-----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, BC80tvUWeae2Vumeb5UExj/Y4bMEN7AZ8bGYpRQPC5AfApO6731RVxrEOu5TK9yH yZV4br1XYVr3cggfb28b+Q== 0001209286-06-000273.txt : 20061108 0001209286-06-000273.hdr.sgml : 20061108 20061108131424 ACCESSION NUMBER: 0001209286-06-000273 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060831 FILED AS OF DATE: 20061108 DATE AS OF CHANGE: 20061108 EFFECTIVENESS DATE: 20061108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS INVESTMENT TRUST CENTRAL INDEX KEY: 0000873803 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06292 FILM NUMBER: 061196513 BUSINESS ADDRESS: STREET 1: C/O UBS GLOBAL ASSET MANAGEMENT (US) INC STREET 2: 51 WEST 52ND ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212 882 5575 MAIL ADDRESS: STREET 1: C/O UBS GLOBAL ASSET MANAGEMENT (US) INC STREET 2: 51 WEST 52ND ST CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: BRINSON INVESTMENT TRUST DATE OF NAME CHANGE: 20010625 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER INVESTMENT TRUST DATE OF NAME CHANGE: 19960511 FORMER COMPANY: FORMER CONFORMED NAME: KIDDER PEABODY INVESTMENT TRUST DATE OF NAME CHANGE: 19920929 0000873803 S000002487 UBS U.S. Allocation Fund C000006689 Class A PWTAX C000006690 Class B PWTBX C000006691 Class C KPAAX C000006692 Class Y PWTYX N-CSR 1 e51966.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-06292 -------------------------------------------------------- UBS Investment Trust ---------------------------------------------------------------- (Exact name of registrant as specified in charter) 51 West 52nd Street, New York, New York 10019-6114 ---------------------------------------------------------------- (Address of principal executive offices) (Zip code) Mark F. Kemper, Esq. UBS Global Asset Management 51 West 52nd Street New York, NY 10019-6114 (Name and address of agent for service) Copy to: Jack W. Murphy, Esq. Dechert LLP 1775 I Street, N.W. Washington, DC 20006-2401 Registrant's telephone number, including area code: 212-882 5000 Date of fiscal year end: August 31 Date of reporting period: August 31, 2006 ITEM 1. REPORTS TO STOCKHOLDERS. - -------------------------------- [LOGO OF UBS] UBS Global Asset Management UBS U.S. ALLOCATION FUND ANNUAL REPORT AUGUST 31, 2006 UBS U.S. ALLOCATION FUND October 16, 2006 DEAR SHAREHOLDER, We present you with the annual report for UBS U.S. Allocation Fund (the "Fund") for the fiscal year ended August 31, 2006. PERFORMANCE Over the fiscal year ended August 31, 2006, the Fund's Class A shares returned 6.84% before deducting the maximum sales charge (after deducting maximum sales charges, the return was 0.98%). During the same period, the S&P 500 Index returned 8.88% and the U.S. Allocation Fund Index* (the "Index") returned 6.46%. (Returns for all share classes over various time periods are shown in "Performance at a glance" on page 6; please note that the returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.) UBS U.S. ALLOCATION FUND INVESTMENT GOAL: Total return, consisting of long-term capital appreciation and current income. PORTFOLIO MANAGERS: Portfolio Management Team, including Brian D. Singer, CFA UBS Global Asset Management (Americas) Inc. COMMENCEMENT: Class A--May 10, 1993 Class B--January 30, 1996 Class C--July 22, 1992 Class Y--May 10, 1993 DIVIDEND PAYMENTS: Annually, if any. AN INTERVIEW WITH LEAD PORTFOLIO MANAGER BRIAN D. SINGER Q. WHAT WAS THE ECONOMIC ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? A. Economic signals during the past fiscal year were quite mixed and, in certain areas, almost contradictory. Throughout the fiscal year, gross domestic product (GDP), unemployment and consumer confidence figures, despite being somewhat volatile, all showed signs of improvement. On the other hand, oil prices climbed significantly higher in the wake of a record-breaking 2005 hurricane season and inflation increasingly became an issue of concern. Throughout the year, equity market returns were quite solid, as investors seemed to focus primarily on the good economic news being reported. * An unmanaged index compiled by the advisor, constructed as follows: from July 22, 1992 (the Fund's inception) until February 29, 2004: 100% S&P 500 Index; from March 1, 2004 until May 31, 2005: 65% Russell 3000 Index, 30% Lehman Brothers Aggregate Bond Index, 5% Merrill Lynch US High Yield Cash Pay Index; and from June 1, 2005 until present: 65% Russell 3000 Index, 30% Lehman Brothers Aggregate Bond Index, 5% Merrill Lynch US High Yield Cash Pay Constrained Index. - -------------------------------------------------------------------------------- 1 UBS U.S. ALLOCATION FUND International stocks continued to outperform US equities, while fixed income markets in aggregate generally remained fairly benign. Q. HOW DID THE FEDERAL RESERVE BOARD (THE "FED") REACT IN THIS ECONOMIC ENVIRONMENT? A. The Fed continued its tightening policy throughout the majority of the reporting period, raising short-term interest rates seven times before pausing during its August meeting. After the reporting period ended, the Fed again opted to leave rates unchanged during its September meeting. Although short-term interest rates have been held steady recently, the Fed indicated that future rate changes will be "data dependent," and has not ruled out the possibility of future tightening in the months ahead. Q. HOW DID YOU ALLOCATE THE PORTFOLIO OVER THE REPORTING PERIOD? A. The most significant divergence from the Index's allocations, from an asset class perspective, was within cash equivalents. At the beginning of the reporting period, we held a sizable overweight to cash and cash equivalents, as we believed equities to be fairly valued, while investment-grade and high yield bonds appeared overvalued. We trimmed our cash position throughout the year, however, bringing the portfolio's asset class weightings more in line with those of the benchmark. In looking at the fixed income side of the portfolio, we found it necessary to position the portfolio defensively in a rising interest rate environment. Opportunities within high yield bonds were not abundant, and the portfolio maintained a weighting that was less than that of the benchmark throughout the period. We did find certain sectors of the fixed-income market attractive, however, and focused on mortgage- and asset-backed securities when possible. Overall, the Fund's fixed income weightings over the course of the fiscal year were approximately 27% to US investment grade bonds and 2% to high yield bonds, compared with 30% and 5% for the Index, respectively. The portfolio's positions in equities remained in line with the Index's exposure. As corporate earnings in the US rose, stock market prices generally kept pace, meaning we didn't encounter any significant top-down opportunities in the asset class. Security selection within equities was solid, and represented the main driver of the Fund's outperformance of the Index during the reporting period. Q. WHAT WERE SOME OF THE TRENDS THAT DROVE STOCK PRICES HIGHER DURING THE REPORTING PERIOD? A. Investors generally were willing to concentrate on the more positive economic data that emerged during the reporting period, and stocks - -------------------------------------------------------------------------------- 2 UBS U.S. ALLOCATION FUND across market capitalizations and styles posted solid returns. Broadly speaking, investors seemed to have a significant appetite for risk, as evidenced by the strong performance of international and emerging markets equities. Domestically, that translated into strong returns for smaller company stocks and stocks with above-average volatility. Q. WHAT PARTICULAR AREAS OF THE STOCK MARKET DID YOU FIND COMPELLING? A. Our security selection process is driven by bottom-up analysis. As always, we seek to allocate assets to what we believe are attractively valued securities representing the risks we feel are most likely to be compensated. In terms of industry exposure, we maintained overweights to banks, pharmaceuticals and biotechnology, and software during the reporting period. Our proprietary research suggests meaningful changes are afoot in the large cap pharmaceutical competitive landscape, such as generic challenges to blockbuster drug patents and increasing FDA safety pressures. The 2006 Medicare prescription drug benefit program rollout will likely create both significant price pressure and opportunities, and we have attempted to position the portfolio to capitalize on those potential opportunities. We also maintained an overweight to the telecom industry, where consolidation continues with increasing integration of wireless and wire-line capabilities. While we believe it has been overhyped recently, we think voice-over-Internet protocol (VOIP) will gain mainstream acceptance over the next few years. The Fund's underweights to the energy and, to a lesser extent, the materials sector negatively impacted performance. We find both to be significantly overvalued, and view current oil and commodity prices to be unsustainably high. As a result, we continue to underweight the energy reserves sector and the entire materials industry, with the exception of construction and real property. Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE FUND OVER THE COMING MONTHS? A. We believe the US economy is better positioned than recent headlines suggest. Our analysis indicates that gross domestic product may slip from its recent above-average growth rate to a more normal, trend-like range. Inflation, while an issue of some concern, is not likely to send the economy into a tailspin. Current short-term interest rates appear neutral, rather than restrictive, and more opportunities are beginning to emerge in the fixed income markets. That said, we believe the vast majority of market opportunities are bottom-up in nature, and with markets appearing fairly valued, we believe this dynamic may continue to be the case over the near term. Our intensive security selection process, - -------------------------------------------------------------------------------- 3 UBS U.S. ALLOCATION FUND within both equity and fixed income asset classes, should help position the portfolio to benefit during such a market environment. We thank you for your continued support and welcome any comments or questions you may have. For additional information on the UBS family of funds,* please contact your financial advisor, or visit us at www.ubs.com/globalam-us. Sincerely, /s/ Kai R. Sotorp Kai R. Sotorp President UBS U.S. Allocation Fund Head of the Americas UBS Global Asset Management (Americas) Inc. /s/ Brian D. Singer Brian D. Singer, CFA Lead Portfolio Manager UBS U.S. Allocation Fund Americas Chief Investment Officer UBS Global Asset Management (Americas) Inc. This letter is intended to assist shareholders in understanding how the Fund performed during the fiscal year ended August 31, 2006. The views and opinions in the letter were current as of October 16, 2006. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program. * Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us. - -------------------------------------------------------------------------------- 4 UBS U.S. ALLOCATION FUND COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CLASS C SHARES OF THE UBS U.S. ALLOCATION FUND, THE S&P 500* INDEX AND US ALLOCATION FUND INDEX** FROM AUGUST 31, 1996 THROUGH AUGUST 31, 2006 (UNAUDITED) [CHART OF COMPARISON]
US ALLOCATION UBS U.S. ALLOCATION S&P 500 INDEX FUND INDEX FUND CLASS C 08/31/96 $10,000 $10,000 $10,000 09/30/96 $10,563 $10,563 $10,546 10/31/96 $10,854 $10,854 $10,825 11/30/96 $11,675 $11,675 $11,625 12/31/96 $11,443 $11,443 $11,378 01/31/97 $12,158 $12,158 $12,069 02/28/97 $12,254 $12,254 $12,138 03/31/97 $11,750 $11,750 $11,621 04/30/97 $12,452 $12,452 $12,306 05/31/97 $13,210 $13,210 $13,035 06/30/97 $13,801 $13,801 $13,602 07/31/97 $14,900 $14,900 $14,668 08/31/97 $14,065 $14,065 $13,820 09/30/97 $14,835 $14,835 $14,555 10/31/97 $14,340 $14,340 $14,044 11/30/97 $15,004 $15,004 $14,674 12/31/97 $15,261 $15,261 $14,905 01/31/98 $15,430 $15,430 $15,056 02/28/98 $16,543 $16,543 $16,117 03/31/98 $17,390 $17,390 $16,920 04/30/98 $17,565 $17,565 $17,020 05/31/98 $17,263 $17,263 $16,794 06/30/98 $17,964 $17,964 $17,441 07/31/98 $17,773 $17,773 $17,234 08/31/98 $15,203 $15,203 $14,717 09/30/98 $16,177 $16,177 $15,640 10/31/98 $17,493 $17,493 $16,889 11/30/98 $18,553 $18,553 $17,893 12/31/98 $19,622 $19,622 $18,896 01/31/99 $20,443 $20,443 $19,652 02/28/99 $19,807 $19,807 $19,012 03/31/99 $20,600 $20,600 $19,749 04/30/99 $21,398 $21,398 $20,492 05/31/99 $20,892 $20,892 $19,979 06/30/99 $22,052 $22,052 $21,056 07/31/99 $21,363 $21,363 $20,377 08/31/99 $21,258 $21,258 $20,248 09/30/99 $20,675 $20,675 $19,665 10/31/99 $21,983 $21,983 $20,883 11/30/99 $22,430 $22,430 $21,280 12/31/99 $23,752 $23,752 $22,227 01/31/00 $22,558 $22,558 $21,605 02/29/00 $22,131 $22,131 $21,429 03/31/00 $24,296 $24,296 $22,489 04/30/00 $23,566 $23,566 $22,168 05/31/00 $23,082 $23,082 $21,965 06/30/00 $23,651 $23,651 $22,246 07/31/00 $23,281 $23,281 $21,965 08/31/00 $24,728 $24,727 $22,992 09/30/00 $23,422 $23,422 $22,430 10/31/00 $23,323 $23,323 $22,403 11/30/00 $21,484 $21,484 $21,559 12/31/00 $21,590 $21,590 $21,574 01/31/01 $22,356 $22,356 $22,331 02/28/01 $20,317 $20,317 $20,264 03/31/01 $19,030 $19,030 $18,954 04/30/01 $20,509 $20,509 $20,402 05/31/01 $20,646 $20,646 $20,512 06/30/01 $20,144 $20,144 $19,988 07/31/01 $19,946 $19,946 $19,762 08/31/01 $18,697 $18,697 $18,503 09/30/01 $17,187 $17,187 $16,981 10/31/01 $17,515 $17,515 $17,280 11/30/01 $18,858 $18,858 $18,583 12/31/01 $19,024 $19,024 $18,720 01/31/02 $18,746 $18,746 $18,427 02/28/02 $18,385 $18,385 $18,046 03/31/02 $19,076 $19,076 $18,698 04/30/02 $17,919 $17,919 $17,534 05/31/02 $17,787 $17,787 $17,380 06/30/02 $16,520 $16,520 $16,122 07/31/02 $15,233 $15,233 $14,834 08/31/02 $15,333 $15,333 $14,914 09/30/02 $13,667 $13,667 $13,275 10/31/02 $14,869 $14,869 $14,424 11/30/02 $15,745 $15,745 $15,251 12/31/02 $14,820 $14,820 $14,329 01/31/03 $14,431 $14,431 $13,934 02/28/03 $14,215 $14,215 $13,707 03/31/03 $14,353 $14,353 $13,824 04/30/03 $15,535 $15,535 $14,936 05/31/03 $16,354 $16,354 $15,705 06/30/03 $16,562 $16,562 $15,888 07/31/03 $16,854 $16,854 $16,144 08/31/03 $17,183 $17,183 $16,436 09/30/03 $17,001 $17,001 $16,239 10/31/03 $17,962 $17,962 $17,132 11/30/03 $18,120 $18,120 $17,256 12/31/03 $19,071 $19,071 $18,129 01/31/04 $19,421 $19,421 $18,437 02/29/04 $19,691 $19,691 $18,664 03/31/04 $19,394 $19,590 $18,518 04/30/04 $19,089 $19,167 $18,254 05/31/04 $19,351 $19,309 $18,298 06/30/04 $19,727 $19,606 $18,606 07/31/04 $19,074 $19,195 $18,173 08/31/04 $19,152 $19,374 $18,466 09/30/04 $19,359 $19,597 $18,686 10/31/04 $19,655 $19,874 $19,001 11/30/04 $20,450 $20,437 $19,514 12/31/04 $21,146 $20,982 $20,124 01/31/05 $20,631 $20,657 $19,842 02/28/05 $21,065 $20,931 $19,983 03/31/05 $20,692 $20,640 $19,828 04/30/05 $20,299 $20,422 $19,643 05/31/05 $20,945 $21,010 $20,035 06/30/05 $20,975 $21,158 $20,353 07/31/05 $21,755 $21,679 $20,760 08/31/05 $21,556 $21,633 $20,686 09/30/05 $21,731 $21,679 $20,767 10/31/05 $21,369 $21,355 $20,664 11/30/05 $22,177 $21,932 $21,138 12/31/05 $22,185 $22,018 $21,288 01/31/06 $22,772 $22,509 $21,625 02/28/06 $22,834 $22,568 $21,708 03/31/06 $23,118 $22,760 $21,813 04/30/06 $23,428 $22,915 $21,865 05/31/06 $22,754 $22,429 $21,355 06/30/06 $22,785 $22,463 $21,415 07/31/06 $22,926 $22,551 $21,663 08/31/06 $23,471 $23,030 $21,932
[END CHART] The graph depicts the performance of UBS U.S. Allocation Fund Class C shares versus the S&P 500 Index and UBS US Allocation Fund Index over the 10 years ended August 31, 2006. The performance of the other share classes will vary from the performance of the class shown based on the difference in sales charges and fees paid by shareholders investing in different share classes. Past performance does not predict future performance and the performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance results assume reinvestment of all dividend and capital gain distributions at net asset value on ex-dividend dates. It is important to note that the Fund is a professionally managed portfolio, while the Indexes are not available for investment and are unmanaged. The comparison is shown for illustrative purposes only. * The S&P 500 Index is an unmanaged, weighted index comprising 500 widely held common stocks varying in composition and is not available for direct investment. ** An unmanaged index compiled by the advisor, constructed as follows: from July 22, 1992 (the Fund's inception) until February 29, 2004: 100% S&P 500 Index; from March 1, 2004 until May 31, 2005: 65% Russell 3000 Index, 30% Lehman Brothers Aggregate Bond Index, and 5% Merrill Lynch US High Yield Cash Pay Index; and from June 1, 2005 until present: 65% Russell 3000 Index, 30% Lehman Brothers Aggregate Bond Index, and 5% Merrill Lynch US High Yield Cash Pay Constrained Index. - -------------------------------------------------------------------------------- 5 UBS U.S. ALLOCATION FUND PERFORMANCE AT A GLANCE (UNAUDITED) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 08/31/06
1 YEAR 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------ Class A* 6.84% 4.23% 8.99% -------------------------------------------------- Before deducting maximum sales charge Class B** 5.99 3.43 8.49 -------------------------------------------------- Class C*** 6.02 3.46 8.17 -------------------------------------------------- Class Y**** 7.22 4.58 9.32 ================================================================================================ Class A* 0.98 3.06 8.37 -------------------------------------------------- After deducting maximum sales charge Class B** 0.99 3.08 8.49 -------------------------------------------------- Class C*** 5.02 3.46 8.17 ================================================================================================ S&P 500 Index+ 8.88 4.65 8.91 - ------------------------------------------------------------------------------------------------ U.S. Allocation Fund Index++ 6.46 4.26 8.70 - ------------------------------------------------------------------------------------------------ Lipper Flexible Portfolio Funds median+++ 6.74 5.65 7.99 ================================================================================================
For most recent quarter-end performance, please refer to the "Average Annual Total Returns" table on page 7. * Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees. ** Maximum contingent deferred sales charge for Class B shares is 5% imposed on redemptions and is reduced to 0% after a maximum of six years. Class B shares bear ongoing 12b-1 service and distribution fees. *** Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees. **** The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees. + The S&P 500 Index is an unmanaged, weighted index comprising 500 widely held common stocks varying in composition and is not available for direct investment. ++ An unmanaged index compiled by the advisor, constructed as follows: from July 22, 1992 (the Fund's inception) until February 29, 2004: 100% S&P 500 Index; from March 1, 2004 until May 31, 2005: 65% Russell 3000 Index, 30% Lehman Brothers Aggregate Bond Index, and 5% Merrill Lynch US High Yield Cash Pay Index; and from June 1, 2005 until present: 65% Russell 3000 Index, 30% Lehman Brothers Aggregate Bond Index, and 5% Merrill Lynch US High Yield Cash Pay Constrained Index. +++ Lipper peer group data calculated by Lipper Inc; used with permission. The Lipper median is the return of the fund that places in the middle of a Lipper peer group. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE, AND THE PERFORMANCE INFORMATION PROVIDED DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE RESULTS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS AT NET ASSET VALUE ON THE EX-DIVIDEND DATES. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-END PERFORMANCE FIGURES, PLEASE VISIT HTTP://WWW.UBS.COM. - -------------------------------------------------------------------------------- 6 UBS U.S. ALLOCATION FUND PERFORMANCE AT A GLANCE (UNAUDITED) (CONCLUDED) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 09/30/06
1 YEAR 5 YEARS 10 YEARS - ------------------------------------------------------------------------------------------------ Class A* 8.63% 6.47% 8.63% -------------------------------------------------- Before deducting maximum sales charge Class B** 7.78% 5.65% 8.14% -------------------------------------------------- Class C*** 7.85% 5.69% 7.82% -------------------------------------------------- Class Y**** 9.02% 6.84% 8.97% ================================================================================================ Class A* 2.67% 5.27% 8.02% -------------------------------------------------- After deducting maximum sales charge Class B** 2.78% 5.33% 8.14% -------------------------------------------------- Class C*** 6.85% 5.69% 7.82% ================================================================================================
* Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees. ** Maximum contingent deferred sales charge for Class B shares is 5% imposed on redemptions and is reduced to 0% after a maximum of six years. Class B shares bear ongoing 12b-1 service and distribution fees. *** Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees. **** The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE, AND THE PERFORMANCE INFORMATION PROVIDED DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE RESULTS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS AT NET ASSET VALUE ON THE EX-DIVIDEND DATES. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-END PERFORMANCE FIGURES, PLEASE VISIT HTTP://WWW.UBS.COM. - -------------------------------------------------------------------------------- 7 UBS U.S. ALLOCATION FUND UNDERSTANDING YOUR FUND'S EXPENSES (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transactional costs (as applicable), including sales charges (loads); and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees (if applicable); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example below is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, March 1, 2006 to August 31, 2006. ACTUAL EXPENSES The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for each class of shares under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return for each class of shares. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing Fund costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing Fund costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - -------------------------------------------------------------------------------- 8 UBS U.S. ALLOCATION FUND UNDERSTANDING YOUR FUND'S EXPENSES (UNAUDITED) (CONCLUDED)
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* MARCH 1, 2006 AUGUST 31, 2006 03/01/06 TO 08/31/06 - ------------------------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,014.20 $4.62 - ------------------------------------------------------------------------------------------------- Hypothetical (5% annual return before expenses) 1,000.00 1,020.62 4.63 ================================================================================================= Class B Actual 1,000.00 1,010.40 8.51 - ------------------------------------------------------------------------------------------------- Hypothetical (5% annual return before expenses) 1,000.00 1,016.74 8.54 ================================================================================================= Class C Actual 1,000.00 1,010.30 8.31 - ------------------------------------------------------------------------------------------------- Hypothetical (5% annual return before expenses) 1,000.00 1,016.94 8.34 ================================================================================================= Class Y Actual 1,000.00 1,016.10 2.79 - ------------------------------------------------------------------------------------------------- Hypothetical (5% annual return before expenses) 1,000.00 1,022.43 2.80 =================================================================================================
