N-14AE

                                     /------------------------------------/
                                     /      OMB Approval                  /
                                     /------------------------------------/
                                     /OMB Number:       3235-0336         /
                                     /Expires:       May 31, 2005         /
                                     /Estimated average burden hours      /
                                     / per response....................531/
                                     /------------------------------------/


    As filed with the Securities and Exchange Commission on August 6, 2003.
                                                       File No.:    333-____

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-14
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

   /__/ Pre-Effective Amendment No. ___ /__/ Post-Effective Amendment No. ___

                        (Check appropriate box or boxes)

- ------------------------------- ------------------------------------------------
Exact Name of Registrant
as Specified in Charter:                      Area Code and Telephone Number:

The UBS Funds                                          (312) 222-7100
- --------------------------------------------------------------------------------
Address of Principal Executive Offices: (Number, Street, City, State, Zip Code)

One North Wacker Drive, Chicago, Illinois  60606
- --------------------------------------------------------------------------------
Name and Address of Agent for Service:            Approximate Date of Proposed
(Number and Street) (City) (State) (Zip Code)     Public Offering:

Amy R. Doberman, Esq.                             As soon as practicable after
51 West 52nd Street                               this Registration Statement
New York, NY  10019-6114                          becomes effective under the
- --------------------------------------------      Securities Act of 1933, as
Copies to:                                        amended.

Bruce G. Leto, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA  19103
- --------------------------------------------------------------------------------

              Calculation of Fee under the Securities Act of 1933:

     Title of Securities Being Registered:  Shares of beneficial  interest,  par
     value $0.001 per share, of UBS U.S. Value Equity Fund. No Filing Fee is due
     because the Registrant  relies on Section 24(f) of the  Investment  Company
     Act of 1940, as amended.

     It is proposed that this filing will become  effective on September 5, 2003
     pursuant to Rule 488 under the Securities Act of 1933, as amended.

     The UBS Funds has executed this Registration Statement.

                         UBS Financial Sector Fund Inc.

Dear Shareholder:

     Enclosed is a Notice of a Special Meeting of  Shareholders  (the "Meeting")
of the UBS Financial Sector Fund Inc. (the "Financial Sector Fund"). The Meeting
has been called for  [____________  __, 2003] at _____ a.m.  Eastern time, at 51
West 52nd Street,  16th Floor, New York, New York  10019-6114.  The accompanying
Prospectus/Proxy  Statement  describes  a  proposal  being  presented  for  your
consideration and requests your prompt attention and vote via the enclosed proxy
card or by telephone or via the Internet.

                   Please take a moment to fill out, sign and
                         return the enclosed Proxy Card!

     The Meeting is  extremely  important.  You are being asked to consider  and
approve an Agreement and Plan of Reorganization  (the "Agreement and Plan") that
would result in your shares of the  Financial  Sector Fund being  exchanged  for
shares of the UBS U.S. Value Equity Fund (the "Value Equity Fund"),  a series of
The UBS Funds.  If the  shareholders  of the  Financial  Sector Fund approve the
Agreement and Plan, the Value Equity Fund will acquire  substantially all of the
assets,  subject to the liabilities,  of the Financial Sector Fund, and you will
receive  shares of the Value  Equity  Fund equal in value to your  shares of the
Financial  Sector Fund.  You would no longer be a  shareholder  of the Financial
Sector Fund,  and instead,  you would be a shareholder of the Value Equity Fund.
You are not  expected  to  recognize  any gain or loss for  federal  income  tax
purposes as a result of the exchange of your shares of the Financial Sector Fund
for shares of the Value Equity Fund.

     The Value Equity Fund and the Financial  Sector Fund invest  principally in
equity securities,  as described in the  Prospectus/Proxy  Statement.  The Value
Equity Fund, like the Financial  Sector Fund, is advised by an asset  management
subsidiary  of  UBS  AG.  The  Financial  Sector  Fund  is  sub-advised  by  DSI
International Management,  Inc., which is also an asset management subsidiary of
UBS AG. By  merging  the  Financial  Sector  Fund into the  Value  Equity  Fund,
Financial  Sector Fund  shareholders  will have the  opportunity to benefit from
Value Equity Fund's more flexible investment  mandate,  which allows the Fund to
provide more diversification across industry sectors.

     Please take the time to review the entire  Prospectus/Proxy  Statement  and
vote now! Whether or not you plan to attend the Meeting, please vote your shares
by mail, by telephone or via the Internet. If you determine at a later date that
you wish to attend the Meeting, you may revoke your proxy and vote in person.

             Thank you for your prompt attention and participation.

                                                          Very truly yours,



                                                          Joseph Varnas
                                                          President






                         UBS FINANCIAL SECTOR FUND INC.

                               51 West 52nd Street
                             New York, NY 10019-6114

                    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

                      To be held on [____________ __, 2003]

To the Shareholders:

     NOTICE  IS  HEREBY  GIVEN  that a  Special  Meeting  of  Shareholders  (the
"Meeting") of UBS Financial  Sector Fund Inc. (the "Financial  Sector Fund") has
been called by the Board of Directors of the  Financial  Sector Fund and will be
held at 51 West 52nd  Street,  16th Floor,  New York,  New York  10019-6114,  on
[____________  __, 2003] at _____ a.m. Eastern time. The Meeting is being called
for the following purposes:

     1.   To  vote  on an  Agreement  and  Plan of  Reorganization  between  the
          Financial  Sector  Fund and The UBS  Funds,  on behalf of the UBS U.S.
          Value Equity Fund (the "Value  Equity  Fund"),  that provides for: (i)
          the  acquisition of  substantially  all of the assets,  subject to the
          liabilities,  of the  Financial  Sector Fund in exchange for shares of
          the Value Equity Fund; (ii) the pro rata distribution of shares of the
          Value Equity Fund to the  shareholders  of the Financial  Sector Fund;
          and (iii) the  liquidation  and  dissolution  of the Financial  Sector
          Fund.

     2.   To  transact  such other  business  as may  properly  come  before the
          Meeting or any adjournment thereof.

     The transaction contemplated by the Agreement and Plan of Reorganization is
described in the attached Prospectus/Proxy  Statement. A copy of the form of the
Agreement  and  Plan  of   Reorganization  is  attached  as  Exhibit  A  to  the
Prospectus/Proxy Statement.

     Shareholders  of record  of the  Financial  Sector  Fund as of the close of
business on  [____________  __, 2003] are entitled to notice of, and to vote at,
the Meeting or any  adjournment  thereof.  Whether or not you plan to attend the
Meeting,  please  vote your  shares by  returning  the proxy card by mail in the
enclosed  postage-paid  envelope or by voting by telephone or via the  Internet.
Your vote is important.

                                           By Order of the Board of Directors,



                                           Amy R. Doberman
                                           Secretary
[____________ __, 2003]


To secure the largest possible representation and to save the expense of further
mailings,  please mark your proxy card,  sign it, and return it in the  enclosed
envelope,  which  requires  no postage if mailed in the  United  States.  If you
prefer,  you may instead vote by telephone or via the  Internet.  You may revoke
your proxy at any time at or before the  Meeting or vote in person if you attend
the Meeting.




                           PROSPECTUS/PROXY STATEMENT

                             [____________ __, 2003]

                          Acquisition of the assets of
                         UBS FINANCIAL SECTOR FUND INC.
                               51 West 52nd Street
                          New York, New York 10019-6114
                                 (800) 647-1568

                        By and in exchange for shares of
                           UBS U.S. VALUE EQUITY FUND
                           (a series of The UBS Funds)
                             One North Wacker Drive
                             Chicago, Illinois 60606
                                 (800) 647-1568


     This  Prospectus/Proxy  Statement solicits proxies to be voted at a Special
Meeting of Shareholders  (the "Meeting") of UBS Financial  Sector Fund Inc. (the
"Financial  Sector  Fund") to approve or  disapprove  an  Agreement  and Plan of
Reorganization (the "Agreement and Plan").

     The Meeting will be held at 51 West 52nd Street,  16th Floor, New York, New
York  10019-6114,  on  [____________  __, 2003] at _____ a.m.  Eastern time. The
Board of Directors of the  Financial  Sector Fund is soliciting  these  proxies.
This  Prospectus/Proxy  Statement will first be sent to shareholders on or about
[____________ __, 2003].

     If shareholders of the Financial  Sector Fund vote to approve the Agreement
and Plan,  substantially all of the assets,  subject to the liabilities,  of the
Financial  Sector Fund will be acquired by the UBS U.S.  Value  Equity Fund (the
"Value Equity Fund"),  a series of The UBS Funds (the "Trust"),  in exchange for
shares of the Value Equity  Fund.  Shareholders  of each class of the  Financial
Sector Fund (Class A, Class B, Class C and Class Y) will  receive  shares of the
corresponding class of the Value Equity Fund (Class A, Class B, Class C or Class
Y) equal  in  value  to their  investment  in the  Financial  Sector  Fund.  The
Financial Sector Fund will then be liquidated.

     The Value Equity Fund's  investment  objective is to seek to maximize total
return,  consisting of capital  appreciation  and current income.  The Financial
Sector Fund's investment objective is to seek long-term capital appreciation.

     This  Prospectus/Proxy  Statement  gives  the  information  about the Value
Equity Fund shares that you should know before  investing.  You should retain it
for future reference. A Statement of Additional Information, dated [____________
__,  2003],   relating  to  this  Prospectus/Proxy   Statement,   contains  more
information  about the Value  Equity  Fund,  the  Financial  Sector Fund and the
proposed merger. The Statement of Additional Information has been filed with the
Securities  and  Exchange  Commission  ("SEC")  and is  incorporated  herein  by
reference.  You  can  request  a  free  copy  of  the  Statement  of  Additional
Information by calling 1-800-647-1568, or by writing to the Value Equity Fund at
51 West 52nd Street, New York, New York 10019-6114.

     The following documents, which are intended to provide you with information
about the Value Equity Fund, accompany this Prospectus/Proxy Statement:

     o    Prospectus  of the Value Equity  Fund,  dated  September  30, 2002 (as
          revised July 2, 2003),  as  supplemented  through the date hereof (the
          "Value Equity Fund Prospectus")

     o    Annual Report to  Shareholders of the Value Equity Fund for the fiscal
          year ended June 30, 2002 (the "Value Equity Fund Annual Report")

     The Value Equity Fund  Prospectus  and Value Equity Fund Annual  Report are
incorporated  herein by reference,  which means they are legally considered part
of this Prospectus/Proxy Statement.

     Documents  providing  information about the Financial Sector Fund have been
filed with the SEC and are listed  below.  You can request a free copy of any of
the  documents  listed  below by  calling  1-800-647-1568,  or by writing to the
Financial  Sector Fund at 51 West 52nd Street,  New York,  New York  10019-6114,
Attn.: Secretary:

     o    Prospectus  of the  Financial  Sector Fund,  dated July 29,  2002,  as
          supplemented  through  the date  hereof  (the  "Financial  Sector Fund
          Prospectus")

     o    Statement of  Additional  Information  of the  Financial  Sector Fund,
          dated July 29,  2002,  as  supplemented  through  the date hereof (the
          "Financial Sector Fund SAI")

     o    Annual Report to  Shareholders  of the  Financial  Sector Fund for the
          fiscal year ended March 31,  2003 (the  "Financial  Sector Fund Annual
          Report")

     Each of the documents  listed above is  incorporated by reference into this
Prospectus/Proxy Statement.

     Like all  mutual  funds,  the SEC has not  approved  or  disapproved  these
securities or passed upon the adequacy of this Prospectus/Proxy  Statement.  Any
representation to the contrary is a criminal offense.

     Mutual fund shares are not deposits or  obligations  of, or  guaranteed  or
endorsed  by, any bank,  and are not  insured by the Federal  Deposit  Insurance
Corporation,  the Federal  Reserve Board, or any other U.S.  government  agency.
Mutual fund shares  involve  investment  risks,  including  the possible loss of
principal.







                           Prospectus/Proxy Statement
                                TABLE OF CONTENTS
                                                                                       Page
                                                                                       ----

Cover Pages                                                                           Cover
SUMMARY
          What is the purpose of the proposal?
          Why is the Merger being proposed?
          What would happen if the Merger is not approved?
          How will the shareholder voting be handled?
          What are the general tax consequences of the Merger?
Comparisons of Some Important Features
          How do the investment objectives and policies of the Funds compare?
          How do the principal  risks of investing in the Financial  Sector Fund
           compare to the principal risks of investing in the Value Equity Fund?
          Who manages the Funds?
          What are the fees and expenses of each Fund and what might they be
           after the Merger?
          Where can I find more financial information about the Funds?
          What are other key features of the Funds?
                  Administrative, Transfer Agency, Accounting and Custody
                   Services
                  Distribution Services and Rule 12b-1 Plans
                  Purchase, Exchange and Redemption Procedures
                  Dividends, Distributions and Taxes
REASONS FOR THE MERGER
INFORMATION ABOUT THE MERGER
          How will the Merger be carried out?
          Who will pay the expenses of the Merger?
          What are the tax consequences of the Merger?
          What should I know about Value Equity Fund Shares?
          How do shareholders rights and obligations of the Funds compare?
          What are the assets of the Funds and what might the  capitalization be
           after the Merger?

COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
          Are  there  any   significant   differences   between  the  investment
           objectives and policies of the Funds?
          What are the principal risk factors associated with investments in the
           Funds?
          How do the investment restrictions of the Funds differ?
COMPARISON OF FUND PERFORMANCE
VOTING INFORMATION
          How many votes are necessary to approve the Agreement and Plan?
          How do I ensure my vote is accurately recorded?
          Can I revoke my proxy?
          What other matters will be voted upon at the Meeting?
          Who is entitled to vote?
          What other solicitations will be made?
INFORMATION ABOUT THE VALUE EQUITY FUND
INFORMATION ABOUT THE FINANCIAL SECTOR FUND
INFORMATION ABOUT EACH FUND
PRINCIPAL HOLDERS OF SHARES





                                     SUMMARY

     This  is  only  a  summary  of  certain   information   contained  in  this
Prospectus/Proxy Statement. You should read the more complete information in the
rest of this  Prospectus/Proxy  Statement,  including  the  Agreement  and  Plan
(attached as Exhibit A), the Value Equity Fund  Prospectus  (included as Exhibit
B) and the Value Equity Fund Annual Report (included as Exhibit C).

What is the purpose of the proposal?

     The Board of Directors of the Financial Sector Fund (the "Financial  Sector
Fund Board" or the "Financial Sector Fund Directors") has approved the Agreement
and Plan for the Financial  Sector Fund and recommends that  shareholders of the
Financial Sector Fund vote to approve the Agreement and Plan. If shareholders of
the Financial Sector Fund approve the Agreement and Plan,  substantially  all of
the  Financial  Sector  Fund's  assets  (subject  to its  liabilities)  will  be
transferred  to the Value Equity Fund,  in exchange for an equal value of shares
of the Value  Equity  Fund.  These  shares of the Value Equity Fund will then be
distributed to the Financial Sector Fund's  shareholders.  As illustrated in the
following  chart,  shareholders of each class of the Financial  Sector Fund will
receive  shares of the  corresponding  class of the Value  Equity  Fund equal in
value to their investment in the Financial Sector Fund:

============================================= ================================================
           Shareholders who own:                               Will receive:
============================================= ================================================
============================================= ================================================
Class A Shares of the Financial Sector Fund   Class A Shares of the Value Equity Fund ("Value
 ("Financial Sector Fund Class A Shares")               Equity Fund Class A Shares")
============================================= ================================================
============================================= ================================================
Class B Shares of the Financial Sector Fund   Class B Shares of the Value Equity Fund ("Value
 ("Financial Sector Fund Class B Shares")               Equity Fund Class B Shares")
============================================= ================================================
============================================= ================================================
Class C Shares of the Financial Sector Fund   Class C Shares of the Value Equity Fund ("Value
 ("Financial Sector Fund Class C Shares")               Equity Fund Class C Shares")
============================================= ================================================
============================================= ================================================
Class Y Shares of the Financial Sector Fund   Class Y Shares of the Value Equity Fund ("Value
 ("Financial Sector Fund Class Y Shares")               Equity Fund Class Y Shares")
============================================= ================================================

The Financial  Sector Fund will then be liquidated.  As a result of the proposed
transaction,  which is referred  to in this  Prospectus/Proxy  Statement  as the
"Merger,"  you will cease to be a shareholder  of the Financial  Sector Fund and
you will become a shareholder of the Value Equity Fund. This exchange,  which is
intended to be a tax-free  reorganization for federal income tax purposes,  will
occur on a date agreed to between the Financial Sector Fund and the Trust.

     The Value Equity Fund is a series of the Trust, an investment  company that
is  advised by UBS Global  Asset  Management  (Americas)  Inc.  ("UBS  Global AM
(Americas)").  UBS Global AM (Americas),  the  investment  advisor for the Value
Equity  Fund,  UBS Global Asset  Management  (US) Inc.  ("UBS  Global AM"),  the
investment  advisor  for  the  Financial  Sector  Fund,  and  DSI  International
Management,  Inc. ("DSI"), the sub-advisor to the Financial Sector Fund, are all
indirect,  wholly  owned  subsidiaries  of  UBS  AG.  In  this  Prospectus/Proxy
Statement, the Value Equity Fund and the Financial Sector Fund are each referred
to as a "Fund," and together as the "Funds."

Why is the Merger being proposed?

     UBS  Global  AM has  reviewed  its  mutual  funds and  determined  that the
Financial  Sector  Fund,  which  is  based  on a  proprietary  model  run by its
sub-advisor,  DSI, is unlikely to attract additional assets,  particularly since
the  Financial  Sector  Fund is the only  sector  fund in the UBS  Global  Asset
Management fund family.  UBS Global Asset Management has recently  determined to
focus primarily on its core investment capabilities, which do not include sector
products such as the Financial Sector Fund.

     In addition,  UBS Global Asset  Management  decided to organize  into three
distinct global investment  platforms:  Core Asset  Management,  Alternative and
Quantitative  Investments  ("AQI"), and Real Estate. DSI will be integrated into
the AQI  platform,  which  will  enable  DSI to  manage  alternative  investment
products, such as hedge funds. Due to certain compliance implications, including
possible  conflicts of interest  that may arise if DSI were to manage both hedge
funds and mutual funds, DSI has decided to cease managing mutual funds.

     Given the above  considerations,  the Financial  Sector  Fund's  management
determined  that a merger  of the Fund  would  be in the best  interests  of the
Financial Sector Fund's shareholders.  Consequently, the Financial Sector Fund's
management  submitted  the  proposed  Merger for the  approval of the  Financial
Sector Fund Board. In evaluating the proposed Merger,  the Financial Sector Fund
Board considered,  as more fully described below under "Reasons for the Merger,"
the following factors, among others:

     o    Shareholders of the Financial Sector Fund will likely benefit by being
          invested  in a  portfolio  that is more  diversified  across  industry
          sectors,  but still  provides  significant  exposure to the  financial
          services sector.

     o    The expense  ratio of each class of shares of the Value  Equity  Fund,
          after taking into account contractual fee waivers,  are lower than the
          expense  ratio of the  corresponding  class of shares of the Financial
          Sector Fund.

     o    The Merger is  intended  to be a tax-free  reorganization  for federal
          income tax purposes and, thus, Financial Sector Fund shareholders will
          not be required  to pay any  federal  income tax solely as a result of
          the exchange of their shares of the  Financial  Sector Fund for shares
          of the Value Equity Fund.

     o    UBS Global AM will bear all expenses  incurred in connection  with the
          Merger.

     o    Financial  Sector Fund  shareholders  will not pay a  front-end  sales
          charge to become  shareholders  of the Value Equity Fund in connection
          with the Merger.

     o    Shareholders  of the  Financial  Sector Fund will not  experience  any
          dilution in the value of their investments as a result of the Merger.

After consideration of these factors,  and for the reasons set forth below under
"REASONS FOR THE MERGER," the  Financial  Sector Fund Board  concluded  that the
Merger is in the best  interests of the  shareholders  of the  Financial  Sector
Fund.

What would happen if the Merger is not approved?

     If the  shareholders  of the  Financial  Sector  Fund  do not  approve  the
Agreement and Plan,  the Merger will not take place,  and the  Financial  Sector
Fund Board may consider other possible courses of action,  including liquidation
and dissolution of the Financial Sector Fund.

                   THE FINANCIAL SECTOR FUND BOARD RECOMMENDS
                THAT YOU VOTE TO APPROVE THE AGREEMENT AND PLAN.

How will the shareholder voting be handled?

     Shareholders  of the  Financial  Sector Fund who own shares at the close of
business on [____________ __, 2003] (the "Record Date") will be entitled to vote
at the  Meeting,  and will be  entitled  to one vote for each  full  share and a
fractional vote for each fractional  share that they hold. To approve the merger
of the  Financial  Sector  Fund into the Value  Equity  Fund,  a majority of the
aggregate  number of shares  entitled to vote on the  proposal  must be voted in
favor of the Agreement and Plan.

     Please  vote  by  proxy  as  soon  as  you  receive  this  Prospectus/Proxy
Statement.  You may cast your vote by completing  and signing the enclosed proxy
card, or by telephone or via the Internet.  If you return your signed proxy card
or vote by telephone or via the Internet,  your votes will be officially cast at
the Meeting by the persons  appointed  as proxies.  You can revoke your proxy or
change  your  voting  instructions  at any time  until  the vote is taken at the
Meeting. For more details about shareholder voting, see the "VOTING INFORMATION"
section of this Prospectus/Proxy Statement.

What are the general tax consequences of the Merger?

     It is expected  that  shareholders  of the  Financial  Sector Fund will not
recognize  any gain or loss for federal  income tax  purposes as a result of the
exchange  of their  shares  for shares of the Value  Equity  Fund.  You  should,
however, consult your tax advisor regarding the effect of the Merger, if any, in
light of your individual circumstances. You should also consult your tax advisor
about  state and local tax  consequences  of the  Merger,  if any,  because  the
information about tax consequences in this Prospectus/Proxy Statement relates to
the federal income tax consequences only. For further  information about the tax
consequences of the Merger,  see "INFORMATION ABOUT THE MERGER--What are the tax
consequences of the Merger?"

COMPARISONS OF SOME IMPORTANT FEATURES

How do the investment objectives and policies of the Funds compare?

     The  Financial  Sector  Fund  and the  Value  Equity  Fund  have  different
investment  objectives.  The  Financial  Sector  Fund  seeks  long-term  capital
appreciation.  The Value Equity Fund seeks to maximize total return,  consisting
of capital  appreciation and current income.  Each Fund's  investment  objective
cannot be changed without shareholder approval.

     Each Fund seeks to achieve its  objective by investing its assets in equity
securities.  Under normal circumstances,  the Value Equity Fund invests at least
80% of its net assets (plus borrowings for investment purposes,  if any) in U.S.
equity  securities.  In contrast,  the Financial  Sector Fund is not required to
invest a  specified  percentage  of its  assets in U.S.  issuers.  However,  the
Financial  Sector  Fund is  required to invest at least 80% of its net assets in
securities issued by financial services  companies.  Unlike the Financial Sector
Fund,  the Value  Equity  Fund is not  required  by its 80%  policy to focus its
assets in any particular sector.

     UBS Global AM (Americas) and DSI utilize different strategies for selecting
securities to be purchased by the Funds.  In selecting  securities for the Value
Equity  Fund,  UBS  Global  AM  (Americas)  employs a price to  intrinsic  value
investment  strategy  that  focuses  on  identifying   discrepancies  between  a
security's  fundamental  value  and  its  market  price.  In this  context,  the
fundamental  value of a given security is UBS Global AM (Americas)'s  assessment
of what a security is worth.  The Value Equity Fund will select a security whose
fundamental  value it estimates to be greater than its market value at any given
time.  Like the Value Equity Fund,  the  investment  strategy for the  Financial
Sector Fund includes assessing the value characteristics of securities. However,
the Financial  Sector Fund's strategy also measures growth  characteristics.  In
constructing  the  Financial  Sector  Fund's  portfolio,  DSI seeks to invest in
stocks of companies with better-than-average earnings growth that also represent
strong,  fundamental investment values. DSI especially looks for companies whose
growth characteristics and value are not yet recognized by the market.

     The investment  advisors for the Funds use different  methods for analyzing
the  securities  to be  purchased  by the Funds.  In  analyzing  securities  for
investment by the Financial  Sector Fund, DSI uses a  proprietary,  multi-factor
model, applied in a systematic,  disciplined manner, to make assessments about a
company's  current  and  anticipated  revenues,   earnings,   cash  flow,  asset
composition and dividend yield. In contrast,  UBS Global AM (Americas) bases its
estimates of intrinsic value upon economic,  industry and company  analysis,  as
well  as  a  company's  core   competencies,   management  team,  and  perceived
competitive advantage.

     Another  difference  between the Funds is their  classification  concerning
diversification.  As a diversified  fund,  the Value Equity Fund adheres to more
stringent  requirements as to the percentage of assets it is permitted to invest
in the securities of a single issuer than does the Financial  Sector Fund, which
is a non-diversified fund.

     For further information about the investment objectives and policies of the
Funds, see "COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES."

How do the principal risks of investing in the Financial  Sector Fund compare to
the principal risks of investing in the Value Equity Fund?

     As with most investments, an investment in the Financial Sector Fund or the
Value  Equity Fund  involves  risks.  There can be no guarantee  against  losses
resulting from an investment in either Fund, nor can there be any assurance that
a Fund will  achieve its  investment  objective.  The risks  associated  with an
investment  in each Fund are  similar and include  those risks  associated  with
investing  in equity  securities,  fluctuations  in the  securities  markets and
engaging in derivative transactions.

     There are,  however,  certain  differences.  The  Financial  Sector Fund is
subject to the risks associated with focusing its investments in the stocks of a
single market sector,  the financial  services sector,  whereas the Value Equity
Fund is more diversified across sectors.

     Also,  to the  extent  that the  Financial  Sector  Fund  invests  a larger
percentage of assets in a single  issuer than a diversified  fund, it is subject
to the risk that the losses on a single issuer will have a greater impact on the
Fund's net asset  value.  As a  diversified  fund,  the Value Equity Fund is not
subject to a similar risk.

     For further  information  about the risks of  investing  in the Funds,  see
"COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES."

Who manages the Funds?

     The  management of the business and affairs of the Value Equity Fund is the
responsibility  of the Board of Trustees of the Trust (the "UBS Funds  Trustees"
or  "UBS  Funds  Board").  The  UBS  Funds  Trustees  elect  officers,  who  are
responsible for the day-to-day operations of the Value Equity Fund.

     UBS Global AM (Americas), a Delaware corporation, is the investment advisor
to the Value Equity Fund.  UBS Global AM  (Americas)  is an  investment  advisor
registered  with the SEC.  As of June 30,  2003,  UBS  Global  AM  Americas  had
approximately  $____ billion in assets.  UBS Global AM (Americas) and UBS Global
AM, the investment  advisor for the Financial Sector Fund and the  administrator
for the Financial  Sector Fund and Value Equity Fund, are both indirect,  wholly
owned subsidiaries of UBS AG. UBS AG, with headquarters in Zurich,  Switzerland,
is an internationally  diversified  organization with operations in many aspects
of the financial services  industry.  The address of UBS Global AM (Americas) is
One North Wacker Drive, Chicago, Illinois 60606.

     Pursuant to an investment  advisory  agreement relating to the Value Equity
Fund, UBS Global AM (Americas) is entitled to receive from the Value Equity Fund
an investment  advisory fee equal,  on an annual basis,  to 0.70% of the average
daily net assets of the Fund. UBS Global AM (Americas) has contractually  agreed
to waive its fees and/or  reimburse  certain  expenses so that the Value  Equity
Fund's expenses do not exceed 1.10%, 1.85%, 1.85% and 0.85% of the average daily
net assets of its Class A,  Class B,  Class C and Class Y Shares,  respectively,
during the Fund's  fiscal  year ending June 30,  2004.  Thereafter,  the expense
limit for the Value  Equity Fund will be reviewed  each year,  at which time the
continuation  of the expense limit will be discussed by UBS Global AM (Americas)
and the UBS Funds Trustees.  The contractual fee waiver  agreement also provides
that UBS Global AM  (Americas)  is entitled to  reimbursement  of fees it waived
and/or  expenses it reimbursed  for a period of three years  following  such fee
waivers and expense reimbursements, provided that the reimbursement by the Value
Equity  Fund of UBS  Global AM  (Americas)  will not  cause the total  operating
expense  ratio to exceed any  contractual  limit in effect for the Value  Equity
Fund.

     Investment  decisions  for the Value Equity Fund are made by an  investment
management  team at UBS  Global  AM  (Americas).  No  member  of the  investment
management  team  is  primarily  responsible  for  making   recommendations  for
portfolio purchases by the Value Equity Fund.

     The management of the business and affairs of the Financial  Sector Fund is
the responsibility of the Financial Sector Fund Directors.  The Financial Sector
Fund Directors elect officers, who are responsible for the day-to-day operations
of the Financial Sector Fund.

     UBS Global AM is the investment  advisor and administrator of the Financial
Sector Fund.  As of June 30,  2003,  UBS Global AM was the  investment  advisor,
sub-advisor or manager of ___ investment  companies with ___ separate portfolios
and  aggregate  assets  of  approximately  $____  billion.  UBS  Global  AM is a
registered  investment advisor whose offices are located at 51 West 52nd Street,
New York, New York 10019-6114.

     Pursuant to an  investment  advisory and  administration  agreement for the
Financial  Sector Fund,  UBS Global AM is entitled to receive a fee for advisory
and administrative  services at the annual rate of 0.70% of the Financial Sector
Fund's average daily net assets.

     UBS Global AM has retained the services of DSI to serve as the  sub-advisor
to the Financial Sector Fund and to be responsible for the day-to-day management
of the Fund's portfolio.  DSI is a registered  investment  advisor whose offices
are located at 400 Atlantic Street, 5th Floor,  Stamford,  Connecticut 06901. As
of  [insert  date],  DSI  had  approximately   $____  billion  in  assets  under
management.  DSI has used a team approach in its quantitative  management of the
Financial Sector Fund's portfolio.

     If the Merger is  approved,  the team  currently  managing the Value Equity
Fund  will  continue  to  manage  the  combined  fund.  DSI will have no role in
managing the combined fund.

What are the fees and  expenses  of each Fund and what  might  they be after the
Merger?

     The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Funds.  The sales charge  structures of the Funds are
identical.  The operating expenses shown for the Financial Sector Fund are based
on expenses incurred during the Financial Sector Fund's fiscal year ending March
31, 2003.  The operating  expenses  shown for the Value Equity Fund,  before and
after the Merger,  are based on expenses incurred during the Value Equity Fund's
most recent fiscal year ending June 30, 2003.

