N-CSR 1 a07-19509_1ncsr.htm N-CSR

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-06637

The UBS Funds
(Exact name of registrant as specified in charter)

51 West 52nd Street, New York, New York					10019-6114
(Address of principal executive offices)					(Zip code)

Mark F. Kemper, Esq. UBS Global Asset Management 51 West 52nd Street New York, NY 10019-6114
(Name and address of agent for service)

Copy to:
Bruce Leto, Esq. Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098

Registrant’s telephone number, including area code:				212-882 5000

Date of fiscal year end:	June 30

Date of reporting period:		June 30, 2007

Item 1. Reports to Stockholders.

The UBS Funds

Annual Report

June 30, 2007

Table of contents

Portfolio Managers' commentary and portfolios of investments

UBS Dynamic Alpha Fund					1

UBS Global Allocation Fund					15

UBS Global Equity Fund					35

UBS International Equity Fund					44

UBS U.S. Equity Alpha Fund					53

UBS U.S. Large Cap Equity Fund					63

UBS U.S. Large Cap Growth Fund					71

UBS U.S. Large Cap Value Equity Fund					79

UBS U.S. Mid Cap Growth Equity Fund					86

UBS U.S. Small Cap Growth Fund					93

UBS Absolute Return Bond Fund					102

UBS Global Bond Fund					122

UBS High Yield Fund					136

UBS U.S. Bond Fund					146

Explanation of expense disclosure					158

Statements of assets and liabilities					164

Statements of operations					170

Statements of changes in net assets					172

Financial highlights					176

Notes to financial statements					204

Report of independent registered public accounting firm					241

General information					242

Board approval of investment advisory agreements					243

Trustee and Officer information					248

Federal tax information					255

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UBS Funds Annual Report

August 15, 2007

Dear Shareholder,

We are pleased to provide you with the annual report for the UBS Funds. This report includes summaries of the performance of each fund and commentaries from the individual portfolio managers regarding the events that affected their results during the 12-month period that ended June 30, 2007.

What follows is an overview of the general economic and market environment during the period.

International economies stayed on track, while the US saw a slowdown

US economic growth fluctuated during the fiscal year. After expanding 2.6% in the second quarter of 2006, gross domestic product (GDP) grew 2.0% and 2.5% in the third and fourth quarters of the year. The economy then trailed off significantly over the first three months of 2007, with GDP growing a tepid 0.7%—its slowest rate since the fourth quarter of 2002. The weakening economy was attributed, in part, to the troubles in the housing market. The economy then picked up steam in the second quarter of 2007, as the advance estimate for GDP growth was 3.4%.

Economic news was largely positive on the international front. A report issued by the Organization for Economic Cooperation and Development (OECD) estimated that, during 2007, growth in Europe and Japan was expected to eclipse the US for the first time since 2001. The OECD projected that the US economy would expand 2.1% in 2007, compared to 3.3% in 2006. In contrast, the estimates for growth during 2007 in the Eurozone and Japan were 2.7% and 2.4%, respectively.

The world's stock markets generated solid gains

The US stock market generated strong results during the fiscal year. Over this period, the overall stock market, as measured by the S&P 500 Index, rose 20.59%. The market's ascent was broad in scope, rising in 10 out of 12 months in the period, and producing double-digit gains in virtually every major index. The international equity markets also generated strong results, as the MSCI EAFE Index rose 27.54%. Emerging markets equities performed even better, gaining 45.45% during the 12-month period as measured by the MSCI EM Index. (The MSCI EAFE Index represents the developed markets outside of North America: Europe, Australasia and the Far East. The MSCI EM Index is a free float-adjusted market capitalization index consisting of 26 emerging markets country indices.) As was the case in the US, international equities were supported by strong corporate profits and an extremely active merger and acquisition (M&A) environment.

Across fixed income markets, moderation prevailed

The global bond markets also generated positive, albeit more modest gains over the 12-month reporting period. In the US, the Federal Reserve Board (the "Fed") kept short-term interest rates on hold at 5.25% over the fiscal year. Despite sharply higher interest rates (and falling bond prices) late in the period, overall, both short- and long-term yields declined over the review period. During that time, the overall US bond market, as measured by the Lehman Brothers U.S. Aggregate Index, returned 6.12%. Given solid economic growth and monetary tightening by many central banks, the international bond markets lagged their US counterparts. During the fiscal year, the JPMorgan Global Government Bond Index returned 4.35%. Lower quality fixed income securities, such as high yield bonds and emerging markets debt, generated better results, as the Lehman Brothers High Yield and JPMorgan EMBI Global Diversified Indexes returned 11.55% and 11.40%, respectively.

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UBS Dynamic Alpha Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned 3.44% (Class A shares declined 2.23% after the deduction of the maximum sales charge), while Class Y shares returned 3.80%. For purposes of comparison, the Merrill Lynch US Treasury 1–5 Year Index returned 5.16% over the same time period, the MSCI World Free Index (net US) returned 23.94% and the Consumer Price Index (CPI) rose 2.69%. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 3; 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.)

Portfolio performance summary

What worked

• Equity market allocations contributed positively to performance during the period. Throughout the year, we steadily reduced global equity market exposure in the Fund, moving it from 40.6% on June 30, 2006, to 13.2% at period end. This entailed reducing our exposures to several markets, primarily the US, continental Europe, Australia and emerging markets. The reduction was implemented in response to our belief that equity market valuations were becoming increasingly stretched as equity prices rose. Our analysis indicated that a favorable market behavior backdrop, including robust liquidity and a healthy risk appetite, was supporting equity prices.

• Within equities, our long positions in the US, the UK, the Netherlands and the emerging markets generated the largest contribution to performance.

• Our decision to further reduce our exposure to the fixed income markets contributed to returns. We adjusted our bond exposures several times during the year, moving from a net 1.5% short position on June 30, 2006 to a net 11.0% short position as of period end. (Shorting involves selling, or taking short positions in securities, asset classes or currencies that our research indicates are overpriced in hopes of making a profit when they fall in value. When shorting an investment, we first borrow it, then sell it, and then buy an equal number of shares later—hopefully at a lower price—to replace those we borrowed.) This positioning reflected our view that bond markets globally were somewhat overvalued relative to our risk estimates (with some differentiation between regions). By period end, many of the sovereign bond market valuations were close to fair value, but some nontraditional bonds, such as emerging markets debt and inflation-linked bonds, were still expensive.

• A short exposure to UK bonds—where we had exposure to inflation-linked bonds, rather than to the conventional bond market—contributed positively to returns. Positioning in German, US, and Swiss bonds also aided returns.

• Security selection in certain segments of the portfolio boosted results. The Fund holds the vast majority of its security selection exposure in equity market vehicles. During the period, security selection among the US small cap, US large cap and 130/30 equity components (in which we take short positions on securities that we believe are overpriced) of the Fund added to performance.

UBS Dynamic Alpha Fund

What didn't work

• The Fund's currency overlay was the most significant detractor from performance for the year. In general, we were long lower-yielding currencies and short higher-yielding currencies, during a period when investors were rewarded for participating in the "carry trade"—a currency strategy that looks to profit by selling low-yielding currencies, and buying high-yielding ones. However, our research indicates investors' yield-seeking behavior has caused a significant valuation distortion in favor of high-yielding currencies (and, conversely, against low-yielding currencies). We expect the carry trade to unwind, and we believe we have positioned the Fund to benefit when it does.

• On the long side, exposures to the Japanese yen, Swiss franc and Taiwan dollar had the largest negative impact.

• Our short exposures to the British pound, euro, Australian dollar and New Zealand dollar were disappointments during the period, as well.

• While our market allocations were positive contributors overall, short equity market exposures in Germany, France, Japan, Australia, and Canada detracted from performance, as those markets rallied further during the year.

• Security selection in our global, European and fixed income components hurt performance over the period.

Portfolio Highlights
Fund positions as of June 30, 2007

	Security selection 6/30/07			Derivatives overlay 6/30/07			Market exposure 6/30/07
Equity		84.0	%		-70.8	%		13.2	%
Fixed Income		9.0			-20.0			-11.0
Cash		7.0			0.0			7.0

Market exposure summary

June 30, 2006				June 30, 2007
Net market exposure = 39.1%				Net market exposure = 2.2%
• Equity = 40.6				• Equity = 13.2%
• Fixed Income = -1.5				• Fixed Income = -11.0%
Security selection = 100%				Security selection = 100%
Derivatives overlay = -52.9%				Derivatives overlay = -90.8%

This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2007. The views and opinions in the letter were current as of August 15, 2007. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program. Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.

UBS Dynamic Alpha Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		3.44	%		6.04	%
maximum sales charge	Class B⁽³⁾		2.64			5.20
	Class C⁽⁴⁾		2.64			5.22
	Class Y⁽⁵⁾		3.80			6.33
After deducting maximum	Class A⁽²⁾		-2.23			3.60
sales charge	Class B⁽³⁾		-2.36			4.04
	Class C⁽⁴⁾		1.64			5.22
Merrill Lynch US Treasury 1-5 Year Index⁽⁶⁾			5.16			2.97
MSCI World Free Index (net US)⁽⁷⁾			23.94			17.58
Consumer Price Index⁽⁸⁾			2.69			3.73

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.20% and 1.20%; Class B—1.99% and 1.99%; Class C—1.97% and 1.97%; Class Y—.92% and .92%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so that the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.35%; Class B—2.10%; Class C—2.10%; Class Y—1.10%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of all share classes of UBS Dynamic Alpha Fund is 01/27/05. Inception date of the indices, for the purpose of this illustration, is 01/31/05.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽³⁾ Maximum contingent deferred sales charge for Class B shares is 5% imposed on redemptions and is reduced to 0% after a maximum of six years. Class B shares bear ongoing 12b-1 service and distribution fees.

⁽⁴⁾ Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees.

⁽⁵⁾ The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees.

⁽⁶⁾ The Merrill Lynch US Treasury 1-5 Year Index: An unmanaged index tracking US Treasury securities with maturities between 1 and 5 years.

⁽⁷⁾ The MSCI World Free Index (net US) is a broad-based securities index that represents the US and developed international equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. This benchmark has been calculated net of withholding tax from a US perspective.

⁽⁸⁾ Consumer Price Index (CPI) - produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. The index is calculated by the Bureau of Labor Statistics.

If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.

Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://www.ubs.com.

UBS Dynamic Alpha Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $5,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS Dynamic Alpha Fund Class A shares (adjusted for 5.50% maximum sales charge) , Class Y shares, the Merrill Lynch US Treasury 1-5 Year Index, MSCI World Free Index (net US) and the Consumer Price Index, if you had invested $10,000 in Class A shares on January 27, 2005 or $5,000,000 in Class Y shares on January 27, 2005, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS Dynamic Alpha Fund Class A vs.
Merrill Lynch US Treasury 1-5 Year Index, MSCI World Free Index (net US), and Consumer Price Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

Indices are started on 01/31/05.

UBS Dynamic Alpha Fund Class Y vs.
Merrill Lynch US Treasury 1-5 Year Index, MSCI World Free Index (net US), and Consumer Price Index

Wealth value with dividends reinvested

Indices are started on 01/31/05.

UBS Dynamic Alpha Fund

Top ten equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
BP PLC		0.9	%
Vodafone Group PLC		0.9
Total SA		0.9
Roche Holding AG		0.6
Royal Bank of Scotland Group PLC		0.6
HBOS PLC		0.6
Barclays PLC		0.5
Suez SA		0.5
Banco Santander Central Hispano SA		0.5
Credit Suisse Group		0.5
Total		6.5	%

Top ten fixed income holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Ford Motor Credit Co. LLC, 7.875%, due 06/15/10		0.7	%
Univision Communications, Inc., 7.850%, due 07/15/11		0.3
Lighthouse International Co. SA, 8.000%, due 04/30/14		0.2
Boise Cascade LLC, 7.125%, due 10/15/14		0.2
Republic of Turkey, 7.000%, due 09/26/16		0.2
Highlander Euro CDO, Series 06-2CA, Class F1, due 12/14/22		0.2
LNR CDO Ltd., Series 06-1A, Class FFX, 7.592%, due 05/28/43		0.2
Eurocredit CDO BV, Series VI-X, Class SUB, due 01/16/22		0.2
Shasta CLO I Ltd., due 04/20/21		0.2
Residential Capital LLC, 6.375%, due 06/30/10		0.2
Total		2.6	%

⁽¹⁾ Figures represent the direct investments of the UBS Dynamic Alpha Fund. Figures could be different if a breakdown of the underlying investment companies was included.

UBS Dynamic Alpha Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Equities International equities
Aerospace & defense	0.08	%
Air freight & logistics	0.36
Airlines	0.13
Automobiles	0.28
Beverages	0.31
Capital markets	0.55
Chemicals	0.05
Commercial banks	4.25
Commercial services & supplies	0.21
Communications equipment	0.58
Computers & peripherals	0.01
Construction & engineering	0.02
Construction materials	0.41
Consumer finance	0.13
Containers & packaging	0.16
Diversified consumer services	0.06
Diversified financial services	0.54
Diversified telecommunication services	1.23
Electric utilities	0.28
Electronic equipment & instruments	0.07
Energy equipment & services	0.03
Food & staples retailing	0.50
Food products	0.42
Health care equipment & supplies	0.07
Health care providers & services	0.22
Hotels, restaurants & leisure	0.19
Household durables	0.12
Household products	0.20
Industrial conglomerates	0.17
Insurance	2.01
Internet & catalog retail	0.06
IT services	0.23
Machinery	0.10
Marine	0.11
Media	0.48
Multi-utilities	0.63
Oil, gas & consumable fuels	2.51
Paper & forest products	0.38
Pharmaceuticals	1.85
Real estate investment trusts (REITs)	0.16
Real estate management & development	0.07
Semiconductors & semiconductor equipment	0.18
Specialty retail	0.23
Textiles, apparel & luxury goods	0.02
Tobacco	0.22
Trading companies & distributors	0.47
Wireless telecommunication services	1.03
Total international equities	22.37
Bonds US bonds US corporate bonds
Consumer finance	0.72	%
Media	0.30
Paper & forest products	0.35
Thrifts & mortgage finance	0.17
Total US corporate bonds	1.54
Asset-backed securities	0.07
Collateralized debt obligations	0.67
Total US bonds	2.28
International bonds International corporate bonds
Diversified financial services	0.07
Media	0.24
Paper & forest products	0.11
Wireless telecommunication services	0.08
Total international corporate bonds	0.50
International collateralized debt obligations	2.28
Foreign government bonds	0.29
Total international bonds	3.07
Total bonds	5.35
Investment companies
UBS Emerging Markets Equity Relationship Fund	8.21
UBS International Equity Relationship Fund	17.16
UBS Opportunistic Emerging Markets Debt Relationship Fund	1.42
UBS Opportunistic High Yield Relationship Fund	1.20
UBS Small-Cap Equity Relationship Fund	6.39
UBS U.S. Equity Alpha Relationship Fund	10.93
UBS U.S. Large Cap Equity Relationship Fund	12.08
UBS U.S. Large Cap Growth Equity Relationship Fund	6.49
Total investment companies	63.88
Short-term investment	2.02
Options purchased	0.71
Total investments	94.33
Cash and other assets, less liabilities	5.67
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS Dynamic Alpha Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—22.37%
International equities—22.37%
Austria—0.07%
Telekom Austria AG		86,661	$	2,169,890
Belgium—0.36%
Dexia SA		81,920		2,573,400
Fortis		172,737		7,366,751
KBC Groep NV		11,889		1,609,439
				11,549,590
Bermuda—0.05%
Catlin Group Ltd.		129,953		1,249,992
Lancashire Holdings Ltd.*		48,660		333,694
				1,583,686
British Virgin Islands—0.02%
Dolphin Capital Investors Ltd.*		248,553		843,512
Canada—0.01%
JumpTV, Inc.*		36,065		173,813
Denmark—0.11%
A.P. Moeller - Maersk A/S		286		3,459,006
Finland—0.58%
Nokia Oyj		449,418		12,657,990
Stora Enso Oyj, Class R		222,565		4,211,204
Tietoenator Oyj		66,865		2,162,913
				19,032,107
France—3.03%
AXA SA		330,191		14,305,173
BNP Paribas		99,688		11,921,772
Bouygues SA		33,950		2,857,607
Carrefour SA		35,209		2,484,660
France Telecom SA		542,087		14,967,228
Neuf Cegetel*		16,557		650,759
Sanofi-Aventis		36,866		2,998,767
Suez SA		299,427		17,219,475
Total SA		339,761		27,710,533
Unibail-Rodamco		13,138		3,381,176
				98,497,150
Germany—2.35%
Allianz SE		63,042		14,811,427
Bayerische Motoren Werke AG		34,434		2,237,492
Celesio AG		33,892		2,208,236
DaimlerChrysler AG		73,897		6,860,090
Deutsche Lufthansa AG		156,681		4,402,364
Deutsche Post AG		162,866		5,296,957
Deutsche Postbank AG		31,315		2,757,880
Deutsche Telekom AG		242,365		4,490,716
E.ON AG		28,310		4,762,317
Fresenius Medical Care AG & Co. KGaA		80,250		3,707,008
Gerresheimer AG*		50,043		2,590,699
Heidelberger Druckmaschinen AG		39,002		1,896,646
Henkel KGaA, Preference shares		120,443		6,372,201

	Shares		Value
Germany—(concluded)
Metro AG		82,218	$	6,841,368
Siemens AG		29,216		4,214,033
Stada Arzneimittel AG		49,146		3,142,247
				76,591,681
Greece—0.15%
Alpha Bank AE		71,697		2,260,992
National Bank of Greece SA		47,641		2,733,940
				4,994,932
Ireland—0.46%
Anglo Irish Bank Corp. PLC		89,517		1,841,583
Bank of Ireland		309,446		6,257,166
Depfa Bank PLC		210,884		3,739,015
EcoSecurities Group PLC*		130,580		1,043,626
Irish Life & Permanent PLC		22,305		564,227
Smurfit Kappa Group PLC*		63,200		1,591,863
				15,037,480
Italy—0.53%
Banca Popolare di Verona e Novara Scrl		48,534		1,401,789
ENI SpA		220,457		8,026,356
Intesa Sanpaolo SpA		1,033,433		7,734,810
				17,162,955
Luxembourg—0.15%
SES, FDR		222,316		4,808,280
Netherlands—2.11%
ABN AMRO Holding NV		304,184		14,018,311
Aegon NV		598,342		11,855,852
ASML Holding NV*		208,548		5,786,315
ING Groep NV CVA		226,897		10,069,604
Ordina NV		19,947		415,758
Royal Dutch Shell PLC, Class B		246,351		10,304,548
Royal KPN NV		587,295		9,792,853
TNT NV		139,406		6,307,541
				68,550,782
Norway—0.12%
Telenor ASA*		197,100		3,868,835
Panama—0.04%
Carnival Corp.		25,600		1,248,512
Spain—0.72%
Altadis SA		48,315		3,217,283
Banco Santander Central Hispano SA		826,063		15,305,899
Repsol YPF SA		123,064		4,871,908
				23,395,090
Sweden—0.53%
Electrolux AB, Class B		156,200		3,722,745
Holmen AB, Class B		54,300		2,306,432
Svenska Cellulosa AB, Class B		343,500		5,775,895

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
International equities—(concluded)
Sweden—(concluded)
Telefonaktiebolaget LM Ericsson, Class B		1,373,000	$	5,512,718
				17,317,790
Switzerland—2.09%
Credit Suisse Group		214,035		15,305,736
Holcim Ltd.		62,695		6,816,124
Nestle SA		30,859		11,772,652
Novartis AG		251,161		14,187,564
Roche Holding AG		111,217		19,794,168
				67,876,244
United Arab Emirates—0.03%
Lamprell PLC		147,390		1,021,110
United Kingdom—8.86%
Aberdeen Asset Management PLC		509,267		2,004,412
ACP Capital Ltd.		244,193		703,672
Anite Group PLC		252,318		377,476
Ashtead Group PLC		491,002		1,498,691
AstraZeneca PLC		102,910		5,544,515
Aviva PLC		219,342		3,274,825
Barclays PLC		1,267,520		17,715,336
BP PLC		2,545,937		30,828,351
BPP Holdings PLC		83,060		954,055
British American Tobacco PLC		118,336		4,034,966
British Polythene Industries PLC		43,639		363,671
BT Group PLC		502,520		3,355,292
Cadbury Schweppes PLC		90,125		1,230,664
Carnival PLC		18,117		867,681
Cattles PLC		533,035		4,195,919
Centaur Media PLC		229,206		612,157
Centrica PLC		268,105		2,091,613
Chemring Group PLC		9,486		374,500
Compass Group PLC		521,369		3,619,868
Computacenter PLC		38,746		175,647
Daily Mail & General Trust, Class A (Non-voting)		240,120		3,691,126
Diageo PLC		490,997		10,224,520
Dignity PLC		40,036		543,479
DSG International PLC		415,315		1,323,549
eaga PLC*		62,400		268,467
Electrocomponents PLC		255,304		1,358,591
Elementis PLC		338,891		670,319
Enodis PLC		208,065		825,185
Entertainment Rights PLC*		458,314		294,509
Experian Group Ltd.		229,786		2,904,722
Fenner PLC		129,205		614,912
Foseco PLC		147,290		601,898
Future PLC		515,518		455,493
Galliford Try PLC		231,600		738,308
Georgica PLC*		218,005		507,820
GlaxoSmithKline PLC		539,768		14,145,001
Gyrus Group PLC*		31,707		300,685

	Shares		Value
United Kingdom—(concluded)
Hanson PLC		298,580	$	6,463,456
HBOS PLC		957,527		18,949,292
Highway Insurance Holdings PLC		265,409		394,396
Home Retail Group PLC		229,786		2,117,979
HSBC Holdings PLC		414,339		7,613,112
ICAP PLC		66,364		658,332
Kesa Electricals PLC		182,581		1,154,002
Kingfisher PLC		715,338		3,253,605
Land Securities Group PLC		56,392		1,973,787
Leaf Clean Energy Co.*		351,856		748,956
LogicaCMG PLC		891,538		2,716,776
London Scottish Bank PLC		283,312		568,919
Lookers PLC		193,218		692,582
Majestic Wine PLC		85,274		666,119
Meggitt PLC		303,229		1,875,456
National Grid PLC		69,174		1,025,143
Northgate Information Solutions PLC		766,298		1,231,042
Old Mutual PLC		1,451,584		4,923,310
PayPoint PLC		54,639		682,462
Phoenix IT Group Ltd.		62,494		526,762
Premier Farnell PLC, Preferred		29,509		844,413
Prudential PLC		948,130		13,594,131
Psion PLC		97,606		248,923
Quintain Estates & Development PLC		47,193		768,097
Reed Elsevier PLC		366,526		4,758,375
Rentokil Initial PLC		686,973		2,214,114
Rexam PLC		62,219		623,148
Royal Bank of Scotland Group PLC		1,517,493		19,289,268
Safestore Holdings Ltd.*		117,350		450,093
Scottish & Southern Energy PLC		151,295		4,402,286
Southern Cross Healthcare Ltd.		96,009		1,090,260
Speedy Hire PLC		31,620		755,604
Sports Direct International PLC*		293,259		1,068,842
SSL International PLC		225,292		1,975,896
Taylor Nelson Sofres PLC		184,136		876,340
Ted Baker PLC		57,133		595,442
Telent PLC*		63,046		652,004
Tesco PLC		730,807		6,141,628
Tomkins PLC		109,775		573,142
Travis Perkins PLC		17,995		686,579
Ultra Electronics Holdings PLC		23,548		512,115
Vanco PLC*		70,673		596,058
Vectura Group PLC*		201,270		349,607
Vodafone Group PLC		9,091,675		30,635,233
Wolseley PLC		506,664		12,229,532
Yule Catto & Co. PLC		107,881		493,930
Zetar PLC*		62,943		719,192
				288,671,635
Total international equities (cost $591,449,406)				727,854,080

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—5.35%
US bonds—2.28%
US corporate bonds—1.54%
Boise Cascade LLC, 7.125%, due 10/15/14	$	8,000,000	$	7,600,000
Bowater, Inc., 9.500%, due 10/15/12		4,000,000		3,940,000
Ford Motor Credit Co. LLC, 7.875%, due 06/15/10		23,500,000		23,495,488
Residential Capital LLC, 6.375%, due 06/30/10		5,520,000		5,448,748
Univision Communications, Inc., 7.850%, due 07/15/11		8,000,000		8,240,000
WDAC Subsidiary Corp., 8.500%, due 12/01/14	EUR	1,050,000		1,485,073
Total US corporate bonds (cost $50,724,611)				50,209,309
Asset-backed securities—0.07%
First Franklin Mortgage Loan Asset-Backed Certificates, Series 06-FFA, Class B2, 6.000%, due 09/25/26^(1),(2),(3)	$	7,591,309		1,518,262
Home Equity Mortgage Trust, Series 06-5, Class B1, 9.320%, due 01/25/37^(2),(4)		5,000,000		400,000
Nomura Asset Acceptance Corp., Series 06-S4, Class B4, 8.000%, due 08/25/36^(2),(4)		6,474,000		194,220
Total asset-backed securities (cost $16,438,866)				2,112,482
Collateralized debt obligations—0.67%
Brentwood Investors CDO Corp., due 05/01/16^(1),(2),(6)		1,200,000		1,200,000
Cent CDO Ltd., due 11/18/20^(2),(6)		2,000,000		1,820,000
Colts, Series 07-1, due 03/20/21^(1),(2),(6)		1,700,000		1,666,000
GoldenTree Loan Opportunities III Ltd., Series 07-3A, Class SUB, due 05/01/22^(1),(2),(6)		2,600,000		2,673,060
Greywolf CLO Ltd., Series 07-1A, Class SUB, due 02/18/21^{(1),(2),(5),(6)}		1,000,000		980,000
MC Funding Ltd., Series 06-1, due 12/20/20^(1),(2),(6)		2,900,000		2,857,950
OHA Park Avenue CLO Ltd., Series 07-1A, Class SUB, due 03/14/22^(1),(2),(6)		2,400,000		2,304,000
Regent's Park CDO BV, Series 1A, Class F, due 01/26/23^(1),(2),(6)	EUR	2,000,000		2,551,794

	Face amount		Value
Collateralized debt obligations—(concluded)
Shasta CLO I Ltd., due 04/20/21^(1),(2),(6)	$	6,000,000	$	5,760,000
Total collateralized debt obligations (cost $21,760,845)				21,812,804
Total US bonds (cost $88,924,322)				74,134,595
International bonds—3.07%
Foreign government bonds—0.29%
Argentina—0.07%
Republic of Argentina, 5.475%, due 08/03/12⁽⁴⁾		3,000,000		2,187,750
Turkey—0.22%
Republic of Turkey, 7.000%, due 09/26/16		7,340,000		7,422,575
Total foreign government bonds (cost $9,636,591)				9,610,325
International collateralized debt obligations—2.28%
Cayman Islands—0.96%
Avenue CLO Fund Ltd., Series 06-4I, Class SUB, due 11/07/18^(2),(6)		2,625,000		2,483,512
Series 07-5I, Class SUB, due 04/25/19^(2),(6)		2,200,000		2,092,860
Babson CLO Ltd., Series 07-1A, Class INC, due 01/18/21^(1),(2),(6)		1,500,000		1,500,000
Black Diamond CLO Ltd., Series 06-1A, Class INC, due 04/29/19^(2),(6)		2,500,000		2,500,000
Callidus Debt Partners CDO Fund I Ltd., Series 5A, Class INC, due 11/20/20^(1),(2),(6)		2,000,000		2,000,000
Duane Street CLO, Series 06-3A, Class SUB, due 01/11/21^(1),(2),(6)		1,200,000		1,116,000
Emerson Place CLO Ltd., Series 06-1A, Class SUB, due 01/15/19^(1),(2),(6)		2,750,000		2,557,500
FM Leveraged Capital Fund II, due 11/20/20^(1),(2),(6)		5,300,000		4,770,000
GSC Partners CDO Fund, Series 07-8A, Class SUB, due 04/17/21^(1),(2),(6)		1,500,000		1,500,000
GSC Partners CDO Fund V, Ltd., due 11/20/16^(1),(2),(6)		1,200,000		1,044,000
Harbourview CLO VI Ltd., Series 6A, Class SUB, due 12/27/19^(1),(2),(6)		1,200,000		1,194,000
LNR CDO Ltd., Series 06-1A, Class FFX, 7.592%, due 05/28/43^(1),(2),(5)		8,000,000		6,400,000

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(concluded)
International bonds—(concluded)
International collateralized debt obligations—(concluded)
Cayman Islands—(concluded)
Logan CDO Ltd., Series III-A, Class E, due 07/05/57^{(1),(2),(5),(6)}	$	2,000,000	$	2,000,000
				31,157,872
Ireland—0.33%
Avoca CLO I BV, Series VI-A, Class M, due 01/16/23^(1),(2),(6)	EUR	2,000,000		2,706,900
Eurocredit CDO BV, Series VI-X, Class SUB, due 01/16/22^(2),(6)		4,500,000		6,090,525
Menton CDO PLC, Series III-A, Class E, 12.510%, due 11/28/56^{(1),(2),(4),(5)}	$	2,900,000		2,082,780
				10,880,205
Luxembourg—0.29%
Ashwell CDO SA, due 12/22/66^(1),(2),(6)	EUR	3,000,000		3,491,901
due 12/22/77^(1),(2),(6)	GBP	1,400,000		2,656,716
GSC European CDO SA, Series I-RA, Class SUB, due 12/15/22^(1),(2),(6)	EUR	2,400,000		3,183,315
				9,331,932
Netherlands—0.70%
Ares Euro CLO BV, Series 07-1A, Class G1, due 05/15/24^(1),(2),(6)	EUR	1,400,000		1,875,882
Cadogan Square CLO BV, Series 3A, Class M, 11.328%, due 01/17/23^(2),(4)		2,000,000		2,964,868
Grosvenor Place CLO BV, Series II-A, Class SUB, 7.500%, due 03/28/23^(1),(2)		3,250,000		4,398,712
Harbourmaster CLO Ltd., Series 7A, Class C, due 09/22/22^(1),(2),(6)		3,000,000		4,060,350
Highlander Euro CDO, Series 06-2CA, Class F1, due 12/14/22^{(1),(2),(5),(6)}		5,000,000		6,631,905
Queen Street CLO, Series 06-1A, Class F, due 04/15/23^(1),(2),(6)		1,900,000		2,749,249
				22,680,966
Total international collateralized debt obligations (cost $74,321,270)				74,050,975

	Face amount		Value
International corporate bonds—0.50%
Canada—0.11%
Bowater Canada Finance Corp., 7.950%, due 11/15/11	$	4,000,000	$	3,765,000
Ireland—0.07%
Smurfit Kappa Funding PLC, 7.750%, due 04/01/15	EUR	1,500,000		2,121,533
Luxembourg—0.32%
Hellas Telecommunications Luxembourg III, 8.500%, due 10/15/13	EUR	1,721,000		2,515,630
Lighthouse International Co. SA, 8.000%, due 04/30/14		5,500,000		7,872,004
				10,387,634
Total international corporate bonds (cost $16,393,971)				16,274,167
Total international bonds (cost $100,351,832)				99,935,467
Total bonds (cost $189,276,154)				174,070,062
	Shares
Investment companies—63.88%
UBS Emerging Markets Equity Relationship Fund⁽⁷⁾		8,037,451		266,941,429
UBS International Equity Relationship Fund⁽⁷⁾		26,700,907		558,286,604
UBS Opportunistic Emerging Markets Debt Relationship Fund⁽⁷⁾		3,866,136		46,175,197
UBS Opportunistic High Yield Relationship Fund⁽⁷⁾		2,914,342		39,142,524
UBS Small-Cap Equity Relationship Fund⁽⁷⁾		4,024,500		207,949,963
UBS U.S. Equity Alpha Relationship Fund⁽⁷⁾		26,550,685		355,505,707
UBS U.S. Large Cap Equity Relationship Fund⁽⁷⁾		17,639,574		392,865,068
UBS U.S. Large Cap Growth Equity Relationship Fund⁽⁷⁾		17,917,764		211,030,048
Total investment companies (cost $1,612,733,981)				2,077,896,540
Short-term investment—2.02%
Investment company—2.02%
UBS U.S. Cash Management Prime Relationship Fund, 5.36%^(7),(8) (cost $65,842,675)		65,842,675		65,842,675

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

	Number of contracts		Value
Options purchased—0.71%
Call options—0.23%
Australian Dollar, strike @ AUD 0.835, expires February 2008*⁽⁹⁾		82,600,000	$	1,922,276
Euro Dollar, strike @ EUR 159.89, expires April 2008*⁽⁹⁾		48,650,000		1,713,954
5 Year US Treasury Notes Futures, strike @ USD 104.50, expires August 2007*⁽⁹⁾		11,436		3,752,438
5 Year US Treasury Notes Futures, strike @ USD 106.00, expires August 2007*⁽⁹⁾		3,966		185,906
Total call options				7,574,574
Put options—0.48%
Dow Jones Euro STOXX 50 Index Futures, strike @ EUR 4,300, expires September 2007*⁽⁹⁾		2,080		2,032,557

	Number of contracts		Value
Put options—(concluded)
Dow Jones Euro STOXX 50 Index Futures, strike @ EUR 4,450, expires December 2007*⁽⁹⁾		2,200	$	5,052,970
5 Year US Treasury Notes Futures, strike @ USD 103.50, expires August 2007*⁽⁹⁾		11,436		3,037,688
Nikkei 225 Index Futures, strike @ JPY 18,000, expires December 2007*⁽⁹⁾		860		5,437,645
Total put options				15,560,860
Total options purchased (cost $26,092,795)				23,135,434
Total investments—94.33% (cost $2,485,395,011)				3,068,798,791
Cash and other assets, less liabilities—5.67%				184,289,729
Net assets—100.00%			$	3,253,088,520

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $2,751,040,084; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	368,649,661
Gross unrealized depreciation		(50,890,954	)
Net unrealized appreciation	$	317,758,707

* Non-income producing security.

⁽¹⁾ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid, unless otherwise noted, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2007, the value of these securities amounted to $79,430,276 or 2.44% of net assets.

⁽²⁾ Security is illiquid. At June 30, 2007, the value of these securities amounted to $97,976,261 or 3.01% of net assets.

⁽³⁾ Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2007. Maturity date disclosed is the ultimate maturity date.

⁽⁴⁾ Floating rate security—The interest rate shown is the current rate as of June 30, 2007.

⁽⁵⁾ Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2007, the value of these securities amounted to $18,094,685 or 0.56% of net assets.

⁽⁶⁾ This security is the equity tranche of a collateralized debt obligation. The Fund receives periodic payments, which may vary, from the issuer of this security.

⁽⁷⁾ Investment in affiliated mutual fund.

⁽⁸⁾ The rate shown reflects the yield at June 30, 2007.

⁽⁹⁾ This security was pledged to cover margin requirements for futures contracts.

CDO Collateralized debt obligations

CLO Collateralized loan obligations

CVA Dutch certification—depositary certificate

FDR Fiduciary depositary receipt

Preference shares A special type of equity investment that shares in the earnings of the company, has limited voting rights, and may have a dividend preference. Preference shares may also have liquidation preference.

Currency type abbreviations:

AUD Australian Dollar

JPY Japanese Yen

EUR Euro

GBP Great Britain Pound

USD United States Dollar

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

Restricted securities

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/07 Market value		06/30/07 Market value as a percentage of net assets
Ares Euro CLO BV, Series 07-2A, Class G1, due 05/15/24	04/04/07	$	1,863,680		0.06	%	$	1,875,882		0.06	%
Ashwell CDO SA, due 12/22/66	10/16/06		3,087,883		0.09			3,491,901		0.11
due 12/22/77	01/29/07		2,527,693		0.08			2,656,716		0.08
Avoca CLO I BV, Series VI-A, Class M, due 01/16/23	10/19/06		2,525,500		0.08			2,706,900		0.08
Babson CLO Ltd., Series 07-1A, Class INC, due 01/18/21	02/02/07		1,425,000		0.04			1,500,000		0.05
Brentwood Investors CDO Corp., due 05/01/16	12/07/06		1,164,000		0.04			1,200,000		0.04
Callidus Debt Partners CDO Fund I Ltd., Series 5A, Class INC, due 11/20/20	11/01/06		1,900,000		0.06			2,000,000		0.06
Colts, Series 07-1, due 03/20/21	02/09/07		1,615,000		0.04			1,666,000		0.05
Duane Street CLO, Series 06-3A, Class SUB, due 01/11/21	11/15/06		1,140,000		0.04			1,116,000		0.03
Emerson Place CLO Ltd., Series 06-1A, Class SUB, due 01/15/19	11/03/06		2,447,500		0.08			2,557,500		0.08
First Franklin Mortgage Loan Asset-Backed Certificates, Series 06-FFA, Class B2, 6.000%, due 09/25/26	11/03/06		8,813,659		0.27			1,518,262		0.05
FM Leveraged Capital Fund II, due 11/20/20	10/31/06		5,300,000		0.16			4,770,000		0.15
GoldenTree Loan Opportunities III Ltd., Series 07-3A, Class SUB, due 05/01/22	02/27/07		2,600,000		0.08			2,673,060		0.08
Greywolf CLO Ltd., Series 07-1A, Class SUB, due 02/18/21	12/08/06		990,000		0.03			980,000		0.03
Grosvenor Place CLO BV, Series II-A, Class SUB, 7.500%, due 03/28/23	12/15/06		4,209,455		0.13			4,398,712		0.13
GSC European CDO SA, Series I-RA, Class SUB, due 12/15/22	12/01/06		3,200,760		0.10			3,183,315		0.10
GSC Partners CDO Fund Ltd., Series 07-8A, Class SUB, due 04/17/21	02/28/07		1,393,350		0.04			1,500,000		0.05
GSC Partners CDO Fund V, Ltd., due 11/20/16	02/07/07		1,104,000		0.03			1,044,000		0.03
Harbourmaster CLO Ltd., Series 7A, Class C, due 09/22/22	10/31/06		3,637,455		0.11			4,060,350		0.12
Harbourview CLO VI Ltd., Series 6A, Class SUB, due 12/27/19	10/20/06		1,128,000		0.03			1,194,000		0.04
Highlander Euro CDO, Series 06-2CA, Class F1, due 12/14/22	12/01/06		6,400,787		0.20			6,631,905		0.20
LNR CDO Ltd., Series 06-1A, Class FFX, 7.592%, due 05/28/43	11/03/06		8,138,056		0.25			6,400,000		0.20
Logan CDO Ltd., Series III-A, Class E, due 07/05/57	06/08/07		2,000,000		0.06			2,000,000		0.06
Menton CDO PLC, Series III-A, Class E, 12.510%, due 11/28/56	10/18/06		2,900,000		0.09			2,082,780		0.06
MC Funding Ltd., Series 06-1, due 12/20/20	12/08/06		2,857,837		0.09			2,857,950		0.09
OHA Park Avenue CLO Ltd., Series 07-1A, Class SUB, due 03/14/22	02/26/07		2,400,000		0.07			2,304,000		0.07
Queen Street CLO, Series 06-1A, Class F, due 04/15/23	12/14/06		2,523,200		0.08			2,749,249		0.08
Regent's Park CDO BV, Series 1A, Class F, due 01/26/23	09/25/06		2,551,500		0.08			2,551,794		0.08
Shasta CLO I Ltd., due 04/20/21	12/20/06		5,700,000		0.18			5,760,000		0.18
		$	87,544,315		2.69	%	$	79,430,276		2.44	%

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

Forward foreign currency contracts

UBS Dynamic Alpha Fund had the following open forward foreign currency contracts as of June 30, 2007:

	Contracts to deliver		In exchange for		Maturity dates	Unrealized appreciation/ (depreciation)
Australian Dollar		265,695,000	USD	218,529,696	11/29/07	$	(5,715,703	)
Brazilian Real		67,400,000	USD	34,431,673	08/20/07		(287,071	)
Canadian Dollar		171,595,000	USD	158,988,780	11/29/07		(2,573,134	)
Euro		25,410,463	HUF	6,416,650,000	09/12/07		521,268
Euro		912,480,000	USD	1,234,617,182	11/29/07		(5,942,975	)
Great Britain Pound		429,100,000	USD	844,298,197	11/29/07		(15,150,002	)
Latvian Lats		18,280,000	EUR	25,870,365	09/12/07		(340,248	)
New Zealand Dollar		86,185,000	JPY	7,762,769,135	11/29/07		(1,376,304	)
New Zealand Dollar		51,180,000	USD	36,745,039	11/29/07		(2,235,127	)
South African Rand		103,300,000	USD	14,439,878	11/29/07		106,651
South Korean Won		162,730,000,000	USD	175,285,716	08/20/07		(1,155,589	)
United States Dollar		302,022,335	CHF	366,190,000	11/29/07		963,463
United States Dollar		34,219,613	EUR	25,160,000	11/29/07		(13,391	)
United States Dollar		59,392,431	EUR	43,950,000	11/29/07		359,694
United States Dollar		31,780,525	GBP	15,990,000	11/29/07		245,988
United States Dollar		148,950,318	JPY	17,673,700,000	11/29/07		(2,637,232	)
United States Dollar		36,259,457	JPY	4,394,900,000	11/29/07		124,061
United States Dollar		242,481,372	SEK	1,643,380,000	11/29/07		(619,497	)
United States Dollar		39,747,791	SGD	60,045,000	11/29/07		(67,341	)
United States Dollar		235,387,853	TWD	7,829,000,000	08/20/07		3,658,691
Net unrealized depreciation on forward foreign currency contracts						$	(32,133,798	)

Currency type abbreviations:

CHF Swiss Franc

EUR Euro

GBP Great Britain Pound

HUF Hungarian Forint

JPY Japanese Yen

SEK Swedish Krona

SGD Singapore Dollar

TWD New Taiwan Dollar

USD United States Dollar

Futures contracts

UBS Dynamic Alpha Fund had the following open futures contracts as of June 30, 2007:

	Expiration dates	Cost/ proceeds		Value		Unrealized appreciation/ (depreciation)
US Treasury futures buy contracts:
5 Year US Treasury Notes, 37 contracts (USD)	September 2007	$	3,813,127	$	3,850,890	$	37,763
US Treasury futures sell contracts:
10 Year US Treasury Notes, 322 contracts (USD)	September 2007		33,754,656		34,036,406		(281,750	)
Index futures buy contracts:
Amsterdam Exchanges Index, 234 contracts (EUR)	July 2007		34,096,238		34,793,464		697,226
Interest rate futures buy contracts:
Australian 10 Year Bond, 1,434 contracts (AUD)	September 2007		113,927,401		114,267,393		339,992
Canadian 10 Year Bond, 166 contracts (CAD)	September 2007		17,355,752		17,269,298		(86,454	)
Euro-Bund, 1,028 contracts (EUR)	September 2007		154,625,080		154,091,636		(533,444	)

UBS Dynamic Alpha Fund—Portfolio of investments

June 30, 2007

Futures contracts—(concluded)

	Expiration dates	Cost/ proceeds		Value		Unrealized appreciation/ (depreciation)
Index futures sell contracts:
CAC 40 Euro Index, 2,941 contracts (EUR)	July 2007	$	236,854,063	$	241,655,940	$	(4,801,877	)
DAX Index, 1,087 contracts (EUR)	September 2007		290,466,952		297,127,261		(6,660,309	)
Dow Jones Euro STOXX 50 Index, 5,097 contracts (EUR)	September 2007		305,658,308		311,468,840		(5,810,532	)
FTSE 100 Index, 28 contracts (GBP)	September 2007		3,703,588		3,732,335		(28,747	)
FTSE/JSE Top 40 Index, 2,595 contracts (ZAR)	September 2007		96,725,495		94,712,451		2,013,044
Hang Seng Index, 302 contracts (HKD)	July 2007		42,583,855		42,243,772		340,083
IBEX 35 Index, 338 contracts (EUR)	July 2007		68,178,951		67,814,775		364,176
NIKKEI 225 Index, 1,862 contracts (JPY)	September 2007		273,030,333		274,630,822		(1,600,489	)
MSCI Singapore Index, 548 contracts (SGD)	July 2007		31,622,679		31,174,156		448,523
OMXS 30 Index, 5,051 contracts (SEK)	July 2007		94,924,999		92,704,815		2,220,184
Russell 2000 Index, 481 contracts (USD)	September 2007		203,988,508		202,525,050		1,463,458
S&P MIB Index, 223 contracts (EUR)	September 2007		63,997,547		63,932,884		64,663
S&P Toronto Stock Exchange 60 Index, 1,221 contracts (CAD)	September 2007		182,487,166		184,516,855		(2,029,689	)
SPI 200 Index, 1,353 contracts (AUD)	September 2007		180,292,088		180,004,494		287,594
S&P 500 Index, 688 contracts (USD)	September 2007		262,446,471		260,648,800		1,797,671
Interest rate futures sell contracts:
Japanese 10 Year Bond, 201 contracts (JPY)	September 2007		215,124,266		215,504,649		(380,383	)
Net unrealized depreciation on futures contracts						$	(12,139,297	)

The segregated aggregate market value of investments and cash collateral pledged to cover margin requirements for the open futures positions at June 30, 2007 was $661,881,001.

Currency type abbreviations:

AUD Australian Dollar

CAD Canadian Dollar

EUR Euro

GBP Great Britain Pound

HKD Hong Kong Dollar

JPY Japanese Yen

SEK Swedish Krona

SGD Singapore Dollar

USD United States Dollar

ZAR South African Rand

Options written

UBS Dynamic Alpha Fund had the following open options written as of June 30, 2007:

Call options written

				Expiration date				Premiums received				Value
Nikkei 225 Index Futures, 860 contracts strike @ JPY 19,500				September 2007				$	1,084,823			$	838,173

Currency type abbreviation:

JPY Japanese Yen

See accompanying notes to financial statements.
14

UBS Global Allocation Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS Global Allocation Fund (the "Fund") returned 14.93% (Class A shares returned 8.58% after the deduction of the maximum sales charge), while Class Y shares returned 15.18%. The Fund's benchmark, the GSMI Mutual Fund Index (the "Index"), returned 17.11% over the same time period. For comparison purposes, the MSCI World Free Index (net US), Russell 3000 Index and Citigroup World Government Bond Index returned 23.94%, 20.07%,and 2.86%, respectively. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 18; 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.)

While strong security selection and asset allocation decisions contributed to performance during the period, this was not enough to outweigh the negative impact from currency positioning.

Portfolio performance summary

What worked

• Asset allocation across the world's markets was a positive for the period. The Fund's overall overweight to equities, as well as an overweight to cash versus fixed income markets, contributed positively to returns.

• The Fund began the period with 46% of its portfolio in US equities and 18% in international stocks. However, our research began to show that international equities were becoming overvalued, while US equities were fairly valued, or slightly undervalued. We therefore increased the Fund's US equity exposure to 49%, and reduced its international stock exposure to 15%. (The Index weights are 40% US equities and 22% international equities.) This change represented no net change in equity exposure—just in the focus of that exposure. At period end, our net equity exposure remains above benchmark levels.

• During June, we eliminated our cash overweight and increased our exposure to global fixed income markets, with the exception of Japan. We had been holding cash for some time in lieu of the full benchmark exposure to fixed income, as research indicated bonds were inferior to cash from a risk/return perspective. This positioning helped the Fund for most of the period. But when a selloff in bonds increased the attractiveness of fixed income relative to cash, we decided a change was warranted. The Fund's aggregate fixed income position is now 1% less than the benchmark.

• Equity security selection was a positive contributor to performance, as well. In the US, strong stock selection—led by overweights to Amazon.com and Exelon—helped the US equity component to outperform.

• Several bond sectors experienced outperformance during the period. The international bond component of the Fund outperformed its benchmark due to its defensive duration and yield curve positioning. The portfolio maintained a less-than-benchmark duration, which contributed to relative performance as global yields continued to rise.

UBS Global Allocation Fund

What didn't work

• Our currency strategy was the largest detractor to Fund returns during the period.

• In general, an overweight to lower-yielding currencies, like the Japanese yen and Swiss franc, hurt performance. We have been in a period when investors were rewarded for participating in the "carry trade"—a currency strategy that looks to profit by selling low-yielding currencies, and buying high-yielding ones. However, our research indicates investors' yield-seeking behavior has caused a significant valuation distortion in favor of high-yielding currencies and, conversely, against low-yielding currencies. We expect the carry trade to unwind at some point, and we believe we have positioned the Fund to benefit when it does.

• Our underweights to the Canadian dollar, the euro, and the British pound also detracted from performance. As noted above, we continue to prefer lower-yielding currencies, as well as Asian currencies. During the period, we sold 1% of our allocation to the euro, using it to add to our position in the Japanese yen, in response to what we viewed to be an increasing valuation gap between these currencies.

• Our emphasis on US equities over international equities detracted from performance.

• In particular, stock selection in the auto and materials industries, as well as an underweight to energy, hurt performance. At the country level, underweights to Australia and Germany detracted from performance.

• The emerging markets equity portfolio slightly underperformed the benchmark due to underweights to industrials and utilities.

• In fixed income, the US high yield portfolio underperformed its benchmark due to a defensive risk posture, while a position in second-lien mortgage bonds that was negatively impacted by the subprime selloff hurt performance. While the portfolio did not hold any direct subprime mortgage-backed securities (subprime mortgages are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history), its allocation to second-lien mortgages (which are issued to borrowers with higher credit ratings than those to whom subprime loans are issued) hurt performance when these securities experienced markdowns.

UBS Global Allocation Fund

Portfolio Highlights
Fund positions as of June 30, 2007

	GSMI Index			Fund			Over/(Under) %
US Equity		40.0	%		49.0	%		9.0	%
International Equity		22.0			15.0			(7.0	)
Emerging Markets Equity		3.0			4.0			1.0
US Bonds		21.0			23.0			2.0
International Bonds		9.0			8.0			(1.0	)
High Yield Bonds		3.0			1.0			(2.0	)
Emerging Market Bonds		2.0			0.0			(2.0	)
Cash		0.0			0.0			0.0

UBS Global Allocation Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			10 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		14.93	%		11.75	%		7.93	%		7.93	%
maximum sales charge	Class B⁽³⁾		13.96			10.88			N/A			10.34
	Class C⁽⁴⁾		14.02			10.90			N/A			10.49
	Class Y⁽⁵⁾		15.18			12.02			8.19			9.45
After deducting maximum	Class A⁽²⁾		8.58			10.49			7.32			7.32
sales charge	Class B⁽³⁾		8.96			10.61			N/A			10.23
	Class C⁽⁴⁾		13.02			10.90			N/A			10.49
Russell 3000 Index⁽⁶⁾			20.07			11.53			7.62			11.35
MSCI World Free Index (net US)⁽⁷⁾			23.94			14.34			7.30			10.06
Citigroup World Government Bond Index (WGBI)⁽⁸⁾			2.86			6.30			5.33			5.80
GSMI Mutual Fund Index⁽⁹⁾			17.11			11.92			7.55			9.55

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.14% and 1.14%; Class B—1.95% and 1.95%; Class C—1.91% and 1.91%; Class Y—.88% and .88%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses.

⁽¹⁾ Inception date of UBS Global Allocation Fund Class A shares is 06/30/97. Inception dates of Class B and Class C shares are 12/13/01 and 11/22/01, respectively. Inception date of Class Y shares and, for purposes of this illustration, the indices, is 08/31/92.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The Russell 3000 Index represents a broad US equities universe representing approximately 98% of the market. It is designed to provide a representative indication of the capitalization and return for the US equity market.

⁽⁸⁾ The Citigroup World Government Bond Index (WGBI) is a market capitalization-weighted index composed of straight (i.e., not floating rate or index-linked) government bonds with a one-year minimum maturity. The average maturity is seven years. The Index includes the 22 government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States.

⁽⁹⁾ The GSMI Mutual Fund Index is an unmanaged index compiled by the Advisor, constructed currently as follows: 40% Russell 3000 Index; 22% MSCI World ex-USA (Free) Index; 21% Citigroup Broad Investment Grade Index; 9% Citigroup WGBI Non-US Index (in USD); 2% J.P. Morgan Emerging Markets Bond Index Global; 3% MSCI Emerging Markets Free Index; and 3% Merrill Lynch US High Yield Cash Pay Constrained Index. On December 1, 2003, the 40% Russell 3000 Index replaced the 40% Wilshire 5000 Index, and on June 1, 2005 the 3% Merrill Lynch US High Yield Cash Pay Constrained Index replaced the 3% Merrill Lynch US High Yield Cash Pay Index.

UBS Global Allocation Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS Global Allocation Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares, the Russell 3000 Index, the MSCI World Free Index (net US), the Citigroup World Government Bond Index (WGBI) and GSMI Mutual Fund Index, if you had invested $10,000 in Class A shares on June 30, 1997 or $10,000,000 in Class Y shares on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS Global Allocation Fund Class A vs. Russell 3000 Index, MSCI World Free Index (net US),
Citigroup World Government Bond Index (WGBI) and GSMI Mutual Fund Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS Global Allocation Fund Class Y vs. Russell 3000 Index, MSCI World Free Index (net US),
Citigroup World Government Bond Index (WGBI) and GSMI Mutual Fund Index

Wealth value with dividends reinvested

UBS Global Allocation Fund

Top ten equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Citigroup, Inc.		1.7	%
Morgan Stanley		1.5
Microsoft Corp.		1.4
Wells Fargo & Co.		1.2
Exelon Corp.		1.2
General Electric Co.		1.2
Allergan, Inc.		1.1
Intel Corp.		1.0
Wyeth		1.0
Sprint Nextel Corp.		1.0
Total		12.3	%

Top ten fixed income holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
US Treasury Notes, 4.500%, due 03/31/12		1.3	%
US Treasury Notes, 4.625%, due 11/15/16		1.3
US Treasury Notes, 4.750%, due 12/31/08		0.7
US Treasury Bonds, 6.250%, due 08/15/23		0.6
US Treasury Bonds, 6.250%, due 05/15/30		0.6
Federal Home Loan Bank System, 5.500%, due 08/13/14		0.5
US Treasury Bonds, 4.750%, due 02/15/37		0.5
Deutsche Bundesrepublik, 4.500%, due 07/04/09		0.5
Deutsche Bundesrepublik, 3.750%, due 01/04/09		0.4
Republic of Italy, 5.250%, due 08/01/11		0.3
Total		6.7	%

Country exposure, top five (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
United States		58.4	%
Germany		4.2
United Kingdom		4.1
Japan		3.7
France		2.4
Total		72.8	%

⁽¹⁾ Figures represent the direct investments of the UBS Global Allocation Fund. Figures could be different if a breakdown of the underlying investment companies was included.

UBS Global Allocation Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Equities US equities
Aerospace & defense	0.63	%
Air freight & logistics	0.72
Auto components	1.34
Automobiles	0.28
Beverages	0.66
Biotechnology	1.27
Building products	0.71
Capital markets	2.74
Chemicals	0.21
Commercial banks	2.51
Commercial services & supplies	0.11
Communications equipment	0.47
Computers & peripherals	0.59
Diversified consumer services	0.03
Diversified financial services	2.44
Diversified telecommunication services	0.64
Electric utilities	1.77
Electrical equipment	0.13
Energy equipment & services	1.23
Food & staples retailing	1.03
Health care equipment & supplies	0.81
Health care providers & services	1.36
Hotels, restaurants & leisure	1.08
Household durables	0.36
Household products	0.07
Industrial conglomerates	1.19
Insurance	1.12
Internet & catalog retail	0.41
Internet software & services	0.92
IT services	0.06
Machinery	1.20
Media	2.01
Multi-utilities	0.74
Multiline retail	0.31
Oil, gas & consumable fuels	1.29
Pharmaceuticals	3.81
Road & rail	0.90
Semiconductors & semiconductor equipment	2.61
Software	3.08
Specialty retail	0.99
Textiles, apparel & luxury goods	0.24
Thrifts & mortgage finance	0.39
Wireless telecommunication services	0.98
Total US equities	45.44
International equities
Air freight & logistics	0.09
Airlines	0.24
Auto components	0.26
Automobiles	0.54
Beverages	0.29
Capital markets	0.36
Chemicals	0.26
Commercial banks	2.97	%
Commercial services & supplies	0.12
Communications equipment	0.23
Construction & engineering	0.04
Construction materials	0.20
Consumer finance	0.08
Diversified financial services	0.16
Diversified telecommunication services	0.56
Electric utilities	0.21
Electronic equipment & instruments	0.07
Energy equipment & services	0.48
Food & staples retailing	0.30
Food products	0.22
Gas utilities	0.05
Health care equipment & supplies	0.17
Hotels, restaurants & leisure	0.09
Household durables	0.10
Household products	0.10
Industrial conglomerates	0.32
Insurance	1.36
Internet & catalog retail	0.03
Machinery	0.41
Media	0.25
Metals & mining	0.22
Office electronics	0.16
Oil, gas & consumable fuels	1.10
Paper & forest products	0.15
Pharmaceuticals	1.04
Real estate management & development	0.13
Road & rail	0.26
Semiconductors & semiconductor equipment	0.31
Software	0.10
Specialty retail	0.36
Textiles, apparel & luxury goods	0.04
Tobacco	0.10
Trading companies & distributors	0.28
Wireless telecommunication services	0.65
Total international equities	15.46
Total equities	60.90
Bonds US bonds US corporate bonds
Automobiles	0.06
Beverages	0.02
Capital markets	0.33
Chemicals	0.02
Commercial banks	0.17
Commercial services & supplies	0.02
Consumer finance	0.38
Diversified financial services	0.13
Diversified telecommunication services	0.08
Electric utilities	0.04
Food products	0.00	⁽²⁾

UBS Global Allocation Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Insurance	0.01	%
IT services	0.01
Media	0.05
Oil, gas & consumable fuels	0.02
Pharmaceuticals	0.01
Real estate investment trusts (REITs)	0.01
Road & rail	0.03
Wireless telecommunication services	0.01
Total US corporate bonds	1.40
Asset-backed securities	0.49
Collateralized debt obligation	0.13
Commercial mortgage-backed securities	1.07
Mortgage & agency debt securities	4.37
Stripped mortgage-backed securities	0.06
US government obligations	5.46
Total US bonds	12.98
International bonds International corporate bonds
Thrifts & mortgage finance	0.07
Commercial banks	0.31
Diversified telecommunication services	0.01
Total international corporate bonds	0.39
International mortgage & agency debt securities	0.02
Foreign government bonds	7.32
Sovereign/supranational bond	0.10
Total international bonds	7.83
Total bonds	20.81
Investment companies
iShares MSCI EAFE Index Fund	0.08	%
iShares Russell 1000 Growth Index Fund	0.01
iShares Russell 2000 Index Fund	0.40
UBS Corporate Bond Relationship Fund	1.90
UBS Emerging Markets Equity Relationship Fund	4.66
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund	0.15
UBS High Yield Relationship Fund	0.88
UBS Small-Cap Equity Relationship Fund	2.83
UBS U.S. Securitized Mortgage Relationship Fund	6.89
Total investment companies	17.80
Short-term investments	0.29
Investment of cash collateral from securities loaned	2.79
Total investments	102.59
Liabilities, in excess of cash and other assets	(2.59	)
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

⁽²⁾ Amount represents less than 0.005%.

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—60.90%
US equities—45.44%
Abbott Laboratories		43,200	$	2,313,360
Abercrombie & Fitch Co.		72,100		5,261,858
Adobe Systems, Inc.*		140,800		5,653,120
Aflac, Inc.		241,200		12,397,680
Allergan, Inc.		971,600		56,003,024
Allstate Corp.		311,500		19,160,365
Amazon.com, Inc.*		310,200		21,220,782
American Electric Power Co., Inc.		397,500		17,903,400
American International Group, Inc.		71,400		5,000,142
Amgen, Inc.*		125,100		6,916,779
Analog Devices, Inc.		963,700		36,273,668
Anheuser-Busch Cos., Inc.		278,800		14,542,208
Apache Corp.		37,800		3,084,102
Apple, Inc.*		78,600		9,592,344
AT&T, Inc.		790,800		32,818,200
Automatic Data Processing, Inc.		61,100		2,961,517
Baker Hughes, Inc.		67,000		5,636,710
Bank of New York Co., Inc.		120,100		4,976,944
Baxter International, Inc.		159,700		8,997,498
BEA Systems, Inc.*		975,300		13,351,857
Becton, Dickinson & Co.		50,900		3,792,050
Best Buy Co., Inc.		71,300		3,327,571
Blackstone Group LP*		206,918		6,056,490
Boeing Co.		30,100		2,894,416
BorgWarner, Inc.		294,200		25,312,968
Bristol-Myers Squibb Co.		753,300		23,774,148
Broadcom Corp., Class A*		119,000		3,480,750
Burlington Northern Santa Fe Corp.		545,700		46,460,898
C.R. Bard, Inc.		86,800		7,172,284
Carnival Corp.		650,100		31,705,377
Cephalon, Inc.*		111,500		8,963,485
Chevron Corp.		160,900		13,554,216
Chico's FAS, Inc.*		500,600		12,184,604
Cisco Systems, Inc.*		419,900		11,694,215
Citigroup, Inc.		1,696,607		87,018,973
Citrix Systems, Inc.*		459,300		15,464,631
City National Corp.		125,900		9,579,731
Coach, Inc.*		256,500		12,155,535
Constellation Brands, Inc., Class A*		675,100		16,391,428
Costco Wholesale Corp.		493,100		28,856,212
Dell, Inc.*		732,700		20,918,585
Dominion Resources, Inc.		66,500		5,739,615
eBay, Inc.*		245,800		7,909,844
ENSCO International, Inc.		351,700		21,457,217
EOG Resources, Inc.		239,200		17,475,952
Exelon Corp.		867,200		62,958,720
Express Scripts, Inc.*		85,300		4,265,853
Exxon Mobil Corp.		214,200		17,967,096
FedEx Corp.		332,900		36,941,913

	Shares		Value
US equities—(continued)
Fifth Third Bancorp		793,600	$	31,561,472
Fortune Brands, Inc.		223,700		18,426,169
Freddie Mac		334,600		20,310,220
Genentech, Inc.*		76,800		5,810,688
General Dynamics Corp.		80,400		6,288,888
General Electric Co.		1,603,400		61,378,152
Genzyme Corp.*		552,900		35,606,760
Goldman Sachs Group, Inc.		27,100		5,873,925
Google, Inc., Class A*		35,800		18,737,004
Halliburton Co.		666,700		23,001,150
Harley-Davidson, Inc.		242,100		14,431,581
Hartford Financial Services Group, Inc.		214,900		21,169,799
Hologic, Inc.*⁽¹⁾		34,100		1,886,071
Home Depot, Inc.		725,200		28,536,620
Illinois Tool Works, Inc.		744,400		40,339,036
Intel Corp.		2,230,200		52,989,552
International Game Technology		173,300		6,880,010
Intuit, Inc.*		488,400		14,691,072
ITT Educational Services, Inc.*		11,400		1,338,132
J. Crew Group, Inc.*		31,400		1,698,426
Johnson & Johnson		451,638		27,829,934
Johnson Controls, Inc.		378,500		43,818,945
JPMorgan Chase & Co.		760,600		36,851,070
Laboratory Corp. of America Holdings*		67,400		5,274,724
Las Vegas Sands Corp.*		78,300		5,981,337
Linear Technology Corp.		438,600		15,868,548
Masco Corp.		1,287,400		36,652,278
McAfee, Inc.*		54,600		1,921,920
McGraw-Hill Cos., Inc.		313,600		21,349,888
Medco Health Solutions, Inc.*		350,000		27,296,500
Medtronic, Inc.		383,000		19,862,380
Mellon Financial Corp.		884,700		38,926,800
Merck & Co., Inc.		704,000		35,059,200
Merrill Lynch & Co., Inc.		72,500		6,059,550
Microchip Technology, Inc.		61,300		2,270,552
Microsoft Corp.		2,484,000		73,203,480
Millennium Pharmaceuticals, Inc.*		790,300		8,353,471
Monster Worldwide, Inc.*		138,500		5,692,350
Moody's Corp.		27,400		1,704,280
Morgan Stanley		947,550		79,480,494
News Corp., Class A		1,018,600		21,604,506
NiSource, Inc.		474,200		9,820,682
Northeast Utilities		59,100		1,676,076
Northrop Grumman Corp.		127,200		9,905,064
Omnicom Group, Inc.		450,600		23,845,752
PACCAR, Inc.		249,300		21,699,072
Peabody Energy Corp.		32,000		1,548,160
Pepco Holdings, Inc.		310,700		8,761,740
PepsiCo, Inc.		49,600		3,216,560
PNC Financial Services Group, Inc.		346,100		24,773,838
Praxair, Inc.		152,700		10,992,873

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(continued)
US equities—(concluded)
Precision Castparts Corp.		16,353	$	1,984,600
Procter & Gamble Co.		62,000		3,793,780
QUALCOMM, Inc.		225,500		9,784,445
Quest Diagnostics, Inc.		146,100		7,546,065
R.H. Donnelley Corp.*		261,292		19,800,708
Range Resources Corp.		77,000		2,880,570
Red Hat, Inc.*		291,900		6,503,532
Research In Motion Ltd.*		13,000		2,599,870
Rockwell Automation, Inc.		92,700		6,437,088
Schlumberger Ltd.		93,700		7,958,878
Sempra Energy		377,100		22,335,633
Southwestern Energy Co.*		74,300		3,306,350
Sprint Nextel Corp.		2,434,752		50,423,714
Starbucks Corp.*		143,900		3,775,936
Symantec Corp.*		1,392,872		28,136,014
SYSCO Corp.		739,300		24,389,507
Target Corp.		254,800		16,205,280
Texas Instruments, Inc.		91,100		3,428,093
United Technologies Corp.		157,300		11,157,289
UnitedHealth Group, Inc.		506,700		25,912,638
Viacom, Inc., Class B*		413,200		17,201,516
Weatherford International Ltd.*		95,300		5,264,372
Wells Fargo & Co.		1,805,700		63,506,469
Wyeth		899,300		51,565,862
Wynn Resorts Ltd.		80,700		7,237,983
Xilinx, Inc.		763,900		20,449,603
XTO Energy, Inc.		115,400		6,935,540
Yahoo!, Inc.*		763,500		20,713,755
Total US equities (cost $2,053,463,912)				2,343,032,176
International equities—15.46%
Australia—0.56%
National Australia Bank Ltd.		187,207		6,510,452
Qantas Airways Ltd.		2,577,233		12,235,877
QBE Insurance Group Ltd.		379,357		10,034,509
				28,780,838
Austria—0.07%
Telekom Austria AG		148,997		3,730,710
Belgium—0.18%
KBC Groep NV		70,207		9,504,067
Canada—0.63%
Alcan, Inc.		73,220		5,973,075
Canadian Pacific Railway Ltd.⁽¹⁾		122,000		8,425,759
Cott Corp.*⁽¹⁾		102,900		1,493,390
Magna International, Inc., Class A		31,900		2,919,737
Manulife Financial Corp.⁽¹⁾		106,300		3,975,585
Toronto-Dominion Bank⁽¹⁾		141,000		9,643,990
				32,431,536
Cayman Islands—0.48%
GlobalSantaFe Corp.		342,400		24,738,400

	Shares		Value
Denmark—0.09%
Novo-Nordisk A/S, Class B		40,450	$	4,414,011
Finland—0.26%
Nokia Oyj		197,447		5,561,153
Stora Enso Oyj, Class R		420,280		7,952,215
				13,513,368
France—1.14%
AXA SA⁽¹⁾		323,228		14,003,509
Compagnie Generale des Etablissements Michelin, Class B		31,769		4,465,317
France Telecom SA⁽¹⁾		539,991		14,909,357
Sanofi-Aventis⁽¹⁾		31,916		2,596,122
Total SA⁽¹⁾		281,301		22,942,599
				58,916,904
Germany—1.49%
Allianz SE		79,714		18,728,437
DaimlerChrysler AG		63,338		5,879,865
Deutsche Postbank AG		42,057		3,703,918
E.ON AG		36,868		6,201,946
Henkel KGaA, Preference shares⁽¹⁾		106,740		5,647,225
IKB Deutsche Industriebank AG		65,152		2,385,268
MAN AG		34,010		4,914,252
Metro AG		59,400		4,942,680
Muenchener Rueckversicherungs- Gesellschaft AG		12,209		2,250,440
SAP AG⁽¹⁾		110,354		5,686,083
Siemens AG		113,229		16,331,830
				76,671,944
Greece—0.12%
Alpha Bank AE		105,877		3,338,872
National Bank of Greece SA		51,094		2,932,095
				6,270,967
Hong Kong—0.19%
Esprit Holdings Ltd.		381,500		4,839,983
Sun Hung Kai Properties Ltd.		279,000		3,357,620
Yue Yuen Industrial Holdings Ltd.⁽¹⁾		589,500		1,828,240
				10,025,843
Ireland—0.37%
Bank of Ireland		420,625		8,505,266
CRH PLC		112,295		5,567,235
Depfa Bank PLC		232,741		4,126,544
Irish Life & Permanent PLC		29,361		742,715
				18,941,760

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
International equities—(concluded)
Italy—0.50%
Fiat SpA⁽¹⁾		146,614	$	4,379,454
Intesa Sanpaolo SpA		2,048,051		15,328,799
UniCredito Italiano SpA		681,697		6,117,122
				25,825,375
Japan—2.69%
Aeon Co., Ltd.		192,200		3,574,725
Aiful Corp.⁽¹⁾		71,250		2,048,528
Asahi Breweries Ltd.⁽¹⁾		299,000		4,640,723
Bank of Yokohama Ltd.		484,000		3,396,353
Bridgestone Corp.⁽¹⁾		193,400		4,146,810
Canon, Inc.⁽¹⁾		141,300		8,297,251
East Japan Railway Co.		629		4,853,198
Fast Retailing Co., Ltd.		26,900		1,916,045
Funai Electric Co., Ltd.		24,300		1,419,021
Honda Motor Co., Ltd.		222,800		8,142,944
Hoya Corp.		101,700		3,378,298
Japan Tobacco, Inc.		1,061		5,239,293
KDDI Corp.		386		2,862,278
Kubota Corp.		457,000		3,711,675
Mitsubishi Corp.		288,500		7,568,365
Mitsui Fudosan Co., Ltd.		125,000		3,512,690
Mitsui Sumitomo Insurance Co., Ltd.		526,000		6,758,432
Nitto Denko Corp.		107,500		5,430,660
NOK Corp.		98,400		2,077,888
Nomura Holdings, Inc.		176,700		3,444,305
NTN Corp.		288,000		2,486,449
NTT DoCoMo, Inc.		2,645		4,189,036
Rohm Co., Ltd.		58,000		5,158,173
Shin-Etsu Chemical Co., Ltd.		75,500		5,402,274
SMC Corp.		20,400		2,717,239
Sompo Japan Insurance, Inc.		279,000		3,419,379
Sumitomo Mitsui Financial Group, Inc.		891		8,322,030
Sumitomo Trust & Banking Co., Ltd.		337,000		3,216,041
Takefuji Corp.		58,680		1,973,078
Tokyo Gas Co., Ltd.		588,000		2,788,971
Toyota Motor Corp.		145,600		9,223,797
Yamada Denki Co., Ltd.		34,560		3,615,292
				138,931,241
Netherlands—1.16%
ABN AMRO Holding NV⁽¹⁾		450,467		20,759,759
ASML Holding NV*		229,322		6,362,705
ING Groep NV CVA		185,458		8,230,557
Koninklijke Philips Electronics NV		81,716		3,490,489
Reed Elsevier NV		263,754		5,047,667
Royal KPN NV		402,474		6,711,054
STMicroelectronics NV		218,931		4,252,080
TNT NV		107,936		4,883,654
				59,737,965

	Shares		Value
Norway—0.22%
Statoil ASA⁽¹⁾		246,600	$	7,673,645
Telenor ASA*		182,800		3,588,143
				11,261,788
Spain—0.34%
Banco Santander Central Hispano SA		935,557		17,334,684
Sweden—0.26%
Sandvik AB		356,600		7,247,543
Telefonaktiebolaget LM Ericsson, Class B		1,585,000		6,363,917
				13,611,460
Switzerland—1.48%
Alcon, Inc.		40,500		5,463,855
Clariant AG*		142,649		2,323,958
Credit Suisse Group		213,021		15,233,225
Holcim Ltd.		45,664		4,964,535
Nestle SA		18,975		7,238,928
Novartis AG		306,976		17,340,437
Roche Holding AG		112,762		20,069,143
Straumann Holding AG⁽¹⁾		12,094		3,405,924
				76,040,005
United Kingdom—3.23%
AstraZeneca PLC		97,901		5,274,644
Balfour Beatty PLC		231,722		2,061,372
Barclays PLC		1,046,980		14,632,986
BP PLC		2,172,371		26,304,899
British Sky Broadcasting Group PLC		326,063		4,190,509
Cadbury Schweppes PLC		297,200		4,058,290
Carnival PLC		95,182		4,558,569
Diageo PLC		420,331		8,752,971
Experian Group Ltd.		362,363		4,580,627
GlaxoSmithKline PLC		140,953		3,693,773
Home Retail Group PLC		151,479		1,396,209
Kesa Electricals PLC		502,076		3,173,369
Kingfisher PLC		1,092,852		4,970,670
Prudential PLC		713,725		10,233,270
Rentokil Initial PLC		501,011		1,614,759
Rio Tinto PLC		66,504		5,110,831
Royal Bank of Scotland Group PLC		1,045,754		13,292,865
Scottish & Southern Energy PLC		159,417		4,638,615
Tesco PLC		818,108		6,875,297
Vodafone Group PLC		7,864,687		26,500,785
Wolseley PLC		292,508		7,060,371
WPP Group PLC		238,238		3,580,867
				166,556,548
Total international equities (cost $627,137,598)				797,239,414
Total equities (cost $2,680,601,510)				3,140,271,590

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—20.81%
US bonds—12.98%
US corporate bonds—1.40%
AT&T Corp., 8.000%, due 11/15/31	$	450,000	$	534,861
AT&T, Inc., 6.450%, due 06/15/34		540,000		533,651
AvalonBay Communities, Inc., 7.500%, due 08/01/09		275,000		286,569
Avon Products, Inc., 7.150%, due 11/15/09		195,000		202,200
Bank of America Corp., 5.420%, due 03/15/17		2,000,000		1,917,328
BellSouth Corp., 6.550%, due 06/15/34		675,000		673,863
Burlington Northern Santa Fe Corp., 7.082%, due 05/13/29		660,000		702,017
Capital One Financial Corp., 5.500%, due 06/01/15		685,000		661,206
Citigroup, Inc., 5.000%, due 09/15/14		1,275,000		1,212,859
5.500%, due 11/18/15	GBP	1,520,000		2,909,793
5.625%, due 08/27/12	$	3,775,000		3,775,804
Comcast Cable Communications LLC, 6.750%, due 01/30/11		2,250,000		2,328,876
Computer Sciences Corp., 3.500%, due 04/15/08		325,000		319,953
ConAgra Foods, Inc., 5.819%, due 06/15/17		1,000		973
Coors Brewing Co., 6.375%, due 05/15/12		925,000		947,168
DaimlerChrysler N.A. Holding Corp., 4.050%, due 06/04/08		3,325,000		3,278,354
Devon Financing Corp. ULC, 6.875%, due 09/30/11		1,050,000		1,096,132
Dominion Resources, Inc., Series B, 5.950%, due 06/15/35		520,000		487,588
Erac USA Finance Co., 8.000%, due 01/15/11⁽²⁾		700,000		747,049
Exelon Generation Co. LLC, 5.350%, due 01/15/14		1,000,000		958,271
Ford Motor Credit Co. LLC, 5.800%, due 01/12/09		12,750,000		12,480,363
General Electric Capital Corp., 6.000%, due 06/15/12		5,325,000		5,419,971
6.750%, due 03/15/32		1,250,000		1,356,210
GMAC LLC, 6.875%, due 09/15/11		2,170,000		2,134,529
Goldman Sachs Group, Inc., 6.875%, due 01/15/11		3,425,000		3,562,538
HSBC Bank USA N.A., 5.625%, due 08/15/35		1,355,000		1,245,092

	Face amount		Value
US corporate bonds—(concluded)
HSBC Finance Corp., 6.750%, due 05/15/11	$	1,925,000	$	1,998,202
ICI Wilmington, Inc., 4.375%, due 12/01/08		600,000		589,891
International Lease Finance Corp., 3.500%, due 04/01/09		1,775,000		1,719,372
John Deere Capital Corp., 7.000%, due 03/15/12		700,000		740,103
JPMorgan Chase & Co., 6.750%, due 02/01/11		2,000,000		2,077,916
MBNA Corp., 7.500%, due 03/15/12		550,000		592,420
Metlife, Inc., 5.000%, due 11/24/13		700,000		672,999
Morgan Stanley, 6.750%, due 04/15/11		3,475,000		3,602,970
New Cingular Wireless Services, Inc., 8.750%, due 03/01/31		375,000		467,483
PPL Energy Supply LLC, Series A, 6.400%, due 11/01/11		825,000		837,938
Sprint Capital Corp., 8.750%, due 03/15/32		1,375,000		1,544,304
US Bank N.A., 6.375%, due 08/01/11		625,000		643,845
Verizon New York, Inc., Series B, 7.375%, due 04/01/32		975,000		1,025,491
Wachovia Bank N.A., 7.800%, due 08/18/10		1,550,000		1,645,297
Waste Management, Inc., 7.375%, due 08/01/10		650,000		681,010
Wells Fargo Bank N.A., 6.450%, due 02/01/11		2,625,000		2,706,622
Wyeth, 5.500%, due 03/15/13		750,000		742,159
Total US corporate bonds (cost $73,908,509)				72,061,240
Asset-backed securities—0.49%
Conseco Finance, Series 01-D, Class M2, 7.070%, due 11/15/32⁽³⁾		1,163,349		1,010,946
Countrywide Asset-Backed Certificates, Series 04-SD1, Class A1, 5.660%, due 06/25/33^(2),(3)		183,691		184,205
Fieldstone Mortgage Investment Corp., Series 06-S1, Class A, 5.540%, due 01/25/37^(2),(3)		2,839,486		2,805,149

