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As filed with the Securities and Exchange Commission on April 23, 1998.
File No. 811-7553
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 2
UBS INVESTOR PORTFOLIOS TRUST
(Exact name of registrant as specified in charter)
P.O. Box 501G, Cardinal Avenue
George Town, Grand Cayman, Cayman Islands B.W.I.
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code:
(345) 914-6266
Susan C. Mosher
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Copy to:
Burton Leibert, Esq.
Wilkie, Farr & Gallagher
153 East 53rd Street
New York, NY 10022
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EXPLANATORY NOTE
This registration statement on Form N-1A has been filed by UBS
Investor Portfolios Trust (the "Registrant") pursuant to Section 8(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"). However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests
will be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or
similar organizations or entities that are accredited investors" within the
meaning of Regulation D under the 1933 Act. This Registration Statement does
not constitute an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in the Registrant.
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PART A
UBS INVESTOR PORTFOLIOS TRUST
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
UBS REAL ESTATE PORTFOLIO
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 3 of instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
UBS Investor Portfolios Trust (the "Portfolios Trust") is a
diversified, open-end management investment company which was organized as a
trust under the law of the State of New York on February 9, 1996. Beneficial
interests of the Portfolios Trust are divided into seven series, 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 (each, a "Portfolio"; collectively the
"Portfolios"). Additional series may be established in the future. Beneficial
interests in each Portfolio are issued solely in private placement transactions
which do not involve any "public offering" within the meaning of Section 4(2)
of the 1933 Act, as amended (the "1933 Act"). Investments in a Portfolio may
only be made by investment companies, insurance company separate accounts,
common or commingled trust funds or similar organizations or entities that are
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Portfolios are described below,
together with the policies the Portfolios employ in their efforts to achieve
their respective objectives. Additional information about the investment
policies of the Portfolios appears in Item 13 of Part B. There can be no
assurance that the investment objective of any of the Portfolios will be
achieved.
UBS BOND PORTFOLIO
The investment objective of UBS Bond Portfolio (the "Bond Portfolio")
is to provide a high total return from a portfolio of debt securities issued by
foreign and domestic companies, consistent with moderate risk of capital and
maintenance of liquidity. Total return will consist of realized and unrealized
capital gains and losses plus net income. Although the net asset value of the
Bond Portfolio will fluctuate, the Bond Portfolio attempts to preserve the
value of its investments to the extent consistent with its investment
objective.
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The New York Branch (the "Branch" or the "Adviser") of Union Bank of
Switzerland (the "Bank") 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 the broad sectors of the fixed income market including, but not limited
to, U.S. Government and agency securities, corporate securities, private
placements, asset-backed securities and mortgage related securities. The
Adviser intends to identify and purchase specific securities that it believes
are undervalued using quantitative tools, analyses of credit risk, the
expertise of a dedicated trading desk, and the judgment of fixed income
portfolio managers and analysts. Under normal circumstances, the Adviser
intends to keep at least 65% of the 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.
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 Bond Portfolio's benchmark is
the Lehman Government Corporate Intermediate Bond Index, which currently has a
duration of approximately 3.25 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 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. 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. See Item 20 in Part B. For the period from April
2, 1996 (commencement of operations) to December 31, 1996 and for the fiscal
year ended December 31, 1997, the portfolio turnover rate for the Bond
Portfolio was 100% and 129%, respectively.
CORPORATE BONDS. The Bond Portfolio may invest in a broad range of
corporate bonds of domestic and foreign issuers. These include debt securities
of various types and maturities, e.g., debentures, notes, mortgage securities,
equipment trust certificates and other collateralized securities and zero
coupon securities. Collateralized securities are backed by a pool of assets
such as loans or receivables that generate cash flow to cover the payments due
on the securities. Collateralized securities are subject to certain risks,
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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 Bond Portfolio will be
required to reinvest the proceeds of prepayments at interest rates prevailing
at the time of reinvestment, which may be lower than the interest rates on the
prepaid securities. In addition, the value of zero coupon securities, which do
not pay interest, is more volatile than that of interest bearing debt
securities with the same maturity. 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 Bond Portfolio does not expect to invest more than 25% of
its total assets in securities of foreign issuers. If the Bond Portfolio
invests in non-U.S. dollar denominated securities, it may hedge its foreign
currency exposure. The Bond Portfolio may purchase non-publicly offered debt
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 Item 13 in
Part B 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 governmental entities.
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MONEY MARKET INSTRUMENTS. The Bond Portfolio may purchase money market
instruments to invest temporary cash balances or to maintain liquidity to meet
withdrawals. However, the Bond Portfolio may also invest, without limit, in
money market instruments as a temporary defensive measure taken during, or in
anticipation of, adverse market conditions. The money market investments
permitted for the Bond Portfolio include obligations of the U.S. Government and
its agencies and instrumentalities, other debt securities, commercial paper,
bank obligations and repurchase agreements. For more detailed information about
these money market investments, see Item 13 in Part B.
QUALITY INFORMATION. It is a current policy of the Bond Portfolio that
under normal circumstances at least sixty-five percent (65%) of its investment
in bonds will consist of securities that are rated at least A by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("Standard & Poor's") or that are unrated and in the Adviser's opinion are of
comparable quality. Up to thirty percent (30%) of the Bond Portfolio's bonds
may consist of debt securities rated Baa or better by Moody's or BBB or better
by Standard & Poor's or are unrated and in the Adviser's opinion are of
comparable quality. Up to five percent (5%) of the Bond Portfolio's bonds may
be invested in debt securities that are rated Ba or better by Moody's or BB or
better by Standard & Poor's or are unrated and in the Adviser's opinion are of
comparable quality. Securities rated Baa by Moody's or BBB by Standard & Poor's
are considered investment grade, but have some speculative characteristics.
Securities rated Ba by Moody's or BB by Standard & Poor's are below investment
grade and considered to be speculative with regard to payment of interest and
principal. These standards must be satisfied at the time an investment is made.
If the quality of the investment later declines, the Bond Portfolio may
continue to hold the investment.
The Bond Portfolio may also purchase obligations on a when-issued or
delayed delivery basis, enter into repurchase and reverse repurchase
agreements, engage in mortgage dollar roll transactions, loan its portfolio
securities, purchase certain privately placed securities and enter into certain
hedging transactions that may involve options on securities and securities
indices, futures contracts and options on futures contracts.
UBS VALUE EQUITY PORTFOLIO
The investment objective of UBS Value Equity Portfolio (the "Value
Equity Portfolio") 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. The average
income 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.
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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 proved to be an
important component of total return. 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 Item 13 in Part
B. 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
U.S. Equity Portfolio may purchase non-publicly offered debt securities.
The Value Equity Portfolio may also utilize equity futures contracts
and options to a limited extent. Specifically, the Value Equity Portfolio may
enter into futures contracts and options provided that such positions are
established for hedging purposes only.
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. To the extent the
Value Equity Portfolio engages in short-term trading, it may incur increased
transaction costs. For the period from April 2, 1996 (commencment of
operations) to December 31, 1996 and the fiscal year ended December 31, 1997,
the portfolio turnover rate for the Value Equity Portfolio was 19% and 47%,
respectively.
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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.
UBS INTERNATIONAL EQUITY PORTFOLIO
The investment objective of UBS International Equity Portfolio (the
"International Equity Portfolio") 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 Portfolio seeks to achieve its investment objective by
investing in companies that UBS International Investment London Limited
("UBSII" or the "Sub-Adviser"; together with the Adviser, the "Advisers")
believes are fundamentally sound and that are typically selling at below market
valuations and that 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
International Equity Portfolio's investments. Consistent with these duties, the
Adviser has entered into a Sub-Advisory Agreement with UBSII, whereby the
Sub-Adviser is primarily responsible for the day-to-day investment decisions
for the International Equity Portfolio. The Adviser is solely responsible for
paying the Sub-Adviser for these services. The Sub-Adviser is an affiliate of
the Adviser.
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, the 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
the UBSII's experienced currency managers.
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. To the extent the International Equity Portfolio
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engages in short-term trading, it may incur increased transaction costs. For
the period from April 2, 1996 (commencement of operations) to December 31,
1996 and the fiscal year ended December 31, 1997, the portfolio turnover rate
for the International Equity Portfolio was 42% and 26%, respectively.
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. Initially, UBSII expects to invest in
issues located in the United Kingdom, France, Japan, Germany and Switzerland.
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. 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, 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.
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.
UBS SMALL CAP PORTFOLIO
The investment objective of the UBS Small Cap Portfolio (the "Small Cap
Portfolio") 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, 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 UBS Asset Management (New York) Inc.
("UBSAM") believes meet the Small Cap Portfolio's investment objective and
relevant policies. For more detailed information about these money market
investments, see Item 13 in Part B.
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.
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.
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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. 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.
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.
The Small Cap Portfolio may also sell securities short to a limited
extent and for hedging purposes only. The Small Cap Fund may also invest in
"special situations." For more detailed information, see Item 13 in Part B.
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 from September 30, 1997
(commencement of operations) through December 31, 1997, the portfolio turnover
rate for the Small Cap Portfolio was 3%.
UBS LARGE CAP GROWTH PORTFOLIO
The investment objective of the UBS Large Cap Growth Portfolio (the
"Large Cap Growth Portfolio") 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 above-average
earnings and cash flow growth or meaningful increases in underlying asset
values over time.
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 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.
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
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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. 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. For more detailed information about these
money market investments, see Item 13 in Part B. 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.
The Large Cap Growth Portfolio may 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.
The Large Cap Growth Portfolio may also sell securities short to a
limited extent and for hedging purposes only. The Large Cap Growth Portfolio
may also invest in "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 HIGH YIELD BOND PORTFOLIO
The primary objective of the UBS High Yield Bond Portfolio (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
bjective 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 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.
Higher yields are generally available from securities in the lower
rating categories of Moody's and Standard & Poor's, including securities rated
Baa or lower by Moody's or BBB or lower by Standard & Poor's. 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 Standard & Poor's, 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
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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.
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.
As a secondary activity, UBSAM may also manage the High Yield Bond
Portfolio's duration (defined under "UBS 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 [4.32] years. The High Yield Bond
Portfolio intends to have a duration between 3 years and 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. It is anticipated that the annual portfolio
turnover rate of the High Yield Bond Portfolio will not exceed 100%. To the
extent the High Yield Bond Portfolio engages in short-term trading, it may
incur increased transaction costs.
UBS REAL ESTATE PORTFOLIO
The investment objective of the UBS Real Estate Portfolio (the "Real
Estate Portfolio") is to provide total return, consisting of long-term capital
appreciation and current income. In order to accomplish this, UBSAM intends to
invest in publicly traded equity securities of domestic and foreign real estate
companies, including Real Estate Investment Trusts ("REITs"). For more
detailed information REITs, see Item 13 in Part B.
The Adviser is responsible for supervising the management of the Real
Estate 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 Real Estate
Portfolio. The Adviser is solely responsible for paying UBSAM for these
services. UBSAM is an affiliate of the Adviser.
For purposes of the Real Estate 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 Real Estate Portfolio will invest principally in
real estate companies with market capitalizations of at least $50 million and
which also are in the opinion of UBSAM, high quality companies. The Real
Estate Portfolio also may invest up to 20% of its assets in securities of
foreign real estate companies.
Under normal circumstances, the Real Estate 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 stock, shares in REITs and securities which are convertible into
common stocks including warrants and rights. The Real Estate 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 Real
Estate Portfolio will seeek to diversify its investment over a carefully
selected list of securities in order to moderate the risks inherent in equity
investments.
Although the Real Estate Portfolio intends to invest in equity
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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. 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. For more detailed
information about these money market investments, see Item 13 in Part B.
The Real Estate Portfolio also may purchase nonpublicly offered
securities and may utilize equity futures contracts and options to a limited
extent. Specifically, the Real Estate Portfolio may enter into futures
contracts and options provided that such positions are established for hedging
purposes only. The Real Estate Portfolio also may sell securities short to a
limited extent and for hedging purposes only.
The Real Estate Portfolio intends to manage its securities actively in
pursuit of its investment objective. Although it generally seeks to invest for
the long term, the Real Estate Portfolio retains the right to sell securities
irrespective of how long they have been held. It is anticipated that the
annual portfolio turnover rate of the Real Estate Portfolio will not exceed
100%. To the extent the Real Estate Portfolio engages in short-term trading,
it may incur increased transaction costs.