* Expenses are equal to the Fund's annualized net expense ratios: Class A: 0.91%, Class B: 1.68%, Class C: 1.64% and Class Y: 0.55%, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period). - -------------------------------------------------------------------------------- 9 UBS U.S. ALLOCATION FUND PORTFOLIO STATISTICS (UNAUDITED)
CHARACTERISTICS 08/31/06 02/28/06 08/31/05 - ----------------------------------------------------------------------------------------------------- Net Assets (mm) $892.6 $991.8 $1,068.70 - ----------------------------------------------------------------------------------------------------- Number of Securities 491 486 484 - ----------------------------------------------------------------------------------------------------- PORTFOLIO COMPOSITION* 08/31/06 02/28/06 08/31/05 - ----------------------------------------------------------------------------------------------------- Stocks 66.1% 64.8% 64.0% - ----------------------------------------------------------------------------------------------------- Bonds 31.8 29.6 26.7 - ----------------------------------------------------------------------------------------------------- Cash equivalents and other assets less liabilities 2.1 5.6 9.3 - ----------------------------------------------------------------------------------------------------- Total 100.0% 100.0% 100.0% ===================================================================================================== TOP FIVE EQUITY SECTORS* 08/31/06 02/28/06 08/31/05 - ----------------------------------------------------------------------------------------------------- Financials 17.2% 16.4% 14.7% - ----------------------------------------------------------------------------------------------------- Health Care 11.9 12.0 12.7 - ----------------------------------------------------------------------------------------------------- Information Technology 9.2 9.9 7.1 - ----------------------------------------------------------------------------------------------------- Consumer Discretionary 9.1 8.1 9.3 - ----------------------------------------------------------------------------------------------------- Industrials 6.5 7.5 6.9 - ----------------------------------------------------------------------------------------------------- Total 53.9% 53.9% 50.7% ===================================================================================================== TOP TEN EQUITY SECURITIES* 08/31/06 02/28/06 08/31/05 - ----------------------------------------------------------------------------------------------------- Citigroup 2.9% Citigroup 2.6% Citigroup 2.5% - ----------------------------------------------------------------------------------------------------- Microsoft 2.4 Microsoft 2.3 Johnson & Johnson 2.2 - ----------------------------------------------------------------------------------------------------- Morgan Stanley 2.3 Wyeth 2.1 Microsoft 2.1 - ----------------------------------------------------------------------------------------------------- Wyeth 2.1 Morgan Stanley 2.0 Sprint Nextel 2.1 - ----------------------------------------------------------------------------------------------------- Wells Fargo 2.1 Wells Fargo 1.8 Wells Fargo 1.8 - ----------------------------------------------------------------------------------------------------- Exelon 1.8 Sprint Nextel 1.8 UnitedHealth Group 1.8 - ----------------------------------------------------------------------------------------------------- Allergan 1.6 Exelon 1.7 Exelon 1.6 - ----------------------------------------------------------------------------------------------------- American UnitedHealth Group 1.6 International Group 1.5 Morgan Stanley 1.6 - ----------------------------------------------------------------------------------------------------- American International Group 1.5 J.P. Morgan Chase 1.5 Allergan 1.4 - ----------------------------------------------------------------------------------------------------- Johnson & Johnson 1.5 UnitedHealth Group 1.5 J.P. Morgan Chase 1.3 - ----------------------------------------------------------------------------------------------------- Total 19.8% 18.8% 18.4% =====================================================================================================
* Weightings represent percentages of the Fund's net assets as of the dates indicated. The Fund's portfolio is actively managed and its composition will vary over time. - -------------------------------------------------------------------------------- 10 UBS U.S. ALLOCATION FUND PORTFOLIO STATISTICS (UNAUDITED) (CONTINUED)
FIXED INCOME SECTOR ALLOCATION* 08/31/06 02/28/06 08/31/05 - ----------------------------------------------------------------------------------------------------- Mortgage & agency debt securities 13.1% 13.2% 11.7% - ----------------------------------------------------------------------------------------------------- Corporate bonds 7.4 7.0 5.9 - ----------------------------------------------------------------------------------------------------- US government obligations 5.9 5.8 4.6 - ----------------------------------------------------------------------------------------------------- Commercial mortgage-backed securities 3.3 2.1 2.4 - ----------------------------------------------------------------------------------------------------- Asset-backed securities 2.1 1.5 1.7 - ----------------------------------------------------------------------------------------------------- International government obligations 0.0+ 0.0+ 0.1 - ----------------------------------------------------------------------------------------------------- Municipal bonds and notes - - 0.3 - ----------------------------------------------------------------------------------------------------- Total 31.8% 29.6% 26.7% =====================================================================================================
* Weightings represent percentages of the Fund's net assets as of the dates indicated. The Fund's portfolio is actively managed and its composition will vary over time. + Weightings represent less than 0.05% of the Fund's net assets as of the date indicated. - -------------------------------------------------------------------------------- 11 UBS U.S. ALLOCATION FUND PORTFOLIO STATISTICS (UNAUDITED) (CONCLUDED)
TOP TEN FIXED INCOME SECURITIES* 08/31/06 02/28/06 08/31/05 - ------------------------------------------------------------------------------------------------------------- US Treasury FNMA Certificates, US Treasury Notes, 3.875% 5.000% maturity Notes, 3.625% due 02/15/13 0.9% to be assigned 1.8% due 04/30/07 1.3% - ------------------------------------------------------------------------------------------------------------- US Treasury US Treasury US Treasury Inflation Bonds, 8.500% Bonds, 8.750% Index Notes, 2.000% due 02/15/20 0.9 due 05/15/17 1.4 due 01/15/14 1.2 - ------------------------------------------------------------------------------------------------------------- US Treasury US Treasury FNMA Bonds, 8.750% Bonds, 8.500% Certificates, 5.500% due 05/15/17 0.8 due 02/15/20 1.0 due 11/01/17 0.9 - ------------------------------------------------------------------------------------------------------------- US Treasury US Treasury FHLMC Bonds, 8.875% Notes, 3.875% Certificates, 5.000% due 02/15/19 0.8 due 02/15/13 0.9 due 01/30/14 0.8 - ------------------------------------------------------------------------------------------------------------- FNMA FNMA FNMA Certificates, 5.500% Certificates, 5.500% REMIC, 6.000% due 11/01/17 0.8 due 11/01/17 0.8 due 01/25/32 0.8 - ------------------------------------------------------------------------------------------------------------- US Treasury FNMA US Treasury Notes, 4.875% REMIC, 6.000% Bonds, 8.750% due 05/31/08 0.7 due 01/25/32 0.7 due 05/15/17 0.8 - ------------------------------------------------------------------------------------------------------------- FNMA US Treasury FNMA Certificates, 4.625% Notes, 3.875% Certificates, 5.500% due 06/01/10 0.7 due 05/15/09 0.6 due 09/01/17 0.6 - ------------------------------------------------------------------------------------------------------------- FNMA FNMA FNMA REMIC, 6.000% Certificates, 4.625% Certificates, 6.500% due 01/25/32 0.7 due 06/01/10 0.6 due 08/01/29 0.6 - ------------------------------------------------------------------------------------------------------------- Ford Motor FNMA FNMA Credit Co., 5.800% Certificates, 5.500% REMIC, 4.544% due 01/12/09 0.6 due 09/01/17 0.6 due 01/25/43 0.6 - ------------------------------------------------------------------------------------------------------------- FNMA FNMA FNMA Certificates, 5.500% Certificates, 6.500% Certificates, 4.625% due 09/01/17 0.6 due 08/01/29 0.6 due 06/01/10 0.6 - ------------------------------------------------------------------------------------------------------------- Total 7.5% 9.0% 8.2% =============================================================================================================
* Weightings represent percentages of the Fund's net assets as of the dates indicated. The Fund's portfolio is actively managed and its composition will vary over time. - -------------------------------------------------------------------------------- 12 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006 COMMON STOCKS--66.09%
NUMBER OF SECURITY DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- AEROSPACE & DEFENSE--0.75% Esterline Technologies Corp.(1)* 20,100 $704,103 - -------------------------------------------------------------------------------- Hexcel Corp* 20,200 303,404 - -------------------------------------------------------------------------------- Northrop Grumman Corp. 76,500 5,110,965 - -------------------------------------------------------------------------------- Triumph Group, Inc. 13,808 607,000 - -------------------------------------------------------------------------------- 6,725,472 ================================================================================ AIR FREIGHT & COURIERS--0.93% FedEx Corp. 82,600 8,345,078 ================================================================================ AIRLINES--0.04% AMR Corp.(1)* 15,700 324,205 ================================================================================ AUTO COMPONENTS--1.69% BorgWarner, Inc. 77,000 4,366,670 - -------------------------------------------------------------------------------- Johnson Controls, Inc. 149,200 10,731,956 - -------------------------------------------------------------------------------- 15,098,626 ================================================================================ AUTOMOBILES--0.62% Harley-Davidson, Inc. 94,800 5,546,748 ================================================================================ BANKS--5.97% Boston Private Financial Holdings, Inc. 12,200 304,512 - -------------------------------------------------------------------------------- City National Corp. 24,400 1,605,520 - -------------------------------------------------------------------------------- Colonial BancGroup, Inc. 24,500 600,005 - -------------------------------------------------------------------------------- Cullen/Frost Bankers, Inc. 11,700 689,832 - -------------------------------------------------------------------------------- Fifth Third Bancorp 262,038 10,308,575 - -------------------------------------------------------------------------------- Mellon Financial Corp. 329,100 12,252,393 - -------------------------------------------------------------------------------- Placer Sierra Bancshares 21,900 520,344 - -------------------------------------------------------------------------------- PNC Financial Services Group 114,300 8,091,297 - -------------------------------------------------------------------------------- South Financial Group, Inc.(1) 11,600 313,548 - -------------------------------------------------------------------------------- Wells Fargo & Co. 535,600 18,612,100 - -------------------------------------------------------------------------------- 53,298,126 ================================================================================ BEVERAGES--0.51% Anheuser-Busch Cos., Inc. 92,000 4,542,960 ================================================================================ BIOTECHNOLOGY--1.34% Connetics Corp.* 24,700 267,748 - -------------------------------------------------------------------------------- Genzyme Corp.* 138,700 9,186,101 - -------------------------------------------------------------------------------- Keryx Biopharmaceuticals, Inc.* 15,800 216,934 - -------------------------------------------------------------------------------- Millennium Pharmaceuticals, Inc.* 193,600 2,102,496 - -------------------------------------------------------------------------------- Telik, Inc.(1)* 10,600 188,998 - -------------------------------------------------------------------------------- 11,962,277 ================================================================================ BUILDING PRODUCTS--1.48% American Woodmark Corp.(1) 14,800 466,644 - -------------------------------------------------------------------------------- ElkCorp 12,700 357,759 - -------------------------------------------------------------------------------- Masco Corp.(1) 425,100 11,651,991 - -------------------------------------------------------------------------------- Trex Co., Inc.(1)* 19,700 530,521 - -------------------------------------------------------------------------------- Watsco, Inc. 4,600 202,124 - -------------------------------------------------------------------------------- 13,209,039 ================================================================================ CHEMICALS--0.03% Airgas, Inc. 8,700 311,634 ================================================================================ COMMERCIAL SERVICES & SUPPLIES--0.60% Bristow Group, Inc.* 11,000 410,410 - -------------------------------------------------------------------------------- Coinstar, Inc.* 23,100 606,375 - -------------------------------------------------------------------------------- H&R Block, Inc. 124,700 2,622,441 - -------------------------------------------------------------------------------- Heidrick & Struggles International, Inc.* 18,500 657,860 - -------------------------------------------------------------------------------- McGrath Rentcorp. 16,600 378,480 - -------------------------------------------------------------------------------- Universal Technical Institute, Inc.* 11,800 217,710 - -------------------------------------------------------------------------------- Valassis Communications, Inc.* 24,200 477,224 - -------------------------------------------------------------------------------- 5,370,500 ================================================================================ COMMUNICATIONS EQUIPMENT--0.22% Black Box Corp. 11,300 435,502 - -------------------------------------------------------------------------------- Harris Corp. 20,900 917,928 - -------------------------------------------------------------------------------- InPhonic, Inc.(1)* 37,600 266,208 - -------------------------------------------------------------------------------- Powerwave Technologies, Inc.(1)* 40,200 304,716 - -------------------------------------------------------------------------------- 1,924,354 ================================================================================
- -------------------------------------------------------------------------------- 13 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006 COMMON STOCKS--(CONTINUED)
NUMBER OF SECURITY DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--0.65% Dell, Inc.* 255,700 $5,766,035 ================================================================================ CONTAINERS & PACKAGING--0.08% Caraustar Industries, Inc.* 35,000 264,950 - -------------------------------------------------------------------------------- Jarden Corp.(1)* 15,400 451,528 - -------------------------------------------------------------------------------- 716,478 ================================================================================ DIVERSIFIED FINANCIALS--7.78% Apollo Investment Corp. 59,000 1,178,230 - -------------------------------------------------------------------------------- Citigroup, Inc. 516,286 25,478,714 - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp. 136,100 8,655,960 - -------------------------------------------------------------------------------- J.P.Morgan Chase & Co. 251,200 11,469,792 - -------------------------------------------------------------------------------- Jackson Hewitt Tax Service, Inc. 23,100 729,960 - -------------------------------------------------------------------------------- Lazard Ltd., Class A(1) 22,700 854,655 - -------------------------------------------------------------------------------- Morgan Stanley 310,150 20,404,769 - -------------------------------------------------------------------------------- National Financial Partners Corp. 18,600 684,852 - -------------------------------------------------------------------------------- 69,456,932 ================================================================================ DIVERSIFIED TELECOMMUNICATION SERVICES--2.40% AT&T, Inc. 261,100 8,128,043 - -------------------------------------------------------------------------------- Embarq Corp. 33,684 1,588,201 - -------------------------------------------------------------------------------- NeuStar, Inc., Class A* 12,200 344,284 - -------------------------------------------------------------------------------- Sprint Nextel Corp.(1) 673,794 11,400,594 - -------------------------------------------------------------------------------- 21,461,122 ================================================================================ ELECTRIC UTILITIES--2.88% American Electric Power Co., Inc. 131,300 4,789,824 - -------------------------------------------------------------------------------- Exelon Corp.(1) 266,200 16,232,876 - -------------------------------------------------------------------------------- Hawaiian Electric Industries, Inc.(1) 18,600 510,012 - -------------------------------------------------------------------------------- Northeast Utilities 68,200 1,555,642 - -------------------------------------------------------------------------------- Pepco Holdings, Inc. 102,600 2,605,014 - -------------------------------------------------------------------------------- 25,693,368 ================================================================================ ELECTRONIC EQUIPMENT & INSTRUMENTS--0.74% Methode Electronics, Inc. 3,800 30,172 - -------------------------------------------------------------------------------- Newport Corp.* 29,900 527,137 - -------------------------------------------------------------------------------- Park Electrochemical Corp. 17,600 459,360 - -------------------------------------------------------------------------------- Regal-Beloit Corp. 13,200 569,712 - -------------------------------------------------------------------------------- Waters Corp.* 117,100 4,994,315 - -------------------------------------------------------------------------------- 6,580,696 ================================================================================ ENERGY EQUIPMENT & SERVICES--1.78% Baker Hughes, Inc. 6,100 434,198 - -------------------------------------------------------------------------------- Dawson Geophysical Co.* 2,500 68,325 - -------------------------------------------------------------------------------- ENSCO International, Inc. 116,100 5,188,509 - -------------------------------------------------------------------------------- GlobalSantaFe Corp. 113,100 5,566,782 - -------------------------------------------------------------------------------- Halliburton Co. 110,000 3,588,200 - -------------------------------------------------------------------------------- Oceaneering International, Inc.* 12,800 460,416 - -------------------------------------------------------------------------------- Oil States International, Inc.* 17,200 549,712 - -------------------------------------------------------------------------------- 15,856,142 ================================================================================ FOOD & DRUG RETAILING--1.36% Kroger Co.(1) 277,600 6,609,656 - -------------------------------------------------------------------------------- Nash Finch Co.(1) 7,500 171,375 - -------------------------------------------------------------------------------- Sysco Corp. 172,100 5,402,219 - -------------------------------------------------------------------------------- 12,183,250 ================================================================================ GAS UTILITIES--1.06% NiSource, Inc. 156,600 3,315,222 - -------------------------------------------------------------------------------- Sempra Energy 124,500 6,190,140 - -------------------------------------------------------------------------------- 9,505,362 ================================================================================ HEALTH CARE EQUIPMENT & SUPPLIES--0.84% Cooper Cos., Inc. 15,622 780,788 - -------------------------------------------------------------------------------- I-Flow Corp.* 17,200 207,432 - -------------------------------------------------------------------------------- Medtronic, Inc. 132,800 6,228,320 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 14 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006 COMMON STOCKS--(CONTINUED)
NUMBER OF SECURITY DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--(CONCLUDED) Syneron Medical Ltd.(1)* 10,300 $244,110 - -------------------------------------------------------------------------------- 7,460,650 ================================================================================ HEALTH CARE PROVIDERS & SERVICES--2.57% Amedisys, Inc.(1)* 10,900 441,123 - -------------------------------------------------------------------------------- Caremark Rx, Inc. 100,800 5,840,352 - -------------------------------------------------------------------------------- Centene Corp.* 36,300 560,835 - -------------------------------------------------------------------------------- LifePoint Hospitals, Inc.(1)* 14,400 490,320 - -------------------------------------------------------------------------------- Matria Healthcare, Inc.(1)* 28,674 774,198 - -------------------------------------------------------------------------------- Molina Healthcare, Inc.* 11,800 437,072 - -------------------------------------------------------------------------------- Option Care, Inc.(1) 27,100 358,262 - -------------------------------------------------------------------------------- UnitedHealth Group, Inc. 269,800 14,016,110 - -------------------------------------------------------------------------------- 22,918,272 ================================================================================ HOTELS, RESTAURANTS & LEISURE--1.27% Carnival Corp.(1) 214,700 8,995,930 - -------------------------------------------------------------------------------- Red Robin Gourmet Burgers, Inc.(1)* 10,400 438,984 - -------------------------------------------------------------------------------- Vail Resorts, Inc.* 15,600 586,872 - -------------------------------------------------------------------------------- Wyndham Worldwide Corp.* 46,300 1,354,738 - -------------------------------------------------------------------------------- 11,376,524 ================================================================================ HOUSEHOLD DURABLES--0.15% Lenox Group, Inc.* 19,200 109,056 - -------------------------------------------------------------------------------- Tempur-Pedic International, Inc.(1)* 41,000 658,050 - -------------------------------------------------------------------------------- Yankee Candle Co., Inc. 21,000 542,850 - -------------------------------------------------------------------------------- 1,309,956 ================================================================================ INSURANCE--2.95% Allstate Corp. 102,900 5,962,026 - -------------------------------------------------------------------------------- American International Group, Inc. 207,700 13,255,414 - -------------------------------------------------------------------------------- AmerUs Group Co. 5,700 386,460 - -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. 71,000 6,096,060 - -------------------------------------------------------------------------------- Primus Guaranty, Ltd.(1)* 55,500 644,355 - -------------------------------------------------------------------------------- 26,344,315 ================================================================================ INTERNET SOFTWARE & SERVICES--0.15% iPass, Inc.* 4,700 21,432 - -------------------------------------------------------------------------------- RightNow Technologies, Inc.(1)* 19,400 297,984 - -------------------------------------------------------------------------------- Tumbleweed Communications Corp.* 106,800 295,836 - -------------------------------------------------------------------------------- WebEx Communications, Inc.* 6,200 221,340 - -------------------------------------------------------------------------------- Websense, Inc.* 22,600 467,142 - -------------------------------------------------------------------------------- 1,303,734 ================================================================================ IT CONSULTING & SERVICES--0.50% Accenture Ltd., Class A 150,100 4,451,966 ================================================================================ LEISURE EQUIPMENT & PRODUCTS--0.07% Nautilus, Inc.(1) 47,900 593,002 ================================================================================ MACHINERY--1.37% Briggs & Stratton Corp. 17,800 501,070 - -------------------------------------------------------------------------------- Dionex Corp.* 4,700 236,974 - -------------------------------------------------------------------------------- ESCO Technologies, Inc.* 9,500 484,880 - -------------------------------------------------------------------------------- Illinois Tool Works, Inc. 245,800 10,790,620 - -------------------------------------------------------------------------------- Insteel Industries, Inc. 9,400 195,896 - -------------------------------------------------------------------------------- 12,209,440 ================================================================================ MEDIA--3.53% DIRECTV Group, Inc.(1)* 424,500 7,976,355 - -------------------------------------------------------------------------------- News Corp., Class A 226,400 4,308,392 - -------------------------------------------------------------------------------- Omnicom Group, Inc.(1) 138,300 12,090,186 - -------------------------------------------------------------------------------- R.H. Donnelley Corp.* 86,285 4,687,001 - -------------------------------------------------------------------------------- Saga Communications, Inc., Class A* 17,100 136,116 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 15 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006 COMMON STOCKS--(CONTINUED)