                 FEES AND EXPENSES FOR THE FINANCIAL SECTOR FUND
                            AND THE VALUE EQUITY FUND

                                SHAREHOLDER FEES
                    (fees paid directly from your investment)

- --------------------- --------------- ---------------- ---------------- ---------------- ----------------
                                                                                        Redemption Fee
                                                                                           (as a % of
                      Maximum Sales    Maximum Sales  Maximum  Contingent                     amount
                      Charge (Load)    Charge (Load)   Deferred Sales                       redeemed
                        (as a % of     on Purchases     Charge (Load)                    within 90 days
Fund Names and           offering       (as a % of       (as a % of                       of purchase,
Classes of Shares         price)      offering price)  offering price)   Exchange Fee    if applicable)
- --------------------- --------------- ---------------- ---------------- ---------------- ----------------
- --------------------- --------------- ---------------- ---------------- ---------------- ----------------
Class A
- ---------------------
- ---------------------
Financial Sector Fund     5.50%            5.50%            None             None             None
- ---------------------
Value Equity Fund         5.50%            5.50%            None             None             None
- ---------------------
Value Equity Fund
After Merger              5.50%            5.50%            None             None             None
- ---------------------
Class B
- ---------------------
Financial Sector Fund     5.00%            None             5.00%            None             None
- ---------------------
Value Equity Fund         5.00%            None             5.00%            None             None
- ---------------------
Value Equity Fund
After Merger              5.00%            None             5.00%            None             None
- ---------------------
Class C
- ---------------------
Financial Sector Fund     2.00%            1.00%            1.00%            None             None
- ---------------------
Value Equity Fund         2.00%            1.00%            1.00%            None             None
- ---------------------
Value Equity Fund
After Merger              2.00%            1.00%            1.00%            None             None
=====================
Class Y
- ---------------------
Financial Sector Fund      None            None             None             None             None
- ---------------------
Value Equity Fund          None            None             None             None             None
- ---------------------
Value Equity Fund
After Merger               None            None             None             None             None
- --------------------- --------------- ---------------- ---------------- ---------------- ----------------

                                                    ANNUAL FUND OPERATING EXPENSES
                                             (expenses that are deducted from Fund assets)

- ----------------------------------- -------------- ------------- ---------- ------------ ------------------
                                                                   Total
                                                                   Annual       Management Fee
                                        Distribution               Fund         Waivers and
          Fund Names and   Management    and Service   Other      Operating       Expense          Net
         Classes of Share     Fees       (12b-1) Fees  Expenses    Expenses     Reimbursements    Expenses
- ------------------------- -------------- ------------- ---------- ------------ ------------------ ----------
              Class A
Financial Sector Fund           0.70%       0.25%      0.41%       1.36%           0.00%          1.36%
Value Equity Fund**             0.70%       0.25%     1.90%*       2.85%           1.75%          1.10%
Value Equity Fund After
Merger**                        0.70%       0.25%     0.40%*       1.35%           0.25%          1.10%
              Class B
Financial Sector Fund           0.70%       1.00%      0.47%       2.17%           0.00%          2.17%
Value Equity Fund**             0.70%       1.00%     1.72%*       3.42%           1.57%          1.85%
Value Equity Fund After
Merger**                        0.70%       1.00%     0.46%*       2.16%           0.31%          1.85%
              Class C
Financial Sector Fund           0.70%       1.00%      0.44%       2.14%           0.00%          2.14%
Value Equity Fund**             0.70%       1.00%     1.34%*       3.04%           1.19%          1.85%
Value Equity Fund After
Merger**                        0.70%       1.00%     0.43%*       2.13%           0.28%          1.85%
              Class Y

Financial Sector Fund           0.70%        None      0.55%       1.25%           0.00%          1.25%
Value Equity Fund**             0.70%        None     1.92%*       2.62%           1.77%          0.85%
Value Equity Fund After
Merger**                        0.70%        None     0.54%*       1.24%           0.39%          0.85%
- ------------------------- -------------- ------------- ---------- ------------ ------------------ ----------

     *    Includes an administrative fee of 0.075% paid by the Value Equity Fund
          to UBS Global AM.

     **   The Trust,  with respect to the Value  Equity Fund,  and UBS Global AM
          (Americas) have entered into a written agreement pursuant to which UBS
          Global AM (Americas)  has agreed to waive a portion of its fees and/or
          to  reimburse  expenses  to the extent  that the Value  Equity  Fund's
          expenses,  for the fiscal year ending June 30, 2004,  otherwise  would
          exceed the "Net  Expenses"  rate shown in the table  above for each of
          the Value  Equity  Fund  Class A Shares,  Value  Equity  Fund  Class B
          Shares, Value Equity Fund Class C Shares and Value Equity Fund Class Y
          Shares, as applicable.  Pursuant to the written agreement,  UBS Global
          AM (Americas) is entitled to be reimbursed  for any fees it waives and
          expenses it reimburses for a period of three years  following such fee
          waivers   and  expense   reimbursements,   to  the  extent  that  such
          reimbursement  of UBS Global AM  (Americas)  by the Value  Equity Fund
          will not cause the Value Equity Fund to exceed any applicable  expense
          limit that is in place for the Fund.

     Examples:

     The  following  Examples  are  intended  to help  you  compare  the cost of
investing in the  Financial  Sector Fund with the cost of investing in the Value
Equity Fund.  The Examples  assume that you invest  $10,000 in each Fund for the
time  periods  indicated  and then redeem all of your shares at the end of those
periods.  Each Example also  assumes that your  investment  has a 5% return each
year.1 These are examples only, and do not represent future expenses,  which may
be greater or less than those shown below.

- --------------------------------------- ---------- --------- --------- ---------
                                           1 Year    3 Years   5 Years 10 Years
- --------------------------------------- ---------- --------- --------- ---------

Class A
   Financial Sector Fund                    $681       $957    $1254     $2095
   Value Equity Fund (Before Merger)        $656      $1228    $1824     $3432
   Value Equity Fund (After Merger)         $680       $904    $1146     $1838
Class B (assuming sale of all
shares at end of period)
   Financial Sector Fund                     720        979     1364      2109
   Value Equity Fund (Before Merger)         687       1205     1844      3351
   Value Equity Fund (After Merger)          719        912     1229      1819
Class B (assuming no sale of shares)
   Financial Sector Fund                     220        679     1164      2109
   Value Equity Fund (Before Merger)         188        305     1644      3351
   Value Equity Fund (After Merger)          219        612     1029      1819
Class C (assuming sale of all
shares at end of period)
   Financial Sector Fund                     415        763     1238      2548
   Value Equity Fund (Before Merger)         386        919     1577      3339
   Value Equity Fund (After Merger)          414        703     1116      2270
Class C (assuming no sale of shares)
   Financial Sector Fund                     315        763     1238      2548
   Value Equity Fund (Before Merger)         286        919     1577      3339
   Value Equity Fund (After Merger)          314        703     1116      2270
Class Y
   Financial Sector Fund                     127        397      686      1511
   Value Equity Fund (Before Merger)          87        646     1231      2822
   Value Equity Fund (After Merger)          126        310      509      1085

1    The Funds' actual returns may be greater or less than the  hypothetical  5%
     return  used.  The 1 Year costs in the  examples  for the Value Equity Fund
     reflect  net  operating  expenses  after the  contractual  fee  waivers and
     expense reimbursements.

Where can I find more financial information about the Funds?

     For the  Value  Equity  Fund,  per  share  information  for  the  six-month
semi-annual  period  ending  December  31, 2002 is shown below under the heading
"Financial  Highlights." The Value Equity Fund Annual Report,  which accompanies
this Prospectus/Proxy Statement as Exhibit C, includes a discussion of the Value
Equity  Fund's  performance  during  the past  fiscal  year and  shows per share
information  for the Value  Equity  Fund since its  inception  through  its most
recently completed fiscal year.

     The Financial  Sector Fund Prospectus and the Financial  Sector Fund Annual
Report contain further  financial  information  about the Financial Sector Fund.
These documents are available upon request (see "INFORMATION ABOUT THE FINANCIAL
SECTOR FUND").

                 Financial Highlights for the Value Equity Fund

     The  tables  below set  forth  financial  data for one share of  beneficial
interest outstanding of the Value Equity Fund throughout the period presented.

- ----------------------------------------------------------------------- -------------------------
                                                                           For the Six-Month
                                                                         Period Ended December
Class A                                                                         31, 2002
- -------
                                                                              (Unaudited)
                                                                              -----------
- ----------------------------------------------------------------------- -------------------------
- ----------------------------------------------------------------------- -------------------------

Net asset value, beginning of period..................................         $    9.37
                                                                               ---------

Income (loss) from investment operations:
   Net investment income..............................................              0.06*
   Net realized and unrealized gain (loss)............................             (1.02)
                                                                               ----------
      Total income (loss) from investment operations..................             (0.96)
                                                                               ----------

Less distributions:
   Distributions from net investment income...........................             (0.05)
   Distributions from net realized gains..............................             (0.06)
                                                                               ----------
Total distributions...................................................             (0.11)
                                                                               ----------

Net asset value, end of period........................................         $    8.30
                                                                               =========
Total return..........................................................            (10.31)%+
Ratios/supplemental data:
   Net assets, end of period (in 000s)................................         $   1,218
   Ratio of expenses to average net assets:
       Before expense reimbursement and earnings credits..............              3.74%**
       After expense reimbursement and earnings credits...............              1.10%**
   Ratio of net investment income (loss) to average net assets:
       Before expense reimbursement and earnings credits..............             (1.23)%**
       After expense reimbursement and earnings credits...............              1.41%**
   Portfolio turnover rate............................................               36%
- ----------------------------------------------------------------------- -------------------------

- ----------------------------------------------------------------------- -------------------------
Class B                                                                    For the Six-Month
- -------
                                                                         Period Ended December
                                                                                31, 2002
                                                                              (Unaudited)
                                                                              -----------
- ----------------------------------------------------------------------- -------------------------
- ----------------------------------------------------------------------- -------------------------

Net asset value, beginning of period..................................         $    9.32
                                                                               ---------

Income (loss) from investment operations:
   Net investment income..............................................              0.03**
   Net realized and unrealized gain (loss)............................             (1.02)
                                                                               ----------
      Total income (loss) from investment operations..................             (0.99)
                                                                               ----------

Less distributions:
   Distributions from net investment income...........................             (0.03)
   Distributions from net realized gains..............................             (0.06)
                                                                               ----------
Total distributions...................................................             (0.09)
                                                                               ----------

Net asset value, end of period........................................         $    8.24
                                                                               =========
Total return..........................................................            (10.69)%+
Ratios/supplemental data:
   Net assets, end of period (in 000s)................................         $     754
   Ratio of expenses to average net assets:
       Before expense reimbursement and earnings credits..............              4.37%**
       After expense reimbursement and earnings credits...............              1.85%**
   Ratio of net investment income (loss) to average net assets:
       Before expense reimbursement and earnings credits..............             (1.86)%**
       After expense reimbursement and earnings credits...............              0.66%**
   Portfolio turnover rate............................................                36%
- ----------------------------------------------------------------------- -------------------------

- ----------------------------------------------------------------------- -------------------------
Class C                                                                    For the Six-Month
- -------
                                                                         Period Ended December
                                                                                31, 2002
                                                                              (Unaudited)
                                                                              -----------
- ----------------------------------------------------------------------- -------------------------
- ----------------------------------------------------------------------- -------------------------

Net asset value, beginning of period..................................         $    9.33
                                                                               ---------

Income (loss) from investment operations:
   Net investment income..............................................              0.03*
   Net realized and unrealized gain (loss)............................             (1.02)
                                                                               ----------
      Total income (loss) from investment operations..................             (0.99)
                                                                               ----------

Less distributions:
   Distributions from net investment income...........................             (0.03)
   Distributions from net realized gains..............................             (0.06)
                                                                               ----------
Total distributions...................................................             (0.09)
                                                                               ----------

Net asset value, end of period........................................         $    8.25
                                                                               =========
Total return..........................................................            (10.64)%+
Ratios/supplemental data:
   Net assets, end of period (in 000s)................................         $     767
   Ratio of expenses to average net assets:
       Before expense reimbursement and earnings credits..............              3.67%**
       After expense reimbursement and earnings credits...............              1.85%**
   Ratio of net investment income (loss) to average net assets:
       Before expense reimbursement and earnings credits..............             (1.16)%**
       After expense reimbursement and earnings credits...............              0.66%**
   Portfolio turnover rate............................................               36%
- ----------------------------------------------------------------------- -------------------------

- ----------------------------------------------------------------------- -------------------------
Class Y                                                                    For the Six-Month
- -------
                                                                         Period Ended December
                                                                                31, 2002
                                                                              (Unaudited)
                                                                              -----------
- ----------------------------------------------------------------------- -------------------------
- ----------------------------------------------------------------------- -------------------------

Net asset value, beginning of period..................................         $    9.38
                                                                               ---------

Income (loss) from investment operations:
   Net investment income..............................................              0.07**
   Net realized and unrealized gain (loss)............................             (1.03)
                                                                               ----------
      Total income (loss) from investment operations..................             (0.96)
                                                                               ----------

Less distributions:
   Distributions from net investment income...........................             (0.06)
   Distributions from net realized gains..............................             (0.06)
                                                                               ----------
Total distributions...................................................             (0.12)
                                                                               ----------

Net asset value, end of period........................................         $    8.30
                                                                               =========
Total return..........................................................            (10.25)%++
Ratios/supplemental data:
   Net assets, end of period (in 000s)................................         $   4,442
   Ratio of expenses to average net assets:
       Before expense reimbursement and earnings credits..............              3.71%**
       After expense reimbursement and earnings credits...............              0.85%**
   Ratio of net investment income (loss) to average net assets:
       Before expense reimbursement and earnings credits..............             (1.20)%**
       After expense reimbursement and earnings credits...............              1.66)%**
   Portfolio turnover rate............................................                36%
- ----------------------------------------------------------------------- -------------------------
*    The net  investment  income per share data was  determined by using average
     shares outstanding throughout the period.
**   Annualized.
***  Class Y does not have sales charges.
+    The returns do not include sales charges and are non-annualized.
++   The total return calculation is non-annualized.

What are other key features of the Funds?

     Administrative,  Transfer  Agency,  Accounting  and Custody  Services.  UBS
Global AM  serves as the  administrator  to both the Value  Equity  Fund and the
Financial  Sector  Fund.  As  administrator,  UBS  Global  AM  provides  various
administrative  services to the Funds.  For the  Financial  Sector  Fund,  these
services are included in the fee that the Fund pays  pursuant to its  investment
advisory agreement.  For the Value Equity Fund, UBS Global AM is responsible for
administering  the affairs of the Value Equity Fund,  including  supervising and
managing all aspects of the Fund's  operations  (other than investment  advisory
activities)  pursuant  to  a  separate   administration   contract.   Under  the
administration  contract,  the  Value  Equity  Fund  pays UBS  Global  AM a fee,
computed  daily and paid  monthly,  at an annual  rate of 0.075% of the  average
daily  net  assets of the Value  Equity  Fund.  J.P.  Morgan  Investor  Services
Company,  a corporate  affiliate  of  JPMorgan  Chase Bank  ("JPMorgan  Chase"),
provides accounting,  portfolio valuation and certain administrative services to
the Value  Equity Fund  pursuant to a Multiple  Services  Agreement  between the
Trust and JPMorgan Chase.

     PFPC Inc. is the transfer agent and dividend  disbursing agent for both the
Value Equity Fund and the Financial  Sector Fund. PFPC Inc., a subsidiary of PNC
Bank, N.A., is located at 400 Bellevue Parkway, Wilmington, Delaware 19809.

     JPMorgan  Chase is the custodian of the  securities and other assets of the
Value Equity Fund.  JPMorgan Chase is located at 270 Park Avenue,  New York, New
York 10017. State Street Bank and Trust Company, located at 1776 Heritage Drive,
North  Quincy,  Massachusetts  02171,  serves as the custodian for the Financial
Sector Fund.

     Distribution  Services  and Rule 12b-1  Plans.  The UBS Funds  Trustees and
Financial  Sector Fund  Directors  have each appointed UBS Global AM to serve as
the principal  underwriter of the shares of each class of the Funds.  UBS Global
AM offers the shares of the Value  Equity  Fund and the shares of the  Financial
Sector Fund on a best-efforts basis pursuant to separate principal  underwriting
contracts  between  UBS  Global  AM and the  Trust,  and UBS  Global  AM and the
Financial Sector Fund, respectively. In addition to its services in distributing
shares of the Value Equity Fund and  Financial  Sector Fund,  UBS Global AM also
provides ongoing shareholder services to each Fund. UBS Global AM is authorized,
under each principal underwriting contract, to enter into dealer agreements with
other  broker-dealers  (affiliated and non-affiliated)  with respect to sales of
shares of the  respective  Fund or in  connection  with the provision of service
activities (a  "Qualified  Dealer").  UBS Global AM markets  shares of the Value
Equity Fund and the Financial Sector Fund directly or through Qualified Dealers.
With respect to both the Value Equity Fund and the Financial  Sector Fund,  when
UBS Global AM receives service fees,  distribution fees or sales charges, it may
pay some or all of them to Qualified Dealers.

     Rule 12b-1 Plans.  Each of the Value Equity Fund and the  Financial  Sector
Fund has adopted separate shareholder service and/or distribution plans or "Rule
12b-1 Plans" for the Fund's Class A Shares (a "Class A Plan"), Class B Shares (a
"Class B  Plan")  and  Class C Shares  (a  "Class  C Plan")  (collectively,  the
"Plans").  Under the Plans of each Fund,  UBS Global AM is entitled to receive a
service fee, accrued daily and payable  monthly,  at the annual rate of 0.25% of
the average daily net assets of each class of shares of each Fund. UBS Global AM
uses the service  fees it receives  to  compensate  dealers and others for their
expenses  in  connection  with  providing  shareholder  services  for the Funds,
including the maintenance of shareholder accounts.

     In addition to the service  fees,  the Value Equity Fund and the  Financial
Sector Fund pay distribution fees to UBS Global AM pursuant to each Fund's Class
B Plan and Class C Plan. The distribution fees are paid to UBS Global AM for its
services and expenses in distributing  and promoting Class B and Class C Shares.
These  expenses  may  include,  among  others,  the  preparation,  printing  and
distribution of advertisements  and sales literature for prospective  investors;
the  distribution  of  prospectuses  and other  shareholder  materials for sales
purposes;  the payment of distribution  fees to  broker-dealers  that enter into
dealer  agreements  with UBS  Global  AM;  and the  payment  of  other  expenses
allocated to UBS Global AM's  distribution  activities.  The  distribution  fees
payable under the Class B Plans and Class C Plans for the Funds may also be used
to pay UBS Global AM for advancing the commission  costs to dealers with respect
to the initial sale of such shares.

     Under  its Class B Plan and  Class C Plan,  each Fund pays UBS  Global AM a
distribution fee, accrued daily and payable monthly,  at an annual rate of 0.75%
of the average daily net assets of the Fund's Class B Shares and Class C Shares,
respectively.

     Because  12b-1  fees are paid out of the  assets of a class of a Fund on an
on-going  basis,  over time these fees will increase the cost of a shareholder's
investment  and may cost the  shareholder  more than paying other types of sales
charges.

     Value Equity Fund Class Y Shares and  Financial  Sector Fund Class Y Shares
do not have Rule 12b-1 Plans.

     Purchase, Exchange and Redemption Procedures.  Procedures for the purchase,
exchange and  redemption  of shares of the  Financial  Sector Fund and the Value
Equity Fund are similar.  You may refer to the Financial Sector Fund Prospectus,
and the Value Equity Fund Prospectus,  which  accompanies this  Prospectus/Proxy
Statement,  for the purchase,  exchange, and redemption procedures applicable to
the purchases,  exchanges and redemptions of shares of the Financial Sector Fund
and Value Equity Fund,  respectively.  Set forth below is a brief description of
the basic purchase, exchange, and redemption procedures applicable to the shares
of the Funds.  The shareholders of the Financial Sector Fund will not be subject
to any front-end sales charges described below in connection with the Merger.

     Shares of either Fund may be purchased directly from the Fund by contacting
its transfer agent, or through brokers,  dealers, other financial intermediaries
and financial  institutions  (banks and bank trust  departments) that have sales
agreements with the Funds.

     Only specific types of investors are eligible to purchase Value Equity Fund
Class Y Shares and  Financial  Sector Fund Class Y Shares.  You may refer to the
Value Equity Fund Prospectus, which accompanies this Prospectus/Proxy Statement,
and the Financial  Sector Fund Prospectus,  for more information  concerning the
eligibility requirements for purchasing Class Y Shares of the Funds.

     The  minimum  initial  investment  for Class A,  Class B and Class C of the
Funds is $1,000,  and each  subsequent  investment  must be at least $100.  Both
Funds may waive or reduce their investment minimums for certain investors.

     Purchases of Class A Shares of each Fund are subject to a maximum front-end
sales charge of 5.50% of the offering  price,  with  reduced  sales  charges for
purchases of $50,000 or more, and no front-end sales charge imposed on purchases
of $1,000,000 or more. Purchases of $1,000,000 or more of Class A Shares of each
Fund,  however,  are subject to a contingent  deferred sales charge  ("CDSC") of
1.00% for shares redeemed within one year after purchase.

     Purchases  of Class B Shares of each Fund are not subject to a sales charge
on purchases, but are subject to a CDSC when shares are sold before the end of a
specified period.  Sales of Class B Shares of each Fund are subject to a CDSC as
shown in the table below:

If shares are sold within:  Percentage (based on amount of investment) by which
                             the shares' net asset value is multiplied:


                          Less than   $100,000 to  $250,000 to  $500,000 to
                           $100,000     $249,999    $499,999      $999,999
                           --------     --------    --------      --------
1st year since purchase       5%           3%          3%            2%
2nd year since purchase       4%           2%          2%            1%
3rd year since purchase       3%           2%          1%           None
4th year since purchase       2%           1%         None          None
5th year since purchase       2%          None        None          None
6th year since purchase       1%          None        None          None
7th year since purchase      None         None        None          None

     The CDSC for the Class B Shares of each Fund is calculated  by  multiplying
the lesser of the net asset  value of the shares at the time of  purchase or the
net asset value at the time of sale by the  applicable  percentage  shown in the
table  above.  Class B Shares of each Fund  automatically  convert to the Fund's
Class A Shares,  which have lower ongoing  expenses,  after the end of the sixth
year for purchases of less than  $100,000,  after the end of the fourth year for
purchases  of at least  $100,000  but less than  $250,000,  after the end of the
third year for purchases of at least $250,000 but less than $500,000,  and after
the end of the second year for  purchases of at least  $500,000 but less than $1
million.

     Regardless of the amount of the investment,  Class B Shares of Family Funds
("Family  Funds" include other UBS Funds,  UBS PACE Select funds and other funds
for which UBS Global AM serves as principal  underwriter)  purchased or acquired
prior to  November  5,  2001 and  exchanged  (including  exchanges  as part of a
reorganization,  such as the Merger)  for shares of the Funds after  November 5,
2001  (collectively,  "Prior  Class B Shares")  are subject to a deferred  sales
charge at the time of redemption at the following percentages: (i) 5%, if shares
are sold  within  the first  year  since  purchase;  (ii) 4%, if shares are sold
within the second year since  purchase;  (iii) 3%, if shares are sold within the
third year  since  purchase;  (iv) 2%, if shares  are sold  within the fourth or
fifth year since purchase;  and (v) 1%, if shares are sold within the sixth year
of purchase.  Prior Class B Shares held longer than six years are not subject to
a deferred sales charge and automatically  convert to Class A Shares, which have
lower ongoing expenses.  Shareholders who purchased or acquired Financial Sector
Fund Class B Shares prior to November 5, 2001, will receive Prior Class B Shares
of the Value Equity Fund in the Merger.

     The Class C Shares of each Fund are subject to a front-end  sales charge of
1.00% of the offering price,  and a CDSC of 1.00% of the shares' net asset value
if the shares are sold  within one year of  purchase.  The CDSC for each  Fund's
Class C Shares is calculated by multiplying the lesser of the net asset value of
the shares at the time of purchase or the net asset value at the time of sale by
1.00%.

     The Funds  reduce or waive their sales  charges for certain  investors  and
transactions  in the Funds'  shares.  For a complete  description  of the Funds'
sales charges and the  exemptions  from such charges,  please refer to the Value
Equity Fund Prospectus,  which accompanies this Prospectus/Proxy  Statement, and
the  Statement  of  Additional  Information  relating  to this  Prospectus/Proxy
Statement,  as well as the Financial Sector Fund Prospectus and Financial Sector
Fund SAI.  Value  Equity Fund Class Y Shares and  Financial  Sector Fund Class Y
Shares are not subject to a front-end sales charge or a CDSC.

     The  purchase  price of shares  of each  Fund is based on net  asset  value
("NAV"),  plus any applicable sales charge.  The NAV per share for each class of
each Fund is calculated as of the close of regular trading (generally, 4:00 p.m.
Eastern  time) on each day that the New York Stock  Exchange  ("NYSE")  is open.
Purchase  orders for shares of each Fund  received  in good form by the close of
regular  trading on the NYSE are priced  according to the NAV determined on that
day;  otherwise,  they are priced  according  to the next  determined  price per
share. Each Fund reserves the right to reject any purchase request.

     Shares of each class of each Fund, except the Funds' Class Y Shares, may be
exchanged for shares of the same class of most other Family Funds.  Exchanges in
shares of both Funds are subject to the initial minimum investment  requirements
to the same extent as purchases of the shares.  Exchanges are not subject to any
sales charges at the time of the exchange. Exchanges are treated as a redemption
and new purchase for federal income tax purposes, and accordingly,  may have tax
consequences for shareholders.

     Shares of each class of each Fund may be sold at any time at the NAV (minus
any  applicable  sales  charge)  next  calculated  after the Fund  receives  the
redemption order in good form. Shareholders of either Fund can sell their shares
by  contacting  the  Funds'  transfer  agent or, if  shares  are held  through a
financial institution, by contacting the shareholders' financial institutions or
investment  professionals.  Each  institution or  professional  may have its own
procedures and requirements for selling shares of the Funds and may charge fees.

     Dividends,  Distributions  and Taxes.  Each Fund normally declares and pays
income  dividends and distributes  any realized gains  annually.  Both the Value
Equity Fund and the Financial Sector Fund automatically  reinvest  distributions
in additional shares of the same class of that Fund, unless the Fund is notified
that the shareholder elects to receive such distributions in cash.

     Distributions  from both the Value  Equity  Fund and the  Financial  Sector
Fund, whether received in cash or in additional shares, are generally subject to
income tax, unless the shares are held in a tax-exempt or tax-deferred  account.
In general,  distributions  from either Fund are taxable to the  shareholder  as
either  ordinary  income  or  capital  gains.  Both the  Value  Equity  Fund and
Financial Sector Fund notify their  shareholders  annually of the source and tax
status of all Fund  distributions  for  federal  income tax  purposes.  For more
information  about the tax  implications of investments in the Value Equity Fund
and the  Financial  Sector  Fund,  see the Value Equity Fund  Prospectus,  which
accompanies  this   Prospectus/Proxy   Statement,   the  Financial  Sector  Fund
Prospectus,  the  Financial  Sector Fund SAI, and the  Statement  of  Additional
Information relating to this Prospectus/Proxy Statement.

                             REASONS FOR THE MERGER

     UBS  Global  AM has  reviewed  its  mutual  funds and  determined  that the
Financial  Sector  Fund,  which  is  based  on a  proprietary  model  run by its
sub-advisor,  DSI, is unlikely to attract additional assets,  particularly since
the  Financial  Sector  Fund is the only  sector  fund in the UBS  Global  Asset
Management fund family.  UBS Global Asset Management has recently  determined to
focus primarily on its core investment capabilities, which do not include sector
products such as the Financial Sector Fund.

     In addition,  UBS Global Asset  Management  decided to organize  into three
distinct global investment  platforms:  Core Asset  Management,  Alternative and
Quantitative  Investments  ("AQI"), and Real Estate. DSI will be integrated into
the AQI  platform,  which  will  enable  DSI to  manage  alternative  investment
products, such as hedge funds. Due to certain compliance implications, including
possible  conflicts of interest  that may arise if DSI were to manage both hedge
funds and mutual funds, DSI has decided to cease managing mutual funds.

     For the reasons  described  above,  the Agreement and Plan was presented to
the Financial Sector Fund Directors for their  consideration,  and the Financial
Sector  Fund Board,  on behalf of the  Financial  Sector  Fund,  determined,  as
described below, to recommend that shareholders approve the Merger.

     In  conjunction  with the  presentation  of the  Agreement  and  Plan,  the
Financial  Sector Fund  Directors  questioned  UBS Global AM about the potential
benefits and costs of the Merger to the  shareholders  of the  Financial  Sector
Fund. In deciding whether to recommend approval of the Merger to shareholders of
the Financial  Sector Fund,  the Financial  Sector Fund  Directors  considered a
number of factors.  The Financial  Sector Fund Directors did not assign relative
weights to the following  factors or deem any one of them to be  controlling  in
and of itself. The factors included:

     o    Shareholders  of the  Financial  Sector  Fund will  likely  benefit by
          investing  in a portfolio  that is more  diversified  across  industry
          sectors,  but still  provides  significant  exposure to the  financial
          services  sector.  Currently,  approximately  35% of the Value  Equity
          Fund's  portfolio  is invested in  securities  of  financial  services
          companies.

     o    Because it is unlikely  that the  Financial  Sector Fund will  attract
          additional  assets,  UBS Global AM believes  that it will be unable to
          retain a sub-advisor to manage the Fund.

     o    Financial Sector Fund shareholders,  following the Merger, will invest
          in  a  fund  that  is  managed   according  to  the  core   investment
          capabilities of UBS Global Asset Management.

     o    Financial  Sector Fund  shareholders  will not pay a  front-end  sales
          charge to become  shareholders  of the Value Equity Fund in connection
          with the Merger.

     o    The Merger is  intended  to be a tax-free  reorganization  for federal
          income tax purposes and, thus, Financial Sector Fund shareholders will
          not be required  to pay any  federal  income tax solely as a result of
          the exchange of their shares of the  Financial  Sector Fund for shares
          of the Value Equity Fund.

     o    UBS Global AM will bear all expenses  incurred in connection  with the
          Merger.

     o    Because  the  proposed  Merger  will be  effected  on the basis of the
          relative net asset values of the Funds,  shareholders of the Financial
          Sector  Fund will not  experience  any  dilution in the value of their
          investments as a result of the Merger.

     o    If the Merger is approved by shareholders of the Financial Sector Fund
          and the merger of the Funds is  consummated,  the  shareholders of the
          Financial  Sector Fund will become  shareholders  of the Value  Equity
          Fund.

     o    The expense  ratios of the Value Equity Fund,  taking into account the
          Value  Equity  Fund's  contractual  fee  waivers,  are lower  than the
          expense ratios of the Financial Sector Fund.

     o    As  shareholders  of the Value  Equity  Fund,  Financial  Sector  Fund
          shareholders would continue to benefit from the same high-quality fund
          administration and shareholder services.

     o    The  combined  fund may be better  positioned  to attract  new assets,
          following the Merger,  than the Financial Sector Fund would be, absent
          the  merger.  If  the  combined  fund  attracts  new  assets,  it  may
          experience  additional economies of scale, which could result in lower
          operating expenses.

     The Financial  Sector Fund Board also considered that the Financial  Sector
Fund is required by its  prospectus to invest 80% of its assets in securities in
the financial  services  sector.  DSI thus has somewhat  limited  flexibility in
making  investment  decisions for the Financial  Sector Fund, as compared to the
broader mandate of UBS Global AM (Americas) in managing the Value Equity Fund.

     The Financial  Sector Fund  Directors  concluded  that the Merger is in the
best  interests of the  shareholders  of the  Financial  Sector Fund and that no
dilution of value would result for the shareholders of the Financial Sector Fund
from the Merger.  The Financial  Sector Fund Directors,  including a majority of
the Directors who are not interested  persons of the Financial Sector Fund, then
decided to approve the Agreement and Plan and to recommend that  shareholders of
the Financial Sector Fund vote to approve the Merger.

     The UBS Funds  Trustees  also  determined  that the  Merger was in the best
interests of the Value Equity Fund and its  shareholders and that no dilution of
value would result to those shareholders.

