-----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, LEqhnWIdYF32xGE+5CpAUoVfqj0+ohgnYkXxcoYGUVmC4XAVHqRYr2ms+lUiUnGR S9vaYYwqSGwUF0G704iJBw== 0000912057-02-034048.txt : 20020829 0000912057-02-034048.hdr.sgml : 20020829 20020829164057 ACCESSION NUMBER: 0000912057-02-034048 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UBS FUNDS CENTRAL INDEX KEY: 0000886244 IRS NUMBER: 367056204 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06637 FILM NUMBER: 02752976 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 FORMER COMPANY: FORMER CONFORMED NAME: BRINSON FUNDS INC DATE OF NAME CHANGE: 19920929 N-30D 1 a2086123zn-30d.txt N-30D [GRAPHIC] UBS GLOBAL ALLOCATION FUND UBS GLOBAL EQUITY FUND UBS GLOBAL TECHNOLOGY FUND UBS GLOBAL BIOTECH FUND UBS GLOBAL BOND FUND UBS U.S. BALANCED FUND UBS U.S. EQUITY FUND UBS U.S. LARGE CAP EQUITY FUND UBS U.S. LARGE CAP GROWTH FUND UBS U.S. SMALL CAP GROWTH FUND UBS U.S. BOND FUND UBS HIGH YIELD FUND UBS INTERNATIONAL EQUITY FUND UBS U.S. VALUE EQUITY FUND ANNUAL REPORT JUNE 30, 2002 THE UBS FUNDS THE FUNDS' ADVISOR -- UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC. AS OF APRIL 8, 2002, BRINSON PARTNERS, INC. FORMALLY CHANGED ITS NAME TO UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC., A MEMBER OF THE UBS GLOBAL ASSET MANAGEMENT DIVISION OF UBS AG, ONE OF THE LARGEST FINANCIAL SERVICES FIRMS IN THE WORLD. AS A RESULT, THE FUNDS COMPRISING THE BRINSON MUTUAL FUND FAMILY WERE RENAMED UBS FUNDS--HOWEVER, THE FUNDS' INVESTMENT OBJECTIVES AND INVESTMENT PROCESSES REMAIN THE SAME. THIS STRATEGIC BRANDING MOVE REFLECTS THE GLOBAL INTEGRATION AND SCOPE OF THE ORGANIZATION'S INVESTMENT APPROACH AND OFFERINGS. THE UBS GLOBAL ASSET MANAGEMENT ORGANIZATION STRIVES TO DELIVER SUPERIOR INVESTMENT PERFORMANCE TO CLIENTS THROUGH THE MANAGEMENT AND ALLOCATION OF THEIR INVESTMENTS ACROSS AND WITHIN ALL MAJOR ASSET CLASSES. OUR STRENGTH LIES IN OUR GLOBALLY INTEGRATED INVESTMENT PLATFORM. WITH INVESTMENT PROFESSIONALS THROUGHOUT THE WORLD, THE UBS GLOBAL ASSET MANAGEMENT ORGANIZATION PROVIDES CLIENTS WITH UNCOMMON RESEARCH, ASSET ALLOCATION AND RISK MANAGEMENT CONDUCTED ON A FULLY GLOBAL BASIS. WE SEEK TO MAXIMIZE THE BENEFITS TO CLIENTS, THROUGH UNDERSTANDING AND ACTING UPON THEIR RISK AND RETURN OBJECTIVES. THIS COVENANT WITH OUR CLIENTS IS THE BASIS FOR THE SUCCESS OF OUR BUSINESS AS WE PROGRESS FORWARD. I AM CERTAIN THAT WE WILL OVERCOME THE TOUGH TIMES OF THE PRESENT AND MOVE TOWARDS GREAT PROSPERITY IN THE FUTURE. 1 TABLE OF CONTENTS Economic Review and Outlook 3 Portfolio Managers' Commentary and Schedule of Investments UBS Global Allocation Fund 4 UBS Global Equity Fund 15 UBS Global Technology Fund 22 UBS Global Biotech Fund 26 UBS Global Bond Fund 30 UBS U.S. Balanced Fund 38 UBS U.S. Equity Fund 46 UBS U.S. Large Cap Equity Fund 51 UBS U.S. Large Cap Growth Fund 56 UBS U.S. Small Cap Growth Fund 61 UBS U.S. Bond Fund 66 UBS High Yield Fund 73 UBS International Equity Fund 81 UBS U.S. Value Equity Fund 87 Statements of Assets and Liabilities 92 Statements of Operations 96 Statements of Changes in Net Assets 98 Financial Highlights 103 Notes to Financial Statements 131 Report of Independent Auditors 143 Trustee Information 144 Federal Tax Information 148 Special Meeting of Shareholders 149
2 ECONOMIC REVIEW AND OUTLOOK The worst attacks on American soil, recession, a hesitant economic recovery, historic lows in the federal funds rate, corporate accounting scandals and plunging stock prices marked a volatile fiscal year ended June 30, 2002. The period began with the U.S. mired in a mild recession, a downturn that was exacerbated by the events of September 11. When U.S. stock markets reopened after a one-week hiatus, stock prices plunged briefly before rallying in the fourth quarter, when economic growth barely edged into positive territory to pull the country out of a recession. In 2002, the Federal Reserve cut its key federal funds rate 11 times by an unprecedented total of 4.75%, bringing the rate down to 1.75% at year's end. Still, the outlook for U.S. and global economic growth in 2002 was for a muted recovery, a forecast that seemed off target temporarily when U.S. gross domestic product skyrocketed 5.0% in the first quarter of 2002. Mixed signals, however, clouded forecasts of how strong the recovery would be. The Institute for Supply Management index of business activity rose above 50 in February, the first time in 18 months this index reached the number showing expansion. A score of 55.6 followed in March, but the index bounced between 56 and just above 50 in subsequent months. Unemployment rates remained stubbornly high, reaching 6% during the spring, but corporate earnings showed improvement. Capital spending remained sluggish and high-profile corporate accounting scandals and bankruptcies shook investors' confidence. Specifically, the legal and regulatory difficulties Enron, Adelphia, Tyco and Worldcom created for themselves cast a pall over U.S. markets. As a result, stock prices again fell during the second quarter. Still, consumers kept the economy going, with a strong housing market a bright spot during this time. Globally, other Central Banks followed the Federal Reserve's lead and kept interest rates low. The threat of terrorist attacks loomed large and tensions between Israel and Palestine and between India and Pakistan erupted. Most European markets saw stock prices plunge at least on par with the U.S., while Asian markets performed relatively strongly during the period. Japan remains the one country in Asia where markets and the economy seem to be in their own vacuum, as Japan fights to emerge from its third recession in a decade. Emerging markets also provided relative value, although Brazil and Argentina continued their financial woes throughout the period. The euro and yen gained against the dollar late in the fiscal year, with the euro almost reaching par value. As with the U.S., European markets declined toward the end of the period in spite of encouraging economic data. Computer and telecommunication related sectors sagged worldwide, as they did in the U.S., while the financial sector outperformed. Capital expenditures for technology remained stagnant across the board, and forecasts of capex spending into 2003 have been lowered. Going into the second half of 2002, much of the world will takes its cue from the U.S markets., where a more robust economic recovery depends as much on a return of confidence by investors as it does on more consistent economic good news. Barring the jolt of further geopolitical unrest, the remainder of the year should bring a fitful continuation of an economic recovery that began at the start of the year. 3 UBS GLOBAL ALLOCATION FUND For the fiscal year ended June 30, 2002, Class Y shares of UBS Global Allocation Fund returned 4.91%. In comparison, the fund's benchmark, the GSMI Mutual Fund Index; declined 5.81%. The MSCI World Equity (Free) Index fell 15.00% and the Salomon Smith Barney World Government Bond Index rose 13.96% for the same period. Effective June 28, 2002 the fund's name changed from UBS Global Balanced Fund. The Fund's investment objective and policies and investment process remain the same. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment environment for global investors was challenging during the fiscal year. Returns were affected by a continued slowdown in economic growth, geopolitical concerns and issues involving corporate governance and accounting. While equity markets declined in the aftermath of the September 11 terrorist attacks, they rebounded in the first quarter of 2002 as earnings and economic data showed improvement. As the year progressed, however, economic data was mixed and many market participants became concerned that economic growth would slip back to recession levels. In this environment, stock markets declined significantly during the second quarter of 2002. Throughout the fiscal year, world fixed-income markets were the beneficiaries of the volatility in the equity markets, as investors favored less risky assets and sought the relative safety and stability of bonds. EQUITY STRATEGY Early in the period the fund was underweighted in U.S. and global equities. As equity markets declined and valuations became more attractive, however, we increased the fund's allocation to equities in developed markets. The fund also had significant exposure to emerging market equities. Over the fiscal period, we reduced exposure to information technology stocks because we believed their prices were anticipating a relatively strong economic recovery. We also underweighted the fund's commitments to the technology hardware and telecommunications services sectors. We lowered the fund's defensive stance by underweighting consumer staples stocks, which tend to perform well in virtually any economic environment. In the consumer discretionary area, we eliminated BMW and Honda in favor of Ford and Toyota. We overweighted investments in the materials and utilities sectors. FIXED-INCOME STRATEGY Early in the period, the decline in yield spreads and the favorable returns of emerging market debt eliminated the attractive price-value discrepancy in this sector. Therefore, we eliminated the overweighted position in emerging market debt and shifted the fund's focus to fixed-income securities in the developed markets. We equally distributed fixed-income assets between the dollar markets and European markets, reflecting the equivalent relative valuation of these blocs. We overweighted the fund in U.S. corporate bonds, reflecting our positive outlook for this sector. We maintained an underweighted position in the Japanese bond market and in other non-U.S. fixed-income securities. For much of the period, the fund was overweighted in high-yield bonds, which performed well. As we approached the end of the fiscal year, we eliminated the high-yield overweighting in favor of conventional fixed-income securities. At the end of the fiscal year, the fund was effectively neutral in its stock/bond weighting. The small underweighting to developed equity markets was offset by an equal overweighting in emerging market equities. High-yield and emerging market debt was neutrally weighted as was the developed fixed-income allocation. If risky assets continue to decline and increase their attractiveness relative to less-risky assets, we are prepared to move to an overweighted exposure in asset classes with equity risk characteristics. 4 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS A 2.22% 4.84% 2.96% 4.24% 4.23% - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS B 1.54 N/A N/A N/A 3.00 - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS C 1.64 N/A N/A N/A 4.23 - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS Y 2.10 4.91 3.18 4.50 8.16 - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS A+ -3.37 -0.96 1.03 3.07 3.07 - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS B+ -3.46 N/A N/A N/A -1.69 - -------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS C+ -0.33 N/A N/A N/A 2.26 - -------------------------------------------------------------------------------------------------------- GSMI Mutual Fund Index** -3.39 -5.81 -2.51 3.35 8.37 - -------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index -8.68 -15.00 -8.64 0.70 7.95 - -------------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index 9.85 13.96 4.45 4.36 5.55 - --------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL ALLOCATION FUND CLASS A (FORMERLY CLASS N) IS 6/30/97. INCEPTION DATES OF CLASS B AND CLASS C ARE 12/13/01 AND 11/22/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) AND THE INDICES IS 8/31/92. ** AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 40% WILSHIRE 5000 INDEX; 22% MSCI WORLD EX USA (FREE) INDEX; 21% SALOMON SMITH BARNEY BIGBOND INDEX; 9% SALOMON NON-U.S. GOV'T BOND INDEX (UNHEDGED); 2% JPMORGAN EMBI GLOBAL; 3% MSCI EMERGING MARKETS FREE INDEX; AND 3% MERRILL LYNCH HIGH YIELD MASTER INDEX. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS Global Allocation Fund Class Y, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and the Salomon Smith Barney World Gov't Bond Index if you had invested $1,000,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS GLOBAL ALLOCATION FUND CLASS Y VS. GSMI MUTUAL FUND INDEX, MSCI WORLD EQUITY FREE INDEX AND SALOMON SMITH BARNEY WORLD GOV'T BOND INDEX Wealth Value with Dividends Reinvested
UBS GLOBAL ALLOCATION GSMI MUTUAL MSCI WORLD EQUITY SALOMON SMITH BARNEY FUND CLASS Y FUND INDEX (FREE) INDEX WORLD GOV'T BOND INDEX --------------------- ----------- ----------------- ---------------------- 08/31/92 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 09/30/92 $ 1,013,000 $ 1,005,314 $ 991,424 $ 1,010,000 10/31/92 $ 1,007,000 $ 997,514 $ 964,679 $ 982,528 11/30/92 $ 1,022,000 $ 1,017,428 $ 981,884 $ 966,906 12/31/92 $ 1,032,925 $ 1,030,790 $ 990,218 $ 972,746 01/31/93 $ 1,048,115 $ 1,042,387 $ 993,555 $ 989,769 02/28/93 $ 1,068,369 $ 1,055,458 $ 1,017,111 $ 1,009,267 03/31/93 $ 1,081,142 $ 1,087,329 $ 1,075,990 $ 1,024,810 04/30/93 $ 1,086,223 $ 1,093,919 $ 1,125,787 $ 1,046,434 05/31/93 $ 1,097,400 $ 1,116,871 $ 1,151,608 $ 1,056,898 06/30/93 $ 1,107,567 $ 1,119,315 $ 1,141,995 $ 1,054,636 07/31/93 $ 1,110,624 $ 1,127,126 $ 1,165,369 $ 1,057,589 08/31/93 $ 1,134,059 $ 1,166,328 $ 1,219,770 $ 1,089,423 09/30/93 $ 1,134,084 $ 1,165,277 $ 1,197,451 $ 1,102,387 10/31/93 $ 1,143,329 $ 1,182,154 $ 1,230,666 $ 1,100,513 11/30/93 $ 1,131,002 $ 1,153,045 $ 1,160,611 $ 1,092,699 12/31/93 $ 1,148,054 $ 1,179,800 $ 1,216,970 $ 1,101,932 01/31/94 $ 1,173,590 $ 1,218,761 $ 1,297,251 $ 1,110,748 02/28/94 $ 1,152,310 $ 1,200,384 $ 1,280,212 $ 1,103,528 03/31/94 $ 1,118,262 $ 1,159,902 $ 1,225,058 $ 1,101,983 04/30/94 $ 1,122,518 $ 1,172,611 $ 1,263,624 $ 1,103,195 05/31/94 $ 1,124,646 $ 1,176,334 $ 1,267,366 $ 1,093,487 06/30/94 $ 1,116,140 $ 1,164,817 $ 1,263,653 $ 1,109,233 07/31/94 $ 1,132,192 $ 1,189,039 $ 1,287,844 $ 1,118,107 08/31/94 $ 1,156,805 $ 1,220,385 $ 1,326,764 $ 1,114,194 09/30/94 $ 1,139,683 $ 1,201,153 $ 1,291,735 $ 1,122,216 10/31/94 $ 1,137,543 $ 1,219,945 $ 1,328,898 $ 1,140,171 11/30/94 $ 1,122,561 $ 1,185,231 $ 1,271,623 $ 1,124,437 12/31/94 $ 1,126,372 $ 1,196,581 $ 1,283,696 $ 1,127,585 01/31/95 $ 1,139,482 $ 1,208,707 $ 1,264,851 $ 1,151,265 02/28/95 $ 1,167,887 $ 1,241,252 $ 1,283,628 $ 1,180,737 03/31/95 $ 1,183,182 $ 1,281,224 $ 1,345,555 $ 1,250,873 04/30/95 $ 1,206,125 $ 1,311,158 $ 1,392,625 $ 1,274,014 05/31/95 $ 1,244,362 $ 1,344,050 $ 1,405,192 $ 1,309,941 06/30/95 $ 1,256,423 $ 1,364,548 $ 1,404,729 $ 1,317,670 07/31/95 $ 1,284,098 $ 1,407,051 $ 1,475,059 $ 1,320,832 08/31/95 $ 1,300,703 $ 1,402,130 $ 1,442,137 $ 1,275,396 09/30/95 $ 1,322,842 $ 1,439,647 $ 1,484,735 $ 1,303,837 10/31/95 $ 1,332,805 $ 1,430,593 $ 1,461,670 $ 1,313,485 11/30/95 $ 1,371,549 $ 1,473,408 $ 1,512,615 $ 1,328,328 12/31/95 $ 1,398,239 $ 1,500,615 $ 1,557,004 $ 1,342,275 01/31/96 $ 1,424,264 $ 1,525,114 $ 1,586,115 $ 1,325,765 02/29/96 $ 1,418,349 $ 1,529,468 $ 1,595,762 $ 1,319,004 03/31/96 $ 1,428,996 $ 1,542,529 $ 1,622,255 $ 1,317,157 04/30/96 $ 1,447,923 $ 1,569,096 $ 1,660,368 $ 1,311,889 05/31/96 $ 1,452,655 $ 1,580,744 $ 1,661,696 $ 1,312,151 06/30/96 $ 1,462,269 $ 1,583,962 $ 1,670,552 $ 1,322,517 07/31/96 $ 1,440,730 $ 1,542,336 $ 1,611,513 $ 1,347,909 08/31/96 $ 1,463,465 $ 1,567,234 $ 1,630,570 $ 1,353,166 09/30/96 $ 1,511,330 $ 1,618,827 $ 1,694,507 $ 1,358,714 10/31/96 $ 1,536,459 $ 1,634,997 $ 1,706,172 $ 1,384,122 11/30/96 $ 1,596,290 $ 1,703,759 $ 1,802,355 $ 1,402,393 12/31/96 $ 1,595,424 $ 1,688,578 $ 1,773,711 $ 1,391,033 01/31/97 $ 1,615,268 $ 1,713,299 $ 1,795,453 $ 1,353,893 02/28/97 $ 1,629,820 $ 1,721,364 $ 1,815,917 $ 1,343,738 03/31/97 $ 1,604,685 $ 1,683,516 $ 1,779,574 $ 1,333,526 04/30/97 $ 1,621,882 $ 1,717,595 $ 1,837,951 $ 1,321,791 05/31/97 $ 1,689,351 $ 1,804,430 $ 1,951,681 $ 1,357,744 06/30/97 $ 1,736,975 $ 1,869,032 $ 2,048,772 $ 1,373,901 07/31/97 $ 1,792,537 $ 1,943,401 $ 2,143,333 $ 1,363,184 08/31/97 $ 1,746,236 $ 1,872,156 $ 1,998,274 $ 1,362,366 09/30/97 $ 1,800,475 $ 1,953,271 $ 2,106,916 $ 1,391,385 10/31/97 $ 1,747,558 $ 1,890,280 $ 1,996,320 $ 1,420,326 11/30/97 $ 1,751,527 $ 1,907,149 $ 2,031,234 $ 1,398,595 12/31/97 $ 1,770,868 $ 1,930,069 $ 2,056,055 $ 1,394,399 01/31/98 $ 1,791,307 $ 1,956,067 $ 2,113,738 $ 1,407,925 02/28/98 $ 1,857,002 $ 2,050,743 $ 2,256,707 $ 1,419,329 03/31/98 $ 1,899,340 $ 2,108,867 $ 2,351,687 $ 1,405,277 04/30/98 $ 1,902,260 $ 2,129,612 $ 2,374,682 $ 1,427,762 05/31/98 $ 1,892,040 $ 2,099,567 $ 2,345,868 $ 1,431,046 06/30/98 $ 1,880,791 $ 2,126,230 $ 2,400,735 $ 1,433,192 07/31/98 $ 1,876,373 $ 2,115,133 $ 2,397,112 $ 1,435,055 08/31/98 $ 1,726,145 $ 1,901,134 $ 2,077,594 $ 1,474,089 09/30/98 $ 1,780,639 $ 1,966,841 $ 2,114,567 $ 1,552,510 10/31/98 $ 1,845,443 $ 2,084,207 $ 2,306,035 $ 1,598,465 11/30/98 $ 1,896,992 $ 2,169,403 $ 2,443,377 $ 1,575,926 12/31/98 $ 1,918,264 $ 2,247,612 $ 2,562,157 $ 1,607,603 01/31/99 $ 1,921,515 $ 2,278,820 $ 2,618,456 $ 1,592,813 02/28/99 $ 1,874,371 $ 2,218,390 $ 2,548,875 $ 1,541,683 03/31/99 $ 1,905,259 $ 2,288,474 $ 2,654,608 $ 1,545,538 04/30/99 $ 1,983,290 $ 2,368,071 $ 2,759,698 $ 1,544,919 05/31/99 $ 1,947,525 $ 2,308,161 $ 2,658,034 $ 1,518,965 06/30/99 $ 1,970,339 $ 2,378,685 $ 2,781,678 $ 1,492,383 07/31/99 $ 1,965,421 $ 2,365,988 $ 2,773,413 $ 1,528,946 08/31/99 $ 1,934,276 $ 2,359,427 $ 2,768,271 $ 1,535,979 09/30/99 $ 1,906,409 $ 2,349,449 $ 2,742,247 $ 1,559,941 10/31/99 $ 1,903,131 $ 2,433,350 $ 2,884,671 $ 1,559,161 11/30/99 $ 1,911,327 $ 2,490,302 $ 2,965,698 $ 1,542,789 12/31/99 $ 1,946,875 $ 2,626,325 $ 3,205,899 $ 1,539,087 01/31/00 $ 1,889,358 $ 2,537,976 $ 3,022,471 $ 1,506,304 02/29/00 $ 1,861,471 $ 2,583,388 $ 3,030,353 $ 1,495,459 03/31/00 $ 1,925,960 $ 2,684,230 $ 3,240,084 $ 1,541,818 04/30/00 $ 1,925,960 $ 2,576,695 $ 3,102,944 $ 1,491,401 05/31/00 $ 1,931,189 $ 2,523,465 $ 3,024,390 $ 1,503,034 06/30/00 $ 1,960,819 $ 2,615,577 $ 3,126,209 $ 1,539,557 07/31/00 $ 1,952,104 $ 2,568,910 $ 3,038,069 $ 1,513,539 08/31/00 $ 1,976,505 $ 2,657,915 $ 3,137,025 $ 1,502,187 09/30/00 $ 1,943,389 $ 2,573,074 $ 2,970,373 $ 1,499,183 10/31/00 $ 1,939,903 $ 2,525,482 $ 2,920,673 $ 1,480,143 11/30/00 $ 1,959,076 $ 2,406,444 $ 2,743,143 $ 1,509,533 12/31/00 $ 2,073,907 $ 2,465,900 $ 2,786,559 $ 1,563,630 01/31/01 $ 2,131,105 $ 2,529,190 $ 2,840,640 $ 1,561,636 02/28/01 $ 2,092,358 $ 2,387,365 $ 2,600,882 $ 1,561,012 03/31/01 $ 2,016,708 $ 2,272,884 $ 2,429,900 $ 1,515,983 04/30/01 $ 2,073,907 $ 2,382,714 $ 2,609,734 $ 1,510,598 05/31/01 $ 2,077,597 $ 2,380,610 $ 2,576,726 $ 1,506,030 06/30/01 $ 2,062,836 $ 2,339,647 $ 2,495,850 $ 1,492,248 07/31/01 $ 2,068,372 $ 2,326,070 $ 2,462,965 $ 1,529,890 08/31/01 $ 2,072,062 $ 2,273,161 $ 2,344,935 $ 1,587,417 09/30/01 $ 1,952,129 $ 2,131,332 $ 2,138,248 $ 1,599,031 10/31/01 2001947.515 $ 2,179,703 $ 2,179,390 $ 1,611,673 11/30/01 $ 2,092,358 $ 2,265,201 $ 2,308,549 $ 1,589,029 12/31/01 $ 2,119,612 $ 2,280,992 $ 2,323,234 $ 1,548,108 01/31/02 $ 2,107,465 $ 2,245,961 $ 2,253,007 $ 1,519,473 02/28/02 $ 2,123,661 $ 2,237,846 $ 2,233,649 $ 1,527,345 03/31/02 $ 2,184,395 $ 2,301,985 $ 2,332,408 $ 1,523,142 04/30/02 $ 2,202,615 $ 2,279,458 $ 2,253,691 $ 1,577,655 05/31/02 $ 2,222,859 $ 2,285,074 $ 2,258,329 $ 1,622,274 06/30/02 $ 2,164,150 $ 2,203,737 $ 2,121,495 $ 1,700,591
8/31/92 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 5 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - -------------------------------------------------- Wells Fargo & Co. 1.3% Burlington Northern Santa Fe Corp. 1.2 Citigroup, Inc. 1.2 Microsoft Corp. 1.1 Greenpoint Financial Corp. 1.0 Masco Corp. 1.0 Wyeth, Inc. 0.9 UnitedHealth Group, Inc. 0.9 Johnson & Johnson 0.9 Allergan, Inc. 0.9 - -------------------------------------------------- Total 10.4%
TOP TEN FIXED INCOME HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ---------------------------------------------------- Federal National Mortgage Association 6.500%, due 01/01/28 1.5% U.S. Treasury Note 3.625%, due 03/31/04 1.0 Federal National Mortgage Association 7.500%, due 02/25/29 0.6 U.S. Treasury Note 4.375%, due 05/15/07 0.6 Treuhandanstalt 6.750%, due 05/13/04 0.5 DLJ Commercial Mortgage Corp. 7.340%, due 10/10/32 0.5 Buoni Poliennali Del Tes 8.750%, due 07/01/06 0.5 Federal National Mortgage Association 6.500%, due 11/01/31 0.4 Fannie Mae Grantor Trust 7.125.%, due 01/15/30 0.4 Buoni Poliennali Del Tes 3.250%, due 04/15/04 0.4 - ---------------------------------------------------- Total 6.4%
6 INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2002 U.S. EQUITIES Energy 2.67% Capital Investment Aerospace/Military 0.65 Capital Goods 2.32 Electronic Components 0.55 ------ 3.52 Basic Industries Broadcasting & Publishing 1.23 Chemicals 1.21 Housing/Paper 0.64 Metals 0.96 ------ 4.04 Computers Software 1.23 Systems 0.79 ------ 2.02 Consumer Autos/Durables 0.63 Food/House Products 0.35 Health: Drugs 3.75 Health: Non-Drugs 3.28 Leisure/Tourism 0.40 Retail/Apparel 2.36 ------ 10.77 Financial Banks 3.66 Non-Banks 4.32 ------ 7.98 Telecommunications Equipment 0.14 Services 1.29 ------ 1.43 Services/Miscellaneous 2.87 Transportation 1.19 Utilities 1.50 ------ Total U.S. Equities 37.99* INTERNATIONAL EQUITIES Appliances & Household 0.25 Autos/Durables 0.38 Banking 2.58 Beverages & Tobacco 0.80 Broadcasting & Publishing 0.85 Building Materials 0.31 Business & Public Service 0.32 Chemicals 0.44 Computer Software 0.13 Construction 0.32 Data Processing 0.19 Electric Components 0.59 Electronics 0.11 Energy 2.31 Financial Services 1.91 Food & House Products 0.94 Forest Products 0.28 Health & Personal Care 2.10 Housing/Paper 0.05 Industrial Components 0.10 Insurance 1.22 Leisure & Tourism 0.22 Machinery & Engineering 0.32% Metals-Non Ferrous 0.16 Metals-Steel 0.05 Multi-Industry 0.38 Real Estate 0.28 Recreation 0.12 Retail/Apparel 0.16 Services/Miscellaneous 0.17 Textiles/Apparel 0.07 Telecommunications 1.80 Transportation 0.42 Utilities 0.53 Wholesale & International Trade 0.11 ------ Total International Equities 20.97 TOTAL EQUITIES 58.96 U.S. BONDS U.S. Corporate Bonds Aerospace &Miltary 0.02 Airlines 0.11 Autos/Durables 0.03 Banks 0.24 Chemicals 0.02 Computer Systems 0.04 Construction 0.05 Consumer 0.04 Energy 0.45 Financial 1.00 Food & House Products 0.18 Housing/Paper 0.04 Health: Drugs 0.04 Industrial Components 0.04 Metals 0.01 Publishing 0.04 Real Estate 0.03 Recreation 0.06 Retail/Apparel 0.10 Services/Miscellaneous 0.12 Telecommunications 0.17 Television Broadcasting 0.08 Transportation 0.07 Utilities 0.27 ------ Total U.S. Corporate Bonds 3.25 Asset-Backed 0.37 Commercial Mortgage-Backed Securities 2.47 International Dollar Bonds 0.16 U.S. Government Mortgage-Backed Securities 5.05 U.S. Government Obligations & Agencies 2.72 ------ Total U.S. Bonds 14.02* Foreign Government Bonds 5.93 INVESTMENT COMPANIES 12.80 SHORT-TERM INVESTMENTS 6.05* ------ TOTAL INVESTMENTS 97.76 INVESTMENTS OF CASH COLLATERAL 3.28 LIABILITIES, LESS CASH AND OTHER ASSETS (1.04) ------ NET ASSETS 100.00% ======
* THE FUND HELD A LONG POSITION IN U.S. TREASURY FUTURES ON JUNE 30, 2002 WHICH INCREASED U.S. BOND EXPOSURE FROM 14.02% TO 23.37%. THE FUND HELD A SHORT POSITION IN STOCK INDEX FUTURES ON JUNE 30, 2002 WHICH REDUCED TOTAL U.S. EQUITY EXPOSURE FROM 37.99% TO 32.78%.THESE ADJUSTMENTS RESULT IN A NET DECREASE IN THE FUND'S EXPOSURE TO SHORT-TERM INVESTMENTS FROM 6.05% TO 1.91%. 7 UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE ------- ----------- EQUITIES -- 58.96% U.S. EQUITIES -- 37.99% Abbott Laboratories, Inc. 32,450 $ 1,221,743 Advanced Micro Devices, Inc. 30,300 294,516 Allergan, Inc. 23,600 1,575,300 American International Group, Inc. 21,221 1,447,909 American Standard Companies, Inc. (b) 15,000 1,126,500 Anthem, Inc. (b) 13,400 904,232 AOL Time Warner, Inc. (b) 21,800 320,678 Baxter International, Inc. 15,400 684,530 BEA Systems, Inc. (b) 29,900 284,349 Beckman Coulter, Inc. 19,300 963,070 Bristol-Myers Squibb Co. 16,000 411,200 Burlington Northern Santa Fe Corp. 69,700 2,091,000 Cephalon, Inc. (b) 15,200 687,040 Citigroup, Inc. 53,307 2,065,646 CMS Energy Corp. 31,600 346,968 CommScope, Inc. (b) 19,600 245,000 Computer Sciences Corp. 7,600 363,280 Conoco, Inc. 27,800 772,840 Consolidated Edison, Inc. 21,400 893,450 Costco Wholesale Corp. (b) 26,300 1,015,706 Dow Chemical Co. 21,900 752,922 Eastman Chemical Co. 11,400 534,660 Electronic Data Systems Corp. 28,300 1,051,345 Entergy Corp. 14,000 594,160 Exelon Corp. 18,600 972,780 Exxon Mobil Corp. 31,100 1,272,612 First Data Corp. 13,060 485,832 FirstEnergy Corp. 32,463 1,083,615 FleetBoston Financial Corp. 27,415 886,875 Freddie Mac 24,800 1,517,760 GreenPoint Financial Corp. 35,600 1,747,960 Hartford Financial Services Group, Inc. (The) 8,700 517,389 Hewlett-Packard Co. 39,609 605,226 Household International, Inc. 22,300 1,108,310 Illinois Tool Works, Inc. 22,600 1,543,580 IMC Global, Inc. 36,700 458,750 Ingersoll-Rand Co., Class A 18,000 821,880 Intel Corp. 40,300 736,281 Johnson & Johnson 30,538 1,595,916 Johnson Controls, Inc. 6,300 514,143 JP Morgan Chase & Co. 32,700 1,109,184 Kerr-McGee Corp. 6,350 340,043 Kimberly-Clark Corp. 9,800 607,600 Kroger Co. (b) 40,100 797,990 Martin Marietta Materials, Inc. 21,384 833,976 Masco Corp. 62,100 1,683,531 McGraw-Hill Cos., Inc. 8,000 477,600 MeadWestvaco Corp. 17,400 583,944 Microsoft Corp. (b) 34,200 1,870,740 Morgan Stanley 21,550 928,374 Motorola, Inc. 52,330 754,599 Newell Rubbermaid, Inc. 35,000 1,227,100 Nextel Communications, Inc. 199,800 641,358 Omnicom Group 21,500 984,700 Pentair, Inc. 18,296 879,672 PNC Financial Services Group 14,000 $ 731,920 Progress Energy, Inc. 13,700 712,537 RadioShack Corp. 20,300 610,218 Royal Caribbean Cruises Ltd. (c) 35,900 700,050 Sapient Corp. 50,500 53,530 SBC Communications, Inc. 28,500 869,250 Sempra Energy 14,500 320,885 SICOR, Inc. (b) 55,500 1,028,970 Texas Instruments, Inc. 28,700 680,190 TJX Companies, Inc. 25,300 496,133 U.S. Bancorp 36,400 849,940 United Health Group, Inc. 17,500 1,602,125 United Technologies Corp. 16,900 1,147,510 Viacom, Inc. 30,900 1,371,033 Viad Corp. 18,200 473,200 W.W. Grainger, Inc. 11,900 596,190 Waters Corp. 14,200 379,140 Wells Fargo & Co. 44,300 2,217,658 Wyeth, Inc. 32,300 1,653,760 ------------ Total U.S. Equities 66,731,603 ------------ INTERNATIONAL EQUITIES -- 20.97% AUSTRALIA -- 0.69% Lion Nathan Ltd. 46,269 125,981 Mayne Nickless Ltd. 68,425 159,033 National Australia Bank Ltd., Preferred 4,700 164,265 News Corp., Ltd., Preferred 32,739 150,346 QBE Insurance Group Ltd. 34,225 127,580 Rio Tinto Ltd. 5,404 101,693 Westpac Banking Corp., Ltd. 41,570 379,000 ------------ 1,207,898 ------------ BELGIUM -- 0.13% Fortis 10,936 234,152 ------------ CANADA -- 0.65% Alcan Aluminum Ltd. 4,520 171,480 Bank of Nova Scotia 6,100 200,499 BCE, Inc. 10,800 187,397 Canadian National Railway Co. 2,700 142,092 Domtar, Inc. 7,100 82,862 Nortel Networks Corp. 17,300 25,025 NOVA Chemicals Corp. 3,600 79,792 Royal Bank of Canada 7,400 255,441 ------------ 1,144,588 ------------ DENMARK -- 0.22% Danske Bank A/S 10,400 191,494 Novo-Nordisk A/S 3,595 119,007 Tele Danmark A/S 2,600 71,897 ------------ 382,398 ------------ FINLAND -- 0.70% Nokia Oyj 42,590 623,354 Sampo Leonia Insurance, Class A 15,000 117,030 UPM-Kymmene Corp. 12,620 496,793 ------------ 1,237,177 ------------ 8 SHARES VALUE ------- ------------ FRANCE -- 2.32% Air Liquide (c) 227 $ 34,928 Alcatel S.A. (c) 7,152 49,726 Aventis S.A., Class A 9,505 673,524 AXA (c) 12,764 233,457 BNP Paribas (c) 7,849 434,092 Cap Gemini S.A. (c) 4,179 166,118 Cie De Saint Gobain 7,584 340,417 France Telecom S.A. (c) 2,903 27,036 Gemplus International S.A. (b) 19,269 27,593 Sanofi 2,748 167,177 Societe Generale 5,999 395,170 Suez S.A. 5,303 141,405 Total Fina S.A., Class B 7,583 1,231,182 Union du Credit-Bail Immobilier 2,556 157,768 ------------ 4,079,593 ------------ GERMANY -- 0.66% Allianz AG 1,280 258,450 Altana AG 3,408 184,913 Bayer AG 4,430 141,970 Deutsche Telekom 6,300 59,108 E.on AG 1,889 109,602 Muenchener Rueckver AG 1,739 412,183 ------------ 1,166,226 ------------ HONG KONG -- 0.16% Hong Kong Electric Holdings Ltd. 36,000 134,538 Sun Hung Kai Properties Ltd. 19,000 144,327 ------------ 278,865 ------------ IRELAND -- 0.26% Bank of Ireland 13,872 172,756 CRH PLC 17,014 277,249 ------------ 450,005 ------------ ITALY -- 0.83% Assicurazioni Generali Spa 15,577 369,211 ENI Spa (c) 48,501 771,180 San Paolo-imi Spa 31,887 319,953 ------------ 1,460,344 ------------ JAPAN -- 3.54% Aiful Corp. 4,100 268,864 Bank of Yokohama (c) 16,000 68,079 Banyu Pharmaceutical 8,000 103,187 Benesse Corp. 11,500 210,120 Canon, Inc. 8,000 302,353 Daikin Industries Ltd. 8,000 146,504 Fuji Photo Film Co., Ltd. 12,000 387,452 Kao Corp. 8,000 184,215 KDDI Corp. 51 157,434 Matsushita Electric Industrial Co. 5,000 68,205 Minebea Co., Ltd. 26,000 152,711 Mitsubishi Corp. 27,000 195,303 Mitsubishi Estate Co., Ltd. 23,000 188,053 Mitsui Mining & Smelting Co., Ltd. 29,000 86,376 Murata Manufacturing Co., Inc. 3,000 192,725 Nintendo Corp., Ltd. 1,400 206,157 Ono Pharmaceutical Co., Ltd. 2,000 71,417 Orix Corp. 3,300 $ 266,236 Rohm Co. 1,400 208,960 Sanyo Electric 43,000 187,627 Sekisui House Ltd. 10,000 73,502 Sony Corp. 7,100 374,962 Sumitomo Chemical Co. 36,000 163,691 Takeda Chemical Industries Ltd. 9,000 394,961 Takefuji Corp. 3,380 234,902 Toyota Motor Corp. 25,300 671,233 West Japan Railway Co. 89 359,386 Yasuda Fire & Marine Insurance Co., Ltd. (c) 47,000 287,819 ------------ 6,212,434 ------------ NETHERLANDS -- 1.49% ABN AMRO Holdings NV 7,653 138,993 Akzo Nobel NV 4,065 177,003 Elsevier NV 50,083 682,572 ING Groep NV 2,891 74,234 Koninklijke Ahold NV 19,406 408,221 Philips Electronics NV 10,340 288,686 Royal KPN NV (b) 53,342 249,705 Vedior NV 9,571 132,332 VNU NV 8,979 249,535 Wolters Kluwer NV 11,433 217,017 ------------ 2,618,298 ------------ NORWAY -- 0.10% Telenor ASA (c) 48,700 172,624 ------------ PORTUGAL -- 0.20% Electricidade de Portugal S.A. 147,111 284,761 Portugal Telecom S.A. 8,806 62,182 ------------ 346,943 ------------ SINGAPORE -- 0.34% DBS Group Holdings Ltd. 36,000 252,660 Neptune Orient Lines Ltd. (b) 253,000 146,061 Singapore Technologies Engineering Ltd. 181,000 197,719 ------------ 596,440 ------------ SPAIN -- 0.60% Banco Bilbao Vizcaya 40,145 453,959 Banco Santander Central Hispano S.A. 53,092 421,565 Telefonica S.A. 21,131 177,386 ------------ 1,052,910 ------------ SWEDEN -- 0.79% Nordea AB 25,000 136,010 Sandvik AB 6,800 169,806 Svenska Cellulosa AB 11,100 394,940 Svenska Handelsbanken AB (c) 20,020 306,056 Swedish Match AB 45,120 373,116 ------------ 1,379,928 ------------ SWITZERLAND -- 1.51% Compagnie Financiere 9,697 220,549 Credit Suisse Group 5,552 176,263 Givaudan S.A. 635 255,997 Nestle S.A. 2,731 636,738 Novartis AG 17,518 770,378 9 SHARES VALUE ------- ------------ Roche Holding AG 4,877 $ 368,650 Swiss Re 2,321 226,907 ------------ 2,655,482 ------------ UNITED KINGDOM -- 5.78% Abbey National PLC 23,766 279,668 Allied Domecq PLC 42,402 278,085 AstraZeneca PLC 4,015 166,221 Barclays Bank PLC 59,133 497,552 BOC Group PLC 11,214 174,182 BP PLC 82,987 696,998 Brambles Industries, Ltd. 24,414 122,156 BT Group PLC (b) 83,069 319,087 Carlton Communications PLC 61,000 195,262 Charter PLC (b) 33,676 85,212 Compass Group PLC 42,723 259,188 Dimension Data Holdings PLC (b) 94,391 58,991 Electrocomponents PLC 33,043 185,100 Exel PLC 2,640 33,622 Gallaher Group PLC 66,688 625,162 GlaxoSmithKline PLC 31,176 673,855 HSBC Holdings PLC 26,050 299,596 Invensys PLC 104,160 141,306 Kingfisher PLC 40,855 196,945 Lloyds TSB Group PLC 24,733 246,184 Matalan PLC 27,544 130,994 National Grid Group PLC 50,189 356,504 Prudential PLC 28,963 264,889 Reckitt Benckiser PLC 9,504 170,511 Rentokil Initial PLC 57,061 232,231 Rolls-Royce PLC 107,140 264,567 Royal Bank of Scotland Group PLC 23,126 655,667 Safeway PLC 64,507 277,039 Scottish & Southern Energy PLC 32,876 325,232 Scottish Power PLC 9,285 49,925 Shell Transport & Trading PLC 138,676 1,046,348 Smurfit (Jefferson) Group PLC 68,884 210,592 Stagecoach Holdings PLC 60,718 58,077 Vodafone Group PLC 415,677 570,254 ------------ 10,147,202 ------------ Total International Equities 36,823,507 ------------ Total Equities (Cost $106,138,922) 103,555,110 ------------ FACE AMOUNT ---------- BONDS -- 19.95% U.S BONDS -- 14.02% U.S. CORPORATE BONDS -- 3.25% Abbott Laboratories, Inc. 5.625%, due 07/01/06 $ 30,000 31,088 Alcoa, Inc. 6.000%, due 01/15/12 15,000 15,394 Anadarko Finance Co. 7.500%, due 05/01/31 30,000 31,999 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 60,000 73,469 AOL Time Warner, Inc. 5.625%, due 05/01/05 100,000 98,121 7.625%, due 04/15/31 45,000 39,402 FACE AMOUNT VALUE ---------- ------------ Apache Corp. 6.250%, due 04/15/12 $ 15,000 $ 15,485 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 40,000 32,310 Avalonbay Communities, Inc. 7.500%, due 08/01/09 30,000 32,303 Avon Products, Inc. 7.150%, due 11/15/09 50,000 54,928 Bank of America Corp. 7.400%, due 01/15/11 90,000 98,568 Bank One Corp. 7.875%, due 08/01/10 55,000 62,394 Boeing Capital Corp. 7.375%, due 09/27/10 20,000 22,026 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 100,000 102,750 Bristol Myers Squibb Co. 5.750%, due 10/01/11 40,000 39,798 Burlington Northern Santa Fe Corp. 6.875%, due 12/01/27 15,000 15,044 7.082%, due 05/13/29 35,000 35,770 Capital One Bank 6.875%, due 02/01/06 25,000 24,711 Cendant Corp. 6.875%, due 08/15/06 140,000 140,805 Centex Corp. 9.750%, due 06/15/05 85,000 96,414 Citigroup, Inc. 7.250%, due 10/01/10 130,000 141,504 Citizens Communications Co. 9.250%, due 05/15/11 40,000 37,974 Coca Cola Co. 4.000%, due 06/01/05 35,000 35,349 Comcast Cable Communications 6.750%, due 01/30/11 80,000 71,455 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 20,000 20,580 Consolidated Edison, Inc. 7.500%, due 09/01/10 220,000 243,566 Continental Airlines, Inc., E.E.T.C 6.320%, due 11/01/08 35,000 35,350 Coors Brewing Co., 144A 6.375%, due 05/15/12 35,000 36,015 Countrywide Home Loan 5.500%, due 02/01/07 50,000 50,892 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 55,000 56,267 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 20,000 22,111 Delta Airlines, Inc. 00-1, E.E.T.C 7.570%, due 11/18/10 75,000 80,463 Devon Financing Corp. ULC 6.875%, due 09/30/11 35,000 36,450 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 135,000 146,373 Duke Energy Field Services, LLC 6.875%, due 02/01/11 15,000 14,999 7.875%, due 08/16/10 55,000 58,372 10 FACE AMOUNT VALUE ---------- ------------ El Paso Energy Corp. 7.800%, due 08/01/31 $ 15,000 $ 14,040 EOP Operating LP 7.000%, due 07/15/11 30,000 31,516 7.875%, due 07/15/31 20,000 20,545 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 65,000 70,545 First Data Corp. 5.625%, due 11/01/11 75,000 74,698 First Energy Corp. 6.450%, due 11/15/11 70,000 67,963 First Union National Bank 7.800%, due 08/18/10 80,000 89,544 FleetBoston Financial Corp. 7.375%, due 12/01/09 35,000 37,977 Ford Motor Co. 7.450%, due 07/16/31 25,000 23,271 Ford Motor Credit Co. 5.800%, due 01/12/09 115,000 108,123 6.875%, due 02/01/06 220,000 225,075 7.375%, due 02/01/11 50,000 50,645 General Electric Capital Corp. 6.750%, due 03/15/32 145,000 142,430 General Motors Acceptance Corp. 6.125%, due 02/01/07 55,000 55,602 6.875%, due 09/15/11 165,000 163,815 8.000%, due 11/01/31 40,000 40,910 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 40,000 41,470 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 80,000 84,120 Household Finance Corp. 6.750%, due 05/15/11 175,000 172,239 International Paper Co. 6.750%, due 09/01/11 50,000 52,072 John Deere Capital Corp. 7.000%, due 03/15/12 25,000 26,786 Kimberly Clark Corp., 144A 4.500%, due 07/30/05 45,000 45,958 Kohls Corp. 7.250%, due 06/01/29 10,000 10,720 Kraft Foods, Inc. 4.625%, due 11/01/06 20,000 19,925 6.500%, due 11/01/31 50,000 49,477 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 35,000 35,490 Lincoln National Corp. 6.200%, due 12/15/11 25,000 25,194 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 75,000 60,750 9.125%, due 05/01/31 10,000 7,150 Morgan Stanley 6.750%, due 04/15/11 70,000 72,008 News America Holdings, Inc. 7.125%, due 04/08/28 75,000 68,022 Occidental Petroleum Corp. 8.450%, due 02/15/29 50,000 58,555 Pepsi Bottling Holdings, 144A 5.625%, due 02/17/09 35,000 35,564 Phillips Petroleum Co. 8.500%, due 05/25/05 $ 60,000 $ 67,063 8.750%, due 05/25/10 25,000 29,686 Praxair, Inc. 6.375%, due 04/01/12 30,000 31,108 Progress Energy, Inc. 7.000%, due 10/30/31 40,000 39,262 Pure Resources, Inc. 7.125%, due 06/15/11 55,000 53,984 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 170,000 96,050 Rohm & Haas Co. 7.850%, due 07/15/29 30,000 34,489 Safeway, Inc. 7.250%, due 02/01/31 20,000 20,714 SBC Communications, Inc. 5.875%, due 02/01/12 55,000 54,917 Sempra Energy 7.950%, due 03/01/10 75,000 79,955 Sprint Capital Corp. 7.625%, due 01/30/11 50,000 39,782 Suntrust Banks, Inc. 5.050%, due 07/01/07 35,000 35,362 Target Corp. 7.000%, due 07/15/31 70,000 74,066 Telus Corp. 8.000%, due 06/01/11 40,000 33,236 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 85,000 87,524 Unilever Capital Corp. 7.125%, due 11/01/10 50,000 55,102 Union Pacific Corp. 6.700%, due 12/01/06 60,000 63,909 United Airlines, Inc., E.E.T.C 7.811%, due 10/01/09 68,731 59,971 United Technologies Corp. 6.100%, due 05/15/12 40,000 41,430 US Bank NA, Minnesota 6.375%, due 08/01/11 20,000 20,779 USA Education, Inc. 5.625%, due 04/10/07 65,000 67,137 Valero Energy Corp. 7.500%, due 04/15/32 35,000 35,119 Verizon Global Funding Corp. 7.250%, due 12/01/10 45,000 45,432 7.750%, due 12/01/30 50,000 48,221 Walt Disney Co. 6.375%, due 03/01/12 15,000 15,278 Washington Mutual, Inc. 5.625%, due 01/15/07 25,000 25,321 Wells Fargo Bank N.A. 6.450%, due 02/01/11 115,000 120,195 Westinghouse Electric 8.625%, due 08/01/12 40,000 47,054 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 20,000 20,300 Williams Cos., Inc. 7.125%, due 09/01/11 20,000 16,196 Xcel Energy, Inc. 7.000%, due 12/01/10 25,000 22,738 ------------ 5,714,078 ------------ 11 FACE AMOUNT VALUE ---------- ------------ ASSET-BACKED SECURITIES -- 0.37% Conseco Financial Corp. 5.590%, due 05/15/33 $ 75,000 $ 76,248 Conseco Finance Securitizations Corp., 00-B, Class AF4 7.870%, due 02/15/31 85,000 89,867 Peco Energy Transition Trust, 99-A3, Class A7 6.130%, due 03/01/09 230,000 243,749 Vanderbilt Mortgage Finance 8.255%, due 05/07/17 215,000 237,145 ------------ 647,009 ------------ COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.47% Bear Stearns Commercial Mortgage Securities, 00-WF1, Class A2 7.780%, due 02/15/32 350,000 396,850 Bear Stearns Commercial Mortgage Securities, 00-WF2, Class A2 7.320%, due 10/15/32 440,000 489,624 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B 7.180%, due 08/10/10 125,000 137,422 DLJ Commercial Mortgage Corp., 99-CG2, Class A1B 7.300%, due 06/10/32 145,000 160,352 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 785,000 869,530 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 125,000 132,159 GS Mortgage Securities Corp. II 7.410%, due 02/15/27 65,000 69,270 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1 6.410%, due 06/15/31 220,335 232,359 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 70,000 77,532 Morgan Stanley Capital I 7.570%, due 12/15/09 150,000 167,798 Nomura Asset Securities Corp., 95-MD3, Class A/B 8.150%, due 03/04/20 94,381 102,746 Norwest Asset Securities Corp., 96-2 7.000%, due 09/25/11 300,315 308,832 Norwest Asset Securities Corp., 99-3, 6.000%, due 01/25/29 472,318 479,389 Residential Asset Securitization Trust, 98-A6, Class IA2 6.750%, due 07/25/28 475,000 485,260 Residential Asset Securitization Trust, 98-A9, Class 2 A5 6.750%, due 09/25/28 150,000 151,368 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 80,000 85,179 ------------ 4,345,670 ------------ INTERNATIONAL DOLLAR BONDS -- 0.16% Canadian National Railway Co. 6.900%, due 07/15/28 15,000 15,329 Deutsche Telekom International Finance 8.250%, due 06/15/30 25,000 23,240 France Telecom S.A. 8.500%, due 03/01/31 25,000 22,113 Petroleum Geo-Services 6.625%, due 03/30/08 30,000 22,800 7.500%, due 03/31/07 (c) 55,000 44,550 United Mexican States 8.375%, due 01/14/11 145,000 150,438 ------------ 278,470 ------------ U.S. GOVERNMENT AGENCY -- 0.55% Fannie Mae Grantor Trust 7.125%, due 01/15/30 $ 665,000 $ 744,674 7.500%, due 06/25/30 209,572 221,989 ------------ 966,663 ------------ U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 5.05% Fannie Mae Whole Loan 7.000%, due 09/25/41 251,351 262,212 Fannie Mae, Grantor Trust, 01-T10, Class A2 7.500%, due 06/19/41 349,638 367,270 Federal Home Loan Mortgage Corp. 6.000%, due 10/01/29 97,321 97,956 6.500%, due 02/01/29 386,659 395,008 Federal Home Loan Mortgage Corp., Gold 6.500%, due 04/01/29 600,162 613,121 Federal National Mortgage Association 6.000%, due 11/01/28 651,775 650,884 6.000%, due 12/01/28 123,175 123,007 6.000%, due 03/01/29 123,272 123,103 6.500%, due 03/01/19 188,659 194,339 6.500%, due 01/01/28 2,554,994 2,608,565 6.500%, due 11/01/31 740,262 755,783 7.500%, due 05/01/31 115,020 120,764 Federal National Mortgage Association (REMIC) 7.500%, due 02/25/29 985,533 1,036,061 Federal National Mortgage Association, Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 8,751 9,648 Government National Mortgage Association 6.000%, due 11/20/28 241,962 240,801 6.000%, due 01/15/29 160,231 160,359 6.000%, due 02/20/29 209,180 208,176 6.000%, due 05/20/29 526,808 524,280 7.500%, due 02/15/27 265,668 280,570 8.000%, due 12/15/22 92,456 99,606 9.000%, due 11/15/04 3,908 4,261 ------------ 8,875,774 ------------ U.S. GOVERNMENT OBLIGATIONS -- 2.17% U.S. Treasury Bond 3.000%, due 02/29/04 (c) 315,000 316,833 5.000%, due 08/15/11 (c) 465,000 471,458 U.S. Treasury Note 3.625%, due 03/31/04 1,765,000 1,792,287 4.375%, due 05/15/07 (c) 995,000 1,008,681 6.250%, due 05/15/30 55,000 59,578 8.000%, due 11/15/21 120,000 153,487 ------------ 3,802,324 ------------ Total U.S. Bonds 24,629,988 ------------ INTERNATIONAL BONDS -- 5.93% AUSTRALIA -- 0.18% Government of Australia 6.750%, due 11/15/06 AUD 335,000 195,282 6.500%, due 05/15/13 110,000 63,841 9.000%, due 09/15/04 110,000 66,194 ------------ 325,317 ------------ 12 FACE AMOUNT VALUE ---------- ------------ CANADA -- 0.72% Government of Canada 5.000%, due 12/01/03 CAD 345,000 $ 231,111 5.750%, due 06/01/29 145,000 94,576 6.000%, due 09/01/05 585,000 401,880 6.000%, due 06/01/08 180,000 123,897 6.000%, due 06/01/11 210,000 143,599 8.000%, due 06/01/23 320,000 264,889 ------------ 1,259,952 ------------ FINLAND -- 0.14% Government of Finland 5.750%, due 02/23/11 EUR 230,000 237,778 ------------ FRANCE -- 0.95% Government of France 3.500%, due 07/12/04 (c) EUR 235,000 229,412 4.000%, due 10/25/09 470,000 441,374 5.500%, due 04/25/07 330,000 338,835 5.500%, due 04/25/10 455,000 466,668 5.500%, due 04/25/29 100,000 101,273 8.500%, due 10/25/19 65,000 87,552 ------------ 1,665,114 ------------ GERMANY -- 1.36% Bundesrepublik Deutschland 4.500%, due 07/04/09 EUR 260,000 252,220 6.500%, due 07/04/27 155,000 176,844 Government of Germany 4.000%, due 07/04/09 225,000 211,862 5.000%, due 07/04/11 400,000 397,287 6.000%, due 01/05/06 (c) 405,000 421,083 Treuhandanstalt 6.750%, due 05/13/04 895,000 926,964 ------------ 2,386,260 ------------ ITALY -- 1.28% Buoni Poliennali Del Tes 3.250%, due 04/15/04 (c) EUR 760,000 742,001 4.250%, due 11/01/09 130,000 122,991 5.250%, due 11/01/29 (c) 400,000 383,515 8.750%, due 07/01/06 (c) 700,000 797,696 12.000%, due 09/01/02 210,000 209,843 ------------ 2,256,046 ------------ NETHERLANDS -- 0.24% Government of Netherlands 5.000%, due 07/15/11 EUR 430,000 423,619 ------------ SPAIN -- 0.65% Government of Spain 3.000%, due 01/31/03 EUR 120,000 118,182 3.250%, due 01/31/05 (c) 510,000 492,041 4.750%, due 07/30/14 (c) 150,000 141,626 5.150%, due 07/30/09 (c) 340,000 340,693 6.000%, due 01/31/29 50,000 53,460 ------------ 1,146,002 ------------ SWEDEN -- 0.25% Government of Sweden 5.000%, due 01/15/04 (c) SEK 1,470,000 $ 160,204 6.750%, due 05/05/14 460,000 55,214 8.000%, due 08/15/07 1,820,000 222,546 ------------ 437,964 ------------ UNITED KINGDOM -- 0.16% U.K. Treasury 5.000%, due 03/07/12 GBP 60,000 91,394 6.000%, due 12/07/28 39,000 69,953 8.500%, due 12/07/05 70,000 118,432 ------------ 279,779 ------------ Total International Bonds 10,417,831 ------------ Total Bonds (Cost $33,917,524) 35,047,819 ------------ SHARES ---------- INVESTMENT COMPANIES -- 12.80% UBS Emerging Markets Debt Relationship Fund 105,440 3,219,505 UBS Emerging Markets Equity Relationship Fund 1,106,216 9,500,404 UBS High Yield Relationship Fund 392,428 5,059,731 UBS U.S. Small Cap Equity Relationship Fund 174,628 4,700,933 ------------ Total Investment Companies (Cost $19,576,106) 22,480,573 ------------ SHORT-TERM INVESTMENTS -- 6.05% OTHER -- 4.91% UBS Supplementary Trust U.S. Cash Management Prime Fund 8,627,035 8,627,035 ------------ FACE AMOUNT ---------- U.S. GOVERNMENT OBLIGATIONS -- 1.14% U.S. Treasury Bill, due 08/08/02 (d) $2,000,000 1,996,464 ------------ Total Short-Term Investments (Cost $10,623,256) 10,623,499 ------------ Total Investments (Cost $170,255,808) -- 97.76% (a) 171,707,001 Total Investments of Cash Collateral for Securities Loaned ($5,763,657) -- 3.28% (a) 5,763,660 Liabilities, less cash and other assets -- (1.04)% (1,831,356) ------------ Net Assets -- 100% $175,639,305 ============ INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 3.28% CORPORATE OBLIGATIONS -- 0.28% Citigroup, Inc. 1.810% due 07/12/02 500,000 500,005 ------------ OTHER -- 3.00% UBS Supplementary Trust U.S. Cash Management Prime Fund 5,263,655 5,263,655 ------------ $ 5,763,660 ============
13 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $180,044,768; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 10,085,187 Gross unrealized depreciation (12,659,294) ------------ Net unrealized depreciation $ (2,574,107) ============
(b) Non-income producing security. (c) Security, or portion thereof, was on loan at June 30, 2002. (d) Held as collateral for open financial futures. % Represents a percentage of net assets E.E.T.C.: Enhanced Equipment Trust Certificate 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2002, the value of these securities amounted to $331,712 or 0.19% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS UBS Global Allocation Fund had the following open forward foreign currency contracts as of June 30, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ------------ ------------ FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 07/18/02 12,600,000 $ 7,063,358 $ 663,440 Canadian Dollar (CAD) 07/18/02 10,200,000 6,703,994 390,354 Euro (EUR) 07/18/02 28,550,000 28,175,689 3,258,032 Japanese Yen (JPY) 07/18/02 130,000,000 1,085,506 38,268 Swedish Krone (SEK) 07/18/02 29,400,000 3,195,214 428,363 Swiss Franc (CHF) 07/18/02 1,500,000 1,008,165 106,853 FORWARD FOREIGN CURRENCY SALE CONTRACTS British Pound (GBP) 07/18/02 6,500,000 9,898,445 (680,814) Euro (EUR) 07/18/02 7,680,000 7,579,310 (285,404) Swedish Krone (SEK) 07/18/02 36,800,000 3,999,451 (391,451) ----------- Total net unrealized gain on Forward Foreign Currency Contracts $ 3,527,641 ===========
FUTURES CONTRACTS UBS Global Allocation Fund had the following open futures contracts as of June 30, 2002:
EXPIRATION COST/ CURRENT UNREALIZED DATE PROCEEDS VALUE GAIN -------------- ----------- ----------- ---------- U.S. INTEREST RATE FUTURES BUY CONTRACTS 5 year U.S. Treasury Notes, 146 contracts September 2002 $15,430,756 $15,683,593 $252,837 10 year U.S. Treasury Notes, 4 contracts September 2002 420,091 428,938 8,847 30 year U.S. Treasury Bonds, 3 contracts September 2002 301,896 308,344 6,448 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 37 contracts September 2002 9,536,029 9,158,425 377,604 -------- Total net unrealized gain on Futures Contracts $645,736 ========
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2002 was $1,996,464. See accompanying notes to financial statements. 14 UBS GLOBAL EQUITY FUND For the fiscal year ended June 30, 2002, Class Y Shares of the UBS Global Equity Fund declined 7.71%, outperforming the negative 15.00% return of its benchmark, the MSCI World Equity (Free) Index. Since performance inception on January 31, 1994 through June 30, 2002, the fund's Class Y annualized return was 6.36%, and the annualized return for the MSCI World Equity (Free) Index was 6.02%. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment environment was challenging during the 12-month period, as a worldwide economic downturn, the terrorist attacks of September 11, 2001, geopolitical issues and corporate governance concerns took their toll on investor confidence. From October 2001 through March 2002, it appeared that developed economies were headed for an economic rebound and equity markets rose, as investors expected economic and corporate earnings growth rates to be in line with past recoveries. As the period progressed, however, economic data was mixed, indicating that the recovery is likely to be relatively weak over the medium term. The uncertainty about the strength of economic growth led to steep declines in world equity markets. Early in the period, it appeared that the deterioration of the Japanese financial system had reached a bottom that might lead to a complete restructuring of the banking sector. As in the past, however, reform of the banking system was postponed. Japan's stock market rose, even though the fundamentals of the Japanese economy did not appear to justify the rebound. We underweighted the fund in Japan and have no assets committed to the banking industry. While the broad major markets showed some recent strength and earnings for the second quarter of 2002 improved over the previous year, some economic sectors continued to struggle. Volatility continued in the broad technology sector. Early in the period, we underweighted the portfolio's INFORMATION TECHNOLOGY position because we believed valuations were based on the prospects of a strong economic recovery. We maintained that underweighting for the remainder of the fiscal period. We also reduced the fund's commitment to TECHNOLOGY HARDWARE, especially semiconductor companies, which had performed better than we expected in the latter part of 2001 and had reached valuations which we believed were unsustainable. While the fund was underweighted in technology hardware for the entire fiscal year, we selectively added back some of these stocks as their valuations became more attractive. The fund was also underweighted in SOFTWARE COMPANIES but maintained investments in BEA Systems, Rational Software and Peregrine Systems. While we maintained an underweighting in TELECOMMUNICATION SERVICES, we believe this area has become more attractive as companies have reduced capital expenditures and have focused on improving profitability. Sentiment in the telecommunication services area was negative throughout the fiscal year; however, we believed certain companies, such as BT, BCE and KON are well-positioned for the future. Over the fiscal year, we reduced some of the fund's defensive positions as some global economies began to show improvement. As a result, we lowered exposure to consumer staples stocks, which tend to perform well in any economic environment. Financial stocks accounted for the fund's largest overweighted position. We added companies in the consumer discretionary sector, which usually do well when economies recover. In the consumer discretionary area, we favored Compass Group, a food service company based in the United Kingdom. We also invested in Safeway, Toyota and Sanyo. While we maintained a slight overweighting to the utilities sector, we reduced exposure to this defensive area of the market, as valuations became less attractive. The fund was overweighted in the materials sector, where we favored paper and forest products companies and chemical companies. The paper cycle appears to be bottoming as pulp prices are nearing cash production costs. The portfolio holds Stora Enso, UPM Kymmene and Svenska Cellulosa. As we look ahead, we believe our focus on identifying the intrinsic value of companies, which we define as the present value of the cash flow generated by an investment, is ideal in today's market environment. This approach screens out companies that lack real cash flow and identifies those that have attractive economic characteristics. 15 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS A -5.16% -8.05% -3.44% 1.43% 1.43% - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS B -5.56 N/A N/A N/A -4.38 - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS C -5.57 N/A N/A N/A -4.57 - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS Y -5.11 -7.71 -3.12 1.77 6.36 - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS A+ -10.42 -13.12 -5.24 0.29 0.29 - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS B+ -10.28 N/A N/A N/A -8.97 - ----------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS C+ -7.46 N/A N/A N/A -6.41 - ----------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index -8.68 -15.00 -8.64 0.70 6.02 - -----------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL EQUITY FUND CLASS A (FORMERLY CLASS N) IS 6/30/97. INCEPTION DATES OF CLASS B AND CLASS C ARE 12/11/01 AND 11/27/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) IS 1/28/94. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEAREST MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 1/31/94. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS Global Equity Fund Class Y and the MSCI World Equity (Free) Index if you had invested $1,000,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS GLOBAL EQUITY FUND CLASS Y VS. MSCI WORLD EQUITY FREE INDEX Wealth Value with Dividends Reinvested