NUMBER OF SECURITY DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- MEDIA--(CONCLUDED) Scholastic Corp.* 11,100 $333,666 - -------------------------------------------------------------------------------- Univision Communications, Inc., Class A* 56,600 1,956,096 - -------------------------------------------------------------------------------- 31,487,812 ================================================================================ METALS & MINING--0.10% Alpha Natural Resources, Inc.* 12,900 233,877 - -------------------------------------------------------------------------------- Foundation Coal Holdings, Inc. 17,800 639,376 - -------------------------------------------------------------------------------- 873,253 ================================================================================ MULTI-LINE RETAIL--1.58% Costco Wholesale Corp. 162,800 7,617,412 - -------------------------------------------------------------------------------- Kohl's Corp.(1)* 99,700 6,232,247 - -------------------------------------------------------------------------------- Tuesday Morning Corp.(1) 16,100 217,028 - -------------------------------------------------------------------------------- 14,066,687 ================================================================================ OIL & GAS--1.90% EOG Resources, Inc. 79,000 5,120,780 - -------------------------------------------------------------------------------- Equitable Resources, Inc. 21,600 796,176 - -------------------------------------------------------------------------------- EXCO Resources, Inc.* 17,600 235,136 - -------------------------------------------------------------------------------- Exxon Mobil Corp. 86,400 5,846,688 - -------------------------------------------------------------------------------- Marathon Oil Corp. 59,100 4,934,850 - -------------------------------------------------------------------------------- 16,933,630 ================================================================================ PERSONAL PRODUCTS--0.06% Chattem, Inc.* 9,700 336,396 - -------------------------------------------------------------------------------- Nu Skin Enterprises, Inc.(1) 13,800 239,016 - -------------------------------------------------------------------------------- 575,412 ================================================================================ PHARMACEUTICALS--7.19% Alkermes, Inc.* 19,200 313,920 - -------------------------------------------------------------------------------- Allergan, Inc. 122,700 14,056,512 - -------------------------------------------------------------------------------- Bristol-Myers Squibb Co.(1) 292,900 6,370,575 - -------------------------------------------------------------------------------- Cephalon, Inc.(1)* 53,100 3,027,762 - -------------------------------------------------------------------------------- Johnson & Johnson(1) 203,864 13,181,846 - -------------------------------------------------------------------------------- K-V Pharmaceutical Co., Class A* 18,000 401,940 - -------------------------------------------------------------------------------- Medco Health Solutions, Inc.* 126,400 8,009,968 - -------------------------------------------------------------------------------- Wyeth 386,500 18,822,550 - -------------------------------------------------------------------------------- 64,185,073 ================================================================================ REAL ESTATE--0.50% American Financial Realty Trust 11,200 128,464 - -------------------------------------------------------------------------------- Capital Lease Funding, Inc. 46,900 536,067 - -------------------------------------------------------------------------------- Kilroy Realty Corp. 4,900 387,443 - -------------------------------------------------------------------------------- LaSalle Hotel Properties 17,000 746,980 - -------------------------------------------------------------------------------- Parkway Properties, Inc. 6,000 294,120 - -------------------------------------------------------------------------------- RAIT Investment Trust 4,300 120,314 - -------------------------------------------------------------------------------- Realogy Corp.* 77,800 1,664,920 - -------------------------------------------------------------------------------- Taberna Realty Finance Trust(4)++ 11,410 123,228 - -------------------------------------------------------------------------------- Thornburg Mortgage, Inc.(1) 7,400 169,978 - -------------------------------------------------------------------------------- Trammell Crow Co.* 7,900 271,918 - -------------------------------------------------------------------------------- 4,443,432 ================================================================================ ROAD & RAIL--1.30% Burlington Northern Santa Fe Corp. 154,300 10,330,385 - -------------------------------------------------------------------------------- Genesee & Wyoming, Inc., Class A* 20,650 513,978 - -------------------------------------------------------------------------------- Kansas City Southern* 10,700 281,945 - -------------------------------------------------------------------------------- Landstar System, Inc. 1,000 42,700 - -------------------------------------------------------------------------------- YRC Worldwide, Inc.* 13,100 481,818 - -------------------------------------------------------------------------------- 11,650,826 ================================================================================ SEMICONDUCTOR EQUIPMENT & PRODUCTS--2.25% Analog Devices, Inc. 180,500 5,530,520 - -------------------------------------------------------------------------------- Intel Corp. 539,200 10,535,968 - -------------------------------------------------------------------------------- Xilinx, Inc. 173,900 3,977,093 - -------------------------------------------------------------------------------- 20,043,581 ================================================================================
- -------------------------------------------------------------------------------- 16 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006 COMMON STOCKS--(CONCLUDED)
NUMBER OF SECURITY DESCRIPTION SHARES VALUE - -------------------------------------------------------------------------------- SOFTWARE--4.74% Innerworkings, Inc.* 11,400 $132,240 - -------------------------------------------------------------------------------- Microsoft Corp. 832,500 21,386,925 - -------------------------------------------------------------------------------- Oracle Corp.* 523,300 8,189,645 - -------------------------------------------------------------------------------- Reynolds & Reynolds Co., Class A 3,900 149,604 - -------------------------------------------------------------------------------- Salesforce.com, Inc.(1)* 105,800 3,647,984 - -------------------------------------------------------------------------------- Secure Computing Corp.* 35,800 227,330 - -------------------------------------------------------------------------------- Symantec Corp.* 428,273 7,983,009 - -------------------------------------------------------------------------------- VASCO Data Security International, Inc.(1)* 26,400 237,600 - -------------------------------------------------------------------------------- Witness Systems, Inc.* 21,100 342,875 - -------------------------------------------------------------------------------- 42,297,212 ================================================================================ SPECIALTY RETAIL--0.10% Interline Brands, Inc.* 16,300 408,152 - -------------------------------------------------------------------------------- Movado Group, Inc. 20,756 466,802 - -------------------------------------------------------------------------------- United Rentals, Inc.* 2,900 61,929 - -------------------------------------------------------------------------------- 936,883 ================================================================================ TEXTILES & APPAREL--0.05% True Religion Apparel, Inc.(1)* 23,900 485,170 ================================================================================ WIRELESS TELECOMMUNICATIONS SERVICES--0.01% @Road, Inc.* 14,000 66,220 - -------------------------------------------------------------------------------- Total common stocks (cost--$526,315,304) 589,891,454 ================================================================================
- -------------------------------------------------------------------------------- 17 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- US GOVERNMENT OBLIGATIONS--5.85% $5,655 US Treasury Bonds(1) 05/15/17 8.750% $7,500,385 - -------------------------------------------------------------------------------------------------- 5,160 US Treasury Bonds(1) 02/15/19 8.875 7,067,183 - -------------------------------------------------------------------------------------------------- 5,940 US Treasury Bonds(1) 02/15/20 8.500 8,022,249 - -------------------------------------------------------------------------------------------------- 1,940 US Treasury Bonds(1) 08/15/23 6.250 2,224,484 - -------------------------------------------------------------------------------------------------- 1,205 US Treasury Bonds(1) 02/15/36 4.500 1,134,112 - -------------------------------------------------------------------------------------------------- 4,752 US Treasury Inflation Index Notes 07/15/14 2.000 4,663,682 - -------------------------------------------------------------------------------------------------- 1,355 US Treasury Notes 05/31/07 3.500 1,339,703 - -------------------------------------------------------------------------------------------------- 2,030 US Treasury Notes(1) 02/29/08 4.625 2,022,704 - -------------------------------------------------------------------------------------------------- 6,530 US Treasury Notes(1) 05/31/08 4.875 6,534,081 - -------------------------------------------------------------------------------------------------- 895 US Treasury Notes 05/15/09 4.875 898,391 - -------------------------------------------------------------------------------------------------- 1,665 US Treasury Notes(1) 04/30/11 4.875 1,676,512 - -------------------------------------------------------------------------------------------------- 8,430 US Treasury Notes(1) 02/15/13 3.875 8,040,441 - -------------------------------------------------------------------------------------------------- 1,120 US Treasury Notes 02/15/16 4.500 1,099,131 - -------------------------------------------------------------------------------------------------- Total US government obligations (cost--$51,634,036) 52,223,058 ================================================================================================== MORTGAGE & AGENCY DEBT SECURITIES--13.09% 2,745 Adjustable Rate Mortgage Trust, Series 2006-1, Class 5A1 03/25/36 6.116 2,764,292 - -------------------------------------------------------------------------------------------------- 1,000 Bear Stearns Alternative-A Trust, Series 2006-4, Class 3B2 07/25/36 6.342[++] 999,979 - -------------------------------------------------------------------------------------------------- 1,147 Countrywide Alternative Loan Trust, Series 2005-J2, Class 2A1 04/25/35 7.500 1,153,039 - -------------------------------------------------------------------------------------------------- 2,898 Countrywide Home Loans, Series 2006-HYB1, Class 1A1 03/20/36 5.408[++] 2,883,085 - -------------------------------------------------------------------------------------------------- 2,494 Credit Suisse First Boston Mortgage Securities Corp., Series 2005-10, Class 10A3 11/25/35 6.000 2,506,245 - -------------------------------------------------------------------------------------------------- 2,175 Credit Suisse First Boston Mortgage Securities Corp., Series 2005-11, Class 1A1 12/25/35 6.500 2,192,720 - -------------------------------------------------------------------------------------------------- 1,750 Federal Home Loan Bank Certificates 06/13/16 5.625 1,786,416 - -------------------------------------------------------------------------------------------------- 1,750 Federal Home Loan Mortgage Corporation Certificates 06/27/16 5.750 1,807,557 - -------------------------------------------------------------------------------------------------- 21 Federal Home Loan Mortgage Corporation Certificates 09/01/17 5.500 21,347 - -------------------------------------------------------------------------------------------------- 31 Federal Home Loan Mortgage Corporation Certificates 12/01/17 6.000 31,653 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 18 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- MORTGAGE & AGENCY DEBT SECURITIES--(CONTINUED) $36 Federal Home Loan Mortgage Corporation Certificates 01/01/18 5.500% $36,143 - -------------------------------------------------------------------------------------------------- 31 Federal Home Loan Mortgage Corporation Certificates 04/01/18 5.500 31,188 - -------------------------------------------------------------------------------------------------- 1,620 Federal Home Loan Mortgage Corporation Certificates 08/01/28 6.500 1,656,799 - -------------------------------------------------------------------------------------------------- 24 Federal Home Loan Mortgage Corporation Certificates 02/01/29 6.500 24,962 - -------------------------------------------------------------------------------------------------- 22 Federal Home Loan Mortgage Corporation Certificates 04/01/29 6.500 22,447 - -------------------------------------------------------------------------------------------------- 10 Federal Home Loan Mortgage Corporation Certificates 10/01/29 6.000 10,143 - -------------------------------------------------------------------------------------------------- 7 Federal Home Loan Mortgage Corporation Certificates 03/01/32 6.000 7,110 - -------------------------------------------------------------------------------------------------- 52 Federal Home Loan Mortgage Corporation Certificates 11/01/32 6.500 52,785 - -------------------------------------------------------------------------------------------------- 2,438 Federal Home Loan Mortgage Corporation Certificates 12/01/34 4.500 2,275,843 - -------------------------------------------------------------------------------------------------- 2,965 Federal National Mortgage Association Certificates 02/15/08 5.750 2,989,912 - -------------------------------------------------------------------------------------------------- 2,890 Federal National Mortgage Association Certificates 09/15/09 6.625 3,019,908 - -------------------------------------------------------------------------------------------------- 6,420 Federal National Mortgage Association Certificates 06/01/10 4.625 6,302,694 - -------------------------------------------------------------------------------------------------- 2,710 Federal National Mortgage Association Certificates 08/15/10 4.250 2,635,055 - -------------------------------------------------------------------------------------------------- 3,525 Federal National Mortgage Association Certificates 11/08/10 5.200 3,501,827 - -------------------------------------------------------------------------------------------------- 2,930 Federal National Mortgage Association Certificates 02/01/11 6.250 3,050,537 - -------------------------------------------------------------------------------------------------- 4,180 Federal National Mortgage Association Certificates 03/15/13 4.375 4,019,768 - -------------------------------------------------------------------------------------------------- 1,943 Federal National Mortgage Association Certificates 02/01/14 6.000 1,966,868 - -------------------------------------------------------------------------------------------------- 1,945 Federal National Mortgage Association Certificates 05/12/16 6.070 1,960,663 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 19 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- MORTGAGE & AGENCY DEBT SECURITIES--(CONTINUED) $72 Federal National Mortgage Association Certificates 03/01/17 6.500% $73,595 - -------------------------------------------------------------------------------------------------- 14 Federal National Mortgage Association Certificates 07/01/17 6.000 14,102 - -------------------------------------------------------------------------------------------------- 5,642 Federal National Mortgage Association Certificates 09/01/17 5.500 5,638,441 - -------------------------------------------------------------------------------------------------- 6,967 Federal National Mortgage Association Certificates 11/01/17 5.500 6,962,379 - -------------------------------------------------------------------------------------------------- 4,149 Federal National Mortgage Association Certificates 02/01/19 5.000 4,075,036 - -------------------------------------------------------------------------------------------------- 4 Federal National Mortgage Association Certificates 06/01/23 6.000 4,142 - -------------------------------------------------------------------------------------------------- 2,510 Federal National Mortgage Association Certificates 02/01/24 5.500 2,489,324 - -------------------------------------------------------------------------------------------------- 16 Federal National Mortgage Association Certificates 03/01/29 6.000 15,885 - -------------------------------------------------------------------------------------------------- 39 Federal National Mortgage Association Certificates 04/01/29 6.500 39,905 - -------------------------------------------------------------------------------------------------- 4,933 Federal National Mortgage Association Certificates 08/01/29 6.500 5,036,723 - -------------------------------------------------------------------------------------------------- 2,341 Federal National Mortgage Association Certificates 12/01/29 6.500 2,389,897 - -------------------------------------------------------------------------------------------------- 15 Federal National Mortgage Association Certificates 05/01/30 6.500 15,701 - -------------------------------------------------------------------------------------------------- 2,633 Federal National Mortgage Association Certificates 07/01/30 6.500 2,687,805 - -------------------------------------------------------------------------------------------------- 3,386 Federal National Mortgage Association Certificates 11/01/30 6.500 3,456,635 - -------------------------------------------------------------------------------------------------- 10 Federal National Mortgage Association Certificates 05/01/31 7.500 10,545 - -------------------------------------------------------------------------------------------------- 17 Federal National Mortgage Association Certificates 11/01/31 6.500 17,562 - -------------------------------------------------------------------------------------------------- 1,539 Federal National Mortgage Association Certificates 08/01/32 7.000 1,582,718 - -------------------------------------------------------------------------------------------------- 24 Federal National Mortgage Association Certificates 02/01/33 7.500 25,314 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 20 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- MORTGAGE & AGENCY DEBT SECURITIES--(CONTINUED) $2,156 Federal National Mortgage Association Certificates 05/01/33 5.500% $2,122,361 - -------------------------------------------------------------------------------------------------- 3,537 Federal National Mortgage Association Certificates 06/01/33 5.500 3,488,911 - -------------------------------------------------------------------------------------------------- 16 Federal National Mortgage Association Certificates 06/01/33 6.000 15,772 - -------------------------------------------------------------------------------------------------- 2,056 Federal National Mortgage Association Certificates 07/01/33 5.500 2,023,973 - -------------------------------------------------------------------------------------------------- 74 Federal National Mortgage Association Certificates 10/01/33 6.000 73,946 - -------------------------------------------------------------------------------------------------- 56 FHLMC REMIC, Series 2148, Class ZA 04/15/29 6.000 55,971 - -------------------------------------------------------------------------------------------------- 23 FHLMC REMIC, Series 2426, Class GH 08/15/30 6.000 22,768 - -------------------------------------------------------------------------------------------------- 1,089 FHLMC REMIC, Series 2430, Class UC 09/15/16 6.000 1,097,157 - -------------------------------------------------------------------------------------------------- 2,579 FHLMC REMIC, Series T-42, Class A5 02/25/42 7.500 2,672,167 - -------------------------------------------------------------------------------------------------- 468 First Horizon Mortgage Pass-Through Trust, Series 2004-FL1, Class 1A1 02/25/35 5.594[++] 467,863 - -------------------------------------------------------------------------------------------------- 6,114 FNMA REMIC, Series 2002-53, Class PD 01/25/32 6.000 6,237,220 - -------------------------------------------------------------------------------------------------- 4,349 FNMA REMIC, Series 2004-W1, Class 3A 01/25/43 5.220[++] 4,500,333 - -------------------------------------------------------------------------------------------------- 10 Government National Mortgage Association Certificates 04/15/26 7.000 10,157 - -------------------------------------------------------------------------------------------------- 15 Government National Mortgage Association Certificates 10/15/28 6.500 15,238 - -------------------------------------------------------------------------------------------------- 4,011 Government National Mortgage Association Certificates 07/15/29 6.000 4,058,991 - -------------------------------------------------------------------------------------------------- 32 Government National Mortgage Association Certificates 04/15/31 6.500 32,931 - -------------------------------------------------------------------------------------------------- 7 Government National Mortgage Association Certificates II 11/20/28 6.000 6,850 - -------------------------------------------------------------------------------------------------- 15 Government National Mortgage Association Certificates II 02/20/29 6.000 15,129 - -------------------------------------------------------------------------------------------------- 3,528 Government National Mortgage Association Certificates II 02/20/34 6.000 3,557,078 - -------------------------------------------------------------------------------------------------- 608 GSMPS Mortgage Loan Trust, Series 2001-2, Class A** 06/19/32 7.500 631,370 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 21 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- MORTGAGE & AGENCY DEBT SECURITIES--(CONCLUDED) $515 Merrill Lynch Credit Corporation Mortgage Investors, Inc., Series 2003-D, Class XA1(2)(4) 08/25/28 1.000% $3,402 - -------------------------------------------------------------------------------------------------- 1,444 Salomon Brothers Mortgage Securities VII, Series 2003-CDCA, Class C** 02/15/15 5.880[++] 1,444,668 - -------------------------------------------------------------------------------------------------- Total mortgage & agency debt securities (cost--$118,676,949) 116,800,950 ================================================================================================== COMMERCIAL MORTGAGE-BACKED SECURITIES--3.29% 5,150 Asset Securitization Corp., Series 1995-MD4, Class A3 08/13/29 7.384 5,241,471 - -------------------------------------------------------------------------------------------------- 330 Commercial Mortgage Pass-Through Certificates, Series 2001-FL5A, Class E** 11/15/13 6.830[++] 330,046 - -------------------------------------------------------------------------------------------------- 880 Commercial Mortgage Pass-Through Certificates, Series 2001-FL5A, Class F** 11/15/13 6.086[++] 862,400 - -------------------------------------------------------------------------------------------------- 840 First Union Lehman-Brothers Commercial Mortgage, Series 1997-C2, Class A3 11/18/29 6.650 846,307 - -------------------------------------------------------------------------------------------------- 3,500 GS Mortgage Securities Corp. II, Series 2006-CC1, Class A** 03/21/46 5.522[++] 3,451,516 - -------------------------------------------------------------------------------------------------- 3,125 GS Mortgage Securities Corporation II, Series 2006-RR2, Class A1** 06/23/46 5.816[++] 3,137,477 - -------------------------------------------------------------------------------------------------- 1,300 Host Marriott Pool Trust, Series 1999-HMTA, Class C** 08/03/15 7.730 1,382,144 - -------------------------------------------------------------------------------------------------- 800 Host Marriott Pool Trust, Series 1999-HMTA, Class D** 08/03/15 7.970 854,714 - -------------------------------------------------------------------------------------------------- 800 Host Marriott Pool Trust, Series 1999-HMTA, Class E** 08/03/15 8.070 856,094 - -------------------------------------------------------------------------------------------------- 2,787 JP Morgan Alternative Loan Trust, Series 2006-S1, Class 1A19 03/25/36 6.500 2,816,355 - -------------------------------------------------------------------------------------------------- 3,651 JP Morgan Commercial Mortgage Finance Corp., Series 1998-C6, Class A3 01/15/30 6.613 3,685,854 - -------------------------------------------------------------------------------------------------- 5 Lehman Brothers Commercial Conduit Mortgage Trust, Series 1999-C1, Class A1 06/15/31 6.410 5,049 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 22 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED SECURITIES--(CONCLUDED) $3,250 Lehman XS Trust, Series 2005-8, Class 2A3 12/25/35 6.000%# $3,209,148 - -------------------------------------------------------------------------------------------------- 1,967 Morgan Stanley Capital I, Series 1997-ALIC, Class D 12/15/07 7.230 1,995,779 - -------------------------------------------------------------------------------------------------- 5 Morgan Stanley Dean Witter Capital I, Series 2000-LIF2, Class A1 10/15/33 6.960 4,813 - -------------------------------------------------------------------------------------------------- 689 Nomura Asset Securities Corp., Series 1996-MD5, Class A4 04/13/39 8.193[++] 696,758 - -------------------------------------------------------------------------------------------------- Total commercial mortgage-backed securities (cost--$29,541,637) 29,375,925 ================================================================================================== ASSET-BACKED SECURITIES--2.14% 726 Conseco Finance Securitizations Corp., Series 2000-2, Class A4 12/01/30 8.480 728,276 - -------------------------------------------------------------------------------------------------- 4,957 Conseco Finance Securitizations Corp., Series 2000-5, Class A5 02/01/32 7.700 4,945,394 - -------------------------------------------------------------------------------------------------- 11 Countrywide Asset-Backed Certificates, Series 2004-SD1, Class A1** 06/25/33 5.664[++] 11,009 - -------------------------------------------------------------------------------------------------- 175 GSAMP Trust, Series 2006-S2, Class B2** 01/25/36 7.000# 143,662 - -------------------------------------------------------------------------------------------------- 300 GSAMP Trust, Series 2006-S5, Class A2 09/25/36 5.658# 300,520 - -------------------------------------------------------------------------------------------------- 2,000 Home Equity Mortgage Trust, Series 2006-4, Class A2 11/25/36 5.730# 2,001,600 - -------------------------------------------------------------------------------------------------- 1,400 Paragon Mortgages PLC, Series 7A, Class B1A** 05/15/43 6.155[++] 1,402,316 - -------------------------------------------------------------------------------------------------- 4,500 Permanent Financing PLC, Series 4, Class 2C 06/10/42 6.020[++] 4,518,488 - -------------------------------------------------------------------------------------------------- 660 Providian Gateway Master Trust, Series 2004-AA, Class C** 03/15/11 6.230[++] 662,888 - -------------------------------------------------------------------------------------------------- 770 Providian Gateway Master Trust, Series 2004-AA, Class D** 03/15/11 7.180[++] 776,617 - -------------------------------------------------------------------------------------------------- 3,000 Residential Asset Securitization Trust, Series 2006-A2, Class A11 05/25/36 6.000 2,987,779 - -------------------------------------------------------------------------------------------------- 645 Rutland Rated Investments, Series DRYD-1A, Class A6F** 06/20/13 6.957 654,933 - -------------------------------------------------------------------------------------------------- Total asset-backed securities (cost--$19,059,456) 19,133,482 ==================================================================================================
- -------------------------------------------------------------------------------- 23 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--7.36% AEROSPACE & DEFENSE--0.11% $100 BE Aerospace, Inc., Series B 05/01/11 8.875% $104,250 - -------------------------------------------------------------------------------------------------- 325 Boeing Capital Corp. 09/27/10 7.375 349,626 - -------------------------------------------------------------------------------------------------- 300 Bombardier, Inc.** 05/01/14 6.300 267,000 - -------------------------------------------------------------------------------------------------- 175 Lockheed Martin Corp.** 09/01/36 6.150 172,847 - -------------------------------------------------------------------------------------------------- 125 Sequa Corp. 08/01/09 9.000 131,875 - -------------------------------------------------------------------------------------------------- 1,025,598 ================================================================================================== AGRICULTURE--0.02% 150 American Rock Salt Co. LLC 03/15/14 9.500 153,750 ================================================================================================== APPAREL/TEXTILES--0.04% 75 Collins & Aikman Floorcovering, Series B 02/15/10 9.750 73,688 - -------------------------------------------------------------------------------------------------- 225 Levi Strauss & Co.** 12/15/12 12.250 252,000 - -------------------------------------------------------------------------------------------------- 75 Rafaella Apparel Group** 06/15/11 11.250 72,375 - -------------------------------------------------------------------------------------------------- 398,063 ================================================================================================== AUTOMOBILE OEM--0.98% 1,200 DaimlerChrysler N.A. Holding Corp. 06/04/08 4.050 1,169,929 - -------------------------------------------------------------------------------------------------- 5,920 Ford Motor Credit Co. 01/12/09 5.800 5,671,094 - -------------------------------------------------------------------------------------------------- 400 Ford Motor Credit Co. 10/28/09 7.375 392,324 - -------------------------------------------------------------------------------------------------- 300 General Motors 01/15/11 7.200 268,875 - -------------------------------------------------------------------------------------------------- 225 General Motors Acceptance Corp 03/02/11 7.250 224,486 - -------------------------------------------------------------------------------------------------- 1,055 General Motors Acceptance Corp.(1) 09/15/11 6.875 1,039,047 - -------------------------------------------------------------------------------------------------- 8,765,755 ================================================================================================== AUTOMOTIVE PARTS--0.05% 175 Arvinmeritor 09/15/15 8.125 161,875 - -------------------------------------------------------------------------------------------------- 200 Cooper Standard Auto** 12/15/14 8.375 151,500 - -------------------------------------------------------------------------------------------------- 125 Stanadyne Corp. 08/15/14 10.000 122,813 - -------------------------------------------------------------------------------------------------- 436,188 ================================================================================================== BANKING-NON-US--0.08% 275 Abbey National PLC 10/26/29 7.950 341,665 - -------------------------------------------------------------------------------------------------- 350 Royal Bank of Scotland Group PLC 03/31/10+++ 9.118 389,371 - -------------------------------------------------------------------------------------------------- 731,036 ==================================================================================================
- -------------------------------------------------------------------------------- 24 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) BANKING-US--1.19% $1,000 Bank of America Corp. 01/15/11 7.400% $1,079,166 - -------------------------------------------------------------------------------------------------- 1,600 Citigroup, Inc. 08/27/12 5.625 1,619,786 - -------------------------------------------------------------------------------------------------- 880 Citigroup, Inc. 09/15/14 5.000 851,427 - -------------------------------------------------------------------------------------------------- 510 CS First Boston, Inc.(1) 01/15/12 6.500 534,974 - -------------------------------------------------------------------------------------------------- 580 HSBC Bank USA 08/15/35 5.625 548,000 - -------------------------------------------------------------------------------------------------- 1,000 J.P. Morgan Chase & Co. 02/01/11 6.750 1,054,438 - -------------------------------------------------------------------------------------------------- 350 US Bank N.A. Minnesota 08/01/11 6.375 365,972 - -------------------------------------------------------------------------------------------------- 775 Wachovia Bank N.A.(1) 08/18/10 7.800 841,424 - -------------------------------------------------------------------------------------------------- 1,000 Washington Mutual, Inc. 01/15/07 5.625 1,000,516 - -------------------------------------------------------------------------------------------------- 800 Washington Mutual Preferred Funding** 03/15/11+++ 6.534[++] 782,712 - -------------------------------------------------------------------------------------------------- 1,250 Wells Fargo Bank N.A. 02/01/11 6.450 1,307,594 - -------------------------------------------------------------------------------------------------- 655 Wells Fargo Bank N.A. 08/26/36 5.950 660,738 - -------------------------------------------------------------------------------------------------- 10,646,747 ================================================================================================== BROADCAST--0.06% 125 CMP Susquehanna** 05/15/14 9.875 116,563 - -------------------------------------------------------------------------------------------------- 295 News America, Inc. 12/15/34 6.200 275,657 - -------------------------------------------------------------------------------------------------- 125 Nexstar Finance Holdings LLC, Inc. 04/01/13 11.375# 103,125 - -------------------------------------------------------------------------------------------------- 100 Nexstar Finance, Inc. 01/15/14 7.000 89,500 - -------------------------------------------------------------------------------------------------- 584,845 ================================================================================================== BROKERAGE--0.36% 1,525 Goldman Sachs Group, Inc.(1) 01/15/11 6.875 1,610,199 - -------------------------------------------------------------------------------------------------- 1,550 Morgan Stanley 04/15/11 6.750 1,632,751 - -------------------------------------------------------------------------------------------------- 3,242,950 ================================================================================================== BUILDING MATERIALS--0.03% 75 Ahern Rentals, Inc. 08/15/13 9.250 76,125 - -------------------------------------------------------------------------------------------------- 100 Ainsworth Lumber 10/01/12 7.250 73,500 - -------------------------------------------------------------------------------------------------- 100 Interface, Inc. 02/01/10 10.375 108,875 - -------------------------------------------------------------------------------------------------- 258,500 ================================================================================================== BUSINESS SERVICES--0.02% 125 Da-Lite Screen Co., Inc. 05/15/11 9.500 131,250 - -------------------------------------------------------------------------------------------------- 50 Sensata Technologies BV** 05/01/14 8.000 49,000 - -------------------------------------------------------------------------------------------------- 180,250 ==================================================================================================
- -------------------------------------------------------------------------------- 25 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) CABLE--0.19% $1,025 Comcast Cable Communications, Inc. 01/30/11 6.750% $1,071,837 - -------------------------------------------------------------------------------------------------- 175 CSC Holdings, Inc., Series B 07/15/09 8.125 180,906 - -------------------------------------------------------------------------------------------------- 150 Insight Communications, Inc. 02/15/11 12.250# 159,375 - -------------------------------------------------------------------------------------------------- 150 Mediacom Broadband LLC 01/15/13 9.500 154,125 - -------------------------------------------------------------------------------------------------- 100 Quebecor Media 03/15/16 7.750 99,000 - -------------------------------------------------------------------------------------------------- 1,665,243 ================================================================================================== CHEMICALS--0.20% 100 Chemtura Corp. 06/01/16 6.875 96,750 - -------------------------------------------------------------------------------------------------- 150 Hercules, Inc. 06/30/29 6.500 118,875 - -------------------------------------------------------------------------------------------------- 400 ICI Wilmington, Inc. 12/01/08 4.375 390,052 - -------------------------------------------------------------------------------------------------- 150 Ineos Group Holdings PLC** 02/15/16 8.500 142,500 - -------------------------------------------------------------------------------------------------- 200 Montell Finance Co. BV** 03/15/27 8.100 185,500 - -------------------------------------------------------------------------------------------------- 150 Omnova Solutions, Inc. 06/01/10 11.250 159,000 - -------------------------------------------------------------------------------------------------- 150 Polyone Corp. 05/15/10 10.625 160,875 - -------------------------------------------------------------------------------------------------- 195 Rhodia SA 06/01/10 10.250 214,013 - -------------------------------------------------------------------------------------------------- 64 Rockwood Specialties Group, Inc. 05/15/11 10.625 68,640 - -------------------------------------------------------------------------------------------------- 200 Terra Capital, Inc. 10/15/08 12.875 223,500 - -------------------------------------------------------------------------------------------------- 1,759,705 ================================================================================================== COMMERCIAL SERVICES--0.02% 200 Technical Olympic USA, Inc. 01/15/15 7.500 158,750 ================================================================================================== COMMERCIAL SERVICES & SUPPLIES--0.02% 200 Xerox Capital Trust I 02/01/27 8.000 205,250 ================================================================================================== CONSUMER PRODUCTS--0.09% 560 Fortune Brands, Inc. 01/15/16 5.375 532,859 - -------------------------------------------------------------------------------------------------- 125 Gregg Appliances, Inc. 02/01/13 9.000 112,813 - -------------------------------------------------------------------------------------------------- 150 Prestige Brands, Inc. 04/15/12 9.250 149,250 - -------------------------------------------------------------------------------------------------- 794,922 ================================================================================================== CONSUMER PRODUCTS-NONDURABLES--0.04% 335 Avon Products, Inc. 11/15/09 7.150 353,437 ================================================================================================== CONTAINERS & PACKAGING--0.06% 250 Berry Plastics 07/15/12 10.750 272,500 - -------------------------------------------------------------------------------------------------- 150 Owens-Illinois, Inc. 05/15/18 7.800 140,250 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 26 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) CONTAINERS & PACKAGING--(CONCLUDED) $125 Solo Cup Co.(1) 02/15/14 8.500% $108,750 - -------------------------------------------------------------------------------------------------- 521,500 ================================================================================================== DIVERSIFIED FINANCIALS--0.01% 125 Bluewater Finance Ltd. 02/15/12 10.250 125,469 ================================================================================================== DIVERSIFIED MANUFACTURING--0.01% 100 Jacuzzi Brands, Inc. 07/01/10 9.625 106,000 ================================================================================================== ELECTRIC UTILITIES--0.25% 125 Comstock Resources, Inc. 03/01/12 6.875 119,844 - -------------------------------------------------------------------------------------------------- 280 Dominion Resources, Inc. 06/15/35 5.950 265,320 - -------------------------------------------------------------------------------------------------- 100 Dynegy Holdings, Inc.** 05/01/16 8.375 98,500 - -------------------------------------------------------------------------------------------------- 450 FirstEnergy Corp., Series B 11/15/11 6.450 466,714 - -------------------------------------------------------------------------------------------------- 175 Mirant Americas Generation LLC 05/01/31 9.125 175,875 - -------------------------------------------------------------------------------------------------- 100 Mirant N.A. LLC 12/31/13 7.375 99,000 - -------------------------------------------------------------------------------------------------- 150 NRG Energy, Inc. 02/01/16 7.375 147,750 - -------------------------------------------------------------------------------------------------- 270 Pacific Gas & Electric Co. 03/01/34 6.050 266,860 - -------------------------------------------------------------------------------------------------- 325 Progress Energy, Inc. 10/30/31 7.000 354,008 - -------------------------------------------------------------------------------------------------- 265 TXU Energy Co. 03/15/13 7.000 276,503 - -------------------------------------------------------------------------------------------------- 2,270,374 ================================================================================================== ELECTRONICS--0.02% 150 Sanmina-SCI Corp. 03/01/16 8.125 146,250 ================================================================================================== ENERGY--0.13% 225 Anadarko Finance Co., Series B 05/01/11 6.750 235,636 - -------------------------------------------------------------------------------------------------- 350 Devon Financing Corp., U.L.C. 09/30/11 6.875 371,170 - -------------------------------------------------------------------------------------------------- 195 Devon Financing Corp., U.L.C. 09/30/31 7.875 233,159 - -------------------------------------------------------------------------------------------------- 100 Gulfmark Offshore, Inc. 07/15/14 7.750 99,500 - -------------------------------------------------------------------------------------------------- 200 Whiting Petroleum Corp. 05/01/12 7.250 197,500 - -------------------------------------------------------------------------------------------------- 1,136,965 ================================================================================================== ENERGY-INTEGRATED--0.03% 250 PPL Energy Supply LLC, Series A 11/01/11 6.400 258,224 ================================================================================================== ENTERTAINMENT--0.03% 225 Time Warner, Inc. 04/15/31 7.625 243,657 ==================================================================================================
