UBS Financial Services Inc. receives networking fees in consideration for certain services, which are ancillary to the effecting of mutual fund transactions that we provide on behalf of mutual funds.  These fees generally are paid from investor assets in mutual funds, but in some cases may be subsidized in part by affiliates of the mutual funds, and are generally calculated by applying our standard networking rate of $12 to each mutual fund position that exceeds $500 and is held at UBS Financial Services Inc.

In addition to sales loads, 12b-1 fees, networking and processing fees, UBS Financial Services Inc.  receives other compensation from certain distributors or advisors of mutual funds that we sell.  These separate compensation amounts (commonly referred to as "revenue sharing") are based on two components (i) the amount of sales by UBS Financial Services Inc. of a particular mutual fund family to our clients (excluding sales through wrap-fee programs), and (ii) the asset value of a particular mutual fund family's shares held by our clients at UBS Financial Services Inc.  We require that these payments be made directly from the distributor or advisor, and not from the mutual funds or indirectly through mutual fund portfolio trading commissions, because revenue sharing payments are intended to compensate us for ancillary services in connection with effecting sales of mutual fund shares.  Except as noted below, none of these amounts are rebated to you or paid to the Financial Advisor or his or her branch office.

The revenue sharing information below is current as of the revision date: Last revised June 2007

Many mutual funds companies pay revenue sharing to us.  UBS Financial Services Inc. determines the level of access to our branches based on our own review and evaluation of mutual funds and fund families. There are multiple factors involved in determining a particular mutual fund's level of access to our branches.  Although revenue sharing may be one factor, others include participation of funds in researched investment models, and branch discretion. 

In general, we charge each mutual fund family the following amounts: (i)  0.05% per year (paid quarterly) on all sales of mutual fund shares (excluding sales through wrap-fee programs); (ii) up to 0.10% per year (paid quarterly) of the asset value of all equity mutual fund shares held at UBS Financial Services Inc.; and, (iii) up to 0.075% per year (paid quarterly) of the asset value of all fixed income mutual fund shares held at UBS Financial Services Inc. (other than money market, institutional, and offshore funds).  Except as noted below, this calculation includes shares of affiliated and non-affiliated funds in our wrap-fee programs, but does not include UBS PACE Money Market investments or mutual fund assets held at other financial institutions.  Further, we may institute caps at certain asset and sales levels, as well as comprehensive caps, and may exclude certain mutual fund shares from the above calculations.  And although we seek to apply a level, standard payment schedule for all of the mutual fund companies whose funds we sell, we recognize that mutual fund companies approach revenue sharing in a variety of ways, and that some mutual fund companies may decline to pay revenue sharing exactly at the levels listed above or at all, which may present a financial disincentive for us to promote the sale of those funds that do not pay us at the levels listed above.

Revenue sharing payments may present a conflict between our interests and those of our customers, because the payments give us a financial incentive to recommend that our customers buy and hold shares of those funds that we maintain on our distribution platform and for which we receive revenue sharing payments.  Although approximately 3,000 mutual funds from nearly 170 different mutual fund families are available through our distribution platform, this is only part of the universe of mutual funds that are available to our customers in the marketplace.  Certain other mutual funds may be purchased by our customers through the FundConnect system at a charge of $20 per transaction, plus other customary sales charges. 

In addition to the payments described above, from time to time, mutual fund distributors and/or advisors will reimburse UBS Financial Services Inc. for expenses we incur in connection with certain training and educational meetings, conferences or seminars. Also, in the ordinary course of business, our Financial Advisors may receive promotional items, meals or entertainment, or other similar "non cash" compensation from representatives of the mutual fund companies with whom we do business.

UBS Financial Services Inc. remains committed to investing in long-term relationships and we remain dedicated to helping you pursue your investment goals. If you have further questions regarding mutual funds, please feel free to contact your Financial Advisor.