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Asset-backed securities—(concluded)
Green Tree Financial Corp., Series 96-4, Class A6, 7.400%, due 06/15/27	$	236,126	$	242,981
GSAMP Trust, Series 06-S5, Class A2, 5.658%, due 09/25/36^(4),(5)		2,000,000		1,600,000
Home Equity Mortgage Trust, Series 06-3, Class A2, 5.594%, due 09/25/36⁽³⁾		1,250,000		1,241,716
Series 06-4, Class A2, 5.730%, due 11/25/36⁽⁵⁾		3,000,000		2,987,210
Providian Gateway Master Trust, Series 04-EA, Class C, 5.900%, due 11/15/11^(2),(3)		3,000,000		3,005,157
Rutland Rated Investments, Series DRYD-1A, Class A6F, 6.957%, due 06/20/13⁽²⁾		1,645,000		1,653,738
Saco I Trust, Series 06-5, Class 2A1, 5.470%, due 05/25/36⁽³⁾		3,135,041		3,134,454
Structured Asset Securities Corp., Series 03-AL2, Class A, 3.357%, due 01/25/31⁽²⁾		182,582		166,286
Series 02-23XS, Class A7, 6.080%, due 11/25/32⁽⁵⁾		5,170,000		5,120,595
Terwin Mortgage Trust, Series 06-1, Class 2M2, 4.250%, due 01/25/37^(2),(5)		2,500,000		2,075,000
Total asset-backed securities (cost $26,101,533)				25,227,437
Collateralized debt obligation—0.13%
G-Force CDO Ltd., Series 06-1A, Class A3, 5.600%, due 09/27/46^(2),(4)(cost $6,900,093)		7,000,000		6,808,725
Commercial mortgage-backed securities—1.07%
Asset Securitization Corp., Series 95-MD4, Class A3, 7.384%, due 08/13/29⁽³⁾		3,250,000		3,257,534
Series 95-MD4, Class A5, 7.384%, due 08/13/29⁽³⁾		5,000,000		5,047,250
Series 97-D4, Class B1, 7.525%, due 04/14/29		5,000,000		5,382,084
Banc of America Commercial Mortgage, Inc., Series 06-6, Class A4, 5.356%, due 10/10/45		4,550,000		4,389,132
DLJ Commercial Mortgage Corp., Series 00-CKP1, Class A1B, 7.180%, due 11/10/33		1,177,675		1,225,683

	Face amount		Value
Commercial mortgage-backed securities—(concluded)
First Union Commercial Mortgage Securities, Inc., Series 97-C2, Class A3, 6.650%, due 11/18/29	$	257,584	$	257,374
GS Mortgage Securities Corp. II, Series 06-RR2, Class A1, 5.812%, due 06/23/46^(2),(3)		9,025,000		8,850,637
Series 98-GLII, Class A1, 6.312%, due 04/13/31		311,101		311,038
Host Marriott Pool Trust, Series 99-HMTA, Class A, 6.980%, due 08/03/15⁽²⁾		148,972		151,386
Series 99-HMTA, Class C, 7.730%, due 08/03/15⁽²⁾		750,000		781,591
Series 99-HMTA, Class D, 7.970%, due 08/03/15⁽²⁾		5,300,000		5,545,475
Series 99-HMTA, Class E, 8.070%, due 08/03/15⁽²⁾		460,000		482,109
JPMorgan Commercial Mortgage Finance Corp., Series 99-C8, Class A2, 7.400%, due 07/15/31		837,707		858,193
Mach One Trust Commercial Mortgage-Backed, Series 04-1A, Class A1, 3.890%, due 05/28/40⁽²⁾		1,009,703		999,931
Merrill Lynch Mortgage Trust, Series 05-LC1, Class A4, 5.291%, due 01/12/44⁽³⁾		9,625,000		9,284,190
Morgan Stanley Capital I, Series 03-T11, Class A4, 5.150%, due 06/13/41		5,065,000		4,918,412
Nomura Asset Securities Corp., Series 96-MD5, Class A4, 8.208%, due 04/13/39⁽³⁾		88,216		88,345
PNC Mortgage Acceptance Corp., Series 00-C1, Class A2, 7.610%, due 02/15/10		1,666,535		1,728,007
Prudential Mortgage Capital Funding LLC, Series 01-ROCK, Class A2, 6.605%, due 05/10/34		1,055,000		1,088,838
Salomon Brothers Mortgage Securities VII, Inc., Series 00-C3, Class A2, 6.592%, due 12/18/33		540,000		553,864
Total commercial mortgage-backed securities (cost $57,194,849)				55,201,073
Mortgage & agency debt securities—4.37%
Bear Stearns Alt-A Trust, Series 05-3, Class B1, 5.300%, due 04/25/35⁽³⁾		7,368,175		7,295,691

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Mortgage & agency debt securities—(continued)
Countrywide Alternative Loan Trust, Series 05-J2, Class 2A1, 7.500%, due 12/25/34	$	1,250,730	$	1,253,632
Countrywide Home Loan Mortgage Pass-Through Trust, Series 03-20, Class 3A2, 4.750%, due 07/25/18		207,348		206,074
Series 06-HYB1, Class 1A1, 5.363%, due 03/20/36⁽³⁾		5,204,846		5,155,698
Series 06-16, Class M1, 6.250%, due 11/25/36⁽³⁾		2,983,632		2,949,322
CS First Boston Mortgage Securities Corp., Series 05-9, Class 3A1, 6.000%, due 10/25/35		3,818,275		3,794,521
Series 05-10, Class 10A3, 6.000%, due 11/25/35		1,015,966		1,017,690
Series 03-8, Class 5A1, 6.500%, due 04/25/33		329,612		329,821
Series 05-12, Class 1A1, 6.500%, due 01/25/36		5,508,339		5,551,779
Series 03-27, Class 9A1, 7.000%, due 11/25/33		187,978		190,887
Series 05-11, Class 4A1, 7.000%, due 12/25/35		3,615,730		3,670,735
Series 01-26, Class 5A1, 7.307%, due 11/25/31⁽³⁾		61,185		60,996
Series 02-10, Class 2A1, 7.500%, due 05/25/32		12,692		12,746
Federal Home Loan Bank System, 5.500%, due 08/13/14		26,855,000		27,039,010
Federal Home Loan Mortgage Corp. Gold Pools, # E93969, 5.500%, due 01/01/18		89,502		88,473
# E01345, 5.500%, due 04/01/18		303,422		299,863
# B11810, 5.500%, due 01/01/19		1,455,688		1,438,611
# D96274, 5.500%, due 09/01/23		2,398,952		2,346,050
# C90798, 5.500%, due 02/01/24		4,258,553		4,160,729
# G11429, 6.000%, due 12/01/17		222,503		223,773
# C56030, 6.000%, due 03/01/31		384,743		384,015
# A24844, 6.000%, due 07/01/34		1,209,603		1,202,589
# E01127, 6.500%, due 02/01/17		90,753		92,708

	Face amount		Value
Mortgage & agency debt securities—(continued)
# E92004, 6.500%, due 10/01/17	$	498,633	$	508,928
# C20606, 6.500%, due 01/01/29		1,661,535		1,697,401
# C00742, 6.500%, due 04/01/29		52,989		54,131
# G01717, 6.500%, due 11/01/29		1,022,451		1,043,845
# G00944, 7.000%, due 06/01/28		160,021		165,425
# G01391, 7.000%, due 04/01/32		1,344,746		1,390,261
Federal Home Loan Mortgage Corp. REMICs, Series 2148, Class ZA, 6.000%, due 04/15/29		688,708		683,455
Series 2426, Class GH, 6.000%, due 08/15/30		248,998		249,584
Series 3164, Class NC, 6.000%, due 12/15/32		7,875,000		7,870,018
Federal Home Loan Mortgage Corp., 5.300%, due 02/27/09		8,275,000		8,262,877
5.375%, due 12/27/11		6,765,000		6,735,430
5.600%, due 10/17/13		2,815,000		2,798,394
5.750%, due 06/27/16		3,300,000		3,323,001
Federal National Mortgage Association Grantor Trust, Series 02-T19, Class A1, 6.500%, due 07/25/42		1,541,569		1,563,284
Series 00-T6, Class A1, 7.500%, due 06/25/30		275,680		284,309
Series 01-T4, Class A1, 7.500%, due 07/25/41		1,233,278		1,270,427
Federal National Mortgage Association Pools, # 809205, 4.272%, due 01/01/35⁽³⁾		2,852,232		2,808,061
# 809625, 4.656%, due 01/01/35⁽³⁾		3,770,434		3,723,260
# 357351, 5.500%, due 02/01/18		6,897,202		6,820,332
# 244450, 5.500%, due 11/01/23		140,968		137,176
# 255182, 5.500%, due 04/01/24		4,882,200		4,770,233
# 829952, 5.500%, due 09/01/24		2,957,679		2,891,792
# 705626, 5.500%, due 05/01/33		4,865,100		4,713,756
# 555523, 5.500%, due 06/01/33		6,169,955		5,978,686
# 720109, 5.500%, due 07/01/33		5,086,072		4,927,854

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Mortgage & agency debt securities—(continued)
# 190015, 6.000%, due 09/01/08	$	440,968	$	441,828
# 323789, 6.000%, due 06/01/14		838,436		843,567
# 829951, 6.000%, due 07/01/17		2,439,196		2,454,124
# 254403, 6.000%, due 08/01/17		565,679		569,015
# 555412, 6.000%, due 04/01/18		234,889		236,313
# 809903, 6.000%, due 03/01/20		2,427,826		2,438,648
# 810112, 6.000%, due 03/01/20		2,146,570		2,156,139
# 596124, 6.000%, due 11/01/28		113,760		113,419
# 252339, 6.000%, due 03/01/29		705,353		703,080
# 522564, 6.000%, due 07/01/29		538,201		536,584
# 676733, 6.000%, due 01/01/33		1,990,297		1,981,071
# 891332, 6.181%, due 04/01/36⁽³⁾		1,274,894		1,288,969
# 313697, 6.500%, due 12/01/10		671,866		674,765
# 629627, 6.500%, due 03/01/17		433,830		442,972
# 652185, 6.500%, due 06/01/17		500,452		511,201
# 650101, 7.000%, due 08/01/32		665,663		689,515
# 754504, 7.000%, due 01/01/34		242,253		248,390
# 578040, 7.500%, due 05/01/31		16,402		17,119
# 653819, 7.500%, due 02/01/33		219,405		229,514
Federal National Mortgage Association Whole Loan, Series 01-W3, Class A, 7.000%, due 09/25/41		60,456		61,620
Series 04-W11, Class 1A3, 7.000%, due 05/25/44		1,748,387		1,787,749
Series 95-W3, Class A, 9.000%, due 04/25/25		795		860
Federal National Mortgage Association, 4.250%, due 08/15/10		8,075,000		7,856,305
5.200%, due 11/08/10		6,450,000		6,427,838
5.500%, due 03/15/11		5,670,000		5,718,365
5.500%, due 01/23/12		5,280,000		5,267,149
6.070%, due 05/12/16		3,790,000		3,799,600

	Face amount		Value
Mortgage & agency debt securities—(concluded)
6.250%, due 02/01/11	$	5,535,000	$	5,720,627
First Horizon Alternative Mortgage Securities Trust, Series 04-AA3, Class A1, 5.303%, due 09/25/34⁽³⁾		915,599		910,017
First Horizon Asset Securities, Inc., Series 04-FL1, Class 1A1, 5.590%, due 02/25/35⁽³⁾		191,075		191,018
Government National Mortgage Association Pools, # 495814, 6.000%, due 01/15/29		41,514		41,450
# 2671, 6.000%, due 11/20/28		31,678		31,620
# 2713, 6.000%, due 02/20/29		28,318		28,262
# 80329, 6.125%, due 10/20/29⁽³⁾		130,260		131,233
# 781276, 6.500%, due 04/15/31		999,092		1,019,999
# 422480, 6.500%, due 03/15/26		335,074		341,709
# 491532, 6.500%, due 01/20/34		555,745		565,763
# 338523, 8.000%, due 12/15/22		6,723		7,111
Government National Mortgage Association, Series 01-35, Class AZ, 6.500%, due 08/20/31		2,837,942		2,881,471
JPMorgan Alternative Loan Trust, Series 06-A4, Class A7, 6.300%, due 09/25/36⁽³⁾		8,000,000		7,989,477
Residential Asset Securitization Trust, Series 04-IP2, Class B1, 5.420%, due 12/25/34⁽³⁾		4,730,524		4,696,116
WaMu Mortgage Pass-Through Certificates, Series 07-HY1, Class 3A2, 5.884%, due 02/25/37⁽³⁾		7,000,000		6,887,335
Wells Fargo Mortgage Backed Securities Trust, Series 03-18, Class A2, 5.250%, due 12/25/33		3,273,725		3,081,292
Total mortgage & agency debt securities (cost $228,714,141)				225,457,552
Stripped mortgage-backed securities—0.06%
Federal National Mortgage Association Interest Strips, Series 365, Class 11, 5.500%, due 02/01/36⁽⁴⁾		2,514,558		650,186

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(concluded)
Stripped mortgage-backed securities—(concluded)
Federal National Mortgage Association Principal Strips, Series 352, Class 1, 3.999%, due 08/01/34⁽⁴⁾	$	2,406,772	$	1,700,489
MLCC Mortgage Investors, Inc., Series 03-D, Class XA1, IO, 1.000%, due 08/25/28^(3),(4)		4,294,094		328
Sequoia Mortgage Trust, Series 04-11, Class XAI, IO, 0.912%, due 12/20/34^(3),(4)		22,155,989		286,470
Structured Adjustable Rate Mortgage Loan Trust, Series 05-17, Class 4AX, IO, 5.500%, due 08/25/35⁽⁴⁾		3,142,442		456,103
Total stripped mortgage-backed securities (cost $4,378,101)				3,093,576
US government obligations—5.46%
US Treasury Bonds, 4.750%, due 02/15/37⁽¹⁾		27,575,000		26,000,219
6.250%, due 08/15/23⁽¹⁾		29,505,000		32,762,086
6.250%, due 05/15/30⁽¹⁾		27,165,000		31,048,753
8.750%, due 05/15/17⁽¹⁾		10,110,000		12,953,437
US Treasury Notes, 4.250%, due 10/15/10⁽¹⁾		5,580,000		5,472,758
4.500%, due 03/31/12⁽¹⁾		69,895,000		68,617,250
4.625%, due 11/15/16		69,545,000		67,398,911
4.750%, due 12/31/08⁽¹⁾		36,385,000		36,274,135
4.750%, due 05/15/14⁽¹⁾		675,000		666,563
Total US government obligations (cost $283,412,027)				281,194,112
Total US bonds (cost $680,609,253)				669,043,715
International bonds—7.83%
International corporate bonds—0.39%
Germany—0.11%
Kreditanstalt fuer Wiederaufbau, 4.750%, due 12/07/10	GBP	1,245,000		2,393,591
Landwirtschaftliche Rentenbank, 6.000%, due 09/15/09	AUD	4,245,000		3,540,795
				5,934,386
Luxembourg—0.01%
Telecom Italia Capital SA, 5.250%, due 11/15/13	$	325,000		309,684
United Kingdom—0.27%
Abbey National PLC, 7.950%, due 10/26/29	$	295,000		354,343
Halifax PLC, 9.375%, due 05/15/21	GBP	1,300,000		3,364,464

	Face amount		Value
United Kingdom—(concluded)
Lloyds TSB Bank PLC, 6.625%, due 03/30/15	GBP	2,375,000	$	4,860,816
Royal Bank of Scotland Group PLC, 9.118%, due 03/31/10⁽⁶⁾	$	675,000		733,832
Royal Bank of Scotland PLC, 9.625%, due 06/22/15	GBP	1,890,000		4,571,769
				13,885,224
Total international corporate bonds (cost $19,698,431)				20,129,294
International mortgage & agency debt securities—0.02%
United Kingdom—0.02%
Paragon Mortgages PLC, Series 7A, Class B1A, 6.110%, due 05/15/43^(2),(3)(cost $1,040,000)	$	1,040,000		1,041,218
Foreign government bonds—7.32%
Australia—0.03%
Government of Australia, 5.750%, due 06/15/11	AUD	2,000,000		1,655,491
Austria—0.43%
Republic of Austria, 5.000%, due 01/15/08	EUR	10,750,000		14,600,948
5.250%, due 01/04/11		5,490,000		7,595,322
				22,196,270
Belgium—0.21%
Government of Belgium, 5.000%, due 09/28/11	EUR	2,300,000		3,164,896
5.750%, due 03/28/08		5,480,000		7,488,472
				10,653,368
Canada—0.27%
Government of Canada, 6.000%, due 06/01/11	CAD	14,000,000		13,807,069
Egypt—0.07%
Egypt Government Agency for International Development, 4.450%, due 09/15/15	$	3,620,000		3,394,365
France—1.28%
French Treasury Notes, 3.000%, due 07/12/08	EUR	5,600,000		7,470,784
3.500%, due 07/12/09		6,210,000		8,246,324
Government of France, 3.750%, due 04/25/21		8,830,000		10,810,722
4.750%, due 04/25/35		6,340,000		8,577,784
5.500%, due 04/25/10		10,090,000		13,997,991
5.500%, due 04/25/29		11,350,000		16,900,896
				66,004,501

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(concluded)
International bonds—(concluded)
Foreign government bonds—(concluded)
Germany—2.55%
Bundesobligation, 3.500%, due 10/10/08	EUR	7,000,000	$	9,366,429
Bundesschatzanweisungen, 2.250%, due 09/14/07		4,350,000		5,865,841
Deutsche Bundesrepublik, 3.750%, due 01/04/09		14,780,000		19,801,151
3.750%, due 01/04/17		6,245,000		7,929,774
4.000%, due 01/04/37		9,070,000		10,915,879
4.500%, due 07/04/09		17,475,000		23,656,033
4.750%, due 07/04/34		8,920,000		12,135,070
5.000%, due 07/04/12		6,020,000		8,311,539
5.250%, due 07/04/10		8,100,000		11,181,546
6.250%, due 01/04/24		3,400,000		5,409,610
6.500%, due 07/04/27		10,085,000		16,735,295
				131,308,167
Italy—0.54%
Republic of Italy, 4.500%, due 05/01/09	EUR	7,480,000		10,129,475
5.250%, due 08/01/11		12,660,000		17,561,845
				27,691,320
Japan—0.99%
Government of Japan CPI Linked Bonds (TIPS), 0.500%, due 12/10/14	JPY	265,000,000		2,056,335
1.000%, due 06/10/16		290,000,000		2,303,018
Government of Japan, 0.300%, due 03/20/08		720,000,000		5,825,284
0.900%, due 06/15/08		1,360,000,000		11,055,947
1.300%, due 06/20/11		1,340,000,000		10,876,795
1.300%, due 06/20/15		850,000,000		6,675,025
1.500%, due 03/20/14		280,000,000		2,253,706
1.700%, due 03/20/17		470,000,000		3,760,569
1.900%, due 06/20/25		305,000,000		2,367,233
2.300%, due 06/20/35		220,000,000		1,737,520
2.600%, due 03/20/19		250,000,000		2,162,727
				51,074,159
Netherlands—0.27%
Government of Netherlands, 4.000%, due 01/15/37	EUR	6,070,000		7,258,096
5.000%, due 07/15/11		4,945,000		6,803,242
				14,061,338
Sweden—0.08%
Government of Sweden, 6.750%, due 05/05/14	SEK	26,100,000		4,314,255
United Kingdom—0.60%
UK Gilts, 4.750%, due 09/07/15	GBP	3,425,000		6,521,606
4.750%, due 03/07/20		3,810,000		7,235,404

	Face amount		Value
United Kingdom—(concluded)
5.000%, due 03/07/12	GBP	1,515,000	$	2,955,567
8.000%, due 06/07/21		5,700,000		14,393,558
				31,106,135
Total foreign government bonds (cost $373,600,099)				377,266,438
Sovereign/supranational bond—0.10%
European Investment Bank, 5.750%, due 09/15/09 (cost $4,907,558)	AUD	6,500,000		5,404,999
Total international bonds (cost $399,246,088)				403,841,949
Total bonds (cost $1,079,855,341)				1,072,885,664
	Shares
Investment companies—17.80%
iShares MSCI EAFE Index Fund		52,600		4,248,502
iShares Russell 1000 Growth Index Fund		7,200		426,312
iShares Russell 2000 Index Fund⁽¹⁾		250,000		20,740,000
UBS Corporate Bond Relationship Fund⁽⁷⁾		8,234,340		98,125,332
UBS Emerging Markets Equity Relationship Fund⁽⁷⁾		7,238,101		240,393,272
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund⁽⁷⁾		700,000		7,524,790
UBS High Yield Relationship Fund⁽⁷⁾		2,080,862		45,363,209
UBS Small-Cap Equity Relationship Fund⁽⁷⁾		2,816,127		145,512,115
UBS U.S. Securitized Mortgage Relationship Fund⁽⁷⁾		27,847,864		355,316,472
Total investment companies (cost $724,248,017)				917,650,004
Short-term investments—0.29%
Other—0.26%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(7),(8)(cost $13,360,735)		13,360,735		13,360,735
	Face amount
US government obligation—0.03%
US Treasury Bills, 4.81%, due 12/20/07^(9),(10)(cost $1,368,562)	$	1,400,000		1,368,612
Total short-term investments (cost $14,729,297)				14,729,347

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Investment of cash collateral from securities loaned—2.79%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(7),(8)(cost $144,054,788)	$	144,054,788	$	144,054,788
Total investments—102.59% (cost $4,643,488,953)				5,289,591,393
Liabilities, in excess of cash and other assets—(2.59)%				(133,476,375	)
Net assets—100.00%			$	5,156,115,018

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $4,726,642,281; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	615,873,449
Gross unrealized depreciation		(52,924,337	)
Net unrealized appreciation	$	562,949,112

* Non-income producing security.

⁽¹⁾ Security, or portion thereof, was on loan at June 30, 2007.

⁽²⁾ Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid, unless otherwise noted, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2007, the value of these securities amounted to $35,297,656 or 0.68% of net assets.

⁽³⁾ Floating rate security—The interest rates shown are the current rates as of June 30, 2007.

⁽⁴⁾ Security is illiquid. At June 30, 2007, the value of these securities amounted to $11,502,301 or 0.22% of net assets.

⁽⁵⁾ Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2007. Maturity date disclosed is the ultimate maturity date.

⁽⁶⁾ Perpetual bond security.The maturity date reflects the next call date.

⁽⁷⁾ Investment in affiliated mutual fund.

⁽⁸⁾ The rate shown reflects the yield at June 30, 2007.

⁽⁹⁾ The rate shown is the effective yield at the date of purchase.

⁽¹⁰⁾ This security was pledged to cover margin requirements for futures contracts.

CDO Collateralized debt obligations

CPI Consumer price index

CS Credit Suisse

CVA Dutch certification—depositary certificate

GMAC General Motors Acceptance Corp.

GSAMP Goldman Sachs Mortgage Securities Corp.

GS Goldman Sachs

IO Interest only security—This security entitles the holder to receive interest from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.

MLCC Merrill Lynch Credit Corp.

REMIC Real Estate Mortgage Investment Conduit

TIPS Treasury inflation protected securities

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

Currency type abbreviations:

AUD Australian Dollar

CAD Canadian Dollar

EUR Euro

GBP Great Britain Pound

JPY Japanese Yen

SEK Swedish Krona

Restricted security

Security				Acquisition date				Acquisition cost				Acquisition cost as a percentage of net assets				06/30/07 Market value				06/30/07 Market value as a percentage of net assets
G-Force CDO, Ltd., Series 06-1A, Class A3, 5.600%, due 09/27/46					08/03/06			$	6,900,093				0.13	%		$	6,808,725				0.13	%

Forward foreign currency contracts

UBS Global Allocation Fund had the following open forward foreign currency contracts as of June 30, 2007:

	Contracts to deliver		In exchange for		Maturity dates	Unrealized appreciation/ (depreciation)
Canadian Dollar		22,910,000	USD	20,696,508	11/05/07	$	(865,292	)
Euro		394,900,000	USD	534,622,879	11/05/07		(1,925,559	)
Euro		28,680,000	JPY	4,691,029,860	11/05/07		(249,041	)
Great Britain Pound		105,245,000	USD	207,735,738	11/05/07		(3,167,055	)
South Korean Won		30,897,000,000	USD	33,236,876	08/20/07		(263,443	)
United States Dollar		290,311,459	CHF	349,445,000	11/05/07		(1,645,302	)
United States Dollar		563,853,419	JPY	66,147,900,000	11/05/07		(17,889,026	)
United States Dollar		262,252,446	SEK	1,779,750,000	11/05/07		(556,718	)
United States Dollar		54,802,328	SGD	82,215,000	11/05/07		(567,442	)
United States Dollar		92,541,857	TWD	3,040,000,000	08/20/07		279,895
Net unrealized depreciation on forward foreign currency contracts						$	(26,848,983	)

Currency type abbreviations:

CHF Swiss Franc

JPY Japanese Yen

SEK Swedish Krona

SGD Singapore Dollar

TWD Taiwan Dollar

USD United States Dollar

Futures contracts

UBS Global Allocation Fund had the following open futures contracts as of June 30, 2007:

	Expiration dates	Cost/ proceeds		Value		Unrealized appreciation/ (depreciation)
US Treasury futures buy contracts:
5 Year US Treasury Notes, 249 contracts	September 2007	$	25,930,635	$	25,915,453	$	(15,182	)
10 Year US Treasury Notes, 25 contracts	September 2007		2,666,086		2,642,578		(23,508	)
US Long Bond, 29 contracts	September 2007		3,088,581		3,124,750		36,169
Index futures buy contracts:
Amsterdam Exchanges Index, 537 contracts (EUR)	July 2007		77,579,220		79,846,539		2,267,320
FTSE 100 Index, 998 contracts (GBP)	September 2007		132,152,552		133,031,082		878,530

UBS Global Allocation Fund—Portfolio of investments

June 30, 2007

Futures contracts—(concluded)

	Expiration date	Cost/ proceeds		Value		Unrealized appreciation/ (depreciation)
Index futures sell contracts:
DAX Index, 200 contracts (EUR)	September 2007	$	53,443,781	$	54,669,229	$	(1,225,448	)
Nikkei 225 Index, 354 contracts (JPY)	September 2007		51,908,022		52,212,305		(304,282	)
S&P Toronto Stock Exchange 60 Index, 346 contracts (CAD)	September 2007		51,712,170		52,287,332		(575,162	)
S&P 500 Index, 68 contracts (USD)	September 2007		26,025,062		25,761,800		263,262
SPI 200 Index, 395 contracts (AUD)	September 2007		52,635,417		52,551,201		84,216
Net unrealized appreciation on futures contracts						$	1,385,915

The segregated aggregate market value of investments and cash collateral pledged to cover margin requirements for the open futures positions at June 30, 2007 was $35,177,425.

Currency type abbreviations:

AUD Australian Dollar

CAD Canadian Dollar

EUR Euro

GBP Great Britain Pound

JPY Japanese Yen

USD United States Dollar

See accompanying notes to financial statements.
34

UBS Global Equity Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS Global Equity Fund (the "Fund") returned 20.11% (Class A shares returned 13.47% after the deduction of the maximum sales charge), while Class Y shares returned 20.44%. The Fund's benchmark, the MSCI World Free Index (net US) (the "Index"), returned 23.94% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. 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.)

While stock selection generated solid returns for the Fund over the period, it was offset by sector positioning.

Portfolio performance summary

What worked

• The consumer discretionary sector was the largest contributor to performance, driven by strong stock selection. In particular, we saw strong stock selection in retailing—notably Amazon.com. (For more on these stocks, see "Portfolio Highlights.")

• In the information technology sector, stock selection in software and services drove outperformance. Within software, we identified what we believe are attractive opportunities having solid, cash-generative business models and good growth prospects. These included Microsoft Corp., Symantec Corp. and McAfee Inc., which were among the top contributors to performance within the Fund's portfolio.

• Stock selection led to strong results in health care during the period. We held a significant allocation to pharmaceutical stocks, particularly in the US market, where we found attractive opportunities despite the prospect of health care reform. Within the sector, we focused on companies with unique or noncommodity product concentrations, such as in vaccines and biologics, and we sought to avoid those companies that we believed had too much generic exposure, significant patent expiry risk and weak product pipelines.

What didn't work

• Stock selection within industrials detracted from performance over the period. In particular, our capital goods stocks detracted from performance, most notably Masco, the building products company, which suffered on the back of housing market concerns.

• The underweight to materials hurt returns. In our opinion, material stocks in general were expensive. We believe the strength in this sector has been partly driven by speculators, who, in our view, have started to show signs of unease. We believe that as capacity additions are recognized and speculative flows leave the market, commodity prices and valuations will normalize.

• While we achieved good results from an underweight to energy as the sector underperformed over the year, stock selection hurt our overall position. We did not hold names such as ExxonMobil and Chevron, which outperformed over the period. We continue to maintain an underweight based on our views of long-term stabilization of oil prices and on correcting supply-demand fundamentals.

UBS Global Equity Fund

Portfolio Highlights

• Vodafone was the top-performing stock in the Fund this year. We believe Vodafone offers long-term growth, is highly cash-generative, and intends to return a significant proportion of its free cash flow to shareholders via a large share buyback program.

• An overweight to retailer Amazon.com was another strong contributor to performance. The company has reported outstanding results for the last two quarters. In the latest set, it reported that its earnings had tripled and its margins expanded, leading to several firms raising their ratings, as well as earnings estimates and price targets on the company.

• Australian company QBE Insurance had a positive impact on returns, as well. The company announced its plans to buy Winterthur US from AXA for $1.2 billion, which will increase QBE's presence in the US. We believe the company's strategy of making acquisitions in the US and the UK, where there are more opportunities than in its native Australia, is a sound one.

• An overweight to BP was our biggest disappointment this year. Although we expect the price of oil to fall, an investment case for BP can be made on the basis that its assets and cash flow would still be very valuable, even if oil prices were to drop. BP has significant asset backing, with a resource base of approximately three barrels of oil for every share in issue. The company is carrying on with its aggressive share-buyback program, which is value enhancing.

• Our overweight to Citigroup was another drag on performance, particularly due to subprime concerns. However, we believe Citigroup will be able to overcome this and has superior product depth, geographic reach and a strong market position within businesses that possess secular growth characteristics. We believe this should lead to above-average earnings growth and profitability in the long term.

Bruno Bertocci named lead portfolio manager for UBS Global Equity Fund

Effective on July 1, 2007, Thomas Madsen, the lead portfolio manager for the UBS Global Equity Fund was replaced by Bruno Bertocci. In this role, Mr. Bertocci is responsible for the day-to-day management of the Fund's portfolio. Mr. Bertocci has access to global analysts who are responsible for researching, projecting cash flow and providing a basis for determining which securities are attractively valued. Mr. Bertocci works closely with the analysts to decide how to structure the UBS Global Equity Fund.

Bruno Bertocci is a Managing Director at UBS Global Asset Management and a member of the Global Equity Portfolio Management team. Mr. Bertocci has been an investment professional with UBS Global Asset Management since 1998 and portfolio manager of the Fund since 2007.

UBS Global Equity Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			10 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		20.11	%		11.77	%		6.48	%		6.48	%
maximum sales charge	Class B⁽³⁾		19.25			10.94			N/A			8.92
	Class C⁽⁴⁾		19.28			10.94			N/A			8.82
	Class Y⁽⁵⁾		20.44			12.12			6.82			8.47
After deducting maximum	Class A⁽²⁾		13.47			10.50			5.88			5.88
sales charge	Class B⁽³⁾		14.25			10.67			N/A			8.80
	Class C⁽⁴⁾		18.28			10.94			N/A			8.82
MSCI World Free Index (net US)⁽⁶⁾			23.94			14.34			7.30			9.05

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.37% and 1.25%; Class B—2.35% and 2.00%; Class C—2.20% and 2.00%; Class Y—.99% and .99%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.25%; Class B—2.00%; Class C—2.00%; Class Y—1.00%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS Global Equity Fund Class A shares is 06/30/97. Inception dates of Class B and Class C shares are 12/11/01 and 11/27/01, respectively. Inception date of Class Y shares is 01/28/94. The inception return of the Index is calculated as of 01/31/94, which is the closest month-end to the inception date of the oldest share class (Class Y).

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The MSCI World Free Index (net US) is a broad-based index that represents the US and developed non-US equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. This benchmark has been calculated net of withholding tax from a US perspective.

UBS Global Equity Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS Global Equity Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the MSCI World Free Index (net US), if you had invested $10,000 in Class A shares on June 30, 1997 or $10,000,000 in Class Y shares on January 28, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS Global Equity Fund Class A vs. MSCI World Free Index (net US)

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS Global Equity Fund Class Y vs. MSCI World Free Index (net US)

Wealth value with dividends reinvested

Index started on 01/31/94

UBS Global Equity Fund

Top ten US equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Citigroup, Inc.		2.6	%
Wyeth		1.9
Wells Fargo & Co.		1.9
Sprint Nextel Corp.		1.8
Morgan Stanley		1.7
Microsoft Corp.		1.7
Burlington Northern Santa Fe Corp.		1.7
Illinois Tool Works, Inc.		1.5
Anheuser-Busch Cos., Inc.		1.5
Allergan, Inc.		1.5
Total		17.8	%

Country exposure, top five (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
United States		54.5	%
United Kingdom		10.3
Japan		7.3
France		4.3
Germany		3.4
Total		79.8	%

Top ten international equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
BP PLC		2.2	%
Vodafone Group PLC		1.6
France Telecom SA		1.5
Total SA		1.5
AXA SA		1.3
Barclays PLC		1.3
Allianz SE		1.3
Roche Holding AG		1.2
Bank of Ireland		1.0
NTT DoCoMo, Inc.		1.0
Total		13.9	%

⁽¹⁾ Figures represent the direct investments of the UBS Global Equity Fund. Figures could be different if a breakdown of the underlying investment companies was included.

UBS Global Equity Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Equities US equities
Aerospace & defense	0.51	%
Air freight & logistics	1.08
Auto components	1.23
Automobiles	0.34
Beverages	1.83
Biotechnology	1.26
Building products	0.89
Capital markets	3.20
Commercial banks	3.66
Computers & peripherals	0.76
Diversified financial services	3.33
Diversified telecommunication services	0.56
Electric utilities	2.00
Energy equipment & services	1.15
Food & staples retailing	1.62
Health care equipment & supplies	0.34
Health care providers & services	1.07
Hotels, restaurants & leisure	1.16
Household durables	0.52
Household products	0.38
Industrial conglomerates	1.50
Insurance	0.43
Internet & catalog retail	0.75
Internet software & services	0.87
Machinery	1.94
Media	2.28
Multi-utilities	0.86
Oil, gas & consumable fuels	0.36
Pharmaceuticals	5.58
Road & rail	1.67
Semiconductors & semiconductor equipment	3.68
Software	3.75
Specialty retail	1.35
Textiles, apparel & luxury goods	0.31
Thrifts & mortgage finance	0.46
Wireless telecommunication services	1.83
Total US equities	54.51
International equities
Auto components	0.23
Automobiles	2.20
Capital markets	0.56
Chemicals	0.26
Commercial banks	6.58	%
Commercial services & supplies	0.85
Communications equipment	0.32
Construction materials	0.33
Consumer finance	0.40
Diversified financial services	0.38
Diversified telecommunication services	2.07
Electronic equipment & instruments	0.40
Food & staples retailing	0.31
Food products	0.26
Health care providers & services	0.13
Household durables	0.05
Industrial conglomerates	0.32
Insurance	6.46
Internet & catalog retail	0.14
Internet software & services	0.20
Machinery	0.30
Media	0.89
Metals & mining	0.92
Office electronics	0.97
Oil, gas & consumable fuels	4.83
Paper & forest products	0.61
Pharmaceuticals	1.76
Road & rail	1.11
Semiconductors & semiconductor equipment	0.59
Specialty retail	0.60
Tobacco	0.50
Wireless telecommunication services	2.61
Total international equities	38.14
Total equities	92.65
Investment companies
UBS Emerging Markets Equity Completion Relationship Fund	6.02
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund	0.61
UBS U.S. Smaller Cap Equity Completion Relationship Fund	0.58
Total investment companies	7.21
Warrants	0.00	⁽²⁾
Short-term investment	0.33
Total investments	100.19
Liabilities, in excess of cash and other assets	(0.19	)
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS Global Equity Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

⁽²⁾ Amount represents less than 0.005%.

UBS Global Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—92.65%
US equities—54.51%
Allergan, Inc.		107,800	$	6,213,592
Amazon.com, Inc.*		44,900		3,071,609
American Electric Power Co., Inc.		37,800		1,702,512
Analog Devices, Inc.		84,900		3,195,636
Anheuser-Busch Cos., Inc.		121,000		6,311,360
AT&T, Inc.		54,600		2,265,900
BEA Systems, Inc.*		90,800		1,243,052
Bristol-Myers Squibb Co.		61,800		1,950,408
Burlington Northern Santa Fe Corp.		79,900		6,802,686
Carnival Corp.		96,900		4,725,813
Cephalon, Inc.*		20,500		1,647,995
Chico's FAS, Inc.*		44,700		1,087,998
Citigroup, Inc.		204,000		10,463,160
Coach, Inc.*		26,800		1,270,052
Constellation Brands, Inc., Class A*		48,000		1,165,440
Costco Wholesale Corp.		54,100		3,165,932
Dell, Inc.*		108,100		3,086,255
eBay, Inc.*		31,100		1,000,798
ENSCO International, Inc.		18,500		1,128,685
EOG Resources, Inc.		20,300		1,483,118
Exelon Corp.		54,300		3,942,180
FedEx Corp.		39,700		4,405,509
Fifth Third Bancorp		105,600		4,199,712
Fortune Brands, Inc.		25,900		2,133,383
Freddie Mac		30,600		1,857,420
General Electric Co.		160,400		6,140,112
Genzyme Corp.*		54,500		3,509,800
GlobalSantaFe Corp.		21,400		1,546,150
Halliburton Co.		58,700		2,025,150
Harley-Davidson, Inc.		23,500		1,400,835
Hartford Financial Services Group, Inc.		17,900		1,763,329
Home Depot, Inc.		112,000		4,407,200
Illinois Tool Works, Inc.		116,500		6,313,135
Intel Corp.		240,500		5,714,280
Intuit, Inc.*		43,000		1,293,440
Johnson & Johnson		27,402		1,688,511
Johnson Controls, Inc.		43,200		5,001,264
JPMorgan Chase & Co.		64,700		3,134,715
Linear Technology Corp.		41,400		1,497,852
Masco Corp.		128,200		3,649,854
McAfee, Inc.*		37,900		1,334,080
McGraw-Hill Cos., Inc.		33,100		2,253,448
Medco Health Solutions, Inc.*		42,400		3,306,776
Medtronic, Inc.		27,100		1,405,406
Mellon Financial Corp.		138,700		6,102,800
Merck & Co., Inc.		103,200		5,139,360
Microsoft Corp.		231,700		6,828,199
Morgan Stanley		82,700		6,936,876
National Semiconductor Corp.		48,400		1,368,268
News Corp., Class A		67,300		1,427,433
NiSource, Inc.		43,800		907,098

	Shares		Value
US equities—(concluded)
Northeast Utilities		37,400	$	1,060,664
Northrop Grumman Corp.		26,800		2,086,916
Omnicom Group, Inc.		38,600		2,042,712
PACCAR, Inc.		18,200		1,584,128
Pepco Holdings, Inc.		51,800		1,460,760
PNC Financial Services Group, Inc.		43,000		3,077,940
Procter & Gamble Co.		25,400		1,554,226
R.H. Donnelley Corp.*		20,000		1,515,600
Red Hat, Inc.*		48,600		1,082,808
Sempra Energy		44,200		2,617,966
Sprint Nextel Corp.		360,153		7,458,769
Symantec Corp.*		175,065		3,536,313
SYSCO Corp.		103,800		3,424,362
UnitedHealth Group, Inc.		20,700		1,058,598
Viacom, Inc., Class B*		49,300		2,052,359
Wells Fargo & Co.		218,000		7,667,060
Wyeth		135,600		7,775,304
Xilinx, Inc.		121,000		3,239,170
Yahoo!, Inc.*		93,600		2,539,368
Total US equities (cost $158,707,302)				222,450,599
International equities—38.14%
Australia—1.52%
National Australia Bank Ltd.		63,453		2,206,690
QBE Insurance Group Ltd.		150,745		3,987,410
				6,194,100
Austria—0.55%
Telekom Austria AG		90,449		2,264,737
Canada—1.86%
Canadian Pacific Railway Ltd.		56,500		3,902,093
Jean Coutu Group, Inc., Class A		86,100		1,252,805
Magna International, Inc., Class A		10,100		924,431
Suncor Energy, Inc.		16,800		1,513,380
				7,592,709
Finland—0.19%
Stora Enso Oyj, Class R		41,382		782,998
France—4.34%
AXA SA		125,466		5,435,681
France Telecom SA		223,322		6,166,005
Total SA		74,662		6,089,350
				17,691,036
Germany—3.40%
Allianz SE		22,390		5,260,427
DaimlerChrysler AG		29,068		2,698,474
Muenchener Rueckversicherungs- Gesellschaft AG		17,650		3,253,360
Rhoen-Klinikum AG		8,568		519,169
Siemens AG		9,053		1,305,779
United Internet AG		39,229		821,372
				13,858,581

UBS Global Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
International equities—(concluded)
Hong Kong—0.38%
Esprit Holdings Ltd.		122,200	$	1,550,317
Ireland—1.43%
Bank of Ireland		206,605		4,177,665
Depfa Bank PLC		94,257		1,671,195
				5,848,860
Italy—0.83%
Intesa Sanpaolo SpA		452,217		3,384,654
Japan—7.33%
Advantest Corp.		19,000		828,670
Aiful Corp.		30,650		881,226
Canon, Inc.		33,800		1,984,764
Funai Electric Co., Ltd.		3,700		216,065
Honda Motor Co., Ltd.		55,100		2,013,807
Hoya Corp.		23,500		780,629
Japan Tobacco, Inc.		410		2,024,609
Keyence Corp.		3,900		853,011
Mitsui Sumitomo Insurance Co., Ltd.		93,000		1,194,932
Nissan Motor Co., Ltd.		166,200		1,783,149
Nitto Denko Corp.		20,800		1,050,770
Nomura Holdings, Inc.		116,600		2,272,812
NTN Corp.		144,000		1,243,224
NTT DoCoMo, Inc.		2,556		4,048,081
Ricoh Co., Ltd.		86,000		1,990,660
Sompo Japan Insurance, Inc.		120,000		1,470,701
Sumitomo Mitsui Financial Group, Inc.		148		1,382,335
Takefuji Corp.		22,360		751,841
Toyota Motor Corp.		39,400		2,496,000
West Japan Railway Co.		136		634,022
				29,901,308
Netherlands—2.11%
Aegon NV		145,571		2,884,418
Arcelor Mittal		10,365		653,027
ASML Holding NV*		56,636		1,571,407
ING Groep NV CVA		35,314		1,567,222
Reed Elsevier NV		102,009		1,952,226
				8,628,300
Norway—0.26%
Statoil ASA		33,650		1,047,113
Spain—0.84%
Banco Bilbao Vizcaya Argentaria SA		49,395		1,216,737
Banco Santander Central Hispano SA		118,234		2,190,726
				3,407,463

	Shares		Value
Sweden—0.73%
Svenska Cellulosa AB, Class B		100,500	$	1,689,891
Telefonaktiebolaget LM Ericsson, Class B		325,000		1,304,904
				2,994,795
Switzerland—2.09%
Holcim Ltd.		12,227		1,329,304
Novartis AG		41,506		2,344,588
Roche Holding AG		27,244		4,848,830
				8,522,722
United Kingdom—10.28%
Associated British Foods PLC		59,824		1,066,777
Barclays PLC		387,515		5,416,055
BP PLC		739,340		8,952,552
British Sky Broadcasting Group PLC		131,742		1,693,127
Experian Group Ltd.		155,295		1,963,082
Home Retail Group PLC		61,373		565,686
HSBC Holdings PLC		90,522		1,663,262
Kingfisher PLC		195,848		890,785
Prudential PLC		202,880		2,908,860
Rentokil Initial PLC		468,954		1,511,439
Rio Tinto PLC		40,422		3,106,430
Royal Bank of Scotland Group PLC		277,290		3,524,709
Tullow Oil PLC		213,764		2,094,786
Vodafone Group PLC		1,958,985		6,600,980
				41,958,530
Total international equities (cost $113,577,150)				155,628,223
Total equities (cost $272,284,452)				378,078,822
Investment companies—7.21%
UBS Emerging Markets Equity Completion Relationship Fund⁽¹⁾		1,728,068		24,558,782
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund⁽¹⁾		230,000		2,472,431
UBS U.S. Smaller Cap Equity Completion Relationship Fund⁽¹⁾		220,000		2,371,138
Total investment companies (cost $20,800,000)				29,402,351
	Number of warrants
Warrants—0.00%⁽²⁾
Alcatel-Lucent, expires 12/10/07* (cost $0)		1,067		181

UBS Global Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Short-term investment—0.33%
Other—0.33%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(1),(3)(cost $1,330,406)		1,330,406	$	1,330,406
Total investments—100.19% (cost $294,414,858)				408,811,760
Liabilities, in excess of cash and other assets—(0.19)%				(760,475	)
Net assets—100.00%			$	408,051,285

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $297,905,388; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	113,146,578
Gross unrealized depreciation		(2,240,206	)
Net unrealized appreciation	$	110,906,372

* Non-income producing security.

⁽¹⁾ Investment in affiliated mutual fund.

⁽²⁾ Amount represents less than 0.005%.

⁽³⁾ The rate shown reflects the yield at June 30, 2007.

CVA Dutch certification—depositary certificate

Forward foreign currency contracts

UBS Global Equity Fund had the following open forward foreign currency contracts as of June 30, 2007:

	Contracts to deliver		In exchange for		Maturity date	Unrealized appreciation/ (depreciation)
Australian Dollar		3,705,000	USD	3,055,791	11/05/07	$	(73,781	)
Euro		5,760,000	JPY	942,131,520	11/05/07		(50,017	)
Euro		20,305,000	USD	27,521,803	11/05/07		(66,488	)
Great Britain Pound		13,090,000	USD	25,837,435	11/05/07		(393,907	)
Japanese Yen		276,400,000	USD	2,325,624	11/05/07		44,304
United States Dollar		33,762,846	CHF	40,640,000	11/05/07		(191,346	)
United States Dollar		2,193,504	HKD	17,075,000	11/05/07		(3,095	)
United States Dollar		39,873,331	JPY	4,677,700,000	11/05/07		(1,265,036	)
United States Dollar		23,726,866	SEK	161,020,000	11/05/07		(50,368	)
United States Dollar		6,879,037	SGD	10,320,000	11/05/07		(71,228	)
Net unrealized depreciation on forward foreign currency contracts						$	(2,120,962	)

Currency type abbreviations:

CHF Swiss Franc

HKD Hong Kong Dollar

JPY Japanese Yen

SEK Swedish Krona

SGD Singapore Dollar

USD United States Dollar

See accompanying notes to financial statements.
43

UBS International Equity Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS International Equity Fund (the "Fund") returned 24.84% (Class A shares returned 17.96% after the deduction of the maximum sales charge), while Class Y shares returned 24.83%. The Fund's benchmark, the MSCI World Free ex USA Index (net US) (the "Index"), returned 27.15% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 47; 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.)

While we saw good results from stock selection over the reporting period, sector allocations were a detractor, leading to the Fund's underperformance versus the Index.

Portfolio performance summary

What worked

• Stock selection in financials generated good performance, and more than compensated for the negative impact our overweight exposure to this sector had on the Fund.

• In particular, we saw a solid contribution from ABN AMRO, the Fund's best stock performer during the period and the largest contributor to performance in this sector. We also benefited by not holding HSBC Holdings and Mitsubishi (for more on our position in ABN AMRO please refer to "Portfolio Highlights" on the following page).

In our opinion, banks remain particularly attractive. We believe the market is overly concerned about the impact of subprime, higher interest rates and the risk of a housing slowdown. The banks held by the Fund have what we view as minimal or manageable subprime exposure, conservative balance sheets and they hedge the risk from higher rates.

• Insurance companies Allianz and QBE Insurance Group generated good performance during the period. We believe insurance companies are undergoing positive change—they appear to be better managed, with more sophisticated asset-liability management procedures in place. They also have stronger balance sheets than in the past, with less equity exposure. We find valuations in this sector attractive.

• The Fund's overweight to the telecom sector, aided by strong stock selection, added to Fund performance. At the stock level, Vodafone was a primary contributor to performance (see "Portfolio Highlights" below). In telecoms, we believe the market is overly concerned about the risks associated with greater competition and further regulation in the industry, such as the European Commission's pledge to lower mobile roaming charges. We believe any impact from these developments will not be immediately felt. We also expect to see the continued consolidation of telecom companies, including the increasing integration of wireless and wireline capabilities and the buyout of smaller firms. We remain focused on companies that generate high free cash flow and have strong market positions and acceptable debt loads.

• An underweight to energy helped Fund performance. We continue to maintain an underweight based on our views of long-term stabilization of oil prices and on correcting supply-demand fundamentals.

UBS International Equity Fund

What didn't work

• An underweight to the materials sector, combined with stock selection, was the largest detractor from performance. At the stock level, Nitto Denko Corp. was the Fund's largest underperformer during the period. (For more on this stock, refer to "Portfolio Highlights" below.)

We maintain our underweight to metals and mining within the materials sector as, in our view, most stocks remain expensive. We believe the current supply-demand imbalance impacting this sector will eventually correct. We expect that, as capacity additions are recognized and speculative flows leave the market, commodity prices and valuations will normalize. In anticipation of that, we hold what we believe are select market leaders and low-cost producers.

• Stock selection in consumer discretionary hurt performance. Specifically, not holding auto stocks DaimlerChrysler, Volkswagen AG and Volvo AB detracted from returns over the period. We subsequently purchased DaimlerChrysler, which has been additive to performance. We believe the Chrysler spin-off is key to unlocking value at the company, and we expect margins to increase in the Mercedes division.

• Our underweight to utilities negatively impacted performance. In general, we continue to find little value in this area. Stocks have already performed well by association with the energy sector, due to low long-term interest rates in the US and Europe and the search for yield by aging investors.

• Our overweight to healthcare, combined with poor stock selection in the sector, detracted from Fund performance over the period. Swiss companies Roche Holdings and Novartis AG ranked among the Fund's bottom contributors to performance over the period. We maintain conviction in these companies, which we believe are attractively valued and likely to return cash to shareholders via share buybacks.

Portfolio Highlights

• ABN AMRO was the best performing stock for the period. Barclays and the Royal Bank of Scotland consortium's bids to acquire the bank boosted its stock price in recent months.

• Vodafone was a top-performing stock in the Fund this year. We believe Vodafone offers long-term growth, is highly cash-generative, and intends to return a significant proportion of its free cash flow to shareholders via a large share buyback program.

• An overweight to BP was our biggest disappointment this year. Although we expect oil prices to fall, an investment case for BP can be made on the basis that its assets and cash flow would still be very valuable, even if oil prices were to drop. BP has significant asset backing, with a resource base of approximately three barrels of oil for every share in issue. The company is carrying on with its aggressive share buyback program, which is value enhancing.

• Nitto Denko, a chemical stock in the materials universe, underperformed as the cyclical supply-demand gap deteriorated; we are now observing signs of recovery here. We maintain conviction in the stock as we believe the long-term growth story is strong—we expect liquid crystal displays (LCDs) to experience double-digit growth on a value basis over the next few years and that this secular growth potential is large enough to ignore the short-term noise. We also expect management to maintain their competitiveness throughout the market expansion.

UBS International Equity Fund

Ilario Di Bon named lead portfolio manager for UBS International Equity Fund

Effective on July 1, 2007, Thomas Madsen, the lead portfolio manager for UBS International Equity Fund, was replaced by Ilario Di Bon. In this role, Mr. Di Bon is responsible for the day-to-day management of the Fund's portfolio. Mr. Di Bon has access to global analysts who are responsible for researching, projecting cash flow and providing a basis for determining which securities are attractively valued.

Mr. Di Bon works closely with the analysts to decide how to structure the UBS International Equity Fund. Ilario Di Bon is an Executive Director at UBS Global Asset Management and a member of the Global Equity Portfolio Management team. Mr. Di Bon has been an investment professional with UBS Global Asset Management since 2000 and portfolio manager of the Fund since 2007.

UBS International Equity Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			10 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		24.84	%		14.04	%		6.21	%		6.21	%
maximum sales charge	Class B⁽³⁾		23.97			13.19			N/A			13.00
	Class C⁽⁴⁾		23.85			13.12			N/A			12.81
	Class Y⁽⁵⁾		24.83			14.25			6.44			7.46
After deducting maximum	Class A⁽²⁾		17.96			12.76			5.62			5.62
sales charge	Class B⁽³⁾		18.97			12.94			N/A			12.89
	Class C⁽⁴⁾		22.85			13.12			N/A			12.81
MSCI World Free ex USA Index (net US)⁽⁶⁾			27.15			18.17			7.94			8.36

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.48% and 1.25%; Class B—2.22% and 2.00%; Class C—2.17% and 2.00%; Class Y—1.19% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses.The Advisor has agreed irrevocably to waive its fees and reimburse certain expenses so that total operating expenses of the Fund do not exceed 1.25% for Class A shares, 2.00% for Class B shares, 2.00% for Class C shares and 1.00% for Class Y shares.

⁽¹⁾ Inception date of UBS International Equity Fund Class A shares is 06/30/97. Inception dates of Class B and Class C shares are 02/12/02 and 01/25/02, respectively. Inception date of Class Y shares and the Index is 08/31/93.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The MSCI World Free ex USA Index (net US) is an unmanaged, market driven broad-based securities index which includes non-US equity markets in terms of capitalization and performance. This benchmark has been calculated net of withholding tax from a US perspective.

UBS International Equity Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS International Equity Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the MSCI World Free ex USA Index (net US), if you had invested $10,000 in Class A shares on June 30, 1997 or $10,000,000 in Class Y shares on August 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS International Equity Fund Class A vs. MSCI World Free ex USA Index (net US)

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS International Equity Fund Class Y vs. MSCI World Free ex USA Index (net US)

Wealth value with dividends reinvested

UBS International Equity Fund

Top ten international equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Vodafone Group PLC		3.2	%
BP PLC		3.1
Total SA		2.7
ABN AMRO Holding NV		2.5
Roche Holding AG		2.4
Allianz SE		2.2
Novartis AG		2.1
Banco Santander Central Hispano SA		2.0
Siemens AG		1.9
Credit Suisse Group		1.8
Total		23.9	%

Country exposure, top five (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
United Kingdom		19.9	%
Japan		16.3
Germany		9.2
Switzerland		8.5
France		7.0
Total		60.9	%

⁽¹⁾ Figures represent the direct investments of the UBS International Equity Fund. Figures could be different if a breakdown of the underlying investment companies was included.

Industry diversification (unaudited)⁽²⁾

As a percentage of net assets as of June 30, 2007

International equities
Air freight & logistics	0.61	%
Airlines	1.46
Auto components	1.65
Automobiles	3.38
Beverages	1.76
Capital markets	2.25
Chemicals	1.56
Commercial banks	18.19
Commercial services & supplies	0.75
Communications equipment	1.47
Construction & engineering	0.25
Construction materials	1.25
Consumer finance	0.49
Diversified financial services	0.82
Diversified telecommunication services	3.45
Electric utilities	1.28
Electronic equipment & instruments	0.41
Food & staples retailing	1.76
Food products	1.29
Gas utilities	0.34
Health care equipment & supplies	0.41
Hotels, restaurants & leisure	0.58
Household durables	0.58
Household products	0.68
Industrial conglomerates	1.95
Insurance	8.29
Internet & catalog retail	0.18
Machinery	2.47
Media	1.59	%
Metals & mining	1.25
Office electronics	0.98
Oil, gas & consumable fuels	6.84
Paper & forest products	0.95
Pharmaceuticals	6.48
Real estate management & development	0.82
Road & rail	1.59
Semiconductors & semiconductor equipment	1.87
Software	0.68
Specialty retail	2.22
Textiles, apparel & luxury goods	0.22
Tobacco	0.63
Trading companies & distributors	1.73
Wireless telecommunication services	4.05
Total international equities	91.46
Investment companies
iShares MSCI EAFE Index Fund	1.42
UBS Emerging Markets Equity Completion Relationship Fund	5.23
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund	1.34
Total investment companies	7.99
Investment of cash collateral from securities loaned	3.02
Total investments	102.47
Liabilities, in excess of cash and other assets	(2.47	)
Net assets	100.00	%

⁽²⁾ Figures represent the industry breakdown of direct investments of the UBS International Equity Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

UBS International Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
International equities—91.46%
Australia—3.49%
National Australia Bank Ltd.		45,536	$	1,583,594
Qantas Airways Ltd.		620,749		2,947,118
QBE Insurance Group Ltd.		95,428		2,524,200
				7,054,912
Austria—0.44%
Telekom Austria AG		35,582		890,931
Belgium—1.12%
KBC Groep NV		16,738		2,265,858
Canada—3.91%
Alcan, Inc.		17,840		1,455,335
Canadian Pacific Railway Ltd.		29,700		2,051,189
Cott Corp.*⁽¹⁾		25,300		367,180
Magna International, Inc., Class A		7,800		713,917
Manulife Financial Corp.⁽¹⁾		25,900		968,652
Toronto-Dominion Bank⁽¹⁾		34,200		2,339,180
				7,895,453
Denmark—0.56%
Novo-Nordisk A/S, Class B		10,400		1,134,876
Finland—1.61%
Nokia Oyj		47,143		1,327,796
Stora Enso Oyj, Class R		101,397		1,918,556
				3,246,352
France—6.96%
AXA SA		77,009		3,336,333
Compagnie Generale des Etablissements Michelin, Class B		7,637		1,073,425
France Telecom SA		128,635		3,551,661
Sanofi-Aventis⁽¹⁾		7,684		625,035
Total SA⁽¹⁾		66,997		5,464,201
				14,050,655
Germany—9.18%
Allianz SE		18,987		4,460,908
DaimlerChrysler AG		16,600		1,541,030
Deutsche Postbank AG		10,255		903,147
E.ON AG		8,797		1,479,834
Henkel KGaA, Preference shares		25,770		1,363,397
IKB Deutsche Industriebank AG		15,968		584,602
MAN AG		8,125		1,174,016
Metro AG		14,175		1,179,503
Muenchener Rueckversicherungs- Gesellschaft AG		2,938		541,551
SAP AG		26,559		1,368,475
Siemens AG		27,260		3,931,905
				18,528,368

	Shares		Value
Greece—0.76%
Alpha Bank AE		25,597	$	807,211
National Bank of Greece SA		12,514		718,132
				1,525,343
Hong Kong—1.21%
Esprit Holdings Ltd.		93,000		1,179,865
Sun Hung Kai Properties Ltd.		68,000		818,345
Yue Yuen Industrial Holdings Ltd.		145,000		449,694
				2,447,904
Ireland—2.24%
Bank of Ireland		99,546		2,012,874
CRH PLC		26,686		1,323,009
Depfa Bank PLC		55,572		985,302
Irish Life & Permanent PLC		7,567		191,415
				4,512,600
Italy—3.11%
Fiat SpA		38,425		1,147,779
Intesa Sanpaolo SpA		480,051		3,592,980
UniCredito Italiano SpA		172,017		1,543,573
				6,284,332
Japan—16.30%
Aeon Co., Ltd.		40,400		751,399
Aiful Corp.⁽¹⁾		17,550		504,585
Asahi Breweries Ltd.		71,300		1,106,634
Bank of Yokohama Ltd.		118,000		828,036
Bridgestone Corp.		47,200		1,012,045
Canon, Inc.		33,700		1,978,891
East Japan Railway Co.		150		1,157,360
Fast Retailing Co., Ltd.		6,500		462,985
Funai Electric Co., Ltd.		5,900		344,536
Honda Motor Co., Ltd.		53,100		1,940,711
Hoya Corp.		24,800		823,813
Japan Tobacco, Inc.		256		1,264,146
KDDI Corp.		95		704,447
Kubota Corp.		95,000		771,574
Mitsubishi Corp.		68,800		1,804,865
Mitsui Fudosan Co., Ltd.		30,000		843,046
Mitsui Sumitomo Insurance Co., Ltd.		109,000		1,400,512
Nitto Denko Corp.		25,600		1,293,255
NOK Corp.		25,300		534,254
Nomura Holdings, Inc.		43,100		840,122
NTN Corp.		71,000		612,979
NTT DoCoMo, Inc.		631		999,350
Rohm Co., Ltd.		13,800		1,227,289
Shin-Etsu Chemical Co., Ltd.		18,000		1,287,959
SMC Corp.		5,000		665,990
Sompo Japan Insurance, Inc.		59,000		723,094
Sumitomo Mitsui Financial Group, Inc.		212		1,980,101
Sumitomo Trust & Banking Co., Ltd.		82,000		782,538
Taiheiyo Cement Corp.		600		2,661
Takefuji Corp.		14,410		484,527

UBS International Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
International equities—(concluded)
Japan—(concluded)
Tokyo Gas Co., Ltd.		144,000	$	683,013
Toyota Motor Corp.		34,700		2,198,254
Yamada Denki Co., Ltd.		8,460		884,993
				32,899,964
Netherlands—6.96%
ABN AMRO Holding NV⁽¹⁾		107,425		4,950,678
ASML Holding NV*		54,721		1,518,274
ING Groep NV CVA		37,493		1,663,925
Koninklijke Philips Electronics NV		19,197		819,997
Reed Elsevier NV		64,680		1,237,832
Royal KPN NV		95,989		1,600,569
STMicroelectronics NV		52,676		1,023,074
TNT NV		27,193		1,230,370
				14,044,719
Norway—1.44%
Statoil ASA⁽¹⁾		63,950		1,989,982
Telenor ASA*		47,000		922,553
				2,912,535
Spain—2.05%
Banco Santander Central Hispano SA		222,813		4,128,442
Sweden—1.69%
Sandvik AB		86,700		1,762,092
Telefonaktiebolaget LM Ericsson, Class B		410,000		1,646,187
				3,408,279
Switzerland—8.52%
Clariant AG*		35,004		570,266
Credit Suisse Group		51,739		3,699,879
Holcim Ltd.		11,082		1,204,822
Nestle SA		4,610		1,758,706
Novartis AG		74,885		4,230,098
Roche Holding AG		27,515		4,897,062
Straumann Holding AG		2,954		831,908
				17,192,741
United Kingdom—19.91%
AstraZeneca PLC		23,579		1,270,373
Balfour Beatty PLC		56,994		507,012
Barclays PLC		250,691		3,503,752
BP PLC		524,225		6,347,758
British Sky Broadcasting Group PLC		85,764		1,102,225

	Shares		Value
United Kingdom—(concluded)
Cadbury Schweppes PLC		62,543	$	854,030
Carnival PLC		24,518		1,174,245
Diageo PLC		99,671		2,075,549
Experian Group Ltd.		86,080		1,088,136
GlaxoSmithKline PLC		35,482		929,831
Home Retail Group PLC		39,055		359,977
Kesa Electricals PLC		122,684		775,424
Kingfisher PLC		260,564		1,185,135
Prudential PLC		180,320		2,585,398
Rentokil Initial PLC		128,953		415,616
Rio Tinto PLC		13,955		1,072,442
Royal Bank of Scotland Group PLC		251,400		3,195,614
Scottish & Southern Energy PLC		38,038		1,106,806
Tesco PLC		192,515		1,617,876
Vodafone Group PLC		1,918,708		6,465,263
Wolseley PLC		69,732		1,683,146
WPP Group PLC		58,180		874,482
				40,190,090
Total international equities (cost $121,682,891)				184,614,354
Investment companies—7.99%
iShares MSCI EAFE Index Fund		35,700		2,883,489
UBS Emerging Markets Equity Completion Relationship Fund⁽²⁾		742,115		10,546,716
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund⁽²⁾		250,000		2,687,425
Total investment companies (cost $12,336,797)				16,117,630
Investment of cash collateral from securities loaned—3.02%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(2),(3)(cost $6,089,234)		6,089,234		6,089,234
Total investments—102.47% (cost $140,108,922)				206,821,218
Liabilities, in excess of cash and other assets—(2.47)%				(4,975,980	)
Net assets—100.00%			$	201,845,238

UBS International Equity Fund—Portfolio of investments

June 30, 2007

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $141,663,092; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	66,752,798
Gross unrealized depreciation		(1,594,672	)
Net unrealized appreciation	$	65,158,126

* Non-inome producing security.

⁽¹⁾ Security, or portion thereof, was on loan at June 30, 2007.

⁽²⁾ Investment in affiliated mutual fund.

⁽³⁾ The rate shown reflects the yield at June 30, 2007.

CVA Dutch certification—depositary certificate

Preference shares—A special type of equity investment that shares in the earnings of the company, has limited voting rights, and may have a dividend preference. Preference shares may also have liquidation preference.

Forward foreign currency contracts

UBS International Equity Fund had the following open forward foreign currency contracts as of June 30, 2007:

	Contracts to deliver		In exchange for		Maturity date	Unrealized appreciation/ (depreciation)
Australian Dollar		4,400,000	USD	3,655,342	11/05/07	$	(61,289	)
Euro		2,735,000	JPY	447,348,908	11/05/07		(23,749	)
Euro		19,195,000	USD	26,017,287	11/05/07		(62,853	)
Great Britain Pound		5,895,000	USD	11,635,728	11/05/07		(177,393	)
Japanese Yen		141,100,000	USD	1,194,750	11/05/07		30,154
Norwegian Krone		7,320,000	USD	1,212,169	11/05/07		(31,181	)
United States Dollar		9,558,161	CHF	11,505,000	11/05/07		(54,222	)
United States Dollar		1,064,825	DKK	5,860,000	11/05/07		4,480
United States Dollar		18,348,194	JPY	2,152,500,000	11/05/07		(582,122	)
United States Dollar		1,044,225	JPY	126,700,000	11/05/07		1,518
United States Dollar		12,206,766	SEK	82,840,000	11/05/07		(25,913	)
United States Dollar		3,929,450	SGD	5,895,000	11/05/07		(40,687	)
Net unrealized depreciation on forward foreign currency contracts						$	(1,023,257	)

Currency type abbreviations:

CHF Swiss Franc

DKK Danish Krone

JPY Japanese Yen

SEK Swedish Krona

SGD Singapore Dollar

USD United States Dollar

See accompanying notes to financial statements.
52

UBS U.S. Equity Alpha Fund

Portfolio performance

Since its inception on September 26, 2006 through June 30, 2007, Class A shares of UBS U.S. Equity Alpha Fund (the "Fund") returned 15.73% (Class A shares returned 9.38% after the deduction of the maximum sales charge), while Class Y shares returned 15.88%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 14.58% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over the period 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.)

The Fund is a core equity fund that has the flexibility to invest in both long and short positions as it seeks to maximize total returns. During the period, the Fund's outperformance versus the benchmark was primarily due to stock selection, with industry exposure slightly detracting from performance. (When shorting an investment, we first borrow the security, then sell it and buy an equal number of shares later—hopefully at a lower price—to replace those we borrowed.)

Portfolio performance summary

What worked

• Stock selection was strong during the period, and the largest contributor to performance overall. In our opinion, the US equity market, despite some volatility, was at or near fair value for most of the period. Careful research and analysis helped us to identify a number of price-to-intrinsic-value discrepancies, on both the long and the short side, which provided what we viewed as attractive investment opportunities.

• We saw generally positive results from our drug stocks over the period. The Fund's short position in Pfizer generated strong results when the company had to halt development of its cholesterol treatment drug due to serious complications arising during its trial. We ultimately closed our short position in Pfizer, as we believed our thesis had played out, and the stock achieved what we believe to be its fair value.

Among our long positions, Wyeth, which we believe has the least number of patents expiring over the next five years among big pharmaceutical companies, has been one of the Fund's strongest performers. We continue to view the company favorably, and increased our position in the company as the period grew to a close.

• While the banking sector as a whole accounted for the largest drag on Fund performance, we did generate strong relative performance from several of our bank stocks. These included Citigroup and JPMorgan Chase and Co. (For more on these two stocks, see "Portfolio Highlights.")

• Automotive parts supplies were one of the better performing industries over the period. Johnson Controls was a top contributor to Fund performance, as rising energy costs have increased demand for the company's efficiency-improving products. Trucking manufacturer Paccar was also a strong performer. (For more information, see "Portfolio Highlights.")

• In transportation, an overweight to rail stocks was the biggest contributor to performance, despite a decline in freight volume that has hurt the industry so far this year. In our view, these stocks continue to provide us with an attractive opportunity: pricing power is still strong and, we believe, sustainable because the excess capacity that had been in rail space for decades is gone. Additionally, rails

UBS U.S. Equity Alpha Fund

continue to gain share from trucking because, while rail rates are increasing, trucking rates are rising more rapidly.

We also generated positive results from our positioning in airlines stocks; we held a short position in US Airways and a long position in Southwest Airlines, both of which we have since closed. In the case of the former, our short position added to performance when US Airways' shares traded lower for a number of reasons, including climbing oil prices.

• The portfolio also benefited by what we did not own. The portfolio's underweight position in REITs had a positive impact on results, as the industry generally underperformed other sectors of the market.

What didn't work

• Industry selection on the whole detracted from Fund performance. Our overweight to banks and our underweights to materials, energy, food and beverage, and retailers had the biggest negative impact on performance.

• The largest detractor from performance was our overweight to banks—the largest position in the Fund's portfolio. The financial sector in general underperformed during the period as investors' focus on subprime lending (which relies on risk-based pricing to serve borrowers who cannot obtain credit in the prime market) issues and levered debt weighed heavily on stock prices.

We continue to find what we view to be very attractive valuations in this space and, in many cases, believe the underlying balance sheets are strong. We continue to maintain an overweight in financials in general, but there are some sub-components where we continue to take a cautious stance. For example, we have shorted some regional banks and utilized the proceeds to increase our overweight to diversified financials, which we view as being more attractively priced.

• In the materials sector, an underweight to metals and mining stocks detracted from performance, as commodities prices in general surged. Our short position in Freeport-McMoRan Copper & Gold hurt performance when its stock price rose during the period, making it one of the largest detractors to performance in the portfolio at the stock level. However, we continue to short this stock, and believe the company is currently over-earning and over-levered to rising demand for materials from China. In general, we believe the market is overestimating the demand surge for commodities and underestimating the supply response, and that earnings for companies in this space will collapse over time.

• In energy, limited exposure to integrated oil companies hurt Fund performance during the period. However, we believe our bearish view on long-run oil prices will be borne out by the market, causing these stocks to underperform other opportunities.

Portfolio Highlights

• Johnson Controls was a top stock-specific contributor to relative results during the period. Rising energy costs increased demand for the company's building efficiency products. Building products growth was also being driven by the company's exposure to emerging markets. We believe the diversification that Johnson Controls retains in terms of customer, geography, product, and business line will enable the company to continue to produce solid results.

UBS U.S. Equity Alpha Fund

• Citigroup's product depth, geographic reach and strong market positions within businesses that possess superior secular growth characteristics will lead to above-average earnings growth and profitability over the long term. In addition, Citi's strong balance sheet provides management with the financial strength and flexibility to exploit opportunities that are unavailable to many of their competitors. We remain confident in our overweight position and feel that the stock is currently pricing in continued legal issues and growth that is slower than what will likely occur.

• A long position in JPMorgan Chase added to the Fund's returns for the period. Strong performance in the stock led us to reduce the position, taking profits and redeploying the assets into higher return opportunities. We continue to hold a reduced position in JPMorgan Chase, since the bank's success should continue with the diversified business operations it maintains.

• Among our short positions, Nucor Corp. was one of the largest contributors to performance during the period. Toward period-end, the company's shares fell despite news that first-quarter sales and profits beat analyst expectations. We continue to short Nucor and remain confident in our thesis that the company is currently over-earning and over-levered to rising demand for materials from China. We believe the market is overestimating the demand surge, underestimating the supply response, and that earnings will fall over time.

• Sprint stock detracted from performance during the period. The integration of the Sprint/Nextel merger has seen a larger number of customer defections. Yet, despite this news, net income and revenues have increased. We expect the merger to yield significant long-term benefits for the combined company.

This letter is intended to assist shareholders in understanding how the Fund performed for the period since its inception date on September 26, 2006 through June 30, 2007. The views and opinions in the letter were current as of August 15, 2007. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program. Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.

UBS U.S. Equity Alpha Fund

Total return (unaudited)

		Inception⁽¹⁾to 06/30/07
Before deducting maximum	Class A⁽²⁾		15.73	%
sales charge	Class C⁽³⁾		15.12
	Class Y⁽⁴⁾		15.88
After deducting maximum sales charge	Class A⁽²⁾		9.38
	Class C⁽³⁾		14.12
Russell 1000 Index⁽⁵⁾			14.58

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—2.18% and 2.07%; Class C—2.95% and 2.82%; Class Y—1.86% and 1.82%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding securities loan fees and dividend expense for securities sold short) to the extent necessary so the Fund's operating expenses (excluding securities loan fees and dividend expense for securities sold short), through the fiscal year ending June 30, 2007, do not exceed Class A—1.50%; Class C—2.25%; Class Y—1.25%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS U.S. Equity Alpha Fund Class A, Class C and Class Y shares and the Index is 09/26/2006.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽³⁾ Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees.

⁽⁴⁾ The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees.

⁽⁵⁾ The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, and represents approximately 92% of the total market capitalization of the Russell 3000 Index.

Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://www.ubs.com.

UBS U.S. Equity Alpha Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $5,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Equity Alpha Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the Russell 1000 Index, if you had invested $10,000 in Class A shares on September 26, 2006 or $5,000,000 in Class Y shares on September 26, 2006, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class C shares will vary based upon the class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Equity Alpha Fund Class A vs. Russell 1000 Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS U.S. Equity Alpha Fund Class Y vs. Russell 1000 Index

Wealth value with dividends reinvested

Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://www.ubs.com/globalam-us.

UBS U.S. Equity Alpha Fund

Top ten equity holdings (unaudited)*⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Morgan Stanley		4.5	%
Citigroup, Inc.		4.4
Wells Fargo & Co.		4.3
Bank of New York Co., Inc.		3.4
Microsoft Corp.		3.3
General Electric Co.		3.1
Wyeth		3.0
Intel Corp.		3.0
JPMorgan Chase & Co.		2.9
Johnson Controls, Inc.		2.9
Total		34.8	%

* Top ten holdings are all long positions

⁽¹⁾ Figures represent the direct investments of the UBS U.S. Equity Alpha Fund. Figures could be different if a breakdown of the underlying investment company was included.

