-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FTVquM1sS5CV5BNAuEaZTEGxZJ6nEO8Lhaum26pb+jMdiZMr8OTX68JaQW2SiWdm 9QCBvDw/fUrk1ofyOGMjEg== 0001386893-07-000034.txt : 20070410 0001386893-07-000034.hdr.sgml : 20070410 20070410165359 ACCESSION NUMBER: 0001386893-07-000034 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20070410 DATE AS OF CHANGE: 20070410 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS FUNDS CENTRAL INDEX KEY: 0000886244 IRS NUMBER: 367056204 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-47287 FILM NUMBER: 07759340 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 FORMER COMPANY: FORMER CONFORMED NAME: BRINSON FUNDS INC DATE OF NAME CHANGE: 19920929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS FUNDS CENTRAL INDEX KEY: 0000886244 IRS NUMBER: 367056204 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06637 FILM NUMBER: 07759341 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 FORMER COMPANY: FORMER CONFORMED NAME: BRINSON FUNDS INC DATE OF NAME CHANGE: 19920929

0000886244

S000017860 UBS Global Frontier Fund

C000049576 A

C000049577 C

C000049578 Y

485APOS 1 filing485a.htm

As filed with the U.S. Securities and Exchange Commission on April 10, 2007

File No. 033-47287
File No. 811-06637

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 55 [X]
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 56

(Check appropriate box or boxes.)

THE UBS FUNDS
(Exact Name of Registrant as Specified in Charter)

One North Wacker, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code 312-525-7100

Mark F. Kemper
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, NY 10019-6114
(Name and Address of Agent for Service)

Please send copies of all communications to:

Bruce G. Leto, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
(215) 564-8027

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

____ immediately upon filing pursuant to paragraph (b)
____ on [Date] pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on [Date] pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
____ on [Date] pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

This Post-Effective Amendment relates only to the UBS Global Frontier Fund. No
other information relating to any other series of the Registrant is amended or
superseded hereby.

Subject to completion April 10, 2007
The UBS Funds
UBS Global Frontier Fund

Prospectus

[__________________, 2007]

This prospectus offers Class A, Class C and Class Y shares F in the UBS Global
Frontier Fund (the "Fund"), a series of The UBS Funds (the "Trust"). Each class
has different sales charges and ongoing expenses. You can choose the class that
is best for you based on how much you plan to invest and how long you plan to
hold your Fund shares. Class Y shares are available only to certain types of
investors.

As with all mutual funds, the U.S. Securities and Exchange Commission ("SEC")
has not approved or disapproved the Fund's shares or determined whether this
prospectus is complete or accurate. To state otherwise is a crime.

The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the SEC
is effective. The prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.

Not FDIC Insured. May lose value. No bank guarantee.

Contents

The UBS Funds
What every investor should know about the Fund

Investment objective, strategies, securities selection and risks.........Page 3
Performance..............................................................Page 10
Expenses and fee tables..................................................Page 11

Your investment
Information for managing your Fund account

Managing your Fund account...............................................Page 13
- --Flexible pricing
- --Buying shares
- --Selling shares
- --Exchanging shares
- --Pricing and valuation

Additional information
Additional important information about the Fund

Management...............................................................Page 25

Disclosure of portfolio holdings.........................................Page 26

Dividends and taxes......................................................Page 27

Supplemental Advisor Performance Information.............................Page 29

Financial highlights.....................................................Page 31

Where to learn more about the Fund....................................Back cover

Please find the UBS Funds' privacy notice inside the back cover
of this prospectus

The Fund is not a complete or balanced investment program.

Investment objective, strategies, securities selection and risks

Fund objective
The Fund seeks to obtain superior long-term returns on capital through leveraged
exposure to a broadly diversified global investment portfolio.

Principal investment strategies
In order to achieve the Fund's investment objective, the Fund's investment
advisor, UBS Global Asset Management (Americas) Inc. (the "Advisor" or "UBS
Global AM (Americas)") employs an enhancement to its global securities
(allocation) strategy ("Global Securities (Allocation) Strategy"). The Advisor's
Global Securities (Allocation) Strategy seeks to provide exposure to the major
asset classes of the global markets and is currently utilized by other funds and
products managed by the Advisor, including the UBS Global Allocation Fund, a
series of the Trust, and the UBS Global Securities Relationship Fund, a series
of UBS Relationship Funds (the "GSR Fund"). The Advisor enhances its Global
Securities (Allocation) Strategy with respect to the Fund by increasing the
Fund's exposure to the global markets through the use of leverage to achieve
higher returns than the Global Securities (Allocation) Strategy typically with
equity-like risk. However, when warranted by market conditions, the Advisor will
attempt to limit the Fund's equity risk through active asset allocation.

The Fund principally invests directly or indirectly in equity and fixed income
securities and other financial instruments to gain exposure to issuers located
within and outside the United States. In connection with its Global Securities
(Allocation) Strategy, under normal circumstances the Advisor will allocate the
exposure of the Fund's assets between fixed income securities and equity
securities. The Fund may invest directly in such securities and financial
instruments and/or indirectly in such investments by investing in shares of
open-end investment companies ("Underlying Funds"), including open-end
investment companies advised by the Advisor to the extent permitted by an
exemptive order received by the Fund. In addition, the Fund will increase its
exposure to the global markets through the use of leverage. Leverage by the Fund
generally will be achieved by entering into total return swap agreements with
respect to the return of the GSR Fund. The Fund is a non-diversified fund.

Investments by the Fund or an Underlying Fund in fixed income securities may
include, but are not limited to, debt securities of governments throughout the
world (including the United States), their agencies and instrumentalities, debt
securities of corporations, mortgage-backed securities and asset-backed
securities. Investments by the Fund or an Underlying Fund in equity securities
may include, but are not limited to, common stock and preferred stock. The Fund
may invest in equity securities of issuers in any capitalization range based on
market conditions and in accordance with its investment objective.

The Fund and the Underlying Funds may, but are not required to, use derivative
instruments ("Derivatives") for risk management purposes or as part of the
Fund's or an Underlying Fund's investment strategies. Generally, Derivatives are
financial contracts whose value depends upon, or is derived from, the value of
an underlying asset, reference rate, or index, and may relate to stocks, bonds,
interest rates, total return rates, currencies or currency exchange rates, and
related indexes. Examples of Derivatives include options, futures, forward
agreements, swap agreements (including, but not limited to, total return,
interest rate and credit default swaps), and credit-linked securities. The Fund
or an Underlying Fund may use Derivatives to earn income and enhance returns, to
manage or adjust the risk profile of the Fund, to replace more traditional
direct investments, or to obtain exposure to certain markets. The Fund and the
Underlying Funds may invest in Derivatives to the extent permitted by the
Investment Company Act of 1940, as amended (the "1940 Act").

In particular, the Fund generally will seek to increase its exposure to the
global markets through the use of leverage by investing in total return swap
agreements with respect to the return of the GSR Fund. In a typical total return
swap agreement, the Fund will receive the price appreciation (or depreciation)
of the GSR Fund from the counterparty to the swap agreement in exchange for a
payment from the Fund based on LIBOR plus a spread.

As an alternative to investing in total return swap agreements based on the
return of the GSR Fund, the Fund may also leverage by borrowing from banks to
the extent permitted by the 1940 Act to invest additional assets in the global
markets by investing the borrowed assets in the GSR Fund. The Fund will adhere
to the SEC's asset coverage requirements for all such borrowings.

The use of leverage by the Fund through total return swaps or borrowing, as
described above, is permitted to range between 0% to 50% of the Fund's total
assets (including amounts borrowed), but will typically range between 25% to 40%
of the Fund's total assets (including amounts borrowed).

The Fund may invest all or a portion of its assets in Underlying Funds to gain
exposure to various asset classes. The Fund does not pay fees in connection with
its investments in the Underlying Funds, but may pay expenses associated with
such investments.

Asset Allocation and securities selection
The Advisor's Global Securities (Allocation) Strategy is focused on investment
fundamentals. The Advisor believes that investment fundamentals determine and
describe future cash flows that define fundamental investment value. The Advisor
tries to identify and exploit periodic discrepancies between market prices and
fundamental value. These price/value discrepancies are used as the building
blocks for portfolio construction.

To achieve the Fund's investment objective, under normal market conditions, the
Advisor purchases securities or shares of Underlying Funds to employ the
Advisor's Global Securities (Allocation) Strategy, which utilizes active asset
allocation strategies across various asset classes based on the Advisor's
assessment of prevailing market conditions in the US and abroad. The Advisor
enhances its Global Securities (Allocation) Strategy with respect to the Fund by
increasing the Fund's exposure to the global markets through the use of leverage
to achieve higher returns than the Global Securities (Allocation) Strategy
typically with equity-like risk. However, when warranted by market conditions,
the Advisor will attempt to limit the Fund's equity risk through active asset
allocation. The asset classes among which the Advisor allocates the Fund's
portfolio are:

o US equities;
o International equities;
o Emerging markets equities;
o US fixed income;
o International fixed income;
o Emerging markets fixed income; and
o US high yield fixed income.

The Fund seeks to outperform the GSMI Mutual Fund Index, which is the benchmark
for the Advisor's Global Securities (Allocation) Strategy. This index is
compiled by the Advisor and is a composite of seven indexes provided by
independent data providers: Russell 3000 Index, MSCI World Free ex USA Index,
Citigroup Broad Investment Grade Bond Index, Citigroup Non-US World Government
Bond Index, MSCI Emerging Markets Index (net US), JP Morgan Emerging Markets
Bond Index Global and Merrill Lynch US High Yield Cash Pay Constrained Index,
each corresponding to a distinct asset class that represents the primary
wealth-holding public global securities markets. The Advisor also seeks for the
Fund to outperform and typically have equity-like risk similar to the MSCI World
Index Free (net US), a broad-based index that represents the US and developed
international equity markets in terms of capitalization and performance.
However, when warranted by market conditions, the Advisor will attempt to limit
the Fund's equity risk through active asset allocation.

The Fund invests its assets in investments or Underlying Funds that are
economically tied to a number of countries throughout the world, including
emerging markets countries and the United States. The Fund intends to invest in
securities of issuers or in Underlying Funds invested in such issuers from at
least three countries and approximately 60% to 70% of its assets will normally
be invested directly or indirectly in US securities.

Under the Global Securities (Allocation) Strategy, the Advisor chooses
investments for the Fund and the Underlying Funds by:

o Identifying asset classes that appear to be temporarily underpriced.
o Analyzing the fundamental value of individual securities in order to
estimate their relative value and attractiveness, and to identify
securities for investment that are underpriced relative to their
fundamental value.
o Identifying and investing in currencies based on identification of
discrepancies between market prices and fundamental values.
o Identifying and investing in strategies or specific securities that
serve to mitigate or manage investment risk exposures resulting from
investments in other assets or asset classes.

Within the equity portion of the Fund's or an Underlying Fund's portfolio, the
Advisor generally selects securities whose fundamental values it believes are
greater than their market prices. In this context, the fundamental value of a
given security is the Advisor's assessment of what a security is worth. The
Advisor bases its estimates of value upon economic, industry and company
analysis, as well as upon a company's management team, competitive advantage and
core competencies. The Advisor then compares its assessment of a security's
value against the prevailing market prices, with the aim of constructing a
portfolio of stocks with attractive relative price/value characteristics.

For each security under analysis, the fundamental value estimate is compared to
the company's current market price to ascertain whether a valuation anomaly
exists.

A stock with a market price below the estimated intrinsic or fundamental value
would be considered a candidate for inclusion in the Fund's or an Underlying
Fund's portfolio. This comparison between price and intrinsic or fundamental
value allows comparisons across industries and countries.

While the Advisor's investment decisions with respect to the equity portion of
the Fund's or an Underlying Fund's portfolio are based primarily on price/value
discrepancies as identified by its fundamental valuation process, under certain
circumstances the Advisor may utilize growth-oriented strategies within its US
equity asset class for a portion of the allocation to manage risk exposures; but
only after subjecting such strategies to a rigorous due diligence process to
judge their suitability for the Fund or an Underlying Fund.

To invest in growth equities, the Advisor will seek to invest in companies that
possess a dominant market position and franchise, a major technological edge or
a unique competitive advantage, in part by using a proprietary quantitative
screening system that ranks stocks using a series of growth, valuation and
momentum metrics.

In selecting fixed income securities, the Advisor uses an internally developed
valuation model that quantifies return expectations for all major bond markets,
domestic and foreign. The model employs a qualitative credit review process that
assesses the ways in which macroeconomic forces (such as inflation, risk
premiums and interest rates) may affect industry trends. Against the output of
this model, the Advisor considers the viability of specific debt securities
compared to certain qualitative factors, such as management strength, market
position, competitive environment and financial flexibility, as well as certain
quantitative factors, such as historical operating results, calculation of
credit ratios and expected future outlook. These securities will have an initial
maturity of more than one year. The Fund and certain Underlying Funds may invest
in both investment grade and high yield (lower-rated) securities.

The Advisor's fixed income strategy combines judgments about the absolute value
of the fixed income universe and the relative value of issuer sectors, maturity
intervals, duration of securities, quality and coupon segments and specific
circumstances facing the issuers of fixed income securities. Duration measures a
fixed income security's price sensitivity to interest rates by indicating the
approximate change in a fixed income security's price if interest rates move up
or down in 1% increments. Duration management involves adjusting the sensitivity
to interest rates of the holdings within a country. The Advisor manages duration
by choosing a maturity mix that provides opportunity for appreciation while also
limiting interest rate risks.

The Fund's and the Underlying Funds' risks are carefully monitored with
consideration given to the risk generated by individual positions, sector,
country and currency views.

The Advisor's employment of leverage mechanisms with respect to the Fund's
portfolio is based on the belief that, in conventional portfolio management,
increasing a portfolio's long-term expected return entails adding riskier
equity-like assets and reducing the allocation to lower-risk fixed income
investments. The Advisor seeks to step beyond this framework to provide higher
risk-adjusted returns than the Global Securities (Allocation) Strategy by
employing leverage through investing in total return swaps based on the return
of the GSR Fund or borrowing from banks to the extent permitted by the 1940 Act
to purchase additional shares of the GSR Fund to increase the Fund's risk and
return in an efficient manner.

The Fund and the Underlying Funds may also invest in cash or cash equivalent
instruments. When market conditions warrant, the Fund or an Underlying Fund may
make substantial temporary defensive investments in cash equivalents, which may
affect its ability to pursue its investment objective. The Advisor actively
manages the Fund and the Underlying Funds. As such, the Fund or an Underlying
Fund may have high portfolio turnover, which may result in higher costs for
brokerage commissions, transaction costs and taxable gains. The trading costs
and tax effects associated with portfolio turnover may adversely affect the
Fund's performance.

Principal risks
An investment in the Fund is not guaranteed; you may lose money by investing in
the Fund. The other principal risks presented by an investment in the Fund and
the Underlying Funds are:

Investing in other funds risk - The Fund's investment performance is affected by
the investment performance of the Underlying Funds in which the Fund may invest.
Thus, the Fund's performance is affected by the allocation of its assets among
the Underlying Funds and their ability to meet their investment objectives, in
addition to any direct investments made by the Fund. The Advisor may not
accurately assess the attractiveness or risk potential of particular Underlying
Funds, asset classes or investment styles. In addition, through its investment
in the Underlying Funds, the Fund is subject to the risks of the Underlying
Funds' investments and their expenses.

Market risk - The risk that the market value of the Fund's or an Underlying
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.

Interest rate risk - The risk that changing interest rates may adversely affect
the value of an investment. An increase in prevailing interest rates typically
causes the value of fixed income securities to fall, while a decline in
prevailing interest rates may cause the market value of fixed income securities
to rise. Changes in interest rates will affect the value of longer-term fixed
income securities more than shorter-term securities and higher quality
securities more than lower quality securities.

US government agency obligations risk - Government agency obligations have
different levels of credit support, and therefore, different degrees of credit
risk. Securities issued by agencies and instrumentalities of the US government
that are supported by the full faith and credit of the United States, such as
the Federal Housing Administration and Ginnie Mae, present little credit risk.
Other securities issued by agencies and instrumentalities sponsored by the US
government that are supported only by the issuer's right to borrow from the US
Treasury, subject to certain limitations, such as securities issued by Federal
Home Loan Banks, and securities issued by agencies and instrumentalities
sponsored by the US government that are supported only by the credit of the
issuing agencies, such as Freddie Mac and Fannie Mae, are subject to a greater
degree of credit risk.

Credit risk - The risk that the issuer of bonds with ratings of BB (S&P) or Ba
(Moody's) or below will default or otherwise be unable to honor a financial
obligation. These securities are considered to be predominately speculative with
respect to an issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. Lower-rated bonds are more likely
to be subject to an issuer's default or downgrade than investment grade
(higher-rated) bonds.

Prepayment or call risk - The risk that issuers will prepay fixed rate
obligations when interest rates fall, forcing the Fund or an Underlying Fund to
reinvest in obligations with lower interest rates than the original obligations.

Small and medium company risk - The risk that investments in small and medium
size companies may be more volatile than investments in larger companies, as
small and medium size companies generally experience higher growth and failure
rates. The trading volume of these securities is normally lower than that of
larger companies. Such securities may be less liquid than others and could make
it difficult to sell a security at a time or price desired. Changes in the
demand for these securities generally have a disproportionate effect on their
market price, tending to make prices rise more in response to buying demand and
fall more in response to selling pressure.

Foreign investing and emerging markets risks - The risk that prices of the
Fund's or an Underlying Fund's investments in foreign securities may go down
because of unfavorable foreign government actions, political instability or the
absence of accurate information about foreign issuers. Also, a decline in the
value of foreign currencies relative to the US dollar will reduce the value of
securities denominated in those currencies. Also, foreign securities are
sometimes less liquid and harder to sell and to value than securities of US
issuers. Each of these risks is more severe for securities of issuers in
emerging market countries.

Asset allocation risk - The risk that the Fund may allocate assets to an asset
category or an Underlying Fund that underperforms other asset categories. For
example, the Fund may be overweighted in the equity asset class when the stock
market is falling and the fixed income market is rising.

Derivatives Risk - Derivatives involve risks different from, and possibly
greater than, the risks associated with investing directly in securities and
other instruments. Derivatives require investment techniques and risk analyses
different from those of other investments. If the Advisor incorrectly forecasts
the value of securities, currencies, interest rates, total return rates, or
other economic factors in using Derivatives, the Fund or an Underlying Fund
might have been in a better position if it had not entered into the Derivatives.
While some strategies involving Derivatives can protect against the risk of
loss, the use of Derivatives can also reduce the opportunity for gain or even
result in losses by offsetting favorable price movements in other Fund or
Underlying Fund investments. Derivatives also involve the risk of mispricing or
improper valuation, the risk that changes in the value of a Derivative may not
correlate perfectly with the underlying asset, rate, index, or overall
securities markets, and counterparty and credit risk (the risk that the other
party to a swap agreement or other Derivative will not fulfill its contractual
obligations, whether because of bankruptcy or other default). Gains or losses
involving some options, futures, and other Derivatives may be substantial (for
example, for some Derivatives, it is possible for the Fund or an Underlying Fund
to lose more than the amount it invested in the Derivatives). Some Derivatives
tend to be more volatile than other investments, resulting in larger gains or
losses in response to market changes. Derivatives are subject to a number of
other risks, including liquidity risk (the possible lack of a secondary market
for Derivatives and the resulting inability of the Fund to sell or otherwise
close out the Derivatives) and interest rate risk (some Derivatives are more
sensitive to interest rate changes and market price fluctuations). Finally, the
Fund's or an Underlying Fund's use of Derivatives may cause it to realize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than if it had not used such instruments.

Similarly, total return swap transactions involve greater risks than if the Fund
had invested in the underlying asset directly. The total rate of return of an
investment on which a total return swap agreement is based may exhibit
substantial volatility and, in any given period, may be positive or negative for
the specified period of the total return swap agreement. In the event the total
rate of return of the underlying asset is negative for the specified period of
the swap agreement, the Fund will be required to make a payment to the
counterparty in addition to the periodic payment required by the swap agreement
to cover the decline in value of the underlying asset. The Fund's risk of loss,
therefore, is increased because the Fund could lose an amount equal to the
decrease in value of the underlying asset for the specified period of time, in
addition to the periodic payments required by the total return swap agreement.
Total return swap agreements may effectively add leverage to the Fund's
portfolio because, in addition to its total net assets, the Fund would be
subject to investment exposure on the notional amount of the swap agreement.

Leverage risk - The Fund or an Underlying Fund may borrow money from banks to
purchase investments, which is a form of leverage, or utilize certain
Derivatives, which may create leverage. If the Fund or an Underlying Fund
borrows money to purchase securities and its investments decrease in value, the
Fund's or an Underlying Fund's losses will be greater than if it did not borrow
money for investment purposes. In addition, if the return on an investment
purchased with borrowed funds is not sufficient to cover the cost of borrowing,
then the net income of the Fund or an Underlying Fund will be less than if
borrowing were not used. Certain Derivatives, including total return swaps, that
the Fund or an Underlying Fund may use may also create leverage. Derivatives
that involve leverage can result in losses to the Fund or an Underlying Fund
that exceed the amount originally invested in the Derivatives.

Non-diversification risk - The risk that the Fund will be more volatile than a
diversified fund because the Fund invests its assets in a smaller number of
issuers. The gains and losses on a single security may, therefore, have a
greater impact on the Fund's net asset value.

Other information
Commodity pool operator exemption - The Trust has claimed an exclusion from the
definition of the term "commodity pool operator" under the Commodity Exchange
Act ("CEA"), and, therefore, is not subject to registration or regulation as a
pool operator under the CEA.

Performance

There is no performance information quoted for the Fund as the Fund had not
commenced investment operations as of the date of this prospectus.

Expenses and fee tables
Fees and expenses These tables describe the fees and expenses that you may pay
if you buy, sell and hold shares of the Fund.

Shareholder transaction expenses (fees paid directly from your investment)(1)

Class A Class C Class Y

Maximum front-end sales charge (load) imposed on
purchases (as a % of offering price) 5.50% None None
Maximum contingent deferred sales charge (load)
(CDSC) (as a % of purchase or sales price,
whichever is less) None(2) 1.00% None
Exchange fee None None None
Redemption fee (as a percentage of amount
redeemed within 90 days of purchase, if
applicable)(3) 1.00% 1.00% 1.00%

Annual Fund operating expenses (expenses that are deducted from Fund assets)(4)

Class A Class C Class Y

Management fees 0.95% 0.95% 0.95%
Distribution and/or service (12b-1) fees 0.25% 1.00% None
Other expenses(5) 0.56% 0.56% 0.56%
Acquired Fund fees and expenses(6) 0.07% 0.07% 0.07%
----- ----- -----
Total annual Fund operating expenses 1.83% 2.58% 1.58%
----- ----- -----
Management fee waiver/expense reimbursements 0.36% 0.36% 0.36%
----- ----- -----
Net expenses(7) 1.47% 2.22% 1.22%
----- ----- -----

(1) Securities dealers or other financial institutions, including UBS
Financial Services Inc., may charge a fee to process a purchase or
redemption of shares. UBS Financial Services Inc. currently charges a
fee of $5.25 for such transactions.

(2) Purchases of $1 million or more that were not subject to a front-end
sales charge are subject to a 1% CDSC if sold within one-year of the
purchase date.

(3) Please see the section entitled "Redemption fees" for additional
information concerning the applicability of the redemption fee.

(4) The fees and expenses are based on estimates.

(5) "Other Expenses" includes, among other expenses, an administrative fee
of 0.075% paid by the Fund to UBS Global AM (Americas).

(6) "Acquired Fund Fees and Expenses" is the amount of the Fund's
proportionate share of the fees and expenses of the Underlying Funds
and other investment companies that the Fund indirectly pays as a
result of its investment in the Underlying Funds and other investment
companies. The Acquired Fund fees and expenses are based on
assumptions as to the specific Underlying Funds and such other
investment companies in which the Fund intends to invest and are
estimated amounts for the current fiscal year.

(7) The Trust, with respect to the Fund, and the Advisor have entered into
a written agreement pursuant to which the Advisor has agreed to waive
a portion of its management fees and/or to reimburse expenses
(excluding expenses incurred through investment in other investment
companies, securities loan fees and dividend expense for securities
sold short) to the extent necessary so that the Fund's operating
expenses (excluding expenses incurred through investment in other
investment companies, securities loan fees and dividend expense for
securities sold short), through the fiscal year ending June 30, 2008,
do not exceed 1.40% for Class A shares, 2.15% for Class C shares and
1.15% for Class Y shares. Pursuant to the written agreement, the
Advisor 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 the Advisor by the Fund will not cause the Fund to
exceed any applicable expense limit that is in place for the Fund.

Example
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Fund has not projected
expenses beyond the three-year period shown because the Fund had not commenced
investment operations as of the date of this prospectus.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same, except as
described below.* Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:

1 year 3 years

Class A $ 691 $ 1061
Class C (assuming sale of all shares at end of period) $ 325 $ 768
Class C (assuming no sale of shares) $ 225 $ 768
Class Y $ 124 $ 464

* The costs described in the example reflect the "Net expenses" of the
Fund that would result from the contractual fee waiver and expense
reimbursement agreement with the Advisor for the first year only and
the costs for the 3 years reflect the "Total annual fund operating
expenses" without any fee waiver and/or expense reimbursement. If the
fee waiver and expense reimbursement continues in effect beyond this
year, your costs would be expected to be lower than the amounts shown
above under the 3 years estimates.

Managing your Fund account

Flexible pricing
The Fund offers three classes of shares - Class A, Class C and Class Y. Each
class has different sales charges and ongoing expenses. You can choose the class
that is best for you, based on how much you plan to invest and how long you plan
to hold your shares of the Fund. Class Y shares are only available to certain
types of investors.

The Fund has adopted separate plans pertaining to the Class A and Class C shares
of the Fund under rule 12b-1 that allow the Fund to pay service and, for Class C
shares, distribution fees, for the sale of the Fund's shares and services
provided to shareholders. Because the 12b-1 fees for Class C shares are paid out
of the Fund's assets on an ongoing basis, over time they will increase the cost
of your investment and may cost you more than if you paid other types of sales
charges, such as the front-end sales charge for Class A shares.

You may qualify for a waiver of certain sales charges on Class A and Class C
shares. See "Sales charge waivers for Class A and Class C shares" later in this
prospectus. You may also qualify for a reduced sales charge on Class A shares.
See "Sales charge reductions for Class A shares" later in this prospectus.

Class A shares
Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is paid at the time of purchase
and is not invested in the Fund. Class A shares pay an annual service fee of
0.25% of average net assets, but they pay no distribution fees. The ongoing
expenses for Class A shares are lower than for Class C shares.

The Class A sales charges for the Fund are described in the following table:

Class A sales charges:

Sales charge as a Reallowance to selected
percentage of dealers as percentage of
Amount of investment offering price net amount offereing price
invested
Less than $50,000 5.50% 5.82% 5.00%
$50,000 to $99,999 4.50 4.71 4.00
$100,000 to $249,999 3.50 3.63 3.00
$250,000 to $499,999 2.50 2.56 2.00
$500,000 to $999,999 2.00 2.04 1.75
$1,000,000 and over (1) None None May pay up to
1.00(2)

(1) A contingent deferred sales charge of 1% of the shares' offering price
or the net asset value at the time of sale by the shareholder,
whichever is less, is charged on sales of shares made within one year
of the purchase date. Class A shares representing reinvestment of
dividends are not subject to this 1% charge. Withdrawals in the first
year after purchase of up to 12% of the value of the fund account
under the Fund's Automatic Cash Withdrawal Plan are not subject to
this charge.
(2) For sales of $1 million or more, UBS Global Asset Management (US) Inc.
pays to the dealer an amount based upon the following schedule: 1.00%
on the first $3 million, 0.75% on the next $2 million, and 0.50% on
the next $5 million.

If you intend to purchase more than $5 million of Class A shares, you should
instead purchase Class Y shares, which have lower on-going expenses.

Class C shares
Class C shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
Class C shares do not convert to another class of shares. This means that you
will pay the 12b-1 fees for as long as you own your shares.

Class C shares also have a contingent deferred sales charge of 1.00%, applicable
if you sell your shares within one year of the date you purchased them. We
calculate the deferred sales charge on sales of Class C shares by multiplying
1.00% by the lesser of the net asset value of the Class C shares at the time of
purchase or the net asset value at the time of sale.

Sales charge waivers for Class A and Class C shares
Class A front-end sales charge waivers. Front-end sales charges will be waived
if you buy Class A shares with proceeds from the following sources:

1. Redemptions from any registered mutual fund for which UBS Global Asset
Management (US) Inc. ("UBS Global AM (US)") or any of its affiliates serves
as principal underwriter if you:

o Originally paid a front-end sales charge on the shares; and

o Reinvest the money within 60 days of the redemption date.

The Fund's front-end sales charges will also not apply to Class A purchases by
or through:

1. Employees of UBS AG and its subsidiaries and members of the employees'
immediate families; and members of the Board of Directors/Trustees
(and former Board members who retire from such Boards after December
1, 2005) of any investment company for which UBS Global AM (US) or any
of its affiliates serve as principal underwriter.

2. Trust companies and bank trust departments investing on behalf of
their clients if clients pay the bank or trust company an asset-based
fee for trust or asset management services.

3. Retirement plans and deferred compensation plans that have assets of
at least $1 million or at least 25 eligible employees.

4. Broker-dealers and other financial institutions (including registered
investment advisers and financial planners) that have entered into a
selling agreement with UBS Global AM (US) (or otherwise have an
arrangement with a broker-dealer or other financial institution with
respect to sales of Fund shares), on behalf of clients participating
in a fund supermarket, wrap program, or other program in which clients
pay a fee for advisory services, executing transactions in Fund
shares, or for otherwise participating in the program.

5. Employees of broker-dealers and other financial institutions
(including registered investment advisers and financial planners) that
have entered into a selling agreement with UBS Global AM (US) (or
otherwise having an arrangement with a broker-dealer or other
financial institution with respect to sales of Fund shares), and their
immediate family members, as allowed by the internal policies of their
employer.

6. Insurance company separate accounts.

7. Shareholders of the Class N shares of any UBS Fund who held such
shares at the time they were redesignated as Class A shares.

8. Reinvestment of capital gains distributions and dividends.

9. College savings plans organized under Section 529 of the Internal
Revenue Code (the "IRC").

10. A UBS Financial Services Inc. Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm,
and

o you were the Financial Advisor's client at the competing
brokerage firm;

o within 90 days of buying shares in the Fund, you sell shares of
one or more mutual funds that were principally underwritten by
the competing brokerage firm or its affiliates, and you either
paid a sales charge to buy those shares, paid a contingent
deferred sales charge when selling them or held those shares
until the contingent deferred sales charge was waived; and

o you purchase an amount that does not exceed the total amount of
money you received from the sale of the other mutual fund.

Class A and Class C shares contingent deferred sales charge waivers. The
contingent deferred sales charge will be waived for:

o Redemptions of Class A shares by former holders of Class N
shares;

o Exchanges between funds for which UBS Global AM (US) or one of
its affiliates serves as principal underwriter, if purchasing the
same class of shares;

o Redemptions following the death or disability of the shareholder
or beneficial owner;

o Tax-free returns of excess contributions from employee benefit
plans;

o Distributions from employee benefit plans, including those due to
plan termination or plan transfer;

o Redemptions made in connection with the Automatic Cash Withdrawal
Plan, provided that such redemptions:

- are limited annually to no more than 12% of the original
account value;

- are made in equal monthly amounts, not to exceed 1% per
month; and

- the minimum account value at the time the Automatic Cash
Withdrawal Plan was initiated was no less than $5,000; and

o Redemptions of shares purchased through certain retirement plans.

Sales charge reductions for Class A shares
Right of accumulation. A purchaser of Class A shares may qualify for a reduction
of the front-end sales charge on purchases of Class A shares by combining a
current purchase with certain other Class A, Class B, Class C, Class P and/or
Class Y shares of Family Funds(1) already owned ("Family Funds" include other
UBS Funds, UBS PACE Select funds and other funds for which UBS Global AM (US)
serves as principal underwriter). To determine if you qualify for a reduction of
the front-end sales charge, the amount of your current purchase is added to the
current net asset value of your other Class A, Class B, Class C, Class P and/or
Class Y shares, as well as those Class A, Class B, Class C, Class P and/or Class
Y shares of your spouse and children under the age of 21 and who reside in the
same household. If you are the sole owner of a company, you may also add any
company accounts, including retirement plan accounts invested in Class A, Class
B, Class C, Class P and/or Class Y shares of the Family Funds. Companies with
one or more retirement plans may add together the total plan assets invested in
Class A, Class B, Class C, Class P and/or Class Y shares of the Family Funds to
determine the front-end sales charge that applies. To qualify for the discount
on a purchase through a financial institution, when each purchase is made, the
investor or institution must provide UBS Global AM (US) with sufficient
information to verify that the purchase qualifies for the privilege or discount.
The right of accumulation may be amended or terminated by UBS Global AM (US) at
any time as to purchases occurring thereafter.

(1) Please note that any Family Fund that is a money market fund will not count
for purposes of the right of accumulation discount or for purposes of
satisfying the forms of a Letter of Intent.

Shares purchased through a broker/dealer may be subject to different procedures
concerning Rights of Accumulation. Please contact your investment professional
for more information.

Letter of intent. Investors may also obtain reduced sales charges for Class A
shares for investments of a particular amount by means of a written Letter of
Intent, which expresses the investor's intention to invest that amount within a
period of 13 months in shares of one or more Family Funds.(1) Each purchase of
Class A shares under a Letter of Intent will be made at the public offering
price applicable at the time of such purchase to a single transaction of the
total dollar amount indicated in the Letter of Intent. A Letter of Intent may
include purchases of Class A, Class C and/or Class Y shares made not more than
three months prior to the date that the investor signs a Letter of Intent and
during the 13-month period in which the Letter of Intent is in effect; however,
the 13-month period during which the Letter of Intent is in effect will begin on
the date on which the Letter of Intent is signed.

Investors do not receive credit for shares purchased by the reinvestment of
distributions. Investors qualifying for a right of accumulation discount
(described previously) may purchase shares under a single Letter of Intent.

The Letter of Intent is not a binding obligation upon the investor to purchase
the full amount indicated. The minimum initial investment under a Letter of
Intent is 5% of such amount, which must be invested immediately. Class A shares
purchased with the first 5% of such amount may be held in escrow to secure
payment of the higher sales charge applicable to the shares actually purchased
if the full amount indicated is not purchased. When the full amount indicated
has been purchased, the escrow will be released. If an investor desires to
redeem escrowed shares before the full amount has been purchased, the shares
will be released only if the investor pays the sales charge that, without regard
to the Letter of Intent, would apply to the total investment made to date.

Letter of Intent forms may be obtained from UBS Global AM (US) or from
investment professionals. Investors should read the Letter of Intent carefully.

Shares purchased through a broker/dealer may be subject to different procedures
concerning Letters of Intent. Please contact your investment professional for
more information.

Note on sales charge reductions and waivers for Class A and Class C shares
Additional information concerning sales charge reductions and waivers is
available in the Fund's Statement of Additional Information ("SAI"). If you
think you qualify for any of the sales charge waivers or reductions described
previously, you may need to notify and/or provide documentation to UBS Global AM
(US). You will also need to notify UBS Global AM (US) of the existence of other
accounts in which there are holdings eligible to be aggregated to meet certain
sales load breakpoints. Information you may need to provide to UBS Global AM
(US) may include:

o Information or records regarding shares of the Fund or other funds
held in all accounts at any financial intermediary;

o Information or records regarding shares of the Fund or other funds
held in any account at any financial intermediary by related parties
of the shareholder, such as members of the same family; and/or

o Any information that may be necessary for UBS Global AM (US) to
determine your eligibility for a reduction or waiver of a sales
charge.

For more information, you should contact your investment professional or call
1-800-647 1568. If you want information on the Automatic Cash Withdrawal Plan,
see the SAI or contact your investment professional. Also, information regarding
the Fund's distribution arrangements and the applicable sales charge reductions
and waivers is available on the Fund's Web Site, free of charge, at
http://www.ubs.com/globalam.

Class Y shares
Shareholders pay no front-end sales charges on Class Y shares. However, UBS
Global AM (US), as principal underwriter of the Fund, may make payments out of
its own resources, to affiliated (UBS Financial Services Inc.) and unaffiliated
dealers, pursuant to written dealer agreements as follows: a one time finder's
fee consistent with the Fund's Class A share Reallowance to Selected Dealers'
schedule (see page [___]) and beginning in month 13, an ongoing fee in an amount
up to 20 basis points. UBS Global AM (US) does not make these payments on
employee related Class Y share accounts and reserves the right not to make these
payments if it determines, in its sole discretion, that a dealer has been acting
to the detriment of the Fund.

The following are eligible to purchase Class Y shares:

o Shareholders of the Class I shares of any UBS Fund who held such
shares as of the date the shares were redesignated Class Y shares;

o Retirement plans with 5,000 or more eligible employees or $100 million
or more in plan assets;

o Retirement plan platforms/programs that include Fund shares if the
platform/program covers plan assets of at least $100 million;

o Trust companies and bank trust departments purchasing shares on behalf
of their clients in a fiduciary capacity;

o Banks, registered investment advisors and other financial institutions
purchasing fund shares for their clients as part of a discretionary
asset allocation model portfolio;

o College savings plans organized under Section 529 of the IRC, if
shareholder servicing fees are paid exclusively outside of the
participating funds;

o Other investors as approved by the Fund's Board of Trustees;

o Shareholders who invest a minimum initial amount of $5 million in the
Fund. An institutional investor may aggregate its holdings with
holdings of certain related institutional investors to meet the
foregoing minimums;

o Foundations, Endowments and Religious and other charitable
organizations described in Section 501(c)(3) of the IRC that invest a
minimum initial amount of $2,500,000;

o Employees of UBS Global AM (Americas), UBS Global AM (US) or Adam
Street Partners as long as the employee establishes an account in his
or her name directly at the Fund's transfer agent and purchases a
minimum initial amount of $50,000; and

o Members of the Board of Directors/Trustees (and former Board members
who retire from such Boards after December 1, 2005) of any investment
company for which UBS Global AM (US) or any of its affiliates serves
as principal underwriter, subject to a minimum initial purchase amount
of $50,000 in an account established by the member in his or her name
directly at the Fund's transfer agent.

Class Y shares do not pay ongoing 12b-1 distribution or service fees. The
ongoing expenses for Class Y shares are the lowest of all the classes.

Buying shares
You can buy Fund shares through your investment professional at a broker-dealer
or other financial institution with which UBS Global AM (US) has a dealer
agreement.

If you wish to invest in other Family Funds, you can do so by:

o Contacting your investment professional (if you have an account at a
financial institution that has entered into a dealer agreement with
UBS Global AM (US));

o Buying shares through the transfer agent as described later in this
prospectus; or

o Opening an account by exchanging shares from another Family Fund.

Selected securities dealers or other financial institutions, including UBS
Financial Services Inc., may charge a processing fee to confirm a purchase. UBS
Financial Services Inc. currently charges a fee of $5.25.

The Fund and UBS Global AM (US) reserve the right to reject a purchase order or
suspend the offering of shares.

Through financial institutions/professionals
As mentioned above, the Fund has entered into one or more sales agreements with
brokers, dealers or other financial intermediaries ("Service Providers"), as
well as with financial institutions (banks and bank trust departments) (each an
"Authorized Dealer"). The Authorized Dealer, or intermediaries designated by the
Authorized Dealer (a "Sub-designee"), may in some cases be authorized to accept
purchase and redemption orders that are in "good form" on behalf of the Fund.
The Fund will be deemed to have received a purchase or redemption order when the
Authorized Dealer or Sub-designee receives the order in good form. Such orders
will be priced at the Fund's net asset value next computed after such order is
received in good form by the Authorized Dealer or Subdesignee. These Authorized
Dealers may charge the investor a transaction fee or other fee for their
services at the time of purchase. These fees would not be otherwise charged if
you purchased shares directly from the Fund. It is the responsibility of such
Authorized Dealers or Sub-designees to promptly forward purchase orders with
payments to the Fund.

Additional compensation to affiliated dealer
UBS Global AM (US) pays its affiliate, UBS Financial Services Inc., the
following additional compensation in connection with the sale of Fund shares:

o 0.05% of the value (at the time of sale) of all shares of the Fund
sold through UBS Financial Services Inc.; and

o a monthly retention fee at a blended annual rate that consists of
0.10% of the value of the equity portion of the Fund's portfolio and
0.075% of the value of the fixed income portion of the Fund's
portfolio that are held in a UBS Financial Services Inc. account at
month-end.

The foregoing payments are made by UBS Global AM (US) out of its own resources.

Minimum investments:
Class A and Class C shares:

To open an account.............. $1,000
To add to an account............ $100

The Fund may waive or reduce these amounts for:

o Employees of UBS Global AM (US) or its affiliates; or

o Participants in certain pension plans, retirement accounts,
unaffiliated investment programs or the Fund's automatic investment
plan.

Market timers. The interests of the Fund's long-term shareholders and the Fund's
ability to manage its investments may be adversely affected when the Fund's
shares are repeatedly bought and sold in response to short-term market
fluctuations--also known as "market timing." Market timing may cause the Fund to
have difficulty implementing long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market timing also may force the
Fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's Fund shares. Market timing also may materially
increase the Fund's transaction costs, administrative costs or taxes. These
factors may hurt the Fund's performance and its shareholders.

In addition, the nature of the Fund's portfolio holdings may allow a shareholder
to engage in a short-term trading strategy to take advantage of possible delays
between the change in the Fund's portfolio holdings and the reflection of that
change in the Fund's net asset value (often called "arbitrage market timing").
Such a delay may occur if the Fund has significant investments in non-US
securities, where due to time zone differences, the value of those securities is
established some time before the Fund calculates its net asset value. In such
circumstances, the available market prices for such non-US securities may not
accurately reflect the latest indications of value at the time the Fund
calculates its net asset value. There is a possibility that arbitrage market
timing may dilute the value of Fund shares if redeeming shareholders receive
proceeds (and buying shareholders receive shares) based upon a net asset value
that does not reflect appropriate fair value prices. One of the objectives of
the Fund's fair value pricing procedures is to minimize the possibilities of
this type of arbitrage market timing.

The Board of Trustees of the Trust has adopted the following policies as a means
to discourage, detect and prevent market timing. The Fund will reject purchase
orders and exchanges into the Fund by any person, group or account that UBS
Global AM (Americas), as the Fund's Advisor and Administrator, determines to be
a market timer. UBS Global AM (Americas) maintains market timing prevention
procedures under which it reviews daily reports from the Fund's transfer agent
of all accounts that engaged in transactions in Fund shares that exceed a
specified monetary threshold and effected such transactions within a certain
period of time to evaluate whether any such account had engaged in market timing
activity. In evaluating the account transactions, UBS Global AM (Americas) will
consider the potential harm of the trading or exchange activity to the Fund or
its shareholders. If UBS Global AM (Americas) determines, in its sole
discretion, that a shareholder has engaged in market timing, the shareholder
will be permanently barred from making future purchases or exchanges into the
Fund. Additionally, in making a determination as to whether a shareholder has
engaged in market timing, the shareholder's account may be temporarily barred
from making additional investments into the Fund pending a definitive
determination. In addition, if a Financial Advisor is identified as the
Financial Advisor of two or more accounts that have engaged in market timing,
UBS Global AM (Americas) may prohibit the Financial Advisor from making
additional purchases of the Fund on behalf of its clients.

Shares of the Fund may be held through omnibus account arrangements, whereby a
broker-dealer, investment advisor, retirement plan sponsor or other financial
intermediary (each a "Financial Intermediary") maintains an omnibus account with
the Fund for trading on behalf of its customers or participants. Omnibus
accounts are accounts that aggregate the transactions of underlying
shareholders, thus making it difficult to identify individual underlying account
holder activity. UBS Global AM (Americas) reviews purchase and redemption
activity in omnibus accounts on a daily basis to seek to identify an unusual
pattern of trading activity within a short period of time. If UBS Global AM
(Americas) detects an unusual pattern of trading activity, UBS Global AM
(Americas) will notify the Financial Intermediary of the omnibus account and
will request that the Financial Intermediary provide underlying account detail.
If UBS Global AM (Americas) identifies market timing activity, it will instruct
the Financial Intermediary to block the customer or participant from further
purchases of Fund shares. In the event that the Financial Intermediary cannot
identify and block the customer or participant, UBS Global AM (Americas) will
require the Financial Intermediary to block the particular plan from further
purchases of Fund shares. UBS Global AM (Americas) also will periodically
request underlying account detail for omnibus accounts for review and analysis.

While the Fund will seek to take actions (directly and with the assistance of
Financial Intermediaries) that will detect market timing, the Fund's efforts may
not be completely successful in minimizing or eliminating such trading activity.

When it is determined that a Financial Intermediary's frequent trading policies
and procedures sufficiently protect Fund shareholders, the Fund and UBS Global
AM (Americas) may rely on the Financial Intermediary's frequent trading policies
and procedures with respect to transactions by shareholders investing through
the Financial Intermediary rather than applying the Fund's market timing
prevention procedures. The determination to rely on a Financial Intermediary's
frequent trading policies and procedures will be made after a review of the
policies and procedures by the Legal and Compliance Departments of UBS Global AM
(Americas). The Chief Compliance Officer of UBS Global AM (Americas) will
determine whether the policies and procedures sufficiently protect Fund
shareholders. The types of Financial Intermediaries that may have frequent
trading policies and procedures on which the Fund and UBS Global AM (Americas)
may rely may include broker-dealers, advisers, clearing firms, bank trust
departments, retirement plan administrators, other record keepers and certain
wrap fee program/platforms. In such cases, a Financial Intermediary through
which a shareholder may own Fund shares may impose frequent trading restrictions
that differ from those of the Fund.

Certain types of transactions will also be exempt from the market timing
prevention procedures. These exempt transactions are purchases and redemptions
through the Automatic Cash Withdrawal Plan, purchases through an automatic
investment plan, redemptions by wrap fee accounts that have an automatic
rebalancing feature and that have been identified to the Fund's principal
underwriter and transfer agent, and purchases and redemptions by UBS funds of
funds.

Selling shares
You can sell your Fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the Fund
will assume that you want to sell shares in the following order: Class A, then
Class C, and last, Class Y.

If you want to sell shares that you purchased recently, the Fund may delay
payment until it verifies that it has received good payment. If you hold your
shares through a financial institution, you can sell shares by contacting your
investment professional, or an Authorized Dealer or Sub-designee, for more
information. Important note: Each institution or professional may have its own
procedures and requirements for selling shares and may charge fees. If you
purchased shares through the Fund's transfer agent, you may sell them as
explained later in this prospectus.

If you sell Class A shares and then repurchase Class A shares of the same Fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

Securities dealers or other financial institutions, including UBS Financial
Services Inc., may charge a fee to process a redemption of shares. UBS Financial
Services Inc. currently charges a fee of $5.25.

The Fund reserves the right to pay redemptions "in kind" (i.e., payment in
securities rather than cash) if the investment you are redeeming is large enough
to affect the Fund's operations (for example, if it represents more than
$250,000 or 1% of the Fund's assets). In these cases, you might incur brokerage
costs converting the securities to cash.

It costs the Fund money to maintain shareholder accounts. Therefore, the Fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $500. Any applicable deferred sales charge may be assessed on
such redemptions. If the Fund elects to do this with your account, it will
notify you that you can increase the amount invested to $500 or more within 60
days. The Fund will not repurchase shares in accounts that fall below $500
solely because of a decrease in the Fund's net asset value.