   For the reasons discussed above, the Financial Sector Fund Board, on behalf
  of the Financial Sector Fund, recommends that you vote FOR the Agreement and
                                     Plan.

     If the  shareholders  of the  Financial  Sector  Fund  do not  approve  the
Agreement and Plan,  the Merger will not take place,  and the  Financial  Sector
Fund  Directors  may  consider  other  possible  courses  of  action,  including
liquidation and dissolution of the Financial Sector Fund.

                          INFORMATION ABOUT THE MERGER

     This is only a summary  of the  Agreement  and Plan.  You  should  read the
actual Agreement and Plan. It is attached as Exhibit A and  incorporated  herein
by reference.

How will the Merger be carried out?

     If the  shareholders of the Financial Sector Fund approve the Agreement and
Plan,  the Merger will take place after various  conditions are satisfied by the
Financial  Sector  Fund,  and by the Trust,  on behalf of the Value Equity Fund,
including the delivery of certain  documents.  The Financial Sector Fund and the
Trust will agree on the specific  date for the actual  Merger to take place (the
"Closing").

     If the  shareholders of the Financial Sector Fund approve the Agreement and
Plan,  the  Financial  Sector  Fund  will  deliver  to  the  Value  Equity  Fund
substantially  all  of  the  Financial  Sector  Fund's  assets,  subject  to its
liabilities, at the Closing. In exchange, the Financial Sector Fund will receive
Value Equity Fund Class A Shares, Value Equity Fund Class B Shares, Value Equity
Fund Class C Shares and Value Equity Fund Class Y Shares,  to be distributed pro
rata by the  Financial  Sector  Fund to its  shareholders  in the  corresponding
classes,  in complete  liquidation and dissolution of the Financial Sector Fund.
The value of the assets of the  Financial  Sector  Fund to be  delivered  to the
Value Equity Fund shall be the value of such net assets computed as of the close
of business of the NYSE (normally,  4:00 p.m. Eastern time) on the last business
day prior to the Closing (the "Valuation Date").

     The stock transfer  books of the Financial  Sector Fund will be permanently
closed as of the Valuation Date. The Financial  Sector Fund will accept requests
for  redemption  only if received  in proper  form  before  that time.  Requests
received  after that time will be  considered  requests to redeem  shares of the
Value Equity Fund.

     To the extent permitted by law, the Financial Sector Fund and the Trust may
agree to amend the Agreement  and Plan without  shareholder  approval.  They may
also agree to  terminate  and abandon the Merger at any time  before,  or to the
extent  permitted by law,  after the approval of  shareholders  of the Financial
Sector Fund.

Who will pay the expenses of the Merger?

     UBS Global AM will pay all expenses incurred in connection with the Merger.

What are the tax consequences of the Merger?

     The Merger is intended to qualify as a tax-free  reorganization for federal
income tax purposes  under  Section  368(a)(1)  of the Internal  Revenue Code of
1986, as amended.  Based on certain  assumptions made and  representations to be
received from the Financial  Sector Fund,  and from the Trust,  on behalf of the
Value Equity Fund, it is expected that Stradley, Ronon, Stevens & Young, LLP
will  provide a legal  opinion  that,  for  federal  income  tax  purposes,  (i)
shareholders  of the  Financial  Sector Fund will not recognize any gain or loss
solely as a result of the exchange of their shares of the Financial  Sector Fund
for shares of the Value  Equity  Fund,  and (ii) the Value  Equity  Fund and its
shareholders  will not  recognize any gain or loss upon receipt of the Financial
Sector Fund's assets.

     You should  recognize  that an  opinion  of  counsel is not  binding on the
Internal  Revenue  Service  ("IRS") or any court.  Neither the Financial  Sector
Fund, nor the Trust,  on behalf of the Value Equity Fund,  will seek to obtain a
ruling from the IRS regarding the tax  consequences of the Merger.  Accordingly,
if the IRS  sought  to  challenge  the tax  treatment  of the  Merger  and  were
successful,  neither of which is  anticipated,  the Merger could be treated,  in
whole or in part,  as a taxable  sale of assets by the  Financial  Sector  Fund,
followed by the taxable liquidation of the Financial Sector Fund.

     You should consult your tax advisor  regarding the effect of the Merger, if
any, in light of your individual circumstances. You should also consult your tax
advisor  about  the state and local  tax  consequences  of the  Merger,  if any,
because this discussion only relates to the federal income tax consequences.

What should I know about the Value Equity Fund Shares?

     If the Merger is approved,  full and fractional  shares of the Value Equity
Fund will be issued without the imposition of a front-end  sales charge or other
fee to  shareholders  of the  Financial  Sector  Fund  in  accordance  with  the
procedures  described  above.  When issued,  each share will be duly and validly
issued,  fully  paid,  nonassessable  and fully  transferable.  All shares  have
noncumulative  voting rights.  This gives holders of more than 50% of the shares
voting the  ability to elect all of the  members of the Board of Trustees of the
Trust. If this happens,  holders of the remaining shares voting will not be able
to elect any trustees.

     A shareholder  of a class of shares of the Value Equity Fund will receive a
pro rata share of all distributions  arising from the Value Equity Fund's assets
attributable to the class of shares owned by the shareholder, and upon redeeming
shares,  will  receive  the  portion  of the  Value  Equity  Fund's  net  assets
attributable to the class of shares owned by the shareholder  represented by the
redeemed shares.

     The shares of the Value Equity Fund will be recorded to each  shareholder's
account on the books of the Value Equity Fund's transfer agent. The Value Equity
Fund does not issue share certificates.

How do shareholder rights and obligations of the Funds compare?

     While  the Trust  and the  Financial  Sector  Fund are  separate  entities,
organized  under the laws of different  jurisdictions  and governed by different
organizational  documents,  shareholders  of the Financial  Sector Fund will not
experience a material reduction in shareholder rights as a result of the Merger.

     The Trust is  organized  as a Delaware  statutory  trust and governed by an
Agreement  and  Declaration  of Trust (the "Trust  Agreement").  Under the Trust
Agreement,  the Trust has an unlimited number of authorized shares of beneficial
interest,  with each share having a par value of $0.001 per share. The Financial
Sector Fund is organized as a Maryland Corporation and governed by a Restatement
of Articles of Incorporation  (the  "Articles").  Pursuant to the Articles,  the
Financial  Sector Fund is currently  authorized to issue  300,000,000  shares of
common  stock,  with each share  having a par value of $0.01 per share.  The UBS
Funds Trustees and the Financial Sector Fund Directors (together,  the "Boards")
may,  without  shareholder  approval,   divide  the  authorized  shares  of  the
applicable  entity into an  unlimited  number of separate  portfolios  or series
("series"). The Boards may also, without shareholder approval, divide the series
into two or more  classes of shares.  The Trust  currently  consists  of fifteen
series, including the Value Equity Fund. Each series of the Trust, including the
Value Equity Fund,  offers four  classes of shares  (designated  Class A Shares,
Class B Shares, Class C Shares and Class Y Shares). The Financial Sector Fund is
not divided into separate  series but offers four classes of shares  (designated
Class A Shares,  Class B Shares,  Class C Shares and Class Y Shares).  The Trust
and each  series  of the  Trust,  as well as the  Financial  Sector  Fund,  will
continue indefinitely until terminated.

     With  respect to a series of shares of the Trust and the  Financial  Sector
Fund,  shares of the same class have equal dividend,  distribution,  liquidation
and voting rights, and fractional shares have proportionate  rights. Each series
or class bears its own expenses related to its distribution of shares (and other
expenses,  such as  transfer  agency,  shareholder  service  and  administration
expenses). Generally, shares of the Trust will be voted in the aggregate without
differentiation  between  separate  series or classes;  provided  however,  if a
matter only affects certain series or classes,  then only shares of the affected
series or  classes  shall be voted in the  aggregate.  Shares  of the  Financial
Sector Fund are voted together,  except that  shareholders of a particular class
of the Fund may vote on matters affecting only that class.

     Under the Trust Agreement and the Articles, annual meetings of shareholders
are not required to be held. Generally, the Trust and Financial Sector Fund call
shareholder  meetings only when  specifically  required by federal law or by the
law of its jurisdiction of  organization.  Shareholders  representing  one-tenth
(10%) or more of the  outstanding  shares entitled to vote on a matter may cause
the  Trust  to call a  shareholder  meeting  on any  matter  and may  cause  the
Financial Sector Fund to call a shareholder meeting for the purpose of voting on
the  removal of a director.  For  matters  other than the removal of a director,
shareholders representing 25% or more of the outstanding shares entitled to vote
on a matter may cause the Financial  Sector Fund to call a shareholder  meeting.
With respect to both the Trust and Financial Sector Fund, a shareholder  meeting
is not required to be called upon the request of  shareholders  entitled to cast
less  than a  majority  of all  votes  entitled  to be cast at such  meeting  to
consider any matter that is  substantially  the same as a matter voted on at any
shareholder meeting held during the preceding twelve months.

     Under  Delaware law and the Trust's Trust  Agreement,  shareholders  of the
Value  Equity Fund are not held  personally  liable for the  obligations  of the
Trust or the Value Equity Fund.  Similarly,  under Maryland law, shareholders of
the Financial  Sector Fund are not subject to personal  liability for any claims
or liabilities of the Financial  Sector Fund solely by reason of being or having
been a shareholder of the Fund.

What are the assets of the Funds and what might the  capitalization be after the
Merger?

     The  following  table sets forth,  as of June 30,  2003,  the assets of the
Value  Equity  Fund  and  the   Financial   Sector  Fund,   and  the   estimated
capitalization  of the  Value  Equity  Fund as  adjusted  to give  effect to the
proposed Merger. The final  capitalization of the Value Equity Fund is likely to
be different when the Merger is consummated.

                                                                      Value Equity Fund
                           Value Equity Fund Financial Sector Fund         Class A
                                Class A             Class A              after Merger
                              (unaudited)         (unaudited)            (estimated)
                           -----------------------------------------------------------------
Net assets                 $ 1,072,253       $ 85,973,374          $ 87,045,897
Total shares outstanding       115,199          3,527,487             9,349,517
Net asset value per share  $      9.31       $      24.37          $       9.31

                                                                      Value Equity Fund
                           Value Equity Fund Financial Sector Fund         Class B
                                Class B             Class B              after Merger
                              (unaudited)         (unaudited)            (estimated)
                           -----------------------------------------------------------------
Net assets                 $   709,121       $ 37,891,352          $ 38,600,473
Total shares outstanding        76,980          1,648,389             4,190,374
Net asset value per share  $      9.21       $      22.99          $       9.21

                                                                      Value Equity Fund
                           Value Equity Fund Financial Sector Fund         Class C
                                Class C             Class C              after Merger
                              (unaudited)         (unaudited)            (estimated)
                           -----------------------------------------------------------------
Net assets                 $ 1,025,446       $ 18,744,615          $ 19,770,061
Total shares outstanding       111,184            816,865             2,143,565
Net asset value per share  $      9.22       $      22.95          $       9.22

                                                                      Value Equity Fund
                           Value Equity Fund Financial Sector Fund         Class Y
                                Class Y             Class Y              after Merger
                              (unaudited)         (unaudited)            (estimated)
                           -----------------------------------------------------------------
Net assets                 $ 4,790,254       $    992,207          $  5,782,461
Total shares outstanding       513,457             40,521               619,810
Net asset value per share  $      9.33       $      24.49          $       9.33

                COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES

     This section  descthe key investment  policies of the Value Equity Fund and
the  Financial  Sector  Fund and  certain  noteworthy  differences  between  the
investment strategies and policies of the Funds. For a more complete description
of the Value Equity Fund's  investment  policies and risks,  you should read the
Value Equity Fund Prospectus,  which accompanies this Prospectus/Proxy Statement
as Exhibit B.

Are there any  significant  differences  between the  investment  objectives and
policies of the Funds?

     Investment Objectives and Investment Strategies.  The Value Equity Fund and
the Financial Sector Fund have different investment objectives. The Value Equity
Fund seeks to maximize  total  return,  consisting of capital  appreciation  and
current  income.  The Financial  Sector Fund's  investment  objective is to seek
long-term  capital  appreciation.  Each Fund's  investment  objective may not be
changed without shareholder approval.

     Unless otherwise stated,  each of the investment policies described in this
Prospectus/Proxy  Statement is a non-fundamental  policy. Policies or investment
restrictions  of a Fund that are  deemed to be  fundamental  may not be  changed
without the approval of the lesser of: (i) a majority of the outstanding  shares
of the Fund;  or (ii) 67% or more of the  shares  represented  at a  meeting  of
shareholders at which the holders of more than 50% of the outstanding  shares of
the Fund are represented. Policies or investment restrictions of a Fund that are
deemed  to be  non-fundamental  may be  changed  by  the  Fund's  Board  without
shareholder approval.

     Each Fund has  adopted a policy to invest  80% of its net  assets in equity
securities.  The Financial Sector Fund, under normal  circumstances,  invests at
least 80% of its net assets (plus borrowings for investment purposes, if any) in
equity securities issued by financial services  companies,  which include banks,
thrifts, insurance companies, finance companies,  securities firms and companies
that provide  specialized  services to them. The Value Equity Fund, under normal
circumstances,  invests  at least 80% of its net  assets  (plus  borrowings  for
investment  purposes,  if any) in U.S.  equity  securities.  The 80%  investment
policies of the Funds differ in two ways.  First,  the Financial  Sector Fund is
required  to commit  at least 80% of its  assets  to  investments  in  financial
services  companies,  thus  concentrating  its  investments  in a single  market
sector.  In contrast,  the Value  Equity Fund is not required by its  investment
policy to focus its  investments in the financial  services  sector or any other
group of  industries.  Thus,  the Value Equity Fund may invest  across a broader
range of businesses. Second, the Value Equity Fund is required by its investment
policy  to invest at least  80% of its net  assets  in U.S.  issuers,  while the
Financial  Sector  Fund  is  not  similarly  required  by  its  policy  to  make
investments in U.S.  securities.  Despite the differences  described  above, the
portfolios of the two Funds are more similar than their 80% investment  policies
would  indicate.  Currently,  approximately  35%  of  the  Value  Equity  Fund's
portfolio is invested in financial  services companies and ___% of the Financial
Sector Fund's portfolio is invested in U.S. securities.

     UBS Global AM (Americas) and DSI utilize different strategies for selecting
securities to be purchased by the Funds.  In selecting  securities for the Value
Equity  Fund,  UBS  Global  AM  (Americas)  employs a price to  intrinsic  value
investment  strategy  that  focuses  on  identifying   discrepancies  between  a
security's  fundamental  value  and  its  market  price.  In this  context,  the
fundamental  value of a given security is UBS Global AM (Americas)'s  assessment
of what a security is worth.  The Value Equity Fund will select a security whose
fundamental  value it estimates to be greater than its market value at any given
time.  UBS Global AM  (Americas)  then  compares its  assessment of a security's
value  against  the  prevailing  market  price  with the aim of  constructing  a
portfolio  of  stocks  for  the  Value  Equity  Fund  with  attractive  relative
price/value characteristics.

     Like the Value  Equity Fund,  the  investment  strategy  for the  Financial
Sector Fund includes assessing the value characteristics of securities. However,
the Financial  Sector Fund's strategy also measures growth  characteristics.  In
constructing  the  Financial  Sector  Fund's  portfolio,  DSI seeks to invest in
stocks of companies with better-than-average earnings growth that also represent
strong,  fundamental investment values. DSI especially looks for companies whose
growth characteristics and value are not yet recognized by the market.

     The investment  advisor for the Value Equity Fund and the  sub-advisor  for
the Financial Sector Fund use different  methods for analyzing the securities to
be  purchased  by the Funds.  In  analyzing  securities  for  investment  by the
Financial Sector Fund, DSI uses a multi-factor  model,  applied in a systematic,
disciplined   manner,   to  make  assessments  about  a  company's  current  and
anticipated revenues, earnings, cash flow, asset composition and dividend yield.
In contrast,  UBS Global AM (Americas) bases its estimates of intrinsic value of
securities upon economic,  industry and company analysis, as well as a company's
core competencies, management team, and perceived competitive advantage.

     Unlike the Financial  Sector Fund, the Value Equity Fund is a "diversified"
fund under the 1940 Act. As a diversified  fund,  75% of the Value Equity Fund's
total  assets may not be invested so that:  (a) more than 5% of its total assets
are invested in the securities of a single issuer,  or (b) it owns more than 10%
of the outstanding  voting securities of a single issuer.  The Value Equity Fund
is not  prohibited  from  investing  the  remaining  25% of  its  assets  in the
securities  of a single  issuer  or in more than 10% of the  outstanding  voting
securities  of a single  issuer.  This  policy  is a  fundamental  policy.  As a
non-diversified  fund, the Financial Sector Fund may invest a greater portion of
its assets in the securities of any one issuer and, therefore,  a smaller number
of issuers than a diversified fund such as the Value Equity Fund.

     Principal  Investments.  As stated above,  under normal market  conditions,
both Funds seek to achieve their investment objectives by investing primarily in
equity securities.

     Equity Securities. Each Fund's investments in equity securities may include
common  stock,  preferred  stock,  convertible  securities,  securities  such as
warrants or rights, and sponsored or unsponsored  American,  European and Global
depositary  receipts.  The  Financial  Sector  Fund may also  invest  in  equity
interests in trusts, partnerships, joint ventures or similar enterprises.

     Foreign  Investments.  As part of its principal  investment  strategy,  the
Financial  Sector  Fund may  invest  up to 20% of its  total  assets  in  equity
securities and  investment  grade bonds of foreign  issuers.  Although the Value
Equity  Fund  maintains  flexibility  to invest in foreign  securities,  foreign
investing is not a principal investment strategy of the Fund.

     Cash and Cash Equivalents.  Each Fund may invest a portion of its assets in
short-term  debt  securities   (including   repurchase  agreements  and  reverse
repurchase agreements) of corporations, the U.S. government and its agencies and
instrumentalities,  and banks and finance companies, which may be denominated in
any currency. Each Fund may also invest a portion of its assets in shares issued
by affiliated  or  unaffiliated  money market  mutual funds and similar  private
investment vehicles.  In addition,  the Financial Sector Fund may invest in debt
obligations  issued or guaranteed by one or more foreign  governments  or any of
their  political   subdivisions,   agencies  or   instrumentalities,   including
obligations of supranational entities. Both Funds may invest in cash equivalents
for  a  variety  of  reasons,   including  for  liquidity,  in  anticipation  of
shareholder  redemptions  of Fund  shares,  to  reinvest  cash  collateral  from
securities lending  activities and as part of their normal investment  programs.
The  Financial  Sector Fund may also invest in these  instruments  as a means to
facilitate  the  transition  to a new  investment  style  or  strategy  if a new
sub-advisor were selected.

     Under normal circumstances, each Fund may invest up to 20% of its assets in
cash and cash equivalents.  However,  in order to protect against adverse market
conditions, each Fund may take a temporary defensive position by investing up to
100% of its assets in cash or cash equivalents.

     Debt Securities. While the Value Equity Fund is only permitted to invest in
the cash and cash  equivalents  described  above,  the Financial Sector Fund may
invest up to 20% of its net assets in  investment  grade bonds of  corporations,
governments and other issuers. In addition, the Financial Sector Fund may invest
in zero coupon and other OID securities  and engage in  when-issued  and delayed
delivery transactions.

     Derivatives.  Derivative  securities are those  securities whose values are
dependent upon the performance of one or more securities, indices or currencies.
Both Funds may engage in the  following  types of derivative  transactions:  (i)
options  on  securities,   securities  indices  and  foreign  currencies;   (ii)
securities  index futures  contracts,  foreign  currency  futures  contracts and
interest rate futures contracts;  and (iii) options on futures  contracts.  Both
Funds may also engage in forward currency contracts and swap transactions.  Each
Fund may use  derivatives  for a variety of  reasons,  including  as part of its
investment  strategies and to help manage  portfolio risks. The Financial Sector
Fund may enter into  transactions  involving  one or more  types of  derivatives
where the full value of the Fund's  portfolio is at risk, while the Value Equity
Fund is not  permitted to engage in  derivatives  to this  extent.  Under normal
circumstances,  however,  the Financial  Sector Fund's use of  derivatives  will
place a much smaller portion of the Fund's assets at risk.

     Portfolio  Turnover.  The  Financial  Sector  Fund may  engage in  frequent
trading to achieve  its  investment  objective.  Frequent  trading can result in
portfolio turnover of 100% or more (high portfolio  turnover).  Frequent trading
may increase the portion of the Fund's  capital  gains that are realized for tax
purposes  in any  given  year.  Frequent  trading  also  may  result  in  higher
transaction  costs and may negatively  affect fund  performance.  Normally,  the
Value Equity Fund expects to have a portfolio  turnover  rate of less than 100%.
However,  the Value Equity Fund is likely to experience high portfolio  turnover
following the Merger due to the anticipated sales of portfolio securities of the
Finacial  Sector  Fund  acquired  in the  Merger  that  do not  align  with  the
investment polices and strategies of the Value Equity Fund.

What are the principal risk factors associated with investments in the Funds?

     The risks of investing  in the Funds are  substantially  similar.  Like all
investments,  investments in the Funds involve risks. There is no assurance that
either Fund will meet its  investment  objective.  The  achievement  of a Fund's
investment  objective  depends  upon  market  conditions  generally  and  on the
analytical and portfolio  management skills of the Fund's investment  advisor or
sub-advisor.  Investments in the Funds are not guaranteed; you may lose money by
investing  in the Funds.  Other  principal  risks of  investing in the Funds are
highlighted below.

     Market Risk.  Each Fund is subject to the risk that the market value of the
Fund's  investments  will  fluctuate  as the stock and bond  markets  fluctuate.
Market risk may affect a single issuer,  industry or section of the economy,  or
it may affect the market as a whole.

     Equity Risk. Each Fund is subject to the risks associated with investing in
equity  securities.  The  prices of common  stocks and other  equity  securities
generally  fluctuate more than those of other investments.  They reflect changes
in the issuing company's  financial condition and changes in the overall market.
Common stocks  generally  represent the riskiest  investment in a company.  Each
Fund  could  lose a  substantial  part,  or even  all,  of its  investment  in a
company's stock.

     Derivatives  Risk.  Each Fund is  subject to the risk that the value of its
investment in derivatives may rise or fall more rapidly than other  investments.
For some derivatives,  it is possible for a Fund to lose more than the amount it
invested in the derivative  instrument.  The use of derivatives  may not succeed
for  various  reasons,   including  unexpected  changes  in  the  value  of  the
derivatives or the assets underlying them.

     Financial  Services  Industry  Concentration  Risk.  (Financial Sector Fund
only) Since the Financial  Sector Fund's  stocks are  concentrated  in financial
services   companies,   it  will  be  more  severely   affected  by  unfavorable
developments  in that  industry  than if the Fund  invested  in a broad range of
businesses.

     Non-Diversification   Risk.   (Financial  Sector  Fund  only)  Because  the
Financial Sector Fund is non-diversified,  it can invest more of its assets in a
single issuer than a diversified  fund can. A change in market value of a single
issuer can have a greater effect on the Financial Sector Fund's  performance and
share price than it would for a more diversified fund.

     Foreign  Investing.  (Financial Sector Fund only) The Financial Sector Fund
may invest in foreign  securities as part of its principal  investment  strategy
and, therefore, is subject to foreign investing risk. Foreign investing subjects
the  Fund to the risk  that  the  value of the  Fund's  investments  in  foreign
securities may fall due to adverse political,  social and economic  developments
abroad. Also, the Fund is subject to the risk of changes in currency valuations.

     Credit and Interest Rate Risks.  (Financial Sector Fund only) The Financial
Sector  Fund is  authorized  to  invest  in  bonds  and  other  income-producing
securities.  These securities are subject to credit risk and interest rate risk.
Credit  risk is the risk that the  issuer of a bond will not make  principal  or
interest  payments  when  they  are due.  Interest  rate  risk is the risk  that
interest  rates  will rise,  so that the value of the  Financial  Sector  Fund's
investment in bonds will fall.

How do the investment restrictions of the Funds differ?

     The Value Equity Fund and the Financial Sector Fund are subject to similar,
but not identical,  fundamental  investment  restrictions  regarding lending and
underwriting.  The differences in these specific investment restrictions, and in
the Funds' other investment restrictions, are discussed below.

     The  Value  Equity  Fund  is  subject  to  a  fundamental   diversification
restriction  which states that the Fund may not purchase the  securities  of any
one  issuer  (other  than  the  U.S.  government  or  any  of  its  agencies  or
instrumentalities  or securities of other  investment  companies) if immediately
after such  investment  (a) more than 5% of the value of the Fund's total assets
would be invested in such issuer or (b) more than 10% of the outstanding  voting
securities  of such issuer would be owned by the Fund,  except that up to 25% of
the value of the Fund's total assets may be invested  without  regard to such 5%
and 10% limitations. As a non-diversified fund, the Financial Sector Fund is not
subject to a similar investment restriction.

     The Funds have comparable investment restrictions relating to lending. Both
Funds will not make loans, although each Fund is permitted to lend its portfolio
securities and to enter into  repurchase  agreements  (which may be deemed to be
loans). Also, certain instruments (such as debt securities, loan participations,
and  interests  therein)  are  explicitly   excluded  from  the  Funds'  lending
restrictions. In this regard, the Financial Sector Fund's restriction explicitly
excludes from the investment  limitation a greater array of debt  securities and
money market  instruments  (including  investments  in  government  obligations,
commercial  paper,  certificates  of deposit,  bankers'  acceptances and similar
instruments) than the Value Equity Fund's restriction.

     The Funds are  subject to  substantively  similar  investment  restrictions
relating to underwriting securities. The Value Equity Fund's limitation provides
that the Fund will not act as an underwriter, except to the extent that the Fund
may be deemed to be an  underwriter  when selling its own shares.  The Financial
Sector Fund's restriction provides that the Fund will not engage in the business
of underwriting  securities of other issuers, except to the extent that the Fund
might  be  considered  an  underwriter  under  the  federal  securities  laws in
connection with the Fund's disposition of portfolio securities.

     The Funds have differing fundamental  investment  restrictions with respect
to borrowing. The Value Equity Fund may not borrow money in excess of 33 1/3% of
the value of its assets  (including the amounts  borrowed),  while the Financial
Sector Fund may not borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount of any senior securities that have been issued but reduced
by any liabilities not constituting senior securities) at the time of borrowing.
Furthermore,  the  Financial  Sector  Fund  is  authorized  to  borrow  up to an
additional  5% of its total  assets  (not  including  the amount  borrowed)  for
temporary or emergency  purposes.  The Value Equity Fund's  restriction does not
provide the Fund with  authority  to borrow  additional  amounts  for  temporary
measures or emergency purposes. Finally, the Financial Sector Fund is subject to
a non-fundamental investment restriction that prohibits the Fund from purchasing
portfolio securities while borrowings in excess of 5% of the Fund's total assets
are outstanding. The Value Equity Fund is not subject to a comparable investment
restriction.

     The Funds have  different  limitations  regarding  short  sales.  The Value
Equity Fund's  limitation,  unlike the Financial Sector Fund's  restriction,  is
fundamental.   The  Value  Equity  Fund  is  permitted,   under  its  investment
limitation,  to make short sales of  securities  to the extent  permitted by the
1940 Act and any rule or order thereunder, or SEC staff interpretations thereof.
The Financial Sector Fund's  non-fundamental  investment  restriction limits the
Fund to selling  securities  short  "against the box" and to  maintaining  short
positions in  connection  with the Fund's use of financial  options and futures,
forward and spot  currency  contracts,  swap  transactions  and other  financial
contracts or derivative instruments.

     There  are  notable  differences  in  the  Funds'  fundamental   investment
restrictions  relating to  concentration.  The Value Equity Fund is subject to a
restriction that provides that the Fund will not invest more than 25% of its net
assets in securities of issuers in a particular industry,  whereas the Financial
Sector Fund is subject to a fundamental  investment  limitation of not investing
25% or more of its total  assets in  issuers  having  their  principal  business
activities  in  the  same  industry.  The  Financial  Sector  Fund's  investment
limitation  differs  from  the  Value  Equity  Fund's  limitation  in two  other
respects.   First,   municipal  securities  are  explicitly  excluded  from  the
application  of the Financial  Sector  Fund's 25%  limitation,  while  municipal
securities are not excluded from the Value Equity Fund's limitation. Second, the
Financial Sector Fund's investment  restriction  contains a provision that under
normal  circumstances,  the Fund will invest 25% or more of its total  assets in
the related group of industries consisting of the financial services industries.
The Value Equity Fund does not have a comparable  investment policy with regards
to investing in financial services companies.

     While both Funds are subject to a fundamental  investment  limitation  that
provides  that neither Fund will  purchase or sell real  estate,  the  Financial
Sector Fund has more  flexibility  under its investment  restriction.  The Value
Equity  Fund is  permitted  to  purchase  and  sell  securities  of real  estate
investment  trusts  ("REITs") under its limitation.  The Financial  Sector Fund,
however, may purchase and sell not only securities of REITs, but also securities
of other issuers that invest in real estate. The Financial Sector Fund may also,
under its limitation, make investments in mortgage-backed  securities,  mortgage
participations  and other instruments  supported by interests in real estate. In
addition,  the  Financial  Sector Fund may exercise its rights under  agreements
relating  to real  estate-related  securities,  including  the right to  enforce
security  interests  and  to  hold  real  estate  acquired  by  reason  of  such
enforcement until the real estate can be liquidated in an orderly manner.

     The Funds'  limitations  on investing in commodities  are similar,  but not
identical.  The Value Equity Fund may not purchase or sell  commodities,  except
that the Fund may purchase or sell currencies,  may enter into futures contracts
on securities,  currencies and other indices or any other financial instruments,
and may  purchase  and sell options on such  futures  contracts.  The  Financial
Sector  Fund may not  purchase  or sell  physical  commodities  unless  they are
acquired  as a  result  of  owning  securities  or  other  instruments,  but the
Financial  Sector Fund may purchase,  sell or enter into  financial  options and
futures,  forward  and spot  currency  contracts,  swap  transactions  and other
financial contracts or derivative instruments.

     The Funds are subject to different  limitations  relating to issuing senior
securities.  The Value Equity Fund is prohibited from issuing senior  securities
to its presently authorized shares of beneficial interest,  except that the Fund
is not prohibited from (a) making any permitted borrowings,  loans, mortgages or
pledges;  (b) entering  into  options,  futures  contracts,  forward  contracts,
repurchase transactions or reverse repurchase transactions;  or (c) making short
sales, as described above. The Financial Sector Fund, by contrast,  is permitted
to issue  senior  securities  as provided in the 1940 Act, in an amount up to 33
1/3% of the Fund's total assets  (including the amount of any senior  securities
that have been issued but reduced by any  liabilities  not  constituting  senior
securities).

     Each Fund has a non-fundamental  investment  limitation regarding purchases
of illiquid securities.  The Financial Sector Fund will not invest more than 10%
of its net assets in illiquid  securities,  while the Value Equity Fund will not
invest more than 15% of its net assets in such securities.

     The  Financial  Sector  Fund is  subject  to a  non-fundamental  investment
restriction  prohibiting the Fund from purchasing  securities on margin,  except
for short-term  credits  necessary for clearance of portfolio  transactions  and
except that the Fund may make  margin  deposits  in  connection  with its use of
financial  options  and  futures,  forward  and spot  currency  contracts,  swap
transactions,  and other  financial  contracts and derivative  instruments.  The
Value  Equity  Fund does not have a stated  investment  restriction  relating to
purchasing securities on margin.

