UBS PRIVATE INVESTOR FUNDS INC, N-30D, 1998-08-26

UBS PRIVATE INVESTOR FUNDS INC
N-30D, 1998-08-26

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<PAGE>

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UBS
INTERNATIONAL
EQUITY
FUND

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

UBS
PRIVATE INVESTOR
FUNDS, INC.

SEMI-ANNUAL REPORT
JUNE 30, 1998

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<PAGE>

UBS Private Investor Funds, Inc.
Chairman's Letter
- --------------------------------------------------------------------------------

Dear Shareholder,

Thank you for your investment in the UBS International Equity Fund, which is
part of the UBS Private Investor Funds.

We are pleased to provide you with the Fund's semi-annual report for the six
months ended June 30, 1998. This report contains a letter from the portfolio
manager discussing the performance of the Fund for the six months ended June 30,
1998, including a market overview. In addition, it includes a complete set of
financial statements as well as a schedule of investments.

The UBS Private Investor Funds are an integral part of the asset allocation
service provided by The Private Bank* of Union Bank of Switzerland, the largest
bank in Switzerland. The Funds provide investment opportunities in U.S. and
international securities markets to enhance investment performance, diversify
risk and preserve capital within your investment objectives.

The UBS Private Investor Funds bring you:

The expertise of The Private Bank's professional money managers

Global investment perspective and knowledge

A high priority on financial stability and preservation of wealth

As you are aware, in December, 1997, Union Bank of Switzerland and Swiss Bank
Corporation ('SBC') announced their intention to merge. Early in February, 1998,
the shareholders of UBS and SBC overwhelmingly approved the proposed merger. The
merger was completed on Monday June 29, 1998, creating UBS A.G.

UBS A.G. is a top-tier global financial services company which concentrates on
clearly defined core businesses. As private banking and asset management are
core businesses of the bank, shareholders of the UBS Private Investor Funds will
continue to see a commitment to growing and building the mutual fund business.

We will continue to keep you informed of any new developments as they occur.

To learn more about the other UBS Private Investor Funds, please call (888)
UBS-FUND. You will be provided with a copy of the prospectus which contains more
complete information including charges and expenses. Please read it carefully
before investing.

We appreciate your continued confidence in the UBS Private Investor Funds.

Sincerely,

Dr. HansPeter Lochmeier

Dr. HansPeter Lochmeier
Chairman of the Board
UBS Private Investor Funds, Inc.

- ------------------------
* 'The Private Bank', as used in this document, refers to Union Bank of
Switzerland, New York Branch.

This semi-annual report must be accompanied or preceded by the Fund's
prospectus.

<PAGE>

UBS Private Investor Funds, Inc.
Fund Commentary
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FUND PERFORMANCE

The UBS International Equity Fund achieved a total return of 16.1% in the first
six months of the year which equaled the 16.1% rise in the MSCI EAFE Index. The
performance was contributed to a positive contribution from stock selection
partially offset by a negative contribution from country/asset allocation.

(a) STOCK SELECTION

There has been somewhat of a reversal in the trend of large cap outperformance
seen in 1997. We had anticipated this by positioning the portfolio away from
such companies.

Very positive returns were seen in Japan where we have been holding a number of
companies biased towards the domestic economy which had become very cheap on
basic financial criteria. We were also, as shareholders, significant
beneficiaries of Salomon Smith Barney's entry into Nikko Securities.

Further outperformance was seen in Europe from a number of restructuring plays
that we have held for sometime. Disappointing results in Australia were due to
our over-exposure to resource stocks.

(b) COUNTRY/ASSET ALLOCATION

There was a positive contribution from being overweighted in France, which has
risen strongly as economic growth has picked up. This was more than offset by
being underweight in peripheral European markets such as Finland, Spain and
Italy, which were again very strong due to EMU convergence leading to falling
interest rates.

Although relatively small amounts have been committed to the Pacific Basin, the
deteriorating economic position led to further sharp falls in stock markets
adversely affecting performance.

Our holding in cash proved to be negative.

This chart provides a comparison of the Fund's performance to that of the MSCI
EAFE Index. This chart compares total returns (which includes changes in share
price and reinvestment of all dividends and capital gains distributions) of a
hypothetical $10,000 investment made on April 2, 1996* and held through June 30,
1998.

[PERFORMANCE GRAPH]

UBS INTERNATIONAL EQUITY FUND MSCI EAFE INDEX
- ----------------------------- ---------------
<S> <C>
$10,000 $10,000
10,205 10,310
10,061 10,120
10,132 10,177
9,898 9,880
10,008 9,902
10,122 10,165
10,126 10,061
10,500 10,462
10,465 10,327
10,281 9,967
10,434 10,131
10,617 10,170
10,551 10,226
11,076 10,894
11,726 11,498
11,706 11,686
11,076 10,816
11,447 11,432
10,764 10,548
10,432 10,443
10,077 10,537
10,669 11,022
11,186 11,731
11,763 12,095
11,800 12,193
11,784 12,137
11,697 12,232
</TABLE>

<PAGE>

<PAGE>
UBS Private Investor Funds, Inc.
Fund Commentary
- --------------------------------------------------------------------------------

Average Annual Total Return:

<TABLE>
<CAPTION>
UBS
INTERNATIONAL MSCI
EQUITY EAFE
FUND INDEX
------------- -----

<S> <C> <C>
Six months ended June 30, 1998...................................... 16.07% 16.09%
1 year ended June 30, 1998.......................................... (0.24)% 6.38%
Since inception* through June 30, 1998.............................. 7.23% 9.38%
</TABLE>

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* Commencement of operations -- April 2, 1996.