To help the government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions to obtain, verify
and record information that identifies each person who opens an account. If you
do not provide the information requested, the Fund may not be able to maintain
your account. If the Fund is unable to verify your identity or that of another
person(s) authorized to act on your behalf, the Fund and UBS Global AM
(Americas) reserve the right to close your account and/or take such other action
they deem reasonable or required by law. Fund shares will be redeemed and valued
in accordance with the net asset value next calculated after the determination
has been made to close the account.

Redemption fee
If you sell or exchange any class of shares of the Fund less than 90 days after
you purchased them, a redemption fee of 1.00% of the amount sold or exchanged
will be deducted at the time of the transaction, except as noted below. This
amount will be paid to the Fund, not to the Advisor or UBS Global AM (US). The
redemption fee is designed to offset the costs associated with fluctuations in
Fund asset levels and cash flow caused by short-term shareholder trading. Shares
held the longest will be redeemed first for purposes of calculating the
redemption fee. The redemption fee will not apply to shares of the Fund that:

o are held in certain omnibus accounts of certain Financial
Intermediaries, such as broker-dealers or qualified retirement plans
including 401(k), 403(b) or 457 plans or plans administered as college
savings programs under Section 529 of the IRC, if those institutions
have not implemented the system changes necessary to be capable of
processing the redemption fee. However, account holders whose
investments in the Fund are held in omnibus accounts through certain
other Financial Intermediaries may be subject to the redemption fee on
terms that are generally in accordance with the redemption fee terms
as described in this prospectus but that may differ in certain
details. For certain retirement plans treated as omnibus accounts by
the Fund's transfer agent or principal underwriter, the redemption fee
will be waived on non-participant initiated exchanges or redemptions;

o are sold or exchanged under automatic withdrawal plans;

o are held by investors in certain asset allocation programs that offer
automatic rebalancing or wrap-fee or similar fee-based programs and
that have been identified to the Fund's principal underwriter and
transfer agent, except to the extent that transactions in those
programs are shareholder initiated;

o are sold due to death or disability of the shareholder; or

o UBS Global AM (Americas), in its sole discretion, deems reasonable, in
light of the circumstances.

Exchanging shares
You may exchange Class A or Class C shares of the Fund for shares of the same
class of most other Family Funds. You may not exchange Class Y shares.

You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares but shareholders may be subject to a redemption fee as noted
above. Also, you may have to pay a deferred sales charge if you later sell the
shares you acquired in the exchange. A fund will use the date of your original
share purchase to determine whether you must pay a deferred sales charge when
you sell the shares of the fund acquired in the exchange.

Other Family Funds may have different minimum investment amounts. You may not be
able to exchange your shares if the value of shares you exchange is not as large
as the minimum investment amount in that other fund.

You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.

If you hold your Fund shares through a financial institution, you may exchange
your shares by placing an order with that institution. If you hold Fund shares
through the Fund's transfer agent, you may exchange your shares as explained
below.

The Fund may modify or terminate the exchange privilege at any time.

Transfer agent
If you wish to invest in this Fund or any other of the Family Funds through the
Fund's transfer agent, PFPC Inc., you can obtain an application by calling
1-800-647 1568. You must complete and sign the application and mail it, along
with a check to the transfer agent.

You may also sell or exchange your shares by writing to the Fund's transfer
agent. Your letter must include:

o Your name and address;

o Your account number;

o The name of the fund whose shares you are selling, and if exchanging
shares, the name of the fund whose shares you want to buy;

o The dollar amount or number of shares you want to sell and/or
exchange; and

o A guarantee of each registered owner's signature. A signature
guarantee may be obtained from a financial institution, broker, dealer
or clearing agency that is a participant in one of the medallion
programs recognized by the Securities Transfer Agents Association.
These are: Securities Transfer Agents Medallion Program (STAMP), Stock
Exchanges Medallion Program (SEMP) and the New York Stock Exchange
Medallion Signature Program (MSP). The Fund will not accept signature
guarantees that are not part of these programs.

Applications to purchase shares (along with a check), and letters requesting
redemptions of shares or exchanges of shares through the transfer agent should
be mailed to:

PFPC Inc.
UBS Global Asset Management
P.O. Box 9786
Providence, RI 02940

You do not have to complete an application when you make additional investments
in the Fund.

Transfer of accounts
If you hold Class A, Class C or Class Y shares of the Fund in a brokerage
account and you transfer your brokerage account to another firm, your Fund
shares will be moved to an account with PFPC Inc., the Fund's transfer agent.
However, if the other firm has entered into a dealer agreement relating to the
Fund with UBS Global AM (US), the Fund's principal underwriter, you may be able
to hold Fund shares in an account with the other firm.

Pricing and valuation
The price at which you may buy, sell or exchange Fund shares is based on the net
asset value per share. The Fund calculates net asset value on days that the New
York Stock Exchange ("NYSE") is open. The Fund calculates net asset value
separately for each class as of the close of regular trading on the NYSE
(generally, 4:00 p.m., Eastern time). The NYSE normally is not open, and the
Fund does not price its shares, on most national holidays and on Good Friday.

Your price for buying, selling or exchanging shares of the Fund will be based on
the net asset value (adjusted for any applicable sales charges and redemption
fees) that is next calculated after the Fund (or an Authorized Dealer or
Sub-designee) receives your order in good form. If you place your order through
a financial institution, your investment professional is responsible for making
sure that your order is promptly sent to the Fund.

The Fund calculates its net asset value based on the current market value of its
portfolio securities. The Fund normally obtains market values for its securities
from independent pricing services that use reported last sales prices or if the
price obtained is unreliable, current market quotations or, if market prices are
not readily available, valuations from computerized "matrix" systems that derive
values based on comparable securities, except with respect to obtaining the
market price of Underlying Funds, which is described below. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
Trust's Board of Trustees. The Fund normally uses the amortized cost method to
value short-term obligations that will mature in 60 days or less.

The Trust's Board of Trustees has delegated to the UBS Global Asset Management
Funds' Valuation Committee the responsibility for making fair value
determinations with respect to the Fund's portfolio securities. The types of
securities for which such fair value pricing may be necessary include, but are
not limited to: foreign securities under some circumstances, as discussed below;
securities of an issuer that has entered into a restructuring; securities whose
trading has been halted or suspended; fixed-income securities that are in
default and for which there is no current market value quotation; and securities
that are restricted as to transfer or resale. The need to fair value the Fund's
portfolio securities may also result from low trading volume in foreign markets
or thinly traded domestic securities, and when a security subject to a trading
limit or collar on the exchange or market on which it is primarily traded
reaches the "limit up" or "limit down" price and no trading has taken place at
that price.

The Fund expects to price most of its portfolio securities based on current
market value, as discussed previously. Securities and assets for which market
quotations are not readily available may be valued based upon appraisals
received from a pricing service using a computerized matrix system or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. Securities also may be valued based upon
appraisals derived from information concerning the security or similar
securities received from recognized dealers in those securities. If the Fund
concludes that a market quotation is not readily available for a portfolio
security for any number of reasons, including the occurrence of a "significant
event" (e.g., natural disaster or governmental action), after the close of
trading in its principal domestic or foreign market but before the close of
regular trading on the NYSE, the Fund will use fair value methods to reflect
those events. This policy is intended to assure that the Fund's net asset value
fairly reflects security values as of the time of pricing. The Fund also may use
a systematic fair valuation model provided by an independent third party in
order to adjust the last sales prices of securities principally traded in
foreign markets because such last sales prices may no longer reflect the current
market value of such foreign securities at the time that the Fund prices its
shares.

Valuing securities at fair value involves greater reliance on judgment than
valuing securities that have readily available market quotations. Fair value
determinations can also involve reliance on quantitative models employed by a
fair value pricing service. There can be no assurance that the Fund could obtain
the fair value assigned to a security if it were to sell the security at
approximately the time at which the Fund determines its net asset value per
share. As a result, the Fund's sale or redemption of its shares at net asset
value, at a time when a holding or holdings are valued at fair value, may have
the effect of diluting or increasing the economic interest of existing
shareholders.

The Fund may invest in securities that trade primarily in foreign markets that
trade on weekends or other days on which the Fund does not calculate its net
asset value. As a result, the Fund's net asset value may change on days when you
will not be able to buy and sell your Fund shares.

The Fund's portfolio securities may also consist of shares of Underlying Funds.
The value of each Underlying Fund will be its net asset value at the time the
Fund's shares are priced. The Underlying Funds calculate their net asset value
based on the current market value for their portfolio securities. The Underlying
Funds value securities in the same manner as the Fund described above.

Management

Investment advisor
UBS Global Asset Management (Americas) Inc. ("UBS Global AM (Americas)" or the
"Advisor"), a Delaware corporation located at One North Wacker Drive, Chicago,
IL 60606, is an investment advisor registered with the SEC. UBS Global AM
(Americas) serves as the investment advisor to the Fund by managing the
investment of assets of the Fund. [TO BE PROVIDED IN RULE 485(b) FILING: As of
March 31, 2007, the Advisor had approximately $[____] billion in assets under
management. The Advisor is an indirect, wholly owned subsidiary of UBS AG
("UBS") and a member of the UBS Global Asset Management Division, which had
approximately $[____] billion in assets under management as of March 31, 2007.]
UBS is an internationally diversified organization headquartered in Zurich and
Basel, Switzerland, with operations in many areas of the financial services
industry.

The Fund had not yet commenced operations as of the date of this prospectus. A
discussion regarding the basis for the Board of Trustees' annual approval of the
investment advisory agreement between the Trust and Advisor on behalf of the
Fund will be available in future annual or semiannual reports to shareholders of
the Fund.

Portfolio management
Brian D. Singer is the lead portfolio manager for the Fund. Mr. Singer has
access to certain members of the fixed-income and equities investment management
teams, each of whom is allocated a specified portion of the portfolio over which
he or she has independent responsibility for research, security selection, and
portfolio construction. The team members also have access to additional
portfolio managers and analysts within the various asset classes and markets in
which the Fund invests. Mr. Singer, as lead portfolio manager and coordinator
for management of the Fund, has responsibility for allocating the Fund's
portfolio among the various managers and analysts, occasionally implementing
trades on behalf of analysts on the team and reviewing the overall composition
of the portfolio to ensure its compliance with its stated investment objectives
and strategies. Information about Mr. Singer is provided below.

Brian D. Singer is the Chief Investment Officer, Americas, at UBS Global Asset
Management. Mr. Singer is a member of the UBS Group Managing Board of UBS Global
Asset Management (Americas) and portfolio manager of the Fund since its
inception.

The Fund's SAI provides information about the Fund's portfolio manager's
compensation, other accounts managed by the portfolio manager and the portfolio
manager's ownership of Fund shares.

Advisory fees
The investment advisory fee (expressed as a monthly fee at an annual rate
multiplied by the average daily net assets of the Fund) payable to the Advisor,
before fee waivers and/or expense reimbursements is 0.95%. For purposes of
calculating such fee, the Fund's average daily net assets will be deemed to be
the average daily value of the Fund's total assets minus the sum of the Fund's
liabilities (which liabilities exclude the aggregate amount of any borrowing).

The Advisor has contractually agreed to waive its fees and/or reimburse certain
expenses so that the total operating expenses of the Fund do not exceed the
amounts listed in the footnote to the Fund's Expense Table. The contractual fee
waiver and/or expense reimbursement agreement will remain in place for the
Fund's fiscal year ending June 30, 2008. Thereafter, the expense limit for the
Fund will be reviewed each year, at which time the continuation of the expense
limit will be discussed by the Advisor and the Board of Trustees. The
contractual fee waiver agreement also provides that the Advisor 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 Fund of the Advisor will not cause the total operating
expense ratio to exceed the contractual limit as then may be in effect for the
Fund.

Administrator
UBS Global AM (Americas) is also the administrator of the Fund. The Fund pays
UBS Global AM (Americas) an annual contract rate of 0.075% of its average daily
net assets for administrative services.

Disclosure of portfolio holdings
The Fund will generally post on its Web Site at http://www.ubs.com/globalam, the
ten largest stock portfolio holdings of the Fund, and the percentage that each
of these holdings represents of the Fund's total assets, as of the most recent
calendar-quarter end, 25 calendar days after the end of the calendar quarter.
The Fund will file its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms
N-Q are available on the SEC's Web Site at www.sec.gov. The Fund's Forms N-Q may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the SEC's Public Reference Room may be obtained
by calling 202-551 8090. Additionally, you may obtain copies of Forms N-Q from
the Fund upon request by calling 1-800-647 1568. The Fund's complete schedule of
portfolio holdings for the second and fourth quarters of each fiscal year is
filed with the SEC on Form N-CSR and appears in the semiannual and annual
reports, respectively, sent to shareholders. The semiannual and annual reports
for the Fund will be posted on the Fund's Web Site at
http://www.ubs.com/globalam. Please consult the Fund's SAI for a description of
the policies and procedures that govern disclosure of the Fund's portfolio
holdings.

Dividends and taxes

Dividends and distributions
Income dividends are normally declared, and paid, by the Fund annually. Net
realized capital gains, if any, are declared and distributed in December. The
amount of any distributions will vary, and there is no guarantee that the Fund
will pay either income dividends or capital gain distributions.

Classes with higher expenses are expected to have lower income dividends. For
example, Class C shares are expected to have the lowest dividends of the Fund's
shares, while Class Y shares are expected to have the highest.

You will receive income dividends and capital gain distributions in additional
shares of the same class of the Fund unless you notify your investment
professional or the Fund in writing that you elect to receive them in cash.
Clients who own Fund shares through certain wrap fee programs may not have the
option of electing to receive dividends in cash. Distribution options may be
changed at any time by requesting a change in writing. Dividends and
distributions are reinvested on the reinvestment date at the net asset value
determined at the close of business on that date.

If you are a taxable investor and invest in the Fund shortly before the record
date of a taxable distribution, the distribution will lower the value of the
Fund's shares by the amount of the distribution and, in effect, you will receive
some of your investment back in the form of a taxable distribution. This is
known as "buying a dividend."

Taxes
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the IRC. As such, the Fund generally pays no federal income tax
on the income and gains it distributes to you. In general, if you are a taxable
investor, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional Fund shares or receive them in cash. Every January, you will receive
a statement that shows the tax status of distributions you received for the
previous calendar year. Distributions declared in December to shareholders of
record in such month, but paid in January, are taxable as if they were paid in
December.

The Fund may reclassify income after your tax reporting statement is mailed to
you. This can result from the rules in the IRC that effectively prevent the Fund
from ascertaining with certainty, until after the calendar year end, and in some
cases the Fund's fiscal year end, the final amount and character of
distributions the Fund has received on its investments during the prior calendar
year. Prior to issuing your statement, the Fund makes every effort to search for
reclassified income to reduce the number of corrected forms mailed to
shareholders. However, when necessary, the Fund will send you a corrected Form
1099-DIV to reflect reclassified information.

For federal income tax purposes, Fund distributions of short-term capital gains
are taxable to you as ordinary income. Fund distributions of long-term capital
gains are taxable to you as long-term capital gains no matter how long you have
owned your shares. A portion of income dividends designated by the Fund may be
qualified dividend income eligible for taxation by individual shareholders at
long-term capital gains rates, provided certain holding period requirements are
met.

By law, if you do not provide the Fund with your proper taxpayer identification
number and certain required certifications, you may be subject to backup
withholding on any distributions of income, capital gains or proceeds from the
sale of your shares. The Fund also must withhold if the IRS instructs it to do
so. When withholding is required, the amount will be 28% of any distributions or
proceeds paid.

If you are a taxable investor, when you sell your shares in the Fund, you may
realize a capital gain or loss. For tax purposes, an exchange of your Fund
shares for shares of a different Family Fund is the same as a sale. Any loss
incurred on sale or exchange of Fund shares held for six months or less will be
treated as a long-term capital loss to the extent of capital gain distributions
received with respect to such shares.

Fund distributions and gains from the sale of your Fund shares generally are
subject to state and local taxes. Any foreign taxes the Fund pays on its
investments may be passed through to you as a foreign tax credit.

Taxable ordinary distributions to non-US investors may be subject to US
withholding at a 30% or lower treaty tax rate. Distributions to non-US investors
from short-term capital gains and interest income from US sources are expected
to be subject to US withholding tax because certain detailed information
necessary for an exemption is not maintained by the Fund or expected to be
available. Non-US investors are subject to back-up withholding at a rate of 28%
on distributions and redemption proceeds paid to a shareholder who fails to
certify that they are not a US person. Non-US investors also may be subject to
US estate tax and are subject to special US tax certification requirements.

Income received directly by the Fund from certain equity interests in mortgage
pooling vehicles, or indirectly from an Underlying Fund that invests in such
mortgage pooling vehicles is treated as "excess inclusion income." The Fund or
an Underlying Fund may derive such income either as a result of its direct
investment in such interests or, indirectly, through its investment in REITs
that hold such interests or otherwise qualify as taxable mortgage pools. In
general, this income is required to be reported to Fund shareholders that are
not disqualified organizations (as defined below) in proportion to dividends
paid with the same consequences as if the shareholders directly received the
excess inclusion income. Excess inclusion income (i) may not be offset with net
operating losses, (ii) represents unrelated business taxable income (UBTI) in
the hands of a tax-exempt shareholder that is not a disqualified organization,
and (iii) is subject to withholding tax, without regard to otherwise applicable
exemptions or rate reductions, to the extent such income is allocable to a
shareholder who is not a U.S. person. The Fund must pay the tax on its excess
inclusion income that is allocable to "disqualified organizations," which
generally are certain cooperatives, governmental entities and tax-exempt
organizations that are not subject to tax on UBTI. To the extent that the Fund
shares owned by a disqualified organization are held in record name by a
broker/dealer or other nominee, the Fund must inform the broker/dealer or other
nominee of the excess inclusion income allocable to them and the broker/dealer
or other nominee must pay the tax on the portion of the Fund's excess inclusion
income allocable to them on behalf of the disqualified organizations.

This discussion of "Dividends and Taxes" is not intended or written to be used
as tax advice. Because everyone's tax situation is unique, you should consult
your tax advisor about the federal, state, local or foreign tax consequences of
your investment in the Fund.

Supplemental Advisor Performance Information

Because the Advisor has managed an offshore private investment pool for several
years in a substantially similar manner to the way in which the Advisor will
manage the Fund, the following supplemental performance information is being
provided to assist prospective investors in making an informed investment
decision. The tables on the following pages provide performance information for
an offshore private investment pool managed by the Advisor with substantially
similar investment objectives, policies and investment strategies as the Fund
("Global Frontier Composite Performance"). The Global Frontier Composite
Performance was obtained from the records maintained by the Advisor. The Advisor
does not currently, nor has in the past, managed any other accounts other than
the offshore private investment pool included in the Global Frontier Composite,
that have substantially similar investment objectives, policies and investment
strategies as the Fund.

The Global Frontier Composite Performance is adjusted to reflect the Fund's
Class A estimated net expenses, which include the effect of contractual fee
waivers and expense reimbursements. The following presentation also shows the
Global Frontier Composite Performance adjusted to reflect the Fund's Class A
estimated net expenses, which includes the effect of contractual fee waivers and
expense reimbursements and also reflects the Class A front-end sales charge of
5.50%. The performance of the GSMI Mutual Fund Index and the MSCI World Index
Free (net US), the Fund's benchmark, not adjusted for any fees or expenses, is
also provided.

Please note that the Global Frontier Composite Performance is not the Fund's own
historical performance. The Global Frontier Composite Performance should not be
considered a substitute for the Fund's performance, and the Global Frontier
Composite Performance is not necessarily an indication of the Fund's future
performance. The offshore private investment pool included in the Global
Frontier Composite was not subject to certain investment limitations,
diversification requirements and other restrictions imposed on mutual funds by
the US securities and tax laws, which, if applicable, may have adversely
affected the performance of the offshore private investment pool.

The Global Frontier Composite Performance may be calculated differently than the
method used for calculating Fund performance pursuant to SEC guidelines.
Investment results are time-weighted performance calculations representing total
return. Returns are calculated using geometric linking of monthly returns. The
Global Frontier Composite Performance is valued at least monthly, taking into
account cash flows. All realized and unrealized capital gains and losses, as
well as all dividends and interest from investments and cash balances, are
included. Interest income from fixed income securities is accrued, and equity
dividends are accrued as of the ex-dividend date. Investment transactions are
accounted for on a trade date basis. The Global Frontier Composite Performance
is included beginning with the first full month of performance to the present.

[Insert Line Graph]

Composite Performance - Global Frontier Composite Performance
March 31, 1999 through December 31, 2006

Year Net with Net without Gross GSMI Mutual MSCI World
sales load sales load Fund Index Index Free
(1) (2) (3) (net US)(4)

- ----------------------------- ----------- ------------ ----------- --------- -----------
1 year 9.21% 15.56% 17.16% 4.84% 20.42%
- ----------------------------- ----------- ------------ ----------- --------- -----------
5 years 12.63% 13.91% 15.49% 9.85% 10.30%
- ----------------------------- ----------- ------------ ----------- --------- -----------
Since inception (03/31/99) 9.40% 10.21% 11.74% 6.20% 4.71%
- ----------------------------- ----------- ------------ ----------- --------- -----------

Composite Performance - Global Frontier Composite Performance
March 31, 1999 through December 31, 2006

- --------------- ------------- -------------- -------------- ------------- --------------
Period ending Net with Net without Gross GSMI Mutual MSCI World
December 31 sales load sales load Fund Index Index Free
(1) (2) (3) (net US)(4)
- --------------- ------------- -------------- -------------- ------------- --------------
1999(5) -3.86% 1.74% 2.80% 14.76% 20.77%
- --------------- ------------- -------------- -------------- ------------- --------------
2000 0.61% 6.47% 7.95% -6.11% -13.08%
- --------------- ------------- -------------- -------------- ------------- --------------
2001 -3.39% 2.23% 3.66% -7.50% -16.63%
- --------------- ------------- -------------- -------------- ------------- --------------
2002 -10.89% -5.70% -4.37% -8.27% -19.65%
- --------------- ------------- -------------- -------------- ------------- --------------
2003 30.62% 38.22% 40.11% 26.53% 33.54%
- --------------- ------------- -------------- -------------- ------------- --------------
2004 12.00% 18.52% 20.16% 12.60% 15.03%
- --------------- ------------- -------------- -------------- ------------- --------------
2005 1.52% 7.43% 8.93% 6.58% 9.82%
- --------------- ------------- -------------- -------------- ------------- --------------
2006 9.21% 15.56% 17.16% 14.84% 20.42%
- --------------- ------------- -------------- -------------- ------------- --------------

(1) Adjusted to reflect Class A shares' estimated net expenses and the maximum
front-end sales charge.
(2) Adjusted to reflect Class A shares' estimated net expenses but not adjusted
to reflect the maximum front-end sales charge.
(3) The GSMI Mutual Fund Index is an unmanaged index compiled by the Advisor,
constructed currently as follows: 40% Russell 3000 Index, 22% MSCI World ex
USA Index, 21% Citigroup Broad Investment Grade Bond Index, 9% Citigroup
Non-US World Government Bond Index, 2% J.P. Morgan Emerging Markets Bond
Index Global, 3% MSCI Emerging Markets Index (net US) and 3% Merrill Lynch
US High Yield Cash Pay Constrained Index. The percentages may be
periodically re-weighted to reflect changing capital market expectations.
On December 1, 2003, the 40% Russell 3000 Index replaced the 40% Wilshire
5000 Index, and on June 1, 2005 the 3% Merrill Lynch US High Yield Cash Pay
Constrained Index replaced the Merrill Lynch US High Yield Cash Pay Index.
(4) The MSCI World Index Free (net US) is a broad-based securities index that
represents the US and developed international equity markets in terms of
capitalization and performance. It is designed to provide a representative
total return for all major stock exchanges located inside and outside the
United States. This benchmark has been calculated net of withholding tax
from a US perspective.
(5) Performance is presented for April 1, 1999 through December 31, 1999.
Returns for this period have not been annualized.

Financial highlights

No financial information is presented for the Fund as it was not publicly
offered prior to the date of this prospectus.

Funds' Privacy Notice

This notice describes the privacy policy of the UBS Family of Funds, the UBS
PACE Funds and all closed-end funds managed by UBS Global Asset Management
(collectively, the "Funds"). The Funds are committed to protecting the personal
information that they collect about individuals who are prospective, current or
former investors.

The Funds collect personal information in order to process requests and
transactions and to provide customer service. Personal information, which is
obtained from applications, may include name(s), address, social security number
or tax identification number, bank account information, other Fund holdings and
any affiliation the person has with UBS Financial Services Inc. or its
subsidiaries ("Personal Information"). The Funds limit access to Personal
Information to those individuals who need to know that information in order to
process transactions and service accounts. These individuals are required to
maintain and protect the confidentiality of Personal Information. The Funds
maintain physical, electronic and procedural safeguards to protect Personal
Information. The Funds may share Personal Information described above with their
affiliates for marketing and other business purposes, such as to facilitate the
servicing of accounts. The Funds may share Personal Information described above
with a non-affiliated third party if the entity is under contract to perform
transaction processing or to service and maintain shareholder accounts on behalf
of the Funds and otherwise as permitted by law. Any such contract will include
provisions designed to ensure that the third party will uphold and maintain
privacy standards when handling Personal Information. The Funds may also
disclose Personal Information to regulatory authorities as required by
applicable law. Except as described in this privacy notice, the Funds will not
use Personal Information for any other purpose unless the Funds describe how
such Personal Information will be used and clients are given an opportunity to
decline approval of such use of Personal Information relating to them. The Funds
endeavor to keep their customer files complete and accurate. The Funds should be
notified if any Personal Information needs to be corrected or updated. Please
call 1-800-647 1568 with any questions or concerns regarding your Personal
Information or this privacy notice.

[Insert UBS Logo]

The UBS Funds
UBS Global Frontier Fund
Prospectus
[_______], 2007

If you want more information about the Fund, the following documents are
available free upon request:

Annual/semiannual reports
Additional information about the Fund's investments will be available in the
Fund's annual and semiannual reports to shareholders. As of the date of this
prospectus, annual and semiannual reports are not yet available because the Fund
had not yet commenced operations.

Statement of additional information (SAI)
The SAI provides more detailed information about the Fund and is incorporated by
reference into this prospectus (i.e., it is legally considered a part of this
prospectus).

You may discuss your questions about the Fund by contacting your investment
professional. You may obtain free copies of the Fund's annual and semiannual
reports and the SAI by contacting the Fund directly at 1-800-647 1568. Because
of limited investor requests for the SAI and the availability of the SAI via a
toll free number, the Advisor has not made the SAI available on its Web Site.

You may review and copy information about the Fund, including shareholder
reports and the SAI, at the Public Reference Room of the U.S. Securities and
Exchange Commission (SEC) in Washington, D.C. You may obtain information about
the operations of the SEC's Public Reference Room by calling the SEC at 202-551
8090. You may get copies of reports and other information about the Fund:

o For a fee, by electronic request at publicinfo@sec.gov or by writing
the SEC's Public Reference Section, Washington, D.C. 20549-0102; or

o Free from the EDGAR Database on the SEC's Internet Web Site at:
http://www.sec.gov.

The UBS Funds
Investment Company Act File No. 811-6637

Subject to Completion April 10, 2007
UBS Funds
UBS Global Frontier Fund
Statement of Additional Information
Dated [____________, 2007]

One North Wacker Drive
Chicago, Illinois 60606

The UBS Global Frontier Fund (the "Fund") is a series of The UBS Funds, an
open-end management investment company (the "Trust").

UBS Global Asset Management (Americas) Inc., an indirect wholly owned subsidiary
of UBS AG ("UBS"), serves as the investment advisor and administrator for the
Fund. UBS Global Asset Management (US) Inc. ("UBS Global AM (US)") serves as the
underwriter for the Fund. UBS Global AM (US) is an indirect wholly owned
subsidiary of UBS.

This SAI is not a prospectus and should be read only in conjunction with the
Fund's current Prospectus, dated [____________, 2007]. A copy of the Prospectus
may be obtained by calling your investment professional or by calling the Trust
toll-free at 1-800-647 1568. The Prospectus contains more complete information
about the Fund. You should read it carefully before investing.

The information in this Statement of Additional Information is not complete and
may be changed. These securities may not be sold until the registration
statement filed with the U.S. Securities and Exchange Commission is effective.
The Statement of Additional Information is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.

Table of contents Page
Diversification status........................................................................................1
General definitions...........................................................................................1
Investment strategies.........................................................................................2
Asset allocation and leveraging mechanisms....................................................................2
Cash and cash equivalents.....................................................................................3
Repurchase agreements.........................................................................................3
Reverse repurchase agreements.................................................................................4
Borrowing.....................................................................................................4
Loans of portfolio securities.................................................................................4
Swaps.........................................................................................................5
Futures.......................................................................................................7
Options.......................................................................................................9
Index options................................................................................................11
Special risks of options on indices..........................................................................12
Rule 144A and illiquid securities............................................................................12
Non-publicly traded securities, private placements and restricted securities.................................13
Investment company securities and investments in affiliated investment companies.............................14
Equity securities............................................................................................14
Exchange-traded index securities.............................................................................15
Eurodollar securities........................................................................................15
Foreign securities...........................................................................................15
Issuer location..............................................................................................15
Forward foreign currency contracts...........................................................................16
Non-deliverable forwards.....................................................................................16
Options on foreign currencies................................................................................17
Lower rated debt securities..................................................................................18
Inflation linked securities..................................................................................19
Pay-in-kind bonds............................................................................................20
Convertible securities.......................................................................................20
Credit-linked securities.....................................................................................20
When-issued securities.......................................................................................21
Mortgage-backed securities and mortgage pass-through securities..............................................22
Collateralized mortgage obligations ("CMOS") and real estate mortgage investment conduits ("REMICS").........24
Dollar rolls.................................................................................................25
To-be-announced securities...................................................................................25
Other mortgage-backed securities.............................................................................25
Asset-backed securities......................................................................................26
Zero coupon and delayed interest securities..................................................................27
Structured notes.............................................................................................28
Emerging markets investments.................................................................................29
Risks of investing in emerging markets.......................................................................30
Investments in Russian securities............................................................................32

Other investments............................................................................................33
Investment restrictions......................................................................................33
Management of the Trust......................................................................................34
Independent Trustees.........................................................................................34
Officers.....................................................................................................36
Information about Independent Trustee ownership of securities issued by UBS Global AM (Americas)
or UBS Global AM (US).......................................................................................39
Information about Trustee ownership of Fund shares...........................................................39
Compensation table...........................................................................................39
Control persons and principal holders of securities..........................................................41
Investment advisory, principal underwriting and other service arrangements...................................41
Advisor......................................................................................................41
Portfolio manager............................................................................................43
Administrative, accounting and custody services..............................................................44
Principal underwriting arrangements..........................................................................45
Transfer agency services.....................................................................................47
Independent registered public accounting firm................................................................47
Legal counsel................................................................................................47
Personal trading policies....................................................................................47
Proxy voting policies........................................................................................48
Portfolio holdings disclosure policies and procedures........................................................49
Bank line of credit..........................................................................................53
Portfolio transactions and brokerage commissions.............................................................53
Portfolio turnover...........................................................................................54
Shares of beneficial interest................................................................................54
Reduced sales charges, additional purchase, exchange and redemption information and other services...........55
Sales charge reductions and waivers..........................................................................55
Additional information regarding purchases through letter of intent..........................................57
Automatic cash withdrawal plan--Class A and Class C..........................................................58
Individual retirement accounts...............................................................................59
Transfer of accounts.........................................................................................59
Transfer of securities.......................................................................................59
Net asset value..............................................................................................60
Taxation.....................................................................................................60
Additional information on distributions and taxes............................................................60
Distributions................................................................................................60
Performance calculations.....................................................................................70
Financial statements and report of independent registered public accounting firm.............................71
Appendix A--Corporate debt ratings..........................................................................A-1

General information about the Trust
The Trust currently offers shares of the following nineteen series, representing
separate portfolios of investments: UBS Dynamic Alpha Fund, UBS Global
Allocation Fund, UBS Emerging Markets Equity Fund, UBS Global Frontier Fund, UBS
Global Equity Fund, UBS International Equity Fund, UBS U.S. Equity Alpha Fund,
UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Large
Cap Value Equity Fund, UBS U.S. Mid Cap Growth Equity Fund, UBS U.S. Real Estate
Equity Fund, UBS U.S. Small Cap Equity Fund, UBS U.S. Small Cap Growth Fund, UBS
Absolute Return Bond Fund, UBS Emerging Markets Debt Fund, UBS Global Bond Fund,
UBS High Yield Fund and UBS U.S. Bond Fund. This SAI relates to the UBS Global
Frontier Fund (the "Fund") only. The Fund currently offers three classes of
shares: the Class A shares, the Class C shares and the Class Y shares. Class A
shares have a front-end sales charge, a contingent deferred sales charge
("CDSC") on purchases over $1 million and sold within one year of the purchase
date, and are subject to annual 12b-1 plan service fees of 0.25% of average
daily net assets. Class C shares have a CDSC and are subject to annual 12b-1
plan distribution fees of 0.75% of average daily net assets, as well as annual
12b-1 plan service fees of 0.25% of average daily net assets. Class Y shares,
which are designed primarily for institutional investors, have no sales charges
and are not subject to annual 12b-1 plan expenses. The Trust is a Delaware
statutory trust organized on August 13, 1993.

Diversification status
The Fund is classified as "non-diversified" for purposes of the Investment
Company Act of 1940, as amended (the "Act"), which means that the Fund is not
limited by the Act with regard to the portion of its assets that may be invested
in the securities of a single issuer. To the extent that the Fund as a
non-diversified Fund makes investments in excess of 5% of its total assets in
the securities of a particular issuer, its exposure to the risks associated with
that issuer is increased. Because the Fund may invest in a limited number of
issuers, the performance of particular securities may adversely affect the
performance of the Fund or subject the Fund to greater price volatility than
that experienced by diversified investment companies.

General definitions
As used throughout this SAI, the following terms shall have the meanings listed:

"Act" shall mean the Investment Company Act of 1940, as amended.

"Administrator" or "UBS Global AM (Americas)" shall mean UBS Global Asset
Management (Americas) Inc., which serves as the Fund's administrator.

"Advisor" or "UBS Global AM (Americas)" shall mean UBS Global Asset Management
(Americas) Inc., which serves as the Fund's investment advisor.

"Board" shall mean the Board of Trustees of the Trust.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Family Funds" shall mean the Fund and other funds for which UBS Global Asset
Management (US) Inc. or any of its affiliates serves as principal underwriter.

"Fund" shall mean the UBS Global Frontier Fund.

"Moody's" shall mean Moody's Investors Service, Inc.

"SEC" shall mean the U.S. Securities and Exchange Commission.

"S&P" shall mean Standard & Poor's Ratings Group.

"Trust" shall mean The UBS Funds, an open-end management investment company
registered under the Act.

"Underwriter" or "UBS Global AM (US)" shall mean UBS Global Asset Management
(US) Inc., which serves as the Fund's underwriter.

"1933 Act" shall mean the Securities Act of 1933, as amended.

Investment strategies

The following discussion of investment techniques and instruments supplements
and should be read in conjunction with the investment objective and policies set
forth in the Fund's Prospectus. The investment practices described below, except
for the discussion of percentage limitations with respect to portfolio loan
transactions and borrowing, are not fundamental and may be changed by the Board
without the approval of the shareholders. As discussed below, the Fund may
invest directly in securities and financial instruments and/or indirectly in
such investments by investing in shares of open-end investment companies advised
by the Advisor to the extent permitted by an exemptive order received by the
Fund. Such investment companies advised by the Advisor in which the Fund may
invest have similar risks and limitations as the Fund described below.

Asset allocation and leveraging mechanisms
As set forth in the Fund's Prospectus, under normal market conditions, to
achieve the Fund's investment objective the Advisor employs its global
securities strategy ("Global Securities (Allocation) Strategy"), which utilizes
active asset allocation strategies across various asset classes based on the
Advisor's assessment of prevailing market conditions in the US and abroad. The
Advisor enhances its Global Securities (Allocation) Strategy with respect to the
Fund by increasing the Fund's exposure to the global markets through the use of
leverage to achieve higher returns than the Global Securities (Allocation)
Strategy with equity-like risk. The Global Securities (Allocation) Strategy is
currently utilized by other funds and products managed by the Advisor, including
the UBS Global Allocation Fund, a series of the Trust, and the UBS Global
Securities Relationship Fund, a series of UBS Relationship Funds (the "GSR
Fund").

The "strategy ranges" indicated below are the ranges among the various asset
classes within which the Fund generally expects to allocate its assets in
connection with its use of the Global Securities (Allocation) Strategy. The Fund
may exceed these strategy ranges and may modify them in the future.

Asset class Strategy ranges
US equities 10 to 70%
International equities 0 to 52%
Emerging markets equities 0 to 13%
US fixed income 0 to 51%
International fixed income 0 to 39%
Emerging markets fixed income 0 to 12%
US high yield fixed income 0 to 13%
Cash equivalents 0 to 50%

Under normal market conditions, the Fund expects to increasing the Fund's
exposure to the global markets through the use of leverage, which may include
investments in total return swaps or borrowing from banks to the extent
permitted by the Act, to purchase additional investments to achieve the Fund's
investment objective. The range of leverage applied may be between 0% and 50% of
the Fund's total assets, but will typically be between 25% and 40% of the total
assets of the Fund.

Cash and cash equivalents
The Fund may invest a portion of its assets in short-term debt securities
(including repurchase agreements and reverse repurchase agreements) of
corporations, the US government and its agencies and instrumentalities and banks
and finance companies, which may be denominated in any currency.

The Fund may also invest a portion of its assets in shares issued by money
market mutual funds. When unusual market conditions warrant, the Fund may make
substantial temporary defensive investments in cash equivalents up to a maximum
of 100% of its net assets. Cash equivalent holdings may be in any currency
(although such holdings may not constitute "cash or cash equivalents" for tax
diversification purposes under the Code). When the Fund invests for defensive
purposes, it may affect the attainment of the Fund's investment objective.

Under the terms of an exemptive order issued by the SEC, the Fund may invest
cash (i) held for temporary defensive purposes; (ii) not invested pending
investment in securities; (iii) that is set aside to cover an obligation or
commitment of the Fund to purchase securities or other assets at a later date;
(iv) to be invested on a strategic management basis (i-iv are herein referred to
as "Uninvested Cash"); and (v) collateral that it receives from the borrowers of
its portfolio securities in connection with the Fund's securities lending
program, in a series of shares of UBS Supplementary Trust (the "Supplementary
Trust Series") or a series of shares of UBS Relationship Funds ("Relationship
Funds Cash Series"). UBS Supplementary Trust is a private investment pool which
has retained the Advisor to manage its investments and UBS Relationship Funds is
a registered investment company advised by the Advisor. Certain Trustees of the
Trust also serve as Trustees of the UBS Supplementary Trust and UBS Relationship
Funds. The Supplementary Trust Series and Relationship Funds Cash Series each
invests in US dollar denominated money market instruments having a
dollar-weighted average maturity of 90 days or less, and operate in accordance
with Rule 2a-7 under the Act. The Fund's investment of Uninvested Cash in shares
of the Supplementary Trust Series or Relationship Funds Cash Series will not
exceed 25% of the Fund's total assets.

Repurchase agreements
When the Fund enters into a repurchase agreement, it purchases securities from a
bank or broker-dealer which simultaneously agrees to repurchase the securities
at a mutually agreed upon time and price, thereby determining the yield during
the term of the agreement. As a result, a repurchase agreement provides a fixed
rate of return insulated from market fluctuations during the term of the
agreement. The term of a repurchase agreement generally is short, possibly
overnight or for a few days, although it may extend over a number of months (up
to one year) from the date of delivery. Repurchase agreements are considered
under the Act to be collateralized loans by the Fund to the seller secured by
the securities transferred to the Fund. Repurchase agreements will be fully
collateralized and the collateral will be marked-to-market daily. The Fund may
not enter into a repurchase agreement having more than seven days remaining to
maturity if, as a result, such agreement, together with any other illiquid
securities held by the Fund, would exceed 15% of the value of the net assets of
the Fund.

Repurchase agreements are securities for purposes of the tax diversification
requirements that must be met for pass-through treatment under the Code.
Accordingly, the Fund will limit the value of its repurchase agreements on each
of the quarterly testing dates to ensure compliance with Subchapter M of the
Code.

Reverse repurchase agreements
Reverse repurchase agreements involve sales of portfolio securities of the Fund
to member banks of the Federal Reserve System or securities dealers believed
creditworthy, concurrently with an agreement by the Fund to repurchase the same
securities at a later date at a fixed price which is generally equal to the
original sales price plus interest. The Fund retains record ownership and the
right to receive interest and principal payments on the portfolio securities
involved. In connection with each reverse repurchase transaction, the Fund will
direct its custodian bank to place cash, US government securities, equity
securities and/or investment and non-investment grade debt securities in a
segregated account of the Fund, or "earmark" such assets as segregated in the
Fund's custody records, in an amount equal to the repurchase price. Any assets
designated as segregated by the Fund, either physically or "earmarked" as
segregated, with respect to any reverse repurchase agreements, when-issued
securities, delayed delivery securities, to-be-announced securities, dollar
rolls, options, futures, forward contracts, swaps or other derivative
transactions shall be liquid, unencumbered and marked-to-market daily (any such
assets designated as segregated, either physically or "earmarked" as segregated,
are referred to in this SAI as "Segregated Assets"), and such Segregated Assets
shall be maintained in accordance with pertinent positions of the SEC.

A reverse repurchase agreement involves the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements are considered borrowings by the Fund and as such,
are subject to the same investment limitations.

Borrowing
The Fund may borrow money for temporary emergency or extraordinary purposes, or
to facilitate redemptions. The Fund may also borrow money for investment
purposes. The Fund will not borrow money in excess of 33 1/3% of the value of
its total assets (including amounts borrowed). Any borrowing will be done from a
bank with the required asset coverage of at least 300%. In the event that such
asset coverage shall at any time fall below 300%, the Fund shall, within three
days thereafter (not including Sundays or holidays), or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%.

When the Fund borrows money for investment purposes, it is engaging in a form of
leverage, which increases investment risk while increasing investment
opportunity. The money borrowed for such leveraging purposes will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased and may exceed the income from the securities purchased.

Loans of portfolio securities
The Fund may lend portfolio securities to qualified broker-dealers and financial
institutions pursuant to agreements provided: (1) the loan is secured
continuously by collateral marked-to-market daily and maintained in an amount at
least equal to the current market value of the securities loaned; (2) the Fund
may call the loan at any time and receive the securities loaned; (3) the Fund
will receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time exceed 33
1/3% of the total assets of the Fund.

When loaning portfolio securities, the Fund will initially require the borrower
to provide the Fund with collateral in an amount at least equal to 102% of the
current market value of the loaned securities with respect to US securities and
105% of the current market value of the loaned securities with respect to
foreign securities. Thereafter, collateral will be maintained in an amount at
least equal to 100% of the current market value of the loaned securities.
Collateral will consist of US and non-US securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral, which may result in a loss of money by the Fund or a delay
in recovering the loaned securities. In addition, in the event of bankruptcy of
the borrower, the Fund could experience delays in recovering the loaned
securities or only recover cash or a security of equivalent value. Therefore,
the Fund will only enter into portfolio loans after a review of all pertinent
factors by the Advisor under the supervision of the Board, including the
creditworthiness of the borrower and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Advisor.

Swaps
The Fund may engage in swaps, including, but not limited to, interest rate,
currency, total return and credit default swaps, and the purchase or sale of
related caps, floors, collars and other derivative instruments. The Fund expects
to enter into these transactions to preserve a return or spread on a particular
investment or portion of the portfolio's duration, to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date, or to gain exposure to certain markets or returns in the most economical
way possible. The Fund may invest a substantial portion of its assets in total
return swaps to attempt to meet its investment objective.

Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to receive or pay interest (e.g., an exchange of fixed
rate payments for floating rate payments) with respect to a notional amount of
principal. Currency swaps involve the exchange of cash flows on a notional
amount based on changes in the values of referenced currencies.

The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of an
interest rate floor entitles the purchaser to receive payments on a notional
principal amount from the party selling the floor to the extent that a specified
index falls below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return with a
predetermined range of interest rates or values.

The use of swaps involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. If the Advisor is
incorrect in its forecast of market values, total returns of securities,
interest rates and other applicable factors, the investment performance of the
Fund will be less favorable than it would have been if this investment technique
was never used. Swaps do not involve the delivery of securities or other
underlying assets or principal, and are subject to counterparty risk. If the
other party to a swap defaults and fails to consummate the transaction, the
Fund's risk of loss consists of the net amount of interest payments that the
Fund is contractually entitled to receive.

If there is a default by the counterparty to a swap contract, the Fund will be
limited to contractual remedies pursuant to the agreements related to the
transaction. There is no assurance that a swap contract counterparty will be
able to meet its obligations pursuant to the swap contract or that, in the event
of a default, the Fund will succeed in pursuing contractual remedies. The Fund
thus assumes the risk that it may be delayed in or prevented from obtaining
payments owed to it pursuant to a swap contract. However, the amount at risk is
only the net unrealized gain, if any, on the swap, not the entire notional
amount. The Advisor will closely monitor, subject to the oversight of the Board,
the creditworthiness of swap counterparties in order to minimize the risk of
swaps.

Total return swap contracts are agreements between two parties where one
counterparty pays the other the total return of a particular instrument (e.g., a
specified security, basket of securities or securities indices during the
specified period) in return for periodic payments based on a fixed or variable
interest rate, typically at a floating rate based on LIBOR, or the total rate of
return on another financial instrument. The "total return" includes interest
payments from, along with any change in value of, the referenced asset over a
specified period. The Fund will enter into total return swap contracts only on a
net basis, i.e., the two parties' obligations are netted out, with the Fund
paying or receiving, as the case may be, only the net amount of the payments.
Total return swap contracts may be used to obtain exposure to a security or
market without owning or taking physical custody of such security or investing
directly in such market. The value of the swap position as well as the payments
required to be made by the Fund or the counterparty will increase or decrease
depending on the changes in value of the underlying asset. Total return swap
contracts may effectively add leverage to the Fund's portfolio because, in
addition to its total net assets, the Fund would be subject to investment
exposure on the notional amount of the swap.

For example, the Fund generally will seek to employ leverage to gain additional
exposure to the Global Securities (Allocation) Strategy by investing in total
return swap contracts based on the total return of the GSR Fund, which currently
employs the Global Securities (Allocation) Strategy. In a typical total return
swap contract, the Fund will receive the price appreciation or depreciation of
the GSR Fund from the counterparty to the swap contract in exchange for a
payment from the Fund based on LIBOR plus a spread. At the expiration of the
contract, the Fund will pay or receive, as applicable, the difference between
LIBOR plus the spread and the price appreciation of the GSR Fund (or pay Libor
plus the spread and the depreciation of the GSR Fund) over the specified period.
The Fund may enter into multiple total return swap contracts based on the total
return of the GSR Fund with a number of different counterparties. It is possible
that the Advisor may encounter resistance contracting with multiple
counterparties to enter into total return swap contracts based on the total
return of the GSR Fund. If the Advisor is not able to contract with numerous
counterparties in order to achieve the preferred amount of additional exposure
to the Global Securities (Allocation) Strategy, the Fund may not be able to meet
its investment objective.