     The  Financial  Sector  Fund is  subject  to a  non-fundamental  investment
limitation  that  provides  that the Fund will not purchase  securities of other
investment companies, except to the extent permitted by the 1940 Act, and except
that this  limitation  does not apply to  securities  received  or  acquired  as
dividends,  through  offers  of  exchange,  or as a  result  of  reorganization,
consolidation  or merger.  The Value  Equity  Fund is not subject to an explicit
investment  restriction  relating to investing in securities of other investment
companies.

                         Comparison of Fund Performance

     The following bar charts and tables provide  information  about each Fund's
performance  and thus give some indication of the risks of an investment in each
Fund.  The bar charts  show how the Funds'  performance  has varied from year to
year.  The bar chart for the Value Equity Fund shows Class Y Shares,  which have
the longest performance history of any class of shares of the Value Equity Fund,
and the bar chart for the Financial  Sector Fund shows Class A Shares,  which is
the class with the  longest  performance  history for that Fund.  The  Financial
Sector  Fund's bar chart  does not  reflect  the effect of sales  charges on the
Financial  Sector Fund's Class A Shares;  if it did reflect sales  charges,  the
total  returns  shown would be lower.  Class Y Shares of the Value  Equity Fund,
unlike other classes of shares in the Fund,  have no sales charges.  The returns
in the bar chart for the  Financial  Sector Fund  reflect the 0.25%  service fee
that Class A shares pay under the 12b-1  plans;  the Class Y shares of the Funds
do not pay 12b-1 fees and,  therefore,  such fees are not  reflected  in the bar
chart for the Value Equity  Fund.  Because the Class A shares and Class Y shares
are  subject to  different  fees,  the bar charts may not  portray as accurate a
comparison of the performance of the Financial Sector Fund and Value Equity Fund
then if identical classes were shown.

     The tables for the Funds  illustrate  how the  performance of each class of
shares, before taxes and for specified time periods, compares to that of a broad
measure of market performance.  In addition,  the tables present the performance
of the  Class Y  Shares  of the  Value  Equity  Fund and  Class A Shares  of the
Financial  Sector Fund  reflecting  the impact of taxes.  After-tax  returns are
calculated using the historical  highest  individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.  Actual  after-tax
returns  depend on an  investor's  tax  situation  and are likely to differ from
those shown.  After-tax  returns  shown are not  relevant to investors  who hold
their Fund shares  through  tax-deferred  arrangements  such as 401(k)  plans or
individual retirement accounts. In some cases, the return after taxes may exceed
the return  before taxes due to an assumed tax benefit from any losses on a sale
of Fund  shares at the end of the period.  After-tax  returns are shown only for
Class Y and  Class A Shares,  respectively,  of the  Value  Equity  Fund and the
Financial Sector Fund, and after-tax returns for the other classes will vary.

     Each Fund's past performance,  before and after taxes, does not necessarily
indicate how the Fund will perform in the future.

- ---------------------------------------- ---------------------------------------------------------
      Value Equity Fund                                Financial Sector Fund
- ---------------------------------------- ---------------------------------------------------------
Total Return on Class Y Shares
(2002 is the Fund's first full                       Total Return on Class A Shares
calendar year of operations)                       (ten calendar years of operations)
- ---------------------------------------- ---------------------------------------------------------
- ---------------------------------------- ---------------------------------------------------------

[insert chart showing (15.56)% in 2002]  [insert chart showing:  1993:  10.32%; 1994:  (0.75)%;
                                         1995:  47.47%; 1996:  28.95%; 1997:  45.20%; 1998:
                                         2.31%; 1999:  (9.42)%; 2000:  23.28%; 2001:  (9.08)%;
                                         2002:  (14.07)%

Best quarter during years shown:         Best quarter during years shown:
4th quarter 2002 9.76%                   3rd quarter 2000 23.82%

Worst quarter during years shown:        Worst quarter during years shown:
 3rd quarter 2002 (18.23)%               3rd quarter 2002 (17.07)%

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

                Average Annual Total Returns, Value Equity Fund**
                    (for the periods ended December 31, 2002)


Class (Inception Date)                           1 Year        Life of Class
- ----------------------                           ------        -------------
Class A (12/07/01)
     Return Before Taxes                       (20.34)%          (19.14)%
Class B (11/08/01)
     Return Before Taxes                       (20.56)%          (14.93)%
Class C (12/12/01)
     Return Before Taxes                       (18.03)%          (14.49)%
Class Y (6/29/01)
     Return Before Taxes                       (15.56)%          (10.80)%
     Return After Taxes on Distribution        (16.02)%          (11.12)%
     Return After Taxes on Distribution and
     Sale of Fund Shares                        (9.55)%           (8.74)%
Russell 1000 Value Index (reflects no
deduction for fees, expenses, or taxes)        (15.52)%                 *
- ------------------------

*    Average  annual total returns for the Russell 1000 Value Index for the life
     of each class were as follows:  Class A-(14.37)%;  Class B-(10.78)%;  Class
     C-(13.14)%; Class Y-(13.27)%.

**   Returns reflect sales charges.


              Average Annual Total Returns, Financial Sector Fund**
                    (for the periods ended December 31, 2002)
                                                                         Life of
                    Class (Inception Date)      1 Year  5 Years  10 Years Class
                    ----------------------      ------  -------  -------- -----


Class A (5/22/86)
     Return Before Taxes                        (18.80)  (3.35)     9.81  11.11
     Return After Taxes on Distributions        (19.11)  (4.49)     7.55   9.35
     Return After Taxes on Distributions and    (11.54)  (2.78)     7.41   8.95
     Sale of Fund Shares
Class B (7/01/91)
     Return Before Taxes                        (19.03)  (3.32)     9.95  13.82
Class C (7/02/92)
     Return Before Taxes                        (16.45)  (3.19)     3.49  10.82
Class Y (3/30/98)
     Return Before Taxes                        (13.97)    N/A       N/A  (3.42)
S&P 500 Index (reflects no deduction for        (22.10)  (0.59)     9.35     *
fees, expenses, or taxes)

*    Average annual total returns for the S&P 500 Index for the life of each
     class were as follows: Class A-10.66%;  Class B-9.85%; Class C-9.62%; Class
     Y-(3.15)%.

**   Returns reflect sales charges.

                               VOTING INFORMATION

How many votes are necessary to approve the Agreement and Plan?

     The  presence,  in person or by proxy,  of the holders of  one-third of the
shares of the  Financial  Sector Fund  outstanding,  and entitled to vote at the
Meeting,  shall  constitute  a quorum for the  transaction  of  business  at the
Meeting.  Provided  that a quorum is present,  the approval of the Agreement and
Plan  requires the  affirmative  vote of a majority of the  aggregate  number of
shares entitled to vote thereon.  Each  shareholder will be entitled to one vote
for each full share,  and a fractional  vote for each  fractional  share, of the
Financial  Sector Fund held on the Record Date. If  sufficient  votes to approve
the proposal  are not  received by the date of the  Meeting,  the Meeting may be
adjourned  to permit  further  solicitations  of  proxies.  In the  absence of a
quorum, the holders of a majority of the shares present at the Meeting in person
or by proxy, or if no shareholder entitled to vote is present at the Meeting, an
officer of the  Financial  Sector  Fund  entitled  to act on such  matters,  may
adjourn the Meeting.

     Abstentions  and  broker   non-votes  will  be  included  for  purposes  of
determining whether a quorum is present at the Meeting,  but will not be treated
as votes cast and,  therefore,  will not be counted for purposes of  determining
whether  the  matters  to be voted upon at the  Meeting  have been  approved  or
counted for purposes of approving an adjournment.

How do I ensure my vote is accurately recorded?

     You may  attend  the  Meeting  and vote in  person.  You may  also  vote by
completing  and signing the  attached  proxy card and mailing it in the enclosed
postage paid envelope. A proxy card is, in essence, a ballot. If you simply sign
and date the proxy but give no voting instructions, your shares will be voted in
favor of the Agreement  and Plan and in accordance  with the views of management
upon any unexpected  matters that come before the Meeting or any  adjournment of
the Meeting. You may also vote your shares by telephone or via the Internet.  To
vote in this manner, please see the instructions on the attached proxy card.

Can I revoke my proxy?

     You may  revoke  your  proxy at any time  before  it is voted by  sending a
written notice to the Financial  Sector Fund expressly  revoking your proxy,  by
signing and forwarding to the Financial  Sector Fund a later-dated  proxy, or by
attending the Meeting and voting in person.

What other matters will be voted upon at the Meeting?

     The Financial Sector Fund Board does not intend to bring any matters before
the Meeting other than the Merger described in this Prospectus/Proxy  Statement.
It is not aware of any other matters to be brought before the Meeting by others.
If any  other  matter  legally  comes  before  the  Meeting,  proxies  for which
discretion  has  been  granted  will be voted in  accordance  with the  views of
management.

Who is entitled to vote?

     Only  shareholders  of record of the Financial  Sector Fund at the close of
business on the Record Date will be entitled to vote at the meeting.  The number
of shares of the Financial Sector Fund and each of its four classes  outstanding
as of the Record Date is listed below:

                               Shares Outstanding
                               ------------------

               Financial Sector Fund

               Financial Sector Fund Class A Shares
               Financial Sector Fund Class B Shares
               Financial Sector Fund Class C Shares
               Financial Sector Fund Class Y Shares

What other solicitations will be made?

     The Financial  Sector Fund will request  broker-dealer  firms,  custodians,
nominees and fiduciaries to forward proxy materials to the beneficial  owners of
the shares  held of record by such  persons.  Broker-dealer  firms,  custodians,
nominees  and  fiduciaries  may be  reimbursed  for  their  reasonable  expenses
incurred  in   connection   with  such  proxy   solicitation.   In  addition  to
solicitations  by mail,  officers and employees of the Financial Sector Fund and
UBS  Global  AM,  without  additional  or  special  compensation,   may  conduct
additional solicitations by telephone and via the Internet. The Financial Sector
Fund has engaged ________________________,  a proxy solicitation firm, to assist
in the  solicitation  of proxies  for the  Meeting,  which is  expected  to cost
approximately  $______.  The  costs of such  solicitations,  and any  additional
solicitations of any adjourned session, will be borne by UBS Global AM.

                     INFORMATION ABOUT THE VALUE EQUITY FUND

     Information about the Value Equity Fund is included in Exhibit B, the Value
Equity  Fund  Prospectus,  and Exhibit C, the Value  Equity Fund Annual  Report,
which are attached to and considered a part of this Prospectus/Proxy  Statement.
Additional  information  about the Value  Equity Fund is also  contained  in the
Statement of Additional Information,  dated [____________ __, 2003], relating to
this Prospectus/Proxy  Statement, which is incorporated by reference herein. You
may request a free copy of this Statement of Additional  Information,  which has
been filed with the SEC,  by calling  1-800-647-1568  or by writing to the Value
Equity Fund at 51 West 52nd Street, New York, New York 10019-6114.

     This Prospectus/Proxy Statement, which constitutes a part of a Registration
Statement  filed by the Trust with the SEC under the  Securities Act of 1933, as
amended,  omits  certain  of  the  information  contained  in  the  Registration
Statement.  Reference is hereby made to the  Registration  Statement  and to the
exhibits  thereto for further  information with respect to the Value Equity Fund
and the shares it offers.  Statements contained herein concerning the provisions
of  documents  are  necessarily  summaries  of such  documents,  and  each  such
statement  is  qualified  in  its  entirety  by  reference  to the  copy  of the
applicable document filed with the SEC.

                   INFORMATION ABOUT THE FINANCIAL SECTOR FUND

     Information  about the  Financial  Sector Fund is included in the Financial
Sector Fund Prospectus,  the Financial Sector Fund Annual Report,  the Financial
Sector  Fund  SAI,  and  the   Statement  of   Additional   Information,   dated
[____________ __, 2003],  relating to this Prospectus/Proxy  Statement,  each of
which is incorporated by reference herein.  You may request free copies of these
documents,  which have been filed with the SEC, by calling  1-800-647-1568 or by
writing to the Financial Sector Fund at 51 West 52nd Street,  New York, New York
10019-6114.

                           INFORMATION ABOUT EACH FUND

     The Funds file proxy materials, reports, and other information with the SEC
in accordance with the informational requirements of the Securities Exchange Act
of 1934 and the 1940 Act.  These  materials  can be inspected  and copied at the
public reference facilities maintained by the SEC at Room 1200, 450 Fifth Street
N.W., Washington,  DC 20549. Also, copies of such materials can be obtained from
the Public  Reference Branch of the SEC, 450 Fifth Street N.W.,  Washington,  DC
20549,   at   prescribed   rates   or   from   the   SEC's   Internet   site  at
http://www.sec.gov.  To request  information  regarding the Funds,  you may also
send an e-mail to the SEC at publicinfo@sec.gov.

                           PRINCIPAL HOLDERS OF SHARES

     On the Record  Date,  the officers and  Directors of the  Financial  Sector
Fund,  as a group,  owned less than 1% of the  outstanding  voting shares of any
class of the Financial Sector Fund.

     To the best knowledge of the Financial  Sector Fund, as of the Record Date,
no  person,  except  as set  forth  in the  table  below,  owned  of  record  or
beneficially 5% or more of the outstanding  shares of any class of the Financial
Sector Fund:

      Class         Name and Address of Account     Share Amount      Percentage of Class
- ------------------- ---------------------------- ------------------- ----------------------

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

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

     On the Record Date,  the  officers  and trustees of the Trust,  as a group,
owned less than 1% of the  outstanding  shares of any class of the Value  Equity
Fund.

     To the best  knowledge of the Value Equity Fund,  as of the Record Date, no
person,  except as set forth in the table below, owned of record or beneficially
5% or more of the  outstanding  voting  shares of any class of the Value  Equity
Fund:

      Class         Name and Address of Account     Share Amount      Percentage of Class
- ------------------- ---------------------------- ------------------- ----------------------

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

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

              [Also include information regarding control persons.]

   [Please also indicate if shares are held beneficially, of record, or both.]


                     EXHIBITS TO PROSPECTUS/PROXY STATEMENT


Exhibit
- -------


     A    Form of Agreement and Plan of Reorganization between the UBS Financial
          Sector  Fund Inc.  and The UBS Funds (on behalf of the UBS U.S.  Value
          Equity Fund)

     B    Prospectus of the UBS U.S. Value Equity Fund, dated September 30, 2002

     C    Annual Report to  Shareholders  of the UBS U.S. Value Equity Fund, for
          the fiscal year ended June 30, 2002





                                    EXHIBIT A

                      AGREEMENT AND PLAN OF REORGANIZATION


     AGREEMENT  AND  PLAN  OF  REORGANIZATION,  made  as of  this  ____  day  of
____________,  2003,  by and  between The UBS Funds (the  "Trust"),  a statutory
trust created under the laws of the State of Delaware,  with its principal place
of business at One North Wacker Drive, Chicago, Illinois 60606, on behalf of its
series,  the UBS U.S.  Value  Equity Fund (the  "Value  Equity  Fund"),  and UBS
Financial Sector Fund Inc. (the "Financial Sector Fund"), a corporation  created
under the laws of the State of Maryland, with its principal place of business at
51 West 52nd Street, New York, New York 10019-6114.

                             PLAN OF REORGANIZATION

     The   reorganization   (hereinafter   referred   to   as   the   "Plan   of
Reorganization") will consist of: (i) the acquisition by the Trust, on behalf of
the Value Equity Fund, of substantially all of the property, assets and goodwill
of the  Financial  Sector  Fund,  in  exchange  solely for shares of  beneficial
interest,  $0.001 par value,  of (a) UBS U.S.  Value Equity  Fund-Class A shares
("Value  Equity Fund Class A Shares"),  (b) UBS U.S.  Value Equity  Fund-Class B
shares  ("Value  Equity  Fund  Class B  Shares"),  (c)  UBS  U.S.  Value  Equity
Fund-Class C shares ("Value Equity Fund Class C Shares"), and (d) UBS U.S. Value
Equity  Fund-Class  Y shares  ("Value  Equity  Fund  Class Y  Shares"),  and the
assumption  by the  Trust,  on behalf of the Value  Equity  Fund,  of all of the
liabilities of the Financial  Sector Fund;  (ii) the  distribution  of (a) Value
Equity  Fund  Class A  Shares  to the  stockholders  of  Class A  shares  of the
Financial Sector Fund ("Financial Sector Fund Class A Shares"), (b) Value Equity
Fund  Class B Shares  to the  stockholders  of Class B shares  of the  Financial
Sector Fund  ("Financial  Sector Fund Class B  Shares"),  (c) Value  Equity Fund
Class C Shares to the  stockholders  of Class C shares of the  Financial  Sector
Fund ("Financial Sector Fund Class C Shares"), and (d) Value Equity Fund Class Y
Shares  to the  stockholders  of Class Y shares  of the  Financial  Sector  Fund
("Financial  Sector  Fund  Class  Y  Shares"),  according  to  their  respective
interests in complete  liquidation  of the Financial  Sector Fund; and (iii) the
dissolution  of the  Financial  Sector  Fund as soon as  practicable  after  the
closing (as referenced in Section 3 hereof,  hereinafter  called the "Closing"),
all upon and subject to the terms and  conditions of this  Agreement and Plan of
Reorganization ("Agreement") hereinafter set forth.

                                    AGREEMENT

     In order to consummate the Plan of  Reorganization  and in consideration of
the premises and of the  covenants and  agreements  hereinafter  set forth,  and
intending to be legally bound, the parties hereto covenant and agree as follows:

     1.   Sale  and  Transfer  of  Assets  and   Liabilities,   Liquidation  and
          Dissolution of the Financial Sector Fund

     (a) Subject to the terms and conditions of this Agreement,  and in reliance
on the  representations  and  warranties of the Trust herein  contained,  and in
consideration  of the  delivery  by the  Trust of the  number  of its  shares of
beneficial interest of the Value Equity Fund hereinafter provided, the Financial
Sector Fund agrees that it will sell, convey, transfer and deliver to the Trust,
on behalf of the Value  Equity Fund,  at the Closing  provided for in Section 3,
all of the  liabilities,  debts,  obligations and duties of any nature,  whether
accrued, absolute, contingent or otherwise ("Liabilities") and the assets of the
Financial Sector Fund as of the close of business (which  hereinafter  shall be,
unless  otherwise  noted,  the  regular  close of business of the New York Stock
Exchange, Inc. ("NYSE")) ("Close of Business") on the valuation date (as defined
in Section 3 hereof, hereinafter called the "Valuation Date"), free and clear of
all liens, encumbrances,  and claims whatsoever (other than stockholders' rights
of redemption and such  restrictions  as might arise under the Securities Act of
1933, as amended (the "1933 Act"), with respect to privately placed or otherwise
restricted  securities  that the Financial  Sector Fund may have acquired in the
ordinary course of business), except for cash, bank deposits, or cash equivalent
securities in an estimated  amount  necessary  (1) to pay the  Financial  Sector
Fund's  costs and expenses of carrying out this  Agreement  (including,  but not
limited to, fees of counsel and accountants, and expenses of its liquidation and
dissolution  contemplated   hereunder),   which  costs  and  expenses  shall  be
established on the books of the Financial Sector Fund as liability reserves, (2)
to discharge all of the Financial Sector Fund's  Liabilities on its books at the
Close of  Business  on the  Valuation  Date  including,  but not limited to, its
income dividends and capital gains distributions, if any, payable for any period
prior to,  and  through,  the  Close of  Business  on the  Valuation  Date,  and
excluding those  liabilities and obligations  that would otherwise be discharged
at a  later  date in the  ordinary  course  of  business,  and  (3) to pay  such
contingent  liabilities  as the  directors  of the  Financial  Sector Fund shall
reasonably deem to exist against the Financial Sector Fund, if any, at the Close
of Business on the Valuation  Date, for which  contingent and other  appropriate
liability  reserves shall be  established  on the books of the Financial  Sector
Fund (hereinafter "Net Assets"). The Financial Sector Fund shall also retain any
and all  rights  that it may have  over and  against  any  person  that may have
accrued up to and  including the Close of Business on the  Valuation  Date.  The
Financial Sector Fund agrees to use commercially  reasonable efforts to identify
all of the Fund's  Liabilities  prior to the Valuation Date and to discharge all
such known Liabilities on or prior to the Valuation Date.

     (b) Subject to the terms and conditions of this Agreement,  and in reliance
on the  representations  and  warranties  of the  Financial  Sector  Fund herein
contained,  and  in  consideration  of  such  sale,  conveyance,  transfer,  and
delivery,  the Trust agrees at the Closing to assume the Liabilities,  on behalf
of the Value Equity Fund,  and to deliver to the Financial  Sector Fund: (i) the
number of Value Equity Fund Class A Shares, determined by dividing the net asset
value per share of Value  Equity Fund Class A Shares as of the Close of Business
on the Valuation Date by the net asset value per share of Financial  Sector Fund
Class A Shares as of Close of Business on the Valuation  Date,  and  multiplying
the result by the number of  outstanding  shares of the  Financial  Sector  Fund
Class A Shares as of Close of Business on the Valuation Date; (ii) the number of
Value Equity Fund Class B Shares, determined by dividing the net asset value per
share of  Value  Equity  Fund  Class B Shares  as of  Close of  Business  on the
Valuation Date by the net asset value per share of Financial Sector Fund Class B
Shares as of Close of Business on the Valuation Date, and multiplying the result
by the number of outstanding  shares of Financial  Sector Fund Class B Shares as
of Close of Business on the  Valuation  Date;  (iii) the number of Value  Equity
Fund Class C Shares,  determined  by  dividing  the net asset value per share of
Value Equity Fund Class C Shares as of Close of Business on the  Valuation  Date
by the net asset value per share of  Financial  Sector Fund Class C Shares as of
Close of Business  on the  Valuation  Date,  and  multiplying  the result by the
number of outstanding shares of Financial Sector Fund Class C Shares as of Close
of  Business on the  Valuation  Date;  and (iv) the number of Value  Equity Fund
Class Y Shares,  determined  by dividing  the net asset value per share of Value
Equity Fund Class Y Shares as of Close of Business on the Valuation  Date by the
net asset value per share of Financial Sector Fund Class Y Shares as of Close of
Business on the  Valuation  Date,  and  multiplying  the result by the number of
outstanding  shares  of  Financial  Sector  Fund  Class Y Shares  as of Close of
Business on the  Valuation  Date.  All such values  shall be  determined  in the
manner and as of the time set forth in Section 2 hereof.

     (c) As soon as practicable following the Closing, the Financial Sector Fund
shall dissolve and distribute pro rata to its  stockholders  of record as of the
Close of Business on the Valuation  Date,  the shares of beneficial  interest of
the Value Equity Fund  received by the  Financial  Sector Fund  pursuant to this
Section  1. Such  dissolution  and  distribution  shall be  accomplished  by the
establishment  of accounts on the share  records of the Value Equity Fund of the
type and in the amounts due such  stockholders  pursuant to this Section 1 based
on their  respective  holdings of shares of the Financial  Sector Fund as of the
Close of  Business  on the  Valuation  Date.  Fractional  shares  of  beneficial
interest of the Value Equity Fund shall be carried to the third  decimal  place.
No certificates  representing  shares of beneficial interest of the Value Equity
Fund will be issued to stockholders of the Financial Sector Fund.

     (d) At the Closing, each stockholder of record of the Financial Sector Fund
as of the record  date (the  "Distribution  Record  Date")  with  respect to any
unpaid  dividends  and  other  distributions  that  were  declared  prior to the
Closing,  including any dividend or  distribution  declared  pursuant to Section
9(e)  hereof,  shall  have the  right  to  receive  such  unpaid  dividends  and
distributions  with respect to the shares of the Financial Sector Fund that such
person had on such Distribution Record Date.

     2.   Valuation

     (a) The value of the  Financial  Sector Fund's Net Assets to be acquired by
the Value Equity Fund hereunder shall be computed as of the Close of Business on
the  Valuation  Date using the valuation  procedures  set forth in the Financial
Sector  Fund's  currently  effective  prospectus  and  statement  of  additional
information.

     (b) The net  asset  value of a share of  beneficial  interest  of the Value
Equity  Fund Class A Shares,  the Value  Equity  Fund Class B Shares,  the Value
Equity  Fund Class C Shares and the Value  Equity  Fund Class Y Shares  shall be
determined to the nearest full cent as of the Close of Business on the Valuation
Date,  using the  valuation  procedures  set forth in the  Value  Equity  Fund's
currently effective prospectus and statement of additional information.

     (c) The net asset value of a share of common stock of the Financial  Sector
Fund Class A Shares, Financial Sector Fund Class B Shares, Financial Sector Fund
Class C Shares,  and Financial Sector Fund Class Y Shares shall be determined to
the nearest full cent as of the Close of Business on the Valuation  Date,  using
the valuation  procedures as set forth in the Financial  Sector Fund's currently
effective prospectus and statement of additional information.

     3.   Closing and Valuation Date

     The Valuation  Date shall be  ____________  __, 200_, or such later date as
mutually  agreed to in writing by the Trust and the Financial  Sector Fund.  The
Closing shall take place at the principal  office of UBS Global Asset Management
(US) Inc., 51 West 52nd Street, New York, New York 10019-6114,  at approximately
10:00 a.m.  Eastern time on the first business day following the Valuation Date.
Notwithstanding  anything  herein  to the  contrary,  in the  event  that on the
Valuation Date (a) the NYSE shall be closed to trading or trading  thereon shall
be  restricted,  or (b) trading or the  reporting of trading on such exchange or
elsewhere  shall be  disrupted  so that,  in the  judgment  of the  Trust or the
Financial Sector Fund,  accurate appraisal of the value of the net assets of the
Financial Sector Fund or the Value Equity Fund is  impracticable,  the Valuation
Date shall be postponed  until the first business day after the day when trading
shall have been fully resumed without restriction or disruption, reporting shall
have been restored and accurate  appraisal of the value of the net assets of the
Financial  Sector Fund and the Value Equity Fund is  practicable in the judgment
of the Trust and the Financial Sector Fund. The Financial Sector Fund shall have
provided  for  delivery  as of the Closing of those Net Assets of the Fund to be
transferred to the Value Equity Fund's  custodian,  J. P. Morgan Chase Bank, 270
Park Avenue,  New York, New York 10017.  Also,  the Financial  Sector Fund shall
deliver at the  Closing a list of names and  addresses  of the  stockholders  of
record of Financial  Sector Fund Class A Shares,  Financial  Sector Fund Class B
Shares,  Financial  Sector Fund Class C Shares and Financial Sector Fund Class Y
Shares,  and the number of shares of common stock of such classes  owned by each
such  stockholder,  indicating  thereon  which such  shares are  represented  by
outstanding  certificates and which by book-entry accounts,  all as of the Close
of Business on the Valuation  Date,  certified by its transfer  agent, or by its
President or Vice President to the best of their knowledge and belief. The Trust
shall issue and deliver a certificate or  certificates  evidencing the shares of
the Value  Equity Fund to be  delivered  at the Closing to said  transfer  agent
registered in such manner as the Financial  Sector Fund may request,  or provide
evidence  satisfactory  to  the  Financial  Sector  Fund  that  such  shares  of
beneficial  interest of the Value  Equity Fund have been  registered  in an open
account on the books of the Value  Equity Fund in such  manner as the  Financial
Sector Fund may request.

     4.   Representations and Warranties by the Financial Sector Fund

     The Financial Sector Fund represents and warrants to the Trust that:

     (a) The Financial  Sector Fund is a  corporation  created under the laws of
the State of Maryland on February 13, 1986, and is validly  existing and in good
standing  under  the  laws of that  State.  The  Financial  Sector  Fund is duly
registered  under the  Investment  Company  Act of 1940,  as amended  (the "1940
Act"), as an open-end  management  investment  company.  Such registration is in
full force and effect as of the date hereof and will be in full force and effect
as of the  Closing  and all of its  shares  sold have been sold  pursuant  to an
effective registration statement filed under the 1933 Act, except for any shares
sold pursuant to the private  offering  exemption for the purpose of raising the
required initial capital.

     (b) The Financial  Sector Fund is authorized to issue three hundred million
shares  of  common  stock,  $0.001  par  value.  Each  outstanding  share of the
Financial Sector Fund is duly and validly issued, fully paid, non-assessable and
has full  voting  rights and,  except for any such  shares sold  pursuant to the
private offering exemption for purposes of raising the required initial capital,
is fully transferable.

     (c) The financial  statements appearing in the Financial Sector Fund Annual
Report to  Shareholders  for the fiscal  year ended March 31,  2003,  audited by
Ernst & Young LLP,  copies of which  have been  delivered  to the Trust,  fairly
present  the  financial  position  of the  Financial  Sector Fund as of the date
indicated,  and the  results  of its  operations  for the period  indicated,  in
conformity with generally accepted accounting principles applied on a consistent
basis. When available, a copy of the unaudited financial statements appearing in
the Financial Sector Fund  Semi-Annual  Report to Shareholders for the six-month
period  ended  September  30, 2003 will be  delivered  to the Trust,  which will
fairly  present the financial  position of the  Financial  Sector Fund as of the
date indicated,  and the results of its operations for the period indicated,  in
conformity with generally accepted accounting principles applied on a consistent
basis.

     (d) The books and records of the  Financial  Sector Fund made  available to
the Trust and/or its counsel are true and correct in all  material  respects and
contain no material omissions with respect to the business and operations of the
Financial Sector Fund.

     (e)  The  statement  of  assets  and  liabilities  to be  furnished  by the
Financial  Sector Fund as of the Close of Business on the Valuation Date for the
purpose of determining the number of shares of beneficial  interest of the Value
Equity Fund to be issued  pursuant to Section 1 hereof will  accurately  reflect
the Net Assets of the  Financial  Sector Fund and  outstanding  shares of common
stock,  as of such  date,  in  conformity  with  generally  accepted  accounting
principles applied on a consistent basis.

     (f) At the Closing, the Financial Sector Fund will have good and marketable
title to all of the securities and other assets shown on the statement of assets
and liabilities referred to in subsection (e) above, free and clear of all liens
or encumbrances of any nature whatsoever except such restrictions as might arise
under the 1933 Act with  respect to  privately  placed or  otherwise  restricted
securities  that the  Financial  Sector Fund may have  acquired in the  ordinary
course of business and such  imperfections  of title or  encumbrances  as do not
materially  detract  from the value or use of the  assets  subject  thereto,  or
materially affect title thereto.

     (g) The  Financial  Sector Fund has the  necessary  power and  authority to
conduct its business as such business is now being conducted.

     (h) The  Financial  Sector  Fund is not a party to or  obligated  under any
provision of its Restatement of Articles of Incorporation,  Restated By-Laws, or
any material contract or any other material commitment or obligation, and is not
subject to any order or decree  that would be violated  by its  execution  of or
performance under this Agreement and Plan of Reorganization.

     (i) The  Financial  Sector Fund has full power and  authority to enter into
and perform its  obligations  under this  Agreement,  subject to approval of the
Plan of  Reorganization by the Financial Sector Fund's  stockholders.  Except as
provided in the  immediately  preceding  sentence,  the execution,  delivery and
performance of this Agreement  have been duly and validly  authorized,  executed
and delivered by it, and this Agreement constitutes its legal, valid and binding
obligation  enforceable  against it in accordance with its terms,  subject as to
enforcement to the effect of bankruptcy, insolvency, reorganization, arrangement
among  creditors,  moratorium,  fraudulent  transfer  or  conveyance,  and other
similar laws of general applicability relating to or affecting creditor's rights
and to general equity principles.