ECONOMIC AND MARKET BACKGROUND

The first six months saw a continuation of the trends of the last year, both in
terms of economic performance and stock markets. Recovery in European economic
growth has been confirmed while, by contrast, economic data for Asia remains
unremittingly bleak. European markets have been testing new highs, while Asian
markets remain under severe pressure, with Japan close to lows for the decade.

One indicator of the strength of the recovery in Europe has been the broad
decline in unemployment from acutely high levels. This applies particularly to
France, where the economic recovery is perhaps strongest for both domestic and
exporting companies. Germany remains mixed, with exporters doing well but a
stagnant domestic economy. The consumer there remains concerned about the future
and is not spending, whilst the situation in the eastern half of the country
remains substantially more depressed than the west.

In the UK, further evidence of strength in the domestic economy led the Bank of
England to raise interest rates during June by 0.25% to 7.5%. Having initially
taken the market by surprise, developments since then suggest that a further
rise may be necessary, despite damage being inflicted on exporters by the
resulting strength of the Sterling.

The potential problems that the new European Central Bank (ECB) will face were
graphically illustrated by the difficulty in the appointment of the first
governor. At the insistence of France, the preferred candidate for the other
members, Duisenberg of the Netherlands, will step down four years into his eight
year term to be replaced by a Frenchman. This sort of political horse trading
does not bode well for the political independence of the monetary authority.
Politics were also a feature in Denmark, where a damaging general strike in May
was only ended after rather unsatisfactory government intervention.

Concern over the stability of the Japanese financial system caused a sell-off in
the yen. This in turn caused a further shock throughout Asia as yen weakness
might force a further round of currency depreciation on the rest of Asia
including perhaps China itself. To break the risk of this vicious spiral, the
Bank of Japan and the US Federal Reserve Bank stepped in to support the yen. It
is highly unusual for the Federal Reserve to act in this way and the
authorization for the move may have come from President Clinton as he prepared
to visit China. As a result, there was a quick rebound in the yen but it remains
under pressure.

During the quarter Japanese companies reported their results for the financial
year ending in March. Excluding the massively loss-taking financial sector,
pre-tax profits fell 5% and there is no sign that this

<PAGE>

<PAGE>
UBS Private Investor Funds, Inc.
Fund Commentary
- --------------------------------------------------------------------------------
trend will reverse this year. Even the major global players came under pressure:
profits for the big five Japanese semi-conductor makers halved last year because
of weak pricing for memory chips.

As for the rest of Asia, the risk of downward spiral has not receded entirely.
Economies which over the last decade have tended to grow at 5-10% each year now
face the prospect of economic contraction. This is already having political
ramifications: in Indonesia, where the economy is on the point of collapse,
General Suharto has been forced to step down after 30 years in power.

These trends were mirrored in stock markets where European indices were up
26.7%, Japan was down 2.5% and most other Asian markets down over 25%, in each
case in US$ in aggregate.

ECONOMIC AND MARKET OUTLOOK

The major event in Europe in the next six months will be the elections in
Germany, where Chancellor Kohl continues to lag his Social Democrat rival
Gerhard Schroder in the polls. In an effort to close the gap on his more
Euro-sceptic rival, Herr Kohl has begun to sound more critical of the EU,
speaking out against the heavy burden of bureaucracy and arguing for greater
autonomy amongst members. The outcome of the elections in Germany is likely to
be critical for the domestic economy of that country, with a clear cut victory
by either party that enables firm action to be taken preferable to messy
coalition. Given the importance of Germany in the whole European project, there
is a risk of increasing political tension within the EU.

France, which has so far enjoyed a robust recovery, now enters a critical period
after the excitement of the World Cup competition to see just how robust the
rebound in consumer confidence is. It is fair to say that many business leaders
are concerned that the domestic economy remains fragile and could suffer a
setback in the second half. Equity markets in Spain and Italy, which have risen
on the back of convergence in their interest rates towards German levels, are
losing momentum in the face of a heavy stock issuance program.

Apart from the continuing concerns over Southeast Asia, Europe has a more
immediate problem, even closer to home, in the Russian economic crisis. Germany
in particular has considerable exposure to Russia, and a major collapse in
confidence in the Russian economy would have repercussions not only for Eastern
Europe but also for the Western Europe banking system. This could prove to be
far more damaging to Europe than the crisis in Japan, severe though that
undoubtedly is.

The economic outlook for Japan remains poor despite the fact that Japan should
begin to feel the impact of the latest and largest public works package. The
critical issue for Japan is whether the authorities will begin to make the tough
decisions which will enable a sustainable recovery to occur. The precedents are
not promising but pressure from the rest of the world has intensified to a level
that cannot be ignored.

Prospects for the rest of Asia have been hurt by the further weakening of the
Japanese economy. Restructuring of balance sheets is the immediate requirement
and only companies with a strong franchise and open management will be able to
attract the necessary capital to survive.

Equity markets in Europe have surged more than reflecting the recovery in
profits on the back of corporate restructuring and broad economic recovery. The
risk of a setback in Europe has therefore increased and our policy is to trim
exposure to Europe and be underweight in the large, internationally held
companies vulnerable to a change in sentiment. Economic prospects in Asia show
no sign of improving, but we feel that this has increasingly been discounted by
the stock market such that for the first time we are finding quality companies
which satisfy our value criteria.

Robin Apps
Portfolio Manager

<PAGE>

<PAGE>
UBS Private Investor Funds, Inc.
Fund Commentary
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The Fund is not insured by the FDIC and is not a deposit with, an obligation of,
or guaranteed by Union Bank of Switzerland. The Fund is subject to investment
risks, including possible loss of principal amount invested.

Shares of the Fund are distributed by First Fund Distributors, Inc. which is not
affiliated with Union Bank of Switzerland.

