UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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Investment Company Act file number |
811-06637 | |||||||
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The UBS Funds | ||||||||
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(Exact name of registrant as specified in charter) | ||||||||
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One North Wacker Drive, Chicago, IL |
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60606-2807 | ||||||
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(Address of principal executive offices) |
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(Zip code) | ||||||
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Mark F. Kemper, Esq. | ||||||||
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(Name and address of agent for service) | ||||||||
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Copy to: | ||||||||
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Registrant’s telephone number, including area code: |
212-821-3000 |
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Date of fiscal year end: |
June 30 |
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Date of reporting period: |
June 30, 2011 |
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Item 1. Reports to Stockholders.
UBS Fixed
Income Funds
June 30, 2011
The UBS Funds—Fixed Income
Annual Report
| Table of contents | |||||||
| President's letter | 1 | ||||||
| Market commentary | 2 | ||||||
| Fixed Income | |||||||
| UBS Absolute Return Bond Fund | 3 | ||||||
| UBS Core Plus Bond Fund (formerly, UBS U.S. Bond Fund) | 20 | ||||||
| UBS Fixed Income Opportunities Fund | 33 | ||||||
| UBS Global Bond Fund | 52 | ||||||
| UBS High Yield Fund | 65 | ||||||
| Explanation of expense disclosure | 82 | ||||||
| Statement of assets and liabilities | 86 | ||||||
| Statement of operations | 90 | ||||||
| Statement of changes in net assets | 92 | ||||||
| Financial highlights | 94 | ||||||
| Notes to financial statements | 104 | ||||||
| Report of independent registered public accounting firm | 127 | ||||||
| General information | 128 | ||||||
| Board approval of investment advisory agreements | 129 | ||||||
| Trustee and Officer information | 134 | ||||||
| Federal tax information | 140 | ||||||
This page has been left blank intentionally.
President's letter
August 15, 2011
Dear Shareholder,
I'm writing this letter to you following what have easily been two of the most tumultuous weeks that the financial markets have seen in a while.
Standard & Poor's decision to downgrade US long-term sovereign debt from AAA to AA+ on Friday, August 5, 2011, came at the end of a five-day period that had already seen the Dow Jones Industrial Average (DJIA) fall over 700 points. News of the downgrade triggered further volatility in the equity market, and the ensuing days were characterized by sharp market declines, and equally steep gains.
Today, the equity market is in calmer territory, having already reclaimed, for the time being, the losses of the past week. While no one can predict with any certainty what will transpire in the days and weeks to come, we believe that the longer term implications of the downgrade, though still unclear, are likely to be limited. However, in the near-term, we expect market volatility to persist.
When I last wrote to you six months ago, I noted that irrational fear has the unfortunate result of leading investors to make the wrong decisions, for the wrong reasons, at the wrong times—and, ultimately, may have a profound negative impact on their portfolios.1 This is an important point to remember in the current atmosphere of uncertainty. The truth is, ups and downs in the market—though never welcome—are a fact of life. A market decline of 15% or more, similar to that which we have just seen, has occurred in the DJIA, on average, once every two years.2 However, equally as certain is that every market decline is also followed by a market recovery.
Against the current market backdrop, it is never more important for investors to maintain a long-term perspective. History has shown that investors with the fortitude to remain invested through a crisis have been rewarded, while those reacting to short-term volatility have met with less success. Arguably, staying the course is easier said than done. To that end, an actively managed, diversified portfolio of stocks and bonds may provide you with smoother returns, and thus make it easier for you to stay on track.3
In a few months, UBS Global Asset Management will reach a major milestone: 30 years of managing clients' assets in a constantly evolving global marketplace. For as long as we have been managing money, our formidable history of experience has shown us that only by adhering to our disciplined processes through up and down markets are we best positioned to seek to achieve the type of long-term investment results that will help our clients achieve their financial goals. This is a standard that we will resolutely adhere to in managing our asset allocation, equity and fixed income funds in the days and weeks, and years to come.
As always, we remain firmly dedicated to your investment success. Thank you for your continued support.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
1 Source: Dalbar.
2 Source: Ned Davis. Covers the period from 1/2/1900 to 8/15/2011.
3 Diversification and asset allocation do not ensure gains or guarantee against loss.
1
The markets in review
Decelerating Growth in Developed Countries
The US and many developed countries abroad experienced decelerating economic growth during the reporting period. Oil and food prices moved higher during this time, which had a negative impact on consumer spending. In addition, supply disruptions following the devastating earthquake and tsunami in Japan last March led to moderating growth in the manufacturing sector. In the US, gross domestic product ("GDP") growth was 2.5% and 2.3% during the third and fourth quarter of 2010, respectively. The Commerce Department then reported that first and second quarter 2011 GDP growth was 0.4% and 1.3%, respectively.
In contrast to their developed country counterparts, growth in most emerging market economies, such as China and India, remained robust. Against a backdrop of higher inflation, several emerging market central banks raised their interest rates and took other actions in an effort to cool growth and stem rising prices. By the end of the period, commodity prices had declined from their peaks and inflationary pressures appeared to have eased.
Riskier fixed income securities outperform
There was also a meaningful shift in investor sentiment in the fixed income market during the reporting period. This, in turn, impacted the performance of the spread sectors (non-Treasuries). During the first nine months of the period, there were hopes for improving economic conditions, coupled with sharply rising oil and commodity prices. Despite hostilities in the Middle East and Northern Africa, the natural disaster in Japan and the European sovereign debt crisis, most spread sectors outperformed Treasuries and yields moved higher. Nonetheless, it was a different story during the last three months of the period. High oil prices hurt consumer spending and economic data pointed to a soft patch in many developed countries. Against this backdrop, Treasury yields declined and nearly every spread sector lagged Treasuries. All told, during 12 months ended June 30, 2011, the spread sectors typically outperformed Treasuries, and the overall US bond market (as measured by the Barclays Capital US Aggregate Index1) returned 3.90%.
Despite increased volatility and periodic flights to quality, riskier fixed income asset classes generated solid gains during the reporting period, as the BofA Merrill Lynch US High Yield Cash Pay Constrained Index2 returned 15.21%, and the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global)3 rose 11.73%.
1 The Barclays Capital US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, fixed rate taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. US agency hybrid adjustable rate mortgage (ARM) securities were added to the Index on April 1, 2007. Investors should note that indices do not reflect the deduction of fees and expenses.
2 The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed non-convertible, coupon-bearing US dollar-denominated below investment grade corporate 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. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US-dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
2
UBS Absolute Return Bond Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Absolute Return Bond Fund (the "Fund") returned 2.47% (Class A shares declined 0.07% after the deduction of the maximum sales charge), while Class Y shares returned 2.50%. For purposes of comparison, the BofA Merrill Lynch US Treasury 1-3 Year Index returned 1.34%, and the US LIBOR 3-Month Index (the "Index") returned 0.33% over the same 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 5; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund generated a positive absolute return during the reporting period. Notably, spread and currency management enhanced the Fund's results.
Portfolio performance summary1
What worked
• The Fund's allocation to the corporate bond sector contributed to performance. In particular, our US and European financial holdings were rewarded. Spreads in these sectors narrowed as corporate profits were generally better than expected and there was overall strong demand from investors seeking to generate additional yield in the low interest rate environment. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
• The Fund's positions in the securitized sector were beneficial. We actively managed the Fund's exposure to the securitized sector and, overall, our holdings enhanced results.
• Active currency management was beneficial. Throughout the 12-month period, we implemented a number of tactical currency trades to take advantage of opportunities in the foreign exchange markets. In particular, the Fund's exposures to the Swedish krona and Norwegian krone contributed to performance.
• Several derivative instruments were used during the period. Certain bond futures and options were utilized to manage the Fund's duration and yield curve exposure. Credit default swaps were used to implement specific credit-related investment strategies. Additionally, foreign exchange futures were utilized to manage the Fund's currency exposures. Overall, the Fund's use of derivatives was within our expectations, and they were successful in helping us to manage the Fund's overall risk exposure.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
3
UBS Absolute Return Bond Fund
What didn't work
• Security selection detracted from performance over the period.
– While the Fund's exposure to US financials aided performance, this was somewhat offset by issue selection within the sector.
– Issue selection of certain US mortgage-backed securities was, overall, a drag on the Fund's performance.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
4
UBS Absolute Return Bond Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | Inception1 | |||||||||||||
| Before deducting maximum sales charge | |||||||||||||||
| Class A2 | 2.47 | % | (4.43 | )% | (2.88 | )% | |||||||||
| Class C3 | 2.08 | (4.77 | ) | (3.22 | ) | ||||||||||
| Class Y4 | 2.50 | (4.27 | ) | (2.70 | ) | ||||||||||
| After deducting maximum sales charge | |||||||||||||||
| Class A2 | (0.07 | )% | (4.91 | )% | (3.28 | )% | |||||||||
| Class C3 | 1.59 | (4.77 | ) | (3.22 | ) | ||||||||||
| BofA Merrill Lynch US Treasury 1-3 Year Index5 | 1.34 | % | 4.14 | % | 3.74 | % | |||||||||
| US LIBOR 3-Month Index6 | 0.33 | 2.53 | 2.88 | ||||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.14% and 1.00%; Class C—1.42% and 1.35%; Class Y—0.80% and 0.80%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, do not exceed 1.00% for Class A shares, 1.35% for Class C shares and 0.85% for Class Y shares. 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 April 27, 2005. Inception date of the indices, for the purpose of this illustration, is April 30, 2005.
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.
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 BofA Merrill Lynch US Treasury 1-3 Year Index is an unmanaged index designed to track short-term US Treasury securities with maturities between 1 and 3 years. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The US LIBOR 3-Month Index is based on LIBOR, the London Interbank Offered Rate, a short-term interest rate that banks charge one another and that is generally representative of short-term interest rates. The US LIBOR 3-Month Index is designed to track the interest rate earned on three month inter-bank US dollar denominated deposits. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
5
UBS Absolute Return Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 2.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Absolute Return Bond Fund Class A and Class Y shares versus the BofA Merrill Lynch US Treasury 1-3 Year Index and the US LIBOR 3-Month Index from April 27, 2005, which is the inception date of the two classes, through June 30, 2011. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://www.ubs.com.
6
UBS Absolute Return Bond Fund
Top ten long-term fixed income holdings (unaudited)
As of June 30, 2011
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Percentage of net assets |
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Federal Home Loan Bank, 5.250%, due 06/18/14 |
3.1 | % | |||||
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Federal Home Loan Mortgage Corp., 5.000%, due 02/16/17 |
3.0 | ||||||
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Eurohypo AG, 3.750%, due 03/24/14 |
2.9 | ||||||
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Kreditanstalt fuer Wiederaufbau, 3.375%, due 01/16/12 |
2.8 | ||||||
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Kreditanstalt fuer Wiederaufbau, 5.550%, due 06/07/21 |
2.2 | ||||||
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Federal National Mortgage Association, 4.125%, due 04/15/14 |
2.2 | ||||||
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Federal National Mortgage Association Pools, #933765, 4.500%, due 04/01/38 |
2.1 | ||||||
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Inter-American Development Bank, 3.250%, due 11/15/11 |
1.8 | ||||||
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European Investment Bank, 6.250%, due 04/15/14 |
1.6 | ||||||
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Telecom Italia SpA, 5.625%, due 12/29/15 |
1.5 | ||||||
| Total | 23.2 | % | |||||
Country exposure by issuer, top five (unaudited)
As of June 30, 2011
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Percentage of net assets |
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| United States | 41.3 | % | |||||
| United Kingdom | 14.1 | ||||||
| Germany | 9.9 | ||||||
| Netherlands | 4.7 | ||||||
| Italy | 3.7 | ||||||
| Total | 73.7 | % | |||||
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Bonds | |||||||
| Corporate bonds | |||||||
| Aerospace & defense | 0.40 | % | |||||
| Auto components | 0.18 | ||||||
| Building materials | 0.45 | ||||||
| Chemicals | 0.54 | ||||||
| Commercial banks | 9.36 | ||||||
| Communications equipment | 0.27 | ||||||
| Construction & engineering | 1.14 | ||||||
| Consumer finance | 0.54 | ||||||
| Diversified financial services | 11.16 | ||||||
| Diversified telecommunication services | 2.87 | ||||||
| Electric utilities | 0.77 | ||||||
| Energy | 0.07 | ||||||
| Food & staples retailing | 0.58 | ||||||
| Health care equipment & supplies | 0.52 | ||||||
| Household durables | 0.17 | ||||||
| Industrial conglomerates | 0.29 | ||||||
| Insurance | 3.54 | ||||||
| Media | 1.23 | ||||||
| Metals & mining | 1.75 | ||||||
| Oil, gas & consumable fuels | 3.24 | ||||||
| Pharmaceuticals | 0.25 | ||||||
| Road & rail | 0.45 | ||||||
| Semiconductors & semiconductor equipment | 0.19 | ||||||
| Sovereign | 1.22 | ||||||
| Specialty retail | 0.60 | ||||||
| Telecommunications | 0.19 | ||||||
| Thrifts & mortgage finance | 3.08 | ||||||
| Tobacco | 2.33 | ||||||
| Wireless telecommunication services | 2.13 | ||||||
| Total corporate bonds | 49.51 | % | |||||
| Asset-backed securities | 1.76 | ||||||
| Collateralized debt obligations | 1.02 | ||||||
| Commercial mortgage-backed securities | 0.47 | ||||||
| Mortgage & agency debt securities | 23.23 | ||||||
| Non-US government obligations | 12.22 | ||||||
| Supranational bonds | 4.56 | ||||||
| Total bonds | 92.77 | % | |||||
| Short-term investment | 6.76 | ||||||
| Total investments | 99.53 | % | |||||
| Cash and other assets, less liabilities | 0.47 | ||||||
| Net assets | 100.00 | % | |||||
1 Figures represent the industry breakdown of direct investments of UBS Absolute Return Bond Fund. Figures would be different if a breakdown of the derivatives exposure was included.