UBS U.S. Equity Alpha Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Equities
Air freight & logistics	2.74	%
Auto components	4.85
Automobiles	0.85
Beverages	1.51
Biotechnology	3.22
Building products	1.89
Capital markets	8.36
Commercial banks	9.00
Computers & peripherals	0.93
Diversified financial services	7.32
Diversified telecommunication services	2.21
Electric utilities	3.24
Energy equipment & services	2.16
Food & staples retailing	2.83
Health care equipment & supplies	0.67
Health care providers & services	2.71
Hotels, restaurants & leisure	2.78
Household durables	1.08
Industrial conglomerates	3.12
Insurance	3.19
Internet & catalog retail	1.20
Internet software & services	0.98
Machinery	3.40
Media	5.15
Multi-utilities	1.58
Multiline retail	0.90
Oil, gas & consumable fuels	3.65
Pharmaceuticals	9.49
Road & rail	2.29
Semiconductors & semiconductor equipment	7.06
Software	7.79
Specialty retail	2.32
Textiles, apparel & luxury goods	0.81
Thrifts & mortgage finance	1.39
Wireless telecommunication services	2.34
Total equities	115.01
Investment company
SPDR Trust, Series 1	4.27
Short-term investment	0.38
Total investments before investments sold short	119.66
Investments sold short Equities sold short
Air freight & logistics	(1.77	)%
Automobiles	(0.83	)
Capital markets	(1.72	)
Commercial banks	(1.76	)
Construction materials	(0.41	)
Diversified financial services	(0.41	)
Diversified telecommunication services	(0.51	)
Food & staples retailing	(0.48	)
Food products	(0.33	)
Health care equipment & supplies	(0.34	)
Health care providers & services	(0.62	)
Hotels, restaurants & leisure	(0.58	)
Household durables	(0.89	)
IT services	(0.61	)
Leisure equipment & products	(0.46	)
Machinery	(0.55	)
Media	(0.69	)
Metals & mining	(1.55	)
Multiline retail	(0.77	)
Oil, gas & consumable fuels	(1.70	)
Pharmaceuticals	(1.09	)
Software	(1.37	)
Specialty retail	(0.85	)
Total investments sold short	(20.29	)
Total investments, net of investments sold short	99.37
Cash and other assets, less liabilities	0.63
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS U.S. Equity Alpha Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

UBS U.S. Equity Alpha Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—115.01%
Air freight & logistics—2.74%
FedEx Corp.⁽¹⁾		58,300	$	6,469,551
Auto components—4.85%
BorgWarner, Inc.⁽¹⁾		54,100		4,654,764
Johnson Controls, Inc.⁽¹⁾		58,500		6,772,545
				11,427,309
Automobiles—0.85%
Harley-Davidson, Inc.⁽¹⁾		33,800		2,014,818
Beverages—1.51%
Anheuser-Busch Cos., Inc.⁽¹⁾		30,600		1,596,096
Constellation Brands, Inc., Class A*⁽¹⁾		80,500		1,954,540
				3,550,636
Biotechnology—3.22%
Amgen, Inc.*		13,700		757,473
Cephalon, Inc.*⁽¹⁾		12,700		1,020,953
Genzyme Corp.*⁽¹⁾		64,300		4,140,920
Millennium Pharmaceuticals, Inc.*⁽¹⁾		158,600		1,676,402
				7,595,748
Building products—1.89%
Masco Corp.⁽¹⁾		156,100		4,444,167
Capital markets—8.36%
Bank of New York Co., Inc.⁽¹⁾		196,000		8,122,240
Blackstone Group LP*		33,154		970,417
Morgan Stanley⁽¹⁾		126,300		10,594,044
				19,686,701
Commercial banks—9.00%
City National Corp.⁽¹⁾		19,500		1,483,755
Fifth Third Bancorp⁽¹⁾		132,600		5,273,502
PNC Financial Services Group, Inc.⁽¹⁾		60,900		4,359,222
Wells Fargo & Co.⁽¹⁾		286,800		10,086,756
				21,203,235
Computers & peripherals—0.93%
Dell, Inc.*⁽¹⁾		76,600		2,186,930
Diversified financial services—7.32%
Citigroup, Inc.⁽¹⁾		203,100		10,416,999
JPMorgan Chase & Co.⁽¹⁾		141,100		6,836,295
				17,253,294
Diversified telecommunication services—2.21%
AT&T, Inc.⁽¹⁾		125,500		5,208,250
Electric utilities—3.24%
American Electric Power Co., Inc.⁽¹⁾		44,600		2,008,784
Exelon Corp.		50,000		3,630,000
Pepco Holdings, Inc.⁽¹⁾		71,100		2,005,020
				7,643,804

	Shares		Value
Energy equipment & services—2.16%
ENSCO International, Inc.⁽¹⁾		38,200	$	2,330,582
Halliburton Co.⁽¹⁾		80,000		2,760,000
				5,090,582
Food & staples retailing—2.83%
Costco Wholesale Corp.⁽¹⁾		58,900		3,446,828
SYSCO Corp.⁽¹⁾		97,900		3,229,721
				6,676,549
Health care equipment & supplies—0.67%
Medtronic, Inc.		30,300		1,571,358
Health care providers & services—2.71%
Medco Health Solutions, Inc.*⁽¹⁾		42,100		3,283,379
UnitedHealth Group, Inc.⁽¹⁾		60,600		3,099,084
				6,382,463
Hotels, restaurants & leisure—2.78%
Carnival Corp.⁽¹⁾		134,300		6,549,811
Household durables—1.08%
Fortune Brands, Inc.⁽¹⁾		31,000		2,553,470
Industrial conglomerates—3.12%
General Electric Co.⁽¹⁾		192,100		7,353,588
Insurance—3.19%
Aflac, Inc.		61,600		3,166,240
Hartford Financial Services Group, Inc.⁽¹⁾		44,100		4,344,291
				7,510,531
Internet & catalog retail—1.20%
Amazon.com, Inc.*⁽¹⁾		41,300		2,825,333
Internet software & services—0.98%
Yahoo!, Inc.*⁽¹⁾		85,200		2,311,476
Machinery—3.40%
Illinois Tool Works, Inc.⁽¹⁾		93,300		5,055,927
PACCAR, Inc.		33,900		2,950,656
				8,006,583
Media—5.15%
McGraw-Hill Cos., Inc.⁽¹⁾		45,400		3,090,832
News Corp., Class A⁽¹⁾		128,000		2,714,880
Omnicom Group, Inc.⁽¹⁾		75,600		4,000,752
Viacom, Inc., Class B*⁽¹⁾		55,700		2,318,791
				12,125,255
Multi-utilities—1.58%
Sempra Energy⁽¹⁾		62,700		3,713,721
Multiline retail—0.90%
Target Corp.		33,300		2,117,880
Oil, gas & consumable fuels—3.65%
ConocoPhillips⁽¹⁾		71,500		5,612,750
EOG Resources, Inc.⁽¹⁾		21,000		1,534,260
Sunoco, Inc.⁽¹⁾		18,300		1,458,144
				8,605,154

UBS U.S. Equity Alpha Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
Pharmaceuticals—9.49%
Allergan, Inc.⁽¹⁾		81,600	$	4,703,424
Bristol-Myers Squibb Co.⁽¹⁾		77,800		2,455,368
Johnson & Johnson⁽¹⁾		54,700		3,370,614
Merck & Co., Inc.⁽¹⁾		94,900		4,726,020
Wyeth⁽¹⁾		123,800		7,098,692
				22,354,118
Road & rail—2.29%
Burlington Northern Santa Fe Corp.⁽¹⁾		63,300		5,389,362
Semiconductors & semiconductor equipment—7.06%
Analog Devices, Inc.⁽¹⁾		130,100		4,896,964
Intel Corp.⁽¹⁾		297,600		7,070,976
Linear Technology Corp.⁽¹⁾		61,100		2,210,598
Xilinx, Inc.⁽¹⁾		91,700		2,454,809
				16,633,347
Software—7.79%
BEA Systems, Inc.*⁽¹⁾		108,600		1,486,734
Citrix Systems, Inc.*		57,300		1,929,291
Intuit, Inc.*⁽¹⁾		57,400		1,726,592
Microsoft Corp.⁽¹⁾		262,900		7,747,663
Red Hat, Inc.*		40,800		909,024
Symantec Corp.*⁽¹⁾		225,100		4,547,020
				18,346,324
Specialty retail—2.32%
Chico's FAS, Inc.*⁽¹⁾		51,300		1,248,642
Home Depot, Inc.⁽¹⁾		107,200		4,218,320
				5,466,962
Textiles, apparel & luxury goods—0.81%
Coach, Inc.*⁽¹⁾		40,400		1,914,556
Thrifts & mortgage finance—1.39%
Freddie Mac⁽¹⁾		53,800		3,265,660
Wireless telecommunication services—2.34%
Sprint Nextel Corp.⁽¹⁾		266,400		5,517,144
Total equities (cost $253,310,941)				270,965,670
Investment company—4.27%
SPDR Trust, Series 1 (cost $10,152,704)		66,900		10,063,767
Short-term investment—0.38%
Investment company—0.38%
UBS U.S. Cash Management Prime Relationship Fund, 5.36%^(2),(3)(cost $879,283)		879,283		879,283
Total investments before investments sold short—119.66% (cost $264,342,928)				281,908,720

	Shares			Value
Investments sold short—(20.29)%
Equities—(20.29)%
Air freight & logistics—(1.77)%
C.H. Robinson Worldwide, Inc.		(42,100	)	$	(2,211,092	)
Expeditors International of Washington, Inc.		(47,600	)		(1,965,880	)
					(4,176,972	)
Automobiles—(0.83)%
Ford Motor Co.		(87,600	)		(825,192	)
General Motors Corp.		(29,900	)		(1,130,220	)
					(1,955,412	)
Capital markets—(1.72)%
Bear Stearns Cos., Inc.		(12,900	)		(1,806,000	)
Charles Schwab Corp.		(55,300	)		(1,134,756	)
Goldman Sachs Group, Inc.		(5,100	)		(1,105,425	)
					(4,046,181	)
Commercial banks—(1.76)%
BB&T Corp.		(25,500	)		(1,037,340	)
Comerica, Inc.		(17,600	)		(1,046,672	)
KeyCorp		(30,700	)		(1,053,931	)
Regions Financial Corp.		(30,700	)		(1,016,170	)
					(4,154,113	)
Construction materials—(0.41)%
Vulcan Materials Co.		(8,500	)		(973,590	)
Diversified financial services—(0.41)%
Chicago Mercantile Exchange Holdings, Inc., Class A		(1,800	)		(961,848	)
Diversified telecommunication services—(0.51)%
Qwest Communications International, Inc.		(123,700	)		(1,199,890	)
Food & staples retailing—(0.48)%
Walgreen Co.		(26,100	)		(1,136,394	)
Food products—(0.33)%
Hershey Co.		(15,500	)		(784,610	)
Health care equipment & supplies—(0.34)%
Zimmer Holdings, Inc.		(9,500	)		(806,455	)
Health care providers & services—(0.62)%
Amedisys, Inc.		(40,100	)		(1,456,833	)
Hotels, restaurants & leisure—(0.58)%
Darden Restaurants, Inc.		(30,900	)		(1,359,291	)
Household durables—(0.89)%
Lennar Corp., Class A		(13,600	)		(497,216	)
Stanley Works		(26,500	)		(1,608,550	)
					(2,105,766	)
IT services—(0.61)%
Cognizant Technology Solutions Corp., Class A		(19,000	)		(1,426,710	)

UBS U.S. Equity Alpha Fund—Portfolio of investments

June 30, 2007

	Shares			Value
Investments sold short—(concluded)
Equities—(concluded)
Leisure equipment & products—(0.46)%
Mattel, Inc.		(42,900	)	$	(1,084,941	)
Machinery—(0.55)%
Cummins, Inc.		(12,900	)		(1,305,609	)
Media—(0.69)%
Gannett Co., Inc.		(10,300	)		(565,985	)
New York Times Co., Class A		(41,500	)		(1,054,100	)
					(1,620,085	)
Metals & mining—(1.55)%
Freeport-McMoRan Copper & Gold, Inc.		(17,600	)		(1,457,632	)
Nucor Corp.		(37,300	)		(2,187,645	)
					(3,645,277	)
Multiline retail—(0.77)%
Sears Holdings Corp.		(10,700	)		(1,813,650	)
Oil, gas & consumable fuels—(1.70)%
Devon Energy Corp.		(15,400	)		(1,205,666	)
Tesoro Corp.		(32,600	)		(1,863,090	)
Valero Energy Corp.		(12,600	)		(930,636	)
					(3,999,392	)

	Shares			Value
Pharmaceuticals—(1.09)%
Abbott Laboratories		(26,500	)	$	(1,419,075	)
Forest Laboratories, Inc.		(25,200	)		(1,150,380	)
					(2,569,455	)
Software—(1.37)%
BMC Software, Inc.		(50,800	)		(1,539,240	)
Novell, Inc.		(215,100	)		(1,675,629	)
					(3,214,869	)
Specialty retail—(0.85)%
Best Buy Co., Inc.		(18,500	)		(863,395	)
RadioShack Corp.		(34,500	)		(1,143,330	)
					(2,006,725	)
Total investments sold short (proceeds $45,697,066)					(47,804,068	)
Total investments, net of investments sold short—99.37%					234,104,652
Cash and other assets, less liabilities—0.63%					1,494,084
Net assets—100.00%				$	235,598,736

Notes to portfolio of investments

Aggregate cost before investments sold short for federal income tax purposes was $264,365,059; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	19,731,499
Gross unrealized depreciation		(2,187,838	)
Net unrealized appreciation	$	17,543,661

* Non-income producing security.

⁽¹⁾ All or a portion of these securities have been pledged to cover open short positions.

⁽²⁾ Investment in affiliated mutual fund.

⁽³⁾ The rate shown reflects the yield at June 30, 2007.

See accompanying notes to financial statements.
62

UBS U.S. Large Cap Equity Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS U.S. Large Cap Equity Fund (the "Fund") returned 20.39% (Class A shares returned 13.77% after the deduction of the maximum sales charge), while Class Y shares returned 20.73%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 20.43% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 65; 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.)

During the period, strong stock selection had a solid impact on performance. However, it was counteracted by negative industry selection—in particular, an overweight to banks. As a result, the Fund performed in line with its Index.

Portfolio performance summary

What worked

• Stock selection was strong during the period, and the largest contributor to performance overall. While the US equity market was generally, in our opinion, at or near fair value over the past year, careful research and analysis helped us to identify a number of stocks with price-to-intrinsic-value discrepancies that provided what we viewed as attractive investment opportunities. Mellon Financial Corp., and DirecTV Group, Inc.* were among our best performing stocks over the period. (For details, refer to "Portfolio Highlights.")

• Additional contributions to performance came from overweights to the auto parts, oil services and software industries, as well as an underweight to energy reserves.

• Within autos, the motor vehicles and parts sector contributed to performance, particularly our holding in Johnson Controls. Rising energy costs have increased demand for the company's building efficiency products. Building products growth is also being driven by the company's exposure to emerging markets. We believe the diversification that Johnson Controls retains in terms of customer, geography, and product and business line will enable the company to continue to produce solid results.

• Energy remains one of our largest industry underweights because of our bearish view on long-run oil prices. While the Fund's underweight to oil refineries hurt us in this area, its overweight to oil services companies, where we found select opportunities, helped drive this industry position to outperformance.

• Despite an underweight position versus the Index, the financial sector provided the Fund with interesting opportunities. Our portfolio was overweighted to financial services companies such as Morgan Stanley, which contributed strongly to performance.

• The portfolio also benefited by what we did not own. The Fund's underweight position in real estate investment trusts (REITs) had a positive impact on results, as the industry generally underperformed other sectors of the market.

* This holding was sold during the reporting period.

UBS U.S. Large Cap Equity Fund

What didn't work

• Industry selection, as a whole, was the biggest detractor from Fund performance, with our overweight in banks, and underweights in oil refining, tobacco and defense among the largest detractors.

• The largest detractor from performance was our overweight to banks—also the largest position in the Fund's portfolio. The financial sector in general underperformed during the period as investors' focus on subprime lending issues and levered debt weighed heavily on stock prices.

We continue to find what we view to be very attractive valuations in this space and, in many cases, believe the underlying balance sheets are strong. We continue to maintain an overweight in this area in general, but there are some sub-components where we continue to take a cautious stance. For example, we are underweight regional banks.

• Our underweight to oil refining detracted from performance. We continue to find this area unattractive, as we believe current oil prices are not sustainable.

Portfolio Highlights

• Mellon Financial was the Fund's top performing stock for the reporting period. The company's shares traded higher after the Federal Reserve Board approved its proposed merger with the Bank of New York. Combining the two companies will make Bank of New York Mellon one of the top custody service providers for institutional investors and will create one of the largest asset managers.

• DirecTV* performed well during the period. The company opened a new call center in Montana to handle its continued customer growth. It also received a favorable court ruling last September when a federal judge dismissed fraud charges brought by Darlene Investments, a former strategic partner. We sold our position in the stock when we believed that it reached its fair value, which benefited portfolio performance.

• Sprint was our biggest disappointment over the last 12 months. Mobile ESPN, a lynchpin of Sprint's larger strategy to attract new subscribers using other brands, said that it will cease operations by the end of the year. Additionally, the Sprint-Nextel merger integration experienced a larger number of customer losses than was anticipated, which has led to a sell-off in the stock.

• Not owning Apple detracted from relative performance when the highly anticipated and successful launch of the iPhone rallied Apple stock. We continue to believe the company's shares are currently overvalued.

* This holding was sold during the reporting period.

UBS U.S. Large Cap Equity Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			10 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		20.39	%		11.89	%		7.41	%		7.41	%
maximum sales charge	Class B⁽³⁾		19.50			11.04			N/A			9.44
	Class C⁽⁴⁾		19.56			11.08			N/A			8.95
	Class Y⁽⁵⁾		20.73			12.22			7.73			11.48
After deducting maximum	Class A⁽²⁾		13.77			10.63			6.80			6.80
sales charge	Class B⁽³⁾		14.50			10.77			N/A			9.32
	Class C⁽⁴⁾		18.56			11.08			N/A			8.95
Russell 1000 Index⁽⁶⁾			20.43			11.33			7.55			11.18

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.24% and 1.24%; Class B—2.01% and 2.01%; Class C—1.98% and 1.98%; Class Y—.97% and .97%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.30%; Class B—2.05%; Class C—2.05%; Class Y—1.05%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS U.S. Large Cap Equity Fund Class A shares is 06/30/97. Inception dates of Class B and Class C shares are 11/05/01 and 11/13/01, respectively. Inception date of Class Y shares and the Index is 02/22/94.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, and represents approximately 92% of the total market capitalization of the Russell 3000 Index.

UBS U.S. Large Cap Equity Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Large Cap Equity Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the Russell 1000 Index, if you had invested $10,000 in Class A shares on June 30, 1997 or $10,000,000 in Class Y shares on February 22, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Large Cap Equity Fund Class A vs. Russell 1000 Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS U.S. Large Cap Equity Fund Class Y vs. Russell 1000 Index

Wealth value with dividends reinvested

UBS U.S. Large Cap Equity Fund

Top ten equity holdings (unaudited)

As of June 30, 2007

	Percentage of net assets
Citigroup, Inc.		3.9	%
Morgan Stanley		3.6
Wells Fargo & Co.		3.1
Microsoft Corp.		2.9
Exelon Corp.		2.9
Intel Corp.		2.6
Wyeth		2.6
General Electric Co.		2.5
Johnson Controls, Inc.		2.2
Allergan, Inc.		2.1
Total		28.4	%

Industry diversification (unaudited)

As a percentage of net assets as of June 30, 2007

Equities
Aerospace & defense	0.48	%
Air freight & logistics	1.66
Auto components	3.43
Automobiles	0.71
Beverages	1.52
Biotechnology	2.75
Building products	1.80
Capital markets	5.98
Commercial banks	6.34
Computers & peripherals	1.02
Diversified financial services	5.74
Diversified telecommunication services	1.61
Electric utilities	4.25
Energy equipment & services	3.39
Food & staples retailing	2.61
Health care equipment & supplies	0.98
Health care providers & services	2.24
Hotels, restaurants & leisure	1.55
Household durables	0.90
Industrial conglomerates	2.48
Insurance	2.59	%
Internet & catalog retail	1.05
Internet software & services	1.01
Machinery	3.04
Media	4.60
Multi-utilities	1.58
Multiline retail	0.80
Oil, gas & consumable fuels	2.40
Pharmaceuticals	8.77
Road & rail	1.95
Semiconductors & semiconductor equipment	6.23
Software	6.72
Specialty retail	2.00
Textiles, apparel & luxury goods	0.60
Thrifts & mortgage finance	1.00
Wireless telecommunication services	2.07
Total equities	97.85
Short-term investments	1.76
Total investments	99.61
Cash and other assets, less liabilities	0.39
Net assets	100.00	%

UBS U.S. Large Cap Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—97.85%
Aerospace & defense—0.48%
Northrop Grumman Corp.		62,400	$	4,859,088
Air freight & logistics—1.66%
FedEx Corp.		150,300		16,678,791
Auto components—3.43%
BorgWarner, Inc.		144,500		12,432,780
Johnson Controls, Inc.		189,300		21,915,261
				34,348,041
Automobiles—0.71%
Harley-Davidson, Inc.		118,800		7,081,668
Beverages—1.52%
Anheuser-Busch Cos., Inc.		137,000		7,145,920
Constellation Brands, Inc., Class A*		331,700		8,053,676
				15,199,596
Biotechnology—2.75%
Amgen, Inc.*		61,500		3,400,335
Cephalon, Inc.*		54,800		4,405,372
Genzyme Corp.*		251,700		16,209,480
Millennium Pharmaceuticals, Inc.*		336,100		3,552,577
				27,567,764
Building products—1.80%
Masco Corp.		632,500		18,007,275
Capital markets—5.98%
Bank of New York Co., Inc.		159,300		6,601,392
Blackstone Group LP*		103,792		3,037,992
Mellon Financial Corp.		330,800		14,555,200
Morgan Stanley		426,900		35,808,372
				60,002,956
Commercial banks—6.34%
City National Corp.		61,800		4,702,362
Fifth Third Bancorp		389,900		15,506,323
PNC Financial Services Group, Inc .		170,000		12,168,600
Wells Fargo & Co.		887,200		31,202,824
				63,580,109
Computers & peripherals—1.02%
Dell, Inc.*		359,500		10,263,725
Diversified financial services—5.74%
Citigroup, Inc.		768,261		39,404,107
JPMorgan Chase & Co.		373,700		18,105,765
				57,509,872
Diversified telecommunication services—1.61%
AT&T, Inc.		388,600		16,126,900

	Shares		Value
Electric utilities—4.25%
American Electric Power Co., Inc.		195,300	$	8,796,312
Exelon Corp.		396,100		28,756,860
Northeast Utilities		27,900		791,244
Pepco Holdings, Inc.		152,700		4,306,140
				42,650,556
Energy equipment & services—3.39%
ENSCO International, Inc.		172,800		10,542,528
GlobalSantaFe Corp.		168,200		12,152,450
Halliburton Co.		327,000		11,281,500
				33,976,478
Food & staples retailing—2.61%
Costco Wholesale Corp.		242,200		14,173,544
SYSCO Corp.		363,200		11,981,968
				26,155,512
Health care equipment & supplies—0.98%
Medtronic, Inc.		189,400		9,822,284
Health care providers & services—2.24%
Medco Health Solutions, Inc.*		148,100		11,550,319
UnitedHealth Group, Inc.		213,800		10,933,732
				22,484,051
Hotels, restaurants & leisure—1.55%
Carnival Corp.		319,400		15,577,138
Household durables—0.90%
Fortune Brands, Inc.		109,900		9,052,463
Industrial conglomerates—2.48%
General Electric Co.		650,200		24,889,656
Insurance—2.59%
Aflac, Inc.		119,600		6,147,440
Allstate Corp.		153,100		9,417,181
Hartford Financial Services Group, Inc.		105,600		10,402,656
				25,967,277
Internet & catalog retail—1.05%
Amazon.com, Inc.*		153,800		10,521,458
Internet software & services—1.01%
Yahoo!, Inc.*		374,500		10,160,185
Machinery—3.04%
Illinois Tool Works, Inc.		365,800		19,822,702
PACCAR, Inc.		122,300		10,644,992
				30,467,694
Media—4.60%
McGraw-Hill Cos., Inc.		96,600		6,576,528
News Corp., Class A		452,100		9,589,041
Omnicom Group, Inc.		222,800		11,790,576
R.H. Donnelley Corp.*		128,395		9,729,773
Viacom, Inc., Class B*		203,000		8,450,890
				46,136,808

UBS U.S. Large Cap Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
Multi-utilities—1.58%
NiSource, Inc.		233,000	$	4,825,430
Sempra Energy		185,300		10,975,319
				15,800,749
Multiline retail—0.80%
Target Corp.		126,800		8,064,480
Oil, gas & consumable fuels—2.40%
Chevron Corp.		79,100		6,663,384
EOG Resources, Inc.		117,500		8,584,550
Exxon Mobil Corp.		105,000		8,807,400
				24,055,334
Pharmaceuticals—8.77%
Allergan, Inc.		365,000		21,038,600
Bristol-Myers Squibb Co .		369,600		11,664,576
Johnson & Johnson		194,444		11,981,639
Merck & Co., Inc.		350,300		17,444,940
Wyeth		449,400		25,768,596
				87,898,351
Road & rail—1.95%
Burlington Northern Santa Fe Corp.		229,600		19,548,144
Semiconductors & semiconductor equipment—6.23%
Analog Devices, Inc.		482,000		18,142,480
Intel Corp.		1,115,400		26,501,904
Linear Technology Corp .		215,100		7,782,318
Xilinx, Inc.		375,300		10,046,781
				62,473,483
Software—6.72%
BEA Systems, Inc.*		477,900		6,542,451
Citrix Systems, Inc.*		227,100		7,646,457
Intuit, Inc.*		202,600		6,094,208
McAfee, Inc.*		25,400		894,080
Microsoft Corp.		999,100		29,443,477
Red Hat, Inc.*		131,500		2,929,820
Symantec Corp.*		684,302		13,822,901
				67,373,394

	Shares		Value
Specialty retail—2.00%
Chico's FAS, Inc.*		245,900	$	5,985,206
Home Depot, Inc.		356,300		14,020,405
				20,005,611
Textiles, apparel & luxury goods—0.60%
Coach, Inc.*		127,700		6,051,703
Thrifts & mortgage finance—1.00%
Freddie Mac		164,400		9,979,080
Wireless telecommunication services—2.07%
Sprint Nextel Corp.		1,002,520		20,762,189
Total equities (cost $813,890,898)				981,099,863
Short-term investments—1.76%
Other—1.70%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(1),(2)(cost $17,042,612)		17,042,612		17,042,612
	Face amount
US government obligation—0.06%
US Treasury Bills, 4.81%, due 12/20/07^(3),(4)(cost $586,527)	$	600,000		586,548
Total short-term investments (cost $17,629,139)				17,629,160
Total investments—99.61% (cost $831,520,037)				998,729,023
Cash and other assets, less liabilities—0.39%				3,893,621
Net assets—100.00%			$	1,002,622,644

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $836,057,743; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	165,623,531
Gross unrealized depreciation		(2,952,251	)
Net unrealized appreciation	$	162,671,280

* Non-income producing security.

⁽¹⁾ Investment in affiliated mutual fund.

⁽²⁾ The rate shown reflects the yield at June 30, 2007.

⁽³⁾ The rate shown is the effective yield at the date of purchase.

⁽⁴⁾ This security was pledged to cover margin requirements for futures contracts.

UBS U.S. Large Cap Equity Fund—Portfolio of investments

June 30, 2007

Futures contracts

UBS U.S. Large Cap Equity Fund had the following open futures contracts as of June 30, 2007:

	Expiration date	Cost		Value		Unrealized depreciation
Index futures buy contracts:
S&P 500 Index, 33 contracts	September 2007	$	12,545,866	$	12,502,050	$	(43,816	)

The segregated aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 2007 was $586,548.

See accompanying notes to financial statements.
70

UBS U.S. Large Cap Growth Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS U.S. Large Cap Growth Fund (the "Fund") returned 21.29% (Class A shares returned 14.65% after the deduction of the maximum sales charge), while Class Y shares returned 21.51%. The Fund's benchmark, the Russell 1000 Growth Index (the "Index"), returned 19.04% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 74; 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 outperformance was due to successful stock selection during the period.

Portfolio performance summary

What worked

• Stock selection was the main engine driving the Fund's significant outperformance. During the period, Apple, Akamai* and Express Scripts* were among our top performers. (For details, see "Portfolio Highlights.")

• Our bottom-up security selection process resulted in industry weights that contributed to returns; these included overweights in Internet, medical services and oil services, as well as an underweight to specialty retailers relative to the Index.

• The Fund's overweight to Internet stocks was the largest contributor to performance. The market pullback provided us with the opportunity to increase the Fund's exposure to these stocks at attractive prices. We are focused on companies with excellent growth prospects, attractive risk/reward profiles, and strong prospects for above-average free cash flow yield (which is similar to earnings yield, but takes into account capital expenditures and other ongoing costs a business incurs to keep itself running) and growth rates.

• We overweighted medical equipment and services stocks, which was one of the Fund's strongest industry positions for the period. The Fund owns several companies that we believe are unique, have sustainable competitive advantages, and have minimal exposure to industry risk factors such as health care regulation. We anticipate healthy growth for companies that provide services and products in the specialty pharmaceutical, medical equipment, and diagnostic testing areas.

• The Fund's overweight to oil services stocks drove positive performance, as well. We believe that years of underinvestment and increased capital intensity, combined with heightened demand from emerging markets, will provide above-average earnings and cash flow growth in these companies. Our research indicates that a shortage of equipment and people to provide advanced drilling and oil recovery services, especially in offshore environments, will support a long cycle of pricing power. This in turn should drive a sustainable cycle of worldwide drilling and infrastructure spending.

• The Fund underweighted specialty retailers. This strategy was consistent with our belief that the consumer sectors may continue to face difficulty in a deteriorating environment. Higher gas prices, tighter money, daunting adjustable-rate mortgage resets, and the resulting slowing housing environment will all contribute to a weaker consumer. We trimmed previous overweights to specialty retailers, which contributed to the Fund's performance.

* This holding was sold during the reporting period.

UBS U.S. Large Cap Growth Fund

What didn't work

• An underweight to tobacco was the biggest detractor for the year. Despite strong performance during the last year, we expect to remain underweight in this area. The dynamics of these big companies and the saturated market in which they operate suggest below average growth potential; nonetheless, they continue to trade at levels above which we would be comfortable owning them.

• In the materials sector, an underweight to metals and mining stocks detracted from performance. While near-term demand supports an extended commodities cycle, we prefer energy companies as a way to play this opportunity. Despite price volatility, we are more comfortable with the supply demand dynamics of energy, as we expect crude demand growth of 1.5 million barrels a year going forward.

• Within the energy sector, our underweight to oil refining stocks detracted from performance. Our preferred segment of the energy sector is oil services, where years of underinvestment and increased capital intensity, combined with heightened demand from emerging markets, should, in our opinion, lead to above-average earnings and cash flow growth.

Portfolio Highlights

• Apple shares were the portfolio's biggest stock success story during the period due to the continued success of the iPod and strong Macintosh personal computer sales. The stock rose as investors anticipated new product releases, including Apple TV, iPhone, and a new operating system. We continue to believe that computer share gains and the continued growth of peripheral devices like the iPhone will drive outperformance.

• Akamai* made a strong contribution to Fund returns early in the period as the market bought into the prospects for multiyear growth opportunities in rich content distribution. (Akamai is responsible for creating a digital operating environment for the Web that plays a critical role in getting content from providers to consumers.) However, later in the period we eliminated the position as we felt its stock price had begun to get ahead of company fundamentals and future growth prospects.

• Express Scripts* was another strong performer during the year. The company manages the purchasing of drugs and the creation of formularies to minimize drug spending for its clients, which include corporations, state governments and unions. Express Scripts generated free cash flow growth, demonstrating the ability of the firm to take advantage of generic drug opportunities, growing faster than the consensus view believed it would.

• Circuit City* was one of our biggest disappointments during the period. In our opinion, the company failed to manage inventory, and lost customers due to the decline in the quality of its customer service. The company failed to execute despite the significant growth in large screen televisions, and caused a thesis violation. As a result, we eliminated the name from the portfolio.

* This holding was sold during the reporting period.

UBS U.S. Large Cap Growth Fund

• Monster Worldwide is a leading job listing Web site. Monster's services allow its corporate clients to reach the widest possible audience when trying to fill a position. The stock reacted negatively to macro data that the US services market is slowing, and this hampered the stock's performance for the period.

UBS U.S. Large Cap Growth Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		21.29	%		10.87	%		1.50	%
maximum sales charge	Class B⁽³⁾		20.42			10.04			4.94
	Class C⁽⁴⁾		20.28			10.07			4.23
	Class Y⁽⁵⁾		21.51			11.14			3.87
After deducting maximum	Class A⁽²⁾		14.65			9.63			0.83
sales charge	Class B⁽³⁾		15.42			9.76			4.80
	Class C⁽⁴⁾		19.28			10.07			4.23
Russell 1000 Growth Index⁽⁶⁾			19.04			9.28			3.48

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—2.33% and 1.05%; Class B—3.23% and 1.80%; Class C—3.12% and 1.80%; Class Y—2.10% and .80%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.05%; Class B—1.80%; Class C—1.80%; Class Y—.80%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS U.S. Large Cap Growth Fund Class A shares is 12/31/98. Inception dates of Class B and Class C shares are 11/07/01 and 11/19/01, respectively. Inception date of Class Y shares and the Index is 10/14/97.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

UBS U.S. Large Cap Growth Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Large Cap Growth Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the Russell 1000 Growth Index, if you had invested $10,000 in Class A shares on December 31, 1998 or $10,000,000 in Class Y shares on October 14, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Large Cap Growth Fund Class A vs. Russell 1000 Growth Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS U.S. Large Cap Growth Fund Class Y vs. Russell 1000 Growth Index

Wealth value with dividends reinvested

UBS U.S. Large Cap Growth Fund

Top ten equity holdings (unaudited)

As of June 30, 2007

	Percentage of net assets
Google, Inc., Class A		5.6	%
Allergan, Inc.		3.8
Praxair, Inc.		3.7
Cisco Systems, Inc.		3.4
Microsoft Corp.		3.1
Morgan Stanley		3.1
XTO Energy, Inc.		3.0
General Electric Co.		2.9
Schlumberger Ltd.		2.8
QUALCOMM, Inc.		2.7
Total		34.1	%

Industry diversification (unaudited)

As a percentage of net assets as of June 30, 2007

Equities
Aerospace & defense	3.76	%
Air freight & logistics	1.30
Biotechnology	1.47
Capital markets	5.21
Chemicals	3.69
Commercial services & supplies	1.37
Communications equipment	7.48
Computers & peripherals	2.50
Diversified financial services	2.14
Electric utilities	1.76
Electrical equipment	1.94
Energy equipment & services	5.24
Health care equipment & supplies	8.23
Health care providers & services	5.99
Hotels, restaurants & leisure	8.13
Household products	1.74
Industrial conglomerates	2.90
Internet software & services	7.68	%
IT services	1.03
Media	2.35
Multi-utilities	1.93
Oil, gas & consumable fuels	4.55
Pharmaceuticals	3.76
Road & rail	1.95
Semiconductors & semiconductor equipment	2.26
Software	4.85
Specialty retail	1.41
Wireless telecommunication services	2.08
Total equities	98.70
Short-term investment	1.14
Total investment	99.84
Cash and other assets, less liabilities	0.16
Net assets	100.00	%

UBS U.S. Large Cap Growth Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—98.70%
Aerospace & defense—3.76%
Boeing Co.		9,600	$	923,136
United Technologies Corp.		25,800		1,829,994
				2,753,130
Air freight & logistics—1.30%
FedEx Corp.		8,600		954,342
Biotechnology—1.47%
Genentech, Inc.*		14,200		1,074,372
Capital markets—5.21%
Goldman Sachs Group, Inc.		7,200		1,560,600
Morgan Stanley		26,900		2,256,372
				3,816,972
Chemicals—3.69%
Praxair, Inc.		37,500		2,699,625
Commercial services & supplies—1.37%
Monster Worldwide, Inc.*		24,400		1,002,840
Communications equipment—7.48%
Cisco Systems, Inc.*		90,300		2,514,855
QUALCOMM, Inc.		45,800		1,987,262
Research In Motion Ltd.*		4,900		979,951
				5,482,068
Computers & peripherals—2.50%
Apple, Inc.*		15,000		1,830,600
Diversified financial services—2.14%
Citigroup, Inc.		30,600		1,569,474
Electric utilities—1.76%
Exelon Corp.		17,800		1,292,280
Electrical equipment—1.94%
Rockwell Automation, Inc.		20,500		1,423,520
Energy equipment & services—5.24%
Baker Hughes, Inc.		21,700		1,825,621
Schlumberger Ltd.		23,700		2,013,078
				3,838,699
Health care equipment & supplies—8.23%
Alcon, Inc.		10,700		1,443,537
Baxter International, Inc.		34,800		1,960,632
Becton, Dickinson & Co.		14,900		1,110,050
C.R. Bard, Inc.		18,300		1,512,129
				6,026,348
Health care providers & services—5.99%
Laboratory Corp. of America Holdings*		20,400		1,596,504
Medco Health Solutions, Inc.*		16,700		1,302,433
Quest Diagnostics, Inc.		28,900		1,492,685
				4,391,622

	Shares		Value
Hotels, restaurants & leisure—8.13%
International Game Technology		41,300	$	1,639,610
Las Vegas Sands Corp.*		19,700		1,504,883
Starbucks Corp.*		41,600		1,091,584
Wynn Resorts Ltd.		19,200		1,722,048
				5,958,125
Household products—1.74%
Procter & Gamble Co.		20,800		1,272,752
Industrial conglomerates—2.90%
General Electric Co.		55,500		2,124,540
Internet software & services—7.68%
eBay, Inc.*		47,900		1,541,422
Google, Inc., Class A*		7,800		4,082,364
				5,623,786
IT services—1.03%
Automatic Data Processing, Inc.		15,600		756,132
Media—2.35%
McGraw-Hill Cos., Inc.		25,300		1,722,424
Multi-utilities—1.93%
Dominion Resources, Inc.		16,400		1,415,484
Oil, gas & consumable fuels—4.55%
Southwestern Energy Co.*		25,200		1,121,400
XTO Energy, Inc.		36,800		2,211,680
				3,333,080
Pharmaceuticals—3.76%
Allergan, Inc.		47,800		2,755,192
Road & rail—1.95%
Burlington Northern Santa Fe Corp.		16,800		1,430,352
Semiconductors & semiconductor equipment—2.26%
Microchip Technology, Inc.		24,100		892,664
Texas Instruments, Inc.		20,300		763,889
				1,656,553
Software—4.85%
Adobe Systems, Inc.*		31,900		1,280,785
Microsoft Corp.		77,100		2,272,137
				3,552,922
Specialty retail—1.41%
Abercrombie & Fitch Co.		14,200		1,036,316
Wireless telecommunication services—2.08%
Sprint Nextel Corp.		73,600		1,524,256
Total equities (cost $68,656,475)				72,317,806

UBS U.S. Large Cap Growth Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Short-term investment—1.14%
Other—1.14%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(1),(2)(cost $834,340)		834,340	$	834,340
Total investments—99.84% (cost $69,490,815)				73,152,146
Cash and other assets, less liabilities—0.16%				120,608
Net assets—100.00%			$	73,272,754

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $69,591,346; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	4,528,341
Gross unrealized depreciation		(967,541	)
Net unrealized appreciation	$	3,560,800

* Non-income producing security.

⁽¹⁾ Investment in affiliated mutual fund.

⁽²⁾ The rate shown reflects the yield at June 30, 2007.

See accompanying notes to financial statements.
78

UBS U.S. Large Cap Value Equity Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS U.S. Large Cap Value Equity Fund (the "Fund") returned 21.20% (Class A shares returned 14.57% after the deduction of the maximum sales charge), while Class Y shares returned 21.52%. The Fund's benchmark, the Russell 1000 Value Index (the "Index"), returned 21.87% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 81; 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.)

During the period, the Fund generally performed in line with the Index, though industry factors served as a slight drag on performance.

Portfolio performance summary

What worked

• Stock selection was strong during the period, and the largest contributor to performance overall. The US equity market, despite some volatility, was, in our opinion, generally at or near fair value over the past year. However, careful research and analysis helped us to identify a number of stocks with price-to-intrinsic-value discrepancies that provided what we viewed as attractive investment opportunities. These included Mellon Financial, the Fund's top-performing stock over the period, DirecTV* and Accenture*. (For details, refer to "Portfolio Highlights.")

• Additional contributions to performance came from overweights to the auto and software industries, as well as an underweight to energy reserves stocks.

• Within autos, the motor vehicles and parts sector contributed to performance, particularly our holding in Johnson Controls. Rising energy costs have increased demand for the company's building efficiency products. Building products growth is also being driven by the company's exposure to emerging markets. We believe the diversification that Johnson Controls retains in terms of customer, geography, and product and business lines will enable the company to continue to produce solid results.

• Energy remains one of the Fund's largest industry underweights because of our bearish view on long-run oil prices. Both the Fund's underweight to energy reserves and the Fund's overweight to oil services companies, where we found select opportunities, helped drive this industry position to outperformance. Our underweight to oil refining, however, detracted from returns; see the "What didn't work" section for details.

• The Fund's overweight to computer software contributed to performance. Key holdings in this area included Microsoft and virus protection companies McAfee and Symantec.

• The portfolio also benefited by what we did not own. The portfolio's underweight position in real estate investment trusts (REITs) had a positive impact on results, as the industry generally underperformed other sectors of the market.

What didn't work

• Industry selection, as a whole, detracted from Fund performance, with overweights in banks and truck/sea/air freight companies, and underweights in tobacco and oil refining detracting from returns.

* This holding was sold during the reporting period.

UBS U.S. Large Cap Value Equity Fund

• The Fund's overweight to banks, which did not perform as well as expected, had the biggest negative impact on performance over the 12 months. Nonetheless, we continue to overweight banks. We believe these companies should continue to derive attractive growth and returns from more global sources. Additionally, we believe merger and acquisition activity in this area still has a few more years to go.

• The Fund's underweight to oil refining, which benefited from what we believe are unsustainably high oil prices, detracted from performance. We continue to underweight this area, and believe the Fund will be rewarded when oil prices decline.

• An overweight to the truck/freight industry detracted from Fund performance. Our exposure in this area is from our position in FedEx, which we continue to find attractive.

Portfolio Highlights

• Mellon Financial was the top performing stock for the reporting period. The company's shares traded higher after the Federal Reserve Board approved its proposed merger with the Bank of New York. Combining the two companies will make Bank of New York Mellon one of the top custody service providers for institutional investors and will create one of the largest asset managers.

• DirecTV* also performed well during the period. The company opened a new call center in Montana to handle its continued customer growth. It also received a favorable court ruling last September when a federal judge dismissed fraud charges brought by Darlene Investments, a former strategic partner.

• Accenture* was a top contributor to Fund performance as the management and technology service consultant achieved record results. Accenture took advantage of its leadership position and its global platform in order to continue to generate growth, coupled with strong financial results in a competitive landscape.

• Sprint was our biggest disappointment over the last 12 months. Mobile ESPN, a lynchpin of Sprint's larger strategy to attract new subscribers using other brands, said that it will cease operations by the end of the year. Additionally, the Sprint-Nextel merger integration has experienced a larger number of customer losses than expected, which has led to a sell-off in the stock. Despite these short-term negative results, we expect the merger to yield significant long-term benefits.

• Masco, which manufactures home improvement and building supplies, continued to be hit hard by the housing slump. The company announced a loss for the fourth quarter of 2006 and said it would be cutting costs, which includes the elimination of 8,000 jobs. Masco forecasted continued weakness as homebuilders cut production to reduce their inventory of unsold homes. Over time we expect Masco's diversified businesses to generate significant cash flow that is not currently being priced in by the market.

* This holding was sold during the reporting period.

UBS U.S. Large Cap Value Equity Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		21.20	%		13.07	%		10.45	%
maximum sales charge	Class B⁽³⁾		20.21			12.20			10.13
	Class C⁽⁴⁾		20.24			12.22			10.11
	Class Y⁽⁵⁾		21.52			13.35			9.83
After deducting maximum	Class A⁽²⁾		14.57			11.78			9.33
sales charge	Class B⁽³⁾		15.21			11.95			10.01
	Class C⁽⁴⁾		19.24			12.22			10.11
Russell 1000 Value Index⁽⁶⁾			21.87			13.32			9.25

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.31% and 1.10%; Class B—2.15% and 1.85%; Class C—2.08% and 1.85%; Class Y—1.06% and .85%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.10%; Class B—1.85%; Class C—1.85%; Class Y—.85%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception dates of UBS U.S. Large Cap Value Equity Fund Class A shares is 12/07/01. Inception dates of Class B and Class C shares are 11/08/01 and 12/12/01, respectively. Inception date of Class Y shares and the Index is 06/29/01.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

UBS U.S. Large Cap Value Equity Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Large Cap Value Equity Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the Russell 1000 Value Index, if you had invested $10,000 in Class A shares on December 7, 2001 or $10,000,000 in Class Y shares on June 29, 2001, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Large Cap Value Equity Fund Class A vs. Russell 1000 Value Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS U.S. Large Cap Value Equity Fund Class Y vs. Russell 1000 Value Index

Wealth value with dividends reinvested

UBS U.S. Large Cap Value Equity Fund

Top ten equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Citigroup, Inc.		5.3	%
Morgan Stanley		4.7
Wells Fargo & Co.		4.4
General Electric Co.		3.8
Exxon Mobil Corp.		3.6
Chevron Corp.		3.5
JPMorgan Chase & Co.		3.4
Exelon Corp.		2.8
AT&T, Inc.		2.6
Wyeth		2.5
Total		36.6	%

⁽¹⁾ Figures represent the direct investments of the UBS U.S. Large Cap Value Equity Fund. Figures could be different if a breakdown of the underlying investment company was included.

Industry diversification (unaudited)⁽²⁾

As a percentage of net assets as of June 30, 2007

Equities
Aerospace & defense	2.01	%
Air freight & logistics	1.75
Auto components	4.05
Automobiles	0.75
Beverages	1.95
Biotechnology	0.59
Building products	1.58
Capital markets	8.53
Commercial banks	9.05
Diversified financial services	10.30
Diversified telecommunication services	2.56
Electric utilities	6.86
Energy equipment & services	4.09
Food & staples retailing	1.76
Health care providers & services	2.22
Household durables	0.97
Industrial conglomerates	3.84
Insurance	3.12
Machinery	3.30	%
Media	3.45
Multi-utilities	1.74
Oil, gas & consumable fuels	7.11
Pharmaceuticals	6.88
Road & rail	2.08
Software	3.54
Specialty retail	1.03
Thrifts & mortgage finance	1.03
Wireless telecommunication services	2.16
Total equities	98.30
Investment company
SPDR Trust, Series 1	0.86
Short-term investment	0.92
Total investments	100.08
Liabilities, in excess of cash and other assets	(0.08	)
Net assets	100.00	%

⁽²⁾ Figures represent the industry breakdown of direct investments of the UBS U.S. Large Cap Value Equity Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

UBS U.S. Large Cap Value Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—98.30%
Aerospace & defense—2.01%
Lockheed Martin Corp.		10,000	$	941,300
Northrop Grumman Corp.		23,900		1,861,093
				2,802,393
Air freight & logistics—1.75%
FedEx Corp.		22,000		2,441,340
Auto components—4.05%
BorgWarner, Inc.		25,000		2,151,000
Johnson Controls, Inc.		30,100		3,484,677
				5,635,677
Automobiles—0.75%
Harley-Davidson, Inc.		17,400		1,037,214
Beverages—1.95%
Anheuser-Busch Cos., Inc.		31,700		1,653,472
Constellation Brands, Inc., Class A*		43,800		1,063,464
				2,716,936
Biotechnology—0.59%
Cephalon, Inc.*		10,200		819,978
Building products—1.58%
Masco Corp.		77,050		2,193,614
Capital markets—8.53%
Mellon Financial Corp.		78,900		3,471,600
Morgan Stanley		78,600		6,592,968
Northern Trust Corp.		28,300		1,817,992
				11,882,560
Commercial banks—9.05%
City National Corp.		11,000		836,990
Fifth Third Bancorp		78,400		3,117,968
PNC Financial Services Group, Inc.		35,600		2,548,248
Wells Fargo & Co.		173,400		6,098,478
				12,601,684
Diversified financial services—10.30%
Bank of America Corp.		43,522		2,127,791
Citigroup, Inc.		144,676		7,420,432
JPMorgan Chase & Co.		98,870		4,790,251
				14,338,474
Diversified telecommunication services—2.56%
AT&T, Inc.		86,050		3,571,075
Electric utilities—6.86%
American Electric Power Co., Inc.		58,900		2,652,856
Exelon Corp.		53,500		3,884,100
Northeast Utilities		59,500		1,687,420
Pepco Holdings, Inc.		46,900		1,322,580
				9,546,956

	Shares		Value
Energy equipment & services—4.09%
ENSCO International, Inc.		29,400	$	1,793,694
GlobalSantaFe Corp.		26,800		1,936,300
Halliburton Co.		56,900		1,963,050
				5,693,044
Food & staples retailing—1.76%
Costco Wholesale Corp.		41,800		2,446,136
Health care providers & services—2.22%
Medco Health Solutions, Inc.*		26,400		2,058,936
UnitedHealth Group, Inc.		20,200		1,033,028
				3,091,964
Household durables—0.97%
Fortune Brands, Inc.		16,400		1,350,868
Industrial conglomerates—3.84%
General Electric Co.		139,700		5,347,716
Insurance—3.12%
Allstate Corp.		31,300		1,925,263
Hartford Financial Services Group, Inc.		24,550		2,418,421
				4,343,684
Machinery—3.30%
Illinois Tool Works, Inc.		56,300		3,050,897
PACCAR, Inc.		17,800		1,549,312
				4,600,209
Media—3.45%
News Corp., Class A		71,000		1,505,910
Omnicom Group, Inc.		39,000		2,063,880
R.H. Donnelley Corp.*		16,200		1,227,636
				4,797,426
Multi-utilities—1.74%
NiSource, Inc.		44,800		927,808
Sempra Energy		25,200		1,492,596
				2,420,404
Oil, gas & consumable fuels—7.11%
Chevron Corp.		57,800		4,869,072
Exxon Mobil Corp.		60,050		5,036,994
				9,906,066
Pharmaceuticals—6.88%
Bristol-Myers Squibb Co.		64,200		2,026,152
Johnson & Johnson		15,200		936,624
Merck & Co., Inc.		62,200		3,097,560
Wyeth		61,500		3,526,410
				9,586,746
Road & rail—2.08%
Burlington Northern Santa Fe Corp.		34,100		2,903,274

UBS U.S. Large Cap Value Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
Software—3.54%
McAfee, Inc.*		1,700	$	59,840
Microsoft Corp.		86,600		2,552,102
Symantec Corp.*		115,000		2,323,000
				4,934,942
Specialty retail—1.03%
Home Depot, Inc.		36,400		1,432,340
Thrifts & mortgage finance—1.03%
Freddie Mac		23,650		1,435,555
Wireless telecommunication services—2.16%
Sprint Nextel Corp.		145,457		3,012,414
Total equities (cost $101,629,642)				136,890,689

	Shares		Value
Investment company—0.86%
SPDR Trust, Series 1 (cost $1,137,333)		8,000	$	1,203,440
Short-term investment—0.92%
Other—0.92%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(1),(2)(cost $1,287,082)		1,287,082		1,287,082
Total investments—100.08% (cost $104,054,057)				139,381,211
Liabilities, in excess of cash and other assets—(0.08)%				(114,163	)
Net assets—100.00%			$	139,267,048

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $104,684,795; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	35,259,354
Gross unrealized depreciation		(562,938	)
Net unrealized appreciation	$	34,696,416

* Non-income producing security.

⁽¹⁾ Investment in affiliated mutual fund.

⁽²⁾ The rate shown reflects the yield at June 30, 2007.

See accompanying notes to financial statements.
85

UBS U.S. Mid Cap Growth Equity Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS U.S. Mid Cap Growth Equity Fund (the "Fund") returned 15.94% (Class A shares returned 9.55% after the deduction of the maximum sales charge), while Class Y shares returned 16.17%. The Fund's benchmark, the Russell Midcap Growth Index (the "Index"), returned 19.73% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 88; 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.)

Performance in the Fund has historically been a function of stock selection as we do not make specific "sector calls." To that end, stock selection within the energy, technology and healthcare sectors were the main positive contributors to performance during the period, whereas stock selections in the industrial and consumer sectors were the main detractors from performance. Industry factors also made a positive contribution to returns. Overall, however, these positive contributions were outweighed by negative contributions from stock selection within the industrial and consumer sectors, which caused the Fund to underperform its benchmark.

Portfolio performance summary

What worked

• In health care, the Fund's positions in medical device companies that focus on women's preventative and therapeutic solutions contributed to overall performance. Medical products in the women's health area are benefiting from both product cycles (conversions to digital technology from analog) as well as innovation of new treatment methods. In addition, the Fund benefited from solid fundamentals, as well as an active mergers and acquisitions (M&A) environment in the diagnostics industry.

• Within technology, the Fund benefited from an eclectic mix of individual stock performance. We continue to benefit from several secular trends in technology, such as consumer adoption of self service hardware in both the financial services, retail and hospitality areas. The offshoring of technology labor to lower-cost markets is also a trend on which we capitalized. The Fund also benefited during the period from the performance of a collection of companies that we consider to be superior innovators in areas such as voice recognition, technology and software for creative professionals.

• Within the energy sector, the Fund's largest positions are in the oil services segment. We continue to believe that years of underinvestment and increased capital intensity, combined with heightened demand from emerging markets, will provide above-average earnings and cash flow growth in these groups. In services, our research indicates that a shortage of equipment and people to develop, maintain and service rigs, especially in offshore environments, will support a long cycle of pricing power. This in turn should drive a sustainable cycle of worldwide drilling and infrastructure spending.

What didn't work

• Stock selection within the industrial and consumer sectors was the main negative contributor to performance during the period.

• The Fund had several disappointing performances in the industrial sector, including American Commercial Lines and Graco Industries, due to company-specific factors.

UBS U.S. Mid Cap Growth Equity Fund

• The Fund underperformed in the consumer segment due to stock-specific performance by the following companies: Scientific Games (see "Portfolio Highlights"), Pool Corp., Texas Roadhouse, Coldwater Creek*, Tractor Supply and Bare Escentuals. Additionally, we did not own Amazon.com during the period, which hurt performance when that stock saw a significant price increase.

Portfolio Highlights

• Thermo Fisher Scientific was the top contributor to Fund performance during the review period. The company is the leading life science and industrial equipment supplier. Company management has consistently executed on 100-plus basis points of margin expansion every year, and we expect this to continue for the next several years.

• Freescale Semiconductor, a designer and manufacturer of semiconductors for the automotive, consumer, industrial, networking and wireless markets, also contributed strongly to performance. The company entered into a leveraged buyout agreement at roughly a 25% premium to then-existing prices.

• The Fund's biggest disappointment for the period was Chemed*, a leading provider of hospice services, as well as plumbing repair and maintenance services. The stock fell when the company pre-announced disappointing results due to government reimbursement issues in three programs of its hospice business. The company has divested one program and is in the process of addressing the problems in the other two. We have eliminated this position from the portfolio.

• Scientific Games, a provider of instant and online lottery services both domestically and internationally, has had very mixed fundamentals over the past twelve months. While the company has been very active in securing future growth opportunities in both Latin America and Asia, recent financial results have been weighed down by spending related to these initiatives, as well as slow progress in the company's highly anticipated German markets. We continue to monitor the company's ability to execute upon the substantial growth opportunities that exist.

* This holding was sold during the reporting period.

UBS U.S. Mid Cap Growth Equity Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting maximum	Class A⁽²⁾		15.94	%		7.66	%
sales charge	Class C⁽³⁾		15.14			4.97
	Class Y⁽⁴⁾		16.17			9.13
After deducting maximum sales charge	Class A⁽²⁾		9.55			2.90
	Class C⁽³⁾		14.14			4.97
Russell Midcap Growth Index⁽⁵⁾			19.73			11.72

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—4.94% and 1.45%; Class C—6.79% and 2.20%; Class Y—4.50% and 1.20%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.45%; Class C—2.20%; Class Y—1.20%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS U.S. Mid Cap Growth Equity Fund Class A shares is 03/31/06. Inception date of Class C shares is 04/21/06. Inception date of Class Y shares and Index is 03/27/06.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁵⁾ The Russell Midcap Growth Index is an unmanaged index that measures the performance of those Russell mid cap companies with higher price-to-book ratios and higher forecasted growth values.

UBS U.S. Mid Cap Growth Equity Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $5,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Mid Cap Growth Equity Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the Russell Midcap Growth Index, if you had invested $10,000 in Class A shares on March 31, 2006 or $5,000,000 in Class Y shares on March 27, 2006, and had reinvested all your income dividends and capital gain distributions, if any, through June 30, 2007. The performance of Class C shares will vary based upon the different inception date, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Mid Cap Growth Equity Fund Class A vs. Russell Midcap Growth Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS U.S. Mid Cap Growth Equity Fund Class Y vs. Russell Midcap Growth Index

Wealth value with dividends reinvested

UBS U.S. Mid Cap Growth Equity Fund

Top ten equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Anixter International, Inc.		4.4	%
Thermo Fisher Scientific, Inc.		3.8
MSC Industrial Direct Co.		3.4
Republic Services, Inc.		2.9
Harsco Corp.		2.8
Roper Industries, Inc.		2.6
Millipore Corp.		2.5
NutriSystem, Inc.		2.5
Micros Systems, Inc.		2.4
Gaylord Entertainment Co.		2.4
Total		29.7	%

⁽¹⁾ Figures represent the direct investments of the UBS U.S. Mid Cap Growth Equity Fund. Figures could be different if a breakdown of the underlying investment company was included.

Industry diversification (unaudited)⁽²⁾

As a percentage of net assets as of June 30, 2007

Equities
Capital markets	0.98	%
Commercial services & supplies	5.52
Communications equipment	0.95
Computers & peripherals	2.13
Diversified financial services	3.06
Electrical equipment	2.60
Electronic equipment & instruments	6.13
Energy equipment & services	11.17
Health care equipment & supplies	3.12
Health care providers & services	8.26
Hotels, restaurants & leisure	7.61
Internet & catalog retail	2.48
IT services	2.72
Leisure equipment & products	1.65
Life sciences tools & services	6.38
Machinery	4.58
Marine	1.93	%
Oil, gas & consumable fuels	1.59
Personal products	2.02
Semiconductors & semiconductor equipment	3.79
Software	8.18
Specialty retail	2.40
Textiles, apparel & luxury goods	1.28
Trading companies & distributors	3.43
Wireless telecommunication services	4.54
Total equities	98.50
Investment company
iShares Russell Midcap Growth Index Fund	0.58
Short-term investment	1.10
Total investments	100.18
Liabilities, in excess of cash and other assets	(0.18	)
Net assets	100.00	%

⁽²⁾ Figures represent the industry breakdown of direct investments of the UBS U.S. Mid Cap Growth Equity Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

UBS U.S. Mid Cap Growth Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—98.50%
Capital markets—0.98%
TD Ameritrade Holding Corp.*		2,900	$	58,000
Commercial services & supplies—5.52%
Dun & Bradstreet Corp.		600		61,788
Monster Worldwide, Inc.*		2,200		90,420
Republic Services, Inc.		5,700		174,648
				326,856
Communications equipment—0.95%
F5 Networks, Inc.*		700		56,420
Computers & peripherals—2.13%
NCR Corp.*		2,400		126,096
Diversified financial services—3.06%
Chicago Mercantile Exchange Holdings, Inc., Class A		100		53,436
Moody's Corp.		1,000		62,200
Nasdaq Stock Market, Inc.*		2,200		65,362
				180,998
Electrical equipment—2.60%
Roper Industries, Inc.		2,700		154,170
Electronic equipment & instruments—6.13%
Amphenol Corp., Class A		2,800		99,820
Anixter International, Inc.*		3,500		263,235
				363,055
Energy equipment & services—11.17%
Cameron International Corp.*		1,500		107,205
Complete Production Services, Inc.*		3,600		93,060
Dril-Quip, Inc.*		1,900		85,405
ENSCO International, Inc.		700		42,707
National Oilwell Varco, Inc.*		1,000		104,240
Smith International, Inc.		2,300		134,872
Weatherford International Ltd.*		1,700		93,908
				661,397
Health care equipment & supplies—3.12%
Cytyc Corp.*		1,600		68,976
Gen-Probe, Inc.*		1,000		60,420
Hologic, Inc.*		1,000		55,310
				184,706
Health care providers & services—8.26%
Aetna, Inc.		900		44,460
DaVita, Inc.*		1,700		91,596
Healthways, Inc.*		2,800		132,636
Henry Schein, Inc.*		2,300		122,889
Psychiatric Solutions, Inc.*		2,700		97,902
				489,483
Hotels, restaurants & leisure—7.61%
Gaylord Entertainment Co.*		2,600		139,464
Life Time Fitness, Inc.*		1,600		85,168
Scientific Games Corp., Class A*		2,400		83,880

	Shares		Value
Hotels, restaurants & leisure—(concluded)
Starwood Hotels & Resorts Worldwide, Inc.		600	$	40,242
Texas Roadhouse, Inc., Class A*		8,000		102,320
				451,074
Internet & catalog retail—2.48%
NutriSystem, Inc.*		2,100		146,664
IT services—2.72%
Cognizant Technology Solutions Corp., Class A*		700		52,563
VeriFone Holdings, Inc.*		3,079		108,535
				161,098
Leisure equipment & products—1.65%
Pool Corp.		2,500		97,575
Life sciences tools & services—6.38%
Millipore Corp.*		2,000		150,180
Thermo Fisher Scientific, Inc.*		4,400		227,568
				377,748
Machinery—4.58%
Graco, Inc.		2,600		104,728
Harsco Corp.		3,200		166,400
				271,128
Marine—1.93%
American Commercial Lines, Inc.*		4,400		114,620
Oil, gas & consumable fuels—1.59%
Apache Corp.		600		48,954
Newfield Exploration Co.*		1,000		45,550
				94,504
Personal products—2.02%
Bare Escentuals, Inc.*		3,500		119,525
Semiconductors & semiconductor equipment—3.79%
Microchip Technology, Inc.		3,000		111,120
Tessera Technologies, Inc.*		2,800		113,540
				224,660
Software—8.18%
Adobe Systems, Inc.*		3,100		124,465
Autodesk, Inc.*		1,000		47,080
Citrix Systems, Inc.*		3,100		104,377
Micros Systems, Inc.*		2,600		141,440
Nuance Communications, Inc.*		4,000		66,920
				484,282
Specialty retail—2.40%
Dick's Sporting Goods, Inc.*		1,100		63,987
Tractor Supply Co.*		1,500		78,075
				142,062
Textiles, apparel & luxury goods—1.28%
Coach, Inc.*		1,600		75,824

UBS U.S. Mid Cap Growth Equity Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
Trading companies & distributors—3.43%
MSC Industrial Direct Co.		3,700	$	203,500
Wireless telecommunication services—4.54%
American Tower Corp., Class A*		3,000		126,000
MetroPCS Communications, Inc.*		2,400		79,296
SBA Communications Corp., Class A*		1,900		63,821
				269,117
Total equities (cost $5,204,745)				5,834,562
Investment company—0.58%
iShares Russell Midcap Growth Index Fund (cost $34,356)		300		34,173

	Shares		Value
Short-term investment—1.10%
Investment company—1.10%
UBS U.S. Cash Management Prime Relationship Fund, 5.36%^(1),(2)(cost $65,133)		65,133	$	65,133
Total investments—100.18% (cost $5,304,234)				5,933,868
Liabilities, in excess of cash and other assets—(0.18)%				(10,597	)
Net assets—100.00%			$	5,923,271

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $5,304,599; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	746,570
Gross unrealized depreciation		(117,301	)
Net unrealized appreciation	$	629,269

* Non-income producing security.

⁽¹⁾ Investment in affiliated mutual fund.

⁽²⁾ The rate shown reflects the yield at June 30, 2007.

See accompanying notes to financial statements.
92

UBS U.S. Small Cap Growth Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 14.18% (Class A shares returned 7.89% after the deduction of the maximum sales charge), while Class Y shares returned 14.54%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 16.83% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 96; 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 underperformance relative to the Index was due largely to stock selection, followed by industry factors.

Portfolio performance summary

What worked

• Though stock selection detracted from Fund performance during the period, some industry weightings contributed positively to returns. Overweights in medical services, clothing stores and oil services, as well as an underweight to financial services, helped the Fund's performance.

• We overweighted medical services stocks, which was the Fund's best-performing industry position for the year. Within health care, the trend of people living longer and aging baby boomers provide, in our opinion, a powerful tailwind. However, regulations, heightened scrutiny of safety issues and increased competitive pressures have dampened investment returns. Against this backdrop, we identified several companies that provide services that we believe are unique, have sustainable competitive advantages and have minimal exposure to industry risk factors such as health care regulation. We anticipate healthy growth for companies that provide services in the pediatric, psychology, and veterinary services areas.

• We overweighted clothing stores, a position that contributed to the Fund's performance. Consumer-related industries represent approximately two thirds of the US economy. The resilience in consumer spending over the past several years in the face of perceived pressures on disposable income has been a major driver of the US economy. Although these headwinds are likely to persist, we have been able to identify several companies that we believe are uniquely positioned to deliver sustainable earnings growth as they rapidly grow their square footage and continue to take market share from the department stores.

• The Fund's overweight to oil services stocks was another contributor to positive performance. We believe that years of underinvestment and increased capital intensity, combined with heightened demand from emerging markets, have resulted in above-average earnings and cash flow growth for these stocks. In services, our research indicates that a shortage of equipment and people to develop, maintain and service rigs, especially in offshore environments, will support a long cycle of pricing power. This in turn should drive a sustainable cycle of worldwide drilling and infrastructure spending.

• The Fund's underweight to financial services also helped returns. Financial services companies are being hurt by slowing loan growth, increasing non-performing assets and pressure on their net interest margins.

UBS U.S. Small Cap Growth Fund

What didn't work

• Underperformance over the period was driven primarily by stock selection. Names such as Esco Technologies, Christopher & Banks, and Tetra Technologies hurt Fund performance. (For more detailed information, refer to "Portfolio Highlights" below.)

• Among industry group weightings, our overweight to truck/sea/air freight stocks hindered performance, as did our underweights to Internet stocks, securities and asset management companies and chemicals. Despite these disappointments, the Fund remains underweight areas of the market where it is more difficult to identify sustainable growth trends.

• Despite the continued growth and usage of the Internet, we remained underweighted to the Internet industry, as the majority of names within our capitalization range are market share losers to the more entrenched, large-cap companies. Sustainable earnings growth remains elusive, while industry valuations are at a premium to other fast growing industries.

• Within transportation, our overweight to the truck/sea/air freight industry impacted performance. Trucking companies were impacted by weak freight volumes due in part to the slowdown in the housing and automotive sectors.

• The Fund's underweight to the securities and asset management industry hurt performance for the period. These companies benefited from increased assets under management, as well as from an increased level of merger and acquisition activity.

• We underweighted chemical stocks due to our belief that the general level of commodity prices is unsustainable. This hurt performance, as the sector experienced appreciation during the period.

Portfolio Highlights

• Teletech Holdings, a leading innovator in customer relationship management services, was one of the Fund's top performers for the year. Teletech enjoyed an increase in its stock price due to new business awards. We remain confident in management's ability to improve margins.

• Our position in Hub Group, an asset-light transportation provider of intermodal, truck brokerage and logistics services, also contributed to performance as shares reacted positively after the company reported rising intermodal volumes in their core division.

• Shares of Investors Financial Services rose during the period, adding to Fund returns. The company agreed to be acquired at a premium by State Street Corp., a leading provider of financial services to institutional investors.

• Shares of Esco Technologies, a leading supplier of engineered filtration products, special purpose communication systems and RF shielding and test products, saw its stock price weaken due to a delayed order for its communication systems.

UBS U.S. Small Cap Growth Fund

• The Fund's overweight in Christopher & Banks detracted from returns. The company, a leading specialty retailer focused on the female baby boomer demographic, saw its stock price fall during the period after failing to meet sales and earnings expectations due to merchandising miscues. The company also reduced its earnings guidance on weak same-store sales results.

• An overweight to Tetra Technologies held back Fund performance as the diversified oil and gas services company saw its stock price decline due to sales and earnings results that failed to meet expectations.

UBS U.S. Small Cap Growth Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		14.18	%		12.23	%		11.54	%
maximum sales charge	Class B⁽³⁾		13.32			11.40			9.99
	Class C⁽⁴⁾		13.33			11.39			9.67
	Class Y⁽⁵⁾		14.54			12.50			8.83
After deducting maximum	Class A⁽²⁾		7.89			10.97			10.81
sales charge	Class B⁽³⁾		8.32			11.14			9.88
	Class C⁽⁴⁾		12.33			11.39			9.67
Russell 2000 Growth Index⁽⁶⁾			16.83			13.08			3.74

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.50% and 1.28%; Class B—2.39% and 2.03%; Class C—2.31% and 2.03%; Class Y—1.13% and 1.03%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.28%; Class B—2.03%; Class C—2.03%; Class Y—1.03%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS U.S. Small Cap Growth Fund Class A shares is 12/31/98. Inception dates of Class B and Class C shares are 11/07/01 and 11/19/01, respectively. Inception date of Class Y shares and the Index is 09/30/97.

⁽²⁾ Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The Russell 2000 Growth Index is an unmanaged index composed of those companies in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an index composed of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

The Fund invests in IPOs which may have a magnified impact on performance.

UBS U.S. Small Cap Growth Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $5,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Small Cap Growth Fund Class A shares (adjusted for 5.50% maximum sales charge), Class Y shares and the Russell 2000 Growth Index, if you had invested $10,000 in Class A shares on December 31, 1998 or $5,000,000 in Class Y shares on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Small Cap Growth Fund Class A vs. Russell 2000 Growth Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.50%.

UBS U.S. Small Cap Growth Fund Class Y vs. Russell 2000 Growth Index

Wealth value with dividends reinvested

UBS U.S. Small Cap Growth Fund

Top ten equity holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Pediatrix Medical Group, Inc.		2.8	%
Tetra Technologies, Inc.		2.7
Phillips-Van Heusen Corp.		2.6
Investors Financial Services Corp.		2.2
VCA Antech, Inc.		2.2
Orient-Express Hotels Ltd., H Shares		2.2
TeleTech Holdings, Inc.		2.1
Psychiatric Solutions, Inc.		2.1
Nice Systems Ltd. ADR		2.1
Landstar System, Inc.		1.9
Total		22.9	%

⁽¹⁾ Figures represent the direct investments of the UBS U.S. Small Cap Growth Fund. Figures could be different if a breakdown of the underlying investment company was included.

Industry diversification (unaudited)⁽²⁾

As a percentage of net assets as of June 30, 2007

Equities
Aerospace & defense	2.08	%
Air freight & logistics	3.00
Biotechnology	4.32
Capital markets	2.23
Commercial banks	1.33
Commercial services & supplies	7.45
Communications equipment	3.69
Computers & peripherals	0.06
Construction & engineering	1.72
Distributors	1.04
Diversified telecommunication services	0.59
Electrical equipment	3.21
Electronic equipment & instruments	2.60
Energy equipment & services	4.55
Health care equipment & supplies	3.56
Health care providers & services	7.11
Health care technology	1.72
Hotels, restaurants & leisure	7.40
Household products	0.99
Internet software & services	1.66
Life sciences tools & services	1.02	%
Machinery	2.49
Media	0.61
Metals & mining	1.90
Oil, gas & consumable fuels	3.60
Pharmaceuticals	0.41
Real estate investment trusts (REITs)	1.77
Road & rail	1.95
Semiconductors & semiconductor equipment	8.57
Software	5.44
Specialty retail	5.27
Textiles, apparel & luxury goods	2.59
Trading companies & distributors	0.39
Total equities	96.32
Investment company
iShares Russell 2000 Growth Index Fund	0.65
Short-term investment	3.19
Total investments	100.16
Liabilities, in excess of cash and other assets	(0.16	)
Net assets	100.00	%

⁽²⁾ Figures represent the industry breakdown of direct investments of the UBS U.S. Small Cap Growth Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

UBS U.S. Small Cap Growth Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—96.32%
Aerospace & defense—2.08%
AAR Corp.*		219,500	$	7,245,695
DRS Technologies, Inc.		41,300		2,365,251
				9,610,946
Air freight & logistics—3.00%
Hub Group, Inc., Class A*		255,100		8,969,316
UTi Worldwide, Inc.		182,000		4,875,780
				13,845,096
Biotechnology—4.32%
BioMarin Pharmaceuticals, Inc.*		148,200		2,658,708
Cubist Pharmaceuticals, Inc.*		91,900		1,811,349
Emergent Biosolutions, Inc.*		177,800		1,831,340
Isis Pharmaceuticals, Inc.*		210,100		2,033,768
Keryx Biopharmaceuticals, Inc.*		164,700		1,609,119
LifeCell Corp.*		172,400		5,265,096
Myriad Genetics, Inc.*		82,500		3,068,175
Regeneron Pharmaceuticals, Inc.*		93,200		1,670,144
				19,947,699
Capital markets—2.23%
Investors Financial Services Corp.		167,200		10,311,224
Commercial banks—1.33%
UCBH Holdings, Inc.		336,400		6,146,028
Commercial services & supplies—7.45%
CRA International, Inc.*		112,500		5,422,500
eTelecare Global Solutions, Inc. ADR*		154,400		2,496,648
Healthcare Services Group, Inc.		129,600		3,823,200
Kenexa Corp.*		79,300		2,990,403
Korn/Ferry International*		65,400		1,717,404
Labor Ready, Inc.*		286,700		6,625,637
PeopleSupport, Inc.*		148,600		1,686,610
TeleTech Holdings, Inc.*		297,700		9,669,296
				34,431,698
Communications equipment—3.69%
BigBand Networks, Inc.*		77,100		1,010,781
Blue Coat Systems, Inc.*		123,400		6,110,768
Nice Systems Ltd. ADR*		274,200		9,525,708
Starent Networks Corp.*		28,200		414,540
				17,061,797
Computers & peripherals—0.06%
Data Domain, Inc.*		11,400		262,200
Construction & engineering—1.72%
EMCOR Group, Inc.*		108,800		7,931,520
Distributors—1.04%
LKQ Corp.*		193,900		4,781,574

	Shares		Value
Diversified telecommunication services—0.59%
NeuStar, Inc., Class A*		93,600	$	2,711,592
Electrical equipment—3.21%
Energy Conversion Devices, Inc.*		59,300		1,827,626
First Solar, Inc.*		72,200		6,446,738
Genlyte Group, Inc.*		83,600		6,565,944
				14,840,308
Electronic equipment & instruments—2.60%
Benchmark Electronics, Inc.*		245,450		5,552,079
Cognex Corp.		200,900		4,522,259
RadiSys Corp.*		156,700		1,943,080
				12,017,418
Energy equipment & services—4.55%
Core Laboratories NV*		50,700		5,155,683
Patterson-UTI Energy, Inc.		132,200		3,464,962
Tetra Technologies, Inc.*		439,050		12,381,210
				21,001,855
Health care equipment & supplies—3.56%
Accuray, Inc.*		80,400		1,783,272
AngioDynamics, Inc.*		101,600		1,829,816
Arthrocare Corp.*		149,100		6,546,981
Hansen Medical, Inc.*		96,200		1,817,218
ResMed, Inc.*		68,600		2,830,436
TomoTherapy, Inc.*		73,900		1,619,888
				16,427,611
Health care providers & services—7.11%
Pediatrix Medical Group, Inc.*		238,400		13,147,760
Psychiatric Solutions, Inc.*		262,800		9,529,128
VCA Antech, Inc.*		270,400		10,191,376
				32,868,264
Health care technology—1.72%
Omnicell, Inc.*		254,900		5,296,822
Phase Forward, Inc.*		158,700		2,670,921
				7,967,743
Hotels, restaurants & leisure—7.40%
Buffalo Wild Wings, Inc.*		97,494		4,054,775
California Pizza Kitchen, Inc.*		292,050		6,273,234
CKE Restaurants, Inc.		403,500		8,098,245
Orient-Express Hotels Ltd., Class A		188,300		10,055,220
Texas Roadhouse, Inc., Class A*		446,500		5,710,735
				34,192,209
Household products—0.99%
Central Garden & Pet Co.*		128,200		1,571,732
Central Garden & Pet Co., Class A*		256,400		3,007,572
				4,579,304

UBS U.S. Small Cap Growth Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Equities—(concluded)
Internet software & services—1.66%
comScore, Inc.*		15,700	$	363,455
DivX, Inc.*		32,200		483,000
Knot, Inc.*		151,700		3,062,823
Limelight Networks, Inc.*		8,900		176,042
Perficient, Inc.*		173,900		3,599,730
				7,685,050
Life sciences tools & services—1.02%
Advanced Magnetics, Inc.*		35,000		2,035,600
Exelixis, Inc.*		221,600		2,681,360
				4,716,960
Machinery—2.49%
ESCO Technologies, Inc.*		140,900		5,109,034
Middleby Corp.*		106,800		6,388,776
				11,497,810
Media—0.61%
National CineMedia, Inc.*		100,400		2,812,204
Metals & mining—1.90%
Steel Dynamics, Inc.		210,000		8,801,100
Oil, gas & consumable fuels—3.60%
EXCO Resources, Inc.*		279,400		4,872,736
PetroHawk Energy Corp.*		500,145		7,932,300
Quicksilver Resources, Inc.*		85,500		3,811,590
				16,616,626
Pharmaceuticals—0.41%
Penwest Pharmaceuticals Co.*		153,200		1,910,404
Real estate investment trusts (REITs)—1.77%
BioMed Realty Trust, Inc.		111,100		2,790,832
Ventas, Inc.		149,000		5,401,250
				8,192,082
Road & rail—1.95%
Landstar System, Inc.		186,500		8,998,625
Semiconductors & semiconductor equipment—8.57%
Diodes, Inc.*		136,400		5,697,428
Exar Corp.*		166,200		2,227,080
FEI Co.*		129,000		4,187,340
Hittite Microwave Corp.*		109,800		4,691,754
Microsemi Corp.*		333,800		7,994,510
Photronics, Inc.*		54,900		816,912

	Shares		Value
Semiconductors & semiconductor equipment—(concluded)
Power Integrations, Inc.*		137,400	$	3,599,880
Rudolph Technologies, Inc.*		250,413		4,159,360
Silicon Image, Inc.*		180,200		1,546,116
Standard Microsystems Corp.*		136,700		4,694,278
				39,614,658
Software—5.44%
Factset Research Systems, Inc.		95,200		6,506,920
Nuance Communications, Inc.*		528,700		8,845,151
Progress Software Corp.*		174,200		5,537,818
Verint Systems, Inc.*		135,221		4,232,417
				25,122,306
Specialty retail—5.27%
Children's Place Retail Stores, Inc.*		133,000		6,868,120
Christopher & Banks Corp.		298,000		5,110,700
DSW, Inc., Class A*		56,300		1,960,366
Guitar Center, Inc.*		66,200		3,959,422
Tween Brands, Inc.*		144,900		6,462,540
				24,361,148
Textiles, apparel & luxury goods—2.59%
Phillips-Van Heusen Corp.		197,600		11,968,632
Trading companies & distributors—0.39%
Beacon Roofing Supply, Inc.*		106,500		1,809,435
Total equities (cost $345,077,356)				445,043,126
Investment company—0.65%
iShares Russell 2000 Growth Index Fund (cost $3,025,930)		35,000		3,002,300
Short-term investment—3.19%
Other—3.19%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(1),(2)(cost $14,753,752)		14,753,752		14,753,752
Total investments—100.16% (cost $362,857,038)				462,799,178
Liabilities, in excess of cash and other assets—(0.16)%				(733,340	)
Net assets—100.00%			$	462,065,838

100

UBS U.S. Small Cap Growth Fund—Portfolio of investments

June 30, 2007

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $363,725,431; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	114,851,443
Gross unrealized depreciation		(15,777,696	)
Net unrealized appreciation	$	99,073,747

* Non-income producing security.

