UBS PRIVATE INVESTOR FUNDS INC, 485BPOS, 1998-04-28

UBS PRIVATE INVESTOR FUNDS INC
485BPOS, 1998-04-28

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<PAGE>

As filed with the U.S. Securities and Exchange Commission on April 28, 1998
Registration Nos. 33-64401 and 811-07431

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 7

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9

UBS PRIVATE INVESTOR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

200 Clarendon Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code:
(888) 827-3863

Susan C. Mosher
200 Clarendon Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)

Copy to:

Burton M. Leibert, Esq.
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022

It is proposed that this filing will become effective (check appropriate box):

[ ] Immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered: Shares of Common Stock

UBS Investor Portfolios Trust has also executed this Registration
Statement.

<PAGE>

UBS PRIVATE INVESTOR FUNDS, INC.
CROSS-REFERENCE SHEET

PART A

<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER CAPTION IN PROSPECTUS
- ----------- ------------------------------------
<C> <S> <C>
1. Cover Page.................................................... Outside Cover Page of Prospectus
2. Synopsis...................................................... Investors for Whom the Fund is
Designed
3. Condensed Financial Information............................... Financial Highlights
4. General Description of Registrant............................. Organization; Master-Feeder
Structure; Investment Objective
and Policies; Additional
Investment Information and Risk
Factors; Investment Restrictions
5. Management of the Fund........................................ Management; Shareholder Services;
Expenses
5A. Management's Discussion of Fund Performance................... Not applicable
6. Capital Stock and Other Securities............................ Dividends and Distributions; Net
Asset Value; Organization; Taxes;
Master-Feeder Structure
7. Purchase of Securities Being Offered.......................... Purchase of Shares; Net Asset Value
8. Redemption or Repurchase...................................... Redemption of Shares; Net Asset
Value
9. Pending Legal Proceedings..................................... Not applicable
</TABLE>

PART B

<TABLE>
<CAPTION>
FORM N-1A CAPTION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
- ----------- ------------------------------------
<C> <S> <C>
10. Cover Page.................................................... Outside Front Cover Page
11. Table of Contents............................................. Table of Contents
12. General Information and History............................... Not applicable
13. Investment Objectives and Policies............................ Investment Objectives and Policies;
Investment Restrictions; Portfolio
Transactions
14. Management of the Fund........................................ Directors and Trustees
15. Control Persons and Principal Holders of Securities........... Directors and Trustees; Organization
16. Investment Advisory and Other Services........................ Investment Adviser and Funds
Services Agent; Administrator;
Distributor; Custodian;
Shareholder Services; Independent
Accountants; Expenses
17. Brokerage Allocation and Other Practices...................... Portfolio Transactions
18. Capital Stock and Other Securities............................ General; Organization
19. Purchase, Redemption and Pricing of Securities Being
Offered..................................................... Purchase of Shares; Redemption of
Shares; Exchange of Shares;
Dividends and Distributions; Net
Asset Value
20. Tax Status.................................................... Taxes
21. Underwriters.................................................. Distributor; Purchase of Shares; Net
Asset Value
22. Calculation of Performance Data............................... Performance Data
23. Financial Statements.......................................... Financial Statements
</TABLE>

PART C. Information required to be included in Part C is set forth under
the appropriately numbered items included in Part C of this Registration
Statement.

<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
UBS
VALUE EQUITY
FUND

UBS
INTERNATIONAL
EQUITY
FUND

UBS
LARGE CAP
GROWTH
FUND

UBS
SMALL CAP
FUND

------------------

UBS
Private Investor
Funds, Inc.

Prospectus
May 1, 1998

- -------------------------------------------------------------------------------

<PAGE>

<PAGE>
PROSPECTUS

UBS VALUE EQUITY FUND
UBS INTERNATIONAL EQUITY FUND
UBS LARGE CAP GROWTH FUND
UBS SMALL CAP FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (888) UBS-FUND ((888) 827-3863)

This Prospectus pertains to the UBS Value Equity Fund, UBS International Equity
Fund, UBS Large Cap Growth Fund, and the UBS Small Cap Fund (the 'Value Equity
Fund,' 'International Equity Fund,' 'Large Cap Growth Fund,' and 'Small Cap
Fund,' respectively, each a 'Fund,' collectively the 'Funds').

The Funds are diversified, no-load mutual funds for which there are no sales
charges or exchange or redemption fees. The Funds are each a 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 VALUE EQUITY FUND, INTERNATIONAL EQUITY FUND, LARGE CAP
GROWTH FUND AND SMALL CAP FUND SEEK TO ACHIEVE THEIR INVESTMENT OBJECTIVES BY
INVESTING ALL OF THEIR INVESTABLE ASSETS IN UBS VALUE EQUITY PORTFOLIO, UBS
INTERNATIONAL EQUITY PORTFOLIO, UBS LARGE CAP GROWTH PORTFOLIO AND UBS SMALL CAP
PORTFOLIO, RESPECTIVELY (THE 'VALUE EQUITY PORTFOLIO,' 'INTERNATIONAL EQUITY
PORTFOLIO,' 'LARGE CAP GROWTH PORTFOLIO,' AND 'SMALL CAP PORTFOLIO,'
RESPECTIVELY, EACH A 'PORTFOLIO,' COLLECTIVELY THE 'PORTFOLIOS'). THE PORTFOLIOS
ARE EACH A SERIES OF UBS INVESTOR PORTFOLIOS TRUST (THE 'TRUST'), AN OPEN-END
MANAGEMENT INVESTMENT COMPANY. EACH PORTFOLIO HAS THE SAME INVESTMENT OBJECTIVE
AS ITS CORRESPONDING FUND. THE FUNDS EMPLOY A TWO-TIER MASTER-FEEDER INVESTMENT
FUND STRUCTURE THAT IS MORE FULLY DESCRIBED UNDER THE SECTION CAPTIONED
'MASTER-FEEDER STRUCTURE.'

The Portfolios are advised by the New York Branch (the 'Branch' or the
'Adviser') of Union Bank of Switzerland (the 'Bank'). The International Equity
Portfolio has entered into a sub-advisory agreement with UBS International
Investment London Limited ('UBSII'), and the Large Cap Growth Portfolio and
Small Cap Portfolio have each entered into sub-advisory agreements with UBS
Asset Management (New York) Inc., ('UBSAM'), (each a 'Sub-Adviser' and, together
with the Adviser, the 'Advisers').

This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated May
1, 1998 (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 (the 'SEC'), 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
((888) 827-3863).

INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUNDS
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE FUNDS 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 MAY 1, 1998.
<PAGE>
<PAGE>
INVESTORS FOR WHOM THE FUNDS ARE DESIGNED

GENERAL

This Prospectus describes the investment objectives and policies, management and
operations of the Funds to enable investors to decide if the Funds suit their
investment needs. Because the investment characteristics and experience of the
Funds will correspond directly with those of the Portfolios, the discussion in
this section of the Prospectus focuses on the investments and investment
policies of the Portfolios. There is no assurance that a Fund or its
corresponding Portfolio will achieve its stated objective.

Each Portfolio is a series of the Trust, an open-end management investment
company. Each Portfolio has the same investment objective as its respective
Fund. The net asset values of shares of each Fund fluctuate with changes in the
value of the investments in such Fund's respective Portfolio.

The minimum initial investment in each Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of the Company.
The minimum subsequent investment for all investors is $5,000. These minimums
may be waived at a Fund's discretion. See 'Purchase of Shares.' If shareholders
reduce their total investment in shares of a Fund to less than $10,000, their
investment will be subject to mandatory redemption. See 'Redemption of
Shares -- Mandatory Redemption.' Each Fund is one of several series of the
Company, an open-end management investment company organized as a Maryland
corporation.

UBS VALUE EQUITY FUND

The Value Equity Fund (formerly the UBS 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. In order to accomplish this, the
Adviser intends to invest in undervalued stocks having above market dividend
yields with emphasis on those securities which have the potential for long-term
earnings growth and increasing dividend payments. It is the intention of the
Adviser that the average dividend yield of the common stocks held by the Value
Equity Fund will exceed that of the Standard and Poor's 500 Composite Stock
Price Index (the 'S&P 500 Index') and have less price volatility than the S&P
500 Index.

Because of the risks associated with common stock investments, the Value Equity
Fund is intended to be a long-term investment vehicle and is not intended to
provide investors with a means for speculating on short-term market movements.
The Value Equity Fund seeks to achieve its investment objective by investing all
of its investable assets in the Value Equity Portfolio.

The Value Equity Portfolio may make various types of investments in seeking its
objective. Among the permissible investments for the Value Equity Portfolio are
equity securities of domestic issuers, including common stocks and securities
which are convertible into common stocks. The Value Equity Portfolio may also
invest in futures contracts, options and certain privately placed securities.
The Value Equity Portfolio's investments in securities of smaller or less
established issuers involve risks and may be more volatile and less liquid than
the securities of larger or more established domestic issuers. For further
information about these investments and related investment techniques, see
'Investment Objectives and Policies' discussed below.

UBS INTERNATIONAL EQUITY FUND

The International Equity Fund seeks to provide a high total return from a
portfolio of equity securities of foreign corporations. It is designed for
investors with a long-term investment horizon who want to diversify their
investments by adding international equities and thereby take advantage of
investment opportunities outside the United States. The International Equity
Fund seeks to achieve its investment objective by investing all of its
investable assets in the International Equity Portfolio.

The International Equity Portfolio may make various types of investments in
seeking its objective. Among the permissible investments for the International
Equity Portfolio are common stocks and other securities with equity
characteristics issued by foreign companies. The International Equity Portfolio
may also invest in futures contracts, options, forward contracts on foreign
currencies and certain privately

-2-
<PAGE>
<PAGE>

placed securities. The International Equity 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 Objectives and Policies'
discussed below.

UBS LARGE CAP GROWTH FUND

The Large Cap Growth Fund seeks to provide long-term capital appreciation. In
order to accomplish this, the Adviser intends to invest primarily in a
diversified portfolio of common stocks and other equity securities of companies
that have stock market capitalizations at the time of initial purchase that are
within the market capitalization range of those stocks listed on the S&P 500
Index and that the Adviser believes will have above-average earnings and cash
flow growth or meaningful increases in underlying asset values over time.

Because of the risks associated with common stock investments, the Large Cap
Growth Fund is intended to be a long-term investment vehicle and is not intended
to provide investors with a means for speculating on short-term market
movements. The Large Cap Growth Fund seeks to achieve its investment objective
by investing all of its investable assets in the Large Cap Growth Portfolio.

The Large Cap Growth Portfolio may make various types of investments in seeking
its objective. Among the permissible investments for the Large Cap Growth
Portfolio are equity securities of domestic issuers, including common stocks and
securities convertible into common stocks. The Large Cap Growth Portfolio may
also invest in futures contracts, options and certain privately placed
securities. For further information about these investments and related
investment techniques, see 'Investment Objectives and Policies' discussed below.

UBS SMALL CAP FUND

The Small Cap Fund seeks to provide long-term capital appreciation. In order to
accomplish this, the Adviser intends to invest primarily in a diversified
portfolio of common stocks and other equity securities of small capital growth
companies that the Adviser believes offer investors above average potential for
capital appreciation. Small capital companies are companies that have stock
market capitalizations at the time of initial purchase within the market
capitalization range of those stocks listed on the Russell 2000 Index and may
include companies still in the developmental stage or older companies that
appear to be entering a new stage of growth owing to factors such as management
changes or new technology, products or markets. It may also include providers of
products or services with a high unit volume growth rate.

Because of the risks associated with common stock investments, the Small Cap
Fund is intended to be a long-term investment vehicle and is not intended to
provide investors with a means for speculating on short-term market movements.
The Small Cap Fund seeks to achieve its investment objective by investing all of
its investable assets in the Small Cap Portfolio.

The Small Cap Portfolio may make various types of investments in seeking its
objective. Among the permissible investments for the Small Cap Portfolio are
equity securities of domestic issuers, including common stocks and securities
convertible into common stocks. The Small Cap Portfolio may also invest in
futures contracts, options and certain privately placed securities. The Small
Cap Portfolio's investments in securities of smaller or less established issuers
involve risks and may be more volatile and less liquid than the securities of
larger or more established domestic issuers. For further information about these
investments and related investment techniques, see 'Investment Objectives and
Policies' discussed below.

The following table illustrates that Fund investors incur no shareholder
transaction expenses: their investments in the Funds are subject only to the
operating expenses set forth below for the Funds and the Portfolios,
respectively, as a percentage of average daily net assets of such Fund. The
Directors believe that the aggregate per share expenses of each Fund and its
corresponding Portfolio will be approximately equal to and may be less than the
expenses that such Fund would incur if it retained the services of an investment
adviser and invested its assets directly in portfolio securities. Expenses for
each Fund and Portfolio are discussed below under the headings 'Management,'
'Expenses' and 'Shareholder Services.'

-3-
<PAGE>
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES (ALL FUNDS)

<TABLE>
<S> <C>
Sales Load Imposed on Purchases..................................................................... None
Sales Load Imposed on Reinvested Dividends.......................................................... None
Deferred Sales Load................................................................................. None
Redemption Fees..................................................................................... None
Exchange Fees....................................................................................... None
</TABLE>

<TABLE>
<CAPTION>
LARGE
VALUE INT'L. CAP SMALL
EQUITY EQUITY GROWTH CAP
EXPENSE TABLE FUND FUND FUND FUND
------ ------ ------ -----
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**........................................ 0.02% 0.05% 0.00% 0.01%
Rule 12b-1 Fees.......................................................... None None None None
Other Expenses, After Expense Reimbursements***.......................... 0.95% 1.21% 1.00% 1.19%
------ ------ ------ -----
Total Operating Expenses, After Fee Waivers and Expense
Reimbursements*........................................................ 0.97% 1.26% 1.00% 1.20%
------ ------ ------ -----
------ ------ ------ -----
</TABLE>

* Expenses are expressed as a percentage of a Fund's average daily net assets
and are based on the expenses actually incurred during the fiscal year ended
December 31, 1997, for the Value Equity Fund and the International Equity Fund,
and expected to be incurred during the fiscal year ending December 31, 1998, for
the Large Cap Growth Fund and Small Cap Fund, after any applicable fee waivers
and expense reimbursements. Without such fee waivers and expense reimbursements,
Total Operating Expenses were equal, on an annual basis, to: (i) 1.86% of the
Value Equity Fund's average daily net assets; and (ii) 2.13% of the
International Equity Fund's average daily net assets; and are expected to be
equal, on an annual basis, to: (iii) 3.62% of the Large Cap Growth Fund's
average daily net assets; and (iv) 2.14% of the Small Cap Fund's average daily
net assets. See 'Management.'

** The Adviser has agreed to waive fees and reimburse each of the Funds and
their respective Portfolios for any of their respective operating expenses to
the extent that each such Fund's total operating expenses (including its share
of its respective Portfolio's expenses) exceed, on an annual basis: (i) 1.00% of
the Value Equity Fund's average daily net assets; (ii) 1.40% of the
International Equity Fund's average daily net assets; (iii) 1.00% of the Large
Cap Growth Fund's average daily net assets; and (iv) 1.20% of the Small Cap
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.

If there were no fee waiver in effect, each respective Portfolio's advisory fee
would be equal, on an annual basis, to: (i) 0.60% of the average daily net
assets of the Value Equity Portfolio; (ii) 0.85% of the average daily net assets
of the International Equity Portfolio; (iii) 0.60% of the average daily net
assets of the Large Cap Growth Portfolio; and (iv) 0.60% of the average daily
net assets of the Small Cap Portfolio. 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 ('Investors Bank', the 'Custodian' or the
'Transfer Agent') (a) under an Administration Agreement with the Funds, (b) as
custodian of the Funds and the Portfolios and (c) as transfer agent of the
Funds;

(ii) IBT Trust and Custodial Services (Ireland) LMTD ('IBT Ireland') under an
Administration Agreement with the Portfolios, and

(iii) Eligible Institutions providing shareholder services under various
shareholder servicing agreements.

-4-
<PAGE>
<PAGE>
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:

<TABLE>
<CAPTION>
LARGE
VALUE INT'L. CAP SMALL
EQUITY EQUITY GROWTH CAP
FUND FUND FUND FUND
------ ------ ------ -----

<S> <C> <C> <C> <C>
1 Year.................................................................... $ 10 $ 14 $ 10 $12
3 Years................................................................... 32 44 32 38
5 Years................................................................... 55 77 55 66
10 Years.................................................................. 122 168 122 145
</TABLE>

The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of the Funds and each Fund's share of its
respective Portfolio's expenses. In connection with the above Example, please
note that $1,000 is less than the minimum investment required for any of the
five Funds and that there are no redemption or exchange fees of any kind. See
'Purchase of Shares,' 'Exchange of Shares' and 'Redemption of Shares.' THE
EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES, AND
ASSUMES THE CONTINUATION OF THE FEE WAIVERS AND EXPENSE REIMBURSEMENTS
REPRESENTED IN THE ABOVE 'EXPENSE TABLE.' IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.

FINANCIAL HIGHLIGHTS

The information regarding the Value Equity Fund, International Equity Fund,
Large Cap Growth Fund and Small Cap Fund has been audited by Price Waterhouse
LLP, independent accountants, whose report thereon appears in the Funds' Annual
Report (the 'Annual Report') dated December 31, 1997. The information should be
read in conjunction with the financial statements and related notes also
included in the Annual Report. Further information about the performance of each
Fund and its corresponding Portfolio is contained in the Annual Report which may
be obtained without charge and upon request by calling 1-888-UBS-FUND.

Per share data for a share outstanding during the indicated period:

-5-
<PAGE>
<PAGE>

UBS Value Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------

<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................................. $106.70 $100.00
----------------- -----------------
Income from investment operations:
Net investment income........................................... 2.32 2.05
Net realized and unrealized gain on investments................. 29.17 6.69
----------------- -----------------
Total income from investment operations......................... 31.49 8.74
----------------- -----------------

Less dividends and distributions to shareholders:
Dividends from net investment income............................ (2.27) (2.04)
Distributions from net realized gains........................... (6.75) --
----------------- -----------------
Total dividends and distributions............................... (9.02) (2.04)
----------------- -----------------

Net asset value, end of period....................................... $129.17 $106.70
----------------- -----------------
----------------- -----------------
Total return......................................................... 29.57% 8.74%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)........................ $26,524 $ 9,466
Ratio of expenses to average net assets(2)...................... 0.97% 0.90%(3)
Ratio of net investment income to average net assets(2)......... 2.17% 3.04%(3)
</TABLE>

- ------------------------

* Commencement of operations.

(1) Not annualized.

(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS Value
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 0.89% and 2.65% (annualized) for
the respective periods.

(3) Annualized.

-6-
<PAGE>
<PAGE>

UBS International Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------

<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>

- ------------------------

* 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.

-7-
<PAGE>
<PAGE>

UBS Large Cap Growth Fund
Financial Highlights
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<S> <C>
Net asset value, beginning of period.............................................. $100.00
-------
Income from investment operations:
Net investment income........................................................ 0.23
Net realized and unrealized loss on investments.............................. (0.79)
-------
Total loss from investment operations........................................ (0.56)
-------
Less: Dividends from net investment income........................................ (0.22)
-------
Net asset value, end of period.................................................... $ 99.22
-------
-------
Total return...................................................................... (0.55%)(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)..................................... $ 4,137
Ratio of expenses to average net assets(2)................................... 1.00%(3)
Ratio of net investment income to average net assets(2)...................... 1.35%(3)
</TABLE>

- ------------------------
(1) Not annualized.

(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS Large Cap
Growth 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 7.54% (annualized). The
annualization of these ratios is affected by the fact that the Investment
Advisory Agreement and Investment Sub-Advisory Agreement was not ratified
until December 29, 1997. Prior to this date, investment advisory services
were being provided without compensation.

(3) Annualized.

-8-
<PAGE>
<PAGE>

UBS Small Cap Fund
Financial Highlights
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<S> <C>
Net asset value, beginning of period.............................................. $100.00
-------
Loss from investment operations:
Net realized and unrealized loss on investments.............................. (5.62)
-------
Net asset value, end of period.................................................... $ 94.38
-------
-------
Total return...................................................................... (5.62%)(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)..................................... $11,954
Ratio of expenses to average net assets(2)................................... 1.20%(3)
Ratio of net investment income to average net assets(2)...................... (0.10%)(3)
</TABLE>

- ------------------------
(1) Not annualized.

(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS Small Cap
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 2.43% (annualized). The annualization of
these ratios is affected by the fact that the Investment Advisory Agreement
and Investment Sub-Advisory Agreement was not ratified until December 22,
1997. Prior to this date, investment advisory services were being provided
without compensation.

(3) Annualized.

-9-
<PAGE>
<PAGE>

HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS -- VALUE EQUITY
FUND. The following table sets forth (i) the composite total return for the
period January 1, 1995 (commencement of operations of the relevant accounts)
through December 31, 1997 and the year ended December 31, 1997 for all
discretionary accounts described below that have been managed for at least one
full quarter by UBSAM, (ii) the average annual total return for the Value Equity
Fund for the period April 2, 1996 (commencement of operations) through December
31, 1996 and the year ended December 31, 1997, and (iii) the annual total return
during the same periods for the S&P 500 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 Value Equity
Portfolio. While the Value Equity Portfolio will be managed by the Adviser, the
management of the Value Equity Portfolio will be substantially the same as by
UBSAM and will be carried out by personnel who performed these services for the
discretionary accounts at UBSAM, who will be employed by the Adviser for this
purpose. The composite total return for such accounts has been adjusted to
deduct all of the Value Equity Fund's annual total operating expenses of 1.00%
of average daily net assets as set forth in the Expense Table above. The Fund's
historical average annual total return is computed after deducting the Fund's
allowable total operating expenses of 1.00% of average daily net assets. No such
accounts were managed by UBSAM or the Adviser prior to 1995. The composite total
return is time-weighted and weighted by individual account size and reflects the
reinvestment of dividends and interest. The discretionary accounts are not
subject to certain investment limitations, diversification requirements and
other restrictions imposed by federal securities and tax laws on the Value
Equity Portfolio that, if applied to the accounts, may have adversely affected
their performance results. The composite total return of these discretionary
accounts does not represent the historical performance of the Value Equity
Portfolio and should not be viewed as a prediction of future performance of the
Value Equity Portfolio. The S&P 500 Index is an unmanaged index that includes
500 U.S. stocks and is a common measure of the performance of the U.S. stock
market. The total returns of the S&P 500 Index do not include management fees or
commissions.

<TABLE>
<CAPTION>
COMPOSITE TOTAL
UBS RETURN OF
VALUE ADVISER'S S&P
EQUITY DISCRETIONARY 500
AVERAGE ANNUAL TOTAL RETURN FOR THE: FUND ACCOUNT INDEX
- ------------------------------------------------------------------------- ----- --------------- -----

<S> <C> <C> <C>
Period from April 2, 1996* through December 31, 1996..................... 8.74% N/A 15.27%
Year ended December 31, 1997............................................. 29.57% 30.09% 33.38%
Period from January 1, 1995* through December 31, 1997................... N/A 27.05% 31.15%
</TABLE>

- ------------

*Commencement date.

HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS -- INTERNATIONAL
EQUITY FUND. The following table sets forth (i) the composite average annual
total returns for the one, three and five year periods ended December 31, 1997
and the period from April 1, 1987 (commencement of operations of the relevant
accounts) through December 31, 1997 for all discretionary accounts described
below that have been managed for at least one full quarter by UBSII, (ii) the
average annual return for the International Equity Fund for the period April 2,
1996 (commencement of operations) through December 31, 1996 and the year ended
December 31, 1997, and (iii) the average annual total return during the same
periods for the Morgan Stanley Capital International Eupope, Australia, Far East
Index (the 'EAFE 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 International Equity Portfolio. The
composite total returns for such accounts have been adjusted to deduct all of
the International Equity Fund's allowable total operating expenses of 1.40% of
average daily net assets. 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 discretionary
accounts are not subject to certain investment limitations, diversification
requirements and other restrictions imposed by federal securities and tax laws
on the International Equity Portfolio that, if applied to the accounts, may have
adversely affected their performance results. UBSII believes that the
restatement of total returns prior to 1994 would not result in any material
changes in the total returns

-10-
<PAGE>
<PAGE>
shown. The composite total returns of these discretionary accounts does not
represent the historical performance of the International Equity Portfolio and
should not be viewed as a prediction of future performance of the International
Equity Portfolio. The EAFE Index is an unmanaged index that measures stock
performance in Europe, Australia and the Far East. The total returns of the EAFE
Index do not include management fees or commissions.

<TABLE>
<CAPTION>
COMPOSITE
TOTAL RETURN MORGAN STANLEY
UBS OF SUB-ADVISER'S CAPITAL
INTERNATIONAL DISCRETIONARY INTERNATIONAL
AVERAGE ANNUAL TOTAL RETURN FOR THE: EQUITY FUND ACCOUNTS EAFE INDEX
- ------------------------------------------------------------- ------------- ---------------- --------------

<S> <C> <C> <C>
Period April 2, 1996* through December 31, 1996.............. 4.07% N/A 3.27%
One Year Ended December 31, 1997............................. (3.70%) (4.02%) 2.03%
Three Years Ended December 31, 1997.......................... N/A 4.34% 6.59%
Five Years Ended December 31, 1997........................... N/A 10.58% 11.71%
Period April 1, 1987* through December 31, 1997.............. N/A 7.79% 6.64%
</TABLE>

- ------------

* Commencement date.

HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS -- LARGE CAP GROWTH
FUND. The following table sets forth (i) the composite average annual total
return for the one, three, five and ten year periods ended December 31, 1997 for
all discretionary accounts described below that have been managed for at least
one full quarter by UBSAM, (ii) the average annual total return for the Large
Cap Growth Fund for the period October 14, 1997 (commencement of operations)
through December 31, 1997, and (iii) the average annual total return during the
same periods for the S&P 500 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 Large Cap Growth Portfolio.
The composite total return for such accounts has been adjusted to deduct all of
the Large Cap Growth Fund's annual total operating expenses of 1.00% of average
daily net assets as set forth in the Expense Table above. The composite total
return is time-weighted and weighted by individual account size and reflects the
reinvestment of dividends and interest. The discretionary accounts are not
subject to certain investment limitations, diversification requirements and
other restrictions imposed by federal securities and tax laws on the Large Cap
Growth Portfolio that, if applied to the accounts, may have adversely affected
their performance results. The composite total return of these discretionary
accounts does not represent the historical performance of the Large Cap Growth
Portfolio and should not be viewed as a prediction of future performance of the
Large Cap Growth Portfolio. The S&P 500 Index is an unmanaged index that
includes 500 U.S. stocks and is a common measure of the performance of the U.S.
stock market. The total returns of the S&P 500 Index do not include management
fees or commissions.

<TABLE>
<CAPTION>
COMPOSITE
TOTAL RETURN
UBS LARGE OF SUB-ADVISER'S
CAP GROWTH DISCRETIONARY S&P 500
AVERAGE ANNUAL TOTAL RETURN FOR THE: FUND ACCOUNTS INDEX
- ------------------------------------------------------------------- ---------- ---------------- -------

<S> <C> <C> <C>
Period October 14, 1997* through December 31, 1997................. (0.70%) N/A 0.38%
One Year Ended December 31, 1997................................... N/A 27.83% 33.37%
Three Years Ended December 31, 1997................................ N/A 24.55% 31.15%
Five Years Ended December 31, 1997................................. N/A 15.82% 20.26%
Ten Years Ended December 31, 1997.................................. N/A 16.32% 18.01%
</TABLE>

- ------------

* Commencement date.

HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS -- SMALL CAP FUND.
The following table sets forth (i) the composite total return for the one,
three, five and ten year periods ended December 31, 1997 for all discretionary
accounts described below that have been managed for at least one full quarter by
UBSAM, (ii) the average annual total return for the Small Cap Fund for the
period September 30, 1997 (commencement of operations) through December 31, 1997
and (iii) the average

-11-
<PAGE>
<PAGE>
annual total returns during the same periods for the Russell 2000 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 Small Cap Portfolio. The composite total return for such accounts
has been adjusted to deduct all of the Small Cap Fund's annual total operating
expenses of 1.20% of average daily net assets as set forth in the Expense Table
above. The composite total return is time-weighted and weighted by individual
account size and reflects the reinvestment of dividends and interest. The
discretionary accounts are not subject to certain investment limitations,
diversification requirements and other restrictions imposed by federal
securities and tax laws on the Small Cap Portfolio that, if applied to the
accounts, may have adversely affected their performance results. The composite
total return of these discretionary accounts does not represent the historical
performance of the Small Cap Portfolio and should not be viewed as a prediction
of future performance of the Small Cap Portfolio. The Russell 2000 Index is an
unmanaged index that includes 2,000 U.S. small capitalization stocks and is a
common measure of the performance of the small capitalization segment of the
U.S. stock market. The total returns of the Russell 2000 Index do not include
management fees or commissions.

<TABLE>
<CAPTION>
COMPOSITE
TOTAL RETURN
OF SUB-ADVISER'S
UBS SMALL DISCRETIONARY RUSSELL 2000
AVERAGE ANNUAL TOTAL RETURN FOR THE: CAP FUND ACCOUNTS INDEX
- ----------------------------------------------------------------- --------- ---------------- ------------

<S> <C> <C> <C>
Period September 30, 1997* through December 31, 1997............. (5.62%) N/A (3.35%)
One Year Ended December 31, 1997................................. N/A 22.78% 22.36%
Three Years Ended December 31, 1997.............................. N/A 21.42% 22.35%
Five Years Ended December 31, 1997............................... N/A 14.14% 16.41%
Ten Years Ended December 31, 1997................................ N/A 16.70% 15.76%
</TABLE>

- ------------

* Commencement date.

MASTER-FEEDER STRUCTURE

Unlike other mutual funds that directly acquire and manage their own portfolio
of securities, the Funds seek to achieve their investment objectives by
investing all of their investable assets in their respective Portfolios. The
Portfolios are separate investment companies with the same investment objective
as their respective Fund. The investment objective of a Fund and a Portfolio may
be changed only with the approval of the holders of a majority of the
outstanding voting securities of such Fund or a majority of the investors in
such Portfolio, respectively, after 30 days' prior notice.

In addition to selling an interest in a Portfolio to a Fund, each Portfolio may
sell interests in such Portfolio to other mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions as a Fund and will pay a proportionate share of the Portfolio's
expenses. However, other entities investing in the Portfolios may sell shares of
their own fund using a different pricing structure than a Fund's. Such different
pricing structures may result in differences in returns experienced by investors
in other funds that invest in the Portfolios. Such differences in returns are
not uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolios is available from
Investors Bank at (888) UBS-FUND (888-827-3863).

Each Fund may withdraw its investment in its 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 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.

-12-
<PAGE>
<PAGE>
will securities which are not readily marketable exceed 15% of the total value
of such in-kind distribution. Such a distribution may result in a Fund having a
less diversified portfolio of investments or adversely affect a Fund's
liquidity, and a 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 Portfolios may be materially affected by the
actions of larger funds investing in the Portfolios. For example, if a large
fund withdraws from a Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby lowering returns. Additionally,
because a 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 a Portfolio could have effective voting control of its operations.
Except as permitted by the SEC, whenever a Fund is requested to vote on matters
pertaining to a Portfolio, the Company will hold a meeting of Fund shareholders
and will cast all of its votes proportionately as instructed by the Fund's
shareholders. See 'Organization' in the SAI. Fund shareholders who do not vote
will not affect a 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 Fund shareholders who do, in fact, vote.

For more information about each Portfolio's investment objective, policies and
restrictions, see 'Investment Objectives and Policies,' 'Additional Investment
Information and Risk Factors' and 'Investment Restrictions.' For more
information about each Portfolio's management and expenses, see 'Management.'
For more information about changing the investment objective, policies and
restrictions of the Funds or the Portfolios, see 'Investment Restrictions.'

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives of the Funds and the Portfolios are described below,
together with the policies each employs to seek to achieve its objective.
Additional information about the investment policies of the Funds and the
Portfolios appears in the SAI under 'Investment Objectives and Policies.' Each
Fund seeks to achieve its investment objective by investing all of its
investable assets in its respective Portfolio, which has the same investment
objective as the Fund. There can be no assurance that the investment objectives
of the Funds or the Portfolios will be achieved.

UBS VALUE EQUITY FUND AND VALUE EQUITY PORTFOLIO

The Value Equity Portfolio's objective is to provide long-term capital
appreciation and the potential for a high level of current income with lower
investment risk and volatility than is normally available from common stock
funds. In order to accomplish this, the Adviser intends to invest in undervalued
stocks having above market dividend yields with emphasis on those securities
which have the potential for long-term earnings growth and increasing dividend
payments. The average dividend yield of the Value Equity Portfolio's common
stocks is expected to be at least 50% greater than that of the S&P 500 Index. It
is also the objective of the Value Equity Portfolio that the Value Equity
Portfolio's investments have less price volatility than the S&P 500 Index.

Under normal circumstances, the Value Equity Portfolio will invest at least 80%
of its assets in income-producing equity securities of domestic issuers,
including dividend-paying common stocks and securities which are convertible
into common stocks. The Value Equity Portfolio intends to invest in securities
that generate relatively high levels of dividend income and have the potential
for capital appreciation. These generally include common stocks of established,
high-quality U.S. corporations. In addition, the Value Equity Portfolio will
seek to diversify its investment over a carefully selected list of securities in
order to moderate the risks inherent in equity investments.

The Value Equity Portfolio will invest in an equity security following a
fundamental analysis of the issuing company. An important part of this analysis
will be the examination of the company's ability to maintain its dividend. The
Adviser believes that dividend income has proven to be an important component of
total return. For example, during the ten-year period ended December 31, 1997,
reinvested

-13-
<PAGE>
<PAGE>
dividend income accounted for approximately 25% of the total return of the S&P
500 Index. Also, the Adviser believes that dividend income tends to be a more
stable source of total return than capital appreciation. While the price of a
company's common stock can be significantly affected by market fluctuations and
other short-term factors, its dividend level usually has greater stability. For
this reason, securities that pay a high level of dividend income tend to be less
volatile in price than comparable securities that pay a lower level of dividend
income.

Although the Value Equity Portfolio intends to invest primarily in equity
securities, it may invest up to 20% of its assets in certain cash investments
and certain short-term fixed income securities. See 'Investment Objectives and
Policies -- Quality and Diversification Requirements' in the SAI. Such
securities may be used to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions or to take a temporarily defensive
position against potential stock market declines. These securities include:
obligations of the United States Government and its agencies or
instrumentalities; commercial paper, bank certificates of deposit and bankers'
acceptances; and repurchase agreements collateralized by these securities. The
Value Equity Portfolio may also purchase nonpublicly offered debt securities.
See 'Additional Investment Information and Risk Factors -- Illiquid Investments;
Privately Placed and Other Unregistered Securities.'

The Value Equity Portfolio may also utilize equity futures contracts and options
to a limited extent. Specifically, the Portfolio may enter into futures
contracts and options provided that such positions are established for hedging
purposes only. See 'Futures Contracts.'

The Value Equity Portfolio intends to manage its securities actively in pursuit
of its investment objective. Although it generally seeks to invest for the
long-term, the Value Equity Portfolio retains the right to sell securities
irrespective of how long they have been held. See 'Portfolio Transactions' in
the SAI. To the extent the Value Equity Portfolio engages in short-term trading,
it may incur increased transaction costs. For the period April 2, 1996
(commencement of operations) to December 31, 1996 and for the year ended
December 31, 1997, the portfolio turnover rate for the Value Equity Portfolio
was 19% and 47%, respectively.

Under normal circumstances, the Adviser intends to invest at least 80% of the
Value Equity Portfolio's assets in the equity securities of domestic issuers.
These investments will consist of common stocks and other securities with equity
characteristics such as preferred stock, warrants, rights and convertible
securities. The Value Equity Portfolio's primary equity investments are the
common stocks of established domestic companies. The common stock in which the
Value Equity 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 Value Equity Portfolio invests in domestic securities listed on
domestic securities exchanges and securities traded in domestic over-the-counter
markets, and may invest in certain restricted or unlisted securities. See
'Additional Investment Information and Risk Factors.'

UBS INTERNATIONAL EQUITY FUND AND INTERNATIONAL EQUITY PORTFOLIO

The Adviser is responsible for supervising the management of the International
Equity Portfolio's investments. Consistent with these duties, the Adviser has
entered into a Sub-Advisory Agreement with UBSII, whereby UBSII is primarily
responsible for the day-to-day investment decisions for the International Equity
Portfolio. The Adviser is solely responsible for paying UBSII for these
services. UBSII is an affiliate of the Adviser.

The International Equity 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 International Equity 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 International Equity Portfolio seeks to achieve its investment objective by
investing in companies that UBSII believes are fundamentally sound and that are
typically selling at below market valuations and that UBSII 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.

-14-
<PAGE>
<PAGE>
UBSII actively manages currency exposure, in conjunction with country and stock
allocations, in an attempt to protect the International Equity Portfolio's
market value. Through the use of forward foreign currency exchange contracts,
futures contracts and options on currencies, UBSII will adjust the International
Equity 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 UBSII's experienced
currency managers. For more information on foreign currency exchange
transactions, see 'Additional Investment Information and Risk Factors.'

The International Equity Portfolio intends to manage its securities actively in
pursuit of its investment objective. The International Equity 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
International Equity Portfolio will be less than 100%. See 'Portfolio
Transactions' in the SAI. To the extent the International Equity Portfolio
engages in short-term trading, it may incur increased transaction costs. For the
period April 2, 1996 (commencement of operations) to December 31, 1996 and for
the year ended December 31, 1997, the portfolio turnover rate for the
International Equity Portfolio was 42% and 26%, respectively.

EQUITY INVESTMENTS. Under normal circumstances, UBSII intends to keep at least
65% of the value of the International Equity 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 International Equity Portfolio's primary equity investments are the common
stock of established companies based in developed countries outside the United
States. The International Equity Portfolio will invest in companies based in at
least five foreign countries. The common stock in which the International Equity
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
International Equity 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 International Equity
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 International Equity 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.'

UBS LARGE CAP GROWTH FUND AND LARGE CAP GROWTH PORTFOLIO

The Adviser is responsible for supervising the management of the Large Cap
Growth Portfolio's investments. Consistent with these duties, the Adviser has
entered into a Sub-Advisory Agreement with UBSAM, whereby UBSAM is primarily
responsible for the day-to-day investment decisions for the Large Cap Growth
Portfolio. The Adviser is solely responsible for paying UBSAM for these
services. UBSAM is an affiliate of the Adviser.

The Large Cap Growth Portfolio's objective is to provide long-term capital
appreciation. In order to accomplish this, the Large Cap Growth Portfolio
intends to invest primarily in a diversified portfolio of common stocks,
preferred stocks and other securities (such as warrants and rights) that are
either convertible into or exchangeable for common stocks of large capital
growth companies. The Large Cap Growth Portfolio defines 'large capital'
companies as companies whose market capitalizations at the time of acquisition
by the Large Cap Growth Portfolio are within the market capitalization range of
those stocks listed on the S&P 500 Index. Additionally, the Large Cap Growth
Portfolio will not invest more than 20% of its net assets in securities of
companies whose market capitalization is less than $3 billion. 'Growth'
companies generally include companies which have, in UBSAM's judgment, the
prospects for

-15-
<PAGE>
<PAGE>
above-average earnings and cash flow growth or meaningful increases in
underlying asset values over time.

The Large Cap Growth Portfolio may also invest up to 20% of its assets in
foreign securities, including American Depository Receipts ('ADRs'), which UBSAM
believes meet the Large Cap Growth Portfolio's investment objective and relevant
policies. See 'Foreign Investment Information' and 'Foreign Currency Exchange
Transactions' under 'Additional Investment Information and Risk Factors.'

Under normal circumstances, the Large Cap Growth Portfolio will invest at least
65% of its assets in large capital growth companies. The Large Cap Growth
Portfolio will invest in companies believed by UBSAM to represent above average
growth opportunities. UBSAM will select individual securities for investment by
screening for above average earnings growth expectations and reasonable
valuations (price relative to earnings and cash flow). Growth company securities
may have above average price volatility. The Large Cap Growth Portfolio attempts
to reduce its overall exposure to the risk of declines in individual security
prices by diversifying its investments over a carefully selected list of
securities issued by different companies in a variety of industries.

Although the Large Cap Growth Portfolio intends to invest primarily in equity
securities, under normal market conditions it may invest up to 20% of its assets
in certain cash investments and certain short-term fixed income securities. See
'Investment Objectives and Policies -- Quality and Diversification Requirements'
in the SAI. Such securities may be used to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions or to take a temporarily
defensive position against potential stock market declines. These securities
include: obligations of the United States Government and its agencies or
instrumentalities; money market mutual funds, commercial paper, bank
certificates of deposit and bankers' acceptances; and repurchase agreements
collateralized by these securities. Under market conditions where the Large Cap
Growth Portfolio or UBSAM have adopted a defensive investment posture, the Large
Cap Growth Portfolio may invest without limit in these securities. The Large Cap
Growth Portfolio may also purchase nonpublicly offered debt securities. See
'Additional Investment Information and Risk Factors -- Illiquid Investments;
Privately Placed and Other Unregistered Securities.'

The Large Cap Growth Portfolio may also utilize equity futures contracts and
options to a limited extent. Specifically, the Large Cap Growth Portfolio may
enter into futures contracts and options provided that such positions are
established for hedging purposes only. See 'Additional Investment Information
and Risk Factors -- Futures Contracts' and ' -- Options.'

The Large Cap Growth Portfolio may also sell securities short to a limited
extent and for hedging purposes only. See 'Additional Investment Information and
Risk Factors -- Short Sales.' The Large Cap Growth Portfolio may also invest in
'special situations.' See 'Additional Investment Information and Risk
Factors -- Special Situations.'

The Large Cap Growth Portfolio intends to manage its securities actively in
pursuit of its investment objective. Although it generally seeks to invest for
the long-term, the Large Cap Growth Portfolio retains the right to sell
securities irrespective of how long they have been held. It is anticipated that
the annual portfolio turnover of the Large Cap Growth Portfolio will not exceed
100%. To the extent the Large Cap Growth Portfolio engages in short-term
trading, it may incur increased transaction costs. For the period October 14,
1997 (commencement of operations) through December 31, 1997, the portfolio
turnover rate for the Large Cap Growth Portfolio was 6%.

UBS SMALL CAP FUND AND SMALL CAP PORTFOLIO

The Adviser is responsible for supervising the management of the Small Cap
Portfolio's investments. Consistent with these duties, the Adviser has entered
into a Sub-Advisory Agreement with UBSAM, whereby UBSAM is primarily responsible
for the day-to-day investment decisions for the Small Cap Portfolio. The Adviser
is solely responsible for paying UBSAM for these services. UBSAM is an affiliate
of the Adviser.

The Small Cap Portfolio's objective is to provide long-term capital
appreciation. In order to accomplish this, the Small Cap Portfolio intends to
invest primarily in a diversified portfolio of common stocks,

-16-
<PAGE>
<PAGE>
preferred stocks and other securities (such as warrants and rights) that are
either convertible into or exchangeable for common stocks of small capital
growth companies. The Small Cap Portfolio defines 'small capital' companies as
companies whose market capitalization at the time of acquisition by the Small
Cap Portfolio is within the market capitalization range of those stocks on the
Russell 2000 Index. 'Growth' companies are generally rapidly growing companies
and may include companies still in the developmental stage or older companies
that appear to be entering a new stage of growth owing to factors such as
management changes or new technology, products or markets and may include
providers of products or services with a high unit volume growth rate.

The Small Cap Portfolio may also invest up to 20% of its assets in foreign
securities, including ADRs, which UBSAM believes meet the Small Cap Portfolio's
investment objective and relevant policies. See 'Foreign Investment Information'
and 'Foreign Currency Exchange Transactions' under 'Additional Investment
Information and Risk Factors.'

Under normal circumstances, the Small Cap Portfolio will invest at least 65% of
its assets in small capital growth companies. The Small Cap Portfolio may also
invest in securities of emerging growth companies -- i.e. small or medium sized
companies that have passed their start-up phase and that show positive earnings
and prospects of achieving significant profit and gain in a relatively short
period of time. Emerging growth companies generally stand to benefit from new
products, services or processes, technological developments or changes in
management and other factors and include smaller companies experiencing unusual
developments affecting their market values.

The Small Cap Portfolio will invest, on an individual security basis, in
companies believed by UBSAM to represent above average growth opportunities.
UBSAM will select individual securities for investment by screening for above
average growth expectations and reasonable valuations. Growth company securities
may have above average price volatility. The Small Cap Portfolio attempts to
reduce its overall exposure to the risk of declines in individual security
prices by diversifying its investments over a carefully selected list of
securities issued by different companies in a variety of industries.

Although the Small Cap Portfolio intends to invest primarily in equity
securities, under normal market conditions it may invest up to 20% of its assets
in certain cash investments and certain short-term fixed income securities. See
'Investment Objectives and Policies -- Quality and Diversification Requirements'
in the SAI. Such securities may be used to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions or to take a temporarily
defensive position against potential stock market declines. These securities
include: obligations of the United States Government and its agencies or
instrumentalities; money market mutual funds, commercial paper, bank
certificates of deposit and bankers' acceptances; and repurchase agreements
collateralized by these securities. Under market conditions where the Small Cap
Portfolio or UBSAM has adopted a defensive investment posture, the Small Cap
Portfolio may invest without limit in these securities. The Small Cap Portfolio
may also purchase nonpublicly offered debt securities. See 'Additional
Investment Information and Risk Factors -- Illiquid Investments; Privately
Placed and Other Unregistered Securities.'

The Small Cap Portfolio may also utilize equity futures contracts and options to
a limited extent. Specifically, the Small Cap Portfolio may enter into futures
contracts and options provided that such positions are established for hedging
purposes only. See 'Additional Investment Information and Risk
Factors -- Futures Contracts' and ' -- Options.'

The Small Cap Portfolio may also sell securities short to a limited extent and
for hedging purposes only. See 'Additional Investment Information and Risk
Factors -- Short Sales.' The Small Cap Portfolio may also invest in 'special
situations.' See 'Additional Investment Information and Risk Factors -- Special
Situations.'

The Small Cap Portfolio intends to manage its securities actively in pursuit of
its investment objective. Although it generally seeks to invest for the
long-term, the Small Cap Portfolio retains the right to sell securities
irrespective of how long they have been held. It is anticipated that the annual
portfolio turnover of the Small Cap Portfolio will not exceed 150%. To the
extent the Small Cap Portfolio engages in short-term trading, it may incur
increased transaction costs. For the period September 30, 1997

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(commencement of operations) through December 31, 1997, the portfolio turnover
rate for the Small Cap Portfolio was 3%.

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

SMALL CAPITAL GROWTH AND EMERGING GROWTH COMPANIES. Because the securities of
small capital growth and emerging growth companies, particularly those traded
over-the-counter, may have more limited marketability than those of larger, more
seasoned companies, or market averages in general, investing in small capital
growth or emerging growth companies may involve greater than average risks. The
value of the Small Cap Portfolio's shares may fluctuate more widely than the
value of shares of a fund that invests primarily in larger, more established
companies. Normally small capital growth companies have fewer shares outstanding
than larger companies; consequently, it may be more difficult to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. Small capital growth companies may have limited product lines, markets
or financial resources and may lack management depth. There is typically less
publicly available information concerning smaller issuers than for larger, more
established companies.

SPECIAL SITUATIONS. From time to time, the Large Cap Growth Portfolio and Small
Cap Portfolio may invest in special situations. A special situation arises when
UBSAM, as sub-adviser, believes that the securities of a particular issuer will
be recognized and appreciate in value due to a specific development affecting
that issuer. Developments that might create a special situation include a new
product or process, a technological breakthrough, a management change, merger,
recapitalization or other extraordinary corporate event, or a change in market
supply of and demand for the security. Investments in special situations may
carry an additional risk of loss in the event that the anticipated development
does not occur or does not result in the anticipated market reaction.

SHORT SALES. In the event that UBSAM anticipates that the price of a security
will decline, it may sell the security short and borrow the same security from a
broker or other institution to complete the sale. The Small Cap and Large Cap
Growth Portfolios will only enter into short sales for hedging purposes. The
Small Cap and Large Cap Growth Portfolios will incur a profit or a loss,
depending upon whether the market price of the security decreases or increases
between the date of the short sale and the date on which the Small Cap or Large
Cap Growth Portfolio must replace the borrowed security. All short sales will be
fully collateralized and the Small Cap and Large Cap Growth Portfolios will not
sell securities short if immediately after and as a result of the short sale,
the value of all securities sold short by either of the Small Cap or Large Cap
Growth Portfolio exceeds 25% of its total assets. The Small Cap and Large Cap
Growth Portfolios will also limit short sales of any one issuer's securities to
2% of their total assets and to 2% of any one class of the issuer's securities.

CONVERTIBLE SECURITIES. Each Portfolio may invest in convertible securities. The
convertible securities in which the Portfolios 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. Each 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
Portfolios 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, a Portfolio will maintain a segregated account with the Custodian
consisting of a portfolio of liquid securities with a value at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, a Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, a Portfolio may be
disadvantaged. It is the current policy of the Portfolios not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
such Portfolio's total assets less liabilities (excluding the obligations
created by these commitments).

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MONEY MARKET INSTRUMENTS. Each of the Portfolios is permitted to invest in money
market instruments although they intend to stay invested in equity securities to
the extent practical in light of their objectives and long-term investment
perspectives. The Portfolios may make money market investments pending other
investments or settlements, for liquidity purposes or in adverse market
conditions. Such money market investments may include obligations of the U.S.
Government and its agencies and instrumentalities, commercial paper, bank
obligations, money market mutual funds and repurchase agreements. The
International Equity Portfolio may also invest in short-term obligations of
sovereign foreign governments, their agencies, instrumentalities, and political
subdivisions. For more detailed information about these money market
investments, see 'Investment Objectives and Policies' in the SAI.

REPURCHASE AGREEMENTS. Each 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, a 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 a Portfolio to the seller. A 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, a Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, a Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in repurchase
agreements maturing in more than seven days may be considered illiquid and are
limited. See 'Illiquid Investments; Privately Placed and Other Unregistered
Securities' below.

REVERSE REPURCHASE AGREEMENTS. Each Portfolio is also permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, a 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 a Portfolio to be
magnified. For more information, including limitations on the use of reverse
repurchase agreements, see 'Investment Objectives and Policies' in the SAI.

ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. Each
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of such Portfolio's net assets would be in illiquid
investments or investments that are not readily marketable. In addition, each
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, each 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 a
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 a 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.

Each Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Trustees of the Trust. The Trustees of the Trust will
monitor the Adviser's implementation of these guidelines on a periodic basis.

SECURITIES LENDING. Subject to applicable investment restrictions, a Portfolio
may lend its securities. A 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 a Portfolio in the normal

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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 finders' and custodial fees in
connection with a loan. In addition, the Portfolios will consider all the 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 of the Company, the Trust, a Portfolio, or the Adviser,
Administrator or Distributor, unless otherwise permitted by applicable law.

RISK FACTORS OF FOREIGN SECURITIES. 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.

The International Equity 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 International Equity 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 International Equity Portfolio's operations. Furthermore,
the economies of individual foreign nations may differ from the U.S. economy,
favorably or unfavorably, in areas such as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. Any foreign investments made by the
International Equity 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 International Equity
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 International Equity 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 International Equity Portfolio's
investment opportunities

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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.

Each Portfolio (except the Value Equity Portfolio) may invest in securities of
foreign issuers directly or in the form of ADRs, European Depository Receipts
('EDRs'), Global Depositary Receipts ('GDRs') 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. GDRs are issued outside the United States, typically by non-U.S.
banks and trust companies. Generally, ADRs, in registered form, are designed for
use in the U.S. securities markets, and EDRs and GDRs, in bearer form, are
designed for use in European securities markets and domestic and European
securities markets, respectively.

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 International Equity
Portfolio will and the Small Cap Portfolio and the Large Cap Growth Portfolio
may buy and sell securities and will receive interest and dividends in
currencies other than the U.S. dollar, the International Equity, Small Cap and
Large Cap Growth Portfolios may, from time to time, enter into foreign currency
exchange transactions. The International Equity, Small Cap, and Large Cap Growth
Portfolios 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 such Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Currency options give the buyer
the right, but not the obligation, to purchase or sell a fixed amount of a
specific currency at a fixed price at a future date. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The International Equity, Small Cap, and Large Cap Growth
Portfolios 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 such 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 International Equity, Small Cap and Large Cap Growth Portfolios 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 International Equity, Small Cap and Large Cap Growth
Portfolios 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.

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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.

FUTURES AND OPTIONS TRANSACTIONS. Each Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.

The Portfolios may purchase and sell exchange traded and over-the-counter
('OTC') put and call options on equity securities or indices of equity
securities, enter into forward contracts, purchase and sell futures contracts on
indices of equity securities and purchase or sell put and call options on
futures contracts on indices of equity securities. The Portfolios 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 Portfolios may use these techniques to manage their exposure to changing
interest rates and/or security prices. Some options and futures strategies,
including selling futures contracts and buying puts, tend to hedge a 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 a 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 Portfolios 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 a Portfolio's overall strategy in a manner deemed
appropriate to the Adviser or Sub-Adviser and consistent with the Portfolio's
objective and policies. Because combined positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.

A 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 a Portfolio's return. While a Portfolio's use of these
instruments may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Adviser or Sub-Adviser applies a strategy at an inappropriate time or judges
market conditions or trends incorrectly, such strategies may lower a Portfolio's
return. Certain strategies limit a Portfolio's opportunity to realize gains as
well as limiting its exposure to losses. A 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, a 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 Portfolios may purchase and sell put and call options on securities, indices
of securities and futures contracts, or purchase and sell futures contracts for
the purposes described herein.

The Commodity Exchange Act prohibits U.S. persons, such as the Portfolios, from
buying or selling certain foreign futures contracts or options on such
contracts. Accordingly, the International Equity 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.

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In addition, in order to assure that the Portfolios will not be considered a
'commodity pool' for purposes of CFTC rules, the Portfolios 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 such Portfolio's net assets are committed
as initial margin or premiums to positions that do not constitute bona fide
hedging transactions.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a 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, a Portfolio pays the current
market price for the option (known as the option premium). Options have various
types of underlying instruments, including specific securities, indices of
securities, indices of securities prices and futures contracts. A Portfolio may
terminate its position in a put option it has purchased by allowing it to expire
or by exercising the option. A 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, a Portfolio will lose the entire premium it
paid. If a Portfolio exercises a put option on a security, it will sell the
instrument underlying the option at the strike price. If a 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 a 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, a 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. A 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 a
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 a 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.

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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. Each 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 a Portfolio may invest. Options on securities
indices are similar to options on securities, except that the exercise of
securities index options is settled by cash payment and does not involve the
actual purchase or sale of securities. In addition, these options are designed
to reflect price fluctuations in a group of securities or segment of the
securities market rather than price fluctuations in a single security. A
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
a 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 a Portfolio may
not be able to close out an option position that it has previously entered into.
When a Portfolio purchases an OTC option, it will be relying on its counterparty
to perform its obligations, and a Portfolio may incur additional losses if the
counterparty is unable to perform.

FUTURES CONTRACTS

When a 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 a
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 a 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 a 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 a
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 a 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 a 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 a Portfolio's current or
anticipated investments. The Portfolios 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 such Portfolio's other investments. A Portfolio may
also enter into transactions in futures contracts and options for specific
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 a 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'), or with the 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. A 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 a
Portfolio to close out its futures positions. Until it closes out a futures
position, a Portfolio will be obligated to continue to pay variation margin.
Initial and variation margin payments do not constitute purchasing on margin for
purposes of a Portfolio's investment restrictions. In the event of the
bankruptcy

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<PAGE>
of an FCM that holds margin on behalf of a Portfolio, a 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. Each Portfolio will segregate liquid securities in
connection with its use of options and futures contracts to the extent required
by the SEC. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that the segregation of a
large percentage of the Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.

For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see 'Investment Objectives and
Policies' in the SAI.

INVESTMENT RESTRICTIONS

The investment objectives of each Fund and its respective 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
1940 Act), of such Fund or such Portfolio, respectively. Each Fund has the same
investment restrictions as its respective Portfolio, except that a Fund may
invest all of its investable assets in another open-end investment company with
the same investment objective and restrictions (such as its respective
Portfolio). References below to a Portfolio's investment restrictions also
include the Fund's investment restrictions.

As a diversified investment company, 75% of the total assets of each Portfolio
are subject to the following fundamental limitations: (a) each 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) each Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.

A 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 such 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 such 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 such 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' and 'Additional
Information' in the SAI.

MANAGEMENT

DIRECTORS AND TRUSTEES. Pursuant to the Trust's Declaration of Trust, the
Trustees establish each Portfolio's general policies, are responsible for the
overall management of the Trust, and review the actions of the Adviser, UBSAM,
UBS II, the Administrator and other service providers. Similarly, the Directors
set the Company's general policies, are responsible for the overall management
of the Company, and review the performance of its service providers. Additional
information about each Board and the officers of the Trust and the Company
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 Trust and the Company are also employees of Investors Bank or
its affiliates.

ADVISER, SUB-ADVISERS AND FUNDS SERVICES AGENT. The Company has not retained the
services of an investment adviser with respect to the Funds because the Funds
seek to achieve their investment objective by investing all of their investable
assets in their respective Portfolios. Each Portfolio has retained the

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<PAGE>
services of the Branch as investment adviser. The International Equity Portfolio
has retained the services of UBSII as investment sub-adviser and the Large Cap
Growth and Small Cap Portfolios have each retained the services of UBSAM 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. UBSAM, which also operates out of offices located at 1345
Avenue of the Americas, New York, New York, is a registered investment adviser
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 San Francisco. In
addition to the receipt of deposits and the making of loans and advances, the
Bank, through its offices and subsidiaries engages in a wide range of banking
and financial activities typical of the world's major international banks,
including fiduciary, investment advisory and custodial services and foreign
exchange in the United States, Swiss, Asian and Euro-capital markets. The Bank
is one of the world's leading asset managers and has been active in New York
City since 1946. At December 31, 1997, the Bank (including its consolidated
subsidiaries) had total assets of $395.1 billion (unaudited) and shareholders'
equity of $14.4 billion (unaudited).

On December 8, 1997, the Bank and Swiss Bank Corporation ('Swiss Bank')
announced their intention to merge (the 'Merger Transaction') the Bank with
Swiss Bank to form a new company expected to be called UBS. In February, 1998
the shareholders of UBS and Swiss Bank overwhelmingly approved the Merger
Transaction. The Merger Transaction's completion is still subject to a number of
conditions, including the receipt of regulatory approvals.

The Adviser, UBSAM and UBSII each provide investment advice and portfolio
management to the respective Portfolios. Subject to the supervision of the
Trustees and the Adviser, UBSII makes the International Equity Portfolio's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages the International Equity Portfolio's
investments and operations. Subject to the supervision of the Trustees and the
Adviser, UBSAM makes the Large Cap Growth and Small Cap Portfolios' day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages the investments and operations for the Large Cap Growth and
Small Cap Portfolios. See 'Investment Adviser and Funds Services Agent' in the
SAI.

In addition to the above-listed investment advisory services, the Branch also
provides the Funds and the Portfolios 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 Funds and Portfolios 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 Funds and providing any resultant expense
reimbursement to the Funds.

The Branch provides its administrative services to each 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 Funds pursuant to the terms of the Funds
Services Agreement.