Total return swap transactions involve greater risks than if the Fund had
invested in the underlying asset directly. Total return swap transactions
involve counterparty risks, as discussed above, but also involve additional
risks, including interest rate risk and market risk. The total rate of return of
an investment on which a total return swap contract is based may exhibit
substantial volatility and, in any given period, may be positive or negative for
the specified period of the total return swap contract. If the Advisor is
incorrect in its forecast of the underlying asset's total return, the investment
performance of the Fund will be less favorable than it would have been if this
investment technique was never used. In the event the total rate of return of
the underlying asset is negative for the specified period of the swap contract,
the Fund will be required to make a payment to the counterparty in addition to
the periodic payment required by the swap contract to cover the decline in value
of the underlying asset. The Fund's risk of loss, therefore, is increased
because the Fund could lose an amount equal to the decrease in value of the
underlying asset for the specified period of time, in addition to the periodic
payments required by the total return swap contract.

The Fund also may enter into credit default swap agreements. The Fund may enter
into a credit default swap on a single security or instrument or on a basket or
index of securities (sometimes referred to as a "CDX" transaction). The "buyer"
in a credit default contract typically is obligated to pay the "seller" a
periodic stream of payments over the term of the contract, provided that no
credit event with respect to any underlying reference obligation has occurred.
If a credit event occurs, the seller typically must pay the buyer the "par
value" (full notional value) of the reference obligation in exchange for the
reference obligation. The Fund may be either the buyer or the seller in the
transaction. If the Fund is a buyer and no credit event occurs, the Fund may
lose its investment and recover nothing. However, if a credit event occurs, the
buyer typically receives full notional value for a reference obligation that may
have little or no value. As a seller, the Fund typically receives a fixed rate
of income throughout the term of the contract, which typically is between six
months and three years, provided a credit event does not occur. If a credit
event occurs, the seller typically must pay the buyer the full notional amount
of the reference obligation.

Credit default swaps involve greater risks than if the Fund had invested in the
reference obligation directly, since, in addition to general market risks,
credit default swaps are subject to illiquidity risk, counterparty risk and
credit risk. A buyer also will lose its investment and recover nothing should no
credit event occur and the swap is held to its termination date. If a credit
event were to occur, the value of any deliverable obligation received by the
seller, coupled with the up-front or periodic payments previously received, may
be less than the full notional value the seller pays to the buyer, resulting in
a loss of value to the Fund. When the Fund acts as a seller of a credit default
swap, the Fund is exposed to many of the same risks of leverage since, if a
credit event occurs, the seller may be required to pay the buyer the full
notional value of the contract net of any amounts owed by the buyer related to
its delivery of deliverable obligations.

The Advisor and the Trust do not believe that the Fund's obligations under swap
contracts are senior securities and, accordingly, the Fund will not treat them
as being subject to its borrowing or senior securities restrictions. However,
with respect to swap contracts that provide for the netting of payments, the net
amount of the excess, if any, of the Fund's obligations over its entitlements
with respect to each swap contract will be accrued on a daily basis and an
amount of Segregated Assets having an aggregate market value at least equal to
the accrued excess will be maintained to cover the transactions in accordance
with SEC positions. With respect to swap contracts that do not provide for the
netting of payments by the counterparties, the full notional amount for which
the Fund is obligated under the swap contract with respect to each swap contract
will be accrued on a daily basis and an amount of Segregated Assets having an
aggregate market value at least equal to the accrued full notional value will be
maintained to cover the transactions in accordance with SEC positions. To the
extent that the Fund cannot dispose of a swap in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
swap, the Fund will treat the swap as illiquid and subject to its overall limit
on illiquid investments of 15% of the Fund's net assets.

Futures
The Fund may enter into contracts for the purchase or sale for future delivery
of securities, indices and foreign currencies.

A purchase of a futures contract means the acquisition of a contractual right to
obtain delivery to the Fund of the securities or foreign currency called for by
the contract at a specified price during a specified future month. When a
futures contract is sold, the Fund incurs a contractual obligation to deliver
the securities or foreign currency underlying the contract at a specified price
on a specified date during a specified future month.

When the Fund enters into a futures transaction, it must deliver to the futures
commission merchant (an "FCM") selected by the Fund, an amount referred to as
"initial margin." The initial margin is required to be deposited in cash or
government securities with an FCM. Minimum initial margin requirements are
established by the futures exchange and FCMs may establish initial margin
requirements which are higher than the exchange requirements. After a futures
contract position is opened, the value of the contract is marked-to-market
daily. If a futures contact price changes to the extent that the margin deposit
does not satisfy margin requirements, payment of a "variation margin" to be held
by the FCM, will be required. Conversely, a reduction in the contract value may
reduce the required margin, resulting in a repayment of excess margin to the
custodial accounts of the Fund. The Fund may also effect futures transactions
through FCMs who are affiliated with the Advisor or the Fund in accordance with
procedures adopted by the Board.

The Fund will enter into futures transactions on domestic exchanges and, to the
extent such transactions have been approved by the Commodity Futures Trading
Commission for sale to customers in the United States, on foreign exchanges. In
addition, the Fund may sell stock index futures in anticipation of or during a
market decline to attempt to offset the decrease in market value of its common
stocks that might otherwise result; and it may purchase such contracts in order
to offset increases in the cost of common stocks that it intends to purchase.
Unlike other futures contracts, a stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.

While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into
offsetting transactions.

The Fund may enter into futures contracts to protect against the adverse effects
of fluctuations in security prices, interest or foreign exchange rates without
actually buying or selling the securities or foreign currency. For example, if
interest rates are expected to increase, the Fund might enter into futures
contracts for the sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities owned by the Fund.
If interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the futures contracts to the Fund
would increase at approximately the same rate, thereby keeping the net asset
value of the Fund from declining as much as it otherwise would have. Similarly,
when it is expected that interest rates may decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at
higher prices. Since fluctuations in the value of futures contracts should be
similar to those of debt securities, the Fund could take advantage of the
anticipated rise in value of debt securities without actually buying them until
the market had stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the cash market. The
Fund may also enter into futures contracts as a low cost method for gaining or
reducing exposure to a particular currency or securities market without directly
investing in those currencies or securities.

To the extent that market prices move in an unexpected direction, the Fund may
not achieve the anticipated benefits of futures contracts or may realize a loss.
For example, if the Fund is hedged against the possibility of an increase in
interest rates, which would adversely affect the price of securities held in its
portfolio, and interest rates decrease instead, the Fund would lose part or all
of the benefit of the increased value which it has because it would have
offsetting losses in its futures position. In addition, in such situations, if
the Fund had insufficient cash, it may be required to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of securities
may, but will not necessarily, be at increased prices that would reflect the
rising market. The Fund may be required to sell securities at a time when it may
be disadvantageous to do so.

The Fund will cover its obligations under the futures transactions in which it
participates by either (i) holding offsetting positions that appropriately equal
the daily market value of the Fund's position in the futures contract (less the
initial margin and any variation margins deposited with an FCM); or (ii)
accruing such amounts on a daily basis and maintaining Segregated Assets having
an aggregate market value at least equal to such amounts in accordance with SEC
positions.

Options
The Fund may purchase and write call or put options on foreign or US securities
and indices and enter into related closing transactions. The Fund may also
purchase exchange-listed call options on particular market segment indices to
achieve temporary exposure to a specific industry.

The Fund may invest in options that are either listed on US or recognized
foreign exchanges or traded over-the-counter. Certain over-the-counter options
may be illiquid. Thus, it may not be possible to close options positions and
this may have an adverse impact on the Fund's ability to effectively hedge its
securities. The Trust has been notified by the SEC that it considers
over-the-counter options to be illiquid. Accordingly, the Fund will only invest
in such options to the extent consistent with its 15% limit on investments in
illiquid securities.

Purchasing Call Options--The Fund may purchase call options on securities to the
extent that premiums paid by the Fund do not aggregate to more than 20% of the
Fund's total assets. When the Fund purchases a call option, in return for a
premium paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call option, who receives
the premium upon writing the option, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. The advantage of purchasing call options is that the Fund may alter
portfolio characteristics and modify portfolio maturities without incurring the
cost associated with transactions.

The Fund may, following the purchase of a call option, liquidate its position by
effecting a closing sale transaction. This is accomplished by selling an option
of the same series as the option previously purchased. The Fund will realize a
profit from a closing sale transaction if the price received on the transaction
is more than the premium paid to purchase the original call option; the Fund
will realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.

Although the Fund will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an exchange
may exist. In such an event, it may not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund, in which event the Fund would realize a capital loss which will be
short-term unless the option was held for more than one year.

Call writing--The Fund may write call options from time to time on such portions
of its portfolio, without limit, as the Advisor determines is appropriate in
seeking to achieve the Fund's investment objective. The advantage to the Fund in
writing calls is that the Fund receives a premium which is additional income.
However, if the security rises in value, the Fund may not fully participate in
the market appreciation.

During the option period for a call option, the writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
or upon entering a closing purchase transaction. A closing purchase transaction,
in which the Fund, as writer of an option, terminates its obligation by
purchasing an option of the same series as the option previously written, cannot
be effected once the option writer has received an exercise notice for such
option.

Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price, expiration date or both. The Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.

If a call option expires unexercised, the Fund will realize a short-term capital
gain in the amount of the premium on the option less the commission paid. Such a
gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, the
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security and the proceeds
of the sale of the security plus the amount of the premium on the option less
the commission paid.

The Fund will generally write call options on a covered basis. A call option
written by the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration maintained as Segregated Assets by the Fund's custodian) upon
conversion or exchange of other securities held by the Fund. A call option is
also deemed to be covered if the Fund holds a call on the same security and in
the same principal amount as the call written and the exercise price of the call
held (i) is equal to or less than the exercise price of the call written or (ii)
is greater than the exercise price of the call written if the difference is
maintained as Segregated Assets by the Fund's custodian.

From time to time, the Fund will write a call option that is not covered as
indicated above but where the Fund's custodian will maintain Segregated Assets
for the term of the option having a value equal to the fluctuating market value
of the optioned securities or currencies, marked-to market daily, in accordance
with SEC positions. While such an option would be "covered" with sufficient
collateral to satisfy SEC prohibitions on issuing senior securities, this type
of strategy would expose the Fund to the risks of writing uncovered options.
When writing uncovered call options, the Fund is subject to the risk of having
to purchase the security or currency subject to the option at a price higher
than the exercise price of the option. As the price of a security or currency
could appreciate substantially, the Fund's loss could be significant.

Purchasing put options--The Fund may only purchase put options to the extent
that the premiums on all outstanding put options do not exceed 20% of the Fund's
total assets. The Fund will, at all times during which it holds a put option,
own the security covered by such option. With regard to the writing of put
options, the Fund will limit the aggregate value of the obligations underlying
such put options to 50% of its total assets.

A put option purchased by the Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. The Fund intends to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The ability to purchase put options will allow
the Fund to protect unrealized gains in an appreciated security in their
portfolios without actually selling the security. If the security does not drop
in value, the Fund will lose the value of the premium paid. The Fund may sell a
put option that it has previously purchased prior to the sale of the securities
underlying such option. Such sale will result in a net gain or loss depending on
whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option that is sold.

The Fund may sell put options purchased on individual portfolio securities.
Additionally, the Fund may enter into closing sale transactions. A closing sale
transaction is one in which the Fund, when it is the holder of an outstanding
option, liquidates its position by selling an option of the same series as the
option previously purchased.

Writing put options--The Fund may also write put options on a secured basis
which means that the Fund's custodian will maintain Segregated Assets in an
amount not less than the exercise price of the option at all times during the
option period. The amount of Segregated Assets will be adjusted on a daily basis
to reflect changes in the market value of the securities covered by the put
option written by the Fund. Secured put options will generally be written in
circumstances where the Advisor wishes to purchase the underlying security for
the Fund's portfolio at a price lower than the current market price of the
security. In such event, the Fund would write a secured put option at an
exercise price, which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.

Following the writing of a put option, the Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.

Index options
The Fund may purchase exchange-listed call options on stock and fixed income
indices and sell such options in closing sale transactions for hedging purposes.
The Fund also may purchase call options on indices primarily as a substitute for
taking positions in certain securities or a particular market segment. The Fund
may also purchase call options on an index to protect against increases in the
price of securities underlying that index that the Fund intends to purchase
pending its ability to invest in such securities.

In addition, the Fund may purchase put options on stock and fixed income indices
and sell such options in closing sale transactions. The Fund may purchase put
options on broad market indices in order to protect its fully invested portfolio
from a general market decline. Put options on market segments may be bought to
protect the Fund from a decline in the value of heavily weighted industries in
the Fund's portfolio. Put options on stock and fixed income indices may also be
used to protect the Fund's investments in the case of a major redemption.

The Fund may also write (sell) put and call options on stock and fixed income
indices. While the option is open, the Fund's custodian will maintain Segregated
Assets to cover the transactions, marked-to-market daily, in accordance with SEC
positions.

Options on indices are similar to regular options except that an option on an
index gives the holder the right, upon exercise, to receive an amount of cash if
the closing level of the index upon which the option is based is greater than
(in the case of a call) or lesser than (in the case of a put) the exercise price
of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars multiplied by a specified multiple (the "multiplier"). The indices on
which options are traded include both US and non-US markets.

Special risks of options on indices
The Fund's purchases of options on indices will subject it to the risks
described below.

Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular security, whether the Fund will
realize gain or loss on the purchase of an option on an index depends upon
movements in the level of prices in the market generally or in an industry or
market segment, rather than movements in the price of a particular security.
Accordingly, successful use by the Fund of options on indices is subject to the
Advisor's ability to predict correctly the direction of movements in the market
generally or in a particular industry. This requires different skills and
techniques than predicting changes in the prices of individual securities.

Index prices may be distorted if trading of a substantial number of securities
included in the index is interrupted causing the trading of options on that
index to be halted. If a trading halt occurred, the Fund would not be able to
close out options which it had purchased and the Fund may incur losses if the
underlying index moved adversely before trading resumed. If a trading halt
occurred and restrictions prohibiting the exercise of options were imposed
through the close of trading on the last day before expiration, exercises on
that day would be settled on the basis of a closing index value that may not
reflect current price information for securities representing a substantial
portion of the value of the index.

If the Fund holds an index option and exercises it before final determination of
the closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall "out-of-the-money," the Fund will be required to pay
the difference between the closing index value and the exercise price of the
option (multiplied by the applicable multiplier) to the assigned writer.
Although the Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising the option when the index level is close to the exercise price, it
may not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.

Rule 144A and illiquid securities
The Fund may invest in securities that are exempt under Rule 144A from the
registration requirements of the 1933 Act. Those securities purchased under Rule
144A are traded among qualified institutional buyers.

The Board has instructed the Advisor to consider the following factors in
determining the liquidity of a security purchased under Rule 144A: (i) the
security can be sold within seven days at approximately the same amount at which
it is valued by the Fund; (ii) there is reasonable assurance that the security
will remain marketable throughout the period it is expected to be held by the
Fund, taking into account the actual frequency of trades and quotations for the
security (expected frequency in the case of initial offerings); (iii) at least
two dealers make a market in the security; (iv) there are at least three sources
from which a price for the security is readily available; (v) settlement is made
in a "regular way" for the type of security at issue; (vi) for Rule 144A
securities that are also exempt from registration under Section 3(c)(7) of the
Act, there is a sufficient market of "qualified purchasers" (as defined in the
Act) to assure that it will remain marketable throughout the period it is
expected to be held by the Fund; (vii) the issuer is a reporting company under
the Securities Exchange Act of 1934, as amended; and (viii) the security is not
in the same class as, or convertible into, any listed security of the issuer.
Although having delegated the day-to-day functions, the Board will continue to
monitor and periodically review the Advisor's selection of Rule 144A securities,
as well as the Advisor's determinations as to their liquidity. Investing in
securities under Rule 144A could have the effect of increasing the level of the
Fund's illiquidity to the extent that qualified institutional buyers become, for
a time, uninterested in purchasing these securities. After the purchase of a
security under Rule 144A, however, the Board and the Advisor will continue to
monitor the liquidity of that security to ensure that the Fund has no more than
15% of its net assets in illiquid securities.

The Fund will limit investments in securities of issuers which the Fund is
restricted from selling to the public without registration under the 1933 Act to
no more than 15% of the Fund's net assets, excluding restricted securities
eligible for resale pursuant to Rule 144A that have been determined to be liquid
pursuant to a policy and procedures adopted by the Trust's Board which includes
continuing oversight by the Board.

If the Advisor determines that a security purchased in reliance on Rule 144A
which was previously determined to be liquid, is no longer liquid and, as a
result, the Fund's holdings of illiquid securities exceed the Fund's 15% limit
on investment in such securities, the Advisor will determine what action shall
be taken to ensure that the Fund continues to adhere to such limitation,
including disposing of illiquid assets which may include such Rule 144A
securities.

Non-publicly traded securities, private placements and restricted securities
The Fund may invest in securities that are neither listed on a stock exchange
nor traded over-the-counter, including privately placed securities and limited
partnerships. Investing in unregistered or unlisted securities, including
investments in new and early stage companies, may involve a high degree of
business and financial risk that can result in substantial losses. As a result
of the absence of a public trading market for these securities, they may be less
liquid than publicly traded securities. Although these securities may be resold
in privately negotiated transactions, the prices realized from these sales could
be less than those originally paid by the Fund, or less than what may be
considered the fair value of such securities. Furthermore, companies whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements which would be applicable if their
securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expense of registration.
Investments by the Fund in non-publicly traded securities, private placements
and restricted securities will be limited to the Fund's prohibition on investing
more than 15% of its net assets in illiquid securities.

Investment company securities and investments in affiliated investment companies
Subject to the provisions of any exemptive orders issued by the SEC (as
described in the following paragraphs), securities of other investment companies
may be acquired by the Fund to the extent that such purchases are consistent
with the Fund's investment objective and restrictions and are permitted under
the Act. The Act requires that, as determined immediately after a purchase is
made, (i) not more than 5% of the value of the Fund's total assets will be
invested in the securities of any one investment company, (ii) not more than 10%
of the value of the Fund's total assets will be invested in securities of
investment companies as a group and (iii) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Fund. Certain
exceptions to these limitations may apply. As a shareholder of another
investment company, the Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the expenses that the Fund would
bear in connection with its own operations.

The Fund may invest in securities issued by other registered investment
companies advised by the Advisor beyond the above percentage maximums pursuant
to exemptive relief granted by the SEC or rules promulgated by the SEC. The Fund
may invest in corresponding portfolios of UBS Relationship Funds to the extent
that the Advisor determines that such investments are a more efficient means for
the Fund to gain exposure to certain asset classes referred to below than by the
Fund investing directly in individual securities. For example, to gain exposure
to equity and fixed income securities of issuers located in emerging market
countries, the Fund may invest that portion of its assets allocated to emerging
market investments in the UBS Emerging Markets Equity Relationship Fund and the
UBS Opportunistic Emerging Markets Debt Relationship Fund.

In lieu of investing directly in certain high yield, higher risk securities, the
Fund may invest a portion of its assets in the UBS High Yield Relationship Fund.
The investment objective of the UBS High Yield Relationship Fund is to maximize
total return, consisting of capital appreciation and current income, while
controlling risk. Under normal circumstances, the UBS High Yield Relationship
Fund invests at least 80% of its net assets (plus borrowings for investment
purposes, if any) in fixed income securities that provide higher yields and are
lower rated. High yield, lower rated fixed income securities are those rated
below investment grade.

In lieu of investing directly in equity securities issued by companies with
relatively small overall market capitalizations, the Fund may invest a portion
of its assets in the UBS U.S. Small Cap Equity Relationship Fund. The investment
objective of the UBS U.S. Small Cap Equity Relationship Fund is to maximize
total US dollar return, consisting of capital appreciation and current income,
while controlling risk. Under normal circumstances, the UBS Small Cap Equity
Relationship Fund invests at least 80% of its net assets (plus borrowings for
investment purposes, if any) in equity securities of US small capitalization
companies.

In addition to the portfolios of UBS Relationship Funds described above, the
Fund may invest in other portfolios of UBS Relationship Funds or other
affiliated investment companies to the extent permitted by the exemptive relief
granted by the SEC or rules promulgated by the SEC. The Fund may only invest in
portfolios of UBS Relationship Funds to the extent that the asset class exposure
in such portfolios of UBS Relationship Funds is consistent with the permissible
asset class exposure for the Fund, had the Fund invested directly in securities,
and the portfolios of UBS Relationship Funds are subject to similar risks and
limitations as the Fund.

Equity securities
The Fund may invest in a broad range of equity securities of US and non-US
issuers, including, but not limited to, common stocks of companies or closed-end
investment companies, preferred stocks, debt securities convertible into or
exchangeable for common stock, securities such as warrants or rights that are
convertible into common stock and sponsored or unsponsored American, European
and Global depositary receipts ("Depositary Receipts"). The issuers of
unsponsored Depositary Receipts are not obligated to disclose material
information in the United States. The Fund expects its US equity investments to
emphasize large and mid capitalization companies. The Fund may also invest in
small capitalization companies. The equity markets in the non-US component of
the Fund will typically include available shares of larger capitalization
companies but may also include intermediate and small capitalization companies.
Capitalization levels are measured relative to specific markets, thus large,
intermediate and small capitalization ranges vary country by country. The Fund
may invest in equity securities of companies considered by the Advisor to be in
their post-venture capital stage, or "post-venture capital companies." A
post-venture capital company is a company that has received venture capital
financing either: (a) during the early stages of the company's existence or the
early stages of the development of a new product or service, or (b) as part of a
restructuring or recapitalization of the company. The Fund may also invest in
equity securities of issuers in emerging markets and in securities with respect
to which the return is derived from the equity securities of issuers in emerging
markets.

Exchange-traded index securities
Subject to the limitations on investment in investment company securities and
its own investment objective, the Fund may invest in exchange-traded index
securities that are currently operational and that may be developed in the
future. Exchange-traded index securities generally trade on the American Stock
Exchange or New York Stock Exchange and are subject to the risks of an
investment in a broadly based portfolio of common stocks, including the risk
that the general level of stock prices may decline, thereby adversely affecting
the value of the investment. These securities generally bear certain operational
expenses. To the extent the Fund invests in these securities, the Fund must bear
these expenses in addition to the expenses of its own operation.

Eurodollar securities
The Fund may invest in Eurodollar securities, which are fixed income securities
of a US issuer or a foreign issuer that are issued outside the United States.
Interest and dividends on Eurodollar securities are payable in US dollars.

Foreign securities
Investors should recognize that investing in foreign issuers involves certain
considerations, including those set forth in the Fund's Prospectus, which are
not typically associated with investing in US issuers. Since the stocks of
foreign companies are frequently denominated in foreign currencies, and since
the Fund may temporarily hold uninvested reserves in bank deposits in foreign
currencies, the Fund will be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations and may incur costs in
connection with conversions between various currencies. The investment policies
of the Fund permit it to enter into forward foreign currency exchange contracts,
futures, options and interest rate swaps in order to hedge portfolio holdings
and commitments against changes in the level of future currency rates.

Issuer location
The Advisor considers a number of factors to determine whether an investment is
tied to a particular country, including whether: the investment is issued or
guaranteed by a particular government or any of its agencies, political
subdivisions or instrumentalities; the investment has its primary trading market
in a particular country; the issuer is organized under the laws of, derives at
least 50% of its revenues from, or has at least 50% of its assets in, a
particular country; the investment is included in an index representative of a
particular country or region; and the investment is exposed to the economic
fortunes and risks of a particular country.

Forward foreign currency contracts
The Fund may purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions
and to manage currency risk.

Forward foreign currency contracts are traded in the inter-bank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement and no
commissions are charged at any stage for trades. The Fund will account for
forward contracts by marking-to-market each day at current forward contract
values.

The Fund will only enter into forward contracts to sell, for a fixed amount of
US dollars or other appropriate currency, an amount of foreign currency, to the
extent that the value of the short forward contract is covered by the underlying
value of securities denominated in the currency being sold. Alternatively, when
the Fund enters into a forward contract to sell an amount of foreign currency,
the Fund's custodian or sub-custodian will maintain Segregated Assets in an
amount not less than the value of the Fund's total assets committed to the
consummation of such forward contract. If the Segregated Assets decline,
additional cash or securities will be designated as Segregated Assets on a daily
basis so that the value of the account will equal the amount of the Fund's
commitments with respect to such contracts.

Non-deliverable forwards
The Fund may, from time to time, engage in non-deliverable forward transactions
to manage currency risk or to gain exposure to a currency without purchasing
securities denominated in that currency. A non-deliverable forward is a
transaction that represents an agreement between the Fund and a counterparty
(usually a commercial bank) to buy or sell a specified (notional) amount of a
particular currency at an agreed upon foreign exchange rate on an agreed upon
future date. Unlike other currency transactions, there is no physical delivery
of the currency on the settlement of a non-deliverable forward transaction.
Rather, the Fund and the counterparty agree to net the settlement by making a
payment in US dollars or another fully convertible currency that represents any
differential between the foreign exchange rate agreed upon at the inception of
the non-deliverable forward agreement and the actual exchange rate on the agreed
upon future date. Thus, the actual gain or loss of a given non-deliverable
forward transaction is calculated by multiplying the transaction's notional
amount by the difference between the agreed upon forward exchange rate and the
actual exchange rate when the transaction is completed.

When the Fund enters into a non-deliverable forward transaction, the Fund's
custodian will maintain Segregated Assets in an amount not less than the value
of the Fund's unrealized loss under such non-deliverable forward transaction. If
the additional Segregated Assets decline in value or the amount of the Fund's
commitment increases because of changes in currency rates, additional cash or
securities will be designated as Segregated Assets on a daily basis so that the
value of the account will equal the amount of the Fund's unrealized loss under
the non-deliverable forward agreement.

Since the Fund generally may only close out a non-deliverable forward with the
particular counterparty, there is a risk that the counterparty will default on
its obligation under the agreement. If the counterparty defaults, the Fund will
have contractual remedies pursuant to the agreement related to the transaction,
but there is no assurance that contract counterparties will be able to meet
their obligations pursuant to such agreements or that, in the event of a
default, the Fund will succeed in pursuing contractual remedies. The Fund thus
assumes the risk that it may be delayed or prevented from obtaining payments
owed to it pursuant to non-deliverable forward transactions.

In addition, where the currency exchange rates that are the subject of a given
non-deliverable forward transaction do not move in the direction or to the
extent anticipated, the Fund could sustain losses on the non-deliverable forward
transaction. The Fund's investment in a particular non-deliverable forward
transaction will be affected favorably or unfavorably by factors that affect the
subject currencies, including economic, political and legal developments that
impact the applicable countries, as well as exchange control regulations of the
applicable countries. These risks are heightened when a non-deliverable forward
transaction involves currencies of emerging market countries because such
currencies can be volatile and there is a greater risk that such currencies will
be devalued against the US dollar or other currencies.

Options on foreign currencies
The Fund also may purchase and write put and call options on foreign currencies
(traded on US and foreign exchanges or over-the-counter markets) to manage the
Fund's exposure to changes in currency exchange rates. The Fund may purchase and
write options on foreign currencies for hedging purposes in a manner similar to
that in which futures contracts on foreign currencies or forward contracts will
be utilized. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the dollar price
of the currency does decline, the Fund will have the right to sell such currency
for a fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the dollar price
of such securities, the Fund may purchase call options on such currency.

The purchase of such options could offset, at least partially, the effects of
the adverse movement in exchange rates. As in the case of other types of
options, however, the benefit to the Fund to be derived from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would require it to
forego a portion or all of the benefits of advantageous changes in such rates.

The Fund may write options on foreign currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar value
of foreign currency denominated securities due to adverse fluctuations in
exchange rates, it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs, the option will
most likely not be exercised, and the diminution in the value of portfolio
securities will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, the Fund could write a
put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on foreign currencies, the Fund also may be required to forego all or a portion
of the benefit which might otherwise have been obtained from favorable movements
in exchange rates.

The Fund may also engage in options transactions for non-hedging purposes. The
Fund may use options transactions to gain exposure to a currency when the
Advisor believes that exposure to the currency is beneficial to the Fund but
believes that the securities denominated in that currency are unattractive.

The Fund may write covered call options on foreign currencies. A call option
written on a foreign currency by the Fund is "covered" if the Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration maintained as Segregated Assets by the Fund's
custodian) upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if the Fund has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written, or (b) is greater than the exercise price of the call
written if the difference is maintained as Segregated Assets by the Fund's
custodian.

With respect to writing put options, at the time the put is written, the Fund's
custodian will maintain Segregated Assets in an amount equal in value to the
exercise price of the put. The Segregated Assets will be maintained and
marked-to-market daily until the put is exercised, has expired or the Fund has
purchased a closing put of the same series as the one previously written.

Lower rated debt securities
Fixed income securities rated lower than Baa3 by Moody's or BBB- by S&P are
below investment grade and are considered to be of poor standing and
predominantly speculative. Such securities ("lower rated securities") are
commonly referred to as "junk bonds" and are subject to a substantial degree of
credit risk. Lower rated securities may be issued as a consequence of corporate
restructurings, such as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. Also, lower rated securities are often
issued by smaller, less creditworthy companies or by highly leveraged (indebted)
firms, which are generally less able than more financially stable firms to make
scheduled payments of interest and principal. The risks posed by securities
issued under such circumstances are substantial.

In the past, the high yields from lower rated securities have more than
compensated for the higher default rates on such securities. However, there can
be no assurance that diversification will protect the Fund from widespread bond
defaults brought about by a sustained economic downturn or that yields will
continue to offset default rates on lower rated securities in the future.
Issuers of these securities are often highly leveraged, so that their ability to
service their debt obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. In addition, such issuers may
not have more traditional methods of financing available to them and may be
unable to repay debt at maturity by refinancing. The risk of loss due to default
by the issuer is significantly greater for the holders of lower rated securities
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. Further, an economic recession may result in default
levels with respect to such securities in excess of historic averages.

The value of lower rated securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, lower rated securities may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.

Especially at such times, trading in the secondary market for lower rated
securities may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for lower rated securities may be less
liquid than the market for investment grade corporate bonds. There are fewer
securities dealers in the high yield market and purchasers of lower rated
securities are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced market liquidity, lower rated
securities prices may become more volatile and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event, such as a deterioration in the
creditworthiness of the issuer, may be adversely affected.

Lower rated securities frequently have call or redemption features that would
permit an issuer to repurchase the security from the Fund. If a call were
exercised by the issuer during a period of declining interest rates, the Fund
likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Fund and any
dividends to investors.

Besides credit and liquidity concerns, prices for lower rated securities may be
affected by legislative and regulatory developments. For example, from time to
time, Congress has considered legislation to restrict or eliminate the corporate
tax deduction for interest payments or to regulate corporate restructurings such
as takeovers or mergers. Such legislation may significantly depress the prices
of outstanding lower rated securities. A description of various corporate debt
ratings appears in Appendix A to this SAI.

Securities issued by foreign issuers rated below investment grade entail greater
risks than higher rated securities, including the risks of untimely interest and
principal payment, default and price volatility and may also present problems of
liquidity, valuation and currency risk.

Inflation linked securities
Inflation linked securities are debt securities whose principal and/or interest
payments are adjusted for inflation, unlike debt securities that make fixed
principal and interest payments. Inflation linked securities include Treasury
Inflation Protected Securities ("TIPS"), which are securities issued by the US
Treasury. The interest rate paid by TIPS is fixed, while the principal value
rises or falls based on changes in a published Consumer Price Index ("CPI").
Thus, if inflation occurs, the principal and interest payments on the TIPS are
adjusted accordingly to protect investors from inflationary loss. During a
deflationary period, the principal and interest payments decrease, although the
TIPS' principal amounts will not drop below their face amounts at maturity. In
exchange for the inflation protection, TIPS generally pay lower interest rates
than typical US Treasury securities. Only if inflation occurs will TIPS offer a
higher real yield than a conventional Treasury bond of the same maturity.

Other issuers of inflation linked debt securities include other US government
agencies or instrumentalities, corporations and foreign governments. There can
be no assurance that the CPI or any foreign inflation index will accurately
measure the real rate of inflation in the prices of goods and services.
Moreover, there can be no assurance that the rate of inflation in a foreign
country will be correlated to the rate of inflation in the United States.

The value of inflation linked securities is expected to change in response to
changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if the rate of inflation rises at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in the value of
inflation linked securities.

While inflation linked securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.

Any increase in the principal amount of an inflation linked security will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity.

Pay-in-kind bonds
The Fund may invest in pay-in-kind bonds. Pay-in-kind bonds are securities that
pay interest through the issuance of additional bonds. The Fund will be deemed
to receive interest over the life of such bonds and may be treated for federal
income tax purposes as if interest were paid on a current basis, although no
cash interest payments are received by the Fund until the cash payment date or
until the bonds mature.

Convertible securities
The Fund may invest in convertible securities which generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality. The value of convertible securities may reflect changes in the value of
the underlying common stock. Convertible securities entail less credit risk than
the issuer's common stock because they rank senior to common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time and to receive interest or dividends until the
holder elects to convert. The provisions of a convertible security determine its
ranking in a company's capital structure. In the case of subordinated
convertible debentures, the holder's claims on assets and earnings are
subordinated to the claims of other creditors and are senior to the claims of
preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claim on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.

Credit-linked securities
The Fund may invest in credit-linked securities. Credit-linked securities are
debt securities that represent an interest in a pool of, or are otherwise
collateralized by, one or more corporate debt obligations or credit default
swaps on corporate debt or bank loan obligations. Such debt obligations may
represent the obligations of one or more corporate issuers. The Fund has the
right to receive periodic interest payments from the issuer of the credit-linked
security (usually the seller of the underlying credit default swap(s)) at an
agreed-upon interest rate, and a return of principal at the maturity date.

The Fund bears the risk of loss of its principal investment and the periodic
interest payments expected to be received for the duration of its investment in
the credit-linked security, in the event that one or more of the debt
obligations underlying bonds or debt obligations underlying the credit default
swaps, go into default or otherwise become non-performing. Upon the occurrence
of such a credit event (including bankruptcy, failure to timely pay interest or
principal or a restructuring) with respect to an underlying debt obligation
(which may represent a credit event of one or more underlying obligors), the
Fund will generally reduce the principal balance of the related credit-linked
security by the Fund's pro rata interest in the par amount of the defaulted
underlying debt obligation in exchange for the actual value of the defaulted
underlying obligation or the defaulted underlying obligation itself, thereby
causing the Fund to lose a portion of its investment. As a result, on an ongoing
basis, interest on the credit-linked security will accrue on a smaller principal
balance and a smaller principal balance will be returned at maturity. To the
extent that a credit-linked security represents an interest in underlying
obligations of a single corporate issuer, a credit event with respect to such an
issuer presents greater risk of loss to the Fund than if the credit-linked
security represented an interest in underlying obligations of multiple corporate
issuers.

In addition, the Fund bears the risk that the issuer of the credit-linked
security will default or become bankrupt. In such an event, the Fund may have
difficulty being repaid, or fail to be repaid, the principal amount of its
investment and the remaining periodic interest payments thereon.

An investment in credit-linked securities also involves reliance on the
counterparty to the swap entered into with the issuer to make periodic payments
to the issuer under the terms of the credit default swap. Any delay or cessation
in the making of such payments may be expected in certain instances to result in
delays or reductions in payments to the Fund as an investor in such
credit-linked securities. Additionally, credit-linked securities are typically
structured as limited recourse obligations of the issuer of such securities such
that the securities issued will usually be obligations solely of the issuer and
will not be obligations or responsibilities of any other person.

Most credit-linked securities are structured as Rule 144A securities so that
they may be freely traded among institutional buyers. The Fund will generally
only purchase credit-linked securities that are determined to be liquid in
accordance with the Fund's liquidity guidelines. However, the market for
credit-linked securities may be, or suddenly can become, illiquid. The other
parties to the transaction may be the only investors with sufficient
understanding of the derivative to be interested in bidding for it. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for credit-linked securities. In certain cases, a market price for a
credit-linked security may not be available or may not be reliable, and the Fund
could experience difficulty in selling such security at a price the investment
manager believes is fair. In the event a credit-linked security is deemed to be
illiquid, the Fund will include such security in calculating its limitation on
investments in illiquid securities.

The value of a credit-linked security will typically increase or decrease with
any change in the value of the underlying debt obligations, if any, held by the
issuer and the credit default swap. Further, in cases where the credit-linked
security is structured such that the payments to the Fund are based on amounts
received in respect of, or the value of performance of, any underlying debt
obligations specified in the terms of the relevant credit default swap,
fluctuations in the value of such obligation may affect the value of the
credit-linked security.

The collateral of a credit-linked security may be one or more credit default
swaps, which are subject to additional risks. See "Investment strategies--Swaps"
for a description of additional risks associated with credit default swaps.

When-issued securities
The Fund may purchase securities offered on a "when-issued" or "delayed
delivery" basis. When so offered, the price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued or delayed delivery securities take
place at a later date. During the period between purchase and settlement, no
payment is made by the purchaser to the issuer and no interest on the
when-issued or delayed delivery security accrues to the purchaser. While
when-issued or delayed delivery securities may be sold prior to the settlement
date, it is intended that the Fund will purchase such securities with the
purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
security on a when-issued or delayed delivery basis, it will record the
transaction and reflect the value of the security in determining its net asset
value. The market value of when-issued or delayed delivery securities may be
more or less than the purchase price. The Advisor does not believe that the
Fund's net asset value or income will be adversely affected by its purchase of
securities on a when-issued or delayed delivery basis. The Fund's custodian will
maintain Segregated Assets equal in value to the purchase price and the interest
rate payable on the securities which are fixed on the purchase commitment date
or at the time of settlement for when-issued or delayed delivery securities,
marked-to-market daily in accordance with pertinent SEC positions.

Mortgage-backed securities and mortgage pass-through securities
The Fund may also invest in mortgage-backed securities, which are interests in
pools of mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations as further described below. The
Fund may also invest in debt securities, which are secured with collateral
consisting of mortgage-backed securities (see "Collateralized Mortgage
Obligations"), and in other types of mortgage-related securities.

The timely payment of principal and interest on mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association ("GNMA") is
backed by GNMA and the full faith and credit of the US government. These
guarantees, however, do not apply to the market value of Fund shares. Also,
securities issued by GNMA and other mortgage-backed securities may be purchased
at a premium over the maturity value of the underlying mortgages. This premium
is not guaranteed and would be lost if prepayment occurs. Mortgage-backed
securities issued by US government agencies or instrumentalities other than GNMA
are not "full faith and credit" obligations. Certain obligations, such as those
issued by the Federal Home Loan Bank are supported by the issuer's right to
borrow from the US Treasury, while others such as those issued by Fannie Mae,
formerly known as the Federal National Mortgage Association, are supported only
by the credit of the issuer. Unscheduled or early payments on the underlying
mortgages may shorten the securities' effective maturities and reduce returns.
The Fund may agree to purchase or sell these securities with payment and
delivery taking place at a future date. A decline in interest rates may lead to
a faster rate of repayment of the underlying mortgages and expose the Fund to a
lower rate of return upon reinvestment. To the extent that such mortgage-backed
securities are held by the Fund, the prepayment right of mortgagors may limit
the increase in net asset value of the Fund because the value of the
mortgage-backed securities held by the Fund may not appreciate as rapidly as the
price of noncallable debt securities.

Interests in pools of mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from the sale of the
underlying property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-backed securities (such as securities issued by GNMA)
are described as "modified pass-through." These securities entitle the holder to
receive all interest and principal payments owed on the mortgage pool, net of
certain fees, at the scheduled payments dates regardless of whether or not the
mortgagor actually makes the payment.

Any discount enjoyed on the purchases of a pass-through type mortgage-backed
security will likely constitute market discount. As the Fund receives principal
payments, it will be required to treat as ordinary income an amount equal to the
lesser of the amount of the payment or the "accrued market discount." Market
discount is to be accrued either under a constant rate method or a proportional
method. Pass-through type mortgage-backed securities purchased at a premium to
face will be subject to a similar rule requiring recognition of an offset to
ordinary interest income, an amount of premium attributable to the receipt of
principal. The amount of premium recovered is to be determined using a method
similar to that in place for market discount. The Fund may elect to accrue
market discount or amortize premium notwithstanding the amount of principal
received, but such election will apply to all bonds held and thereafter acquired
unless permission is granted by the Commissioner of the Internal Revenue Service
to change such method.

The principal governmental guarantor of mortgage-related securities is GNMA,
which is a wholly owned US government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the US government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of mortgages which are insured by the Federal Housing Authority or
guaranteed by the Veterans Administration. These guarantees, however, do not
apply to the market value or yield of mortgage-backed securities or to the value
of Fund shares. Also, GNMA securities often are purchased at a premium over the
maturity value of the underlying mortgages. This premium is not guaranteed and
should be viewed as an economic offset to interest to be earned. If prepayments
occur, less interest will be earned and the value of the premium paid will be
lost.

Government-related guarantors (i.e., not backed by the full faith and credit of
the US government) include Fannie Mae and Freddie Mac (formerly known as the
Federal Home Loan Mortgage Corporation). Fannie Mae is a government-sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. Fannie Mae
purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers which include state
and federally chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by Fannie Mae are guaranteed as to timely payment of principal and
interest by Fannie Mae, but are not backed by the full faith and credit of the
US government.

Freddie Mac is a corporate instrumentality of the US government and was created
by Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. Freddie Mac issues Participation Certificates ("PCs"), which
represent interests in conventional mortgages from Freddie Mac's national
portfolio. Freddie Mac guarantees the timely payment of interest and the
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the US government.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans,
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance guarantees are issued by governmental entities,
private insurers and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets the Fund's investment quality
standards. There can be no assurance that the private insurers or guarantors can
meet their obligations under the insurance policies or guarantee or guarantees,
even if through an examination of the loan experience and practices of the
originators/servicers and poolers, the Advisor determines that the securities
meet the Fund's quality standards. Although the market for such securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable.

Collateralized mortgage obligations ("CMOS") and real estate mortgage investment
conduits ("REMICS")
A CMO is a debt security on which interest and prepaid principal are paid, in
most cases, semiannually. CMOs may be collateralized by whole mortgage loans but
are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, Freddie Mac or Fannie Mae and their income
streams. Privately issued CMOs tend to be more sensitive to interest rates than
Government-issued CMOs.

CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payments of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.

In a typical CMO transaction, a corporation issues multiple series (e.g., A, B,
C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase
mortgages or mortgage pass-through certificates ("Collateral"). The Collateral
is pledged to a third party trustee as security for the Bonds. Principal and
interest payments from the Collateral are used to pay principal on the Bonds in
the order A, B, C, Z. The series A, B and C Bonds all bear current interest.
Interest on the series Z Bond is accrued and added to principal and a like
amount is paid as principal on the series A, B or C Bond currently being paid
off. When the series A, B and C Bonds are paid in full, interest and principal
on the series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios. REMICs are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.

REMICs are entities that own mortgages and elect REMIC status under the Code.
The Fund will purchase only regular interests in REMICs. REMIC regular interests
are treated as debt of the REMIC and income/discount thereon must be accounted
for on the "catch-up method," using a reasonable prepayment assumption under the
original issue discount rules of the Code.

CMOs and REMICs issued by private entities are not government securities and are
not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. Yields on privately issued CMOs, as
described above, have been historically higher than yields on CMOs issued or
guaranteed by US government agencies. However, the risk of loss due to default
on such instruments is higher since they are not guaranteed by the US
government. Such instruments also tend to be more sensitive to interest rates
than US government-issued CMOs. The Fund will not invest in subordinated
privately issued CMOs. For federal income tax purposes, the Fund will be
required to accrue income on CMOs and REMIC regular interests using the
"catch-up method," with an aggregate prepayment assumption.

Dollar rolls
The Fund may enter into dollar rolls in which the Fund sells securities and
simultaneously contracts to repurchase substantially similar securities on a
specified future date. In the case of dollar rolls involving mortgage-backed
securities, the mortgage-backed securities that are purchased typically will be
of the same type and will have the same or similar interest rate and maturity as
those sold, but will be supported by different pools of mortgages. The Fund
forgoes principal and interest paid during the roll period on the securities
sold in a dollar roll, but the Fund is compensated by the difference between the
current sales price and the price for the future purchase, as well as by any
interest earned on the proceeds of the securities sold. The Fund could also be
compensated through receipt of fee income. The Fund intends to enter into dollar
rolls only with government securities dealers recognized by the Federal Reserve
Board or with member banks of the Federal Reserve. The Trust does not believe
the Fund's obligations under dollar rolls are senior securities and accordingly,
the Fund, as a matter of non-fundamental policy, will not treat dollar rolls as
being subject to its borrowing or senior securities restrictions. However, the
Fund's custodian will maintain Segregated Assets equal in value to the purchase
price and the interest rate payable on the securities which are fixed on the
purchase commitment date or at the time of settlement for dollar rolls,
marked-to-market daily in accordance with pertinent SEC positions. In addition
to the general risks involved in leveraging, dollar rolls are subject to the
same risks as repurchase and reverse repurchase agreements.

To-be-announced securities
A to-be-announced mortgage-backed security ("TBA") is a mortgage-backed
security, such as a GNMA pass-through security, that is purchased or sold with
specific pools of cash that will constitute that GNMA pass-through security, to
be announced on a future settlement date. At the time of purchase of a TBA, the
seller does not specify the particular mortgage-backed securities to be
delivered but rather agrees to accept any mortgage-backed security that meets
specified terms. The Fund and the seller would agree upon the issuer, interest
rate and terms of the underlying mortgages, but the seller would not identify
the specific underlying mortgages until shortly before it issues the
mortgage-backed security. TBAs increase interest rate risks because the
underlying mortgages may be less favorable than anticipated by the Fund. The
Fund's custodian will maintain Segregated Assets equal in value to the purchase
price and the interest rate payable on the securities which are fixed on the
purchase commitment date or at the time of settlement for TBAs, marked-to-market
daily in accordance with pertinent SEC positions.

Other mortgage-backed securities
The Advisor expects that governmental, government-related or private entities
may create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. The mortgages underlying these securities may include
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may differ from
customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Advisor will, consistent
with the Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.

Asset-backed securities
The Fund may invest a portion of its assets in debt obligations known as
"asset-backed securities." Asset-backed securities are securities that represent
a participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool or pools of similar assets
(e.g., receivables on home equity and credit loans and receivables regarding
automobile, credit card, mobile home and recreational vehicle loans, wholesale
dealer floor plans and leases). Such receivables are securitized in either a
pass-through or a pay-through structure. Pass-through securities provide
investors with an income stream consisting of both principal and interest
payments in respect of the receivables in the underlying pool. Pay-through
asset-backed securities are debt obligations issued usually by a special purpose
entity, which are collateralized by the various receivables and in which the
payments on the underlying receivables provide that the Fund pay the debt
service on the debt obligations issued. The Fund may invest in these and other
types of asset-backed securities that may be developed in the future.

The credit quality of these securities depends primarily upon the quality of the
underlying assets and the level of credit support and/or enhancement provided.
Such asset-backed securities are subject to the same prepayment risks as
mortgage-backed securities. For federal income tax purposes, the Fund will be
required to accrue income on pay-through asset-backed securities using the
"catch-up method," with an aggregate prepayment assumption.

The credit quality of most asset-backed securities depends primarily on the
credit quality of the assets underlying such securities, how well the entity
issuing the security is insulated from the credit risk of the originator or any
other affiliated entities, and the amount and quality of any credit support
provided to the securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets which in turn may be affected by a variety of economic and
other factors. As a result, the yield on any asset-backed security is difficult
to predict with precision and the actual yield to maturity may be more or less
than the anticipated yield to maturity. Asset-backed securities may be
classified as "pass-through certificates" or "collateralized obligations."

Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets to make payment, such securities may contain
elements of credit support. Such credit support falls into two categories: (i)
liquidity protection; and (ii) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments due on the underlying pool is
timely. Protection against losses resulting from ultimate default enhances the
likelihood of payments of the obligations on at least some of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The Fund will not pay any additional fees for such credit support,
although the existence of credit support may increase the price of a security.

Due to the shorter maturity of the collateral backing such securities, there is
less of a risk of substantial prepayment than with mortgage-backed securities.
Such asset-backed securities do, however, involve certain risks not associated
with mortgage-backed securities, including the risk that security interests
cannot be adequately, or in many cases, ever, established. In addition, with
respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities.

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payments of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical credit information with
respect to the level of credit risk associated with the underlying assets.
Delinquencies or losses in excess of those anticipated could adversely affect
the return on an investment in such issue.

The Fund may invest asset-backed securities that are categorized as
collateralized debt obligations ("CDOs"). CDOs include collateralized bond
obligations ("CBOs"), collateralized loan obligations ("CLOs") and other
similarly structured securities. A CBO is a trust which is backed by a
diversified pool of high risk, below investment grade fixed income securities. A
CLO is a trust typically collateralized by a pool of loans, which may include,
among others, domestic and foreign senior secured loans, senior unsecured loans,
and subordinate corporate loans, including loans that may be rated below
investment grade or equivalent unrated loans. CDOs may charge management fees
and administrative expenses.

Zero coupon and delayed interest securities
The Fund may invest in zero coupon or delayed interest securities which pay no
cash income until maturity or a specified date when the securities begin paying
current interest (the "cash payment date") and are sold at substantial discounts
from their value at maturity. When held to maturity or cash payment date, the
entire income of such securities, which consists of accretion of discount, comes
from the difference between the purchase price and the securities' value at
maturity or cash payment date. The discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, in the absence of financial difficulties of the issuer, decreases as
the final maturity or cash payment date of the security approaches. The market
prices of zero coupon and delayed interest securities are generally more
volatile and more likely to respond to changes in interest rates than the market
prices of securities having similar maturities and credit qualities that pay
interest periodically.

Zero coupon securities are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest (cash). Zero coupon convertible
securities offer the opportunity for capital appreciation as increases (or
decreases) in market value of such securities closely follow the movements in
the market value of the underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile than the underlying common
stocks as they usually are issued with short maturities (15 years or less) and
are issued with options and/or redemption features exercisable by the holder of
the obligation, entitling the holder to redeem the obligation and receive a
defined cash payment.

Zero coupon securities include securities issued directly by the US Treasury,
and US Treasury bonds or notes and their unmatured interest coupons and receipts
for their underlying principal ("coupons") which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A holder will
separate the interest coupons from the underlying principal (the "corpus") of
the US Treasury security. A number of securities firms and banks have stripped
the interest coupons and receipts and then resold them in custodial receipt
programs with a number of different names, including "Treasury Income Growth
Receipts" ("TIGRS") and Certificate of Accrual on Treasuries ("CATS"). The
underlying US Treasury bonds and notes themselves are held in book-entry form at
the Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are owned ostensibly by the bearer or holder
thereof), in trust on behalf of the owners thereof. Counsel to the underwriters
of these certificates or other evidences of ownership of the US Treasury
securities has stated that for federal tax and securities purposes, in its
opinion, purchasers of such certificates, such as the Fund, most likely will be
deemed the beneficial holder of the underlying US government securities.

The US Treasury has facilitated transfers of ownership of zero coupon securities
by accounting separately for the beneficial ownership of particular interest
coupon and corpus payments on Treasury securities through the Federal Reserve
book-entry record-keeping system. The Federal Reserve program as established by
the US Treasury Department is known as "STRIPS" or "Separate Trading of
Registered Interest and Principal of Securities." Under the STRIPS program, the
Fund will be able to have its beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying US Treasury
securities.

When US Treasury obligations have been stripped of their unmatured interest
coupons by the holder, the principal or corpus is sold at a deep discount
because the buyer receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic interest (cash)
payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold in such bundled form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the US Treasury sells
itself. These stripped securities are also treated as zero coupon securities
with original issue discount for tax purposes.

Structured notes
Structured notes are derivative debt securities, the interest rate and/or
principal of which is determined by an unrelated indicator. The value of the
principal of and/or interest on structured notes is determined by reference to
changes in the return, interest rate or value at maturity of a specific asset,
reference rate or index (the "reference instrument") or the relative change in
two or more reference instruments. The interest rate or the principal amount
payable upon maturity or redemption may be increased or decreased, depending
upon changes in the applicable reference instruments. Structured notes may be
positively or negatively indexed, so that an increase in value of the reference
instrument may produce an increase or a decrease in the interest rate or value
of the structured note at maturity. In addition, changes in the interest rate or
the value of the structured note at maturity may be calculated as a specified
multiple of the change in the value of the reference; therefore, the value of
such note may be very volatile. Structured notes may entail a greater degree of
market risk than other types of debt securities because the investor bears the
risk of the reference instrument. Structured notes may also be more volatile,
less liquid and more difficult to accurately price than less complex securities
or more traditional debt securities. In order to cover structured notes, the
Fund, to the extent required by the SEC, will maintain Segregated Assets in
accordance with SEC positions to cover its obligations with respect to such
instruments.

Emerging markets investments
The Fund may invest in equity securities of emerging market issuers, or
securities with respect to which the return is derived from the equity
securities of issuers in emerging markets, and in debt securities of emerging
markets issuers, or securities with respect to which the return is derived from
debt securities of issuers in emerging markets. The Fund's investments in
emerging market government and government-related securities may consist of: (i)
debt securities or obligations issued or guaranteed by governments, governmental
agencies or instrumentalities and political subdivisions located in emerging
market countries (including participation in loans between governments and
financial institutions), (ii) debt securities or obligations issued by
government owned, controlled or sponsored entities located in emerging market
countries and (iii) interests in issuers organized and operated for the purpose
of restructuring the investment characteristics of instruments issued by any of
the entities described above.

The Fund's investments in the fixed income securities of emerging market issuers
may include investments in Structured Securities, Loan Participation and
Assignments (as such capitalized terms are defined below), Brady Bonds and
certain non-publicly traded securities.

The Fund may invest a portion of its assets in entities organized and operated
solely for the purpose of restructuring the investment characteristics of
sovereign debt obligations. This type of restructuring involves the deposit
with, or purchase by, an entity, such as a corporation or trust, of specified
instruments (such as commercial bank loans or Brady Bonds) and the issuance by
that entity of one or more classes of securities ("Structured Securities")
backed by, or representing interests in, the underlying instruments. The cash
flow of the underlying instruments may be apportioned among the newly issued
Structured Securities to create securities with different investment
characteristics, such as varying maturities, payment priorities and interest
rate provisions, and the extent of the payments made with respect to Structured
Securities is dependent on the extent of the cash flow on the underlying
instruments. Because Structured Securities of the type in which the Fund
anticipates investing typically involve no credit enhancement, their credit risk
generally will be equivalent to that of the underlying instruments. The Fund is
permitted to invest in a class of Structured Securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Securities are typically sold in private placement
transactions, and there currently is no active trading market for Structured
Securities. Thus, investments by the Fund in Structured Securities will be
limited by the Fund's prohibition on investing more than 15% of its net assets
in illiquid securities.

The Fund may invest in fixed rate and floating rate loans ("Loans") arranged
through private negotiations between an issuer of sovereign debt obligations and
one or more financial institutions ("Lenders"). The Fund's investments in Loans
are expected in most instances to be in the form of a participation in loans
("Participation") and assignments of all or a portion of Loans ("Assignments")
from third parties. The Fund will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In the event of the insolvency of the Lender selling a
Participation, the Fund may be treated as a general creditor of the Lender and
may not benefit from any set-off between the Lender and the borrower. Certain
Participations may be structured in a manner designed to avoid subjecting
purchasers of Participations to the credit risk of the Lender with respect to
the Participations. Even under such a structure, in the event of the Lender's
insolvency, the Lender's servicing of the Participation may be delayed and the
assignability of the Participation may be impaired. The Fund will acquire the
Participations only if the Lender interpositioned between the Fund and a
borrower is determined by the Advisor to be creditworthy.

When the Fund purchases Assignments from Lenders, it will acquire direct rights
against the borrower on the Loan. However, because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Fund as the purchaser of
an Assignment may differ from, and be more limited than, those held by the
assigning Lender.

The Fund may invest in Brady Bonds, which are securities created through the
exchange of existing commercial bank loans to public and private entities in
certain emerging markets for new bonds in connection with debt restructurings
under a debt restructuring plan introduced by former US Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings
have been implemented to date in Argentina, Bulgaria, Brazil, Costa Rica, the
Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Morocco, Nicaragua,
Nigeria, Panama, Peru, the Philippines, Poland, Russia, Uruguay, Venezuela and
Vietnam. Brady Bonds have been issued only in recent years, and for that reason
do not have a very long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the US
dollar), and are actively traded in over-the-counter secondary markets.
Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized in full as to principal by US
Treasury zero coupon bonds having the same maturity as the bonds.

Brady Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of Brady
Bonds and the history of defaults of countries issuing Brady Bonds with respect
to commercial bank loans by public and private entities, investments in Brady
Bonds may be viewed as speculative. There can be no assurance that the Brady
Bonds in which the Fund invests will not be subject to restructuring
arrangements or to requests for a new credit which may cause the Fund to suffer
a loss of interest or principal in any of its holdings.

The Fund also may invest in securities that are neither listed on a stock
exchange nor traded over-the-counter, including privately placed securities and
limited partnerships. Investing in such unlisted emerging market equity
securities, including investments in new and early stage companies, may involve
a high degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities.

The Fund's investments in emerging market securities will, at all times, be
limited by the Fund's prohibition on investing more than 15% of its net assets
in illiquid securities.

Risks of investing in emerging markets
There are additional risks inherent in investing in less developed countries.
The Fund considers a country to be an "emerging market" if it is defined as an
emerging or developing economy by any one of the following: the International
Bank for Reconstruction and Development (i.e., the World Bank), the
International Finance Corporation or the United Nations or its authorities. An
emerging market security is a security issued by a government or other issuer
that, in the opinion of the Advisor, has one or more of the following
characteristics: (i) the principal trading market of the security is an emerging
market; (ii) the primary revenue of the issuer (at least 50%) is generated from
goods produced or sold, investments made or services performed in an emerging
market country; or (iii) at least 50% of the assets of the issuer are situated
in emerging market countries.

Compared to the United States and other developed countries, emerging countries
may have relatively unstable governments, economies based on only a few
industries and securities markets that trade only a small number of securities
and employ settlement procedures different from those used in the United States.
Prices on these exchanges tend to be volatile and, in the past, securities in
these countries have offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. Further, investments by
foreign investors are subject to a variety of restrictions in many emerging
countries. Countries such as those in which the Fund may invest have
historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors that may
influence the ability or willingness to service debt include, but are not
limited to: a country's cash flow situation; the availability of sufficient
foreign exchange on the date a payment is due; the relative size of its debt
service burden to the economy as a whole; its government's policy towards the
International Monetary Fund, the World Bank and other international agencies;
and the political constraints to which a government debtor may be subject.

The ability of a foreign government or government-related issuer to make timely
and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign trade
to service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the issuer's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a governmental issuer to obtain sufficient foreign
exchange to service its external debt.

As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Fund may have limited effective legal
recourse against the issuer and/or guarantor. Remedies must, in some cases, be
pursued in the courts of the defaulting country itself, and the ability of the
holder of foreign government and government-related debt securities to obtain
recourse may be subject to the political climate in the relevant country. In
addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of other foreign government and
government-related debt obligations in the event of default under their
commercial bank loan agreements.

The issuers of the government and government-related debt securities in which
the Fund expects to invest have in the past experienced substantial difficulties
in servicing their external debt obligations, which has led to defaults on
certain obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds, and
obtaining new credit to finance interest payments. Holders of certain foreign
government and government-related debt securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that the Brady Bonds and other
foreign government and government-related debt securities in which the Fund may
invest will not be subject to similar defaults or restructuring arrangements
which may adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.

Payments to holders of the high yield, high risk, foreign debt securities in
which the Fund may invest may be subject to foreign withholding and other taxes.
Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
instruments, there is no assurance that such payments will be made.

Investments in Russian securities
The Fund may invest in securities of Russian companies. The registration,
clearing and settlement of securities transactions in Russia are subject to
significant risks not normally associated with securities transactions in the
United States and other more developed markets. Ownership of shares of Russian
companies is evidenced by entries in a company's share register (except where
shares are held through depositories that meet the requirements of the Act) and
the issuance of extracts from the register or, in certain limited cases, by
formal share certificates. However, Russian share registers are frequently
unreliable and the Fund could possibly lose its registration through oversight,
negligence or fraud. Moreover, Russia lacks a centralized registry to record
securities transactions and registrars located throughout Russia or the
companies themselves maintain share registers. Registrars are under no
obligation to provide extracts to potential purchasers in a timely manner or at
all and are not necessarily subject to state supervision. In addition, while
registrars are liable under law for losses resulting from their errors, it may
be difficult for the Fund to enforce any rights it may have against the
registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by law to employ an independent company to maintain share registers, in
practice, such companies have not always followed this law. Because of this lack
of independence of registrars, management of a Russian company may be able to
exert considerable influence over who can purchase or sell the company's shares
by illegally instructing the registrar to refuse to record transactions on the
share register. Furthermore, these practices may prevent the Fund from investing
in the securities of certain Russian companies deemed suitable by the Advisor
and could cause a delay in the sale of Russian securities by the Fund if the
company deems a purchaser unsuitable, which may expose the Fund to potential
loss on its investment.

In light of the risks described above, the Board has approved certain procedures
concerning the Fund's investments in Russian securities. Among these procedures
is a requirement that the Fund will not invest in the securities of a Russian
company unless that issuer's registrar has entered into a contract with the
Fund's sub-custodian containing certain protective conditions including, among
other things, the sub-custodian's right to conduct regular share confirmations
on behalf of the Fund. This requirement will likely have the effect of
precluding investments in certain Russian companies that the Fund would
otherwise make.

Other investments
The Board may, in the future, authorize the Fund to invest in securities other
than those listed in this SAI and in the Prospectus, provided such investment
would be consistent with the Fund's investment objective and that it would not
violate any fundamental investment policies or restrictions applicable to the
Fund.

Investment restrictions

The investment restrictions set forth below are fundamental policies and may not
be changed as to the Fund without the approval of a majority of the outstanding
voting securities (as defined in the Act) of the Fund. Unless otherwise
indicated, all percentage limitations listed below apply to the Fund only at the
time of the transaction. Accordingly, if a percentage restriction is adhered to
at the time of investment, a later increase or decrease in the percentage that
results from a relative change in values or from a change in the Fund's total
assets will not be considered a violation. The Fund may not:

(i) Purchase or sell real estate, except that the Fund may purchase or sell
securities of real estate investment trusts;

(ii) 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;

(iii) Issue securities senior to the Fund's presently authorized shares of
beneficial interest, except that this restriction shall not be deemed to
prohibit the Fund from: (a) making any permitted borrowings, loans or
pledges; (b) entering into options, futures contracts, forward contracts,
repurchase transactions, or reverse repurchase transactions; or (c) making
short sales of securities to the extent permitted by the Act and any rule
or order thereunder, or SEC staff interpretations thereof;

(iv) Make loans to other persons, except: (a) through the lending of its
portfolio securities; (b) through the purchase of debt securities, loan
participations and/or engaging in direct corporate loans for investment
purposes in accordance with its investment objectives and policies; (c) to
the extent the entry into a repurchase agreement is deemed to be a loan;
and (d) to affiliated investment companies to the extent permitted by the
Act or any exemptions that may be granted by the SEC;

(v) Borrow money in excess of 33 1/3% of the value of its assets, except as a
temporary measure for extraordinary or emergency purposes to facilitate
redemptions. All borrowings will be done from a bank and to the extent that
such borrowing exceeds 5% of the value of the Fund's assets, asset coverage
of at least 300% is required;

(vi) Concentrate (invest more than 25% of its net assets) in securities of
issuers in a particular industry (other than securities issued or
guaranteed by the US government or any of its agencies); and

(vii) Act as an underwriter, except to the extent the Fund may be deemed to be
an underwriter when selling its own shares.

Management of the Trust

The Trust is a Delaware statutory trust. Under Delaware law, the Board has
overall responsibility for managing the business and affairs of the Trust. Each
Trustee of the Trust is an Independent Trustee because he or she is not
considered an "interested person" of the Trust under the Act. The Trustees elect
the officers of the Trust, who are responsible for administering the day-to-day
operations of the Fund.

The Trustees and executive officers of the Trust, along with their principal
occupations over the past five years and their affiliations, if any, with the
Advisor, are listed below. None of the Trustees is an "interested person" (as
defined in the Act) of the Trust. The Trustees may be referred to herein as
"Independent Trustees."

Independent Trustees
Term of
office(1)
Position(s) and length Number of portfolios Other
held with of time Principal occupation(s) during in Fund complex directorships held
Name, address and age Trust served past 5 years overseen by Trustee by Trustee

Walter E. Auch(2) Trustee Since 1994 Mr. Auch is retired (since 1986). Mr. Auch is a Mr. Auch is a
6001 N. 62nd Place trustee of three Trustee/Director
Paradise Valley, AZ investment companies of Advisors Series
85253 (consisting of 56 Trust (22
Age: 86 portfolios) for portfolios); Legg
which UBS Global AM Mason Partners
(Americas) or one of Fund Complex (23
its affiliates portfolios);
serves as investment Nicholas Applegate
advisor, sub-advisor Institutional
or manager. Funds (14
portfolios); and
Chairman of the
Board of Sound
Surgical
Technologies.

Frank K. Reilly(2) Chairman Since 1993 Mr. Reilly is a Professor at the Mr. Reilly is a Mr. Reilly is a
Mendoza College of and Trustee University of Notre Dame since director or trustee Director of
Business 1982. of four investment Discover Bank,
University of Notre Dame companies Morgan Stanley
Notre Dame, IN (consisting of 57 Trust and FSB.
46556-5649 portfolios) for
Age: 71 which UBS Global AM
(Americas) or one of
its affiliates
serves as investment
advisor, sub-advisor
or manager.

Edward M. Roob(2) Trustee Since 1994 Mr. Roob is retired (since 1993). Mr. Roob is a None.
841 Woodbine Lane director or trustee
Northbrook, IL 60002 of four investment
Age: 72 companies
(consisting of 57
portfolios) for
which UBS Global AM
(Americas) or one of
its affiliates
serves as investment
advisor, sub-advisor
or manager.

Adela Cepeda(2) Trustee Since 2004 Ms. Cepeda is founder and Ms. Cepeda is a Ms. Cepeda is a
A.C. Advisory, Inc. president of A.C. Advisory, director or trustee director of MGI
161 No. Clark Street Inc. (since 1995). of four investment Funds (8
Suite 4975 companies portfolios) (since
Chicago, IL 60601 (consisting of 57 2005).
Age: 49 portfolios) for
which UBS Global AM
(Americas) or one of
its affiliates
serves as investment
advisor, sub-advisor
or manager.

J. Mikesell Thomas(2) Trustee Since 2004 Mr. Thomas is President and CEO Mr. Thomas is a Mr. Thomas is a
Federal Home Loan Bank of Federal Home Loan Bank of director or trustee director and
of Chicago Chicago(since 2004). Mr. Thomas of four investment chairman of the
111 East Wacker Drive was an independent financial companies Audit Committee
Chicago, IL 60601 advisor (2001 to 2004). He was (consisting of 57 for Evanston
Age: 56 managing director of Lazard portfolios) for Northwestern
Freres & Co.(1995 to 2001). which UBS Global AM Healthcare.
(Americas) or one of
its affiliates
serves as investment
advisor, sub-advisor
or manager.

(1) Each Trustee holds office for an indefinite term.

(2) Messrs. Auch, Reilly and Roob are also Independent Trustees of UBS
Supplementary Trust and UBS Private Portfolios Trust, which are both
investment vehicles advised by UBS Global AM (Americas) and are excluded
from registration under the Act in reliance on the exemptions afforded by
Section 3(c)(7) of the Act. Ms. Cepeda and Mr. Thomas are also Independent
Trustees of UBS Private Portfolios Trust.

Officers
Term of
office+ and
Position(s) held length of time
Name, address and age with the Trust served Principal occupation(s) during past 5 years

Joseph J. Allessie* Vice President Since 2005 Mr. Allessie is an executive director (since 2007) and deputy general
Age: 41 and Assistant counsel (since 2005) at UBS Global AM (US) and UBS Global AM (Americas)
Secretary (collectively, "UBS Global AM-Americas region"). Prior to joining UBS
Global AM-Americas region, he was senior vice president and general
counsel of Kenmar Advisory Corp. (from 2004 to 2005). Prior to that
Mr. Allessie was general counsel and secretary of GAM USA Inc., GAM
Investments, GAM Services, GAM Funds, Inc. and the GAM Avalon Funds
(from 1999 to 2004). Mr. Allessie is a vice president and assistant
secretary of 20 investment companies (consisting of 93 portfolios) for
which UBS Global AM-Americas region or one of its affiliates serves as
investment advisor, sub-advisor or manager.

Rose Ann Bubloski* Vice President Since 2004 Ms. Bubloski is an associate director (since 2003) and a senior manager
Age: 39 and Assistant (since 2004) of the US Mutual Fund Treasury Administration department
Treasurer of UBS Global AM-Americas region. Ms. Bubloski is vice president and
assistant treasurer of 20 investment companies (consisting of 93
portfolios) for which UBS Global AM-Americas region or one of its
affiliates serves as investment advisor, sub-advisor or manager.

Thomas Disbrow* Vice President, Since 2000 Mr. Disbrow is an executive director (since 2007) and head of the US
Age: 41 Treasurer and (Vice Mutual Fund Treasury Administration department (since 2006) of UBS
Principal President) and Global AM-Americas region. Mr. Disbrow is vice president, treasurer
Accounting 2006 and principal accounting officer of 20 investment companies (consisting
Officer (Treasurer and of 93 portfolios) for which UBS Global AM-Americas region or one of its
Principal affiliates serves as investment advisor, sub-advisor or manager.
Accounting
Officer)

Michael J. Flook* Vice President Since 2006 Mr. Flook is an associate director and a senior manager of the US
Age: 42 and Assistant Mutual Fund Treasury Administration department of UBS Global
Treasurer AM-Americas region (since 2006). Prior to joining UBS Global
AM-Americas region, he was a senior manager with The Reserve (asset
management firm) from May 2005 to May 2006. Prior to that he was a
senior manager with PFPC Worldwide since October 2000. Mr. Flook is a
vice president and assistant treasurer of 20 investment companies
(consisting of 93 portfolios) for which UBS Global AM-Americas region
or one of its affiliates serves as investment advisor, sub-advisor or
manager.

Mark F. Kemper** Vice President Since 1999 and Mr. Kemper is general counsel of UBS Global AM-Americas region (since
Age: 49 and Secretary 2004, 2004). Mr. Kemper is also a managing director of UBS Global
respectively AM-Americas region (since 2006). He was deputy general counsel of UBS
Global AM (Americas) from July 2001 to July 2004. He has been
secretary of UBS Global AM-Americas region since 1999 and assistant
secretary of UBS Global Asset Management Trust Company since 1993. Mr.
Kemper is secretary of UBS Global AM-Americas region (since 2004). Mr.
Kemper is vice president and secretary of 20 investment companies
(consisting of 93 portfolios) for which UBS Global AM-Americas region
or one of its affiliates serves as investment advisor, sub-advisor or
manager.

Joanne M. Kilkeary* Vice President Since 2006 Ms. Kilkeary is an associate director (since 2000) and a senior manager
Age: 39 and Assistant (since 2004) of the US Mutual Fund Treasury Administration department
Treasurer of UBS Global AM-Americas region. Ms. Kilkeary is a vice president and
assistant treasurer of 20 investment companies (consisting of 93
portfolios) for which UBS Global AM-Americas region or one of its
affiliates serves as investment advisor, sub-advisor or manager.

Tammie Lee* Vice President Since 2005 Ms. Lee is a director and associate general counsel of UBS Global
Age: 36 and Assistant AM-Americas region (since 2005). Prior to joining UBS Global
Secretary AM-Americas region, she was vice president and counsel at Deutsche
Asset Management/Scudder Investments from 2003 to 2005. Prior to that
she was assistant vice president and counsel at Deutsche Asset
Management/Scudder Investments from 2000 to 2003. Ms. Lee is a vice
president and assistant secretary of 20 investment companies
(consisting of 93 portfolios) for which UBS Global AM-Americas region
or one of its affiliates serves as investment advisor, sub-advisor or
manager.

Joseph McGill* Vice President Since 2004 Mr. McGill is managing director (since 2006) and chief compliance
Age: 44 and Chief officer (since 2003) of UBS Global AM-Americas region. Prior to
Compliance joining UBS Global AM-Americas region, he was assistant general counsel
Officer at J.P. Morgan Investment Management (from 1999 to 2003). Mr. McGill
is a vice president and chief compliance officer of 20 investment
companies (consisting of 93 portfolios) for which UBS Global
AM-Americas region or one of its affiliates serves as investment
advisor, sub-advisor or manager.

Nancy Osborn* Vice President Since 2007 Ms. Osborn is an associate director and a senior manager of the US
Age: 41 and Assistant Mutual Fund Treasury Administration department of UBS Global
Treasurer AM-Americas region (since 2007). Prior to joining UBS Global
AM-Americas region, she was an Assistant Vice President with Brown
Brothers Harriman since April 1996. Ms. Osborn is a vice president and
assistant treasurer of 20 investment companies (consisting of 93
portfolios) for which UBS Global AM-Americas region or one of its
affiliates serves as investment advisor, sub-advisor or manager.

Eric Sanders* Vice President Since 2005 Mr. Sanders is a director and associate general counsel of UBS Global
Age: 41 and Assistant AM-Americas Region (since 2005). From 1996 until June 2005, he held
Secretary various positions at Fred Alger & Company, Incorporated, the most
recent being assistant vice president and associate general counsel.
Mr. Sanders is a vice president and assistant secretary of 20
investment companies (consisting of 93 portfolios) for which UBS Global
AM-Americas region or one of its affiliates serves as investment
advisor, sub-advisor or manager.

Andrew Shoup* Vice President Since 2006 Mr. Shoup is a managing director and senior member of the Global
Age: 50 and Chief Treasury Administration Department of UBS Global AM-Americas region
Operating Officer (since July 2006). Prior to joining UBS Global AM-Americas region, he
was Chief Administration Officer for the Legg Mason Partner Funds
(formerly Smith Barney, Salomon Brothers and CitiFunds mutual funds)
from November 2003 to July 2006. Prior to that, he held various
positions with Citigroup Asset Management and related companies with
their domestic and offshore mutual funds since 1993. Additionally, he
has worked for another mutual fund complex as well as spending eleven
years in public accounting. Mr. Shoup is a vice president and chief
operating officer of 20 investment companies (consisting of 93
portfolios) for which UBS Global AM-Americas region or one of its
affiliates serves as investment advisor, sub-advisor or manager.

Kai R. Sotorp** President Since 2006 Mr. Sotorp is the Head of the Americas for UBS Global Asset Management
Age: 47 (since 2004); a member of the UBS Group Managing Board (since 2003) and
a member of UBS Global Asset Management Executive Committee (since
2001). Prior to his current role, Mr. Sotorp was Head of UBS Global
Asset Management-Asia Pacific (2002-2004), covering Australia, Japan,
Hong Kong, Singapore and Taiwan; Head of UBS Global Asset Management
(Japan) Ltd. (2001 to 2004); Representative Director and President of
UBS Global Asset Management (Japan) Ltd. (2000 to 2004); and member of
the board of Mitsubishi Corp.-UBS Realty Inc. (2000 to 2004). Mr.
Sotorp is president of 20 investment companies (consisting of 93
portfolios) for which UBS Global AM-Americas region or one of its
affiliates serves as investment advisor, sub-advisor or manager.

Keith A. Weller* Vice President Since 2004 Mr. Weller is an executive director and senior associate general
Age: 45 and Assistant counsel of UBS Global AM-Americas region (since 2005) and has been an
Secretary attorney with affiliated entities since 1995. Mr. Weller is a vice
president and assistant secretary of 20 investment companies
(consisting of 93 portfolios) for which UBS Global AM-Americas region
or one of its affiliates serves as investment advisor, sub-advisor or
manager.

+ Officers of the Trust are appointed by the Trustees and serve at the
pleasure of the Board.

* This person's business address is 51 West 52nd Street, New York, NY
10019-6114.

** This person's business address is One North Wacker Drive, Chicago, IL
60606.

Information about Independent Trustee ownership of securities issued by UBS
Global AM (Americas) or UBS Global AM (US) or any company controlling,
controlled by or under common control with UBS Global AM (Americas) or UBS
Global AM (US).

As of December 31, 2006, the Independent Trustees did not own any securities
issued by UBS Global AM (Americas) or UBS Global AM (US) or any company
controlling, controlled by or under common control with UBS Global AM (Americas)
or UBS Global AM (US).

Information about Trustee ownership of Fund shares

[TO BE UPDATED IN RULE 485(b) FILING:]

Aggregate dollar range of equity securities in all
registered investment companies overseen by Trustee for
Dollar range of equity which UBS Global AM (Americas) or an affiliate serves
Name of Independent Trustees securities in Fund+ as investment advisor, sub-advisor or manager+

Walter E. Auch None [$10,001 - $50,000]

Frank K. Reilly None [over $100,000]

Edward M. Roob None [over $100,000]

Adela Cepeda None [$10,001 - $50,000]

J. Mikesell Thomas None [None]

+ Information regarding ownership is as of December 31, 2006.

NOTE REGARDING RANGES: In disclosing the dollar range of equity securities
beneficially owned by a Trustee in these columns, the following ranges will be
used: (i) none; (ii) $1-$10,000; (iii) $10,001-$50,000; (iv) $50,001-$100,000;
or (v) over $100,000.

Compensation table
Trustees
Pension or
Annual aggregate Retirement benefits Total compensation from the
compensation from the accrued as part of Trust and Fund complex paid
Name and position held Trust(1) Fund expenses to Trustees(2)

Walter E. Auch, Trustee $35,767 N/A $89,282
Frank K. Reilly, Trustee $35,594 N/A $92,209
Edward M. Roob, Trustee $33,378 N/A $86,592
Adela Cepeda, Trustee $35,569 N/A $92,592
J. Mikesell Thomas, Trustee $35,694 N/A $93,092

(1) Represents aggregate annual compensation paid by the Trust to each Trustee
indicated for the fiscal year ended June 30, 2006.

(2) This amount represents the aggregate amount of compensation paid to the
Trustees for service on the Board of Directors/Trustees of four registered
investment companies (three registered investment companies with regard to
Mr. Auch) managed by UBS Global AM (Americas) or an affiliate for the
fiscal year ended June 30, 2006.

No officer or Trustee of the Trust who is also an officer or employee of the
Advisor receives any compensation from the Trust for services to the Trust.

Each Independent Trustee receives, in the aggregate from the UBS Global AM
family of funds for his or her service to four registered investment companies
(three with respect to Mr. Auch) and one unregistered investment companies (with
respect to Messrs. Auch, Reilly and Roob only) managed by UBS Global AM
(Americas), an annual retainer of $40,000 for serving as a Board member, an
annual $5,000 retainer for serving as an Audit Committee member, and an annual
$5,000 retainer for serving as a Nominating, Compensation and Governance
Committee member. In addition, the chairman of the Board, for serving as
chairman of the Board, and the chairman of the Audit Committee, for serving as
chairman of the Audit Committee, receive, in the aggregate from the UBS Global
AM family of funds, for his or her service to four registered investment
companies and one unregistered investment companies (with respect to Mr. Reilly
only) managed by UBS Global AM (Americas), an annual retainer of $10,000 and
$5,000, respectively. The foregoing fees will be allocated among all such funds
as follows: (i) one-half of the expense will be allocated pro rata based on the
funds' relative net assets at the end of the calendar quarter preceding the date
of payment; and (ii) one-half of the expense will be allocated equally according
to the number of such funds (i.e., expenses divided by number of funds). Each
Independent Trustee will receive $300 per Fund for each regular Board meeting
(and each in-person special meeting) actually attended from the Trust. In
addition, each Independent Trustee will receive $200 and $100, respectively, per
Fund for each Audit Committee meeting and Nominating, Compensation and
Governance Committee meeting actually attended from the Trust. The Trust
reimburses each Trustee and officer for out-of-pocket expenses in connection
with travel and attendance at Board meetings.

Each Trustee sits on the Trust's Audit Committee, which has the responsibility,
among other things, to: (i) select, oversee and set the compensation of the
Trust's independent registered public accounting firm; (ii) oversee the Trust's
accounting and financial reporting policies and practices, its internal controls
and, as appropriate, the internal controls of certain service providers; (iii)
oversee the quality and objectivity of the Fund's financial statements and the
independent audit(s) thereof; and (iv) act as a liaison between the Trust's
independent registered public accounting firm and the full Board. The Audit
Committee met three times during the fiscal year ended June 30, 2006.

Each Trustee sits on the Trust's Nominating, Compensation and Governance
Committee (the "Nominating Committee"), which has the responsibility, among
other things, to: (i) make recommendations and to consider shareholder
recommendations for nominations for Board members; (ii) review Board governance
procedures and recommend any appropriate changes to the full Board; (iii)
periodically review Independent Trustee compensation and recommend any changes
to the Independent Trustees as a group; and (iv) make recommendations to the
full Board for nominations for membership on all committees, review all
committee assignments annually and periodically review the responsibilities and
need for all committees of the Board.

The Nominating Committee will consider nominees recommended by Qualifying Fund
Shareholders if an Independent Trustee vacancy on the Board occurs. A Qualifying
Fund Shareholder is a shareholder that: (i) owns of record, or beneficially
through a financial intermediary,1/2of 1% or more of the Trust's outstanding
shares and (ii) has been a shareholder of at least1/2of 1% of the Trust's total
outstanding shares for 12 months or more prior to submitting the recommendation
to the Nominating Committee. In order to recommend a nominee, a Qualifying Fund
Shareholder should send a letter to the chairperson of the Nominating Committee,
Mr. Walter Auch, care of the Secretary of the Trust at UBS Global Asset
Management, One North Wacker Drive, Chicago, Illinois 60606, and indicate on the
envelope "Nominating Committee." The Qualifying Fund Shareholder's letter should
include: (i) the name and address of the Qualifying Fund Shareholder making the
recommendation; (ii) the number of shares of each class and series of shares of
the Trust which are owned of record and beneficially by such Qualifying Fund
Shareholder and the length of time that such shares have been so owned by the
Qualifying Fund Shareholder; (iii) a description of all arrangements and
understandings between such Qualifying Fund Shareholder and any other person or
persons (naming such person or persons) pursuant to which the recommendation is
being made; (iv) the name and address of the nominee; and (v) the nominee's
resume or curriculum vitae. The Qualifying Fund Shareholder's letter must be
accompanied by a written consent of the individual to stand for election if
nominated for the Board and to serve if elected by shareholders.

The Nominating, Compensation and Governance Committee met twice during the
fiscal year ended June 30, 2006.

There is no separate Investment Committee. Items pertaining to these matters are
submitted to the full Board.

Control persons and principal holders of securities
As of the date of this SAI, UBS Global AM (Americas) owned 100% of all
outstanding shares of the Fund and thus may be deemed a controlling shareholder
of the Fund until additional shareholders purchase shares. As of the same date,
none of the Trustees or officers of the Fund beneficially owned any of the
outstanding shares of the Fund.

Any person who owns beneficially, either directly or through one or more
controlled companies, more than 25% of the voting securities of the Trust is
presumed to control the Trust under the provisions of the Act. Note that a
controlling person possesses the ability to control the outcome of matters
submitted for shareholder vote of the Trust or the Fund.

To the extent that UBS Global AM (Americas) maintains a greater than 24.99%
interest in the Fund, UBS Global AM (Americas) will be deemed to "control" the
Fund for purposes of the U.S. Bank Holding Company Act of 1956, as amended
("BHCA"). Accordingly, the Fund may be subject to certain limitations on its
ability to own equity securities of certain issuers set forth in the BHCA. These
limitations may be eliminated as UBS Global AM (Americas) reduces its percentage
interest in the Fund through redemptions.

Investment advisory, principal underwriting and other service arrangements

Advisor
UBS Global Asset Management (Americas) Inc., with its principal office located
at One North Wacker Drive, Chicago, Illinois 60606, manages the assets of the
Fund pursuant to its investment advisory agreement with the Fund (the
"Agreement"). [TO BE PROVIDED IN RULE 485(b) FILING: The Advisor is an
investment management firm managing approximately $[___] billion, as of March
31, 2007, primarily for institutional pension and profit sharing funds. The
Advisor is an indirect, wholly owned subsidiary of UBS AG ("UBS") and a member
of the UBS Global Asset Management Division, which had approximately $[___]
billion in assets under management as of March 31, 2007.]

[TO BE UPDATED IN RULE 485(b) FILING:]

As of May 31, 2007, the Advisor also serves as the investment advisor or
sub-advisor to forty other investment companies: The Park Avenue Portfolio: The
Guardian UBS Large Cap Value Fund, The Park Avenue Portfolio: The Guardian UBS
Small Cap Value Fund, The Guardian Variable Contracts Fund, Inc.: The Guardian
UBS VC Large Cap Value Fund, The Guardian Variable Contracts Fund, Inc.: The
Guardian UBS VC Small Cap Value Fund, John Hancock Trust: Global Allocation
Trust, John Hancock Trust: Large Cap Trust, John Hancock Funds II: Large Cap
Fund, John Hancock Funds II: Global Allocation Fund, J.P. Morgan Fleming Series
Trust: JPMorgan Multi-Manager Small Cap Growth Fund, Principal Investors Fund,
Inc.: Partners SmallCap Growth Fund II, Principal Investors Fund, Inc.: Partners
LargeCap Value Fund I, Principal Variable Contracts Fund, Inc.: SmallCap Growth
Account, AXP Strategy Series Inc.: RiverSource Small Cap Growth Fund, Lincoln
Variable Insurance Products Trust: Global Asset Allocation Fund, ING UBS U.S.
Allocation Portfolio, ING UBS U.S. Large Cap Equity Portfolio, ING UBS U.S.
Small Cap Growth Portfolio, BB&T International Equity Fund, TA IDEX UBS Large
Cap Value, AXA Enterprise Growth and Income Fund, EQ/UBS Growth and Income
Portfolio, UBS Relationship Funds, SMA Relationship Trust, Fort Dearborn Income
Securities, Inc., UBS Cashfund Inc., UBS Index Trust, UBS Investment Trust, UBS
Money Series, UBS Managed Municipal Trust, UBS Master Series, Inc., UBS
Municipal Money Market Series, UBS RMA Money Fund, Inc., UBS RMA Tax-Free Fund,
Inc., UBS Series Trust, Global High Income Dollar Fund Inc., Insured Municipal
Income Fund Inc., Investment Grade Municipal Income Fund Inc., Managed High
Yield Plus Fund Inc., Strategic Global Income Fund, Inc. and UBS PACE Select
Advisors Trust.

Pursuant to its Agreement with the Trust, on behalf of the Fund, the Advisor
will receive from the Fund a monthly fee at an annual rate multiplied by the
average daily net assets of the Fund of 0.95% for providing investment advisory
services. For purposes of calculating such fee, the Fund's average daily net
assets will be deemed to be the average daily value of the Fund's total assets
minus the sum of the Fund's liabilities (which liabilities exclude the aggregate
amount of any borrowing). The Advisor is responsible for paying its expenses.
The Fund will pay the following expenses: (1) the fees and expenses of the
Trust's disinterested Trustees; (2) the salaries and expenses of any of the
Trust's officers or employees who are not affiliated with the Advisor; (3)
interest expenses; (4) taxes and governmental fees; (5) brokerage commissions
and other expenses incurred in acquiring or disposing of portfolio securities;
(6) the expenses of registering and qualifying shares for sale with the SEC and
with various state securities commissions; (7) auditing and legal costs; (8)
insurance premiums; (9) fees and expenses of the Trust's custodian,
administrator and transfer agent and any related services; (10) expenses of
obtaining quotations of the Fund's portfolio securities and of pricing the
Fund's shares; (11) expenses of maintaining the Trust's legal existence and of
shareholders' meetings; (12) expenses of preparation and distribution to
existing shareholders of reports, proxies and prospectuses; and (13) fees and
expenses of membership in industry organizations.

The Fund is subject to a one-year contractual expense limit at the rate of 1.15%
of the Fund's average daily net assets, excluding any 12b-1 Plan fees, expenses
incurred through investment in other investment companies, securites loan fees
and dividend expense for securities sold short. The contractual fee waiver
and/or expense reimbursement agreement will remain in place until June 30, 2008.
Thereafter, the expense limit for the Fund will be reviewed each year, at which
time the continuation of the expense limit will be considered by the Advisor and
the Board of Trustees. The contractual fee waiver and/or expense reimbursement
agreement also provides that the Advisor 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
Fund of the Advisor will not cause the total operating expense ratio to exceed
the contractual limit as then may be in effect for the Fund.

General expenses of the Trust (such as costs of maintaining corporate existence,
certain legal fees, insurance, etc.) will be allocated among the Fund and the
other series of the Trust in proportion to their relative net assets. Expenses
which relate exclusively to the Fund, such as certain registration fees,
brokerage commissions and other portfolio expenses, will be borne directly by
the Fund.

Portfolio manager
Presented below is information about the individual identified as the portfolio
manager of the Fund in the Fund's Prospectus.

[TO BE PROVIDED IN RULE 485(b) FILING:]

The following table provides information relating to other accounts managed by
the portfolio manager as of [___________], 2007:

Registered Other pooled
investment companies investment vehicles Other accounts
Brian D. Singer
Number of accounts managed [____] [____] [____]
Number of accounts managed with performance-based
advisory fees [____] [____] [____]
Assets managed (in millions) $[____] $[____] $[____]
Assets managed with performance-based advisory fees
(in millions) $[____] $[____] $[____]

The portfolio management team's management of the Fund and other accounts could
result in potential conflicts of interest if the Fund and other accounts have
different objectives, benchmarks and fees because the portfolio management team
must allocate its time and investment expertise across multiple accounts,
including the Fund. The portfolio manager and his team manage the Fund and other
accounts utilizing a model portfolio approach that groups similar accounts
within a model portfolio. The Advisor manages accounts according to the
appropriate model portfolio, including where possible, those accounts that have
specific investment restrictions. Accordingly, portfolio holdings, position
sizes and industry and sector exposures tend to be similar across accounts,
which may minimize the potential for conflicts of interest.

If a portfolio manager identifies a limited investment opportunity that may be
suitable for more than one account or model portfolio, the Fund may not be able
to take full advantage of that opportunity due to an allocation of filled
purchase or sale orders across all eligible model portfolios and accounts. To
deal with these situations, the Advisor has adopted procedures for allocating
portfolio trades across multiple accounts to provide fair treatment to all
accounts.

The management of personal accounts by a portfolio manager may also give rise to
potential conflicts of interest. The Advisor and the Trust have adopted Codes of
Ethics that govern such personal trading but there is no assurance that the
Codes will adequately address all such conflicts.

The compensation received by the portfolio managers at UBS Global Asset
Management, including the Fund's portfolio manager, includes a base salary and
incentive compensation, as detailed below. UBS Global Asset Management's
compensation and benefits programs are designed to provide its investment
professionals with incentives to excel, and to promote an entrepreneurial,
performance-oriented culture. They also align the interests of the investment
professionals with the interests of UBS Global Asset Management's clients.
Overall compensation can be grouped into three categories:

o Competitive salary, benchmarked to maintain competitive compensation
opportunities.

o Annual bonus, tied to individual contributions and investment performance.

o UBS equity awards, promoting company-wide success and employee retention.

Base salary is fixed compensation used to recognize the experience, skills and
knowledge that the investment professionals bring to their roles. Salary levels
are monitored and adjusted periodically in order to remain competitive within
the investment management industry.

Annual bonuses are correlated with performance. As such, annual incentives can
be highly variable, and are based on three components: 1) the firm's overall
business success; 2) the performance of the respective asset class and/or
investment mandate; and 3) an individual's specific contribution to the firm's
results. UBS Global Asset Management strongly believes that tying bonuses to
both long-term (3-year) and shorter-term (1-year) portfolio pre-tax performance
closely aligns the investment professionals' interests with those of UBS Global
Asset Management's clients. A portfolio manager's bonus is based on the
performance of the Fund the portfolio manager manages as compared to the Fund's
broad-based index over a three-year rolling period.

UBS AG equity. Senior investment professionals, including the portfolio manager
of the Fund, may receive a portion of their annual performance-based incentive
in the form of deferred or restricted UBS AG shares or employee stock options.
UBS Global Asset Management believes that this reinforces the critical
importance of creating long-term business value and also serves as an effective
retention tool as the equity shares typically vest over a number of years.

Broader equity share ownership is encouraged for all employees through "Equity
Plus." This long-term incentive program gives employees the opportunity to
purchase UBS stock with after-tax funds from their bonus and/or salary. Two UBS
stock options are given for each share acquired and held for two years. UBS
Global Asset Management feels this engages its employees as partners in the
firm's success, and helps to maximize its integrated business strategy.

As of the date of this SAI, the portfolio manager identified above owned no
shares of the Fund because the Fund has not yet been publicly offered.

Administrative, accounting and custody services
Administrative and accounting services. UBS Global AM (Americas) also serves as
the Fund's administrator. The Administrator is an indirect wholly owned asset
management subsidiary of UBS.
As administrator, the Administrator supervises and manages all aspects (other
than investment advisory activities) of the Trust's operations. Under the
Administration Contract, the Administrator will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund, the Trust or
any of its shareholders in connection with the performance of the Administration
Contract, except to the extent that such a loss results from negligence, willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard of its duties and
obligations thereunder. The Administration Contract is terminable at any time
without penalty by the Board or by vote of the holders of a majority of the
Fund's outstanding voting securities, on 60 days' written notice to the
Administrator, or by the Administrator on 60 days' written notice to the Trust.
The Fund pays a fee to the Administrator that is computed daily and paid monthly
at an annual rate of 0.075% of average daily net assets of the Fund.

J.P. Morgan Investors Services Co. ("J.P. Morgan") provides accounting,
portfolio valuation and certain administrative services for the Fund under a
Multiple Services Agreement between the Trust and JPMorgan Chase Bank ("JPMorgan
Chase Bank"). J.P. Morgan is located at 73 Tremont Street, Boston, Massachusetts
02108-3913 and is a corporate affiliate of JPMorgan Chase.

Custody services. JPMorgan Chase Bank, located at 270 Park Avenue, New York, New
York 10017, provides custodian services for the securities and cash of the Fund.
The custody fee schedule is based primarily on the net amount of assets held
during the period for which payment is being made plus a per transaction fee for
transactions during the period. JPMorgan Chase Bank utilizes foreign
sub-custodians under procedures approved by the Board in accordance with
applicable legal requirements.

Principal underwriting arrangements
UBS Global AM (US) (the "Underwriter"), with its principal office located at 51
West 52nd Street, New York, New York 10019-6114, acts as the principal
underwriter of each class of shares of the Fund pursuant to a Principal
Underwriting Contract with the Trust. The Principal Underwriting Contract
requires the Underwriter to use its best efforts, consistent with its other
businesses, to sell shares of the Fund. Shares of the Fund are offered
continuously. The Underwriter enters into dealer agreements with other
broker-dealers (affiliated and non-affiliated) and with other financial
institutions to authorize them to sell Fund shares.

