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 or the distributor 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., though some fund companies may choose to calculate this rate expressed in basis points on assets. Based on the networking level of the Mutual Fund Position (Omnibus) and the associated additional account services provided by UBS, the networking rate can be higher than $12 for certain mutual funds during UBS's transition into an Omnibus networking provider.

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 November 2008.

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 mutual funds from more than 200 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.

Class Y shares: Generally, shareholders pay no front-end sales charges on Class Y shares, nor does that share class pay ongoing 12b-1 distribution or service fees. We have entered into an agreement with our affiliate, UBS Global Asset Management (US) Inc., pursuant to which UBS Global Asset Management (US) Inc., as principal underwriter of its funds, may make payments out of its own resources for the sales of Class Y shares to eligible purchasers. The payments consist of a one-time finder's fee consistent with the Fund's Class A share Reallowance to Selected Dealers' schedule as indicated in the relevant funds's prospectus and, beginning in month 13 after purchase, an annual fee in an amount up to 20 basis points for an equity fund, an asset allocation fund or balanced fund; 15 basis points for a fixed-income fund; and 5 basis points for an index fund. UBS Global Asset Management (US) Inc. does not make these payments on accounts holding Class Y shares for employee or employee-related clients. 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 Asset Management (US) Inc. reserves the right to suspend these payments at any time in its sole discretion. We pay a portion of these payments to the Financial Advisor originating the sale. These payments may create a financial incentive for our brokers to recommend Class Y shares of UBS proprietary funds over non-proprietary products.

In addition, our Financial Advisors may also receive "finder's fees" from certain mutual fund companies. Such finder's fees may be up to 1% of sales of a particular mutual fund. Generally, these finder's fees offset other fees payable to UBS Financial Services Inc. by the client purchasing the particular mutual fund.

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.