-----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, UDswLbei3E/HyKDL+h6KZdKvOH7n+5TZBgzn9XORIY48QVuOk0HchdhQm5JsbdGC 3UaF37C+yBu+qyx3asVfUg== 0000930413-03-000791.txt : 20030307 0000930413-03-000791.hdr.sgml : 20030307 20030307163909 ACCESSION NUMBER: 0000930413-03-000791 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030307 EFFECTIVENESS DATE: 20030307 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: 03596563 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 c26531_n30d.txt [logo] UBS Global Asset Management UBS Global Allocation Fund UBS Global Equity Fund UBS Global Bond Fund UBS U.S. Balanced Fund UBS U.S. 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 Semi-Annual Report December 31, 2002 --------------------------------------------------------------------- TABLE OF CONTENTS --------------------------------------------------------------------- - -------------------------------------------------------------------------------- Economic Review and Outlook ..................................... 2 Portfolio Managers' Commentary and Schedules of Investments UBS Global Allocation Fund ................................ 3 UBS Global Equity Fund .................................... 14 UBS Global Bond Fund ...................................... 20 UBS U.S. Balanced Fund .................................... 28 UBS U.S. Equity Fund ...................................... 36 UBS U.S. Large Cap Growth Fund ............................ 40 UBS U.S. Small Cap Growth Fund ............................ 44 UBS U.S. Bond Fund ........................................ 48 UBS High Yield Fund ....................................... 55 UBS International Equity Fund ............................. 63 UBS U.S. Value Equity Fund ................................ 69 Statements of Assets and Liabilities ............................ 74 Statements of Operations ........................................ 78 Statements of Changes in Net Assets ............................. 80 Financial Highlights ............................................ 84 Notes to Financial Statements ................................... 106 Trustee Information ............................................. 115 ================================================================================ 1 - -------------------------------------------------------------------------------- ECONOMIC REVIEW AND OUTLOOK - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- At the start of the reporting period, U.S. economic growth appeared to be slowing. Second quarter's gross domestic product (GDP) figure of 1.3% was significantly lower than the healthy 5.0% increase posted in the first quarter of 2002. The decline was attributable to a confluence of events that adversely affected consumer confidence, including the ongoing threat of terrorism, high-profile corporate accounting scandals, and continued turmoil in the Middle East. Although GDP improved during the third quarter--rising to 4.0%--increased geopolitical risks ultimately took their toll on both consumer and corporate spending. In the fourth quarter, despite a move by the Federal Reserve to lower the federal funds rate one-half of a percentage point to 1.25% (its lowest level in 41 years), GDP came in at a dramatically lower 1.4%. During times of uncertainty, the equity markets do not fare well, and this was certainly true during the second half of 2002. In addition to recession-related speculation, investors had to contend with continued threats of terrorism, a variety of corporate scandals and the increasing possibility of a conflict with Iraq. As a result, flagging investor confidence dragged down U.S. equity prices during the third quarter. The fourth quarter did see a short-lived rally among lower-priced, higher volatility stocks. However, the gains were not enough to overcome the losses posted by the broad market over the prior months, and stocks, as measured by the S&P 500 Index, ultimately posted a 10.29% decline over the six-month period. The news was similar overseas, as global economic growth prospects weakened. Europe's economic slowdown and market declines had been less severe than in the United States, leading many to believe that Europe's recovery would be more rapid. However, geopolitical risks and other factors prevented the anticipated economic recovery from occurring. By the time the European Monetary Union took action to lower interest rates in December 2002 in an effort to kick-start growth, the move was widely perceived as being too little, too late. Stock prices were held back, despite a fourth quarter rally that resulted in some of the smaller country markets turning in double-digit returns. At period end, European stocks, as measured by the MSCI Europe Index, had declined 14.39%. In Japan, political infighting stymied all efforts at economic reform, and Japan moved closer to a recession. Japanese stocks, as measured by the TOPIX index, declined 16.41% over the period. While emerging market stocks generated better results, they also posted a decline of 6.0% as measured by the MSCI Emerging Markets Free Index. What is bad for stocks tends to be good for bonds, and this proved to be the case over the six-month period. In the market environment described above, investors were drawn to the "safe haven" provided by the bond markets. Third quarter performance was particularly strong, led by higher-quality securities. Fourth quarter saw lower-quality bonds rally as investors became more willing to take on added risk in the face of better-than-expected earnings reports and short-lived gains in the stock market. Ultimately, the world's bond markets posted a gain of 8.78% over the six-month period, as measured by the Salomon Smith Barney World Government Bond Index. Looking ahead, we anticipate that the economy will grow, though at a tepid rate. We are closely monitoring the geopolitical situation, which is tenuous at best. Uncertainty surrounding the situations in Iraq and North Korea are but two of the factors that could undermine economic recovery in 2003. However, it is important to understand that market prices tend to decouple from fundamental values in times of uncertainty. This is as much of a source of investment opportunity as it is risk. Our fundamental valuation estimates indicate that equity and credit (non-government bond) markets are priced at fair to good value, and our security-level analysis continues to reveal opportunities where fundamental value estimates are greater than market prices. ================================================================================ 2 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS Global Allocation Fund declined 5.06%, compared to the 5.60% decline for the Fund's benchmark, the GSMI Mutual Fund Index.* For comparison purposes, the MSCI World Equity (Free) Index declined 12.01% and the Salomon Smith Barney World Government Bond Index rose 8.78%. (Returns for all share classes over various time periods are shown on page 4. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW An uncertain geopolitical environment drove investors to the relative security of bonds during the third quarter of 2002. Global equity markets fell in virtually every region while global bond markets rallied. The U.S. bond market offered up the best performance, closely followed by European bond markets. Japan was the notable exception, as both its equity and bond markets struggled in the third quarter. The fourth quarter offered a very different picture, with global equity markets outperforming global bond markets. Improving economic statistics and better-than-expected earnings reports re-ignited investor interest in stocks. The subsequent rebound drove the global equity markets up approximately 8% over the three months ended December 31, 2002. Emerging market stocks led this rally, supported by especially strong returns in Brazil, Argentina, and Colombia. However, price increases in stocks during the fourth quarter were at the expense of the global bond markets. Against this backdrop, emerging market debt delivered the best relative performance, with Russia and other non-Latin American countries offering the strongest returns. High yield bonds in the United States also did well in this environment of decreased investor risk aversion. AN INTEGRATED GLOBAL PLATFORM AND FOCUS ON VALUE DROVE PERFORMANCE The Fund began the reporting period neutral in U.S. equities, and overweight to non-U.S. equities relative to the GSMI Mutual Fund Index. The Fund benefited significantly from a decision to overweight emerging market stocks throughout the period. This decision was a result of leveraging the firm's integrated global platform, which enables the firm's 451 investment specialists from around the world to share ideas and information. Our analysts used our fundamental valuation models to identify emerging market equity opportunities that existed around the world. The analysts on our developed and emerging markets equity teams then pooled their resources to determine the relative valuation attractiveness of emerging versus developed companies within industries. For example, it was determined that in emerging market countries we should overweight the telecom industry, while in developed market countries we should underweight it. Finally, we evaluated the return potential of the overweight to the industry versus its contribution to the risk of the Fund as whole, using a globally based, forward-looking risk model. As the reporting period progressed, our focus on intrinsic value--whereby we carefully analyze the expected cash flows that we believe an investment will provide to determine whether its market price reflects its intrinsic value--led us to decrease the Fund's bond allocation and overweight U.S. stocks in order to take advantage of attractive valuations in that market. We believed that investors were ignoring attractive opportunities in U.S. stocks because of their concerns over geopolitical events and disappointing earnings reports. In addition, our research showed that high quality U.S. bonds appeared expensive. Yields had been driven to their lowest level in decades, leaving little room for future gains. We reduced the Fund's position in conventional U.S. fixed income and increased its exposure to U.S. high yield bonds and global equities. After the equity market rally ended in November 2002, we reduced the Fund's U.S. equity position to a weight equivalent to the benchmark. We believed that investors had caused prices to once again increase beyond fair value. We then purchased more high yield and conventional fixed income. As of December 31, 2002, the Fund was underweighted to conventional fixed income and overweighted to higher-risk, higher-return asset classes--that is, high yield bonds, emerging market equity and developed international equity. LOOKING AHEAD We believe that global equities are poised to deliver positive returns in 2003. Investors appear to be growing more confident that, at the very least, a muted economic recovery will occur. Of course, there are still several external factors that could undermine the global economy and equity markets, not the least of which is the uncertainty surrounding situations in Iraq and North Korea. On the global fixed income front, we believe we will see an increase in government borrowing worldwide, which should steepen the yield curve in most markets. Based on their performance in the fourth quarter of the year, we expect to see continued improvements in the higher-quality corporate bond market. - ---------- * The GSMI Mutual Fund Index is an unmanaged, proprietary index compiled by the Advisor that is designed to replicate the performance of the asset classes in which the Fund invests. It represents 65% equity and 35% fixed income across seven asset classes. It is currently constructed as follows: 40% Wilshire 5000 Equity Index, 22% MSCI World Ex USA (Free) Index, 21% Salomon Smith Barney Broad Investment Grade (BIG) Bond Index, 9% Salomon Smith Barney WGBI Non-U.S. Index, 3% Merrill Lynch High Yield Master Index, 3% MSCI Emerging Markets Free Index and 2% JP Morgan EMBI Global. ================================================================================ 3 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years 10 years Inception* ended ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS A -5.09% -2.99% 1.64% 2.79% N/A 2.86% - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS B -5.41 -3.95 N/A N/A N/A -2.45 - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS C -5.45 -3.90 N/A N/A N/A -1.31 - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS Y -5.06 -3.06 1.81 3.02 7.12% 7.22 - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS A+ -10.34 -8.29 -0.26 1.62 N/A 1.81 - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS B+ -9.95 -8.56 N/A N/A N/A -5.70 - ---------------------------------------------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND CLASS C+ -7.32 -5.73 N/A N/A N/A -2.19 - ---------------------------------------------------------------------------------------------------------------------- GSMI Mutual Fund Index** -5.60 -8.27 -7.30 1.63 7.34 7.41 - ---------------------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index -12.01 -19.65 -16.50 -1.91 6.54 6.23 - ---------------------------------------------------------------------------------------------------------------------- Salomon Smith Barney World Gov't Bond Index 8.78 19.49 6.32 5.82 6.64 6.13 - ----------------------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL ALLOCATION FUND CLASS A 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 AND THE INDICES IS 8/31/92. ** AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 40% WILSHIRE 5000 EQUITY 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. ================================================================================ 4 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- ----------------------------------------------------- ------------------------------------------------------- TOP TEN EQUITY HOLDINGS TOP TEN FIXED INCOME HOLDINGS - ----------------------------------------------------- ------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Percentage of Net Assets Net Assets - ----------------------------------------------------- ------------------------------------------------------ Citigroup, Inc. 1.4% U.S. Treasury Note Wells Fargo & Co. 1.3 3.250%, due 08/15/07 2.4% Burlington Northern Santa Fe Corp. 1.1 Microsoft Corp. 1.1 U.S. Treasury Note United Health Group, Inc. 1.1 2.875%, due 06/30/04 0.7 GreenPoint Financial Corp. 1.0 Nextel Communications, Inc. 1.0 U.S. Treasury Note Omnicom Group 1.0 5.000%, due 08/15/11 0.5 Johnson & Johnson 0.9 Freddie Mac 0.9 Federal National Mortgage Association - ----------------------------------------------------- 5.500%, due 03/15/11 0.4 Total 10.8% U.S. Treasury Note 6.750%, due 05/15/05 0.4 Buoni Poliennali Del Tes 3.250%, due 04/15/04 0.3 U.S. Treasury Note 4.750%, due 11/15/08 0.3 Federal National Mortgage Association 6.000%, due 11/01/28 0.3 Merrill Lynch Mortgage Investors, Inc. 7.120%, due 06/18/29 0.3 Federal Home Loan Mortgage Corp. 6.500%, due 04/01/29 0.2 ------------------------------------------------------ Total 5.8%
================================================================================ 5 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION - -------------------------------------------------------------------------------- AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- U.S. EQUITIES Airlines ................................ 0.08% Autos/Durables .......................... 0.32 Banks ................................... 3.11 Broadcasting & Publishing ............... 1.04 Capital Goods ........................... 1.32 Chemicals ............................... 1.11 Computer Software ....................... 1.11 Computer Systems ........................ 0.49 Construction ............................ 0.47 Consumer ................................ 0.45 Electric Components ..................... 0.70 Energy .................................. 3.61 Financial Services ...................... 6.41 Health: Drugs ........................... 3.22 Health: Non-Drugs ....................... 2.46 Housing/Paper ........................... 0.74 Industrial Components ................... 0.64 Metals Non-Ferrous ...................... 0.86 Recreation .............................. 0.38 Retail/Apparel .......................... 1.68 Services/Miscellaneous .................. 2.13 Technology .............................. 0.71 Telecommunications -- Services .......... 1.85 Textiles and Apparel .................... 0.10 Transportation .......................... 1.16 Utilities ............................... 1.08 ----- Total U.S. Equities ............ 37.23 INTERNATIONAL EQUITIES Aerospace & Military .................... 0.14 Appliances & Household Durables ......... 0.24 Autos/Durables .......................... 0.51 Banks ................................... 3.55 Beverages & Tobacco ..................... 1.10 Broadcasting & Publishing ............... 1.21 Business & Public Service ............... 0.09 Chemicals ............................... 1.07 Computer Software ....................... 0.11 Construction ............................ 0.27 Data Processing ......................... 0.25 Electric Components ..................... 0.86 Electronics ............................. 0.09 Energy .................................. 1.43 Financial Services ...................... 1.18 Food & House Products ................... 1.42 Forest Products ......................... 0.35 Health: Drugs ........................... 2.66 Health: Non-Drugs ....................... 0.34 Housing/Paper ........................... 0.30 Industrial Components ................... 0.12 Insurance ............................... 0.72 Machinery & Engineering ................. 0.37 Metals Non-Ferrous ...................... 0.19 Multi-Industry .......................... 0.32 Real Estate ............................. 0.18 Recreation .............................. 0.64 Retail/Apparel .......................... 0.56 Services/Miscellaneous .................. 0.51 Telecommunications ...................... 2.13 Transportation .......................... 1.18 Utilities ............................... 1.01 Wholesale & International Trade ......... 0.12 ------ Total International Equities ... 25.22 TOTAL EQUITIES .......................... 62.45 U.S. BONDS U.S. Corporate Bonds Aerospace & Military .................... 0.01 Autos/Durables .......................... 0.04 Banks ................................... 0.10 Beverages & Tobacco ..................... 0.07 Chemicals ............................... 0.03 Computer Systems ........................ 0.01 Construction ............................ 0.06 Consumer ................................ 0.05 Electric Components ..................... 0.05 Energy .................................. 0.21 Financial Services ...................... 0.44 Food & House Products ................... 0.06 Forest Products ......................... 0.01 Health: Drugs ........................... 0.01 Housing/Paper ........................... 0.01 Leisure & Tourism ....................... 0.01 Metals Non-Ferrous ...................... 0.01 Multi-Industry .......................... 0.04 Publishing .............................. 0.04 Real Estate ............................. 0.02 Recreation .............................. 0.02 Retail/Apparel .......................... 0.02 Services/Miscellaneous .................. 0.04 Telecommunications ...................... 0.05 Telecommunications -- Wireless .......... 0.02 Transportation .......................... 0.02 Utilities ............................... 0.05 ------ Total U.S. Corporate Bonds ..... 1.50 Asset-Backed ............................ 0.42 Mortgage-Backed Securities .............. 4.51 International Dollar Bonds .............. 0.03 U.S. Government Obligations ............. 4.53 ------ Total U.S. Bonds ............... 10.99* International Bonds ..................... 3.38 INVESTMENT COMPANIES .................... 15.06 SHORT-TERM INVESTMENTS .................. 8.74* INVESTMENTS OF CASH COLLATERAL .......... 3.36 ------ TOTAL INVESTMENTS .................... 103.98 LIABILITIES, LESS CASH AND OTHER ASSETS ......................... (3.98) ------ NET ASSETS .............................. 100.00% ====== - -------------------------------------------------------------------------------- * The Fund held a long position in U.S. Treasury futures, which increased the U.S. Bond exposure from 10.99% to 15.07%. These adjustments resulted in a net decrease to the Fund's exposure to Short-Term Investments from 8.74% to 4.66%. ================================================================================ 6 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE ------ ------------ EQUITIES -- 62.45% U.S. EQUITIES -- 37.23% Advanced Medical Optics, Inc. (b) ................... 6,544 $ 78,332 Advanced Micro Devices, Inc. (b) .................... 51,800 334,628 Allergan, Inc. ...................................... 29,300 1,688,266 American International Group, Inc. .................. 17,421 1,007,805 American Standard Companies, Inc. (b) ............... 20,600 1,465,484 Anthem, Inc. (b) .................................... 24,200 1,522,180 Baxter International, Inc. .......................... 30,700 859,600 Bristol-Myers Squibb Co. ............................ 56,600 1,310,290 Burlington Northern Santa Fe Corp. .................. 86,500 2,249,865 Cephalon, Inc. (b) .................................. 18,800 914,958 Citigroup, Inc. ..................................... 76,107 2,678,205 CMS Energy Corp. (c) ................................ 38,400 362,496 CommScope, Inc. (b) ................................. 24,300 191,970 Computer Sciences Corp. ............................. 9,400 323,830 ConocoPhillips ...................................... 16,134 780,724 Consolidated Edison, Inc. ........................... 17,200 736,504 Continental Airlines, Inc., Class B ................. 6,600 47,850 Costco Wholesale Corp. (b) .......................... 32,600 914,756 Delta Air Lines, Inc. ............................... 13,500 163,350 Dominion Resources, Inc. ............................ 10,500 576,450 Dow Chemical Co. (The) .............................. 27,100 804,870 Eastman Chemical Co. ................................ 14,200 522,134 Entergy Corp. ....................................... 17,400 793,266 Exelon Corp. ........................................ 28,900 1,525,053 ExxonMobil Corp. .................................... 38,600 1,348,684 First Data Corp. .................................... 25,860 915,703 FirstEnergy Corp. ................................... 40,363 1,330,768 FleetBoston Financial Corp. ......................... 34,015 826,564 Freddie Mac ......................................... 30,800 1,818,740 GreenPoint Financial Corp. .......................... 44,200 1,996,956 Hartford Financial Services Group, Inc. (The) ....... 16,200 735,966 Hewlett-Packard Co. ................................. 56,009 972,316 Household International, Inc. ....................... 44,600 1,240,326 Illinois Tool Works, Inc. ........................... 28,000 1,816,080 IMC Global, Inc. .................................... 45,600 486,552 Ingersoll-Rand Co., Class A ......................... 29,200 1,257,352 Intel Corp. ......................................... 39,500 615,015 Johnson & Johnson ................................... 34,038 1,828,181 Johnson Controls, Inc. .............................. 7,800 625,326 J.P. Morgan Chase & Co. ............................. 64,100 1,538,400 Kerr-McGee Corp. .................................... 7,950 352,185 Kimberly-Clark Corp. ................................ 18,500 878,195 Martin Marietta Materials, Inc. ..................... 30,484 934,639 Masco Corp. ......................................... 80,400 1,692,420 McGraw-Hill Cos., Inc. .............................. 10,000 604,400 MeadWestvaco Corp. .................................. 21,700 536,207 Mellon Financial Corp. .............................. 33,200 866,852 Microsoft Corp. (b) ................................. 42,500 2,197,250 Morgan Stanley ...................................... 30,850 1,231,532 Motorola, Inc. ...................................... 82,630 714,750 Newell Rubbermaid, Inc. ............................. 43,500 1,319,355 Nextel Communications, Inc. (b) ..................... 171,200 1,977,360 Omnicom Group ....................................... 29,600 1,912,160 Pentair, Inc. ....................................... 22,696 784,147 PNC Financial Services Group ........................ 17,400 729,060 Progress Energy, Inc. ............................... 17,100 741,285 RadioShack Corp. .................................... 25,100 470,374 Royal Caribbean Cruises Ltd.(c) ..................... 44,500 743,150 SBC Communications, Inc. ............................ 35,300 956,983 Sempra Energy ....................................... 28,400 671,660 SICOR, Inc. (b) ..................................... 68,900 1,092,065 Texas Instruments, Inc. ............................. 28,900 433,789 TJX Companies, Inc. ................................. 31,500 614,880 United Health Group, Inc. ........................... 25,100 2,095,850 United Technologies Corp. ........................... 22,700 1,406,038 Viacom, Inc. (b) .................................... 35,500 1,446,980 Viad Corp. .......................................... 22,600 505,110 Waters Corp. (b) .................................... 17,600 383,328 Wells Fargo & Co. ................................... 55,000 2,577,850 Wyeth, Inc. ......................................... 36,100 1,350,140 ------------ Total U.S. Equities ................................. 73,425,789 ------------ INTERNATIONAL EQUITIES -- 25.22% AUSTRALIA -- 0.73% Lion Nathan Ltd. .................................... 53,063 169,419 Mayne Nickless Ltd. ................................. 70,597 129,596 National Australia Bank Ltd., Preferred ............. 3,400 110,670 News Corp., Ltd., Preferred ......................... 33,066 177,816 QBE Insurance Group Ltd. ............................ 58,386 267,949 Rio Tinto Ltd. ...................................... 8,379 160,184 Westpac Banking Corp., Ltd. ......................... 55,308 428,230 ------------ 1,443,864 ------------ BELGIUM -- 0.08% Fortis .............................................. 8,984 158,386 ------------ CANADA -- 0.84% Alcan Aluminum Ltd.(c) .............................. 7,120 208,805 Bank of Nova Scotia ................................. 9,600 320,000 BCE, Inc.(c) ........................................ 17,000 306,684 Canadian National Railway Co. ....................... 6,500 268,550 Domtar, Inc. ........................................ 11,300 112,299 Royal Bank of Canada (c) ............................ 11,800 432,099 ------------ 1,648,437 ------------ FINLAND -- 0.87% Nokia Oyj ........................................... 62,290 990,307 Sampo Oyj, Class A .................................. 20,300 154,445 UPM-Kymmene Oyj ..................................... 17,720 569,016 ------------ 1,713,768 ------------ FRANCE -- 2.32% Aventis S.A., Class A ............................... 15,056 818,424 AXA ................................................. 10,021 134,499 BNP Paribas ......................................... 18,161 740,025 Cap Gemini S.A ...................................... 9,860 225,358 Sanofi-Synthelabo S.A ............................... 7,071 432,231 Suez S.A ............................................ 19,740 342,627 Total Fina S.A., Class B ............................ 11,225 1,603,184 Unibail S.A ......................................... 4,011 285,379 ------------ 4,581,727 ------------ GERMANY -- 0.75% Allianz AG .......................................... 2,558 243,337 Altana AG ........................................... 12,906 589,142 Bayer AG ............................................ 6,903 148,139 Deutsche Telekom .................................... 10,073 129,489 E.on AG ............................................. 2,960 119,434 Linde AG ............................................ 6,524 239,619 ------------ 1,469,160 ------------ ================================================================================ 7 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) SHARES VALUE ------ ------------ HONG KONG -- 0.11% Hong Kong Electric Holdings Ltd. .................... 56,000 $ 211,838 ------------ IRELAND -- 0.38% Bank of Ireland ..................................... 32,235 331,169 CRH PLC ............................................. 33,845 419,098 ------------ 750,267 ------------ ITALY -- 1.03% Assicurazioni Generali Spa .......................... 24,616 506,305 ENI Spa ............................................. 76,851 1,221,803 San Paolo-imi Spa ................................... 47,551 309,379 ------------ 2,037,487 ------------ JAPAN -- 4.35% AIFUL Corp. ......................................... 6,500 244,291 Bank of Yokohama (c) ................................ 47,000 185,750 Banyu Pharmaceutical Co., Ltd. ...................... 28,000 262,847 Benesse Corp.(c) .................................... 8,800 98,626 Canon, Inc. ......................................... 13,000 489,677 Daikin Industries Ltd. .............................. 13,000 205,949 Fuji Photo Film Co., Ltd. ........................... 19,000 619,617 Hitachi Credit Corp.(c) ............................. 11,600 139,001 Honda Motor Co. ..................................... 12,200 451,319 Kao Corp. ........................................... 12,000 263,420 Mitsubishi Corp. .................................... 41,000 250,485 Mitsui Fudosan Co., Ltd. ............................ 12,000 77,863 Murata Manufacturing Co., Inc. ...................... 14,700 576,009 Nintendo Corp., Ltd. ................................ 6,900 644,822 NTT DoCoMo, Inc. .................................... 207 382,009 Rohm Co. ............................................ 3,100 394,716 Sanyo Electric Co., Ltd. ............................ 67,000 174,459 Sekisui House Ltd. .................................. 15,000 106,177 Sompo Japan Insurance, Inc. ......................... 80,000 467,178 Sony Corp. .......................................... 11,300 472,301 Sumitomo Chemical Co. (c) ........................... 55,000 217,367 Takeda Chemical Industries Ltd. ..................... 14,100 589,332 Takefuji Corp. ...................................... 5,340 308,241 Toyota Motor Corp. .................................. 20,400 548,378 West Japan Railway Co. .............................. 117 415,075 ------------ 8,584,909 ------------ NETHERLANDS -- 1.91% ABN AMRO Holdings NV ................................ 12,200 199,465 Akzo Nobel NV ....................................... 9,367 297,151 Koninklijke Ahold NV ................................ 44,117 560,183 Philips Electronics NV .............................. 22,998 403,038 Reed Elsevier NV .................................... 79,352 970,114 TNT Post Group NV ................................... 14,520 235,415 VNU NV .............................................. 30,165 786,627 Wolters Kluwer NV ................................... 18,016 313,838 ------------ 3,765,831 ------------ NORWAY -- 0.17% Telenor ASA ......................................... 86,700 331,642 ------------ PORTUGAL -- 0.29% Electricidade de Portugal S.A ....................... 232,322 387,638 Portugal Telecom S.A ................................ 27,444 188,637 ------------ 576,275 ------------ SINGAPORE -- 0.32% DBS Group Holdings Ltd. ............................. 28,000 177,573 Neptune Orient Lines Ltd. (b) ....................... 328,000 173,975 Singapore Technologies Engineering Ltd. ............. 285,000 271,116 ------------ 622,664 ------------ SPAIN -- 0.59% Banco Bilbao Vizcaya S.A ............................ 62,567 598,796 Banco Santander Central Hispano S.A ................. 37,625 258,222 Telefonica S.A. (b) ................................. 33,239 297,534 ------------ 1,154,552 ------------ SWEDEN -- 1.03% Nordea AB ........................................... 89,000 392,228 Sandvik AB .......................................... 10,700 238,847 Svenska Cellulosa AB ................................ 17,500 590,477 Svenska Handelsbanken AB (c) ........................ 31,520 419,625 Swedish Match AB .................................... 49,620 390,090 ------------ 2,031,267 ------------ SWITZERLAND -- 1.92% Adecco S.A .......................................... 9,187 360,118 Compagnie Financiere ................................ 26,633 496,949 Credit Suisse Group ................................. 8,180 177,479 Givaudan S.A ........................................ 512 229,580 Nestle S.A .......................................... 5,008 1,061,216 Novartis AG ......................................... 13,672 498,845 Roche Holding AG .................................... 7,719 537,879 Serono S.A .......................................... 357 191,319 Swiss Re ............................................ 3,659 240,017 ------------ 3,793,402 ------------ UNITED KINGDOM -- 7.53% Abbey National PLC .................................. 39,248 327,299 Allied Domecq PLC ................................... 87,939 562,042 ARM Holdings PLC (b) ................................ 115,026 88,886 AstraZeneca PLC ..................................... 15,220 543,956 Barclays Bank PLC ................................... 122,488 759,191 BP PLC .............................................. 219,801 1,510,964 Brambles Industries, Ltd. ........................... 71,015 173,776 BT Group PLC ........................................ 138,999 436,358 Carlton Communications PLC .......................... 61,000 131,838 Charter PLC (b) ..................................... 33,676 41,442 Compass Group PLC ................................... 108,131 574,461 Electrocomponents PLC ............................... 52,025 240,376 Gallaher Group PLC .................................. 105,629 1,049,216 GlaxoSmithKline PLC ................................. 53,703 1,030,555 HSBC Holdings PLC ................................... 35,812 395,791 Invensys PLC ........................................ 277,191 235,395 Kingfisher PLC ...................................... 130,597 467,800 Lloyds TSB Group PLC ................................ 58,596 420,726 Matalan PLC ......................................... 42,121 142,401 National Grid Group PLC ............................. 79,322 582,950 Rentokil Initial PLC ................................ 155,412 550,432 Rolls-Royce PLC ..................................... 169,218 291,492 Royal Bank of Scotland Group PLC .................... 37,511 898,583 Safeway PLC ......................................... 101,845 349,643 Scottish & Southern Energy PLC ...................... 62,320 682,233 - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE ------ ------------ Shell Transport & Trading Co. PLC ................... 187,612 $ 1,235,323 Vodafone Group PLC .................................. 623,398 1,136,580 ------------ 14,859,709 ------------ Total International Equities ........................ 49,735,185 ------------ Total Equities (Cost $130,682,479) .................. 123,160,974 ------------ FACE AMOUNT ------ BONDS -- 14.37% U.S. BONDS -- 10.99% U.S. CORPORATE BONDS -- 1.50% Abbott Laboratories, Inc. 5.625%, due 07/01/06 .............................. $ 20,000 21,865 Alcoa, Inc. 6.000%, due 01/15/12 .............................. 10,000 11,009 American Express Co. 3.750%, due 11/20/07 .............................. 10,000 10,122 Anadarko Finance Co. 7.500%, due 05/01/31 .............................. 10,000 11,891 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 .............................. 60,000 77,629 AOL Time Warner, Inc. 7.625%, due 04/15/31 .............................. 50,000 51,389 Apache Corp. 6.250%, due 04/15/12 .............................. 10,000 11,209 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 .............................. 25,000 25,125 Avalonbay Communities, Inc. 7.500%, due 08/01/09 .............................. 30,000 33,538 Avon Products, Inc. 7.150%, due 11/15/09 .............................. 40,000 46,722 Bank of America Corp. 7.400%, due 01/15/11 .............................. 55,000 64,788 Bank One Corp. 7.875%, due 08/01/10 .............................. 35,000 41,948 Boeing Capital Corp. 7.375%, due 09/27/10 .............................. 10,000 11,158 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 .............................. 35,000 31,674 Bristol Myers Squibb Co. 5.750%, due 10/01/11 .............................. 5,000 5,324 Burlington Northern Santa Fe Corp. 6.875%, due 12/01/27 .............................. 5,000 5,534 7.082%, due 05/13/29 .............................. 25,000 28,411 Caterpillar, Inc. 6.550%, due 05/01/11 (c) .......................... 20,000 22,773 Cendant Corp. 6.875%, due 08/15/06 .............................. 35,000 36,318 Centex Corp. 9.750%, due 06/15/05 .............................. 85,000 94,656 Cingular Wireless, LLC 6.500%, due 12/15/11 .............................. 15,000 16,179 Citigroup, Inc. 7.250%, due 10/01/10 .............................. 55,000 63,848 Citizens Communications Co. 9.250%, due 05/15/11 .............................. 25,000 29,775 Coca Cola Co. 4.000%, due 06/01/05 .............................. 35,000 36,642 Comcast Cable Communications 6.750%, due 01/30/11 .............................. 45,000 46,822 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 .............................. 15,000 16,595 ConocoPhillips 8.500%, due 05/25/05 .............................. 15,000 17,057 8.750%, due 05/25/10 .............................. 25,000 31,286 Consolidated Edison, Inc. 7.500%, due 09/01/10 .............................. 65,000 77,558 Coors Brewing Co., 144A 6.375%, due 05/15/12 .............................. 20,000 22,351 Countrywide Home Loans, Inc. 5.500%, due 02/01/07 .............................. 35,000 37,161 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 .............................. 25,000 26,762 6.500%, due 01/15/12 .............................. 35,000 37,407 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 .............................. 10,000 12,307 Devon Financing Corp., ULC 6.875%, due 09/30/11 .............................. 20,000 22,277 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 .............................. 35,000 38,396 Dow Chemical Co. (The) 6.125%, due 02/01/11 .............................. 15,000 15,456 DTE Energy Co. 7.050%, due 06/01/11 .............................. 10,000 11,098 Duke Energy Field Services, LLC 6.875%, due 02/01/11 .............................. 15,000 14,952 7.875%, due 08/16/10 .............................. 55,000 58,208 EOP Operating LP 7.000%, due 07/15/11 .............................. 5,000 5,448 7.875%, due 07/15/31 .............................. 20,000 21,780 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 .............................. 30,000 34,495 First Data Corp. 5.625%, due 11/01/11 .............................. 30,000 31,746 FirstEnergy Corp. 6.450%, due 11/15/11 .............................. 45,000 44,768 First Union National Bank 7.800%, due 08/18/10 .............................. 35,000 42,254 FleetBoston Financial Corp. 7.375%, due 12/01/09 .............................. 20,000 22,857 Ford Motor Co. 7.450%, due 07/16/31 .............................. 15,000 13,048 Ford Motor Credit Co. 5.800%, due 01/12/09 .............................. 55,000 51,012 7.375%, due 02/01/11 .............................. 30,000 29,172 General Electric Capital Corp. 6.750%, due 03/15/32 .............................. 60,000 66,335 General Motors Acceptance Corp. 6.875%, due 09/15/11 .............................. 70,000 69,808 8.000%, due 11/01/31 .............................. 25,000 25,136 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 .............................. 20,000 22,325 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 .............................. 35,000 38,586 Household Finance Corp. 6.750%, due 05/15/11 .............................. 55,000 58,640 ================================================================================ 9 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ------ ------------ HSBC Holdings PLC 5.250%, due 12/12/12 .............................. $ 15,000 $ 15,375 International Business Machines Corp. 5.875%, due 11/29/32 .............................. 15,000 14,842 International Paper Co. 6.750%, due 09/01/11 .............................. 20,000 22,254 John Deere Capital Corp. 7.000%, due 03/15/12 .............................. 20,000 23,188 Kerr-McGee Corp. 7.875%, due 09/15/31 .............................. 10,000 12,216 Kimberly Clark Corp., 144A 4.500%, due 07/30/05 .............................. 45,000 47,524 Kohls Corp. 7.250%, due 06/01/29 .............................. 5,000 5,875 Kraft Foods, Inc. 4.625%, due 11/01/06 .............................. 10,000 10,513 6.500%, due 11/01/31 .............................. 25,000 27,471 Kroger Co. 7.500%, due 04/01/31 .............................. 10,000 11,186 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 .............................. 20,000 22,137 Lincoln National Corp. 6.200%, due 12/15/11 .............................. 25,000 26,661 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 (c) .......................... 75,000 39,375 9.125%, due 05/01/31 .............................. 10,000 4,450 Morgan Stanley 6.750%, due 04/15/11 .............................. 40,000 44,451 News America Holdings, Inc. 7.125%, due 04/08/28 .............................. 75,000 71,903 Occidental Petroleum Corp. 8.450%, due 02/15/29 .............................. 20,000 25,657 Pemex Project Funding Master Trust, 144A 8.000%, due 11/15/11 .............................. 45,000 48,375 Pepsi Bottling Group, Inc., 144A 5.625%, due 02/17/09 .............................. 35,000 38,139 Praxair, Inc. 6.375%, due 04/01/12 .............................. 30,000 33,537 Progress Energy, Inc. 7.000%, due 10/30/31 .............................. 20,000 20,843 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 .............................. 110,000 71,500 Rohm & Haas Co. 7.850%, due 07/15/29 .............................. 10,000 12,503 SBC Communications, Inc. 5.875%, due 02/01/12 .............................. 20,000 21,602 Sempra Energy 7.950%, due 03/01/10 .............................. 45,000 51,312 SLM Corp. 5.625%, due 04/10/07 .............................. 35,000 38,065 Southern Power Co. 6.250%, due 07/15/12 .............................. 10,000 10,565 Target Corp. 7.000%, due 07/15/31 .............................. 25,000 28,320 Telus Corp. 8.000%, due 06/01/11 .............................. 20,000 19,200 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 .............................. 50,000 55,055 Unilever Capital Corp. 7.125%, due 11/01/10 .............................. 30,000 35,409 United Technologies Corp. 6.100%, due 05/15/12 .............................. 40,000 44,724 U.S. Bank N.A., Minnesota 6.375%, due 08/01/11 .............................. 10,000 11,215 Valero Energy Corp. 7.500%, due 04/15/32 .............................. 20,000 20,259 Verizon New England, Inc. 6.500%, due 09/15/11 .............................. 10,000 11,042 Verizon New York, Inc. 7.375%, due 04/01/32 .............................. 5,000 5,782 Walt Disney Co. 6.375%, due 03/01/12 .............................. 10,000 10,938 Washington Mutual, Inc. 5.625%, due 01/15/07 .............................. 15,000 16,052 Wells Fargo Bank, N.A. 6.450%, due 02/01/11 .............................. 50,000 56,130 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 .............................. 15,000 16,268 ------------ 2,954,543 ------------ ASSET-BACKED SECURITIES -- 0.42% Conseco Finance Corp.,00-B, Class AF4 7.870%, due 02/15/31 .............................. 85,000 89,881 Conseco Finance Corp., 02-B, Class A2 5.590%, due 05/15/33 .............................. 75,000 76,249 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 .............................. 35,000 31,333 Delta Air Lines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 .............................. 55,000 54,943 Peco Energy Transition Trust, 99-A, Class A7 6.130%, due 03/01/09 .............................. 230,000 257,887 Union Pacific Corp. 6.700%, due 12/01/06 .............................. 60,000 66,374 United Airlines, Inc., E.E.T.C. (b) (e) (f) 7.811%, due 10/01/09 .............................. 68,731 27,714 Vanderbilt Mortgage Finance, 00-B, Class IA3 8.255%, due 05/07/17 .............................. 215,000 231,650 ------------ 836,031 ------------ INTERNATIONAL DOLLAR BONDS -- 0.03% Canadian National Railway Co. 6.900%, due 07/15/28 .............................. 15,000 17,100 Deutsche Telekom International Finance 8.250%, due 06/15/30 .............................. 15,000 17,327 France Telecom S.A. 8.500%, due 03/01/31 .............................. 15,000 18,260 ------------ 52,687 ------------ MORTGAGE-BACKED SECURITIES -- 4.51% Bear Stearns Commercial Mortgage Securities, 00-WF1, Class A2 7.780%, due 02/15/32 .............................. 210,000 252,566 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B 7.180%, due 08/10/10 .................... 275,000 319,572 DLJ Commercial Mortgage Corp., 99-CG2, Class A1B 7.300%, due 06/10/32 .................... 275,000 319,772 ================================================================================ 10 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ------ ------------ DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 .................... $ 200,000 $ 234,343 Fannie Mae Grantor Trust 7.125%, due 01/15/30 .............................. 155,000 191,277 7.500%, due 06/25/30 .............................. 182,059 197,363 Fannie Mae Whole Loan, 01-W3, Class A 7.000%, due 09/25/41 .............................. 227,286 249,050 Federal Home Loan Mortgage Corp. 5.500%, due 09/01/17 .............................. 137,466 142,744 6.000%, due 10/01/29 .............................. 87,664 91,031 Federal Home Loan Mortgage Corp., Gold 6.500%, due 04/01/29 .............................. 451,261 470,265 Federal National Mortgage Association 5.500%, due 03/15/11 .............................. 670,000 734,323 5.500%, due 12/01/17 .............................. 168,000 174,428 6.000%, due 11/01/28 .............................. 572,624 592,765 6.000%, due 06/01/31 .............................. 55,718 57,678 6.500%, due 11/01/31 .............................. 33,500 34,897 6.500%, due 08/01/32 .............................. 701,558 730,809 6.500%, due 09/01/32 .............................. 198,004 206,260 7.000%, due 06/01/32 .............................. 387,447 407,520 7.500%, due 05/01/31 .............................. 94,739 100,583 Federal National Mortgage Association Whole Loan, 95-W3, Class A 9.000%, due 04/25/25 .............................. 6,607 7,323 Federal National Mortgage Association, Grantor Trust, 01-T5, Class A3 7.500%, due 06/19/41 .............................. 307,605 327,073 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 .............. 125,000 135,872 Government National Mortgage Association 6.000%, due 11/20/28 .............................. 201,999 209,796 6.000%, due 01/15/29 .............................. 141,680 147,703 6.000%, due 02/20/29 .............................. 175,207 181,970 6.000%, due 05/20/29 .............................. 448,426 465,735 8.000%, due 12/15/22 .............................. 76,057 83,316 9.000%, due 11/15/04 .............................. 3,119 3,506 GS Mortgage Securities Corp. II, 96-PL, Class A2 7.410%, due 02/15/27 ..................... 65,000 69,749 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1 6.410%, due 06/15/31 .............. 213,454 230,916 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 .............. 70,000 82,081 Merrill Lynch Mortgage Investors, Inc, 97-C1, Class A3 7.120%, due 06/18/29 ..................... 500,000 561,849 Morgan Stanley Dean Witter Capital I, 00-LIFE, Class A2 7.570%, due 12/15/09 ............ 150,000 177,417 Nomura Asset Securities Corp., 95-MD3, Class A/B 8.150%, due 03/04/20 .................... 92,461 101,821 Norwest Asset Securities Corp., 99-3, Class A3 6.000%, due 01/25/29 ..................... 57,804 57,835 Norwest Asset Securities Corp., 96-2, Class A9 7.000%, due 09/25/11 ..................... 174,135 177,012 Residential Asset Securitization Trust, 98-A6, Class IA2 6.750%, due 07/25/28 .................... 278,263 278,527 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 .............. 80,000 90,448 ------------ 8,897,195 ------------ U.S. GOVERNMENT OBLIGATIONS -- 4.53% U.S. Treasury Bond TIP 3.000%, due 07/15/12 .............................. 310,000 332,154 U.S. Treasury Note 2.875%, due 06/30/04 (c) .......................... 1,402,000 1,432,997 3.250%, due 08/15/07 .............................. 4,679,000 4,794,880 4.750%, due 11/15/08 (c) .......................... 565,000 616,733 5.000%, due 08/15/11 .............................. 900,000 986,906 6.125%, due 08/15/07 (c) .......................... 25,000 28,748 6.750%, due 05/15/05 .............................. 630,000 702,376 8.000%, due 11/15/21 .............................. 25,000 34,834 ------------ 8,929,628 ------------ Total U.S Bonds ..................................... 21,670,084 ------------ INTERNATIONAL BONDS -- 3.38% AUSTRALIA -- 0.19% Government of Australia 6.250%, due 04/15/15 .......................... AUD 85,000 51,542 6.500%, due 05/15/13 .............................. 157,000 97,623 9.000%, due 09/15/04 .............................. 110,000 66,310 10.000%, due 02/15/06 ............................. 235,000 152,842 ------------ 368,317 ------------ CANADA -- 0.46% Burlington Resources Finance Co. 6.680%, due 02/15/11 .......................... CAD 15,000 16,768 Government of Canada 5.000%, due 12/01/03 .............................. 52,000 33,553 5.750%, due 06/01/29 .............................. 40,000 26,674 6.000%, due 09/01/05 .............................. 350,000 236,160 6.000%, due 06/01/08 .............................. 270,000 186,004 6.000%, due 06/01/11 .............................. 302,000 208,020 8.000%, due 06/01/23 .............................. 235,000 196,832 ------------ 904,011 ------------ FINLAND -- 0.07% Government of Finland 5.750%, due 02/23/11 .......................... EUR 125,000 145,997 ------------ FRANCE -- 0.53% Government of France 3.500%, due 07/12/04 .......................... EUR 340,000 360,779 5.500%, due 04/25/07 .............................. 245,000 278,487 5.500%, due 04/25/10 .............................. 178,000 203,974 5.500%, due 04/25/29 .............................. 28,500 32,809 8.500%, due 10/25/19 .............................. 110,000 167,065 ------------ 1,043,114 ------------ GERMANY -- 0.66% Bundesrepublik Deutschland 4.500%, due 07/04/09 .......................... EUR 94,000 102,695 6.000%, due 01/04/07 .............................. 8,800 10,156 6.500%, due 07/04/27 .............................. 175,000 227,137 Government of Germany 5.000%, due 07/04/11 .............................. 267,000 297,809 6.000%, due 01/05/06 .............................. 210,000 238,738 Treuhandanstalt 6.750%, due 05/13/04 .............................. 385,000 425,513 ------------ 1,302,048 ------------ ================================================================================ 11 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ------ ------------ ITALY -- 0.73% Buoni Poliennali Del Tes 3.250%, due 04/15/04 .......................... EUR 601,000 $ 635,704 5.000%, due 05/01/08 .............................. 47,000 52,510 5.250%, due 11/01/29 (c) .......................... 190,000 209,502 5.500%, due 11/01/10 .............................. 240,000 275,576 8.750%, due 07/01/06 .............................. 210,000 260,470 ------------ 1,433,762 ------------ NETHERLANDS -- 0.14% Government of Netherlands 5.000%, due 07/15/11 .......................... EUR 250,000 278,713 ------------ SPAIN -- 0.37% Government of Spain 3.000%, due 01/31/03 .......................... EUR 30,000 31,482 3.250%, due 01/31/05 .............................. 390,000 412,901 4.750%, due 07/30/14 .............................. 125,000 134,736 5.150%, due 07/30/09 .............................. 83,000 93,654 6.000%, due 01/31/29 .............................. 45,000 54,802 ------------ 727,575 ------------ SWEDEN -- 0.13% Government of Sweden 5.000%, due 01/15/04 .......................... SEK 740,000 86,074 6.750%, due 05/05/14 .............................. 240,000 32,097 8.000%, due 08/15/07 .............................. 1,020,000 135,631 ------------ 253,802 ------------ UNITED KINGDOM -- 0.10% Royal Bank of Scotland 9.118%, due 12/31/49 .......................... GBP 15,000 18,497 U.K. Treasury 5.000%, due 03/07/12 .............................. 40,000 67,384 5.750%, due 12/07/09 .............................. 9,500 16,623 6.000%, due 12/07/28 .............................. 23,500 46,592 8.500%, due 12/07/05 .............................. 32,000 57,941 ------------ 207,037 ------------ Total International Bonds ........................... 6,664,376 ------------ Total Bonds (Cost $27,166,911) ...................... 28,334,460 SHARES VALUE ------ ------------ INVESTMENT COMPANIES -- 15.06% UBS High Yield Relationship Fund .................... 828,275 $ 11,163,072 UBS Emerging Markets Debt Relationship Fund ................................. 105,440 3,557,096 UBS Emerging Markets Equity Relationship Fund ................................. 1,359,287 10,808,510 UBS U.S. Small Cap Equity Relationship Fund ................................. 174,628 4,175,398 ------------ Total Investment Companies (Cost $27,276,106) ................................ 29,704,076 ------------ INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 3.36% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $6,624,623) ................................. 6,624,623 6,624,623 ------------ SHORT-TERM INVESTMENTS -- 8.74% OTHER -- 7.98% UBS Supplementary Trust U.S. Cash Management Prime Fund ................... 15,738,641 15,738,641 ------------ FACE AMOUNT ------ U.S. GOVERNMENT OBLIGATIONS -- 0.76% U.S. Treasury Bill, due 02/06/03 (d) ................ $1,500,000 1,498,270 ------------ Total Short Term Investments (Cost $17,236,361) ................................ 17,236,911 Total Investments (Cost $208,986,480) -- 103.98% (a) ................ 205,061,044 Liabilities, less cash and other assets -- (3.98)% ........................... (7,842,239) ------------ Net Assets -- 100% .................................. $197,218,805 ============ ================================================================================ 12 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $208,986,480; and net unrealized depreciation consisted of: Gross unrealized appreciation ...................... $ 8,915,632 Gross unrealized depreciation ...................... (12,841,068) ------------ Net unrealized depreciation ................. $ (3,925,436) ============ (b) Non-income producing security. (c) Security, or portion thereof, was on loan at December 31, 2002. (d) All or a portion of these securities was pledged to cover margin requirements for futures contracts. (e) Security is in default. (f) Security is illiquid. This security amounted to $27,714 or 0.01% of net assets. % 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 December 31, 2002, the value of these securities amounted to $255,421 or 0.13% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS UBS Global Allocation Fund had the following open forward foreign currency contracts as of December 31, 2002:
EXPIRATION LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) ................................................ 01/21/03 20,150,000 $11,326,535 $ 430,040 British Pound (GBP) .................................................... 01/21/03 2,200,000 3,537,084 159,644 Canadian Dollar (CAD) .................................................. 01/21/03 11,500,000 7,274,101 (206,276) Euro (EUR) ............................................................. 01/21/03 24,557,708 25,750,318 1,751,465 Japanese Yen (JPY) ..................................................... 01/21/03 115,000,000 969,741 7,583 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) ................................................ 01/21/03 7,400,000 4,159,621 (112,767) British Pound (GBP) .................................................... 01/21/03 9,400,000 15,112,995 (731,189) Euro (EUR) ............................................................. 01/21/03 5,551,816 5,821,432 (452,770) Japanese Yen (JPY) ..................................................... 01/21/03 255,000,000 2,150,295 (40,726) Swedish Krone (SEK) .................................................... 01/21/03 8,750,000 1,002,901 (85,200) ---------- Total net unrealized gain on Forward Foreign Currency Contracts ... $ 719,804 ==========
FUTURES CONTRACTS UBS Global Allocation Fund had the following open futures contracts as of December 31, 2002:
EXPIRATION CURRENT UNREALIZED DATE COST VALUE GAIN ---------- ---- ------- ---------- U.S. INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Notes, 71 contracts ............................. March 2003 $7,841,560 $8,040,750 $199,190 ==========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 2002 was $1,498,270. ================================================================================ See accompanying notes to financial statements. 13 - -------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS Global Equity Fund declined 10.99%, compared to a 12.01% decline for the MSCI World Equity (Free) Index. Since the Fund's inception on January 28, 1994 through December 31, 2002, Class Y shares returned 4.62% on an annualized basis. This compares favorably to the 4.17% return of the Fund's benchmark. (Returns for all share classes over various time periods are shown on page 15. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW The last six months in 2002 were a study in contrasts for global equity investors. In the third quarter of 2002, global equity markets fell sharply. Stock prices were held back by disappointing earnings announcements, fading global economic prospects, and corporate misconduct. In addition, investors became increasingly risk-averse as the geopolitical climate deteriorated. Then, during the fourth quarter, global equities advanced approximately 8%, with some smaller country markets turning in double-digit returns. Corporate investigations continued, but there were no new crises. Earnings reports were mixed, but the relentless wave of missed targets tapered off. Overall market sentiment was that the worst was in the past. Virtually every region was affected by these global conditions. In the U.S., the economic indicators were inconsistent, and took the equity markets along for a ride. Global equity markets rallied in the fourth quarter, but not enough to reverse the prior quarter's market losses, and U.S. stocks, as measured by the S&P 500 Index, declined 10.29% in the second half of 2002. Europe's economic slowdown and market declines had been less severe than those felt in the U.S., leading many to hope Europe's recovery would occur more quickly. However, the economy stalled early in 2002, and the equity markets fell in turn. The European Monetary Union intervened by lowering interest rates in December, but the move was too little, and came too late. The net result was a decline of 14.39% for the MSCI Europe Index over the six-month period. The news was no better in Japan, where signs of improving conditions in January and February of 2002 were smothered by political infighting. All efforts at reform were stymied, and the Prime Minister's influence waned. At period end, the Japanese equity market, as measured by the TOPIX, had declined 16.41% over the six months ended December 31, 2002. SECTOR WEIGHTINGS WERE PRIMARY DRIVERS OF PERFORMANCE As a result of insight provided by our team of analysts via our integrated global investment platform, we sought to maintain a delicate balance between sectors sensitive to an economic recovery and sectors immune to an economic decline. More specifically, the Fund saw particularly strong contributions from its holdings in pharmaceuticals. The industry, tainted by a few well-publicized drug failures, had seen its stock prices fall. The result was attractive valuations on companies that we believed offered long-term sustainable growth potential. We remain positive on this sector going into 2003, and intend to increase our positions in core holdings. The Fund also benefited from an underweight position in consumer staples and technology hardware. Earlier in the year, risk-averse investors had flocked to consumer staples companies, since the sector has historically delivered steady earnings, even during periods of economic decline. However, this intense interest drove stock prices up beyond their true value, which set the stage for a correction. Ultimately, technology hardware companies posted one of the biggest declines over the six-month period. Presently, forecasts for IT-related capital expenditures remain low and valuations are not compelling. Finally, the Fund's geographic weightings also helped relative performance, especially its underweight to Japan. LOOKING AHEAD We believe that conditions are right for global equities to deliver positive returns in 2003. Investors' fears have subsided somewhat, and, despite all the negative news over the six-month review period, there were some positive signs as well: industrial production increased, consumer spending remained relatively stable and there were small advances in corporate spending. These statistics, though not painting a picture of rapid recovery, do suggest that a below-trend recovery is underway. That said, the market is running on emotion at this point. The potential for future terrorist attacks, war in the Middle East or increasing hostilities in Korea could all change the situation dramatically. Our strategy in this environment is to closely monitor events while employing our price to intrinsic value investment philosophy to pursue attractive opportunities in a variety of sectors and markets, and to maintain a risk-managed diversified portfolio. ================================================================================ 14 - -------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS A -11.14% -15.73% -8.75% -0.56% -0.85% - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS B -11.50 -16.42 N/A N/A -14.64 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS C -11.43 -16.36 N/A N/A -14.26 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS Y -10.99 -15.54 -8.43 -0.24 4.62 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS A+ -16.07 -20.40 -10.44 -1.68 -1.86 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS B+ -15.80 -20.49 N/A N/A -17.67 - ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND CLASS C+ -13.13 -18.01 N/A N/A -15.02 - ------------------------------------------------------------------------------------------------------- MSCI World Equity (Free) Index -12.01 -19.65 -16.50 -1.91 4.17 - -------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL EQUITY FUND CLASS A 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 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. - -------------------------------------------------------------------------------- GEOGRAPHIC ALLOCATION - -------------------------------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) - ------------------------------------------------- United States 50.0% United Kingdom 14.4 Japan 8.1 France 4.8 Netherlands 3.3 Switzerland 3.2 Italy 2.1 Finland 1.9 Australia 1.7 Sweden 1.6 Germany 1.3 Ireland 0.6 Spain 0.6 Portugal 0.5 Norway 0.5 Belgium 0.3 Singapore 0.2 - ------------------------------------------------- Total 95.1% ================================================================================ 15 - -------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------- TOP TEN U.S. EQUITY HOLDINGS TOP TEN INTERNATIONAL EQUITY HOLDINGS - --------------------------------------------------- ---------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Percentage of Net Assets Net Assets - --------------------------------------------------- ---------------------------------------------------- SPDR Trust Series 1 3.0% BP PLC 2.4% Citigroup, Inc. 2.5 Total Fina S.A., Class B 1.8 Johnson & Johnson 2.1 Gallaher Group PLC 1.4 Wyeth, Inc. 1.6 ENI Spa 1.4 Microsoft Corp. 1.6 Shell Transport & Trading Co. PLC 1.2 Wells Fargo & Co. 1.6 Reed Elsevier NV 1.1 SBC Communications, Inc. 1.5 Aventis S.A., Class A 1.0 Philip Morris Cos. 1.4 UPM-Kymmene Oyj 1.0 Nextel Communications, Inc., Class A 1.3 Vodafone Group PLC 0.9 Bristol-Myers Squibb Co. 1.3 VNU NV 0.9 - --------------------------------------------------- ---------------------------------------------------- Total 17.9% Total 13.1%
- -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION - -------------------------------------------------------------------------------- AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- U.S. EQUITIES Banks ................................................................ 3.55% Beverages & Tobacco .................................................. 1.41 Broadcasting & Publishing ............................................ 1.47 Capital Goods ........................................................ 1.13 Chemicals ............................................................ 1.35 Computer Software .................................................... 2.51 Computer Systems ..................................................... 1.65 Electric Components .................................................. 0.53 Energy ............................................................... 3.11 Financial Services ................................................... 8.30 Health: Drugs ........................................................ 5.44 Health: Non-Drugs .................................................... 3.83 Industrial Components ................................................ 0.72 Internet Services .................................................... 0.40 Metals Non-Ferrous ................................................... 0.61 Multi-Industry ....................................................... 0.95 Retail/Apparel ....................................................... 1.40 Services/Miscellaneous ............................................... 4.87 Technology ........................................................... 0.56 Telecommunications -- Services ....................................... 3.84 Transportation ....................................................... 1.14 Utilities ............................................................ 1.24 ------ Total U.S. Equities ......................................... 50.01 INTERNATIONAL EQUITIES Aerospace & Military ................................................. 0.23 Appliances & Household Durables ...................................... 0.25 Autos/Durables ....................................................... 0.94 Banks ................................................................ 4.39 Beverages & Tobacco .................................................. 2.43 Broadcasting & Publishing ............................................ 1.97 Business & Public Service ............................................ 0.21 Chemicals ............................................................ 2.88 Computer Software .................................................... 0.17 Construction ......................................................... 0.81 Electric Components .................................................. 2.26 Electronics .......................................................... 0.19 Energy ............................................................... 3.20 Financial Services ................................................... 1.84 Food & House Products ................................................ 2.84 Forest Products ...................................................... 0.98 Health: Drugs ........................................................ 3.97 Health: Non-Drugs .................................................... 0.46 Housing/Paper ........................................................ 0.67 Industrial Components ................................................ 0.51 Insurance ............................................................ 1.37 Machinery & Engineering .............................................. 0.52 Multi-Industry ....................................................... 1.01 Real Estate .......................................................... 0.36 Recreation ........................................................... 1.57 Retail/Apparel ....................................................... 1.09 Services/Miscellaneous ............................................... 1.51 Telecommunications ................................................... 2.52 Transportation ....................................................... 1.64 Utilities ............................................................ 1.12 ------ Total International Equities ................................ 43.91 INVESTMENT COMPANIES ................................................. 1.95 SHORT-TERM INVESTMENTS ............................................... 2.64 ------ TOTAL INVESTMENTS ................................................. 98.51 CASH AND OTHER ASSETS, LESS LIABILITIES .................................................. 1.49 ------ NET ASSETS ........................................................... 100.00% ====== ================================================================================ 16 - -------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE ------ ------------ EQUITIES -- 93.92% U.S. EQUITIES -- 50.01% Advanced Micro Devices, Inc. (b) .................... 25,600 $ 165,376 Allergan, Inc. ...................................... 5,500 316,910 American Electric Power Co., Inc. ................... 3,600 98,388 American International Group, Inc. .................. 5,847 338,249 Anthem, Inc. (b) .................................... 5,800 364,820 AOL Time Warner, Inc. (b) ........................... 17,400 227,940 Ascential Software Corp. (b) ........................ 759 1,822 Bank of New York Co., Inc. .......................... 10,200 244,392 Baxter International, Inc. .......................... 17,100 478,800 BEA Systems, Inc. (b) ............................... 25,800 295,926 Bristol-Myers Squibb Co. ............................ 30,700 710,705 Burlington Northern Santa Fe Corp. .................. 24,700 642,447 Cephalon, Inc. (b) .................................. 7,000 340,676 Cisco Systems, Inc. (b) ............................. 12,300 161,130 Citigroup, Inc. ..................................... 39,800 1,400,562 CMS Energy Corp. .................................... 12,000 113,280 Computer Sciences Corp. ............................. 3,200 110,240 ConocoPhillips ...................................... 8,818 426,703 Consolidated Edison, Inc. ........................... 3,600 154,152 Constellation Energy Group .......................... 5,000 139,100 Costco Wholesale Corp. (b) .......................... 19,500 547,170 Dominion Resources, Inc. ............................ 1,600 87,840 Dow Chemical Co. (The) .............................. 2,600 77,220 E.I. du Pont de Nemours & Co. ....................... 10,700 453,680 Exelon Corp. ........................................ 3,700 195,249 FirstEnergy Corp. ................................... 9,707 320,040 FleetBoston Financial Corp. ......................... 12,000 291,600 FPL Group Corp. ..................................... 5,400 324,702 Freddie Mac ......................................... 9,000 531,450 General Electric Co. ................................ 22,000 535,700 GreenPoint Financial Corp. .......................... 4,000 180,720 Hartford Financial Services Group, Inc. (The) ................................. 5,000 227,150 Hewlett-Packard Co. ................................. 23,891 414,748 Household International, Inc. ....................... 19,000 528,390 Illinois Tool Works, Inc. ........................... 9,900 642,114 Ingersoll-Rand Co., Class A ......................... 9,500 409,070 International Business Machines Corp. ............... 4,600 356,500 Johnson & Johnson ................................... 21,802 1,170,985 J.P. Morgan Chase & Co. ............................. 22,900 549,600 Masco Corp. ......................................... 16,400 345,220 McGraw-Hill Cos., Inc. .............................. 5,700 344,508 MeadWestvaco Corp. .................................. 13,500 333,585 Mellon Financial Corp. .............................. 11,700 305,487 Merck & Co., Inc. ................................... 4,500 254,745 Microsoft Corp. (b) ................................. 17,900 925,430 Morgan Stanley ...................................... 8,000 319,360 Motorola, Inc. ...................................... 20,500 177,325 Nextel Communications, Inc., Class A (b) ............ 64,200 741,510 Omnicom Group ....................................... 6,300 406,980 Pfizer, Inc. ........................................ 4,801 146,766 Philip Morris Cos., Inc. ............................ 19,700 798,441 Praxair, Inc. ....................................... 4,000 231,080 Principal Financial Group, Inc. ..................... 4,400 132,572 RadioShack Corp. .................................... 13,200 247,368 Rational Software Corp. (b) ......................... 18,900 196,371 Sapient Corp. (b) ................................... 110,200 225,910 SBC Communications, Inc. ............................ 31,300 848,543 Schlumberger Ltd. ................................... 4,700 197,823 Sempra Energy ....................................... 17,200 406,780 SICOR, Inc. (b) ..................................... 24,100 381,985 SPDR Trust Series 1 ................................. 19,000 1,676,370 Texas Instruments, Inc. ............................. 9,100 136,591 U.S. Bancorp ........................................ 19,000 403,180 United Health Group, Inc. ........................... 6,200 517,700 United Technologies Corp. ........................... 5,100 315,894 Verizon Communications, Inc. ........................ 10,500 406,875 Viacom, Inc., Class A (b) ........................... 2,060 84,068 Viacom, Inc., Class B (b) ........................... 9,900 403,524 Wells Fargo & Co. ................................... 19,000 890,530 Wyeth, Inc. ......................................... 24,800 927,520 ------------ Total U.S. Equities ................................. 28,305,587 ------------ INTERNATIONAL EQUITIES -- 43.91% AUSTRALIA -- 1.68% Mayne Nickless Ltd. ................................. 57,500 105,553 National Australia Bank Ltd., Preferred ............. 10,600 345,030 QBE Insurance Group Ltd. ............................ 48,804 223,975 Westpac Banking Corp., Ltd. ......................... 35,853 277,597 ------------ 952,155 ------------ BELGIUM -- 0.31% Fortis .............................................. 9,892 174,394 ------------ FINLAND -- 1.85% Nokia Oyj ........................................... 30,900 491,258 UPM-Kymmene Oyj ..................................... 17,300 555,529 ------------ 1,046,787 ------------ FRANCE -- 4.82% Aventis S.A., Class A ............................... 10,623 577,452 BNP Paribas ......................................... 9,978 406,584 Cap Gemini S.A ...................................... 4,200 95,994 Sanofi-Synthelabo S.A ............................... 2,520 154,041 Suez S.A ............................................ 15,156 263,063 Total Fina S.A., Class B ............................ 7,172 1,024,324 Unibail S.A ......................................... 2,874 204,482 ------------ 2,725,940 ------------ GERMANY -- 1.29% Allianz AG .......................................... 1,530 145,545 Altana AG ........................................... 7,251 330,999 Bayer AG ............................................ 6,090 130,692 Linde AG ............................................ 3,401 124,915 ------------ 732,151 ------------ IRELAND -- 0.62% CRH PLC ............................................. 28,489 352,775 ------------ ITALY -- 2.08% Assicurazioni Generali Spa .......................... 8,004 164,627 ENI Spa ............................................. 49,334 784,329 San Paolo-imi Spa ................................... 35,498 230,959 ------------ 1,179,915 ------------ JAPAN -- 7.53% AIFUL Corp. ......................................... 3,950 148,454 Bank of Yokohama .................................... 28,000 110,660 Banyu Pharmaceutical Co., Ltd. ...................... 13,500 126,730 ================================================================================ 17 - -------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE ------ ------------ Benesse Corp. ....................................... 9,800 $ 109,834 Fuji Photo Film Co., Ltd. ........................... 13,000 423,949 Hitachi Credit Corp. ................................ 7,900 94,664 Honda Motor Co. ..................................... 7,600 281,149 Kao Corp. ........................................... 6,000 131,710 Murata Manufacturing Co., Inc. ...................... 10,500 411,435 Nintendo Corp., Ltd. ................................ 5,000 467,262 NTT DoCoMo, Inc. .................................... 55 101,500 Rohm Co. ............................................ 3,000 381,984 Sanyo Electric Co., Ltd. ............................ 42,000 109,362 Sekisui House Ltd. .................................. 15,000 106,177 Sompo Japan Insurance, Inc. ......................... 28,000 163,512 Sony Corp. .......................................... 3,400 142,108 Takeda Chemical Industries Ltd. ..................... 5,700 238,240 Takefuji Corp. ...................................... 3,980 229,738 Toyota Motor Corp. .................................. 9,400 252,684 West Japan Railway Co. .............................. 65 230,597 ------------ 4,261,749 ------------ NETHERLANDS -- 3.34% Akzo Nobel NV ....................................... 1,977 62,717 Koninklijke Ahold NV ................................ 34,756 441,321 Philips Electronics NV .............................. 15,482 271,320 Reed Elsevier NV .................................... 49,772 608,485 VNU NV .............................................. 19,491 508,276 ------------ 1,892,119 ------------ NORWAY -- 0.45% Telenor ASA ......................................... 66,400 253,991 ------------ PORTUGAL -- 0.49% Electricidade de Portugal S.A ....................... 165,780 276,610 ------------ SINGAPORE -- 0.23% Singapore Technologies Engineering Ltd. ............. 136,000 129,375 ------------ SPAIN -- 0.61% Banco Bilbao Vizcaya S.A ............................ 35,952 344,078 ------------ SWEDEN -- 1.60% Sandvik AB .......................................... 13,000 290,189 Svenska Cellulosa AB ................................ 11,250 379,592 Swedish Match AB .................................... 29,700 233,488 ------------ 903,269 ------------ SWITZERLAND -- 3.19% Adecco S.A .......................................... 7,037 275,841 Compagnie Financiere ................................ 13,246 247,159 Givaudan S.A ........................................ 292 130,932 Nestle S.A .......................................... 2,344 496,704 Roche Holding AG .................................... 3,218 224,238 Serono S.A .......................................... 347 185,960 Swiss Re ............................................ 3,712 243,494 ------------ 1,804,328 ------------ UNITED KINGDOM -- 13.82% Abbey National PLC .................................. 14,506 120,969 Allied Domecq PLC ................................... 50,210 320,906 ARM Holdings PLC (b) ................................ 87,185 67,372 AstraZeneca PLC ..................................... 4,330 154,752 Barclays Bank PLC ................................... 64,850 401,946 BP PLC .............................................. 198,966 1,367,739 Brambles Industries, Ltd. ........................... 48,414 118,471 BT Group PLC ........................................ 21,326 66,949 Compass Group PLC ................................... 58,794 312,351 Electrocomponents PLC ............................... 31,925 147,506 Gallaher Group PLC .................................. 82,418 818,660 GlaxoSmithKline PLC ................................. 18,016 345,725 Invensys PLC ........................................ 201,621 171,220 Kingfisher PLC ...................................... 83,221 298,098 Matalan PLC ......................................... 21,053 71,175 Rentokil Initial PLC ................................ 131,939 467,296 Rolls-Royce PLC ..................................... 179,120 308,549 Royal Bank of Scotland Group PLC .................... 19,917 477,115 Safeway PLC ......................................... 64,835 222,585 Scottish & Southern Energy PLC ...................... 32,014 350,466 Shell Transport & Trading Co. PLC ................... 106,107 698,657 Vodafone Group PLC .................................. 281,461 513,160 ------------ 7,821,667 ------------ Total International Equities ........................ 24,851,303 ------------ Total Equities (Cost $55,592,659) ................... 53,156,890 ------------ INVESTMENT COMPANIES -- 1.95% JAPAN -- 0.52% iShares MSCI Japan Index Fund ....................... 42,000 291,900 ------------ UNITED KINGDOM -- 0.62% iShares MSCI United Kingdom Index Fund .............. 28,900 351,135 ------------ OTHER -- 0.81% iShares MSCI EMU Index Fund ......................... 10,600 461,100 ------------ Total Investment Companies (Cost $1,103,303) ................................. 1,104,135 ------------ SHORT-TERM INVESTMENTS -- 2.64% OTHER -- 2.64% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,493,820) ............................... 1,493,820 1,493,820 ------------ Total Investments (Cost $58,189,782) -- 98.51% (a) .................. 55,754,845 Cash and other assets, less liabilities -- 1.49% ......................... 842,131 ------------ Net Assets -- 100% .................................. $ 56,596,976 ============ ================================================================================ 18 - -------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $58,189,782; and net unrealized depreciation consisted of: Gross unrealized appreciation ............................. $ 4,444,510 Gross unrealized depreciation ............................. (6,879,447) ----------- Net unrealized depreciation ...................... $(2,434,937) =========== (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 December 31, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- -------- ------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) ................................................ 01/21/03 9,750,000 $5,480,581 $193,755 British Pound (GBP) .................................................... 01/21/03 150,000 241,165 9,166 Canadian Dollar (CAD) .................................................. 01/21/03 5,900,000 3,731,930 (100,178) Euro (EUR) ............................................................. 01/21/03 6,451,837 6,765,161 452,952 Hong Kong Dollar (HKD) ................................................. 01/21/03 6,300,000 807,811 240 Japanese Yen (JPY) ..................................................... 01/21/03 36,000,000 303,571 10,907 Swedish Krona (SEK) .................................................... 01/21/03 2,500,000 286,543 9,921 Swiss Franc (CHF) ...................................................... 01/21/03 800,000 578,812 31,644 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) ................................................ 01/21/03 3,350,000 1,883,072 (53,668) British Pound (GBP) .................................................... 01/21/03 3,480,000 5,595,024 (241,521) Canadian Dollar (CAD) .................................................. 01/21/03 600,000 379,518 (2,681) Euro (EUR) ............................................................. 01/21/03 2,567,310 2,691,988 (199,804) Hong Kong Dollar (HKD) ................................................. 01/21/03 3,300,000 423,139 (57) Japanese Yen (JPY) ..................................................... 01/21/03 261,000,000 (2,200,891) (497) Swedish Krona (SEK) .................................................... 01/21/03 6,100,000 699,165 (59,397) Swiss Franc (CHF) ...................................................... 01/21/03 800,000 578,812 (29,434) -------- Total net unrealized gain on Forward Foreign Currency Contracts ... $ 21,348 ========
================================================================================ See accompanying notes to financial statements. 19 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS Global Bond Fund returned 8.22%, versus 8.78% for the Salomon Smith Barney World Government Bond Index (WGBI). (Returns for all share classes over various time periods are shown on page 21. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW Weak global growth and increasing anxiety about the geopolitical situation continued to drive investors to the bond markets over the six-month period. The third quarter saw most major economies faltering, primarily out of fear that the United States was heading into a double-dip recession. Global bonds rallied in this environment, with the G-3 (U.S., Japan and Germany) ten-year yield falling from 3.7% to 3.0%, and the G-3 two-year yield falling from 2.3% to 1.5%. The fourth quarter brought slightly better economic news and a rebound in the global equity markets. It also saw interest rate cuts from both the U.S. Federal Reserve Board and the European Central Bank--clear signs that the governments were prepared to use accommodative monetary policy to prevent further economic decline. U.S. bonds offered particularly strong relative performance in the third quarter, when yields on ten-year U.S. government bonds fell by 120 basis points to 3.6%. However, lower quality corporate bonds did not do as well in the risk-averse climate. In the fourth quarter, the U.S. market lagged behind other major markets. During this time, the yield differential between 10-year U.S. Treasuries and equivalent-maturity government bonds overseas narrowed by between 30 and 75 basis points. Elsewhere in the dollar bloc, Australia boasted a relatively strong domestic economy in the third quarter, but in the fourth quarter, a severe drought in that country placed downward pressure on growth expectations, which resulted in the outperformance of some AUD bonds relative to the United States. European Monetary Union (EMU) bond markets underperformed the U.S. market during the first half of the period, but then outperformed U.S. bonds in the second half. Within the EMU during this time, the probability of increased government debt issuance in Germany led other sovereign EMU issues to perform more strongly. Finally, Japan's bond market was trapped in a cycle of ups and downs. Political infighting hindered any useful economic intervention, and pushed the country back towards a recession. KEY ALLOCATIONS HELPED PERFORMANCE The Fund's performance over the period benefited from its underweight to Japanese securities compared to the WGBI Index. In addition, an overweight position to European corporate bonds in the A/BBB credit sectors produced good results, while our active currency strategy had a positive impact on returns. More specifically, with regard to the latter, overweights in the Euro and Australian dollar, along with underweights in the U.S. dollar, the U.K. pound and the Japanese yen, were beneficial to performance. However, the Fund maintained a shorter duration than the benchmark in both the United States and the EMU, which ultimately proved to be a detractor from Fund performance. LOOKING AHEAD In our opinion, the main risk to the global bond market going forward is positive growth surprise. To protect against this, we have moved the Fund to a shorter-than-benchmark duration in the United States and European Monetary Union. We expect to maintain our limited exposure to Japan, where the appointment of a new Bank of Japan governor may herald changes in monetary policy. In terms of sectors, we are looking for increased opportunities in the high credit quality end of the corporate bond market. We believe there will be an inevitable increase in government borrowing worldwide going forward. This increase in government bond issuance should continue to narrow swap spreads between the United States and the Euro zone, giving assistance to the corporate bond markets. ================================================================================ 20 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS A 8.03% 20.18% N/A N/A 13.55% - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS B 7.64 19.45 N/A N/A 16.35 - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS C N/A N/A N/A N/A 7.79 - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS Y 8.22 20.55 6.43% 4.82% 5.76 - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS A+ 3.22 14.74 N/A N/A 9.15 - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS B+ 2.64 14.45 N/A N/A 12.75 - ------------------------------------------------------------------------------------------------------ UBS GLOBAL BOND FUND CLASS C+ N/A N/A N/A N/A 5.98 - ------------------------------------------------------------------------------------------------------ Salomon Smith Barney World Gov't Bond Index 8.78 19.49 6.32 5.82 6.12 - ------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS GLOBAL BOND FUND CLASS A IS 11/05/01. INCEPTION DATES OF CLASS B AND CLASS C ARE 11/26/01 AND 7/02/02, RESPECTIVELY. INCEPTION DATE OF CLASS Y 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. ================================================================================ 21 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND - --------------------------------------------------------------------------------
- -------------------------------------------------- -------------------------------------------------- COUNTRY EXPOSURE, TOP FIVE CURRENCY EXPOSURE, TOP FIVE - -------------------------------------------------- -------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Percentage of Net Assets Net Assets - -------------------------------------------------- -------------------------------------------------- European Union 52.8% Euro 48.6% U.S. 18.9 U.S. Dollar 19.3 Japan 7.8 Japanese Yen 12.0 United Kingdom 6.5 British Pound 6.5 Canada 4.8 Canadian Dollar 4.8 - -------------------------------------------------- -------------------------------------------------- Total 90.8% Total 91.2%
- -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION - -------------------------------------------------------------------------------- AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds ...................................................... 0.04% Aerospace & Military ................................................. 0.03 Airlines ............................................................. 0.09 Autos/Durables ....................................................... 0.09 Banks ................................................................ 0.22 Beverages & Tobacco .................................................. 0.08 Chemicals ............................................................ 0.04 Computer Systems ..................................................... 0.01 Construction ......................................................... 0.13 Consumer ............................................................. 0.06 Electric Components .................................................. 0.11 Energy ............................................................... 0.30 Financial Services ................................................... 0.89 Food & House Products ................................................ 0.13 Forest Products ...................................................... 0.01 Health: Drugs ........................................................ 0.03 Housing/Paper ........................................................ 0.03 Leisure & Tourism .................................................... 0.01 Metals Non-Ferrous ................................................... 0.01 Multi-Industry ....................................................... 0.11 Publishing ........................................................... 0.04 Real Estate .......................................................... 0.03 Recreation ........................................................... 0.03 Retail/Apparel ....................................................... 0.04 Services/Miscellaneous ............................................... 0.08 Telecommunications ................................................... 0.11 Telecommunications -- Wireless ....................................... 0.04 Transportation ....................................................... 0.04 Utilities ............................................................ 0.11 ------ Total U.S. Corporate Bonds .................................. 2.94 Asset-Backed ......................................................... 0.37 International Dollar Bonds ........................................... 0.04 Mortgage-Backed Securities ........................................... 7.80 U.S. Government Obligations .......................................... 4.73 ------ Total U.S. Bonds ............................................ 15.88 International Bonds .................................................. 80.75 ------ Total Bonds ................................................. 96.63 SHORT-TERM INVESTMENTS ............................................... 3.06 ------ TOTAL INVESTMENTS ................................................. 99.69 CASH AND OTHER ASSETS, LESS LIABILITIES .................................................. 0.31 ------ NET ASSETS ........................................................... 100.00% ====== - -------------------------------------------------------------------------------- TOP TEN FIXED INCOME HOLDINGS - -------------------------------------------------------------------------------- AS OF DECEMBER 31, 2002 - -------------------------------------------------------------------------------- Percentage of Net Assets - -------------------------------------------------------------------------------- European Investment Bank 2.125%, due 09/20/07 4.7% Depfa Deutsche Pfandbriefbank 0.150%, due 06/20/03 4.2 Government of Belgium 5.750%, due 03/28/08 4.1 Bank Nederlandse Gemeeten 5.250%. due 07/04/11 3.9 Dexia Municipal Agency 5.375%, due 04/26/07 3.7 Kredit Fuer Wiederaufbau 5.000%, due 01/04/09 3.3 Government of Japan 1.750%, due 06/21/10 3.1% Duetsche Ausgleichsbank 6.000%, due 07/04/07 2.9 Government of France 5.125%, due 10/25/08 2.9 International Bank for Reconstruction & Development 4.750%, due 12/20/04 2.8 - -------------------------------------------------------------------------------- Total 35.6% ================================================================================ 22 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ------------ BONDS -- 96.63% U.S. BONDS -- 15.88% U.S. CORPORATE BONDS -- 2.85% Abbott Laboratories, Inc. 5.625%, due 07/01/06 .............................. $ 5,000 $ 5,466 Alcoa, Inc. 6.000%, due 01/15/12 .............................. 5,000 5,504 Anadarko Finance Co. 7.500%, due 05/01/31 .............................. 5,000 5,945 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 .............................. 20,000 25,877 AOL Time Warner, Inc. 7.625%, due 04/15/31 .............................. 20,000 20,556 Apache Corp. 6.250%, due 04/15/12 .............................. 5,000 5,605 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 .............................. 10,000 10,050 Avalonbay Communities, Inc. 7.500%, due 08/01/09 .............................. 5,000 5,590 Avon Products, Inc. 7.150%, due 11/15/09 .............................. 20,000 23,361 Bank of America Corp. 7.400%, due 01/15/11 .............................. 25,000 29,449 Bank One Corp. 7.875%, due 08/01/10 .............................. 15,000 17,978 Bristol Myers Squibb Co. 5.750%, due 10/01/11 .............................. 5,000 5,324 Burlington Northern Santa Fe Corp. 6.875%, due 12/01/27 .............................. 5,000 5,534 7.082%, due 05/13/29 .............................. 5,000 5,682 Burlington Resources Finance Co. 6.680%, due 02/15/11 .............................. 5,000 5,589 Cendant Corp. 6.875%, due 08/15/06 .............................. 20,000 20,753 Centex Corp. 9.750%, due 06/15/05 .............................. 45,000 50,112 Cingular Wireless 6.500%, due 12/15/11 .............................. 5,000 5,393 Citigroup, Inc. 7.250%, due 10/01/10 .............................. 30,000 34,826 Citizens Communications Co. 9.250%, due 05/15/11 .............................. 10,000 11,910 Comcast Cable Communications 6.750%, due 01/30/11 .............................. 15,000 15,607 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 .............................. 5,000 5,532 ConocoPhillips 8.750%, due 05/25/10 .............................. 5,000 6,257 Consolidated Edison, Inc. 7.500%, due 09/01/10 .............................. 30,000 35,796 Coors Brewing Co., 144A 6.375%, due 05/15/12 .............................. 5,000 5,588 Countrywide Home Loans 5.500%, due 02/01/07 .............................. 15,000 15,926 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 .............................. 15,000 16,057 6.500%, due 01/15/12 .............................. 5,000 5,344 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 .............................. 5,000 6,154 Devon Financing Corp., ULC 6.875%, due 09/30/11 .............................. 10,000 11,139 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 .............................. 15,000 16,455 Dow Chemical Co. (The) 6.125%, due 02/01/11 .............................. 5,000 5,152 Duke Energy Field Services, LLC 6.875%, due 02/01/11 .............................. 10,000 9,968 EOP Operating LP 7.000%, due 07/15/11 .............................. 5,000 5,448 7.875%, due 07/15/31 .............................. 5,000 5,445 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 .............................. 15,000 17,248 First Data Corp. 5.625%, due 11/01/11 .............................. 10,000 10,582 First Energy Corp. 6.450%, due 11/15/11 .............................. 15,000 14,923 First Union National Bank 7.800%, due 08/18/10 .............................. 20,000 24,145 FleetBoston Financial Corp. 7.375%, due 12/01/09 .............................. 10,000 11,429 Ford Motor Co. 7.450%, due 07/16/31 .............................. 15,000 13,048 Ford Motor Credit Co. 5.800%, due 01/12/09 .............................. 15,000 13,912 6.875%, due 02/01/06 .............................. 5,000 5,009 7.375%, due 02/01/11 .............................. 10,000 9,724 General Electric Capital Corp. 6.750%, due 03/15/32 .............................. 30,000 33,168 General Motors Acceptance Corp. 6.875%, due 09/15/11 .............................. 35,000 34,904 8.000%, due 11/01/31 .............................. 15,000 15,082 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 .............................. 10,000 11,162 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 .............................. 10,000 11,025 Household Finance Corp. 6.750%, due 05/15/11 .............................. 15,000 15,993 HSBC Holdings PLC 5.250%, due 12/12/12 .............................. 5,000 5,125 International Business Machines Corp. 5.875%, due 11/29/32 .............................. 5,000 4,947 International Paper Co. 6.750%, due 09/01/11 .............................. 10,000 11,127 John Deere Capital Corp. 7.000%, due 03/15/12 .............................. 10,000 11,594 Kohls Corp. 7.250%, due 06/01/29 .............................. 5,000 5,875 Kraft Foods, Inc. 4.625%, due 11/01/06 .............................. 5,000 5,257 6.500%, due 11/01/31 .............................. 10,000 10,988 Kroger Co. 7.500%, due 04/01/31 .............................. 5,000 5,593 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 .............................. 5,000 5,534 Lincoln National Corp. 6.200%, due 12/15/11 .............................. 10,000 10,664 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 .............................. 15,000 7,875 9.125%, due 05/01/31 .............................. 10,000 4,450 ================================================================================ 23 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ------------ Morgan Stanley 6.750%, due 04/15/11 .............................. $ 15,000 $ 16,669 News America Holdings, Inc. 7.125%, due 04/08/28 .............................. 15,000 14,381 Occidental Petroleum Corp. 8.450%, due 02/15/29 .............................. 10,000 12,829 Pemex Project Funding Master Trust, 144A 8.000%, due 11/15/11 .............................. 15,000 16,125 Pepsi Bottling Group, Inc., 144A 5.625%, due 02/17/09 .............................. 10,000 10,897 Praxair, Inc. 6.375%, due 04/01/12 .............................. 5,000 5,589 Progress Energy, Inc. 7.000%, due 10/30/31 .............................. 10,000 10,421 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 .............................. 35,000 22,750 Rohm & Haas Co. 7.850%, due 07/15/29 .............................. 5,000 6,251 SBC Communications, Inc. 5.875%, due 02/01/12 .............................. 10,000 10,801 Sempra Energy 7.950%, due 03/01/10 .............................. 15,000 17,104 SLM Corp. 5.625%, due 04/10/07 .............................. 20,000 21,752 Southern Power Co. 6.250%, due 07/15/12 .............................. 5,000 5,283 Target Corp. 7.000%, due 07/15/31 .............................. 10,000 11,328 Telus Corp. 8.000%, due 06/01/11 .............................. 10,000 9,600 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 .............................. 20,000 22,022 Unilever Capital Corp. 7.125%, due 11/01/10 .............................. 15,000 17,704 Union Pacific Corp. 6.700%, due 12/01/06 .............................. 10,000 11,062 United Technologies Corp. 6.100%, due 05/15/12 .............................. 10,000 11,181 Valero Energy Corp. 7.500%, due 04/15/32 .............................. 10,000 10,129 Verizon New York, Inc. 7.375%, due 04/01/32 .............................. 10,000 11,564 Walt Disney Co. (The) 6.375%, due 03/01/12 .............................. 5,000 5,469 Washington Mutual, Inc. 5.625%, due 01/15/07 .............................. 5,000 5,351 Wells Fargo Bank, NA 6.450%, due 02/01/11 .............................. 25,000 28,065 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 ............................ 5,000 5,423 ------------ 1,116,505 ------------ ASSET-BACKED SECURITIES -- 0.46% Comed Transitional Funding Trust, 98-1, Class A7 5.740%, due 12/25/10 ..................... 45,000 49,738 Conseco Finance Securitizations Corp., 00-B, Class AF4 7.870%, due 02/15/31 .............................. 20,000 21,148 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 .............................. 10,000 8,952 DVI Receivable Corp., 00-2, Class A3 6.808%, due 07/12/04 .............................. 13,383 13,538 Delta Air Lines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 .............................. 15,000 14,984 Peco Energy Transition Trust, 99-A3, Class A7 6.130%, due 03/01/09 ..................... 55,000 61,669 United Airlines, Inc., E.E.T.C. 7.811%, due 10/01/09 (b) (d) (e) .................. 29,456 11,877 ------------ 181,906 ------------ INTERNATIONAL DOLLAR BONDS -- 0.04% Canadian National Railway Co. 6.900%, due 07/15/28 .............................. 5,000 5,700 Deutsche Telekom International Finance 8.250%, due 06/15/30 .............................. 5,000 5,776 France Telecom S.A. 8.500%, due 03/01/31 .............................. 5,000 6,086 ------------ 17,562 ------------ MORTGAGE BACKED SECURITIES -- 7.80% CS First Boston Mortgage Securities Corp., 02-10, Class 2A1 7.500%, due 05/25/32 ............. 58,710 61,781 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B 7.180%, due 08/10/10 .............................. 140,000 162,691 DLJ Commercial Mortgage Corp., 99-CG1, Class A1B 6.460%, due 03/10/32 .............................. 20,000 22,521 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 .............................. 165,000 193,333 Fannie Mae Grantor Trust 7.125%, due 01/15/30 .............................. 175,000 215,958 7.500%, due 06/25/30 .............................. 76,656 83,100 7.500%, due 12/25/41 .............................. 131,750 142,825 Federal Home Loan Mortgage Corp. 6.500%, due 11/01/28 .............................. 6,014 6,267 7.000%, due 10/15/13 .............................. 68,215 72,638 Federal Home Loan Mortgage Corp. Gold 8.000%, due 01/01/30 .............................. 262,643 281,553 Federal National Mortgage Association 6.000%, due 03/01/29 .............................. 79,121 81,904 6.500%, due 06/01/29 .............................. 59,547 62,030 6.500%, due 08/01/32 .............................. 117,000 121,878 7.000%, due 06/01/32 .............................. 77,489 81,504 Federal National Mortgage Association, Whole Loan 95-W3, Class A 9.000%, due 04/25/25 .............................. 3,130 3,469 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 .............................. 25,000 27,174 Government National Mortgage Association 6.000%, due 11/20/28 .............................. 56,901 59,097 6.000%, due 12/20/28 .............................. 89,661 93,392 6.000%, due 05/20/29 .............................. 110,528 114,794 6.500%, due 08/15/27 .............................. 4,132 4,340 6.500%, due 12/15/29 .............................. 106,393 111,839 7.000%, due 07/15/25 .............................. 23,334 24,909 7.000%, due 07/15/31 .............................. 242,881 257,490 ================================================================================ 24 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ------------ Impac Secured Assets Common Owner Trust 01-3, Class A2 (c) 7.250%, due 04/25/31 ............................ $ 75,104 $ 80,831 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 ............................ 50,000 58,629 Merrill Lynch Mortgage Investors, Inc., 97-C2, Class A2 6.540%, due 12/10/29 ............................ 20,000 22,407 Merrill Lynch Mortgage Investors, Inc., 96-C2, Class A3 6.960%, due 11/21/28 ............................ 50,000 55,038 Morgan Stanley Dean Witter Capital I, 00-LIF2, Class A1 6.960%, due 10/15/33 ............................ 35,209 39,282 Nomura Asset Securities Corp., 95-MD3, Class A1B 8.150%, due 03/04/20 ............................ 19,465 21,436 Norwest Asset Securities Corp., 99-3, Class A3 6.000%, due 01/25/29 ............................ 4,844 4,847 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B 7.330%, due 12/10/32 ............................ 30,000 35,055 PNC Mortgage Securities Corp., 94-3, Class A8 7.500%, due 07/25/24 ............................ 190,000 194,721 Prudential Home Mortgage Securities, 93-43, Class A9 6.750%, due 10/25/23 ............................ 70,972 71,723 Prudential Home Mortgage Securities, 96-7, Class A4 6.750%, due 06/25/11 ............................ 59,701 60,947 Prudential Mortgage Capital Funding LLC, 00-ROCK, Class A2 6.605%, due 05/10/34 ............................ 10,000 11,336 Residential Funding Mortgage Securitization I, 98-56, Class A6 6.750%, due 03/25/28 ............................ 45,000 46,084 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 ............................ 60,000 67,836 ------------ 3,056,659 ------------ U.S. GOVERNMENT OBLIGATIONS -- 4.73% U.S. Treasury Bond 3.000%, due 07/15/12 ............................ 210,000 225,008 U.S. Treasury Note 2.875%, due 06/30/04 ............................ 715,000 730,808 3.250%, due 08/15/07 ............................ 600,000 614,859 5.000%, due 08/15/11 ............................ 215,000 235,761 6.250%, due 05/15/30 ............................ 10,000 11,967 8.000%, due 11/15/21 ............................ 25,000 34,834 ------------ 1,853,237 ------------ Total U.S. Bonds .................................. 6,225,869 ------------ INTERNATIONAL BONDS -- 80.75% AUSTRALIA -- 3.62% Government of Australia 6.250%, due 04/15/15 ........................ AUD 400,000 242,552 10.000%, due 02/15/06 ........................... 385,000 250,401 Queensland Treasury Corp. 6.000%, due 07/14/09 ............................ 920,000 543,566 6.500%, due 06/14/05 ............................ 650,000 381,370 ------------ 1,417,889 ------------ BELGIUM -- 4.07% Government of Belgium 5.750%, due 03/28/08 ........................ EUR 1,380,000 1,595,559 ------------ CANADA -- 4.83% Government of Canada 5.750%, due 06/01/29 ........................ CAD 330,000 220,063 6.000%, due 09/01/05 ............................ 540,000 364,361 6.000%, due 06/01/11 ............................ 410,000 282,412 8.000%, due 06/01/23 ............................ 300,000 251,274 Province of Ontario 5.200%, due 03/08/07 ............................ 620,000 410,500 7.500%, due 01/19/06 ............................ 520,000 365,553 ------------ 1,894,163 ------------ FINLAND -- 3.95% Government of Finland 3.750%, due 11/12/03 ........................ EUR 660,000 698,834 5.000%, due 04/25/09 ............................ 300,000 336,116 5.750%, due 02/23/11 ............................ 440,000 513,910 ------------ 1,548,860 ------------ FRANCE -- 11.12% Dexia Municipal Agency 5.375%, due 04/26/07 ........................ EUR 1,300,000 1,463,176 Government of France 3.500%, due 07/12/04 ............................ 885,000 939,086 5.125%, due 10/25/08 ............................ 1,000,000 1,123,970 5.500%, due 04/25/10 ............................ 440,000 504,205 5.500%, due 04/25/29 ............................ 100,000 115,120 8.500%, due 10/25/19 ............................ 140,000 212,628 ------------ 4,358,185 ------------ GERMANY -- 17.58% Bundesrepublik Deutschland 4.500%, due 07/04/09 ........................ EUR 240,000 262,199 6.000%, due 01/04/07 ............................ 125,000 144,265 6.500%, due 07/04/27 ............................ 535,000 694,390 Depfa Deutsche Pfandbriefbank 0.150%, due 06/20/03 ........................ JPY 197,000,000 1,659,865 Deutsche Ausgleichsbank 6.000%, due 07/04/07 ........................ EUR 985,000 1,136,446 Federal Republic of Germany 5.000%, due 07/04/11 ............................ 875,000 975,967 Kredit Fuer Wiederaufbau 5.000%, due 01/04/09 ............................ 1,150,000 1,284,681 Treuhandanstalt 6.750%, due 05/13/04 ............................ 665,000 734,977 ------------ 6,892,790 ------------ ================================================================================ 25 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ------------ ITALY -- 5.92% Buoni Poliennali Del Tes 3.250%, due 04/15/04 ........................ EUR 420,000 $ 444,251 5.000%, due 05/01/08 ............................ 115,000 128,482 5.250%, due 11/01/29 ............................ 190,000 209,502 8.750%, due 07/01/06 ............................ 400,000 496,133 Republic of Italy 1.800%, due 02/23/10 ........................ JPY 72,000,000 664,303 3.800%, due 03/27/08 ............................ 38,000,000 377,749 ------------ 2,320,420 ------------ JAPAN -- 12.48% European Investment Bank 2.125%, due 09/20/07 ........................ JPY 200,000,000 1,832,451 Federal National Mortgage Association -- Global 2.125%, due 10/09/07 ............................ 80,000,000 731,066 Government of Japan 1.750%, due 06/21/10 ............................ 135,000,000 1,226,195 International Bank for Reconstruction & Development 4.750%, due 12/20/04 .............. 120,000,000 1,102,798 ------------ 4,892,510 ------------ MEXICO -- 0.03% Mexico Government International Bond 8.125%, due 12/30/19 MXN ...................... 10,000 10,550 ------------ NETHERLANDS -- 8.38% Bank Nederlandse Gemeenten 5.250%, due 07/04/11 ....................... EUR 1,350,000 1,520,256 Government of Netherlands 5.000%, due 07/15/11 ............................ 890,000 992,217 6.000%, due 01/15/06 ............................ 680,000 774,074 ------------ 3,286,547 ------------ SPAIN -- 4.48% Government of Spain 3.000%, due 01/31/03 ........................ EUR 630,000 661,124 3.250%, due 01/31/05 ............................ 310,000 328,203 4.750%, due 07/30/14 ............................ 350,000 377,260 5.150%, due 07/30/09 ............................ 190,000 214,390 6.000%, due 01/31/29 ............................ 145,000 176,584 ------------ 1,757,561 ------------ SWEDEN -- 2.47% Government of Sweden 5.000%, due 01/15/04 ........................ SEK 3,550,000 412,923 6.750%, due 05/05/14 ............................ 1,640,000 219,328 8.000%, due 08/15/07 ............................ 2,520,000 335,090 ------------ 967,341 ------------ UNITED KINGDOM -- 1.82% European Investment Bank 6.250%, due 04/15/14 ....................... GBP 70,000 128,166 U.K. Treasury 5.750%, due 12/07/09 ............................ 87,000 152,232 6.000%, due 12/07/28 ............................ 112,000 222,055 8.500%, due 12/07/05 ............................ 115,000 208,225 ------------ 710,678 ------------ Total International Bonds ......................... 31,653,053 ------------ Total Bonds (Cost $33,861,429) .................... 37,878,922 SHARES ---------- SHORT-TERM INVESTMENTS -- 3.06% OTHER -- 3.06% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,199,248) ............................... 1,199,248 1,199,248 ------------ Total Investments (Cost $35,060,677) -- 99.69% (a) ................ 39,078,170 Cash and other assets, less liabilities -- 0.31% ....................... 121,768 ------------ Net Assets -- 100% ................................ $ 39,199,938 ============ ================================================================================ 26 - -------------------------------------------------------------------------------- UBS GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $35,060,677; and net unrealized appreciation consisted of: Gross unrealized appreciation ...................... $ 4,081,632 Gross unrealized depreciation ...................... (64,139) ----------- Net unrealized appreciation ................. $ 4,017,493 =========== (b) Security is in default. (c) Step bonds -- coupon rate increases in increments to maturity. Rate disclosed is as of December 31, 2002. Maturity date disclosed is the ultimate maturity date. (d) Non-income producing security. (e) Security is illiquid. This security amounted to $11,877 or 0.03% of net assets. % 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 December 31, 2002, the value of these securities amounted to $60,813 or 0.16% of net assets. FORWARD FOREIGN CURRENCY CONTRACTS UBS Global Bond Fund had the following open forward foreign currency contracts as of December 31, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- -------- ------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar (AUD) ................................................ 01/21/03 4,450,000 $ 2,501,394 $ 91,895 British Pounds (GBP) ................................................... 01/21/03 410,000 659,184 (31,771) Canadian Dollar (CAD) .................................................. 01/21/03 1,160,000 733,735 (4,405) Euro (EUR) ............................................................. 01/21/03 2,168,207 2,273,503 (142,573) Japanese Yen (JPY) ..................................................... 01/21/03 84,000,000 708,333 (27,014) Swedish Krona (SEK) .................................................... 01/23/03 5,800,000 664,780 (56,476) FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar (AUD) ................................................ 01/23/03 2,840,000 1,596,395 (42,545) Canadian Dollar (CAD) .................................................. 01/23/03 550,000 347,892 (10,823) Danish Krone (DKK) ..................................................... 01/21/03 2,900,000 409,350 28,423 Euro (EUR) ............................................................. 01/23/03 1,238,207 1,298,339 84,929 Japanese Yen (JPY) ..................................................... 01/23/03 332,000,000 2,799,600 (11,607) Swiss Franc (CHF) ...................................................... 01/21/03 350,000 253,230 17,673 --------- Total net unrealized loss on Forward Foreign Currency Contracts ... $(104,294) =========
================================================================================ See accompanying notes to financial statements. 27 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS U.S. Balanced Fund declined 3.65%, versus a decline of 4.40% for the Fund's benchmark, the U.S. Balanced Mutual Fund Index.* (Returns for all share classes over various time periods are shown on page 29. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW A sluggish economy, disappointing corporate profits, high profile accounting scandals, and the ongoing threat of trouble in the Middle East conspired to push the U.S. equity market down 17.27% in the third quarter of 2002. No segment of the market went untouched as virtually every investment style, industry sector, and market capitalization segment posted negative returns. In contrast, these same general conditions supported a bond market rally. Government bonds and high quality and commercial mortgage-backed securities turned in particularly impressive results. Lower quality corporate bonds continued to underperform, held back by investors' aversion to risk, the questionable business practices of some high-profile corporations and a sudden influx of "fallen angels"-- that is, investment-grade bonds that have been downgraded to non-investment-grade status. The situation reversed itself in the fourth quarter, when stocks outperformed bonds. The equity market hit a five-year low in early October, and then rallied. Investor interest in stocks was re-ignited by attractive valuations and better-than-expected third quarter earnings reports from several of the year's most volatile companies. Ultimately, the Wilshire 5000 advanced 7.82% over the fourth quarter. Though an impressive gain, it was still not enough to overcome the losses posted in the third quarter. The net result was a market decline of 10.30% for the six months ended December 31, 2002. While stocks reclaimed center stage in the fourth quarter, the bond market retreated. However, one segment did well: lower-quality corporate bonds, which rallied due to signs of economic stability, a rising stock market, and heavy inflows into high yield mutual funds. FOCUS ON INTRINSIC VALUE HAD A STRONG IMPACT During the period, our focus on intrinsic value--whereby we carefully analyze the expected cash flows that we believe an investment will provide to determine whether its market price reflects its intrinsic value--led us to decrease the Fund's bond allocation and overweight U.S. stocks in order to take advantage of attractive valuations in that market. We believed that investors were ignoring attractive opportunities in U.S. stocks because of their concerns over geopolitical events and disappointing earnings reports. In addition, our research showed that high quality U.S. bonds appeared expensive. Yields had been driven to their lowest level in decades, leaving little room for further declines, and thus, future gains in price. We reduced the Fund's position in conventional U.S. fixed income and increased its exposure to U.S. high yield bonds and global equities. As a result of the insight provided by our team of analysts via our integrated global investment platform, we focused on undervalued companies in non-cyclical industries. This strategy led us to overweight healthcare and pharmaceuticals, banks and utilities. Our holdings in pharmaceuticals were especially beneficial to the Fund. Drug company prices had been driven down by government intervention and patent expirations on several high profile drugs, leaving many fundamentally sound companies selling at relatively low prices. The Fund also saw good results from its holdings in the bank sector. Banks began to realize the benefits of earlier consolidations, an increased focus on automation, and the introduction of new products. Alternately, the Fund's overweight position in utilities detracted from relative performance. Traditionally, utilities have been considered a good place to ride out economic downturns. However, utilities fell over the six-month period. Despite this poor performance, we remain positive on the sector, attracted to its sound fundamentals, fair valuations, and the possibility that dividends, typically higher on utilities than the broad market average, may be classified as tax exempt income if President Bush's fiscal stimulus plan is implemented as proposed. Within the bond portion of the Fund, we saw poor results from our investments in corporate bond issues. However, what ground we lost in that area was made up for by the positive results of our investments in mortgage-backed and commercial mortgage-backed securities. On a sector level, the positive performance generated by our overweights to these two top-performing sectors was offset by our weighting to the corporate sector. As a result, sector allocation essentially had no effect on performance. LOOKING AHEAD Heading into 2003, the Fund is presently neutral to U.S. equities compared to the benchmark, with a slight underweight to U.S. bonds. We believe this allocation strategy places the Fund in a good position to benefit in the market environment. We expect that the U.S. equity market will produce positive returns in 2003, though not at levels seen in the past. Within the bond market, we expect that mortgages will stay solid, while higher-quality corporates will provide attractive opportunities; however, the government sector, in our opinion, could underperform. - ---------- * The U.S. Balanced Mutual Fund Index is an unmanaged index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Lehman U.S. Aggregate Bond Index. 28 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS A -3.85% -7.14% 3.80% 2.62% 3.42% - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS B -4.17 -7.76 N/A N/A -4.63 - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS C -4.25 -7.83 N/A N/A -4.33 - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS Y -3.65 -6.83 4.13 2.92 7.82 - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS A+ -9.18 -12.20 1.86 1.47 2.36 - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS B+ -8.87 -12.28 N/A N/A -7.80 - -------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND CLASS C+ -6.12 -9.60 N/A N/A -5.13 - -------------------------------------------------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 4.40 -10.55 -6.00 2.51 9.58 - -------------------------------------------------------------------------------------------------------- Lehman U.S. Aggregate Bond Index*** 6.23 10.25 10.10 7.54 8.61 - -------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 6.27 10.09 10.06 7.52 8.61 - -------------------------------------------------------------------------------------------------------- Wilshire 5000 Equity Index -10.30 -20.86 14.37 -0.87 9.58 - --------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. BALANCED FUND CLASS A 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 AND EACH OF THE INDICES IS 12/30/94. ** AN UNMANAGED INDEX COMPILED BY THE ADVISOR, CONSTRUCTED AS FOLLOWS: 65% WILSHIRE 5000 EQUITY INDEX AND 35% LEHMAN U.S. AGGREGATE BOND INDEX. *** AS OF APRIL 1, 2002, THE FUND'S BENCHMARK BOND INDEX WAS CHANGED TO THE LEHMAN U.S. AGGREGATE BOND INDEX BECAUSE IT IS A MORE BROAD-BASED INDEX FOR THE FUND. + 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. - -------------------------------------------------------------------------------- TOP TEN FIXED INCOME HOLDINGS - -------------------------------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - -------------------------------------------------------------------------------- U.S. Treasury Note 6.750%, due 05/15/05 5.0% U.S. Treasury Note 3.250%, due 08/15/07 1.7 U.S. Treasury Note 2.875%, due 06/30/04 1.7 Morgan Stanley Dean Witter Capital I 6.660%, due 02/15/33 1.1 Government National Mortgage Association 7.500%, due 02/15/27 1.0 U.S. Treasury Note 8.000%, due 11/15/21 1.0 Federal National Mortgage Association 5.500%, due 12/01/31 0.9 Federal National Mortgage Association 7.125%, due 01/15/30 0.9 Federal Home Loan Mortgage Corp., Gold 6.500%, due 11/01/32 0.8 Federal National Mortgage Association 7.000%, due 09/01/23 0.8 - -------------------------------------------------------------------------------- Total 14.9% AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - -------------------------------------------------------------------------------- Citigroup, Inc. 2.3% Wells Fargo & Co. 2.2 Burlington Northern Santa Fe Corp. 1.9 Microsoft Corp. 1.9 United Health Group, Inc. 1.8 GreenPoint Financial Corp. 1.7 Nextel Communications, Inc. 1.7 Omnicom Group 1.6 Illinois Tool Works, Inc. 1.5 Johnson & Johnson 1.5 - -------------------------------------------------------------------------------- Total 18.1% 29 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION - -------------------------------------------------------------------------------- AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- U.S. EQUITIES Airlines .................................... 0.16% Autos/Durables .............................. 0.54 Banks ....................................... 5.18 Broadcasting & Publishing ................... 1.73 Capital Goods ............................... 2.21 Chemicals ................................... 1.87 Computer Software ........................... 1.85 Computer Systems ............................ 0.82 Construction ................................ 0.78 Consumer .................................... 0.75 Electric Components ......................... 1.17 Energy ...................................... 5.73 Financial Services .......................... 10.66 Health: Drugs ............................... 5.37 Health: Non-Drugs ........................... 4.10 Housing/Paper ............................... 1.25 Industrial Components ....................... 1.06 Metals Non-Ferrous .......................... 1.43 Recreation .................................. 0.63 Retail/Apparel .............................. 2.81 Services/Miscellaneous ...................... 3.54 Technology .................................. 1.19 Telecommunications Equipment ................ 0.16 Telecommunications-Services ................. 3.09 Transportation .............................. 1.90 Utilities ................................... 2.05 ------ Total U.S. Equities ................ 62.03 U.S. CORPORATE BONDS Aerospace & Military ........................ 0.05 Airlines .................................... 0.02 Autos/Durables .............................. 0.10 Banks ....................................... 0.35 Beverages & Tobacco ......................... 0.17 Chemicals ................................... 0.07 Computer Systems ............................ 0.02 Construction ................................ 0.14 Consumer .................................... 0.14 Electric Components ......................... 0.15 Energy ...................................... 0.67 Financial Services .......................... 1.34 Food & House Products ....................... 0.21 Forest Products ............................. 0.02 Health: Drugs ............................... 0.05 Housing & Paper ............................. 0.05 Leisure & Tourism ........................... 0.02 Metals Non-Ferrous .......................... 0.02 Multi-Industry .............................. 0.15 Publishing .................................. 0.06 Real Estate ................................. 0.11 Recreation .................................. 0.07 Retail/Apparel .............................. 0.07 Services/Miscellaneous ...................... 0.16 Telecommunications .......................... 0.12 Telecommunications-Wireless ................. 0.06 Transportation .............................. 0.17 Utilities ................................... 0.18 ------ Total U.S. Corporate Bonds ......... 4.74 Asset-Backed Securities ..................... 0.85 International Dollar Bonds .................. 0.14 Mortgage-Backed Securities .................. 16.92 U.S. Government Obligations ................. 10.77 ------ Total Bonds ........................ 33.42 SHORT-TERM INVESTMENTS ...................... 4.51 ------ TOTAL INVESTMENTS ........................ 99.96 CASH AND OTHER ASSETS, LESS LIABILITIES ......................... 0.04 ------ NET ASSETS ..................................100.00% ====== 30 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- U.S. EQUITIES -- 62.03% AIRLINES -- 0.16% Continental Airlines, Inc., Class B ..................... 1,000 $ 7,250 Delta Air Lines, Inc. ................................... 2,600 31,460 ----------- 38,710 ----------- AUTOS/DURABLES -- 0.54% Johnson Controls, Inc. .................................. 1,600 128,272 ----------- BANKS -- 5.18% FleetBoston Financial Corp. ............................. 6,905 167,791 GreenPoint Financial Corp. .............................. 9,000 406,620 PNC Financial Services Group ............................ 3,500 146,650 Wells Fargo & Co. ....................................... 11,100 520,257 ----------- 1,241,318 ----------- BROADCASTING & PUBLISHING -- 1.73% McGraw-Hill Cos., Inc. .................................. 2,000 120,880 Viacom, Inc. (b) ........................................ 7,200 293,472 ----------- 414,352 ----------- CAPITAL GOODS -- 2.21% Illinois Tool Works, Inc. ............................... 5,700 369,702 Pentair, Inc. ........................................... 4,600 158,930 ----------- 528,632 ----------- CHEMICALS -- 1.87% Dow Chemical Co. (The) .................................. 5,500 163,350 Eastman Chemical Co. .................................... 2,900 106,633 IMC Global, Inc. ........................................ 9,300 99,231 Waters Corp. (b) ........................................ 3,600 78,408 ----------- 447,622 ----------- COMPUTER SOFTWARE -- 1.85% Microsoft Corp. (b) ..................................... 8,600 444,620 ----------- COMPUTER SYSTEMS -- 0.82% Hewlett-Packard Co. ..................................... 11,385 197,644 ----------- CONSTRUCTION -- 0.78% Martin Marietta Materials, Inc. ......................... 6,136 188,130 ----------- CONSUMER -- 0.75% Kimberly-Clark Corp. .................................... 3,800 180,386 ----------- ELECTRIC COMPONENTS -- 1.17% Advanced Micro Devices, Inc. (b) ........................ 10,500 67,830 Intel Corp. ............................................. 8,000 124,560 Texas Instruments, Inc. ................................. 5,900 88,559 ----------- 280,949 ----------- ENERGY -- 5.73% ConocoPhillips .......................................... 3,260 157,752 Exelon Corp. ............................................ 5,900 311,343 ExxonMobil Corp. ........................................ 7,800 272,532 FirstEnergy Corp. ....................................... 8,191 270,057 Kerr-McGee Corp. ........................................ 1,650 73,095 Progress Energy, Inc. ................................... 3,500 151,725 Sempra Energy ........................................... 5,800 137,170 ----------- 1,373,674 ----------- FINANCIAL SERVICES -- 10.66% American International Group, Inc. ...................... 3,500 202,475 Anthem, Inc. (b) ........................................ 4,900 308,210 Citigroup, Inc. ......................................... 15,386 541,433 Freddie Mac ............................................. 6,200 366,110 Hartford Financial Services Group, Inc. ................. 3,300 149,919 Household International, Inc. ........................... 9,000 250,290 J.P. Morgan Chase & Co. ................................. 13,000 312,000 Mellon Financial Corp. .................................. 6,700 174,937 Morgan Stanley .......................................... 6,250 249,500 ----------- 2,554,874 ----------- HEALTH: DRUGS -- 5.37% Allergan, Inc. .......................................... 5,900 339,958 Bristol-Myers Squibb Co. ................................ 11,500 266,225 Cephalon, Inc. (b) ...................................... 3,800 184,938 SICOR, Inc. (b) ......................................... 14,000 221,900 Wyeth, Inc. ............................................. 7,300 273,020 ----------- 1,286,041 ----------- HEALTH: NON-DRUGS -- 4.10% Advanced Medical Optics, Inc. (b) ....................... 1,277 15,286 Baxter International, Inc. .............................. 6,200 173,600 Johnson & Johnson ....................................... 6,864 368,665 United Health Group, Inc. ............................... 5,100 425,850 ----------- 983,401 ----------- HOUSING/PAPER -- 1.25% American Standard Cos., Inc. (b) ........................ 4,200 298,788 ----------- INDUSTRIAL COMPONENTS -- 1.06% Ingersoll-Rand Co., Class A ............................. 5,900 254,054 ----------- METALS NON-FERROUS -- 1.43% Masco Corp. ............................................. 16,300 343,115 ----------- RECREATION -- 0.63% Royal Caribbean Cruises Ltd. ............................ 9,000 150,300 ----------- RETAIL/APPAREL -- 2.81% Costco Wholesale Corp. (b) .............................. 6,600 185,196 Newell Rubbermaid, Inc. ................................. 8,800 266,904 RadioShack Corp. ........................................ 5,100 95,574 TJX Companies, Inc. ..................................... 6,400 124,928 ----------- 672,602 ----------- SERVICES/MISCELLANEOUS -- 3.54% Computer Sciences Corp. (b) ............................. 1,900 65,455 First Data Corp. ........................................ 5,216 184,699 MeadWestvaco Corp. ...................................... 4,350 107,488 Omnicom Group ........................................... 6,000 387,600 Viad Corp. .............................................. 4,600 102,810 ----------- 848,052 ----------- TECHNOLOGY -- 1.19% United Technologies Corp. ............................... 4,600 284,924 ----------- TELECOMMUNCIATIONS EQUIPMENT -- 0.16% CommScope, Inc. (b) ..................................... 4,900 38,710 ----------- 31 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- TELECOMMUNICATIONS SERVICES -- 3.09% Motorola, Inc. .......................................... 16,715 $ 144,585 Nextel Communications, Inc. (b) ......................... 34,700 400,785 SBC Communications, Inc. ................................ 7,200 195,192 ----------- 740,562 ----------- TRANSPORTATION -- 1.90% Burlington Northern Santa Fe Corp. ...................... 17,500 455,175 ----------- UTILITIES -- 2.05% CMS Energy Corp. ........................................ 7,800 73,632 Consolidated Edison, Inc. ............................... 3,600 154,152 Dominion Resources, Inc. ................................ 1,900 104,310 Entergy Corp. ........................................... 3,500 159,565 ----------- 491,659 ----------- Total U.S. Equities (Cost $16,085,950) .................. 14,866,566 ----------- FACE AMOUNT --------- BONDS -- 33.42% ASSET-BACKED SECURITIES -- 0.85% Conseco Finance Corp., 00-B, Class AF4 7.870%, due 02/15/31 ..................................$ 25,000 26,435 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 .................................. 10,000 8,952 Delta Air Lines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 .................................. 20,000 19,979 Peco Energy Transition Trust, 99-A, Class A7 6.130%, due 03/01/09 .................................. 55,000 61,669 United Airlines, Inc., E.E.T.C. (b) (d) (e) 7.811%, due 10/01/09 .................................. 29,456 11,877 Vanderbilt Mortgage Finance, 00-B, Class IA3 8.255%, due 05/07/17 .................................. 70,000 75,421 ----------- 204,333 ----------- INTERNATIONAL DOLLAR BONDS -- 0.14% Canadian National Railway Co. 6.900%, due 07/15/28 .................................. 5,000 5,700 Deutsche Telekom Finance 8.250%, due 06/15/30 .................................. 5,000 5,776 France Telecom S.A. 8.500%, due 03/01/31 .................................. 5,000 6,086 Mexico Government International Bond 8.125%, due 12/30/19 .................................. 10,000 10,550 Royal Bank of Scotland 9.118%, due 12/31/49 .................................. 5,000 6,166 ----------- 34,278 ----------- U.S. CORPORATE BONDS -- 4.74% Abbott Laboratories, Inc. 5.625%, due 07/01/06 .................................. 5,000 5,467 Alcoa, Inc. 6.000%, due 01/15/12 .................................. 5,000 5,504 Anadarko Finance Co. 7.500%, due 05/01/31 .................................. 5,000 5,945 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 .................................. 15,000 19,407 AOL Time Warner, Inc. 7.625%, due 04/15/31 .................................. 20,000 20,556 Apache Corp. 6.250%, due 04/15/12 .................................. 5,000 5,605 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 .................................. 10,000 10,050 Avalonbay Communities, Inc. 7.500%, due 08/01/09 .................................. 10,000 11,180 Avon Products, Inc. 7.150%, due 11/15/09 .................................. 15,000 17,521 Bank of America Corp. 7.400%, due 01/15/11 .................................. 15,000 17,669 Bank One Corp. 7.875%, due 08/01/10 .................................. 10,000 11,985 Boeing Capital Corp. 7.375%, due 09/27/10 .................................. 5,000 5,579 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 .................................. 15,000 13,574 Bristol Myers Squibb Co. 5.750%, due 10/01/11 .................................. 5,000 5,324 Burlington Northern Santa Fe Corp. 7.082%, due 05/13/29 .................................. 10,000 11,365 Burlington Resources Finance Co. 6.680%, due 02/15/11 .................................. 5,000 5,589 Caterpillar, Inc. 6.550%, due 05/01/11 .................................. 10,000 11,386 Cendant Corp. 6.875%, due 08/15/06 .................................. 15,000 15,565 Centex Corp. 9.750%, due 06/15/05 .................................. 20,000 22,272 Cingular Wireless 6.500%, due 12/15/11 .................................. 5,000 5,393 Citigroup, Inc. 7.250%, due 10/01/10 .................................. 25,000 29,022 Citizens Communications Co. 9.250%, due 05/15/11 .................................. 10,000 11,910 Coca Cola Co. 4.000%, due 06/01/05 .................................. 10,000 10,469 Comcast Cable Communications 6.750%, due 01/30/11 .................................. 20,000 20,810 Commonwealth Edison Co. 6.150%, due 03/15/12 .................................. 5,000 5,532 ConocoPhillips 8.500%, due 05/25/05 .................................. 20,000 22,742 8.750%, due 05/25/10 .................................. 10,000 12,514 Consolidated Edison, Inc. 7.500%, due 09/01/10 .................................. 25,000 29,830 Coors Brewing Co., 144A 6.375%, due 05/15/12 .................................. 10,000 11,175 Countrywide Home Loans, Inc. 5.500%, due 02/01/07 .................................. 10,000 10,618 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 .................................. 10,000 10,705 6.500%, due 01/15/12 .................................. 10,000 10,688 DaimlerChrysler NA Holdings Corp. 8.500%, due 01/18/31 .................................. 5,000 6,154 Devon Financing Corp., ULC 6.875%, due 09/30/11 .................................. 10,000 11,139 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 .................................. 15,000 16,455 32 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE -------- --------- Dow Chemical Co. (The) 6.125%, due 02/01/11 ................................. $ 5,000 $ 5,152 DTE Energy Co. 7.050%, due 06/01/11 ................................. 5,000 5,549 Duke Energy Field Services, LLC 6.875%, due 02/01/11 ................................. 5,000 4,984 7.875%, due 08/16/10 ................................. 5,000 5,292 EOP Operating LP 7.000%, due 07/15/11 ................................. 15,000 16,343 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 ................................. 15,000 17,248 First Data Corp. 5.625%, due 11/01/11 ................................. 10,000 10,582 FirstEnergy Corp. 6.450%, due 11/15/11 ................................. 20,000 19,897 First Union National Bank 7.800%, due 08/18/10 ................................. 20,000 24,145 FleetBoston Financial Corp. 7.375%, due 12/01/09 ................................. 5,000 5,714 Ford Motor Co. 7.450%, due 07/16/31 ................................. 10,000 8,699 Ford Motor Credit Co. 5.800%, due 01/12/09 ................................. 10,000 9,275 7.375%, due 02/01/11 ................................. 15,000 14,586 General Electric Capital Corp. 6.750%, due 03/15/32 ................................. 30,000 33,168 General Motors Acceptance Corp. 6.875%, due 09/15/11 ................................. 30,000 29,918 8.000%, due 11/01/31 ................................. 15,000 15,082 Goldman Sachs Group 6.875%, due 01/15/11 ................................. 10,000 11,162 Harrah's Operating Co. 7.125%, due 06/01/07 ................................. 15,000 16,537 Household Finance Corp. 6.750%, due 05/15/11 ................................. 20,000 21,324 HSBC Holdings PLC 5.250%, due 12/12/12 ................................. 5,000 5,125 International Business Machines Corp. 5.875%, due 11/29/32 ................................. 5,000 4,948 International Paper Co. 6.750%, due 09/01/11 ................................. 10,000 11,127 John Deere Capital Corp. 7.000%, due 03/15/12 ................................. 5,000 5,797 Kerr McGee Corp. 7.875%, due 09/15/31 ................................. 5,000 6,108 Kimberly Clark Corp., 144A 4.500%, due 07/30/05 ................................. 15,000 15,841 Kohl's Corp. 6.300%, due 03/01/11 ................................. 5,000 5,543 Kraft Foods, Inc. 6.500%, due 11/01/31 ................................. 15,000 16,483 Kroger Co. 7.500%, due 04/01/31 ................................. 5,000 5,593 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 ................................. 10,000 11,068 Lincoln National Corp. 6.200%, due 12/15/11 ................................. 5,000 5,332 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 ................................. 15,000 7,875 9.125%, due 05/01/31 ................................. 5,000 2,225 Morgan Stanley 6.750%, due 04/15/11 ................................. 15,000 16,669 News America Holdings, Inc. 7.125%, due 04/08/28 ................................. 15,000 14,381 Occidental Petroleum Corp. 8.450%, due 02/15/29 ................................. 5,000 6,414 Pemex Project Funding Master Trust, 144A 8.000%, due 11/15/11 ................................. 15,000 16,125 Pepsi Bottling Group, Inc., 144A 5.625%, due 02/17/09 ................................. 15,000 16,345 Praxair, Inc. 6.375%, due 04/01/12 ................................. 5,000 5,589 Progress Energy, Inc. 7.000%, due 10/30/31 ................................. 10,000 10,421 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 ................................. 40,000 26,000 Rohm & Haas Co. 7.850%, due 07/15/29 ................................. 5,000 6,252 SBC Communications, Inc. 5.875%, due 02/01/12 ................................. 10,000 10,801 Sempra Energy 7.950%, due 03/01/10 ................................. 15,000 17,104 SLM Corp. 5.625%, due 04/10/07 ................................. 10,000 10,876 Southern Power Co. 6.250%, due 07/15/12 ................................. 5,000 5,283 Suntrust Banks, Inc. 5.050%, due 07/01/07 ................................. 5,000 5,363 Target Corp. 7.000%, due 07/15/31 ................................. 10,000 11,328 Telus Corp. 8.000%, due 06/01/11 ................................. 10,000 9,600 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 ................................. 20,000 22,022 Unilever Capital Corp. 7.125%, due 11/01/10 ................................. 10,000 11,803 Union Pacific Corp. 6.700%, due 12/01/06 ................................. 15,000 16,593 United Technologies Corp. 6.100%, due 05/15/12 ................................. 10,000 11,181 Valero Energy Corp. 7.500%, due 04/15/32 ................................. 10,000 10,129 Verizon New York, Inc. 7.375%, due 04/01/32 ................................. 5,000 5,782 Walt Disney Co. (The) 6.375%, due 03/01/12 ................................. 5,000 5,469 Washington Mutual, Inc. 5.625%, due 01/15/07 ................................. 5,000 5,351 Wells Fargo Bank, N.A. 6.450%, due 02/01/11 ................................. 25,000 28,065 Weyerhaeuser Co. 7.375%, due 03/15/32 ................................. 5,000 5,423 ----------- 1,134,790 ----------- 33 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- --------- MORTGAGE-BACKED SECURITIES -- 16.92% Bear Stearns Commercial Mortgage Securities, 00-WF1, Class A2 7.780%, due 02/15/32 ................................$ 140,000 $ 168,378 DLJ Commercial Mortgage Corp., 99-CG2, Class A1B 7.300%, due 06/10/32 ...................... 25,000 29,070 Fannie Mae Grantor Trust 7.125%, due 01/15/30 ................................ 170,000 209,787 7.500%, due 06/25/30 ................................ 63,880 69,250 7.500%, due 12/25/41 ................................ 7,381 8,001 Fannie Mae Whole Loan, 01-W3, Class A 7.000%, due 09/25/41 ................................ 78,517 86,036 Federal Home Loan Mortgage Corp. 5.500%, due 09/01/17 ................................ 53,023 55,059 6.000%, due 10/01/29 ................................ 30,492 31,663 Federal Home Loan Mortgage Corp., Gold 6.000%, due 03/01/32 ................................ 21,669 22,438 6.500%, due 02/01/29 ................................ 151,470 157,849 6.500%, due 04/01/29 ................................ 160,284 167,034 6.500%, due 11/01/32 ................................ 179,870 187,445 Federal National Mortgage Association 5.500%, due 03/15/11 ................................ 140,000 153,441 5.500%, due 12/01/17 ................................ 64,000 66,449 5.500%, due 12/01/31 ................................ 213,228 217,838 6.000%, due 12/01/28 ................................ 37,229 38,539 6.000%, due 03/01/29 ................................ 79,121 81,904 6.500%, due 01/01/28 ................................ 154,097 160,522 6.500%, due 11/01/31 ................................ 67,881 70,711 6.500%, due 08/01/32 ................................ 144,000 150,004 7.000%, due 09/01/23 ................................ 174,997 184,063 7.500%, due 05/01/31 ................................ 52,992 56,261 Federal National Mortgage Association, 93-73, Class ZA 7.500%, due 10/25/22 ................ 30,709 31,870 Federal National Mortgage Association, Grantor Trust, 01-T5, Class A3 7.500%, due 06/19/41 ................................ 126,661 134,677 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 ................ 35,000 38,044 Government National Mortgage Association 6.000%, due 11/20/28 ................................ 36,986 38,414 6.000%, due 02/20/29 ................................ 78,843 81,886 6.500%, due 10/15/28 ................................ 93,656 98,366 7.000%, due 04/15/26 ................................ 70,225 74,449 7.500%, due 02/15/27 ................................ 224,690 239,689 GS Mortgage Securities Corp. II, 96-PL, Class A2 7.410%, due 02/15/27 ....................... 20,000 21,461 GS Mortgage Securities Corp., 01-2, 144A Class A, 7.500%, due 06/19/32 ....................... 109,637 116,524 Impac Secured Assets Corp., 01-3, (c) Class A2, 7.250%, due 04/25/31 ...................... 22,253 23,950 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1 6.410%, due 06/15/31 ................................ 88,383 95,613 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 ................................ 40,000 46,903 Morgan Stanley Dean Witter Capital I, 01-TOP1, Class A4 6.660%, due 02/15/33 ................................ 235,000 268,948 Morgan Stanley Dean Witter Capital I, 00-LIF2, Class A1 6.960%, due 10/15/33 ................................ 26,407 29,462 Morgan Stanley Dean Witter Capital I, 00-LIFE, Class A2 7.570%, due 12/15/09 ................................ 135,000 159,675 Nomura Asset Securities Corp., 95-MD3, Class A/B 8.150%, due 03/04/20 ...................... 68,129 75,026 Norwest Asset Securities Corp., 99-3, Class A3 6.000%, due 01/25/29 ....................... 4,844 4,847 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B 7.330%, due 12/10/32 ...................... 15,000 17,528 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 ................ 45,000 50,877 Structured Asset Securities Corp., 98-ALS1, Class 1A 6.900%, due 01/25/29 ....................... 35,221 36,003 ----------- 4,055,954 ----------- U.S. GOVERNMENT OBLIGATIONS -- 10.77% U.S. Treasury Bond TIP 3.000%, due 07/15/12 ................................ 140,000 150,005 U.S. Treasury Note 2.875%, due 06/30/04 ................................ 407,000 415,998 3.250%, due 08/15/07 ................................ 407,000 417,080 4.750%, due 11/15/08 ................................ 85,000 92,783 6.250%, due 05/15/30 ................................ 60,000 71,801 6.750%, due 05/15/05 ................................ 1,080,000 1,204,074 8.000%, due 11/15/21 ................................ 165,000 229,904 ----------- 2,581,645 ----------- Total U.S. Bonds (Cost $7,755,457) .................... 8,011,000 ----------- SHARES --------- SHORT-TERM INVESTMENTS -- 4.51% OTHER -- 4.51% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,080,514) ................................... 1,080,514 1,080,514 ----------- Total Investments (Cost $24,921,921) -- 99.96% (a) .................... 23,958,080 Cash and other assets, less liabilities -- 0.04% ........................... 10,371 ----------- Net Assets -- 100% .................................... $23,968,451 =========== 34 - -------------------------------------------------------------------------------- UBS U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $24,921,921; and net unrealized depreciation consisted of: Gross unrealized appreciation ........................ $ 931,365 Gross unrealized depreciation ........................ (1,895,206) ----------- Net unrealized depreciation ................. $ (963,841) =========== (b) Non-income producing security. (c) Step bonds -- coupon rate increases in increments to maturity. Rate disclosed is as of December 31, 2002. Maturity date disclosed is the ultimate maturity date. (d) Security is in default. (e) Security is illiquid. This security amounted to $11,877 or 0.05% of net assets. % 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 December 31, 2002, the value of these securities amounted to $206,832 or 0.86% of net assets. - -------------------------------------------------------------------------------- 35 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- UBS U.S. EQUITY FUND - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS U.S. Equity Fund declined 9.79%, versus a 10.30% decline for the Wilshire 5000 Equity Index. Since the Fund's inception on February 22, 1994 through December 31, 2002, its Class Y shares provided an average annual return of 9.10%. This compares favorably to the 8.53% return of the Fund's benchmark. (Returns for all share classes over various time periods are shown on page 37. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW Early in 2002, there was widespread hope that the stock market would stage a recovery. By mid-year, it was clear this would not happen. A weak economy, disappointing corporate profits, high profile accounting scandals, and the ongoing threat of a conflict in the Middle East kept investors at bay. Problems escalated in the third quarter, when the publication of less-than-expected second quarter gross domestic product (GDP) growth spurred fears of a double-dip economic recession. In addition, there were continued questions about the quality of earnings and corporate governance in the United States, to the extent that even revered corporate names such as General Electric were brought to task. The U.S. stock market responded with a 16.8% decline during the third quarter, as measured by the Wilshire 5000 Equity Index. The fourth quarter told a very different story. The market hit a five-year low in early October, but then rallied. Attractive valuations and better-than-expected third quarter earnings reports released by several of the year's most volatile companies re-ignited investor interest. The result was a 7.82% advance in the Wilshire 5000--an impressive gain, but not enough to overcome the year's earlier losses. OUR FOCUS ON INTRINSIC VALUE GENERATED POSITIVE RESULTS During the period, we employed fundamental research to identify undervalued companies in non-cyclical industries. This search for intrinsic value led us to overweight healthcare and pharmaceuticals, banks, and utilities. Our holdings in pharmaceuticals were especially beneficial to Fund performance. Several high-profile drug failures had scared investors away from the sector. This left many fundamentally sound companies selling at relatively low prices. We concentrated our holdings on companies with strong, established drug pipelines and were rewarded with good results. Performance was also supported by the Fund's holdings in the bank sector. Banks began to reap the benefits of earlier consolidations, an increased focus on automation, and the introduction of new products. While many banks were hurt by the increase in commercial loan defaults, these losses were at least partially offset by lower interest rates and the resulting increase in consumer loans and mortgages. The Fund's bank holdings were bought at attractive valuations and provided an appealing return on equity. Conversely, the Fund's overweight position in utilities detracted from relative performance. Traditionally, utilities have been considered a "safe haven"--a place for investors to ride out economic downturns. However, utilities did not meet our expectations over the six-month period. Despite this poor performance, we remain positive on the sector, attracted by its sound fundamentals, fair valuations, and the possibility that dividends, typically higher on utilities than the broad market average, may be classified as tax-exempt income if President Bush's fiscal stimulus plan is implemented as proposed. LOOKING AHEAD Our valuation model suggests that U.S. equities could deliver positive returns in 2003. The economic recovery may be mild thus far, but it appears to be underway. In addition, corporate profits have been recovering and valuations are coming down. There is, however, still a great deal of uncertainty, especially with respect to the unfolding events in Iraq and Korea. We believe it is more important than ever to employ a fundamental, disciplined investment strategy in this environment. Therefore, we intend to continue to focus on companies with solid balance sheets and strong cash flows. 36 - -------------------------------------------------------------------------------- UBS U.S. EQUITY FUND - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - --------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS A -10.01% -16.87% -4.56% -0.35% 0.86% - --------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS B -10.30 -17.44 N/A N/A -10.09 - ---------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS C -10.26 -17.40 N/A N/A -12.49 - ---------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS Y -9.79 -16.55 -4.26 -0.03 9.10 - ---------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS A+ -14.95 -21.45 -6.34 -1.47 -0.17 - ---------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS B+ -14.62 -21.42 N/A N/A -12.96 - ---------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND CLASS C+ -12.01 -19.00 N/A N/A -13.25 - ---------------------------------------------------------------------------------------------- Wilshire 5000 Equity Index -10.30 -20.86 -14.37 -0.87 8.53 - ----------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. EQUITY FUND CLASS A 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 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. - ------------------------------------------------------- TOP TEN EQUITY HOLDINGS - ------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - ------------------------------------------------------- Citigroup, Inc. 3.6% Wells Fargo & Co. 3.4 Burlington Northern Santa Fe Corp. 3.0 Microsoft Corp. 2.9 United Health Group, Inc. 2.8 GreenPoint Financial Corp. 2.7 Nextel Communications, Inc. 2.6 Omnicom Group 2.5 Johnson & Johnson 2.4 Freddie Mac 2.4 - ------------------------------------------------------- Total 28.3% 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. - -------------------------------------------------------------------------------- 37 - -------------------------------------------------------------------------------- UBS U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- U.S. EQUITIES -- 97.76% AIRLINES -- 0.26% Continental Airlines, Inc., Class B (b) ................. 5,700 $ 41,325 Delta Air Lines, Inc. ................................... 14,500 175,450 ----------- 216,775 ----------- AUTOS/DURABLES -- 0.83% Johnson Controls, Inc. .................................. 8,700 697,479 ----------- BANKS -- 8.17% FleetBoston Financial Corp. ............................. 38,055 924,736 GreenPoint Financial Corp. .............................. 49,400 2,231,892 PNC Financial Services Group ............................ 19,500 817,050 Wells Fargo & Co. ....................................... 61,400 2,877,818 ----------- 6,851,496 ----------- BROADCASTING & PUBLISHING -- 2.74% McGraw-Hill Cos., Inc. .................................. 11,200 676,928 Viacom, Inc. (b) ........................................ 39,700 1,618,172 ----------- 2,295,100 ----------- CAPITAL GOODS -- 3.46% Illinois Tool Works, Inc. ............................... 31,300 2,030,118 Pentair, Inc. ........................................... 25,400 877,570 ----------- 2,907,688 ----------- CHEMICALS -- 2.93% Dow Chemical Co. (The) .................................. 30,300 899,910 Eastman Chemical Co. .................................... 15,850 582,804 IMC Global, Inc. ........................................ 50,900 543,103 Waters Corp. ............................................ 19,700 429,066 ----------- 2,454,883 ----------- COMPUTER SOFTWARE -- 2.92% Microsoft Corp. (b) ..................................... 47,400 2,450,580 ----------- COMPUTER SYSTEMS -- 1.29% Hewlett-Packard Co. ..................................... 62,488 1,084,792 ----------- CONSTRUCTION -- 1.24% Martin Marietta Materials, Inc. ......................... 34,007 1,042,655 ----------- CONSUMER -- 1.18% Kimberly-Clark Corp. .................................... 20,850 989,749 ----------- ELECTRIC COMPONENTS -- 1.84% Advanced Micro Devices, Inc. (b) ........................ 57,900 374,034 Intel Corp. ............................................. 44,100 686,637 Texas Instruments, Inc. ................................. 32,300 484,823 ----------- 1,545,494 ----------- ENERGY -- 8.98% ConocoPhillips .......................................... 18,082 874,988 Exelon Corp. ............................................ 32,300 1,704,471 ExxonMobil Corp. ........................................ 43,100 1,505,914 FirstEnergy Corp. ....................................... 45,045 1,485,134 Kerr-McGee Corp. ........................................ 8,900 394,270 Progress Energy, Inc. ................................... 19,000 823,650 Sempra Energy ........................................... 31,700 749,705 ----------- 7,538,132 ----------- FINANCIAL SERVICES -- 16.83% American International Group, Inc. ...................... 19,459 1,125,703 Anthem, Inc. (b) ........................................ 27,100 1,704,590 Citigroup, Inc. ......................................... 84,961 2,989,778 Freddie Mac ............................................. 34,400 2,031,320 Hartford Financial Services Group, Inc. (The) ........... 18,100 822,283 Household International, Inc. ........................... 49,800 1,384,938 J.P. Morgan Chase & Co. ................................. 71,600 1,718,400 Mellon Financial Corp. .................................. 37,100 968,681 Morgan Stanley .......................................... 34,400 1,373,248 ----------- 14,118,941 ----------- HEALTH: DRUGS -- 8.46% Allergan, Inc. .......................................... 32,700 1,884,174 Bristol-Myers Squibb Co. ................................ 63,200 1,463,080 Cephalon, Inc. (b) ...................................... 21,000 1,022,028 SICOR, Inc. (b) ......................................... 76,900 1,218,865 Wyeth, Inc. ............................................. 40,300 1,507,220 ----------- 7,095,367 ----------- HEALTH: NON-DRUGS -- 6.47% Advanced Medical Optics, Inc. (b) ....................... 7,244 86,711 Baxter International, Inc. .............................. 34,300 960,400 Johnson & Johnson ....................................... 38,044 2,043,343 UnitedHealth Group, Inc. ................................ 28,000 2,338,000 ----------- 5,428,454 ----------- HOUSING/PAPER -- 1.95% American Standard Cos., Inc. (b) ........................ 23,000 1,636,220 ----------- INDUSTRIAL COMPONENTS -- 1.68% Ingersoll-Rand Co., Class A ............................. 32,700 1,408,062 ----------- METALS NON-FERROUS -- 2.25% Masco Corp. ............................................. 89,800 1,890,290 ----------- RECREATION -- 0.99% Royal Caribbean Cruises Ltd. ............................ 49,700 829,990 ----------- RETAIL/APPAREL -- 4.42% Costco Wholesale Corp. (b) .............................. 36,500 1,024,190 Newell Rubbermaid, Inc. ................................. 48,600 1,474,038 RadioShack Corp. ........................................ 28,100 526,594 TJX Companies, Inc. ..................................... 35,100 685,152 ----------- 3,709,974 ----------- SERVICES/MISCELLANEOUS -- 5.59% Computer Sciences Corp. (b) ............................. 10,500 361,725 First Data Corp. ........................................ 28,960 1,025,474 MeadWestvaco Corp. ...................................... 24,200 597,982 Omnicom Group ........................................... 33,100 2,138,260 Viad Corp. .............................................. 25,250 564,337 ----------- 4,687,778 ----------- TECHNOLOGY -- 1.87% United Technologies Corp. ............................... 25,400 1,573,276 ----------- TELECOMMUNICATIONS EQUIPMENT -- 0.26% Comm Scope, Inc.(b) ..................................... 27,200 214,880 ----------- - -------------------------------------------------------------------------------- 38 - -------------------------------------------------------------------------------- UBS U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- TELECOMMUNICATIONS SERVICES -- 4.86% Motorola, Inc. ........................................ 92,323 798,594 Nextel Communications, Inc.(b) ........................ 191,000 2,206,050 SBC Communications, Inc. .............................. 39,500 1,070,845 ----------- 4,075,489 ----------- TRANSPORTATION -- 2.99% Burlington Northern Santa Fe Corp. .................... 96,600 $ 2,512,566 ----------- UTILITIES -- 3.30% CMS Energy Corp. ...................................... 42,850 404,504 Consolidated Edison, Inc. ............................. 19,900 852,118 Dominion Resources, Inc. .............................. 11,400 625,860 Entergy Corp. ......................................... 19,400 884,446 ----------- 2,766,928 ----------- Total U.S. Equities (Cost $76,592,750) ................ 82,023,038 ----------- SHORT-TERM INVESTMENTS -- 2.29% OTHER -- 2.10% UBS Supplementary Trust U.S. Cash Management Prime Fund ..................... 1,764,323 1,764,323 FACE AMOUNT --------- U.S. GOVERNMENT OBLIGATIONS -- 0.19% U.S. Treasury Bill, due 02/06/03 (c) .................. $ 160,000 159,816 ----------- Total Short-Term Investments (Cost $1,924,080) ................................... 1,924,139 ----------- Total Investments (Cost $78,516,830) -- 100.05% (a) ................... 83,947,177 Liabilities, less cash and other assets -- (0.05)% ............................. (39,246) ----------- Net Assets -- 100% .................................... $83,907,931 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $78,516,830; and net unrealized appreciation consisted of: Gross unrealized appreciation ...................... $13,702,630 Gross unrealized depreciation ...................... (8,272,283) ----------- Net unrealized appreciation ............... $ 5,430,347 =========== (b) Non-income producing security. (c) All or a portion of these securities was pledged to cover margin requirements for futures contracts. % Represents a percentage of net assets. FUTURES CONTRACTS UBS U.S. Equity Fund had the following open futures contracts as of December 31, 2002:
EXPIRATION CURRENT UNREALIZED DATE COST VALUE LOSS ---------- ---------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Standard & Poor's 500, 11 contracts ........ March 2003 $2,453,452 $2,416,975 $(36,477) =========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at December 31, 2002 was $159,816. - -------------------------------------------------------------------------------- 39 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS U.S. Large Cap Growth Fund declined 10.51%, compared to an 8.97% decline for the Russell 1000 Growth Index. (Returns for all share classes over various time periods are shown on page 41. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW The stock market may have delivered negative results for the six months ended 2002, but it largely ended on a high note for many investors. The U.S. market (as measured by the S&P 500 Index) declined 17.2% in the third quarter, continuing the downward trend set earlier in the year. Weak economic numbers, disappointing corporate profits and a significant decline in capital spending left investors nervous about investing in stocks. Efforts made by industries to restore investor confidence, including over 900 CEOs vouching for their company's financial records by personally signing their accounting books, led to a rally, but any gains were gradually given back as investors were faced with new evidence of decreased consumer spending and deteriorating relations with Iraq. No segment of the market escaped these problems, with virtually every investment style, industry sector and market capitalization posting declines. The fourth quarter was significantly better than the third. After revisiting a five-year low in early October, the market rebounded. Indications were that the third quarter was not as problematic as initially feared. Third quarter economic statistics were better than expected, and included a 4.0% increase in GDP. In addition, several of the year's worst performing stocks were able to meet or exceed their downwardly revised third quarter earnings estimates. Investors welcomed this positive news, buying into the riskiest end of the market - --low-priced, low-quality stocks. Unfortunately, less encouraging economic and company-specific news followed, bringing the rally to a halt just two months after it had started. The market ended on a weak note in December, but still managed to deliver an 8.4% gain for the quarter. Growth stocks lagged the market as a whole during this period, returning 7.2%. FOCUS ON VALUE IDENTIFIED POCKETS OF OPPORTUNITY As its returns indicate, the Fund was not able to avoid the overall weakness in the equity markets. However, we were able to identify several pockets of opportunity. For example, the Fund's consumer staples stocks performed well in the third quarter, when investors were looking for stocks immune to economic decline. In our opinion, this demand drove prices beyond their intrinsic value. We therefore moved to adopt an underweight position in the sector relative to the benchmark. Conversely, we remained overweight in consumer areas that were more affected by the market's decline, including media. We believe these sectors will benefit as the economic picture continues to improve. FINDING GROWTH THROUGH RISK MANAGEMENT AND A GLOBALLY INTEGRATED PLATFORM During the period, sector selection was the most significant positive contributor to performance. Our rigorous risk management approach and our leveraging of UBS Global Asset Management's (UBS GAM) integrated global platform played important roles in this outcome. Most notably, our decision to invest in Wells Fargo and Pepsi Bottling Group came about as a direct result of these capabilities. During the period, we sought to reduce our weightings to technology (which we felt held too dominant a position within the benchmark index) and pharmaceuticals (a sector that was coming under increasing pressure from the government), based on the results of our careful risk assessment process. At the same time, we wanted to increase our exposure to financials and consumer staples, sectors that the Fund held underweights in, but which we viewed positively in the given market environment. Our goal was to select names that were well known in their respective sectors, but that still offered good growth potential. Through a careful screening process, backed by extensive research that had already been conducted on UBS GAM's global platform, we identified Wells Fargo as a strong buy. Similarly, after conducting careful research within our own framework, we identified Pepsi as a stock that offered strong growth potential. We purchased both stocks, which ultimately were among our best performers over the period. LOOKING AHEAD Many of the problems that plagued the markets in 2002 have flowed into 2003. However, the news is not all negative. We may not see a rapid, "V-shaped" recovery, but the economy appears to be gradually improving. We believe investors are coming to accept this reality and will become more risk tolerant in the new year. To our benefit, the market's prolonged decline has created opportunities for large-cap growth investors. To that end, we will continue to employ our fundamental, research-drive investment process to identify these opportunities, focusing on financially strong companies that we believe are poised to benefit from economic growth. 40 - -------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS A -10.66% -28.84% -22.92% N/A -11.79% - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS B -11.01 -29.34 N/A N/A -24.49 - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS C -10.87 -29.34 N/A N/A -27.75 - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS Y -10.51 -28.61 -22.65 -5.16% -5.06 - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS A+ -15.56 -32.78 -24.36 N/A -13.03 - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS B+ -15.46 -32.87 N/A N/A -27.11 - -------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND CLASS C+ -12.58 -30.74 N/A N/A -28.37 - -------------------------------------------------------------------------------------------------------- Russell 1000 Growth Index -8.97 -27.88 -23.64 -3.84 -2.73 - --------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. LARGE CAP GROWTH FUND CLASS A 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 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. - ------------------------------------------------------ TOP TEN EQUITY HOLDINGS - ------------------------------------------------------ AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - ------------------------------------------------------ Microsoft Corp. 5.4% Pfizer, Inc. 4.9 General Electric Co. 4.1 Johnson & Johnson 4.0 Wal-Mart Stores, Inc. 2.9 Citigroup, Inc. 2.8 Wells Fargo & Co. 2.4 Amgen, Inc. 2.4 Medtronic, Inc. 2.2 Intel Corp. 2.1 - ------------------------------------------------------ Total 33.2% - -------------------------------------------------------------------------------- 41 - -------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- U.S. EQUITIES -- 98.60% BANKS -- 2.44% Wells Fargo & Co. ....................................... 1,700 $ 79,679 ----------- BEVERAGES & TOBACCO -- 1.74% Philip Morris Companies, Inc. ........................... 1,400 56,742 ----------- BIOMEDICAL -- 2.39% Amgen, Inc. (b) ......................................... 1,616 78,118 ----------- BROADCASTING & PUBLISHING -- 3.32% McGraw-Hill Cos., Inc. .................................. 750 45,330 Viacom, Inc., Class B (b) ............................... 1,546 63,015 ----------- 108,345 ----------- CHEMICALS -- 1.57% International Flavors & Fragrances, Inc. ................ 500 17,550 Waters Corp. (b) ........................................ 1,550 33,759 ----------- 51,309 ----------- COMPUTER SOFTWARE -- 5.99% Microsoft Corp. (b) ..................................... 3,400 175,780 Oracle Corp. (b) ........................................ 1,850 19,980 ----------- 195,760 ----------- COMPUTER SYSTEMS -- 5.29% Cisco Systems, Inc. (b) ................................. 5,200 68,120 Dell Computer Corp. (b) ................................. 2,000 53,480 Hewlett-Packard Co. ..................................... 1,608 27,915 International Business Machines Corp. ................... 300 23,250 ----------- 172,765 ----------- CONSUMER -- 1.11% H&R Block, Inc. ......................................... 900 36,180 ----------- ELECTRIC COMPONENTS -- 4.09% Applied Materials, Inc. (b) ............................. 1,350 17,591 Intel Corp. ............................................. 4,450 69,286 Novellus Systems, Inc. (b) .............................. 650 18,252 Texas Instruments, Inc. ................................. 1,900 28,519 ----------- 133,648 ----------- ELECTRONICS -- 0.93% Lexmark International, Inc. (b) ......................... 500 30,250 ----------- ENERGY -- 3.87% Anadarko Petroleum Corp. ................................ 850 40,715 Devon Energy Corp. ...................................... 1,000 45,900 Schlumberger Ltd. ....................................... 950 39,985 ----------- 126,600 ----------- FINANCIAL SERVICES -- 7.47% American International Group, Inc. ...................... 437 25,280 Citigroup, Inc. ......................................... 2,583 90,896 Freddie Mac ............................................. 1,050 62,003 Morgan Stanley .......................................... 1,650 65,868 ----------- 244,047 ----------- FOOD & HOUSE PRODUCTS -- 0.82% Sysco Corp. ............................................. 900 26,811 ----------- HEALTH: DRUGS -- 9.91% Allergan, Inc. .......................................... 650 37,453 Bristol-Myers Squibb Co. ................................ 1,900 43,985 Cephalon, Inc. (b) ...................................... 1,000 48,668 Pfizer, Inc. ............................................ 5,250 160,492 SICOR, Inc. (b) ......................................... 800 12,680 Wyeth, Inc. ............................................. 550 20,570 ----------- 323,848 ----------- HEALTH: NON-DRUGS -- 13.81% Baxter International, Inc. .............................. 1,600 44,800 Beckman Coulter, Inc. ................................... 950 28,044 Johnson & Johnson ....................................... 2,422 130,086 Laboratory Corp. of America Holdings (b) ................ 2,000 46,480 Medtronic, Inc. ......................................... 1,600 72,960 United Health Group, Inc. ............................... 600 50,100 Wellpoint Health Networks (b) ........................... 700 49,812 Zimmer Holdings, Inc. (b) ............................... 700 29,064 ----------- 451,346 ----------- INSURANCE -- 1.02% Allstate Corp. .......................................... 900 33,291 ----------- LEISURE & TOURISM -- 1.09% Harrah's Entertainment, Inc. (b) ........................ 900 35,640 ----------- METALS NON-FERROUS -- 1.35% Masco Corp. ............................................. 2,100 44,205 ----------- MULTI-INDUSTRY -- 6.55% Black & Decker Corp. .................................... 400 17,156 General Electric Co. .................................... 5,450 132,707 Proctor & Gamble Co. .................................... 750 64,455 ----------- 214,318 ----------- NON-DURABLES -- 2.24% Pepsi Bottling Group, Inc. .............................. 1,200 30,840 PepsiCo, Inc. ........................................... 1,000 42,220 ----------- 73,060 ----------- RESEARCH & DEVELOPMENT -- 0.61% Idec Pharmaceuticals Corp. (b) .......................... 600 19,902 ----------- RETAIL/APPAREL -- 6.68% Costco Wholesale Corp. (b) .............................. 1,000 28,060 Newell Rubbermaid, Inc. ................................. 1,550 47,012 TJX Companies, Inc. ..................................... 2,550 49,776 Wal-Mart Stores, Inc. ................................... 1,850 93,443 ----------- 218,291 ----------- SERVICES/MISCELLANEOUS -- 8.41% Amazon.com, Inc. (b) .................................... 2,300 43,447 AOL Time Warner, Inc. (b) ............................... 4,350 56,985 Cendant Corp. (b) ....................................... 1,400 14,672 eBay, Inc. (b) .......................................... 650 44,083 Expedia, Inc. (b) ....................................... 500 33,465 First Data Corp. ........................................ 1,500 53,115 Omnicom Group ........................................... 450 29,070 ----------- 274,837 ----------- TECHNOLOGY -- 2.44% Analog Devices, Inc. (b) ................................ 1,000 23,870 United Technologies Corp. ............................... 900 55,746 ----------- 79,616 ----------- 42 - -------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- TELECOMMUNICATIONS EQUIPMENT -- 0.95% QUALCOMM, Inc. (b) ...................................... 850 $ 30,932 ---------- TELECOMMUNICATIONS SERVICES -- 1.99% EchoStar Communications Corp., Class A (b) ........................................... 2,250 50,085 Nextel Communications, Inc., Class A (b) ................ 1,300 15,015 ---------- 65,100 ---------- THERAPEUTICS -- 0.52% Gilead Sciences, Inc. (b) ............................... 500 17,000 ---------- Total U.S. Equities (Cost $3,952,805) 3,221,640 ---------- SHORT-TERM INVESTMENTS -- 1.41% OTHER -- 1.41% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $45,985) ........................................ 45,985 45,985 ---------- Total Investments (Cost $3,998,790) -- 100.01% (a) ...................... 3,267,625 Liabilities, less cash and other assets -- (0.01)% ............................... (480) ---------- Net Assets -- 100% ...................................... $3,267,145 ========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $3,998,790; and net unrealized depreciation consisted of: Gross unrealized appreciation .................... $ 51,525 Gross unrealized depreciation .................... (782,690) --------- Net unrealized depreciation ............. $(731,165) ========= (b) Non-income producing security. % Represents a percentage of net assets. - -------------------------------------------------------------------------------- 43 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS U.S. Small Cap Growth Fund declined 11.59%, outperforming the 15.63% decline of the benchmark Russell 2000 Growth Index. Since the Fund's inception on September 30, 1997, through December 31, 2002, its Class Y shares generated an average annual return of 2.16%. This compares very favorably to the 7.80% decline posted by the Fund's benchmark. (Returns for all share classes over various time periods are shown on page 45. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) The Fund's strong relative performance in a weak market environment is a reflection of the portfolio's relatively high-quality orientation and rigorous risk management disciplines, which include a diversification of the portfolio at both the sector and individual security level. MARKET REVIEW At the start of the six-month period, it was apparent that, contrary to early 2002 expectations, the economy was not going to make a rapid and dramatic recovery. This fact, combined with disappointing earnings announcements, continued reports of corporate misconduct and the growing threat of a conflict in the Middle East, caused investor confidence--and stock prices--to plummet. The market's downward spiral was halted briefly in mid-October, when announcements of improving economic statistics and better-than-expected earnings reports sparked a short-lived two-month rally. Although some of the gains were given back in December, the S&P 500 Index ended the fourth quarter up 8.43%. This was not enough, however, to offset the prior quarter's losses, and the S&P 500 Index finished the six-month period down 10.30%. Small cap growth stocks tended to follow the path established by the broader market over the six-month period, though not necessarily for the same reasons. During the third quarter, equity investors favored large-cap stocks, which they considered to be less volatile investments than their small cap counterparts. As a result, small caps as a whole underperformed the overall market. In contrast, small cap growth stocks were at the center of the fourth quarter's rally. Low-priced, high-volatility telecommunications and technology stocks rose and then fell, taking the Russell 2000 Growth Index up 9.17% and 5.43% in October and November, respectively, then down 6.91% in December. When all was said and done, small cap growth stocks had posted a respectable 7.51% return for the quarter. However, like the broader market, this was not enough to counter the prior quarter's losses, and small cap growth stocks declined 15.63% over the review period. FOCUS ON STABLE INCOME STREAM AND STRONG BALANCE SHEET HELPS PERFORMANCE As its returns indicate, the Fund was unable to completely avoid the market's weakness during the reporting period. However, a defensive posture--in part due to our concern over market volatility and in part because of our traditional orientation toward relatively high-quality stocks--helped limit the extent to which the Fund's performance was compromised by market weakness. Compared to the Russell 2000 Growth Index, the Fund favored larger, more liquid stocks with stable income streams and strong balance sheets. Our strategy also called for the Fund to underweight high volatility stocks, especially those with substantial earnings variability. Sector strategy was also a positive influence on performance, though less so. Early in the period, the Fund benefited from an underweight position in information technology. However, as we saw increasing signs of stability in this sector, we increased our exposure to it, bringing our weighting in line with that of the benchmark's. As a result, we were able to participate in the October/November rally. LOOKING AHEAD Investors appear to have accepted the fact that the economy is improving, albeit at a slower pace than anticipated. Accordingly, they are becoming more investment risk-tolerant. Against this backdrop, and assuming the geopolitical situation does not materially change, we believe the U.S. equity markets could deliver positive returns in 2003. We are particularly optimistic about the future prospects for small cap stocks. Presently, small cap stock prices are relatively low and we are finding attractive opportunities in virtually every industry sector. In addition, we believe investors now have good reason to take notice of small cap stocks. First, periods of economic recovery have historically favored small caps, which tend to be more dependent on economic stimulus. In addition, many large-cap companies have been forced to reduce their defined-benefit plan assumptions in order to reflect the market's decline and decreased investment return expectations. These reductions will hurt large cap earnings growth versus the profit gains of smaller companies that have no defined benefit plans. As a result, we believe the potential exists for small cap stocks to outperform large cap stocks in 2003. 44 - -------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS A -11.64% -18.55% -3.82% N/A 5.86% - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS B -12.00 -19.21 N/A N/A -10.71 - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS C -12.01 -19.23 N/A N/A -12.56 - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS Y -11.59 -18.42 -3.57 3.46% 2.16 - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS A+ -16.59 -23.04 -5.61 N/A 4.38 - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS B+ -16.49 -23.25 N/A N/A -13.70 - -------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND CLASS C+ -13.86 -20.86 N/A N/A -13.31 - -------------------------------------------------------------------------------------------------------- Russell 2000 Growth Index -15.63 -30.26 -21.11 -6.59 -7.80 - --------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. SMALL CAP GROWTH FUND CLASS A 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 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 MAY INVEST IN IPOs WHICH MAY HAVE A MAGNIFIED IMPACT ON PERFORMANCE. - ------------------------------------------------------ TOP TEN EQUITY HOLDINGS - ------------------------------------------------------ AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - ------------------------------------------------------ New York Community Bancorp, Inc. 3.0% Career Education Corp. 2.7 Cognizant Technology Solutions Corp. 2.5 Patterson Dental Co. 2.5 UCBH Holdings, Inc. 2.4 Pediatrix Medical Group, Inc. 2.4 CACI International, Inc. 2.3 Chico's FAS, Inc. 2.1 Fair, Isaac & Co., Inc. 2.1 Patterson-UTI Energy, Inc. 2.1 - ------------------------------------------------------ Total 24.1% - -------------------------------------------------------------------------------- 45 - -------------------------------------------------------------------------------- UBS U.S. SMALL CAP FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- U.S. EQUITIES -- 97.17% AEROSPACE & DEFENSE -- 0.76% Engineered Support Systems .............................. 7,350 $ 269,451 ----------- AIRLINES -- 0.87% Atlantic Coast Airlines Holdings, Inc. (b) .............. 25,500 306,765 ----------- APPLICATION SOFTWARE -- 4.94% Fair, Isaac & Company, Inc. ............................. 17,200 734,440 Mercury Interactive Corp. (b) ........................... 7,100 210,515 THQ, Inc. (b) ........................................... 17,450 231,212 Verisity Ltd. (b) ....................................... 29,900 569,894 ----------- 1,746,061 ----------- AUTO PARTS & EQUIPMENT -- 1.23% American Axle & Mfg Holdings, Inc. (b) .................. 18,600 435,612 ----------- BANKS -- 11.15% BankUnited Financial Corp., Class A (b) ................. 28,100 454,658 Greater Bay Bancorp ..................................... 16,000 276,640 Harbor Florida Bancshares, Inc. ......................... 11,100 249,972 Investors Financial Services Corp. ...................... 24,000 657,360 New York Community Bancorp, Inc. ........................ 36,371 1,050,394 Sterling Bancshares, Inc. ............................... 31,500 384,930 UCBH Holdings, Inc. ..................................... 20,400 865,980 ----------- 3,939,934 ----------- BIOTECHNOLOGY -- 3.10% Medarex, Inc. (b) ....................................... 13,500 53,325 Neurocrine Biosciences, Inc. (b) ........................ 10,300 470,298 Sangstat Medical Corp. (b) .............................. 14,600 164,980 Scios, Inc. (b) ......................................... 12,500 407,250 ----------- 1,095,853 ----------- BROADCASTING & CABLE TV -- 1.92% Cumulus Media, Inc., Class A (b) ........................ 29,900 444,613 Salem Communications Corp., Class A (b) ................. 9,400 234,718 ----------- 679,331 ----------- CHEMICALS -- 1.23% Albemarle Corp. ......................................... 15,300 435,285 ----------- COMPUTER SOFTWARE -- 0.27% Internet Security Systems, Inc. (b) ..................... 5,200 95,316 ----------- CONSTRUCTION & ENGINEERING -- 1.62% EMCOR Group, Inc. (b) ................................... 10,800 572,508 ----------- CONSUMER -- 0.91% Leapfrog Enterprises, Inc. (b) .......................... 12,800 321,920 ----------- DISTILLER & VINTNERS -- 1.51% Constellation Brands, Inc., Class A (b) ................. 22,500 533,475 ----------- DIVERSIFIED FINANCIALS -- 0.94% Jones Lang Lasalle, Inc. (b) ............................ 21,600 332,208 ----------- ELECTRIC COMPONENTS -- 3.77% Artisan Components, Inc. (b) ............................ 15,400 237,622 Cree, Inc. (b) .......................................... 11,500 188,025 Foundry Networks, Inc. (b) .............................. 29,300 206,272 Omnivision Technologies, Inc. (b) ....................... 16,700 226,619 Smith, A.O. Corp. ....................................... 17,600 475,376 ----------- 1,333,914 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS -- 4.74% Benchmark Electronics, Inc. (b) ......................... 19,300 553,138 Cognex Corp. (b) ........................................ 24,900 458,907 Planar Systems, Inc. (b) ................................ 32,100 662,223 ----------- 1,674,268 ----------- FOOD DISTRIBUTORS -- 1.35% Performance Food Group Co. (b) .......................... 14,000 475,426 ----------- GENE -- 1.26% Affymetrix, Inc. (b) .................................... 7,600 173,964 InterMune, Inc. (b) ..................................... 5,000 127,550 Telik, Inc. (b) ......................................... 12,200 142,252 ----------- 443,766 ----------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.67% ResMed, Inc. (b) ........................................ 7,800 238,446 ----------- HEALTH: DRUGS -- 1.20% Amylin Pharmaceuticals, Inc. (b) ........................ 10,200 164,628 SICOR, Inc. (b) ......................................... 16,400 259,940 ----------- 424,568 ----------- HEALTH: NON-DRUGS -- 0.89% Advanced Neuromodulation Systems, Inc.(b) ...................................... 9,000 315,900 ----------- HEALTHCARE DISTRIBUTOR SERVICES -- 8.36% Dianon Systems, Inc. (b) ................................ 8,500 405,535 Fisher Scientific International, Inc. (b) ............... 10,100 303,808 Patterson Dental Co. (b) ................................ 20,100 879,174 Pediatrix Medical Group, Inc. (b) ....................... 21,000 841,260 Pharmaceutical Product Development, Inc. (b) ................................. 18,000 526,860 ----------- 2,956,637 ----------- HEALTHCARE FACILITY -- 1.50% Odyssey HealthCare, Inc. ................................ 8,700 301,890 Province Healthcare Co. (b) ............................. 23,700 230,601 ----------- 532,491 ----------- HOMEBUILDING -- 1.17% Beazer Homes U.S.A., Inc. (b) ........................... 2,000 121,200 NVR, Inc. (b) ........................................... 900 292,950 ----------- 414,150 ----------- INSURANCE -- 0.59% RLI Corp. ............................................... 7,500 209,250 ----------- INSURANCE BROKERS -- 1.46% Hilb, Rogal & Hamilton Co. .............................. 7,300 298,570 Hub International Ltd. .................................. 16,900 216,827 ----------- 515,397 ----------- INTERNET SERVICES -- 0.64% Websense, Inc. (b) ...................................... 10,600 226,427 ----------- INTERNET SOFTWARE & SERVICES -- 2.06% Intercept Group, Inc. (b) ............................... 16,600 281,055 Overture Services, Inc. (b) ............................. 16,400 447,884 ----------- 728,939 ----------- - -------------------------------------------------------------------------------- 46 - -------------------------------------------------------------------------------- UBS U.S. SMALL CAP FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE -------- --------- IT CONSULTING & SERVICES -- 4.77% CACI International, Inc., Class A (b) ................. 22,400 $ 798,336 Cognizant Technology Solutions Corp. (b) .............. 12,300 888,429 ----------- 1,686,765 ----------- LEISURE PRODUCTS -- 0.67% Action Performance Companies, Inc. .................... 12,500 237,500 ----------- MACHINERY INDUSTRIAL -- 2.03% ESCO Technologies, Inc. (b) ........................... 12,200 451,400 Flowserve Corp. (b) ................................... 17,900 264,741 ----------- 716,141 ----------- OIL & GAS EXPLORATION & PRODUCTION -- 0.96% Stone Energy Corp. (b) ................................ 10,200 340,272 ----------- OIL & GAS-DRILLING -- 2.07% Patterson-UTI Energy, Inc. (b) ........................ 24,200 730,114 ----------- OIL & GAS-EQUIPMENT SERVICES -- 1.31% Tetra Technologies, Inc. (b) .......................... 21,700 463,729 ----------- PHARMACEUTICALS -- 2.23% Isis Pharmaceuticals, Inc. (b) ........................ 28,300 186,497 NPS Pharmaceuticals, Inc. (b) ......................... 13,900 349,863 Penwest Pharmaceuticals Co. (b) ....................... 23,900 253,340 ----------- 789,700 ----------- REITS EQ HEALTHCARE -- 0.95% Ventas, Inc. .......................................... 29,400 336,630 ----------- REITS EQ RETAIL -- 1.08% Mills Corp. ........................................... 13,000 381,420 ----------- RESTAURANTS -- 2.57% Panera Bread Co., Class A (b) ......................... 13,200 459,492 Ruby Tuesday, Inc. .................................... 26,000 449,540 ----------- 909,032 ----------- RETAIL -- COMPUTERS/ELECTRONICS -- 0.77% Electronics Boutique Holdings Corp. (b) ............... 17,300 273,513 ----------- RETAIL/APPAREL -- 2.21% Aeropostale, Inc. (b) ................................. 3,600 38,052 Chico's FAS, Inc. (b) ................................. 39,200 741,272 ----------- 779,324 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 0.86% Rudolph Technologies, Inc. (b) ........................ 15,900 304,644 ----------- SEMICONDUCTORS -- 2.42% Exar Corp. (b) ........................................ 25,300 313,720 Intersil Corp. (b) .................................... 18,452 257,221 Pericom Semiconductor Corp. (b) ....................... 34,300 285,033 ----------- 855,974 ----------- SERVICES -- DATA PROCESSING -- 0.73% Factset Research Systems, Inc. ........................ 9,100 257,257 ----------- SERVICES -- DIVERSIFIED COMMERCIAL -- 2.67% Career Education Corp. (b) ............................ 23,600 944,000 ----------- SERVICES -- OFFICE/SUPPLIES -- 1.10% Moore Corp., Ltd. (b) ................................. 42,600 387,660 ----------- SERVICES/MISCELLANEOUS -- 0.69% Avocent Corp. (b) ..................................... 10,900 242,198 ----------- SOFT DRINKS -- 1.09% Cott Corp. (b) ........................................ 21,600 384,912 ----------- SPECIALTY STORES -- 3.85% Copart, Inc. (b) ...................................... 48,350 572,464 Gart Sports Co. (b) ................................... 12,100 234,135 Petco Animal Supplies, Inc. (b) ....................... 23,600 553,160 ----------- 1,359,759 ----------- SYSTEMS SOFTWARE -- 1.26% Borland Software Corp. (b) ............................ 36,300 446,490 ----------- TRANSPORTATION -- 0.77% UTI Worldwide, Inc. ................................... 10,300 270,375 ----------- Total U.S. Equities (Cost $35,747,941) 34,350,707 ----------- SHORT-TERM INVESTMENTS -- 3.49% OTHER -- 3.49% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,234,438) ................................... 1,234,438 1,234,438 ----------- Total Investments (Cost $36,982,379) -- 100.66% (a) ................... 35,585,145 Liabilities, less cash and other assets -- (0.66)% ............................. (234,712) ----------- Net Assets -- 100% .................................... $35,350,433 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $36,982,379; and net unrealized depreciation consisted of: Gross unrealized appreciation ................... $3,986,499 Gross unrealized depreciation ................... (5,383,733) ----------- Net unrealized depreciation ............ ($1,397,234) ============ (b) Non-income producing. % Represents a percentage of net assets. - -------------------------------------------------------------------------------- 47 See accompanying notes to financial statements. During the six months ended December 31, 2002, Class Y shares of UBS U.S. Bond Fund returned 5.54%. Over the same period, the Fund's benchmark, the Lehman U.S. Aggregate Bond Index returned 6.23%. Since the Fund's inception on August 31, 1995 through December 31, 2002, its Class Y shares provided an average annual return of 7.39%. This compares to the 7.68% return of the Fund's benchmark. (Returns for all share classes over various time periods are shown on page 49. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW Despite a high profile stock market rally in October and November, bonds soundly outperformed stocks in the six months ended December 31, 2002. A stop-and-go economy, lackluster stock returns and geopolitical unrest encouraged investors to stay with the relative security of bonds. Several sectors of the bond market flourished in this environment. High quality, noncredit-sensitive sectors such as mortgage- and commercial mortgage-backed securities turned in impressive performances. U.S. government bonds also did well, boosted by the Federal Reserve Board's decision to lower the fed funds rate another half a percentage point in November to 1.25%, bringing it to its lowest level in 41 years. These results were in stark contrast to the credit sector. Lower quality corporate bonds underperformed throughout the third quarter, held back by investors' risk aversion, the weak stock market, and the questionable business practices of several corporations. However, the biggest drag on the sector was aggressive downgrading by rating agencies. The large-scale movement of investment-grade bonds into non-investment-grade status--at which point they are referred to as "fallen angels"--overwhelmed the market. Yet, despite this, investors were willing to jump back into the market when lower quality corporates rallied in the fourth quarter. Riding on the back of the rising stock market and better than expected third quarter earnings reports, lower-quality corporate bonds posted positive results during the fourth quarter. On a Fund level, our risk management capability helped us navigate through this difficult credit environment. PORTFOLIO REVIEW The Fund's sector allocation had little effect on relative performance during the year. Our overweight in mortgage-backed securities and commercial mortgage-backed securities (the two best performing sectors of 2002) offset the weak performance produced by an overweight to the corporate sector. Security selection also had a negligible effect on performance, as holdings in the corporate bond sector hindered performance, while our mortgage-backed and commercial mortgage-backed securities enhanced performance. Finally, duration management had a slightly negative impact on the Fund, due to our shorter-than-benchmark position during part of the year's rally. LOOKING AHEAD Our current strategy is leading us to maintain underweight positions in higher quality sectors, such as agencies and upper-tier investment grade corporates. Our analysis indicates that these bonds are overvalued at current prices. Conversely, we believe that commercial mortgage-backed securities remain attractive and still warrant our overweight position. 48 - -------------------------------------------------------------------------------- UBS U.S. BOND FUND - --------------------------------------------------------------------------------
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS A 5.42% 8.96% 9.23% 6.81% 7.40% - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS B 4.96 8.16 N/A N/A 4.94 - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS C 5.15 8.40 N/A N/A 5.14 - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS Y 5.54 9.31 9.51 7.09 7.39 - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS A+ 0.63 4.07 7.57 5.83 6.51 - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS B+ -0.04 3.16 N/A N/A 1.48 - -------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND CLASS C+ 3.32 6.53 N/A N/A 4.21 - -------------------------------------------------------------------------------------------------------- Lehman U.S. Aggregate Bond Index++ 6.23 10.25 10.10 7.54 7.68 - -------------------------------------------------------------------------------------------------------- Salomon Smith Barney Broad Investment Grade (BIG) Bond Index 6.27 10.09 10.06 7.52 7.67 - --------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS U.S. BOND FUND CLASS A 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, THE LEHMAN U.S. AGGREGATE BOND 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 BOND 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. - ----------------------------------------------------- TOP TEN U.S. BOND HOLDINGS - ----------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - ----------------------------------------------------- U.S. Treasury Note 2.875%, due 06/30/04 7.8% U.S. Treasury Note 6.750%, due 05/15/05 7.1 Federal National Mortgage Association 5.500%, due 03/15/11 3.2 U.S. Treasury Note 8.000%, due 11/15/21 3.1 Federal National Mortgage Association 7.000%, due 06/01/32 3.0 U.S. Treasury Note 4.750%, due 11/15/08 2.6 U.S. Treasury Note 3.250%, due 08/15/07 2.5 U.S. Treasury Bond 3.000%, due 07/15/12 2.3 Government National Mortgage Association 6.000%, due 05/20/29 2.3 Federal Home Loan Mortgage Corp. 6.500%, due 11/01/29 2.0 - ----------------------------------------------------- Total 35.9% - -------------------------------------------------------------------------------- 49 - -------------------------------------------------------------------------------- UBS U.S. BOND FUND - -------------------------------------------------------------------------------- - ------------------------------------------------------ INDUSTRY DIVERSIFICATION - ------------------------------------------------------ AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - ------------------------------------------------------ U.S. CORPORATE BONDS Aerospace & Military ....................... 0.14% Autos/Durables ............................. 0.45 Banks ...................................... 1.08 Beverages & Tobacco ........................ 0.45 Chemicals .................................. 0.21 Computer Systems ........................... 0.07 Construction ............................... 0.31 Consumer ................................... 0.18 Electric Components ........................ 0.45 Energy ..................................... 2.54 Financial Services ......................... 4.91 Food & House Products ...................... 0.57 Forest Products ............................ 0.07 Health: Drugs .............................. 0.14 Housing/Paper .............................. 0.11 Leisure & Tourism .......................... 0.05 Metals Non-Ferrous ......................... 0.05 Multi-Industry ............................. 0.52 Publishing ................................. 0.20 Real Estate ................................ 0.10 Recreation ................................. 0.18 Retail/Apparel ............................. 0.16 Services/Miscellaneous ..................... 0.45 Telecommunications ......................... 0.56 Telecommunications-Wireless ................ 0.21 Transportation ............................. 0.28 Utilities .................................. 0.55 ------ Total U.S. Corporate Bonds ........ 14.99 Asset-Backed Securities .................... 3.79 International Dollar Bonds ................. 0.61 Mortgage-Backed Securities ................. 49.24 U.S. Government Obligations ................ 27.64 SHORT-TERM INVESTMENTS ..................... 2.04 ------ TOTAL INVESTMENTS ....................... 98.31 CASH AND OTHER ASSETS, LESS LIABILITIES ........................ 1.69 ------ NET ASSETS ................................. 100.00% ====== 50 - -------------------------------------------------------------------------------- UBS U.S. BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE --------- --------- BONDS -- 96.27% U.S. CORPORATE BONDS -- 14.99% Abbott Laboratories, Inc. 5.625%, due 07/01/06 ................................. $ 85,000 $ 92,925 Alcoa, Inc. 6.000%, due 01/15/12 ................................. 45,000 49,540 Amerada Hess Corp. 6.650%, due 08/15/11 ................................. 55,000 60,075 American Express Co. 3.750%, due 11/20/07 ................................. 55,000 55,670 Anadarko Finance Co. 7.500%, due 05/01/31 ................................. 55,000 65,398 Anheuser Busch Cos., Inc. 9.000%, due 12/01/09 ................................. 180,000 232,889 AOL Time Warner, Inc. 7.625%, due 04/15/31 ................................. 255,000 262,085 Apache Corp. 6.250%, due 04/15/12 ................................. 40,000 44,838 AT&T Wireless Services, Inc. 7.875%, due 03/01/11 ................................. 120,000 120,600 Avon Products, Inc. 7.150%, due 11/15/09 ................................. 150,000 175,209 Bank of America Corp. 7.400%, due 01/15/11 ................................. 265,000 312,161 Bank One Corp. 7.875%, due 08/01/10 ................................. 155,000 185,768 Bombardier Capital, Inc., 144A 6.125%, due 06/29/06 ................................. 175,000 158,368 Bristol Myers Squibb Co. 5.750%, due 10/01/11 ................................. 40,000 42,594 Burlington Northern Santa Fe Corp. 7.082%, due 05/13/29 ................................. 55,000 62,505 Burlington Resources Finance Co. 6.680%, due 02/15/11 ................................. 65,000 72,661 Caterpillar, Inc. 6.550%, due 05/01/11 ................................. 55,000 62,625 Cendant Corp. 6.875%, due 08/15/06 ................................. 220,000 228,286 Centex Corp. 9.750%, due 06/15/05 ................................. 155,000 172,607 Cingular Wireless 6.500%, due 12/15/11 ................................. 70,000 75,504 Citigroup, Inc. 7.250%, due 10/01/10 ................................. 385,000 446,935 Citizens Communications Co. 9.250%, due 05/15/11 ................................. 135,000 160,787 Coca Cola Co. 4.000%, due 06/01/05 ................................. 105,000 109,925 Comcast Cable Communications 6.750%, due 01/30/11 ................................. 200,000 208,097 Commonwealth Edison Co., 144A 6.150%, due 03/15/12 ................................. 65,000 71,912 Conoco, Inc. 5.900%, due 04/15/04 ................................. 320,000 334,974 ConocoPhillips 8.500%, due 05/25/05 ................................. 190,000 216,053 8.750%, due 05/25/10 ................................. 75,000 93,857 Consolidated Edison, Inc. 7.500%, due 09/01/10 ................................. 300,000 357,959 Coors Brewing Co., 144A 6.375%, due 05/15/12 ................................. 80,000 89,404 Countrywide Home Loans 5.500%, due 02/01/07 ................................. 120,000 127,411 Credit Suisse First Boston USA, Inc. 5.750%, due 04/15/07 ................................. 130,000 139,163 6.500%, due 01/15/12 ................................. 155,000 165,658 DaimlerChrysler NA Holdings 8.500%, due 01/18/31 ................................. 65,000 79,997 Devon Financing Corp., ULC 6.875%, due 09/30/11 ................................. 105,000 116,955 Dominion Resources, Inc., Class B 7.625%, due 07/15/05 ................................. 175,000 191,978 Dow Chemical Co. (The) 6.125%, due 02/01/11 ................................. 75,000 77,279 DTE Energy Co. 7.050%, due 06/01/11 ................................. 45,000 49,940 Duke Energy Field Services, LLC 6.875%, due 02/01/11 ................................. 85,000 84,729 7.875%, due 08/16/10 ................................. 65,000 68,791 8.125%, due 08/16/30 ................................. 55,000 55,827 EOP Operating LP 7.000%, due 07/15/11 ................................. 85,000 92,613 7.875%, due 07/15/31 ................................. 55,000 59,895 Erac U.S.A. Finance Co., 144A 8.000%, due 01/15/11 ................................. 195,000 224,220 First Data Corp. 5.625%, due 11/01/11 ................................. 85,000 89,946 FirstEnergy Corp. 6.450%, due 11/15/11 ................................. 205,000 203,943 First Union National Bank 7.800%, due 08/18/10 ................................. 240,000 289,740 FleetBoston Financial Corp. 7.375%, due 12/01/09 ................................. 110,000 125,714 Ford Motor Co. 7.450%, due 07/16/31 ................................. 165,000 143,528 Ford Motor Credit Co. 5.800%, due 01/12/09 ................................. 225,000 208,686 7.375%, due 02/01/11 ................................. 170,000 165,306 General Electric Capital Corp. 6.750%, due 03/15/32 ................................. 395,000 436,708 General Motors Acceptance Corp. 6.875%, due 09/15/11 ................................. 440,000 438,794 8.000%, due 11/01/31 ................................. 170,000 170,926 Goldman Sachs Group, Inc. 6.875%, due 01/15/11 ................................. 105,000 117,205 Harrah's Operating Co., Inc. 7.125%, due 06/01/07 ................................. 155,000 170,883 Household Finance Corp. 6.750%, due 05/15/11 ................................. 255,000 271,878 HSBC Holdings PLC 5.250%, due 12/12/12 ................................. 65,000 66,624 International Business Machines Corp. 5.875%, due 11/29/32 ................................. 70,000 69,265 International Lease Finance Corp. 6.375%, due 03/15/09 ................................. 180,000 192,291 International Paper Co. 6.750%, due 09/01/11 ................................. 95,000 105,707 - -------------------------------------------------------------------------------- 51 - -------------------------------------------------------------------------------- UBS U.S. BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE --------- --------- John Deere Capital Corp. 7.000%, due 03/15/12 ................................. $ 85,000 $ 98,551 Kerr McGee Corp. 5.375%, due 04/15/05 ................................. 250,000 263,606 Kraft Foods, Inc. 4.625%, due 11/01/06 ................................. 50,000 52,568 6.500%, due 11/01/31 ................................. 110,000 120,873 Kroger Co. 7.500%, due 04/01/31 ................................. 55,000 61,522 Lehman Brothers Holdings, Inc. 6.625%, due 01/18/12 ................................. 90,000 99,615 Lincoln National Corp. 6.200%, due 12/15/11 ................................. 80,000 85,314 MBNA Global Capital Securities FRN 2.713%, due 02/01/27 ................................. 205,000 138,155 Mirant Americas Generation, Inc. 7.625%, due 05/01/06 ................................. 210,000 110,250 9.125%, due 05/01/31 ................................. 95,000 42,275 Morgan Stanley 6.750%, due 04/15/11 ................................. 185,000 205,585 News America Holdings, Inc. 7.125%, due 04/08/28 ................................. 195,000 186,949 Occidental Petroleum Corp. 8.450%, due 02/15/29 ................................. 95,000 121,871 Pemex Project Funding Master Trust, 144A 8.000%, due 11/15/11 ................................. 200,000 215,000 Pepsi Bottling Group, Inc., 144A 5.625%, due 02/17/09 ................................. 145,000 158,007 Praxair, Inc. 6.375%, due 04/01/12 ................................. 55,000 61,484 Progress Energy, Inc. 7.000%, due 10/30/31 ................................. 110,000 114,635 Qwest Capital Funding, Inc. 7.900%, due 08/15/10 ................................. 490,000 318,500 Rohm & Haas Co. 7.850%, due 07/15/29 ................................. 50,000 62,515 SBC Communications, Inc. 5.875%, due 02/01/12 ................................. 100,000 108,009 Sempra Energy 7.950%, due 03/01/10 ................................. 210,000 239,457 SLM Corp. 5.625%, due 04/10/07 ................................. 175,000 190,328 Southern Power Co. 6.250%, due 07/15/12 ................................. 50,000 52,826 Target Corp. 7.000%, due 07/15/31 ................................. 135,000 152,926 Telus Corp. 8.000%, due 06/01/11 ................................. 125,000 120,000 Transocean Sedco Forex, Inc. 6.625%, due 04/15/11 ................................. 195,000 214,714 Unilever Capital Corp. 7.125%, due 11/01/10 ................................. 130,000 153,439 Union Pacific Corp. 6.700%, due 12/01/06 ................................. 180,000 199,121 United Technologies Corp. 6.100%, due 05/15/12 ................................. 120,000 134,172 Valero Energy Corp. 7.500%, due 04/15/32 ................................. 105,000 106,358 Verizon New England, Inc. 6.500%, due 09/15/11 ................................. 