- -------------------------------------------------------------------------------- 27 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) ENVIRONMENTAL SERVICES--0.04% $300 Waste Management, Inc. 08/01/10 7.375% $319,909 ================================================================================================== FINANCE-NONCAPTIVE CONSUMER--0.32% 490 Capital One Financial(1) 06/01/15 5.500 476,964 - -------------------------------------------------------------------------------------------------- 500 Countrywide Home Loans(1) 05/21/08 3.250 483,266 - -------------------------------------------------------------------------------------------------- 700 HSBC Finance Corp. 05/15/11 6.750 738,997 - -------------------------------------------------------------------------------------------------- 335 MBNA Corp. 03/15/12 7.500 368,653 - -------------------------------------------------------------------------------------------------- 765 Residential Capital Corp. 11/21/08 6.125 766,665 - -------------------------------------------------------------------------------------------------- 2,834,545 ================================================================================================== FINANCE-NONCAPTIVE DIVERSIFIED--0.44% 2,350 General Electric Capital Corp.(1) 06/15/12 6.000 2,428,640 - -------------------------------------------------------------------------------------------------- 600 General Electric Capital Corp. 03/15/32 6.750 677,163 - -------------------------------------------------------------------------------------------------- 850 International Lease Finance Corp.(1) 04/01/09 3.500 812,626 - -------------------------------------------------------------------------------------------------- 3,918,429 ================================================================================================== FOOD--0.14% 200 Ameriqual Group LLC** 04/01/12 9.000 204,000 - -------------------------------------------------------------------------------------------------- 300 Conagra Foods, Inc. 09/15/11 6.750 315,325 - -------------------------------------------------------------------------------------------------- 100 Dole Foods Co.(1) 03/15/11 8.875 97,500 - -------------------------------------------------------------------------------------------------- 375 Kraft Foods, Inc. 11/01/11 5.625 377,383 - -------------------------------------------------------------------------------------------------- 150 Pinnacle Foods Holding Corp. 12/01/13 8.250 147,375 - -------------------------------------------------------------------------------------------------- 150 Wornick Co. 07/15/11 10.875 142,500 - -------------------------------------------------------------------------------------------------- 1,284,083 ================================================================================================== FOOD PROCESSORS/BEVERAGE/BOTTLING--0.10% 325 Coors Brewing Co. 05/15/12 6.375 336,299 - -------------------------------------------------------------------------------------------------- 175 Le-Natures, Inc.** 06/15/13 10.000 182,875 - -------------------------------------------------------------------------------------------------- 410 Miller Brewing Co.** 08/15/13 5.500 403,515 - -------------------------------------------------------------------------------------------------- 922,689 ================================================================================================== GAMING--0.20% 150 Chukchansi Economic Development Authority** 11/15/13 8.000 151,500 - -------------------------------------------------------------------------------------------------- 100 Circus & Eldorado 03/01/12 10.125 105,000 - -------------------------------------------------------------------------------------------------- 225 Jacobs Entertainment** 06/15/14 9.750 224,719 - -------------------------------------------------------------------------------------------------- 250 MTR Gaming Group, Inc. 04/01/10 9.750 262,812 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 28 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) GAMING--(CONCLUDED) $100 Pokagon Gaming Authority** 06/15/14 10.375% $105,750 - -------------------------------------------------------------------------------------------------- 150 Poster Financial Group 12/01/11 8.750 156,750 - -------------------------------------------------------------------------------------------------- 150 River Rock Entertainment 11/01/11 9.750 158,812 - -------------------------------------------------------------------------------------------------- 150 San Pasqual Casino** 09/15/13 8.000 150,938 - -------------------------------------------------------------------------------------------------- 100 Seneca Gaming Corp. 05/01/12 7.250 98,250 - -------------------------------------------------------------------------------------------------- 150 Tunica-Biloxi Gaming Authority** 11/15/15 9.000 154,125 - -------------------------------------------------------------------------------------------------- 200 Wheeling Island Gaming, Inc. 12/15/09 10.125 205,500 - -------------------------------------------------------------------------------------------------- 1,774,156 ================================================================================================== HEALTHCARE--0.10% 150 Ameripath, Inc. 04/01/13 10.500 158,625 - -------------------------------------------------------------------------------------------------- 100 Psychiatric Solutions 07/15/15 7.750 96,500 - -------------------------------------------------------------------------------------------------- 420 UnitedHealth Group 03/15/36 5.800 405,621 - -------------------------------------------------------------------------------------------------- 200 Universal Hospital Services 11/01/11 10.125 207,000 - -------------------------------------------------------------------------------------------------- 867,746 ================================================================================================== INSURANCE-MULTILINE--0.04% 300 Allstate Corp. 12/01/09 7.200 316,802 ================================================================================================== MACHINERY-AGRICULTURE & CONSTRUCTION--0.04% 325 John Deere Capital Corp. 03/15/12 7.000 348,786 ================================================================================================== MANUFACTURING-DIVERSIFIED--0.01% 100 Maax Corp. 06/15/12 9.750 76,000 - -------------------------------------------------------------------------------------------------- 25 Maax Holdings, Inc.** 12/15/12 11.250# 8,500 - -------------------------------------------------------------------------------------------------- 84,500 ================================================================================================== MEDIA--0.07% 100 Affinion Group, Inc.** 10/15/13 10.125 103,750 - -------------------------------------------------------------------------------------------------- 75 Baker & Taylor, Inc.** 07/01/13 11.500 74,625 - -------------------------------------------------------------------------------------------------- 150 LIN Television Corp. 05/15/13 6.500 138,375 - -------------------------------------------------------------------------------------------------- 175 Sinclair Broadcast Group 03/15/12 8.000 177,187 - -------------------------------------------------------------------------------------------------- 100 Sirius Satellite Radio 08/01/13 9.625 95,000 - -------------------------------------------------------------------------------------------------- 588,937 ================================================================================================== METALS & MINING--0.05% 225 AK Steel Corp. 06/15/12 7.750 219,375 - -------------------------------------------------------------------------------------------------- 200 FastenTech, Inc. 05/01/11 11.500 205,000 - -------------------------------------------------------------------------------------------------- 424,375 ==================================================================================================
- -------------------------------------------------------------------------------- 29 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) OIL & GAS--0.17% $150 Atlas Pipeline Partners 12/15/15 8.125% $153,000 - -------------------------------------------------------------------------------------------------- 175 Inergy LP/Inergy Finance** 03/01/16 8.250 179,813 - -------------------------------------------------------------------------------------------------- 510 Kinder Morgan Energy Partners 11/15/14 5.125 481,720 - -------------------------------------------------------------------------------------------------- 770 Kinder Morgan Energy Partners 03/15/35 5.800 691,292 - -------------------------------------------------------------------------------------------------- 1,505,825 ================================================================================================== OIL REFINING--0.05% 80 Giant Industries, Inc. 05/15/12 11.000 86,800 - -------------------------------------------------------------------------------------------------- 325 Valero Energy Corp. 04/15/32 7.500 376,526 - -------------------------------------------------------------------------------------------------- 463,326 ================================================================================================== PAPER & FOREST PRODUCTS--0.08% 150 Abitibi-Consolidated, Inc. 04/01/08 6.950 148,875 - -------------------------------------------------------------------------------------------------- 50 Abitibi-Consolidated, Inc. 08/01/10 8.550 49,375 - -------------------------------------------------------------------------------------------------- 150 Buckeye Technologies, Inc. 10/15/10 8.000 141,000 - -------------------------------------------------------------------------------------------------- 150 Cellu Tissue Holdings, Inc. 03/15/10 9.750 146,250 - -------------------------------------------------------------------------------------------------- 150 Millar Western Forest 11/15/13 7.750 119,250 - -------------------------------------------------------------------------------------------------- 75 P.H. Glatfelter** 05/01/16 7.125 73,934 - -------------------------------------------------------------------------------------------------- 678,684 ================================================================================================== PHARMACEUTICALS--0.21% 275 Abbott Laboratories 05/15/11 5.600 278,704 - -------------------------------------------------------------------------------------------------- 770 Allergan, Inc.** 04/01/16 5.750 773,906 - -------------------------------------------------------------------------------------------------- 325 Bristol-Myers Squibb Co. 10/01/11 5.750 329,253 - -------------------------------------------------------------------------------------------------- 160 Teva Pharmaceutical Finance LLC 02/01/16 5.550 155,420 - -------------------------------------------------------------------------------------------------- 350 Wyeth 03/15/13 5.500 349,600 - -------------------------------------------------------------------------------------------------- 1,886,883 ================================================================================================== PUBLISHING--0.18% 125 Advanstar Communications, Inc. 08/15/10 10.750 135,000 - -------------------------------------------------------------------------------------------------- 200 Cadmus Communications Corp. 06/15/14 8.375 195,500 - -------------------------------------------------------------------------------------------------- 125 Cenveo Corp. 12/01/13 7.875 118,125 - -------------------------------------------------------------------------------------------------- 100 Clarke American Corp.** 12/15/13 11.750 104,500 - -------------------------------------------------------------------------------------------------- 200 Deluxe Corp. 12/15/12 5.000 161,250 - -------------------------------------------------------------------------------------------------- 325 Houghton Mifflin Co. 10/15/13 11.500# 272,187 - -------------------------------------------------------------------------------------------------- 200 Quebecor World Capital Corp.** 03/15/16 8.750 188,000 - -------------------------------------------------------------------------------------------------- 175 R.H. Donnelley Corp. 01/15/16 8.875 172,375 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 30 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) PUBLISHING--(CONCLUDED) $200 Sheridan Acquisition Corp. 08/15/11 10.250% $201,500 - -------------------------------------------------------------------------------------------------- 75 Vertis, Inc. 06/15/09 10.875 75,750 - -------------------------------------------------------------------------------------------------- 1,624,187 ================================================================================================== REAL ESTATE INVESTMENT TRUSTS--0.11% 325 Avalonbay Communities 08/01/09 7.500 343,845 - -------------------------------------------------------------------------------------------------- 325 EOP Operating LP 06/15/28 7.250 349,570 - -------------------------------------------------------------------------------------------------- 280 Prologis 11/15/15 5.625 275,731 - -------------------------------------------------------------------------------------------------- 969,146 ================================================================================================== RESTAURANTS--0.06% 150 Buffets, Inc. 07/15/10 11.250 158,250 - -------------------------------------------------------------------------------------------------- 175 Landry's Restaurants, Inc., Series B** 12/15/14 7.500 165,375 - -------------------------------------------------------------------------------------------------- 150 Restaurant Co. 10/01/13 10.000 133,875 - -------------------------------------------------------------------------------------------------- 125 Sbarro, Inc. 09/15/09 11.000 126,562 - -------------------------------------------------------------------------------------------------- 584,062 ================================================================================================== RETAIL--0.16% 50 Brookstone Co., Inc. 10/15/12 12.000 45,500 - -------------------------------------------------------------------------------------------------- 225 GSC Holdings Corp.(1)** 10/01/12 8.000 229,781 - -------------------------------------------------------------------------------------------------- 200 Ingles Markets, Inc. 12/01/11 8.875 208,500 - -------------------------------------------------------------------------------------------------- 75 Jean Coutu Group PJC, Inc. 08/01/14 8.500 71,531 - -------------------------------------------------------------------------------------------------- 260 Kroger Co. 04/01/31 7.500 284,210 - -------------------------------------------------------------------------------------------------- 150 Pantry, Inc. 02/15/14 7.750 147,750 - -------------------------------------------------------------------------------------------------- 150 Petro Stopping Center/Financial 02/15/12 9.000 150,750 - -------------------------------------------------------------------------------------------------- 275 Safeway, Inc. 02/01/31 7.250 290,632 - -------------------------------------------------------------------------------------------------- 1,428,654 ================================================================================================== ROAD & RAIL--0.07% 275 Burlington Northern Santa Fe Corp. 05/13/29 7.082 309,006 - -------------------------------------------------------------------------------------------------- 150 Kansas City Southern 06/15/09 7.500 149,250 - -------------------------------------------------------------------------------------------------- 155 Norfolk Southern Corp. 09/17/14 5.257 152,879 - -------------------------------------------------------------------------------------------------- 611,135 ================================================================================================== SERVICE--0.02% 150 Carriage Services, Inc. 01/15/15 7.875 145,500 ==================================================================================================
- -------------------------------------------------------------------------------- 31 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONTINUED) SPECIALTY PURPOSE ENTITY--0.03% $150 AAC Group Holding Corp. 10/01/12 10.250%# $120,375 - -------------------------------------------------------------------------------------------------- 175 Riddell Bell Holdings, Inc. 10/01/12 8.375 171,063 - -------------------------------------------------------------------------------------------------- 291,438 ================================================================================================== TECHNOLOGY-HARDWARE--0.04% 250 Cisco Systems, Inc. 02/22/16 5.500 248,901 - -------------------------------------------------------------------------------------------------- 125 Xerox Corp. 02/01/17 6.750 125,313 - -------------------------------------------------------------------------------------------------- 374,214 ================================================================================================== TECHNOLOGY-SOFTWARE--0.05% 350 Computer Sciences Corp. 04/15/08 3.500 338,894 - -------------------------------------------------------------------------------------------------- 125 Unisys Corp. 10/15/12 8.000 115,781 - -------------------------------------------------------------------------------------------------- 454,675 ================================================================================================== TELECOMMUNICATIONS--0.16% 325 Bellsouth Corp. 06/15/34 6.550 317,726 - -------------------------------------------------------------------------------------------------- 200 Citizens Communications 08/15/31 9.000 211,000 - -------------------------------------------------------------------------------------------------- 100 Dycom Industries, Inc. 10/15/15 8.125 101,000 - -------------------------------------------------------------------------------------------------- 200 Intelsat Subsidiary Holding Co. Ltd. 01/15/15 8.625 202,000 - -------------------------------------------------------------------------------------------------- 350 Telecom Italia Capital 11/15/13 5.250 333,422 - -------------------------------------------------------------------------------------------------- 310 Telecom Italia Capital 11/15/33 6.375 292,708 - -------------------------------------------------------------------------------------------------- 1,457,856 ================================================================================================== TOBACCO--0.02% 150 Reynolds American, Inc.** 06/01/13 7.250 153,650 ================================================================================================== TRANSPORTATION SERVICES--0.05% 400 ERAC USA Finance Co.** 01/15/11 8.000 437,396 ================================================================================================== UTILITIES-OTHER--0.05% 500 Duke Capital LLC 08/15/14 5.668 488,648 ================================================================================================== WIRELESS TELECOMMUNICATIONS SERVICES--0.26% 200 American Cellular Corp., Series B 08/01/11 10.000 208,000 - -------------------------------------------------------------------------------------------------- 300 AT&T Corp. 11/15/31 8.000 358,418 - -------------------------------------------------------------------------------------------------- 175 AT&T Wireless Services, Inc. 03/01/31 8.750 221,188 - -------------------------------------------------------------------------------------------------- 135 Cincinnati Bell, Inc. 01/15/14 8.375 135,506 - -------------------------------------------------------------------------------------------------- 650 Sprint Capital Corp. 03/15/32 8.750 788,169 - -------------------------------------------------------------------------------------------------- 350 Verizon New York, Inc., Series A 04/01/12 6.875 363,410 - -------------------------------------------------------------------------------------------------- 100 Wind Acquisition Finance SA** 12/01/15 10.750 108,625 - --------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 32 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- CORPORATE BONDS--(CONCLUDED) WIRELESS TELECOMMUNICATIONS SERVICES--(CONCLUDED) $125 Windstream Corp.** 08/01/16 8.625% $132,188 - -------------------------------------------------------------------------------------------------- 2,315,504 ================================================================================================== Total corporate bonds (cost--$66,683,106) 65,725,168 ================================================================================================== INTERNATIONAL GOVERNMENT OBLIGATION--0.04% - -------------------------------------------------------------------------------------------------- 330 Pemex Project Funding Master Trust (cost--$365,907) 11/15/11 8.000 359,700 ================================================================================================== REPURCHASE AGREEMENT--2.23% - -------------------------------------------------------------------------------------------------- 19,946 Repurchase agreement dated 08/31/06 with State Street Bank & Trust Co., collateralized by $15,489 US Treasury Bonds, 6.500% to 7.250% due 08/15/22 to 11/15/26 and $20,326,003 US Treasury Notes, 4.125% to 4.375% due 12/31/07 to 08/15/10; (value--$20,345,020); proceeds: $19,948,693 (cost--$19,946,000) 09/01/06 4.860 19,946,000 ================================================================================================== NUMBER OF SHARES (000) - -------------------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LOANED--8.02% - -------------------------------------------------------------------------------------------------- MONEY MARKET FUNDS+--3.25% - -------------------------------------------------------------------------------------------------- 683 AIM Liquid Assets Portfolio 5.182 682,648 - -------------------------------------------------------------------------------------------------- 58 AIM Prime Portfolio 5.216 58,460 - -------------------------------------------------------------------------------------------------- [++][++] 0 BlackRock Provident TempFund 5.137 105 - -------------------------------------------------------------------------------------------------- 6,066 DWS Money Market Series 5.251 6,066,309 - -------------------------------------------------------------------------------------------------- 22,164 UBS Private Money Market Fund LLC(3) 5.231 22,164,084 - -------------------------------------------------------------------------------------------------- Total money market funds (cost--$28,971,606) 28,971,606 ==================================================================================================
- -------------------------------------------------------------------------------- 33 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - -------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT--4.77% - -------------------------------------------------------------------------------------------------- $42,600 Repurchase agreement dated 08/31/06 with Barclays Bank PLC, collateralized by $2,639,000 Federal Home Loan Mortgage Corp. obligations, zero coupon due 05/11/07 and $41,948,000 Federal National Mortgage Association obligations, zero coupon due 02/21/07; (value--$43,452,741); proceeds: $42,606,236 (cost--$42,600,000) 09/01/06 5.270% $42,600,000 ================================================================================================== Total investments of cash collateral from securities loaned (cost--$71,571,606) 71,571,606 ================================================================================================== Total investments (cost--$903,794,001)--108.11% 965,027,343 - -------------------------------------------------------------------------------------------------- Liabilities in excess of other assets--(8.11)% (72,411,780) - -------------------------------------------------------------------------------------------------- Net assets--100.00% $892,615,563 ==================================================================================================
* Non-income producing security. ** Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 2.60% of net assets as of August 31, 2006, are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. + Interest rates shown reflect yield at August 31, 2006. [++] Floating rate securities. The interest rates shown are the current rates as of August 31, 2006. [++][++] Amount represents less than 500 shares. ++ Security is being fair valued by a Valuation Committee under the direction of the Board of Trustees. +++ Perpetual bond security. The maturity date reflects the next call date. # Denotes a step-up bond that converts to the noted fixed rate at a designated future date. (1) Security, or portion thereof, was on loan at August 31, 2006. (2) Interest Only Security. This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase. - -------------------------------------------------------------------------------- 34 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006 (3) The table below details the Fund's transaction activity in an affiliated issuer for the year ended August 31, 2006.