UBS GLOBAL EQUITY FUND CLASS Y MSCI WORLD EQUITY (FREE) INDEX ----------------- ------------------------------ 1/31/94 $1,000,000 $1,000,000 2/28/94 $ 978,000 $ 986,865 3/31/94 $ 935,000 $ 944,349 4/30/94 $ 957,000 $ 974,078 5/31/94 $ 964,000 $ 976,963 6/30/94 $ 953,025 $ 974,101 7/31/94 $ 967,085 $ 992,749 8/31/94 $1,008,259 $1,022,751 9/30/94 $ 981,144 $ 995,748 10/31/94 $ 983,153 $1,024,396 11/30/94 $ 957,042 $ 980,244 12/31/94 $ 956,520 $ 989,551 1/31/95 $ 942,320 $ 975,024 2/28/95 $ 957,535 $ 989,498 3/31/95 $ 965,650 $1,037,236 4/30/95 $ 991,008 $1,073,520 5/31/95 $1,004,194 $1,083,208 6/30/95 $1,010,802 $1,082,850 7/31/95 $1,057,638 $1,137,065 8/31/95 $1,075,010 $1,111,687 9/30/95 $1,094,426 $1,144,524 10/31/95 $1,092,382 $1,126,744 11/30/95 $1,131,213 $1,166,016 12/31/95 $1,166,324 $1,200,233 1/31/96 $1,201,270 $1,222,674 2/29/96 $1,206,730 $1,230,110 3/31/96 $1,227,479 $1,250,533 4/30/96 $1,261,333 $1,279,913 5/31/96 $1,264,610 $1,280,937 6/30/96 $1,270,202 $1,287,763 7/31/96 $1,229,582 $1,242,252 8/31/96 $1,251,539 $1,256,943 9/30/96 $1,293,257 $1,306,229 10/31/96 $1,297,648 $1,315,221 11/30/96 $1,363,519 $1,389,365 12/31/96 $1,367,688 $1,367,284 1/31/97 $1,379,696 $1,384,044 2/28/97 $1,398,908 $1,399,820 3/31/97 $1,392,904 $1,371,804 4/30/97 $1,401,310 $1,416,804 5/31/97 $1,484,164 $1,504,475 6/30/97 $1,540,253 $1,579,318 7/31/97 $1,590,951 $1,652,211 8/31/97 $1,517,318 $1,540,391 9/30/97 $1,582,501 $1,624,139 10/31/97 $1,496,797 $1,538,885 11/30/97 $1,495,590 $1,565,798 12/31/97 $1,514,304 $1,584,932 1/31/98 $1,539,631 $1,629,398 2/28/98 $1,634,275 $1,739,607 3/31/98 $1,700,926 $1,812,823 4/30/98 $1,698,260 $1,830,549 5/31/98 $1,692,928 $1,808,337 6/30/98 $1,678,772 $1,850,633 7/31/98 $1,670,739 $1,847,840 8/31/98 $1,487,333 $1,601,536 9/30/98 $1,511,430 $1,630,037 10/31/98 $1,611,835 $1,777,632 11/30/98 $1,673,417 $1,883,504 12/31/98 $1,726,828 $1,975,067 1/31/99 $1,726,828 $2,018,465 2/28/99 $1,676,039 $1,964,828 3/31/99 $1,728,200 $2,046,333 4/30/99 $1,847,623 $2,127,343 5/31/99 $1,780,362 $2,048,974 6/30/99 $1,849,022 $2,144,286 7/31/99 $1,842,133 $2,137,916 8/31/99 $1,813,199 $2,133,952 9/30/99 $1,762,220 $2,113,891 10/31/99 $1,787,020 $2,223,680 11/30/99 $1,831,110 $2,286,141 12/31/99 $1,949,056 $2,471,302 1/31/00 $1,816,581 $2,329,904 2/29/00 $1,780,037 $2,335,980 3/31/00 $1,842,467 $2,497,654 4/30/00 $1,822,672 $2,391,938 5/31/00 $1,837,899 $2,331,384 6/30/00 $1,898,807 $2,409,872 7/31/00 $1,856,172 $2,341,928 8/31/00 $1,889,671 $2,418,209 9/30/00 $1,833,331 $2,289,744 10/31/00 $1,854,649 $2,251,432 11/30/00 $1,839,422 $2,114,581 12/31/00 $1,947,478 $2,148,049 1/31/01 $1,990,037 $2,189,738 2/28/01 $1,874,277 $2,004,918 3/31/01 $1,765,328 $1,873,114 4/30/01 $1,870,873 $2,011,742 5/31/01 $1,855,552 $1,986,297 6/30/01 $1,821,530 $1,923,953 7/31/01 $1,799,358 $1,898,603 8/31/01 $1,755,014 $1,807,618 9/30/01 $1,618,570 $1,648,291 10/31/01 $1,645,859 $1,680,006 11/30/01 $1,748,192 $1,779,570 12/31/01 $1,771,643 $1,790,890 1/31/02 $1,732,589 $1,736,755 2/28/02 $1,730,814 $1,721,833 3/31/02 $1,800,046 $1,797,962 4/30/02 $1,768,093 $1,737,282 5/31/02 $1,782,294 $1,740,858 6/30/02 $1,681,108 $1,635,377
1/31/94 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 16 GEOGRAPHIC ALLOCATION AS OF JUNE 30, 2002 - --------------------------------------------------- United States 53.3% United Kingdom 11.0 Japan 7.1 France 5.7 Netherlands 3.8 Switzerland 3.3 Australia 2.8 Italy 2.3 Finland 2.3 Sweden 1.9 Spain 1.5 Germany 1.3 Hong Kong 0.8 Portugal 0.6 Singapore 0.5 Ireland 0.5 Norway 0.4 Belgium 0.4 Canada 0.3 Denmark 0.2 - --------------------------------------------------- Total 100.0%
TOP TEN U.S. EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ----------------------------------------------------- Citigroup, Inc. 2.3% Johnson & Johnson 2.1 Wyeth, Inc. 1.9 Wells Fargo & Co. 1.8 American International Group, Inc. 1.7 Microsoft Corp. 1.7 Philip Morris Companies, Inc. 1.5 Abbott Laboratories, Inc. 1.4 JP Morgan Chase & Co. 1.3 SBC Communications, Inc. 1.3 - ----------------------------------------------------- Total 17.0%
TOP TEN INTERNATIONAL EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ----------------------------------------------------- Total Fina S.A., Class B 2.2% Shell Transport & Trading PLC 1.7 ENI Spa 1.3 Gallaher Group PLC 1.3 UPM-Kymmene Oyj 1.2 Elsevier NV 1.2 BNP Paribas 1.2 Westpac Banking Corp., Ltd. 1.1 Nestle S.A. 1.1 Nokia Oyj 1.0 Toyota Motor Corp. 1.0 - ----------------------------------------------------- Total 14.3%
17 INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2002 U.S. EQUITIES Energy 2.11% Capital Investment Electronic Components 0.71 Technology 0.96 ------ 1.67 Basic Industries Chemicals 1.20 Industrial Components 2.27 Metals 1.69 ------ 5.16 Computers Software 3.01 Systems 1.37 ------ 4.38 Consumer Food & House Products 1.48 Health: Drugs 6.52 Health: Non-Drugs 3.89 Recreation 0.01 Retail/Apparel 2.02 ------ 13.92 Financial Banks 6.08 Non-Banks 7.06 ------ 13.14 Telecommunications 2.94 Transportation 1.26 Services/Miscellaneous 3.77 Utilities 2.03 ------ Total U.S. Equities 50.38 INTERNATIONAL EQUITIES Appliances & Household Durables 0.32% Banking 6.57 Beverages and Tobacco 2.42 Broadcasting & Publishing 1.81 Business & Public Service 0.22 Chemicals 1.46 Computer Software 0.38 Construction 0.70 Data Processing 0.04 Electric Components 1.95 Electronics 0.31 Energy 3.55 Financial Services 3.54 Food & House Products 2.96 Forest Products 1.24 Health: Drugs 3.40 Health: Non-Drugs 0.36 Housing/Paper 0.68 Industrial Components 0.73 Insurance 1.06 Machinery & Engineering 0.22 Multi-Industry 0.91 Real Estate 0.57 Recreation 0.68 Retail/Apparel 0.98 Services/Miscellaneous 1.27 Telecommunications 3.15 Transportation 3.62 Utilities 1.48 ------ Total International Equities 46.58 SHORT-TERM INVESTMENTS 1.62 ------ TOTAL INVESTMENTS 98.58 CASH AND OTHER ASSETS, LESS LIABILITIES 1.42 ------ NET ASSETS 100.00% ======
18 UBS GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE ------- ----------- EQUITIES -- 96.96% U.S. EQUITIES -- 50.38% Abbott Laboratories, Inc. 21,300 $ 801,945 Allergan, Inc. 5,300 353,775 American International Group, Inc. 14,147 965,250 Anthem, Inc. (b) 3,700 249,676 AOL Time Warner, Inc. (b) 41,400 608,994 Ascential Software Corp. (b) 759 2,118 Bank of New York Co., Inc. 9,800 330,750 Baxter International, Inc. 10,300 457,835 BEA Systems, Inc. (b) 37,800 359,478 Beckman Coulter, Inc. 6,500 324,350 Bristol-Myers Squibb Co. 7,800 200,460 Burlington Northern Santa Fe Corp. 23,800 714,000 Cephalon, Inc. (b) 6,800 307,360 Cisco Systems, Inc. (b) 12,300 171,585 Citigroup, Inc. 33,400 1,294,250 CMS Energy Corp. 12,000 131,760 Computer Sciences Corp. (b) 3,200 152,960 Conoco, Inc. 11,500 319,700 Consolidated Edison, Inc. 9,100 379,925 Constellation Energy Group 5,000 146,700 Costco Wholesale Corp. (b) 11,400 440,268 E.I. du Pont de Nemours and Co. 10,400 461,760 Electronic Data Systems Corp. 11,500 427,225 Eli Lilly & Co. 2,800 157,920 Exxon Mobil Corp. 12,800 523,776 FirstEnergy Corp. 9,407 314,006 FleetBoston Financial Corp. 11,600 375,260 FPL Group, Inc. 5,200 311,948 Freddie Mac 7,000 428,400 General Electric Co. 21,600 627,480 GreenPoint Financial Corp. 6,000 294,600 Hartford Financial Services Group, Inc. (The) 2,600 154,622 Hewlett-Packard Co. 8,791 134,326 Household International, Inc. 11,200 556,640 Illinois Tool Works, Inc. 8,100 553,230 Ingersoll-Rand Co., Class A 9,100 415,506 Intel Corp. 10,200 186,354 International Business Machines Corp. 6,500 468,000 Johnson & Johnson 23,002 1,202,085 JP Morgan Chase & Co. 22,100 749,632 Masco Corp. 11,800 319,898 McGraw-Hill Cos., Inc. 8,300 495,510 MeadWestvaco Corp. 5,500 184,580 Merck & Co., Inc. 4,300 217,752 Microsoft Corp. (b) 17,200 940,840 Morgan Stanley 5,300 228,324 Motorola, Inc. 19,800 285,516 Nextel Communications, Inc., Class A (b) 71,800 230,478 Omnicom Group 4,100 187,780 Oracle Corp. (b) 26,700 252,849 Pfizer, Inc. 4,801 168,035 Philip Morris Companies, Inc. 19,200 838,656 Praxair, Inc. 3,800 216,486 Principal Financial Group, Inc. (b) 12,100 375,100 RadioShack Corp. 12,800 384,768 Rational Software Corp. (b) 12,000 98,520 Royal Caribbean Cruises Ltd. 400 7,800 Sapient Corp. (b) 110,200 $ 116,812 Sara Lee Corp. 1 21 SBC Communications, Inc. 24,200 738,100 Schlumberger Ltd. 4,700 218,550 SICOR, Inc. (b) 23,300 431,982 Sun Microsystems, Inc. (b) 10,800 54,108 Texas Instruments, Inc. 9,100 215,670 TJX Companies, Inc. 16,200 317,682 U.S. Bancorp 18,300 427,305 United Health Group, Inc. 2,400 219,720 United Technologies Corp. 4,900 332,710 Verizon Communications, Inc. 10,200 409,530 Viacom, Inc., Class A (b) 4,960 220,521 Viacom, Inc., Class B (b) 6,400 283,968 Wells Fargo & Co. 20,300 1,016,218 Wyeth, Inc. 20,600 1,054,720 ----------- Total U.S. Equities 28,546,418 ----------- INTERNATIONAL EQUITIES -- 46.58% AUSTRALIA -- 2.80% Mayne Nickless Ltd. 87,980 204,483 National Australia Bank Ltd., Preferred 13,000 454,350 News Corp., Ltd., Preferred 35,960 165,138 QBE Insurance Group Ltd. 36,500 136,061 Westpac Banking Corp., Ltd. 68,593 625,372 ----------- 1,585,404 ----------- BELGIUM -- 0.36% Fortis 9,575 205,011 ----------- CANADA -- 0.31% Nortel Networks Corp. 15,500 22,421 NOVA Chemicals Corp. 6,900 152,935 ----------- 175,356 ----------- DENMARK -- 0.23% Novo-Nordisk A/S 3,937 130,328 ----------- FINLAND -- 2.27% Nokia Oyj 39,900 583,983 UPM-Kymmene Oyj 17,900 704,644 ----------- 1,288,627 ----------- FRANCE -- 5.69% Aventis S.A., Class A 7,633 540,874 BNP Paribas 11,800 652,603 Cap Gemini S.A. 4,200 166,953 Cie De Saint Gobain 6,552 294,095 Gemplus International S.A. (b) 33,937 48,598 Suez S.A. 3,387 90,315 Total Fina S.A., Class B 7,706 1,251,152 Union du Credit-Bail Immobilier 2,874 177,397 ----------- 3,221,987 ----------- GERMANY -- 1.32% Altana AG 2,700 146,498 Bayer AG 6,090 195,169 Muenchener Rueckver AG 1,702 403,413 ----------- 745,080 ----------- 19 SHARES VALUE ------- ----------- HONG KONG -- 0.76% Hong Kong Electric Holdings Ltd. 76,443 $ 285,681 Sun Hung Kai Properties Ltd. 19,000 144,327 ----------- 430,008 ----------- IRELAND -- 0.50% CRH PLC 17,470 284,679 ----------- ITALY -- 2.28% Assicurazioni Generali Spa 8,004 189,713 ENI Spa 47,631 757,347 San Paolo-imi Spa 34,296 344,125 ----------- 1,291,185 ----------- JAPAN -- 7.12% AIFUL Corp. 3,950 259,027 Bank of Yokohama 24,000 102,119 Benesse Corp. 12,900 235,700 Fuji Photo Film Co., Ltd. 12,000 387,452 Kao Corp. 6,000 138,161 KDDI Corp. 31 95,695 Minebea Co., Ltd. 13,000 76,356 Mitsui Mining & Smelting Co., Ltd. 32,000 95,311 Murata Manufacturing Co., Inc. 2,900 186,301 Orix Corp. 3,100 250,100 Rohm Co. 1,700 253,738 Sanyo Electric 40,000 174,537 Sekisui House Ltd. 15,000 110,254 Sony Corp. 3,400 179,559 Takeda Chemical Industries Ltd. 6,000 263,307 Takefuji Corp. 3,850 267,566 Toyota Motor Corp. 20,500 543,885 West Japan Railway Co. 62 250,359 Yasuda Fire & Marine Insurance Co., Ltd. 27,000 165,343 ----------- 4,034,770 ----------- NETHERLANDS -- 3.80% Elsevier NV 48,057 654,960 Koninklijke Ahold NV 20,883 439,291 Philips Electronics NV 14,957 417,590 Royal KPN NV (b) 53,591 250,870 Vedior NV 13,163 181,996 VNU NV 7,457 207,237 ----------- 2,151,944 ----------- NORWAY -- 0.37% Telenor ASA 59,200 209,842 ----------- PORTUGAL -- 0.55% Electricidade de Portugal S.A. 160,255 310,204 ----------- SINGAPORE -- 0.46% DBS Group Holdings Ltd. 16,000 112,293 Singapore Technologies Engineering Ltd. 137,000 149,655 ----------- 261,948 ----------- SPAIN -- 1.50% Banco Bilbao Vizcaya 35,643 403,050 Banco Santander Central Hispano S.A. 56,432 448,085 ----------- 851,135 ----------- SWEDEN -- 1.94% Sandvik AB 12,600 $ 314,640 Svenska Cellulosa AB 10,850 386,045 Swedish Match AB 48,200 398,586 ----------- 1,099,271 ----------- SWITZERLAND -- 3.29% Compagnie Financiere 7,537 171,422 Givaudan S.A. 575 231,808 Nestle S.A. 2,644 616,454 Novartis AG 7,705 338,838 Roche Holding AG 3,109 235,008 Swiss Re 2,786 272,366 ----------- 1,865,896 ----------- UNITED KINGDOM -- 11.03% Abbey National PLC 23,992 282,328 Allied Domecq PLC 34,867 228,668 Barclays Bank PLC 54,790 461,010 BP PLC 29,434 247,213 Brambles Industries, Ltd. 24,860 124,387 BT Group PLC (b) 62,489 240,035 Compass Group PLC 35,362 214,531 Dimension Data Holdings PLC (b) 88,188 55,114 Electrocomponents PLC 30,940 173,319 Exel PLC 3,534 45,007 Gallaher Group PLC 79,583 746,045 GlaxoSmithKline PLC 12,506 270,311 Invensys PLC 90,814 123,201 Kingfisher PLC 61,517 296,548 Matalan PLC 18,532 88,135 Rentokil Initial PLC 60,492 246,195 Rolls-Royce PLC 173,022 427,254 Safeway PLC 62,704 269,295 Scottish & Southern Energy PLC 21,291 210,625 Scottish Power PLC 5,415 29,116 Shell Transport & Trading PLC 127,682 963,395 Stagecoach Holdings PLC 103,471 98,970 Vodafone Group PLC 295,455 405,325 ----------- 6,246,027 ----------- Total International Equities 26,388,702 ----------- Total Equities (Cost $54,425,065) 54,935,120 ----------- SHORT-TERM INVESTMENTS -- 1.62% OTHER -- 1.62% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $915,301) 915,301 915,301 ----------- Total Investments (Cost $55,340,366)-- 98.58% (a) 55,850,421 Cash and other assets, less liabilities -- 1.42% 805,804 ----------- Net Assets -- 100% $56,656,225 ===========
20 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $57,877,774; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 4,772,856 Gross unrealized depreciation (6,800,209) ----------- Net unrealized depreciation $(2,027,353) ===========
(b) Non-income producing security. % Represents a percentage of net assets FORWARD FOREIGN CURRENCY CONTRACTS UBS Global Equity Fund had the following open forward foreign currency contracts as of June 30, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 07/18/02 5,350,000 $ 2,999,124 $ 281,699 British Pound (GBP) 07/18/02 950,000 1,446,696 60,128 Canadian Dollar (CAD) 07/18/02 5,550,000 3,647,761 199,886 Euro (EUR) 07/18/02 11,390,647 11,241,308 1,299,746 Hong Kong Dollar (HKD) 07/18/02 200,000 25,641 (4) Japanese Yen (JPY) 07/18/02 194,100,000 1,620,744 125,530 Swedish Krona (SEK) 07/18/02 8,000,000 869,446 109,607 FORWARD FOREIGN CURRENCY SALE CONTRACTS British Pound (GBP) 07/18/02 3,350,000 5,101,506 (342,385) Canadian Dollar (CAD) 07/18/02 400,000 262,902 1,567 Euro (EUR) 07/18/02 6,220,000 6,138,451 (431,874) Hong Kong Dollar (HKD) 07/18/02 3,500,000 448,716 (147) Japanese Yen (JPY) 07/18/02 340,000,000 2,839,016 (241,693) Swedish Krona (SEK) 07/18/02 14,100,000 1,532,398 (161,467) ---------- Total net unrealized gain on Forward Foreign Currency Contracts $ 900,593 ==========
See accompanying notes to financial statements. 21 UBS GLOBAL TECHNOLOGY FUND For the fiscal year ended June 30, 2002, Class Y shares of UBS Global Technology Fund declined 42.24%. In comparison, the fund's benchmark, the Morgan Stanley High Tech Index, declined 42.66% for the same period. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. For the second year in a row, volatility in the technology sector was a major factor in the performance of world stock markets. Returns in the sector were affected by a continued slowdown in economic growth and diminished capital spending from corporations. Geopolitical concerns and issues involving corporate governance and accounting also weighed heavily on the technology sector. Early in the period, data indicated that the economic recovery was on a upward course, and individual areas of the broad technology sector produced short-term rallies. In the second quarter of 2002, however, economic data was weak, and many investors became concerned that the hoped for recovery in the technology sector would be put off until the end of 2002 and into 2003. Against this backdrop, technology shares declined significantly. At the end of the fiscal year, many technology stocks had dropped well below the low price levels of September 2001. In the last few weeks of the fiscal period, investor interest in the technology sector focused on fundamental values rather than sector momentum. Investors remained risk-averse because of global political tensions. In the consumer electronics and wireless area, companies reported strong end-market demand. However, there was little recovery in the corporate information technology and wireline telecommunications equipment markets. Despite good fundamentals and order growth in the semiconductor business, investors avoided that industry, because they were concerned that valuations were excessive. As we entered the second half of 2002, economic data was mixed and many market participants became concerned that economic growth could revert to recession levels. As a result, equity markets declined significantly. While business prospects in many technology industries had stabilized, market sentiment regarding technology stocks became extremely negative. We believe that the deep pessimism about technology stocks could indicate that the technology sector may have reached its low. 22 TOTAL RETURN
6 MONTHS 1 YEAR INCEPTION* ENDED ENDED TO 6/30/02 6/30/02 6/30/02 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND CLASS A -31.91% -42.14% -40.60% - ------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND CLASS C N/A N/A -36.55 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND CLASS Y -31.35 -42.24 40.56 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND CLASS A+ -35.70 -45.35 -42.18 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND CLASS C+ N/A N/A -37.78 - ------------------------------------------------------------------------------------------------------- Morgan Stanley High Tech Index -34.48 -42.66 -38.26 - -------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL TECHNOLOGY FUND CLASS A (FORMERLY CLASS N) AND CLASS Y (FORMERLY CLASS I) IS 5/26/00. INCEPTION DATE OF CLASS C IS 1/09/02. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEAREST MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 5/31/00. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS Global Technology Fund Class Y and the Morgan Stanley High Tech Index if you had invested $1,000,000 on May 31, 2000, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS GLOBAL TECHNOLOGY FUND CLASS Y VS. MORGAN STANLEY HIGH TECH INDEX Wealth Value with Dividends Reinvested
UBS GLOBAL TECHNOLOGY MORGAN STANLEY FUND CLASS Y HIGH TECH INDEX --------------------- --------------- 5/01/00 $1,000,000 $1,000,000 6/30/00 $1,130,000 $1,119,878 7/31/00 $1,076,000 $1,085,761 8/31/00 $1,210,000 $1,231,069 9/30/00 $1,011,000 $1,048,546 10/31/00 $ 951,000 $1,023,082 11/30/00 $ 707,000 $ 781,364 12/31/00 $ 669,226 $ 736,598 1/31/01 $ 791,450 $ 867,830 2/28/01 $ 581,064 $ 654,551 3/31/01 $ 516,947 $ 577,928 4/30/01 $ 600,099 $ 669,697 5/31/01 $ 568,040 $ 627,632 6/30/01 $ 581,064 $ 638,699 7/31/01 $ 531,974 $ 600,867 8/31/01 $ 458,840 $ 528,213 9/30/01 $ 350,642 $ 412,017 10/31/01 $ 423,776 $ 486,766 11/30/01 $ 501,919 $ 566,166 12/31/01 $ 488,895 $ 558,913 1/31/02 $ 490,899 $ 554,746 2/28/02 $ 417,765 $ 466,527 3/31/02 $ 451,828 $ 501,350 4/30/02 $ 400,734 $ 440,049 5/31/02 $ 379,695 $ 425,653 6/30/02 $ 335,615 $ 366,216
5/31/00 = 1,000,000 23 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ---------------------------------------------------- Nasdaq 100-Exchange Traded Fund 8.7% Technology Select Sector SPDR 8.5 Intuit, Inc. 4.7 eBay, Inc. 4.4 Motorola, Inc. 4.2 Cisco Systems, Inc. 3.9 Yahoo!, Inc. 3.9 Hewlett-Packard Co. 3.7 Dell Computer Corp. 3.7 First Data Corp. 3.5 - ---------------------------------------------------- Total 49.2%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2002 U.S. EQUITIES Computers Software 19.51% Systems 12.29 ------ 31.80 Electronic Components 23.03 Internet Services 5.01 Services/Miscellaneous 8.89 Telecommunications 13.41 ------ Total U.S. Equities 82.14 INTERNATIONAL EQUITIES Computer Systems 0.39% Electronic Components 7.01 Telecommunications 0.84 ------ Total International Equities 8.24 INVESTMENT COMPANIES 17.20 TOTAL INVESTMENTS 107.58 LIABILITIES, LESS CASH AND OTHER ASSETS (7.58) ------ NET ASSETS 100.00% ======
24 UBS GLOBAL TECHNOLOGY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE ------- ---------- EQUITIES -- 90.38% U.S. EQUITIES -- 82.14% Advanced Fibre Communications (b) 100 $ 1,654 Advanced Micro Devices, Inc. (b) 150 1,458 Advent Software, Inc. (b) 100 2,570 Agere Systems, Inc., Class A (b) 12 17 Agere Systems, Inc., Class B (b) 784 1,176 Agilent Technologies, Inc. (b) 219 5,179 Amazon.com, Inc. (b) 200 3,250 Amkor Technologies, Inc. (b) 350 2,177 AOL Time Warner, Inc. (b) 750 11,032 Apple Computer, Inc. (b) 50 886 Applied Materials, Inc. (b) 1,050 19,971 Atmel Corp. (b) 450 2,817 Automatic Data Processing, Inc. 50 2,178 Borland Software Corp. (b) 1,150 11,845 Broadcom Corp., Class A (b) 750 13,155 Cisco Systems, Inc. (b) 1,750 24,412 Dell Computer Corp. (b) 900 23,526 eBay, Inc. (b) 450 27,729 Echostar Communications Corp., Class A (b) 300 5,568 Electronic Arts, Inc. (b) 150 9,907 Electronic Data Systems Corp. 150 5,573 EMC Corp. (b) 2,000 15,100 Emcore Corp. (b) 700 4,200 First Data Corp. 600 22,320 Hewlett-Packard Co. 1,545 23,608 Intel Corp. 900 16,443 International Business Machines Corp. 200 14,400 Intuit, Inc. (b) 600 29,832 Jabil Circuit, Inc. (b) 250 5,278 Juniper Networks, Inc. (b) 300 1,695 KLA-Tencor Corp. (b) 200 8,798 Lucent Technologies, Inc. (b) 2,950 4,897 Micron Technology, Inc. (b) 950 19,209 Microsoft Corp. (b) 400 21,880 Motorola, Inc. 1,850 26,677 Oracle Corp. (b) 1,250 11,837 PeopleSoft, Inc. (b) 400 5,952 Photronics, Inc. (b) 100 1,894 QUALCOMM, Inc. (b) 700 19,243 Solectron Corp. (b) 1,050 6,458 Tellabs, Inc. (b) 350 2,170 Texas Instruments, Inc. 900 21,330 Titan Corp. (b) 650 11,888 Veritas Software Corp. (b) 350 6,927 Xilinx, Inc. (b) 700 $ 15,701 Yahoo!, Inc. (b) 1,650 24,354 ---------- Total U.S. Equities 518,171 ---------- INTERNATIONAL EQUITIES -- 8.24% BERMUDA -- 0.32% Marvell Technology Group Ltd. (b) 100 1,989 ---------- CANADA -- 1.59% Celestica, Inc. (b) 400 9,084 Nortel Networks Corp. (b) 650 942 ---------- 10,026 ---------- FINLAND -- 0.69% Nokia OYJ 300 4,344 ---------- FRANCE -- 1.16% STMicroelectronics N.V. 300 7,299 ---------- GERMANY -- 0.38% SAP AG 100 2,429 ---------- JAPAN -- 1.18% Rohm Co. 50 7,463 ---------- NETHERLANDS -- 0.24% A.S.M. Lithography Holding (b) 100 1,512 ---------- SINGAPORE -- 0.34% Flextronics International Ltd. (b) 300 2,139 ---------- SWITZERLAND -- 1.49% Logitech International S.A. (b) 200 9,410 ---------- TAIWAN -- 0.85% AU Optronics Corp. ADR (b) 300 2,493 Taiwan Semiconductor Manufacturing Co. (b) 220 2,860 ---------- 5,353 ---------- Total International Equities 51,964 ---------- Total Equities (Cost $719,498) 570,135 ---------- INVESTMENT COMPANIES -- 17.20% Nasdaq 100-Exchange Traded Fund (b) 2,100 54,747 Technology Select Sector SPDR Fund (b) 3,400 53,788 ---------- 108,535 ---------- Total Investments (Cost $719,498) -- 107.58% (a) 678,670 Liabilities, less cash and other assets -- (7.58)% (47,826) ---------- Net Assets -- 100% $ 630,844 ==========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $843,797; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 3,164 Gross unrealized depreciation (168,291) ---------- Net unrealized depreciation $ (165,127) ==========
(b) Non-income producing security. % Represents a percentage of net assets. See accompanying notes to financial statements. 25 UBS GLOBAL BIOTECH FUND For the fiscal year ended June 30, 2002, Class Y shares of UBS Global Biotech Fund declined 47.64%. In comparison, the Nasdaq Biotech Index benchmark declined 49.69%, and the Morgan Stanley High Tech Index was off 42.66% for the same period. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During the fiscal year, biotechnology stocks were affected by the general decline in global economic growth, a worldwide sell-off in equities, concerns about corporate governance and uncertainty about the pace of the economic recovery. About mid-way through the period, technology indicators suggested that a biotechnology rally might be possible during the first quarter of 2001. However, the positive prospect of a rally was overshadowed by investor overreaction to a negative decision by the Food and Drug Administration (FDA) on Imclone's Erbitux cancer drug and fallout from the Enron collapse. As a result, the biotechnology sector generated weak performance in the first quarter of 2001. Despite the FDA's decision in February that no new clinical trials were required for consideration of Erbitux, the biotechnology sector did not rebound to the levels achieved in the fourth quarter of 2001. Concerns about corporate accounting issues added to the weak performance of the biotechnology sector as companies, such as Elan, were required to restate their revenues in accordance with standard accounting practices. This higher level of scrutiny resulted in a significant decrease in reported revenues and in share prices across the sector. As we look ahead to the remainder of 2002, we believe the biotechnology industry will continue to mature as more companies generate sales, build sales and marketing infrastructures, and reach profitability. With more than 800 products in clinical trials, we expect many research breakthroughs in the next few years, particularly in the treatment of cancer, in pioneering research tools, and in diagnostics that help determine the safest and most effective treatments for individual patients. We believe there will be improvements in existing drugs using new delivery methods and devices. In the next five to 10 years, we believe refinements and implementation of knowledge derived from the human genome sequence map will be a strong growth driver--especially in developing safer and more effective treatments that can be customized to individual patients. In the interim, we expect continued consolidation in the industry, as pharmaceutical companies and large biotechnology companies acquire smaller companies. Momentum players will come and go and contribute to short-term volatility, but they will have little impact on the positive long-term prospects that we believe are developing for the sector. We remain focused on identifying promising new companies with strong product pipelines that we believe should produce relatively good long-term returns for patient investors. 26 TOTAL RETURN
6 MONTHS 1 YEAR INCEPTION* ENDED ENDED TO 6/30/02 6/30/02 6/30/02 - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS A -43.97% -47.80% -29.60% - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS B -44.21 N/A -42.65 - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS C -44.26 N/A -44.06 - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS Y -43.95 -47.64 -29.36 - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS A+ -47.04 -50.68 -31.49 - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS B+ -47.00 N/A -45.52 - --------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND CLASS C+ -45.41 N/A -45.21 - --------------------------------------------------------------------------------------------------------- Nasdaq Biotech Index -43.88 -49.69 -35.25 - ---------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL BIOTECH FUND CLASS A (FORMERLY CLASS N) IS 6/02/00. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/15/01 AND 12/10/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) IS 6/02/00. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEXT MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 6/30/00. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS Global Biotech Fund Class Y and the Nasdaq Biotech Index if you had invested $1,000,000 on June 30, 2000, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS GLOBAL BIOTECH FUND CLASS Y VS. NASDAQ BIOTECH INDEX Wealth Value with Dividends Reinvested
UBS GLOBAL BIOTECH FUND CLASS Y NASDAQ BIOTECH INDEX ------------------ -------------------- 6/30/00 $1,000,000 $1,000,000 7/31/00 $1,112,000 $ 923,369 8/31/00 $1,347,000 $1,120,182 9/30/00 $1,362,000 $1,080,904 10/31/00 $1,261,000 $ 992,963 11/30/00 $1,056,000 $ 862,021 12/31/00 $1,130,730 $ 891,337 1/31/01 $ 995,368 $ 856,917 2/28/01 $ 941,427 $ 790,919 3/31/01 $ 755,177 $ 630,031 4/30/01 $ 858,988 $ 749,516 5/31/01 $ 898,681 $ 811,757 6/30/01 $ 927,178 $ 833,184 7/31/01 $ 820,313 $ 714,288 8/31/01 $ 822,349 $ 721,644 9/30/01 $ 721,591 $ 610,410 10/31/01 $ 821,331 $ 709,866 11/30/01 $ 885,450 $ 777,679 12/31/01 $ 866,113 $ 746,917 1/31/02 $ 746,017 $ 641,093 2/28/02 $ 701,236 $ 612,418 3/31/02 $ 722,609 $ 635,193 4/30/02 $ 621,851 $ 535,340 5/31/02 $ 559,767 $ 476,635 6/30/02 $ 485,471 $ 419,196
6/30/00 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 27 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ----------------------------------------------------- Amgen, Inc. 7.4% Millenium Pharmaceuticals, Inc. 5.3 Idec Pharmaceuticals Corp. 4.9 Gilead Sciences, Inc. 4.9 Cephalon, Inc. 4.3 Abgenix, Inc. 3.8 Immunex Corp. 3.7 Vertex Pharmaceuticals, Inc. 3.5 Medimmune, Inc. 3.5 Protein Design Labs, Inc. 2.9 - ----------------------------------------------------- Total 44.2%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2002 U.S. EQUITIES Biomedical 11.91% Computer Software 0.32 Gene 13.61 Health: Drugs 17.87 Health: Non-Drugs 1.54 Medical Products 5.28 Research and Development 16.43 Therapeutics 24.16 ------ Total U.S. Equities 91.12 INTERNATIONAL EQUITIES Gene 2.20% Technology 1.15 Therapeutics 1.92 ------ Total International Equities 5.27 SHORT-TERM INVESTMENTS 8.73 ------ TOTAL INVESTMENTS 105.12 LIABILITIES, LESS CASH AND OTHER ASSETS (5.12) ------ NET ASSETS 100.00% ======
28 UBS GLOBAL BIOTECH FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE ----------- ----------- EQUITIES -- 96.39% U.S. EQUITIES -- 91.12% Abbott Laboratories, Inc. 950 $ 35,767 Abgenix, Inc. (b) 8,300 81,340 Affymetrix, Inc. (b) 1,000 23,990 Albany Molecular Research, Inc. (b) 1,150 24,311 Alkermes, Inc. (b) 2,200 35,222 Amgen, Inc. (b) 3,750 157,050 Amylin Pharmaceuticals, Inc. (b) 1,600 17,504 Applied Biosystems Group 100 1,949 Arqule, Inc. (b) 700 4,725 Atrix Labs, Inc. 350 7,788 Avigen, Inc. (b) 400 3,764 Baxter International, Inc. 850 37,782 Biogen, Inc. (b) 1,400 58,002 Caliper Technologies Corp. (b) 800 6,680 Celera Genomics Group (b) 4,550 54,600 Celgene Corp. (b) 2,150 32,895 Cell Genesys, Inc. (b) 900 12,140 Cell Therapeutics, Inc. (b) 3,300 18,015 Cephalon, Inc. (b) 2,000 90,400 Chiron Corp. (b) 500 17,675 Cubist Pharmaceuticals, Inc. (b) 1,450 13,645 Curagen Corp. (b) 1,200 6,612 CV Therapeutics, Inc. (b) 1,850 34,447 Emisphere Technologies, Inc. (b) 1,200 4,932 Enzon, Inc. (b) 1,400 35,168 Exelixis, Inc. (b) 1,800 13,554 GenVec, Inc. (b) 600 1,320 Genzyme Corp. (b) 1,450 27,898 Gilead Sciences, Inc. (b) 3,150 103,572 Guilford Pharmaceuticals, Inc. (b) 950 7,163 Human Genome Sciences, Inc. (b) 2,800 37,520 Icos Corp. (b) 800 13,568 Idec Pharmaceuticals Corp. (b) 2,950 104,577 ILEX Oncology, Inc. (b) 1,600 22,544 ImClone Systems, Inc. (b) 3,954 34,380 Immunex Corp. (b) 3,550 79,307 Immunogen, Inc. (b) 2,100 5,649 Immunomedics, Inc. (b) 2,150 11,202 Incyte Genomics, Inc. (b) 3,400 $ 24,718 Inhale Therapeutic Systems, Inc. (b) 1,050 9,965 InterMune, Inc. (b) 2,500 52,750 Invitrogen Corp. (b) 1,650 52,816 Isis Pharmaceuticals, Inc. 2,150 20,446 Lexicon Genetics, Inc. (b) 700 2,884 Medarex, Inc. (b) 5,050 37,471 Medimmune, Inc. (b) 2,800 73,920 Millennium Pharmaceuticals, Inc. (b) 9,150 111,172 Myriad Genetics, Inc. (b) 1,100 22,374 Neurocrine Biosciences Inc. (b) 1,050 30,082 NPS Pharmaceuticals, Inc. (b) 2,300 35,236 Pharmacopeia, Inc. (b) 500 4,260 Protein Design Labs, Inc. (b) 5,650 61,359 Regeneron Pharmaceuticals, Inc. (b) 850 12,334 Specialty Laboratories, Inc. (b) 1,450 12,180 Transkaryotic Therapies, Inc. (b) 300 10,815 Vertex Pharmaceuticals, Inc. (b) 4,600 74,888 ----------- Total U.S. Equities 1,928,327 ----------- INTERNATIONAL EQUITIES -- 5.27% CANADA -- 1.92% QLT, Inc. (b) 3,050 40,717 ----------- NETHERLANDS -- 2.20% Qiagen N.V. (b) 4,000 46,600 ----------- SPAIN -- 1.15% Zeltia S.A. 3,050 24,248 ----------- Total International Equities 111,565 ----------- Total Equities (Cost $2,794,461) 2,039,892 ----------- SHORT-TERM INVESTMENTS -- 8.73% INVESTMENT COMPANIES -- 8.73% JPMorgan U.S. Government Money Market Fund (Cost $184,763) 184,763 184,763 ----------- Total Investments (Cost $2,979,224) -- 105.12% (a) 2,224,655 Liabilities, less cash and other assets -- (5.12)% (108,260) ----------- Net Assets -- 100% $ 2,116,395 ===========
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $3,363,165; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 23,387 Gross unrealized depreciation (1,161,897) ----------- Net unrealized depreciation $(1,138,510) ===========
(b) Non-income producing security. % Represents a percentage of net assets. See accompanying notes to financial statements. 29 UBS GLOBAL BOND FUND For the fiscal year ended June 30, 2002, UBS Global Bond Fund Class Y shares gained 16.57%, outperforming the Fund's benchmark, the Salomon Smith Barney World Government Bond Index, which advanced 13.96% during the period. Very strong performance in the second half of the fiscal year pushed returns higher for both the Fund and the global bond market. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Interest rate deductions by Central Banks marked the first half of the fiscal year, when the U.S. economy struggled to overcome the impact of both a recession and the September 11 terrorists' attacks. A post-September 11 inflow of money into bonds lowered yields in the U.S., with bonds from other countries following suit. Going into 2002, bond yields began to rise again in the first quarter, only to see waning expectations about growth and inflation rally the markets in the second quarter. While Europe and other developed markets generally saw less volatility than the U.S. markets during most of the period, Japan continued to struggle along its own path. The Japanese government continued to buy its own bonds, reducing yields. A continuation of that country's economic sluggishness and a lack of resolve to take the strong steps necessary to pull the Japanese economy out of the doldrums contributed to low yields. A rally against the U.S. dollar, however, helped Japan's market toward the end of the fiscal year. The Fund retained its underweight in Japanese securities, generally helping performance during the period. Currency was a non-factor during the last half of 2001, but became an influence during the second quarter of 2002 when the dollar weakened. The euro and yen both rallied against the dollar, with the euro approaching par with the U.S. dollar. During the last two quarters of 2001, the Fund had an underweight to the yen, which helped, and an overweight in the euro, which hurt. As the euro and yen rallied in the second quarter of 2002, their effects on performance reversed from earlier. Internationally, the Fund's exposure to the euro and euro-related currencies was about 35% of net assets. An overweight to corporate bonds, particularly those issued by U.S. companies, also helped performance during the period. The fund mostly steered clear of credits from emerging countries, concentrating on investment-grade issues from Mexico, Malaysia and Russia. The economic problems in Brazil and Argentina had little affect on the Fund's performance. Brazil's problems, in particular, made a large negative impact on emerging market indexes. Going forward, we believe the investors' aversion to risk may last into the middle of the summer. American equities declined sharply during the second quarter of 2002, with developed countries' markets following suit. Questions about the strength of the U.S. economic recovery and ever-present geopolitical risk both in the U.S. and overseas continues to cast a large shadow over forecasts of economic recoveries. Low interest rates worldwide, which can be expected to remain stable into the fourth quarter, may be one catalyst to help an economic recovery. 30 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - --------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND CLASS A 11.25% N/A N/A N/A 7.18 - --------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND CLASS B 10.97 N/A N/A N/A 9.67 - --------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND CLASS Y 11.39 16.57% 3.70% 3.38% 5.16% - --------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND CLASS A+ 6.21 N/A N/A N/A 2.40 - --------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND CLASS B+ 5.97 N/A N/A N/A 4.67 - --------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index 9.85 13.96 4.45 4.36 5.47 - ---------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL BOND FUND CLASS A (FORMERLY CLASS N) IS 11/05/01. INCEPTION DATE OF CLASS B IS 11/26/01. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) AND THE SALOMON SMITH BARNEY WORLD GOV'T BOND INDEX IS 7/31/93. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS Global Bond Fund Class Y and the Salomon Smith Barney World Gov't Bond Index if you had invested $1,000,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS GLOBAL BOND FUND CLASS Y VS. SALOMON SMITH BARNEY WORLD GOV'T BOND INDEX Wealth Value with Dividends Reinvested
UBS GLOBAL BOND SALOMON SMITH BARNEY FUND CLASS Y WORLD GOV'T BOND INDEX --------------- ---------------------- 7/31/93 $ 1,000,000 $ 1,000,000 8/31/93 $ 1,019,000 $ 1,030,100 9/30/93 $ 1,022,010 $ 1,042,358 10/31/93 $ 1,032,059 $ 1,040,586 11/30/93 $ 1,023,015 $ 1,033,198 12/31/93 $ 1,038,591 $ 1,041,929 1/31/94 $ 1,045,818 $ 1,050,264 2/28/94 $ 1,021,040 $ 1,043,437 3/31/94 $ 1,007,619 $ 1,041,976 4/30/94 $ 1,002,457 $ 1,043,123 5/31/94 $ 994,198 $ 1,033,943 6/30/94 $ 992,146 $ 1,048,832 7/31/94 $ 999,419 $ 1,057,223 8/31/94 $ 1,000,457 $ 1,053,522 9/30/94 $ 1,001,496 $ 1,061,108 10/31/94 $ 1,005,652 $ 1,078,085 11/30/94 $ 1,003,574 $ 1,063,208 12/31/94 $ 1,002,396 $ 1,066,185 1/31/95 $ 1,012,827 $ 1,088,575 2/28/95 $ 1,030,559 $ 1,116,442 3/31/95 $ 1,044,119 $ 1,182,759 4/30/95 $ 1,069,153 $ 1,204,640 5/31/95 $ 1,106,704 $ 1,238,611 6/30/95 $ 1,104,638 $ 1,245,919 7/31/95 $ 1,122,712 $ 1,248,909 8/31/95 $ 1,134,406 $ 1,205,946 9/30/95 $ 1,148,228 $ 1,232,839 10/31/95 $ 1,167,365 $ 1,241,962 11/30/95 $ 1,190,755 $ 1,255,996 12/31/95 $ 1,206,119 $ 1,269,184 1/31/96 $ 1,212,149 $ 1,253,573 2/29/96 $ 1,200,088 $ 1,247,180 3/31/96 $ 1,204,913 $ 1,245,434 4/30/96 $ 1,216,974 $ 1,240,452 5/31/96 $ 1,220,592 $ 1,240,700 6/30/96 $ 1,231,653 $ 1,250,502 7/31/96 $ 1,243,921 $ 1,274,511 8/31/96 $ 1,253,735 $ 1,279,482 9/30/96 $ 1,274,590 $ 1,284,728 10/31/96 $ 1,301,578 $ 1,308,752 11/30/96 $ 1,326,113 $ 1,326,028 12/31/96 $ 1,318,299 $ 1,315,287 1/31/97 $ 1,297,658 $ 1,280,169 2/28/97 $ 1,299,034 $ 1,270,567 3/31/97 $ 1,279,768 $ 1,260,911 4/30/97 $ 1,272,888 $ 1,249,815 5/31/97 $ 1,310,043 $ 1,283,810 6/30/97 $ 1,326,556 $ 1,299,087 7/31/97 $ 1,321,051 $ 1,288,955 8/31/97 $ 1,316,923 $ 1,288,181 9/30/97 $ 1,343,069 $ 1,315,619 10/31/97 $ 1,360,958 $ 1,342,984 11/30/97 $ 1,343,069 $ 1,322,437 12/31/97 $ 1,339,835 $ 1,318,469 1/31/98 $ 1,351,311 $ 1,331,258 2/28/98 $ 1,359,918 $ 1,342,042 3/31/98 $ 1,345,573 $ 1,328,755 4/30/98 $ 1,362,787 $ 1,350,016 5/31/98 $ 1,362,787 $ 1,353,121 6/30/98 $ 1,362,306 $ 1,355,150 7/31/98 $ 1,362,306 $ 1,356,912 8/31/98 $ 1,378,231 $ 1,393,820 9/30/98 $ 1,444,826 $ 1,467,971 10/31/98 $ 1,476,676 $ 1,511,423 11/30/98 $ 1,466,542 $ 1,490,112 12/31/98 $ 1,500,412 $ 1,520,063 1/31/99 $ 1,500,412 $ 1,506,079 2/28/99 $ 1,451,914 $ 1,457,734 3/31/99 $ 1,450,398 $ 1,461,378 4/30/99 $ 1,453,429 $ 1,460,793 5/31/99 $ 1,427,665 $ 1,436,252 6/30/99 $ 1,404,902 $ 1,411,118 7/31/99 $ 1,430,918 $ 1,445,690 8/31/99 $ 1,424,797 $ 1,452,340 9/30/99 $ 1,438,570 $ 1,474,997 10/31/99 $ 1,430,918 $ 1,474,259 11/30/99 $ 1,409,493 $ 1,458,780 12/31/99 $ 1,406,271 $ 1,455,278 1/31/00 $ 1,370,532 $ 1,424,281 2/29/00 $ 1,362,762 $ 1,414,026 3/31/00 $ 1,392,286 $ 1,457,861 4/30/00 $ 1,342,562 $ 1,410,189 5/31/00 $ 1,350,331 $ 1,421,188 6/30/00 $ 1,400,056 $ 1,455,723 7/31/00 $ 1,370,532 $ 1,431,122 8/31/00 $ 1,354,993 $ 1,420,388 9/30/00 $ 1,347,224 $ 1,417,547 10/31/00 $ 1,317,700 $ 1,399,545 11/30/00 $ 1,353,439 $ 1,427,334 12/31/00 $ 1,425,362 $ 1,478,485 1/31/01 $ 1,425,362 $ 1,476,600 2/28/01 $ 1,419,089 $ 1,476,010 3/31/01 $ 1,372,048 $ 1,433,433 4/30/01 $ 1,370,480 $ 1,428,341 5/31/01 $ 1,353,231 $ 1,424,022 6/30/01 $ 1,343,823 $ 1,410,990 7/31/01 $ 1,384,592 $ 1,446,583 8/31/01 $ 1,441,042 $ 1,500,977 9/30/01 $ 1,441,042 $ 1,511,958 10/31/01 $ 1,456,723 $ 1,523,912 11/30/01 $ 1,445,150 $ 1,502,501 12/31/01 $ 1,406,353 $ 1,463,808 1/31/02 $ 1,383,305 $ 1,436,732 2/28/02 $ 1,392,570 $ 1,444,176 3/31/02 $ 1,389,939 $ 1,440,202 4/30/02 $ 1,444,602 $ 1,491,747 5/31/02 $ 1,494,414 $ 1,533,936 6/30/02 $ 1,566,491 $ 1,607,988
7/31/93 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 31 COUNTRY EXPOSURE, TOP FIVE AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ---------------------------------------------------- European Monetary Union 52.4% U.S. 29.5 United Kingdom 5.3 Japan 4.5 Canada 3.2 - ---------------------------------------------------- Total 94.9%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2002 - ---------------------------------------------------- U.S. BONDS Corporate Bonds Airlines 0.20% Autos/Durables 0.12 Banks 0.37 Chemicals 0.06 Construction 0.14 Consumer 0.23 Energy 0.29 Financial Services 1.08 Food & House Products 0.13 Forest Products 0.04 Leisure & Tourism 0.07 Metals 0.01 Retail/Apparel 0.06 Services/Miscellaneous 0.45 Telecommunications 0.14 Television Broadcasting 0.04 Transportation 0.04 Utilities 0.34 ------ Total U.S. Corporate Bonds 3.81 Asset-Backed 0.42 Commercial Mortgage-Backed Securities 4.57 International Dollar Bonds 4.77 U.S. Government Mortgage-Backed Securities 3.91 U.S. Government Obligations & Agencies 8.39 ------ Total U.S. Bonds 25.87 Foreign Government Bonds 65.53 SHORT-TERM INVESTMENTS 3.59 ------ TOTAL INVESTMENTS 94.99 CASH AND OTHER ASSETS, LESS LIABILITIES 5.01 ------ NET ASSETS 100.00% ======
TOP TEN FIXED INCOME HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ------------------------------------------------------- Buoni Poliennali Del Tes 3.250%, due 04/15/04 4.9% International Bank, 4.750%, due 12/20/04 4.6 Kingdom of Belgium 5.750%, due 03/28/08 4.4 European Investment Bank 2.125%, due 09/20/07 3.7 U.S. Treasury Note 4.375%, due 05/15/07 3.3 Kredit Fuer Wiederaufbau 5.000%, due 01/04/09 3.3 Depfa Pfandbriefbank 0.150%, due 06/20/03 3.1 Treuhandanstalt 6.750%, due 05/13/04 3.1 Government of France 5.125%, due 10/25/08 3.0 Buoni Poliennali Del Tes 8.750%, due 07/01/06 2.8 - ------------------------------------------------------- Total 36.2%
32 UBS GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
FACE AMOUNT VALUE --------------- --------------- BONDS -- 91.40% U.S BONDS -- 21.31% U.S. CORPORATE BONDS -- 3.81% Abbott Laboratories, Inc. 5.625%, due 07/01/06 $ 5,000 $ 5,181 Alcoa, Inc. 6.000%, due 01/15/12 5,000 5,131 Anadarko Finance Co. 7.500%, due 05/01/31 5,000 5,333 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 20,000 24,490 AOL Time Warner, Inc. 5.625%, due 05/01/05 20,000 19,624 7.625%, due 04/15/31 15,000 13,134 Apache Corp. 6.250%, due 04/15/12 5,000 5,162 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 10,000 8,077 Avalonbay Communities, Inc. 7.500%, due 08/01/09 5,000 5,384 Avon Products, Inc. 7.150%, due 11/15/09 20,000 21,971 Bank of America Corp. 7.400%, due 01/15/11 25,000 27,380 Bank One Corp. 7.875%, due 08/01/10 15,000 17,017 Bristol Myers Squibb Co. 5.750%, due 10/01/11 10,000 9,949 Burlington Northern Santa Fe Corp. 6.875%, due 12/01/27 5,000 5,015 7.082%, due 05/13/29 10,000 10,220 Capital One Bank 6.875%, due 02/01/06 10,000 9,884 Cendant Corp. 6.875%, due 08/15/06 40,000 40,230 Centex Corp. 9.750%, due 06/15/05 45,000 51,043 Citigroup, Inc. 7.250%, due 10/01/10 35,000 38,097 Citizens Communications Co. 9.250%, due 05/15/11 10,000 9,494 Comcast Cable Communications 6.750%, due 01/30/11 20,000 17,864 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 5,000 5,145 Consolidated Edison, Inc. 7.500%, due 09/01/10 30,000 33,214 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 10,000 10,100 Coors Brewing Co., 144A 6.375%, due 05/15/12 5,000 5,145 Countrywide Home Loan 5.500%, due 02/01/07 15,000 15,268 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 15,000 15,346 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 5,000 5,528 Delta Airlines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 $ 20,000 $ 21,457 Devon Financing Corp., ULC 6.875%, due 09/30/11 10,000 10,414 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 30,000 32,527 Duke Energy Field Services, LLC 6.875%, due 02/01/11 10,000 9,999 EOP Operating LP 7.000%, due 07/15/11 5,000 5,253 7.875%, due 07/15/31 5,000 5,136 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 25,000 27,133 First Data Corp. 5.625%, due 11/01/11 20,000 19,919 First Energy Corp. 6.450%, due 11/15/11 20,000 19,418 First Union National Bank 7.800%, due 08/18/10 25,000 27,983 FleetBoston Financial Corp. 7.375%, due 12/01/09 10,000 10,851 Ford Motor Co. 7.450%, due 07/16/31 5,000 4,654 Ford Motor Credit Co. 5.800%, due 01/12/09 15,000 14,103 6.875%, due 02/01/06 80,000 81,845 7.375%, due 02/01/11 15,000 15,193 General Electric Capital Corp. 6.750%, due 03/15/32 30,000 29,468 General Motors Acceptance Corp. 6.125%, due 02/01/07 15,000 15,164 6.875%, due 09/15/11 40,000 39,713 8.000%, due 11/01/31 10,000 10,228 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 10,000 10,367 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 20,000 21,030 Household Finance Corp. 6.750%, due 05/15/11 40,000 39,369 International Paper Co. 6.750%, due 09/01/11 10,000 10,414 John Deere Capital Corp. 7.000%, due 03/15/12 10,000 10,714 Kohls Corp. 7.250%, due 06/01/29 5,000 5,360 Kraft Foods, Inc. 4.625%, due 11/01/06 5,000 4,981 6.500%, due 11/01/31 10,000 9,895 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 10,000 10,140 Lincoln National Corp. 6.200%, due 12/15/11 10,000 10,078 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 15,000 12,150 9.125%, due 05/01/31 10,000 7,150 Morgan Stanley 6.750%, due 04/15/11 15,000 15,430 33 FACE AMOUNT VALUE --------------- --------------- News America Holdings, Inc. 7.125%, due 04/08/28 $ 15,000 $ 13,604 Occidental Petroleum Corp. 8.450%, due 02/15/29 10,000 11,711 Pepsi Bottling Holdings, 144A 5.625%, due 02/17/09 10,000 10,161 Phillips Petroleum Co. 8.750%, due 05/25/10 5,000 5,937 Praxair, Inc. 6.375%, due 04/01/12 5,000 5,185 Progress Energy, Inc. 7.000%, due 10/30/31 10,000 9,816 Pure Resources, Inc. 7.125%, due 06/15/11 20,000 19,631 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 65,000 36,725 Rohm & Haas Co. 7.850%, due 07/15/29 5,000 5,748 Safeway, Inc. 7.250%, due 02/01/31 5,000 5,178 SBC Communications, Inc. 5.875%, due 02/01/12 15,000 14,977 Sempra Energy 7.950%, due 03/01/10 20,000 21,321 Sprint Capital Corp. 7.625%, due 01/30/11 15,000 11,935 Target Corp. 7.000%, due 07/15/31 15,000 15,871 Telus Corp. 8.000%, due 06/01/11 10,000 8,309 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 20,000 20,594 Unilever Capital Corp. 7.125%, due 11/01/10 15,000 16,531 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 34,366 29,986 United Technologies Corp. 6.100%, due 05/15/12 10,000 10,358 USA Education, Inc. 5.625%, due 04/10/07 20,000 20,658 Valero Energy Corp. 7.500%, due 04/15/32 10,000 10,034 Verizon Global Funding Corp. 7.250%, due 12/01/10 5,000 5,048 7.750%, due 12/01/30 15,000 14,466 Walt Disney Co. 6.375%, due 03/01/12 5,000 5,093 Washington Mutual, Inc. 5.625%, due 01/15/07 5,000 5,064 Wells Fargo Bank N.A. 6.450%, due 02/01/11 25,000 26,129 Westinghouse Electric 8.625%, due 08/01/12 20,000 23,527 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 5,000 5,075 Williams Cos., Inc. 7.125%, due 09/01/11 5,000 4,049 --------------- 1,399,683 --------------- ASSET-BACKED SECURITIES -- 0.42% Comed Transitional Funding Trust, 98-1, Class A7 5.740%, due 12/25/10 $ 45,000 $ 46,887 Conseco Finance Securitizations Corp., 00-B, Class AF4 7.870%, due 02/15/31 20,000 21,145 DVI Receivables Corp. 6.808%, due 07/12/04 27,940 28,485 Peco Energy Transition Trust, 99-A3, Class A7 6.130%, due 03/01/09 55,000 58,288 --------------- 154,805 --------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 4.57% DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B 7.180%, due 08/10/10 140,000 153,912 DLJ Commercial Mortgage Corp., 99-CG1, Class A1B 6.460%, due 03/10/32 20,000 21,255 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 165,000 182,767 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 25,000 26,432 Impac Secured Assets Common Owner Trust 01-3, Class A2 7.250%, due 04/25/31 101,402 103,098 LB Commercial Conduit Mortgage Trust, 98-C4, Class A1B 6.210%, due 10/15/35 30,000 31,594 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 50,000 55,380 Merrill Lynch Mortgage Investors, Inc., 96-C2, Class A3 6.960%, due 11/21/28 50,000 53,674 Morgan Stanley Capital I, 00-LIF2, Class A2 6.960%, due 10/15/33 36,379 38,953 Norwest Asset Securities Corp., 99-3, 6.000%, due 01/25/29 39,580 40,173 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B 7.330%, due 12/10/32 30,000 33,267 PNC Mortgage Securities Corp., 94-3, Class A8 7.500%, due 07/25/24 190,000 199,027 Prudential Home Mortgage Securities, 93-43, Class A9 6.750%, due 10/25/23 113,040 115,784 Prudential Home Mortgage Securities, 96-7, Class A4 6.750%, due 06/25/11 97,287 99,970 34 FACE AMOUNT VALUE --------------- --------------- Residential Accredit Loans, Inc., 98-QS4, Class AI5 7.000%, due 03/25/28 $ 400,000 $ 414,583 Residential Funding Mortgage Securities I, 98-56, Class A6 6.750%, due 03/25/28 45,000 46,949 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 60,000 63,885 --------------- 1,680,703 --------------- INTERNATIONAL DOLLAR BONDS -- 0.21% Canadian National Railway Co. 6.900%, due 07/15/28 5,000 5,110 Deutsche Telekom International Finance 8.250%, due 06/15/30 10,000 9,296 France Telecom S.A. 8.500%, due 03/01/31 5,000 4,423 Petroleum Geo-Services 7.500%, due 03/31/07 30,000 24,300 United Mexican States 9.875%, due 02/01/10 30,000 33,525 --------------- 76,654 --------------- U.S. GOVERNMENT AGENCY -- 1.53% Fannie Mae Grantor Trust 7.125%, due 01/15/30 275,000 307,948 7.500%, due 06/25/30 88,241 93,469 7.500%, due 12/25/41 151,246 160,483 --------------- 561,900 --------------- U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 3.91% Federal Home Loan Mortgage Corp. 6.500%, due 11/01/28 8,360 8,540 7.000%, due 10/15/13 68,215 73,296 Federal Home Loan Mortgage Corp. Gold 8.000%, due 01/01/30 334,214 354,665 Federal National Mortgage Association 6.000%, due 03/01/29 93,388 93,260 6.500%, due 03/01/19 81,319 83,767 6.500%, due 06/01/29 90,121 92,011 Federal National Mortgage Association, Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 4,145 4,570 Government National Mortgage Association 6.000%, due 11/20/28 68,158 67,831 6.000%, due 12/20/28 108,208 108,249 6.000%, due 05/20/29 129,847 129,224 6.500%, due 08/15/27 5,125 5,239 7.000%, due 07/15/25 29,117 30,495 7.000%, due 07/15/31 302,252 314,460 7.500%, due 08/15/23 30,810 32,779 7.500%, due 01/15/24 37,040 39,374 --------------- 1,437,760 --------------- U.S. GOVERNMENT OBLIGATIONS -- 6.86% U.S. Treasury Bond 3.000%, due 02/29/04 $ 350,000 $ 352,037 5.000%, due 08/15/11 160,000 162,222 U.S. Treasury Note 3.625%, due 03/31/04 585,000 594,044 4.375%, due 05/15/07 1,185,000 1,201,294 5.625%, due 05/15/08 115,000 122,745 6.250%, due 05/15/30 80,000 86,659 --------------- 2,519,001 --------------- Total U.S. Bonds 7,830,506 --------------- INTERNATIONAL BONDS -- 70.09% AUSTRALIA -- 1.69% Government of Australia 6.500%, due 05/15/13 EUR 220,000 127,682 6.750%, due 11/15/06 640,000 373,076 9.000%, due 09/15/04 200,000 120,353 --------------- 621,111 --------------- BELGIUM -- 4.41% Government of Belgium 5.750%, due 03/28/08 EUR 1,564,000 1,618,863 --------------- CANADA -- 3.24% Government of Canada 6.000%, due 06/01/11 CAD 520,000 355,579 8.000%, due 06/01/23 260,000 215,223 Province of Ontario 5.200%, due 03/08/07 470,000 311,336 7.500%, due 01/19/06 430,000 308,408 --------------- 1,190,546 --------------- FINLAND -- 3.01% Government of Finland 3.750%, due 11/12/03 EUR 660,000 650,900 5.750%, due 02/23/11 440,000 454,879 --------------- 1,105,779 --------------- FRANCE -- 7.02% Government of France 3.500%, due 07/12/04 EUR 570,000 556,445 5.125%, due 10/25/08 1,100,000 1,101,596 5.500%, due 04/25/10 300,000 307,693 5.500%, due 04/25/29 420,000 425,346 8.500%, due 10/25/19 140,000 188,572 --------------- 2,579,652 --------------- GERMANY -- 14.74% Bundesrepublik Deutschland 6.500%, due 07/04/27 EUR 360,000 410,735 Depfa Deutsche Pfandbriefbank 0.150%, due 06/20/03 137,000,000 1,142,656 Deutsche Ausgleichsbank 6.000%, due 07/04/07 550,000 572,698 Federal Republic of Germany 5.000%, due 07/04/11 960,000 953,489 35 FACE AMOUNT VALUE --------------- --------------- Kredit Fuer Wiederaufbau 5.000%, due 01/04/09 EUR 1,200,000 $ 1,194,412 Treuhandanstalt 6.750%, due 05/13/04 1,100,000 1,139,285 --------------- 5,413,275 --------------- ITALY -- 11.79% Buoni Poliennali Del Tes 3.250%, due 04/15/04 EUR 1,825,000 1,781,778 5.000%, due 12/15/04 JPY 80,000,000 747,172 5.250%, due 11/01/29 EUR 420,000 402,690 6.500%, due 11/01/27 335,000 375,667 8.750%, due 07/01/06 900,000 1,025,609 --------------- 4,332,916 --------------- JAPAN -- 9.09% Government of Japan 1.750%, due 06/21/10 JPY 100,000,000 875,748 Inter-American Development Bank 1.900%, due 07/08/09 87,000,000 787,315 International Bank for Reconstruction & Development 4.750%, due 12/20/04 180,000,000 1,674,599 --------------- 3,337,662 --------------- NETHERLANDS -- 3.99% Government of Netherlands 5.500%, due 07/15/10 EUR 745,000 762,116 6.000%, due 01/15/06 680,000 705,360 --------------- 1,467,476 --------------- SPAIN -- 3.60% Government of Spain 3.000%, due 01/31/03 EUR 650,000 640,154 4.750%, due 07/30/14 150,000 141,626 5.150%, due 07/30/09 385,000 385,785 6.000%, due 01/31/29 145,000 155,034 --------------- 1,322,599 --------------- SWEDEN -- 2.21% Government of Sweden 6.750%, due 05/05/14 SEK 1,640,000 $ 196,851 8.000%, due 08/15/07 2,520,000 308,141 10.250%, due 05/05/03 2,700,000 306,743 --------------- 811,735 --------------- UNITED KINGDOM -- 5.30% European Investment Bank 2.125%, due 09/20/07 GBP 150,000,000 1,366,024 6.250%, due 04/15/14 70,000 114,757 U.K. Treasury 5.750%, due 12/07/09 60,000 95,326 6.000%, due 12/07/28 79,000 141,700 8.500%, due 12/07/05 135,000 228,404 --------------- 1,946,211 --------------- Total International Bonds 25,747,825 --------------- Total Bonds (Cost $31,181,890) 33,578,331 --------------- SHARES --------------- SHORT-TERM INVESTMENTS -- 3.59% OTHER -- 3.59% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,318,563) 1,318,563 1,318,563 --------------- Total Investments (Cost $32,500,453) -- 94.99% (a) 34,896,894 Cash and other assets, less liabilities -- 5.01% 1,840,603 --------------- Net Assets -- 100% $ 36,737,497 ===============
36 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $32,504,500; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 2,478,909 Gross unrealized depreciation (86,515) --------------- Net unrealized appreciation $ 2,392,394 ===============
% Represents a percentage of net assets. E.E.T.C.: Enhanced equipment trust certificate 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2002, the value of these securities amounted to $52,659 or 0.14% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS UBS Global Bond Fund had the following open forward foreign currency contracts as of June 30, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) 07/18/02 4,700,000 $ 2,634,745 $ 166,379 British Pounds (GBP) 07/18/02 140,000 213,197 13,018 Canadian Dollar (CAD) 07/18/02 1,100,000 722,980 5,760 Danish Krone (DKK) 07/18/02 3,600,000 478,209 55,029 Euro (EUR) 07/18/02 3,540,000 3,493,588 396,942 Japanese Yen (JPY) 07/18/02 420,250,000 3,509,108 292,344 Swiss Franc (CHF) 07/18/02 350,000 235,238 24,932 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) 07/18/02 1,950,000 1,093,139 (15,732) Canadian Dollar (CAD) 07/18/02 600,000 394,353 (22,962) British Pounds (GBP) 07/18/02 500,000 761,419 (52,144) Euro (EUR) 07/18/02 3,190,000 3,148,177 (239,688) Japanese Yen (JPY) 07/18/02 190,400,000 1,589,849 (109,941) Swedish Krona (SEK) 07/18/02 6,500,000 706,425 (84,623) ----------- Total net unrealized gain on Forward Foreign Currency Contracts $ 429,314 ===========