Under separate plans pertaining to the Class A and Class C shares of the Fund
adopted by the Trust in the manner prescribed under Rule 12b-1 under the Act
(each, respectively, a "Class A Plan" and "Class C Plan," and collectively,
"Plans"), the Fund pays the Underwriter 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. Under the Class C Plan, the Fund pays the Underwriter a
distribution fee, accrued daily and payable monthly, at the annual rate of 0.75%
of the average daily net assets of the class of shares. There is no distribution
plan with respect to the Fund's Class Y shares and the Fund pays no service or
distribution fees with respect to its Class Y shares.

The Underwriter uses the service fees under the Plans for Class A and Class C
shares primarily to pay dealers for shareholder servicing, currently at the
annual rate of 0.25% of the aggregate investment amounts maintained in the Fund
by each dealer. Each dealer then compensates its investment professionals for
shareholder servicing that they perform and offsets its own expenses in
servicing and maintaining shareholder accounts including related overhead
expenses.

The Underwriter uses the distribution fees under the Class C Plans to offset the
commissions it pays to dealers for selling the Fund's Class C shares, and to
offset the Fund's marketing costs attributable to such Class, such as the
preparation, printing and distribution of sales literature, advertising and
prospectuses and other shareholder materials to prospective investors. The
Underwriter may also use distribution fees to pay additional compensation to
dealers and to offset other costs allocated to the Underwriter's distribution
activities.

The Underwriter receives the proceeds of the initial sales charge paid when
Class A shares are bought and of the contingent deferred sales charge paid upon
sales of shares. These proceeds also may be used to cover distribution expenses.

UBS Global AM (US) may also make cash and non-cash payments to banks,
broker-dealers, insurance companies, financial planning firms and other
financial intermediaries (collectively, "Financial Intermediaries"), that sell
shares of the Fund, subject to UBS Global AM (US)'s internal policies and
procedures. The source of such payments may come from sales charges on such
shares, 12b-1 fees collected from the Fund and/or from the underwriter's own
resources (including through transfers from affiliates). Payments made out of
the underwriter's own resources are often referred to as "revenue sharing." UBS
Global AM (US) provides Financial Intermediaries with sales literature and
advertising materials relating to the registered investment companies advised by
UBS Global AM (US). UBS Global AM (US) also shares expenses with Financial
Intermediaries for costs incurred in hosting seminars for employees and clients
of Financial Intermediaries, subject to UBS Global AM (US)'s internal policies
and procedures governing payments for such seminars. These seminars may take
place at UBS Global AM (US)'s headquarters or other appropriate locations and
may include reimbursement of travel expenses (i.e., transportation, lodging and
meals) of employees of Financial Intermediaries in connection with training and
education seminars. Subject to UBS Global AM (US)'s internal policies and
procedures, UBS Global AM (US) may provide any or all of the following to
employees of Financial Intermediaries and their guest(s): (i) an occasional
meal, a sporting event or theater ticket or other comparable entertainment; (ii)
gifts of less than $100 per person per year; and/or (iii) UBS Global AM (US)'s
promotional items of nominal value (golf balls, shirts, etc.).

In addition, Financial Intermediaries may maintain omnibus accounts and/or have
similar arrangements with UBS Global AM (US) and may be paid by UBS Global AM
(US) for providing sub-transfer agency and other services. Financial
Intermediaries may be paid a sub-transfer agency or related fee out of Fund
assets similar to that which the Fund otherwise would have paid the Fund's
transfer agent. In addition, the Financial Intermediary, for the services
provided, may charge a higher fee than would be represented by the sub-transfer
agency or related fee. To the extent 12b-1 fees and sub-transfer agency or
related fees do not meet the charge, the underwriter or an affiliate will pay
the difference out of its own resources. Such payments are often referred to as
"revenue sharing." Such expenses, to the extent they are Fund expenses, are
included in the annual operating expenses set forth in the Fund's Prospectus.

You should ask your Financial Intermediary about any payment it receives from
the underwriter and any services provided.

The Plans and the Principal Underwriting Contract specify that the Fund must pay
service and distribution fees to the Underwriter as compensation for its service
and distribution related activities, not as reimbursement for specific expenses
incurred. Therefore, even if the Underwriter's expenses for the Fund exceed the
service or distribution fees it receives, the Fund will not be obligated to pay
more than those fees. On the other hand, if the Underwriter's expenses are less
than such fees, it will retain its full fees and realize a profit. Expenses in
excess of service and distribution fees received or accrued through the
termination date of any Plan will be the Underwriter's sole responsibility and
not that of the Fund. Annually, the Board reviews the Plans and the
Underwriter's corresponding expenses for each class of shares of the Fund
separately from the Plans and expenses of the other classes of shares.

Among other things, each Plan provides that (1) the Underwriter will submit to
the Board at least quarterly, and the Board members will review, reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made, (2) the Plan will continue in effect only so long as it
is approved at least annually, and any material amendment thereto is approved,
by the Board, including those Board members who are not "interested persons" of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan, acting in person at a meeting
called for that purpose, (3) payments by the Fund under the Plan shall not be
materially increased without the approval by a majority of the outstanding
voting securities of the relevant class of the Fund, and (4) while the Plan
remains in effect, the selection and nomination of Board members who are not
"interested persons" of the Trust shall be committed to the discretion of the
Board members who are not "interested persons" of the Trust.

In reporting amounts expended under the Plans to the Board members, the
Underwriter allocates expenses attributable to the sale of each class of the
Fund's shares to such class based on the ratio of sales of shares of such class
to the sales of all three classes of shares. The fees paid by one class of the
Fund's shares will not be used to subsidize the sale of any other class of the
Fund's shares.

In approving the Class A Plan and the Class C Plan, the Board considered all of
the features of the distribution system and the anticipated benefits to the Fund
and its shareholders. With regard to each Plan, the Board considered (1) the
advantages to the shareholders of economies of scale resulting from growth in
the Fund's assets and potential continued growth, (2) the services provided to
the Fund and its shareholders by the Underwriter, (3) the services provided by
dealers pursuant to each dealer agreement with the Underwriter, and (4) the
Underwriter shareholder service-related and, where applicable,
distribution-related expenses and costs.

With respect to each Plan, the Board considered all compensation that the
Underwriter would receive under the Plan and the Principal Underwriting
Contract, including service fees and, as applicable, initial sales charges,
distribution fees and contingent deferred sales charges. The Board also
considered the benefits that would accrue to the Underwriter under each Plan, in
that the Underwriter would receive service, distribution, advisory and
administrative fees that are calculated based upon a percentage of the average
net assets of the Fund, which fees would increase if the Plans were successful
and the Fund attained and maintained significant asset levels.

Transfer agency services
PFPC Inc. ("PFPC"), a subsidiary of PNC Bank, N.A., serves as the Trust's
transfer and dividend disbursing agent. It is located at 760 Moore Road, King of
Prussia, Pennsylvania 19406.

Independent registered public accounting firm
Ernst & Young LLP, 5 Times Square, New York, New York 10036, is the independent
registered public accounting firm of the Trust.

Legal counsel
Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania, is legal
counsel to the Trust and the Independent Trustees.

Personal trading policies
The Trust, the Advisor and the Underwriter have adopted a Code of Ethics. The
Code of Ethics establishes standards by which employees of UBS Global Asset
Management (including all employees of the Advisor and Underwriter) (together,
"Covered Persons") must abide when engaging in personal securities trading
conduct.

Under the Code of Ethics, Covered Persons are prohibited from: (i) knowingly
buying, selling or transferring any security (subject to narrow exceptions)
within five calendar days before or after that same security, or an equivalent
security, is purchased or sold by the Fund; (ii) entering into a net short
position with respect to any security that is held by the Fund; (iii) purchasing
or selling futures (except currency forwards) that are not traded on an
exchange, as well as options on any type of futures; (iv) purchasing securities
issued by a supplier or vendor about which the Covered Person has information or
with whom the Covered Person is directly involved in negotiating a contract; and
(v) acquiring securities in an initial public offering (other than a new
offering of a registered open-end investment company).

In addition, Covered Persons must obtain prior written approval before
purchasing, selling or transferring any security subject to certain exceptions
listed in the Code of Ethics. Covered Persons and Trustees are required to file
the following reports: (1) an initial holdings report disclosing all securities
owned by the Covered Person or Interested Trustee and any securities accounts
maintained by the Covered Person or Interested Trustee, which must be filed
within ten days of becoming a Covered Person or Interested Trustee (Independent
Trustees are not required to file this report); and (2) quarterly reports of
security investment transactions and new securities accounts. Independent
Trustees need only report a transaction in a security if such Trustee, at the
time of the transaction, knew or should have known, in the ordinary course of
fulfilling his official duties as a Trustee, that, during the 15-day period
immediately preceding or after the date of the transaction by the Trustee, such
security was purchased or sold by the Fund, or was being considered for purchase
or sale by the Fund.

A copy of the Code of Ethics has been filed with and is available through the
SEC.

Proxy voting policies
The Board of Trustees believes that the voting of proxies on securities held by
the Fund is an important element of the overall investment process. As such, the
Board has delegated the responsibility to vote such proxies to UBS Global AM
(Americas). Following is a summary of UBS Global AM (Americas)'s proxy voting
policy.

You may obtain information about the Fund's proxy voting decisions, without
charge, online on the Trust's Web Site (www.ubs.com/ubsglobalam-proxy) or the
EDGAR database on the SEC's Web Site (www.sec.gov).

The proxy voting policy of UBS Global AM (Americas) is based on its belief that
voting rights have economic value and must be treated accordingly. Generally,
UBS Global AM (Americas) expects the boards of directors of companies issuing
securities held by its clients to act as stewards of the financial assets of the
company, to exercise good judgment and practice diligent oversight with the
management of the company. While there is no absolute set of rules that
determine appropriate corporate governance under all circumstances and no set of
rules will guarantee ethical behavior, there are certain benchmarks, which, if
substantial progress is made toward, give evidence of good corporate governance.
UBS Global AM (Americas) may delegate to an independent proxy voting and
research service the authority to exercise the voting rights associated with
certain client holdings. Any such delegation shall be made with the direction
that the votes be exercised in accordance with UBS Global AM (Americas)'s proxy
voting policy.

When UBS Global AM (Americas)'s view of a company's management is favorable, UBS
Global AM (Americas) generally supports current management initiatives. When UBS
Global AM (Americas)'s view is that changes to the management structure would
probably increase shareholder value, UBS Global AM (Americas) may not support
existing management proposals. In general, UBS Global AM (Americas): (1) opposes
proposals which act to entrench management; (2) believes that boards should be
independent of company management and composed of persons with requisite skills,
knowledge and experience; (3) believes that any contracts or structures which
impose financial constraints on changes in control should require prior
shareholder approval; (4) believes remuneration should be commensurate with
responsibilities and performance; and (5) believes that appropriate steps should
be taken to ensure the independence of the registered public accounting firm.

UBS Global AM (Americas) has implemented procedures designed to identify whether
it has a conflict of interest in voting a particular proxy proposal, which may
arise as a result of its or its affiliates' client relationships, marketing
efforts or banking, investment banking and broker/dealer activities. To address
such conflicts, UBS Global AM (Americas) has imposed information barriers
between it and its affiliates who conduct banking, investment banking and
broker/dealer activities and has implemented procedures to prevent business,
sales and marketing issues from influencing its proxy votes. Whenever UBS Global
AM (Americas) is aware of a conflict with respect to a particular proxy, its
appropriate local corporate governance committee is required to review and agree
to the manner in which such proxy is voted.

Portfolio holdings disclosure policies and procedures
Introduction. UBS Global AM (Americas) and the Trust's Board of Trustees have
adopted portfolio holdings disclosure policies and procedures to govern the
disclosure of the portfolio holdings of the Fund (the "Disclosure Policy"). The
Trust's policy with respect to the release of portfolio holdings is to only
release such information consistent with applicable legal requirements and the
fiduciary duties owed to shareholders. Subject to the limited exceptions
described below, the Fund's portfolio holdings will not be made available to
anyone outside of UBS Global AM (Americas) unless and until the information has
been made available to all shareholders or the general public in a manner
consistent with the spirit and terms of the Disclosure Policy. A description of
the type and frequency of portfolio holdings that are disclosed to the public is
contained in the Fund's Prospectus.

The Disclosure Policy requires that the UBS Global AM (Americas) Legal and
Compliance Departments address any material conflicts of interest regarding a
disclosure of portfolio holdings and determine whether a disclosure of the
Fund's portfolio holdings is for a legitimate business purpose and in the best
interest of the Fund's shareholders prior to the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary of the Trust or an attorney in the UBS Global
AM (Americas) Legal and Compliance Departments authorizing the disclosure of
portfolio holdings. The UBS Global AM (Americas) Legal and Compliance
Departments will periodically review how the Fund's portfolio holdings are being
disclosed to and used by, if at all, service providers, UBS Global AM (Americas)
affiliates, fiduciaries, and broker-dealers, to ensure that such use is for
legitimate business reasons and in the best interests of the Fund's
shareholders.

The Trust's Board of Trustees exercises continuing oversight of the disclosure
of Fund portfolio holdings by: (i) overseeing the implementation and enforcement
by the Chief Compliance Officer of the Trust of the Disclosure Policy, the
Trust's code of ethics and policies and procedures regarding the misuse of
inside information; (ii) considering reports and recommendations by the Chief
Compliance Officer concerning any material compliance matters (as defined in
Rule 38a-1 under the Act and Rule 206(4)-7 under the Investment Advisers Act of
1940) that may arise in connection with any policies governing portfolio
holdings; and (iii) considering whether to approve or ratify any amendment to
any policies governing portfolio holdings. The Disclosure Policy may be amended
from time to time, subject to approval by the Board of Trustees.

Disclosure of complete portfolio holdings to service providers subject to
confidentiality and trading restrictions. UBS Global AM (Americas), for
legitimate fund business purposes, may disclose the Fund's complete portfolio
holdings if it deems such disclosure necessary and appropriate to rating and
ranking organizations, financial printers, proxy voting service providers,
pricing information vendors, third-parties that deliver analytical, statistical
or consulting services, custodians or a redeeming party's custodian or transfer
agent, as necessary in connection with redemptions in-kind, and other third
parties that provide services (collectively, "Service Providers") to UBS Global
AM (Americas) and/or the Fund.

Disclosure of complete portfolio holdings to a Service Provider is conditioned
on the Service Provider being subject to a written duty of confidentiality,
including a duty not to trade on the basis of any material non-public
information, pursuant to the terms of the service agreement between the Service
Provider and the Trust or UBS Global AM (Americas), or the terms of a separate
confidentiality agreement. The frequency with which complete portfolio holdings
may be disclosed to a Service Provider, and the length of lag, if any, between
the date of information and the date on which the information is disclosed to
the Service Provider, is to be determined based on the facts and circumstances,
including, without limitation, the nature of the portfolio holdings information
to be disclosed, the risk of harm to the Fund's shareholders, and the legitimate
fund business purposes served by such disclosure. Disclosure of Fund complete
portfolio holdings to a Service Provider must be authorized in writing by the
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of the Trust or
by an attorney in the UBS Global AM (Americas) Legal Department.

Disclosure of complete portfolio holdings to UBS Global Asset Management
affiliates and certain fiduciaries subject to confidentiality and trading
restrictions. The Fund's complete portfolio holdings may be disclosed between
and among the following persons (collectively, "Affiliates and Fiduciaries")
subject to authorization by the Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary of the Trust, or an attorney in the UBS Global AM (Americas)
Legal and Compliance Departments, for legitimate fund business purposes within
the scope of their official duties and responsibilities, and subject to such
Affiliate/Fiduciary's continuing duty of confidentiality and duty not to trade
on the basis of any material nonpublic information, as such duties are imposed
under the Trust's and/or UBS Global AM (Americas)'s Code of Ethics, the Fund's
policies and procedures regarding the prevention of the misuse of inside
information, by agreement or under applicable laws, rules and regulations: (i)
persons who are subject to UBS Global AM (Americas)'s Codes of Ethics or the
policies and procedures regarding the prevention of the misuse of inside
information; (ii) an investment advisor, distributor, administrator,
sub-administrator, transfer agent, custodian or securities lending agent to the
Fund; (iii) an accounting firm, an auditing firm or outside legal counsel
retained by UBS Global AM (Americas) or the Fund; (iv) an investment advisor to
whom complete portfolio holdings are disclosed for due diligence purposes when
the advisor is in merger or acquisition talks with the Fund's current advisor;
and (v) a newly hired investment advisor or sub-advisor to whom complete
portfolio holdings are disclosed prior to the time it commences its duties.

The frequency with which complete portfolio holdings may be disclosed between
and among Affiliates and Fiduciaries, and the length of the lag, if any, between
the date of the information and the date on which the information is disclosed
between and among the Affiliates and Fiduciaries, is to be determined by the UBS
Global AM (Americas) Legal and Compliance Departments based on the facts and
circumstances, including, without limitation, the nature of the portfolio
holdings information to be disclosed, and the risk of harm to the Fund and its
shareholders, and the legitimate fund business purposes served by such
disclosure.

Arrangements to disclose portfolio holdings to service providers and
fiduciaries. As of the date of this SAI, the specific Service Providers and
Fiduciaries with whom the Trust has arrangements to provide portfolio holdings
in advance of their release to the general public in the course of performing or
to enable them to perform services for the Fund are:

o JP Morgan Chase Bank, the Fund's Custodian, receives portfolio holdings
information daily on a real-time basis.

o Thomson Corporation Vestek receives portfolio holdings information so that
it may assist the Fund in production of its quarterly fact sheet on a
quarterly basis. The portfolio holdings information is provided with a
one-day lag between the date of the portfolio holdings information and the
date on which the information is disclosed to Thomson Corporation.

o Ernst & Young LLP, the Fund's independent registered public accounting
firm, receives portfolio holdings information on an annual and semiannual
basis for reporting purposes. There is a 30-day lag between the date of
portfolio holdings information and the date on which the information is
disclosed to Ernst & Young. Ernst & Young also receives portfolio holdings
information annually at year-end for audit purposes. In this case, there is
no lag between the date of the portfolio holdings information and the date
on which the information is disclosed to Ernst & Young.

o The rating agencies of Morningstar, Standard & Poor's and Lipper receive
portfolio holdings information on a monthly basis so that the Fund may be
included in each rating agency's industry reports and other materials.
There is a 30-day lag between the date of the portfolio holdings
information and the date on which the information is disclosed to the
rating agencies.

Disclosure of portfolio holdings to broker-dealers in the normal course of
managing fund assets. An investment advisor, administrator or custodian for the
Fund may, for legitimate fund business purposes within the scope of their
official duties and responsibilities, disclose portfolio holdings (whether
partial portfolio holdings or complete portfolio holdings) and other investment
positions comprising the Fund to one or more broker-dealers during the course
of, or in connection with, normal day-to-day securities and derivatives
transactions with or through such broker-dealers subject to the broker-dealer's
legal obligation not to use or disclose material non-public information
concerning the Fund's portfolio holdings, other investment positions, securities
transactions or derivatives transactions without the consent of the Trust or the
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of the Trust or
an attorney in the UBS Global AM (Americas) Legal and Compliance Departments.
The Trust has not given its consent to any such use or disclosure and no person
or Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of the Trust
or an attorney in the UBS Global AM (Americas) Legal and Compliance Departments
of UBS Global AM (Americas) is authorized to give such consent except as
approved by the Trust's Board of Trustees. In the event consent is given to
disclose portfolio holdings to a broker-dealer, the frequency with which the
portfolio holdings may be disclosed to a broker-dealer, and the length of the
lag, if any, between the date of the information and the date on which the
information is disclosed to the broker-dealer, is to be determined based on the
facts and circumstances, including, without limitation, the nature of the
portfolio holdings information to be disclosed, and the risk of harm to the Fund
and its shareholders, and the legitimate fund business purposes served by such
disclosure.

Disclosure of non-material information. Policies and procedures regarding
disclosure of non-material information permit the officers of the Trust, UBS
Global Asset Management Fund portfolio managers and senior officers of UBS
Global AM (Americas) Finance, UBS Global AM (Americas) Legal and Compliance
Departments, and anyone employed by or associated with UBS Global AM (Americas)
who has been authorized by the UBS Global AM (Americas) Legal Department
(collectively, "Approved Representatives") to disclose any views, opinions,
judgments, advice or commentary, or any analytical, statistical, performance or
other information, in connection with or relating to the Fund or its portfolio
holdings and/or other investment positions (collectively, commentary and
analysis) or any changes in the portfolio holdings of the Fund that occurred
after the most recent calendar-quarter end (recent portfolio changes) to any
person if such information does not constitute material non-public information.

An Approved Representative must make a good faith determination whether the
information constitutes material non-public information, which involves an
assessment of the particular facts and circumstances. UBS Global AM (Americas)
believes that in most cases recent portfolio changes that involve a few or even
several securities in a diversified portfolio or commentary and analysis would
be immaterial and would not convey any advantage to a recipient in making an
investment decision concerning the Fund. Nonexclusive examples of commentary and
analysis include: (i) the allocation of the Fund's portfolio holdings and other
investment positions among various asset classes, sectors, industries and
countries; (ii) the characteristics of the stock and bond components of the
Fund's portfolio holdings and other investment positions; (iii) the attribution
of Fund returns by asset class, sector, industry and country; and (iv) the
volatility characteristics of the Fund. An Approved Representative may in his or
her sole discretion determine whether to deny any request for information made
by any person, and may do so for any reason or no reason.

Disclosure of portfolio holdings as required by applicable law. Fund portfolio
holdings and other investment positions comprising the Fund may be disclosed to
any person as required by applicable laws, rules and regulations. Examples of
such required disclosure include, but are not limited to, disclosure of Fund
portfolio holdings: (i) in a filing or submission with the SEC or another
regulatory body; (ii) in connection with seeking recovery on defaulted bonds in
a federal bankruptcy case; (iii) in connection with a lawsuit; or (iv) as
required by court order, subpoena or similar process (e.g., arbitration
proceedings).

Prohibitions on disclosure of portfolio holdings. No person is authorized to
disclose Fund portfolio holdings or other investment positions (whether online
at www.ubs.com, in writing, by fax, by e-mail, orally or by other means) except
in accordance with the Disclosure Policy. In addition, no person is authorized
to make disclosure pursuant to the Disclosure Policy if such disclosure would be
unlawful under the antifraud provisions of the federal securities laws (as
defined in Rule 38a-1 under the Act). Furthermore, UBS Global AM (Americas), in
its sole discretion, may determine not to disclose portfolio holdings or other
investment positions comprising the Fund to any person who might otherwise be
eligible to receive such information under the Disclosure Policy, or may
determine to make such disclosures publicly as described above.

Prohibitions on receipt of compensation or other consideration. Neither UBS
Global AM (Americas), the Fund nor any other person may pay or receive any
compensation or other consideration of any type for the purpose of obtaining
disclosure of Fund portfolio holdings or other investment positions.
"Consideration" includes any agreement to maintain assets in the Fund or in
other investment companies or accounts managed by the investment advisor or by
any affiliated person of the investment advisor.

Bank line of credit
The Fund participates with other funds managed by UBS Global AM (Americas) in a
$75 million committed credit facility (the "Credit Facility") with JPMorgan
Chase Bank, to be utilized for temporary financing until the settlement of sales
or purchases of portfolio securities, the repurchase or redemption of shares at
the request of shareholders and other temporary or emergency purposes. Under the
Credit Facility arrangement, the Fund has agreed to pay a commitment fee, pro
rata, based on the relative asset size of the funds participating in the credit
facility. Interest is charged to each fund at rates based on prevailing market
rates at the time of borrowings.

Portfolio transactions and brokerage commissions

The Advisor is responsible for decisions to buy and sell securities for the Fund
and for the placement of the Fund's portfolio business and the negotiation of
commissions, if any, paid on such transactions. Fixed income securities in which
the Fund invests are traded in the over-the-counter market. These securities are
generally traded on a net basis with dealers acting as principal for their own
accounts without a stated commission, although the bid/ask spread quoted on
securities includes an implicit profit to the dealers. In over-the-counter
transactions, orders are placed directly with a principal market-maker unless a
better price and execution can be obtained by using a broker. Brokerage
commissions are paid on transactions in listed securities, futures contracts and
options thereon. The Advisor is responsible for effecting portfolio transactions
and will do so in a manner deemed fair and reasonable to the Fund. Under its
advisory agreements with the Fund, the Advisor is authorized to utilize the
trading desk of its foreign affiliates to execute foreign securities
transactions, but monitors the selection by such affiliates of brokers and
dealers used to execute transactions for the Fund.

The primary consideration in all portfolio transactions will be prompt execution
of orders in an efficient manner at the most favorable price. However, subject
to policies established by the Board of the Trust, the Fund may pay a
broker-dealer a commission for effecting a portfolio transaction for the Fund in
excess of the amount of commission another broker-dealer would have charged if
the Advisor determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such broker-dealer,
viewed in terms of that particular transaction or such firm's overall
responsibilities with respect to the clients, including the Fund, as to which
the Advisor exercises investment discretion. In selecting and monitoring
broker-dealers and negotiating commissions, the Advisor considers the firm's
reliability, the quality of its execution services on a continuing basis and its
financial condition. When more than one firm is believed to meet these criteria,
preference may be given to brokers who provide research or statistical material
or other services to the Fund or the Advisor. Such services include advice, both
directly and in writing, as to the value of the securities; the advisability of
investing in, purchasing or selling securities; and the availability of
securities, or purchasers or sellers of securities, as well as analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. This allows the Advisor to
supplement its own investment research activities and obtain the views and
information of others prior to making investment decisions. The Advisor is of
the opinion that, because this material must be analyzed and reviewed by its
staff, the receipt and use of such material does not tend to reduce expenses but
may benefit the Fund by supplementing the Advisor's research.

The Advisor effects portfolio transactions for other investment companies and
advisory accounts. Research services furnished by dealers through whom the Fund
effects its securities transactions may be used by the Advisor, or its
affiliated investment advisors, in servicing all of their accounts; not all such
services may be used in connection with the Fund. In the opinion of the Advisor,
it is not possible to measure separately the benefits from research services to
each of the accounts (including the Fund). The Advisor will attempt to equitably
allocate portfolio transactions among the Fund and others whenever concurrent
decisions are made to purchase or sell securities by the Fund and another. In
making such allocations between the Fund and others, the main factors to be
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for recommending investments to the Fund and
the others. In some cases, this procedure could have an adverse effect on the
Fund. In the opinion of the Advisor, however, the results of such procedures
will, on the whole, be in the best interest of each of the clients.

When buying or selling securities, the Fund may pay commissions to brokers who
are affiliated with the Advisor or the Fund. The Fund may purchase securities in
certain underwritten offerings for which an affiliate of the Fund or the Advisor
may act as an underwriter. The Fund may effect futures transactions through, and
pay commissions to, FCMs who are affiliated with the Advisor or the Fund in
accordance with procedures adopted by the Board.

The Fund maintains a commission recapture program with certain brokers for the
Fund. Under the program, a percentage of commissions generated by portfolio
transactions for the Fund is rebated to the Fund by the brokers.

Portfolio turnover
The Fund is free to dispose of its portfolio securities at any time, subject to
complying with the Code and the Act, when changes in circumstances or conditions
make such a move desirable in light of the Fund's investment objective. The Fund
will not attempt to achieve or be limited to a predetermined rate of portfolio
turnover, such a turnover always being incidental to transactions undertaken
with a view to achieving that Fund's investment objective.

The Fund does not intend to use short-term trading as a primary means of
achieving its investment objective. The rate of portfolio turnover shall be
calculated by dividing (a) the lesser of purchases and sales of portfolio
securities for the particular fiscal year by (b) the monthly average of the
value of the portfolio securities owned by the Fund during the particular fiscal
year. Such monthly average shall be calculated by totaling the values of the
portfolio securities as of the beginning and end of the first month of the
particular fiscal year and as of the end of each of the succeeding eleven months
and dividing the sum by 13.

The portfolio turnover rate for the Fund may exceed 100%, and in some years,
200%. A high portfolio turnover rate (over 100%) may involve correspondingly
greater brokerage commissions and other transaction costs, which will be borne
directly by the Fund and ultimately by the Fund's shareholders. In addition,
high portfolio turnover may result in increased short-term capital gains, which,
when distributed to shareholders, are treated as ordinary income.

Shares of beneficial interest

The Trust currently offers three classes of shares for the Fund: the UBS Global
Frontier Fund-Class A (the Class A shares), the UBS Global Frontier Fund-Class C
(the Class C shares) and the UBS Global Frontier Fund-Class Y (the Class Y
shares). The Fund is authorized to issue an unlimited number of shares of
beneficial interest with a $0.001 par value per share. Each share of beneficial
interest represents an equal proportionate interest in the assets and
liabilities of the Fund and has identical voting, dividend, redemption,
liquidation and other rights and preferences as the other classes of the Fund,
except that only the Class A shares may vote on any matter affecting the Class A
Plan. Similarly, only Class C shares may vote on matters that affect only the
Class C Plan. No class may vote on matters that affect only another class. Under
Delaware law, the Trust does not normally hold annual meetings of shareholders.
Shareholders' meetings may be held from time to time to consider certain
matters, including changes to the Fund's fundamental investment objective and
fundamental investment policies, changes to the Fund's investment advisory
agreement and the election of Trustees when required by the Act. When matters
are submitted to shareholders for a vote, shareholders are entitled to one vote
per share with proportionate voting for fractional shares. The shares of the
Fund do not have cumulative voting rights or any preemptive or conversion
rights, and the Trustees have authority, from time to time, to divide or combine
the shares of the Fund into a greater or lesser number of shares so affected. In
the case of a liquidation of the Fund, each shareholder of the Fund will be
entitled to share, based upon the shareholder's percentage share ownership, in
the distribution of assets, net of liabilities, of the Fund. No shareholder is
liable for further calls or assessment by the Fund.

On any matters affecting only one series or class, only the shareholders of that
series or class are entitled to vote. On matters relating to the Trust but
affecting the series of the Trust differently, separate votes by the affected
series or classes are required. With respect to the submission to shareholder
vote of a matter requiring separate voting by series or class, the matter shall
have been effectively acted upon with respect to any series or class if a
majority of the outstanding voting securities of that series or class votes for
the approval of the matter, notwithstanding that: (1) the matter has not been
approved by a majority of the outstanding voting securities of any other series
or class; and (2) the matter has not been approved by a majority of the
outstanding voting securities of the Trust.

The Trustees of the Trust do not intend to hold annual meetings of shareholders
of the Fund. The SEC, however, requires the Trustees to promptly call a meeting
for the purpose of voting upon the question of removal of any Trustee when
requested to do so by not less than 10% of the outstanding shareholders of the
Fund. In addition, subject to certain conditions, shareholders of the Fund may
apply to the Fund to communicate with other shareholders to request a
shareholders' meeting to vote upon the removal of a Trustee or Trustees.

Reduced sales charges, additional purchase, exchange and redemption information
and other services

Sales charge reductions and waivers
Waivers of sales charges--Class A shares. The following additional sales charge
waivers are available for Class A shares if you:

o Acquire shares in connection with a reorganization pursuant to which the
Fund acquires substantially all of the assets and liabilities of another
fund in exchange solely for shares of the acquiring fund;

o Acquire shares in connection with the disposition of proceeds from the sale
of shares of Managed High Yield Plus Fund Inc. that were acquired during
that fund's initial public offering of shares and that meet certain other
conditions described in its prospectus; or

o Acquire shares in connection with shares purchased by UBS Global AM (US) or
any affiliate on behalf of a discretionary advisory client.

Reinstatement privilege--Class A shares. Shareholders who have redeemed Class A
shares may reinstate their account without a sales charge by notifying the
transfer agent of such desire and forwarding a check for the amount to be
purchased within 365 days after the date of redemption. The reinstatement will
be made at the net asset value per share next computed after the notice of
reinstatement and check are received. The amount of a purchase under this
reinstatement privilege cannot exceed the amount of the redemption proceeds.
Gain on a redemption will be taxable regardless of whether the reinstatement
privilege is exercised, although a loss arising out of a redemption will not be
deductible to the extent the reinstatement privilege is exercised within 30 days
after redemption, in which event an adjustment will be made to the shareholder's
tax basis for shares acquired pursuant to the reinstatement privilege. Gain or
loss on a redemption also will be readjusted for federal income tax purposes by
the amount of any sales charge paid on Class A shares, under the circumstances
and to the extent described in "Taxes--Special Rule for Class A and C
Shareholders," below.

Purchases of Class A shares through the UBS Financial Services Inc.
InsightOne(SM) program. Investors who purchase shares through the UBS Financial
Services Inc. InsightOne(SM) Program are eligible to purchase Class A shares of
the funds for which the Underwriter or its affiliates serve as investment
advisor or investment manager without a sales load, and may exchange those
shares for Class A shares of the Fund. The UBS Financial Services Inc.
InsightOne(SM) Program offers a nondiscretionary brokerage account to UBS
Financial Services Inc. clients for an asset-based fee at an annual rate of up
to 1.50% of the assets in the account. Account holders may purchase or sell
certain investment products without paying commissions or other
markups/markdowns.

Purchases of shares through the PACE(SM) multi advisor program. An investor who
participates in the PACE(SM) Multi Advisor Program is eligible to purchase Class
A shares. The PACE(SM) Multi Advisor Program is an advisory program sponsored by
UBS Financial Services Inc. that provides comprehensive investment services,
including investor profiling, a personalized asset allocation strategy using an
appropriate combination of funds and a quarterly investment performance review.
Participation in the PACE(SM) Multi Advisor Program is subject to payment of an
advisory fee at the effective maximum annual rate of 1.5% of assets. Employees
of UBS Financial Services Inc. and its affiliates are entitled to a waiver of
this fee. Please contact your UBS Financial Services Inc. Financial Advisor or
UBS Financial Services Inc. correspondent firms for more information concerning
mutual funds that are available through the PACE(SM) Multi Advisor Program.

Payments by UBS Global AM (US)--Class Y shares. Class Y shares are sold without
sales charges and do not pay ongoing 12b-1 distribution or service fees.
However, UBS Global AM (US), as principal underwriter of the Fund, may make
payments out of its own resources, to affiliated (UBS Financial Services Inc.)
and unaffiliated dealers, pursuant to written dealer agreements as follows: a
one time finder's fee consistent with the Fund's Class A share Reallowance to
Selected Dealers' schedule, as provided in the Prospectus, and, beginning in
month 13, an ongoing fee in an amount up to 20 basis points. UBS Global AM (US)
does not make these payments on employee-related Class Y share accounts and
reserves the right not to make these payments if it determines, in its sole
discretion, that a dealer has been acting to the detriment of the Fund. The one
time finder's fee is calculated on the date of purchase and may be paid in four
equal installments over the first 12 months of ownership. UBS Global AM (US)
reserves the right to suspend these payments at any time in its sole discretion.

Additional compensation to affiliated dealer. UBS Global AM (US) pays its
affiliate, UBS Financial Services Inc., the following additional compensation in
connection with the sale of Fund shares:

o 0.05% of the value (at the time of sale) of all shares of the Fund sold
through UBS Financial Services Inc.

o a monthly retention fee at the blended annual rate of 0.10% of the value of
the equity portion of the Fund and 0.075% of the value of the fixed income
portion of the Fund that are held in a UBS Financial Services Inc. account
at month-end.

The foregoing payments are made by UBS Global AM (US) out of its own resources.
Such payments are often referred to as "revenue sharing."

Additional information regarding purchases through letter of intent
To the extent that an investor purchases less than the dollar amount indicated
on the Letter of Intent within the 13-month period, the sales charge will be
adjusted upward for the entire amount purchased at the end of the 13-month
period. This adjustment will be made by redeeming shares first from amounts held
in escrow, and then from the account to cover the additional sales charge, the
proceeds of which will be paid to the investor's investment professional and UBS
Global Asset Management, as applicable, in accordance with the Prospectus.

Letters of Intent are not available for certain employee benefit plans.

Additional exchange and redemption information. As discussed in the Prospectus,
eligible shares of the Fund may be exchanged for shares of the corresponding
class of other series of the Trust and most other Family Funds. Class Y shares
are not eligible for exchange.

Shareholders will receive at least 60 days' notice of any termination or
material modification of the exchange offer, except no notice need be given if,
under extraordinary circumstances, either redemptions are suspended under the
circumstances described below or the Fund temporarily delays or ceases the sales
of its shares because it is unable to invest amounts effectively in accordance
with the Fund's investment objective, policies and restrictions.

The Trust will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the Advisor or
the Board, result in the necessity of the Fund selling assets under
disadvantageous conditions and to the detriment of the remaining shareholders of
the Fund. Pursuant to the Trust's Agreement and Declaration of Trust, payment
for shares redeemed may be made either in cash or in-kind, or partly in cash and
partly in-kind. Under unusual circumstances, when the Board deems it in the best
interest of the Fund's shareholders, the Trust may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current values. With respect to such redemptions in kind, the Trust has made an
election pursuant to Rule 18f-1 under the Act. This will require the Trust to
redeem in cash at a shareholder's election in any case where the redemption
involves less than $250,000 (or 1% of the Fund's net asset value at the
beginning of each 90-day period during which such redemptions are in effect, if
that amount is less than $250,000), during any 90-day period for any one
shareholder. Should payment be made in securities, the redeeming shareholder may
incur brokerage costs in converting such securities to cash. In-kind payments to
non-affiliated shareholders need not constitute a cross-section of the Fund's
portfolio. Where a shareholder has requested redemption of all or a part of the
shareholder's investment and where the Fund computes such redemption in-kind,
the Fund will not recognize gain or loss for federal tax purposes on the
securities used to compute the redemption, but the shareholder will recognize
gain or loss equal to the difference between the fair market value of the
securities received and the shareholder's basis in the Fund shares redeemed.
Pursuant to redemption in-kind procedures adopted by the Board on behalf of the
Fund, the Trust is permitted to pay redemptions in-kind to shareholders that are
affiliated persons of the Fund by nature of a greater than 5% ownership interest
in the Fund.

The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ("NYSE") is closed or
trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, that makes it not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the value of its assets, or (3) as the SEC may otherwise permit. The
redemption price may be more or less than the shareholder's cost, depending on
the market value of the Fund's portfolio at the time.

Financial institutions. The Fund may authorize financial institutions, or their
agents, to accept on the Fund's behalf purchase and redemption orders that are
in "good form" in accordance with the policies of those institutions. The Fund
will be deemed to have received these purchase and redemption orders when such
financial institution or its agent accepts them. Like all customer orders, these
orders will be priced based on the Fund's net asset value next computed after
receipt of the order by the financial institutions or their agents. Financial
institutions may include retirement plan service providers who aggregate
purchase and redemption instructions received from numerous retirement plans or
plan participants.

Automatic investment plan--Class A and Class C shares. The Underwriter or your
investment professional offers an automatic investment plan with a minimum
initial investment of $1,000 through which the Fund will deduct $50 or more on a
monthly, quarterly, semiannual or annual basis from the investor's bank account
to invest directly in the Fund's Class A or Class C shares. In addition to
providing a convenient and disciplined manner of investing, participation in the
automatic investment plan enables an investor to use the technique of "dollar
cost averaging." When a shareholder invests the same dollar amount each month
under the plan, the shareholder will purchase more shares when the Fund's net
asset value per share is low and fewer shares when the net asset value per share
is high. Using this technique, a shareholder's average purchase price per share
over any given period will be lower than if the shareholder purchased a fixed
number of shares on a monthly basis during the period. Of course, investing
through the automatic investment plan does not assure a profit or protect
against loss in declining markets. Additionally, because the automatic
investment plan involves continuous investing regardless of price levels, an
investor should consider his or her financial ability to continue purchases
through periods of both low and high price levels. An investor should also
consider whether a large, single investment would qualify for sales load
reductions.

Automatic cash withdrawal plan--Class A and Class C
The Automatic Cash Withdrawal Plan allows investors to set up monthly, quarterly
(March, June, September and December), semiannual (June and December) or annual
(December) withdrawals from their Family Fund accounts. Minimum balances and
withdrawals vary according to the class of shares:

o Class A and Class C shares. Minimum value of Fund shares is $5,000; minimum
withdrawals of $100.

Withdrawals under the Automatic Cash Withdrawal Plan will not be subject to a
contingent deferred sales charge if the investor withdraws no more than 12% of
the value of the Fund account when the shareholder signed up for the plan during
the first year under the plan. Shareholders who elect to receive dividends or
other distributions in cash may not participate in the plan.

An investor's participation in the Automatic Cash Withdrawal Plan will terminate
automatically if the "Initial Account Balance" (a term that means the value of
the Fund account at the time the shareholder elects to participate in the
Automatic Cash Withdrawal Plan), less aggregate redemptions made other than
pursuant to the Automatic Cash Withdrawal Plan, is less than the minimum values
specified above. Purchases of additional shares of the Fund concurrent with
withdrawals are ordinarily disadvantageous to shareholders because of tax
liabilities and, for Class A shares, initial sales charges. On or about the 20th
of a month for monthly, quarterly and semiannual plans, your investment
professional will arrange for redemption by the Fund of sufficient Fund shares
to provide the withdrawal payments specified by participants in the Automatic
Cash Withdrawal Plan. The payments generally are mailed approximately five
Business Days (defined under "Net Asset Value") after the redemption date.
Withdrawal payments should not be considered dividends, but redemption proceeds.
If periodic withdrawals continually exceed reinvested dividends and other
distributions, a shareholder's investment may be correspondingly reduced. A
shareholder may change the amount of the automatic cash withdrawal or terminate
participation in the Automatic Cash Withdrawal Plan at any time without charge
or penalty by written instructions with signatures guaranteed to your investment
professional or PFPC. Instructions to participate in the plan, change the
withdrawal amount or terminate participation in the plan will not be effective
until five days after written instructions with signatures guaranteed are
received by PFPC. Shareholders may request the forms needed to establish an
Automatic Cash Withdrawal Plan from their investment professionals or PFPC at
1-800-647 1568.

Individual retirement accounts
Self-directed IRAs are available in which purchases of shares of Family Funds
and other investments may be made. Investors considering establishing an IRA
should review applicable tax laws and should consult their tax advisors.

Transfer of accounts
If investors holding Class A, Class C or Class Y shares of the Fund in a
brokerage account transfer their brokerage accounts to another firm, the Fund
shares will be moved to an account with PFPC. However, if the other firm has
entered into a dealer agreement with the Underwriter relating to the Fund, the
shareholder may be able to hold Fund shares in an account with the other firm.

Transfer of securities
At the discretion of the Trust, investors may be permitted to purchase Fund
shares by transferring securities to the Fund that meet the Fund's investment
objective and policies. Securities transferred to the Fund will be valued in
accordance with the same procedures used to determine the Fund's net asset value
at the time of the next determination of net asset value after such acceptance.
Shares issued by the Fund in exchange for securities will be issued at net asset
value per share of the Fund determined as of the same time. All dividends,
interest, subscription or other rights pertaining to such securities shall
become the property of the Fund and must be delivered to the Fund by the
investor upon receipt from the issuer. Investors who are permitted to transfer
such securities will be required to recognize a gain or loss on such transfer
and pay tax thereon, if applicable, measured by the difference between the fair
market value of the securities and the investors' basis therein. Securities will
not be accepted in exchange for shares of the Fund unless: (1) such securities
are, at the time of the exchange, eligible to be included in the Fund's
portfolio and current market quotations are readily available for such
securities; (2) the investor represents and warrants that all securities offered
to be exchanged are not subject to any restrictions upon their sale by the Fund
under the 1933 Act, or under the laws of the country in which the principal
market for such securities exists, or otherwise; and (3) the value of any such
security (except US government securities) being exchanged, together with other
securities of the same issuer owned by the Fund, will not exceed 5% of the
Fund's net assets immediately after the transaction.

Net asset value

The Fund determines its net asset value per share separately for each class of
shares, normally as of the close of regular trading (usually 4:00 p.m., Eastern
time) on the NYSE on each Business Day when the NYSE is open. Prices will be
calculated earlier when the NYSE closes early because trading has been halted
for the day. Currently the NYSE is open for trading every day (each such day a
"Business Day") except Saturdays, Sundays and the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Securities that are listed on exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are generally valued on the exchange considered by
the Advisor as the primary market. Securities traded in the over-the-counter
market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are
valued at the NASDAQ Official Closing Price ("NOCP"); other over-the-counter
securities are valued at the last bid price available prior to valuation (other
than short-term obligations that mature in 60 days or less, which are valued as
described further below). All investments quoted in foreign currency will be
valued daily in U.S. dollars on the basis of the foreign currency exchange rate
prevailing at the time such valuation is determined by the Fund's custodian. The
foreign currency exchange transactions of the Fund conducted on a spot (that is,
cash) basis are valued at the spot rate for purchasing or selling currency
prevailing on the foreign exchange market. Generally, securities issued by
open-end investment companies are valued using their respective net asset values
or public offering prices, as appropriate, for purchase orders placed at the
close of the NYSE. Futures contracts are valued at the settlement price
established each day on the exchange on which they are traded. Forward foreign
currency contracts are valued daily using forward exchange rates quoted by
independent pricing services. Where market quotations are readily available,
portfolio securities are valued based upon market quotations, provided those
quotations adequately reflect, in the judgment of the Advisor, the fair value of
the security. Where those market quotations are not readily available,
securities are valued based upon appraisals received from an independent pricing
service using a computerized matrix system or based upon appraisals derived from
information concerning the security or similar securities received from
recognized dealers in those securities. All other securities and other assets
are valued at fair value as determined in good faith by or under the direction
of the Board. It should be recognized that judgment often plays a greater role
in valuing thinly traded securities, including many lower rated bonds, than is
the case with respect to securities for which a broader range of dealer
quotations and last-sale information is available. The amortized cost method of
valuation generally is used to value short-term obligations with 60 days or less
remaining until maturity, unless the Board determines that this does not
represent fair value.

Taxation

Additional information on distributions and taxes
Distributions
Distributions of net investment income. The Fund receives income generally in
the form of: (a) dividends and/or interest on its direct investments; (b) its
distributive share of dividends and/or interest earned from its investments in
open-end investment companies classified as partnerships for federal income tax
purposes; and (c) distributions from its investments in open-end investment
companies classified as corporations for federal income tax purposes. The
open-end investment companies described in (b) and (c) of the foregoing sentence
are referred to herein as the "Underlying Funds." This income, less expenses
incurred in the operation of the Fund, constitutes the Fund's net investment
income from which income dividends may be paid to you. The Fund calculates
income dividends and capital gain distributions the same way for each class. The
amount of any income dividends per share will differ, however, generally due to
any differences in the distribution and service (Rule 12b-1) fees applicable to
the classes. If you are a taxable investor, any income dividends the Fund pays
are taxable to you as ordinary income, except that, a portion of the income
dividends designated by the Fund will be qualified dividend income eligible for
taxation with respect to individual shareholders at long-term capital gain
rates.

Capital gain distributions. The Fund, indirectly, through its investments in the
Underlying Funds, or from its direct investment in securities, may derive
capital gain or loss in connection with sales or other dispositions of portfolio
securities. The Fund may also derive capital gains through its redemption of
shares in an Underlying Fund classified as a corporation. Distributions from net
short-term capital gains are taxable to you as ordinary income. Distributions
from net long-term capital gains are taxable to you as long-term capital gains,
regardless of how long you have owned your shares in the Fund. Any net capital
gains realized by the Fund generally are distributed once each year, and may be
distributed more frequently, if necessary, to reduce or eliminate excise or
income taxes on the Fund.