Under the Trust's Investment Advisory Agreement, the Value Equity Portfolio,
International Equity Portfolio, Large Cap Growth Portfolio and Small Cap
Portfolio pay the Adviser a fee, calculated daily and payable monthly, equal, on
an annual basis, to 0.60%, 0.85%, 0.60%, and 0.60% of the respective Portfolio's
average daily net assets. The Adviser has voluntarily agreed to waive its fees
and reimburse the Funds and the Portfolios for any of their direct and indirect
expenses to the extent that each Fund's total operating expenses (including its
share of its Portfolio's expenses) exceed, respectively, on an annual basis,
1.00%, 1.40%, 1.00%, and 1.20% of the respective Fund's average daily net
assets. The Adviser may modify or discontinue this fee waiver and expense
limitation at any time in the future with 30 days' prior notice to a Fund. See
'Expenses.'

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Pursuant to the Sub-Advisory Agreement between the Adviser and UBSII, the
Adviser has agreed to pay UBSII a fee, calculated daily and payable monthly,
equal, on an annual basis, to 0.75% of the International Equity 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 International Equity Portfolio's
average daily net assets in excess of $50 million. The Adviser is solely
responsible for paying UBSII this fee.

Pursuant to Sub-Advisory Agreements between the Adviser and UBSAM, the Adviser
has agreed to pay UBSAM a fee, calculated daily and paid monthly, equal, on an
annual basis to the following rates:

<TABLE>
<S> <C>
Large Cap Growth 0.30% of the Portfolio's first $25 million average daily net assets,
Portfolio 0.25% of the Portfolio's next $25 million average daily net assets and
0.20% of the Portfolio's average daily net assets in excess of $50 million
Small Cap 0.40% of the Portfolio's first $25 million average daily net assets,
Portfolio 0.325% of the Portfolio's next $25 million average daily net assets and
0.25% of the Portfolio's average daily net assets in excess of $50 million
</TABLE>

The Adviser is solely responsible for paying UBSAM these fees.

PORTFOLIO MANAGERS. The Adviser, UBSAM and UBSII each use a sophisticated,
disciplined, collaborative process for managing all asset classes. The Adviser,
UBSAM and UBSII have advised mutual funds since 1996, but each also has
considerable experience managing portfolios with similar investment objectives.
See 'Historical Performance of Comparable Discretionary Accounts.'

Neil S. Kenagy is primarily responsible for the day-to-day management and
implementation of the Adviser's process for the Value Equity Portfolio. Mr.
Kenagy, CFA, has been a Vice President and Portfolio Manager of UBSAM since
February 1996. Previously, Mr. Kenagy was Vice President and Portfolio Manager
for Dillon Read Investment Management from March 1992 through February 1996. Mr.
Kenagy has seven years of investment experience.

Robin Apps is primarily responsible for the day-to-day management and
implementation of UBSII's process for the International Equity Portfolio. Mr.
Apps has been a Senior Vice President of UBSII since 1990, and is responsible
for researching investment opportunities in the Far East. Mr. Apps has twelve
years of investment experience and is also qualified as an actuary.

Wayne D. Thornbrough, CFA is primarily responsible for the day-to-day management
and implementation of UBSAM's process for the Large Cap Growth Portfolio. Mr.
Thornbrough has thirty years investment experience and has been the Chief
Investment Officer and a Managing Director of UBSAM since 1995. Previously, Mr.
Thornbrough has been affiliated with a number of investment firms, including
State Street Research and Dillon, Read & Co. Mr. Thornbrough received an MBA
from Harvard University Business School and a BA from Harvard University.

Paul A. Graham, Jr., CFA and David N. Wabnik are primarily responsible for the
day-to-day management and implementation of UBSAM's process for the Small Cap
Portfolio. Mr. Graham has twelve years investment experience and has been a
Director and Senior Portfolio Manager of UBSAM since 1994. Previously, Mr.
Graham was affiliated with Value Line, Inc. Mr. Graham received a BA from
Dartmouth College and is a member of the New York Society of Security Analysts.
Mr. Wabnik has seven years investment experience and has been a Vice President
and Portfolio Manager of UBSAM since 1995. Prior to joining UBSAM, Mr. Wabnik
was affiliated with Value Line Asset Management and Morgan Stanley & Co., Inc.
Mr. Wabnik holds an MBA from Columbia Business School.

ADMINISTRATORS. The Portfolios and the Funds employ IBT Ireland, a subsidiary of
Investors Bank, and Investors Bank, respectively, as Administrators under
Administration Agreements (the 'Administration Agreements') to provide certain
administrative services. The services provided by IBT Ireland and Investors Bank
under the Administration Agreements include certain accounting, clerical and
bookkeeping services, Blue Sky (for the Funds only), corporate secretarial
services and assistance in the preparation and filing of tax returns and reports
to shareholders and the SEC. Investors Bank 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.

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For its services under the Administration Agreement, each Fund pays Investors
Bank a fee which is calculated daily and paid monthly, equal, on an annual
basis, to 0.065% of such Fund's first $100 million average daily net assets and
0.025% of the next $100 million average daily net assets. Investors Bank does
not receive a fee from the Funds on average daily net assets in excess of $200
million. For its services under the Administration Agreement, each Portfolio
pays IBT Ireland a fee which is calculated daily and paid monthly, equal, on an
annual basis, to 0.07% of such Portfolio's first $100 million average daily net
assets and 0.05% of the assets average daily net in excess of $100 million. IBT
Ireland's principal offices are located at Deloitte & Touche House, 29 Earlsfort
Terrace, Dublin 2, Ireland. Investors Bank's principal offices are located at
200 Clarendon Street, Boston, Massachusetts 02116.

DISTRIBUTOR. Pursuant to a Distribution Agreement, First Fund Distributors, Inc.
('First Fund'or the 'Distributor') serves as the distributor of each Fund's
shares. First Fund is a broker-dealer registered with the SEC and is a member of
the National Association of Securities Dealers, Inc. ('NASD'). First Fund is
authorized by the NASD to act as a mutual fund underwriter and distributor. The
principal offices of First Fund 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 the Administrator.

CUSTODIAN. Investors Bank also serves as the custodian for the Portfolios and
the Funds and transfer and dividend disbursing agent for the Funds. See
'Custodian' in the SAI. The Custodian also maintains offices at 1 First Canadian
Place, Suite 2800, Toronto, Ontario M5X 1C8.

SHAREHOLDER SERVICES

The Company 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') 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 a Fund, will perform the following services for these
investors, among other things: coordinating shareholder accounts and records,
assisting investors seeking to purchase or redeem Fund shares, providing
performance information relating to a Fund, and responding to shareholder
inquiries. The Company has agreed to pay each Eligible Institution a fee for
these services equal, on an annual basis, to 0.25% of the average daily net
assets of the Fund represented by shares of the Fund owned during the period for
which payment is being made. Under the terms of the shareholder servicing
agreements, Eligible Institutions may delegate one or more of their
responsibilities to other entities at their expense.

EXPENSES

In addition to the fees of the Adviser, Investors Bank and IBT Ireland, the
Funds will be responsible for other expenses, including brokerage costs and
litigation and extraordinary expenses. The Adviser has voluntarily agreed to
limit the total operating expenses of the Value Equity Fund, International
Equity Fund, Large Cap Growth Fund and Small Cap Fund, excluding extraordinary
expenses, to an annual rate of 1.00%, 1.40%, 1.00%, and 1.20%, respectively, of
each 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 Funds and the Portfolios may allocate brokerage transactions to their
affiliates and the Adviser's affiliates only if the commissions received by such
affiliates are fair and reasonable when compared to the commissions paid to
unaffiliated brokers in connection with comparable transactions. See 'Portfolio
Transactions' in the SAI.

PURCHASE OF SHARES

GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Company also reserves the right to determine the purchase
orders that it will accept and reserves the right to cease offering its shares
for a

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period of time. The shares of a Fund may be purchased only in those states where
they may be lawfully sold.

The minimum initial investment in a Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of the Company.
The minimum subsequent investment in a Fund for all investors is $5,000. The
minimum initial investment for employees of the Bank or its affiliates is
$5,000. The minimum subsequent investment is $1,000. These minimum investment
requirements may be waived at a Fund's discretion.

No share certificates will be issued.

PURCHASE PRICE AND SETTLEMENT. Fund shares 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. Each 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 and is
executed at the net asset value determined that day. The 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 the business day following 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 SAI.

Customers of Eligible Institutions should request a representative of their
Eligible Institution to assist them in placing a purchase order with the
Distributor. Shareholders who do not currently maintain a relationship with an
Eligible Institution may purchase shares of a Fund directly from the Distributor
by wire transfer or mail.

By wire transfer: Purchases may be made by federal funds wire. To place a
purchase order with a 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 mailed or sent via facsimile. Shareholders 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 marked on the check 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 [Name of fund]
[Investor account name(s) and account number]

By mail: Shareholders may purchase shares of a Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 9130; MFD 23, Boston, MA 02117-9130.

Checks are subject to collection at full value. For shares purchased by check,
dividend payments and redemption proceeds, if any, will be delayed until such
funds are collected, which may take up to 15 days from the date of purchase. The
Funds will not accept third party checks.

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-

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<PAGE>
FUND (888-827-3863) or in writing at UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 9130; MFD 23, Boston, MA 02117-9130.

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 shareholder's
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.

Customers of Eligible Institutions must request a representative of their
Eligible Institution to assist them in placing a redemption order with a Fund.

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, or sent
by check to the address of record if requested by the shareholder. The Funds may
suspend redemptions or postpone payments when the NYSE is closed or when trading
is restricted for any reason or under emergency circumstances as determined by
the SEC.

Shareholders who maintain an account directly with the Distributor may redeem
Fund shares by mail or telephone.

By mail: Redemption requests may be mailed to the Transfer Agent, identifying
the Fund, the dollar amount or number of shares to be redeemed and the
shareholder's account number. The request must be signed in exactly the same
manner as the account is registered (e.g., if there is more than one owner of
the shares, all must sign). In all cases, a signature guarantee is required. See
'General Information on Redemptions' above.

By telephone: The shareholder may place a redemption request by calling the
Transfer Agent at 888-UBS-FUND (888-827-3863). Shareholders utilizing the
telephone redemption option must have previously designated this option on the
initial account application, or by subsequent written authorization to a Fund.
Such shareholders risk possible loss of principal and income in the event of a
telephone redemption not authorized by them. The Funds and the Transfer Agent
will employ reasonable procedures to verify that telephone redemption
instructions are genuine and will require that shareholders electing such an
option provide a form of personal identification. The failure by a Fund or the
Transfer Agent to employ such procedures may cause a Fund or the Transfer Agent
to be liable for any losses incurred by investors due to telephone redemptions
based upon unauthorized or fraudulent instructions. The telephone redemption
option may be modified or discontinued at any time upon 60 days' notice to
shareholders.

MANDATORY REDEMPTION. If the value of a shareholder's holdings in a Fund falls
below $10,000 because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is
increased to $10,000 or more. For example, a shareholder whose initial and only
investment is $10,000 may be subject to mandatory redemption resulting from any
redemption that causes his or her investment to fall below $10,000.

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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, a Fund must have received the shareholder's taxpayer
identification number and address. As discussed under 'Taxes' below, a Fund may
be required to impose 'back-up' withholding of federal income tax on dividends,
distributions and redemptions when non-corporate investors have not provided a
certified taxpayer identification number. In addition, if an investor sends a
check to the Distributor for the purchase of Fund shares and shares are
purchased with funds made available by the Distributor before the check has
cleared, the transmittal of redemption proceeds from the sale of those shares
will not occur until the check used to purchase such shares has cleared, which
may take up to 15 days. Redemption delays may be avoided by purchasing shares by
federal funds wire.

The right of redemption may be suspended or the date of payment postponed for
such periods as the 1940 Act or the SEC may permit. See 'Redemption of Shares'
in the SAI.

EXCHANGE OF SHARES

An investor may exchange Fund shares for shares of any other series of the
Company, without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the Company's other series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
appropriate section relating to the purchase and redemption of shares in this
and other prospectuses. See also 'Additional Information' below for an
explanation of the telephone exchange policy.

Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes. The Funds reserve the right to discontinue, alter or limit the
exchange privilege at any time.

RETIREMENT PLANS

The Funds have available a form of Individual Retirement Account ('IRA') for
investment in Fund shares. Subject to certain restrictions imposed by applicable
tax laws, self-employed individuals may purchase shares of the Funds through
tax-deductible contributions to existing retirement plans known as Self-Employed
Retirement Plans ('SERPs'). Fund shares may also be a suitable investment for
'401(k) Plans' which, subject to certain restrictions, allow their participants
to invest in qualified pension plans on a tax-deferred basis. The Funds do not
currently act as sponsor to such plans.

The minimum initial investment for all such retirement plans is $2,000. The
minimum for all subsequent investments is $500.

Under the Code, individuals may make IRA contributions of up to $2,000 annually,
which may be, depending on the contributor's participation in an
employer-sponsored plan and income level, wholly or partly tax-deductible.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $4,000 annually to one or both
IRAs provided that no more than $2,000 may be contributed to the IRA of either
spouse.

Investors should be aware that they may be subject to penalties or additional
taxes on contributions to or withdrawals from IRAs or other retirement plans
under certain circumstances. Prior to a withdrawal, shareholders may be required
to certify as to their age and awareness of such restrictions in writing.
Clients of Eligible Institutions desiring information concerning investments
through IRAs or other retirement plans should contact their Eligible
Institution. Clients who do not maintain a relationship with an Eligible
Institution may obtain such information by calling the Transfer Agent at (888)
UBS-FUND (888-827-3863).

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DIVIDENDS AND DISTRIBUTIONS

Dividends consisting of substantially all of a Fund's net investment income, if
any, are declared and paid annually. The Funds 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 such Fund.

Substantially all of a 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 a 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 a 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 Funds reserve the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.

NET ASSET VALUE

A Fund's net asset value per share equals the value of a Fund's total assets
(i.e., the value of its investment in its 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 Funds and the Portfolios, 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 a Portfolio's assets and liabilities.

Each 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
Funds on a day in which no orders to purchase or redeem Fund shares have been
received or on any day on which the New York Stock Exchange is closed, including
the following holidays: New Year's Day, Dr. Martin Luther King, Jr. 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 expect to close for purchases
and redemptions at the same time.

ORGANIZATION

UBS PRIVATE INVESTOR FUNDS, INC.

The Company, 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 nine series: The UBS Bond Fund Series; The UBS Tax Exempt Bond Fund Series;
The UBS High Yield Bond Fund Series; The UBS Real Estate Fund Series; The UBS
International Equity Fund Series; The UBS Institutional International Equity
Fund Series; The UBS Value Equity Fund Series; The UBS Small Cap Fund Series;
and The UBS Large Cap Growth Fund Series. Each outstanding share of the Company
will have a pro rata interest in the assets of its series, but it will have no
interest in the assets of any other Company series. Only shares of The UBS Value
Equity Fund Series, The UBS International Equity Fund Series, The UBS Small Cap
Fund Series and The UBS Large Cap Growth Fund Series are offered through this
Prospectus.

Shareholders of a 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.

-32-
<PAGE>
<PAGE>
UBS INVESTOR PORTFOLIOS TRUST

The 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, seven series
have been authorized: the Value Equity Portfolio, International Equity
Portfolio, Small Cap Portfolio, Large Cap Growth Portfolio, Real Estate
Portfolio, Bond Portfolio and High Yield Bond Portfolio.

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 a
Portfolio, but that only the Trust property shall be liable. The Declaration of
Trust provides that a Fund and other entities investing in a 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 a 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 Funds nor their shareholders
will be adversely affected by reason of a Fund's investment in a Portfolio.

TAXES

Each of the Funds intends to annually qualify and elect to be treated as RICs
under Subchapter M of the Code. 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. Each Portfolio intends to qualify as a partnership for federal
income tax purposes. As such, the Portfolios generally should not be subject to
tax. The status of each Fund as a RIC is dependent on, among other things, each
respective Portfolio's continued qualification as a partnership for federal
income tax purposes.

Distributions of net investment income and realized net short-term capital gains
in excess of net long-term capital losses are taxable as ordinary income to Fund
shareholders whether such distributions are received in the form of cash or
reinvested in additional shares. Distributions of net gains from certain foreign
currency transactions are taxable as ordinary income to shareholders of the
International Equity Fund whether such distributions are received in the form of
cash or reinvested in additional shares. To the extent that dividends
distributed to shareholders are designated as derived from a Fund's dividend
income that would be eligible for the dividends received deduction if the Fund
were not a regulated investment company, such dividends are eligible, subject to
certain restrictions, for the 70% dividends received deduction for corporations.
Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to Fund shareholders as long-term capital gains regardless of
how long a shareholder has held shares in the Fund and regardless of whether
received in the form of cash or reinvested in additional shares. Long-term
capital gains distributions to corporate shareholders are not eligible for the
dividends-received deduction. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders after the end of the
taxable year for such Fund.

Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than a
year, otherwise as short-term capital gain or loss. However, any loss realized
by a shareholder upon the redemption or exchange of shares in a 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 a 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 such
Fund.

-33-
<PAGE>
<PAGE>
taxable to shareholders in the calendar year in which it was earned by such
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 International Equity 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 International Equity Portfolio's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the International Equity Fund may elect to treat its
proportionate share of foreign income taxes paid by the International Equity
Portfolio as paid directly by the International Equity Fund's shareholders. The
International Equity 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 International
Equity 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
International Equity 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 International Equity Portfolio or the International Equity Fund purchases
shares in certain foreign investment entities, referred to as 'passive foreign
investment companies,' the International Equity 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
International Equity Fund as a dividend to its shareholders. If the
International Equity 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 International Equity Fund would be required each year to
include in income, and distribute to shareholders in accordance with the
distribution requirement set forth above, the International Equity Fund's pro
rata share of the ordinary earnings and net capital gains of the company,
whether or not distributed to the International Equity Fund.

Distributions of net investment income or net long-term capital gains will have
the effect of reducing the net asset value of a Fund's shares by the amount of
the distribution. If the net asset value is reduced below a shareholder's cost,
the distribution will nonetheless be taxable as described above, even if the
distribution represents a return of invested capital. Investors should consider
the tax implications of buying shares just prior to a distribution, when the
price of shares may reflect the amount of the forthcoming distribution. 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, a Fund may be fined up to
$50 annually for each account for which a certified taxpayer identification
number is not provided. In the event that such a fine is imposed with respect to
any uncertified account in any year, a corresponding charge may be made against
that account.

ADDITIONAL INFORMATION

The Funds will send their shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and periodic statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.

-34-
<PAGE>
<PAGE>
Shareholders of certain Eligible Institutions 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 Branch, the Eligible
Institution, 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 Funds may make historical performance information available and may compare
its performance to other investments or relevant indices, including data from
Morgan Stanley Indices, Lipper Analytical Services, Inc., Micropal Inc.,
Morningstar Inc., Ibbotson Associates, S&P 500 Index, the Dow Jones Average, the
Frank Russell Indices, the MSCI EAFE Index, the Financial Times World Stock
Index and other industry publications.

The Funds may advertise 'total return.' The total return shows what an
investment in a Fund would have earned over a specified period of time (one,
five or ten years or since commencement of operations, if less) assuming that
all Fund distributions and dividends were reinvested on the reinvestment dates
and less all recurring fees during the period and assuming the redemption of
such investment at the end of each period. This method of calculating total
return is required by regulations of the SEC. Total return data similarly
calculated, unless otherwise indicated, over other specified periods of time may
also be used. All performance figures are based on historical earnings and are
not intended to indicate future performance. Performance information may be
obtained by clients of an Eligible Institution by calling the Eligible
Institution and other shareholders may address their inquiries to the Transfer
Agent.

-35-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---

<S> <C>
Investors for Whom the Funds are Designed............................................................. 2
Financial Highlights.................................................................................. 5
Master-Feeder Structure............................................................................... 12
Investment Objectives and Policies.................................................................... 13
Additional Investment Information and Risk Factors.................................................... 18
Investment Restrictions............................................................................... 25
Management............................................................................................ 25
Shareholder Services.................................................................................. 28
Expenses.............................................................................................. 28
Purchase of Shares.................................................................................... 28
Redemption of Shares.................................................................................. 30
Exchange of Shares.................................................................................... 31
Retirement Plans...................................................................................... 31
Dividends and Distributions........................................................................... 32
Net Asset Value....................................................................................... 32
Organization.......................................................................................... 32
Taxes................................................................................................. 33
Additional Information................................................................................ 34
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT ADVISER Union Bank of Switzerland,
New York Branch
1345 Avenue of the Americas
New York, New York 10105

INVESTMENT SUB-ADVISERS UBS Asset Management (New York) Inc.
1345 Avenue of the Americas
New York, New York 10105
UBS International Investment London Limited
Triton Court
14 Finsbury Square
London, England EC2A 1PD

ADMINISTRATOR, CUSTODIAN Investors Bank & Trust Company
AND TRANSFER AGENT 200 Clarendon Street
Boston, Massachusetts 02116

DISTRIBUTOR First Fund Distributors, Inc.
4455 E. Camelback Road
Phoenix, Arizona 85018
</TABLE>

- --------------------------------------------------------------------------------

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 FUNDS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY THE FUNDS IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION MAY NOT LAWFULLY BE
MADE.

[LOGO]

<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
UBS
BOND
FUND

UBS
HIGH YIELD
BOND FUND
------------------------

UBS
Private Investor
Funds, Inc.

Prospectus
May 1, 1998

- -------------------------------------------------------------------------------

<PAGE>

<PAGE>
PROSPECTUS

UBS BOND FUND
UBS HIGH YIELD BOND FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (888) UBS-FUND ((888) 827-3863)

This Prospectus pertains to the UBS Bond Fund (the 'Bond Fund') and the UBS High
Yield Bond Fund (the 'High Yield Bond Fund,' each a 'Fund,' collectively, the
'Funds').

The Funds are diversified, no-load mutual funds for which there are no sales
charges or exchange or redemption fees. The Funds are two 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 BOND FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN UBS BOND PORTFOLIO (THE 'BOND
PORTFOLIO'), AND THE HIGH YIELD BOND FUND SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN UBS HIGH YIELD BOND
PORTFOLIO (THE 'HIGH YIELD BOND PORTFOLIO,' EACH A 'PORTFOLIO,' COLLECTIVELY,
THE 'PORTFOLIOS'). THE PORTFOLIOS ARE SERIES OF UBS INVESTOR PORTFOLIOS TRUST
(THE 'TRUST'), AN OPEN-END MANAGEMENT INVESTMENT COMPANY. THE PORTFOLIOS HAVE
THE SAME INVESTMENT OBJECTIVES AS THEIR RESPECTIVE FUNDS. THE FUNDS EMPLOY A
TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE THAT IS MORE FULLY DESCRIBED
UNDER THE SECTION CAPTIONED 'MASTER-FEEDER STRUCTURE.'

The Portfolios are advised by the New York Branch (the 'Branch' or the
'Adviser') of Union Bank of Switzerland (the 'Bank') and the High Yield Bond
Portfolio has entered into a sub-advisory agreement with UBS Asset Management
(New York) Inc. ('UBSAM', the 'Sub-Adviser' and, together with the Adviser, the
'Advisers').

This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated May
1, 1998 (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, which has been filed with the Securities and Exchange Commission (the
'SEC'), 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 ((888) 827-3863).

INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUNDS
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN EITHER 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.

PROSPECTUS DATED MAY 1, 1998.
<PAGE>
<PAGE>
INVESTORS FOR WHOM THE FUND IS DESIGNED

GENERAL

This Prospectus describes each Fund's investment objective and policies,
management and operations to enable investors to decide if either Fund suits
their investment needs. Because the investment characteristics and experience of
the Funds will correspond directly with those of the Portfolios, the discussion
in this section of the Prospectus focuses on the investments and investment
policies of the Portfolios. There is no assurance that either Fund or its
corresponding Portfolio will achieve its stated objective.

The minimum initial investment in either Fund is $25,000, except that the
minimum initial investment is $10,000 for shareholders of another series of the
Company. The minimum subsequent investment for all investors is $5,000. These
minimums may be waived at either Fund's discretion. See 'Purchase of Shares.' If
shareholders reduce their total investment in shares of either Fund to less than
$10,000, their investment will be subject to mandatory redemption. See
'Redemption of Shares -- Mandatory Redemption.' Each Fund is one of several
series of the Company, an open-end management investment company organized as a
Maryland corporation.

UBS BOND FUND

The Bond Fund is designed for investors seeking a higher total return from a
portfolio of debt securities issued by domestic and foreign companies than that
generally available from a portfolio of short-term obligations in exchange for
some risk of capital. The net asset value of shares of the Bond Fund fluctuates
with changes in the value of the investments in the Bond Portfolio. See
'Investment Objectives and Policies -- Quality Information.'

The Bond Portfolio may make various types of investments in seeking its
objective. Among the permissible investments for the Bond Portfolio are bonds
and debt instruments of domestic and foreign companies. The Bond Portfolio may
also invest in futures contracts, options, forward contracts on foreign
currencies and certain privately placed securities. For further information
about these investments and related investment techniques, see 'Investment
Objectives and Policies' discussed below.

UBS HIGH YIELD BOND FUND

The High Yield Bond Fund is designed for investors seeking higher current income
from a portfolio of higher-yielding, lower-rated debt securities issued by
domestic and foreign companies than that generally available from a portfolio of
higher-rated obligations in exchange for assuming additional risk of capital.
The High Yield Bond Fund will also seek capital appreciation when consistent
with high current income by investing in securities benefiting from declines in
long-term interest rates or improvements in credit quality. The net asset value
of shares of the High Yield Bond Fund fluctuates with changes in the value of
the investments in the High Yield Bond Portfolio. See 'Investment Objectives and
Policies -- Quality Information.'

The High Yield Bond Portfolio may make various types of investments in seeking
its objectives. Among the permissible investments for the High Yield Bond
Portfolio are high-yielding, lower-rated bonds and debt instruments of domestic
and foreign companies commonly known as 'junk bonds.' Investments of this type
are subject to a greater risk of loss of principal and nonpayment of interest.
Investors should carefully assess the risks associated with an investment in the
High Yield Bond Fund. The High Yield Bond Fund is designed for investors willing
to assume additional risk in return for above-average income potential. See
'Additional Investment Information and Risk Factors.'

The High Yield Bond Portfolio may also invest in futures contracts, options,
forward contracts on foreign currencies, certain privately placed securities and
equity securities such as common and preferred stocks.

-2-
<PAGE>
<PAGE>
For further information about these investments and related investment
techniques, see 'Investment Objectives and Policies' discussed below.

The following table illustrates that Fund investors incur no shareholder
transaction expenses: their investments in the Funds are subject only to the
operating expenses set forth below for the Funds and their respective Portfolios
as a percentage of average daily net assets of such Fund. The Directors believe
that the aggregate per share expenses of each Fund and its corresponding
Portfolio will be approximately equal to and may be less than the expenses that
such Fund would incur if it retained the services of an investment adviser and
invested its assets directly in portfolio securities. Expenses for each Fund and
Portfolio are discussed below under the headings 'Management,' 'Expenses' and
'Shareholder Services.'

SHAREHOLDER TRANSACTION EXPENSES (BOTH FUNDS)

EXPENSE TABLE

<TABLE>
<CAPTION>
HIGH
BOND YIELD
FUND BOND FUND
---- ---------

<S> <C> <C>
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................... 0.02% 0.00%
Rule 12b-1 Fees..................................................................... None None
Other Expenses, After Expense Reimbursements***..................................... 0.78% 0.90%
---- ---------
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*............. 0.80% 0.90%
---- ---------
---- ---------
</TABLE>

* Expenses are expressed as a percentage of a Fund's average daily net assets
and are based on the expenses actually incurred during the fiscal year ended
December 31, 1997 for the Bond Fund, and expected to be incurred during the
fiscal year ending December 31, 1998, for the High Yield Bond Fund, after any
applicable fee waivers and expense reimbursements. Without such fee waivers and
expense reimbursements, Total Operating Expenses were equal, on an annual basis,
to 2.34% of the Bond Fund's average daily net assets and are expected to be
equal, on an annual basis, to 2.81% of the High Yield Bond Fund's average daily
net assets. See 'Management.'

** The Adviser has agreed to waive fees and reimburse each Fund and its
respective Portfolio for any of its respective operating expenses to the extent
that each such Fund's total operating expenses (including its share of its
respective Portfolio's expenses) exceed, on an annual basis, 0.80% of the Bond
Fund's average daily net assets and 0.90% of the High Yield Bond 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 either Fund.

If there were no fee waiver in effect, the Bond Portfolio and the High Yield
Bond Portfolio's advisory fees would each be equal, on an annual basis, to 0.45%
of the average daily net assets of each such Portfolio. 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 ('Investors Bank', the 'Custodian', or the
'Transfer Agent') (a) under an Administration Agreement with the Funds, (b) as
custodian of the Funds and the Portfolios and (c) as transfer agent of the
Funds;

(ii) IBT Trust & Custodial Services (Ireland) LMTD ('IBT Ireland') under an
Administration Agreement with the Portfolios, and

(iii) Eligible Institutions providing shareholder services under various
shareholder servicing agreements.

-3-
<PAGE>
<PAGE>
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:

<TABLE>
<CAPTION>
HIGH
BOND YIELD
FUND BOND FUND
---- ---------

<S> <C> <C>
1 Year................................................ $ 8 $ 9
3 Years............................................... 26 29
5 Years............................................... 44 50
10 Years.............................................. 99 111
</TABLE>

The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of each Fund and each Fund's share of its
respective Portfolio's expenses. In connection with the above Example, please
note that $1,000 is less than the minimum investment requirement of either Fund
and that there are no redemption or exchange fees of any kind. See 'Purchase of
Shares,' 'Exchange of Shares' and 'Redemption of Shares.' THE EXAMPLE IS
HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES, AND ASSUMES THE
CONTINUATION OF THE FEE WAIVERS AND EXPENSE REIMBURSEMENTS REPRESENTED IN THE
ABOVE 'EXPENSE TABLE'. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS

The information regarding the Bond Fund and the High Yield Bond Fund has been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
appears in the Funds' Annual Report (the 'Annual Report') dated December 31,
1997. The information should be read in conjunction with the financial
statements and related notes also included in the Annual Report. Further
information about the performance of each Fund and its corresponding Portfolio
is contained in the Annual Report which may be obtained without charge and upon
request by calling 1-888-UBS-FUND.

Per share data for a share outstanding during the indicated period:

-4-
<PAGE>
<PAGE>

UBS Bond Fund
- --------------------------------------------------------------------------------

<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................................. $100.13 $100.00
----------------- -----------------
Income from investment operations:
Net investment income........................................... 5.71 4.12
Net realized and unrealized gain on investments................. 1.30 0.14
----------------- -----------------
Total income from investment operations......................... 7.01 4.26
----------------- -----------------

Less dividends and distributions to shareholders:
Dividends from net investment income............................ (5.53) (4.11)
Distributions from net realized gains........................... (0.11) (0.02)
----------------- -----------------
Total dividends and distributions............................... (5.64) (4.13)
----------------- -----------------
Net asset value, end of period....................................... $101.50 $100.13
----------------- -----------------
----------------- -----------------
Total return......................................................... 7.22% 4.36%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)........................ $13,546 $ 7,500
Ratio of expenses to average net assets(2)...................... 0.80% 0.80%(3)
Ratio of net investment income to average net assets(2)......... 5.52% 5.61%(3)
</TABLE>

- ------------------------

* Commencement of operations.

(1) Not annualized.

(2) Includes the Fund's share of UBS Investor Portfolios 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 1.54% and 3.33% (annualized) for the
respective periods.

(3) Annualized.

-5-
<PAGE>
<PAGE>

UBS High Yield Bond Fund
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<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............................................... 1.80
Net realized and unrealized gain on investments..................... 0.52
-------
Total income from investment operations............................. 2.32
-------

Less dividends to shareholders from net investment income................ (1.77)
-------

Net asset value, end of period........................................... $100.55
-------
-------
Total return............................................................. 2.34%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............................ $ 7,861
Ratio of expenses to average net assets(2).......................... 0.90%(3)
Ratio of net investment income to average net assets(2)............. 7.23%(3)
</TABLE>

- ------------------------
(1) Not annualized.

(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS High
Yield 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 4.08% (annualized).
The annualization of these ratios is affected by the fact that the
Investment Advisory Agreement and Investment Sub-Advisory Agreement was not
ratified until December 22, 1997. Prior to this date, investment advisory
services were being provided without compensation.

(3) Annualized.

-6-
<PAGE>
<PAGE>
HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS -- BOND FUND. The
following table sets forth (i) the composite average annual total returns for
the one, three, five and ten year periods ended December 31, 1997, for all
discretionary accounts described below that have been managed for at least one
full quarter by UBSAM, (ii) the average annual total return for the Bond Fund
for the period April 2, 1996 (commencement of operations) through December 31,
1996, and the year ended December 31, 1997, and (iii) the average annual total
return during the same periods for the Lehman Government/Corporate Intermediate
Bond Index (the 'Lehman 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 Bond Portfolio. While the Bond
Portfolio will be managed by the Adviser, the management of the Bond Portfolio
will be substantially the same as by UBSAM and will be carried out by personnel
who performed these services for the discretionary accounts at UBSAM, who will
be employed by the Adviser for this purpose. The composite total returns for
such accounts have been adjusted to deduct all of the Bond Fund's annual total
operating expenses of 0.80% of average daily net assets as set forth in the
Expense Table above. The composite total returns are time-weighted and weighted
by individual account size and reflect the reinvestment of interest. The
discretionary accounts are not subject to certain investment limitations,
diversification requirements and other restrictions imposed by federal
securities and tax laws on the Bond Portfolio that, if applied to the accounts,
may have adversely affected their performance results. The composite total
returns of these discretionary accounts does not represent the historical
performance of the Bond Portfolio and should not be viewed as a prediction of
future performance of the Bond Portfolio. The Lehman Index is an unmanaged
composite of intermediate duration consisting of publicly-issued, fixed-rate,
non-convertible, domestic bonds. The total returns of the Lehman Index do not
include management fees or commissions.

<TABLE>
<CAPTION>
COMPOSITE LEHMAN
TOTAL RETURN GOV'T/CORP
UBS OF ADVISER'S INTERMEDIATE
BOND DISCRETIONARY BOND
AVERAGE ANNUAL TOTAL RETURN FOR THE FUND ACCOUNTS INDEX
- ------------------------------------------------------------------------ ---- -------------- ------------

<S> <C> <C> <C>
Period April 2, 1996* through December 31, 1996......................... 4.28% N/A 4.85%
One Year Ended December 31, 1997........................................ 7.22% 7.10% 7.87%
Three Years Ended December 31, 1997..................................... N/A 8.44% 8.99%
Five Years Ended December 31, 1997...................................... N/A 6.23% 6.68%
Ten Years Ended December 31, 1997....................................... N/A 7.69% 8.34%
</TABLE>

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* Commencement of operations.

HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS -- HIGH YIELD BOND
FUND. The following table sets forth (i) the composite average annual total
returns for the period July 1, 1995 (commencement date of investment operations)
through December 31, 1997, and for the one year period ended December 31, 1997,
for all discretionary accounts described below that have been managed for at
least one full quarter by UBSAM, (ii) the average annual total return for the
High Yield Bond Fund for the period September 30, 1997 (commencement of
operations) through December 31, 1997 and (iii) the average annual total return
during the same periods for the Merrill Lynch All High Yield Bond Index (the
'Merrill 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 High Yield Bond Portfolio. The composite
total returns for such accounts have been adjusted to deduct all of the High
Yield Bond Fund's annual total operating expenses of 0.90% of average daily net
assets as set forth in the Expense Table above. The composite total returns are
time-weighted and weighted by individual account size and reflect the
reinvestment of interest. The discretionary accounts are not subject to certain
investment limitations, diversification requirements and other restrictions
imposed by federal securities and tax laws on the High Yield Bond Portfolio
that, if applied to the accounts, may have adversely affected their performance
results. The composite total returns of these discretionary accounts does not
represent the historical performance of the High Yield Bond Portfolio and should
not be viewed as a prediction of future performance of the High Yield Bond
Portfolio. The Merrill Index is an unmanaged

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<PAGE>
composite of consisting of publicly-issued, fixed-rate, non-convertible,
domestic bonds that are below investment grade. The total returns of the Merrill
Index do not include management fees or commissions.

<TABLE>
<CAPTION>
COMPOSITE
UBS TOTAL
HIGH RETURN OF MERRILL
YIELD SUB-ADVISER'S LYNCH ALL
BOND DISCRETIONARY HIGH YIELD
AVERAGE ANNUAL TOTAL RETURN FOR THE: FUND ACCOUNTS BOND INDEX
- ------------------------------------------------------------------------- ----- ------------- ----------

<S> <C> <C> <C>
Period July 1, 1995* through December 31, 1997........................... N/A 13.13% 12.16%
Period September 30, 1997* through December 31, 1997..................... 2.34% N/A 2.58%
One Year Ended December 31, 1997......................................... N/A 13.12% 12.82%
</TABLE>

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* Commencement of operations.

MASTER-FEEDER STRUCTURE

Unlike other mutual funds that directly acquire and manage their own portfolio
of securities, the Funds seek to achieve their investment objectives by
investing all of their investable assets in their respective Portfolios. The
Portfolios are separate investment companies with the same investment objectives
as their respective Funds. The investment objective of a Fund and a Portfolio
may be changed only with the approval of the holders of a majority of the
outstanding voting securities of such Fund or a majority of the investors in
such Portfolio, respectively, after 30 days' prior notice.

In addition to selling an interest in a Portfolio to a Fund, each 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 a Fund and will pay a proportionate share of the Portfolio's
expenses. However, other entities investing in the Portfolios may sell shares of
their own fund using a different pricing structure than a Fund's. Such different
pricing structures may result in differences in returns experienced by investors
in other funds that invest in the Portfolios. Such differences in returns are
not uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolios is available from
Investors Bank at (888) UBS-FUND.

Each Fund may withdraw its investment in its 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 same investment objective and restrictions as the Funds 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 a Portfolio's investment objective, policies or restrictions,
or a failure by a Fund's shareholders to approve a change in a Portfolio's
investment objective or restrictions, may require a Fund to withdraw its
investment in the Portfolio. Any such withdrawal could result in an in-kind
distribution of portfolio securities (as opposed to a cash distribution) by a
Portfolio to a 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 a 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.

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<PAGE>
<PAGE>
meeting of Fund shareholders and will cast all of its 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 Fund
shareholders who do, in fact, vote.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund and its respective Portfolio is described
below, together with the policies each employs to seek to achieve its objective.
Additional information about the investment policies of each Fund and its
respective Portfolio appears in the SAI under 'Investment Objectives and
Policies.' Each Fund seeks to achieve its objective by investing all of its
investable assets in its respective Portfolio, which has the same investment
objective as the Fund. There can be no assurance that the investment objectives
of the Funds or the Portfolios will be achieved.

UBS BOND FUND AND BOND PORTFOLIO

The objective of the Bond Portfolio is to provide a high total return from a
portfolio of debt securities issued by domestic and foreign companies,
consistent with moderate risk of capital and maintenance of liquidity. Total
return will consist of realized and unrealized capital gains and losses plus net
income. Although the net asset value of the Bond Portfolio will fluctuate, the
Bond Portfolio attempts to preserve the value of its investments to the extent
consistent with its investment objective.

The Bond Fund is designed for investors who seek a total return over time that
is higher than that generally available from a portfolio of shorter-term
obligations while recognizing the greater price fluctuation of longer-term
instruments. The Bond Fund may also be a convenient way to add fixed income
exposure to diversify an investor's existing portfolio.

The Adviser actively manages the Bond Portfolio's duration (defined below), the
allocation of securities across market sectors and the selection of specific
securities within sectors. Based on fundamental economic and capital markets
research, the Adviser adjusts the duration of the Bond Portfolio in light of
market conditions and the Adviser's opinion regarding future interest rates. For
example, if interest rates are expected to fall, the duration may be lengthened
to take advantage of the anticipated increase in bond prices. The Adviser also
actively allocates the Bond Portfolio's assets among broad sectors of the fixed
income market including, but not limited to, U.S. Government and agency
securities, corporate securities, private placements, asset-backed securities
and mortgage related securities. The Adviser intends to identify and purchase
specific securities that it believes are undervalued using quantitative tools,
analyses of credit risk, the expertise of a dedicated trading desk, and the
judgment of fixed income portfolio managers and analysts. Under normal
circumstances, the Adviser intends to keep at least 65% of the Bond Portfolio's
assets invested in bonds. Bonds are debt instruments such as debentures, notes,
mortgage securities, equipment trust certificates and other collateralized
securities, zero coupon securities, government obligations and money market
instruments. See 'Corporate Bonds' and 'Government Obligations' below.

Duration is a measure of a bond's price sensitivity, expressed in years. It is a
measure of interest rate risk of a bond calculated by taking into consideration
the number of years until the average dollar, in present value terms, is
received from principal and interest payments. For example, for a bond with a
duration of four years, every one percentage point change in yield will result
in a 4% change in price in the opposite direction. The Bond Portfolio's
benchmark is the Lehman Government Corporate Intermediate Bond Index, which
currently has a duration of approximately 3.31 years. The Bond Portfolio intends
to have a duration between 0.5 years shorter and 0.5 years longer than its
benchmark. The maturities of the Bond

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<PAGE>
<PAGE>
Portfolio's individual securities may vary widely from its duration, however,
and may be as long as 30 years.

The Bond Portfolio intends to manage its securities actively in pursuit of its
investment objective. Bond Portfolio transactions are undertaken principally to
accomplish the Bond Portfolio's objective in relation to expected movements in
the general level of interest rates, but the Bond Portfolio may also engage in
short-term trading consistent with its objective. To the extent the Bond
Portfolio engages in short-term trading, it may incur increased transaction
costs. For the period April 2, 1996 (commencement of operations) to December 31,
1996, and for the year ended December 31, 1997, the portfolio turnover rate for
the Bond Portfolio was 100% and 129%, respectively.

UBS HIGH YIELD BOND FUND AND HIGH YIELD BOND PORTFOLIO

The Adviser is responsible for supervising the management of the High Yield Bond
Portfolio's investments. Consistent with these duties, the Adviser has entered
into a Sub-Advisory Agreement with UBSAM, whereby UBSAM is primarily responsible
for the day-to-day investment decisions for the High Yield Bond Portfolio. The
Adviser is solely responsible for paying UBSAM for these services. UBSAM is an
affiliate of the Adviser.

The primary objective of the High Yield Bond Portfolio is to provide high
current income from a portfolio of higher-yielding, lower-rated debt securities
issued by domestic and foreign companies. The High Yield Bond Portfolio will
seek to achieve this investment objective of high current income by investing,
under normal market conditions, at least 65% of its assets in debt securities,
convertible securities or preferred stocks that are consistent with this
objective. The High Yield Bond Portfolio's remaining assets may be held in cash
or money market instruments, or invested in equity securities when these types
of investments are consistent with high current income.

The High Yield Bond Portfolio seeks its secondary objective of capital growth,
when consistent with high current income, by investing in securities, including
common stocks and non-income producing securities, which UBSAM expects will
appreciate in value as a result of declines in long-term interest rates or
favorable developments affecting the business or prospects of the issuer which
may improve the issuer's financial condition and credit rating. The High Yield
Bond Portfolio may invest up to 25% of its assets in the securities of foreign
issuers.

The High Yield Bond Fund is designed for investors who seek current income that
is higher than that generally available from a portfolio of higher-rated
obligations while recognizing the additional risks of lower-rated obligations.
The High Yield Bond Fund may also be a convenient way to add high yield bond
exposure to diversify an investor's existing portfolio.

UBSAM intends to identify and purchase specific securities that will constitute
a diversified portfolio. In selecting securities, UBSAM will use quantitative
tools, analyses of credit risk, the expertise of a dedicated trading desk, and
the judgment of fixed income portfolio managers and analysts. Under normal
circumstances, UBSAM intends to keep at least 65% of the High Yield Bond
Portfolio's assets invested in bonds. Bonds are debt instruments such as
debentures, notes, mortgage securities, equipment trust certificates and other
collateralized securities, zero coupon securities, government obligations and
money market instruments. See 'Corporate Bonds,' 'Foreign Securities' and
'Temporary Defensive Investments' below.

As a secondary activity, UBSAM may also manage the High Yield Bond Portfolio's
duration (defined under 'UBS Bond Fund and Bond Portfolio' above), and the
allocation of securities across market sectors. Based on fundamental economic
and capital markets research, UBSAM may adjust the duration of the High Yield
Bond Portfolio in light of market conditions and UBSAM's opinion regarding
future interest rates. For example, if interest rates are expected to fall, the
duration may be lengthened to take advantage of the anticipated increase in bond
prices. UBSAM also actively allocates the High Yield Bond Portfolio's assets
among the broad sectors of the fixed income market including, but not limited
to, corporate securities, private placements, asset-backed securities and
mortgage related securities.

The High Yield Bond Portfolio's benchmark is the Merrill Index, which currently
has a duration of approximately 4.26 years. The High Yield Bond Portfolio
intends to have a duration between 3 years and

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<PAGE>
<PAGE>
8 years. The maturities of the High Yield Bond Portfolio's individual securities
may vary widely from its duration, however, and may be as long as 30 years.

The High Yield Bond Portfolio intends to manage its securities actively in
pursuit of its investment objective. High Yield Bond Portfolio transactions are
undertaken principally to accomplish the High Yield Bond Portfolio's objective
in relation to expected movements in the general level of interest rates, but
the High Yield Bond Portfolio may also engage in short-term trading consistent
with its objective. See 'Portfolio Transactions' in the SAI. To the extent the
High Yield Bond Portfolio engages in short-term trading, it may incur increased
transaction costs. For the period October 1, 1997 (commencement of operations)
to December 31, 1997, the portfolio turnover rate for the High Yield Bond
Portfolio was 80%.

CORPORATE SECURITIES. The Portfolios may invest in a broad range of corporate
bonds of domestic and foreign issuers. These include debt securities of various
types and maturities, e.g., debentures, notes, mortgage securities, equipment
trust certificates and other collateralized securities and zero coupon
securities. Collateralized securities are backed by a pool of assets such as
loans or receivables that generate cash flow to cover the payments due on the
securities. Collateralized securities are subject to certain risks, including a
decline in the value of the collateral backing the security, failure of the
collateral to generate the anticipated cash flow or in certain cases more rapid
prepayment than anticipated because of events affecting the collateral, such as
accelerated prepayment of mortgages or other loans backing these securities or
destruction of equipment subject to equipment trust certificates. In the event
of any such prepayment, the Portfolios will be required to reinvest the proceeds
of prepayments at interest rates prevailing at the time of reinvestment, which
may be lower than the interest rates on the prepaid securities. In addition, the
value of zero coupon securities, which do not pay interest, is more volatile
than that of interest bearing debt securities with the same maturity. Although
zero coupon securities do not pay interest to the holders thereof, federal
income tax law requires the Funds to recognize a portion of such securities'
discount as income each year. This income must be distributed to shareholders
along with other income earned by the Funds. See 'Dividends and Distributions.'

The Bond Portfolio does not intend to invest in common stock but may invest to a
limited degree in convertible debt or preferred stocks. The High Yield Bond
Portfolio may invest to a limited degree in common stock, convertible debt or
preferred stocks to the extent consistent with its investment objective. The
Portfolios also may purchase nonpublicly offered debt securities. See
'Additional Investment Information and Risk Factors -- Illiquid Investments;
Privately Placed and Other Unregistered Securities.'

GOVERNMENT OBLIGATIONS. The Bond Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of the
United States. These securities include Treasury securities, obligations of the
Government National Mortgage Association ('GNMA Certificates'), the Farmers Home
Administration and the Export Import Bank. GNMA Certificates are mortgage-backed
securities that evidence an undivided interest in mortgage pools. These
securities are subject to more rapid repayment than their stated maturity would
indicate because prepayments of principal on mortgages in the pool are passed
through to the holder of the securities. During periods of declining interest
rates, prepayments of mortgages in the pool can be expected to increase. The
pass-through of these prepayments would have the effect of reducing the Bond
Portfolio's positions in these securities and requiring the Bond Portfolio to
reinvest the prepayments at interest rates prevailing at the time of
reinvestment. The Bond Portfolio may also invest in obligations issued or
guaranteed by U.S. Government agencies or instrumentalities where the Bond
Portfolio must look principally to the issuing or guaranteeing agency for
ultimate repayment; some examples of agencies or instrumentalities issuing these
obligations are the Federal Farm Credit System, the Federal Home Loan Banks and
the Federal National Mortgage Association. Although these governmental issuers
are responsible for payments on their obligations, they do not guarantee their
market value. See 'Investment Objectives and Policies' in the SAI for a more
detailed discussion of the Bond Portfolio's investments in government
securities.

The Bond Portfolio may also invest in municipal obligations, which may be
general obligations of the issuer or payable only from specific revenue sources.
However, the Bond Portfolio will invest only in municipal obligations that have
been issued on a taxable basis or have an attractive yield excluding tax
considerations. In addition, the Bond Portfolio may invest in debt securities of
foreign governments and

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<PAGE>
governmental entities. See 'Additional Investment Information and Risk Factors'
for further information on foreign investments.

MONEY MARKET INSTRUMENTS. The Portfolios may purchase money market instruments
to invest temporary cash balances or to maintain liquidity to meet withdrawals.
However, the Portfolios may also invest, without limit, in money market
instruments as a temporary defensive measure taken during, or in anticipation
of, adverse market conditions. The money market investments permitted for the
Portfolios include obligations of the U.S. Government and its agencies and
instrumentalities, other debt securities, commercial paper, bank obligations and
repurchase agreements. For more detailed information about these money market
investments, see 'Investment Objectives and Policies' in the SAI.

FOREIGN SECURITIES. The Portfolios do not expect to invest more than 25% of
their total assets in securities principally traded in foreign markets. The High
Yield Bond Portfolio may also purchase Eurodollar certificates of deposits
without regard to the 25% limit. Since Foreign securities are normally
denominated and traded in foreign currencies, the Portfolio's net asset value
may be affected favorably or unfavorably by currency exchange rates and exchange
control regulations. If the Portfolios invest in non-U.S. dollar denominated
securities, it may hedge its foreign currency exposure. See 'Foreign Investment
Information' and 'Foreign Currency Exchange Transactions' under 'Additional
Investment Information and Risk Factors.'

QUALITY INFORMATION. It is a current policy of the Bond Portfolio that under
normal circumstances at least 65% of its investment in bonds will consist of
securities that are rated at least A by Moody's or S&P or that are unrated and
in the Adviser's opinion are of comparable quality. Up to 30% of the Bond
Portfolio's bonds may consist of debt securities rated Baa or better by Moody's
or BBB or better by S&P or are unrated and in the Adviser's opinion are of
comparable quality. Up to 5% of the Bond Portfolio's bonds may be invested in
debt securities that are rated Ba or better by Moody's or BB or better by S&P or
are unrated and in the Adviser's opinion are of comparable quality. Securities
rated Baa by Moody's or BBB by S&P are considered investment grade, but have
some speculative characteristics. Securities rated Ba by Moody's or BB by S&P
are below investment grade and considered to be speculative with regard to
payment of interest and principal. These standards must be satisfied at the time
an investment is made. If the quality of the investment later declines, the Bond
Portfolio may continue to hold the investment.

Higher yields are generally available from securities in the lower rating
categories of Moody's Investors Service, Inc. ('Moody's') and Standard & Poor's
Ratings Group ('S&P'), including securities rated Baa or lower by Moody's or BBB
or lower by S&P. Securities rated Baa or BBB are considered investment grade,
but have some speculative characteristics. Securities rated below Baa or BBB are
considered to be of poor standing and predominantly speculative. The High Yield
Bond Portfolio may invest up to 10% of its assets in securities rated below Caa
by Moody's or CCC by S&P, including securities in the lowest rating category of
either rating agency, or in unrated securities that UBSAM determines to be of
comparable quality. If, subsequent to the High Yield Bond Portfolio's purchase
of a security, the security's rating is reduced by a rating service, the High
Yield Bond Portfolio will not necessarily dispose of that security. UBSAM will,
however, monitor the investment to determine whether continued investment in the
security will assist in meeting the High Yield Bond Fund's investment objective.

The Portfolios may also purchase obligations on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
their portfolio securities, purchase certain privately placed securities and
enter into certain hedging transactions that may involve options on securities
and securities indices, futures contracts and options on futures contracts. The
Bond Portfolio may engage in mortgage dollar roll transactions. For a discussion
of these investments and investment techniques, see 'Additional Investment
Information and Risk Factors.'

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

LOWER-RATED SECURITIES. Changes by ratings services in their ratings of
securities held by the High Yield Bond Portfolio may affect the value of these
investments. Changes in the value of portfolio investments generally will not
affect the income derived from these investments, but will affect the High Yield
Bond Fund's net asset value.

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Securities rated C by Moody's are the lowest rated class and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Debt rated D by S&P, its lowest rating, is in default or is expected to default
upon maturity or payment date.

Lower-rated, and unrated securities determined by UBSAM to be comparable, (i)
will likely have some quality and protective characteristics that, in the
judgment of the rating organization and/or UBSAM, are outweighed by considerable
uncertainties or major exposures to adverse conditions and (ii) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. The market
values of these securities tend to be more sensitive to individual corporate
developments and changes in economic conditions than higher-quality securities.

The inability (or perceived inability) of issuers to make timely payments of
interest and principal would likely make the values of securities held by the
High Yield Bond Portfolio more volatile and could limit the High Yield Bond
Portfolio's ability to sell its securities at prices approximating the values
the High Yield Bond Portfolio had placed on these securities. The absence of a
liquid trading market for certain of these securities may make it more difficult
for the High Yield Bond Portfolio to establish the fair market value of these
securities and calculate the High Yield Bond Fund's net asset value. The rating
assigned to a security by Moody's or S&P does not reflect an assessment of the
volatility of the security's market value or the liquidity of an investment in
the security.

For a complete description of the rating systems of Moody's and S&P, see the
Appendix to the SAI.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each 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
Portfolios 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 Portfolios will maintain a segregated account with the Custodian
consisting of a portfolio of liquid securities with a value at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolios will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolios may be
disadvantaged. It is the current policy of the Portfolios 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. Each 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, a 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
Portfolios always receive 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.

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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 a 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
Portfolios may lend their securities. The Portfolios may lend their 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 Portfolios 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 Portfolios and its respective
investors. The Portfolios may pay reasonable finders' and custodial fees in
connection with a loan. In addition, the Portfolios will consider all the 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 of the Company, the Trust, the Portfolios, or the Adviser,
Administrator or Distributor, unless otherwise permitted by applicable law.

TEMPORARY DEFENSIVE INVESTMENTS. Under unusual market circumstances, the
Portfolios may seek to limit the risk of principal loss by reducing its exposure
to high yield bonds in favor of other, more defensive investments. Defensive
investments may include money market instruments, or higher-rated fixed income
securities, including U.S. Government and agency obligations. The yields on
these securities will generally be lower than those on lower-rated securities
and the Funds' net investment income and dividend yield will decrease
accordingly. The Portfolios cannot predict when, if ever, they might use these
defensive investments, to what extent they might utilize these investments or
for how long they might hold these types of investments.

FOREIGN INVESTMENT INFORMATION. The Portfolios may invest in foreign securities.
Investments in securities of foreign issuers and in obligations of foreign
branches of domestic banks involve somewhat different investment risks from
those affecting securities of domestic issuers. There may be limited publicly
available information with respect to foreign issuers, and foreign issuers are
not generally subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to domestic companies. Dividends
and interest paid by foreign issuers may be subject to withholding and other
foreign taxes that may decrease the net return on such investments.

Investors should realize that the value of a 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 a
Portfolio's operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, favorably or unfavorably, in areas such as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position; it may also be more
difficult to obtain and enforce a judgment against a foreign issuer. Any foreign
investments made by the Portfolios must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolios' 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

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higher than the negotiated commissions charged in the United States. In
addition, there is generally less government supervision and regulation of
securities exchanges, brokers and issuers located in countries other than in the
United States.

The Portfolios may invest in securities of foreign issuers directly or in the
form of American Depository Receipts ('ADRs') and European Depository Receipts
('EDRs'). The High Yield Bond Portfolio also may invest in Global Depository
Receipts ('GDRs'). 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. GDRs are issued outside the United States, typically by
non-U.S. banks and trust companies. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs and GDRs, in bearer
form, are designed for use in European securities markets, and domestic and
European securities markets, respectively.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolios may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolios may, from time-to-time, enter into foreign currency
exchange transactions. The Portfolios may enter into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, use forward currency contracts to purchase or sell foreign
currencies, use currency futures contracts or purchase or sell options thereon
or purchase or sell currency options.

A forward foreign currency exchange contract is an obligation of the Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Currency options give the buyer
the right, but not the obligation, to purchase or sell a fixed amount of a
specific currency at a fixed price at a future date. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The Portfolios 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 a
Portfolio's securities or in foreign exchange rates, or prevent loss if the
local currency prices of these securities should decline.

The Portfolios 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 Portfolios 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.

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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
Portfolios 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
Portfolios 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 Portfolios 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 Portfolios. 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 Portfolios pay for illiquid securities or
receive 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 Portfolios may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Trustees of the Trust. The Trustees of the Trust will
monitor the Adviser's implementation of these guidelines on a periodic basis.

FUTURES AND OPTIONS TRANSACTIONS. The Portfolios are permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.

The Portfolios may purchase and sell exchange traded and over-the-counter
('OTC') put and call options on fixed income securities or indices of fixed
income securities, enter into forward contracts, purchase and sell futures
contracts on indices of fixed income securities, purchase and sell put and call
options on futures contracts on indices of fixed income securities and purchase
and sell options on currencies. The Portfolios 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 Portfolios may use these techniques to manage their 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 a 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 a 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 Portfolios 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 they could have obtained by purchasing
the relevant securities and will not use futures contracts or options to
leverage their 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 a Portfolio's overall
strategy in a manner deemed appropriate to the Adviser and consistent with a
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.

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certain other risks. If the Adviser applies a strategy at an inappropriate time
or judges market conditions or trends incorrectly, such strategies may lower a
Portfolio's return. Certain strategies limit a Portfolio's opportunity to
realize gains as well as limiting its exposure to losses. The Portfolios 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 Portfolios
will incur costs, including commissions and premiums, in connection with these
transactions and these transactions could significantly increase a Portfolio's
turnover rate.

The Portfolios 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 Portfolios, 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 Portfolios will not be considered a
'commodity pool' for purposes of CFTC rules, the Portfolios will enter into
transactions in futures contracts or options on futures contracts only if (1)
such transactions constitute bona fide hedging transactions, as defined under
CFTC rules, or (2) no more than 5% of the Portfolio's net assets are committed
as initial margin or premiums to positions that do not constitute bona fide
hedging transactions.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a 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, a 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. A
Portfolio may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. A 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, a Portfolio will lose
the entire premium it paid. If a Portfolio exercises a put option on a security,
it will sell the instrument underlying the option at the strike price. If a
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.

SELLING (WRITING) PUT AND CALL OPTIONS. When a 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. A 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 a Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to post margin as discussed below.

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If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, however, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.

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 Portfolios are 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 Portfolios may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security. A
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 a Portfolio may
not be able to close out an option position that it has previously entered into.
When a 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 a 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 a 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 Portfolios, 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 a Portfolio's current or
anticipated investments. The Portfolios 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

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that the options or futures position will not track the performance of the
Portfolio's other investments. The Portfolios 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 Portfolios buy or sell a futures contract they will be
required to deposit 'initial margin' in a segregated account with the futures
broker, known as a futures commission merchant ('FCM'), or with the 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 Portfolios 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 Portfolios to close out their futures
positions. Until it closes out a futures position, the Portfolios 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 Portfolios, the Portfolios 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 Portfolios.

COVER -- SEGREGATED ACCOUNTS. The Portfolios will segregate liquid securities in
connection with its use of options and futures contracts to the extent required
by the SEC. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that the segregation of a
large percentage of a Portfolio's assets could impede portfolio management or a
Portfolio's ability to meet redemption requests or other current obligations.