See accompanying notes to financial statements. 37 UBS U.S. BALANCED FUND For the fiscal year ended June 30, 2002, UBS U.S. Balanced Fund Class Y shares returned-0.36%. The Fund's performance outdistanced its benchmark, the U.S. Balanced Mutual Fund Index*, which fell 8.07% during the same period. Since inception on December 30, 1994, the U.S. Balanced Fund (Class Y shares) has registered an 8.89% annualized gain. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Continuing a two-year decline, equity markets lost value throughout the fiscal year. Going into September, a short recession and poor corporate earnings followed by the September 11 terrorist attacks only further weakened a declining market. The market rebounded in the fourth quarter, but high-profile corporate bankruptcies and accounting issues hurt stocks again, even with the promise of an increase in corporate earnings. As of June 30, the Wilshire 5000 index was down 11.77% for the calendar year and 16.62% for the fiscal year. During the second quarter of this year, the S&P 500 index fell 13.4% alone, as investor pessimism pervaded the market. In 2002, equities declined in most sectors, both growth and value stocks. The Fund's stock selection, with an underweight in technology and overweight in healthcare, helped performance. The investment-grade bond market, on the other hand, prospered during the fiscal year as low inflation and a 40-year low in the federal funds rate helped to keep yields up. For most of the year, the Fed has maintained a neutral bias, making it likely that neither tightening nor another rate cut is in the immediate future. Mortgage backed securities also performed well during this time, as mortgage rates continued to drop and consumer financing and refinancing continued strongly. A flight to quality hastened during the period, as a spate of downgrades and difficulty in the high yield market only made investment-grade issues more attractive. For the fiscal year ended June 30, 2002, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index posted an 8.50% return. Additionally, the yield curve steepened near the end of the fiscal year, as two-year Treasuries fell approximately 90 basis points and 10-year rates decreased about 60 basis points versus investment-grade corporate bonds. During the period, the Fund maintained an overweight in fixed income securities and, therefore, an underweight in equities. The Fund's standard allocation is to have a 65%-30%-5% split among stocks, bonds and money respectively. During the fiscal year, bonds generally made up at least 50% of the portfolio. This strategy helped fund performance. Even as another giant corporation -- this time, WorldCom -- revealed accounting irregularities post-period, the shock of misstated earnings was gradually receding as the promise of tougher government rules for corporate governance loomed large. Although the Fund ended the reporting period still overweight in fixed income, we anticipate adding to our equity holdings in the coming months. Some sectors, including wireless telecom and other pockets in technology, may lag the recovery in other sectors as corporate customers wait to resume spending. We will look for attractively priced securities, particularly in the healthcare, finance and utilities sectors, and anticipate corporate earnings to rise and, eventually, capital spending to resume toward the end of 2002. We will continue to emphasize a broad diversification of both equity and fixed income securities. - ---------- * An unmanaged index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Lehman U.S. Aggregate Index. 38 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS A -3.42% -0.60% 2.32% 4.59% 4.48% - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS B -3.74 N/A N/A N/A -1.18 - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS C -3.74 N/A N/A N/A -0.76 - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS Y -3.30 -0.36 2.60 4.88 8.89 - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS A+ -8.69 -6.10 0.39 3.41 3.41 - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS B+ -8.56 N/A N/A N/A -5.97 - -------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS C+ -5.62 N/A N/A N/A -2.67 - -------------------------------------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** -6.44 -8.07 -2.39 5.40 10.91 - -------------------------------------------------------------------------------------------------------------- Lehman U.S. Aggregate Index++ 4.20 7.53 8.69 7.25 8.41 - -------------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 3.59 8.50 8.05 7.54 8.32 - -------------------------------------------------------------------------------------------------------------- Wilshire 5000 Index -11.77 -16.62 -8.22 3.56 11.86 - --------------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. BALANCED FUND CLASS A (FORMERLY CLASS N) IS 6/30/97. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/07/01 AND 11/06/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) AND EACH OF THE INDICES IS 12/30/94. ** AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 65% WILSHIRE 5000 INDEX AND 35% LEHMAN U.S. AGGREGATE INDEX. + RETURNS INCLUDE SALES CHARGES. ++ AS OF APRIL 1, 2002, THE FUND'S BENCHMARK INDEX WAS CHANGED TO THE LEHMAN U.S. AGGREGATE INDEX BECAUSE IT IS A MORE BROAD BASED INDEX FOR THE FUND. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS U.S. Balanced Fund Class Y, the U.S. Balanced Mutual Fund Index, the Lehman U.S. Aggregate Index, the Salomon Smith Barney (BIG) Bond Index and the Wilshire 5000 Index if you had invested $1,000,000 on December 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. BALANCED FUND CLASS Y VS. U.S. BALANCED MUTUAL FUND INDEX, LEHMAN U.S. AGGREGATE INDEX, SALOMON SMITH BARNEY (BIG) BOND INDEX AND WILSHIRE 5000 INDEX Wealth Value with Dividends Reinvested
UBS U.S. BALANCED U.S. BALANCED MUTUAL LEHMAN U.S. SALOMON SMITH BARNEY FUND CLASS Y FUND INDEX AGGREGATE INDEX (BIG) BOND INDEX WILSHIRE 5000 INDEX ------------------- ---------------------- ---------------- ----------------------- ---------------------- 12/30/94 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 1/31/95 $ 1,019,000 $ 1,020,438 $ 1,019,800 $ 1,020,700 $ 1,021,610 2/28/95 $ 1,050,000 $ 1,054,228 $ 1,044,071 $ 1,044,584 $ 1,062,301 3/31/95 $ 1,064,000 $ 1,074,348 $ 1,050,440 $ 1,050,643 $ 1,090,303 4/30/95 $ 1,080,000 $ 1,096,369 $ 1,065,146 $ 1,065,037 $ 1,117,397 5/31/95 $ 1,120,000 $ 1,133,823 $ 1,106,367 $ 1,107,319 $ 1,155,243 6/30/95 $ 1,139,086 $ 1,159,972 $ 1,114,444 $ 1,115,070 $ 1,192,095 7/31/95 $ 1,154,301 $ 1,190,187 $ 1,111,992 $ 1,112,840 $ 1,241,150 8/31/95 $ 1,170,530 $ 1,202,521 $ 1,125,447 $ 1,125,637 $ 1,253,251 9/30/95 $ 1,192,845 $ 1,236,289 $ 1,136,364 $ 1,136,218 $ 1,301,050 10/31/95 $ 1,199,945 $ 1,234,019 $ 1,151,137 $ 1,151,444 $ 1,287,988 11/30/95 $ 1,236,461 $ 1,274,743 $ 1,168,404 $ 1,169,406 $ 1,342,560 12/31/95 $ 1,254,813 $ 1,294,447 $ 1,184,761 $ 1,185,544 $ 1,364,511 1/31/96 $ 1,278,797 $ 1,320,069 $ 1,192,581 $ 1,193,606 $ 1,401,066 2/29/96 $ 1,273,346 $ 1,327,269 $ 1,171,830 $ 1,173,434 $ 1,425,571 3/31/96 $ 1,276,616 $ 1,333,362 $ 1,163,627 $ 1,164,985 $ 1,441,166 4/30/96 $ 1,279,887 $ 1,351,325 $ 1,157,111 $ 1,156,364 $ 1,476,778 5/31/96 $ 1,284,248 $ 1,375,103 $ 1,154,797 $ 1,155,786 $ 1,517,153 6/30/96 $ 1,293,124 $ 1,373,956 $ 1,170,317 $ 1,170,696 $ 1,504,667 7/31/96 $ 1,273,247 $ 1,327,073 $ 1,173,477 $ 1,173,857 $ 1,423,490 8/31/96 $ 1,287,603 $ 1,353,971 $ 1,171,482 $ 1,172,096 $ 1,469,027 9/30/96 $ 1,324,045 $ 1,409,072 $ 1,191,913 $ 1,192,490 $ 1,547,238 10/31/96 $ 1,354,965 $ 1,432,973 $ 1,218,421 $ 1,219,321 $ 1,568,869 11/30/96 $ 1,405,762 $ 1,502,957 $ 1,239,256 $ 1,239,440 $ 1,672,806 12/31/96 $ 1,396,859 $ 1,487,317 $ 1,227,731 $ 1,228,533 $ 1,653,954 1/31/97 $ 1,414,616 $ 1,541,045 $ 1,231,537 $ 1,233,201 $ 1,742,490 2/28/97 $ 1,419,351 $ 1,541,177 $ 1,234,616 $ 1,234,558 $ 1,741,688 3/31/97 $ 1,394,492 $ 1,491,420 $ 1,220,911 $ 1,222,089 $ 1,664,653 4/30/97 $ 1,418,167 $ 1,541,162 $ 1,239,176 $ 1,239,565 $ 1,737,249 5/31/97 $ 1,459,599 $ 1,617,208 $ 1,250,899 $ 1,251,217 $ 1,860,333 6/30/97 $ 1,493,510 $ 1,672,235 $ 1,265,734 $ 1,266,106 $ 1,945,797 7/31/97 $ 1,555,541 $ 1,771,661 $ 1,299,904 $ 1,300,418 $ 2,095,390 8/31/97 $ 1,530,490 $ 1,723,041 $ 1,288,855 $ 1,289,234 $ 2,016,624 9/30/97 $ 1,563,891 $ 1,797,997 $ 1,307,879 $ 1,308,186 $ 2,135,625 10/31/97 $ 1,548,383 $ 1,768,066 $ 1,326,790 $ 1,326,893 $ 2,064,487 11/30/97 $ 1,559,120 $ 1,808,600 $ 1,332,841 $ 1,333,129 $ 2,132,079 12/31/97 $ 1,581,464 $ 1,836,782 $ 1,346,249 $ 1,346,727 $ 2,171,479 1/31/98 $ 1,597,411 $ 1,851,559 $ 1,363,481 $ 1,364,100 $ 2,183,270 2/28/98 $ 1,638,609 $ 1,938,721 $ 1,362,390 $ 1,363,145 $ 2,342,213 3/31/98 $ 1,670,504 $ 2,004,438 $ 1,367,022 $ 1,368,461 $ 2,459,440 4/30/98 $ 1,666,517 $ 2,023,552 $ 1,374,131 $ 1,375,577 $ 2,488,634 5/31/98 $ 1,670,504 $ 1,995,350 $ 1,387,185 $ 1,388,783 $ 2,422,411 6/30/98 $ 1,675,623 $ 2,046,549 $ 1,398,976 $ 1,400,171 $ 2,507,341 7/31/98 $ 1,661,933 $ 2,018,906 $ 1,401,914 $ 1,403,111 $ 2,452,405 8/31/98 $ 1,614,019 $ 1,825,353 $ 1,424,765 $ 1,424,579 $ 2,070,492 9/30/98 $ 1,672,885 $ 1,917,932 $ 1,458,105 $ 1,458,199 $ 2,205,737 10/31/98 $ 1,705,740 $ 2,007,662 $ 1,450,377 $ 1,451,637 $ 2,369,844 11/30/98 $ 1,726,275 $ 2,093,700 $ 1,458,644 $ 1,459,621 $ 2,519,073 12/31/98 $ 1,738,302 $ 2,183,057 $ 1,463,020 $ 1,464,146 $ 2,680,268 1/31/99 $ 1,734,600 $ 2,240,874 $ 1,473,407 $ 1,474,981 $ 2,778,795 2/28/99 $ 1,693,873 $ 2,174,347 $ 1,447,623 $ 1,449,168 $ 2,678,063 3/31/99 $ 1,712,385 $ 2,233,226 $ 1,455,585 $ 1,457,429 $ 2,781,410 4/30/99 $ 1,762,368 $ 2,305,381 $ 1,460,243 $ 1,462,238 $ 2,914,723 5/31/99 $ 1,753,112 $ 2,265,155 $ 1,447,392 $ 1,448,786 $ 2,850,920 6/30/99 $ 1,755,023 $ 2,338,684 $ 1,442,761 $ 1,443,860 $ 2,998,512 7/31/99 $ 1,728,828 $ 2,286,674 $ 1,436,701 $ 1,438,084 $ 2,902,379 8/31/99 $ 1,702,634 $ 2,272,261 $ 1,435,983 $ 1,437,078 $ 2,875,329 9/30/99 $ 1,665,214 $ 2,243,210 $ 1,452,640 $ 1,454,323 $ 2,800,197 10/31/99 $ 1,646,503 $ 2,338,293 $ 1,458,015 $ 1,458,686 $ 2,978,275 11/30/99 $ 1,646,503 $ 2,389,113 $ 1,457,869 $ 1,458,540 $ 3,078,018 12/31/99 $ 1,617,539 $ 2,503,182 $ 1,450,871 $ 1,451,830 $ 3,311,735 1/31/00 $ 1,582,878 $ 2,433,170 $ 1,446,083 $ 1,447,728 $ 3,174,275 2/29/00 $ 1,532,811 $ 2,478,532 $ 1,463,581 $ 1,464,624 $ 3,245,369 3/31/00 $ 1,602,134 $ 2,585,473 $ 1,482,900 $ 1,483,622 $ 3,438,131 4/30/00 $ 1,656,052 $ 2,495,227 $ 1,478,600 $ 1,479,217 $ 3,259,001 5/31/00 $ 1,675,309 $ 2,437,812 $ 1,477,861 $ 1,477,911 $ 3,145,180 6/30/00 $ 1,666,038 $ 2,525,510 $ 1,508,600 $ 1,508,793 $ 3,283,857 7/31/00 $ 1,685,433 $ 2,500,118 $ 1,522,328 $ 1,522,577 $ 3,216,909 8/31/00 $ 1,724,223 $ 2,630,597 $ 1,544,402 $ 1,544,332 $ 3,450,447 9/30/00 $ 1,720,344 $ 2,557,051 $ 1,554,132 $ 1,554,799 $ 3,289,443 10/31/00 $ 1,761,074 $ 2,527,427 $ 1,564,402 $ 1,564,693 $ 3,219,545 11/30/00 $ 1,772,711 $ 2,378,337 $ 1,589,988 $ 1,590,061 $ 2,899,258 12/31/00 $ 1,819,583 $ 2,421,642 $ 1,619,489 $ 1,620,131 $ 2,950,952 1/31/01 $ 1,871,975 $ 2,495,882 $ 1,645,961 $ 1,646,791 $ 3,063,985 2/28/01 $ 1,863,914 $ 2,349,780 $ 1,660,302 $ 1,661,443 $ 2,773,373 3/31/01 $ 1,837,719 $ 2,251,268 $ 1,668,634 $ 1,670,146 $ 2,586,672 4/30/01 $ 1,882,050 $ 2,367,996 $ 1,661,708 $ 1,662,308 $ 2,799,545 5/31/01 $ 1,916,305 $ 2,388,750 $ 1,671,745 $ 1,673,194 $ 2,827,420 6/30/01 $ 1,902,361 $ 2,365,493 $ 1,678,053 $ 1,678,722 $ 2,780,038 7/31/01 $ 1,920,556 $ 2,359,236 $ 1,715,569 $ 1,717,506 $ 2,734,142 8/31/01 $ 1,894,274 $ 2,275,544 $ 1,735,226 $ 1,736,471 $ 2,568,669 9/30/01 $ 1,807,344 $ 2,152,494 $ 1,755,436 $ 1,757,878 $ 2,337,923 10/31/01 $ 1,845,755 $ 2,203,289 $ 1,792,177 $ 1,793,355 $ 2,397,393 11/30/01 $ 1,934,707 $ 2,302,151 $ 1,767,465 $ 1,768,557 $ 2,580,738 12/31/01 $ 1,960,067 $ 2,324,320 $ 1,756,229 $ 1,758,195 $ 2,627,114 1/31/02 $ 1,964,238 $ 2,311,969 $ 1,770,448 $ 1,772,042 $ 2,594,493 2/28/02 $ 1,962,152 $ 2,288,821 $ 1,787,603 $ 1,788,985 $ 2,541,171 3/31/02 $ 1,999,686 $ 2,340,675 $ 1,757,872 $ 1,759,381 $ 2,652,385 4/30/02 $ 1,983,004 $ 2,282,277 $ 1,791,963 $ 1,792,756 $ 2,522,883 5/31/02 $ 1,974,664 $ 2,271,617 $ 1,807,186 $ 1,807,993 $ 2,493,211 6/30/02 $ 1,895,427 $ 2,174,703 $ 1,822,819 $ 1,821,345 $ 2,317,953
12/30/94 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 39 TOP TEN FIXED INCOME HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - -------------------------------------------------------------------------------- U.S. Treasury Note, 3.625%, due 03/31/04 2.5% Federal National Mortgage Association 6.500%, due 01/01/28 1.9 Government National Mortgage Association 7.500%, due 02/15/27 1.7 Federal National Mortgage Association 6.500%, due 11/01/31 1.1 Federal National Mortgage Association 7.000%, due 09/01/23 1.0 Fannie Mae Grantor Trust, 7.125%, due 01/15/30 0.9 U.S. Treasury Note 5.625%, due 05/15/08 0.9 Federal Home Loan Mortgage Corp., Gold 6.500%, due 04/01/29 0.8 Federal Home Loan Mortgage Corp., 6.500%, due 02/01/29 0.8 U.S. Treasury Bond, 5.000%, due 08/15/11 0.7 - -------------------------------------------------------------------------------- Total 12.3%
TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - -------------------------------------------------------------------------------- Wells Fargo & Co. 2.0% Burlington Northern Santa Fe Corp. 1.8 Citigroup, Inc. 1.8 Microsoft Corp. 1.6 GreenPoint Financial Corp. 1.5 Masco Corp. 1.5 Wyeth, Inc. 1.5 Johnson & Johnson Co. 1.4 United Health Group, Inc. 1.4 Allergan, Inc. 1.4 - -------------------------------------------------------------------------------- Total 15.9%
40
SHARES VALUE ---------- ------------ U.S. EQUITIES -- 58.53% AUTOS/DURABLES -- 0.97% Johnson Controls, Inc. 1,400 $ 114,254 W.W. Grainger, Inc. 2,700 135,270 ------------ 249,524 ------------ BANKS -- 6.74% Citigroup, Inc. 12,086 468,332 FleetBoston Financial Corp. 6,205 200,732 GreenPoint Financial Corp. 8,000 392,800 PNC Financial Services Group 3,200 167,296 Wells Fargo & Co. 10,000 500,600 ------------ 1,729,760 ------------ BROADCASTING & PUBLISHING -- 1.63% McGraw-Hill Cos., Inc. 1,800 107,460 Viacom, Inc. 7,000 310,590 ------------ 418,050 ------------ CAPITAL GOODS -- 2.12% Illinois Tool Works, Inc. 5,100 348,330 Pentair, Inc. 4,100 197,128 ------------ 545,458 ------------ CHEMICALS -- 2.92% Dow Chemical Co. 4,900 168,462 Eastman Chemical Co. 2,600 121,940 Exxon Mobil Corp. 7,000 286,440 IMC Global, Inc. 8,300 103,750 Waters Corp. 2,600 69,420 ------------ 750,012 ------------ COMPUTER SOFTWARE -- 1.89% BEA Systems, Inc. (b) 6,800 64,668 Microsoft Corp. (b) 7,700 421,190 ------------ 485,858 ------------ COMPUTER SYSTEMS -- 1.46% Electronic Data Systems Corp. 6,400 237,760 Hewlett-Packard Co. 8,885 135,763 ------------ 373,523 ------------ CONSTRUCTION -- 0.73% Martin Marietta Materials, Inc. 4,836 188,604 ------------ CONSUMER -- 0.53% Kimberly-Clark Corp. 2,200 136,400 ------------ ELECTRIC COMPONENTS -- 1.51% Advanced Micro Devices, Inc. 6,800 66,096 Intel Corp. 9,100 166,257 Texas Instruments, Inc. 6,500 154,050 ------------ 386,403 ------------ ENERGY -- 3.70% Conoco, Inc. 6,300 175,140 Exelon Corp. 4,200 219,660 FirstEnergy Corp. 7,291 243,374 Kerr-McGee Corp. 1,450 77,647 Progress Energy, Inc. 3,100 $ 161,231 Sempra Energy 3,300 73,029 ------------ 950,081 ------------ FINANCIAL SERVICES -- 6.40% American International Group, Inc. 4,800 327,504 Anthem, Inc. (b) 3,000 202,440 Freddie Mac 5,600 342,720 Hartford Financial Services Group, Inc. (The) 2,000 118,940 JP Morgan Chase & Co. 7,400 251,008 Morgan Stanley 4,850 208,938 U.S. Bancorp 8,200 191,470 ------------ 1,643,020 ------------ HEALTH: DRUGS -- 5.75% Abbott Laboratories, Inc. 7,150 269,198 Allergan, Inc. 5,300 353,775 Bristol-Myers Squibb Co. 3,600 92,520 Cephalon, Inc. (b) 3,400 153,680 SICOR, Inc. (b) 12,500 231,750 Wyeth, Inc. 7,300 373,760 ------------ 1,474,683 ------------ HEALTH: NON-DRUGS -- 4.23% Baxter International, Inc. 3,400 151,130 Beckman Coulter, Inc. 4,400 219,560 Johnson & Johnson 6,864 358,713 United Health Group, Inc. 3,900 357,045 ------------ 1,086,448 ------------ HOUSING/PAPER -- 1.69% American Standard Companies, Inc. (b) 3,400 255,340 Kroger Co. (b) 9,000 179,100 ------------ 434,440 ------------ INDUSTRIAL COMPONENTS -- 0.73% Ingersoll-Rand Co., Class A 4,100 187,206 ------------ INTERNET SERVICES -- 0.05% Sapient Corp. 11,400 12,084 ------------ METALS-NON-FERROUS -- 1.48% Masco Corp. 14,000 379,540 ------------ RECREATION -- 0.62% Royal Caribbean Cruises Ltd. 8,100 157,950 ------------ RETAIL/APPAREL -- 2.94% Costco Wholesale Corp. (b) 5,900 227,858 Newell Rubbermaid, Inc. 7,900 276,974 RadioShack Corp. 4,600 138,276 TJX Companies, Inc. 5,700 111,777 ------------ 754,885 ------------ SERVICES/MISCELLANEOUS -- 3.79% AOL Time Warner, Inc. (b) 4,900 72,079 Computer Sciences Corp. 1,700 81,260 First Data Corp. 2,916 108,475 Household International, Inc. 5,000 248,500 MeadWestvaco Corp. 3,900 130,884 41 SHARES VALUE ---------- ------------ Omnicom Group 4,900 $ 224,420 Viad Corp. 4,100 106,600 ------------ 972,218 ------------ TECHNOLOGY -- 1.01% United Technologies Corp. 3,800 258,020 ------------ TELECOMMUNICATIONS-SERVICES -- 1.99% Motorola, Inc. 11,815 170,372 Nextel Communications, Inc. 45,100 144,771 SBC Communications, Inc. 6,400 195,200 ------------ 510,343 ------------ TEXTILES AND APPAREL -- 0.21% CommScope, Inc. (b) 4,400 55,000 ------------ TRANSPORTATION -- 1.83% Burlington Northern Santa Fe Corp. 15,700 471,000 ------------ UTILITIES -- 1.61% CMS Energy Corp. 7,000 76,860 Consolidated Edison, Inc. 4,800 200,400 Entergy Corp. 3,200 135,808 ------------ 413,068 ------------ Total U.S. Equities (Cost $15,711,131) 15,023,578 ------------ FACE AMOUNT ---------- BONDS -- 29.65% ASSET-BACKED SECURITIES -- 0.63% Conseco Finance Securitizations Corp., 00-B, Class AF4 7.870%, due 02/15/31 $ 25,000 26,431 Peco Energy Transition Trust, 99-A3, Class A7 6.130%, due 03/01/09 55,000 58,288 Vanderbilt Mortgage Finance 8.255%, due 05/07/17 70,000 77,210 ------------ 161,929 ------------ COMMERCIAL MORTGAGE-BACKED SECURITIES -- 4.53% Bear Stearns Commercial Mortgage Securities, 00-WF1, Class A2 7.780%, due 02/15/32 140,000 158,740 Bear Stearns Commercial Mortgage Securities, 00-WF2, Class A2 7.320%, due 10/15/32 150,000 166,917 DLJ Commercial Mortgage Corp., 99-CG2, Class A1B 7.300%, due 06/10/32 24,999 27,646 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 75,000 83,076 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 35,000 37,004 GS Mortgage Securities Corp., 144A 7.500%, due 06/19/32 125,261 131,015 GS Mortgage Securities Corp. II 7.410%, due 02/15/27 20,000 21,314 Impac Secured Assets Common Owner Trust 01-3, Class A2 7.250%, due 04/25/31 30,045 30,548 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1 6.410%, due 06/15/31 91,233 96,212 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 40,000 44,304 FACE AMOUNT VALUE ---------- ------------ Morgan Stanley Capital I 7.570%, due 12/15/09 $ 135,000 $ 151,018 Morgan Stanley Capital I, 00-LIF2, Class A2 6.960%, due 10/15/33 27,284 29,215 Nomura Asset Securities Corp., 95-MD3, Class A/B 8.150%, due 03/04/20 29,805 32,447 Norwest Asset Securities Corp., 99-3, 6.000%, due 01/25/29 39,580 40,173 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B 7.330%, due 12/10/32 15,000 16,633 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 45,000 47,913 Structured Asset Securities Corp., 98-ALS1, Class 1A 6.900%, due 01/25/29 47,155 48,481 ------------ 1,162,656 ------------ INTERNATIONAL DOLLAR BONDS -- 0.37% Canadian National Railway Co. 6.900%, due 07/15/28 5,000 5,110 Deutsche Telekom International Finance 8.250%, due 06/15/30 10,000 9,296 France Telecom S.A. 8.500%, due 03/01/31 5,000 4,423 Petroleum Geo-Services 6.625%, due 03/30/08 10,000 7,600 7.500%, due 03/31/07 25,000 20,250 United Mexican States 8.375%, due 01/14/11 10,000 10,375 9.875%, due 02/01/10 35,000 39,112 ------------ 96,166 ------------ U.S. CORPORATE BONDS -- 6.40% Abbott Laboratories, Inc. 5.625%, due 07/01/06 10,000 10,363 Alcoa, Inc. 6.000%, due 01/15/12 5,000 5,131 Anadarko Finance Co. 7.500%, due 05/01/31 10,000 10,666 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 15,000 18,367 AOL Time Warner, Inc. 5.625%, due 05/01/05 30,000 29,436 7.625%, due 04/15/31 15,000 13,134 Apache Corp. 6.250%, due 04/15/12 5,000 5,162 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 10,000 8,077 Avalonbay Communities, Inc. 7.500%, due 08/01/09 10,000 10,768 Avon Products, Inc. 7.150%, due 11/15/09 20,000 21,971 Bank of America Corp. 7.400%, due 01/15/11 25,000 27,380 Bank One Corp. 7.875%, due 08/01/10 15,000 17,017 Boeing Capital Corp. 7.375%, due 09/27/10 5,000 5,507 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 20,000 20,550 42 FACE AMOUNT VALUE ---------- ------------ Bristol Myers Squibb Co. 5.750%, due 10/01/11 $ 15,000 $ 14,924 Burlington Northern Santa Fe Corp. 7.082%, due 05/13/29 15,000 15,330 Capital One Bank 6.875%, due 02/01/06 10,000 9,884 Cendant Corp. 6.875%, due 08/15/06 40,000 40,230 Centex Corp. 7.875%, due 02/01/11 10,000 10,879 Cingular Wireless, 144A 6.500%, due 12/15/11 5,000 4,656 Citigroup, Inc. 7.250%, due 10/01/10 40,000 43,540 Citizens Communications Co. 9.250%, due 05/15/11 10,000 9,494 Coca Cola Co. 4.000%, due 06/01/05 10,000 10,100 Comcast Cable Communications 6.750%, due 01/30/11 25,000 22,330 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 5,000 5,145 Consolidated Edison, Inc. 7.500%, due 09/01/10 40,000 44,285 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 10,000 10,100 Coors Brewing Co., 144A 6.375%, due 05/15/12 10,000 10,290 Countrywide Home Loan 5.500%, due 02/01/07 15,000 15,268 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 15,000 15,346 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 5,000 5,528 Delta Airlines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 20,000 21,457 Devon Financing Corp., ULC 6.875%, due 09/30/11 10,000 10,414 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 40,000 43,370 Duke Energy Field Services, LLC 6.875%, due 02/01/11 5,000 5,000 7.875%, due 08/16/10 10,000 10,613 El Paso Energy Corp. 7.800%, due 08/01/31 5,000 4,680 EOP Operating LP 7.000%, due 07/15/11 15,000 15,758 7.875%, due 07/15/31 10,000 10,272 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 20,000 21,706 First Data Corp. 5.625%, due 11/01/11 20,000 19,919 First Energy Corp. 6.450%, due 11/15/11 20,000 19,418 First Union National Bank 7.800%, due 08/18/10 25,000 27,982 FleetBoston Financial Corp. 7.375%, due 12/01/09 10,000 10,851 Ford Motor Co. 7.450%, due 07/16/31 $ 10,000 $ 9,308 Ford Motor Credit Co. 5.800%, due 01/12/09 25,000 23,505 6.875%, due 02/01/06 75,000 76,730 7.375%, due 02/01/11 15,000 15,193 General Electric Capital Corp. 6.750%, due 03/15/32 45,000 44,202 General Motors Acceptance Corp. 6.125%, due 02/01/07 15,000 15,164 6.875%, due 09/15/11 50,000 49,641 8.000%, due 11/01/31 10,000 10,228 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 15,000 15,551 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 25,000 26,288 Household Finance Corp. 6.750%, due 05/15/11 50,000 49,211 International Paper Co. 6.750%, due 09/01/11 10,000 10,414 John Deere Capital Corp. 7.000%, due 03/15/12 10,000 10,714 Kimberly Clark Corp., 144A 4.500%, due 07/30/05 15,000 15,319 Kohl's Corp. 6.300%, due 03/01/11 5,000 5,158 Kraft Foods, Inc. 4.625%, due 11/01/06 5,000 4,981 6.500%, due 11/01/31 15,000 14,843 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 10,000 10,140 Lincoln National Corp. 6.200%, due 12/15/11 10,000 10,078 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 20,000 16,200 9.125%, due 05/01/31 5,000 3,575 Morgan Stanley 6.750%, due 04/15/11 20,000 20,574 News America Holdings, Inc. 7.125%, due 04/08/28 20,000 18,139 Occidental Petroleum Corp. 8.450%, due 02/15/29 10,000 11,711 Pepsi Bottling Holdings, 144A 5.625%, due 02/17/09 10,000 10,161 Phillips Petroleum Co. 8.500%, due 05/25/05 20,000 22,354 8.750%, due 05/25/10 5,000 5,937 Praxair, Inc. 6.375%, due 04/01/12 10,000 10,369 Progress Energy, Inc. 7.000%, due 10/30/31 10,000 9,816 Pure Resources, Inc. 7.125%, due 06/15/11 15,000 14,723 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 55,000 31,075 Rohm & Haas Co. 7.850%, due 07/15/29 5,000 5,748 Safeway, Inc. 7.250%, due 02/01/31 5,000 5,178 43 FACE AMOUNT VALUE ---------- ------------ SBC Communications, Inc. 5.875%, due 02/01/12 $ 15,000 $ 14,977 Sempra Energy 7.950%, due 03/01/10 20,000 21,321 Sprint Capital Corp. 7.625%, due 01/30/11 15,000 11,935 Suntrust Banks, Inc. 5.050%, due 07/01/07 10,000 10,103 Target Corp. 7.000%, due 07/15/31 20,000 21,162 Telus Corp. 8.000%, due 06/01/11 15,000 12,464 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 25,000 25,742 Unilever Capital Corp. 7.125%, due 11/01/10 15,000 16,531 Union Pacific Corp. 6.700%, due 12/01/06 15,000 15,977 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 29,456 25,702 United Technologies Corp. 6.100%, due 05/15/12 10,000 10,358 US Bank NA, Minnesota 6.375%, due 08/01/11 5,000 5,195 USA Education, Inc. 5.625%, due 04/10/07 15,000 15,493 Valero Energy Corp. 7.500%, due 04/15/32 10,000 10,034 Verizon Global Funding Corp. 7.250%, due 12/01/10 10,000 10,096 7.750%, due 12/01/30 15,000 14,466 Walt Disney Co. 6.375%, due 03/01/12 5,000 5,093 Washington Mutual, Inc. 5.625%, due 01/15/07 10,000 10,128 Wells Fargo Bank N.A. 6.450%, due 02/01/11 35,000 36,581 Westinghouse Electric 8.625%, due 08/01/12 15,000 17,645 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 5,000 5,075 Williams Cos, Inc. 7.125%, due 09/01/11 5,000 4,049 Xcel Energy, Inc. 7.000%, due 12/01/10 10,000 9,095 ------------ 1,643,748 ------------ U.S. GOVERNMENT AGENCY -- 1.25% Fannie Mae Grantor Trust 7.125%, due 01/15/30 210,000 235,160 7.500%, due 06/25/30 73,534 77,891 7.500%, due 12/25/41 8,473 8,991 ------------ 322,042 ------------ U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 10.76% Fannie Mae, Grantor Trust, 01-T10, Class A2 7.500%, due 06/19/41 143,969 151,229 Fannie Mae Whole Loan 7.000%, due 09/25/41 86,830 90,582 Federal Home Loan Mortgage Corp. 6.000%, due 10/01/29 $ 33,851 $ 34,072 6.000%, due 03/01/32 22,754 22,735 6.500%, due 02/01/29 193,329 197,503 Federal Home Loan Mortgage Corp., Gold 6.500%, due 04/01/29 213,172 217,775 Federal National Mortgage Association 6.000%, due 12/01/28 45,751 45,689 6.000%, due 03/01/29 93,388 93,260 6.500%, due 01/01/28 472,966 482,883 6.500%, due 11/01/31 284,000 289,955 7.000%, due 09/01/23 246,606 255,675 7.500%, due 10/25/22 29,582 31,842 7.500%, due 05/01/31 64,336 67,549 Government National Mortgage Association 6.000%, due 11/20/28 44,303 44,090 6.000%, due 02/20/29 94,131 93,679 6.500%, due 10/15/28 113,027 115,544 7.000%, due 04/15/26 91,161 94,843 7.500%, due 02/15/27 410,091 433,095 ------------ 2,762,000 ------------ U.S. GOVERNMENT OBLIGATIONS -- 5.70% U.S. Treasury Bond 3.000%, due 02/29/04 55,000 55,320 5.000%, due 08/15/11 185,000 187,569 U.S. Treasury Note 3.625%, due 03/31/04 625,000 634,662 4.375%, due 05/15/07 110,000 111,513 5.625%, due 05/15/08 220,000 234,816 6.250%, due 05/15/30 15,000 16,249 7.500%, due 02/15/05 155,000 171,590 8.000%, due 11/15/21 40,000 51,162 ------------ 1,462,881 ------------ Total Bonds (Cost $7,503,263) 7,611,422 ------------ SHARES ---------- SHORT-TERM INVESTMENTS -- 11.61% OTHER -- 11.22% UBS Supplementary Trust U.S. Cash Management Prime Fund 2,881,099 2,881,099 ------------ FACE AMOUNT ---------- U.S. GOVERNMENT OBLIGATIONS -- 0.39% U.S. Treasury Bill, due 08/08/02 (c) $ 100,000 99,824 ------------ Total Short-Term Investments (Cost $2,980,910) 2,980,923 ------------ Total Investments (Cost $26,195,304) -- 99.79% (a) 25,615,923 Cash and other assets, less liabilities -- 0.21% 53,020 ------------ Net Assets-- 100% $ 25,668,943 ============
44 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $26,653,553; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 807,723 Gross unrealized depreciation (1,845,353) ------------ Net unrealized depreciation $ (1,037,630) ============
(b) Non-income producing security. (c) Held as collateral for open financial futures. % Represents a percentage of net assets. E.E.T.C.: Enhanced Equipment Trust Certificate 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2002, the value of these securities amounted to $223,917 or 0.87% of net assets. FUTURES CONTRACTS UBS U.S. Balanced Fund had the following open futures contracts as of June 30, 2002:
EXPIRATION CURRENT UNREALIZED DATE COST VALUE GAIN/LOSS ---------------- ------------ ----------- ------------ U.S. TREASURY NOTE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Notes, 13 contracts September 2002 $ 1,383,669 $ 1,396,484 $ 12,815 INDEX FUTURES BUY CONTRACTS Standard & Poor's 500, 2 contracts September 2002 510,664 495,050 (15,614) ------------ Total net unrealized loss on Futures Contracts $ (2,799) ============
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2002 was $99,824. See accompanying notes to financial statements. 45 UBS U.S. EQUITY FUND For the fiscal year ended June 30, 2002, the UBS U.S. Equity Fund (Class Y shares) outperformed its benchmark in a challenging market, losing 8.17% to the Wilshire 5000 Index's drop of 16.62%. The Fund (Class Y) has outperformed its benchmark since its February 28, 1994 performance inception, gaining 11.03% to the Wilshire 5000 Index's positive 10.50%. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Fund relied on careful sector and individual stock selection, a low beta, and an exposure to value-style investing measures to achieve strong relative performance in a weak, volatile U.S. equity market. The year began with a weak recovery. The markets plunged in the wake of September 11 and then rebounded sharply in the fourth quarter of 2001, only to fall again on news of corporate accounting scandals and economic indicators that appeared positive one moment and negative the next. Major market indices ended the year down; the S&P 500, a broad measure of U.S. equity performance, lost 17.99% for the year ended June 30, 2002. During the period the Federal Reserve lowered the Fed Fund rate -- the target rate at which banks borrow money from each other -- to a forty-year low of 1.75%. They then maintained that level through multiple Fed meetings. The low rate spurred car financing and mortgage refinancing and increased consumer confidence, which was widely credited with creating whatever recovery the economy showed. That same confidence, however, was sorely lacking in investors, who were shaken by the news of accounting mistakes and accusations of outright fraud at such companies as Enron and WorldCom. We credit the Fund's sector selection for part of its relative outperformance. The Fund benefited from overweights in healthcare and pharmaceuticals, where key holdings included Cephalon, Abbott Laboratories, Baxter International, and Johnson & Johnson. In general we are interested in companies with strong developmental pipelines in these sectors. For example, Remicade, a Johnson & Johnson drug for rheumatoid arthritis, holds the potential for increasing future earnings. The Fund also profited from an overweight to the financial services sector, where holdings included Citigroup, Morgan Stanley, JPMorgan Chase, and Wells Fargo. We find decent growth and very attractive valuations and return on equity from this sector. Our Wells Fargo holding, for instance, has attractive revenue growth, which we believe will continue at more than 10% annually. The company enjoys solid credit quality, improving customer quality, and stabilizing commercial quality, with strong reserve levels and good loan portfolio diversification. We have an overweight in utilities, where one of our favorite names is Sempra Energy. This company's common share price level has reflected investor concern with the ability of Sempra subsidiary San Diego Gas & Electric (SDG&E) to obtain electricity at favorable prices. Power prices have since declined to levels that are well below SDG&E's fixed tariffs, thereby, we believe, alleviating any near-term risk to Sempra's cash flow. In general we see this sector as one with excellent price/value ratios. The Fund's final overweight is to transportation, which we also feel has contributed to our relative outperformance. We have reduced exposure to retailing, computer hardware, and energy. Going forward, we hope that the market's fundamental soundness will become more apparent as the current round of corporate accounting and fraud scandals fades from view. Barring a major crisis in consumer confidence, we hope to see a return to capital spending contributing to stronger overall markets. We think that investors have become overly pessimistic, and that to the extent that the market overreacts to problems, investors will see new opportunities to put money to work. We continue to position the Fund to take advantage of these opportunities as they arise. 46 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS A -7.62% -8.41% -5.70% 3.10% 3.10% - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS B -7.96 N/A N/A N/A -1.39 - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS C -7.96 N/A N/A N/A -4.18 - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS Y -7.50 -8.17 -5.45 3.42 11.03 - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS A+ -12.71 -13.45 -7.46 1.94 1.94 - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS B+ -12.56 N/A N/A N/A -6.09 - ------------------------------------------------------------------------------------------------------------------ UBS U.S. EQUITY FUND CLASS C+ -9.78 N/A N/A N/A -6.03 - ------------------------------------------------------------------------------------------------------------------ Wilshire 5000 Equity Index -11.77 -16.62 -8.22 3.56 10.50 - ------------------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. EQUITY FUND CLASS A (FORMERLY CLASS N) IS 6/30/97. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/05/01 AND 11/13/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) IS 2/22/94. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEAREST MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 2/28/94. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR REPRESENT AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBSU.S. Equity Fund Class Y and the Wilshire 5000 Equity Index if you had invested $1,000,000 on February 28, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. EQUITY FUND CLASS Y VS. WILSHIRE 5000 EQUITY INDEX Wealth Value with Dividends Reinvested
UBS U.S. EQUITY FUND CLASS Y WILSHIRE 5000 EQUITY INDEX --------------- -------------------------- 2/28/94 $ 1,000,000 $ 1,000,000 3/31/94 $ 942,000 $ 954,720 4/30/94 $ 964,000 $ 963,876 5/31/94 $ 984,000 $ 973,322 6/30/94 $ 969,033 $ 947,285 7/31/94 $ 991,125 $ 975,401 8/31/94 $ 1,054,389 $ 1,018,484 9/30/94 $ 1,018,238 $ 998,766 10/31/94 $ 1,013,217 $ 1,015,076 11/30/94 $ 978,071 $ 977,904 12/31/94 $ 982,692 $ 991,086 1/31/95 $ 1,003,017 $ 1,012,504 2/28/95 $ 1,048,747 $ 1,052,832 3/31/95 $ 1,075,169 $ 1,080,584 4/30/95 $ 1,098,542 $ 1,107,437 5/31/95 $ 1,139,191 $ 1,144,946 6/30/95 $ 1,176,845 $ 1,181,470 7/31/95 $ 1,218,693 $ 1,230,087 8/31/95 $ 1,241,148 $ 1,242,080 9/30/95 $ 1,288,099 $ 1,289,453 10/31/95 $ 1,284,017 $ 1,276,507 11/30/95 $ 1,357,506 $ 1,330,593 12/31/95 $ 1,381,494 $ 1,352,348 1/31/96 $ 1,438,138 $ 1,388,577 2/29/96 $ 1,461,216 $ 1,412,864 3/31/96 $ 1,488,489 $ 1,428,320 4/30/96 $ 1,516,811 $ 1,463,614 5/31/96 $ 1,540,937 $ 1,503,629 6/30/96 $ 1,536,662 $ 1,491,254 7/31/96 $ 1,462,936 $ 1,410,801 8/31/96 $ 1,518,757 $ 1,455,933 9/30/96 $ 1,587,217 $ 1,533,447 10/31/96 $ 1,620,921 $ 1,554,884 11/30/96 $ 1,733,616 $ 1,657,895 12/31/96 $ 1,735,857 $ 1,639,211 1/31/97 $ 1,798,916 $ 1,726,958 2/28/97 $ 1,809,235 $ 1,726,163 3/31/97 $ 1,749,615 $ 1,649,815 4/30/97 $ 1,803,502 $ 1,721,764 5/31/97 $ 1,935,354 $ 1,843,751 6/30/97 $ 2,026,459 $ 1,928,453 7/31/97 $ 2,181,545 $ 2,076,712 8/31/97 $ 2,096,535 $ 1,998,648 9/30/97 $ 2,190,735 $ 2,116,589 10/31/97 $ 2,074,708 $ 2,046,085 11/30/97 $ 2,116,064 $ 2,113,074 12/31/97 $ 2,165,710 $ 2,152,123 1/31/98 $ 2,180,493 $ 2,163,810 2/28/98 $ 2,370,209 $ 2,321,335 3/31/98 $ 2,506,951 $ 2,437,518 4/30/98 $ 2,482,313 $ 2,466,451 5/31/98 $ 2,446,588 $ 2,400,819 6/30/98 $ 2,461,722 $ 2,484,991 7/31/98 $ 2,399,901 $ 2,430,545 8/31/98 $ 2,057,411 $ 2,052,036 9/30/98 $ 2,207,019 $ 2,186,075 10/31/98 $ 2,375,172 $ 2,348,720 11/30/98 $ 2,474,086 $ 2,496,618 12/31/98 $ 2,567,974 $ 2,656,377 1/31/99 $ 2,550,880 $ 2,754,025 2/28/99 $ 2,457,523 $ 2,654,192 3/31/99 $ 2,537,731 $ 2,756,617 4/30/99 $ 2,766,521 $ 2,888,742 5/31/99 $ 2,732,334 $ 2,825,507 6/30/99 $ 2,836,350 $ 2,971,784 7/31/99 $ 2,717,508 $ 2,876,508 8/31/99 $ 2,622,435 $ 2,849,699 9/30/99 $ 2,432,289 $ 2,775,237 10/31/99 $ 2,433,609 $ 2,951,728 11/30/99 $ 2,448,134 $ 3,050,581 12/31/99 $ 2,463,992 $ 3,282,215 1/31/00 $ 2,298,456 $ 3,145,980 2/29/00 $ 2,110,947 $ 3,216,441 3/31/00 $ 2,320,430 $ 3,407,484 4/30/00 $ 2,412,720 $ 3,229,951 5/31/00 $ 2,433,229 $ 3,117,145 6/30/00 $ 2,354,123 $ 3,254,586 7/31/00 $ 2,362,913 $ 3,188,235 8/31/00 $ 2,513,799 $ 3,419,691 9/30/00 $ 2,427,369 $ 3,260,122 10/31/00 $ 2,509,404 $ 3,190,847 11/30/00 $ 2,446,413 $ 2,873,415 12/31/00 $ 2,543,689 $ 2,924,648 1/31/01 $ 2,662,113 $ 3,036,674 2/28/01 $ 2,561,534 $ 2,748,652 3/31/01 $ 2,446,354 $ 2,563,615 4/30/01 $ 2,581,001 $ 2,774,590 5/31/01 $ 2,652,380 $ 2,802,217 6/30/01 $ 2,610,252 $ 2,755,257 7/31/01 $ 2,592,385 $ 2,709,771 8/31/01 $ 2,496,551 $ 2,545,773 9/30/01 $ 2,277,271 $ 2,317,084 10/31/01 $ 2,324,375 $ 2,376,023 11/30/01 $ 2,529,037 $ 2,557,734 12/31/01 $ 2,591,338 $ 2,603,697 1/31/02 $ 2,589,634 $ 2,571,367 2/28/02 $ 2,570,894 $ 2,518,520 3/31/02 $ 2,679,931 $ 2,628,743 4/30/02 $ 2,604,968 $ 2,500,395 5/31/02 $ 2,574,301 $ 2,470,987 6/30/02 $ 2,397,115 $ 2,297,292
2/28/94 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 47 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ------------------------------------------------------------------------- Wells Fargo & Co. 3.3% Burlington Northern Santa Fe Corp. 3.1 Citigroup, Inc. 3.0 Microsoft Corp. 2.7 GreenPoint Financial Corp. 2.6 Masco Corp. 2.5 Wyeth, Inc. 2.4 United Health Group, Inc. 2.3 Johnson & Johnson 2.3 Allergan, Inc. 2.3 - ------------------------------------------------------------------------- Total 26.5%
48
SHARES VALUE ---------- ------------ U.S. EQUITIES -- 98.01% AUTOS/DURABLES -- 1.63% Johnson Controls, Inc. 9,400 $ 767,134 W.W. Grainger, Inc. 17,800 891,780 ------------ 1,658,914 ------------ BANKS -- 11.24% Citigroup, Inc. 79,561 3,082,989 FleetBoston Financial Corp. 40,955 1,324,894 GreenPoint Financial Corp. 53,200 2,612,120 PNC Financial Services Group 21,000 1,097,880 Wells Fargo & Co. 66,100 3,308,966 ------------ 11,426,849 ------------ BROADCASTING & PUBLISHING -- 2.72% McGraw-Hill Cos., Inc. 12,000 716,400 Viacom, Inc. 46,100 2,045,457 ------------ 2,761,857 ------------ CAPITAL GOODS -- 3.55% Illinois Tool Works, Inc. 33,700 2,301,710 Pentair, Inc. 27,300 1,312,584 ------------ 3,614,294 ------------ CHEMICALS -- 4.99% Dow Chemical Co. 32,700 1,124,226 Eastman Chemical Co. 17,150 804,335 Exxon Mobil Corp. 46,400 1,898,688 IMC Global, Inc. 54,900 686,250 Waters Corp. 21,200 566,040 ------------ 5,079,539 ------------ COMPUTER SOFTWARE -- 3.17% BEA Systems, Inc. (b) 44,800 426,048 Microsoft Corp. (b) 51,100 2,795,170 ------------ 3,221,218 ------------ COMPUTER SYSTEMS -- 2.43% Electronic Data Systems Corp. 42,300 1,571,445 Hewlett-Packard Co. 59,088 902,865 ------------ 2,474,310 ------------ CONSTRUCTION -- 1.23% Martin Marietta Materials, Inc. 32,007 1,248,273 ------------ CONSUMER -- 0.89% Kimberly-Clark Corp. 14,650 908,300 ------------ ELECTRIC COMPONENTS -- 2.51% Advanced Micro Devices, Inc. 45,300 440,316 Intel Corp. 60,200 1,099,854 Texas Instruments, Inc. 42,900 1,016,730 ------------ 2,556,900 ------------ ENERGY -- 6.18% Conoco, Inc. 41,600 1,156,480 Exelon Corp. 27,800 1,453,940 FirstEnergy Corp. 48,545 1,620,432 Kerr-McGee Corp. 9,500 508,725 Progress Energy, Inc. 20,500 1,066,205 Sempra Energy 21,700 480,221 ------------ 6,286,003 ------------ FINANCIAL SERVICES -- 10.69% American International Group, Inc. 31,759 $ 2,166,917 Anthem Insurance (b) 20,000 1,349,600 Freddie Mac 37,000 2,264,400 JP Morgan Chase & Co. 48,900 1,658,688 Morgan Stanley 32,200 1,387,176 The Hartford Financial Services Group 13,000 773,110 U.S. Bancorp 54,400 1,270,240 ------------ 10,870,131 ------------ HEALTH: DRUGS -- 9.62% Abbott Laboratories, Inc. 47,450 1,786,492 Allergan, Inc. 35,300 2,356,275 Bristol-Myers Squibb Co. 23,900 614,230 Cephalon, Inc. (b) 22,700 1,026,040 SICOR, Inc. (b) 82,900 1,536,966 Wyeth, Inc. 48,200 2,467,840 ------------ 9,787,843 ------------ HEALTH: NON-DRUGS -- 7.10% Baxter International, Inc. 22,500 1,000,125 Beckman Coulter, Inc. 28,900 1,442,110 Johnson & Johnson 45,644 2,385,355 United Health Group, Inc. 26,100 2,389,455 ------------ 7,217,045 ------------ HOUSING/PAPER -- 2.82% American Standard Companies, Inc. (b) 22,400 1,682,240 Kroger Co. (b) 59,800 1,190,020 ------------ 2,872,260 ------------ INDUSTRIAL COMPONENTS -- 1.21% Ingersoll-Rand Co. 26,900 1,228,254 ------------ INTERNET SERVICES -- 0.08% Sapient Corp. 75,400 79,924 ------------ METALS-NON-FERROUS -- 2.47% Masco Corp. 92,800 2,515,808 ------------ RECREATION -- 1.03% Royal Caribbean Cruises Ltd. 53,500 1,043,250 ------------ RETAIL/APPAREL -- 4.92% Costco Wholesale Corp. (b) 39,300 1,517,766 Newell Rubbermaid, Inc. 52,300 1,833,638 RadioShack Corp. 30,200 907,812 TJX Companies, Inc. 37,800 741,258 ------------ 5,000,474 ------------ SERVICES/MISCELLANEOUS -- 6.34% AOL Time Warner, Inc. (b) 32,600 479,546 Computer Sciences Corp. 11,300 540,140 First Data Corp. 19,660 731,352 Household International, Inc. 33,300 1,655,010 MeadWestvaco Corp. 26,000 872,560 Omnicom Group 32,000 1,465,600 Viad Corp. 27,150 705,900 ------------ 6,450,108 ------------ TECHNOLOGY -- 1.69% United Technologies Corp. 25,300 1,717,870 ------------ 49 SHARES VALUE ---------- ------------ TELECOMMUNICATIONS-SERVICES -- 3.38% Motorola, Inc. 78,223 $ 1,127,976 Nextel Communications, Inc. 315,100 1,011,471 SBC Communications, Inc. 42,500 1,296,250 ------------ 3,435,697 ------------ TEXTILES AND APPAREL -- 0.36% CommScope, Inc. 29,300 366,250 ------------ TRANSPORTATION -- 3.07% Burlington Northern Santa Fe Corp. 104,100 3,123,000 ------------ UTILITIES -- 2.69% CMS Energy Corp. 46,250 507,825 Consolidated Edison, Inc. 32,000 1,336,000 Entergy Corp. 20,900 886,996 ------------ 2,730,821 ------------ Total U.S. Equities (Cost $89,732,124) 99,675,192 ------------ SHORT-TERM INVESTMENTS -- 2.24% OTHER -- 1.75% UBS Supplementary Trust U.S. Cash Management Prime Fund 1,775,539 $ 1,775,539 ------------ FACE AMOUNT ---------- U.S. GOVERNMENT OBLIGATIONS -- 0.49% U.S. Treasury Bill, due 08/08/02 (c) $ 500,000 499,120 ------------ Total Short-Term Investments (Cost $2,274,594) 2,274,659 ------------ Total Investments (Cost $92,006,718) -- 100.25% (a) 101,949,851 Liabilities, less cash and other assets -- (0.25)% (248,861) ------------ Net Assets -- 100% $101,700,990 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $95,563,514; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 16,286,640 Gross unrealized depreciation (9,900,303) ------------- Net unrealized appreciation $ 6,386,337 =============
(b) Non-income producing security. (c) Held as collateral for open financial futures. % Represents a percentage of net assets. FUTURES CONTRACTS UBS U.S. Equity Fund had the following open futures contracts as of June 30, 2002:
EXPIRATION CURRENT UNREALIZED DATE COST VALUE LOSS ---------------- ------------ ------------- ----------- INDEX FUTURES BUY CONTRACTS Standard & Poor's 500, 7 contracts September 2002 $ 1,804,212 $ 1,732,675 $ (71,537) ===========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2002 was $499,120. See accompanying notes to financial statements. 50 UBS U.S. LARGE CAP EQUITY FUND The UBS U.S. Large Cap Equity Fund (Class Y shares) outperformed its benchmark for the fiscal year ending June 30, 2002, dropping 10.73% to the S&P 500 Index loss of 17.99%. Since its April 30, 1998 performance inception, the UBS U.S. Large Cap Equity Fund (Class Y) has underperformed the S&P 500, losing 3.61% compared with the S&P 500's decline of 1.46%. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment environment was challenging throughout the year, with a weak recovery and seemingly contradictory economic indicators playing havoc with investor expectations. The tragic events of September 11 caused a serious market slump, and though that was followed by a fourth-quarter rebound, corporate accounting problems and outright fraud soon brought the market down again. Rising unemployment, lower corporate profits, and shaky consumer confidence all characterized the period. The Federal Reserve eased interest rates for the first part of the fiscal year and left them where they stood -- at 1.75%, the lowest rate in four decades -- during the second portion of the period. Low interest rates fueled aggressive new car financing and mortgage refinancing, which together combined to increase consumer confidence. The Fund outperformed its benchmark, we believe, because of a combination of sector and stock selection. As the fiscal year ended, our largest overweights were in utilities, health care and pharmaceuticals, financial services, and transportation. We have also made significant investments during the review period in materials, capital goods, and information services. We have avoided retail, computer hardware and software, telecommunications, and energy. Concern over consumer confidence is our reason for avoiding retail; we are watchful for the possibility that lower company profits may prompt further layoffs, weakening consumer spending. We are equally cautious in the telecommunications equipment sector, where a difficult environment for wireline equipment sales continues. Wise stock selection within our overweighted categories contributed to Fund performance. Within the financial services sector, we have invested in Greenpoint Financial, a specialty finance company in New York State that recently announced its intention to exit the manufactured housing finance business. The manufactured housing business has long been the most glaring negative for this stock, so the company's planned change is good news. Its mortgage business -- and that of banks in general -- is robust, with generally strong credit quality. Wells Fargo, another of our bank sector holdings, has also benefited from a strong mortgage market. The company enjoys solid credit quality, improving consumer quality, stabilizing commercial quality, good reserve levels, and loan portfolios that are among the best in the industry. We expect Wells Fargo's earnings growth per share to reach an annual 12% to 13%, in part because of their emphasis on cross-selling products. In general we feel that financial services will grow faster than gross domestic product, driven by intergenerational wealth transfer and the trend toward consolidation. This will give market leaders more pricing power and market share. Our utility holdings include CMS Energy, Consolidated Edison, Entergy, Exelon, First Energy, and Progress Energy. We feel that the electric energy sector has excellent price/ value ratios. The Fund has made key investments in the pharmaceutical sector, including Johnson & Johnson, Cephalon, Abbott Laboratories, and Baxter International. We feel that the overall aging of the American population, and the Baby Boomers in particular, will join increased research and development to benefit this sector. We are particularly interested in firms with strong research and development pipelines. We are hopeful that the current round of corporate accounting and fraud scandals will fade, leaving a view of the market's fundamental soundness. Barring a major crisis in investor confidence, we hope to see stronger corporate profits and a return to capital spending. We believe that investors have become overly pessimistic, and that to the extent that the market overreacts to problems, investors will see new opportunities to put money to work. We continue to position the Fund to take advantage of these opportunities as they arise. 51 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS A -9.19% -10.89% -8.92% -3.86% - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS B -9.69 N/A N/A -6.98 - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS C N/A N/A N/A -9.22 - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS Y -9.13 -10.73 8.69 -3.61 - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS A+ -14.20 -15.80 -10.63 -5.13 - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS B+ -14.20 N/A N/A -11.61 - ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND CLASS C+ N/A N/A N/A -11.02 - ------------------------------------------------------------------------------------------------------- S&P 500 Index -13.16 -17.99 -9.18 -1.46 - -------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. LARGE CAP EQUITY FUND CLASS A (FORMERLY CLASS N) AND CLASS Y (FORMERLY CLASS I) IS 4/06/98. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/28/01 AND 5/08/02, RESPECTIVELY. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEXT MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 4/30/98. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS U.S. Large Cap Equity Fund Class Y, and the S&P 500 Index if you had invested $1,000,000 on April 30, 1998, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. LARGE CAP EQUITY FUND CLASS Y VS. S&P 500 INDEX Wealth Value with Dividends Reinvested
UBS U.S. LARGE CAP EQUITY FUND CLASS Y S&P 500 INDEX ------------------- ------------- 4/30/98 $ 1,000,000 $ 1,000,000 5/31/98 $ 967,000 $ 982,810 6/30/98 $ 981,675 $ 1,022,732 7/31/98 $ 963,644 $ 1,011,840 8/31/98 $ 836,427 $ 865,548 9/30/98 $ 901,538 $ 920,995 10/31/98 $ 967,651 $ 995,909 11/30/98 $ 1,008,721 $ 1,056,263 12/31/98 $ 1,040,705 $ 1,117,132 1/31/99 $ 1,047,764 $ 1,163,846 2/28/99 $ 1,014,485 $ 1,127,677 3/31/99 $ 1,039,696 $ 1,172,792 4/30/99 $ 1,128,439 $ 1,218,210 5/31/99 $ 1,095,160 $ 1,189,443 6/30/99 $ 1,124,414 $ 1,255,453 7/31/99 $ 1,073,901 $ 1,216,262 8/31/99 $ 1,042,583 $ 1,210,249 9/30/99 $ 951,660 $ 1,177,076 10/31/99 $ 948,630 $ 1,251,561 11/30/99 $ 939,537 $ 1,277,005 12/31/99 $ 925,720 $ 1,352,230 1/31/00 $ 857,401 $ 1,284,290 2/29/00 $ 774,280 $ 1,259,977 3/31/00 $ 839,183 $ 1,383,240 4/30/00 $ 869,926 $ 1,341,634 5/31/00 $ 884,729 $ 1,314,112 6/30/00 $ 855,097 $ 1,346,507 7/31/00 $ 852,810 $ 1,325,456 8/31/00 $ 914,542 $ 1,407,782 9/30/00 $ 885,962 $ 1,333,457 10/31/00 $ 932,833 $ 1,327,821 11/30/00 $ 911,112 $ 1,223,145 12/31/00 $ 945,879 $ 1,229,131 1/31/01 $ 986,801 $ 1,272,740 2/28/01 $ 955,232 $ 1,156,692 3/31/01 $ 926,002 $ 1,083,414 4/30/01 $ 954,063 $ 1,167,606 5/31/01 $ 977,447 $ 1,175,441 6/30/01 $ 958,733 $ 1,146,831 7/31/01 $ 955,217 $ 1,135,541 8/31/01 $ 918,884 $ 1,064,454 9/30/01 $ 853,249 $ 978,496 10/31/01 $ 859,109 $ 997,155 11/30/01 $ 922,400 $ 1,073,643 12/31/01 $ 941,828 $ 1,083,049 1/31/02 $ 938,296 $ 1,067,244 2/28/02 $ 930,055 $ 1,046,662 3/31/02 $ 964,196 $ 1,086,026 4/30/02 $ 930,055 $ 1,020,183 5/31/02 $ 920,637 $ 1,012,667 6/30/02 $ 855,886 $ 940,525
4/30/98 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 52 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - --------------------------------------------------- Wells Fargo & Co. 4.2% Masco Corp. 4.0 Illinois Tool Works, Inc. 3.8 United Health Group, Inc. 3.7 Freddie Mac 3.6 Wyeth, Inc. 3.4 Microsoft Corp. 3.4 Burlington Northern Santa Fe Corp. 3.4 Citigroup, Inc. 3.3 Newell Rubbermaid, Inc. 3.0 - --------------------------------------------------- Total 35.8%
53 UBS U.S. LARGE CAP EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE ---------- ------------ U.S. EQUITIES -- 96.84% BANKS -- 11.32% Citigroup, Inc. 2,696 $ 104,470 FleetBoston Financial Corp. 2,085 67,450 PNC Financial Services Group 1,000 52,280 Wells Fargo & Co. 2,600 130,156 ------------ 354,356 ------------ BROADCASTING & PUBLISHING -- 3.86% McGraw-Hill Cos., Inc. 500 29,850 Viacom, Inc. 2,050 90,959 ------------ 120,809 ------------ CAPITAL GOODS -- 3.82% Illinois Tool Works, Inc. 1,750 119,525 ------------ CHEMICALS -- 4.07% Dow Chemical Co. 1,150 39,537 Exxon Mobil Corp. 2,150 87,978 ------------ 127,515 ------------ COMPUTER SOFTWARE -- 3.41% Microsoft Corp. (b) 1,950 106,665 ------------ COMPUTER SYSTEMS -- 3.31% Electronic Data Systems Corp. 1,600 59,440 Hewlett-Packard Co. 2,892 44,190 ------------ 103,630 ------------ ELECTRIC COMPONENTS -- 2.87% Intel Corp. 2,200 40,194 Texas Instruments, Inc. 2,100 49,770 ------------ 89,964 ------------ ENERGY -- 8.02% American Electric Power Co., Inc. 1,010 40,420 Conoco, Inc. 2,300 63,940 FirstEnergy Corp. 1,900 63,422 Progress Energy, Inc. 1,600 83,216 ------------ 250,998 ------------ FINANCIAL SERVICES -- 10.87% American International Group, Inc. 1,142 77,919 Freddie Mac 1,850 113,220 Hartford Financial Services Group (The) 500 29,735 Morgan Stanley 1,500 64,620 U.S. Bancorp 2,350 54,872 ------------ 340,366 ------------ HEALTH: DRUGS -- 9.29% Abbott Laboratories, Inc. 2,150 80,947 Allergan, Inc. 1,150 76,763 Bristol-Myers Squibb Co. 1,000 25,700 Wyeth, Inc. 2,100 107,520 ------------ 290,930 ------------ HEALTH: NON-DRUGS -- 7.93% Baxter International, Inc. 950 $ 42,228 Johnson & Johnson 1,750 91,455 United Health Group, Inc. 1,250 114,437 ------------ 248,120 ------------ HOUSING/PAPER -- 1.30% Kroger Co. (b) 2,050 40,795 ------------ METALS-NON-FERROUS -- 4.03% Masco Corp. 4,650 126,061 ------------ RETAIL/APPAREL -- 5.25% Costco Wholesale Corp. (b) 1,800 69,516 Newell Rubbermaid, Inc. 2,700 94,662 ------------ 164,178 ------------ SERVICES/MISCELLANEOUS -- 5.29% AOL Time Warner, Inc. (b) 900 13,239 First Data Corp. 900 33,480 Household International, Inc. 1,150 57,155 Omnicom Group 1,350 61,830 ------------ 165,704 ------------ TECHNOLOGY -- 2.82% United Technologies Corp. 1,300 88,270 ------------ TELECOMMUNICATIONS-SERVICES -- 4.53% Motorola, Inc. 2,850 41,097 Nextel Communications, Inc. 13,300 42,693 SBC Communications, Inc. 1,900 57,950 ------------ 141,740 ------------ TRANSPORTATION -- 3.36% Burlington Northern Santa Fe Corp. 3,500 105,000 ------------ UTILITIES -- 1.49% Entergy Corp. 1,100 46,684 ------------ Total U.S. Equities (Cost $3,271,321) 3,031,310 ------------ SHORT-TERM INVESTMENTS -- 4.59% INVESTMENT COMPANIES -- 2.52% JPMorgan U.S. Government Money Market Fund 78,708 78,708 ------------ FACE AMOUNT ------ U.S. GOVERNMENT OBLIGATIONS 2.07% U.S. Treasury Bill, due 08/08/02 $ 65,000 64,885 ------------ Total Short-Term Investments (Cost $143,585) 143,593 ------------ Total Investments (Cost $3,414,906) -- 101.43% (a) 3,174,903 Liabilities, less cash and other assets (1.43)% (44,619) ------------ Net Assets -- 100% $ 3,130,284 ============
54 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $3,477,201; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 104,062 Gross unrealized depreciation (406,360) ------------ Net unrealized depreciation $ (302,298) ============