ADDITIONAL INVESTMENT INFORMATION
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. The Portfolios 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
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commitment. The value of these securities is subject to market fluctuation
during this period and no interest or income accrues to a Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
more or 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,
a 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 each 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 Portfolios may engage in repurchase
agreement transactions with brokers, dealers or banks that meet the credit
guidelines established by the Trust's Board of Trustees (the "Trustees"). In a
repurchase agreement, 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 and certain other investments that
may be considered illiquid and are limited.
REVERSE REPURCHASE AGREEMENTS. The Portfolios are 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 a 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 Item 13 in the Part B and "Investment
Restrictions" below.
SECURITIES LENDING. Subject to applicable investment restrictions,
each Portfolio may lend its 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 a Portfolio
any income accruing thereon. Loans will be subject to termination by a
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
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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 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 Portfolio, or the
Adviser, Sub-Adviser, Administrator or Distributor, unless otherwise permitted
by applicable law.
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 the 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 that cannot be
offered for public sale in the United States without first being registered
under the 1933 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
1933 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 1933 Act. These
securities may be determined to be liquid in accordance with guidelines
established by the Adviser and approved by the Trustees. The Trustees will
monitor the Adviser's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. Each Portfolio is permitted to enter
into the futures and options transactions described below for hedging purposes.
These instruments are commonly known as derivatives.
The Bond and High Yield Bond 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. With respect to
the Value Equity, International Equity, Small Cap, Large Cap Growth and Real
Estate Portfolios, such Portfolios may purchase
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and sell exchange traded and 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 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.
Each Portfolio may use these techniques to manage its exposure to
changing interest rates, currency exchange rates (with respect to the Bond,
High Yield Bond and International Equity Portfolios only) 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 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 future 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 a
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.
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 the 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 Advisers apply a strategy at an inappropriate time or judge
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.
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Each 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.
The Commodity Exchange Act prohibits U.S. persons, such as the Bond
and International Equity Portfolios, from buying or selling certain foreign
futures contracts or options on such contracts. Accordingly, these Portfolios
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 "commodity pools"
for purposes of CFTC rules, each 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, 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.
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
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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, 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.
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.
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. A 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. A
Portfolio, in purchasing or selling index options, is subject to the risk that
the value of its
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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 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
the Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, 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. A 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. A 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 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,
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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 of an FCM that holds margin on
behalf of a Portfolio, the Portfolio may be entitled to return of margin owed
to it only in proportion to the amount received by the FCM's other customers,
potentially resulting in losses to the Portfolio.
COVER-SEGREGATED ACCOUNTS. A 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 a 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 Item 13 in
Part B.
MONEY MARKET INSTRUMENTS: 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
are permitted to invest in money market instruments although each intends to
stay invested in equity securities to the extent practical in light of their
objectives and long-term investment perspectives. These Portfolios may make
money market investments pending other investments or settlements, for
liquidity or in adverse market conditions. Such money market investments may
include obligations of the U.S. Government and its agencies and
instrumentalities, other debt securities, commercial paper, bank obligations
and repurchase agreements. The International Equity and Real Estate Portfolios
may purchase non-publicly offered debt securities. 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 Item 13 in
Part B.
FOREIGN INVESTMENT INFORMATION: BOND, HIGH YIELD BOND AND
INTERNATIONAL EQUITY PORTFOLIOS. The Bond and High Yield Bond Portfolios may
invest and 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
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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 a 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, a
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 including restrictions on investing
in issuers or industries deemed sensitive to relevant national
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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 American Depository
Receipts ("ADRs"), European Depository 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.
Generally, ADRs, in registered form, are designed for use in the U.S.
securities markets, and EDRs, in bearer form, are designed for use in European
securities markets.
Because investments in foreign securities involve foreign currencies,
the value of assets as measured in U.S. dollars may be affected, favorably or
unfavorably, by changes in currency exchange rates and in exchange control
regulations, including currency blockage.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the International
Equity Portfolio will and the Small Cap Portfolio and the Large Cap Growth
Portfolios may buy and sell securities and will receive interest and dividends
in currencies other than the U.S. dollar, such Portfolios may, from time to
time, enter into foreign currency exchange transactions. A 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 a
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 a 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.
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The International Equity, Samll 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. Such 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.
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 a Portfolio for currency
or futures options increase the Portfolio's transaction costs. Similarly, the
cost of a 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.
SMALL CAPITAL GROWTH AND EMERGING GROWTH COMPANIES: SMALL CAP
PORTFOLIO. 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: SMALL CAP PORTFOLIO, LARGE CAP GROWTH PORTFOLIO
AND REAL ESTATE PORTFOLIO. From time to time, the Large Cap Growth Portfolio,
Small Cap Portfolio and Real Estate 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: SMALL CAP PORTFOLIO, LARGE CAP GROWTH PORTFOLIO AND REAL
ESTATE PORTFOLIO. 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, Large Cap Growth and the Real Estate Portfolios will only enter into short
sales for hedging purposes. The Small Cap, Large Cap Growth and Real Estate
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, Large Cap Growth or Real Estate Portfolio
must replace the borrowed security. All short sales will be fully
collateralized and the Small Cap, Large Cap Growth and Real Estate Portfolios
will not sell securities short if immediately after and as a result of the
short sale, the value of all securities sold by either of the Small Cap, Large
Cap Growth or Real Estate Portfolio exceeds 25% of its total assets. The Small
Cap, Large Cap Growth and Real Estate 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.
CORPORATE BONDS: BOND PORTFOLIO AND HIGH YIELD BOND PORTFOLIO. 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,
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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.
LOWER-RATED SECURITIES: HIGH YIELD BOND PORTFOLIO. 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.
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)
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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.
NON-DIVERSIFIED STATUS: REAL ESTATE PORTFOLIO. The Real Estate
Portfolio IS classified as "non-diversified" investment companies under the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that
the the Real Estate Portfolio is 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 Real Estate Portfolio may invest in a smaller number of individual
issuers than a diversified investment company.
In order to qualify as a RIC, the Real Estate Portfolio will have to
meet certain requirements, including asset diversification requirements. Under
these asset diversification requirements, the Real Estate Portfolio will limit
its investments so that, at the close of each quarter of the taxable year:
(i) not more than 25% of the Real Estate 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 Real Estate Portfolio will not own more than 10% of the outstanding
voting securities of any single issuer.
The Real Estate Portfolio's investments in securities issued by the
U.S. Government, its agencies and instrumentalities or other mutual funds are
not subject to these limitations.
REAL ESTATE SECURITIES: REAL ESTATE PORTFOLIO. The Real Estate
Portfolio will not invest in real estate directly, but only in securities
issued by real estate companies. However, the Real Estate Portfolio may be
subject to risks similar to those associated with the direct ownership of real
estate (in addition to securities market 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.
REAL ESTATE INVESTMENT TRUSTS: REAL ESTATE PORTFOLIO. The Real Estate
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
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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.
INVESTMENT RESTRICTIONS
The investment objective of each Portfolio, together with the
investment restrictions described below and in Part B, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the "vote of a
majority of the outstanding voting securities" (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Portfolio.
As a diversified investment company, 75% of each Portfolio's total
assets 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.
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
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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 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 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 Item 13 in Part B.
ITEM 5. MANAGEMENT OF THE PORTFOLIOS TRUST.
DIRECTORS AND TRUSTEES. Pursuant to the Declaration of Trust, the
Trustees establish the Portfolio's general policies, are responsible for the
overall management of the Portfolios Trust and review the actions of the
Adviser, UBSAM, UBSII, the Administrator and other service providers. Additional
information about the Portfolios Trust's Board of Trustees and officers appears
in Item 14 of Part B. The officers of the Portfolios Trust are also employees
of Investors Bank & Trust Company ("Investors Bank") or its affiliates.
ADVISERS, UBSAM, UBSII AND FUND SERVICES AGENT. The Portfolios Trust
has retained the services of the Branch as investment adviser with respect to
each Portfolio and UBSII as investment sub-adviser with respect to
International Equity Portfolio and UBSAM as investment sub-adviser with respect
to the Small Cap Portfolio, Large Cap Growth Portfolio, High Yield Bond
Portfolio and Real Estate Portfolio. The Branch, which operates out of offices
located at 299 Park Avenue, New York, New York, is licensed by the
Superintendent of Banks of the State of New York under the banking laws of the
State of New York and is subject to state and federal banking laws and
regulations applicable to a foreign bank that operates a state licensed branch
in the United States. 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, 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 shareholders
equity of $14.4 billion (unaudited).
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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, the Adviser makes the Bond and Value Equity Portfolios'
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages said Portfolios' investments and operations.
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 said Portfolio's
investments and operations. Subject to the supervision of the Trustees and the
Adviser, UBSAM makes the day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the investments and
operations of the Small Cap, Large Cap Growth, High Yield Bond and Real Estate
Portfolios. See Item 16 in Part B.
The Advisers use a sophisticated, disciplined, collaborative process
for managing all asset classes.
Ranji H. Nagaswami and Maud 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. 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.
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 the Sub-Adviser'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.
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.
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.
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
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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.
Bruce C. Ebnother is primarily responsible for the day-to-day
management and implementation of UBSAM's process for the Real Estate Portfolio.
Mr. Ebnother is a Vice President and Portfolio Manager at UBSAM, a position he
has held since 1996. Prior to joining UBSAM, Mr. Ebnother was a Senior Equity
Analyst, Real Estate, at Smith Barney from 1992 through 1996. Mr. Ebnother has
14 years investment experience and holds a BA degree.
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In addition to the above-listed investment advisory services, the
Adviser also provides the Portfolios Trust with certain related administrative
services. Subject to the supervision of the Trustees, the Adviser is
responsible for: establishing performance standards for the third-party service
providers of the Portfolios Trust and overseeing and evaluating the performance
of such entities; providing and presenting quarterly management reports to the
Trustees; and supervising the preparation of reports for investors in the
Portfolios.
Under Investment Advisory Agreements with the Portfolios Trust with
respect to each Portfolio, the Portfolios Trust pay the Adviser a fee,
calculated daily and payable monthly, at an annual rate equal to 0.45% of the
Bond Portfolio's average net assets, 0.60% of the Value Equity Portfolio's
average net assets, 0.85% of the International Equity Portfolio's average net
assets, 0.60% of the Small Cap Portfolio's average net assets, 0.60% of the
Large Cap Growth Portfolio's average net assets, 0.45% of the High Yield Bond
Portfolio's average net assets and 0.70% of the Real Estate Portfolio's average
net assets. 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, at an annual rate equal 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 the International Equity
Portfolio's average 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:
Large Cap Growth Portfolio 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.
Small Cap Portfolio 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.
Real Estate Portfolio 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.
The Adviser is soly responsible for paying UBSAM these fees.
ADMINISTRATOR. The Portfolios employ IBT Trust & Custodial Services
(Ireland) LTMD ("IBT Ireland"), a subsidiary of Investors Bank, as
Administrator under an Administration Agreement (the "Administration
Agreements") to provide certain administrative services. The services provided
by IBT Ireland under the Administration Agreement include certain accounting,
clerical and bookkeeping services, 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 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 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.
CUSTODIAN. Investors Bank also serves as the custodian for the
Portfolios. The Custodian also maintains offices at 1 First Canadian Place,
King Street West, Suite 2800, Toronto, Ontario M5X 1C8.
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ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
Each Portfolio is a series of the Portfolios Trust, which is organized
as a series trust under the law of the State of New York. Under the Declaration
of Trust, the Trustees are authorized to issue beneficial interests in one or
more series or subtrusts (each a "Portfolio"). Currently, there are seven
active series of the Portfolios Trust: 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. Investments in a Portfolio may not be transferred, but an investor
may withdraw all or any portion of its investment at any time at net asset
value. Investors in a Portfolio (e.g., investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable
for all obligations of that Portfolio (and of no other series). However, the
risk of an investor in a Portfolio 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.
Investments in a Portfolio have no preemptive or conversion rights and are
fully paid and nonassessable, except as set forth below.
Each investor is entitled to a vote in proportion to the amount of its
investment in a Portfolio. Investors in each Portfolio will vote as a separate
class, except as to voting of Trustees, as otherwise required by the 1940 Act,
or if determined by the Trustees to be a matter which affects all series. As to
any matter which does not affect a particular series, only investors in the one
or more affected Portfolios are entitled to vote. The Portfolios are not
required and have no current intention of holding special meetings of
investors, but the Portfolios will hold special meetings of investors when in
the judgment of the Trustees it is necessary or desirable to submit matters for
an investor vote. Changes in fundamental objectives and policies will be
submitted to investors for approval. Investors under certain circumstances
(e.g., upon application and submission of certain specified documents to the
Trustees by a specified number of investors) have the right to communicate with
other investors in connection with requesting a meeting of investors for the
purpose of removing one or more Trustees. Investors also have the right to
remove one or more Trustees without a meeting by a declaration in writing by a
specified number of investors. Upon liquidation of a Portfolio, investors would
be entitled to share pro rata in the net assets of that Portfolio (and no other
series) available for distribution to investors.