For further information about the Portfolios' 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 objectives of each Fund and its respective 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 such Fund or such
Portfolio, respectively. Each Fund has the same investment restrictions as its
corresponding Portfolio, except that each Fund may invest all of its investable
assets in another open-end investment company with the same investment objective
and restrictions (such as its corresponding Portfolio). References below to each
Portfolio's investment restrictions also include the Funds' investment
restrictions.

As a diversified investment company, 75% of the total assets of each Portfolio
are subject to the following fundamental limitations: (a) a 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) a Portfolio may not own more than 10%
of the outstanding voting securities of any one issuer.

Each 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' and 'Additional Information' in the
SAI.

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MANAGEMENT

DIRECTORS AND TRUSTEES. Pursuant to the Trust's Declaration of Trust, the
Trustees establish each Portfolio's general policies, are responsible for the
overall management of the Trust, and review the actions of the Adviser, UBSAM,
the administrator and other service providers. Similarly, the Directors set the
Company's general policies, are responsible for the overall management of the
Company, and review the performance of its service providers. Additional
information about each Board and the officers of the Trust and the Company
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 Trust and the Company are also employees of Investors Bank or
its affiliates.

ADVISER, SUB-ADVISER AND FUNDS SERVICES AGENT. The Company has not retained the
services of an investment adviser with respect to the Funds because the Funds
seek to achieve their investment objective by investing all of their investable
assets in their respective Portfolios. Each Portfolio has retained the services
of the Branch as investment adviser and the High Yield Bond Portfolio has
retained the services of UBSAM 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. UBSAM, which also operates out of offices
located at 1345 Avenue of the Americas, New York, New York, is a registered
investment adviser in the United States.

The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Houston, Los Angeles and San Francisco. In
addition to the receipt of deposits and the making of loans and advances, the
Bank through its offices and subsidiaries engages in a wide range of banking and
financial activities typical of the world's major international banks, including
fiduciary, investment advisory and custodial services and foreign exchange in
the United States, Swiss, Asian and Euro-capital markets. The Bank is one of the
world's leading asset managers and has been active in New York City since 1946.
At December 31, 1997, the Bank (including its consolidated subsidiaries) had
total assets of $395.1 billion (unaudited) and shareholders' equity of $14.4
billion (unaudited). See 'Investment Adviser' in the SAI.

On December 8, 1997, the Bank and Swiss Bank Corporation ('Swiss Bank')
announced their intention to merge (the 'Merger Transaction') the Bank with
Swiss Bank to form a new company expected to be called UBS. In February, 1998,
the shareholders of UBS and Swiss Bank overwhelmingly approved the proposed
Merger Transaction. The Merger Transaction's completion is still subject to a
number of conditions, including the receipt of regulatory approvals.

The Adviser and UBSAM each provide investment advice and portfolio management to
the Portfolios. Subject to the supervision of the Trustees and the Adviser,
UBSAM makes the High Yield Bond Portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
High Yield Bond Portfolio's investments and operations. See 'Investment Adviser
and Funds Services Agent' in the SAI.

The Branch provides its administrative services to the Funds pursuant to a Funds
Services Agreement between the Branch and the Company. The Branch does not
receive a fee from the Company or the Funds pursuant to the terms of the Funds
Services Agreement.

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Under the Trust's Investment Advisory Agreement, the Bond Portfolio and the High
Yield Bond Portfolio each pay the Adviser a fee, calculated daily and payable
monthly, equal, on an annual basis, to 0.45% of the respective Portfolio's
average daily net assets. The Adviser has voluntarily agreed to waive its fees
and reimburse the Funds and the Portfolios for any of their direct and indirect
expenses to the extent that each Fund's total operating expenses (including its
share of its Portfolio's expenses) exceed, respectively, on an annual basis,
0.80% and 0.90% of the respective Fund's average daily net assets. The Adviser
may modify or discontinue this fee waiver and expense limitation at any time in
the future with 30 days' prior notice to a Fund. See 'Expenses.'

Pursuant to the Sub-Advisory Agreement between the Adviser and UBSAM, the
Adviser has agreed to pay UBSAM a fee, calculated daily and payable monthly,
equal, on an annual basis to 0.25% of the Fund's first $25 million of average
daily net assets, 0.20% of the next $25 million of such assets and 0.15% of such
assets in excess of $50 million. The Adviser is solely responsible for paying
UBSAM this fee.

PORTFOLIO MANAGERS. The Adviser and UBSAM each use a sophisticated, disciplined,
collaborative process for managing all asset classes.

The Adviser and UBSAM have advised mutual funds since 1996, but each has
considerable experience managing portfolios with similar investment objectives.
See 'Historical Performance of Comparable Discretionary Accounts.'

Ranji H. Nagaswami and Maud I. Welles are primarily responsible for the
day-to-day management and implementation of the Adviser's process for the Bond
Portfolio. Ms. Nagaswami, CFA, is also Managing Director and Head of Fixed
Income of UBSAM and has served as a portfolio manager of UBSAM since 1986. She
has an M.B.A. from Yale University. Ms. Welles is a Director and Senior
Portfolio Manager of UBSAM since 1988. She has an M.B.A. from New York
University. Ms. Nagaswami and Ms. Welles have eleven years and twelve years of
investment experience, respectively.

Kevin J. McCormick and Kurtis W. Krestinski are primarily responsible for the
day-to-day management and implementation of UBSAM's process for the High Yield
Bond Portfolio. Mr. McCormick has twelve years investment experience. Mr.
McCormick spent two years as a portfolio manager for UBSAM before leaving and
joining Wasserstein Perella Securities, where he spent one year. Mr. McCormick
rejoined UBSAM in 1997 as a Director and Senior Portfolio Manager. He also
serves on the firm's Credit Committee. Mr. McCormick has been affiliated with a
number of investment firms, including Kidder, Peabody & Co., Drexel Burnham
Lambert and Citicorp Investment Bank. Mr. Krestinski has four years investment
experience and has been a Vice President and Portfolio Manager of UBSAM since
1996. He also serves on the firm's Credit Committee. Previously, Mr. Krestinski
was affiliated with Standard & Poor's and Mercantile and General Reinsurance. He
received an M.B.A. from Columbia Business School.

ADMINISTRATORS. The Portfolios and the Funds each employ IBT Ireland, a
subsidiary of Investors Bank, and Investors Bank, respectively, as
administrators under Administration Agreements (the 'Administration Agreements')
to provide certain administrative services. The services provided by IBT Ireland
and Investors Bank under the Administration Agreements include certain
accounting, clerical and bookkeeping services, Blue Sky (for the Funds only),
corporate secretarial services and assistance in the preparation and filing of
tax returns and reports to shareholders and the SEC. Investors Bank 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 pays Investors
Bank a fee, which is calculated daily and payable monthly, equal, on an annual
basis, to 0.065% of such Fund's first $100 million of average daily net assets
and 0.025% of the next $100 million of average daily net assets. Investors Bank
does not receive a fee from the Funds on average daily net assets in excess of
$200 million.

For its services under the Administration Agreement, each Portfolio pays IBT
Ireland a fee, calculated daily and payable monthly, equal, on an annual basis,
to 0.07% of such Portfolio's first $100 million of 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. Investors Bank's principal offices are located at 200
Clarendon Street, Boston, Massachusetts 02116.

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DISTRIBUTOR. Pursuant to a Distribution Agreement, First Fund Distributors, Inc.
('First Fund' or the 'Distributor') serves as the distributor of each Fund's
shares. First Fund is a broker-dealer registered with the SEC and is a member of
the National Association of Securities Dealers, Inc. ('NASD'). First Fund is
authorized by the NASD to act as a mutual fund underwriter and distributor. The
principal offices of First Fund are located at 4455 E. Camelback Road, Phoenix,
Arizona 85018. First Fund does not receive a fee pursuant to the terms of the
Distribution Agreement, but receives compensation from the Administrator.

CUSTODIAN. Investors Bank serves as the custodian for the Portfolios and the
Funds and transfer and dividend disbursing agent for the Funds. See 'Custodian'
in the SAI. The Custodian also maintains offices at 1 First Canadian Place,
Suite 2800, Toronto, Ontario M5X1C8.

SHAREHOLDER SERVICES

The Company has entered into a shareholder servicing agreement with the Branch,
and may enter into additional shareholder servicing agreements with one or more
financial institutions (together with the Branch, 'Eligible Institutions') 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 Funds, will perform the following services for these
investors, among other things: coordinating shareholder accounts and records,
assisting investors seeking to purchase or redeem Fund shares, providing
performance information relating to the Funds, and responding to shareholder
inquiries. The Company has agreed to pay each Eligible Institution a fee for
these services equal, on an annual basis, to 0.25% of the average daily net
assets of the Fund represented by shares of the Fund owned during the period for
which payment is being made by customers of the Eligible Institution. Under the
terms of the shareholder servicing agreements, Eligible Institutions may
delegate one or more of their responsibilities to other entities at their
expense.

EXPENSES

In addition to the fees of the Adviser and Investors Bank, the Funds will be
responsible for other expenses, including litigation and extraordinary expenses.
The Adviser has voluntarily agreed to limit the total operating expenses of the
Bond Fund and the High Yield Bond Fund, excluding extraordinary expenses, to an
annual rate of 0.80% of the Bond Fund's average daily net assets and 0.90% of
the High Yield Bond Fund's average daily net assets. The Adviser may modify or
discontinue this voluntary expense limitation at any time in the future with 30
days' prior notice to the Funds.

The Portfolios may allocate brokerage transactions to their affiliates and the
Adviser's 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

The minimum initial investment in either Fund is $25,000, except that the
minimum initial investment is $10,000 for shareholders of another series of the
Company. The minimum subsequent investment for all investors is $5,000. The
minimum initial investment for employees of the Bank or its affiliates is $5,000
and the minimum subsequent investment is $1,000. For purposes of the minimum
investment requirements, the Funds may aggregate investments by related
shareholders. The investment minimums may be waived at either Fund's discretion.

No share certificates will be issued.

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Each 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 First Fund prior
to 4:00 p.m. New York time on any Fund Business Day will be effective and is
executed at the net asset value determined that day. The 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 the business day following 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 as next determined on the day that the
investor's subscription is accepted. See 'Purchase of Shares' in the SAI.

Customers of Eligible Institutions should request a representative of their
Eligible Institution to assist them in placing a purchase order with the
Distributor. Shareholders who do not currently maintain a relationship with an
Eligible Institution may purchase shares of the Funds directly from the
Distributor by wire transfer or mail.

By wire transfer: Purchases may be made by federal funds wire. To place a
purchase order with a Fund, the shareholder must telephone the Transfer Agent at
(888) UBS-FUND ((888) 827-3863) for specific instructions. A completed account
application must promptly follow any wire order for an initial purchase.
Completed account applications should be mailed or sent via facsimile. 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 marked on the check 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 Bond Fund or UBS High Yield Bond Fund
[Investor account name(s) and account number]

By mail: Shareholders may purchase shares of a Fund through First Fund by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.,' to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 9130; MFD 23, Boston, Massachusetts
02117-9130.

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 at
UBS Private Investor Funds, Inc., c/o Investors Bank & Trust Company, P.O. Box
9130 MFD 23, Boston, MA 02117-9130.

REDEMPTION OF SHARES

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<PAGE>
<PAGE>
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.

Customers of Eligible Institutions must request a representative of their
Eligible Institution to assist them in placing a redemption order with a Fund.

Shareholders will continue to earn dividends through the day of redemption.

Shareholders who maintain an account directly with the Distributor may redeem
Fund shares by mail or telephone.

By telephone: The shareholder may place a redemption request by calling the
Transfer Agent at (888) UBS-FUND ((888) 827-3863). 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.
Such shareholders risk possible loss of principal and income in the event of a
telephone redemption not authorized by them. The Funds and the Transfer Agent
will employ reasonable procedures to verify that telephone redemption
instructions are genuine and will require that shareholders electing such an
option provide a form of personal identification. The failure by a Fund or the
Transfer Agent to employ such procedures may cause the Funds or the Transfer
Agent to be liable for any losses incurred by investors due to telephone
redemptions based upon unauthorized or fraudulent instructions. The telephone
redemption option may be modified or discontinued at any time upon 60 days'
notice to shareholders.

FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions may
not be processed unless the redemption request is submitted in proper form. To
be in proper form, the Fund must have received the shareholder's taxpayer
identification number and address. As discussed under 'Taxes' below, the Fund
may be required to impose 'back-up' withholding of federal income tax on
dividends, distributions and redemptions when non-corporate investors have not
provided a certified taxpayer identification number. In addition, if an investor
sends a check to the Distributor for the purchase of Fund shares and shares are
purchased with funds made available by the Distributor before the check has
cleared, the transmittal of redemption proceeds from the sale of those shares
will not occur until the check used to purchase such shares has cleared, which
may take up to 15 days. Redemption delays may be avoided by purchasing shares by
federal funds wire.

-24-
<PAGE>
<PAGE>
The right of redemption may be suspended or the date of payment postponed for
such periods as the 1940 Act or the SEC may permit. See 'Redemption of Shares'
in the SAI.

EXCHANGE OF SHARES

An investor may exchange Fund shares for shares of any other series of the
Company without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the other Company series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
appropriate section relating to the purchase and redemption of shares in this
and other prospectuses. See also 'Additional Information' below for an
explanation of the telephone exchange policy.

Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time.

RETIREMENT PLANS

Each Fund has available a form of Individual Retirement Account ('IRA') for
investment in Fund shares. Subject to certain restrictions imposed by applicable
tax laws, self-employed individuals may purchase shares of the Fund through
tax-deductible contributions to existing retirement plans known as Self-Employed
Retirement Plans ('SERPs'). Fund shares may also be a suitable investment for
'401(k) Plans' which subject to certain restrictions allow their participants to
invest in qualified pension plans on a tax-deferred basis. The Funds do not
currently act as sponsors to such plans.

The minimum initial investment for all such retirement plans is $2,000. The
minimum for all subsequent investments is $500.

Under the Internal Revenue Code of 1986, as amended (the 'Tax Code'),
individuals may make IRA contributions of up to $2,000 annually, which may be,
depending on the contributor's participation in an employer-sponsored plan and
income level, wholly or partly tax-deductible. However, dividends and
distributions held in the account are not taxed until withdrawn in accordance
with the provisions of the Tax Code. An individual with a non-working spouse may
establish a separate IRA for the spouse under the same conditions and contribute
a combined maximum of $4,000 annually to one or both IRAs provided that no more
than $2,000 may be contributed to the IRA of either spouse.

DIVIDENDS AND DISTRIBUTIONS

Each Fund will declare daily, and pay monthly, dividends from its daily net
investment income. The Funds 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 such Fund.

Substantially all of a 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 Funds. Declared dividends and
distributions are payable on the payment date to shareholders of record on the
record date.

-25-
<PAGE>
<PAGE>
Dividends and capital gains distributions paid by the Funds 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 Funds reserve the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.

NET ASSET VALUE

A Fund's net asset value per share equals the value of a 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 Funds and the Portfolios, 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.

Each 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
Funds 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
holidays: New Year's Day, Dr. Martin Luther King, Jr. 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 expect to close for purchases and redemptions at the
same time.

ORGANIZATION

UBS PRIVATE INVESTOR FUNDS, INC.

UBS Private Investor Funds, Inc., a Maryland corporation incorporated on
November 16, 1995, is an open-end management investment company registered under
the 1940 Act and organized as a series fund. The Company is currently authorized
to issue shares in nine series: The UBS Bond Fund Series; The UBS High Yield
Bond Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS Institutional
International Equity Fund Series; The UBS International Equity Fund Series; The
UBS Large Cap Growth Fund Series; The UBS Small Cap Fund Series; The UBS Value
Equity Fund Series and The UBS Real Estate Fund Series. Each outstanding share
of the Company will have a pro rata interest in the assets of its series, but it
will have no interest in the assets of any other Company series. Only shares of
The UBS Bond Fund Series and The UBS High Yield Bond Fund Series are offered
through this Prospectus.

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, seven
series have been authorized: UBS Bond Portfolio, UBS High Yield Bond Portfolio,
UBS Value Equity Portfolio, UBS International Equity Portfolio, UBS Small Cap
Portfolio, UBS Large Cap Growth Portfolio and UBS Real Estate Portfolio.

-26-
<PAGE>
<PAGE>
common and commingled trust funds) will each be liable for all the obligations
of a Portfolio. However, the risk of a 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

Each Fund intends to annually qualify and elect to be treated as a regulated
investment company (a 'RIC') under Subchapter M of the Tax Code. 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. Each Portfolio intends to qualify as a
partnership for federal income tax purposes. As such, each Portfolio generally
should not be subject to tax. The status of a 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 investment income and realized net short-term capital gains
in excess of net long-term capital losses are taxable as ordinary income to Fund
shareholders whether such distributions are received in the form of cash or
reinvested in additional shares. Distributions of net gains from certain foreign
currency transactions are taxable as ordinary income to shareholders of the
Funds whether such distributions are received in the form of cash or reinvested
in additional shares. To the extent that dividends distributed to shareholders
are designated as derived from a Fund's dividend income that would be eligible
for the dividends received deduction if the Fund were not a regulated investment
company, such dividends are eligible, subject to certain restrictions, for the
70% dividends received deduction for corporations. Distributions of net
long-term capital gains in excess of net short-term capital losses are taxable
to Fund shareholders as long-term capital gains regardless of how long a
shareholder has held shares in the Fund and regardless of whether received in
the form of cash or reinvested in additional shares. Long-term capital gains
distributions to corporate shareholders are not eligible for the dividends-
received deduction. Annual statements as to the current federal tax status of
distributions will be mailed to shareholders after the end of the taxable year
for such Fund.

Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than a 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 a 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 Funds 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.

-27-
<PAGE>
<PAGE>
declared to non-corporate shareholders. Shareholders should be aware that, under
applicable regulations, a Fund may be fined up to $50 annually for each account
for which a certified taxpayer identification number is not provided. In the
event that such a fine is imposed with respect to any uncertified account in any
year, a corresponding charge may be made against that account.

ADDITIONAL INFORMATION

Each Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and periodic statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.

Shareholders of certain Eligible Institutions 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 Branch, the Eligible
Institution, 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 Funds may make historical performance information available and may compare
its performance to other investments or relevant indices, including data from
Lipper Analytical Services, Inc., the Salomon Brothers Long Term High Yield
Index, the Lehman Indices, the Merrill Lynch Indices, Micropal Inc., Morningstar
Inc., Ibbotson Associates, Standard & Poor's 500 Composite Stock Price Index,
the Dow Jones Average, the Frank Russell Indices, the EAFE Index, the Financial
Times World Stock Index and other industry publications.

The Funds may advertise 'yield'. Yield refers to the net income generated by an
investment in the Fund over a stated 30-day period. This income is then
annualized -- i.e., the amount of income generated by the investment during the
30-day period is assumed to be generated each 30-day period for 12 periods and
is shown as a percentage of the investment. The income earned on the investment
is also assumed to be reinvested at the end of the sixth 30-day period.

The Funds may also advertise 'total return.' The total return shows what an
investment in the Fund would have earned over a specified period of time (one,
five or ten years or since commencement of operations, if less) assuming that
all Fund distributions and dividends were reinvested on the reinvestment dates
and less all recurring fees during the period and assuming the redemption of
such investment at the end of each period.

These methods of calculating yield and total return are required by regulations
of the SEC. Yield and total return data similarly calculated, unless otherwise
indicated, over other specified periods of time may also be used. All
performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may be obtained by clients
of an Eligible Institution by calling the Eligible Institution, while other
shareholders may address their inquiries to the Transfer Agent.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---

<S> <C>
Investors for Whom the Funds are Designed............................................................. 2
Financial Highlights.................................................................................. 4
Master-Feeder Structure............................................................................... 8
Investment Objectives and Policies.................................................................... 9
Additional Investment Information and Risk Factors.................................................... 12
Investment Restrictions............................................................................... 19
Management............................................................................................ 20
Shareholder Services.................................................................................. 22
Expenses.............................................................................................. 22
Purchase of Shares.................................................................................... 22
Redemption of Shares.................................................................................. 23
Exchange of Shares.................................................................................... 25
Retirement Plans...................................................................................... 25
Dividends and Distributions........................................................................... 25
Net Asset Value....................................................................................... 26
Organization.......................................................................................... 26
Taxes................................................................................................. 27
Additional Information................................................................................ 28
</TABLE>

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<TABLE>
<S> <C>
INVESTMENT ADVISER Union Bank of Switzerland,
New York Branch
1345 Avenue of the Americas
New York, New York 10105

INVESTMENT SUB-ADVISER UBS Asset Management (New York) Inc.
1345 Avenue of the Americas
New York, New York 10105

DISTRIBUTOR First Fund Distributors, Inc.
4455 E. Camelback Road
Phoenix, Arizona 85018

CUSTODIAN, ADMINISTRATOR Investors Bank & Trust Company
AND TRANSFER AGENT 200 Clarendon Street
Boston, Massachusetts 02116
</TABLE>

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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.

[LOGO]
<PAGE>
<PAGE>
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UBS
INSTITUTIONAL
INTERNATIONAL
EQUITY
FUND

------------------

UBS
Private Investor
Funds, Inc.

Prospectus
May 1, 1998

- -------------------------------------------------------------------------------

<PAGE>

<PAGE>
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 ('UBSII' or 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 May
1, 1998, (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 (the 'SEC'), 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
((888) 827-3863).

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.

PROSPECTUS DATED MAY 1, 1998.
<PAGE>
<PAGE>
UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED

GENERAL

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
the Portfolio. The Portfolio is a series of 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 the Company at the address set forth on the back
cover of this Prospectus, or by calling (888) UBS-FUND ((888) 827-3863). 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' and 'Shareholder
Services.'

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<PAGE>
<PAGE>
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
EXPENSE TABLE

ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................... 0.51%
Rule 12b-1 Fees..................................................................................... None
Other Expenses, After Expense Reimbursements***..................................................... 0.44%
----
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*............................. 0.95%
----
----
</TABLE>

* Expenses are expressed as a percentage of the Fund's average daily net
assets and are based on actual expenses incurred during the fiscal year ended
December 31, 1997, 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 Adviser 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 Adviser 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) IBT Trust & Custodial Services (Ireland) LMTD ('IBT Ireland') under an
Administration Agreement with the Portfolio.

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:

<TABLE>
<S> <C>
1 Year..................................................... $10
3 Years.................................................... 30
5 Years.................................................... 53
10 Years.................................................... 117
</TABLE>

The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of the Fund and the Fund's share of the
Portfolio's expenses. In connection with the above Example, please note that
$1,000 is less than the Fund's minimum investment requirement and that there are
no redemption fees of any kind. fee '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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<PAGE>

FINANCIAL HIGHLIGHTS

The information regarding the UBS Institutional International Equity Funds has
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon appears in the Fund's Annual Report (the 'Annual Report') dated December
31, 1997. The information should be read in conjunction with the financial
statements and related notes also included in the Annual Report. Further
information about the performance of each Fund and its corresponding Portfolio
is contained in the Annual Report which may be obtained without charge and upon
request by calling 1-888-UBS-FUND ((888) 827-3863).

Per share data for a share outstanding during the indicated period:

UBS Institutional International Equity Fund
For the Period April 14, 1997 (Commencement of Operations) through December 31,
1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD

Net asset value, beginning of period..................................... $100.00
-------
Loss from investment operations:
Net investment income............................................... 1.21
Net realized and unrealized loss on investments..................... (3.05)
-------
Total loss from investment operations............................... (1.84)
-------
Less dividends and distributions to shareholders:
Dividends from net investment income................................ (1.21)
Dividends in excess of net investment income........................ (0.05)
Distributions from net realized gains............................... (1.80)
-------
Total dividends and distributions................................... (3.06)
-------
Net asset value, end of period........................................... $ 95.10
-------
-------
Total return............................................................. (1.89%)(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............................ $13,158
Ratio of expenses to average net assets(2).......................... 0.95%(3)
Ratio of net investment income to average net assets(2)............. 1.76%(3)
</TABLE>

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(1) Not annualized.

(3) Annualized.

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<PAGE>

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, 1997, and the period April 1, 1987*
(commencement date) through December 31, 1997, for all discretionary accounts
described below that have been managed for at least one full quarter by UBSII;
(ii) the average annual total return for the period April 14, 1997* through
December 31, 1997 for the Fund and (iii) the average annual total return during
the same periods for the Morgan Stanley Capital International EAFE'r' Index (the
'EAFE 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 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. UBSII 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 do not represent the historical
performance of the Portfolio and should not be viewed as a prediction of future
performance of the Portfolio. The EAFE Index is an unmanaged index that measures
stock performance in Europe, Australia and the Far East. The total returns of
the EAFE Index do not include management fees or commissions.

<TABLE>
<CAPTION>
UBS COMPOSITE
INSTITUTIONAL TOTAL RETURN MORGAN STANLEY
INTERNATIONAL OF SUB-ADVISER'S CAPITAL
EQUITY DISCRETIONARY INTERNATIONAL
AVERAGE ANNUAL TOTAL RETURN FOR THE: FUND ACCOUNTS EAFE INDEX
- ---------------------------------------------------------- ------------- ---------------- --------------

<S> <C> <C> <C>
One Year Ended December 31, 1997.......................... N/A (4.02%) 2.03%
Three Years Ended December 31, 1997....................... N/A 4.34% 6.59%
Five Years Ended December 31, 1997........................ N/A 10.58% 11.71%
Period April 14, 1997* through December 31, 1997.......... (2.64) N/A N/A
Period April 1, 1987* through December 31, 1997........... N/A 7.79% 6.64%
</TABLE>

- ------------

* 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.

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 ((888) 827-3863).

-5-
<PAGE>
<PAGE>
be taken, including the investment of all the Fund's assets in another pooled
investment entity having the same investment objective and restrictions as the
Fund or the retaining of an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Portfolio.

Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require the Fund to
withdraw its investments in the Portfolio. Any such withdrawal could result in
an in-kind distribution of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. In 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 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 UBSII believes are fundamentally sound and that are typically
selling at below market valuations and that UBSII 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 UBSII whereby UBSII is

-6-
<PAGE>
<PAGE>
primarily responsible for the day-to-day investment decisions for the Portfolio.
The Adviser is solely responsible for paying UBSII for these services. UBSII 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. For the year ended December
31, 1997, the portfolio turnover rate for the Portfolio was 42%.

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.

-7-
<PAGE>
<PAGE>
consisting of a portfolio of high-grade, liquid debt securities with a value at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities (excluding the obligations created
by these commitments).

REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
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 Company, the Trust, 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

-8-
<PAGE>
<PAGE>
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect the Portfolio's operations. Furthermore, the economies of
individual foreign nations may differ from the U.S. economy, favorably or
unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. Any foreign investments made by the Portfolio
must be made in compliance with U.S. and foreign currency restrictions and tax
laws restricting the amounts and types of such investments.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less 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'), Global Depositary Receipts ('GDRs') 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. GDRs are issued outside the United States, typically by non-U.S.
banks and trust companies. Generally, ADRs, in registered form, are designed for
use in the U.S. securities markets, and EDRs and GDRs, in bearer form, are
designed for use in European securities markets and domestic and European
securities markets, respectively.

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.

-9-
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<PAGE>
currency at a fixed price at a future date. These contracts are entered into in
the interbank market directly between currency traders (usually large commercial
banks) and their customers. A forward foreign currency exchange contract
generally has no deposit requirement, and is traded at a net price without
commission. The Portfolio will not enter into these foreign currency exchange
transactions for speculative purposes. Foreign currency exchange transactions do
not eliminate fluctuations in the local currency prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the local currency
prices of these securities should decline.

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.

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may include obligations of the U.S. Government and its agencies and
instrumentalities, other debt securities, commercial paper, bank obligations and
repurchase agreements. The Portfolio may purchase nonpublicly offered debt
securities. The Portfolio may also invest in short-term obligations of sovereign
foreign governments, their agencies, instrumentalities and political
subdivisions. For more detailed information about these money market
investments, see 'Investment Objectives and Policies' in the SAI.

FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.

The Portfolio may purchase and sell exchange traded and over-the-counter ('OTC')
put and call options on equity securities or indices of equity securities, enter
into forward contracts, purchase and sell futures contracts on indices of equity
securities, purchase and sell put and call options on futures contracts on
indices of equity securities and purchase and sell options on currencies. The
Portfolio may use these techniques for hedging or risk management purposes or,
subject to certain limitations, for 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

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contracts only if (1) such transactions constitute bona fide hedging
transactions, as defined under CFTC rules, or (2) no more than 5% of the
Portfolio's net assets are committed as initial margin or premiums to positions
that do not constitute bona fide hedging transactions.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities,
currencies, indices of securities, indices of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a put
option on a security, it will sell the instrument underlying the option at the
strike price. If the Portfolio exercises an option on an index, settlement is in
cash and does not involve the actual sale of securities. American style options
may be exercised on any day up to their expiration date. European style options
may be exercised only on their expiration date.

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.

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.

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OPTIONS ON INDICES. The Portfolio is permitted to enter into options
transactions and may purchase and sell put and call options on any securities
index based on securities in which the Portfolio may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In Addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing or selling index options, is subject to the risk
that the value of its portfolio securities may not change as much as an index
because the Portfolio's investments generally will not match the composition of
an index.

For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.

FUTURES CONTRACTS

When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date and
price or to make or receive a cash payment based on the value of a securities
index. When the Portfolio sells a futures contract, it agrees to sell a
specified quantity of the underlying instrument at a specified future date and
price or to receive or make a cash payment based on the value of a securities
index. The price at which the purchase and sale will take place is fixed when
the Portfolio enters into the contract. Futures can be held until their delivery
dates or the positions can be (and normally are) closed out before then. There
is no assurance, however, that a liquid market will exist when a Portfolio
wishes to close out a particular position.

When the Portfolio purchases or sells a futures contract, the value of the
futures contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, much as if it had purchased the underlying instrument
directly, as discussed above. When the Portfolio sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the value of the underlying instrument. Selling futures contracts on
securities similar to those held by the Portfolio, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that these
standardized instruments will not exactly match the Portfolio's current or
anticipated investments. The Portfolio may invest in futures contracts and
options thereon based on currencies or on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments. 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') or with the 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.

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COVER -- SEGREGATED ACCOUNTS. The Portfolio will segregate liquid securities in
connection with its use of options and futures contracts to the extent required
by the SEC. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that the segregation of a
large percentage of the Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.

For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see 'Investment Objectives and
Policies' in the SAI.

INVESTMENT RESTRICTIONS

The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the 'vote of a
majority of the outstanding voting securities' (as defined in the Investment
Company Act of 1940 (the '1940 Act')), of the Fund 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' and 'Additional Information' in the
SAI.

MANAGEMENT

DIRECTORS AND TRUSTEES. Pursuant to the Trust's Declaration of Trust, the
Trustees establish the Portfolio's general policies, are responsible for the
overall management of the Trust, and review the actions of the Adviser, UBSII,
the Administrator and other service providers. Similarly, the Directors set the
Company's general policies, are responsible for the overall management of the
Company, and review the performance of its service providers. Additional
information about each Board and the officers of the Trust and the Company
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 Trust and the Company are also employees of IBT or its
affiliates.

ADVISER, SUB-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

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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 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, 1997, the Bank
(including its consolidated subsidiaries) had total assets of $395.1 billion
(unaudited) and shareholders' equity of $14.4 billion (unaudited). 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 Adviser and UBSII each provide investment advice and portfolio management to
the Portfolio. Subject to the supervision of the Trustees and the 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. 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.'

Pursuant to the Sub-Advisory Agreement between the Adviser and UBSII, the
Adviser has agreed to pay UBSII 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 UBSII this fee.

PORTFOLIO MANAGER. UBSII 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 UBSII's process for the
Portfolio. Mr. Apps has been a Senior Vice President of UBSII 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 and has twelve
years of investment experience. Mr. Apps is also qualified as an actuary.

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ADMINISTRATORS. The Portfolio and the Fund employ IBT Ireland, a subsidiary of
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 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, 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 m illion 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.
('First Fund') 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 also 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 Adviser, IBT, and IBT Ireland, the Fund will be
responsible for other expenses, including brokerage costs and litigation and
extraordinary expenses. The Adviser 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 Adviser 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. All purchase orders must be accepted by 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.

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PURCHASE PRICE AND SETTLEMENT. Fund shares 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 and is
executed at the net asset value determined that day. The 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 the business day following 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 SAI.

By wire transfer: Purchases may be made by federal funds wire. 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 mailed or sent via facsimile. Shareholders 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 marked on the check 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]

By mail: Shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.,' to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 9130; MFD 23, Boston, MA 02117-9130.

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

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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, or sent
by check to the address of record if requested by the shareholder. The Fund may
suspend redemptions or postpone payments when the NYSE is closed or when trading
is restricted for any reason or under emergency circumstances as determined by
the SEC.

Shareholders will continue to earn dividends through the day of redemption.

Shareholders who maintain an account directly with the Distributor may redeem
Fund shares by mail or telephone.

By telephone: The shareholder may place a redemption request by calling the
Transfer Agent at (888) UBS-FUND ((888) 827-3863). 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.
Such shareholders risk possible loss of principal and income in the event of a
telephone redemption not authorized by them. The Fund and the Transfer Agent
will employ reasonable procedures to verify that telephone redemption
instructions are genuine and will require that shareholders electing such an
option provide a form of personal identification. The failure by the Fund or the
Transfer Agent to employ such procedures may cause the Fund or the Transfer
Agent to be liable for any losses incurred by investors due to telephone
redemptions based upon unauthorized or fraudulent instructions. The telephone
redemption option may be modified or discontinued at any time upon 60 days'
notice to shareholders.

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.

The right of redemption may be suspended or the date of payment postponed for
such periods as the 1940 Act or the SEC may permit. See 'Redemption of Shares'
in the SAI.

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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 following
holidays: New Year's Day, Dr. Martin Luther King, Jr. 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.

The Company, 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 nine series: The UBS Bond Fund Series; The UBS High Yield Bond Fund Series;
The UBS Tax Exempt Bond Fund Series; The UBS Institutional International Equity
Fund Series; The UBS International Equity Fund Series; The UBS Value Equity Fund
Series; The UBS Small Cap Fund Series; The UBS Large Cap Growth Fund Series; and
The UBS Real Estate 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.

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UBS INVESTOR PORTFOLIOS TRUST

The 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, seven 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 annually qualify and elect to be treated 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 tax. The status of the Fund as a RIC is dependent on,
among other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.

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.

-20-
<PAGE>
<PAGE>
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 or net long-term capital gains will have
the effect of reducing the net asset value of the Fund's shares by the amount of
the distribution. If the net asset value is reduced below a shareholder's cost,
the distribution will nonetheless be taxable as described above, even if the
distribution represents a return of invested capital. Investors should consider
the tax implications of buying shares just prior to a distribution, when the
price of shares may reflect the amount of the forthcoming distribution. 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.

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<PAGE>
<PAGE>
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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<PAGE>
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---

<S> <C>
Investors for Whom the Fund is Designed............................................................... 2
Master-Feeder Structure............................................................................... 5
Investment Objective and Policies..................................................................... 6
Additional Investment Information and Risk Factors.................................................... 7
Investment Restrictions............................................................................... 14
Management............................................................................................ 14
Expenses.............................................................................................. 16
Purchase of Shares.................................................................................... 16
Redemption of Shares.................................................................................. 17
Dividends and Distributions........................................................................... 19
Net Asset Value....................................................................................... 19
Organization.......................................................................................... 19
Taxes................................................................................................. 20
Additional Information................................................................................ 22
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT ADVISER Union Bank of Switzerland
New York Branch
1345 Avenue of the Americas
New York, New York 10105

INVESTMENT SUB-ADVISER UBS International Investment London Limited
Triton Court
14 Finsbury Square
London, England EC2A 1PD

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
</TABLE>

- --------------------------------------------------------------------------------

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.

[LOGO]
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
UBS
REAL ESTATE
FUND
-----------------
UBS
Private Investor
Funds Inc.

Prospectus
May 1, 1998

- -------------------------------------------------------------------------------

<PAGE>

<PAGE>
PROSPECTUS

UBS REAL ESTATE FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (888) UBS-FUND ((888) 827-3863)

UBS Real Estate Fund (the 'Fund') seeks to provide total return through
long-term capital appreciation and current income. In order to accomplish this,
the Adviser (defined below) intends to invest in publicly traded equity
securities of domestic and foreign real estate companies, including Real Estate
Investment Trusts ('REITs'). For further information about REITs, see
'Investment Objective and Policies' and 'Additional Investment Information and
Risk Factors.' There is no assurance that the Fund will achieve its stated
objective.

The Fund is a non-diversified, no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is one of several series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law.

UNLIKE OTHER MUTUAL FUNDS THAT DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN UBS REAL ESTATE 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 Asset Management (New York)
Inc. ('UBSAM'), (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 May
1, 1998 (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 Distributor (as defined herein) at the addresses set forth on the
back cover of the Prospectus, or by calling (888) UBS-FUND ((888) 827-3863).

INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE. WHEN
THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY INVESTED BY THE INVESTOR.

PROSPECTUS DATED MAY 1, 1998.

<PAGE>
<PAGE>
UBS REAL ESTATE FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED

UBS Real Estate Fund (the 'Fund') is designed for investors seeking total
return, consisting of long-term capital appreciation and current income from a
portfolio of equity securities of domestic and foreign real estate companies.
Because of the risks associated with common stock investments, the Fund is
intended to be a long-term investment vehicle and is not intended to provide
investors with a means for speculating on short-term market movements. The Fund
seeks to achieve its investment objective by investing all of its investable
assets in UBS Real Estate 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 publicly traded equity
securities of domestic and foreign real estate companies, including common and
preferred stocks, shares in Real Estate Investment Trusts ('REITs') and
securities which are convertible into common stocks, including warrants and
rights. The Portfolio may also invest in futures contracts, options and certain
privately placed securities. The Portfolio's investments in securities of
smaller or less established issuers involve risks and may be more volatile and
less liquid than the securities of larger or more established issuers. For
further information about these investments and related investment techniques,
see 'Investment Objective and Policies' discussed below.

The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of UBS Private
Investor Funds, Inc. (the 'Company'). The minimum subsequent investment for all
investors is $5,000. These minimums may be waived at the Fund's discretion. See
'Purchase of Shares.' If shareholders reduce their total investment in shares of
the Fund to less than $10,000, their investment will be subject to mandatory
redemption. See 'Redemption of Shares -- Mandatory Redemption.' The Fund is one
of several series of the Company, an open-end management investment company
organized as a Maryland corporation.

SHAREHOLDER TRANSACTION EXPENSES

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<TABLE>
<S> <C>
EXPENSE TABLE

ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................... 0.00%
Rule 12b-1 Fees..................................................................................... None
Other Expenses, After Expense Reimbursements***..................................................... 1.20%
----
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*............................. 1.20%
----
----
</TABLE>

* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on the annualized estimates of expenses expected to be
incurred during the fiscal period ending December 31, 1998, after any applicable
fee waivers and expense reimbursements. Without such fee waivers and expense
reimbursements, Total Operating Expenses are estimated to be equal, on an annual
basis, to 3.32% of the Fund's projected average daily net assets. See
'Management.'

** The Adviser has agreed to waive fees and reimburse each of the Fund and the
Portfolio for any of their respective 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, 1.20% of the Fund's average daily net
assets. The Adviser may modify or discontinue this undertaking at any time in
the future with 30 days' prior notice to the Fund. The Portfolio's advisory fee
would be equal, on an annual basis, to 0.70% 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 ('Investors Bank', 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,

(ii) IBT Trust and Custodial Services (Ireland) LMTD ('IBT Ireland') under an
Administration Agreement with the Portfolio, and

(iii) Eligible Institutions providing shareholder services under various
shareholder servicing agreements.

For a more detailed description of contractual fee arrangements, including fee
waivers and expense reimbursements, and of the fees and expenses included in
Other Expenses, see 'Management' and 'Shareholder Services.'

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:

<TABLE>
<S> <C>
1 Year...................................................... $12
3 Years..................................................... 38
</TABLE>

The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of the Fund and the Fund's share of the
Portfolio's expenses. In connection with the above Example, please note that
$1,000 is less than the Fund's minimum investment requirement and that there are
no redemption or exchange fees of any kind. See 'Purchase of Shares,' 'Exchange
of Shares' and 'Redemption of Shares.' THE EXAMPLE IS HYPOTHETICAL; IT IS
INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES, AND ASSUMES THE CONTINUATION OF THE
FEE WAIVERS AND EXPENSE REIMBURSEMENTS REPRESENTED IN THE ABOVE 'EXPENSE TABLE.'
IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS. The following table
sets forth (i) the composite total return for the period October 1, 1996
(commencement of operations of the relevant accounts) through December 31, 1997
and the year ended December 31, 1997 for all discretionary accounts described
below that have been managed for at least one full quarter by UBSAM, and (ii)
the annual total return during the same periods for the Wilshire Real Estate
Securities Index (the 'Index').

-3-
<PAGE>
<PAGE>

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 return for such accounts has been
adjusted to deduct all of the Fund's annual total operating expenses of 1.20% of
average daily net assets as set forth in the Expense Table above. No such
accounts were managed by UBSAM or the Branch prior to 1996. The composite total
return is time-weighted and weighted by individual account size and reflects the
reinvestment of dividends and interest. The discretionary accounts are not
subject to certain investment limitations 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 composite
total return 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 a market capitalization weighted
index comprised of 113 (88% of market capitalization) of the largest and most
actively traded equity Real Estate Investment Trusts and 10 real estate
operating companies (12% of market capitalization). The Index is rebalanced
monthly and reconstituted quarterly. The Index is designed to provide a broad
based measure of real estate equity performance. The total returns of the Index
do not include management fees or commissions.

<TABLE>
<CAPTION>
COMPOSITE
TOTAL RETURN WILSHIRE
OF SUB-ADVISER'S REAL ESTATE
DISCRETIONARY SECURITIES
AVERAGE ANNUAL TOTAL RETURN FOR ACCOUNTS INDEX
- ------------------------------------------------------------------------ ---------------- --------------

<S> <C> <C>
One Year Ended December 31, 1997........................................ 26.43% 19.67%
October 1, 1996* through December 31, 1997.............................. 38.84% 33.67%
</TABLE>

- ------------

* Commencement date.

MASTER-FEEDER STRUCTURE

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 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.

-4-
<PAGE>
<PAGE>
investments or adversely affect the Fund's liquidity, and the Fund could incur
brokerage, tax or other charges in converting such securities to cash.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby lowering returns. Additionally,
because the Portfolio would become smaller, it may become less diversified,
resulting in potentially increased portfolio risk (however, these possibilities
also exist for traditionally structured funds that have large or institutional
investors who may withdraw from a fund). Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of its
operations. Except as permitted by the Securities and Exchange Commission (the
'SEC'), whenever the Fund is requested to vote on matters pertaining to the
Portfolio, the Company will hold a meeting of Fund shareholders and will cast
all of its votes proportionately as instructed by the Fund's shareholders. See
'Organization' in the 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,' 'Options,' 'Futures Contracts' and 'Investment
Restrictions.' For more information about the Portfolio's management and
expenses, see 'Management,' 'Shareholder Services' and 'Expenses.' 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 Portfolio's objective is to provide total return, consisting of long-term
capital appreciation and current income. In order to accomplish this, the
Portfolio intends to invest in publicly traded equity securities of domestic and
foreign real estate companies. For purposes of the Portfolio's investment
objective, a 'real estate company' is one whose principal business focus is the
ownership, construction, financing, management or sale of commercial, industrial
or residential real estate. The Portfolio will invest principally in real estate
companies with market capitalizations of at least $50 million and which also
are, in the opinion of the Sub-Adviser, high quality companies. The Portfolio
may invest up to 20% of its assets in securities of foreign real estate
companies.

Under normal circumstances, the Portfolio will invest at least 65% of its assets
in income-producing equity securities of domestic and foreign real estate
companies, including dividend-paying common stocks, preferred stocks, shares in
REITs and securities which are convertible into common stocks including warrants
and rights. The Portfolio intends to invest in securities that generate
relatively high levels of dividend income and have the potential for capital
appreciation. These generally include common stocks of established, high-quality
issuers. In addition, the Portfolio will seek to diversify its investment over a
carefully selected list of securities in order to moderate the risks inherent in
equity investments.

Although the Portfolio intends to invest primarily in equity securities of real
estate companies, under normal market conditions it may invest up to 20% of its
assets in certain cash investments and certain short-term fixed income
securities. See 'Investment Objective and Policies -- Quality and
Diversification Requirements' in the SAI. Such securities may be used to invest
uncommitted cash balances, to maintain liquidity to meet shareholder redemptions
or to take a temporarily defensive position against potential

-5-
<PAGE>
<PAGE>
stock market declines. These securities include: obligations of the United
States Government and its agencies or instrumentalities; money market mutual
funds; commercial paper, bank certificates of deposit and bankers' acceptances;
and repurchase agreements collateralized by these securities. The Portfolio may
also purchase nonpublicly offered debt securities. See 'Additional Investment
Information and Risk Factors -- Illiquid Investments; Privately Placed and Other
Unregistered Securities.'

The Portfolio may also utilize equity futures contracts and options to a limited
extent. Specifically, the Portfolio may enter into futures contracts and options
provided that such positions are established for hedging purposes only. See
'Additional Investment Information and Risk Factors -- Futures Contracts' and
' -- Options.'

The Portfolio may also sell securities short to a limited extent and for hedging
purposes only. See 'Additional Investment Information and Risk Factors -- Short
Sales.' The Fund may also invest in 'special situations.' See 'Additional
Investment Information and Risk Factors -- Special Situations.'

The Portfolio intends to manage its securities actively in pursuit of its
investment objective. Although it generally seeks to invest for the long-term,
the Portfolio retains the right to sell securities irrespective of how long they
have been held. It is anticipated that the annual portfolio turnover of the
Portfolio will not exceed 100%. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs.

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

NON-DIVERSIFIED STATUS. The Fund is classified as a 'non-diversified' investment
company under the Investment Company Act of 1940, as amended (the '1940 Act'),
which means that the Fund and the Portfolio are not limited by the 1940 Act in
the proportion of their assets that may be invested in the securities of a
single issuer. As such, the Portfolio may invest in a smaller number of
individual issuers than a diversified investment company. Therefore, an
investment in the Fund may present greater risk to an investor than an
investment in a diversified company.

However, the Fund intends to annually qualify and elect to be treated as a
regulated investment company (a 'RIC') for purposes of the Internal Revenue Code
of 1986, as amended (the 'Code') in order to obtain favorable tax treatment. See
'Taxes.' In order to qualify as a RIC, the Fund and the Portfolio will have to
meet certain requirements, including asset diversification requirements. Under
these asset diversification requirements, the Portfolio will limit its
investments so that, at the close of each quarter of the taxable year:

(i) not more than 25% of the Portfolio's total assets (at market value) will be
invested in the securities of a single issuer, and

(ii) with respect to 50% of its total assets (at market value), not more than 5%
of its total assets (at market value) will be invested in the securities of a
single issuer, and

(iii) the Portfolio will not own more than 10% of the outstanding voting
securities of any single issuer. The Portfolio's investments in securities
issued by the U.S. Government, its agencies and instrumentalities are not
subject to these limitations.

REAL ESTATE SECURITIES. The Portfolio will not invest in real estate directly,
but only in securities issued by real estate companies. However, the Portfolio
(and the Fund) may be subject to risks similar to those associated with the
direct ownership of real estate (in addition to securities markets risks)
because of its policy of concentration in the securities of companies in the
real estate industry. These include declines in the value of real estate, risks
related to general and local economic conditions, dependency on management
skill, heavy cash flow dependency, possible lack of availability of mortgage
funds, overbuilding, extended vacancies of properties, increased competition,
increases in property taxes and operating expenses, changes in zoning laws,
losses due to costs resulting from the clean-up of environmental problems,
liability to third parties for damages resulting from environmental problems,
casualty or condemnation losses, limitations on rents, changes in neighborhood
property values and the appeal of properties to tenants and changes in interest
rates.

-6-
<PAGE>
<PAGE>
REAL ESTATE INVESTMENT TRUSTS. The Portfolio may invest without limit in shares
of REITs. REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if it complies with several
requirements relating to its organization, ownership, assets, income and a
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. REITs can generally
be classified as Equity REITs, Mortgage REITs or Hybrid REITs.

Equity REITs, which invest the majority of their assets directly in real
property, derive their income primarily from rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.

Mortgage REITs, which invest the majority of their assets in real estate
mortgages, derive their income primarily from interest payments.

Hybrid REITs combine the characteristics of both Equity REITs and Mortgage
REITs.

In addition to the risks of investments in Real Estate Securities noted above,
investment in REITs may present additional risks. Equity REITs may be affected
by changes in the value of the underlying property owned by the trusts, while
Mortgage REITs may be affected by the quality of any credit extended. Further,
Equity and Mortgage REITs are dependent upon specialized management skills and
generally may not be diversified. Equity and Mortgage REITs are also subject to
heavy cash flow dependency and defaults by borrowers. In addition, Equity and
Mortgage REITs could possibly fail to qualify for tax free pass-through of
income under the Code, or to maintain their exemptions from registration under
the 1940 Act. The above factors may also adversely affect a borrower's or a
lessee's ability to meet its obligations to the REIT. In the event of a default
by a borrower or lessee, the REIT may experience delays in enforcing its rights
as a mortgagee or lessor and may incur substantial costs associated with
protecting its investments.

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 liquid securities with a value at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities (excluding the obligations created
by these commitments).

SHORT SALES. In the event that the Sub-Adviser anticipates that the price of a
security will decline, the Sub-Adviser may sell the security short and borrow
the same security from a broker or other institution to complete the sale. The
Portfolio will incur a profit or a loss, depending upon whether the market price
of the security decreases or increases between the date of the short sale and
the date on which the Fund must replace the borrowed security. The Portfolio
will only enter into short sales for hedging purposes. All short sales will be
fully collateralized and the Portfolio will not sell securities short if
immediately after and as a result of the short sale the value of all securities
sold short by the Portfolio exceeds 25% of its total assets. The Fund also
limits short sales of any one issuer's securities to 2% of the Fund's total
assets and to 2% of any one class of the issuer's securities.

SPECIAL SITUATIONS. From time to time, the Portfolio may invest in special
situations. A special situation arises when the Adviser believes that the
securities of a particular issuer will be recognized and appreciate

-7-
<PAGE>
<PAGE>
in value due to a specific development affecting that issuer. Developments that
might create a special situation include a new product or process, a
technological breakthrough, a management change, merger, recapitalization or
other extraordinary corporate event, or a change in market supply of and demand
for the security. Investments in special situations may carry an additional risk
of loss in the event that the anticipated development does not occur or does not
result in the anticipated market reaction.

SECURITIES LENDING. Subject to applicable investment restrictions, the Portfolio
may lend its securities. The Portfolio may lend its securities if such loans are
secured continuously by cash or equivalent collateral
or by a letter of credit in favor of the Portfolio at least equal at all times
to 100% of the market value of the securities loaned, plus accrued interest.
While such securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or by
the borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed
securities that occurs during the term of the loan inures to the Portfolio and
its respective investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will
consider all the facts and circumstances, including the creditworthiness of the
borrowing financial institution, and the Portfolio will not make any loans in
excess of one year. The Portfolio will not lend its securities to any officer,
Trustee, Director, employee or affiliate or placement agent of the Company, the
Trust, or the Adviser, Sub-Adviser, Administrator or Distributor, unless
otherwise permitted by applicable law.

FOREIGN INVESTMENT INFORMATION. The Portfolio may invest up to 20% of its assets
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.

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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
foreign investments.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in countries
other than in the United States.

The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ('ADRs'), European Depositary Receipts
('EDRs'), Global Depository Receipts ('GDRs') 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. GDRs are issued outside the United States, typically by non-U.S.
banks and trust companies. Generally, ADRs, in registered form, are designed for
use in the U.S. securities markets, and EDRs and GDRs, in bearer form, are
designed for use in European and non-U.S. securities markets, respectively.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may, from time-to-time, enter into foreign currency
exchange transactions. The Portfolio may enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, use forward currency contracts to purchase or sell foreign currencies,
use currency futures contracts or purchase or sell options thereon or purchase
or sell currency options.

A forward foreign currency exchange contract is an obligation of the Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. These contracts are entered into
in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The Portfolio will not enter into these foreign currency
exchange transactions for speculative purposes. Foreign currency exchange
transactions do not eliminate fluctuations in the local currency prices of the
Portfolio's securities or in foreign exchange rates, or prevent loss if the
local currency prices of these securities should decline.

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.
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.

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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 change in foreign currency exchange rates (with the U.S. dollar or
other foreign currencies) that would cause a decline in the value of existing
investments denominated or principally traded in a foreign currency.

Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, these transactions also limit any
potential gain that might be realized should the value of the hedged currency
increase. Additionally, the premiums paid by the Portfolio for currency or
futures options increase the Portfolio's transaction costs. Similarly, the cost
of the Portfolio's spot currency exchange transactions is generally the
difference between the bid and offer spot rate of the currency being purchased
or sold. The precise matching of these transactions and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date such a transaction is
entered into and the date it is sold or 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, as amended (the 'Securities Act'). Subject to
those non-fundamental policy limitations, the Portfolio may acquire investments
that are illiquid or have limited liquidity, such as private placements or
investments that are not registered under the Securities Act, and cannot be
offered for public sale in the United States without first being registered. An
illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it is
valued by the Portfolio. Repurchase agreements maturing in more than seven days
are considered illiquid investments and, as such, are subject to the limitations
set forth in this paragraph. The price the Portfolio pays for illiquid
securities or receives upon resale may be lower than the price paid or received
for similar securities with a more liquid market. Accordingly, the valuation of
these securities will reflect any limitations on their liquidity.

The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Trustees of the Trust. The Trustees of the Trust will
monitor the Adviser's implementation of these guidelines on a periodic basis.

MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment perspective.
The Portfolio may make money market investments pending other investments or
settlements, for liquidity or in adverse market conditions. Such money market
investments may include obligations of the U.S. Government and its agencies and
instrumentalities, money market mutual funds, commercial paper, bank obligations
and repurchase agreements. For more detailed information about these money
market investments, see 'Investment Objectives and Policies' in the SAI.

FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.

The Portfolio may purchase and sell exchange traded and over-the-counter ('OTC')
put and call options on equity securities or indices of equity securities, enter
into forward contracts, purchase and sell futures contracts on indices of equity
securities and purchase or sell put and call options on futures contracts on
indices of equity securities. The Portfolio may use these techniques for hedging
or risk management purposes or, subject to certain limitations, for investment
purposes in lieu of investing directly in the corresponding securities or
instruments. Such use of derivatives may be considered speculative.

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The Portfolio may use these techniques to manage its exposure to changing
interest rates and/or security prices. Some options and futures strategies,
including selling futures contracts and buying puts, tend to hedge the
Portfolio's investments against price fluctuations. Other strategies, including
buying futures contracts, writing puts and calls, and buying calls, may tend to
increase market exposure. For example, if the Portfolio wishes to obtain
exposure to a particular market or market sector but does not wish to purchase
the relevant securities, it could, as an alternative, purchase a futures
contract on an index of such securities or related securities. Such a purchase
would not constitute a hedging transaction and could be considered speculative.
However, the Portfolio will use futures contracts or options in this manner only
for the purpose of obtaining the same level of exposure to a particular market
or market sector that it could have obtained by purchasing the relevant
securities and will not use futures contracts or options to leverage its
exposure beyond this level. 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 Sub-Adviser and consistent with the
Portfolio's objective and policies. Because combined positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.

The Portfolio's use of these transactions is a highly specialized activity,
which involves investment strategies and risks different from those associated
with ordinary portfolio securities transactions, and there can be no guarantee
that their use will increase the Portfolio's return. While the Portfolio's use
of these instruments may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Sub-Adviser applies a strategy at an inappropriate time or judges market
conditions or trends incorrectly, such strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's opportunity to realize gains as
well as limiting its exposure to losses. The Portfolio could experience losses
if the prices of its options and futures positions were poorly correlated with
its other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur costs,
including commissions and premiums, in connection with these transactions and
these transactions could significantly increase the Portfolio's turnover rate.

The Portfolio may purchase and sell put and call options on securities, indices
of securities and futures contracts, or purchase and sell futures contracts for
the purposes described herein.

In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of the U.S. Commodity Futures Trading Commission
('CFTC') rules, the Portfolio will enter into transactions in futures contracts
or options on futures contracts only if (1) such transactions constitute bona
fide hedging transactions as defined under CFTC rules, or (2) no more than 5% of
the Portfolio's net assets are committed as initial margin or premiums to
positions that do not constitute bona fide hedging transactions.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indices
of securities, indices of securities prices and futures contracts. The Portfolio
may terminate its position in a put option it has purchased by allowing it to
expire or by exercising the option. The Portfolio may also close out a put
option position by entering into an offsetting transaction, if a liquid market
exists. If the option is allowed to expire, the Portfolio will lose the entire
premium it paid. If the Portfolio exercises a put option on a security, it will
sell the instrument underlying the option at the strike price. If the Portfolio
exercises an option on an index, settlement is in cash and does not involve the
actual sale of securities. American style options may be exercised on any day up
to their expiration date. European style options may be exercised only on their
expiration date.

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The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).

OPTIONS ON INDICES. The Portfolio is permitted to purchase and sell put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indices are similar to options on securities,
except that the exercise of securities index options is settled by cash payment
and does not involve the actual purchase or sale of securities. In addition,
these options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security. The Portfolio, in purchasing or selling index options, is
subject to the risk that the value of its portfolio securities may not change as
much as an index because the Portfolio's investments generally will not match
the composition of an index.

FUTURES CONTRACTS

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quantity of the underlying instrument at a specified future date and price or to
receive or make a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the Portfolio
enters into the contract. Futures can be held until their delivery dates or the
positions can be (and normally are) closed out before then. There is no
assurance, however, that a liquid market will exist when a Portfolio wishes to
close out a particular position.

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' either with the Custodian in a segregated
account in the name of its futures broker, known as a futures commission
merchant ('FCM'), or with the 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.

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 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.

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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' and 'Additional Information' 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 and the Trust are also employees of Investors
Bank 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 UBSAM 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. UBSAM, which also operates out of offices located at 1345
Avenue of the Americas, New York, New York, is a registered investment adviser
in the U.S.

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, Houston, Los Angeles and San Francisco. In addition to
the receipt of deposits and the making of loans and advances, the Bank, through
its offices and subsidiaries engages in a wide range of banking and financial
activities typical of the world's major international banks, including
fiduciary, investment advisory and custodial services and foreign exchange in
the United States, Swiss, Asian and Euro-capital markets. The Bank is one of the
world's leading asset managers and has been active in New York since 1946. At
December 31, 1997, the Bank (including its consolidated subsidiaries) had total
assets of $395.1 billion (unaudited) and equity capital and reserves of $14.4
billion (unaudited).

The Advisers provide investment advice and portfolio management to the
Portfolio. Subject to the supervision of the Trustees and the Adviser, the
Sub-Adviser makes the Portfolio's day-to-day investment decisions, arranges for
the execution of portfolio transactions and generally manages the Portfolio's
investments and operations. See 'Investment Adviser and Funds Services Agent' in
the SAI.

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In addition to the above-listed investment advisory services, the 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.

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 0.70%
of the Portfolio's average daily net assets. The Branch has voluntarily agreed
to waive its fees and reimburse the Fund and the Portfolio for any of their
respective 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, 1.20% 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 the Portfolio. Bruce C. Ebnother is primarily responsible
for the day-to-day management and implementation of the Sub-Adviser's process
for the Portfolio. Mr. Ebnother is a Vice President and Portfolio Manager at the
Sub-Adviser, a position he has held since 1996. Prior to joining the
Sub-Adviser, Mr. Ebnother was a Senior Equity Analyst, Real Estate, at Smith
Barney from 1992 through 1996. In total, Mr. Ebnother has 14 years investment
experience and holds a BA degree from Brown University. The Sub-Adviser has
advised mutual funds for only a short time.