7
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
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Face amount |
Value | ||||||||||
| Bonds: 92.77% | |||||||||||
| Corporate bonds: 49.51% | |||||||||||
| Australia: 0.92% | |||||||||||
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Rio Tinto Finance USA Ltd., 4.125%, due 05/20/21 |
$ | 1,000,000 | $ | 993,310 | |||||||
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Westpac Banking Corp., 4.200%, due 02/27/15 |
350,000 | 370,366 | |||||||||
| Total Australia corporate bonds | 1,363,676 | ||||||||||
| Canada: 0.57% | |||||||||||
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Barrick Gold Corp., 2.900%, due 05/30/161 |
400,000 | 399,685 | |||||||||
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Nova Chemicals Corp., 8.625%, due 11/01/19 |
195,000 | 217,181 | |||||||||
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Teck Resources Ltd., 3.150%, due 01/15/17 |
220,000 | 220,143 | |||||||||
| Total Canada corporate bonds | 837,009 | ||||||||||
| Denmark: 0.26% | |||||||||||
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Dong Energy A/S, 4.875%, due 05/07/14 |
EUR | 250,000 | 381,286 | ||||||||
| France: 1.72% | |||||||||||
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AXA SA, 6.667%, due 07/06/162,3 |
GBP | 525,000 | 754,126 | ||||||||
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Casino Guichard Perrachon SA, 5.500%, due 01/30/15 |
EUR | 550,000 | 847,932 | ||||||||
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CNP Assurances, 6.875%, due 09/30/412 |
500,000 | 715,105 | |||||||||
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Compagnie de Financement Foncier, 3.625%, due 01/16/12 |
145,000 | 212,373 | |||||||||
| Total France corporate bonds | 2,529,536 | ||||||||||
| Germany: 3.45% | |||||||||||
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Commerzbank AG, 6.375%, due 03/22/19 |
350,000 | 479,797 | |||||||||
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Eurohypo AG, 3.750%, due 03/24/14 |
2,900,000 | 4,330,353 | |||||||||
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HeidelbergCement Finance BV, 8.500%, due 10/31/19 |
160,000 | 259,287 | |||||||||
| Total Germany corporate bonds | 5,069,437 | ||||||||||
| Ireland: 0.71% | |||||||||||
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Allied Irish Banks PLC, 4.500%, due 10/01/12 |
300,000 | 363,263 | |||||||||
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GE Capital UK Funding, 6.000%, due 04/11/13 |
GBP | 400,000 | 681,770 | ||||||||
| Total Ireland corporate bonds | 1,045,033 | ||||||||||
| Italy: 2.60% | |||||||||||
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Intesa Sanpaolo SpA, 2.658%, due 02/24/141,2 |
$ | 600,000 | 598,531 | ||||||||
| 6.625%, due 05/08/18 | EUR | 500,000 | 733,308 | ||||||||
|
Face amount |
Value | ||||||||||
|
Telecom Italia SpA, 5.625%, due 12/29/15 |
GBP | 1,350,000 | $ | 2,225,681 | |||||||
|
Wind Acquisition Finance SA, 11.750%, due 07/15/174 |
EUR | 160,000 | 261,027 | ||||||||
| Total Italy corporate bonds | 3,818,547 | ||||||||||
| Luxembourg: 1.51% | |||||||||||
|
ArcelorMittal, 9.000%, due 02/15/15 |
$ | 350,000 | 417,756 | ||||||||
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Boardriders SA, 8.875%, due 12/15/174 |
EUR | 200,000 | 303,806 | ||||||||
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Fiat Industrial Finance Europe SA, 6.250%, due 03/09/18 |
550,000 | 791,601 | |||||||||
|
GAZ Capital SA for Gazprom, 6.580%, due 10/31/13 |
GBP | 250,000 | 426,315 | ||||||||
|
Intelsat Jackson Holdings SA, 7.250%, due 10/15/201 |
$ | 285,000 | 283,575 | ||||||||
| Total Luxembourg corporate bonds | 2,223,053 | ||||||||||
| Mexico: 0.50% | |||||||||||
|
America Movil SAB de CV, 3.625%, due 03/30/15 |
700,000 | 733,571 | |||||||||
| Netherlands: 4.41% | |||||||||||
|
Allianz Finance II BV, 4.750%, due 07/22/19 |
EUR | 850,000 | 1,288,609 | ||||||||
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Conti-Gummi Finance BV, 7.125%, due 10/15/184 |
175,000 | 262,024 | |||||||||
|
CRH Finance BV, 7.375%, due 05/28/14 |
250,000 | 399,734 | |||||||||
|
ELM BV for Swiss Reinsurance Co., 5.252%, due 05/25/162,3 |
650,000 | 829,505 | |||||||||
|
MDC BV, 5.750%, due 05/06/141 |
$ | 1,650,000 | 1,802,625 | ||||||||
|
Rabobank Nederland NV, 4.000%, due 09/10/15 |
GBP | 230,000 | 387,691 | ||||||||
|
Repsol International Finance BV, 4.750%, due 02/16/17 |
EUR | 300,000 | 449,497 | ||||||||
|
Scotland International Finance BV, 4.250%, due 05/23/131 |
$ | 800,000 | 802,520 | ||||||||
|
Ziggo Bond Co. BV, 8.000%, due 05/15/184 |
EUR | 175,000 | 260,755 | ||||||||
| Total Netherlands corporate bonds | 6,482,960 | ||||||||||
| Portugal: 0.51% | |||||||||||
|
EDP Finance BV, 5.375%, due 11/02/121 |
$ | 750,000 | 750,981 | ||||||||
| Qatar: 0.30% | |||||||||||
|
Qtel International Finance Ltd., 6.500%, due 06/10/141 |
400,000 | 442,500 | |||||||||
| South Africa: 0.20% | |||||||||||
|
Edcon Proprietary Ltd., 9.500%, due 03/01/184 |
EUR | 215,000 | 294,634 | ||||||||
8
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| South Korea: 0.52% | |||||||||||
|
Hyundai Capital Services, Inc., 4.375%, due 07/27/161 |
$ | 750,000 | $ | 769,067 | |||||||
| Spain: 0.51% | |||||||||||
|
Telefonica Emisiones SAU, 5.431%, due 02/03/14 |
EUR | 500,000 | 758,363 | ||||||||
| Sweden: 0.26% | |||||||||||
|
Vattenfall Treasury AB, 4.250%, due 05/19/14 |
250,000 | 376,262 | |||||||||
| Switzerland: 0.91% | |||||||||||
|
Credit Suisse/London, 6.125%, due 05/16/14 |
850,000 | 1,337,818 | |||||||||
| United Kingdom: 10.09% | |||||||||||
|
Anglo American Capital PLC, 9.375%, due 04/08/141 |
$ | 450,000 | 537,983 | ||||||||
|
Aviva PLC, 4.729%, due 11/28/142,3 |
EUR | 675,000 | 856,495 | ||||||||
|
BAA Funding Ltd., 3.975%, due 02/15/121 |
1,150,000 | 1,680,947 | |||||||||
|
Barclays Bank PLC, 2.500%, due 01/23/13 |
$ | 950,000 | 967,476 | ||||||||
|
BP Capital Markets PLC, 1.550%, due 08/11/11 |
100,000 | 100,115 | |||||||||
|
Brambles Finance PLC, 4.625%, due 04/20/18 |
EUR | 550,000 | 816,997 | ||||||||
|
HSBC Holdings PLC, 4.500%, due 04/30/14 |
250,000 | 376,566 | |||||||||
| 6.250%, due 03/19/18 | 300,000 | 462,199 | |||||||||
|
Imperial Tobacco Finance PLC, 4.500%, due 07/05/18 |
550,000 | 798,380 | |||||||||
| 8.375%, due 02/17/16 | 450,000 | 777,430 | |||||||||
|
Lloyds TSB Bank PLC, 2.624%, due 01/24/142 |
$ | 1,500,000 | 1,520,863 | ||||||||
|
Nationwide Building Society, 4.650%, due 02/25/151 |
550,000 | 569,552 | |||||||||
|
Reed Elsevier Investments PLC, 5.625%, due 10/20/16 |
GBP | 450,000 | 779,428 | ||||||||
|
Royal Bank of Scotland Group PLC, 5.250%, due 05/15/13 |
EUR | 1,000,000 | 1,498,114 | ||||||||
|
Smiths Group PLC, 6.050%, due 05/15/141 |
$ | 400,000 | 433,620 | ||||||||
|
Standard Chartered Bank PLC, 3.850%, due 04/27/151 |
1,400,000 | 1,449,272 | |||||||||
|
Vodafone Group PLC, 5.750%, due 03/15/16 |
650,000 | 734,731 | |||||||||
|
WPP PLC, 6.625%, due 05/12/16 |
EUR | 300,000 | 485,549 | ||||||||
| Total United Kingdom corporate bonds | 14,845,717 | ||||||||||
|
Face amount |
Value | ||||||||||
| United States: 19.56% | |||||||||||
|
Ally Financial, Inc., 4.500%, due 02/11/14 |
$ | 215,000 | $ | 215,000 | |||||||
|
Altria Group, Inc., 9.250%, due 08/06/19 |
300,000 | 391,184 | |||||||||
|
American Honda Finance Corp., 3.875%, due 09/16/14 |
EUR | 200,000 | 298,109 | ||||||||
|
American International Group, Inc., 3.650%, due 01/15/14 |
$ | 750,000 | 764,318 | ||||||||
|
Anadarko Petroleum Corp., 5.750%, due 06/15/14 |
1,000,000 | 1,103,971 | |||||||||
| 7.625%, due 03/15/14 | 325,000 | 372,658 | |||||||||
|
AT&T, Inc., 4.850%, due 02/15/14 |
750,000 | 814,626 | |||||||||
|
BAE Systems Holdings, Inc., 4.950%, due 06/01/141 |
550,000 | 590,919 | |||||||||
|
Bank of America Corp., 4.900%, due 05/01/13 |
710,000 | 747,962 | |||||||||
| 5.650%, due 05/01/18 | 650,000 | 685,315 | |||||||||
|
Boston Scientific Corp., 4.500%, due 01/15/15 |
720,000 | 759,149 | |||||||||
|
Celanese US Holdings LLC, 6.625%, due 10/15/18 |
285,000 | 300,675 | |||||||||
|
Cellco Partnership, 7.625%, due 12/19/11 |
EUR | 500,000 | 743,362 | ||||||||
| 8.500%, due 11/15/18 | $ | 500,000 | 649,282 | ||||||||
|
Citigroup, Inc., 4.750%, due 05/31/172 |
EUR | 400,000 | 533,798 | ||||||||
| 5.625%, due 08/27/12 | $ | 540,000 | 564,134 | ||||||||
|
Comcast Corp., 6.300%, due 11/15/17 |
620,000 | 718,659 | |||||||||
|
CSX Corp., 5.750%, due 03/15/13 |
610,000 | 656,326 | |||||||||
|
DirecTV Holdings LLC, 7.625%, due 05/15/16 |
550,000 | 599,500 | |||||||||
|
Enterprise Products Operating LLC, 3.700%, due 06/01/15 |
380,000 | 398,381 | |||||||||
| Series I, 5.000%, due 03/01/15 | 330,000 | 359,264 | |||||||||
|
ERAC USA Finance Co., 2.750%, due 07/01/131 |
400,000 | 408,079 | |||||||||
|
Freescale Semiconductor, Inc., 9.250%, due 04/15/181 |
260,000 | 280,150 | |||||||||
|
General Electric Capital Corp., 0.367%, due 12/20/132 |
240,000 | 237,106 | |||||||||
| Series A, 3.750%, due 11/14/14 | 1,410,000 | 1,492,496 | |||||||||
| Series A, 6.750%, due 03/15/32 | 1,500,000 | 1,666,578 | |||||||||
|
Goldman Sachs Group, Inc., 7.500%, due 02/15/19 |
1,300,000 | 1,512,606 | |||||||||
|
JPMorgan Chase & Co., 3.400%, due 06/24/15 |
1,350,000 | 1,385,979 | |||||||||
| 6.300%, due 04/23/19 | 1,200,000 | 1,352,563 | |||||||||
9
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Morgan Stanley, 5.950%, due 12/28/17 |
$ | 1,300,000 | $ | 1,397,561 | |||||||
|
Motorola Solutions, Inc., 6.000%, due 11/15/17 |
350,000 | 398,257 | |||||||||
|
Nalco Co., 6.625%, due 01/15/191 |
275,000 | 281,875 | |||||||||
|
ONEOK Partners LP, 8.625%, due 03/01/19 |
550,000 | 699,224 | |||||||||
|
Petrohawk Energy Corp., 7.875%, due 06/01/15 |
275,000 | 288,063 | |||||||||
|
Pfizer, Inc., 3.625%, due 06/03/13 |
EUR | 250,000 | 370,285 | ||||||||
|
Quicksilver Resources, Inc., 11.750%, due 01/01/16 |
$ | 245,000 | 280,525 | ||||||||
|
Reynolds Group Issuer LLC, 7.750%, due 10/15/164 |
EUR | 170,000 | 255,154 | ||||||||
|
SLM Corp., 6.250%, due 01/25/16 |
$ | 350,000 | 363,125 | ||||||||
|
Toys R Us Property Co. II LLC, 8.500%, due 12/01/17 |
265,000 | 276,925 | |||||||||
|
UST, Inc., 6.625%, due 07/15/12 |
1,375,000 | 1,453,022 | |||||||||
|
Wells Fargo & Co., 5.250%, due 10/23/12 |
2,000,000 | 2,110,184 | |||||||||
|
Total United States corporate bonds |
28,776,349 | ||||||||||
|
Total corporate bonds (cost $69,122,620) |
72,835,799 | ||||||||||
| Asset-backed securities: 1.76% | |||||||||||
| United Kingdom: 0.78% | |||||||||||
|
Chester Asset Receivables Dealings, Series 2004-1, Class A, 1.012%, due 04/15/162 |
GBP | 150,000 | 234,495 | ||||||||
|
2003-B PLC, Series A, 4.650%, due 07/15/13 |
240,000 | 400,066 | |||||||||
|
Permanent Financing PLC, Series 6, Class 5A2, 0.984%, due 06/10/422,4 |
320,000 | 512,390 | |||||||||
|
Total United Kingdom asset-backed securities |
1,146,951 | ||||||||||
| United States: 0.98% | |||||||||||
|
Bank of America Corp., Series 2008-A5, Class A5, 1.387%, due 12/16/132 |
$ | 300,000 | 300,135 | ||||||||
|
Series 2004-A1, 4.500%, due 01/17/14 |
EUR | 270,000 | 400,306 | ||||||||
|
Face amount |
Value | ||||||||||
|
Chase Issuance Trust, Series 2007-A16, Class A16, 0.547%, due 06/16/142 |
$ | 300,000 | $ | 300,572 | |||||||
|
MBNA Credit Card Master Note Trust, Series 2002-A2, Class A, 5.600%, due 07/17/14 |
EUR | 300,000 | 442,058 | ||||||||
|
Total United States asset-backed securities |
1,443,071 | ||||||||||
|
Total asset-backed securities (cost $2,484,875) |
2,590,022 | ||||||||||
| Collateralized debt obligations: 1.02% | |||||||||||
| Cayman Islands: 0.44% | |||||||||||
|
Denali Capital CLO VII Ltd., Series 2007-1A, Class B2L, 4.524%, due 01/22/221,2,5,6 |
$ | 290,000 | 216,224 | ||||||||
|
FM Leveraged Capital Fund, Series 2006-2A, Class E, 4.011%, due 11/15/202,5,6 |
400,000 | 272,000 | |||||||||
|
Trimaran CLO Ltd., Series 2007-1A, Class B2L, 3.647%, due 06/15/211,2,5,6 |
200,000 | 162,360 | |||||||||
|
Total Cayman Islands collateralized debt obligations |
650,584 | ||||||||||
| Netherlands: 0.34% | |||||||||||
|
Highlander Euro CDO, Series 2006-2CA, Class E, 5.126%, due 12/14/221,5,6,7 |
EUR | 250,000 | 195,770 | ||||||||