55,000 60,729 Verizon New York, Inc. 7.375%, due 04/01/32 ................................. 70,000 80,946 Walt Disney Co. (The) 6.375%, due 03/01/12 ................................. 45,000 49,220 Washington Mutual, Inc. 5.625%, due 01/15/07 ................................. 75,000 80,261 Wells Fargo Bank, N.A. 6.450%, due 02/01/11 ................................. 270,000 303,100 Weyerhaeuser Co., 144A 7.375%, due 03/15/32 ................................. 65,000 70,494 ----------- 14,257,186 ----------- ASSET-BACKED SECURITIES -- 3.79% Conseco Finance Securitizations Corp., 00-B, Class AF4 7.870%, due 02/15/31 ................................. 230,000 243,206 Continental Airlines, Inc., E.E.T.C. 6.320%, due 11/01/08 ................................. 95,000 85,047 Delta Air Lines, Inc. 00-1, E.E.T.C. 7.570%, due 11/18/10 ................................. 215,000 214,778 Greentree Financial Corp., 99-3, Class A5 6.160%, due 02/01/31 .................................1,000,000 981,924 Greentree Financial Corp., 94-5, Class A5 8.300%, due 11/15/19 ................................. 320,000 331,273 Impac Secured Assets Common Owner Trust, 01-3, Class A2, (c) 7.250%, due 04/25/31 ................................. 522,944 562,823 Nomura Asset Securities Corp., 95-MD3, Class A/B 8.150%, due 03/04/20 ....................... 335,779 369,772 Structured Asset Securities Corp., 98-ALS1, Class 1A 6.900%, due 01/25/29 ........................ 704,419 720,064 United Airlines, Inc., E.E.T.C. (b) (e) (f) 7.811%, due 10/01/09 ................................. 220,922 89,080 ----------- 3,597,967 ----------- INTERNATIONAL DOLLAR BONDS -- 0.61% Canadian National Railway Co. 6.900%, due 07/15/28 ................................. 65,000 74,101 Deutsche Telekom International Finance 8.250%, due 06/15/30 ................................. 75,000 86,636 France Telecom S.A., 8.500%, due 03/01/31 ................................. 70,000 85,214 Mexico Government International Bond 8.125%, due 12/30/19 ................................. 105,000 110,775 Royal Bank of Scotland 9.118%, due 12/31/49 ................................. 70,000 86,321 WestDeutsche Landesbank 6.750%, due 06/15/05 ................................. 130,000 141,880 ----------- 584,927 ----------- MORTGAGE-BACKED SECURITIES -- 49.24% Bank One Mortgage-Backed Pass Through, 2000-2, Class 6A, 6.676%, (d) due 03/15/30 ......................................... 26,411 26,906 Bank One Mortgage-Backed Pass Through, 2000-2, Class 8A, 6.859%, (d) due 03/15/30 ......................................... 425,311 433,878 - -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- UBS U.S. BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE --------- --------- Bear Stearns Commercial Mortgage Securities, 00-WF1, Class A2 7.780%, due 02/15/32 ............................... $1,215,000 $ 1,461,277 Citicorp Mortgage Securities, Inc., 94-9, Class A8 5.750%, due 06/25/09 ................ 422,756 430,378 CS First Boston Mortgage Securities Corp., 02-10, Class 2A1 7.500%, due 05/25/32 ............................... 838,718 882,583 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B 7.180%, due 08/10/10 ..................... 850,000 987,767 DLJ Commercial Mortgage Corp., 99-CG1, Class A1B 6.460%, due 03/10/32 ..................... 220,000 247,736 DLJ Commercial Mortgage Corp., 99-CG2, Class A1B 7.300%, due 06/10/32 ..................... 1,012,000 1,176,761 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B 7.340%, due 10/10/32 ..................... 400,000 468,685 Fannie Mae 5.500%, due 03/15/11 ............................... 2,770,000 3,035,931 7.125%, due 01/15/30 ............................... 935,000 1,153,830 Fannie Mae Grantor Trust 7.500%, due 06/25/30 ............................... 661,160 716,739 7.500%, due 12/25/41 ............................... 195,595 212,037 Federal Home Loan Mortgage Corp. 5.500%, due 09/01/17 ............................... 598,961 621,957 6.000%, due 10/01/29 ............................... 926,192 961,769 6.500%, due 11/01/28 ............................... 10,024 10,446 6.500%, due 09/01/29 ............................... 735,518 766,492 7.000%, due 10/15/13 ............................... 492,125 524,035 Federal Home Loan Mortgage Corp., 1595 D 6.500%, due 11/01/32 ............................... 199,855 208,271 Federal Home Loan Mortgage Corp., Gold 6.500%, due 11/01/29 ............................... 1,804,528 1,880,520 6.500%, due 03/01/32 ............................... 162,234 169,066 Federal National Mortgage Association 5.500%, due 12/01/17 ............................... 734,000 762,082 5.500%, due 12/01/31 ............................... 1,550,345 1,583,861 6.000%, due 03/01/28 ............................... 368,452 382,408 6.000%, due 11/01/28 ............................... 1,808,081 1,871,678 6.000%, due 12/01/28 ............................... 472,522 489,142 6.000%, due 03/01/29 ............................... 386,113 399,694 6.000%, due 05/01/29 ............................... 414,464 429,042 6.000%, due 06/01/31 ............................... 245,078 253,698 6.500%, due 01/01/28 ............................... 514,748 536,210 6.500%, due 04/01/28 ............................... 225,241 234,632 6.500%, due 08/01/32 ............................... 1,467,002 1,528,169 6.500%, due 09/01/32 ............................... 870,922 907,235 7.000%, due 03/01/31 ............................... 118,080 124,897 7.000%, due 11/01/31 ............................... 938,366 986,982 7.000%, due 04/01/32 ............................... 875,711 921,081 7.000%, due 06/01/32 ............................... 2,712,130 2,852,643 Federal National Mortgage Association, Whole Loan 95-W3, Class A 9.000%, due 04/25/25 ....................................... 40,685 45,096 Federal National Mortgage Association, Grantor Trust, 01-T5, Class A3 7.500%, due 06/19/41 ............................... 253,321 269,354 GMAC Commercial Mortgage Securities, Inc., 97-C2, Class A2 6.550%, due 04/16/29 ............... 330,000 358,702 Government National Mortgage Association 6.000%, due 12/20/28 ............................... 448,307 466,964 6.000%, due 05/20/29 ............................... 2,144,238 2,227,003 6.000%, due 08/20/29 ............................... 1,570,041 1,630,643 6.500%, due 10/15/24 ............................... 1,480,281 1,565,960 6.500%, due 08/15/27 ............................... 8,264 8,680 7.000%, due 07/15/25 ............................... 39,805 42,492 7.000%, due 07/15/31 ............................... 401,122 425,248 8.500%, due 12/15/17 ............................... 640,239 707,473 9.000%, due 11/15/04 ............................... 2,749 3,091 GS Mortgage Securities Corp. II, 96-PL, Class A2 7.410%, due 02/15/27 ...................... 190,000 203,881 GS Mortgage Securities Corp., 01-2, 144A Class A, 7.500%, due 06/19/32 ...................... 511,640 543,781 Heller Financial Commercial Mortgage Assets, 99-PH1, Class A1 6.500%, due 05/15/31 ............................... 911,306 997,000 JP Morgan Commercial Mortgage Finance Corp., 99-C8, Class A1 7.325%, due 07/15/31 ............................... 382,186 421,795 LB Commercial Conduit Mortgage Trust, 99-C1, Class A1 6.410%, due 06/15/31 ............... 590,137 638,414 LB Commercial Conduit Mortgage Trust, 99-C2, Class A2 7.325%, due 10/15/32 ............... 325,000 381,090 Merrill Lynch Mortgage Investors, Inc., 97-C2, Class A2 6.540%, due 12/10/29 ............... 265,000 296,898 Merrill Lynch Mortgage Investors, Inc., 96-C2, Class A3 6.960%, due 11/21/28 ............... 535,000 588,911 Morgan Stanley Dean Witter Capital I, 00-LIF2, Class A1 6.960%, due 10/15/33 ....................................... 330,088 368,272 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B 7.330%, due 12/10/32 ..................... 245,000 286,285 PNC Mortgage Securities Corp., 94-3, Class A8 7.500%, due 07/25/24 ...................... 375,000 384,317 Prudential Home Mortgage Securities, 93-43, Class A9 6.750%, due 10/25/23 ...................... 94,629 95,630 Prudential Mortgage Capital Funding, LLC, 00-ROCK, Class A2 6.605%, due 05/10/34 ....................................... 115,000 130,364 Residential Asset Securitization Trust, 98-A6, Class IA2 6.750%, due 07/25/28 .............. 292,909 293,187 Residential Funding Mortgage, 95-S16, Class A7 7.500%, due 11/25/25 .............. 390,347 392,284 Salomon Brothers Mortgage Securities, 00-C1, Class A2 7.520%, due 12/18/09 ............... 1,250,000 1,474,483 Salomon Brothers Mortgage Securities VII, 00-C3, Class A2 6.592%, due 12/18/33 ............... 395,000 446,589 Washington Mutual, 99-WM2, Class 2A 7.000%, due 11/19/14 ............................... 489,302 503,748 ----------- 46,838,153 ----------- - -------------------------------------------------------------------------------- 53 - -------------------------------------------------------------------------------- UBS U.S. BOND FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE --------- --------- U.S. GOVERNMENT OBLIGATIONS -- 27.64% U.S. Treasury Bond TIP 3.000%, due 07/15/12 ............................... $2,080,000 $ 2,228,647 5.000%, due 08/15/11 ............................... 1,035,000 1,134,942 U.S. Treasury Note 2.875%, due 06/30/04 ............................... 7,216,000 7,375,539 3.250%, due 08/15/07 ............................... 2,315,000 2,372,333 4.750%, due 11/15/08 ............................... 2,245,000 2,450,557 6.250%, due 05/15/30 ............................... 855,000 1,023,161 6.750%, due 05/15/05 ............................... 6,030,000 6,722,745 8.000%, due 11/15/21 ............................... 2,140,000 2,981,788 ----------- 26,289,712 ----------- Total Bonds (Cost $88,553,873) ....................... 91,567,945 ----------- SHORT-TERM INVESTMENTS -- 2.04% OTHER -- 2.04% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,939,585) .................................. 1,939,585 $ 1,939,585 ----------- Total Investments (Cost $90,493,458) -- 98.31% (a) ................... 93,507,530 Cash and other assets, less liabilities -- 1.69% .......................... 1,604,837 ----------- Net Assets -- 100% ................................... $95,112,367 =========== NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $90,493,458; and net unrealized appreciation consisted of: Gross unrealized appreciation ................. $3,650,630 Gross unrealized depreciation ................. (636,558) ---------- Net unrealized appreciation ............. $3,014,072 ========== (b) Non-income producing security. (c) Step bonds -- coupon rate increases in increments to maturity. Rate disclosed is as of December 31, 2002. Maturity date disclosed is the ultimate maturity date. (d) Variable rate note -- The rate disclosed is that in effect at December 31, 2002. (e) Security is in default. (f) Security is illiquid. This security amounted to $89,080 or 0.09% of net assets. % 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 December 31, 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 December 31, 2002, the value of these securities amounted to $1,531,186 or 1.61% of net assets. - -------------------------------------------------------------------------------- 54 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND - -------------------------------------------------------------------------------- In a complete turnaround from losses earlier in the year, the high yield market (as measured by the Merrill Lynch High Yield Master Index) returned 3.30% for the six months ended December 31, 2002. UBS High Yield Fund's Class Y shares provided even better results, advancing 4.80% for the period. Since its inception on September 30, 1997, the Fund's Class Y shares have returned an average of 2.40% per year, compared to 1.67% for the Index. (Returns for all share classes over various time periods are shown on page 56. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW High yield investors were optimistic as 2002 began. Interest rates were low and the economy appeared to be picking up again. However, the situation reversed starting in May when Worldcom, a large investment grade issuer that eventually filed for bankruptcy, entered the high yield market after it was downgraded by the ratings agencies. Additionally, Adelphia Communications, then the largest issuer of high yield debt, revealed massive fraud and insider dealing by management, which caused it to eventually file for bankruptcy. At the same time, a few other large "fallen angels"--investment-grade companies that have been downgraded to below-investment-grade status, including Georgia Pacific, Tyco, Qwest Communications and Williams Companies--also entered the high yield market. Conditions further deteriorated in the third quarter as a result of a weak stock market, disappointing second quarter economic statistics, and the growing threat of war with Iraq. Under pressure, the high yield market declined 3.09% for the three-month period, as measured by the Merrill Lynch High Yield Master Index. This difficult environment would ordinarily have favored the highest quality sector, but the influx of newly downgraded securities was felt most in the BB-rated category, leading this sector to decline 3.27%. In contrast, the B-rated sector led the quarter with a decline of 1.86%, while the CCC-rated sector trailed with a decline of 7.22%. The fourth quarter brought with it better news, and high yield bonds rallied to a return of 6.67%. The market's jump was attributable to better-than-expected third-quarter earnings reports, gains in the stock market, and the large inflow of assets from mutual funds. Low-quality bonds led the way as CCC-rated bonds gained 11.75%, compared to 6.81% for the B-rated sector and 5.07% for the BB-rated sector. Most industries posted positive returns during this quarter, but the downtrodden telecommunication bonds fared the best, gaining more than 20% over the fourth quarter. During this time, the high yield new issues market came back to life following an essentially stagnant third quarter. Several large financings, including the USD $975 million Dex Media East deal, were completed. These new issues were absorbed by the marketplace, due in part to the large market inflows that were occurring through high yield mutual funds. GLOBALLY INTEGRATED INVESTMENT PLATFORM HELPED US AVOID WORLDCOM On a sector level, our overweights in the broadcasting, gaming and printing and publishing sectors added to the Fund's performance, while our exposure to wireless telecommunications and cable television detracted from performance. More specifically, we were able to avoid the fallout from Worldcom, due in large part to our globally integrated investment platform, which enables our investment specialists from around the world to share ideas and information. With the knowledge that Worldcom stood to become over 3% of the high yield universe if it was downgraded further, our telecom analysts in the equity, high grade and high yield asset class divisions worked together to examine Worldcom as an investment. Ultimately, the additional insights that this joint effort provided led us to completely avoid the company. LOOKING AHEAD We believe we are in a period where we may see moderate economic improvement and stable rates-both of which should support the high yield market. Investors appear to be more confident in the potential for an economic recovery, and are beginning to demonstrate a willingness to take on additional risk in exchange for return potential. Our market-specific research indicates that the U.S. high yield market is offering attractive opportunities for long-term investors, and we believe the Fund is well positioned to succeed in this type of environment. 55 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS A 4.37% -1.19% -0.99% N/A 0.36% - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS B 4.13 -1.96 N/A N/A 1.14 - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS C 4.27 -1.71 N/A N/A 1.40 - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS Y 4.80 -0.78 -0.68 2.04% 2.40 - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS A+ -0.33 -5.59 -2.49 N/A -0.79 - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS B+ -0.84 -6.43 N/A N/A -2.00 - ----------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND CLASS C+ 2.55 -3.33 N/A N/A 0.52 - ----------------------------------------------------------------------------------------------------------- Merrill Lynch High Yield Master Index 3.30 -1.14 0.34 1.24 1.67 - -----------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS HIGH YIELD FUND CLASS A IS 12/31/98. INCEPTION DATE OF CLASS B AND CLASS C IS 11/07/01. INCEPTION DATE OF CLASS Y 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. - -------------------------------------------------------------------------------- TOP TEN FIXED INCOME HOLDINGS - -------------------------------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - -------------------------------------------------------------------------------- NUC02 12.000%, due 10/31/04 2.7% Nextel Communications, Inc. 0.000%, due 02/15/08 1.7 Echostar DBS Corp. 9.375%, due 02/01/09 1.6 Allied Waste North America 10.000%, due 08/01/09 1.2 Tommy Hilfiger USA, Inc. 6.850%, due 06/01/08 1.2 MGM Mirage, Inc. 9.750%, due 06/01/07 1.1 LIN Holdings Corp. 0.000%, due 03/01/08 1.1 Ainsworth Lumber Co., Ltd. 12.500%, due 07/15/07 1.1 Phillips-Van Heusen Corp. 9.500%, due 05/01/08 1.0 Chesapeake Energy Corp. 8.125%, due 04/01/11 1.0 - -------------------------------------------------------------------------------- Total 13.7% ================================================================================ 56 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- U.S. CORPORATE BONDS Aerospace & Defense .......................................... 2.41% Aerospace & Military ......................................... 0.13 Appliances & Household Durables .............................. 0.54 Autos/Durables ............................................... 2.22 Beverages & Tobacco .......................................... 1.51 Building Materials ........................................... 1.90 Business & Public Service .................................... 0.63 Cable TV/Pay Services ........................................ 2.79 Chemicals .................................................... 5.87 Construction ................................................. 1.57 Consumer ..................................................... 0.69 Consumer Durables ............................................ 0.61 Electric Components .......................................... 1.37 Energy ....................................................... 5.30 Environmental ................................................ 1.48 Financial Services ........................................... 2.05 Food & House Products ........................................ 4.67 Gaming ....................................................... 7.89 Health: Drugs ................................................ 0.76 Health: Non-Drugs ............................................ 2.65 Healthcare ................................................... 0.80 Housing/Paper ................................................ 1.93 Industrial Components ........................................ 1.06 Leisure & Tourism ............................................ 4.47 Machinery & Engineering ...................................... 0.73 Metals Steel ................................................. 0.80 Non-Durables ................................................. 0.31 Publishing ................................................... 6.85 Radio Broadcasting ........................................... 2.21 Real Estate .................................................. 0.57 Recreation ................................................... 0.92 Retail/Apparel ............................................... 6.22 Services/Miscellaneous ....................................... 5.16 Telecommunications ........................................... 5.62 Telecommunications-Wireless .................................. 2.28 Telecommunications-Services .................................. 0.48 Television Broadcasting ...................................... 5.37 Transportation ............................................... 0.48 Utilities .................................................... 0.34 ------ Total U.S. Corporate Bonds .......................... 93.64% U.S. EQUITIES Computer Systems ............................................. 0.47% Electronics .................................................. 0.53 Gaming ....................................................... 0.47 Publishing ................................................... 0.17 Retail/Apparel ............................................... 0.01 Services/Miscellaneous ....................................... 0.66 ------ Total U.S. Equities ................................. 2.31 International Dollar Bonds ................................... 0.87 Warrants ..................................................... 0.10 SHORT-TERM INVESTMENTS ....................................... 1.00 ------ TOTAL INVESTMENTS ................................... 97.92 CASH AND OTHER ASSETS, LESS LIABILITIES .......................................... 2.08 ------ NET ASSETS ................................................... 100.00% ====== ================================================================================ 57 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ---------- U.S. BONDS -- 94.51% U.S. CORPORATE BONDS -- 93.64% Acetex Corp. 10.875%, due 08/01/09 ......................... $ 925,000 $ 980,500 Adelphia Communications Corp. (e) 8.375%, due 02/01/08 Series B ................ 1,650,000 610,500 10.875%, due 10/01/10 ......................... 350,000 133,000 Advance Stores Co. 10.250%, due 04/15/08 ......................... 500,000 530,000 Advanced Medical Optics, Inc. 9.250%, due 07/15/10 ......................... 325,000 334,750 AES Corp. 9.375%, due 09/15/10 ......................... 350,000 210,000 Ainsworth Lumber Co., Ltd. 12.500%, due 07/15/07 ......................... 1,750,000 1,820,000 AirGate PCS, Inc. (c) 0.000%, due 10/01/09 ......................... 475,000 52,250 AK Steel Holding Corp., 144A 7.750%, due 06/15/12 ......................... 1,300,000 1,309,750 Alamosa Delaware, Inc. 12.500%, due 02/01/11 ......................... 600,000 180,000 Allbritton Communications Co. 7.750%, due 12/15/12, 144A ................... 1,000,000 1,001,250 8.875%, due 02/01/08, Series B, 144A ......... 550,000 568,563 9.750%, due 11/30/07 ......................... 975,000 1,009,125 Alliance Gaming Corp. 10.000%, due 08/01/07 ......................... 1,000,000 1,045,000 Allied Waste North America 7.875%, due 01/01/09 ......................... 475,000 467,875 8.500%, due 12/01/08 ......................... 250,000 251,250 10.000%, due 08/01/09 ......................... 2,000,000 1,985,000 American Eco Corp., Series B (e)(f) 9.625%, due 05/15/08 ......................... 5,500,000 550 American Restaurant Group, Inc., Series D 11.500%, due 11/01/06 ................ 198,000 158,400 AmerisourceBergen Corp., 144A 7.250%, due 11/15/12 ......................... 475,000 486,875 Ameristar Casino, Inc. 10.750%, due 02/15/09 ......................... 1,000,000 1,095,000 Amkor Technologies, Inc. 9.250%, due 02/15/08 ......................... 1,250,000 1,056,250 Argo-Tech Corp. 8.625%, due 10/01/07 ......................... 1,500,000 1,035,000 Argosy Gaming Co. 10.750%, due 06/01/09 ......................... 1,000,000 1,100,000 Atrium Cos., Inc. 10.500%, due 05/01/09 ......................... 1,100,000 1,067,000 Aztar Corp. 8.875%, due 05/15/07 ......................... 1,305,000 1,331,100 B&G Foods, Inc. 9.625%, due 08/01/07 ......................... 1,100,000 1,131,625 Bally Total Fitness Corp., Series D 9.875%, due 10/15/07 ......................... 750,000 652,500 BE Aerospace, Inc. 8.000%, due 03/01/08 ......................... 300,000 220,500 8.875%, due 05/01/11 ......................... 1,250,000 918,750 Bear Island Paper Co., LLC 10.000%, due 12/01/07 ......................... 525,000 446,906 Belden & Blake Corp. 9.875%, due 06/15/07 ......................... 1,175,000 998,750 Berry Plastics Corp. 10.750%, due 07/15/12 ......................... 750,000 798,750 Block Communications, Inc. 9.250%, due 04/15/09 ......................... 1,200,000 1,239,000 Brickman Group Ltd, 144A 1.750%, due 12/15/09 ......................... 300,000 313,500 Buckeye Technologies, Inc. 8.000%, due 10/15/10 ......................... 860,000 694,450 8.500%, due 12/15/05 ......................... 800,000 724,000 Buffets, Inc., 144A 11.250%, due 07/15/10 ......................... 950,000 897,750 Bway Corp., 144A 10.000%, due 10/15/10 ......................... 500,000 518,750 Cadmus Communications Corp. 9.750%, due 06/01/09 ......................... 995,000 997,487 Calpine Canada Energy Finance Corp. 8.500%, due 05/01/08 ......................... 1,150,000 500,250 Calpine Corp. 8.500%, due 02/15/11 ......................... 800,000 348,000 Chancellor Broadcasting Co. 8.000%, due 11/01/08 ......................... 1,500,000 1,636,875 8.750%, due 06/15/07 ......................... 500,000 521,875 Charter Communications Holdings 8.250%, due 04/01/07 ......................... 2,500,000 1,112,500 10.000%, due 05/15/11 ......................... 125,000 55,625 Chesapeake Energy Corp. 8.125%, due 04/01/11 ......................... 1,625,000 1,673,750 Chippac International Co., Ltd. 12.750%, due 08/01/09 ......................... 625,000 656,250 Coast Hotels and Casinos, Inc. 9.500%, due 04/01/09 ......................... 1,000,000 1,070,000 Coaxial Communications of Central Ohio, Inc. 10.000%, due 08/15/06 .............. 825,000 721,875 Collins & Aikman Corp. 10.750%, due 12/31/11 ......................... 1,100,000 1,047,750 11.500%, due 04/15/06 ......................... 250,000 210,000 Constellation Brands, Inc. 8.000%, due 02/15/08 ......................... 275,000 288,750 8.125%, due 01/15/12 ......................... 450,000 465,750 Cott Beverages USA, Inc. 8.000%, due 12/15/11 ......................... 1,000,000 1,060,000 Cross Timbers Oil Co. 8.750%, due 11/01/09 ......................... 500,000 520,000 Crown Castle International Corp. 9.000%, due 05/15/11 ......................... 150,000 120,000 9.375%, due 08/01/11 ......................... 250,000 207,500 10.750%, due 08/01/11 ......................... 850,000 743,750 CSC Holdings, Inc. 7.625%, due 04/01/11 ......................... 135,000 126,731 7.875%, due 12/15/07 ......................... 750,000 720,938 8.125%, due 08/15/09 ......................... 1,050,000 1,009,312 Cummins, Inc., 144A 9.500%, due 12/01/10 ......................... 650,000 692,250 D.R. Horton, Inc. 7.500%, due 12/01/07 ......................... 800,000 784,000 Dayton Superior Corp. (f) 13.000%, due 06/15/09 ......................... 675,000 580,500 ================================================================================ 58 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ---------- Dean Foods 6.750%, due 06/15/05 ......................... $ 250,000 $ 250,625 Delhaize America, Inc. 8.125%, due 04/15/11 ......................... 1,350,000 1,306,124 Desa International, Inc. (e) 9.875%, due 12/15/07 ......................... 3,000,000 75,000 Dex Media East LLC, 144A 9.875%, due 11/15/09 ......................... 500,000 535,000 12.125%, due 11/15/12 ......................... 425,000 470,688 Dobson Communications Corp. 10.875%, due 07/01/10 ......................... 900,000 760,500 Dobson Sygnet Communications, Inc. 12.250%, due 12/15/08 ......................... 250,000 191,250 Dura Operating Corp. 9.000%, due 05/01/09 ......................... 1,350,000 1,228,500 Echostar DBS Corp. 9.375%, due 02/01/09 ......................... 2,550,000 2,696,625 Equistar Chemicals LP 8.500%, due 02/15/04 ......................... 900,000 891,000 Extendicare Health Services, Inc. 9.350%, due 12/15/07 ......................... 1,000,000 830,000 9.500%, due 07/01/10, 144A ................... 365,000 354,050 Fedders North America 9.375%, due 08/15/07 ......................... 120,000 91,200 Felcor Lodging LP 8.500%, due 06/01/11 ......................... 175,000 172,375 Fisher Scientific International, Inc. 8.125%, due 05/01/12 ......................... 550,000 569,250 Fleming Cos., Inc. 9.875%, due 05/01/12 ......................... 500,000 290,000 Fort James Corp. 6.875%, due 09/15/07 ......................... 350,000 332,500 Four M Corp., Series B 12.000%, due 06/01/06 Series B ................ 850,000 879,750 Frontier Oil Corp. 11.750%, due 11/15/09 ......................... 400,000 412,000 FrontierVision Holdings L.P. 11.875%, due 09/15/07 ......................... 275,000 154,000 GEO Specialty Chemicals 10.125%, due 08/01/08 ......................... 800,000 456,000 Georgia-Pacific Corp. 9.500%, due 12/01/11 ......................... 750,000 735,000 Granite Broadcasting Corp. 8.875%, due 05/15/08 ......................... 500,000 410,000 10.375%, due 05/15/05 ......................... 300,000 259,500 Gray Television, Inc. 9.250%, due 12/15/11 ......................... 1,255,000 1,350,694 Grey Wolf, Inc. 8.875%, due 07/01/07 ......................... 1,500,000 1,522,500 Hanger Orthopedic Group, Inc. 11.250%, due 06/15/09 ......................... 775,000 798,250 Hilton Hotels Corp. 8.250%, due 02/15/11 ......................... 150,000 156,909 HMH Properties, Inc. 8.450%, due 12/01/08 ......................... 1,495,000 1,476,312 Hollinger International Publishing Corp. 9.000%, due 12/15/10, 144A ................... 750,000 756,562 9.250%, due 02/01/06 ......................... 325,000 335,156 9.250%, due 03/15/07 ......................... 850,000 889,312 Hollywood Casino Corp. 11.250%, due 05/01/07 ......................... 1,000,000 1,080,000 Hornbeck-Leevac Marine Services 10.625%, due 08/01/08 ......................... 350,000 369,250 Host Marriott LP 8.375%, due 02/15/06 ......................... 900,000 891,000 Huntsman ICI Chemicals, LLC 10.125%, due 07/01/09 ......................... 700,000 581,000 Hyperion Telecommunications (e) 12.000%, due 11/01/07 ......................... 2,000,000 5,000 Insight Communications Co., Inc. (c) 0.000%, due 02/15/11 ......................... 1,300,000 716,625 Insight Midwest, LP 10.500%, due 11/01/10 ......................... 695,000 675,888 InterAct Operating Co., Inc. (d)(e)(f) 14.000%, due 08/01/03 ......................... 14,135,746 0 Interep National Radio Sales, Series B 10.000%, due 07/01/08 ......................... 345,000 269,100 Interface, Inc. 10.375%, due 02/01/10 ......................... 425,000 412,250 International Game Technology 7.875%, due 05/15/04 ......................... 215,000 223,600 IPC Acquisition Corp. 11.500%, due 12/15/09 ......................... 750,000 645,000 Iron Mountain, Inc. 8.750%, due 09/30/09 ......................... 1,500,000 1,546,875 John Q. Hammons Hotels, Inc. 8.875%, due 05/15/12 ......................... 1,250,000 1,256,250 Kansas City Southern 7.500%, due 06/15/09 ......................... 400,000 422,000 L-3 Communications Corp. 7.625%, due 06/15/12 ......................... 525,000 540,750 Lamar Media Co. 8.625%, due 09/15/07 ......................... 1,000,000 1,045,000 Levi Strauss & Co. 6.800%, due 11/01/03 ......................... 1,000,000 985,000 11.625%, due 01/15/08 ......................... 550,000 537,625 12.250%, due 12/15/12, 144A ................... 1,500,000 1,470,000 LIN Holdings Corp. (c) 0.000%, due 03/01/08 ......................... 1,800,000 1,838,250 Luigino's, Inc. 10.000%, due 02/01/06 ......................... 1,550,000 1,582,937 Lyondell Chemical Co., Series B 9.875%, due 05/01/07 ......................... 500,000 480,000 Mail Well Corp. 8.750%, due 12/15/08, Series B ............... 450,000 292,500 9.625%, due 03/15/12 ......................... 1,000,000 890,000 Majestic Investment Holdings LLC 11.653%, due 11/30/07 ......................... 1,000,000 925,000 Majestic Star Casino LLC, Series B 10.875%, due 07/01/06 ......................... 150,000 153,000 Massey Energy Co. 6.950%, due 03/01/07 ......................... 625,000 513,678 Mediacom LLC 7.875%, due 02/15/11 ......................... 50,000 41,750 9.500%, due 01/15/13 ......................... 1,815,000 1,633,500 Meristar Hospitality Corp. 9.000%, due 01/15/08 ......................... 625,000 550,000 9.125%, due 01/15/11 ......................... 450,000 391,500 ================================================================================ 59 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ---------- MGM Mirage, Inc. 8.500%, due 09/15/10 ........................... $ 150,000 $ 165,750 9.750%, due 06/01/07 ........................... 1,700,000 1,878,500 Millenium America, Inc. 7.000%, due 11/15/06 ........................... 500,000 483,125 9.250%, due 06/15/08, 144A ..................... 900,000 938,250 Mothers Work, Inc. 11.250%, due 08/01/10 ........................... 700,000 745,500 National Wine & Spirits, Inc. 10.125%, due 01/15/09 ........................... 975,000 979,875 Nexstar Finance, Inc., LLC 12.000%, due 04/01/08 ........................... 760,000 824,600 Nextel Communications, Inc. 0.000%, due 02/15/08 (c) ....................... 3,000,000 2,745,000 9.375%, due 11/15/09 ........................... 200,000 181,000 9.500%, due 02/01/11 ........................... 25,000 22,500 Nextel Partners, Inc 11.000%, due 03/15/10 ........................... 150,000 127,500 12.500%, due 11/15/09 ........................... 500,000 450,000 Nextmedia Operating, Inc. 10.750%, due 07/01/11 ........................... 250,000 262,813 Nortek, Inc., Series B 9.125%, due 09/01/07, Series B ................. 250,000 256,250 9.250%, due 03/15/07 ........................... 625,000 642,188 9.875%, due 06/15/11, Series B ................. 200,000 200,250 NUC02 (f)(g) 12.000%, due 10/31/04 ........................... 5,000,000 4,500,000 Orion Refining (f)(g) 10.000%, due 11/15/04 ........................... 3,879,123 38 Owens-Brockway Glass Corp. 8.875%, due 02/15/09 ........................... 850,000 875,500 Owens-Illinois, Inc. 7.150%, due 05/15/05 ........................... 287,000 275,879 Pacifica Papers, Inc. 0.000%, due 03/15/09 ........................... 955,000 1,009,912 Pantry, Inc. 10.250%, due 10/15/07 ........................... 650,000 583,375 Parker Drilling Corp. 5.500%, due 08/01/04 ........................... 225,000 207,844 10.125%, due 11/15/09 ........................... 1,000,000 1,030,000 Pathmark Stores, Inc. 8.750%, due 02/01/12 ........................... 1,000,000 920,000 Paxson Communications Corp., (c) 0.000%, due 01/15/09 ........................... 1,250,000 793,750 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, Series B ................. 975,000 999,375 11.125%, due 03/01/08 ........................... 220,000 240,900 Per-Se Technologies, Inc. 9.500%, due 02/15/05 ........................... 1,000,000 965,000 Perry Ellis International, Inc. 9.500%, due 03/15/09 ........................... 1,000,000 1,018,750 Petco Animal Supplies, Inc. 10.750%, due 11/01/11 ........................... 1,190,000 1,310,487 Phillips-Van Heusen Corp. 9.500%, due 05/01/08 ........................... 1,725,000 1,729,312 Plains Exploration & Production Co., 144A 8.750%, due 07/01/12 ........................... 950,000 988,000 Premier Graphics, Inc. 11.500%, due 12/01/05 ........................... 4,250,000 132,813 Prime Hospitality Corp. 8.375%, due 05/01/12 ........................... 1,150,000 1,115,500 PRIMEDIA, Inc. 8.875%, due 05/15/11 ........................... 1,000,000 905,000 Qwest Communications, 144A 13.500%, due 12/15/10 ........................... 1,143,000 1,188,720 Qwest Corp., 144A 8.875%, due 03/15/12 ........................... 550,000 533,500 R.H. Donnelley Finance Corp. I, 144A 10.875%, due 12/15/12 ........................... 750,000 817,500 R.H. Donnelly, Inc. 9.125%, due 06/01/08 ........................... 1,100,000 1,100,000 Radio One, Inc. 8.875%, due 07/01/11 ........................... 435,000 465,450 Rexnord Corp., 144A 10.125%, due 12/15/12 ........................... 650,000 666,250 Riverwood International Corp. 10.875%, due 04/01/08 ........................... 525,000 527,625 Roundy's, Inc., 144A 8.880%, due 06/15/12 ........................... 400,000 392,000 Salem Communications Corp. 9.500%, due 10/01/07 ........................... 1,000,000 1,046,250 Sanmina Corp., 144A 10.380%, due 01/15/10 ........................... 550,000 555,500 Samsonite Corp. 10.750%, due 06/15/08 ........................... 1,000,000 810,000 Sbarro, Inc. 11.000%, due 09/15/09 ........................... 1,280,000 1,190,400 Sequa Corp. 9.000%, due 08/01/09 ........................... 1,575,000 1,512,000 Silgan Corp. 9.000%, due 06/01/09 ........................... 750,000 781,875 Sinclair Broadcast Group, Inc. 8.000%, due 03/15/12 ........................... 725,000 755,812 8.750%, due 12/15/11 ........................... 750,000 807,187 Six Flags, Inc. 0.000%, due 04/01/08,(c) ....................... 175,000 169,313 8.875%, due 02/01/10 ........................... 750,000 705,000 9.500%, due 02/01/09 ........................... 100,000 96,500 9.750%, due 06/15/07 ........................... 325,000 315,250 Speedway Motorsports, Inc. 8.500%, due 08/15/07 ........................... 450,000 468,000 SPX Corp. 7.500%, due 01/01/13 ........................... 500,000 506,875 Starwood Hotels & Resorts Worldwide, Inc., 144A 7.875%, due 05/01/12 ........................... 1,500,000 1,485,000 Stone Container Corp. 8.375%, due 07/01/12 ........................... 500,000 512,500 Superior National Capital Trust I (d)(e)(f) 10.750%, due 12/01/17 ........................... 9,000,000 0 Sybron Dental Specialties, Inc. 8.125%, due 06/15/12 ........................... 750,000 757,500 Team Health, Inc. 12.000%, due 03/15/09 ........................... 760,000 786,600 Tembec Industries, Inc. 7.750%, due 03/15/12 ........................... 750,000 727,500 8.500%, due 02/01/11 ........................... 250,000 251,875 ================================================================================ 60 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- FACE AMOUNT VALUE ---------- ---------- Tenet Healthcare Corp. 6.375%, due 12/01/11 ........................... $ 700,000 $ 630,000 Terra Capital, Inc. 12.875%, due 10/15/08 ........................... 400,000 430,000 Tommy Hilfiger USA, Inc. 6.850%, due 06/01/08 ........................... 2,050,000 1,927,000 TransWestern Publishing Co. 9.625%, due 11/15/07 ........................... 1,000,000 1,045,000 Triad Hospitals, Inc. 8.750%, due 05/01/09 ........................... 450,000 482,063 Trico Marine Services, Inc. 8.875%, due 05/15/12 ........................... 725,000 670,625 Triton PCS, Inc. 0.000%, due 05/01/08 (c) ....................... 125,000 104,063 9.375%, due 02/01/11 ........................... 1,250,000 1,037,500 Von Hoffmann Press, Inc. 10.250%, due 03/15/09 ........................... 725,000 677,875 10.375%, due 05/15/07 (d) ....................... 500,000 385,000 Weirton Steel Corp.(d)(f)(g) 10.000%, due 04/01/08 ........................... 110,000 11,000 Wheeling Island Gaming, Inc. 10.125%, due 12/15/09 ........................... 750,000 772,500 William Carter Co. 10.875%, due 08/15/11 ........................... 775,000 844,750 Winsloew Furniture, Inc., B (f) 12.750%, due 08/15/07 ........................... 250,000 202,500 Wiser Oil Co. 9.500%, due 05/15/07 ........................... 375,000 281,250 WRC Media, Inc. 12.750%, due 11/15/09 ........................... 1,000,000 980,000 Wynn Las Vegas LLC 12.000%, due 11/01/10 ........................... 1,000,000 1,010,000 Young Broadcasting, Inc. 8.500%, due 12/15/08 ........................... 1,375,000 1,419,687 10.000%, due 03/01/11 .......................... 136,000 135,660 ------------ Total U.S. Corporate Bonds ....................... 155,442,388 ------------ INTERNATIONAL DOLLAR BONDS -- 0.87% Methanex Corp. 7.750%, due 08/15/05 ........................... 1,450,000 1,450,000 ------------ Total Bonds (Cost $200,434,233) .................. 156,892,388 ------------ SHARES ------ EQUITIES -- 2.41% COMMON STOCKS -- 1.55% AIRLINES -- 0.00% Sabreliner Corp. (b)(g) .......................... 8,400 0 ------------ COMPUTER SYSTEMS -- 0.47% Seagate Technology, Inc., 144A ................... 750,000 776,250 ------------ ELECTRONICS -- 0.00% Communications & Power Industries Holding Corp. (b)(f) ........................... 1,400 14 ------------ GAMING -- 0.47% Venetian Casino, 144A ............................ 750,000 783,750 ------------ RETAIL/APPAREL -- 0.01% Samuels Jewelers, Inc. (b)(f) .................... 605,400 21,794 ------------ FOOD/PRODUCTS -- 0.00% Aurora Foods, Inc. (b) ........................... 174 136 ------------ SHARES VALUE ------ ----- SERVICES/MISCELLANEOUS -- 0.60% Metal Management, Inc. (b)(f) .................... 233,198 921,132 Packaged Ice, Inc. (b) ........................... 74,223 77,934 Song Networks Holding AB, ADR (b) ................ 61,644 2,139 Waste Systems International, Inc.(b)(g) .......... 664,249 67 ------------ 1,001,272 ------------ TELECOMMUNICATIONS SERVICES -- 0.00% PNV, Inc. (b) .................................... 79,417 159 RCN Corp. (b) .................................... 466 247 ------------ 406 ------------ 2,583,622 ------------ CONVERTIBLE PREFERRED -- 0.76% ELECTRONICS -- 0.53% Communications & Power Industries Holding Corp.(f) Series B, PIK 14.000% .......................... 39,639 872,058 ------------ METALS -- STEEL 0.00% Weirton Steel Corp. 0.000% ....................... 1,800 1,800 ------------ PUBLISHING -- 0.17% Cablevision Systems Corp., Series M, PIK 11.125% (b) .................................... 3,000 279,000 ------------ SERVICES/MISCELLANEOUS -- 0.06% American Restaurant Group, Inc.,(f)(g) Series B, PIK 12.000% .......................... 73 0 EarthWatch, Inc., Series C, PIK, 8.500% 144A .................................... 393,079 98,270 ICG Holdings, Inc., PIK 14.000% (b)(f)(g) ........ 2,218 0 Waste Systems International, Inc., Series E, PIK 8.000% ........................... 5,428 0 ------------ 98,270 ------------ TELECOMMUNICATIONS SERVICES -- 0.00% InterAct Electronic Marketing, Inc.(f)(g) 14.000%, 144A .................................. 19,500 0 ------------ 1,251,128 ------------ NUMBER OF WARRANTS ---------- WARRANTS (B) (F) -- 0.10% Arcadia Financial Ltd.(g) expires 03/15/07 ............................... 6,000 0 PathNet, Inc. (g) expires 04/15/08 ............................... 6,275 0 Dayton Superior Corp., 144A expires 06/15/09 ............................... 225 135 Electronic Retailing Systems International, Inc. expires 02/01/04 (g) ........................... 13,700 0 InterAct Electronic Marketing, Inc.(g) expires 12/15/09 ............................... 19,500 0 InterAct Systems, Inc., 144A(g) expires 08/01/03 ............................... 19,500 0 Knology, Inc., 144A(g) expires 10/15/07 ............................... 16,995 0 Leap Wireless International, Inc., 144A(g) expires 04/15/10 ............................... 200 0 Nextel International, Inc.(g) expires 04/15/07 ............................... 15,750 0 ================================================================================ 61 - -------------------------------------------------------------------------------- UBS HIGH YIELD FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NUMBER OF WARRANTS VALUE ---------- ---------- NUC02 (g) expires 10/31/04 ......................... 109,290 $ 147,541 Pliant Corp., 144A expires 06/01/10 ......................... 160 160 Samuels Jewelers, Inc.(g) expires 09/29/03 ......................... 13,146 13 UIH Australia Pacific, Inc.(g) expires 05/15/06 ......................... 10,000 0 Wam!Net, Inc.(g) expires 03/01/05 ......................... 26,250 0 Winsloew Furniture, Inc., 144A expires 08/15/07 ......................... 250 2,500 ------------ 150,349 ------------ Total Equities (Cost $32,754,823) .......... 3,985,099 ------------ SHARES VALUE ---------- ---------- SHORT-TERM INVESTMENTS -- 1.00% OTHER -- 1.00% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $1,668,212) ........................ 1,668,212 1,668,212 ------------ Total Investments (Cost $234,857,268) -- 97.92% (a) ........ 162,545,699 Cash and other assets, less liabilities -- 2.08% ..................... 3,458,153 ------------ Net Assets -- 100% ......................... $166,003,852 ============ NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $234,857,268; and net unrealized depreciation consisted of: Gross unrealized appreciation ............... $ 3,693,784 Gross unrealized depreciation ............... (76,005,353) ------------ Net unrealized depreciation ........ $(72,311,569) ============ (b) Non-income producing security. (c) Step bonds -- coupon rate increases in increments to maturity. Rate disclosed is as of December 31, 2002. Maturity date disclosed is the ultimate maturity date. (d) Variable rate note. The rate disclosed is that in effect at December 31, 2002. (e) Security is in default. (f) Security is illiquid. These securities amounted to $7,259,385 or 4.37% of net assets. (g) Securities are fair valued by the valuation committee under the direction of the Board of Trustees. At December 31, 2002, the value of these securities amounted to $4,658,659 or 2.81% of net assets. % 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 December 31, 2002, the value of these securities amounted to $18,600,773 or 11.21% of net assets. ADR: American Depositary Receipt. PIK: Payment In Kind. ================================================================================ See accompanying notes to financial statements. 62 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of the UBS International Equity Fund declined 14.65%. Over the same period, the Fund's benchmark, the MSCI World Ex USA (Free) Index, declined 14.38%. Since the Fund's inception on August 31, 1993 through December 31, 2002, its Class Y shares generated an average annual return of 1.84%. This compares favorably to the 1.30% return of the Fund's benchmark. (Returns for all share classes over various time periods are shown on page 64. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW Overall, international investors faced a challenging environment during the six-month reporting period. Geopolitical unrest, reduced corporate spending, and an uncertain worldwide economy weighed heavily on virtually every region. Europe's economic slowdown and market declines had been less severe than those felt in the U.S., leading many to hope Europe's recovery would occur more quickly. However, the economy stalled early in 2002, and the equity markets fell in turn. The European Monetary Union intervened by lowering interest rates in December, but the move was too little, and came too late. The net result was a decline of 14.39% for the MSCI Europe Index over the six-month period. The news was no better in Japan, where signs of improving conditions were smothered by political infighting. All efforts at reform were stymied, and the Prime Minister's influence waned. At period end, Japan moved closer to a recession, and the Japanese equity market, as measured by the TOPIX, declined 16.41% over the six months ended December 31, 2002. SECTOR WEIGHTINGS WERE PRIMARY CONTRIBUTORS TO PERFORMANCE As its returns indicate, the Fund was unable to avoid the market's overall weakness during the reporting period. Against this backdrop, the Fund's geographic weightings contributed to the Fund's return, but its sector weightings had the biggest impact on performance. As a result of insight provided by our team of analysts via our integrated global investment platform, we sought to strike a balance between sectors sensitive to an economic recovery and those immune to an economic decline. This strategy led us to overweight consumer discretionary and healthcare. In consumer discretionary, we underweighted the struggling retail industry and concentrated on consumer durables and media. In healthcare, we particularly liked pharmaceuticals, which offered attractive valuations and the prospect for long-term sustainable growth. The Fund also benefited from its underweight position in financials, technology, and telecommunications. Within financials, we underweighted European insurance and focused on niche areas such as Japanese diversified financials and European real estate. Technology and telecommunications companies faced an uphill battle in almost all regions. Our select investments in this sector held strong market positions and acceptable debt loads. LOOKING AHEAD We believe that conditions are right for international equities to deliver positive returns in 2003. The falling U.S. dollar boosted returns in foreign markets. Over the six months ended December 31, 2002, the U.S. dollar declined against the pound, euro and yen. In addition, despite all the negative news over the review period, there were some positive signs: industrial production increased, consumer spending remained relatively stable, the decline in technology spending appeared to bottom out, and there were small advances in corporate spending. These statistics, though not painting a picture of rapid recovery, do suggest that a below-trend recovery is underway. That said, the market is running on emotion at this point. The potential for future terrorist attacks, war in the Middle East or increasing hostilities in Korea could all change the situation dramatically. Our strategy in this environment entails closely monitoring these events, pursuing attractive opportunities in a variety of sectors and markets, and maintaining a diversified portfolio. ================================================================================ 63 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN
6 months 1 year 3 years 5 years Inception* ended ended ended ended to 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS A -14.69% -14.27% -13.61% -2.67% -3.80% - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS B -15.02 N/A N/A N/A -11.73 - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS C -15.23 N/A N/A N/A -11.95 - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS Y -14.65 -14.12 -13.46 -2.45 1.84 - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS A+ -19.38 -19.00 -15.22 -3.77 -4.78 - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS B+ -19.08 N/A N/A N/A -15.94 - ------------------------------------------------------------------------------------------------------------ UBS INTERNATIONAL EQUITY FUND CLASS C+ -16.86 N/A N/A N/A -13.68 - ------------------------------------------------------------------------------------------------------------ MSCI World Ex USA (Free) Index -14.38 -15.78 -16.94 -2.77 1.30 - ------------------------------------------------------------------------------------------------------------