     (j) The Financial Sector Fund is not under the jurisdiction of a Court in a
Title 11 or similar  case  within the  meaning  of Section  368(a)(3)(A)  of the
Internal Revenue Code of 1986, as amended (the "Code").

     (k) The  Financial  Sector  Fund  does not have any  unamortized  or unpaid
organizational fees or expenses.

     (l) The Financial  Sector Fund has since its inception  satisfied,  will at
the Closing satisfy,  and consummation of the transactions  contemplated by this
Agreement will not cause it to fail to satisfy, for any period, the requirements
of Subchapter M of the Code relating to qualification as a regulated  investment
company.

     (m) The  Financial  Sector  Fund,  or its  agents,  (i)  holds a valid  tax
identification   number  certification  form  for  each  Financial  Sector  Fund
stockholder of record,  which form can be associated  with  reportable  payments
made by the Financial Sector Fund to such stockholder, and/or (ii) has otherwise
timely instituted the appropriate backup withholding  procedures with respect to
such stockholder as provided by Section 3406 of the Code.

     5.   Representations and Warranties by the Trust

     The Trust represents and warrants to the Financial Sector Fund that:

     (a) The Trust is a statutory  trust and was  created  under the laws of the
State of  Delaware  on August  13,  1993,  and is validly  existing  and in good
standing under the laws of that State. The Trust, of which the Value Equity Fund
is a diversified  separate series of shares,  is duly registered  under the 1940
Act, as an open-end management  investment company, such registration is in full
force and effect as of the date hereof or will be in full force and effect as of
the Closing and all of its shares sold have been sold  pursuant to an  effective
registration  statement  filed  under the 1933 Act,  except for any shares  sold
pursuant  to the  private  offering  exemption  for the  purpose of raising  the
required initial capital.

     (b) The  Trust is  authorized  to issue an  unlimited  number  of shares of
beneficial  interest,   $0.001  par  value,  of  the  Value  Equity  Fund.  Each
outstanding share of the Value Equity Fund is fully paid, non-assessable and has
full  voting  rights  and,  except for any shares  sold  pursuant to the private
offering  exemption  for purposes of raising the required  initial  capital,  is
fully  transferable.  The shares of beneficial interest of the Value Equity Fund
to be issued pursuant to Section 1 hereof will, upon their issuance, be duly and
validly issued and fully paid and  non-assessable,  fully  transferable and have
full voting rights.

     (c) At the  Closing,  each class of shares of  beneficial  interest  of the
Value Equity Fund to be issued  pursuant to this  Agreement will be eligible for
offering to the public in those states of the United States and jurisdictions in
which  the  corresponding  class of  shares  of the  Financial  Sector  Fund are
presently eligible for offering to the public, and there are an unlimited number
of shares  registered under the 1933 Act such that there is a sufficient  number
of such shares to permit the  transfers  contemplated  by this  Agreement  to be
consummated.

     (d) The statement of assets and  liabilities of the Value Equity Fund to be
furnished by the Trust as of the Close of Business on the Valuation Date for the
purpose of determining the number of shares of beneficial  interest of the Value
Equity Fund to be issued  pursuant to Section 1 hereof will  accurately  reflect
the net assets of the Value  Equity Fund and  outstanding  shares of  beneficial
interest,  as of such date, in conformity  with  generally  accepted  accounting
principles applied on a consistent basis.

     (e) At the Closing, the Trust will have good and marketable title to all of
the securities and other assets shown on the statement of assets and liabilities
referred to in subsection (d) above, free and clear of all liens or encumbrances
of any nature whatsoever, except such restrictions as might arise under the 1933
Act with respect to privately placed or otherwise restricted securities that the
Trust  may  have   acquired  in  the  ordinary   course  of  business  and  such
imperfections  of title or  encumbrances  as do not materially  detract from the
value or use of the assets subject thereto, or materially affect title thereto.

     (f) The Trust has the necessary power and authority to conduct its business
and the  business  of the Value  Equity  Fund as such  businesses  are now being
conducted.

     (g) The Trust is not a party to or  obligated  under any  provision  of its
Agreement and  Declaration of Trust,  By-laws,  or any material  contract or any
other  material  commitment  or  obligation,  and is not subject to any order or
decree that would be  violated by its  execution  of or  performance  under this
Agreement.

     (h) The Trust has full power and  authority  to enter into and  perform its
obligations  under this  Agreement.  The execution,  delivery and performance of
this Agreement have been duly and validly authorized,  executed and delivered by
it, and this  Agreement  constitutes  its legal,  valid and binding  obligation,
enforceable against it in accordance with its terms,  subject in all respects to
the  effects  of  bankruptcy,  insolvency,  reorganization,  arrangements  among
creditors, moratorium, fraudulent transfer or conveyance, and other similar laws
of  general  applicability  relating  to or  affecting  creditors  rights and to
general equity principles.

     (i) Neither the Trust nor the Value  Equity Fund is under the  jurisdiction
of a  Court  in a Title  11 or  similar  case  within  the  meaning  of  Section
368(a)(3)(A) of the Code.

     (j) The books and records of the Value  Equity Fund made  available  to the
Financial  Sector Fund  and/or its counsel are true and correct in all  material
respects  and contain no material  omissions  with  respect to the  business and
operations of the Value Equity Fund.

     (k) The Value Equity Fund has since its  inception  satisfied,  will at the
Closing  satisfy,  and  consummation  of the  transactions  contemplated by this
Agreement will not cause it to fail to satisfy, for any period, the requirements
of Subchapter M of the Code relating to qualification as a regulated  investment
company.

     6.   Representations  and  Warranties by the Financial  Sector Fund and the
          Trust

     The Financial Sector Fund and the Trust each represents and warrants to the
other that:

     (a)  There  are  no  legal,   administrative   or  other   proceedings   or
investigations  against it, or, to its  knowledge,  threatened  against it, that
would materially affect its financial condition or its ability to consummate the
transactions  contemplated by this Agreement.  It is not charged with, or to its
knowledge,  threatened  with,  any  violation or  investigation  of any possible
violation of any provisions of any federal,  state or local law or regulation or
administrative ruling relating to any aspect of its business.

     (b)  There are no known  actual or  proposed  deficiency  assessments  with
respect to any taxes payable by it.

     (c) The Financial  Sector Fund and the Trust (on behalf of the Value Equity
Fund) has duly and timely filed all Tax (as defined  below)  returns and reports
(including  information  returns),  which are required to be filed, and all such
returns  and  reports  accurately  state the amount of Tax owed for the  periods
covered by the returns,  or, in the case of information  returns, the amount and
character of income required to be reported by the Financial  Sector Fund or the
Value Equity  Fund.  The  Financial  Sector Fund and the Trust (on behalf of the
Value Equity Fund) has paid or made  provision  and properly  accounted  for all
Taxes (as  defined  below) due or properly  shown to be due on such  returns and
reports.  The amounts set up as provisions for Taxes in the books and records of
the Financial Sector Fund or Value Equity Fund, as appropriate,  as of the Close
of Business on the  Valuation  Date will,  to the extent  required by  generally
accepted  accounting  principles,  be sufficient for the payment of all Taxes of
any kind, whether accrued, due, absolute, contingent or otherwise, which were or
which may be payable by the  Financial  Sector  Fund or Value  Equity  Fund,  as
appropriate, for any periods or fiscal years prior to and including the Close of
Business on the Valuation Date,  including all Taxes imposed before or after the
Close of Business on the Valuation Date that are attributable to any such period
or fiscal year. No return filed by the Financial Sector Fund or by the Trust (on
behalf of the Value  Equity  Fund) is  currently  being  audited by the Internal
Revenue  Service  or by any  state or local  taxing  authority.  As used in this
Agreement, "Tax" or "Taxes" means all federal, state, local and foreign (whether
imposed by a country or political  subdivision or authority  thereunder) income,
gross receipts, excise, sales, use, value added, employment, franchise, profits,
property,  ad valorem or other taxes, stamp taxes and duties, fees,  assessments
or charges,  whether  payable  directly  or by  withholding,  together  with any
interest and any penalties,  additions to tax or additional  amounts  imposed by
any  taxing  authority  (foreign  or  domestic)  with  respect  thereto.  To its
knowledge,  there  are no  levies,  liens  or  encumbrances  relating  to  Taxes
existing,  threatened  or pending  with  respect to the assets of the  Financial
Sector Fund or the Value Equity Fund, as appropriate.

     (d) All information provided to the Financial Sector Fund by the Trust, and
by the Financial  Sector Fund to the Trust,  for  inclusion  in, or  transmittal
with, the Prospectus/Proxy  Statement with respect to this Agreement pursuant to
which approval of the Financial Sector Fund stockholders  will be sought,  shall
not contain an untrue  statement of a material fact, or omit to state a material
fact  required to be stated in order to make the  statements  made  therein,  in
light of the circumstances under which they were made, not misleading.

     (e) Except in the case of the  Financial  Sector  Fund with  respect to the
approval of the  Financial  Sector  Fund's  stockholders  of the  Agreement,  no
consent,  approval,   authorization  or  order  of  any  court  or  governmental
authority, or of any other person or entity, is required for the consummation of
the  transactions  contemplated by this Agreement,  except as may be required by
the 1933 Act, the Securities  Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, or state  securities laws or Delaware  statutory trust or Maryland
corporation laws (including, in the case of each of the foregoing, the rules and
regulations thereunder).

     7.   Covenants of the Financial Sector Fund

     (a) The  Financial  Sector  Fund  covenants  to  operate  its  business  as
presently conducted between the date hereof and the Closing.

     (b) The  Financial  Sector  Fund  undertakes  that it will not  acquire the
shares of beneficial interest of the Value Equity Fund for the purpose of making
distributions thereof other than to the Financial Sector Fund's stockholders.

     (c) The Financial  Sector Fund  covenants  that by the Closing,  all of the
Financial  Sector Fund's  federal and other Tax returns and reports  required by
law to be filed on or before such date shall have been filed and all federal and
other Taxes shown as due on said returns shall have either been paid or adequate
liability reserves shall have been provided for the payment of such Taxes.

     (d) The Financial  Sector Fund will at the Closing provide the Trust with a
copy of the stockholder  ledger accounts,  including,  without  limitation,  the
name, address and taxpayer  identification number of each stockholder of record,
the number of shares of common  stock  held by each  stockholder,  the  dividend
reinvestment   elections   applicable  to  each  stockholder,   and  the  backup
withholding and nonresident alien withholding certifications, notices or records
on file with the Financial Sector Fund with respect to each stockholder, for all
stockholders  of record of the  Financial  Sector Fund shares as of the Close of
Business on the  Valuation  Date,  who are to become  shareholders  of the Value
Equity  Fund as a result of the  transfer  of assets that is the subject of this
Agreement,  certified  by its  transfer  agent  or  its  President  or its  Vice
President to the best of their knowledge and belief.

     (e) The Financial  Sector Fund agrees to mail to each stockholder of record
of the Financial  Sector Fund entitled to vote at the meeting of stockholders at
which action on this Agreement is to be considered, in sufficient time to comply
with  requirements  as to notice  thereof,  a  Prospectus/Proxy  Statement  that
complies in all material  respects  with the  applicable  provisions  of Section
14(a) of the 1934 Act,  and  Section  20(a) of the 1940  Act,  and the rules and
regulations, respectively, thereunder.

     (f) The  Financial  Sector Fund shall supply to the Trust,  at the Closing,
the  statement of the assets and  liabilities  described in Section 4(e) of this
Agreement in conformity with the requirements described in such Section.

     8.   Covenants of the Trust

     (a) The Trust covenants that the shares of beneficial interest of the Value
Equity Fund to be issued and delivered to the Financial  Sector Fund pursuant to
the terms of Section 1 hereof shall have been duly  authorized as of the Closing
and, when so issued and delivered,  shall be registered under the 1933 Act, duly
and validly issued, and fully paid and non-assessable, and no shareholder of the
Value Equity Fund shall have any statutory or  contractual  preemptive  right of
subscription or purchase in respect thereof.

     (b) The Trust covenants to operate the business of the Value Equity Fund as
presently conducted between the date hereof and the Closing.

     (c) The Trust covenants that by the Closing, all of the Value Equity Fund's
federal  and other tax  returns  and  reports  required by law to be filed on or
before  such date shall have been filed and all federal and other taxes shown as
due on said returns shall have either been paid or adequate  liability  reserves
shall have been provided for the payment of such taxes.

     (d) The Trust shall supply to the  Financial  Sector Fund,  at the Closing,
the  statement  of assets and  liabilities  described  in  Section  5(d) of this
Agreement in conformity with the requirements described in such Section.

     (e) The Trust  will file with the United  States  Securities  and  Exchange
Commission (the  "Commission")  a Registration  Statement on Form N-14 under the
1933 Act  ("Registration  Statement"),  relating  to the  shares  of  beneficial
interest of the Value  Equity  Fund  issuable  hereunder,  and will use its best
efforts  to  provide  that such  Registration  Statement  becomes  effective  as
promptly  as  practicable.  At the  time  such  Registration  Statement  becomes
effective,  it (i) will  comply in all  material  respects  with the  applicable
provisions  of the 1933 Act,  the 1934 Act and the 1940  Act,  and the rules and
regulations  promulgated  thereunder;  and  (ii)  will  not  contain  an  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary to make the statements  therein not  misleading.  At
the  time  the  Registration  Statement  becomes  effective,  at the time of the
Financial  Sector  Fund's  stockholders'   meeting,  and  at  the  Closing,  the
prospectus and statement of additional  information included in the Registration
Statement  will not contain an untrue  statement  of a material  fact or omit to
state a material fact necessary to make the statements  therein, in the light of
the circumstances under which they were made, not misleading.

     9.   Conditions  Precedent to be Fulfilled by the Financial Sector Fund and
          the Trust

     The  obligations  of the Financial  Sector Fund and the Trust to effectuate
this Agreement and the Plan of Reorganization  hereunder shall be subject to the
following respective conditions:

     (a) That (i) all the  representations  and  warranties  of the other  party
contained  herein shall be true and correct in all  material  respects as of the
Closing  with the same  effect as though  made as of and at such date;  (ii) the
other party shall have performed all  obligations  required by this Agreement to
be performed  by it at or prior to the Closing;  and (iii) the other party shall
have  delivered  to such party a  certificate  signed by the  President  or Vice
President and by the Secretary or equivalent officer to the foregoing effect.

     (b) That the other party shall have  delivered  to such party a copy of the
resolutions  approving  this  Agreement  adopted by the other  party's  Board of
Directors or Board of Trustees,  as  applicable,  certified by the  Secretary or
equivalent officer.

     (c) That the  Commission  shall  not have  issued an  unfavorable  advisory
report under Section  25(b) of the 1940 Act, nor  instituted  nor  threatened to
institute   any   proceeding   seeking  to  enjoin  the   consummation   of  the
reorganization  contemplated  hereby under Section 25(c) of the 1940 Act, and no
other  legal,   administrative  or  other  proceeding  shall  be  instituted  or
threatened that would materially and adversely affect the financial condition of
either party or would prohibit the transactions contemplated hereby.

     (d) That this Agreement and the Plan of Reorganization and the transactions
contemplated  hereby shall have been approved by the  appropriate  action of the
stockholders of the Financial Sector Fund at an annual or special meeting or any
adjournment thereof.

     (e) That the Financial  Sector Fund shall have declared a  distribution  or
distributions  prior to the  Valuation  Date that,  together  with all  previous
distributions, shall have the effect of distributing to its stockholders (i) all
of its ordinary  income and all of its capital gain net income,  if any, for the
period  from the close of its last  fiscal  year to the Close of Business on the
Valuation Date, and (ii) any undistributed  ordinary income and capital gain net
income from any prior period. Capital gain net income has the meaning given such
term by Section 1222(9) of the Code.

     (f) That prior to or at the  Closing,  the  Financial  Sector  Fund and the
Trust  shall  receive an opinion  from  Stradley,  Ronon,  Stevens & Young,  LLP
("Stradley  Ronon") to the effect that,  provided the  acquisition  contemplated
hereby is carried out in accordance with this  Agreement,  the laws of the State
of  Delaware  and the  State  of  Maryland,  and in  accordance  with  customary
representations  provided  by  the  Financial  Sector  Fund  and  the  Trust  in
certificates delivered to Stradley Ronon:

          (1) The acquisition by the Value Equity Fund of  substantially  all of
     the assets and the assumption of the  liabilities  of the Financial  Sector
     Fund in  exchange  solely  for the Value  Equity  Fund  shares to be issued
     pursuant to Section 1 hereof, followed by the distribution by the Financial
     Sector Fund to its stockholders of the Value Equity Fund shares in complete
     liquidation of the Financial  Sector Fund, will qualify as a reorganization
     within the meaning of Section  368(a)(1) of the Code,  and the Value Equity
     Fund  and  the  Financial  Sector  Fund  will  each  be  a  "party  to  the
     reorganization" within the meaning of Section 368(b) of the Code;

          (2) No gain or loss will be recognized  by the  Financial  Sector Fund
     upon the transfer of substantially  all of its assets to and the assumption
     of the  liabilities  by the Value  Equity Fund in  exchange  solely for the
     voting  shares of the Value  Equity Fund (to be issued in  accordance  with
     Section 1 hereof) under Section 361(a) and Section 357(a) of the Code;

          (3) No gain or loss will be  recognized  by the Value Equity Fund upon
     the receipt by it of substantially  all of the assets and the assumption of
     the  liabilities  of the Financial  Sector Fund in exchange  solely for the
     voting  shares of the Value  Equity Fund (to be issued in  accordance  with
     Section 1 hereof) under Section 1032(a) of the Code;

          (4) No gain or loss will be recognized  by the  Financial  Sector Fund
     upon the  distribution  of the Value  Equity Fund  shares to the  Financial
     Sector Fund stockholders in accordance with Section 1 hereof in liquidation
     of the Financial Sector Fund under Section 361(c)(1) of the Code;

          (5) The basis of the assets of the  Financial  Sector Fund received by
     the Value  Equity  Fund will be the same as the basis of such assets to the
     Financial  Sector Fund  immediately  prior to the  exchange  under  Section
     362(b) of the Code;

          (6) The  holding  period of the assets of the  Financial  Sector  Fund
     received by the Value Equity Fund will include the period during which such
     assets were held by the Financial  Sector Fund under Section 1223(2) of the
     Code;

          (7) No gain or loss  will be  recognized  by the  stockholders  of the
     Financial  Sector Fund upon the exchange of their  shares in the  Financial
     Sector Fund for the voting  shares  (including  fractional  shares to which
     they may be entitled) of the Value Equity Fund (to be issued in  accordance
     with Section 1 hereof) under Section 354(a) of the Code;

          (8)  The  basis  of the  Value  Equity  Fund  shares  received  by the
     Financial  Sector Fund  stockholders  in  accordance  with Section 1 hereof
     (including  fractional  shares to which they may be  entitled)  will be the
     same as the basis of the  shares of the  Financial  Sector  Fund  exchanged
     therefor under Section 358(a)(1) of the Code;

          (9) The holding period of the Value Equity Fund shares received by the
     Financial  Sector Fund's  stockholders  in accordance with Section 1 hereof
     (including  fractional  shares to which they may be entitled)  will include
     the holding  period of the Financial  Sector Fund's shares  surrendered  in
     exchange therefor, provided that the Financial Sector Fund shares were held
     as a capital asset on the date of the Reorganization  under Section 1223(l)
     of the Code; and

          (10) The Value Equity Fund will succeed to and take into account as of
     the date of the  transfer  (as  defined  in  Section  1.381(b)-1(b)  of the
     regulations   issued  by  the  United  States   Treasury   (the   "Treasury
     Regulations"))  the items of the Financial Sector Fund described in Section
     381(c) of the Code, subject to the conditions and limitations  specified in
     Sections 381, 382, 383 and 384 of the Code, and the Treasury Regulations.

     (g) That the Trust  shall have  received  an opinion in form and  substance
reasonably  satisfactory  to it from Dechert,  counsel to the  Financial  Sector
Fund, to the effect that,  subject in all respects to the effects of bankruptcy,
insolvency,  arrangement  among creditors,  moratorium,  fraudulent  transfer or
conveyance,  and other  similar  laws of general  applicability  relating  to or
affecting creditors' rights and to general equity principles:

          (1) The Financial  Sector Fund was created as a corporation  under the
     laws of the State of Maryland on February 13, 1986, and is validly existing
     and in good standing under the laws of the State of Maryland;

          (2) The  Financial  Sector Fund is  authorized  to issue three hundred
     million shares of common stock, $0.001 par value. Assuming that the initial
     shares  of  common  stock of the  Financial  Sector  Fund  were  issued  in
     accordance   with  the  1940  Act,  and  the  Restatement  of  Articles  of
     Incorporation  and Restated  By-Laws of the Financial Sector Fund, and that
     all other such  outstanding  shares of the Financial Sector Fund were sold,
     issued and paid for in accordance  with the terms of the  Financial  Sector
     Fund prospectus in effect at the time of such sales,  each such outstanding
     share is duly and validly issued,  fully paid,  non-assessable,  and except
     for any shares sold pursuant to the private offering exemption for purposes
     of raising the required initial capital, is fully transferable and has full
     voting rights;

          (3) The  Financial  Sector Fund is an open-end  management  investment
     company registered as such under the 1940 Act;

          (4) Except as  disclosed  in the  Financial  Sector  Fund's  currently
          effective prospectus, such counsel does not know of any material suit,
     action, or legal or administrative proceeding pending or threatened against
     the Fund, the unfavorable  outcome of which would  materially and adversely
     affect the Fund;

          (5) To such counsel's knowledge, no consent,  approval,  authorization
     or order of any court, governmental authority or agency is required for the
     consummation by the Financial Sector Fund of the transactions  contemplated
     by this  Agreement,  except such as have been obtained  under the 1933 Act,
     the 1934 Act, the 1940 Act, and Maryland  laws  (including,  in the case of
     each of the foregoing,  the rules and  regulations  thereunder) and such as
     may be required under state securities laws;

          (6) Neither the execution,  delivery nor performance of this Agreement
     by the Financial  Sector Fund violates any provision of its  Restatement of
     Articles of Incorporation,  its Restated By-Laws,  or the provisions of any
     agreement or other instrument, known to such counsel to which the Financial
     Sector Fund is a party or by which the  Financial  Sector Fund is otherwise
     bound; and

          (7) This Agreement has been duly and validly authorized,  executed and
     delivered by the Financial Sector Fund and represents the legal,  valid and
     binding obligation of the Financial Sector Fund and is enforceable  against
     the Financial Sector Fund in accordance with its terms.

     In giving  the  opinions  set forth  above,  Dechert  may state  that it is
relying on certificates of the officers of the Financial Sector Fund with regard
to  matters  of fact  and  certain  certifications  and  written  statements  of
governmental officials with respect to the good standing of the Financial Sector
Fund.

     (h) That the  Financial  Sector Fund shall have received an opinion in form
and substance reasonably  satisfactory to it from Stradley Ronon, counsel to the
Trust, to the effect that, subject in all respects to the effects of bankruptcy,
insolvency,  arrangement  among creditors,  moratorium,  fraudulent  transfer or
conveyance,  and other  similar  laws of general  applicability  relating  to or
affecting creditors' rights and to general equity principles:

          (1) The Trust is a statutory  trust and was created  under the laws of
     the State of Delaware on August 13,  1993,  and is validly  existing and in
     good standing under the laws of the State of Delaware;

          (2) The Trust is authorized to issue an unlimited  number of shares of
     beneficial interest,  $0.001 par value. Assuming that the initial shares of
     beneficial interest of the Value Equity Fund were issued in accordance with
     the  1940 Act and the  Trust's  Agreement  and  Declaration  of  Trust  and
     By-laws,  and that all other such  outstanding  shares of the Value  Equity
     Fund were  sold,  issued and paid for in  accordance  with the terms of the
     Value Equity Fund's  prospectus  in effect at the time of such sales,  each
     such   outstanding   share  is  duly  and  validly   issued,   fully  paid,
     non-assessable, freely transferable and has full voting rights;

          (3) The Trust is an open-end management  investment company registered
     as such under the 1940 Act;

          (4) Except as disclosed in the Value Equity Fund's currently effective
     prospectus,  such counsel does not know of any material  suit,  action,  or
     legal or administrative proceeding pending or threatened against the Trust,
     the unfavorable  outcome of which would materially and adversely affect the
     Trust or the Value Equity Fund;

          (5) The shares of  beneficial  interest of the Value Equity Fund to be
     issued  pursuant to the terms of Section 1 hereof have been duly authorized
     and,  when issued and  delivered as provided in this  Agreement,  will have
     been duly and validly issued and fully paid and will be  non-assessable  by
     the Trust or the Value Equity Fund,  and to such  counsel's  knowledge,  no
     shareholder has any preemptive right to subscription or purchase in respect
     thereof;

          (6) To such counsel's knowledge, no consent,  approval,  authorization
     or order of any court, governmental authority or agency is required for the
     consummation  by  the  Trust  of  the  transactions  contemplated  by  this
     Agreement,  except such as have been obtained  under the 1933 Act, the 1934
     Act, the 1940 Act, and Delaware laws (including, in the case of each of the
     foregoing, the rules and regulations thereunder and such as may be required
     under state securities laws);

          (7) Neither the execution,  delivery nor performance of this Agreement
     by the Trust  violates any provision of its Agreement  and  Declaration  of
     Trust, its By-laws, or the provisions of any agreement or other instrument,
     known to such  counsel  to which the Trust is a party or by which the Trust
     is otherwise bound; and

          (8) This Agreement has been duly and validly authorized,  executed and
     delivered  by the  Trust  and  represents  the  legal,  valid  and  binding
     obligation of the Trust and is enforceable  against the Trust in accordance
     with its terms.

     In giving the opinions set forth above, Stradley Ronon may state that it is
relying on  certificates  of the officers of the Trust with regard to matters of
fact and certain certifications and written statements of governmental officials
with respect to the good standing of the Trust.

     (i) That the Trust's  Registration  Statement with respect to the shares of
beneficial  interest of the Value Equity Fund to be  delivered to the  Financial
Sector Fund's stockholders in accordance with Section 1 hereof shall have become
effective,  and no stop order  suspending the  effectiveness of the Registration
Statement or any amendment or supplement  thereto,  shall have been issued prior
to the Closing or shall be in effect at the Closing,  and no proceedings for the
issuance of such an order shall be pending or threatened on that date.

     (j) That the shares of  beneficial  interest of the Value Equity Fund to be
delivered in accordance  with Section 1 hereof shall be eligible for sale by the
Trust with each state  commission  or agency  with  which  such  eligibility  is
required  in order  to  permit  the  shares  lawfully  to be  delivered  to each
Financial Sector Fund stockholder.

     (k) That at the Closing,  the Financial  Sector Fund transfers to the Value
Equity Fund  aggregate  Net Assets of the  Financial  Sector Fund  comprising at
least 90% in fair  market  value of the total net assets and 70% in fair  market
value of the total gross assets  recorded on the books of the  Financial  Sector
Fund at the Close of Business on the Valuation Date.

     10.  Brokerage Fees and Expenses; Other Agreements

     (a) The Financial Sector Fund and the Trust each represents and warrants to
the other that there are no broker or finders'  fees payable by it in connection
with the transaction provided for herein.

     (b) The expenses of entering  into and carrying out the  provisions of this
Agreement,  whether  or not  consummated,  shall be borne  by UBS  Global  Asset
Management (US) Inc.

     (c) Any other provision of this Agreement to the contrary  notwithstanding,
any  liability of the Trust under this  Agreement  with respect to any series of
the Trust,  or in  connection  with the  transactions  contemplated  herein with
respect to any series of the Trust,  shall be discharged  only out of the assets
of that  series of the Trust,  and no other  series of the Trust shall be liable
with respect thereto.

     11.  Indemnification by the Financial Sector Fund

     The Financial Sector Fund hereby agrees to indemnify and hold the Trust and
the Value Equity Fund and each of them  harmless  from all loss,  liability  and
expense  (including  reasonable counsel fees and expenses in connection with the
contest  of any  claim)  which the Trust or the Value  Equity  Fund may incur or
sustain by reason of the fact that (i) the Trust or the Value  Equity Fund shall
be  required  to pay  any  obligation  of the  Financial  Sector  Fund,  whether
consisting  of Tax  deficiencies  or  otherwise,  based  upon a claim or  claims
against the  Financial  Sector Fund that were omitted or not fully  reflected in
the financial  statements  to be delivered to the Trust in  connection  with the
Closing;  (ii) any  representations  or warranties made by the Financial  Sector
Fund in  Sections 4 or 6 hereof  should  prove to be false or  erroneous  in any
material respect;  (iii) any covenant has been breached in any material respect;
or (iv) any  claim is made  alleging  that  (a) the  Prospectus/Proxy  Statement
delivered to the  stockholders  of the Financial  Sector Fund in connection with
this transaction,  or (b) the Registration  Statement on Form N-14 of which such
Prospectus/Proxy  Statement  forms a part,  included  an untrue  statement  of a
material  fact or  omitted  to  state a  material  fact  necessary  to make  the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading,  except  insofar as such claim is based on written  information
furnished to the Financial Sector Fund by the Trust,  its investment  adviser or
distributor.

     12.  Indemnification by the Trust and the Value Equity Fund

     The Trust and the Value Equity Fund hereby agree to indemnify  and hold the
Directors of the Financial  Sector Fund  harmless  from all loss,  liability and
expenses (including  reasonable counsel fees and expenses in connection with the
contest of any claim)  which the  Financial  Sector Fund may incur or sustain by
reason of the fact that (i) any  representations or warranties made by the Trust
in  Sections 5 or 6 hereof  should  prove  false or  erroneous  in any  material
respect;  (ii) any covenant  has been  breached by the Trust or the Value Equity
Fund in any material  respect;  or (iii) any claim is made alleging that (a) the
Prospectus/Proxy Statement delivered to the stockholders of the Financial Sector
Fund in connection with this transaction,  or (b) the Registration  Statement on
Form N-14 of which such  Prospectus/Proxy  Statement  forms a part,  included an
untrue  statement  of a  material  fact or  omitted  to  state a  material  fact
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not  misleading,  except insofar as such claim is based on
written  information  furnished to the Trust by the Financial  Sector Fund,  its
investment adviser or distributor.

     13.  Notice of Claim of Indemnification

     In the event that any claim is made  against the Trust or the Value  Equity
Fund in  respect  of which  indemnity  may be  sought  by the Trust or the Value
Equity Fund from the Financial  Sector Fund or the stockholders of the Financial
Sector Fund under Section 11 of this Agreement,  or, in the event that any claim
is made against the Financial  Sector Fund in respect of which  indemnity may be
sought by the  Financial  Sector  Fund from the Trust or the Value  Equity  Fund
under  Section 12 of this  Agreement,  the party  seeking  indemnification  (the
"Indemnified  Party") shall,  with  reasonable  promptness and before payment of
such  claim,  give  written  notice  of  such  claim  to the  other  party  (the
"Indemnifying  Party").  If no objection as to the validity of the claim is made
in writing to the Indemnified Party by the Indemnifying Party within thirty (30)
days after giving notice  hereunder,  then, the  Indemnified  Party may pay such
claim  and  shall  be  entitled  to  reimbursement  therefor,  pursuant  to this
Agreement.  If, prior to the termination of such thirty-day period, objection in
writing as to the validity of such claim is made to the Indemnified  Party,  the
Indemnified Party shall withhold payment thereof until the validity of the claim
is established (i) to the satisfaction of the  Indemnifying  Party; or (ii) by a
final  determination  of  a  court  of  competent  jurisdiction,  whereupon  the
Indemnified  Party may pay such  claim and shall be  entitled  to  reimbursement
thereof,  pursuant to this  Agreement;  or (iii) with respect to any Tax claims,
within seven (7) calendar days following the earlier of (A) an agreement between
the Financial Sector Fund and the Trust that an indemnity amount is payable, (B)
an  assessment  of a Tax by a  taxing  authority,  or (C) a  "determination"  as
defined in Section  1313(a) of the Code.  For  purposes of this  Section 13, the
term "assessment"  shall have the same meaning as used in Chapter 63 of the Code
and Treasury Regulations thereunder,  or any comparable provision under the laws
of the  appropriate  taxing  authority.  In the  event of any  objection  by the
Indemnifying Party, the Indemnifying Party shall promptly investigate the claim,
and if it is not satisfied with the validity  thereof,  the  Indemnifying  Party
shall conduct the defense against such claim. All costs and expenses incurred by
the Indemnifying Party in connection with such investigation and defense of such
claim shall be borne by it. These indemnification provisions are in addition to,
and not in limitation of, any other rights the parties may have under applicable
law.