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Each Portfolio determines its net income and realized capital gains,
if any, on each Portfolio Business Day (as defined below) and allocates all
such income and gain pro rata among the investors in the Portfolio at the time
of such determination.
The "net income" of each Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of a Portfolio,
less (ii) all actual and accrued expenses of that Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of a Portfolio. All the net income of each
Portfolio is allocated pro rata among the investors in that Portfolio (and no
other series).
Under their anticipated method of operation, the Portfolios will not
be subject to any income tax. However, each investor in each Portfolio will be
taxable on its share (as determined in accordance with the governing
instruments of the Portfolios Trust) of that Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that each Portfolio's assets, income and distributions
will be managed in such a way that an investor in each Portfolio will be able
to satisfy the requirements of Subchapter M of the Code, assuming that the
investor invested all of its assets in that Portfolio.
For more information on tax matters, see Item 20 in Part B. Investor
inquiries regarding the Portfolios Trust may be directed to UBS Investor
Portfolios Trust, P.O. Box 501B, Cardinal Avenue, George Town, Grand Cayman,
Cayman Islands B.W.I. (345-914-6266).
ITEM 7. PURCHASE OF SECURITIES.
Beneficial interests in each Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See Item 4 above.
An investment in a Portfolio may be made without sales load at the net
asset value next determined if an order is received "in good order" by the
Portfolios Trust. The net asset value of each Portfolio is determined each day
during which the New York Stock Exchange ("NYSE") is open for business
("Portfolio Business Day"). This determination is made once each day as of 4:00
p.m. New York time or at the close of regular trading on the NYSE, whichever is
earlier (the "Valuation Time"). For information on the valuation of the
Portfolios' securities, see Item 19 in Part B.
There is no minimum initial or subsequent investment in a Portfolio.
However, because each Portfolio intends to be as fully invested at all times as
is reasonably
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practicable in order to enhance the yield on its assets, investments must be
made in federal funds (i.e., monies credited to the account of a Portfolio's
custodian bank by a Federal Reserve Bank).
A Portfolio may, at its own option, accept securities in payment for
investments in its beneficial interest. The securities delivered in kind are
valued by the method described in Item 19 of Part B as of the business day
prior to the day a Portfolio receives the securities. Securities may be
accepted in payment for beneficial interests only if they are, in the judgment
of the Trustees, appropriate investments for a Portfolio. In addition,
securities accepted in payment for beneficial interests must: (i) meet the
investment objective and policies of a Portfolio; (ii) be acquired by the
Portfolio for investment and not for resale; (iii) be liquid securities which
are not restricted as to transfer either by law or liquidity of market; and
(iv) if stock, have a value which 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 Portfolio reserves the
right to accept or reject at its own option any and all securities offered in
payment for beneficial interests.
Each investor in each Portfolio may add to or reduce its investment in
that Portfolio on each Portfolio Business Day. As of the Valuation Time on each
such day, the value of each investor's beneficial interests in each Portfolio
will be determined by multiplying the net asset value of a Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in each Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in a Portfolio as
of the Valuation Time on such day plus or minus, as the case may be, the amount
of net additions to or reductions in the investor's investment in the Portfolio
effected as of the Valuation Time, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Valuation Time on such
day, plus or minus, as the case may be, the amount of net additions to or
reductions in the aggregate investments in the Portfolio by all investors in
the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in a Portfolio as of the Valuation Time on
the following Portfolio Business Day.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in each Portfolio may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal request in
proper form is furnished by the investor to the Portfolios Trust by the
designated cutoff time for each accredited
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investor. The proceeds of a reduction or withdrawal will be paid by the
Portfolios Trust in federal funds normally on the Portfolio Business Day the
withdrawal is effected, but in any event within seven days. Investments in the
Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on the NYSE is restricted or, to the extent otherwise permitted by
the 1940 Act, if an emergency exists.
Each Portfolio reserves the right to pay redemptions in kind. Unless
requested by an investor, a Portfolio will not make redemptions in kind to an
investor, except in situations where that investor may make redemptions in
kind. See Item 19 in Part B.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
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PART B
ITEM 10. COVER PAGE.
Not Applicable.
ITEM 11. TABLE OF CONTENTS.
General Information and History..........................B-1
Investment Objectives and Policies ......................B-1
Management of the Portfolio Series......................B-14
Control Persons and Principal Holders of Securities.....B-16
Investment Advisory and Other Services..................B-17
Brokerage Allocation and Other Practices................B-21
Capital Stock and Other Securities......................B-23
Purchase, Redemption and Pricing of Securities..........B-25
Tax Status..............................................B-27
Underwriters............................................B-29
Calculations of Performance Data .......................B-29
Financial Statements....................................B-29
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
Part A contains additional information about the investment objectives
and policies and management techniques of the Portfolios. This Part B should
only be read in conjunction with Part A of the registration statement.
The approval of the investors in the Portfolios is not required to
change any of the investment policies or management techniques of the
Portfolios discussed herein or in Part A of this registration statement, unless
otherwise indicated.
INVESTMENT OBJECTIVES AND POLICIES
The Bond Portfolio attempts to achieve its investment objective by
investing primarily in the corporate and government debt obligations and
related securities described in Part A and this Part B.
The High Yield Bond Portfolio attempts to achieve its investment
objective by investing in securities benefiting from declines in long-term
interest rates or improvements in credit quality.
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.
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.
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The Small Cap Portfolio will attempt to achieve its investment
objective by investing, on an individual basis, in companies believed to
represent above average growth opportunities. Securities will be selected for
investment by screening for above average growth expectations and reasonable
valuations. 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 selected list of securities issued by different companies in
a variety of industries.
The Large Cap Portfolio will attempt to achieve its investment
objective by investing in companies believed to represent above average growth
opportunities. Individual securities will be selected for investment by
screening for above average earnings growth expectations and reasonable
valuations (price relative to earnings and cash flow). 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.
The Real Estate Portfolio will attempt to achieve its investment
objective by investing in publicly traded equity securities of domestic and
foreign real estate companies. For purposes of the Real Estate 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.
MONEY MARKET INSTRUMENTS
As discussed in Part A, each Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio, unless otherwise noted in Part A or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks that have more than $2 billion in total assets (the "Asset Limitation")
and are organized under the laws of the United States or any state, (ii)
foreign branches of these banks or of foreign banks of equivalent size (Euros)
and (iii) U.S. branches of foreign banks of equivalent size (Yankees). The
Asset Limitation is not applicable to the International Equity Portfolio. See
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"Foreign Investments". No Portfolio will invest in obligations for which the
Adviser, defined below (or the Sub-Adviser, defined below, in the case of the
International Equity Portfolio), or any of its affiliated persons, is the
ultimate obligor or accepting bank. Each Portfolio may also invest in
obligations of international banking institutions designated or supported by
national governments to promote economic reconstruction, development or trade
between nations (e.g., the European Investment Bank, the Inter-American
Development Bank or the World Bank).
COMMERCIAL PAPER. Each Portfolio 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 Bank, the Branch, 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, acting as agent, for no additional fee, in its capacity as
investment (sub)adviser to the Portfolios and as fiduciary for other clients
for whom it exercises investment discretion. The monies loaned to the borrower
come from accounts managed by the 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.
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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 not more than thirteen months, including without
limitation corporate and foreign bonds, asset-backed securities and other
obligations described in Part A or this Part B.
As discussed in Part A, 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 its investment objectives and policies. A
description of these investments appears in Part A 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 Part A, 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 Part A 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.
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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.
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 cawn 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,
or European, in the case of EDRs, 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 and International Equity
Portfolios may enter into foreign currency exchange transactions in connection
with the settlement of foreign securities transactions or to manage their
currency exposure related to foreign investments. The Portfolios will not enter
into such transactions for speculative purposes. For a description of the risks
associated with investing in foreign securities, see Item 4 in Part A.
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ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and no interest accrues to a Portfolio until
settlement takes place. At the time a Portfolio makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it will record
the transaction, reflect the value of such securities each day in determining
its net asset value and, if applicable, calculate the maturity for the purposes
of average maturity from that date. At the time of settlement, a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, each Portfolio will maintain with the Custodian a segregated
account with liquid assets, consisting of cash, U.S. Government securities or
other high-grade, liquid securities, in an amount at least equal to the value
of such commitments. On delivery dates for such transactions, each Portfolio
will meet its obligations from maturities or sales of the securities held in
the segregated account and/or from cash flow. If a Portfolio chooses to dispose
of the right to acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation, incur a gain
or loss due to market fluctuation. It is the current policy of each Portfolio
not to enter into when-issued commitments exceeding in the aggregate 15% of the
market value of that Portfolio's total assets, less liabilities (excluding the
obligations created by when-issued commitments).
INVESTMENT COMPANY SECURITIES. Securities of other investment
companies may be acquired by each Portfolio to the extent that such purchases
are consistent with that entity's investment objectives and restrictions and
are permitted under 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, provided, however, that a Portfolio may invest all of its investable
assets in an open-end investment company having the same investment objective
as that Portfolio. As a shareholder of another investment company, a Portfolio
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 Portfolio 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
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simultaneously agrees to repurchase a similar security on a specified future
date at an agreed upon price. During the roll period, the Portfolio will not be
entitled to receive any interest or principal paid on the securities sold. The
Portfolio is compensated for the lost interest on the securities sold by the
difference between the sales price and the lower price for the future
repurchase as well as by the interest earned on the reinvestment of the sales
proceeds. The Portfolio may also be compensated by receipt of a commitment fee.
When the Portfolio enters into a mortgage dollar roll transaction, liquid
assets in an amount sufficient to pay for the future repurchase are segregated
with its Custodian. Mortgage dollar roll transactions are considered reverse
repurchase agreements for purposes of the Portfolio's investment restrictions.
SECURITIES LENDING. Each Portfolio may lend its securities if such
loans are secured continuously by cash or equivalent collateral or by a letter
of credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolios in the normal
settlement time, generally three business days after notice or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
that occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolios may pay reasonable finder's and custodial
fees in connection with a loan. In addition, the Portfolios will consider all
facts and circumstances including the creditworthiness of the borrowing
financial institution, and the Portfolios will not make any loans in excess of
one year. The Portfolios will not lend their securities to any officer,
Trustee, Director, employee, or affiliate or placement agent of the Company,
the Trust, or to the Adviser, Sub-Adviser, Administrator or Distributor or any
affiliate thereof, unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolios
may invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in Part A.
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 1933 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, subject to the
limitation of any applicable state securities laws. Investments not subject to
the limitations described above could involve an increased risk to a Portfolio
should an issuer, or a state or its related entities, be unable to make
interest or principal payments or should the market value of such securities
decline. See "Investment Restrictions".
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
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qualify 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 is 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 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(1) 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.
B-8
<PAGE>
<PAGE>
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 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 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.
B-9
<PAGE>
<PAGE>
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 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 Portfolios 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.
B-10
<PAGE>
<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions below
have been adopted by the Trustees with respect to each 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 Portfolio to which they relate. The "vote
of a majority of the outstanding voting securities" under the 1940 Act is the
lesser of (a) 67% or more of the voting shares present at a meeting of holders
of beneficial interests if the holders of more than 50% of the outstanding
beneficial interests are present or represented by proxy or (b) more than 50%
of the outstanding beneficial interests. The limitations described below apply
at the time the securities are purchased by the Portfolio.