Unlike other mutual funds, the Fund seeks to achieve its investment objective by
investing all of its investable assets in UBS Investor Portfolios Trust -- UBS
International Equity Portfolio (the 'Portfolio') which is a separate fund with
an identical investment objective. The Portfolio concentrates its investments in
securities of foreign issuers. A variety of factors such as changes in the
economic/political conditions and currency fluctuations in the international
markets may affect the value of your investment in the fund.

Union Bank of Switzerland is voluntarily waiving all shareholder servicing fees
for the Fund and reimbursing a portion of the Fund's expenses. Union Bank of
Switzerland is also waiving a portion of its advisory fees for the Portfolio. If
Union Bank of Switzerland had not waived fees and reimbursed expenses, total
return would have been lower. Past performance is not a guarantee of future
results. Investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.

The MSCI EAFE Index (Morgan Stanley Capital International -- Europe, Australia,
Far East Index) is an unmanaged index used to portray the pattern of common
stock price movement in Europe, Australia and the Far East.

<PAGE>

UBS International Equity Fund
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
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<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment in UBS Investor Portfolios Trust -- UBS International Equity Portfolio,
at value.......................................................................... $31,929,620
Tax reclaims receivable............................................................. 71,500
Receivable from sale of capital stock............................................... 12,000
Deferred organization expenses and other assets..................................... 75,571
-----------
Total Assets.............................................................. 32,088,691
-----------

LIABILITIES:
Administrative services fees payable................................................ 1,800
Payable to funds services agent..................................................... 1,841
Payable from purchase of capital stock.............................................. 213,570
Other accrued expenses.............................................................. 24,020
-----------
Total Liabilities......................................................... 241,231
-----------

NET ASSETS.......................................................................... $31,847,460
-----------
-----------

SHARES OUTSTANDING ($0.001 PAR VALUE, 10 MILLION SHARES AUTHORIZED)................. 287,682
-----------
-----------

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $ 110.70
-----------
-----------

COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................................... $ 288
Additional paid-in capital.......................................................... 30,432,323
Net unrealized appreciation of investments, foreign currency contracts and foreign
currency translations............................................................. 194,041
Accumulated undistributed net investment income..................................... 277,035
Accumulated undistributed net realized gains on securities and foreign currency
translations...................................................................... 943,773
-----------
Net Assets................................................................ $31,847,460
-----------
-----------
</TABLE>

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See notes to financial statements.

<PAGE>

<PAGE>
UBS International Equity Fund
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<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 $87,038)............ $ 390,559
Interest......................................................... 78,326
----------
Investment income........................................... 468,885
Total expenses................................................... $189,820
Less: Fee waiver................................................. (52,586)
--------
Net expenses..................................................... 137,234
----------
Net Investment Income from UBS Investor Portfolios Trust -- UBS
International Equity Portfolio...................................... 331,651

EXPENSES:
Shareholder service fees.............................................. 37,658
Administrative services fees.......................................... 9,791
Registration fees..................................................... 16,402
Amortization of organization expenses................................. 11,461
Reports to shareholders expense....................................... 10,709
Transfer agent fees................................................... 7,439
Audit fees............................................................ 6,190
Legal fees............................................................ 6,149
Fund accounting fees.................................................. 4,464
Directors' fees....................................................... 1,700
Miscellaneous expenses................................................ 3,886
--------
Total expenses.............................................. 115,849
Less: Fee waiver and expense reimbursements................. (42,201)
--------
Net expenses................................................ 73,648
----------
Net investment income................................................. 258,003
----------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS
INVESTOR PORTFOLIOS TRUST -- UBS INTERNATIONAL EQUITY PORTFOLIO
Net realized gain on securities transactions.......................... 605,634
Net realized loss on foreign currency transactions.................... (19,581)
Net change in unrealized appreciation of investments.................. 3,305,673
Net change in unrealized depreciation of foreign currency contracts
and translations.................................................... (9,313)
----------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS International Equity Portfolio.............. 3,882,413
----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $4,140,416
----------
----------
</TABLE>

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See notes to financial statements.

<PAGE>

<PAGE>
UBS International Equity Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------

<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income........................................... $ 258,003 $ 338,671
Net realized gain on securities and foreign currency
transactions.................................................. 586,053 921,325
Net change in unrealized appreciation (depreciation) of
investments, foreign currency contracts and foreign currency
translations.................................................. 3,296,360 (3,442,927)
------------- -----------------
Net increase (decrease) in net assets resulting from
operations.................................................... 4,140,416 (2,182,931)
------------- -----------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................... -- (323,895)
Net realized gains.............................................. -- (626,539)
------------- -----------------
Total dividends and distributions to shareholders............... -- (950,434)
------------- -----------------

TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares................................ 9,720,194 20,167,259
Net asset value of shares issued to shareholders from
reinvestment of dividends and distributions................... -- 879,502
Cost of shares redeemed......................................... (5,260,538) (21,289,737)
------------- -----------------
Net increase (decrease) in net assets from transactions in
shares of common stock........................................ 4,459,656 (242,976)
------------- -----------------

NET INCREASE (DECREASE) IN NET ASSETS........................... 8,600,072 (3,376,341)

NET ASSETS:
Beginning of period............................................. 23,247,388 26,623,729
------------- -----------------
End of period (including undistributed net investment income of
$277,035 and $19,032, respectively)........................... $ 31,847,460 $23,247,388
------------- -----------------
------------- -----------------
</TABLE>

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See notes to financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE APRIL 2, 1996*
JUNE 30, 1998 YEAR ENDED THROUGH
(UNAUDITED) DECEMBER 31, 1997 DECEMBER 31, 1996
------------- ----------------- -----------------
<S> <C> <C> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD

Net asset value, beginning of period...................... $ 95.37 $102.84 $100.00
------------- ----------------- -----------------
Income from investment operations:
Net investment income................................ 0.88 1.27 1.08
Net realized and unrealized gain (loss) on
investments........................................ 14.45 (5.01) 3.54
------------- ----------------- -----------------
Total income (loss) from investment operations....... 15.33 (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............................ $110.70 $ 95.37 $102.84
------------- ----------------- -----------------
------------- ----------------- -----------------
Total return.............................................. 16.07%(1) (3.70%) 4.65%(1)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............. $31,847 $23,247 $26,624
Ratio of expenses to average net assets(2)........... 1.40%(3) 1.26% 1.39%(3)
Ratio of net investment income to average net
assets(2).......................................... 1.71%(3) 1.28% 1.78%(3)
</TABLE>

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* Commencement of operations.
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios Trust -- UBS
International Equity Portfolio expenses and net of fee waivers and expense
reimbursements. Such fee waivers and expense reimbursements had the effect
of reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 0.63% (annualized),
0.87% and 1.66% (annualized) for the respective periods.
(3) Annualized.