⁽¹⁾ Investment in affiliated mutual fund.

⁽²⁾ The rate shown reflects the yield at June 30, 2007.

ADR American depositary receipt

See accompanying notes to financial statements.
101

UBS Absolute Return Bond Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS Absolute Return Bond Fund (the "Fund") returned 2.87% (Class A shares returned 0.30% after the deduction of the maximum sales charge), while Class Y shares returned 2.96%. For purposes of comparison, the Merrill Lynch US Treasury 1-3 Year Index returned 5.06%, and the US LIBOR 3-Month Index (the "Index") returned 5.60%. (Class Y shares have lower expenses than other share classes in the Fund. Returns for all share classes over various time periods are shown on page 104; 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 seeks to achieve consistent absolute positive returns through the active management of duration, credit quality, yield curve positioning, currency exposure, and sector and security selection. The Fund's performance was hindered over the period by security selection and our currency strategy. Performance was helped by spread management.

Portfolio performance summary

What worked

• Spread management enhanced the Fund's performance (the spread is the difference between the yield paid on US Treasury bonds and higher risk securities).

• Spread management across emerging markets debt, as well as investment grade and high yield corporate bonds, added to performance and helped to offset negative results from security selection (specifically the Fund's allocation to US asset-backed securities, or "ABS") in the latter half of the reporting period.

What didn't work

• While duration management had a positive influence on the Fund's performance during the period, market allocation was negative, leading to an overall negative contribution from yield curve management.

• We maintained a negative duration (which is a measure of a portfolio's sensitivity to changes in interest rates) over much of the reporting period, actively managing its magnitude according to short-term market movements. This stance reflected our view that the global economy was stronger than the general market expected.

• Near the end of the reporting period, we steered the Fund's duration into a neutral area, since interest rates increased towards the point of indifference (that is, the level where we believe they should be). We accomplished this change by adding back duration to the US market.

• At the end of the reporting period, the Fund's duration remained negative in the US, as well as in the UK and Japan, albeit to a lesser extent. We were neutral duration in the Euro-zone, and positive in Australia and the emerging debt markets.

102

UBS Absolute Return Bond Fund

• Security selection detracted from the Fund's performance.

• In the second half of the reporting cycle, negative security selection resulted primarily from holdings in US asset-backed securities ("ABS"). Investors grew increasingly concerned about a weakening economy, and feared wider repercussions from problems in the subprime mortgage market. These concerns drove down prices in the ABS sector. Negative performance in ABS was also magnified by limited market liquidity.

• The Fund did not hold any direct subprime mortgage-backed securities. (Subprime mortgages are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history.) However, its allocation to second-lien mortgages (which are issued to borrowers with higher credit ratings than those to whom subprime loans are issued) hurt performance when these securities experienced markdowns.

• At the end of the reporting—specifically in June—we observed some re-pricing within the collateralized debt obligation (CDO) arena that negatively impacted the Fund's overall performance. (A CDO is an investment-grade security backed by a pool of bonds, loans and other assets.) However, not all CDO sub sectors performed in a highly correlated fashion; in addition to diversifying the Fund's CDO allocation according to the type of underlying collateral, we also employ different parts of the capital structure, a wide range of managers and different vintage years to avoid too much concentration with respect to a single return driver.

• The Fund's overall broad diversification helped to limit somewhat the negative results from the Fund's ABS holdings. The vast majority of the portfolio is invested in common bonds, such as corporate bonds, supra nationals and sovereigns, which were not affected by the above-described events. Consequently, the overall credit quality of the portfolio remains robust.

• Currency strategy also hindered Fund performance over the period.

• We actively managed currency exposure, navigating across global fixed income markets in order to benefit from perceived price/value discrepancies in currency. During the period, our currency strategy was positioned to benefit from an unwinding of carry trades. (A carry trade is a strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate.) While we saw some reversal of this practice in February, it was short-lived, and carry trades picked up with vigor in March, detracting from the Fund's performance.

• In our view, carry trades have pushed valuations in exchange rates further away from their fundamentals. We expect the Fund to remain positioned to benefit from a reversal of these carry trades.

103

UBS Absolute Return Bond Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting maximum	Class A⁽²⁾		2.87	%		3.48	%
sales charge	Class C⁽³⁾		2.42			3.09
	Class Y⁽⁴⁾		2.96			3.67
After deducting maximum sales charge	Class A⁽²⁾		0.30			2.27
	Fund C⁽³⁾		1.92			3.09
Merrill Lynch US Treasury 1-3 Year Index⁽⁵⁾			5.06			3.44
US LIBOR 3-Month Index⁽⁶⁾			5.60			4.96

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—.99% and .99%; Class C—1.35% and 1.35%; Class Y—.77% and .77%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.00%; Class C—1.35%; Class Y—.85%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾Inception date of all shares of UBS Absolute Return Bond Fund is 04/27/05. Inception date of the Indices, for the purpose of this illustration, is 04/30/05.

⁽²⁾ Maximum sales charge for Class A shares is 2.5%. Class A shares bear ongoing 12b-1 service fees.

⁽³⁾ Maximum contingent deferred sales charge for Class C shares is 0.5% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees.

⁽⁵⁾ The Merrill Lynch US Treasury 1-3 Year Index: An unmanaged index tracking short-term US Treasury securities with maturities between 1 and 3 years.

⁽⁶⁾ The US LIBOR 3-Month Index: LIBOR is the London Interbank Offered Rate, a short-term interest rate that banks charge one another generally representative of the most competitive and current cash rate available. The US LIBOR 3-Month Index tracks the interest rate earned on a three-month inter-bank deposit in US dollars.

104

UBS Absolute Return Bond Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $5,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS Absolute Return Bond Fund Class A shares (adjusted for 2.50% maximum sales charge), Class Y shares, the Merrill Lynch US Treasury 1-3 Year Index and the US LIBOR 3-Month Index, if you had invested $10,000 in Class A shares on April 27, 2005 or $5,000,000 in Class Y shares on April 27, 2005, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS Absolute Return Bond Fund Class A vs.
Merrill Lynch US Treasury 1-3 Year Index and US LIBOR 3-Month Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 2.50%.

Indices are started on 04/30/05.

UBS Absolute Return Bond Fund Class Y vs.
Merrill Lynch US Treasury 1-3 Year Index and US LIBOR 3-Month Index

Wealth value with dividends reinvested

Indices are started on 04/30/05.

105

UBS Absolute Return Bond Fund

Top ten fixed income holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Compagnie de Financement Foncier, 2.375%, due 01/29/09		5.2	%
Federal Home Loan Mortgage Corp., 4.875%, due 02/09/10		3.8
Kreditanstalt fuer Wiederaufbau, 3.500%, due 07/15/09		3.6
European Investment Bank, 6.250%, due 12/07/08		2.9
Federal National Mortgage Association, 6.625%, due 09/15/09		2.8
General Electric Capital Corp., 4.375%, due 01/20/10		2.2
Federal Home Loan Mortgage Corp., 5.000%, due 02/16/17		2.1
Depfa ACS Bank, 0.750%, due 09/22/08		1.8
Landwirtschaftliche Rentenbank, 0.650%, due 09/30/08		1.8
Federal National Mortgage Association, 4.125%, due 04/15/14		1.5
Total		27.7	%

⁽¹⁾ Figures represent the direct investments of the UBS Absolute Return Bond Fund. Figures could be different if a breakdown of the underlying investment company was included.

106

UBS Absolute Return Bond Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Bonds US bonds US corporate bonds
Auto components	0.26	%
Automobiles	0.44
Capital markets	2.20
Chemicals	0.21
Commercial banks	0.41
Commercial services & supplies	0.32
Consumer finance	2.67
Containers & packaging	0.38
Diversified financial services	3.64
Diversified telecommunication services	0.80
Electric utilities	0.08
Electronic equipment & instruments	0.07
Food & staples retailing	0.79
Hotels, restaurants & leisure	0.20
Independent power producers & energy traders	0.16
Industrial conglomerates	0.15
Insurance	0.58
Media	0.82
Metals & mining	0.15
Multi-utilities	0.30
Office electronics	0.35
Oil, gas & consumable fuels	0.56
Paper & forest products	0.22
Real estate investment trusts (REITs)	0.17
Semiconductors & semiconductor equipment	0.12
Textiles, apparel & luxury goods	0.44
Thrifts & mortgage finance	0.82
Tobacco	0.26
Wireless telecommunication services	0.08
Total US corporate bonds	17.65
Asset-backed securities	3.03
Collateralized debt obligations	2.58
Commercial mortgage-backed securities	2.16
Mortgage & agency debt securities	17.42
Stripped mortgage-backed security	0.02
Total US bonds	42.86
International bonds International corporate bonds
Building products	0.50	%
Chemicals	0.03
Commercial banks	14.48
Commercial services & supplies	0.16
Construction & engineering	0.78
Containers & packaging	0.17
Diversified financial services	0.86
Diversified telecommunication services	1.65
Electric utilities	1.37
Media	0.39
Multi-utilities	0.89
Paper & forest products	0.50
Thrifts & mortgage finance	5.57
Total international corporate bonds	27.35
International asset-backed security	0.02
International collateralized debt obligations	5.66
International commercial mortgage-backed securities	0.41
International mortgage & agency debt securities	0.35
Foreign government bonds	6.24
Sovereign/supranational bonds	3.05
Total international bonds	43.08
Total bonds	85.94
Investment company
UBS U.S. Securitized Mortgage Relationship Fund	5.33
Short-term investments	2.14
Total investments	93.41
Cash and other assets, less liabilities	6.59
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS Absolute Return Bond Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

107

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—85.94%
US bonds—42.86%
US corporate bonds—17.65%
AES Corp., 8.750%, due 06/15/08	$	750,000	$	764,063
9.500%, due 06/01/09		100,000		104,500
AK Steel Corp., 7.875%, due 02/15/09		649,000		647,378
American Cellular Corp., Series B, 10.000%, due 08/01/11		404,000		423,190
American General Finance Corp., 5.375%, due 10/01/12		2,500,000		2,466,740
Aramark Corp., 8.856%, due 02/01/15^(1),(2)		1,000,000		1,015,000
ArvinMeritor, Inc., 8.125%, due 09/15/15		1,500,000		1,453,125
AT&T, Inc., 5.875%, due 02/01/12		875,000		882,442
Berkshire Hathaway Finance Corp., 4.125%, due 01/15/10		2,400,000		2,333,362
Boeing Capital Corp., Ltd., 7.375%, due 09/27/10		825,000		873,204
Boise Cascade LLC, 7.125%, due 10/15/14		300,000		285,000
Bowater, Inc., 9.000%, due 08/01/09		940,000		954,100
Caesars Entertainment, Inc., 8.125%, due 05/15/11		1,050,000		1,095,937
Cincinnati Bell, Inc., 7.250%, due 07/15/13		1,200,000		1,230,000
Citigroup, Inc., 3.625%, due 11/30/17⁽¹⁾	EUR	650,000		823,481
5.625%, due 08/27/12	$	940,000		940,200
Comcast Cable Communications LLC, 6.750%, due 01/30/11		850,000		879,798
Countrywide Home Loans, Inc., 3.250%, due 05/21/08		1,900,000		1,862,154
CSC Holdings, Inc., Series B, 8.125%, due 08/15/09		1,200,000		1,224,000
DaimlerChrysler N.A. Holding Corp., 7.200%, due 09/01/09		2,370,000		2,443,104
Edison Mission Energy, 7.000%, due 05/15/17⁽²⁾		290,000		273,325
7.200%, due 05/15/19⁽²⁾		200,000		188,000
Ford Motor Credit Co. LLC, 5.800%, due 01/12/09		4,350,000		4,258,006
Freeport-McMoRan Copper & Gold, Inc., 8.564%, due 04/01/15⁽¹⁾		175,000		183,313
Freescale Semiconductor, Inc., 8.875%, due 12/15/14⁽²⁾		475,000		453,625
10.125%, due 12/15/16⁽²⁾		200,000		188,000

	Face amount		Value
US corporate bonds—(continued)
General Electric Capital Corp., 3.600%, due 10/15/08	$	1,875,000	$	1,833,817
4.375%, due 01/20/10	EUR	9,095,000		12,206,079
6.750%, due 03/15/32	$	4,050,000		4,394,120
Giant Industries, Inc., 11.000%, due 05/15/12		600,000		633,000
GMAC LLC, 7.250%, due 03/02/11		1,920,000		1,913,704
Goldman Sachs Group, Inc., 5.500%, due 10/12/21	GBP	550,000		999,474
Harland Clarke Holdings Corp., 10.106%, due 05/15/15^(1),(2)	$	840,000		810,600
International Lease Finance Corp., 3.300%, due 01/23/08		1,875,000		1,853,244
JPMorgan Chase Bank N.A., 4.375%, due 11/30/21⁽¹⁾	EUR	1,800,000		2,268,228
Kinder Morgan Energy Partners LP, 5.800%, due 03/15/35	$	2,750,000		2,442,973
Lehman Brothers Holdings, Inc., 4.750%, due 01/16/14	EUR	3,860,000		5,076,396
Levi Strauss & Co., 12.250%, due 12/15/12	$	2,250,000		2,435,625
Marsh & McLennan Cos., Inc., 6.250%, due 03/15/12		875,000		880,899
Mirant North America LLC, 7.375%, due 12/31/13		1,600,000		1,636,000
Morgan Stanley, 5.300%, due 03/01/13		3,840,000		3,763,864
5.750%, due 10/18/16		2,410,000		2,354,356
Nexstar Finance, Inc., 7.000%, due 01/15/14		750,000		742,500
Nissan Motor Acceptance Corp., 5.625%, due 03/14/11⁽²⁾		2,570,000		2,554,593
Owens-Brockway Glass Container, Inc., 8.250%, due 05/15/13		200,000		207,000
Owens-Illinois, Inc., 7.350%, due 05/15/08		1,900,000		1,904,750
PolyOne Corp., 10.625%, due 05/15/10		1,082,000		1,136,100
Qwest Communications International, Inc., 7.500%, due 02/15/14		50,000		50,625
R.H. Donnelley Corp., 8.875%, due 01/15/16		75,000		78,000
Residential Capital LLC, 5.125%, due 05/17/12	EUR	2,100,000		2,674,695
Safeway, Inc., 4.800%, due 07/16/07	$	900,000		899,547
Sanmina-SCI Corp., 8.110%, due 06/15/14^(1),(2)		410,000		410,000
Sheridan Group, Inc., 10.250%, due 08/15/11		725,000		761,250

108

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
US corporate bonds—(concluded)
Simon Property Group LP, 5.375%, due 06/01/11	$	925,000	$	918,063
Sinclair Broadcast Group, Inc., 8.000%, due 03/15/12		717,000		738,510
SLM Corp., 4.750%, due 03/17/14	EUR	800,000		902,156
Sprint Capital Corp., 8.750%, due 03/15/32	$	2,000,000		2,246,260
Univision Communications, Inc., 7.850%, due 07/15/11		650,000		669,500
UST, Inc., 6.625%, due 07/15/12		1,375,000		1,426,307
Wal-Mart Stores, Inc., 4.750%, due 01/29/13	GBP	475,000		890,852
6.875%, due 08/10/09	$	2,525,000		2,603,949
WDAC Subsidiary Corp., 8.500%, due 12/01/14	EUR	150,000		212,153
Xerox Capital Trust I, 8.000%, due 02/01/27	$	1,900,000		1,950,565
Total US corporate bonds (cost $98,673,717)				97,724,801
Asset-backed securities—3.03%
ACE Securities Corp., Series 06-SL1, Class B1, 8.320%, due 09/25/35^{(1),(2),(3),(4)}		800,000		80,000
American Express Credit Account Master Trust, Series 07-1, Class C, 5.590%, due 09/15/14^(1),(2)		1,500,000		1,499,363
Bank of America Credit Card Trust, Series 07-C1, Class C1, 5.610%, due 06/15/14⁽¹⁾		2,000,000		2,001,875
Capital One Multi-Asset Execution Trust, Series 07-C2, Class C2, 5.620%, due 11/15/14⁽¹⁾		1,250,000		1,249,984
Countrywide Asset-Backed Certificates, Series 06-S9, Class A5, 5.871%, due 08/25/36^(1),(3)		1,500,000		1,409,421
First Franklin Mortgage Loan Asset-Backed Certificates, Series 06-FFA, Class B2, 6.000%, due 09/25/26^(2),(3),(5)		759,131		151,826
Green Tree Financial Corp., Series 99-3, Class A6, 6.500%, due 02/01/31		1,150,000		1,150,863
GSAMP Trust, Series 05-S1, Class B1, 6.208%, due 12/25/34^(3),(5)		787,844		196,961

	Face amount		Value
Asset-backed securities—(concluded)
Harley-Davidson Motorcycle Trust, Series 07-2, Series B, 5.230%, due 03/15/14	$	1,250,000	$	1,250,000
Home Equity Mortgage Trust, Series 06-4, Class B1, 9.320%, due 11/25/36^(1),(3)		600,000		24,000
Series 06-4, Class B2, 9.320%, due 11/25/36^{(1),(2),(3),(4)}		500,000		15,000
Hyundai Auto Receivables Trust, Series 05-A, Class D, 4.450%, due 02/15/12		1,000,000		983,136
Merrill Lynch Mortgage Investors, Inc., Series 05-SL3, Class B3, 7.470%, due 07/25/36^(1),(3)		2,450,000		1,631,244
Series 04-SL2, Class B4, 10.070%, due 06/25/35^(1),(2),(3)		1,200,000		889,854
Washington Mutual Master Note Trust, Series 06-C3A, Class C3A, 5.700%, due 10/15/13^(1),(2)		1,500,000		1,499,988
Series 07-C1, Class C1, 5.720%, due 05/15/14^(1),(2),(4)		1,000,000		993,000
Wells Fargo Home Equity Trust, Series 05-3, Class M7, 6.470%, due 11/25/35⁽¹⁾		1,775,000		1,751,295
Total asset-backed securities (cost $20,615,008)				16,777,810
Collateralized debt obligations—2.58%
Ajax One Ltd., Series 2A, Class C, 7.820%, due 09/08/32^(1),(2),(3)		500,000		465,000
Ares VR CLO Ltd., Series 06-1A, Class D, 7.260%, due 02/24/18^{(1),(2),(3),(4)}		890,000		851,730
Ares X CLO Ltd., Series 05-1A, Class D2, 7.360%, due 09/18/17^{(1),(2),(3),(4)}		500,000		485,450
Avery Street CLO, Series 06-1A, Class E, 10.350%, due 04/05/18^(1),(2),(3)		700,000		703,500
Brentwood CLO Ltd., Series 06-1I, Class D, 9.106%, due 02/01/22^(1),(3)		310,000		292,578
Brentwood Investors CDO Corp., Series 07-01, due 05/01/16^(2),(3),(6)		250,000		250,000
Colts, Series 07-1, due 03/20/21^(2),(3),(6)		300,000		294,000
Commercial Industrial Finance Corp., Series 06-2A, Class B2L, 9.360%, due 03/01/21^(1),(2),(3)		280,000		270,648

109

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Collateralized debt obligations—(continued)
Duke Funding Ltd., Series 06-11A, Class B1E, 6.286%, due 08/08/46^(2),(3)	EUR	878,045	$	1,088,090
Fortius Funding Ltd., Series 06-2A, Class INC, due 02/03/42^(3),(4),(6)	$	280,000		117,600
GoldenTree Capital Opportunities LP, Series 06-1A, Class D1, 7.460%, due 02/22/20^{(1),(2),(3),(4)}		600,000		600,000
GoldenTree Loan Opportunities III Ltd., Series 07-3A, Class SUB, due 05/01/22^(2),(3),(6)		430,000		442,083
Greywolf CLO Ltd., Series 07-1A, Class SUB, due 02/18/21^{(2),(3),(4),(6)}		250,000		245,000
Hereford Street ABS CDO Ltd., Series 05-1A, Class D, 8.250%, due 01/03/45^(1),(2),(3)		700,000		541,485
Hewett's Island CDO Ltd., Series 06-4A, Class C, 6.107%, due 05/09/18^(1),(2),(3)		250,000		248,350
Series 06-4A, Class D1, 7.007%, due 05/09/18^(1),(2),(3)		250,000		238,075
Series 07-6A, Class D, 7.630%, due 06/09/19^(1),(2),(3)		250,000		247,467
Series 06-4A, Class E, 9.907%, due 05/09/18^(1),(2),(3)		350,000		350,000
Longport Funding Ltd., Series 07-1A. Class D, 11.598%, due 04/12/51^(1),(2),(3)		500,000		428,500
Longshore CDO Funding Ltd., Series 06-1A, Class D, 8.255%, due 05/03/46^(1),(2),(3)		380,000		307,800
MC Funding Ltd., Series 06-1, due 12/20/20^(2),(3),(6)		490,000		482,895
Series 06-1A, Class E, 9.110%, due 12/20/20^(1),(2),(3)		640,000		604,947
OHA Park Avenue CLO Ltd., Series 07-1A, Class SUB, due 03/14/22^(2),(3),(6)		370,000		355,200
Sagittarius CDO Ltd., Series 07-1A, Class C, 7.420%, due 12/10/51^(1),(2),(3)		1,040,000		936,000
Shasta CLO I Ltd., due 04/20/21^(2),(3),(6)		770,000		739,200
Spirit CBO, Series 04-2A, Class D, 6.097%, due 10/27/10^(1),(2),(3)		736,613		724,828

	Face amount		Value
Collateralized debt obligations—(concluded)
Taberna Preferred Funding Ltd., Series 06-7A, Class A3L, 6.806%, due 02/05/37^(1),(2),(3)	$	240,000	$	231,144
Series 06-7A, Class B1L, 8.306%, due 02/05/37^(1),(2),(3)		310,000		294,500
Tricadia CDO Ltd., Series 05-4A, Class B1L, 8.610%, due 12/11/40^(1),(2),(3)		505,015		488,905
Series 05-3A, Class B1L, 8.860%, due 06/25/41^(1),(2),(3)		481,236		469,494
Series 06-5A, Class F, 11.360%, due 06/19/46^(1),(2),(3)		587,064		487,264
Total collateralized debt obligations (cost $14,946,278)				14,281,733
Commercial mortgage-backed securities—2.16%
Banc of America Large Loan, Series 06-LAQ, Class L, 6.870%, due 02/09/21^(1),(2)		1,600,000		1,591,868
Bear Stearns Commercial Mortgage Securities, Series 07-BB, Class MS-41, 5.820%, due 03/15/22		1,500,000		1,500,000
GS Mortgage Securities Corp., II, Series 98-GLII, Class F, 7.191%, due 04/13/31^(1),(2)		1,650,000		1,718,978
Series 07-GKK1, Class A1, 5.700%, due 12/20/49^(1),(2),(3)		2,000,000		1,939,400
Hilton Hotel Pool Trust, Series 00-HLTA, Class C, 7.458%, due 10/03/15⁽²⁾		1,000,000		1,032,222
LB Commercial Conduit Mortgage Trust, Series 98-C4, Class G, 5.600%, due 10/15/35⁽²⁾		1,000,000		985,945
Nomura Asset Securities Corp., Series 98-D6, Class B1, 6.000%, due 03/15/30⁽²⁾		1,472,000		1,497,743
TW Hotel Funding 2005 LLC, Series 05-LUX, Class L, 6.870%, due 01/15/21^(1),(2)		1,702,946		1,694,723
Total commercial mortgage-backed securities (cost $12,190,373)				11,960,879
Mortgage & agency debt securities—17.42%
Banc of America Funding Corp., Series 06-F, Class B1, 5.605%, due 07/20/36⁽¹⁾		999,176		979,032
Series 07-C, Class 1A4, 5.763%, due 05/20/36⁽¹⁾		2,200,000		2,139,137
Series 07-1, Class 1B1, 6.000%, due 01/25/37		1,246,231		1,209,545
Series 06-H, Class B1, 6.111%, due 09/20/46⁽¹⁾		1,496,713		1,496,036

110

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(concluded)
Mortgage & agency debt securities—(continued)
Banc of America Mortgage Securities, Inc., Series 06-3, Class 30B1, 6.250%, due 10/25/36	$	2,273,403	$	2,230,066
Bear Stearns Adjustable Rate Mortgage Trust, Series 07-3, Class 2A1, 5.650%, due 05/25/47		2,728,465		2,695,986
Chase Mortgage Finance Corp., Series 07-S2, Class B1, 5.870%, due 03/25/37^(1),(4)		2,038,111		1,944,012
Citigroup Mortgage Loan Trust, Inc., Series 06-AR6, Class 1B1, 6.075%, due 08/25/36⁽¹⁾		998,717		990,602
Series 07-AR4, Class 1B1, 6.100%, due 03/25/37⁽¹⁾		1,999,263		1,964,752
Countrywide Alternative Loan Trust, Series 05-79CB, Class M, 5.500%, due 01/25/36⁽⁴⁾		660,000		601,657
Series 06-5T2, Class A3, 6.000%, due 04/25/36		760,236		761,239
Federal Home Loan Mortgage Corp., 4.875%, due 02/09/10		21,150,000		20,983,592
5.000%, due 02/16/17		12,000,000		11,587,932
Federal National Mortgage Association, 4.125%, due 04/15/14		9,000,000		8,366,274
6.625%, due 09/15/09		15,050,000		15,493,027
IndyMac INDX Mortgage Loan Trust, Series 06-AR31, Class A5, 6.115%, due 11/25/36⁽¹⁾		700,000		691,155
Series 06-AR19, Class 1B2, 6.419%, due 08/25/36⁽¹⁾		996,145		984,004
Lehman Structured Securities Corp., Series 07-1, Class M5, 5.033%, due 10/28/34^(1),(2)		974,888		948,230
Merrill Lynch Alternative Note Asset, Series 07-F1, Class 2A1, 6.000%, due 03/25/37		1,243,353		1,239,420
MLCC Mortgage Investors, Inc., Series 07-1, Class 4A3, 5.746%, due 01/25/37⁽¹⁾		2,000,000		1,922,025
Series 07-1, Class M2, 6.147%, due 01/25/37⁽¹⁾		1,501,817		1,502,639
Residential Accredit Loans, Inc., Series 06-Q55, Class M1, 6.000%, due 05/25/36		1,086,249		1,056,543

	Face amount		Value
Mortgage & agency debt securities—(concluded)
Series 06-QS5, Class A6, 6.000%, due 05/25/36	$	989,801	$	995,275
Series 07-QS6, A29, 6.000%, due 04/25/37		1,464,437		1,462,592
Structured Adjustable Rate Mortgage Loan Trust, Series 07-3, Class B2II, 5.890%, due 04/25/37⁽¹⁾		1,821,520		1,762,219
WaMu Mortgage Pass-Through Certificates, Series 06-AR14, Class 1B1, 5.651%, due 11/25/36⁽¹⁾		1,099,253		1,081,699
Series 07-HY5, Class 2B1, 5.722%, due 05/25/37⁽¹⁾		2,454,846		2,395,872
Series 07-HY1, Class LB2, 5.804%, due 02/25/37⁽¹⁾		549,941		536,945
Series 06-AR8, Class 1A1, 5.900%, due 08/25/46⁽¹⁾		309,891		309,576
Series 07-HY7, Class 3A1, 5.925%, due 07/25/37⁽¹⁾		1,000,000		998,398
Wells Fargo Alternative Loan Trust, Series 07-PA1, Class B1, 6.250%, due 03/25/37		1,995,247		1,928,423
Wells Fargo Mortgage Backed Securities Trust, Series 07-4, Class B1, 6.000%, due 04/25/37		1,996,881		1,983,153
Series 06-AR19, Class B1, 6.168%, due 12/25/36⁽¹⁾		1,249,016		1,240,170
Total mortgage & agency debt securities (cost $97,877,672)				96,481,227
Stripped mortgage-backed security—0.02%
Structured Adjustable Rate Mortgage Loan Trust, Series 05-21, Class 6AX, IO, 5.500%, due 11/25/35^(1),(3) (cost $119,331)		751,999		108,374
Total US bonds (cost $244,422,379)				237,334,824
International bonds—43.08%
International corporate bonds—27.35%
Austria—0.50%
Wienerberger AG, 6.500%, due 02/09/17^(1),(7)	EUR	2,100,000		2,775,594
Canada—0.83%
Abitibi-Consolidated, Inc., 6.950%, due 04/01/08	$	1,975,000		1,955,250
8.550%, due 08/01/10		400,000		382,000
Bowater Canada Finance Corp., 7.950%, due 11/15/11		450,000		423,563
Quebecor World Capital Corp., 4.875%, due 11/15/08		925,000		897,250

111

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
International bonds—(continued)
International corporate bonds—(concluded)
Canada—(concluded)
Stone Container Finance, 7.375%, due 07/15/14	$	980,000	$	940,800
				4,598,863
France—7.69%
BNP Paribas, 5.250%, due 12/17/12	EUR	4,665,000		6,421,988
Compagnie de Financement Foncier, 2.375%, due 01/29/09		21,800,000		28,545,730
France Telecom SA, 6.750%, due 03/14/08		1,275,000		1,750,565
7.250%, due 01/28/13		1,405,000		2,094,164
Veolia Environnement, 4.875%, due 05/28/13		2,830,000		3,792,310
				42,604,757
Germany—6.55%
Iesy Hessen GmbH & Co KG and Ish NRW GmbH, 6.880%, due 04/15/13⁽¹⁾	EUR	270,000		370,456
Kreditanstalt fuer Wiederaufbau, 3.500%, due 07/15/09		15,020,000		19,914,863
5.550%, due 06/07/21	GBP	3,000,000		5,942,038
Landwirtschaftliche Rentenbank, 0.650%, due 09/30/08	JPY	1,240,000,000		10,037,731
				36,265,088
Ireland—2.08%
Depfa ACS Bank, 0.750%, due 09/22/08	JPY	1,240,000,000		10,050,944
Diamond Finance PLC, 6.000%, due 05/18/15^(1),(2)	BRL	1,560,000		1,329,154
Smurfit Kappa Funding PLC, 7.750%, due 04/01/15	EUR	110,000		155,579
10.125%, due 10/01/12		4,000		5,759
				11,541,436
Italy—0.60%
Sanpaolo IMI SpA, 6.375%, due 04/06/10	EUR	2,350,000		3,307,845
Kazakhstan—0.07%
CenterCredit International BV, 8.250%, due 09/30/11⁽⁴⁾	KZT	47,000,000		375,369
Luxembourg—1.20%
Erste Europaeische Pfandbrief und Kommunalkreditbank AG, 5.000%, due 02/16/16	$	2,400,000		2,291,527
Hellas Telecommunications Luxembourg III, 8.500%, due 10/15/13	EUR	300,000		438,518
Lighthouse International Co. SA, 8.000%, due 04/30/14		800,000		1,145,019

	Face amount		Value
Luxembourg—(concluded)
SGL Carbon Luxembourg SA, 8.500%, due 02/01/12	EUR	100,000	$	142,924
Telecom Italia Finance SA, 6.575%, due 07/30/09		1,400,000		1,955,881
7.250%, due 04/20/11		450,000		652,976
				6,626,845
Netherlands—1.78%
Koninklijke KPN NV, 8.000%, due 10/01/10	$	2,500,000		2,675,688
Linde Finance BV, 7.375%, due 07/14/66⁽¹⁾	EUR	1,500,000		2,131,582
RWE Finance BV, 4.625%, due 08/17/10	GBP	2,100,000		4,019,873
5.375%, due 04/18/08	EUR	770,000		1,048,731
				9,875,874
Philippines—0.26%
National Power Corp., 8.400%, due 12/15/16	$	1,300,000		1,448,330
Sweden—0.98%
Svenska Handelsbanken AB, 6.125%, due 03/04/09^(1),(7)	GBP	2,730,000		5,458,540
United Kingdom—4.81%
ABB International Finance Ltd., 4.625%, due 06/06/13	EUR	1,680,000		2,217,792
Alliance & Leicester PLC, 4.250%, due 12/30/08	GBP	3,150,000		6,144,631
Anglo Irish Capital UK LP, 5.219%, due 09/29/16^(1),(7)	EUR	1,600,000		2,048,339
Bank of Scotland, 6.375%, due 08/16/19	GBP	3,145,000		6,399,035
Barclays Bank PLC, 4.750%, due 03/15/20^(1),(7)	EUR	3,950,000		4,493,420
Getin Finance PLC, 6.036%, due 05/13/09⁽¹⁾		530,000		722,242
6.242%, due 04/25/08⁽¹⁾		250,000		340,850
National Grid Electricity Transmission PLC, 4.125%, due 09/18/08		800,000		1,076,536
National Grid PLC, 5.250%, due 06/02/11	GBP	590,000		1,134,279
Ono Finance PLC 12.561%, due 05/15/14⁽¹⁾	EUR	450,000		624,279
Reed Elsevier Investments PLC, 5.625%, due 10/20/16	GBP	750,000		1,414,626
				26,616,029
Total international corporate bonds (cost $147,200,185)				151,494,570
International asset-backed security—0.02%
United Kingdom—0.02%
Whinstone Capital Management Ltd., Series 1X, Class B2, 4.892%, due 10/25/44^(1),(2) (cost $94,184)	EUR	77,835		105,873

112

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
International bonds—(continued)
International collateralized debt obligations—5.66%
Cayman Islands—3.20%
Abacus Ltd., Series 05-CB1A, Class F, 9.820%, due 05/28/41^{(1),(2),(3),(4)}	$	250,000	$	200,000
ACA ABS Ltd., Series 06-2, due 01/10/47^(2),(3),(6)		600,000		360,000
Acacia CDO Ltd., Series 10A, Class SUB, due 09/07/46^{(2),(3),(4),(6)}		280,000		98,000
Aladdin CDO I Ltd, Series 06-2A, Class 10D, 12.860%, due 10/31/16^(1),(2),(3)		250,000		252,750
Atrium CDO Corp., Series 5X, Class SUB, due 07/20/20^(3),(6)		180,000		178,200
Avenue CLO Fund Ltd., Series 06-4I, Class SUB, due 11/07/18^(3),(6)		310,000		293,291
Series 07-5I, Class SUB, due 04/25/19^(3),(6)		330,000		313,929
Series 06-3A, Class B2L, 9.358%, due 07/20/18^(1),(2),(3)		220,000		215,248
Avenue CLO III Fund Ltd., due 07/20/18^(2),(3),(6)		150,000		138,000
Babson CLO Ltd., Series 07-1A, Class INC, due 01/18/21^(2),(3),(6)		250,000		250,000
Black Diamond CLO Ltd., Series 05-2X, Class IN, due 01/07/18^(3),(6)		110,000		108,900
Series 06-1A, Class INC., due 04/29/19^(3),(6)		400,000		400,000
Series 06-1A, Class D, 6.741%, due 04/29/19^(1),(2),(3)		350,000		339,395
Series 05-2A, Class D, 7.150%, due 01/07/18^(1),(2),(3)		300,000		297,900
Series 06-1A, Class E, 8.691%, due 04/29/19^(1),(3)		560,000		528,136
Series 05-2A, Class E1, 9.850%, due 01/07/18^(1),(2),(3)		250,000		252,000
Series 05-1A, Class E, 10.350%, due 06/20/17^(1),(3)		350,000		355,530
Blackrock Senior Income Series Corp., Series 07-5A, Class SUB, due 08/13/19^(2),(3),(6)		300,000		300,000
Callidus Debt Partners CDO Fund I Ltd., Series 5A, Class INC, due 11/20/20^(2),(3),(6)		200,000		200,000
CIFC Funding, Series 06-II, due 03/01/21^(2),(3),(6)		250,000		250,000
Cratos CLO Ltd., Series 07-1A, Class D, 7.755%, due 05/19/21^(1),(2),(3)		250,000		235,000

	Face amount		Value
Cayman Islands—(continued)
Credit-Based Asset Servicing and Securitization CBO Ltd., Series 15A, Class D, 8.260%, due 02/16/41^{(1),(2),(3),(4)}	$	240,256	$	229,421
Series 18A, Class D, 10.110%, due 03/13/47^{(1),(2),(3),(4)}		796,405		796,404
De Meer Middle Market CLO Ltd., Series 06-1A, Class E, 9.358%, due 10/20/18^(1),(2),(3)		226,226		223,566
Denali Capital CLO VII Ltd., Series 07-1A, Class B2L, 9.620%, due 01/22/22^(1),(2),(3)		290,000		290,000
Emporia Preferred Funding, Series 07-3A, Class D, 6.805%, due 04/23/21^(1),(2),(3)		250,000		228,853
Series 07-3A, Class E, 9.005%, due 04/23/21^(1),(2),(3)		250,000		227,465
FM Leveraged Capital Fund II, due 11/20/20^(2),(3),(6)		370,000		333,000
FM Leveraged Capital Fund, Series 06-2A, Class E, 9.110%, due 11/15/20^(1),(2),(3)		400,000		376,692
Galena CDO Ltd., Series II-AIRL, Class A1U, 6.025%, due 04/07/17^{(1),(2),(3),(4)}		1,000,000		999,800
Gresham Street CDO Funding, Series 03-1X, Class D, 8.606%, due 11/07/33^(1),(3)		100,000		98,829
GSC Partners CDO Fund Ltd., Series 07-8A, Class SUB, due 04/17/21^(2),(3),(6)		240,000		240,000
GSC Partners CDO Fund V, Ltd., due 11/20/16^(2),(3),(6)		520,000		452,400
Gulf Stream - Sextant CLO Ltd., Series 07-1A, Class SUB, due 06/17/21^(2),(3),(6)		520,000		520,000
Series 06-1A, Class D, 6.960%, due 08/21/20^(1),(2),(3)		170,000		163,030
Harbourview CLO VI Ltd., Series 6A, Class D, 9.060%, due 12/27/19^{(1),(2),(3),(4)}		370,000		333,000
Herald Ltd.29, 8.860%, due 09/16/45^(1),(3)		300,000		293,160
ING Investment Management CLO II Ltd., due 08/01/20^(2),(3),(6)		300,000		289,500
Ischus CDO Ltd., Series 06-S1, Class B1L, 9.355%, due 04/12/41^(1),(2),(3)		738,717		664,845
Kingsland Ltd., Series 07-5A, Class SUB, due 07/14/21^(2),(3),(6)		220,000		215,600
Series 07-5A, Class E, 9.610%, due 07/14/21^(1),(2),(3)		250,000		245,625

113

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
International bonds—(continued)
International collateralized debt obligations—(continued)
Cayman Islands—(concluded)
Lenox CDO Ltd., Series 05-1A, Class E1, 8.860%, due 11/14/43^{(1),(2),(3),(4)}	$	247,124	$	217,642
Lightpoint CLO Ltd., Series 06-4A, Class C, 7.156%, due 04/15/18^(1),(2),(3)		550,000		533,093
Logan CDO Ltd., Series III-A, Class E, due 07/05/57^{(2),(3),(4),(6)}		390,000		390,000
Series II-A, Class E, 12.855%, due 05/04/51^(1),(2),(3)		400,000		381,760
Northwoods Capital Ltd., Series 06-6A, Class C, 7.106%, due 03/16/21^(1),(2),(3)		400,000		385,000
Octans CDO Ltd., Series 06-2A, Class D, 8.660%, due 11/12/51^(1),(2),(3)		297,150		209,232
Race Point CLO, Series 06-3, Class E, 9.606%, due 04/15/20^(1),(2),(3)		500,000		475,150
Rockwall CDO Ltd., Series 06-1A, Class B1L, 7.606%, due 08/01/21^(1),(2),(3)		300,000		300,000
Rockwall Investors Corp., due 08/01/21^(2),(3),(6)		200,000		190,000
Saturn CLO Ltd., Series 07-1A, Class D, 9.374%, due 05/13/22^(1),(2),(3)		250,000		245,250
Stanfield Veyron CLO Ltd., Series 06-1A, Class D, 6.956%, due 07/15/18^(1),(2),(3)		200,000		192,440
Trimaran CLO Ltd., Series 06-2A, Class C1, due 11/01/18^(3),(6)		280,000		274,400
Series 07-1A, Class C1, due 06/15/21^(3),(6)		530,000		530,000
Series 06-2A, Class B2L, 9.106%, due 11/01/18^(1),(2),(3)		410,000		399,422
Series 07-1A, Class B2L, 8.741%, due 06/15/21^(1),(2),(3)		200,000		189,640
				17,700,498
Ireland—1.00%
Adagio CLO BV, Series III-A, Class SUB, due 09/15/22^(2),(3),(6)	EUR	390,000		519,928
Adagio CLO, Series III-A, Class E, 7.751%, due 09/15/22^(1),(2),(3)		270,000		365,249
Avoca CLO I BV, Series VI-A, Class M, due 01/16/23^(2),(3),(6)		250,000		338,362

	Face amount		Value
Ireland—(concluded)
Cairn Mezzanine ABS CDO PLC, Series 06-1A, Class SUB, due 12/09/46^{(2),(3),(4),(6)}	$	580,000	$	359,600
Series 06-1A, Class 7, 11.360%, due 12/09/46^{(1),(2),(3),(4)}		244,375		167,397
Eirles One Ltd., Series 29, 7.479%, due 10/07/15^(1),(3),(4)	EUR	1,200,000		1,542,933
Eurocredit CDO BV, Series VI-X, Class SUB, due 01/16/22^(3),(6)		400,000		541,380
MARC CDO PLC, Series 1A, Class E, 12.360%, due 03/13/53^{(1),(2),(3),(4)}	$	350,000		273,840
Menton CDO PLC, Series II-A, Class E, 12.355%, due 10/24/53^{(1),(2),(3),(4)}		250,000		236,950
Series III-A, Class E, 12.510%, due 11/28/56^{(1),(2),(3),(4)}		550,000		395,010
PSION Synthetic CDO PLC, Series I-A, Class E, 10.610%, due 12/21/15^(1),(2),(3)		330,000		318,450
Valleriite CDO, Series 07-A1, Class D1EU, 7.525%, due 12/20/17^{(1),(2),(3),(4)}	EUR	350,000		473,707
				5,532,806
Luxembourg—0.30%
Ashwell CDO SA, due 12/22/66^(2),(3),(6)	EUR	200,000		232,793
due 12/22/77^(2),(3),(6)	GBP	220,000		417,484
GSC European CDO SA, Series II-A, Class SUB, due 07/15/20^(2),(3),(6)	EUR	320,000		411,449
GSC European CDO, Series 07-4A, Class E, 7.444%, due 04/25/23^(1),(2),(3)		470,000		632,941
				1,694,667
Netherlands—1.16%
Ares Euro CLO BV, Series 07-1A, Class G1, due 05/15/24^(2),(3),(6)	EUR	250,000		334,979
Series 07-1A, Class E, 7.629%, due 05/15/24^(1),(2),(3)		470,000		627,152
Cadogan Square CLO, Series 3A, Class E, 7.178%, due 01/17/23^(1),(3)		280,000		371,008
Series 2A, Class E, 7.930%, due 08/12/22^(1),(3),(4)		300,000		400,635
Eurocredit CDO BV, Series III-X, Class D1, 7.479%, due 10/20/16^(1),(3),(4)		550,000		759,285
Grosvenor Place CLO BV, Series II-A, Class SUB, 7.500%, due 03/28/23^(2),(3)		530,000		717,329

114

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(concluded)
International bonds—(concluded)
International collateralized debt obligations—(concluded)
Netherlands—(concluded)
Harbourmaster CLO Ltd., Series 7A, Class C, due 09/22/22^(2),(3),(6)	EUR	300,000	$	406,035
Series PR2A, Class C, due 10/15/22^(2),(3),(6)		150,000		197,414
Series PR2A, Class B2, 8.068%, due 10/15/22^(1),(2),(3)		300,000		414,643
Highlander Euro CDO, Series 06-2CA, Class F1, due 12/14/22^{(2),(3),(4),(6)}		450,000		596,871
Series 06-2CA, Class E, 7.760%, due 12/14/22^{(1),(2),(3),(4)}		250,000		325,742
Laurelin BV, Series 2A, Class SUB, due 07/15/23^(2),(3),(6)		250,000		338,363
Queen Street CLO, Series 06-1A, Class F, due 04/15/23^(2),(3)		320,000		463,031
Series 07-1A, Class F, due 09/25/24^(2),(3),(4)		350,000		464,233
				6,416,720
Total international collateralized debt obligations (cost $31,846,433)				31,344,691
International commercial mortgage-backed securities—0.41%
Ireland—0.04%
Fleet Street Finance One PLC, Series 1, Class A, 5.969%, due 07/20/14⁽¹⁾	GBP	110,034		220,986
Luxembourg—0.37%
EMC PLC, Series 4, Class A, 4.215%, due 04/30/13⁽¹⁾	EUR	1,493,707		2,021,779
Total international commercial mortgage-backed securities (cost $2,228,473)				2,242,765
International mortgage & agency debt securities—0.35%
Netherlands—0.12%
Delphinus BV, Series 00-1, Class B, 6.250%, due 06/26/32⁽¹⁾	EUR	500,000		699,024
United Kingdom—0.23%
Arkle Master Issuer PLC, Series 06-2A, Class 2C, 5.740%, due 02/17/52^(1),(2)	$	1,000,000		1,000,000
Granite Master Issuer PLC, Series 05-1, Class A5, 4.238%, due 12/20/54⁽¹⁾	EUR	190,000		257,190
				1,257,190
Total international mortgage & agency debt securities (cost $1,899,329)				1,956,214

	Face amount		Value
Foreign government bonds—6.24%
Argentina—1.65%
Republic of Argentina, 5.475%, due 08/03/12⁽¹⁾	$	8,400,000	$	6,125,700
5.830%, due 12/31/33 DISC⁽¹⁾	ARS	4,990,000		2,225,972
Republic of Argentina CPI Index Linked Bond, 2.000%, due 03/15/14⁽¹⁾		1,820,000		771,087
				9,122,759
Canada—0.35%
Quebec Province, 6.125%, due 01/22/11	$	1,880,000		1,925,872
Germany—1.10%
Deutsche Bundesrepublik, 4.000%, due 01/04/37	EUR	5,045,000		6,071,732
Japan—0.89%
Japan Bank for International Cooperation, 5.250%, due 03/23/16	$	5,100,000		4,946,873
Philippines—0.18%
Republic of Philippines, 8.375%, due 02/15/11	$	950,000		1,015,265
Russia—0.88%
Russian Federation, 7.500%, due 03/31/30⁽⁵⁾	$	4,427,750		4,859,456
Turkey—1.00%
Republic of Turkey Credit-Linked Notes, 6.986%, due 05/29/08⁽¹⁾	$	4,300,000		4,343,043
Republic of Turkey, 7.000%, due 09/26/16		1,172,000		1,185,185
				5,528,228
Venezuela—0.19%
Republic of Venezuela, 5.750%, due 02/26/16	$	1,290,000		1,086,825
Total foreign government bonds (cost $34,668,514)				34,557,010
Sovereign/supranational bonds—3.05%
European Investment Bank, 6.250%, due 12/07/08	GBP	7,900,000		15,939,740
6.250%, due 04/15/14		470,000		956,446
Total sovereign/supranational bonds (cost $16,413,590)				16,896,186
Total international bonds (cost $234,350,708)				238,597,309
Total bonds (cost $478,773,087)				475,932,133

115

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Investment company—5.33%
UBS U.S. Securitized Mortgage Relationship Fund⁽⁸⁾ (cost $27,576,862)		2,311,377	$	29,491,317
Short-term investments—2.14%
Investment company—1.89%
UBS U.S. Cash Management Prime Relationship Fund,^(8),(9)5.36% (cost $10,485,682)		10,485,682		10,485,682

	Face amount		Value
US government obligation—0.25%
US Treasury Bills, 4.81%, due on 12/20/07^(10),(11) (cost $1,386,158)	$	1,418,000	$	1,386,208
Total short-term investments (cost $11,871,840)				11,871,890
Total investments—93.41% (cost $518,221,789)				517,295,340
Cash and other assets, less liabilities—6.59%				36,521,667
Net assets—100.00%			$	553,817,007

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $520,307,898; and net unrealized depreciation consisted of:

Gross unrealized appreciation	$	9,088,860
Gross unrealized depreciation		(12,101,418	)
Net unrealized depreciation	$	(3,012,558	)

⁽¹⁾ Floating rate security—The interest rate shown is the current rate as of June 30, 2007.

⁽³⁾ Security is illiquid. At June 30, 2007, the value of these securities amounted to $52,072,504 or 9.40% of net assets.

⁽⁴⁾ Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2007, the value of these securities amounted to $15,569,288 or 2.81% of net assets.

⁽⁵⁾ Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2007. Maturity date disclosed is the ultimate maturity date.

⁽⁶⁾ This security is the equity tranche of a collateralized debt obligation. The Fund receives periodic payments, which may vary, from the issuer of this security.

⁽⁷⁾ Perpetual bond security. The maturity date reflects the next call date.

⁽⁸⁾ Investment in affiliated mutual fund.

⁽⁹⁾ The rate shown reflects the yield at June 30, 2007.

⁽¹⁰⁾ The rate shown is the effective yield at the date of purchase.

⁽¹¹⁾ This security was pledged to cover margin requirements for futures contracts.

ABS Asset-backed securities

CBO Collateralized bond obligations

CDO Collateralized debt obligations

CLO Collateralized loan obligations

CPI Consumer price index

DISC Discount bond

GMAC General Motors Acceptance Corp.

GS Goldman Sachs

GSAMP Goldman Sachs Mortgage Securities Corp.

MLCC Merrill Lynch Credit Corp.

IO Interest only security—This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.

Currency type abbreviations:

ARS Argentina Peso

BRL Brazilian Real

EUR Euro

GBP Great Britain Pound

JPY Japanese Yen

KZT Kazakhstan Tenge

116

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

Restricted securities

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/07 Market value		06/30/07 Market value as a percentage of net assets
Abacus Ltd., Series 05-CB1A, Class F, 9.820%, due 05/28/41	04/24/06	$	252,656		0.05	%	$	200,000		0.04	%
ACA ABS, Series 06-2, due 01/10/47	11/16/06		480,000		0.09			360,000		0.07
Acacia CDO Ltd., Series 10A, Class SUB, due 09/07/46	07/17/06		127,708		0.02			98,000		0.02
ACE Securities Corp., Series 06-SL1, Class B1, 8.320%, due 09/25/35	01/20/06		678,151		0.12			80,000		0.01
Adagio CLO BV, Series III-A, Class SUB, due 09/15/22	07/21/06		495,164		0.09			519,928		0.09
Adagio CLO, Series III-A, Class E, 7.751%, due 09/15/22	07/21/06		340,234		0.06			365,249		0.07
Ajax One Ltd., Series 2A, Class C, 7.820%, due 09/08/32	11/08/05		487,550		0.09			465,000		0.09
Aladdin CDO I Ltd, Series 06-2A, Class 10D, 12.860%, due 10/31/16	06/23/06		250,000		0.05			252,750		0.05
Ares Euro CLO BV, Series 07-1A, Class G1, due 05/15/24	03/16/07		332,800		0.06			334,979		0.06
Series 07-1A, Class E, 7.629%, due 05/15/24	03/16/07		625,664		0.11			627,152		0.11
Ares VR CLO Ltd., Series 06-1A, Class D, 7.260%, due 02/24/18	02/16/06		885,550		0.16			851,730		0.15
Ares X CLO Ltd., Series 05-1A, Class D2, 7.360%, due 09/18/17	09/20/05		498,125		0.09			485,450		0.09
Ashwell CDO SA, due 12/22/66	10/16/06		205,859		0.04			232,793		0.04
due 12/22/77	01/29/07		397,209		0.07			417,484		0.08
Avenue CLO Fund Ltd., Series 06-3A, Class B2L, 9.358%, due 07/20/18	04/24/06		215,160		0.04			215,248		0.04
Avenue CLO III Fund Ltd., due 07/20/18	04/24/06		146,625		0.03			138,000		0.03
Avery Street CLO, Series 06-1A, Class E, 10.350%, due 04/05/18	01/31/06		688,100		0.12			703,500		0.13
Avoca CLO I BV, Series VI-A, Class M, due 01/16/23	10/19/06		315,688		0.06			338,362		0.06
Babson CLO Ltd., Series 07-1A, Class INC, due 01/18/21	02/02/07		237,500		0.04			250,000		0.05
Black Diamond CLO Ltd., Series 06-1A, Class D, 6.741%, due 04/29/19	12/22/06		350,000		0.06			339,395		0.06
Series 05-2A, Class D, 7.150%, due 01/07/18	09/22/05		300,000		0.05			297,900		0.05
Series 05-2A, Class E1, 9.850%, due 01/07/18	09/22/05		250,000		0.05			252,000		0.05
Blackrock Senior Income Series Corp., Series 07-5A, Class SUB, due 08/13/19	06/22/07		300,000		0.05			300,000		0.05
Brentwood Investors CDO Corp., Series 07-01, due 05/01/16	12/07/06		242,500		0.04			250,000		0.05
Callidus Debt Partners CDO Fund I Ltd., Series 5A, Class INC, due 11/20/20	11/01/06		190,000		0.03			200,000		0.04
Cairn Mezzanine ABS CDO PLC, Series 06-1A, Class SUB, due 12/09/46	08/11/06		493,000		0.09			359,600		0.07
Series 06-1A, Class 7, 11.360%, due 12/09/46	08/11/06		243,153		0.04			167,397		0.03
CIFC Funding, Series 06-II, due 03/01/21	11/22/06		237,500		0.04			250,000		0.05
Colts, Series 07-1, due 03/20/21	02/09/07		285,000		0.05			294,000		0.05

117

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

Restricted securities—(continued)

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/07 Market value		06/30/07 Market value as a percentage of net assets
Commercial Industrial Finance Corp., Series 06-2A, Class B2L, 9.360%, due 03/01/21	11/22/06	$	278,600		0.05	%	$	270,648		0.05	%
Cratos CLO Ltd., Series 07-1A, Class D, 7.755%, due 05/19/21	04/30/07		250,000		0.05			235,000		0.04
Credit-Based Asset Servicing and Securitization CBO Ltd., Series 15A, Class D, 8.260%, due 02/16/41	01/25/06		240,256		0.04			229,421		0.04
Series 18A, Class D, 10.110%, due 03/13/47	03/06/07		796,404		0.14			796,404		0.14
De Meer Middle Market CLO Ltd., Series 06-1A, Class E, 9.358%, due 10/20/18	08/03/06		226,226		0.04			223,566		0.04
Denali Capital CLO VII Ltd., Series 07-1A, Class B2L, 9.620%, due 01/22/22	04/27/07		285,865		0.05			290,000		0.05
Duke Funding Ltd., Series 06-11A, Class B1E, 6.286%, due 08/08/46	09/19/06		1,068,529		0.19			1,088,090		0.20
Emporia Preferred Funding, Series 07-3A, Class D, 6.805%, due 04/23/21	02/27/07		250,000		0.05			228,853		0.04
Series 07-3A, Class E, 9.005%, due 04/23/21	02/27/07		250,000		0.05			227,465		0.04
First Franklin Mortgage Loan Asset- Backed Certificates, Series 06-FFA, Class B2, 6.000%, due 09/25/26	11/03/06		700,891		0.13			151,826		0.03
FM Leveraged Capital Fund II, due 11/20/20	10/31/06		370,000		0.07			333,000		0.07
FM Leveraged Capital Fund, Series 06-2A, Class E, 9.110%, due 11/15/20	10/31/06		400,000		0.07			376,692		0.07
Galena CDO Ltd., Series II-AIRL, Class A1U, 6.025%, due 04/07/17	03/08/07		1,000,000		0.18			999,800		0.18
GoldenTree Capital Opportunities LP, Series 06-1A, Class D1, 7.460%, due 02/22/20	01/27/06		600,000		0.11			600,000		0.11
GoldenTree Loan Opportunities III Ltd., Series 07-3A, Class SUB, due 05/01/22	02/27/07		430,000		0.08			442,083		0.08
Greywolf CLO Ltd., Series 07-1A, Class SUB, due 02/18/21	12/08/06		247,500		0.04			245,000		0.04
Grosvenor Place CLO BV, Series II-A, Class SUB, 7.500%, due 03/28/23	12/15/06		686,465		0.12			717,329		0.13
GS Mortgage Securities Corp., II, Series 07-GKK1, Class A1, 5.700%, due 12/20/49	05/02/07		2,001,948		0.36			1,939,400		0.35
GSC European CDO SA, Series II-A, Class SUB, due 07/15/20	07/18/06		386,262		0.07			411,449		0.07
GSC European CDO, Series 07-4A, Class E, 7.444%, due 04/25/23	03/16/07		625,664		0.11			632,941		0.11
GSC Partners CDO Fund Ltd., Series 07-8A, Class SUB, due 04/17/21	02/28/07		222,936		0.04			240,000		0.04
GSC Partners CDO Fund V, Ltd., due 11/20/16	07/25/06		257,681		0.05			234,900		0.04
due 11/20/16	02/07/07		230,000		0.04			217,500		0.04

118

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

Restricted securities—(continued)

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/07 Market value		06/30/07 Market value as a percentage of net assets
Gulf Stream - Sextant CLO Ltd., Series 07-1A, Class SUB, due 06/17/21	05/17/07	$	520,000		0.09	%	$	520,000		0.09	%
Series 06-1A, Class D, 6.960%, due 08/21/20	07/26/06		170,000		0.03			163,030		0.03
Harbourmaster CLO Ltd., Series 7A, Class C, due 09/22/22	10/31/06		363,746		0.07			406,035		0.07
Series PR2A, Class C, due 10/15/22	08/03/06		182,486		0.03			197,414		0.04
Series PR2A, Class B2, 8.068%, due 10/15/22	08/03/06		384,180		0.07			414,643		0.08
Harbourview CLO VI Ltd., Series 6A, Class D, 9.060%, due 12/27/19	10/20/06		363,584		0.07			333,000		0.06
Hereford Street ABS CDO Ltd., Series 05-1A, Class D, 8.250%, due 01/03/45	11/04/05		696,500		0.13			541,485		0.10
Hewett's Island CDO Ltd., Series 06-4A, Class C, 6.107%, due 05/09/18	04/11/06		249,360		0.05			248,350		0.05
Series 06-4A, Class D1, 7.007%, due 05/09/18	04/11/06		247,857		0.04			238,075		0.04
Series 07-6A, Class D, 7.630%, due 06/09/19	05/09/07		247,467		0.04			247,467		0.04
Series 06-4A, Class E, 9.907%, due 05/09/18	04/11/06		346,364		0.06			350,000		0.06
Highlander Euro CDO, Series 06-2CA, Class F1, due 12/14/22	11/28/06		576,071		0.11			596,871		0.11
Series 06-2CA, Class E, 7.760%, due 12/14/22	11/28/06		329,608		0.06			325,742		0.06
Home Equity Mortgage Trust, Series 06-4, Class B2, 9.320%, due 11/25/36	07/26/06		418,189		0.08			15,000		0.00	⁽¹⁾
ING Investment Management CLO II Ltd., due 08/01/20	06/30/06		300,000		0.05			289,500		0.05
Ischus CDO Ltd., Series 06-S1, Class B1L, 9.355%, due 04/12/41	02/21/06		721,522		0.13			664,845		0.12
Kingsland Ltd., Series 07-5A, Class SUB, due 07/14/21	05/02/07		209,000		0.04			215,600		0.04
Series 07-5A, Class E, 9.610%, due 07/14/21	05/02/07		241,728		0.04			245,625		0.04
Laurelin BV, Series 2A, Class SUB, due 07/15/23	06/05/07		337,988		0.06			338,363		0.06
Lenox CDO Ltd., Series 05-1A, Class E1, 8.860%, due 11/14/43	11/23/05		239,092		0.04			217,642		0.04
Lightpoint CLO Ltd., Series 06-4A, Class C, 7.156%, due 04/15/18	03/03/06		550,000		0.10			533,093		0.10
Logan CDO Ltd., Series III-A, Class E, due 07/05/57	06/08/07		390,000		0.07			390,000		0.07
Series II-A, Class E, 12.855%, due 05/04/51	04/11/06		398,000		0.07			381,760		0.07
Longport Funding Ltd., Series 07-1A. Class D, 11.598%, due 04/12/51	05/31/07		428,500		0.08			428,500		0.08
Longshore CDO Funding Ltd., Series 06-1A, Class D, 8.255%, due 05/03/46	01/10/06		367,913		0.07			307,800		0.06
MARC CDO PLC, Series 1A, Class E, 12.360%, due 03/13/53	11/30/05		349,125		0.06			273,840		0.05

119

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

Restricted securities—(concluded)

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/07 Market value		06/30/07 Market value as a percentage of net assets
MC Funding Ltd., Series 06-1, due 12/20/20	12/08/06	$	482,876		0.09	%	$	482,895		0.09	%
Series 06-1A, Class E, 9.110%, due 12/20/20	12/08/06		640,000		0.12			604,947		0.11
Menton CDO PLC, Series II-A, Class E, 12.355%, due 10/24/53	10/10/05		249,375		0.05			236,950		0.04
Series III-A, Class E, 12.510%, due 11/28/56	10/18/06		550,000		0.10			395,010		0.07
Merrill Lynch Mortgage Investors, Inc., Series 04-SL2, Class B4, 10.070%, due 06/25/35	02/10/06		1,082,250		0.20			889,854		0.16
Northwoods Capital Ltd., Series 06-6A, Class C, 7.106%, due 03/16/21	02/15/06		397,074		0.07			385,000		0.07
Octans CDO Ltd., Series 06-2A, Class D, 8.660%, due 11/12/51	09/20/06		297,150		0.05			209,232		0.04
OHA Park Avenue CLO Ltd., Series 07-1A, Class SUB, due 03/14/22	02/26/07		370,000		0.07			355,200		0.06
PSION Synthetic CDO PLC, Series I-A, Class E, 10.610%, due 12/21/15	12/15/05		314,985		0.06			318,450		0.06
Queen Street CLO, Series 06-1A, Class F, due 04/15/23	12/12/06		424,960		0.08			463,031		0.08
Series 07-1A, Class F, due 09/25/24	05/18/07		263,444		0.05			464,233		0.08
Race Point CLO, Series 06-3, Class E, 9.606%, due 04/15/20	03/10/06		500,000		0.09			475,150		0.09
Rockwall CDO Ltd., Series 06-1A, Class B1L, 7.606%, due 08/01/21	04/24/06		297,750		0.05			300,000		0.05
Rockwall Investors Corp., due 08/01/21	04/24/06		198,500		0.03			190,000		0.03
Sagittarius CDO Ltd., Series 07-1A, Class C, 7.420%, due 12/10/51	02/13/07		1,040,000		0.19			936,000		0.17
Saturn CLO Ltd., Series 07-1A, Class D, 9.374%, due 05/13/22	04/20/07		238,025		0.04			245,250		0.04
Shasta CLO I Ltd., due 04/20/21	12/20/06		731,500		0.13			739,200		0.13
Spirit CBO, Series 04-2A, Class D, 6.097%, due 10/27/10	11/16/05		702,085		0.13			724,828		0.13
Stanfield Veyron CLO Ltd., Series 06-1A, Class D, 6.956%, due 07/15/18	06/13/06		199,300		0.04			192,440		0.03
Taberna Preferred Funding Ltd., Series 06-7A, Class A3L, 6.806%, due 02/05/37	09/15/06		232,629		0.04			231,144		0.04
Series 06-7A, Class B1L, 8.306%, due 02/05/37	09/15/06		303,800		0.05			294,500		0.05
Tricadia CDO Ltd., Series 05-4A, Class B1L, 8.610%, due 12/11/40	12/01/05		502,490		0.09			488,905		0.09
Series 05-3A, Class B1L, 8.860%, due 06/25/41	11/01/05		475,221		0.09			469,494		0.08
Series 06-5A, Class F, 11.360%, due 06/19/46	05/09/06		581,505		0.10			487,264		0.09
Trimaran CLO Ltd., Series 06-2A, Class B2L, 9.106%, due 11/01/18	07/28/06		407,950		0.07			399,422		0.07
Series 07-1A, Class B2L, 8.741%, due 06/15/21	03/09/07		198,806		0.04			189,640		0.03
Valleriite CDO, Series 07-A1, Class D1EU, 7.525%, due 12/20/17	06/12/07		465,868		0.09			473,707		0.09
		$	44,131,946		7.97	%	$	41,302,710		7.46	%

⁽¹⁾ Amount represents less than 0.005%.

120

UBS Absolute Return Bond Fund—Portfolio of investments

June 30, 2007

Forward foreign currency contracts

UBS Absolute Return Bond Fund had the following open forward foreign currency contracts as of June 30, 2007:

	Contracts to deliver		In exchange for		Maturity date	Unrealized appreciation/ (depreciation)
Australian Dollar		7,755,000	USD	6,482,909	09/12/07	$	(78,933	)
Canadian Dollar		12,825,000	USD	12,138,564	09/12/07		79,665
Euro		157,730,000	USD	213,855,381	09/12/07		(135,333	)
Great Britain Pound		45,940,000	USD	91,544,868	09/12/07		(612,304	)
United States Dollar		40,056,115	CHF	48,540,000	09/12/07		(102,831	)
United States Dollar		9,855,489	EUR	7,390,000	09/12/07		170,450
United States Dollar		315,923	EUR	235,000	07/11/07		2,225
United States Dollar		2,903,581	JPY	348,000,000	09/12/07		(50,421	)
United States Dollar		15,858,581	SEK	108,820,000	09/12/07		108,417
United States Dollar		5,452,545	SGD	8,275,000	09/12/07		(15,625	)
Net unrealized depreciation on forward foreign currency contracts						$	(634,690	)

Currency type abbreviations:

CHF Swiss Franc

EUR Euro

JPY Japanese Yen

SEK Swedish Krona

SGD Singapore Dollar

USD United States Dollar

Futures contracts

UBS Absolute Return Bond Fund had the following open futures contracts as of June 30, 2007:

	Expiration date	Cost/ proceeds		Value		Unrealized appreciation/ (depreciation)
US Treasury futures buy contracts:
2 Year US Treasury Notes, 85 contracts	September 2007	$	17,345,550	$	17,321,406	$	(24,144	)
US Treasury futures sell contracts:
5 Year US Treasury Notes, 790 contracts	September 2007		82,592,163		82,221,719		370,444
10 Year US Treasury Notes, 1,330 contracts	September 2007		140,825,026		140,585,156		239,870
Index futures buy contracts:
Australian 10 Year Bond, 220 contracts (AUD)	September 2007		17,478,402		17,530,563		52,161
Index futures sell contracts:
EURO-Bobl, 260 contracts (EUR)	September 2007		37,428,980		37,325,715		103,265
EURO-Bund, 225 contracts (EUR)	September 2007		33,947,211		33,726,282		220,929
EURO-Schatz, 440 contracts (EUR)	September 2007		61,057,556		61,037,618		19,938
Japanese 10 Year Bond, 11 contracts (JPY)	September 2007		11,772,970		11,793,787		(20,817	)
Long Gilt, 75 contracts (GBP)	September 2007		15,914,417		15,622,516		291,901
Net unrealized appreciation on futures contracts						$	1,253,547

The segregated aggregate market value of investments and cash collateral pledged to cover margin requirements for the open futures positions at June 30, 2007 was $3,265,576.

Currency type abbreviations:

AUD Australian Dollar

EUR Euro

GBP Great Britain Pound

JPY Japanese Yen

See accompanying notes to financial statements.
121

UBS Global Bond Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS Global Bond Fund (the "Fund") returned 1.67% (Class A shares declined 2.93% after the deduction of the maximum sales charge), while Class Y shares returned 2.03%. The Fund's benchmark, the Lehman Brothers Global Aggregate Index (the "Index"), returned 4.67% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 124; 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 underperformance relative to the Index was primarily due to foreign currency positioning. Relative returns were affected to a lesser extent by an underweight exposure to the credit sector and select asset-backed security holdings.

Portfolio performance summary

What worked

• A defensive duration strategy helped relative performance for the period as a whole.

• The Fund held a less-than-Index duration (duration is a measure of a bond's sensitivity to changes in interest rates) throughout the period, which helped to reduce the impact of interest rate changes. This defensive stance helped the portfolio during periods when interest rates rose (and bond prices fell).

• We made several moves to adjust the Fund's duration during the reporting period, responding to weakness in most bond markets; much of the Fund's underweight duration was achieved in the US market.

• Interest rate management made a strong contribution to relative returns. Our interest rate strategy aided performance for much of the reporting period. However, when bonds rallied across all developed markets in the third quarter of 2006, our below benchmark exposure hurt relative results. Much of these losses were recovered during the second quarter of 2007, when interest rate management once again made a strong contribution to performance.

• Spread management (our allocation between sectors) generated positive results over the period. Our posture early in the period—when we viewed credit as being overvalued, leading us to maintain an underweight duration-adjusted exposure (a measure of duration that incorporates the expected impact that a change in interest rates would have on the value of an instrument)—initially detracted from performance. However, we saw a reversal in the last few months of the period, which produced a small net positive impact on performance from spread management.

What didn't work

• Foreign currency positioning was the primary factor behind the Fund's relative underperformance.

• The Fund's overweight exposure to select currencies, such as the Japanese yen and the Swiss franc, had a negative impact on relative performance.

122

UBS Global Bond Fund

• Relative performance was also hurt by the Fund's underweight exposure to the strong performing British pound and Canadian dollar.

• In our view, the recent increase in currency market volatility will create growing pressure for corrections, bringing overvalued exchange rates back toward fair value; as a result, we expect to continue to maintain our overweights to the Japanese yen and the Swiss franc.

• The Fund's positions in residential mortgage-backed securities (RMBS) hurt performance during the period. We had a limited number of holdings in RMBS, which suffered severe price markdowns as a result of the growing awareness of problems in the US subprime mortgage market, as well as the wider US residential mortgage market. It should be noted that, due to the strength of our risk management process—which requires us to maintain the discipline of a widely diversified portfolio strategy—the impact of these events, on a relative basis, had limited effect on the Fund.

123

UBS Global Bond Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			10 years ended 06/30/07			Inception(1⁾ to 06/30/07
Before deducting	Class A(2⁾		1.67	%		5.61	%		N/A			6.25	%
maximum sales charge	Class B(2⁾		0.90			4.84			N/A			6.05
	Class C(4⁾		1.17			N/A			N/A			5.09
	Class Y(5⁾		2.03			5.89			4.63	%		5.42
After deducting maximum	Class A(2⁾		-2.93			4.65			N/A			5.39
sales charge	Class B⁽³⁾		-4.05			4.51			N/A			5.92
	Class C⁽⁴⁾		0.42			N/A			N/A			5.09
Lehman Brothers Global Aggregate Index⁽⁶⁾			4.67			6.28			5.56			5.96

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.38% and 1.15%; Class B—2.15% and 1.90%; Class C—1.78% and 1.65%; Class Y—1.06% and .90%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.15%; Class B—1.90%; Class C—1.65%; Class Y—.90%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS Global Bond Fund Class A shares is 11/05/01. Inception dates of Class B and Class C shares are 11/26/01 and 07/02/02, respectively. Inception date of Class Y shares and the Index is 07/31/93.

⁽²⁾ Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.

⁴⁾ Maximum contingent deferred sales charge for Class C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees.

⁽⁵⁾ The Portfolio offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees.

⁽⁶⁾ The Lehman Brothers Global Aggregate Index is a broad-based, market capitalization weighted index which measures the broad global market for US and non US corporate, government, governmental agency, supranational, mortgage-backed and asset backed fixed income securities.

124

UBS Global Bond Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS Global Bond Fund Class A shares (adjusted for 4.50% maximum sales charge), Class Y shares and the Lehman Brothers Global Aggregate Index, if you had invested $10,000 in Class A shares on November 5, 2001 or $10,000,000 in Class Y shares on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS Global Bond Fund Class A vs. Lehman Brothers Global Aggregate Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 4.50%.

UBS Global Bond Fund Class Y vs. Lehman Brothers Global Aggregate Index

Wealth value with dividends reinvested

125

UBS Global Bond Fund

Top ten fixed income holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
Government of Japan CPI Linked Bonds, 0.500%, due 12/10/14		7.4	%
Government of France, 3.500%, due 07/12/09		4.7
Deutsche Bundesrepublik, 6.250%, due 01/04/24		4.5
Government of Belgium, 5.750%, due 03/28/08		4.2
Government of Sweden, 5.000%, due 01/28/09		3.4
Council of Europe Development Bank, 5.625%, due 12/14/15		3.2
US Treasury Inflation Indexed Notes 2.375%, due 01/15/17		2.9
US Treasury Notes, 4.250%, due 11/30/07		2.7
Government of Japan, 1.900%, due 06/20/25		2.4
UK Gilts, 4.750%, due 09/07/15		2.3
Total		37.7	%

Country exposure, top five (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
United States		25.7	%
Japan		9.8
Germany		9.0
France		9.0
United Kingdom		6.9
Total		60.4	%

⁽¹⁾ Figures represent the direct investments of the UBS Global Bond Fund. Figures could be different if a breakdown of the underlying investment company was included.