|
Queen Street CLO, Series 2007-1A, Class F, 6.980%, due 08/15/241,5,6 |
350,000 | 304,532 | |||||||||
|
Total Netherlands collateralized debt obligations |
500,302 | ||||||||||
| United States: 0.24% | |||||||||||
|
Axius Europe CLO SA, Series 2007-1A, Class D, 4.699%, due 11/15/231,2,5,6 |
350,000 | 350,211 | |||||||||
|
Total collateralized debt obligations (cost $2,128,374) |
1,501,097 | ||||||||||
| Commercial mortgage-backed securities: 0.47% | |||||||||||
| United States: 0.47% | |||||||||||
|
Greenwich Capital Commercial Funding Corp., Series 2007-GG11, Class A4, 5.736%, due 12/10/49 |
$ | 175,000 | 187,784 | ||||||||
|
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.992%, due 08/10/452 |
300,000 | 322,080 | |||||||||
10
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Commercial mortgage-backed securities—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Morgan Stanley Dean Witter Capital I, Series 2002-IQ3, Class B, 5.240%, due 09/15/37 |
$ | 175,000 | $ | 179,623 | |||||||
|
Total commercial mortgage-backed securities (cost $592,938) |
689,487 | ||||||||||
| Mortgage & agency debt securities: 23.23% | |||||||||||
| United Kingdom: 3.19% | |||||||||||
|
Arkle Master Issuer PLC, Series 2010-1A, Class 2A, 1.411%, due 05/17/601,2 |
500,000 | 499,194 | |||||||||
|
Arran Residential Mortgages Funding PLC, Series 2011-1A, Class A1C, 1.537%, due 11/19/471,2 |
1,700,000 | 1,700,401 | |||||||||
|
Holmes Master Issuer PLC, Series 2011-1A, Class A2, 1.628%, due 10/15/541,2 |
1,500,000 | 1,501,859 | |||||||||
|
Permanent Master Issuer PLC, Series 2011-1A, Class 1A1, 1.669%, due 07/15/421,2 |
1,000,000 | 1,002,418 | |||||||||
|
Total United Kingdom mortgage & agency debt securities |
4,703,872 | ||||||||||
| United States: 20.04% | |||||||||||
|
Federal Home Loan Bank, 5.250%, due 06/18/14 |
4,100,000 | 4,620,987 | |||||||||
|
Federal Home Loan Mortgage Corp.,8 4.750%, due 03/05/12 |
1,300,000 | 1,339,209 | |||||||||
| 5.000%, due 02/16/17 | 3,900,000 | 4,452,275 | |||||||||
|
Federal Home Loan Mortgage Corp. Gold Pools,8 #Q01348, 4.500%, due 06/01/41 |
150,000 | 155,190 | |||||||||
|
#G04668, 5.000%, due 03/01/38 |
635,494 | 676,000 | |||||||||
|
#G08307, 5.000%, due 11/01/38 |
955,481 | 1,015,786 | |||||||||
|
#A60064, 5.500%, due 04/01/37 |
1,900,000 | 2,057,114 | |||||||||
|
#G06381, 5.500%, due 08/01/40 |
779,375 | 845,649 | |||||||||
|
Federal National Mortgage Association,8 4.125%, due 04/15/14 |
2,950,000 | 3,212,582 | |||||||||
|
Federal National Mortgage Association Pools,8 #992260, 4.000%, due 01/01/39 |
1,981,210 | 1,986,482 | |||||||||
|
#AH6655, 4.000%, due 02/01/41 |
550,000 | 550,776 | |||||||||
|
#933765, 4.500%, due 04/01/38 |
2,937,095 | 3,046,747 | |||||||||
|
Face amount |
Value | ||||||||||
|
#AE0106, 4.500%, due 06/01/40 |
$ | 369,982 | $ | 383,503 | |||||||
| 5.000%, TBA | 1,270,000 | 1,349,375 | |||||||||
| 5.500%, TBA | 75,000 | 81,094 | |||||||||
| 6.000%, TBA | 1,200,000 | 1,318,126 | |||||||||
| 6.500%, TBA | 425,000 | 481,180 | |||||||||
|
Federal Home Loan Mortgage Corp., Multifamily Structured Pass Through Certificates, Series K-012, Class A-1,8 3.427%, due 10/25/20 |
1,307,024 | 1,353,803 | |||||||||
|
Government National Mortgage Association Pools, #741646, 4.500%, due 06/15/41 |
525,000 | 555,133 | |||||||||
|
Total United States mortgage & agency debt securities |
29,481,011 | ||||||||||
|
Total mortgage & agency debt securities (cost $32,957,832) |
34,184,883 | ||||||||||
| Non-US government obligations: 12.22% | |||||||||||
| Denmark: 0.86% | |||||||||||
|
Government of Denmark, 1.875%, due 03/16/12 |
1,250,000 | 1,262,222 | |||||||||
| Germany: 6.45% | |||||||||||
|
Bundesobligation, 4.000%, due 04/13/12 |
EUR | 1,420,000 | 2,099,903 | ||||||||
|
Kreditanstalt fuer Wiederaufbau, 3.375%, due 01/16/12 |
2,800,000 | 4,100,484 | |||||||||
| 5.550%, due 06/07/21 | GBP | 1,800,000 | 3,285,653 | ||||||||
| 9,486,040 | |||||||||||
| Italy: 1.13% | |||||||||||
|
Republic of Italy, 4.750%, due 01/25/16 |
$ | 1,565,000 | 1,662,418 | ||||||||
| Japan: 1.08% | |||||||||||
|
Japan Bank for International Cooperation, 5.250%, due 03/23/16 |
1,400,000 | 1,589,322 | |||||||||
| Spain: 2.70% | |||||||||||
|
Instituto de Credito Oficial, 5.375%, due 07/02/12 |
1,800,000 | 1,859,202 | |||||||||
|
Kingdom of Spain, 4.700%, due 07/30/41 |
EUR | 1,775,000 | 2,123,023 | ||||||||
| 3,982,225 | |||||||||||
|
Total Non-US government obligations (cost $17,391,117) |
17,982,227 | ||||||||||
11
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| Supranational bonds: 4.56% | |||||||||||
|
European Investment Bank, 2.500%, due 04/15/12 |
EUR | 1,225,000 | $ | 1,789,686 | |||||||
| 6.250%, due 04/15/14 | GBP | 1,270,000 | 2,286,695 | ||||||||
|
Inter-American Development Bank, 3.250%, due 11/15/11 |
$ | 2,600,000 | 2,628,899 | ||||||||
|
Total supranational bonds (cost $6,425,166) |
6,705,280 | ||||||||||
|
Total bonds (cost $131,102,922) |
136,488,795 | ||||||||||
| Shares | Value | ||||||||||
| Short-term investment: 6.76% | |||||||||||
| Investment company: 6.76% | |||||||||||
|
UBS Cash Management Prime Relationship Fund9 (cost $9,946,180) |
9,946,180 | $ | 9,946,180 | ||||||||
|
Total investments: 99.53% (cost $141,049,102) |
146,434,975 | ||||||||||
|
Cash and other assets, less liabilities: 0.47% |
693,971 | ||||||||||
| Net assets: 100.00% | $ | 147,128,946 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $141,049,102; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 6,570,368 | |||||
| Gross unrealized depreciation | (1,184,495 | ) | |||||
| Net unrealized appreciation of investments | $ | 5,385,873 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 81.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $18,014,850 or 12.24% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2011 and changes periodically.
3 Perpetual bond security. The maturity date reflects the next call date.
4 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of these securities amounted to $2,149,790 or 1.46% of net assets.
5 Security is illiquid. At June 30, 2011, the value of these securities amounted to $1,501,097 or 1.02% of net assets.
6 These securities, which represent 1.02% of net assets as of June 30, 2011, are considered restricted. (See restricted securities table below for more information.)
12
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
| Restricted securities |
Acquisition date |
Acquisition cost |
Acquisition cost as a percentage of net assets |
Value 06/30/11 |
Value as a percentage of net assets |
||||||||||||||||||
|
Axius Europe CLO SA, Series 2007-1A, Class D, 09/28/07- 4.699%, due 11/15/23 |
11/01/09 | $ | 466,689 | 0.32 | % | $ | 350,211 | 0.24 | % | ||||||||||||||
|
Denali Capital CLO VII Ltd., Series 2007-1A, Class B2L, 4.524%, due 01/22/22 |
04/27/07 | 285,865 | 0.19 | 216,224 | 0.15 | ||||||||||||||||||
|
FM Leveraged Capital Fund Series 2006-2A, Class E 4.011%, due 11/15/20 |
10/31/06 | 400,000 | 0.27 | 272,000 | 0.18 | ||||||||||||||||||
|
Highlander Euro CDO, Series 2006-2CA, Class E, 5.126%, due 12/14/22 |
11/28/06 | 329,608 | 0.22 | 195,770 | 0.13 | ||||||||||||||||||
|
Queen Street CLO, Series 2007-1A, Class F, 6.980%, due 08/15/24 |
05/18/07 | 463,444 | 0.32 | 304,532 | 0.21 | ||||||||||||||||||
|
Trimaran CLO Ltd., Series 2007-1A, Class B2L, 3.647%, due 06/15/21 |
03/09/07 | 198,806 | 0.14 | 162,360 | 0.11 | ||||||||||||||||||
| $ | 2,144,412 | 1.46 | % | $ | 1,501,097 | 1.02 | % | ||||||||||||||||
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 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
9 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 5,509,864 | $ | 49,570,026 | $ | 45,133,710 | $ | 9,946,180 | $ | 16,199 | |||||||||||||
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||||||||||
| Barclays Bank PLC | EUR | 512,500 | JPY | 58,814,039 | 07/27/11 | $ | (12,107 | ) | |||||||||||||||||||
| Barclays Bank PLC | JPY | 167,315,550 | USD | 2,075,000 | 07/27/11 | (3,552 | ) | ||||||||||||||||||||
| Barclays Bank PLC | USD | 6,562,688 | NOK | 36,620,000 | 07/27/11 | 215,497 | |||||||||||||||||||||
| HSBC Bank, N.A. | EUR | 33,540,000 | USD | 47,695,792 | 07/27/11 | (912,724 | ) | ||||||||||||||||||||
| HSBC Bank, N.A. | GBP | 11,780,000 | USD | 19,057,071 | 07/27/11 | 155,944 | |||||||||||||||||||||
| JPMorgan Chase Bank | CAD | 2,535,000 | USD | 2,576,953 | 07/27/11 | (50,090 | ) | ||||||||||||||||||||
| JPMorgan Chase Bank | JPY | 423,800,000 | USD | 5,280,043 | 07/27/11 | 15,198 | |||||||||||||||||||||
| JPMorgan Chase Bank | SEK | 16,496,104 | EUR | 1,785,000 | 07/27/11 | (17,640 | ) | ||||||||||||||||||||
| JPMorgan Chase Bank | USD | 5,838,813 | SEK | 37,730,000 | 07/27/11 | 118,415 | |||||||||||||||||||||
Net unrealized depreciation on forward foreign currency contracts $(491,059)
13
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures sell contracts: | |||||||||||||||||||
| 2 Year US Treasury Notes, 113 contracts (USD) | September 2011 | $ | (24,759,184 | ) | $ | (24,785,844 | ) | $ | (26,660 | ) | |||||||||
| 5 Year US Treasury Notes, 310 contracts (USD) | September 2011 | (36,889,510 | ) | (36,950,547 | ) | (61,037 | ) | ||||||||||||
| 10 Year US Treasury Notes, 110 contracts (USD) | September 2011 | (13,472,252 | ) | (13,456,094 | ) | 16,158 | |||||||||||||
| Interest rate futures buy contracts: | |||||||||||||||||||
| Euro-Bund, 60 contracts (EUR) | September 2011 | 10,996,800 | 10,917,890 | (78,910 | ) | ||||||||||||||
| Interest rate futures sell contracts: | |||||||||||||||||||
| Euro-Bobl, 149 contracts (EUR) | September 2011 | (25,123,728 | ) | (25,189,714 | ) | (65,986 | ) | ||||||||||||
| Euro-Schatz, 36 contracts (EUR) | September 2011 | (5,605,243 | ) | (5,614,952 | ) | (9,709 | ) | ||||||||||||
| Long Gilt, 20 contracts (GBP) | September 2011 | (3,845,980 | ) | (3,856,695 | ) | (10,715 | ) | ||||||||||||
| Net unrealized depreciation on futures contracts | $ | (236,859 | ) | ||||||||||||||||
Interest rate swap agreements
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments made |
Value |
Unrealized depreciation |
||||||||||||||||||||||||
| Deutsche Bank AG | CHF | 6,490,000 | 02/03/16 | 1.5575 | % | 0.2400 | %2 | — | $ | (149,064 | ) | $ | (149,064 | ) | |||||||||||||||||
1 Payments made or received are based on the notional amount.
2 Rate based on 6 month LIBOR (CHF BBA).
14
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
Credit default swaps on credit indices—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Barclays Bank PLC | USD | 4,500,000 | 06/20/16 | 1.0000 | % | —3 | $ | 5,864 | $ | (12,434 | ) | $ | (6,570 | ) | |||||||||||||||||
| JP Morgan Chase Bank | EUR | 500,000 | 06/20/16 | 5.0000 | —4 | 40,184 | (27,066 | ) | 13,118 | ||||||||||||||||||||||
| JP Morgan Chase Bank | EUR | 2,800,000 | 06/20/16 | 1.0000 | —5 | 2,405 | 18,586 | 20,991 | |||||||||||||||||||||||
| JP Morgan Chase Bank | EUR | 5,100,000 | 06/20/16 | 1.0000 | —5 | (43,000 | ) | 33,854 | (9,146 | ) | |||||||||||||||||||||
| Morgan Stanley & Co. Inc. | EUR | 800,000 | 06/20/16 | 5.0000 | —4 | 52,740 | (43,306 | ) | 9,434 | ||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | EUR | 3,150,000 | 06/20/16 | 1.0000 | —5 | (9,105 | ) | 20,910 | 11,805 | ||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | USD | 1,500,000 | 06/20/16 | 5.0000 | —6 | 34,167 | (14,318 | ) | 19,849 | ||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | USD | 3,900,000 | 06/20/16 | 1.0000 | —3 | 11,951 | (10,776 | ) | 1,175 | ||||||||||||||||||||||
| $ | 95,206 | $ | (34,550 | ) | $ | 60,656 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments made are based on the notional amount.
3 Payment from the counterparty will be received upon the occurrence of a succession event with respect to the CDX.NA.IG Series 16 Index.
4 Payment from the counterparty will be received upon the occurrence of a succession event with respect to the iTraxx Europe Crossover Series 15 Index.
5 Payment from the counterparty will be received upon the occurrence of a succession event with respect to the iTraxx Europe Series 15 Index.
6 Payment from the counterparty will be received upon the occurrence of a succession event with respect to the CDX.NA.HY Series 16 Index.