1. Borrow money, except from banks for extraordinary or emergency purposes and
then only in amounts up to one-third of the value of its total assets
(including the amount borrowed), less liabilities (not including the amounts
borrowed), or mortgage, pledge, or hypothecate any assets, except in connection
with any permitted borrowing or reverse repurchase agreements (see Investment
Restrictions No. 7). It will not purchase securities while borrowings
(including reverse repurchase agreements) exceed 5% of its net assets;
provided, however, that it may increase its interest in an open-end management
investment company with the same investment objective and restrictions while
such borrowings are outstanding and provided further that for purposes of this
restriction, short-term credits necessary for the clearance of transactions are
not considered borrowings. This borrowing provision facilitates the orderly
sale of portfolio securities, for example, in the event of abnormally heavy
redemption requests and is not for investment purposes. Collateral arrangements
for premium and margin payments in connection with its hedging activities are
not deemed to be a pledge of assets;
2. Purchase the securities of an issuer if, immediately after such purchase, it
owns more than 10% of the outstanding voting securities of such issuer;
provided, however, that a Fund may invest all or part of its investable assets
in an open-end management investment company with the same investment objective
and restrictions. This limitation shall not apply to investments of up to 25%
of its total assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in securities or other obligations of any one such issuer;
provided, however, that a Fund may invest all or part of its investable assets
in an open-end management investment company with the same investment objective
and restrictions. This limitation shall not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or to
investments of up to 25% of its total assets (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 nor the International Equity Portfolio may purchase or sell real
estate mortgage loans. The Bond Portfolio, however, may purchase debt
obligations secured by interests in real estate or issued by companies that
invest in real estate or interests therein including real estate investment
B-11
<PAGE>
<PAGE>
trusts ("REITs"); and the International Equity Portfolio and the Value Equity
Portfolio may purchase the equity securities or commercial paper issued by
companies that invest in real estate or interests therein, including REITs;
7. Issue any senior security, except as appropriate to evidence indebtedness
that it is permitted to incur pursuant to Investment Restriction No. 1 and
except that it may enter into reverse repurchase agreements, provided that the
aggregate of senior securities, including reverse repurchase agreements, shall
not exceed one-third of the market value of its total assets (including the
amounts borrowed), less liabilities (excluding obligations created by such
borrowings and reverse repurchase agreements). Hedging activities as described
in "Investment Objective(s) and Policies" shall not be considered senior
securities for purposes hereof; or
8. Act as an underwriter of securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Portfolios and may be
changed by the Trustees. These non-fundamental investment policies provide that
the Portfolios may not:
i. borrow money (including through reverse repurchase or forward roll
transactions) for any purpose in excess of 5% of the Portfolio's total assets
(taken at cost), except that the Portfolio may borrow for temporary or
emergency purposes up to 1/3 of its assets;
ii. pledge, mortgage or hypothecate for any purpose in excess of 10% of the
Portfolio'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 Portfolio, and the
value of securities of any one issuer in which the Portfolio is short exceeds
the lesser of 2.0% of the value of the Portfolio'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 Portfolio contemporaneously owns or where the Portfolio
has the right to obtain securities equivalent in kind and amount to those sold,
I.E., short sales against the box.) (The Portfolio 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 Portfolio if such purchase at the time thereof
would cause (a) more than 10% of the Portfolio'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 Portfolio'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 Portfolio; provided further that, except in the case of a merger or
consolidation, the Portfolio shall not purchase any securities of any open-end
investment company unless (1) the Portfolio's investment adviser waives the
investment advisory fee with respect to assets invested in other open-end
investment companies and (2) the Portfolio incurs no sales charge in connection
with that investment;
B-12
<PAGE>
<PAGE>
vii. invest more than 10% of the Portfolio'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. (except for the Small Cap, Large Cap Growth, High Yield Bond and Real
Estate Portfolios), invest more than 15% of the Portfolio's total assets (taken
at the greater of cost or market value) in (a) securities (excluding Rule 144A
securities) that are restricted as to resale under the 1933 Act, and (b)
securities that are issued by issuers which (including predecessors) have been
in operation less than three years (other than U.S. Government securities),
provided, however, that no more than 5% of the Portfolio'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 Portfolio'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
Portfolio to be liquid);
x. (except for the Small Cap, Large Cap Growth, High Yield Bond and Real Estate
Portfolios), invest in securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Director of the
Portfolio, or is an officer or director of the Adviser, if after the purchase
of the securities of such issuer for the Portfolio 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 Portfolio 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 Portfolio's net assets or (except for the Small Cap, Large Cap
Growth, High Yield Bond and Real Estate Portfolios) if, as a result, more than
2% of the Portfolio'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 Portfolio 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 Portfolio's net assets; (c) the securities
subject to the exercise of the call written by the Portfolio must be owned by
the Portfolio at the time the call is sold and must continue to be owned by the
Portfolio until the call has been exercised, has lapsed, or the Portfolio has
purchased a closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio's obligation to deliver securities pursuant to the
call it has sold; and (d) at the time a put is written, the Portfolio
establishes a segregated account with its custodian consisting of cash or
short-term U.S. Government securities equal in value to the amount the
Portfolio will be obligated to pay upon exercise of the put (this account must
be maintained until the put is exercised, has expired, or the Portfolio has
purchased a closing put, which is a put of the same series as the one
previously written); and
B-13
<PAGE>
<PAGE>
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 Portfolio'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 Portfolio's total assets; and (d) such activities are
permitted by Regulation 4.5 under the Commodity Exchange Act.
ALL PORTFOLIOS. 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.
ITEM 14. MANAGEMENT OF THE PORTFOLIO SERIES.
The Portfolios Trust's Board of Trustees, which consists of three
Trustees, is responsible for the overall management of the Portfolios,
including the general supervision and review of their investment activities.
The Board, in turn, elects the officers of the Portfolios Trust. The addresses
and principal occupations of the Trustees and principal officers of the
Portfolios Trust are set forth below.
DR. HANS-PETER LOCHMEIER*, 1345 Avenue of the Americas, New York, New
York 10105; Age: 55; Trustee; UBS Private Investor Funds, Inc. (mutual fund),
Trustee (February 1996-Present); Union Bank of Switzerland (Investment Services
Department), Division Head.
TIMOTHY M. SPICER, CPA, 1345 Avenue of the Americas, New York, New
York 10105; Age: 49; Trustee; UBS Private Investor Funds, Inc., Trustee
(February 1996-Present); San Francisco Sentry Investment Group (a west coast
investment adviser and venture capital firm) 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); Smith & Hawkin (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, 1345 Avenue of the Americas, New York, New
York 10105; Age: 71; Trustee; UBS Private Investor Funds, Inc., Trustee
(February 1996-Present); Zemex Corporation (mining), Chairman of the Board and
Director (1990-Present); The McGraw-Hill Companies, 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 Solomon R.
Guggenheim Museum 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).
B-14
<PAGE>
<PAGE>
PAUL J. JASINSKI, 200 Clarendon Street, Boston, Massachusetts 02116;
Age: 51; President; UBS Private Investor Funds, Inc., President (March 1997-
Present); Investors Bank & Trust Company, Managing Director (1990-Present).
NICHOLAS G. CHUNIAS, 200 Clarendon Street, Boston, Massachusetts
02116; Age: 33; Treasurer and Chief Financial Officer; UBS Private Investor
Funds, Inc., Treasurer and Chief Financial Officer (March 1997-Present);
Investors Bank & Trust Company, Director, Mutual Fund Administration Reporting
& Compliance (1996-Present); Director, Fund Accounting (1993-1996); Coopers &
Lybrand, LLP, Account Supervisor (1992-1993).
SUSAN C. MOSHER, 200 Clarendon Street, Boston, Massachusetts 02116;
Age: 43; Secretary; UBS Private Investor Funds, Inc., Secretary (March 1997-
Present); Investors Bank & Trust Company, Director, Legal Administration
(1995-Present); 440 Financial Group of Worcester, Inc., Associate Counsel
(1993-1995); Gallagher, Callahan & Gartrell, P.A., Associate and Partner (1986-
1992).
RAYMOND O'NEILL, Deloitte & Touche House, 29 Earlsfort Terrace,
Dublin 2, Ireland; Age: 36; Assistant Treasurer and Assistant Secretary; UBS
Private Investor Funds, Inc., Assistant Treasurer and Assistant Secretary
(March 1997-Present); IBT Trust & Custodial Services (Ireland) LMTD, Managing
Director (1994-Present); Atlantic Corporate Management Limited, Vice President
(1991-1994).
<TABLE>
<CAPTION>
COMPENSATION TABLE
Pension or Estimated
Aggregate Retirement Benefits Annual
Compensation from Accrued as Part of Benefits Upon
NAME OF PERSON, POSITION PORTFOLIOS TRUST FUND EXPENSES RETIREMENT
- ------------------------ ---------------- ------------- ----------
<S> <C> <C> <C>
Dr. Lochmeier* 0 0 0
Chairman of the Board
Mr. Spicer $11,250 0 0
Trustee
Mr. Lawson-Johnston $11,250 0 0
Trustee
Total Compensation
from Company and
Fund Complex** Paid
TO TRUSTEES
-----------
<C>
0
$23,250
$23,250
</TABLE>
* "Interested person" within the meaning of the 1940 Act.
** The Fund Complex consists of the Portfolio Trust and UBS Private
Investor Funds, Inc.
B-15
<PAGE>
<PAGE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of April 13, 1998, the UBS Bond Fund, a series of UBS Private
Investor Funds, Inc., a Maryland Corporation (the "Company"), owned 19% and
UBS Bond Fund, Ltd. owned 81% of the outstanding beneficial interests in the
UBS Bond Portfolio. As of the same date, the UBS Value Equity Fund, also a
series of the Company, owned 47% and UBS Value Equity Fund, Ltd. owned
53% of the outstanding beneficial interests in the UBS Value Equity
Portfolio. As of the same date, the UBS International Equity Fund and the UBS
Institutional International Equity Fund, each a series of the Company owned
49% and 23%, respectively, and UBS International Equity Fund, Ltd. owned
28% of the outstanding beneficial interests in the UBS International Equity
Portfolio. As of the same date, the UBS Small Cap Fund, also a series of the
Company, owned 52% and UBS Small Cap Fund, Ltd. owned 48% of the
outstanding beneficial interests in the UBS Small Cap Portfolio. As of the
same date, the UBS Large Cap Growth Fund, also a series of the Company, owned
31% and UBS Large Cap Growth Fund, Ltd. owned 69% of the outstanding
beneficial interests in the UBS Large Cap Growth Portfolio. As of the
same date, the UBS High Yield Bond Fund, also a series of the Company, owned
60% and UBS High Yield Bond Fund, Ltd. owned 40% of the outstanding
beneficial interests in the UBS High Yield Bond Portfolio. The UBS Real Estate
Portfolio had not commenced operations as of April 13, 1998.
B-16
<PAGE>
<PAGE>
Because the Company controls each Portfolio, it may take actions
without the approval of any other investor in such Portfolio. As of the same
date, the Trustees and officers of the Portfolios Trust owned beneficially and
in the aggregate less than 1% of the outstanding beneficial interests of each
Portfolio. None of the Trustees receive compensation from the Portfolios Trust
exceeding $60,000 per fiscal year. None of the officers receive any compensation
from the Portfolios Trust.
The Company has informed the Portfolios Trust that whenever one of its
series is requested to vote on matters pertaining to a Portfolio, the Company
will hold a meeting of shareholders of that series and will cast its vote as
instructed by those shareholders. It is anticipated that other investors in the
Portfolios Trust will follow the same or a similar practice.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER AND FUND SERVICES AGENT
Pursuant to Investment Advisory Agreements between the Portfolios Trust
and Union Bank of Switzerland, New York Branch, the Branch serves as the
Portfolios' investment adviser. Pursuant to a Sub-Advisory Agreement between the
Branch and UBS International Investment London Limited, UBSII serves as the
sub-adviser to the International Equity Portfolio. Pursuant to Sub-Advisory
Agreements between the Branch and UBS Asset Management (New York), Inc.,
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 subsidiary of UBS Asset
Management London Limited, which is a direct subsidiary of UBSUK Holding
Limited, which is in turn a wholly-owned direct subsidiary of the Bank. UBSII
was organized under the laws of the United Kingdom on June 19, 1986. (The
Adviser and the Sub-Adviser are collectively referred to as the "Advisers".)
UBSAM is a wholly-owned subsidiary of UBS Inc., whose parent is the Bank.
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
offshore investment companies and act as fiduciaries for trusts, estates and
employee benefit plans. Certain of the assets of trusts and estates under
management are invested in common trust funds for which the Advisers serve as
trustees. The accounts managed or advised by the Advisers have varying
investment objectives and the Advisers invest assets of such accounts in
investments substantially similar to, or the same as, those which are expected
to constitute the principal investments of the Portfolios. Such accounts are
supervised by officers and employees of the Advisers (or their affiliates) who
may also be acting in similar capacities for the Portfolios. See Item 17 below.
B-17
<PAGE>
<PAGE>
The Bank has branches, agencies, representative offices and
subsidiaries in Switzerland and in more than 40 cities outside Switzerland,
including, in the United States, New York City, Chicago, Houston, Los Angeles
and San Francisco. In addition to the receipt of deposits and the making of
loans and advances, the Bank, through its offices and subsidiaries (including
UBSII 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 (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.
BOND AND HIGH YIELD BOND PORTFOLIOS. 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 PORTFOLIO. 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.
SMALL CAP AND LARGE CAP GROWTH PORTFOLIOS. UBSAM's portfolio
managers have extensive experience in managing equity portfolios. Based on the
investment objective of the Portfolios, UBSAM 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 Portfolio. 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 PORTFOLIO. UBSII'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 PORTFOLIO. UBSAM'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 Portfolio, UBSAM
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.