126

UBS Global Bond Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Bonds US bonds US corporate bonds
Aerospace & defense	0.04	%
Automobiles	0.42
Beverages	0.80
Capital markets	0.58
Chemicals	0.12
Commercial banks	1.57
Commercial services & supplies	0.24
Consumer finance	0.86
Containers & packaging	0.21
Diversified financial services	0.96
Diversified telecommunication services	0.67
Electronic equipment & instruments	0.04
Food & staples retailing	0.59
Food products	0.16
Hotels, restaurants & leisure	0.20
Independent power producers & energy traders	0.12
Industrial conglomerates	0.07
Insurance	0.16
Media	0.41
Metals & mining	0.20
Multi-utilities	0.13
Office electronics	0.08
Oil, gas & consumable fuels	0.72
Paper & forest products	0.63
Pharmaceuticals	0.68
Semiconductors & semiconductor equipment	0.11
Textiles, apparel & luxury goods	0.24
Thrifts & mortgage finance	0.46
Wireless telecommunication services	0.05
Total US corporate bonds	11.52
Asset-backed securities	1.86
Collateralized debt obligations	2.44
Commercial mortgage-backed securities	2.34
Mortgage & agency debt securities	0.55
US government obligations	6.94
Total US bonds	25.65
International bonds International corporate bonds
Chemicals	0.05	%
Commercial banks	5.80
Commercial services & supplies	0.08
Construction materials	0.70
Containers & packaging	0.12
Diversified financial services	0.16
Diversified telecommunication services	1.01
Electric utilities	0.63
Multi-utilities	0.21
Oil, gas & consumable fuels	1.04
Paper & forest products	0.43
Thrifts & mortgage finance	0.60
Total international corporate bonds	10.83
International asset-backed security	0.19
International collateralized debt obligations	2.81
International mortgage & agency debt security	0.20
Foreign government bonds	36.88
Sovereign/supranational bonds	6.92
Total international bonds	57.83
Total bonds	83.48
Investment company
UBS U.S. Securitized Mortgage Relationship Fund	11.29
Short-term investment	4.17
Total investments	98.94
Cash and other assets, less liabilities	1.06
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS Global Bond Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

127

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—83.48%
US bonds—25.65%
US corporate bonds—11.52%
Ainsworth Lumber Co., Ltd., 7.250%, due 10/01/12	$	9,000	$	6,930
AK Steel Corp., 7.875%, due 02/15/09		83,000		82,793
American Cellular Corp., Series B, 10.000%, due 08/01/11		58,000		60,755
ArvinMeritor, Inc., 8.125%, due 09/15/15		50,000		48,438
Bank One Corp., 7.875%, due 08/01/10		675,000		720,761
Cincinnati Bell, Inc., 7.250%, due 07/15/13		150,000		153,750
Citigroup, Inc., 5.000%, due 09/15/14		400,000		380,505
Comcast Cable Communications LLC, 6.750%, due 01/30/11		150,000		155,258
Countrywide Home Loans, Inc., 3.250%, due 05/21/08		575,000		563,547
CSC Holdings, Inc., Series B, 8.125%, due 08/15/09		150,000		153,000
DaimlerChrysler N.A. Holding Corp., 7.200%, due 09/01/09		500,000		515,471
Deluxe Corp., 5.000%, due 12/15/12		150,000		135,000
Dynegy Holdings, Inc., 8.375%, due 05/01/16		75,000		73,313
Ford Motor Credit Co. LLC, 5.800%, due 01/12/09		380,000		371,964
Freeport-McMoRan Copper & Gold, Inc., 8.250%, due 04/01/15		150,000		158,250
Freescale Semiconductor, Inc., 10.125%, due 12/15/16⁽¹⁾		150,000		141,000
General Electric Capital Corp., 4.375%, due 01/20/10	EUR	505,000		677,743
6.750%, due 03/15/32	$	110,000		119,346
GMAC LLC, 7.250%, due 03/02/11		100,000		99,672
Harland Clarke Holdings Corp., 10.106%, due 05/15/15^(1),(2)		85,000		82,025
HSBC Finance Corp., 6.750%, due 05/15/11		350,000		363,309
Jacobs Entertainment, Inc., 9.750%, due 06/15/14		50,000		51,938
JPMorgan Chase Bank N.A., 4.375%, due 11/30/21⁽²⁾	EUR	350,000		441,044

	Face amount		Value
US corporate bonds—(concluded)
Kinder Morgan Energy Partners LP, 5.800%, due 03/15/35	$	1,000,000	$	888,354
Kraft Foods, Inc., 5.625%, due 11/01/11		200,000		198,435
Kroger Co., 8.050%, due 02/01/10		350,000		369,069
Landry's Restaurants, Inc., Series B, 7.500%, due 12/15/14		250,000		242,500
Levi Strauss & Co., 12.250%, due 12/15/12		275,000		297,688
Marsh & McLennan Cos., Inc., 6.250%, due 03/15/12		200,000		201,348
Miller Brewing Co., 5.500%, due 08/15/13⁽¹⁾		1,000,000		983,279
Mirant Americas Generation LLC, 8.300%, due 05/01/11		150,000		154,875
Mirant North America LLC, 7.375%, due 12/31/13		75,000		76,688
Morgan Stanley, 5.300%, due 03/01/13		235,000		230,341
5.750%, due 10/18/16		500,000		488,455
Owens-Brockway Glass Container, Inc., 8.250%, due 05/15/13		250,000		258,750
PolyOne Corp., 10.625%, due 05/15/10		147,000		154,350
Sanmina-SCI Corp., 8.110%, due 06/15/14^(1),(2)		45,000		45,000
Sheridan Group, Inc., 10.250%, due 08/15/11		150,000		157,500
Sinclair Broadcast Group, Inc., 8.000%, due 03/15/12		89,000		91,670
SLM Corp., 4.750%, due 03/17/14	EUR	200,000		225,539
Sprint Capital Corp., 8.375%, due 03/15/12	$	620,000		675,424
Univision Communications, Inc., 7.850%, due 07/15/11		50,000		51,500
Wal-Mart Stores, Inc., 6.875%, due 08/10/09		350,000		360,943
Wells Fargo Bank N.A., 6.450%, due 02/01/11		750,000		773,320
Weyerhaeuser Co., 6.750%, due 03/15/12		750,000		775,992
Wyeth, 5.500%, due 02/01/14		850,000		837,747
Xerox Capital Trust I, 8.000%, due 02/01/27		100,000		102,661
Total US corporate bonds (cost $14,372,625)				14,197,240

128

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Asset-backed securities—1.86%
Countrywide Asset-Backed Certificates, Series 04-SD1, Class A1, 5.660%, due 06/25/33^(1),(2)	$	5,801	$	5,817
First Franklin Mortgage Loan Asset-Backed Certificates, Series 05-FFA, Class M3, 5.517%, due 03/25/25^(3),(4)		500,000		452,318
GSAMP Trust, Series 06-S1, Class M6, 7.000%, due 11/25/35^(3),(4)		500,000		10,000
Indymac Seconds Asset-Backed Trust, Series 06-1, Class A4, 6.166%, due 05/25/36⁽⁴⁾		1,000,000		994,778
Metris Master Trust, Series 05-2, Class C, 5.870%, due 09/20/11^(1),(2),(5)		500,000		499,995
SACO I Trust, Series 06-5, Class 2A1, 5.470%, due 05/25/36⁽²⁾		316,139		316,079
Structured Asset Securities Corp., Series 03-AL2, Class A, 3.357%, due 01/25/31⁽¹⁾		14,415		13,128
Total asset-backed securities (cost $2,810,011)				2,292,115
Collateralized debt obligations—2.44%
Ares VR CLO Ltd., Series 06-1A, Class D, 7.260%, due 02/24/18^{(1),(2),(3),(5)}		140,000		133,980
Brentwood CLO Ltd., Series 06-1A, Class C, 6.956%, due 02/01/22^(1),(2),(3)		250,000		239,000
Commercial Industrial Finance Corp., Series 07-1A, Class A3L, 6.135%, due 05/10/21^(1),(2),(3)		200,000		197,060
Duke Funding Ltd., Series 06-11A, Class B1E, 6.286%, due 08/08/46^(1),(3)	EUR	180,000		223,059
Global Leveraged Capital Credit Opportunity Fund, Series 06-1A, Class C, 6.358%, due 12/20/18^{(1),(2),(3),(5)}	$	250,000		250,800
Halcyon Loan Investors CLO Ltd., Series 06-1A, Class C, 6.810%, due 11/20/20^(1),(2),(3)		250,000		240,025

	Face amount		Value
Collateralized debt obligations—(concluded)
Hewett's Island CDO Ltd., Series 07-6A, Class D, 7.630%, due 06/09/19^(1),(2),(3)	$	250,000	$	247,467
Highland Credit Opportunities CDO Ltd., Series 06-1A, Class C, 6.206%, due 11/01/13^(1),(2),(3)		250,000		249,975
Longport Funding Ltd., Series 07-1A, Class D, 11.598%, due 04/12/51^(1),(2),(3)		250,000		214,250
Sagittarius CDO Ltd., Series 07-1A, Class C, 7.420%, due 12/10/51^(1),(2),(3)		250,000		225,000
Taberna Preferred Funding Ltd., Series 06-5A, Class A3, 6.806%, due 08/05/36^(1),(2),(3)		200,000		192,880
Series 06-7A, Class A3L, 6.806%, due 02/05/37^(1),(2),(3)		330,000		317,823
Series 06-7A, Class B1L, 8.306%, due 02/05/37^(1),(2),(3)		200,000		190,000
Tricadia CDO Ltd., Series 05-4A, Class B1L, 8.610%, due 12/11/40^(1),(2),(3)		93,521		90,538
Total collateralized debt obligations (cost $3,066,854)				3,011,857
Commercial mortgage-backed securities—2.34%
Asset Securitization Corp., Series 95-MD4, Class A3, 7.384%, due 08/13/29⁽²⁾		350,000		350,811
Series 96-MD6, Class A4, 7.586%, due 11/13/29⁽²⁾		375,000		376,944
Bear Stearns Commercial Mortgage Securities, Series 00-WF2, Class A2, 7.320%, due 10/15/32		80,000		83,639
DLJ Commercial Mortgage Corp., Series 00-CKP1, Class A1B, 7.180%, due 11/10/33		267,863		278,783
First Union Commercial Mortgage Securities, Inc., Series 97-C2, Class A3, 6.650%, due 11/18/29		30,831		30,806
Hilton Hotel Pool Trust, Series 00-HLTA, Class A1, 7.055%, due 10/03/15⁽¹⁾		227,043		232,906
JPMorgan Commercial Mortgage Finance Corp., Series 99-C8, Class A2, 7.400%, due 07/15/31		71,205		72,946

129

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(concluded)
Commercial mortgage-backed securities—(concluded)
Mach One Trust Commercial Mortgage-Backed, Series 04-1A, Class A1, 3.890%, due 05/28/40⁽¹⁾	$	67,925	$	67,268
Morgan Stanley Capital I, Series 03-T11, Class A4, 5.150%, due 06/13/41		155,000		150,514
Series 05-HQ7, Class A4, 5.373%, due 11/14/42⁽²⁾		870,000		838,933
PNC Mortgage Acceptance Corp., Series 00-C1, Class A2, 7.610%, due 02/15/10		312,475		324,001
TIAA Retail Commercial Trust, Series 01-C1A, Class A2, 6.300%, due 06/19/21⁽¹⁾		75,907		76,165
Total commercial mortgage-backed securities (cost $3,000,958)				2,883,716
Mortgage & agency debt securities—0.55%
Federal National Mortgage Association, 6.625%, due 09/15/09		360,000		370,597
Government National Mortgage Association Pool, # 781276, 6.500%, due 04/15/31		103,748		105,919
WaMu Mortgage Pass-Through Certificates, Series 07-HY1, Class 3A2, 5.884%, due 02/25/37⁽²⁾		200,000		196,781
Total mortgage & agency debt securities (cost $678,049)				673,297
US government obligations—6.94%
US Treasury Bonds, 6.250%, due 05/15/30		1,460,000		1,668,735
US Treasury Inflation Indexed Notes (TIPS), 2.375%, due 01/15/17		3,688,056		3,600,752
US Treasury Notes, 4.250%, due 11/30/07		3,300,000		3,291,235
Total US government obligations (cost $8,581,568)				8,560,722
Total US bonds (cost $32,510,065)				31,618,947
International bonds—57.83%
International corporate bonds—10.83%
Canada—0.63%
Abitibi-Consolidated, Inc., 6.950%, due 04/01/08		225,000		222,750
8.550%, due 08/01/10		150,000		143,250

	Face amount		Value
Canada—(concluded)
Bowater Canada Finance Corp., 7.950%, due 11/15/11	$	175,000	$	164,719
Quebecor World Capital Corp., 4.875%, due 11/15/08		100,000		97,000
Stone Container Finance, 7.375%, due 07/15/14		150,000		144,000
				771,719
Denmark—0.33%
Dong Energy A/S, 5.500%, due 06/29/3005⁽²⁾	EUR	300,000		403,112
France—2.45%
BNP Paribas, 5.250%, due 12/17/12	EUR	140,000		192,729
5.625%, due 08/07/08		100,000		136,813
5.750%, due 01/24/22	GBP	80,000		155,805
Compagnie de Financement Foncier, 2.375%, due 01/29/09	EUR	550,000		720,190
Credit Lyonnais SA, 5.000%, due 11/15/12⁽²⁾		210,000		284,678
France Telecom SA, 8.125%, due 01/28/33		240,000		413,097
Lafarge SA, 4.750%, due 03/23/20		700,000		864,895
Veolia Environnement, 4.875%, due 05/28/13		190,000		254,607
				3,022,814
Germany—2.36%
Eurohypo AG, 3.750%, due 11/05/08	EUR	550,000		737,124
EWE AG, 4.875%, due 10/14/19		170,000		221,962
Kreditanstalt fuer Wiederaufbau,
4.750%, due 08/17/07		710,000		961,498
Landwirtschaftliche Rentenbank, 6.000%, due 09/15/09	AUD	700,000		583,877
6.000%, due 05/30/13		500,000		405,184
				2,909,645
Ireland—0.65%
Allied Irish Banks PLC, 7.500%, due 01/28/11^(2),(6)	EUR	550,000		804,070
Luxembourg—0.68%
Telecom Italia Finance SA, 6.575%, due 07/30/09	EUR	600,000		838,235
Netherlands—0.50%
E.ON International Finance BV, 6.375%, due 05/29/12	GBP	100,000		200,576

130

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
International bonds—(continued)
International corporate bonds—(concluded)
Netherlands—(concluded)
Montell Finance Co. BV, 8.100%, due 03/15/27⁽¹⁾	$	65,000	$	59,150
RWE Finance BV, 5.500%, due 10/26/07	EUR	265,000		359,769
				619,495
Trinidad & Tobago—0.71%
Petroleum Co. of Trinidad & Tobago Ltd.,
6.000%, due 05/08/22⁽¹⁾	$	900,000		873,700
United Kingdom—2.52%
Barclays Bank PLC, 4.500%, due 03/04/19⁽²⁾	EUR	190,000		249,711
4.750%, due 03/15/20^(2),(6)		900,000		1,023,817
5.750%, due 09/14/26	GBP	80,000		155,584
Lloyds TSB Bank PLC, 5.875%, due 06/20/14		400,000		783,069
National Westminster Bank PLC, 6.000%, due 01/21/10	EUR	335,000		466,716
6.500%, due 09/07/21	GBP	110,000		227,650
Travelers Insurance Co. Institutional Funding Ltd., 5.750%, due 12/06/11		100,000		196,034
				3,102,581
Total international corporate bonds (cost $13,025,601)				13,345,371
International asset-backed security—0.19%
United Kingdom—0.19%
Whinstone Capital Management Ltd., Series 1A, Class B2, 4.892%,due 10/25/44^(1),(2)(cost $207,205)	EUR	171,237		232,919
International collateralized debt obligations—2.81%
Cayman Islands—1.71%
Black Diamond CLO Ltd., Series 05-2X, Class IN, due 01/07/18^(3),(7)	$	100,000		99,000
Series 06-1A, Class D, 6.741%, due 04/29/19^(1),(2),(3)		250,000		242,425
Blackrock Senior Income Series Corp., Series 07-5A, Class SUB, due 08/13/19^(1),(3),(7)		100,000		100,000
Cratos CLO Ltd., Series 07-1A, Class D, 7.755%, due 05/19/21^(1),(2),(3)		250,000		235,000

	Face amount		Value
Cayman Islands—(concluded)
Credit-Based Asset Servicing and Securitization CBO Ltd., Series 18A, Class C, 7.360%, due 03/13/47^(1),(2),(3)	$	250,000	$	250,000
Galena CDO Ltd., Series II-AIRL, Class A1U, 6.025%, due 04/07/17^{(1),(2),(3),(5)}		300,000		299,940
Greywolf CLO Ltd., Series 07-1A, Class D, 6.888%, due 02/18/21^{(1),(2),(3),(5)}		250,000		234,425
Gulf Stream - Sextant CLO Ltd., Series 06-1A, Class D, 6.960%, due 08/21/20^(1),(2),(3)		180,000		172,620
Series 07-1A, Class SUB, due 06/17/21^(1),(3),(7)		100,000		100,000
Octans CDO Ltd., Series 06-2A, Class D, 8.660%, due 11/12/51^(1),(2),(3)		258,808		182,235
Stanfield Veyron CLO Ltd., Series 06-1A, Class D, 6.956%, due 07/15/18^(1),(2),(3)		200,000		192,440
				2,108,085
Ireland—0.18%
Valleriite CDO, Series 07-1A, Class A1EU, 4.875%, due 12/20/17^{(1),(2),(3),(5)}	EUR	160,000		216,552
Luxembourg—0.27%
GSC European CDO SA, Series I-RA, Class D, 5.595%, due 12/15/22^(1),(2),(3)	EUR	250,000		338,362
Netherlands—0.65%
Highlander Euro CDO, Series 06-2NA, Class D, 5.810%, due 12/14/22^{(1),(2),(3),(5)}	EUR	250,000		334,573
Queen Street CLO, Series 06-1A, Class C1, 4.589%, due 04/15/23^(1),(2),(3)		250,000		335,798
Series 07-1A, Class F, due 08/15/24^{(1),(3),(5),(7)}		100,000		132,638
				803,009
Total international collateralized debt obligations (cost $3,570,621)				3,466,008

131

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(concluded)
International bonds—(concluded)
International mortgage & agency debt security—0.20%
United Kingdom—0.20%
Granite Master Issuer PLC, Series 05-4, Class C4, 4.623%, due 12/20/54⁽²⁾(cost $217,329)	EUR	180,000	$	244,290
Foreign government bonds—36.88%
Belgium—4.17%
Government of Belgium, 5.750%, due 03/28/08	EUR	3,765,000		5,144,908
Canada—0.96%
Government of Canada, 6.000%, due 06/01/08	CAD	1,240,000		1,178,015
France—6.55%
Government of France, 3.500%, due 07/12/09	EUR	4,335,000		5,756,492
5.500%, due 04/25/29		1,555,000		2,315,497
				8,071,989
Germany—6.65%
Deutsche Bundesrepublik, 3.750%, due 01/04/17	EUR	500,000		634,890
4.000%, due 01/04/37		1,300,000		1,564,569
5.000%, due 07/04/12		330,000		455,616
6.250%, due 01/04/24		3,485,000		5,544,850
				8,199,925
Japan—9.85%
Government of Japan CPI Linked Bonds, 0.500%, due 12/10/14	JPY	1,179,000,000		9,148,753
Government of Japan, 1.900%, due 06/20/25		385,300,000		2,990,475
				12,139,228
Netherlands—1.30%
Government of Netherlands, 5.000%, due 07/15/11	EUR	1,165,000		1,602,786
Sweden—3.37%
Government of Sweden, 5.000%, due 01/28/09	SEK	28,070,000		4,151,891
United Kingdom—4.03%
UK Gilts, 4.000%, due 09/07/16	GBP	500,000		899,205
4.750%, due 09/07/15		1,475,000		2,808,575
4.750%, due 03/07/20		665,000		1,262,872
				4,970,652
Total foreign government bonds (cost $45,006,446)				45,459,394

	Face amount		Value
Sovereign/supranational bonds—6.92%
Council of Europe Development Bank, 5.625%, due 12/14/15	AUD	5,000,000	$	3,922,546
European Investment Bank, 5.750%, due 09/15/09		880,000		731,754
6.250%, due 04/15/14	GBP	690,000		1,404,143
Inter-American Development Bank, 1.900%, due 07/08/09	JPY	300,000,000		2,475,969
Total sovereign/supranational bonds (cost $8,294,490)				8,534,412
Total international bonds (cost $70,321,692)				71,282,394
Total bonds (cost $102,831,757)				102,901,341
	Shares
Investment company—11.29%
UBS U.S. Securitized Mortgage Relationship Fund⁽⁸⁾(cost $13,235,380)		1,090,494		13,913,833
Short-term investment—4.17%
Other—4.17%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(8),(9)(cost $5,138,362)5,138,362				5,138,362
Total investments—98.94% (cost $121,205,499)				121,953,536
Cash and other assets, less liabilities—1.06%				1,310,038
Net assets—100.00%			$	123,263,574

132

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $121,869,750; and net unrealized appreciation consisted of:

Gross unrealized appreciation	$	2,530,525
Gross unrealized depreciation		(2,446,739	)
Net unrealized appreciation	$	83,786

⁽²⁾ Floating rate security—The interest rates shown are the current rates as of June 30, 2007.

⁽³⁾ Security is illiquid. These securities amounted to $6,940,183 or 5.63% of net assets.

⁽⁴⁾ Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2007. Maturity date disclosed is the ultimate maturity date.

⁽⁵⁾ Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2007, the value of these securities amounted to $2,102,903 or 1.71% of net assets.

⁽⁶⁾ Perpetual bond security. The maturity date reflects the next call date.

⁽⁷⁾ This security is the equity tranche of a collateralized debt obligation. The Fund receives periodic payments, which may vary, from the issuer of this security.

⁽⁸⁾ Investment in affiliated mutual fund.

⁽⁹⁾ The rate shown reflects the yield at June 30, 2007.

CBO Collateralized bond obligations

CDO Collateralized debt obligations

CLO Collateralized loan obligations

CPI Consumer price index

GMAC General Motors Acceptance Corp.

GSAMP Goldman Sachs Mortgage Securities Corp.

TIPS Treasury inflation protected securities

Currency type abbreviations:

AUD Australian Dollar

CAD Canadian Dollar

EUR Euro

GBP Great Britain Pound

JPY Japanese Yen

SEK Swedish Krona

133

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

Restricted securities

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/2007 Market value		06/30/2007 Market value as a percentage of net assets
Ares VR CLO Ltd., Series 06-1A, Class D, 7.260%, due 02/24/18	02/16/06	$	139,300		0.12	%	$	133,980		0.11	%
Black Diamond CLO Ltd., Series 06-1A, Class D, 6.741%, due 04/29/19	12/22/06		250,000		0.20			242,425		0.20
Blackrock Senior Income Series Corp., Series 07-5A, Class SUB, due 08/13/19	06/22/07		100,000		0.08			100,000		0.08
Brentwood CLO Ltd., Series 06-1A, Class C, 6.956%, due 02/01/22	12/07/06		249,100		0.20			239,000		0.19
Commercial Industrial Finance Corp., Series 07-1A, Class A3L, 6.135%, due 05/10/21	01/26/07		200,000		0.16			197,060		0.16
Cratos CLO Ltd., Series 07-1A, Class D, 7.755%, due 05/19/21	04/30/07		250,000		0.20			235,000		0.19
Credit-Based Asset Servicing and Securitization CBO Ltd., Series 18A, Class C, 7.360%, due 03/13/47	03/06/07		250,000		0.20			250,000		0.20
Duke Funding Ltd., Series 06-11A, Class B1E, 6.286%, due 08/08/46	01/08/07		216,107		0.18			223,059		0.18
Galena CDO Ltd., Series II-AIRL, Class A1U, 6.025%, due 04/07/17	03/08/07		300,000		0.25			299,940		0.24
Global Leveraged Capital Credit Opportunity Fund, Series 06-1A, Class C, 6.358%, due 12/20/18	11/28/06		245,500		0.20			250,800		0.20
Greywolf CLO Ltd., Series 07-1A, Class D, 6.888%, due 02/18/21	12/08/06		250,000		0.20			234,425		0.19
GSC European CDO SA, Series I-RA, Class D, 5.595%, due 12/15/22	12/01/06		333,413		0.27			338,362		0.27
Gulf Stream - Sextant CLO Ltd., Series 06-1A, Class D, 6.960%, due 08/21/20	07/26/06		180,000		0.15			172,620		0.14
Series 07-1A, Class SUB, due 06/17/21	05/17/07		100,000		0.08			100,000		0.08
Halcyon Loan Investors CLO Ltd.,Series 06-1A, Class C, 6.810%, due 11/20/20	09/27/06		250,000		0.20			240,025		0.20
Hewett's Island CDO Ltd., Series 07-6A, Class D, 7.630%, due 06/09/19	05/09/07		247,467		0.20			247,467		0.20
Highland Credit Opportunities CDO Ltd., Series 06-1A, Class C, 6.206%, due 11/01/13	09/28/06		250,000		0.20			249,975		0.20
Highlander Euro CDO, Series 06-2NA, Class D, 5.810%, due 12/14/22	11/28/06		250,000		0.20			334,573		0.27
Longport Funding Ltd.,Series 07-1A, Class D, 11.598%, due 04/12/51	05/31/07		214,250		0.18			214,250		0.18
Octans CDO Ltd., Series 06-2A, Class D, 8.660%, due 11/12/51	09/20/06		270,000		0.22			182,235		0.15
Queen Street CLO, Series 06-1A, Class C1, 4.589%, due 04/15/23	12/21/06		323,782		0.26			335,798		0.27
Series 07-1A, Class F, due 08/15/24	05/18/07		132,413		0.11			132,638		0.11
Sagittarius CDO Ltd., Series 07-1A, Class C, 7.420%, due 12/10/51	02/13/07		250,000		0.20			225,000		0.18
Stanfield Veyron CLO Ltd., Series 06-1A, Class D, 6.956%, due 07/15/18	06/13/06		199,300		0.16			192,440		0.16

134

UBS Global Bond Fund—Portfolio of investments

June 30, 2007

Restricted securities—(concluded)

Security	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/2007 Market value		06/30/2007 Market value as a percentage of net assets
Taberna Preferred Funding Ltd., Series 06-5A, Class A3, 6.806%, due 08/05/36	05/26/06	$	195,000		0.16	%	$	192,880		0.16	%
Series 06-7A, Class A3L, 6.806%, due 02/05/37	09/15/06		319,865		0.26			317,823		0.26
Series 06-7A, Class B1L, 8.306%, due 02/05/37	09/15/06		196,000		0.16			190,000		0.15
Tricadia CDO Ltd., Series 05-4A, Class B1L, 8.610%, due 12/11/40	12/01/05		99,500		0.08			90,538		0.07
Valleriite CDO, Series 07-1A, Class A1EU, 4.875%, due 12/20/17	06/12/07		212,968		0.17			216,552		0.18
		$	6,473,965		5.25	%	$	6,378,865		5.17	%

Forward foreign currency contracts

UBS Global Bond Fund had the following open forward foreign currency contracts as of June 30, 2007:

	Contracts to deliver		In exchange for		Maturity dates	Unrealized appreciation/ (depreciation)
Australian Dollar		6,030,000	USD	4,973,393	11/05/07	$	(120,081	)
Canadian Dollar		1,175,000	USD	1,101,755	11/05/07		(4,098	)
Euro		6,115,000	USD	8,286,134	11/05/07		(22,283	)
Great Britain Pound		3,945,000	USD	7,786,759	11/05/07		(118,714	)
Japanese Yen		152,507,685	CHF	1,565,000	11/05/07		34,049
Japanese Yen		205,300,000	USD	1,702,984	11/05/07		8,501
United States Dollar		5,765,604	CHF	6,940,000	11/05/07		(32,676	)
United States Dollar		452,460	DKK	2,490,000	11/05/07		1,903
United States Dollar		12,368,515	JPY	1,451,000,000	11/05/07		(392,408	)
United States Dollar		959,866	SGD	1,440,000	11/05/07		(9,939	)
United States Dollar		2,736,019	TWD	91,000,000	08/20/07		42,527
Net unrealized depreciation on forward foreign currency contracts						$	(613,219	)

Currency type abbreviations:

CHF Swiss Franc

DKK Danish Krona

JPY Japanese Yen

SGD Singapore Dollar

TWD New Taiwan Dollar

USD United States Dollar

See accompanying notes to financial statements.
135

UBS High Yield Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS High Yield Fund (the "Fund") returned 8.60% (Class A shares returned 3.78% after the deduction of the maximum sales charge), while Class Y shares returned 8.98%. The Fund's benchmark, the Merrill Lynch US High Yield Cash Pay Constrained Index (the "Index"), returned 11.28% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 138; 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 underperformance was primarily due to issue selection. Our cautious stance hindered results in the early part of the reporting period but proved to be a sound strategy as the fiscal year unfolded.

Portfolio performance summary

What worked

• Our actively managed sector strategy benefited relative performance.

• The Fund began the reporting period overweight auto and suppliers relative to the Index. This position benefited relative performance as investors responded positively toward GMAC's spin-off from General Motors and restructuring news from Ford. As the fiscal year progressed, we took profits from this area to invest in more attractive opportunities, ending the period underweight automotives.

• The Fund maintained a significant overweight to publishing and printing relative to the benchmark. Overall, the sector performed well given its solid fundamentals and merger and acquisition activity. Issue selection within the sector further contributed to returns.

• Issue selection in gaming, as well as printing and publishing, contributed to relative returns.

• Our cautious approach to the market led us to search for attractive opportunities in sectors that we consider less sensitive to changes in interest rates. This led to positive results from the Fund's holdings in gaming, and printing and publishing.

• The metals sector rallied on the back of solid fundamentals and merger and acquisition activity, while cable television continued its rebound due to its stable operating environment.

What didn't work

• Our defensive duration strategy hindered relative performance during the period.

• In our opinion, the high yield market was overvalued during the reporting period. As a result, we implemented a more defensive strategy as the period progressed. This stance hurt relative performance over the period, but especially in the last six months as spreads (the difference between the yield paid on US Treasury bonds and higher risk securities) ground to near all-time lows and the market was, in our opinion, extremely overvalued. We believe that the combination of loose underwriting standards and a quest for yield by investors drove market returns into double digits for the fiscal year.

136

UBS High Yield Fund

• The Fund also suffered from exposure to a fixed rate second-lien deal which did not perform up to expectations. This BB-rated asset-backed security suffered losses as the delinquency rate of mortgage payments increased.

• In addition, the Fund had exposure to a homebuilder whose bonds did not perform well. However, the negative impact from this position was lessened somewhat when our large underweight to the sector produced positive results for the Fund.

Thomas Haag named lead portfolio manager for UBS High Yield Fund

Effective on July 1, 2007, John Penicook, the lead portfolio manager for UBS High Yield Fund, was replaced by Thomas Haag. In this role, Mr. Haag is responsible for the day-to-day management of the Fund's portfolio. Mr. Haag has access to members of the Fixed-income investment management team, each of whom is allocated a specified portion of the portfolio over which he or she has independent responsibility for research, security selection and portfolio construction. The team members also have access to additional portfolio managers and analysts within the various asset classes and markets in which the Fund invests. Mr. Haag, as lead portfolio manager and coordinator for management of the Fund, has responsibility for allocating the Fund's portfolio among the various managers and analysts, occasionally implementing trades on behalf of the team and reviewing the overall composition of the portfolio to ensure its compliance with its stated investment objectives and strategies. Information about Mr. Haag is provided below. Thomas Haag is an Executive Director and Senior Portfolio Manager at UBS Global Asset Management since 2007.

Prior to that, Mr. Haag was a portfolio manager of fixed income at Seneca Capital Management from 2002 to 2007.

Mr. Haag has been portfolio manager of the Fund since 2007.

137

UBS High Yield Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		8.60	%		10.43	%		5.66	%
maximum sales charge	Class B⁽³⁾		7.93			9.66			7.98
	Class C⁽⁴⁾		8.05			9.91			8.23
	Class Y⁽⁵⁾		8.98			10.77			6.23
After deducting maximum	Class A⁽²⁾		3.78			9.42			5.09
sales charge	Class B⁽³⁾		2.93			9.38			7.86
	Class C⁽⁴⁾		7.30			9.91			8.23
Merrill Lynch US High Yield Cash Pay Constrained Index⁽⁶⁾			11.28			11.22			6.33

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.37% and 1.20%; Class B—2.09% and 1.95%; Class C—1.86% and 1.70%; Class Y—1.06% and .95%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—1.20%; Class B—1.95%; Class C—1.70%; Class Y—.95%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS High Yield Fund Class A shares is 12/31/98. Inception date of Class B and Class C shares is 11/07/01. Inception date of Class Y shares and, for purposes of this illustration, the Merrill Lynch US High Yield Cash Pay Constrained Index is 09/30/97.

⁽²⁾ Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁶⁾ The Merrill Lynch US High Yield Cash Pay Constrained Index is the index of publicly placed non-convertible, coupon-bearing US domestic debt with a term to maturity of at least one year. The index is market weighted, so that larger bond issuers have a greater effect on the index's return. However, the representation of any single bond issue is restricted to a maximum of 2% of the total index.

138

UBS High Yield Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $5,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS High Yield Fund Class A shares (adjusted for 4.50% maximum sales charge) , Class Y shares, and the Merrill Lynch US High Yield Cash Pay Constrained Index, if you had invested $10,000 in Class A shares on December 31, 1998 or $5,000,000 in Class Y shares on September 30, 1997, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS High Yield Fund Class A vs. Merrill Lynch US High Yield Cash Pay Constrained Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 4.50%.

UBS High Yield Fund Class Y vs. Merrill Lynch US High Yield Cash Pay Constrained Index

Wealth value with dividends reinvested

139

UBS High Yield Fund

Top ten fixed income holdings (unaudited)

As of June 30, 2007

	Percentage of net assets
US Treasury Notes, 5.125%, due 05/15/16		6.2	%
Ford Motor Credit Co. LLC, 7.375%, due 10/28/09		2.5
Xerox Capital Trust I, 8.000%, due 02/01/27		1.6
Community Health Systems, Inc., 8.875%, due 07/15/15		1.5
AK Steel Corp., 7.750%, due 06/15/12		1.5
Citizens Communications Co., 9.000%, due 08/15/31		1.5
General Motors Corp., 7.200%, due 01/15/11		1.4
ArvinMeritor, Inc., 8.125%, due 09/15/15		1.4
GMAC LLC, 7.250%, due 03/02/11		1.4
Deluxe Corp., 5.000%, due 12/15/12		1.4
Total		20.4	%

140

UBS High Yield Fund

Industry diversification (unaudited)

As a percentage of net assets as of June 30, 2007

Bonds US bonds US corporate bonds
Aerospace/defense	1.88	%
Apparel/textiles	1.04
Automotive	3.47
Broadcasting	4.21
Building materials	2.64
Cable	3.13
Capital goods	0.51
Chemicals	1.47
Consumer products	2.99
Containers	1.13
Diversified financial services	3.90
Diversified media	1.04
Energy	4.00
Food & drug retailers	1.63
Food/beverage/tobacco	2.42
Gaming	7.76
Healthcare	3.40
Homebuilders/real estate	0.36
Metals/mining	1.99
Non-food & drug retailers	1.16
Paper	3.20
Printing & publishing	5.74
Railroads	0.70
Restaurants	1.29
Services	1.46
Steel	2.30
Technology	5.96
Telecommunications	5.03
Transportation ex. air/rail	0.71
Utilities	3.81
Total US corporate bonds	80.33
Asset-backed security	0.00	⁽¹⁾
US government obligation	6.16
Total US bonds	86.49
International bonds International corporate bonds
Capital goods	0.96	%
Chemicals	1.13
Containers	0.94
Energy	1.20
Gaming	0.14
Paper	3.63
Printing & publishing	1.05
Technology	0.28
Telecommunications	1.11
Total international corporate bonds	10.44
Total bonds	96.93
Equities	0.00
Warrants	0.00
Short-term investment	3.60
Total investments	100.53
Liabilities, in excess of cash and other assets	(0.53	)
Net assets	100.00	%

⁽¹⁾ Amount represents less than 0.005%.

141

UBS High Yield Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—96.93%
US bonds—86.49%
US corporate bonds—80.33%
AAC Group Holding Corp., 0.000%, due 10/01/12⁽¹⁾	$	1,100,000	$	990,000
Activant Solutions, Inc., 9.500%, due 05/01/16		200,000		196,500
AES Corp., 8.875%, due 02/15/11		500,000		526,875
Affinion Group, Inc., 10.125%, due 10/15/13		650,000		693,875
Ahern Rentals, Inc., 9.250%, due 08/15/13		775,000		784,687
Ainsworth Lumber Co., Ltd., 7.250%, due 10/01/12		285,000		219,450
AK Steel Corp., 7.750%, due 06/15/12		1,600,000		1,600,000
American Cellular Corp., Series B, 10.000%, due 08/01/11		301,000		315,298
American Rock Salt Co. LLC, 9.500%, due 03/15/14		900,000		910,125
AmeriQual Group LLC, 9.500%, due 04/01/12⁽²⁾		1,000,000		1,000,000
Aramark Corp., 8.856%, due 02/01/15^(2),(3)		500,000		507,500
ArvinMeritor, Inc., 8.125%, due 09/15/15		1,550,000		1,501,562
Ashtead Capital, Inc., 9.000%, due 08/15/16⁽²⁾		250,000		261,875
Atlas Pipeline Partners LP, 8.125%, due 12/15/15		900,000		897,750
Baker & Taylor, Inc., 11.500%, due 07/01/13⁽²⁾		400,000		418,000
Boise Cascade LLC, 7.125%, due 10/15/14		620,000		589,000
Brookstone Co., Inc., 12.000%, due 10/15/12		275,000		281,875
Buckeye Technologies, Inc., 8.000%, due 10/15/10		1,050,000		1,050,000
Cadmus Communications Corp., 8.375%, due 06/15/14		1,200,000		1,212,000
Caesars Entertainment, Inc., 8.125%, due 05/15/11		550,000		574,063
Carriage Services, Inc., 7.875%, due 01/15/15		465,000		470,813
Cellu Tissue Holdings, Inc., 9.750%, due 03/15/10		1,050,000		1,042,125
Century Aluminum Co., 7.500%, due 08/15/14		725,000		731,344
Cenveo Corp., 7.875%, due 12/01/13		700,000		686,000
Chukchansi Economic Development Authority, 8.000%, due 11/15/13⁽²⁾		550,000		561,000
Cincinnati Bell, Inc., 8.375%, due 01/15/14		1,000,000		1,010,000

	Face amount		Value
US corporate bonds—(continued)
Circus & Eldorado Joint Venture Corp., 10.125%, due 03/01/12	$	500,000	$	523,125
Citizens Communications Co., 9.000%, due 08/15/31		1,525,000		1,570,750
CMP Susquehanna Corp., 10.125%, due 05/15/14⁽²⁾		625,000		625,000
Coleman Cable, Inc., 9.875%, due 10/01/12⁽²⁾		450,000		470,250
Community Health Systems, Inc., 8.875%, due 07/15/15⁽²⁾		1,600,000		1,622,000
Comstock Resources, Inc., 6.875%, due 03/01/12		500,000		477,500
CPG International I, Inc., 12.130%, due 07/01/12⁽³⁾		800,000		820,000
CSC Holdings, Inc., Series B, 7.625%, due 04/01/11		500,000		496,250
Series B, 8.125%, due 08/15/09		875,000		892,500
Da-Lite Screen Co., Inc., 9.500%, due 05/15/11		650,000		682,500
Deluxe Corp., 5.000%, due 12/15/12		1,625,000		1,462,500
7.375%, due 06/01/15⁽²⁾		150,000		149,250
Dole Food Co., Inc., 8.875%, due 03/15/11		1,025,000		1,009,625
Dycom Industries, Inc., 8.125%, due 10/15/15		350,000		364,000
Dynegy Holdings, Inc., 8.375%, due 05/01/16		775,000		757,562
Easton-Bell Sports, Inc., 8.375%, due 10/01/12		750,000		738,750
Esterline Technologies Corp., 6.625%, due 03/01/17⁽²⁾		900,000		868,500
Ford Motor Credit Co. LLC, 7.375%, due 10/28/09		2,700,000		2,680,171
Freeport-McMoRan Copper & Gold, Inc., 8.375%, due 04/01/17		800,000		854,000
Freescale Semiconductor, Inc., 8.875%, due 12/15/14⁽²⁾		1,075,000		1,026,625
10.125%, due 12/15/16⁽²⁾		350,000		329,000
General Motors Corp., 7.200%, due 01/15/11		1,600,000		1,538,000
Giant Industries, Inc., 11.000%, due 05/15/12		606,000		639,330
Glatfelter, 7.125%, due 05/01/16		200,000		201,500
GMAC LLC, 7.250%, due 03/02/11		1,475,000		1,470,163
Gulfmark Offshore, Inc., 7.750%, due 07/15/14		750,000		757,500
Harland Clarke Holdings Corp., 9.500%, due 05/15/15⁽²⁾		450,000		432,000
Hawker Beechcraft Acquisition Co LLC, 8.500%, due 04/01/15⁽²⁾		250,000		258,125

142

UBS High Yield Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
US corporate bonds—(continued)
HCA, Inc., 9.125%, due 11/15/14⁽²⁾	$	250,000	$	262,813
9.250%, due 11/15/16⁽²⁾		250,000		266,250
Hercules, Inc., 6.500%, due 06/30/29		375,000		315,000
Inergy LP/ Inergy Finance Corp., 8.250%, due 03/01/16		875,000		899,062
Ingles Markets, Inc., 8.875%, due 12/01/11		1,175,000		1,217,594
Insight Communications Co. Inc., 12.250%, due 02/15/11⁽¹⁾		625,000		653,125
Interface, Inc., 10.375%, due 02/01/10		900,000		967,500
Jacobs Entertainment, Inc., 9.750%, due 06/15/14		1,100,000		1,142,625
Jefferson Smurfit Corp., 8.250%, due 10/01/12		500,000		496,250
Kansas City Southern Railway Co., 7.500%, due 06/15/09		750,000		744,375
Landry's Restaurants, Inc., Series B, 7.500%, due 12/15/14		900,000		873,000
Levi Strauss & Co., 12.250%, due 12/15/12		1,025,000		1,109,562
LIN Television Corp., Series B, 6.500%, due 05/15/13		1,175,000		1,148,562
Mediacom LLC, 9.500%, due 01/15/13		1,265,000		1,293,462
Mirant Americas Generation LLC, 8.300%, due 05/01/11		250,000		258,125
9.125%, due 05/01/31		500,000		547,500
Mirant North America LLC, 7.375%, due 12/31/13		1,150,000		1,175,875
Momentive Performance Materials, Inc., 9.750%, due 12/01/14⁽²⁾		275,000		277,750
MTR Gaming Group, Inc., Series B, 9.000%, due 06/01/12		425,000		447,313
Series B, 9.750%, due 04/01/10		750,000		780,000
Neenah Foundary Co., 9.500%, due 01/01/17		500,000		480,000
Nexstar Finance Holdings LLC, 0.000%, due 04/01/13⁽¹⁾		500,000		491,250
Nexstar Finance, Inc., 7.000%, due 01/15/14		500,000		495,000
NRG Energy, Inc., 7.375%, due 02/01/16		400,000		401,000
7.375%, due 01/15/17		650,000		652,438
Owens-Illinois, Inc., 7.500%, due 05/15/10		700,000		706,125
Pantry, Inc., 7.750%, due 02/15/14		975,000		950,625
Pathmark Stores, Inc., 8.750%, due 02/01/12		500,000		515,000

	Face amount		Value
US corporate bonds—(continued)
Pokagon Gaming Authority, 10.375%, due 06/15/14⁽²⁾	$	700,000	$	771,750
PolyOne Corp., 10.625%, due 05/15/10		468,000		491,400
Prestige Brands, Inc., 9.250%, due 04/15/12		750,000		768,750
Psychiatric Solutions, Inc., 7.750%, due 07/15/15		750,000		741,563
Qwest Communications International, Inc., 7.250%, due 02/15/11		1,050,000		1,057,875
Qwest Corp., 8.875%, due 03/15/12		350,000		377,125
R.H. Donnelley Corp., Series A, 8.875%, due 01/15/16		1,000,000		1,040,000
Realogy Corp., 10.500%, due 04/15/14⁽²⁾		400,000		381,000
Restaurant Co., 10.000%, due 10/01/13		525,000		502,688
Reynolds American, Inc., 7.250%, due 06/01/13		550,000		570,897
River Rock Entertainment Authority, 9.750%, due 11/01/11		650,000		682,500
San Pasqual Casino, 8.000%, due 09/15/13⁽²⁾		750,000		757,500
Sanmina-SCI Corp., 8.110%, due 06/15/14^(2),(3)		975,000		975,000
8.125%, due 03/01/16		750,000		697,500
Sequa Corp., 9.000%, due 08/01/09		850,000		877,625
Sheridan Group, Inc., 10.250%, due 08/15/11		975,000		1,023,750
Sinclair Broadcast Group, Inc., 8.000%, due 03/15/12		519,000		534,570
Stanadyne Corp., 10.000%, due 08/15/14		625,000		660,938
Terra Capital, Inc., Series B, 7.000%, due 02/01/17		500,000		482,500
Tube City IMS Corp., 9.750%, due 02/01/15⁽²⁾		525,000		538,125
Tunica-Biloxi Gaming Authority, 9.000%, due 11/15/15⁽²⁾		700,000		731,500
Unisys Corp., 8.000%, due 10/15/12		650,000		632,125
Universal Hospital Services, Inc., 8.500%, due 06/01/15^(2),(4)		130,000		128,700
8.759%, due 06/01/15^(2),(3)		130,000		130,000
Univision Communications, Inc., 7.850%, due 07/15/11		295,000		303,850
9.750%, due 03/15/15^(2),(4)		900,000		888,750
US Concrete, Inc., 8.375%, due 04/01/14		550,000		548,625
Verso Paper Holdings LLC, 9.125%, due 08/01/14⁽²⁾		300,000		309,750

143

UBS High Yield Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(concluded)
US bonds—(concluded)
US corporate bonds—(concluded)
Vertis, Inc., Series B, 10.875%, due 06/15/09	$	550,000	$	539,000
Wheeling Island Gaming, Inc., 10.125%, due 12/15/09		1,275,000		1,290,937
Whiting Petroleum Corp., 7.250%, due 05/01/12		1,150,000		1,092,500
Wind Acquisition Finance SA, 10.750%, due 12/01/15⁽²⁾		500,000		573,750
Windstream Corp., 8.625%, due 08/01/16		425,000		449,438
Xerox Capital Trust I, 8.000%, due 02/01/27		1,650,000		1,693,911
Total US corporate bonds (cost $85,057,072)				85,561,266
Asset-backed security—0.00%⁽⁵⁾
GSAMP Trust, Series 06-S2, Class B2, 7.000%, due 01/25/36^(1),(2),(6)(cost $58,009)		71,576		716
US government obligation—6.16%
US Treasury Notes, 5.125%, due 05/15/16 (cost $6,616,756)		6,525,000		6,561,703
Total US bonds (cost $91,731,837)				92,123,685
International bonds—10.44%
International corporate bonds—10.44%
Bermuda—1.42%
Intelsat Subsidiary Holding Co., Ltd., 8.625%, due 01/15/15		1,150,000		1,178,749
Petroplus Finance Ltd., 6.750%, due 05/01/14⁽²⁾		175,000		168,438
7.000%, due 05/01/17⁽²⁾		175,000		168,438
				1,515,625
Canada—5.78%
Abitibi-Consolidated, Inc., 6.950%, due 04/01/08		1,025,000		1,014,750
8.550%, due 08/01/10		800,000		764,000
Bowater Canada Finance Corp., 7.950%, due 11/15/11		1,300,000		1,223,625
Great Canadian Gaming Corp., 7.250%, due 02/15/15⁽²⁾		150,000		149,250
Millar Western Forest Products Ltd., 7.750%, due 11/15/13		1,000,000		861,250
Quebecor World Capital Corp., 8.750%, due 03/15/16⁽²⁾		1,150,000		1,132,750
Stone Container Finance, 7.375%, due 07/15/14		1,050,000		1,008,000
				6,153,625

	Face amount		Value
Cayman Islands—0.88%
Bluewater Finance Ltd., 10.250%, due 02/15/12	$	900,000	$	938,250
Netherlands—1.81%
Clondalkin Acquisition BV, 7.359%, due 12/15/13^(2),(3)		780,000		778,050
Montell Finance Co. BV, 8.100%, due 03/15/27⁽²⁾		675,000		614,250
NXP BV/NXP Funding LLC, 7.875%, due 10/15/14		300,000		295,500
Sensata Technologies BV 8.000%, due 05/01/14		250,000		241,250
				1,929,050
United Kingdom—0.55%
Ineos Group Holdings PLC, 8.500%, due 02/15/16⁽²⁾		600,000		586,500
Total international corporate bonds (cost $11,360,594)				11,123,050
Total bonds (cost $103,092,431)				103,246,735
	Shares
Equities—0.00%
US equities—0.00%
Aerospace & defense—0.00%
Sabreliner Corp.*^(6),(7)		8,400		0
Hotels, restaurants & leisure—0.00%
American Restaurant Group, Inc.*^(6),(7)		972		0
Total US equities (cost $153,000)				0
	Number of warrants
Warrants—0.00%
Dayton Superior Corp., expires 06/15/09*^(2),(6),(7)		225		0
Knology, Inc., expires 10/15/07*^(2),(6),(7)		16,995		0
Pathnet, Inc., expires 04/15/08*^(6),(7)		6,275		0
Pliant Corp., expires 06/01/10*^(2),(6),(7)		1		0
Total warrants (cost $10)				0

144

UBS High Yield Fund—Portfolio of investments

June 30, 2007

	Shares		Value
Short-term investment—3.60%
Other—3.60%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(8),(9)(cost $3,832,781)		3,832,781	$	3,832,781
Total investments—100.53% (cost $107,078,222)*				107,079,516
Liabilities, in excess of cash and other assets—(0.53)%				(565,170	)
Net assets—100.00%			$	106,514,346

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $107,084,610; and net unrealized depreciation consisted of:

Gross unrealized appreciation	$	1,406,619
Gross unrealized depreciation		(1,411,713	)
Net unrealized depreciation	$	(5,094	)

* Non-income producing security.

⁽¹⁾ Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2007. Maturity date disclosed is the ultimate maturity date.

⁽³⁾ Floating rate security—The interest rate shown is the current rate as of June 30, 2007.

⁽⁴⁾ PIK—Payment-in-kind security. Income may be paid in cash or additional notes, at the discretion of the issuer.

⁽⁵⁾ Amount represents less than 0.005%.

⁽⁶⁾ Security is illiquid. At June 30, 2007, the value of these securities amounted to $716 or 0.00% of net assets.

⁽⁷⁾ Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2007, the value of these securities amounted to $0 or 0.00% of net assets.

⁽⁸⁾ Investment in affiliated mutual fund.

⁽⁹⁾ The rate shown reflects the yield at June 30, 2007.

GMAC General Motors Acceptance Corp.

GSAMP Goldman Sachs Mortgage Securities Corp.

Restricted securities

Securities	Acquisition dates	Acquisition cost		Acquisition cost as a percentage of net assets			06/30/07 Market value		06/30/07 Market value as a percentage of net assets
Dayton Superior Corp., expires 06/15/09	08/07/00	$	0		0.00	%	$	0		0.00	%
GSAMP Trust, 7.000%, due 01/25/36	04/10/06		57,887		0.05			716		0.00	⁽¹⁾
Knology, Inc., expires 10/15/07	06/08/98		0		0.00			0		0.00
Pliant Corp., expires 06/01/10	10/20/00		0		0.00			0		0.00
		$	57,887		0.05	%	$	716		0.00	%

⁽¹⁾ Amount represents less than 0.005%.

See accompanying notes to financial statements.
145

UBS U.S. Bond Fund

Portfolio performance

For the 12 months ended June 30, 2007, Class A shares of UBS U.S. Bond Fund (the "Fund") returned 5.39% (Class A shares returned 0.69% after the deduction of the maximum sales charge), while Class Y shares returned 5.76%. The Fund's benchmark, the Lehman Brothers US Aggregate Bond Index (the "Index"), returned 6.12% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 148; 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 underperformance was primarily due to issue selection in the asset-backed securities sector.

Portfolio performance summary

What worked

• Issue selection in mortgage-backed securities and investment grade corporate bonds contributed to the Fund's relative performance.

• The Fund was underweight the mortgage-backed sector overall, in particular avoiding generic mortgage bonds (30-year fixed rate with 5.0% and 5.5% coupons). Instead, we focused on securities that we believed had better characteristics, including 15-year seasoned (2003 and earlier) mortgage bonds and hybrid adjustable-rate mortgages (ARMs).

Hybrid ARMs offer a blend of fixed rate and adjustable rate characteristics in one single loan; for example, a 5/1 hybrid ARM would refer to a 5-year fixed period and a subsequent 1-year rate adjustment. Among ARMs, we found value in "last cash flow" hybrid ARMS, 5/1 and 7/1 hybrid ARMs and subordinated fixed-rate and hybrid ARMs.

• Within investment grade corporate bonds, we favored shorter-dated maturities, targeting bonds in the three- to seven-year area of the yield curve. We anticipate maintaining this position for the near-term, as we believe we would not be appropriately compensated for taking general market risk.

• Sector allocation strategy added to the Fund's relative performance, due primarily to positioning in the securitized sectors.

• An overweight exposure to commercial mortgage-backed securities (CMBS) and an underweight exposure to mortgage-backed securities (MBS), driven by security selection in these areas, helped the Fund's relative performance. Within CMBS and asset-backed securities (ABS), the Fund held a slightly longer-than-Index duration, paying particular attention to the five- to seven-year fixed-rate CMBS.

• The Fund's underweight to spread sectors also enhanced relative performance, including a less-than-Index exposure to corporate bonds. Corporate bonds represented one of the Fund's largest sector underweights, as we continued to believe the market was not appropriately compensating investors for the associated risk. As credit spreads widened in June, the Fund's underweight positions to spread sectors contributed to performance.

• The Fund's defensive duration strategy versus the benchmark produced flat results over the 12-month period.

146

UBS U.S. Bond Fund

• Conflicting economic data and shifting investor sentiment led us to maintain a defensive duration strategy for much of the reporting period. A defensive strategy entails holding a shorter-then-Index duration so that the portfolio is less sensitive to increasing interest rates (which drive bond prices down).

Our strategy hindered relative returns early in the reporting cycle, as well as during the flight to quality in February 2007 that was triggered by the unexpected selloff in Chinese equities. However, beginning in March, US Treasury yields started recovering, and then further accelerated in May and June. This contributed to performance given our shorter-than-benchmark duration. We have since extended the Fund's duration, ending the Fund's fiscal year in line with the Index. This neutral position reflects our current belief that market sentiment and pricing have moved within our fair value estimates.

• An opportunistic allocation to emerging markets debt produced positive results over the period, driven by strong economic growth in Latin American, Eastern European and Asian countries, including Argentina, Turkey and Mexico.

What didn't work

• Issue selection in ABS detracted from performance. While we avoided direct investments in subprime securities, the Fund's performance was hurt by disappointing returns from its investment in the Alt-A market. Alt-A loans are designed for people with good credit, who want to borrow without verifying their income. In the wake of the deterioration of the subprime market, the Alt-A market came under scrutiny as concerns were raised about the creditworthiness of borrowers and the standards of the lenders of these securities. Even higher-quality home equity ABS securities were affected as investors—surprised by the number and magnitude of defaults in the subprime mortgage market—grew increasingly concerned.

• Investors were surprised by the number and magnitude of defaults in the subprime mortgage market. They responded by pulling out of subprime and related areas that they considered to be of lower quality. In particular, the Fund's performance was hurt by disappointing returns from our investments in the Alt-A market. Alt-A loans are not subprime mortgages; they are loans designed for people with good credit who wanted to borrow without verifying their income. The Alt-A market has grown dramatically in recent years, raising concerns about the creditworthiness of borrowers and the standards of the lenders.

• The portfolio's allocation to high yield securities detracted slightly from the Fund's return. In our opinion, the high yield market was overvalued, so we entered the period with a defensive strategy. This stance hurt relative performance in the first half of the year, when solid corporate results and a pause in the Federal Reserve Board's tightening cycle sparked a strong rally.

147

UBS U.S. Bond Fund

Average annual total return (unaudited)

		1 year ended 06/30/07			5 years ended 06/30/07			10 years ended 06/30/07			Inception⁽¹⁾to 06/30/07
Before deducting	Class A⁽²⁾		5.39	%		4.02	%		5.52	%		5.52	%
maximum sales charge	Class B⁽³⁾		4.70			3.23			N/A			2.99
	Class C⁽⁴⁾		4.98			3.51			N/A			3.23
	Class Y⁽⁵⁾		5.76			4.28			5.78			5.90
After deducting maximum	Class A⁽²⁾		0.69			3.05			5.03			5.03
sales charge	Class B⁽³⁾		-0.30			2.88			N/A			2.84
	Class C⁽⁴⁾		4.23			3.51			N/A			3.23
Lehman Brothers US Aggregate Bond Index⁽⁶⁾			6.12			4.48			6.01			6.11

The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2006 prospectuses were as follows: Class A—1.07% and .85%; Class B—1.83% and 1.60%; Class C—1.56% and 1.35%; Class Y—.82% and .60%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund and the Advisor have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses to the extent necessary so the Fund's operating expenses, through the fiscal year ending June 30, 2007, do not exceed Class A—.85%; Class B—1.60%; Class C—1.35%; Class Y—.60%. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund.

⁽¹⁾ Inception date of UBS U.S. Bond Fund Class A shares is 06/30/97. Inception dates of Class B and Class C shares are 11/06/01 and 11/08/01, respectively. Inception date of Class Y shares and the Index is 08/31/95.

⁽²⁾ Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.

⁽⁴⁾ Maximum contingent deferred sales charge for Class C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees.

⁽⁶⁾ The Lehman Brothers US Aggregate Bond Index is an unmanaged index of investment grade fixed rate debt issues, including corporate, government, treasury, mortgage-backed and asset-backed securities with maturities of at least one year.

148

UBS U.S. Bond Fund

Illustration of an assumed investment of $10,000 in Class A shares (adjusted for maximum sales

charge) and $10,000,000 in Class Y shares (unaudited)

The following two charts show the growth in the value of an investment in UBS U.S. Bond Fund Class A shares (adjusted for 4.50% maximum sales charge), Class Y shares and the Lehman Brothers US Aggregate Bond Index, if you had invested $10,000 in Class A shares on June 30, 1997 or $10,000,000 in Class Y shares on August 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 2007. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.

UBS U.S. Bond Fund Class A vs. Lehman Brothers US Aggregate Bond Index

Wealth value with dividends reinvested

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 4.50%.

UBS U.S. Bond Fund Class Y vs. Lehman Brothers US Aggregate Bond Index

Wealth value with dividends reinvested

149

UBS U.S. Bond Fund

Top ten fixed income holdings (unaudited)⁽¹⁾

As of June 30, 2007

	Percentage of net assets
US Treasury Notes, 4.500%, due 03/31/12		8.0	%
US Treasury Notes, 4.625%, due 11/15/16		3.7
US Treasury Bonds, 6.250%, due 05/15/30		3.3
US Treasury Bonds, 6.250%, due 08/15/23		3.3
US Treasury Bonds, 4.750%, due 02/15/37		2.6
US Treasury Bonds, 8.750%, due 05/15/17		2.4
Federal National Mortgage Association, 5.500%, due 03/15/11		1.4
Ford Motor Credit Co. LLC, 5.800%, due 01/12/09		1.2
Long Beach Mortgage Loan Trust, Series 06-A, Class A1, 5.410%, due 05/25/36		1.0
US Treasury Notes, 4.750%, due 12/31/08		0.8
Total		27.7	%

⁽¹⁾ Figures represent the direct investments of the UBS U.S. Bond Fund. Figures could be different if a breakdown of the underlying investment companies was included.

150

UBS U.S. Bond Fund

Industry diversification (unaudited)⁽¹⁾

As a percentage of net assets as of June 30, 2007

Bonds US bonds US corporate bonds
Automobiles	0.27	%
Beverages	0.07
Capital markets	0.63
Chemicals	0.11
Commercial banks	0.89
Commercial services & supplies	0.05
Consumer finance	1.90
Diversified financial services	1.66
Diversified telecommunication services	0.32
Electric utilities	0.16
Insurance	0.07
IT services	0.08
Media	0.23
Multi-utilities	0.06
Oil, gas & consumable fuels	0.14
Personal products	0.08
Pharmaceuticals	0.09
Real estate investment trusts (REITs)	0.05
Road & rail	0.23
Wireless telecommunication services	0.08
Total US corporate bonds	7.17
Asset-backed securities	2.67
Collateralized debt obligation	0.20
Commercial mortgage-backed securities	4.37
Mortgage & agency debt securities	19.74
Stripped mortgage-backed security	0.00	⁽²⁾
US government obligations	24.19
Total US bonds	58.34
International bonds
Foreign government bond	0.43
International corporate bonds
Commercial banks	0.11	%
Diversified telecommunication services	0.06
Total international corporate bonds	0.17
Total international bonds	0.60
Total bonds	58.94
Investment companies
UBS Corporate Bond Relationship Fund	1.63
UBS Opportunistic Emerging Markets Debt Relationship Fund	2.07
UBS Opportunistic High Yield Relationship Fund	6.61
UBS U.S. Securitized Mortgage Relationship Fund	27.47
Total investment companies	37.78
Short-term investments	2.47
Options purchased	0.41
Total investments	99.60
Cash and other assets, less liabilities	0.40
Net assets	100.00	%

⁽¹⁾ Figures represent the industry breakdown of direct investments of the UBS U.S. Bond Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification was included.

⁽²⁾ Amount represents less than 0.005%.

151

UBS U.S. Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—58.94%
US bonds—58.34%
US corporate bonds—7.17%
AT&T Corp., 8.000%, due 11/15/31	$	175,000	$	208,001
AvalonBay Communities, Inc., 7.500%, due 08/01/09		95,000		98,997
Avon Products, Inc., 7.150%, due 11/15/09		150,000		155,539
Bank of America Corp., 5.420%, due 03/15/17		400,000		383,466
Bank One Corp., 7.875%, due 08/01/10		345,000		368,389
BellSouth Corp., 6.550%, due 06/15/34		125,000		124,789
Burlington Northern Santa Fe Corp., 7.082%, due 05/13/29		200,000		212,732
Capital One Financial Corp., 5.500%, due 06/01/15		170,000		164,095
Citigroup, Inc., 5.625%, due 08/27/12		975,000		975,208
Comcast Cable Communications LLC, 6.750%, due 01/30/11		425,000		439,899
Computer Sciences Corp., 3.500%, due 04/15/08		165,000		162,438
Coors Brewing Co., 6.375%, due 05/15/12		135,000		138,235
Credit Suisse First Boston USA, Inc., 6.500%, due 01/15/12		180,000		186,440
DaimlerChrysler N.A. Holding Corp., 4.050%, due 06/04/08		530,000		522,565
Devon Financing Corp. ULC, 6.875%, due 09/30/11		260,000		271,423
Dominion Resources, Inc., Series B, 5.950%, due 06/15/35		130,000		121,897
Erac USA Finance Co., 8.000%, due 01/15/11⁽¹⁾		200,000		213,443
Ford Motor Credit Co. LLC, 5.800%, due 01/12/09		2,325,000		2,275,831
General Electric Capital Corp., 6.000%, due 06/15/12		1,145,000		1,165,421
6.750%, due 03/15/32		140,000		151,895
GMAC LLC, 6.875%, due 09/15/11		510,000		501,663
Goldman Sachs Group, Inc., 6.875%, due 01/15/11		500,000		520,078
HSBC Bank USA N.A., 5.625%, due 08/15/35		265,000		243,505
HSBC Finance Corp., 6.750%, due 05/15/11		295,000		306,218
ICI Wilmington, Inc., 4.375%, due 12/01/08		220,000		216,293
International Lease Finance Corp., 3.500%, due 04/01/09		300,000		290,598

	Face amount		Value
US corporate bonds—(concluded)
John Deere Capital Corp., 7.000%, due 03/15/12	$	145,000	$	153,307
JPMorgan Chase & Co., 6.750%, due 02/01/11		225,000		233,765
MBNA Corp., 7.500%, due 03/15/12		125,000		134,641
Metlife, Inc., 5.000%, due 11/24/13		145,000		139,407
Morgan Stanley, 6.750%, due 04/15/11		680,000		705,042
New Cingular Wireless Services, Inc., 8.750%, due 03/01/31		130,000		162,061
PPL Energy Supply LLC, Series A, 6.400%, due 11/01/11		200,000		203,137
Sprint Capital Corp., 8.750%, due 03/15/32		200,000		224,626
US Bank N.A., 6.375%, due 08/01/11		240,000		247,236
Verizon New York, Inc., Series B, 7.375%, due 04/01/32		70,000		73,625
Wachovia Bank N.A., 7.800%, due 08/18/10		345,000		366,211
Waste Management, Inc., 7.375%, due 08/01/10		100,000		104,771
Wells Fargo Bank N.A., 6.450%, due 02/01/11		480,000		494,925
Wyeth, 5.500%, due 03/15/13		170,000		168,223
Xcel Energy, Inc., 7.000%, due 12/01/10		100,000		104,279
Total US corporate bonds (cost $14,025,025)				13,934,314
Asset-backed securities—2.67%
Conseco Finance, Series 01-D, Class M2, 7.070%, due 11/15/32⁽²⁾		465,340		404,378
Countrywide Asset-Backed Certificates, Series 04-SD1, Class A1, 5.660%, due 06/25/33^(1),(2)		84,433		84,670
Fieldstone Mortgage Investment Corp., Series 06-S1, Class A, 5.540%, due 01/25/37^(1),(2)		435,083		429,821
Green Tree Financial Corp., Series 99-3, Class A5, 6.160%, due 02/01/31		3,476		3,476
Series 94-5, Class A5, 8.300%, due 11/15/19		91,173		94,507
GSAMP Trust, Series 06-S3, Class A2, 5.769%, due 05/25/36^(3),(4)		1,450,000		1,160,000
Series 06-S3, Class A1, 6.085%, due 05/25/36⁽⁴⁾		997,734		980,274

152

UBS U.S. Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Asset-backed securities—(concluded)
Long Beach Mortgage Loan Trust, Series 06-A, Class A1, 5.410%, due 05/25/36⁽²⁾	$	1,925,948	$	1,882,157
Structured Asset Securities Corp., Series 03-AL2, Class A, 3.357%, due 01/25/31⁽¹⁾		177,777		161,910
Total asset-backed securities (cost $5,586,591)				5,201,193
Collateralized debt obligation—0.20%
Abacus Ltd., Series 06-10A, Class H, 6.820%, due 10/30/45^{(1),(2),(3),(5)}(cost $400,000)		400,000		388,000
Commercial mortgage-backed securities—4.37%
Banc of America Commercial Mortgage, Inc., Series 02-PB2, Class C, 6.349%, due 06/11/35		745,000		762,816
Bear Stearns Commercial Mortgage Securities, Series 00-WF2, Class A2, 7.320%, due 10/15/32		200,000		209,099
Series 00-WF1, Class A2, 7.780%, due 02/15/32		1,215,000		1,269,632
DLJ Commercial Mortgage Corp., Series 00-CKP1, Class A1B, 7.180%, due 11/10/33		785,117		817,122
First Union Commercial Mortgage Securities, Inc., Series 97-C2, Class A3, 6.650%, due 11/18/29		98,459		98,379
Host Marriott Pool Trust, Series 99-HMTA, Class A, 6.980%, due 08/03/15⁽¹⁾		127,690		129,759
Series 99-HMTA, Class C, 7.730%, due 08/03/15⁽¹⁾		360,000		375,164
Series 99-HMTA, Class D, 7.970%, due 08/03/15⁽¹⁾		220,000		230,190
Series 99-HMTA, Class E, 8.070%, due 08/03/15⁽¹⁾		220,000		230,574
Mach One Trust Commercial Mortgage-Backed, Series 04-1A, Class A1, 3.890%, due 05/28/40⁽¹⁾		323,105		319,978
Merrill Lynch Mortgage Trust, Series 05-LC1, Class A4, 5.291%, due 01/12/44⁽²⁾		1,475,000		1,422,772
PNC Mortgage Acceptance Corp., Series 00-C1, Class A2, 7.610%, due 02/15/10		833,268		864,003

	Face amount		Value
Commercial mortgage-backed securities—(concluded)
Prudential Mortgage Capital Funding LLC, Series 01-ROCK, Class A2, 6.605%, due 05/10/34	$	115,000	$	118,688
Salomon Brothers Mortgage Securities VII, Inc., Series 00-C1, Class A2, 7.520%, due 12/18/09		1,250,000		1,296,710
TIAA Retail Commercial Trust, Series 01-C1A, Class A2, 6.300%, due 06/19/21⁽¹⁾		345,032		346,205
Total commercial mortgage-backed securities (cost $8,778,323)				8,491,091
Mortgage & agency debt securities—19.74%
Countrywide Alternative Loan Trust, Series 04-J8, Class 2A1, 7.000%, due 08/25/34		183,891		187,206
Countrywide Home Loan Mortgage Pass-Through Trust, Series 06-HYB1, Class 1A1, 5.363%, due 03/20/36⁽²⁾		966,614		957,487
Credit Suisse Mortgage Capital Certificates, Series 06-2, Class 3A1, 6.500%, due 03/25/36		1,111,839		1,119,910
CS First Boston Mortgage Securities Corp., Series 05-9, Class 3A1, 6.000%, due 10/25/35		908,312		902,661
Series 05-11, Class 1A1, 6.500%, due 12/25/35		938,931		941,425
Series 05-12, Class 1A1, 6.500%, due 01/25/36		1,101,668		1,110,356
Series 03-8, Class 5A1, 6.500%, due 04/25/33		121,956		122,034
Series 02-10, Class 2A1, 7.500%, due 05/25/32		101,537		101,970
Federal Home Loan Bank System, 5.500%, due 08/13/14		1,535,000		1,545,518
Federal Home Loan Mortgage Corp., 5.300%, due 02/27/09		760,000		758,887
5.600%, due 10/17/13		1,265,000		1,257,538
5.750%, due 06/27/16		815,000		820,681
Federal Home Loan Mortgage Corp. Gold Pools, # E93969, 5.500%, due 01/01/18		358,007		353,892
# E01345, 5.500%, due 04/01/18		323,878		320,078
# G11429, 6.000%, due 12/01/17		269,571		271,110

153

UBS U.S. Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(continued)
US bonds—(continued)
Mortgage & agency debt securities—(continued)
# C63008, 6.000%, due 01/01/32	$	966,546	$	964,260
# G01038, 6.500%, due 06/01/29		50,013		51,091
# G01717, 6.500%, due 11/01/29		326,587		333,420
# C64678, 6.500%, due 03/01/32		52,414		53,477
# G01449, 7.000%, due 07/01/32		724,963		749,500
Federal Home Loan Mortgage Corp. REMICs, Series 2532, Class PD, 5.500%, due 06/15/26		167,861		167,529
Series 2297, Class NB, 6.000%, due 03/15/16		357,886		360,871
Series 2148, Class ZA, 6.000%, due 04/15/29		516,531		512,591
Series 2426, Class GH, 6.000%, due 08/15/30		146,364		146,709
Series 1595, Class D, 7.000%, due 10/15/13		118,026		120,536
Federal National Mortgage Association, 4.250%, due 08/15/10		1,450,000		1,410,730
5.200%, due 11/08/10		1,555,000		1,549,657
5.500%, due 03/15/11		2,770,000		2,793,628
5.500%, due 01/23/12		1,275,000		1,271,897
6.070%, due 05/12/16		800,000		802,026
6.250%, due 02/01/11		1,370,000		1,415,946
Federal National Mortgage Association Grantor Trust, Series 00-T6, Class A1, 7.500%, due 06/25/30		381,230		393,163
Federal National Mortgage Association Pools, # 735661, 5.500%, due 12/01/17		952,150		941,538
# 255047, 5.500%, due 01/01/24		1,130,954		1,105,760
# 357501, 5.500%, due 02/01/24		1,018,461		995,104
# 576764, 5.500%, due 09/01/24		285,250		277,830
# 688066, 5.500%, due 03/01/33		497,406		482,038
# 688314, 5.500%, due 03/01/33		582,829		564,699
# 802481, 5.500%, due 11/01/34		877,971		850,039
# 545015, 6.000%, due 06/01/16		770,183		774,776

	Face amount		Value
Mortgage & agency debt securities—(continued)
# 254798, 6.000%, due 06/01/23	$	185,352	$	185,800
# 408267, 6.000%, due 03/01/28		58,036		57,849
# 252339, 6.000%, due 03/01/29		66,195		65,981
# 323715, 6.000%, due 05/01/29		60,396		60,201
# 522564, 6.000%, due 07/01/29		211,100		210,466
# 676733, 6.000%, due 01/01/33		436,506		434,482
# 708631, 6.000%, due 06/01/33		70,810		70,395
# 253824, 7.000%, due 03/01/31		14,587		15,111
# 619809, 7.000%, due 11/01/31		84,976		88,073
Federal National Mortgage Association Whole Loan, Series 04-W12, Class 1A3, 7.000%, due 07/25/44		441,765		453,494
Series 04-W15, Class 1A3, 7.000%, due 08/25/44		452,826		465,732
Series 95-W3, Class A, 9.000%, due 04/25/25		4,896		5,291
First Horizon Alternative Mortgage Securities Trust, Series 04-AA3, Class A1, 5.303%, due 09/25/34⁽²⁾		476,485		473,580
First Horizon Asset Securities, Inc., Series 04-FL1, Class 1A1, 5.590%, due 02/25/35⁽²⁾		63,692		63,673
Government National Mortgage Association Pools, # 2687, 6.000%, due 12/20/28		70,217		70,087
# 2753, 6.000%, due 05/20/29		321,769		321,127
# 2794, 6.000%, due 08/20/29		233,397		232,932
# 80329, 6.125%, due 10/20/29⁽²⁾		105,079		105,864
# 780204, 7.000%, due 07/15/25		6,003		6,261
GSR Mortgage Loan Trust, Series 05-4F, Class 3A1, 6.500%, due 04/25/20		693,473		707,776
IndyMac INDX Mortgage Loan Trust, Series 05-AR3, Class B1, 5.412%, due 04/25/35⁽²⁾		1,372,985		1,355,525

154

UBS U.S. Bond Fund—Portfolio of investments

June 30, 2007

	Face amount		Value
Bonds—(concluded)
US bonds—(concluded)
Mortgage & agency debt securities—(concluded)
Morgan Stanley Mortgage Loan Trust, Series 06-1AR, Class 2A, 5.948%, due 02/25/36⁽²⁾	$	1,173,457	$	1,183,269
Series 04-4, Class 2A, 6.408%, due 09/25/34⁽²⁾		455,121		457,183
Residential Asset Securitization Trust, Series 04-IP2, Class B1, 5.420%, due 12/25/34⁽²⁾		1,028,375		1,020,895
Structured Asset Securities Corp., Series 04-20, Class 4A1, 6.000%, due 11/25/34		430,521		428,670
Total mortgage & agency debt securities (cost $39,027,824)				38,399,285
Stripped mortgage-backed security—0.00%⁽⁶⁾
MLCC Mortgage Investors, Inc., Series 03-D, Class XA1, IO, 1.000%, due 08/25/28^(2),(3)(cost $3,447)		3,436,149		263
US government obligations—24.19%
US Treasury Bonds, 4.750%, due 02/15/37		5,360,000		5,053,896
6.250%, due 08/15/23		5,710,000		6,340,333
6.250%, due 05/15/30		5,645,000		6,452,060
8.750%, due 05/15/17		3,615,000		4,631,719
US Treasury Notes, 4.500%, due 03/31/12		15,795,000		15,506,251
4.625%, due 11/15/16		7,385,000		7,157,106
4.750%, due 12/31/08		1,645,000		1,639,988
4.750%, due 05/15/14		270,000		266,625
Total US government obligations (cost $47,518,261)				47,047,978
Total US bonds (cost $115,339,471)				113,462,124
International bonds—0.60%
Foreign government bond—0.43%
Egypt—0.43%
Egypt Government Agency for International Development, 4.450%, due 09/15/15 (cost $867,285)		895,000		839,214
International corporate bonds—0.17%
Luxembourg—0.06%
Telecom Italia Capital SA, 5.250%, due 11/15/13		120,000		114,345

	Face amount		Value
United Kingdom—0.11%
Abbey National PLC, 7.950%, due 10/26/29	$	105,000	$	126,122
Royal Bank of Scotland Group PLC, 9.118%, due 03/31/10⁽⁷⁾		70,000		76,101
				202,223
Total international corporate bonds (cost $330,415)				316,568
Total international bonds (cost $1,197,700)				1,155,782
Total bonds (cost $116,537,171)				114,617,906
	Shares
Investment companies—37.78%
UBS Corporate Bond Relationship Fund⁽⁸⁾		266,105		3,171,063
UBS Opportunistic Emerging Markets Debt Relationship Fund⁽⁸⁾		337,846		4,035,065
UBS Opportunistic High Yield Relationship Fund⁽⁸⁾		957,291		12,857,378
UBS U.S. Securitized Mortgage Relationship Fund⁽⁸⁾		4,187,087		53,423,874
Total investment companies (cost $71,287,781)				73,487,380
Short-term investments—2.47%
Other—2.35%
UBS Supplementary Trust— U.S. Cash Management Prime Fund, 5.37%^(8),(9)(cost $4,566,581)		4,566,581		4,566,581
	Face amount
US government obligation—0.12%
US Treasury Bills, 4.81%, due 12/20/07^(10),(11)(cost $244,386)	$	250,000		244,395
Total short-term investments (cost $4,810,967)				4,810,976
	Number of contracts
Options purchased—0.41%
Call options—0.11%
5 Year US Treasury Notes Futures, strike @ 104.50, expires August 2007*⁽¹¹⁾		598		196,219
strike @ 106.00, expires August 2007*⁽¹¹⁾		204		9,563
				205,782

155

UBS U.S. Bond Fund—Portfolio of investments

June 30, 2007

	Number of contracts		Value
Options purchased—(concluded)
Put options—0.30%
90 Day Euro Futures, strike @ 94.75, expires December 2007*⁽¹¹⁾		443	$	143,975
90 Day Sterling Interest Rate Futures, strike @ GBP 93.75, expires March 2008*⁽¹¹⁾		736		286,354
5 Year US Treasury Notes Futures, strike @ 103.50, expires August 2007*⁽¹¹⁾		598		158,844
				589,173
Total options purchased (cost $884,421)				794,955
Total investments—99.60% (cost $193,520,340)				193,711,217
Cash and other assets, less liabilities—0.40%				783,734
Net assets—100.00%			$	194,494,951

Notes to portfolio of investments

Aggregate cost for federal income tax purposes was $195,179,661; and net unrealized depreciation consisted of:

Gross unrealized appreciation	$	1,713,940
Gross unrealized depreciation		(3,182,384	)
Net unrealized depreciation	$	(1,468,444	)

* Non-income producing security.

⁽²⁾ Floating rate security—The interest rate shown is the current rate as of June 30, 2007.

⁽³⁾ Security is illiquid. At June 30, 2007, the value of these securities amounted to $1,548,263 or 0.80% of net assets.

⁽⁴⁾ Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2007. Maturity date disclosed is the ultimate maturity date.

⁽⁵⁾ Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2007, the value of these securities amounted to $388,000 or 0.20% of net assets.

⁽⁶⁾Amount represents less than 0.005%.

⁽⁷⁾ Perpetual bond security. The maturity date reflects the next call date.

⁽⁸⁾ Investment in affiliated mutual fund.

⁽⁹⁾ The rate shown reflects the yield at June 30, 2007.

⁽¹⁰⁾ The rate shown is the effective yield at the date of purchase.

⁽¹¹⁾ This security was pledged to cover margin requirements for futures contracts.

CS Credit Suisse

GMAC General Motors Acceptance Corp.

GSAMP Goldman Sachs Mortgage Securities Corp.

GSR Goldman Sachs Residential

MLCC Merrill Lynch Credit Corp.

REMIC Real Estate Mortgage Investment Conduit

156

UBS U.S. Bond Fund—Portfolio of investments

June 30, 2007

Restricted security

Security				Acquisition date				Acquisition cost				Acquisition cost as a percentage of net assets				06/30/07 Market value				06/30/07 Market value as a percentage of net assets
Abacus Ltd., Series 06-10A, Class H, 6.820%, due 10/30/45					02/23/06			$	400,000				0.21	%		$	388,000				0.20	%

Futures contracts

UBS U.S. Bond Fund had the following open futures contracts as of June 30, 2007:

	Expiration date	Cost		Value		Unrealized appreciation
US Treasury futures buy contracts:
5 Year US Treasury Notes, 2 contracts	September 2007	$	206,115	$	208,156	$	2,041

The segregated aggregate market value of investments and cash collateral pledged to cover margin requirements for the open futures positions at June 30, 2007, was $1,067,350.

Options written

UBS U.S. Bond Fund had the following open options written as of June 30, 2007:

Put Options Written

	Expiration dates	Premiums received		Value
90 Day Euro Futures, 443 contracts, strike @ 94.50	December 2007	$	47,947	$	30,456
90 Day Sterling Interest Rate Futures, 1,177 contracts, strike @ 94.00	March 2008		234,404		206,809
Total put options written		$	282,351	$	237,265

See accompanying notes to financial statements.
157

The UBS Funds

June 30, 2007 (unaudited)

Explanation of expense disclosure (unaudited)

As a shareholder of the Funds, you incur two types of costs: (1) transactional costs (as applicable); including sales charges (loads); and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees (if applicable); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The example below is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, January 1, 2007 to June 30, 2007.

Actual expenses

The first line of each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.