Credit default swaps on corporate issues—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Barclays Bank PLC | EUR | 540,000 | 06/20/16 | 1.0000 | % | —3 | $ | (6,409 | ) | $ | 6,065 | $ | (344 | ) | |||||||||||||||||
| Barclays Bank PLC | EUR | 1,080,000 | 06/20/16 | 1.0000 | —4 | 34,972 | (23,336 | ) | 11,636 | ||||||||||||||||||||||
| Barclays Bank PLC | USD | 750,000 | 09/20/16 | 1.0000 | —5 | (7,194 | ) | 16,808 | 9,614 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,130,000 | 03/20/14 | 1.0000 | —6 | 10,693 | (3,021 | ) | 7,672 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 750,000 | 06/20/16 | 1.0000 | —7 | 23,183 | (22,300 | ) | 883 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,500,000 | 06/20/16 | 1.0000 | —8 | (27,459 | ) | 29,571 | 2,112 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 750,000 | 09/20/16 | 1.0000 | —5 | (7,561 | ) | 16,808 | 9,247 | ||||||||||||||||||||||
| Goldman Sachs International | USD | 2,260,000 | 03/20/14 | 1.0000 | —9 | 25,005 | (35,881 | ) | (10,876 | ) | |||||||||||||||||||||
| Goldman Sachs International | USD | 300,000 | 03/20/16 | 1.0000 | —10 | 1,344 | 979 | 2,323 | |||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 1,680,000 | 03/20/14 | 5.0000 | —11 | 270,721 | (187,698 | ) | 83,023 | ||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 540,000 | 06/20/16 | 1.0000 | —3 | (7,112 | ) | 6,065 | (1,047 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,100,000 | 03/20/14 | 1.0000 | —6 | 9,401 | (2,941 | ) | 6,460 | ||||||||||||||||||||||
15
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 300,000 | 03/20/16 | 1.0000 | % | —10 | $ | 1,344 | $ | 979 | $ | 2,323 | |||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,500,000 | 06/20/16 | 1.0000 | —12 | 44,201 | (46,017 | ) | (1,816 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,500,000 | 06/20/16 | 1.0000 | —13 | (1,966 | ) | 6,482 | 4,516 | ||||||||||||||||||||||
| Merrill Lynch International | EUR | 1,100,000 | 06/20/16 | 1.0000 | —14 | (2,402 | ) | 8,497 | 6,095 | ||||||||||||||||||||||
| $ | 360,761 | $ | (228,940 | ) | $ | 131,821 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments made are based on the notional amount.
3 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Legal & General Finance PLC 5.875% bond, due 12/11/31.
4 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Centrica PLC 7.000% bond, due 09/19/18.
5 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the CNA Financial Corp. 5.850% bond, due 12/15/14.
6 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Computer Sciences Corp. 6.500% bond, due 03/15/18.
7 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Honeywell International, Inc 5.700% bond, due 03/15/36.
8 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Prudential Financial, Inc. 4.500% bond, due 07/15/13
9 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions, Inc. 6.500% bond, due 09/01/25.
10 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Allstate Corp. 6.750% bond, due 05/15/18
11 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the ITV PLC 5.375% bond, due 10/19/15
12 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Lockheed Martin Corp. 7.650% bond, due 01/05/16.
13 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Constellation Energy Group, Inc. 4.550% bond, due 06/15/15.
14 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Volvo Treasury AB 5.000% bond, due 05/31/17
16
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
Credit default swaps on credit indices—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments made |
Value |
Unrealized appreciation |
Credit spread4 |
|||||||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 2,950,000 | 06/20/16 | —3 | 5.0000 | % | $ | (1,639 | ) | $ | 28,159 | $ | 26,520 | 4.8062 | % | ||||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments received are based on the notional amount.
3 Payment to the counterparty will be made upon the occurrence of a succession event with respect to the CDX.NA.HY. Series 16 Index.
4 Credit spreads, where available, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
Credit default swaps on corporate and sovereign issues—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
| Barclays Bank PLC | EUR | 540,000 | 06/20/16 | —4 | 1.0000 | % | $ | 28,313 | $ | (29,069 | ) | $ | (756 | ) | 1.8312 | % | |||||||||||||||||||
| Barclays Bank PLC | EUR | 1,080,000 | 06/20/16 | —5 | 1.0000 | (21,981 | ) | 17,658 | (4,323 | ) | 0.7085 | ||||||||||||||||||||||||
| Barclays Bank PLC | USD | 750,000 | 09/20/16 | —6 | 1.0000 | 14,850 | (27,242 | ) | (12,392 | ) | 1.7588 | ||||||||||||||||||||||||
| Deutsche Bank AG | USD | 750,000 | 03/20/16 | —7 | 1.0000 | 11,204 | (21,056 | ) | (9,852 | ) | 1.6135 | ||||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,500,000 | 06/20/16 | —8 | 1.0000 | 41,493 | (40,403 | ) | 1,090 | 1.5758 | |||||||||||||||||||||||||
| Deutsche Bank AG | USD | 750,000 | 09/20/16 | —6 | 1.0000 | 14,850 | (27,242 | ) | (12,392 | ) | 1.7588 | ||||||||||||||||||||||||
| Goldman Sachs International | USD | 1,490,000 | 03/20/16 | —9 | 1.0000 | 14,985 | 7,410 | 22,395 | 0.8829 | ||||||||||||||||||||||||||
| Goldman Sachs International | USD | 800,000 | 06/20/18 | —10 | 0.5140 | — | (102,511 | ) | (102,511 | ) | 2.7561 | ||||||||||||||||||||||||
| Goldman Sachs International | USD | 1,600,000 | 12/20/18 | —11 | 1.1425 | — | (66,302 | ) | (66,302 | ) | 1.7708 | ||||||||||||||||||||||||
| Goldman Sachs International | USD | 3,000,000 | 09/20/19 | —12 | 1.0000 | (19,160 | ) | 52,604 | 33,444 | 0.7561 | |||||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 430,000 | 03/20/16 | —13 | 1.0000 | 12,797 | (18,982 | ) | (6,185 | ) | 1.7098 | ||||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 1,080,000 | 03/20/16 | —14 | 5.0000 | (212,763 | ) | 117,872 | (94,891 | ) | 3.1855 | ||||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 540,000 | 06/20/16 | —4 | 1.0000 | 28,313 | (29,069 | ) | (756 | ) | 1.8312 | ||||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 740,000 | 03/20/16 | —7 | 1.0000 | 12,076 | (20,775 | ) | (8,699 | ) | 1.6350 | ||||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,500,000 | 06/20/16 | —15 | 1.0000 | 28,081 | (27,407 | ) | 674 | 1.3833 | |||||||||||||||||||||||||
| Merrill Lynch International | EUR | 1,100,000 | 06/20/16 | —16 | 1.0000 | 65,049 | (89,456 | ) | (24,407 | ) | 2.2628 | ||||||||||||||||||||||||
| $ | 18,107 | $ | (303,970 | ) | $ | (285,863 | ) | ||||||||||||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
17
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
2 Payments received are based on the notional amount.
3 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
4 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Aegon NV 4.125% bond, due 12/08/14.
5 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the E.ON International Finance BV 6.375% bond, due 05/29/17.
6 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Hartford Financial Services Group, Inc. 4.000% bond, due 03/30/15.
7 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Computer Sciences Corp. 6.500% bond, due 03/15/18.
8 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the MetLife, Inc. 5.000% bond, due 06/15/15.
9 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions, Inc. 6.500% bond, due 09/1/25.
10 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Kingdom of Spain 5.500% bond, due 12/20/17.
11 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Republic of Poland 5.250% bond, due 01/15/14.
12 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Republic of Austria 5.250% bond, due 01/04/11.
13 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the AXA SA 6.000% bond, due 06/18/13.
14 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the ITV PLC 5.375% bond, due 10/19/15.
15 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Exelon Generation Co. LLC 6.200% bond, due 10/01/17.
16 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Renault SA 2.647% bond, due 08/04/14.
18
UBS Absolute Return Bond Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Corporate bonds | $ | — | $ | 72,835,799 | $ | — | $ | 72,835,799 | |||||||||||
| Asset-backed securities | — | 2,590,022 | — | 2,590,022 | |||||||||||||||
| Collateralized debt obligations | — | — | 1,501,097 | 1,501,097 | |||||||||||||||
| Commercial mortgage-backed securities | — | 689,487 | — | 689,487 | |||||||||||||||
| Mortgage & agency debt securities | — | 34,184,883 | — | 34,184,883 | |||||||||||||||
| Non-US government obligations | — | 17,982,227 | — | 17,982,227 | |||||||||||||||
| Supranational bonds | — | 6,705,280 | — | 6,705,280 | |||||||||||||||
| Short-term investment | — | 9,946,180 | — | 9,946,180 | |||||||||||||||
| Forward foreign currency contracts | — | (491,059 | ) | — | (491,059 | ) | |||||||||||||
| Futures contracts | (236,859 | ) | — | — | (236,859 | ) | |||||||||||||
| Swap agreements | — | (688,365 | ) | — | (688,365 | ) | |||||||||||||
| Total | $ | (236,859 | ) | $ | 143,754,454 | $ | 1,501,097 | $ | 145,018,692 | ||||||||||
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
| Measurements using unobservable inputs (Level 3) | |||||||||||
|
Collateralized debt obligations |
Total | ||||||||||
| Assets | |||||||||||
| Beginning balance | $ | 1,269,921 | $ | 1,269,921 | |||||||
| Purchases | 3,898 | 3,898 | |||||||||
| Issuances | — | — | |||||||||
| Sales | (1,126,512 | ) | (1,126,512 | ) | |||||||
| Settlements | — | — | |||||||||
| Accrued discounts (premiums) | 397 | 397 | |||||||||
| Total realized gain (loss) | (1,936,014 | ) | (1,936,014 | ) | |||||||
| Net change in unrealized appreciation/depreciation | 3,289,407 | 3,289,407 | |||||||||
| Transfers into Level 3 | — | — | |||||||||
| Transfers out of Level 3 | — | — | |||||||||
| Ending balance | $ | 1,501,097 | $ | 1,501,097 | |||||||
The change in unrealized appreciation/depreciation relating to the Level 3 investments still held at June 30, 2011 was $823,449.
See accompanying notes to financial statements.
19
UBS Core Plus Bond Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Core Plus Bond Fund (the "Fund") (formerly UBS U.S. Bond Fund) returned 5.00% (Class A shares returned 0.26% after the deduction of the maximum sales charge), while Class Y shares returned 5.26%. The Fund's benchmark, the Barclays Capital US Aggregate Index (the "Index"), returned 3.90% 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 22; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a positive return and outperformed the Index during the reporting period, largely due to sector allocation, issue selection and yield curve positioning.
Portfolio performance summary1
What worked
• The Fund's overweight to several spread sectors (non-US Treasuries) was beneficial during the reporting period.
– The largest contributor to performance was the Fund's overweight exposure to commercial mortgage-backed securities (CMBS). CMBS spreads narrowed significantly during the reporting period due, in part, to overall robust demand from investors seeking to generate incremental yield in the low interest rate environment. While CMBS prices weakened toward the end of the period given increased risk aversion, it was not enough to offset their earlier strong returns. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
– An overweight to investment grade bonds was rewarded. While they, too, gave back a portion of their gains late in the period, overall, the Fund's overweight added value. In particular, the Fund's allocation to investment grade bonds in the financials and industrials sectors enhanced its results.
– Out-of-index exposures to high yield bonds and emerging markets debt also enhanced the Fund's returns. Overall, these riskier asset classes generated strong returns during the period.
• Issue selection was a positive for performance.
– Within the corporate bond sector, the Fund's industrial holdings, especially its energy and natural gas credits, contributed to results. The spreads of issuers in this sector narrowed as the economic recovery continued, corporate profits generally exceeded expectations and investor demand was typically solid. Issue selection in financials was also rewarded.
– Asset-backed issue selection added value, as well. In particular, the Fund's BBB-rated credit card receivables generated solid results during the period.2
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
2 Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest.
20
UBS Core Plus Bond Fund
• The Fund's yield curve positioning and, to a lesser extent, duration, meaningfully contributed to performance.
– The Fund's positioning on the yield curve was a positive for results. In particular, our positioning on the curve in July 2010 was beneficial, as we emphasized portions of the curve that generated very strong returns.
– We tactically adjusted the Fund's duration during the reporting period. Overall, duration positioning was additive for performance. (Duration measures the price sensitivity of a portfolio to interest rate changes.)
What didn't work
• Certain bonds held by the Fund somewhat held back performance. Several of the Fund's utility credits modestly detracted from performance. In addition, certain exposures to sovereign bonds also detracted from results.
• The Fund's use of derivatives was a slight detractor from performance. Several derivative instruments, namely bond and interest rate futures, were used to facilitate specific duration and yield curve strategies. Credit default swaps were used to implement specific credit-related investment strategies.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
21
UBS Core Plus Bond Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 5.00 | % | 2.10 | % | 3.35 | % | 4.29 | % | |||||||||||
| Class B3 | 4.20 | 1.35 | N/A | 2.256 | |||||||||||||||
| Class C4 | 4.60 | 1.60 | N/A | 2.20 | |||||||||||||||
| Class Y5 | 5.26 | 2.36 | 3.59 | 4.78 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 0.26 | % | 1.17 | % | 2.87 | % | 3.95 | % | |||||||||||
| Class B3 | (0.80 | ) | 1.02 | N/A | 2.256 | ||||||||||||||
| Class C4 | 3.85 | 1.60 | N/A | 2.20 | |||||||||||||||
| Barclays Capital US Aggregate Index7 | 3.90 | % | 6.52 | % | 5.74 | % | 6.24 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.41% and 0.66%; Class B—2.24% and 1.41%; Class C—1.88% and 1.16%; Class Y—1.11% and 0.41%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the 12-month period ending October 27, 2011, do not exceed 0.64% for Class A shares, 1.39% for Class B shares, 1.14% for Class C shares and 0.39% for Class Y shares. 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 Core Plus Bond Fund (formerly, UBS U.S. Bond Fund) Class A shares is June 30, 1997. Inception dates of Class B and Class C shares are November 6, 2001 and November 8, 2001, respectively. Inception date of Class Y shares and the index is August 31,1995.