PURCHASES SALES INCOME EARNED DURING THE DURING THE FROM AFFILIATE SECURITY VALUE AT YEAR ENDED YEAR ENDED VALUE AT FOR THE YEAR DESCRIPTION 08/31/05 08/31/06 08/31/06 08/31/06 ENDED 08/31/06 - ------------------------------------------------------------------------------------------------------- UBS Private Money Market Fund LLC $45,139,164 $1,110,558,037 $1,133,533,117 $22,164,084 $27,908 =======================================================================================================
(4) The securities detailed in the table below, which represent 0.01% of net assets, are considered illiquid and restricted as of August 31, 2006:
ACQUISITION ILLIQUID AND COST AS A VALUE AS A RESTRICTED ACQUISITION ACQUISITION PERCENTAGE PERCENTAGE OF SECURITY DATES COST OF NET ASSETS VALUE NET ASSETS - -------------------------------------------------------------------------------------------------- Merrill Lynch Credit Corporation Mortgage Investors, Inc., Series 2003-D, Class XA1, 1.000%, 08/25/28 09/12/03 $3,440 0.00% $3,402 0.00% - -------------------------------------------------------------------------------------------------- Taberna Realty Finance Trust 08/04/05 136,920 0.02 123,228 0.01 - -------------------------------------------------------------------------------------------------- $140,360 0.02% $126,630 0.01% ==================================================================================================
FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GSAMP Goldman Sachs Asset Mortgage Passthrough GSMPS Goldman Sachs Mortgage Passthrough Securities OEM Original Equipment Manufacturer REMIC Real Estate Mortgage Investment Conduit - -------------------------------------------------------------------------------- 35 UBS U.S. ALLOCATION FUND PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
ISSUER BREAKDOWN BY COUNTRY (UNAUDITED) PERCENTAGE OF PORTFOLIO ASSETS - -------------------------------------------------------------------------------- United States 96.7% - -------------------------------------------------------------------------------- Panama 1.0 - -------------------------------------------------------------------------------- United Kingdom 0.8 - -------------------------------------------------------------------------------- Cayman Islands 0.7 - -------------------------------------------------------------------------------- Bermuda 0.7 - -------------------------------------------------------------------------------- Canada 0.1 - -------------------------------------------------------------------------------- Total 100.0% ================================================================================
See accompanying notes to financial statements - -------------------------------------------------------------------------------- 36 UBS U.S. ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES--AUGUST 31, 2006 ASSETS: Investments in unaffiliated securities, at value (cost-$881,629,917)* $942,863,259 - ------------------------------------------------------------------------------------------- Investments in an affliliated security, at value (cost-$22,164,084) 22,164,084 =========================================================================================== Total investments in securities, at value (cost-$903,794,001) 965,027,343 - ------------------------------------------------------------------------------------------- Cash 41 - ------------------------------------------------------------------------------------------- Receivable for investments sold 5,096,022 - ------------------------------------------------------------------------------------------- Receivable for shares of beneficial interest sold 118,453 - ------------------------------------------------------------------------------------------- Receivable for dividends and interest 3,673,781 - ------------------------------------------------------------------------------------------- Other assets 43,130 - ------------------------------------------------------------------------------------------- Total assets 973,958,770 - ------------------------------------------------------------------------------------------- LIABILITIES: Payable for cash collateral from securities loaned 71,571,606 - ------------------------------------------------------------------------------------------- Payable for investments purchased 5,781,552 - ------------------------------------------------------------------------------------------- Payable for shares of beneficial interest repurchased 2,717,774 - ------------------------------------------------------------------------------------------- Payable to affiliates 698,578 - ------------------------------------------------------------------------------------------- Payable for foreign witholding taxes 1,386 - ------------------------------------------------------------------------------------------- Accrued expenses and other liabilities 572,311 - ------------------------------------------------------------------------------------------- Total liabilities 81,343,207 - ------------------------------------------------------------------------------------------- NET ASSETS: Beneficial interest-$0.001 par value per share (unlimited amount authorized) 992,491,383 - ------------------------------------------------------------------------------------------- Accumulated undistributed net investment income 14,556,482 - ------------------------------------------------------------------------------------------- Accumulated net realized loss from investments and options written (175,665,644) - ------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and options written 61,233,342 - ------------------------------------------------------------------------------------------- NET ASSETS $892,615,563 ===========================================================================================
* Includes $147,309,958 of investments in securities on loan, at value. See accompanying notes to financial statements - -------------------------------------------------------------------------------- 37 UBS U.S. ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES--AUGUST 31, 2006 CLASS A: Net assets $472,212,998 - ------------------------------------------------------------------------------------------- Shares outstanding 15,772,510 - ------------------------------------------------------------------------------------------- Net asset value per share $29.94 - ------------------------------------------------------------------------------------------- Maximum offering price per share (net asset value plus maximum sales charge of 5.50%) $31.68 - ------------------------------------------------------------------------------------------- CLASS B: Net assets $77,296,278 - ------------------------------------------------------------------------------------------- Shares outstanding 2,643,815 - ------------------------------------------------------------------------------------------- Net asset value and offering price per share $29.24 - ------------------------------------------------------------------------------------------- CLASS C: Net assets $226,218,769 - ------------------------------------------------------------------------------------------- Shares outstanding 7,728,663 - ------------------------------------------------------------------------------------------- Net asset value and offering price per share $29.27 - ------------------------------------------------------------------------------------------- CLASS Y: Net assets $116,887,518 - ------------------------------------------------------------------------------------------- Shares outstanding 3,845,862 - ------------------------------------------------------------------------------------------- Net asset value, offering price and redemption value per share $30.39 ===========================================================================================
See accompanying notes to financial statements - -------------------------------------------------------------------------------- 38 UBS U.S. ALLOCATION FUND STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2006 - ---------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $10,852,422 - ---------------------------------------------------------------------------------------------------- Interest (net of foreign withholding taxes of $1,516) 16,583,433 - ---------------------------------------------------------------------------------------------------- Securities lending income (includes $27,908 earned from an affiliated entity) 122,874 - ---------------------------------------------------------------------------------------------------- 27,558,729 - ---------------------------------------------------------------------------------------------------- EXPENSES: Investment advisory and administration fees 4,535,942 - ---------------------------------------------------------------------------------------------------- Service fees-Class A 1,264,723 - ---------------------------------------------------------------------------------------------------- Service and distribution fees-Class B 1,060,405 - ---------------------------------------------------------------------------------------------------- Service and distribution fees-Class C 2,482,898 - ---------------------------------------------------------------------------------------------------- Transfer agency and related services fees-Class A 648,412 - ---------------------------------------------------------------------------------------------------- Transfer agency and related services fees-Class B 193,945 - ---------------------------------------------------------------------------------------------------- Transfer agency and related services fees-Class C 296,570 - ---------------------------------------------------------------------------------------------------- Transfer agency and related services fees-Class Y 21,036 - ---------------------------------------------------------------------------------------------------- Custody and accounting fees 418,098 - ---------------------------------------------------------------------------------------------------- Reports and notices to shareholders 232,473 - ---------------------------------------------------------------------------------------------------- Professional fees 112,731 - ---------------------------------------------------------------------------------------------------- State registration fees 53,752 - ---------------------------------------------------------------------------------------------------- Insurance expense 52,941 - ---------------------------------------------------------------------------------------------------- Trustees' fees 21,890 - ---------------------------------------------------------------------------------------------------- Other expenses 32,298 - ---------------------------------------------------------------------------------------------------- 11,428,114 - ---------------------------------------------------------------------------------------------------- Less: Fee waivers by investment advisor and administrator (240,105) - ---------------------------------------------------------------------------------------------------- Net expenses 11,188,009 - ---------------------------------------------------------------------------------------------------- Net investment income 16,370,720 - ---------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAINS (LOSS) FROM INVESTMENT ACTIVITIES: Net realized gain from investments 49,492,775 - ---------------------------------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation of: - ---------------------------------------------------------------------------------------------------- Investments (2,616,205) - ---------------------------------------------------------------------------------------------------- Net realized and unrealized gain from investment activities 46,876,570 - ---------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $63,247,290 ====================================================================================================
See accompanying notes to financial statements - -------------------------------------------------------------------------------- 39 UBS U.S. ALLOCATION FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, ------------------------------ 2006 2005 - ---------------------------------------------------------------------------------------------------- FROM OPERATIONS: Net investment income $16,370,720 $18,631,766 - ---------------------------------------------------------------------------------------------------- Net realized gains from investments 49,492,775 69,010,509 - ---------------------------------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation of: Investments and options written (2,616,205) 55,659,498 - ---------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 63,247,290 143,301,773 - ---------------------------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM: Net investment income-Class A (10,696,257) (10,204,377) - ---------------------------------------------------------------------------------------------------- Net investment income-Class B (947,042) (1,960,273) - ---------------------------------------------------------------------------------------------------- Net investment income-Class C (3,192,484) (3,383,530) - ---------------------------------------------------------------------------------------------------- Net investment income-Class Y (2,885,670) (2,739,816) - ---------------------------------------------------------------------------------------------------- (17,721,453) (18,287,996) - ---------------------------------------------------------------------------------------------------- FROM BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from the sale of shares 19,991,380 30,554,718 - ---------------------------------------------------------------------------------------------------- Cost of shares repurchased (258,340,216) (391,894,693) - ---------------------------------------------------------------------------------------------------- Proceeds from dividends reinvested 16,781,941 17,405,269 - ---------------------------------------------------------------------------------------------------- Net decrease in net assets from beneficial interest transactions (221,566,895) (343,934,706) - ---------------------------------------------------------------------------------------------------- Net decrease in net assets (176,041,058) (218,920,929) - ---------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of year 1,068,656,621 1,287,577,550 - ---------------------------------------------------------------------------------------------------- End of year 892,615,563 1,068,656,621 - ---------------------------------------------------------------------------------------------------- Accumulated undistributed net investment income $14,556,482 $15,213,242 ====================================================================================================
See accompanying notes to financial statements - -------------------------------------------------------------------------------- 40 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES UBS U.S. Allocation Fund (the "Fund") is a series of UBS Investment Trust (the "Trust") and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. Currently, the Fund offers Class A, Class B, Class C and Class Y shares. Each class represents interests in the same assets of the Fund, and the classes are identical except for differences in their sales charge structures, ongoing service and distribution charges and certain transfer agency and related services expenses. In addition, Class B shares and all corresponding reinvested dividend shares automatically convert to Class A shares within a certain number of years after issuance which varies depending upon the amount invested. All classes of shares have equal voting privileges except that Class A, Class B and Class C shares each have exclusive voting rights with respect to their respective service and/or distribution plans. Class Y shares have no service or distribution plan. In the normal course of business the Fund may enter into contracts that contain a variety of representations or that provide indemnification for certain liabilities. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. The preparation of financial statements in accordance with US generally accepted accounting principles requires Fund management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies: VALUATION OF INVESTMENTS--The Fund calculates net asset values based on the current market value for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources. Independent pricing sources may use last reported sale prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities. Securities traded in the over-the-counter ("OTC") market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price available prior to - -------------------------------------------------------------------------------- 41 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS valuation. Securities which are listed on US and foreign stock 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 valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees (the "Board"). Various factors may be reviewed in order to make a good faith determination of a security's fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities (particularly non-US securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities are fair valued. The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board determines that this does not represent fair value. REPURCHASE AGREEMENTS--The Fund may purchase securities or other obligations from a bank or securities dealer (or its affiliate), subject to the seller's agreement to repurchase them at an agreed upon date (or upon demand) and price. The Fund maintains custody of the underlying obligations prior to their repurchase, either through its regular custodian or through a special "tri-party" custodian or sub-custodian that maintains a separate account for both the Fund and its counterparty. The underlying collateral is valued daily to ensure that the value, including accrued interest, is at least equal to the repurchase price. In the event of default of the obligation to repurchase, the Fund generally has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Repurchase agreements involving obligations other than US government securities (such as commercial paper, corporate bonds and mortgage loans) may be subject to special risks and may not have the benefit of certain protections in the event of counterparty insolvency. If the seller (or seller's guarantor, if any) becomes insolvent, the Fund may suffer delays, costs and possible losses in connection with the disposition or retention of the collateral. Under certain circumstances, in the event of default or bankruptcy - -------------------------------------------------------------------------------- 42 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. The Fund may participate in joint repurchase agreement transactions with other funds managed, advised or sub-advised by UBS Global Asset Management (Americas) Inc. INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES--Investment transactions are recorded on the trade date. Realized gains and losses from investment transactions are calculated using the identified cost method. Dividend income is recorded on the ex-dividend date ("ex-date"). Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments. Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend-eligible shares, as appropriate) of each class at the beginning of the day (after adjusting for current capital share activity of the respective classes). Class-specific expenses are charged directly to the applicable class of shares. PURCHASED OPTIONS--The Fund may also purchase put and call options. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Fund pays a premium which is included in the Statement of Assets and Liabilities as an investment and subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future, security or currency transaction to determine the realized gain or loss. DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are recorded on the ex-date. The amount of dividends and distributions is determined in accordance with federal income tax regulations, which may differ from US generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on - -------------------------------------------------------------------------------- 43 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS their federal tax-basis treatment; temporary differences do not require reclassification. CONCENTRATION OF RISK The ability of the issuers of the debt securities held by the Fund to meet their obligations may be affected by economic developments, including those particular to a specific industry, country or region. INVESTMENT ADVISOR AND ADMINISTRATOR UBS Global Asset Management (US) Inc. ("UBS Global AM--US") served as the Fund's investment manager and administrator from August 1, 2005 until April 1, 2006. On April 1, 2006, the Fund's Investment Management and Administration Agreement ("Advisory Contract") was transferred from UBS Global AM--US to UBS Global Asset Management (Americas) Inc. ("UBS Global AM--Americas"). The transfer of the Advisory Contract between sister companies occurred in connection with an internal reorganization involving UBS Global AM--US and UBS Global AM--Americas. The Trust's Board of Trustees approved the transfer of the Advisory Contract effective April 1, 2006. All of the personnel of UBS Global AM--US who previously provided investment management services to the Fund continue to provide investment management services to the Fund as employees of UBS Global AM--Americas. UBS Global AM--Americas has the same contractual rights and responsibilities under the Advisory Contract as those previously held by UBS Global AM--US. UBS Global AM--US and UBS Global AM--Americas are both indirect wholly owned subsidiaries of UBS AG. UBS Global AM--US continues to serve as the Fund's principal underwriter. In accordance with the Advisory Contract, the Fund pays UBS Global AM an investment advisory and administration fee, which was accrued daily and paid monthly, at an annual rate of 0.50% of the Fund's average daily net assets up to $250 million and 0.45% thereafter. UBS Global AM--Americas had agreed to permanently reduce its advisory and administration fee based on the Fund's average daily net assets so that it was as follows: $0 to $250 million - 0.50%; in excess of $250 million up to $500 million - 0.45%; in excess of $500 million up to $2 billion - 0.40%; and over $2 billion - 0.35%. Accordingly, for the year ended August 31, 2006, UBS Global AM--Americas (or UBS Global AM--US for periods prior to April 1, 2006) waived $240,105 in investment advisory and administration fees. At August 31, 2006, the Fund owed UBS Global AM--Americas - -------------------------------------------------------------------------------- 44 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS $351,447 in investment advisory and administration fees. At August 31, 2006, UBS Global AM--Americas owed the Fund $16,637 for fee waivers under the above agreement. For the year ended August 31, 2006, the Fund paid $19,929 in brokerage commissions to UBS Securities LLC, an indirect wholly owned subsidiary of UBS AG, for transactions executed on behalf of the Fund. ADDITIONAL INFORMATION REGARDING COMPENSATION TO AFFILIATE OF A BOARD MEMBER Effective March 1, 2005, Professor Meyer Feldberg accepted the position of senior advisor to Morgan Stanley, resulting in him becoming an interested trustee of the Fund. The Fund has been informed that Professor Feldberg's role at Morgan Stanley does not involve matters directly affecting any UBS funds. Fund transactions are executed through Morgan Stanley based on that firm's ability to provide best execution of the transactions. During the year ended August 31, 2006, the Fund paid brokerage commissions to Morgan Stanley in the amount of $34,572. During the year ended August 31, 2006, the Fund purchased and sold certain securities (e.g., fixed income securities) in principal trades with Morgan Stanley having an aggregate value of $178,505,500. Morgan Stanley received compensation in connection with these trades, which may have been in the form of a "mark-up" or "mark-down" of the price of the securities, a fee from the issuer for maintaining a commercial paper program, or some other form of compensation. Although the precise amount of this compensation is not generally known by the advisor, it is believed that under normal circumstances it represents a small portion of the total value of the transactions. SERVICE AND DISTRIBUTION PLANS UBS Global AM--US is the principal underwriter of the Fund's shares. Under separate plans of service and/or distribution pertaining to Class A, Class B and Class C shares, the Fund pays UBS Global AM--US monthly service fees at an annual rate of 0.25% of the average daily net assets of Class A, Class B and Class C shares and monthly distribution fees at the annual rate of 0.75% of the average daily net assets of Class B and Class C shares. At August 31, 2006, the Fund owed UBS Global AM--US $358,018 in service and distribution fees. UBS Global AM--US also receives the proceeds of the initial sales charges paid by shareholders upon the purchase of Class A shares and the - -------------------------------------------------------------------------------- 45 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS contingent deferred sales charges paid by shareholders upon certain redemptions of Class A, Class B and Class C shares. UBS Global AM--US has informed the Fund that for the year ended August 31, 2006, it earned $114,897, $291,139, and $6,406 in initial sales and deferred sales charges on Class A, Class B and Class C shares, respectively. TRANSFER AGENCY AND RELATED SERVICES FEES UBS Financial Services Inc., an indirect wholly owned subsidiary of UBS AG, provides transfer agency related services to the Fund pursuant to a delegation of authority from PFPC, Inc. ("PFPC"), the Fund's transfer agent, and is compensated for these services by PFPC, not the Fund. For the year ended August 31, 2006, UBS Financial Services Inc. received from PFPC, not the Fund, $506,228 of the total transfer agency and related services fees paid by the Fund to PFPC. SECURITIES LENDING The Fund may lend securities up to 33 1/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, US government securities or irrevocable letters of credit in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. The Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, US government securities or irrevocable letters of credit held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. UBS Financial Services Inc. and other affiliated broker-dealers have been approved as borrowers under the Fund's securities lending program. UBS Securities LLC is the Fund's lending agent. For the year ended August 31, 2006 UBS Securities LLC earned $45,174 in compensation as the Fund's lending agent. At August 31, 2006, the Fund owed UBS Securities LLC $5,750 in compensation as the Fund's lending agent. At August 31, 2006, the Fund had securities on loan having a market value of $147,309,958. The custodian for the Fund held cash and cash equivalents as collateral for securities loaned of $71,571,606. In addition, the Fund held US government and agency securities having an aggregate value of $79,690,811 as collateral for portfolio securities loaned as follows: - -------------------------------------------------------------------------------- 46 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS
PRINCIPAL AMOUNT MATURITY INTEREST (000) DATES RATES VALUE - ------------------------------------------------------------------------------------------- $5,525 Federal Home Loan Mortgage Corp. 04/05/07 4.250% $5,582,493 - ------------------------------------------------------------------------------------------- 12,143 Federal National Mortgage Association 03/16/09 3.125 11,762,961 - ------------------------------------------------------------------------------------------- 6,246 US Treasury Bonds 05/15/17 8.750 8,423,987 - ------------------------------------------------------------------------------------------- 85 US Treasury Bonds 11/15/18 9.000 119,021 - ------------------------------------------------------------------------------------------- 53,651 US Treasury Inflation Index Notes 01/15/16 2.000 53,802,349 - ------------------------------------------------------------------------------------------- $79,690,811 ===========================================================================================
BANK LINE OF CREDIT The Fund participates with other funds managed, advised or sub-advised by UBS Global AM--Americas in a $100 million committed credit facility with State Street Bank and Trust Company ("Committed Credit Facility"), to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of the Fund at the request of the shareholders and other temporary or emergency purposes. Under the Committed Credit Facility arrangement, the Fund has agreed to pay a commitment fee, pro rata, based on the relative asset size of the funds in the Committed Credit Facility. Interest is charged to the Fund at the overnight federal funds rate in effect at the time of borrowings, plus 0.50%. The Fund did not borrow under the Committed Credit Facility during the year ended August 31, 2006. PURCHASE AND SALES OF SECURITIES For the year ended August 31, 2006, aggregate purchases and sales of portfolio securities, excluding short-term securities and US Government securities, were $290,375,522 and $415,369,112, respectively. For the year ended August 31, 2006, aggregate purchases and sales of US Government securities, excluding short-term securities, were $476,555,683 and $491,014,606, respectively. FEDERAL TAX STATUS The Fund intends to distribute substantially all of its income and to comply with the other requirements of the Internal Revenue Code applicable to regulated investment companies. Accordingly, no provision for federal income taxes is required. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, the Fund intends not to be subject to a federal excise tax. - -------------------------------------------------------------------------------- 47 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS The tax character of distributions paid during the fiscal years ended August 31, 2006 and August 31, 2005 were as follows:
DISTRIBUTIONS PAID FROM: 2006 2005 - ------------------------------------------------------------------------------------------- Ordinary Income $17,721,453 $18,287,996 ===========================================================================================
At August 31, 2006, the components of accumulated deficit on a tax basis were as follows: Undistributed ordinary income $14,538,707 - ------------------------------------------------------------------------------------------- Accumulated realized capital and other losses (167,762,681) - ------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 53,348,154 - ------------------------------------------------------------------------------------------- Total accumulated deficit $(99,875,820) ===========================================================================================
The differences between book-basis and tax-basis unrealized appreciation/ depreciation is attributable primarily to the tax deferral of losses on wash sales and return of capital adjustments from real estate investment trusts. At August 31, 2006, the Fund had a net capital loss carryforward of $167,762,681. This loss carryforward is available as a reduction, to the extent provided in the regulations, of any future net realized capital gains and will expire August 31, 2011. To the extent that such losses are used to offset future net realized capital gains, it is probable these gains will not be distributed. In addition, the Fund utilized $41,388,979 of the capital loss carryforward to offset current year realized gains. For federal income tax purposes, the tax cost of investments and the components of net unrealized appreciation of investments at August 31, 2006 were as follows: Tax cost of investments $911,679,189 - ------------------------------------------------------------------------------------------- Gross appreciation (investments having an excess of value over cost) 74,441,910 - ------------------------------------------------------------------------------------------- Gross depreciation (investments having an excess of cost over value) (21,093,756) - ------------------------------------------------------------------------------------------- Net unrealized appreciation of investments $53,348,154 ===========================================================================================
To reflect reclassifications arising from permanent "book/tax" differences for the year ending August 31, 2006, undistributed net investment income was increased by $693,973, and accumulated net realized losses from investment transactions were increased by $693,973. These differences - -------------------------------------------------------------------------------- 48 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS are primarily due to return of capital adjustments from real estate investments trusts and paydown reclasses. On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48, and its impact on the financial statements has not yet been determined. SHARES OF BENEFICIAL INTEREST There is an unlimited amount of $0.001 par value shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