Hypothetical example for comparison purposes

The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on that Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not that Fund's actual return for each class of shares. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

158

The UBS Funds

June 30, 2007 (unaudited)

	Beginning account value January 1, 2007		Ending account value June 30, 2007		Expenses paid during period* 01/01/07 to 06/30/07		Expense ratio during period
UBS Dynamic Alpha Fund
Class A Actual	$	1,000.00	$	985.30	$	5.81		1.18	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.94		5.91		1.18	%
Class B Actual		1,000.00		981.70		9.63		1.96	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.08		9.79		1.96	%
Class C Actual		1,000.00		981.70		9.53		1.94	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.17		9.69		1.94	%
Class Y Actual		1,000.00		987.10		4.43		0.90	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.33		4.51		0.90	%
UBS Global Allocation Fund
Class A Actual		1,000.00		1,046.60		5.68		1.12	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.24		5.61		1.12	%
Class B Actual		1,000.00		1,041.60		9.67		1.91	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.32		9.54		1.91	%
Class C Actual		1,000.00		1,042.50		9.57		1.89	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.42		9.44		1.89	%
Class Y Actual		1,000.00		1,047.40		4.47		0.88	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.43		4.41		0.88	%
UBS Global Equity Fund
Class A Actual		1,000.00		1,064.00		6.35		1.24	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.65		6.21		1.24	%
Class B Actual		1,000.00		1,060.30		10.17		1.99	%
Hypothetical (5% annual return before expenses)		1,000.00		1,014.93		9.94		1.99	%
Class C Actual		1,000.00		1,060.00		10.16		1.99	%
Hypothetical (5% annual return before expenses)		1,000.00		1,014.93		9.94		1.99	%
Class Y Actual		1,000.00		1,065.50		5.17		1.01	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.79		5.06		1.01	%

159

The UBS Funds

June 30, 2007 (unaudited)

	Beginning account value January 1, 2007		Ending account value June 30, 2007		Expenses paid during period* 01/01/07 to 06/30/07		Expense ratio during period
UBS International Equity Fund
Class A Actual	$	1,000.00	$	1,087.90	$	6.52		1.26	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.55		6.31		1.26	%
Class B Actual		1,000.00		1,083.80		10.33		2.00	%
Hypothetical (5% annual return before expenses)		1,000.00		1,014.88		9.99		2.00	%
Class C Actual		1,000.00		1,082.70		10.33		2.00	%
Hypothetical (5% annual return before expenses)		1,000.00		1,014.88		9.99		2.00	%
Class Y Actual		1,000.00		1,088.30		5.23		1.01	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.79		5.06		1.01	%
UBS U.S. Equity Alpha Fund
Class A Actual		1,000.00		1,065.50		9.47		1.85	%
Hypothetical (5% annual return before expenses)		1,000.00		1,016.36		9.25		1.85	%
Class C Actual		1,000.00		1,061.90		13.19		2.58	%
Hypothetical (5% annual return before expenses)		1,000.00		1,012.69		12.87		2.58	%
Class Y Actual		1,000.00		1,067.40		8.56		1.67	%
Hypothetical (5% annual return before expenses)		1,000.00		1,017.41		8.35		1.67	%
UBS U.S. Large Cap Equity Fund
Class A Actual		1,000.00		1,069.10		6.00		1.17	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.99		5.86		1.17	%
Class B Actual		1,000.00		1,064.90		9.83		1.92	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.27		9.59		1.92	%
Class C Actual		1,000.00		1,064.90		9.78		1.91	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.32		9.54		1.91	%
Class Y Actual		1,000.00		1,070.40		4.57		0.89	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.38		4.46		0.89	%
UBS U.S. Large Cap Growth Fund
Class A Actual		1,000.00		1,079.90		5.36		1.04	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.64		5.21		1.04	%
Class B Actual		1,000.00		1,076.60		9.22		1.79	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.92		8.95		1.79	%
Class C Actual		1,000.00		1,075.50		9.21		1.79	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.92		8.95		1.79	%
Class Y Actual		1,000.00		1,081.00		4.13		0.80	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.83		4.01		0.80	%

160

The UBS Funds

June 30, 2007 (unaudited)

	Beginning account value January 1, 2007		Ending account value June 30, 2007		Expenses paid during period* 01/01/07 to 06/30/07		Expense ratio during period
UBS U.S. Large Cap Value Equity Fund
Class A Actual	$	1,000.00	$	1,068.70	$	5.59		1.09	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.39		5.46		1.09	%
Class B Actual		1,000.00		1,063.80		9.42		1.84	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.67		9.20		1.84	%
Class C Actual		1,000.00		1,064.30		9.42		1.84	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.67		9.20		1.84	%
Class Y Actual		1,000.00		1,069.40		4.36		0.85	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.58		4.26		0.85	%
UBS U.S. Mid Cap Growth Equity Fund
Class A Actual		1,000.00		1,114.10		7.55		1.44	%
Hypothetical (5% annual return before expenses)		1,000.00		1,017.65		7.20		1.44	%
Class C Actual		1,000.00		1,110.80		11.46		2.19	%
Hypothetical (5% annual return before expenses)		1,000.00		1,013.93		10.94		2.19	%
Class Y Actual		1,000.00		1,115.00		6.24		1.19	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.89		5.96		1.19	%
UBS U.S. Small Cap Growth Fund
Class A Actual		1,000.00		1,094.80		6.60		1.27	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.50		6.36		1.27	%
Class B Actual		1,000.00		1,090.80		10.42		2.01	%
Hypothetical (5% annual return before expenses)		1,000.00		1,014.83		10.04		2.01	%
Class C Actual		1,000.00		1,091.00		10.47		2.02	%
Hypothetical (5% annual return before expenses)		1,000.00		1,014.78		10.09		2.02	%
Class Y Actual		1,000.00		1,096.40		5.30		1.02	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.74		5.11		1.02	%
UBS Absolute Return Bond Fund
Class A Actual		1,000.00		1,003.20		4.77		0.96	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.03		4.81		0.96	%
Class C Actual		1,000.00		1,000.50		6.45		1.30	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.35		6.51		1.30	%
Class Y Actual		1,000.00		1,003.20		3.77		0.76	%
Hypothetical (5% annual return before expenses)		1,000.00		1,021.03		3.81		0.76	%

161

The UBS Funds

June 30, 2007 (unaudited)

	Beginning account value January 1, 2007		Ending account value June 30, 2007		Expenses paid during period* 01/01/07 to 06/30/07		Expense ratio during period
UBS Global Bond Fund
Class A Actual	$	1,000.00	$	990.20	$	5.63		1.14	%
Hypothetical (5% annual return before expenses)		1,000.00		1,019.14		5.71		1.14	%
Class B Actual		1,000.00		986.50		9.31		1.89	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.42		9.44		1.89	%
Class C Actual		1,000.00		986.70		8.08		1.64	%
Hypothetical (5% annual return before expenses)		1,000.00		1,016.66		8.20		1.64	%
Class Y Actual		1,000.00		991.40		4.44		0.90	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.33		4.51		0.90	%
UBS High Yield Fund
Class A Actual		1,000.00		1,025.60		5.98		1.19	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.89		5.96		1.19	%
Class B Actual		1,000.00		1,021.80		9.73		1.94	%
Hypothetical (5% annual return before expenses)		1,000.00		1,015.17		9.69		1.94	%
Class C Actual		1,000.00		1,023.00		8.48		1.69	%
Hypothetical (5% annual return before expenses)		1,000.00		1,016.41		8.45		1.69	%
Class Y Actual		1,000.00		1,026.70		4.77		0.95	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.08		4.76		0.95	%
UBS U.S. Bond Fund
Class A Actual		1,000.00		1,011.20		4.24		0.85	%
Hypothetical (5% annual return before expenses)		1,000.00		1,020.58		4.26		0.85	%
Class B Actual		1,000.00		1,007.40		7.91		1.59	%
Hypothetical (5% annual return before expenses)		1,000.00		1,016.91		7.95		1.59	%
Class C Actual		1,000.00		1,008.70		6.67		1.34	%
Hypothetical (5% annual return before expenses)		1,000.00		1,018.15		6.71		1.34	%
Class Y Actual		1,000.00		1,012.50		2.99		0.60	%
Hypothetical (5% annual return before expenses)		1,000.00		1,021.82		3.01		0.60	%

* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).

162

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163

The UBS Funds—Financial statements

Statements of assets and liabilities

June 30, 2007

	UBS Dynamic Alpha Fund		UBS Global Allocation Fund		UBS Global Equity Fund		UBS International Equity Fund		UBS U.S. Equity Alpha Fund			UBS U.S. Large Cap Equity Fund		UBS U.S. Large Cap Growth Fund
Assets:
Investments, at cost:
Unaffiliated issuers	$	806,818,355	$	3,786,427,064	$	272,284,452	$	124,519,688	$	263,463,645		$	814,477,425	$	68,656,475
Affiliated issuers		1,678,576,656		713,007,101		22,130,406		9,500,000		879,283			17,042,612		834,340
Investments of cash collateral in affiliated issuers received from securities loaned, at cost		—		144,054,788		—		6,089,234		—			—		—
Foreign currency, at cost		22,838,473		14,713,935		1,230,398		2,967,664		—			—		—
	$	2,508,233,484	$	4,658,202,888	$	295,645,256	$	143,076,586	$	264,342,928		$	831,520,037	$	69,490,815
Investments, at value:
Unaffiliated issuers	$	925,059,576	$	4,239,940,680	$	378,079,003	$	187,497,843	$	281,029,437		$	981,686,411	$	72,317,806
Affiliated issuers		2,143,739,215		905,595,925		30,732,757		13,234,141		879,283			17,042,612		834,340
Investments of cash collateral in affiliated issuers received from securities loaned, at value^(1),(2)		—		144,054,788		—		6,089,234		—			—		—
Foreign currency, at value		23,096,860		14,843,223		1,238,013		2,996,385		—			—		—
Cash		—		1,533,586		—		—		1,720,552			1,451,000		—
Receivables:
Investment securities sold		1,238,368		77,382,694		192,165		3,390,188		65,411			1,261,186		2,505,183
Due from advisor -		—		—		—		—		—			—		26,431
Dividends		1,674,998		3,707,772		661,106		411,740		283,020			878,125		37,359
Interest		1,361,025		15,691,351		2,242		4,975		3,270			132,670		5,683
Fund shares sold		5,060,123		12,145,146		457,117		503,854		465,219			2,351,814		172,664
Due from broker		—		—		—		—		—			—		—
Variation margin		—		—		—		—		—			—		—
Receivable for foreign tax reclaims		378,803		160,992		201,683		98,396		—			—		—
Cash collateral for futures contracts		638,745,567		33,808,813		—		—		—			—		—
Unrealized appreciation on forward foreign currency contracts		5,979,816		279,895		44,304		36,152		—			—		—
Outstanding swap agreements, at value⁽³⁾		56,724,320		483,531		—		—		—			—		—
Other assets		63,733		595,938		47,041		52,396		19,394			16,416		299
Total assets		3,803,122,404		5,450,224,334		411,655,431		214,315,304		284,465,586			1,004,820,234		75,899,765
Liabilities:
Payables:
Cash collateral from securities loaned		—		144,054,788		—		6,089,234		—			—		—
Investment securities purchased		2,616,296		92,699,084		—		40,676		—			—		2,430,078
Investment advisory and administration fees		2,271,117		3,173,077		237,279		124,785		290,418	⁽⁴⁾		619,578		—
Fund shares redeemed		11,542,485		9,008,125		844,089		1,357,456		542,775			1,318,897		133,784
Distribution and service fees		964,722		1,797,013		84,830		8,021		72,771			41,971		3,005
Trustees' fees		8,063		9,953		4,229		3,964		3,906			4,699		3,702
Custody fees		118,905		424,140		56,142		43,825		16,443			70,514		5,078
Variation margin		13,119,451		612,634		—		—		—			14,850		—
Due to broker		437,440,444		13,967,600		—		—		—			—		—
Due to custodian		3,925,381		—		—		3,622,448		—			—		—

164

The UBS Funds—Financial statements

	UBS U.S. Large Cap Value Equity Fund		UBS U.S. Mid Cap Growth Equity Fund			UBS U.S. Small Cap Growth Fund		UBS Absolute Return Bond Fund		UBS Global Bond Fund		UBS High Yield Fund		UBS U.S. Bond Fund
Assets:
Investments, at cost:
Unaffiliated issuers	$	102,766,975	$	5,239,101		$	348,103,286	$	480,159,245	$	102,831,757	$	103,245,441	$	117,665,978
Affiliated issuers		1,287,082		65,133			14,753,752		38,062,544		18,373,742		3,832,781		75,854,362
Investments of cash collateral in affiliated issuers received from securities loaned, at cost		—		—			—		—		—		—		—
Foreign currency, at cost		—		—			—		16,205,029		545,674		—		—
	$	104,054,057	$	5,304,234		$	362,857,038	$	534,426,818	$	121,751,173	$	107,078,222	$	193,520,340
Investments, at value:
Unaffiliated issuers	$	138,094,129	$	5,868,735		$	448,045,426	$	477,318,341	$	102,901,341	$	103,246,735	$	115,657,256
Affiliated issuers		1,287,082		65,133			14,753,752		39,976,999		19,052,195		3,832,781		78,053,961
Investments of cash collateral in affiliated issuers received from securities loaned, at value^(1),(2)		—		—			—		—		—		—		—
Foreign currency, at value		—		—			—		16,443,704		551,453		—		—
Cash		—		—			—		1,242,977		12,000		14,125		—
Receivables:
Investment securities sold		70,959		—			6,511,767		15,589,969		497,707		—		7,594,094
Due from advisor -		—		40,432	⁽⁵⁾		—		—		—		—		—
Dividends		177,091		888			99,090		—		—		—		—
Interest		6,292		327			34,411		7,702,595		1,623,502		2,127,786		1,254,701
Fund shares sold		95,286		—			653,694		749,868		190,707		162,558		243,397
Due from broker		—		—			—		8,687,506		—		—		—
Variation margin		—		—			—		—		—		—		625
Receivable for foreign tax reclaims		—		—			—		485		—		—		—
Cash collateral for futures contracts		—		—			—		1,879,368		—		—		28,000
Unrealized appreciation on forward foreign currency contracts		—		—			—		360,757		86,980		—		—
Outstanding swap agreements, at value⁽³⁾		—		—			—		6,384,069		—		—		1,403,382
Other assets		2,738		105			8,884		10,811		2,156		2,165		3,453
Total assets		139,733,577		5,975,620			470,107,024		576,347,449		124,918,041		109,386,150		204,238,869
Liabilities:
Payables:
Cash collateral from securities loaned		—		—			—		—		—		—		—
Investment securities purchased		—		—			3,455,981		16,840,079		557,665		2,387,091		7,604,610
Investment advisory and administration fees		71,693		—			254,565		285,584		40,259		61,805		50,072
Fund shares redeemed		244,286		8,251			4,044,262		1,958,349		260,183		287,602		698,301
Distribution and service fees		39,229		531			39,138		48,229		4,070		18,643		7,500
Trustees' fees		3,750		3,612			4,220		4,356		3,747		3,744		3,887
Custody fees		12,166		542			39,102		57,510		13,300		11,211		10,841
Variation margin		—		—			—		795,897		—		—		—
Due to broker		—		—			—		—		—		—		95,805
Due to custodian		—		—			—		—		—		—		19,647

See accompanying notes to financial statements.
165

The UBS Funds—Financial statements

Statements of assets and liabilities (cont'd)

June 30, 2007

	UBS Dynamic Alpha Fund			UBS Global Allocation Fund			UBS Global Equity Fund			UBS International Equity Fund		UBS U.S. Equity Alpha Fund			UBS U.S. Large Cap Equity Fund		UBS U.S. Large Cap Growth Fund			UBS U.S. Large Cap Value Equity Fund		UBS U.S. Mid Cap Growth Equity Fund		UBS U.S. Small Cap Growth Fund		UBS Absolute Return Bond Fund			UBS Global Bond Fund			UBS High Yield Fund			UBS U.S. Bond Fund
Options written, at value⁽⁶⁾	$	838,173		$	—		$	—		$	—	$	—		$	—	$	—		$	—	$	—	$	—	$	—		$	—		$	—		$	237,265
Securities sold short		—			—			—			—		47,804,068	⁽⁷⁾		—		—			—		—		—		—			—			—			—
Dividends payable for securities sold short		—			—			—			—		55,840			—		—			—		—		—		—			—			—			—
Accrued expenses		406,486			1,234,024			212,311			120,248		80,629			127,081		51,364			95,405		39,413		203,918		107,527			75,044			101,708			79,026
Unrealized depreciation on forward foreign currency contracts		38,113,614			27,128,878			2,165,266			1,059,409		—			—		—			—		—		—		995,447			700,199			—			—
Outstanding swap agreements, at value⁽³⁾		38,668,747			—			—			—		—			—		—			—		—		—		1,437,464			—			—			936,964
Total liabilities		550,033,884			294,109,316			3,604,146			12,470,066		48,866,850			2,197,590		2,627,011			466,529		52,349		8,041,186		22,530,442			1,654,467			2,871,804			9,743,918
Net assets	$	3,253,088,520		$	5,156,115,018		$	408,051,285		$	201,845,238	$	235,598,736		$	1,002,622,644	$	73,272,754		$	139,267,048	$	5,923,271	$	462,065,838	$	553,817,007		$	123,263,574		$	106,514,346		$	194,494,951
Net assets consist of:
Beneficial interest	$	2,886,703,001		$	4,335,170,284		$	1,028,741,131		$	120,006,725	$	212,607,220		$	810,871,958	$	70,507,984		$	97,604,094	$	5,252,794	$	355,384,877	$	553,266,485		$	124,890,769		$	327,761,512		$	196,762,312
Accumulated undistributed (distributions in excess of) net investment income		(130,946,501	)		(212,477	)		241,492			1,638,529		212,931			4,684,713		63,458			706,587		17,399		—		1,435,214			(1,066,893	)		39,734			706,894
Accumulated undistributed net realized gain (loss)		(58,553,868	)		200,416,497			(733,221,999	)		14,469,847		7,319,795			19,900,803		(960,019	)		5,629,213		23,444		6,738,821		(1,545,289	)		(724,121	)		(221,288,194	)		(3,537,858	)
Net unrealized appreciation (depreciation)		555,885,888			620,740,714			112,290,661			65,730,137		15,458,790			167,165,170		3,661,331			35,327,154		629,634		99,942,140		660,597			163,819			1,294			563,603
Net assets	$	3,253,088,520		$	5,156,115,018		$	408,051,285		$	201,845,238	$	235,598,736		$	1,002,622,644	$	73,272,754		$	139,267,048	$	5,923,271	$	462,065,838	$	553,817,007		$	123,263,574		$	106,514,346		$	194,494,951

⁽¹⁾ The market value of securities loaned for UBS Global Allocation Fund as of June 30, 2007 is $337,414,527.

⁽²⁾ The market value of securities loaned for UBS International Equity Fund as of June 30, 2007 is $5,832,136.

⁽³⁾ Upfront payments made by UBS Absolute Return Bond Fund and UBS U.S. Bond Fund were $4,387,578 and $140,377, respectively.

⁽⁴⁾ Includes $45,595 of reimbursement for offering costs payable to Advisor.

⁽⁵⁾ Includes $43,545 of reimbursement for offering costs payable to Advisor.

⁽⁶⁾ Premiums received for UBS Dynamic Alpha Fund and UBS U.S. Bond Fund were $1,084,823 and $282,351, respectively.

⁽⁷⁾ Proceeds from securities sold short for UBS U.S. Equity Alpha Fund was $45,697,066.

166

The UBS Funds—Financial statements

	UBS U.S. Large Cap Value Equity Fund		UBS U.S. Mid Cap Growth Equity Fund		UBS U.S. Small Cap Growth Fund		UBS Absolute Return Bond Fund			UBS Global Bond Fund			UBS High Yield Fund			UBS U.S. Bond Fund
Options written, at value⁽⁶⁾	$	—	$	—	$	—	$	—		$	—		$	—		$	237,265
Securities sold short		—		—		—		—			—			—			—
Dividends payable for securities sold short		—		—		—		—			—			—			—
Accrued expenses		95,405		39,413		203,918		107,527			75,044			101,708			79,026
Unrealized depreciation on forward foreign currency contracts		—		—		—		995,447			700,199			—			—
Outstanding swap agreements, at value⁽³⁾		—		—		—		1,437,464			—			—			936,964
Total liabilities		466,529		52,349		8,041,186		22,530,442			1,654,467			2,871,804			9,743,918
Net assets	$	139,267,048	$	5,923,271	$	462,065,838	$	553,817,007		$	123,263,574		$	106,514,346		$	194,494,951
Net assets consist of:
Beneficial interest	$	97,604,094	$	5,252,794	$	355,384,877	$	553,266,485		$	124,890,769		$	327,761,512		$	196,762,312
Accumulated undistributed (distributions in excess of) net investment income		706,587		17,399		—		1,435,214			(1,066,893	)		39,734			706,894
Accumulated undistributed net realized gain (loss)		5,629,213		23,444		6,738,821		(1,545,289	)		(724,121	)		(221,288,194	)		(3,537,858	)
Net unrealized appreciation (depreciation)		35,327,154		629,634		99,942,140		660,597			163,819			1,294			563,603
Net assets	$	139,267,048	$	5,923,271	$	462,065,838	$	553,817,007		$	123,263,574		$	106,514,346		$	194,494,951

See accompanying notes to financial statements.
167

The UBS Funds—Financial statements

Statements of assets and liabilities (cont'd)

Net asset value, offering price and redemption value per share:

June 30, 2007

	UBS Dynamic Alpha Fund		UBS Global Allocation Fund		UBS Global Equity Fund		UBS International Equity Fund		UBS U.S. Equity Alpha Fund⁽²⁾		UBS U.S. Large Cap Equity Fund		UBS U.S. Large Cap Growth Fund
Class A:
Net assets	$	2,168,596,449	$	3,094,036,344	$	168,207,546	$	26,564,144	$	187,444,437	$	158,138,206	$	9,541,900
Shares outstanding		189,976,822		208,972,221		10,873,469		2,045,572		16,226,035		7,461,849		893,691
Net asset value per share	$	11.42	$	14.81	$	15.47	$	12.99	$	11.55	$	21.19	$	10.68
Offering price per share (NAV per share plus maximum sales charge)⁽¹⁾	$	12.08	$	15.67	$	16.37	$	13.75	$	12.22	$	22.42	$	11.30
Redemption proceeds per share	$	11.42	$	14.81	$	15.47	$	12.99	$	11.55	$	21.19	$	10.68
Class B:
Net assets	$	25,790,264	$	139,060,672	$	7,438,618	$	555,076		N/A	$	870,191	$	215,740
Shares outstanding		2,290,668		9,574,432		492,285		43,334		N/A		42,119		21,031
Net asset value per share and offering price per share	$	11.26	$	14.52	$	15.11	$	12.81		N/A	$	20.66	$	10.26
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)⁽¹⁾	$	10.70	$	13.79	$	14.35	$	12.17		N/A	$	19.63	$	9.75
Class C:
Net assets	$	579,916,367	$	1,274,538,993	$	52,378,056	$	2,576,415	$	42,749,582	$	10,590,848	$	986,246
Shares outstanding		51,520,342		88,026,622		3,487,179		202,780		3,718,032		512,653		96,107
Net asset value per share and offering price per share	$	11.26	$	14.48	$	15.02	$	12.71	$	11.50	$	20.66	$	10.26
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)⁽¹⁾	$	11.15	$	14.34	$	14.87	$	12.58	$	11.39	$	20.45	$	10.16
Class Y:
Net assets	$	478,785,440	$	648,479,009	$	180,027,065	$	172,149,603	$	5,404,717	$	833,023,399	$	62,528,868
Shares outstanding		41,719,627		43,121,743		11,410,308		13,170,045		467,752		38,846,966		5,714,904
Net asset value per share, offering price and redemption value per share	$	11.48	$	15.04	$	15.78	$	13.07	$	11.55	$	21.44	$	10.94

⁽¹⁾ 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%, and UBS Absolute Return Bond Fund which is 2.50%. Classes B, C and Y have no front-end sales charges. For Class A, the maximum contingent deferred sales charge of 1.00% of the shares' offering price or the net asset value at the time of sales by the shareholder, whichever is less, is charged on sales of shares on original purchases of $1 million or more that were not subject to a front-end sales charge made within one year of the purchase date. For Class B, the maximum contingent deferred sales charge is 5.00%, Class C maximum contingent deferred sales charge is 1.00%, except for UBS Global Bond Fund, UBS U.S. Bond Fund and UBS High Yield Fund which is 0.75%, and UBS Absolute Return Bond Fund which is 0.50%. Class Y has no contingent deferred sales charges.

⁽²⁾ UBS U.S. Equity Alpha Fund, UBS U.S. Mid Cap Growth Equity Fund and UBS Absolute Return Bond Fund currently do not offer Class B shares.

168

The UBS Funds—Financial statements

	UBS U.S. Large Cap Value Equity Fund		UBS U.S. Mid Cap Growth Equity Fund⁽²⁾		UBS U.S. Small Cap Growth Fund		UBS Absolute Return Bond Fund⁽²⁾		UBS Global Bond Fund		UBS High Yield Fund		UBS U.S. Bond Fund
Class A:
Net assets	$	113,213,371	$	261,288	$	149,361,699	$	257,180,446	$	14,093,405	$	45,030,873	$	29,356,389
Shares outstanding		9,711,443		23,482		9,368,236		25,599,893		1,498,141		6,503,852		2,805,212
Net asset value per share	$	11.66	$	11.13	$	15.94	$	10.05	$	9.41	$	6.92	$	10.46
Offering price per share (NAV per share plus maximum sales charge)⁽¹⁾	$	12.34	$	11.78	$	16.87	$	10.31	$	9.85	$	7.25	$	10.95
Redemption proceeds per share	$	11.66	$	11.13	$	15.94	$	10.05	$	9.41	$	6.92	$	10.46
Class B:
Net assets	$	1,060,524		N/A	$	1,798,052		N/A	$	214,744	$	2,385,875	$	441,728
Shares outstanding		92,205		N/A		117,899		N/A		22,773		344,440		42,174
Net asset value per share and offering price per share	$	11.50		N/A	$	15.25		N/A	$	9.43	$	6.93	$	10.47
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)⁽¹⁾	$	10.93		N/A	$	14.49		N/A	$	8.96	$	6.58	$	9.95
Class C:
Net assets	$	15,919,136	$	81,585	$	7,877,186	$	37,547,917	$	1,490,599	$	11,330,023	$	1,524,845
Shares outstanding		1,393,745		7,395		517,187		3,739,571		158,866		1,635,916		145,922
Net asset value per share and offering price per share	$	11.42	$	11.03	$	15.23	$	10.04	$	9.38	$	6.93	$	10.45
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)⁽¹⁾	$	11.31	$	10.92	$	15.08	$	9.99	$	9.31	$	6.88	$	10.37
Class Y:
Net assets	$	9,074,017	$	5,580,398	$	303,028,901	$	259,088,644	$	107,464,826	$	47,767,575	$	163,171,989
Shares outstanding		774,783		500,608		18,501,987		25,775,228		10,288,482		6,862,669		15,596,702
Net asset value per share, offering price and redemption value per share	$	11.71	$	11.15	$	16.38	$	10.05	$	10.45	$	6.96	$	10.46

See accompanying notes to financial statements.
169

The UBS Funds—Financial statements

Statements of operations

For the year ended June 30, 2007

	UBS Dynamic Alpha Fund			UBS Global Allocation Fund			UBS Global Equity Fund			UBS International Equity Fund			UBS U.S. Equity Alpha Fund⁽¹⁾			UBS U.S. Large Cap Equity Fund			UBS U.S. Large Cap Growth Fund
Investment income:
Dividends	$	22,551,891		$	56,597,535		$	9,927,424		$	5,750,967		$	2,846,504		$	14,086,725		$	377,132
Interest and other		14,868,231			44,921,116			23,062			11,588			—			63,909			9,970
Affiliated interest		4,500,231			9,356,035			112,243			97,594			70,593			1,596,771			41,798
Securities lending-net		—			981,323			—			186,719			—			—			—
Foreign tax withheld		(3,114,831	)		(2,239,354	)		(520,961	)		(552,372	)		—			—			(6,991	)
Total income		38,805,522			109,616,655			9,541,768			5,494,496			2,917,097			15,747,405			421,909
Expenses:
Advisory and administration fees		25,988,983			34,203,353			3,561,370			1,818,557			1,428,904			6,159,091			285,101
Service and distribution fees:
Class A		5,291,704			6,636,917			436,557			63,450			266,754			304,643			19,044
Class B		302,447			1,527,044			101,955			6,157			—			9,583			3,438
Class C		5,892,916			11,605,355			548,972			25,598			241,941			86,058			9,292
Transfer agency fees:
Class A		848,566			1,138,836			239,706			12,236			36,952			105,221			4,969
Class B		22,425			134,455			19,961			1,031			—			969			578
Class C		344,339			755,635			95,072			2,091			18,541			8,168			1,154
Class Y		39,596			256,160			63,229			146,764			123			353,546			48,517
Custodian		650,842			2,470,563			322,042			218,419			66,531			410,699			18,050
Federal and state registration		164,822			119,011			39,576			46,630			13,548			72,921			43,485
Professional services		65,246			69,019			88,650			64,860			88,879			81,231			49,668
Shareholder reports		465,239			883,612			185,457			27,519			10,566			63,774			6,454
Trustees		28,876			34,341			13,233			12,068			8,451			16,250			11,086
Offering costs		—			—			—			—			58,176			—			—
Dividend expense for securities sold short		—			—			—			—			441,389			—			—
Other		180,372			274,191			37,547			28,109			6,468			54,249			6,466
Total operating expenses		40,286,373			60,108,492			5,753,327			2,473,489			2,687,223			7,726,403			507,302
Fee waivers and/or expenses reimbursements by Advisor		—			—			(276,821	)		(299,152	)		(65,098	)		—			(182,286	)
Net operating expenses		40,286,373			60,108,492			5,476,506			2,174,337			2,622,125			7,726,403			325,016
Interest expense		19,101			—			15,429			23,936			73,048			17,044			—
Net expenses		40,305,474			60,108,492			5,491,935			2,198,273			2,695,173			7,743,447			325,016
Net investment income (loss)		(1,499,952	)		49,508,163			4,049,833			3,296,223			221,924			8,003,958			96,893
Net realized gain (loss) on:
Investments		196,898,714			257,517,874			47,349,234			19,385,917			7,498,806			37,034,397			1,439,799
Futures contracts		(414,413,777	)		(19,129,362	)		—			—			—			2,276,288			—
Foreign forward currency transactions		(124,334,027	)		(51,172,294	)		(4,096,639	)		(2,329,769	)		—			—			—
Swap agreements		(15,149,532	)		—			—			—			—			—			—
Securities sold short		(29,242	)		—			—			—			(18,831	)		—			—
Options written		2,459,134			—			—			—			—			—			—
Net realized gain (loss)		(354,568,730	)		187,216,218			43,252,595			17,056,148			7,479,975			39,310,685			1,439,799
Change in net unrealized appreciation (depreciation) on:
Investments		443,992,050			382,605,420			35,626,418			26,758,386			17,565,792			103,861,374			3,681,852
Futures contracts		41,776,704			4,037,794			—			—			—			(350,666	)		—
Foreign forward currency contracts		(36,471,011	)		(17,983,404	)		(1,982,729	)		(946,075	)		—			—			—
Swap agreements		(4,881,020	)		483,531			—			—			—			—			—
Securities sold short		—			—			—			—			(2,107,002	)		—			—
Translation of other assets and liabilities denominated in foreign currency		(1,403,379	)		(840,550	)		5,344			8,166			—			—			—
Options written		(605,137	)		—			—			—			—			—			—
Change in net unrealized appreciation (depreciation)		442,408,207			368,302,791			33,649,033			25,820,477			15,458,790			103,510,708			3,681,852
Net realized and unrealized gain (loss)		87,839,477			555,519,009			76,901,628			42,876,625			22,938,765			142,821,393			5,121,651
Net increase from payment by Advisor		—			—			—			—			—			—			—
Net increase in net assets resulting from operations	$	86,339,525		$	605,027,172		$	80,951,461		$	46,172,848		$	23,160,689		$	150,825,351		$	5,218,544

⁽¹⁾ For the period September 26, 2006 (commencement of operations) to June 30,2007.

170

The UBS Funds—Financial statements

	UBS U.S. Large Cap Value Equity Fund			UBS U.S. Mid Cap Growth Equity Fund			UBS U.S. Small Cap Growth Fund			UBS Absolute Return Bond Fund			UBS Global Bond Fund			UBS High Yield Fund			UBS U.S. Bond Fund
Investment income:
Dividends	$	2,923,564		$	22,267		$	1,177,436		$	—		$	—		$	6,947		$	—
Interest and other		—			—			1,469			21,563,480			3,981,825			8,782,818			6,461,836
Affiliated interest		85,801			2,745			389,348			1,872,942			298,653			133,674			316,427
Securities lending-net		—			—			—			—			—			—			—
Foreign tax withheld		—			—			—			(68,050	)		—			—			—
Total income		3,009,365			25,012			1,568,253			23,368,372			4,280,478			8,923,439			6,778,263
Expenses:
Advisory and administration fees		1,052,049			49,249			4,169,290			3,317,163			809,664			719,803			1,003,407
Service and distribution fees:
Class A		276,619			508			379,714			379,866			38,595			127,664			80,625
Class B		14,542			—			36,958			—			3,699			22,749			6,788
Class C		156,461			693			78,611			186,081			12,512			89,784			11,499
Transfer agency fees:
Class A		97,601			281			554,712			156,608			33,361			82,319			36,015
Class B		3,378			—			9,600			—			847			3,556			782
Class C		17,901			136			19,985			22,247			1,422			18,917			1,528
Class Y		9,268			—			422,016			36,230			84,373			44,091			76,461
Custodian		56,517			2,727			235,783			342,791			77,480			31,412			63,293
Federal and state registration		32,916			28,333			53,774			51,502			47,397			36,499			49,829
Professional services		67,490			68,159			59,535			82,806			60,232			60,122			59,874
Shareholder reports		54,154			5,060			74,665			78,405			27,193			59,299			22,882
Trustees		11,907			12,519			13,470			14,219			9,663			11,396			11,479
Offering costs		—			60,152			—			—			—			—			—
Dividend expense for securities sold short		—			—			—			—			—			—			—
Other		14,012			3,153			38,259			34,477			13,595			10,549			20,009
Total operating expenses		1,864,815			230,970			6,146,372			4,702,395			1,220,033			1,318,160			1,444,471
Fee waivers and/or expenses reimbursements by Advisor		(263,098	)		(165,848	)		(1,001,626	)		—			(159,638	)		(64,770	)		(297,638	)
Net operating expenses		1,601,717			65,122			5,144,746			4,702,395			1,060,395			1,253,390			1,146,833
Interest expense		—			—			—			—			478			—			—
Net expenses		1,601,717			65,122			5,144,746			4,702,395			1,060,873			1,253,390			1,146,833
Net investment income (loss)		1,407,648			(40,110	)		(3,576,493	)		18,665,977			3,219,605			7,670,049			5,631,430
Net realized gain (loss) on:
Investments		11,760,005			53,214			13,576,424			2,602,039			523,451			(905,916	)		177,447
Futures contracts		—			—			—			4,836,720			—			—			(144,350	)
Foreign forward currency transactions		—			—			—			(6,031,971	)		(1,567,742	)		—			109
Swap agreements		—			—			—			(522,467	)		—			—			163,040
Securities sold short		—			—			—			52,928			—			—			—
Options written		—			—			—			27,017			5,306			—			147,577
Net realized gain (loss)		11,760,005			53,214			13,576,424			964,266			(1,038,985	)		(905,916	)		343,823
Change in net unrealized appreciation (depreciation) on:
Investments		12,654,030			802,159			51,793,775			(3,006,315	)		(117,220	)		2,131,556			2,664,728
Futures contracts		—			—			—			(251,406	)		—			—			(10,916	)
Foreign forward currency contracts		—			—			—			(2,182,073	)		(312,353	)		—			—
Swap agreements		—			—			—			559,027			—			—			321,473
Securities sold short		—			—			—			(222,316	)		—			—			—
Translation of other assets and liabilities denominated in foreign currency		—			—			—			104,203			6,335			—			(442	)
Options written		—			—			—			—			—			—			45,086
Change in net unrealized appreciation (depreciation)		12,654,030			802,159			51,793,775			(4,998,880	)		(423,238	)		2,131,556			3,019,929
Net realized and unrealized gain (loss)		24,414,035			855,373			65,370,199			(4,034,614	)		(1,462,223	)		1,225,640			3,363,752
Net increase from payment by Advisor		—			—			—			—			—			—			2,876
Net increase in net assets resulting from operations	$	25,821,683		$	815,263		$	61,793,706		$	14,631,363		$	1,757,382		$	8,895,689		$	8,998,058

See accompanying notes to financial statements.
171

The UBS Funds—Financial statements

Statements of changes in net assets

	UBS Dynamic Alpha Fund						UBS Global Allocation Fund						UBS Global Equity Fund
	Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Year Ended June 30, 2006
Operations:
Net investment income (loss)	$	(1,499,952	)	$	(15,660,466	)	$	49,508,163		$	41,067,168		$	4,049,833		$	3,604,161
Net realized gain (loss)		(354,568,730	)		21,441,994			187,216,218			184,234,464			43,252,595			55,804,923
Change in net unrealized appreciation (depreciation)		442,408,207			100,939,338			368,302,791			81,438,410			33,649,033			(6,400,532	)
Net increase from payment by Advisor		—			24,866			—			—			—			—
Net increase in net assets from operations		86,339,525			106,745,732			605,027,172			306,740,042			80,951,461			53,008,552
Dividends and distributions to shareholders by class:
Class A:
Dividends from net investment income and net foreign currency gains		(36,977	)		(9,085,869	)		(46,009,509	)		(19,342,594	)		(1,538,106	)		(1,096,767	)
Distributions from net realized gain		—			—			(138,962,907	)		(81,236,181	)		—			—
Total Class A dividends and distributions		(36,977	)		(9,085,869	)		(184,972,416	)		(100,578,775	)		(1,538,106	)		(1,096,767	)
Class B:
Dividends from net investment income and net foreign currency gains		—			(88,826	)		(1,454,318	)		(194,937	)		(15,312	)		—
Distributions from net realized gain		—			—			(8,537,738	)		(7,483,823	)		—			—
Total Class B dividends and distributions		—			(88,826	)		(9,992,056	)		(7,678,760	)		(15,312	)		—
Class C:
Dividends from net investment income and net foreign currency gains		—			(1,567,093	)		(12,514,040	)		(3,358,146	)		(254,412	)		—
Distributions from net realized gain		—			—			(63,009,563	)		(43,158,661	)		—			—
Total Class C dividends and distributions		—			(1,567,093	)		(75,523,603	)		(46,516,807	)		(254,412	)		—
Class Y:
Dividends from net investment income and net foreign currency gains		(9,903	)		(1,349,644	)		(10,584,281	)		(4,969,313	)		(2,156,504	)		(1,345,824	)
Distributions from net realized gain		—			—			(28,466,966	)		(17,133,687	)		—			—
Total Class Y dividends and distributions		(9,903	)		(1,349,644	)		(39,051,247	)		(22,103,000	)		(2,156,504	)		(1,345,824	)
Decrease in net assets from dividends and distributions		(46,880	)		(12,091,432	)		(309,539,322	)		(176,877,342	)		(3,964,334	)		(2,442,591	)
Beneficial interest transactions:
Shares sold		1,484,636,528			1,998,280,696			1,457,963,124			1,296,886,409			81,018,863			170,054,722
Shares issued on reinvestment of dividends and distributions		42,579			11,407,688			296,393,014			168,648,902			3,801,067			2,360,467
Shares redeemed		(939,202,364	)		(285,347,554	)		(809,465,895	)		(717,756,759	)		(178,310,291	)		(245,313,514	)
Redemption fees		181,216			129,393			104,285			86,029			4,771			3,939
Net increase (decrease) in net assets resulting from beneficial interest transactions		545,657,959			1,724,470,223			944,994,528			747,864,581			(93,485,590	)		(72,894,386	)
Increase (decrease) in net assets		631,950,604			1,819,124,523			1,240,482,378			877,727,281			(16,498,463	)		(22,328,425	)
Net assets, beginning of year		2,621,137,916			802,013,393			3,915,632,640			3,037,905,359			424,549,748			446,878,173
Net assets, end of year	$	3,253,088,520		$	2,621,137,916		$	5,156,115,018		$	3,915,632,640		$	408,051,285		$	424,549,748
Net assets include accumulated undistributed (distributions in excess of) net investment income	$	(130,946,501	)	$	(29,023,741	)	$	(212,477	)	$	53,621,431		$	241,492		$	3,906,219

⁽¹⁾ For the period September 26, 2006 (commencement of operations) to June 30, 2007.

172

The UBS Funds—Financial statements

	UBS International Equity Fund						UBS U.S. Equity Alpha Fund			UBS U.S. Large Cap Equity Fund						UBS U.S. Large Cap Growth Fund
	Year Ended June 30, 2007			Year Ended June 30, 2006			Period Ended June 30, 2007⁽¹⁾			Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Year Ended June 30, 2006
Operations:
Net investment income (loss)	$	3,296,223		$	2,716,776		$	221,924		$	8,003,958		$	3,779,244		$	96,893		$	(14,502	)
Net realized gain (loss)		17,056,148			8,857,119			7,479,975			39,310,685			7,774,481			1,439,799			995,485
Change in net unrealized appreciation (depreciation)		25,820,477			17,237,736			15,458,790			103,510,708			21,874,419			3,681,852			(635,956	)
Net increase from payment by Advisor		—			—			—			—			—			—			—
Net increase in net assets from operations		46,172,848			28,811,631			23,160,689			150,825,351			33,428,144			5,218,544			345,027
Dividends and distributions to shareholders by class:
Class A:
Dividends from net investment income and net foreign currency gains		(228,735	)		(195,160	)		(112,683	)		(589,980	)		(303,204	)		(4,031	)		(1,122	)
Distributions from net realized gain		(1,094,747	)		(721,446	)		(127,187	)		(3,618,463	)		(1,172,120	)		—			—
Total Class A dividends and distributions		(1,323,482	)		(916,606	)		(239,870	)		(4,208,443	)		(1,475,324	)		(4,031	)		(1,122	)
Class B:
Dividends from net investment income and net foreign currency gains		(428	)		—			—			—			—			—			—
Distributions from net realized gain		(29,133	)		(25,067	)		—			(30,560	)		(19,225	)		—			—
Total Class B dividends and distributions		(29,561	)		(25,067	)		—			(30,560	)		(19,225	)		—			—
Class C:
Dividends from net investment income and net foreign currency gains		(6,311	)		(3,051	)		—			—			(2,197	)		—			—
Distributions from net realized gain		(114,736	)		(64,762	)		(30,761	)		(277,580	)		(96,623	)		—			—
Total Class C dividends and distributions		(121,047	)		(67,813	)		(30,761	)		(277,580	)		(98,820	)		—			—
Class Y:
Dividends from net investment income and net foreign currency gains		(2,116,644	)		(1,437,989	)		(150	)		(4,600,476	)		(2,718,913	)		(10,358	)		(4,029	)
Distributions from net realized gain		(8,036,802	)		(4,418,048	)		(112	)		(20,376,839	)		(8,607,085	)		—			—
Total Class Y dividends and distributions		(10,153,446	)		(5,856,037	)		(262	)		(24,977,315	)		(11,325,998	)		(10,358	)		(4,029	)
Decrease in net assets from dividends and distributions		(11,627,536	)		(6,865,523	)		(270,893	)		(29,493,898	)		(12,919,367	)		(14,389	)		(5,151	)
Beneficial interest transactions:
Shares sold		103,318,624			90,851,632			242,289,940			431,482,430			376,538,429			64,821,995			9,809,159
Shares issued on reinvestment of dividends and distributions		11,499,707			6,761,683			262,664			27,311,261			11,937,737			14,250			5,096
Shares redeemed		(121,601,827	)		(76,610,266	)		(29,868,602	)		(216,543,622	)		(166,331,009	)		(9,570,585	)		(4,576,426	)
Redemption fees		3,595			5,683			24,938			8,917			—			460			—
Net increase (decrease) in net assets resulting from beneficial interest transactions		(6,779,901	)		21,008,732			212,708,940			242,258,986			222,145,157			55,266,120			5,237,829
Increase (decrease) in net assets		27,765,411			42,954,840			235,598,736			363,590,439			242,653,934			60,470,275			5,577,705
Net assets, beginning of year		174,079,827			131,124,987			—			639,032,205			396,378,271			12,802,479			7,224,774
Net assets, end of year	$	201,845,238		$	174,079,827		$	235,598,736		$	1,002,622,644		$	639,032,205		$	73,272,754		$	12,802,479
Net assets include accumulated undistributed (distributions in excess of) net investment income	$	1,638,529		$	2,257,631		$	212,931		$	4,684,713		$	1,871,207		$	63,458		$	(1	)

See accompanying notes to financial statements.
173

The UBS Funds—Financial statements

Statements of changes in net assets

	UBS U.S. Large Cap Value Equity Fund						UBS U.S. Mid Cap Growth Equity Fund						UBS U.S. Small Cap Growth Fund						UBS Absolute Return Bond Fund
	Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Period Ended June 30, 2006⁽¹⁾			Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Year Ended June 30, 2006
Operations:
Net investment income (loss)	$	1,407,648		$	1,291,635		$	(40,110	)	$	(8,226	)	$	(3,576,493	)	$	(2,555,008	)	$	18,665,977		$	9,976,032
Net realized gain (loss)		11,760,005			10,356,646			53,214			(29,770	)		13,576,424			17,172,677			964,266			(331,116	)
Change in net unrealized appreciation (depreciation)		12,654,030			3,542,465			802,159			(172,525	)		51,793,775			16,235,430			(4,998,880	)		6,734,308
Net increase from payment by Advisor		—			—			—			—			—			—			—			—
Net increase (decrease) in net assets from operations		25,821,683			15,190,746			815,263			(210,521	)		61,793,706			30,853,099			14,631,363			16,379,224
Dividends and distributions to shareholders by class:
Class A:
Dividends from net investment income and net foreign currency gains		(1,076,729	)		(1,180,726	)		—			—			—			—			(7,516,653	)		(4,903,230	)
Distributions from net realized gain		(8,837,350	)		(9,995,542	)		—			—			(4,757,748	)		(5,311,677	)		(1,927,672	)		(150,694	)
Total Class A dividends and distributions		(9,914,079	)		(11,176,268	)		—			—			(4,757,748	)		(5,311,677	)		(9,444,325	)		(5,053,924	)
Class B:
Dividends from net investment income and net foreign currency gains		—			—			—			—			—			—			—			—
Distributions from net realized gain		(112,812	)		(300,968	)		—			—			(135,148	)		(331,063	)		—			—
Total Class B dividends and distributions		(112,812	)		(300,968	)		—			—			(135,148	)		(331,063	)		—			—
Class C:
Dividends from net investment income and net foreign currency gains		(29,335	)		(62,311	)		—			—			—			—			(987,564	)		(625,870	)
Distributions from net realized gain		(1,255,982	)		(1,645,112	)		—			—			(254,106	)		(350,676	)		(290,753	)		(22,526	)
Total Class C dividends and distributions		(1,285,317	)		(1,707,423	)		—			—			(254,106	)		(350,676	)		(1,278,317	)		(648,396	)
Class Y:
Dividends from net investment income and net foreign currency gains		(90,763	)		(84,236	)		(6,100	)		—			—			—			(7,668,427	)		(5,273,291	)
Distributions from net realized gain		(595,960	)		(580,926	)		—			—			(8,601,303	)		(7,818,200	)		(1,801,190	)		(171,039	)
Total Class Y dividends and distributions		(686,723	)		(665,162	)		(6,100	)		—			(8,601,303	)		(7,818,200	)		(9,469,617	)		(5,444,330	)
Decrease in net assets from dividends and distributions		(11,998,931	)		(13,849,821	)		(6,100	)		—			(13,748,305	)		(13,811,616	)		(20,192,259	)		(11,146,650	)
Beneficial interest transactions:
Shares sold		7,885,699			9,482,763			426,342			5,456,508			121,643,837			237,309,281			237,542,541			431,394,854
Shares issued on reinvestment of dividends and distributions		10,871,379			12,467,214			6,100			—			12,462,455			12,644,348			19,483,491			9,518,443
Shares redeemed		(23,854,078	)		(26,716,957	)		(351,835	)		(212,486	)		(155,442,604	)		(107,414,142	)		(173,470,533	)		(112,686,324	)
Redemption fees		51			—			—			—			3,049			—			13,208			—
Net increase (decrease) in net assets resulting from beneficial interest transactions		(5,096,949	)		(4,766,980	)		80,607			5,244,022			(21,333,263	)		142,539,487			83,568,707			328,226,973
Increase (decrease) in net assets		8,725,803			(3,426,055	)		889,770			5,033,501			26,712,138			159,580,970			78,007,811			333,459,547
Net assets, beginning of year		130,541,245			133,967,300			5,033,501			—			435,353,700			275,772,730			475,809,196			142,349,649
Net assets, end of year	$	139,267,048		$	130,541,245		$	5,923,271		$	5,033,501		$	462,065,838		$	435,353,700		$	553,817,007		$	475,809,196
Net assets include accumulated undistributed (distributions in excess of) net investment income	$	706,587		$	495,766		$	17,399		$	3,189		$	—		$	—		$	1,435,214		$	(2,424,803	)

⁽¹⁾ For the period March 27, 2006 (commencement of operations) to June 30, 2006.

174

The UBS Funds—Financial statements

	UBS Global Bond Fund						UBS High Yield Fund						UBS U.S. Bond Fund
	Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Year Ended June 30, 2006			Year Ended June 30, 2007			Year Ended June 30, 2006
Operations:
Net investment income (loss)	$	3,219,605		$	1,677,373		$	7,670,049		$	8,604,450		$	5,631,430		$	5,381,409
Net realized gain (loss)		(1,038,985	)		(1,560,529	)		(905,916	)		(5,692,387	)		343,823			(1,824,329	)
Change in net unrealized appreciation (depreciation)		(423,238	)		546,413			2,131,556			1,762,732			3,019,929			(3,637,609	)
Net increase from payment by Advisor		—			—			—			—			2,876			—
Net increase (decrease) in net assets from operations		1,757,382			663,257			8,895,689			4,674,795			8,998,058			(80,529	)
Dividends and distributions to shareholders by class:
Class A:
Dividends from net investment income and net foreign currency gains		(398,966	)		(649,130	)		(3,973,940	)		(4,659,800	)		(1,135,733	)		(1,516,248	)
Distributions from net realized gain		—			—			—			—			—			—
Total Class A dividends and distributions		(398,966	)		(649,130	)		(3,973,940	)		(4,659,800	)		(1,135,733	)		(1,516,248	)
Class B:
Dividends from net investment income and net foreign currency gains		(6,617	)		(17,832	)		(159,102	)		(204,232	)		(19,345	)		(39,737	)
Distributions from net realized gain		—			—			—			—			—			—
Total Class B dividends and distributions		(6,617	)		(17,832	)		(159,102	)		(204,232	)		(19,345	)		(39,737	)
Class C:
Dividends from net investment income and net foreign currency gains		(33,975	)		(86,788	)		(870,935	)		(1,018,907	)		(46,306	)		(60,177	)
Distributions from net realized gain		—			—			—			—			—			—
Total Class C dividends and distributions		(33,975	)		(86,788	)		(870,935	)		(1,018,907	)		(46,306	)		(60,177	)
Class Y:
Dividends from net investment income and net foreign currency gains		(2,467,037	)		(2,208,907	)		(3,345,623	)		(2,732,863	)		(5,264,231	)		(4,288,926	)
Distributions from net realized gain		—			—			—			—			—			—
Total Class Y dividends and distributions		(2,467,037	)		(2,208,907	)		(3,345,623	)		(2,732,863	)		(5,264,231	)		(4,288,926	)
Decrease in net assets from dividends and distributions		(2,906,595	)		(2,962,657	)		(8,349,600	)		(8,615,802	)		(6,465,615	)		(5,905,088	)
Beneficial interest transactions:
Shares sold		61,327,924			58,131,940			33,241,831			29,236,468			90,314,904			69,892,399
Shares issued on reinvestment of dividends and distributions		2,833,920			2,730,438			5,740,511			5,497,236			5,950,248			5,248,275
Shares redeemed		(38,678,925	)		(32,916,738	)		(31,825,332	)		(48,270,220	)		(43,454,878	)		(77,542,857	)
Redemption fees		2,168			—			722			—			2,659			—
Net increase (decrease) in net assets resulting from beneficial interest transactions		25,485,087			27,945,640			7,157,732			(13,536,516	)		52,812,933			(2,402,183	)
Increase (decrease) in net assets		24,335,874			25,646,240			7,703,821			(17,477,523	)		55,345,376			(8,387,800	)
Net assets, beginning of year		98,927,700			73,281,460			98,810,525			116,288,048			139,149,575			147,537,375
Net assets, end of year	$	123,263,574		$	98,927,700		$	106,514,346		$	98,810,525		$	194,494,951		$	139,149,575
Net assets include accumulated undistributed (distributions in excess of) net investment income	$	(1,066,893	)	$	(532,682	)	$	39,734		$	169,574		$	706,894		$	48,987

See accompanying notes to financial statements.
175

UBS Dynamic Alpha Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽⁵⁾
Net asset value, beginning of period	$	11.04		$	10.22		$	10.00
Net investment income (loss)⁽¹⁾		0.01			(0.09	)		(0.04	)
Net realized and unrealized gain from investment activities		0.37			1.01			0.26
Total income from investment operations		0.38			0.92			0.22
Dividends from net investment income		0.00	⁽³⁾		(0.10	)		—
Net increase from payment by advisor		—			0.00	⁽³⁾		—
Net asset value, end of period	$	11.42		$	11.04		$	10.22
Total investment return⁽²⁾		3.44	%		9.02	%⁽⁴⁾		2.20	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	2,168,596		$	1,777,329		$	528,088
Ratio of expenses to average net assets		1.17	%		1.20	%		1.32	%⁽⁶⁾
Net investment income (loss) to average net assets		0.06	%		(0.80	)%		(1.04	)%⁽⁶⁾
Portfolio turnover		28	%		38	%		6	%
	Class B
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽⁵⁾
Net asset value, beginning of period	$	10.98		$	10.19		$	10.00
Net investment income (loss)⁽¹⁾		(0.09	)		(0.17	)		(0.08	)
Net realized and unrealized gain from investment activities		0.37			1.00			0.27
Total income from investment operations		0.28			0.83			0.19
Dividends from net investment income		—			(0.04	)		—
Net increase from payment by advisor		—			0.00	⁽³⁾		—
Net asset value, end of period	$	11.26		$	10.98		$	10.19
Total investment return⁽²⁾		2.64	%		8.09	%⁽⁴⁾		1.90	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	25,790		$	30,051		$	14,815
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment		1.95	%		1.98	%		2.11	%⁽⁶⁾
After expense reimbursement/recoupment		1.95	%		1.99	%		2.10	%⁽⁶⁾
Net investment income (loss) to average net assets		(0.78	)%		(1.59	)%		(1.82	)%⁽⁶⁾
Portfolio turnover		28	%		38	%		6	%

⁽¹⁾ The net investment income (loss) per share data was determined by using average shares outstanding throughout the period.

	Class C
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽⁵⁾
Net asset value, beginning of period	$	10.97		$	10.19		$	10.00
Net investment income (loss)⁽¹⁾		(0.08	)		(0.17	)		(0.08	)
Net realized and unrealized gain from investment activities		0.37			1.00			0.27
Total income from investment operations		0.29			0.83			0.19
Dividends from net investment income		—			(0.05	)		—
Net increase from payment by advisor		—			0.00	⁽³⁾		—
Net asset value, end of period	$	11.26		$	10.97		$	10.19
Total investment return⁽²⁾		2.64	%		8.15	%⁽⁴⁾		1.90	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	579,916		$	520,754		$	202,891
Ratio of expenses to average net assets		1.93	%		1.97	%		2.09	%⁽⁶⁾
Net investment income (loss) to average net assets		(0.72	)%		(1.57	)%		(1.81	)%⁽⁶⁾
Portfolio turnover		28	%		38	%		6	%
	Class Y
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽⁵⁾
Net asset value, beginning of period	$	11.07		$	10.23		$	10.00
Net investment income (loss)⁽¹⁾		0.05			(0.06	)		(0.03	)
Net realized and unrealized gain from investment activities		0.36			1.02			0.26
Total income from investment operations		0.41			0.96			0.23
Dividends from net investment income		0.00	⁽³⁾		(0.12	)		—
Net increase from payment by advisor		—			0.00	⁽³⁾		—
Net asset value, end of period	$	11.48		$	11.07		$	10.23
Total investment return⁽²⁾		3.80	%		9.28	%⁽⁴⁾		2.30	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	478,785		$	293,004		$	56,220
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment		0.89	%		0.92	%		1.00	%⁽⁶⁾
After expense reimbursement/recoupment		0.89	%		0.92	%		1.00	%⁽⁶⁾
Net investment income (loss) to average net assets		0.40	%		(0.52	)%		(0.72	)%⁽⁶⁾
Portfolio turnover		28	%		38	%		6	%

⁽²⁾ Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.

⁽³⁾ Amount represents less than $0.005 per share.

⁽⁴⁾ During the fiscal year ended June 30, 2006, the Fund's total investment return included a reimbursement by the Investment Advisor for amounts relating to a trading error that had an impact on the total return of less than 0.005%.

⁽⁵⁾ For the period January 27, 2005 (commencement of operations) through June 30, 2005.

⁽⁶⁾ Annualized.

176

See accompanying notes to financial statements.
177

UBS Global Allocation Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	13.86		$	13.33		$	12.35		$	10.69		$	10.60
Net investment income⁽¹⁾		0.19			0.19			0.17			0.12			0.10
Net realized and unrealized gain from investment activities		1.83			1.08			1.32			1.69			0.41
Total income from investment operations		2.02			1.27			1.49			1.81			0.51
Dividends from net investment income		(0.27	)		(0.14	)		(0.19	)		(0.15	)		(0.42	)
Distributions from net realized gains		(0.80	)		(0.60	)		(0.32	)		—			—
Total dividends/distributions		(1.07	)		(0.74	)		(0.51	)		(0.15	)		(0.42	)
Net asset value, end of year	$	14.81		$	13.86		$	13.33		$	12.35		$	10.69
Total investment return⁽²⁾		14.93	%		9.72	%		12.11	%		17.02	%		5.35	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	3,094,036		$	2,246,289		$	1,594,113		$	876,636		$	175,415
Ratio of expenses to average net assets		1.13	%		1.14	%		1.20	%		1.28	%		1.35	%
Net investment income to average net assets		1.28	%		1.41	%		1.34	%		1.00	%		0.98	%
Portfolio turnover		74	%		83	%		84	%		78	%		66	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	13.60		$	13.08		$	12.14		$	10.55		$	10.52
Net investment income⁽¹⁾		0.07			0.08			0.08			0.02			0.02
Net realized and unrealized gain from investment activities		1.79			1.06			1.29			1.68			0.41
Total income from investment operations		1.86			1.14			1.37			1.70			0.43
Dividends from net investment income		(0.14	)		(0.02	)		(0.11	)		(0.11	)		(0.40	)
Distributions from net realized gains		(0.80	)		(0.60	)		(0.32	)		—			—
Total dividends/distributions		(0.94	)		(0.62	)		(0.43	)		(0.11	)		(0.40	)
Net asset value, end of year	$	14.52		$	13.60		$	13.08		$	12.14		$	10.55
Total investment return⁽²⁾		13.96	%		8.81	%		11.24	%		16.14	%		4.60	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	139,061		$	161,704		$	184,359		$	153,481		$	49,573
Ratio of expenses to average net assets		1.93	%		1.95	%		1.96	%		2.09	%		2.10	%
Net investment income to average net assets		0.48	%		0.60	%		0.58	%		0.19	%		0.23	%
Portfolio turnover		74	%		83	%		84	%		78	%		66	%

⁽¹⁾ The net investment income per share data was determined by using average shares outstanding throughout the year.

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	13.58		$	13.09		$	12.15		$	10.56		$	10.54
Net investment income⁽¹⁾		0.07			0.09			0.09			0.03			0.02
Net realized and unrealized gain from investment activities		1.79			1.05			1.29			1.68			0.41
Total income from investment operations		1.86			1.14			1.38			1.71			0.43
Dividends from net investment income		(0.16	)		(0.05	)		(0.12	)		(0.12	)		(0.41	)
Distributions from net realized gains		(0.80	)		(0.60	)		(0.32	)		—			—
Total dividends/distributions		(0.96	)		(0.65	)		(0.44	)		(0.12	)		(0.41	)
Net asset value, end of year	$	14.48		$	13.58		$	13.09		$	12.15		$	10.56
Total investment return⁽²⁾		14.02	%		8.82	%		11.32	%		16.19	%		4.55	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	1,274,539		$	1,044,517		$	903,280		$	539,399		$	137,078
Ratio of expenses to average net assets		1.90	%		1.91	%		1.95	%		2.06	%		2.10	%
Net investment income to average net assets		0.51	%		0.64	%		0.59	%		0.23	%		0.23	%
Portfolio turnover		74	%		83	%		84	%		78	%		66	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	14.06		$	13.51		$	12.50		$	10.79		$	10.69
Net investment income⁽¹⁾		0.23			0.23			0.22			0.15			0.12
Net realized and unrealized gain from investment activities		1.85			1.09			1.33			1.73			0.41
Total income from investment operations		2.08			1.32			1.55			1.88			0.53
Dividends from net investment income		(0.30	)		(0.17	)		(0.22	)		(0.17	)		(0.43	)
Distributions from net realized gains		(0.80	)		(0.60	)		(0.32	)		—			—
Total dividends/distributions		(1.10	)		(0.77	)		(0.54	)		(0.17	)		(0.43	)
Net asset value, end of year	$	15.04		$	14.06		$	13.51		$	12.50		$	10.79
Total investment return⁽²⁾		15.18	%		9.98	%		12.40	%		17.44	%		5.50	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	648,479		$	463,122		$	356,154		$	263,675		$	193,758
Ratio of expenses to average net assets		0.88	%		0.88	%		0.93	%		1.02	%		1.10	%
Net investment income to average net assets		1.53	%		1.67	%		1.61	%		1.26	%		1.23	%
Portfolio turnover		74	%		83	%		84	%		78	%		66	%

⁽²⁾ Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.

178

See accompanying notes to financial statements.
179

UBS Global Equity Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	12.99		$	11.63		$	10.51		$	8.89		$	9.37
Net investment income⁽¹⁾		0.13			0.11			0.15			0.10			0.16
Net realized and unrealized gain (loss) from investment activities		2.47			1.32			0.97			1.63			(0.39	)
Total income (loss) from investment operations		2.60			1.43			1.12			1.73			(0.23	)
Dividends from net investment income		(0.12	)		(0.07	)		—			(0.11	)		(0.25	)
Net asset value, end of year	$	15.47		$	12.99		$	11.63		$	10.51		$	8.89
Total investment return⁽²⁾		20.11	%		12.35	%		10.66	%		19.49	%		(2.23	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	168,208		$	173,052		$	109,998		$	117,084		$	123,756
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.35	%		1.37	%		1.39	%		1.44	%		1.44	%
After expense reimbursement and earnings credits		1.25	%		1.25	%		1.25	%		1.25	%		1.25	%
Net investment income to average net assets		0.91	%		0.88	%		1.35	%		0.99	%		1.92	%
Portfolio turnover		32	%		48	%		37	%		50	%		206	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	12.69		$	11.39		$	10.37		$	8.82		$	9.34
Net investment income⁽¹⁾		0.01			0.02			0.07			0.02			0.10
Net realized and unrealized gain (loss) from investment activities		2.43			1.28			0.95			1.62			(0.39	)
Total income (loss) from investment operations		2.44			1.30			1.02			1.64			(0.29	)
Dividends from net investment income		(0.02	)		—			—			(0.09	)		(0.23	)
Net asset value, end of year	$	15.11		$	12.69		$	11.39		$	10.37		$	8.82
Total investment return⁽²⁾		19.25	%		11.41	%		9.84	%		18.61	%		(2.91	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	7,439		$	13,672		$	108,894		$	134,419		$	144,232
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.17	%		2.35	%		2.22	%		2.27	%		2.20	%
After expense reimbursement and earnings credits		2.00	%		2.00	%		2.00	%		2.00	%		2.00	%
Net investment income to average net assets		0.10	%		0.13	%		0.60	%		0.24	%		1.17	%
Portfolio turnover		32	%		48	%		37	%		50	%		206	%

(1) The net investment income per share data was determined by using average shares outstanding throughout the year.

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	12.65		$	11.35		$	10.33		$	8.79		$	9.33
Net investment income⁽¹⁾		0.02			0.02			0.06			0.02			0.10
Net realized and unrealized gain (loss) from investment activities		2.42			1.28			0.96			1.61			(0.40	)
Total income (loss) from investment operations		2.44			1.30			1.02			1.63			(0.30	)
Dividends from net investment income		(0.07	)		—			—			(0.09	)		(0.24	)
Net asset value, end of year	$	15.02		$	12.65		$	11.35		$	10.33		$	8.79
Total investment return⁽²⁾		19.28	%		11.45	%		9.87	%		18.54	%		(2.93	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	52,378		$	56,836		$	68,735		$	82,684		$	93,605
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.14	%		2.20	%		2.20	%		2.28	%		2.24	%
After expense reimbursement and earnings credits		2.00	%		2.00	%		2.00	%		2.00	%		2.00	%
Net investment income to average net assets		0.16	%		0.13	%		0.60	%		0.25	%		1.17	%
Portfolio turnover		32	%		48	%		37	%		50	%		206	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	13.23		$	11.83		$	10.67		$	8.99		$	9.47
Net investment income⁽¹⁾		0.17			0.15			0.18			0.13			0.18
Net realized and unrealized gain (loss) from investment activities		2.52			1.34			0.98			1.67			(0.39	)
Total income (loss) from investment operations		2.69			1.49			1.16			1.80			(0.21	)
Dividends from net investment income		(0.14	)		(0.09	)		—			(0.12	)		(0.27	)
Net asset value, end of year	$	15.78		$	13.23		$	11.83		$	10.67		$	8.99
Total investment return⁽²⁾		20.44	%		12.67	%		10.87	%		20.09	%		(1.93	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	180,027		$	180,990		$	159,252		$	114,835		$	62,873
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		0.99	%		0.99	%		1.04	%		1.03	%		1.16	%
After expense reimbursement and earnings credits		0.99	%		0.99	%		1.00	%		1.00	%		1.00	%
Net investment income to average net assets		1.16	%		1.14	%		1.60	%		1.24	%		2.17	%
Portfolio turnover		32	%		48	%		37	%		50	%		206	%

(2) Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.

180

See accompanying notes to financial statements.
181

UBS International Equity Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.98		$	9.48		$	8.58		$	6.99		$	8.08
Net investment income⁽¹⁾		0.17			0.16			0.15			0.12			0.10
Net realized and unrealized gain (loss) from investment activities		2.47			1.81			0.86			1.69			(0.87	)
Total income (loss) from investment operations		2.64			1.97			1.01			1.81			(0.77	)
Dividends from net investment income		(0.11	)		(0.10	)		(0.11	)		(0.22	)		(0.31	)
Distributions from net realized gains		(0.52	)		(0.37	)		—			—			(0.01	)
Total dividends/distributions		(0.63	)		(0.47	)		(0.11	)		(0.22	)		(0.32	)
Net asset value, end of year	$	12.99		$	10.98		$	9.48		$	8.58		$	6.99
Total investment return⁽²⁾		24.84	%		20.93	%		11.73	%		26.00	%		(9.24	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	26,564		$	23,539		$	15,168		$	7,866		$	3,146
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.38	%⁽³⁾		1.48	%		1.68	%		1.55	%		1.47	%
After expense reimbursement and earnings credits		1.26	%⁽³⁾		1.25	%		1.25	%		1.25	%		1.25	%
Net investment income to average net assets		1.42	%		1.52	%		1.61	%		1.43	%		1.43	%
Portfolio turnover		72	%		69	%		71	%		108	%		120	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.82		$	9.34		$	8.48		$	6.92		$	8.05
Net investment income⁽¹⁾		0.06			0.08			0.08			0.06			0.04
Net realized and unrealized gain (loss) from investment activities		2.46			1.77			0.85			1.67			(0.86	)
Total income (loss) from investment operations		2.52			1.85			0.93			1.73			(0.82	)
Dividends from net investment income		(0.01	)		—			(0.07	)		(0.17	)		(0.30	)
Distributions from net realized gains		(0.52	)		(0.37	)		—			—			(0.01	)
Total dividends/distributions		(0.53	)		(0.37	)		(0.07	)		(0.17	)		(0.31	)
Net asset value, end of year	$	12.81		$	10.82		$	9.34		$	8.48		$	6.92
Total investment return⁽²⁾		23.97	%		19.86	%		10.92	%		25.17	%		(9.94	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	555		$	732		$	876		$	815		$	352
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.25	%⁽³⁾		2.22	%		2.25	%		2.60	%		2.18	%
After expense reimbursement and earnings credits		2.01	%⁽³⁾		2.00	%		2.00	%		2.00	%		2.00	%
Net investment income to average net assets		0.51	%		0.77	%		0.86	%		0.69	%		0.68	%
Portfolio turnover		72	%		69	%		71	%		108	%		120	%

⁽¹⁾  The net investment income per share data was determined by using average shares outstanding throughout the year.
⁽²⁾  Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.
⁽³⁾  Includes interest expense of 0.01%.

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.76		$	9.30		$	8.45		$	6.90		$	8.05
Net investment income⁽¹⁾		0.08			0.08			0.08			0.06			0.04
Net realized and unrealized gain (loss) from investment activities		2.42			1.77			0.85			1.68			(0.89	)
Total income (loss) from investment operations		2.50			1.85			0.93			1.74			(0.85	)
Dividends from net investment income		(0.03	)		(0.02	)		(0.08	)		(0.19	)		(0.29	)
Distributions from net realized gains		(0.52	)		(0.37	)		—			—			(0.01	)
Total dividends/distributions		(0.55	)		(0.39	)		(0.08	)		(0.19	)		(0.30	)
Net asset value, end of year	$	12.71		$	10.76		$	9.30		$	8.45		$	6.90
Total investment return⁽²⁾		23.85	%		19.93	%		10.97	%		25.26	%		(10.29	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	2,576		$	2,412		$	1,816		$	1,338		$	399
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.16	%⁽³⁾		2.17	%		2.16	%		2.35	%		2.21	%
After expense reimbursement and earnings credits		2.01	%⁽³⁾		2.01	%		2.00	%		2.00	%		2.00	%
Net investment income to average net assets		0.66	%		0.77	%		0.86	%		0.69	%		0.68	%
Portfolio turnover		72	%		69	%		71	%		108	%		120	%
	Class Y
	Year Ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	11.04		$	9.55		$	8.63		$	7.01		$	8.12
Net investment income⁽¹⁾		0.20			0.19			0.17			0.14			0.11
Net realized and unrealized gain (loss) from investment activities		2.49			1.79			0.86			1.71			(0.88	)
Total income (loss) from investment operations		2.69			1.98			1.03			1.85			(0.77	)
Dividends from net investment income		(0.14	)		(0.12	)		(0.11	)		(0.23	)		(0.33	)
Distributions from net realized gains		(0.52	)		(0.37	)		—			—			(0.01	)
Total dividends/distributions		(0.66	)		(0.49	)		(0.11	)		(0.23	)		(0.34	)
Net asset value, end of year	$	13.07		$	11.04		$	9.55		$	8.63		$	7.01
Total investment return⁽²⁾		24.83	%		21.22	%		11.97	%		26.56	%		(9.21	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	172,150		$	147,397		$	113,264		$	100,782		$	90,514
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.16	%⁽³⁾		1.19	%		1.18	%		1.26	%		1.21	%
After expense reimbursement and earnings credits		1.01	%⁽³⁾		1.00	%		1.00	%		1.00	%		1.00	%
Net investment income to average net assets		1.63	%		1.77	%		1.86	%		1.69	%		1.68	%
Portfolio turnover		72	%		69	%		71	%		108	%		120	%

182

See accompanying notes to financial statements.
183

UBS U.S. Equity Alpha Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.

	Class A
	For the period ended June 30, 2007⁽³⁾
Net asset value, beginning of period	$	10.00
Net investment income (loss)⁽¹⁾		0.02
Net realized and unrealized gain from investment activities		1.55
Total income from investment operations		1.57
Dividends from net investment income		(0.01	)
Distributions from net realized gains		(0.01	)
Total dividends/distributions		(0.02	)
Net asset value, end of period	$	11.55
Total investment return⁽²⁾		15.73	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	187,444
Ratio of expenses to average net assets:
Before expense reimbursement and after interest and dividend expense for securities sold short		1.93	%⁽⁴⁾
After expense reimbursement and interest and dividend income for securities sold short		1.88	%⁽⁴⁾
After expense reimbursement and before interest and dividend expense for securities sold short		1.50	%⁽⁴⁾
Net investment income (loss) to average net assets		0.30	%⁽⁴⁾
Portfolio turnover		81	%


Net asset value, beginning of period
Net investment income⁽¹⁾
Net realized and unrealized gain from investment activities
Total income from investment operations
Dividends from net investment income
Distributions from net realized gains
Total dividends/distributions
Net asset value, end of period
Total investment return⁽²⁾
Ratios/Supplemental data:
Net assets, end of period (in 000s)
Ratio of expenses to average net assets:
Before expense reimbursement and after interest and dividend expense for securities sold short
After expense reimbursement and interest and dividend expense for securities sold short
After expense reimbursement and before interest and dividend expense for securities sold short
Net investment income to average net assets:
Portfolio turnover

⁽¹⁾ The net investment income (loss) per share data was determined by using average shares outstanding throughout the period.

	Class C
	For the period ended June 30, 2007⁽³⁾
Net asset value, beginning of period	$	10.00
Net investment income (loss)⁽¹⁾		(0.04	)
Net realized and unrealized gain from investment activities		1.55
Total income from investment operations		1.51
Dividends from net investment income		0.00
Distributions from net realized gains		(0.01	)
Total dividends/distributions		(0.01	)
Net asset value, end of period	$	11.50
Total investment return⁽²⁾		15.12	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	42,750
Ratio of expenses to average net assets:
Before expense reimbursement and after interest and dividend expense for securities sold short		2.72	%⁽⁴⁾
After expense reimbursement and interest and dividend income for securities sold short		2.64	%⁽⁴⁾
After expense reimbursement and before interest and dividend expense for securities sold short		2.25	%⁽⁴⁾
Net investment income (loss) to average net assets		(0.44	)%⁽⁴⁾
Portfolio turnover		81	%
	Class Y
	For the period ended June 30, 2007⁽³⁾
Net asset value, beginning of period	$	10.00
Net investment income⁽¹⁾		0.04
Net realized and unrealized gain from investment activities		1.54
Total income from investment operations		1.58
Dividends from net investment income		(0.02	)
Distributions from net realized gains		(0.01	)
Total dividends/distributions		(0.03	)
Net asset value, end of period	$	11.55
Total investment return⁽²⁾		15.88	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	5,405
Ratio of expenses to average net assets:
Before expense reimbursement and after interest and dividend expense for securities sold short		1.67	%⁽⁴⁾
After expense reimbursement and interest and dividend expense for securities sold short		1.67	%⁽⁴⁾
After expense reimbursement and before interest and dividend expense for securities sold short		1.25	%⁽⁴⁾
Net investment income to average net assets:		0.43	%⁽⁴⁾
Portfolio turnover		81	%

⁽³⁾ For the period September 26, 2006 (commencement of operations) through June 30, 2007.

⁽⁴⁾ Annualized.

See accompanying notes to financial statements.
184

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185

UBS U.S. Large Cap Equity Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout each
period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	18.24		$	17.27		$	16.08		$	13.63		$	13.94
Net investment income (loss)⁽¹⁾		0.15			0.10			0.15			0.06			0.11
Net realized and unrealized gain from investment activities		3.52			1.39			1.63			2.54			0.04
Total income from investment operations		3.67			1.49			1.78			2.60			0.15
Dividends from net investment income		(0.10	)		(0.11	)		(0.11	)		(0.15	)		(0.08	)
Distributions from net realized gains		(0.62	)		(0.41	)		(0.48	)		—			(0.38	)
Total dividends/distributions		(0.72	)		(0.52	)		(0.59	)		(0.15	)		(0.46	)
Net asset value, end of year	$	21.19		$	18.24		$	17.27		$	16.08		$	13.63
Total investment return⁽²⁾		20.39	%		8.62	%		11.10	%		19.10	%		1.37	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	158,138		$	88,968		$	25,669		$	7,886		$	4,702
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		1.18	%		1.20	%		1.14	%		1.36	%		1.30	%
After expense reimbursement/recoupment and earnings credits		1.18	%		1.24	%		1.14	%		1.30	%		1.05	%
Net investment income (loss) to average net assets		0.75	%		0.54	%		0.89	%		0.43	%		0.89	%
Portfolio turnover		34	%		50	%		32	%		43	%		33	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	17.84		$	16.94		$	15.81		$	13.45		$	13.87
Net investment income (loss)⁽¹⁾		(0.00	)⁽³⁾		(0.04	)		0.00	⁽³⁾		(0.05	)		0.02
Net realized and unrealized gain from investment activities		3.44			1.35			1.61			2.50			0.02
Total income from investment operations		3.44			1.31			1.61			2.45			0.04
Dividends from net investment income		—			—			—			(0.09	)		(0.08	)
Distributions from net realized gains		(0.62	)		(0.41	)		(0.48	)		—			(0.38	)
Total dividends/distributions		(0.62	)		(0.41	)		(0.48	)		(0.09	)		(0.46	)
Net asset value, end of year	$	20.66		$	17.84		$	16.94		$	15.81		$	13.45
Total investment return⁽²⁾		19.50	%		7.73	%		10.19	%		18.25	%		0.63	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	870		$	989		$	1,018		$	1,217		$	635
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		1.95	%		1.92	%		2.02	%		2.04	%		2.04	%
After expense reimbursement/recoupment and earnings credits		1.95	%		2.01	%		2.02	%		2.04	%		1.80	%
Net investment income (loss) to average net assets		(0.01	)%		(0.23	)%		0.01	%		(0.31	)%		0.14	%
Portfolio turnover		34	%		50	%		32	%		43	%		33	%

⁽¹⁾  The net investment income (loss) per share data was determined by using average shares outstanding throughout the year.
⁽²⁾  Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.
⁽³⁾  Amount represents less than $0.005 per share.