See notes to financial statements.

<PAGE>

UBS International Equity Fund
Notes to Financial Statements
June 30, 1998 (Unaudited)
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1. GENERAL
UBS International Equity Fund (the 'Fund') is a diversified, no-load mutual fund
registered under the Investment Company Act of 1940. The Fund is one of several
series of UBS Private Investor Funds, Inc. (the 'Company'), an open-end
management investment company organized as a corporation under Maryland law. At
June 30, 1998, 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 June 30,
1998, certain shares of the Fund were held by UBS or its affiliates on behalf of
its clients.

Investors Bank & Trust Company ('IBT') serves as the Fund's administrator and
First Fund Distributors, Inc. ('FFDI') serves as the Fund's distributor. Union
Bank of Switzerland, New York Branch ('UBS') serves as the funds services agent
to the Fund.

The financial statements of the Portfolio, including its Schedule of
Investments, are included elsewhere within this report and should be read in
conjunction with the Fund's financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. Significant accounting policies
followed by the Fund are as follows:

A. INVESTMENT VALUATION -- The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio
(49.35% at June 30, 1998). 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 the amount the Fund expects to recover from foreign tax authorities.

C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies, including
the requirement to distribute substantially all of its taxable income, including
any net realized capital gains on investment transactions, to its shareholders.
Accordingly, no provision for federal income or excise taxes is necessary.

D. DIVIDENDS AND DISTRIBUTIONS -- The Fund declares dividends from net
investment income to shareholders of record on the day of declaration. Such
dividends are declared and paid annually. Net realized gains, if any, will be
distributed at least annually. However, to the extent that net realized gains of
the Fund can be reduced by capital loss carryovers, such gains will not be
distributed. Dividends and distributions are recorded on the ex-dividend date.

The amounts of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These 'book/tax'
differences are either considered temporary or permanent in

<PAGE>

<PAGE>
UBS International Equity Fund
Notes to Financial Statements
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based upon their federal
tax-basis treatment; temporary differences do not require reclassification.

E. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in connection
with its organization in the amount of approximately $107,500 have been deferred
and are being amortized on a straight line basis over five years from the Fund's
commencement of operations (April 2, 1996).

F. OTHER -- The Fund bears all costs of its operations other than expenses
specifically assumed by IBT, FFDI and UBS. Expenses incurred by the Company on
behalf of any two or more funds are allocated in proportion to the net assets of
each fund, except when allocations of direct expenses to each fund can otherwise
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 six months ended June 30,
1998, the administrative services fee amounted to $9,791.

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 six months ended June 30, 1998,
the shareholder service fee amounted to $37,658 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 1.40% of the Fund's
average daily net assets. For the six months ended June 30, 1998, UBS reimbursed
the Fund for expenses totaling $4,543 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.

<PAGE>

<PAGE>
UBS International Equity Fund
Notes to Financial Statements
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

4. CAPITAL SHARE TRANSACTIONS
At June 30, 1998 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>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
---------------- -----------------

<S> <C> <C>
Shares subscribed..................................... 91,999 187,382
Shares issued to shareholders from reinvestment of
dividends and
distributions....................................... 0 9,044
Shares redeemed....................................... (48,078) (211,542)
---------------- -----------------
Net (decrease) increase in shares
outstanding......................................... 43,921 (15,116)
---------------- -----------------
---------------- -----------------
</TABLE>