* INCEPTION DATE OF UBS INTERNATIONAL EQUITY FUND CLASS A 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 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. - -------------------------------------------------------------------------------- TOP TEN INTERNATIONAL EQUITY HOLDINGS - -------------------------------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - -------------------------------------------------------------------------------- Total Fina S.A., Class B 3.1% BP PLC 2.9 Shell Transport & Trading Co. PLC 2.4 ENI Spa 2.3 Vodafone Airtouch PLC 2.2 Nestle S.A 2.1 GlaxoSmithKline PLC 2.0 Gallaher Group PLC 2.0 Nokia Oyj 1.9 Reed Elsevier NV 1.9 - ------------------------------------------------------------------------------- Total 22.8% ================================================================================ 64 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION AS A PERCENT OF NET ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- INTERNATIONAL EQUITIES Aerospace & Military ........................................ 0.52% Appliances & Household Durables ............................. 0.89 Autos/Durables .............................................. 1.99 Banks ....................................................... 14.29 Beverages & Tobacco ......................................... 4.13 Broadcasting & Publishing ................................... 4.78 Business & Public Service ................................... 0.33 Chemicals ................................................... 4.09 Computer Software ........................................... 0.42 Construction ................................................ 1.05 Data Processing ............................................. 0.94 Electric Components ......................................... 3.29 Electronics ................................................. 0.34 Energy ...................................................... 5.46 Financial Services .......................................... 3.72 Food & House Products ....................................... 5.50 Forest Products ............................................. 1.40 Health: Drugs ............................................... 10.14 Health: Non-Drugs ........................................... 1.33 Housing/Paper ............................................... 1.13 Industrial Components ....................................... 0.45 Insurance ................................................... 2.81 Machinery & Engineering ..................................... 1.48 Metals Non-Ferrous .......................................... 0.72 Multi-Industry .............................................. 1.21 Real Estate ................................................. 0.70 Recreation .................................................. 2.50 Retail/Apparel .............................................. 2.13 Services/Miscellaneous ...................................... 2.04 Telecommunications .......................................... 8.09 Transportation .............................................. 4.52 Utilities ................................................... 3.78 Wholesale & International Trade ............................. 0.48 ------ Total International Equities ....................... 96.65 INVESTMENTS COMPANIES ....................................... 1.31 SHORT-TERM INVESTMENTS ...................................... 0.98 INVESTMENTS OF CASH COLLATERAL .............................. 7.19 ------ TOTAL INVESTMENTS ........................................ 106.13 LIABILITIES, LESS CASH AND OTHER ASSETS ......................................... (6.13) ------ NET ASSETS .................................................. 100.00% ====== ================================================================================ 65 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) SHARES VALUE ------- ----------- INTERNATIONAL EQUITIES -- 96.65% AUSTRALIA -- 2.79% Lion Nathan Ltd. ............................... 93,589 $ 298,809 Mayne Nickless Ltd. ............................ 115,596 212,201 National Australia Bank Ltd., Preferred ........ 5,700 185,535 News Corp., Ltd., Preferred .................... 58,874 316,602 QBE Insurance Group Ltd.(b) .................... 98,308 451,162 Rio Tinto Ltd. ................................. 14,440 276,054 Westpac Banking Corp., Ltd. .................... 93,343 722,721 ----------- 2,463,084 ----------- BELGIUM -- 0.30% Fortis ......................................... 15,172 267,480 ----------- CANADA -- 3.13% Alcan Aluminum Ltd.(c) ......................... 12,240 358,956 Bank of Nova Scotia (c) ........................ 16,100 536,667 BCE, Inc.(c) ................................... 28,700 517,755 Canadian National Railway Co. .................. 10,600 437,943 Domtar, Inc. ................................... 18,900 187,828 Royal Bank of Canada (c) ....................... 19,800 725,047 ----------- 2,764,196 ----------- FINLAND -- 3.52% Nokia Oyj ...................................... 106,592 1,694,635 Sampo Oyj, Class A ............................. 46,860 356,516 UPM-Kymmene Corp. (c) .......................... 32,789 1,052,904 ----------- 3,104,055 ----------- FRANCE -- 8.81% Aventis S.A., Class A .......................... 25,386 1,379,949 AXA ............................................ 16,964 227,687 BNP Paribas .................................... 30,556 1,245,096 Cap Gemini S.A.(c) ............................. 16,186 369,944 Sanofi-Synthelabo S.A .......................... 11,947 730,288 Suez S.A ....................................... 33,511 581,650 Total Fina S.A., Class B ....................... 19,325 2,760,048 Unibail S.A .................................... 6,751 480,327 ----------- 7,774,989 ----------- GERMANY -- 2.84% Allianz AG ..................................... 4,337 412,569 Altana AG ...................................... 21,939 1,001,486 Bayer AG ....................................... 11,855 254,410 Deutsche Telekom ............................... 16,900 217,251 E.on AG ........................................ 4,978 200,859 Linde AG (c) ................................... 11,475 421,463 ----------- 2,508,038 ----------- HONG KONG -- 0.41% Hong Kong Electric Holdings Ltd. ............... 96,000 363,151 ----------- IRELAND -- 1.48% Bank of Ireland ................................ 54,679 561,749 CRH PLC ........................................ 59,985 742,786 ----------- 1,304,535 ----------- ITALY -- 3.93% Assicurazioni Generali Spa ..................... 41,479 853,146 ENI Spa ........................................ 129,614 2,060,647 San Paolo-imi Spa (c) .......................... 84,810 551,795 ----------- 3,465,588 ----------- JAPAN -- 16.69% AIFUL Corp.(c) ................................. 10,850 407,778 Bank of Yokohama (c) ........................... 79,000 312,219 Banyu Pharmaceutical ........................... 47,600 446,839 Benesse Corp.(c) ............................... 22,200 248,808 Canon, Inc. .................................... 22,000 828,685 Daikin Industries Ltd. ......................... 22,000 348,529 Fuji Photo Film Co., Ltd. ...................... 33,000 1,076,178 Hitachi Credit Corp.(c) ........................ 18,900 226,475 Honda Motor Co. ................................ 21,500 795,357 Kao Corp. ...................................... 20,000 439,033 Mitsubishi Corp.(c) ............................ 69,000 421,547 Mitsui Fudosan Co., Ltd. ....................... 21,000 136,260 Murata Manufacturing Co., Inc. ................. 25,100 983,526 Nintendo Corp., Ltd. ........................... 12,100 1,130,774 NTT DoCoMo, Inc. ............................... 356 656,981 Rohm Co. ....................................... 5,300 674,838 Sanyo Electric ................................. 115,000 299,444 Sekisui House Ltd. ............................. 26,000 184,040 Sompo Japan Insurance, Inc.(c) ................. 134,000 782,523 Sony Corp.(c) .................................. 18,900 789,955 Sumitomo Chemical Co.(c) ....................... 94,000 371,501 Taiheiyo Cement Corp. .......................... 600 758 Takeda Chemical Industries Ltd. ................ 24,000 1,003,118 Takefuji Corp.(c) .............................. 8,970 517,776 Toyota Motor Corp. ............................. 35,800 962,349 West Japan Railway Co. ......................... 193 684,697 ----------- 14,729,988 ----------- NETHERLANDS -- 7.30% ABN AMRO Holdings NV ........................... 21,038 343,962 Akzo Nobel NV .................................. 15,934 505,478 Koninklijke Ahold NV ........................... 77,696 986,559 Philips Electronics NV ......................... 38,952 682,630 Reed Elsevier NV ............................... 133,813 1,635,924 TNT Post Group NV .............................. 24,764 401,503 VNU NV ......................................... 52,274 1,363,173 Wolters Kluwer NV .............................. 30,330 528,347 ----------- 6,447,576 ----------- NORWAY -- 0.67% Telenor ASA .................................... 155,900 596,344 ----------- PORTUGAL -- 1.10% Electricidade de Portugal S.A .................. 391,281 652,867 Portugal Telecom S.A ........................... 46,201 317,565 ----------- 970,432 ----------- SINGAPORE -- 1.28% DBS Group Holdings Ltd. ........................ 48,000 304,411 Neptune Orient Lines Ltd. (b)(c) ............... 701,000 371,819 Singapore Technologies Engineering Ltd. ........ 478,000 454,713 ----------- 1,130,943 ----------- ================================================================================ 66 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) SHARES VALUE ------- ----------- SPAIN -- 2.21% Banco Bilbao Vizcaya S.A .................... 105,475 $ 1,009,447 Banco Santander Central Hispano S.A ......... 63,618 436,613 Telefonica S.A. (b) ......................... 55,954 500,863 ------------ 1,946,923 ------------ SWEDEN -- 3.89% Nordea AB ................................... 150,000 661,058 Sandvik AB .................................. 18,000 401,800 Svenska Cellulosa AB (c) .................... 29,490 995,037 Svenska Handelsbanken AB (c) ................ 53,150 707,585 Swedish Match AB ............................ 84,640 665,401 ------------ 3,430,881 ------------ SWITZERLAND -- 7.38% Adecco S.A .................................. 15,638 612,989 Compagnie Financiere ........................ 45,096 841,453 Credit Suisse Group ......................... 14,585 316,446 Givaudan S.A ................................ 895 401,316 Nestle S.A .................................. 8,801 1,864,969 Novartis AG ................................. 22,968 838,024 Roche Holding AG ............................ 12,986 904,897 Serono S.A .................................. 624 334,407 Swiss Re .................................... 6,157 403,876 ------------ 6,518,377 ------------ UNITED KINGDOM -- 28.92% Abbey National PLC .......................... 65,817 548,863 Allied Domecq PLC ........................... 142,253 909,177 ARM Holdings PLC ............................ 204,180 157,780 AstraZeneca PLC ............................. 26,949 963,146 Barclays Bank PLC ........................... 214,357 1,328,602 BP PLC ...................................... 375,810 2,583,406 Brambles Industries PLC ..................... 117,876 288,447 BT Group PLC ................................ 233,918 734,336 Carlton Communications PLC .................. 173,401 374,768 Charter PLC (b) ............................. 100,497 123,672 Compass Group PLC ........................... 183,254 973,563 Electrocomponents PLC ....................... 87,526 404,404 Gallaher Group PLC .......................... 178,133 1,769,400 GlaxoSmithKline PLC ......................... 93,948 1,802,853 HSBC Holdings PLC ........................... 62,712 693,087 Invensys PLC ................................ 490,060 416,168 Kingfisher PLC .............................. 220,394 789,453 Lloyds TSB Group PLC ........................ 99,466 714,177 Matalan PLC ................................. 72,599 245,441 National Grid Group PLC ..................... 133,677 982,413 Rentokil Initial PLC ........................ 264,448 936,611 Rolls-Royce PLC ............................. 284,847 490,673 Royal Bank of Scotland Group PLC ............ 65,430 1,567,387 Safeway PLC ................................. 171,486 588,727 Scottish & Southern Energy PLC .............. 103,865 1,137,037 Shell Transport & Trading Co. PLC ........... 318,070 2,094,317 Vodafone Group PLC .......................... 1,046,669 1,908,289 ------------ 25,526,197 ------------ Total International Equities (Cost $80,229,037) ........................ 85,312,777 ------------ INVESTMENT COMPANIES -- 1.31% JAPAN -- 0.34% iShares MSCI Japan Index Fund ............... 43,000 298,850 ------------ UNITED KINGDOM -- 0.41% iShares MSCI United Kingdom Index Fund ...... 30,000 364,500 ------------ OTHER -- 0.56% iShares MSCI EMU Index Fund ................. 11,300 491,550 ------------ Total Investment Companies (Cost $1,082,233) ......................... 1,154,900 ------------ SHORT-TERM INVESTMENTS -- 0.98% OTHER -- 0.98% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $862,153) ........................... 862,153 862,153 ------------ INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 7.19% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $6,350,170) ......................... 6,350,170 6,350,170 ------------ Total Investments (Cost $88,523,593) -- 106.13% (a) ......... 93,680,000 Liabilities, less cash and other assets -- (6.13)% ................... (5,412,716) ------------ Net Assets -- 100% .......................... $ 88,267,284 ============ ================================================================================ 67 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $88,523,593; and net unrealized appreciation consisted of: Gross unrealized appreciation ............... $ 14,038,678 Gross unrealized depreciation ............... (8,882,271) ------------ Net unrealized appreciation ........ $ 5,156,407 ============ (b) Non-income producing security. (c) Security, or portion thereof, was on loan at December 31, 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 December 31, 2002:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) --------------- ------------- ------------- -------------- FORWARD FOREIGN CURRENCY BUY CONTRACTS: \Australian Dollar (AUD) 01/21/03 18,200,000 $10,230,419 $ 329,201 British Pound (GBP) 01/21/03 1,400,000 2,250,872 68,196 Canadian Dollar (CAD) 01/21/03 2,800,000 1,771,085 (55,101) Danish Krone (DKK) 01/21/03 3,500,000 494,043 31,735 Euro (EUR) 01/21/03 9,377,875 9,833,299 590,445 Hong Kong Dollar (HKD) 01/21/03 12,100,000 1,551,511 553 Japanese Yen (JPY) 01/21/03 582,000,000 4,907,733 168,764 Singapore Dollar (SGD) 01/21/03 700,000 403,686 10,891 Swedish Krona (SEK) 01/21/03 3,600,000 412,622 27,311 Swiss Franc (CHF) 01/21/03 3,200,000 2,315,247 133,578 FORWARD FOREIGN CURRENCY SALE CONTRACTS: Australian Dollar (AUD) 01/21/03 9,350,000 5,255,737 (154,411) British Pound (GBP) 01/21/03 6,800,000 10,932,805 (511,138) Euro (EUR) 01/21/03 6,000,000 6,291,382 (455,382) Hong Kong Dollar (HKD) 01/21/03 5,500,000 705,232 (95) Japanese Yen (JPY) 01/21/03 696,800,000 5,875,788 (50,637) Singapore Dollar (SGD) 01/21/03 1,650,000 951,546 (2,725) Swedish Krona (SEK) 01/21/03 17,400,000 1,994,340 (169,427) Swiss Franc (CHF) 01/21/03 3,200,000 2,315,247 (119,772) --------- Total net unrealized loss on Forward Foreign Currency Contracts $(158,014) =========
See accompanying notes to financial statements. ================================================================================ 68 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- During the six months ended December 31, 2002, Class Y shares of UBS U.S. Value Equity Fund declined 10.25%, versus the 11.29% decline of its benchmark, the Russell 1000 Value Index. Since the Fund's inception on June 29, 2001 through December 31, 2002, its Class Y shares declined 10.80% on an annualized basis. This compares favorably to the 13.27% decline of the Fund's benchmark. (Returns for all share classes over various time periods are shown on page 70. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.) MARKET REVIEW Stock investors saw two very different markets in the last six months of 2002. In the third quarter, the stock market was down across the board, with negative returns posted by virtually every index. Lower-than-expected second quarter earnings, disappointing economic statistics and a deteriorating geopolitical landscape held stock prices back. As a result, many investors fled stocks for the relative safety of fixed income securities. Those that stayed favored low P/E stocks in non-cyclical industries. Thus, value outperformed growth, and large caps outperformed small caps. However, there was a reversal of fortune during the fourth quarter as several of the year's worst performing companies met or exceeded revised earnings expectations. This positive news, combined with very low stock prices, brought investors back into the riskier end of the market. The S&P 500 Index finished the quarter up 8.44%, with growth outperforming value, and small caps outperforming large caps. Unfortunately, these gains were not enough to offset earlier losses. Value and growth both finished the six-month period in negative territory, with growth the relative winner: the Russell 1000 Value Index declined 11.29%, while the Russell 1000 Growth Index declined 8.97%. FOCUS ON INTRINSIC VALUE TARGETS SPECIFIC SECTORS While the Fund was unable to avoid the market's overall weakness, it did outperform its benchmark. Our valuation analysis uncovered attractive opportunities in several sectors--particularly banks and pharmaceuticals. We found that banks were offering respectable growth potential and very attractive stock prices relative to their intrinsic values. Our overweight in this sector generated a solid return on equity. Many pharmaceuticals were also selling at discounted stock prices. We concentrated on fundamentally strong companies with established drug pipelines and, as a result, generated solid appreciation from these holdings. Relative performance was also helped by an underweight in retailing and computer hardware, which were among the worst performing sectors over the period. Conversely, the Fund's overweight position in utilities proved a detriment to relative performance. Utilities have historically done well during economic declines, but this was not the case over the period. Despite the sector's decline, we have maintained our overweight in utilities. Our decision is based on the positive fundamentals of the Fund's holdings and the boost that this industry's stocks could get if dividends, typically higher on utilities than the broad market average, are exempted from income tax if President Bush's fiscal stimulus plan is implemented as proposed. LOOKING AHEAD Our research model indicates that the U.S. equity market could deliver positive returns in 2003. These prospects are complicated, however, by the still evolving situations in Iraq and Korea. Against this backdrop, we believe it will take extensive, bottom-up research conducted by our team of investment specialists to identify the right opportunities. As such, we intend to continue to rely on our fundamental, disciplined process to find companies selling for less than what we believe is their intrinsic value. ================================================================================ 69 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL RETURN
6 months 1 year Inception* ended ended to 12/31/02 12/31/02 12/31/02 - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS A -10.31% -15.70% -14.73% - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS B -10.69 -16.43 -11.87 - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS C -10.64 -16.38 -13.66 - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS Y -10.25 -15.56 -10.80 - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS A+ -15.28 -20.34 -19.14 - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS B+ -15.11 -20.56 -14.93 - -------------------------------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND CLASS C+ -12.37 -18.03 -14.49 - -------------------------------------------------------------------------------------------------------- Russell 1000 Value Index -11.29 -15.52 -13.27 - --------------------------------------------------------------------------------------------------------
* 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. - -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS - -------------------------------------------------------------------------------- AS OF DECEMBER 31, 2002 (UNAUDITED) Percentage of Net Assets - -------------------------------------------------------------------------------- Citigroup, Inc. 5.1% ExxonMobil Corp. 4.4 Wells Fargo & Co. 4.3 JP Morgan Chase & Co. 3.7 GreenPoint Financial Corp. 3.7 Nextel Communications, Inc. 3.5 United Health Group, Inc. 3.2 ConocoPhillips 3.1 Illinois Tool Works, Inc. 3.0 Exelon Corp. 2.8 - ------------------------------------------------------------------------------- Total 36.8% ================================================================================ 70 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- SHARES VALUE ------ ----- U.S. EQUITIES -- 99.18% AUTOS/DURABLES -- 1.00% Johnson Controls, Inc. ........................ 900 $ 72,153 ----------- BANKS -- 11.53% FleetBoston Financial Corp. ................... 5,485 133,286 GreenPoint Financial Corp. .................... 5,800 262,044 PNC Financial Services Group .................. 3,000 125,700 Wells Fargo & Co. ............................. 6,550 306,998 ----------- 828,028 ----------- BROADCASTING & PUBLISHING -- 1.36% Viacom, Inc. .................................. 2,400 97,824 ----------- CAPITAL GOODS -- 4.47% llinois Tool Works, Inc. ...................... 3,350 217,281 Pentair, Inc. ................................. 3,000 103,650 ----------- 320,931 ----------- CHEMICALS -- 2.36% Dow Chemical Co. (The) ........................ 5,700 169,290 ----------- CONSTRUCTION -- 1.62% Martin Marietta Materials, Inc. ............... 3,800 116,508 ----------- CONSUMER -- 1.06% Kimberly-Clark Corp. .......................... 1,600 75,952 ----------- ENERGY -- 17.87% ConocoPhillips ................................ 4,549 220,126 DTE Energy Co. ................................ 2,550 118,320 Exelon Corp. .................................. 3,750 197,888 ExxonMobil Corp. .............................. 9,050 316,207 FirstEnergy Corp. ............................. 5,000 164,850 Progress Energy, Inc. ......................... 3,400 147,390 Sempra Energy ................................. 5,000 118,250 ----------- 1,283,031 ----------- FINANCIAL SERVICES -- 22.52% American International Group, Inc. ............ 2,076 120,097 Anthem Inc. (b) ............................... 1,400 88,060 Citigroup, Inc. ............................... 10,296 362,316 Freddie Mac ................................... 3,250 191,912 Hartford Financial Services Group, Inc. ....... 2,650 120,390 Household International, Inc. ................. 5,650 157,126 J.P. Morgan Chase & Co. ....................... 11,100 266,400 Mellon Financial Corp. ........................ 4,400 114,884 Morgan Stanley ................................ 4,900 195,608 ----------- 1,616,793 ----------- HEALTH: DRUGS -- 6.53% Bristol-Myers Squibb Co. ...................... 6,800 157,420 Cephalon, Inc. (b) ............................ 2,300 111,936 SICOR, Inc. (b) ............................... 3,400 53,890 Wyeth, Inc. ................................... 3,900 145,860 ----------- 469,106 ----------- HEALTH: NON-DRUGS -- 6.14% Baxter International, Inc. .................... 2,550 71,400 Johnson & Johnson ............................. 2,600 139,646 United Health Group, Inc. ..................... 2,750 229,625 ----------- 440,671 ----------- LEISURE & TOURISM -- 0.84% Walt Disney Co. (The) ......................... 3,700 60,347 ----------- METALS NON-FERROUS -- 2.21% Masco Corp. ................................... 7,550 158,928 ----------- RETAIL/APPAREL -- 1.52% Newell Rubbermaid, Inc. ....................... 3,600 109,188 ----------- SERVICES/MISCELLANEOUS -- 1.53% First Data Corp. .............................. 3,100 109,771 ----------- TECHNOLOGY -- 2.16% United Technologies Corp. ..................... 2,500 154,850 ----------- TELECOMMUNICATIONS EQUIPMENT -- 0.37% CommScope, Inc. ............................... 3,400 26,860 ----------- TELECOMMUNICATIONS SERVICES -- 9.04% AT&T Wireless Services, Inc. (b) .............. 871 4,921 BellSouth Corp. ............................... 2,900 75,023 Motorola, Inc. ................................ 7,800 67,470 Nextel Communications, Inc. ................... 21,800 251,790 SBC Communications, Inc. ...................... 5,850 158,593 Verizon Communications, Inc. .................. 2,350 91,063 ----------- 648,860 ----------- TRANSPORTATION -- 4.19% Burlington Northern Santa Fe Corp. ............ 5,500 143,055 Norfolk Southern Corp. ........................ 7,900 157,921 ----------- 300,976 ----------- UTILITIES -- 0.86% CMS Energy Corp. .............................. 6,550 61,832 ----------- Total U.S. Equities (Cost $7,734,553) ........................... 7,121,899 ----------- SHORT-TERM INVESTMENTS -- 0.88% OTHER -- 0.88% UBS Supplementary Trust U.S. Cash Management Prime Fund (Cost $63,345) .............................. 63,345 63,345 ----------- Total Investments (Cost $7,797,898) -- 100.06% (a) ............ 7,185,244 Liabilities, less cash and other assets -- (0.06)% ..................... (4,397) ----------- Net Assets -- 100% ............................ $ 7,180,847 =========== ================================================================================ 71 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $7,797,898; and net unrealized depreciation consisted of: Gross unrealized appreciation .................. $ 271,214 Gross unrealized depreciation .................. (883,868) --------- Net unrealized depreciation ........... $(612,654) ========= (b) Non-income producing. % Represents a percentage of net assets. ================================================================================ See accompanying notes to financial statements. 72 This page is intentionally left blank. 73 - -------------------------------------------------------------------------------- THE UBS FUNDS--FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2002 (UNAUDITED)
UBS GLOBAL UBS UBS ALLOCATION GLOBAL GLOBAL FUND EQUITY FUND BOND FUND - ---------------------------------------------------------------------------------------------------------------- ASSETS: Investments, at cost: Unaffiliated issuers .......................................... $159,347,110 $56,695,962 $ 33,861,429 Affiliated issuers ............................................ 43,014,747 1,493,820 1,199,248 Investments of cash collateral received for securities loaned, at cost ............................................... 6,624,623 -- -- Foreign currency, at cost ....................................... 191,547 741,367 79,767 ------------ ----------- ------------ $209,178,027 $58,931,149 $ 35,140,444 ============ =========== ============ Investments, at value: Unaffiliated issuers + ........................................ $152,993,704 $54,261,025 $ 37,878,922 Affiliated issuers ............................................ 45,442,717 1,493,820 1,199,248 Investments of cash collateral received for securities loaned, at value ................................ 6,624,623 -- -- Foreign currency, at value ...................................... 195,783 741,368 80,317 Cash ............................................................ -- 5,165 6,168 Receivables: Investment securities sold .................................... 137,812 -- -- Due from Advisor .............................................. -- -- 14,220 Cash collateral, due from Broker .............................. -- -- -- Dividends ..................................................... 231,916 156,747 -- Interest ...................................................... 383,136 2,969 733,744 Fund shares sold .............................................. 1,417,805 40,416 71,707 Variation margin .............................................. -- -- -- Net unrealized appreciation on forward foreign currency contracts ................................... 719,804 21,348 -- ------------ ----------- ------------ TOTAL ASSETS .................................................... 208,147,300 56,722,858 39,984,326 ------------ ----------- ------------ LIABILITIES: Payables: Securities loaned ............................................. 6,624,623 -- -- Investment securities purchased ............................... 3,713,151 -- 602,447 Investment advisory fees ...................................... 153,080 40,701 -- Fund shares redeemed .......................................... 19,698 3,116 6,525 Distribution and service fees ................................. 23,649 4,176 1,458 Tustees' fees ................................................. 1,250 2,744 1,199 Due to Custodian Bank ......................................... 176,150 -- -- Variation margin .............................................. 11,094 -- -- Accrued expenses .............................................. 205,800 75,145 68,465 Net unrealized depreciation on forward foreign currency contracts .......................................... -- -- 104,294 ------------ ----------- ------------ TOTAL LIABILITIES ............................................. 10,928,495 125,882 784,388 ------------ ----------- ------------ NET ASSETS ......................................................... $197,218,805 $56,596,976 $ 39,199,938 ============ =========== ============ NET ASSETS CONSIST OF: Paid in capital ................................................. $215,055,957 $67,678,964 $ 38,069,998 Accumulated undistributed net investment income (loss) .......... (4,359,517) (655,748) (1,394,220) Accumulated net realized gain (loss) ............................ (10,490,927) (8,039,891) (1,432,693) Net unrealized appreciation (depreciation) ...................... (2,986,708) (2,386,349) 3,956,853 ------------ ----------- ------------ NET ASSETS .................................................... $197,218,805 $56,596,976 $ 39,199,938 ============ =========== ============
+ The market value of securities loaned for the UBS Global Allocation Fund and the UBS International Equity Fund as of December 31, 2002 were $6,496,147 and $6,133,780, respectively. Collateral is invested in short-term trust securities of an affiliated issuer. ================================================================================ See accompanying notes to financial statements. 74 - -------------------------------------------------------------------------------- THE UBS FUNDS--FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
UBS UBS UBS UBS U.S. LARGE CAP U.S. SMALL CAP UBS UBS UBS UBS U.S. BALANCED U.S. EQUITY GROWTH GROWTH U.S. BOND HIGH YIELD INTERNATIONAL U.S. VALUE FUND FUND FUND FUND FUND FUND EQUITY FUND EQUITY FUND - ------------------------------------------------------------------------------------------------------------------------ $ 23,841,407 $ 76,752,507 3,952,805 $35,747,941 $ 88,553,873 $233,189,056 $81,311,270 $ 7,734,553 1,080,514 1,764,323 45,985 1,234,438 1,939,585 1,668,212 862,153 63,345 -- -- -- -- -- -- 6,350,170 -- -- -- -- -- -- -- 731,990 -- ------------- ------------ ----------- ----------- ----------- ------------ ------------ ------------ $ 24,921,921 $ 78,516,830 $ 3,998,790 $36,982,379 $ 90,493,458 $234,857,268 $89,255,583 $ 7,797,898 ============= ============ =========== =========== ============ ============ =========== ============ $ 22,877,566 $ 82,182,854 $ 3,221,640 $34,350,707 $ 91,567,945 $160,877,487 $86,467,677 $ 7,121,899 1,080,514 1,764,323 45,985 1,234,438 1,939,585 1,668,212 862,153 63,345 -- -- -- -- -- -- 6,350,170 -- -- -- -- -- -- -- 751,901 -- 1,176 6,949 -- 612 928,013 74,125 -- 5,325 -- -- -- 164,078 -- 438,767 -- -- 18,401 -- 19,317 -- -- 22,166 -- 49,341 -- 184,750 -- -- -- -- -- -- 25,328 147,471 4,437 13,132 -- 8,344 301,622 15,232 71,137 4,553 156 1,161 760,669 4,111,643 9,501 221 40 34,765 5,979 12,115 25,576 436,019 330,000 -- -- 3,850 -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------------- ------------ ----------- ----------- ----------- ------------ ------------ ------------ 24,074,162 84,329,515 3,297,514 35,776,243 95,221,788 167,636,763 95,073,024 7,255,363 ------------- ------------ ----------- ----------- ----------- ------------ ------------ ------------ -- -- -- -- -- -- 6,350,170 -- 41,089 227,524 3,451 322,358 -- 1,082,648 -- -- -- 46,061 -- 36,211 33,036 -- 135,270 -- 1,170 27,404 -- 14,960 20,343 295,691 1,314 2,021 4,038 2,370 1,917 2,534 8,525 82,156 1,185 2,550 4,904 2,076 526 1,167 501 -- 3,670 1,646 -- -- -- -- -- -- 4,834 -- -- -- -- -- -- -- -- -- 54,510 116,149 24,475 48,580 47,016 172,416 151,283 68,299 -- -- -- -- -- -- 158,014 -- ------------- ------------ ----------- ----------- ----------- ------------ ------------ ------------ 105,711 421,584 30,369 425,810 109,421 1,632,911 6,805,740 74,516 ------------- ------------ ----------- ----------- ----------- ------------ ------------ ------------ $ 23,968,451 $ 83,907,931 $ 3,267,145 $35,350,433 $95,112,367 $166,003,852 $ 88,267,284 $ 7,180,847 ============= ============ =========== =========== =========== ============ ============ ============ $ 27,330,636 $ 87,401,835 $ 7,708,792 $39,315,472 $93,676,246 $499,229,646 $ 98,120,143 $ 8,318,737 (23,418) 530,361 2,365 (130,433) (76,118) 149,564 (465,326) 30,897 (2,374,926) (9,418,135) (3,712,847) (2,437,372) (1,501,833) (261,063,789) (14,435,544) (556,133) (963,841) 5,393,870 (731,165) (1,397,234) 3,014,072 (72,311,569) 5,048,011 (612,654) ------------- ------------ ----------- ----------- ----------- ------------ ------------ ------------ $ 23,968,451 $ 83,907,931 $ 3,267,145 $35,350,433 $95,112,367 $166,003,852 $ 88,267,284 $ 7,180,847 ============= ============ =========== =========== =========== ============ ============ ============
================================================================================ See accompanying notes to financial statements. 75 - -------------------------------------------------------------------------------- THE UBS FUNDS -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
UBS GLOBAL UBS UBS ALLOCATION GLOBAL EQUITY GLOBAL BOND FUND FUND FUND - ----------------------------------------------------------------------------------------------------------------------- CLASS A: Net assets ......................................................... $ 29,126,675 $13,183,474 $ 2,836,830 Shares outstanding ................................................. 3,025,685 1,631,847 295,291 Net asset value per share (Net Assets/shares outstanding) .......... $ 9.63 $ 8.08 $ 9.61 Offering price per share (NAV per share plus maximum sales charge) (a) $ 10.19 $ 8.55 $ 10.14 Redemption proceeds per share ...................................... $ 9.63 $ 8.08 $ 9.61 - ----------------------------------------------------------------------------------------------------------------------- CLASS B: Net assets ......................................................... $ 7 ,088,523 $ 786,954 $ 953,346 Shares outstanding ................................................. 743,097 97,846 99,171 Net asset value per share (Net Assets / shares outstanding) ........ $ 9.54 $ 8.04 $ 9.61 Offering price per share ........................................... $ 9.54 $ 8.04 $ 9.61 Redemption proceeds per share (NAV per share* maximum redemption charge) (a) .......................................... $ 9.06 $ 7.64 $ 9.13 - ----------------------------------------------------------------------------------------------------------------------- CLASS C: Net assets ......................................................... $ 12,455,585 $ 971,046 $ 344,981 Shares outstanding ................................................. 1,304,222 121,114 35,941 Net asset value per share (Net Assets / shares outstanding) ........ $ 9.55 $ 8.02 $ 9.60 Offering price per share (NAV per share / maximum sales charge) (a). $ 9.65 $ 8.10 $ 9.70 Redemption proceeds per share (NAV per share minus maximum redemption charge) (a) .......................................... $ 9.45 $ 7.94 $ 9.50 - ----------------------------------------------------------------------------------------------------------------------- CLASS Y: Net assets ......................................................... $148,548,022 $ 41,655,502 $35,064,781 Shares outstanding ................................................. 15,292,969 5,106,227 3,353,355 Net asset value per share (Net Assets / shares outstanding) ........ $ 9.71 $ 8.16 $ 10.46 Offering price pere share .......................................... $ 9.71 $ 8.16 $ 10.46 Redemption proceeds per share ...................................... $ 9.71 $ 8.16 $ 10.46 - -----------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- (a) For Class A, the maximum sales charge is 5.50%, except for the 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%. Classes B and 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 and UBS High Yield Fund which is 0.75%. Classes A and Y have no redemption charges. See accompanying notes to financial statements. ================================================================================ 76
UBS UBS UBS UBS U.S. LARGE CAP U.S. SMALL CAP UBS UBS UBS UBS U.S. BALANCED U.S. EQUITY GROWTH GROWTH U.S. BOND HIGH YIELD INTERNATIONAL U.S. VALUE FUND FUND FUND FUND FUND FUND EQUITY FUND EQUITY FUND - -------------------------------------------------------------------------------------------------------------------------------- $ 2,903,382 $ 4,236,706 $ 919,831 $ 3,331,574 $ 23,635,801 $ 66,255,253 $ 2,300,936 $ 1,217,647 341,457 350,015 161,332 385,109 2,184,324 10,478,515 350,369 146,763 $ 8.50 $ 12.10 $ .70 $ 8.65 $ 10.82 $ 6.32 $ 6.57 $ 8.30 $ 8.99 $ 12.80 $ 6.03 $ 9.15 $ 11.33 $ 6.62 $ 6.95 $ 8.78 $ 8.50 $ 12.10 $ 5.70 $ 8.65 $ 10.82 $ 6.32 $ 6.57 $ 8.30 - -------------------------------------------------------------------------------------------------------------------------------- $ 1,989,415 $ 442,277 $ 153,052 $ 700,877 $ 3,329,134 $ 14,155,086 $ 281,984 $ 754,233 235,246 36,877 27,031 81,679 308,204 2,239,239 43,193 91,525 $ 8.46 $ 11.99 $ 5.66 $ 8.58 $ 10.80 $ 6.32 $ 6.53 $ 8.24 $ 8.46 $ 11.99 $ 5.66 $ 8.58 $ 10.80 $ 6.32 $ 6.53 $ 8.24 $ 8.04 $ 11.39 $ 5.38 $ 8.15 $ 10.26 $ 6.00 $ 6.20 $ 7.83 - -------------------------------------------------------------------------------------------------------------------------------- $ 1,070,968 $ 289,812 $ 282,111 $ 634,873 $ 1,743,006 $ 17,738,507 $ 270,987 $ 767,267 126,518 24,191 49,863 74,053 161,251 2,805,747 41,554 93,007 $ 8.46 $ 11.98 $ 5.66 $ 8.57 $ 10.81 $ 6.32 $ 6.52 $ 8.25 $ 8.55 $ 12.10 $ 5.72 $ 8.66 $ 10.92 $ 6.38 $ 6.59 $ 8.33 $ 8.38 $ 11.86 $ 5.60 $ 8.48 $ 10.70 $ 6.26 $ 6.45 $ 8.17 - -------------------------------------------------------------------------------------------------------------------------------- $ 18,004,686 $ 78,939,136 $ 1,912,151 $ 30,683,109 $ 66,404,426 $ 67,855,006 $85,413,377 $ 4,441,700 2,106,156 6,481,854 330,474 3,498,493 6,127,533 10,675,861 12,961,401 534,899 $ 8.55 $ 12.18 $ 5.79 $ 8.77 $ 10.84 $ 6.36 $ 6.59 $ 8.30 $ 8.55 $ 12.18 $ 5.79 $ 8.77 $ 10.84 $ 6.36 $ 6.59 $ 8.30 $ 8.55 $ 12.18 $ 5.79 $ 8.77 $ 10.84 $ 6.36 $ 6.59 $ 8.30 - --------------------------------------------------------------------------------------------------------------------------------
================================================================================ 77 - -------------------------------------------------------------------------------- THE UBS FUNDS -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 2002 (UNAUDITED)
UBS GLOBAL UBS UBS ALLOCATION GLOBAL GLOBAL FUND EQUITY FUND BOND FUND - ----------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends ........................................................ $ 1,059,391 $ 534,840 $ -- Interest ......................................................... 669,745 15,321 702,163 Securities lending-net ........................................... 11,907 -- -- Foreign tax withheld ............................................. (29,830) (14,205) -- ----------- ----------- ------------ TOTAL INCOME ................................................... 1,711,213 535,956 702,163 ----------- ----------- ------------ EXPENSES: Advisory and Administration ...................................... 707,210 225,296 144,162 Professional Services ............................................ 22,240 25,933 40,662 Printing ......................................................... 66,781 18,860 16,625 Distribution and Service Fees: Class A ........................... 17,178 17,080 3,185 Distribution and Service Fees: Class B ........................... 15,992 2,188 4,072 Distribution and Service Fees: Class C ........................... 22,816 2,137 760 Custodian ........................................................ 68,425 21,842 14,885 State registration ............................................... 30,360 34,960 33,120 Transfer agent ................................................... 4,007 2,492 7,376 Trustees' Fees ................................................... 3,864 2,576 2,392 Other ............................................................ 4,021 697 820 ----------- ----------- ------------ TOTAL OPERATING EXPENSES ....................................... 962,894 354,061 268,059 ----------- ----------- ------------ Expenses waived by Advisor ..................................... -- (63,133) (94,516) ----------- ----------- ------------ NET OPERATING EXPENSES ......................................... 962,894 290,928 173,543 Interest Expense ............................................... 403 -- -- ----------- ----------- ------------ NET INVESTMENT INCOME (LOSS) ................................... 747,916 245,028 528,620 ----------- ----------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments .................................................... (6,672,204) (3,445,346) 241,989 Futures contracts .............................................. 2,812,560 -- -- Foreign currency transactions .................................. 3,876,187 797,979 993,938 ----------- ----------- ------------ Net realized gain (loss) .................................... 16,543 (2,647,367) 1,235,927 ----------- ----------- ------------ Change in net unrealized appreciation (depreciation) on: Investments and foreign currency ............................... (5,380,547) (2,949,141) 1,618,250 Futures contracts .............................................. (446,545) -- -- Forward contracts .............................................. (2,807,837) (879,245) (533,608) Translation of other assets and liabilities denominated in foreign currency .......................................... (7,461) 21,600 2,688 ----------- ----------- ------------ Change in net unrealized appreciation (depreciation) ........... (8,642,390) (3,806,786) 1,087,330 ----------- ----------- ------------ Net realized and unrealized gain (loss) .......................... (8,625,847) (6,454,153) 2,323,257 ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations .. $(7,877,931) $(6,209,125) $ 2,851,877 =========== =========== ============
See accompanying notes to financial statements. ================================================================================ 78
UBS UBS UBS U.S. LARGE CAP U.S. SMALL CAP UBS UBS UBS UBS U.S. BALANCED U.S. EQUITY GROWTH GROWTH U.S. BOND HIGH YIELD INTERNATIONAL U.S. VALUE FUND FUND FUND FUND FUND FUND EQUITY FUND EQUITY FUND - ------------------------------------------------------------------------------------------------------------------------------- $ 154,930 $ 890,087 $ 21,263 $ 74,608 $ -- $ 16,687 $ 746,540 $ 66,256 206,306 24,892 545 14,434 2,239,116 7,700,819 13,038 1,022 -- -- -- -- -- -- 34,370 -- -- -- -- -- -- -- (51,240) -- - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- 361,236 914,979 21,808 89,042 2,239,116 7,717,506 742,708 67,278 - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- 87,855 337,112 13,695 190,153 232,209 481,322 371,717 20,012 25,392 15,302 15,163 14,062 28,985 35,884 18,968 13,572 8,063 32,964 1,618 13,601 26,529 100,466 37,113 4,682 3,322 15,227 1,347 2,903 23,405 81,526 2,973 1,257 7,123 1,367 572 3,265 14,854 73,357 1,097 2,157 3,756 638 2,616 2,177 5,128 66,202 1,118 2,340 6,255 23,972 974 9,594 12,649 39,501 48,899 1,403 34,040 32,200 35,880 37,720 25,880 34,960 45,080 46,184 2,610 25,611 1,857 4,733 3,419 115,000 3,870 639 2,208 3,680 1,840 2,392 2,760 2,576 4,048 1,840 155 2,036 59 346 714 1,399 1,618 6,870 - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- 180,779 490,109 75,621 280,946 376,532 1,032,193 536,501 100,956 - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- (70,771) (106,779) (56,178) (61,471) (72,996) (287,767) (86,078) (72,426) - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- 110,008 383,330 19,443 219,475 303,536 744,426 450,423 28,530 -- 995 -- -- -- -- -- -- - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- 251,228 530,654 2,365 (130,433) 1,935,580 6,973,080 292,285 38,748 - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- (926,465) (5,619,121) (944,062) (865,179) 497,750 (14,836,449) (2,959,680) (546,801) (68,295) (298,851) -- -- -- -- -- -- -- -- -- -- -- -- 642,002 -- - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- (994,760) (5,917,972) (944,062) (865,179) 497,750 (14,836,449) (2,317,678) (546,801) - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- (384,460) (4,512,786) 499,472 (3,484,818) 2,145,909 (76,130,905) (11,252,717) (263,794) 2,799 35,060 -- -- -- -- -- -- -- -- -- -- -- -- (889,218) -- -- -- -- -- -- -- 22,723 - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- (381,661) (4,477,726) 499,472 (3,484,818) 2,145,909 (76,130,905) (12,119,212) (263,794) - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- (1,376,421) (10,395,698) (444,590) (4,349,997) 2,643,659 (90,967,354) (14,436,890) (810,595) - ------------- ------------ ---------- ----------- ----------- ------------ ------------ ----------- $ (1,125,193) $ (9,865,044) $ (442,225) $(4,480,430) $ 4,579,239 $(83,994,274) $(14,144,605) (771,847) ============= ============ ========== =========== =========== ============ ============ ===========
================================================================================ 79 - -------------------------------------------------------------------------------- THE UBS FUNDS -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
UBS UBS GLOBAL ALLOCATION FUND GLOBAL EQUITY FUND -------------------------------- ----------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 2002 JUNE 30, DECEMBER 31, 2002 JUNE 30, (UNAUDITED) 2002 (UNAUDITED) 2002 - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) ...................... $ 747,916 $ 2,109,235 $ 245,028 $ 486,984 Net realized gain (loss) .......................... 16,543 (1,202,175) (2,647,367) (4,019,795) Change in net unrealized appreciation (depreciation) ................................. (8,642,390) 6,940,305 (3,806,786) (760,540) ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from operations ................................ (7,877,931) 7,847,365 (6,209,125) (4,293,351) ------------ ----------- ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: Distributions from net investment income ........ (816,676) (92,144) (391,439) (77,577) Distributions from net realized gains ........... -- (388,420) -- (419,643) ------------ ----------- ----------- ----------- Total Class A distributions ....................... (816,676) (480,564) (391,439) (497,220) ------------ ----------- ----------- ----------- Class B: Distributions from net investment income ........ (159,173) (2,885) (18,143) (123) Distributions from net realized gains ........... -- (6,162) -- (668) ------------ ----------- ----------- ----------- Total Class B distributions ....................... (159,173) (9,047) (18,143) (791) ------------ ----------- ----------- ----------- Class C: Distributions from net investment income ........ (255,507) (438) (28,866) (1,134) Distributions from net realized gains ........... -- (1,867) -- (6,132) ------------ ----------- ----------- ----------- Total Class C distributions ....................... (255,507) (2,305) (28,866) (7,266) ------------ ----------- ----------- ----------- Class Y: Distributions from net investment income ........ (6,269,057) (2,763,739) (1,343,765) (244,638) Distributions from net realized gains ........... -- (11,553,728) -- (1,324,139) ------------ ----------- ----------- ----------- Total Class Y distributions ....................... (6,269,057) (14,317,467) (1,343,765) (1,568,777) ------------ ----------- ----------- ----------- Decrease in net assets from distributions .......... (7,500,413) (14,809,383) (1,782,213) (2,074,054) ------------ ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS BY CLASS: Class A: Shares sold ..................................... 24,057,840 7,853,473 1,325,660 30,870,623 Shares issued on reinvestment of distributions .. 694,883 442,708 326,514 396,391 Shares redeemed ................................. (1,917,635) (1,383,496) (1,529,432) (15,694,357) ------------ ----------- ----------- ----------- Total Class A transactions ........................ 22,835,088 6,912,685 122,742 15,572,657 ------------ ----------- ----------- ----------- Class B: Shares sold ..................................... 6,338,856 1,761,729 417,793 432,203 Shares issued on reinvestment of distributions .. 153,482 9,047 17,410 792 Shares redeemed ................................. (778,317) (181,252) (697) (99) ------------ ----------- ----------- ----------- Total Class B transactions ........................ 5,714,021 1,589,524 434,506 432,896 ------------ ----------- ----------- ----------- Class C: Shares sold ..................................... 11,790,131 1,562,320 756,331 428,669 Shares issued on reinvestment of distributions .. 238,616 2,241 21,402 7,265 Shares redeemed ................................. (928,816) (23,300) (99,183) (62,915) ------------ ----------- ----------- ----------- Total Class C transactions ........................ 11,099,931 1,541,261 678,550 373,019 ------------ ----------- ----------- ----------- Class Y: Shares sold ..................................... 20,692,732 87,020,622 11,554,353 126,818,221 Shares issued on reinvestment of distributions .. 4,205,702 9,091,252 972,071 1,024,427 Shares redeemed ................................. (27,589,630) (79,981,613) (5,830,133) (132,070,159) ------------ ------------ ----------- ------------ Total Class Y transactions ........................ (2,691,196) 16,130,261 6,696,291 (4,227,511) ------------ ------------ ----------- ------------ UBS Investment Funds Class+ Shares sold ..................................... -- 143,261 -- 142,132 Shares issued on reinvestment of distributions .. -- -- -- -- Shares redeemed ................................. -- (7,052,896) -- (18,825,671) ------------ ------------ ----------- ------------ Total UBS Investment Funds Class transactions ..... -- (6,909,635) -- (18,683,539) ------------ ------------ ----------- ------------ Net increase (decrease) in net assets resulting from capital share transactions ................ 36,957,844 19,264,096 7,932,089 (6,532,478) ------------ ------------ ----------- ------------ INCREASE (DECREASE) IN NET ASSETS ................. 21,579,500 12,302,078 (59,249) (12,899,883) NET ASSETS, BEGINNING OF PERIOD ................... 175,639,305 163,337,227 56,656,225 69,556,108 ------------ ------------ ----------- ------------ NET ASSETS, END OF PERIOD ......................... $197,218,805 $175,639,305 $56,596,976 $ 56,656,225 ============ ============ =========== ============ Net assets include accumulated undistributed net investment income (loss) ................... $ (4,359,517) $ 2,392,980 $ (655,748) $ 881,437 ============ ============ =========== ============
* The amount represents a distribtion from return of capital for the UBS Global Fund. See accompanying notes to financial statements. ================================================================================ 80 - -------------------------------------------------------------------------------- THE UBS FUNDS -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
UBS UBS UBS UBS GLOBAL BOND FUND U.S. BALANCED FUND U.S. EQUITY FUND U.S. LARGE CAP GROWTH FUND - ----------------------------- --------------------------- ----------------------------- -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED 2002 JUNE 30, 2002 JUNE 30, 2002 JUNE 30, 2002 JUNE 30, (UNAUDITED) 2002 (UNAUDITED) 2002 (UNAUDITED) 2002 UNAUDITED 2002 - ------------------------------------------------------------------------------------------------------------------------------ $ 528,620 $ 1,273,573 $ 251,228 $ 612,007 $ 530,654 $ 993,283 $ 2,365 $ (17,572) 1,235,927 (1,972,049) (994,760) (12,971) (5,917,972) 6,100,564 (944,062) (2,195,537) 1,087,330 5,897,508 (381,661) (1,272,222) (4,477,726) (16,018,358) 499,472 475,180 - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 2,851,877 5,199,032 (1,125,193) (673,186) (9,865,044) (8,924,511) (442,225) (1,737,929) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (33,641) (23,082)* (64,035) (35,339) (35,257) (33,362) -- -- -- -- -- -- (174,016) (531,722) -- (13,807) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (33,641) (23,082) (64,035) (35,339) (209,273) (565,084) -- (13,807) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (7,560) (1,816)* (35,979) (3,889) (3,439) (206) -- -- -- -- -- -- (15,413) (3,285) -- (244) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (7,560) (1,816) (35,979) (3,889) (18,852) (3,491) -- (244) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (2,173) -- (21,002) (781) (2,486) (60) -- -- -- -- -- -- (8,679) (955) -- (3,707) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (2,173) -- (21,002) (781) (11,165) (1,015) -- (3,707) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (421,850) (700,361)* (431,180) (520,386) (897,680) (314,778) -- -- -- -- -- -- (2,331,732) (5,018,843) -- (15,304) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (421,850) (700,361) (431,180) (520,386) (3,229,412) (5,333,621) -- (15,304) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (465,224) (725,259)* (552,196) (560,395) (3,468,702) (5,903,211) -- (33,062) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 2,252,531 8,168,545 719,363 2,792,372 4,051,960 10,524,445 467,634 2,494,053 29,817 16,968 60,100 34,527 135,067 163,489 -- 13,610 (1,516,453) (6,346,130) (293,723) (175,467) (12,150,374) (2,721,652) (571,378) (1,041,589) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 765,895 1,839,383 485,740 2,651,432 (7,963,347) 7,966,282 (103,744) 1,466,074 - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 723,174 378,073 1,409,491 1,128,265 400,136 349,959 168,036 210,860 7,062 1,722 29,916 3,643 18,852 3,491 -- 244 (219,139) -- (301,431) (178,788) (153,207) (103,306) (114,724) (67,097) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 511,097 379,795 1,137,976 953,120 265,781 250,144 53,312 144,007 - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 353,633 -- 738,513 436,391 259,661 79,070 161,431 794,762 2,058 -- 18,542 781 10,921 1,015 -- 3,708 (26,857) -- (60,853) (20,000) (25,729) (3,915) (394,997) (68,579) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 328,834 -- 696,202 417,172 244,853 76,170 (233,566) 729,891 - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 11,947,313 15,342,104 1,994,252 11,358,860 8,889,904 36,606,235 22,012 674,289 304,321 450,050 418,301 493,900 2,905,921 4,877,452 -- 13,460 (13,781,672) (23,493,711) (4,755,574) (14,710,999) (8,802,425) (66,693,377) (161,322) (814,297) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- (1,530,038) (7,701,557) (2,343,021) (2,858,239) 2,993,400 (25,209,690) (139,310) (126,548) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- -- 2,139 -- 5,273 -- 235,795 -- 203,529 -- -- -- -- -- -- -- -- -- (1,125,010) -- (1,291,178) -- (5,719,369) -- (3,266,791) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- -- (1,122,871) -- (1,285,905) -- (5,483,574) -- (3,063,262) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 75,788 (6,605,250) (23,103) (122,420) (4,459,313) (22,400,668) (423,308) (849,838) - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- 2,462,441 (2,131,477) (1,700,492) (1,356,001) (17,793,059) (37,228,390) (865,533) (2,620,829) 36,737,497 38,868,974 25,668,943 27,024,944 101,700,990 138,929,380 4,132,678 6,753,507 - ------------ ------------ ----------- ------------ ------------ ------------ ---------- ----------- $ 39,199,938 $ 36,737,497 $23,968,451 $ 25,668,943 $ 83,907,931 $101,700,990 $3,267,145 $ 4,132,678 ============ ============ =========== ============ ============ ============ ========== =========== $ (1,394,220) $ (1,457,616) $ (23,418) $ 277,550 $ 530,361 $ 938,569 $ 2,365 $ -- ============ ============ =========== ============ ============ ============ ========== ===========