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	17.83		$	16.93		$	15.80		$	13.44		$	13.88
Net investment income (loss)⁽¹⁾		0.00	⁽³⁾		(0.04	)		0.01			(0.04	)		0.02
Net realized and unrealized gain from investment activities		3.45			1.36			1.60			2.49			0.03
Total income from investment operations		3.45			1.32			1.61			2.45			0.05
Dividends from net investment income		—			(0.01	)		—			(0.09	)		(0.11	)
Distributions from net realized gains		(0.62	)		(0.41	)		(0.48	)		—			(0.38	)
Total dividends/distributions		(0.62	)		(0.42	)		(0.48	)		(0.09	)		(0.49	)
Net asset value, end of year	$	20.66		$	17.83		$	16.93		$	15.80		$	13.44
Total investment return⁽²⁾		19.56	%		7.79	%		10.20	%		18.26	%		0.68	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	10,591		$	5,977		$	2,423		$	1,629		$	1,020
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		1.92	%		1.96	%		1.95	%		2.00	%		2.04	%
After expense reimbursement/recoupment and earnings credits		1.92	%		1.98	%		1.95	%		2.00	%		1.80	%
Net investment income (loss) to average net assets		0.01	%		(0.20	)%		0.08	%		(0.27	)%		0.14	%
Portfolio turnover		34	%		50	%		32	%		43	%		33	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	18.43		$	17.42		$	16.21		$	13.73		$	14.07
Net investment income (loss)⁽¹⁾		0.21			0.15			0.19			0.12			0.14
Net realized and unrealized gain from investment activities		3.56			1.40			1.65			2.55			0.04
Total income from investment operations		3.77			1.55			1.84			2.67			0.18
Dividends from net investment income		(0.14	)		(0.13	)		(0.15	)		(0.19	)		(0.14	)
Distributions from net realized gains		(0.62	)		(0.41	)		(0.48	)		—			(0.38	)
Total dividends/distributions		(0.76	)		(0.54	)		(0.63	)		(0.19	)		(0.52	)
Net asset value, end of year	$	21.44		$	18.43		$	17.42		$	16.21		$	13.73
Total investment return⁽²⁾		20.73	%		8.91	%		11.37	%		19.50	%		1.69	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	833,023		$	543,099		$	367,268		$	153,608		$	99,398
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		0.89	%		0.92	%		0.90	%		0.96	%		1.04	%
After expense reimbursement/recoupment and earnings credits		0.89	%		0.97	%		0.90	%		0.96	%		0.80	%
Net investment income (loss) to average net assets		1.04	%		0.81	%		1.13	%		0.76	%		1.14	%
Portfolio turnover		34	%		50	%		32	%		43	%		33	%

186

See accompanying notes to financial statements.
187

UBS U.S. Large Cap Growth Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	8.81		$	8.21		$	7.71		$	6.39		$	6.38
Net investment income (loss)⁽¹⁾		0.01			(0.01	)		0.00	⁽³⁾		(0.02	)		0.00	⁽³⁾
Net realized and unrealized gain from investment activities		1.87			0.61			0.50			1.34			0.01
Total income (loss) from investment operations		1.88			0.60			0.50			1.32			0.01
Dividends from net investment income		(0.01	)		(0.00	)⁽³⁾		—			—			—
Net asset value, end of year	$	10.68		$	8.81		$	8.21		$	7.71		$	6.39
Total investment return⁽²⁾		21.29	%		7.33	%		6.49	%		20.66	%		0.16	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	9,542		$	6,803		$	3,175		$	2,275		$	1,163
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.68	%		2.33	%		3.19	%		2.76	%		3.91	%
After expense reimbursement and earnings credits		1.05	%		1.05	%		1.05	%		1.05	%		1.05	%
Net investment income (loss) to average net assets:		0.12	%		(0.16	)%		0.04	%		(0.32	)%		0.04	%
Portfolio turnover		112	%		137	%		145	%		102	%		86	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	8.52		$	8.00		$	7.57		$	6.32		$	6.36
Net investment income (loss)⁽¹⁾		(0.06	)		(0.08	)		(0.05	)		(0.08	)		(0.04	)
Net realized and unrealized gain (loss) from investment activities		1.80			0.60			0.48			1.33			—
Total income (loss) from investment operations		1.74			0.52			0.43			1.25			(0.04	)
Dividends from net investment income		—			—			—			—			—
Net asset value, end of year	$	10.26		$	8.52		$	8.00		$	7.57		$	6.32
Total investment return⁽²⁾		20.42	%		6.50	%		5.68	%		19.78	%		(0.63	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	216		$	389		$	564		$	342		$	321
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.61	%		3.23	%		3.93	%		3.48	%		4.54	%
After expense reimbursement and earnings credits		1.80	%		1.80	%		1.80	%		1.80	%		1.80	%
Net investment income (loss) to average net assets:		(0.64	)%		(0.91	)%		(0.71	)%		(1.07	)%		(0.71	)%
Portfolio turnover		112	%		137	%		145	%		102	%		86	%

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	8.53		$	8.00		$	7.56		$	6.32		$	6.35
Net investment income (loss)⁽¹⁾		(0.06	)		(0.08	)		(0.05	)		(0.08	)		(0.04	)
Net realized and unrealized gain from investment activities		1.79			0.61			0.49			1.32			0.01
Total income (loss) from investment operations		1.73			0.53			0.44			1.24			(0.03	)
Dividends from net investment income		—			—			—			—			—
Net asset value, end of year	$	10.26		$	8.53		$	8.00		$	7.56		$	6.32
Total investment return⁽²⁾		20.28	%		6.63	%		5.82	%		19.62	%		(0.47	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	986		$	814		$	407		$	432		$	267
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.51	%		3.12	%		3.96	%		3.54	%		4.71	%
After expense reimbursement and earnings credits		1.80	%		1.80	%		1.80	%		1.80	%		1.80	%
Net investment income (loss) to average net assets:		(0.64	)%		(0.91	)%		(0.71	)%		(1.08	)%		(0.71	)%
Portfolio turnover		112	%		137	%		145	%		102	%		86	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	9.02		$	8.38		$	7.85		$	6.49		$	6.47
Net investment income (loss)⁽¹⁾		0.04			0.01			0.02			(0.01	)		0.02
Net realized and unrealized gain (loss) from investment activities		1.90			0.64			0.51			1.37			0.00	⁽³⁾
Total income (loss) from investment operations		1.94			0.65			0.53			1.36			0.02
Dividends from net investment income		(0.02	)		(0.01	)		—			—			—
Net asset value, end of year	$	10.94			9.02		$	8.38		$	7.85		$	6.49
Total investment return⁽²⁾		21.51	%		7.72	%		6.75	%		20.96	%		0.31	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	62,529		$	4,797		$	3,078		$	3,502		$	1,943
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.25	%		2.10	%		3.01	%		2.51	%		3.72	%
After expense reimbursement and earnings credits		0.80	%		0.80	%		0.80	%		0.80	%		0.80	%
Net investment income (loss) to average net assets:		0.35	%		0.09	%		0.29	%		(0.07	)%		0.29	%
Portfolio turnover		112	%		137	%		145	%		102	%		86	%

188

See accompanying notes to financial statements.
189

UBS U.S. Large Cap Value Equity Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.54		$	10.48		$	11.18		$	9.31		$	9.37
Net investment income⁽¹⁾		0.13			0.11			0.12			0.09			0.11
Net realized and unrealized gain (loss) from investment activities		2.03			1.12			1.22			1.80			(0.06	)
Total income (loss) from investment operations		2.16			1.23			1.34			1.89			0.05
Dividends from net investment income		(0.11	)		(0.12	)		(0.12	)		(0.02	)		(0.05	)
Distributions from net realized gains		(0.93	)		(1.05	)		(1.92	)		—			(0.06	)
Total dividends/distributions		(1.04	)		(1.17	)		(2.04	)		(0.02	)		(0.11	)
Net asset value, end of year	$	11.66		$	10.54		$	10.48		$	11.18		$	9.31
Total investment return⁽²⁾		21.20	%		12.13	%		12.35	%		20.28	%		0.61	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	113,213		$	105,709		$	105,975		$	108,369		$	1,073
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.29	%		1.31	%		1.39	%		1.42	%		2.85	%
After expense reimbursement and earnings credits		1.10	%		1.10	%		1.10	%		1.10	%		1.10	%
Net investment income to average net assets		1.12	%		1.07	%		1.09	%		0.86	%		1.33	%
Portfolio turnover		27	%		41	%		49	%		170	%		59	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.39		$	10.31		$	10.99		$	9.21		$	9.32
Net investment income⁽¹⁾		0.04			0.03			0.04			0.01			0.05
Net realized and unrealized gain (loss) from investment activities		2.00			1.10			1.20			1.77			(0.07	)
Total income (loss) from investment operations		2.04			1.13			1.24			1.78			(0.02	)
Dividends from net investment income		—			—			—			(0.00	)⁽³⁾		(0.03	)
Distributions from net realized gains		(0.93	)		(1.05	)		(1.92	)		—			(0.06	)
Total dividends/distributions		(0.93	)		(1.05	)		(1.92	)		(0.00	)		(0.09	)
Net asset value, end of year	$	11.50		$	10.39		$	10.31		$	10.99		$	9.21
Total investment return⁽²⁾		20.21	%		11.25	%		11.59	%		19.38	%		(0.17	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	1,061		$	1,978		$	4,997		$	14,556		$	709
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.19	%		2.15	%		2.35	%		2.31	%		3.42	%
After expense reimbursement and earnings credits		1.85	%		1.85	%		1.85	%		1.85	%		1.85	%
Net investment income to average net assets		0.39	%		0.32	%		0.34	%		0.11	%		0.58	%
Portfolio turnover		27	%		41	%		49	%		170	%		59	%

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.34		$	10.30		$	11.00		$	9.22		$	9.33
Net investment income⁽¹⁾		0.04			0.03			0.04			0.01			0.05
Net realized and unrealized gain (loss) from investment activities		1.99			1.10			1.20			1.77			(0.07	)
Total income (loss) from investment operations		2.03			1.13			1.24			1.78			(0.02	)
Dividends from net investment income		(0.02	)		(0.04	)		(0.02	)		(0.00	)⁽³⁾		(0.03	)
Distributions from net realized gains		(0.93	)		(1.05	)		(1.92	)		—			(0.06	)
Total dividends/distributions		(0.95	)		(1.09	)		(1.94	)		(0.00	)		(0.09	)
Net asset value, end of year	$	11.42		$	10.34		$	10.30		$	11.00		$	9.22
Total investment return⁽²⁾		20.24	%		11.26	%		11.62	%		19.34	%		(0.13	)%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	15,919		$	15,683		$	17,235		$	19,530		$	1,025
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.06	%		2.08	%		2.19	%		2.17	%		3.04	%
After expense reimbursement and earnings credits		1.85	%		1.85	%		1.85	%		1.85	%		1.85	%
Net investment income to average net assets		0.37	%		0.32	%		0.34	%		0.11	%		0.58	%
Portfolio turnover		27	%		41	%		49	%		170	%		59	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.58		$	10.52		$	11.22		$	9.33		$	9.38
Net investment income⁽¹⁾		0.15			0.14			0.14			0.11			0.13
Net realized and unrealized gain (loss) from investment activities		2.05			1.12			1.24			1.80			(0.06	)
Total income (loss) from investment operations		2.20			1.26			1.38			1.91			0.07
Dividends from net investment income		(0.14	)		(0.15	)		(0.16	)		(0.02	)		(0.06	)
Distributions from net realized gains		(0.93	)		(1.05	)		(1.92	)		—			(0.06	)
Total dividends/distributions		(1.07	)		(1.20	)		(2.08	)		(0.02	)		(0.12	)
Net asset value, end of year	$	11.71		$	10.58		$	10.52		$	11.22		$	9.33
Total investment return⁽²⁾		21.52	%		12.37	%		12.74	%		20.49	%		0.89	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	9,074		$	7,172		$	5,760		$	4,516		$	4,790
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.06	%		1.06	%		1.13	%		1.27	%		2.62	%
After expense reimbursement and earnings credits		0.85	%		0.85	%		0.85	%		0.85	%		0.85	%
Net investment income to average net assets		1.36	%		1.32	%		1.34	%		1.10	%		1.58	%
Portfolio turnover		27	%		41	%		49	%		170	%		59	%

190

See accompanying notes to financial statements.
191

UBS U.S. Mid Cap Growth Equity Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A						Class C
	For the year ended June 30, 2007			For the period ended June 30, 2006⁽³⁾			For the year ended June 30, 2007			For the period ended June 30, 2006⁽⁵⁾
Net asset value, beginning of period	$	9.60		$	10.15		$	9.58		$	10.41
Net investment loss⁽¹⁾		(0.10	)		(0.02	)		(0.17	)		(0.03	)
Net realized and unrealized gain (loss) from investment activities		1.63			(0.53	)		1.62			(0.80	)
Total income (loss) from investment operations		1.53			(0.55	)		1.45			(0.83	)
Net asset value, end of period	$	11.13		$	9.60		$	11.03		$	9.58
Total investment return⁽²⁾		15.94	%		(5.42	)%		15.14	%		(7.97	)%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	261		$	162		$	82		$	67
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		4.61	%		6.59	%⁽⁴⁾		5.10	%		7.52	%⁽⁴⁾
After expense reimbursement and earnings credits		1.45	%		1.45	%⁽⁴⁾		2.20	%		2.20	%⁽⁴⁾
Net investment loss to average net assets		(0.99	)%		(0.87	)%⁽⁴⁾		(1.73	)%		(1.62	)%⁽⁴⁾
Portfolio turnover		72	%		12	%		72	%		12	%

	Class Y
	For the year ended June 30, 2007			For the period ended June 30, 2006⁽⁶⁾
Net asset value, beginning of period	$	9.61		$	10.00
Net investment loss⁽¹⁾		(0.07	)		(0.02	)
Net realized and unrealized gain (loss) from investment activities		1.62			(0.37	)
Total income (loss) from investment operations		1.55			(0.39	)
Dividends from net investment income		(0.01	)		—
Net asset value, end of period	$	11.15		$	9.61
Total investment return⁽²⁾		16.17	%		(3.90	)%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	5,580		$	4,805
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		4.31	%		5.90	%⁽⁴⁾
After expense reimbursement and earnings credits		1.20	%		1.20	%⁽⁴⁾
Net investment loss to average net assets		(0.73	)%		(0.61	)%⁽⁴⁾
Portfolio turnover		72	%		12	%

⁽¹⁾ The net investment loss per share data was determined by using average shares outstanding throughout the period.

⁽³⁾ For the period March 31, 2006 (commencent of issuance) through June 30, 2006.

⁽⁴⁾ Annualized.

⁽⁵⁾ For the period April 21, 2006 (commencement of issuance) through June 30, 2006.

⁽⁶⁾ For the period March 27, 2006 (commencement of operations) through June 30, 2006.

See accompanying notes to financial statements.
192

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193

UBS U.S. Small Cap Growth Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	14.41		$	13.65		$	12.41		$	10.00		$	9.79
Net investment loss⁽¹⁾		(0.14	)		(0.12	)		(0.11	)		(0.11	)		(0.08	)
Net realized and unrealized gain from investment activities		2.14			1.45			1.55			2.55			0.29
Total income from investment operations		2.00			1.33			1.44			2.44			0.21
Distributions from net realized gains		(0.47	)		(0.57	)		(0.20	)		(0.03	)		—
Net asset value, end of year	$	15.94		$	14.41		$	13.65		$	12.41		$	10.00
Total investment return⁽²⁾		14.18	%		9.88	%		11.63	%		24.45	%		2.14	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	149,362		$	151,731		$	110,795		$	73,833		$	9,841
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.65	%		1.50	%		1.59	%		1.56	%		1.71	%
After expense reimbursement and earnings credits		1.28	%		1.28	%		1.28	%		1.28	%		1.40	%
Net investment loss to average net assets		(0.93	)%		(0.82	)%		(0.88	)%		(0.90	)%		(0.90	)%
Portfolio turnover		34	%		49	%		50	%		75	%		69	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	13.91		$	13.29		$	12.17		$	9.89		$	9.75
Net investment loss⁽¹⁾		(0.24	)		(0.22	)		(0.20	)		(0.20	)		(0.14	)
Net realized and unrealized gain from investment activities		2.05			1.41			1.52			2.51			0.28
Total income from investment operations		1.81			1.19			1.32			2.31			0.14
Distributions from net realized gains		(0.47	)		(0.57	)		(0.20	)		(0.03	)		—
Net asset value, end of year	$	15.25		$	13.91		$	13.29		$	12.17		$	9.89
Total investment return⁽²⁾		13.32	%		9.09	%		10.86	%		23.40	%		1.44	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	1,798		$	5,598		$	9,592		$	11,683		$	1,132
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.29	%		2.39	%		2.53	%		2.55	%		2.47	%
After expense reimbursement and earnings credits		2.03	%		2.03	%		2.03	%		2.03	%		2.15	%
Net investment loss to average net assets		(1.69	)%		(1.57	)%		1.63	%		(1.62	)%		(1.65	)%
Portfolio turnover		34	%		49	%		50	%		75	%		69	%

⁽¹⁾ The net investment loss per share data was determined by using average shares outstanding throughout the year.
⁽²⁾ Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	13.89		$	13.28		$	12.16		$	9.88		$	9.74
Net investment loss⁽¹⁾		(0.24	)		(0.22	)		(0.20	)		(0.20	)		(0.14	)
Net realized and unrealized gain from investment activities		2.05			1.40			1.52			2.51			0.28
Total income from investment operations		1.81			1.18			1.32			2.31			0.14
Distributions from net realized gains		(0.47	)		(0.57	)		(0.20	)		(0.03	)		—
Net asset value, end of year	$	15.23		$	13.89		$	13.28		$	12.16		$	9.88
Total investment return⁽²⁾		13.33	%		9.02	%		10.87	%		23.43	%		1.44	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	7,877		$	8,329		$	8,661		$	9,580		$	757
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.28	%		2.31	%		2.45	%		2.54	%		2.47	%
After expense reimbursement and earnings credits		2.03	%		2.03	%		2.03	%		2.03	%		2.15	%
Net investment loss to average net assets		(1.68	)%		(1.57	)%		(1.63	)%		(1.63	)%		(1.65	)%
Portfolio turnover		34	%		49	%		50	%		75	%		69	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	14.75		$	13.93		$	12.63		$	10.15		$	9.92
Net investment loss⁽¹⁾		(0.10	)		(0.08	)		(0.08	)		(0.08	)		(0.06	)
Net realized and unrealized gain from investment activities		2.20			1.47			1.58			2.59			0.29
Total income from investment operations		2.10			1.39			1.50			2.51			0.23
Distributions from net realized gains		(0.47	)		(0.57	)		(0.20	)		(0.03	)		—
Net asset value, end of year	$	16.38		$	14.75		$	13.93		$	12.63		$	10.15
Total investment return⁽²⁾		14.54	%		10.12	%		11.90	%		24.78	%		2.32	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	303,029		$	269,696		$	146,725		$	91,406		$	39,785
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.18	%		1.13	%		1.14	%		1.21	%		1.49	%
After expense reimbursement and earnings credits		1.03	%		1.03	%		1.03	%		1.03	%		1.15	%
Net investment loss to average net assets		(0.68	)%		(0.57	)%		(0.63	)%		(0.66	)%		(0.66	)%
Portfolio turnover		34	%		49	%		50	%		75	%		69	%

194

See accompanying notes to financial statements.
195

UBS Absolute Return Bond Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽³⁾
Net asset value, beginning of period	$	10.14		$	9.98		$	10.00
Net investment income⁽¹⁾		0.35			0.28			0.03
Net realized and unrealized gain (loss) from investment activities		(0.06	)		0.18			(0.02	)
Total income from investment operations		0.29			0.46			0.01
Dividends from net investment income		(0.30	)		(0.29	)		(0.03	)
Distributions from net realized gains		(0.08	)		(0.01	)		—
Total dividends/distributions		(0.38	)		(0.30	)		(0.03	)
Net asset value, end of period	$	10.05		$	10.14		$	9.98
Total investment return⁽²⁾		2.87	%		4.65	%		0.06	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	257,180		$	212,983		$	105,373
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		0.95	%		0.96	%		1.31	%⁽⁴⁾
After expense reimbursement/recoupment and earnings credits		0.95	%		0.99	%		1.00	%⁽⁴⁾
Net investment income to average net assets		3.43	%		2.78	%		1.75	%⁽⁴⁾
Portfolio turnover		56	%		96	%		22	%

⁽¹⁾  The net investment income per share data was determined by using average shares outstanding throughout the period.
⁽²⁾  Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.
⁽³⁾  For the period April 27, 2005 (commencement of operations) through June 30, 2005.
⁽⁴⁾  Annualized.

	Class C
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽³⁾
Net asset value, beginning of period	$	10.14		$	9.98		$	10.00
Net investment income⁽¹⁾		0.31			0.24			0.02
Net realized and unrealized gain (loss) from investment activities		(0.06	)		0.18			(0.02	)
Total income from investment operations		0.25			0.42			0.00
Dividends from net investment income		(0.27	)		(0.25	)		(0.02	)
Distributions from net realized gains		(0.08	)		(0.01	)		—
Total dividends/distributions		(0.35	)		(0.26	)		(0.02	)
Net asset value, end of period	$	10.04		$	10.14		$	9.98
Total investment return⁽²⁾		2.42	%		4.30	%		0.01	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	37,548		$	30,618		$	16,973
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		1.29	%		1.32	%		1.68	%⁽⁴⁾
After expense reimbursement/recoupment and earnings credits		1.30	%		1.35	%		1.35	%⁽⁴⁾
Net investment income to average net assets		3.07	%		2.42	%		1.40	%⁽⁴⁾
Portfolio turnover		56	%		96	%		22	%

	Class Y
	Year ended June 30,						For the period ended
	2007			2006			June 30, 2005⁽³⁾
Net asset value, beginning of period	$	10.15		$	9.98		$	10.00
Net investment income⁽¹⁾		0.37			0.30			0.03
Net realized and unrealized gain (loss) from investment activities		(0.07	)		0.19			(0.02	)
Total income from investment operations		0.30			0.49			0.01
Dividends from net investment income		(0.32	)		(0.31	)		(0.03	)
Distributions from net realized gains		(0.08	)		(0.01	)		—
Total dividends/distributions		(0.40	)		(0.32	)		(0.03	)
Net asset value, end of period	$	10.05		$	10.15		$	9.98
Total investment return⁽²⁾		2.96	%		4.94	%		0.09	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	259,089		$	232,208		$	20,004
Ratio of expenses to average net assets:
Before expense reimbursement/recoupment and earnings credits		0.75	%		0.77	%		1.11	%⁽⁴⁾
After expense reimbursement/recoupment and earnings credits		0.75	%		0.77	%		0.85	%⁽⁴⁾
Net investment income to average net assets		3.63	%		3.00	%		1.90	%⁽⁴⁾
Portfolio turnover		56	%		96	%		22	%

196

See accompanying notes to financial statements.
197

UBS Global Bond Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of period	$	9.50		$	9.83		$	9.87		$	10.24		$	9.01
Net investment income⁽¹⁾		0.26			0.19			0.17			0.19			0.24
Net realized and unrealized gain (loss) from investment activities		(0.10	)		(0.15	)		0.34			0.35			1.21
Total income (loss) from investment operations		0.16			0.04			0.51			0.54			1.45
Dividends from net investment income		(0.25	)		(0.37	)		(0.55	)		(0.91	)		(0.22	)
Net asset value, end of period	$	9.41		$	9.50		$	9.83		$	9.87		$	10.24
Total investment return⁽²⁾		1.67	%		0.51	%		5.05	%		5.21	%		16.34	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	14,093		$	15,546		$	16,701		$	14,610		$	11,659
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.40	%		1.48	%		1.48	%		1.55	%		1.53	%
After expense reimbursement and earnings credits		1.15	%		1.15	%		1.15	%		1.15	%		1.15	%
Net investment income to average net assets		2.67	%		1.97	%		1.65	%		1.84	%		2.44	%
Portfolio turnover		74	%		114	%		112	%		186	%		145	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	9.52		$	9.85		$	9.88		$	10.25		$	9.01
Net investment income⁽¹⁾		0.18			0.12			0.09			0.11			0.16
Net realized and unrealized gain (loss) from investment activities		(0.09	)		(0.15	)		0.35			0.35			1.23
Total income (loss) from investment operations		0.09			(0.03	)		0.44			0.46			1.39
Dividends from net investment income		(0.18	)		(0.30	)		(0.47	)		(0.83	)		(0.15	)
Net asset value, end of year	$	9.43		$	9.52		$	9.85		$	9.88		$	10.25
Total investment return⁽²⁾		0.90	%		(0.26	)%		4.29	%		4.38	%		15.61	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	215		$	420		$	1,153		$	1,536		$	1,755
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.17	%		2.25	%		2.30	%		2.33	%		2.30	%
After expense reimbursement and earnings credits		1.90	%		1.90	%		1.90	%		1.90	%		1.90	%
Net investment income to average net assets		1.92	%		1.22	%		0.90	%		1.09	%		1.69	%
Portfolio turnover		74	%		114	%		112	%		186	%		145	%

⁽¹⁾  The net investment income per share data was determined by using average shares outstanding throughout the period.
⁽²⁾  Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.
⁽³⁾  For the period July 2, 2002 (commencement of issuance) through June 30, 2003.
⁽⁴⁾  Annualized.

	Class C
	Year ended June 30,												For the period ended
	2007			2006			2005			2004			June 30, 2003⁽³⁾
Net asset value, beginning of period	$	9.47		$	9.81		$	9.85		$	10.23		$	9.00
Net investment income⁽¹⁾		0.21			0.14			0.12			0.14			0.19
Net realized and unrealized gain (loss) from investment activities		(0.10	)		(0.15	)		0.35			0.34			1.22
Total income (loss) from investment operations		0.11			(0.01	)		0.47			0.48			1.41
Dividends from net investment income		(0.20	)		(0.33	)		(0.51	)		(0.86	)		(0.18	)
Net asset value, end of period	$	9.38		$	9.47		$	9.81		$	9.85		$	10.23
Total investment return⁽²⁾		1.17	%		(0.09	)%		4.60	%		4.64	%		15.84	%
Ratios/Supplemental data:
Net assets, end of period (in 000s)	$	1,491		$	2,426		$	3,081		$	3,451		$	3,198
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.77	%		1.88	%		1.92	%		1.99	%		2.01	%⁽⁴⁾
After expense reimbursement and earnings credits		1.65	%		1.65	%		1.65	%		1.65	%		1.65	%⁽⁴⁾
Net investment income to average net assets		2.17	%		1.47	%		1.15	%		1.34	%		1.94	%⁽⁴⁾
Portfolio turnover		74	%		114	%		112	%		186	%		145	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.51		$	10.84		$	10.83		$	11.16		$	9.79
Net investment income⁽¹⁾		0.31			0.23			0.21			0.23			0.28
Net realized and unrealized gain (loss) from investment activities		(0.10	)		(0.17	)		0.38			0.38			1.33
Total income (loss) from investment operations		0.21			0.06			0.59			0.61			1.61
Dividends from net investment income		(0.27	)		(0.39	)		(0.58	)		(0.94	)		(0.24	)
Net asset value, end of year	$	10.45		$	10.51		$	10.84		$	10.83		$	11.16
Total investment return⁽²⁾		2.03	%		0.65	%		5.36	%		5.43	%		16.72	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	107,465		$	80,536		$	52,345		$	41,016		$	35,484
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.03	%		1.16	%		1.16	%		1.24	%		1.32	%
After expense reimbursement and earnings credits		0.90	%		0.90	%		0.90	%		0.90	%		0.90	%
Net investment income to average net assets		2.93	%		2.22	%		1.90	%		2.09	%		2.69	%
Portfolio turnover		74	%		114	%		112	%		186	%		145	%

198

See accompanying notes to financial statements.
199

UBS High Yield Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	6.89		$	7.14		$	7.06		$	6.84		$	6.36
Net investment income⁽¹⁾		0.50			0.55			0.57			0.58			0.56
Net realized and unrealized gain (loss) from investment activities		0.08			(0.24	)		0.10			0.22			0.50
Total income from investment operations		0.58			0.31			0.67			0.80			1.06
Dividends from net investment income		(0.55	)		(0.56	)		(0.59	)		(0.58	)		(0.58	)
Net asset value, end of year	$	6.92		$	6.89		$	7.14		$	7.06		$	6.84
Total investment return⁽²⁾		8.60	%		4.48	%		9.66	%		12.15	%		17.70	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	45,031		$	51,121		$	66,677		$	72,614		$	76,309
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.28	%		1.37	%		1.28	%		1.31	%		1.29	%
After expense reimbursement and earnings credits		1.20	%		1.20	%		1.20	%		1.20	%		0.95	%
Net investment income to average net assets		7.16	%		7.86	%		7.83	%		8.27	%		8.72	%
Portfolio turnover		46	%		64	%		61	%		80	%		71	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	6.89		$	7.14		$	7.06		$	6.83		$	6.35
Net investment income⁽¹⁾		0.45			0.50			0.51			0.53			0.51
Net realized and unrealized gain (loss) from investment activities		0.09			(0.25	)		0.10			0.23			0.50
Total income from investment operations		0.54			0.25			0.61			0.76			1.01
Dividends from net investment income		(0.50	)		(0.50	)		(0.53	)		(0.53	)		(0.53	)
Net asset value, end of year	$	6.93		$	6.89		$	7.14		$	7.06		$	6.83
Total investment return⁽²⁾		7.93	%		3.69	%		8.79	%		11.48	%		16.83	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	2,386		$	2,497		$	3,945		$	7,844		$	13,130
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		2.04	%		2.09	%		1.99	%		2.05	%		2.05	%
After expense reimbursement and earnings credits		1.95	%		1.95	%		1.95	%		1.95	%		1.70	%
Net investment income to average net assets		6.42	%		7.11	%		7.08	%		7.53	%		7.97	%
Portfolio turnover		46	%		64	%		61	%		80	%		71	%

(1) The net investment income per share data was determined by using average shares outstanding throughout the year.
(2) Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares.

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	6.89		$	7.14		$	7.06		$	6.84		$	6.35
Net investment income⁽¹⁾		0.47			0.52			0.53			0.55			0.53
Net realized and unrealized gain (loss) from investment activities		0.08			(0.25	)		0.10			0.22			0.51
Total income from investment operations		0.55			0.27			0.63			0.77			1.04
Dividends from net investment income		(0.51	)		(0.52	)		(0.55	)		(0.55	)		(0.55	)
Net asset value, end of year	$	6.93		$	6.89		$	7.14		$	7.06		$	6.84
Total investment return⁽²⁾		8.05	%		3.95	%		9.09	%		11.59	%		17.29	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	11,330		$	12,177		$	15,389		$	17,499		$	18,969
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.78	%		1.86	%		1.79	%		1.82	%		1.79	%
After expense reimbursement and earnings credits		1.70	%		1.70	%		1.70	%		1.70	%		1.45	%
Net investment income to average net assets		6.66	%		7.36	%		7.33	%		7.78	%		8.22	%
Portfolio turnover		46	%		64	%		61	%		80	%		71	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	6.92		$	7.17		$	7.10		$	6.87		$	6.38
Net investment income⁽¹⁾		0.52			0.57			0.59			0.61			0.58
Net realized and unrealized gain (loss) from investment activities		0.09			(0.24	)		0.09			0.23			0.50
Total income from investment operations		0.61			0.33			0.68			0.84			1.08
Dividends from net investment income		(0.57	)		(0.58	)		(0.61	)		(0.61	)		(0.59	)
Net asset value, end of year	$	6.96		$	6.92		$	7.17		$	7.10		$	6.87
Total investment return⁽²⁾		8.98	%		4.72	%		9.82	%		12.66	%		18.08	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	47,768		$	33,015		$	30,277		$	48,038		$	71,819
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		0.98	%		1.06	%		0.96	%		0.92	%		1.05	%
After expense reimbursement and earnings credits		0.95	%		0.95	%		0.95	%		0.92	%		0.70	%
Net investment income to average net assets		7.43	%		8.11	%		8.08	%		8.55	%		8.97	%
Portfolio turnover		46	%		64	%		61	%		80	%		71	%

200

See accompanying notes to financial statements.
201

UBS U.S. Bond Fund—Financial highlights

The table below sets forth financial data for one share of beneficial interest outstanding throughout
each period presented.

	Class A
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.27		$	10.73		$	10.56		$	10.99		$	10.51
Net investment income⁽¹⁾		0.32			0.40			0.39			0.39			0.42
Net realized and unrealized gain (loss) from investment activities		0.24			(0.42	)		0.20			(0.37	)		0.52
Total income (loss) from investment operations		0.56			(0.02	)		0.59			0.02			0.94
Dividends from net investment income		(0.37	)		(0.44	)		(0.42	)		(0.45	)		(0.46	)
Net increase from payment by Advisor		0.00	⁽³⁾		—			—			—			—
Net asset value, end of year	$	10.46		$	10.27		$	10.73		$	10.56		$	10.99
Total investment return⁽²⁾		5.39	%⁽⁴⁾		(0.07	)%		5.72	%		0.18	%		9.17	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	29,356		$	31,285		$	34,282		$	31,420		$	31,337
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.07	%		1.07	%		1.19	%		1.11	%		1.04	%
After expense reimbursement and earnings credits		0.85	%		0.85	%		0.85	%		0.85	%		0.85	%
Net investment income to average net assets		3.08	%		3.79	%		3.61	%		3.58	%		3.89	%
Portfolio turnover		209	%		229	%		174	%		137	%		180	%
	Class B
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.28		$	10.74		$	10.56		$	10.97		$	10.50
Net investment income⁽¹⁾		0.25			0.32			0.31			0.30			0.34
Net realized and unrealized gain (loss) from investment activities		0.23			(0.42	)		0.21			(0.36	)		0.52
Total income (loss) from investment operations		0.48			(0.10	)		0.52			(0.06	)		0.86
Dividends from net investment income		(0.29	)		(0.36	)		(0.34	)		(0.35	)		(0.39	)
Net increase from payment by Advisor		0.00	⁽³⁾		—			—			—			—
Net asset value, end of year	$	10.47		$	10.28		$	10.74		$	10.56		$	10.97
Total investment return⁽²⁾		4.70	%⁽⁴⁾		(0.93	)%		4.96	%		(0.55	)%		8.30	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	442		$	808		$	1,620		$	2,043		$	3,646
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.84	%		1.83	%		2.00	%		2.00	%		1.79	%
After expense reimbursement and earnings credits		1.60	%		1.60	%		1.60	%		1.60	%		1.60	%
Net investment income to average net assets		2.39	%		3.04	%		2.86	%		2.82	%		3.14	%
Portfolio turnover		209	%		229	%		174	%		137	%		180	%

	Class C
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.26		$	10.72		$	10.55		$	10.98		$	10.50
Net investment income⁽¹⁾		0.27			0.34			0.33			0.33			0.37
Net realized and unrealized gain (loss) from investment activities		0.24			(0.41	)		0.22			(0.37	)		0.52
Total income (loss) from investment operations		0.51			(0.07	)		0.55			(0.04	)		0.89
Dividends from net investment income		(0.32	)		(0.39	)		(0.38	)		(0.39	)		(0.41	)
Net increase from payment by Advisor		0.00	⁽³⁾		—			—			—			—
Net asset value, end of year	$	10.45		$	10.26		$	10.72		$	10.55		$	10.98
Total investment return⁽²⁾		4.98	%⁽⁴⁾		(0.67	)%		5.25	%		(0.37	)%		8.65	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	1,525		$	1,530		$	2,068		$	2,195		$	3,164
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		1.55	%		1.56	%		1.64	%		1.65	%		1.54	%
After expense reimbursement and earnings credits		1.35	%		1.35	%		1.35	%		1.35	%		1.35	%
Net investment income to average net assets		2.56	%		3.29	%		3.11	%		3.08	%		3.39	%
Portfolio turnover		209	%		229	%		174	%		137	%		180	%
	Class Y
	Year ended June 30,
	2007			2006			2005			2004			2003
Net asset value, beginning of year	$	10.27		$	10.72		$	10.57		$	11.01		$	10.53
Net investment income⁽¹⁾		0.34			0.42			0.41			0.41			0.45
Net realized and unrealized gain (loss) from investment activities		0.25			(0.41	)		0.21			(0.37	)		0.52
Total income (loss) from investment operations		0.59			0.01			0.62			0.04			0.97
Dividends from net investment income		(0.40	)		(0.46	)		(0.47	)		(0.48	)		(0.49	)
Net increase from payment by Advisor		0.00	⁽³⁾		—			—			—			—
Net asset value, end of year	$	10.46		$	10.27		$	10.72		$	10.57		$	11.01
Total investment return⁽²⁾		5.76	%⁽⁴⁾		0.14	%		5.95	%		0.40	%		9.42	%
Ratios/Supplemental data:
Net assets, end of year (in 000s)	$	163,172		$	105,526		$	109,568		$	89,281		$	78,807
Ratio of expenses to average net assets:
Before expense reimbursement and earnings credits		0.76	%		0.82	%		0.78	%		0.80	%		0.79	%
After expense reimbursement and earnings credits		0.60	%		0.60	%		0.60	%		0.60	%		0.60	%
Net investment income to average net assets		3.27	%		4.04	%		3.86	%		3.83	%		4.14	%
Portfolio turnover		209	%		229	%		174	%		137	%		180	%

202

See accompanying notes to financial statements.
203

The UBS Funds—Notes to financial statements

1. Organization and significant accounting policies

The UBS Funds (the "Trust") is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (the "1940 Act"), as amended, as an open-end management investment company currently offering multiple series representing separate investment portfolios. The Trust is a Delaware statutory trust organized on August 9, 1993. The trustees of the Trust have the authority to issue an unlimited number of shares of beneficial interest at a par value of $0.001 per share.

The Trust has fourteen Funds available for investment, each having its own investment objectives and policies: UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Large Cap Value Equity Fund, UBS U.S. Mid Cap Growth Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Absolute Return Bond Fund, UBS Global Bond Fund, UBS High Yield Fund and UBS U.S. Bond Fund (each a "Fund", and collectively, the "Funds").

Each of the Funds is classified as a "diversified" investment company with the exception of UBS Dynamic Alpha Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Growth Fund, UBS Absolute Return Bond Fund and UBS Global Bond Fund which are classified as "non-diversified" for purposes of the 1940 Act. Each Fund currently offers Class A, Class B, Class C and Class Y shares, except for UBS Absolute Return Bond Fund, UBS U.S. Equity Alpha Fund and UBS U.S. Mid Cap Growth Equity Fund, which offer Class A, Class C, and Class Y. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing service and distribution charges and certain transfer agency and related services expenses. In addition, Class B shares and all corresponding reinvested dividend shares automatically convert to Class A shares within a certain number of years after issuance which varies depending upon the amount invested. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plan, if any. Class Y shares have no service or distribution plan.

In the normal course of business, the Funds may enter into contracts that contain a variety of representations or that provide general indemnification for certain liabilities. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had any prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.

The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis.

The preparation of financial statements in accordance with US generally accepted accounting principles requires the Trust's management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies:

A. Valuation of investments: Each Fund calculates its net asset value based on the current market value for its portfolio securities. The Funds normally obtain market values for their securities from independent pricing sources. Independent pricing sources may use last reported sale prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities. Securities traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price available prior to valuation. Securities which are listed on US and foreign stock exchanges

204

The UBS Funds—Notes to financial statements

normally are valued at the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. Securities listed on foreign stock exchanges may be fair valued based on significant events that have occurred subsequent to the close of the foreign markets. Certain funds may use a systematic fair valuation model provided by an independent third party to value securities principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. If a security is valued at a "fair value," that value is likely to be different from the last quoted market price for the security. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM"), the investment manager of the Funds. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG, an internationally diversified organization with headquarters in Zurich and Basel, Switzerland and operations in many areas of the financial services industry. If a market value is not readily available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees (the "Board"). Various factors may be reviewed in order to make a good faith determination of a security's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the securities; and the evaluation of forces which influence the market in which the securities are purchased and sold. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company.

Certain securities in which the Funds invest are traded in markets that close before 4:00 p.m. Eastern Time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m. Eastern Time will not be reflected in the Fund's NAV. However, if any of the Funds determine that such developments are so significant that they will materially affect the value of the Fund's securities, the Fund may adjust the previous closing prices to reflect what the Board believes to be the fair value of these securities as of 4:00 p.m. Eastern Time.

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 forward exchange rates quoted by independent pricing services. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of June 30, 2007, management does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosure will be required about the inputs used to develop the measurements of fair value and the effect of certain measurements reported in the Statement of Operations for a fiscal period.

B. Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of each Fund's Portfolio of Investments.

C. Foreign currency translation: Investment securities and other assets and liabilities denominated in foreign currencies are translated daily into US dollars using foreign currency exchange rates determined as of the close of regular trading on the New York Stock Exchange. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing

205

The UBS Funds—Notes to financial statements

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 foreign forward currency contracts and foreign currency transactions in the Statements of Operations. Certain foreign exchange gains and losses included in realized and unrealized gains and losses are included in or are a reduction of ordinary income in accordance with US federal income tax regulations.

D. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment transactions and foreign exchange transactions are calculated using the identified cost method. Dividend income is recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.

Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend-eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.

E. Forward foreign currency contracts: 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 US dollar and the potential inability of the counterparty to meet the terms of the contract. The Funds may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions and to manage currency risk.

A Fund will only enter into forward contracts to sell, for a fixed amount of US dollars or other appropriate currency, an amount of foreign currency, to the extent that the value of the short forward contract is covered by the underlying value of securities denominated in the currency being sold. Alternatively, when a Fund enters into a forward contract to sell an amount of foreign currency, the Fund's custodian or sub-custodian will place assets in a segregated account of the Fund in an amount not less than the value of the Fund's total assets committed to the consumption of such forward contracts. If the assets placed in the account decline in value, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Fund's commitments with respect to such contracts.

The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of the open forward foreign currency contracts are recorded daily for book purposes as net unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by the Funds on contracts which have been sold or matured.

F. 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 Fund may purchase or sell futures contracts to increase or reduce its exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance or realize gains. 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.

206

The UBS Funds—Notes to financial statements

Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or government securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin". Subsequent payments, known as "variation margin", are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized gain or loss on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.

The Statements of Operations reflect net realized and net unrealized gains and losses on these contracts.

G. Securities traded on to-be-announced basis: Certain Funds may from time to time purchase, or sell short, securities on a to-be-announced ("TBA") basis. In a TBA transaction, the Fund commits to purchasing or selling securities for which all specific information is not yet known at the time of the trade, particularly the face amount and maturity date of the underlying security transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, US government securities or other liquid high grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.

H. Swap agreements: The Funds (except for UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund and UBS U.S. Small Cap Growth Fund) may engage in swap agreements, including but not limited to interest rate, currency, credit default and equity swap agreements. A Fund expects to enter into these transactions to preserve a return or spread on a particular investment or portion of the portfolio's duration, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible.

Certain Funds may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect themselves from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.

Credit default swap agreements involve commitments to make or receive payments in the event of a default of a security or a credit event. As a buyer, the Fund would make periodic payments to the counterparty, and the Fund would receive payments only upon the occurrence of a credit event. If no credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event does occur, the Fund typically would receive full notional value for a reference obligation that may have little or no value. As a seller, the Fund would receive periodic payments from the counterparty, and the Fund would make payments only upon the occurrence of a credit event. If no credit event occurs, the Fund will gain the periodic stream of payments it received over the term of the contract. However, if a credit event occurs, the Fund will pay full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if the Fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk and credit risk.

207

The UBS Funds—Notes to financial statements

Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation or depreciation.

The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If UBS Global AM is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of the Funds will be less favorable than it would have been if this investment technique was never used. Swaps do not involve the delivery of securities or other underlying assets or principal, and are subject to counterparty risk. If the other party to a swap defaults and fails to consummate the transaction, a Fund's risk of loss will consist of the net amount of interest payments that the Fund is contractually entitled to receive. Therefore, the Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.

The Funds will accrue for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap agreements on the Statements of Assets and Liabilities. Once interim payments are settled in cash, the net amount is recorded as realized gain/loss on swap agreements, in addition to realized gain/loss recorded upon the termination of swap agreements on the Statements of Operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation of swap agreements.

At June 30, 2007, UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Absolute Return Bond Fund and UBS U.S. Bond Fund had outstanding interest rate swap agreements with the following terms:

UBS Dynamic Alpha Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Barclays Bank PLC	JPY	1,200,000,000	10/27/35		2.4400	%		0.7369	%⁽¹⁾	$	345,616
Barclays Bank PLC	GBP	42,300,000	01/19/36		—	⁽²⁾		3.0550			(5,692,788	)
Barclays Bank PLC	GBP	10,600,000	07/03/36		—	⁽²⁾		3.1075			(1,215,005	)
Barclays Bank PLC	GBP	47,000,000	11/02/36		4.3850			5.8463	⁽³⁾		11,757,194
Deutsche Bank AG	USD	114,000,000	12/30/11		5.0150			5.3600	⁽⁴⁾		2,064,662
Deutsche Bank AG	CHF	87,000,000	02/01/17		2.9275			2.2925	⁽⁵⁾		3,478,941
Deutsche Bank AG	GBP	41,000,000	11/02/21		3.0850			—	⁽²⁾		2,121,621
Deutsche Bank AG	GBP	47,000,000	11/02/21		5.8463	⁽³⁾		4.7550			(8,912,532	)
Deutsche Bank AG	GBP	34,000,000	11/02/36		—	⁽²⁾		3.0350			(4,564,164	)
Deutsche Bank AG	GBP	49,000,000	06/27/37		5.2100			6.0906	⁽³⁾		89,532
Deutsche Bank AG	GBP	65,000,000	06/27/37		—	⁽²⁾		3.3150			(1,715,031	)
Goldman Sachs International	USD	895,000,000	12/19/07		—	⁽⁶⁾		5.0300			(660,286	)

208

The UBS Funds—Notes to financial statements

UBS Dynamic Alpha Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Goldman Sachs International	USD	1,870,000,000	12/17/08		4.5750	%		—	⁽⁶⁾	$	2,636,437
Goldman Sachs International	USD	1,000,000,000	12/16/09		—	⁽⁶⁾		4.6900	%		(1,430,965	)
Goldman Sachs International	CHF	62,000,000	01/10/17		2.8630			2.2500	⁽⁵⁾		2,535,580
Goldman Sachs International	GBP	20,000,000	01/24/37		4.5988			5.7144	⁽³⁾		3,858,344
Goldman Sachs International	JPY	2,400,000,000	02/02/37		2.5230			0.5788	⁽¹⁾		334,441
Goldman Sachs International	GBP	14,000,000	03/13/37		—	⁽²⁾		3.0675			(1,644,506	)
Goldman Sachs International	GBP	16,000,000	03/13/37		4.6100			5.6300	⁽³⁾		2,950,120
JPMorgan Chase Bank	USD	406,000,000	06/12/11		—	⁽⁶⁾		5.6100			1,077,759
JPMorgan Chase Bank	USD	101,000,000	06/12/19		5.8475			—	⁽⁶⁾		(726,367	)
Royal Bank of Scotland PLC	JPY	1,600,000,000	05/09/35		2.2513			0.7419	⁽¹⁾		948,660
Royal Bank of Scotland PLC	JPY	675,000,000	07/12/35		2.2550			0.6563	⁽¹⁾		371,924
Royal Bank of Scotland PLC	GBP	62,300,000	12/09/35		—	⁽²⁾		3.1450			(6,291,987	)
Royal Bank of Scotland PLC	GBP	80,000,000	12/09/35		4.3175			5.9738	⁽³⁾		21,583,782
Royal Bank of Scotland PLC	JPY	700,000,000	12/19/35		2.4700			0.8513	⁽¹⁾		184,646
Royal Bank of Scotland PLC	JPY	1,500,000,000	03/02/36		2.4625			0.7269	⁽¹⁾		357,601
Royal Bank of Scotland PLC	JPY	1,000,000,000	05/19/36		2.7200			0.7519	⁽¹⁾		(162,651	)
Royal Bank of Scotland PLC	JPY	1,100,000,000	07/05/36		2.7800			0.6306	⁽¹⁾		(359,833	)
Royal Bank of Scotland PLC	GBP	13,000,000	01/24/37		—	⁽²⁾		3.0900			(1,460,721	)
										$	21,860,024

⁽¹⁾ Rate based on 6 month LIBOR (JPY BBA)

⁽²⁾ Zero coupon inflation swap. Cash is exchanged at the end of the swap. The dollar amount to be paid/received by the Fund is based on the RPI (Retail Price Index in the UK) as published by the Office of National Statistics.

⁽³⁾ Rate based on 6 month LIBOR (GBP BBA)

⁽⁴⁾ Rate based on 3 month LIBOR (USD BBA)

⁽⁵⁾ Rate based on 6 month LIBOR (Swiss BBA)

⁽⁶⁾ Rate based on 3 month LIBOR (USD BBA). This is a forward starting trade and, as such, a floating rate has not yet been assigned as of June 30, 2007.

BBA British Banking Association

Currency type abbreviations:

CHF Swiss Franc

GBP Great Britain Pound

JPY Japanese Yen

USD United States Dollar

UBS Global Allocation Fund

Counterparty

Notional amount

Termination
date

Payments
made
by the Fund

Payments
received
by the Fund

Value

Deutsche Bank AG

USD

18,885,000

06/16/27

5.3600

%⁽¹⁾

6.0350

483,531

⁽¹⁾ Rate based on 3 month LIBOR (USD BBA)

BBA British Banking Association

Currency type abbreviation:

USD United States Dollar

209

The UBS Funds—Notes to financial statements

UBS Absolute Return Bond Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Goldman Sachs International	USD	305,000,000	12/19/07		—	⁽¹⁾		5.0300	%	$	(225,014	)
Goldman Sachs International	USD	635,000,000	12/17/08		4.5750	%		—	⁽¹⁾		895,261
Goldman Sachs International	USD	335,000,000	12/16/09		—	⁽¹⁾		4.6900			(479,373	)
Goldman Sachs International	GBP	4,400,000	03/28/37		—	⁽²⁾		3.1280			(423,548	)
Goldman Sachs International	GBP	5,800,000	03/28/37		4.7420			5.7013	⁽³⁾		836,889
										$	604,215

⁽¹⁾ Rate based on 3 month LIBOR (USD BBA). This is a forward starting trade and, as such, a floating rate has not yet been assigned as of June 30, 2007.

⁽³⁾ Rate based on 6 month LIBOR (GBP BBA)

BBA British Banking Association

Currency type abbreviations:

GBP Great Britain Pound

USD United States Dollar

UBS U.S. Bond Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Deutsche Bank AG	USD	2,885,000	06/16/27		5.3600	%⁽¹⁾		6.0350	%	$	73,868
Goldman Sachs International	USD	95,000,000	12/19/07		—	⁽²⁾		5.0300			(70,086	)
Goldman Sachs International	USD	195,000,000	12/17/08		4.5750			—	⁽²⁾		274,923
Goldman Sachs International	USD	105,000,000	12/16/09		—	⁽²⁾		4.6900			(150,252	)
JPMorgan Chase Bank	USD	45,000,000	12/07/09		—	⁽²⁾		4.5810			(637,517	)
JPMorgan Chase Bank	USD	42,000,000	06/12/11		—	⁽²⁾		5.6100			111,492
JPMorgan Chase Bank	USD	11,000,000	12/07/17		4.8910			—	⁽²⁾		663,453
JPMorgan Chase Bank	USD	11,000,000	06/12/19		5.8475			—	⁽²⁾		(79,109	)
										$	186,772

⁽¹⁾ Rate based on 3 month LIBOR (USD BBA)

⁽²⁾ Payments made based on 3 month LIBOR (USD BBA). This is a forward starting trade and, as such, a floating rate has not yet been assigned as of June 30, 2007.

BBA British Banking Association

Currency type abbreviation:

USD United States Dollar

210

The UBS Funds—Notes to financial statements

At June 30, 2007, UBS Dynamic Alpha Fund, UBS Absolute Return Bond Fund and UBS U.S. Bond Fund had outstanding credit default swap agreements with the following terms:

UBS Dynamic Alpha Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Barclays Bank PLC	USD	48,500,000	12/20/11		1.4000	%⁽¹⁾		—	⁽²⁾	$	(670,344	)
Barclays Bank PLC	USD	62,500,000	12/20/11		1.4000	⁽¹⁾		—	⁽²⁾		(863,846	)
Barclays Bank PLC	USD	57,000,000	06/20/12		1.2500	⁽¹⁾		—	⁽³⁾		(363,377	)
Deutsche Bank AG	EUR	23,000,000	12/20/11		0.5000	⁽¹⁾		—	⁽⁴⁾		(253,518	)
Deutsche Bank AG	USD	15,500,000	12/20/11		0.4800	⁽¹⁾		—	⁽⁵⁾		15,638
Deutsche Bank AG	USD	40,000,000	12/20/11		1.4000	⁽¹⁾		—	⁽²⁾		(552,862	)
Deutsche Bank AG	EUR	13,000,000	03/20/12		0.2600	⁽¹⁾		—	⁽⁶⁾		(28,115	)
Deutsche Bank AG	EUR	3,000,000	06/20/12		0.3100	⁽¹⁾		—	⁽⁷⁾		(13,781	)
Deutsche Bank AG	EUR	3,000,000	06/20/12		0.4700	⁽¹⁾		—	⁽⁴⁾		(24,668	)
Goldman Sachs International	USD	56,500,000	12/20/11		1.4000	⁽¹⁾		—	⁽²⁾		(780,917	)
Goldman Sachs International	EUR	4,320,000	03/20/12		—	⁽⁸⁾		2.5000	%⁽¹⁾		(121,951	)
Goldman Sachs International	USD	5,000,000	06/20/12		0.3400	⁽¹⁾		—	⁽⁹⁾		11,822
Royal Bank of Scotland PLC	EUR	23,000,000	12/20/11		0.2800	⁽¹⁾		—	⁽⁷⁾		(92,301	)
Royal Bank of Scotland PLC	USD	29,000,000	12/20/11		0.3900	⁽¹⁾		—	⁽⁹⁾		(66,231	)
										$	(3,804,451	)

⁽¹⁾ Payments made are based on the notional amount.

⁽²⁾ Payment from the counterparty will be received upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of the referenced obligation specified in the Dow Jones CDX.EM.6 Index.

⁽³⁾ Payment from the counterparty will be received upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of the referenced obligation specified in the Dow Jones CDX.EM.7 Index.

⁽⁴⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Wolters Kluwer N.V. 5.125% bond, due 01/27/14.

⁽⁵⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Masco Corp. 5.875% bond, due 07/15/12.

⁽⁶⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Volvo AB 5.375% bond, due 01/26/10.

⁽⁷⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Akzo Nobel N.V. 4.250% bond, due 06/14/11.

⁽⁸⁾ Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the WDAC Subsidiary Corp. 8.500% bond, due 12/01/14.

⁽⁹⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the H.J. Heinz Company 6.000% bond, due 03/15/08.

Currency type abbreviations:

EUR Euro

USD United States Dollar

211

The UBS Funds—Notes to financial statements

UBS Absolute Return Bond Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Deutsche Bank AG	USD	1,420,000	06/20/08		—	⁽¹⁾		0.6500	%⁽²⁾	$	(664	)
Deutsche Bank AG	USD	4,300,000	06/20/08		—	⁽³⁾		1.0500	⁽²⁾		(15,004	)
Deutsche Bank AG	USD	2,570,000	03/20/11		0.1700	%⁽²⁾		—	⁽⁴⁾		(5,260	)
Deutsche Bank AG	EUR	3,700,000	09/20/11		0.5700	⁽²⁾		—	⁽⁵⁾		(56,220	)
Deutsche Bank AG	EUR	3,740,000	09/20/11		0.2500	⁽²⁾		—	⁽⁶⁾		(11,465	)
Deutsche Bank AG	USD	2,700,000	12/20/11		0.4800	⁽²⁾		—	⁽⁷⁾		2,724
Deutsche Bank AG	USD	5,000,000	12/20/11		0.3800	⁽²⁾		—	⁽⁸⁾		(9,415	)
Deutsche Bank AG	EUR	2,100,000	03/20/12		0.2600	⁽²⁾		—	⁽⁹⁾		(4,542	)
Deutsche Bank AG	EUR	4,200,000	06/20/12		2.3000	⁽²⁾		—	⁽¹⁰⁾		(13,446	)
Deutsche Bank AG	EUR	25,700,000	06/20/12		0.5500	⁽²⁾		—	⁽¹¹⁾		(168,805	)
Deutsche Bank AG	EUR	25,700,000	06/20/17		—	⁽¹²⁾		0.5000	⁽²⁾		187,316
Goldman Sachs International	EUR	2,650,000	09/20/07		—	⁽¹³⁾		0.2500	⁽²⁾		1,136
Goldman Sachs International	EUR	630,000	03/20/12		—	⁽¹⁴⁾		2.5000	⁽²⁾		(17,784	)
Goldman Sachs International	EUR	4,200,000	03/20/12		—	⁽¹⁵⁾		0.1400	⁽²⁾		(6,924	)
Goldman Sachs International	EUR	12,600,000	06/20/12		—	⁽¹⁶⁾		2.3000	⁽²⁾		3,872
										$	(114,481	)

⁽¹⁾ Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the SLM Corp. 5.125% bond, due 08/27/12.

⁽²⁾ Payments made are based on the notional amount.

⁽³⁾ Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Residental Capital LLC 6.500% bond, due 04/17/13.

⁽⁴⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Nissan Motor Co., Ltd. 1.000% bond, due 07/10/29.

⁽⁵⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Wolters Kluwer N.V. 5.125% bond, due 01/27/14.

⁽⁶⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Akzo Nobel N.V. 4.250% bond, due 06/14/11.

⁽⁷⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Masco Corp. 5.875% bond, due 07/15/12.

⁽⁸⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the H.J. Heinz Company 6.000% bond, due 03/15/08.

⁽⁹⁾ Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Volvo AB 5.375% bond, due 01/10/26.

⁽¹⁰⁾ Payment from the counterparty will be received upon the occurrence of a succession event with respect to the iTraxx Europe Crossover Series 7 Index.

⁽¹¹⁾ Payment from the counterparty will be received upon the occurrence of a succession event with respect to the iTraxx HiVol Series 7 Index.

⁽¹²⁾ Payment to the counterparty will be made upon the occurrence of a succession event with respect to the iTraxx Main 10 year Series 7 Index.

⁽¹³⁾ Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Glencore International AG 5.375% bond, due 09/30/11.

⁽¹⁴⁾ Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the WDAC Subsidiary Corp. 8.500% bond, due 12/01/14.

⁽¹⁵⁾ Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Credit Suisse Finance Group 3.125% bond, due 09/14/12.

⁽¹⁶⁾ Payment to the counterparty will be made upon the occurrence of a succession event with respect to the iTraxx Europe Crossover Series 7 Index.

Currency type abbreviations:

EUR Euro

USD United States Dollar

212

The UBS Funds—Notes to financial statements

UBS U.S. Bond Fund

Counterparty

Notional amount

Termination
dates

Payments
made
by the Fund

Payments
received
by the Fund

Value

Deutsche Bank AG

USD

1,950,000

06/20/12

0.7500

%⁽¹⁾

—

⁽²⁾

16,470

Deutsche Bank AG

USD

1,200,000

07/25/45

2.67

%⁽¹⁾

—

⁽³⁾

263,176

(Upfront payments made by the Fund of $140,377)

279,646

⁽¹⁾ Payments made are based on the notional amount.

⁽³⁾ Payment from the counterparty will be made upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of the referenced obligation specified in the Dow Jones ABX.HE.BBB-.06.0 Index.

Currency type abbreviation:

USD United States Dollar

At June 30, 2007, UBS Absolute Return Bond Fund had outstanding total return swap agreements with the following terms:

UBS Absolute Return Bond Fund
Counterparty	Notional amount		Termination dates	Payments made by the Fund			Payments received by the Fund			Value
Deutsche Bank AG	BRL	2,575,000	08/15/10	$	2,161,081	⁽¹⁾		—	⁽²⁾	$	2,219,139
Deutsche Bank AG	BRL	2,575,000	05/15/45		2,226,497	⁽¹⁾		—	⁽³⁾		2,237,732
(Upfront payments made by the Fund of $4,387,578)										$	4,456,871

⁽¹⁾ Payment made on 05/22/07 to fully fund swap.

⁽²⁾ Rate is equal to the total return of the Federative Republic of Brazil Nota do Tesouro Nacional Serie B 6.000% bond, due 08/05/10.

⁽³⁾ Rate is equal to the total return of the Federative Republic of Brazil Nota do Tesouro Nacional Serie B 6.000% bond, due 05/15/45.

Currency type abbreviation:

BRL Brazilian Real

I. Option writing: Certain Funds may write (sell) put and call options on foreign or US securities indices in order to gain exposure to or protect against changes in the markets. When a Fund writes a call or a put option, an amount equal to the premium received by the Fund is included in the Fund's Statement of Assets and Liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option which the Fund has written is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.

In writing an option, the Funds bear the market risk of an unfavorable change in the price of the derivative instrument, security or currency underlying the written option. Exercise of an option written by a Fund could

213

The UBS Funds—Notes to financial statements

result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.

Written option activity for the year ended June 30, 2007 for UBS Dynamic Alpha Fund was as follows:

	Number of contracts			Amount of premiums received
Options outstanding at June 30, 2006		2,627		$	3,766,496
Options written		7,971			1,242,687
Options terminated in closing purchase transactions		(2,627	)		(3,766,496	)
Options expired prior to exercise		(7,111	)		(157,864	)
Options exercised		—			—
Options outstanding at June 30, 2007		860		$	1,084,823

Written option activity for the year ended June 30, 2007 for UBS Absolute Return Bond Fund was as follows:

	Number of contracts			Amount of premiums received
Options outstanding at June 30, 2006		—		$	—
Options written		1,217			27,017
Options terminated in closing purchase transactions		—			—
Options expired prior to exercise		(1,217	)		(27,017	)
Options exercised		—			—
Options outstanding at June 30, 2007		—		$	—

Written option activity for the year ended June 30, 2007 for UBS Global Bond Fund was as follows:

	Number of contracts			Amount of premiums received
Options outstanding at June 30, 2006		—		$	—
Options written		239			5,306
Options terminated in closing purchase transactions					—
Options expired prior to exercise		(239	)		(5,306	)
Options exercised		—			—
Options outstanding at June 30, 2007		—		$	—

214

The UBS Funds—Notes to financial statements

Written option activity for the year ended June 30, 2007 for UBS U.S. Bond Fund was as follows:

	Number of contracts			Amount of premiums received
Options outstanding at June 30, 2006		—		$	—
Options written		3,708			457,804
Options terminated in closing purchase transactions		(1,248	)		(89,109	)
Options expired prior to exercise		(840	)		(86,344	)
Options exercised		—			—
Options outstanding at June 30, 2007		1,620		$	282,351

J. Purchased options: Certain Funds may also purchase put and call options on foreign or US securities and indices as well as exchange-listed call options on particular market segment indices to achieve temporary exposure to a specific industry or geographic region. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Fund pays a premium which is included in the Statement of Assets and Liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying futures, security or currency transaction to determine the realized gain or loss.

K. Short sales: UBS U.S. Equity Alpha Fund ("Equity Alpha") enters into short sales whereby it sells a security it generally does not own, in anticipation of a decline in the security's price. The initial amount of a short sale is recorded as a liability which is marked to market daily. Fluctuations in the value of this liability are recorded as unrealized gains or losses on the Statement of Operations. If Equity Alpha shorts a security when also holding a long position in the security (a "short against the box"), as the security price declines, the short position increases in value, offsetting the long position's decrease in value. The opposite effect occurs if the security price rises. Equity Alpha will realize a gain or loss upon closing of the short sale (returning the security to the counterparty by way of purchase or delivery of a long position owned). Equity Alpha is liable to the buyer for any dividends payable on securities while those securities are in a short position. These dividends are booked as an expense of the Fund. Equity Alpha designates collateral consisting of cash, US government securities or other liquid assets sufficient to collateralize the market value of short positions. Equity Alpha is charged a securities loan fee equal to 0.40% of short market value in connection with short sale transactions.

The UBS Dynamic Alpha Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Mid Cap Growth Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Absolute Return Bond Fund and UBS High Yield Fund may, from time to time, sell securities short. There were no short positions as of June 30, 2007 for any of these funds.

L. Dividends and distributions: It is the Funds' policy to distribute their respective net investment income and net capital gains, if any, annually except for UBS Global Bond Fund, UBS U.S. Bond Fund and UBS High Yield Fund, which will distribute their respective net investment income, if any, monthly. UBS Absolute Return Bond Fund will distribute its respective net investment income, if any, quarterly. Dividends and distributions to shareholders are recorded on the ex-dividend date. The amounts of dividends from net investment income and distributions of net capital gains are determined in accordance with income tax regulations which may differ from US generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent they are permanent in nature, such

215

The UBS Funds—Notes to financial statements

amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Differences in dividends from net investment income per share between the classes are mainly due to service and distribution related expenses.

M. Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which some Funds in the Trust invest.

Small capitalization ("small cap") companies may be more vulnerable than larger capitalization ("large cap") companies to adverse business or economic developments. Small cap companies may also have limited product lines, markets or financial resources, and may be dependent on a relatively small management group. Securities of such companies may be less liquid and more volatile than securities of large cap companies or the market averages in general and therefore may involve greater risk than investing in large cap companies. In addition, small cap companies may not be well-known to the investing public, may not have institutional ownership and may have only cyclical, static or moderated growth prospects.

The ability of the issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.

N. Commission recapture program: The following Funds participate in a brokerage commission recapture program: UBS Global Allocation Fund, UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Large Cap Value Equity Fund, UBS U.S. Mid Cap Growth Equity Fund and UBS U.S. Small Cap Growth Fund. These Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. The following Funds recorded recaptured commissions which are reflected on the Statements of Operations within the net realized gains (losses) on investment activities:

Fund	Amount
UBS Global Allocation Fund	$	297,507
UBS Global Equity Fund		61,719
UBS U.S. Equity Alpha Fund		27,399
UBS U.S. Large Cap Equity Fund		35,078
UBS U.S. Large Cap Value Equity Fund		9,113
UBS U.S. Mid Cap Growth Equity Fund		1,165

O. Redemption fees: Effective on or about March 1, 2007, each class of each series of The UBS Funds will impose a 1% redemption fee on shares sold or exchanged within 90 days of their purchase date, subject to limited exceptions. Prior to March 1, 2007, UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Equity Fund, UBS International Equity Fund and UBS U.S. Equity Alpha Fund charged a 1.00% redemption fee if Class A shares or Class Y shares were sold or exchanged less than 90 days after the purchase date. This amount is paid to the applicable Fund, not the Advisor or UBS Global AM (US). The

216

The UBS Funds—Notes to financial statements

redemption fees earned by the Fund are disclosed in the Statements of Changes in Net Assets. For the year ended June 30, 2007, redemption fees represent less than $0.005 per share.

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, accrued daily and paid monthly, based on each Fund's respective average daily net assets in accordance with the following per annum schedule:

Fund	$0 to $500 mm			$500 mm to $1 billion			$1 billion to $1.5 billion			$1.5 billion to $2.0 billion			$2.0 billion to $3.0 billion			$3.0 billion to $6.0 billion			$6.0 billion and over
UBS Dynamic Alpha Fund		0.850	%		0.800	%		0.750	%		0.725	%		0.700	%		0.700	%		0.700	%
UBS Global Allocation Fund		0.800			0.750			0.700			0.675			0.650			0.630			0.610
UBS International Equity Fund		0.800			0.750			0.700			0.675			0.650			0.650			0.650
UBS U.S. Equity Alpha Fund		1.000			0.900			0.850			0.850			0.850			0.850			0.850
UBS U.S. Large Cap Equity Fund		0.700			0.650			0.600			0.575			0.550			0.550			0.550
UBS U.S. Large Cap Growth Fund		0.700			0.650			0.600			0.575			0.550			0.550			0.550
UBS U.S. Large Cap Value Equity Fund		0.700			0.650			0.600			0.575			0.550			0.550			0.550
UBS U.S. Mid Cap Growth Equity Fund		0.850			0.800			0.775			0.775			0.775			0.775			0.775
UBS U.S. Small Cap Growth Fund		0.850			0.850			0.825			0.825			0.825			0.825			0.825
UBS Absolute Return Bond Fund		0.550			0.500			0.475			0.450			0.425			0.425			0.425
UBS Global Bond Fund		0.650			0.650			0.650			0.600			0.550			0.550			0.550
UBS High Yield Fund		0.600			0.550			0.525			0.525			0.525			0.525			0.525
UBS U.S. Bond Fund		0.500			0.475			0.450			0.425			0.400			0.400			0.400
	$0 to $250 mm			$250 mm to $500 mm			$500 mm to $1 billion			$1 billion and over
UBS Global Equity Fund		0.750	%		0.700	%		0.680	%		0.650	%

On June 5, 2007, the Board approved a change to the investment advisory fee schedule for the UBS Dynamic Alpha Fund. Effective July 1, 2007, UBS Dynamic Alpha Fund will pay the Advisor a monthly fee, accrued daily and paid monthly, based on its average daily net assets in accordance with the following per annum schedule:

Fund				$0 to $500 mm				$500 mm to $1 billion				$1 billion to $1.5 billion				$1.5 billion to $2.0 billion				$2.0 billion to $4.0 billion				$4.0 billion and over
UBS Dynamic Alpha Fund					0.850	%			0.800	%			0.750	%			0.725	%			0.700	%			0.680	%

217

The UBS Funds—Notes to financial statements

The Advisor has agreed to waive its fees and/or reimburse the expenses (excluding securities loan fees and dividend expense for securities sold short for UBS U.S. Equity Alpha Fund) of each Fund to the extent that total annualized operating expenses (excluding securities loan fees and dividend expense for securities sold short for UBS U.S. Equity Alpha Fund) exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees, including the dollar amount waived or reimbursed for the year ended June 30, 2007, were as follows:

Fund	Class A expense cap			Class B expense cap			Class C expense cap			Class Y expense cap			Advisory fees		Fees waived/ expenses reimbursed
UBS Dynamic Alpha Fund		1.35	%		2.10	%		2.10	%		1.10	%	$	23,631,158	$	—
UBS Global Allocation Fund		N/A			N/A			N/A			N/A			30,801,439		—
UBS Global Equity Fund		1.25			2.00			2.00			1.00			3,228,817		276,821
UBS International Equity Fund		1.25			2.00			2.00			1.00			1,662,680		299,152
UBS U.S. Equity Alpha Fund		1.50			N/A*			2.25			1.25			1,329,213		65,098
UBS U.S. Large Cap Equity Fund		1.30			2.05			2.05			1.05			5,548,125		—
UBS U.S. Large Cap Growth Fund		1.05			1.80			1.80			0.80			255,412		182,286
UBS U.S. Large Cap Value Equity Fund		1.10			1.85			1.85			0.85			950,238		263,098
UBS U.S. Mid Cap Growth Fund		1.45			N/A*			2.20			1.20			45,256		165,848
UBS U.S. Small Cap Growth Fund		1.28			2.03			2.03			1.03			3,831,239		1,001,626
UBS Absolute Return Bond Fund		1.00			N/A*			1.35			0.85			2,917,215		—
UBS Global Bond Fund		1.15			1.90			1.65			0.90			725,912		159,638
UBS High Yield Fund		1.20			1.95			1.70			0.95			639,825		64,770
UBS U.S. Bond Fund		0.85			1.60			1.35			0.60			872,527		297,638

* UBS U.S. Equity Alpha Fund, UBS U.S. Mid Cap Growth Equity Fund and UBS Absolute Return Bond Fund do not offer Class B shares.

Each Fund, except for UBS International Equity Fund, will reimburse the Advisor for expenses it reimburses for a period of three years following such expense reimbursements, to the extent such reimbursements will not cause a Fund to exceed any applicable expense limit for the Fund. The expenses waived for the year ended June 30, 2007 are subject to repayment through June 30, 2010. For the year ended June 30, 2007, the UBS U.S. Large Cap Equity Fund and UBS Absolute Return Bond Fund repaid $3,428 and $2,565, respectively, of fee waivers and expenses the Advisor had previously reimbursed.