Returns of capital. If the Fund's distributions exceed its taxable income and
capital gains realized during a taxable year, and undistributed income from
prior years, all or a portion of the distributions made in the same taxable year
may be recharacterized as a return of capital to shareholders. A return of
capital distribution generally will not be taxable, but will reduce each
shareholder's cost basis in the Fund and result in a higher reported capital
gain or lower reported capital loss when those shares on which the distribution
was received are sold. Any return of capital in excess of your basis, however,
is taxable as a capital gain.

Investments in foreign securities
The next four paragraphs describe tax considerations that are applicable to the
Underlying Fund's and the Fund's investments in foreign securities.

Effect of foreign withholding taxes. An Underlying Fund and the Fund may be
subject to foreign withholding taxes on income from certain foreign securities.
This, in turn, could reduce the Fund's distributions paid to you.

Pass-through of foreign tax credits. If more than 50% of the Fund's total assets
at the end of a fiscal year are invested directly, or indirectly through
Underlying Funds classified as partnerships, in foreign securities, the Fund may
elect to pass through to you your pro rata share of foreign taxes paid by the
Fund. If this election is made, the Fund may report more taxable income to you
than it actually distributes. You will then be entitled either to deduct your
share of these taxes in computing your taxable income, or to claim a foreign tax
credit for these taxes against your US federal income tax (subject to
limitations for certain shareholders). The Fund will provide you with the
information necessary to complete your personal income tax return if it makes
this election.

You should also be aware that use of foreign dividends, designated by the Fund
as dividends from qualifying foreign corporations and subject to reduced rates
of taxation on qualified dividend income, may reduce the otherwise available
foreign tax credits on your federal income tax return. Shareholders in these
circumstances should talk with their personal tax advisors about their foreign
tax credits and the procedures that they should follow to claim these credits on
their personal income tax returns.

Effect of foreign debt investments and hedging on distributions. Most foreign
exchange gains realized on the sale of debt securities are treated as ordinary
income by the Underlying Fund or the Fund. Similarly, foreign exchange losses
realized on the sale of debt securities generally are treated as ordinary
losses. These gains when distributed are taxable to you as ordinary income, and
any losses reduce the Fund's ordinary income otherwise available for
distribution to you (or in the case of an Underlying Fund, its ordinary income
available for distribution to the Fund). This treatment could increase or
decrease the Fund's ordinary income distributions to you, and may cause some or
all of the Fund's previously distributed income to be classified as a return of
capital.

PFIC securities. An Underlying Fund or the Fund may invest in securities of
foreign entities that could be deemed for tax purposes to be passive foreign
investment companies (PFICs). When an Underlying Fund or the Fund invests in
PFIC securities, a mark-to-market election will be made with respect to the
Fund's indirect or direct interest in such securities and the Fund will
recognize any gains at the end of its fiscal and excise (described below) tax
years. Deductions for losses are allowable only to the extent of any current or
previously recognized gains. These gains (reduced by allowable losses) are
treated as ordinary income that an Underlying Fund or the Fund is required to
distribute, even though the Underlying Fund or the Fund has not sold the
securities. You should also be aware that the designation of a foreign security
as a PFIC security will cause its income dividends to fall outside of the
definition of qualified foreign corporation dividends. These dividends generally
will not qualify for the reduced rate of taxation on qualified dividends when
distributed to you by the Fund. In addition, if the Underlying Fund or Fund is
unable to identify an investment as a PFIC and thus does not make a
mark-to-market election, the Fund may be subject to U.S. federal income tax on a
portion of any "excess distribution" or gain from the disposition of such shares
even if such income is distributed as a taxable dividend by an Underlying Fund
or the Fund to its shareholders. Additional charges in the nature of interest
may be imposed on an Underlying Fund or the Fund in respect of deferred taxes
arising from such distributions or gains.

Information on the amount and tax character of distributions. The Fund will
inform you of the amount of your income dividends and capital gain distributions
at the time they are paid, and will advise you of the tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not owned your Fund shares for a full year, the Fund may designate and
distribute to you, as ordinary income, qualified dividends or capital gains, and
in the case of non-US shareholders, the Fund may further designate and
distribute as interest-related dividends and short-term capital gain dividends,
a percentage of income that may not be equal to the actual amount of each type
of income earned during the period of your investment in the Fund. Distributions
declared in December to shareholders of record in such month but paid in January
are taxable to you as if paid in December.

Election to be taxed as a regulated investment company. The Fund intends to
elect and qualify to be treated as a regulated investment company under
Subchapter M of the Code and intends to so qualify during the current fiscal
year. As a regulated investment company, the Fund generally pays no federal
income tax on the income and gains it distributes to you. The Board reserves the
right not to elect or maintain the qualification of the Fund as a regulated
investment company if it determines such a course of action to be beneficial to
shareholders. If net long-term capital gain is retained, the Fund would be taxed
on the gain, and shareholders would be notified that they are entitled to a
credit or refund for the tax paid by the Fund. If the Fund fails to qualify as a
regulated investment company, the Fund would be subject to federal, and possibly
state, corporate taxes on its taxable income and gains, and distributions to you
would be taxed as qualified dividend income to the extent of the Fund's earnings
and profits.

Excise tax distribution requirements. To avoid federal excise taxes, the Code
requires the Fund to distribute to you by December 31 of each year, at a
minimum, the following amounts:

o 98% of its taxable ordinary income earned during the calendar year;

o 98% of its capital gain net income earned during the twelve-month period
ending October 31; and

o 100% of any undistributed amounts of these categories of income or gain
from the prior year.

The Fund intends to declare and pay these distributions in December (or to pay
them in January, in which case you must treat them as received in December), but
can give no assurances that its distributions will be sufficient to eliminate
all taxes.

Because the periods for measuring a regulated investment company's income are
different for excise and income tax purposes special rules are required to
protect the amount of earnings and profits needed to support excise tax
distributions. For instance, if a regulated investment company that uses October
31 as the measurement period for paying out capital gain net income realizes a
net capital loss after October 31 and before the close of its taxable year, the
fund likely would have insufficient earnings and profits for that taxable year
to support the dividend treatment of its required distributions for that
calendar year. Accordingly, the Fund is permitted to elect to treat net capital
losses realized between November 1 and its fiscal year end of June 30
("post-October loss") as occurring on the first day of the following tax year (
(i.e., July 1).

Redemptions of Fund shares
Redemptions, sales and exchanges. If you are a taxable investor, redemptions,
sales and exchanges of Fund shares are taxable transactions for federal and
state income tax purposes. If you redeem your Fund shares, or exchange them for
shares of a different Family Fund, the Internal Revenue Service requires you to
report any gain or loss on your redemption or exchange. If you hold your shares
as a capital asset, any gain or loss that you realize is a capital gain or loss
and is long-term or short-term, generally depending on how long you have owned
your shares.

Redemptions at a loss within six months of purchase. Any loss incurred on the
redemption or exchange of shares held for six months or less is treated as a
long-term capital loss, instead of short-term, to the extent of any long-term
capital gains distributed to you by the Fund on those shares.

Special rule for Class A shareholders. A special tax rule applies when a
shareholder sells or exchanges shares of the Fund within 90 days of purchase and
subsequently acquires shares of the Fund or another Family Fund without paying a
sales charge due to the 365-day reinstatement privilege or the exchange
privilege. In these cases, any gain on the sale or exchange of the original
shares would be increased, or any loss would be decreased, by the amount of the
sales charge paid when those shares were bought, and that amount would increase
the basis in the Fund or Family Fund shares subsequently acquired.

Wash sales. All or a portion of any loss that you realize on the redemption of
your Fund shares is disallowed to the extent that you buy other shares in the
Fund (through reinvestment of dividends or otherwise) within 30 days before or
after your share redemption. Any loss disallowed under these rules is added to
your tax basis in the new shares.

US government securities. To the extent the Fund (or an Underlying Fund
classified as a partnership) invests in certain U.S. government obligations,
dividends paid by the Fund to shareholders that are derived from interest on
these obligations should be exempt from state and local personal income taxes,
subject in some states to minimum investment or reporting requirements that must
be met by the Fund. To the extent the Fund invests indirectly in US government
obligations by investing in an Underlying Fund classified as a corporation that
holds these obligations, dividends derived from interest on these obligations
and paid to the Fund and, in turn, to you is unlikely to be exempt from state
and local income tax. The income on portfolio investments in certain securities,
such as repurchase agreements, commercial paper and federal agency-backed
obligations (e.g., Government National Mortgage Association (GNMA) or Federal
National Mortgage Association (FNMA) securities), generally does not qualify for
tax-free treatment. The rules on exclusion of this income are different for
corporate shareholders.

Qualified dividend income for individuals. For individual shareholders, it is
anticipated that a portion of the income dividends paid by the Fund will be
qualified dividend income eligible for taxation at long-term capital gain rates.
This reduced rate of taxation generally is available for dividends paid by the
Fund out of its or an Underlying Fund's income earned on investments in:

o domestic corporations, and

o qualified foreign corporations, including:

- corporations incorporated in a possession of the United States,

- corporations eligible for income tax treaty benefits with the United
States under treaties determined by the Treasury Department to be
qualified, and

- corporations whose stock is traded on a domestic securities exchange.

Dividends from corporations exempt from tax, dividends from PFICs, and dividends
paid from interest earned by the Fund or an Underlying Fund on debt securities
generally will not qualify for this favorable tax treatment.

Both the Fund (or an Underlying Fund) and the investor must meet certain holding
period requirements to qualify Fund dividends for this treatment. Specifically,
the Fund (or an Underlying Fund) must hold the stock for at least 61 days during
the 121-day period beginning 60 days before the stock becomes ex-dividend.
Similarly, investors must hold their Fund shares for at least 61 days during the
121-day period beginning 60 days before the Fund distribution goes ex-dividend.
The ex-dividend date is the first date following the declaration of a dividend
on which the purchaser of stock is not entitled to receive the dividend payment.
When counting the number of days you held your Fund shares, include the day you
sold your shares but not the day you acquired these shares.

While the income received in the form of a qualified dividend is taxed at the
same rates as long-term capital gains, such income will not be considered as a
long-term capital gain for other federal income tax purposes. For example, you
will not be allowed to offset your long-term capital losses against qualified
dividend income on your federal income tax return. Any qualified dividend income
that you elect to be taxed at these reduced rates also cannot be used as
investment income in determining your allowable investment interest expense. For
other limitations on the amount of or use of qualified dividend income on your
income tax return, please contact your personal tax advisor.

After the close of its fiscal year, the Fund will designate the portion of its
ordinary dividend income that meets the definition of qualified dividend income
taxable at reduced rates. If 95% or more of the Fund's income is from qualified
sources, it will be allowed to designate 100% of its ordinary income
distributions as qualified dividend income. This designation rule may have the
effect of converting small amounts of ordinary income or net short-term capital
gains, that otherwise would be taxable as ordinary income, into qualified
dividend income eligible for taxation at reduced rates.

Dividends-received deduction for corporations. For corporate shareholders, a
portion of the dividends paid by the Fund may qualify for the dividends-received
deduction. The portion of dividends paid by the Fund that so qualifies will be
designated each year in a notice mailed to the Fund's shareholders, and cannot
exceed the gross amount of dividends received by the Fund (or an Underlying
Fund) from domestic (U.S.) corporations that would have qualified for the
dividends-received deduction in the hands of the Fund (or an Underlying Fund) if
the Fund (or the Underlying Fund) was a regular corporation. Dividends paid by
the Fund from interest on debt securities or dividends earned on portfolio
securities of non-U.S. issuers are not expected to qualify for the corporate
dividends-received deduction.

The availability of the dividends-received deduction is subject to certain
holding period and debt financing restrictions imposed under the Code on the
corporation claiming the deduction. The amount that the Fund may designate as
eligible for the dividends-received deduction will be reduced or eliminated if
the shares on which the dividends earned by the Fund (or an Underlying Fund)
were debt-financed or held by the Fund (or an Underlying Fund) for less than a
minimum period of time, generally 46 days during a 91-day period beginning 45
days before the stock becomes ex-dividend. Similarly, if your Fund shares are
debt-financed or held by you for less than a 46-day period then the
dividends-received deduction for Fund dividends on your shares may also be
reduced or eliminated. In the case of certain dividends on preferred stock, the
minimum holding period is generally increased to 91 days during a 181-day
period. Even if designated as dividends eligible for the dividends-received
deduction, all dividends (including any deducted portion) must be included in
your alternative minimum taxable income calculation.

Investment in complex securities. The Underlying Funds and the Fund may invest
in complex securities (e.g., futures, options, short-sales, swaps, etc.) that
could be subject to numerous special and complex tax rules. These rules could
affect whether gain or loss recognized by the Fund directly or indirectly
through its investment in the Underlying Funds is treated as ordinary or
capital, or as interest or dividend income. These rules could also accelerate
the recognition of income to the Fund or an Underlying Fund (possibly causing
the Underlying Fund or the Fund to sell securities to raise the cash for
necessary distributions). These rules could defer an Underlying Fund's or the
Fund's ability to recognize a loss, and, in limited cases, subject an Underlying
Fund or the Fund to US federal income tax on income from certain foreign
securities. These rules could, therefore, affect the amount, timing, or
character of the income distributed to you by the Fund. For example:

Derivatives. If an Underlying Fund or the Fund is permitted to invest in certain
options, futures, forwards or foreign currency contracts, it could be required
to mark-to-market these contracts and realize any unrealized gains and losses at
its fiscal year end even though it continues to hold the contracts. Under these
rules, gains or losses on the contracts generally would be treated as 60%
long-term and 40% short-term gains or losses, but gains or losses on certain
foreign currency contracts would be treated as ordinary income or losses. In
determining its net income for excise tax purposes, the Underlying Fund or the
Fund also would be required to mark-to-market these contracts annually as of
October 31 (for capital gain net income) and December 31 (for taxable ordinary
income arising from certain foreign currency contracts), and to realize and
distribute any resulting income and gains.

Tax straddles. An Underlying Fund's or the Fund's investment in options,
futures, forwards, or foreign currency contracts (or in substantially similar or
related property) in connection with certain hedging transactions could cause it
to hold offsetting positions in securities. If an Underlying Fund's or the
Fund's risk of loss with respect to specific securities in its portfolio is
substantially diminished by the fact that it holds other securities, the
Underlying Fund or the Fund could be deemed to have entered into a tax
"straddle" or to hold a "successor position" that would require any loss
realized by it on one of the offsetting positions to be deferred for tax
purposes to the extent of unrealized gains on the other positions.

Securities purchased at discount. An Underlying Fund or the Fund may invest in
securities issued or purchased at a discount, such as zero coupon, step-up or
payment-in-kind (PIK) bonds, that could require it to accrue and distribute
income not yet received. If it invests in these securities, an Underlying Fund
or the Fund could be required to sell securities in its portfolio that it
otherwise might have continued to hold in order to generate sufficient cash to
make these distributions.

Short sales and securities lending transactions. An Underlying Fund's or the
Fund's entry into a short sale transaction or an option or other contract could
be treated as the "constructive sale" of an "appreciated financial position,"
causing it to realize gain, but not loss, on the position. Additionally, the
Underlying Fund's or the Fund's entry into securities lending transactions may
cause the replacement income earned on the loaned securities to fall outside of
the definition of qualified dividend income. This replacement income generally
will not be eligible for reduced rates of taxation on qualified dividend income
and, to the extent that debt securities are loaned, will generally not qualify
as qualified interest income for foreign withholding tax purposes.

Convertible debt. Convertible debt is ordinarily treated as a "single property"
consisting of a pure debt interest until conversion, after which the investment
becomes an equity interest. If the security is issued at a premium (i.e., for
cash in excess of the face amount payable on retirement), the creditor-holder
may amortize the premium over the life of the bond. If the security is issued
for cash at a price below its face amount, the creditor-holder must accrue
original issue discount in income over the life of the debt.

Investment in REMIC residual interests (excess inclusion income). An Underlying
Fund or the Fund may invest in residual interests in certain mortgage pooling
vehicles formed as real estate mortgage investment conduits ("REMICs"). The
portion of the Underlying Fund's or the Fund's income received from REMIC
residual interests, either directly or through an investment in a real estate
investment trust ("REIT") that holds such interests or qualifies as a taxable
mortgage pool (such income is referred to in the Code as "excess inclusion
income") generally is required to be allocated by the Underlying Fund and the
Fund to its shareholders in proportion to the dividends paid to such
shareholders with the same consequences as if the shareholders received the
excess inclusion income directly.

Under these rules, an Underlying Fund, as well as the Fund, will be taxed at the
highest corporate income tax rate on its excess inclusion income that is
allocable to the percentage of its shares held in record name by "disqualified
organizations," which are generally certain cooperatives, governmental entities
and tax-exempt organizations that are exempt from tax on unrelated business
taxable income. To the extent that Fund shares owned by "disqualified
organizations" are held in record name by a broker/dealer or other nominee, the
broker/dealer or other nominee would be liable for the corporate level tax on
the portion of the Fund's excess inclusion income allocable to Fund shares held
by the broker/dealer or other nominee on behalf of the "disqualified
organizations." The Fund expects that disqualified organizations own their
shares. Because this tax is imposed at the Underlying Fund and the Fund level,
all shareholders, including shareholders that are not disqualified
organizations, will bear a portion of the tax cost associated with the Fund's
receipt of excess inclusion income. However, to the extent permissible under the
1940 Act, regulated investment companies such as the Fund are permitted under
Treasury Regulations to specially allocate this tax expense to the disqualified
organizations to which it is attributable, without a concern that such an
allocation will constitute a preferential dividend.

In addition, with respect to Fund shareholders who are not nominees, for Fund
taxable years beginning on or after January 1, 2007, the Fund must report excess
inclusion income to shareholders in two cases:

o If the excess inclusion income received by the Fund from all sources
exceeds 1% of the Fund's gross income, it must inform the non-nominee
shareholders of the amount and character of excess inclusion income
allocated to them; and

o If the Fund directly or indirectly receives excess inclusion income from a
REIT whose excess inclusion income in its most recent tax year ending not
later than nine months before the first day of the Fund's taxable year
exceeded 3% of the REIT's total dividends, the Fund must inform its
non-nominee shareholders of the amount and character of the excess
inclusion income allocated to them from such REIT.

Under these rules, the taxable income of any Fund shareholder can in no event be
less that the sum of the excess inclusion income allocated to that shareholder
and any such excess inclusion income cannot be offset by net operating losses of
the shareholder. If the shareholder is a tax-exempt entity and not a
"disqualified organization," then this income is fully taxable as unrelated
business taxable income under the Code. Charitable reminder trusts do not incur
unrelated business taxable income by receiving excess inclusion income from the
Fund. If the shareholder is a non-US person, such shareholder would be subject
to U.S. federal income tax withholding at a rate of 30% on this income without
reduction or exemption pursuant to any otherwise applicable income tax treaty.
If the shareholder is a REIT, a regulated investment company, common trust fund
or other pass-through entity, such shareholder's allocable share of the Fund's
excess inclusion income would be considered excess inclusion income of such
entity and such entity would be subject to tax at the highest corporate tax rate
on any excess inclusion income allocated to their owners that are disqualified
organizations. Accordingly, investors should be aware that a portion of the
Fund's income may be considered excess inclusion income.

Credit default swap agreements. An Underlying Fund or the Fund may enter into
credit default swap agreements. The rules governing the tax aspects of swap
agreements that provide for contingent non-periodic payments of this type are in
a developing stage and are not entirely clear in certain aspects. Accordingly,
while an Underlying Fund or the Fund intends to account for such transactions in
a manner deemed to be appropriate, the IRS might not accept such treatment. The
Fund intends to monitor developments in this area. Certain requirements that
must be met under the Code in order for an Underlying Fund or the Fund to
qualify as a regulated investment company may limit the extent to which the Fund
will be able to engage in credit default swap agreements.

Investments in securities of uncertain tax character. An Underlying Fund or the
Fund may invest in securities the U.S. Federal income tax treatment of which may
not be clear or may be subject to recharacterization by the IRS. To the extent
the tax treatment of such securities or the income from such securities differs
from the tax treatment expected by the Fund or the Underlying Fund, it could
affect the timing or character of income recognized by the Fund or the
Underlying Fund, requiring the Underlying Fund or the Fund to purchase or sell
securities, or otherwise change its portfolio, in order to comply with the tax
rules applicable to regulated investment companies under the Code.

Backup Withholding. By law, the Fund must withhold a portion of the taxable
dividends and sales proceeds unless the shareholder:

o provides his correct social security or taxpayer identification number,

o certifies that this number is correct,

o certifies that he is not subject to backup withholding, and

o certifies that he is a U.S. person (including a U.S. resident alien).

The Fund also must withhold if the IRS instructs it to do so. When withholding
is required, the amount will be 28% of any dividends or proceeds paid. The
special U.S. tax certification requirements applicable to non-U.S. investors are
described under the "Non-U.S. Investors" heading below.

Non-US investors. Non-US investors (shareholders who, as to the United States,
are a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership) may be subject to US withholding and estate
tax, and are subject to special US tax certification requirements. Non-U.S.
investors should consult their tax advisors about the applicability of U.S. tax
withholding and the use of the appropriate forms to certify their status.

The United States imposes a flat 30% withholding tax (or a withholding tax at a
lower treaty rate) on US source dividends, including on income dividends paid by
the Fund, subject to certain exemptions for dividends designated as capital gain
dividends, short-term capital gain dividends and interest-related dividends as
described below. However, notwithstanding such exemptions from U.S. withholding
at the source, any dividends and distributions of income and capital gains,
including the proceeds from the sale of Fund shares, will be subject to backup
withholding at a rate of 28% if the non-US investor fails to properly certify
that he is not a U.S. person.

In general, capital gain dividends designated by the Fund from long-term capital
gains or short-term capital gains (other than gain realized on disposition of US
real property interests) are not subject to US withholding tax unless the gain
is effectively connected with the conduct of a trade or business in the United
States or you are a nonresident alien individual present in the United States
for a period or periods aggregating 183 days or more during the taxable year.

Similarly, interest-related dividends paid by the Fund from qualified interest
income are not subject to US withholding tax. "Qualified interest income"
includes, in general, (1) bank deposit interest, (2) short-term original
discount and (3) interest (including original issue discount, market discount,
or acquisition discount) on an obligation which is in registered form, unless it
is earned on an obligation issued by a corporation or partnership in which an
Underlying Fund or the Fund is a 10-percent shareholder or is contingent
interest, and (4) any interest-related dividend from another regulated
investment company.

However, the Fund does not intend to account for or designate interest-related
dividends or short-term capital gains dividends for the benefit of non-US
investors. As a result, non-US investors may be subject to more US withholding
tax than would otherwise be the case. In addition, the exemption from
withholding for short-term capital gain dividends and interest-related dividends
paid by the Fund is effective for dividends paid with respect to taxable years
of the Fund beginning after December 31, 2004 and before January 1, 2008, unless
such exemption is extended or made permanent.

Certain Underlying Funds and the Fund may invest in equity securities of
corporations that invest in U.S. real property, including Real Estate Investment
Trusts (REITs). The sale of a U.S. real property interest by an Underlying Fund,
the Fund, or by a REIT or U.S. real property holding corporation in which an
Underlying Fund or Fund invests, may trigger special tax consequences to the
Fund's non-U.S. shareholders. The Foreign Investment in Real Property Tax Act of
1980 (FIRPTA) makes non-U.S. persons subject to U.S. tax on disposition of a
U.S. real property interest as if he or she were a U.S. person. Such gain is
sometimes referred to as FIRPTA gain. The Code provides a look-through rule for
distributions of FIRPTA gain by a regulated investment company (RIC) such as the
Fund, as follows:

o The RIC is classified as a qualified investment entity. A "qualified
investment entity" includes a RIC if, in general, more than 50% of the
RIC's assets consists of interests in REITs and U.S. real property holding
corporations;

o You are a non-U.S. shareholder that owns more than 5% of a class of Fund
shares at any time during the one-year period ending on the date of the
distribution; and

o If these conditions are met, Fund distributions to you are treated as gain
from the disposition of a U.S. real property interest (USRPI), causing the
distribution to be subject to U.S. withholding tax at a rate of 35%, and
requiring that you to file a nonresident U.S. income tax return.

o In addition, even if you are a non-U.S. shareholder that owns 5% or less of
a class of shares of the Fund classified as a qualified investment entity,
Fund distributions to you attributable to gain realized by the Fund from
disposition of USRPI will be treated as ordinary dividends (rather than
short- or long-term capital gain) subject to withholding at a 30% or lower
treaty rate.

Because the Fund expects to invest less than 50% of its assets at all times,
directly and indirectly, in U.S. real property interests, the Fund does not
expect to pay any dividends that would be subject to FIRPTA reporting and tax
withholding.

An individual who, at the time of death, is a non-US shareholder will
nevertheless be subject to U.S. federal estate tax with respect to shares at the
graduated rates applicable to U.S. citizens and residents, unless a treaty
exception applies. In the absence of a treaty, there is a $13,000 statutory
estate tax credit. A partial exemption from US estate tax may apply to stock in
the Fund held by the estate of a nonresident decedent. The amount treated as
exempt is based upon the proportion of the assets held by the Fund at the end of
the quarter immediately preceding the decedent's death that are debt
obligations, deposits, or other property that would generally be treated as
situated outside the United States if held directly by the estate. Whether for
this purpose the Fund may look through to the exempt assets held by an
Underlying Fund classified as a corporation is unclear. This provision applies
to decedents dying after December 31, 2004 and before January 1, 2008, unless
such exemption is extended or made permanent. Transfers by gift of shares of the
Fund by a non-US shareholder who is a nonresident alien individual will not be
subject to U.S. federal gift tax. The tax consequences to a non-US shareholder
entitled to claim the benefits of an applicable tax treaty may be different from
those described herein. Non-US shareholders are urged to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund, including the applicability of foreign tax.

Special US tax certification requirements apply to non-US shareholders both to
avoid US back up withholding imposed at a rate of 28% and to obtain the benefits
of any treaty between the United States and the shareholder's country of
residence. In general, a non-US shareholder must provide a Form W-8 BEN (or
other Form W-8 if applicable) to establish that you are not a US person, to
claim that you are the beneficial owner of the income and, if applicable, to
claim a reduced rate of, or exemption from, withholding as a resident of a
country with which the United States has an income tax treaty. A Form W-8BEN
provided without a US taxpayer identification number will remain in effect for a
period beginning on the date signed and ending on the last day of the third
succeeding calendar year unless an earlier change of circumstances makes the
information on the form incorrect.

Effect of Future Legislation; Local Tax Considerations. The foregoing general
discussion of U.S. federal income tax consequences is based on the Code and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, and any
such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein. Rules of state and local taxation of ordinary
income, qualified dividend income and capital gain dividends may differ from the
rules for U.S. federal income taxation described above. Distributions may also
be subject to additional state, local and foreign taxes depending on each
shareholder's particular situation. Non-U.S. shareholders may be subject to U.S.
tax rules that differ significantly from those summarized above. Shareholders
are urged to consult their tax advisers as to the consequences of these and
other state and local tax rules affecting investment in the Fund.

This discussion of "Taxation" is not intended or written to be used as tax
advice and does not purport to deal with all federal tax consequences applicable
to all categories of investors, some of which may be subject to special rules.
You should consult your tax advisor about the federal, state, local or foreign
tax consequences of an investment in the Fund.

Performance calculations

From time to time, performance information, such as yield or total return, may
be quoted in advertisements or in communications to present or prospective
shareholders. Performance quotations represent the Fund's past performance and
should not be considered as representative of future results. The current yield
will be calculated by dividing the net investment income earned per share by the
Fund during the period stated in the advertisement (based on the average daily
number of shares entitled to receive dividends outstanding during the period) by
the maximum net asset value per share on the last day of the period and
annualizing the result on a semiannual compounded basis. The Fund's total return
may be calculated on an annualized and aggregate basis for various periods
(which periods will be stated in the advertisement). Average annual return
reflects the average percentage change per year in value of an investment in the
Fund. Aggregate total return reflects the total percentage change over the
stated period.

To help investors better evaluate how an investment in the Fund might satisfy
their investment objectives, advertisements regarding the Fund may discuss yield
or total return as reported by various financial publications. Advertisements
may also compare yield or total return to other investments, indices and
averages. The following publications, benchmarks, indices and averages may be
used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis;
Lipper Mutual Fund Indices; Morgan Stanley Capital International Indices; Lehman
Brothers Indices; Salomon Smith Barney Indices; Dow Jones Composite Average or
its component indices; Standard & Poor's 500 Stock Index or its component
indices; Russell Indices; Wilshire Indices; The New York Stock Exchange
composite or component indices; CDA Mutual Fund Report; Weisenberger-Mutual
Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund
Service Book, published by Morningstar, Inc.; comparable portfolios managed by
the Advisor; and financial publications, such as Business Week, Kiplinger's
Personal Finance, Financial World, Forbes, Fortune, Money Magazine, The Wall
Street Journal, Barron's et al., which rate fund performance over various time
periods.

The principal value of an investment in the Fund will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Any fees charged by banks or other institutional investors directly to
their customer accounts in connection with investments in shares of the Fund
will not be included in the Fund's calculations of yield or total return.

Performance information for the various classes of shares of the Fund will vary
due to the effect of expense ratios on the performance calculations.

Financial statements and report of independent registered public accounting firm

Because the Fund is new, financial statements are not yet available for the
Fund.

Appendix A--Corporate debt ratings

Moody's Investors Service, Inc. describes classifications of corporate bonds as
follows:

Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa. Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates the security is in the higher end of its
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates a ranking toward the lower end of the category.

A-1

Standard & Poor's Ratings Group describes classifications of corporate bonds as
follows:

AAA. This is the highest rating assigned by Standard & Poor's Ratings Group to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.

AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and in the majority of instances, they
differ from the AAA issues only in small degree.

A. Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB. Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

BB. Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lend
to inadequate capacity to meet timely interest and principal payments.

B. Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.

CCC. Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal.

CC. The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC rating.

C. The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC rating.

D. Debt rated D is in default, or is expected to default upon maturity or
payment date.

CI. The rating CI is reserved for income bonds on which no interest is being
paid.

Plus (+) or minus (-): The ratings from AAA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Fitch Ratings Service describes international long-term credit ratings as
follows:

Investment grade

AAA. Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

A-2

AA. Very high credit quality. `AA' ratings denote expectations of very low
credit risk. They indicate very strong capacity for payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

A. High credit quality. `A' ratings denote expectations of low credit risk. The
capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB. Good credit quality. `BBB' ratings indicate that there are currently
expectations of low credit risk. The capacity for payment of financial
commitments is considered adequate but adverse changes in circumstances and
economic conditions are more likely to impair this capacity. This is the lowest
investment grade category.

Speculative grade

BB. Speculative. `BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.

B. Highly speculative.

o For issuers and performing obligations, `B' ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.

o For individual obligations, `B' ratings may indicate distressed or
defaulted obligations with potential for extremely high recoveries. Such
obligations would possess a Recovery Rating of `R1' (outstanding).

CCC

o For issuers and performing obligations, `CCC' ratings indicate that default
is a real possibility. Capacity for meeting financial commitments is solely
reliant upon sustained, favorable business or economic conditions.

o For individual obligations, `CCC' ratings may indicate distressed or
defaulted obligations with potential for average to superior levels of
recovery. Differences in credit quality may be denoted by plus/minus
distinctions. Such obligations typically would possess a Recovery Rating of
`R2' (superior), `R3' (good) or `R4' (average).

o For issuers and performing obligations, `CC' ratings indicate that default
of some kind appears probable.

o For individual obligations, `CC' ratings may indicate distressed or
defaulted obligations with a Recovery Rating of `R4' (average) or `R5'
(below average).

A-3

o For issuers and performing obligations, `C' ratings indicate that default
is imminent.

o For individual obligations, `C' ratings may indicate distressed or
defaulted obligations with potential for below-average to poor recoveries.
Such obligations would possess a Recovery Rating of `R6' (poor).

RD. Indicates an entity that has failed to make due payments (within the
applicable grace period) on some but not all material financial obligations, but
continues to honor other classes of obligations.

D. Indicates an entity or sovereign that has defaulted on all of its financial
obligations. Default generally is defined as one of the following:

o failure of an obligor to make timely payment of principal and/or interest
under the contractual terms of any financial obligation;

o the bankruptcy filings, administration, receivership, liquidation or other
winding-up or cessation of business of an obligor; or

o the distressed or other coercive exchange of an obligation, where creditors
were offered securities with diminished structural or economic terms
compared with the existing obligation.

Note: The modifiers "+" or "-" may be appended to a rating to denote relative
status within major rating categories. Such suffixes are not added to the `AAA'
Long-term rating category, to categories below `CCC', or to Short-term ratings
other than `F1'. (The +/- modifiers are only used to denote issues within the
CCC category, whereas issuers are only rated CCC without the use of modifiers.)

A-4

The UBS Funds
Statement of Additional Information

[_________________, 2007]

You should rely only on the information contained or referred to in the
Prospectus and this Statement of Additional Information. The Fund and its
principal underwriter have not authorized anyone to provide you with information
that is different. The Prospectus and this Statement of Additional Information
are not an offer to sell shares of the Fund in any jurisdiction where the Fund
or its principal underwriter may not lawfully sell those shares.

THE UBS FUNDS

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Articles of Incorporation.

(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 (the "SEC") on September 15, 1998.

(i) 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.

(2) Amended and Restated Agreement and Declaration of Trust (the
"Declaration") effective as of September 28, 2004, as amended March 8,
2007, is filed herewith as Exhibit No. Ex-99(a)(2).

(b) By-Laws.

(1) 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 (Nos.
33-47287 and 811-6637) as filed electronically with the SEC on August
29, 1996.

(i) Amendment to the By-Laws dated July 1, 2002 is incorporated
herein 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 with the SEC on July 19,
2002.

(1) 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.

(2) 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:

(i) By-Laws.

Article II - "Meeting of Shareholders."

(ii) Declaration.

Article III - "Shares" and Article V - "Shareholders' Voting Powers
and Meetings."

(d) Investment Advisory Contracts.

(1) 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.

(i) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS Global Allocation Fund is incorporated herein
by reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637)
as filed electronically with the SEC on October 28, 2004.

(2) 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.

(i) Amendment dated July 1, 2004 to 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. 43 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637)
as filed electronically with the SEC on October 28, 2004.

(3) Investment Advisory Agreement dated April 25, 1995 between the Advisor
and the Registrant on behalf of the UBS International Equity Fund
(f/k/a Global (Ex-U.S.) Equity Fund and Brinson Non-U.S. Equity 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.

(i) Certificate of the Secretary and resolutions redesignating the
Global (Ex-U.S.) Equity Fund as the International Equity Fund are
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.

(ii) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated April 25, 1995 between the Advisor and the Registrant on
behalf of the UBS International Equity Fund is incorporated
herein by reference to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287
and 811-6637) as filed electronically with the SEC on October 28,
2004.

(4) Amended Investment Advisory Agreement dated July 1, 2002, as amended
July 1, 2003 and January 1, 2004, between the Advisor and the
Registrant on behalf of the UBS Global Equity Fund is incorporated
herein by reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as
filed electronically with the SEC on October 28, 2004.

(5) Investment Advisory Agreement dated July 1, 2002 between the Advisor
and the Registrant on behalf of the UBS U.S. Large Cap Equity Fund
(f/k/a UBS U.S. Equity 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.

(i) Amendment dated February 17, 2004 to Investment Advisory
Agreement dated July 1, 2002 between the Advisor and the
Registrant on behalf of the UBS U.S. Large Cap Equity Fund (f/k/a
UBS U.S. Equity Fund) is incorporated herein by reference to
Post-Effective Amendment No. 43 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on October 28, 2004.

(ii) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS U.S. Large Cap Equity Fund (f/k/a UBS U.S.
Equity Fund) is incorporated herein by reference to
Post-Effective Amendment No. 43 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on October 28, 2004.

(6) Investment Advisory Agreement dated July 1, 2002 between the Advisor
and the Registrant on behalf of the UBS U.S. 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.

(i) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS U.S. Bond Fund is incorporated herein by
reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637)
as filed electronically with the SEC on October 28, 2004.

(7) Investment Advisory Agreement dated July 1, 2002 between the Advisor
and the Registrant on behalf of the UBS U.S. Large Cap Growth 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.

(i) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS U.S. Large Cap Growth Fund is incorporated
herein by reference to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287
and 811-6637) as filed electronically with the SEC on October 28,
2004.

(8) Investment Advisory Agreement dated July 1, 2002 between the Advisor
and the Registrant on behalf of the UBS U.S. Small Cap Growth 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.

(i) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS U.S. Small Cap Growth Fund is incorporated
herein by reference to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287
and 811-6637) as filed electronically with the SEC on October 28,
2004.

(9) Investment Advisory Agreement dated July 1, 2002 between the Advisor
and the Registrant on behalf of the UBS High Yield 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.

(i) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS High Yield Fund is incorporated herein by
reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637)
as filed electronically with the SEC on October 28, 2004.

(10) Investment Advisory Agreement dated December 10, 1998 between the
Advisor and the Registrant on behalf of the UBS Emerging Markets
Equity Fund 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.

(i) Form of Certificate of the Secretary and resolutions restating
the Investment Advisory Agreement of the UBS Emerging Markets
Equity Fund are 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) Investment Advisory Agreement dated December 10, 1998 between the
Advisor and the Registrant on behalf of the UBS Emerging Markets Debt
Fund 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.

(i) 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.

(12) Investment Advisory Agreement dated May 23, 2000 between the Advisor
and the Registrant on behalf of the UBS U.S. Small Cap Equity Fund 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.

(i) Form of Certificate of the Secretary and resolutions restating
the Investment Advisory Agreement of the UBS U.S. Small Cap
Equity Fund are 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.

(13) Investment Advisory Agreement dated July l, 2002 between the Advisor
and the Registrant on behalf of the UBS U.S. Large Cap Value Equity
Fund (f/k/a UBS U.S. Value Equity 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 September 30, 2002.

(i) Amendment dated February 17, 2004 to Investment Advisory
Agreement dated July 1, 2002 between the Advisor and the
Registrant on behalf of the UBS U.S. Large Cap Value Equity Fund
(f/k/a UBS U.S. Value Equity Fund) is incorporated herein by
reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637)
as filed electronically with the SEC on October 28, 2004.

(ii) Amendment dated July 1, 2004 to Investment Advisory Agreement
dated July 1, 2002 between the Advisor and the Registrant on
behalf of the UBS U.S. Large Cap Value Equity Fund (f/k/a UBS
U.S. Value Equity Fund) is incorporated herein by reference to
Post-Effective Amendment No. 43 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on October 28, 2004.

(14) Investment Advisory Agreement dated December 7, 2000 between the
Advisor and the Registrant on behalf 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.

(i) 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.

(15) Form of Investment Advisory Agreement between the Advisor and the
Registrant on behalf of the UBS Dynamic Alpha Fund is incorporated
herein by reference to Post-Effective Amendment No. 42 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as
filed electronically with the SEC on October 13, 2004.

(16) Form of Investment Advisory Agreement between the Advisor and the
Registrant on behalf of the UBS Absolute Return Bond Fund is
incorporated herein by reference to Post-Effective Amendment No. 44 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and
811-6637) as filed electronically with the SEC on December 21, 2004.

(17) Investment Advisory Agreement dated March 27, 2006 between the Advisor
and the Registrant on behalf of the UBS U.S. Mid Cap Growth Equity
Fund is incorporated herein by reference to Post-Effective Amendment
No. 51 to Registrant's Registration Statement on Form N-1A (Nos.
33-47287 and 811-6637) as filed electronically with the SEC on March
27, 2006.

(18) Investment Advisory Agreement dated August 14, 2006 between the
Advisor and the Registrant on behalf of the UBS U.S. Equity Alpha Fund
is filed herewith as Exhibit No. EX-99 (d)(18).

(19) Form of Investment Advisory Agreement between the Advisor and the
Registrant on behalf of the UBS Global Frontier Fund is filed herewith
as Exhibit No. EX-99 (d)(19).

(e) Underwriting Contracts.

(1) 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 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.

(f) Bonus or Profit Sharing Contracts.

Not Applicable.

(g) Custodian Agreements.

(1) Custodial arrangements are provided under the Multiple Services
Agreement dated May 9, 1997, as amended, between Morgan Stanley Trust
Company and succeeded by JPMorgan Chase Bank (f/k/a 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.

(i) 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.
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.

(ii) 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.

(iii) Amended Attachment A (approved borrowers) to the Registrant's
Multiple Services Agreement is incorporated herein by reference
to Post Effective Amendment No. 54 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on October 27, 2006.

(iv) Revised Schedule B3 (authorized signatories) to the Registrant's
Multiple Services Agreement is incorporated herein by reference
to Post Effective Amendment No. 54 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on October 27, 2006.

(v) Amended Schedule B1 and Schedule F to the Registrant's Multiple
Services Agreement is incorporated herein by reference to Post
Effective Amendment No. 54 to Registrant's Registration Statement
on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically
with the SEC on October 27, 2006.

(vi) Revised Schedule A to the Registrant's Multiple Services
Agreement is incorporated herein by reference to Post-Effective
Amendment No. 53 to Registrant's Registration Statement on Form
N-1A (Nos. 33-47287 and 811-6637) as filed electronically with
the SEC on August 14, 2006.

(h) Other Material Contracts.

(1) Form of Administration Contract, dated April 1, 2006, between UBS
Global Asset Management (Americas) Inc. and the Registrant is
incorporated herein by reference to Post-Effective Amendment No. 51 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and
811-6637) as filed electronically with the SEC on March 27, 2006.

(2) 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. 37 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.

(i) Amendment to Exhibit B to the Transfer Agency and Related
Services Agreement, approved August 19, 2003, between PFPC Inc.
and the Registrant is incorporated herein by reference to
Post-Effective Amendment No. 40 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on October 28, 2003.

(ii) Amendment to Exhibit A, dated as of August 14, 2006 of the
Transfer Agency and Related Services Agreement is incorporated
herein by reference to Post-Effective Amendment No. 53 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287
and 811-6637) as filed electronically with the SEC on August 14,
2006.

(i) Legal Opinion.

(1) Legal Opinion of Stradley, Ronon, Stevens & Young, LLP is incorporated
herein by reference to Post-Effective Amendment No. 53 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as
filed electronically with the SEC on August 14, 2006.

(j) Other Opinions.

(1) Consent of Ernst & Young LLP, Independent Registered Public Accounting
Firm, is incorporated herein by reference to Post Effective Amendment
No. 54 to the Registrant's Registration Statement on Form N-1A (Nos.
33-47287 and 811-6637) as filed electronically with the SEC via EDGAR
on October 27, 2006.

(2) (a) Powers of Attorney appointing Mark F. Kemper, Keith A. Weller,
Joseph J. Allessie, Mary Capasso, Michael Calhoun, Stephen
Fleischer, Eric Sanders, Tammie Lee, Bruce G. Leto, Mark A.
Sheehan and Jana L. Cresswell attorneys-in-fact and agents to
Frank K. Reilly, Walter E. Auch, Edward M. Roob, Adela Cepeda and
J. Mikesell Thomas are incorporated herein by reference to
Post-Effective Amendment No. 48 to Registrant's Registration
Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed
electronically with the SEC on December 20, 2005.

(b) Powers of Attorney appointing Mark F. Kemper, Keith A. Weller,
Joseph J. Allessie, Mary Capasso, Michael Calhoun, Stephen
Fleischer, Eric Sanders, Tammie Lee, Bruce G. Leto, Mark A.
Sheehan and Jana L. Cresswell attorneys-in-fact and agents to
Thomas Disbrow and Kai Sotorp are incorporated herein by
reference to Post-Effective Amendment No. 54 to Registrant's
Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637)
as filed electronically with the SEC on October 27, 2006.

(k) Omitted Financial Statements.

Not Applicable.

(l) Initial Capital Agreements.

(1) Letter of Understanding Relating to Initial Capital, dated July 1,
1992, 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.

(m) Rule 12b-1 Plan.

(1) Form of Shareholder Services Plan dated October 29, 2001, as revised
August 14, 2006, relating to Class A shares of each series of the
Registrant is incorporated herein by reference to Post-Effective
Amendment No. 53 to Registrant's Registration Statement on Form N-1A
(Nos. 33-47287 and 811-6637) as filed electronically with the SEC on
August 14, 2006.

(2) Form of Rule 12b-1 Plan relating to the Class B shares of each series
of the Registrant is incorporated herein by reference to
Post-Effective Amendment No. 43 to Registrant's Registration Statement
on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with
the SEC on October 28, 2004.

(3) Form of Rule 12b-1 Plan dated October 29, 2001, as revised August 14,
2006, relating to the Class C shares of each series of the Registrant
is incorporated herein by reference to Post-Effective Amendment No. 53
to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and
811-6637) as filed electronically with the SEC on August 14, 2006.

(i) Addendum to Rule 12b-1 Plan relating to the Class C shares of
each series of the Registrant is filed herewith as Exhibit No.
EX-99(m)(3)(i).

(4) Shareholder Services Plan relating to Class A shares on behalf of the
UBS Absolute Return Bond Fund is filed herewith as Exhibit No. EX-99
(m)(4).

(n) Rule 18f-3 Plan.

(1) Amended and Restated Multiple Class Plan pursuant to Rule 18f-3,
effective as of December 14, 2004, on behalf of each series of the
Registrant is incorporated herein by reference to Post-Effective
Amendment No. 44 to Registrant's Registration Statement on Form N-1A
(Nos. 33-47287 and 811-6637) as filed electronically with the SEC on
December 21, 2004.

(p) Codes of Ethics.

(1) Joint Code of Ethics of Registrant, the investment adviser, the
sub-adviser and the principal underwriter of the Registrant are
incorporated herein by reference to Post-Effective Amendment No. 54 to
Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and
811-6637) as filed electronically with the SEC on October 27, 2006.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT

None.

ITEM 25. INDEMNIFICATION

Under the terms of the Delaware Statutory Trust Act ("DSTA") and the
Registrant's Amended and Restated Agreement and Declaration of Trust, as
amended, ("Declaration of Trust"), no officer or trustee of the Registrant shall
have any liability to the Registrant, its shareholders, or any other party for
damages, except to the extent such limitation of liability is precluded by
Delaware law, the Declaration of Trust or the By-Laws of the Registrant.

Subject to the standards and restrictions set forth in the Declaration of Trust,
DSTA, Section 3817, permits a statutory trust to indemnify and hold harmless any
trustee, beneficial owner or other person from and against any and all claims
and demands whatsoever. DSTA, Section 3803 protects trustees, officers, managers
and other employees, when acting in such capacity, from liability to any person
other than the Registrant or beneficial owner for any act, omission or
obligation of the Registrant or any trustee thereof, except as otherwise
provided in the Declaration of Trust.