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 0.40% of the first $25 million of
the Portfolio's average daily net assets plus 0.325% of the next $25 million of
such assets plus 0.25% of such 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 Fund and the Portfolio employ Investors Bank & Trust Company
('Investors Bank') and IBT Trust and Custodial Services (Ireland) LMTD ('IBT
Ireland'), a subsidiary of Investors Bank, respectively, as Administrators under
Administration Agreements (the 'Administration Agreements') to provide certain
administrative services. The services provided by Investors Bank and IBT Ireland
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 SEC. Investors Bank 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, the Fund has agreed to pay
Investors Bank a fee, calculated daily and payable monthly, equal, on an annual
basis, to 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. Investors Bank does
not receive a fee from the Fund on average daily net assets in excess of $200
million. Investors Bank's principal offices are located at 200 Clarendon Street,
Boston, Massachusetts 02116.

Under the Trust's Administrative Services Agreement, the Portfolio has agreed to
pay IBT Ireland a fee, calculated daily and payable monthly, equal, on an annual
basis, to 0.07% of the Portfolio's first $100 million of 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.

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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 Investors Bank.

CUSTODIAN. Investors Bank also 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.

SHAREHOLDER SERVICES

The Company 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') 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 the following services for these
investors, among other things: coordinating shareholder accounts and records,
assisting investors seeking to purchase or redeem Fund shares, providing
performance information relating to the Fund, and responding to shareholder
inquiries. The Company has agreed to pay each Eligible Institution a fee for
these services equal, on an annual basis, to 0.25% of the average daily net
assets of the Fund represented by shares of the Fund owned during the period for
which payment is being made. Under the terms of the shareholder servicing
agreements, Eligible Institutions may delegate one or more of their
responsibilities to other entities at their expense.

EXPENSES

In addition to the fees of the Branch, Investors Bank, and IBT Ireland, the Fund
will be responsible for other expenses, including brokerage costs and litigation
and extraordinary expenses. The Branch has voluntarily agreed to limit the total
operating expenses of the Fund, excluding extraordinary expenses, to an annual
rate of 1.20% 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.

PURCHASE OF SHARES

GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Fund also reserves the right to determine the purchase orders
that it will accept and reserves the right to cease offering its shares at any
time. The shares of the Fund may be purchased only in those states where they
may be lawfully sold.

The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of the Company.
The minimum subsequent investment in the Fund for all investors is $5,000. The
minimum initial investment for employees of the Bank or its affiliates is $5,000
and the minimum subsequent investment is $1,000. These minimum investment
requirements may be waived at the Fund's sole discretion.

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

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orders received and accepted by the Distributor prior to 4:00 p.m. New York time
on any Fund Business Day or prior to the close of the NYSE, whichever is
earlier, will be effective and executed at the net asset value determined that
day. The 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. or after the close of the NYSE, whichever is earlier,
will receive the net asset value determined on the next Fund Business Day, and
the investor becomes a holder of record on such next Fund Business Day.
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 SAI.

Customers of Eligible Institutions should request a representative of their
Eligible Institution to assist them in placing a purchase order with the
Distributor. Shareholders who do not currently maintain a relationship with an
Eligible Institution may purchase shares of the Fund directly from the
Distributor by wire transfer or mail.

By wire transfer: Purchases may be made by federal funds wire. To place a
purchase order with the Fund, the shareholder must telephone the Transfer Agent
at (888) UBS-FUND (888-827-3863) for specific instructions. A completed account
application must promptly follow any wire order for an initial purchase.
Completed account applications should be mailed or sent via facsimile. 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.

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 Real Estate Fund
[Investor account name(s) and account number]

By mail: Shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to UBS Private Investor Funds, Inc.; c/o
Investors Bank & Trust Company; P.O. Box 9130; MFD 23; Boston, Massachusetts
02117-9130.

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 9130;
MFD 23; Boston, MA 02117-9130.

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

Customers of Eligible Institutions must request a representative of their
Eligible Institution to assist them in placing a redemption order with the Fund.

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 or the
close of the NYSE, whichever is earlier, 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, or sent by check to the address
of record if requested by the shareholder.

Shareholders who maintain an account directly with the Distributor may redeem
Fund shares by mail or telephone.

By telephone: The shareholder may place a redemption request by calling the
Transfer Agent at 888-UBS-FUND (888-827-3863). 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.
Such shareholders risk possible loss of principal and income in the event of a
telephone redemption not authorized by them. The Fund and the Transfer Agent
will employ reasonable procedures to verify that telephone redemption
instructions are genuine and will require that shareholders electing such an
option provide a form of personal identification. The failure by the Fund or the
Transfer Agent to employ such procedures may cause the Fund or the Transfer
Agent to be liable for any losses incurred by investors due to telephone
redemptions based upon unauthorized or fraudulent instructions. The telephone
redemption option may be modified or discontinued at any time upon 60 days'
notice to shareholders.

MANDATORY REDEMPTION. If the value of a shareholder's holdings in the Fund falls
below $10,000 because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is
increased to $10,000 or more. For example, a shareholder whose initial and only
investment is $10,000 may be subject to mandatory redemption resulting from any
redemption that causes his or her investment to fall below $10,000.

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.

-18-
<PAGE>
<PAGE>
EXCHANGE OF SHARES

An investor may exchange Fund shares for shares of any other series of the
Company, without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the other Company series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
appropriate section relating to the purchase and redemption of shares in this
and other prospectuses. See also 'Additional Information' below for an
explanation of the telephone exchange policy.

RETIREMENT PLANS

The Fund has available a form of Individual Retirement Account ('IRA') for
investment in Fund shares. Subject to certain restrictions imposed by applicable
tax laws, self-employed individuals may purchase shares of the Fund through
tax-deductible contributions to existing retirement plans known as Self-Employed
Retirement Plans ('SERPs'). Fund shares may also be a suitable investment for
'401(k) Plans' which subject to certain restrictions allow their participants to
invest in qualified pension plans on a tax-deferred basis. The Fund does not
currently act as sponsor to such plans.

The minimum initial investment for all such retirement plans is $2,000. The
minimum for all subsequent investments is $500.

DIVIDENDS AND DISTRIBUTIONS

Dividends consisting of substantially all of the Fund's net investment income,
if any, will be declared and paid quarterly. 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.

-19-
<PAGE>
<PAGE>
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 New York Stock Exchange is closed, including
the following holidays: New Year's Day, Dr. Martin Luther King, Jr. 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 will close for purchases and
redemptions at the same time.

ORGANIZATION

UBS PRIVATE INVESTOR FUNDS, INC.

UBS Private Investor Funds, Inc., a Maryland corporation incorporated on
November 16, 1995, is an open-end management investment company registered under
the 1940 Act and organized as a series fund.

The Company is currently authorized to issue shares in nine series: The UBS Bond
Fund Series; The UBS High Yield Bond Fund Series; The UBS Tax Exempt Bond Fund
Series; The UBS International Equity Fund Series; The UBS Institutional
International Equity Fund Series; The UBS Large Cap Growth Fund Series; The UBS
Small Cap Fund Series; The UBS Value Equity Fund Series; and the UBS Real Estate
Fund Series. Each outstanding share of the Company will have a pro rata interest
in the assets of its series, but it will have no interest in the assets of any
other Company series. Only shares of The UBS Real Estate Fund Series are offered
through this Prospectus.

Shareholder inquiries by clients of Eligible Institutions may be directed to
their Eligible Institution and other shareholders may address their inquiries to
the Transfer Agent.

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, seven
series have been authorized: The Value Equity Portfolio, International Equity
Portfolio, Small Cap Portfolio, Large Cap Growth Portfolio, Real Estate
Portfolio, Bond Portfolio and High Yield Bond Portfolio.

-20-
<PAGE>
<PAGE>
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 annually qualify and elect to be treated as a regulated
investment company (a 'RIC') under Subchapter M of the Code. 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. The Portfolio intends to qualify as a
partnership for federal income tax purposes. As such, the Portfolio generally
should not be subject to tax. The status of the Fund as a regulated investment
company is dependent on, among other things, the Portfolio's continued
qualification as a partnership for federal income tax purposes.

Distributions of net investment income and realized net short-term capital gains
in excess of net long-term capital losses are taxable as ordinary income to Fund
shareholders whether such distributions are received in the form of cash or
reinvested in additional shares. To the extent that dividends distributed to
shareholders are designated as derived from the Fund's dividend income that
would be eligible for the dividends received deduction if the Fund were not a
regulated investment company, such dividends are eligible, subject to certain
restrictions, for the 70% dividends received deduction for corporations.
Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to Fund shareholders as long-term capital gains regardless of
how long a shareholder has held shares in the Fund and regardless of whether
received in the form of cash or reinvested in additional shares. Long-term
capital gains distributions to corporate shareholders are not eligible for the
dividends-received deduction. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders after the end of the
taxable year for the Fund.

Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than a
year, 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.

-21-
<PAGE>
<PAGE>
number is not provided. In the event that such a fine is imposed with respect to
any uncertified account in any year, a corresponding charge may be made against
that account.

ADDITIONAL INFORMATION

The Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and 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
Morgan Stanley Indices, Lipper Analytical Services, Inc., Micropal Inc.,
Morningstar Inc., Ibbotson Associates, S&P 500 Index, the Dow Jones Average, the
Frank Russell Indices, the Financial Times World Stock Index and other industry
publications.

-22-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---

<S> <C>
Investors for Whom the Fund is Designed............................................................... 2
Master-Feeder Structure............................................................................... 4
Investment Objective and Policies..................................................................... 5
Additional Investment Information and Risk Factors.................................................... 6
Investment Restrictions............................................................................... 13
Management............................................................................................ 14
Shareholder Services.................................................................................. 16
Expenses.............................................................................................. 16
Purchase of Shares.................................................................................... 16
Redemption of Shares.................................................................................. 17
Exchange of Shares.................................................................................... 19
Retirement Plans...................................................................................... 19
Dividends and Distributions........................................................................... 19
Net Asset Value....................................................................................... 20
Organization.......................................................................................... 20
Taxes................................................................................................. 21
Additional Information................................................................................ 22
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT ADVISER Union Bank of Switzerland,
New York Branch
1345 Avenue of the Americas
New York, NY 10105

INVESTMENT SUB-ADVISER UBS Asset Management (New York) Inc.
1345 Avenue of the Americas
New York, NY 10105

ADMINISTRATOR AND CUSTODIAN Investors Bank & Trust Company
AND TRANSFER AGENT 200 Clarendon Street
Boston, Massachusetts 02116

DISTRIBUTOR First Fund Distributors, Inc.
4455 E. Camelback Road
Phoenix, Arizona 85018
</TABLE>

- --------------------------------------------------------------------------------

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.

[LOGO]

UBS PRIVATE INVESTOR FUNDS, INC.
UBS TAX EXEMPT BOND FUND

- --------------------------------------------------------------------------------
PROSPECTUS

UBS TAX EXEMPT BOND FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (888) UBS-FUND ((888) 827-3863)

UBS Tax Exempt Bond Fund (the 'Fund') seeks to provide a high level of current
income exempt from federal income tax consistent with moderate risk of capital
and maintenance of liquidity. It is designed for investors who seek tax exempt
yields greater than those generally available from a portfolio of short-term tax
exempt obligations and who are willing to incur the greater price fluctuation of
intermediate-term instruments.

The Fund is a diversified, no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is one of several series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law.

The Fund is advised by the New York Branch (the 'Branch' or the 'Adviser') of
Union Bank of Switzerland (the 'Bank').

This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated May
1, 1998, provides further discussion of certain topics referred to in this
Prospectus and other matters that may be of interest to investors. The Statement
of Additional Information has been filed with the Securities and Exchange
Commission and is incorporated herein by reference and is available without
charge upon written request from the Company or the Distributor (as defined
herein) at the addresses set forth on the back cover of the Prospectus or by
calling (888) UBS-FUND ((888) 827-3863).

INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE. WHEN
THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY INVESTED BY THE INVESTOR.

PROSPECTUS DATED MAY 1, 1998.

UBS TAX EXEMPT BOND FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED

UBS Tax Exempt Bond Fund (the 'Fund') is designed for investors seeking a higher
level of current income that is exempt from federal income tax from a portfolio
of tax exempt securities than that available from a portfolio of short-term tax
exempt obligations and who are willing to incur the greater price fluctuation of
intermediate-term instruments. The Fund seeks to achieve its investment
objective by investing primarily in municipal securities that earn interest
exempt from federal income tax in the opinion of the issuer's bond counsel. See
'Investment Objective and Policies'.

The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of UBS Private
Investor Funds, Inc. (the 'Company'). The minimum subsequent investment for all
investors is $5,000. These minimums may be waived for certain accounts. See
'Purchase of Shares'. If shareholders reduce their total investment in shares of
the Fund to less than $10,000, their investment will be subject to mandatory
redemption. See 'Redemption of Shares -- Mandatory Redemption'. The Fund is one
of several series of the Company, an open-end management investment company
organized as a Maryland corporation.

This Prospectus describes the Fund's investment objective and policies,
management and operations to enable investors to decide if the Fund suits their
investment needs.

The following table illustrates that Fund investors incur no shareholder
transaction expenses: their investments in the Fund are subject only to the
operating expenses set forth below as a percentage of the Fund's average daily
net assets. Fund expenses are discussed below under the headings 'Management',
'Expenses' and 'Shareholder Services'.

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases................................................................... None
Sales Load Imposed on Reinvested Dividends........................................................ None
Deferred Sales Load............................................................................... None
Redemption Fees................................................................................... None
Exchange Fees..................................................................................... None

EXPENSE TABLE

ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................. 0.00%
Rule 12b-1 Fees................................................................................... None
Other Expenses, After Expense Reimbursements***................................................... 0.80%
----
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*........................... 0.80%
----
----
</TABLE>

* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on estimates of the expenses to be incurred during the
current fiscal year, after any applicable fee waivers and expense
reimbursements. Without such fee waivers and expense reimbursements, Total
Operating Expenses would be equal, on an annual basis, to 2.74% of the Fund's
projected average daily net assets. See 'Management'.

** The New York Branch (the 'Branch' or the 'Adviser') of Union Bank of
Switzerland (the 'Bank') has agreed to waive fees and reimburse the Fund for any
of its operating expenses to the extent that the Fund's total operating expenses
exceed, on an annual basis, 0.80% of the Fund's average daily net assets. The
Branch may modify or discontinue this undertaking at any time in the future with
30 days' notice to the Fund. The advisory fee would be 0.45% if there were not a
fee waiver. See 'Expenses'.

*** The fees and expenses in Other Expenses, After Expense Reimbursements
include fees payable to: (i) Investors Bank & Trust Company ('Investors Bank',
the 'Custodian', or the 'Transfer Agent') (a) under an Administration Agreement
with the Funds, (b) as custodian of the Funds and the Portfolios and (c) as
transfer agent of the Funds; (ii) IBT Trust & Custodial Services (Ireland) LMTD
('IBT Ireland') under an Administration Agreement with the Fund, and (iii)
Eligible Institutions providing shareholder services

-2-

under various shareholder servicing agreements. For a more detailed description
of contractual fee arrangements, including fee waivers and expense
reimbursements, and of the fees and expenses included in Other Expenses, see
'Management' and 'Shareholder Services'.

EXAMPLE

An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and a redemption at the end of each time period:

<TABLE>
<S> <C>
1 Year...................................................... $ 8
3 Years..................................................... $26
</TABLE>

The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear. In connection with the above Example, please note that $1,000 is less
than the Fund's minimum investment requirement and that there are no redemption
or exchange fees of any kind. See 'Purchase of Shares', 'Exchange of Shares' and
'Redemption of Shares'. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR
ILLUSTRATIVE PURPOSES, AND ASSUMES THE CONTINUATION OF THE FEE WAIVERS AND
EXPENSE REIMBURSEMENTS REPRESENTED IN THE ABOVE 'EXPENSE TABLE'. IT SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective and policies are described below. Additional
information about the Fund's investment policies appears in the Statement of
Additional Information (the 'SAI') under 'Investment Objective and Policies'.
There can be no assurance that the Fund's investment objective will be achieved.
The Fund's investment objective is to provide a high level of current income
exempt from federal income tax consistent with moderate risk of capital and
maintenance of liquidity. See 'Taxes'.

The Fund attempts to achieve its investment objective by investing primarily in
municipal securities that pay interest that is, in the opinion of bond counsel
for the issuer, exempt from federal income tax. As a fundamental policy, during
normal market conditions, the Fund will invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income taxation, which
obligations will not include obligations that may be subject to the alternative
minimum tax. Interest on these securities may be subject to state and local
taxes. For more detailed information regarding tax matters, including the
applicability of the alternative minimum tax, see 'Taxes'. The remainder of the
Fund's portfolio may be invested in U.S. dollar-denominated debt securities of
foreign and domestic issuers.

The Adviser anticipates that the duration (as defined below) of the Fund's
portfolio will usually be between one and seven years. In view of the Fund's
duration, under normal market conditions, the Fund's yield can be expected to be
higher and its net asset value less stable than those of a money market fund.
The maturities of the individual securities in the Fund's portfolio may vary
widely from its duration, however, and may be as long as 30 years. Duration is a
measure of a bond's price sensitivity, expressed in years. It is a measure of
interest rate risk of a bond calculated by taking into consideration the number
of years until the average dollar, in present value terms, is received from
principal and interest payments. For example, for a bond with a duration of four
years, every 1% change in yield will result in a 4% change in price in the
opposite direction. The Adviser will select long-term or short-term securities
for the Fund depending on several factors, including whether the Adviser
believes interest rates will rise or fall in the future.

The Fund intends to manage its portfolio actively in pursuit of its investment
objective. Portfolio transactions are undertaken principally to accomplish the
Fund's objective in relation to expected movements in the general level of
interest rates, but the Fund may also engage in short-term trading consistent
with its objective. To the extent the Fund engages in short-term trading, it may
incur

-3-

increased transaction and tax costs. See 'Taxes' below. The annual portfolio
turnover rate for the Fund is expected to be under 100%. See 'Portfolio
Transactions' in the SAI.

The value of the Fund's investments will generally fluctuate inversely with
changes in prevailing interest rates. The existing value of the Fund's
investments will also be affected by changes in the creditworthiness of issuers
and other market factors. The quality criteria applied in selecting portfolio
securities are intended to minimize adverse price changes due to credit
considerations. The value of the Fund's municipal securities can also be
affected by market reaction to legislative consideration of various tax reform
proposals. Although the net asset value of the Fund fluctuates, the Fund
attempts to preserve the value of its investments to the extent consistent with
its objective.

MUNICIPAL BONDS. The Fund may invest in bonds issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies, authorities and instrumentalities.
These obligations may be general obligation bonds secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest, or they may be revenue bonds payable from specific revenue sources,
but not generally backed by the issuer's taxing power. These include industrial
development bonds where payment is the responsibility of the private industrial
user of the facility financed by the bonds. Because industrial development bonds
are generally subject to federal income tax or the alternative minimum tax, the
Fund may invest only up to 20% of its net assets in industrial development bonds
or other securities subject to federal income tax.

MUNICIPAL NOTES. The Fund may also invest in municipal notes of various types,
including notes issued in anticipation of receipt of taxes, the proceeds of the
sale of bonds, other revenues or grant proceeds, as well as municipal commercial
paper and municipal demand obligations such as variable rate demand notes and
master demand obligations. The interest rate on variable rate demand notes is
adjustable at periodic intervals as specified in the notes. Master demand
obligations permit the investment of fluctuating amounts at periodically
adjusted interest rates. They are governed by agreements between the municipal
issuer and the Adviser acting as agent, for no additional fee, in its capacity
as the Fund's Adviser and as fiduciary for other clients. Although master demand
obligations are not marketable to third parties, the Fund considers them to be
liquid because they are payable on demand. For more information about municipal
notes, see 'Investment Objective and Policies' in the SAI.

TAXABLE BONDS. The Fund intends to invest its assets principally in tax exempt
securities. However, it may invest up to 20% of its net assets in a broad range
of U.S. dollar denominated debt securities of domestic and foreign issuers, the
interest income from which may be subject to federal, as well as state and local
and foreign income taxes. These include debt securities of various types and
maturities, e.g., debentures, notes, mortgage securities, equipment trust
certificates and other collateralized securities, securities of the United
States government and zero coupon securities. Collateralized securities are
backed by a pool of assets such as loans or receivables that generate cash flow
to cover the payments due on the securities. Collateralized securities are
subject to certain risks, including a decline in the value of the collateral
backing the security, failure of the collateral to generate the anticipated cash
flow or in certain cases more rapid prepayment than anticipated because of
events affecting the collateral, such as accelerated prepayment of mortgages or
other loans backing these securities or destruction of equipment subject to
equipment trust certificates. In the event of any such prepayment, the Fund will
be required to reinvest the proceeds of prepayments at interest rates prevailing
at the time of reinvestment, which may be lower than the interest rates on the
prepaid securities. In addition, the value of zero coupon securities, which do
not pay interest, is more volatile than that of interest bearing debt securities
with the same maturity. The Fund does not expect to invest more than 5% of its
assets in securities of foreign issuers. All such investments will be
denominated in U.S. Dollars. See 'Additional Investment Information and Risk
Factors' for further information on foreign investments and convertible
securities. The Portfolio may purchase nonpublicly offered debt securities. See
'Illiquid Investments; Privately Placed and Other Unregistered Securities'.

The Fund may invest in money market instruments that meet the quality
requirements described below, except that short-term municipal obligations of
New York State issuers may be rated MIG-2 by Moody's Investors Service Inc.
('Moody's') or SP-2 by Standard & Poor's Corporation ('Standard & Poor's').
Under normal circumstances, the Fund will purchase these securities to invest
temporary cash balances or to

-4-

maintain liquidity to meet withdrawals. However, the Fund may also invest in
money market instruments, without limit, as a temporary defensive measure taken
during, or in anticipation of, adverse market conditions.

QUALITY INFORMATION. The Fund will not purchase any municipal obligation unless
it is rated at least Aaa, Aa, A, Baa, MIG-1 or Prime-1 by Moody's or AAA, AA, A,
BBB, SP-1 or A1 by Standard & Poor's (except for short-term obligations of New
York State issuers as described above) or, if it is unrated, in the Adviser's
opinion it is of comparable quality. It is the Fund's current policy that its
non-municipal debt securities will be rated at least Baa or BBB by Moody's or
Standard & Poor's, respectively. These standards must be satisfied at the time
an investment is made. If the quality of the investment later declines, the Fund
may continue to hold the investment. Securities rated Baa by Moody's or BBB by
Standard & Poor's are considered investment grade, but have some speculative
characteristics.

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

The Fund may purchase municipal obligations together with puts, municipal
obligations on a when-issued or delayed delivery basis, enter into repurchase
and reverse repurchase agreements, purchase synthetic variable rate instruments,
loan its portfolio securities, purchase investment company securities and
certain privately placed securities, and enter into certain hedging transactions
that may involve options on securities and securities indices, futures contracts
and options on futures contracts and currency options.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase securities on
a when-issued or delayed delivery basis. Delivery of and payment for these
securities may take as long as a month or more after the date of the purchase
commitment. The value of these securities is subject to market fluctuation
during this period and no interest or income accrues to the Fund until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. Between the trade and settlement dates, the Fund
will maintain a segregated account with the Custodian consisting of a portfolio
of high grade, liquid debt securities with a value at least equal to these
commitments. When entering into a when-issued or delayed delivery transaction,
the Fund will rely on the other party to consummate the transaction; if the
other party fails to do so, the Fund may be disadvantaged. It is the Fund's
current policy not to enter into when-issued commitments exceeding in the
aggregate 15% of the market value of the Fund's total assets less liabilities
(excluding the obligations created by these commitments).

REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement transactions
with brokers, dealers or banks that meet the credit guidelines established by
the Company's Board of Directors (the 'Directors' or the 'Board'). In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of the agreement. The term of these agreements is
usually from overnight to one week. A repurchase agreement may be viewed as a
fully collateralized loan of money by the Fund to the seller. The Fund always
receives securities with a market value at least equal to the purchase price
plus accrued interest as collateral and this value is maintained during the term
of the agreement. If the seller defaults and the collateral's value declines,
the Fund might incur a loss. If bankruptcy proceedings are commenced with
respect to the seller, the Fund's realization upon the disposition of collateral
may be delayed or limited. Investments in repurchase agreements maturing in more
than seven days and certain other investments that may be considered illiquid
are subject to certain limitations. See 'Illiquid Investments; Privately Placed
and Other Unregistered Securities' below.

REVERSE REPURCHASE AGREEMENTS. The Fund is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Fund sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Fund and, therefore, is a form
of leverage. Leverage may cause the Fund's gains or losses, if any, to be
magnified. For more information, including limitations on the use of reverse
repurchase agreements, see 'Investment Objective and Policies' in the SAI.

SECURITIES LENDING. Subject to applicable investment restrictions, the Fund may
lend its securities. The Fund may lend its securities if such loans are secured
continuously by cash or equivalent collateral or by a

-5-

letter of credit in favor of the Fund at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Fund any income accruing
thereon. Loans will be subject to termination by the Fund in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities that
occurs during the term of the loan inures to the Fund. The Fund may pay
reasonable finders' and custodial fees in connection with a loan. In addition,
the Fund will consider all the facts and circumstances, including the
creditworthiness of the borrowing financial institution, and the Fund will not
make any loans with a term in excess of one year. The Fund will not lend its
securities to any officer, Director, employee or affiliate or placement agent of
the Fund, or the Adviser, Administrator or Distributor, unless otherwise
permitted by applicable law.

TAXABLE INVESTMENTS. The Fund attempts to invest its assets primarily in tax
exempt municipal securities; however, the Fund is permitted to invest up to 20%
of the value of its net assets in securities the interest income on which may be
subject to federal, as well as state and local and foreign income taxes. The
Fund may make taxable investments pending the investment of proceeds from
earlier sales of its portfolio securities or when -- in the opinion of the
Adviser -- adverse market conditions exist. In abnormal market conditions, if,
in the judgment of the Adviser tax exempt securities satisfying the Fund's
investment objective may not be purchased, the Fund may, for defensive purposes
only, temporarily invest more than 20% of its net assets in taxable investments.
The taxable investments permitted for the Fund include obligations of the U.S.
Government and its agencies and instrumentalities, bank obligations, commercial
paper, the debt securities of domestic and foreign issuers (U.S. dollar
denominated) and repurchase agreements and other debt securities that meet the
Fund's quality requirements. See 'Taxes'.

PUTS. The Fund may purchase, without limit, municipal bonds or notes together
with the right to resell them at an agreed price or yield within a specified
period prior to maturity. This right to resell is known as a put. The aggregate
price paid for securities with puts may be higher than the price which otherwise
would be paid. Consistent with the Fund's investment objective and subject to
the supervision of the Directors, the purpose of this practice is to permit the
Fund to be fully invested in tax exempt securities while maintaining the
necessary liquidity to purchase securities on a when-issued basis, to meet
unusually large withdrawals, to purchase at a later date securities other than
those subject to the put and to facilitate the Adviser's ability to manage the
portfolio actively. The principal risk of puts is that the put writer may
default on its obligation to repurchase. The Adviser will monitor each writer's
ability to meet its obligations under puts.

The Fund uses the amortized cost method to value all municipal securities with
maturities of less than 60 days; when these securities are subject to puts
separate from the underlying securities, no value is assigned to the puts. The
cost of any such put is carried as an unrealized loss from the time of purchase
until it is exercised or expires. See 'Investment Objective and Policies' in the
SAI for the valuation procedure if the Fund were to invest in municipal
securities with maturities of 60 days or more that are subject to separate puts.

SYNTHETIC VARIABLE RATE INSTRUMENTS. The Fund may invest in certain synthetic
variable rate instruments. Such instruments generally involve the deposit of a
long-term tax exempt bond in a custody or trust arrangement and the creation of
a mechanism to adjust the long-term interest rate on the bond to a variable
short-term rate and a right (subject to certain conditions) on the part of the
purchaser to tender it periodically to a third party at par. The Adviser will
review the structure of synthetic variable rate instruments to identify credit
and liquidity risks (including the conditions under which the right to tender
the instrument would no longer be available) and will monitor those risks. In
the event that the right to tender the instrument is no longer available, the
risk to the Fund will be that of holding the long-term bond.

ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Fund may not acquire any illiquid securities if, as a result thereof, more than
15% of the market value of the Fund's net assets would be in illiquid
investments or investments that are not readily marketable. In addition, the
Fund will not invest more than 10% of the market value of its total assets in
restricted securities that

-6-

cannot be offered for public sale in the United States without first being
registered under the Securities Act of 1933 (the 'Securities Act'). Subject to
those non-fundamental policy limitations, the Fund may acquire investments that
are illiquid or have limited liquidity, such as private placements or
investments that are not registered under the Securities Act, and cannot be
offered for public sale in the United States without first being registered. An
illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it is
valued by the Fund. Repurchase agreements maturing in more than seven days are
considered illiquid and, as such, are subject to the limitations set forth in
this paragraph. The price the Fund pays for illiquid securities or receives upon
resale may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly, the valuation of these securities will
reflect any limitations on their liquidity.

The Fund may also purchase Rule 144A securities sold to institutional investors
without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Board. The Board will monitor the Adviser's implementation
of these guidelines on a periodic basis.

FUTURES AND OPTIONS TRANSACTIONS. The Fund is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.

The Fund may purchase and sell exchange traded and over-the-counter ('OTC') put
and call options on fixed income securities or indices of fixed income
securities, purchase and sell futures contracts on indices of fixed income
securities, and purchase and sell put and call options on futures contracts on
indices of fixed income securities. The Fund may use these techniques for
hedging or risk management purposes or, subject to certain limitations, for the
purpose of obtaining desired exposure to certain securities or markets.

The Fund may use these techniques to manage its exposure to changing interest
rates and/or security prices. Some options and futures strategies, including
selling futures contracts and buying puts, tend to hedge the Fund's investments
against price fluctuations. Other strategies, including buying futures
contracts, writing puts and calls, and buying calls, may tend to increase market
exposure. For example, if the Portfolio wishes to obtain exposure to a
particular market or market sector but does not wish to purchase the relevant
securities, it could, as an alternative, purchase a futures contract on an index
of such securities or related securities. Such a purchase would not constitute a
hedging transaction and could be considered speculative. However, the Portfolio
will use futures contracts or options in this manner only for the purpose of
obtaining the same level of exposure to a particular market or market sector
that it could have obtained by purchasing the relevant securities and will not
use futures contracts or options to leverage its exposure beyond this level.
Options and futures contracts may be combined with each other or with forward
contracts in order to adjust the risk and return characteristics of the Fund's
overall strategy in a manner deemed appropriate to the Adviser and consistent
with the Fund's objective and policies. Because combined positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.

The Fund's use of these transactions is a highly specialized activity, which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase the Fund's return. While the Fund's use of these
instruments may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Adviser applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, such strategies may lower the Fund's return. Certain
strategies limit the Fund's opportunity to realize gains as well as its exposure
to losses. The Fund could experience losses if the prices of its options and
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market. In
addition, the Fund will incur costs, including commissions and premiums, in
connection with these transactions and these transactions could significantly
increase the Fund's turnover rate.

-7-

The Fund may purchase and sell put and call options on securities, indices of
securities and futures contracts, or purchase and sell futures contracts for the
purposes described herein.

In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of Commodity Futures Trading Commission ('CFTC')
rules, the Portfolio will enter into transactions in futures contracts or
options on futures contracts only if (1) such transactions constitute bona fide
hedging transactions as defined under CFTC rules, or (2) no more than 5% of the
Portfolio's net assets are committed as initial margin or premiums to positions
that do not constitute bona fide hedging transactions.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund obtains
the right (but not the obligation) to sell the instrument underlying the option
at a fixed strike price. In return for this right, the Fund pays the current
market price for the option (known as the option premium). Options have various
types of underlying instruments, including specific securities, indices of
securities, indices of securities prices and futures contracts. The Fund may
terminate its position in a put option it has purchased by allowing it to expire
or by exercising the option. The Fund may also close out a put option position
by entering into an offsetting transaction, if a liquid market exists. If the
option is allowed to expire, the Fund will lose the entire premium it paid. If
the Fund exercises a put option on a security, it will sell the instrument
underlying the option at the strike price. If the Fund exercises an option on an
index, settlement is in cash and does not involve the actual sale of securities.
American style options may be exercised on any day up to their expiration date.
European style options may be exercised only on their expiration date.

SELLING (WRITING) PUT AND CALL OPTIONS. When the Fund writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Fund assumes the obligation to pay the
strike price for the instrument underlying the option if the other party to the
option chooses to exercise it. The Fund may seek to terminate its position in a
put option it writes before exercise by purchasing an offsetting option in the
market at its current price. If the market is not liquid for a put option the
Fund has written, however, the Fund must continue to be prepared to pay the
strike price while the option is outstanding, regardless of price changes, and
must continue to post margin as discussed below.

Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decrease. At the
same time, because a call writer must be prepared to deliver the underlying
instrument

-8-

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.

OPTIONS ON INDICES. The Fund is permitted to enter into options transactions and
may purchase and sell put and call options on any securities index based on
securities in which the Fund may invest. Options on securities indices are
similar to options on securities, except that the exercise of securities index
options is settled by cash payment and does not involve the actual purchase or
sale of securities. In addition, these options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. The Fund, in purchasing or selling
index options, is subject to the risk that the value of its portfolio securities
may not change as much as an index because the Fund's investments generally will
not match the composition of an index.

For a number of reasons, a liquid market may not exist and thus the Fund may not
be able to close out an option position that it has previously entered into.
When the Fund purchases an OTC option, it will be relying on its counterparty to
perform its obligations, and the Fund may incur additional losses if the
counterparty is unable to perform.

FUTURES CONTRACTS

When the Fund purchases a futures contract, it agrees to purchase a specified
quantity of an underlying instrument at a specified future date and price or to
make or receive a cash payment based on the value of a securities index. When
the Fund sells a futures contract, it agrees to sell a specified quantity of the
underlying instrument at a specified future date and price or to receive or make
a cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Fund enters into the
contract. Futures can be held until their delivery dates or the positions can be
(and normally are) closed out before then. There is no assurance, however, that
a liquid market will exist when a Fund wishes to close out a particular
position.

When the Fund purchases or sells a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Fund's exposure to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument directly, as
discussed above. When the Fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to the value
of the underlying instrument. Selling futures contracts on securities similar to
those held by the Fund, therefore, will tend to offset both positive and
negative market price changes, much as if the underlying instrument had been
sold. Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that these standardized instruments will not
exactly match the Fund's current or anticipated investments. The Fund may invest
in futures contracts and options thereon based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments. The Portfolio
may also enter into transactions in futures contracts and options for
non-hedging purposes, as discussed above.

The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Fund buys or sells a futures contract it will be
required to deposit 'initial margin' with the Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
('FCM'). Initial margin deposits are typically equal to a small percentage of
the contract's value. If the value of either party's position declines, that
party will be required to make additional 'variation margin' payments equal to
the change in value on a daily basis. The party that has a gain may be entitled
to receive all or a portion of this amount. The Fund may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Fund to close out its futures
positions. Until it closes out a futures position, the Fund will be obligated to
continue to pay variation margin. Initial and variation margin payments do not
constitute purchasing on margin for purposes of the

-9-

Fund's investment restrictions. In the event of the bankruptcy of an FCM that
holds margin on behalf of the Fund, the Fund may be entitled to return of margin
owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Fund.

COVER -- SEGREGATED ACCOUNTS. The Fund will segregate liquid securities in
connection with its use of options and futures contracts to the extent required
by the SEC. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that the segregation of a
large percentage of the Fund's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.

For further information about the Fund's use of futures and options and a more
detailed discussion of associated risks, see 'Investment Objective and Policies'
in the SAI.

INVESTMENT RESTRICTIONS

The Fund's investment objective, together with the investment restrictions
described below and in the SAI, except as noted, are deemed fundamental
policies, i.e., they may be changed only by the 'vote of a majority of the
outstanding voting securities' (as defined in the Investment Company Act of 1940
(the '1940 Act')) of the Fund.

As a diversified investment company, 75% of the Fund's total assets are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
Government securities; and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. See 'Investment Objective and
Policies -- Quality and Diversification Requirements' in the SAI.

The Fund may not: (i) purchase the securities of governmental units located in
any one state, territory or possession of the United States if, as a result,
more than 25% of the Fund's assets would be so invested; (ii) enter into reverse
repurchase agreements or other permitted borrowings that constitute senior
securities under the 1940 Act, exceeding in the aggregate one-third of the value
of the Fund's assets; or (iii) borrow money, except from banks for extraordinary
or emergency purposes, or mortgage, pledge or hypothecate any assets except in
connection with any such borrowings or permitted reverse repurchase agreements
in amounts up to one-third of the value of the Fund's assets at the time of such
borrowing or purchase securities while borrowings and other senior securities
exceed 5% of its total assets. Currently, however, it is expected that the
Adviser will limit aggregate Fund borrowings, including reverse repurchase
agreements, to 10% of the Fund's total assets.

For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see 'Investment
Restrictions' in the SAI.

MANAGEMENT

DIRECTORS. The Board establishes the general policies of the Company, is
responsible for the overall management of the Company and reviews the
performance of the Fund's Adviser, Administrator, Custodian, Distributor,
Shareholder Servicing Agent and other service providers. Additional information
about the Company's Board of Directors and officers appears in the SAI under the
heading 'Directors'. The officers of the Company are also employees of Signature
or its affiliates.

ADVISER. The Fund has retained the services of the Branch as investment adviser.
The Branch, which operates out of offices located at 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.

-10-

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, 1997, the Bank
(including its consolidated subsidiaries) had total assets of $395.1 billion
(unaudited) and equity capital and reserves of $14.4 billion (unaudited).

On December 8, 1997, the Bank and Swiss Bank Corporation ('Swiss Bank')
announced their intention to merge (the 'Merger Transaction') the Bank with
Swiss Bank to form a new company expected to be called UBS. In February, 1998,
the shareholders of UBS and Swiss Bank overwhelmingly approved the proposed
Merger Transaction. The Merger Transaction's completion is still subject to a
number of conditions, including the receipt of regulatory approvals.

The Branch provides investment advice and portfolio management to the Fund.
Subject to the supervision of the Directors, the Branch makes the Fund's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages the Fund's investments and operations. See
'Investment Adviser and Funds Services Agent' in the SAI.

Ronald W. Fleming is primarily responsible for the day-to-day management and
implementation of the Adviser's process for the Fund. Mr. Fleming has been a
Vice President of the Adviser since July 1994 and is responsible for asset
allocation and security selection for other domestic fixed income portfolios,
including several tax exempt portfolios. From 1988 to 1994, Mr. Fleming was a
Senior Portfolio Manager for IBM Credit Corp. and was responsible for managing
$7 billion in domestic and international fixed income products. Mr. Fleming has
previously managed various national and state-specific tax exempt portfolios and
has previously managed the investments of mutual funds. Mr. Fleming holds an
undergraduate degree from Kent State University and has done post graduate work
at the Wharton School of the University of Pennsylvania and has 19 years of
investment experience. The Branch has not previously advised a mutual fund. This
may be viewed as a risk of investing in this Fund.

In addition to the above-listed investment advisory services, the Adviser also
provides the Fund with certain related administrative services. Subject to the
supervision of the Board, the Adviser is responsible for: establishing
performance standards for the Fund's third-party service providers and
overseeing and evaluating the performance of such entities; providing and
presenting quarterly management reports to the Directors; supervising the
preparation of reports for Fund shareholders; establishing voluntary expense
limitations for the Fund and providing any resultant expense reimbursement to
the Fund; and such other related services as the Company may reasonably request.

Under the Investment Advisory Agreement, the Fund pays the Adviser a fee,
calculated daily and payable monthly, at an annual rate of 0.45% of the Fund's
average net assets. The Branch has voluntarily agreed to waive its fees and
reimburse the Fund for any of its expenses to the extent that the Fund's total
operating expenses exceed, on an annual basis, 0.80% of the Fund's average daily
net assets. The Branch may modify or discontinue this expense limitation at any
time in the future with 30 days' notice to the Fund. See 'Expenses'.

INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE BRANCH OR ANY OTHER BANK.

ADMINISTRATOR. The Fund employs Investors Bank as Administrator under an
Administration Agreement (the 'Administration Agreement') to provide certain
administratve services. The services provided by Investors Bank under the
Administration Agreement include certain accounting, clerical and bookkeeping
services, Blue Sky, corporate secretarial services and assistance in the
preparation and filing of tax returns and reports to shareholders and the SEC.
Investors Bank 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.

DISTRIBUTOR. Pursuant to a Distribution Agreement, First Fund Distributors, Inc.
('First Fund' or the 'Distributor') serves as the distributor of the Fund's
shares. First Fund is a broker-dealer registered with

-11-

the SEC and is a member of the National Association of Securities Dealers, Inc.
('NASD'). First Fund is authorized by the NASD to act as a mutual fund
underwriter and distributor. The principal offices of First Fund 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 the Administrator.

SHAREHOLDER SERVICES

The Company 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') 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 the following
services for these investors, among other things: coordinating shareholder
accounts and records, assisting investors seeking to purchase or redeem Fund
shares, providing performance information relating to the Fund, and responding
to shareholder inquiries. The Company has agreed to pay each Eligible
Institution a fee for these services equal, on an annual basis, to 0.25% of the
average daily net assets of the Fund represented by shares of the Fund owned
during the period for which payment is being made by customers of the Eligible
Institution. Under the terms of the shareholder servicing agreements, Eligible
Institutions may delegate one or more of their responsibilities to other
entities at their expense.

EXPENSES

In addition to the fees of the Adviser and Investors Bank, the Fund will be
responsible for other expenses, including brokerage costs and litigation and
extraordinary expenses. The Adviser has voluntarily agreed to limit the total
operating expenses of the Fund, excluding extraordinary expenses, to an annual
rate of 0.80% of the Fund's average daily net assets. The Branch may modify or
discontinue this voluntary expense limitation at any time in the future with 30
days' prior notice to the Fund.

The Fund may allocate brokerage transactions to its affiliates and the Adviser's
affiliates. Brokerage transactions may be allocated to these affiliates only if
the commissions received by such affiliates are fair and reasonable when
compared to the commissions paid to unaffiliated brokers in connection with
comparable transactions. See 'Portfolio Transactions' in the SAI.

PURCHASE OF SHARES

GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Company also reserves the right to determine the purchase
orders that it will accept and it reserves the right to cease offering its
shares at any time. The shares of the Fund may be purchased only in those states
where they may be lawfully sold.

The business days of the Fund are the days the New York Stock Exchange (the
'NYSE') is open for regular trading.

The shares of the Fund are sold on a continuous basis without a sales charge at
the net asset value per share next determined after receipt and acceptance of a
purchase order by the Distributor. The Fund calculates its net asset value at
the close of business. See 'Net Asset Value'. The minimum initial investment in
the Fund is $25,000, except that the minimum initial investment is $10,000 for
shareholders of another series of the Company. The minimum subsequent investment
in the Fund for all investors is $5,000. The minimum initial investment for
employees of the Bank or its affiliates is $5,000. The minimum subsequent
investment is $1,000. These minimum investment requirements may be waived for
certain accounts for the benefit of minors. For purposes of the minimum
investment requirements, the Fund may aggregate investments by related
shareholders. Investors will receive the number of full and fractional
shares of the Fund equal to the dollar amount of their subscription divided

-12-

by the net asset value per share of the Fund as next determined on the day
that the investor's subscription is accepted. See 'Purchase of Shares' in
the SAI.

Purchase orders in proper form received by the Distributor prior to 4:00 p.m.
New York time or the close of regular trading on the NYSE, whichever is earlier,
are effective and executed at the net asset value next determined that day.
Purchase orders received after 4:00 p.m. New York time or the close of the NYSE,
whichever is earlier, will be executed at the net asset value determined on the
next business day. Investors become record shareholders of the Fund on the next
business day ('day two') after they place their subscription order, provided the
Custodian receives payment for the shares on day two. As record shareholders,
investors are entitled to earn dividends.

Fund shares may be purchased in the following methods:

BRANCH CLIENTS: Private Bank Clients of the Branch should request a Branch
representative to assist them in placing a purchase order with the Distributor.

THROUGH THE DISTRIBUTOR: Shareholders who do not currently maintain a private
banking relationship with the Branch may purchase shares of the Fund directly
from the Distributor by wire transfer or mail.

The Transfer Agent will maintain the accounts for all shareholders who purchase
Fund shares directly through the Distributor. For account balance information
and shareholder services, such shareholders should contact the Transfer Agent at
(888) UBS-FUND or in writing at UBS Private Investor Funds, Inc., c/o Investors
Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.

By wire: Purchases may be made by federal funds wire. To place a purchase order
with the Fund, the shareholder must telephone the Transfer Agent at (888)
UBS-FUND for specific instructions.

Subject to the minimum purchase requirements discussed above, shares purchased
by federal funds wire will be effected at the net asset value per share next
determined after acceptance of the order.

A completed account application must promptly follow any wire order for an
initial purchase. No account application is required for subsequent purchases.
Completed account applications should be mailed or sent via facsimile.
Shareholders should contact the Transfer Agent for further instructions
regarding account applications.

By mail: Subject to the minimum purchase requirements discussed above,
shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.

Account applications are not required for subsequent purchases; however, the
shareholder's account number must be clearly marked on the check to ensure
proper credit.

REDEMPTION OF SHARES

GENERAL INFORMATION ON REDEMPTIONS. A shareholder may redeem all or any number
of the shares registered in its name at any time at the net asset value next
determined after a redemption request in proper form is received by the
Distributor. The Fund calculates its net asset value at the close of business.
See 'Net Asset Value'.

A redemption order will be effected provided the Distributor receives such an
order prior to 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier. The redemption of Fund shares is effective and is
executed at the net asset value next determined that day. Redemption orders
received after 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier, will be executed at the net asset value determined
on the next business day. Proceeds of an effective redemption are generally
deposited the next business day in immediately available funds to the
account designated by the redeeming shareholder or mailed to the shareholder's
address of record, in accordance with the shareholder's instructions.

Shareholders will continue to earn dividends through the day of redemption.

-13-

Fund shares may be redeemed in the following methods:

BRANCH CLIENTS: Shareholders who are Private Bank Clients of the Branch should
request a Branch representative to assist them in placing a redemption order.

THROUGH THE DISTRIBUTOR: Shareholders who are not Branch clients may redeem Fund
shares by telephone or mail.

By telephone: Telephone redemptions may be made by calling the Transfer Agent at
(888) UBS-FUND. Redemption orders will be accepted until 4:00 p.m. New York time
or the close of regular trading on the NYSE, whichever is earlier. Telephone
redemption requests are limited to those shareholders who have previously
elected this service. Such shareholders risk possible loss of principal and
income in the event of a telephone redemption not authorized by them. The Fund
and the Transfer Agent will employ reasonable procedures to verify that
telephone redemption instructions are genuine and will require that shareholders
electing such an option provide a form of personal identification. The failure
by the Fund or the Transfer Agent to employ such procedures may cause the Fund
or the Transfer Agent to be liable for any losses incurred by investors due to
telephone redemptions based upon unauthorized or fraudulent instructions. The
telephone redemption option may be modified or discontinued at any time upon 60
days' notice to shareholders.

By mail: Redemption requests may also be mailed to the Transfer Agent,
identifying the Fund, the dollar amount or number of shares to be redeemed and
the shareholder's account number. The request must be signed in exactly the same
manner as the account is registered (e.g., if there is more than one owner of
the shares, all must sign). In all cases, all signatures on a redemption request
must be signature guaranteed by an eligible guarantor institution which includes
a domestic bank, a domestic savings and loan institution, a domestic credit
union, a member bank of the Federal Reserve System or a member firm of a
national securities exchange, pursuant to the Fund's standards and procedures;
if the guarantor institution belongs to one of the Medallion Signature programs,
it must use the specific 'Medallion Guaranteed' stamp (guarantees by notaries
public are not acceptable). Further documentation, such as copies of corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.
The redemption request in proper form should be sent to UBS Private Investor
Funds, Inc., c/o Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston,
MA 02205-1537.

The right of redemption of Fund shares may be suspended or the date of payment
postponed for such periods as the 1940 Act or the Securities and Exchange
Commission (the 'SEC') may permit. See 'Redemption of Shares' in the SAI.

EXCHANGE OF SHARES

-14-

remains an investor, with a value equal to or greater than each such series'
minimum investment amount. See 'Purchase of Shares' in the prospectuses of the
other Company series for the minimum investment amounts for each of those funds.
Shares are exchanged on the basis of relative net asset value per share.
Exchanges are in effect redemptions from one fund and purchases of another
fund and the usual purchase and redemption procedures and requirements are
applicable to exchanges. See 'Purchase of Shares' and 'Redemption of Shares'
in this Prospectus and in the prospectuses of the other Company series. See
also 'Additional Information' below for an explanation of the telephone
exchange policy.

DIVIDENDS AND DISTRIBUTIONS

The Fund will declare daily, and pay monthly, dividends from its net investment
income. The Fund may also declare an additional dividend of net investment
income in a given year to the extent necessary to avoid the imposition of
federal excise taxes on the Fund.

Substantially all of the Fund's net realized capital gains, if any, will be
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Fund. Declared dividends and
distributions are payable on the payment date to shareholders of record on the
record date.

Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional Fund shares unless the shareholder has elected in
writing to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the account designated by the shareholder or sent by check
to the shareholder's address of record, in accordance with the shareholder's
instructions. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.

To the extent that shareholders of the Fund elect to receive their dividends in
cash, rather than electing to reinvest such dividends in additional shares, the
cash used to make these distributions must be provided from the Fund's assets.
The Fund will be required to use its own cash or the proceeds from the sales of
its securities in order to fund such distributions. Moreover, in the case of
zero coupon bonds, the Fund generally will not have received any income from the
issuer of such a security. Consequently, the Fund must rely on other sources
(e.g., proceeds from the sales of assets or other income) to meet such
distribution requirements. To the extent the Fund makes such cash distributions,
the Fund will not be able to invest that cash in income producing securities.
Consequently, the current income of the Fund may ultimately be reduced.

NET ASSET VALUE

The Fund's net asset value per share equals the value of the Fund's total assets
less the amount of its liabilities, divided by the number of its outstanding
shares, rounded to the nearest cent. Expenses, including the fees payable to the
Fund's service providers, are accrued daily. Securities for which market
quotations are readily available are valued at market value. All other
securities will be valued at 'fair value'. See 'Net Asset Value' in the SAI for
information on the valuation of the Fund's portfolio securities.

The Fund computes its net asset value once daily at the close of business on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the following holidays: New Year's Day, Dr. Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. On days when U.S. trading markets close
early in observance of these holidays, the Fund expects to close for purchases
and redemptions at the same time.

ORGANIZATION

-15-

The UBS Bond Fund Series; The UBS High Yield Bond Fund Series; The UBS Tax
Exempt Bond Fund Series; The UBS Institutional International Equity Fund
Series; The UBS International Equity Fund Series; The UBS Large Cap Growth
Series; The UBS Small Cap Fund Series; The UBS Value Equity Fund Series;
and The UBS Real Estate Fund Series. Each outstanding share of the Company
will have a pro rata interest in the assets of its series, but it will have
no interest in the assets of any other Company series. Only shares of The
UBS Tax Exempt Bond Fund Series are offered through this Prospectus.

Shareholder inquiries by clients of the Branch should be directed to the Branch,
while other shareholders should address their inquiries to the Transfer Agent.

Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable when issued by the Company. The Company does not intend to
hold meetings of shareholders annually. The Board may call meetings of
shareholders for action by shareholder vote as may be required by the 1940 Act
or the Company's Articles of Incorporation. For further organizational
information, including certain shareholder rights, see 'Organization' in the
SAI.

TAXES

The Fund intends to invest at least 80% of its net assets in 'tax exempt
securities'. Municipal obligations that are tax preference items for purposes of
the alternative minimum tax will not be considered 'tax exempt securities' for
this purpose.

The Company intends that the Fund will annually qualify and elect to be treated
as a separate regulated investment company (a 'RIC') under Subchapter M of the
Code. As a RIC the Fund will not be subject to federal income taxes if at least
90% of its net investment income and net short-term capital gains less any
available capital loss carryforwards are distributed to shareholders within
allowable time limits. In addition, the Fund intends to qualify to pay
exempt-interest dividends to its shareholders by ensuring that, at the close of
each quarter of each of its taxable years, at least 50% of the value of its
total assets will consist of tax exempt securities. An exempt-interest dividend
is that part of a distribution made by the Fund that consists of interest
received by the Fund on tax exempt securities less any expenses allocable to
such interest, provided that the 50% test described above is met. Shareholders
will not incur any federal income tax liability on the amount of exempt-interest
dividends received by them from the Fund. In view of the investment policy of
the Fund, it is expected that a substantial portion of its dividends will be
exempt-interest dividends, although the Fund may from time to time realize and
distribute ordinary income and net capital gains.

Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to Fund shareholders as long-term capital gains regardless of
how long a shareholder has held shares in the Fund and regardless of whether
received in the form of cash or reinvested in additional shares. Distributions
of taxable income and realized net short-term capital gains in excess of net
long-term capital losses, if any, are taxable as ordinary income to Fund
shareholders, whether such distributions are received in the form of cash or
reinvested in additional shares. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders after the end of the
taxable year for the Fund. Distributions to corporate shareholders of the Fund
will not qualify for the dividends-received deduction because the income of the
Fund will not consist of dividends paid by United States corporations.

Interest on indebtedness incurred or continued to purchase or carry shares of
the Fund will not be deductible for Federal income tax purposes to the extent
that the Fund's distributions are exempt from Federal income tax.

Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in the Fund
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the
shareholder with respect to such shares. Moreover, any loss realized by a
shareholder upon the sale of shares of the Fund held for six months or less will
be disallowed to the extent of any exempt-interest dividends received by the
shareholder with respect to such shares.

In addition, no loss will be allowed on the sale or other disposition of shares
of the Fund if, within a period beginning 30 days before the date of such sale
or disposition and ending 30 days after such date,

-16-

the holder acquires (such as through dividend reinvestment) securities that
are substantially identical to the shares of the Fund.

This discussion of tax consequences is based on U.S. federal tax laws in effect
on the date of this Prospectus. These laws and regulations are subject to change
by legislative or administrative action, possibly with retroactive effect.
Shareholders are urged to consult their tax advisors concerning the effect of
Federal taxes on their individual circumstances and with respect to the
applicability of state and local taxes. See 'Taxes' in the SAI. In particular,
shareholders should be aware that interest on certain tax exempt municipal
obligations issued after August 7, 1986 is a preference item for purposes of the
alternative minimum tax applicable to individuals and corporations. In addition,
the Treasury has been granted authority under the Code to issue regulations that
would require the portion of an exempt-interest dividend of a regulated
investment company that is allocable to these obligations to be treated as a
preference item for purposes of the alternative minimum tax. Furthermore,
additional or special tax provisions may apply to corporations, financial
institutions and property and casualty insurance companies, and they should
consult their tax advisors before purchasing shares of the Fund.

If a correct and certified taxpayer identification number is not on file, the
Fund is required to withhold 31% of taxable distributions to non-corporate
shareholders. Shareholders should be aware that, under applicable regulations,
the Fund may be fined up to $50 annually for each account for which a certified
taxpayer identification number is not provided. In the event that such a fine is
imposed with respect to any uncertified account in any year, a corresponding
charge may be made against that account.

ADDITIONAL INFORMATION

The Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders will also be sent confirmations of each purchase and
redemption and monthly statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.

All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Company, the Branch, the Transfer Agent or the Distributor may subject the
investor to risk of loss if such instruction is subsequently found not to be
genuine. The Company and its service providers will employ reasonable
procedures, including requiring investors to give a form of personal
identification and tape recording of telephonic instructions, to confirm that
telephonic instructions by investors are genuine; if it does not, it or the
service provider may be liable for any losses due to unauthorized or fraudulent
instructions.

The Fund may advertise 'yield' and 'tax equivalent yield'. Yield refers to the
net income generated by an investment in the Fund over a stated 30-day period.
This income is then annualized -- i.e., the amount of income generated by the
investment during the 30-day period is assumed to be generated each 30-day
period for 12 periods and is shown as a percentage of the investment. The income
earned on the investment is also assumed to be reinvested at the end of the
sixth 30-day period. The tax equivalent yield is calculated similarly to the
yield for the Fund, except that the yield is increased using a stated
income tax rate to demonstrate the taxable yield necessary to produce an
after-tax yield equivalent to that of the Fund's.

The Fund may also advertise 'total return'. The total return shows what an
investment in the Fund would have earned over a specified period of time (one,
five or ten years or since commencement of operations, if less) assuming that
all Fund distributions and dividends were reinvested on the

-17-

reinvestment dates and less all recurring fees during the period and assuming
the redemption of such investment at the end of each period.

These methods of calculating yield, tax equivalent yield and total return are
required by SEC regulations. Yield, tax equivalent yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. All performance figures are based on historical
earnings and are not intended to indicate future performance. Performance
information may be obtained by clients of the Branch by calling the Branch,
while other shareholders may address their inquiries to the Transfer Agent.

-18-

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Investors for Whom the Fund is Designed.......................................................... 2
Investment Objective and Policies................................................................ 3
Additional Investment Information and Risk Factors............................................... 5
Options.......................................................................................... 8
Futures Contracts................................................................................ 9
Investment Restrictions.......................................................................... 10
Management....................................................................................... 10
Shareholder Services............................................................................. 12
Expenses......................................................................................... 12
Purchase of Shares............................................................................... 12
Redemption of Shares............................................................................. 13
Exchange of Shares............................................................................... 14
Dividends and Distributions...................................................................... 15
Net Asset Value.................................................................................. 15
Organization..................................................................................... 15
Taxes............................................................................................ 16
Additional Information........................................................................... 17
</TABLE>

- --------------------------------------------------------------------------------

INVESTMENT ADVISER Union Bank of Switzerland,
New York Branch
1345 Avenue of the Americas
New York, NY 10105

DISTRIBUTOR First Fund Distributors, Inc.
4455 E. Camelback Road
Phoenix, Arizona 85018

ADMINISTRATOR AND CUSTODIAN Investors Bank & Trust Company
AND TRANSFER AGENT 200 Clarendon Street
Boston, Massachusetts 02116

</TABLE>

- --------------------------------------------------------------------------------

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.