2 Maximum sales charge for Class A shares is 4.5%. 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 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The Barclays Capital US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, fixed rate taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial-mortgage backed sectors. US agency hybrid adjustable rate mortgage (ARM) securities were added to the index on April 1, 2007. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
22
UBS Core Plus Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Core Plus Bond Fund Class A and Class Y shares versus the Barclays Capital US Aggregate Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
23
UBS Core Plus Bond Fund
Top ten long-term fixed income holdings
(unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
US Treasury Notes, 0.750%, due 03/31/13 |
8.5 | % | |||||
|
US Treasury Bonds, 4.750%, due 02/15/41 |
4.5 | ||||||
|
Federal National Mortgage Association Pools, 4.500%, TBA |
3.6 | ||||||
|
Federal National Mortgage Association Pools, 5.000%, TBA |
3.3 | ||||||
|
Federal National Mortgage Association, 1.625%, due 10/26/15 |
2.8 | ||||||
|
Federal Home Loan Mortgage Corp. Gold Pools, #A89870, 4.500%, due 11/01/39 |
2.2 | ||||||
|
Federal Home Loan Mortgage Corp., 1.000%, due 08/27/14 |
2.1 | ||||||
|
Government National Mortgage Association Pools, #701813, 4.500%, due 04/15/39 |
1.6 | ||||||
|
US Treasury Notes, 1.750%, due 05/31/16 |
1.6 | ||||||
|
Federal National Mortgage Association Pools, #AD9114, 5.000%, due 07/01/40 |
1.4 | ||||||
| Total | 31.6 | % | |||||
Industry diversification (unaudited)2
As a percentage of net assets as of June 30, 2011
| Bonds | |||||||
| Corporate bonds | |||||||
| Aerospace & defense | 0.20 | % | |||||
| Biotechnology | 0.24 | ||||||
| Building products | 0.32 | ||||||
| Capital markets | 1.43 | ||||||
| Chemicals | 0.17 | ||||||
| Commercial banks | 2.40 | ||||||
| Commercial services & supplies | 0.23 | ||||||
| Consumer finance | 1.01 | ||||||
| Diversified financial services | 3.02 | ||||||
| Diversified telecommunication services | 0.36 | ||||||
| Electric utilities | 0.96 | ||||||
| Energy equipment & services | 0.40 | ||||||
| Food & staples retailing | 0.44 | ||||||
| Food products | 0.60 | ||||||
| Household durables | 0.31 | ||||||
| Insurance | 2.32 | ||||||
| Leisure equipment & products | 0.14 | ||||||
| Machinery | 0.15 | ||||||
| Media | 1.86 | ||||||
| Metals & mining | 0.78 | ||||||
| Multi-utilities | 0.12 | ||||||
| Oil, gas & consumable fuels | 2.24 | ||||||
| Paper & forest products | 0.43 | ||||||
| Pharmaceuticals | 0.25 | ||||||
| Tobacco | 0.40 | ||||||
| Wireless telecommunication services | 1.04 | ||||||
| Total corporate bonds | 21.82 | % | |||||
| Asset-backed securities | 1.14 | ||||||
| Commercial mortgage-backed securities | 8.43 | ||||||
| Mortgage & agency debt securities | 41.85 | ||||||
| Municipal bonds | 1.42 | ||||||
| US government obligations | 16.70 | ||||||
| Supranational bond | 0.28 | ||||||
| Total bonds | 91.64 | % | |||||
| Investment companies | |||||||
| UBS High Yield Relationship Fund | 3.66 | ||||||
|
UBS Opportunistic Emerging Markets Debt Relationship Fund |
1.26 | ||||||
| Total investment companies | 4.92 | % | |||||
| Short-term investment | 6.48 | ||||||
| Investment of cash collateral from securities loaned | 0.57 | ||||||
| Total investments | 103.61 | % | |||||
| Liabilities, in excess of cash and other assets | (3.61 | ) | |||||
| Net assets | 100.00 | % | |||||
1 Figures represent the direct investments of UBS Core Plus Bond Fund. Figures would be different if a breakdown of the underlying investment companies was included.
2 Figures represent the industry breakdown of direct investments of UBS Core Plus Bond Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification and derivatives exposure was included.
24
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds: 91.64% | |||||||||||
| Corporate bonds: 21.82% | |||||||||||
| Australia: 0.08% | |||||||||||
|
Rio Tinto Finance USA Ltd., 4.125%, due 05/20/21 |
$ | 30,000 | $ | 29,799 | |||||||
| Austria: 0.22% | |||||||||||
|
PE Paper Escrow GmbH, 12.000%, due 08/01/141 |
75,000 | 84,750 | |||||||||
| Canada: 0.26% | |||||||||||
|
Cenovus Energy, Inc., 4.500%, due 09/15/14 |
95,000 | 103,104 | |||||||||
| Cayman Islands: 0.93% | |||||||||||
|
Transocean, Inc., 6.800%, due 03/15/38 |
145,000 | 155,688 | |||||||||
|
Vale Overseas Ltd., 4.625%, due 09/15/20 |
155,000 | 154,154 | |||||||||
| 6.875%, due 11/21/36 | 50,000 | 54,289 | |||||||||
| Total Cayman Islands corporate bonds | 364,131 | ||||||||||
| France: 0.13% | |||||||||||
|
RCI Banque SA, 4.600%, due 04/12/161 |
50,000 | 51,076 | |||||||||
| Ireland: 0.54% | |||||||||||
|
The Governor & Co. of the Bank of Ireland, 2.750%, due 03/02/121 |
225,000 | 210,957 | |||||||||
| Luxembourg: 0.21% | |||||||||||
|
Telecom Italia Capital SA, 4.950%, due 09/30/14 |
80,000 | 83,413 | |||||||||
| Mexico: 0.26% | |||||||||||
|
America Movil SAB de CV, 5.000%, due 03/30/20 |
100,000 | 104,320 | |||||||||
| Netherlands Antilles: 0.25% | |||||||||||
|
Teva Pharmaceutical Finance II BV, 3.000%, due 06/15/15 |
95,000 | 97,756 | |||||||||
| South Africa: 0.18% | |||||||||||
|
AngloGold Ashanti Holdings PLC, 5.375%, due 04/15/20 |
70,000 | 68,923 | |||||||||
| United Kingdom: 0.80% | |||||||||||
|
BP Capital Markets PLC, 3.875%, due 03/10/15 |
120,000 | 126,378 | |||||||||
|
Lloyds TSB Bank PLC, 6.375%, due 01/21/21 |
80,000 | 83,285 | |||||||||
|
PPL WEM Holdings PLC, 3.900%, due 05/01/161 |
35,000 | 35,916 | |||||||||
|
Face amount |
Value | ||||||||||
|
Royal Bank of Scotland PLC, 5.625%, due 08/24/20 |
$ | 70,000 | $ | 70,029 | |||||||
| Total United Kingdom corporate bonds | 315,608 | ||||||||||
| United States: 17.96% | |||||||||||
|
Allied Waste North America, Inc., 6.875%, due 06/01/17 |
85,000 | 92,119 | |||||||||
|
Altria Group, Inc., 9.950%, due 11/10/38 |
55,000 | 77,278 | |||||||||
|
American International Group, Inc., 6.400%, due 12/15/20 |
60,000 | 64,583 | |||||||||
|
Amgen, Inc., 3.450%, due 10/01/20 |
100,000 | 95,351 | |||||||||
|
Anadarko Petroleum Corp., 5.950%, due 09/15/16 |
75,000 | 84,419 | |||||||||
|
Appalachian Power Co., 4.600%, due 03/30/21 |
70,000 | 70,499 | |||||||||
|
Bank of America Corp., 5.625%, due 07/01/20 |
40,000 | 41,301 | |||||||||
| 6.500%, due 08/01/16 | 130,000 | 144,983 | |||||||||
|
Bunge Ltd. Finance Corp., 5.100%, due 07/15/15 |
80,000 | 86,019 | |||||||||
|
Capital One Financial Corp., 7.375%, due 05/23/14 |
55,000 | 62,801 | |||||||||
|
Caterpillar, Inc., 3.900%, due 05/27/21 |
60,000 | 60,008 | |||||||||
|
Cellco Partnership, 8.500%, due 11/15/18 |
85,000 | 110,378 | |||||||||
|
CenterPoint Energy Resources Corp., 6.000%, due 05/15/18 |
115,000 | 128,978 | |||||||||
|
CIT Group, Inc., 7.000%, due 05/02/161 |
135,000 | 134,494 | |||||||||
|
Citigroup, Inc., 6.125%, due 05/15/18 |
160,000 | 176,197 | |||||||||
| 8.125%, due 07/15/39 | 60,000 | 75,082 | |||||||||
|
Comcast Corp., 6.300%, due 11/15/17 |
160,000 | 185,460 | |||||||||
|
CVS Caremark Corp., 6.125%, due 09/15/39 |
100,000 | 102,520 | |||||||||
|
CVS Pass-Through Trust, 6.036%, due 12/10/28 |
66,496 | 70,573 | |||||||||
|
DirecTV Holdings LLC, 6.000%, due 08/15/40 |
70,000 | 70,973 | |||||||||
| 7.625%, due 05/15/16 | 105,000 | 114,450 | |||||||||
|
Dow Chemical Co., 4.250%, due 11/15/20 |
70,000 | 68,317 | |||||||||
|
Duke Energy Carolinas LLC, 5.100%, due 04/15/18 |
55,000 | 60,830 | |||||||||
|
ERAC USA Finance Co., 7.000%, due 10/15/371 |
85,000 | 93,528 | |||||||||
|
FGI Operating Co., Inc., 10.250%, due 08/01/15 |
75,000 | 79,687 | |||||||||
25
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Ford Motor Credit Co. LLC, 5.000%, due 05/15/18 |
$ | 110,000 | $ | 109,624 | |||||||
| 5.750%, due 02/01/21 | 110,000 | 109,864 | |||||||||
| 7.800%, due 06/01/12 | 215,000 | 224,843 | |||||||||
|
Fortune Brands, Inc., 6.375%, due 06/15/14 |
60,000 | 66,703 | |||||||||
|
General Electric Capital Corp., 2.950%, due 05/09/16 |
75,000 | 75,413 | |||||||||
|
Series A, 6.750%, due 03/15/32 |
260,000 | 288,874 | |||||||||
|
Georgia-Pacific LLC, 5.400%, due 11/01/201 |
80,000 | 81,531 | |||||||||
|
Goldman Sachs Group, Inc., 6.150%, due 04/01/18 |
260,000 | 282,969 | |||||||||
|
Hartford Financial Services Group, Inc., 6.300%, due 03/15/18 |
85,000 | 92,429 | |||||||||
|
Hasbro, Inc., 6.350%, due 03/15/40 |
55,000 | 56,853 | |||||||||
|
International Lease Finance Corp., 7.125%, due 09/01/181 |
80,000 | 85,600 | |||||||||
|
Jersey Central Power & Light Co., 7.350%, due 02/01/19 |
60,000 | 72,847 | |||||||||
|
JP Morgan Chase Capital XXII, Series V, 6.450%, due 02/02/37 |
225,000 | 226,705 | |||||||||
|
JPMorgan Chase & Co., 4.400%, due 07/22/20 |
145,000 | 142,052 | |||||||||
|
Kinder Morgan Energy Partners LP, 5.800%, due 03/15/35 |
45,000 | 43,539 | |||||||||
|
Kraft Foods, Inc., 6.500%, due 02/09/40 |
135,000 | 149,954 | |||||||||
|
Massachusetts Mutual Life Insurance Co., 8.875%, due 06/01/391 |
50,000 | 69,272 | |||||||||
|
MetLife, Inc., 6.400%, due 12/15/36 |
150,000 | 146,250 | |||||||||
|
Morgan Stanley, 5.500%, due 01/26/20 |
15,000 | 15,196 | |||||||||
|
Series F, 5.625%, due 09/23/19 |
110,000 | 112,876 | |||||||||
| 6.625%, due 04/01/18 | 150,000 | 165,239 | |||||||||
|
Mutual of Omaha Insurance Co., 6.800%, due 06/15/361 |
80,000 | 81,359 | |||||||||
|
Nationwide Mutual Insurance Co., 9.375%, due 08/15/391 |
95,000 | 117,866 | |||||||||
|
NBC Universal, Inc., 5.950%, due 04/01/411 |
85,000 | 86,436 | |||||||||
|
News America, Inc., 6.200%, due 12/15/34 |
35,000 | 35,745 | |||||||||
| 7.750%, due 12/01/45 | 60,000 | 71,692 | |||||||||
|
Face amount |
Value | ||||||||||
|
NuStar Logistics LP, 7.650%, due 04/15/18 |
$ | 100,000 | $ | 119,447 | |||||||
|
Oncor Electric Delivery Co. LLC, 6.800%, due 09/01/18 |
50,000 | 58,434 | |||||||||
|
ONEOK, Inc., 6.000%, due 06/15/35 |
60,000 | 59,478 | |||||||||
|
Owens Corning, 6.500%, due 12/01/16 |
115,000 | 125,129 | |||||||||
|
Pacific Gas & Electric Co., 6.050%, due 03/01/34 |
30,000 | 31,722 | |||||||||
|
Pacific Life Insurance Co., 9.250%, due 06/15/391 |
100,000 | 130,321 | |||||||||
|
Principal Financial Group, Inc., 8.875%, due 05/15/19 |
105,000 | 133,562 | |||||||||
|
Prudential Financial, Inc., Series C, 5.400%, due 06/13/35 |
25,000 | 22,902 | |||||||||
| 6.100%, due 06/15/17 | 45,000 | 50,541 | |||||||||
|
PSEG Power LLC, 8.625%, due 04/15/31 |
35,000 | 44,976 | |||||||||
|
Qwest Corp., 7.625%, due 06/15/15 |
125,000 | 141,250 | |||||||||
|
Reynolds American, Inc., 7.625%, due 06/01/16 |
65,000 | 77,962 | |||||||||
|
Sempra Energy, 9.800%, due 02/15/19 |
35,000 | 46,949 | |||||||||
|
Southern Natural Gas Co., 8.000%, due 03/01/32 |
130,000 | 162,893 | |||||||||
|
Time Warner, Inc., 6.100%, due 07/15/40 |
35,000 | 35,579 | |||||||||
|
Tupperware Brands Corp., 4.750%, due 06/01/211 |
55,000 | 54,234 | |||||||||
|
Verizon Communications, Inc., 6.100%, due 04/15/18 |
100,000 | 114,595 | |||||||||
|
Wells Fargo & Co., 3.676%, due 06/15/16 |
95,000 | 97,597 | |||||||||
|
Williams Partners LP, 6.300%, due 04/15/40 |
50,000 | 51,835 | |||||||||
|
WMG Acquisition Corp., 9.500%, due 06/15/16 |
125,000 | 131,875 | |||||||||
| Total United States corporate bonds | 7,053,840 | ||||||||||
|
Total corporate bonds (cost $8,176,851) |
8,567,677 | ||||||||||
| Asset-backed securities: 1.14% | |||||||||||
| United States: 1.14% | |||||||||||
|
Ameriquest Mortgage Securities, Inc., Series 2005-R6, Class A2, 0.386%, due 08/25/352 |
58,124 | 55,313 | |||||||||
|
MBNA Credit Card Master Note Trust, Series 2004-C2, Class C2, 1.087%, due 11/15/162 |
350,000 | 349,524 | |||||||||
26
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Asset-backed securities—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Renaissance Home Equity Loan Trust, Series 2006-4, Class AF1, 5.545%, due 01/25/37 |
$ | 42,208 | $ | 41,556 | |||||||
|
Total asset-backed securities (cost $415,648) |
446,393 | ||||||||||
| Commercial mortgage-backed securities: 8.43% | |||||||||||
| United States: 8.43% | |||||||||||
|
Banc of America Commercial Mortgage, Inc., Series 2007-2, Class AM, 5.833%, due 04/10/492 |
150,000 | 142,023 | |||||||||
|
Series 2007-4, Class AM, 5.997%, due 02/10/512 |
300,000 | 293,656 | |||||||||
|
Commercial Mortgage Loan Trust, Series 2008-LS1, Class AM, 6.213%, due 12/10/492 |
300,000 | 289,238 | |||||||||
|
Delta Air Lines Pass Through Trust, Series 2007-1, Class A, 6.821%, due 08/10/22 |
39,245 | 40,815 | |||||||||
|
FDIC Structured Sale Guaranteed Notes, Series 2010-C1, Class A, 2.980%, due 12/06/201 |
296,260 | 301,567 | |||||||||
|
GE Capital Commercial Mortgage Corp., Series 2007-C1, Class AM, 5.606%, due 12/10/492 |
150,000 | 137,535 | |||||||||
|
Greenwich Capital Commercial Funding Corp., Series 2007-GG9, Class AM, 5.475%, due 03/10/39 |