- -------------------------------------------------------------------------------- ================================================================================ 81 - -------------------------------------------------------------------------------- THE UBS FUNDS -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
UBS UBS U.S. SMALL CAP GROWTH FUND U.S. BOND FUND ------------------------------------ ------------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 2002 JUNE 30, DECEMBER 31, 2001 JUNE 30, (UNAUDITED) 2002 (UNAUDITED) 2002 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) ................. $ (130,433) $ (324,060) $1,935,580 $4,478,203 Net realized gain (loss) ..................... (865,179) (431,999) 497,750 1,921,383 Change in net unrealized appreciation (depreciation) .......................... (3,484,818) (4,904,899) 2,145,909 925,071 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets from operations ....................... (4,480,430) (5,660,958) 4,579,239 7,324,657 ----------- ----------- ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS BY CLASS: Class A: Distributions from net investment income -- -- (455,657) (308,304) Distributions from net realized gains ... -- (61,112) -- -- ----------- ----------- ----------- ----------- Total Class A distributions ............... -- (61,112) (455,657) (308,304) ----------- ----------- ----------- ----------- Class B: Distributions from net investment income -- -- (61,109) (15,882) Distributions from net realized gains ... -- (3,713) -- -- ----------- ----------- ----------- ----------- Total Class B distributions ............... -- (3,713) (61,109) (15,882) ----------- ----------- ----------- ----------- Class C: Distributions from net investment income -- -- (28,283) (27,034) Distributions from net realized gains ... -- (767) -- -- ----------- ----------- ----------- ----------- Total Class C distributions ............... -- (767) (28,283) (27,034) ----------- ----------- ----------- ----------- Class Y: Distributions from net investment income -- -- (1,572,372) (5,307,109) Distributions from net realized gains ... -- (1,477,411) -- -- ----------- ----------- ----------- ----------- Total Class Y distributions ............... -- (1,477,411) (1,572,372) (5,307,109) ----------- ----------- ----------- ----------- UBS Investment Funds Class+ Distributions from net investment income -- -- -- (38,696) Distributions from net realized gains ... -- -- -- -- ----------- ----------- ----------- ----------- Total UBS Investment Funds Class distributions -- -- -- (38,696) ----------- ----------- ----------- ----------- Decrease in net assets from distributions . -- (1,543,003) (2,117,421) (5,697,025) ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS BY CLASS: Class A: Shares sold ............................. 3,212,742 2,179,415 16,044,009 20,944,347 Shares issued on reinvestment of distributions -- 60,938 369,561 243,825 Shares redeemed ......................... (1,398,210) (366,992) (11,881,279) (2,899,216) ----------- ----------- ----------- ----------- Total Class A transactions ................ 1,814,532 1,873,361 4,532,291 18,288,956 ----------- ----------- ----------- ----------- Class B: Shares sold ............................. 297,318 859,490 2,509,033 1,536,154 Shares issued on reinvestment of distributions -- 3,713 39,185 9,884 Shares redeemed ......................... (169,707) (153,113) (693,333) (143,152) ----------- ----------- ----------- ----------- Total Class B transactions ................ 127,611 710,090 1,854,885 1,402,886 ----------- ----------- ----------- ----------- Class C: Shares sold ............................. 332,724 580,457 1,393,741 1,767,103 Shares issued on reinvestment of distributions -- 768 21,650 11,416 Shares redeemed ......................... (42,389) (133,522) (848,215) (634,562) ----------- ----------- ----------- ----------- Total Class C transactions ................ 290,335 447,703 567,176 1,143,957 ----------- ----------- ----------- ----------- Class Y: Shares sold ............................. 6,342,508 24,755,474 15,105,294 273,440,239 Shares issued on reinvestment of distributions -- 1,389,547 1,510,991 4,731,214 Shares redeemed ......................... (7,916,502) (27,169,494) (11,765,826) (282,313,285) ----------- ----------- ----------- ----------- Total Class Y transactions ................ (1,573,994) (1,024,473) 4,850,459 (4,141,832) ----------- ----------- ----------- ----------- UBS Investment Funds Class+ Shares sold ............................. -- 268,873 -- 207,611 Shares issued on reinvestment of distributions -- -- -- 29,558 Shares redeemed ......................... -- (2,293,974) -- (3,107,604) ----------- ----------- ----------- ----------- Total UBS Investment Funds Class transactions -- (2,025,101) -- (2,870,435) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions ......... 658,484 (18,420) 11,804,811 13,823,532 ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS ......... (3,821,946) (7,222,381) 14,266,629 15,451,164 NET ASSETS, BEGINNING OF PERIOD ........... 39,172,379 46,394,760 80,845,738 65,394,574 ----------- ----------- ----------- ----------- NET ASSETS, END OF PERIOD ................. $35,350,433 $39,172,379 $95,112,367 $80,845,738 =========== =========== =========== =========== Net assets include accumulated undistributed net investment income (loss) ............ $ (130,433) $ -- $ (76,118) $ 105,723 =========== =========== =========== ===========
* For the period June 29, 2001, commencement of investment operations, to June 30, 2002. + UBS Investment Funds Class was liquidated effective November 9, 2001. See accompanying notes to financial statements. ================================================================================ 82 - -------------------------------------------------------------------------------- THE UBS FUNDS -- FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
UBS UBS UBS HIGH YIELD FUND INTERNATIONAL EQUITY FUND U.S. VALUE EQUITY -------------------------------- -------------------------------- --------------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 2002 JUNE 30, DECEMBER 31, 2002 JUNE 30, DECEMBER 31, 2002 JUNE 30, (UNAUDITED) 2002 (UNAUDITED) 2002 (UNAUDITED) 2002* - --------------------------------------------------------------------------------------------------------------------- $ 6,973,080 $ 11,343,538 $ 292,285 $ 1,457,063 $ 38,748 $ 36,677 (14,836,449) (27,901,284) (2,317,678) (7,755,636) (546,801) 41,135 (76,130,905) 7,837,661 (12,119,212) 1,110,495 (263,794) (348,860) ------------ ------------ ------------ ------------- ---------- ----------- (83,994,274) (8,720,085) (14,144,605) (5,188,078) (771,847) (271,048) ------------ ------------ ------------ ------------- ---------- ----------- (3,143,983) (4,859,620) (102,615) (36,545) (6,981) -- -- -- (3,166) (218,141) (8,594) -- ------------ ------------ ------------ ------------- ---------- ----------- (3,143,983) (4,859,620) (105,781) (254,686) (15,575) -- ------------ ------------ ------------ ------------- ---------- ----------- (653,127) (1,062,540) (12,207) -- (2,449) -- -- -- (392) -- (5,316) -- ------------ ------------ ------------ ------------- ---------- ----------- (653,127) (1,062,540) (12,599) -- (7,765) -- ------------ ------------ ------------ ------------- ---------- ----------- (807,868) (1,219,662) (10,789) (28) (2,890) -- -- -- (354) (166) (5,570) -- ------------ ------------ ------------ ------------- ---------- ----------- (807,868) (1,219,662) (11,143) (194) (8,460) -- ------------ ------------ ------------ ------------- ---------- ----------- (2,648,857) (5,509,093) (4,107,868) (2,957,696) (32,891) -- -- -- (119,936) (17,649,540) (30,987) -- ------------ ------------ ------------ ------------- ---------- ----------- (2,648,857) (5,509,093) (4,227,804) (20,607,236) (63,878) -- ------------ ------------ ------------ ------------- ---------- ----------- -- (153,732) -- -- -- -- -- -- -- -- -- -- ------------ ------------ ------------ ------------- ---------- ----------- -- (153,732) -- -- -- -- ------------ ------------ ------------ ------------- ---------- ----------- (7,253,835) (12,804,647) (4,357,327) (20,862,116) (95,678) -- ------------ ------------ ------------ ------------- ---------- ----------- 66,606,625 85,975,437 1,484,866 10,837,418 1,070,884 944,284 1,439,438 2,162,926 100,144 241,742 14,112 -- (8,630,449) (13,264,252) (1,425,675) (8,692,780) (465,933) (144,738) ------------ ------------ ------------ ------------- ---------- ----------- 59,415,614 74,874,111 159,335 2,386,380 619,063 799,546 ------------ ------------ ------------ ------------- ---------- ----------- 17,097,678 23,835,512 195,881 137,033 731,114 353,289 264,867 410,680 12,357 -- 7,755 -- (2,535,580) (6,409,813) (11,044) (15,060) (212,844) (33,608) ------------ ------------ ------------ ------------- ---------- ----------- 14,826,965 17,836,379 197,194 121,973 526,025 319,681 ------------ ------------ ------------ ------------- ---------- ----------- 16,835,733 23,894,164 176,550 708,527 639,965 256,183 368,300 565,332 10,420 1 2,916 -- (1,206,466) (4,088,587) (54,611) (531,255) (60,834) (3,131) ------------ ------------ ------------ ------------- ---------- ----------- 15,997,567 20,370,909 132,359 177,273 582,047 253,052 ------------ ------------ ------------ ------------- ---------- ----------- 41,832,598 93,174,128 59,270,940 776,370,655 2,306,425 4,355 2,435,125 4,929,419 3,923,965 18,542,125 48,665 -- (16,847,477) (104,801,747) (57,668,693) (863,839,409) (139,400) (49) ------------ ------------ ------------ ------------- ---------- ----------- 27,420,246 (6,698,200) 5,526,212 (68,926,629) 2,215,690 4,306 ------------ ------------ ------------ ------------- ---------- ----------- -- 83,673 -- 231,701 -- -- -- 119,090 -- -- -- -- -- (1,958,227) -- (4,025,287) -- -- ------------ ------------ ------------ ------------- ---------- ----------- -- (1,755,464) -- (3,793,586) -- -- ------------ ------------ ------------ ------------- ---------- ----------- 117,660,392 104,627,735 6,015,100 (70,034,589) 3,942,825 1,376,585 ------------ ------------ ------------ ------------- ---------- ----------- 26,412,283 83,103,003 (12,486,832) (96,084,783) 3,075,300 1,105,537 139,591,569 56,488,566 100,754,116 196,838,899 4,105,547 3,000,010 ------------ ------------ ------------ ------------- ---------- ----------- $166,003,852 $139,591,509 $ 88,267,284 $ 100,754,116 $7,180,847 $4,105,547 ------------ ------------ ------------ ------------- ---------- ----------- $ 149,564 $ 430,319 $ (465,326) $ 3,475,868 $ 30,897 $ 37,360 ============ ============ ============ ============= ========== ===========
================================================================================ 83 - -------------------------------------------------------------------------------- UBS GLOBAL ALLOCATION FUND--FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 ------------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ........... $10.60 $11.10 $11.20 $11.99 $12.75 $13.13 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income ....................... 0.04** 0.10** 0.22 0.19** 0.27 0.63 Net realized and unrealized gain (loss) ..... (0.59) 0.40 0.31 (0.30) 0.25 0.32 ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations ................. (0.55) 0.50 0.53 (0.11) 0.52 0.95 ------ ------ ------ ------ ------ ------ Less distributions: Distributions from net investment income .... (0.42) (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 ...................... (0.42) (1.00) (0.63) (0.68) (1.28) (1.33) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................. $ 9.63 $10.60 $11.10 $11.20 $11.99 $12.75 ====== ====== ====== ====== ====== ====== Total return+ .................................. (5.09)%++ 4.84% 4.95% (0.80)% 4.47% 7.90% Ratios/Supplemental data: Net assets, end of period (in 000s) ......... $29,127 $6,914 $ 237 $ 202 $1,576 $1,163 Ratio of gross expenses to average net assets 1.28%*** 1.35% 1.30% 1.24% 1.21% 1.19% Ratio of net investment income to average net assets ....................... 0.74%*** 0.98% 1.52% 1.74% 1.98% 2.45% Portfolio turnover rate ..................... 43% 116% 115% 98% 105% 88% - -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ........................................... $ 10.52 $ 11.21 --------- --------- Income from investment operations: Net investment income ....................................................... 0.00** 0.12** Net realized and unrealized gain (loss) ..................................... (0.58) 0.19 --------- --------- Total income (loss) from investment operations ........................... (0.58) 0.31 --------- --------- Less distributions: Distributions from net investment income .................................... (0.40) (0.19) Distributions from net realized gains ....................................... -- (0.81) --------- --------- Total distributions ...................................................... (0.40) (1.00) --------- --------- Net asset value, end of period ................................................. $ 9.54 $ 10.52 ========= ========= Total return+ .................................................................. (5.41)%++ 3.00%++ Ratios/Supplemental data: Net assets, end of period (in 000s) ......................................... $ 7,089 $ 1,570 Ratio of gross expenses to average net assets ............................... 2.03%*** 2.10%*** Ratio of net investment income to average net assets ........................ (0.01)%*** 2.17%*** Portfolio turnover rate ..................................................... 43% 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 is non-annualized. + The returns do not include sales charges. ================================================================================ See accompanying notes to financial statements. 84 UBS GLOBAL ALLOCATION FUND--FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period .......................................... $ 10.54 $ 11.10 ---------- ---------- Income (loss) from investment operations: Net investment income ...................................................... 0.00** 0.11** Net realized and unrealized gain (loss) .................................... (0.58) 0.33 ---------- ---------- Total income (loss) from investment operations .......................... (0.58) 0.44 ---------- ---------- Less distributions: Distributions from net investment income ................................... (0.41) (0.19) Distributions from net realized gains ...................................... -- (0.81) ---------- ---------- Total distributions ..................................................... (0.41) (1.00) ---------- ---------- Net asset value, end of period ................................................ $ 9.55 $ 10.54 ========== ========== Total return+ ................................................................. (5.45)%(o) 4.23%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ........................................ $ 12,456 $ 1,525 Ratio of gross expenses to average net assets .............................. 2.01%*** 2.10%*** Ratio of net investment income to average net assets ....................... 0.01%*** 1.77%*** Portfolio turnover rate .................................................... 43% 116% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 ----------------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ........... $ 10.69 $ 11.18 $ 11.25 $ 12.02 $ 12.77 $ 13.13 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income ....................... 0.05** 0.13** 0.25 0.23** 0.30 0.37 Net realized and unrealized gain (loss) ..... (0.60) 0.38 0.31 (0.30) 0.25 0.62 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ................. (0.55) 0.51 0.56 (0.07) 0.55 0.99 -------- -------- -------- -------- -------- -------- Less distributions: Distributions from net investment income .... (0.43) (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 ...................... (0.43) (1.00) (0.63) (0.70) (1.30) (1.35) -------- -------- -------- -------- -------- -------- Net asset value, end of period ................. $ 9.71 $ 10.69 $ 11.18 $ 11.25 $ 12.02 $ 12.77 ======== ======== ======== ======== ======== ======== Total return++ ................................. (5.06)%(o) 4.91% 5.20% (0.48)% 4.76% 8.28% Ratios/Supplemental data: Net assets, end of period (in 000s) ......... $148,548 $165,630 $156,130 $284,229 $469,080 $667,745 Ratio of gross expenses to average net assets 1.08%*** 1.10% 1.05% 0.99% 0.96% 0.94% Ratio of net investment income to average net assets ....................... 0.94%*** 1.24% 1.77% 1.99% 2.23% 2.70% Portfolio turnover rate ..................... 43% 116% 115% 98% 105% 88% - -----------------------------------------------------------------------------------------------------------------------------------
* For the period November 22, 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ Class Y does not have sales charges. ================================================================================ See accompanying notes to financial statements. 85 UBS GLOBAL EQUITY FUND--FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 ----------------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ........... $ 9.37 $ 10.61 $ 12.44 $ 13.40 $ 12.53 $ 12.76 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income ....................... 0.03** 0.04** 0.07 0.04** 0.10** 0.13 Net realized and unrealized gain (loss) ..... (1.07) (0.88) (0.56) 0.27 1.09 0.82 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ................. (1.04) (0.84) (0.49) 0.31 1.19 0.95 -------- -------- -------- -------- -------- -------- Less distributions: Distributions from net investment income .... (0.25) (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 ...................... (0.25) (0.40) (1.34) (1.27) (0.32) (1.18) -------- -------- -------- -------- -------- -------- Net asset value, end of period ................. $ 8.08 $ 9.37 $ 10.61 $ 12.44 $ 13.40 $ 12.53 ======== ======== ======== ======== ======== ======== Total return+ .................................. (11.14)%++ (8.05)% (4.45)% 2.49% 9.80% 8.60% Ratios/Supplemental data: Net assets, end of period (in 000s) ......... $ 13,183 $ 15,173 $ 302 $ 224 $ 220 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .................. 1.49%*** 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% 1.25% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits .................. 0.50%*** 0.17% 0.65% 0.23% 0.80% 1.04% After expense reimbursement and earnings credits .................. 0.74%*** 0.39% 0.77% 0.31% 0.85% 1.06% Portfolio turnover rate ..................... 25% 117% 81% 111% 86% 46% - -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............................................. $ 9.34 $ 10.17 ------- ------- Income (loss) from investment operations: Net investment income ......................................................... 0.00** 0.05** Net realized and unrealized loss .............................................. (1.07) (0.48) ------- ------- Total loss from investment operations ...................................... (1.07) (0.43) ------- ------- Less distributions: Distributions from net investment income ...................................... (0.23) (0.06) Distributions from net realized gains ......................................... -- (0.34) ------- ------- Total distributions ........................................................ (0.23) (0.40) ------- ------- Net asset value, end of period ................................................... $ 8.04 $ 9.34 ======= ======= Total return+ .................................................................... (11.50)%++ (4.38)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) ........................................... $ 787 $ 418 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .......................... 2.21%*** 2.25%*** After expense reimbursement and earnings credits ........................... 2.00%*** 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits .......................... (0.22)%*** 0.72%*** After expense reimbursement and earnings credits ........................... (0.01)%*** 0.97%*** Portfolio turnover rate ....................................................... 25% 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 is non-annualized. + The returns do not include sales charges. ================================================================================ See accompanying notes to financial statements. 86 UBS GLOBAL EQUITY FUND--FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............................................. $ 9.33 $ 10.18 ------- ------- Income (loss) from investment operations: Net investment income ......................................................... 0.00** 0.04** Net realized and unrealized loss .............................................. (1.07) (0.49) ------- ------- Total loss from investment operations ...................................... (1.07) (0.45) ------- ------- Less distributions: Distributions from net investment income ...................................... (0.24) (0.06) Distributions from net realized gains ......................................... -- (0.34) ------- ------- Total distributions ........................................................ (0.24) (0.40) ------- ------- Net asset value, end of period ................................................... $ 8.02 $ 9.33 ======= ======= Total return+ .................................................................... (11.43)%(o) (4.57)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ........................................... $ 971 $ 351 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .......................... 2.16%*** 2.23%*** After expense reimbursement and earnings credits ........................... 2.00%*** 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits .......................... (0.17)%*** 0.55%*** After expense reimbursement and earnings credits ........................... (0.01)%*** 0.78%*** Portfolio turnover rate ....................................................... 25% 117% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 ----------------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ............. $ 9.47 $ 10.68 $ 12.47 $ 13.42 $ 12.54 $ 12.76 ------- -------- ------- -------- ------- ------- Income (loss) from investment operations: Net investment income ......................... 0.04** 0.06** 0.09 0.07** 0.14** 0.22 Net realized and unrealized gain (loss) ....... (1.08) (0.87) (0.54) 0.27 1.09 0.78 ------- -------- ------- -------- ------- ------- Total income (loss) from investment operations ................... (1.04) (0.81) (0.45) 0.34 1.23 1.00 ------- -------- ------- -------- ------- ------- Less distributions: Distributions from net investment income ...... (0.27) (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 ........................ (0.27) (0.40) (1.34) (1.29) (0.35) (1.22) ------- -------- ------- -------- ------- ------- Net asset value, end of period ................... $ 8.16 $ 9.47 $ 10.68 $ 12.47 $ 13.42 $ 12.54 ======= ======== ======= ======== ======= ======= Total return++ ................................... (10.99)%(o) (7.71)% (4.07)% 2.69% 10.14% 8.99% Ratios/Supplemental data: Net assets, end of period (in 000s) .............. $41,656 $40,714 $49,306 $40,538 $42,106 $22,724 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .................... 1.23%*** 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% 1.00% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits .................... 0.76%*** 0.45% 0.90% 0.48% 1.05% 1.29% After expense reimbursement and earnings credits .................... 0.99%*** 0.64% 1.02% 0.56% 1.10% 1.31% Portfolio turnover rate ....................... 25% 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ Class Y does not have sales charges. ================================================================================ See accompanying notes to financial statements. 87 UBS GLOBAL BOND FUND--FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 -------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................. $ 9.01 $ 8.58 $ 9.09 $ 9.16 $ 9.40 $ 9.64 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income ............................. 0.12** 0.17** 0.33** 0.37** 0.37** 0.42** Net realized and unrealized gain (loss) ........... 0.60 0.43 (0.72) (0.43) (0.07) (0.20) ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations ....................... 0.72 0.60 (0.39) (0.06) 0.30 0.22 ------ ------ ------ ------ ------ ------ Less distributions: Distributions from and in excess of net investment income .......................... (0.12) -- (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 ............................ (0.12) (0.17) (0.06) (0.01) (0.54) (0.46) ------ ------ ------ ------ ------ ------ Net asset value, end of period ....................... $ 9.61 $ 9.01 $ 8.64 $ 9.09 $ 9.16 $ 9.40 ====== ====== ====== ====== ====== ====== Total return+ ........................................ 8.03%(o) 7.18% (4.27)% (0.66)% 2.89% 2.37% Ratios/Supplemental data: Net assets, end of period (in 000s) ............... $2,837 $1,925 $ 3 $ 1 $1,085 $ 9 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 1.67%*** 1.49%*** 1.37% 1.30% 1.15% 1.21% After expense reimbursement and earnings credits ........................ 1.15%*** 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 ........................ 2.15%*** 2.72%*** 3.60% 4.09% 3.80% 4.22% After expense reimbursement and earnings credits ........................ 2.67%*** 3.06%*** 3.82% 4.20% 3.80% 4.28% Portfolio turnover rate ........................... 52% 157% 165% 87% 138% 151%
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ............................................... $ 9.01 $ 8.35 ------- ------- Income from investment operations: Net investment income ........................................................... 0.09** 0.11** Net realized and unrealized gain ................................................ 0.59 0.69 ------- ------- Total income from investment operations ...................................... 0.68 0.80 ------- ------- Less distributions: Distributions from and in excess of net investment income ....................... (0.08) -- Distributions from return of capital ............................................ -- (0.14) ------- ------- Net asset value, end of period ..................................................... $ 9.61 $ 9.01 ======= ======= Total return+ ...................................................................... 7.64%(o) 9.67%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ............................................. $ 953 $ 392 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............................ 2.43%*** 2.25%*** After expense reimbursement and earnings credits ............................. 1.90%*** 1.90%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............................ 1.39%*** 1.94%*** After expense reimbursement and earnings credits ............................. 1.92%*** 2.29%*** Portfolio turnover rate ......................................................... 52% 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 B respectively, through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. (o) 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 1.15%. =============================================================================== See accompanying notes to financial statements. 88 - ------------------------------------------------------------------------------- UBS GLOBAL BOND FUND--FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED. FOR THE PERIOD ENDED DECEMBER 31, 2002 CLASS C (UNAUDITED)* - ------------------------------------------------------------------------------- Net asset value, beginning of period .......................... $ 9.00 ------- Income (loss) from investment operations: Net investment income ...................................... 0.10** Net realized and unrealized gain ........................... 0.60 ------- Total income from investment operations ................. 0.70 ------- Less distributions: Distributions from net investment income ................... (0.10) ------- Net asset value, end of period ................................ $ 9.60 ======= Total return+ ................................................. 7.79%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ........................ $ 345 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ....... 2.23%*** After expense reimbursement and earnings credits ........ 1.65%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ....... 1.59%*** After expense reimbursement and earnings credits ........ 2.17%*** Portfolio turnover rate .................................... 52% - -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 --------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................. $ 9.79 $ 8.57 $ 9.01 $ 9.18 $ 9.41 $ 9.64 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income ............................. 0.15** 0.31** 0.36** 0.40** 0.39** 0.43** Net realized and unrealized gain (loss) ........... 0.65 1.09 (0.72) (0.43) (0.07) (0.18) ------- ------- ------- ------- ------- ------- Total income (loss) from investment operations ....................... 0.80 1.40 (0.36) (0.03) 0.32 0.25 ------- ------- ------- ------- ------- ------- Less distributions: Distributions from and in excess of net investment income .......................... (0.13) -- (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 ............................ (0.13) (0.18) (0.08) (0.14) (0.55) (0.48) ------- ------- ------- ------- ------- ------- Net asset value, end of period ....................... $ 10.46 $ 9.79 $ 8.57 $ 9.01 $ 9.18 $ 9.41 ======= ======= ======= ======= ======= ======= Total return++ ....................................... 8.22%(o) 16.57% (4.02)% (0.34)% 3.13% 2.69% Ratios/Supplemental data: Net assets, end of period (in 000s) ............... $35,065 $34,421 $37,822 $43,467 $92,832 $91,274 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 1.41%*** 1.17% 1.12% 1.05% 0.90% 0.96% After expense reimbursement and earnings credits ........................ 0.90%*** 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 ........................ 2.41%*** 3.14% 3.85% 4.34% 4.05% 4.47% After expense reimbursement and earnings credits ........................ 2.92%*** 3.41% 4.07% 4.45% 4.05% 4.53% Portfolio turnover rate ........................... 52% 157% 165% 87% 138% 151% - ------------------------------------------------------------------------------------------------------------------------------------
* For the period July 2, 2002 (commencement of reissuance) through December 31, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. (o) The return is non-annualized + The returns do not include sales charges. ++ 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. 89 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.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 --------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................. $ 9.04 $ 9.38 $ 8.57 $ 9.38 $ 12.27 $ 12.53 -------- ------- ------- ------- -------- ------- Income (loss) from investment operations: Net investment income ............................. 0.09** 0.20** 0.28 0.23** 0.29** 0.47** Net realized and unrealized gain (loss) ........... (0.44) (0.25) 0.89 (0.74) 0.18 0.94 -------- ------- ------- ------- -------- ------- Total income (loss) from investment operations ....................... (0.35) (0.05) 1.17 (0.51) 0.47 1.41 -------- ------- ------- ------- -------- ------- Less distributions: Distributions from net investment income .......... (0.19) (0.29) (0.36) (0.24) (0.71) (0.73) Distributions from net realized gains ............. -- -- -- (0.06) (2.65) (0.94) -------- ------- ------- ------- -------- ------- Total distributions ............................ (0.19) (0.29) (0.36) (0.30) (3.36) (1.67) -------- ------- ------- ------- -------- ------- Net asset value, end of period ....................... $ 8.50 $ 9.04 $ 9.38 $ 8.57 $ 9.38 $ 12.27 ======== ======= ======= ======= ======== ======= Total return+ ........................................ (3.85)%(o) (0.60)% 13.89% (5.39)% 4.17% 12.15% Ratios/Supplemental data: Net assets, end of period (in 000s) ............... $ 2,903 $ 2,583 $ 1 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 1.60%*** 1.57% 1.39% 1.26% 1.21% 1.06% After expense reimbursement and earnings credits ........................ 1.05%*** 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 ........................ 1.42%*** 1.63% 2.81% 2.55% 2.75% 3.63% After expense reimbursement and earnings credits ........................ 1.97%*** 2.15% 3.15% 2.75% 2.91% 3.64% Portfolio turnover rate ........................... 58% 147% 159% 96% 113% 194% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ...................................... $ 9.00 $ 9.39 --------- -------- Income (loss) from investment operations: Net investment income .................................................. 0.05** 0.08** Net realized and unrealized loss ....................................... (0.42) (0.19) --------- -------- Total loss from investment operations ............................... (0.37) (0.11) --------- -------- Less distributions: Distributions from net investment income ............................... (0.17) (0.28) --------- -------- Net asset value, end of period ............................................ $ 8.46 $ 9.00 ========= ======== Total return+ ............................................................. (4.17)%(o) (1.18)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .................................... $ 1,989 $ 913 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ................... 2.28%*** 2.41%*** After expense reimbursement and earnings credits .................... 1.80%*** 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ................... 0.74%*** 0.69%*** After expense reimbursement and earnings credits .................... 1.22%*** 1.30%*** Portfolio turnover rate ................................................ 58% 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. (o) 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 1.05%. ================================================================================ See accompanying notes to financial statements. 90 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.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - ----------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period .................................... $ 9.01 $ 9.36 ------- ------- Income (loss) from investment operations: Net investment income ................................................ 0.05** 0.08** Net realized and unrealized loss ..................................... (0.43) (0.15) ------- ------- Total loss from investment operations ............................. (0.38) (0.07) ------- ------- Less distributions: Distributions from net investment income ............................. (0.17) (0.28) ------- ------- Net asset value, end of period .......................................... $ 8.46 $ 9.01 ======= ======= Total return+ ........................................................... (4.25)%(o) (0.76)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .................................. $ 1,071 $ 402 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ................. 2.37%*** 2.37%*** After expense reimbursement and earnings credits .................. 1.80%*** 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ................. 0.65%*** 0.75%*** After expense reimbursement and earnings credits .................. 1.22%*** 1.32%*** Portfolio turnover rate .............................................. 58% 147% - -----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 --------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................. $ 9.09 $ 9.41 $ 8.59 $ 9.38 $ 12.24 $ 12.53 -------- ------- ------- ------- -------- ------- Income (loss) from investment operations: Net investment income ............................. 0.10** 0.24** 0.31 0.26** 0.34** 0.49** Net realized and unrealized gain (loss) ........... (0.43) (0.27) 0.89 (0.74) 0.18 0.93 -------- ------- ------- ------- -------- ------- Total income (loss) from investment operations ....................... (0.33) (0.03) 1.20 (0.48) 0.52 1.42 -------- ------- ------- ------- -------- ------- Less distributions: Distributions from net investment income .......... (0.21) (0.29) (0.38) (0.25) (0.73) (0.77) Distributions from net realized gains ............. -- -- -- (0.06) (2.65) (0.94) -------- ------- ------- ------- -------- ------- Total distributions ............................ (0.21) 0.29) (0.38) (0.31) (3.38) (1.71) -------- ------- ------- ------- -------- ------- Net asset value, end of period ....................... $ 8.55 $ 9.09 $ 9.41 $ 8.59 $ 9.38 $ 12.24 ======== ======= ======= ======= ======== ======= Total return++ ....................................... (3.65)%(o) (0.36)% 14.18% (5.07)% 4.74% 12.19% Ratios/Supplemental data: Net assets, end of period (in 000s) ............... $ 18,005 $21,771 $25,719 $11,136 $ 37,603 $80,556 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 1.41%*** 1.24% 1.14% 1.01% 0.96% 0.81% After expense reimbursement and earnings credits ........................ 0.80%*** 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 ........................... 1.61%*** 2.17% 3.06% 2.80% 3.00% 3.88% After expense reimbursement and earnings credits ........................... 2.22%*** 2.61% 3.40% 3.00% 3.16% 3.89% Portfolio turnover rate ........................... 58% 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ 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. 91 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.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 --------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................. $ 13.94 $ 15.97 $ 15.97 $ 21.39 $ 19.88 $ 17.64 -------- -------- ------- ------- -------- ------- Income (loss) from investment operations: Net investment income ............................. 0.06** 0.08** 0.08** 0.13** 0.08** 0.15 Net realized and unrealized gain (loss) ........... (1.45) (1.38) 1.56 (3.75) 2.67 3.37 -------- -------- ------- ------- -------- ------- Total income (loss) from investment operations ....................... (1.39) (1.30) 1.64 (3.62) 2.75 3.52 -------- -------- ------- ------- -------- ------- Less distributions: Distributions from net investment income .......... (0.07) (0.04) (0.29) (0.03) (0.12) (0.15) Distributions from net realized gains ............. (0.38) (0.69) (1.35) (1.77) (1.12) (1.13) -------- -------- ------- ------- -------- ------- Total distributions ............................ (0.45) (0.73) (1.64) (1.80) (1.24) (1.28) -------- -------- ------- ------- -------- ------- Net asset value, end of period ....................... $ 12.10 $ 13.94 $ 15.97 $ 15.97 $ 21.39 $ 19.88 ======== ======== ======= ======= ======== ======= Total return+ ........................................ (10.01)%(o) (8.41)% 10.63% (17.24)% 14.75% 21.10% Ratios/Supplemental data: Net assets, end of period (in 000s) ............... $ 4,237 $ 13,698 $ 7,067 $ 7,191 $ 7,563 $ 268 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 1.30%*** 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% 1.05% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ........................ 0.69%*** 0.40% 0.37% 0.64% 0.57% 0.87% After expense reimbursement and earnings credits ........................ 0.94%*** 0.54% 0.49% 0.68% 0.57% 0.87% Portfolio turnover rate ........................... 17% 60% 54% 55% 48% 42% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ....................................... $ 13.87 $ 14.76 -------- ------- Income (loss) from investment operations: Net investment income ................................................... 0.01** 0.06** Net realized and unrealized loss ........................................ (1.43) (0.22) -------- ------- Total loss from investment operations ................................ (1.42) (0.16) -------- ------- Less distributions: Distributions from net investment income ................................ (0.08) (0.04) Distributions from net realized gains ................................... (0.38) (0.69) -------- ------- Total distributions .................................................. (0.46) (0.73) -------- ------- Net asset value, end of period ............................................. $ 11.99 $ 13.87 ======== ======= Total return+ .............................................................. (10.30)%(o) (1.39)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ..................................... $ 442 $ 223 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .................... 2.01%*** 1.99%*** After expense reimbursement and earnings credits ..................... 1.80%*** 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits .................... (0.02)%*** 0.46%*** After expense reimbursement and earnings credits ..................... 0.19%*** 0.65%*** Portfolio turnover rate ................................................. 17% 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. (o) The return is non-annualized. + The returns do not include sales charges. ================================================================================ See accompanying notes to financial statements. 92 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.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ..................................... $ 13.88 $ 15.20 -------- -------- Income (loss) from investment operations: Net investment income ................................................. 0.01** 0.07** Net realized and unrealized loss ...................................... (1.43) (0.66) -------- -------- Total loss from investment operations .............................. (1.42) (0.59) -------- -------- Less distributions: Distributions from net investment income .............................. (0.10) (0.04) Distributions from net realized gains ................................. (0.38) (0.69) -------- -------- Total distributions ................................................ (0.48) (0.73) -------- -------- Net asset value, end of period ........................................... $ 11.98 $ 13.88 ======== ======== Total return+ ............................................................ (10.26)%(o) (4.18)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ................................... $ 290 $ 70 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .................. 2.00%*** 1.97%*** After expense reimbursement and earnings credits ................... 1.80%*** 1.80%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits .................. (0.01)%*** 0.56%*** After expense reimbursement and earnings credits ................... 0.19%*** 0.73%*** Portfolio turnover rate ............................................... 17% 60% - --------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 --------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................. $ 14.07 $ 16.07 $ 16.07 $ 21.48 $ 19.91 $ 17.64 -------- -------- -------- -------- --------- -------- Income (loss) from investment operations: Net investment income ............................. 0.08** 0.12** 0.12** 0.16** 0.17** 0.19 Net realized and unrealized gain (loss) ........... (1.45) (1.39) 1.57 (3.75) 2.67 3.39 -------- -------- -------- -------- --------- -------- Total income (loss) from investment operations ....................... (1.37) (1.27) 1.69 (3.59) 2.84 3.58 -------- -------- -------- -------- --------- -------- Less distributions: Distributions from net investment income .......... (0.14) (0.04) (0.34) (0.05) (0.15) (0.18) Distributions from net realized gains ............. (0.38) (0.69) (1.35) (1.77) (1.12) (1.13) -------- -------- -------- -------- --------- -------- Total distributions ............................ (0.52) (0.73) (1.69) (1.82) (1.27) (1.31) -------- -------- -------- -------- --------- -------- Net asset value, end of period ....................... $ 12.18 $ 14.07 $ 16.07 $ 16.07 $ 21.48 $ 19.91 ======== ======== ======== ======== ========= ======== Total return++ ....................................... (9.79)%(o) (8.17)% 10.88% (17.00)% 15.22% 21.48% Ratios/Supplemental data: Net assets, end of period (in 000s) ............... $ 78,939 $ 87,710 $125,997 $167,870 $713,321 $605,768 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 1.03%*** 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% 0.80% Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ........................ 0.96%*** 0.66% 0.62% 0.89% 0.82% 1.12% After expense reimbursement and earnings credits ........................ 1.19%*** 0.79% 0.74% 0.93% 0.82% 1.12% Portfolio turnover rate ........................... 17% 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ Class Y does not have sales charges. ================================================================================ See accompanying notes to financial statements. 93 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.
SIX MONTHS ENDED YEAR ENDED JUNE 30, FOR THE DECEMBER 31, 2002 ----------------------------------- PERIOD ENDED CLASS A (UNAUDITED) 2002 2001 2000 JUNE 30, 1999* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ..................... $ 6.38 $ 8.90 $ 15.20 $ 13.88 $ 11.84 -------- -------- ------- ------- ------- Income (loss) from investment operations: Net investment loss ................................... 0.00** (0.02)** (0.07) (0.02)** (0.01) Net realized and unrealized gain (loss) ............... (0.68) (2.45) (4.32) 2.29 2.05 -------- -------- ------- ------- ------- Total income (loss) from investment operations .. (0.68) (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 ........................... $ 5.70 $ 6.38 $ 8.90 $ 15.20 $ 13.88 ======== ======== ======= ======= ======= Total return+ ............................................ (10.66)%(o) (27.89)% (31.59)% 17.18 % 17.23%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ................... $ 920 $ 1,155 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .. 4.07%*** 2.51% 1.59% 2.11% 2.63%*** After expense reimbursement and earnings credits ... 1.05%*** 1.05% 1.05% 1.05% 1.05%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits .. (2.90)%*** (1.71)% (0.91)% (1.22)% (1.51)%*** After expense reimbursement and earnings credits ... 0.12%*** (0.25)% (0.37)% (0.16)% 0.07%*** Portfolio turnover rate ............................... 42% 93% 56% 86% 51% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002++ - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ....................................... $ 6.36 $ 7.86 -------- -------- Income (loss) from investment operations: Net investment loss ..................................................... (0.02)** (0.05)** Net realized and unrealized loss ........................................ (0.68) (1.40) -------- -------- Total loss from investment operations ............................. (0.70) (1.45) -------- -------- Less distributions: Distributions from net realized gains ................................... -- (0.05) -------- -------- Net asset value, end of period ............................................. $ 5.66 $ 6.36 ======== ======== Total return+ .............................................................. (11.01)%(o) (18.61)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ..................................... $ 153 $ 115 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .................... 4.86%*** 3.06%*** After expense reimbursement and earnings credits ..................... 1.80%*** 1.80%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits .................... (3.69)%*** (2.28)%*** After expense reimbursement and earnings credits ..................... (0.63)%*** (1.02)%*** Portfolio turnover rate ................................................. 42% 93% - --------------------------------------------------------------------------------------------------------------------
* For the period December 31, 1998 (commencement of operations) through June 30, 1999. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. (o) The return is non-annualized. + The returns do not include sales charges. ++ For the period November 7, 2001 (commencement of reissuance) through June 30, 2002. ================================================================================ See accompanying notes to financial statements. 94 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.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ........................................ $ 6.35 $ 8.18 -------- -------- Income (loss) from investment operations: Net investment loss ...................................................... (0.02)** (0.05)** Net realized and unrealized loss ......................................... (0.67) (1.73) -------- -------- Total loss from investment operations .............................. (0.69) (1.78) -------- -------- Less distributions: Distributions from net realized gains .................................... -- (0.05) -------- -------- Net asset value, end of period .............................................. $ 5.66 $ 6.35 ======== ======== Total return+ ............................................................... (10.87)%(o) (21.91)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ...................................... $ 282 $ 572 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ..................... 4.77%*** 3.22%*** After expense reimbursement and earnings credits ...................... 1.80%*** 1.80%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ..................... (3.60)%*** (2.44)%*** After expense reimbursement and earnings credits ...................... (0.63)%*** (1.02)%*** Portfolio turnover rate .................................................. 42% 93% - ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS ENDED YEAR ENDED JUNE 30, ENDED YEAR ENDED DECEMBER 31, 2002 ------------------------------------ JUNE 30, DECEMBER 31, CLASS Y (UNAUDITED) 2002 2001 2000 1999(a) 1998(b) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............ $ 6.47 $ 8.99 $ 15.28 $ 13.91 $ 11.84 $ 9.92 -------- -------- ------- -------- ------- ------- Income (loss) from investment operations: Net investment income (loss) ................. 0.01** --** (0.01) 0.03** 0.02 0.06 Net realized and unrealized gain (loss) ...... (0.69) (2.47) (4.37) 2.29 2.05 2.38 -------- -------- ------- -------- ------- ------- Total income (loss) from investment operations ........................... (0.68) (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 .................. $ 5.79 $ 6.47 $ 8.99 $ 15.28 $ 13.91 $ 11.84 ======== ======== ======= ======== ======= ======= Total return++ .................................. (10.51)%(o) (27.61)% (31.33)% 17.52% 17.48%(o) 24.90% Ratios/Supplemental data: Net assets, end of period (in 000s) .......... $ 1,912 $ 2,291 $ 3,299 $ 5,885 $ 2,947 $ 4,147 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................ 3.82%*** 2.14% 1.34% 1.86% 2.38%*** 2.76% After expense reimbursement and earnings credits ........................ 0.80%*** 0.80% 0.80% 0.80% 0.80%*** 0.99% Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ........................ (2.65)%*** (1.39)% (0.66)% (0.97)% (1.26)%*** (1.40)% After expense reimbursement and earnings credits ........................ 0.37%*** (0.05)% (0.12)% 0.09% 0.32%*** 0.37% Portfolio turnover rate ...................... 42% 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ 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. 95 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.