[LOGO]

<PAGE>

<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION

DATED MAY 1, 1998

UBS BOND FUND
UBS VALUE EQUITY FUND
UBS INTERNATIONAL EQUITY FUND
UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND
UBS SMALL CAP FUND
UBS LARGE CAP GROWTH FUND
UBS HIGH YIELD BOND FUND
UBS REAL ESTATE FUND

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUSES DATED MAY 1, 1998, FOR UBS BOND FUND, UBS
VALUE EQUITY FUND, UBS INTERNATIONAL EQUITY FUND, UBS INSTITUTIONAL
INTERNATIONAL EQUITY FUND, UBS SMALL CAP FUND, UBS LARGE CAP GROWTH FUND, UBS
HIGH YIELD BOND FUND AND UBS REAL ESTATE 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
------

<S> <C>
GENERAL............................................................................................ SAI-1
INVESTMENT OBJECTIVES AND POLICIES................................................................. SAI-1
INVESTMENT RESTRICTIONS............................................................................ SAI-11
DIRECTORS AND TRUSTEES............................................................................. SAI-14
INVESTMENT ADVISER AND FUNDS SERVICES AGENT........................................................ SAI-17
ADMINISTRATORS..................................................................................... SAI-20
DISTRIBUTOR........................................................................................ SAI-21
CUSTODIAN.......................................................................................... SAI-21
SHAREHOLDER SERVICES............................................................................... SAI-21
INDEPENDENT ACCOUNTANTS............................................................................ SAI-22
EXPENSES........................................................................................... SAI-22
PURCHASE OF SHARES................................................................................. SAI-23
REDEMPTION OF SHARES............................................................................... SAI-23
EXCHANGE OF SHARES................................................................................. SAI-24
DIVIDENDS AND DISTRIBUTIONS........................................................................ SAI-24
NET ASSET VALUE.................................................................................... SAI-24
PERFORMANCE DATA................................................................................... SAI-25
PORTFOLIO TRANSACTIONS............................................................................. SAI-26
ORGANIZATION....................................................................................... SAI-27
TAXES.............................................................................................. SAI-28
ADDITIONAL INFORMATION............................................................................. SAI-30
FINANCIAL STATEMENTS............................................................................... SAI-30
</TABLE>

ii
<PAGE>
<PAGE>
GENERAL

UBS Private Investor Funds, Inc. (the 'Company') is an open-end management
investment company organized as a series fund. The Company is currently
authorized to issue shares in nine series, eight of which are described in this
Statement of Additional Information ('SAI'). These eight series (each a 'Fund'
and collectively, the 'Funds') consist of: UBS Bond Fund, UBS International
Equity Fund, UBS Institutional International Equity Fund, UBS Value Equity Fund,
UBS Small Cap Fund, UBS Large Cap Growth Fund, UBS High Yield Bond Fund and UBS
Real Estate 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 seven Portfolios: UBS Bond Portfolio; UBS
Value Equity Portfolio; UBS International Equity Portfolio; UBS Small Cap
Portfolio; UBS Large Cap Growth Portfolio; UBS High Yield Bond Portfolio and UBS
Real Estate Portfolio. UBS Bond Fund invests in UBS Bond Portfolio; UBS Value
Equity Fund invests in UBS Value Equity Portfolio; UBS International Equity Fund
and UBS Institutional International Equity Fund invest in UBS International
Equity Portfolio. UBS Small Cap Fund invests in UBS Small Cap Portfolio; UBS
Large Cap Growth Fund invests in UBS Large Cap Growth Portfolio; UBS High Yield
Bond Fund invests in UBS High Yield Bond Portfolio and UBS Real Estate Fund
invests in UBS Real Estate 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 HIGH YIELD BOND FUND (the 'High Yield Bond Fund') is designed for
investors seeking higher current income from a portfolio of higher-yielding,
lower-rated debt securities issued by domestic and foreign companies than
generally available from a portfolio of higher-rated obligations in exchange for
assuming additional risk of capital. The High Yield Bond Fund attempts to
achieve its objective by investing all of its investable assets in UBS High
Yield Bond Portfolio (the 'High Yield Bond Portfolio'), a series of the Trust
having the same investment objective as the High Yield Bond Fund. The High Yield
Bond Portfolio will also seek capital appreciation when consistent with high
current income by investing in securities benefiting from declines in long-term
interest rates or improvements in credit quality.

SAI-1
<PAGE>
<PAGE>
UBS VALUE EQUITY FUND (the 'Value 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 Value Equity Fund attempts to achieve its
investment objective by investing all of its investable assets in UBS Value
Equity Portfolio (the 'Value Equity Portfolio'), a series of the Trust having
the same investment objective as the Value Equity Fund.

Under normal circumstances, at least 80% of the Value 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 Value Equity Portfolio's primary investments are the common
stocks of established, high-quality U.S. corporations.

UBS INTERNATIONAL EQUITY FUND (the 'International Equity Fund') is designed
for investors who want to participate in the risks and returns associated with
investing in equity securities issued by foreign corporations but who may not be
prepared to meet the minimum investment requirements established by the UBS
Institutional International Equity Fund. The International Equity Fund attempts
to achieve its investment objective by investing all of its investable assets in
the UBS International Equity Portfolio (the 'International Equity Portfolio'), a
series of the Trust having the same investment objective as the International
Equity Fund.

The International Equity Portfolio seeks to achieve its investment
objective by investing primarily in the equity securities of foreign
corporations, consisting of common stocks and other securities with equity
characteristics such as preferred stocks, warrants, rights and convertible
securities. Under normal circumstances, the International Equity Portfolio
expects to invest at least 65% of its total assets in such securities. It does
not intend to invest in U.S. securities (other than short-term instruments),
except temporarily, when extraordinary circumstances prevailing at the same time
in a significant number of developed foreign countries render investments in
such countries inadvisable.

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 of its investable assets in the International Equity Portfolio, a
series of the Trust having the same investment objective as the Institutional
International Equity Fund.

UBS SMALL CAP FUND (the 'Small Cap Fund') is designed for investors seeking
long-term capital appreciation from a portfolio of common stocks and other
equity securities of small capital growth companies believed to offer investors
above average potential for capital appreciation. 'Small capital' companies are
companies that have stock market capitalizations at the time of initial purchase
within the market capitalization range of those stocks on the Russell 2000
Index. 'Growth' companies are generally rapidly growing companies and may
include companies still in the development stage or older companies that appear
to be entering a new stage of growth owing to factors such as management changes
or new technology, products or markets. It may also include providers of
products or services with a high unit volume growth rate. The Small Cap Fund
attempts to achieve its objective by investing all of its investable assets in
UBS Small Cap Portfolio (the 'Small Cap Portfolio'), a series of the Trust
having the same investment objective as the Small Cap Fund.

UBS LARGE CAP GROWTH FUND (the 'Large Cap Growth Fund') is designed for
investors seeking long-term capital appreciation from a portfolio of common
stocks and other equity securities of large capital growth companies. 'Large
capital' companies are companies whose stock market capitalizations at

SAI-2
<PAGE>
<PAGE>
the time of initial purchase are within the market capitalization range of those
stocks on the Standard & Poor's 500 Index. 'Growth' companies generally include
companies with the potential for above-average earnings and cash flow growth or
meaningful increases in underlying asset values over time. The Large Cap Growth
Fund attempts to achieve its objective by investing all of its investable assets
in UBS Large Cap Growth Portfolio (the 'Large Cap Growth Portfolio'), a series
of the Trust having the same investment objective as the Large Cap Growth Fund.

UBS REAL ESTATE FUND (the 'Real Estate Fund') is designed for investors
seeking total return, consisting of long-term capital appreciation and current
income from a portfolio of equity securities of domestic and foreign real estate
companies. Because of the risks associated with common stock investments, the
Real Estate Fund is intended to be a long-term investment vehicle and is not
intended to provide investors with a means for speculating on short-term market
movements. The Real Estate Fund seeks to achieve its investment objective by
investing all of its investable assets in UBS Real Estate Portfolio (the 'Real
Estate Portfolio'), a series of the Trust having the same investment objective
as the Real Estate Fund.

MONEY MARKET INSTRUMENTS

As discussed in the Prospectuses, 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, the Small Cap Fund, the Large Cap Growth Fund,
the High Yield Bond Fund and the Real Estate Fund), or any of its affiliated
persons, is the ultimate obligor or accepting bank. Each Fund may also invest in
obligations of international banking institutions designated or supported by
national governments to promote economic reconstruction, development or trade
between nations (e.g., the European Investment Bank, the Inter-American
Development Bank or the World Bank).

SAI-3
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COMMERCIAL PAPER. Each Fund may invest in commercial paper, including
Master Demand obligations. Master Demand obligations are obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. Master Demand obligations are governed by
agreements between the issuer and Union Bank of Switzerland (the 'Bank'), New
York Branch (the 'Branch' or the 'Adviser'), and in the case of the
International Equity Funds, UBS International Investment London Limited ('UBSII'
or the 'Sub-Adviser'), and in the case of the Small Cap Fund, the Large Cap
Growth Fund, High Yield Bond Fund and the Real Estate Fund, UBS Asset Management
(New York), Inc., ('UBSAM' 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 Portfolios'
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 a Portfolio may be
delayed or limited.

CORPORATE BONDS AND OTHER DEBT SECURITIES

Each Portfolio, with the exception of the Bond Portfolio and the High Yield
Bond Portfolio, may invest in other debt securities with remaining effective
maturities of less than thirteen months, including

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* Unless otherwise noted, references to the Adviser in the context of the
International Equity Portfolio, Small Cap Portfolio, Large Cap Growth Portfolio,
High Yield Bond Portfolio and the Real Estate Portfolio refer to the Adviser
and/or the Sub-Advisers, as appropriate.

SAI-4
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<PAGE>
without limitation corporate and foreign bonds, asset-backed securities and
other obligations described in the Prospectus or this SAI.

As discussed in the relevant Prospectus, the Bond Portfolio and the High
Yield Bond Portfolio may invest in bonds and other debt securities of domestic
and foreign issuers to the extent consistent with their investment objectives
and policies. A description of these investments appears in the Prospectus and
below. See 'Quality and Diversification Requirements.' For information on
short-term investments in these securities, see 'Money Market Instruments.'

ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by or payable from, a
stream of payments generated by particular assets such as mortgages, motor
vehicles or credit card receivables. Payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit issued by a financial institution unaffiliated with the entities issuing
the securities. The asset-backed securities in which a Portfolio may invest are
subject to the Portfolio's overall credit requirements. However, asset-backed
securities, in general, are subject to certain risks. These risks include the
prepayment of the debtor's obligation and the creditor's limited interests in
applicable collateral. For example, credit card debt receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on credit card debt thereby reducing the balance
due. Additionally, if the letter of credit is exhausted, 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.

EQUITY INVESTMENTS

As discussed in the Prospectuses, the Value Equity, International Equity,
Small Cap, Large Cap Growth and Real Estate 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.

REAL ESTATE INVESTMENT TRUSTS ('REITS'). The Real Estate Portfolio's
investment in REITs presents certain further risks that are unique and in
addition to the risks associated with investing in the real estate industry.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent on management skills, are not diversified
and are subject to the risks of financing projects. REITs whose underlying
assets include long-term health care properties, such as nursing, retirement and
assisted living facilities may be impacted by federal regulations concerning the
health care industry.

SAI-5
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REITs (especially mortgage REITs) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest
fluctuations than would investments in fixed rate obligations.

REITs may have limited financial resources, may trade less frequently and
in a limited volume, and may be subject to more abrupt or erratic price
movements than other securities.

FOREIGN INVESTMENTS

The International Equity Portfolio makes substantial investments in
companies based in foreign countries. The Bond, High Yield Bond and Real Estate
Portfolios may also invest in certain foreign securities. Neither the Bond
Portfolio nor the High Yield Bond Portfolio expect to invest more than 25% of
their total assets, at the time of purchase, in securities of foreign issuers.
The Real Estate Portfolio may invest up to 20% of its assets in foreign
securities. 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, GDRs 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, European, in
the case of EDRs, or domestic and European in the case of GDRs, securities
markets.

Because investments in foreign securities may involve foreign currencies,
the value of the International Equity, Bond, High Yield Bond and Real Estate
Portfolios' assets as measured in U.S. dollars may be affected, favorably or
unfavorably, by changes in currency rates and in exchange control regulations,
including currency blockage. The Bond, High Yield Bond, International Equity and
Real Estate 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 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).

SAI-6
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INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by each Portfolio 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 Portfolio's total assets will be invested in
the securities of any one investment company, (ii) not more than 10% of the
value of the Portfolio'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 Portfolio. Each
Portfolio, however, 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 Portfolios' Custodian a separate account with a portfolio
of securities in an amount at least equal to its obligations under its reverse
repurchase agreements.

MORTGAGE DOLLAR ROLL TRANSACTIONS. The Bond Portfolio may engage in
mortgage dollar roll transactions with respect to mortgage securities issued by
the Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. In a mortgage dollar
roll transaction, the Portfolio sells a mortgage backed security and
simultaneously agrees to repurchase a similar security on a specified future
date at an agreed upon price. During the roll period, the Portfolio will not be
entitled to receive any interest or principal paid on the securities sold. The
Portfolio is compensated for the lost interest on the securities sold by the
difference between the sales price and the lower price for the future repurchase
as well as by the interest earned on the reinvestment of the sales proceeds. The
Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in an
amount sufficient to pay for the future repurchase are segregated with its
Custodian. Mortgage dollar roll transactions are considered reverse repurchase
agreements for purposes of the Portfolio's investment restrictions.

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.

SAI-7
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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 (except the Real Estate 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. 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.'

The Real Estate Portfolio is classified as a 'non-diversified' investment
company under the 1940 Act, which means that the Portfolio is not limited by the
above-mentioned requirements. However, the Portfolio intends to annually qualify
and elect to be treated as a regulated investment company ('RIC') for purposes
of the Internal Revenue Code of 1986, as amended (the 'Code'). In order to
qualify as a RIC, the Portfolio will have to meet certain requirements,
including asset diversification requirements. Under these asset diversification
requirements, the Portfolio will limit its investments so that, at the close of
each quarter of the taxable year: (i) not more than 25% of the Portfolio's total
assets (at market value) will be invested in the securities of a single issuer,
and (ii) with respect to 50% of its total assets (at market value), not more
than 5% of its total assets (at market value) will be invested in the securities
of a single issuer, and (iii) the Portfolio will not own more than 10% of the
outstanding voting securities of any single issuer. The Portfolio's investments
in securities issued by the U.S. Government, its agencies and instrumentalities
are not subject to these limitations.

BOND PORTFOLIO. The Bond Portfolio invests principally in a diversified
portfolio of 'high grade' and 'investment grade' securities. Investment grade
debt is rated, on the date of investment, within the four highest ratings of
Moody's Investors Service, Inc. ('Moody's'), currently Aaa, Aa, A and Baa, or of
Standard & Poor's Ratings Group ('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.

HIGH YIELD BOND PORTFOLIO. The High Yield Bond Portfolio invests primarily
in lower-rated securities, commonly known as 'junk bonds.' Lower rated
securities include securities rated lower than Baa by Moody's or BBB or lower by
Standard & Poor's. Securities rated lower than Baa or BBB are considered to be
of poor standing and predominantly speculative. The High Yield Bond Portfolio
may

SAI-8
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<PAGE>

invest up to 10% of its assets in securities rated below Caa by Moody's or CCC
by Standard & Poor's (including securities in the lowest rating category of
either rating agency) or if unrated, determined by the Adviser to be of
comparable quality. The market values of these securities tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher-quality securities.

VALUE EQUITY, INTERNATIONAL EQUITY, SMALL CAP, LARGE CAP GROWTH AND REAL
ESTATE PORTFOLIOS. The Value Equity, International Equity, Small Cap, Large Cap
Growth and Real Estate 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 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

SAI-9
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<PAGE>
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 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

SAI-10
<PAGE>
<PAGE>
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 Directors 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 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

SAI-11
<PAGE>
<PAGE>
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 (50% for the Real Estate Portfolio);

4. (Except for the Real Estate Portfolio) 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 Value Equity
Portfolio, the International Equity Portfolio, the Small Cap Portfolio nor
the Large Cap Growth Portfolio may purchase or sell real estate mortgage
loans. The Bond Portfolio, High Yield Bond Portfolio and the Real Estate
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, the Value Equity Portfolio, the Small Cap
Portfolio, the Large Cap Growth Portfolio and the Real Estate 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;

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;

SAI-12
<PAGE>
<PAGE>
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 Funds have 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 (except the
Real Estate 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. (except for the Small Cap Fund, Large Cap Growth Fund, High Yield Bond
Fund and Real Estate Fund) 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 organization and the Fund's Board of Directors has determined that
the commercial paper is of equivalent quality and is liquid;

10. (except for the Small Cap Fund, Large Cap Growth Fund, High Yield Bond
Fund and Real Estate Fund) invest in securities issued by an issuer any
of whose officers, directors, trustees or security holders is an officer
or Director of the Fund, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer for the Fund one or
more of such persons own beneficially more than 1/2 of 1% of the shares
or securities, or both, all taken at market value, of such issuer, and
such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or
both, all taken at market value;

SAI-13
<PAGE>
<PAGE>
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 (except for the Small Cap Fund,
Large Cap Growth Fund, High Yield Bond Fund and Real Estate Fund) 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. (except for the Small Cap Fund, Large Cap Growth Fund, High Yield Bond
Fund and Real Estate Fund) 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 December 31, 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-14
<PAGE>
<PAGE>

<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: 49 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: 71 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: 51
Nicholas G. Chunias Treasurer Director, Mutual Fund Administration -- Reporting and
200 Clarendon Street and Chief Compliance, Investors Bank & Trust Company, (1996- Present);
Boston, Massachusetts 02116 Financial Director, Fund Accounting, Investors Bank & Trust Company,
Age: 33 Officer (1993-1996); Account Supervisor, Coopers & Lybrand, LLP,
(1992-1993).
Susan C. Mosher Secretary Director, Mutual Fund Administration -- Legal
200 Clarendon Street Administration, Investors Bank & Trust Company,
Boston, Massachusetts 02116 (1995-Present); Associate Counsel, 440 Financial Group of
Age: 43 Worcester, Inc., (1993-1995); Associate and Partner,
Gallagher, Callahan & Gartrell, P.A., (1986-1992).
</TABLE>

- ------------------------------------
* 'Interested Person' within the meaning of the 1940 Act.

SAI-15
<PAGE>
<PAGE>
COMPENSATION TABLE*

<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM COMPANY AND
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX**
NAME OF PERSON, POSITION FROM COMPANY FUND EXPENSES UPON RETIREMENT PAID TO DIRECTORS
- ---------------------------------- ------------ ------------------- --------------- ------------------

<S> <C> <C> <C> <C>
Dr. Lochmeier 0 0 0 0
Chairman of the Board
Mr. Spicer $ 11,250 0 0 $ 23,250
Director
Mr. Lawson-Johnston $ 11,250 0 0 $ 23,250
Director
</TABLE>

- ------------------------------------
*The noted amounts are for the fiscal year ended December 31, 1997. 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 April 10, 1998, the following owned of record or, to the knowledge of
management, beneficially owned more than 5% of the outstanding shares of:

UBS Value Equity Fund -- C.E. Exley, Jr. and S.Y. Exley Tr., u/a/d
8/2/93 C.E. Exley, Jr. Trust, 2350 Kettering Tower, Dayton, OH 45423
(8.21%); Union Bank of Switzerland, NY Branch, 1345 Avenue of the Americas,
New York, NY 10105 (6.21%).

UBS Bond Fund -- Union Bank of Switzerland, NY Branch, 1345 Avenue of
the Americas, New York, NY 10105 (11.70%); Union Bank of Switzerland, NY
Branch, 1345 Avenue of the Americas, New York, NY 10105 (10.87%); Howard
Darby & Levin Profit Sharing Plan, 1330 Avenue of the Americas, New York,
NY 10019 (9.60%); Union Bank of Switzerland, NY Branch, 1345 Avenue of the
Americas, New York, NY 10105 (7.64%).

UBS High Yield Bond Fund -- Union Bank of Switzerland, NY Branch, 1345
Avenue of the Americas, New York, NY 10105 (15.44%); Union Bank of
Switzerland, NY Branch, 1345 Avenue of the Americas, New York, NY 10105
(15.44%); Union Bank of Switzerland, NY Branch, 1345 Avenue of the
Americas, New York, NY 10105 (10.30%); Union Bank of Switzerland, NY
Branch, 1345 Avenue of the Americas, New York, NY 10105 (7.84%); Union Bank
of Switzerland, NY Branch, 1345 Avenue of the Americas, New York, NY 10105
(7.72%).

UBS Small Cap Fund -- Union Bank of Switzerland, NY Branch, 1345
Avenue of the Americas, New York, NY 10105 (12.54%); Union Bank of
Switzerland, NY Branch, 1345 Avenue of the Americas, New York, NY 10105
(10.23%); Howard Darby & Levin Profit Sharing Plan, 1330 Avenue of the
Americas, New York, NY 10019 (6.55%).

UBS Large Cap Growth Fund -- Union Bank of Switzerland, NY Branch,
1345 Avenue of the Americas, New York, NY 10105 (15.55%); Howard Darby &
Levin Profit Sharing Plan, 1330 Avenue of the Americas, New York, NY 10019
(12.54%); Union Bank of Switzerland, NY Branch, 1345 Avenue of the
Americas, New York, NY 10105 (8.22%); Union Bank of Switzerland, NY Branch,
1345 Avenue of the Americas, New York, NY 10105 (7.10%); Union Bank of
Switzerland, NY Branch, 1345 Avenue of the Americas, New York, NY 10105
(5.95%).

UBS Institutional International Equity Fund -- Archstone Foundation,
401 E. Ocean Blvd., Ste. 1000, Long Beach, CA 90802 (100.00%).

The UBS Real Estate Fund had not commenced operations as of April 10,
1998.

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.

SAI-16
<PAGE>
<PAGE>
INVESTMENT ADVISER AND FUNDS SERVICES AGENT

Pursuant to Investment Advisory Agreements between the Trust and the
Branch, the Branch serves as the Portfolios' investment adviser. Pursuant to a
Sub-Advisory Agreement between the Branch and UBSII, UBSII serves as the
sub-adviser to the International Equity Portfolio. Pursuant to Sub-Advisory
Agreements between the Branch and UBSAM, UBSAM serves as the sub-adviser to the
Small Cap, Large Cap Growth, High Yield Bond and Real Estate Portfolios. 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. UBSAM is a wholly-owned subsidiary of UBS Inc., whose parent
is the Bank. (The Adviser and the Sub-Adviser are collectively referred to as
the 'Advisers'.) Subject to the supervision of the Trustees, the Adviser (UBSII
in the case of the International Equity Portfolio and UBSAM in the case of the
Small Cap Portfolio, Large Cap Growth Portfolio, High Yield Bond Portfolio and
Real Estate Portfolio), makes the Portfolios' day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages each
Portfolio's investments and provides certain administrative services.

The investment advisory services provided by the Advisers to the Portfolios
are not exclusive under the terms of the advisory agreements. The Advisers are
free to and do render similar investment advisory services to others. The
Advisers serve as investment advisers to personal investors and act as
fiduciaries for trusts, estates and employee benefit plans. Certain of the
assets of trusts and estates under management are invested in common trust funds
for which the Advisers serve as trustees. The accounts managed or advised by the
Advisers have varying investment objectives and the Advisers invest assets of
such accounts in investments substantially similar to, or the same as, those
which are expected to constitute the principal investments of the Portfolios.
Such accounts are supervised by officers and employees of the Advisers (or their
affiliates) who may also be acting in similar capacities for the Portfolios. See
'Portfolio Transactions.'

The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York, 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 and UBSAM) 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 since 1946. At December 31, 1997, the Bank (including its consolidated
subsidiaries) had total assets of $395.1 billion and shareholders' equity of
$14.4 billion.

On December 8, 1997, the Bank and Swiss Bank Corporation ('Swiss Bank')
announced their intention to merge (the 'Merger Transaction') the Bank with
Swiss Bank to form a new company expected to be called United Bank of
Switzerland. In February, 1998, the shareholders of UBS and Swiss Bank
overwhelmingly approved the proposed Merger Transaction. The Merger
Transaction's completion is still subject to a number of conditions, including
the receipt of regulatory approvals.

BOND AND HIGH YIELD BOND FUNDS. 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.

VALUE 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.

SAI-17
<PAGE>
<PAGE>
SMALL CAP AND LARGE CAP GROWTH FUNDS. The Sub-Adviser's portfolio managers
have extensive experience in managing equity portfolios. Based on the investment
objective of the Fund, the Sub-Adviser analyzes equity securities of either
small capitalization growth companies or large capitalization growth companies
in order to identify above average growth opportunities for each respective
Fund. These opportunities may be characterized by the combination of security
valuations (e.g. price relative to earnings and/or cash flow) and above average
earnings growth expectations.

INTERNATIONAL EQUITY AND INSTITUTIONAL 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.

REAL ESTATE FUND. The Sub-Adviser's portfolio manager has extensive
experience in analyzing and evaluating real estate companies and managing real
estate portfolios. Based on the investment objectives of the Fund, the
Sub-Adviser analyzes publicly-traded companies whose business is focused on the
development, ownership, management, and/or financing of real estate. Both REITs
as well as C-corporations are included in this group.

The Sub-Advisers are registered investment advisers 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 fiscal year ended December 31, 1997, the advisory fees
for the Bond, Value Equity and International Equity Portfolios amounted to
$272,781, $246,135 and $428,213, respectively, of which $151,544, $160,330 and
$176,323, respectively, were waived as described in the next paragraph. For the
period December 22, 1997 to December 31, 1997, the advisory fees for the Small
Cap and High Yield Bond Portfolios amounted to $4,233 and $1,611, respectively,
all of which were waived. For the period December 29, 1997 to December 31, 1997,
the advisory fee for the Large Cap Growth Portfolio amounted to $923, all of
which was waived. The Real Estate Portfolio had not commenced operations as of
December 31, 1997.

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, High Yield Bond Fund, Value Equity Fund, Institutional International
Equity Fund, International Equity Fund, Small Cap Fund, Large Cap Growth Fund
and Real Estate Fund exceed, on an annual basis, 0.80%, 0.90%, 1.00%, 0.95%,
1.40%, 1.20%, 1.00% and 1.20%, 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 fiscal year ended December 31, 1997, UBS reimbursed the Bond Fund, Value
Equity Fund and International Equity Fund for expenses totaling $122,317,
$102,221 and $137,212, respectively. For the period April 14, 1997 (commencement
of operations) to December 31, 1997, UBS reimbursed the Institutional
International Equity Fund for expenses totaling $62,791. For the period
September 30, 1997 (commencement of operations) to December 31, 1997, UBS
reimbursed the Small Cap Fund and the High Yield Bond Fund for expenses totaling
$57,213 and $54,646, respectively. For the period October 14, 1997,
(commencement of operations) to December 31, 1997, UBS reimbursed the Large Cap
Growth Fund for expenses totaling $45,138. The Real Estate Fund had not
commenced operations as of December 31, 1997.

Pursuant to the Sub-Advisory Agreements, the Sub-Advisers, under the
supervision of the Trustees and the Adviser, make the day-to-day investment
decisions for the International Equity, Small Cap, Large Cap Growth, High Yield
Bond and Real Estate Portfolios. Under the Sub-Advisory Agreement, the Adviser
has agreed to pay UBSII 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 UBSII. For the fiscal year ended December 31,
1997, the Adviser paid $251,890 to UBSII on behalf of the International Equity
Portfolio.

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Under the Sub-Advisory Agreements with UBSAM, the Adviser has agreed to pay
UBSAM a fee, calculated daily and payable monthly equal, on an annual basis, to
the following percentages of each Portfolio's respective average net assets:

<TABLE>
<S> <C>
UBS High Yield Bond Portfolio........................................ 0.25% of the first $25 million
0.20% of the next $25 million
0.15% over $50 million

UBS Small Cap Portfolio.............................................. 0.40% of the first $25 million
0.325% of the next $25 million
0.25% over $50 million

UBS Large Cap Growth Portfolio....................................... 0.30% of the first $25 million
0.25% of the next $25 million
0.20% over $50 million

UBS Real Estate Portfolio............................................ 0.40% of the first $25 million
0.325% of the next $25 million
0.25% over $50 million
</TABLE>

The Adviser is solely responsible for paying this fee to UBSAM. For the
period December 22, 1997 to December 31, 1997, the Adviser paid $535 and $1,250
to UBSAM on behalf of the High Yield Bond and Small Cap Portfolios,
respectively. For the period December 29, 1997 to December 31, 1997, the Adviser
paid $100 to UBSAM on behalf of the Large Cap Growth Portfolio. The Real Estate
Portfolio had not commenced operations as of December 31, 1997.

The Investment Advisory and Sub-Advisory Agreements for the Bond, Value
Equity and International Equity Portfolios will each continue in effect until
April 1998. The Investment Advisory and Sub-Advisory Agreements for the Small
Cap, Large Cap Growth and High Yield Bond Portfolios will each continue in
effect until September 1999, and the Investment Advisory and Sub-Advisory
Agreement for the Real Estate Portfolio will each continue in effect until
February 2000. Thereafter the agreements will be subject to annual approval by
the Trustees or the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of each Portfolio, provided that in either case the
continuance also is approved by a majority of the Trustees who are not
interested persons (as defined in the 1940 Act) of the Trust by vote cast in
person at a meeting called for the purpose of voting on such approval. The
Investment Advisory and Sub-Advisory Agreements will terminate automatically if
assigned and are terminable at any time without penalty by a vote of a majority
of the Trustees or by a vote of the holders of a majority (as defined in the
1940 Act) of the Portfolio's outstanding shares on 60 days' written notice to
the Adviser or Sub-Adviser as applicable. Whenever a Fund, as a shareholder of a
Portfolio, is required by the 1940 Act to vote its Portfolio interest, the
Company will hold a meeting of that Fund's shareholders and will vote its
Portfolio interests proportionately as instructed by that Fund's shareholders.
See 'Organization'. Each Investment Advisory 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-Advisers) 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.

SAI-19
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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-Advisers 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. Commencing on March 13, 1997, the Trust and the Company
employed IBT Trust & Custodial Services (Ireland) Limited ('IBT Ireland'), a
subsidiary of Investors Bank & Trust Company ('Investors Bank') and Investors
Bank, respectively, as Administrators under Administration Agreements (the
'Administration Agreements') to provide certain administrative services. The
services provided by IBT Ireland and Investors Bank under the Administration
Agreements include certain accounting, clerical and bookkeeping services, Blue
Sky (for the Funds only), corporate secretarial services and assistance in the
preparation and filing of tax returns and reports to shareholders and the SEC.
Investors Bank 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 pays Investors Bank 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. Investors Bank 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, each 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. Investors
Bank's principal offices are located at 200 Clarendon Street, Boston,
Massachusetts 02116.

During the period March 13, 1997 through December 31, 1997, the Bond, Value
Equity and International Equity Portfolios paid IBT Ireland administrative fees
of $34,846, $24,786 and $29,948, respectively, while the Bond, Value Equity and
International Equity Funds paid Investors Bank administrative fees of $4,946,
$11,634 and $14,128, respectively. During the period April 14, 1997
(commencement of operations) through December 31, 1997, the Institutional
International Equity Fund paid Investors Bank administrative fees of $6,541.
During the period September 30, 1997 (commencement of operations) through
December 31, 1997, the Small Cap and High Yield Bond Portfolios paid IBT Ireland
administrative fees of $3,362 and $1,870, respectively, while the Small Cap and
High Yield Bond Funds paid Investors Bank administrative fees of $1,580 and
$1,185, respectively. During the period October 14, 1997 (commencement of
operations) through December 31, 1997, the Large Cap Growth Portfolio paid IBT
Ireland an administrative fee of $2,096, while the Large Cap Growth Fund paid
Investors Bank an administrative fee of $450. The Real Estate Portfolio and Fund
had not commenced operations as of December 31, 1997.

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. ('Signature Grand Cayman') served as
Administrators to the Company and the Trust, respectively.

SAI-20
<PAGE>
<PAGE>

During the period April 2, 1996 (commencement of operations) through December
31, 1996, the Bond, Value Equity and International Equity Portfolios paid
Signature Grand Cayman administrative fees of $14,594, $7,036 and $11,712,
respectively, while the Bond, Value Equity and International Equity Funds paid
Signature administrative fees of $1,526, $2,593 and $4,131, respectively. During
the period January 1, 1997 to March 13, 1997, the Bond, Value Equity and
International Equity Portfolios paid Signature Grand Cayman administrative fees
of $4,801, $2,471, and $3,376, respectively, while the Bond, Value Equity and
International Equity Funds paid Signature administrative fees of $837, $897, and
$2,071, respectively. The Small Cap Portfolio and Fund, Large Cap Growth
Portfolio and Fund, High Yield Bond Portfolio and Fund and the Real Estate
Portfolio and Fund had not commenced operations as of March 13, 1997.

The Administration Agreements may be renewed or amended by the Directors or
Trustees, as applicable, without a shareholder vote. The Administration
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 Administration 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 Investors
Bank.

CUSTODIAN

Investors Bank (the 'Custodian'), whose principal offices are located at
200 Clarendon Street, Boston, Massachusetts 02116, serves as the custodian,
transfer and dividend disbursing agent for the Funds and the Portfolios.
Pursuant to 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 200
Clarendon Street, Boston, Massachusetts 02116. 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') 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

SAI-21
<PAGE>
<PAGE>

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, Value Equity Fund and International
Equity Fund amounted to $7,632, $12,965 and $20,658, respectively, all of which
were waived. For the fiscal year ended December 31, 1997, the shareholder
service fee for the Bond Fund, Value Equity Fund and International Equity Fund
amounted to $23,536, $49,844 and $66,267, respectively, all of which were
waived. For the period September 30, 1997 (commencement of operations) through
December 31, 1997, the shareholder service fee for the Small Cap Fund and the
High Yield Bond Fund amounted to $6,078 and $4,558, respectively, all of which
were waived. For the period October 14, 1997 (commencement of operations)
through December 31, 1997, the shareholder service fee for the Large Cap Growth
Fund amounted to $1,730, all of which was waived. The Real Estate Fund had not
commenced operations as of December 31, 1997.

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 and UBSAM under the
Sub-Advisory Agreements, may raise issues under these laws. However, the Branch,
UBSII and UBSAM 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, UBSII or UBSAM 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, UBSII and UBSAM.

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. 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

SAI-22
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<PAGE>
the affected Fund. For additional information regarding waivers or expense
subsidies, see 'Management' in the Prospectuses.

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 requirement for certain retirement plans such as Individual
Retirement Accounts ('IRAs'), Self-Employed Retirement Plans ('SERPs'), 401(k)
Plans and other tax-deferred plans is $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 its 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.

SAI-23
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<PAGE>
EXCHANGE OF SHARES

An investor may exchange Fund shares for shares of any other series of the
Company as described under 'Exchange of Shares' in the Prospectuses. Investors
considering an exchange of Fund shares for shares of another Company series
should read the prospectus of the series into which the transfer is being made
prior to such exchange (see 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. 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
(usually 4:00 p.m. EST, unless trading on the NYSE is suspended at an earlier
time) 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, Dr.
Martin Luther King, Jr. 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 and High Yield Bond Portfolios, 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 Portfolios 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 Value Equity, Small Cap, Large Cap Growth, International
Equity and Real Estate 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-

SAI-24
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<PAGE>
counter market. The value of each security for which readily available market
quotations exist is based on a decision as to the broadest and most
representative market for such security. For purposes of calculating net asset
value per share, all assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars at the prevailing market rates
available at the time of valuation.

Options on stock indices traded on national securities exchanges are valued
at the close of options trading on such exchanges, which is currently 4:10 p.m.,
New York time. Stock index futures and related options traded on commodities
exchanges are valued at their last sales price as of the close of such
commodities exchanges, which is currently 4:15 p.m., New York time. Securities
or other assets for which market quotations are not readily available are valued
at fair value in accordance with procedures established by and under the general
supervision of the Trustees. Such procedures include the use of independent
pricing services, indications as to values from dealers and general market
conditions. Short-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 Prospectuses.

YIELD QUOTATIONS. As required by regulations of the SEC, the annualized
yield for the Bond Fund and the High Yield Bond Fund is computed by dividing the
Funds' 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 Prospectuses.

TOTAL RETURN QUOTATIONS. As required by SEC regulations, the average annual
total return of the Bond, High Yield Bond, Value Equity, Small Cap, Large Cap
Growth, International Equity, Institutional International Equity and Real Estate
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

SAI-25
<PAGE>
<PAGE>
addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in a Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.

Comparative performance information may be used from time to time in
advertising the Funds' shares, including data from Morgan Stanley Indices,
Merrill Lynch Indices, 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 and High Yield Bond Portfolios will be
undertaken principally to accomplish their objectives in relation to expected
movements in the general level of interest rates. The Bond and High Yield Bond
Portfolios may engage in short-term trading consistent with their objectives.

In connection with portfolio transactions for the Bond and High Yield Bond
Portfolios, 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. For the fiscal year ended
December 31, 1997, the portfolio turnover rate for the Bond Portfolio was 129%.
For the period September 30, 1997 (commencement of operations) through December
31, 1997, the portfolio turnover rate for the High Yield Bond Portfolio was 80%.

In connection with portfolio transactions for the Value Equity, Small Cap,
Large Cap Growth, International Equity and Real Estate 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 Real Estate Portfolio is
expected to be under 100%. For the fiscal year ended December 31, 1997, the
portfolio turnover rate for the Value Equity and International Equity Portfolios
was 47% and 26%, respectively. For the period September 30, 1997 (commencement
of operations) through December 31, 1997, the portfolio turnover rate for the
Small Cap Portfolio was 3%. For the period October 14, 1997 (commencement of
operations) through December 31, 1997, the portfolio turnover rate for the Large
Cap Growth Portfolio was 6%. The Real Estate Portfolio had not commenced
operations as of December 31, 1997.

In selecting a broker, the Adviser or Sub-Advisers, as applicable, consider
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-Advisers decide 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

SAI-26
<PAGE>
<PAGE>

brokers are used for the benefit of all the Adviser's clients and not solely or
necessarily for the benefit of the Portfolios. The Advisers believe that the
value of research services received is not determinable and does not
significantly increase expenses. The Portfolios do not reduce their fee to the
Adviser by any amount that might be attributable to the value of such services.
For the fiscal year ended December 31, 1997, the Trust paid brokerage
commissions on behalf of the Value Equity and International Equity Portfolios in
the amount of $58,581 and $129,250, respectively. For the period September 30,
1997 (commencement of operations) through December 31, 1997, the Trust paid
brokerage commissions on behalf of the Small Cap Portfolio in the amount of
$30,680. For the period October 14, 1997 (commencement of operations) through
December 31, 1997, the Trust paid brokerage commissions on behalf of the Large
Cap Growth Portfolio in the amount of $18,270. The Real Estate Portfolio had not
commenced operations as of December 31, 1997.

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-Advisers, 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-Advisers 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 nine
series: The UBS Bond Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS
Value Equity Fund Series; The UBS Institutional International Equity Fund
Series; The UBS International Equity Fund Series; The UBS High Yield Bond Fund
Series;

SAI-27
<PAGE>
<PAGE>
The UBS Small Cap Fund Series; The UBS Large Cap Growth Fund Series and The UBS
Real Estate 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
nine current series. Under Maryland law, the Board has the authority to increase
the number of shares of stock that the Company has the authority to issue. Each
share has one vote (and fractional shares have a corresponding fractional vote)
with respect to matters upon which shareholder vote is required; stockholders
have no cumulative voting rights with respect to their shares. Shares of all
series vote together as a single class except that if the matter being voted
upon affects only a particular series then it will be voted on only by that
series. If a matter affects a particular series differently from other series,
that series will vote separately on such matter. Each share is entitled to
participate equally in dividends and distributions declared by the Directors
with respect to the relevant series, and in the net distributable assets of such
series on liquidation.

Under Maryland law, the Company is not required to hold an annual meeting
of stockholders unless required to do so under the 1940 Act. It is the Company's
policy not to hold an annual meeting of stockholders unless so required. All
shares of the Company (regardless of series) have noncumulative voting rights
for the election of Directors. Under Maryland law, the Company's Directors may
be removed by vote of stockholders. The Board currently consists of three
directors.

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, seven
series have been authorized. Each series (i.e., a Portfolio) of the Trust
corresponds to a Fund of the Company, with the exception that the International
Equity Portfolio corresponds to the International Equity Fund and the
Institutional International Equity Fund.

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 intends to annually qualify and elect to be treated 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; and (b) 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.

SAI-28
<PAGE>
<PAGE>
Gains or losses on sales of securities by a Portfolio will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, a Portfolio
acquires a put or writes a call thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by a
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by a Portfolio pursuant to the exercise
of a put option written by it, the Portfolio will subtract the premium received
from its cost basis in the securities purchased.

Under the Code, gains or losses attributable to disposition of foreign
currency or to foreign currency contracts, or to fluctuations in exchange rates
between the time a Portfolio accrues income or receivables or expenses or other
liabilities denominated in a foreign currency and the time a Portfolio actually
collects such income or pays such liabilities, are treated as ordinary income or
ordinary loss. Similarly, gains or losses on the disposition of debt securities
held by a Portfolio, if any, denominated in foreign currency, to the extent
attributable to fluctuations in exchange rates between the acquisition and
disposition dates are also treated as ordinary income or loss.

Forward currency contracts, options and futures contracts entered into by a
Portfolio may create 'straddles' for U.S. federal income tax purposes and this
may affect the character and timing of gains or losses realized by a Portfolio
on forward currency contracts, options and futures contracts or on the
underlying securities.

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 Prospectuses. 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

SAI-29
<PAGE>
<PAGE>
any, to be treated as paid by the shareholders. If the Portfolio makes the
election, each shareholder of the International Equity Fund will be required to
include in his or her income their proportionate share of the amount of foreign
income taxes paid by the Portfolio and will be entitled to claim either a credit
(subject to the limitations discussed below), or, if he or she itemizes
deductions, a deduction for his or her share of the foreign income taxes in
computing federal income tax liability. (No deduction will be permitted in
computing an individual's alternative minimum tax liability.) A shareholder who
is a nonresident alien individual or a foreign corporation may be subject to
U.S. withholding tax on the income resulting from the election described in this
paragraph, but may not be able to claim a credit or deduction against such U.S.
tax for the foreign taxes treated as having been paid by such shareholder. A
tax-exempt shareholder will not ordinarily benefit from this election.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to the limitation that the credit may not exceed
the shareholder's U.S. tax (determined without regard to the availability of the
credit) attributable to his or her total foreign source taxable income. For this
purpose, the portion of dividends and distributions paid by the International
Equity 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, 1997 has been filed
with the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder and is included herein. The Real Estate Fund had not commenced
operations as of December 31, 1997. Consequently, financial statements for the
Real Estate Fund are not included in the Annual Report.

SAI-30
<PAGE>
<PAGE>
UBS Bond Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS Bond
Portfolio, at value............................................................... $13,471,492
Receivable from funds services agent................................................ 10,256
Receivable from sale of capital stock............................................... 5,008
Deferred organization expenses and other assets..................................... 89,144
-----------
Total Assets.............................................................. 13,575,900
-----------

LIABILITIES:
Administrative services fees payable................................................ 1,413
Dividends payable................................................................... 264
Other accrued expenses.............................................................. 27,861
-----------
Total Liabilities......................................................... 29,538
-----------

NET ASSETS.......................................................................... $13,546,362
-----------
-----------

SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)................. 133,467
-----------
-----------

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $101.50
-----------
-----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................................... $ 133
Additional paid-in capital.......................................................... 13,441,982
Net unrealized appreciation of investments.......................................... 109,471
Accumulated undistributed net investment income..................................... 15,416
Accumulated net realized loss on securities and foreign currency transactions....... (20,640)
-----------
Net Assets................................................................ $13,546,362
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-31
<PAGE>
<PAGE>
UBS Bond Fund
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Investment Income and Expenses allocated from UBS Investor Portfolios
Trust -- UBS Bond Portfolio
Interest............................................................ $584,252
Dividends........................................................... 12,171
--------
Investment income.............................................. 596,423
Total expenses...................................................... $ 68,883
Less: Fee waiver.................................................... (23,467)
--------
Net expenses........................................................ 45,416
--------
Net Investment Income from UBS Investor Portfolios Trust -- UBS Bond
Portfolio.............................................................. 551,007

EXPENSES:
Shareholder service fees................................................. 23,536
Administrative services fees............................................. 5,783
Reports to shareholders expense.......................................... 23,614
Registration fees........................................................ 21,494
Amortization of organization expenses.................................... 21,330
Legal fees............................................................... 16,968
Transfer agent fees...................................................... 10,487
Audit fees............................................................... 9,741
Fund accounting fees..................................................... 7,744
Directors' fees.......................................................... 5,357
Miscellaneous expenses................................................... 6,170
--------
Total expenses................................................. 152,224
Less: Fee waiver and expense reimbursements.................... (122,317)
--------
Net expenses................................................... 29,907
--------
Net investment income.................................................... 521,100
--------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS INVESTOR
PORTFOLIOS TRUST -- UBS BOND PORTFOLIO
Net realized loss on securities transactions............................. (18,474)
Net realized gain on foreign currency transactions....................... 14,698
Net change in unrealized appreciation of investments..................... 96,595
Net change in unrealized appreciation of foreign currency contracts and
translations........................................................... 12,255
--------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS Bond Portfolio................................. 105,074
--------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $626,174
--------
--------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-32
<PAGE>
<PAGE>
UBS Bond Fund
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...................................................... $ 521,100 $ 171,160
Net realized (loss) gain on securities and foreign currency transaction.... (3,776) 3,907
Net change in unrealized appreciation of investments, foreign currency
contracts and foreign currency translations.............................. 108,850 621
----------------- -----------------
Net increase in net assets resulting from operations....................... 626,174 175,688
----------------- -----------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................................... (521,100) (170,408)
Net realized gains......................................................... (11,079) (1,273)
----------------- -----------------
Total dividends and distributions to shareholders.......................... (532,179) (171,681)
----------------- -----------------

TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares........................................... 10,921,938 10,846,978
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions.............................................. 509,400 127,366
Cost of shares redeemed.................................................... (5,479,261) (3,503,061)
----------------- -----------------
Net increase in net assets from transactions in shares of common stock..... 5,952,077 7,471,283
----------------- -----------------

NET INCREASE IN NET ASSETS................................................. 6,046,072 7,475,290

NET ASSETS:
Beginning of period........................................................ 7,500,290 25,000
----------------- -----------------
End of period (including undistributed net investment income of $15,416 and
net investment loss of $4,086, respectively)............................. $13,546,362 $ 7,500,290
----------------- -----------------
----------------- -----------------
</TABLE>

- ------------------------

* Commencement of operations.

See notes to financial statements.
SAI-33
<PAGE>
<PAGE>
UBS Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------

<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....................................... $100.13 $100.00
----------------- -----------------
Income from investment operations:
Net investment income................................................. 5.71 4.12
Net realized and unrealized gain on investments....................... 1.30 0.14
----------------- -----------------
Total income from investment operations............................... 7.01 4.26
----------------- -----------------

Less dividends and distributions to shareholders:
Dividends from net investment income.................................. (5.53) (4.11)
Distributions from net realized gains................................. (0.11) (0.02)
----------------- -----------------
Total dividends and distributions..................................... (5.64) (4.13)
----------------- -----------------

Net asset value, end of period............................................. $101.50 $100.13
----------------- -----------------
----------------- -----------------
Total return............................................................... 7.22% 4.36%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).............................. $13,546 $ 7,500
Ratio of expenses to average net assets(2)............................ 0.80% 0.80%(3)
Ratio of net investment income to average net assets(2)............... 5.52% 5.61%(3)
</TABLE>

- ------------------------
* Commencement of operations.
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios 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 1.54% and 3.33% (annualized) for the
respective periods.
(3) Annualized.

See notes to financial statements.
SAI-34
<PAGE>
<PAGE>
UBS Bond Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

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 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 International Equity 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 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. At December 31,
1997, certain shares of the Fund were held by UBS or its affiliates on behalf of
its clients. Three shareholders, individually owning greater than 10% of the
shares of the Fund, collectively held 35.4% at December 31, 1997.

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
(18.0% at December 31, 1997). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements.

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. At December 31, 1997, the Fund had a capital loss carryforward of
$20,238 which will expire in 2005. 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

SAI-35
<PAGE>
<PAGE>
UBS Bond Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
tax-basis treatment; temporary differences do not require reclassification. For
the year ended December 31, 1997, the Fund increased accumulated undistributed
net investment income by $19,502, decreased accumulated net realized loss on
securities and foreign currency by $14,463 and decreased paid-in-capital by
$5,039. 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 $107,000 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 $5,783.

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 period ended December 31, 1997,
the shareholder service fee amounted to $23,536, 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, to an annual rate of 0.80% of the Fund's
average daily net assets. For the year ended December 31, 1997, UBS reimbursed
the Fund for expenses totaling $98,781 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-36
<PAGE>
<PAGE>
UBS Bond Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

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................................. 108,662 108,567
Shares issued to shareholders in reinvestment of
dividends and distributions..................... 5,076 1,278
Shares redeemed................................... (55,177) (35,189)
----------------- ----------
Net increase in shares outstanding................ 58,561 74,656
----------------- ----------
----------------- ----------
</TABLE>

SAI-37
<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 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

SAI-38
<PAGE>
<PAGE>
UBS Bond Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FACE COUPON MATURITY
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------------------------------------------ ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. TREASURY & U.S. GOVERNMENT AGENCY OBLIGATIONS -- 52.3%
U.S. TREASURY OBLIGATIONS -- 49.2%
$7,550,000 U.S. Treasury Bond................................................ 5.88% 11/15/99 $ 7,577,096
1,203,000 U.S. Treasury Bond................................................ 7.75% 1/31/00 1,251,120
1,375,000 U.S. Treasury Bond................................................ 6.25% 4/30/01 1,396,478
400,000 U.S. Treasury Bond................................................ 6.75% 8/15/26 440,376
500,000 U.S. Treasury Bond................................................ 6.63% 2/15/27 542,810
1,100,000 U.S. Treasury Note................................................ 5.00% 1/31/99 1,092,784
1,100,000 U.S. Treasury Note................................................ 6.50% 4/30/99 1,111,858
1,255,000 U.S. Treasury Note................................................ 6.38% 4/30/99 1,266,370
1,700,000 U.S. Treasury Note................................................ 6.38% 7/15/99 1,717,799
1,500,000 U.S. Treasury Note................................................ 5.88% 8/31/99 1,504,680
375,000 U.S. Treasury Note................................................ 5.88% 2/15/00 376,466
755,000 U.S. Treasury Note................................................ 6.75% 4/30/00 772,222
3,500,000 U.S. Treasury Note................................................ 6.25% 5/31/00 3,543,750
800,000 U.S. Treasury Note................................................ 5.50% 12/31/00 795,496
1,300,000 U.S. Treasury Note................................................ 6.50% 8/31/01 1,332,292
400,000 U.S. Treasury Note................................................ 6.63% 3/31/02 412,936
2,020,000 U.S. Treasury Note................................................ 6.38% 8/15/02 2,072,076
2,690,000 U.S. Treasury Note................................................ 6.25% 2/15/03 2,750,955
1,419,000 U.S. Treasury Note................................................ 7.25% 5/15/04 1,531,413
100,000 U.S. Treasury Note................................................ 7.25% 8/15/04 108,078
2,000,000 U.S. Treasury Note................................................ 5.88% 11/15/05 2,010,620
1,850,000 U.S. Treasury Note................................................ 5.63% 2/15/06 1,829,765
1,000,000 U.S. Treasury Note................................................ 6.88% 5/15/06 1,070,000
250,000 U.S. Treasury Note................................................ 6.63% 5/15/07 264,610
-----------
36,772,050
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.1%
1,400,000 Federal Home Loan Mortgage Corp. ................................. 5.96% 10/20/00 1,404,816
937,818 Federal National Mortgage Assc., Pool #250576..................... 7.00% 6/01/26 946,812
-----------
2,351,628
-----------
TOTAL U.S. TREASURY & U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $38,599,244).................................. 39,123,678
-----------
CORPORATE OBLIGATIONS -- 32.8%
CORPORATE OBLIGATIONS -- DOMESTIC -- 30.7%
BANKING -- 4.5%
500,000 BanPonce Corp. ................................................... 6.75% 4/26/00 504,905
800,000 Bayerische Landesbank NY.......................................... 6.20% 2/09/06 785,336
600,000 First USA Bank.................................................... 7.00% 8/20/01 614,652
720,000 J.P. Morgan & Co. ................................................ 8.50% 8/15/03 794,081
650,000 J.P. Morgan & Co. ................................................ 6.70% 11/01/07 656,247
-----------
3,355,221
-----------
BROKERAGE -- 4.0%
1,000,000 Goldman Sachs (a)................................................. 7.80% 7/15/02 1,060,000
750,000 Lehman Brothers Inc. ............................................. 6.89% 10/10/00 761,153
200,000 Lehman Brothers Inc. ............................................. 7.25% 4/15/03 205,342
250,000 Paine Webber Group Inc............................................ 7.12% 1/27/04 259,343
650,000 Salomon, Inc. .................................................... 7.50% 2/01/03 679,406
-----------
2,965,244
-----------
BUILDING SUPPLIES -- 0.7%
500,000 Sherwin Williams.................................................. 6.25% 2/01/00 503,398
-----------
CAPITAL EQUIPMENT -- 1.1%
800,000 Case Corp. ....................................................... 7.25% 8/01/05 833,264
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-39
<PAGE>
<PAGE>
UBS Bond Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------------------------------------------ ------ -------- -----------
<C> <S> <C> <C> <C>
FINANCING & LEASING -- 6.4%
$ 950,000 Associates Corp. N.A. ............................................ 8.50% 1/10/00 $ 995,268
500,000 CIBC Capital Funding LP (a)....................................... 6.25% 12/17/02 498,047
500,000 CIT Group Holdings................................................ 6.38% 8/01/02 502,307
750,000 Countrywide Home Loan............................................. 6.84% 10/22/04 766,028
265,000 General Electric Capital Corp. ................................... 6.88% 4/15/00 271,241
1,000,000 General Motors Acceptance Corporation............................. 6.38% 12/01/01 1,005,400
750,000 Heller Financial, Inc. ........................................... 6.44% 10/06/02 745,403
-----------
4,783,694
-----------
FOOD -- 0.3%
200,000 Foodbrands America Inc. .......................................... 10.75% 5/15/06 232,830
-----------
FUNERAL SERVICES -- 0.8%
600,000 Loewen Group International, Inc................................... 7.50% 4/15/01 618,424
-----------
INDUSTRIAL -- CAPTIVE FINANCE -- 0.8%
600,000 Sears Roebuck Acceptance Corp..................................... 5.59% 2/16/01 590,082
-----------
LODGING -- 0.5%
350,000 FelCor Suite Hotels, Inc. (a)..................................... 7.38% 10/01/04 352,982
-----------
MEDIA/CABLE -- 2.5%
660,000 Continental Cablevision, Inc...................................... 11.00% 6/01/07 732,838
600,000 News America Holdings............................................. 7.50% 3/01/00 613,476
500,000 Turner Broadcasting............................................... 7.40% 2/01/04 517,173
-----------
1,863,487
-----------
OFFICE EQUIPMENT AND SUPPLIES -- 2.0%
1,500,000 Xerox Corporation................................................. 6.50% 6/29/00 1,512,765
-----------
REAL ESTATE -- 1.3%
350,000 Chelsea GCA Realty................................................ 7.75% 1/26/01 361,568
500,000 Crescent Real Estate (a).......................................... 7.13% 9/15/07 511,565
125,000 Susa Partnership LP............................................... 7.13% 11/01/03 126,874
-----------
1,000,007
-----------
TELECOMMUNICATIONS -- 1.9%
650,000 GTE South, Inc. .................................................. 7.25% 8/01/02 672,295
700,000 WorldCom, Inc. ................................................... 8.88% 1/15/06 753,144
-----------
1,425,439
-----------
UTILITIES -- 3.9%
300,000 Cleveland Electric Illuminating Company (a)....................... 7.88% 11/01/17 315,944
550,000 Connecticut Light And Power (a)................................... 7.75% 6/01/02 561,336
450,000 Gulf States Utilities............................................. 8.25% 4/01/04 485,928
1,000,000 Nipsco Capital Markets, Inc. ..................................... 7.39% 4/01/04 1,049,470
500,000 Penn Power & Light................................................ 6.55% 3/01/06 503,910
-----------
2,916,588
-----------
TOTAL CORPORATE OBLIGATIONS -- DOMESTIC (COST $22,628,952)........ 22,953,425
-----------
CORPORATE OBLIGATIONS -- FOREIGN -- 1.9%
BANKING -- 1.2%
500,000 Merita Bank (a)................................................... 7.15% 12/29/49 507,910
400,000 Spintab (a)....................................................... 7.50% 8/14/49 422,236
-----------
930,146
-----------
UTILITIES -- 0.7%
550,000 Southern Investments.............................................. 6.80% 12/01/06 555,429
-----------
TOTAL CORPORATE OBLIGATIONS -- FOREIGN (COST $1,452,557).......... 1,485,575
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-40
<PAGE>
<PAGE>
UBS Bond Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------------------------------------------ ------ -------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS -- EURODOLLAR -- 0.2%
ENERGY -- 0.1%
$ 50,000 BP America, Inc. ................................................. 9.75% 3/01/99 $ 52,030
-----------
INDUSTRIAL -- CAPTIVE FINANCE -- 0.1%
80,000 Unilever Capital.................................................. 9.25% 3/29/00 85,205
-----------
TOTAL CORPORATE OBLIGATIONS -- EURODOLLAR (COST $136,560)......... 137,235
-----------
TOTAL CORPORATE OBLIGATIONS (COST $24,218,069).................... 24,576,235
-----------
ASSET BACKED SECURITIES -- 11.4%
AUTO LEASES -- 5.8%
1,000,000 Aesop Funding II LLC, Series 97-1 (a)............................. 6.22% 10/20/01 1,004,450
650,000 Arcadia Automobile Receivables Trust, Series 97-D................. 6.20% 5/15/03 652,438
650,000 General Motors Acceptance Corporation, Series 97-C2............... 6.45% 12/15/04 654,266
650,000 Key Auto Finance Trust, Series 97-2............................... 6.15% 10/15/01 651,703
700,000 MMCA Automobile Trust, Series 97-1................................ 6.08% 5/15/01 701,134
700,000 WFS Financial Owner Trust, Series 97-D............................ 6.25% 3/20/02 700,219
-----------
4,364,210
-----------
CREDIT CARD RECEIVABLES -- 1.1%
350,000 Chemical Master Credit Card Trust 1, Series 96-1.................. 5.55% 9/15/03 346,084
440,000 First Omni Bank Credit Card Trust, Series 96-A.................... 6.65% 9/15/03 447,286
-----------
793,370
-----------
EQUIPMENT LEASES -- 3.0%
1,000,000 Case Equipment Loan Trust, Series 97-B............................ 6.24% 9/15/04 1,004,690
1,240,000 Newcourt Receivables Asset Trust, Series 97-1..................... 6.19% 5/20/05 1,245,619
-----------
2,250,309
-----------
UTILITIES -- 1.5%
750,000 California Infrastructure PG & E, Series 97-1..................... 6.25% 6/25/04 754,102
350,000 California Infrastructure SCE, Series 97-1........................ 6.22% 3/25/04 351,531
-----------
1,105,633
-----------
TOTAL ASSET BACKED SECURITIES (COST $8,477,633)................... 8,513,522
-----------
FOREIGN GOVERNMENT OBLIGATIONS -- 0.7%
CANADA -- 0.1%
50,000 Province Of Ontario............................................... 7.38% 1/27/03 52,558
50,000 Province Of Quebec................................................ 9.13% 8/22/01 54,489
-----------
107,047
-----------
JAPAN -- 0.6%
355,000 Japan Finance Corp. .............................................. 9.13% 10/11/00 381,700
-----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST $480,043).............. 488,747
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 97.2% (COST $71,774,989)..... 72,702,182
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.8%..................... 2,058,836
-----------
NET ASSETS -- 100.0%.............................................. $74,761,018
-----------
-----------
</TABLE>

- ------------------------

(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,
1997, the value of these securities amounted to $5,234,470 or 7.00% of net
assets.

Note: Based upon the cost of investments of $71,744,989 for Federal Income Tax
purposes at December 31, 1997, the aggregate gross unrealized appreciation
and depreciation was $932,919 and $5,726, respectively, resulting in net
unrealized appreciation of $927,193.