<PAGE>

UBS International Equity Portfolio
Schedule of Investments
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- -------------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK -- 88.5%
AUSTRALIA -- 3.6%
40,000 Australia & New Zealand Bank Group (Banking & Finance)................................ $ 276,718
15,800 Australian National Industries (Metals & Mining)...................................... 9,125
254,362 Burns Philp & Co. (Food).............................................................. 20,535
62,500 Coles Myer Ltd. (Retail).............................................................. 244,519
102,400 Fosters Brewing Group (Beverages)..................................................... 241,644
211,100 Goodman Fielder Limited (Food)........................................................ 308,069
721,323 MIM Holdings (Metals & Mining)........................................................ 349,394
89,000 Pacific Dunlop Ltd. (Diversified)..................................................... 144,252
570,000 Pasminco Limited (Metals & Mining).................................................... 435,383
100,000 WMC Limited (Metals & Mining)......................................................... 301,806
-----------
2,331,445
-----------
DENMARK -- 1.7%
4,440 BG Bank A/S (Banking & Finance)....................................................... 275,294
9,000 Tele Danmark -- B shares (Telecommunications)......................................... 864,692
-----------
1,139,986
-----------
FRANCE -- 14.9%
3,060 AXA Company (Banking & Finance)....................................................... 344,179
8,700 Alcatel Alsthom SA (Electrical & Electronics)......................................... 1,771,457
16,517 Banque Nationale de Paris (Banking & Finance)......................................... 1,349,620
5,500 Compagnie de Saint Gobain (Building Materials)........................................ 1,019,816
4,300 Groupe Danone (Food).................................................................. 1,185,653
27,120 Moulinex (Household Appliances) (a)................................................... 703,827
5,200 Sefimeg (Societe Francaise d'Investissements Immobiliers et de Gestion) (Real
Estate)............................................................................. 376,731
13,400 Societe Nationale Elf-Aquitaine (Energy Sources)...................................... 1,883,984
2,048 Suez Lyonnaise des Eaux (Building & Construction)..................................... 337,059
5,070 Total Cie Francaise des Petroles -- B shares (Energy Sources)......................... 659,149
-----------
9,631,475
-----------
GERMANY -- 8.9%
45,300 Bayer AG (Chemicals).................................................................. 2,346,070
2,050 MAN AG (Automotive & Heavy Machinery)................................................. 800,244
4,500 Schering AG (Pharmaceuticals)......................................................... 530,234
2,153 Volkswagen AG (Automotive)............................................................ 2,080,833
-----------
5,757,381
-----------
GREAT BRITAIN -- 15.7%
172,200 Allied Domecq PLC (Food & Beverages).................................................. 1,609,603
89,591 B.A.T. Industries (Tobacco)........................................................... 894,908
186,117 BG PLC -- New Shares (Natural Gas).................................................... 1,079,695
484,725 BTR PLC (Diversified)................................................................. 1,364,523
34,410 Bass PLC (Beverages).................................................................. 638,106
113,000 Coats Viyella (Apparel & Textiles).................................................... 137,812
61,775 Express Dairies PLC (Food) (a)........................................................ 170,803
53,000 MEPC British Registered (Real Estate)................................................. 466,629
324,000 Marley PLC (Building Materials)....................................................... 584,594
123,550 Northern Foods PLC (Food)............................................................. 445,843
67,176 Peninsular & Orient Steam (Transportation)............................................ 969,646
80,839 Safeway PLC (Food -- Retail).......................................................... 533,462
118,000 Smith & Nephew PLC (Health Care Providers)............................................ 293,734
18,605 South West Water PLC (Utilities)...................................................... 308,649
214,679 Tarmac PLC (Building Materials)....................................................... 383,759
15,000 Thames Water PLC (Utilities).......................................................... 274,946
-----------
10,156,712
-----------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

JAPAN -- 20.6%
12,000 Dai Nippon Printing Co. (Printing).................................................... 191,997
6,000 Fuji Photo Film Co. (Photographic Equipment & Supplies)............................... 209,333
98,000 Hitachi Ltd. (Hit. Seisakusho) (Electrical & Electronics)............................. 640,639
140,000 Ishikawajima Harima Heavy Industries (Machinery)...................................... 255,851
31,000 JGC Engineering & Construction Corp. (Engineering).................................... 75,910
74 Japan Tobacco, Inc. (Tobacco)......................................................... 501,921
75,000 Japan Wool Textile Co. (Apparel & Textiles)........................................... 357,556
56,000 Kajima Corp. (Building & Construction)................................................ 153,713
78,000 Kansai Paint Co. (Chemicals).......................................................... 180,295
15,000 Kao Corp. (Household Products)........................................................ 231,869
90,000 Koito Manufacturing Co., Ltd. (Automotive -- Parts & Equipment)....................... 445,319
39,000 Marudai Food Co., Ltd. (Food)......................................................... 90,711
48,000 Matsushita Electric Industries (Electrical & Electronics)............................. 773,187
301,000 Mitsubishi Chemical Corp. (Chemicals)................................................. 545,731
90,000 Mitsubishi Estate Co. (Real Estate)................................................... 793,123
80,000 Mitsubishi Heavy Industries (Aerospace / Defense Equipment)........................... 302,803
101,000 Nihon Cement Co. (Building Materials)................................................. 202,817
184,000 Nikko Securities Co. (Investment Banking)............................................. 764,230
162,000 Nippon Yusen Kabushiki Kaish (Shipping)............................................... 549,986
51,250 Nissan Fire & Marine Insurance (Insurance)............................................ 176,584
63,000 Nisshinbo Industries, Inc. (Apparel & Textiles)....................................... 252,564
248,000 Sakura Bank Ltd. (Banking & Finance).................................................. 644,900
44,000 Sharp Corporation (Electronics)....................................................... 357,238
2,600 Sony Corporation (Electrical & Electronics)........................................... 224,429
58,000 Sumitomo Marine & Fire (Insurance).................................................... 325,108
232,000 Tokyo Gas (Energy Sources)............................................................ 517,827
44,000 Tokyo Steel Manufacturing (Metals & Mining)........................................... 226,929
75,000 Toray Industries, Inc. (Chemicals).................................................... 390,061
54,000 Tostem Corporation (Building & Construction).......................................... 701,329
44,000 Toyo Seikan Kaisha (Packaging)........................................................ 540,306
18,000 Uny Co. (Retail)...................................................................... 292,546
152 West Japan Railway (Transportation)................................................... 552,268
81,000 Yamaha Motor Co. (Automotive)......................................................... 509,029
17,000 Yamanouchi Pharmaceutical (Pharmaceuticals)........................................... 354,883
-----------
13,332,992
-----------
NETHERLANDS -- 5.3%
7,800 Akzo Nobel (Chemicals)................................................................ 1,734,740
9,490 Internationale Nederlanden Groep NV (Banking & Finance)............................... 621,698
17,200 Koninklijke Papierfabrieken BT NV (Paper & Forest Products)........................... 444,117
3,400 Philips Electronics NV (Electronics).................................................. 285,946
5,114 Royal PTT Nederland (Telecommunications).............................................. 196,939
5,114 TNT Post Group NV (Transportation) (a)................................................ 130,790
-----------
3,414,230
-----------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