     14.  Termination; Waiver; Order

     (a) Anything  contained in this Agreement to the contrary  notwithstanding,
this Agreement may be terminated and the Plan of Reorganization abandoned at any
time  (whether  before or after  approval  thereof  by the  stockholders  of the
Financial Sector Fund) prior to the Closing as follows:

               (1) by mutual consent of the Financial  Sector Fund and the Trust
          in writing;

               (2) by the Trust if any  condition  precedent to its  obligations
          set forth in Section 9 has not been  fulfilled  or waived by the Trust
          in writing; or

               (3) by the Financial  Sector Fund if any  condition  precedent to
          its  obligations  set  forth in  Section 9 has not been  fulfilled  or
          waived by the Financial Sector Fund in writing.

     (b) If the  transactions  contemplated  by this  Agreement  have  not  been
consummated  by  ____________  __,  2004,  this  Agreement  shall  automatically
terminate on that date,  unless a later date is agreed to in writing by both the
Financial Sector Fund and the Trust.

     (c)  In  the  event  of  termination  of  this  Agreement  pursuant  to the
provisions  hereof,  the same shall become void and have no further effect,  and
there shall not be any liability on the part of either the Financial Sector Fund
or the Trust or persons who are their  directors or trustees  (as  appropriate),
officers,  agents or shareholders or stockholders (as appropriate) in respect of
this Agreement.

     (d) At any time prior to the  Closing,  any of the terms or  conditions  of
this  Agreement may be waived by either the Financial  Sector Fund or the Trust,
respectively (whichever is entitled to the benefit thereof).

     (e) The respective  representations,  warranties and covenants contained in
Sections 4-8 hereof shall expire with, and be terminated by, the consummation of
the Plan of Reorganization.

     (f) If any order or orders of the Commission with respect to this Agreement
shall be issued  prior to the Closing and shall  impose any terms or  conditions
that are determined by action of the Board of Directors of the Financial  Sector
Fund or the Board of  Trustees  of the Trust to be  acceptable,  such  terms and
conditions shall be binding as if a part of this Agreement  without further vote
or  approval of the  stockholders  of the  Financial  Sector  Fund,  unless such
further vote is required by applicable law, or by mutual consent of the parties.

     15.  Final Tax Returns and Forms 1099 of the Financial Sector Fund

     (a) After the Closing,  the Financial  Sector Fund shall or shall cause its
agents to prepare any federal,  state or local Tax returns,  including any Forms
1099,  required to be filed with respect to the  Financial  Sector  Fund's final
taxable year ending with its complete  liquidation  and for any prior periods or
taxable years and shall further cause such Tax returns and Forms 1099 to be duly
filed with the appropriate taxing authorities.

     (b)  Notwithstanding  the  provisions  of  Section 1 hereof,  any  expenses
incurred  by the  Financial  Sector  Fund  (other  than for payment of Taxes) in
connection  with the  preparation  and filing of said Tax returns and Forms 1099
after the  Closing,  shall be borne by the  Financial  Sector Fund to the extent
such expenses have been or should have been accrued by the Financial Sector Fund
in the ordinary course without regard to the Plan of Reorganization contemplated
by this Agreement.

     16.  Cooperation and Exchange of Information

     The Trust and the  Financial  Sector Fund will provide each other and their
respective  representatives  with such  cooperation and information as either of
them  reasonably  may  request of the other in filing any Tax  returns,  amended
return or claim for refund,  determining  a liability  for Taxes or a right to a
refund of Taxes or  participating in or conducting any audit or other proceeding
in respect of Taxes.  Each party or their  respective  agents  will retain for a
period of six (6) years  following  the Closing all returns,  schedules and work
papers and all material  records or other  documents  relating to Tax matters of
the  Financial  Sector Fund and Value  Equity Fund for its taxable  period first
ending after the Closing and for all prior taxable periods.

     17.  Entire Agreement and Amendments

     This Agreement  embodies the entire Agreement between the parties and there
are no  agreements,  understandings,  restrictions,  or  warranties  between the
parties other than those set forth herein or herein provided for. This Agreement
may be amended  only by mutual  consent of the parties in writing.  Neither this
Agreement  nor any  interest  herein may be assigned  without the prior  written
consent of the other party.

     18.  Counterparts

     This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an  original,  but all such  counterparts  together  shall
constitute but one instrument.

     19.  Notices

     Any notice,  report,  or demand  required or permitted by any  provision of
this  Agreement  shall be in  writing  and shall be deemed to have been given if
delivered or mailed,  first class postage prepaid,  addressed to the Trust at 51
West 52nd Street, New York, New York 10019-6114, Attention: Secretary, or to the
Financial  Sector Fund at 51 West 52nd Street,  New York,  New York  10019-6114,
Attention: Secretary.

     20.  Governing Law

     This Agreement  shall be governed by and carried out in accordance with the
laws of the State of Delaware.

     21.  Effect of Facsimile Signature

     A facsimile  signature of an  authorized  officer of a party hereto on this
Agreement and/or any transfer document shall have the same effect as if executed
in the original by such officer.

     IN  WITNESS  WHEREOF,  the Trust and the  Financial  Sector  Fund have each
caused this Agreement and Plan of Reorganization to be executed on its behalf by
its duly authorized officers, all as of the day and year first-above written.

                                               THE UBS FUNDS, ON BEHALF
                                               OF THE UBS U.S. VALUE EQUITY FUND
Attest:

By:    _____________________________________   By:    __________________________

Title:   ___________________________________   Title:   ________________________





                                                UBS FINANCIAL SECTOR FUND INC.
Attest:

By:    _____________________________________    By:    _________________________

Title:   ___________________________________    Title:   _______________________






                                    EXHIBIT B

[The  Prospectus of the Value Equity Fund,  dated September 30, 2002 (as revised
July 2,  2003),  as  previously  filed  via  EDGAR,  is  incorporated  herein by
reference and will be included with the mailing to shareholders.]





                                    EXHIBIT C

[The Annual Report to  Shareholders of the Value Equity Fund for the fiscal year
ended June 30, 2002, as previously  filed via EDGAR, is  incorporated  herein by
reference.  The 2003  Annual  Report  will be  incorporated  by  reference  in a
post-effective amendment and included with the mailing to shareholders.]





VOTE THIS PROXY CARD TODAY!

                            Your Proxy Vote is important!

                            And now you can Vote your Proxy over the
                            TELEPHONE or the INTERNET.

                            It saves Time!  Telephone and Internet voting
                            are instantaneous-24 hours a day.

                            It's Easy!  Just follow these simple steps:

                            1.   Read your proxy statement and have it at
                                 hand.

                            2.   Call toll-free [____________] or go to
                                 website:  [____________].

                            3.   Enter your 14 digit Control Number from
                                 your Proxy Card.

                            4.   Follow the recorded or on-screen
                                 directions.

                            5.   Do not mail your Proxy Card when you vote
                                    ---
                                 by Telephone or over the Internet.





                  Please detach at perforation before mailing.



PROXY   SPECIAL MEETING OF SHAREHOLDERS OF UBS FINANCIAL SECTOR FUND INC.  PROXY
                             [____________ __, 2003]

The undersigned  hereby revokes all previous proxies for his shares and appoints
as proxies  Todd Lebo and Evelyn  DeSimone,  and each of them (with the power of
substitution)  to vote for the  undersigned  all  shares of common  stock of the
undersigned  in the UBS  Financial  Sector Fund Inc.  at the Special  Meeting of
Shareholders  to be held at [_____] a.m.  Eastern time, on [_________ __, 2003],
at 51 West 52nd  Street,  16th Floor,  New York,  New York  10019-6114,  and any
adjournment thereof  ("Meeting"),  with all the power the undersigned would have
if  personally  present.  The shares  represented  by this card will be voted as
instructed.

UNLESS INDICATED TO THE CONTRARY,  THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY
TO VOTE "FOR" THE PROPOSAL  RELATING TO THE  REORGANIZATION OF THE UBS FINANCIAL
SECTOR FUND INC. INTO THE UBS U.S. VALUE EQUITY FUND, A SERIES OF THE UBS FUNDS.
IF ANY OTHER MATTERS  PROPERLY  COME BEFORE THE SPECIAL  MEETING ABOUT WHICH THE
PROXIES WERE NOT AWARE PRIOR TO THE TIME OF SOLICITATION, AUTHORIZATION IS GIVEN
TO THE PROXIES TO VOTE IN THEIR DISCRETION.

           VOTE VIA THE INTERNET:  [____________________]
           VOTE VIA THE TELEPHONE:  [__________________]
- --------------------------------------------------------------------------------
           CONTROL NUMBER:
- --------------------------------------------------------------------------------

           NOTE:  If shares are held by an  individual,  sign your name  exactly
           as it  appears  on this  card.  If shares  are held  jointly,  either
           party may  sign,  but the name of the party  signing  should  conform
           exactly  to the name  shown on this  card.  If  shares  are held by a
           corporation,  partnership  or  similar  account,  the  name  and  the
           capacity of the individual  signing should be indicated  unless it is
           reflected  in the form of  registration.  For  example:  "ABC  Corp.,
           John Doe, Treasurer."


           Signature


           Signature (if held jointly)


           Date                                            EAW_12958





                      EACH SHAREHOLDER'S VOTE IS IMPORTANT
                        PLEASE SIGN, DATE AND RETURN YOUR
                                   PROXY TODAY







                  Please detach at perforation before mailing.



THIS PROXY IS BEING  SOLICITED  FOR THE BOARD OF DIRECTORS OF THE UBS  FINANCIAL
SECTOR FUND INC., AND RELATES TO THE PROPOSAL INDICATED BELOW.

When  properly  signed,  the  proxy  will be voted as  instructed  below.  If no
instruction is given for a proposal, a vote will be made "For" that proposal.

TO VOTE, MARK THE BLOCKS BELOW IN BLUE OR BLACK INK.  Example:

The Board of Directors recommends a vote FOR the following Proposal.


1.   To approve an Agreement and Plan of Reorganization between UBS   FOR   AGAINST  ABSTAIN
     Financial Sector Fund Inc. (the "Financial Sector Fund") and
     The UBS Funds, on behalf of its series, UBS U.S. Value Equity    [ ]    [ ]       [ ]
     Fund (the "Value Equity Fund"), that provides for the
     acquisition of substantially all of the assets, subject to the
     liabilities, of the Financial Sector Fund in exchange for
     shares of the Value Equity Fund, the distribution of such
     shares to the shareholders of the Financial Sector Fund, and
     the complete liquidation and dissolution of the Financial
     Sector Fund.



 Please date and sign the reverse side of this proxy and return it promptly in
   the enclosed envelope. This proxy will not be voted unless it is dated and
                         signed exactly as instructed.




Part B
- ------
                       STATEMENT OF ADDITIONAL INFORMATION
                                       FOR
                                  THE UBS FUNDS
                          Dated [____________ __, 2003]


Acquisition of the assets of the
UBS FINANCIAL SECTOR FUND INC.


By and in exchange for shares of the
UBS U.S. VALUE EQUITY FUND
(a series of The UBS Funds)


     This Statement of Additional  Information  ("SAI") relates  specifically to
the proposed  acquisition  (the  "Merger") of  substantially  all of the assets,
subject  to  the  liabilities,  of the  UBS  Financial  Sector  Fund  Inc.  (the
"Financial  Sector  Fund"),  in exchange for shares of the UBS U.S. Value Equity
Fund (the "Value Equity Fund"), a series of The UBS Funds (the "Trust").

     This SAI also includes the following  documents,  which are attached to and
legally considered to be a part of this SAI:

1.   Pro Forma Financial  Statements  reflecting the financial  situation of the
     Value Equity Fund  following the Merger as if the Merger had taken place on
     June 30, 2003.

2.   Statement  of  Additional  Information  of the  Value  Equity  Fund,  dated
     September 30, 2002 (as revised as of December 6, 2002).

3.   [Annual  Report of the Value Equity Fund for the fiscal year ended June 30,
     2002.

4.   Semi-Annual  Report for the period ended December 31,  2002--to be replaced
     in post-effective amendment with 2003 Annual Report.]

5.   Annual Report of the Financial  Sector Fund for the fiscal year ended March
     31, 2003.

     This SAI is not a Prospectus;  you should read this SAI in conjunction with
the Prospectus/Proxy  Statement,  dated [____________ __, 2003], relating to the
Merger.  You can  request a copy of the  Prospectus/Proxy  Statement  by calling
1-800-647-1568  or by writing to the Value  Equity Fund at 51 West 52nd  Street,
New York, New York 10019-6114.





                           INSERT PRO FORMA FINANCIALS

Pro Forma Portfolio of Investments (unaudited)
June 30, 2003
                                                    Shares                                      Market Value
                                 ----------------------------------------- -------------------------------------------------------

                                   UBS U.S.                                  UBS U.S.
                                    Value      UBS Financial    Pro Forma     Value     UBS Financial                Pro Forma
                                 Equity Fund    Sector Fund     Combined   Equity Fund   Sector Fund  Adjustments    Combined

U.S. Equities--100.11%
Aerospace & Military--0.12%
United Technologies Corp.            2,500                       2,500      $ 177,075                                177,075

Autos/Durables--0.05%
Johnson Controls, Inc.                 900                         900         77,040                                 77,040

Banks--38.19%
AmSouth Bancorp                                   30,100        30,100                       657,384                 657,384
Astoria Financial Corp.                            3,600         3,600                       100,548                 100,548
BancorpSouth, Inc.                                 8,100         8,100                       168,885                 168,885
Bank of America Corp.                  900       106,100       107,000         71,127      8,385,083               8,456,210
Bank of New York Co., Inc.                        58,500        58,500                     1,681,875               1,681,875
Bank One Corp.                                    79,200        79,200                     2,944,656               2,944,656
BB&T Corp.                                        39,400        39,400                     1,351,420               1,351,420
Charter One Financial, Inc.                       20,784        20,784                       648,045                 648,045
City National Corp.                                3,200         3,200                       142,592                 142,592
Colonial BancGroup, Inc.                          11,100        11,100                       153,957                 153,957
Comerica, Inc.                                    16,500        16,500                       767,250                 767,250
Commerce Bancorp, Inc.                             2,100         2,100                        77,910                  77,910
Commerce Bancshares, Inc.                          6,489         6,489                       252,747                 252,747
Compass Bancshares, Inc.                          12,700        12,700                       443,611                 443,611
Cullen/Frost Bankers, Inc.                         3,200         3,200                       102,720                 102,720
Fifth Third Bancorp                               45,952        45,952                     2,634,887               2,634,887
First Midwest Bancorp, Inc.                        2,800         2,800                        80,668                  80,668
First Tennessee National Corp.                    11,400        11,400                       500,574                 500,574
First Virginia Banks, Inc.                         4,050         4,050                       174,636                 174,636
FirstMerit Corp.                                   9,500         9,500                       217,170                 217,170
FleetBoston Financial Corp.          4,485        78,516        83,001        133,249      2,332,710               2,465,959
Golden West Financial Corp.                       11,500        11,500                       920,115                 920,115
GreenPoint Financial Corp.           5,100         8,500        13,600        259,794        432,990                 692,784
Hibernia Corp., Class A                           11,600        11,600                       210,656                 210,656
Huntington Bancshares, Inc.                       15,900        15,900                       310,368                 310,368
IndyMac Bancorp, Inc.                              3,700         3,700                        94,054                  94,054
KeyCorp                                           34,600        34,600                       874,342                 874,342
M&T Bank Corp.                                     4,300         4,300                       362,146                 362,146
Marshall & Ilsley Corp.                           16,000        16,000                       489,280                 489,280
Mellon Financial Corp.               3,600        37,200        40,800         99,900      1,032,300               1,132,200
National City Corp.                               45,800        45,800                     1,498,118               1,498,118
National Commerce Financial Corp.                 12,500        12,500                       277,375                 277,375
North Fork Bancorp, Inc.                           2,000         2,000                        68,120                  68,120
Northern Trust Corp.                              18,600        18,600                       777,294                 777,294
Old National Bancorp.                              5,003         5,003                       115,069                 115,069
PNC Financial Services Group         3,000        23,600        26,600        146,430      1,151,916               1,298,346
Popular, Inc.                                      6,400         6,400                       246,976                 246,976
Regions Financial Corp.                           18,500        18,500                       624,930                 624,930
Roslyn Bancorp, Inc.                               5,900         5,900                       126,791                 126,791
SouthTrust Corp.                                  24,500        24,500                       666,400                 666,400
Sovereign Bancorp, Inc.                            8,700         8,700                       136,155                 136,155
SunTrust Banks, Inc.                              19,300        19,300                     1,145,262               1,145,262
Synovus Financial Corp.                           33,500        33,500                       720,250                 720,250
TCF Financial Corp.                                5,400         5,400                       215,136                 215,136
U.S. Bancorp                                     171,041       171,041                     4,190,505               4,190,505
Union Planters Corp.                              18,200        18,200                       564,746                 564,746
UnionBanCal Corp.                                  4,100         4,100                       169,617                 169,617
Valley National Bancorp                            3,045         3,045                        80,236                  80,236
Wachovia Corp.                                    92,700        92,700                     3,704,292               3,704,292
Washington Federal, Inc.                           7,018         7,018                       162,326                 162,326
Washington Mutual Corp.                           86,225        86,225                     3,561,093               3,561,093
Webster Financial Corp.                            4,400         4,400                       166,320                 166,320
Wells Fargo & Co.                    6,250       141,800       148,050        315,000      7,146,720               7,461,720
Whitney Holding Corp.                              3,100         3,100                        99,107                  99,107
Zions Bancorp                                     11,100        11,100                       561,771                 561,771
                                    --------------------------------------  -------------------------     ----------------------
                                    23,335     1,469,023     1,492,358      1,025,500     56,722,104              57,747,604
                                    --------------------------------------  -------------------------     ----------------------
Capital Goods--0.19%
Illinois Tool Works, Inc.            2,850                       2,850        187,673                                187,673
Pentair, Inc.                        2,500                       2,500         97,650                                 97,650
                                    --------------------------------------  -------------------------     ----------------------
                                     5,350           -           5,350        285,323            -                   285,323
                                    --------------------------------------  -------------------------     ----------------------
Chemicals--0.11%
Dow Chemical Co. (The)               5,500                       5,500        170,280                                170,280

Commercial Services & Supplies
- --3.87%
Automatic Data Processing, Inc.                   41,200        41,200                     1,395,032               1,395,032
BISYS Group, Inc.*                                 4,500         4,500                        82,665                  82,665
Certegy, Inc.*                                     3,550         3,550                        98,513                  98,513
Concord EFS, Inc.*                                11,500        11,500                       169,280                 169,280
Deluxe Corp.                                       7,000         7,000                       313,600                 313,600
DST Systems, Inc.*                                 4,700         4,700                       178,600                 178,600
Equifax, Inc.                                     10,400        10,400                       270,400                 270,400
Fair, Issac & Co., Inc.                            2,300         2,300                       118,335                 118,335
First Data Corp.                     3,000        41,300        44,300        124,320      1,711,472               1,835,792
Fiserv, Inc.*                                      3,300         3,300                       117,513                 117,513
H&R Block, Inc.                                    8,000         8,000                       346,000                 346,000
Paychex, Inc.                                     28,500        28,500                       835,335                 835,335
Total System Services, Inc.                        4,100         4,100                        91,430                  91,430
                                    --------------------------------------  -------------------------     ----------------------
                                     3,000       170,350       173,350        124,320      5,728,175               5,852,495
                                    --------------------------------------  -------------------------     ----------------------
Computer Systems--0.15%
Hewlett-Packard Co.                  7,100                       7,100        151,230                                151,230
Jack Henry & Associates, Inc.                      4,600         4,600                        81,834                  81,834
                                    --------------------------------------  -------------------------     ----------------------
                                     7,100         4,600        11,700        151,230         81,834                 233,064
                                    --------------------------------------  -------------------------     ----------------------
Construction--0.08%
Martin Marietta Materials, Inc.      3,800                       3,800        127,718                                127,718

Consumer--0.06%
Kimberly-Clark Corp.                 1,700                       1,700         88,638                                 88,638

Diversified Financials--32.98%
Allied Capital Corp.                               3,900         3,900                        90,090                  90,090
American Express Co.                              90,000        90,000                     3,762,900               3,762,900
Bear Stearns Co., Inc.                             8,000         8,000                       579,360                 579,360
Capital One Financial Corp.                       17,700        17,700                       870,486                 870,486
Charles Schwab Corp.                              14,000        14,000                       141,260                 141,260
Citigroup, Inc.                     10,296       291,180       301,476        440,669     12,462,504              12,903,173
Countrywide Financial Corp.                        9,600         9,600                       667,872                 667,872
Fannie Mae                                        77,400        77,400                     5,219,856               5,219,856
Franklin Resources, Inc.                          17,800        17,800                       695,446                 695,446
Freddie Mac                          3,350        58,200        61,550        170,079      2,954,814               3,124,893
Goldman Sachs Group, Inc.                         16,500        16,500                     1,381,875               1,381,875
J.P. Morgan Chase & Co.              9,700       152,570       162,270        331,546      5,214,842               5,546,388
Janus Capital Group, Inc.                         15,400        15,400                       252,560                 252,560
Labranche & Co., Inc.                              3,600         3,600                        74,484                  74,484
Legg Mason, Inc.                                   5,600         5,600                       363,720                 363,720
Lehman Brothers Holdings, Inc.                    19,600        19,600                     1,303,008               1,303,008
MBNA Corp.                                       119,850       119,850                     2,497,674               2,497,674
Merrill Lynch & Co., Inc.                         68,800        68,800                     3,211,584               3,211,584
Morgan Stanley                       5,000        80,600        85,600        213,750      3,445,650               3,659,400
Neuberger Berman, Inc.                             4,900         4,900                       195,559                 195,559
Principal Financial Group, Inc.                   12,800        12,800                       412,800                 412,800
SEI Investments Co.                                1,900         1,900                        60,800                  60,800
SLM Corp.                                         33,900        33,900                     1,327,863               1,327,863
State Street Corp.                                26,300        26,300                     1,036,220               1,036,220
T. Rowe Price Group, Inc.                         12,900        12,900                       486,975                 486,975
                                    --------------------------------------  -------------------------     ----------------------
                                    28,346     1,163,000     1,191,346      1,156,044     48,710,202              49,866,246
                                    --------------------------------------  -------------------------     ----------------------
Energy--0.77%
ConocoPhillips                       3,949                       3,949        216,405                                216,405
DTE Energy Co.                       2,550                       2,550         98,532                                 98,532
Exelon Corp.                         3,150                       3,150        188,402                                188,402
Exxon Mobil Corp.                    6,150                       6,150        220,846                                220,846
FirstEnergy Corp.                    4,700                       4,700        180,715                                180,715
Progress Energy, Inc.                3,400                       3,400        149,260                                149,260
Sempra Energy                        4,000                       4,000        114,120                                114,120
                                    --------------------------------------  -------------------------     ----------------------
                                    27,899           -          27,899      1,168,280            -                 1,168,280
                                    --------------------------------------  -------------------------     ----------------------

Health: Drugs--0.31%
Bristol-Myers Squibb Co.             5,600                       5,600        152,040                                152,040
Cephalon, Inc.*                      2,000                       2,000         82,320                                 82,320
SICOR, Inc.*                         3,400                       3,400         69,156                                 69,156
Wyeth                                3,600                       3,600        163,980                                163,980
                                    --------------------------------------  -------------------------     ----------------------
                                    14,600           -          14,600        467,496            -                   467,496
                                    --------------------------------------  -------------------------     ----------------------
Health: Non-Drugs--0.28%
Baxter International, Inc.           1,750                       1,750         45,500                                 45,500
Johnson & Johnson                    2,800                       2,800        144,760                                144,760
UnitedHealth Group, Inc.             4,700                       4,700        236,175                                236,175
                                    --------------------------------------  -------------------------     ----------------------
                                     9,250           -           9,250        426,435             -                  426,435
                                    --------------------------------------  -------------------------     ----------------------
Insurance--19.77%
AFLAC, Inc.                                       42,200        42,200                     1,297,650               1,297,650
Allmerica Financial Corp.*                         3,600         3,600                        64,764                  64,764
Allstate Corp.                                    54,700        54,700                     1,950,055               1,950,055
AMBAC Financial Group, Inc.                        7,400         7,400                       490,250                 490,250
American International Group, Inc.   2,476       183,900       186,376        136,626     10,147,602              10,284,228
Anthem, Inc.*                        1,000                       1,000         77,150                                 77,150
AON Corp.                                         21,200        21,200                       510,496                 510,496
Chubb Corp.                                       13,800        13,800                       828,000                 828,000
CIGNA Corp.                                       13,100        13,100                       614,914                 614,914
Cincinnati Financial Corp.*                        6,200         6,200                       229,958                 229,958
CNA Financial Corp.*                               1,900         1,900                        46,740                  46,740
First American Corp.                               4,200         4,200                       110,670                 110,670
Gallagher Arthur J. & Co.                          8,000         8,000                       217,600                 217,600
Hartford Financial Services
Group, Inc. (The)                     2,250       21,600        23,850        113,310      1,087,776               1,201,086
HCC Insurance Holdings, Inc.                       3,600         3,600                       106,452                 106,452
Jefferson-Pilot Corp.                             16,550        16,550                       686,163                 686,163
John Hancock Financial
Services, Inc.                                    23,900        23,900                       734,447                 734,447
Lincoln National Corp.                            15,400        15,400                       548,702                 548,702
Loews Corp.                                       14,600        14,600                       690,434                 690,434
Marsh & McLennan Cos., Inc.                       45,100        45,100                     2,303,257               2,303,257
MBIA, Inc.                                        14,600        14,600                       711,750                 711,750
MetLife, Inc.                                     48,100        48,100                     1,362,192               1,362,192
MGIC Investment Corp.                             10,600        10,600                       494,384                 494,384
Nationwide Financial
Services, Inc., Class A                            4,800         4,800                       156,000                 156,000
Old Republic International Corp.                   5,200         5,200                       178,204                 178,204
PMI Group, Inc.                                   13,100        13,100                       351,604                 351,604
Progressive Corp.                                 12,900        12,900                       942,990                 942,990
Protective Life Corp.                              6,500         6,500                       173,875                 173,875
Prudential Financial, Inc.                        17,800        17,800                       598,970                 598,970
Radian Group, Inc.                                 5,900         5,900                       216,235                 216,235
SAFECO Group, Inc.                                 2,500         2,500                        88,200                  88,200
St. Paul Cos. Inc.                                16,500        16,500                       602,415                 602,415
Torchmark Corp.                                    9,700         9,700                       361,325                 361,325
Travelers Property Causalty
Corp., Class B                                    23,473        23,473                       370,169                 370,169
Unum Provident Corp.                              21,400        21,400                       286,974                 286,974
                                    --------------------------------------  -------------------------     ----------------------
                                     5,726       714,023       719,749        327,086     29,561,217              29,888,303
                                    --------------------------------------  -------------------------     ----------------------
IT Consulting & Services--0.26%
SunGard Data Systems, Inc.*                       14,900        14,900                       386,059                 386,059

Leisure & Tourism--0.05%
Walt Disney Co. (The)                3,600                       3,600         71,100                                 71,100

Media and Entertainment--0.08%
Viacom, Inc., Class B*               2,600                       2,600        113,516                                113,516

Metals Non-Ferrous--0.10%
Masco Corp.                          6,450                       6,450        153,833                                153,833

Real Estate--1.78%
Annaly Mortgage Management, Inc.                   4,100         4,100                        81,631                  81,631
Avalonbay Communities, Inc.                        2,100         2,100                        89,544                  89,544
Duke Realty Corp.                                 11,200        11,200                       308,560                 308,560
Equity Office Properties Trust                    27,100        27,100                       731,971                 731,971
Equity Residential                                22,300        22,300                       578,685                 578,685
Host Marriott Corp.*                              15,700        15,700                       143,655                 143,655
iStar Financial, Inc.                              3,800         3,800                       138,700                 138,700
Kimco Realty Corp.                                 4,400         4,400                       166,760                 166,760
Liberty Property Trust                             2,000         2,000                        69,200                  69,200
Public Storage, Inc.                               2,700         2,700                        91,449                  91,449
Rouse Co.                                          2,000         2,000                        76,200                  76,200
Vornado Realty Trust                               5,100         5,100                       222,360                 222,360
                                    --------------------------------------  -------------------------     ----------------------
                                       -         102,500       102,500            -        2,698,715               2,698,715
                                    --------------------------------------  -------------------------     ----------------------
Retail/Apparel--0.07%
Newell Rubbermaid, Inc.              3,700                       3,700        103,600                                103,600

Services/Miscellaneous--0.13%
SPDR Trust, Series 1                 2,000                       2,000        195,260                                195,260

Telecommunications-
Services--0.50%
BellSouth Corp.                      4,400                       4,400        117,172                                117,172
Motorola, Inc.                       7,800                       7,800         73,554                                 73,554
Nextel Communications,
Inc., Class A*                      20,600                      20,600        372,448                                372,448
SBC Communications, Inc.             7,350                       7,350        187,792                                187,792
                                    --------------------------------------  -------------------------     ----------------------
                                    40,150           -          40,150        750,966            -                  750,966
                                    --------------------------------------  -------------------------     ----------------------
Transportation--0.18%
Burlington Northern Santa Fe Corp.   4,700                       4,700        133,668                                133,668
Norfolk Southern Corp.               7,600                       7,600        145,920                                145,920
                                    --------------------------------------  -------------------------     ----------------------
                                    12,300           -          12,300        279,588            -                   279,588
                                    --------------------------------------  -------------------------     ----------------------
Utilities--0.03%
CMS Energy Corp.                     5,050                       5,050         40,905                                 40,905

Total U.S. Equities
                                    --------------------------------------  -------------------------     ----------------------
    (Cost $142,737,531)            214,856     3,638,396     3,853,252      7,481,233    143,888,306             151,369,539
                                    --------------------------------------  -------------------------     ----------------------

Short-Term Investments--0.13%
Other--0.13%
UBS Supplementary Trust
U.S. Cash Management Prime Fund
 (Cost $195,394)                   195,394                     195,394        195,394                                195,394

Investments of Cash Collateral
From Securities Loaned--0.52%
Money Market Funds--0.52%
AIM Liquid Assets                                     50            50                            50                      50
Deutsche Cash Reserves                            23,032        23,032                        23,032                  23,032
Scudder Money Market Fund                             39            39                            39                      39
UBS Private Money Market Fund LLC                758,079       758,079                       758,079                 758,079
                                    --------------------------------------  -------------------------     ----------------------
Total Money Market Funds
(Cost $781,200)                        -         781,200       781,200            -          781,200                 781,200
                                    --------------------------------------  -------------------------     ----------------------