220,000 | 213,072 | |||||||||
|
Series 2007-GG11, Class A4, 5.736%, due 12/10/49 |
220,000 | 236,071 | |||||||||
|
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.992%, due 08/10/452,3 |
200,000 | 214,720 | |||||||||
|
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CB17, Class AM, 5.464%, due 12/12/43 |
150,000 | 149,229 | |||||||||
|
Series 2006-LDP8, Class AJ, 5.480%, due 05/15/452 |
200,000 | 182,771 | |||||||||
|
Series 2007-LD12, Class A4, 5.882%, due 02/15/512 |
260,000 | 282,697 | |||||||||
|
Series 2007-LD11, Class A4, 6.005%, due 06/15/492 |
160,000 | 172,560 | |||||||||
|
Series 2006-LDP7, Class AJ, 6.067%, due 04/15/452 |
225,000 | 204,480 | |||||||||
|
Morgan Stanley Dean Witter Capital I, Series 2002-IQ3, Class B, 5.240%, due 09/15/37 |
75,000 | 76,981 | |||||||||
|
Face amount |
Value | ||||||||||
|
Morgan Stanley Re-REMIC Trust, Series 2009-GG10, Class A4B, 5.992%, due 08/12/451,2 |
$ | 375,000 | $ | 374,025 | |||||||
|
Total commercial mortgage-backed securities (cost $3,289,303) |
3,311,440 | ||||||||||
| Mortgage & agency debt securities: 41.85% | |||||||||||
| United Kingdom: 1.40% | |||||||||||
|
Fosse Master Issuer PLC, Series 2011-1A, Class A2, 1.619%, due 10/18/541,2 |
300,000 | 300,533 | |||||||||
|
Holmes Master Issuer PLC, Series 2011-1A, Class A2, 1.628%, due 10/15/541,2 |
250,000 | 250,310 | |||||||||
|
Total United Kingdom mortgage & agency debt securities |
550,843 | ||||||||||
| United States: 40.45% | |||||||||||
|
Federal Home Loan Mortgage Corp.4 1.000%, due 08/27/14 |
830,000 | 828,904 | |||||||||
|
Federal Home Loan Mortgage Corp. Gold Pools4 #G13223, 4.000%, due 05/01/23 |
379,600 | 397,178 | |||||||||
| #A96140, 4.000%, due 01/01/41 | 148,847 | 148,939 | |||||||||
| #G08431, 4.000%, due 01/01/41 | 395,664 | 395,908 | |||||||||
| #A89870, 4.500%, due 11/01/39 | 830,000 | 859,431 | |||||||||
| #AI2472, 4.500%, due 05/01/41 | 425,000 | 440,369 | |||||||||
| #AI4815, 4.500%, due 06/01/41 | 505,000 | 523,262 | |||||||||
| #Q01348, 4.500%, due 06/01/41 | 250,000 | 258,650 | |||||||||
| #G05249, 5.000%, due 01/01/39 | 383,614 | 407,825 | |||||||||
| #G04567, 5.500%, due 07/01/38 | 180,320 | 195,062 | |||||||||
| #G05267, 5.500%, due 12/01/38 | 197,607 | 213,762 | |||||||||
| #G06381, 5.500%, due 08/01/40 | 194,844 | 211,412 | |||||||||
| #C63008, 6.000%, due 01/01/32 | 235,249 | 261,068 | |||||||||
| #G06019, 6.000%, due 10/01/36 | 220,294 | 243,646 | |||||||||
| #G01717, 6.500%, due 11/01/29 | 109,186 | 123,734 | |||||||||
|
Federal National Mortgage Association,4 1.625%, due 10/26/15 |
1,120,000 | 1,115,167 | |||||||||
|
Federal National Mortgage Association Pools,4 4.500%, TBA |
1,375,000 | 1,422,480 | |||||||||
| 5.000%, TBA | 1,225,000 | 1,301,562 | |||||||||
| 5.500%, TBA | 475,000 | 513,594 | |||||||||
| #AH3347, 4.000%, due 01/01/41 | 448,037 | 448,669 | |||||||||
| #935520, 4.500%, due 08/01/39 | 220,784 | 228,820 | |||||||||
| #AE0106, 4.500%, due 06/01/40 | 24,665 | 25,567 | |||||||||
| #AH6927, 4.500%, due 04/01/41 | 299,215 | 310,035 | |||||||||
| #890209, 5.000%, due 05/01/40 | 457,254 | 486,620 | |||||||||
| #AD9114, 5.000%, due 07/01/40 | 523,846 | 558,927 | |||||||||
| #576764, 5.500%, due 09/01/24 | 126,483 | 137,118 | |||||||||
| #688066, 5.500%, due 03/01/33 | 247,742 | 271,682 | |||||||||
27
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| Mortgage & agency debt securities—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
| #688314, 5.500%, due 03/01/33 | $ | 296,711 | $ | 325,385 | |||||||
| #802481, 5.500%, due 11/01/34 | 430,619 | 468,807 | |||||||||
| #995018, 5.500%, due 06/01/38 | 317,488 | 344,287 | |||||||||
| #408267, 6.000%, due 03/01/28 | 25,699 | 28,967 | |||||||||
| #323715, 6.000%, due 05/01/29 | 23,709 | 26,321 | |||||||||
| #522564, 6.000%, due 07/01/29 | 81,428 | 90,327 | |||||||||
| #676733, 6.000%, due 01/01/33 | 179,404 | 200,859 | |||||||||
| #708631, 6.000%, due 06/01/33 | 45,732 | 51,514 | |||||||||
| #AE0405, 6.000%, due 08/01/37 | 332,342 | 366,996 | |||||||||
| #831730, 6.500%, due 09/01/36 | 270,684 | 306,821 | |||||||||
| #253824, 7.000%, due 03/01/31 | 8,954 | 10,315 | |||||||||
|
Federal National Mortgage Association Pools Re-REMIC,4 |
|||||||||||
|
Series 2005-29, Class KA, #FNR 2005-29 KA, 4.500%, due 02/25/35 |
214,866 | 226,586 | |||||||||
|
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates,4 Series K-012, Class A1, 3.427%, due 10/25/20 |
272,297 | 282,042 | |||||||||
|
First Horizon Asset Securities, Inc., Series 2004-FL1, Class 1A1, 0.456%, due 02/25/352 |
49,086 | 39,283 | |||||||||
|
Government National Mortgage Association Pools, #701813, 4.500%, due 04/15/39 |
593,756 | 629,134 | |||||||||
| #G2 2687, 6.000%, due 12/20/28 | 34,801 | 38,726 | |||||||||
| #G2 2794, 6.000%, due 08/20/29 | 108,705 | 120,966 | |||||||||
|
WaMu Mortgage Pass-Through Certificates, Series 2007-HY1, Class 3B2, 5.331%, due 02/25/372 |
512,477 | 511 | |||||||||
|
Total United States mortgage & agency debt securities |
15,887,238 | ||||||||||
|
Total mortgage & agency debt securities (cost $16,217,970) |
16,438,081 | ||||||||||
| Municipal bonds: 1.42% | |||||||||||
|
Chicago Transit Authority, Series 2008-A, 6.899%, due 12/01/40 |
60,000 | 63,826 | |||||||||
|
Illinois State Taxable Pension, Series 2003, 5.100%, due 06/01/33 |
115,000 | 98,011 | |||||||||
|
Face amount |
Value | ||||||||||
|
Los Angeles Unified School District, Series 2010, 6.758%, due 07/01/34 |
$ | 110,000 | $ | 124,201 | |||||||
|
New Jersey State Turnpike Authority Revenue Bonds, Class F, 7.414%, due 01/01/40 |
30,000 | 36,470 | |||||||||
|
New York State Urban Development Corp. Revenue Bonds, 5.770%, due 03/15/39 |
55,000 | 57,015 | |||||||||
|
State of California, GO, 6.650%, due 03/01/22 |
30,000 | 33,577 | |||||||||
| 7.300%, due 10/01/39 | 130,000 | 145,363 | |||||||||
|
Total municipal bonds (cost $530,548) |
558,463 | ||||||||||
| US government obligations: 16.70% | |||||||||||
|
US Treasury Bonds, 4.750%, due 02/15/41 |
1,650,000 | 1,753,899 | |||||||||
|
US Treasury Notes, 0.750%, due 03/31/13 |
3,315,000 | 3,334,426 | |||||||||
| 0.875%, due 01/31/123 | 450,000 | 451,969 | |||||||||
| 1.750%, due 05/31/163 | 625,000 | 625,975 | |||||||||
| 3.125%, due 05/15/213 | 395,000 | 393,890 | |||||||||
|
Total US government obligations (cost $6,592,876) |
6,560,159 | ||||||||||
| Supranational bond: 0.28% | |||||||||||
|
European Investment Bank, 1.250%, due 09/17/133 (cost $109,624) |
110,000 | 111,146 | |||||||||
|
Total Bonds (cost $35,332,820) |
35,993,359 | ||||||||||
| Shares | |||||||||||
| Investment companies: 4.92% | |||||||||||
| UBS High Yield Relationship Fund*5 | 51,913 | 1,439,092 | |||||||||
|
UBS Opportunistic Emerging Markets Debt Relationship Fund*5 |
28,534 | 493,162 | |||||||||
|
Total investment companies (cost $1,802,494) |
1,932,254 | ||||||||||
| Short-term investment: 6.48% | |||||||||||
| Investment company: 6.48% | |||||||||||
|
UBS Cash Management Prime Relationship Fund5 (cost $2,543,100) |
2,543,100 | 2,543,100 | |||||||||
28
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investment of cash collateral from securities loaned: 0.57% | |||||||||||
|
UBS Private Money Market Fund LLC5 (cost $223,105) |
223,105 | $ | 223,105 | ||||||||
|
Total investments: 103.61% (cost $39,901,519) |
40,691,818 | ||||||||||
|
Liabilities, in excess of cash and other assets: (3.61)% |
(1,418,387 | ) | |||||||||
| Net assets: 100.00% | $ | 39,273,431 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $40,185,443; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 832,954 | |||||
| Gross unrealized depreciation | (326,579 | ) | |||||
| Net unrealized appreciation of investments | $ | 506,375 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 81.
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $2,543,775 or 6.48% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2011 and changes periodically.
3 Security, or portion thereof, was on loan at June 30, 2011.
4 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
29
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
5 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Funds.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Net realized gain during the year ended 06/30/11 |
Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | 2,632,182 | $ | 36,146,097 | $ | 36,235,179 | $ | — | $ | — | $ | 2,543,100 | $ | 11,710 | |||||||||||||||||
|
UBS Private Money Market Fund LLCa |
197,250 | 5,546,951 | 5,521,096 | — | — | 223,105 | 172 | ||||||||||||||||||||||||
|
UBS High Yield Relationship Fund |
988,798 | 1,860,000 | 1,575,000 | 127,521 | 37,773 | 1,439,092 | — | ||||||||||||||||||||||||
|
UBS Opportunitic Emerging Markets Debt Relationship Fund |
417,560 | — | — | — | 75,602 | 493,162 | — | ||||||||||||||||||||||||
| $ | 4,235,790 | $ | 43,553,048 | $ | 43,331,275 | $ | 127,521 | $ | 113,375 | $ | 4,698,459 | $ | 11,882 | ||||||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures buy contracts: | |||||||||||||||||||
| US Ultra Bond Futures, 12 contracts (USD) | September 2011 | $ | 1,544,910 | $ | 1,515,000 | $ | (29,910 | ) | |||||||||||
| US Treasury futures sell contracts: | |||||||||||||||||||
| US Long Bond, 3 contracts (USD) | September 2011 | (375,558 | ) | (369,094 | ) | 6,464 | |||||||||||||
| US Ultra Bond Futures, 2 contracts (USD) | September 2011 | (256,106 | ) | (252,500 | ) | 3,606 | |||||||||||||
| 2 Year US Treasury Notes, 23 contracts (USD) | September 2011 | (5,043,073 | ) | (5,044,906 | ) | (1,833 | ) | ||||||||||||
| 10 Year US Treasury Notes, 5 contracts (USD) | September 2011 | (616,172 | ) | (611,641 | ) | 4,531 | |||||||||||||
| Net unrealized depreciation on futures contracts | $ | (17,142 | ) | ||||||||||||||||
Interest rate swap agreements
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments received |
Value |
Unrealized depreciation |
||||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,310,000 | 02/15/36 | 4.5450 | % | 0.2608 | %2 | $ | — | $ | (138,075 | ) | $ | (138,075 | ) | ||||||||||||||||
1 Payments made or received are based on the notional amount.
2 Rate based on 3 month LIBOR (USD BBA).
30
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
Credit default swaps on corporate issues—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments received |
Value |
Unrealized depreciation |
||||||||||||||||||||||||
| Deutsche Bank AG | USD | 225,000 | 03/20/14 | 1.0000 | % | —3 | $ | 1,958 | $ | (3,572 | ) | $ | (1,614 | ) | |||||||||||||||||
| Deutsche Bank AG | USD | 250,000 | 12/20/15 | 1.0000 | —4 | 5,969 | (7,082 | ) | (1,113 | ) | |||||||||||||||||||||
| $ | 7,927 | $ | (10,654 | ) | $ | (2,727 | ) | ||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments made are based on the notional amount.
3 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions Inc. 6.500% bond, due 09/01/25.
4 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Amgen, Inc. 4.850% bond, due 11/18/14.
Credit default swaps on corporate issues—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
| Deutsche Bank AG | USD | 250,000 | 12/20/15 | —4 | 1.0000 | % | $ | (5,716 | ) | $ | 5,039 | $ | (677 | ) | 0.5381 | % | |||||||||||||||||||
| Deutsche Bank AG | USD | 150,000 | 03/20/16 | —5 | 1.0000 | 2,683 | 746 | 3,429 | 0.8829 | ||||||||||||||||||||||||||
| $ | (3,033 | ) | $ | 5,785 | $ | 2,752 | |||||||||||||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments received are based on the notional amount.
3 Credit spreads, where available, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
4 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Pfizer, Inc. 4.650% bond, due 03/01/18.
5 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions, Inc. 6.500% bond, due 09/01/25.
31
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Corporate bonds | $ | — | $ | 8,567,677 | — | $ | 8,567,677 | ||||||||||||
| Asset-backed securities | — | 446,393 | — | 446,393 | |||||||||||||||
| Commercial mortgage-backed securities | — | 3,311,440 | — | 3,311,440 | |||||||||||||||
| Mortgage & agency debt securities | — | 16,438,081 | — | 16,438,081 | |||||||||||||||
| Municipal bonds | — | 558,463 | — | 558,463 | |||||||||||||||
| US government obligations | — | 6,560,159 | — | 6,560,159 | |||||||||||||||
| Supranational bond | — | 111,146 | — | 111,146 | |||||||||||||||
| Investment companies | — | 1,932,254 | — | 1,932,254 | |||||||||||||||
| Short-term investment | — | 2,543,100 | — | 2,543,100 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 223,105 | — | 223,105 | |||||||||||||||
| Futures contracts | (17,142 | ) | — | — | (17,142 | ) | |||||||||||||
| Swap agreements | — | (142,944 | ) | — | (142,944 | ) | |||||||||||||
| Total | $ | (17,142 | ) | $ | 40,548,874 | — | $ | 40,531,732 | |||||||||||
See accompanying notes to financial statements.