(b) Non-income producing security. % Represents a percentage of net assets. See accompanying notes to financial statements. 55 UBS U.S. LARGE CAP GROWTH FUND For the fiscal year ended June 30, 2002, the UBS U.S. Large Cap Growth Fund (Class Y Shares) underperformed its benchmark, the Russell 1000 Growth Index, losing 27.61%. The benchmark lost 26.49% during the same period. Since the Fund's (Class Y) October 31, 1997 performance inception date, it has returned a negative 3.33% to the benchmark's drop of 4.98%. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Fund's loss for this fiscal year occurred during a challenging period in the U.S. equities market. The recession that ended the longest economic expansion in American history was weak, with economic indicators sometimes negative and sometimes encouraging. The market plunged after the events of September 11 and, despite a year-end rebound, stayed largely negative throughout the reporting period. Corporate accounting and fraud scandals also rocked the equities market as a whole. The S&P 500 Index ended the fiscal year down 17.99%. The period began poorly for large cap growth stocks, with the technology and telecommunications stocks that make up a significant portion of this area in a continuation of their downward slide. In the third quarter of the fiscal year -- the first quarter of calendar 2002 -- large cap growth stocks closed slightly better, though the telecommunications sector was again the weakest performer. The last quarter of the fiscal year, however, showed a dramatic downturn in all segments of the growth market, and indeed in all parts of the S&P 500. The Russell 1000 lost 18.70% for the quarter; the S&P 500 lost 13.40%. Healthcare joined technology and telecommunications as the worst final-quarter growth performers, while consumer staples, energy, and financials made a somewhat better showing. Why did growth stocks lose so much more than the overall market? The major reason, we believe, is that they had more to correct than did the rest of the market -- not only their valuations, which had risen significantly during the late 1990s, but also overly optimistic Wall Street earnings expectations. We believe that investors' fear and lack of trust is contributing to a market bottom, not only for growth stocks but for the market as a whole. We continue to find attractive opportunities in many market segments. One such opportunity is among companies, such as Ebay and Amazon.com, that survived the Internet meltdown with working business models. Another is in the re-emergence of large global franchise companies, which may respond well to the weakening dollar and improving opportunities for domestic growth. Finally, the massive corrections in major health care and biotechnology companies offers opportunities we have not seen in ten years. We feel that the aging of the U.S. population -- and the Baby Boomers in particular -- will lead to a high demand for health care services, even in the face of government regulatory pressure. While recognizing these opportunities, however, we are also keenly aware that it will not be easy to find assured growth stocks in today's market. We currently hold stocks with consensus earnings growth expectations of 17% per year for the next five years. The recent earnings collapse may make this possible, but we think it is more likely that the market will discount growth rates between 10% and 12%. We hope to find companies offering this kind of growth in every sector, in niches that can be defended against competition and oversupply, and possibly in somewhat smaller companies than we have seen in the past. The shortage of assured growth in today's environment will likely make commitment to such companies particularly rewarding. 56 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS A -20.35% -27.89% -16.70% -10.53% - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS B -20.60 N/A N/A -18.61 - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS C -20.72 N/A N/A -21.91 - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS Y -20.22 -27.61 -16.40 -3.33 - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS A+ -24.76 -31.87 -18.26 -11.96 - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS B+ -24.57 N/A N/A -22.65 - ------------------------------------------------------------------------------------------------------ UBS U.S. LARGE CAP GROWTH FUND CLASS C+ -22.30 N/A N/A -23.44 - ------------------------------------------------------------------------------------------------------ Russell 1000 Growth Index -20.78 -26.49 -19.99 -4.98 - ------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. LARGE CAP GROWTH FUND CLASS A (FORMERLY CLASS N) IS 12/31/98. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/07/01 AND 11/19/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) IS 10/14/97. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEXT MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 10/31/97. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS U.S. Large Cap Growth Fund Class Y and the Russell 1000 Growth Index if you had invested $1,000,000 on October 31, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. LARGE CAP GROWTH FUND CLASS Y VS. RUSSELL 1000 GROWTH INDEX Wealth Value with Dividends Reinvested
UBS U.S. LARGE CAP GROWTH FUND CLASS Y RUSSELL 1000 GROWTH INDEX ------------------- ------------------------- 10/31/97 $ 1,000,000 $ 1,000,000 11/30/97 $ 974,700 $ 1,042,475 12/31/97 $ 994,457 $ 1,054,153 1/31/98 $ 987,141 $ 1,085,674 2/28/98 $ 1,044,772 $ 1,167,341 3/31/98 $ 1,085,865 $ 1,213,876 4/30/98 $ 1,107,113 $ 1,230,673 5/31/98 $ 1,082,758 $ 1,195,752 6/30/98 $ 1,125,054 $ 1,268,987 7/31/98 $ 1,120,944 $ 1,260,587 8/31/98 $ 931,915 $ 1,071,403 9/30/98 $ 982,549 $ 1,153,705 10/31/98 $ 1,080,574 $ 1,246,431 11/30/98 $ 1,158,653 $ 1,341,241 12/31/98 $ 1,242,076 $ 1,462,180 1/31/99 $ 1,320,754 $ 1,548,037 2/28/99 $ 1,263,057 $ 1,477,318 3/31/99 $ 1,324,951 $ 1,555,122 4/30/99 $ 1,374,256 $ 1,557,111 5/31/99 $ 1,357,471 $ 1,509,256 6/30/99 $ 1,459,229 $ 1,614,972 7/31/99 $ 1,399,433 $ 1,563,647 8/31/99 $ 1,398,384 $ 1,589,195 9/30/99 $ 1,351,177 $ 1,555,811 10/31/99 $ 1,425,659 $ 1,673,303 11/30/99 $ 1,498,044 $ 1,763,584 12/31/99 $ 1,648,623 $ 1,947,011 1/31/00 $ 1,584,653 $ 1,855,718 2/29/00 $ 1,657,601 $ 1,946,436 3/31/00 $ 1,766,461 $ 2,085,754 4/30/00 $ 1,718,204 $ 1,986,504 5/31/00 $ 1,650,867 $ 1,886,489 6/30/00 $ 1,714,837 $ 2,029,462 7/31/00 $ 1,673,313 $ 1,944,844 8/31/00 $ 1,769,828 $ 2,120,950 9/30/00 $ 1,610,465 $ 1,920,310 10/31/00 $ 1,579,042 $ 1,829,460 11/30/00 $ 1,406,211 $ 1,559,783 12/31/00 $ 1,383,265 $ 1,510,417 1/31/01 $ 1,459,240 $ 1,614,769 2/28/01 $ 1,245,725 $ 1,340,631 3/31/01 $ 1,114,734 $ 1,194,734 4/30/01 $ 1,233,936 $ 1,345,855 5/31/01 $ 1,219,527 $ 1,326,029 6/30/01 $ 1,177,609 $ 1,295,329 7/31/01 $ 1,144,862 $ 1,262,949 8/31/01 $ 1,047,928 $ 1,159,696 9/30/01 $ 941,826 $ 1,043,889 10/31/01 $ 987,672 $ 1,098,662 11/30/01 $ 1,080,676 $ 1,204,206 12/31/01 $ 1,068,546 $ 1,201,946 1/31/02 $ 1,046,148 $ 1,180,714 2/28/02 $ 998,715 $ 1,131,715 3/31/02 $ 1,032,972 $ 1,170,847 4/30/02 $ 952,600 $ 1,075,293 5/31/02 $ 932,837 $ 1,049,297 6/30/02 $ 852,465 $ 952,215
10/31/97 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 57 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - --------------------------------------------------- Microsoft Corp. 4.8% General Electric Co. 4.3 Pfizer, Inc. 3.7 Wal-Mart Stores, Inc. 3.3 Johnson & Johnson Co. 3.1 Intel Corp. 2.7 Coca-Cola Co. 2.6 Wyeth, Inc. 2.5 Citigroup, Inc. 2.4 Viacom, Inc. 2.4 - --------------------------------------------------- Total 31.8%
58 UBS U.S. LARGE CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS
SHARES VALUE ---------- ------------ U.S. EQUITIES -- 97.36% BANKS -- 4.72% Citigroup, Inc. 2,583 $ 100,091 Wells Fargo & Co. 1,900 95,114 ------------ 195,205 ------------ BIOMEDICAL -- 0.81% Amgen, Inc. (b) 800 33,504 ------------ BROADCASTING & PUBLISHING -- 3.64% McGraw-Hill Cos., Inc. 850 50,745 Viacom, Inc. 2,246 99,655 ------------ 150,400 ------------ CAPITAL GOODS -- 0.99% Illinois Tool Works, Inc. 600 40,980 ------------ CHEMICALS -- 0.74% Waters Corp. 1,150 30,705 ------------ COMPUTER SOFTWARE -- 5.43% Microsoft Corp. (b) 3,600 196,920 Oracle Corp. (b) 2,050 19,414 Veritas Software Corp. (b) 400 7,916 ------------ 224,250 ------------ COMPUTER SYSTEMS -- 3.44% Dell Computer Corp. (b) 2,700 70,578 Electronic Data Systems Corp. 400 14,860 Hewlett-Packard Co. 2,308 35,266 International Business Machines Corp. 300 21,600 ------------ 142,304 ------------ CONSUMER -- 0.74% Philip Morris Companies, Inc. 700 30,576 ------------ ELECTRIC COMPONENTS -- 7.68% Agilent Technologies, Inc. (b) 1,100 26,015 Applied Materials, Inc. (b) 2,550 48,501 Intel Corp. 6,150 112,360 Micron Technology, Inc. (b) 750 15,165 Novellus Systems, Inc. (b) 650 22,100 Solectron Corp. (b) 3,600 22,140 Texas Instruments, Inc. 3,000 71,100 ------------ 317,381 ------------ ENERGY -- 4.48% Anadarko Petroleum Corp. 1,350 66,555 Phillips Petroleum Co. 950 55,936 Schlumberger Ltd. 1,350 62,775 ------------ 185,266 ------------ FINANCIAL SERVICES -- 5.53% American Express Co. 550 19,976 American International Group, Inc. 1,137 77,578 Freddie Mac 1,050 64,260 Morgan Stanley 1,550 66,774 ------------ 228,588 ------------ FOOD & HOUSE PRODUCTS -- 2.64% Coca-Cola Co. 1,950 109,200 ------------ HEALTH: DRUGS -- 10.97% Abbott Laboratories, Inc. 1,650 $ 62,122 Allergan, Inc. 750 50,063 Cephalon, Inc. (b) 800 36,160 Immunex Corp. (b) 1,400 31,276 Pfizer, Inc. 4,350 152,250 SICOR, Inc. (b) 900 16,686 Wyeth, Inc. 2,050 104,960 ------------ 453,517 ------------ HEALTH: NON-DRUGS -- 11.26% Baxter International, Inc. 1,800 80,010 Beckman Coulter, Inc. 1,150 57,385 Guidant Corp. (b) 1,700 51,391 Johnson & Johnson 2,422 126,574 Medtronic, Inc. 1,500 64,275 Wellpoint Health Networks (b) 1,100 85,591 ------------ 465,226 ------------ HOUSING/PAPER -- 0.75% Kroger Co. (b) 1,550 30,845 ------------ INVESTMENT COMPANIES -- 0.49% iShares Russell 1000 Growth Index Fund 500 20,100 ------------ METALS-NON-FERROUS -- 1.31% Masco Corp. 2,000 54,220 ------------ MULTI-INDUSTRY -- 5.51% General Electric Co. 6,150 178,657 Proctor & Gamble Co. 550 49,115 ------------ 227,772 ------------ NON-DURABLES -- 1.27% Pepsi Bottling Group, Inc. 1,700 52,360 ------------ RETAIL/APPAREL -- 8.09% Newell Rubbermaid, Inc. 1,450 50,837 RadioShack Corp. 2,300 69,138 TJX Companies, Inc. 4,050 79,421 Wal-Mart Stores, Inc. 2,450 134,774 ------------ 334,170 ------------ SERVICES/MISCELLANEOUS -- 8.93% Amazon.com, Inc. (b) 2,000 32,500 AOL Time Warner, Inc. (b) 4,850 71,343 Cendant Corp. (b) 2,800 44,464 eBay, Inc. (b) 550 33,891 First Data Corp. 1,700 63,240 Gemstar-TV Guide International, Inc. (b) 1,650 8,894 Household International, Inc. 750 37,275 Omnicom Group 650 29,770 Pitney Bowes, Inc. 1,200 47,664 ------------ 369,041 ------------ TECHNOLOGY -- 2.16% Analog Devices, Inc. (b) 1,400 41,580 United Technologies Corp. 700 47,530 ------------ 89,110 ------------ 59 SHARES VALUE ---------- ------------ TELECOMMUNICATIONS EQUIPMENT -- 3.36% Cisco Systems, Inc. (b) 6,500 $ 90,675 QUALCOMM, Inc. (b) 1,750 48,108 ------------ 138,783 ------------ TELECOMMUNICATIONS SERVICES -- 2.42% Echostar Communications Corp. (b) 2,950 54,752 Motorola, Inc. 3,150 45,423 ------------ 100,175 ------------ Total U.S. Equities (Cost $5,254,315) 4,023,678 ------------ SHORT-TERM INVESTMENTS -- 7.12% INVESTMENT COMPANIES -- 7.12% JPMorgan U.S. Government Money Market Fund (Cost $293,968) 293,968 $ 293,968 ------------ Total Investments (Cost $5,548,283) -- 104.48% (a) 4,317,646 Liabilities, less cash and other assets -- (4.48)% (184,968) ------------ Net Assets -- 100% $ 4,132,678 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $5,912,676; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 72,949 Gross unrealized depreciation (1,667,979) ------------ Net unrealized depreciation $ (1,595,030) ============
(b) Non-income producing security. % Represents a percentage of net assets. See accompanying notes to financial statements. 60 UBS U.S. SMALL CAP GROWTH FUND For the year ended June 30, 2002, the UBS U.S. Small Cap Growth Fund (Class Y shares) declined 12.90%. The Fund outperformed its benchmark, the Russell 2000 Growth Index, which lost 25.00% during the same period. Since the Fund's (Class Y) inception on September 30, 1997, it has gained 5.08% to the benchmark's loss of 7.77%. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Fund's loss for this fiscal year occurred against a background of volatility and loss for the U.S. equities market. The recession that ended the longest economic expansion in American history was weak and unconvincing, with economic indicators sometimes negative and sometimes encouraging. Corporate accounting problems and outright fraud combined to increase investor skittishness. The market plunged after the events of September 11 and, despite a year-end rebound, stayed largely negative throughout the reporting period. The S&P 500 Index ended the fiscal year down 17.99%. Small cap growth stocks ended calendar 2001 in a strong position. These equities experienced a briefly negative period after the events of September 11, but rebounded sharply in the fourth quarter of the year. During that quarter small cap growth stocks returned 26.2% to small cap value's 7.4% (based on performance of the Russell 2000 Growth Index and Russell 2000 Value Index, respectively). Even so, the first quarter began poorly, with the Russell 2000 Growth Index down 2.0%. In the calendar year's second quarter the Russell 2000 Growth Index fell further, losing 15.7%. (The Russell 2000 Value Index, by contrast, lost just 2.1% in the same period.) In fact, the Russell 2000 Growth Index lost 24.4% between March 31, 2000 and June 30, 2002, while its value counterpart gained 17.8%. Growth stock underperformance is at its worst relative level in two decades, and we find it difficult to predict when a sector recovery will commence. We were pleased to outperform the Fund benchmark in this dismal environment, and attribute our ability to do so to our focus on higher quality growth stocks. In general the Fund holds equities that are slightly larger, more liquid, and less volatile than their counterparts in the Russell 2000 Growth Index. We also favor strongly performing companies with what we believe are excellent fundamentals and reasonable valuations. We also credit sector selection for some of our outperformance. Our largest overweights are in the financial, consumer staples, and healthcare sectors; our largest underweights are in the areas of information technology, consumer discretionary, and telecommunications. As the economy stabilizes we intend to further lower our technology underweight. Though we continue to find it difficult to predict when small cap growth stocks will begin to recover, we have several reasons for optimism. Investor confidence in an ongoing economic recovery is increasing, and small cap stocks have historically outperformed their large cap counterparts during such periods. As the last two recessions ended, for instance, small cap stocks beat large cap stocks by an average 25% in the last six months of the recession and by 10% in the six months following an economic slowdown. Growth has also typically beaten value as the economy exited a recession. Of course, past performance is no guarantee of future results. Another reason for optimism lies in small cap valuations, which remain inexpensive by historical standards compared with large cap valuations. Small cap valuations relative to their large cap counterparts remain below long-term averages, and small cap earnings gains continue to outpace large cap profit growth. Because small cap stocks have typically sold at large premiums to large cap stocks at the end of small cap outperformance cycles, we think there is room for continued relative upside. Finally, small cap growth stocks have generally outperformed during weak dollar periods. Although some cite the weakening dollar as a problem for small caps, which are generally domestically oriented, we think that there is reason for hope as the dollar comes off its historic highs. All these factors -- economic recovery, small cap valuations, and a weaker dollar -- combine to make us more optimistic that the stage is set for a potential recovery in small cap growth stocks. 61 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS A -7.72% -13.18% 10.97% 10.60% - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS B -8.10 N/A N/A -0.11 - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS C -8.11 N/A N/A -2.04 - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS Y -7.72 -12.90 11.28 5.08 - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS A+ -12.81 -17.92 8.91 8.83 - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS B+ -12.69 N/A N/A -4.91 - ----------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS C+ -9.97 N/A N/A -3.92 - ----------------------------------------------------------------------------------------------------- Russell 2000 Growth Index -17.35 -25.00 -12.87 -7.77 - -----------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. SMALL CAP GROWTH FUND CLASS A (FORMERLY CLASS N) IS 12/31/98. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/07/01 AND 11/19/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) AND THE RUSSELL 2000 GROWTH INDEX IS 9/30/97. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR REPRESENT AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. THE FUND INVESTS IN IPOS WHICH MAY HAVE A MAGNIFIED IMPACT ON PERFORMANCE. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS U.S. Small Cap Growth Fund Class Y and the Russell 2000 Growth Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. SMALL CAP GROWTH FUND CLASS Y VS. RUSSELL 2000 GROWTH INDEX Wealth Value with Dividends Reinvested
UBS U.S. SMALL CAP GROWTH FUND (CLASS Y) RUSSELL 2000 GROWTH INDEX --------------------- ------------------------- 9/30/97 $ 1,000,000 $ 1,000,000 10/31/97 $ 953,600 $ 939,937 11/30/97 $ 936,600 $ 917,525 12/31/97 $ 943,800 $ 918,043 1/31/98 $ 932,700 $ 905,796 2/28/98 $ 1,007,600 $ 985,767 3/31/98 $ 1,049,900 $ 1,027,116 4/30/98 $ 1,047,200 $ 1,033,415 5/31/98 $ 990,700 $ 958,334 6/30/98 $ 971,100 $ 968,127 7/31/98 $ 887,800 $ 887,283 8/31/98 $ 700,200 $ 682,460 9/30/98 $ 739,372 $ 751,655 10/31/98 $ 788,803 $ 790,859 11/30/98 $ 807,515 $ 852,209 12/31/98 $ 880,562 $ 929,328 1/31/99 $ 881,563 $ 971,130 2/28/99 $ 807,515 $ 882,295 3/31/99 $ 825,527 $ 913,719 4/30/99 $ 823,526 $ 994,410 5/31/99 $ 859,549 $ 995,985 6/30/99 $ 918,586 $ 1,048,449 7/31/99 $ 926,591 $ 1,016,028 8/31/99 $ 906,579 $ 978,029 9/30/99 $ 938,599 $ 996,894 10/31/99 $ 974,622 $ 1,022,429 11/30/99 $ 1,127,720 $ 1,130,536 12/31/99 $ 1,247,796 $ 1,329,796 1/31/00 $ 1,212,774 $ 1,317,421 2/29/00 $ 1,405,897 $ 1,623,938 3/31/00 $ 1,526,975 $ 1,453,236 4/30/00 $ 1,472,940 $ 1,306,510 5/31/00 $ 1,377,879 $ 1,192,108 6/30/00 $ 1,628,039 $ 1,346,106 7/31/00 $ 1,543,985 $ 1,230,743 8/31/00 $ 1,757,122 $ 1,360,205 9/30/00 $ 1,725,101 $ 1,292,632 10/31/00 $ 1,671,067 $ 1,187,702 11/30/00 $ 1,379,881 $ 972,058 12/31/00 $ 1,527,863 $ 1,031,536 1/31/01 $ 1,563,395 $ 1,115,029 2/28/01 $ 1,378,385 $ 962,189 3/31/01 $ 1,249,736 $ 874,708 4/30/01 $ 1,416,367 $ 981,791 5/31/01 $ 1,421,268 $ 1,004,532 6/30/01 $ 1,453,124 $ 1,031,927 7/31/01 $ 1,378,385 $ 943,892 8/31/01 $ 1,310,997 $ 884,948 9/30/01 $ 1,151,717 $ 742,155 10/31/01 $ 1,219,105 $ 813,554 11/30/01 $ 1,303,646 $ 881,463 12/31/01 $ 1,371,636 $ 936,343 1/31/02 $ 1,346,118 $ 903,031 2/28/02 $ 1,307,839 $ 844,585 3/31/02 $ 1,412,467 $ 917,996 4/30/02 $ 1,393,327 $ 898,135 5/31/02 $ 1,333,358 $ 845,622 6/30/02 $ 1,265,733 $ 773,913
9/30/97 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 62 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ------------------------------------------------------ Career Education Corp. 3.3% Patterson Dental Co. 3.2 New York Community Bancorp, Inc. 2.7 CACI International, Inc. 2.6 Constellation Brands, Inc. 2.3 Investors Financial Services Corp. 2.3 Cognizant Technology Solutions Corp. 2.0 Emcor Group, Inc. 2.0 Copart, Inc. 2.0 UCBH Holdings, Inc. 2.0 - ------------------------------------------------------ Total 24.4%
63 UBS U.S. SMALL CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE ---------- ------------ U.S. EQUITIES -- 92.26% AEROSPACE & DEFENSE -- 0.65% Engineered Support Systems 4,900 $ 256,270 ------------ AIRFREIGHT & LOGISTICS -- 0.51% Forward Air Corp. (b) 6,100 199,958 ------------ AIRLINES -- 1.41% Atlantic Coast Airlines Holdings, Inc. 25,400 551,180 ------------ APPLICATION SOFTWARE -- 3.97% Fair, Isaac & Company, Inc. 17,100 562,077 Mercury Interactive Corp. (b) 10,200 234,192 THQ, Inc. 17,350 517,377 Verisity Ltd. 13,900 241,026 ------------ 1,554,672 ------------ AUTO PARTS & EQUIPMENT -- 1.40% American Axle & Mfg Holdings, Inc. 18,500 550,190 ------------ BANKS -- 10.13% BankUnited Financial Corp. 8,300 158,945 Greater Bay Bancorp 16,000 492,160 Harbor Florida Bancshares, Inc. 5,700 126,483 Investors Financial Services Corp. 27,200 912,288 New York Community Bancorp, Inc. 38,871 1,037,078 Sterling Bancshares, Inc. 31,500 465,255 UCBH Holdings, Inc. 20,400 775,404 ------------ 3,967,613 ------------ BIOTECHNOLOGY -- 3.85% Biomarin Pharmaceutical, Inc. (b) 26,100 136,216 Cubist Pharmaceuticals, Inc. (b) 12,500 117,625 Ilex Oncology, Inc. (b) 14,200 200,078 Medarex, Inc. (b) 22,600 167,692 Neurocrine Biosciences, Inc. (b) 7,500 214,875 Regeneron Pharmaceuticals, Inc. (b) 2,400 34,824 Sangstat Medical Corp. (b) 11,200 257,376 Scios, Inc. (b) 12,400 379,564 ------------ 1,508,250 ------------ BROADCASTING & CABLE TV -- 1.66% Cumulus Media, Inc. 30,100 414,778 Salem Communications Holding 9,500 236,265 ------------ 651,043 ------------ CONSTRUCTION & ENGINEERING -- 2.20% EMCOR Group, Inc. 13,300 780,710 Shaw Group, Inc. (b) 2,600 79,820 ------------ 860,530 ------------ DISTILLER & VINTNERS -- 2.34% Constellation Brands, Inc. 28,600 915,200 ------------ DIVERSIFIED FINANCIALS -- 1.37% Jones Lang Lasalle, Inc. 21,800 538,460 ------------ DIVERSIFIED METAL/MINING -- 0.19% Arch Coal, Inc. 3,200 72,672 ------------ ELECTRIC COMPONENTS -- 1.31% Smith, A. O. 16,500 514,965 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.86% Benchmark Electronics, Inc. (b) 13,800 $ 400,200 Cognex Corp. 24,800 497,240 Planar Systems, Inc. 31,900 614,075 ------------ 1,511,515 ------------ FOOD DISTRIBUTORS -- 1.20% Performance Food Group Co. 13,900 470,654 ------------ HEALTH CARE EQUIPMENT & SUPPLIES -- 1.03% Cytyc Corp. (b) 11,600 88,392 ResMed, Inc. (b) 10,700 314,580 ------------ 402,972 ------------ HEALTHCARE DISTRIBUTOR SERVICES -- 8.22% Dianon Systems, Inc. 8,500 454,070 Fisher Scientific International, Inc. 10,000 280,000 Orthodontic Centers of America, Inc. (b) 4,300 99,115 Patterson Dental Co. (b) 24,900 1,253,217 Pediatrix Medical Group, Inc. (b) 20,900 522,500 Pharmaceutical Product Development, Inc. 17,900 471,486 Syncor International Corp. 4,400 138,600 ------------ 3,218,988 ------------ HEALTHCARE FACILITY -- 1.52% Province Healthcare Co. (b) 26,600 594,776 ------------ HOMEBUILDING -- 1.15% Beazer Homes U.S.A. Inc. 2,000 160,000 NVR, Inc. 900 290,700 ------------ 450,700 ------------ INSURANCE BROKERS -- 1.46% Hilb, Rogal & Hamilton Co. 6,500 294,125 Hub International Ltd. 18,500 278,980 ------------ 573,105 ------------ INTERNET SOFTWARE & SERVICES -- 2.21% I-Many, Inc. 22,200 61,028 Intercept Group, Inc. 16,500 341,880 Overture Services, Inc. 18,900 461,160 ------------ 864,068 ------------ IT CONSULTING & SERVICES -- 5.09% Anteon International Corp. 6,400 161,792 CACI International, Inc. 27,000 1,031,130 Cognizant Technology Solutions Corp. 14,900 800,875 ------------ 1,993,797 ------------ LEISURE PRODUCTS -- 1.22% Action Performance Companies, Inc. 12,600 398,160 Nautilus Group, Inc. (b) 2,600 79,560 ------------ 477,720 ------------ MACHINERY INDUSTRIAL -- 2.47% ESCO Technologies, Inc. 12,200 427,000 Flowserve Corp. 17,800 530,440 Global Power Equipment Group, Inc. 1,000 9,900 ------------ 967,340 ------------ 64 SHARES VALUE ---------- ------------ OIL & GAS EXPLORATION & PRODUCTION -- 1.25% Stone Energy Corp. (b) 10,200 $ 410,550 Vintage Petroleum, Inc. 6,700 79,730 ------------ 490,280 ------------ OIL & GAS-DRILLING -- 1.74% Patterson-UTI Energy, Inc. (b) 24,200 683,166 ------------ OIL & GAS-EQUIPMENT SERVICES -- 1.47% Tetra Technologies, Inc. 21,700 576,135 ------------ PHARMACEUTICALS -- 3.12% Isis Pharmaceuticals, Inc. 19,100 181,641 NPS Pharmaceuticals, Inc. (b) 3,900 59,748 Penwest Pharmaceuticals Co. 23,900 466,050 SICOR, Inc. (b) 27,700 513,558 ------------ 1,220,997 ------------ REITS EQ HEALTHCARE -- 0.96% Ventas, Inc. 29,600 377,400 ------------ REITS EQ RETAIL -- 1.04% Mills Corp. 13,100 406,100 ------------ RESTAURANTS -- 2.45% Panera Bread Co. (b) 13,200 455,004 Ruby Tuesday, Inc. 26,000 504,400 ------------ 959,404 ------------ RETAIL-COMPUTERS/ELECTRONICS -- 1.29% Electronics Boutique PLC 17,200 503,960 ------------ RETAIL/APPAREL -- 2.07% Aeropostale, Inc. 3,500 95,795 Chico's FAS, Inc. 19,650 713,688 ------------ 809,483 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 1.10% Rudolph Technologies, Inc. (b) 15,800 393,894 Ultratech Stepper, Inc. (b) 2,400 38,856 ------------ 432,750 ------------ SEMICONDUCTORS -- 3.42% Exar Corp. (b) 25,200 $ 496,944 Intersil Holding Corp. (b) 18,352 392,366 Pericom Semiconductor Corp. 38,900 450,851 ------------ 1,340,161 ------------ SERVICES-DATA PROCESSING -- 1.15% Factset Research Systems, Inc. 15,200 452,504 ------------ SERVICES-DIVERSIFIED COMMERCIAL -- 3.32% Career Education Corp. 28,900 1,300,500 ------------ SERVICES-OFFICE/SUPPLIES -- 0.83% Moore Corp. Ltd. 28,200 323,736 ------------ SOFT DRINKS -- 1.01% Cott Corp. 20,800 394,992 ------------ SPECIALTY STORES -- 4.36% Copart, Inc. 48,050 779,851 Gart Sports Co. 12,100 344,729 Petco Animal Supplies, Inc. 23,500 585,385 ------------ 1,709,965 ------------ SYSTEMS SOFTWARE -- 1.24% Borland Software Corp. 47,000 484,100 ------------ WIRELESS TELECOMMUNICATION SERVICES -- 0.02% Triton PCS Holdings, Inc. (b) 1,600 6,240 ------------ Total U.S. Equities ($34,050,927) 36,138,511 ------------ SHORT-TERM INVESTMENTS -- 7.92% OTHER -- 7.92% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $3,103,143) 3,103,143 3,103,143 ------------ Total Investments (Cost $37,154,070) -- 100.18% (a) 39,241,654 Liabilities, less cash and other assets -- (0.18)% (69,275) ------------ Net Assets -- 100% $ 39,172,379 ============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $37,410,411; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 5,813,687 Gross unrealized depreciation (3,982,444) ------------ Net unrealized appreciation $ 1,831,243 ============
(b) Non-income producing. % Represents a percentage of net assets. See accompanying notes to financial statements. 65 UBS U.S. BOND FUND For the fiscal year ended June 30, 2002, the UBS U.S. Bond Fund Class Y shares gained 8.59%, slightly ahead of its new benchmark, the Lehman U.S. Aggregate Index, which gained 7.53%. Since its inception on August 31, 1995, Class Y shares of the Fund have produced an annualized return of 7.09%. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. An uncertain economy, unrest overseas, corporate governance issues and the September 11 attacks on the U.S. mainland marked a volatile fiscal year in the markets. The Federal Reserve cut interest rates 11 times by a total of 4.75% in 2001, attempting to resuscitate an economy that was cooling off dramatically at the start of the fiscal year. By year's end, the federal funds rate stood at 1.75%, its lowest level in 40 years. Throughout the fiscal period, low interest rates produced a consumer rush to refinance their mortgages. This led to a volatile prepayment atmosphere in the mortgage-backed securities market, resulting in poor performance in this sector. Then with the country in a recession, the September terrorists' attacks jolted the economy further, sending equities down dramatically in its immediate aftermath and accelerating a flight to safety into bonds by investors. A stock market rally at the end of 2001 and into early 2002 proved to be short-lived, as impressive economic growth of 5.0%, measured by gross domestic product, marked the first quarter. As the Fed held its federal funds rate steady, the economy produced mixed signals during the second quarter. Stock prices fell again and consumer and investor confidence waned, even as indicators showed economic growth. The Institute of Supply Management's index rose above 50 in January after 18 months below the mark, then began to drop near 50 again toward the end of the fiscal year. A mark above 50 signifies economic expansion. During this time, the yield curve between the 2-year note and 30-year bond continued to steepen, with the difference between two and ten years approaching 200 basis points, a level it reached in January. During the fiscal year, investment-grade yields steepened their spread against Treasurys and performed well, despite bankruptcies by Enron and other high-profile companies. Agency debt also saw an increased flow of money, benefiting from investors' flight to safety away from equities and below-investment grade debt. Continued questions about the strength of an economic recovery, the Fed's non-action on interest rates and a continued influx of money from investors nervous about the equity markets will likely keep yields low into the summer. Yield curve management, sector allocation and security selection all played a part in the Fund's positive performance during the fiscal year. In particular, an overweight in the investment-grade sector perked up performance. A longer-than-average duration also played a role in the results, as did an emphasis on short-duration mortgages. Going forward, we believe that the yield curve will begin to shrink and outflows will increase once investors are ready to move money into equities again. Geopolitical risk and a recovery that has yet to gain speed are two factors that could drastically alter this outlook. 66 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS A 3.36% 8.41% 7.37% 7.03% 7.03% - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS B 3.04 N/A N/A N/A 0.70 - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS C 3.09 N/A N/A N/A 0.72 - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS Y 3.57 8.59 7.69 7.30 7.09 - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS A+ -1.28 3.50 5.72 6.06 6.05 - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS B+ -1.96 N/A N/A N/A -4.18 - ---------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS C+ 1.27 N/A N/A N/A -1.03 - ---------------------------------------------------------------------------------------------------- ++Lehman U.S. Aggregate Index 4.20 7.53 8.69 7.25 7.41 - ---------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 3.76 8.68 8.11 7.58 7.32 - ----------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. BOND FUND CLASS A (FORMERLY CLASS N) IS 6/30/97. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/06/01 AND 11/08/01, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I), THE LEHMAN U.S. AGGREGATE INDEX AND THE SALOMON SMITH BARNEY (BIG) BOND INDEX IS 8/31/95. + RETURNS INCLUDE SALES CHARGES. ++ AS OF APRIL 1, 2002, THE FUND'S BENCHMARK INDEX WAS CHANGED TO THE LEHMAN U.S. AGGREGATE INDEX BECAUSE IT IS A MORE BROAD BASED INDEX FOR THE FUND. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS U.S. Bond Fund Class Y, the Lehman U.S. Aggregate Index and the Salomon Smith Barney (BIG) Bond Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. BOND FUND CLASS Y VS. LEHMAN U.S. AGGREGATE INDEX AND SALOMON SMITH BARNEY (BIG) BOND INDEX Wealth Value with Dividends Reinvested
UBS U.S. BOND LEHMAN U.S. SALOMON SMITH BARNEY FUND CLASS Y AGGREGATE INDEX (BIG) BOND INDEX ------------- --------------- -------------------- 8/31/95 $ 1,000,000 $ 1,009,700 $ 1,000,000 9/30/95 $ 1,009,000 $ 1,022,826 $ 1,009,400 10/31/95 $ 1,024,000 $ 1,038,168 $ 1,022,926 11/30/95 $ 1,040,000 $ 1,052,703 $ 1,038,884 12/31/95 $ 1,054,932 $ 1,059,651 $ 1,053,220 1/31/96 $ 1,061,071 $ 1,041,213 $ 1,060,382 2/29/96 $ 1,038,561 $ 1,033,924 $ 1,042,462 3/31/96 $ 1,031,398 $ 1,028,134 $ 1,034,956 4/30/96 $ 1,023,213 $ 1,026,078 $ 1,027,297 5/31/96 $ 1,020,143 $ 1,039,869 $ 1,026,784 6/30/96 $ 1,035,997 $ 1,042,676 $ 1,040,029 7/31/96 $ 1,039,127 $ 1,040,904 $ 1,042,837 8/31/96 $ 1,032,867 $ 1,059,057 $ 1,041,273 9/30/96 $ 1,054,776 $ 1,082,610 $ 1,059,391 10/31/96 $ 1,081,902 $ 1,101,123 $ 1,083,227 11/30/96 $ 1,109,028 $ 1,090,883 $ 1,101,101 12/31/96 $ 1,092,169 $ 1,094,264 $ 1,091,411 1/31/97 $ 1,094,338 $ 1,097,000 $ 1,095,558 2/28/97 $ 1,096,507 $ 1,084,823 $ 1,096,763 3/31/97 $ 1,081,323 $ 1,101,052 $ 1,085,686 4/30/97 $ 1,098,676 $ 1,111,468 $ 1,101,211 5/31/97 $ 1,109,522 $ 1,124,650 $ 1,111,563 6/30/97 $ 1,123,558 $ 1,155,011 $ 1,124,790 7/31/97 $ 1,158,669 $ 1,145,194 $ 1,155,272 8/31/97 $ 1,148,794 $ 1,162,097 $ 1,145,337 9/30/97 $ 1,164,156 $ 1,178,901 $ 1,162,173 10/31/97 $ 1,180,614 $ 1,184,276 $ 1,178,792 11/30/97 $ 1,183,906 $ 1,196,190 $ 1,184,333 12/31/97 $ 1,197,458 $ 1,211,501 $ 1,196,413 1/31/98 $ 1,211,341 $ 1,210,532 $ 1,211,847 2/28/98 $ 1,211,341 $ 1,214,648 $ 1,210,998 3/31/98 $ 1,214,812 $ 1,220,964 $ 1,215,721 4/30/98 $ 1,220,597 $ 1,232,563 $ 1,222,043 5/31/98 $ 1,232,167 $ 1,243,040 $ 1,233,775 6/30/98 $ 1,242,614 $ 1,245,651 $ 1,243,892 7/31/98 $ 1,243,789 $ 1,265,955 $ 1,246,504 8/31/98 $ 1,264,930 $ 1,295,578 $ 1,265,575 9/30/98 $ 1,287,245 $ 1,288,711 $ 1,295,443 10/31/98 $ 1,282,547 $ 1,296,057 $ 1,289,613 11/30/98 $ 1,291,943 $ 1,299,945 $ 1,296,706 12/31/98 $ 1,297,674 $ 1,309,175 $ 1,300,726 1/31/99 $ 1,308,672 $ 1,286,264 $ 1,310,351 2/28/99 $ 1,286,677 $ 1,293,339 $ 1,287,420 3/31/99 $ 1,295,231 $ 1,297,477 $ 1,294,759 4/30/99 $ 1,298,896 $ 1,286,060 $ 1,299,031 5/31/99 $ 1,285,455 $ 1,281,944 $ 1,287,080 6/30/99 $ 1,279,528 $ 1,276,560 $ 1,282,704 7/31/99 $ 1,273,304 $ 1,275,922 $ 1,277,573 8/31/99 $ 1,269,570 $ 1,290,723 $ 1,276,679 9/30/99 $ 1,285,751 $ 1,295,498 $ 1,291,999 10/31/99 $ 1,286,996 $ 1,295,369 $ 1,295,875 11/30/99 $ 1,289,485 $ 1,289,151 $ 1,295,745 12/31/99 $ 1,284,169 $ 1,284,897 $ 1,289,785 1/31/00 $ 1,278,906 $ 1,300,444 $ 1,286,140 2/29/00 $ 1,293,379 $ 1,317,610 $ 1,301,151 3/31/00 $ 1,309,168 $ 1,313,789 $ 1,318,028 4/30/00 $ 1,301,274 $ 1,313,132 $ 1,314,115 5/31/00 $ 1,296,011 $ 1,340,445 $ 1,312,954 6/30/00 $ 1,327,337 $ 1,352,643 $ 1,340,390 7/31/00 $ 1,337,956 $ 1,372,256 $ 1,352,636 8/31/00 $ 1,356,539 $ 1,380,901 $ 1,371,962 9/30/00 $ 1,365,830 $ 1,390,027 $ 1,381,261 10/31/00 $ 1,371,139 $ 1,412,761 $ 1,390,050 11/30/00 $ 1,397,686 $ 1,438,974 $ 1,412,587 12/31/00 $ 1,423,076 $ 1,462,495 $ 1,439,301 1/31/01 $ 1,445,642 $ 1,475,238 $ 1,462,986 2/28/01 $ 1,459,746 $ 1,482,641 $ 1,476,002 3/31/01 $ 1,468,208 $ 1,476,486 $ 1,483,733 4/30/01 $ 1,456,925 $ 1,485,405 $ 1,476,770 5/31/01 $ 1,465,387 $ 1,491,010 $ 1,486,441 6/30/01 $ 1,471,530 $ 1,524,344 $ 1,491,353 7/31/01 $ 1,509,918 $ 1,541,810 $ 1,525,807 8/31/01 $ 1,525,557 $ 1,559,768 $ 1,542,655 9/30/01 $ 1,545,462 $ 1,592,413 $ 1,561,673 10/31/01 $ 1,576,533 $ 1,570,456 $ 1,593,191 11/30/01 $ 1,552,390 $ 1,560,472 $ 1,571,160 12/31/01 $ 1,542,888 $ 1,573,106 $ 1,561,955 1/31/02 $ 1,555,849 $ 1,588,349 $ 1,574,257 2/28/02 $ 1,571,060 $ 1,561,932 $ 1,589,308 3/31/02 $ 1,541,910 $ 1,592,223 $ 1,563,008 4/30/02 $ 1,574,880 $ 1,605,749 $ 1,592,658 5/31/02 $ 1,588,069 $ 1,619,640 $ 1,606,195 6/30/02 $ 1,597,964 $ 1,639,176 $ 1,618,056
8/31/95 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 67 TOP TEN U.S. BOND HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - ------------------------------------------------------------- U.S. Treasury Note 3.625%, due 03/31/04 6.3% U.S. Treasury Bond 3.000%, due 02/29/04 5.1 Residential Accredit Loans, Inc., Class A15 7.000%, due 03/25/28 3.7 Fannie Mae 5.500%, due 03/15/11 3.5 Government National Mortgage Association 6.000%, due 05/20/29 3.1 Fannie Mae 7.125%, due 01/15/30 3.1 Federal National Mortgage Association 6.000%, due 11/01/28 2.8 Government National Mortgage Association 6.500%, due 10/15/24 2.3 Government National Mortgage Association 6.000%, due 08/20/29 2.3 Salomon Brothers Mortgage Securities 7.520%, due 12/18/09 1.7 - ------------------------------------------------------------- Total 33.9%
68 UBS U.S. BOND FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
FACE AMOUNT VALUE ---------- ----------- BONDS -- 91.86% U.S. CORPORATE BONDS -- 18.89% Abbott Laboratories, Inc. 5.625%, due 07/01/06 $ 85,000 $ 88,083 Alcoa, Inc. 6.000%, due 01/15/12 45,000 46,181 Amerada Hess Corp. 6.650%, due 08/15/11 55,000 57,048 Anadarko Finance Co. 7.500%, due 05/01/31 55,000 58,666 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 180,000 220,406 AOL Time Warner, Inc. 5.625%, due 05/01/05 270,000 264,927 7.625%, due 04/15/31 135,000 118,207 Apache Corp. 6.250%, due 04/15/12 40,000 41,295 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 120,000 96,929 Avon Products, Inc. 7.150%, due 11/15/09 150,000 164,785 Bank of America Corp. 7.400%, due 01/15/11 265,000 290,229 Bank One Corp. 7.875%, due 08/01/10 155,000 175,837 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 215,000 220,912 Bristol Myers Squibb Co. 5.750%, due 10/01/11 125,000 124,368 Burlington Northern Santa Fe Corp. 7.082%, due 05/13/29 105,000 107,309 Capital One Bank 6.875%, due 02/01/06 90,000 88,958 Cendant Corp. 6.875%, due 08/15/06 415,000 417,386 Centex Corp. 9.750%, due 06/15/05 155,000 175,813 Citigroup, Inc. 7.250%, due 10/01/10 400,000 435,397 Citizens Communications Co. 9.250%, due 05/15/11 110,000 104,429 Coca Cola Co. 4.000%, due 06/01/05 105,000 106,046 Comcast Cable Communications 6.750%, due 01/30/11 140,000 125,046 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 65,000 66,885 Consolidated Edison, Inc. 7.500%, due 09/01/10 300,000 332,136 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 95,000 95,950 Coors Brewing Co., 144A 6.375%, due 05/15/12 100,000 102,900 Countrywide Home Loan 5.500%, due 02/01/07 120,000 122,140 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 130,000 132,996 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 65,000 71,860 Delta Airlines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 $ 215,000 $ 230,661 Devon Financing Corp., ULC 6.875%, due 09/30/11 105,000 109,351 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 370,000 401,169 Duke Energy Field Services, LLC 6.875%, due 02/01/11 85,000 84,993 7.875%, due 08/16/10 65,000 68,985 8.125%, due 08/16/30 55,000 57,210 El Paso Energy Corp. 7.800%, due 08/01/31 45,000 42,121 EOP Operating LP 7.000%, due 07/15/11 85,000 89,296 7.875%, due 07/15/31 55,000 56,497 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 235,000 255,048 First Data Corp. 5.625%, due 11/01/11 200,000 199,194 First Energy Corp. 6.450%, due 11/15/11 205,000 199,034 First Union National Bank 7.800%, due 08/18/10 240,000 268,632 FleetBoston Financial Corp. 7.375%, due 12/01/09 110,000 119,356 Ford Motor Co. 7.450%, due 07/16/31 80,000 74,468 Ford Motor Credit Co. 5.800%, due 01/12/09 275,000 258,555 6.875%, due 02/01/06 765,000 782,645 7.375%, due 02/01/11 145,000 146,869 General Electric Capital Corp. 6.750%, due 03/15/32 395,000 387,998 General Motors Acceptance Corp. 6.125%, due 02/01/07 160,000 161,751 6.875%, due 09/15/11 510,000 506,337 8.000%, due 11/01/31 120,000 122,730 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 105,000 108,858 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 220,000 231,330 Household Finance Corp. 6.750%, due 05/15/11 450,000 442,900 International Paper Co. 6.750%, due 09/01/11 95,000 98,937 John Deere Capital Corp. 7.000%, due 03/15/12 85,000 91,072 Kraft Foods, Inc. 4.625%, due 11/01/06 50,000 49,813 6.500%, due 11/01/31 110,000 108,850 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 90,000 91,260 Lincoln National Corp. 6.200%, due 12/15/11 80,000 80,622 MBNA Global Capital Securities, FRN 2.713%, due 02/01/27 205,000 150,838 69 FACE AMOUNT VALUE ---------- ----------- Mirant Americas Generation, Inc. 7.625%, due 05/01/06 $ 210,000 $ 170,100 9.125%, due 05/01/31 95,000 67,925 Morgan Stanley 6.750%, due 04/15/11 185,000 190,307 News America Holdings, Inc. 7.125%, due 04/08/28 175,000 158,717 Occidental Petroleum Corp. 8.450%, due 02/15/29 95,000 111,255 Pepsi Bottling Holdings, 144A 5.625%, due 02/17/09 115,000 116,852 Phillips Petroleum Co. 8.500%, due 05/25/05 190,000 212,365 8.750%, due 05/25/10 75,000 89,057 Praxair, Inc. 6.375%, due 04/01/12 55,000 57,031 Progress Energy, Inc. 7.000%, due 10/30/31 110,000 107,971 Pure Resources, Inc. 7.125%, due 06/15/11 155,000 152,138 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 565,000 319,225 Rohm & Haas Co. 7.850%, due 07/15/29 55,000 63,229 Safeway, Inc. 7.250%, due 02/01/31 55,000 56,963 SBC Communications, Inc. 5.875%, due 02/01/12 145,000 144,782 Sempra Energy 7.950%, due 03/01/10 215,000 229,205 Sprint Capital Corp. 7.625%, due 01/30/11 160,000 127,301 Target Corp. 7.000%, due 07/15/31 215,000 227,490 Telus Corp. 8.000%, due 06/01/11 125,000 103,864 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 195,000 200,790 Unilever Capital Corp. 7.125%, due 11/01/10 130,000 143,265 Union Pacific Corp. 6.700%, due 12/01/06 120,000 127,819 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 220,922 192,763 United Technologies Corp. 6.100%, due 05/15/12 120,000 124,290 USA Education, Inc. 5.625%, due 04/10/07 175,000 180,754 Valero Energy Corp. 7.500%, due 04/15/32 105,000 105,356 Verizon Global Funding Corp. 7.250%, due 12/01/10 110,000 111,056 7.750%, due 12/01/30 130,000 125,375 Walt Disney Co. 6.375%, due 03/01/12 45,000 45,832 Washington Mutual, Inc. 5.625%, due 01/15/07 75,000 75,963 Wells Fargo Bank N.A. 6.450%, due 02/01/11 270,000 282,197 Westinghouse Electric 8.625%, due 08/01/12 $ 180,000 $ 211,745 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 65,000 65,975 Williams Cos., Inc. 7.125%, due 09/01/11 55,000 44,539 ----------- 15,274,000 ----------- ASSET-BACKED SECURITIES -- 2.03% Conseco Finance Securitizations Corp., 00-B, Class AF4 7.870%, due 02/15/31 230,000 243,168 Greentree Financial Corp. 6.160%, due 02/01/31 1,000,000 1,051,129 Greentree Financial Corp., 94-5, Class A5 8.300%, due 11/15/19 320,000 346,984 ----------- 1,641,281 ----------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 22.74% Bank One Mortgage, 2000-2, Class A6 6.680%, due 03/15/30 43,570 45,841 Bank One Mortgage-Backed Pass Through, 00-2, Class 8A 6.835%, due 03/15/30 719,665 737,342 Bear Stearns Commercial Mortgage Securities, 00-WF1, Class A2 7.780%, due 02/15/32 1,215,000 1,377,635 Citicorp Mortgage Securities, Inc., 94-9, Class A8 5.750%, due 06/25/09 589,768 600,785 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B 7.180%, due 08/10/10 850,000 934,467 DLJ Commercial Mortgage Corp., 99-CG1, Class A1B 6.460%, due 03/10/32 220,000 233,807 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 400,000 443,073 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 330,000 348,899 GS Mortgage Securities Corp., 144A 7.500%, due 06/19/32 584,551 611,405 GS Mortgage Securities Corp. II 7.410%, due 02/15/27 190,000 202,481 Heller Financial Commercial Mortgage Assets, 99-PH1, Class A1 6.500%, due 05/15/31 984,278 1,041,460 Impac Secured Assets Common Owner Trust 01-3, Class A2 7.250%, due 04/25/31 706,061 717,872 LB Commercial Conduit Mortgage Trust, 98-C4, Class A1B 6.210%, due 10/15/35 355,000 373,867 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1 6.410%, due 06/15/31 609,161 642,402 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 325,000 359,971 Merrill Lynch Mortgage Investors, Inc., 96-C2, Class A3 6.960%, due 11/21/28 535,000 574,310 Morgan Stanley Capital I, 00-LIF2, Class A2 6.960%, due 10/15/33 341,052 365,186 Nomura Asset Securities Corp., 95-MD3, Class A/B 8.150%, due 03/04/20 268,241 292,014 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B 7.330%, due 12/10/32 245,000 271,676 PNC Mortgage Securities Corp., 94-3, Class A8 7.500%, due 07/25/24 375,000 392,816 70 FACE AMOUNT VALUE ---------- ----------- Prudential Home Mortgage Securities, 93-43, Class A9 6.750%, due 10/25/23 $ 150,720 $ 154,378 Residential Accredit Loans, Inc., 98-QS4, Class AI5 7.000%, due 03/25/28 2,850,000 2,953,903 Residential Asset Securitization Trust, 98-A6, Class IA2 6.750%, due 07/25/28 500,000 510,800 Residential Funding Mortgage, 95-S6, Class A7 7.500%, due 11/25/25 577,918 592,379 Salomon Brothers Mortgage Securities VII, 00-C1, Class A2 7.520%, due 12/18/09 1,250,000 1,394,329 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 395,000 420,573 Structured Asset Securities Corp., 98-ALS1, Class 1A 6.900%, due 01/25/29 943,096 969,625 Washington Mutual, 99-WM2, Class 2A 7.000%, due 11/19/14 789,608 820,411 ----------- 18,383,707 ----------- INTERNATIONAL DOLLAR BONDS -- 0.94% Canadian National Railway Co. 6.900%, due 07/15/28 50,000 51,098 Deutsche Telekom International Finance 8.250%, due 06/15/30 80,000 74,369 France Telecom S.A. 8.500%, due 03/01/31 70,000 61,916 Petroleum Geo-Services 6.625%, due 03/30/08 50,000 38,000 7.500%, due 03/31/07 235,000 190,350 United Mexican States 9.875%, due 02/01/10 310,000 346,425 ----------- 762,158 ----------- U.S. GOVERNMENT AGENCY -- 7.84% Fannie Mae 5.500%, due 03/15/11 2,770,000 2,809,990 7.125%, due 01/15/30 2,215,000 2,480,381 Fannie Mae Grantor Trust 7.500%, due 06/25/30 761,077 806,171 7.500%, due 12/25/41 224,538 238,251 ----------- 6,334,793 ----------- U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 24.20% Fannie Mae, Grantor Trust, 01-T10, Class A2 7.500%, due 06/19/41 287,937 302,458 Federal Home Loan Mortgage Corp. 6.000%, due 10/01/29 1,028,220 1,034,927 6.500%, due 11/01/28 13,933 14,234 6.500%, due 09/01/29 874,977 893,869 6.500%, due 03/01/32 167,993 171,620 7.000%, due 10/15/13 492,125 528,780 Federal National Mortgage Association 6.000%, due 03/01/28 435,862 438,544 6.000%, due 11/01/28 2,291,105 2,287,973 6.000%, due 12/01/28 $ 580,684 $ 579,890 6.000%, due 03/01/29 455,731 455,108 6.000%, due 05/01/29 501,318 500,633 6.500%, due 03/01/19 322,022 331,717 6.500%, due 01/01/28 1,038,576 1,060,352 6.500%, due 04/01/28 325,812 332,643 7.000%, due 03/01/31 140,121 145,779 7.000%, due 11/01/31 1,173,999 1,217,175 7.000%, due 04/01/32 926,172 960,234 Federal National Mortgage Association, Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 53,885 59,409 Government National Mortgage Association 6.000%, due 12/20/28 541,040 541,243 6.000%, due 05/20/29 2,519,036 2,506,947 6.000%, due 08/20/29 1,856,309 1,847,401 6.500%, due 10/15/24 1,797,934 1,854,015 6.500%, due 08/15/27 10,248 10,476 7.000%, due 07/15/25 49,670 52,021 7.000%, due 07/15/31 499,174 519,336 7.500%, due 01/15/24 32,261 34,294 7.500%, due 06/15/25 37,080 39,452 8.500%, due 12/15/17 775,651 843,735 9.000%, due 11/15/04 3,445 3,756 ----------- 19,568,021 ----------- U.S. GOVERNMENT OBLIGATIONS -- 15.22% U.S. Treasury Bond 3.000%, due 02/29/04 4,100,000 4,123,862 5.000%, due 08/15/11 85,000 86,181 U.S. Treasury Note 3.625%, due 03/31/04 5,000,000 5,077,300 4.375%, due 05/15/07 1,335,000 1,353,356 6.250%, due 05/15/30 785,000 850,345 7.500%, due 02/15/05 735,000 813,669 ----------- 12,304,713 ----------- Total Bonds (Cost $73,400,510) 74,268,673 ----------- SHARES ---------- SHORT-TERM INVESTMENTS -- 3.51% OTHER -- 3.51% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $2,836,367) 2,836,367 2,836,367 ----------- Total Investments (Cost $76,236,877) -- 95.37% (a) 77,105,040 Cash and other assets, less liabilities -- 4.63% 3,740,698 ----------- Net Assets -- 100% $80,845,738 ===========
71 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $76,256,429; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 1,532,666 Gross unrealized depreciation (684,055) ----------- Net unrealized appreciation $ 848,611 ===========
% Represents a percentage of net assets E.E.T.C.: Enhanced Equipment Trust Certificate FRN: Floating rate note -- The rate disclosed is that in effect at June 30, 2002. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2002, the value of these securities amounted to $1,439,977 or 1.78% of net assets. See accompanying notes to financial statements. 72 UBS HIGH YIELD FUND For the fiscal year ended June 30, 2002, UBS High Yield Fund Class Y shares declined 2.98%. The Fund slightly outperformed its benchmark, the Merrill Lynch High Yield Master Index, which returned -3.08% for the same period. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Corporate accounting scandals, high-profile corporate bankruptcies and a battered stock market all negatively impacted performance, which was erratic during the fiscal year. The high yield market sagged during summer 2001 and its struggles exacerbated after the September 11 terrorist attacks. Impending military action overseas, a serious flare-up in Middle East tensions and a full-blown recession helped depress high yield debt until November, when the market rallied through year-end. During this time, the Federal Reserve's spate of federal funds rate cuts had dropped the key indicator to a 40-year low of 1.75%. Entering January 2002, the high yield market was poised to continue its strong performance. Low interest rates and the end of what turned out to be a short recession were the backdrop, as high yields performed well through February. However, the weight of continuous discoveries of accounting and corporate governance irregularities, as evidenced by Enron, Global Crossing, Adelphia Communications and WorldCom, once again weighed negatively on the market. The telecommunications sector, in particular, was hit hard, as a rash of downgrades by ratings companies depressed issues in this sector. The wireless telecommunications sector swooned following forecasts by Sprint PCS and other companies of falling subscriber growth. Coincidentally, a glut of investment-grade new issues put additional price pressure on high-yield debt and caused an outflow of money from high-yield funds. Several sectors, however, performed well, especially during the first half of 2002, including steel, paper and game. The steel industry should benefit from new import tariffs on foreign competitors, gaming has posted strong operating results and the paper industry has shown a stable pricing environment. We continue to overweight the broadcasting, gaming, cable and food sectors, and we have increased our exposure to textile apparel and healthcare. We continued an underweight in the home building and utilities sectors. Going forward, we expect weakness in several sectors to continue over the short-term. After strong economic growth in the first quarter of 5.0% (as measured by gross domestic product), GDP growth slowed in the second to 1.1%, creating continued uncertainty as to the strength of an economic recovery. Spreads against Treasurys have widened, however, and the high yield market ended the fiscal year close to fair valuations. The federal funds rate has remained at 1.75% during all of 2002, and is expected to remain constant into at least the fourth quarter. New federal legislation, passed by Congress and designed to tighten up corporate governance and accounting practices, should eventually bring a measure of confidence to investors. Barring any future shocks that would further erode investor confidence, including additional domestic terror attacks, new unrest overseas or a rash of new corporate accounting scandals, we expect the high yield market to resume the recovery, albeit fitful, that it began in late 2001 and early 2002. 73 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS INCEPTION* ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS A -5.32% -3.01% -1.81% -0.80% - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS B -5.85 N/A N/A -2.70 - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS C -5.72 N/A N/A -2.54 - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS Y -5.32 -2.98 -1.60 1.65 - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS A+ -9.53 -7.37 -3.31 -2.10 - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS B+ -10.33 N/A N/A -7.22 - ------------------------------------------------------------------------------------------ UBS HIGH YIELD FUND CLASS C+ -7.32 N/A N/A -4.18 - ------------------------------------------------------------------------------------------ Merrill Lynch High Yield Master Index -4.31 -3.08 -0.81 1.16 - ------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS HIGH YIELD FUND CLASS A (FORMERLY CLASS N) IS 12/31/98. INCEPTION DATE OF CLASS B AND CLASS C IS 11/07/01. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) AND MERRILL LYNCH HIGH YIELD MASTER INDEX IS 9/30/97. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS High Yield Fund Class Y and the Merrill Lynch High Yield Master Index if you had invested $1,000,000 on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS HIGH YIELD FUND CLASS Y VS. MERRILL LYNCH HIGH YIELD MASTER INDEX Wealth Value with Dividends Reinvested
UBS HIGH YIELD MERRILL LYNCH HIGH FUND CLASS Y YIELD MASTER INDEX -------------- ------------------ 9/30/97 $ 1,000,000 $ 1,000,000 10/31/97 $ 995,405 $ 1,006,640 11/30/97 $ 1,005,534 $ 1,016,173 12/31/97 $ 1,023,437 $ 1,025,816 1/31/98 $ 1,047,261 $ 1,041,091 2/28/98 $ 1,054,154 $ 1,045,390 3/31/98 $ 1,066,780 $ 1,054,402 4/30/98 $ 1,068,390 $ 1,059,410 5/31/98 $ 1,070,931 $ 1,066,784 6/30/98 $ 1,081,783 $ 1,072,064 7/31/98 $ 1,098,346 $ 1,078,175 8/31/98 $ 1,042,278 $ 1,031,652 9/30/98 $ 1,057,179 $ 1,033,715 10/31/98 $ 1,049,905 $ 1,016,741 11/30/98 $ 1,109,744 $ 1,063,035 12/31/98 $ 1,102,832 $ 1,063,388 1/31/99 $ 1,129,353 $ 1,073,905 2/28/99 $ 1,134,878 $ 1,065,711 3/31/99 $ 1,147,033 $ 1,074,897 4/30/99 $ 1,163,609 $ 1,091,708 5/31/99 $ 1,140,403 $ 1,084,132 6/30/99 $ 1,134,878 $ 1,082,094 7/31/99 $ 1,133,738 $ 1,083,685 8/31/99 $ 1,128,041 $ 1,072,685 9/30/99 $ 1,124,623 $ 1,068,566 10/31/99 $ 1,124,623 $ 1,062,315 11/30/99 $ 1,147,412 $ 1,074,468 12/31/99 $ 1,156,363 $ 1,080,109 1/31/00 $ 1,141,924 $ 1,074,751 2/29/00 $ 1,138,314 $ 1,075,676 3/31/00 $ 1,111,841 $ 1,060,638 4/30/00 $ 1,119,061 $ 1,061,009 5/31/00 $ 1,115,451 $ 1,049,327 6/30/00 $ 1,135,097 $ 1,067,292 7/31/00 $ 1,147,448 $ 1,074,987 8/31/00 $ 1,161,035 $ 1,088,112 9/30/00 $ 1,146,213 $ 1,081,758 10/31/00 $ 1,110,394 $ 1,050,019 11/30/00 $ 1,059,753 $ 1,017,121 12/31/00 $ 1,096,517 $ 1,039,182 1/31/01 $ 1,153,514 $ 1,101,149 2/28/01 $ 1,165,727 $ 1,118,536 3/31/01 $ 1,145,371 $ 1,103,738 4/30/01 $ 1,144,014 $ 1,091,685 5/31/01 $ 1,153,514 $ 1,112,689 6/30/01 $ 1,114,357 $ 1,089,745 7/31/01 $ 1,127,053 $ 1,106,680 8/31/01 $ 1,136,927 $ 1,117,404 9/30/01 $ 1,063,577 $ 1,045,722 10/31/01 $ 1,097,557 $ 1,076,519 11/30/01 $ 1,147,060 $ 1,111,495 12/31/01 $ 1,141,907 $ 1,103,649 1/31/02 $ 1,141,367 $ 1,109,821 2/28/02 $ 1,116,127 $ 1,099,142 3/31/02 $ 1,138,943 $ 1,125,255 4/30/02 $ 1,150,269 $ 1,143,145 5/31/02 $ 1,137,103 $ 1,136,960 6/30/02 $ 1,081,134 $ 1,056,136 9/30/97 = $1,000,000
FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 74 TOP TEN FIXED INCOME HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - -------------------------------------------------- NUC02, Inc. 12.000%, due 10/31/04 3.2% Iron Mountain, Inc. 8.750%, due 09/30/09 1.6 Echostar DBS Corp. 9.375%, due 02/01/09 1.5 Allied Waste North America, Inc. 10.000%, due 08/01/09 1.4 West Point Stevens, Inc. 15.000%, due 02/28/05 1.4 Fresenius Med Care, Inc. 7.875%, due 02/01/08 1.3 MGM Grand, Inc., 9.750%, due 06/01/07 1.3 Charter Communications Corp., 8.250%, due 04/01/07 1.2 Lin Holdings Corp. 0.000%, due 03/01/08 1.2 Grey Wolf, Inc. 8.875%, due 07/01/07 1.1 - -------------------------------------------------- Total 15.2%
75 UBS HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
FACE AMOUNT VALUE -------------- -------------- U.S. BONDS -- 91.77% U.S. CORPORATE BONDS -- 90.96% Acetex Corp. 10.875%, due 08/01/09 $ 125,000 $ 130,625 Adelphia Communications Corp. (d) 8.375%, due 02/01/08 Series B 1,650,000 660,000 10.875%, due 10/01/10 350,000 138,250 Advance Stores Co. 10.250%, due 04/15/08 500,000 525,000 Advanced Medical Optics, Inc., 144A 9.250%, due 07/15/10 325,000 320,938 AES Corp. 8.750%, due 12/15/02 550,000 511,500 9.375%, due 09/15/10 350,000 227,500 Affinity Technology Group 11.000%, due 04/01/07 1,000,000 980,000 Ainsworth Lumber Co., Ltd. 12.500%, due 07/15/07 650,000 703,625 13.875%, due 07/15/07 250,000 280,000 AirGate PCS, Inc. (c) 0.000%, due 10/01/09 1,200,000 240,000 Airplanes Pass Through Trust, Series D 10.875%, due 03/15/19 4,938,500 370,388 AK Steel Holding Corp., 144A 7.750%, due 06/15/12 775,000 767,250 Alamosa Delaware, Inc., 12.500%, due 02/01/11 600,000 168,000 Alamosa PCS Holdings, Inc. (c) 0.000%, due 02/15/10 400,000 60,000 Allbritton Communications Co. 8.875%, due 02/01/08, Series B 550,000 566,500 9.750%, due 11/30/07 975,000 1,004,250 Allegiance Telecom, Inc. 12.875%, due 05/15/08 1,190,000 249,900 Alliance Gaming Corp. 10.000%, due 08/01/07 950,000 988,000 Allied Waste North America, Inc. 7.875%, due 01/01/09 175,000 168,000 8.500%, due 12/01/08 250,000 241,250 10.000%, due 08/01/09 2,000,000 1,965,160 American Eco Corp., Series B (d) 9.625%, due 05/15/08 5,500,000 550 American Restaurant Group, Inc. 11.500%, due 11/01/06 198,000 178,200 American Tower Corp. 9.375%, due 02/01/09 250,000 137,500 Ameristar Casino, Inc. 10.750%, due 02/15/09 550,000 589,875 Amkor Technology, Inc. 9.250%, due 02/15/08 550,000 448,250 Argo-Tech Corp. 8.625%, due 10/01/07 1,500,000 1,320,000 Argosy Gaming Co. 10.750%, due 06/01/09 1,000,000 1,075,000 Atrium Cos., Inc. 10.500%, due 05/01/09 700,000 714,875 Aztar Corp. 8.875%, due 05/15/07 $ 1,305,000 $ 1,313,156 B&G Foods, Inc. 9.625%, due 08/01/07 850,000 871,250 9.625%, due 08/01/07, 144A 250,000 256,250 Bally Total Fitness Corp., Series D 9.875%, due 10/15/07 1,000,000 992,500 BE Aerospace, Inc. 8.000%, due 03/01/08 300,000 276,000 8.875%, due 05/01/11 500,000 465,000 Bear Island Paper Co. LLC, Series B 10.000%, due 12/01/07 525,000 448,875 Belden & Blake Corp., Series B 9.875%, due 06/15/07 650,000 572,000 Block Communications, Inc., 144A 9.250%, due 04/15/09 1,000,000 1,000,000 Blount, Inc. 13.000%, due 08/01/09 1,000,000 675,000 Boyd Gaming Corp., 144A 8.750%, due 04/15/12 250,000 251,250 Buckeye Technologies, Inc. 8.000%, due 10/15/10 860,000 705,200 8.500%, due 12/15/05 800,000 720,000 Buffets, Inc., 144A 11.250%, due 07/15/10 750,000 750,000 Cadmus Communications Corp. 9.750%, due 06/01/09 595,000 603,925 Calpine Canada Energy Finance 8.500%, due 05/01/08 1,150,000 787,750 8.500%, due 02/15/11 800,000 536,000 Chancellor Broadcasting Co. 8.000%, due 11/01/08 1,500,000 1,485,000 8.750%, due 06/15/07 500,000 500,000 Charter Communications Holdings 0.000%, due 01/15/12,144A (c) 900,000 288,000 8.250%, due 04/01/07 2,500,000 1,675,000 10.000%, due 05/15/11 300,000 202,500 Charter Communications Holdings (c) 0.000%, due 04/01/11 150,000 72,000 Chesapeake Energy Corp. 8.125%, due 04/01/11 1,225,000 1,203,562 Circus & Eldorado Jt Venture/Silver Legacy Capital, 144A 10.125%, due 03/01/12 250,000 255,000 Coast Hotels and Casinos, Inc. 9.500%, due 04/01/09 1,000,000 1,050,000 Coaxial Communications of Central Ohio, Inc. 10.000%, due 08/15/06 1,000,000 900,000 Collins & Alkman Corp. 10.750%, due 12/31/11, 144A 850,000 854,250 11.500%, due 04/15/06 250,000 236,875 Constellation Brands, Inc. 8.000%, due 02/15/08 275,000 283,250 8.125%, due 01/15/12 450,000 461,812 Cott Beverages USA, Inc. 8.000%, due 12/15/11 1,000,000 1,010,000 Cross Timbers Oil Co. 8.750%, due 11/01/09 500,000 525,000 76 FACE AMOUNT VALUE -------------- -------------- Crown Castle International Corp. 9.000%, due 05/15/11 $ 150,000 $ 91,500 9.375%, due 08/01/11 150,000 94,500 10.750%, due 08/01/11 850,000 561,000 CSC Holdings, Inc. 8.125%, due 08/15/09 1,050,000 869,481 Cumulus Media, Inc. 10.375%, due 07/01/08 635,000 673,100 Dayton Superior Corp. 13.000%, due 06/15/09 675,000 675,000 Desa International, Inc. (d) 9.875%, due 12/15/07 3,000,000 300,000 Dobson Communications Corp. 10.875%, due 07/01/10 650,000 383,500 Dobson Sygnet Communications, Inc. 12.250%, due 12/15/08 250,000 150,000 Dresser Industries, Inc., 144A 9.375%, due 04/15/11 500,000 506,250 Dura Operating Corp. 9.000%, due 05/01/09 1,100,000 1,067,000 Echostar DBS Corp. 9.375%, due 02/01/09 2,250,000 2,081,250 eKabel Hessen 14.500%, due 09/01/10 125,000 30,625 Equistar Chemicals LP 8.500%, due 02/15/04 50,000 48,727 Extendicare Health Services, Inc., 144A 9.500%, due 07/01/10 250,000 250,313 Extendicare, Inc. 9.350%, due 12/15/07 750,000 697,500 Fedders North America, Inc. 9.375%, due 08/15/07 120,000 86,400 Felcor Lodging LP 8.500%, due 06/01/11 175,000 171,500 Fisher Scientific International, Inc., 144A 8.125%, due 05/01/12 550,000 547,250 Fleming Cos, Inc. 9.875%, due 05/01/12, 144A 500,000 472,500 10.625%, due 07/31/07 500,000 490,000 Four M Corp., Series B 12.000%, due 06/01/06 Series B 850,000 871,250 Fox Sports Network LLC (c) 0.000%, due 08/15/07 1,100,000 1,122,000 Fresenius Medical Care Capital Trust 11 7.875%, due 02/01/08 2,000,000 1,800,000 Fresenius Medical Care Capital Trust 1V 7.875%, due 06/15/11 50,000 44,750 FrontierVision Holdings LP (c) (d) 0.000%, due 09/15/07 275,000 184,250 GEO Specialty Chemicals 10.125%, due 08/01/08 750,000 615,000 Granite Broadcasting Corp. 8.875%, due 05/15/08 500,000 437,500 Gray Communications Systems, Inc., 144A 9.250%, due 12/15/11 1,005,000 1,025,100 Grey Wolf, Inc. 8.875%, due 07/01/07 1,500,000 1,515,000 Hanger Orthopedic Group, Inc. 11.250%, due 06/15/09 775,000 780,812 Hayes Lemmerz International, Inc. (d) 8.250%, due 12/15/08 $ 495,000 $ 49,500 HCA - The Healthcare Co. 7.125%, due 06/01/06 150,000 157,329 7.875%, due 02/01/11 1,000,000 1,076,993 8.750%, due 09/01/10 150,000 169,269 Hilton Hotels Corp. 8.250%, due 02/15/11 150,000 155,774 HMH Properties, Inc. 8.450%, due 12/01/08 1,495,000 1,465,100 Hollinger International Publishing Corp. 9.250%, due 02/01/06 325,000 334,750 9.250%, due 03/15/07 600,000 618,000 Hollywood Casino Corp. 11.250%, due 05/01/07 590,000 637,200 Hornbeck-Leevac Marine Services 10.625%, due 08/01/08 350,000 366,188 Host Marriott LP 8.375%, due 02/15/06 900,000 882,000 Huntsman ICI Chemicals LLC 10.125%, due 07/01/09 700,000 626,500 Hyperion Telecommunications (d) 12.000%, due 11/01/07 2,000,000 200 Ingles Markets, Inc. 8.875%, due 12/01/11 550,000 547,250 Insight Communications Co., Inc. (c) 0.000%, due 02/15/11 1,300,000 559,000 Insight Midwest LP 10.500%, due 11/01/10 445,000 416,075 Integrated Electrical Services, Inc., Series B 9.375%, due 02/01/09 125,000 120,000 InterAct Operating Co., Inc. 14.000%, due 08/01/03 (f) 14,335,241 -- Interep National Radio Sales, Series B 10.000%, due 07/01/08 345,000 303,600 International Game Technology 7.875%, due 05/15/04 215,000 221,450 IPC Acquisition Corp., 144A 11.500%, due 12/15/09 750,000 720,000 Iron Mountain, Inc. 8.625%, due 04/01/13 200,000 204,500 8.750%, due 09/30/09 2,150,000 2,198,375 JLG Industries, Inc., 144A 8.375%, due 06/15/12 500,000 500,000 John Q. Hammons Hotels, Inc., 144A 8.875%, due 05/12/15 750,000 735,000 Kansas City Southern, 144A 7.500%, due 06/15/09 400,000 400,500 Key3Media Group, Inc. 11.250%, due 06/15/11 625,000 281,250 Lamar Media Co. 8.625%, due 09/15/07 1,000,000 1,025,000 Level 3 Communications Corp., 144A 7.625%, due 06/15/12 525,000 526,312 Levi Strauss & Co. 6.800%, due 11/01/03 1,000,000 925,000 11.625%, due 01/15/08 250,000 237,500 77 FACE AMOUNT VALUE -------------- -------------- LIN Holdings Corp. (c) 0.000%, due 03/01/08 $ 1,800,000 $ 1,656,000 LIN Television Corp. 8.000%, due 01/15/08 100,000 99,500 Luigino's, Inc. 10.000%, due 02/01/06 1,100,000 1,111,000 Lyondell Chemical Co., Series B 9.875%, due 05/01/07 1,000,000 957,500 Mail Well Corp., Series B 8.750%, due 12/15/08 450,000 400,500 Mail-Well, Inc. 5.000%, due 11/01/02 300,000 292,875 Mail-Well I Corp., 144A 9.625%, due 03/15/12 475,000 477,375 Majestic Investment Holdings LLC., 144A 11.653%, due 11/30/07 1,000,000 948,750 Majestic Star Casino LLC, Series B 10.875%, due 07/01/06 150,000 156,000 Mediacom LLC 7.875%, due 02/15/11 50,000 39,250 9.500%, due 01/15/13 1,665,000 1,440,225 MGM Grand, Inc. 9.750%, due 06/01/07 1,700,000 1,793,500 MGM Mirage, Inc. 8.500%, due 09/15/10 150,000 156,429 Millennium America, Inc., 144A 9.250%, due 06/15/08 450,000 459,000 Motors & Gears, Inc., Series D 10.750%, due 11/15/06 400,000 382,000 National Wine & Spirits, Inc. 10.125%, due 01/15/09 1,150,000 1,164,375 Nexstar Finance, Inc., LLC 12.000%, due 04/01/08 450,000 477,000 Nextel Communications, Inc. 0.000%, due 02/15/08 (c) 3,000,000 1,440,000 9.375%, due 11/15/09 200,000 101,500 9.500%, due 02/01/11 25,000 12,313 Nextel Partners, Inc. 11.000%, due 03/15/10 150,000 60,000 12.500%, due 11/15/09 500,000 210,000 Nextmedia Operating, Inc. 10.750%, due 07/01/11 250,000 252,500 Nortek, Inc. 9.250%, due 03/15/07 1,000,000 1,012,500 9.875%, due 06/15/11, Series B 200,000 202,000 NUC02 12.000%, due 10/31/04 (f) 5,000,000 4,500,000 Official Information Co., Series B 10.375%, due 11/01/07 150,000 147,000 Ono Finance PLC 13.000%, due 05/01/09 325,000 107,250 Orion Refining 10.000%, due 11/15/04 3,693,434 364,684 Owens-Brockway, 144A 8.875%, due 02/15/09 700,000 700,000 Owens-Illinois, Inc. 7.150%, due 05/15/05 $ 287,000 $ 266,910 Pacifica Papers, Inc. 10.000%, due 03/15/09 655,000 695,937 Pantry, Inc. 10.250%, due 10/15/07 650,000 588,250 Pathmark Stores, Inc. 8.750%, due 02/01/12 725,000 735,875 Paxson Communications Corp. 12.250%, due 01/15/09 1,250,000 709,375 Pegasus Communications Corp., Series B 9.750%, due 12/01/06 800,000 360,000 12.500%, due 08/01/07 100,000 50,000 Pegasus Satellite Communications, Inc. (c) 0.000%, due 03/01/07 375,000 112,500 Penn National Gaming, Inc. 8.875%, due 03/15/10 950,000 938,125 11.125%, due 03/01/08, Series B 220,000 237,325 Per-Se Technologies, Inc. 9.500%, due 02/15/05 650,000 624,000 Petco Animal Supplies, Inc. 10.750%, due 11/01/11 500,000 540,000 Phillips-Van Heusen Corp. 9.500%, due 05/01/08 925,000 938,875 Plains Exploration & Production Co., 144A 8.750%, due 07/01/12 950,000 934,572 Plains Resources, Inc. 10.250%, due 03/15/06 550,000 567,875 10.250%, due 03/15/06, Series B 425,000 438,812 10.250%, due 03/15/06, Series D 150,000 154,875 Premier Graphics, Inc. (d) 11.500%, due 12/01/05 4,250,000 127,500 Premier Parks, Inc. (c) 0.000%, due 04/01/08 175,000 170,625 PRIMEDIA, Inc. 8.875%, due 05/15/11 1,000,000 750,000 Qwest Capital Funding, Inc. 7.000%, due 08/03/09 1,800,000 999,000 Qwest Corp., 144A 8.875%, due 03/15/12 325,000 289,250 R.H. Donnelly, Inc. 9.125%, due 06/01/08 1,100,000 1,138,500 Radio One, Inc. 8.875%, due 07/01/11 160,000 159,600 Radiologix, Inc. 10.500%, due 12/15/08 875,000 901,250 Salem Communications Corp. 9.500%, due 10/01/07 1,000,000 1,020,000 Samsonite Corp. 10.750%, due 06/15/08 675,000 543,375 Sbarro, Inc. 11.000%, due 09/15/09 530,000 530,000 Sequa Corp. 8.875%, due 04/01/08 125,000 125,000 9.000%, due 08/01/09 625,000 628,125 78 FACE AMOUNT VALUE -------------- -------------- Silgan Holdings, Inc., 144A 9.000%, due 06/01/09 $ 250,000 $ 257,500 Sinclair Broadcast Group, Inc. 8.000%, due 03/15/12 550,000 541,750 8.750%, due 12/15/11 750,000 750,000 Six Flags, Inc. 8.875%, due 02/01/10 750,000 746,250 9.500%, due 02/01/09 100,000 102,000 Song Networks NV 13.000%, due 05/15/09 2,000,000 280,000 Speedway Motorsports, Inc. 8.500%, due 08/15/07 350,000 363,125 Starwood Hotels & Resorts Worldwide, Inc., 144A 7.875%, due 05/01/12 750,000 735,000 Stone Container Corp., 144A 8.375%, due 07/01/12 325,000 327,438 Superior National Capital Trust I (d) 10.750%, due 12/01/17 9,000,000 -- Swift Energy Co. 9.375%, due 05/01/12 400,000 377,000 Sybron Dental Specialties, 144A 8.125%, due 06/15/12 325,000 321,750 Team Health, Inc. 12.000%, due 03/15/09 760,000 851,200 Tembec Industries, Inc. 7.750%, due 03/15/12 750,000 744,375 8.500%, due 02/01/11 250,000 257,500 Tommy Hilfiger USA, Inc. 6.500%, due 06/01/03 1,000,000 1,002,500 TransWestern Publishing Co. 9.625%, due 11/15/07 1,000,000 1,040,000 Triad Hospitals, Inc. 8.750%, due 05/01/09 150,000 156,750 Trico Marine Services, Inc., 144A 8.875%, due 05/15/12 400,000 396,000 Triton PCS, Inc. 0.000%, due 05/01/08 (c) 125,000 77,500 9.375%, due 02/01/11 100,000 64,000 US Unwired, Inc. (c) 0.000%, due 11/01/09 1,200,000 288,000 Vicar Operating Inc. 9.875%, due 12/01/09 125,000 131,250 Von Hoffmann Corp., 144A 10.250%, due 03/15/09 450,000 461,250 Weirton Steel Corp. (e)(f) 0.000%, due 08/13/02, Convertible (d) 1,800 72,000 10.000%, due 04/01/08 110,000 44,000 Westpoint Stevens, Inc. 7.875%, due 06/15/05 325,000 219,375 15.000%, due 02/28/05 2,000,000 1,960,000 Wheeling Island Gaming, Inc. 10.125%, due 12/15/09 400,000 412,000 William Carter 10.875%, due 08/15/11 900,000 985,500 Winsloew Furniture, Inc., Series B 12.750%, due 08/15/07 250,000 248,750 Wiser Oil Co. 9.500%, due 05/15/07 $ 375,000 $ 307,500 WRC Media, Inc. 12.750%, due 11/15/09 750,000 766,875 Yell Finance BV 10.750%, due 08/01/11 190,000 207,100 Young Broadcasting, Inc. 8.500%, due 12/15/08, 144A 850,000 845,750 10.000%, due 03/01/11 200,000 177,000 -------------- Total U.S. Corporate Bonds 126,974,009 -------------- INTERNATIONAL DOLLAR BONDS -- 0.81% Callahan Nordrhein-Westfallen 0.000%, due 07/15/10 (c) 300,000 3,000 14.000%, due 07/15/10 800,000 32,000 COLT Telecom Group (c) 0.000%, due 12/15/06 1,000,000 580,000 Energis PLC (d) 9.750%, due 06/15/09 250,000 20,000 Methanex Corp. 7.400%, due 08/15/02 460,000 458,266 Microcell Telecommunications, Inc., Series B (c) 0.000%, due 06/01/06 400,000 32,000 -------------- 1,125,266 -------------- Total Bonds (Cost $185,769,375) 128,099,275 -------------- SHARES -------------- EQUITIES -- 2.94% U.S. EQUITIES -- 2.14% AIRLINES -- 0.00% Sabreliner Corp. (b)(f) 8,400 -- -------------- ELECTRONICS -- 0.00% Communications & Power Industries Holding Corp. (b) 1,400 14 -------------- LEISURE & TOURISM -- 0.53% Prime Hospitality Corp., 144A 750,000 735,000 -------------- RECREATION -- 0.39% Venetian Casino, 144A 550,000 553,438 -------------- RETAIL/APPAREL -- 0.57% Perry Ellis International, Inc., 144A 750,000 757,500 Samuels Jewelers, Inc. (b) 640,011 40,321 -------------- 797,821 -------------- SERVICES/MISCELLANEOUS -- 0.65% Metal Management, Inc. (b) 234,913 798,704 Orion Refining (b) 46,598 -- Packaged Ice, Inc. (b) 74,223 92,779 Song Networks Holding AB ADR (b) 61,644 11,096 Waste Systems International, Inc. (b) 664,249 3,321 -------------- 905,900 -------------- TELECOMMUNICATIONS-SERVICES -- 0.00% PNV, Inc. (b) 79,417 397 RCN Corp. (b) 466 638 -------------- 1,035 -------------- 2,993,208 -------------- 79 SHARES VALUE -------------- -------------- CONVERTIBLE PREFERRED -- 0.67% ELECTRONICS -- 0.45% Communications & Power Industries Holding Corp. Series B, PIK 14.000% 39,639 $ 629,269 -------------- PUBLISHING -- 0.14% CSC Holdings, Inc., Series M, PIK, 11.125% (b) 3,000 192,000 -------------- SERVICES/MISCELLANEOUS -- 0.07% American Restaurant Group, Inc. Series B, PIK 12.000% 68 -- EarthWatch, Inc., Series C, PIK 8.500%, 144A 376,891 94,223 ICG Holdings, Inc., PIK 14.000% 2,218 22 Waste Systems International, Inc., Series E, PIK 8.000% 5,428 54 -------------- 94,299 -------------- TELECOMMUNICATIONS-SERVICES -- 0.01% InterAct Electronic Marketing, Inc.14.000%, 144A 19,500 19,500 -------------- 935,068 -------------- NUMBER OF WARRANTS -------------- WARRANTS (b) (e) -- 0.13% Arcadia Financial Ltd. expires 03/15/07 6,000 60 expires 04/15/08 6,275 63 Dayton Superior Corp., 144A expires 06/15/09 225 2,250 Electronic Retailing Systems International, Inc. expires 02/01/04 13,700 137 InterAct Electronic Marketing, Inc. expires 12/31/09 19,500 195 InterAct Electronic Marketing, Inc., 144A expires 08/01/03 19,500 $ 19,500 Knology, Inc., 144A expires 10/15/07 16,995 17 Leap Wireless International, Inc., 144A expires 04/15/10 200 100 Motient Corp., 144A expires 04/01/08 182 2 Nextel International, Inc. expires 04/15/07 15,750 158 NUC02 expires 10/31/04 (f) 109,290 147,541 Pliant Corp., 144A expires 06/01/10 160 1,600 Samuels Jewelers, Inc. expires 09/29/03 13,146 13 UIH Australia Pacific, Inc. expires 05/15/06 10,000 100 Wam!Net, Inc. expires 03/01/05 26,250 262 Winsloew Furniture, Inc., 144A expires 08/15/07 250 2,531 -------------- 174,529 -------------- Total Equities (Cost $34,016,178) 4,102,805 -------------- SHARES -------------- SHORT-TERM INVESTMENTS -- 0.69% OTHER -- 0.69% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $963,891) 963,891 963,891 -------------- Total Investments (Cost $220,749,444) -- 95.40% (a) 133,165,971 Cash and other assets, less liabilities -- 4.60% 6,425,598 -------------- Net Assets -- 100% $ 139,591,569 ==============
NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $221,107,844; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 1,851,450 Gross unrealized depreciation (89,793,323) -------------- Net unrealized depreciation $ (87,941,873) ==============
(b) Non-income producing security. (c) Step bonds -- coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2002. Maturity date disclosed is the ultimate maturity date. (d) Security is in default. (e) Security is illiquid. These securities amounted to $290,529 or 0.21% of net assets. (f) Security is being fair valued by a management committee under the direction of the Board of Directors. % Represents a percentage of net assets. 144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2002, the value of these securities amounted to $19,765,459 or 14.16% of net assets. ADR: American Depositary Receipt PIK: Payment-In-Kind See accompanying notes to financial statements. 80 UBS INTERNATIONAL EQUITY FUND For the fiscal year ended June 30, 2002, Class Y Shares of the UBS International Equity Fund declined 5.78%, outperforming the negative 9.40% return of its benchmark, the MSCI World Ex USA (Free) Index. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The investment environment was challenging during the 12-month period, as a worldwide economic downturn, the terrorist attacks of September 11, 2001, geopolitical issues and corporate governance concerns took their toll on investor confidence. From October 2001 through March 2002, it appeared that developed economies were headed for an economic rebound and equity markets rose, as investors expected economic and corporate earnings growth rates to be in line with past recoveries. As the period progressed, however, economic data was mixed, indicating that the recovery is likely to be relatively weak over the medium term. The uncertainty about the strength of economic growth led to steep declines in international equity markets. Early in the period, it appeared that the deterioration of the Japanese financial system had reached a bottom that might lead to a complete restructuring of the banking sector. As in the past, however, reform of the banking system was put off. Japan's stock market rose, even though the fundamentals of the Japanese economy did not appear to justify the rebound. We underweighted the fund in Japan and have no assets committed to the banking industry. Volatility continued in the broad technology sector. Early in the period, we underweighted the portfolio's INFORMATION TECHNOLOGY position because we believed valuations were based on the prospects of a strong economic recovery. We maintained that underweighting for the remainder of the fiscal period. The fund was also underweighted in TECHNOLOGY HARDWARE, especially semiconductor companies, which had performed better than we expected in the latter part of 2001 and had reached valuations which we believed were unsustainable. We selectively added back some of these stocks as their valuations became more attractive. SOFTWARE COMPANIES were also underweighted in the portfolio. While we maintained an underweighting in TELECOMMUNICATION SERVICES, we believe this area has become more attractive as companies have reduced capital expenditures and have focused on improving profitability. Sentiment in the telecommunication services area was negative throughout the fiscal year; however, we added back certain companies, such as BT Group, that are well-positioned for the future. Over the fiscal year, we reduced some of the fund's defensive positions as some economies began to show improvement. As a result, we lowered exposure to consumer staples stocks, which tend to perform well in any economic environment. While we maintained an underweighting in the consumer cyclicals area, we added to Compass Group, a food service company that is based in the United Kingdom, and we maintained holdings, such as Toyota and Sony. The fund was overweighted in the materials sector, where we favored paper and forest products companies and chemical companies. The paper cycle appears to be bottoming as pulp prices are nearing cash production costs. The portfolio holds Stora Enso, UPM Kymmene and Svenska Cellulosa. Other overweighted sectors included insurance and media. 81 TOTAL RETURN
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION* ENDED ENDED ENDED ENDED TO 6/30/02 6/30/02 6/30/02 6/30/02 6/30/02 - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS A 0.50% -5.91% -4.27% -1.08% -1.08% - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS B N/A N/A N/A N/A 3.87 - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS C N/A N/A N/A N/A 3.87 - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS Y 0.62 -5.78 -4.06 -0.84 3.79 - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS A+ -5.05 -11.10 -6.06 -2.19 -2.19 - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS B+ N/A N/A N/A N/A -1.13 - ---------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND CLASS C+ N/A N/A N/A N/A 1.81 - ---------------------------------------------------------------------------------------------------- MSCI World Ex USA (Free) Index -1.63 -9.40 -6.42 -1.41 3.17 - ----------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS INTERNATIONAL EQUITY FUND CLASS A (FORMERLY CLASS N) IS 6/30/97. INCEPTION DATES OF CLASS B AND CLASS C ARE 2/12/02 AND 1/25/02, RESPECTIVELY. INCEPTION DATE OF CLASS Y (FORMERLY CLASS I) AND THE MSCI WORLD EX USA (FREE) INDEX IS 8/31/93. + RETURNS INCLUDE SALES CHARGES. PERFORMANCE IS NET OF WITHHOLDING TAXES ON DIVIDENDS. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS IN EXCESS OF 1 YEAR ARE AVERAGE ANNUALIZED RETURNS. ALL TOTAL RETURNS LESS THAN 1 YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS International Equity Fund Class Y and the MSCI World Ex USA (Free) Index if you had invested $1,000,000 on August 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS INTERNATIONAL EQUITY FUND CLASS Y VS. MSCI WORLD EX USA (FREE) INDEX Wealth Value with Dividends Reinvested
UBS INTERNATIONAL EQUITY MSCI WORLD EX FUND CLASS Y USA (FREE) INDEX ------------------------ ---------------- 8/31/93 $ 1,000,000 $ 1,000,000 9/30/93 $ 972,000 $ 976,801 10/31/93 $ 997,000 $ 1,009,609 11/30/93 $ 929,000 $ 923,179 12/31/93 $ 965,500 $ 988,755 1/31/94 $ 1,033,606 $ 1,070,906 2/28/94 $ 1,002,558 $ 1,065,670 3/31/94 $ 957,488 $ 1,019,802 4/30/94 $ 984,530 $ 1,061,898 5/31/94 $ 985,531 $ 1,056,877 6/30/94 $ 975,547 $ 1,068,785 7/31/94 $ 990,648 $ 1,080,675 8/31/94 $ 1,019,844 $ 1,107,765 9/30/94 $ 990,648 $ 1,075,156 10/31/94 $ 1,007,763 $ 1,109,502 11/30/94 $ 974,540 $ 1,055,987 12/31/94 $ 974,540 $ 1,062,772 1/31/95 $ 940,310 $ 1,021,301 2/28/95 $ 936,283 $ 1,020,962 3/31/95 $ 952,391 $ 1,083,954 4/30/95 $ 983,601 $ 1,124,091 5/31/95 $ 984,608 $ 1,113,638 6/30/95 $ 974,540 $ 1,095,523 7/31/95 $ 1,032,932 $ 1,161,849 8/31/95 $ 1,049,040 $ 1,119,128 9/30/95 $ 1,066,155 $ 1,140,631 10/31/95 $ 1,056,087 $ 1,111,129 11/30/95 $ 1,082,263 $ 1,142,653 12/31/95 $ 1,126,103 $ 1,187,454 1/31/96 $ 1,148,603 $ 1,195,636 2/29/96 $ 1,144,317 $ 1,199,068 3/31/96 $ 1,159,318 $ 1,224,307 4/30/96 $ 1,202,176 $ 1,260,385 5/31/96 $ 1,196,819 $ 1,238,756 6/30/96 $ 1,204,891 $ 1,244,664 7/31/96 $ 1,171,452 $ 1,208,121 8/31/96 $ 1,176,845 $ 1,213,340 9/30/96 $ 1,212,442 $ 1,246,304 10/31/96 $ 1,209,206 $ 1,237,791 11/30/96 $ 1,270,691 $ 1,289,534 12/31/96 $ 1,269,637 $ 1,271,881 1/31/97 $ 1,262,768 $ 1,232,993 2/28/97 $ 1,283,375 $ 1,251,326 3/31/97 $ 1,291,389 $ 1,251,906 4/30/97 $ 1,300,548 $ 1,259,866 5/31/97 $ 1,385,267 $ 1,343,154 6/30/97 $ 1,449,115 $ 1,414,417 7/31/97 $ 1,475,588 $ 1,440,677 8/31/97 $ 1,371,998 $ 1,332,367 9/30/97 $ 1,449,115 $ 1,407,159 10/31/97 $ 1,358,186 $ 1,301,256 11/30/97 $ 1,335,166 $ 1,285,967 12/31/97 $ 1,342,509 $ 1,298,194 1/31/98 $ 1,387,259 $ 1,353,928 2/28/98 $ 1,460,600 $ 1,441,978 3/31/98 $ 1,516,538 $ 1,488,741 4/30/98 $ 1,528,968 $ 1,500,219 5/31/98 $ 1,528,968 $ 1,493,498 6/30/98 $ 1,518,353 $ 1,499,786 7/31/98 $ 1,533,349 $ 1,509,687 8/31/98 $ 1,343,399 $ 1,316,936 9/30/98 $ 1,310,908 $ 1,279,301 10/31/98 $ 1,412,131 $ 1,412,763 11/30/98 $ 1,484,612 $ 1,484,559 12/31/98 $ 1,535,729 $ 1,540,535 1/31/99 $ 1,531,928 $ 1,540,305 2/28/99 $ 1,482,511 $ 1,501,559 3/31/99 $ 1,525,592 $ 1,563,636 4/30/99 $ 1,596,550 $ 1,631,163 5/31/99 $ 1,512,921 $ 1,547,710 6/30/99 $ 1,573,726 $ 1,607,439 7/31/99 $ 1,619,637 $ 1,653,936 8/31/99 $ 1,610,710 $ 1,658,375 9/30/99 $ 1,603,058 $ 1,676,894 10/31/99 $ 1,641,317 $ 1,741,709 11/30/99 $ 1,680,851 $ 1,802,392 12/31/99 $ 1,830,034 $ 1,968,324 1/31/00 $ 1,691,356 $ 1,848,754 2/29/00 $ 1,696,540 $ 1,900,647 3/31/00 $ 1,752,270 $ 1,978,709 4/30/00 $ 1,683,579 $ 1,875,810 5/31/00 $ 1,666,731 $ 1,830,372 6/30/00 $ 1,758,751 $ 1,909,384 7/31/00 $ 1,691,356 $ 1,836,375 8/31/00 $ 1,697,836 $ 1,860,337 9/30/00 $ 1,625,257 $ 1,763,940 10/31/00 $ 1,582,487 $ 1,715,862 11/30/00 $ 1,574,710 $ 1,646,579 12/31/00 $ 1,663,635 $ 1,703,212 1/31/01 $ 1,647,067 $ 1,706,390 2/28/01 $ 1,551,805 $ 1,571,304 3/31/01 $ 1,459,305 $ 1,464,720 4/30/01 $ 1,546,283 $ 1,567,068 5/31/01 $ 1,503,484 $ 1,515,985 6/30/01 $ 1,474,753 $ 1,454,141 7/31/01 $ 1,452,576 $ 1,428,647 8/31/01 $ 1,440,102 $ 1,390,464 9/30/01 $ 1,319,516 $ 1,250,026 10/31/01 $ 1,336,149 $ 1,280,560 11/30/01 $ 1,363,869 $ 1,330,857 12/31/01 $ 1,380,988 $ 1,339,334 1/31/02 $ 1,321,094 $ 1,271,209 2/28/02 $ 1,331,362 $ 1,278,771 3/31/02 $ 1,391,256 $ 1,346,797 4/30/02 $ 1,408,369 $ 1,355,054 5/31/02 $ 1,437,460 $ 1,373,193 6/30/02 $ 1,389,545 $ 1,317,466 8/31/93 = $1,000,000
FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 82 TOP TEN INTERNATIONAL EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - -------------------------------------------------- Total Fina S.A., Class B 3.3% Shell Transport & Trading Co., PLC 2.8 ENI Spa 2.0 Novartis AG 2.0 BP PLC 1.9 Elsevier N.V. 1.8 GlaxoSmithLine PLC 1.8 Aventis S.A., Class A 1.8 Toyota Motor Corp. 1.8 Royal Bank of Scotland Group PLC 1.7 - -------------------------------------------------- Total 20.9%
INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF JUNE 30, 2002 INTERNATIONAL EQUITIES Appliances & Households 1.18% Autos/Durables 1.78 Banking 16.05 Beverages and Tobacco 2.98 Broadcasting & Publishing 3.94 Building Materials 0.02 Business & Public Service 1.53 Chemicals 3.13 Computer Software 0.08 Construction 0.92 Consumer 0.52 Data Processing 0.83 Electric Components 3.11 Energy 10.10 Financial Services 5.58 Food & House Products 5.68 Forest Products 2.56 Health: Drugs 7.78 Health: Non Drugs 1.79 Housing/Paper 0.55 Industrial Components 0.45 Insurance 4.47 Leisure & Tourism 1.06% Machinery & Engineering 0.65 Metals-Steel 0.96 Multi-Industry 2.56 Real Estate 0.90 Recreation 0.54 Retail/Apparel 1.07 Services/Miscellaneous 1.53 Technology 0.52 Telecommunications 6.63 Transportation 2.01 Utilities 3.20 Wholesale & International Trade 0.50 ------ Total International Equities 97.16 SHORT-TERM INVESTMENTS 1.24 ------ TOTAL INVESTMENTS 98.40 ------ INVESTMENTS OF CASH COLLATERAL 9.78 ------ LIABILITIES, LESS CASH AND OTHER ASSETS (8.18) ------ NET ASSETS 100.00% ======
83 UBS INTERNATIONAL EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE -------------- -------------- INTERNATIONAL EQUITIES -- 97.16% AUSTRALIA -- 3.12% Lion Nathan Ltd. 123,568 $ 336,450 Mayne Nickless Ltd. 180,794 420,201 National Australia Bank Ltd., Preferred 10,000 349,500 News Corp., Ltd., Preferred 86,376 396,661 QBE Insurance Group Ltd. 96,019 357,930 Rio Tinto Ltd. 14,440 271,734 Westpac Banking Corp., Ltd. 110,740 1,009,632 -------------- 3,142,108 -------------- BELGIUM -- 0.62% Fortis 29,019 621,328 -------------- CANADA -- 3.04% Alcan Aluminum Ltd. 12,240 464,362 Bank of Nova Scotia 16,100 529,186 BCE, Inc. 28,700 497,990 Canadian National Railway Co. 7,100 373,650 Domtar, Inc. 18,900 220,576 Nortel Networks Corp. 52,500 75,942 NOVA Chemicals Corp. 9,700 214,996 Royal Bank of Canada 19,800 683,477 -------------- 3,060,179 -------------- DENMARK -- 1.00% Danske Bank A/S 27,400 504,514 Novo-Nordisk A/S 9,521 315,177 TDC A/S 6,950 192,186 -------------- 1,011,877 -------------- FINLAND -- 3.29% Nokia Oyj 111,892 1,637,670 Sampo Leonia Insurance, Class A 46,860 365,602 UPM-Kymmene Corp. (c) 33,189 1,306,504 -------------- 3,309,776 -------------- FRANCE -- 10.80% Air Liquide (c) 582 89,551 Alcatel S.A 19,085 132,692 Aventis S.A., Class A 25,386 1,798,852 AXA 33,873 619,546 BNP Paribas (c) 20,925 1,157,265 Cap Gemini S.A. (c) 11,186 444,652 Cie De Saint Gobain (c) 20,184 905,984 France Telecom S.A. (c) 8,270 77,019 Gemplus International S.A. (b) 55,395 79,326 Sanofi 7,317 445,136 Societe Generale 15,986 1,053,040 Suez S.A (c) 14,128 376,724 Total Fina S.A., Class B 20,225 3,283,746 Union du Credit-Bail Immobilier 6,751 416,704 -------------- 10,880,237 -------------- GERMANY -- 3.07% Allianz AG (c) 3,328 671,970 Altana AG 9,008 488,761 Bayer AG 11,855 379,923 Deutsche Telekom 16,900 $ 158,558 E.on AG 4,978 288,830 Muenchener Rueckver AG (c) 4,669 1,106,660 -------------- 3,094,702 -------------- HONG KONG -- 0.74% Hong Kong Electric Holdings Ltd. 96,000 358,769 Sun Hung Kai Properties Ltd. 51,000 387,404 -------------- 746,173 -------------- IRELAND -- 1.19% Bank of Ireland 36,693 456,959 CRH PLC 45,245 737,282 -------------- 1,194,241 -------------- ITALY -- 3.87% Assicurazioni Generali Spa (c) 41,479 983,148 ENI Spa (c) 129,614 2,060,900 San Paolo-imi Spa (c) 84,810 850,981 -------------- 3,895,029 -------------- JAPAN -- 16.15% AIFUL Corp. 10,850 711,505 Bank of Yokohama (c) 47,000 199,983 Banyu Pharmaceutical 20,000 257,968 Benesse Corp. 29,200 533,522 Canon, Inc. 22,000 831,470 Daikin Industries Ltd. 22,000 402,887 Fuji Photo Film Co., Ltd. 33,000 1,065,493 Kao Corp. 20,000 460,537 KDDI Corp. 133 410,562 Matsushita Electric Industrial Co. (c) 14,000 190,973 Minebea Co., Ltd. 58,000 340,664 Mitsubishi Corp. (c) 69,000 499,107 Mitsubishi Estate Co., Ltd. 60,000 490,572 Mitsui Mining & Smelting Co., Ltd. (c) 77,000 229,343 Murata Manufacturing Co., Inc. 7,800 501,085 Nintendo Corp., Ltd. 3,700 544,844 Orix Corp. (c) 8,700 701,894 Rohm Co. 3,600 537,327 Sanyo Electric 115,000 501,794 Sekisui House Ltd. 26,000 191,106 Sony Corp. (c) 18,900 998,140 Sompo Japan Insurance, Inc. (c) 134,000 820,591 Sumitomo Chemical Co. 94,000 427,415 Taiheiyo Cement Corp. 600 1,116 Takeda Chemical Industries Ltd. 24,000 1,053,229 Takefuji Corp. 8,970 623,395 Toyota Motor Corp. 67,700 1,796,146 West Japan Railway Co. 236 952,978 -------------- 16,275,646 -------------- NETHERLANDS -- 6.84% ABN AMRO Holdings NV 20,470 371,774 Akzo Nobel NV 10,748 468,001 ING Groep NV 7,599 195,123 Koninklijke Ahold NV 51,736 1,088,308 Koninklijke (Royal) KPN NV (b) 125,997 589,818 84 SHARES VALUE -------------- -------------- Philips Electronics NV 27,483 $ 767,307 Reed Elsevier NV 133,813 1,823,713 Vedior NV 25,201 348,437 VNU NV 23,860 663,092 Wolters Kluwer NV 30,330 575,712 -------------- 6,891,285 -------------- NORWAY -- 0.45% Telenor ASA 128,700 456,194 -------------- PORTUGAL -- 0.93% Electricidade de Portugal S.A. 391,281 757,398 Portugal Telecom S.A. 25,079 177,090 -------------- 934,488 -------------- SINGAPORE -- 1.59% DBS Group Holdings Ltd. 94,000 659,724 Neptune Orient Lines Ltd. (b) 736,000 424,904 Singapore Technologies Engineering Ltd. 478,000 522,153 -------------- 1,606,781 -------------- SPAIN -- 2.75% Banco Bilbao Vizcaya 105,475 1,192,708 Banco Santander Central Hispano S.A. 139,481 1,107,517 Telefonica S.A. 55,954 469,710 -------------- 2,769,935 -------------- SWEDEN -- 3.64% Nordea AB 67,500 367,227 Sandvik AB (c) 18,000 449,486 Svenska Cellulosa AB 29,490 1,049,260 Svenska Handelsbanken AB (c) 53,150 812,532 Swedish Match AB 120,140 993,487 -------------- 3,671,992 -------------- SWITZERLAND -- 7.02% Compagnie Financiere Richemont AG 25,819 587,229 Credit Suisse Group 14,585 463,039 Givaudan S.A. 1,686 679,702 Nestle S.A. 7,295 1,700,843 Novartis AG 46,814 2,058,709 Roche Holding AG 12,986 981,607 Swiss Re 6,157 601,924 -------------- 7,073,053 -------------- UNITED KINGDOM -- 27.05% Abbey National PLC 62,454 734,932 Allied Domecq PLC 112,709 739,178 AstraZeneca PLC 10,690 442,565 Barclays Bank PLC 157,786 1,327,630 BOC Group PLC 30,182 468,805 BP PLC 225,962 1,897,827 Brambles Industries, Ltd. 65,269 326,574 BT Group PLC (b) 228,380 877,260 Carlton Communications PLC 173,401 555,061 Charter PLC (b) 100,497 254,291 Compass Group PLC 113,495 688,540 Dimension Data Holdings PLC (b) 251,845 $ 157,394 Electrocomponents PLC 87,526 490,302 Exel PLC 7,529 95,886 Gallaher Group PLC 178,133 1,669,895 GlaxoSmithKline PLC 83,269 1,799,821 HSBC Holdings PLC 69,302 797,030 Invensys PLC 318,379 431,921 Kingfisher PLC 108,281 521,978 Lloyds TSB Group PLC 66,233 659,261 Matalan PLC 72,599 345,267 National Grid Group PLC 133,677 949,538 Prudential PLC 76,928 703,567 Reckitt Benckiser PLC 25,432 456,275 Rentokil Initial PLC 151,375 616,077 Rolls-Royce PLC 284,847 703,390 Royal Bank of Scotland Group PLC 61,787 1,751,781 Safeway PLC 171,486 736,482 Scottish & Southern Energy PLC 87,505 865,660 Scottish Power PLC 24,565 132,085 Shell Transport & Trading PLC 370,996 2,799,266 Smurfit (Jefferson) Group PLC 182,469 557,844 Stagecoach Holdings PLC 190,850 182,547 Vodafone Group PLC 1,107,421 1,519,235 -------------- 27,255,165 -------------- Total International Equities (Cost $81,482,134) 97,890,189 -------------- SHORT-TERM INVESTMENTS -- 1.24% OTHER -- 1.24% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,253,925) 1,253,925 1,253,925 -------------- Total Investments (Cost $82,736,059) -- 98.40% (a) 99,144,114 Total Investments of Cash Collateral for Securities Loaned (Cost $9,853,046) -- 9.78% (a) 9,853,046 Liabilities, less cash and other assets -- (8.18)% (8,243,044) -------------- Net Assets-- 100% $ 100,754,116 ============== INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 9.78% OTHER -- 9.78 % UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $9,853,046) 9,853,046 $ 9,853,046 ==============
85 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $97,040,953; and net unrealized appreciation consisted of: Gross unrealized appreciation $ 17,235,764 Gross unrealized depreciation (5,279,557) ------------- Net unrealized appreciation $ 11,956,207 =============
(b) Non-income producing security. (c) Security, or portion thereof, was on loan at June 30, 2002. % Represents a percentage of net assets. FORWARD FOREIGN CURRENCY CONTRACTS UBS International Equity Fund had the following open forward foreign currency contracts as of June 30, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- --------------- ------------ ------------ FORWARD FOREIGN CURRENCY BUY CONTRACTS: Australian Dollar (AUD) 07/18/02 17,700,000 $ 9,922,337 $ 802,932 British Pound (GBP) 07/18/02 5,834,464 8,884,942 394,156 Canadian Dollar (CAD) 07/18/02 5,400,000 3,549,173 199,154 Euro (EUR) 07/18/02 15,053,962 14,856,594 1,587,288 Hong Kong Dollar (HKD) 07/18/02 5,500,000 705,126 252 Japanese Yen (JPY) 07/18/02 848,000,000 7,080,841 550,765 Singapore Dollar (SGD) 07/18/02 850,000 481,299 18,619 Swedish Krona (SEK) 07/18/02 21,600,000 2,347,504 293,550 Swiss Franc (CHF) 07/18/02 2,900,000 1,949,119 206,582 FORWARD FOREIGN CURRENCY SALE CONTRACTS: Australian Dollar (AUD) 07/18/02 6,600,000 3,699,854 (105,594) British Pound (GBP) 07/18/02 10,750,000 16,370,505 (1,130,790) Canadian Dollar (CAD) 07/18/02 2,100,000 1,380,234 (56,084) Danish Krone (DKK) 07/18/02 3,300,000 438,359 (8,122) Euro (EUR) 07/18/02 10,600,000 10,461,027 (682,216) Hong Kong Dollar (HKD) 07/18/02 11,000,000 1,410,252 (465) Japanese Yen (JPY) 07/18/02 1,041,000,000 8,692,400 (732,435) Singapore Dollar (SGD) 07/18/02 2,500,000 1,415,586 (35,344) Swedish Krona (SEK) 07/18/02 39,000,000 4,238,549 (438,029) Swiss Franc (CHF) 07/18/02 1,950,000 1,310,614 (133,015) ------------ Total net unrealized gain on Forward Foreign Currency Contracts $ 731,204 ============
See accompanying notes to financial statements. 86 UBS U.S. VALUE EQUITY FUND For the fiscal year ended June 30, 2002, UBS U.S. Value Equity Fund Class Y shares declined 6.20%, outperforming its benchmark, the Russell 1000 Value Index, which declined 8.95% for the same 12-month period. Returns for all share classes over various time periods are shown in "Total Return" on the next page. Please note those returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Volatility was constant during this past fiscal year, with economic recession and recovery, geopolitical unrest and corporate governance scandals dominating the headlines and consuming equity investors. A recession kept stock prices depressed during the summer and was exacerbated after the events of September 11. Gross domestic product (GDP) fell during the third quarter and stock prices plunged further in the immediate aftermath of the attacks, with airlines and travel-related industries hit particularly hard. Value stocks, which had outperformed growth equities prior to September, were not immune to the market decline. The market began to recover during the fourth quarter, however, led by the S&P 500 Index, which surged 10.7%. Value stocks performed equally well, and the Fund declined only 0.3% for the six-month period ended December 31, 2001. Expansion in the manufacturing sector, a 40-year low in the federal funds rate and a forecast of improved corporate earnings gave hope that equities markets were about to recover beginning 2002, but corporate governance and accounting irregularities rocked the markets. Enron executives were called before Congress and its stock price plummeted, prompting the company to seek bankruptcy protection. Accounting irregularities plagued other high-profile companies, and more bankruptcies followed. Stock prices swooned again entering the second quarter, struggling through the end of the fiscal year. In this environment, value stocks outperformed growth and even large-cap issues, although they weren't immune to a smaller overall decline. Stock selection also helped the Fund outperform its benchmark. The financial services sector, in which the Fund has an overweight, has value in certain issues. One of our holdings, Wells Fargo, we believe is positioned to continue its recent positive performance. The company's revenue growth remains strong at better than 10% growth, and the bank's credit quality is solid and improving. Greenpoint Financial is another holding we expect to remain a positive for the Fund. This specialty finance company, with mortgage business in California and a chartered savings bank in New York, exited its manufactured housing business early in the year, improving the company's outlook. In the utilities sector, Sempra Energy is poised to rebound from a regulatory-induced earnings slump. The utility's San Diego Gas & Electric subsidiary incurred skyrocketing costs to buy power in 2000 and 2001 while electric rates were frozen through state legislation. Once the state ironed out its energy shortage problem, power prices began to decline and consequently helped to improve Sempra's cash flow. Healthcare and pharmaceuticals were also among our other largest overweights. Holdings including Johnson & Johnson, Abbott Laboratories, Baxter International and Cephalon have strong drug pipelines. We also added EDS to our portfolio during the first quarter, even though we remain underweight in the information services sector. All of these companies have seen stock prices struggle, despite strong fundamentals. We believe they offer value, particularly as the stock market begins to recover. The Fund enters a new fiscal year overweighted in financial services, utilities, health care, pharmaceuticals and transportation sectors. It is underweight in retailing, computer hardware and energy. As the market rebounds and consumer and business demand for products and services pick up, we believe that companies with a history of earnings growth, strong management and stellar fundamentals will be rewarded. 87 TOTAL RETURN
6 MONTHS 1 YEAR INCEPTION* ENDED ENDED TO 6/30/02 6/30/02 6/30/02 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS A -6.02% N/A -5.92 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS B -6.43 N/A -3.12% - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS C -6.42 N/A -4.11 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS Y -5.92 -6.20% -6.17 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS A+ -11.18 N/A -11.10 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS B+ -11.10 N/A -7.96 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS C+ -8.28 N/A -6.05 - -------------------------------------------------------------------------------- Russell 1000 Value Index -4.78 -8.95 -8.95 - --------------------------------------------------------------------------------
* INCEPTION DATES OF UBS U.S. VALUE EQUITY FUND CLASS A, CLASS B, CLASS C AND CLASS Y ARE 12/07/01, 11/08/01, 12/12/01 AND 6/29/01, RESPECTIVELY. INCEPTION RETURN FOR THE INDEX IS AS OF THE NEAREST MONTH-END OF INCEPTION OF THE OLDEST SHARE CLASS: 6/30/01. + RETURNS INCLUDE SALES CHARGES. TOTAL RETURN INCLUDES REINVESTMENT OF ALL CAPITAL GAIN AND INCOME DISTRIBUTIONS. TOTAL RETURN DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ALL TOTAL RETURNS LESS THAN ONE YEAR ARE CUMULATIVE RETURNS. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $1,000,000 This chart shows the growth in the value of an investment in the UBS U.S. Value Equity Fund Class Y and the Russell 1000 Value Index if you had invested $1,000,000 on June 30, 2001, and had reinvested all your income dividends and capital gain distributions through June 30, 2002. The performance of Class A, Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. [CHART] UBS U.S. VALUE EQUITY FUND CLASS Y VS. RUSSELL 1000 VALUE INDEX Wealth Value with Dividends Reinvested
UBS U.S. VALUE EQUITY FUND CLASS Y RUSSELL 1000 VALUE INDEX --------------------- ----------------------- 6/30/01 $ 1,000,000 $ 1,000,000 7/31/01 $ 1,011,000 $ 997,871 8/31/01 $ 973,000 $ 957,898 9/30/01 $ 918,000 $ 890,479 10/31/01 $ 917,000 $ 882,824 11/30/01 $ 980,000 $ 934,136 12/31/01 $ 997,000 $ 956,139 1/31/02 $ 987,000 $ 948,771 2/28/02 $ 990,000 $ 950,306 3/31/02 $ 1,033,000 $ 995,253 4/30/02 $ 1,002,000 $ 961,113 5/31/02 $ 999,000 $ 965,943 6/30/02 $ 938,000 $ 910,476
6/30/01 = $1,000,000 FUND RETURNS ARE NET OF ALL FEES AND COSTS, WHILE THE INDEX RETURNS ARE BASED SOLELY ON MARKET RETURNS WITHOUT DEDUCTION FOR FEES OR TRANSACTION COSTS FOR REBALANCING. 88 TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2002
PERCENTAGE OF NET ASSETS - -------------------------------------------------- Citigroup, Inc. 4.6% Wells Fargo & Co. 4.5 Exxon Mobil Corp. 3.9 GreenPoint Financial Corp. 3.6 American International Group, Inc 3.4 Progress Energy, Inc. 3.3 Conoco, Inc. 3.1 JP Morgan Chase & Co. 3.1 United Health Group, Inc. 2.9 Wyeth, Inc. 2.7 - -------------------------------------------------- Total 35.1%
89 UBS U.S. VALUE EQUITY FUND -- SCHEDULE OF INVESTMENTS JUNE 30, 2002
SHARES VALUE -------------- -------------- U.S. EQUITIES -- 98.25% AUTOS/DURABLES -- 0.99% Johnson Controls, Inc. 500 $ 40,805 -------------- BANKS -- 16.67% Citigroup, Inc. 4,900 189,875 FleetBoston Financial Corp. 2,500 80,875 GreenPoint Financial Corp. 3,000 147,300 PNC Financial Services Group 1,600 83,648 Wells Fargo & Co. 3,650 182,719 -------------- 684,417 -------------- BROADCASTING & PUBLISHING -- 2.00% Viacom, Inc. 1,850 82,085 -------------- CAPITAL GOODS -- 4.30% Illinois Tool Works, Inc. 1,600 109,280 Pentair, Inc. 1,400 67,312 -------------- 176,592 -------------- CHEMICALS -- 6.44% Dow Chemical Co. 3,050 104,859 Exxon Mobil Corp. 3,900 159,588 -------------- 264,447 -------------- COMPUTER SYSTEMS -- 1.72% Electronic Data Systems Corp. 1,900 70,585 -------------- CONSTRUCTION -- 1.24% Martin Marietta Materials, Inc. 1,300 50,700 -------------- ENERGY -- 12.15% Conoco, Inc. 4,650 129,270 DTE Energy Co. 1,350 60,264 Exelon Corp. 950 49,685 FirstEnergy Corp. 2,600 86,788 Progress Energy, Inc. 2,600 135,226 Sempra Energy 1,700 37,621 -------------- 498,854 -------------- FINANCIAL SERVICES -- 13.92% American International Group, Inc. 2,034 138,780 Freddie Mac 1,700 104,040 Hartford Financial Services Group, Inc. (The) 950 56,496 JP Morgan Chase & Co. 3,700 125,504 Morgan Stanley 2,100 90,468 U.S. Bancorp 2,400 56,040 -------------- 571,328 -------------- HEALTH: DRUGS -- 6.58% Abbott Laboratories, Inc. 2,300 86,595 Bristol-Myers Squibb Co. 1,000 25,700 Cephalon, Inc. (b) 1,000 45,200 Wyeth, Inc. 2,200 112,640 -------------- 270,135 -------------- HEALTH: NON-DRUGS -- 6.45% Baxter International, Inc. 800 35,560 Beckman Coulter, Inc. 900 44,910 Johnson & Johnson 1,250 65,325 United Health Group, Inc. 1,300 119,015 -------------- 264,810 -------------- HOUSING/PAPER -- 2.25% Kroger Co. (b) 4,650 $ 92,535 -------------- LEISURE & TOURISM -- 0.92% Walt Disney Co. 2,000 37,800 -------------- METALS-NON-FERROUS -- 2.25% Masco Corp. 3,400 92,174 -------------- RETAIL/APPAREL -- 2.39% Newell Rubbermaid, Inc. 2,800 98,168 -------------- SERVICES/MISCELLANEOUS -- 3.63% First Data Corp. 1,200 44,640 Household International, Inc. 2,100 104,370 -------------- 149,010 -------------- TECHNOLOGY -- 1.99% United Technologies Corp. 1,200 81,480 -------------- TELECOMMUNICATIONS-SERVICES -- 6.81% AT&T Wireless Group (b) 471 2,755 BellSouth Corp. 1,500 47,250 Motorola, Inc. 2,950 42,539 Nextel Communications, Inc. 14,300 45,903 SBC Communications, Inc. 2,150 65,575 Sprint Corp. 2,400 25,464 Verizon Communications, Inc. 1,250 50,188 -------------- 279,674 -------------- TEXTILES AND APPAREL -- 0.58% CommScope, Inc. 1,900 23,750 -------------- TRANSPORTATION -- 4.29% Burlington Northern Santa Fe Corp. 2,600 78,000 Norfolk Southern Corp. 4,200 98,196 -------------- 176,196 -------------- UTILITIES -- 0.68% CMS Energy Corp. 2,550 27,999 -------------- Total U.S. Equities (Cost $4,382,404) 4,033,544 -------------- SHORT-TERM INVESTMENTS -- 1.16% INVESTMENT COMPANIES -- 1.16% JPMorgan U.S. Government Money Market Fund (Cost $47,741) 47,741 47,741 -------------- Total Investments (Cost $4,430,145) -- 99.41% (a) 4,081,285 Cash and other assets, less liabilities -- 0.59% 24,262 -------------- Net Assets --100% $ 4,105,547 ==============
90 NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $4,439,410; and net unrealized depreciation consisted of: Gross unrealized appreciation $ 184,430 Gross unrealized depreciation (542,555) ---------- Net unrealized depreciation $ (358,125) ==========
(b) Non-income producing. % Represents a percentage of net assets. See accompanying notes to financial statements. 91 THE UBS FUNDS -- FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2002
UBS GLOBAL UBS GLOBAL UBS U.S. ALLOCATION UBS GLOBAL TECHNOLOGY UBS GLOBAL UBS GLOBAL BALANCED FUND EQUITY FUND FUND BIOTECH FUND BOND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers $ 142,052,667 $ 54,425,065 $ 719,498 $ 2,979,224 $ 31,181,890 $ 23,314,205 Affiliated issuers 28,203,141 915,301 -- -- 1,318,563 2,881,099 Foreign currency, at cost 512,295 189,713 -- 31 112,685 -- Investments of cash collateral received for securities loaned, at cost 5,763,657 -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- $ 176,531,760 $ 55,530,079 $ 719,498 $ 2,979,255 $ 32,613,138 $ 26,195,304 ============= ============= ============= ============= ============= ============= Investments, at value: Unaffiliated issuers+ $ 140,599,393 $ 54,935,120 $ 678,670 $ 2,224,655 $ 33,578,331 $ 22,734,824 Affiliated issuers 31,107,608 915,301 -- -- 1,318,563 2,881,099 Foreign currency, at value 516,209 193,862 -- 33 115,488 -- Investments of cash collateral received for securities loaned, at value 5,763,660 -- -- -- -- -- Cash -- 33,811 44,077 -- -- -- Receivables: Investment securities sold 566,249 1,178,901 -- 43,674 90,813 65,150 Due from Advisor -- 5,318 52,355 48,338 -- 7,684 Dividends 182,236 130,336 346 -- -- 16,466 Interest 540,414 1,418 36 258 601,791 89,009 Fund shares sold 297,980 57,017 -- -- 798,339 59,702 Variation margin 14,544 -- -- -- -- -- Other assets -- -- -- -- -- -- Net unrealized appreciation on forward foreign currency contracts 3,527,641 900,593 -- -- 429,314 -- ------------- ------------- ------------- ------------- ------------- ------------- TOTAL ASSETS 183,115,934 58,351,677 775,484 2,316,958 36,932,639 25,853,934 ------------- ------------- ------------- ------------- ------------- ------------- LIABILITIES: Payables: Securities loaned 5,763,657 -- -- -- -- -- Investment securities purchased 800,199 834,596 -- 40,958 93,548 120,991 Investment advisory fees 115,498 -- -- -- 10,926 -- Fund shares redeemed 558,251 773,706 122,691 135,285 32,429 6,888 Distribution and service fees 5,381 7,828 187 252 1,332 1,788 Transfer agent fees 2,250 3,750 2,250 2,250 2,250 2,250 Variation margin -- -- -- -- -- 1,153 Accrued expenses 231,393 75,572 19,512 21,818 54,657 51,921 ------------- ------------- ------------- ------------- ------------- ------------- TOTAL LIABILITIES 7,476,629 1,695,452 144,640 200,563 195,142 184,991 ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 175,639,305 $ 56,656,225 $ 630,844 $ 2,116,395 $ 36,737,497 $ 25,668,943 ============= ============= ============= ============= ============= ============= NET ASSETS CONSIST OF: Paid in capital $ 178,098,113 $ 59,746,875 $ 2,417,343 $ 4,459,534 $ 37,994,210 $ 27,353,739 Accumulated undistributed net investment income (loss) 2,392,980 881,437 -- -- (1,457,616) 277,550 Accumulated net realized gain (loss) (10,507,470) (5,392,524) (1,745,671) (1,588,572) (2,668,620) (1,380,166) Net unrealized appreciation (depreciation) 5,655,682 1,420,437 (40,828) (754,567) 2,869,523 (582,180) ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 175,639,305 $ 56,656,225 $ 630,844 $ 2,116,395 $ 36,737,497 $ 25,668,943 ============= ============= ============= ============= ============= =============
* The Fund commenced investment operations on June 29, 2001. + The Market value of securities loaned for the UBS Global Allocation Fund and the UBS International Equity Fund as of June 30, 2002 were $5,884,503 and $9,658,450, respectively. See accompanying notes to financial statements. 92
UBS U.S. UBS U.S. UBS U.S. UBS U.S. LARGE CAP LARGE CAP SMALL CAP UBS U.S. UBS HIGH EQUITY FUND EQUITY FUND GROWTH FUND GROWTH FUND BOND FUND YIELD FUND - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers $ 90,231,179 $ 3,414,906 $ 5,548,283 $ 34,050,927 $ 73,400,510 $ 219,785,553 Affiliated issuers 1,775,539 -- -- 3,103,143 2,836,367 963,891 Foreign currency, at cost -- -- -- -- -- -- Investments of cash collateral received for securities loaned, at cost -- -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- $ 92,006,718 $ 3,414,906 $ 5,548,283 $ 37,154,070 $ 76,236,877 $ 220,749,444 ============= ============= ============= ============= ============= ============= Investments, at value: Unaffiliated issuers+ $ 100,174,312 $ 3,174,903 $ 4,317,646 $ 36,138,511 $ 74,268,673 $ 132,202,080 Affiliated issuers 1,775,539 -- -- 3,103,143 2,836,367 963,891 Foreign currency, at value -- -- -- -- -- -- Investments of cash collateral received for securities loaned, at value -- -- -- -- -- -- Cash -- -- -- -- -- -- Receivables: Investment securities sold -- 250 123,453 1,718,064 522,185 5,015,088 Due from Advisor -- 41,628 10,755 -- 5,790 -- Dividends 113,721 3,481 2,636 2,502 -- 8,344 Interest 4,450 64 269 4,217 803,832 3,886,132 Fund shares sold 202,744 -- 19,910 51,951 3,066,665 30,279 Variation margin -- -- -- -- -- -- Other assets -- -- -- -- -- 88,733 Net unrealized appreciation on forward foreign currency contracts -- -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- TOTAL ASSETS 102,270,766 3,220,326 4,474,669 41,018,388 81,503,512 142,194,547 ------------- ------------- ------------- ------------- ------------- ------------- LIABILITIES: Payables: Securities loaned -- -- -- -- -- -- Investment securities purchased 342,544 46,616 261,026 1,618,590 539,336 1,994,279 Investment advisory fees 48,969 -- -- 10,996 -- 39,551 Fund shares redeemed 49,065 -- 57,307 159,733 52,469 342,417 Distribution and service fees 4,350 1,695 1,609 1,659 5,274 81,685 Transfer agent fees 2,250 2,250 2,250 2,250 2,250 48,360 Variation margin 3,325 -- -- -- -- -- Accrued expenses 119,273 39,481 19,799 52,781 58,445 96,686 ------------- ------------- ------------- ------------- ------------- ------------- TOTAL LIABILITIES 569,776 90,042 341,991 1,846,009 657,774 2,602,978 ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 101,700,990 $ 3,130,284 $ 4,132,678 $ 39,172,379 $ 80,845,738 $ 139,591,569 ============= ============= ============= ============= ============= ============= NET ASSETS CONSIST OF: Paid in capital $ 91,861,148 $ 9,587,250 $ 8,132,100 $ 38,656,988 $ 81,871,435 $ 381,569,254 Accumulated undistributed net investment income (loss) 938,569 45,696 -- -- 105,723 430,319 Accumulated net realized gain (loss) (970,323) (6,262,660) (2,768,785) (1,572,193) (1,999,583) (246,227,340) Net unrealized appreciation (depreciation) 9,871,596 (240,002) (1,230,637) 2,087,584 868,163 3,819,336 ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 101,700,990 $ 3,130,284 $ 4,132,678 $ 39,172,379 $ 80,845,738 $ 139,591,569 ============= ============= ============= ============= ============= ============= UBS UBS U.S. INTERNATIONAL VALUE EQUITY EQUITY FUND FUND* - ---------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers $ 81,482,134 $ 4,430,145 Affiliated issuers 1,253,925 -- Foreign currency, at cost 538,044 -- Investments of cash collateral received for securities loaned, at cost 9,853,046 -- ------------- ------------- $ 93,127,149 $ 4,430,145 ============= ============= Investments, at value: Unaffiliated issuers+ $ 97,890,189 $ 4,081,285 Affiliated issuers 1,253,925 -- Foreign currency, at value 539,113 -- Investments of cash collateral received for securities loaned, at value 9,853,046 -- Cash 123,011 7,245 Receivables: Investment securities sold 1,897,691 -- Due from Advisor -- 32,525 Dividends 438,958 5,123 Interest 22,758 74 Fund shares sold 909,529 1,883 Variation margin -- -- Other assets -- -- Net unrealized appreciation on forward foreign currency contracts 731,204 -- ------------- ------------- TOTAL ASSETS 113,659,424 4,128,135 ------------- ------------- LIABILITIES: Payables: Securities loaned 9,853,046 -- Investment securities purchased 1,353,652 -- Investment advisory fees 41,159 -- Fund shares redeemed 1,475,068 -- Distribution and service fees 1,422 689 Transfer agent fees 2,250 2,250 Variation margin -- -- Accrued expenses 178,711 19,649 ------------- ------------- TOTAL LIABILITIES 12,905,308 22,588 ------------- ------------- NET ASSETS $ 100,754,116 $ 4,105,547 ============= ============= NET ASSETS CONSIST OF: Paid in capital $ 92,105,043 $ 4,375,912 Accumulated undistributed net investment income (loss) 3,475,868 37,360 Accumulated net realized gain (loss) (11,994,018) 41,135 Net unrealized appreciation (depreciation) 17,167,223 (348,860) ------------- ------------- NET ASSETS $ 100,754,116 $ 4,105,547 ============= =============