Total Investments
                                    --------------------------------------  -------------------------     ----------------------
(Cost $143,714,125) -- 100.24%     410,250     4,419,596     4,829,846      7,676,627    144,669,506             152,346,133
                                    --------------------------------------  -------------------------     ----------------------
Liabilities, less cash and
  other assets --(0.76)%                                                      (79,283)    (1,067,958)             (1,147,241)
                                    --------------------------------------  -------------------------     ----------------------
Net Assets-100%                  $ 410,250   $ 4,419,596   $ 4,829,846     $ 7,597,344  $ 143,601,548           $ 151,198,892
                                    ======================================  =========================     ======================


* Non-income producing security

              See accompany notes to proforma financial statements




UBS U.S. Value Equity Fund
UBS Financial Sector Fund
Proforma Statement of Assets and Liabilities
June 30, 2003 (unaudited)

                                                         UBS U.S. Value     UBS Financial
                                                           Equity Fund        Sector Fund        Adjustment      Combined
                                                        -----------------  -----------------  ---------------  -----------
Assets
Investments in securities, at value
 (cost - $7,230,014 and $136,484,111
respectively)                                                $ 7,676,627      $ 144,669,506                  $ 152,346,133
Dividends and interest receivable                                  9,961            239,057                        249,018
Receivable for shares sold                                        33,685                214                         33,899
Other assets                                                      63,337             45,466                        108,803
                                                        -----------------  -----------------   ------------   ------------

Total assets                                                   7,783,610        144,954,243             -      152,737,853
                                                        -----------------  -----------------   ------------   ------------

Liabilities
Payable for cash collateral for securities
loaned                                                               -              781,200                        781,200
Payable for capital shares                                        78,894            150,329                        229,223
Payable to affiliates                                                -              299,580                        299,580
Accrued expenses and other liabilities                           107,372            121,586                        228,958
                                                        -----------------  -----------------   ------------   ------------
Total liabilities                                                186,266          1,352,695             -        1,538,961
                                                        -----------------  -----------------   ------------   ------------

Net assets                                                     7,597,344        143,601,548                    151,198,892

Common Stock/Beneficial interest shares
of $0.001 par value outstanding                                7,921,776        139,154,549                    147,076,325
Accumulated undistributed  net investment income                  75,936            488,924                        564,860
Accumulated net realized losses from investment
transactions                                                    (846,981)        (4,227,320)                    (5,074,301)
Net unrealized appreciation of investments                       446,613          8,185,395                      8,632,008
                                                        -----------------  -----------------   ------------
Net assets applicable to shares outstanding                  $ 7,597,344      $ 143,601,548    $         -   $ 151,198,892
                                                        =================  =================   ============   ============

  Class A:
Net assets                                                   $ 1,072,523       $ 85,973,374                   $ 87,045,897
                                                            ------------      -------------                   ------------
Shares outstanding                                               115,199          3,527,487       5,706,831(a)   9,349,517
                                                                --------         ----------                      ---------
Net asset value and offering price per share                      $ 9.31            $ 24.37                         $ 9.31
                                                                 =======           ========                         ======

  Class B:
Net assets                                                     $ 709,121       $ 37,891,352                   $ 38,600,473
                                                              ----------      -------------                   ------------
Shares outstanding                                                76,980          1,648,389       2,465,005(a)   4,190,374
                                                                 -------         ----------                      ---------
Net asset value and offering price per share                      $ 9.21            $ 22.99                         $ 9.21
                                                                 =======           ========                         ======


  Class C:
Net assets                                                  $ 1,025,446        $ 18,744,615                   $ 19,770,061
                                                            ------------      -------------                   ------------
Shares outstanding                                               111,184            816,865       1,215,516(a)   2,143,565
                                                                --------           --------                      ---------
Net asset value and offering price per share                     $ 9.22             $ 22.95                         $ 9.22
                                                                 =======           ========                         ======

  Class Y:
Net assets                                                   $ 4,790,254          $ 992,207                    $ 5,782,461
                                                            ------------         ----------                     ----------
Shares outstanding                                               513,457             40,521          65,832(a)     619,810
                                                                --------            -------                        -------
Net asset and redemption value per share                          $ 9.33            $ 24.49                         $ 9.33
                                                                 =======           ========                         ======



(a)  Acquisition by UBS U.S. Value Equity Fund of UBS Financial  Sector Fund and
issuance  of UBS U.S.  Value  Equity  Fund  shares  in  exchange  for all of the
outstanding shares of UBS Fnancial Sector Fund



             See accompanying notes to proforma financial statements




UBS U.S. Value Equity Fund
UBS Financial Sector Fund
Proforma Statement of Operations
June 30, 2003 (unaudited)
                                                         UBS U.S. Value     UBS Financial
                                                           Equity Fund        Sector Fund        Adjustment      Combined
                                                        -----------------  -----------------  ---------------  -----------

Investment income:
  Dividend (net of withholding taxes
of $0 and $173)                                               $  149,796          $ 3,379,460         $ -      $ 3,529,256
  Interest                                                         1,789               28,476           -           30,265
                                                         ----------------   -----------------   -----------    ------------
                                                                 151,585            3,407,936           -        3,559,521
                                                         ----------------   -----------------   -----------    ------------

Expenses:
  Investment advisory and administration fees                     47,527            1,019,151                    1,066,678
  Shareholder distribution and servicing fees                     14,820              825,730                      840,550
  Transfer agency and service fees                                10,204              347,403                      357,607
  Trustees/Directors' fees                                         3,650                5,618                        9,268
  Legal and audit fees                                            28,371              116,197     (116,197)(b)      28,371
  Reports and notices to shareholders                                936              131,699      (70,000)(b)      62,635
  Federal and state registration fees                             56,848               85,262      (30,000)(b)     112,110
  Custody and accounting                                           3,266               97,356                      100,622
  Insurance expense                                                   99                7,327                        7,426
  Other expenses                                                   7,233               74,703                       81,936
                                                         ----------------   -----------------   -----------   ------------
                                                                 172,954            2,710,444     (216,197)(b)   2,667,201
  Less: fee waivers and reimbursements from
  investment advisor                                            (105,155)                 -       (475,535)       (580,690)
                                                         ----------------   -----------------   -----------   ------------
  Net expenses                                                    67,799            2,710,444      (691,732)     2,086,511
                                                         ----------------   -----------------   -----------   ------------
  Net investment income                                           83,786              697,492       691,732      1,473,009
                                                         ----------------   -----------------   -----------   ------------

Realized and unrealized gains (losses
from investment transactions:
  Net realized gains (losses)
  from investment transactions                                  (837,648)          (6,489,172)          -       (7,326,820)
  Net change in unrealized appreciation
  (depreciation) of investments                                  795,473          (5,023,371)           -       (4,227,898)
                                                        ----------------    -----------------   -----------   ------------
Net realized and unrealized gains (losses)
from investment activities                                       (42,175)         (11,512,542)          -      (11,554,717)
                                                        ----------------    -----------------   -----------   ------------
Net increase (decrease) in net assets
resulting from operations                                       $ 41,611        $ (10,815,051)   $  691,732  $ (10,081,708)
                                                        ================     ================   ===========    ===========


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

(b) Certain pro forma basis  expenses  have been  adjusted to reflect  estimated
cost savings arising from the merger.








             See accompanying notes to proforma financial statements



NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)

NOTE 1--Basis of Combination:

     At a  special  meeting  of the  Board of  Trustees  of The UBS  Funds  (the
"Trust") held on July 28, 2003, the Board of Trustees  approved an Agreement and
Plan  of  Reorganization   pursuant  to  which,   subject  to  approval  by  the
shareholders of UBS Financial Sector Fund ("Financial  Sector Fund"),  Financial
Sector Fund will transfer all of its assets, subject to its liabilities,  to UBS
U.S.  Value Equity Fund (the "Fund"),  a series of the Trust,  in exchange for a
number  of  shares of the Fund  equal in value to the net  assets  of  Financial
Sector Fund (the  "Exchange").  Shares of the Fund then will be  distributed  to
Financial  Sector  Fund  shareholders  on a pro  rata  basis in  liquidation  of
Financial Sector Fund.

     The  Exchange  will be  accounted  for as a tax-free  merger of  investment
companies.  The unaudited pro forma  portfolio of  investments  and statement of
assets and liabilities  reflect the financial position of the Fund and Financial
Sector Fund at June 30, 2003.  The unaudited  pro forma  statement of operations
reflects the results of operations of the Fund and Financial Sector Fund for the
twelve months ended June 30, 2003.  These  statements have been derived from the
funds'  respective  books and records  utilized in  calculating  daily net asset
value  at  the  dates  indicated  above  under  generally  accepted   accounting
principles. The historical cost of investment securities will be carried forward
to the Fund, as the  surviving  entity and results of operations of the Fund for
pre-combination  periods will not be restated. The fiscal year ends for the Fund
and Financial Sector Fund are June 30 and March 31, respectively.

     The pro forma portflio of investments,  statement of assets and liabilities
and statement of operations  should be read in  conjunction  with the historical
financial  statements of the Funds included or  incorporated by reference in the
respective  Statements of  Additional  Information  of the Funds.  The pro forma
combined  financial  statements are presented for  information  only and may not
necessarily be representative of what the actual combined  financial  statements
would have been had the reorganization occurred at June 30, 2003.



NOTE 2--Portfolio Valuation:

     Securities for which market  quotations are readily available are valued at
the last  available  sales  price on the  exchange  or market on which  they are
principally traded, or lacking any sales, at the last available bid price on the
exchange or market on which such securities are principally  traded. U.S. equity
securities  traded  over-the-counter  are  valued at the most  recent bid price.
Investments in affiliated  investment  companies are valued at the daily closing
net asset  value of the  respective  investment  company.  Securities  for which
market quotations are not readily  available,  including  restricted  securities
which are  subject to  limitations  on their  sale,  are valued at fair value as
determined  in good  faith by or under the  direction  of the  Trust's  Board of
Trustees  and  Financial   Sector  Fund's  Board  of  Directors,   respectively.
Short-term  obligations  with a  maturity  of 60  days  or less  are  valued  at
amortized cost, which approximates market value.


NOTE 3--Shares of Beneficial Interest:

     The pro forma net asset  value  per  share  assumes  15,486,446  additional
shares of  beneficial  interest of the Fund were issued in  connection  with the
Exchange  as of June 30,  2003.  The pro forma  number of shares  that  would be
issuable was  calculated by dividing the net assets of Financial  Sector Fund at
June 30, 2003 by the net asset value per share per class of the Fund at June 30,
2003.  The pro forma  combined  number of Class A,  Class B, Class C and Class Y
shares outstanding of 9,349,517,  4,190,374, 2,143,565 and 619,810 respectively,
consists of 9,234,318,  4,113,394,  2,032,381 and 106,353 shares,  respectively,
issuable to  Financial  Sector Fund as a result of the  Exchange,  and  115,199,
76,980,  111,184 and 513,457 shares,  respectively,  of the Fund  outstanding at
June 30, 2003.

NOTE 4--Pro Forma Operating Expenses:

     The  accompanying  pro forma financial  statements  reflect changes in fund
expenses as if the  Exchange  had taken place on June 30,  2003.  Although it is
anticipated that there will be an elimination of certain duplicative expenses as
a  result  of the  Exchange,  the  actual  amount  of such  expenses  cannot  be
determined because it is not possible to predict the cost of future operations.

NOTE 5--Merger Costs:

     Merger costs are estimated at  approximately  $120,000 and are not included
in the pro forma  statement of operations  since UBS Global Asset  Management is
paying these costs.  These costs represent the estimated  expenses of management
of the Trust and  Financial  Sector  Fund  carrying  out  obligations  under the
Exchange,  and consist of management's  estimate of legal fees, accounting fees,
printing costs and mailing charges related to the Exchange.


NOTE 6--Federal Income Taxes:

     Each fund has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code").  After the Exchange,
the Fund intends to continue to qualify as a regulated  investment  company,  if
such  qualification is in the best interests of its  shareholders,  by complying
with the provisions  available to certain  investment  companies,  as defined in
applicable  sections of the Code,  and to make  distributions  of taxable income
sufficient to relieve it from all, or substantially all, Federal income taxes.

     The identified cost of investments for the Funds is substantially  the same
for both financial  accounting and Federal income tax purposes.  The tax cost of
investments will remain unchanged for the combined entity.






   [The Statement of Additional Information for the Value Equity Fund, dated
  September 30, 2002, as previously filed via EDGAR is incorporated herein by
    reference and will be mailed to any shareholder who requests this SAI.]





 [The Annual Report of the Value Equity Fund for the fiscal year ended June 30,
2002, as previously filed via EDGAR is incorporated herein by reference and will
              be mailed to any shareholder who requests this SAI.]




         [The Annual Report of the Financial Sector Fund for the fiscal
 year ended March 31, 2003 as previously filed via EDGAR is incorporated herein
   by reference and will be mailed to any shareholder who requests this SAI.]



                                    PART C

                                OTHER INFORMATION

Item 15.          Indemnification

     Indemnification  of the  Registrant's  Trustees is provided  for in Article
     VII, Sections 2 through 4 of the Registrant's  Agreement and Declaration of
     Trust dated August 9, 1993, as amended, as follows:

     Section 2. Indemnification and Limitation of Liability.  The Trustees shall
     not be responsible or liable in any event for any neglect or wrong-doing of
     any  officer,  agent,  employee,  Manager or Principal  Underwriter  of the
     Trust,  nor shall any Trustee be responsible for the act or omission of any
     other Trustee,  and, subject to the provisions of the Bylaws, the Trust out
     of its assets may  indemnify  and hold  harmless each and every Trustee and
     officer of the Trust from and against any and all claims,  demands,  costs,
     losses,  expenses, and damages whatsoever arising out of or related to such
     Trustee's  performance  of his or her duties as a Trustee or officer of the
     Trust;  provided  that  nothing  herein  contained  shall  indemnify,  hold
     harmless or protect any Trustee or officer from or against any liability to
     the Trust or any  Shareholder to which he or she 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 or her office.

     Every note,  bond,  contract,  instrument,  certificate or undertaking  and
     every  other  act or thing  whatsoever  issued,  executed  or done by or on
     behalf of the Trust or the Trustees or any of them in  connection  with the
     Trust shall be  conclusively  deemed to have been issued,  executed or done
     only in or with  respect to their or his or her  capacity  as  Trustees  or
     Trustee,  and such  Trustees  or  Trustee  shall not be  personally  liable
     thereon.

     Section 3. Trustee's Good Faith Action,  Expert Advice,  No Bond or Surety.
     The  exercise by the Trustees of their  powers  hereunder  shall be binding
     upon everyone  interested in or dealing with the Trust.  A Trustee shall be
     liable  to the  Trust  and to any  Shareholder  solely  for  his or her own
     willful  misfeasance,  bad faith, gross negligence or reckless disregard of
     the duties  involved  in the conduct of the office of Trustee and shall not
     be liable for errors of judgment or mistakes of fact or law.  The  Trustees
     may take advice of counsel or other experts with respect to the meaning and
     operation of this  Declaration of Trust and shall be under no liability for
     any act or  omission  in  accordance  with such  advice nor for  failing to
     follow such advice.  The Trustees shall not be required to give any bond as
     such, nor any surety if a bond is required.

     Section 4.  Insurance.  The Trustees shall be entitled and empowered to the
     fullest extent permitted by law to purchase with Trust assets insurance for
     liability and for all expenses,  reasonably incurred or paid or expected to
     be paid by a Trustee or officer in connection with any claim,  action, suit
     or proceeding  in which he or she becomes  involved by virtue of his or her
     capacity or former capacity with the Trust,  whether or not the Trust would
     have the power to  indemnify  him or her against such  liability  under the
     provisions of this Article.

     Indemnification  of  Registrant's  custodian,  transfer  agent,  accounting
     services  provider,  administrator  and distributor  against certain stated
     liabilities is provided until May 9, 1997 under the following documents:

     (a)  Section 12 of Accounting  Services  Agreement,  between the Registrant
          and  Fund/Plan  Services,  Inc.,  incorporated  herein by reference to
          Post-Effective Amendment No. 16 to Registrant's Registration Statement
          on Form N-1A (File Nos. 33-47287 and 811-6637),  Exhibit 9(c) as filed
          electronically on February 15, 1996.

     (b)  Section 8 of  Administration  Agreement  between  the  Registrant  and
          Fund/Plan  Services,   Inc.,   incorporated  herein  by  reference  to
          Post-Effective Amendment No. 16 to Registrant's Registration Statement
          on Form N-1A (File Nos. 33-47287 and 811-6637),  Exhibit 9(b) as filed
          electronically on February 15, 1996.

     (c)  Section 14 of Custodian  Agreement  between the Registrant and Bankers
          Trust  Company,  incorporated  herein by reference  to  Post-Effective
          Amendment No. 13 to Registrant's  Registration  Statement on Form N-1A
          (File Nos. 33-47287 and 811-6637), Exhibit Nos. 8(a) and 8(b) as filed
          electronically on September 20, 1995.

     (d)  Section 19 of Shareholder  Services  Agreement between  Registrant and
          Fund/Plan  Services,   Inc.,   incorporated  herein  by  reference  to
          Post-Effective Amendment No. 16 to Registrant's Registration Statement
          on Form N-1A (File Nos. 33-47287 and 811-6637),  Exhibit 9(a) as filed
          electronically on February 15, 1996.

     (e)  Section  8  of  the  Underwriting  Agreement  between  Registrant  and
          Fund/Plan Broker Services,  Inc. are incorporated  herein by reference
          to  Post-Effective  Amendment  No.  16  to  Registrant's  Registration
          Statement on Form N-1A (File Nos. 33-47287 and 811-6637),  Exhibit No.
          (6) as filed electronically on February 15, 1996.

     Effective May 10, 1997, indemnification of Registrant's custodian, transfer
     agent, accounting services provider,  administrator and distributor against
     certain stated liabilities is provided for in the following documents:

     (a)  Sections I.8(a),  I.8(c)(iii),I.10,  II.A.2,  II.B.5,  II.C.6, III.1.,
          III.2.(b) through  III.2.(e),  III.4.(e) and III.9.(b) of the Multiple
          Services  Agreement  dated May 9, 1997,  as  amended,  between  Morgan
          Stanley Trust Company,  as succeeded by The Chase  Manhattan Bank, and
          the  Registrant  on  behalf  of  each  series  of  the  Registrant  is
          incorporated  by  reference  to  Post-Effective  Amendment  No.  25 to
          Registrant's  Registration  Statement on Form N-1A (Nos.  33-47287 and
          811-6637) as filed electronically on March 1, 1999.

     Effective  November 5, 2001,  indemnification  of Registrant's  distributor
     against  certain  stated  liabilities  is  provided  for in  the  following
     document:

     (a)  Section 9(a) of the Principal Underwriting Contract between UBS Global
          Asset Management (US) Inc. and the Registrant on behalf of each series
          dated November 5, 2001 is incorporated by reference to  Post-Effective
          Amendment No. 37 to Registrant's  Registration  Statement on Form N-1A
          (Nos. 33-47287 and 811-6637) as filed electronically on July 19, 2002.

     Effective August 20, 2001,  indemnification of Registrant's  transfer agent
     against  certain  stated  liabilities  is  provided  for in  the  following
     document:

     (a)  Section 12 of the  Transfer  Agency  and  Related  Services  Agreement
          between UBS Global Asset  Management  (US) Inc. and the  Registrant on
          behalf  of each  series  dated  August  20,  2001 is  incorporated  by
          reference  to   Post-Effective   Amendment  No.  38  to   Registrant's
          Registration  Statement on Form N-1A (Nos.  33-47287 and  811-6637) as
          filed electronically on July 19, 2002.

Item 16.          Exhibits

     1.   Charter Documents.

          A.   (1)  Certificate of Trust of the Registrant dated August 9, 1993,
                    as filed  with the Office of the  Secretary  of State of the
                    State of Delaware on August 13, 1993, is incorporated herein
                    by  reference  to   Post-Effective   Amendment   No.  21  to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed electronically with the U.S.
                    Securities and Exchange  Commission ("SEC") on September 15,
                    1998.

               (2)  Amendment to  Certificate  of Trust dated  February 15, 2002
                    changing the Trust's name to The UBS Funds,  is incorporated
                    herein by reference to  Post-Effective  Amendment  No. 39 to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed  electronically with the SEC
                    on September 30, 2002.

          B.   (1)  Agreement and Declaration of Trust (the "Declaration") dated
                    August  19,  1993,   as  amended,   of  the   Registrant  is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 21 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on September 15, 1998.

               (2)  Amendment  No. 1 to the  Declaration,  dated May 21, 2001 is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 34 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on July 31, 2001.

               (3)  Amendment  No. 2 to the  Declaration  dated July 29, 2002 to
                    change the  principal  place of  business  of the Trust,  is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 39 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on September 30, 2002.

          C.   Certificates   of  the   Secretary/Assistant   Secretary  of  the
               Registrant  to  the   Declaration  re:   applicable   resolutions
               pertaining to:

               (a)  Meeting held August 9, 1993  designating  initial  eight (8)
                    Series of shares (from The UBS Funds,  Inc.) is incorporated
                    herein by reference to  Post-Effective  Amendment  No. 21 to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed  electronically with the SEC
                    on September 15, 1998.

               (b)  Meeting held  November 8, 1993  creating  Class B Shares and
                    redesignating  Class A  Shares  is  incorporated  herein  by
                    reference to Post-Effective Amendment No. 21 to Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637) as filed  electronically with the SEC on September
                    15, 1998.

               (c)  Meeting  held  February 21, 1995 adding Class A and B shares
                    to the  Brinson  Short-Term  Global  Income Fund and Brinson
                    U.S. Cash  Management Fund and adding Class C shares for all
                    Series is incorporated herein by reference to Post-Effective
                    Amendment No. 21 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on September 15, 1998.

               (d)  Meeting  held May 22, 1995  redesignating  Class A shares to
                    Brinson  Class  shares and Class C shares to SwissKey  Class
                    shares is incorporated herein by reference to Post-Effective
                    Amendment No. 21 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on September 15, 1998.

               (e)  Unanimous  written consent of Trustees  executed on July 27,
                    1995   changing   the  names  of  Series,   as  follows  and
                    redesignating  the  Brinson  Class  and  SwissKey  Class  is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 21 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on September 15, 1998:

                    (i)  Redesignation  of the Brinson Global Fund to the Global
                         Fund;

                    (ii) Redesignation  of the  Brinson  Global Bond Fund to the
                         Global Bond Fund;

                    (iii)Redesignation  of the Brinson  Non-U.S.  Equity Fund to
                         the Non-U.S. Equity Fund;

                    (iv) Redesignation  of the Brinson Global Equity Fund to the
                         Global Equity Fund;

                    (v)  Redesignation  of the Brinson  U.S.  Equity Fund to the
                         U.S. Equity Fund;

                    (vi) Redesignation of the Brinson U.S.  Balanced Fund to the
                         U.S. Balanced Fund;

                    (vii)Redesignation  of the  Brinson  U.S.  Bond  Fund to the
                         U.S. Bond Fund.

               (f)  Meeting   held   November  20,  1995   eliminating   Brinson
                    Short-Term  Global  Income  Fund is  incorporated  herein by
                    reference to Post-Effective Amendment No. 21 to Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637) as filed  electronically with the SEC on September
                    15, 1998.

               (g)  Meeting  held  August  26,  1996   eliminating   U.S.   Cash
                    Management  Fund  and  Non-U.S.  Bond  Fund is  incorporated
                    herein by reference to  Post-Effective  Amendment  No. 21 to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed  electronically with the SEC
                    on September 15, 1998.

               (h)  Meeting held May 19, 1997  redesignating  Brinson Fund Class
                    as Brinson Fund -- Class I and adding  Brinson Fund -- Class
                    N is  incorporated  herein by  reference  to  Post-Effective
                    Amendment No. 21 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on September 15, 1998.

               (i)  Meeting   held   November   24,  1997   adding  U.S.   Large
                    Capitalization  Equity Fund and adding Brinson Fund -- Class
                    I Shares,  SwissKey  Fund Class and Brinson  Fund -- Class N
                    Shares to such Series is incorporated herein by reference to
                    Post-Effective Amendment No. 21 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on September 15, 1998.

               (j)  Meeting held August 24, 1998 approving  redesignation of the
                    SwissKey  Class  to  the  UBS  Investment   Funds  Class  is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 27 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on May 3, 1999.

               (k)  Meeting held August 24, 1998 approving  redesignation of the
                    Non-U.S.  Equity Fund to the Global (ex-U.S.) Equity Fund is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 27 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on May 3, 1999.

               (l)  Meeting held August 24, 1998  establishing  and  designating
                    the  U.S.  Large  Capitalization  Growth  Fund,  U.S.  Small
                    Capitalization  Fund, High Yield Bond Fund, Emerging Markets
                    Equity  Fund and  Emerging  Markets  Debt  Fund  and  adding
                    Brinson Fund - Class I Shares, UBS Investment Funds class of
                    shares and  Brinson  Fund - Class N Shares to such Series is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 27 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on May 3, 1999.

               (m)  Meeting held November 23, 1998  redesignating the High Yield
                    Bond   Fund  to  the  High   Yield   Fund  and  U.S.   Small
                    Capitalization Fund as the U.S. Small Capitalization  Growth
                    Fund is incorporated  herein by reference to  Post-Effective
                    Amendment No. 27 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on May 3, 1999.

               (n)  Meeting held February 28, 2000  establishing and designating
                    the Global  Technology Fund, Global Biotech Fund, U.S. Small
                    Cap Equity Fund, U.S. Value Equity Fund and U.S. Real Estate
                    Equity Fund and adding  Brinson Fund -- Class I Shares,  UBS
                    Investment Funds class of shares and Brinson Fund -- Class N
                    Shares to such Series is incorporated herein by reference to
                    Post-Effective Amendment No. 30 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on May 2, 2000.

               (o)  Meeting held February 28, 2000  redesignating the U.S. Large
                    Capitalization Equity Fund, U.S. Large Capitalization Growth
                    and U.S. Small Capitalization  Growth Fund as the U.S. Large
                    Cap Equity Fund,  U.S.  Large Cap Growth Fund and U.S. Small
                    Cap Growth Fund,  respectively,  is  incorporated  herein by
                    reference to Post-Effective Amendment No. 30 to Registrant's
                    Registration  Statement  on Form N- 1A  (Nos.  33-47287  and
                    811-6637)  as  filed  electronically  with the SEC on May 2,
                    2000.

               (p)  Meeting  held  August  21,  2000  redesignating  the  Global
                    (Ex-U.S.)  Equity Fund as the  International  Equity Fund is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 33 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on December 7, 2000.

               (q)  Meeting held May 21, 2001  redesignating  the Global Fund as
                    the Global Balanced Fund is incorporated herein by reference
                    to   Post-Effective   Amendment   No.  34  to   Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637) as filed  electronically  with the SEC on July 31,
                    2001.

               (r)  Meeting  held May 21, 2001  creating  Brinson  Fund-Class  A
                    Shares, Brinson Fund-Class B Shares and Brinson Fund-Class C
                    Shares of each Series is incorporated herein by reference to
                    Post-Effective Amendment No. 34 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on July 31, 2001.

               (s)  Meeting  held  May  21,  2001   redesignating   the  Brinson
                    Fund-Class  I Shares as the Brinson  Fund-Class  Y Shares of
                    each  Series  is   incorporated   herein  by   reference  to
                    Post-Effective Amendment No. 34 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on July 31, 2001.

               (t)  Meeting  held May 21,  2001  abolishing  the UBS  Investment
                    Funds Class of Shares of each Series is incorporated  herein
                    by  reference  to   Post-Effective   Amendment   No.  34  to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed  electronically with the SEC
                    on July 31, 2001.

               (u)  Unanimous written consent of Trustees executed June 20, 2002
                    changing the name of UBS Global  Balanced Fund to UBS Global
                    Allocation  Fund is  incorporated  herein  by  reference  to
                    Post-Effective Amendment No. 38 as filed electronically with
                    the SEC on July 19, 2002.

               (v)  Meeting  held June 3, 2002  regarding  the  liquidation  and
                    dissolution  of UBS  Global  Technology  Fund and UBS Global
                    Biotech  Fund  is   incorporated   herein  by  reference  to
                    Post-Effective Amendment No. 39 as filed electronically with
                    the SEC on September 30, 2002.

     2.   By-Laws.

          A.   By-Laws of The UBS Funds  (f/k/a The Brinson  Funds) dated August
               9, 1993, are incorporated  herein by reference to  Post-Effective
               Amendment No. 17 to Registrant's  Registration  Statement on Form
               N-1A (File Nos. 33-47287 and 811-6637),  as filed  electronically
               with the SEC on August 29, 1996.

          B.   Amendment  to the By-Laws  dated  April 25, 2002 is  incorporated
               herein by reference to  Post-Effective  Amendment No. 37 as filed
               electronically with the SEC on July 19, 2002.

     3.   Voting Trust Agreement.

          Not applicable.

     4.   Agreement of Acquisition, Reorganization, Merger and Liquidation.

          Form of  Agreement  and Plan of  Reorganization  is filed  herewith as
          Exhibit A to the Prospectus/Proxy Statement.

     5.   Instruments Defining the Rights of Security Holders.

          A.   Form  of  Specimen   Share   Certificate  of  The  UBS  Funds  is
               incorporated herein by reference to Post-Effective  Amendment No.
               21 to  Registrant's  Registration  Statement  on Form N-1A  (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               September 15, 1998.

               The rights of  security  holders of the  Registrant  are  further
               defined in the following sections of the Registrant's By-Laws and
               Declaration  and are herein  incorporated  by  reference  to such
               documents as applicable:

               (1)  By-Laws.

                    Article II - "Voting," Section 7 and Section 10.

               (2)  Declaration.

                    Article III - "Shares," Section 1, Section 2 and Section 6.

     6.   Investment Advisory Contracts.

          A.   Investment  Advisory  Agreement  dated July 1, 2002  between  UBS
               Global Asset  Management  (Americas) Inc. (the "Advisor") and the
               Registrant  on  behalf  of the  UBS  Global  Allocation  Fund  is
               incorporated herein by reference to Post-Effective  Amendment No.
               39 to  Registrant's  Registration  Statement  on Form N-1A  (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               September 30, 2002.

          B.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor and the  Registrant on behalf of the UBS Global Bond Fund
               is incorporated  herein by reference to Post-Effective  Amendment
               No. 39 to Registrant's  Registration Statement on Form N-1A (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               September 30, 2002.

          C.   Investment  Advisory  Agreement  dated April 25, 1995 between the
               Advisor  and the  Registrant  on behalf of the UBS  International
               Equity Fund series, and Secretary's  Certificate relating thereto
               is incorporated  herein by reference to Post-Effective  Amendment
               No. 21 to Registrant's  Registration Statement on Form N-1A (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               September 15, 1998.

               (1)  Certificate of the Secretary and  resolutions  redesignating
                    the Global (Ex-U.S.) Equity Fund as the International Equity
                    Fund is incorporated  herein by reference to  Post-Effective
                    Amendment No. 33 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on December 7, 2000.