See notes to financial statements.
SAI-41
<PAGE>
<PAGE>
UBS Bond Portfolio
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment, at value (cost $71,774,989)............................................. $72,702,182
Cash................................................................................ 2,574,005
Dividends and interest receivable................................................... 1,111,572
Deferred organization expenses and other assets..................................... 16,809
-----------
Total Assets................................................................... 76,404,568
-----------

LIABILITIES:
Investment advisory fees payable.................................................... 12,160
Administrative services fees payable................................................ 12,904
Payable for investment securities purchased......................................... 1,573,410
Other accrued expenses.............................................................. 45,076
-----------
Total Liabilities.............................................................. 1,643,550
-----------

NET ASSETS.......................................................................... $74,761,018
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-42
<PAGE>
<PAGE>
UBS Bond Portfolio
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................... $3,772,752
Dividends.............................................................. 82,826
----------
Total income...................................................... 3,855,578

EXPENSES
Investment advisory fees............................................... $272,781
Administrative services fees........................................... 39,647
Custodian fees and expenses............................................ 46,405
Audit fees............................................................. 36,000
Fund accounting fees................................................... 31,904
Trustees' fees......................................................... 7,000
Amortization of organization expenses.................................. 6,896
Miscellaneous expense.................................................. 5,711
--------
Total expenses.................................................... 446,344
Less: Fee waiver.................................................. (151,544)
--------
Net expenses...................................................... 294,800
----------
Net investment income.................................................. 3,560,778
----------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities transactions........................... (16,439)
Net realized gain on foreign currency transactions..................... 288,511
Net change in unrealized appreciation of investments................... 784,709
Net change in unrealized depreciation of foreign currency contracts and
translations......................................................... (84,921)
----------
Net realized and unrealized gain on investments........................ 971,860
----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $4,532,638
----------
----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-43
<PAGE>
<PAGE>
UBS Bond 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...................................................... $ 3,560,778 $ 1,703,082
Net realized gain on securities and foreign currency transactions.......... 272,072 44,624
Net change in unrealized appreciation of investments, foreign currency
contracts and foreign currency translations.............................. 699,788 227,405
----------------- -----------------
Net increase in net assets resulting from operations....................... 4,532,638 1,975,111
----------------- -----------------

CAPITAL TRANSACTIONS:
Proceeds from contributions................................................ 34,422,392 59,142,218
Value of withdrawals....................................................... (17,194,864) (8,116,477)
----------------- -----------------
Net increase in net assets from capital transactions....................... 17,227,528 51,025,741
----------------- -----------------

NET INCREASE IN NET ASSETS................................................. 21,760,166 53,000,852
NET ASSETS:
Beginning of period........................................................ 53,000,852 --
----------------- -----------------
End of period.............................................................. $74,761,018 $53,000,852
----------------- -----------------
----------------- -----------------
</TABLE>

- ------------------------
* Commencement of operations.

See notes to financial statements.
SAI-44
<PAGE>
<PAGE>
UBS Bond 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).............................. $74,761 $53,001
Ratio of expenses to average net assets(1)............................ 0.49% 0.50%(2)
Ratio of net investment income to average net assets(1)............... 5.88% 5.83%(2)
Portfolio turnover.................................................... 129% 100%
</TABLE>

- ------------------------
* Commencement of operations.
(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 0.25% and 0.45% (annualized) for the
respective periods.
(2) Annualized.

See notes to financial statements.
SAI-45
<PAGE>
<PAGE>
UBS Bond Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

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. At December 31,
1997, all of the beneficial interests in the Portfolio were held by UBS Bond
Fund and UBS Bond Fund, Ltd.

The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'). 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 preparation of its financial statements:

A. INVESTMENT VALUATION -- Debt securities with remaining maturities of more
than 60 days are normally valued by a pricing service approved by the
Portfolio's 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 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
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-46
<PAGE>
<PAGE>
UBS Bond Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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 counterparty's
failure to perform its obligations.

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 $30,000 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 IBT Ireland. 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 year ended December 31, 1997,
the investment advisory fee amounted to $272,781. UBS voluntarily agreed to
waive $151,544 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 $39,647.

4. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 1997, purchases and sales of investment
securities, excluding short-term investments, were as follows:

<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------

<S> <C> <C>
U.S. Government Securities............................................. $48,120,195 $41,466,639
Corporate obligations.................................................. 49,714,078 34,578,344
----------- -----------
Total........................................................ $97,834,273 $76,044,983
----------- -----------
----------- -----------
</TABLE>

SAI-47
<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 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

SAI-48
<PAGE>
<PAGE>
UBS Value Equity Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS Value
Equity Portfolio, at value........................................................ $26,454,709
Receivable from funds services agent................................................ 9,021
Deferred organization expenses and other assets..................................... 91,315
-----------
Total Assets.............................................................. 26,555,045
-----------

LIABILITIES:
Administrative services fees payable................................................ 2,607
Other accrued expenses.............................................................. 28,488
-----------
Total Liabilities......................................................... 31,095
-----------

NET ASSETS.......................................................................... $26,523,950
-----------
-----------

SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)................. 205,343
-----------
-----------

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $ 129.17
-----------
-----------

COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................................... $ 205
Additional paid-in capital.......................................................... 22,506,410
Net unrealized appreciation of investments.......................................... 3,802,538
Accumulated undistributed net investment income..................................... 11,388
Accumulated undistributed net realized gains........................................ 203,409
-----------
Net Assets................................................................ $26,523,950
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-49
<PAGE>
<PAGE>
UBS Value Equity Fund
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Investment Income and Expenses from UBS Investor Portfolios
Trust -- UBS Value Equity Portfolio
Dividends......................................................... $ 584,504
Interest.......................................................... 41,559
----------
Investment income............................................ 626,063
Total expenses.................................................... $ 183,777
Less: Fee waiver.................................................. (75,604)
---------
Net expenses...................................................... 108,173
----------
Net Investment Income from UBS Investor Portfolios Trust -- UBS Value
Equity Portfolio..................................................... 517,890

EXPENSES:
Shareholder service fees............................................... 49,844
Administrative services fees........................................... 12,531
Reports to shareholders expense........................................ 23,601
Registration fees...................................................... 22,739
Amortization of organization expenses.................................. 21,364
Legal fees............................................................. 16,968
Transfer agent fees.................................................... 10,487
Audit fees............................................................. 9,741
Fund accounting fees................................................... 7,744
Directors' fees........................................................ 5,357
Miscellaneous expenses................................................. 7,241
---------
Total expenses.................................................... 187,617
Less: Fee waiver and expense reimbursements....................... (102,221)
---------
Net expenses...................................................... 85,396
----------
Net investment income.................................................. 432,494
----------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS FROM UBS INVESTOR
PORTFOLIOS TRUST -- UBS VALUE EQUITY PORTFOLIO:
Net realized gain on securities transactions........................... 1,477,194
Net change in unrealized appreciation of investments................... 3,117,642
----------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS Value Equity Portfolio....................... 4,594,836
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $5,027,330
----------
----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-50
<PAGE>
<PAGE>
UBS Value Equity Fund
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...................................................... $ 432,494 $ 157,796
Net realized gain on securities transactions............................... 1,477,194 13,685
Net change in unrealized appreciation of investments....................... 3,117,642 684,896
----------------- -----------------
Net increase in net assets resulting from operations....................... 5,027,330 856,377
----------------- -----------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................................... (435,505) (156,639)
Net realized gains......................................................... (1,287,470) --
----------------- -----------------
Total dividends and distributions to shareholders.......................... (1,722,975) (156,639)
----------------- -----------------

TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares........................................... 20,401,903 13,752,890
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions.............................................. 1,713,022 156,639
Cost of shares redeemed.................................................... (8,361,026) (5,168,571)
----------------- -----------------
Net increase in net assets from transactions in shares of common stock..... 13,753,899 8,740,958
----------------- -----------------

NET INCREASE IN NET ASSETS................................................. 17,058,254 9,440,696
NET ASSETS:
Beginning of period........................................................ 9,465,696 25,000
----------------- -----------------
End of period (including undistributed net investment income of $11,388 and
$1,157, respectively).................................................... $26,523,950 $ 9,465,696
----------------- -----------------
----------------- -----------------
</TABLE>

- ------------------------

* Commencement of operations.

See notes to financial statements.
SAI-51
<PAGE>
<PAGE>
UBS Value Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------

<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........................................ $106.70 $100.00
-------- --------
Income from investment operations:
Net investment income.................................................. 2.32 2.05
Net realized and unrealized gain on investments........................ 29.17 6.69
-------- --------
Total income from investment operations................................ 31.49 8.74
-------- --------

Less dividends and distributions to shareholders:
Dividends from net investment income................................... (2.27) (2.04)
Distributions from net realized gains.................................. (6.75) --
-------- --------
Total dividends and distributions...................................... (9.02) (2.04)
-------- --------

Net asset value, end of period.............................................. $129.17 $106.70
-------- --------
-------- --------
Total return................................................................ 29.57% 8.74%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............................... $26,524 $ 9,466
Ratio of expenses to average net assets (2)............................ 0.97% 0.90%(3)
Ratio of net investment income to average net assets (2)............... 2.17% 3.04%(3)
</TABLE>

- ------------------------

* Commencement of operations.
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS Value
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 0.89% and 2.65% (annualized) for
the respective periods.
(3) Annualized.

See notes to financial statements.
SAI-52
<PAGE>
<PAGE>
UBS Value Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL

UBS Value Equity Fund (the 'Fund'), formerly known as the UBS U.S. Equity 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 International 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 Value 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.

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

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
(48.2% at December 31, 1997). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements.

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.

SAI-53
<PAGE>
<PAGE>
UBS Value Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
Fund increased accumulated undistributed net investment income by $13,242 and
decreased paid-in-capital by $13,242. 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).

3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

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 $49,844, all of which was waived.

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 from January 1, 1997
through June 5, 1997, the Fund's total operating expenses were limited to an
annual rate of 0.90% of the Fund's average daily net assets. Effective June 6,
1997, this expense limitation was increased to 1.00% of the Fund's average daily
net assets. For the year ended December 31, 1997, UBS reimbursed the Fund for
expenses totaling $52,377 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-54
<PAGE>
<PAGE>
UBS Value Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERIOD FROM APRIL 2, 1996
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
DECEMBER 31, 1997 THROUGH DECEMBER 31, 1996
----------------- ----------------------------

<S> <C> <C>
Shares subscribed................................. 169,168 137,339
Shares issued to shareholders in reinvestment of
dividends and distribution...................... 13,323 1,465
Shares redeemed................................... (65,860) (50,342)
----------------- ----------
Net increase in shares outstanding................ 116,631 88,462
----------------- ----------
----------------- ----------
</TABLE>

SAI-55
<PAGE>
<PAGE>
UBS Value 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 Value 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

SAI-56
<PAGE>
<PAGE>
UBS Value Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------- ------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK -- 94.5%
BANKING & FINANCIAL INSTITUTIONS -- 17.2%
6,400 BankAmerica Corp........................................................................... $ 467,200
20,500 Corestates Financial Corp.................................................................. 1,641,281
19,000 J.P. Morgan & Co........................................................................... 2,144,625
40,100 Mellon Bank Corp........................................................................... 2,431,063
18,400 U.S. Bancorp............................................................................... 2,059,650
8,300 Wachovia Corp.............................................................................. 673,338
-----------
9,417,157
-----------
CHEMICALS -- 2.8%
10,250 Dow Chemical Company....................................................................... 1,040,375
12,200 Witco Corp................................................................................. 497,913
-----------
1,538,288
-----------
CONSUMER FOODS -- 7.6%
29,300 General Mills, Inc......................................................................... 2,098,613
40,900 H.J. Heinz Co.............................................................................. 2,078,231
-----------
4,176,844
-----------
COSMETICS -- 2.1%
22,600 International Flavors & Fragrances......................................................... 1,163,900
-----------
DIVERSIFIED -- 0.9%
13,700 Fortune Brands Inc......................................................................... 507,756
-----------
DRUGS & PHARMACEUTICALS -- 12.2%
18,200 American Home Products Corp................................................................ 1,392,300
16,900 Baxter International Inc................................................................... 852,394
28,800 Bristol-Myers Squibb Co.................................................................... 2,725,195
46,400 Pharmacia & Upjohn Inc..................................................................... 1,699,400
-----------
6,669,289
-----------
FOOD -- RETAIL -- 2.5%
28,900 Albertson's, Inc........................................................................... 1,369,138
-----------
INSURANCE -- 4.4%
21,100 American General Corp...................................................................... 1,140,719
17,200 Marsh & McLennan Cos., Inc................................................................. 1,282,475
-----------
2,423,194
-----------

LUMBER, PAPER & BUILDING SUPPLIES -- 4.1%
21,400 Union Camp Corp............................................................................ 1,148,913
22,600 Weyerhaeuser Co............................................................................ 1,108,813
-----------
2,257,726

MANUFACTURING -- 5.6%
23,400 Cooper Industries Inc...................................................................... 1,146,600
23,200 Minnesota Mining & Manufacturing........................................................... 1,903,850
-----------
3,050,450
-----------
OFFICE EQUIPMENT AND SUPPLIES -- 3.2%
19,600 Pitney Bowes, Inc.......................................................................... 1,762,775
-----------
PETROLEUM PRODUCTION & SALES -- 8.3%
11,500 Amoco Corp................................................................................. 978,938
17,600 Atlantic Richfield Co...................................................................... 1,410,200
14,400 Chevron Corporation........................................................................ 1,108,800
18,900 Texaco Inc................................................................................. 1,027,688
-----------
4,525,626
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-57
<PAGE>
<PAGE>
UBS Value Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------- ------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 1.5%
13,500 Eastman Kodak Company...................................................................... $ 820,969
-----------
REAL ESTATE -- 2.9%
30,800 Security Capital Industrial Trust REIT(a).................................................. 766,150
25,400 Simon DeBartolo Group, Inc. REIT(a)........................................................ 830,263
-----------
1,596,413
-----------
RETAIL -- 3.7%
14,900 J.C. Penney Company, Inc................................................................... 898,656
10,300 May Department Stores...................................................................... 542,681
13,000 Sears, Roebuck and Co...................................................................... 588,250
-----------
2,029,587
-----------
TELECOMMUNICATIONS -- 11.4%
12,600 Ameritech Corp............................................................................. 1,014,300
22,400 Bell Atlantic Corp......................................................................... 2,038,400
23,800 GTE Corporation............................................................................ 1,243,550
13,500 SBC Communications Inc..................................................................... 988,875
22,100 US West Inc................................................................................ 997,263
-----------
6,282,388
-----------
TOBACCO -- 4.1%
50,000 Philip Morris Companies, Inc............................................................... 2,265,625
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 94.5%
(COST $43,748,965)..................................................................... 51,857,125
OTHER ASSETS IN EXCESS OF LIABILITIES -- 5.5%.............................................. 3,023,320
-----------
NET ASSETS -- 100.0%....................................................................... $54,880,445
-----------
-----------
</TABLE>

- ------------------------

(a) REIT -- Real Estate Investment Trust

Note: Based upon the cost of investments of $43,748,965 for Federal Income Tax
purposes at December 31, 1997, the aggregate gross unrealized appreciation
and depreciation was $8,214,965 and $106,805, respectively, resulting in
net unrealized appreciation of $8,108,160.

See notes to financial statements.
SAI-58
<PAGE>
<PAGE>
UBS Value Equity Portfolio
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment, at value (cost $43,748,965).......................................... $51,857,125
Cash............................................................................. 3,120,961
Dividends and interest receivable................................................ 152,703
Deferred organization expenses and other assets.................................. 17,858
-----------
Total Assets................................................................ 55,148,647
-----------
LIABILITIES:
Investment advisory fees payable................................................. 23,050
Administrative services fees payable............................................. 8,576
Payable for investment securities purchased...................................... 201,097
Other accrued expenses........................................................... 35,479
-----------
Total Liabilities........................................................... 268,202
-----------

NET ASSETS....................................................................... $54,880,445
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-59
<PAGE>
<PAGE>
UBS Value Equity Portfolio
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................................... $1,221,696
Interest........................................................... 85,602
----------
Investment income............................................. $ 1,307,298

EXPENSES
Investment advisory fees........................................... 246,135
Administrative services fees....................................... 27,257
Audit fees......................................................... 36,000
Fund accounting fees............................................... 31,903
Custodian fees and expenses........................................ 22,155
Trustees' fees..................................................... 7,000
Amortization of organization expenses.............................. 6,896
Insurance expense.................................................. 2,602
Miscellaneous expenses............................................. 1,991
----------
Total expenses................................................ 381,939
Less: Fee waiver.............................................. (160,330)
----------
Net expenses.................................................. 221,609
-----------
Net investment income.............................................. 1,085,689
-----------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on securities transactions....................... 3,252,224
Net change in unrealized appreciation of investments............... 6,433,825
-----------
Net realized and unrealized gain on investments.................... 9,686,049
-----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $10,771,738
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-60
<PAGE>
<PAGE>
UBS Value 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...................................................... $ 1,085,689 $ 432,121
Net realized gain on securities transactions............................... 3,252,224 1,679
Net change in unrealized appreciation of investments....................... 6,433,825 1,674,335
----------------- -----------------
Net increase in net assets resulting from operations....................... 10,771,738 2,108,135
----------------- -----------------

CAPITAL TRANSACTIONS:
Proceeds from contributions................................................ 38,796,136 30,786,561
Value of withdrawals....................................................... (20,113,162) (7,468,963)
----------------- -----------------
Net increase in net assets from capital transactions....................... 18,682,974 23,317,598
----------------- -----------------

NET INCREASE IN NET ASSETS................................................. 29,454,712 25,425,733
NET ASSETS:
Beginning of period........................................................ 25,425,733 --
----------------- -----------------
End of period.............................................................. $ 54,880,445 $25,425,733
----------------- -----------------
----------------- -----------------
</TABLE>

- ------------------------

* Commencement of operations.

See notes to financial statements.
SAI-61
<PAGE>
<PAGE>
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)............................... $54,880 $25,426
Average commission rate per share...................................... $ 0.06 $ 0.06
Ratio of expenses to average net assets(1)............................. 0.54% 0.91%(2)
Ratio of net investment income to average net assets(1)................ 2.65% 3.07%(2)
Portfolio turnover..................................................... 47% 19%
</TABLE>

- ------------------------
* Commencement of operations.
(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 0.39% and 0.60% (annualized) for the
respective periods.
(2) Annualized.

See notes to financial statements.
SAI-62
<PAGE>
<PAGE>
UBS Value Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS Value Equity Portfolio (the 'Portfolio'), formerly known as the UBS U.S.
Equity 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 Value Equity Fund and UBS
Value Equity Fund, Ltd.

The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'). Investors Fund Services (Ireland) Limited ('IBT Ireland') acts
as the Portfolio's administrator.

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.

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 approximately $30,000 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 IBT Ireland. 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 0.60% of
the Portfolio's average daily net assets. For the year ended December 31, 1997,
UBS voluntarily agreed to waive a portion of its advisory fee. Such waiver
amounted to $160,330.

SAI-63
<PAGE>
<PAGE>
UBS Value Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

4. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 1997, purchases and sales of investment
securities, excluding short-term investments, aggregated $35,758,058 and
$18,403,738, respectively.

SAI-64
<PAGE>
<PAGE>
UBS Value 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 Value 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 ended
December 31, 1997 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

SAI-65
<PAGE>
<PAGE>
UBS International Equity Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<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
-----------

NET ASSETS.......................................................................... $23,247,388
-----------
-----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)................. 243,761
-----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $95.37
-----------
-----------
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
-----------
Net Assets................................................................ $23,247,388
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-66
<PAGE>
<PAGE>
UBS International Equity Fund
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------

<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
-----------
Investment income........................................... 673,622
Total expenses................................................... $ 346,918
Less: Fee waiver................................................. (92,337)
---------
Net expenses..................................................... 254,581
-----------
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
---------
Total expenses................................................... 217,582
Less: Fee waiver and expense reimbursements...................... (137,212)
---------
Net expenses..................................................... 80,370
-----------
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)
-----------
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>

- ------------------------
See notes to financial statements.
SAI-67
<PAGE>
<PAGE>
UBS International Equity Fund
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...................................................... $ 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>

- ------------------------

* Commencement of operations.

See notes to financial statements.
SAI-68
<PAGE>
<PAGE>
UBS International Equity Fund
Financial Highlights
-------------------------------------------------------------------------------

<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>

- ------------------------

* 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.
SAI-69
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

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.

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

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.

SAI-70
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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.

3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

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.

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 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.

SAI-71
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

<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>

SAI-72
<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

SAI-73
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------

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.
SAI-74
<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.
SAI-75
<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.
SAI-76
<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.
SAI-77
<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.
SAI-78
<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.

SAI-79
<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.

SAI-80
<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.

SAI-81
<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.

SAI-82
<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.

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.

SAI-83
<PAGE>
<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

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.

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 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.

SAI-84
<PAGE>
<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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.

SAI-85
<PAGE>
<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 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

SAI-86
<PAGE>
<PAGE>
UBS Institutional International Equity Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS International Equity Portfolio,
at value.......................................................................... $13,153,439
Tax reclaims receivable............................................................. 25,366
Deferred organization expenses and other assets..................................... 24,214
-----------
Total Assets.............................................................. 13,203,019
-----------

LIABILITIES:
Administrative services fees payable................................................ 1,877
Due to funds services agent......................................................... 5,129
Organization expenses payable....................................................... 19,478
Other accrued expenses.............................................................. 18,975
-----------
Total Liabilities......................................................... 45,459
-----------

NET ASSETS.......................................................................... $13,157,560
-----------
-----------

SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)................. 138,357
-----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $95.10
-----------
-----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................................... $ 138
Additional paid-in capital.......................................................... 13,970,313
Net unrealized depreciation of investments, foreign currency contracts and
foreign currency translations..................................................... (1,001,035)
Distributions in excess of net investment income.................................... (5,991)
Accumulated undistributed net realized gains on securities and
foreign currency translations..................................................... 194,135
-----------
Net Assets................................................................ $13,157,560
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-87
<PAGE>
<PAGE>
UBS Institutional International Equity Fund
Statement of Operations
For the Period April 14, 1997 (Commencement of Operations) through December 31,
1997
- --------------------------------------------------------------------------------

<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 $9,530).............. $ 205,478
Interest.......................................................... 67,231
-----------
Investment income............................................ 272,709
Total expenses.................................................... $126,152
Less: Fee waiver.................................................. (35,159)
--------
Net expenses...................................................... 90,993
-----------
Net Investment Income from UBS Investor Portfolios Trust --
UBS International Equity Portfolio................................... 181,716

EXPENSES
Administrative services fees........................................... 6,541
Reports to shareholders expense........................................ 12,535
Audit fees............................................................. 11,300
Transfer agent fees.................................................... 10,000
Fund accounting fees................................................... 6,000
Legal fees............................................................. 5,384
Registration fees...................................................... 4,316
Amortization of organization expenses.................................. 3,860
Directors' fees........................................................ 3,857
Miscellaneous expenses................................................. 3,600
--------
Total expenses.................................................... 67,393
Less: Expense reimbursements...................................... (62,791)
--------
Net expenses...................................................... 4,602
-----------
Net investment income.................................................. 177,114
-----------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS
INVESTOR PORTFOLIOS TRUST -- UBS INTERNATIONAL EQUITY PORTFOLIO
Net realized gain on securities transactions........................... 443,179
Net realized loss on foreign currency transactions..................... (9,733)
Net change in unrealized depreciation of investments................... (1,002,215)
Net change in unrealized appreciation of foreign currency contracts and
translations......................................................... 1,180
-----------
Net realized and unrealized loss on investments from UBS Investor
Portfolios Trust -- UBS International Equity Portfolio............... (567,589)
-----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $ (390,475)
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-88
<PAGE>
<PAGE>
UBS Institutional International Equity Fund
Statement of Changes in Net Assets
For the Period April 14, 1997 (Commencement of Operations) through December 31,
1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income.................................................................. $ 177,114
Net realized gain on securities and foreign currency transactions...................... 433,446
Net change in unrealized depreciation of investments, foreign currency contracts and
foreign currency translations........................................................ (1,001,035)
-----------
Net decrease in net assets resulting from operations................................... (390,475)
-----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (173,638)
Net realized gains..................................................................... (249,043)
-----------
Total dividends and distributions to shareholders...................................... (422,681)
-----------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares....................................................... 13,970,716
-----------
NET INCREASE IN NET ASSETS............................................................. 13,157,560
NET ASSETS:
Beginning of period.................................................................... --
-----------
End of period (including distributions in excess of net investment income of $5,991)... $13,157,560
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-89
<PAGE>
<PAGE>
UBS Institutional International Equity Fund
Financial Highlights
For the Period April 14, 1997 (Commencement of Operations) through December 31,
1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD

Net asset value, beginning of period....................................................... $100.00
-------
Loss from investment operations:
Net investment income................................................................. 1.21
Net realized and unrealized loss on investments....................................... (3.05)
-------
Total loss from investment operations................................................. (1.84)
-------

Less dividends and distributions to shareholders:
Dividends from net investment income.................................................. (1.21)
Dividends in excess of net investment income.......................................... (0.05)
Distributions from net realized gains................................................. (1.80)
-------
Total dividends and distributions..................................................... (3.06)
-------

Net asset value, end of period............................................................. $ 95.10
-------
-------
Total return............................................................................... (1.89%)(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).............................................. $13,158
Ratio of expenses to average net assets(2)............................................ 0.95%(3)
Ratio of net investment income to average net assets(2)............................... 1.76%(3)
</TABLE>

- ------------------------
(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 0.97% (annualized).
(3) Annualized.

See notes to financial statements.
SAI-90
<PAGE>
<PAGE>
UBS Institutional International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL

UBS Institutional 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 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 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
(25.4% 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 amount the Fund expects to recover from foreign tax authorities.

SAI-91
<PAGE>
<PAGE>
UBS Institutional International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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 year ended December 31, 1997, the Fund
decreased accumulated undistributed net investment income by $9,467, increased
accumulated undistributed net realized gains by $9,732 and decreased
paid-in-capital by $265. 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 $27,000 have been deferred
and are being amortized on a straight line basis over five years from the Fund's
commencement of operations (April 14, 1997).

3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. ADMINISTRATION AGREEMENT -- Under the terms of an Administration Agreement
with the Company, 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. For the period April 14, 1997
(commencement of operations) through December 31, 1997, the administrative
services fee amounted to $6,541.

B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement with
the Company, FFDI serves as the distributor of Fund shares. FFDI does not
receive any fees from the Fund for services provided pursuant to this agreement.

C. 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.

D. 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, to an annual rate of 0.95% of the Fund's
average daily net assets. During the period April 14, 1997 (commencement of
operations) through December 31, 1997, UBS reimbursed the Fund for expenses
totaling $62,791 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. For the period April 14, 1997 (commencement of operations) through
December 31, 1997 there were 138,357 shares subscribed.

SAI-92
<PAGE>
<PAGE>

UBS Institutional International Equity Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------

To the Board of Directors
and Shareholder 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 Institutional International Equity Fund (the 'Fund') (one of the funds
constituting UBS Private Investor Funds, Inc.) at December 31, 1997, and the
results of its operations, the changes in its net assets and the financial
highlights for the period April 14, 1997 (commencement of operations) through
December 31, 1997, 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 Americas
New York, New York
February 17, 1998

SAI-93
<PAGE>
<PAGE>
UBS Small Cap Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS Small Cap Portfolio, at value.... $11,944,837
Receivable from sale of capital stock............................................... 25,000
Deferred organization expenses and other assets..................................... 38,289
-----------
Total Assets.............................................................. 12,008,126
-----------

LIABILITIES:
Due to funds services agent......................................................... 5,192
Administrative services fees payable................................................ 1,160
Organizational expenses payable..................................................... 20,000
Other accrued expenses.............................................................. 27,776
-----------
Total Liabilities......................................................... 54,128
-----------

NET ASSETS.......................................................................... $11,953,998
-----------
-----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)................. 126,657
-----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $94.38
-----------
-----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................................... $ 127
Additional paid-in capital.......................................................... 12,476,380
Net unrealized depreciation of investments.......................................... (526,758)
Accumulated undistributed net realized gain......................................... 4,249
-----------
Net Assets................................................................ $11,953,998
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-94
<PAGE>
<PAGE>
UBS Small Cap Fund
Statement of Operations
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Investment Income and Expenses from UBS Investor Portfolios Trust -- UBS
Small Cap Portfolio
Interest............................................................ $ 19,156
Dividends........................................................... 7,705
---------
Investment income.............................................. 26,861
Total expenses...................................................... $ 29,904
Less: Fee waiver.................................................... (1,873)
--------
Net expenses........................................................ 28,031
---------
Net Investment Loss from UBS Investor Portfolios Trust -- UBS Small Cap
Portfolio.............................................................. (1,170)

EXPENSES:
Shareholder service fees................................................. 6,078
Administrative services fees............................................. 1,580
Reports to shareholders expense.......................................... 15,380
Audit fees............................................................... 11,300
Registration fees........................................................ 11,151
Transfer agent fees...................................................... 3,750
Legal fees............................................................... 3,750
Fund accounting fees..................................................... 2,250
Amortization of organization expenses.................................... 1,008
Directors' fees.......................................................... 857
Miscellaneous expenses................................................... 1,252
--------
Total expenses...................................................... 58,356
Less: Fee waiver and expense reimbursements......................... (57,213)
--------
Net expenses........................................................ 1,143
---------
Net investment loss...................................................... (2,313)
---------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS INVESTOR
PORTFOLIOS TRUST -- UBS SMALL CAP PORTFOLIO
Net realized gain on securities transactions............................. 6,540
Net change in unrealized depreciation of investments..................... (526,758)
---------
Net realized and unrealized loss on investments from UBS Investor
Portfolios Trust -- UBS Small Cap Portfolio............................ (520,218)
---------

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... ($522,531)
---------
---------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-95
<PAGE>
<PAGE>
UBS Small Cap Fund
Statement of Changes in Net Assets
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss............................................................. $ (2,313)
Net realized gain on securities transactions.................................... 6,540
Net change in unrealized depreciation of investments............................ (526,758)
-----------------
Net decrease in net assets resulting from operations............................ (522,531)
-----------------

TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares................................................ 12,731,529
Cost of shares redeemed......................................................... (255,000)
-----------------
Net increase in net assets from transactions in shares of common stock.......... 12,476,529
-----------------

NET INCREASE IN NET ASSETS...................................................... 11,953,998
NET ASSETS:
Beginning of period............................................................. --
-----------------
End of period................................................................... $11,953,998
-----------------
-----------------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-96
<PAGE>
<PAGE>
UBS Small Cap Fund
Financial Highlights
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD

Net asset value, beginning of period....................................................... $ 100.00
-----------------
Loss from investment operations:
Net realized and unrealized loss on investments....................................... (5.62)
-----------------

Net asset value, end of period............................................................. $ 94.38
-----------------
-----------------
Total return............................................................................... (5.62%)(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).............................................. $ 11,954
Ratio of expenses to average net assets(2)............................................ 1.20%(3)
Ratio of net investment income to average net assets(2)............................... (0.10%)(3)
</TABLE>

- ------------------------
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS Small Cap
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 2.43% (annualized). The annualization of
these ratios is affected by the fact that the Investment Advisory Agreement
and Investment Sub-Advisory Agreement was not ratified until December 22,
1997. Prior to this date, investment advisory services were being provided
without compensation.
(3) Annualized.

See notes to financial statements.

SAI-97
<PAGE>
<PAGE>
UBS Small Cap Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS Small Cap 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
International Equity 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 Small Cap 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. One shareholder owned 19.7% of the shares of the Fund at December
31, 1997.

The financial statements of the Portfolio, including its Schedule of
Investments, are include elsewhere within this report and should be read in
conjunction with the Fund's financial statements.

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
(44.2% at December 31, 1997). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements.

SAI-98
<PAGE>
<PAGE>
UBS Small Cap Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
the Fund increased accumulated undistributed net investment income by $2,313,
decreased accumulated undistributed net realized gains by $2,291 and decreased
paid-in-capital by $22. 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 $20,000 have been deferred
and are being amortized on a straight line basis over five years from the Fund's
commencement of operations (September 30, 1997).

3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. ADMINISTRATION AGREEMENT -- Under the terms of an Administration Agreement
with the Company, 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. For the period September 30, 1997
(commencement of operations) through December 31, 1997, the administrative
services fee amounted to $1,580.

B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement FFDI
serves as the distributor of Fund shares. FFDI does not receive any fees from
the Fund for services provided pursuant to this agreement.

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 period September 30, 1997
(commencement of operations) through December 31, 1997, the shareholder service
fee amounted to $6,078, all of which was waived.

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, to an annual rate of 1.20% of the Fund's
average daily net assets. For the period September 30, 1997 (commencement of
operations) through December 31, 1997, UBS reimbursed the Fund for expenses
totaling $51,135 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.

<TABLE>
<S> <C>
Shares subscribed............................................... 129,190
Shares redeemed................................................. (2,533)
----------
Net increase in shares outstanding.............................. 126,657
----------
----------
</TABLE>

SAI-99
<PAGE>
<PAGE>
UBS Small Cap 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 Small Cap Fund (the 'Fund') (one of the funds constituting UBS Private
Investor Funds, Inc.) at December 31, 1997, and the results of its operations,
the changes in its net assets and the financial highlights for the period
September 30, 1997 (commencement of operations) through December 31, 1997, 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 Americas
New York, New York
February 17, 1998

SAI-100
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ -------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK -- 96.7%
ADVERTISING -- 2.3%
23,700 HA-LO Industries, Inc....................................................................... $ 616,200
-----------
AIRLINES -- 1.6%
16,400 Mesaba Holdings, Inc.*...................................................................... 426,400
-----------
BANKING & FINANCIAL INSTITUTIONS -- 12.5%
17,100 Commercial Federal Corporation.............................................................. 608,119
9,100 Imperial Bancorp............................................................................ 448,744
8,000 Investors Financial Services Corporation.................................................... 368,000
20,500 North Fork Bancorporation, Inc.............................................................. 688,031
14,900 Peoples Heritage Financial Group, Inc....................................................... 685,400
9,200 U.S. Trust Corporation...................................................................... 576,150
-----------
3,374,444
-----------
BIO-TECHNOLOGY -- 2.1%
25,500 COR Therapeutics, Inc.*..................................................................... 573,750
-----------
BUILDING MATERIALS -- 2.1%
12,900 Texas Industries, Inc....................................................................... 580,500
-----------
COMMERCIAL SERVICES -- 1.3%
17,400 Norrell Corporation......................................................................... 345,825
-----------
CONSUMER FOODS -- 6.3%
14,000 American Italian Pasta Company, Class A*.................................................... 350,000
19,500 JP Foodservice, Inc.*....................................................................... 720,278
22,000 Richfood Holdings, Inc...................................................................... 621,500
-----------
1,691,778
-----------
CONSUMER GOODS & SERVICES -- 3.4%
21,500 Central Garden & Pet Company*............................................................... 564,375
11,600 Samsonite Corporation*...................................................................... 366,850
-----------
931,225
-----------
ELECTRONICS -- 4.5%
18,886 Computer Products Inc.*..................................................................... 427,296
9,000 Sanmina Corporation......................................................................... 609,750
6,800 SpeedFam International, Inc.*............................................................... 180,200
-----------
1,217,246
-----------
ENVIRONMENTAL SERVICES -- 2.1%
28,050 Tetra Tech, Inc............................................................................. 561,000
-----------
HEALTH CARE PROVIDERS -- 4.1%
14,200 FPA Medical Management, Inc.*............................................................... 264,475
11,700 Genesis Health Ventures, Inc................................................................ 308,588
12,700 Pediatrix Medical Group Inc.*............................................................... 542,925
-----------
1,115,988
-----------
HOME BUILDING -- 2.4%
19,700 Oakwood Homes Corp.......................................................................... 653,794
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-101
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ -------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
INSURANCE -- 7.0%
21,800 Horace Mann Educators Corporation........................................................... $ 619,938
10,700 Protective Life Corporation................................................................. 639,325
10,400 Vesta Insurance Group, Inc.................................................................. 617,500
-----------
1,876,763
-----------
LODGING -- 3.9%
13,900 Interstate Hotels Company*.................................................................. 487,369
13,600 Promus Hotel Corporation*................................................................... 571,200
-----------
1,058,569
-----------
MANUFACTURING -- 2.5%
17,100 Kuhlman Corporation......................................................................... 669,038
-----------
MEDICAL SUPPLIES -- 3.0%
15,300 Patterson Dental Company*................................................................... 692,325
2,100 Safeskin Corporation........................................................................ 119,175
-----------
811,500
-----------
OIL SERVICES -- 6.2%
20,700 Pride International, Inc.*.................................................................. 522,675
13,800 R&B Falcon Corp.*........................................................................... 577,875
23,800 Tuboscope Inc.*............................................................................. 572,688
-----------
1,673,238
-----------
PACKAGING -- 0.1%
800 Ivex Packaging Corporation*................................................................. 19,200
-----------
REAL ESTATE -- 0.6%
6,800 Prime Group Realty Trust REIT(a)............................................................ 137,700
500 Trammell Crow Company*...................................................................... 12,875
-----------
150,575
-----------
RETAIL -- 9.0%
15,700 Ethan Allen Interiors Inc................................................................... 605,431
37,600 Foodmaker, Inc.*............................................................................ 566,350
22,000 Landry's Seafood Restaurants, Inc.*......................................................... 528,000
5,700 Paul Harris Stores, Inc.*................................................................... 57,356
30,000 Pier 1 Imports, Inc......................................................................... 678,750
-----------
2,435,887
-----------
SCIENTIFIC INSTRUMENTS -- 2.0%
14,300 Waters Corporation*......................................................................... 538,038
-----------
TECHNOLOGY -- 8.9%
2,700 Coherent, Inc.*............................................................................. 94,838
4,500 Concord Communications, Inc.*............................................................... 93,375
14,000 Dallas Semiconductor Corporation............................................................ 570,500
12,200 Methode Electronics, Inc., Class A.......................................................... 198,250
37,200 Paxar Corporation........................................................................... 551,025
9,400 Perceptron, Inc.*........................................................................... 203,275
10,300 SPSS, Inc.*................................................................................. 198,275
19,000 Technology Solutions Company................................................................ 501,125
-----------
2,410,663
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-102
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ -------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
TRANSPORTATION -- 6.3%
7,600 Airborne Freight Corporation................................................................ $ 472,150
20,900 Coach USA, Inc.*............................................................................ 700,150
7,000 Expeditors International of Washington, Inc................................................. 269,500
8,000 Swift Transportation Co., Inc.*............................................................. 259,000
-----------
1,700,800
-----------
WATER TREATMENT SYSTEMS -- 2.5%
13,600 Culligan Water Technologies, Inc.*.......................................................... 683,400
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 96.7%
(COST $27,126,057)...................................................................... 26,115,821
OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.3%............................................... 879,967
-----------
NET ASSETS -- 100.0%........................................................................ $26,995,788
-----------
-----------
</TABLE>

- ------------------------

(a) REIT -- Real Estate Investment Trust.

* Non-income producing security.

Note: Based upon the cost of investments of $27,126,057 for Federal Income Tax
purposes at December 31, 1997, the aggregate gross unrealized appreciation
and depreciation was $1,229,092 and $2,239,328, respectively, resulting in
net unrealized depreciation of $1,010,236.

See notes to financial statements.
SAI-103
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $27,126,057)......................................... $26,115,821
Cash............................................................................. 1,006,534
Receivable for investment securities sold........................................ 500,000
Dividends and interest receivable................................................ 12,942
Deferred organization expenses and other assets.................................. 4,549
-----------
Total Assets................................................................ 27,639,846
-----------
LIABILITIES:
Administrative services fees payable............................................. 2,643
Payable for investment securities purchased...................................... 604,904
Organization expenses payable.................................................... 5,000
Other accrued expenses........................................................... 31,511
-----------
Total Liabilities........................................................... 644,058
-----------

NET ASSETS....................................................................... $26,995,788
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-104
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Statement of Operations
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................................. $34,600
Dividends............................................................. 14,908
-------
Investment income................................................ $ 49,508

EXPENSES:
Investment advisory fees.............................................. 4,233
Administrative services fees.......................................... 3,362
Audit fees............................................................ 24,500
Fund accounting fees.................................................. 8,750
Custodian fees and expenses........................................... 8,000
Legal fees............................................................ 3,750
Trustees' fees........................................................ 1,000
Insurance expense..................................................... 375
Amortization of organization expenses................................. 252
Miscellaneous expenses................................................ 1,000
-------
Total expenses................................................... 55,222
Less: Fee waiver................................................. (4,233)
-------
Net expenses..................................................... 50,989
-----------
Net investment loss................................................... (1,481)
-----------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions.......................... 14,491
Net change in unrealized depreciation of investments.................. (1,010,236)
-----------
Net realized and unrealized loss on investments....................... (995,745)
-----------

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $ (997,226)
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-105
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Statement of Changes in Net Assets
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss................................................................. $ (1,481)
Net realized gain on securities transactions........................................ 14,491
Net change in unrealized depreciation of investments................................ (1,010,236)
-----------
Net decrease in net assets resulting from operations................................ (997,226)
-----------

CAPITAL TRANSACTIONS:
Proceeds from contributions......................................................... 28,559,733
Value of withdrawals................................................................ (566,719)
-----------
Net increase in net assets from capital transactions................................ 27,993,014
-----------

NET INCREASE IN NET ASSETS.......................................................... 26,995,788
NET ASSETS:
Beginning of period................................................................. --
-----------
End of period....................................................................... $26,995,788
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-106
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Financial Highlights
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period (000s omitted).............................. $26,996
Average commission rate per share..................................... $ 0.05
Ratio of expenses to average net assets(1)............................ 1.06% (2)
Ratio of net investment loss to average net assets(1)................. (0.03%)(2)
Portfolio turnover.................................................... 3%
</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 0.09% (annualized). The annualization of
these ratios is affected by the fact that the Investment Advisory Agreement
and Investment Sub-Advisory Agreement was not ratified until December 22,
1997. Prior to this date, investment advisory services were being provided
without compensation.
(2) Annualized.

See notes to financial statements.
SAI-107
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS Small Cap 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 the UBS
Small Cap Fund and UBS Small Cap Fund, Ltd.

The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'); UBS Asset Management (New York), Inc. ('UBSAM') is the
sub-advisor of the Portfolio. Investors Fund Services (Ireland) Limited ('IBT
Ireland') acts as the Portfolio's administrator.

A. INVESTMENT VALUATION -- Equity securities 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.

D. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Portfolio in
connection with its organization in the amount of approximately $5,000 have been
deferred and are being amortized on a straight line basis over five years from
the Portfolio's commencement of operations (September 30, 1997).

E. OTHER -- The Portfolio bears all costs of its operations other than expenses
specifically assumed by UBS, UBSAM 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.

SAI-108
<PAGE>
<PAGE>
UBS Small Cap Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
0.60% of the Portfolio's average daily net assets. UBS, in turn, has agreed to
pay UBSAM a fee, accrued daily and payable monthly, at an annual rate of 0.40%
of the Portfolio's first $25 million average daily net assets, 0.325% of the
Portfolio's next $25 million average daily net assets and 0.25% of the
Portfolio's average daily net assets in excess of $50 million. For the period
December 22, 1997 through December 31, 1997, the investment advisory fee
amounted to $4,233, all of which was waived.

B. ADMINISTRATION AGREEMENT -- Under the terms of an Administration Agreement
with the Trust, 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. For the period
September 30, 1997 (commencement of operations) through December 31, 1997, the
administrative services fee amounted to $3,362.

4. PURCHASE AND SALES OF INVESTMENTS
For the period from September 30, 1997 (commencement of operations) through
December 31, 1997, purchases and sales of investment securities, excluding
short-term investments, aggregated $27,779,049 and $667,483, respectively.

SAI-109
<PAGE>
<PAGE>
UBS Small Cap 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 Small Cap Portfolio (the
Portfolio') (one of the portfolios constituting the UBS Investor Portfolios
Trust) at December 31, 1997, and the results of its operations, the changes in
its net assets and the financial highlights for the period September 30, 1997
(commencement of operations) through December 31, 1997, 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 audit. We conducted our audit 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 audit, 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, provides a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 17,1998

SAI-110
<PAGE>
<PAGE>
UBS Large Cap Growth Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS Large Cap Growth Portfolio, at
value.............................................................................. $4,138,823
Receivable from sale of capital stock................................................ 10,000
Receivable from funds services agent................................................. 1,705
Deferred organization expenses and other assets...................................... 32,273
----------
Total Assets............................................................... 4,182,801
----------
LIABILITIES:
Administrative services fees payable................................................. 388
Organization expenses payable........................................................ 20,000
Other accrued expenses............................................................... 25,299
----------
Total Liabilities.......................................................... 45,687
----------

NET ASSETS........................................................................... $4,137,114
----------
----------

SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized).................. 41,697
----------
----------

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE....................... $ 99.22
----------
----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par....................................................... $ 42
Additional paid-in capital........................................................... 4,117,496
Net unrealized appreciation of investments........................................... 33,821
Accumulated undistributed net investment income...................................... 300
Accumulated net realized loss........................................................ (14,545)
----------
Net Assets................................................................. $4,137,114
----------
----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-111
<PAGE>
<PAGE>
UBS Large Cap Growth Fund
Statement of Operations
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Investment Income and Expenses from UBS Investor Portfolios Trust -- UBS
Large Cap Growth Portfolio
Dividends............................................................ $ 10,648
Interest............................................................. 5,624
--------
Investment income............................................... 16,272
Total expenses....................................................... $ 12,215
Less: Fee waiver and expense reimbursements.......................... (5,293)
--------
Net expenses......................................................... 6,922
--------
Net Investment Income from UBS Investor Portfolios Trust -- UBS Large Cap
Growth Portfolio........................................................ 9,350

EXPENSES:
Shareholder service fees.................................................. 1,730
Administrative services fees.............................................. 450
Reports to shareholders expense........................................... 15,425
Audit fees................................................................ 11,300
Registration fees......................................................... 6,155
Legal fees................................................................ 3,750
Transfer agent fees....................................................... 3,185
Fund accounting fees...................................................... 1,911
Directors' fees........................................................... 857
Amortization of organization expenses..................................... 855
Miscellaneous expenses.................................................... 1,250
--------
Total expenses....................................................... 46,868
Less: Fee waiver and expense reimbursements.......................... (46,868)
--------
Net expenses......................................................... --
--------
Net investment income..................................................... 9,350
--------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS INVESTOR
PORTFOLIOS TRUST -- UBS LARGE CAP GROWTH PORTFOLIO
Net realized loss on securities transactions.............................. (14,545)
Net change in unrealized appreciation of investments...................... 33,821
--------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS Large Cap Growth Portfolio...................... 19,276
--------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $ 28,626
--------
--------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-112
<PAGE>
<PAGE>
UBS Large Cap Growth Fund
Statement of Changes in Net Assets
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.......................................................................... (9,050)
-----------------

TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares............................................................... 4,108,844
Net asset value of shares issued to shareholders in reinvestment of dividends.................. 9,050
Cost of shares redeemed........................................................................ (356)
-----------------
Net increase in net assets from transactions in shares of common stock......................... 4,117,538
-----------------

NET INCREASE IN NET ASSETS..................................................................... 4,137,114
NET ASSETS:
Beginning of period............................................................................ --
-----------------
End of period (including undistributed net investment income of $300).......................... $4,137,114
-----------------
-----------------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-113
<PAGE>
<PAGE>
UBS Large Cap Growth Fund
Financial Highlights
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<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..................................................................... 0.23
Net realized and unrealized loss on investments........................................... (0.79)
-----------------
Total loss from investment operations..................................................... (0.56)
-----------------

Less: Dividends from net investment income..................................................... (0.22)
-----------------
Net asset value, end of period................................................................. $ 99.22
-----------------
-----------------
Total return................................................................................... (0.55%)(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).................................................. $ 4,137
Ratio of expenses to average net assets(2)................................................ 1.00%(3)
Ratio of net investment income to average net assets(2)................................... 1.35%(3)
</TABLE>

- ------------------------
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS Large Cap
Growth 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 7.54% (annualized). The
annualization of these ratios is affected by the fact that the Investment
Advisory Agreement and Investment Sub-Advisory Agreement was not ratified
until December 29, 1997. Prior to this date, investment advisory services
were being provided without compensation.
(3) Annualized.

- ------------------------
See notes to financial statements.
SAI-114
<PAGE>
<PAGE>
UBS Large Cap Growth Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS Large Cap Growth 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 International Equity 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 Large Cap Growth 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. Two shareholders, individually owning greater than 10% of
the shares of the Fund, collectively held 52.0% at December 31, 1997.

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.

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
(21.6% at December 31, 1997). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements.

SAI-115
<PAGE>
<PAGE>
UBS Large Cap Growth Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
tax-basis treatment; temporary differences do not require reclassification. For
the period ended December 31, 1997, there were no permanent 'book/tax'
differences.

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
be 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, 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. For the period October 14, 1997
(commencement of operations) through December 31, 1997, the administrative
services fee amounted to $450.

B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement, FFDI
serves as the distributor of Fund shares. FFDI does not receive any fees from
the Fund for services provided pursuant to this agreement.

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 period October 14, 1997
(commencement of operations) through December 31, 1997, the shareholder service
fee amounted to $1,730, all of which was waived.

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 1.00% of the Fund's
average daily net assets. For the period October 14, 1997 (commencement of
operations) through December 31, 1997, UBS reimbursed the Fund for expenses
totaling $45,138 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.

<TABLE>
<S> <C>
Shares subscribed................................................ 41,609
Shares issued in reinvestment of dividends....................... 92
Shares redeemed.................................................. (4)
-------
Net increase in shares outstanding............................... 41,697
-------
-------
</TABLE>

SAI-116
<PAGE>
<PAGE>
UBS Large Cap Growth 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 Large Cap Growth Fund (the 'Fund') (one of the funds constituting UBS
Private Investor Funds, Inc.) at December 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
period October 14, 1997 (commencement of operations) through December 31, 1997,
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 Americas
New York, New York
February 17, 1998

SAI-117
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ ------------------------------------------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK -- 92.9%
AIRLINES -- 1.5%
6,010 Continental Airlines, Inc., Class B....................................................... $ 289,231
-----------
AUTOMOTIVE -- 1.9%
6,000 General Motors Corporation................................................................ 363,750
-----------
BANKING & FINANCIAL INSTITUTIONS -- 7.6%
6,390 American Express Company.................................................................. 570,308
5,220 BankAmerica Corp.......................................................................... 381,060
2,360 Chase Manhattan Corporation............................................................... 258,420
700 Wells Fargo & Company..................................................................... 237,606
-----------
1,447,394
-----------
CHEMICALS -- 1.9%
6,120 Du Pont (E.I.) de Nemours................................................................. 367,583
-----------
CONSUMER FOODS -- 3.9%
6,920 Kellogg Company........................................................................... 343,405
11,210 PepsiCo, Inc.............................................................................. 408,464
-----------
751,869
-----------
COSMETICS & TOILETRIES -- 1.8%
7,150 Kimberly-Clark Corporation................................................................ 352,584
-----------
DIVERSIFIED -- 2.4%
6,390 General Electric Company.................................................................. 468,866
-----------
DRUGS & PHARMACEUTICALS -- 9.4%
6,680 Abbott Laboratories....................................................................... 437,958
4,680 Bristol-Myers Squibb Co................................................................... 442,845
7,460 Johnson & Johnson......................................................................... 491,428
4,140 Merck & Co., Inc.......................................................................... 439,875
-----------
1,812,106
-----------
ELECTRONICS -- 2.4%
7,580 Emerson Electric Company.................................................................. 427,796
383 Raytheon Company, Class A................................................................. 18,868
-----------
446,664
-----------
ENTERTAINMENT -- 3.6%
6,620 Tele-Communications TCI Ventures Group, Class A *......................................... 187,429
8,040 Time Warner Inc........................................................................... 498,480
-----------
685,909
-----------
ENVIRONMENTAL CONTROL -- 2.1%
14,670 Waste Management Inc...................................................................... 403,425
-----------
FOOD -- RETAIL -- 2.3%
9,220 Albertson's, Inc.......................................................................... 436,798
</TABLE>

- ------------------------
See notes to financial statements.
SAI-118
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ ------------------------------------------------------------------------------------------ -----------
<C> <S> <C>
HEALTH CARE PROVIDERS -- 1.1%
6,780 Columbia/HCA Healthcare Corporation....................................................... $ 200,858
-----------
INSURANCE -- 6.8%
6,120 AFLAC Incorporated........................................................................ 312,885
3,730 Allstate Corporation...................................................................... 338,964
3,560 Chubb Corporation......................................................................... 269,225
7,085 Travelers Group, Inc...................................................................... 381,704
-----------
1,302,778
-----------
LUMBER, PAPER & BUILDING SUPPLIES -- 3.0%
2,690 Georgia-Pacific Timber Group *............................................................ 61,029
2,790 Georgia-Pacific Corporation............................................................... 169,493
7,860 International Paper Company............................................................... 338,963
-----------
569,485
-----------
MANUFACTURING -- 0.8%
4,000 Corning Inc............................................................................... 148,500
-----------
MEDIA/CABLE -- 3.3%
14,500 CBS Corporation........................................................................... 426,844
7,820 Tele-Communications TCI Group, Class A.................................................... 218,471
-----------
645,315
-----------
MEDICAL SUPPLIES -- 2.4%
8,710 Medtronic, Inc............................................................................ 455,642
-----------
METALS & MINING -- 1.5%
4,100 Aluminum Company of America............................................................... 288,538
-----------
OIL SERVICES -- 5.0%
5,260 Baker Hughes Incorporated................................................................. 229,468
4,650 Dresser Industries, Inc................................................................... 195,009
4,000 Halliburton Company....................................................................... 207,750
4,080 Schlumberger Ltd.......................................................................... 328,440
-----------
960,667
-----------
PETROLEUM PRODUCTION & SALES -- 5.8%
7,130 Burlington Resources Inc.................................................................. 319,513
8,220 Exxon Corporation......................................................................... 502,961
7,420 Unocal Corporation........................................................................ 287,989
-----------
1,110,463
-----------
REAL ESTATE -- 1.7%
9,720 Simon DeBartolo Group, Inc. REIT(a)....................................................... 317,723
-----------
RETAIL -- 4.8%
8,980 Dayton Hudson Corporation................................................................. 606,150
6,370 McDonald's Corporation.................................................................... 304,168
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-119
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ ------------------------------------------------------------------------------------------ -----------
<C> <S> <C>
910,318
-----------
TECHNOLOGY -- 10.1%
8,120 Advanced Micro Devices, Inc. *............................................................ $ 145,653
6,230 Electronic Data Systems Corporation....................................................... 273,731
6,920 Hewlett-Packard Company................................................................... 432,500
6,970 International Business Machines Corporation............................................... 728,796
5,180 Micron Technology, Inc.................................................................... 134,680
4,780 Texas Instruments Incorporated............................................................ 215,100
-----------
1,930,460
-----------
TELECOMMUNICATIONS -- 2.6%
3,500 Lucent Technologies, Inc.................................................................. 279,563
4,230 QUALCOMM, Inc. *.......................................................................... 213,615
-----------
493,178
-----------
TOBACCO -- 2.2%
9,200 Philip Morris Companies, Inc.............................................................. 416,875
-----------
TRANSPORTATION -- 1.0%
2,110 Burlington Northern Santa Fe.............................................................. 196,098
-----------
TOTAL COMMON STOCK (COST $17,470,426)..................................................... 17,773,077
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 92.9%
(COST $17,470,426).................................................................... 17,773,077
OTHER ASSETS IN EXCESS OF LIABILITIES -- 7.1%............................................. 1,361,051
-----------
NET ASSETS -- 100.0%...................................................................... $19,134,128
-----------
-----------
</TABLE>

- ------------------------
(a) REIT -- Real Estate Investment Trust.

* Non-income producing security.

Note: Based upon the cost of investments of $17,470,426 for Federal Income Tax
purposes at December 31, 1997, the aggregate gross unrealized appreciation
and depreciation was $803,351 and $500,700, respectively, resulting in net
unrealized appreciation of $302,651.

See notes to financial statements.
SAI-120
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment, at value (cost $17,470,426)............................................. $17,773,077
Cash................................................................................ 1,355,342
Dividends and interest receivable................................................... 28,932
Receivable from Investment Advisor.................................................. 11,793
Deferred organization expenses and other assets..................................... 4,588
-----------
Total Assets.............................................................. 19,173,732
-----------
LIABILITIES:
Administrative services fees payable................................................ 1,915
Other accrued expenses.............................................................. 37,689
-----------
Total Liabilities......................................................... 39,604
-----------
NET ASSETS.......................................................................... $19,134,128
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-121
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Statement of Operations
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................................. $ 49,436
Interest.................................................................. 22,239
--------
Investment income.................................................... $ 71,675
EXPENSES
Investment advisory fees.................................................. 923
Administrative services fees.............................................. 2,096
Audit fees................................................................ 24,500
Fund accounting fees...................................................... 7,433
Custodian fees and expenses............................................... 6,000
Legal fees................................................................ 3,750
Trustees' fees............................................................ 1,000
Insurance expense......................................................... 375
Amortization of organization expenses..................................... 214
Miscellaneous expenses.................................................... 1,000
--------
Total expenses....................................................... 47,291
Less: Fee waiver and expense reimbursements.......................... (12,716)
--------
Net expenses......................................................... 34,575
--------
Net investment income..................................................... 37,100
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities transactions.............................. (59,628)
Net change in unrealized appreciation of investments...................... 302,651
--------
Net realized and unrealized gain on investments........................... 243,023
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $280,123
--------
--------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-122
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Statement of Changes in Net Assets
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income.......................................................................... $ 37,100
Net realized loss on securities transactions................................................... (59,628)
Net change in unrealized appreciation of investments........................................... 302,651
-----------------
Net increase in net assets resulting from operations........................................... 280,123
-----------------
CAPITAL TRANSACTIONS:
Proceeds from contributions.................................................................... 18,949,248
Value of withdrawals........................................................................... (95,243)
-----------------
Net increase in net assets from capital transactions........................................... 18,854,005
-----------------
NET INCREASE IN NET ASSETS..................................................................... 19,134,128
NET ASSETS:
Beginning of period............................................................................ --
-----------------
End of period.................................................................................. $19,134,128
-----------------
-----------------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-123
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Financial Highlights
For the Period October 14, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).................................................. $19,134
Average commission rate per share......................................................... $0.05
Ratio of expenses to average net assets(1)................................................ 1.14%(2)
Ratio of net investment income to average net assets(1)................................... 1.22%(2)
Portfolio turnover........................................................................ 6%
</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 0.42% (annualized). The annualization of
these ratios is affected by the fact that the Investment Advisory Agreement
and Investment Sub-Advisory Agreement was not ratified until December 29,
1997. Prior to this date, investment advisory services were being provided
without compensation.
(2)Annualized.

See notes to financial statements.

SAI-124
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS Large Cap Growth 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 Large Cap Growth Fund and UBS Large Cap Growth Fund, Ltd.

The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'); UBS Asset Management (New York) Inc. ('UBSAM') is the
sub-adviser of the portfolio. Investors Fund Services (Ireland) Limited ('IBT
Ireland') acts as the Portfolio's administrator.

B. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
trade date. Realized gains and losses on securities 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.

E. OTHER -- The Portfolio bears all costs of its operations other than expenses
specifically assumed by UBS, UBSAM and IBT Ireland. 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 -- Effective December 29, 1997, the Portfolio
has retained the services of UBS as investment adviser and UBSAM as investment
sub-adviser. UBS and UBSAM were not entitled to receive any investment advisory
fee prior to the approval of the Investment Advisory Agreement and Investment
Sub-Advisory Agreement by the shareholders of the Fund. UBSAM makes the
Portfolio's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages the Portfolio's investments and

SAI-125
<PAGE>
<PAGE>
UBS Large Cap Growth Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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
0.60% of the Portfolio's average daily net assets. UBS, in turn, has agreed to
pay UBSAM a fee, accrued daily and payable monthly, at an annual rate of 0.30%
of the Portfolio's first $25 million average daily net assets, 0.25% of the
Portfolio's next $25 million average daily net assets and 0.20% of the
Portfolio's average daily net assets in excess of $50 million. For the period
from December 29, 1997 through December 31, 1997, the investment advisory fee
amounted to $923, all of which was waived.