32
UBS Fixed Income Opportunities Fund
Portfolio performance
From its inception on November 29, 2010 through June 30, 2011, Class A shares of UBS Fixed Income Opportunities Fund (the "Fund") returned 0.76% (Class A shares declined 3.76% after the deduction of the maximum sales charge), while Class Y shares returned 0.97%. For comparison purposes, the BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index (the "Index"), returned 0.18% 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 35; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund generated a modest positive return during the reporting period, largely due to sector allocation.
Portfolio performance summary1
What worked
• The Fund's focus on several spread sectors (non-US Treasuries) was beneficial during the reporting period.
– An emphasis on investment grade bonds was rewarded. While they gave back a portion of their gains later in the period when investor risk aversion increased, overall, the Fund's position in the sector added value. In particular, the Fund's allocation to financials enhanced results.
– An allocation to high yield bonds—in particular securities rated BB and below—was beneficial.2 Demand for these securities was typically strong as investors looked to generate incremental yield in the low interest rate environment.
– Security selection of emerging markets debt boosted the Fund's returns. We emphasized inflation-linked securities in a number of countries, such as Brazil, that were experiencing inflationary pressures.
– A small allocation to commercial mortgage-backed securities (CMBS) was rewarded as their spreads narrowed during much of the period given overall solid demand. (Spread measures the difference between the yields paid on a security versus those paid on US Treasuries.)
• Certain derivative instruments, namely bond and interest rate futures, as well as interest rate swaps, were used to facilitate specific duration and yield curve strategies. Credit default swaps were used to implement specific credit-related investment strategies. Currency forwards and currency options were utilized as part of our currency management strategy. The Fund's use of derivatives was modestly positive for performance.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
2 Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments.
33
UBS Fixed Income Opportunities Fund
What didn't work
• The Fund's interest rate strategies and duration positioning modestly detracted from performance. The Fund's duration was generally positioned net short in anticipation that interest rates would move higher. This was beneficial for performance during the first three months of the period, as Treasury yields moved higher given expectations for strengthening economic conditions. However, having a short duration later detracted from results as economic growth decelerated and an escalation of the European sovereign debt crisis triggered a flight to quality and caused Treasury yields to decline. (Duration measures the price sensitivity of a portfolio to interest rate changes.)
• Overall, currency positioning was a slight negative for performance. The Fund's active currency decisions in several developed markets as well as the use of currency hedging, detracted from results. This more than offset the positives associated with the Fund's currency exposures to a number of emerging market countries, including Brazil, Indonesia, India and Turkey.
This letter is intended to assist shareholders in understanding how the Fund performed from its inception on November 29, 2010 through June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
34
UBS Fixed Income Opportunities Fund
Total returns for periods ended 6/30/2011 (unaudited)
| Inception1 | |||||||
| Before deducting maximum sales charge | |||||||
| Class A2 | 0.76 | % | |||||
| Class C3 | 0.43 | ||||||
| Class Y4 | 0.97 | ||||||
| After deducting maximum sales charge | |||||||
| Class A2 | (3.76 | )% | |||||
| Class C3 | (0.31 | ) | |||||
| BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index5 | 0.18 | % | |||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the November 24, 2010 prospectuses were as follows: Class A—1.60% and 0.95%; Class C—2.10% and 1.45%; Class Y—1.35% and 0.70%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 24-month period ending October 27, 2012, do not exceed 0.95% for Class A shares, 1.45% for Class C shares and 0.70% for Class Y shares. 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 Fixed Income Opportunities Fund and the index is November 29, 2010.
2 Maximum sales charge for Class A shares is 4.50%. Class A shares bear ongoing 12b-1 service fees.
3 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.
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 BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index is designed to track the performance of a synthetic asset paying Libor to a stated maturity. The index is based on the assumed purchase at par of a synthetic instrument having exactly its stated maturity and with a coupon equal to that day's fixing rate. That issue is assumed to be sold the following business day (priced at a yield equal to the current day fixing rate) and rolled into a new instrument. Investors should note that indices do not reflect the deduction of fees and expenses.
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. Total returns for period 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.
35
UBS Fixed Income Opportunities Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Fixed Income Opportunities Fund Class A and Class Y shares versus the BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index from November 29, 2010, which is the inception date of the two classes, through June 30, 2011. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
36
UBS Fixed Income Opportunities Fund
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
Federal National Mortgage Association, 4.556%, due 10/09/19 |
2.3 | % | |||||
|
Citigroup, Inc., 4.750%, due 05/31/17 |
2.0 | ||||||
|
Merrill Lynch & Co., Inc., 6.400%, due 08/28/17 |
1.6 | ||||||
|
US Treasury Bonds, PO, 4.683%, due 05/15/40 |
1.5 | ||||||
|
Merrill Lynch & Co., Inc., 6.050%, due 05/16/16 |
1.4 | ||||||
|
Santander US Debt SA Unipersonal, 3.724%, due 01/20/15 |
1.3 | ||||||
|
Lloyds TSB Bank PLC, 6.500%, due 03/24/20 |
1.3 | ||||||
|
Morgan Stanley, 7.300%, due 05/13/19 |
1.1 | ||||||
|
Ford Motor Credit Co. LLC, 8.700%, due 10/01/14 |
1.1 | ||||||
|
US Treasury Bonds, 4.750%, due 02/15/41 |
1.1 | ||||||
| Total | 14.7 | % | |||||
Country exposure by issuer, top five (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
| United States | 55.6 | % | |||||
| United Kingdom | 6.8 | ||||||
| Ireland | 2.6 | ||||||
| Canada | 1.9 | ||||||
| Spain | 1.6 | ||||||
| Total | 68.5 | % | |||||
Industry diversification (unaudited)2
As a percentage of net assets as of June 30, 2011
| Bonds | |||||||
| Corporate bonds | |||||||
| Airlines | 0.41 | % | |||||
| Broadcasting | 0.41 | ||||||
| Building materials | 1.57 | ||||||
| Capital markets | 2.25 | ||||||
| Chemicals | 2.16 | ||||||
| Commercial banks | 13.74 | ||||||
| Consumer finance | 1.78 | ||||||
| Containers & packaging | 0.36 | ||||||
| Diversified financial services | 8.19 | ||||||
| Electric utilities | 3.23 | ||||||
| Health care providers & services | 1.29 | ||||||
| Hotels, restaurants & leisure | 2.56 | ||||||
| Household durables | 0.54 | ||||||
| Insurance | 0.63 | ||||||
| Leisure equipment & products | 0.29 | ||||||
| Machinery | 0.54 | ||||||
| Media | 1.92 | ||||||
| Metals & mining | 1.91 | ||||||
| Oil, gas & consumable fuels | 5.96 | ||||||
| Paper & forest products | 1.41 | ||||||
| Real estate investment trust (REIT) | 0.08 | ||||||
| Road & rail | 0.02 | ||||||
| Specialty retail | 0.81 | ||||||
| Textiles, apparel & luxury goods | 0.19 | ||||||
| Tobacco | 0.57 | ||||||
| Transportation infrastructure | 0.67 | ||||||
| Wireless telecommunication services | 2.41 | ||||||
| Total corporate bonds | 55.90 | % | |||||
| Asset-backed securities | 3.24 | ||||||
| Collateralized debt obligations | 2.03 | ||||||
| Commercial mortgage-backed securities | 8.21 | ||||||
| Mortgage & agency debt securities | 3.49 | ||||||
| Municipal bonds | 4.54 | ||||||
| US government obligations | 2.58 | ||||||
| Non-US government obligations | 0.82 | ||||||
| Total bonds | 80.81 | % | |||||
| Preferred stock | 0.20 | ||||||
| Investment company | |||||||
|
UBS Opportunistic Emerging Markets Debt Relationship Fund |
15.48 | ||||||
| Short-term investment | 4.79 | ||||||
| Options purchased | 2.08 | ||||||
| Total investments | 103.36 | % | |||||
| Liabilities, in excess of cash and other assets | (3.36 | ) | |||||
| Net assets | 100.00 | % | |||||
1 Figures represent the direct investments of UBS Fixed Income Opportunities Fund. Figures would be different if a breakdown of the underlying investment company was included.
2 Figures represent the industry breakdown of direct investments of UBS Fixed Income Opportunities Fund. Figures would be different if a breakdown of the underlying investment company's industry diversification and derivatives exposure was included.
37
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds: 80.81% | |||||||||||
| Corporate bonds: 55.90% | |||||||||||
| Australia: 1.09% | |||||||||||
|
Leighton Finance Ltd., 9.500%, due 07/28/14 |
AUD | 500,000 | $ | 554,344 | |||||||
|
Sydney Airport Finance Co. Pty Ltd., 8.000%, due 07/06/15 |
500,000 | 545,738 | |||||||||
| Total Australia corporate bonds | 1,100,082 | ||||||||||
| Austria: 0.45% | |||||||||||
|
PE Paper Escrow GmbH, 12.000%, due 08/01/141 |
$ | 400,000 | 452,000 | ||||||||
| Brazil: 1.35% | |||||||||||
|
Banco do Brasil SA, 5.875%, due 01/26/221 |
550,000 | 539,000 | |||||||||
|
Petrobras International Finance Co., 5.375%, due 01/27/21 |
800,000 | 821,447 | |||||||||
| Total Brazil corporate bonds | 1,360,447 | ||||||||||
| Canada: 1.86% | |||||||||||
|
ING Bank of Canada, 4.300%, due 12/05/162 |
CAD | 150,000 | 146,975 | ||||||||
|
Nova Chemicals Corp., 8.625%, due 11/01/19 |
$ | 800,000 | 891,000 | ||||||||
|
Rogers Communications, Inc., 5.340%, due 03/22/21 |
CAD | 800,000 | 837,086 | ||||||||
| Total Canada corporate bonds | 1,875,061 | ||||||||||
| France: 0.42% | |||||||||||
|
Credit Agricole SA, 6.637%, due 05/31/171,2,3 |
$ | 500,000 | 426,250 | ||||||||
| Germany: 1.58% | |||||||||||
|
HeidelbergCement Finance BV, 8.500%, due 10/31/19 |
EUR | 500,000 | 810,271 | ||||||||
|
Unitymedia GmbH, 9.625%, due 12/01/194 |
500,000 | 786,707 | |||||||||
| Total Germany corporate bonds | 1,596,978 | ||||||||||
| Greece: 0.71% | |||||||||||
|
OTE PLC, 3.750%, due 11/11/11 |
500,000 | 720,161 | |||||||||
| Ireland: 2.62% | |||||||||||
|
Allied Irish Banks PLC, 1.355%, due 04/11/122 |
200,000 | 247,976 | |||||||||
| 1.546%, due 09/15/112 | 750,000 | 1,046,827 | |||||||||
|
Ardagh Packaging Finance PLC, 7.375%, due 10/15/174 |
250,000 | 364,350 | |||||||||
|
Face amount |
Value | ||||||||||
|
The Governor & Co. of the Bank of Ireland, 2.750%, due 03/02/121 |
$ | 500,000 | $ | 468,793 | |||||||
| 4.000%, due 01/28/15 | EUR | 250,000 | 264,398 | ||||||||
|
Irish Life & Permanent Group Holdings PLC, 3.600%, due 01/14/131 |
$ | 300,000 | 252,213 | ||||||||
| Total Ireland corporate bonds | 2,644,557 | ||||||||||
| Italy: 0.32% | |||||||||||
|
Wind Acquisition Finance SA, 11.750%, due 07/15/174 |
EUR | 200,000 | 326,284 | ||||||||
| Luxembourg: 0.89% | |||||||||||
|
ArcelorMittal, 5.500%, due 03/01/21 |
$ | 900,000 | 901,405 | ||||||||
| Mexico: 1.27% | |||||||||||
|
Cemex Finance LLC, 9.500%, due 12/14/161 |
750,000 | 775,312 | |||||||||
|
Petroleos Mexicanos, 6.500%, due 06/02/411 |
500,000 | 507,324 | |||||||||
| Total Mexico corporate bonds | 1,282,636 | ||||||||||
| Netherlands: 1.28% | |||||||||||
|
Case New Holland, Inc., 7.750%, due 09/01/13 |
500,000 | 541,250 | |||||||||
|
Ziggo Bond Co. BV, 8.000%, due 05/15/184 |
EUR | 500,000 | 745,015 | ||||||||
| Total Netherland corporate bonds | 1,286,265 | ||||||||||
| Portugal: 0.85% | |||||||||||
|
EDP Finance BV, 4.900%, due 10/01/191 |
1,000,000 | 856,722 | |||||||||
| South Africa: 0.87% | |||||||||||
|
AngloGold Ashanti Holdings PLC, 5.375%, due 04/15/20 |
500,000 | 492,306 | |||||||||
|
Edcon Proprietary Ltd., 4.721%, due 06/15/142,4 |
300,000 | 380,664 | |||||||||
| Total South Africa corporate bonds | 872,970 | ||||||||||
| Spain: 1.63% | |||||||||||
|
Cirsa Funding Luxembourg SA, 8.750%, due 05/15/184 |
200,000 | 294,380 | |||||||||