CLASS A CLASS B --------------------------------------------------------- YEAR ENDED AUGUST 31, 2006: SHARES AMOUNT SHARES AMOUNT - --------------------------------------------------------------------------------- Shares sold 452,746 $13,229,529 24,074 $687,476 - --------------------------------------------------------------------------------- Shares repurchased (5,038,838) (147,389,209) (1,064,911) (30,347,204) - --------------------------------------------------------------------------------- Shares converted from Class B to Class A 1,633,859 47,559,412 (1,675,063) (47,559,412) - --------------------------------------------------------------------------------- Dividends reinvested 344,764 10,039,512 30,776 879,895 - --------------------------------------------------------------------------------- Net decrease (2,607,469) $(76,560,756) (2,685,124) $(76,339,245) ================================================================================= YEAR ENDED AUGUST 31, 2005: - --------------------------------------------------------------------------------- Shares sold 724,677 $19,823,615 67,241 $1,794,125 - --------------------------------------------------------------------------------- Shares repurchased (7,461,777) (204,580,314) (2,435,021) (64,713,634) - --------------------------------------------------------------------------------- Shares converted from Class B to Class A 3,375,151 92,362,408 (3,466,959) (92,362,408) - --------------------------------------------------------------------------------- Dividends reinvested 351,070 9,686,022 67,540 1,822,230 - --------------------------------------------------------------------------------- Net decrease (3,010,879) $(82,708,269) (5,767,199) $(153,459,687) =================================================================================
- -------------------------------------------------------------------------------- 49 UBS U.S. ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS
CLASS C CLASS Y YEAR ENDED ------------------------------------------------------- AUGUST 31, 2006: SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------ Shares sold 95,556 $2,726,972 112,245 $3,347,403 - ------------------------------------------------------------------------------ Shares repurchased (2,206,226) (63,042,153) (590,909) (17,561,650) - ------------------------------------------------------------------------------ Dividends reinvested 106,455 3,045,661 95,552 2,816,873 - ------------------------------------------------------------------------------ Net decrease (2,004,215) $(57,269,520) (383,112) $(11,397,374) ============================================================================== YEAR ENDED AUGUST 31, 2005: - ------------------------------------------------------------------------------ Shares sold 160,442 $4,302,776 166,719 $4,634,202 - ------------------------------------------------------------------------------ Shares repurchased (3,785,482) (101,554,394) (755,998) (21,046,351) - ------------------------------------------------------------------------------ Dividends reinvested 120,241 3,258,519 94,468 2,638,498 - ------------------------------------------------------------------------------ Net decrease (3,504,799) $(93,993,099) (494,811) $(13,773,651) ==============================================================================
- -------------------------------------------------------------------------------- 50 (This page has been left blank intentionally) - -------------------------------------------------------------------------------- 51 UBS U.S. ALLOCATION FUND FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each year is presented below:
CLASS A --------------------------------------------------------- FOR THE YEARS ENDED AUGUST 31, --------------------------------------------------------- 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR $28.60 $25.81 $23.00 $20.80 $25.78 - ------------------------------------------------------------------------------------------------- Net investment income (loss) 0.56@ 0.51@ 0.30@ 0.18@ 0.13@ - ------------------------------------------------------------------------------------------------- Net realized and unrealized gains (losses) from investment activites 1.38 2.79 2.72 2.10 (4.94) - ------------------------------------------------------------------------------------------------- Net increase (decrease) from operations 1.94 3.30 3.02 2.28 (4.81) - ------------------------------------------------------------------------------------------------- Dividends from net investment income (0.60) (0.51) (0.21) (0.08) (0.03) - ------------------------------------------------------------------------------------------------- Distributions from net realized gains from investment activities -- -- -- -- (0.14) - ------------------------------------------------------------------------------------------------- Total dividends and distributions (0.60) (0.51) (0.21) (0.08) (0.17) - ------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR $29.94 $28.60 $25.81 $23.00 $20.80 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN(1) 6.84% 12.85% 13.19% 10.99% (18.79) - ------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000's) $472,213 $525,711 $552,195 $649,582 $690,546 - ------------------------------------------------------------------------------------------------- Expenses to average net assets, net of fee waivers by advisor(2) 0.91% 0.90% 0.93% 0.98% 0.89% - ------------------------------------------------------------------------------------------------- Expenses to average net assets, before fee waivers by advisor(2) 0.94% 0.93% 0.95% 0.98% 0.89% - ------------------------------------------------------------------------------------------------- Net investment income (loss) to average net assets 1.91% 1.87% 1.18% 0.84% 0.54% - ------------------------------------------------------------------------------------------------- Portfolio turnover 82% 67% 128% 2% 5% =================================================================================================
@ Calculated using the average month-end shares outstanding for the year. 1 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and other distributions, if any, at net asset value on the ex-dividend dates and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2 During the years ended August 31, 2003 and August 31, 2002, UBS Global Asset Management (US) Inc. did not waive any advisory and administration fees. - -------------------------------------------------------------------------------- 52
CLASS B ---------------------------------------------------------- FOR THE YEARS ENDED AUGUST 31, ---------------------------------------------------------- 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR $27.81 $25.04 $22.29 $20.23 $25.24 - -------------------------------------------------------------------------------------------------- Net investment income (loss) 0.30@ 0.28@ 0.09@ 0.02@ (0.05)@ - -------------------------------------------------------------------------------------------------- Net realized and unrealized gains (losses) from investment activites 1.36 2.70 2.66 2.04 (4.82) - -------------------------------------------------------------------------------------------------- Net increase (decrease) from operations 1.66 2.98 2.75 2.06 (4.87) - -------------------------------------------------------------------------------------------------- Dividends from net investment income (0.23) (0.21) -- -- -- - -------------------------------------------------------------------------------------------------- Distributions from net realized gains from investment activities -- -- -- -- (0.14) - -------------------------------------------------------------------------------------------------- Total dividends and distributions (0.23) (0.21) -- -- (0.14) - -------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR $29.24 $27.81 $25.04 $22.29 $20.23 - -------------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN(1) 5.99% 11.95% 12.34% 10.18% (19.41)% - -------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000's) $77,296 $148,208 $277,891 $461,273 $606,133 - -------------------------------------------------------------------------------------------------- Expenses to average net assets, net of fee waivers by advisor(2) 1.71% 1.70% 1.70% 1.74% 1.65% - -------------------------------------------------------------------------------------------------- Expenses to average net assets, before fee waivers by advisor(2) 1.74% 1.73% 1.72% 1.74% 1.65% - -------------------------------------------------------------------------------------------------- Net investment income (loss) to average net assets 1.07% 1.08% 0.36% 0.08% (0.22)% - -------------------------------------------------------------------------------------------------- Portfolio turnover 82% 67% 128% 2% 5% ==================================================================================================
- -------------------------------------------------------------------------------- 53 UBS U.S. ALLOCATION FUND FINANCIAL HIGHLIGHTS Selected data for a share of beneficial interest outstanding throughout each year is presented below:
CLASS C --------------------------------------------------------- FOR THE YEARS ENDED AUGUST 31, --------------------------------------------------------- 2006 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR $27.95 $25.21 $22.46 $20.38 $25.42 - ------------------------------------------------------------------------------------------------- Net investment income (loss) 0.33@ 0.30@ 0.10@ 0.02@ (0.05) - ------------------------------------------------------------------------------------------------- Net realized and unrealized gains (losses) from investment activites 1.35 2.72 2.67 2.06 (4.85) - ------------------------------------------------------------------------------------------------- Net increase (decrease) from operations 1.68 3.02 2.77 2.08 (4.90) - ------------------------------------------------------------------------------------------------- Dividends from net investment income (0.36) (0.28) (0.02) -- -- - ------------------------------------------------------------------------------------------------- Distributions from net realized gains from investment activities -- -- -- -- (0.14) - ------------------------------------------------------------------------------------------------- Total dividends and distributions (0.36) (0.28) (0.02) -- (0.14) - ------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR $29.27 $27.95 $25.21 $22.46 $20.38 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN(1) 6.02% 12.02% 12.35% 10.21% (19.39) - ------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000's) $226,219 $271,996 $333,765 $458,117 $538,109 - ------------------------------------------------------------------------------------------------- Expenses to average net assets, net of fee waivers by advisor(2) 1.65% 1.65% 1.67% 1.72% 1.63% - ------------------------------------------------------------------------------------------------- Expenses to average net assets, before fee waivers by advisor(2) 1.68% 1.68% 1.69% 1.72% 1.63% - ------------------------------------------------------------------------------------------------- Net investment income (loss) to average net assets 1.16% 1.12% 0.42% 0.10% (0.20) - ------------------------------------------------------------------------------------------------- Portfolio turnover 82% 67% 128% 2% 5% =================================================================================================
@ Calculated using the average month-end shares outstanding for the year. 1 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and other distributions, if any, at net asset value on the ex-dividend dates and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2 During the years ended August 31, 2003 and August 31, 2002, UBS Global Asset Management (US) Inc. did not waive any advisory and administration fees. - -------------------------------------------------------------------------------- 54
CLASS Y ---------------------------------------------------------- FOR THE YEARS ENDED AUGUST 31, ---------------------------------------------------------- 2006 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR $29.02 $26.19 $23.33 $21.07 $26.05 - -------------------------------------------------------------------------------------------------- Net investment income (loss) 0.67@ 0.61@ 0.39@ 0.25@ 0.21@ - -------------------------------------------------------------------------------------------------- Net realized and unrealized gains (losses) from investment activites 1.40 2.83 2.76 2.13 (5.00) - -------------------------------------------------------------------------------------------------- Net increase (decrease) from operations 2.07 3.44 3.15 2.38 (4.79) - -------------------------------------------------------------------------------------------------- Dividends from net investment income (0.70) (0.61) (0.29) (0.12) (0.05) - -------------------------------------------------------------------------------------------------- Distributions from net realized gains from investment activities -- -- -- -- (0.14) - -------------------------------------------------------------------------------------------------- Total dividends and distributions (0.70) (0.61) (0.29) (0.12) (0.19) - -------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR $30.39 $29.02 $26.19 $23.33 $21.07 - -------------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN(1) 7.22% 13.22% 13.58% 11.39% (18.54)% - -------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000's) $116,888 $122,743 $123,727 $137,401 $149,653 - -------------------------------------------------------------------------------------------------- Expenses to average net assets, net of fee waivers by advisor(2) 0.55% 0.55% 0.58% 0.63% 0.58% - -------------------------------------------------------------------------------------------------- Expenses to average net assets, before fee waivers by advisor(2) 0.57% 0.58% 0.60% 0.63% 0.58% - -------------------------------------------------------------------------------------------------- Net investment income (loss) to average net assets 2.27% 2.21% 1.53% 1.19% 0.85% - -------------------------------------------------------------------------------------------------- Portfolio turnover 82% 67% 128% 2% 5% ==================================================================================================
- -------------------------------------------------------------------------------- 55 UBS U.S. ALLOCATION FUND REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Trustees and Shareholders of UBS U.S. Allocation Fund We have audited the accompanying statement of assets and liabilities of the UBS U.S. Allocation Fund (the sole Fund comprising UBS Investment Trust) (the "Fund"), including the portfolio of investments, as of August 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2006, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS U.S. Allocation Fund at August 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York October 17, 2006 - -------------------------------------------------------------------------------- 56 UBS U.S. ALLOCATION FUND GENERAL INFORMATION (UNAUDITED) TAX INFORMATION We are required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise you within 60 days of the Fund's fiscal year end (August 31, 2006) as to the federal tax status of distributions received by shareholders during such fiscal year. The percentage of dividends paid that qualify for the 70% dividends received deduction for corporate shareholders is 76.08%. For the fiscal year ended August 31, 2006, certain dividends paid by UBS U.S. Allocation Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $17,721,453 represents the maximum amount that may be considered qualified dividend income. Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Since the Fund's fiscal year is not the calendar year, another notification will be sent in respect of calendar year 2006. The second notification, which will reflect the amount to be used by calendar year taxpayers on their federal income tax returns, will be made in conjunction with Form 1099 DIV and will be mailed in January 2007. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. QUARTERLY FORM N-Q PORTFOLIO SCHEDULE The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission ("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 http://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 1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the Fund upon request by calling 1-800-647 1568. - -------------------------------------------------------------------------------- 57 UBS U.S. ALLOCATION FUND GENERAL INFORMATION (UNAUDITED) PROXY VOTING POLICIES, PROCEDURES AND RECORD You may obtain a description of the Fund's (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Fund voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Fund directly at 1-800-647 1568, online on the Fund's Web site www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov). - -------------------------------------------------------------------------------- 58 UBS U.S. ALLOCATION FUND BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED) BACKGROUND--At a meeting of the board of UBS Investment Trust (the "Company") on July 19, 2006, the members of the board, including the trustees who are not "interested persons" of the Company ("Independent Trustees"), as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), considered and approved the continuance of the Investment Advisory and Administration Agreement of the Company, with respect to its series, UBS U.S. Allocation Fund (the "Fund"), with UBS Global Asset Management (Americas) Inc. ("UBS Global AM"). In preparing for the meeting, the board members had requested and received extensive information from UBS Global AM to assist them, including performance and expense information for other investment companies with similar investment objectives. The board received and considered a variety of information about UBS Global AM, as well as the advisory, administrative and distribution arrangements for the Fund. The Independent Trustees discussed the materials initially provided by management prior to the scheduled board meeting in a session with their independent legal counsel and requested, and received from management, supplemental materials to assist them in their consideration of the Investment Advisory and Administration Agreement. The board received materials detailing the administrative services provided to the Fund by UBS Global AM, which include providing accounting and financial analysis, ensuring that all financial and tax regulatory reporting requirements were met, certifying required Securities and Exchange Commission documentation and monitoring the performance of the Fund's service providers. The Independent Trustees also met for several hours the evening before the board meeting and met again after management's presentation was completed to review the disclosure that had been made to them at the meeting. At all of these sessions the Independent Trustees met in session with their independent legal counsel. The Independent Trustees also received a memorandum from their independent legal counsel discussing the duties of board members in considering approval of advisory, administration and distribution agreements. In its consideration of the approval of the Investment Advisory and Administration Agreement, the board considered the following factors: NATURE, EXTENT AND QUALITY OF THE SERVICES UNDER THE INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT--The board received and considered information regarding the nature, extent and quality of - -------------------------------------------------------------------------------- 59 UBS U.S. ALLOCATION FUND BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED) management services provided to the Fund by UBS Global AM under the Investment Advisory and Administration Agreement during the past year. The board also received a description of the administrative and other services rendered to the Fund and its shareholders by UBS Global AM. The board considered the nature, extent and quality of administrative, distribution, and shareholder services performed by UBS Global AM and its affiliates. (Given that the Investment Advisory and Administration Agreement had been transferred between sister companies during the period reviewed, the services provided by UBS Global Asset Management (US) Inc. prior to April 1, 2006, were taken into account nearly as if they had been provided by UBS Global AM) The board also considered the resources devoted to, and the record of compliance with the Fund's compliance policies and procedures. The board noted that it received information at regular meetings throughout the year regarding the services rendered by UBS Global AM concerning the management of the Fund's affairs and UBS Global AM's role in coordinating providers of other services to the Fund, including custody, accounting and transfer agency services. The board's evaluation of the services provided by UBS Global AM took into account the board's knowledge and familiarity gained as board members of funds in the UBS New York Fund complex, including the scope and quality of UBS Global AM's investment management and other capabilities and the quality of its administrative and other services. The board observed that the scope of services provided by UBS Global AM had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund's expanded compliance programs. The board had available to it the qualifications, backgrounds and responsibilities of the Fund's senior personnel at UBS Global AM and had received information regarding the person primarily responsible for the day-to-day portfolio management of the Fund and recognized that the Fund's senior personnel at UBS Global AM report to the board regularly, some at every board meeting, and that at each regular meeting the board receives a report on the Fund's performance. The board also considered, based on its knowledge of UBS Global AM and its affiliates, the financial resources available to UBS Global AM and its parent organization, UBS AG. In that regard, the board received extensive financial information regarding UBS Global AM and noted that it was a wholly owned, indirect subsidiary of one of the largest financial services firms in the world. It was also noted that UBS Global AM had well over $100 billion in assets under - -------------------------------------------------------------------------------- 60 UBS U.S. ALLOCATION FUND BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED) management and was part of the UBS Global Asset Management Division, which had over $600 billion of assets under management worldwide. The board reviewed how transactions in Fund assets are effected. The board also reviewed the Fund's brokerage policies and practices, the standards applied in seeking best execution, policies and practices regarding soft dollars, the use of a broker affiliated with UBS Global AM and the existence of quality controls applicable to brokerage allocation procedures. In addition, UBS Global AM also reported to the board on, among other things, its disaster recovery plans and portfolio manager compensation plan. The board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Fund under the Investment Advisory and Administration Agreement. ADVISORY FEES AND EXPENSE RATIOS--The board reviewed and considered the contractual management fee ("Contractual Management Fee") payable by the Fund to UBS Global AM in light of the nature, extent and quality of the advisory and administrative services provided by UBS Global AM. The board also reviewed and considered the fee waiver arrangement in place for the Fund and considered the actual fee rate (after taking any waivers into account) (the "Actual Management Fee"). Additionally, the board received and considered information comparing the Fund's Contractual Management Fee, Actual Management Fee and overall expenses with those of funds in a group of funds selected and provided by Lipper, Inc. ("Lipper"), an independent provider of investment company data (the "Expense Group"). In connection with its consideration of the Fund's advisory fees, the board also received information on UBS Global AM's standard institutional account fees for accounts of a similar investment type to the Fund. The board noted that, in general, these fees were lower than the Contractual Management Fees and Actual Management Fees for the Fund, but also noted management's explanation that comparisons with such accounts may be of limited relevance given the different structures and regulatory requirements of mutual funds versus such accounts and the differences in the levels of services required by mutual funds and such accounts. The - -------------------------------------------------------------------------------- 61 UBS U.S. ALLOCATION FUND BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED) board also received information on fees charged to other mutual funds managed by UBS Global AM. In addition to the Contractual and Actual Management Fees, the board also reviewed and considered the total expenses for the Fund. The comparative Lipper information showed that the Fund's Contractual Management Fee, Actual Management Fee and total expenses were in the first quintile in the Fund's Expense Group for the comparison periods utilized in the Lipper report (with the first quintile representing that fifth of the funds in the Expense group with the lowest level of fees or expenses, as applicable, and the fifth quintile representing that fifth of the funds in the Expense Group with the highest level of fees or expenses, as applicable). Taking all of the above into consideration, the board determined that the management fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Investment Advisory and Administration Agreement. FUND PERFORMANCE--The board received and considered performance information of the Fund compared to other funds (the "Performance Universe") selected by Lipper over the one-, three-, five-, ten- and since inception periods ended April 30, 2006. The board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in its Performance Universe. The board also noted that it had received information throughout the year at periodic intervals with respect to the Fund's performance, including in most cases with respect to its benchmark index. The comparative Lipper information showed that the Fund's performance was in the fourth quintile for the one-year period, the third quintile for the three-year period, the fifth quintile for the five-year period and the second quintile for the ten-year period and since inception (with the first quintile representing that fifth of the funds in the Performance Universe with the highest performance and the fifth quintile representing that fifth of the funds in the Performance Universe with the lowest performance). In its review the board particularly concentrated on the Fund's performance for the one- and five-year periods as compared to the average return for the Fund's Performance Universe and benchmark index, taking the volatility in returns for the Performance Universe and the index into account. The board took note of management's explanation that the Fund's portfolio - -------------------------------------------------------------------------------- 62 UBS U.S. ALLOCATION FUND BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED) manager had implemented a more conservative investment approach in both security selection and asset allocation for the one-year period, which was reflected in the returns for that period. Management also explained that the below average five-year return was due almost entirely to the legacy Tactical Allocation investment model, and reminded the board that the Fund had discontinued using that model and had changed its investment strategies in 2004. Based on its review, and management's explanations, the board concluded that the Fund's investment performance was satisfactory. ADVISER PROFITABILITY--The board received and considered a profitability analysis of UBS Global AM and its affiliates in providing services to the Fund. The board also received profitability information with respect to the UBS New York fund complex as a whole. In addition, the board received information with respect to UBS Global AM's allocation methodologies used in preparing this profitability data. UBS Global AM's profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund. ECONOMIES OF SCALE--The Board received and considered information from management regarding whether it has achieved economies of scale with respect to the management of the Fund, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential realization of further economies of scale. The Board considered whether economies of scale in the provision of services to the Fund were being passed along to shareholders. The Board also considered whether alternative fee structures (such as breakpoints) would be more appropriate or reasonable taking into consideration economies of scale or other efficiencies. Although the Board noted that the Fund's Contractual Management Fee did not contain breakpoints, it recognized that the Company had entered into an agreement with UBS Global AM, whereby UBS Global AM agreed to permanently reduce its Contractual Management Fee by utilizing breakpoints based on the Fund's average daily net assets, thereby achieving the same effect as if the Contractual Management Fee contained breakpoints. The Board also noted that as the Fund's assets have increased over time, it has realized other economies of scale as certain expenses, such as fees for Trustees, auditors and legal fees, become a smaller percentage of overall assets. - -------------------------------------------------------------------------------- 63 UBS U.S. ALLOCATION FUND BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED) Generally, in light of UBS Global AM's profitability data and the Contractual Management Fee and Actual Management Fee currently in place, the board believed that UBS Global AM's sharing of current economies of scale with the Fund was acceptable. OTHER BENEFITS TO UBS GLOBAL AM--The board considered other benefits received by UBS Global AM and its affiliates as a result of its relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders. In light of the costs of providing investment management, administrative and other services to the Fund and UBS Global AM's ongoing commitment to the Fund, the profits and other ancillary benefits that UBS Global AM and its affiliates received were considered reasonable. In light of all of the foregoing, the board approved the Investment Advisory and Administration Agreement to continue for another year. In making its decision, the board identified no single factor as being determinative in approving the Investment Advisory and Administration Agreement. The Independent Trustees were advised by separate independent legal counsel throughout the entire process. The board discussed the proposed continuance of the Investment Advisory and Administration Agreement in a private session with their independent legal counsel at which no representatives of UBS Global AM were present. - -------------------------------------------------------------------------------- 64 (This page has been left blank intentionally) - -------------------------------------------------------------------------------- 65 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) BOARD OF TRUSTEES & OFFICERS The Fund is governed by a Board of Trustees which oversees the Fund's operations. Each trustee serves an indefinite term of office. Officers are appointed by the trustees and serve at the pleasure of the Board. The table below shows, for each trustee and officer, his or her name, address and age, the position held with the Trust, the length of time served as a trustee and officer of the Fund, the trustee's or officer's principal occupations during the last five years, the number of portfolios in the UBS fund complex overseen by the trustee or for which a person served as an officer, and other directorships held by the trustee. The Fund's Statement of Additional Information contains additional information about the trustees and is available, without charge, upon request by calling 1-800-647 1568. INTERESTED TRUSTEE
TERM OF POSITION(s) OFFICE+ AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION(s) NAME, ADDRESS, AND AGE TRUST TIME SERVED DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------ Meyer Feldberg; ++ 64 Trustee Since 1996 Professor Feldberg is Dean Emeritus and Morgan Stanley Sanford Bernstein Professor of Leadership and 1585 Broadway Ethics at Columbia Business School, although 33rd Floor on a two year leave of absence. He is also a New York, NY 10036 senior advisor to Morgan Stanley (financial services) (since March 2005). Prior to July 2004, he was Dean and Professor of Management of the Graduate School of Business at Columbia University (since 1989).