93 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
UBS GLOBAL UBS GLOBAL UBS U.S. ALLOCATION UBS GLOBAL TECHNOLOGY UBS GLOBAL UBS GLOBAL BALANCED FUND EQUITY FUND FUND BIOTECH FUND BOND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A: Net assets $ 6,914,095 $ 15,173,431 $ 392,000 $ 241,535 $ 1,924,743 $ 2,583,489 Shares outstanding 652,540 1,619,776 117,126 50,954 213,693 285,712 Net asset value per share $ 10.60 $ 9.37 $ 3.35 $ 4.74 $ 9.01 $ 9.04 Offering price per share (NAV per share plus maximum sales charge)(a) $ 11.22 $ 9.92 $ 3.54 $ 5.02 $ 9.43 $ 9.57 Redemption proceeds per share $ 10.60 $ 9.37 $ 3.35 $ 4.74 $ 9.01 $ 9.04 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS B: Net assets $ 1,570,248 $ 417,713 $ -- $ 18,793 $ 392,178 $ 912,614 Shares outstanding 149,209 44,721 -- 3,984 43,510 101,422 Net asset value per share $ 10.52 $ 9.34 $ -- $ 4.72 $ 9.01 $ 9.00 Offering price per share $ 10.52 $ 9.34 $ -- $ 4.72 $ 9.01 $ 9.00 Redemption proceeds per share (NAV per share minus maximum redemption charge)(a) $ 9.99 $ 8.87 $ -- $ 4.48 $ 8.56 $ 8.55 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS C: Net assets $ 1,525,266 $ 351,347 $ 472 $ 551 $ -- $ 402,057 Shares outstanding 144,763 37,660 141 117 -- 44,629 Net asset value per share $ 10.54 $ 9.33 $ 3.35 $ 4.71 $ -- $ 9.01 Offering price per share (NAV per share plus maximum sales charge)(a) $ 10.65 $ 9.42 $ 3.38 $ 4.76 $ -- $ 9.10 Redemption proceeds per share (NAV per share minus maximum redemption charge)(a) $ 10.43 $ 9.24 $ 3.32 $ 4.66 $ -- $ 8.92 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS Y: Net assets $ 165,629,696 $ 40,713,734 $ 238,372 $ 1,855,516 $ 34,420,576 $ 21,770,783 Shares outstanding 15,499,228 4,298,670 71,234 389,354 3,515,934 2,394,189 Net asset value per share $ 10.69 $ 9.47 $ 3.35 $ 4.77 $ 9.79 $ 9.09 Offering price per share $ 10.69 $ 9.47 $ 3.35 $ 4.77 $ 9.79 $ 9.09 Redemption proceeds per share $ 10.69 $ 9.47 $ 3.35 $ 4.77 $ 9.79 $ 9.09 - ----------------------------------------------------------------------------------------------------------------------------------
(a) For Class A, the maximum sales charge is 5.50%, except for UBS Global Bond Fund, UBS U.S. Bond Fund, and the UBS High Yield Fund which is 4.50%. Class C maximum sales charge is 1.00%. Class B and Class Y have no sales charges. For Class B, the maximum redemption charge is 5.00%, Class C maximum redemption charge is 1.00%, except for UBS Global Bond Fund, UBS U.S. Bond Fund and the UBS High Yield Fund which is 0.75%. Class A and Class Y have no redemption charges. + The Fund commenced investment operations on June 29, 2001. See accompanying notes to financial statements. 94
UBS U.S. UBS U.S. UBS U.S. UBS U.S. LARGE CAP LARGE CAP SMALL CAP UBS U.S. UBS HIGH EQUITY FUND EQUITY FUND GROWTH FUND GROWTH FUND BOND FUND YIELD FUND - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A: Net assets $ 13,697,693 $ 262,871 $ 1,154,562 $ 1,788,739 $ 18,558,163 $ 65,831,976 Shares outstanding 982,840 35,970 180,939 182,707 1,765,075 10,358,781 Net asset value per share $ 13.94 $ 7.31 $ 6.38 $ 9.79 $ 10.51 $ 6.36 Offering price per share (NAV per share plus maximum sales charge)(a) $ 14.75 $ 7.74 $ 6.75 $ 10.36 $ 11.01 $ 6.66 Redemption proceeds per share $ 13.94 $ 7.31 $ 6.38 $ 9.79 $ 10.51 $ 6.36 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS B: Net assets $ 222,984 $ 94,055 $ 115,444 $ 656,195 $ 1,404,600 $ 15,692,009 Shares outstanding 16,078 12,937 18,165 67,292 133,795 2,469,606 Net asset value per share $ 13.87 $ 7.27 $ 6.36 $ 9.75 $ 10.50 $ 6.35 Offering price per share $ 13.87 $ 7.27 $ 6.36 $ 9.75 $ 10.50 $ 6.35 Redemption proceeds per share (NAV per share minus maximum redemption charge)(a) $ 13.18 $ 6.91 $ 6.04 $ 9.26 $ 9.98 $ 6.03 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS C: Net assets $ 70,226 $ 211,547 $ 572,012 $ 409,815 $ 1,142,906 $ 17,947,343 Shares outstanding 5,060 29,017 90,055 42,069 108,825 2,824,376 Net asset value per share $ 13.88 $ 7.29 $ 6.35 $ 9.74 $ 10.50 $ 6.35 Offering price per share (NAV per share plus maximum sales charge)(a) $ 14.02 $ 7.36 $ 6.41 $ 9.84 $ 10.61 $ 6.41 Redemption proceeds per share (NAV per share minus maximum redemption charge)(a) $ 13.74 $ 7.22 $ 6.29 $ 9.64 $ 10.42 $ 6.30 - ---------------------------------------------------------------------------------------------------------------------------------- CLASS Y: Net assets $ 87,710,087 $ 2,561,811 $ 2,290,660 $ 36,317,630 $ 59,740,069 $ 40,120,241 Shares outstanding 6,235,429 352,387 354,208 3,662,601 5,673,693 6,286,375 Net asset value per share $ 14.07 $ 7.27 $ 6.47 $ 9.92 $ 10.53 $ 6.38 Offering price per share $ 14.07 $ 7.27 $ 6.47 $ 9.92 $ 10.53 $ 6.38 Redemption proceeds per share $ 14.07 $ 7.27 $ 6.47 $ 9.92 $ 10.53 $ 6.38 - ---------------------------------------------------------------------------------------------------------------------------------- UBS UBS U.S. INTERNATIONAL VALUE EQUITY EQUITY FUND FUND+ - ---------------------------------------------------------------------- CLASS A: Net assets $ 2,599,061 $ 751,111 Shares outstanding 321,520 80,143 Net asset value per share $ 8.08 $ 9.37 Offering price per share (NAV per share plus maximum sales charge)(a) $ 8.55 $ 9.92 Redemption proceeds per share $ 8.08 $ 9.37 - ---------------------------------------------------------------------- CLASS B: Net assets $ 120,414 $ 301,261 Shares outstanding 14,949 32,316 Net asset value per share $ 8.05 $ 9.32 Offering price per share $ 8.05 $ 9.32 Redemption proceeds per share (NAV per share minus maximum redemption charge)(a) $ 7.65 $ 8.85 - ---------------------------------------------------------------------- CLASS C: Net assets $ 183,255 $ 233,871 Shares outstanding 22,772 25,055 Net asset value per share $ 8.05 $ 9.33 Offering price per share (NAV per share plus maximum sales charge)(a) $ 8.13 $ 9.42 Redemption proceeds per share (NAV per share minus maximum redemption charge)(a) $ 7.97 $ 9.24 - ---------------------------------------------------------------------- CLASS Y: Net assets $ 97,851,386 $ 2,819,304 Shares outstanding 12,048,397 300,432 Net asset value per share $ 8.12 $ 9.38 Offering price per share $ 8.12 $ 9.38 Redemption proceeds per share $ 8.12 $ 9.38 - ----------------------------------------------------------------------
95 STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2002
UBS GLOBAL UBS GLOBAL ALLOCATION UBS GLOBAL TECHNOLOGY UBS GLOBAL UBS GLOBAL UBS U.S. FUND EQUITY FUND FUND BIOTECH FUND BOND FUND BALANCED FUND - ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 1,794,155 $ 1,161,760 $ 2,538 $ 2,338 $ -- $ 229,012 Interest 2,174,106 57,906 1,831 2,483 1,618,842 585,359 Securities lending-net 54,304 -- -- -- -- -- Foreign tax withheld (71,174) (63,687) -- -- (1,853) -- ------------- ------------- ------------- ------------- ------------- ------------- TOTAL INCOME 3,951,391 1,155,979 4,369 4,821 1,616,989 814,371 ------------- ------------- ------------- ------------- ------------- ------------- EXPENSES: Advisory 1,319,471 472,933 21,507 31,990 280,606 167,846 Administration 88,315 -- -- -- -- -- Professional services 154,410 71,181 23,744 28,442 49,489 39,023 Shareholder reports 140,806 53,383 4,621 5,366 25,022 20,456 Distribution and service fees: Class A 9,386 25,632 1,010 789 1,772 2,507 Class B 1,385 1,401 -- 132 769 2,653 Class C 2,255 1,243 2 5 -- 1,517 Class UBS 15,036 50,047 1,957 2,347 1,714 2,109 Custodian 34,578 24,638 39 72 13,136 600 State registration 42,372 53,235 51,816 51,133 43,473 46,885 Transfer agent 5,480 5,753 8,329 8,457 6,848 7,561 Other 30,130 24,816 8,808 10,081 17,941 13,002 ------------- ------------- ------------- ------------- ------------- ------------- TOTAL OPERATING EXPENSES 1,843,624 784,262 121,833 138,814 440,770 304,159 ------------- ------------- ------------- ------------- ------------- ------------- Expenses waived by Advisor -- (109,842) (94,978) (99,376) (98,763) (103,551) Earnings credits (1,468) (5,425) -- (2) (977) -- ------------- ------------- ------------- ------------- ------------- ------------- NET OPERATING EXPENSES 1,842,156 668,995 26,855 39,436 341,030 200,608 Interest Expense -- -- -- -- 2,386 1,756 ------------- ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) 2,109,235 486,984 (22,486) (34,615) 1,273,573 612,007 ------------- ------------- ------------- ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments (1,517,058) (4,414,246) (737,201) (1,235,262) 171,428 15,372 Futures contracts 2,579,198 -- -- -- -- (28,343) Foreign currency transactions (2,264,315) 394,451 16 10,239 (2,143,477) -- ------------- ------------- ------------- ------------- ------------- ------------- Net realized gain (loss) (1,202,175) (4,019,795) (737,185) (1,225,023) (1,972,049) (12,971) ------------- ------------- ------------- ------------- ------------- ------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency 101,339 (1,685,839) 243,960 (724,314) 5,034,058 (1,255,945) Futures contracts 366,666 -- -- -- -- (16,277) Forward contracts 6,462,033 913,417 -- -- 803,244 -- Translation of other assets and liabilities denominated in foreign currency 10,267 11,882 -- 3 60,206 -- ------------- ------------- ------------- ------------- ------------- ------------- Change in net unrealized appreciation (depreciation) 6,940,305 (760,540) 243,960 (724,311) 5,897,508 (1,272,222) ------------- ------------- ------------- ------------- ------------- ------------- Net realized and unrealized gain (loss) 5,738,130 (4,780,335) (493,225) (1,949,334) 3,925,459 (1,285,193) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ 7,847,365 $ (4,293,351) $ (515,711) $ (1,983,949) $ 5,199,032 $ (673,186) ============= ============= ============= ============= ============= =============
* The Fund commenced investment operations on June 29, 2001. See accompanying notes to financial statements. 96
UBS U.S. UBS U.S. UBS U.S. UBS U.S. LARGE CAP LARGE CAP SMALL CAP UBS U.S. UBS HIGH EQUITY FUND EQUITY FUND GROWTH FUND GROWTH FUND BOND FUND YIELD FUND - ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 1,910,948 $ 86,308 $ 35,642 $ 79,275 $ -- $ 16,687 Interest 114,486 10,904 3,912 56,764 5,045,239 12,365,975 Securities lending-net -- -- -- -- -- -- Foreign tax withheld -- -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- TOTAL INCOME 2,025,434 97,212 39,554 136,039 5,045,239 12,382,662 ------------- ------------- ------------- ------------- ------------- ------------- EXPENSES: Advisory 870,376 39,402 36,801 390,240 427,378 629,243 Administration -- -- -- -- -- -- Professional services 108,345 36,008 7,266 40,482 73,512 24,477 Shareholder reports 95,321 4,820 5,584 43,218 72,859 178,085 Distribution and service fees: Class A 26,585 476 2,912 2,806 13,510 108,444 Class B 1,306 559 603 2,259 3,288 106,526 Class C 298 125 3,854 1,475 4,157 89,265 Class UBS 9,683 6,568 7,722 5,103 3,887 5,504 Custodian 3,315 141 132 976 1,891 2,622 State registration 39,424 57,194 44,687 49,053 49,841 47,120 Transfer agent 5,381 8,215 7,868 7,797 7,811 97,633 Other 29,226 12,014 10,514 18,502 24,945 70,828 ------------- ------------- ------------- ------------- ------------- ------------- TOTAL OPERATING EXPENSES 1,189,260 165,522 127,943 561,911 683,079 1,359,747 ------------- ------------- ------------- ------------- ------------- ------------- Expenses waived by Advisor (156,903) (112,897) (70,817) (101,812) (145,430) (324,507) Earnings credits (206) -- -- -- (21) -- ------------- ------------- ------------- ------------- ------------- ------------- NET OPERATING EXPENSES 1,032,151 52,625 57,126 460,099 537,628 1,035,240 Interest Expense -- -- -- -- 29,408 3,884 ------------- ------------- ------------- ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) 993,283 44,587 (17,572) (324,060) 4,478,203 11,343,538 ------------- ------------- ------------- ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments 6,231,890 (156,489) (2,195,537) (431,999) 1,921,383 (27,901,284) Futures contracts (131,326) (26,250) -- -- -- -- Foreign currency transactions -- -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- Net realized gain (loss) 6,100,564 (182,739) (2,195,537) (431,999) 1,921,383 (27,901,284) ------------- ------------- ------------- ------------- ------------- ------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency (15,917,505) (399,899) 475,180 (4,904,899) 925,071 7,837,661 Futures contracts (100,853) -- -- -- -- -- Forward contracts -- -- -- -- -- -- Translation of other assets and liabilities denominated in foreign currency -- -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- ------------- Change in net unrealized appreciation (depreciation) (16,018,358) (399,899) 475,180 (4,904,899) 925,071 7,837,661 ------------- ------------- ------------- ------------- ------------- ------------- Net realized and unrealized gain (loss) (9,917,794) (582,638) (1,720,357) (5,336,898) 2,846,454 (20,063,623) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations $ (8,924,511) $ (538,051) $ (1,737,929) $ (5,660,958) $ 7,324,657 $ (8,720,085) ============= ============= ============= ============= ============= ============= UBS UBS U.S. INTERNATIONAL VALUE EQUITY EQUITY FUND FUND* - ---------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 2,856,933 $ 68,713 Interest 241,328 933 Securities lending-net 50,612 -- Foreign tax withheld (261,181) -- ------------- ------------- TOTAL INCOME 2,887,692 69,646 ------------- ------------- EXPENSES: Advisory 1,121,694 24,925 Administration -- -- Professional services 136,946 15,998 Shareholder reports 107,304 3,460 Distribution and service fees: Class A 3,424 942 Class B 149 1,212 Class C 280 797 Class UBS 10,294 -- Custodian 112,865 89 State registration 79,422 50,907 Transfer agent 6,542 8,585 Other 33,668 9,523 ------------- ------------- TOTAL OPERATING EXPENSES 1,612,588 116,438 ------------- ------------- Expenses waived by Advisor (168,567) (83,469) Earnings credits (28,740) -- ------------- ------------- NET OPERATING EXPENSES 1,415,281 32,969 Interest Expense 15,348 -- ------------- ------------- NET INVESTMENT INCOME (LOSS) 1,457,063 36,677 ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments (7,904,657) 41,135 Futures contracts -- -- Foreign currency transactions 149,021 -- ------------- ------------- Net realized gain (loss) (7,755,636) 41,135 ------------- ------------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency (1,532,743) (348,860) Futures contracts -- -- Forward contracts 2,578,355 -- Translation of other assets and liabilities denominated in foreign currency 64,883 -- ------------- ------------- Change in net unrealized appreciation (depreciation) 1,110,495 (348,860) ------------- ------------- Net realized and unrealized gain (loss) (6,645,141) (307,725) ------------- ------------- Net increase (decrease) in net assets resulting from operations $ (5,188,078) $ (271,048) ============= =============
97 STATEMENTS OF CHANGES IN NET ASSETS
UBS UBS GLOBAL ALLOCATION FUND GLOBAL EQUITY FUND ------------------------------ ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 2,109,235 $ 3,566,708 $ 486,984 $ 481,767 Net realized gain (loss) (1,202,175) 8,733,570 (4,019,795) 3,073,081 Change in net unrealized appreciation (depreciation) 6,940,305 (4,502,261) (760,540) (6,530,459) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 7,847,365 7,798,017 (4,293,351) (2,975,611) ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income (92,144) -- (77,577) (11,410) Distributions from net realized gains (388,420) (11,340) (419,643) (2,498,356) ------------- ------------- ------------- ------------- Total Class A distributions (480,564) (11,340) (497,220) (2,509,766) ------------- ------------- ------------- ------------- Class B: Distributions from net investment income (2,885) -- (123) -- Distributions from net realized gains (6,162) -- (668) -- ------------- ------------- ------------- ------------- Total Class B distributions (9,047) -- (791) -- ------------- ------------- ------------- ------------- Class C: Distributions from net investment income (438) -- (1,134) -- Distributions from net realized gains (1,867) -- (6,132) -- ------------- ------------- ------------- ------------- Total Class C distributions (2,305) -- (7,266) -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Distributions from net investment income (2,763,739) -- (244,638) (79,603) Distributions from net realized gains (11,553,728) (9,702,495) (1,324,139) (4,104,552) ------------- ------------- ------------- ------------- Total Class Y distributions (14,317,467) (9,702,495) (1,568,777) (4,184,155) ------------- ------------- ------------- ------------- UBS Investment Funds Class Distributions from net investment income -- -- -- (444) Distributions from net realized gains -- (459,422) -- (34,788) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions -- (459,422) -- (35,232) ------------- ------------- ------------- ------------- Decrease in net assets from distributions (14,809,383) (10,173,257) (2,074,054) (6,729,153) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Class A: (formerly Class N) Shares sold 7,853,473 40,708 30,870,623 100,000 Shares issued on reinvestment of distributions 442,708 3,867 396,391 24,164 Shares redeemed (1,383,496) (7,231) (15,694,357) -- ------------- ------------- ------------- ------------- Total Class A transactions 6,912,685 37,344 15,572,657 124,164 ------------- ------------- ------------- ------------- Class B: Shares sold 1,761,729 -- 432,203 -- Shares issued on reinvestment of distributions 9,047 -- 792 -- Shares redeemed (181,252) -- (99) -- ------------- ------------- ------------- ------------- Total Class B transactions 1,589,524 -- 432,896 -- ------------- ------------- ------------- ------------- Class C: Shares sold 1,562,320 -- 428,669 -- Shares issued on reinvestment of distributions 2,241 -- 7,265 -- Shares redeemed (23,300) -- (62,915) -- ------------- ------------- ------------- ------------- Total Class C transactions 1,541,261 -- 373,019 -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Shares sold 87,020,622 148,059,955 126,818,221 95,186,592 Shares issued on reinvestment of distributions 9,091,252 7,392,619 1,024,427 2,877,959 Shares redeemed (79,981,613) (281,289,752) (132,070,159) (83,354,000) ------------- ------------- ------------- ------------- Total Class Y transactions 16,130,261 (125,837,178) (4,227,511) 14,710,551 ------------- ------------- ------------- ------------- UBS Investment Funds Class+ Shares sold 143,261 432,323 142,132 429,378 Shares issued on reinvestment of distributions -- 422,475 -- 2,289,192 Shares redeemed (7,052,896) (2,556,696) (18,825,671) (7,155,696) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (6,909,635) (1,701,898) (18,683,539) (4,437,126) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 19,264,096 (127,501,732) (6,532,478) 10,397,589 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS 12,302,078 (129,876,972) (12,899,883) 692,825 NET ASSETS, BEGINNING OF PERIOD 163,337,227 293,214,199 69,556,108 68,863,283 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 175,639,305 $ 163,337,227 $ 56,656,225 $ 69,556,108 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income (loss) $ 2,392,980 $ 3,449,304 $ 881,437 $ 323,622 ============= ============= ============= =============
* The amount represents a distribution from return of capital for the UBS Global Bond Fund. + The UBS Investment Funds Class was liquidated effective November 9, 2001. See accompanying notes to financial statements. 98
UBS UBS GLOBAL TECHNOLOGY FUND GLOBAL BIOTECH FUND ------------------------------ ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (22,486) $ (30,494) $ (34,615) $ (23,194) Net realized gain (loss) (737,185) (1,007,036) (1,225,023) (325,522) Change in net unrealized appreciation (depreciation) 243,960 (331,524) (724,311) (130,463) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (515,711) (1,369,054) (1,983,949) (479,179) ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income -- -- -- -- Distributions from net realized gains -- (1) -- (21) ------------- ------------- ------------- ------------- Total Class A distributions -- (1) -- (21) ------------- ------------- ------------- ------------- Class B: Distributions from net investment income -- -- -- -- Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class B distributions -- -- -- -- ------------- ------------- ------------- ------------- Class C: Distributions from net investment income -- -- -- -- Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class C distributions -- -- -- -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Distributions from net investment income -- -- -- -- Distributions from net realized gains -- (785) -- (22,723) ------------- ------------- ------------- ------------- Total Class Y distributions -- (785) -- (22,723) ------------- ------------- ------------- ------------- UBS Investment Funds Class Distributions from net investment income -- -- -- -- Distributions from net realized gains -- (2,011) -- (6,758) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions -- (2,011) -- (6,758) ------------- ------------- ------------- ------------- Decrease in net assets from distributions -- (2,797) -- (29,502) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Class A: (formerly Class N) Shares sold 868,114 -- 1,039,154 -- Shares issued on reinvestment of distributions -- 1 -- 21 Shares redeemed (290,078) -- (562,148) -- ------------- ------------- ------------- ------------- Total Class A transactions 578,036 1 477,006 21 ------------- ------------- ------------- ------------- Class B: Shares sold -- -- 30,500 -- Shares issued on reinvestment of distributions -- -- -- -- Shares redeemed -- -- -- -- ------------- ------------- ------------- ------------- Total Class B transactions -- -- 30,500 -- ------------- ------------- ------------- ------------- Class C: Shares sold 743 -- 989 -- Shares issued on reinvestment of distributions -- -- -- -- Shares redeemed (1) -- -- -- ------------- ------------- ------------- ------------- Total Class C transactions 742 -- 989 -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Shares sold 6,956,691 2,477,857 3,051,479 2,694,167 Shares issued on reinvestment of distributions -- 785 -- 22,723 Shares redeemed (7,426,144) (1,252,617) (1,848,095) (708,088) ------------- ------------- ------------- ------------- Total Class Y transactions (469,453) 1,226,025 1,203,384 2,008,802 ------------- ------------- ------------- ------------- UBS Investment Funds Class+ Shares sold 297 1,557,760 176,392 625,322 Shares issued on reinvestment of distributions -- 1,400 -- 6,744 Shares redeemed (551,588) (403,474) (695,923) (64,650) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (551,291) 1,155,686 (519,531) 567,416 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (441,966) 2,381,712 1,192,348 2,576,239 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS (957,677) 1,009,861 (791,601) 2,067,558 NET ASSETS, BEGINNING OF PERIOD 1,588,521 578,660 2,907,996 840,438 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 630,844 $ 1,588,521 $ 2,116,395 $ 2,907,996 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income (loss) $ -- $ 1,885 $ -- $ (23,194) ============= ============= ============= ============= UBS UBS GLOBAL BOND FUND U.S. BALANCED FUND ------------------------------- ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 1,273,573 $ 1,564,794 $ 612,007 $ 553,222 Net realized gain (loss) (1,972,049) (2,748,106) (12,971) 855,561 Change in net unrealized appreciation (depreciation) 5,897,508 (572,549) (1,272,222) 663,395 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 5,199,032 (1,755,861) (673,186) 2,072,178 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income (23,082)* (11) (35,339) (47) Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class A distributions (23,082) (11) (35,339) (47) ------------- ------------- ------------- ------------- Class B: Distributions from net investment income (1,816)* -- (3,889) -- Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class B distributions (1,816) -- (3,889) -- ------------- ------------- ------------- ------------- Class C: Distributions from net investment income -- -- (781) -- Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class C distributions -- -- (781) -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Distributions from net investment income (700,361)* (331,177) (520,386) (476,453) Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class Y distributions (700,361) (331,177) (520,386) (476,453) ------------- ------------- ------------- ------------- UBS Investment Funds Class Distributions from net investment income -- (4,729) -- (46,051) Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions -- (4,729) -- (46,051) ------------- ------------- ------------- ------------- Decrease in net assets from distributions (725,259)* (335,917) (560,395) (522,551) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Class A: (formerly Class N) Shares sold 8,168,545 2,672 2,792,372 -- Shares issued on reinvestment of distributions 16,968 -- 34,527 47 Shares redeemed (6,346,130) (849) (175,467) -- ------------- ------------- ------------- ------------- Total Class A transactions 1,839,383 1,823 2,651,432 47 ------------- ------------- ------------- ------------- Class B: Shares sold 378,073 -- 1,128,265 -- Shares issued on reinvestment of distributions 1,722 -- 3,643 -- Shares redeemed -- -- (178,788) -- ------------- ------------- ------------- ------------- Total Class B transactions 379,795 -- 953,120 -- ------------- ------------- ------------- ------------- Class C: Shares sold -- -- 436,391 -- Shares issued on reinvestment of distributions -- -- 781 -- Shares redeemed -- -- (20,000) -- ------------- ------------- ------------- ------------- Total Class C transactions -- -- 417,172 -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Shares sold 15,342,104 14,479,767 11,358,860 19,666,739 Shares issued on reinvestment of distributions 450,050 242,044 493,900 423,258 Shares redeemed (23,493,711) (18,340,807) (14,710,999) (6,941,267) ------------- ------------- ------------- ------------- Total Class Y transactions (7,701,557) (3,618,996) (2,858,239) 13,148,730 ------------- ------------- ------------- ------------- UBS Investment Funds Class+ Shares sold 2,139 156,620 5,273 200,000 Shares issued on reinvestment of distributions -- 3,519 -- 45,287 Shares redeemed (1,125,010) (1,163,438) (1,291,178) (293,128) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (1,122,871) (1,003,299) (1,285,905) (47,841) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (6,605,250) (4,620,472) (122,420) 13,100,936 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS (2,131,477) (6,712,250) (1,356,001) 14,650,563 NET ASSETS, BEGINNING OF PERIOD 38,868,974 45,581,224 27,024,944 12,374,381 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 36,737,497 $ 38,868,974 $ 25,668,943 $ 27,024,944 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income (loss) $ (1,457,616) $ (1,584,511) $ 277,550 $ 209,168 ============= ============= ============= ============= 99 UBS UBS U.S. EQUITY FUND U.S. LARGE CAP EQUITY FUND ------------------------------ ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 993,283 $ 1,042,201 $ 44,587 $ 67,597 Net realized gain (loss) 6,100,564 11,935,456 (182,739) 6,876 Change in net unrealized appreciation (depreciation) (16,018,358) 3,172,706 (399,899) 1,161,741 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (8,924,511) 16,150,363 (538,051) 1,236,214 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income (33,362) (136,402) (1,213) (360) Distributions from net realized gains (531,722) (626,092) -- -- ------------- ------------- ------------- ------------- Total Class A distributions (565,084) (762,494) (1,213) (360) ------------- ------------- ------------- ------------- Class B: Distributions from net investment income (206) -- (418) -- Distributions from net realized gains (3,285) -- -- -- ------------- ------------- ------------- ------------- Total Class B distributions (3,491) -- (418) -- ------------- ------------- ------------- ------------- Class C: Distributions from net investment income (60) -- -- -- Distributions from net realized gains (955) -- -- -- ------------- ------------- ------------- ------------- Total Class C distributions (1,015) -- -- -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Distributions from net investment income (314,778) (2,310,563) (11,570) (134,581) Distributions from net realized gains (5,018,843) (9,027,121) -- -- ------------- ------------- ------------- ------------- Total Class Y distributions (5,333,621) (11,337,684) (11,570) (134,581) ------------- ------------- ------------- ------------- UBS Investment Funds Class Distributions from net investment income -- (43,540) -- (5,236) Distributions from net realized gains -- (471,358) -- -- ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions -- (514,898) -- (5,236) ------------- ------------- ------------- ------------- Decrease in net assets from distributions (5,903,211) (12,615,076) (13,201) (140,177) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS (SEE NOTE 10 & 11): Class A: (formerly Class N) Shares sold 10,524,445 4,531,959 284,413 -- Shares issued on reinvestment of distributions 163,489 11,498 1,213 360 Shares redeemed (2,721,652) (4,650,226) (28,497) (17,725) ------------- ------------- ------------- ------------- Total Class A transactions 7,966,282 (106,769) 257,129 (17,365) ------------- ------------- ------------- ------------- Class B: Shares sold 349,959 -- 198,002 -- Shares issued on reinvestment of distributions 3,491 -- 96 -- Shares redeemed (103,306) -- (95,988) -- ------------- ------------- ------------- ------------- Total Class B transactions 250,144 -- 102,110 -- ------------- ------------- ------------- ------------- Class C: Shares sold 79,070 -- 275,464 -- Shares issued on reinvestment of distributions 1,015 -- -- -- Shares redeemed (3,915) -- (50,887) -- ------------- ------------- ------------- ------------- Total Class C transactions 76,170 -- 224,577 -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Shares sold 36,606,235 59,473,592 10,668,134 3,121,581 Shares issued on reinvestment of distributions 4,877,452 10,320,990 5,418 109,658 Shares redeemed (66,693,377) (114,970,733) (11,373,787) (17,203,370) ------------- ------------- ------------- ------------- Total Class Y transactions (25,209,690) (45,176,151) (700,235) (13,972,131) ------------- ------------- ------------- ------------- UBS Investment Funds Class+ Shares sold 235,795 708,297 906,536 77,826 Shares issued on reinvestment of distributions -- 400,452 -- 5,215 Shares redeemed (5,719,369) (7,995,833) (238,252) (10,746) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (5,483,574) (6,887,084) 668,284 72,295 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (22,400,668) (52,170,004) 551,865 (13,917,201) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS (37,228,390) (48,634,717) 613 (12,821,164) NET ASSETS, BEGINNING OF PERIOD 138,929,380 187,564,097 3,129,671 15,950,835 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 101,700,990 $ 138,929,380 $ 3,130,284 $ 3,129,671 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income (loss) $ 938,569 $ 348,525 $ 45,696 $ 13,535 ============= ============= ============= =============
+ The UBS Investment Funds Class shares were liquidated November 9, 2001. See accompanying notes to financial statements. 100
UBS UBS U.S. LARGE CAP GROWTH FUND U.S. SMALL CAP GROWTH FUND ------------------------------ ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ (17,572) $ (50,594) $ (324,060) $ (299,723) Net realized gain (loss) (2,195,537) (232,759) (431,999) 3,225,926 Change in net unrealized appreciation (depreciation) 475,180 (3,253,566) (4,904,899) (9,250,074) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (1,737,929) (3,536,919) (5,660,958) (6,323,871) ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income -- -- -- -- Distributions from net realized gains (13,807) (173) (61,112) (322) ------------- ------------- ------------- ------------- Total Class A distributions (13,807) (173) (61,112) (322) ------------- ------------- ------------- ------------- Class B: Distributions from net investment income -- -- -- -- Distributions from net realized gains (244) -- (3,713) -- ------------- ------------- ------------- ------------- Total Class B distributions (244) -- (3,713) -- ------------- ------------- ------------- ------------- Class C: Distributions from net investment income -- -- -- -- Distributions from net realized gains (3,707) -- (767) -- ------------- ------------- ------------- ------------- Total Class C distributions (3,707) -- (767) -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Distributions from net investment income -- -- -- -- Distributions from net realized gains (15,304) (582,801) (1,477,411) (8,814,507) ------------- ------------- ------------- ------------- Total Class Y distributions (15,304) (582,801) (1,477,411) (8,814,507) ------------- ------------- ------------- ------------- UBS Investment Funds Class Distributions from net investment income -- -- -- -- Distributions from net realized gains -- (798,399) -- (707,080) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions -- (798,399) -- (707,080) ------------- ------------- ------------- ------------- Decrease in net assets from distributions (33,062) (1,381,373) (1,543,003) (9,521,909) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS (SEE NOTE 10 & 11): Class A: (formerly Class N) Shares sold 2,494,053 -- 2,179,415 -- Shares issued on reinvestment of distributions 13,610 173 60,938 322 Shares redeemed (1,041,589) -- (366,992) -- ------------- ------------- ------------- ------------- Total Class A transactions 1,466,074 173 1,873,361 322 ------------- ------------- ------------- ------------- Class B: Shares sold 210,860 -- 859,490 -- Shares issued on reinvestment of distributions 244 -- 3,713 -- Shares redeemed (67,097) -- (153,113) -- ------------- ------------- ------------- ------------- Total Class B transactions 144,007 -- 710,090 -- ------------- ------------- ------------- ------------- Class C: Shares sold 794,762 -- 580,457 -- Shares issued on reinvestment of distributions 3,708 -- 768 -- Shares redeemed (68,579) -- (133,522) -- ------------- ------------- ------------- ------------- Total Class C transactions 729,891 -- 447,703 -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Shares sold 674,289 890,634 24,755,474 26,763,500 Shares issued on reinvestment of distributions 13,460 557,236 1,389,547 7,277,911 Shares redeemed (814,297) (1,863,805) (27,169,494) (26,330,137) ------------- ------------- ------------- ------------- Total Class Y transactions (126,548) (415,935) (1,024,473) 7,711,274 ------------- ------------- ------------- ------------- UBS Investment Funds Class+ Shares sold 203,529 528,204 268,873 1,781,567 Shares issued on reinvestment of distributions -- 751,964 -- 676,885 Shares redeemed (3,266,791) (2,261,874) (2,293,974) (2,577,682) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (3,063,262) (981,706) (2,025,101) (119,230) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (849,838) (1,397,468) (18,420) 7,592,366 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS (2,620,829) (6,315,760) (7,222,381) (8,253,414) NET ASSETS, BEGINNING OF PERIOD 6,753,507 13,069,267 46,394,760 54,648,174 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 4,132,678 $ 6,753,507 $ 39,172,379 $ 46,394,760 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income (loss) $ -- $ -- $ -- $ -- ============= ============= ============= ============= UBS UBS U.S. BOND FUND HIGH YIELD FUND ------------------------------ ------------------------------ YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) $ 4,478,203 $ 4,008,666 $ 11,343,538 $ 5,305,020 Net realized gain (loss) 1,921,383 119,289 (27,901,284) (5,794,063) Change in net unrealized appreciation (depreciation) 925,071 2,228,358 7,837,661 (487,323) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 7,324,657 6,356,313 (8,720,085) (976,366) ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income (308,304) (992) (4,859,620) (124) Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class A distributions (308,304) (992) (4,859,620) (124) ------------- ------------- ------------- ------------- Class B: Distributions from net investment income (15,882) -- (1,062,540) -- Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class B distributions (15,882) -- (1,062,540) -- ------------- ------------- ------------- ------------- Class C: Distributions from net investment income (27,034) -- (1,219,662) -- Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class C distributions (27,034) -- (1,219,662) -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Distributions from net investment income (5,307,109) (3,998,606) (5,509,093) (4,665,809) Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total Class Y distributions (5,307,109) (3,998,606) (5,509,093) (4,665,809) ------------- ------------- ------------- ------------- UBS Investment Funds Class Distributions from net investment income (38,696) (195,266) (153,732) (242,944) Distributions from net realized gains -- -- -- -- ------------- ------------- ------------- ------------- Total UBS Investment Funds Class distributions (38,696) (195,266) (153,732) (242,944) ------------- ------------- ------------- ------------- Decrease in net assets from distributions (5,697,025) (4,194,864) (12,804,647) (4,908,877) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS BY CLASS (SEE NOTE 10 & 11): Class A: (formerly Class N) Shares sold 20,944,347 123,495 85,975,437 -- Shares issued on reinvestment of distributions 243,825 812 2,162,926 123 Shares redeemed (2,899,216) (1,422) (13,264,252) -- ------------- ------------- ------------- ------------- Total Class A transactions 18,288,956 122,885 74,874,111 123 ------------- ------------- ------------- ------------- Class B: Shares sold 1,536,154 -- 23,835,512 -- Shares issued on reinvestment of distributions 9,884 -- 410,680 -- Shares redeemed (143,152) -- (6,409,813) -- ------------- ------------- ------------- ------------- Total Class B transactions 1,402,886 -- 17,836,379 ------------- ------------- ------------- ------------- Class C: Shares sold 1,767,103 -- 23,894,164 -- Shares issued on reinvestment of distributions 11,416 -- 565,332 -- Shares redeemed (634,562) -- (4,088,587) -- ------------- ------------- ------------- ------------- Total Class C transactions 1,143,957 -- 20,370,909 -- ------------- ------------- ------------- ------------- Class Y: (formerly Class I) Shares sold 273,440,239 132,318,463 93,174,128 167,750,223 Shares issued on reinvestment of distributions 4,731,214 3,591,657 4,929,419 4,317,900 Shares redeemed (282,313,285) (133,516,288) (104,801,747) (162,774,488) ------------- ------------- ------------- ------------- Total Class Y transactions (4,141,832) 2,393,832 (6,698,200) 9,293,635 ------------- ------------- ------------- ------------- UBS Investment Funds Class+ Shares sold 207,611 1,507,160 83,673 259,383 Shares issued on reinvestment of distributions 29,558 170,655 119,090 117,825 Shares redeemed (3,107,604) (2,609,246) (1,958,227) (306,671) ------------- ------------- ------------- ------------- Total UBS Investment Funds Class transactions (2,870,435) (931,431) (1,755,464) 70,537 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 13,823,532 1,585,286 104,627,735 9,364,295 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS 15,451,164 3,746,735 83,103,003 3,479,052 NET ASSETS, BEGINNING OF PERIOD 65,394,574 61,647,839 56,488,566 53,009,514 ------------- ------------- ------------- ------------- NET ASSETS, END OF PERIOD $ 80,845,738 $ 65,394,574 $ 139,591,569 $ 56,488,566 ============= ============= ============= ============= Net assets include accumulated undistributed net investment income (loss) $ 105,723 $ 1,231,051 $ 430,319 $ 1,891,428 ============= ============= ============= ============= 101 UBS UBS INTERNATIONAL EQUITY FUND U.S. VALUE EQUITY ---------------------------------- ------------------- YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 2002 2001 2002* - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income $ 1,457,063 $ 3,135,238 $ 36,677 Net realized gain (loss) (7,755,636) 24,276,913 41,135 Change in net unrealized appreciation (depreciation) 1,110,495 (76,476,247) (348,860) --------------- --------------- --------------- Net decrease in net assets from operations (5,188,078) (49,064,096) (271,048) --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: (formerly Class N) Distributions from net investment income (36,545) (4) -- Distributions from net realized gains (218,141) (68) -- --------------- --------------- --------------- Total Class A distributions (254,686) (72) -- --------------- --------------- --------------- Class B: Distributions from net investment income -- -- -- Distributions from net realized gains -- -- -- --------------- --------------- --------------- Total Class B distributions -- -- -- --------------- --------------- --------------- Class C: Distributions from net investment income (28) -- -- Distributions from net realized gains (166) -- -- --------------- --------------- --------------- Total Class C distributions (194) -- -- --------------- --------------- --------------- Class Y: (formerly Class I) Distributions from net investment income (2,957,696) (663,935) -- Distributions from net realized gains (17,649,540) (19,686,583) -- --------------- --------------- --------------- Total Class Y distributions (20,607,236) (20,350,518) -- --------------- --------------- --------------- UBS Investment Funds Class Distributions from net investment income -- (10,203) -- Distributions from net realized gains -- (307,666) -- --------------- --------------- --------------- Total UBS Investment Funds Class distributions -- (317,869) -- --------------- --------------- --------------- Decrease in net assets from distributions (20,862,116) (20,668,459) -- --------------- --------------- --------------- CAPITAL SHARE TRANSACTIONS BY CLASS: Class A: (formerly Class N) Shares sold 10,837,418 310,000 944,284 Shares issued on reinvestment of distributions 241,742 72 -- Shares redeemed (8,692,780) (9,495) (144,738) --------------- --------------- --------------- Total Class A transactions 2,386,380 300,577 799,546 --------------- --------------- --------------- Class B: Shares sold 137,033 -- 353,289 Shares issued on reinvestment of distributions -- -- -- Shares redeemed (15,060) -- (33,608) --------------- --------------- --------------- Total Class B transactions 121,973 -- 319,681 --------------- --------------- --------------- Class C: Shares sold 708,527 -- 256,183 Shares issued on reinvestment of distributions 1 -- -- Shares redeemed (531,255) -- (3,131) --------------- --------------- --------------- Total Class C transactions 177,273 -- 253,052 --------------- --------------- --------------- Class Y: (formerly Class I) Shares sold 776,370,655 1,068,404,548 4,355 Shares issued on reinvestment of distributions 18,542,125 18,935,302 -- Shares redeemed (863,839,409) (1,238,414,502) (49) --------------- --------------- --------------- Total Class Y transactions (68,926,629) (151,074,652) 4,306 --------------- --------------- --------------- UBS Investment Funds Class+ Shares sold 231,701 1,238,857 -- Shares issued on reinvestment of distributions -- 316,754 -- Shares redeemed (4,025,287) (2,014,627) -- --------------- --------------- --------------- Total UBS Investment Funds Class transactions (3,793,586) (459,016) -- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from capital share transactions (70,034,589) (151,233,091) 1,376,585 --------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS (96,084,783) (220,965,646) 1,105,537 NET ASSETS, BEGINNING OF PERIOD 196,838,899 417,804,545 3,000,010 --------------- --------------- --------------- NET ASSETS, END OF PERIOD $ 100,754,116 $ 196,838,899 $ 4,105,547 =============== =============== =============== Net assets include accumulated undistributed net investment income $ 3,475,868 $ 3,594,471 $ 37,360 =============== =============== ===============
* For the period June 29, 2001, commencement of investment operations, to June 30, 2002 + The UBS Investment Funds Class shares were liquidated effective November 9, 2001. See accompanying notes to financial statements. 102 UBS GLOBAL ALLOCATION FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, ------------------------------------------------ CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.10 $ 11.20 $ 11.99 $ 12.75 $ 13.13 -------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income 0.10** 0.22 0.19** 0.27 0.63 Net realized and unrealized gain (loss) 0.40 0.31 (0.30) 0.25 0.32 -------- ------- ------- ------- ------- Total income (loss) from investment operations 0.50 0.53 (0.11) 0.52 0.95 -------- ------- ------- ------- ------- Less distributions: Distributions from net investment income (0.19) -- (0.16) (0.44) (0.63) Distributions from net realized gains (0.81) (0.63) (0.52) (0.84) (0.70) -------- ------- ------- ------- ------- Total distributions (1.00) (0.63) (0.68) (1.28) (1.33) -------- ------- ------- ------- ------- Net asset value, end of period $ 10.60 $ 11.10 $ 11.20 $ 11.99 $ 12.75 ======== ======= ======= ======= ======= Total return+ 4.84% 4.95% (0.80)% 4.47% 7.90% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 6,914 $ 237 $ 202 $ 1,576 $ 1,163 Ratio of expenses to average net assets 1.35% 1.30% 1.24% 1.21% 1.19% Ratio of net investment income to average net assets 0.98% 1.52% 1.74% 1.98% 2.45% Portfolio turnover rate 116% 115% 98% 105% 88% - ---------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ------------------------------------------------------------------------ Net asset value, beginning of period $ 11.21 -------------- Income from investment operations: Net investment income 0.12** Net realized and unrealized gain 0.19 -------------- Total income from investment operations 0.31 -------------- Less distributions: Distributions from net investment income (0.19) Distributions from net realized gains (0.81) -------------- Total distributions (1.00) -------------- Net asset value, end of period $ 10.52 ============== Total return 3.00%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,570 Ratio of gross expenses to average net assets 2.10%*** Ratio of net investment income to average net assets 2.17%*** Portfolio turnover rate 116% - ------------------------------------------------------------------------
* For the period December 13, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. See accompanying notes to financial statements. 103
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ------------------------------------------------------------------------ Net asset value, beginning of period $ 11.10 -------------- Income from investment operations: Net investment income 0.11** Net realized and unrealized gain 0.33 -------------- Total income from investment operations 0.44 -------------- Less distributions: Distributions from net investment income (0.19) Distributions from net realized gains (0.81) -------------- Total distributions (1.00) -------------- Net asset value, end of period $ 10.54 ============== Total return 4.23%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,525 Ratio of gross expenses to average net assets 2.10%*** Ratio of net investment income to average net assets 1.77%*** Portfolio turnover rate 116% - ------------------------------------------------------------------------ YEAR ENDED JUNE 30, ------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.18 $ 11.25 $ 12.02 $ 12.77 $ 13.13 --------- --------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.13** 0.25 0.23** 0.30 0.37 Net realized and unrealized gain (loss) 0.38 0.31 (0.30) 0.25 0.62 --------- --------- --------- --------- --------- Total income (loss) from investment operations 0.51 0.56 (0.07) 0.55 0.99 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income (0.19) -- (0.18) (0.46) (0.65) Distributions from net realized gains (0.81) (0.63) (0.52) (0.84) (0.70) --------- --------- --------- --------- --------- Total distributions (1.00) (0.63) (0.70) (1.30) (1.35) --------- --------- --------- --------- --------- Net asset value, end of period $ 10.69 $ 11.18 $ 11.25 $ 12.02 $ 12.77 ========= ========= ========= ========= ========= Total return+ 4.91% 5.20% (0.48)% 4.76% 8.28% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 165,630 $ 156,130 $ 284,229 $ 469,080 $ 667,745 Ratio of gross expenses to average net assets 1.10% 1.05% 0.99% 0.96% 0.94% Ratio of net investment income to average net assets 1.24% 1.77% 1.99% 2.23% 2.70% Portfolio turnover rate 116% 115% 98% 105% 88% - -----------------------------------------------------------------------------------------------------------------
* For the period November 22, 2001 (commencement of issuance) through December 31, 2001. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 104
YEAR ENDED JUNE 30, ------------------------------------------------------- CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.61 $ 12.44 $ 13.40 $ 12.53 $ 12.76 --------- --------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.04** 0.07 0.04** 0.10** 0.13 Net realized and unrealized gain (loss) (0.88) (0.56) 0.27 1.09 0.82 --------- --------- --------- --------- --------- Total income (loss) from investment operations (0.84) (0.49) 0.31 1.19 0.95 --------- --------- --------- --------- --------- Less distributions: Distributions from net investment income (0.06) (0.02) (0.06) (0.14) (0.13) Distributions from net realized gains (0.34) (1.32) (1.21) (0.18) (1.05) --------- --------- --------- --------- --------- Total distributions (0.40) (1.34) (1.27) (0.32) (1.18) --------- --------- --------- --------- --------- Net asset value, end of period $ 9.37 $ 10.61 $ 12.44 $ 13.40 $ 12.53 ========= ========= ========= ========= ========= Total return+ (8.05)% (4.45)% 2.49% 9.80% 8.60% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 15,173 $ 302 $ 224 $ 220 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.47% 1.37% 1.33% 1.30% 1.27% After expense reimbursement and earnings credits 1.25% 1.25% 1.25% 1.25% 1.25% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.17% 0.65% 0.23% 0.80% 1.04% After expense reimbursement and earnings credits 0.39% 0.77% 0.31% 0.85% 1.06% Portfolio turnover rate 117% 81% 111% 86% 46% - ----------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 10.17 -------------- Income (loss) from investment operations: Net investment income 0.05** Net realized and unrealized loss (0.48) -------------- Total loss from investment operations (0.43) -------------- Less distributions: Distributions from net investment income (0.06) Distributions from net realized gains (0.34) -------------- Total distributions (0.40) -------------- Net asset value, end of period $ 9.34 ============== Total return (4.38)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 418 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.25%*** After expense reimbursement and earnings credits 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.72%*** After expense reimbursement and earnings credits 0.97%*** Portfolio turnover rate 117% - -----------------------------------------------------------------------------
* For the period December 11, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. See accompanying notes to financial statements. 105
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 10.18 -------------- Income (loss) from investment operations: Net investment income 0.04** Net realized and unrealized loss (0.49) -------------- Total loss from investment operations (0.45) -------------- Less distributions: Distributions from net investment income (0.06) Distributions from net realized gains (0.34) -------------- Total distributions (0.40) -------------- Net asset value, end of period $ 9.33 ============== Total return (4.57)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 351 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.23%*** After expense reimbursement and earnings credits 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.55%*** After expense reimbursement and earnings credits 0.78%*** Portfolio turnover rate 117% - ----------------------------------------------------------------------------- YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.68 $ 12.47 $ 13.42 $ 12.54 $ 12.76 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.06** 0.09 0.07** 0.14** 0.22 Net realized and unrealized gain (loss) (0.87) (0.54) 0.27 1.09 0.78 ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations (0.81) (0.45) 0.34 1.23 1.00 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.06) (0.02) (0.08) (0.17) (0.17) Distributions from net realized gains (0.34) (1.32) (1.21) (0.18) (1.05) ---------- ---------- ---------- ---------- ---------- Total distributions (0.40) (1.34) (1.29) (0.35) (1.22) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.47 $ 10.68 $ 12.47 $ 13.42 $ 12.54 ========== ========== ========== ========== ========== Total return+ (7.71)% (4.07)% 2.69% 10.14% 8.99% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 40,714 $ 49,306 $ 40,538 $ 42,106 $ 22,724 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.19% 1.12% 1.08% 1.05% 1.02% After expense reimbursement and earnings credits 1.00% 1.00% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.45% 0.90% 0.48% 1.05% 1.29% After expense reimbursement and earnings credits 0.64% 1.02% 0.56% 1.10% 1.31% Portfolio turnover rate 117% 81% 111% 86% 46% - ------------------------------------------------------------------------------------------------------------------------