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. 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.
Under the Portfolios Trust's Advisory Agreement, each Portfolio will
pay the Adviser a fee, calculated daily and payable monthly, at an annual rate
of that Portfolio's average net assets, as shown below.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO ANNUALIZED FEE RATE
<S> <C>
UBS BOND PORTFOLIO 0.45% OF AVERAGE DAILY NET ASSETS
UBS VALUE EQUITY PORTFOLIO 0.60% OF AVERAGE DAILY NET ASSETS
UBS INTERNATIONAL EQUITY PORTFOLIO 0.85% OF AVERAGE DAILY NET ASSETS
UBS SMALL CAP PORTFOLIO 0.60% OF AVERAGE DAILY NET ASSETS
UBS LARGE CAP GROWTH PORTFOLIO 0.60% OF AVERAGE DAILY NET ASSETS
UBS HIGH YIELD BOND PORTFOLIO 0.45% OF AVERAGE DAILY NET ASSETS
UBS REAL ESTATE PORTFOLIO 0.70% OF AVERAGE DAILY NET ASSETS
</TABLE>
B-18
<PAGE>
<PAGE>
Pursuant to the Sub-Advisory Agreement, UBSII, under the supervision
of the Trustees and the Adviser, makes the day-to-day investment decisions for
the International Equity Portfolio. Under the Sub-Advisory Agreement, the
Adviser has agreed to pay UBSII a fee, calculated daily and payable monthly, at
an annual rate of 0.75% of the International Equity Portfolio's first $20
million of average net assets, plus 0.50% of the next $30 million of average
net assets, plus 0.40% of this Portfolio's average net assets in excess of $50
million. The Adviser is solely responsible for paying UBSII this fee. For the
fiscal year ended to December 31, 1997, the Adviser paid $251,890 to UBSII on
behalf of the International Equity Portfolio.
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>
<CAPTION>
<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 1999. 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
Agreements 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 Portfolios 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. Each Investment
Advisory Agreement and Sub-Advisory Agreement is also terminable by the Adviser
or Sub-Adviser, as applicable, on 60 days' written notice to the Portfolios
Trust.
In addition to the above noted investment advisory services, the
Adviser (but not the Sub-Adviser) also provides certain administrative services
to the Portfolios and subject to the supervision of the Trustees is responsible
for: establishing performance standards for the Portfolios' third-party service
providers and overseeing and evaluating the performance of such entities;
providing and presenting quarterly management reports to the Trustees; and
supervising the preparation of reports for Portfolio shareholders. These
administrative services are provided to the Portfolios by the Adviser pursuant
to the above discussed Investment Advisory Agreements.
<PAGE>
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. 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 contemplated by the Investment Advisory and Sub-Advisory
Agreements without violating the Glass-Steagall Act or other applicable banking
laws or regulations. State laws on this issue may differ from the
interpretation of relevant federal law, and banks and financial institutions
may be required to register as dealers pursuant to state securities laws.
However, it is possible that future changes in either federal or state statutes
and regulations concerning the permissible activities of banks or trust
companies, as well as further judicial or administrative decisions and
interpretations of present and future statutes and regulations, might prevent
these entities from continuing to perform such services. If the Adviser or
Sub-Adviser were prohibited from providing these services to the Funds or the
Portfolios, it is expected that the Directors and Trustees, as applicable,
would recommend to shareholders that they approve new agreements with other
qualified service providers.
B-19
<PAGE>
<PAGE>
ADMINISTRATOR
Commencing on March 13, 1997, the Portfolios Trust employed IBT Trust
& Custodial Services (Ireland) LMTD ("IBT Ireland"), a subsidiary of Investors
Bank & Trust Company ("Investors Bank"), as Administrator under an
Administration Agreement (the "Administration Agreement") to provide certain
administrative services. The services provided by IBT Ireland under the
Administration Agreement includes certain accounting, clerical and bookkeeping
services, 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 subsidary 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
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. 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. 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.
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 Financial Group (Grand Cayman) Ltd. ("Signature Grand
Cayman") served as Administrator to the Portfolios Trust. 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. During the
period January 1, 1997 to March 13, 1997, the Bond, Value Equity and
International Equity Portfolios paid Signature Grand Cayman adminstrative fees
of $4,801, $2,471, and $3,376, respectively. The Small Cap Portfolio, Large
Cap Growth Portfolio, High Yield Bond Portfolio and the Real Estate Portfolio
had not commenced operations as of March 13, 1997.
The Administration Agreement may be renewed or amended by the
Trustees without shareholder vote. The Administration Agreement is terminable
at any time without penalty by a vote of a majority of the Trustees on not less
than 60 days' written notice to the other party. The Administrator may
subcontract for the performance of its obligations under the Administration
Agreement with the prior written consent of the Trustees. If the Administrator
subcontracts all or a portion of its duties to another party, the 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.
CUSTODIAN
Investors Bank (the "Custodian"), serves as the custodian and transfer
and dividend disbursing agent for the Portfolios. Pursuant to a Custodian
Agreement with the Portfolios Trust, on behalf of each Portfolio, 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 beneficial interests in each Portfolio, 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. Each Portfolio is
responsible for its proportionate share of the Portfolios Trust's transfer
agency, custodial and dividend disbursement fees.
B-20
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS
The Portfolios Trust's independent accounting firm is Price
Waterhouse, George Town, Grand Cayman, Cayman Islands, B.W.I. Price Waterhouse
will conduct an annual audit of the financial statements of each Portfolio,
assist in the review and filing of the federal and state income tax returns of
the Portfolios and consult with the Portfolios as to matters of accounting and
federal and state income taxation.
EXPENSES
Each Portfolio is responsible for the fees and expenses attributable to
it. Each investor in a Portfolio will bear its proportionate share of the
expenses of that Portfolio.
The costs of organizing the Portfolios Trust were paid initially by
the Adviser and were reimbursed by the Portfolios Trust at the time of the
initial offering of the shares of the Company. These costs were equitably
allocated to each Portfolio as provided for by the Trustees. Such organization
costs have been deferred and are being amortized ratably over a period of sixty
months from the commencement of operations of the Portfolios.
* * *
Statements contained in this registration statement regarding 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.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
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 Item 13 above.
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 its objective 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 its
objectives.
B-21
<PAGE>
<PAGE>
In connection with portfolio transactions for the Bond and High Yield
Bond Portfolios, the Adviser and UBSAM, respectively, intend 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 remaining
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. For the fiscal year ended December 31, 1997, the
portfolio turnover rate for the Value Equity Portfolio and International Equity
Portfolio 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%.
In selecting a broker, the Adviser, UBSII or UBSAM, as applicable,
considers a number of factors including: the price per unit of the security;
the broker's reliability for prompt, accurate confirmations and on-time
delivery of securities; the broker's financial condition; and the commissions
charged. A broker may be paid a brokerage commission greater than that another
broker might have charged for effecting the same transaction if, after
considering the foregoing factors, the Adviser, UBSII or UBSAM decides that the
broker chosen will provide the best possible execution and/or such a broker
provides research services to the Adviser, UBSII or UBSAM. The Advisers monitor
the reasonableness of the brokerage commissions paid in light of the execution
received. The Trustees regularly review the reasonableness of commissions and
other transaction costs incurred by the Portfolios in light of the facts and
circumstances deemed relevant, and, in that connection, will review reports and
published data concerning transaction costs incurred by institutional investors
generally. Research services provided by brokers to which the Advisers have
allocated brokerage business in the past include economic statistics and
forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Advisers' clients and not solely or necessarily for the
benefit of the Portfolios. The Advisers believe that the value of research
services received is not determinable and does not significantly increase
expenses. The Portfolios do not reduce their fee to the Advisers by any amount
that might be attributable to the value of such services. For the fiscal year
ended December 31, 1997, the Trust paid brokerage commissions on behalf of the
Value Equity Portfolio and International Equity Portfolio 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, UBSII, UBSAM 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, UBSII, UBSAM or
affiliates thereof is a member, except to the extent permitted by
law.
B-22
<PAGE>
<PAGE>
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.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Each Portfolio is a series of UBS Investor Portfolios Trust, which is
organized as a series trust under the law of the State of New York. Under the
Declaration of Trust, the Trustees are authorized to issue beneficial interests
in one or more series (each a "Series"). Currently, there are seven active
Series: UBS Bond Portfolio, UBS Value Equity Portfolio, UBS International
Equity Portfolio, UBS High Yield Bond Portfolio, UBS Small Cap Portfolio, UBS
Large Cap Growth Portfolio and UBS Real Estate Portfolio. Investors in a Series
will be held personally liable for the obligations and liabilities of that
Series (and of no other Series), subject, however, to indemnification by the
Portfolios Trust in the event that there is imposed upon an investor a greater
portion of the liabilities and obligations of the Series than its proportionate
beneficial interest in the Series. The Declaration of Trust also provides that
the Portfolios Trust shall maintain appropriate insurance (for example, a
fidelity bond and errors and omissions insurance) for the protection of the
Portfolios Trust, its investors, Trustees, officers, employees and agents, and
covering possible tort and other liabilities. Thus, the risk of an investor
incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and the Portfolios
Trust itself was unable to meet its obligations.
Investors in a Series are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
Series only. Upon liquidation or dissolution of a Series, investors are
entitled to share pro rata in that Series' (and no other Series) net assets
available for distribution to its investors. The Portfolios Trust reserves the
right to create and issue additional Series of beneficial interests, in which
case the beneficial interests in each new Series would participate equally in
the earnings, dividends and assets of that particular Series only (and no other
Series). Any property of the Portfolios Trust is allocated and belongs to a
specific Series to the exclusion of all other Series. All consideration
received by the Portfolios Trust for the issuance and sale of beneficial
interests in a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings and proceeds
thereof, and any funds or payments derived from any reinvestment of such
proceeds, is held by the Trustees in a separate subtrust (a Series) for the
benefit of investors in that Series and irrevocably belongs to that series for
all purposes. Neither a Series nor investors in that Series possess any right
to or interest in the assets belonging to any other Series.
B-23
<PAGE>
<PAGE>
Investments in a Series have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Investments in a Series may not be transferred. Certificates representing an
investor's beneficial interest in a Series are issued only upon the written
request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in each Series. Investors in a Series do not have cumulative voting
rights, and investors holding more than 50% of the aggregate beneficial
interests in all outstanding Series may elect all of the Trustees if they
choose to do so and in such event other investors would not be able to elect
any Trustees. Investors in each Series will vote as a separate class except as
to voting of Trustees, as otherwise required by the 1940 Act, or if determined
by the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of a particular Series, only investors in the one
or more affected Series are entitled to vote. The Portfolios Trust is not
required and has no current intention of holding annual meetings of investors,
but the Portfolios Trust will hold special meetings of investors when in the
judgment of the Portfolios Trust's Trustees it is necessary or desirable to
submit matters for an investor vote. The Portfolios Trust's Declaration of
Trust may be amended without the vote of investors, except that investors have
the right to approve by affirmative majority vote any amendment which would
affect their voting rights, alter the procedures to amend the Declaration of
Trust of the Portfolios Trust, or as required by law or by the Portfolios
Trust's registration statement, or as submitted to them by the Trustees. Any
amendment submitted to investors which the Trustees determine would affect the
investors of any Series shall be authorized by vote of the investors of such
Series and no vote will be required of investors in a Series not affected.
The Portfolios Trust or any Series may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved (a)
at a meeting of investors by investors representing the lesser of (i) 67% or
more of the beneficial interests in the affected Series present of represented
at such meeting, if investors in more than 50% of all such beneficial interests
are present or represented by proxy, or (ii) more than 50% of all such
beneficial interests, or (b) by an instrument in writing without a meeting,
consented to by investors representing not less than a majority of the
beneficial interests in the affected Series. The Portfolios Trust or any Series
may also be terminated (i) upon liquidation and distribution of its assets if
approved by the vote of two thirds of its investors (with the vote of each
being in proportion to the amount of its investment), (ii) by the Trustees by
written notice to its investors, or (iii) upon the bankruptcy or expulsion of
an investor in the affected Series, unless the investors in such Series, by
majority vote, agree to continue the Series. The Portfolios Trust will be
dissolved upon the dissolution of the last remaining Series.