- -------------------------------------------------------------------------------- 66 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE - ----------------------------------------------------------------------------------------------------- Professor Feldberg is a director or trustee of Professor Feldberg is also a director of 29 investment companies (consisting of 48 Primedia Inc. (publishing), Federated portfolios) for which UBS Global AM or one Department Stores, Inc. (operator of of its affiliates serves as investment advisor, department stores), Revlon, Inc. (cosmetics) sub-advisor or manager. and SAPPI, Ltd. (producer of paper).
- -------------------------------------------------------------------------------- 67 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) INDEPENDENT TRUSTEES
TERM OF POSITION(s) OFFICE+ AND HELD WITH LENGTH OF NAME, ADDRESS, AND AGE TRUST TIME SERVED PRINCIPAL OCCUPATION(s) DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------ Richard Q. Armstrong; 71 Trustee and Since 1995 Mr. Armstrong is chairman and principal of c/o Willkie Farr & Gallagher Chairman (Trustee) R.Q.A. Enterprises (management consulting LLP of the Since 2004 firm) (since April 1991 and principal 787 Seventh Avenue Board of (Chairman of occupation since March 1995). New York, NY 10019-6099 Trustees the Board of Trustees) Richard R. Burt; 59 Trustee Since 1996 Mr. Burt is chairman of Diligence Inc. 1275 Pennsylvania Ave., N.W. (information and risk management firm) and Washington, D.C. 20004 IEP Advisors (international investments and consulting firm). Alan S. Bernikow; 65 Trustee Since 2005 Mr. Bernikow is a consultant on 207 Benedict Ave. non-management matters for the firm of Staten Island, NY 10314 Deloitte & Touche (international accounting and consulting firm) (since June 2003). Previously, he was Deputy Chief Executive Officer at Deloitte & Touche. Bernard H. Garil; 66 Trustee Since 2005 Mr. Garil is retired (since 2001). He was a 6754 Casa Grande Way Managing Director at PIMCO Advisory Services Delray Beach, FL 33446 (from 1999 to 2001) where he served as President of closed-end funds and Vice-President of the variable insurance product funds advised by OpCap Advisors (until 2001).
- -------------------------------------------------------------------------------- 68 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE - ----------------------------------------------------------------------------------------------------- Mr. Armstrong is a director or trustee of 16 None investment companies (consisting of 35 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. Mr. Burt is a director or trustee of 16 Mr. Burt is also a director of The Central investment companies (consisting of 35 European Fund, Inc., The Germany Fund, portfolios) for which UBS Global AM or one of Inc., The New Germany Fund, Inc., IGT, Inc. its affiliates serves as investment advisor, (provides technology to gaming and sub-advisor or manager. wagering industry) and The Protective Group, Inc. (produces armor products). Mr. Bernikow is a director or trustee of 16 Mr. Bernikow is also a director of Revlon, investment companies (consisting of 35 Inc. (cosmetics) (and serves as the chair of portfolios) for which UBS Global AM or one of its audit committee), a director of its affiliates serves as investment advisor, Mack-Cali Realty Corporation (real estate sub-advisor or manager. investment trust) (and serves as the chair of its audit committee) and a director of the Casual Male Retail Group, Inc. (menswear). Mr. Garil is a director or trustee of 16 Mr. Garil is also a director of OFI Trust investment companies (consisting of 35 Company (commercial trust company) and portfolios) for which UBS Global AM or one of a trustee for the Brooklyn College its affiliates serves as investment advisor, Foundation, Inc. (charitable foundation). sub-advisor or manager.
- -------------------------------------------------------------------------------- 69 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) INDEPENDENT TRUSTEES (CONCLUDED)
TERM OF POSITION(s) OFFICE+ AND HELD WITH LENGTH OF NAME, ADDRESS, AND AGE TRUST TIME SERVED PRINCIPAL OCCUPATION(s) DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------ Heather R. Higgins; 47 Trustee Since 2005 Ms. Higgins is the President and Director of 255 E. 49th St., Suite 23D The Randolph Foundation (charitable New York, NY 10017 foundation) (since 1991). Ms. Higgins also serves on the boards of several non-profit charitable groups, including the Independent Women's Forum (chairman), the Philanthropy Roundtable (vice chairman) and the Hoover Institution (executive committee).
- -------------------------------------------------------------------------------- 70 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE - ----------------------------------------------------------------------------------------------------- Ms. Higgins is a director or trustee of 16 None investment companies (consisting of 35 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 71 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Joseph Allessie*; 41 Vice President Since 2005 Mr. Allessie is a director and deputy general and Assistant counsel at UBS Global Asset Management (US) Secretary Inc and UBS Global AM (collectively, "UBS Global AM--Americas region") (since 2005). 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 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. Rose Ann Bubloski*; 38 Vice President Since 2006 Ms. Bubloski is an associate director and Assistant (since 2003) and a senior manager of the US Treasurer mutual fund treasury administration department of UBS Global AM--Americas region. Ms. Bubloski is vice president and assistant treasurer of 20 investment companies (consisting of 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 72 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Thomas Disbrow*; 40 Vice President Since 2000 Mr. Disbrow is a director (since 2001), and and Treasurer (Vice head of US mutual fund treasury President); administration department (since September Since 2004 2006) of UBS Global AM--Americas region. (Treasurer) Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 20 investment companies (consisting of 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. Michael J. Flook*; 41 Vice President Since 2006 Mr. Flook is an associate director and a and Assistant senior manager of the US mutual fund treasury Treasurer administration department of UBS Global 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 91 portfolios) for which UBS Global AM-- Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 73 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Mark F. Kemper**; 48 Vice President Since 2004 Mr. Kemper is general counsel of UBS Global and Secretary AM--Americas region (since 2004). Mr. Kemper also is a managing director of UBS Global AM--Americas region (since 2006). He was deputy general counsel of UBS Global Asset Management (Americas) Inc. ("UBS Global AM--Americas") from July 2001 to July 2004. He has been secretary of UBS Global AM--Americas 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 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. Joanne M. Kilkeary*; 38 Vice President Since 2004 Ms. Kilkeary is an associate director (since and Assistant 2000) and a senior manager (since 2004) of Treasurer the US mutual fund treasury administration department of UBS Global AM--Americas region. Ms. Kilkeary is a vice president and assistant treasurer of 20 investment companies (consisting of 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 74 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Tammie Lee*; 35 Vice President Since 2005 Ms. Lee is a director and associate general and Assistant counsel of UBS Global AM--Americas Secretary region (since 2005). Prior to joining UBS Global 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 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. Joseph McGill*; 44 Vice President Since 2004 Mr. McGill is a managing director (since and Chief 2006) and chief compliance officer (since Compliance 2003) at UBS Global AM--Americas Officer region. Prior to joining UBS Global AM-- Americas region, he was assistant general counsel 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 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 75 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Eric Sanders*; 41 Vice President Since 2005 Mr. Sanders is a director and associate and Assistant general counsel of UBS Global AM-- Secretary Americas region (since 2005). From 1996 until June 2005, he held 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 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. Andrew Shoup *; 50 Vice President Since 2006 Mr. Shoup is a managing director and and Chief senior member of the Global Treasury Operating Administration department of UBS Global Officer AM--Americas region (since July 2006). Prior to joining UBS Global AM--Americas region, he was Chief Administrative 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 of 20 investment companies (consisting of 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 76 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Brian D. Singer**; 46 Vice President Since 2004 Mr. Singer is chief investment officer-- UBS Global AM--Americas region (since 2003). Prior to 2003, he was global head of asset allocation and risk management at UBS Global AM--Americas region. Mr. Singer is a vice president of two investment companies (consisting of two portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. Kai R. Sotorp**; 47 President Since 2006 Mr. Sotorp is the Head of the Americas for UBS Global Asset Management (since 2004); a member of the UBS Group Managing Board (since 2003) and a member of the 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. (2001-2004); Representative Director and President of UBS Global Asset Management (Japan) Ltd. (2000-2004) and member of the board of Mitsubishi Corp.--UBS Realty Inc. (2000-2004) Mr. Sotorp is President of 16 investment companies (consisting of 35 portfolios) for which UBS Global Asset Management--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 77 UBS U.S. ALLOCATION FUND SUPPLEMENTAL INFORMATION (UNAUDITED) OFFICERS (CONCLUDED)
TERM OF PRINCIPAL OCCUPATION(s) DURING POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER - ------------------------------------------------------------------------------------------------------------------ Keith A. Weller*; 45 Vice President Since 1996 Mr. Weller is an executive director and and Assistant senior associate general counsel of UBS Secretary Global AM--Americas region (since 2005) and has been an attorney with affiliated entities since 1995. Mr. Weller is a vice president and assistant secretary of 20 investment companies (consisting of 91 portfolios) for which UBS Global AM--Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.
* 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 + Each trustee holds office for an indefinite term. Each trustee who has attained the age of seventy-two (72) years will be subject to retirement on the last day of the month in which he or she attains such age. Officers of the Fund are appointed by the trustees and serve at the pleasure of the Board. ++ Professor Feldberg is deemed an "interested person" of the Fund as defined in the Investment Company Act because he is a senior advisor to Morgan Stanley, a financial services firm with which the Fund may conduct transactions. - -------------------------------------------------------------------------------- 78 (This page has been left blank intentionally) - -------------------------------------------------------------------------------- 79 (This page has been left blank intentionally) - -------------------------------------------------------------------------------- 80 TRUSTEES Richard Q. Armstrong Meyer Feldberg Chairman Bernard H. Garil Alan S. Bernikow Heather R. Higgins Richard R. Burt PRINCIPAL OFFICERS Kai Sotorp Thomas Disbrow President Vice President and Treasurer Mark F. Kemper Brian D. Singer Vice President and Secretary Vice President INVESTMENT ADVISOR AND ADMINISTRATOR UBS Global Asset Management (Americas) Inc. 51 West 52nd Street New York, New York 10019-6114 PRINCIPAL UNDERWRITER UBS Global Asset Management (US) Inc. 51 West 52nd Street New York, New York 10019-6114 This report is not to be used in connection with the offering of shares of the Fund unless accompanied or preceded by an effective prospectus. (C) 2006 UBS Global Asset Management (Americas) Inc. All rights reserved. [LOGO OF UBS] UBS ------------- PRESORTED STANDARD U.S. POSTAGE PAID COMPUTERSHARE ------------- UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC. 51 West 52nd Street New York, New York 10019-6114 ITEM 2. CODE OF ETHICS. - ----------------------- The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of ethics adopted pursuant to Sarbanes-Oxley as a "Code of Conduct" to lessen the risk of confusion with its separate code of ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended.) ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. - ----------------------------------------- The registrant's Board has determined that the following person serving on the registrant's Audit Committee is an "audit committee financial expert" as defined in item 3 of Form N-CSR: Alan S. Bernikow. Mr. Bernikow is independent as defined in item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. - ----------------------------------------------- (a) Audit Fees: ---------- For the fiscal years ended August 31, 2006 and August 31, 2005, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $56,400 and $65,700, respectively. Fees included in the audit fees category are those associated with the annual audits of financial statements and services that are normally provided in connection with statutory and regulatory filings. (b) Audit-Related Fees: ------------------ In each of the fiscal years ended August 31, 2006 and August 31, 2005, the aggregate audit-related fees billed by E&Y for services rendered to the registrant that are reasonably related to the performance of the audits of the financial statements, but not reported as audit fees, were approximately $3,773 and $6,212, respectively. Fees included in the audit-related fees category are those associated with (1) the reading and providing of comments on the 2006 and 2005 semiannual financial statements and (2) review of the consolidated 2005 and 2004 reports on the profitability of the UBS Funds to UBS Global Asset Management (US) Inc. and its affiliates to assist the board members in their annual advisory/administration contract and service/distribution plan reviews. There were no audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above. (c) Tax Fees: -------- In each of the fiscal years ended August 31, 2006 and August 31, 2005, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $5,300 and $6,100, respectively. Fees included in the tax fees category comprise all services performed by professional staff in the independent accountant's tax division except those services related to the audits. This category comprises fees for review of tax compliance, tax return preparation and excise tax calculations. There were no tax fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above. (d) All Other Fees: -------------- In each of the fiscal years ended August 31, 2006 and August 31, 2005, there were no fees billed by E&Y for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant. Fees included in the all other fees category would consist of services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the registrant. There were no "all other fees" required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above. (e) (1) Audit Committee Pre-Approval Policies and Procedures: ---------------------------------------------------- The registrant's Audit Committee ("audit committee") has adopted an "Audit Committee Charter (Amended and Restated as of May 12, 2004 - Revised as of February 3, 2006)" (the "charter"). The charter contains the audit committee's pre-approval policies and procedures. Reproduced below is an excerpt from the charter regarding pre-approval policies and procedures: The [audit] Committee shall: ... 2. Pre-approve (a) all audit and permissible non-audit services(1) to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund's independent auditors to UBS Global Asset Management (Americas) Inc. ("UBS Global AM") and any Covered Service Providers, if the engagement relates directly to the operations and financial reporting of the Fund. In carrying out this responsibility, the Committee shall seek periodically from UBS Global [AM] and from the independent auditors a list of such audit and permissible non-audit services that can be expected to be rendered to the Fund, UBS Global [AM] or any Covered Service Providers by the Fund's independent auditors, and an estimate of the fees sought to be paid in connection with such services. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to a sub-committee consisting of the Chairperson of the Committee and two other members of the Committee as the Chairperson, from time to time, may determine and appoint, and such sub-committee shall report to the Committee, at its next regularly scheduled meeting after the sub-committee's meeting, its decision(s). From year to year, the Committee shall report to the Board whether this system of pre-approval has been effective and efficient or whether this Charter should be amended to allow for pre-approval pursuant to such policies and procedures as the Committee shall approve, including the delegation of some or all of the Committee's pre-approval responsibilities to other persons (other than UBS Global [AM] or the Fund's officers). ______________ (1) The Committee will not approve non-audit services that the Committee believes may taint the independence of the auditors. Currently, permissible non-audit services include any professional services (including tax services) that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible. Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, UBS Global [AM] and any service providers controlling, controlled by or under common control with UBS Global [AM] that provide ongoing services to the Fund ("Covered Service Providers") constitutes not more than 5% of the total amount of revenues paid to the independent auditors (during the fiscal year in which the permissible non-audit services are provided) by (a) the Fund, (b) its investment adviser and (c) any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit. (e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: Audit-Related Fees: ------------------ There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended August 31, 2006 and August 31, 2005 on behalf of the registrant. There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended August 31, 2006 and August 31, 2005 on behalf of the registrant's service providers that relate directly to the operations and financial reporting of the registrant. Tax Fees: -------- There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended August 31, 2006 and August 31, 2005 on behalf of the registrant. There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended August 31, 2006 and August 31, 2005 on behalf of the registrant's service providers that relate directly to the operations and financial reporting of the registrant. All Other Fees: -------------- There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended August 31, 2006 and August 31, 2005 on behalf of the registrant. There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended August 31, 2006 and August 31, 2005 on behalf of the registrant's service providers that relate directly to the operations and financial reporting of the registrant. (f) According to E&Y, for the fiscal year ended August 31, 2006, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who are not full-time, permanent employees of E&Y was 0%. (g) For the fiscal years ended August 31, 2006 and August 31, 2005, the aggregate fees billed by E&Y of $1,888,547 and $2,876,074, respectively, for non-audit services rendered on behalf of the registrant ("covered"), its investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser ("non-covered") that provides ongoing services to the registrant for each of the last two fiscal years of the registrant is shown in the table below:
2006 2005 ---- ---- Covered Services $ 9,073 $ 12,312 Non-Covered Services 1,879,474 2,863,762
(h) The registrant's audit committee was not required to consider whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. - ----------------------------------------------- Not applicable to the registrant. ITEM 6. SCHEDULE OF INVESTMENTS. - --------------------------------- Included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END - -------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES. - -------------------------------- Not applicable to the registrant. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. - -------------------------------------------------------------------------- Not applicable to the registrant. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT - --------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASERS. - ---------------------------------- Not applicable to the registrant. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------- The registrant's Board has established a Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders if a vacancy occurs among those board members who are not "interested persons" as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended. In order to recommend a nominee, a shareholder should send a letter to the chairperson of the Nominating and Corporate Governance Committee, Richard R. Burt, care of the Secretary of the registrant at UBS Global Asset Management (Americas) Inc., 51 West 52nd Street, New York, New York 10019-6114, and indicate on the envelope "Nominating and Corporate Governance Committee." The shareholder's letter should state the nominee's name and should include the nominee's resume or curriculum vitae, and 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. ITEM 11. CONTROLS AND PROCEDURES. - --------------------------------- (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. (b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. - ------------------ (a) (1) Code of Ethics as required pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (and designated by registrant as a "Code of Conduct") is incorporated by reference herein from Exhibit EX-99.CODE ETH to the registrant's Report on Form N-CSR filed November 9, 2004 (Accession Number: 0000950136-04-003777)(SEC File No. 811-06292). (a) (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.CERT. (a) (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons - not applicable to the registrant. (b) Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UBS Investment Trust By: /s/ Kai Sotorp -------------- Kai Sotorp President Date: November 8, 2006 ---------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Kai Sotorp -------------- Kai Sotorp President Date: November 8, 2006 ---------------- By: /s/ Thomas Disbrow ------------------ Thomas Disbrow Vice President and Treasurer Date: November 8, 2006 ---------------- EX-99.CERT 2 e51966ex99_cert.txt Exhibit EX-99.CERT CERTIFICATIONS -------------- I, Kai Sotorp, President of UBS Investment Trust, certify that: 1. I have reviewed this report on Form N-CSR of UBS Investment Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ Kai Sotorp -------------- Kai Sotorp President Date: November 8, 2006 ---------------- I, Thomas Disbrow, Vice President and Treasurer of UBS Investment Trust, certify that: 1. I have reviewed this report on Form N-CSR of UBS Investment Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ Thomas Disbrow ------------------ Thomas Disbrow Vice President and Treasurer Date: November 8, 2006 ---------------- EX-99.906 CERT 3 e51966ex99_906cert.txt Exhibit EX-99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) In connection with the attached report of UBS Investment Trust (the "Registrant") on Form N-CSR (the "Report"), each of the undersigned officers of the Registrant does hereby certify that, to the best of such officer's knowledge: 1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and for, the periods presented in the Report. Dated: November 8, 2006 ---------------- By: /s/ Kai Sotorp -------------- Kai Sotorp President Dated: November 8, 2006 ---------------- By: /s/ Thomas Disbrow ------------------ Thomas Disbrow Vice President and Treasurer This certification is being furnished solely pursuant to 18 U.S.C. [SEC] 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----