* For the period November 27, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 106
YEAR ENDED JUNE 30, FOR THE --------------------------- PERIOD ENDED CLASS A (FORMERLY CLASS N) 2002 2001 JUNE 30, 2000(a) - ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.79 $ 11.30 $ 10.00 ------------ ------------ ---------------- Income (loss) from investment operations: Net investment loss (0.07)** (0.12)** -- Net realized and unrealized gain (loss) (2.37) (5.38) 1.30 ------------ ------------ ---------------- Total income (loss) from investment operations (2.44) (5.50) 1.30 ------------ ------------ ---------------- Less distributions: Distributions from net realized gains -- (0.01) -- ------------ ------------ ---------------- Net asset value, end of period $ 3.35 $ 5.79 $ 11.30 ============ ============ ================ Total return+ (42.14)% (48.67)% 13.00%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 392 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 9.34% 4.85% 13.53%*** After expense reimbursement and earnings credits 1.80% 1.80% 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (9.08)% (4.45)% (12.51)%*** After expense reimbursement and earnings credits (1.54)% (1.40)% (0.78)%*** Portfolio turnover rate 608% 221% 14% - ------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 5.28 -------------- Income (loss) from investment operations: Net investment loss (0.04)** Net realized and unrealized loss (1.89) -------------- Total loss from investment operations (1.93) -------------- Net asset value, end of period $ 3.35 ============== Total return (36.55)%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ --++ Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 11.56%*** After expense reimbursement and earnings credits 2.55%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (11.20)%*** After expense reimbursement and earnings credits (2.19)%*** Portfolio turnover rate 608% - -----------------------------------------------------------------------------
(a) For the period May 26, 2000 (commencement of investment operations) through June 30, 2000. * For the period January 9, 2002 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + The returns do not include sales charges. ++ Amount represents less than $1,000. See accompanying notes to financial statements. 107
YEAR ENDED JUNE 30, FOR THE --------------------------- PERIOD ENDED CLASS Y (FORMERLY CLASS I) 2002 2001 JUNE 30, 2000* - ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.80 $ 11.30 $ 10.00 ------------ ------------ ---------------- Income (loss) from investment operations: Net investment loss (0.06)** (0.08)** -- Net realized and unrealized gain (loss) (2.39) (5.41) 1.30 ------------ ------------ ---------------- Total income (loss) from investment operations (2.45) (5.49) 1.30 ------------ ------------ ---------------- Less distributions: Distributions from net realized gains -- (0.01) -- ------------ ------------ ---------------- Net asset value, end of period $ 3.35 $ 5.80 $ 11.30 ============ ============ ================ Total return+ (42.24)% (48.58)% 13.00%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 238 $ 895 $ 224 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 7.60% 4.60% 13.28%*** After expense reimbursement and earnings credits 1.55% 1.55% 1.55%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (7.30)% (4.20)% (12.26)%*** After expense reimbursement and earnings credits (1.25)% (1.15)% (0.53)%*** Portfolio turnover rate 608% 221% 14% - -------------------------------------------------------------------------------------------------------------
* For the period May 26, 2000 (commencement of investment operations) through June 30, 2000. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. # The return is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 108
YEAR ENDED JUNE 30, FOR THE --------------------------- PERIOD ENDED CLASS A (FORMERLY CLASS N) 2002 2001 JUNE 30, 2000(a) - ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.08 $ 12.07 $ 10.00 ------------ ------------ ---------------- Income (loss) from investment operations: Net investment loss (0.10)** (0.12)** (0.01)** Net realized and unrealized gain (loss) (4.24) (2.66) 2.08 ------------ ------------ ---------------- Total income (loss) from investment operations (4.34) (2.78) 2.07 ------------ ------------ ---------------- Less distributions: Distributions from net realized gains -- (0.21) -- ------------ ------------ ---------------- Net asset value, end of period $ 4.74 $ 9.08 $ 12.07 ============ ============ ================ Total return+ (47.80)% (23.44)% 20.70%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 242 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 5.15% 4.11% 10.35%*** After expense reimbursement and earnings credits 1.55% 1.55% 1.55%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (5.00)% (3.73)% (9.54)%*** After expense reimbursement and earnings credits (1.40)% (1.17)% (0.74)%*** Portfolio turnover rate 223% 205% 19% - ------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 8.23 -------------- Income (loss) from investment operations: Net investment loss (0.09)** Net realized and unrealized loss (3.42) -------------- Total loss from investment operations (3.51) -------------- Net asset value, end of period $ 4.72 ============== Total return (42.65)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 19 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 6.57%*** After expense reimbursement and earnings credits 2.30%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (6.32)%*** After expense reimbursement and earnings credits (2.05)%*** Portfolio turnover rate 223% - -----------------------------------------------------------------------------
(a) For the period June 2, 2000 (commencement of investment operations) through June 30, 2000. * For the period November 15, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + The returns do not include sales charges. See accompanying notes to financial statements. 109
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002(a) - ------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.42 ---------------- Income (loss) from investment operations: Net investment loss (0.08)** Net realized and unrealized loss (3.63) ---------------- Total loss from investment operations (3.71) ---------------- Net asset value, end of period $ 4.71 ================ Total return (44.06)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 7.09%*** After expense reimbursement and earnings credits 2.30%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (6.86)%*** After expense reimbursement and earnings credits (2.07)%*** Portfolio turnover rate 223% - ------------------------------------------------------------------------------- YEAR ENDED JUNE 30, FOR THE --------------------------- PERIOD ENDED CLASS Y (FORMERLY CLASS I) 2002 2001 JUNE 30, 2000* - ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.11 $ 12.08 $ 10.00 ------------ ------------ ---------------- Income (loss) from investment operations: Net investment loss (0.08)** (0.09)** --** Net realized and unrealized gain (loss) (4.26) (2.67) 2.08 ------------ ------------ ---------------- Total income (loss) from investment operations (4.34) (2.76) 2.08 ------------ ------------ ---------------- Less distributions: Distributions from net realized gains -- (0.21) -- ------------ ------------ ---------------- Net asset value, end of period $ 4.77 $ 9.11 $ 12.08 ============ ============ ================ Total return+ (47.64)% (23.25)% 20.80%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,856 $ 2,322 $ 691 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 5.02% 3.86% 10.10%*** After expense reimbursement and earnings credits 1.30% 1.30% 1.30%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (4.87)% (3.48)% (9.29)%*** After expense reimbursement and earnings credits (1.15)% (0.92)% (0.49)%*** Portfolio turnover rate 223% 205% 19% - -------------------------------------------------------------------------------------------------------------
(a) For the period December 10, 2001 (commencement of issuance) through June 30, 2002. * For the period June 2, 2000 (commencement of investment operations) through June 30, 2000. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 110
YEAR ENDED JUNE 30, ----------------------------------------------------------------- CLASS A (FORMERLY CLASS N) 2002* 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.58 $ 9.09 $ 9.16 $ 9.40 $ 9.64 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.17** 0.33** 0.37** 0.37** 0.42** Net realized and unrealized gain (loss) 0.43 (0.72) (0.43) (0.07) (0.20) ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 0.60 (0.39) (0.06) 0.30 0.22 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income -- (0.06) -- (0.46) (0.29) Distributions from net realized gains -- -- (0.01) (0.08) (0.17) Distributions from return of capital (0.17) -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total distributions (0.17) (0.06) (0.01) (0.54) (0.46) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.01 $ 8.64 $ 9.09 $ 9.16 $ 9.40 ========== ========== ========== ========== ========== Total return+ 7.18%# (4.27)% (0.66)% 2.89% 2.37% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,925 $ 3 $ 1 $ 1,085 $ 9 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.49%*** 1.37% 1.30% 1.15% 1.21% After expense reimbursement and earnings credits 1.15%*** 1.15% 1.19%++ 1.15% 1.15% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 2.72%*** 3.60% 4.09% 3.80% 4.22% After expense reimbursement and earnings credits 3.06%*** 3.82% 4.20% 3.80% 4.28% Portfolio turnover rate 157% 165% 87% 138% 151% - --------------------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 8.35 -------------- Income from investment operations: Net investment income 0.11** Net realized and unrealized gain 0.69 -------------- Total income from investment operations 0.80 -------------- Less distributions: Distributions from return of capital (0.14) -------------- Net asset value, end of period $ 9.01 ============== Total return 9.67%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 392 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.25%*** After expense reimbursement and earnings credits 1.90%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 1.94%*** After expense reimbursement and earnings credits 2.29%*** Portfolio turnover rate 157% - -----------------------------------------------------------------------------
* On July 2, 2001 Class A (formerly Class N) was fully liquidated. For the period November 5, 2001 and November 26, 2001 (commencement of reissuance) for Class A and Class B, respectively, through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. ++ The ratio of net operating expenses to average net assets for Class A was 1.15%. # The return is non-annualized. See accompanying notes to financial statements. 111
YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 8.57 $ 9.01 $ 9.18 $ 9.41 $ 9.64 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.31* 0.36* 0.40* 0.39* 0.43* Net realized and unrealized gain (loss) 1.09 (0.72) (0.43) (0.07) (0.18) ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 1.40 (0.36) (0.03) 0.32 0.25 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income -- (0.08) (0.13) (0.47) (0.31) Distributions from net realized gains -- -- (0.01) (0.08) (0.17) Distributions from return of capital (0.18) -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total distributions (0.18) (0.08) (0.14) (0.55) (0.48) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.79 $ 8.57 $ 9.01 $ 9.18 $ 9.41 ========== ========== ========== ========== ========== Total return+ 16.57% (4.02)% (0.34)% 3.13% 2.69% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 34,421 $ 37,822 $ 43,467 $ 92,832 $ 91,274 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.17% 1.12% 1.05% 0.90% 0.96% After expense reimbursement and earnings credits 0.90% 0.90% 0.94%++ 0.90% 0.90% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 3.14% 3.85% 4.34% 4.05% 4.47% After expense reimbursement and earnings credits 3.41% 4.07% 4.45% 4.05% 4.53% Portfolio turnover rate 157% 165% 87% 138% 151% - ------------------------------------------------------------------------------------------------------------------------
* The net investment income per share data was determined by using average shares outstanding throughout the period. + Class Y does not have sales charges. ++ The ratio of net operating expenses to average net assets for Class Y was 0.90%. See accompanying notes to financial statements. 112 UBS U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 9.38 $ 8.57 $ 9.38 $ 12.27 $ 12.53 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.20** 0.28 0.23** 0.29** 0.47** Net realized and unrealized gain (loss) (0.25) 0.89 (0.74) 0.18 0.94 ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations (0.05) 1.17 (0.51) 0.47 1.41 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.29) (0.36) (0.24) (0.71) (0.73) Distributions from net realized gains -- -- (0.06) (2.65) (0.94) ---------- ---------- ---------- ---------- ---------- Total distributions (0.29) (0.36) (0.30) (3.36) (1.67) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.04 $ 9.38 $ 8.57 $ 9.38 $ 12.27 ========== ========== ========== ========== ========== Total return+ (0.60)% 13.89% (5.39)% 4.17% 12.15% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,583 $ 1 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.57% 1.39% 1.26% 1.21% 1.06% After expense reimbursement and earnings credits 1.05% 1.05% 1.06%++ 1.05% 1.05% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 1.63% 2.81% 2.55% 2.75% 3.63% After expense reimbursement and earnings credits 2.15% 3.15% 2.75% 2.91% 3.64% Portfolio turnover rate 147% 159% 96% 113% 194% - ------------------------------------------------------------------------------------------------------------------------ FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 9.39 -------------- Income (loss) from investment operations: Net investment income 0.08** Net realized and unrealized loss (0.19) -------------- Total loss from investment operations (0.11) -------------- Less distributions: Distributions from net investment income (0.28) -------------- Net asset value, end of period $ 9.00 ============== Total return (1.18)%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 913 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.41%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.69%*** After expense reimbursement and earnings credits 1.30%*** Portfolio turnover rate 147% - -----------------------------------------------------------------------------
* For the period November 7, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. ++ The ratio of net operating expenses to average net assets for Class A was 1.05%. See accompanying notes to financial statements. 113
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 9.36 -------------- Income (loss) from investment operations: Net investment income 0.08** Net realized and unrealized loss (0.15) -------------- Total loss from investment operations (0.07) -------------- Less distributions: Distributions from net investment income (0.28) -------------- Net asset value, end of period $ 9.01 ============== Total return (0.76)%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 402 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.37%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.75%*** After expense reimbursement and earnings credits 1.32%*** Portfolio turnover rate 147% - ----------------------------------------------------------------------------- YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 9.41 $ 8.59 $ 9.38 $ 12.24 $ 12.53 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.24** 0.31 0.26** 0.34** 0.49** Net realized and unrealized gain (loss) (0.27) 0.89 (0.74) 0.18 0.93 ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations (0.03) 1.20 (0.48) 0.52 1.42 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.29) (0.38) (0.25) (0.73) (0.77) Distributions from net realized gains -- -- (0.06) (2.65) (0.94) ---------- ---------- ---------- ---------- ---------- Total distributions (0.29) (0.38) (0.31) (3.38) (1.71) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.09 $ 9.41 $ 8.59 $ 9.38 $ 12.24 ========== ========== ========== ========== ========== Total return+ (0.36)% 14.18% (5.07)% 4.74% 12.19% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 21,771 $ 25,719 $ 11,136 $ 37,603 $ 80,556 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.24% 1.14% 1.01% 0.96% 0.81% After expense reimbursement and earnings credits 0.80% 0.80% 0.81%++ 0.80% 0.80% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 2.17% 3.06% 2.80% 3.00% 3.88% After expense reimbursement and earnings credits 2.61% 3.40% 3.00% 3.16% 3.89% Portfolio turnover rate 147% 159% 96% 113% 194% - ------------------------------------------------------------------------------------------------------------------------
* For the period November 6, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. ++ The ratio of net operating expenses to average net assets for Class Y was 0.80%. See accompanying notes to financial statements. 114 UBS U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 15.97 $ 15.97 $ 21.39 $ 19.88 $ 17.64 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.08** 0.08** 0.13** 0.08** 0.15 Net realized and unrealized gain (loss) (1.38) 1.56 (3.75) 2.67 3.37 ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations (1.30) 1.64 (3.62) 2.75 3.52 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.04) (0.29) (0.03) (0.12) (0.15) Distributions from net realized gains (0.69) (1.35) (1.77) (1.12) (1.13) ---------- ---------- ---------- ---------- ---------- Total distributions (0.73) (1.64) (1.80) (1.24) (1.28) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 13.94 $ 15.97 $ 15.97 $ 21.39 $ 19.88 ========== ========== ========== ========== ========== Total return+ (8.41)% 10.63% (17.24)% 14.75% 21.10% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 13,698 $ 7,067 $ 7,191 $ 7,563 $ 268 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.19% 1.17% 1.09% 1.05% 1.05% After expense reimbursement and earnings credits 1.05% 1.05% 1.05% 1.05% 1.05% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.40% 0.37% 0.64% 0.57% 0.87% After expense reimbursement and earnings credits 0.54% 0.49% 0.68% 0.57% 0.87% Portfolio turnover rate 60% 54% 55% 48% 42% - ------------------------------------------------------------------------------------------------------------------------ FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 14.76 -------------- Income (loss) from investment operations: Net investment income 0.06** Net realized and unrealized loss (0.22) -------------- Total loss from investment operations (0.16) -------------- Less distributions: Distributions from net investment income (0.04) Distributions from net realized gains (0.69) -------------- Total distributions (0.73) -------------- Net asset value, end of period $ 13.87 ============== Total return (1.39)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 223 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.99%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.46%*** After expense reimbursement and earnings credits 0.65%*** Portfolio turnover rate 60% - -----------------------------------------------------------------------------
* For the period November 5, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. See accompanying notes to financial statements. 115
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 15.20 -------------- Income (loss) from investment operations: Net investment income 0.07** Net realized and unrealized loss (0.66) -------------- Total loss from investment operations (0.59) -------------- Less distributions: Distributions from net investment income (0.04) Distributions from net realized gains (0.69) -------------- Total distributions (0.73) -------------- Net asset value, end of period $ 13.88 ============== Total return (4.18)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 70 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.97%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.56%*** After expense reimbursement and earnings credits 0.73%*** Portfolio turnover rate 60% - ----------------------------------------------------------------------------- YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 16.07 $ 16.07 $ 21.48 $ 19.91 $ 17.64 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.12** 0.12** 0.16** 0.17** 0.19 Net realized and unrealized gain (loss) (1.39) 1.57 (3.75) 2.67 3.39 ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations (1.27) 1.69 (3.59) 2.84 3.58 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.04) (0.34) (0.05) (0.15) (0.18) Distributions from net realized gains (0.69) (1.35) (1.77) (1.12) (1.13) ---------- ---------- ---------- ---------- ---------- Total distributions (0.73) (1.69) (1.82) (1.27) (1.31) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 14.07 $ 16.07 $ 16.07 $ 21.48 $ 19.91 ========== ========== ========== ========== ========== Total return+ (8.17)% 10.88% (17.00)% 15.22% 21.48% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 87,710 $ 125,997 $ 167,870 $ 713,321 $ 605,768 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 0.93% 0.92% 0.84% 0.80% 0.80% After expense reimbursement and earnings credits 0.80% 0.80% 0.80% 0.80% 0.80% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.66% 0.62% 0.89% 0.82% 1.12% After expense reimbursement and earnings credits 0.79% 0.74% 0.93% 0.82% 1.12% Portfolio turnover rate 60% 54% 55% 48% 42% - ------------------------------------------------------------------------------------------------------------------------
* For the period November 13, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 116 UBS U.S. LARGE CAP EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, FOR THE ------------------------------------------------- PERIOD ENDED CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 JUNE 30, 1998(a) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 8.24 $ 7.51 $ 11.13 $ 9.78 $ 10.00 ---------- ---------- ---------- ---------- ---------------- Income (loss) from investment operations: Net investment income 0.05** 0.06** 0.07** 0.09** 0.02 Net realized and unrealized gain (loss) (0.94) 0.82 (2.68) 1.31 (0.23) ---------- ---------- ---------- ---------- ---------------- Total income (loss) from investment operations (0.89) 0.88 (2.61) 1.40 (0.21) ---------- ---------- ---------- ---------- ---------------- Less distributions: Distributions from net investment income (0.04) (0.15) (0.06) (0.05) (0.01) Distributions from net realized gains -- -- (0.95) -- -- ---------- ---------- ---------- ---------- ---------------- Total distributions (0.04) (0.15) (1.01) (0.05) (0.01) ---------- ---------- ---------- ---------- ---------------- Net asset value, end of period $ 7.31 $ 8.24 $ 7.51 $ 11.13 $ 9.78 ========== ========== ========== ========== ================ Total return+ (10.89)% 11.74% (24.12)% 14.40% (2.02)%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 263 $ 20 $ 35 $ 3,756 $ 16,033 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 4.89% 2.28% 1.52% 1.54% 1.84%*** After expense reimbursement and earnings credits 1.05% 1.05% 1.05% 1.05% 1.05%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (3.16)% (0.49)% 0.45% 0.32% 0.27%*** After expense reimbursement and earnings credits 0.68% 0.74% 0.92% 0.81% 1.06%*** Portfolio turnover rate 256% 94% 174% 88% 12% - ------------------------------------------------------------------------------------------------------------------------------ FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 7.85 -------------- Income (loss) from investment operations: Net investment income (0.01)** Net realized and unrealized loss (0.53) -------------- Total loss from investment operations (0.54) -------------- Less distributions: Distributions from net investment income (0.04) -------------- Net asset value, end of period $ 7.27 ============== Total return (6.98)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 94 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 6.35%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (4.68)%*** After expense reimbursement and earnings credits (0.13)%*** Portfolio turnover rate 256% - -----------------------------------------------------------------------------
(a) For the period April 6, 1998 (commencement of investment operations) through June 30, 1998. * For the period November 28, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. # The return is non-annualized. See accompanying notes to financial statements. 117
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002(a) - ------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.03 ---------------- Income (loss) from investment operations: Net investment income --** Net realized and unrealized loss (0.74) ---------------- Total loss from investment operations (0.74) ---------------- Net asset value, end of period $ 7.29 ================ Total return (9.22)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 212 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 9.04%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (7.55)%*** After expense reimbursement and earnings credits (0.31)%*** Portfolio turnover rate 256% - ------------------------------------------------------------------------------- YEAR ENDED JUNE 30, FOR THE ------------------------------------------------- PERIOD ENDED CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 JUNE 30, 1998* - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.18 $ 7.48 $ 11.13 $ 9.80 $ 10.00 ---------- ---------- ---------- ---------- --------------- Income (loss) from investment operations: Net investment income 0.07** 0.08** 0.09** 0.11** 0.02 Net realized and unrealized gain (loss) (0.94) 0.82 (2.68) 1.31 (0.20) ---------- ---------- ---------- ---------- --------------- Total income (loss) from investment operations (0.87) 0.90 (2.59) 1.42 (0.18) ---------- ---------- ---------- ---------- --------------- Less distributions: Distributions from net investment income (0.04) (0.20) (0.11) (0.09) (0.02) Distributions from net realized gains -- -- (0.95) -- -- ---------- ---------- ---------- ---------- --------------- Total distributions (0.04) (0.20) (1.06) (0.09) (0.02) ---------- ---------- ---------- ---------- --------------- Net asset value, end of period $ 7.27 $ 8.18 $ 7.48 $ 11.13 $ 9.80 ========== ========== ========== ========== =============== Total return+ (10.73)% 12.12% (23.95)% 14.54% (1.83)%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,562 $ 2,859 $ 15,758 $ 22,668 $ 154 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 3.06% 2.03% 1.27% 1.29% 1.59%*** After expense reimbursement and earnings credits 0.80% 0.80% 0.80% 0.80% 0.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits (1.37)% (0.25)% 0.70% 0.57% 0.52%*** After expense reimbursement and earnings credits 0.89% 0.98% 1.17% 1.06% 1.31%*** Portfolio turnover rate 256% 94% 174% 88% 12% - -----------------------------------------------------------------------------------------------------------------------------
(a) For the period May 8, 2002 (commencement of issuance) through June 30, 2002. * For the period April 6, 1998 (commencement of investment operations) through June 30, 1998. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 118 UBS U.S. LARGE CAP GROWTH FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, FOR THE ------------------------------------ PERIOD ENDED CLASS A (FORMERLY CLASS N) 2002 2001 2000 JUNE 30, 1999(a) - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.90 $ 15.20 $ 13.88 $ 11.84 ---------- ---------- ---------- ---------------- Income (loss) from investment operations: Net investment loss (0.02)** (0.07) (0.02)** (0.01) Net realized and unrealized gain (loss) (2.45) (4.32) 2.29 2.05 ---------- ---------- ---------- ---------------- Total income (loss) from investment operations (2.47) (4.39) 2.27 2.04 ---------- ---------- ---------- ---------------- Less distributions: Distributions from net realized gains (0.05) (1.91) (0.95) -- ---------- ---------- ---------- ---------------- Net asset value, end of period $ 6.38 $ 8.90 $ 15.20 $ 13.88 ========== ========== ========== ================ Total return+ (27.89)% (31.59)% 17.18% 17.23%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,155 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.51% 1.59% 2.11% 2.63%*** After expense reimbursement and earnings credits 1.05% 1.05% 1.05% 1.05%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.71)% (0.91)% (1.22)% (1.51)%*** After expense reimbursement and earnings credits (0.25)% (0.37)% (0.16)% 0.07%*** Portfolio turnover rate 93% 56% 86% 51% - ----------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 7.86 -------------- Income (loss) from investment operations: Net investment loss (0.05)** Net realized and unrealized loss (1.40) -------------- Total loss from investment operations (1.45) -------------- Less distributions: Distributions from net realized gains (0.05) -------------- Net asset value, end of period $ 6.36 ============== Total return (18.61)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 115 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 3.06%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (2.28)%*** After expense reimbursement and earnings credits (1.02)%*** Portfolio turnover rate 93% - -----------------------------------------------------------------------------
(a) For the period December 31, 1998 (commencement of operations) through June 30, 1999. * For the period November 7, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + The returns do not include sales charges. See accompanying notes to financial statements. 119
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 8.18 -------------- Income (loss) from investment operations: Net investment loss (0.05)** Net realized and unrealized loss (1.73) -------------- Total loss from investment operations (1.78) -------------- Less distributions: Distributions from net realized gains (0.05) -------------- Net asset value, end of period $ 6.35 ============== Total return (21.91)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 572 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 3.22%*** After expense reimbursement and earnings credits 1.80%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (2.44)%*** After expense reimbursement and earnings credits (1.02)%*** Portfolio turnover rate 93% - ----------------------------------------------------------------------------- SIX MONTHS YEAR ENDED JUNE 30, ENDED YEAR ENDED ------------------------------------ JUNE 30, DECEMBER 31, CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999(a) 1998(b) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 8.99 $ 15.28 $ 13.91 $ 11.84 $ 9.92 ---------- ---------- ---------- ------------ ------------ Income (loss) from investment operations: Net investment income (loss) --** (0.01) 0.03** 0.02 0.06 Net realized and unrealized gain (loss) (2.47) (4.37) 2.29 2.05 2.38 ---------- ---------- ---------- ------------ ------------ Total income (loss) from investment operations (2.47) (4.38) 2.32 2.07 2.44 ---------- ---------- ---------- ------------ ------------ Less distributions: Distributions from net investment income (0.05) -- -- -- (0.06) Distributions from net realized gains -- (1.91) (0.95) -- (0.46) ---------- ---------- ---------- ------------ ------------ Total distributions (0.05) (1.91) (0.95) -- (0.52) ---------- ---------- ---------- ------------ ------------ Net asset value, end of period $ 6.47 $ 8.99 $ 15.28 $ 13.91 $ 11.84 ========== ========== ========== ============ ============ Total return+ (27.61)% (31.33)% 17.52% 17.48%# 24.90% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,291 $ 3,299 $ 5,885 $ 2,947 $ 4,147 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.14% 1.34% 1.86% 2.38%*** 2.76% After expense reimbursement and earnings credits 0.80% 0.80% 0.80% 0.80%*** 0.99% Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.39)% (0.66)% (0.97)% (1.26)%*** (1.40)% After expense reimbursement and earnings credits (0.05)% (0.12)% 0.09% 0.32%*** 0.37% Portfolio turnover rate 93% 56% 86% 51% N/A - ------------------------------------------------------------------------------------------------------------------------------
* For the period November 19, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + Class Y does not have sales charges. (a) Reflects the Fund's change in fiscal year end from December 31 to June 30. (b) Reflects 10 for 1 share split effective December 9, 1998. N/A = Information is not available for periods prior to reorganization. See accompanying notes to financial statements. 120 UBS U.S. SMALL CAP GROWTH FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, FOR THE ------------------------------------ PERIOD ENDED CLASS A (FORMERLY CLASS N) 2002 2001 2000 JUNE 30, 1999(a) - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.76 $ 16.20 $ 9.16 $ 8.80 ---------- ---------- ---------- ---------------- Income (loss) from investment operations: Net investment loss (0.11)** (0.09) (0.08)** (0.04) Net realized and unrealized gain (loss) (1.42) (1.52) 7.12 0.40 ---------- ---------- ---------- ---------------- Total income (loss) from investment operations (1.53) (1.61) 7.04 0.36 ---------- ---------- ---------- ---------------- Less distributions: Distributions from net realized gains (0.44) (2.83) -- -- ---------- ---------- ---------- ---------------- Net asset value, end of period $ 9.79 $ 11.76 $ 16.20 $ 9.16 ========== ========== ========== ================ Total return+ (13.18)% (11.00)% 76.86% 4.09%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,789 $ 2 $ 2 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.69% 1.48% 1.56% 1.57%*** After expense reimbursement and earnings credits 1.40% 1.40% 1.40% 1.40%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.35)% (0.87)% (1.01)% (0.87)%*** After expense reimbursement and earnings credits (1.06)% (0.79)% (0.85)% (0.70)%*** Portfolio turnover rate 71% 93% 104% 71% - ----------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 10.18 -------------- Income (loss) from investment operations: Net investment loss (0.11)** Net realized and unrealized gain 0.12 -------------- Total income from investment operations 0.01 -------------- Less distributions: Distributions from net realized gains (0.44) -------------- Net asset value, end of period $ 9.75 ============== Total return (0.11)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 656 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.46%*** After expense reimbursement and earnings credits 2.15%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.93)%*** After expense reimbursement and earnings credits (1.62)%*** Portfolio turnover rate 71% - -----------------------------------------------------------------------------
(a) For the period December 31, 1998 (commencement of investment operations) through June 30, 1999. * For the period November 7, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + The returns do not include sales charges. See accompanying notes to financial statements. 121
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 10.37 -------------- Income (loss) from investment operations: Net investment loss (0.10)** Net realized and unrealized loss (0.09) -------------- Total loss from investment operations (0.19) -------------- Less distributions: Distributions from net realized gains (0.44) -------------- Net asset value, end of period $ 9.74 ============== Total return (2.04)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 410 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.46%*** After expense reimbursement and earnings credits 2.15%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.90)%*** After expense reimbursement and earnings credits (1.59)%*** Portfolio turnover rate 71% - ----------------------------------------------------------------------------- SIX MONTHS YEAR ENDED JUNE 30, ENDED YEAR ENDED ------------------------------------ JUNE 30, DECEMBER 31, CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999(a) 1998(b) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 11.86 $ 16.27 $ 9.18 $ 8.80 $ 9.44 ---------- ---------- ---------- ------------ ------------ Income (loss) from investment operations: Net investment loss (0.09)** (0.07) (0.03)** (0.02) (0.02) Net realized and unrealized gain (loss) (1.41) (1.51) 7.12 0.40 (0.57) ---------- ---------- ---------- ------------ ------------ Total income (loss) from investment operations (1.50) (1.58) 7.09 0.38 (0.59) ---------- ---------- ---------- ------------ ------------ Less distributions: Distributions from net realized gains (0.44) (2.83) -- -- (0.05) ---------- ---------- ---------- ------------ ------------ Net asset value, end of period $ 9.92 $ 11.86 $ 16.27 $ 9.18 $ 8.80 ========== ========== ========== ============ ============ Total return+ (12.90)% (10.74)% 77.23% 4.32%# (6.70)% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 36,318 $ 44,057 $ 50,975 $ 35,211 $ 22,607 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.41% 1.23% 1.31% 1.32%*** 1.69% After expense reimbursement and earnings credits 1.15% 1.15% 1.15% 1.15%*** 1.20% Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.07)% (0.62)% (0.76)% (0.62)%*** (0.76)% After expense reimbursement and earnings credits (0.81)% (0.54)% (0.60)% (0.45)%*** (0.27)% Portfolio turnover rate 71% 93% 104% 71% N/A - -------------------------------------------------------------------------------------------------------------------------------
* For the period November 19, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + Class Y does not have sales charges. (a) Reflects the Fund's change in fiscal year end from December 31 to June 30. (b) Reflects 10 for 1 share split effective December 9, 1998. N/A = Information is not available for periods prior to reorganization. See accompanying notes to financial statements. 122 UBS U.S. BOND FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.33 $ 9.99 $ 10.30 $ 10.58 $ 10.24 ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income 0.53** 0.62** 0.58** 0.57** 0.61 Net realized and unrealized gain (loss) 0.32 0.41 (0.25) (0.26) 0.42 ---------- ---------- ---------- ---------- ---------- Total income from investment operations 0.85 1.03 0.33 0.31 1.03 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.67) (0.69) (0.64) (0.44) (0.55) Distributions from net realized gains -- -- -- (0.15) (0.14) ---------- ---------- ---------- ---------- ---------- Total distributions (0.67) (0.69) (0.64) (0.59) (0.69) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 10.51 $ 10.33 $ 9.99 $ 10.30 $ 10.58 ========== ========== ========== ========== ========== Total return+ 8.41% 10.56% 3.29% 2.88% 10.30% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 18,558 $ 123 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.21% 0.98% 0.92% 0.86% 1.09% After expense reimbursement and earnings credits 0.86%++ 0.85% 0.85% 0.85% 0.85% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 4.68% 5.86% 5.87% 5.17% 5.36% After expense reimbursement and earnings credits 5.03% 5.99% 5.94% 5.18% 5.60% Portfolio turnover rate 452% 314% 170% 260% 198% - ------------------------------------------------------------------------------------------------------------------------ FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 10.76 -------------- Income from investment operations: Net investment income 0.29** Net realized and unrealized loss (0.22) -------------- Total income from investment operations 0.07 -------------- Less distributions: Distributions from net investment income (0.33) -------------- Net asset value, end of period $ 10.50 ============== Total return 0.70%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,405 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.96%*** After expense reimbursement and earnings credits 1.60%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 3.93%*** After expense reimbursement and earnings credits 4.29%*** Portfolio turnover rate 452% - -----------------------------------------------------------------------------
* For the period November 6, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. + The returns do not include sales charges. ++ The ratio of net operating expenses to average net assets for Class A was 0.85%. See accompanying notes to financial statements. 123
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 10.77 -------------- Income from investment operations: Net investment income 0.31** Net realized and unrealized loss (0.24) -------------- Total income from investment operations 0.07 -------------- Less distributions: Distributions from net investment income (0.34) -------------- Net asset value, end of period $ 10.50 ============== Total return 0.72%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 1,143 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.61%*** After expense reimbursement and earnings credits 1.35%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 4.32%*** After expense reimbursement and earnings credits 4.58%*** Portfolio turnover rate 452% - ----------------------------------------------------------------------------- YEAR ENDED JUNE 30, -------------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 10.35 $ 10.00 $ 10.28 $ 10.58 $ 10.24 ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income 0.56** 0.64** 0.62** 0.58** 0.53 Net realized and unrealized gain (loss) 0.31 0.42 (0.25) (0.26) 0.53 ---------- ---------- ---------- ---------- ---------- Total income from investment operations 0.87 1.06 0.37 0.32 1.06 ---------- ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (0.69) (0.71) (0.65) (0.47) (0.58) Distributions from net realized gains -- -- -- (0.15) (0.14) ---------- ---------- ---------- ---------- ---------- Total distributions (0.69) (0.71) (0.65) (0.62) (0.72) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 10.53 $ 10.35 $ 10.00 $ 10.28 $ 10.58 ========== ========== ========== ========== ========== Total return+ 8.59% 10.86% 3.74% 2.97% 10.60% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 59,740 $ 62,514 $ 58,121 $ 92,030 $ 38,874 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 0.80% 0.73% 0.67% 0.61% 0.84% After expense reimbursement and earnings credits 0.64%++ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 5.10% 6.11% 6.12% 5.42% 5.61% After expense reimbursement and earnings credits 5.26% 6.24% 6.19% 5.43% 5.85% Portfolio turnover rate 452% 314% 170% 260% 198% - ------------------------------------------------------------------------------------------------------------------------
* For the period November 8, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. ++ The ratio of net operating expenses to average net assets for Class Y was 0.60%. See accompanying notes to financial statements. 124 UBS HIGH YIELD FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, FOR THE ------------------------------------ PERIOD ENDED CLASS A (FORMERLY CLASS N) 2002 2001 2000 JUNE 30, 1999(a) - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.87 $ 9.18 $ 9.95 $ 9.98 ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income 0.76** 0.85** 0.90** 0.42** Net realized and unrealized loss (0.96) (1.08) (0.90) (0.15) ---------- ---------- ---------- ---------- Total income (loss) from investment operations (0.20) (0.23) -- 0.27 ---------- ---------- ---------- ---------- Less distributions: Distributions from net investment income (1.31) (1.08) (0.70) (0.30) Distributions from net realized gains -- -- (0.07) -- ---------- ---------- ---------- ---------- Total distributions (1.31) (1.08) (0.77) (0.30) ---------- ---------- ---------- ---------- Net asset value, end of period $ 6.36 $ 7.87 $ 9.18 $ 9.95 ========== ========== ========== ========== Total return+ (3.01)% (2.28)% (0.13)% 2.71%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 65,832 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.26% 1.14% 1.11% 1.08%*** After expense reimbursement and earnings credits 0.95% 0.97%++ 0.95% 0.95%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 10.71% 9.65% 9.06% 8.29%*** After expense reimbursement and earnings credits 11.02% 9.82% 9.22% 8.42%*** Portfolio turnover rate 120% 87% 73% 77% - -------------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 7.02 -------------- Income (loss) from investment operations: Net investment income 0.45** Net realized and unrealized loss (0.61) -------------- Total loss from investment operations (0.16) -------------- Less distributions: Distributions from net investment income (0.51) -------------- Net asset value, end of period $ 6.35 ============== Total return (2.70)%+++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 15,692 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.05%*** After expense reimbursement and earnings credits 1.70%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 9.88%*** After expense reimbursement and earnings credits 10.23%*** Portfolio turnover rate 120% - -----------------------------------------------------------------------------
(a) For the period December 31, 1998 (commencement of investment operations) through June 30, 1999. * For the period November 7, 2001 (commencement of issuance) June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. +++ The return does not include sales charges and is non-annualized. # The return is non-annualized. + The returns do not include sales charges. ++ The ratio of net operating expenses to average net assets for Class A was 0.95%. See accompanying notes to financial statements. 125
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - ----------------------------------------------------------------------------- Net asset value, beginning of period $ 7.02 -------------- Income (loss) from investment operations: Net investment income 0.46** Net realized and unrealized loss (0.61) -------------- Total loss from investment operations (0.15) -------------- Less distributions: Distributions from net investment income (0.52) -------------- Net asset value, end of period $ 6.35 ============== Total return (2.54)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 17,947 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.79%*** After expense reimbursement and earnings credits 1.45%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 10.15%*** After expense reimbursement and earnings credits 10.49%*** Portfolio turnover rate 120% - ----------------------------------------------------------------------------- SIX MONTHS YEAR ENDED JUNE 30, ENDED YEAR ENDED ------------------------------------ JUNE 30, DECEMBER 31, CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999(a) 1998(b) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 7.90 $ 9.19 $ 9.96 $ 9.98 $ 10.05 ---------- ---------- ---------- ------------ ------------ Income (loss) from investment operations: Net investment income 0.81** 0.88** 0.91** 0.44** 7.30 Net realized and unrealized gain (loss) (1.01) (1.08) (0.90) (0.15) 0.02 ---------- ---------- ---------- ------------ ------------ Total income (loss) from investment operations (0.20) (0.20) 0.01 0.29 7.32 ---------- ---------- ---------- ------------ ------------ Less distributions: Distributions from net investment income (1.32) (1.09) (0.71) (0.31) (7.33) Distributions from net realized gains -- -- (0.07) -- (0.06) ---------- ---------- ---------- ------------ ------------ Total distributions (1.32) (1.09) (0.78) (0.31) (7.39) ---------- ---------- ---------- ------------ ------------ Net asset value, end of period $ 6.38 $ 7.90 $ 9.19 $ 9.96 $ 9.98 ========== ========== ========== ============ ============ Total return+ (2.98)% (1.83)% 0.02% 2.91%# 7.75% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 40,120 $ 54,560 $ 50,845 $ 60,044 $ 34,900 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.02% 0.89% 0.86% 0.83%*** 1.59% After expense reimbursement and earnings credits 0.70% 0.72%++ 0.70% 0.70%*** 0.89% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 10.77% 9.90% 9.31% 8.54%*** 7.38% After expense reimbursement and earnings credits 11.09% 10.07% 9.47% 8.67%*** 8.08% Portfolio turnover rate 120% 87% 73% 77% N/A - ------------------------------------------------------------------------------------------------------------------------------
* For the period November 7, 2001 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. # The total return is non-annualized. + Class Y does not have sales charges. (a) Reflects the Fund's change in fiscal year end from December 31 to June 30. (b) Reflects 10 for 1 share split effective December 9, 1998. N/A = Information is not available for periods prior to reorganization. See accompanying notes to financial statements. 126 UBS INTERNATIONAL EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
YEAR ENDED JUNE 30, --------------------------------------------------------------- CLASS A (FORMERLY CLASS N) 2002 2001 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.61 $ 13.57 $ 12.30 $ 12.14 $ 12.59 ------------ ---------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.13** --** 0.08** 0.12 0.16 Net realized and unrealized gain (loss) (0.79) (2.15) 1.33 0.27 0.29 ------------ ---------- --------- --------- --------- Total income (loss) from investment operations (0.66) (2.15) 1.41 0.39 0.45 ------------ ---------- --------- --------- --------- Less distributions: Distributions from net investment income (0.27) (0.04) -- (0.11) (0.16) Distributions from net realized gains (1.60) (0.77) (0.14) (0.12) (0.74) ------------ ---------- --------- --------- --------- Total distributions (1.87) (0.81) (0.14) (0.23) (0.90) ------------ ---------- --------- --------- --------- Net asset value, end of period $ 8.08 $ 10.61 $ 13.57 $ 12.30 $ 12.14 ============ ========== ========= ========= ========= Total return+ (5.91)% (16.37)% 11.51% 3.30% 4.51% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,599 $ 301 $ 1 $ 15 $ 11 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.41% 1.31% 1.25% 1.24% 1.25% After expense reimbursement and earnings credits 1.25% 1.28%++ 1.25%+++ 1.24% 1.25% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 1.38% 0.77% 0.64% 1.10% 1.27% After expense reimbursement and earnings credits 1.54% 0.80% 0.64% 1.10% 1.27% Portfolio turnover rate 82% 62% 59% 74% 49% - -------------------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.75 ------------- Income from investment operations: Net investment income 0.05** Net realized and unrealized gain 0.25 ------------- Total income from investment operations 0.30 ------------- Net asset value, end of period $ 8.05 ============= Total return 3.87%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 120 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.05%*** After expense reimbursement and earnings credits 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 1.45%*** After expense reimbursement and earnings credits 1.50%*** Portfolio turnover rate 82% - --------------------------------------------------------------------------------------------------------------------------
* For the period February 12, 2002 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. # The return does not include sales charges and is non-annualized. + The returns do not include sales charges. ++ The ratio of net operating expenses to average net assets for Class A was 1.25%. +++ The ratio of net operating expenses to average net assets for Class A was 1.24%. See accompanying notes to financial statements. 127
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.75 ------------- Income from investment operations: Net investment income 0.04** Net realized and unrealized gain 2.13 ------------- Total income from investment operations 2.17 ------------- Less distributions: Distributions from net investment income (0.27) Distributions from net realized gains (1.60) ------------- Total distributions (1.87) ------------- Net asset value, end of period $ 8.05 ============= Total return 3.87%# Ratios/Supplemental data: Net assets, end of period (in 000s) $ 183 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 2.19%*** After expense reimbursement and earnings credits 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.91%*** After expense reimbursement and earnings credits 1.10%*** Portfolio turnover rate 82% - -------------------------------------------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, ---------------------------------------------------------------- CLASS Y (FORMERLY CLASS I) 2002 2001 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.64 $ 13.57 $ 12.34 $ 12.15 $ 12.59 ------------ ---------- --------- --------- --------- Income (loss) from investment operations: Net investment income 0.09** 0.13** 0.11** 0.16 0.18 Net realized and unrealized gain (loss) (0.74) (2.25) 1.33 0.27 0.30 ------------ ---------- --------- --------- --------- Total income (loss) from investment operations (0.65) (2.12) 1.44 0.43 0.48 ------------ ---------- --------- --------- --------- Less distributions: Distributions from net investment income (0.27) (0.04) (0.07) (0.12) (0.18) Distributions from net realized gains (1.60) (0.77) (0.14) (0.12) (0.74) ------------ ---------- --------- --------- --------- Total distributions (1.87) (0.81) (0.21) (0.24) (0.92) ------------ ---------- --------- --------- --------- Net asset value, end of period $ 8.12 $ 10.64 $ 13.57 $ 12.34 $ 12.15 ============ ========== ========= ========= ========= Total return+ (5.78)% (16.15)% 11.76% 3.65% 4.78% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 97,851 $ 192,408 $ 411,985 $ 490,322 $ 439,329 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 1.13% 1.06% 1.00% 0.99% 1.00% After expense reimbursement and earnings credits 1.00% 1.03%++ 1.00%+++ 0.99% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits 0.92% 1.02% 0.89% 1.35% 1.52% After expense reimbursement and earnings credits 1.05% 1.05% 0.89% 1.35% 1.52% Portfolio turnover rate 82% 62% 59% 74% 49% - --------------------------------------------------------------------------------------------------------------------------
* For the period January 27, 2002 (commencement of issuance) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. # The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. ++ The ratio of net operating expenses to average net assets for Class Y was 1.00%. +++ The ratio of net operating expenses to average net assets for Class Y was 0.99%. See accompanying notes to financial statements. 128 UBS U.S. VALUE EQUITY FUND -- FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD PRESENTED.