The Portfolios Trust's Declaration of Trust provides that obligations
of the Portfolios Trust are not binding upon the Trustees individually but only
upon the property of the Portfolios Trust and that the Trustees will not be
liable for any action or failure to act, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
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<PAGE>
The Portfolios Trust's Declaration of Trust further provides that it
will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Portfolios Trust, unless, as to liability to the
Portfolios Trust or its investors, it is finally adjudicated that they engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in their offices, or unless with respect to any other matter it
is finally adjudicated that they did not act in good faith in the reasonable
belief that their actions were in the best interests of the Portfolios Trust.
In the case of settlement, such indemnification will not be provided unless it
has been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in wilful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in each Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See Item 4 in Part A of this
registration statement.
Each investor in each Portfolio may add to or reduce its investment in
that Portfolio on each Portfolio Business Day. As of the Valuation Time on each
such day, the value of each investor's beneficial interest in each Portfolio
will be determined by multiplying the net asset value of a Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in each Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in a Portfolio as
of the Valuation Time on such day plus or minus, as the case may be, the amount
of net additions to or reductions in the investor's investment in the Portfolio
effected as of the Valuation Time, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Valuation Time on such
day, plus or minus, as the case may be, the amount of net additions to or
reductions in the aggregate investments in the Portfolio by all investors in
the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in a Portfolio as of the Valuation Time on
the following Portfolio Business Day.
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 Portfolio by using the
average of at least three bid quotes from dealers or, in all other cases, by
taking into account various factors affecting market value, including yields
and prices of comparable securities, indications as to values from dealers and
general market conditions. All portfolio securities with a remaining maturity
of less than 60 days are valued by the amortized cost method, whereby such
securities are valued at acquisition cost as adjusted for amortization of
premium or accretion of discount to maturity. Because many of the municipal
bond issues outstanding do not have large principal obligations and because of
the varying risk factors applicable to each issuer, no readily available market
quotations exist for most municipal securities.
B-25
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<PAGE>
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when the Portfolio's net asset value is calculated,
such securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.
In the case of the Value Equity, International Equity, Small Cap,
Large Cap Growth 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 the close of trading on the NYSE
(normally 4:00 p.m. New York time) or, in the absence of recorded sales, at the
average of readily available closing bid and asked prices on such exchange or,
in the absence of such prices, at the readily available closing bid price on
such exchange. Securities listed on foreign exchanges are valued at the last
quoted sale price available before the time when net assets are valued or, in
the absence of such recorded sales, at the average of readily available closing
bid and asked prices on such exchange or, in the absence of such prices, at the
readily available closing bid price on such exchange. Unlisted securities are
valued at the average of the quoted bid and asked prices in the over-the-counter
market. The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative market
for such security. For purposes of calculating net asset value per share, all
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.
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.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by
the Portfolios Trust's Board of Trustees. While no single standard for
determining fair value exists, as a general rule, the
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<PAGE>
current fair value of a security would appear to be the amount which a
Portfolio could expect to receive upon its current sale. Some, but not
necessarily all, of the general factors which may be considered in determining
fair value include: (i) the fundamental analytical data relating to the
investment; (ii) the nature and duration of restrictions on disposition of the
securities; and (iii) an evaluation of the forces which influence the market in
which these securities are purchased and sold. Without limiting or including
all of the specific factors which may be considered in determining fair value,
some of the specific factors include: type of security, financial statements of
the issuer, cost at date of purchase, size of holding, discount from market
value, value of unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as to any
transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the securities, price and extent of public
trading in similar securities of the issuer or comparable companies, and other
relevant matters.
Each Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other transaction costs in converting the securities to cash.
In addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolios or the
investor's portfolio, as the case may be. A Portfolio will not make a
distribution in kind except in circumstances in which the owner of a beneficial
interest in that Portfolio is permitted to redeem in kind or unless requested
by such investor.
ITEM 20. TAX STATUS.
The Portfolios Trust is organized as a New York trust. The Portfolios
are not subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. However, each investor in a Portfolio will be
taxable on its share (as determined in accordance with the governing
instruments of the Portfolios Trust) of the Portfolio's ordinary income and
capital gains in determining its income tax liability. The determination of
such share will be made in accordance with the Code and regulations
promulgated thereunder.
Under interpretations of the Internal Revenue Service (1) each
Portfolio will be treated for federal income tax purposes as a partnership
which is not a publicly traded partnership, and (2) for purposes of determining
whether an investor in a Portfolio satisfies requirements of Subchapter M of
the Code, the investor will be deemed to own a proportionate share of the
Portfolio's assets and will be deemed to be entitled to the Portfolio's income
attributable to that share. The Portfolios Trust intends to conduct its
operations so as to enable investors to satisfy the requirements of Subchapter
M of the Code.
Each Portfolio, since it is taxed as a partnership, is not subject to
federal income taxation. Instead, an investor must take into account, in
computing its federal income tax liability, its share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether it has received any cash distributions from the Portfolio.
Each Portfolio's taxable year-end will be December 31st. Although, as
described above, a Portfolio will not be subject to federal income tax, it will
file appropriate income tax returns.
Withdrawals by investors from a Portfolio generally will not result in
their recognizing any gain or loss for federal income tax purposes, except that
(1) gain will be recognized to the extent that any cash distributed exceeds the
basis of the investor's interest in the Portfolio prior to the distribution,
(2) income or gain will be realized if the withdrawal is in liquidation of the
investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if the distribution is in liquidation of that entire interest and
consists solely of cash and/or unrealized receivables. The basis of an
investor's interest in a Portfolio generally equals the amount of cash and the
basis of any property that the investor invests in the Portfolio, increased by
the investor's share of income from the Portfolio and decreased by the amount
of any cash distributions and the basis of any property distributed from the
Portfolio.
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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, the 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 the 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
the 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 the
Portfolio on forward currency contracts, options and futures contracts or on
the underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, a Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Certain options, futures and foreign currency contracts held by a
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes--i.e., treated as having been sold at
market value. For 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 a Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts and
investors who contribute assets rather than cash to a Portfolio. It is intended
that such segregated asset accounts will be able to satisfy diversification
requirements applicable to them and that such contributions of assets will not
be taxable provided certain requirements are met. Such investors are advised to
consult their own tax advisors as to the tax consequences of an investment in a
Portfolio.
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FOREIGN INVESTORS. Allocations of U.S. source dividend income to an
investor who, as to the United States, is a foreign trust, foreign corporation
or other foreign investor will be subject to United States withholding tax at
the rate of 30% (or lower treaty rate). Allocations of Portfolio interest or
short term or net long term capital gains to foreign investors will not be
subject to United States tax.
STATE AND LOCAL TAXES. A Portfolio may be subject to state or local
taxes in jurisdictions in which the Portfolio is deemed to be doing business.
In addition, the treatment of a Portfolio and its investors in those states
which have income tax laws might differ from treatment under the federal income
tax laws. Investors should consult their own tax advisors with respect to any
state or local taxes.
FOREIGN TAXES. A Portfolio may be subject to foreign withholding taxes
with respect to income received from sources within foreign countries.
OTHER TAXATION. The investment by an investor in the Portfolio does
not cause the investor to be liable for any income or franchise tax in the
State of New York. Investors are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Portfolio.
ITEM 21. UNDERWRITERS.
Not applicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The financial statements for the Portfolios (except the Real Estate
Portfolio) are hereby incorporated by reference from the Registrant's Annual
Reports and have been included in reliance upon the report of Price Waterhouse
LLP, independent certified public accountants, as experts in accounting and
auditing. The Real Estate Portfolio had not commenced operations as of
December 31, 1997.
B-29
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<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
The financial statements called for by this Item are incorporated in
Part B hereof.
(b) EXHIBITS FILED HEREWITH:
1. Declaration of Trust of the Registrant.(1)
2. By-Laws of the Registrant.(1)
5(a). Investment Advisory Agreement between the Registrant on behalf of its
series, UBS Bond Portfolio, and Union Bank of Switzerland, New York Branch.(1)
5(b). Investment Advisory Agreement between the Registrant on behalf of its
series, UBS Value Equity Portfolio, and Union Bank of Switzerland, New York
Branch.(1)
5(c). Investment Advisory Agreement between the Registrant on behalf of its
series, UBS International Equity Portfolio, and Union Bank of Switzerland, New
York Branch.(1)
5(d). Investment Sub-Advisory Agreement between Union Bank of Switzerland, New
York Branch, and UBS International Investment London Limited.(1)
5(e). Investment Sub-Advisory Agreement between Union Bank of Switzerland, New
York Branch, and UBS Asset Management (New York), Inc.(2)
5(f). Investment Advisory Agreement between the Registrant on behalf of its
series, High Yield Bond Portfolio, and Union Bank of Switzerland, New York
Branch.(2)
5(g). Investment Advisory Agreement between the Registrant on behalf of its
series, Small Cap Portfolio, and Union Bank of Switzerland, New York Branch.(2)
5(h). Investment Advisory Agreement between the Registrant on behalf of its
series, Large Cap Growth Portfolio, and Union Bank of Switzerland, New York
Branch.(2)
5(i). Form of Investment Advisory Agreement between the Registrant on behalf of
its series, Real Estate Portfolio, and Union Bank of Switzerland, New York
Branch.(2)
8(a). Custodian Agreement between the Registrant and Investors Bank and
Trust.(1)
9. Custodian Agreement Supplement between the Registrant and Investors Bank and
Trust.(1)
17. Financial Data Schedules.(2)
- --------------
(1) Incorporated herein by reference from the initial N-1A filing as filed
with the U.S. Securities and Exchange Commission (the "SEC") on February
28, 1996.
(2) Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT.
Not applicable.
C-1
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ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
<S> <C>
Number of Record Holders
TITLE OF CLASSES AS OF APRIL 1, 1998
- ----------------- ------------------------
UBS Bond Portfolio 2
UBS Value Equity Portfolio 2
UBS International Equity Portfolio 3
UBS Small Cap Portfolio 2
UBS Large Cap Growth Portfolio 2
UBS High Yield Bond Portfolio 2
UBS Real Estate Portfolio 0
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article V of the Registrant's Declaration of Trust,
filed as Exhibit 1 herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
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:
<TABLE>
<CAPTION>
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>
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
UBS Investors Portfolios Trust, P. O. Box 501G, Cardinal Avenue, George Town,
Grand Cayman, Cayman Islands, B.W.I.
IBT Trust & Custodial Services (Ireland) LTMD, Deloitte & Touche House, 29
Earlsfort Terrace, Dublin 2, Ireland.
Investors Bank & Trust Company (custodian, transfer agent and dividend
disbursing agent), 200 Clarendon Street, Boston, MA 02116; 1 First Canadian
Place, Suite 2800, Toronto, Ontario M5X1C8.
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Union Bank of Switzerland, New York Branch (adviser), 1345 Avenue of the
Americas, New York, NY 10105.
UBS International Investment London Limited (subadviser), Triton Court, 14
Finsbury Square, London, England EC2A 1PD.
UBS Asset Management (New York), Inc. (Subadviser), 1345 Avenue of the
Americas, New York, New York 10105.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) The Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940 (the "Act") as though such provisions of the Act were
applicable to the Registrant.
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SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
UBS Investor Portfolios Trust has duly caused this registration statement on
Form N-1A to be signed on its behalf by the undersigned, thereto duly
authorized on the 23rd day of April, 1998.
UBS INVESTOR PORTFOLIOS TRUST
By /S/PAUL J. JASINSKI
-------------------
Paul J. Jasinski
President
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INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
5(e). Investment Sub-Advisory Agreement
5(f). Investment Advisory Agreement (High Yield Bond Portfolio)
5(g). Investment Advisory Agreement (Small Cap Portfolio)
5(h). Investment Advisory Agreement (Large Cap Growth Portfolio)
5(i). Form of Investment Advisory Agreement (Real Estate
Portfolio)
17. Financial Data Schedules
<PAGE>
<PAGE>
UBS HIGH YIELD BOND PORTFOLIO
SUB-ADVISORY AGREEMENT
Agreement made as of September 30, 1997 by and between Union Bank of
Switzerland, New York Branch (the "Adviser") and UBS Asset Management (New York)
Inc., (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 September 30, 1997 (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 High Yield Bond 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.
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:
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(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
2
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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 0.25% of the Portfolio's first $25 million of
average daily net assets, plus 0.20% of the next $25 million of average daily
net assets, plus 0.15% of the Portfolio's average daily net assets in excess of
$50 million. This fee will be computed daily and payable monthly.
3
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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 1345 Avenue
of the Americas, New York, New York 10105, Attention: President; (c) to the
Trust, c/o IBT Trust Company (Cayman) Ltd., P.O. Box 501, Cardinal Avenue,
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.
4
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 30th day of September,
1997.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Dr. HansPeter Lochmeier
-----------------------------
By: /s/ Richard A. Fabietti
-----------------------------
UBS ASSET MANAGEMENT (NEW YORK) INC.