<PAGE>
UBS International Equity Portfolio
Schedule of Investments
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- -------------------------------------------------------------------------------------- -----------
NEW ZEALAND -- 0.4%
<C> <S> <C>
10,300 Ceramco Corp. Ltd. (Diversified)...................................................... $ 6,700
43,840 Fletcher Challenge Forestry Shares (Forest Products).................................. 24,637
192,000 Fletcher Challenge Paper Shares (Paper & Forest Products)............................. 213,801
-----------
245,138
-----------
PHILIPPINES -- 0.2%
84,000 San Miquel Corporation Class B (Food & Beverages)..................................... 110,791
-----------
SINGAPORE -- 2.3%
197,579 Dairy Farm International Holdings (Food).............................................. 211,410
39,000 Development Bank Of Singapore Limited -- Foreign Shares (Banking & Finance)........... 215,833
302,696 Hong Kong Land Holdings (Real Estate)................................................. 378,370
46,765 Jardine Matheson Holdings (Diversified)............................................... 126,266
303,250 Keppel Corp., Ltd. (Diversified)...................................................... 455,907
264,000 United Overseas Land Ltd. (Real Estate)............................................... 142,196
-----------
1,529,982
-----------
SOUTH KOREA -- 2.2%
2,033 Housing & Commercial Bank, Korea (Banking & Finance).................................. 6,767
39,400 Hyundai Motor Co. GDR (Automotive) *.................................................. 73,875
17,570 Hyundai Motor Co., Ltd. (Automotive).................................................. 177,875
68,259 Kookmin Bank (Banking & Finance) (a).................................................. 253,548
26,400 Korea Electric Power Corporation (Utilities).......................................... 281,690
10,900 Korean Air (Airlines) (a)............................................................. 28,103
623 SK Telecom Co. Ltd. (Telecommunications).............................................. 291,308
55,215 Shinhan Bank (Banking & Finance)...................................................... 183,380
26,500 Yukong Ltd. (Energy Sources).......................................................... 162,127
-----------
1,458,673
-----------
SWEDEN -- 4.7%
29,900 Astra AB (Pharmaceuticals)............................................................ 611,046
96,250 Electrolux (Household Appliances)..................................................... 1,653,241
8,000 Forenings Sparbanken AB (Banking & Finance)........................................... 240,722
400 Mandamus AB REIT (Real Estate) (a).................................................... 2,508
33,400 Stora Kopparbergs -- A shares (Paper & Forest Products)............................... 525,539
-----------
3,033,056
-----------
SWITZERLAND -- 4.8%
41 Bobst AG (Machinery).................................................................. 75,460
600 Forbo Holding (Building Materials).................................................... 305,561
1,120 Nestle SA (Food & Beverages).......................................................... 2,398,255
210 Schindler Holding AG (Machinery)...................................................... 320,008
-----------
3,099,284
-----------
THAILAND -- 1.1%
168,200 Bangkok Bank Public Company, Ltd. (Banking & Finance)................................. 207,261
15,000 Italian-Thai Development PLC -- Foreign Shares (Building & Construction) (a).......... 7,642
63,000 Shinawatra Computer Company -- Foreign Shares (Technology)............................ 229,905
266,000 TelecomAsia Corp. -- Foreign Shares (Telecommunications) (a).......................... 77,216
223,000 Thai Farmers Bank Public Co., Ltd. (Banking & Finance)................................ 196,842
58,000 Thai Military Bank, Ltd. (Banking & Finance).......................................... 7,147
-----------
726,013
-----------

TOTAL COMMON STOCK (COST $56,136,740)................................................. 57,307,200
-----------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

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

GDR Global Depository Receipts.

(a) Non-income producing security.

* Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1998, the value of
these securities amounted to $183,850 or 0.28% of net assets.

Note: Based upon the cost of investments of $56,254,079 for Federal Income Tax
purposes at June 30, 1998, the aggregate gross unrealized appreciation and
depreciation was $12,394,931 and 11,231,835, respectively, resulting in
net unrealized appreciation of $1,163,096.

See notes to financial statements.

<PAGE>

UBS International Equity Portfolio
Schedule of Investments
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS

<TABLE>
<CAPTION>
FOREIGN U.S. DOLLAR
CURRENCY U.S. DOLLAR NET UNREALIZED
UNITS U.S. DOLLAR VALUE AT APPRECIATION/
CURRENCY AND SETTLEMENT DATE PURCHASED COST JUNE 30, 1998 (DEPRECIATION)
- -------------------------------------------------------------- --------- ----------- -------------- --------------

<S> <C> <C> <C> <C>
PURCHASE CONTRACTS
British Pound, 7/01/98........................................ 20,020 $33,402 $ 33,444 $ 42
British Pound, 7/02/98........................................ 19,477 32,517 32,536 19
British Pound, 7/06/98........................................ 19,486 32,427 32,544 117
Hong Kong Dollar, 7/02/98..................................... 386,798 49,926 49,913 (13)
Thai Baht, 7/02/98............................................ 943,161 22,716 22,316 (400)
Thai Baht, 7/02/98............................................ 1,353,139 32,551 32,017 (534)
Thai Baht, 7/02/98............................................ 1,019,636 24,067 24,126 59
------
$ (710)
------
------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

UBS International Equity Portfolio
Schedule of Investments
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