          D.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor  and the  Registrant  on behalf of the UBS Global  Equity
               Fund (f/k/a  Brinson  Global Equity Fund) series is  incorporated
               herein  by  reference  to  Post-Effective  Amendment  No.  39  to
               Registrant's  Registration  Statement on Form N-1A (Nos. 33-47287
               and 811-6637) as filed  electronically  with the SEC on September
               30, 2002.

          E.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor and the Registrant on behalf of the UBS U.S.  Equity Fund
               (f/k/a Brinson U.S. Equity Fund) series is incorporated herein by
               reference  to  Post-Effective  Amendment  No. 39 to  Registrant's
               Registration  Statement on Form N-1A (Nos. 33-47287 and 811-6637)
               as filed electronically with the SEC on September 30, 2002.

          F.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor  and the  Registrant  on behalf of the UBS U.S.  Balanced
               Fund (f/k/a Brinson U.S.  Balanced  Fund) series is  incorporated
               herein  by  reference  to  Post-Effective  Amendment  No.  39  to
               Registrant's  Registration  Statement on Form N-1A (Nos. 33-47287
               and 811-6637) as filed  electronically  with the SEC on September
               30, 2002.

          G.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor and the  Registrant  on behalf of the UBS U.S.  Bond Fund
               (f/k/a Brinson U.S. Bond Fund) series is  incorporated  herein by
               reference  to  Post-Effective  Amendment  No. 39 to  Registrant's
               Registration  Statement on Form N-1A (Nos. 33-47287 and 811-6637)
               as filed electronically with the SEC on September 30, 2002.

          H.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor and the  Registrant  on behalf of the UBS U.S.  Large Cap
               Growth  Fund  series  is  incorporated  herein  by  reference  to
               Post-Effective  Amendment  No.  39 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on September 30, 2002.

          I.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor and the  Registrant  on behalf of the UBS U.S.  Small Cap
               Growth  Fund  series  is  incorporated  herein  by  reference  to
               Post-Effective  Amendment  No.  39 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on September 30, 2002.

          J.   Investment  Advisory  Agreement  dated July 1, 2002  between  the
               Advisor and the  Registrant  on behalf of the UBS High Yield Fund
               series is  incorporated  herein by  reference  to  Post-Effective
               Amendment No. 39 to Registrant's  Registration  Statement on Form
               N-1A (Nos.  33-47287 and 811-6637) as filed  electronically  with
               the SEC on September 30, 2002.

          K.   Investment Advisory Agreement dated December 10, 1998 between the
               Advisor and the Registrant on behalf of the UBS Emerging  Markets
               Equity  Fund  series  is  incorporated  herein  by  reference  to
               Post-Effective  Amendment  No.  25 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on March 1, 1999.

               (1)  Form  of  Certificate  of  the  Secretary  and   resolutions
                    restating  the  Investment  Advisory  Agreement  of the  UBS
                    Emerging  Markets  Equity  Fund is  incorporated  herein  by
                    reference to Post-Effective Amendment No. 34 to Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637) as filed  electronically  with the SEC on July 31,
                    2001.

          L.   Investment Advisory Agreement dated December 10, 1998 between the
               Advisor and the Registrant on behalf of the UBS Emerging  Markets
               Debt  Fund  series  is   incorporated   herein  by  reference  to
               Post-Effective  Amendment  No.  25 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on March l, 1999.

               (1)  Form  of  Certificate  of  the  Secretary  and   resolutions
                    restating  the  Investment  Advisory  Agreement  of the  UBS
                    Emerging  Markets  Debt  Fund  is  incorporated   herein  by
                    reference to Post-Effective Amendment No. 34 to Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637) as filed  electronically  with the SEC on July 31,
                    2001.

          M.   Investment  Advisory  Agreement  dated May 23,  2000  between the
               Advisor and the  Registrant  on behalf of the UBS U.S.  Small Cap
               Equity  Fund  series  is  incorporated  herein  by  reference  to
               Post-Effective  Amendment  No.  31 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on August 29, 2000.

               (1)  Form  of  Certificate  of  the  Secretary  and   resolutions
                    restating the Investment  Advisory Agreement of the UBS U.S.
                    Small Cap Equity Fund is incorporated herein by reference to
                    Post-Effective Amendment No. 34 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on July 31, 2001.

          N.   Investment  Advisory  Agreement  dated July l, 2002  between  the
               Advisor and the Registrant on behalf of the UBS U.S. Value Equity
               Fund series is incorporated herein by reference to Post-Effective
               Amendment No. 39 to Registrant's  Registration  Statement on Form
               N-1A (Nos.  33-47287 and 811-6637) as filed  electronically  with
               the SEC September 30, 2002.

          O.   Investment  Advisory Agreement dated December 7, 2000 between the
               Advisor and the  Registrant on behalf of the UBS U.S. Real Estate
               Equity  Fund  series  is  incorporated  herein  by  reference  to
               Post-Effective  Amendment  No.  34 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on July 31, 2001.

               (1)  Form  of  Certificate  of  the  Secretary  and   resolutions
                    restating the Investment  Advisory Agreement of the UBS U.S.
                    Real Estate Equity Fund is incorporated  herein by reference
                    to   Post-Effective   Amendment   No.  34  to   Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637) as filed  electronically  with the SEC on July 31,
                    2001.

          P.   Sub-Advisory Agreement dated December 7, 2000 between the Advisor
               and  UBS  Global  Asset  Management  (New  York),  Inc.  and  the
               Registrant on behalf of the UBS U.S. Large Cap Growth Fund series
               is incorporated  herein by reference to Post-Effective  Amendment
               No. 34 to Registrant's  Registration Statement on Form N-1A (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               July 31, 2001.

          Q.   Sub-Advisory Agreement dated December 7, 2000 between the Advisor
               and  UBS  Global  Asset  Management  (New  York),  Inc.  and  the
               Registrant on behalf of the UBS U.S. Small Cap Growth Fund series
               is incorporated  herein by reference to Post-Effective  Amendment
               No. 34 to Registrant's  Registration Statement on Form N-1A (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               July 31, 2001.

          R.   Sub-Advisory Agreement dated December 7, 2000 between the Advisor
               and  UBS  Global  Asset  Management  (New  York),  Inc.  and  the
               Registrant  on behalf of the UBS U.S.  High Yield Fund  series is
               incorporated herein by reference to Post-Effective  Amendment No.
               34 to  Registrant's  Registration  Statement  on Form N-1A  (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               July 31, 2001.

          S.   Sub-Advisory Agreement dated December 7, 2000 between the Advisor
               and  UBS  Global  Asset  Management  (New  York),  Inc.  and  the
               Registrant  on behalf of the UBS U.S.  Real  Estate  Equity  Fund
               series is  incorporated  herein by  reference  to  Post-Effective
               Amendment No. 34 to Registrant's  Registration  Statement on Form
               N-1A (Nos.  33-47287 and 811-6637) as filed  electronically  with
               the SEC on July 31, 2001.

     7.   Underwriting or Distribution Contracts.

          Principal Underwriting  Contract,  dated November 5, 2001, between UBS
          Global Asset Management (US) Inc. (f/k/a Brinson  Advisors,  Inc.) and
          the Registrant is incorporated  herein by reference to  Post-Effective
          Amendment  No.  37 as  filed  electronically  with the SEC on July 19,
          2002.

     8.   Bonus, Profit Sharing, Pension or Other Similar Contracts.

          Not Applicable.

     9.   Custodian Agreements.

          A.   Custodial  arrangements are provided under the Multiple  Services
               Agreement  dated May 9, 1997,  as amended  through  December  10,
               1998,  between  Morgan Stanley Trust Company and succeeded by The
               Chase Manhattan Bank, and the Registrant on behalf of each series
               of  the  Registrant  is  incorporated   herein  by  reference  to
               Post-Effective  Amendment  No.  25 to  Registrant's  Registration
               Statement  on Form N-1A (Nos.  33-47287  and  811-6637)  as filed
               electronically with the SEC on March 1, 1999.

               (1)  Amendment  dated May 9, 2000 relating to Fee  Obligation and
                    Continuation of the Registrant's Multiple Services Agreement
                    is  incorporated   herein  by  reference  to  Post-Effective
                    Amendment No. 34 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on July 31, 2001.

               (2)  Amended  Schedule A, as amended  through  April 28, 2000, to
                    the  Registrant's  Multiple  Services  Agreement  Securities
                    Lending Authorization is incorporated herein by reference to
                    Post-Effective Amendment No. 31 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on August 29, 2000.

               (3)  Amended Attachment A, as amended through August 19, 2002, to
                    the  Registrant's  Multiple  Services  Agreement  Securities
                    Lending Authorization is incorporated herein by reference to
                    Post-Effective Amendment No. 39 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on September 30, 2002.

               (4)  Revised  Schedule B3, as approved through August 19, 2002 to
                    the Registrant's Multiple Services Agreement is incorporated
                    herein by reference to  Post-Effective  Amendment  No. 39 to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    3347287 and 811-6637) as filed  electronically  with the SEC
                    on September 30, 2002.

               (5)  Amended  Schedule B 1 and  Schedule  F, as  amended  through
                    April  28,  2000,  to  the  Registrant's  Multiple  Services
                    Agreement   is   incorporated   herein   by   reference   to
                    Post-Effective Amendment No. 31 to Registrant's Registration
                    Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
                    electronically with the SEC on August 29, 2000.

               (6)  Amendment, dated May 21, 2001 relating to the Appointment of
                    Brinson  Advisors,  Inc.  to serve as  administrator  to the
                    Trust is incorporated  herein by reference to Post-Effective
                    Amendment No. 39 to Registrant's  Registration  Statement on
                    Form   N-1A   (Nos.   33-47287   and   811-6637)   as  filed
                    electronically with the SEC on September 30, 2002.

          B.   Co-custodial  arrangements  between  Investors  Bank & Trust  and
               Chase Global Funds  Services  Company dated  December 18, 1998 is
               incorporated herein by reference to Post-Effective  Amendment No.
               25 to  Registrant's  Registration  Statement  on Form N-1A  (Nos.
               33-47287 and  811-6637) as filed  electronically  with the SEC on
               March 1, 1999.

     10.  Rule 12b-1 Plans and Rule 18f-3 Plans.

          A.   Rule 12b-1 Plans.

               (1)  Shareholder  Services Plan dated October 29, 2001 as revised
                    April 8, 2002,  relating  to Class A shares  (f/k/a  Brinson
                    Fund Class A shares)  of each  series of the  Registrant  is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 38 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on July 19, 2002.

               (2)  12b-1 plan dated  October 29, 2001 as revised April 8, 2002,
                    relating to the Class B shares (f/k/a/  Brinson Fund Class B
                    shares) of each  series of the  Registrant  is  incorporated
                    herein by reference to  Post-Effective  Amendment  No. 38 to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed  electronically with the SEC
                    on July 19, 2002.

               (3)  12b-1 plan dated  October 29, 2001 as revised April 8, 2002,
                    relating to the Class C shares  (f/k/a  Brinson Fund Class C
                    shares) of each  series of the  Registrant  is  incorporated
                    herein by reference to  Post-Effective  Amendment  No. 38 to
                    Registrant's  Registration  Statement  on  Form  N-1A  (Nos.
                    33-47287 and 811-6637) as filed  electronically with the SEC
                    on July 19, 2002.

          B.   Rule 18f-3 Plans.

               (1)  Revised Multiple Class Plan adopted May 22, 1995, as amended
                    through June 11, 1999,  pursuant to Rule 18f--3 on behalf of
                    each  series of the  Registrant  is  incorporated  herein by
                    reference to Post-Effective Amendment No. 30 to Registrant's
                    Registration  Statement  on Form  N-1A  (Nos.  33-47287  and
                    811-6637)  as  filed  electronically  with the SEC on May 2,
                    2000.

                    (a)  Appendix A to the  Registrant's  Revised Multiple Class
                         Plan adopted May 22, 1995, as amended through April 28,
                         2000, adding the Global Technology Fund, Global Biotech
                         Fund,  U.S.  Small Cap Equity Fund,  U.S.  Value Equity
                         Fund and U.S.  Real Estate Equity Fund pursuant to Rule
                         18f-3  is   incorporated   herein   by   reference   to
                         Post-Effective   Amendment   No.  30  to   Registrant's
                         Registration  Statement on Form N-1A (Nos. 33-47287 and
                         811-6637) as filed  electronically  with the SEC on May
                         2, 2000.

               (2)  Amended and Restated Multiple Class Plan, adopted on May 22,
                    1995,  as amended and restated on May 21, 2001,  pursuant to
                    Rule  18f-3 on behalf of each  series of the  Registrant  is
                    incorporated herein by reference to Post-Effective Amendment
                    No. 34 to Registrant's  Registration  Statement on Form N-1A
                    (Nos.  33-47287 and 811-6637) as filed  electronically  with
                    the SEC on July 31, 2001.

     11.  An opinion and consent of counsel as to the legality of the securities
          being registered,  indicating whether they will, when sold, be legally
          issued, fully paid and nonassessable.

          Legal opinion of Stradley, Ronon, Stevens & Young, LLP, counsel to the
          Registrant,  dated  September  27,  2002,  as to the  legality  of the
          securities  being  registered is  incorporated  herein by reference to
          Post-Effective Amendment No. 39 to Registrant's Registration Statement
          on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with
          the SEC on September 30, 2002.

     12.  An  opinion,  and  consent to their use,  of counsel or, in lieu of an
          opinion,  a copy of the  revenue  ruling  from  the  Internal  Revenue
          Service,  supporting the tax matters and  consequences to shareholders
          discussed in the prospectus.

          Form of tax opinion of Stradley,  Ronon, Stevens & Young, LLP, counsel
          to the  Registrant,  supporting  the tax matters and  consequences  to
          shareholders  discussed  in the  Prospectus/Proxy  Statement  is filed
          electronically as Exhibit No. EX-99.12.

     13.  Other Material Contracts.

          A.   Administration  Agreement,  dated May 21, 2001,  between  Brinson
               Advisors,  Inc.  and the  Registrant  is  incorporated  herein by
               reference   to   Post-Effective   Amendment   No.   37  as  filed
               electronically with the SEC on July 19, 2002.

          B.   Administration Agreement,  dated May 21, 2001, as revised June 3,
               2002,  between  UBS  Global  Asset  Management  (US) Inc.  (f/k/a
               Brinson Advisors Inc.) and the Registrant is incorporated  herein
               by  reference  to  Post-Effective   Amendment  No.  38  as  filed
               electronically with the SEC on July 19, 2002.

          C.   Transfer Agency and Related Services Agreement,  dated August 20,
               2001, between PFPC Inc. and the Registrant is incorporated herein
               by  reference  to  Post-Effective   Amendment  No.  38  as  filed
               electronically with the SEC on July 19, 2002.

     14.  Other Opinions and Consents.

          Consents of Ernst & Young, LLP,  independent  auditors to the UBS U.S.
          Value  Equity Fund and the UBS  Financial  Sector Fund Inc.  are filed
          electronically as Exhibit No. EX-99.14.

     15.  Omitted Financial Statements.

          Not Applicable.

     16.  Power of Attorney.

          A.   Powers  of  Attorney   appointing  Amy  R.  Doberman,   David  M.
               Goldenberg,  Bruce G. Leto, Mark A. Sheehan and Jana L. Cresswell
               as  attorneys-in-fact  and agents to Frank K.  Reilly,  Walter E.
               Auch, Edward M. Roob and Paul H. Schubert are incorporated herein
               by reference to  Post-Effective  Amendment No. 39 to Registrant's
               Registration  Statement on Form N-1A (Nos.  3347287 and 811-6637)
               as filed electronically with the SEC on September 30, 2002.

          B.   Powers  of  Attorney  dated  May  19,  2003,  appointing  Amy  R.
               Doberman, David M. Goldenberg, Bruce G. Leto, Mark A. Sheehan and
               Jana L.  Cresswell  as  attorneys-in-fact  and agents to Brian M.
               Storms and Joseph Varnas,  are  electronically  filed herewith as
               Exhibit No. EX-99.16.B.

     17.  Additional Exhibits.

                  Not Applicable.

Item 17. Undertakings

     (1)  Insofar  as   indemnification   for  liabilities   arising  under  the
          Securities  Act of 1933 may be  permitted to  directors,  officers and
          controlling  persons  of the  Registrant  pursuant  to Rule 484 of the
          Securities Act of 1933, as amended (the "1933 Act"), or otherwise, the
          Registrant  has been advised that in the opinion of the Securities and
          Exchange  Commission such  indemnification is against public policy as
          expressed  in the 1933 Act and is,  therefore,  unenforceable.  In the
          event that a claim for indemnification against such liabilities (other
          than the payment by the  Registrant of expenses  incurred or paid by a
          director,  officer  or  controlling  person of the  Registrant  in the
          successful  defense of any action,  suit or proceeding) is asserted by
          such  director,  officer  or  controlling  person in  connection  with
          securities  being  registered,  the  Registrant  will,  unless  in the
          opinion of its  counsel  the matter  has been  settled by  controlling
          precedent,  submit to a court of appropriate jurisdiction the question
          whether  such  indemnification  by  it is  against  public  policy  as
          expressed  in  the  1933  Act  and  will  be  governed  by  the  final
          adjudication of such issue.

     (2)  The undersigned  registrant agrees that prior to any public reoffering
          of the securities  registered through the use of a prospectus which is
          a part of this  registration  statement  by any person or party who is
          deemed to be an  underwriter  within the meaning of Rule 145(c) of the
          1933 Act,  the  reoffering  prospectus  will  contain the  information
          called for by the  applicable  registration  form for  reofferings  by
          persons who may be deemed underwriters, in addition to the information
          called for by the other items of the applicable form.

     (3)  The undersigned  registrant agrees that every prospectus that is filed
          under  paragraph  (1) above will be filed as a part of an amendment to
          the registration statement and will not be used until the amendment is
          effective,  and that, in determining any liability under the 1933 Act,
          each post-effective amendment shall be deemed to be a new registration
          statement for the securities offered therein,  and the offering of the
          securities  at that time shall be deemed to be the  initial  bona fide
          offering of them.

     (4)  The  undersigned  registrant  undertakes  to file,  by  post-effective
          amendment, a copy of the opinion of counsel as to certain tax matters,
          within a reasonable time after receipt of such opinion.





                                   SIGNATURES

As required by the  Securities  Act of 1933,  as amended (the "1933 Act"),  this
Registration  Statement has been signed on behalf of the  Registrant in the City
of New York, and the State of New York on the 6th day of August 2003.

                                        THE UBS FUNDS


                                        By:/s/Joseph Varnas
                                           --------------------------------
                                             Joseph Varnas*
                                             President



As required by the 1933 Act, this registration  statement has been signed by the
following persons in the capacities and on the dates indicated.



         Signature                     Title                            Date
         ---------                     -----                            ----


/s/Joseph Varnas                    President                    August 6, 2003
- ----------------------------
Joseph Varnas*

/s/Brian M. Storms                  Trustee                      August 6, 2003
- ----------------------------
Brian M. Storms*


/s/Frank K. Reilly                  Chairman and                 August 6, 2003
- ----------------------------        Trustee
Frank K. Reilly*


/s/Paul H. Schubert                 Principal Accounting         August 6, 2003
- ----------------------------        Officer and Treasurer
Paul H. Schubert*


/s/Walter E. Auch                   Trustee                      August 6, 2003
- ----------------------------
Walter E. Auch*


/s/Edward M. Roob                   Trustee                      August 6, 2003
- ----------------------------
Edward M. Roob*


     * By:  /s/David M. Goldenberg
            --------------------------------------------
             David M. Goldenberg, Attorney-in-Fact
             (Pursuant to Power of Attorney, incorporated herein by reference)





EXHIBIT INDEX

    Exhibit No.                      Exhibit
    -----------                      -------

EX-99.12            Form of Tax Opinion of Stradley, Ronon, Stevens & Young, LLP

EX-99.14            Consent of Independent Auditor

EX-99.16.B          Powers-of-Attorney

EX-99.12

                              ______________, 2003



Board of Trustees
The UBS Funds
One North Wacker Drive
Chicago, Illinois 60606

Board of Directors
UBS Financial Sector Fund, Inc.
51 West 52nd Street
New York, New York 10019

               Re:  Agreement and Plan of Reorganization  (the "Agreement") made
                    as of the ____ day of ______,  2003,  by and between The UBS
                    Funds, a statutory trust created under the laws of the State
                    of Delaware (the "Trust"),  on behalf of its series, the UBS
                    U.S. Value Equity Fund (the "Acquiring  Fund"),  and the UBS
                    Financial Sector Fund Inc., a corporation  created under the
                    laws of the State of Maryland (the "Acquired Fund")


Gentlemen:

     You have  requested  our  opinion  concerning  certain  federal  income tax
consequences of the reorganization of the Acquired Fund (the  "Reorganization"),
which will  consist  of:  (i) the  acquisition  by the  Trust,  on behalf of the
Acquiring Fund, of substantially all of the property, assets and goodwill of the
Acquired Fund, in exchange solely for shares of beneficial interest,  $0.001 par
value, of (a) Acquiring  Fund-Class A shares  ("Acquiring Fund Class A Shares"),
(b)  Acquiring  Fund-Class  B shares  ("Acquiring  Fund  Class B  Shares"),  (c)
Acquiring  Fund-Class  C  shares  ("Acquiring  Fund  Class C  Shares"),  and (d)
Acquiring Fund-Class Y shares ("Acquiring Fund Class Y Shares" and together with
Acquiring Fund Class A Shares,  Acquiring Fund Class B Shares and Acquiring Fund
Class C Shares,  the "Acquiring Fund Shares" which are voting  securities),  and
the  assumption  by the Trust,  on behalf of the  Acquiring  Fund, of all of the
liabilities of the Acquired Fund;  (ii) the  distribution  of (a) Acquiring Fund
Class A  Shares  to the  stockholders  of Class A shares  of the  Acquired  Fund
("Acquired  Fund  Class A  Shares"),  (b)  Acquiring  Fund Class B Shares to the
stockholders  of Class B shares of the  Acquired  Fund  ("Acquired  Fund Class B
Shares"),  (c)  Acquiring  Fund  Class C Shares to the  stockholders  of Class C
shares of the Acquired Fund ("Acquired Fund Class C Shares"),  and (d) Acquiring
Fund Class Y Shares to the  stockholders  of Class Y shares of the Acquired Fund
("Acquired  Fund Class Y Shares" and together with Acquired Fund Class A Shares,
Acquired  Fund Class B Shares and Acquired  Fund Class C Shares,  the  "Acquired
Fund Shares"),  according to their respective  interests in complete liquidation
of the Acquired Fund; and (iii) the  dissolution of the Acquired Fund as soon as
practicable after the Closing of the Reorganization, all upon and subject to the
terms and conditions of this Agreement.

     In  rendering  our  opinion,  we have  reviewed  and relied  upon:  (a) the
Agreement,  made as of the __ day of ____,  2003,  by and between the Trust,  on
behalf of the Acquiring  Fund, and the Acquired  Fund;  (b) the proxy  materials
provided to  shareholders  of the Acquired Fund in  connection  with the Special
Shareholders' Meeting of the Acquired Fund held on _________,  2003; (c) certain
representations concerning the Reorganization made to us by the Trust, on behalf
of the Acquiring Fund, and the Acquired Fund in a letter dated  _________,  2003
(the  "Representation  Letter");  (d) all other  documents,  financial and other
reports and corporate  minutes we deemed relevant or  appropriate;  and (e) such
statutes, regulations,  rulings and decisions as we deemed material in rendering
this  opinion.  All terms used herein,  unless  otherwise  defined,  are used as
defined in the Agreement.

     For purposes of this  opinion,  we have assumed that the Acquired  Fund, on
the Closing of the  Reorganization,  satisfies,  and  immediately  following the
Closing,  the  Acquiring  Fund will  continue to satisfy,  the  requirements  of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),  for
qualification as a regulated investment company.

     Based on the foregoing,  and provided the  Reorganization is carried out in
accordance  with the  applicable  laws of the  State of  Delaware  and  State of
Maryland,  the terms of the Agreement and the  statements in the  Representation
Letter with regard to matters of fact, it is our opinion that:

     1. The acquisition by the Acquiring Fund of substantially all of the assets
and the  assumption of the  liabilities  of the Acquired Fund as provided for in
the Agreement in exchange solely for the Acquiring Fund Shares,  followed by the
distribution  by the Acquired Fund to its  stockholders  of the  Acquiring  Fund
Shares  in  complete  liquidation  of  the  Acquired  Fund,  will  qualify  as a
reorganization  within the  meaning of Section  368(a)(1)  of the Code,  and the
Acquired   Fund  and  the   Acquiring   Fund  each  will  be  a  "party  to  the
reorganization" within the meaning of Section 368(b) of the Code.

     2. No gain  or loss  will be  recognized  by the  Acquired  Fund  upon  the
transfer  of  substantially  all of its  assets  to and  the  assumption  of the
liabilities  by the Acquiring  Fund in exchange  solely for the  Acquiring  Fund
Shares pursuant to Section 361(a) and Section 357(a) of the Code.

     3. No gain or loss  will be  recognized  by the  Acquiring  Fund  upon  the
receipt by it of  substantially  all of the assets to and the  assumption of the
liabilities  of the  Acquired  Fund in exchange  solely for the  Acquiring  Fund
Shares pursuant to Section 1032(a) of the Code.

     4. No gain  or loss  will be  recognized  by the  Acquired  Fund  upon  the
distribution  of the  Acquiring  Fund  Shares to its  stockholders  in  complete
liquidation  of the Acquired  Fund (in pursuance of the  Agreement)  pursuant to
Section 361(c)(1) of the Code.

     5. The basis of the assets of the Acquired  Fund  received by the Acquiring
Fund  will be the  same as the  basis  of  these  assets  to the  Acquired  Fund
immediately prior to the exchange pursuant to Section 362(b) of the Code.

     6. The holding  period of the assets of the Acquired  Fund  received by the
Acquiring Fund will include the period during which such assets were held by the
Acquired Fund pursuant to Section 1223(2) of the Code.

     7. No gain or loss will be recognized by the  stockholders  of the Acquired
Fund upon the  exchange of their  Acquired  Fund Shares for the  Acquiring  Fund
Shares (including fractional shares to which they may be entitled),  pursuant to
Section 354(a) of the Code.

     8. The basis of the Acquiring Fund Shares  received by the  stockholders of
the Acquired Fund  (including  fractional  shares to which they may be entitled)
will be the same as the basis of the  Acquired  Fund Shares  exchanged  therefor
pursuant to Section 358(a)(1) of the Code.

     9.  The  holding  period  of the  Acquiring  Fund  Shares  received  by the
stockholders of the Acquired Fund (including fractional shares to which they may
be  entitled)  will  include  the  holding  period of the  Acquired  Fund Shares
surrendered  in exchange  therefor,  provided that the Acquired Fund Shares were
held as a capital asset on the Closing of the Reorganization pursuant to Section
1223(1) of the Code.

     10. The  Acquiring  Fund will succeed to and take into  account,  as of the
date of the  transfer  as  defined in  Section  1.381(b)-1(b)  of the income tax
regulations  issued  by  the  United  States  Department  of the  Treasury  (the
"Treasury  Regulations"),  the items of the Acquired  Fund  described in Section
381(c) of the Code,  subject to the  conditions  and  limitations  specified  in
Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations.

     Our opinion is based upon the Code,  the applicable  Treasury  Regulations,
the present positions of the Internal Revenue Service (the "Service") as are set
forth  in   published   revenue   rulings   and  revenue   procedures,   present
administrative positions of the Service, and existing judicial decisions, all of
which are subject to change either  prospectively  or  retroactively.  We do not
undertake to make any continuing analysis of the facts or relevant law following
the Closing of the Reorganization.

     Our opinion is conditioned  upon the performance by the Trust, on behalf of
the Acquiring Fund, and the Acquired Fund of their undertakings in the Agreement
and the  Representation  Letter.  Our  opinion is  limited  to the  transactions
incident to the Reorganization described herein, and no opinion is rendered with
respect  to (i)  any  other  transaction  or (ii)  the  effect,  if any,  of the
Reorganization   (and/or  the  transactions   incident  thereto)  on  any  other
transaction  and/or the  effect,  if any, of any such other  transaction  on the
Reorganization.

     This opinion is being rendered to the Trust,  on behalf of its series,  the
Acquired Fund and the Acquiring  Fund, and may be relied upon only by such funds
and the shareholders of each. We hereby consent to the use of this opinion as an
exhibit to the Registration Statement of the Acquired Fund on Form N-14, and any
amendments thereto, covering the registration of the shares of the Acquired Fund
under  the   Securities   Act  of  1933,  as  amended,   to  be  issued  in  the
Reorganization.



                               Very truly yours,

                               STRADLEY, RONON, STEVENS & YOUNG, LLP


                               By:
                                    --------------------------------------------
                                                          , a partner

EX-99.14

                        CONSENT OF INDEPENDENT AUDITORS




We consent to the reference to our firm under the caption "Financial  Highlights
for the Value Equity Fund" in the Prospectus/Proxy  Statement,  to the reference
to our firm in Exhibit A to the Prospectus/Proxy Statement and to the use of our
reports on UBS U.S.  Value Equity Fund, a series of The UBS Funds,  dated August
27, 2002 and UBS Financial Sector Fund Inc.  (formerly,  UBS Financial  Services
Fund)  dated  May  5,  2003,  which  are  incorporated  by  reference,  in  this
Registration Statement (Form N-14 No. 33-47287 and 811-6637) of The UBS Funds.






                    ERNST & YOUNG LLP


New York, New York
August 5, 2003

EX-99.16

                                POWER OF ATTORNEY

     I, Brian M.  Storms,  Trustee of The UBS Funds and UBS  Relationship  Funds
(each a  "Trust"),  hereby  constitute  and appoint  Amy R.  Doberman,  David M.
Goldenberg,  Bruce G. Leto, Mark A. Sheehan and Jana L.  Cresswell,  and each of
them singly, my true and lawful attorneys, with full power to sign for me, in my
name and in my capacity as Trustee of the Trusts,  any amendments to the current
registration statements of the Trusts on Form N-1A (as filed with the Securities
and Exchange  Commission) and any registration  statements of the Trusts on Form
N-14, or any  amendments  thereto,  to be filed with the Securities and Exchange
Commission,  and all instruments necessary or desirable in connection therewith,
and hereby ratify and confirm my signature as it may be signed by said attorneys
to these registration statements, amendments to such registration statements and
other instruments.

                   Signature              Title              Date
                   ---------              -----              ----

/s/Brian M. Storms                       Trustee         May 19, 2003
- -----------------------------------
Brian M. Storms



                                POWER OF ATTORNEY

     I, Joseph  Varnas,  President of The UBS Funds and UBS  Relationship  Funds
(each a  "Trust"),  hereby  constitute  and appoint  Amy R.  Doberman,  David M.
Goldenberg,  Bruce G. Leto, Mark A. Sheehan and Jana L.  Cresswell,  and each of
them singly, my true and lawful attorneys, with full power to sign for me, in my
name and in my  capacity  as  President  of the Trusts,  any  amendments  to the
current  registration  statements  of the Trusts on Form N-1A (as filed with the
Securities  and Exchange  Commission)  and any  registration  statements  of the
Trusts on Form N-14, or any amendments  thereto, to be filed with the Securities
and  Exchange  Commission,   and  all  instruments  necessary  or  desirable  in
connection  therewith,  and hereby  ratify and confirm my signature as it may be
signed by said attorneys to these  registration  statements,  amendments to such
registration statements and other instruments.

                   Signature              Title              Date
                   ---------              -----              ----

/s/Joseph Varnas                       Trustee         May 19, 2003
- -----------------------------------
Joseph Varnas