By: /s/ George M. Jamgochian
-----------------------------
5
<PAGE>
<PAGE>
UBS HIGH YIELD BOND PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 30th day of September 1997, between UBS Investor
Portfolios Trust, a trust organized under the laws of the State of New York (the
"Trust"), on behalf of its series known as UBS High Yield Bond Portfolio (the
"Portfolio"), and Union Bank of Switzerland, New York Branch (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Portfolio, a diversified mutual fund, desires to retain the
Adviser to render investment advisory and certain related administrative
services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as investment adviser
to the Portfolio for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Adviser may enter into an
agreement (the "Sub-Advisory Agreement") with UBS Asset Management (New York)
Inc. (the "Sub-Adviser") pursuant to which the Sub-Adviser shall furnish to the
Portfolio the investment advisory services specified in such agreement. In such
event, the Adviser will continue to have responsibility for all investment
advisory services furnished pursuant to the Sub-Advisory Agreement.
2. Subject to the general supervision of the Trustees of the Trust and
subject to the terms of the Sub-Advisory Agreement, if any, the Adviser shall
oversee 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 in particular in conjunction with the
Sub-Adviser:
(a) the Adviser shall furnish a continuous investment program
for the Portfolio and review from time to time the determination
by its Sub-Adviser of 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;
<PAGE>
<PAGE>
(b) the Adviser shall use the same skill and care in the
overseeing of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with
the Declaration of Trust, Bylaws and Registration Statement of
the Trust and with the instructions and directions of the
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and
state laws and regulations;
(d) the Adviser shall oversee the performance of the
Sub-Adviser in connection with its responsibility as agent of the
Portfolio to effect portfolio transactions, all as provided in
paragraph 2(d) of the Sub-Advisory Agreement.
(e) the Adviser shall maintain records with respect to the
Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the
extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards for the
Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the
Adviser assumes no liabilities or responsibilities for the
performance of the third-party service providers it is overseeing
or any other responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and
conditions provided herein; and
(g) the investment management services of the Adviser to the
Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to
others.
3. The Portfolio has delivered copies of each of the following documents to
the Adviser and will promptly notify and deliver to it all future amendments and
supplements, if any:
(a) 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 Adviser and approving the form
of this Agreement;
2
<PAGE>
<PAGE>
(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 Adviser agrees that all records that it maintains for the Portfolio
pursuant to paragraphs 2(e) and 2(f) of this Agreement are the property of the
Portfolio and it will promptly surrender copies of any of such records to the
Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement, other
than the cost of securities and investments purchased or sold for the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Portfolio will pay to the Adviser as full compensation therefor a
fee at an annual rate equal to .45% of the Portfolio's average daily net assets.
This fee will be computed daily and payable monthly.
7. The Trust shall not use the name of the Adviser or any of its affiliates
in the registration statement or other material relating to the Trust and the
Portfolio in a manner not approved by the Adviser prior thereto in writing;
provided, however, that the approval of the Adviser shall not be required for
any use of its or any affiliate's name that merely refers in accurate and
factual terms to the Adviser's appointment hereunder or that is required by the
Securities and Exchange Commission or any other appropriate regulatory,
governmental or judicial authority; provided, further, that in no event shall
such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the 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 Trust on behalf
of the Portfolio at any time, without the payment of any penalty, 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) on 60 days' written notice to the Adviser, or by the Adviser
at any time, without the payment of
3
<PAGE>
<PAGE>
any penalty, on 60 days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Trust 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 to the Adviser by the Trust shall be in
writing and shall be duly given if mailed or delivered to the Adviser at 299
Park Avenue, New York, New York 10171, Attention: General Counsel, with a copy
to Richard A. Fabietti at Union Bank of Switzerland, New York Branch, 1345
Avenue of the Americas, New York, New York 10105, or at such other address or to
such other individual as shall be specified by the Adviser to the Trust. Notices
of any kind to be given to the Trust by the Adviser shall be in writing and
shall be duly given if mailed or delivered to the Trust c/o IBT Trust Company
(Cayman) Ltd. at P.O. Box 501, Cardinal Avenue, George Town, Grand Cayman BWI or
at such other address or to such other individual as shall be specified by the
Trust to the Adviser.
12. The Trustees have authorized the execution of this Agreement in their
capacity as Trustees and not individually, and the Adviser agrees that neither
the shareholders nor the Trustees nor any officer, employee, representative or
agent of the Trust shall be personally liable upon, or shall resort be had to
their private property for the satisfaction of, obligations given, executed or
delivered on behalf of or by the Portfolio and that the Trust shall look solely
to the property of the Portfolio for the satisfaction of any claim hereunder.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
4
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 30th day of September,
1997.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS HIGH YIELD BOND PORTFOLIO
By: /s/ Paul J. Jasinski
------------------------------
Paul J. Jasinski, President
UBS Investor Portfolios Trust
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Dr. HansPeter Lochmeier
------------------------------
By: /s/ Richard A. Fabietti
------------------------------
5
<PAGE>
<PAGE>
UBS SMALL CAP PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 30th day of September 1997, between UBS Investor
Portfolios Trust, a trust organized under the laws of the State of New York (the
"Trust"), on behalf of its series known as UBS Small Cap Portfolio (the
"Portfolio"), and Union Bank of Switzerland, New York Branch (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Portfolio, a diversified mutual fund, desires to retain the
Adviser to render investment advisory and certain related administrative
services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as investment adviser
to the Portfolio for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Adviser may enter into an
agreement (the "Sub-Advisory Agreement") with UBS Asset Management (New York)
Inc. (the "Sub-Adviser") pursuant to which the Sub-Adviser shall furnish to the
Portfolio the investment advisory services specified in such agreement. In such
event, the Adviser will continue to have responsibility for all investment
advisory services furnished pursuant to the Sub-Advisory Agreement.
2. Subject to the general supervision of the Trustees of the Trust and
subject to the terms of the Sub-Advisory Agreement, if any, the Adviser shall
oversee 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 in particular in conjunction with the
Sub-Adviser:
(a) the Adviser shall furnish a continuous investment
program for the Portfolio and review from time to time the
determination by its Sub-Adviser of 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;
<PAGE>
<PAGE>
(b) the Adviser shall use the same skill and care in the
overseeing of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with
the Declaration of Trust, Bylaws and Registration Statement of
the Trust and with the instructions and directions of the
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and
state laws and regulations;
(d) the Adviser shall oversee the performance of the
Sub-Adviser in connection with its responsibility as agent of the
Portfolio to effect portfolio transactions, all as provided in
paragraph 2(d) of the Sub-Advisory Agreement.
(e) the Adviser shall maintain records with respect to the
Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the
extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards for
the Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the
Adviser assumes no liabilities or responsibilities for the
performance of the third-party service providers it is overseeing
or any other responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and
conditions provided herein; and
(g) the investment management services of the Adviser to the
Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to
others.
3. The Portfolio has delivered copies of each of the following documents to
the Adviser and will promptly notify and deliver to it all future amendments and
supplements, if any:
(a) 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 Adviser and approving the form
of this Agreement;
2
<PAGE>
<PAGE>
(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 Adviser agrees that all records that it maintains for the Portfolio
pursuant to paragraphs 2(e) and 2(f) of this Agreement are the property of the
Portfolio and it will promptly surrender copies of any of such records to the
Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement, other
than the cost of securities and investments purchased or sold for the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Portfolio will pay to the Adviser as full compensation therefor a
fee at an annual rate equal to .60% of the Portfolio's average daily net assets.
This fee will be computed daily and payable monthly.
7. The Trust shall not use the name of the Adviser or any of its affiliates
in the registration statement or other material relating to the Trust and the
Portfolio in a manner not approved by the Adviser prior thereto in writing;
provided, however, that the approval of the Adviser shall not be required for
any use of its or any affiliate's name that merely refers in accurate and
factual terms to the Adviser's appointment hereunder or that is required by the
Securities and Exchange Commission or any other appropriate regulatory,
governmental or judicial authority; provided, further, that in no event shall
such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the 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 Trust on behalf
of the Portfolio at any time, without the payment of any penalty, 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) on 60 days' written notice to the Adviser, or by the Adviser
at any time, without the payment of
3
<PAGE>
<PAGE>
any penalty, on 60 days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Trust 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 to the Adviser by the Trust shall be in
writing and shall be duly given if mailed or delivered to the Adviser at 299
Park Avenue, New York, New York 10171, Attention: General Counsel, with a copy
to Richard A. Fabietti at Union Bank of Switzerland, New York Branch, 1345
Avenue of the Americas, New York, New York 10105, or at such other address or to
such other individual as shall be specified by the Adviser to the Trust. Notices
of any kind to be given to the Trust by the Adviser shall be in writing and
shall be duly given if mailed or delivered to the Trust c/o IBT Trust Company
(Cayman) Ltd. at P.O. Box 501, Cardinal Avenue, George Town, Grand Cayman BWI or
at such other address or to such other individual as shall be specified by the
Trust to the Adviser.
12. The Trustees have authorized the execution of this Agreement in their
capacity as Trustees and not individually, and the Adviser agrees that neither
the shareholders nor the Trustees nor any officer, employee, representative or
agent of the Trust shall be personally liable upon, or shall resort be had to
their private property for the satisfaction of, obligations given, executed or
delivered on behalf of or by the Portfolio and that the Trust shall look solely
to the property of the Portfolio for the satisfaction of any claim hereunder.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
4
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 30th day of September,
1997.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS SMALL CAP PORTFOLIO
By: /s/ Paul J. Jasinski
-----------------------------------------
Paul J. Jasinski, President
UBS Investor Portfolios Trust
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Dr. HansPeter Lochmeier
------------------------------------
By: /s/ Richard A. Fabietti
------------------------------------
5
<PAGE>
<PAGE>
UBS LARGE CAP GROWTH PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 30th day of September 1997, between UBS Investor
Portfolios Trust, a trust organized under the laws of the State of New York (the
"Trust"), on behalf of its series known as UBS Large Cap Growth Portfolio (the
"Portfolio"), and Union Bank of Switzerland, New York Branch (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Portfolio, a diversified mutual fund, desires to retain the
Adviser to render investment advisory and certain related administrative
services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as investment adviser
to the Portfolio for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Adviser may enter into an
agreement (the "Sub-Advisory Agreement") with UBS Asset Management (New York)
Inc. (the "Sub-Adviser") pursuant to which the Sub-Adviser shall furnish to the
Portfolio the investment advisory services specified in such agreement. In such
event, the Adviser will continue to have responsibility for all investment
advisory services furnished pursuant to the Sub-Advisory Agreement.
2. Subject to the general supervision of the Trustees of the Trust and
subject to the terms of the Sub-Advisory Agreement, if any, the Adviser shall
oversee 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 in particular in conjunction with the
Sub-Adviser:
(a) the Adviser shall furnish a continuous investment
program for the Portfolio and review from time to time the
determination by its Sub-Adviser of 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;
<PAGE>
<PAGE>
(b) the Adviser shall use the same skill and care in the
overseeing of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with
the Declaration of Trust, Bylaws and Registration Statement of
the Trust and with the instructions and directions of the
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and
state laws and regulations;
(d) the Adviser shall oversee the performance of the
Sub-Adviser in connection with its responsibility as agent of the
Portfolio to effect portfolio transactions, all as provided in
paragraph 2(d) of the Sub-Advisory Agreement.
(e) the Adviser shall maintain records with respect to the
Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the
extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards for
the Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the
Adviser assumes no liabilities or responsibilities for the
performance of the third-party service providers it is overseeing
or any other responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and
conditions provided herein; and
(g) the investment management services of the Adviser to the
Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to
others.
3. The Portfolio has delivered copies of each of the following documents to
the Adviser and will promptly notify and deliver to it all future amendments and
supplements, if any:
(a) 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 Adviser and approving the form
of this Agreement;
2
<PAGE>
<PAGE>
(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 Adviser agrees that all records that it maintains for the Portfolio
pursuant to paragraphs 2(e) and 2(f) of this Agreement are the property of the
Portfolio and it will promptly surrender copies of any of such records to the
Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement, other
than the cost of securities and investments purchased or sold for the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Portfolio will pay to the Adviser as full compensation therefor a
fee at an annual rate equal to .60% of the Portfolio's average daily net assets.
This fee will be computed daily and payable monthly.