FOR THE PERIOD ENDED CLASS A JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.96 ------------- Income (loss) from investment operations: Net investment income 0.05** Net realized and unrealized loss (0.64) ------------- Total loss from investment operations (0.59) ------------- Net asset value, end of period $ 9.37 ============= Total return (5.92)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 751 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 3.82%*** After expense reimbursement and earnings credits 1.10%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.85)%*** After expense reimbursement and earnings credits 0.87%*** Portfolio turnover rate 39% - -------------------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS B JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.62 ------------- Income (loss) from investment operations: Net investment income 0.01** Net realized and unrealized loss (0.31) ------------- Total loss from investment operations (0.30) ------------- Net asset value, end of period $ 9.32 ============= Total return (3.12)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 301 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 4.66%*** After expense reimbursement and earnings credits 1.85%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (2.72)%*** After expense reimbursement and earnings credits 0.09%*** Portfolio turnover rate 39% - --------------------------------------------------------------------------------------------------------------------------
* For the periods December 9, 2001 and November 8, 2001 (commencement of issuance and investment operations) for Class A and Class B, respectively, through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The returns do not include sales charges and are non-annualized. See accompanying notes to financial statements. 129
FOR THE PERIOD ENDED CLASS C JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.73 ------------- Income (loss) from investment operations: Net investment income --** Net realized and unrealized loss (0.40) ------------- Total loss from investment operations (0.40) ------------- Net asset value, end of period $ 9.33 ============= Total return (4.11)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) $ 234 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 4.58%*** After expense reimbursement and earnings credits 1.85%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (2.68)%*** After expense reimbursement and earnings credits 0.05%*** Portfolio turnover rate 39% - -------------------------------------------------------------------------------------------------------------------------- FOR THE PERIOD ENDED CLASS Y JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 10.00 ------------- Income (loss) from investment operations: Net investment income 0.11** Net realized and unrealized loss (0.73) ------------- Total loss from investment operations (0.62) ------------- Net asset value, end of period $ 9.38 ============= Total return+ (6.20)% Ratios/Supplemental data: Net assets, end of period (in 000s) $ 2,819 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits 3.15%*** After expense reimbursement and earnings credits 0.85%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits (1.17)%*** After expense reimbursement and earnings credits 1.13%*** Portfolio turnover rate 39% - --------------------------------------------------------------------------------------------------------------------------
* For the periods December 12, 2001 and June 29, 2001 (commencement of issuance and investment operations) for Class C and Class Y, respectively, through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. ++ The return does not include sales charges and is non-annualized. + Class Y does not have sales charges. See accompanying notes to financial statements. 130 THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES The UBS Funds (formerly The Brinson Funds) (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of fourteen series: UBS Global Allocation Fund, UBS Global Equity Fund, UBS Global Technology Fund, UBS Global Biotech Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Bond Fund, UBS High Yield Fund, UBS International Equity Fund, and UBS U.S. Value Equity Fund (formerly Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund, International Equity Fund, and U.S. Value Equity Fund) (each a "Fund" and collectively, the "Funds"). As of November 5, 2001, each Fund has four classes of shares outstanding, Class A, Class B, Class C and Class Y. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The UBS Investment Funds share class liquidated effective November 9, 2001. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. A. INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. U.S. equity securities traded over-the-counter are valued at the most recent bid price. Investments in affiliated investment companies are valued at the daily closing net asset value of the respective fund. Debt securities are valued at the most recent bid price by using market quotations or independent pricing services. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate as of the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss on investments in the statements of operations. C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D. INVESTMENT INCOME: Interest income, which includes the amortization of premiums and accretion of discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E. FEDERAL INCOME TAXES: It is the Funds' policy to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 2002, therefore, no federal income tax provision was required. At June 30, 2002, the following Funds had capital loss carryforwards for federal income tax purposes available to offset future net capital gains through the indicated expiration dates: 131
EXPIRATION DATE EXPIRATION DATE EXPIRATION DATE FUND JUNE 30, 2008 JUNE 30, 2009 JUNE 30, 2010 - ---- --------------- --------------- --------------- UBS Global Equity Fund $ -- $ -- $ 1,293,102 UBS Global Technology Fund -- 66,391 1,032,585 UBS Global Biotech Fund -- -- 381,521 UBS Global Bond Fund 1,071,616 1,590,880 -- UBS U.S. Balanced Fund -- 751,452 -- UBS U.S. Large Cap Equity Fund -- 5,942,698 83,503 UBS U.S. Large Cap Growth Fund -- -- 1,265,393 UBS U.S. Bond Fund 446,367 1,533,662 --
At June 30, 2002 the UBS High Yield Fund had the following capital loss carryforwards for federal income tax purposes available to offset future capital gains through the indicated expiration dates:
EXPIRATION DATE EXPIRATION DATE EXPIRATION DATE EXPIRATION DATE EXPIRATION DATE EXPIRATION DATE JUNE 30, 2003 JUNE 30, 2004 JUNE 30, 2005 JUNE 30, 2006 JUNE 30, 2007 JUNE 30, 2008 --------------- --------------- --------------- --------------- --------------- --------------- $ 36,527,101 $ 16,663,383 $ 10,089,023 $ 11,387,957 $ 18,661,457 $ 98,009,332 EXPIRATION DATE EXPIRATION DATE JUNE 30, 2009 JUNE 30, 2010 --------------- --------------- $ 23,205,714+ $ 6,612,767+
+ Due to merger with Paine Webber High Income Fund, utilization of capital loss carryforwards is limited to $20,645,392 in 2003. The remaining portion will be available for utilization in subsequent years. For the fiscal year end June 30, 2002, the UBS Global Bond Fund, UBS U.S. Balanced Fund and the UBS U.S. Bond Fund utilized capital loss carryforwards of $37,560, $449,140 and $1,218,543, respectivley. Post-October losses are deemed to arise on the first business day of a portfolio's next taxable year. For the year ended June 30, 2002, the following Funds incurred, and elected to defer, net capital losses of the following:
NET NET CAPITAL CURRENCY FUND LOSSES LOSSES - ---- ------------- ----------- UBS Global Allocation Fund $ 5,820,045 $ -- UBS Global Equity Fund 1,609,656 -- UBS Global Technology Fund 522,397 -- UBS Global Biotech Fund 823,176 -- UBS Global Bond Fund 2,077 817,021 UBS U.S. Balanced Fund 173,268 -- UBS U.S. Large Cap Equity Fund 174,163 -- UBS U.S. Large Cap Growth Fund 1,138,998 -- UBS U.S. Small Cap Growth Fund 1,315,852 -- UBS High Yield Fund 24,971,560 -- UBS International Equity Fund 7,665,274 --
The tax character of distributions paid during the fiscal years ended June 30, 2002 and 2001, were as follows:
2002 2001 -------------------------------------------------------------- ------------- DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS PAID FROM PAID FROM NET DISTRIBUTIONS TOTAL PAID FROM ORDINARY LONG-TERM FROM RETURN OF DISTRIBUTIONS ORDINARY FUND INCOME CAPITAL GAINS CAPITAL PAID INCOME - ---- ------------- ------------- -------------- ------------- ------------- UBS Global Allocation Fund $ 5,031,352 $ 9,778,031 $ -- $ 14,809,383 $ 713,154 UBS Global Equity Fund 689,423 1,384,778 -- 2,074,201 1,445,095 UBS Global Technology Fund -- -- -- -- 2,797 UBS Global Biotech Fund -- -- -- -- 29,502 UBS Global Bond Fund -- -- 725,259 725,259 335,918 UBS U.S. Balanced Fund 560,395 -- -- 560,395 522,551 UBS U.S. Equity Fund 675,823 5,227,388 -- 5,903,211 2,490,505 UBS U.S. Large Cap Equity Fund 13,201 -- -- 13,201 140,177 UBS U.S. Large Cap Growth Fund -- 33,063 -- 33,063 466,240 UBS U.S. Small Cap Growth Fund 401,689 1,141,314 -- 1,543,003 8,102,185 UBS U.S. Bond Fund 5,697,025 -- -- 5,697,025 4,194,864 UBS High Yield Fund 12,804,647 -- -- 12,804,647 4,908,877 UBS International Equity Fund 4,444,207 16,417,909 -- 20,862,116 674,142 UBS U.S. Value Equity Fund* -- -- -- -- -- ------------- $ 65,025,504 ============= 2001 ----------------------------- DISTRIBUTIONS PAID FROM NET TOTAL LONG-TERM DISTRIBUTIONS CAPITAL GAINS PAID ------------- ------------- UBS Global Allocation Fund $ 9,460,103 $ 10,173,257 UBS Global Equity Fund 5,284,058 6,729,153 UBS Global Technology Fund -- 2,797 UBS Global Biotech Fund -- 29,502 UBS Global Bond Fund -- 335,918 UBS U.S. Balanced Fund -- 522,551 UBS U.S. Equity Fund 10,124,571 12,615,076 UBS U.S. Large Cap Equity Fund -- 140,177 UBS U.S. Large Cap Growth Fund 915,132 1,381,372 UBS U.S. Small Cap Growth Fund 1,419,724 9,521,909 UBS U.S. Bond Fund -- 4,194,864 UBS High Yield Fund -- 4,908,877 UBS International Equity Fund 19,994,317 20,668,459 UBS U.S. Value Equity Fund* -- -- ------------- $ 71,223,912 =============
* The UBS U.S. Value Equity Fund commenced investment operations on June 29, 2001. 132 At June 30, 2002, the components of accumulated earnings (deficit) on a tax basis were as follows:
UNDISTRIBUTED ACCUMULATED ORDINARY ACCUMULATED CAPITAL AND FUND INCOME EARNINGS OTHER LOSSES - ---- ------------- ------------- -------------- UBS Global Allocation Fund $ 6,136,958 $ -- $ -- UBS Global Equity Fund 1,782,181 -- (1,293,102) UBS Global Technology Fund -- -- (1,098,976) UBS Global Biotech Fund -- -- (381,521) UBS Global Bond Fund -- -- (2,662,496) UBS U.S. Balanced Fund 277,550 -- (751,452) UBS U.S. Equity Fund 938,572 2,514,938 -- UBS U.S. Large Cap Equity Fund 45,695 -- (6,026,201) UBS U.S. Large Cap Growth Fund -- -- (1,265,393) UBS U.S. Small Cap Growth Fund -- -- -- UBS U.S. Bond Fund 105,723 -- (1,980,029) UBS High Yield Fund 993,045 -- (221,156,734) UBS International Equity Fund 4,355,235 -- -- UBS U.S. Value Equity Fund 87,761 -- --
The difference between book-basis and tax basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. Due to inherent differences in the recognition of income, expenses and realized gains/losses under generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax basis reporting for the current fiscal year have been identified and appropriately reclassified. Reclassifications for the year ended June 30, 2002, were as follows:
ACCUMUALATED UNDISTRIBUTED ACCUMUALATED NET INVESTMENT NET REALIZED FUND INCOME (LOSS) GAIN (LOSS) PAID IN CAPITAL - ---- -------------- ------------- --------------- UBS Global Allocation Fund $ (306,353) $ (2,958,578) $ 3,264,931 UBS Global Equity Fund 394,303 (402,751) 8,448 UBS Global Technology Fund 20,601 (16) (20,585) UBS Global Biotech Fund 57,809 (16,266) (41,543) UBS Global Bond Fund (421,419) 2,140,586 (1,719,167) UBS U.S. Balanced Fund 16,770 (16,702) (68) UBS U.S. Equity Fund (54,833) 54,833 -- UBS U.S. Large Cap Equity Fund 775 -- (775) UBS U.S. Large Cap Growth Fund 17,572 16 (17,588) UBS U.S. Small Cap Growth Fund 324,060 (1,265,841) 941,781 UBS U.S. Bond Fund 93,494 (93,494) -- UBS High Yield Fund -- (208,876,282) 208,876,282 UBS International Equity Fund 3,178,194 (3,948,890) 770,696 UBS U.S. Value Equity Fund 683 -- (683)
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. 133 F. DISTRIBUTIONS TO SHAREHOLDERS: It is the Funds' policy to distribute their respective net investment income and net capital gains, if any, annually except for UBS U.S. Bond Fund, UBS High Yield Fund and UBS Global Bond Fund. These Funds will distribute their respective net income, if any, monthly. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to service and distribution related expenses. G. INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by each Fund will be borne on a pro rata basis by each of the classes. H. EARNINGS CREDITS: The Funds have entered into an arrangement with their custodian whereby interest earned on uninvested cash balances are used to offset a portion of the Fund's expenses. These amounts are reflected in the Statements of Operations. I. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES UBS Global Asset Management (Americas) Inc. (formerly Brinson Partners, Inc.) (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on each Fund's respective average daily net assets. With respect to UBS Global Technology Fund, UBS Global Biotech Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund and UBS High Yield Fund, UBS Global Asset Management (New York) Inc. (formerly Brinson Partners (New York) Inc.) (the "Sub-Advisor") an affiliate of the Advisor, serves as Sub-Advisor for these Funds pursuant to a Sub-Advisory Agreement (the "Sub-Advisory Agreement") with the Advisor. The Sub-Advisor receives 0.10% from the Advisor for services it provides under the Sub-Advisory Agreement.
FUND ADVISORY FEE - ---- -------------- UBS Global Allocation Fund 0.80% UBS Global Equity Fund 0.80 UBS Global Technology Fund 1.40 UBS Global Biotech Fund 1.15 UBS Global Bond Fund 0.75 UBS U.S. Balanced Fund 0.70 UBS U.S. Equity Fund 0.70 UBS U.S. Large Cap Equity Fund 0.70 UBS U.S. Large Cap Growth Fund 0.70 UBS U.S. Small Cap Growth Fund 1.00 UBS U.S. Bond Fund 0.50 UBS High Yield Fund 0.60 UBS International Equity Fund 0.80 UBS U.S. Value Equity Fund 0.70
The Advisor has agreed to waive its fees and reimburse each Fund to the extent that total annualized operating expenses exceed a specified percentage of each Fund's respective average daily net assets. The Advisor may recapture any amounts waived or reimbursed with respect to the UBS Global Technology Fund and UBS Global Biotech Fund subject to the following conditions: (1) the Advisor must request reimbursement within three years from the date on which the waiver and/or reimbursement was made, and (2) the Fund must be able to reimburse the Advisor and remain within the operating expense limits noted in the following chart. No amounts were recaptured by the Advisor during the year ended June 30, 2002. Investment advisory fees and other transactions for the year ended June 30, 2002, were as follows: 134
CLASS A CLASS B CLASS C CLASS Y ADVISORY FEES FUND EXPENSE CAP EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED - ---- ----------- ----------- ----------- ----------- ----------- --------- UBS Global Allocation Fund 1.35% 2.10% 2.10% 1.10% $ 1,319,471 $ -- UBS Global Equity Fund 1.25 2.00 2.00 1.00 472,933 109,842 UBS Global Technology Fund 1.80 2.55 2.55 1.55 21,507 94,978 UBS Global Biotech Fund 1.55 2.30 2.30 1.30 31,990 99,376 UBS Global Bond Fund 1.15 1.90 1.65 0.90 280,606 98,763 UBS U.S. Balanced Fund 1.05 1.80 1.80 0.80 167,846 103,551 UBS U.S. Equity Fund 1.05 1.80 1.80 0.80 870,376 156,903 UBS U.S. Large Cap Equity Fund 1.05 1.80 1.80 0.80 39,402 112,897 UBS U.S. Large Cap Growth Fund 1.05 1.80 1.80 0.80 36,801 70,817 UBS U.S. Small Cap Growth Fund 1.40 2.15 2.15 1.15 390,240 101,812 UBS U.S. Bond Fund 0.85 1.60 1.35 0.60 427,378 145,430 UBS High Yield Fund 0.95 1.70 1.45 0.70 629,243 324,507 UBS International Equity Fund 1.25 2.00 2.00 1.00 1,121,694 168,567 UBS U.S. Value Equity Fund 1.10 1.85 1.85 0.85 24,925 83,469
Certain officers of the Funds are also officers of the Advisor. All officers serve without compensation from the Funds. Trustees' fees paid to unaffiliated trustees for the year ended June 30, 2002, were as follows:
FUND FEES PAID - ---- --------- UBS Global Allocation Fund $ 7,601 UBS Global Equity Fund 6,799 UBS Global Technology Fund 3,656 UBS Global Biotech Fund 3,656 UBS Global Bond Fund 4,748 UBS U.S. Balanced Fund 4,356 UBS U.S. Equity Fund 7,026 UBS U.S. Large Cap Equity Fund 3,628 UBS U.S. Large Cap Growth Fund 3,667 UBS U.S. Small Cap Growth Fund 4,742 UBS U.S. Bond Fund 5,479 UBS High Yield Fund 5,097 UBS International Equity Fund 8,011 UBS U.S. Value Equity Fund 3,460
The Funds may invest in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented 17.71% of UBS Global Allocation Fund's net assets at June 30, 2002. Amounts relating to those investments at June 30, 2002 and for the year then ended, were as follows:
NET CHANGE IN SALES REALIZED NET UNREALIZED AFFILIATES PURCHASES PROCEEDS GAIN/(LOSS) GAIN/(LOSS) VALUE - ---------- ------------- ------------- ----------- -------------- ------------ UBS U.S. Small Cap Equity Relationship Fund $ -- $ -- $ -- $ 380,891 $ 4,700,933 UBS High Yield Relationship Fund 2,900,000 5,128,000 37,120 (280,241) 5,059,731 UBS Emerging Markets Equity Relationship Fund 4,600,000 3,670,000 (877,874) 2,061,284 9,500,404 UBS Emerging Markets Debt Relationship Fund -- 3,100,000 1,569,804 (1,134,476) 3,219,505 UBS Supplementary Trust U.S. Cash Management Prime Fund 108,688,424 106,798,567 -- -- 8,627,035
The Funds may invest in shares of the UBS Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). Supplementary Trust is managed by the Advisor and is offered as a cash management option only to mutual funds and certain other accounts managed by the Advisor. The Supplementary Trust pays no management fees. Distributions received from the Supplementary 135 Trust are reflected as interest income in the statements of operations. Amounts relating to those investments at June 30, 2002 and for the year ended June 30, 2002, were as follows:
% OF SALES INTEREST NET FUND PURCHASES PROCEEDS INCOME VALUE ASSETS - ---- ------------- ------------- ------------ ------------ -------- UBS Global Allocation Fund $ 108,688,424 $ 106,798,567 $ 84,036 $ 8,627,035 4.91% UBS Global Equity Fund 107,041,583 112,110,568 53,616 915,301 1.62 UBS Global Bond Fund 31,918,606 31,692,347 18,618 1,318,563 3.59 UBS U.S. Balanced Fund 21,442,918 20,076,598 29,841 2,881,099 11.22 UBS U.S. Equity Fund 59,560,732 61,518,027 64,485 1,775,539 1.75 UBS U.S. Small Cap Growth Fund 32,035,489 31,743,094 45,152 3,103,143 7.92 UBS U.S. Bond Fund 289,817,244 287,015,947 81,415 2,836,367 3.51 UBS High Yield Fund 125,151,448 124,256,951 67,555 963,891 0.69 UBS International Equity Fund 528,438,862 561,995,425 220,699 1,253,925 1.24
The following Funds have incurred brokerage commissions with affiliated broker dealers as listed below. Amounts relating to those transactions at June 30, 2002, were as follows:
FUND UBSWARBURG LLC - ---- -------------- UBS Global Allocation Fund $ 17,191 UBS Global Equity Fund 7,935 UBS Global Technology Fund 16,837 UBS Global Biotech Fund 102 UBS U.S. Balanced Fund 3,050 UBS U.S. Equity Fund 50,669 UBS U.S. Large Cap Equity Fund 1,571 UBS U.S. Large Cap Growth Fund 725 UBS U.S. Value Equity Fund 115
3. INVESTMENT TRANSACTIONS Investment transactions for the period ended June 30, 2002, excluding short-term investments, were as follows:
SALES FUND PURCHASES PROCEEDS - ---- ------------- ------------- UBS Global Allocation Fund $ 190,858,464 $ 182,192,329 UBS Global Equity Fund 66,817,154 68,546,792 UBS Global Technology Fund 8,028,381 8,431,613 UBS Global Biotech Fund 7,053,416 5,840,358 UBS Global Bond Fund 56,274,716 61,693,821 UBS U.S. Balanced Fund 33,126,366 34,276,430 UBS U.S. Equity Fund 72,247,853 97,199,514 UBS U.S. Large Cap Equity Fund 13,367,121 12,757,737 UBS U.S. Large Cap Growth Fund 4,761,041 5,531,629 UBS U.S. Small Cap Growth Fund 26,102,221 27,981,798 UBS U.S. Bond Fund 383,109,267 375,217,810 UBS High Yield Fund 116,142,819 115,687,687 UBS International Equity Fund 108,907,960 165,016,303 UBS U.S. Value Equity Fund 2,726,904 1,365,507
4. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A 136 forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statements of operations reflect net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts during the period ended June 30, 2002, was the Funds' custodian. 5. FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio or equitize cash. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statements of operations reflects net realized and net unrealized gains and losses on these contracts. 6. SECURITY LENDING UBS Global Allocation Fund and UBS International Equity Fund loaned securities to certain brokers, with the Funds' custodian acting as the Funds' lending agent. The Funds earned negotiated lenders' fees, which are included in securities lending-net in the statements of operations. The Funds receive cash and/or securities as collateral against the loaned securities. The cash collateral received is invested in interest bearing securities which are included in the schedule of investments. The Funds monitor the market value of securities loaned on a daily basis and initially require collateral against the loaned securities in an amount at least equal to 102% of the value of domestic securities loaned and 105% of the value of foreign securities loaned. The value of loaned securities and related collateral outstanding at June 30, 2002, were as follows:
MARKET CASH COLLATERAL MARKET VALUE OF VALUE OF RECEIVED FOR INVESTMENTS SECURITIES SECURITIES OF CASH COLLATERAL FUND LOANED LOANED RECEIVED - ---- ----------- --------------- ------------------ UBS Global Allocation Fund $ 5,884,503 $ 5,763,657 $ 5,763,660 UBS International Equity Fund 9,658,450 9,853,046 9,853,046
137 7. DISTRIBUTION PLANS Effective November 5, 2001, the Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, for Class A, Class B and Class C. Each Plan governs payments made for the expenses incurred in the service and/or distribution of Class A, Class B and Class C. Annual fees under the Plan are as follows as a percentage of the average daily net assets of the Class of each of the Funds:
FUND CLASS A CLASS B CLASS C - ---- ------- ------- ------- UBS Global Allocation Fund 0.25% 1.00% 1.00% UBS Global Equity Fund 0.25 1.00 1.00 UBS Global Technology Fund 0.25 1.00 1.00 UBS Global Biotech Fund 0.25 1.00 1.00 UBS Global Bond Fund 0.25 1.00 0.75 UBS U.S. Balanced Fund 0.25 1.00 1.00 UBS U.S. Equity Fund 0.25 1.00 1.00 UBS U.S. Large Cap Equity Fund 0.25 1.00 1.00 UBS U.S. Large Cap Growth Fund 0.25 1.00 1.00 UBS U.S. Small Cap Growth Fund 0.25 1.00 1.00 UBS U.S. Bond Fund 0.25 1.00 0.75 UBS High Yield Fund 0.25 1.00 0.75 UBS International Equity Fund 0.25 1.00 1.00 UBS U.S. Value Equity Fund 0.25 1.00 1.00
8. TRANSFER AGENCY SERVICES FEES As of August 20, 2001, PFPC, Inc. ("PFPC") serves as the Funds' transfer agent. Pursuant to the Transfer Agency and Related Services Agreement between PFPC and the Trust, PFPC may delegate to an affiliated or unaffiliated entity, its obligation to perform certain transfer agency related services. PFPC, not the Funds, compensates UBS Global AM for delegated services. 9. LINE OF CREDIT Effective September 10, 2001, the Trust has entered into an agreement with UBS AG, Stamford Branch to provide a 364-day $300 million committed line of credit to the Funds. Prior to September 10, 2001, the line of credit was provided by JPMorgan Chase Bank. Borrowings will be made for temporary purposes. Interest on amounts borrowed is calculated based on the Federal Funds Rate plus 0.40%. The Funds pay an annual commitment fee of 0.09% of the average daily balance of the line of credit not utilized. The average borrowings under the agreement for the period ended June 30, 2002, were as follows:
AVERAGE NUMBER OF DAYS INTEREST FUND BORROWINGS OUTSTANDING PAID - ---- ---------- -------------- -------- UBS Global Bond Fund $5,700,000 7 $ 2,386 UBS U.S. Balanced Fund 6,400,000 3 1,756 UBS U.S. Bond Fund 6,465,306 49 29,408 UBS High Yield Fund 3,485,714 14 3,884 UBS International Equity Fund 5,058,696 23 15,348
138 10. SHARES OF BENEFICIAL INTEREST For the year ended June 30, 2002, transactions in shares of beneficial interest for each of the Funds were as follows:
NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS A (FORMERLY CLASS N) SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - -------------------------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 715,521 (127,567) 43,233 631,187 UBS Global Equity Fund 3,128,725 (1,578,288) 40,866 1,591,303 UBS Global Technology Fund 181,863 (64,837) -- 117,026 UBS Global Biotech Fund 131,672 (80,820) -- 50,852 UBS Global Bond Fund 984,747 (773,376) 2,030 213,401 UBS U.S. Balanced Fund 300,457 (18,636) 3,757 285,578 UBS U.S. Equity Fund 708,862 (179,477) 11,062 540,447 UBS U.S. Large Cap Equity Fund 36,869 (3,521) 154 33,502 UBS U.S. Large Cap Growth Fund 319,480 (140,346) 1,699 180,833 UBS U.S. Small Cap Growth Fund 213,258 (36,510) 5,820 182,568 UBS U.S. Bond Fund 2,004,680 (274,863) 23,321 1,753,138 UBS High Yield Fund 1,406,628 (1,889,150) 314,424 (168,098) UBS International Equity Fund 1,278,780 (1,016,129) 30,484 293,135 UBS U.S. Value Equity Fund 94,668 (14,525) -- 80,143 NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS B SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 164,512 (16,187) 884 149,209 UBS Global Equity Fund 44,650 (10) 81 44,721 UBS Global Technology Fund -- -- -- -- UBS Global Biotech Fund 3,984 -- -- 3,984 UBS Global Bond Fund 43,303 -- 207 43,510 UBS U.S. Balanced Fund 120,172 (19,146) 396 101,422 UBS U.S. Equity Fund 23,188 (7,347) 237 16,078 UBS U.S. Large Cap Equity Fund 24,868 (11,943) 12 12,937 UBS U.S. Large Cap Growth Fund 27,444 (9,309) 30 18,165 UBS U.S. Small Cap Growth Fund 81,729 (14,792) 355 67,292 UBS U.S. Bond Fund 146,602 (13,754) 947 133,795 UBS High Yield Fund 408,633 (910,331) 59,686 (442,012) UBS International Equity Fund 16,821 (1,872) -- 14,949 UBS U.S. Value Equity Fund 35,795 (3,479) -- 32,316 139 NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS C SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 146,726 (2,182) 219 144,763 UBS Global Equity Fund 43,240 (6,324) 744 37,660 UBS Global Technology Fund 141 -- -- 141 UBS Global Biotech Fund 117 -- -- 117 UBS Global Bond Fund -- -- -- -- UBS U.S. Balanced Fund 46,781 (2,237) 85 44,629 UBS U.S. Equity Fund 5,264 (272) 68 5,060 UBS U.S. Large Cap Equity Fund 35,643 (6,626) -- 29,017 UBS U.S. Large Cap Growth Fund 99,366 (9,774) 463 90,055 UBS U.S. Small Cap Growth Fund 54,771 (12,775) 73 42,069 UBS U.S. Bond Fund 169,007 (61,276) 1,094 108,825 UBS High Yield Fund 441,548 (585,864) 82,124 (62,192) UBS International Equity Fund 85,602 (62,830) -- 22,772 UBS U.S. Value Equity Fund 25,369 (314) -- 25,055 NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS Y (FORMERLY CLASS I) SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - -------------------------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 8,027,916 (7,367,875) 880,082 1,540,123 UBS Global Equity Fund 12,705,436 (13,129,371) 103,897 (320,038) UBS Global Technology Fund 1,632,274 (1,715,311) -- (83,037) UBS Global Biotech Fund 429,011 (294,436) -- 134,575 UBS Global Bond Fund 1,682,126 (2,629,806) 49,855 (897,825) UBS U.S. Balanced Fund 1,214,669 (1,606,011) 53,510 (337,832) UBS U.S. Equity Fund 2,474,912 (4,407,500) 327,346 (1,605,242) UBS U.S. Large Cap Equity Fund 1,331,323 (1,329,202) 692 2,813 UBS U.S. Large Cap Growth Fund 118,647 (133,138) 1,660 (12,831) UBS U.S. Small Cap Growth Fund 2,812,018 (2,993,966) 131,213 (50,735) UBS U.S. Bond Fund 25,786,380 (26,600,460) 448,819 (365,261) UBS High Yield Fund 12,655,217 (14,030,481) 707,677 (667,587) UBS International Equity Fund 84,473,748 (92,835,346) 2,329,414 (6,032,184) UBS U.S. Value Equity Fund 431 -- -- 431 NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES UBS INVESTMENT FUNDS CLASS* SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - -------------------------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 29,669 (662,034) -- (632,365) UBS Global Equity Fund 121,155 (2,013,474) -- (1,892,319) UBS Global Technology Fund -- (120,896) -- (120,896) UBS Global Biotech Fund 22,349 (87,211) -- (64,862) UBS Global Bond Fund 34 (122,117) -- (122,083) UBS U.S. Balanced Fund 535 (140,307) -- (139,772) UBS U.S. Equity Fund 35,944 (400,785) -- (364,841) UBS U.S. Large Cap Equity Fund 631 (31,458) -- (30,827) UBS U.S. Large Cap Growth Fund 24,524 (418,933) -- (394,409) UBS U.S. Small Cap Growth Fund 39,760 (241,359) -- (201,599) UBS U.S. Bond Fund 38,862 (309,461) 2,786 (267,813) UBS High Yield Fund 10,605 (272,296) 17,013 (244,678) UBS International Equity Fund 39,536 (436,791) -- (397,255) UBS U.S. Value Equity Fund -- -- -- --
* The UBS Investment Funds share class were liquidated effective November 9, 2001. 140 For the year ended June 30, 2001, transactions in shares of beneficial interest for each of the Funds were as follows:
NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS A (FORMERLY CLASS N) SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - -------------------------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 3,612 (654) 360 3,318 UBS Global Equity Fund 8,271 -- 2,169 10,440 UBS Global Technology Fund -- -- -- -- UBS Global Biotech Fund -- -- 2 2 UBS Global Bond Fund 302 (96) -- 206 UBS U.S. Balanced Fund -- -- 5 5 UBS U.S. Equity Fund 282,952 (291,478) 744 (7,782) UBS U.S. Large Cap Equity Fund -- (2,239) 45 (2,194) UBS U.S. Large Cap Growth Fund -- -- 16 16 UBS U.S. Small Cap Growth Fund -- -- 25 25 UBS U.S. Bond Fund 11,879 (137) 78 11,820 UBS High Yield Fund -- -- 15 15 UBS International Equity Fund 29,190 (900) 6 28,296 UBS U.S. Value Equity Fund* -- -- -- -- NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS Y (FORMERLY CLASS I) SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - -------------------------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 13,170,765 (25,149,917) 682,606 (11,296,546) UBS Global Equity Fund 8,564,732 (7,452,703) 257,001 1,369,030 UBS Global Technology Fund 284,244 (149,855) 96 134,485 UBS Global Biotech Fund 262,496 (66,939) 1,959 197,516 UBS Global Bond Fund 1,633,523 (2,073,452) 27,821 (412,108) UBS U.S. Balanced Fund 2,159,047 (770,837) 47,172 1,435,382 UBS U.S. Equity Fund 3,772,869 (7,044,608) 663,992 (2,607,747) UBS U.S. Large Cap Equity Fund 393,712 (2,164,332) 13,686 (1,756,934) UBS U.S. Large Cap Growth Fund 78,058 (144,949) 48,752 (18,139) UBS U.S. Small Cap Growth Fund 2,035,204 (2,031,226) 577,154 581,132 UBS U.S. Bond Fund 12,781,260 (12,913,593) 357,842 225,509 UBS High Yield Fund 19,421,713 (18,586,243) 545,121 1,380,591 UBS International Equity Fund 89,527,090 (103,415,131) 1,613,416 (12,274,625) UBS U.S. Value Equity Fund* -- -- -- -- NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES UBS INVESTMENT FUNDS SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - -------------------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund 39,462 (232,932) 39,447 (154,023) UBS Global Equity Fund 37,501 (615,995) 206,290 (372,204) UBS Global Technology Fund 151,006 (61,638) 173 89,541 UBS Global Biotech Fund 57,847 (5,809) 584 52,622 UBS Global Bond Fund 17,470 (131,350) 404 (113,476) UBS U.S. Balanced Fund 22,321 (32,886) 5,101 (5,464) UBS U.S. Equity Fund 50,554 (495,064) 25,701 (418,809) UBS U.S. Large Cap Equity Fund 10,314 (1,342) 655 9,627 UBS U.S. Large Cap Growth Fund 36,350 (185,074) 67,020 (81,704) UBS U.S. Small Cap Growth Fund 110,194 (191,641) 54,734 (26,713) UBS U.S. Bond Fund 147,598 (251,733) 17,092 (87,043) UBS High Yield Fund 28,962 (35,174) 14,868 8,656 UBS International Equity Fund 104,031 (169,681) 27,545 (38,105) UBS U.S. Value Equity Fund* -- -- -- --
* The Fund commenced investment operations on June 29, 2001. 141 11. REORGANIZATION At the close of business November 30, 2001, the High Yield Fund ("Acquiring Fund") acquired the assets and liabilities of the Paine Webber High Income Fund ("Acquired Fund") by effecting a tax-free reorganization whereby Paine Webber High Income Fund made a distribution-in-kind of the assets of the Fund to the sole shareholder, High Yield Fund, pursuant to a plan of reorganization approved by the Board of Trustees and shareholders of the Acquired Fund. Net assets as of the reorganization date were as follows:
PAINE WEBBER HIGH INCOME FUND HIGH YIELD NET SHARES ACQUIRED FUND UNREALIZED FUND ACQUIRED EXCHANGED ASSETS SHARES ISSUED NET ASSETS DEPRECIATION - ------------- ------------------ ---------- -------------- ------------ --------------- Paine Webber High Income Fund $117,928,581 $(91,402,909) Class A 23,125,101 75,847,383 10,526,844 Class B 6,398,808 20,971,245 2,911,618 Class C 6,330,500 20,793,488 2,886,568 Class Y 96,550 316,465 43,748
The High Yield Fund's net assets immediately before the reorganization were $31,342,005. 12. SUBSEQUENT EVENTS On June 3, 2002, the Board of Trustees voted to liquidate the UBS Global Biotech Fund and the UBS Global Technology Fund (the "Funds"). It is anticipated that the Funds will cease operations and will be liquidated on August 16, 2002, or as soon as practicable thereafter. The Board of Trustees also approved a plan of reorganization on June 3, 2002 (the "Plan"), whereby, the UBS U.S. Large Cap Equity Fund (the "Large Cap Fund") will transfer substantially all of its assets and liabilities to the UBS U.S. Value Equity Fund. If approved by shareholders at a meeting scheduled to be held on September 25, 2002 (or at any adjournment thereof) it is expected that the reorganization will occur on or about October 4, 2002. 142 UBS FUNDS -- REPORT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders The UBS Funds We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The UBS Funds -- UBS Global Allocation Fund, UBS Global Equity Fund, UBS Global Technology Fund, UBS Global Biotech Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Bond Fund, UBS High Yield Fund, UBS International Equity Fund and UBS U.S. Value Equity Fund (collectively the "Funds") as of June 30, 2002, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' 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 auditing standards generally accepted in the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of June 30, 2002, by correspondence with the custodian and brokers, or alternative procedures for confirmations not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 The UBS Funds -- UBS Global Allocation Fund, UBS Global Equity Fund, UBS Global Technology Fund, UBS Global Biotech Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Bond Fund, UBS High Yield Fund, UBS International Equity Fund and UBS U.S. Value Equity Fund at June 30, 2002, and the results of their operations for the year then ended, the statements of changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP New York, New York August 27, 2002 143 TRUSTEE INFORMATION (UNAUDITED) The table below shows, for each Trustee, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee of the Trust, the Trustee's principal occupations during the last five years, the number of funds in the UBS Family of Funds overseen by the Trustee, and other directorships held by such 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. Non-Interested Trustees:
NUMBER OF PORTFOLIOS IN POSITION/ FUND COMPLEX TERM/TIME PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS, AND AGE SERVED (1) PAST 5 YEARS TRUSTEE (2) HELD BY TRUSTEE - ---------------------- ------------ ---------------------------------------- ---------------- ----------------------------- Walter E. Auch, 81 Trustee Retired; prior thereto, Chairman and CEO 39 portfolios in Trustee, Advisors Series 6001 N. 62nd Place since 1994 of Chicago Board of Options Exchange two registered Trust since 1997 (16 Paradise Valley, 1979-1986. Trustee, UBS Supplementary investment portfolios); Trustee, Smith AZ 85253 Trust since 1997. companies Barney Fund Complex since advised by the 1992 (27 portfolios); Trustee Advisor. Nicholas Applegate 1992 (19 portfolios); Trustee Banyan Strategic Realty Trust since 1998; Director, Express America Holdings Corp. since 1992; and Director, Semele Group Inc. since 1987. Frank K. Reilly, 66 Chairman and Professor, University of Notre Dame 39 portfolios in Director, Discover Bank since College of Business Trustee since 1982; Trustee, UBS Supplementary two registered 1993; Director Morgan Administration since 1994 Trust since 1997; and Director, Battery investment Stanley Trust, FSB since University of Park Funds Inc. (1995-2001). companies 1996; and Director, MIBCO Notre Dame advised by the Inc. since 1993. Notre Dame, Advisor and one IN 46556-0399 portfolio in UBS Supplementary Trust. Edward M. Roob, 67 Trustee since Retired; prior thereto, Senior Vice 39 portfolios in Trustee, CCM Fund Complex 841 Woodbine Lane 1994 President, Daiwa Securities America Inc. two registered since 2001 (9 portfolios). Northbrook, 1986-1993; Trustee, UBS Supplementary investment IL 60002 Trust since 1997; Director UBS Global companies Asset Management Trust Company advised by the since 1993; and Committee Member, Advisor and one Chicago Stock Exchange 1993-1999. portfolio in UBS Supplementary Trust.
144 Interested Trustee:
NUMBER OF PORTFOLIOS IN POSITION/ FUND COMPLEX TERM/TIME PRINCIPAL OCCUPATION(S) DURING OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS, AND AGE SERVED (1) PAST 5 YEARS TRUSTEE (2) HELD BY TRUSTEE - ---------------------- ------------ ------------------------------------------ ---------------- ----------------------------- Brian M. Storms +, 47** Trustee and Chief Executive Officer since July 2002, 39 portfolios in None President Director and President of UBS Global AM two registered since 2001 since March 1999. Director, President and investment Chief Executive Officer of the Advisor companies since July 2002. Director, President advised by the and Chief Executive Officer of UBS Advisor and one Global Asset Management (New York) Inc., portfolio in UBS since July 2002. Chief Executive Officer Supplementary Trust. of UBS Global AM (October 2000-- September 2001); Chief Operating Officer of the Advisor, UBS Global AM (New York) and UBS Global AM (US) (September 2001-- July 2002); President, Prudential Investments (1996-1999); and Managing Director, Fidelity Investments (prior to 1996). Trustee, UBS Supplementary Trust since 2001. Mr. Storms is president of 22 other investment companies (consisting of 43 portfolios) for which UBS Global AM, the Advisor, UBS PaineWebber or one of their affiliates serves as an investment advisor, sub-advisor or manager. Officers: Amy R. Doberman**; 40 Vice President Ms. Doberman is a managing director and and Secretary general counsel of UBS Global AM. From since 2001 December 1997 through July 2000, she was general counsel of Aeltus Investment Management, Inc. Prior to working at Aeltus, Ms. Doberman was assistant chief counsel of the SEC's Division of Investment Management. Ms. Doberman is vice president and secretary of UBS Supplementary Trust and a vice president and secretary of 24 investment companies (consisting of 82 portfolios) for which UBS Global AM, UBS Global Asset Management (Americas) Inc. ("UBS Global AM (Americas)"), UBS Paine Webber or one of their affiliates serves as investment advisor, sub-advisor or manager. 145 POSITION/ TERM/TIME NAME, ADDRESS, AND AGE SERVED (1) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---------------------- ------------------- ------------------------------------------------------------------------ David E. Floyd*, 33 Assistant Secretary Mr. Floyd is a Director of UBS Global Asset Management (Americas) Inc. since 1998 (since 2000). He was formerly an Associate Director of UBS Global Asset Management (Americas) Inc. 1998-2000 and an Associate of UBS Global Asset Management (Americas) Inc. 1994-1998; Trust Officer of Brinson Trust Company since 2000; and Assistant Trust Officer of Brinson Trust Company 1993-2000. Mr. Floyd is an Assistant Secretary of UBS Supplementary Trust and two investment companies (consisting of 39 portfolios) for which UBS Global Asset Management (Americas), UBS Global Asset Management (US) or one of their affiliates serves as investment advisor, sub-advisor or manager. David M. Goldenberg**, 36 Vice President and Mr. Goldenberg is an Executive Director and deputy general counsel of UBS Assistant Secretary Global AM. From 2000-2002 he was director, legal affairs at Lazard Asset Since 2002 Management. Mr. Goldenberg was global director of compliance for SSB Citi Asset Management Group from 1998-2000. He was associate general counsel at Smith Barney Asset Management from 1996-1998. Prior to working at Smith Barney Asset Management, Mr.Goldenberg was branch chief and senior counsel of the SEC Division of Investment Management. Mr. Goldenberg is vice president and assistant secretary of UBS Supplementary Trust and a vice president and assistant secretary of 24 investment companies (consisting of 82 portfolios) for which UBS Global AM, UBS Global AM (Americas), UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager. Mark F. Kemper*, 44 Assistant Secretary Mr. Kemper is an Executive Director of UBS Global Asset Management since 1999 (Americas) since 2001. He was Director of UBS Global Asset Management (Americas) 1997-2000; Partner of UBS Global Asset Management (Americas) 1993-1996; Secretary of UBS Global Asset Management (Americas) since 1999; Assistant Secretary of UBS Global Asset Management (Americas) 1993-1999; Assistant Secretary of Brinson Trust Company since 1993. Secretary of UBS Global Asset Management (New York) since 1998 and Assistant Secretary, Brinson Holdings, Inc. 1993-1998. Mr. Kemper is an Assistant Secretary of UBS Supplementary Trust and of two investment companies (consisting of 39 portfolios) for which UBS Global Asset Management (Americas), UBS Global Asset Management (US) or one of their affiliates serves as investment advisor, sub-advisor or manager. 146 POSITION/ TERM/TIME NAME, ADDRESS, AND AGE SERVED (1) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---------------------- ------------------- ------------------------------------------------------------------------ Joseph T. Malone**, 34 Assistant Treasurer Mr. Malone is a director and a senior manager of the mutual fund since 2001 finance department of UBS Global AM. From August 2000 through June 2001, he was the controller at AEA Investors Inc. From March 1998 to August 2000, Mr. Malone was a manager within investment management services of PricewaterhouseCoopers LLC. Prior to March 1998, he was a vice president of the mutual fund services group of Bankers Trust & Co. Mr. Malone is an assistant treasurer of UBS Supplementary Trust and of two investment companies (consisting of 39 portfolios) for which UBS Global AM (Americas), UBS Global AM, UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager. Paul H. Schubert**, 39 Treasurer and Mr. Schubert is an executive director and head of the mutual fund finance Principal Accounting department of UBS Global AM. Mr. Schubert is treasurer and principal Officer accounting officer of UBS Supplementary Trust and of two investment since 2001 companies (consisting of 39 portfolios) and a vice president and treasurer of 22 investment companies (consisting of 43 portfolios) for which UBS Global AM, UBS Global AM (Americas), UBS Paine Webber or one of their affiliates serves as investment advisor, sub-advisor or manager.
(1) Each Trustee holds office for an indefinite term. (2) Messrs. Reilly and Roob also serve on the Board of Directors of Fort Dearborn Income Securities, Inc. * This person's business address is UBS Global Asset Management (Americas) Inc., UBS Tower, One North Wacker Drive, Chicago, IL 60606. ** This person's business address is UBS Global Asset Management (US) Inc., 51 West 52nd Street, New York, NY 10019-6114. + Mr. Storms is an "interested person" of the Trust, as that term is defined in the Investment Company Act by virtue of his positions with the advisor, UBS Global AM and/or UBS PaineWebber. 147 FEDERAL TAX INFORMATION: (UNAUDITED) For the year ended June 30, 2002, the percentage of dividends paid that qualify for the 70% dividends received deduction for corporate shareholders, the designation of long-term capital gain and the amounts expected to be passed through to the shareholders as foreign tax credits are approximated as follows:
DIVIDENDS 20% RECEIVED LONG-TERM FOREIGN TAX FUND DEDUCTION CAPITAL GAIN CREDIT - ---- --------- ------------ ----------- UBS Global Allocation Fund 20.39% $ 9,778,031 $ -- UBS Global Equity Fund 52.22 1,384,778 -- UBS U.S. Balanced Fund 28.63 -- -- UBS U.S. Equity Fund 100.00 5,227,388 -- UBS U.S. Large Cap Equity Fund 100.00 -- -- UBS U.S. Large Cap Growth Fund -- 33,063 -- UBS U.S. Small Cap Growth Fund 33.92 1,141,453 -- UBS International Equity Fund -- 16,417,909 261,181
In addition, for the year ended June 30, 2002, gross income derived from sources within foreign countries amounted to $2,857,941 for UBS International Equity Fund. For the year ended June 30, 2002, the percentage of income earned from direct treasury obligations approximately amounted to the following:
DIRECT TREASURY FUND OBLIGATIONS - ---- ----------- UBS Global Allocation Fund 20.27% UBS Global Bond Fund 17.24 UBS U.S. Balanced Fund 23.26 UBS U.S. Bond Fund 28.16
148 SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) Voting Results of Special Meeting of Shareholders Set forth below are the voting results of the proposals that were submitted to a vote of shareholders of the UBS Global Allocation Fund, the UBS Global Equity Fund, the UBS Global Technology Fund, the UBS Global Biotech Fund, the UBS Global Bond Fund, the UBS U.S. Balanced Fund, the UBS U.S. Equity Fund, the UBS U.S. Large Cap Equity Fund, the UBS U.S. Large Cap Growth Fund, the UBS U.S. Small Cap Growth Fund, the UBS U.S. Bond Fund, the UBS High Yield Fund, the UBS International Equity Fund, and the UBS U.S. Value Equity Fund, as applicable (each a "Fund" and collectively, the "Funds") each a series of The UBS Funds (the "Trust") at a special meeting of shareholders held on June 28, 2002 (the "Meeting"). PROPOSAL NO. 1- TO ELECT FOUR TRUSTEES TO THE BOARD OF TRUSTEES. PROPOSAL NO. 1.01- WALTER E. AUCH, TRUSTEE
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------ UBS Global Allocation Fund 9,728,351 245,407 -- -- UBS Global Equity Fund 4,153,792 13,041 -- -- UBS Global Technology Fund 174,791 34,811 -- -- UBS Global Biotech Fund 390,592 10,228 -- -- UBS Global Bond Fund 2,539,413 10,722 -- -- UBS U.S. Balanced Fund 2,286,759 4,645 -- -- UBS U.S. Equity Fund 4,914,055 25,818 -- -- UBS U.S. Large Cap Equity Fund 275,384 -- -- -- UBS U.S. Large Cap Growth Fund 449,590 17,033 -- -- UBS U.S. Small Cap Growth Fund 2,004,950 182,506 -- -- UBS U.S. Bond Fund 5,466,749 7,234 -- -- UBS High Yield Fund 11,333,017 560,246 -- -- UBS International Equity Fund 6,712,038 416,786 -- -- UBS U.S. Value Equity Fund 309,458 834 -- --
PROPOSAL NO. 1.02- FRANK K. REILLY, TRUSTEE
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------ UBS Global Allocation Fund 9,820,036 153,722 -- -- UBS Global Equity Fund 4,153,792 13,041 -- -- UBS Global Technology Fund 174,791 34,811 -- -- UBS Global Biotech Fund 390,592 10,228 -- -- UBS Global Bond Fund 2,539,413 10,722 -- -- UBS U.S. Balanced Fund 2,286,759 4,645 -- -- UBS U.S. Equity Fund 4,914,055 25,818 -- -- UBS U.S. Large Cap Equity Fund 275,384 -- -- -- UBS U.S. Large Cap Growth Fund 449,590 17,033 -- -- UBS U.S. Small Cap Growth Fund 2,004,950 182,506 -- -- UBS U.S. Bond Fund 5,466,749 7,234 -- -- UBS High Yield Fund 11,349,922 543,340 -- -- UBS International Equity Fund 6,712,038 416,786 -- -- UBS U.S. Value Equity Fund 309,458 834 -- --
149 PROPOSAL NO. 1.03- EDWARD M. ROOB, TRUSTEE
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------ UBS Global Allocation Fund 9,820,036 153,722 -- -- UBS Global Equity Fund 4,153,792 13,041 -- -- UBS Global Technology Fund 174,791 34,811 -- -- UBS Global Bond Fund 2,539,413 10,722 -- -- UBS Global Biotech Fund 390,592 10,228 -- -- UBS U.S. Balanced Fund 2,286,759 4,645 -- -- UBS U.S. Equity Fund 4,914,055 25,818 -- -- UBS U.S. Large Cap Equity Fund 275,384 -- -- -- UBS U.S. Large Cap Growth Fund 449,590 17,033 -- -- UBS U.S. Small Cap Growth Fund 2,004,950 182,506 -- -- UBS U.S. Bond Fund 5,466,749 7,234 -- -- UBS High Yield Fund 11,348,422 544,840 -- -- UBS International Equity Fund 6,712,038 416,786 -- -- UBS U.S. Value Equity Fund 309,458 834 -- --
PROPOSAL NO. 1.04- BRIAN M. STORMS, TRUSTEE
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------ UBS Global Allocation Fund 9,820,036 153,722 -- -- UBS Global Equity Fund 4,153,792 13,041 -- -- UBS Global Technology Fund 174,791 34,811 -- -- UBS Global Biotech Fund 390,592 10,228 -- -- UBS Global Bond Fund 2,539,413 10,722 -- -- UBS U.S. Balanced Fund 2,286,759 4,645 -- -- UBS U.S. Equity Fund 4,914,055 25,818 -- -- UBS U.S. Large Cap Equity Fund 275,384 -- -- -- UBS U.S. Large Cap Growth Fund 449,590 17,033 -- -- UBS U.S. Small Cap Growth Fund 2,004,950 182,506 -- -- UBS U.S. Bond Fund 5,466,749 7,234 -- -- UBS High Yield Fund 11,353,307 539,955 -- -- UBS International Equity Fund 6,712,038 416,786 -- -- UBS U.S. Value Equity Fund 309,458 834 -- --
PROPOSAL NO. 2- APPROVE THE ELIMINATION OF THE PERMANENT EXPENSE CAP FOR THE FUND.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- --------- UBS Global Allocation Fund 7,736,876 1,730,560 254,970 251,351 UBS Global Equity Fund 3,483,770 124,387 18,781 539,896 UBS Global Technology Fund * 109,732 89,716 323 9,831 UBS Global Biotech Fund 340,096 55,053 -- 5,670 UBS Global Bond Fund 1,881,420 73,154 4,543 591,018 UBS U.S. Balanced Fund 1,677,014 25,202 254,083 335,104 UBS U.S. Equity Fund 4,659,070 90,222 31,549 159,031 UBS U.S. Large Cap Equity Fund 260,229 14,968 -- 186 UBS U.S. Large Cap Growth Fund 424,974 34,191 4,026 3,432 UBS U.S. Small Cap Growth Fund 1,466,869 648,143 31,613 40,830 UBS U.S. Bond Fund 4,885,425 66,367 6,380 515,810 UBS High Yield Fund 8,181,988 1,293,828 484,824 1,932,621 UBS International Equity Fund ** 5,562,463 620,651 436,500 509,209
150 PROPOSAL NO. 3- APPROVE AN AMENDED INVESTMENT ADVISORY AGREEMENT FOR THE FUND.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- --------- UBS Global Allocation Fund 8,826,711 777,745 117,950 251,351 UBS Global Equity Fund 3,563,750 52,880 10,306 539,896 UBS Global Technology Fund 163,987 35,461 323 9,831 UBS Global Biotech Fund 384,070 11,080 -- 5,670 UBS Global Bond Fund 1,903,558 46,400 9,159 591,018 UBS U.S. Balanced Fund 1,935,082 16,054 5,164 335,104 UBS U.S. Equity Fund 4,725,941 23,541 31,359 159,031 UBS U.S. Large Cap Equity Fund 275,198 -- -- 186 UBS U.S. Large Cap Growth Fund 446,158 15,189 1,844 3,432 UBS U.S. Small Cap Growth Fund 1,987,374 109,971 49,279 40,830 UBS U.S. Bond Fund 4,940,035 5,527 12,611 515,810 UBS High Yield Fund 8,810,951 595,118 554,572 1,932,621 UBS International Equity Fund ** 5,693,843 488,021 437,750 509,209 UBS U.S. Value Equity Fund 309,357 -- 936 --
PROPOSAL NO. 4a- TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING BORROWING.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 9,011,962 351,036 359,409 251,351 UBS Global Equity Fund 3,536,119 78,830 11,988 539,896 UBS Global Bond Fund 1,924,147 27,390 7,579 591,018 UBS U.S. Balanced Fund 1,685,907 265,647 4,746 335,104 UBS U.S. Equity Fund 4,727,921 20,055 32,865 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,933,674 8,322 16,176 515,810 UBS International Equity Fund ** 6,156,299 22,658 440,658 509,209
PROPOSAL NO. 4b- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING UNDERWRITING SECURITIES.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,858,069 743,935 120,403 251,351 UBS Global Equity Fund 3,541,511 74,793 10,633 539,896 UBS Global Bond Fund 1,924,740 28,131 6,245 591,018 UBS U.S. Balanced Fund 1,685,907 262,344 8,049 335,104 UBS U.S. Equity Fund 4,733,710 15,590 31,541 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,933,868 8,322 15,982 515,810 UBS International Equity Fund ** 6,147,296 20,963 451,356 509,209
PROPOSAL NO. 4c- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING LENDING.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 9,083,781 480,422 158,204 251,351 UBS Global Equity Fund 3,498,862 76,889 51,187 539,896 UBS Global Bond Fund 1,894,827 56,863 7,427 591,018 UBS U.S. Balanced Fund 1,685,907 265,647 4,746 335,104 UBS U.S. Equity Fund 4,720,793 32,727 27,320 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,912,283 6,102 39,787 515,810 UBS International Equity Fund ** 6,039,870 128,650 451,094 509,209
151 PROPOSAL NO. 4d- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING INVESTMENTS IN REAL ESTATE.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,854,706 709,496 158,205 251,351 UBS Global Equity Fund 3,514,417 61,335 51,185 539,896 UBS Global Bond Fund 1,928,255 23,433 7,428 591,018 UBS U.S. Balanced Fund 1,932,834 18,719 4,747 335,104 UBS U.S. Equity Fund 4,722,315 27,041 31,485 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,915,255 6,102 36,815 515,810 UBS International Equity Fund ** 6,089,611 102,306 427,697 509,209
PROPOSAL NO. 4e- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING INVESTMENTS IN COMMODITIES.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,575,574 737,445 409,386 251,351 UBS Global Equity Fund 3,498,973 81,114 46,850 539,896 UBS Global Bond Fund 1,897,679 55,042 6,396 591,018 UBS U.S. Balanced Fund 1,919,533 32,020 4,747 335,104 UBS U.S. Equity Fund 4,722,522 31,596 26,722 159,031 UBS U.S. Large Cap Equity Fund 260,229 14,968 -- 186 UBS U.S. Bond Fund 4,868,737 49,455 39,981 515,810 UBS International Equity Fund ** 6,133,834 45,123 440,658 509,209
PROPOSAL NO. 4f- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING ISSUING SENIOR SECURITIES OR MAKING SHORT SALES.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,586,909 749,083 386,414 251,351 UBS Global Equity Fund 3,520,388 54,010 52,540 539,896 UBS Global Bond Fund 1,928,380 24,261 6,475 591,018 UBS U.S. Balanced Fund 1,685,907 265,647 4,746 335,104 UBS U.S. Equity Fund 4,712,915 33,484 34,442 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,912,393 6,516 39,263 515,810 UBS International Equity Fund ** 6,051,095 115,646 452,873 509,209
PROPOSAL NO. 4g- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING INDUSTRY CONCENTRATION.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,880,459 706,393 135,554 251,351 UBS Global Equity Fund 3,526,310 52,906 47,721 539,896 UBS Global Bond Fund 1,926,163 25,375 7,578 591,018 UBS U.S. Balanced Fund 1,680,490 271,064 4,747 335,104 UBS U.S. Equity Fund 4,732,751 15,217 32,873 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,906,059 11,733 40,380 515,810 UBS International Equity Fund ** 6,160,087 17,712 441,815 509,209
152 PROPOSAL NO. 4h- TO AMEND THE FUND'S FUNDAMENTAL RESTRICTION REGARDING DIVERSIFICATION OF INVESTMENTS.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,852,083 735,091 135,233 251,351 UBS Global Equity Fund 3,526,095 54,476 46,366 539,896 UBS U.S. Balanced Fund 1,929,531 22,023 4,747 335,104 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,871,175 49,212 37,786 515,810
PROPOSAL NO. 5a- TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING INVESTING FOR CONTROL OR MANAGEMENT.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,790,755 772,988 158,664 251,351 UBS Global Equity Fund 3,508,455 64,603 53,880 539,896 UBS Global Bond Fund 1,915,106 36,432 7,578 591,018 UBS U.S. Balanced Fund 1,680,490 271,063 4,747 335,104 UBS U.S. Equity Fund 4,727,591 25,476 27,775 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,903,595 17,360 37,217 515,810 UBS International Equity Fund ** 6,152,143 28,372 439,100 509,209
PROPOSAL NO. 5b- TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING PURCHASING SECURITIES OR MARGIN.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,579,659 762,604 380,144 251,351 UBS Global Equity Fund 3,501,853 78,249 46,836 539,896 UBS Global Bond Fund 1,919,063 32,625 7,428 591,018 UBS U.S. Balanced Fund 1,685,907 265,648 4,747 335,104 UBS U.S. Equity Fund 4,721,079 25,328 34,435 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,906,762 11,927 39,483 515,810 UBS International Equity Fund ** 6,134,832 47,462 437,321 509,209
PROPOSAL NO. 5c- TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING INVESTING IN UNSEASONED ISSUERS.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,559,867 753,336 409,203 251,351 UBS Global Equity Fund 3,500,347 79,705 46,885 539,896 UBS Global Bond Fund 1,887,907 63,782 7,428 591,018 UBS U.S. Balanced Fund 1,685,907 265,647 4,746 335,104 UBS U.S. Equity Fund 4,703,336 45,674 31,833 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,905,645 11,927 40,600 515,810 UBS International Equity Fund ** 6,007,684 154,915 437,016 529,209
153 PROPOSAL NO. 5d- TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING INVESTMENTS IN OTHER INVESTMENT COMPANIES.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,601,905 740,358 380,144 251,351 UBS Global Equity Fund 3,511,043 69,058 46,836 539,896 UBS Global Bond Fund 1,917,511 34,179 7,427 591,018 UBS U.S. Balanced Fund 1,675,909 275,645 4,746 335,104 UBS U.S. Equity Fund 4,729,417 25,985 25,440 159,031 UBS U.S. Large Cap Equity Fund 260,229 14,968 -- 186 UBS U.S. Bond Fund 4,909,926 10,446 37,800 515,810 UBS International Equity Fund ** 6,147,374 35,224 437,016 509,209
PROPOSAL NO. 5e- TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING INVESTING IN PUTS, CALLS AND STRADDLES.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,555,008 787,254 380,144 251,351 UBS Global Equity Fund 3,501,164 78,888 46,886 539,896 UBS Global Bond Fund 1,914,257 38,614 6,246 591,018 UBS U.S. Balanced Fund 1,680,490 271,063 4,747 335,104 UBS U.S. Equity Fund 4,710,943 36,495 33,405 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,905,645 14,328 38,200 515,810 UBS International Equity Fund ** 6,058,970 110,521 450,124 509,209
PROPOSAL NO. 5f- TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING INVESTMENTS IN OIL, GAS AND/OR MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS OR LEASES.
FOR AGAINST ABSTAIN BNV ---------- ---------- --------- ------- UBS Global Allocation Fund 8,504,251 837,691 380,464 251,351 UBS Global Equity Fund 3,510,109 68,341 48,487 539,896 UBS Global Bond Fund 1,918,036 33,502 7,579 591,018 UBS U.S. Balanced Fund 1,932,834 18,719 4,747 335,104 UBS U.S. Equity Fund 4,712,450 35,229 33,164 159,031 UBS U.S. Large Cap Equity Fund 272,301 2,897 -- 186 UBS U.S. Bond Fund 4,848,355 69,423 40,395 515,810 UBS International Equity Fund ** 6,070,587 121,118 427,917 509,201
* Required vote not obtained to approve this proposal. ** Quorum not obtained. 154 THE UBS FUNDS - -------------------------------------------------------------------------------- ONE NORTH WACKER DRIVE - CHICAGO, ILLINOIS 60606 - TEL: (800) 647-1568 -----END PRIVACY-ENHANCED MESSAGE-----