Indemnification of the Trustees and officers of the Registrant is provided for
in Article VII, Sections 2 through 4 of the Registrant's Declaration of Trust
effective as of September 28, 2004, 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 willful 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 advisors, custodian, transfer agent, accounting
services provider, administrator and distributor against certain stated
liabilities is provided for in the following documents:

(a) Each Series' investment advisory agreement between the Registrant, on
behalf of the series, and UBS Global Asset Management (Americas) Inc.,
all of which are incorporated herein by reference or filed herewith,
as follows:

(1) Section 6 of the Investment Advisory Agreement on behalf of the
UBS International Equity Fund, dated April 25, 1995, as amended;

(2) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Bond Fund, dated July 1, 2002;

(3) Section 7 of the Investment Advisory Agreement on behalf of the
UBS High Yield Fund, dated July 1, 2002;

(4) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Equity Fund, dated July 1, 2002;

(5) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Value Equity Fund, dated July 1, 2002;

(6) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Large Cap Growth Fund, dated July 1, 2002;

(7) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Small Cap Equity Fund, dated May 23, 2000, as amended;

(8) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Small Cap Growth Fund, dated July 1, 2002;

(9) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Real Estate Equity Fund, dated December 7, 2000, as
amended;

(10) Section 7 of the Investment Advisory Agreement on behalf of the
UBS Global Allocation Fund, dated July 1, 2002;

(11) Section 7 of the Investment Advisory Agreement on behalf of the
UBS Global Bond Fund, dated July 1, 2002;

(12) Section 7 of the Investment Advisory Agreement on behalf of the
UBS Global Equity Fund, dated July 1, 2002, as amended and
restated July 1, 2003;

(13) Section 6 of the Investment Advisory Agreement on behalf of the
UBS Emerging Markets Debt Fund, dated December 10, 1998, as
amended;

(14) Section 6 of the Investment Advisory Agreement on behalf of the
UBS Emerging Markets Equity Fund, dated December 10, 1998, as
amended;

(15) Section 7 of the Form of Investment Advisory Agreement on behalf
of the UBS Dynamic Alpha Fund;

(16) Section 7 of the Form of Investment Advisory Agreement on behalf
of the UBS Absolute Return Bond Fund;

(17) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Mid Cap Growth Equity Fund; and

(18) Section 7 of the Investment Advisory Agreement on behalf of the
UBS U.S. Equity Alpha Fund.

(19) Section 7 of the Investment Advisory Agreement on behalf of the
UBS Global Frontier Fund.

(b) 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 JPMorgan Chase Bank (formerly
known as The Chase Manhattan Bank) and the Registrant, on behalf of
its series, which is incorporated herein by reference.

(c) Section 9(a) of the Principal Underwriting Contract between UBS Global
Asset Management (US) Inc. (formerly known as Brinson Advisors, Inc.)
and the Registrant on behalf of each series dated November 5, 2001,
which is incorporated herein by reference.

(d) Section 12 of the Transfer Agency and Related Services Agreement
between PFPC Inc. and the Registrant on behalf of each series dated
August 20, 2001, which is incorporated herein by reference.

(e) Sections 8 and 9 of the Administration Contract between UBS Global
Asset Management (Americas) Inc. and the Registrant on behalf of each
series, which is incorporated herein by reference.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT MANAGER

UBS Global Asset Management (Americas) Inc. provides investment advisory
services consisting of portfolio management for a variety of individuals and
institutions. For information as to any other business, vocation or employment
of a substantial nature in which the Registrant's investment advisor and each
officer of the Registrant's investment advisor is or has been engaged for his or
her own account or in the capacity of director, officer, employee, partner or
trustee, within the last two fiscal years, see UBS Global Asset Management
(Americas) Inc.'s Form ADV (File #801-34910) filed under the Investment Advisers
Act of 1940, as amended, which is incorporated herein by reference.

ITEM 27. PRINCIPAL UNDERWRITER

(a) UBS Global AM (US) serves as principal underwriter for the following
investment companies:

UBS Cashfund Inc.,
UBS Index Trust,
UBS Investment Trust,
UBS Money Series,
UBS Managed Municipal Trust,
UBS Master Series, Inc.,
UBS Municipal Money Market Series,
UBS RMA Money Fund, Inc.,
UBS RMA Tax-Free Fund, Inc.,
UBS Series Trust,
Global High Income Dollar Fund Inc.,
Insured Municipal Income Fund Inc.,
Investment Grade Municipal Income Fund Inc.,
Managed High Yield Plus Fund Inc.,
Strategic Global Income Fund, Inc., and
UBS PACE Select Advisors Trust
SMA Relationship Trust
Fort Dearborn Income Securities, Inc.

(b) UBS Global AM (US) is the Registrant's principal underwriter. The
information set forth below is furnished for those directors and
officers of UBS Global AM (US) who also serve as directors or officers
of the Registrant.

Positions and Offices with Positions and Offices with
Name and Business Address* Underwriter the Registrant

Kai Sotorp** Head of the Americas for UBS President
Global Asset Management, a
member of the UBS Group
Managing Board and a member of
the UBS Global Asset
Management Executive Committee

Joseph J. Allessie* Director and Deputy General Vice President and
Counsel of UBS Global AM Assistant Secretary

Andrew Shoup* Managing Director and Head of Vice President and Chief
Global Treasury Administration Operating Officer
Department

Thomas Disbrow* Director and Head of the U.S. Vice President and Treasurer
Mutual Fund Treasury
Administration Department of
UBS Global AM

Mark F. Kemper** Managing Director, General Vice President and Secretary
Counsel and Secretary of UBS
Global AM

RoseAnn Bubloski* Associate Director and Senior Vice President and
Manager of the U.S. Mutual Assistant Treasurer
Fund Treasury Administration
Department of UBS Global AM

Joanne Kilkeary* Associate Director and Senior Vice President and
Manager of the U.S. Mutual Assistant Treasurer
Fund Treasury Administration
Department of UBS Global AM

Michael Flook * Associate Director and Senior Vice President and
Manager of the U.S. Mutual Assistant Treasurer
Fund Treasury Administration
Department of UBS Global AM

Joseph McGill* Managing Director and Chief Vice President and Chief
Compliance Officer of UBS Compliance Officer
Global AM

Eric Sanders* Director and Associate General Vice President and
Counsel of UBS Global AM Assistant Secretary

Tammie Lee* Director and Associate General Vice President and
Counsel of UBS Global AM Assistant Secretary

Keith A. Weller* Executive Director and Senior Vice President and
Associate General Counsel of Assistant Secretary
UBS Global AM

Nancy Osborn Associate Director and Senior Vice President and
Manager of the U.S. Mutual Assistant Treasurer
Fund Treasury Administration
Department of UBS Global AM

* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is One North Wacker Drive, Chicago, Illinois
60606.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by Section
31(a) [15 U.S.C. 80a-3-(a)] and rules under that section, are maintained by
JPMorgan Chase Bank ("JPMorgan Chase"), 270 Park Avenue, New York, New York
10017 with the exception of those maintained by the Registrant's investment
advisor, UBS Global Asset Management (Americas) Inc., One North Wacker Drive,
Chicago, IL, 60606.

JPMorgan Chase provides general sub-administrative, accounting, portfolio
valuation, and custodian services to the Registrant, including the coordination
and monitoring of any third-party service providers and maintains all such
records relating to these services.

ITEM 29. MANAGEMENT SERVICES

There are no management related service contracts not discussed in Part A or
Part B.

ITEM 30. UNDERTAKINGS

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Investment Company Act of 1940, as amended, the
Registrant has duly caused Post-Effective Amendment No. 55/56 to this
registration statement to be signed on its behalf by the undersigned, duly
authorized, in the City of New York, and the State of New York on the 10th day
of April 2007.

THE UBS FUNDS
By:/s/ Kai Sotorp
Kai Sotorp*
President and Principal Executive Officer

Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated:

Signature Title Date

/s/ Kai Sotorp President and Principal April 10, 2007
Kai Sotorp* Executive Officer

/s/ Frank K. Reilly Chairman and April 10, 2007
Frank K. Reilly* Trustee

/s/ Walter E. Auch Trustee April 10, 2007
Walter E. Auch*

/s/ Edward M. Roob Trustee April 10, 2007
Edward M. Roob*

/s/ Adela Cepeda Trustee April 10, 2007
Adela Cepeda*

/s/ J. Mikesell Thomas Trustee April 10, 2007
J. Mikesell Thomas*

/s/ Thomas Disbrow Treasurer and Principal April 10, 2007
Thomas Disbrow* Accounting Officer

* By: /s/ Joseph J. Allessie
Joseph J. Allessie, Attorney-in-Fact
(Pursuant to Powers of Attorney incorporated herein by reference.)

EXHIBITS INDEX

EXHIBIT EXHIBIT NO.

Amended and Restated Agreement and Declaration of Trust effective as of EX-99.a.2
September 28, 2004, as amended March 8, 2007.

Investment Advisory Agreement dated August 14, 2006 between the Advisor and the EX-99.d.18
Registrant on behalf of the UBS U.S. Equity Alpha Fund.

Form of Investment Advisory Agreement between the Advisor and the Registrant on EX-99.d.19
behalf of the UBS Global Frontier Fund.

Addendum to Rule 12b-1 Plan relating to the Class C shares of each series of the EX-99.m.3.i
Registrant.

Shareholder Services Plan relating to Class A shares of UBS Absolute Return Bond EX-99.m.4
Fund.

EX-99.A.2 2 ex99a2.htm

                                                                       EX-99.a.2

                                                                  Effective as of
                                                               September 28, 2004

                              AMENDED AND RESTATED

                       AGREEMENT AND DECLARATION OF TRUST

                                       of

                                  THE UBS FUNDS

                           a Delaware Statutory Trust

                           Principal Place of Business

                             One North Wacker Drive
                             Chicago, Illinois 60606


                                TABLE OF CONTENTS

ARTICLE I. Name and Definitions...............................................................1

     Section 1. Name..........................................................................1

     Section 2. Definitions...................................................................2

ARTICLE II. Purpose of Trust..................................................................3

ARTICLE III. Shares...........................................................................3

     Section 1. Division of Beneficial Interest...............................................3

     Section 2. Ownership of Shares...........................................................4

     Section 3. Investments in the Trust......................................................4

     Section 4. Status of Shares and Limitation of Personal Liability.........................4

     Section 5. Power of Board of Trustees to Change Provisions Relating to Shares............4

     Section 6. Establishment and Designation of Shares.......................................5

ARTICLE IV. The Board of Trustees.............................................................7

     Section 1. Number, Election and Tenure...................................................7

     Section 2. Effect of Death, Resignation, etc. of a Trustee...............................8

     Section 3. Powers........................................................................8

     Section 4. Payment of Expenses by the Trust.............................................11

     Section 5. Ownership of Assets of the Trust.............................................11

     Section 6. Service Contracts............................................................11

ARTICLE V. Shareholders' Voting Powers and Meetings..........................................13

     Section 1. Voting Powers................................................................13

     Section 2. Voting Power and Meetings....................................................13

     Section 3. Quorum and Required Vote.....................................................13

     Section 4. Action by Written Consent....................................................13

     Section 5. Record Dates.................................................................14

ARTICLE VI. Net Asset Value, Distributions, and Redemptions..................................14

     Section 1. Determination of Net Asset Value, Net Income, and Distributions..............14

     Section 2. Redemptions and Repurchases..................................................14

     Section 3. Redemptions at the Option of the Trust.......................................16

     Section 4. Transfer of Shares...........................................................16

ARTICLE VII. Compensation and Limitation of Liability........................................16

     Section 1. Compensation of Trustees.....................................................16

     Section 2. Indemnification and Limitation of Liability..................................16

     Section 3. Trustee's Good Faith Action, Expert Advice No Bond or Surety.................17

     Section 4. Insurance....................................................................17

ARTICLE VIII. Miscellaneous..................................................................17

     Section 1. Liability of Third Persons Dealing with Trustees.............................17

     Section 2. Termination of Trust or Series...............................................17

     Section 3. Merger and Consolidation.....................................................18

     Section 4. Amendments...................................................................18

     Section 5. Filing of Copies References, Headings........................................18

     Section 6. Applicable Law...............................................................18

     Section 7. Provisions in Conflict with Law or Regulations...............................19

     Section 8. Statutory Trust Only.........................................................20

     Section 9. Use of the Name "UBS"........................................................20





                              AMENDED AND RESTATED

                       AGREEMENT AND DECLARATION OF TRUST

                                       OF

                                  THE UBS FUNDS

     WHEREAS,  the  Trust  was  formed  by the  Trustees  by the  filing  of the
Certificate  of Trust with the Office of the  Secretary of State of the State of
Delaware on August 9, 1993,  pursuant to an Agreement and  Declaration of Trust,
dated as of  August  9,  1993,  as  amended  from  time to time  (the  "Original
Declaration of Trust"); and

     WHEREAS,  the Trust desires to update certain information  contained in the
Original Declaration of Trust; and

     WHEREAS,  pursuant to the provisions of the Original  Declaration of Trust,
the Trustees  desire to amend and restate the Original  Declaration  of Trust in
the manner hereinafter set forth;

     NOW, THEREFORE, the Trustees hereby declare that:

     (i) the  Original  Declaration  of Trust is  amended  and  restated  in its
entirety in the matter set forth; and

     (ii) the Trustees shall hold IN TRUST all cash, securities and other assets
which the Trust now possesses or may hereafter  acquire from time to time in any
manner  and  manage  and  dispose  of the same  upon  the  following  terms  and
conditions for the pro rata benefit of the holders of Shares in this Trust; and

     (iii) this  Declaration  of Trust shall be binding in  accordance  with its
terms on every Trustee,  by virtue of having become of Trustee of the Trust, and
on every  Shareholder,  by virtue of having become a  Shareholder  of the Trust,
pursuant  to  the  terms  of the  Original  Declaration  of  Trust  and/or  this
Declaration of Trust.

                                   ARTICLE I.
                              Name and Definitions

     Section 1. Name.  This  trust  shall be known as "THE UBS FUNDS"  (formerly
known as "The Brinson Funds") and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to time determine.

     Section 2. Definitions.  Whenever used herein, unless otherwise required by
the context or specifically provided:

     (a) The "Trust" refers to the Delaware statutory trust (formerly known as a
Delaware business trust)  established by the Agreement and Declaration of Trust,
dated as of August 9, 1993, as amended from time to time;

     (b) The "Trust  Property"  means any and all  property,  real or  personal,
tangible  or  intangible,  which is owned or held by or for the  account  of the
Trust.  The Trustees may  authorize  the division of Trust  Property into two or
more series, in accordance with the provisions of Article III, Section 1 hereof,
in which case all references in this  Declaration to the Trust,  Trust Property,
Shares  therein or  Shareholders  thereof  shall be deemed to refer to each such
series, as the case may be, except as the context otherwise requires. Any series
(or classes) of Trust  Property  shall be established  and  designated,  and the
variations  in the  relative  rights and  preferences  as between the  different
series (and classes) shall be fixed and determined,  by the Trustees. All series
(and classes) of Trust  Property so  established  and designated by the Trustees
shall be set forth in Attachment A to this Declaration of Trust, as amended from
time to time;

     (c)  "Trustees"  refers to the persons who have signed this  Agreement  and
Declaration of Trust,  so long as they continue in office in accordance with the
terms  hereof,  and all other persons who have been duly elected or appointed to
serve on the Board of Trustees in accordance with the provisions of the Original
Declaration  of Trust or this  Declaration of Trust,  and reference  herein to a
Trustee or the Trustees  shall refer to such person or persons in their capacity
as trustees hereunder;

     (d)  "Shares"  means  the  shares of  beneficial  interest  into  which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;

     (e) "Shareholder" means a record owner of outstanding Shares;

     (f) "Person" means and includes  individuals,  corporations,  partnerships,
trusts,  foundations,  plans,  associations,  joint ventures,  estates and other
entities,  whether or not legal  entities,  and  governments  and  agencies  and
political subdivisions thereof, whether domestic or foreign;

     (g) The "1940 Act"  refers to the  Investment  Company  Act of 1940 and the
Rules and Regulations  thereunder,  all as amended from time to time. References
herein to  specific  sections  of the 1940 Act shall be deemed to  include  such
Rules and  Regulations  as are  applicable to such sections as determined by the
Trustees or their designees;

     (h) The terms  "Commission"  and  "Principal  Underwriter"  shall  have the
respective  meanings given them in Section 2 (a) (7) and Section (2) (a) (29) of
the 1940 Act;

     (i)  "Declaration of Trust" shall mean this Amended and Restated  Agreement
and Declaration of Trust, as amended or restated from time to time;

     (j)  "By-Laws"  shall mean the By-Laws of the Trust as amended from time to
time;

     (k) The term "Interested  Person" has the meaning given it in Section 2 (a)
(19) of the 1940 Act;

     (l) "Investment  Manager" or "Manager" means a party furnishing services to
the Trust  pursuant  to any  contract  described  in Article  IV,  Section 7 (a)
hereof;

     (m) "Series"  refers to each Series of Shares  established  and  designated
under or in accordance with the provisions of Article III.

                                  ARTICLE II.

                                Purpose of Trust

     The purpose of the Trust is to conduct,  operate and carry on the  business
of a management  investment company registered under the 1940 Act through one or
more Series investing primarily in securities.

                                  ARTICLE III.

                                     Shares

     Section 1. Division of Beneficial Interest.  The beneficial interest in the
Trust shall at all times be divided into an unlimited  number of Shares,  with a
par value of $.001 per Share.  The Trustees may authorize the division of Shares
into separate Series and the division of Series into separate classes of Shares.
The different Series shall be established and designated,  and the variations in
the relative  rights and  preferences  as between the different  Series shall be
fixed and determined,  by the Trustees. If only one Series shall be established,
the Shares  shall have the rights  and  preferences  provided  for herein and in
Article III, Section 6 hereof to the extent relevant and not otherwise  provided
for herein.

     Subject to the  provisions  of Section 6 of this  Article  III,  each Share
shall have voting  rights as  provided  in Article V hereof,  and holders of the
Shares of any Series  shall be entitled to receive  dividends,  when,  if and as
declared with respect  thereto in the manner  provided in Article VI,  Section 1
hereof.  No Share shall have any priority or preference  over any other Share of
the same Series  with  respect to  dividends  or  distributions  of the Trust or
otherwise.  All  dividends  and  distributions  shall be made ratably  among all
Shareholders  of a Series (or class) from the assets  held with  respect to such
Series  according  to the number of Shares of such  Series  (or  class)  held of
record by such  Shareholders on the record date for any dividend or distribution
or on the date of  termination  of the Trust,  as the case may be.  Shareholders
shall have no preemptive or other right to subscribe to any additional Shares or
other securities  issued by the Trust or any Series.  The Trustees may from time
to time divide or combine the Shares of a Series into a greater or lesser number
of Shares of such Series without thereby  materially  changing the proportionate
beneficial  interest  of such  Shares in the  assets  held with  respect to that
Series or materially affecting the rights of Shares of any other Series.

     Section 2.  Ownership of Shares.  The ownership of Shares shall be recorded
on the books of the Trust or a transfer  or similar  agent for the Trust,  which
books  shall  be  maintained  separately  for  the  Shares  of each  Series.  No
certificates  evidencing  the  ownership of Shares shall be issued except as the
Board of Trustees may otherwise  determine  from time to time.  The Trustees may
make such rules as they consider  appropriate for the transfer of Shares of each
series (or class) and similar matters.  The record books of the Trust as kept by
the  Trust or any  transfer  or  similar  agent,  as the  case may be,  shall be
conclusive as to the identity of the  Shareholders  of each Series and as to the
number of shares of each Series held from time to time by each Shareholder.

     Section 3.  Investments  in the Trust.  Investments  may be accepted by the
Trust  from  such  Persons,   at  such  times,  on  such  terms,  and  for  such
consideration  as the Trustees from time to time may authorize.  Each investment
shall  be  credited  to the  Shareholder's  account  in the  form  of  full  and
fractional Shares of the Trust, in such Series (or class) as the purchaser shall
select,  at the net asset  value per Share next  determined  for such Series (or
class) after receipt of the  investment;  provided,  however,  that the Trustees
may, in their sole discretion,  impose a sales charge or reimbursement  fee upon
investments in the Trust.

     Section 4. Status of Shares and  Limitation of Personal  Liability.  Shares
shall be deemed to be personal  property giving only the rights provided in this
instrument and the By-Laws of the Trust.  Every  Shareholder by virtue of having
become a Shareholder shall be held to have expressly  assented and agreed to the
terms hereof. The death of a Shareholder during the existence of the Trust shall
not  operate to  terminate  the Trust,  nor entitle  the  representative  of any
deceased  Shareholder  to an  accounting  or to take  any  action  in  court  or
elsewhere   against  the  Trust  or  the   Trustees,   but  shall  entitle  such
representative  only to the  rights  of said  deceased  Shareholder  under  this
Declaration of Trust. Ownership of Shares shall not entitle a Shareholder to any
title in or to the whole or any part of the Trust  Property or right to call for
a  partition  or  division  of the  same or for an  accounting,  nor  shall  the
ownership of Shares  constitute the Shareholders as partners or joint venturers.
Neither the Trust nor the  Trustees,  nor any officer,  employee or agent of the
Trust shall have any power to bind personally any  Shareholder,  or to call upon
any  Shareholder  for the payment of any sum of money or  assessment  whatsoever
other than such as the Shareholder may at any time agree to pay.

     Section 5. Power of Board of  Trustees  to Change  Provisions  Relating  to
Shares.  Notwithstanding any other provision of this Declaration of Trust to the
contrary,  and without  limiting the power of the Board of Trustees to amend the
Declaration of Trust as provided  elsewhere herein,  the Board of Trustees shall
have the power to amend this  Declaration of Trust, at any time and from time to
time,  in such  manner as the Board of  Trustees  may  determine  in their  sole
discretion,  without the need for Shareholder  action,  so as to add to, delete,
replace or otherwise  modify any provisions  relating to the Shares contained in
this  Declaration  of Trust,  provided that before  adopting any such  amendment
without  Shareholder  approval the Board of Trustees shall  determine that it is
consistent with the fair and equitable  treatment of all  Shareholders  and that
Shareholder approval is not required by the 1940 Act or other applicable law. If
Shares have been  issued,  Shareholder  approval  shall be required to adopt any
amendments  to this  Declaration  of Trust  which  would  adversely  affect to a
material  degree  the  rights  and  preferences  of the Shares of any Series (or
class) or to increase or decrease  the par value of the Shares of any Series (or
class).

     Section 6.  Establishment and Designation of Shares.  The establishment and
designation  of any  Series  (or class) of Shares  shall be  effective  upon the
adoption by a majority of the  Trustees,  of a resolution  which sets forth such
establishment  and  designation  and the relative rights and preferences of such
Series  (or  class).  Each  such  resolution  shall be  incorporated  herein  by
reference upon adoption.

     Shares of each Series (or class)  established  pursuant to this  Section 6,
unless otherwise provided in the resolution establishing such Series, shall have
the following relative rights and preferences.

     (a) Assets Held with  Respect to a  Particular  Series.  All  consideration
received  by the Trust  for the  issue or sale of Shares of a Series,  including
dividends and  distributions  paid by, and reinvested in, such Series,  together
with all assets in which such  consideration  is  invested  or  reinvested,  all
income,  earnings,  profits,  and proceeds thereof from whatever source derived,
including,  without limitation,  any proceeds derived from the sale, exchange or
liquidation  of  such  assets,  and any  funds  or  payments  derived  from  any
reinvestment  of  such  proceeds  in  whatever  form  the  same  may  be,  shall
irrevocably  be held with respect to that Series for all purposes,  subject only
to the rights of  creditors,  and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof,  from whatever  source  derived,  including,  without  limitation,  any
proceeds derived from the sale,  exchange or liquidation of such assets, and any
funds or payments  derived from any  reinvestment of such proceeds,  in whatever
form the same may be, are herein  referred to as "assets  held with  respect to"
that Series. In the event that there are any assets, income,  earnings,  profits
and proceeds  thereof,  funds or payments which are not readily  identifiable as
assets  held  with  respect  to any  particular  Series  (collectively  "General
Assets"),  the Trustees  shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as the  Trustees,
in their sole  discretion,  deem fair and  equitable,  and any General  Asset so
allocated to a particular Series shall be held with respect to that Series. Each
such  allocation  by the  Trustees  shall be  conclusive  and  binding  upon the
Shareholders of all Series for all purposes in absence of manifest error.

     (b) Liabilities Held with Respect to a Particular Series. The assets of the
Trust held with respect to each Series shall be charged with the  liabilities of
the Trust with  respect to such  Series and all  expenses,  costs,  charges  and
reserves  attributable to such Series, and any general  liabilities of the Trust
which are not readily identifiable as being held in respect of a Series shall be
allocated  and  charged by the  Trustees  to and among any one or more Series in
such manner and on such basis as the Trustees in their sole discretion deem fair
and  equitable.  The  liabilities,  expenses,  costs,  charges,  and reserves so
charged to a Series are herein referred to as "liabilities held with respect to"
that Series.  Each  allocation  of  liabilities,  expenses,  costs,  charges and
reserves by the Trustees shall be conclusive and binding upon the holders of all
Series for all  purposes  in absence of  manifest  error.  All  Persons who have
extended credit which has been allocated to a particular  Series,  or who have a
claim or contract which has been allocated to a Series,  shall look  exclusively
to the assets  held with  respect to such  Series  for  payment of such  credit,
claim,  or  contract.  In the absence of an express  agreement  so limiting  the
claims of such  creditors,  claimants and  contracting  parties,  each creditor,
claimant and  contracting  party shall be deemed  nevertheless to have agreed to
such  limitation   unless  an  express   provision  to  the  contrary  has  been
incorporated  in  the  written  contract  or  other  document  establishing  the
contractual relationship.

     (c) Dividends, Distributions,  Redemptions, and Repurchases. No dividend or
distribution   including,   without  limitation,   any  distribution  paid  upon
termination  of the Trust or of any Series (or class)  with  respect  to, or any
redemption  or  repurchase  of, the  Shares of any  Series  (or class)  shall be
effected  by the Trust  other  than from the  assets  held with  respect to such
Series,  nor shall any  shareholder  of any Series  otherwise  have any right or
claim  against the assets held with  respect to any other  Series  except to the
extent  that  such  Shareholder  has  such  a  right  or  claim  hereunder  as a
Shareholder  of such other Series.  The Trustees  shall have full  discretion to
determine which items shall be treated as income and which items as capital; and
each such  determination and allocation shall be conclusive and binding upon the
Shareholders in absence of manifest error.

     (d) Voting. All Shares of the Trust entitled to vote on a matter shall vote
without  differentiation  between the  separate  Series on a  one-vote-per-Share
basis;  provided however,  if a matter to be voted on affects only the interests
of not all  Series (or class of a Series),  then only the  Shareholders  of such
affected Series (or class) shall be entitled to vote on the matter.

     (e)  Equality.  All the  Shares of each  Series  shall  represent  an equal
proportionate  undivided interest in the assets held with respect to such Series
(subject to the  liabilities  of such Series and such rights and  preferences as
may have been  established  and  designated  with  respect  to classes of shares
within  such  Series),  and each Share of a Series  shall be equal to each other
Share of such Series.

     (f) Fractions.  Any fractional Share of a Series shall have proportionately
all the rights and obligations of a whole share of such Series, including rights
with respect to voting, receipt of dividends and distributions and redemption of
Shares.

     (g) Exchange  Privilege.  The Trustees  shall have the authority to provide
that the holders of Shares of any series  shall have the right to exchange  such
Shares  for  Shares  of one  or  more  other  Series  in  accordance  with  such
requirements and procedures as may be established by the Trustees.

     (h) Combination of Series.  The Trustees shall have the authority,  without
the approval of the  Shareholders  of any Series  unless  otherwise  required by
applicable law, to combine the assets and  liabilities  held with respect to any
two or more  Series into assets and  liabilities  held with  respect to a single
Series.

     (i) Elimination of Series. At any time that there are no Shares outstanding
of a Series (or class),  the Trustees  may abolish such Series (or class).  If a
class of a Series  has  outstanding  Shares,  the  Trustees  may,  in their sole
discretion and without Shareholder  approval,  abolish any such class;  provided
that, prior to abolishing such class without Shareholder approval,  the Board of
Trustees shall make a determination that the manner of abolishing such class (i)
is consistent with the fair and equitable  treatment of all  Shareholders;  (ii)
shall not adversely  affect to a material  degree the rights and  preferences of
the Shares of any Series (or class) or increase or decrease the par value of the
Shares of any  Series  (or  class);  and (iii)  shall  not  require  Shareholder
approval under the 1940 Act or other applicable law.

                                   ARTICLE IV.

                              The Board of Trustees

     Section 1. Number, Election and Tenure. The number of Trustees constituting
the Board of Trustees  shall be fixed from time to time by a written  instrument
signed, or by resolution  approved at a duly constituted  meeting, by a majority
of the Board of Trustees,  provided,  however, that the number of Trustees shall
in no event be less  than one (1) nor more than  fifteen  (15).  Subject  to the
requirements of Section 16 (a) of the 1940 Act, the Board of Trustees, by action
of a majority  of the then  Trustees  at a duly  constituted  meeting,  may fill
vacancies in the Board of Trustees and remove  Trustees  with or without  cause.
Each Trustee shall serve during the continued  lifetime of the Trust until he or
she dies,  resigns,  is declared bankrupt or incompetent by a court of competent
jurisdiction,  or is  removed.  Any  Trustee  may  resign at any time by written
instrument  signed  by him and  delivered  to any  officer  of the Trust or to a
meeting of the Trustees. Such resignation shall be effective upon receipt unless
specified  to be effective  at some other time.  Except to the extent  expressly
provided in a written  agreement  with the Trust,  no Trustee  resigning  and no
Trustee  removed  shall  have  any  right  to any  compensation  for any  period
following his or her  resignation  or removal,  or any right to damages or other
payment on account of such removal. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the  outstanding  Shares of the Trust. A
meeting of  Shareholders  for the purpose of  electing  or removing  one or more
Trustees may be called (i) by the Trustees upon their own vote, or (ii) upon the
demand  of  Shareholders  owning  10% or more of the  Shares of the Trust in the
aggregate.

     Section 2.  Effect of Death,  Resignation,  etc.  of a Trustee.  The death,
declination,  resignation,  retirement,  removal,  or  incapacity of one or more
Trustees,  or all of them, shall not operate to annul the Trust or to revoke any
existing  agency  created  pursuant to the terms of this  Declaration  of Trust.
Whenever a vacancy in the Board of Trustees  shall occur,  until such vacancy is
filled as provided in Article IV, Section 1, the Trustees in office,  regardless
of their  number,  shall have all the powers  granted to the  Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust.

     Section 3. Powers.  Subject to the provisions of this Declaration of Trust,
the  business of the Trust shall be managed by the Board of  Trustees,  and such
Board  shall  have  all  powers  necessary  or  convenient  to  carry  out  that
responsibility  including  the power to engage in  transactions  of all kinds on
behalf of the Trust. Trustees, in all instances, shall act as principals and are
and shall be free from the control of the Shareholders.  The Trustees shall have
full power and  authority to do any and all acts and to make and execute any and
all  contracts,  documents  and  instruments  that they may consider  desirable,
necessary or appropriate  in connection  with the  administration  of the Trust.
Without  limiting the  foregoing,  the  Trustees  may:  adopt,  amend and repeal
By-Laws  not  inconsistent  with this  Declaration  of Trust  providing  for the
regulation  and  management  of the affairs of the Trust;  elect and remove such
officers and appoint and  terminate  such agents as they  consider  appropriate;
appoint from their own number and establish and terminate one or more committees
consisting  of two or more Trustees who may exercise the powers and authority of
the Board of Trustees to the extent that the Trustees  determine;  employ one or
more  custodians of the assets of the Trust and may authorize such custodians to
employ  subcustodians  and to deposit all or any part of such assets in a system
or systems for the  central  handling of  securities  or with a Federal  Reserve
Bank, retain a transfer agent or a shareholder servicing agent, or both; provide
for the issuance and distribution of Shares by the Trust directly or through one
or more Principal  Underwriters  or otherwise;  redeem,  repurchase and transfer
Shares  pursuant to applicable  law; set record dates for the  determination  of
Shareholders  with respect to various  matters;  declare and pay  dividends  and
distributions  to  Shareholders  of each Series from the assets of such  Series;
establish  from time to time, in accordance  with the provisions of Article III,
Section 6 hereof,  any  Series of  Shares,  each  such  series to  operate  as a
separate and distinct  investment medium and with separately  defined investment
objectives and policies and distinct investment purpose; and in general delegate
such  authority as they consider  desirable to any officer of the Trust,  to any
committee  of the  Trustees  and to any agent or employee of the Trust or to any
such custodian,  transfer or shareholder servicing agent,  Investment Manager or
Principal  Underwriter.  Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive.  In construing the
provisions of this Declaration of Trust, the presumption  shall be in favor of a
grant of power to the Trustees and unless otherwise specified herein or required
by the 1940 Act or other  applicable  law,  any action by the Board of  Trustees
shall be deemed  effective  if approved  or taken by a majority of the  Trustees
then in office or a majority of any duly constituted committee of Trustees.  Any
action  required  or  permitted  to be  taken  at any  meeting  of the  Board of
Trustees,  or any  committee  thereof,  may be taken  without a  meeting  if all
members  of the Board of  Trustees  or  committee  (as the case may be)  consent
thereto in writing,  and the  writing or writings  are filed with the minutes of
the  proceedings  of the Board of Trustees,  or  committee,  except as otherwise
provided in the 1940 Act.

     Without limiting the foregoing, the Trust shall have power and authority:

     (a) To invest and reinvest  cash and cash items,  to hold cash  uninvested,
and to subscribe for,  invest in,  reinvest in,  purchase or otherwise  acquire,
own, hold, pledge, sell, assign, transfer,  exchange,  distribute, write options
on, lend or otherwise deal in or dispose of contracts for the future acquisition
or delivery of all types of securities,  futures  contracts and options thereon,
and forward  currency  contracts  of every nature and kind,  including,  without
limitation, all types of bonds, debentures, stocks, preferred stocks, negotiable
or   non-negotiable   instruments,   obligations,   evidences  of  indebtedness,
certificates  of  deposit  or   indebtedness,   commercial   paper,   repurchase
agreements,  bankers'  acceptances,  and other  securities of any kind,  issued,
created,  guaranteed,  or sponsored by any and all Persons,  including,  without
limitation,  states,  territories,  and possessions of the United States and the
District of Columbia and any political  subdivision,  agency, or instrumentality
thereof,  any  foreign  government  or any  political  subdivision  of  the  U.S
Government or any foreign  government,  or any international  instrumentality or
organization,  or by any bank or savings  institution,  or by any corporation or
organization  organized  under the laws of the  United  States or of any  state,
territory,  or  possession  thereof,  or  by  any  corporation  or  organization
organized  under any foreign  law, or in "when  issued"  contracts  for any such
securities,   futures  contracts  and  options  thereon,  and  forward  currency
contracts, to change the investments of the assets of the Trust; and to exercise
any and all rights,  powers,  and privileges of ownership or interest in respect
of any and all such  investments  of  every  kind  and  description,  including,
without limitation, the right to consent and otherwise act with respect thereto,
with power to  designate  one or more  Persons,  to exercise any of said rights,
powers, and privileges in respect of any of said instruments;

     (b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write
options with respect to or otherwise deal in any property rights relating to any
or all of the assets of the Trust or any Series;

     (c) To vote or give  assent,  or  exercise  any rights of  ownership,  with
respect to stock or other  securities  or  property;  and to execute and deliver
proxies or powers of attorney to such  person or persons as the  Trustees  shall
deem proper,  granting to such person or persons such power and discretion  with
relation to securities or property as the Trustees shall deem proper;

     (d) To exercise  powers and right of subscription or otherwise which in any
manner arise out of ownership of securities;

     (e) To hold any  security or property in a form not  indicating  that it is
trust property, whether in bearer,  unregistered or other negotiable form, or in
its own name or in the name of a  custodian  or  subcustodian  or a  nominee  or
nominees or otherwise  or to authorize  the  custodian  or a  subcustodian  or a
nominee or nominees to deposit the same in a securities  depository,  subject in
each case to the applicable provisions of the 1940 Act;

     (f) To consent  to, or  participate  in,  any plan for the  reorganization,
consolidation  or merger of any  corporation  or issuer of any security which is
held in the Trust; to consent to any contract,  lease,  mortgage,  purchase,  or
sale  of  property  by  such  corporation  or  issuer;   and  to  pay  calls  or
subscriptions with respect to any security held in the Trust;

     (g) To join with other  security,  holders in acting  through a  committee,
depositary,  voting trustee or otherwise,  and in that connection to deposit any
security  with, or transfer any security to, any such  committee,  depositary or
trustee,  and to delegate to them such power and authority  with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper,  and to agree to pay,  and to pay,  such  portion  of the  expenses  and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;

     (h) To litigate,  compromise,  arbitrate, settle or otherwise adjust claims
in favor of or  against  the Trust or a Series,  or any  matter in  controversy,
including but not limited to claims for taxes;

     (i) To enter into joint ventures,  general or limited  partnerships and any
other combinations or associations;

     (j) To borrow  funds or other  property  in the name of the Trust or Series
exclusively for Trust purposes;

     (k) To endorse or guarantee  the payment of any notes or other  obligations
of any Person; to make contracts of guaranty or suretyship,  or otherwise assume
liability for payment thereof;

     (l) To purchase and pay for entirely out of Trust  Property such  insurance
as the Trustees may deem necessary,  desirable or appropriate for the conduct of
the business,  including,  without  limitation,  insurance policies insuring the
assets of the Trust or payment of  distributions  and principal on its portfolio
investments,  and  insurance  policies  insuring  the  Shareholders,   Trustees,
officers,  employees,  agents,  Investment Manager,  principal underwriters,  or
independent  contractors  of the  Trust,  individually  against  all  claims and
liabilities of every nature arising by reason of holding Shares,  holding, being
or having held any such office or position,  or by reason of any action  alleged
to have been taken or omitted by any such Person as Trustee, officer,  employee,
agent,  investment Manager,  Principal Underwriter,  or independent  contractor,
including  any action  taken or omitted  that may be  determined  to  constitute
negligence,  whether  or not the Trust  would have the power to  indemnify  such
Person against liability; and

     (m) To adopt, establish and carry out pension; profit-sharing, share bonus,
share  purchase,  savings,  thrift and other  retirement,  incentive and benefit
plans,  trusts and  provisions,  including the  purchasing of life insurance and
annuity  contracts as a means of providing such  retirement and other  benefits,
for any or all of the Trustees, officers, employees and agents of the Trust.

     The Trust shall not be limited to investing in obligations  maturing before
the possible  termination  of the Trust or one or more of its Series.  The Trust
shall not in any way be bound or limited by any  present or future law or custom
in regard to  investment  by  fiduciaries.  The Trust  shall not be  required to
obtain  any court  order to deal with any  assets of the Trust or take any other
action hereunder.

     Section 4. Payment of Expenses by the Trust.  Subject to the  provisions of
Article III,  Section  6(b),  the Trustees are  authorized to pay or cause to be
paid out of the principal or income of the Trust or Series, or partly out of the
principal  and  partly  out of income,  and to charge or  allocate  the same to,
between  or among  such one or more of the  Series  that may be  established  or
designated  pursuant to Article III,  Section 6, all  expenses,  fees,  charges,
taxes and  liabilities  incurred  or  arising  in  connection  with the Trust or
Series, or in connection with the management thereof, including, but not limited
to, the Trustees' compensation and such expenses and charges for the services of
the Trust's officers,  employees,  Investment  Manager,  Principal  Underwriter,
auditors, counsel,  custodian,  transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other expenses and charges
as the Trustees may deem necessary or proper to incur.

     Section 5. Ownership of Assets of the Trust.  Title to all of the assets of
the Trust shall at all times be considered  as vested in the Trust,  except that
the Trustees  shall have power to cause legal title to any Trust  Property to be
held by or in the  name of one or more of the  Trustees,  or in the  name of the
Trust,  or in the name of any other  Person  as  nominee,  on such  terms as the
Trustees may determine. Upon the resignation, incompetency, bankruptcy, removal,
or death of a Trustee he or she shall automatically cease to have any such title
in any of the  Trust  Property,  and the  title  of such  Trustee  in the  Trust
Property shall vest  automatically in the remaining  Trustees.  Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and  delivered  The Trustees may  determine  that the Trust or the
Trustees,  acting  for and on  behalf  of the  Trust,  shall be  deemed  to hold
beneficial  ownership of any income earned on the securities owned by the Trust,
whether domestic or foreign.

     Section 6. Service Contracts.

     (a) The  Trustees  may,  at any time and from  time to time,  contract  for
exclusive or nonexclusive  advisory,  management and/or administrative  services
for the Trust or for any  Series  with any  Person;  and any such  contract  may
contain  such other  terms as the  Trustees  may  determine,  including  without
limitation,  authority for the Investment Manager to determine from time to time
without  prior   consultation  with  the  Trustees  what  investments  shall  be
purchased,  held,  sold or exchanged and what portion,  if any, of the assets of
the  Trust  shall  be  held  uninvested  and to  make  changes  in  the  Trust's
investments, and such other responsibilities as may specifically be delegated to
such Person.

     (b) The Trustees may also, at any time and from time to time, contract with
any Persons,  appointing such Persons  exclusive or nonexclusive  distributor or
Principal  Underwriter  for the  Shares  of one or more of the  Series  or other
securities to be issued by the Trust. Every such contract may contain such other
terms as the Trustees may determine.

     (c) The Trustees are also empowered,  at any time and from time to time, to
contract with any Persons,  appointing such Person(s) to serve as  custodian(s),
transfer agent and/or  shareholder  servicing agent for the Trust or one or more
of its  Series.  Every  such  contract  shall  comply  with such terms as may be
required by the Trustees.

     (d) The Trustees are further empowered,  at any time and from time to time,
to contract with any Persons to provide such other  services to the Trust or one
or more of the Series, as the Trustees  determine to be in the best interests of
the Trust and the applicable Series.

     (e) The fact that:

          (i) any of the Shareholders,  Trustees,  or officers of the Trust is a
     shareholder,   director,  officer,  partner,  trustee,  employee,  Manager,
     adviser,  Principal Underwriter,  distributor,  or affiliate or agent of or
     for any  Person  with  which  an  advisory,  management  or  administration
     contract,  or  Principal   Underwriter's  or  distributor's   contract,  or
     transfer,  shareholder  servicing or other type of service  contract may be
     made, or that

          (ii) any Person with which an advisory,  management or  administration
     contract or Principal Underwriter's or distributor's contract, or transfer,
     shareholder  servicing  or other type of service  contract may be made also
     has an  advisory,  management  or  administration  contract,  or  principal
     underwriter's or distributor's contract, or transfer, shareholder servicing
     or other  service  contract,  or has other  business or interests  with any
     other Person,

     shall not  affect the  validity  of any such  contract  or  disqualify  any
     Shareholder,  Trustee or officer of the Trust from voting upon or executing
     the same,  or create any  liability or  accountability  to the Trust or its
     Shareholders,  provided  approval of each such contract is made pursuant to
     the applicable requirements of the 1940 Act.

                                   ARTICLE V.

                    Shareholders' Voting Powers and Meetings

     Section 1.  Voting  Powers.  Subject  to the  provisions  of  Article  III,
Sections 5 and 6(d), the Shareholders  shall have right to vote only (i) for the
election or removal of  Trustees as provided in Article IV,  Section 1, and (ii)
with respect to such additional matters relating to the Trust as may be required
by the applicable  provisions of the 1940 Act,  including Section 16(a) thereof,
and (iii) on such other  matters  as the  Trustees  may  consider  necessary  or
desirable.  Each whole  Share  shall be entitled to one vote as to any matter on
which it is  entitled to vote and each  fractional  Share shall be entitled to a
proportionate  fractional  vote.  There  shall be no  cumulative  voting  in the
election  of  Trustees.  Shares  may be voted in  person  or by  proxy.  A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless  challenged  at or  prior  to its  exercise  and the  burden  of  proving
invalidity shall rest on the challenger.

     Section 2. Voting Power and Meetings.  Meetings of the  Shareholders may be
called by the Trustees  for the purposes  described in Section 1 of this Article
V. A  meeting  of  Shareholders  may be  held  at any  place  designated  by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by delivering  personally or mailing such notice not
more than ninety (90), nor less than ten (10) days before such meeting,  postage
prepaid,  stating the time and place of the meeting,  to each Shareholder at the
Shareholder's Address as it appears on the records of the Trust. Whenever notice
of a meeting is required to be given to a Shareholder  under this Declaration of
Trust, a written waiver  thereof,  executed  before or after the meeting by such
Shareholder  or his or her  attorney  thereunto  authorized  and filed  with the
records of the meeting,  or actual  attendance at the meeting of Shareholders in
person or by proxy, shall be deemed equivalent to such notice.

     Section  3.  Quorum  and  Required  Vote.  Except  when a larger  quorum is
required by the applicable provisions of the 1940 Act, the presence in person or
by  proxy  of a  majority  of the  Shares  entitled  to vote on a  matter  shall
constitute a quorum at a Shareholders'  meeting. Any meeting of Shareholders may
be adjourned from time to time by a majority of the votes properly cast upon the
question  of  adjourning  a meeting to another  date and time,  whether or not a
quorum is present,  and the meeting may be held as adjourned within a reasonable
time after the date set for the original meeting without further notice. Subject
to the provisions of Article III, Section 6(d) and the applicable  provisions of
the 1940 Act, when a quorum, is present at any meeting, a majority of the Shares
voted shall decide any questions except only a plurality vote shall be necessary
to elect Trustees.

     Section 4. Action by Written Consent.  Any action taken by Shareholders may
be taken without a meeting if all the holders of Shares  entitled to vote on the
matter are provided with not less than 7 days written notice thereof and written
consent to the action is filed with the records of the meetings of  Shareholders
by the  holders of the number of shares  that would be  required  to approve the
matter as provided in Article V,  Section 3. Such  consent  shall be treated for
all purposes as a vote taken at a meeting of Shareholders.

     Section 5. Record Dates.  For the purpose of determining  the  Shareholders
who are entitled to vote or act at any meeting or any adjournment  thereof,  the
Trustees may fix a time,  which shall be not more than ninety (90) nor less than
ten (10) days before the date of any meeting of Shareholders, as the record date
for  determining the  Shareholders  having the right to notice of and to vote at
such meeting and any adjournment  thereof, and in such case only Shareholders of
record on such record date shall have such right,  notwithstanding  any transfer
of shares on the books of the Trust  after the record  date.  For the purpose of
determining the Shareholders who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may fix a date, which shall be before
the date for the payment of such  dividend or  distribution,  as the record date
for  determining the  Shareholders  having the right to receive such dividend or
distribution.  Nothing in this  Section  shall be construed  as  precluding  the
Trustees from setting different record dates for different Series.

                                  ARTICLE VI.

                 Net Asset Value, Distributions, and Redemptions

     Section 1. Determination of Net Asset Value, Net Income, and Distributions.
Subject  to Article  III,  Section 6 hereof,  the  Trustees,  in their  absolute
discretion,  may  prescribe  and  shall set  forth in the  By-laws  or in a duly
adopted  resolution of the Trustees such bases and time for  determining the per
Share net  asset  value of the  Shares of any  Series  and the  declaration  and
payment of dividends and  distributions on the Shares of any Series, as they may
deem necessary or desirable.

     Section 2.  Redemptions  and  Repurchases.  The Trust shall  purchase  such
Shares as are offered by any  Shareholder  for  redemption,  upon receipt by the
Trust or a Person  designated by, the Trust that the Trust redeem such Shares or
in accordance  with such procedures for redemption as the Trustees may from time
to time authorize;  and the Trust will pay therefor the net asset value thereof,
in accordance  with the By-Laws and the  applicable  provisions of the 1940 Act.
Payment for said  Shares  shall be made by the Trust to the  Shareholder  within
seven days after the date on which the  request  for  redemption  is received in
proper  form.  The  obligation  set forth in this  Section 2 is  subject  to the
provision  that in the  event  that any time the New York  Stock  Exchange  (the
"Exchange") is closed for other than weekends,  or holidays,  or if permitted by
the Rules of the  Commission  during  periods  when  trading on the  Exchange is
restricted or during any emergency which makes it impracticable for the Trust to
dispose of the investments of the applicable  Series or to determine  fairly the
value of the net assets  held with  respect  to such  Series or during any other
period  permitted by order of the  Commission  for the  protection of investors,
such obligations may be suspended or postponed by the Trustees.