B. ADMINISTRATION AGREEMENT -- Under the terms of an Administration Agreement
with the Trust, 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. For the period
ended December 31, 1997, the administrative services fee amounted to $2,096.

4. PURCHASES AND SALES OF INVESTMENTS

For the period October 14, 1997 (commencement of operations) through December
31, 1997, purchases and sales of investment securities, excluding short-term
investments, aggregated $18,325,865 and $795,811, respectively.

SAI-126
<PAGE>
<PAGE>
UBS Large Cap Growth 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 Large Cap Growth Portfolio
(the 'Portfolio') (one of the portfolios constituting UBS Investor Portfolios
Trust) at December 31, 1997, and the results of its operations, the changes in
its net assets and the financial highlights for the period October 14, 1997
(commencement of operations) through December 31, 1997, 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 audit. We conducted our audit 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 audit, 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, provides a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE
Chartered Accountants

Toronto, Ontario
February 17,1998

SAI-127
<PAGE>
<PAGE>
UBS High Yield Bond Fund
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust --
UBS High Yield Bond Portfolio, at value............................................ $7,882,781
Receivable from sale of capital stock................................................ 8,000
Deferred organization expenses and other assets...................................... 30,855
----------
Total Assets............................................................... 7,921,636
----------

LIABILITIES:
Due to funds services agent.......................................................... 13,318
Administrative services fees payable................................................. 829
Organization costs payable........................................................... 20,000
Other accrued expenses............................................................... 26,228
----------
Total Liabilities.......................................................... 60,375
----------

NET ASSETS........................................................................... $7,861,261
----------
----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized).................. 78,181
----------
----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE....................... $100.55
----------
----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par....................................................... $ 78
Additional paid-in capital........................................................... 7,809,648
Net unrealized appreciation of investments........................................... 31,878
Accumulated undistributed net investment income...................................... 2,277
Accumulated undistributed net realized gains on securities........................... 17,380
----------
Net Assets................................................................. $7,861,261
----------
----------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-128
<PAGE>
<PAGE>
UBS High Yield Bond Fund
Statement of Operations
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Investment Income and Expenses allocated from UBS Investor Portfolios
Trust -- UBS High Yield Bond Portfolio
Interest............................................................ $146,094
Dividends........................................................... 2,165
--------
Investment income.............................................. 148,259
Total expenses...................................................... $ 36,201
Less: Fee waiver and expense reimbursements......................... (19,792)
--------
Net expenses........................................................ 16,409
--------
Net Investment Income from UBS Investor Portfolios Trust --
UBS High Yield Bond Portfolio.......................................... 131,850

EXPENSES:
Shareholder service fees................................................. 4,558
Administrative services fees............................................. 1,185
Reports to shareholders expense.......................................... 15,550
Audit fees............................................................... 11,300
Registration fees........................................................ 9,188
Transfer agent fees...................................................... 3,750
Legal fees............................................................... 3,750
Fund accounting fees..................................................... 2,250
Amortization of organization expenses.................................... 1,008
Directors' fees.......................................................... 857
Miscellaneous expenses................................................... 1,250
--------
Total expenses...................................................... 54,646
Less: Fee waiver and expense reimbursements......................... (54,646)
--------
Net expenses........................................................ --
--------
Net investment income.................................................... 131,850
--------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS FROM UBS INVESTOR
PORTFOLIOS TRUST -- UBS HIGH YIELD BOND PORTFOLIO
Net realized gains on securities transactions............................ 17,380
Net change in unrealized appreciation of investments..................... 31,878
--------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS High Yield Bond Portfolio...................... 49,258
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $181,108
--------
--------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-129
<PAGE>
<PAGE>
UBS High Yield Bond Fund
Statement of Changes in Net Assets
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.......................................................................... (129,573)
-----------------

TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares............................................................... 7,756,774
Net asset value of shares issued to shareholders in reinvestment of dividends.................. 129,246
Cost of shares redeemed........................................................................ (76,294)
-----------------
Net increase in net assets from transactions in shares of common stock......................... 7,809,726
-----------------

NET INCREASE IN NET ASSETS..................................................................... 7,861,261
NET ASSETS:
Beginning of period............................................................................ --
-----------------
End of period (including undistributed net investment income of $2,277)........................ $ 7,861,261
-----------------
-----------------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-130
<PAGE>
<PAGE>
UBS High Yield Bond Fund
Financial Highlights
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<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..................................................................... 1.80
Net realized and unrealized gain on investments........................................... 0.52
-----------------
Total income from investment operations................................................... 2.32
-----------------

Less dividends to shareholders from net investment income...................................... (1.77)
-----------------

Net asset value, end of period................................................................. $100.55
-----------------
-----------------
Total return................................................................................... 2.34%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).................................................. $ 7,861
Ratio of expenses to average net assets(2)................................................ 0.90%(3)
Ratio of net investment income to average net assets(2)................................... 7.23%(3)
</TABLE>

- ------------------------
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS High Yield
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 4.08% (annualized).The
annualization of these ratios is affected by the fact that the Investment
Advisory Agreement and Investment Sub-Advisory Agreement was not ratified
until December 22, 1997. Prior to this date, investment advisory services
were being provided without compensation.
(3) Annualized.

See notes to financial statements.

SAI-131
<PAGE>
<PAGE>
UBS High Yield Bond Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS High Yield Bond 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
International Equity 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 High Yield 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. At December
31, 1997, certain shares of the Fund were held by UBS or its affiliates on
behalf of its clients. Three shareholders, individually owning greater than 10%
of the shares of the Fund, collectively held 52.1% at December 31, 1997.

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.

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
(60.0% at December 31, 1997). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements.

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.

SAI-132
<PAGE>
<PAGE>
UBS High Yield Bond Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
tax-basis treatment; temporary differences do not require reclassification. For
the period ended December 31, 1997, there were no permanent 'book/tax'
differences.

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
be 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, 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. For the period September 30, 1997
(commencement of operations) to December 31, 1997, the administrative services
fee amounted to $1,185.

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 period September 30, 1997
(commencement of operations) to December 31, 1997, the shareholder service fee
amounted to $4,558, all of which was waived.

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 September 30, 1997 (commencement of
operations) to December 31, 1997, UBS reimbursed the Fund for expenses totaling
$50,088 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.

<TABLE>
<S> <C>
Shares subscribed..................................................... 77,644
Shares issued in reinvestment of dividends............................ 1,296
Shares redeemed....................................................... (759)
-------
Net increase in shares outstanding.................................... 78,181
-------
-------
</TABLE>

SAI-133
<PAGE>
<PAGE>
UBS High Yield 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 High Yield Bond Fund (the 'Fund') (one of the funds constituting UBS
Private Investor Funds, Inc.) at December 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
period September 30, 1997 (commencement of operations) through December 31,
1997, 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 Americas
New York, New York
February 17, 1998

SAI-134
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FACE COUPON MATURITY MARKET
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- -------- -------------------------------------------------------------------- ------ -------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS -- 91.0%

CORPORATE OBLIGATIONS -- DOMESTIC -- 88.1%
ADVERTISING -- 4.5%
$200,000 Lamar Advertising Company........................................... 8.63 % 9/15/07 $ 206,500
250,000 Outdoor Communications, Inc......................................... 9.25 % 8/15/07 256,250
125,000 Outdoor Systems, Inc................................................ 8.88 % 6/15/07 130,625
-----------
593,375
-----------

BROADCASTING -- 8.8%
105,000 Argyle Television, Inc.............................................. 9.75 % 11/01/05 117,600
300,000 Chancellor Media Corporation........................................ 8.75 % 6/15/07 306,748
250,000 Jacor Communications Co.**.......................................... 8.75 % 6/15/07 256,250
225,000 Sinclair Broadcast Group, Inc.**.................................... 9.00 % 7/15/07 230,625
250,000 Young Broadcasting Inc.............................................. 8.75 % 6/15/07 246,250
-----------
1,157,473
-----------

BUILDING MATERIALS -- 7.2%
278,000 American Standard, Inc. (0.00% until 6/01/98, 10.50%
thereafter)(a).................................................... 0.00 % 6/01/05 280,085
125,000 Building Materials Holding Corporation (0.00% until 7/01/99, 11.75%
thereafter)(a).................................................... 0.00 % 7/01/04 118,125
300,000 Maxim Group, Inc.**................................................. 9.25 % 10/15/07 297,000
250,000 Nortek, Inc.**...................................................... 9.13 % 9/01/07 255,000
-----------
950,210
-----------

CABLE TV -- 14.7%
200,000 Adelphia Communications Corporation................................. 9.25 % 10/01/02 205,000
135,000 Cablevision Systems Corporation..................................... 9.25 % 11/01/05 143,100
200,000 Cablevision Systems Corporation**................................... 7.88 % 12/15/07 204,000
250,000 Century Communications Corp.**...................................... 8.75 % 10/01/07 255,000
250,000 Comcast Corporation................................................. 9.13 % 10/15/06 270,000
300,000 Echostar Satellite Broadcast Corp. (0.00% until 3/15/00, 13.125%
thereafter)(a).................................................... 0.00 % 3/15/04 249,000
125,000 Marcus Cable Company, L.P (0.00% until 8/01/99, 13.50%
thereafter)(a).................................................... 0.00 % 8/01/04 115,625
200,000 Pegasus Communications Corporation**................................ 9.63 % 10/15/05 206,000
425,000 TCI Satellite Entertainment, Inc.** (0.00% until 2/15/02, 12.25%
thereafter)(a).................................................... 0.00 % 2/15/07 280,500
-----------
1,928,225
-----------

CHEMICALS -- 1.7%
125,000 ISP Holdings, Inc................................................... 9.00 % 10/15/03 130,156
100,000 NL Industries, Inc. (0.00% until 10/15/98, 13.00% thereafter)(a).... 0.00 % 10/15/05 99,500
-----------
229,656
-----------

CONSUMER GOODS & SERVICES -- 5.7%
250,000 Bally Total Fitness Holding Corporation**........................... 9.88 % 10/15/07 253,750
250,000 Iron Mountain, Inc.**............................................... 8.75 % 9/30/09 256,250
235,000 Ryder TRS, Inc...................................................... 10.00 % 12/01/06 236,175
-----------
746,175
-----------

COSMETICS -- 2.0%
250,000 Revlon, Inc......................................................... 10.50 % 2/15/03 266,250
-----------

DRUGS & PHARMACEUTICALS -- 1.7%
225,000 NBTY, Inc.**........................................................ 8.63 % 9/15/07 226,125
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-135
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY MARKET
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- -------- -------------------------------------------------------------------- ------ -------- -----------
<C> <S> <C> <C> <C>
ENTERTAINMENT -- 9.0%
$150,000 Fox Kids Worldwide Inc.**........................................... 9.25% 11/01/07 $ 145,500
225,000 Grand Casinos, Inc.**............................................... 9.00% 10/15/04 226,125
250,000 Horseshoe Gaming, L.L.C............................................. 12.75% 9/30/00 277,500
275,000 Speedway Motorsports, Inc........................................... 8.50% 8/15/07 281,875
125,000 Trump Atlantic City Association..................................... 11.25% 5/01/06 123,438
125,000 United Artists Entertainment Company................................ 11.50% 5/01/02 130,313
-----------
1,184,751
-----------
FOOD -- 1.2%
150,000 AmeriServ Food Company**............................................ 8.875% 10/15/06 151,500
-----------
HEALTH CARE PROVIDERS -- 1.0%
125,000 Tenet Healthcare Corporation........................................ 10.13% 3/01/05 136,563
-----------
HOUSEHOLD APPLIANCES -- 1.8%
225,000 Fedders North America**............................................. 9.38% 8/15/07 230,625
-----------
MANUFACTURING -- 3.8%
250,000 RBX Corp.**......................................................... 12.00% 1/15/03 255,625
250,000 Unicco Service Co................................................... 9.88% 10/15/07 250,313
-----------
505,938
-----------
METALS & MINING -- 1.9%
250,000 WCI Steel, Inc...................................................... 10.00% 12/01/04 255,625
-----------
OIL SERVICES -- 0.8%
100,000 Trico Marine Services............................................... 8.50% 8/01/05 100,500
-----------
PAPER & FOREST PRODUCTS -- 2.9%
150,000 Gaylord Container Corporation**..................................... 9.75% 6/15/07 146,250
220,000 Stone Container Corporation......................................... 11.88% 12/01/98 228,800
-----------
375,050
-----------
PETROLEUM PRODUCTION & SALES -- 10.9%
250,000 Belko Oil & Gas Corporation**....................................... 8.88% 9/15/07 255,625
125,000 Chesapeake Energy Corporation....................................... 10.50% 6/01/02 134,375
150,000 Forcenergy Inc...................................................... 8.50% 2/15/07 151,500
100,000 Gothic Energy Corporation**......................................... 12.25% 9/01/04 104,250
250,000 Newpark Resources, Inc.**........................................... 8.63% 12/15/07 253,750
250,000 Parker Drilling Corp................................................ 9.75% 11/15/06 268,125
250,000 Pride Petroleum Services, Inc....................................... 9.38% 5/01/07 268,750
-----------
1,436,375
-----------
PRINTING & PUBLISHING -- 1.6%
200,000 Transwestern Publishing Co.**....................................... 9.63% 11/15/07 209,000
-----------
TECHNOLOGY -- 1.6%
200,000 Details Inc.**...................................................... 10.00% 11/15/05 205,500
-----------
TELECOMMUNICATIONS -- 5.3%
300,000 McLeod USA Inc. (0.00% until 3/01/02, 10.50% thereafter)(a)......... 0.00% 3/01/07 218,250
200,000 Nextel Communications, Inc.** (0.00% until 9/15/02, 10.65%
thereafter)(a).................................................... 0.00% 9/15/07 126,500
125,000 Rogers Communications, Inc.**....................................... 8.88% 7/15/07 125,000
275,000 Teleport Communications Group Inc. (0.00% until 7/01/01, 11.125%
thereafter)(a).................................................... 0.00% 7/01/07 224,125
-----------
693,875
-----------
TOTAL CORPORATE OBLIGATIONS -- DOMESTIC (COST $11,531,859).......... 11,582,791
-----------
</TABLE>

- ------------------------
See notes to financial statements.
SAI-136
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY MARKET
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- -------- -------------------------------------------------------------------- ------ -------- -----------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS -- FOREIGN -- 2.9%
ENTERTAINMENT -- 0.9%
$125,000 Livent, Inc.**...................................................... 9.38% 10/15/04 $ 125,625
-----------
FOOD -- 2.0%
250,000 Cott Corporation.................................................... 9.38% 7/01/05 260,625
-----------
TOTAL CORPORATE OBLIGATIONS -- FOREIGN (COST $386,328).............. 386,250
-----------
TOTAL CORPORATE OBLIGATIONS (COST $11,918,187)...................... 11,969,041
-----------
<CAPTION>

SHARES
- --------
<C> <S> <C> <C> <C>
PREFERRED STOCK -- 1.0%
TELECOMMUNICATIONS -- 1.0%
125 Hyperion Telecommunications, Inc. (Cost $125,000)**................. 126,250
-----------
WARRANTS -- 0.0%
PETROLEUM PRODUCTION & SALES -- 0.0%
1,400 Gothic Energy Corporation Warrant (Cost $2,019)..................... 2,800
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 92.0%
(COST $12,045,206)............................................... 12,098,091
OTHER ASSETS IN EXCESS OF LIABILITIES -- 8.0%....................... 1,045,200
-----------
NET ASSETS -- 100.0%................................................ $13,143,291
-----------
-----------
</TABLE>

- ------------------------

** 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,
1997, the value of these securities amounted to $5,407,625 or 41.14% of net
assets.

(a) Step coupon bond.

Note: Based upon the cost of investments of $12,045,206 for Federal Income Tax
purposes at December 31, 1997, the aggregate gross unrealized appreciation
and depreciation was $102,956 and $50,071, respectively, resulting in net
unrealized appreciation of $52,885.

See notes to financial statements.
SAI-137
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment, at value (cost $12,045,206).......................................... $12,098,091
Cash............................................................................. 837,762
Dividends and interest receivable................................................ 219,245
Receivable from Investment Advisor............................................... 21,780
Deferred organization expenses and other assets.................................. 4,550
-----------
Total Assets........................................................... 13,181,428
-----------
LIABILITIES:
Administrative services fees payable............................................. 1,391
Organization expenses payable.................................................... 5,000
Other accrued expenses........................................................... 31,746
-----------
Total Liabilities...................................................... 38,137
-----------

NET ASSETS....................................................................... $13,143,291
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-138
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Statement of Operations
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................................ $215,326
Dividends............................................................... 3,613
--------
Total income....................................................... 218,939

EXPENSES
Investment advisory fees................................................ $ 1,611
Administrative services fees............................................ 1,870
Audit fees.............................................................. 24,500
Fund accounting fees.................................................... 8,750
Custodian fees and expenses............................................. 6,000
Legal fees.............................................................. 3,750
Trustees' fees.......................................................... 1,000
Insurance expense....................................................... 375
Amortization of organization expenses................................... 252
Miscellaneous expenses.................................................. 1,000
--------
Total expenses..................................................... 49,108
Less: Fee waiver and expense reimbursements........................ (23,391)
--------
Net expenses....................................................... 25,717
--------
Net investment income................................................... 193,222
--------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on securities transactions............................ 28,936
Net change in unrealized appreciation of investments.................... 52,885
--------
Net realized and unrealized gain on investments......................... 81,821
--------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $275,043
--------
--------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-139
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Statement of Changes in Net Assets
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

CAPITAL TRANSACTIONS:
Proceeds from contributions.................................................................... 12,987,656
Value of withdrawals........................................................................... (119,408)
-----------------
Net increase in net assets from capital transactions........................................... 12,868,248
-----------------

NET INCREASE IN NET ASSETS..................................................................... 13,143,291
NET ASSETS:
Beginning of period............................................................................ --
-----------------
End of period.................................................................................. $13,143,291
-----------------
-----------------
</TABLE>

- ------------------------
See notes to financial statements.

SAI-140
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Financial Highlights
For the Period September 30, 1997 (Commencement of Operations) through December
31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).................................................. $13,143
Ratio of expenses to average net assets(1)................................................ 0.96%(2)
Ratio of net investment income to average net assets(1)................................... 7.23%(2)
Portfolio turnover........................................................................ 80%
</TABLE>

- ------------------------
(1) Net of fee waiver and expense reimbursements. Such fee waiver 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 0.88% (annualized). The annualization of these ratios is affected
by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement was not ratified until December 22, 1997. Prior to
this date, investment advisory services were being provided without
compensation.
(2) Annualized.

See notes to financial statements.

SAI-141
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

1. GENERAL
UBS High Yield 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. At
December 31, 1997, all of the beneficial interests in the Portfolio were held by
UBS High Yield Bond Fund and UBS High Yield Bond Fund, Ltd.

The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'); UBS Asset Management (New York) Inc. ('UBSAM') is the
sub-advisor of the portfolio. Investors Fund Services (Ireland) Limited ('IBT
Ireland') acts as the Portfolio's administrator.

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. Interest income, adjusted for amortization of
premiums and accretion of discounts on investments, is accrued daily.

SAI-142
<PAGE>
<PAGE>
UBS High Yield Bond Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------

3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY AGREEMENT -- Effective December 22, 1997, the Portfolio
has retained the services of UBS as investment adviser and UBSAM as investment
sub-advisor. UBS and UBSAM were not entitled to receive any investment advisory
fee prior to the approval of the Investment Advisory Agreement and Investment
Sub-Advisory Agreement by the Shareholders of the Fund. UBSAM 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
0.45% of the Portfolio's average daily net assets. UBS, in turn, has agreed to
pay UBSAM a fee, accrued daily and payable monthly, at an annual rate of 0.25%
of the Portfolio's first $25 million average daily net assets, 0.20% of the
Portfolio's next $25 million average daily net assets and 0.15% of the
Portfolio's average daily net assets in excess of $50 million. For the period
December 22, 1997 through December 31, 1997, the investment advisory fee
amounted to $1,611, all of which was waived.

4. PURCHASES AND SALES OF INVESTMENTS
For the period September 30, 1997 (commencement of operations) through December
31, 1997, purchases and sales of investment securities, excluding short-term
investments, were as follows:

<TABLE>
<CAPTION>
PURCHASES SALES
----------- ----------

<S> <C> <C>
U.S. Government Securities................................................. $ 2,019,063 $2,002,031
Corporate obligations...................................................... 18,325,115 6,351,871
----------- ----------
Total................................................................. $20,344,178 $8,353,902
----------- ----------
----------- ----------
</TABLE>

SAI-143
<PAGE>
<PAGE>
UBS High Yield 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 High Yield Bond Portfolio
(the 'Portfolio') (one of the portfolios constituting UBS Investor Portfolios
Trust) at December 31, 1997, and the results of its operations, the changes in
its net assets and the financial highlights for the period September 30, 1997
(commencement of operations) through December 31, 1997, 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 audit. We conducted our audit 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 audit, 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, provides a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 17, 1998

SAI-144
<PAGE>
<PAGE>

UBS PRIVATE INVESTOR FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1998
UBS TAX EXEMPT BOND FUND

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1998 (THE 'PROSPECTUS'), FOR THE
FUND LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO TIME. COPIES OF THE PROSPECTUS
MAY BE OBTAINED WITHOUT CHARGE FROM SIGNATURE BROKER-DEALER SERVICES, INC. AT
THE ADDRESS AND PHONE NUMBER SET FORTH HEREIN.

<PAGE>
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------

<S> <C>
GENERAL............................................................................................ SAI-1
INVESTMENT OBJECTIVE AND POLICIES.................................................................. SAI-1
INVESTMENT RESTRICTIONS............................................................................ SAI-9
DIRECTORS.......................................................................................... SAI-13
INVESTMENT ADVISER................................................................................. SAI-14
ADMINISTRATOR...................................................................................... SAI-15
DISTRIBUTOR........................................................................................ SAI-16
CUSTODIAN.......................................................................................... SAI-16
SHAREHOLDER SERVICES............................................................................... SAI-17
INDEPENDENT ACCOUNTANTS............................................................................ SAI-17
EXPENSES........................................................................................... SAI-17
PURCHASE OF SHARES................................................................................. SAI-18
REDEMPTION OF SHARES............................................................................... SAI-18
EXCHANGE OF SHARES................................................................................. SAI-19
DIVIDENDS AND DISTRIBUTIONS........................................................................ SAI-19
NET ASSET VALUE.................................................................................... SAI-19
PERFORMANCE DATA................................................................................... SAI-20
PORTFOLIO TRANSACTIONS............................................................................. SAI-20
ORGANIZATION....................................................................................... SAI-21
TAXES.............................................................................................. SAI-22
ADDITIONAL INFORMATION............................................................................. SAI-23
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS......................................... F-1
</TABLE>

<PAGE>
<PAGE>
GENERAL

UBS Private Investor Funds, Inc. (the 'Company') currently issues shares in
nine series: UBS Bond Fund; UBS High Yield Bond Fund; UBS Tax Exempt Bond Fund;
UBS International Equity Fund; UBS Institutional International Equity Fund; UBS
Large Cap Growth Fund; UBS Small Cap Fund; UBS Value Equity Fund; and UBS Real
Estate Fund. Each series is a series of the Company, an open-end management
investment company organized as a Maryland corporation. The Company was
organized on November 16, 1995. This Statement of Additional Information ('SAI')
describes the investment objective and policies, management and operation of UBS
Tax Exempt Bond Fund (the 'Fund') to enable investors to determine if the Fund
suits their investment needs. As more fully described herein, the Fund invests
primarily in securities of states, territories and possessions of the United
States and their political subdivisions, agencies and instrumentalities, the
interest of which is exempt from federal income tax.

This SAI provides additional information with respect to the Fund, and
should be read in conjunction with its current Prospectus. Capitalized terms not
otherwise defined in this SAI have the meanings accorded to them in the Fund's
Prospectus. The Company's executive offices are located at 6 St. James Avenue,
Boston, Massachusetts 02116.

INVESTMENT OBJECTIVE AND POLICIES

The Fund is designed for investors who seek tax exempt yields greater than
those generally available from a portfolio of short-term tax exempt obligations
and who are willing to incur the greater price fluctuation of longer-term
investments. The Fund's investment objective is to provide a high level of
current income exempt from federal income tax consistent with moderate risk of
capital and maintenance of liquidity. See 'Taxes'. The Fund attempts to achieve
this investment objective by investing primarily in securities of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities, the interest on which is exempt
from federal income tax in the opinion of bond counsel for the issuer. However,
the Fund may invest up to 20% of its net assets in securities the interest
income on which may be subject to federal, as well as state and local and
foreign taxes. The Fund seeks to maintain a current yield that is greater than
that obtainable from a portfolio of short-term tax exempt obligations, subject
to certain quality restrictions. See 'Investment Objective and Policies --
Quality and Diversification Requirements'.

MONEY MARKET INSTRUMENTS

As discussed in the Prospectus, the Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased appears below. See 'Investment Objective and Policies -- Quality and
Diversification Requirements'.

U.S. TREASURY SECURITIES. The Fund may invest in direct obligations of the
U.S. Treasury, including Treasury Bills, Notes and Bonds, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.

ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations
issued or guaranteed by U.S. Government agencies or instrumentalities. These
obligations may or may not be backed by the 'full faith and credit' of the
United States. In the case of securities not backed by the full faith and credit
of the United States, the Fund must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which the Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations,
and the obligations of the Federal Farm Credit System and the Federal Home Loan
Banks, both of whose obligations may be satisfied only by the individual credits
of each

SAI-1

<PAGE>
<PAGE>
issuing agency. Securities that are backed by the full faith and credit of the
United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank.

BANK OBLIGATIONS. The Fund, unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks that have more than $2 billion in total assets and are organized under the
laws of the United States or any state, (ii) foreign branches of these banks and
(iii) U.S. branches of foreign banks of equivalent size (Yankees). The Fund may
not invest in obligations of foreign branches of foreign banks. The Fund will
not invest in obligations for which the New York Branch (the 'Branch' or the
'Adviser') of Union Bank of Switzerland (the 'Bank'), or any of its affiliated
persons, is the ultimate obligor or accepting bank. The Fund may not invest in
obligations of international banking institutions designated or supported by
national governments to promote economic reconstruction, development or trade
between nations (e.g., the European Investment Bank, the Inter-American
Development Bank or the World Bank).

COMMERCIAL PAPER. The Fund may invest in commercial paper, including Master
Demand obligations. Master Demand obligations are obligations that provide for a
periodic adjustment in the interest rate paid and permit daily changes in the
amount borrowed. Master Demand obligations are governed by agreements between
the issuer and the Adviser acting as agent, for no additional fee, in its
capacity as investment adviser to the Fund and as a fiduciary for other clients
for whom it exercises investment discretion. The monies loaned to the borrower
come from accounts managed by the Adviser or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. The Adviser, acting as a fiduciary on behalf of its clients, has
the right to increase or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty all or any part of
the principal amount then outstanding on an obligation together with interest to
the date of payment. Because these obligations typically provide that the
interest rate is tied to the Federal Reserve commercial paper composite rate,
the rate on Master Demand obligations is subject to change. Repayment of a
Master Demand obligation to participating accounts depends on the ability of the
borrower to pay the accrued interest and principal of the obligation on demand,
which is continuously monitored by the Adviser. Because Master Demand
obligations typically are not rated by credit rating agencies, the Fund may
invest in such unrated obligations only if at the time of an investment the
obligation is determined by the Adviser to have a credit quality which satisfies
the Fund's quality restrictions. See 'Investment Objective and Policies --
Quality and Diversification Requirements'. Although there is no secondary market
for Master Demand obligations, such obligations are considered to be liquid
because they are payable upon demand. The Fund does not have any specific
percentage limitation on investments in Master Demand obligations.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
brokers, dealers or banks that meet the credit guidelines approved by the
Company's Board of Directors (the 'Directors' or the 'Board'). In a repurchase
agreement, the Fund buys a security from a seller that has agreed to repurchase
the same security at a mutually agreed upon date and price. The resale price
normally is in excess of the purchase price, reflecting an agreed upon interest
rate. This interest rate is effective for the period of time the Fund is
invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than thirteen
months. The securities that are subject to repurchase agreements, however, may
have maturity dates in excess of thirteen months from the effective date of the
repurchase agreement. The Fund will always receive securities as collateral
whose market value is, and during the entire term of the agreement remains, at
least equal to 100% of the dollar amount invested by the Fund in each agreement
plus accrued interest, and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the Custodian. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in

SAI-2

<PAGE>
<PAGE>
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of proceeds upon the disposition of the collateral by the Fund may
be delayed or limited.

CORPORATE BONDS AND OTHER DEBT SECURITIES

The Fund may invest up to 20% of its net assets in U.S. dollar-denominated
debt securities of domestic and foreign issuers the interest income on which may
be subject to federal, as well as state and local and foreign taxes. See
'Investment Objective and Policies' in the Prospectus.

TAX EXEMPT OBLIGATIONS

As discussed in the Prospectus, the Fund will invest in tax exempt
obligations to the extent consistent with its investment objective and policies.
The various types of tax exempt obligations that the Fund may purchase are
described in the Prospectus and below. See 'Investment Objective and Policies --
Quality and Diversification Requirements'.

MUNICIPAL BONDS. Municipal bonds are debt obligations issued by the states,
territories and possessions of the United States and the District of Columbia,
by their political subdivisions and by duly constituted authorities and
corporations. For example, states, territories, possessions and municipalities
may issue municipal bonds to raise funds for various public purposes such as
airports, housing, hospitals, mass transportation, schools, water and sewer
works. They may also issue municipal bonds to refund outstanding obligations and
to meet general operating expenses. Public authorities issue municipal bonds to
obtain funding for privately operated facilities, such as housing and pollution
control facilities, for industrial facilities or for water supply, gas,
electricity or waste disposal facilities.

Municipal bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from revenues derived from particular facilities, from the proceeds of a
special excise tax or from other specific revenue sources. They are not
generally payable from the general taxing power of a municipality.

MUNICIPAL NOTES. Municipal Notes are divided into three categories of
short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.

Municipal Notes are short-term obligations with a maturity at the time of
issuance ranging from six months to five years. The principal types of municipal
notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.

Municipal commercial paper typically consists of very short-term,
unsecured, negotiable promissory notes that are sold to meet the seasonal
working capital or interim construction financing needs of a municipality or
agency. While these obligations are intended to be paid from general revenues or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or institutions.

Municipal demand obligations are subdivided into two types: Variable Rate
Demand Notes and Master Demand obligations.

Variable Rate Demand Notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to demand payment of the notes,
or to demand purchase of the notes at a purchase price equal to the unpaid

SAI-3

<PAGE>
<PAGE>
principal balance, plus accrued interest either directly by the issuer or by
drawing on a bank's letter of credit or guaranty issued with respect to such
note. The issuer of the municipal obligation may have a corresponding right to
prepay at its discretion the outstanding principal of the note plus accrued
interest upon notice comparable to that required for the holder to demand
payment. The Variable Rate Demand Notes in which the Fund may invest are
payable, or are subject to purchase, on demand usually on notice of seven
calendar days or less. The terms of the notes provide that interest rates are
adjustable at intervals ranging from daily to six months, and the adjustments
are based upon the prime rate of a bank or other appropriate interest rate index
specified in the respective notes. Variable Rate Demand notes are valued at
amortized cost; no value is assigned to the right of the holder to receive the
par value of the obligation upon demand or notice.

Master Demand obligations are tax exempt municipal obligations that provide
for a periodic adjustment in the interest rate paid and permit daily changes in
the amount borrowed. The interest on such obligations is, in the opinion of
counsel for the borrower, exempt from federal income tax. For a description of
the attributes of Master Demand obligations, see 'Money Market Instruments'
above. Although there is no secondary market for Master Demand obligations, such
obligations are considered to be liquid because they are payable upon demand.
The Fund has no specific percentage limitations on investments in Master Demand
obligations.

PUTS. The Fund may purchase, without limit, municipal bonds or notes
together with the right to resell the bonds or notes to the seller at an agreed
price or yield within a specified period prior to the maturity date of the bonds
or notes. Such a right to resell is commonly known as a 'put'. The aggregate
price for bonds or notes with puts may be higher than the price for bonds or
notes without puts. Consistent with its investment objective and subject to the
supervision of the Board, the purpose of this practice is to permit the Fund to
be fully invested in tax exempt securities while preserving the necessary
liquidity to purchase securities on a when-issued basis, to meet unusually large
redemptions, and to purchase at a later date securities other than those subject
to the put. The principal risk of puts is that the writer of the put may default
on its obligation to repurchase. The Adviser will monitor each writer's ability
to meet its obligations under puts.

Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests. These
obligations may arise during periods in which proceeds from sales of interests
in the Fund and from recent sales of portfolio securities are insufficient to
meet such obligations or when the funds available are otherwise allocated for
investment. In addition, puts may be exercised prior to the expiration date in
order to take advantage of alternative investment opportunities or if the
Adviser revises its evaluation of the creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts prior to their
expiration date and in selecting which puts to exercise, the Adviser considers
the amount of cash available to the Fund, the expiration dates of the available
puts, any future commitments for securities purchases, alternative investment
opportunities, the desirability of retaining the underlying securities and the
yield, quality and maturity dates of the underlying securities.

The Fund values municipal bonds and notes subject to puts with remaining
maturities of less than 60 days by the amortized cost method. If the Fund
invests in municipal bonds and notes with maturities of 60 days or more that are
subject to puts separate from the underlying securities, the puts and the
underlying securities will be valued at fair value as determined in accordance
with procedures established by the Board. The Board will, in determining the
value of a put, consider, among other factors, the creditworthiness of the
writer of the put, the duration of the put, the dates on which or the periods
during which the put may be exercised and the applicable rules and regulations
of the Securities and Exchange Commission ('SEC'). Prior to investing in such
securities, the Fund, if deemed necessary based upon the advice of counsel, will
apply to the SEC for an exemptive order, which may not be granted, relating to
the valuation of such securities.

SAI-4

<PAGE>
<PAGE>
Because the value of the put is partly dependent on the ability of the put
writer to meet its obligation to repurchase, the Fund's policy is to enter into
put transactions only with municipal securities dealers who are approved by the
Adviser. Each dealer will be approved on its own merits and it is the Fund's
general policy to enter into put transactions only with those dealers that
present a minimal credit risk. In connection with such a determination, the
Board will regularly review the Adviser's list of approved dealers, which will
reflect the Adviser's consideration of, among other things, the ratings, if
available, of their debt securities, their reputation in the municipal
securities markets, their net worth, their efficiency in consummating
transactions and any collateral arrangements, such as letters of credit,
securing the puts written by them. Commercial bank dealers normally will be
members of the Federal Reserve System, and other dealers will be members of the
National Association of Securities Dealers, Inc. or members of a national
securities exchange. The Fund intends to limit its use of put writers to those
entities having an outstanding debt rating of Aa or better by Moody's Investors
Service, Inc. ('Moody's') or AA or better by Standard & Poor's Corporation
('Standard & Poor's'), or will be of comparable quality in the Adviser's opinion
or such put writers' obligations will be collateralized and of comparable
quality in the Adviser's opinion. The Board has directed the Adviser not to
enter into put transactions with any dealer that in the judgment of the Adviser
presents more than a minimal credit risk. If a dealer defaults on its obligation
to repurchase an underlying security, the Fund is unable to predict whether all
or any portion of any loss sustained could subsequently be recovered from such
dealer.

The Fund may also invest up to 20% of the value of its net assets in U.S.
dollar-denominated debt instruments of domestic and foreign issuers the interest
income on which may be subject to federal, as well as state and local and
foreign taxes. In abnormal market conditions, the Fund may, for defensive
purposes only, temporarily invest more than 20% of its net assets in debt
securities the interest on which is subject to federal income taxes. In no event
will the Fund invest more than 5% of its total assets in the securities of
foreign issuers. The Fund intends to limit its purchase of non-municipal debt
securities to those issuers rated at least Baa by Moody's or BBB by Standard and
Poor's or, if unrated, issuers of equal creditworthiness.

ADDITIONAL INVESTMENTS

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to the Fund until settlement takes place. At
the time the Fund commits to purchase securities on a when-issued or delayed
delivery basis, it will record the transaction, reflect the value of such
securities each day in determining its net asset value and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement, a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Fund will maintain with the
Custodian a segregated account with liquid assets, consisting of cash, U.S.
Government securities or other liquid securities, in an amount at least equal to
the value of such commitments. On delivery dates for such transactions, the Fund
will meet its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition, it could, as
with the disposition of any other portfolio obligation, incur a gain or loss due
to market fluctuation. It is the Fund's current policy not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
its total assets, less liabilities (excluding the obligations created by
when-issued commitments).

INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by the Fund to the extent that such purchases are consistent with
its investment objectives and restrictions and are permitted under the
Investment Company Act of 1940, as amended (the '1940 Act'). The 1940 Act
requires that, as determined immediately after a purchase is made, (i) not more
than 5% of the value of

SAI-5

<PAGE>
<PAGE>
the Fund's total assets will be invested in the securities of any one investment
company, (ii) not more than 10% of the value of the Fund's total assets will be
invested in securities of investment companies as a group and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Fund would bear in
connection with its own operations.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement, the Fund sells a security and
agrees to repurchase the same security at a mutually agreed upon date and price.
For purposes of the 1940 Act, reverse repurchase agreements are considered
borrowings by the Fund and, therefore, a form of leverage. The Fund will invest
the proceeds of borrowings under reverse repurchase agreements. In addition, the
Fund will enter into a reverse repurchase agreement only when the interest
income to be earned from the investment of the proceeds is greater than the
interest expense of the repurchase agreement. The Fund will not invest the
proceeds of a reverse repurchase agreement for a period that exceeds the term of
the reverse repurchase agreement. The Fund may not enter into reverse repurchase
agreements if such repurchase agreements, together with the Fund's other
borrowings, would exceed 10% of the Fund's total assets, less liabilities
(excluding obligations created by such borrowings and reverse repurchase
agreements). See 'Investment Restrictions'. The Fund will establish and maintain
with the Custodian a separate account with a portfolio of securities in an
amount at least equal to its obligations under its reverse repurchase
agreements.

SECURITIES LENDING. The Fund may lend its securities if such loans are
secured continuously by cash or equivalent collateral or by a letter of credit
in favor of the Fund at least equal at all times to 100% of the market value of
the securities loaned, plus accrued interest. While such securities are on loan,
the borrower will pay the Fund any income accruing thereon. Loans will be
subject to termination by the Fund in the normal settlement time, generally
three business days after notice, or by the borrower on one day's notice.
Borrowed securities must be returned when the loan is terminated. Any gain or
loss in the market price of the borrowed securities that occurs during the term
of the loan inures to the benefit of the Fund. The Fund may pay reasonable
finders' and custodial fees in connection with a loan. In addition, the Fund
will consider all facts and circumstances including the creditworthiness of the
borrowing financial institution and the Fund will not make any loans in excess
of one year. The Fund will not lend its securities to any officer, Director,
employee, or affiliate or placement agent of the Company, or the Adviser,
Administrator or Distributor, unless otherwise permitted by applicable law.

PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Fund may invest
in privately placed, restricted, Rule 144A or other unregistered securities as
described in the Prospectus.

As to illiquid investments, the Fund is subject to a risk that it might not
be able to sell such securities at a price that the Fund deems reflective of
their value. Where an illiquid security must be registered under the Securities
Act of 1933, as amended (the 'Securities Act'), before it may be resold, the
Fund may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time the Fund decides to sell and the
time the Fund is permitted to sell under an effective registration statement.
If, during such a period, adverse market conditions develop, the Fund might
obtain a less favorable price than that which prevailed when it decided to sell.

SYNTHETIC VARIABLE RATE INSTRUMENTS. The Fund may invest in certain
synthetic variable rate instruments as described in the Prospectus. In the case
of some types of instruments, credit enhancements are not provided and if
certain events occur, including a default in the payment of principal or
interest on the underlying bond, a downgrading of the bond below investment
grade or a loss of the bond's tax exempt status then the put will terminate and
the Fund will bear the risk of holding a long-term bond.

SAI-6

<PAGE>
<PAGE>
QUALITY AND DIVERSIFICATION REQUIREMENTS

The Fund intends to meet the diversification requirements of the 1940 Act.
To meet these requirements, 75% of the Fund's assets are subject to the
following fundamental limitation: the Fund may not invest more than 5% of its
total assets in the securities of any one issuer, except obligations of the U.S.
Government, its agencies and instrumentalities. As for the 25% of the Fund's
assets not subject to the limitation described above, there is no limitation on
investment of these assets under the 1940 Act, so that all of such assets may be
invested in securities of any one issuer, subject to the limitation of any
applicable state securities laws. Investments not subject to the limitations
described above could involve an increased risk to the Fund should an issuer, or
a state or its related entities, be unable to make interest or principal
payments or should the market value of such securities decline.

For purposes of diversification and concentration under the 1940 Act,
identification of the issuer of municipal bonds or notes depends on the terms
and conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision is regarded
as the sole issuer. Similarly, in the case of an industrial development revenue
bond or pollution control revenue bond, if the bond is backed only by the assets
and revenues of the nongovernmental user, the nongovernmental user is regarded
as the sole issuer. If in either case the creating government or another entity
guarantees an obligation, the guaranty is regarded as a separate security and
treated as an issue of such guarantor. Because securities issued or guaranteed
by states or municipalities are not voting securities, there is no limitation on
the percentage of a single issuer's securities that the Fund may own so long as
it does not invest more than 5% of its total assets that are subject to the
diversification limitation in the securities of such issuer, except obligations
issued or guaranteed by the U.S. Government. Consequently, the Fund may invest
in a greater percentage of the outstanding securities of a single issuer than
would an investment company that invests in voting securities. See 'Investment
Restrictions'.

The Fund invests principally in a diversified portfolio of 'high grade' and
'investment grade' tax exempt securities. On the date of investment (i)
municipal bonds must be rated within the four highest ratings of Moody's,
currently Aaa, Aa, A, and Baa, or of Standard & Poor's, currently AAA, AA, A,
and BBB, (ii) municipal notes must be rated MIG-1 by Moody's or SP-1 by Standard
& Poor's (or, in the case of New York State municipal notes, MIG-1 or MIG-2 by
Moody's or SP-1 or SP-2 by Standard & Poor's) and (iii) municipal commercial
paper must be rated Prime-1 by Moody's or A1 by Standard & Poor's or, if not
rated by either Moody's or Standard & Poor's, issued by an issuer either (a)
having an outstanding debt issue rated A or higher by Moody's or Standard &
Poor's or (b) having comparable quality in the opinion of the Adviser. The Fund
may invest in other tax exempt securities that are not rated if, in the opinion
of the Adviser, such securities are of comparable quality to the rated
securities discussed above. In addition, at the time the Fund invests in any
commercial paper, bank obligation, repurchase agreement, or other debt
obligations, the issuer must have outstanding debt rated Baa or BBB or higher by
Moody's or Standard & Poor's, respectively, the issuer's parent corporation, if
any, must have outstanding commercial paper rated Prime-1 by Moody's or A-1 by
Standard & Poor's, or if no such ratings are available, the investment must be
of comparable quality in the Adviser's opinion.

OPTIONS AND FUTURES TRANSACTIONS

EXCHANGE TRADED AND OVER THE COUNTER OPTIONS. All options purchased or sold
by the Fund will be exchange traded or will be purchased or sold by securities
dealers ('over-the-counter' or 'OTC options') that meet creditworthiness
standards approved by the Board. Exchange-traded options are obligations of the
Options Clearing Corporation. In OTC options, the Fund relies on the dealer from
which it purchased the option to perform if the option is exercised. Thus, when
a Fund purchases an OTC option, it relies on the dealer from which it purchased
the option to make or take delivery of the

SAI-7

<PAGE>
<PAGE>
underlying securities. Failure by the dealer to do so would result in the loss
of the premium paid by the Fund as well as loss of the expected benefit of the
transaction.

The staff of the SEC has taken the position that, in general, purchased OTC
options and the underlying securities used to cover written OTC options are
illiquid securities. However, the Fund may treat as liquid the underlying
securities used to cover written OTC options, provided it has arrangements with
certain qualified dealers who agree that the Fund may repurchase any option it
writes for a maximum price to be calculated by a predetermined formula. In these
cases, the OTC option itself would only be considered illiquid to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund is permitted
to enter into futures and options transactions and may purchase or sell futures
contracts and purchase or sell put and call options, including put and call
options on futures contracts. Futures contracts obligate the buyer to take and
the seller to deliver at a future date a specified quantity of a financial
instrument or an amount of cash based on the value of a securities index or
financial instrument. Currently, futures contracts are available on various
types of fixed-income securities, including but not limited to U.S. Treasury
bonds, notes and bills, Eurodollar certificates of deposit and on indices of
fixed income securities.

COMBINED POSITIONS. The Fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, the
Fund may 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 options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.

CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not exactly match the
Fund's current or anticipated investments. The Fund may invest in options and
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.

Options and futures contract prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund's investments well. Options and futures contracts prices are affected by
such factors as current and anticipated short-term interest rates, changes in
volatility 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

SAI-8

<PAGE>
<PAGE>
and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in the Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and could potentially
require the Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, the Fund's access to other
assets held to cover its options or futures positions could also be impaired.
See 'Exchange Traded and Over the Counter Options' above for a discussion of the
liquidity of options not traded on an exchange.

POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, the Fund or the Adviser may be required
to reduce the size of its futures and options positions or may not be able to
trade a certain futures or options contract in order to avoid exceeding such
limits.

ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Fund
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which the Fund can commit assets to
initial margin deposits and option premiums. In addition, the Fund will comply
with SEC guidelines with respect to coverage of options and futures contracts by
mutual funds, and if the guidelines so require, will set aside appropriate
liquid assets in a segregated custodial account in the amount prescribed.
Securities held in a segregated account cannot be sold and will be considered
illiquid while the futures contract or option is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility that
the segregation of a large percentage of the Fund's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental and non-fundamental
investment restrictions (as defined and distinguished below); to the extent that
a fundamental policy and non-fundamental policy apply to a given investment
activity or strategy, the more restrictive policy shall govern.

FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions below have
been adopted by the Directors with respect to the Fund. Except where otherwise
noted, these investment restrictions are 'fundamental' policies which, under the
1940 Act, may not be changed without the 'vote of a majority of the outstanding
voting securities' of the Fund. The 'vote of a majority of the outstanding
voting securities' under the 1940 Act is the lesser of (a) 67% or more of the
Fund's voting shares present at a shareholders' meeting if the holders of more
than 50% of the outstanding voting shares are present or represented by proxy,
or (b) more than 50% of the Fund's outstanding voting shares. The limitations
described below apply at the time the Fund purchases the securities.

SAI-9

<PAGE>
<PAGE>
The Fund may not:

1. Borrow money, except from banks for extraordinary or emergency purposes and
then only in amounts up to one-third of the value of its total assets
(including the amount borrowed) taken at cost at the time of such borrowing,
less liabilities (not including the amount borrowed), or mortgage, pledge, or
hypothecate any assets, except in connection with any permitted borrowing or
reverse repurchase agreements (see Investment Restriction No. 7). It will not
purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of its net assets; provided, however, that it may
increase its interest in an open-end management investment company with the
same investment objective and restrictions while such borrowings are
outstanding and provided further that for purposes of this restriction,
short-term credits necessary for the clearance of transactions are not
considered borrowings. This borrowing provision facilitates the orderly sale
of portfolio securities, for example, in the event of abnormally heavy
redemption requests and is not for investment purposes. Collateral
arrangements for premium and margin payments in connection with its hedging
activities are not deemed to be a pledge of assets;

2. Purchase the securities of an issuer if, immediately after such purchase, it
owns more than 10% of the outstanding voting securities of such an issuer.
This limitation shall not apply to investments of up to 25% of its total
assets;

3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total
assets would be invested in securities or other obligations of any one such
issuer. Each state and each political subdivision, agency or instrumentality
of such state and each multi-state agency of which such state is a member
will be a separate issuer if the security is backed only by the assets and
revenue of that issuer. If the security is guaranteed by another entity, the
guarantor will be deemed to be the issuer.* This limitation shall not apply
to securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or to investments of up to 25% of the Fund's total assets;

4. Invest more than 25% of its total assets in securities of governmental units
located in any one state, territory, or possession of the United States;

5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of repurchase
agreements or loans of portfolio securities;

6. Purchase or sell real estate, commodities or commodity contracts or options
thereon (except for its interest in hedging activities and certain other
activities as described under 'Investment Objective and Policies'), interests
in oil, gas, or mineral exploration or development programs (including
limited partnerships). However, purchases of municipal bonds, notes,
commercial paper or other obligations secured by interests in real estate are
permitted;

7. Issue any senior security, except as appropriate to evidence indebtedness
that it is permitted to incur pursuant to Investment Restriction No. 1 and
except that it may enter into reverse repurchase agreements, provided that
the aggregate of all senior securities, including reverse repurchase
agreements, shall not exceed one-third of the market value of its total
assets (including the amounts borrowed), less liabilities (excluding
obligations created by such borrowings and reverse repurchase agreements).
Hedging activities as described in 'Investment Objective and Policies' shall
not be considered senior securities for purposes hereof; or

- ------------------------------------
*For purposes of interpretation of Investment Restriction No. 3,
'guaranteed by another entity' includes credit substitutions, such as letters of
credit or insurance, unless the Adviser determines that the security meets the
relevant credit standards without regard to the credit substitution.

SAI-10

<PAGE>
<PAGE>
8. Act as an underwriter of securities.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Fund and may be changed by
the Directors. These non-fundamental investment policies provide that the Fund
may not:

i. borrow money (including through reverse repurchase or forward
roll transactions) for any purpose in excess of 5% of the Fund's
total assets (taken at cost), except that the Fund may borrow for
temporary or emergency purposes up to one-third of its assets;

ii. pledge, mortgage or hypothecate for any purpose in excess of 10%
of the Fund's total assets (taken at market value), provided that
collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, and
reverse repurchase agreements are not considered a pledge of
assets for purposes of this restriction;

iii. purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained
and except that deposits of initial deposit and variation margin
may be made in connection with the purchase, ownership, holding
or sale of futures;

iv. sell securities it does not own such that the dollar amount of
such short sales at any one time exceeds 25% of the net equity of
the Fund, and the value of securities of any one issuer in which
the Fund is short exceeds the lesser of 2.0% of the value of the
Fund's net assets or 2.0% of the securities of any class of any
U.S. issuer, and provided that short sales may be made only in
those securities which are fully listed on a national securities
exchange or a foreign exchange (This provision does not include
the sale of securities the Fund contemporaneously owns or where
the Fund has the right to obtain securities equivalent in kind
and amount to those sold, i.e., short sales against the box.)
(The Fund has no current intention to engage in short selling.);

v. invest for the purpose of exercising control or management;

vi. purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of merger
or consolidation; provided, however, that securities of any
investment company will not be purchased for the Fund if such
purchase at the time thereof would cause (a) more than 10% of the
Fund's total assets (taken at the greater of cost or market
value) to be invested in the securities of such issuers; (b) more
than 5% of the Fund's total assets (taken at the greater of cost
or market value) to be invested in any one investment company; or
(c) more than 3% of the outstanding voting securities of any such
issuer to be held for the Fund; provided further that, except in
the case of a merger or consolidation, the Fund shall not
purchase any securities of any open-end investment company unless
(1) the Fund's investment adviser waives the investment advisory
fee with respect to assets invested in other open-end investment
companies and (2) the Fund incurs no sales charge in connection
with that investment;

vii. invest more than 10% of the Fund's total assets (taken at the
greater of cost or market value) in securities (excluding Rule
144A securities) that are restricted as to resale under the 1933
Act;

viii. invest more than 15% of the Fund's total assets (taken at the
greater of cost or market value) in (a) securities (excluding
Rule 144A securities) that are restricted as to resale under the
1933 Act, and (b) securities that are issued by issuers which
(including

SAI-11

<PAGE>
<PAGE>
predecessors) have been in operation less than three years (other
than U.S. Government securities), provided, however, that no more
than 5% of the Fund's total assets are invested in securities
issued by issuers which (including predecessors) have been in
operation less than three years;

ix. invest more than 15% of the Fund's net assets (taken at the
greater of cost or market value) in securities that are illiquid
or not readily marketable (excluding Rule 144A securities deemed
by the Board of Directors of the Fund to be liquid);

x. invest in securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Director
of the Fund, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer for the Fund
one or more of such persons own beneficially more than 1/2 of 1%
of the shares or securities, or both, all taken at market value,
of such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5%
of such shares or securities, or both, all taken at market value;

xi. invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the Fund's net assets or
if, as a result, more than 2% of the Fund's net assets would be
invested in warrants not listed on a recognized United States or
foreign stock exchange, to the extent permitted by applicable
state securities laws;

xii. write puts and calls on securities unless each of the following
conditions are met: (a) the security underlying the put or call
is within the investment policies of the Fund and the option is
issued by the Options Clearing Corporation, except for put and
call options issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the aggregate value of
the obligations underlying the puts determined as of the date the
options are sold shall not exceed 5% of the Fund's net assets;
(c) the securities subject to the exercise of the call written by
the Fund must be owned by the Fund at the time the call is sold
and must continue to be owned by the Fund until the call has been
exercised, has lapsed, or the Fund has purchased a closing call,
and such purchase has been confirmed, thereby extinguishing the
Fund's obligation to deliver securities pursuant to the call it
has sold; and (d) at the time a put is written, the Fund
establishes a segregated account with its custodian consisting of
cash or short-term U.S. Government securities equal in value to
the amount the Fund will be obligated to pay upon exercise of the
put (this account must be maintained until the put is exercised,
has expired, or the Fund has purchased a closing put, which is a
put of the same series as the one previously written);

xiii. buy and sell puts and calls on securities, stock index futures or
options on stock index futures, or financial futures or options
on financial futures unless: (a) the options or futures are
offered through the facilities of a national securities
association or are listed on a national securities or commodities
exchange, except for put and call options issued by non-U.S.
entities or listed on non-U.S. securities or commodities
exchanges; (b) the aggregate premiums paid on all such options
which are held at any time do not exceed 20% of the Fund's total
net assets; (c) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5%
of the Fund's total assets; and (d) such activities are permitted
by Regulation 4.5 under the Commodity Exchange Act. and

There will be no violation of any investment restriction if that investment
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment or any other later change.

SAI-12

<PAGE>
<PAGE>
DIRECTORS

The Company's Board consists of three directors. The Board is responsible
for the overall management of the Fund, including the general supervision and
review of its investment activities. The Board, in turn, elects the officers of
the Company. The addresses and principal occupations of the Company's Directors
and officers are listed below. As of April 1, 1998, the Directors and officers
of the Company owned of record, as a group, less than 1% of the outstanding
shares of the Company. None of the Company's Directors or officers receives
compensation from the Company exceeding $60,000 per fiscal year.

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 coast
New York, NY 10105 investment advisor and venture capital firm), President and
Age: 49 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-Present); Smith & Hawken (mail order supplier of
gardening tools and clothing), Director and Chief Financial
Officer (1990-1992); Concord Holding Corporation (provides
distribution and administrative services to mutual funds),
Director (1989-1995); active in civic/charitable
organizations in the San Francisco, California area,
including Big Brothers/Big Sisters and United Way.

Peter Lawson-Johnston Director UBS Investor Portfolios Trust, Trustee (February 1996-
299 Park Avenue Present); Zemex Corporation (mining), Chairman of the Board
New York, NY 10171 and Director (1990-Present); McGraw-Hill, Inc. (publishing),
Age: 71 Director (1990-Present); National Review, Inc. (publishing),

Director (1990-Present); Guggenheim Brothers (real
estate -- venture capital partnership), Partner (1990-
Present); Elgerbar Corporation (holding company), President
and Director (1990-Present); The Solomon R. Guggenheim
Foundation (operates the Solomon R. Guggenheim Museum in New
York and the Peggy Guggenheim Collection in Venice, Italy),
Chairman and Trustee (1990-Present); The Harry Frank
Guggenheim Foundation (charitable organization), Chairman of
the Board and Trustee (1990-Present).

Paul J. Jasinski President Managing Director, Investors Bank & Trust Company (1990-
200 Clarendon Street Present)
Boston, MA 02116
Age: 51

Nicholas G. Chunias Treasurer Director, Mutual Fund Administration -- Reporting and
200 Clarendon Street and Chief Compliance, Investors Bank & Trust Company, (1996-Present);
Boston, Massachusetts 02116 Financial Director, Fund Accounting, Investors Bank & Trust Company,
Age: 33 Officer (1993-1996); Account Supervisor, Coopers & Lybrand, LLP,
(1992-1993).
</TABLE>

(table continued on next page)

SAI-13

<PAGE>
<PAGE>
(table continued from previous page)

- ------------

* 'Interested Person' within the meaning of the 1940 Act.

COMPENSATION TABLE*

<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM COMPANY AND
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX PAID
NAME OF PERSON, POSITION FROM COMPANY FUND EXPENSES UPON RETIREMENT TO DIRECTORS
- ---------------------------------- ------------ ------------------- --------------- ------------------

<S> <C> <C> <C> <C>
Dr. Lochmeier 0 0 0 0
Director
Mr. Spicer $11,250 0 0 $23,250**
Director
Mr. Lawson-Johnston $11,250 0 0 $23,250**
Director
</TABLE>

- ------------------------------------
*The Directors are also reimbursed for all reasonable expenses incurred
during the execution of their duties.

**The other entity in the Fund Complex is UBS Investor Portfolios Trust.

INVESTMENT ADVISER

Pursuant to an Investment Advisory Agreement between the Company and the
Branch, the Branch serves as the Fund's investment adviser. Subject to the
supervision of the Directors, the Adviser makes the Fund's day-to-day investment
decisions, arranges for the execution of portfolio transactions, generally
manages the Fund's investments and provides certain administrative services.

The investment advisory services provided by the Branch to the Fund are not
exclusive under the terms of the Investment Advisory Agreement. The Branch is
free to and does render similar investment advisory services to others. The
Branch serves as investment adviser to personal investors and acts as fiduciary
for trusts, estates and employee benefit plans. Certain of the assets of trusts
and estates under management are invested in common trust funds for which the
Branch serves as trustee. The accounts managed or advised by the Branch have
varying investment objectives and the Branch invests assets of such accounts in
investments substantially similar to, or the same as, the Fund's. Such accounts
are supervised by officers and employees of the Branch who may also be acting in
similar capacities for the Fund. See 'Portfolio Transactions'.

The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank, through its offices and subsidiaries, engages in a wide range of banking
and financial activities typical of the world's major international banks,
including fiduciary, investment advisory and custodial services and foreign
exchange in the United States, Swiss, Asian and Euro-capital markets. The Bank
is one of the world's leading asset managers and has been active in New York
City since 1946. At December 31, 1997, the Bank (including its consolidated
subsidiaries) had total assets of $395.1 billion (unaudited) and equity capital
and reserves of $14.4 billion (unaudited). On December 8, 1997, the Bank

SAI-14

and Swiss Bank Corporation ('Swiss Bank') announced their intention to merge
(the 'Merger Transaction') the Bank with Swiss Bank to form a new company
expected to be called UBS. In February, 1998, the shareholders of UBS and Swiss
Bank overwhelmingly approved the proposed Merger Transaction. The Merger
Transaction's completion is still subject to a number of conditions, including
the receipt of regulatory approvals.