SIX MONTHS ENDED YEAR ENDED JUNE 30, FOR THE DECEMBER 31, 2002 ----------------------------------- PERIOD ENDED CLASS A (UNAUDITED) 2002 2001 2000 JUNE 30, 1999* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ..................... $ 9.79 $ 11.76 $ 16.20 $ 9.16 $ 8.80 -------- -------- -------- ------- -------- Income (loss) from investment operations: Net investment loss ................................... (0.04)** (0.11)** (0.09) (0.08)** (0.04) Net realized and unrealized gain (loss) ............... (1.10) (1.42) (1.52) 7.12 0.40 -------- -------- -------- ------- -------- Total income (loss) from investment operations .. (1.14) (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 ........................... $ 8.65 $ 9.79 $ 11.76 $ 16.20 $ 9.16 ======== ======== ======== ======= ======== Total return+ ............................................ (11.64)%(o) (13.18)% (11.00)% 76.86% 4.09%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ................... $ 3,332 $ 1,789 $ 2 $ 2 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .. 1.70%*** 1.69% 1.48% 1.56% 1.57%*** After expense reimbursement and earnings credits ... 1.40%*** 1.40% 1.40% 1.40% 1.40%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits .. (1.22)%*** (1.35)% (0.87)% (1.01)% (0.87)%*** After expense reimbursement and earnings credits ... (0.92)%*** (1.06)% (0.79)% (0.85)% (0.70)%*** Portfolio turnover rate ............................... 27% 71% 93% 104% 71% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002++ - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ...................................... $ 9.75 $ 10.18 -------- ------- Income (loss) from investment operations: Net investment loss .................................................... (0.07)** (0.11)** Net realized and unrealized loss ....................................... (1.10) 0.12 -------- ------- Total income (loss) from investment operations ................... (1.17) 0.01 -------- ------- Less distributions: Distributions from net realized gains .................................. -- (0.44) -------- ------- Net asset value, end of period ............................................ $ 8.58 $ 9.75 ======== ======= Total return+ ............................................................. (12.00)%(o) (0.11)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .................................... $ 701 $ 656 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ................... 2.47%*** 2.46%*** After expense reimbursement and earnings credits .................... 2.15%*** 2.15%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ................... (1.99)%*** (1.93)%*** After expense reimbursement and earnings credits .................... (1.67)%*** (1.62)%*** Portfolio turnover rate ................................................ 27% 71% - --------------------------------------------------------------------------------------------------------------------
* 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. (o) The return is non-annualized. + The returns do not include sales charges. ================================================================================ See accompanying notes to financial statements. 96 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.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ........................................ $ 9.74 $ 10.37 -------- ------- Income (loss) from investment operations: Net investment loss ...................................................... (0.07)** (0.10)** Net realized and unrealized loss ......................................... (1.10) (0.09) -------- ------- Total loss from investment operations .............................. (1.17) (0.19) -------- ------- Less distributions: Distributions from net realized gains .................................... -- (0.44) -------- ------- Net asset value, end of period .............................................. $ 8.57 $ 9.74 ======== ======= Total return+ ............................................................... (12.01)%(o) (2.04)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ...................................... $ 635 $ 410 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ..................... 2.43%*** 2.46%*** After expense reimbursement and earnings credits ...................... 2.15%*** 2.15%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ..................... (1.95)%*** (1.90)%*** After expense reimbursement and earnings credits ...................... (1.67)%*** (1.59)%*** Portfolio turnover rate .................................................. 27% 71% - ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS ENDED YEAR ENDED JUNE 30, ENDED YEAR ENDED DECEMBER 31, 2002 ------------------------------------ JUNE 30, DECEMBER 31, CLASS Y (UNAUDITED) 2002 2001 2000 1999(a) 1998(b) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ........... $ 9.92 $ 11.86 $ 16.27 $ 9.18 $ 8.80 $ 9.44 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment loss ......................... (0.03) (0.09)** (0.07) (0.03)** (0.02) (0.02) Net realized and unrealized gain (loss) ..... (1.12) (1.41) (1.51) 7.12 0.40 (0.57) -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ............... (1.15) (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 ................. $ 8.77 $ 9.92 $ 11.86 $ 16.27 $ 9.18 $ 8.80 ======== ======== ======== ========= ======== ======== Total return++ ................................. (11.59)%(o) (12.90)% (10.74)% 77.23% 4.32%(o) (6.70)% Ratios/Supplemental data: Net assets, end of period (in 000s) ......... $ 30,683 $ 36,318 $ 44,057 $ 50,975 $ 35,211 $ 22,607 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ....................... 1.49%*** 1.41% 1.23% 1.31% 1.32%*** 1.69% After expense reimbursement and earnings credits ....................... 1.15%*** 1.15% 1.15% 1.15% 1.15%*** 1.20% Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ....................... (1.00)%*** (1.07)% (0.62)% (0.76)% (0.62)%*** (0.76)% After expense reimbursement and earnings credits ....................... (0.66)%*** (0.81)% (0.54)% (0.60)% (0.45)%*** (0.27)% Portfolio turnover rate ..................... 27% 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ 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. 97 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.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 -------------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period .............. $ 10.51 $ 10.33 $ 9.99 $ 10.30 $ 10.58 $ 10.24 -------- ------- ------- ------- ------- ------- Income from investment operations: Net investment income .......................... 0.23** 0.53** 0.62** 0.58** 0.57** 0.61 Net realized and unrealized gain (loss) ........ 0.33 0.32 0.41 (0.25) (0.26) 0.42 -------- ------- ------- ------- ------- ------- Total income from investment operations .. 0.56 0.85 1.03 0.33 0.31 1.03 -------- ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income ....... (0.25) (0.67) (0.69) (0.64) (0.44) (0.55) Distributions from net realized gains .......... -- -- -- -- (0.15) (0.14) -------- ------- ------- ------- ------- ------- Total distributions ...................... (0.25) (0.67) (0.69) (0.64) (0.59) (0.69) -------- ------- ------- ------- ------- ------- Net asset value, end of period .................... $ 10.82 $ 10.51 $ 10.33 $ 9.99 $ 10.30 $ 10.58 ======== ======== ======= ======= ======= ======= Total return+ ..................................... 5.42%(o) 8.41% 10.56% 3.29% 2.88% 10.30% Ratios/Supplemental data: Net assets, end of period (in 000s) ............ $ 23,636 $ 18,558 $ 123 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .......................... 1.01%*** 1.21% 0.98% 0.92% 0.86% 1.09% After expense reimbursement and earnings credits .......................... 0.85%*** 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 .......................... 4.15%*** 4.68% 5.86% 5.87% 5.17% 5.36% After expense reimbursement and earnings credits .......................... 4.31%*** 5.03% 5.99% 5.94% 5.18% 5.60% Portfolio turnover rate ........................ 71% 452% 314% 170% 260% 198% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ............................................... $ 10.50 $ 10.76 ------- ------- Income from investment operations: Net investment income ........................................................... 0.19** 0.29** Net realized and unrealized gain (loss) ......................................... 0.33 (0.22) ------- ------- Total income from investment operations ................................... 0.52 0.07 ------- ------- Less distributions: Distributions from net investment income ........................................ (0.22) (0.33) ------- ------- Net asset value, end of period ..................................................... $ 10.80 $ 10.50 ======= ======= Total return+ ...................................................................... 4.96%(o) 0.70%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ............................................. $ 3,329 $ 1,405 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............................ 1.77%*** 1.96%*** After expense reimbursement and earnings credits ............................. 1.60%*** 1.60%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............................ 3.39%*** 3.93%*** After expense reimbursement and earnings credits ............................. 3.56%*** 4.29%*** Portfolio turnover rate ......................................................... 71% 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. (o) 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. 85%. See accompanying notes to financial statements. 98 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.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................................ $ 10.50 $ 10.77 ------- ------- Income from investment operations: Net investment income ............................................................ 0.21** 0.31** Net realized and unrealized gain (loss) .......................................... 0.33 (0.24) ------- ------- Total income from investment operations .................................... 0.54 0.07 ------- ------- Less distributions: Distributions from net investment income ......................................... (0.23) (0.34) ------- ------- Net asset value, end of period ...................................................... $ 10.81 $ 10.50 ======= ======= Total return+ ....................................................................... 5.15%(o) 0.72%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .............................................. $ 1,743 $ 1,143 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............................. 1.52%*** 1.61%*** After expense reimbursement and earnings credits .............................. 1.35%*** 1.35%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............................. 3.64%*** 4.32%*** After expense reimbursement and earnings credits .............................. 3.81%*** 4.58%*** Portfolio turnover rate .......................................................... 71% 452% - ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 -------------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............. $ 10.53 $ 10.35 $ 10.00 $ 10.28 $ 10.58 $ 10.24 -------- ------- ------- ------- ------- ------- Income from investment operations: Net investment income ......................... 0.25** 0.56** 0.64** 0.62** 0.58** 0.53 Net realized and unrealized gain (loss) ....... 0.32 0.31 0.42 (0.25) (0.26) 0.53 -------- ------- ------- ------- ------- ------- Total income from investment operations ....... 0.57 0.87 1.06 0.37 0.32 1.06 -------- ------- ------- ------- ------- ------- Less distributions: Distributions from net investment income ...... (0.26) (0.69) (0.71) (0.65) (0.47) (0.58) Distributions from net realized gains ......... -- -- -- -- (0.15) (0.14) -------- ------- ------- ------- ------- ------- Total distributions ........................... (0.26) (0.69) (0.71) (0.65) (0.62) (0.72) -------- ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 10.84 $ 10.53 $ 10.35 $ 10.00 $ 10.28 $ 10.58 ======= ======= ======= ======= ======= ======= Total return++ ................................... 5.54%(o) 8.59% 10.86% 3.74% 2.97% 10.60% Ratios/Supplemental data: Net assets, end of period (in 000s) ........... $66,404 $59,740 $62,514 $58,121 $92,030 $38,874 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ......................... 0.77%*** 0.80% 0.73% 0.67% 0.61% 0.84% After expense reimbursement and earnings credits ............................ 0.60%*** 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 ......................... 4.39%*** 5.10% 6.11% 6.12% 5.42% 5.61% After expense reimbursement and earnings credits ......................... 4.56%*** 5.26% 6.24% 6.19% 5.43% 5.85% Portfolio turnover rate ....................... 71% 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ 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. 99 UBS HIGH YIELD FUND--FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED YEAR ENDED JUNE 30, FOR THE DECEMBER 31, 2002 --------------------------------- PERIOD ENDED CLASS A (UNAUDITED) 2002 2001 2000 JUNE 30, 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ....................... $ 6.36 $ 7.87 $ 9.18 $ 9.95 $ 9.98 -------- -------- ------- ------- ------- Income (loss) from investment operations: Net investment income ................................... 0.29** 0.76** 0.85** 0.90** 0.42** Net realized and unrealized loss ........................ (0.02) (0.96) (1.08) (0.90) (0.15) -------- -------- ------- ------- ------- Total income (loss) from investment operations ... 0.27 (0.20) (0.23) -- 0.27 -------- -------- ------- ------- ------- Less distributions: Distributions from net investment income ................ (0.31) (1.31) (1.08) (0.70) (0.30) Distributions from net realized gains ................... -- -- -- (0.07) -- -------- -------- ------- ------- ------- Total distributions ............................... (0.31) (1.31) (1.08) (0.77) (0.30) -------- -------- ------- ------- ------- Net asset value, end of period ............................. $ 6.32 $ 6.36 $ 7.87 $ 9.18 $ 9.95 ======== ======== ======= ======= ======= Total return+ .............................................. 4.37%(o) (3.01)% (2.28)% (0.13)% 2.71%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ..................... $ 66,255 $ 65,832 $ 1 $ 1 $ 1 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .... 1.33%*** 1.26% 1.14% 1.11% 1.08%*** After expense reimbursement and earnings credits ..... 0.95%*** 0.95% 0.97%++ 0.95% 0.95%*** Ratio of net investment income to average net assets: ... Before expense reimbursement and earnings credits .... 8.96%*** 10.71% 9.65% 9.06% 8.29%*** After expense reimbursement and earnings credits ..... 9.34%*** 11.02% 9.82% 9.22% 8.42%*** Portfolio turnover rate ................................. 19% 120% 87% 73% 77% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................................ $ 6.35 $ 7.02 -------- ------- Income (loss) from investment operations: Net investment income ............................................................ 0.27** 0.45** Net realized and unrealized loss ................................................. (0.02) (0.61) -------- ------- Total income (loss) from investment operations ............................. 0.25 (0.16) -------- ------- Less distributions: Distributions from net investment income ......................................... (0.28) (0.51) -------- ------- Net asset value, end of period ...................................................... $ 6.32 $ 6.35 ======== ======= Total return+ ....................................................................... 4.13%(o) (2.70)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .............................................. $ 14,155 $15,692 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............................. 2.08%*** 2.05%*** After expense reimbursement and earnings credits .............................. 1.70%*** 1.70%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............................. 8.21%*** 9.88%*** After expense reimbursement and earnings credits .............................. 8.59%*** 10.23%*** Portfolio turnover rate .......................................................... 19% 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) through June 30, 2002. ** The net investment income per share data was determined by using average shares outstanding throughout the period. *** Annualized. (o) 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. 100 UBS HIGH YIELD FUND--FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............................................... $ 6.35 $ 7.02 ------- ------- Income (loss) from investment operations: Net investment income ........................................................... 0.28** 0.46** Net realized and unrealized loss ................................................ (0.02) (0.61) ------- ------- Total income (loss) from investment operations ............................ 0.26 (0.15) ------- ------- Less distributions: Distributions from net investment income ........................................ (0.29) (0.52) ------- ------- Net asset value, end of period ..................................................... $ 6.32 $ 6.35 ======= ======= Total return+ ...................................................................... 4.27%(o) (2.54)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) ............................................. $17,739 $17,947 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............................ 1.83%*** 1.79%*** After expense reimbursement and earnings credits ............................. 1.45%*** 1.45%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............................ 8.46%*** 10.15%*** After expense reimbursement and earnings credits ............................. 8.84%*** 10.49%*** Portfolio turnover rate ......................................................... 19% 120% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS ENDED YEAR ENDED JUNE 30, ENDED YEAR ENDED DECEMBER 31, 2002 ----------------------------------- JUNE 30, DECEMBER 31, CLASS Y (UNAUDITED) 2002 2001 2000 1999(a) 1998(b) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............... $ 6.38 $ 7.90 $ 9.19 $ 9.96 $ 9.98 $ 10.05 --------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income ........................... 0.30** 0.81** 0.88** 0.91** 0.44** 7.30 Net realized and unrealized gain (loss) ......... (0.01) (1.01) (1.08) (0.90) (0.15) 0.02 --------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ................... 0.29 (0.20) (0.20) 0.01 0.29 7.32 --------- -------- -------- -------- -------- -------- Less distributions: Distributions from net investment income ........ (0.31) (1.32) (1.09) (0.71) (0.31) (7.33) Distributions from net realized gains ........... -- -- -- (0.07) -- (0.06) --------- -------- -------- -------- -------- -------- Total distributions ....................... (0.31) (1.32) (1.09) (0.78) (0.31) (7.39) --------- -------- -------- -------- -------- -------- Net asset value, end of period ..................... $ 6.36 $ 6.38 $ 7.90 $ 9.19 $ 9.96 $ 9.98 ========= ======== ======== ======== ======== ======== Total return++ ..................................... 4.80%(o) (2.98)% (1.83)% 0.02% 2.91%(o) 7.75% Ratios/Supplemental data: Net assets, end of period (in 000s) ............. $ 67,855 $ 40,120 $ 54,560 $ 50,845 $ 60,044 $ 34,900 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ........................... 1.10%*** 1.02% 0.89% 0.86% 0.83%*** 1.59% After expense reimbursement and earnings credits ........................... 0.70%*** 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 ........................... 9.19%*** 10.77% 9.90% 9.31% 8.54%*** 7.38% After expense reimbursement and earnings credits ........................... 9.59%*** 11.09% 10.07% 9.47% 8.67%*** 8.08% Portfolio turnover rate ......................... 19% 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. (o) The return is non-annualized. + The returns do not include 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. ++ Class Y does not have sales charges. # The ratio of net operating expenses to average net assets for Class Y was 0. 70%. N/A = Information is not available for periods prior to sreorganization. See accompanying notes to financial statements. 101 UBS INTERNATIONAL EQUITY FUND--FINANCIAL HIGHLIGHTS THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 ----------------------------------------------------------- CLASS A (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period .............. $ 8.08 $ 10.61 $ 13.57 $ 12.30 $ 12.14 $ 12.59 -------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income .......................... 0.01** 0.13** 0.00** 0.08** 0.12 0.16 Net realized and unrealized gain (loss) ........ (1.20) (0.79) (2.15) 1.33 0.27 0.29 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ............................. (1.19) (0.66) (2.15) 1.41 0.39 0.45 -------- -------- -------- -------- -------- -------- Less distributions: Distributions from net investment income ....... (0.31) (0.27) (0.04) -- (0.11) (0.16) Distributions from net realized gains .......... (0.01) (1.60) (0.77) (0.14) (0.12) (0.74) -------- -------- -------- -------- -------- -------- Total distributions ...................... (0.32) (1.87) (0.81) (0.14) (0.23) (0.90) -------- -------- -------- -------- -------- -------- Net asset value, end of period .................... $ 6.57 $ 8.08 $ 10.61 $ 13.57 $ 12.30 $ 12.14 ======== ======== ======== ======== ======== ======== Total return+ ..................................... (14.69)%(o) (5.91)% (16.37)% 11.51% 3.30% 4.51% Ratios/Supplemental data: Net assets, end of period (in 000s) ............ $ 2,301 $ 2,599 $ 301 $ 1 $ 15 $ 11 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits .......................... 1.45%*** 1.41% 1.31% 1.25% 1.24% 1.25% After expense reimbursement and earnings credits .......................... 1.25%*** 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 .......................... 0.22%*** 1.38% 0.77% 0.64% 1.10% 1.27% After expense reimbursement and earnings credits .......................... 0.42%*** 1.54% 0.80% 0.64% 1.10% 1.27% Portfolio turnover rate ........................ 48% 82% 62% 59% 74% 49% - ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ................................................ $ 8.05 $ 7.75 -------- -------- Income (loss) from investment operations: Net investment income (loss) ..................................................... (0.02)** 0.05** Net realized and unrealized gain (loss) .......................................... (1.19) 0.25 -------- -------- Total income (loss) from investment operations ............................. (1.21) 0.30 -------- -------- Less distributions: Distributions from net investment income ......................................... (0.30) -- Distributions from net realized gains ............................................ (0.01) -- -------- -------- Total distributions ........................................................ (0.31) -- -------- -------- Net asset value, end of period ...................................................... $ 6.53 $ 8.05 ======== ======== Total return+ ....................................................................... (15.02)%(o) 3.87%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .............................................. $ 282 $ 120 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............................. 2.13%*** 2.05%*** After expense reimbursement and earnings credits .............................. 2.00%*** 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............................. (0.46)%*** 1.45%*** After expense reimbursement and earnings credits .............................. (0.33)%*** 1.50%*** Portfolio turnover rate .......................................................... 48% 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. (o) 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 1.24%. # The ratio of net operating expenses to average net assets for Class A was 1.25%. See accompanying notes to financial statements. 102 - -------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................ $ 8.05 $ 7.75 -------- ------- Income (loss) from investment operations: Net investment income (loss) ..................................... (0.01)** 0.04** Net realized and unrealized gain (loss) .......................... (1.22) 0.26 -------- ------- Total income (loss) from investment operations ............. (1.23) 0.30 -------- ------- Less distributions: Distributions from net investment income ......................... (0.29) -- Distributions from net realized gains ............................ (0.01) -- -------- ------- Total distributions ................................................. (0.30) -- -------- ------- Net asset value, end of period ...................................... $ 6.52 $ 8.05 ======== ======= Total return+ ....................................................... (15.23)%(o) 3.87%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .............................. $ 271 $ 183 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............. 2.16%*** 2.19%*** After expense reimbursement and earnings credits .............. 2.00%*** 2.00%*** Ratio of net investment income to average net assets: Before expense reimbursement and earnings credits ............. (0.49)%*** 0.91%*** After expense reimbursement and earnings credits .............. (0.33)%*** 1.10%*** Portfolio turnover rate .......................................... 48% 82% - --------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2002 ---------------------------------------------------------------- CLASS Y (UNAUDITED) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period ............. $ 8.12 $ 10.64 $ 13.57 $ 12.34 $ 12.15 $ 12.59 -------- ------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income ......................... 0.02** 0.09** 0.13** 0.11** 0.16 0.18 Net realized and unrealized gain (loss) ....... (1.21) (0.74) (2.25) 1.33 0.27 0.30 -------- ------- -------- -------- -------- -------- Total income (loss) from investment operations ............................ (1.19) (0.65) (2.12) 1.44 0.43 0.48 -------- ------- -------- -------- -------- -------- Less distributions: Distributions from net investment income ...... (0.33) (0.27) (0.04) (0.07) (0.12) (0.18) Distributions from net realized gains ......... (0.01) (1.60) (0.77) (0.14) (0.12) (0.74) -------- ------- -------- -------- -------- -------- Total distributions .............................. (0.34) (1.87) (0.81) (0.21) (0.24) (0.92) -------- ------- -------- -------- -------- -------- Net asset value, end of period ................... $ 6.59 $ 8.12 $ 10.64 $ 13.57 $ 12.34 $ 12.15 ======== ======= ======== ======== ======== ======== Total return++ ................................... (14.65)%(o) (5.78)% (16.15)% 11.76% 3.65% 4.78% Ratios/Supplemental data: Net assets, end of period (in 000s) ........... $ 85,413 $97,851 $192,408 $411,985 $490,322 $439,329 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ......................... 1.19%*** 1.13% 1.06% 1.00% 0.99% 1.00% After expense reimbursement and earnings credits ......................... 1.00%*** 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 ......................... 0.48%*** 0.92% 1.02% 0.89% 1.35% 1.52% After expense reimbursement and earnings credits ......................... 0.67%*** 1.05% 1.05% 0.89% 1.35% 1.52% Portfolio turnover rate ....................... 48% 82% 62% 59% 74% 49% - ------------------------------------------------------------------------------------------------------------------------------------
* For the period December 26, 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ Class Y does not have sales charges. # The ratio of net operating expenses to average net assets for Class Y was 0.99%. ## The ratio of net operating expenses to average net assets for Class Y was 1.00%. - -------------------------------------------------------------------------------- See accompanying notes to financial statements. 103 - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS A (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................ $ 9.37 $ 9.96 -------- ------- Income (loss) from investment operations: Net investment income ............................................ 0.06** 0.05** Net realized and unrealized gain (loss) .......................... (1.02) (0.64) -------- ------- Total loss from investment operations ...................... (0.96) (0.59) -------- ------- Less distributions: Distributions from net investment income ......................... (0.05) -- Distributions from net realized gains ............................ (0.06) -- -------- ------- Total distributions ................................................. (0.11) -- -------- ------- Net asset value, end of period ...................................... $ 8.30 $ 9.37 ======== ======= Total return ........................................................ (10.31)%++ (5.92)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) .............................. $ 1,218 $ 751 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............. 3.74%*** 3.82%*** After expense reimbursement and earnings credits .............. 1.10%*** 1.10%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ............. (1.23)%*** (1.85)%*** After expense reimbursement and earnings credits .............. 1.41%*** 0.87%*** Portfolio turnover rate .......................................... 36% 39% - --------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS B (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................ $ 9.32 $ 9.62 -------- ------- Income (loss) from investment operations: Net investment income ............................................ 0.03** 0.01** Net realized and unrealized loss ................................. (1.02) (0.31) -------- ------- Total loss from investment operations ...................... (0.99) (0.30) -------- ------- Less distributions: Distributions from net investment income ......................... (0.03) -- Distributions from net realized gains ............................ (0.06) -- -------- ------- Total distributions ................................................. (0.09) -- -------- ------- Net asset value, end of period ...................................... $ 8.24 $ 9.32 ======== ======= Total return ........................................................ (10.69)%++ (3.12)%++ Ratios/Supplemental data: Net assets, end of period (in 000s) .............................. $ 754 $ 301 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............. 4.37%*** 4.66%*** After expense reimbursement and earnings credits .............. 1.85%*** 1.85%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ............. (1.86)%*** (2.72)%*** After expense reimbursement and earnings credits .............. 0.66%*** 0.09%*** Portfolio turnover rate .......................................... 36% 39% - ---------------------------------------------------------------------------------------------------------
* For the periods December 7, 2001 and November 8, 2001 (commencement of issuance) 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. - -------------------------------------------------------------------------------- 104 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- UBS U.S. VALUE EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD PRESENTED.
SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS C (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................ $ 9.33 $ 9.73 -------- ------- Income (loss) from investment operations: Net investment income ............................................ 0.03** 0.00** Net realized and unrealized loss ................................. (1.02) (0.40) -------- ------- Total loss from investment operations ...................... (0.99) (0.40) -------- ------- Less distributions: Distributions from net investment income ......................... (0.03) -- Distributions from net realized gains ............................ (0.06) -- -------- ------- Total distributions ................................................. (0.09) -- -------- ------- Net asset value, end of period ...................................... $ 8.25 $ 9.33 ======== ======= Total return+ ....................................................... (10.64)%(o) (4.11)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .............................. $ 767 $ 234 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............. 3.67%*** 4.58%*** After expense reimbursement and earnings credits .............. 1.85%*** 1.85%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ............. (1.16)%*** (2.68)%*** After expense reimbursement and earnings credits .............. 0.66%*** 0.05%*** Portfolio turnover rate .......................................... 36% 39% - --------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED FOR THE DECEMBER 31, 2002 PERIOD ENDED CLASS Y (UNAUDITED) JUNE 30, 2002* - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period ................................ $ 9.38 $ 10.00 -------- -------- Income (loss) from investment operations: Net investment income ............................................ 0.07** 0.11** Net realized and unrealized loss ................................. (1.03) (0.73) -------- -------- Total loss from investment operations ...................... (0.96) (0.62) -------- -------- Less distributions: Distributions from net investment income ......................... (0.06) -- Distributions from net realized gains ............................ (0.06) -- -------- -------- Total distributions ................................................. (0.12) -- -------- -------- Net asset value, end of period ...................................... $ 8.30 $ 9.38 ======== ======== Total return++ (10.25)%(o) (6.20)%(o) Ratios/Supplemental data: Net assets, end of period (in 000s) .............................. $ 4,442 $ 2,819 Ratio of expenses to average net assets: Before expense reimbursement and earnings credits ............. 3.71%*** 3.15%*** After expense reimbursement and earnings credits .............. 0.85%*** 0.85%*** Ratio of net investment income (loss) to average net assets: Before expense reimbursement and earnings credits ............. (1.20)%*** (1.17)%*** After expense reimbursement and earnings credits .............. 1.66%*** 1.13%*** Portfolio turnover rate .......................................... 36% 39% - ---------------------------------------------------------------------------------------------------------
* For the periods December 12, 2001 and June 29, 2001 (commencement of issuance) 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. (o) The return is non-annualized. + The returns do not include sales charges. ++ Class Y does not have sales charges. - -------------------------------------------------------------------------------- See accompanying notes to financial statements. 105 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The UBS 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 eleven series: UBS Global Allocation Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. 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 (each a "Fund" and collectively, the "Funds"). 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 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. 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. Differences in dividends per share between the classes are due to service and distribution related expenses. - -------------------------------------------------------------------------------- 106 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 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. Class-specific expenses are charged directly to the applicable class of shares. 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, if any, 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. (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 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. (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 Bond Fund ...................................... 0.75 UBS U.S. Balanced Fund .................................... 0.70 UBS U.S. 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. Investment advisory fees and other transactions for the period ended December 31, 2002, were as follows:
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% $676,514 $ -- UBS Global Equity Fund ............... 1.25 2.00 2.00 1.00 215,814 63,133 UBS Global Bond Fund ................. 1.15 1.90 1.65 0.90 137,851 94,516 UBS U.S. Balanced Fund ............... 1.05 1.80 1.80 0.80 83,867 70,771 UBS U.S. Equity Fund ................. 1.05 1.80 1.80 0.80 321,475 106,779 UBS U.S. Large Cap Growth Fund ....... 1.05 1.80 1.80 0.80 13,055 56,178 UBS U.S. Small Cap Growth Fund ....... 1.40 2.15 2.15 1.15 183,751 61,471 UBS U.S. Bond Fund ................... 0.85 1.60 1.35 0.60 216,750 72,996 UBS High Yield Fund .................. 0.95 1.70 1.45 0.70 453,617 287,767 UBS International Equity Fund ........ 1.25 2.00 2.00 1.00 356,632 86,078 UBS U.S. Value Equity Fund ........... 1.10 1.85 1.85 0.85 18,777 72,426
- -------------------------------------------------------------------------------- 107 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- The Funds may invest in shares of certain affiliated investment companies also sponsored by the Advisor. These investments represented approximately 24% of UBS Global Allocation Fund's net assets at December 31, 2002. Amounts relating to those investments at December 31, 2002 and for the period then ended, were as follows:
NET CHANGE IN SALES REALIZED NET UNREALIZED AFFILIATES PURCHASES PROCEEDS GAIN/(LOSS) GAIN/(LOSS) VALUE - ---------- ----------- ----------- ----------- -------------- ----------- UBS Small Cap Equity Relationship Fund ........... $ -- $ -- $ -- $(525,535) $ 4,175,398 UBS High Yield Relationship Fund ................. 5,700,000 -- -- 403,341 11,163,072 UBS Emerging Markets Equity Relationship Fund .... 2,000,000 -- -- (691,894) 10,808,510 UBS Emerging Markets Debt Relationship Fund ...... -- -- -- 337,591 3,557,096 UBS Supplementary Trust U.S. Cash Management Prime Fund ......................... 63,604,734 56,493,128 -- -- 15,738,641
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 Trust are reflected as interest income in the statements of operations. Amounts relating to those investments for the period ended December 31, 2002, were as follows:
% OF SALES INTEREST NET FUND PURCHASES PROCEEDS INCOME VALUE ASSETS - ---- ----------- ----------- -------- ----------- ------ UBS Global Allocation Fund ............ $63,604,734 $56,493,128 $73,485 $15,738,641 7.98% UBS Global Equity Fund ................ 14,958,820 14,380,303 15,297 1,493,820 2.64 UBS Global Bond Fund .................. 15,584,913 15,704,228 9,927 1,199,248 3.06 UBS U.S. Balanced Fund ................ 5,726,572 7,527,157 11,278 1,080,514 4.51 UBS U.S. Equity Fund .................. 16,361,490 16,372,706 22,904 1,764,323 2.10 UBS U.S. Large Cap Growth Fund ........ 430,319 384,334 124 45,985 1.41 UBS U.S. Small Cap Growth Fund ........ 8,608,500 10,477,205 14,434 1,234,438 3.49 UBS U.S. Bond Fund .................... 40,508,639 41,405,421 40,333 1,939,585 2.04 UBS High Yield Fund ................... 53,146,032 52,441,711 71,974 1,668,212 1.00 UBS International Equity Fund ......... 47,257,422 47,649,194 13,038 862,153 0.98 UBS U.S. Value Equity Fund ............ 273,188 209,843 209 63,345 0.88
The following Funds have incurred brokerage commissions with affiliated broker dealers as listed below. Amounts relating to those transactions at December 31,2002, were as follows: UBS UBS FUND WARBURG LLC PAINEWEBBER, INC. - ---- ----------- ----------------- UBS Global Allocation Fund ..................... $10,234 -- UBS Global Equity Fund ......................... 5,184 -- UBS U.S. Balanced Fund ......................... 1,321 -- UBS U.S. Equity Fund ........................... 19,216 -- UBS U.S. Large Cap Growth Fund ................. 395 $30 UBS U.S. Small Cap Growth Fund ................. 1,973 -- UBS U.S. Value Equity Fund ..................... 313 -- - -------------------------------------------------------------------------------- 108 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Investment transactions for the period ended December 31, 2002, excluding long-term U.S. government securities and short-term investments, were as follows: SALES FUND PURCHASES PROCEEDS - ---- ------------ ----------- UBS Global Allocation Fund ........................ $100,998,008 $69,381,351 UBS Global Equity Fund ............................ 18,960,658 13,287,124 UBS Global Bond Fund .............................. 19,197,489 18,088,001 UBS U.S. Balanced Fund ............................ 14,757,816 13,194,040 UBS U.S. Equity Fund .............................. 14,992,133 22,512,385 UBS U.S. Large Cap Growth Fund .................... 1,524,726 1,882,175 UBS U.S. Small Cap Growth Fund .................... 12,156,845 9,594,652 UBS U.S. Bond Fund ................................ 73,105,741 58,392,399 UBS High Yield Fund ............................... 54,878,206 26,791,476 UBS International Equity Fund ..................... 44,987,821 41,861,547 UBS U.S. Value Equity Fund ........................ 5,774,989 1,876,038 For the period ended December 31, 2002, purchases and sales of long-term U.S. government securities were as follows: SALES FUND PURCHASES PROCEEDS - ---- ---------- --------- UBS Global Allocation Fund ........................ $ 330,122 $ 197,566 UBS Global Bond Fund .............................. 48,430 49,703 UBS U.S. Balanced Fund ............................ 78,075 70,806 UBS U.S. Bond Fund ................................ 588,111 499,594 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 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 December 31, 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. - -------------------------------------------------------------------------------- 109 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 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 December 31, 2002, were as follows: MARKET CASH COLLATERAL MARKET VALUE OF VALUE OF RECEIVED FOR INVESTMENTS OF SECURITIES SECURITIES CASH COLLATERAL FUND LOANED LOANED RECEIVED - ---- ---------- --------------- --------------- UBS Global Allocation Fund ........ $6,496,147 $6,624,623 $6,624,623 UBS International Equity Fund ..... 6,133,780 6,350,170 6,350,170 7. DISTRIBUTION PLANS 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: UBS UBS UBS 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 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 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 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 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. Borrowings will be made for temporary purposes to fund redemptions. 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 December 31, 2002, were as follows: AVERAGE NUMBER OF DAYS INTEREST FUND BORROWINGS OUTSTANDING PAID - ---- ---------- -------------- -------- UBS Global Allocation Fund ........... $3,400,000 2 $403 UBS U.S. Equity Fund ................. 4,300,000 5 995 - -------------------------------------------------------------------------------- 110 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 10. SHARES OF BENEFICIAL INTEREST For the period ended December 31, 2002, transactions in shares of beneficial interest for each of the Funds were as follows:
NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS A SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund ............ 2,497,890 (198,434) 73,689 2,373,145 UBS Global Equity Fund ................ 160,007 (188,147) 40,211 12,071 UBS Global Bond Fund .................. 244,838 (166,506) 3,266 81,598 UBS U.S. Balanced Fund ................ 83,749 (35,017) 7,013 55,745 UBS U.S. Equity Fund .................. 317,061 (960,867) 10,981 (632,825) UBS U.S. Large Cap Growth Fund ........ 77,390 (96,997) -- (19,607) UBS U.S. Small Cap Growth Fund ........ 361,417 (159,015) -- 202,402 UBS U.S. Bond Fund .................... 1,500,108 (1,114,426) 33,567 419,249 UBS High Yield Fund ................... 1,272,108 (1,384,661) 232,287 119,734 UBS International Equity Fund ......... 215,544 (202,102) 15,407 28,849 UBS U.S. Value Equity Fund ............ 120,660 (55,710) 1,670 66,620 NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS B SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund ............ 658,232 (80,742) 16,398 593,888 UBS Global Equity Fund ................ 51,060 (87) 2,152 53,125 UBS Global Bond Fund .................. 78,860 (23,973) 774 55,661 UBS U.S. Balanced Fund ................ 165,369 (35,052) 3,507 133,824 UBS U.S. Equity Fund .................. 32,148 (12,895) 1,547 20,800 UBS U.S. Large Cap Growth Fund ........ 28,080 (19,214) -- 8,866 UBS U.S. Small Cap Growth Fund ........ 34,066 (19,679) -- 14,387 UBS U.S. Bond Fund .................... 235,796 (65,068) 3,681 174,409 UBS High Yield Fund ................... 134,950 (408,063) 42,746 (230,367) UBS International Equity Fund ......... 27,889 (1,558) 1,913 28,244 UBS U.S. Value Equity Fund ............ 83,581 (25,295) 923 59,209
- -------------------------------------------------------------------------------- 111 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - --------------------------------------------------------------------------------
NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS C SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund ............ 1,229,941 (95,948) 25,466 1,159,459 UBS Global Equity Fund ................ 92,776 (11,977) 2,655 83,454 UBS Global Bond Fund .................. 38,712 (2,996) 225 35,941 UBS U.S. Balanced Fund ................ 86,933 (7,217) 2,173 81,889 UBS U.S. Equity Fund .................. 20,217 (1,983) 897 19,131 UBS U.S. Large Cap Growth Fund ........ 26,968 (67,160) -- (40,192) UBS U.S. Small Cap Growth Fund ........ 36,818 (4,834) -- 31,984 UBS U.S. Bond Fund .................... 130,387 (79,994) 2,033 52,426 UBS High Yield Fund ................... 115,674 (193,716) 59,413 (18,629) UBS International Equity Fund ......... 25,088 (7,921) 1,615 18,782 UBS U.S. Value Equity Fund ............ 75,209 (7,604) 347 67,952 NET INCREASE (DECREASE) SHARES DIVIDENDS IN SHARES CLASS Y SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund ............ 2,087,733 (2,735,768) 441,776 (206,259) UBS Global Equity Fund ................ 1,365,660 (676,648) 118,545 807,557 UBS Global Bond Fund .................. 1,197,929 (1,391,159) 30,651 (162,579) UBS U.S. Balanced Fund ................ 226,471 (563,031) 48,527 (288,033) UBS U.S. Equity Fund .................. 701,015 (689,507) 234,917 246,425 UBS U.S. Large Cap Growth Fund ........ 3,864 (27,598) -- (23,734) UBS U.S. Small Cap Growth Fund ........ 722,470 (886,578) -- (164,108) UBS U.S. Bond Fund .................... 1,413,410 (1,101,081) 141,511 453,840 UBS High Yield Fund ................... 6,695,510 (2,696,801) 390,777 4,389,486 UBS International Equity Fund ......... 8,586,167 (8,274,998) 601,835 913,004 UBS U.S. Value Equity Fund ............ 245,293 (16,578) 5,752 234,467
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 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 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 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
- -------------------------------------------------------------------------------- 112 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - --------------------------------------------------------------------------------
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 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 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 ......... 16,034 (1,872) 787 14,949 UBS U.S. Value Equity Fund ............ 35,795 (3,479) -- 32,316 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 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 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 SHARES SOLD REPURCHASED REINVESTED OUTSTANDING - ------- ----------- ----------- ---------- ------------ UBS Global Allocation Fund ............ 6,074,539 (5,947,592) 880,082 1,007,029 UBS Global Equity Fund ................ 12,705,436 (13,129,371) 103,897 (320,038) 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 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
- -------------------------------------------------------------------------------- 113 - -------------------------------------------------------------------------------- THE UBS FUNDS -- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - --------------------------------------------------------------------------------
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 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 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 ............ -- -- -- --
11. REORGANIZATION At the close of business August 16, 2002, the UBS Global Biotech Fund and the UBS Global Technology Fund were liquidated, as approved by the Board of Trustees, at net assets values of $4.79 and $2.89, respectively. The financial statements of these Funds are not included herein. At the close of business on October 4, 2002, the UBS U.S. Value Equity Fund ("Acquiring Fund") acquired assets and liabilities of the UBS U.S. Large Cap Equity Fund ("Acquired Fund") by effecting a tax-free reorganization whereby UBS U.S. Value Equity Fund shares were exchanged for those of UBS U.S. Large Cap Equity 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:
UBS U.S. UBS U.S. LARGE CAP VALUE EQUITY FUND EQUITY FUND NET SHARES ACQUIRED SHARES NET UNREALIZED FUND ACQUIRED EXCHANGED ASSETS ISSUED ASSETS DEPRECIATION - ------------- ----------- --------- ----------- ---------- ------------ UBS U.S. Large Cap Equity Fund ....... $2,903,174 $(709,288) Class A .............................. 88,889 $ 524,863 70,357 Class B .............................. 25,429 149,087 20,132 Class C .............................. 93,477 549,128 74,042 Class Y .............................. 285,930 1,680,096 224,762
The UBS U.S. Value Equity Fund's net assets immediately before the reorganization were $3,199,099. - -------------------------------------------------------------------------------- 114 - -------------------------------------------------------------------------------- TRUSTEE INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- The Trust is a Delaware business trust. Under Delaware law, the Board has overall responsibility for managing the business and affairs of the Trust, including general supervision and review of its investment activities. The Trustees elect the officers of the Trust. who are responsible for administering the day-to-day operations of the Trust and the Funds. 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 HELD/ 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 Trustee Mr. Auch is retired. Prior thereto, Mr. Auch is a Mr. Auch is a Trustee of 6001 N. 62nd Place since 1994 he was Chairman and CEO of Chicago trustee of three Advisors Series Trust since Paradise Valley, Board of Options Exchange (1979-1986). investment 1997 (16 portfolios); Smith AZ 85253 He is also a Trustee of UBS companies Barney Fund Complex since Age: 81 Supplementary Trust since 1997. (consisting of 1992 (27 portfolios); 40 manager. portfolios Nicholas Applegate for which UBS Institutional Funds since Global AM 1992 (19 portfolios) and (Americas) or Banyan Strategic Realty one of its Trust since 1998. He is also affiliate serves a Director of Express as investment America Holdings Corp. advisor, sub- since 1992 and Semele advisor or Grou Inc. since 1987. Frank K. Reilly Chairman and Mr. Reilly is a Professor at the Mr. Reilly is a Mr. Reilly is a Director of College of Business Trustee University of Notre Dame since 1982. He director or Discover Bank since 1993; Administration since 1993 is also a Trustee of UBS Supplementary trustee of four Morgan Stanley Trust, FSB University of Trust since 1997. Mr. Reilly was a investment since 1996; and NIBCO, Notre Dame Director of Battery Park Funds Inc. companies Inc. since 1993. Notre Dame, (1995-2001). (consisting of IN 46556-0399 41 portfolios Age: 67 for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub- advisor or manager.
- -------------------------------------------------------------------------------- 115 - -------------------------------------------------------------------------------- TRUSTEE INFORMATION (UNAUDITED) - --------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN POSITION HELD/ 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 - ---------------------- ------------- -------------------------------------- ---------------- --------------------------- Edward M. Roob Trustee since Mr. Roob is Retired. Prior thereto, he Mr. Roob is a Mr. Roob is a Trustee of 841 Woodbine Lane 1995 was a Senior Vice President of Daiwa director or the CCM Fund Complex since Northbrook, Securities America Inc. 1986-1993. He is trustee of four 2001 (9 portfolios). IL 60002 also a Trustee of UBS Supplementary Trust investment Age: 68 since 1997 and Director of UBS Global companies Asset Management Trust Company since (consisting of 1993. Mr. Roob was a Committee Member of 41 portfolios the Chicago Stock Exchange from for which UBS 1993-1999. Global AM (Americas) or one of its affiliates serves as investment advisor, sub- advisor or manager. Interested Trustee: Brian M. Storms +**; Trustee and Mr. Storms is chief executive officer Mr. Storms is a None Age: 48 President (since July 2002), director and president trustee of three since 2001 of UBS Global Asset Management (US), Inc. investment ("UBS Global AM") since March 1999). He companies is also chief executive officer (since (consisting of July 2002), a member of the board of 40 portfolios directors and president of UBS Global AM for which UBS (Americas) and UBS Global Asset Global AM Management (New York) Inc. ("UBS Global (Americas) or one AM (New York)") (since October 2001). Mr. of its affiliates Storms was chief executive officer of UBS serves as Global AM from October 2000 to September investment advisor, 2001 and chief operating officer of UBS sub-advisor or Global AM (Americas) and UBS Global AM manager. (New York) from September 2001 to July 2002. He was a director or trustee of several investment companies in the UBS Family of Funds (1999-2001). He was president of Prudential Investments (1996-1999). Prior to joining Prudential Investments he was a managing director at Fidelity Investments. Mr. Storms is president and trustee of UBS Supplementary Trust since 2001. Mr. Storms is president of 20 investment companies (consisting of 41 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager.
- -------------------------------------------------------------------------------- 116 - -------------------------------------------------------------------------------- TRUSTEE INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- OFFICERS:
POSITION HELD/ TERM/TIME NAME, ADDRESS AND AGE SERVED (1) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - --------------------- -------------- ------------------------------------------- Amy R. Doberman**; 40 Vice President and Ms. Doberman is a managing director and Assistant Secretary general counsel of UBS Aeltus, Ms. Doberman since 2001 was assistant chief Global AM. From December 1997 through July 2000, she was general counsel of the SEC's Division of Investment Management. Ms. Doberman is vice counsel of Aeltus Investment Management, Inc. Prior to working at president and assistant secretary of UBS Supplementary Trust and three investment companies (consisting of 40 portfolios) and vice president and secretary of 20 investment companies (consisting of 41 portfolios) for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub-advisor or manager. David M. Goldenberg**; 36 Vice President and Mr. Goldenberg is an executive director and Secretary deputy general counsel of UBS Global AM. since 2002 From 2000-2002 he was director, legal affairs at compliance for SSB Citi Asset Management Group Lazard Asset Management. Mr. Goldenberg was global director of 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 in the SEC's Division of Investment Management. Mr. Goldenberg is vice president and secretary of UBS Supplementary Trust and three investment companies (consisting of 40 portfolios); and a vice president and assistant secretary of 20 investment companies (consisting of 41 portfolios) for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub-advisor or manager. Mark F. Kemper*; 45 Assistant Secretary Mr. Kemper is an Executive Director of UBS since 1999 Global AM (Americas) since 2001. He was Director of UBS Global AM (Americas) 1997-2000; Partner of UBS Global AM (Americas) 1993-1996; Secretary of UBS Global AM (Americas) since 1999; Assistant Secretary of UBS Global AM (Americas) 1993-1999; Assistant Secretary of UBS Global Asset Management 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 38 portfolios) for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub-advisor or manager.
- -------------------------------------------------------------------------------- 117 - -------------------------------------------------------------------------------- TRUSTEE INFORMATION (UNAUDITED) - --------------------------------------------------------------------------------
POSITION HELD/ TERM/TIME NAME, ADDRESS AND AGE SERVED (1) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - --------------------- -------------- ------------------------------------------- Joseph T. Malone**; 35 Assistant Treasurer Mr. Malone is a director and a senior since 2001 manager of the mutual fund 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 three investment companies (consisting of 40 portfolios) for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub-advisor or manager. Rita Rubin**; 32 Assistant Secretary Ms. Rubin is a director and assistant since 2002 general counsel of UBS Global AM. From 1999-2001, she was an attorney with the law firm of Kirkpatrick & Lockhart LLP. Prior thereto, she was a legal administrative officer at Alliance Capital Management, L.P. Ms. Rubin is an assistant secretary of UBS Supplementary Trust and of three investment companies (consisting of 41 portfolios) for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub-advisor or manager. Paul H. Schubert**; 40 Treasurer and Mr. Schubert is an executive director and Principal Accounting head of the mutual fund finance department Officer of UBS Global AM. Mr. Schubert is treasurer since 2001 and portfolios), a vice president and principal accounting officer of UBS Supplementary Trust and of two treasurer of 20 investment companies investment companies (consisting of 38 (consisting of 41 portfolios), treasurer and chief financial officer of one investment company (consisting of two portfolios) and treasurer of one investment company (consisting of two portfolios) for which UBS Global AM (Americas) or one of its affiliates serves as investment advisor, sub-advisor or manager.
(1) Each Trustee holds office for an indefinite term. (2) Messrs. 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., 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. - -------------------------------------------------------------------------------- 118 THE UBS FUNDS - -------------------------------------------------------------------------------- One North Wacker Drive o Chicago, Illinois 60606 o Tel: (800) 647-1568 -----END PRIVACY-ENHANCED MESSAGE-----