7. The Trust shall not use the name of the Adviser or any of its affiliates
in the registration statement or other material relating to the Trust and the
Portfolio in a manner not approved by the Adviser prior thereto in writing;
provided, however, that the approval of the Adviser shall not be required for
any use of its or any affiliate's name that merely refers in accurate and
factual terms to the Adviser's appointment hereunder or that is required by the
Securities and Exchange Commission or any other appropriate regulatory,
governmental or judicial authority; provided, further, that in no event shall
such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the 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 Trust on behalf
of the Portfolio at any time, without the payment of any penalty, 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) on 60 days' written notice to the Adviser, or by the Adviser
at any time, without the payment of
3
<PAGE>
<PAGE>
any penalty, on 60 days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Trust 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 to the Adviser by the Trust shall be in
writing and shall be duly given if mailed or delivered to the Adviser at 299
Park Avenue, New York, New York 10171, Attention: General Counsel, with a copy
to Richard A. Fabietti at Union Bank of Switzerland, New York Branch, 1345
Avenue of the Americas, New York, New York 10105, or at such other address or to
such other individual as shall be specified by the Adviser to the Trust. Notices
of any kind to be given to the Trust by the Adviser shall be in writing and
shall be duly given if mailed or delivered to the Trust c/o IBT Trust Company
(Cayman) Ltd. at P.O. Box 501, Cardinal Avenue, George Town, Grand Cayman BWI or
at such other address or to such other individual as shall be specified by the
Trust to the Adviser.
12. The Trustees have authorized the execution of this Agreement in their
capacity as Trustees and not individually, and the Adviser agrees that neither
the shareholders nor the Trustees nor any officer, employee, representative or
agent of the Trust shall be personally liable upon, or shall resort be had to
their private property for the satisfaction of, obligations given, executed or
delivered on behalf of or by the Portfolio and that the Trust shall look solely
to the property of the Portfolio for the satisfaction of any claim hereunder.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
4
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 30th day of September,
1997.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS LARGE CAP GROWTH PORTFOLIO
By: /s/ Paul J. Jasinski
-----------------------------------
Paul J. Jasinski, President
UBS Investor Portfolios Trust
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Dr. HansPeter Lochmeier
------------------------------
By: /s/ Richard A. Fabietti
-------------------------------
5
<PAGE>
<PAGE>
FORM OF
UBS REAL ESTATE PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this ___ day of ________ 1998, between UBS Investor
Portfolios Trust, a trust organized under the laws of the State of New York (the
"Trust"), on behalf of its series known as UBS Real Estate Portfolio (the
"Portfolio"), and Union Bank of Switzerland, New York Branch (the "Adviser").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Portfolio, a diversified mutual fund, desires to retain the
Adviser to render investment advisory and certain related administrative
services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as investment adviser
to the Portfolio for the period and on the terms set forth in this Agreement.
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Adviser may enter into an
agreement (the "Sub-Advisory Agreement") with UBS Asset Management (New York)
Inc. (the "Sub-Adviser") pursuant to which the Sub-Adviser shall furnish to the
Portfolio the investment advisory services specified in such agreement. In such
event, the Adviser will continue to have responsibility for all investment
advisory services furnished pursuant to the Sub-Advisory Agreement.
2. Subject to the general supervision of the Trustees of the Trust and
subject to the terms of the Sub-Advisory Agreement, if any, the Adviser shall
oversee 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 in particular in conjunction with the
Sub-Adviser:
(a) the Adviser shall furnish a continuous investment
program for the Portfolio and review from time to time the
determination by its Sub-Adviser of the securities, commodities,
commodity contracts and other investments to be
<PAGE>
<PAGE>
purchased, retained, sold or lent by the Portfolio, and the
portion of the assets to be invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in the
overseeing of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with
the Declaration of Trust, Bylaws and Registration Statement of
the Trust and with the instructions and directions of the
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and
state laws and regulations;
(d) the Adviser shall oversee the performance of the
Sub-Adviser in connection with its responsibility as agent of the
Portfolio to effect portfolio transactions, all as provided in
paragraph 2(d) of the Sub-Advisory Agreement.
(e) the Adviser shall maintain records with respect to the
Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the
extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards for
the Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the
Adviser assumes no liabilities or responsibilities for the
performance of the third-party service providers it is overseeing
or any other responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and
conditions provided herein; and
(g) the investment management services of the Adviser to the
Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to
others.
3. The Portfolio has delivered copies of each of the following documents to
the Adviser and will promptly notify and deliver to it all future amendments and
supplements, if any:
(a) 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");
2
<PAGE>
<PAGE>
(c) Certified resolutions of the Trustees of the Trust
authorizing the appointment of the 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 Adviser agrees that all records that it maintains for the Portfolio
pursuant to paragraphs 2(e) and 2(f) of this Agreement are the property of the
Portfolio and it will promptly surrender copies of any of such records to the
Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement, other
than the cost of securities and investments purchased or sold for the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Portfolio will pay to the Adviser as full compensation therefor a
fee at an annual rate equal to .70% of the Portfolio's average daily net assets.
This fee will be computed daily and payable monthly.
7. The Trust shall not use the name of the Adviser or any of its affiliates
in the registration statement or other material relating to the Trust and the
Portfolio in a manner not approved by the Adviser prior thereto in writing;
provided, however, that the approval of the Adviser shall not be required for
any use of its or any affiliate's name that merely refers in accurate and
factual terms to the Adviser's appointment hereunder or that is required by the
Securities and Exchange Commission or any other appropriate regulatory,
governmental or judicial authority; provided, further, that in no event shall
such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the 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 Trust on behalf
of the Portfolio at any time, without the payment of any penalty, 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)
3
<PAGE>
<PAGE>
on 60 days' written notice to the Adviser, or by the Adviser at any time,
without the payment of any penalty, on 60 days' written notice to the Trust.
This Agreement will automatically and immediately terminate in the event of its
"assignment" (as defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Trust 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 to the Adviser by the Trust shall be in
writing and shall be duly given if mailed or delivered to the Adviser at 1345
Avenue of the Americas, New York, New York 10105, 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, or at such other
address or to such other individual as shall be specified by the Adviser to the
Trust. Notices of any kind to be given to the Trust by the Adviser shall be in
writing and shall be duly given if mailed or delivered to the Trust c/o IBT
Trust Company (Cayman) Ltd. at P.O. Box 501, Cardinal Avenue, George Town, Grand
Cayman BWI or at such other address or to such other individual as shall be
specified by the Trust to the Adviser.
12. The Trustees have authorized the execution of this Agreement in their
capacity as Trustees and not individually, and the Adviser agrees that neither
the shareholders nor the Trustees nor any officer, employee, representative or
agent of the Trust shall be personally liable upon, or shall resort be had to
their private property for the satisfaction of, obligations given, executed or
delivered on behalf of or by the Portfolio and that the Trust shall look solely
to the property of the Portfolio for the satisfaction of any claim hereunder.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
4
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the ____th day of ________,
1998.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS REAL ESTATE PORTFOLIO
By: _____________________________
Paul J. Jasinski, President
UBS Investor Portfolios Trust
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: _____________________________
By: _____________________________
5
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001007523
<NAME> UBS INVESTOR PORTFOLIOS TRUST
<SERIES>
<NUMBER> 001
<NAME> UBS BOND PORTFOLIO
<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> 71,774,989
<INVESTMENTS-AT-VALUE> 72,702,182
<RECEIVABLES> 1,111,572
<ASSETS-OTHER> 2,574,005
<OTHER-ITEMS-ASSETS> 16,809
<TOTAL-ASSETS> 76,404,568
<PAYABLE-FOR-SECURITIES> 1,573,410
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70,140
<TOTAL-LIABILITIES> 1,643,550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74,761,018
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 74,761,018
<DIVIDEND-INCOME> 82,826
<INTEREST-INCOME> 3,772,752
<OTHER-INCOME> 0
<EXPENSES-NET> 294,800
<NET-INVESTMENT-INCOME> 3,560,778
<REALIZED-GAINS-CURRENT> 272,072
<APPREC-INCREASE-CURRENT> 699,788
<NET-CHANGE-FROM-OPS> 4,532,638
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21,760,166
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 272,781
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 446,344
<AVERAGE-NET-ASSETS> 60,579,555
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001007523
<NAME> UBS INVESTOR PORTFOLIOS TRUST
<SERIES>
<NUMBER> 002
<NAME> UBS VALUE EQUITY PORTFOLIO
<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> 43,748,965
<INVESTMENTS-AT-VALUE> 51,857,125
<RECEIVABLES> 152,703
<ASSETS-OTHER> 3,120,961
<OTHER-ITEMS-ASSETS> 17,858
<TOTAL-ASSETS> 55,148,647
<PAYABLE-FOR-SECURITIES> 201,097
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67,105
<TOTAL-LIABILITIES> 268,202
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54,880,445
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 54,880,445
<DIVIDEND-INCOME> 1,221,696
<INTEREST-INCOME> 85,602
<OTHER-INCOME> 0
<EXPENSES-NET> 221,609
<NET-INVESTMENT-INCOME> 1,085,689
<REALIZED-GAINS-CURRENT> 3,252,224
<APPREC-INCREASE-CURRENT> 6,433,825
<NET-CHANGE-FROM-OPS> 10,771,738
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 29,454,712
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 246,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 381,939
<AVERAGE-NET-ASSETS> 41,022,017
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001007523
<NAME> UBS INVESTOR PORTFOLIOS TRUST
<SERIES>
<NUMBER> 003
<NAME> UBS INTERNATIONAL EQUITY PORTFO
<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> 55,386,859
<INVESTMENTS-AT-VALUE> 49,475,494
<RECEIVABLES> 1,023,378
<ASSETS-OTHER> 1,476,139
<OTHER-ITEMS-ASSETS> 34,513
<TOTAL-ASSETS> 52,009,524
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89,625
<TOTAL-LIABILITIES> 89,625
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,919,899
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 51,919,899
<DIVIDEND-INCOME> 849,307
<INTEREST-INCOME> 333,088
<OTHER-INCOME> 0
<EXPENSES-NET> 478,307
<NET-INVESTMENT-INCOME> 704,088
<REALIZED-GAINS-CURRENT> 1,982,162
<APPREC-INCREASE-CURRENT> (6,280,784)
<NET-CHANGE-FROM-OPS> (3,594,534)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,373,320
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 428,213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 654,630
<AVERAGE-NET-ASSETS> 50,377,950
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001007523
<NAME> UBS INVESTOR PORTFOLIOS TRUST
<SERIES>
<NUMBER> 004
<NAME> UBS HIGH YIELD BOND PORTFOLIO
<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> 12,045,206
<INVESTMENTS-AT-VALUE> 12,098,091
<RECEIVABLES> 241,025
<ASSETS-OTHER> 837,762
<OTHER-ITEMS-ASSETS> 4,550
<TOTAL-ASSETS> 13,181,428
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,137
<TOTAL-LIABILITIES> 38,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,143,291
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13,143,291
<DIVIDEND-INCOME> 3,613
<INTEREST-INCOME> 215,326
<OTHER-INCOME> 0
<EXPENSES-NET> 25,717
<NET-INVESTMENT-INCOME> 193,222
<REALIZED-GAINS-CURRENT> 28,936
<APPREC-INCREASE-CURRENT> 52,885
<NET-CHANGE-FROM-OPS> 275,043
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,143,291
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,611
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,108
<AVERAGE-NET-ASSETS> 10,595,996
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001007523
<NAME> UBS INVESTOR PORTFOLIOS TRUST
<SERIES>
<NUMBER> 005
<NAME> UBS SMALL CAP PORTFOLIO
<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> 27,126,057
<INVESTMENTS-AT-VALUE> 26,115,821
<RECEIVABLES> 512,942
<ASSETS-OTHER> 1,006,534
<OTHER-ITEMS-ASSETS> 4,549
<TOTAL-ASSETS> 27,639,846
<PAYABLE-FOR-SECURITIES> 604,904
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,154
<TOTAL-LIABILITIES> 644,058
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,995,788
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 26,995,788
<DIVIDEND-INCOME> 14,908
<INTEREST-INCOME> 34,600
<OTHER-INCOME> 0
<EXPENSES-NET> 50,989
<NET-INVESTMENT-INCOME> (1,481)
<REALIZED-GAINS-CURRENT> 14,491
<APPREC-INCREASE-CURRENT> (1,010,236)
<NET-CHANGE-FROM-OPS> (997,226)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26,995,788
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,233
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,222
<AVERAGE-NET-ASSETS> 19,054,139
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
</LEGEND>
<CIK> 0001007523
<NAME> UBS INVESTOR PORTFOLIOS TRUST
<SERIES>
<NUMBER> 006
<NAME> UBS LARGE CAP GROWTH PORTFOLIO
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
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<INVESTMENTS-AT-VALUE> 17,773,077
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<REALIZED-GAINS-CURRENT> (59,628)
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</TABLE>