In addition to the above discussed advisory services, the Adviser also
provides certain administrative services to the Fund. In this capacity, the
Adviser, subject to the supervision of the Board, is also responsible for:
establishing performance standards for the Fund's third-party service providers
and overseeing and evaluating the performance of such entities; providing and
presenting quarterly management reports to the Directors; supervising the
preparation of reports for Fund shareholders; establishing voluntary expense
limitations for the Fund and providing any resultant expense reimbursement to
the Fund; and such other related services as the Company may reasonably request.

Under the Investment Advisory Agreement, the Fund will pay the Adviser a
fee, calculated daily and payable monthly, at an annual rate of 0.45% of the
Fund's average net assets. The Branch has voluntarily agreed to waive its fees
and reimburse the Fund for any of its expenses to the extent that the Fund's
total operating expenses exceed, on an annual basis, 0.80% of the Fund's average
daily net assets. The Branch may modify or discontinue this fee waiver and
expense limitation at any time in the future with 30 days' notice to the Fund.
See 'Expenses'.

The Investment Advisory Agreement will continue in effect until February
1999, and thereafter will be subject to annual approval by the Directors or the
vote of a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act), provided that in either case the continuance also is approved by
a majority of the Directors who are not interested persons (as defined in the
1940 Act) of the Company by vote cast in person at a meeting called for the
purpose of voting on such approval. The Investment Advisory Agreement will
terminate automatically if assigned and is terminable at any time without
penalty by a vote of a majority of the Directors or by a vote of the holders of
a majority (as defined in the 1940 Act) of the Fund's outstanding shares on 60
days' written notice to the Adviser. The Investment Advisory Agreement is also
terminable by the Adviser on 60 days' written notice to the Fund. See
'Additional Information'.

The Glass-Steagall Act and other applicable laws generally prohibit banks,
such as Union Bank of Switzerland, from engaging in the business of underwriting
or distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Company. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment adviser and custodian to such an
investment company. The Adviser believes that it may perform the services for
the Fund contemplated by the Investment Advisory Agreement without violating the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent the Adviser from continuing to perform such services for the Fund.

If the Adviser were prohibited from acting as the Fund's investment
adviser, it is expected that the Directors would recommend to shareholders that
they approve the Fund's entering into a new investment advisory agreement with
another qualified investment adviser selected by the Board.

ADMINISTRATOR
The Trust and the Company employs Investors Bank & Trust Company
('Investors Bank') as Administrator under an Administration Agreement (the
'Administration Agreement') to provide certain

SAI-15

administrative services. The services provided by Investors Bank under the
Administration Agreement include certain accounting, clerical and bookkeeping
services, Blue Sky, corporate secretarial services and assistance in the
preparation and filing of tax returns and reports to shareholders and the SEC.
Investors Bank 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, the Fund pays Investors Bank 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. Investors Bank does not receive a fee from the Fund on average daily
net assets in excess of $200 million.

The Administration Agreement may be renewed or amended by the Directors or
Trustees, as applicable, without shareholder vote. The Administration Agreement
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 Administrator may subcontract for the performance of
their obligations under the Administration Agreement 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.

The Administrative Services Agreement may be renewed or amended by the
Directors without shareholder vote. This agreement is terminable at any time
without penalty by a vote of a majority of the Directors or the Administrator on
not less than 60 days' written notice to the other party. The Administrator may
subcontract for the performance of its obligations under the Administrative
Services Agreement with the prior written consent of the Directors. If the
Administrator subcontracts all or a portion of its duties to another party, the
Administrator shall be as fully responsible for the acts and omissions of any
such subcontractor(s) as it would be for its own acts or omissions.

DISTRIBUTOR

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 Investors Bank.

CUSTODIAN

Investors Bank (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 M5X 1C8, while its duties as the Funds' transfer agent and
dividend disbursing agent will be performed at its offices located at 200
Clarendon Street, Boston, Massachusetts 02116. 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.

SAI-16

The Custodian will perform its duties as the Fund's transfer agent and
dividend disbursing agent from its offices located at 89 South Street, Boston,
Massachusetts 02111.

SHAREHOLDER SERVICES

The Company, on behalf of the Fund, has entered into a Shareholder
Servicing Agreement with the Branch under which the Branch provides shareholder
services to Fund shareholders, which include performing shareholder account
administrative and servicing functions such as answering inquiries regarding
account status and history, the manner in which purchases and redemptions of
shares may be made and certain other matters pertaining to the Fund, assisting
customers in designating and changing dividend options, account designations and
addresses, providing necessary personnel and facilities to coordinate the
establishment and maintenance of shareholder accounts and records with the
Fund's Distributor and transfer agent, assisting investors seeking to purchase
or redeem Fund shares, arranging for the wiring or other transfer of funds to
and from customer accounts in connection with orders to purchase or redeem Fund
shares, verifying purchase and redemption orders, transfers among and changes in
accounts and providing other related services. In return for these services, the
Company has agreed to pay the Branch a fee, at an annual rate of 0.25% of the
average daily net assets of the Fund.

As discussed under 'Investment Adviser', the Glass-Steagall Act and other
applicable laws and regulations limit the activities of bank holding companies
and certain of their subsidiaries in connection with registered open-end
investment companies. The activities of the Branch as a shareholder servicing
agent under a Shareholder Servicing Agreement and as adviser to the Fund under
the Investment Advisory Agreement may raise issues under these laws. However,
the Branch believes that it may properly perform these services and the other
activities described herein and in the Prospectus without violating the
Glass-Steagall Act or other applicable banking laws or regulations.

If the Branch were prohibited from providing its respective services under
the above noted agreements, the Directors would seek an alternative provider of
such services. In such an event, changes in the operation of the Fund might
occur and shareholders might not receive the same level of service previously
provided by the Branch.

INDEPENDENT ACCOUNTANTS

The Company's independent accounting firm is Price Waterhouse LLP, 1177
Avenue of the Americas, New York, New York 10036. The U.S. Firm of Price
Waterhouse is a Registered Limited Liability Partnership (LLP) under the laws of
the State of Delaware. Price Waterhouse LLP will conduct an annual audit of the
financial statements of the Fund, assist in the review of the federal and state
income tax returns of the Fund and consult with the Fund as to matters of
accounting and federal and state income taxation.

EXPENSES

The Fund is responsible for the fees and expenses attributable to it.

The Branch has 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.

SAI-17

PURCHASE OF SHARES

Investors may purchase Fund shares as described in the Prospectus under
'Purchase of Shares'. Fund shares are sold on a continuous basis without a sales
charge at the net asset value per share next determined after receipt of a
purchase order.

The minimum investment requirement for accounts established for the benefit
of minors under the 'Uniform Gift to Minors Act' is $5,000. The minimum
subsequent investment is $1,000. The minimum investment requirement for
employees of the Bank and its affiliates is $5,000. The minimum subsequent
investment is $1,000.

The Fund may, at its own option, accept securities in payment for shares.
The securities tendered are valued by the methods described in 'Net Asset Value'
as of the day the Fund shares are purchased. This is a taxable transaction to
the investor. Securities may be accepted in payment for shares only if they are,
in the judgment of the Adviser, appropriate investments for the Fund. In
addition, securities accepted in payment for shares must: (i) meet the Fund's
investment objective and policies; (ii) be acquired by the Fund for investment
and not for resale; (iii) be liquid securities that are not restricted as to
transfer either by law or by market liquidity; and (iv) have a value that is
readily ascertainable, as evidenced by a listing on a stock exchange,
over-the-counter market or by readily available market quotations from a dealer
in such securities. The Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.

REDEMPTION OF SHARES

Investors may redeem Fund shares as described in the Prospectus under
'Redemption of Shares'.

If the Directors determine that it would be detrimental to the best
interest of the remaining shareholders of the Fund to effect redemptions wholly
or partly in cash, payment of the redemption price may be made in whole or in
part by an in-kind distribution of securities, in lieu of cash, in conformity
with applicable SEC rules. If shares are redeemed in-kind, the redeeming
shareholder might incur transaction costs in converting the securities into
cash. The methods of valuing portfolio securities distributed to a shareholder
are described under 'Net Asset Value', and such valuations will be made at the
same time the redemption price is determined.

FURTHER REDEMPTION INFORMATION. The right of redemption may be suspended or
the date of payment postponed: (i) during periods when the New York Stock
Exchange (the 'NYSE') is closed for other than weekends and holidays or when
trading on the NYSE is suspended or restricted; (ii) during periods in which an
emergency exists, as determined by the SEC, which causes the disposal of, or
evaluation of the net asset value of, the Fund's securities to be unreasonable
or impracticable; or (iii) for such other periods as the 1940 Act or the SEC may
permit.

EXCHANGE OF SHARES

An investor may exchange Fund shares for shares of any other series of the
Company as described under 'Exchange of Shares' in each such series' prospectus.
Investors considering an exchange of Fund shares for shares of another Company
series should read the prospectus of the series into which the transfer is being
made prior to such exchange (see 'Purchase of Shares'). Requests for exchange
are made in the same manner as requests for redemptions (see 'Redemption of
Shares'). Shares of the acquired series are

SAI-18

<PAGE>
<PAGE>
purchased for settlement when the proceeds from redemption become available.
Certain state securities laws may restrict the availability of the exchange
privilege. The Company reserves the right to discontinue, alter or limit this
exchange privilege at any time.

DIVIDENDS AND DISTRIBUTIONS

The Fund will declare and pay dividends and distributions as described
under 'Dividends and Distributions' in the Prospectus.

Determination of the net income for the Fund is made at the times described
in the Prospectus; in addition, net investment income for days other than
business days is determined at the time net asset value is determined on the
prior business day.

NET ASSET VALUE

The Fund computes its net asset value once daily at the close of business
on Monday through Friday as described under 'Net Asset Value' in the Prospectus.
The net asset value will not be computed on a day in which no orders to purchase
or redeem Fund shares have been received or on the following legal holidays: New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
On days when U.S. trading markets close early in observance of these holidays,
the Fund expects to close for purchases and redemptions at the same time.

The net asset value per share of the Fund equals the Fund's total assets
less its total liabilities, divided by the number of outstanding shares of the
Fund.

Securities with a maturity of 60 days or more, including securities that
are listed on an exchange or traded over-the-counter, are valued by the Fund by
using prices supplied daily by an independent pricing service(s). These prices
are based on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid and
asked prices, or in the absence of such prices, at the readily available closing
bid price on such exchange or at the quoted bid price in the over-the-counter
market, if such exchange or market constitutes the broadest and most
representative market for the security. In other cases, the pricing service
values the security by taking into account various factors affecting market
value, including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. All portfolio securities with
a remaining maturity of less than 60 days are valued by the amortized cost
method, whereby such securities are valued at acquisition cost as adjusted for
amortization of premium or accretion of discount to maturity. Because of the
large number of municipal bond issues outstanding and their varying maturity
dates, coupons and risk factors applicable to each issuer's books, no readily
available market quotations exist for most municipal securities.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Directors.

If market quotations for the Fund's securities are not readily available,
such securities will be valued at 'fair value' as determined in good faith by
the Directors.

SAI-19

PERFORMANCE DATA

From time to time, the Fund may quote performance in terms of yield, actual
distributions, total return or capital appreciation in reports, sales literature
and advertisements published by the Fund. Current performance information for
the Fund may be obtained by calling your Shareholder Servicing Agent. See
'Additional Information' in the Prospectus.

YIELD QUOTATIONS. As required by SEC regulations, the Fund's annualized
yield is computed by dividing the Fund's net investment income per share earned
during a 30-day period by its net asset value on the last day of the period. The
average daily number of Fund shares outstanding during the period that are
eligible to receive dividends is used in determining the net investment income
per share. Income is computed by totaling the interest earned on all debt
obligations during the period and subtracting from that amount the total of all
recurring expenses incurred during the period. The 30-day yield is then
annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income, as described under 'Additional
Information' in the Prospectus.

TAX EQUIVALENT YIELD QUOTATION. The tax equivalent annualized yield is
computed by first computing the annualized yield as discussed above. Then the
portion of the yield attributable to securities the income of which is exempt
for federal income tax purposes is determined. This portion of the yield is then
divided by one minus 39.6% (39.6% being the 1997 maximum marginal federal income
tax rate for married taxpayers filing jointly) and then added to the portion of
the yield that was not attributable to securities, the income of which was not
tax-exempt.

TOTAL RETURN QUOTATIONS. As required by SEC regulations, the Fund's average
annual total return for a period is computed by assuming a hypothetical initial
payment of $1,000. It is then assumed that all of the Fund's dividends and
distributions over the relevant period are reinvested. It is then assumed that
at the end of the period, the entire amount is redeemed. The average annual
total return is then calculated by determining the annual rate required for the
initial payment to grow to the amount which would have been received upon
redemption (i.e., the average annual compound rate of return).

Aggregate total returns, reflecting the cumulative percentage change over a
measuring period, may also be calculated.

GENERAL. The Fund's performance will vary from time-to-time depending upon
market conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for the future. In addition, because
performance will fluctuate, it may not provide a basis for comparing an
investment in the Fund with certain bank deposits or other investments that pay
a fixed yield or return for a stated period of time.

Comparative performance information may be used from time-to-time in
advertising the Fund's shares, including data from Lipper Analytic Services,
Morningstar Inc. and other industry publications.

PORTFOLIO TRANSACTIONS

The Adviser places orders for all purchases and sales of securities on
behalf of the Fund. The Adviser enters into repurchase agreements and reverse
repurchase agreements and effects loans of portfolio securities on behalf of the
Fund. See 'Investment Objective and Policies'.

SAI-20

<PAGE>
<PAGE>
underwriter's concession or discount. Occasionally, certain securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.

The Fund's portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to expected movements in the general
level of interest rates. The Fund may, however, engage in short-term trading
consistent with this objective. In connection with the Fund's portfolio
transactions, the Adviser intends to seek best price and execution on a
competitive basis for both purchases and sales of securities. Portfolio turnover
may vary from year to year, as well as within a year. The annual portfolio
turnover rate for the Fund is expected to be under 100%.

Portfolio securities will not be purchased from or through or sold to or
through the Distributor or an 'affiliated person' of the Fund or an 'affiliated
person' thereof (as defined in the 1940 Act) when such entities are acting as
principals, except to the extent permitted by law. In addition, the Fund will
not purchase securities during the existence of any underwriting group relating
thereto of which the Adviser or an affiliate of the Adviser is a member, except
to the extent permitted by law.

On those occasions when the Adviser deems the purchase or sale of a
security to be in the Fund's best interests as well as other customers, the
Adviser to the extent permitted by applicable laws and regulations may, but is
not obligated to, aggregate the securities to be sold or purchased for the Fund
with those to be sold or purchased for other customers in order to obtain best
execution, including lower brokerage commissions if appropriate. In such an
event, the securities so purchased or sold as well as any expenses incurred in
the transaction will be allocated by the Adviser in the manner it considers to
be most equitable and consistent with its fiduciary obligations to its
customers. In some instances, this procedure might adversely affect the Fund.

If the Fund writes an option and effects a closing purchase transaction
with respect to such an option, the transaction will normally be executed by the
same broker-dealer who executed the sale of the option. The writing of options
by the Fund will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class that may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options that the Fund may write may be affected by options written by the
Adviser for other investment advisory clients. An exchange may order the
liquidation of positions found to be in excess of these limits and it may impose
certain other sanctions.

ORGANIZATION

UBS PRIVATE INVESTOR FUNDS, INC.

UBS Private Investor Funds, Inc. is a Maryland corporation and is currently
issuing shares of common stock, par value $0.001 per share, in nine series: The
UBS Bond Fund Series; The UBS High Yield Bond Fund Series; The UBS Tax Exempt
Bond Fund Series; The UBS Institutional International Equity Fund Series; The
UBS Large Cap Growth Fund Series; The UBS Small Cap Fund Series; The UBS Value
Equity Fund Series; The UBS International Equity Fund Series; and The UBS Real
Estate 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
eight 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

SAI-21

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.

CONTROL PERSONS. The Company expects that, immediately prior to the initial
public offering of its shares, the sole holder of the capital stock of each of
its series will be the Distributor. Upon the offering of the Fund shares, the
Fund may have a number of shareholders each holding 5% or more of the Fund's
outstanding shares. In such an event, the Company cannot predict the length of
time that such persons will own such amounts or whether one or more of such
persons will become 'control' persons of the Fund.

TAXES

The Fund intends to annually qualify and elect to be treated as a regulated
investment company (a 'RIC') under Subchapter M of the Code. As a RIC, the Fund
must, among other things: (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock or securities and other income
(including but not limited to gains from options, futures, and forward
contracts) derived with respect to its business of investing in such stock or
securities; (b) derive less than 30% of its gross income from the sale or other
disposition of stock, securities, options, futures or forward contracts held
less than three months; and (c) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is
represented by cash, U.S. Government securities, investments in other RICs and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the Fund's total assets and 10% of the outstanding voting securities
of such issuer and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other RICs). As a RIC, the Fund (as opposed to
its shareholders) will not be subject to federal income taxes on the net
investment income and capital gains that it distributes to its shareholders,
provided that at least 90% of its net investment income and realized net
short-term capital gains in excess of net long-term capital losses for the
taxable year is distributed.

For federal income tax purposes, dividends that are declared by the Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.

The Fund intends to qualify to pay exempt-interest dividends to its
shareholders by ensuring that, at the close of each quarter of each of its
taxable years, at least 50% of the value of its total assets will consist of tax
exempt securities. An exempt-interest dividend is that part of distribution made
by the Fund that consists of interest received by the Fund on tax exempt
securities less any expenses allocable to such interest, provided the 50% test
described above is met. Shareholders will not incur any federal income tax
liability on the amount of exempt-interest dividends received by them from the
Fund. In view of the investment policy of the Fund, it is expected that a
substantial portion of its dividends will be exempt-interest dividends, although
the Fund may from time to time realize and distribute net short-term and
long-term capital gains and may invest limited amounts in taxable securities.

Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, the Fund
acquires a put or writes a call with respect to such securities. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will be treated as gains and losses from the sale of securities. If
an option written by the Fund lapses or is terminated through a closing
transaction, such as a repurchase by

SAI-22

the Fund of the option from its holder, the Fund will realize a short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount paid by the Fund in the closing transaction. If securities are
purchased by the Fund pursuant to the exercise of a put option written by it,
the Fund's cost basis in the securities purchased will be reduced by the premium
received.

Options and futures contracts entered into by the Fund may create
'straddles' for U.S. federal income tax purposes that may affect the character
and timing of gains or losses realized by the Fund on options and futures
contracts or on the underlying securities. 'Straddles' may also result in the
loss of the holding period of underlying securities for purposes of the 30% of
gross income test described above, and therefore, the Fund's ability to enter
into options and futures contracts may be limited.

Certain options and futures contracts held by the Fund at the end of each
fiscal year will be required to be 'marked to market' for federal income tax
purposes i.e., treated as having been sold at market value. For such options and
futures contracts, 60% of any gain or loss recognized on these deemed sales and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss regardless of
how long the Fund has held such options or futures.

STATE AND LOCAL TAXES. The Fund may be subject to state or local taxes in
jurisdictions in which the Fund is deemed to be doing business. In addition, the
treatment of the Fund and its shareholders in those states that have income tax
laws might differ from treatment under the federal income tax laws. For example,
a portion of the dividends received by shareholders may be subject to state
income tax. Shareholders should consult their own tax advisors with respect to
any state or local taxes.

ADDITIONAL INFORMATION

This SAI does not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act and the 1940 Act with
respect to the securities offered hereby. Certain portions of this SAI have been
omitted pursuant to the rules and regulations of the SEC. The Registration
Statement, including the exhibits filed therewith, the Prospectus and the SAI,
may be examined at the office of the SEC, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549.

Statements contained in this SAI as to the contents of any agreement or
other document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such agreement or other document filed as an
exhibit to the Registration Statement of which this document forms a part, each
such statement being qualified in all respects by such reference.

SAI-23
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.- UBS TAX EXEMPT BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Cash............................................................. $25,000
Deferred organization costs...................................... 72,500
-------
Total Assets................................................ 97,500
-------
LIABILITIES
Organization costs payable....................................... 72,500
-------
NET ASSETS............................................................ $25,000
-------
-------
Shares Outstanding ($0.001 par value)................................. 250
-------
-------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE........ $100.00
-------
-------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par................................... $ 0
Additional paid-in capital....................................... 25,000
-------
-------
Net Assets, January 31, 1996.......................................... $25,000
-------
-------
</TABLE>

See Notes to Financial Statements.

F-1
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.-UBS TAX EXEMPT BOND FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
- --------------------------------------------------------------------------------

NOTE 1 -- GENERAL

UBS Private Investor Funds, Inc. (the 'Company') was organized as a Maryland
corporation on November 16, 1995. The Company consists of four series, as
follows: UBS Bond Fund, UBS Tax Exempt Bond Fund, UBS U.S. Equity Fund and UBS
International Equity Fund. The accompanying financial statements and notes
relate only to UBS Tax Exempt Bond Fund (the 'Fund').

Union Bank of Switzerland, New York Branch (the 'Branch') will serve as
investment adviser to the Fund. Signature Broker-Dealer Services, Inc.
('Signature') will serve as the Fund's administrator, principal underwriter and
distributor of the Fund's shares.

The Fund has had no operations through January 31, 1996, other than the sale to
Signature of 250 shares of the Fund for $25,000.

Organization costs incurred in connection with the organization and initial
registration of the Fund will be paid initially by the Branch and reimbursed by
the Fund. Such organization costs have been deferred and will be amortized
ratably over a period of sixty months from the commencement of operations. The
amount paid by the Fund on any redemption by Signature (or any subsequent
holder) of the Fund's initial shares will be reduced by the pro-rata portion of
any unamortized organization expenses of the Fund.

NOTE 2 -- AGREEMENTS

The Branch is expected to enter into an Investment Advisory Agreement with the
Fund. Pursuant to the terms of this agreement, the Branch will be responsible
for the provision of investment advice, portfolio management and certain
administrative services to the Fund. For its services, the Branch will be
entitled to a fee, accrued daily and payable monthly, at an annual rate of 0.45%
of the average net assets of the Fund.

Signature expects to enter into an Administrative Services Agreement with the
Company pursuant to which it will agree to administer the day-to-day operations
of the Fund subject to the direction and control of the Board of Directors of
the Company. For the services provided to the Fund, Signature will receive a
fee, accrued daily and payable monthly, at an annual rate of 0.10% of the Fund's
first $100 million average net assets, 0.075% of the next $100 million of such
assets and 0.05% of such assets in excess of $200 million.

Signature expects to enter into a Distribution Agreement with the Company. The
Distributor will not receive a fee pursuant to the terms of the Distribution
Agreement.

The Company expects to enter into separate Shareholder Servicing Agreements (the
'SSA') with the Branch and Signature. Pursuant to the terms of the SSA, the
Branch will agree to provide shareholder support to their clients who are also
shareholders of the Fund while Signature will agree to provide support services
to all other shareholders of the Fund. Both Signature and the Branch will be
entitled to a fee under the SSA, accrued daily and payable monthly, at an annual
rate of 0.25% of the average balance of the accounts so serviced. Services to be
provided may include, but are not limited to, any of the following: establishing
and/or maintaining shareholder accounts and records, assisting investors seeking
to purchase or redeem Fund shares, providing performance information relating to
the Fund and responding to shareholder inquiries.

The Branch has voluntarily agreed to waive a portion of its fees and reimburse a
portion of Fund expenses to the extent that the ordinary operating expenses of
the Fund exceed an annual rate of 0.80% of the Fund's average net assets.

F-2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Directors of
UBS PRIVATE INVESTOR FUNDS, INC.

In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of UBS Tax Exempt Bond
Fund (one of the four series constituting UBS Private Investor Funds, Inc.,
hereafter referred to as the 'Funds') at January 31, 1996, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Funds' management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 31, 1996

F-3

PART C

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements:

The following financial statements are included in Part A:

None.

The following financial statements are included in Part B:

UBS PRIVATE INVESTOR FUNDS, INC.

UBS BOND FUND

Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the year ended December 31, 1997 and for
the period April 2, 1996 (commencement of operations) through December 31, 1996
Financial Highlights for the year ended December 31, 1997 and for the period
April 2, 1996 (commencement of operations) through December 31, 1996
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

UBS BOND PORTFOLIO

Schedule of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the year ended December 31, 1997 and for
the period April 2, 1996 (commencement of operations) through December 31, 1996
Financial Highlights for the year ended December 31, 1997 and for the period
April 2, 1996 (commencement of operations) through December 31, 1996
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

UBS VALUE EQUITY FUND

UBS VALUE EQUITY PORTFOLIO

<PAGE>

UBS INTERNATIONAL EQUITY FUND

UBS INTERNATIONAL EQUITY PORTFOLIO

UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND

Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the period April 14, 1997 (commencement of
operations) through December 31, 1997
Statement of Changes in Net Assets for the period April 14, 1997 (commencement
of operations) through December 31, 1997
Financial Highlights for the period April 14, 1997 (commencement of operations)
through December 31, 1997
Notes to Financial Statements, December 31, 1997
Report of Independent Auditors

<PAGE>

UBS SMALL CAP FUND

Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the period September 30, 1997 (commencement of
operations) through December 31, 1997
Statement of Changes in Net Assets for the period September 30, 1997
(commencement of operations) through December 31, 1997
Financial Highlights for the period September 30, 1997 (commencement of
operations) through December 31, 1997
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

UBS SMALL CAP PORTFOLIO

Schedule of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the period September 30, 1997 (commencement of
operations) through December 31, 1997
Statement of Changes in Net Assets for the period September 30, 1997
(commencement of operations) through December 31, 1997
Financial Highlights for the period September 30, 1997 (commencement of
operations) through December 31, 1997
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

UBS LARGE CAP GROWTH FUND

Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the period October 14, 1997 (commencement of
operations) through December 31, 1997
Statement of Changes in Net Assets for the period October 14, 1997 (commencement
of operations) through December 31, 1997
Financial Highlights for the period October 14, 1997 (commencement of
operations) through December 31, 1997
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

UBS LARGE CAP GROWTH PORTFOLIO

Schedule of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the period October 14, 1997 (commencement of
operations) through December 31, 1997
Statement of Changes in Net Assets for the period October 14, 1997
(commencement of operations) through December 31, 1997
Financial Highlights for the period October 14, 1997 (commencement of
operations) through December 31, 1997
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

UBS HIGH YIELD BOND FUND

UBS HIGH YIELD BOND PORTFOLIO

UBS TAX EXEMPT BOND FUND

Statement of Assets and Liabilities, January 31, 1996 (unaudited)

<PAGE>

UBS LARGE CAP GROWTH PORTFOLIO

Schedule of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the period October 14, 1997 (commencement of
operations) through December 31, 1997
Statement of Changes in Net Assets for the period October 14, 1997 (commencement
of operations) through December 31, 1997
Financial Highlights for the period October 14, 1997 (commencement of
operations) through December 31, 1997
Notes to Financial Statements, December 31, 1997
Report of Independent Accountants

<PAGE>

(b) Exhibits.

(1) Articles of Incorporation of the Company.1

(2) Bylaws of the Company.1

(4)(A) Specimen certificate evidencing shares of Common Stock, $.001 par value,
of the Company.1

(4)(B) Articles FIFTH, SIXTH, NINTH and TWELFTH of the Company's Articles of
Incorporation, relating to the rights of stockholders.1

(4)(C) Selected portions of the Company's Bylaws, relating to the rights of
stockholders.1

(5)(A) Investment Advisory Agreement between the Company and Union Bank of
Switzerland (the 'Bank'), New York Branch (the 'Adviser') on behalf of UBS Tax
Exempt Bond Fund.1

(5)(B) Investment Sub-Advisory Agreement between the Adviser and UBS
International Investment London Limited on behalf of the International Equity
Portfolio.4

(6) Distribution Agreement between the Company and First Fund Distributors,
Inc.3

(8) Custodian Agreement between the Company and Investors Bank & Trust Company
('Investors Bank').1

(9)(A) Administrative Services Agreement between the Company and Investors Bank
on behalf of the Funds.3

(9)(B) Transfer Agency and Service Agreement between the Company and Investors
Bank on behalf of the Funds.1

(10) Opinion and consent of counsel.2

(11) Auditor's Consent.4

(13) Subscription Agreement between the Company and Signature Broker-Dealer
Services, Inc. with respect to the Company's initial capitalization.2

(17) Financial Data Schedules.4

(18) Powers of Attorney.3

- -----------------------
1 Incorporated herein by reference from pre-effective amendment no. 1 to the
Registrant's registration statement (the "Registration Statement") on Form N-1A
(File nos. 33-64401, 811-07431) as filed with the U.S. Securities and Exchange
Commission (the "SEC") on February 9, 1996.

2 Incorporated herein by reference from pre-effective amendment no. 2 to the
Registration Statement as filed with the SEC on February 26, 1996.

3 Incorporated herein by reference from post-effective amendment no. 3 to the
Registration Statement as filed with the SEC on March 27, 1997.

4 Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not Applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

Common Stock (par value $0.0001)
Title of Class: Number of record holders as of February 2, 1998

UBS Tax Exempt Bond Fund: 1

<PAGE>

UBS Bond Fund: 66
UBS Value Equity Fund: 106
UBS International Equity Fund: 118
UBS Institutional International Equity Fund: 1
UBS Small Cap Fund: 75
UBS Large Cap Growth Fund: 32
UBS High Yield Bond Fund: 44

ITEM 27. INDEMNIFICATION.

STATE LAW, ARTICLES OF INCORPORATION AND BYLAWS. It is the Company's policy
to indemnify its officers, directors, employees and other agents to the maximum
extent permitted by Section 2-418 of the Maryland General Corporation Law,
Articles SEVENTH and EIGHTH of the Company's Articles of Incorporation and
Article IV of the Company's Bylaws (each set forth below).

SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW READS AS FOLLOWS:

'2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.

(a) In this section the following words have the meaning indicated.

(1) 'Director' means any person who is or was a director of a
corporation and any person who, while a director of a corporation, is or
was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan.

(2) 'Corporation' includes any domestic or foreign predecessor entity
of a corporation in a merger, consolidation, or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.

(3) 'Expenses' include attorney's fees.

(4) 'Official capacity' means the following:

(i) When used with respect to a director, the office of director in
the corporation; and

(ii) When used with respect to a person other than a director as
contemplated in subsection (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency
relationship undertaken by the employee or agent in behalf of the
corporation.

(iii) 'Official capacity' does not include service for any other
foreign or domestic corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.

(5) 'Party' includes a person who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.

(6) 'Proceeding' means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or
investigative.

(b)(1) A corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established
that:

(i) the act or omission of the director was material to the matter
giving rise to the proceeding; and

1. Was committed in bad faith; or

2. Was the result of active and deliberate dishonesty; or

(ii) The director actually received an improper personal benefit in
money, property, or services; or

(iii) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.

<PAGE>

(2)(i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.

(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding
in which the director shall have been adjudged to be liable to the
corporation.

(3)(i) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet the
requisite standard of conduct set forth in this subsection.

(ii) The termination of any proceeding by conviction, or a plea of
nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the director did
not meet that standard of conduct.

(c) A director may not be indemnified under subsection (B) of this
section in respect of any proceeding charging improper personal benefit to
the director, whether or not involving action in the director's official
capacity, in which the director was adjudged to be liable on the basis that
personal benefit was improperly received.

(d) Unless limited by the charter:

(1) A director who has been successful, on the merits or otherwise,
in the defense of any proceeding referred to in subsection (B) of this
section shall be indemnified against reasonable expenses incurred by the
director in connection with the proceeding.

(2) A court of appropriate jurisdiction upon application of a
director and such notice as the court shall require, may order
indemnification in the following circumstances:

(i) If it determines a director is entitled to reimbursement
under paragraph (1) of this subsection, the court shall order
indemnification, in which case the director shall be entitled to
recover the expenses of securing such reimbursement; or

(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not the director has met the standards of
conduct set forth in subsection (b) of this section or has been
adjudged liable under the circumstances described in subsection (c)
of this section, the court may order such indemnification as the
court shall deem proper. However, indemnification with respect to any
proceeding by or in the right of the corporation or in which
liability shall have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.

(3) A court of appropriate jurisdiction may be the same court in
which the proceeding involving the director's liability took place.

(e)(1) Indemnification under subsection (b) of this section may not
be made by the corporation unless authorized for a specific proceeding
after a determination has been made that indemnification of the director
is permissible in the circumstances because the director has met the
standard of conduct set forth in subsection (b) of this section.

(2) Such determination shall be made:

(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding,
or, if such a quorum cannot be obtained, then by a majority vote of a
committee of the board consisting solely of two or more directors
not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full board
in which the designated directors who are parties may participate;

(ii) By special legal counsel selected by the board of directors

<PAGE>

or a committee of the board by vote as set forth in subparagraph (i)
of this paragraph, or, if the requisite quorum of the full board
cannot be obtained therefor and the committee cannot be established,
by a majority vote of the full board in which director [SIC] who are
parties may participate; or

(iii) By the shareholders.

(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination that indemnification is permissible is made by special
legal counsel, authorization of indemnification and determination as to
reasonableness of expenses shall be made in the manner specified in
subparagraph (ii) of paragraph (2) of this subsection for selection of
such counsel.

(4) Shares held by directors who are parties to the proceeding may
not be voted on the subject matter under this subsection.

(f)(1) Reasonable expenses incurred by a director who is a party to
a proceeding may be paid or reimbursed by the corporation in advance of
the final disposition of the proceeding upon receipt by the corporation
of:

(i) A written affirmation by the director of the director's good
faith belief that the standard of conduct necessary for
indemnification by the corporation as authorized in this section has
been met; and

(ii) A written undertaking by or on behalf of the director to
repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.

(2) The undertaking required by subparagraph (ii) of paragraph (1)
of this subsection shall be an unlimited general obligation of the
director but need not be secured and may be accepted without reference
to financial ability to make the repayment.

(3) Payments under this subsection shall be made as provided by the
charter, bylaws, or contract or as specified in subsection (e) of this
section.

(g) The indemnification and advancement of expenses provided or
authorized by this section may not be deemed exclusive of any other
rights, by indemnification or otherwise, to which a director may be
entitled under the charter, the bylaws, a resolution of shareholders or
directors, an agreement or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office.

(h) This section does not limit the corporation's power to pay or
reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when the director has
not been made a named defendant or respondent in the proceeding.

(i) For purposes of this section:

(1) The corporation shall be deemed to have requested a director
to serve an employee benefit plan where the performance of the
director's duties to the corporation also imposes duties on, or
otherwise involves services by, the director to the plan or
participants or beneficiaries of the plan;

(2) Excise taxes assessed on a director with respect to an
employee benefit plan pursuant to applicable law shall be deemed
fines; and

(3) Action taken or omitted by the director with respect to an
employee benefit plan in the performance of the director's duties for
a purpose reasonably believed by the director to be in the interest
of the participants and beneficiaries of the plan shall be deemed to

<PAGE>

be for a purpose which is not opposed to the best interests of the
corporation.

(j) Unless limited by the charter:

(1) An officer of the corporation shall be indemnified as and to
the extent provided in subsection (d) of this section for a director
and shall be entitled, to the same extent as a director, to seek
indemnification pursuant to the provisions of subsection (d);

(2) A corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent
that it may indemnify directors under this section; and

(3) A corporation, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director to
such further extent, consistent with law, as may be provided by its
charter, bylaws, general or specific action of its board of directors
or contract.

(k)(1) A corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of
the corporation, or who, while a director, officer, employee, or agent
of the corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan against any liability
asserted against and incurred by such person in any such capacity or
arising out of such person's position, whether or not the corporation
would have the power to indemnify against liability under the provisions
of this section.

(2) A corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with this
section.

(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.

(l) Any indemnification of, or advance of expenses to, a director
in accordance with this section, if arising out of a proceeding by or in
the right of the corporation, shall be reported in writing to the
shareholders with the notice of the next stockholders' meeting or prior
to the meeting.'

Article SEVENTH of the Company's Articles of Incorporation provides:

'To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, and the Investment Company Act of 1940, no
director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office. No amendment of
the Corporation's charter or repeal of any of its provisions shall limit or
eliminate the limitation of liability provided to directors and officers
hereunder with respect to any act or omission occurring prior to such
amendment or repeal.'

Article EIGHTH of the Company's Articles of Incorporation provides:

'The Corporation shall indemnify (i) its directors and officers,
whether serving the Corporation or at its request any other entity, to the
full extent required or permitted by Maryland statutory and decisional law,
now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the Bylaws and as permitted by law. Nothing contained herein
shall be construed to protect any director, officer, employee or agent of

<PAGE>

the Corporation against any liability to the Corporation or its security
holders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office. The foregoing
rights of indemnification shall not be exclusive of any other rights to
which those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from time
to time such Bylaws, resolutions or contracts implementing such provisions
or such further indemnification arrangements as may be permitted by law. No
amendment of the Corporation's charter or repeal of any of its provisions
shall limit or eliminate the right of indemnification provided hereunder
with respect to acts or omissions occurring prior to such amendment or
repeal.'

Article FOURTH of the Company's Bylaws provides:

Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation
or serves or served at the request of the Corporation any other enterprise
as a director or officer, whether or not the Corporation would have power
to indemnify such person.

------------------------

Reference is made to Article 4 of the Company's Distribution Agreement.

The Company, its Directors and officers are insured against certain
expenses in connection with the defense of claims, demands, action's suits or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the 'Securities Act'), may be permitted to Directors,
officers and controlling persons of the Company and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a Director, officer, or controlling person of the Company
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Company by such Director,
officer or controlling person or principal underwriter in connection with the
shares being registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

See 'Investment Adviser and Funds Services Agent' in the Statement of
Additional Information. Information as to the directors and officers of the
Sub-Advisers is included in their forms ADV as filed with the Securities and
Exchange Commission (the 'SEC') and is hereby incorporated herein by reference.
Information as to the directors and officers of the Adviser is as follows.

Name Title
---- ----
<S> <C>
Dr. HansPeter A. Lochmeier Senior Managing Director
J. Michael Gaffney Managing Director and Chief Investment Officer
Lawrence E. Gore Managing Director
Peter E. Guernsey, Jr. Managing Director
Alfredo F. Roth Managing Director
Paul Eckstein Senior Managing Director

</TABLE>

<PAGE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) First Fund Distributors ("First Fund") is the principal underwriter of
the shares of UBS Bond Fund, UBS Tax Exempt Bond Fund, UBS Value Equity Fund,
UBS International Equity Fund, UBS Institutional International Equity Fund, UBS
Small Cap Fund, UBS Large Cap Growth Fund, UBS High Yield Bond Fund and UBS Real
Estate Fund. First Fund also acts as a principal underwriter and distributor for
numerous other registered investment companies.

(b) The following are the directors and officers of First Fund. The
principal business address of these individuals is 4455 E. Camelback Road,
Phoenix, Arizona 85018 unless otherwise noted. Their respective position and
offices with the Company, if any, are also indicated.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICERS POSITIONS AND OFFICERS
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ ---------------- ---------------
<S> <C> <C>
Robert H. Wadsworth President & Treasurer None
4455 E. Camelback Road
Phoenix, Arizona 85018

Eric Banhazl Vice President None
4455 E. Camelback Road
Phoenix, Arizona 85018

Steven J. Paggioli Vice President None
4455 E. Camelback Road
Phoenix, Arizona 85018

</TABLE>

<PAGE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents of the Company required to be
maintained by Section 31(a) of the 1940 Act and the rules thereunder will be
maintained at the offices of Investors Bank, 200 Clarendon Street, Boston,
Massachusetts 02116 and at First Canadian Place, Suite 2800, Toronto, Ontario,
M5X1C8.

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

(a) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall furnish each
person to whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, UBS Private Investor Funds, Inc.
(the "Registrant") has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and Commonwealth of Massachusetts on the
28th day of April, 1998.

UBS PRIVATE INVESTOR FUNDS, INC.

By: /s/ Paul J. Jasinski
- ---------------------------------
Paul J. Jasinski
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated on the 28th day of April,
1998.

/s/ Paul J. Jasinski
- ---------------------------------
Paul J. Jasinski
President

/s/ Nicholas G. Chunias
- ---------------------------------
Nicholas G. Chunias
Treasurer and Principal Accounting and Financial Officer

Hans-Peter Lochmeier*
- ---------------------------------
HansPeter Lochmeier
Director

Timothy McDermott Spicer*
- ---------------------------------
Timothy McDermott Spicer
Director

Peter Lawson-Johnston*
- ---------------------------------
Peter Lawson-Johnston
Director

*By /s/ Susan C. Mosher
- ---------------------------------
Susan C. Mosher,

*as attorney-in-fact pursuant to a power of attorney filed with
Registrant's Post-effective amendment no. 3 to its Registration Statement on
March 27, 1997.

<PAGE>

SIGNATURES

UBS Investor Portfolios Trust (the "Portfolio Trust") has duly caused
this Post-Effective Amendment to the Registration Statement (the "Registration
Statement") on Form N-1A (File nos. 33-64401, 811-07431) of UBS Private Investor
Funds, Inc. to be signed on its behalf by the undersigned, thereto duly
authorized on the 28th day of April, 1998.

UBS INVESTOR PORTFOLIOS TRUST

By: /s/ Paul J. Jasinski
- ---------------------------------
Paul J. Jasinski
President of the Portfolio Trust

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement on Form N-1A of UBS
Private Investor Funds, Inc. has been signed below by the following persons in
the capacities indicated on the 28th day of April, 1998.

/s/ Paul J. Jasinski
- ---------------------------------
Paul J. Jasinski
President of the Portfolio Trust

/s/ Nicholas G. Chunias
- ---------------------------------
Nicholas G. Chunias
Treasurer and Principal Accounting and Financial Officer of the Portfolio Trust

Hans-Peter Lochmeier*
- ---------------------------------
HansPeter Lochmeier
Trustee of the Portfolio Trust

Timothy McDermott Spicer*
- ---------------------------------
Timothy McDermott Spicer
Trustee of the Portfolio Trust

Peter Lawson-Johnston*
- ---------------------------------
Peter Lawson-Johnston
Trustee of the Portfolio Trust

*By /s/ Susan C. Mosher
- ---------------------------------
Susan C. Mosher,

*as attorney-in-fact pursuant to a power of attorney filed with
Registrant's Post-Effective Amendment no. 3 to its Registration Statement on
March 27, 1997.

<PAGE>

INDEX TO EXHIBITS

5(b) Investment Sub-Advisory Agreement
11 Auditor's Consent
17 Financial Data Schedules

STATEMENT OF DIFFERENCES

The registered trademark symbol shall be expressed as......................'r'

<PAGE>

UBS INTERNATIONAL EQUITY PORTFOLIO
SUB-ADVISORY AGREEMENT

Agreement made as of April 1, 1996 by and between Union Bank of
Switzerland, New York Branch (the "Adviser") and UBS International Investment
London Limited, a private limited company organized under the laws of England
(hereinafter called the "Sub-Adviser").

W I T N E S S E T H:

WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 1, 1996 (the "Advisory Agreement") with UBS Investor Portfolios
Trust, an open-end management investment company registered under the Investment
Company Act of 1940 (the "1940 Act") and organized as a trust under the laws of
the State of New York (the "Trust") on behalf of one of its diversified mutual
fund series, UBS International Equity Portfolio (the "Portfolio"), pursuant to
which the Adviser will act as investment adviser to the Portfolio;

WHEREAS, the Advisory Agreement contemplates that the Adviser may retain
the Sub-Adviser to provide certain investment advisory services to the Portfolio
in connection with the management of the Portfolio, and the Sub-Adviser is
willing to render such investment advisory services; and

WHEREAS, the Sub-Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940 and is regulated in the United Kingdom in
the conduct of its investment advisory business by Investment Management
Regulatory Organization ("IMRO").

NOW, THEREFORE, this Agreement

W I T N E S S E T H:

that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:

1. The Adviser hereby appoints the Sub-Adviser to act as sub-adviser to
the Portfolio for the period and on the terms set forth in this Agreement. The
Sub-Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.

2. Subject to the general supervision of the Trustees of the Trust and
the Adviser, the Sub-Adviser shall manage the investment operations of the
Portfolio and the composition of the Portfolio's holdings of securities and
other investments, including commodities and commodities contracts, cash, the
purchase, retention and disposition thereof and agreements relating thereto, in
accordance with the Portfolio's investment objective and policies as stated in
the Registration Statement (as defined in paragraph 3(d) of this Agreement) and
subject to the following understandings:

<PAGE>

a. the Sub-Adviser shall furnish a continuous investment program
for the Portfolio and determine from time to time the securities,
commodities, commodity contracts and other investments to be purchased,
retained, sold or lent by the Portfolio, and the portion of the assets
to be invested or held uninvested as cash;

b. the Sub-Adviser shall use the same skill and care in the
management of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;

c. the Sub-Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust, Bylaws and Registration Statement of the Trust and
with the instructions and directions of the Trustees of the Trust and
the Adviser and will conform to and comply with the requirements of the
1940 Act and all other applicable laws and regulations;

d. the Sub-Adviser shall determine the securities to be
purchased, sold or lent by the Portfolio and as agent for the Portfolio
will effect portfolio transactions pursuant to its determinations either
directly with the issuer or with any broker and/or dealer in such
securities, commodities or commodities contracts; in placing orders, the
Sub-Adviser will select the brokers and/or dealers as it shall deem
appropriate in conformity with the policy with respect to brokerage as
set forth in the Registration Statement; and the Sub-Adviser shall also
determine whether or not the Portfolio shall enter into repurchase or
reverse repurchase agreements;

On occasions when the Sub-Adviser deems the purchase or sale of a
security, commodity or commodity contract to be in the best interest of
the Portfolio as well as other customers of the Sub-Adviser and to the
extent permitted by applicable law, the Sub-Adviser may, but shall not
be obligated to, aggregate the securities to be so sold or purchased in
order to obtain best execution, including lower brokerage commissions,
if applicable. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the
Portfolio;

The Sub-Adviser may execute the Portfolio's brokerage (but not
principal) transactions through an affiliate, provided that such
transactions are effected in accordance with Rule 17e-1 under the 1940
Act and the Trust's procedures adopted thereunder as such may be amended
from time to time;

e. the Sub-Adviser shall maintain books and records with respect
to the Portfolio's securities transactions in accordance with Rule 204-2
under the

<PAGE>

Investment Advisers Act of 1940 and shall render to the Trust's
Trustees such periodic and special reports as the Trustees may
reasonably request; and

f. the investment advisory services of the Sub-Adviser to the
Portfolio under this Agreement are not to be deemed exclusive, and the
Sub-Adviser shall be free to render similar services to others.

3. The Adviser has delivered copies of each of the following documents
to the Sub-Adviser and will promptly notify and deliver to it all future
amendments and supplements, if any:

a. Declaration of Trust of the Trust (such Declaration of Trust,
as presently in effect and as amended from time to time, is herein
called the "Declaration of Trust");

b. Bylaws of the Trust (such Bylaws, as presently in effect and
as amended from time to time, are herein called the "Bylaws");

c. Certified resolutions of the Trustees of the Trust authorizing
the appointment of the Sub-Adviser and approving the form of this
Agreement;

d. The Trust's Notification of Registration on Form N-8A and its
Registration Statement on Form N-1A (No. 811-7553) each under the 1940
Act (the "Registration Statement"), each as filed with the Commission on
February 28, 1996, and all amendments thereto.

4. The Sub-Adviser shall keep the Portfolio's books and records required
to be maintained by it pursuant to paragraphs 2(e) of this Agreement. The
Sub-Adviser agrees that all records that it maintains for the Portfolio are the
property of the Portfolio and it will promptly surrender any of such records to
the Portfolio upon the Portfolio's request.

5. During the term of this Agreement the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased or sold for the
Portfolio (including taxes and brokerage commissions, if any).

6. The Adviser shall continue to have responsibility for all services to
be provided to the Portfolio pursuant to the Advisory Agreement and shall
oversee and review the Sub-Adviser's performance of its duties under this
Agreement.

7. For the services provided and the expenses borne pursuant to this
Agreement, the Adviser will pay to the Sub-Adviser as full compensation therefor
a fee at an annual rate equal to 0.75% of the Portfolio's first $20 million of
average daily net assets, plus 0.50% of the next $30 million of average daily
net assets, plus 0.40% of the Portfolio's average daily net assets in excess of
$50 million. This fee will be computed daily and payable monthly.

<PAGE>

8. The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Adviser or the Portfolio in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.

9. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Adviser or by
the Trust on behalf of the Portfolio at any time, without the payment of any
penalty, on 60 days' written notice to the Sub-Adviser. Termination by the Trust
shall be effected by vote of a majority of all the Trustees of the Trust or by
"vote of a majority of the outstanding voting securities" of the Portfolio (as
defined in the 1940 Act and a rule thereunder). The Sub-Adviser may also
terminate this Agreement at any time, without the payment of any penalty, on 60
days' written notice to the Adviser and to the Trust. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
defined in the 1940 Act) or upon termination of the Advisory Agreement.

10. The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Trust and the Adviser from time to time, have
no authority to act for or represent the Portfolio in any way or otherwise be
deemed an agent of the Portfolio.

11. Notices of any kind to be given hereunder shall be in writing and
shall be duly given if mailed or delivered as follows: (a) to the Adviser at 299
Park Avenue, New York, New York 10171, Attention: General Counsel, with a copy
to Richard A. Fabietti at Union Bank of Switzerland, New York Branch, 1345
Avenue of the Americas, New York, New York 10105; (b) to the Sub-Adviser at
Triton Court, 14 Finsbury Square, London, England EC2A 1 PD, Attention:
President; (c) to the Trust, c/o Signature Financial Group (Cayman) Limited at
P.O. Box 268, Elizabethan Square, George Town, Grand Cayman BWI; or (d) at such
other address or to such other individual as any of the foregoing shall
designate by notice to the others.

12. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.

13. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 1st day of April 1996.

UNION BANK OF SWITZERLAND,
NEW YORK BRANCH

By: /s/ J. Michael Gaffney
------------------------------

By: /s/ Richard Fabietti
------------------------------

UBS INTERNATIONAL INVESTMENT
LONDON LIMITED

By: /s/ J.C. Hayes
------------------------------

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statements of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the registration
statement on Form N-1A (the "Registration Statement") of our reports dated
February 17, 1998, relating to the financial statements and financial
highlights of UBS Private Investor Funds, Inc., which appear in such Statements
of Additional Information, and to the incorporation by reference of our reports
into the Prospectuses which constitute part of this Registration Statement.
We also consent to the references to us under the headings "Independent
Accountants" in such Statements of Additional information.

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
April 27, 1998

<PAGE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 001
<NAME> UBS BOND FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 13,471,492
<RECEIVABLES> 15,264
<ASSETS-OTHER> 89,144
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,575,900
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,538
<TOTAL-LIABILITIES> 29,538
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,442,115
<SHARES-COMMON-STOCK> 133,467
<SHARES-COMMON-PRIOR> 74,906
<ACCUMULATED-NII-CURRENT> 15,416
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20,640)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 109,471
<NET-ASSETS> 13,546,362
<DIVIDEND-INCOME> 12,171
<INTEREST-INCOME> 584,252
<OTHER-INCOME> 0
<EXPENSES-NET> 75,323
<NET-INVESTMENT-INCOME> 521,100
<REALIZED-GAINS-CURRENT> (3,776)
<APPREC-INCREASE-CURRENT> 108,850
<NET-CHANGE-FROM-OPS> 626,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (521,100)
<DISTRIBUTIONS-OF-GAINS> (11,079)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,921,938
<NUMBER-OF-SHARES-REDEEMED> (5,479,261)
<SHARES-REINVESTED> 509,400
<NET-CHANGE-IN-ASSETS> 6,046,072
<ACCUMULATED-NII-PRIOR> (4,086)
<ACCUMULATED-GAINS-PRIOR> 8,678
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 42,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 221,107
<AVERAGE-NET-ASSETS> 9,444,375
<PER-SHARE-NAV-BEGIN> 100.13
<PER-SHARE-NII> 5.71
<PER-SHARE-GAIN-APPREC> 1.30
<PER-SHARE-DIVIDEND> (5.53)
<PER-SHARE-DISTRIBUTIONS> (0.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 101.50
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 002
<NAME> UBS VALUE EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 26,454,709
<RECEIVABLES> 9,021
<ASSETS-OTHER> 91,315
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,555,045
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,095
<TOTAL-LIABILITIES> 31,095
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,506,615
<SHARES-COMMON-STOCK> 205,343
<SHARES-COMMON-PRIOR> 88,712
<ACCUMULATED-NII-CURRENT> 11,388
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 203,409
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,802,538
<NET-ASSETS> 26,523,950
<DIVIDEND-INCOME> 584,504
<INTEREST-INCOME> 41,559
<OTHER-INCOME> 0
<EXPENSES-NET> 193,569
<NET-INVESTMENT-INCOME> 432,494
<REALIZED-GAINS-CURRENT> 1,477,194
<APPREC-INCREASE-CURRENT> 3,117,642
<NET-CHANGE-FROM-OPS> 5,027,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (435,505)
<DISTRIBUTIONS-OF-GAINS> (1,287,470)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,401,903
<NUMBER-OF-SHARES-REDEEMED> (8,361,026)
<SHARES-REINVESTED> 1,713,022
<NET-CHANGE-IN-ASSETS> 17,058,254
<ACCUMULATED-NII-PRIOR> 1,157
<ACCUMULATED-GAINS-PRIOR> 13,685
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,320
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 371,394
<AVERAGE-NET-ASSETS> 19,939,085
<PER-SHARE-NAV-BEGIN> 106.70
<PER-SHARE-NII> 2.32
<PER-SHARE-GAIN-APPREC> 29.17
<PER-SHARE-DIVIDEND> (2.27)
<PER-SHARE-DISTRIBUTIONS> (6.75)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 129.17
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 003
<NAME> UBS INTERNATIONAL EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 23,124,610
<RECEIVABLES> 59,210
<ASSETS-OTHER> 89,638
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,273,458
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,070
<TOTAL-LIABILITIES> 26,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,972,955
<SHARES-COMMON-STOCK> 243,761
<SHARES-COMMON-PRIOR> 258,877
<ACCUMULATED-NII-CURRENT> 19,032
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 357,720
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,102,319)
<NET-ASSETS> 23,247,388
<DIVIDEND-INCOME> 500,589
<INTEREST-INCOME> 173,033
<OTHER-INCOME> 0
<EXPENSES-NET> 334,951
<NET-INVESTMENT-INCOME> 338,671
<REALIZED-GAINS-CURRENT> 921,325
<APPREC-INCREASE-CURRENT> (3,442,927)
<NET-CHANGE-FROM-OPS> (2,182,931)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (323,895)
<DISTRIBUTIONS-OF-GAINS> (626,539)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,167,259
<NUMBER-OF-SHARES-REDEEMED> (21,289,737)
<SHARES-REINVESTED> 879,502
<NET-CHANGE-IN-ASSETS> (3,376,341)
<ACCUMULATED-NII-PRIOR> 18,022
<ACCUMULATED-GAINS-PRIOR> 37,818
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 224,251
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 564,500
<AVERAGE-NET-ASSETS> 26,506,218
<PER-SHARE-NAV-BEGIN> 102.84
<PER-SHARE-NII> 1.27
<PER-SHARE-GAIN-APPREC> (5.01)
<PER-SHARE-DIVIDEND> (1.26)
<PER-SHARE-DISTRIBUTIONS> (2.47)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 95.37
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 005
<NAME> UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 13,153,439
<RECEIVABLES> 25,366
<ASSETS-OTHER> 24,214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,203,019
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,459
<TOTAL-LIABILITIES> 45,459
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,970,451
<SHARES-COMMON-STOCK> 138,357
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (5,991)
<ACCUMULATED-NET-GAINS> 194,135
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,001,035)
<NET-ASSETS> 13,157,560
<DIVIDEND-INCOME> 205,478
<INTEREST-INCOME> 67,231
<OTHER-INCOME> 0
<EXPENSES-NET> 95,595
<NET-INVESTMENT-INCOME> 177,114
<REALIZED-GAINS-CURRENT> 433,446
<APPREC-INCREASE-CURRENT> (1,001,035)
<NET-CHANGE-FROM-OPS> (390,475)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (173,638)
<DISTRIBUTIONS-OF-GAINS> (249,043)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,970,716
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,157,560
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 85,392
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 193,545
<AVERAGE-NET-ASSETS> 14,072,710
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 1.21
<PER-SHARE-GAIN-APPREC> (3.05)
<PER-SHARE-DIVIDEND> (1.26)
<PER-SHARE-DISTRIBUTIONS> (1.80)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 95.10
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 006
<NAME> UBS HIGH YIELD BOND FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 7,882,781
<RECEIVABLES> 8,000
<ASSETS-OTHER> 30,855
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,921,636
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,375
<TOTAL-LIABILITIES> 60,375
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,809,726
<SHARES-COMMON-STOCK> 78,181
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,277
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,380
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,878
<NET-ASSETS> 7,861,261
<DIVIDEND-INCOME> 2,165
<INTEREST-INCOME> 146,094
<OTHER-INCOME> 0
<EXPENSES-NET> 16,409
<NET-INVESTMENT-INCOME> 131,850
<REALIZED-GAINS-CURRENT> 17,380
<APPREC-INCREASE-CURRENT> 31,878
<NET-CHANGE-FROM-OPS> 181,108
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (129,573)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,756,774
<NUMBER-OF-SHARES-REDEEMED> (76,294)
<SHARES-REINVESTED> 129,246
<NET-CHANGE-IN-ASSETS> 7,861,261
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 90,847
<AVERAGE-NET-ASSETS> 7,233,355
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 1.80
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> (1.77)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 100.55
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 007
<NAME> UBS SMALL CAP FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 11,944,837
<RECEIVABLES> 25,000
<ASSETS-OTHER> 38,289
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,008,126
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,128
<TOTAL-LIABILITIES> 54,128
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,476,507
<SHARES-COMMON-STOCK> 126,657
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,249
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (526,758)
<NET-ASSETS> 11,953,998
<DIVIDEND-INCOME> 7,705
<INTEREST-INCOME> 19,156
<OTHER-INCOME> 0
<EXPENSES-NET> 29,174
<NET-INVESTMENT-INCOME> (2,313)
<REALIZED-GAINS-CURRENT> 6,540
<APPREC-INCREASE-CURRENT> (526,758)
<NET-CHANGE-FROM-OPS> (522,531)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,731,529
<NUMBER-OF-SHARES-REDEEMED> (255,000)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,953,998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,873
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 88,260
<AVERAGE-NET-ASSETS> 9,649,332
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (5.62)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 94.38
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001003599
<NAME> UBS PRIVATE INVESTOR FUNDS, INC.
<SERIES>
<NUMBER> 008
<NAME> UBS LARGE CAP GROWTH FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 4,138,823
<RECEIVABLES> 11,705
<ASSETS-OTHER> 32,273
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,182,801
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,687
<TOTAL-LIABILITIES> 45,687
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,117,538
<SHARES-COMMON-STOCK> 41,697
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 300
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,545)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,821
<NET-ASSETS> 4,137,114
<DIVIDEND-INCOME> 10,648
<INTEREST-INCOME> 5,624
<OTHER-INCOME> 0
<EXPENSES-NET> 6,922
<NET-INVESTMENT-INCOME> 9,350
<REALIZED-GAINS-CURRENT> (14,545)
<APPREC-INCREASE-CURRENT> 33,821
<NET-CHANGE-FROM-OPS> 28,626
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,050)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,108,844
<NUMBER-OF-SHARES-REDEEMED> (356)
<SHARES-REINVESTED> 9,050
<NET-CHANGE-IN-ASSETS> 4,137,114
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 198
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 59,083
<AVERAGE-NET-ASSETS> 3,239,263
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> (0.79)
<PER-SHARE-DIVIDEND> (0.22)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 99.22
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>