SUMMARY OF INDUSTRY DIVERSIFICATION

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY DIVERSIFICATION (UNAUDITED) NET ASSETS
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Chemicals............................................................................................. 8.0%
Banking & Finance..................................................................................... 7.9%
Food & Beverages...................................................................................... 6.4%
Energy Sources........................................................................................ 6.3%
Electrical & Electronics.............................................................................. 5.3%
Automotive............................................................................................ 4.4%
Building Materials.................................................................................... 3.9%
Food.................................................................................................. 3.8%
Household Appliances.................................................................................. 3.6%
Real Estate........................................................................................... 3.5%
Diversified........................................................................................... 3.2%
Transportation........................................................................................ 2.5%
Pharmaceuticals....................................................................................... 2.3%
Telecommunications.................................................................................... 2.2%
Tobacco............................................................................................... 2.2%
Paper & Forest Products............................................................................... 2.1%
Metals & Mining....................................................................................... 2.0%
Building & Construction............................................................................... 1.9%
Natural Gas........................................................................................... 1.7%
Beverages............................................................................................. 1.4%
Utilities............................................................................................. 1.3%
Automotive & Heavy Machinery.......................................................................... 1.2%
Investment Banking.................................................................................... 1.2%
Apparel & Textiles.................................................................................... 1.2%
Machinery............................................................................................. 1.0%
Electronics........................................................................................... 1.0%
Shipping.............................................................................................. 0.8%
Packaging............................................................................................. 0.8%
Retail................................................................................................ 0.8%
Food -- Retail........................................................................................ 0.8%
Insurance............................................................................................. 0.8%
Automotive -- Parts & Equipment....................................................................... 0.7%
Aerospace/Defense Equipment........................................................................... 0.5%
Health Care Providers................................................................................. 0.5%
Household Products.................................................................................... 0.4%
Technology............................................................................................ 0.4%
Photographic Equipment & Supplies..................................................................... 0.3%
Printing.............................................................................................. 0.3%
Engineeering.......................................................................................... 0.1%
Airlines.............................................................................................. 0.0%
Forest Products....................................................................................... 0.0%
----------
Total Portfolio Holdings.............................................................................. 88.7%
Other assets in excess of liabilities................................................................. 11.3%
----------
Total Net Assets...................................................................................... 100.0%
----------
----------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

UBS International Equity Portfolio
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment, at value (cost $56,254,079)............................................. $57,417,175
Cash................................................................................ 7,214,585
Receivable for investment securities sold........................................... 1,919,491
Dividends receivable................................................................ 175,919
Interest receivable................................................................. 15,588
Deferred organization expenses and other assets..................................... 18,977
-----------
Total Assets.............................................................. 66,761,735
-----------

LIABILITIES:
Investment advisory fees payable.................................................... 26,659
Administrative services fees payable................................................ 3,895
Payable for investment securities purchased......................................... 227,040
Foreign Currency Overdraft (Cost $1,755,766)........................................ 1,747,270
Unrealized depreciation on open forward foreign currency contracts.................. 710
Other accrued expenses.............................................................. 50,223
-----------
Total Liabilities......................................................... 2,055,797
-----------

NET ASSETS.......................................................................... $64,705,938
-----------
-----------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

<PAGE>
UBS International Equity Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $177,665)................ $670,780
Interest.............................................................. 160,726
--------
Investment income................................................ $ 831,506

EXPENSES:
Investment advisory fees.............................................. 264,201
Administrative services fees.......................................... 21,758
Custodian fees and expenses........................................... 49,299
Fund accounting fees.................................................. 27,274
Audit fees............................................................ 18,646
Amortization of organization expenses................................. 3,618
Legal fees............................................................ 2,801
Trustees' fees........................................................ 1,984
Miscellaneous expense................................................. 3,451
--------
Total expenses................................................... 393,032
Less: Fee waiver................................................. (108,788)
--------
Net expenses..................................................... 284,244
----------
Net investment income................................................. 547,262
----------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions.......................... 1,261,946
Net realized loss on foreign currency transactions.................... (48,259)
Net change in unrealized appreciation of investments.................. 7,074,460
Net change in unrealized depreciation of foreign currency contracts
and translations.................................................... (10,678)
----------
Net realized and unrealized gain on investments....................... 8,277,469
----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $8,824,731
----------
----------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

<PAGE>
UBS International Equity Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------

<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income........................................... $ 547,262 $ 704,088
Net realized gain on securities and foreign currency
transactions.................................................. 1,213,687 1,982,162
Net change in unrealized appreciation (depreciation) of
investments, foreign currency contracts and foreign currency
translations.................................................. 7,063,782 (6,280,784)
------------- -----------------
Net increase (decrease) in net assets resulting from
operations.................................................... 8,824,731 (3,594,534)
------------- -----------------

CAPITAL TRANSACTIONS:
Proceeds from contributions..................................... 12,250,754 44,945,810
Value of withdrawals............................................ (8,289,446) (30,977,956)
------------- -----------------
Net increase in net assets from capital transactions............ 3,961,308 13,967,854
------------- -----------------

NET INCREASE IN NET ASSETS...................................... 12,786,039 10,373,320

NET ASSETS:
Beginning of period............................................. 51,919,899 41,546,579
------------- -----------------
End of period................................................... $ 64,705,938 $51,919,899
------------- -----------------
------------- -----------------
</TABLE>

- ------------------------
See notes to financial statements.

<PAGE>

UBS International Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE YEAR APRIL 2, 1996*
JUNE 30, 1998 ENDED THROUGH
(UNAUDITED) DECEMBER 31, 1997 DECEMBER 31, 1996
------------- ----------------- -----------------
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............. $64,706 $51,920 $41,547
Ratio of expenses to average net assets(1)........... 0.91%(2) 0.95% 0.88%(2)
Ratio of net investment income to average net
assets(1).......................................... 1.76%(2) 1.40% 2.07%(2)
Portfolio turnover................................... 8% 26% 42%
</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 0.35% (annualized), 0.35% and 0.79%
(annualized) for the respective periods.
(2) Annualized.

See notes to financial statements.

<PAGE>

UBS International Equity Portfolio
Notes to Financial Statements
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

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
June 30, 1998, all of the beneficial interests in the Portfolio were held by UBS
International Equity Fund, UBS Institutional International Equity Fund and UBS
International Equity Fund, Ltd.