     The redemption  price may in any case or cases be paid in cash or wholly or
partly in kind in accordance  with Rule 18f-1 under the 1940 Act if the Trustees
determine  that such  payment is  advisable  in the  interest  of the  remaining
Shareholders  of the Series of which the Shares are being  redeemed.  Subject to
the  foregoing,  the selection  and quantity of securities or other  property so
paid or delivered as all or part of the redemption  price shall be determined by
or under authority of the Trustees. In no case shall the Trust be liable for any
delay of any corporation or other Person in transferring securities selected for
delivery as all or part of any payment in kind.

     Section 3. Redemptions at the Option of the Trust. The Trust shall have the
right,  at its option,  upon 60 days notice to the affected  Shareholder  at any
time to redeem  Shares of any  Shareholder  at the net asset  value  thereof  as
described in Section 1 of this Article VI: (i) if at such time such  Shareholder
owns  Shares of any Series  having an  aggregate  net asset value of less than a
minimum  value  determined  from  time to time by the  Trustees;  or (ii) to the
extent that such  Shareholder owns Shares of a Series equal to or in excess of a
maximum percentage of the outstanding Shares of such Series determined from time
to time by the  Trustees;  or (iii) to the  extent  that such  Shareholder  owns
Shares equal to or in excess of a maximum  percentage,  determined  from time to
time by the Trustees, of the outstanding Shares of the Trust.

     Section 4.  Transfer  of Shares.  The Trust shall  transfer  shares held of
record by any Person to any other  Person upon  receipt by the Trust or a Person
designated by the Trust of a written request therefore in such form and pursuant
to such procedures as may be approved by the Trustees.

                                  ARTICLE VII.

                    Compensation and Limitation of Liability

     Section 1. Compensation of Trustees. The Trustees as such shall be entitled
to reasonable  compensation  from the Trust, and they may fix the amount of such
compensation  from time to time.  Nothing  herein  shall in any way  prevent the
employment of any Trustee to-provide advisory,  management,  legal,  accounting,
investment  banking  or  other  services  to  the  Trust  and  to  be  specially
compensated for such services by the Trust.

     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 willful  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 wilful  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.

                                  ARTICLE VIII.

                                  Miscellaneous

     Section 1.  Liability of Third  Persons  Dealing with  Trustees.  No Person
dealing  with the  Trustees  shall be bound to make any inquiry  concerning  the
validity of any transaction  made or to be made by the Trustees or to see to the
application of any payments,  made or properly  transferred to the Trust or upon
its order.

     Section 2.  Termination of Trust or Series.  Unless  terminated as provided
herein,  the Trust shall continue  without  limitation of time. The Trust may be
terminated at any time, by the Trustees upon 60 days prior written notice to the
Shareholders.  Any Series may be  terminated at any time by the Trustees upon 60
days prior written notice to the Shareholders of that Series.

     Upon  termination  of the Trust (or any Series,  as the case may be), after
paying or otherwise providing for all charges,  taxes,  expenses and liabilities
held,  severally,  with respect to each Series (or the applicable Series, as the
case may be),  whether due or accrued or  anticipated  may be  determined by the
Trustees,  the Trust shall,  in accordance  with such procedures as the Trustees
consider appropriate,  reduce the remaining assets held, severally, with respect
to each Series (or the applicable  Series, as the case may be), to distributable
form in cash or shares or other  securities,  and any combination  thereof,  and
distribute  the  proceeds  held with  respect to each Series (or the  applicable
Series,  as the case may be), to the  Shareholders of that Series,  as a Series,
ratably  according  to the number of Shares of that  Series  held by the several
Shareholders on the date of termination.

     Section 3. Merger and  Consolidation.  The Trustees may cause (i) the Trust
or one or more of its Series to the extent  consistent with applicable law to be
merged into or  consolidated  with  another  Trust,  series or Person,  (ii) the
Shares of the Trust or any Series to be converted into  beneficial  interests in
another  statutory trust (or series  thereof),  (iii) the Shares to be exchanged
for assets or property under or pursuant to any state or federal  statute to the
extent  permitted by-law or (iv) a sale of assets of the Trust or one or more of
its Series.  Such merger or consolidation,  Share conversion,  Share exchange or
sale of assets must be  authorized  by vote as provided in Article V,  Section 3
herein; provided that in all respects not governed by statute or applicable law,
the  Trustees  shall  have  power  to  prescribe  the  procedure   necessary  or
appropriate  to  accomplish  a  sale  of  assets,  Share  exchange,   merger  or
consolidation  including  the power to  create  one or more  separate  statutory
trusts to which all or any part of the assets, liabilities, profits or losses of
the Trust may be transferred  and to provide for the conversion of Shares of the
Trust or any Series into beneficial  interests in such separate  statutory trust
or trusts (or series thereof).

     Section 4.  Amendments.  This  Declaration of Trust may be restated  and/or
amended  at any time by an  instrument  in writing  signed by a majority  of the
Trustees then holding office. Any such restatement and/or amendment hereto shall
be effective  immediately upon execution and approval.  The Certificate of Trust
of the Trust may be restated and/or amended by a similar procedure, and any such
restatement and/or amendment shall be effective immediately upon filing with the
office of the  Secretary  of State of the State of  Delaware or upon such future
date as may be stated therein.

     Section 5. Filing of Copies References, Headings. The original or a copy of
this instrument and of each restatement and/or amendment hereto shall be kept at
the office of the Trust where it may be  inspected  by any  Shareholder.  Anyone
dealing with the Trust may rely on a  certificate  by an officer of the Trust as
to whether or not any such restatements  and/or amendments have been made and as
to any matters in connection with the Trust hereunder; and, with the same effect
as if it were the  original,  may rely on a copy  certified by an officer of the
Trust  to be a copy  of  this  instrument  or of any  such  restatements  and/or
amendments.  In this instrument,  and in any such restatements and/or amendment,
references to this instrument,  and all expressions like "herein,"  "hereof" and
"hereunder,"  shall be deemed to refer to this instrument as amended or affected
by any such  restatements  and/or  amendments.  Headings,  are placed herein for
convenience of reference only and shall not be taken as a part hereof or control
or affect the meaning,  construction or effect of this instrument.  Whenever the
singular  number is used  herein,  the same shall  include the  plural;  and the
neuter,  masculine and feminine genders shall include each other, as applicable.
This  instrument  may be  executed in any number of  counterparts  each of which
shall be deemed an original.

     Section 6.  Applicable  Law.  This  Agreement and  Declaration  of Trust is
created under and is to be governed by and construed and administered  according
to the laws of the State of Delaware  and the Delaware  Statutory  trust Act, as
amended from time to time (the "Act").  The Trust shall be a Delaware  statutory
trust  pursuant to such Act, and without  limiting the  provisions  hereof,  the
Trust may exercise all powers which are ordinarily exercised by such a statutory
trust.

     Section 7. Provisions in Conflict with Law or Regulations

     (a) The provisions of the  Declaration  of Trust are severable,  and if the
Trustees  shall  determine,  with  the  advice  of  counsel,  that  any of  such
provisions is in conflict with the 1940 Act, the  regulated  investment  company
provisions  of the  Internal  Revenue  Code or with  other  applicable  laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration of Trust;  provided,  however, that such determination
shall not affect any of the remaining  provisions of the Declaration of Trust or
render   invalid  or  improper  any  action  taken  or  omitted   prior  o  such
determination.

     (b) If any provision of the  Declaration  of Trust shall be held invalid or
unenforceable in any  jurisdiction,  such invalidity or  unenforceability  shall
attach only to such provision in such  jurisdiction  and shall not in any manner
affect such provision in any other  jurisdiction  or any other  provision of the
Declaration of Trust in any jurisdiction.

     Section 8.  Statutory  Trust Only.  It is the  intention of the Trustees to
create a statutory  trust  pursuant  to the Act,  and thereby to create only the
relationship  of trustee and  beneficial  owners  within the meaning of such Act
between  the  Trustees  and each  Shareholder.  It is not the  intention  of the
Trustees  to create a general  partnership,  limited  partnership,  joint  stock
association,  corporation,  bailment,  joint  venture,  or  any  form  of  legal
relationship  other than a statutory trust pursuant to such Act. Nothing in this
Declaration  of Trust shall be  construed  to make the  Shareholders,  either by
themselves  or  with  the  Trustees,  partners  or  members  of  a  joint  stock
association.

     Section 9. Use of the Name "UBS".  The name "UBS" and all rights to the use
of the name "UBS" belong to UBS AG or its affiliates  (together "UBS").  UBS has
consented to the use by the Trust of the identifying  word "UBS" and has granted
to the Trust a  non-exclusive  license to use the name "UBS" as part of the name
of the  Trust  and the name of any  Series  of  Shares.  In the  event UBS or an
affiliate of UBS is not  appointed as Manager or ceases to be the Manager of the
Trust or of any Series  using such  names,  the  non-exclusive  license  granted
herein may be revoked by UBS and the Trust  promptly  shall cease using the name
"UBS" as part of its name or the name of any Series of Shares,  upon  receipt of
the written  request  therefore by UBS or any successor to its interests in such
name.

     IN WITNESS WHEREOF,  the Trustees named below do hereby make and enter into
this Amended and Restated  Agreement and Declaration of Trust as of the 28th day
of September, 2004.

 /s/ Walter E. Auch                                          /s/ Edward M. Roob
 ----------------------------------------------------        --------------------------------------------------------
 Walter E. Auch                                              Edward M. Roob
 6001 N. 62nd Place                                          841 Woodbine Lane
 Paradise Valley, Arizona  85253                             Northbrook, Illinois  60062


/s/ Adela Cepeda                                            /s/ J. Mikesell Thomas
 ----------------------------------------------------        --------------------------------------------------------
 Adela Cepeda                                                J. Mikesell Thomas
 A.C. Advisory, Inc.                                         Federal Home Loan Bank of Chicago
 161 North Clark Street                                      111 East Wacker Drive
 Suite 4975                                                  Suite 800
 Chicago, Illinois  60601                                    Chicago, Illinois  60601


 /s/ Frank K. Reilly
 ----------------------------------------------------
 Frank K. Reilly
 University of Notre Dame
 College of Business Administration, Room 307A
 Notre Dame, Indiana  46556-0399


THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS

One North Wacker Drive
Chicago, Illinois  60606





                                                                        EXHIBIT A

                         SERIES AND CLASSES OF THE TRUST

I.   Pursuant to Article III,  Section 1 of the Declaration of Trust, the Shares
     of beneficial interest of the Trust are divided into the following separate
     Series of Shares  established  and  designated  as: UBS U.S. Bond Fund, UBS
     High Yield Fund,  UBS U.S.  Large Cap Equity Fund, UBS U.S. Large Cap Value
     Equity  Fund,  UBS U.S.  Large Cap Growth Fund,  UBS U.S.  Small Cap Equity
     Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Real Estate Equity Fund, UBS
     Global  Allocation  Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS
     International  Equity Fund,  UBS Emerging  Markets Debt Fund,  UBS Emerging
     Markets Equity Fund, UBS Dynamic Alpha Fund, UBS Absolute Return Bond Fund,
     UBS U.S.  Mid Cap Growth  Equity Fund,  UBS U.S.  Equity Alpha Fund and UBS
     Global Frontier Fund, each with an unlimited number of Shares of beneficial
     interest, (par value $0.001 per share), with such rights and preferences as
     are set forth in the Declaration of Trust.

II.  Pursuant to Article III, Section 1 of the Declaration of Trust, each Series
     of the Trust is further  divided  into the  following  separate  classes of
     Shares established and designated as: Class A Shares, Class B Shares, Class
     C Shares and Class Y Shares,  with the exception of the UBS Absolute Return
     Bond Fund,  the UBS U.S. Mid Cap Growth  Equity Fund,  the UBS U.S.  Equity
     Alpha Fund and the UBS Global  Frontier  Fund,  which are divided  into the
     following separate classes of Shares established and designated as: Class A
     Shares,  Class C Shares  and Class Y Shares.  Each  separate  class of each
     Series has an unlimited number of Shares of beneficial interest, (par value
     of  $0.001  per  share).  The  Class B Shares  of a Series of the Trust are
     further  divided into the following  sub-classes of Shares  established and
     designated  as:  Class B-1 Shares,  Class B-2 Shares,  Class B-3 Shares and
     Class B-4 Shares,  each with an  unlimited  number of Shares of  beneficial
     interest, (par value $0.001 per share).

     A.   Each Class A Share,  Class B Share, Class C Share and Class Y Share of
          a Series shall have the rights and limitations as set forth in Section
          1 of  Article  III of the  Declaration  of  Trust,  except  that:  (i)
          dividends and distributions paid on Class A Shares, Class B Shares and
          Class C Shares of a Series shall  reflect  reductions  for payments of
          fees under the Series'  shareholder  services and/or distribution plan
          adopted pursuant to Rule 12b-1 of the 1940 Act for the Class A Shares,
          Class B Shares and Class C Shares, respectively; (ii) only the Class A
          Shares,  Class B Shares,  Class C Shares and Class Y Shares shall have
          (a) exclusive  voting rights with respect to any matter submitted to a
          vote of  shareholders  that  affects  only  holders of Class A Shares,
          Class B  Shares,  Class C Shares  and  Class Y  Shares,  respectively,
          including,  without  limitation,  the  provisions  or any  shareholder
          services and/or  distribution  plan adopted  pursuant to Rule 12b-1 of
          the 1940  Act for the  Class A  Shares,  Class B  Shares  and  Class C
          Shares,  and (b) no voting rights with respect to the provision of any
          shareholder services and/or distribution plan adopted pursuant to Rule
          12b-1 of the 1940 Act  applicable  to any other class of shares of the
          Series  or with  regard  to any other  matter  submitted  to a vote of
          shareholders  that does not now or in the future affect holders of the
          Class A  Shares,  Class B Shares,  Class C Shares  and Class Y Shares,
          respectively; and (iii) Class B Shares of a Series shall automatically
          convert to Class A Shares of the same Series, beginning in the seventh
          year (in the case of Class B-1  Shares),  beginning  in the fifth year
          (in the case of B-2 Shares), beginning in the fourth year (in the case
          if Class B-3 Shares) and  beginning  in the third year (in the case of
          Class B-4 Shares) that such Class B Shares are held.

     B.   Purchases of Class A Shares of a Series are subject to the  imposition
          of a sales charge according to the following  schedules,  which may be
          adjusted from time to time and are subject to such waivers as shall be
          determined  from time to time by UBS Global  Asset  Management  and as
          shall be described in the current  prospectuses  of the Class A Shares
          of the Series of the Trust:

          (i)  With respect to the Class A Shares of the Series  designated  and
               established  as the UBS U.S. Bond Fund,  UBS High Yield Fund, UBS
               Global   Bond   Fund  and  UBS   Emerging   Markets   Debt   Fund
               (collectively,  the "Fixed  Income  Series"),  sales  charges are
               imposed as follows:

                                                                Sales Charge as a
                           Amount of Investment                    Offering Price
                                                                -----------------
                           Less than $100,000...............................4.50%
                           $100,000 to $249,999.............................3.50%
                           $250,000 to $499,999.............................2.50%
                           $500,000 to $999,999.............................2.00%
                           $1,000,000 and over.............................  None

          (ii) With respect to the Class A Shares of the Series  designated  and
               established  as the UBS  Absolute  Return  Bond  Fund  (the  "ARB
               Series"), sales charges are imposed as follows:

                                                                Sales Charge as a
                           Amount of Investment                    Offering Price
                                                                -----------------

                           Less than $50,000................................2.50%
                           $50,000 to $99,999...............................2.00%
                           $100,000 to $249,999.............................1.00%
                           $250,000 and over................................ None

          (iii) With respect to the Class A Shares of the Series  designated and
               established as the UBS U.S. Large Cap Equity Fund, UBS U.S. Large
               Cap Value Equity Fund,  UBS U.S.  Large Cap Growth Fund, UBS U.S.
               Small Cap Equity Fund,  UBS U.S.  Small Cap Growth Fund, UBS U.S.
               Real Estate Equity Fund, UBS Global  Allocation  Fund, UBS Global
               Equity Fund, UBS International  Equity Fund, UBS Emerging Markets
               Equity  Fund,  UBS Dynamic  Alpha Fund,  UBS U.S.  Mid Cap Growth
               Equity Fund, UBS U.S.  Equity Alpha Fund and UBS Global  Frontier
               Fund  (collectively,  the  "Equity  Series"),  sales  charges are
               imposed as follows:

                                                                Sales Charge as a
                           Amount of Investment                    Offering Price
                                                                -----------------

                           Less than $50,000................................5.75%
                           $50,000 to $99,999...............................4.50%
                           $100,000 to $249,999.............................3.50%
                           $250,000 to $499,999.............................2.50%
                           $500,000 to $999,999.............................2.00%
                           $1,000,000 and over...............................None

          (iv) Purchases  of Class A Shares of the  Series  (except  for the ARB
               Series) of $1 million or more that are  redeemed  within one year
               after  purchase  are subject to the  imposition  of a  contingent
               deferred sales charge equal to 1% of the Class A Shares' offering
               price  or  the  net  asset  value  at the  time  of  sale  by the
               shareholder,  whichever is less, subject to such waivers as shall
               be  determined  from time to time by UBS Global Asset  Management
               and as shall be  described  in the  current  prospectuses  of the
               Class A Shares of the Series of the Trust.

          (v)  Purchases of Class A Shares of the ARB Series of $250,000 or more
               that are redeemed  within one year after  purchase are subject to
               the  imposition  of a contingent  deferred  sales charge equal to
               0.50% of the  Class A  Shares'  offering  price or the net  asset
               value at the time of sale by the shareholder,  whichever is less,
               subject to such waivers as shall be determined  from time to time
               by UBS Global Asset  Management  and as shall be described in the
               current  prospectuses  of the Class A Shares of the Series of the
               Trust.

     C.   Class B  Shares  of are  subject  to the  imposition  of a  contingent
          deferred  sales  charge  when  shares  are sold  before the end of the
          specified  periods  as shown in the  schedule  below,  subject to such
          waivers as shall be  determined  from time to time by UBS Global Asset
          Management  and as shall be described in the current  prospectuses  of
          the Class B Shares of a Series of the Trust:

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

                                      Class B-1         Class B-2         Class B-3         Class B-4
                                      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  contingent  deferred  sales  charge  for the  Class B Shares of a
          Series 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 schedule above.

          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 Asset Management (US) Inc. serves
          as principal  underwriter)  purchased or acquired prior to November 5,
          2001 and exchanged  (including  exchanges as part of a reorganization)
          for shares of the Series after November 5, 2001 (collectively,  "Prior
          Class B Shares") are subject to the  contingent  deferred sales charge
          schedule for Class B-1 Shares.  Class B-1 Shares of a Series that were
          received in exchange for Class B Shares of a Family  Fund,  held by an
          investor for six years, will  automatically  convert to Class A Shares
          of the same Series is beginning of the seventh year that the Class B-1
          Shares and Prior Class B Shares are held.

     D.   Class C Shares are subject to the  imposition of  contingent  deferred
          sales  charge  on  Class C  Shares  redeemed  within  one  year  after
          purchase, which shall be equal to the lesser of the net asset value of
          the Class C Shares at the time of  purchase  or the net asset value of
          such  Class C Shares  at the time of  sale,  multiplied  by 1% for the
          Equity Series,  0.75% for the Fixed Income  Series,  and 0.50% for the
          ARB Series,  subject to such waivers as shall be determined  from time
          to time by UBS Global  Asset  Management  and as shall be described in
          the  current  prospectuses  of the Class C Shares of the Series of the
          Trust.

March 8, 2007

EX-99.D.18 3 ex99d18.htm

                                                           EXHIBIT NO. EX-99.d.18

                          INVESTMENT ADVISORY AGREEMENT

     AGREEMENT made this 14th day of August, 2006, by and between The UBS Funds,
a  Delaware  statutory  trust (the  "Trust")  and UBS  Global  Asset  Management
(Americas) Inc., a Delaware corporation (the "Advisor").

     1. Duties of the Advisor.  The Trust hereby  appoints the Advisor to act as
investment  advisor to the UBS U.S.  Equity  Alpha Fund (the  "Series")  for the
period  and on such terms set forth in this  Agreement.  The Trust  employs  the
Advisor to manage the investment and  reinvestment  of the assets of the Series,
to continuously  review,  supervise and administer the investment program of the
Series,  to determine in its  discretion  the assets to be held  uninvested,  to
provide the Trust with records  concerning  the Advisor's  activities  which the
Trust is  required to  maintain,  and to render  regular  reports to the Trust's
officers  and  Board of  Trustees  concerning  the  Advisor's  discharge  of the
foregoing   responsibilities.   The  Advisor   shall   discharge  the  foregoing
responsibilities  subject  to the  control  of the  officers  and the  Board  of
Trustees of the Trust,  and in  compliance  with the  objectives,  policies  and
limitations  set forth in the Trust's  Prospectus  and  Statement of  Additional
Information.  The  Advisor  accepts  such  employment  and  agrees to render the
services and to provide,  at its own  expense,  the office  space,  furnishings,
equipment and the personnel  required by it to perform the services on the terms
and for the compensation provided herein. With respect to foreign securities, at
its  own  expense,   the  Advisor  may  obtain  statistical  and  other  factual
information and advice  regarding  economic  factors and trends from its foreign
subsidiaries,  and may obtain investment  services from the investment  advisory
personnel of its affiliates located throughout the world to the extent permitted
under interpretations of the federal securities laws.

     2.  Portfolio  Transactions.  The Advisor  shall  provide the Series with a
trading  department,  and with  respect to foreign  securities,  the  Advisor is
authorized to utilize the trading  departments  of its foreign  affiliates.  The
Advisor shall select,  and with respect to its foreign  affiliates or the use of
any  sub-advisors,  shall  monitor the selection of, the brokers or dealers that
will  execute  the  purchases  and sales of  securities  for the  Series  and is
directed  to use its best  efforts to ensure that the best  available  price and
most favorable execution of securities transactions for the Series are obtained.
Subject  to  policies  established  by the  Board of  Trustees  of the Trust and
communicated  to the  Advisor,  it is  understood  that the Advisor  will not be
deemed to have acted  unlawfully,  or to have  breached a fiduciary  duty to the
Trust or in respect of the Series,  or be in breach of any  obligation  owing to
the Trust or in respect of the Series under this Agreement, or otherwise, solely
by reason  of its  having  caused  the  Series  to pay a member of a  securities
exchange,  a  broker  or a  dealer  a  commission  for  effecting  a  securities
transaction for the Series in excess of the amount of commission  another member
of an exchange, broker or dealer would have charged if the Advisor determines in
good faith that the commission  paid was reasonable in relation to the brokerage
or research services provided by such member,  broker or dealer, viewed in terms
of that particular  transaction or the Advisor's overall  responsibilities  with
respect to the Series and to other  funds and  advisory  accounts  for which the
Advisor or any Sub-Advisor, as defined in Section 8 hereof, exercises investment
discretion.  The Advisor will promptly  communicate to the officers and trustees
of the Trust such  information  relating to the Series  transactions as they may
reasonably request.

     3.  Compensation  of the  Advisor.  For the  services to be rendered by the
Advisor as provided in Sections 1 and 2 of this Agreement,  the Series shall pay
to the Advisor within five business days after the end of each calendar month, a
monthly fee of one twelfth of the effective  advisory fee rate multiplied by the
Series' average daily net assets for the month. The effective  advisory fee rate
is calculated  according to the following fee schedule:  1.00% on the first $500
million of assets under management; 0.90% on the next $500 million to $1 billion
of  assets  under  management;  and  0.85%  above $1  billion  of  assets  under
management.

     In the event of  termination  of this  Agreement,  the fee provided in this
Section 3 shall be paid on a pro rata  basis,  based on the  number of days when
this Agreement was in effect.

     4. Reimbursement of Fee Waivers and Expense  Reimbursements.  If on any day
during which this  Agreement is in effect,  the estimated  annualized  Operating
Expenses  (as  defined  below)  of the  Series  for that  day are less  than the
Operating  Expense  Limit (as defined  below),  the Advisor shall be entitled to
reimbursement by the Series of the investment management fees waived or reduced,
and of any expense reimbursements or similar payments remitted by the Advisor to
the Series  pursuant to the Advisor's  agreement to limit the Series'  Operating
Expenses  (the  "Reimbursement  Amount")  during any of the  previous  three (3)
years, to the extent that the Series' annualized  Operating  Expenses,  plus the
amount  so  reimbursed,  equals,  for such day,  the  Operating  Expense  Limit,
provided  that such amount paid to the Advisor will in no event exceed the total
Reimbursement  Amount and will not include any amounts previously  reimbursed by
the Series to the  Advisor.  For  purposes  of this  Section  4:  (i)"Operating
Expenses" shall include the ordinary operating expenses,  incurred by the Series
in any fiscal year, including,  without limitation,  management fees paid to the
Advisor,   but  excluding  interest,   taxes,   brokerage   commissions,   other
investment-related   costs,  securities  loan  fees  and  dividend  expense  for
securities  sold short and  extraordinary  expenses not incurred in the ordinary
course of the Series' business;  and  (ii)"Operating  Expense Limit" shall mean
the rate of the "Equity  Alpha Total  Expense  Limit" as a percentage of average
daily net  assets of the  Series  as  stated  in the then  current  registration
statement of the Series,  plus any distribution or service fees under Rule 12b-1
under the  Investment  Company Act of 1940 and/or  shareholder  service  fees as
described  in  the  then  current  registration  statement  of  the  Series,  as
determined from time to time by the Board of Trustees of the Trust.

     5. Reports.  The Series and the Advisor agree to furnish to each other such
information  regarding their operations with regard to their affairs as each may
reasonably request.

     6. Status of Advisor.  The services of the Advisor to the Series are not to
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.

     7. Liability of Advisor. In the absence of willful misfeasance,  bad faith,
gross  negligence or reckless  disregard by the Advisor of its  obligations  and
duties hereunder,  the Advisor shall not be subject to any liability  whatsoever
to the Series,  or to any shareholder of the Series,  for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including,  without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.

     8. Delegation of Responsibilities to Sub-Advisors.  The Advisor may, at its
expense,  select  and  contract  with  one or more  affiliated  or  unaffiliated
investment  advisors  registered  under  the  Investment  Advisers  Act of  1940
("Sub-Advisors") to perform some or all of the services for the Series for which
it is  responsible  under  this  Agreement.  The  Advisor  will  compensate  any
Sub-Advisor  for its  services to the Series.  The  Advisor  may  terminate  the
services of any  Sub-Advisor  at any time in its sole  discretion,  and shall at
such time  assume  the  responsibility  of such  Sub-Advisor  unless and until a
successor  Sub-Advisor  is selected  and the  requisite  approval of the Series'
shareholders is obtained.  The Advisor will continue to have  responsibility for
all advisory services furnished by any Sub-Advisor.

     9.  Duration and  Termination.  This  Agreement  shall become  effective on
August 14, 2006  provided  that first it is approved by the Board of Trustees of
the Trust,  including a majority of those  trustees  who are not parties to this
Agreement or interested  persons of any party hereto,  in the manner provided in
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940 Act")
and by the holders of a majority of the  outstanding  voting  securities  of the
Series;  and shall  continue in effect until August 14, 2008.  Thereafter,  this
Agreement may continue in effect only if such  continuance  is approved at least
annually  by:  (i) the  Trust's  Board  of  Trustees;  or (ii) by the  vote of a
majority of the outstanding voting securities of the Series; and in either event
by a vote of a majority  of those  trustees  of the Trust who are not parties to
this Agreement or interested persons of any such party in the manner provided in
Section 15(c) of the 1940 Act. This  Agreement may be terminated by the Trust at
any time,  without the payment of any  penalty,  by the Board of Trustees of the
Trust  or by  vote  of the  holders  of a  majority  of the  outstanding  voting
securities  of the  Series  on 60 days'  written  notice  to the  Advisor.  This
Agreement may be  terminated by the Advisor at any time,  without the payment of
any penalty,  upon 60 days' written  notice to the Trust.  This  Agreement  will
automatically  terminate in the event of its  assignment.  Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.

     As used in this Section 9, the terms "assignment," "interested person," and
"a vote of a  majority  of the  outstanding  voting  securities"  shall have the
respective meanings set forth in  Section 2(a)(4),  Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.

     10. Name of Advisor.  The parties  agree that the Advisor has a proprietary
interest in the name "UBS," and the Trust agrees to promptly take such action as
may be necessary to delete from its corporate name and/or the name of the Series
any reference to the name of the Advisor promptly after receipt from the Advisor
of a written request therefor.

     11. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision,  statute, rule or otherwise,  the remainder of this
Agreement shall not be affected thereby.

     12.  Amendment of this  Agreement.  No provision of this  Agreement  may be
changed,  waived,  discharged or terminated orally, but only by an instrument in
writing  signed by the party against which  enforcement  of the change,  waiver,
discharge or termination is sought,  and no material amendment of this Agreement
shall  be  effective  until  approved  by  vote  of a  majority  of the  Series'
outstanding voting securities.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this 14th day of August, 2006.

THE UBS FUNDS                                  THE UBS FUNDS

By:    /s/ Joseph J. Allessie                  By:    /s/ Joseph Malone
 Name: Joseph J. Allessie                      Name: Joseph Malone
Title: Vice President and                      Title: Treasurer and Principal
       Assistant Secretary                            Accounting Officer

UBS GLOBAL ASSET MANAGEMENT                    UBS GLOBAL ASSET MANAGEMENT
(AMERICAS) INC.                                (AMERICAS) INC.

By:    /s/ John Moore                          By:    /s/ Mark F. Kemper
       Name: John Moore                               Name:  Mark F. Kemper
       Title: Managing Director                       Title:  Managing Director
                                                              and Secretary

EX-99.D.19 4 ex99d19.htm

                                                                       EX-99.d.19
                          INVESTMENT ADVISORY AGREEMENT


     AGREEMENT  made this ____ day  of_________,  2007,  by and  between The UBS
Funds, a Delaware  statutory trust (the "Trust") and UBS Global Asset Management
(Americas) Inc., a Delaware corporation (the "Advisor").

     1. Duties of the Advisor.  The Trust hereby  appoints the Advisor to act as
investment advisor to the UBS Global Frontier Fund (the "Series") for the period
and on such terms set forth in this Agreement.  The Trust employs the Advisor to
manage  the  investment  and  reinvestment  of  the  assets  of the  Series,  to
continuously  review,  supervise and administer  the  investment  program of the
Series,  to determine in its  discretion  the assets to be held  uninvested,  to
provide the Trust with records  concerning  the Advisor's  activities  which the
Trust is  required to  maintain,  and to render  regular  reports to the Trust's
officers  and  Board of  Trustees  concerning  the  Advisor's  discharge  of the
foregoing   responsibilities.   The  Advisor   shall   discharge  the  foregoing
responsibilities  subject  to the  control  of the  officers  and the  Board  of
Trustees of the Trust,  and in  compliance  with the  objectives,  policies  and
limitations  set forth in the Trust's  Prospectus  and  Statement of  Additional
Information.  The  Advisor  accepts  such  employment  and  agrees to render the
services and to provide,  at its own  expense,  the office  space,  furnishings,
equipment and the personnel  required by it to perform the services on the terms
and for the compensation provided herein. With respect to foreign securities, at
its  own  expense,   the  Advisor  may  obtain  statistical  and  other  factual
information and advice  regarding  economic  factors and trends from its foreign
subsidiaries,  and may obtain investment  services from the investment  advisory
personnel of its affiliates located throughout the world to the extent permitted
under interpretations of the federal securities laws.

     2.  Portfolio  Transactions.  The Advisor  shall  provide the Series with a
trading  department,  and with  respect to foreign  securities,  the  Advisor is
authorized to utilize the trading  departments  of its foreign  affiliates.  The
Advisor shall select,  and with respect to its foreign  affiliates or the use of
any  sub-advisors,  shall  monitor the selection of, the brokers or dealers that
will  execute  the  purchases  and sales of  securities  for the  Series  and is
directed  to use its best  efforts to ensure that the best  available  price and
most favorable execution of securities transactions for the Series are obtained.
Subject  to  policies  established  by the  Board of  Trustees  of the Trust and
communicated  to the  Advisor,  it is  understood  that the Advisor  will not be
deemed to have acted  unlawfully,  or to have  breached a fiduciary  duty to the
Trust or in respect of the Series,  or be in breach of any  obligation  owing to
the Trust or in respect of the Series under this Agreement, or otherwise, solely
by reason  of its  having  caused  the  Series  to pay a member of a  securities
exchange,  a  broker  or a  dealer  a  commission  for  effecting  a  securities
transaction for the Series in excess of the amount of commission  another member
of an exchange, broker or dealer would have charged if the Advisor determines in
good faith that the commission  paid was reasonable in relation to the brokerage
or research services provided by such member,  broker or dealer, viewed in terms
of that particular  transaction or the Advisor's overall  responsibilities  with
respect to the Series and to other  funds and  advisory  accounts  for which the
Advisor or any Sub-Advisor, as defined in Section 8 hereof, exercises investment
discretion.  The Advisor will promptly  communicate to the officers and trustees
of the Trust such  information  relating to the Series  transactions as they may
reasonably request.

     3.  Compensation  of the  Advisor.  For the  services to be rendered by the
Advisor as provided in Sections 1 and 2 of this Agreement,  the Series shall pay
to the Advisor within five business days after the end of each calendar month, a
monthly fee of one twelfth of the effective  advisory fee rate multiplied by the
Series' average daily net assets for the month. For purposes of calculating such
fee, the Series' average daily net assets will be deemed to be the average daily
value of the  Series'  total  assets  minus the sum of the  Series'  liabilities
(which liabilities exclude the aggregate amount of any borrowing). The effective
advisory fee rate is calculated  according to the following fee schedule:  0.95%
of assets under management.

     In the event of  termination  of this  Agreement,  the fee provided in this
Section 3 shall be paid on a pro rata  basis,  based on the  number of days when
this Agreement was in effect.

     4. Reimbursement of Fee Waivers and Expense  Reimbursements.  If on any day
during which this  Agreement is in effect,  the estimated  annualized  Operating
Expenses  (as  defined  below)  of the  Series  for that  day are less  than the
Operating  Expense  Limit (as defined  below),  the Advisor shall be entitled to
reimbursement by the Series of the investment management fees waived or reduced,
and of any expense reimbursements or similar payments remitted by the Advisor to
the Series  pursuant to the Advisor's  agreement to limit the Series'  Operating
Expenses  (the  "Reimbursement  Amount")  during any of the  previous  three (3)
years, to the extent that the Series' annualized  Operating  Expenses,  plus the
amount  so  reimbursed,  equals,  for such day,  the  Operating  Expense  Limit,
provided  that such amount paid to the Advisor will in no event exceed the total
Reimbursement  Amount and will not include any amounts previously  reimbursed by
the Series to the  Advisor.  For  purposes  of this  Section  4: (i)  "Operating
Expenses" shall include the ordinary  operating  expenses incurred by the Series
in any fiscal year, including,  without limitation,  management fees paid to the
Advisor,   but  excluding  interest,   taxes,   brokerage   commissions,   other
investment-related costs and extraordinary expenses not incurred in the ordinary
course of the Series'  business;  and (ii) "Operating  Expense Limit" shall mean
the rate of the "Total  Expense  Limit" as a  percentage  of  average  daily net
assets of the Series as stated in the then current registration statement of the
Series,  plus any  distribution  or service  fees  under  Rule  12b-1  under the
Investment Company Act of 1940 and/or  shareholder  service fees as described in
the then current  registration  statement of the Series, as determined from time
to time by the Board of Trustees of the Trust.

     5. Reports.  The Series and the Advisor agree to furnish to each other such
information  regarding their operations with regard to their affairs as each may
reasonably request.

     6. Status of Advisor.  The services of the Advisor to the Series are not to
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.

     7. Liability of Advisor. In the absence of willful misfeasance,  bad faith,
gross  negligence or reckless  disregard by the Advisor of its  obligations  and
duties hereunder,  the Advisor shall not be subject to any liability  whatsoever
to the Series,  or to any shareholder of the Series,  for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including,  without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.

     8. Delegation of Responsibilities to Sub-Advisors.  The Advisor may, at its
expense,  select  and  contract  with  one or more  affiliated  or  unaffiliated
investment  advisors  registered  under  the  Investment  Advisers  Act of  1940
("Sub-Advisors") to perform some or all of the services for the Series for which
it is  responsible  under  this  Agreement.  The  Advisor  will  compensate  any
Sub-Advisor  for its  services to the Series.  The  Advisor  may  terminate  the
services of any  Sub-Advisor  at any time in its sole  discretion,  and shall at
such time  assume  the  responsibility  of such  Sub-Advisor  unless and until a
successor  Sub-Advisor  is selected  and the  requisite  approval of the Series'
shareholders is obtained.  The Advisor will continue to have  responsibility for
all advisory services furnished by any Sub-Advisor.

     9.  Duration and  Termination.  This  Agreement  shall become  effective on
________________,  2007  provided  that  first it is  approved  by the  Board of
Trustees  of the Trust,  including  a  majority  of those  trustees  who are not
parties to this  Agreement or  interested  persons of any party  hereto,  in the
manner  provided in Section  15(c) of the  Investment  Company  Act of 1940,  as
amended  (the "1940 Act") and by the  holders of a majority  of the  outstanding
voting   securities  of  the  Series;   and  shall   continue  in  effect  until
________________,  2009. Thereafter,  this Agreement may continue in effect only
if such  continuance  is approved at least annually by: (i) the Trust's Board of
Trustees; or (ii) by the vote of a majority of the outstanding voting securities
of the Series;  and in either event by a vote of a majority of those trustees of
the Trust who are not parties to this  Agreement  or  interested  persons of any
such  party in the  manner  provided  in  Section  15(c) of the 1940  Act.  This
Agreement may be terminated by the Trust at any time, without the payment of any
penalty,  by the Board of  Trustees  of the Trust or by vote of the holders of a
majority of the outstanding  voting securities of the Series on 60 days' written
notice to the Advisor.  This  Agreement  may be terminated by the Advisor at any
time,  without the payment of any penalty,  upon 60 days' written  notice to the
Trust.  This  Agreement  will  automatically  terminate  in  the  event  of  its
assignment. Any notice under this Agreement shall be given in writing, addressed
and delivered or mailed postpaid,  to the other party at the principal office of
such party.

     As used in this Section 9, the terms "assignment," "interested person," and
"a vote of a  majority  of the  outstanding  voting  securities"  shall have the
respective  meanings set forth in Section 2(a)(4),  Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.

     10. Name of Advisor.  The parties  agree that the Advisor has a proprietary
interest in the name "UBS," and the Trust agrees to promptly take such action as
may be necessary to delete from its corporate name and/or the name of the Series
any reference to the name of the Advisor promptly after receipt from the Advisor
of a written request therefor.

     11. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision,  statute, rule or otherwise,  the remainder of this
Agreement shall not be affected thereby.

     12.  Amendment of this  Agreement.  No provision of this  Agreement  may be
changed,  waived,  discharged or terminated orally, but only by an instrument in
writing  signed by the party against which  enforcement  of the change,  waiver,
discharge or termination is sought,  and no material amendment of this Agreement
shall  be  effective  until  approved  by  vote  of a  majority  of the  Series'
outstanding voting securities.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this ____ day of _________, 2007.

THE UBS FUNDS                                   THE UBS FUNDS


By:                                             By:
    Name:                                            Name:
    Title:                                           Title:


UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.     UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.


By:                                             By:
    Name:                                            Name:
    Title:                                           Title:

EX-99.M.3.I 5 ex99m3i.htm

                                                         EXHIBIT NO. EX-99.m.3.i

                         THE UBS FUNDS - CLASS C SHARES

                            DISTRIBUTION FEE ADDENDUM

                           PLAN PURSUANT TO RULE 12b-1

                    UNDER THE INVESTMENT COMPANY ACT OF 1940

     WHEREAS,  The UBS Funds ("Fund") is registered under the Investment Company
Act of 1940,  as amended  ("1940  Act"),  as an open-end  management  investment
company; and

     WHEREAS,  the Fund adopted a Plan pursuant to Rule 12b-1 under the 1940 Act
("Plan") on October 29, 2001, as amended from time to time,  with respect to the
Class C shares  ("Class C shares") of its existing  series of shares and of such
other series as may be designated by the Fund's board of trustees ("Board") that
have Class C shares established; and

     WHEREAS,  the Fund  has  established  a new  series  designated  as the UBS
Absolute  Return Bond Fund (the "Series") and the Fund desires to adopt the Plan
with respect to the Class C shares of the Series; and

     WHEREAS,  the Fund  has  entered  into a  Principal  Underwriting  Contract
("Contract")  with UBS Global  Asset  Management  (US) Inc.  ("UBS  Global  AM")
pursuant to which UBS Global AM has agreed to serve as Principal  Underwriter of
the Class C shares of the Series;

     NOW, THEREFORE, the Fund hereby executes this Distribution Fee Addendum and
adopts the Plan with  respect to the Class C shares of the Series in  accordance
with  Rule  12b-1  under the 1940 Act and  pursuant  to the  following  terms as
required by Paragraph 1B of the Plan:

     1.   The Series is authorized to pay to UBS Global AM, as compensation  for
          UBS Global AM's services as Principal Underwriter of the Series' Class
          C shares,  a  distribution  fee at the rate of 0.25% on an  annualized
          basis of the average  daily net assets of the Series'  Class C shares.
          Such fee shall be calculated  and accrued daily and paid monthly or at
          such other intervals as the Board shall determine.

     2.   The Series is authorized to pay to UBS Global AM, as compensation  for
          UBS Global AM's services as Principal Underwriter of the Series' Class
          C shares, a service fee at the rate of 0.25% on an annualized basis of
          the average daily net assets of the Series'  Class C shares.  Such fee
          shall be  calculated  and  accrued  daily and paid  monthly or at such
          other intervals as the Board shall determine.

     3.   The Series is subject to all the terms and conditions set forth in the
          Plan.

     IN WITNESS WHEREOF, the Fund has executed this Distribution Fee Addendum on
the day and year set forth below in New York, New York.

Date:  December 14, 2004

ATTEST:                                              THE UBS FUNDS

By: /s/ Maria Suarez                                 By: /s/ Mark F. Kemper
                                                     Mark F. Kemper, Managing
                                                     Director and Secretary

EX-99.M.4 6 ex99m4.htm

                                                                       EX-99.m.4

                         THE UBS FUNDS - CLASS A SHARES

                            SHAREHOLDER SERVICES PLAN

     WHEREAS,  The UBS Funds ("Fund") is registered under the Investment Company
Act of 1940,  as amended  ("1940  Act"),  as an open-end  management  investment
company, and has sixteen distinct series of shares of beneficial  interest,  one
of which has been designated as the UBS Absolute Return Bond Fund ("Series") and
corresponds to a distinct portfolio; and

     WHEREAS,  UBS Global Asset Management (US) Inc. ("UBS Global AM") serves as
Principal  Underwriter  of the  Series  and  performs  or  contracts  with other
intermediaries to perform certain services for shareholders of Class A shares;

     NOW, THEREFORE,  the Fund hereby adopts this Plan with respect to the Class
A shares of the Series in accordance with Rule 12b-1 under the 1940 Act.

     1.   Class  A  shares  of  the  Series  will  pay  to  UBS  Global  AM,  as
          compensation  for the provision of services to shareholders of Class A
          shares,  a service fee at the rate of 0.15% on an annualized  basis of
          the  average  daily  net  assets  of such  shares.  Such fee  shall be
          calculated  and  accrued  daily  and  paid  monthly  or at such  other
          intervals, as the Fund's Board of Trustees ("Board") shall determine.

     2.   The service fee received by UBS Global AM is for  providing  "personal
          service and/or the  maintenance  of shareholder  accounts" as provided
          for  in  Section  2830(b)(9)  of the  NASD  Conduct  Rules,  including
          expenditures  for  overhead  and other  expenses of UBS Global AM, and
          telephone and other communications  expenses relating to the provision
          of shareholder services. If the NASD amends the definition of "service
          fee" or  adopts a  related  definition  intended  to  define  the same
          concept,  the services  provided under the Plan shall be automatically
          amended,  without  further  action of the parties,  to conform to such
          definition.

     3.   This Plan must be approved,  together with any related agreements,  by
          votes of a majority of both (a) the Board and (b) those Board  members
          of the Fund who are not  "interested  persons" of the Fund and have no
          direct or indirect financial interest in the operation of this Plan or
          any agreements related thereto ("Independent Board Members"),  cast in
          person at a meeting (or meetings)  called for the purpose of voting on
          such approval.

     4.   This Plan shall  continue in full force and effect for so long as such
          continuance is  specifically  approved at least annually in the manner
          provided for approval of this Plan in Paragraph 3.

     5.   UBS Global AM shall  provide to the Board and the Board shall  review,
          at least  quarterly,  a written  report of the amounts  expended  with
          respect to servicing  shareholders  of Class A shares and the purposes
          for which such expenditures were made. UBS Global AM shall submit only
          information  regarding  amounts  expended  for  servicing  shareholder
          accounts to the Board in support of the service fee payable hereunder.

     6.   This Plan may be terminated  with respect to the Class A shares at any
          time by vote of the Board,  by vote of a majority  of the  Independent
          Board  Members,  or by vote of a majority  of the  outstanding  voting
          securities of the Class A shares.

     7.   This Plan may not be  amended  to  increase  materially  the amount of
          service fee provided for in Paragraph 1 hereof  unless such  amendment
          is approved by a majority of the outstanding  voting securities of the
          Class A shares. No material amendment to the Plan shall be made unless
          approved in the manner  provided  for initial  approval in Paragraph 3
          hereof.

     8.   The amount of the  service fee payable to UBS Global AM is not related
          directly to expenses incurred by UBS Global AM on behalf of the Series
          or its Class A shares in providing  services to shareholders.  Neither
          the Series nor Class A Shares is obligated reimburse UBS Global AM for
          such expenses. The service fee set forth in Paragraph 1 hereof will be
          paid to UBS Global AM until the Plan is terminated or not renewed.  If
          the Plan is terminated or not renewed,  any  service-related  expenses
          incurred  by UBS Global AM in excess of  payments  of the  service fee
          specified  in  Paragraph 1 hereof  that UBS Global AM has  received or
          accrued through the termination date are the sole  responsibility  and
          liability of UBS Global AM, and are not  obligations  of the Series or
          Class A shares.

     9.   While this Plan is in effect,  the  selection  and  nomination  of the
          Board members who are  Independent  Board Members of the Fund shall be
          committed to the discretion of the Independent Board Members.

     10.  As used in this Plan, the terms  "majority of the  outstanding  voting
          securities"  shall have the same  meaning  as those  terms have in the
          1940 Act.

     11.  The Fund shall preserve  copies of this Plan (including any amendments
          thereto) and any related  agreements  and all reports made pursuant to
          Paragraph  5 hereof  for a period of not less than six years  from the
          date of this Plan, the first two years in an easily accessible place.

     12.  The Board members of the Fund and the shareholders of the Series shall
          not be liable for any obligations of the Fund or the Series under this
          Plan,  and UBS Global AM or any other person,  in asserting any rights
          or claims under this Plan,  shall look only to the assets and property
          of the Fund or such Series in settlement  of such right or claim,  and
          not to such Board members or shareholders.

IN WITNESS WHEREOF,  the Fund has executed this Shareholder Services Plan on the
day and year set forth below in New York, New York.

Date:  December 14, 2004

ATTEST:                                              THE UBS FUNDS

By: /s/ Maria Suarez                                 By: /s/ Mark F. Kemper
                                                     Mark F. Kemper, Managing
                                                     Director and Secretary

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