218

The UBS Funds—Notes to financial statements

At June 30, 2007, the following Funds had remaining fee waivers and expense reimbursements subject to repayment to the Advisor and respective dates of expiration as follows:

Fund	Fee waivers/ expense reimbursements subject to repayment		Expires June 30, 2008		Expires June 30, 2009		Expires June 30, 2010
UBS Global Equity Fund—Class A	$	526,432	$	157,744	$	194,727	$	173,961
UBS Global Equity Fund—Class B		462,278		271,790		173,443		17,045
UBS Global Equity Fund—Class C		355,266		155,224		124,069		75,973
UBS Global Equity Fund—Class Y		63,995		48,718		5,435		9,842
UBS U.S. Equity Alpha Fund—Class A		45,576		—		—		45,576
UBS U.S. Equity Alpha Fund—Class C		19,433		—		—		19,433
UBS U.S. Equity Alpha Fund—Class Y		89		—		—		89
UBS U.S. Large Cap Growth Fund—Class A		169,075		51,018		69,987		48,070
UBS U.S. Large Cap Growth Fund—Class B		16,694		7,933		5,968		2,793
UBS U.S. Large Cap Growth Fund—Class C		23,270		8,401		8,261		6,608
UBS U.S. Large Cap Growth Fund—Class Y		251,745		71,839		55,091		124,815
UBS U.S. Large Cap Value Equity Fund—Class A		746,656		312,029		226,959		207,669
UBS U.S. Large Cap Value Equity Fund—Class B		57,846		42,951		9,897		4,998
UBS U.S. Large Cap Value Equity Fund—Class C		134,927		62,485		39,190		33,252
UBS U.S. Large Cap Value Equity Fund—Class Y		46,836		15,415		14,242		17,179
UBS U.S. Mid Cap Growth Equity Fund—Class A		8,009		—		1,575		6,434
UBS U.S. Mid Cap Growth Equity Fund—Class C		2,601		—		590		2,011
UBS U.S. Mid Cap Growth Equity Fund—Class Y		217,665		—		60,262		157,403
UBS U.S. Small Cap Growth Fund—Class A		1,123,608		272,585		298,049		552,974
UBS U.S. Small Cap Growth Fund—Class B		90,331		51,108		29,642		9,581
UBS U.S. Small Cap Growth Fund—Class C		82,259		38,249		24,460		19,550
UBS U.S. Small Cap Growth Fund—Class Y		731,615		110,351		201,743		419,521
UBS Global Bond Fund—Class A		148,492		54,654		54,977		38,861
UBS Global Bond Fund—Class B		8,620		5,301		2,335		984
UBS Global Bond Fund—Class C		18,096		9,933		6,123		2,040
UBS Global Bond Fund—Class Y		396,419		123,731		154,935		117,753
UBS High Yield Fund—Class A		196,495		55,259		99,109		42,127
UBS High Yield Fund—Class B		8,177		2,034		4,134		2,009
UBS High Yield Fund—Class C		47,615		15,374		22,658		9,583
UBS High Yield Fund—Class Y		53,011		4,299		37,661		11,051
UBS U.S. Bond Fund—Class A		258,276		108,925		79,152		70,199
UBS U.S. Bond Fund—Class B		11,980		7,703		2,662		1,615
UBS U.S. Bond Fund—Class C		12,752		6,202		3,411		3,139
UBS U.S. Bond Fund—Class Y		602,628		168,925		211,018		222,685

Each Fund pays UBS Global Asset Management (US) Inc. ("UBS Global AM (US)"), an affiliate of the Advisor, a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the

219

The UBS Funds—Notes to financial statements

average daily net assets of such Fund. For the year ended June 30, 2007, the Funds owed and incurred administrative fees as follows:

Fund	Administrative fees owed		Administrative fees incurred
UBS Dynamic Alpha Fund	$	206,880	$	2,357,825
UBS Global Allocation Fund		318,001		3,401,914
UBS Global Equity Fund		25,526		332,553
UBS International Equity Fund		12,556		155,877
UBS U.S. Equity Alpha Fund		14,491		99,691
UBS U.S. Large Cap Equity Fund		62,004		610,966
UBS U.S. Large Cap Growth Fund		6,842		29,689
UBS U.S. Large Cap Value Equity Fund		8,685		101,811
UBS U.S. Mid Cap Growth Equity Fund		369		3,993
UBS U.S. Small Cap Growth Fund		28,864		338,051
UBS Absolute Return Bond Fund		34,576		399,948
UBS Global Bond Fund		7,559		83,752
UBS High Yield Fund		6,626		79,978
UBS U.S. Bond Fund		11,962		130,880

The Funds may invest in shares of certain affiliated investment companies also advised or managed by the Advisor. The Funds pay no management fees to these affiliated investment companies. Investments in affiliated investment companies for the year ended June 30, 2007 were as follows:

					UBS Dynamic Alpha Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS Emerging Markets Equity Relationship Fund	$	195,498,312	$	—	$	12,902,500	$	6,751,516	$	77,594,103	$	266,941,429
UBS International Equity Relationship Fund		752,513,966		17,000,000		397,000,000		125,781,308		59,991,330		558,286,604
UBS Opportunistic Emerging Markets Debt Relationship Fund		—		42,000,000		—		—		4,175,197		46,175,197
UBS Opportunistic High Yield Relationship Fund		—		38,000,000		—		—		1,142,524		39,142,524
UBS Small-Cap Equity Relationship Fund		169,249,160		—		—		—		38,700,803		207,949,963
UBS U.S. Equity Alpha Relationship Fund		264,889,737		19,000,000		—		—		71,615,970		355,505,707
UBS U.S. Large Cap Equity Relationship Fund		642,474,353		—		318,000,000		23,876,223		44,514,492		392,865,068
UBS U.S. Large Cap Growth Equity Relationship Fund		166,243,607		9,000,000		—		—		35,786,441		211,030,048

220

The UBS Funds—Notes to financial statements

					UBS Global Allocation Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS Corporate Bond Relationship Fund	$	40,646,810	$	58,350,000	$	5,000,000	$	385,729	$	3,742,793	$	98,125,332
UBS Emerging Markets Equity Relationship Fund		167,868,945		—		—		—		72,524,327		240,393,272
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund		—		7,000,000		—		—		524,790		7,524,790
UBS High Yield Relationship Fund		31,640,230		10,000,000		—		—		3,722,979		45,363,209
UBS Small-Cap Equity Relationship Fund		118,431,390		—		—		—		27,080,725		145,512,115
UBS U.S. Securitized Mortgage Relationship Fund		122,928,299		225,000,000		—		—		7,388,173		355,316,472
					UBS Global Equity Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS Emerging Markets Equity Completion Relationship Fund	$	16,731,326	$	—	$	—	$	—	$	7,827,456	$	24,558,782
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund		—		2,300,000		—		—		172,431		2,472,431
UBS U.S. Smaller Cap Equity Completion Relationship Fund		—		2,200,000		—		—		171,138		2,371,138
					UBS International Equity Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS Emerging Markets Equity Completion Relationship Fund	$	7,185,232	$	—	$	—	$	—	$	3,361,484	$	10,546,716
UBS Global ex U.S. Smaller Cap Equity Completion Relationship Fund		—		2,500,000		—		—		187,425		2,687,425
					UBS Absolute Return Bond Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS U.S. Securitized Mortgage Relationship Fund	$	63,042,475	$	—	$	37,000,000	$	2,576,862	$	871,980	$	29,491,317

221

The UBS Funds—Notes to financial statements

					UBS Global Bond Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS U.S. Securitized Mortgage Relationship Fund	$	11,710,161	$	7,275,000	$	5,800,000	$	626,279	$	102,393	$	13,913,833
					UBS U.S. Bond Fund
Affiliated investment companies	Value 06/30/06		Purchases		Sales proceeds		Net realized gain (loss)		Change in net unrealized appreciation (depreciation)		Value 06/30/07
UBS Corporate Bond Relationship Fund	$	2,698,312	$	2,600,000	$	2,500,000	$	171,525	$	201,226	$	3,171,063
UBS Opportunistic Emerging Markets Debt Relationship Fund		2,006,713		1,600,000		—		—		428,352		4,035,065
UBS Opportunistic High Yield Relationship Fund		8,026,848		4,200,000		—		—		630,530		12,857,378
UBS U.S. Securitized Mortgage Relationship Fund		9,435,351		43,090,000		—		—		898,523		53,423,874

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. Supplementary Trust pays no management fees to the Advisor. Distributions received from Supplementary Trust are reflected as affiliated interest income in the Statements of Operations. Amounts relating to those investments at June 30, 2007 and for the year then ended were as follows:

Fund	Value 06/30/06		Purchases		Sales proceeds		Interest income		Value 06/30/07		% of net assets
UBS Global Allocation Fund	$	207,914,294	$	968,045,584	$	1,018,544,355	$	9,356,035	$	157,415,523		3.05	%
UBS Global Equity Fund		—		79,517,370		78,186,964		112,243		1,330,406		0.33	%
UBS International Equity Fund		21,075,030		88,158,740		103,144,536		97,594		6,089,234		3.02	%
UBS U.S. Large Cap Equity Fund		18,145,640		318,787,694		319,890,722		1,596,771		17,042,612		1.70	%
UBS U.S. Large Cap Growth Fund		139,461		39,138,491		38,443,612		41,798		834,340		1.14	%
UBS U.S. Large Cap Value Equity Fund		903,587		25,431,330		25,047,835		85,801		1,287,082		0.92	%
UBS U.S. Small Cap Growth Fund		10,786,995		118,081,266		114,114,509		389,348		14,753,752		3.19	%
UBS Global Bond Fund		7,204,469		48,808,057		50,874,164		298,653		5,138,362		4.17	%
UBS High Yield Fund		982,605		54,062,667		51,212,491		133,674		3,832,781		3.60	%
UBS U.S. Bond Fund		7,844,306		106,469,650		109,747,375		316,427		4,566,581		2.35	%

222

The UBS Funds—Notes to financial statements

The Funds may invest in shares of the UBS U.S. Cash Management Prime Relationship Fund ("Cash Prime"). Cash Prime is offered as a cash management option only to mutual funds and certain other accounts. Distributions received from Cash Prime are reflected as affiliated interest income in the Statements of Operations. Amounts relating to those investments at June 30, 2007 and for the year then ended were as follows:

Fund	Value 06/30/06		Purchases		Sales proceeds		Interest income		Value 06/30/07		% of net assets
UBS Dynamic Alpha Fund	$	27,133,225	$	1,116,298,573	$	1,077,589,123	$	4,500,231	$	65,842,675		2.02	%
UBS U.S. Equity Alpha Fund		—		60,906,870		60,027,587		70,593		879,283		0.38
UBS U.S. Mid Cap Growth Equity Fund		60,872		1,176,234		1,171,973		2,745		65,133		1.10
UBS Absolute Return Bond Fund		39,828,887		208,575,271		237,918,476		1,872,942		10,485,682		1.89

The following Funds have incurred brokerage commissions with UBS AG, an affiliated broker-dealer. Amounts relating to those transactions for the year ended June 30, 2007, were as follows:

Fund	Brokerage commissions
UBS Dynamic Alpha Fund	$	29,363
UBS Global Allocation Fund		935
UBS U.S. Equity Alpha Fund		463
UBS U.S. Large Cap Equity Fund		15,563
UBS U.S. Large Cap Value Equity Fund		23
UBS U.S. Mid Cap Growth Fund		68

3. Service and distribution plans

UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted service and/or distribution 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. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A, Class B and Class C. Annual fees under the Plans as a percentage of the average daily net assets of each representative class of each of the Funds are as follows:

Fund	Class A			Class B			Class C
UBS Dynamic Alpha Fund		0.25	%		1.00	%		1.00	%
UBS Global Allocation Fund		0.25			1.00			1.00
UBS Global Equity Fund		0.25			1.00			1.00
UBS International Equity Fund		0.25			1.00			1.00
UBS U.S. Equity Alpha Fund		0.25			N/A*			1.00
UBS U.S. Large Cap Equity Fund		0.25			1.00			1.00
UBS U.S. Large Cap Growth Fund		0.25			1.00			1.00
UBS U.S. Large Cap Value Equity Fund		0.25			1.00			1.00
UBS U.S. Mid Cap Growth Equity Fund		0.25			N/A*			1.00
UBS U.S. Small Cap Growth Fund		0.25			1.00			1.00
UBS Absolute Return Bond Fund		0.15			N/A*			0.50

223

The UBS Funds—Notes to financial statements

Fund	Class A			Class B			Class C
UBS Global Bond Fund		0.25	%		1.00	%		0.75	%
UBS High Yield Fund		0.25			1.00			0.75
UBS U.S. Bond Fund		0.25			1.00			0.75

* UBS U.S. Equity Alpha Fund, UBS U.S. Mid Cap Growth Equity Fund and UBS Absolute Return Bond Fund do not offer Class B shares.

UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchase of Class A and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A, Class B, and Class C.

At June 30, 2007, certain Funds owed UBS Global AM (US) service and distribution fees, and for the year ended June 30, 2007, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:

Fund	Service and distribution fees owed		Sales charges earned
UBS Dynamic Alpha Fund—Class A	$	455,122	$	5,227,717
UBS Dynamic Alpha Fund—Class B		21,570		111,940
UBS Dynamic Alpha Fund—Class C		488,030		217,359
UBS Global Allocation Fund—Class A		634,276		6,765,318
UBS Global Allocation Fund—Class B		113,941		237,595
UBS Global Allocation Fund—Class C		1,048,796		128,972
UBS Global Equity Fund—Class A		34,965		70,164
UBS Global Equity Fund—Class B		6,197		12,752
UBS Global Equity Fund—Class C		43,668		1,124
UBS International Equity Fund—Class A		5,429		41,251
UBS International Equity Fund—Class B		437		1,172
UBS International Equity Fund—Class C		2,155		937
UBS U.S. Equity Alpha Fund—Class A		38,652		1,265,376
UBS U.S. Equity Alpha Fund—Class C		34,119		6,315
UBS U.S. Large Cap Equity Fund—Class A		32,447		71,603
UBS U.S. Large Cap Equity Fund—Class B		720		1,163
UBS U.S. Large Cap Equity Fund—Class C		8,804		1,358
UBS U.S. Large Cap Growth Fund—Class A		2,016		4,018
UBS U.S. Large Cap Growth Fund—Class B		187		234
UBS U.S. Large Cap Growth Fund—Class C		802		22
UBS U.S. Large Cap Value Equity Fund—Class A		25,172		19,340
UBS U.S. Large Cap Value Equity Fund—Class B		866		1,779
UBS U.S. Large Cap Value Equity Fund—Class C		13,191		389
UBS U.S. Mid Cap Growth Equity Fund—Class A		55		2,654
UBS U.S. Mid Cap Growth Equity Fund—Class C		476		246
UBS U.S. Small Cap Growth Fund—Class A		31,094		8,568
UBS U.S. Small Cap Growth Fund—Class B		1,508		7,861
UBS U.S. Small Cap Growth Fund—Class C		6,536		682
UBS Absolute Return Bond Fund—Class A		32,620		182,305
UBS Absolute Return Bond Fund—Class C		15,609		13,826
UBS Global Bond Fund—Class A		2,961		25,948

224

The UBS Funds—Notes to financial statements

Fund	Service and distribution fees owed		Sales charges earned
UBS Global Bond Fund—Class B	$	185	$	190
UBS Global Bond Fund—Class C		924		815
UBS High Yield Fund—Class A		9,417		57,892
UBS High Yield Fund—Class B		2,120		5,118
UBS High Yield Fund—Class C		7,106		1,833
UBS U.S. Bond Fund—Class A		6,151		22,151
UBS U.S. Bond Fund—Class B		363		156
UBS U.S. Bond Fund—Class C		986		1,014

4. Transfer agency and related services fees

UBS Financial Services Inc. provides transfer agency and related services to each Fund pursuant to a delegation of authority from PFPC, Inc. ("PFPC"), each Fund's transfer agent, and is compensated for these services by PFPC, not the Funds.

For the year ended June 30, 2007, UBS Financial Services Inc. received from PFPC, not the Funds, total transfer agency and related services fees paid by the Funds to PFPC as follows:

Fund	Amount paid
UBS Dynamic Alpha Fund	$	733,850
UBS Global Allocation Fund		1,042,304
UBS Global Equity Fund		184,505
UBS International Equity Fund		10,238
UBS U.S. Equity Alpha Fund		34,565
UBS U.S. Large Cap Equity Fund		24,462
UBS U.S. Large Cap Growth Fund		3,434
UBS U.S. Large Cap Value Equity Fund		50,299
UBS U.S. Mid Cap Growth Equity Fund		162
UBS U.S. Small Cap Growth Fund		39,287
UBS Absolute Return Bond Fund		103,471
UBS Global Bond Fund		14,677
UBS High Yield Fund		47,656
UBS U.S. Bond Fund		5,017

5. Securities lending

Each Fund may lend portfolio securities up to 33 1/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, US government securities or irrevocable letters of credit in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. Each Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, each Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. Each Fund receives compensation for lending its securities from interest or dividends earned on the cash, US government securities or irrevocable letters of credit held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. 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.

225

The UBS Funds—Notes to financial statements

UBS Global Allocation Fund and UBS International Equity Fund loaned securities to certain qualified broker-dealers, with the Funds' custodian acting as the Funds' lending agent. Cash collateral received is invested in interest bearing securities, which are included in the Portfolios of Investments. In addition, the UBS Global Allocation Fund received US Government Agency securities as collateral amounting to $204,396,017, which cannot be resold. The value of loaned securities and related collateral outstanding at June 30, 2007, were as follows:

Fund	Market value of securities loaned		Total collateral received from securities loaned		Market value of investments of cash collateral received
UBS Global Allocation Fund	$	337,414,527	$	348,450,805	$	144,054,788
UBS International Equity Fund		5,832,136		6,089,234		6,089,234

6. Purchases and sales of securities

For the year ended June 30, 2007, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government securities, were as follows:

Fund	Purchases		Sales proceeds
UBS Dynamic Alpha Fund	$	811,625,930	$	880,550,067
UBS Global Allocation Fund		2,473,202,710		1,833,940,973
UBS Global Equity Fund		139,571,456		238,718,919
UBS International Equity Fund		145,594,116		182,548,160
UBS U.S. Equity Alpha Fund		408,787,133		198,473,130
UBS U.S. Large Cap Equity Fund		492,765,878		271,337,763
UBS U.S. Large Cap Growth Fund		95,938,750		41,509,392
UBS U.S. Large Cap Value Equity Fund		35,999,650		52,266,304
UBS U.S. Mid Cap Growth Equity Fund		3,838,131		3,815,062
UBS U.S. Small Cap Growth Fund		150,757,043		190,872,386
UBS Absolute Return Bond Fund		351,445,697		260,062,578
UBS Global Bond Fund		88,086,276		58,202,601
UBS High Yield Fund		52,375,076		47,156,255
UBS U.S. Bond Fund		83,474,967		51,981,077

For the year ended June 30, 2007, aggregate purchases and sales of US Government securities, excluding short-term investments, were as follows:

Fund	Purchases		Sales proceeds
UBS Global Allocation Fund	$	1,459,623,114	$	1,388,004,316
UBS Global Bond Fund		16,818,528		20,222,872
UBS U.S. Bond Fund		317,400,747		299,076,938

7. Federal income taxes

It is each Fund's 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. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, each Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.

226

The UBS Funds—Notes to financial statements

The tax character of distributions paid during the fiscal years ended June 30, 2007 and June 30, 2006 were as follows:

	2007						2006
Fund	Distributions paid from ordinary income		Distributions paid from net long-term capital gains		Total distributions paid		Distributions paid from ordinary income		Distributions paid from net long-term capital gains		Total distributions paid
UBS Dynamic Alpha Fund	$	46,880	$	—	$	46,880	$	7,212,627	$	4,878,805	$	12,091,432
UBS Global Allocation Fund		123,945,917		185,593,405		309,539,322		65,733,883		111,143,459		176,877,342
UBS Global Equity Fund		3,964,334		—		3,964,334		2,442,591		—		2,442,591
UBS International Equity Fund		5,455,734		6,171,802		11,627,536		2,158,708		4,706,815		6,865,523
UBS U.S.Equity Alpha Fund		270,893		—		270,893		—		—		—
UBS U.S. Large Cap Equity Fund		14,888,199		14,605,699		29,493,898		5,777,509		7,141,858		12,919,367
UBS U.S. Large Cap Growth Fund		14,389		—		14,389		5,151		—		5,151
UBS U.S. Large Cap Value Equity Fund		1,196,827		10,802,104		11,998,931		3,914,428		9,935,393		13,849,821
UBS U.S. Mid Cap Growth Equity Fund		6,100		—		6,100		—		—		—
UBS U.S. Small Cap Growth Fund		178,406		13,569,899		13,748,305		503,650		13,307,966		13,811,616
UBS Absolute Return Bond Fund		17,849,667		2,342,592		20,192,259		10,912,261		234,389		11,146,650
UBS Global Bond Fund		2,906,595		—		2,906,595		2,962,657		—		2,962,657
UBS High Yield Fund		8,349,600		—		8,349,600		8,615,802		—		8,615,802
UBS U.S. Bond Fund		6,465,615		—		6,465,615		5,905,088		—		5,905,088

At June 30, 2007, the components of accumulated earnings (deficit) on a tax basis were as follows:

Fund	Undistributed ordinary income		Undistributed long-term capital gain		Accumulated capital and other losses			Unrealized appreciation/ (depreciation)
UBS Dynamic Alpha Fund	$	3,468,561	$	—	$	(227,303,396	)	$	329,100,786
UBS Global Allocation Fund		51,865,262		185,613,021		(57,821,993	)		563,870,707
UBS Global Equity Fund		2,143,997		—		(736,550,597	)		110,846,770
UBS International Equity Fund		7,291,063		11,828,154		(2,603,702	)		65,163,018
UBS U.S. Equity Alpha Fund		7,558,481		—		—			15,433,035
UBS U.S. Large Cap Equity Fund		15,456,782		13,622,624		—			162,671,280
UBS U.S. Large Cap Growth Fund		63,459		—		(859,493	)		3,560,800
UBS U.S. Large Cap Value Equity Fund		1,472,238		5,915,774		(427,665	)		34,696,416
UBS U.S. Mid Cap Growth Equity Fund		17,399		23,809		—			629,269
UBS U.S. Small Cap Growth Fund		—		7,608,495		—			99,073,747
UBS Absolute Return Bond Fund		6,595,459		—		(6,058,862	)		(1,533,023	)
UBS Global Bond Fund		—		—		(2,413,600	)		147,681
UBS High Yield Fund		39,737		—		(221,281,806	)		(5,094	)
UBS U.S. Bond Fund		846,164		—		(3,145,215	)		(1,192,648	)

227

The UBS Funds—Notes to financial statements

Due to inherent differences in the recognition of income, expenses and realized gains/losses under US generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax basis reporting for the current fiscal year have been identified and appropriately reclassified. Reclassifications for the year ended June 30, 2007 were as follows:

Fund	Accumulated undistributed net investment income			Accumulated net realized gain (loss)			Beneficial interest
UBS Dynamic Alpha Fund	$	(100,375,928	)	$	273,193,021		$	(172,817,093	)
UBS Global Allocation Fund		(32,779,923	)		85,809,844			(53,029,921	)
UBS Global Equity Fund		(3,750,226	)		3,946,800			(196,574	)
UBS International Equity Fund		(1,563,207	)		1,723,187			(159,980	)
UBS U.S. Equity Alpha Fund		103,840			(2,120	)		(101,720	)
UBS U.S. Large Cap Equity Fund		4			(4	)		—
UBS U.S. Large Cap Growth Fund		(19,045	)		—			19,045
UBS U.S. Large Cap Value Equity Fund		—			(215,566	)		215,566
UBS U.S. Mid Cap Growth Equity Fund		60,420			—			(60,420	)
UBS U.S. Small Cap Growth Fund		3,576,493			(3,441,969	)		(134,524	)
UBS Absolute Return Bond Fund		1,366,684			(1,426,673	)		59,989
UBS Global Bond Fund		(847,221	)		841,310			5,911
UBS High Yield Fund		549,711			18,111,746			(18,661,457	)
UBS U.S. Bond Fund		1,492,092			(263,286	)		(1,228,806	)

At June 30, 2007, the following Funds had net capital loss carryforwards for federal income tax purposes available to offset future capital gains through the indicated expiration dates:

	Expiration dates
Fund	June 30, 2008			June 30, 2009			June 30, 2010			June 30, 2011		June 30, 2012		June 30, 2013		June 30, 2014		June 30, 2015
UBS Dynamic Alpha Fund	$	—		$	—		$	—		$	—	$	—	$	—	$	—	$	19,275,465
UBS Global Equity Fund		85,562,248	⁽¹⁾		389,124,210	⁽¹⁾		253,636,661	⁽¹⁾		4,283,846		—		—		—		—
UBS U.S. Large Cap Growth Fund		—			—			—			255,718		603,775		—		—		—
UBS U.S. Large Cap Value Equity Fund		70,827	⁽²⁾		83,503	⁽²⁾		273,335	⁽²⁾		—		—		—		—		—
UBS Global Bond Fund		—			269,385			—			—		—		—		—		359,497
UBS High Yield Fund		98,009,332	⁽³⁾		23,205,714	⁽³⁾		6,612,767			37,425,637		15,791,570		11,067,780		22,213,870		5,885,761
UBS U.S. Bond Fund		—			404,247			—			—		614,333		140,847		630,558		1,283,441

⁽¹⁾ Due to merger with UBS Strategy Fund, utilization of capital loss carryforwards in subsequent years may be limited.

⁽²⁾ Due to merger with UBS U.S. Large Cap Equity Fund, utilization of capital loss carryforwards in subsequent years may be limited.

⁽³⁾ Due to merger with Paine Webber High Income Fund, utilization of capital loss carryforwards in subsequent years may be limited.

228

The UBS Funds—Notes to financial statements

The UBS High Yield Fund had capital loss carryforwards in the amount of $18,661,457 that expired as of June 30, 2007.

During the fiscal year ended June 30, 2007, the following Funds utilized capital loss carryforwards to offset current year realized gains:

Fund	Amount
UBS Global Equity Fund	$	46,678,549
UBS U.S. Large Cap Growth Fund		1,467,417
UBS U.S. Large Cap Value Equity Fund		142,555
UBS U.S. Mid Cap Growth Equity Fund		27,770
UBS High Yield Fund		12,775,696

Post-October losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2007, the following Funds incurred, and elected to defer, losses of the following:

Fund	Net capital losses		Net currency losses
UBS Dynamic Alpha Fund	$	39,226,902	$	166,615,966
UBS Global Allocation Fund		—		51,558,194
UBS Global Equity Fund		—		3,943,632
UBS International Equity Fund		—		2,603,702
UBS Absolute Return Bond Fund		—		2,305,788
UBS Global Bond Fund		63,433		783,981
UBS High Yield Fund		1,069,375		—
UBS U.S. Bond Fund		71,789		—

On July 13, 2006, FASB released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing a fund's tax return to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Based on the Securities and Exchange Commission's announcement on December 22, 2006, the implementation of FIN 48 must be incorporated into accounting practices no later than the last business day of the Funds' December 31, 2007 semiannual report. Management continues to evaluate the application of FIN 48 to the Funds, and is not in a position at this time to estimate the significance of its impact, if any, on the Funds' financial statements.

229

The UBS Funds—Notes to financial statements

8. Line of credit

The Trust has entered into an agreement with JPMorgan Chase Bank to provide a $75 million committed line of credit to the Funds ("Committed Credit Facility") to be utilized for temporary financing until the settlement of shares or purchases of portfolio securities, the repurchase or redemption of shares of each Fund at the request of shareholders and other temporary or emergency purposes. Interest on amounts borrowed is calculated based on the federal funds rate in effect at the time of borrowing, plus 0.50%. Under the Committed Credit Facility arrangement, each Fund has agreed to pay commitment fees, pro rata, based on the relative asset size of the Funds in the Committed Credit Facility. The average daily borrowings under the agreement for the year ended June 30, 2007, were as follows:

Fund	Average daily borrowings		Number of days outstanding		Interest expense		Weighted average annualized interest rate
UBS Dynamic Alpha Fund	$	13,218,500		9	$	19,101		5.78	%
UBS Global Equity Fund		15,931,121		6		15,429		5.81
UBS International Equity Fund		14,818,346		10		23,936		5.82
UBS U.S. Large Cap Equity Fund		26,470,000		4		17,044		5.80
UBS Global Bond Fund		1,480,000		2		478		5.81

9. Capital contributions from advisor

During the year ended June 30, 2007, the Advisor reimbursed the UBS U.S. Bond Fund for trading errors in the amount of $2,876.

10. Shares of beneficial interest

For the year ended June 30, 2007, transactions in shares of beneficial interest for each of the Funds were as follows:

UBS Dynamic Alpha Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		84,872,728		$	969,584,092			434,805		$	4,900,329
Shares repurchased		(56,278,365	)		(645,034,749	)		(473,098	)		(5,382,643	)
Shares converted from Class B to Class A		404,603			4,666,041			(408,967	)		(4,666,041	)
Dividends reinvested		2,843			32,985			—			—
Net increase (decrease)		29,001,809		$	329,248,369			(447,260	)	$	(5,148,355	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		15,243,059		$	172,303,345			28,936,867		$	333,363,937
Shares repurchased		(11,188,363	)		(127,116,150	)		(13,688,026	)		(157,002,781	)
Dividends reinvested		—			—			826			9,594
Net increase		4,054,696		$	45,187,195			15,249,667		$	176,370,750

230

The UBS Funds—Notes to financial statements

UBS Global Allocation Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		65,260,018		$	943,331,489			1,084,208		$	15,416,202
Shares repurchased		(33,433,692	)		(483,355,215	)		(1,363,205	)		(19,296,039	)
Shares converted from Class B to Class A		2,665,559			38,581,986			(2,714,928	)		(38,581,986	)
Dividends reinvested		12,438,305			176,001,316			681,599			9,501,490
Net increase (decrease)		46,930,190		$	674,559,576			(2,312,326	)	$	(32,960,333	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		16,801,188		$	238,217,003			15,286,994		$	222,520,729
Shares repurchased		(10,933,500	)		(154,638,618	)		(7,743,183	)		(113,594,037	)
Dividends reinvested		5,254,975			72,991,604			2,641,018			37,898,604
Net increase		11,122,663		$	156,569,989			10,184,829		$	146,825,296

UBS Global Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		504,742		$	7,265,598			9,628		$	134,431
Shares repurchased		(3,494,615	)		(50,125,614	)		(144,727	)		(1,994,547	)
Shares converted from Class B to Class A		440,377			6,195,832			(450,862	)		(6,195,832	)
Dividends reinvested		96,516			1,399,479			803			11,422
Net decrease		(2,452,980	)	$	(35,264,705	)		(585,158	)	$	(8,044,526	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		85,773		$	1,193,616			4,603,507		$	66,234,157
Shares repurchased		(1,107,265	)		(15,322,502	)		(7,023,160	)		(104,671,796	)
Dividends reinvested		16,938			239,335			145,622			2,150,831
Net decrease		(1,004,554	)	$	(13,889,551	)		(2,274,031	)	$	(36,286,808	)

UBS International Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		323,243		$	3,854,557			10,466		$	127,568
Shares repurchased		(557,978	)		(6,726,775	)		(8,252	)		(93,478	)
Shares converted from Class B to Class A		28,610			346,130			(28,962	)		(346,130	)
Dividends reinvested		107,043			1,270,596			2,423			28,499
Net decrease		(99,082	)	$	(1,255,492	)		(24,325	)	$	(283,541	)

231

The UBS Funds—Notes to financial statements

	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		59,135		$	684,396			8,197,482		$	98,309,568
Shares repurchased		(90,644	)		(1,063,565	)		(9,217,288	)		(113,371,879	)
Dividends reinvested		10,126			118,068			844,434			10,082,544
Net decrease		(21,383	)	$	(261,101	)		(175,372	)	$	(4,979,767	)

UBS U.S. Equity Alpha Fund

	Class A						Class C						Class Y
	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		18,528,407		$	193,873,168			4,161,711		$	43,341,238			467,729		$	5,100,472
Shares repurchased		(2,323,800	)		(25,191,910	)		(446,483	)		(4,676,681	)		(1	)		(11	)
Dividends reinvested		21,428			232,063			2,804			30,339			24			262
Net increase		16,226,035		$	168,913,321			3,718,032		$	38,694,896			467,752		$	5,100,723

UBS U.S. Large Cap Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		4,300,640		$	85,817,295			7,429		$	142,594
Shares repurchased		(1,910,313	)		(38,475,464	)		(9,550	)		(184,230	)
Shares converted from Class B to Class A		12,299			244,971			(12,589	)		(244,971	)
Dividends reinvested		180,554			3,573,169			1,387			26,879
Net increase (decrease)		2,583,180		$	51,159,971			(13,323	)	$	(259,728	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		222,217		$	4,269,324			16,946,562		$	341,017,163
Shares repurchased		(58,531	)		(1,144,923	)		(8,746,010	)		(176,494,034	)
Dividends reinvested		13,801			267,332			1,172,194			23,443,881
Net increase		177,487		$	3,391,733			9,372,746		$	187,967,010

UBS U.S. Large Cap Growth Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		503,361		$	5,122,977			4,684		$	44,200
Shares repurchased		(405,356	)		(3,973,752	)		(5,439	)		(51,198	)
Shares converted from Class B to Class A		22,966			227,581			(23,833	)		(227,581	)
Dividends reinvested		395			3,927			—			—
Net increase (decrease)		121,366		$	1,380,733			(24,588	)	$	(234,579	)

232

The UBS Funds—Notes to financial statements

	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		15,712		$	143,489			5,678,333		$	59,284,208
Shares repurchased		(15,064	)		(144,014	)		(496,580	)		(5,174,040	)
Dividends reinvested		—			—			1,016			10,323
Net increase (decrease)		648		$	(525	)		5,182,769		$	54,120,491

UBS U.S. Large Cap Value Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		244,851		$	2,746,516			24,037		$	263,300
Shares repurchased		(1,473,691	)		(16,453,754	)		(32,051	)		(350,388	)
Shares converted from Class B to Class A		97,753			1,096,913			(99,219	)		(1,096,913	)
Dividends reinvested		814,426			8,877,242			9,030			97,430
Net decrease		(316,661	)	$	(3,733,083	)		(98,203	)	$	(1,086,571	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		82,435		$	911,614			253,679		$	2,867,407
Shares repurchased		(318,417	)		(3,459,159	)		(219,237	)		(2,493,864	)
Dividends reinvested		112,897			1,210,256			62,804			686,451
Net increase (decrease)		(123,085	)	$	(1,337,289	)		97,246		$	1,059,994

UBS U.S. Mid Cap Growth Equity Fund

	Class A						Class C						Class Y
	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		40,544		$	399,944			1,524		$	15,501			2		$	20
Shares repurchased		(33,879	)		(329,942	)		(1,098	)		(10,985	)		(3	)		(31	)
Dividends reinvested		—			—			—			—			608			6,100
Net increase		6,665		$	70,002			426		$	4,516			607		$	6,089

UBS U.S. Small Cap Growth Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		2,596,313		$	38,518,444			3,014		$	42,736
Shares repurchased		(4,235,057	)		(63,686,920	)		(79,064	)		(1,114,640	)
Shares converted from Class B to Class A		209,503			3,100,512			(218,037	)		(3,100,512	)
Dividends reinvested		268,311			3,903,931			9,444			131,933
Net decrease		(1,160,930	)	$	(18,164,033	)		(284,643	)	$	(4,040,483	)

233

The UBS Funds—Notes to financial statements

	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		19,907		$	289,376			5,214,735		$	79,695,818
Shares repurchased		(119,669	)		(1,693,978	)		(5,539,837	)		(85,846,554	)
Dividends reinvested		17,265			240,842			548,275			8,185,749
Net increase (decrease)		(82,497	)	$	(1,163,760	)		223,173		$	2,035,013

UBS U.S. Absolute Return Bond Fund

	Class A						Class C						Class Y
	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		14,929,111		$	151,842,876			1,770,795		$	18,003,867			6,665,800		$	67,709,006
Shares repurchased		(11,202,346	)		(113,847,734	)		(1,166,203	)		(11,839,127	)		(4,708,300	)		(47,783,672	)
Dividends reinvested		875,978			8,848,267			115,432			1,165,607			936,879			9,469,617
Net increase		4,602,743		$	46,843,409			720,024		$	7,330,347			2,894,379		$	29,394,951

UBS Global Bond Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		560,582		$	5,372,560			3,408		$	32,715
Shares repurchased		(755,625	)		(7,222,959	)		(7,194	)		(68,840	)
Shares converted from Class B to Class A		18,153			174,944			(18,115	)		(174,944	)
Dividends reinvested		37,868			361,495			571			5,469
Net decrease		(139,022	)	$	(1,313,960	)		(21,330	)	$	(205,600	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		16,557		$	158,560			5,244,536		$	55,591,313
Shares repurchased		(116,251	)		(1,106,312	)		(2,847,139	)		(30,105,870	)
Dividends reinvested		2,426			23,100			230,897			2,443,856
Net increase (decrease)		(97,268	)	$	(924,652	)		2,628,294		$	27,929,299

UBS High Yield Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		1,490,533		$	10,396,916			85,830		$	603,764
Shares repurchased		(2,748,818	)		(19,294,928	)		(54,659	)		(381,508	)
Shares converted from Class B to Class A		60,378			422,360			(60,346	)		(422,360	)
Dividends reinvested		279,270			1,952,535			11,118			77,802
Net decrease		(918,637	)	$	(6,523,117	)		(18,057	)	$	(122,302	)

234

The UBS Funds—Notes to financial statements

	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		151,233		$	1,060,575			2,945,820		$	20,758,938
Shares repurchased		(344,292	)		(2,417,167	)		(1,319,877	)		(9,309,369	)
Dividends reinvested		61,519			430,538			466,270			3,279,636
Net increase (decrease)		(131,540	)	$	(926,054	)		2,092,213		$	14,729,205

UBS U.S. Bond Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		729,430		$	7,654,158			662		$	6,983
Shares repurchased		(1,062,535	)		(11,157,475	)		(6,508	)		(68,610	)
Shares converted from Class B to Class A		31,854			335,863			(31,826	)		(335,863	)
Dividends reinvested		61,452			644,355			1,221			12,821
Net decrease		(239,799	)	$	(2,523,099	)		(36,451	)	$	(384,669	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		26,853		$	281,430			7,826,619		$	82,039,129
Shares repurchased		(33,323	)		(348,376	)		(3,004,349	)		(31,544,554	)
Dividends reinvested		3,320			34,779			501,194			5,258,293
Net increase (decrease)		(3,150	)	$	(32,167	)		5,323,464		$	55,752,868

For the year ended June 30, 2006, transactions in shares of beneficial interest for each of the Funds were as follows:

UBS Dynamic Alpha Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		128,078,469		$	1,389,322,850			1,828,083		$	19,652,310
Shares repurchased		(19,812,434	)		(215,331,923	)		(303,794	)		(3,249,313	)
Shares converted from Class B to Class A		247,266			2,658,305			(248,477	)		(2,658,305	)
Dividends reinvested		794,100			8,560,404			7,912			85,128
Net increase		109,307,401		$	1,185,209,636			1,283,724		$	13,829,820
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		31,040,840		$	334,455,043			23,122,252		$	252,321,581
Shares repurchased		(3,628,976	)		(39,225,551	)		(2,264,553	)		(24,882,462	)
Dividends reinvested		138,072			1,484,271			118,432			1,277,885
Net increase		27,549,936		$	296,713,763			20,976,131		$	228,717,004

235

The UBS Funds—Notes to financial statements

UBS Global Allocation Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		62,903,880		$	865,736,142			1,491,471		$	20,139,283
Shares repurchased		(30,065,197	)		(413,871,317	)		(1,655,143	)		(22,377,744	)
Shares converted from Class B to Class A		2,541,296			34,905,059			(2,591,178	)		(34,905,059	)
Dividends reinvested		7,117,515			95,516,626			548,472			7,256,282
Net increase (decrease)		42,497,494		$	582,286,510			(2,206,378	)	$	(29,887,238	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		16,719,366		$	225,655,967			10,854,603		$	150,535,987
Shares repurchased		(12,243,723	)		(165,380,957	)		(5,820,329	)		(81,221,682	)
Dividends reinvested		3,404,722			44,942,397			1,539,235			20,933,597
Net increase		7,880,365		$	105,217,407			6,573,509		$	90,247,902

UBS Global Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		1,396,975		$	17,595,879			24,111		$	287,187
Shares repurchased		(4,721,111	)		(60,109,715	)		(1,231,208	)		(14,756,174	)
Shares converted from Class B to Class A		7,111,962			86,168,577			(7,279,324	)		(86,168,577	)
Dividends reinvested		81,168			1,015,414			—			—
Net increase (decrease)		3,868,994		$	44,670,155			(8,486,421	)	$	(100,637,564	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		160,698		$	1,945,401			5,025,750		$	64,061,617
Shares repurchased		(1,724,053	)		(20,983,395	)		(4,904,221	)		(63,295,653	)
Dividends reinvested		—			—			105,660			1,345,053
Net increase (decrease)		(1,563,355	)	$	(19,037,994	)		227,189		$	2,111,017

UBS International Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		971,667		$	10,111,325			15,235		$	161,759
Shares repurchased		(542,890	)		(5,730,867	)		(12,924	)		(138,242	)
Shares converted from Class B to Class A		30,377			309,728			(30,868	)		(309,728	)
Dividends reinvested		85,840			875,565			2,373			23,936
Net increase (decrease)		544,994		$	5,565,751			(26,184	)	$	(262,275	)

236

The UBS Funds—Notes to financial statements

	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		80,175		$	837,960			7,425,136		$	79,436,543
Shares repurchased		(57,952	)		(593,700	)		(6,502,467	)		(69,837,729	)
Dividends reinvested		6,566			65,849			564,394			5,796,333
Net increase		28,789		$	310,109			1,487,063		$	15,395,147

UBS U.S. Large Cap Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		4,162,891		$	75,756,826			50,395		$	893,374
Shares repurchased		(896,850	)		(16,440,209	)		(6,298	)		(110,259	)
Shares converted from Class B to Class A		48,664			873,574			(49,693	)		(873,574	)
Dividends reinvested		77,658			1,407,165			944			16,797
Net increase (decrease)		3,392,363		$	61,597,356			(4,652	)	$	(73,662	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		225,170		$	4,010,894			16,056,543		$	295,877,335
Shares repurchased		(38,503	)		(692,110	)		(8,231,439	)		(149,088,431	)
Dividends reinvested		5,388			95,856			569,596			10,417,919
Net increase		192,055		$	3,414,640			8,394,700		$	157,206,823

UBS U.S. Large Cap Growth Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		575,000		$	5,261,963			29,874		$	267,760
Shares repurchased		(237,052	)		(2,154,474	)		(6,129	)		(51,853	)
Shares converted from Class B to Class A		47,337			414,391			(48,647	)		(414,391	)
Dividends reinvested		113			1,082			—			—
Net increase (decrease)		385,398		$	3,522,962			(24,902	)	$	(198,484	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		76,410		$	688,459			378,505		$	3,590,977
Shares repurchased		(31,861	)		(286,655	)		(213,933	)		(2,083,444	)
Dividends reinvested		—			—			412			4,014
Net increase		44,549		$	401,804			164,984		$	1,511,547

237

The UBS Funds—Notes to financial statements

UBS U.S. Large Cap Value Equity Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		388,095		$	4,108,673			16,700		$	175,261
Shares repurchased		(1,693,252	)		(18,009,583	)		(86,173	)		(904,307	)
Shares converted from Class B to Class A		245,309			2,618,270			(249,359	)		(2,618,270	)
Dividends reinvested		979,619			9,962,730			24,425			245,715
Net decrease		(80,229	)	$	(1,319,910	)		(294,407	)	$	(3,101,601	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		37,589		$	393,836			205,542		$	2,186,723
Shares repurchased		(353,585	)		(3,677,575	)		(140,354	)		(1,507,222	)
Dividends reinvested		159,245			1,595,633			65,013			663,136
Net increase (decrease)		(156,751	)	$	(1,688,106	)		130,201		$	1,342,637

UBS U.S. Mid Cap Growth Equity Fund

	Class A						Class C				Class Y
	Shares			Amount			Shares		Amount		Shares		Amount
Shares sold		37,333		$	385,174			6,969	$	71,324		500,001	$	5,000,010
Shares repurchased		(20,516	)		(212,486	)		—		—		—		—
Net increase		16,817		$	172,688			6,969	$	71,324		500,001	$	5,000,010

UBS U.S. Small Cap Growth Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		4,491,291		$	65,274,814			17,046		$	237,916
Shares repurchased		(2,638,851	)		(38,341,212	)		(101,823	)		(1,423,996	)
Shares converted from Class B to Class A		249,854			3,687,653			(258,086	)		(3,687,653	)
Dividends reinvested		312,044			4,353,008			23,758			320,974
Net increase (decrease)		2,414,338		$	34,974,263			(319,105	)	$	(4,552,759	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		32,009		$	447,802			11,429,781		$	167,661,096
Shares repurchased		(109,350	)		(1,541,864	)		(4,217,628	)		(62,419,417	)
Dividends reinvested		24,665			332,733			535,598			7,637,633
Net increase (decrease)		(52,676	)	$	(761,329	)		7,747,751		$	112,879,312

238

The UBS Funds—Notes to financial statements

UBS Absolute Return Bond Fund

	Class A						Class C						Class Y
	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		18,921,598		$	190,630,308			2,101,902		$	21,191,655			21,840,716		$	219,572,891
Shares repurchased		(8,935,032	)		(90,035,339	)		(839,168	)		(8,434,110	)		(1,407,032	)		(14,216,875	)
Dividends reinvested		451,836			4,522,668			55,894			559,167			442,679			4,436,608
Net increase		10,438,402		$	105,117,637			1,318,628		$	13,316,712			20,876,363		$	209,792,624

UBS Global Bond Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		545,080		$	5,240,870			3,088		$	29,383
Shares repurchased		(725,048	)		(6,931,243	)		(20,862	)		(199,014	)
Shares converted from Class B to Class A		56,802			547,406			(56,686	)		(547,406	)
Dividends reinvested		61,472			582,841			1,473			13,990
Net decrease		(61,694	)	$	(560,126	)		(72,987	)	$	(703,047	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		16,285		$	155,446			4,946,965		$	52,158,835
Shares repurchased		(80,174	)		(769,544	)		(2,314,779	)		(24,469,531	)
Dividends reinvested		5,864			55,436			198,026			2,078,171
Net increase (decrease)		(58,025	)	$	(558,662	)		2,830,212		$	29,767,475

UBS High Yield Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		1,045,985		$	7,353,436			162,614		$	1,141,616
Shares repurchased		(3,492,760	)		(24,556,100	)		(163,377	)		(1,153,500	)
Shares converted from Class B to Class A		200,458			1,410,267			(200,411	)		(1,410,267	)
Dividends reinvested		331,995			2,323,759			11,386			79,749
Net decrease		(1,914,322	)	$	(13,468,638	)		(189,788	)	$	(1,342,402	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		74,596		$	525,427			2,652,297		$	18,805,721
Shares repurchased		(531,985	)		(3,737,732	)		(2,472,637	)		(17,412,621	)
Dividends reinvested		70,445			493,321			369,919			2,600,408
Net increase (decrease)		(386,944	)	$	(2,718,984	)		549,579		$	3,993,508

239

The UBS Funds—Notes to financial statements

UBS U.S. Bond Fund

	Class A						Class B
	Shares			Amount			Shares			Amount
Shares sold		2,092,757		$	21,892,814			2,714		$	28,183
Shares repurchased		(2,387,338	)		(24,802,696	)		(30,768	)		(322,979	)
Shares converted from Class B to Class A		46,616			487,276			(46,573	)		(487,276	)
Dividends reinvested		98,002			1,026,053			2,392			25,116
Net decrease		(149,963	)	$	(1,396,553	)		(72,235	)	$	(756,956	)
	Class C						Class Y
	Shares			Amount			Shares			Amount
Shares sold		20,643		$	215,872			4,566,668		$	47,755,530
Shares repurchased		(68,731	)		(724,302	)		(4,908,628	)		(51,692,880	)
Dividends reinvested		4,179			43,684			396,907			4,153,422
Net increase (decrease)		(43,909	)	$	(464,746	)		54,947		$	216,072

11. Subsequent event

The UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Large Cap Value Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Global Bond Fund, UBS High Yield Fund and UBS U.S. Bond Fund will cease offering Class B shares (with exceptions for existing shareholders for exchanges or reinvesting dividends) effective on or about October 1, 2007. New or additional investments into Class B shares, including investments through an automatic investment plan, will not be permitted after September 28, 2007. Existing shareholders of Class B shares may: (i) continue as Class B shareholders; (ii) continue to reinvest dividends and distributions into Class B shares and (iii) exchange their Class B shares for Class B shares of other series of the UBS Family of Funds, as permitted by existing exchange privileges. For Class B shares outstanding on October 1, 2007 and Class B shares acquired upon reinvestment of dividends or distributions or through exchanges after September 28, 2007, Class B share attributes, including the associated Rule 12b-1 plan service and distribution fees, contingent deferred sales charges and conversion features, as applicable, will continue.

240

The UBS Funds—Report of Ernst & Young LLP, independent registered public accounting firm

The Board of Trustees and Shareholders of The UBS Funds

We have audited the accompanying statements of assets and liabilities of The UBS Funds (comprising, respectively, UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Large Cap Value Equity Fund, UBS U.S. Mid Cap Growth Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Absolute Return Bond Fund, UBS Global Bond Fund, UBS High Yield Fund and UBS U.S. Bond Fund) (collectively the "Funds"), including the schedules of investments, as of June 30, 2007, and the related statements of operations and changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective funds constituting The UBS Funds at June 30, 2007, and the results of their operations, the changes in their net assets and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.

New York, New York
August 24, 2007

241

The UBS Funds—General information (unaudited)

Quarterly Form N-Q portfolio

Each Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the Funds upon request by calling 1-800-647 1568.

Proxy voting policies and procedures record

You may obtain a description of the Funds' (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Funds voted any proxies related to portfolio securities during the most recent 12-month period ended June 30, for which an SEC filing has been made without charge, upon request by contacting the Funds directly at 1-800-647 1568, online on the Funds' Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).

242

The UBS Funds—Board approval of investment advisory agreements

At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 5, 2007 (the "Meeting"), the Board, consisting entirely of Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust or UBS Global Asset Management (Americas) Inc. (the "Advisor") and its affiliates (together, the "Independent Trustees"), considered the continuation of the investment advisory agreements (the "Advisory Agreements") between the Trust and the Advisor for the UBS U.S. Bond Fund, UBS High Yield Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS Global Allocation Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS International Equity Fund, UBS Absolute Return Bond Fund, UBS Dynamic Alpha Fund and UBS U.S. Mid Cap Growth Equity Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process, on May 25, 2007 and June 4, 2007, to discuss the materials provided to them in response to the information request, including materials prepared by the Advisor, as well as reports prepared by Lipper Inc. ("Lipper Reports"), an independent statistical compilation company, providing comparative expense information on an actual and contractual basis and comparative performance information for the Funds. The Board also made reference to information and material that had been provided to the Independent Trustees throughout the year at quarterly Board meetings.

At the Meeting, the Board considered a number of factors in connection with their deliberations concerning the continuation of the Advisory Agreement for each Fund, including: (i) the nature, extent, and quality of the services provided by the Advisor to the Fund; (ii) the performance of the Fund and the Advisor; (iii) the Fund's expenses, costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund; and (iv) whether economies of scale are realized by the Advisor with respect to the Fund, as it grows larger, and the extent to which the economies of scale are reflected in the level of the management fees charged.

Nature, extent, and quality of services. In considering the nature, extent, and quality of the services provided by the Advisor to a Fund, the Board reviewed the material presented by the Advisor describing the various services provided to each Fund. The Board noted that in addition to investment management services, the Advisor provides each Fund with operational, legal, and compliance support. The Board also considered the scope and depth of the Advisor's organization and the experience and expertise of the professionals currently providing investment management and other services to the Funds. The Board considered that the Advisor was a well-established investment management organization employing investment personnel with significant experience in the investment management industry. The Board also considered the Advisor's in-house research capabilities, as well as other research services available to it, including research services available to the Advisor as a result of securities transactions effected for the Funds and the Advisor's other investment management clients, and noted that the Advisor had extensive global research capabilities. The Board also evaluated the Advisor's portfolio management process for each Fund, including the use of risk management techniques and the proprietary technologies utilized to structure the Fund's portfolio. The Board noted that various presentations had been made by investment personnel at Board meetings throughout the year concerning the Funds' investment performance and investment strategies.

The Board also noted and discussed the services that the Advisor and its affiliates provide to the Funds under other agreements with the Trust including administration services provided by the Advisor, underwriting services provided by UBS Global Asset Management (US) Inc. ("UBS Global AM (US)"), and sub-transfer agency services provided by UBS Financial Services Inc. ("UBS Financial Services"). In connection with the non-investment management services, the Board also considered the quarterly reports that the Advisor provides to

243

The UBS Funds—Board approval of investment advisory agreements

the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. The Board also discussed the annual written compliance report from the Chief Compliance Officer and noted enhancements planned with respect to the compliance program. The Board noted the growth of Fund assets across the Fund complex. The Advisor described for the Board the portfolio management and research enhancements that had been undertaken over the previous year as a result of the increase in assets across the complex. After analyzing the services provided by the Advisor to each Fund, both quantitatively and qualitatively, including the impact of these services on investment performance, the Board concluded that the nature, extent, and quality of services provided to each Fund were consistent with the operational requirements of each Fund, and met the needs of the Fund's shareholders.

Performance. In evaluating the performance of each Fund, the Board analyzed the Lipper Reports, which compared the performance of each Fund with other funds in its respective peer universe over various time periods. In reviewing the Lipper Reports, the Board noted that the UBS U.S. Bond Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Mid Cap Growth Fund and UBS U.S. Small Cap Growth Fund had appeared in one of the top three performance quintiles for most applicable performance periods. The Board also noted that the UBS Global Allocation Fund had strong comparative one-year performance appearing in the second performance quintile for the one-year period. At the Board's request, the Advisor addressed the performance data for the UBS High Yield Fund, UBS Absolute Return Bond Fund, UBS Dynamic Alpha Fund, UBS Global Equity Fund, UBS International Equity Fund, and UBS Global Bond Fund, each of which had appeared in one of the lower performance quintiles for the one-year period.

In explaining the performance of the UBS High Yield Fund, the Advisor discussed the investments in the issuers and the duration and credit strategies that had a negative impact on the Fund's performance in 2006. The Advisor also noted that unlike some of the funds in its peer universe, the UBS High Yield Fund did not invest in preferred securities, REITs, or other non-traditional asset classes, which affected its relative performance. The Board did note that the UBS High Yield Fund's performance compared more favorably to its peers over the longer performance periods.

The Advisor then discussed the factors that contributed to the UBS Absolute Return Bond Fund's performance by explaining that the Fund's negative duration stance had negatively impacted its short-term performance in comparison to its peer group. The Advisor discussed with the Board the Fund's strategy of delivering consistent absolute returns regardless of market conditions over time and noted that the Fund was ranked in the second performance quintile for the since inception period.

The Advisor also addressed the comparative performance for the UBS Dynamic Alpha Fund by explaining that due to the Fund's unique strategy, there was not an ideal Lipper peer universe for comparative performance purposes. The global flexible portfolio funds peer universe used for comparative performance information for the Fund consists of funds that utilize a goal of relative return, while the Fund is designed to provide absolute return over market cycles regardless of the market's direction. The Advisor explained that the Fund invests to limit market risk and thus is subject to less risk than the funds in its peer group and also noted that the Fund is less volatile than a majority of its peers. The Advisor stated that while the UBS Dynamic Alpha Fund underperformed for the one-year performance period, the Advisor believes that the Fund's strategy is intended to provide consistent absolute return over the long term.

In addressing the performance of the UBS Global Equity Fund and UBS International Equity Fund, the Advisor discussed the long-term investment strategy of each Fund and noted that each Fund is positioned with an emphasis on high quality large cap issuers. The Advisor stated that each of the UBS Global Equity Fund and

244

The UBS Funds—Board approval of investment advisory agreements

UBS International Equity Fund lagged the performance of the funds in its respective peer universe for the one-year performance period due, in part, to a smaller allocation of its investments to small- and mid-cap companies, which have performed well. The Advisor also noted that both Funds have continued to deliver strong risk-adjusted returns and are less volatile than many funds in their respective peer groups.

The Advisor also addressed the comparative performance of the UBS Global Bond Fund, which had performance that lagged the funds in its peer universe during the one-year performance period. The Advisor discussed the duration strategies and currency positioning that negatively impacted performance and discussed the Advisor's market outlook and strategies for the future. The Advisor noted that the Board approved changes to the UBS Global Bond Fund's strategy at the Board meeting held in March 2006, which provided the Fund with the flexibility to invest in the high yield debt and emerging markets debt asset classes. The Advisor stated that the Fund had begun to include non-investment grade holdings in its Portfolio which may increase the return potential of the Fund.

The Board concluded that the Advisor's explanations provided a sound basis for understanding the performance of each Fund that underperformed in comparison to its peer universe. The Board determined, after analyzing the performance data, that the performance of each Fund was acceptable as compared with relevant performance standards, given the investment strategies and risk profile of each Fund and the expectations of the shareholder base.

Fund fees and expenses. When considering the fees and expenses borne by each Fund, and the reasonableness of the management fees paid to the Advisor in light of the services provided to each Fund, the Board compared the fees charged by the Advisor to each Fund to fees charged to the funds in its peer group for comparable services, as provided in the Lipper Reports, on both an actual (taking into account expense limitation arrangements) and a contractual basis (assuming all funds in the peer expense group were similar in size to the respective Fund and also at various asset levels). In examining the Lipper Reports, and in reviewing comparative costs, it was noted that the results of such expense comparisons showed that the actual management fee rate for each Fund, except the UBS Absolute Return Bond Fund, UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS U.S. Large Cap Equity Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except UBS Dynamic Alpha Fund, UBS U.S. Mid Cap Growth Equity Fund, UBS U.S. Small Cap Growth Fund and UBS Global Bond Fund, had a contractual fee rate comparable to the funds in its respective expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund, except UBS Dynamic Alpha Fund, had total expenses that compared favorably to the funds in its respective expense group and that UBS Dynamic Alpha Fund's total expenses were not appreciably higher than its expense group median.

The Board noted that the management fee for the UBS Dynamic Alpha Fund was higher than many funds in its Lipper expense group on both an actual and contractual basis, which led the Board to discuss this Fund's management fee at some length with the Advisor. The Advisor explained that the complexity of the Fund's investment strategy was the reason that the Fund's management fee was higher than the management fees of funds in its expense group. The Advisor explained that the Fund is designed to provide absolute return over market cycles regardless of the market's direction. The Advisor explained that in order to achieve its absolute return goal, the Fund uses sophisticated derivatives techniques and is the only fund in its peer group that actively utilized short positions for individual markets, currencies and securities. The Advisor also stated that the Fund is continually adding additional types of investments as sources of return and that there is continual innovation with respect to the strategies, tools and techniques utilized to manage the Fund. The Advisor stated that employing these sophisticated management techniques make the Fund more expensive to manage than other global allocation funds. The Board noted that due to the UBS Dynamic Alpha Fund's significant asset growth in the past year, the Fund had reached the final breakpoint level in its management

245

The UBS Funds—Board approval of investment advisory agreements

fee breakpoint schedule. At the request of the Board, the Advisor agreed to revise the UBS Dynamic Alpha Fund's management fee breakpoint schedule to include an additional breakpoint for assets over $4 billion.

The Board also noted that the actual management fee for the UBS U.S. Large Cap Equity Fund was higher than the management fee of several of the funds in its Lipper expense group. The Board, however, determined that the UBS U.S. Large Cap Equity Fund's management fee was reasonable considering that it was not appreciably higher than its Lipper expense group median, the Fund was in the second quintile in its expense group with respect to total expenses, and the Fund's performance compared favorably to its peers for all performance periods.

The Board also reviewed the management fee of the UBS Global Allocation Fund and noted that the actual management fee for the UBS Global Allocation Fund was only four basis points higher than the median in the Fund's peer group. The Board also considered that as the UBS Global Allocation Fund's assets continue to grow, the effective management fee, taking into account the management fee breakpoints, should decrease, which may result in the Fund's management fee being more competitive with its peers.

The Board then discussed the fees and expenses for the UBS Global Bond Fund. The Board noted that, while the Fund was in the fourth quintile of its Lipper expense group with respect to contractual management fees, the Fund's actual management fee was less than one basis point greater than the median for the Fund's peer group. The Board also noted that the UBS Global Bond Fund appeared in the first quintile of its Lipper expense group with respect to its total expenses.

The Board next addressed the management fees of the UBS U.S. Mid Cap Growth Equity Fund and UBS U.S. Small Cap Growth Fund noting that while each Fund appeared in the fourth quintile of its respective Lipper expense group with respect to contractual management fees, each Fund appeared in the first quintile and second quintile of its respective Lipper expense group with respect to its actual management fee and total expenses, respectively.

The Board next noted that while the UBS Absolute Return Bond Fund was ranked in the fourth quintile of its Lipper expense group with respect to its actual management fee, the management fee was only three basis points greater than the median for its Lipper expense group. The Board also noted that the UBS Absolute Return Bond Fund had recently reached the first breakpoint in the Fund's fee in its management fee breakpoint schedule and that, as the Fund's assets continue to grow, the effective management fee, taking into account this breakpoint, should decrease. In addition, the Board noted that the Fund appeared in the second quintile and first quintile of its Lipper expense group with respect to its contractual management fee and total expenses, respectively

The Board also received and considered information about the fee rates charged to other funds and accounts that are managed by the Advisor. After discussing the information about the other funds and accounts managed by the Advisor, the Board determined that the fees charged by the Advisor to the Funds were within a reasonable range, giving effect to differences in services performed for such other funds and accounts as compared to such fee rates. With respect to each Fund subject to a one-year contractual expense limit, the Board also considered that the Advisor had agreed to renew the expense limit arrangement at the current rate for an additional one-year period. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.

Costs and profitability. The Board considered the costs of providing services to the Funds and the profitability of the Funds to the Advisor and its affiliates by reviewing the profitability analysis provided by the

246

The UBS Funds—Board approval of investment advisory agreements

Advisor, including information about its fee revenues and expenses. The Board reviewed the profitability of each Fund to the Advisor and its affiliates, and the compensation that was received for providing services to each Fund. The profitability analysis, which provided information for the last two calendar years, included schedules relating to the revenue and expenses attributable to: (i) the investment advisory and administration services provided by the Advisor; (ii) the distribution and shareholder services provided by UBS Global AM (US) and UBS Financial Services; (iii) the sub-transfer agency related services provided by UBS Financial Services; and (iv) all services provided by the Advisor, UBS Global AM (US), and UBS Financial Services shown on a consolidated basis. The Board paid specific attention to the cost allocation methodology used in the profitability analysis noting that the Advisor had, as the Board requested during the annual investment advisory review process last year, engaged a consultant to assist the Advisor in enhancing the methodology used in the profitability analysis. The Board noted that the new methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was more closely linked to how management assessed the profitability of the Funds from a business standpoint and concluded that the methodology used was reasonable. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with examples demonstrating as to when, and under what circumstances, the methodology utilized in the profitability analysis would show profitability that indicates that economies of scale have been achieved. The Advisor also explained to the Board the reasons for an increase or decrease in profitability of each Fund from last calendar year to this calendar year. In comparing the profitability of each Fund over the past two years, the Board particularly noted the profitability to the Advisor of the UBS Dynamic Alpha Fund and the increase in profitability from the 2005 calendar year to the 2006 calendar year. In reviewing the Advisor's profitability for the UBS Dynamic Alpha Fund, the Board considered that the Advisor had agreed to include an additional breakpoint level in the management fee of the Fund, which could decrease the profitability of this Fund to the Advisor in the future and result in a sharing of economies of scale with shareholders of the Fund.

The Board also considered "fall-out" or ancillary benefits to the Advisor or its affiliates as the result of their relationship with the Funds; for example, the ability to attract other clients due to the Advisor's role as investment advisor to the Funds and the research services available to the Advisor through soft dollar brokerage commissions of the Funds that could be of benefit to other clients of the Advisor. The Independent Trustees also considered the ancillary benefits received by the Advisor's affiliates, UBS Securities LLC and UBS AG, in the form of commissions for executing securities transactions for the Funds. Upon closely examining the information provided concerning the Advisor's profitability, the Board concluded that the level of profits realized by the Advisor and its affiliates with respect to each Fund, if any, was reasonable in relation to the nature and quality of the services that were provided.

Economies of scale. The Board also discussed whether economies of scale are realized by the Advisor with respect to each Fund as it grows larger, and the extent to which this is reflected in the level of management fees charged. The Board noted that with respect to each Fund, any actual or potential economies of scale are, or will be, shared with the Fund and its shareholders through existing management fee breakpoints so that as the Fund grows in size, its effective management fee declines. The Board noted that with the inclusion of the additional breakpoint level for the UBS Dynamic Alpha Fund agreed to at the Meeting, each Fund had a breakpoint schedule that provided for continuing breakpoints past the current asset level for the Fund. Based on each Fund's fees and expenses and the Advisor's profitability analysis, the Board concluded that any actual or potential economies of scale would be reasonably shared with a Fund and its shareholders.

After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, with the assistance of independent counsel, concluded that the continuation of the Advisory Agreement for each Fund was in the best interests of the Fund and its shareholders.

247

Trustee & Officer 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 show, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee or Officer of the Trust, the Trustee's or Officer's principal occupations during the last five years, the number of funds in the UBS Family of Funds overseen by the Trustee or Officer and other directorships held by such Trustee.

The Trust'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:

Name, address and age

Position(s)
held with
Trust

Term of
office⁽¹⁾and
length of
time served

Principal
occupation(s)
during past
5 years

Number of portfolios
in fund complex
overseen by Trustee

Other directorships
held by Trustee

Walter E. Auch; 86
6001 N. 62nd Place
Paradise Valley, AZ 85253

Trustee

Since 1994

Mr. Auch is retired (since 1986).

Mr. Auch is a trustee of three investment companies (consisting of 55 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager.

Mr. Auch is a Trustee/Director of Advisors Series Trust (22 portfolios); Legg Mason Partners Fund Complex (23 portfolios); Nicholas Applegate Institutional Funds (14 portfolios); and Chairman of the Board of Sound Surgical Technologies.

Adela Cepeda; 49
A.C. Advisory, Inc.
161 No. Clark Street,
Suite 4975
Chicago, Illinois 60601

Trustee

Since 2004

Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995).

Ms. Cepeda is a director or trustee of four investment companies (consisting of 56 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager.

Ms. Cepeda is a director of the MGI Funds (8 portfolios) (since 2005).

248

Trustee & Officer information (unaudited)

Name, address and age

Position(s)
held with
Trust

Term of
office⁽¹⁾and
length of
time served

Principal
occupation(s)
during past
5 years

Number of portfolios
in fund complex
overseen by Trustee

Other directorships
held by Trustee

Frank K. Reilly; 71
Mendoza College of Business
University of Notre Dame
Notre Dame, IN 46556-5649

Chairman and Trustee

Since 1993

Mr. Reilly is a Professor at the University of Notre Dame (since 1982).

Mr. Reilly is a director or trustee of four investment companies (consisting of 56 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager.

Mr. Reilly is a Director of Discover Bank, Morgan Stanley Trust FSB and Morgan Stanley National Trust.

Edward M. Roob; 72
841 Woodbine Lane
Northbrook, IL 60002

Trustee

Since 1994

Mr. Roob is retired (since 1993).

Mr. Roob is a director or trustee of four investment companies (consisting of 56 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager.

None.

J. Mikesell Thomas; 56 Federal Home Loan Bank of Chicago 111 East Wacker Drive Chicago, IL 60601

Trustee

Since 2004

Mr. Thomas is President and CEO of Federal Home Loan Bank of Chicago (since 2004). Mr. Thomas was an independent financial advisor (2001-2004). He was a managing director of Lazard Freres & Co. (1995 to 2001).

Mr. Thomas is a director or trustee of four investment companies (consisting of 56 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager.

Mr. Thomas is a director and chairman of the Audit Committee for Evanston Northwestern Healthcare.

249

Trustee & Officer information (unaudited)

Officers:

Name, address and age

Position(s)
held with
the Trust

Term of
office⁽¹⁾and
length of
time served

Principal occupation(s) during past 5 years; number of
portfolios in fund complex for which person serves as officer

Joseph J. Allessie*; 42

Vice President and Assistant Secretary

Since 2005

Mr. Allessie is an executive director (since 2007) and deputy general counsel (since 2005) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM – Americas region"). Prior to joining UBS Global AM – Americas region, he was senior vice president and general counsel of Kenmar Advisory Corp. (from 2004 to 2005). Prior to that, Mr. Allessie was general counsel and secretary of GAM USA Inc., GAM Investments, GAM Services, GAM Funds, Inc. and the GAM Avalon Funds (from 1999 to 2004). Mr. Allessie is a vice president and assistant secretary of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Thomas Disbrow*; 41

Vice President and Treasurer

Since 2000 (Vice President) Since 2004 (Treasurer)

Mr. Disbrow is an executive director (since 2007), (prior to which he was a director) and head of the US mutual fund treasury administration department (since September 2006) of UBS Global AM – Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Michael J. Flook*; 42

Vice President and Assistant Treasurer

Since 2006

Mr. Flook is an associate director and a senior manager of the US mutual fund treasury administration department of UBS Global AM – Americas region (since 2006). Prior to joining UBS Global AM – Americas region, he was a senior manager with The Reserve (asset management firm) from May 2005 to May 2006. Prior to that he was a senior manager with PFPC Worldwide since October 2000. Mr. Flook is a vice president and assistant treasurer of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

250

Trustee & Officer information (unaudited)

Name, address and age

Position(s)
held with
the Trust

Term of
office⁽¹⁾and
length of
time served

Principal occupation(s) during past 5 years; number of
portfolios in fund complex for which person serves as officer

Mark F. Kemper**; 49

Vice President and Secretary

Since 1999 and 2004, respectively

Mr. Kemper is general counsel of UBS Global AM – Americas region (since 2004). Mr. Kemper also is a managing director of UBS Global AM – Americas region (since 2006). He was deputy general counsel of UBS Global Asset Management (Americas) Inc. ("UBS Global AM – Americas") from July 2001 to July 2004. He has been secretary of UBS Global AM – Americas region since 1999 and assistant secretary of UBS Global Asset Management Trust Company since 1993. Mr. Kemper is secretary of UBS Global AM – Americas region (since 2004). Mr. Kemper is vice president and secretary of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Joanne M. Kilkeary*; 39

Vice President and Assistant Treasurer

Since 2004

Ms. Kilkeary is an associate director (since 2000) and a senior manager (since 2004) of the US mutual fund treasury administration department of UBS Global AM – Americas region. Ms. Kilkeary is a vice president and assistant treasurer of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Tammie Lee*; 36

Vice President and Assistant Secretary

Since 2005

Ms. Lee is a director and associate general counsel of UBS Global AM – Americas region (since 2005). Prior to joining UBS Global AM – Americas region, she was vice president and counsel at Deutsche Asset Management/Scudder Investments from 2003 to 2005. Prior to that she was assistant vice president and counsel at Deutsche Asset Management/Scudder Investments from 2000 to 2003. Ms. Lee is a vice president and assistant secretary of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

251

Trustee & Officer information (unaudited)

Name, address and age

Position(s)
held with
the Trust

Term of
office⁽¹⁾and
length of
time served

Principal occupation(s) during past 5 years; number of
portfolios in fund complex for which person serves as officer

Joseph McGill*; 45

Vice President and Chief Compliance Officer

Since 2004

Mr. McGill is a managing director (since 2006) and chief compliance officer (since 2003) of UBS Global AM – Americas region. Prior to joining UBS Global AM – Americas region, he was assistant general counsel at J. P. Morgan Investment Management (from 1999 to 2003). Mr. McGill is a vice president and chief compliance officer of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Nancy D. Osborn*; 41

Vice President and Assistant Treasurer

Since 2007

Mrs. Osborn is an associate director and a senior manager of the US mutual fund treasury administration department of UBS Global AM – Americas region (since 2006). Prior to joining UBS Global AM – Americas region, she was an assistant vice president with Brown Brothers Harriman since April 1996. Mrs. Osborn is a vice president and assistant treasurer of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Eric Sanders*; 41

Vice President and Assistant Secretary

Since 2005

Mr. Sanders is a director and associate general counsel of UBS Global AM – Americas region (since 2005). From 1996 until June 2005, he held various positions at Fred Alger & Company, Incorporated, the most recent being assistant vice president and associate general counsel. Mr. Sanders is a vice president and assistant secretary of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

252

Trustee & Officer information (unaudited)

Name, address and age

Position(s)
held with
the Trust

Term of
office⁽¹⁾and
length of
time served

Principal occupation(s) during past 5 years; number of
portfolios in fund complex for which person serves as officer

Andrew Shoup*; 50

Vice President and Chief Operating Officer

Since 2006

Mr. Shoup is a managing director and senior member of the global treasury administration department of UBS Global AM – Americas region (since July 2006). Prior to joining UBS Global AM – Americas region, he was chief administrative officer for the Legg Mason Partner Funds (formerly Smith Barney, Salomon Brothers, and CitiFunds mutual funds) from November 2003 to July 2006. Prior to that, he held various positions with Citigroup Asset Management and related Companies with their domestic and offshore mutual funds since 1993. Additionally, he has worked for another mutual fund complex as well as spending eleven years in public accounting. Mr. Shoup is a vice president and chief operating officer of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

Kai Sotorp**; 48

President

Since 2006

Mr. Sotorp is the head of the Americas for UBS Global Asset Management (since 2004); a member of the UBS Group Managing Board (since 2003) and a member of the UBS Global Asset Management Executive Committee (since 2001). Prior to his current role, Mr. Sotorp was head of UBS Global Asset Management – Asia Pacific (2002-2004), covering Australia, Japan, Hong Kong, Singapore and Taiwan; head of UBS Global Asset Management (Japan) Ltd. (2001-2004); representative director and president of UBS Global Asset Management (Japan) Ltd. (2000-2004); and member of the board of Mitsubishi Corp. – UBS Realty Inc. (2000-2004). Mr. Sotorp is president of 20 investment companies (consisting of 93 portfolios) for which UBS Global Asset Management – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

253

Trustee & Officer information (unaudited)

Name, address and age

Position(s)
held with
the Trust

Term of
office⁽¹⁾and
length of
time served

Principal occupation(s) during past 5 years; number of
portfolios in fund complex for which person serves as officer

Keith A. Weller*; 45

Vice President and Assistant Secretary

Since 2004

Mr. Weller is an executive director and senior associate general counsel of UBS Global AM – Americas region (since 2005) and has been an attorney with affiliated entities since 1995. Mr. Weller is a vice president and assistant secretary of 20 investment companies (consisting of 93 portfolios) for which UBS Global AM – Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager.

⁽¹⁾ Each Trustee holds office for an indefinite term. Officers of the Trust are appointed by the Trustees and serve at the pleasure of the Board.

* This person's business address is 51 West 52nd Street, New York, NY 10019-6114.

** This person's business address is One North Wacker Drive, Chicago, IL 60606.

254

The UBS Funds—Federal tax information (unaudited)

For the year ended June 30, 2007, the percentage of dividends paid that qualify for the 70% dividends received deduction for corporate shareholders, the designation of long-term capital gain and the amounts expected to be passed through to the shareholders as foreign tax credits are approximated as follows:

	Dividends received deduction			20% Long-term capital gain		Foreign tax credit
UBS Global Allocation Fund		29.49	%	$	185,593,405	$	—
UBS Global Equity Fund		84.14			—		—
UBS International Equity Fund		—			6,171,802		327,341
UBS U.S. Equity Alpha Fund		34.35			—		—
UBS U.S. Large Cap Equity Fund		71.94			14,605,699		—
UBS U.S. Large Cap Growth Fund		100.00			—		—
UBS U.S. Large Cap Value Equity Fund		96.76			10,802,104		—
UBS U.S. Mid Cap Growth Equity Fund		100.00			—		—
UBS U.S. Small Cap Growth Fund		100.00			13,569,898		—
UBS Absolute Return Bond Fund		—			2,342,592		—

In addition, for the year ended June 30, 2007, gross income derived from sources within foreign countries amounted to $6,117,491 for UBS International Equity Fund.

For the year ended June 30, 2007, the percentage of income earned from direct treasury obligations approximately amounted to the following:

	Direct treasury obligations
UBS Global Allocation Fund		20.32	%
UBS Absolute Return Bond Fund		5.25
UBS Global Bond Fund		23.82
UBS U.S. Bond Fund		10.69

255

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256

Item 2. Code of Ethics.

The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of ethics adopted pursuant to Sarbanes-Oxley as a “Code of Conduct” to lessen the risk of confusion with its separate code of ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended.)

Item 3. Audit Committee Financial Expert.

The registrant’s Board has determined that the following person serving on the registrant’s Audit Committee is an “audit committee financial expert” as defined in item 3 of Form N-CSR: J. Mikesell Thomas. Mr. Thomas is independent as defined in item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees:

For the fiscal years ended June 30, 2007 and June 30, 2006, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $548,500 and $492,350, respectively.

Fees included in the audit fees category are those associated with the annual audits of financial statements and services that are normally provided in connection with statutory and regulatory filings.

(b) Audit-Related Fees:

In each of the fiscal years ended June 30, 2007 and June 30, 2006, the aggregate audit-related fees billed by E&Y for services rendered to the registrant that are reasonably related to the performance of the audits of the financial statements, but not reported as audit fees, were approximately $18,500 and $19,800, respectively.

Fees included in the audit-related category are those associated with (1) the reading and providing of comments on the 2006 and 2005 semiannual financial statements.

There were no audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.

In each of the fiscal years ended June 30, 2007 and June 30, 2006, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $59,750 and $55,698, respectively.

Fees included in the tax fees category comprise all services performed by professional staff in the independent accountant’s tax division except those services related to the audits. This category comprises fees for review of tax returns.

There were no tax fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.

(d) All Other Fees:

In each of the fiscal years ended June 30, 2007 and June 30, 2006, there were no fees billed by E&Y for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant.

Fees included in the all other fees category would consist of services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the registrant.

There were no “all other fees” required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.

(e) (1) Audit Committee Pre-Approval Policies and Procedures:

The registrant’s Audit Committee must pre-approve all audit and non-audit services provided by the auditors relating to any series of the registrant’s operations or financial reporting. Prior to the commencement of any audit or non-audit services, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.

The registrant’s Audit Committee has adopted a charter that, among other things, provides a framework for the Audit Committee’s consideration of non-audit services by the registrant’s auditors. The charter requires pre-approval of any non-audit services to be provided by the auditors to a series of the registrant when, without such pre-approval, the auditors would not be independent of the registrant under the applicable federal securities laws, rules or auditing standards. The charter also requires pre-approval of all non-audit services to be provided by the registrant’s auditors to the registrant’s investment adviser or any entity that it controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant when, without such pre-approval, the auditors would not be independent of the registrant under applicable federal securities laws, rules or auditing standards.

All non-audit services must be approved in advance of provision of the service either: (i) by resolution of the Audit Committee; (ii) by oral or written approval of the Chairman of the Audit Committee and one other Audit Committee member; or (iii) if the Chairman is unavailable, by oral or written approval of two other members of the Audit Committee.

(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:

Audit-Related Fees:

There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2007 and June 30, 2006 on behalf of the registrant.

There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2007 and June 30, 2006 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.

Tax Fees:

There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2007 and June 30, 2006 on behalf of the registrant.

All Other Fees:

There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2007 and June 30, 2006 on behalf of the registrant.

(f) According to E&Y, for the fiscal year ended June 30, 2007, the percentage of hours spent on the audit of the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons who are not full-time, permanent employees of E&Y was less than 0%.

(g) For the fiscal years ended June 30, 2007 and June 30, 2006, the aggregate fees billed by E&Y of $1,668,131 and $2,288,990, respectively, for non-audit services rendered on behalf of the registrant (“covered”), its investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser (“non-covered”) that provides ongoing services to the registrant for each of the last two fiscal years of the registrant is shown in the table below:

	2007		2006
Covered Services	$	78,250	$	75,498
Non-Covered Services	$	1,589,881	$	2,213,492

(h) The registrant’s audit committee was not required to consider whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

Not applicable to the registrant.

Item 6. Schedule of Investments.

Included as part of the report to shareholders filed under Item 1 of this form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to the registrant.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to the registrant.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to the registrant.

Item 10. Submission of Matters to a Vote of Security Holders.

The Nominating Committee will consider nominees recommended by Qualifying Fund Shareholders if an Independent Trustee vacancy on the Board occurs. A Qualifying Fund Shareholder is a shareholder that: (i) owns of record, or beneficially through a financial intermediary, 1/2 of 1% or more of the Trust’s outstanding shares and (ii) has been a shareholder of at least 1/2 of 1% of the Trust’s total outstanding shares for 12 months or more prior to submitting the recommendation to the Nominating Committee. In order to recommend a nominee, a Qualifying Fund Shareholder should send a letter to the chairperson of the Nominating Committee, Mr. Walter Auch, care of the Secretary of the Trust at UBS Global Asset Management, One North Wacker Drive, Chicago, Illinois 60606, and indicate on the envelope “Nominating Committee.” The Qualifying Fund Shareholder’s letter should include: (i) the name and address of the Qualifying Fund Shareholder making the recommendation; (ii) the number of shares of each class and series of shares of the Trust which are owned of record and beneficially by such Qualifying Fund Shareholder and the length of time that such shares have been so owned by the Qualifying Fund Shareholder; (iii) a description of all arrangements and understandings between such Qualifying Fund Shareholder and any other person or persons (naming such person or persons) pursuant to which the recommendation is being made; (iv) the name and address of the nominee; and (v) the nominee’s resume or curriculum vitae. The Qualifying Fund Shareholder’s letter must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.

Item 11. Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a) (1) Code of Ethics as required pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (and designated by registrant as a “Code of Conduct”) is incorporated by reference herein from Exhibit EX-99.CODE ETH to the registrant’s Report on Form N-CSR filed September 7, 2004 (Accession Number: 0001047469-04-028138)(SEC File No. 811-06637).

(a) (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.CERT.

(a) (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons – not applicable to the registrant.

(b) Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.906.CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The UBS Funds

By:	/s/ Kai R. Sotorp
	Kai R. Sotorp
	President

Date:	September 7, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Kai R. Sotorp
	Kai R. Sotorp
	President

Date:	September 7, 2007

By:	/s/ Thomas Disbrow
	Thomas Disbrow
	Vice President and Treasurer

Date:	September 7, 2007