The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'); UBS International Investment London Limited ('UBSII') is the
sub-adviser of the Portfolio. Investors Fund Services (Ireland) Limited ('IBT
Ireland') acts as the Portfolio's administrator.

2. SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements:

A. INVESTMENT VALUATION -- Equity securities in the portfolio are valued at the
last sale price on the exchange on which they are primarily traded, or in the
absence of recorded sales, at the average of readily available closing bid and
asked prices, or at the quoted bid price. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.

Securities or other assets for which market quotations are not readily available
are valued at fair value in accordance with procedures established by and under
the general supervision of the Portfolio's Board of Trustees (the 'Trustees').

Trading in securities on most foreign exchanges and over-the-counter market is
normally completed before the close of the New York Stock Exchange and may also
take place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the pricing of the Portfolio,
such securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.

B. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Portfolio are
maintained in U.S. dollars. Assets, including investment securities, and
liabilities denominated in foreign currency are translated into U.S. dollars at
the prevailing rate of exchange at period-end. Purchases and sales of
securities, income and expenses are translated at the prevailing rate of
exchange on the respective dates of such transactions. Gain/loss on translation
of foreign currency includes net exchange gains and losses, gains and losses on
disposition of foreign currency and adjustments to the amount of foreign taxes
withheld.

The assets and liabilities are presented at the exchange rates and market value
at the close of the period. The changes in net assets arising from changes in
exchange rates and the changes in net assets resulting from changes in market
prices of securities at period-end are not separately presented. However, gains
and losses from certain foreign currency transactions are treated as ordinary
income for U.S. Federal income tax purposes.

C. FORWARD FOREIGN CURRENCY CONTRACTS -- The Portfolio may enter into forward
foreign currency contracts in connection with planned purchases or sales of
securities or to hedge the U.S. dollar value of portfolio securities denominated
in a particular currency. The Portfolio could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts
and from unanticipated

<PAGE>

<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

movements in the value of a foreign currency relative to the U.S. dollar. The
forward foreign currency contracts are marked-to market daily using the daily
exchange rate of the underlying currency and any resulting gains or losses are
recorded for financial statement purposes as unrealized gains or losses until
the contract settlement date.

The Portfolio's use of forward contracts involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts reflect the extent of the
Portfolio's involvement in these financial instruments. Risks arise from the
possible movements in the foreign exchange rates underlying these instruments.
The unrealized appreciation/depreciation on forward contracts reflects the
Portfolio's exposure at period-end to credit loss in the event of counterparty's
failure to perform its obligations.

D. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
trade date. Realized gains and losses on security transactions are determined on
the identified cost basis. Dividend income and other distributions from
portfolio securities are recorded on the ex-dividend date, except, if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the Portfolio is informed of the ex-dividend date. Dividend
income is recorded net of foreign taxes withheld where recovery of such taxes is
not assured. Withholding taxes on foreign dividends have been provided for in
accordance with the Portfolio's understanding of the applicable countries' tax
rules and rates. Recoveries of foreign taxes withheld from the Portfolio's
income are generally recorded, where applicable, by the funds investing in the
Portfolio. Interest income, adjusted for amortization of premiums and accretion
of discounts on investments, is accrued daily.

E. U.S. FEDERAL INCOME TAXES -- The Portfolio is considered a partnership under
the U.S. Internal Revenue Code (the 'Code'). As such, each investor in the
Portfolio will be taxed on its share of the Portfolio's ordinary income and
capital gains. Accordingly, no provision for federal income taxes is necessary.
It is intended that the Portfolio will be managed in such a way that an investor
will be able to satisfy the requirements of the Code applicable to regulated
investment companies.

F. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Portfolio in
connection with its organization in the amount of approximately $40,000 have
been deferred and are being amortized on a straight line basis over five years
from the Portfolio's commencement of operations (April 2, 1996).

G. OTHER -- The Portfolio bears all costs of its operations other than expenses
specifically assumed by UBS, UBSII and IBT Ireland. Expenses incurred by the
Trust on behalf of any two or more portfolios are allocated in proportion to net
assets of each portfolio, except when allocations of direct expenses to each
portfolio can otherwise be made fairly. Expenses directly attributable to the
Portfolio are charged directly to the Portfolio.

3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

A. INVESTMENT ADVISORY AGREEMENT -- The Portfolio has retained the services of
UBS as investment adviser and UBSII as investment sub-adviser. UBSII makes the
Portfolio's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages the Portfolio's investments and
operations subject to the supervision of UBS and the Trustees. As compensation
for overall investment management services, the Trust has agreed to pay UBS an
investment advisory fee, accrued daily and payable monthly, at an annual rate of
0.85% of the Portfolio's average daily net assets. UBS, in turn, has agreed to
pay UBSII a fee, accrued daily and payable monthly, at an annual rate of 0.75%
of the Portfolio's first $20 million average daily net assets, 0.50% of the next
$30 million average daily net assets and 0.40% of the Portfolio's average daily
net assets in excess of $50 million. For the six months

<PAGE>

<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------

ended June 30, 1998, the investment advisory fee amounted to $264,201. UBS
voluntarily agreed to waive $108,788 of this amount.

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 six
months ended June 30, 1998, the administrative services fee amounted to $21,758.

4. PURCHASE AND SALES OF INVESTMENTS
For the six months ended June 30, 1998, purchases and sales of investment
securities, excluding short-term investments, aggregated to $4,723,681 and
$5,135,229, respectively.

<PAGE>

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UBS International Equity Fund
200 Clarendon Street
Boston, Massachusetts 02116

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

Administrator Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116

Distributor First Fund Distributors, Inc.
4455 East Camelback Road
Phoenix, AZ 85018

Custodian and Transfer Agent Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
</TABLE>

The accompanying financial statements dated as of June 30, 1998 were not audited
and, accordingly, no opinion is expressed on them.

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