|
Santander US Debt SA Unipersonal, 3.724%, due 01/20/151 |
$ | 1,400,000 | 1,355,151 | ||||||||
| Total Spain corporate bonds | 1,649,531 | ||||||||||
| Sweden: 0.38% | |||||||||||
|
Nordea Bank AB, 4.875%, due 05/13/211 |
400,000 | 384,148 | |||||||||
38
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| United Kingdom: 5.42% | |||||||||||
|
Barclays Bank PLC, 5.140%, due 10/14/20 |
$ | 1,000,000 | $ | 948,413 | |||||||
|
CEVA Group PLC, 8.500%, due 12/01/144 |
EUR | 500,000 | 679,758 | ||||||||
|
FCE Bank PLC, 7.125%, due 01/15/13 |
500,000 | 750,453 | |||||||||
|
Ineos Group Holdings PLC, 7.875%, due 02/15/164 |
500,000 | 705,135 | |||||||||
|
Lloyds TSB Bank PLC, 6.375%, due 01/21/21 |
$ | 250,000 | 260,264 | ||||||||
| 6.500%, due 03/24/20 | EUR | 1,000,000 | 1,348,380 | ||||||||
|
PPL WEM Holdings PLC, 3.900%, due 05/01/161 |
$ | 500,000 | 513,091 | ||||||||
|
Virgin Media Finance PLC, 9.125%, due 08/15/16 |
250,000 | 263,125 | |||||||||
|
Total United Kingdom corporate bonds |
5,468,619 | ||||||||||
| United States: 32.91% | |||||||||||
|
Ally Financial, Inc., 3.769%, due 12/01/125 |
600,000 | 561,000 | |||||||||
| 6.625%, due 05/15/12 | 250,000 | 257,792 | |||||||||
|
Anadarko Petroleum Corp., 8.700%, due 03/15/19 |
600,000 | 764,586 | |||||||||
|
Apria Healthcare Group, Inc., 11.250%, due 11/01/14 |
750,000 | 776,250 | |||||||||
|
Caesars Entertainment Operating Co., Inc., 11.250%, due 06/01/17 |
750,000 | 827,812 | |||||||||
|
Cequel Communications Holdings I LLC, 8.625%, due 11/15/171 |
100,000 | 104,000 | |||||||||
|
Chesapeake Energy Corp., 6.500%, due 08/15/17 |
750,000 | 793,125 | |||||||||
|
CIT Group, Inc., 7.000%, due 05/01/15 |
500,000 | 500,625 | |||||||||
|
Citigroup, Inc., 4.750%, due 05/31/172 |
EUR | 1,500,000 | 2,001,744 | ||||||||
| 5.000%, due 09/15/14 | $ | 750,000 | 785,969 | ||||||||
|
Delta Air Lines 2007-1 Class A Pass Through Trust, Series 071A, 6.821%, due 08/10/22 |
392,449 | 408,146 | |||||||||
|
Discover Bank, 8.700%, due 11/18/19 |
500,000 | 603,180 | |||||||||
|
DISH DBS Corp., 6.625%, due 10/01/14 |
750,000 | 789,375 | |||||||||
|
Dow Chemical Co., 7.375%, due 03/01/23 |
500,000 | 584,106 | |||||||||
|
Exelon Generation Co. LLC, 6.200%, due 10/01/17 |
900,000 | 1,015,298 | |||||||||
|
Face amount |
Value | ||||||||||
|
Felcor Lodging LP, 6.750%, due 06/01/191 |
$ | 80,000 | $ | 76,800 | |||||||
|
FireKeepers Development Authority, 13.875%, due 05/01/151 |
750,000 | 866,250 | |||||||||
|
Ford Motor Credit Co. LLC, 5.000%, due 05/15/18 |
250,000 | 249,145 | |||||||||
| 8.700%, due 10/01/14 | 1,000,000 | 1,119,490 | |||||||||
| 12.000%, due 05/15/15 | 250,000 | 310,030 | |||||||||
|
Forest Oil Corp., 8.500%, due 02/15/14 |
500,000 | 542,500 | |||||||||
|
Fortune Brands, Inc., 5.375%, due 01/15/16 |
250,000 | 270,893 | |||||||||
| 6.375%, due 06/15/14 | 250,000 | 277,930 | |||||||||
|
Frontier Communications Corp., 8.250%, due 05/01/14 |
500,000 | 549,375 | |||||||||
|
GenOn Americas Generation LLC, 8.500%, due 10/01/21 |
850,000 | 871,250 | |||||||||
|
Georgia-Pacific LLC, 5.400%, due 11/01/201 |
950,000 | 968,175 | |||||||||
|
Goldman Sachs Group, Inc., 4.100%, due 11/03/15 |
CAD | 330,000 | 339,252 | ||||||||
| 5.000%, due 05/03/18 | 500,000 | 515,512 | |||||||||
|
HCA Holdings, Inc., 6.750%, due 07/15/13 |
$ | 500,000 | 521,250 | ||||||||
|
Hertz Corp., 8.875%, due 01/01/14 |
22,000 | 22,550 | |||||||||
|
HSBC USA, Inc., 5.000%, due 09/27/20 |
750,000 | 741,870 | |||||||||
|
JC Penney Corp., Inc., 7.650%, due 08/15/16 |
400,000 | 448,000 | |||||||||
|
JP Morgan Chase Capital XXVII, 7.000%, due 11/01/39 |
1,000,000 | 998,760 | |||||||||
|
Kinder Morgan Finance Co. ULC, 5.700%, due 01/05/16 |
750,000 | 780,938 | |||||||||
|
Merrill Lynch & Co., Inc., 6.050%, due 05/16/16 |
1,350,000 | 1,415,327 | |||||||||
| 6.400%, due 08/28/17 | 1,500,000 | 1,637,370 | |||||||||
|
MGM Resorts International, 13.000%, due 11/15/13 |
750,000 | 890,625 | |||||||||
|
Morgan Stanley, 3.800%, due 04/29/16 |
250,000 | 247,097 | |||||||||
| 5.750%, due 01/25/21 | 250,000 | 252,957 | |||||||||
| 6.250%, due 08/28/17 | 500,000 | 540,716 | |||||||||
| 7.300%, due 05/13/19 | 1,000,000 | 1,134,026 | |||||||||
|
Nationwide Mutual Insurance Co., 9.375%, due 08/15/391 |
250,000 | 310,173 | |||||||||
|
Pacific Life Insurance Co., 9.250%, due 06/15/391 |
250,000 | 325,802 | |||||||||
|
Petrohawk Energy Corp., 7.250%, due 08/15/18 |
1,000,000 | 1,026,250 | |||||||||
|
Plains Exploration & Production Co., 7.000%, due 03/15/17 |
750,000 | 772,500 | |||||||||
39
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Quiksilver, Inc., 6.875%, due 04/15/15 |
$ | 200,000 | $ | 194,500 | |||||||
|
Regions Financial Corp., 5.750%, due 06/15/15 |
250,000 | 246,250 | |||||||||
|
Reynolds American, Inc., 6.750%, due 06/15/17 |
500,000 | 577,288 | |||||||||
|
Ryerson, Inc., 12.000%, due 11/01/15 |
500,000 | 531,250 | |||||||||
|
SLM Corp., 1.670%, due 11/15/112 |
EUR | 100,000 | 143,030 | ||||||||
| 5.400%, due 10/25/11 | 500,000 | 504,986 | |||||||||
|
Springleaf Finance Corp., 5.625%, due 08/17/11 |
$ | 550,000 | 547,836 | ||||||||
|
Univision Communications, Inc., 7.875%, due 11/01/201 |
400,000 | 410,000 | |||||||||
|
Wachovia Capital Trust III, 5.570%, due 08/01/112,3 |
300,000 | 274,500 | |||||||||
|
Total United States corporate bonds |
33,225,461 | ||||||||||
|
Total corporate bonds (cost $56,128,627) |
56,429,577 | ||||||||||
| Asset-backed securities: 3.24% | |||||||||||
| United Kingdom: 0.40% | |||||||||||
|
Permanent Financing PLC, Series 6, Class 5A2, 0.984%, due 06/10/422,4 |
GBP | 250,000 | 400,305 | ||||||||
| United States: 2.84% | |||||||||||
|
Accredited Mortgage Loan Trust, Series 2006-1, Class A3, 0.366%, due 04/25/362 |
$ | 395,813 | 339,062 | ||||||||
|
Citigroup Mortgage Loan Trust, Inc., Series 2006-WFH2, Class A2A, 0.336%, due 08/25/362 |
768,821 | 525,106 | |||||||||
|
First Franklin Mortgage Loan Asset Backed Certificates, Series 2005-FF10, Class A4, 0.506%, due 11/25/352 |
1,259,254 | 1,040,121 | |||||||||
|
Saxon Asset Securities Trust, Series 2006-2, Class A3C, 0.336%, due 09/25/362 |
1,273,461 | 967,910 | |||||||||
|
Total United States asset-backed securities |
2,872,199 | ||||||||||
|
Total asset-backed securities (cost $3,374,303) |
3,272,504 | ||||||||||
|
Face amount |
Value | ||||||||||
| Collateralized debt obligations: 2.03% | |||||||||||
| United Kingdom: 0.66% | |||||||||||
|
Jubilee CDO BV, Series XIII, Class A2, 2.438%, due 04/20/172,6 |
EUR | 500,000 | $ | 662,558 | |||||||
| United States: 1.37% | |||||||||||
|
GSC Partners CDO Fund Ltd., Series 2003-4A, Class B, 2.208%, due 12/16/151,2,6,7 |
$ | 500,000 | 475,000 | ||||||||
|
Race Point CLO, Series 2X, Class B1, 1.761%, due 05/15/152,4,6 |
1,000,000 | 915,087 | |||||||||
|
Total United States collateralized debt obligations |
1,390,087 | ||||||||||
|
Total collateralized debt obligations (cost $2,070,765) |
2,052,645 | ||||||||||
| Commercial mortgage-backed securities: 8.21% | |||||||||||
| United States: 8.21% | |||||||||||
|
Banc of America Commercial Mortgage, Inc., Series 2007-2, Class AM, 5.833%, due 04/10/492 |
500,000 | 473,411 | |||||||||
|
Commercial Mortgage Loan Trust, Series 2008-LS1, Class AM, 6.213%, due 12/10/492 |
500,000 | 482,063 | |||||||||
|
Commercial Mortgage Pass Through Certificates, Series 2005-F10A, Class AJ2, 0.377%, due 04/15/171,2 |
800,000 | 772,607 | |||||||||
|
Series 2006-C8, Class AM, 5.347%, due 12/10/46 |
150,000 | 142,911 | |||||||||
|
CW Capital Cobalt Ltd., Series 2007-C3, Class AJ, 6.010%, due 05/15/462 |
575,000 | 418,485 | |||||||||
|
Series 2007-C3, Class AM, 6.010%, due 05/15/462 |
400,000 | 368,809 | |||||||||
|
GE Capital Commercial Mortgage Corp., Series 2007-C1, Class AM, 5.606%, due 12/10/49 |
1,000,000 | 916,903 | |||||||||
|
Greenwich Capital Commercial Funding Corp., Series 2007-GG9, Class AM, 5.475%, due 03/10/39 |
500,000 | 484,254 | |||||||||
|
Series 2007-GG11, Class AM, 5.867%, due 12/10/492 |
500,000 | 457,182 | |||||||||
|
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.992%, due 08/10/452 |
775,000 | 832,040 | |||||||||
40
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| Commercial mortgage-backed securities—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2007-LD11, Class AM, 6.005%, due 06/15/492 |
$ | 1,000,000 | $ | 889,893 | |||||||
|
Morgan Stanley Capital I, Series 2006-HQ8, Class A3, 5.652%, due 03/12/442 |
379,911 | 383,538 | |||||||||
|
Morgan Stanley Re-REMIC Trust, Series 2009-GG10, Class A4B, 5.992%, due 08/12/451,2 |
700,000 | 698,180 | |||||||||
|
Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class AM, 6.096%, due 02/15/512 |
1,000,000 | 967,344 | |||||||||
|
Total commercial mortgage-backed securities (cost $8,653,128) |
8,287,620 | ||||||||||
| Mortgage & agency debt securities: 3.49% | |||||||||||
| United Kingdom: 0.30% | |||||||||||
|
Holmes Master Issuer PLC, Series 2011-1A, Class A2, 1.628%, due 10/15/541,2,8 |
300,000 | 300,372 | |||||||||
| United States: 3.19% | |||||||||||
|
Federal Home Loan Bank of Chicago, 5.625%, due 06/13/16 |
500,000 | 555,499 | |||||||||
|
Federal National Mortgage Association,9 4.556%, due 10/09/195,10 |
3,250,000 | 2,275,098 | |||||||||
| 5.097%, due 05/15/3010 | 1,000,000 | 392,698 | |||||||||
|
Total United States mortgage & agency debt securities |
3,223,295 | ||||||||||
|
Total mortgage & agency debt securities (cost $3,459,223) |
3,523,667 | ||||||||||
| Municipal bonds: 4.54% | |||||||||||
|
American Municipal Power-Ohio, Inc., Revenue Bonds, Series 2010, Class B, 7.834%, due 02/15/41 |
250,000 | 298,960 | |||||||||
|
Commonwealth of Pennsylvania, GO Unlimited, Series 2010, 5.850%, due 07/15/30 |
500,000 | 510,215 | |||||||||
|
Face amount |
Value | ||||||||||
|
Illinois State Taxable Pension, Series 2003, 5.100%, due 06/01/33 |
$ | 250,000 | $ | 213,068 | |||||||
|
Los Angeles Unified School District, Series 2010, 6.758%, due 07/01/34 |
500,000 | 564,550 | |||||||||
|
New York City Transitional Finance Authority, Series 2010, 5.267%, due 05/01/27 |
250,000 | 258,613 | |||||||||
|
Port Authority of New York & New Jersey, Series 2009, 6.040%, due 12/01/29 |
250,000 | 272,502 | |||||||||
|
State of California, GO bonds, 7.300%, due 10/01/39 |
800,000 | 894,544 | |||||||||
|
State of Illinois, GO bonds, Series 2010, 4.421%, due 01/01/15 |
225,000 | 232,076 | |||||||||
| 5.365%, due 03/01/17 | 800,000 | 826,032 | |||||||||
| 5.665%, due 03/01/18 | 500,000 | 516,935 | |||||||||
|
Total municipal bonds (cost $4,360,101) |
4,587,495 | ||||||||||
| US government obligations: 2.58% | |||||||||||
|
US Treasury Bonds, PO, 4.683%, due 05/15/405,10 |
6,000,000 | 1,540,104 | |||||||||
|
US Treasury Bonds, 4.750%, due 02/15/4110 |
1,000,000 | 1,062,969 | |||||||||
|
Total US government obligations (cost $2,632,742) |
2,603,073 | ||||||||||
| Non-US government obligations: 0.82% | |||||||||||
| Greece: 0.31% | |||||||||||
|
Hellenic Republic Government Bond, 4.300%, due 03/20/12 |
EUR | 250,000 | 310,296 | ||||||||
| Russia: 0.51% | |||||||||||
|
Federation of Russia, 3.625%, due 04/29/154 |
$ | 500,000 | 512,750 | ||||||||
|
Total Non-US government obligations (cost $813,170) |
823,046 | ||||||||||
|
Total bonds (cost $81,492,059) |
81,579,627 | ||||||||||
| Shares | |||||||||||
| Preferred stock: 0.20% | |||||||||||
|
GMAC Capital Trust I* (cost $200,000) |
8,000 | 204,800 | |||||||||
41
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investment companies: 15.48% | |||||||||||
|
UBS Opportunistic Emerging Markets Debt Relationship Fund*11 (cost $15,000,000) |
903,948 | $ | 15,623,479 | ||||||||
| Short-term investment: 4.79% | |||||||||||
| Investment company: 4.79% | |||||||||||
|
UBS Cash Management Prime Relationship Fund11 (cost $4,839,734) |
4,839,734 | 4,839,734 | |||||||||
|
Number of contracts |
|||||||||||
| Options purchased: 2.08% | |||||||||||
| Call Options: 0.21% | |||||||||||
|
10 Year US Treasury Notes, strike @ USD 125.00, expires August 2011* |
310 | 130,781 | |||||||||
|
5 Year US Treasury Notes, strike @ USD 120.50, expires July 2011* |
123 | 13,453 | |||||||||
|
5 Year US Treasury Notes, strike @ USD 121.00, expires July 2011* |
123 | 5,766 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.62, expires September 2011* |
250 | 56,250 | |||||||||
| 206,250 | |||||||||||
| Put Options: 0.88% | |||||||||||
|
1 Year Euro-Dollar Mid Curve, strike @ USD 98.50, expires September 2011* |
160 | 7,000 | |||||||||
|
1 Year Euro-Dollar Mid Curve, strike @ USD 98.25, expires December 2011* |
160 | 31,000 | |||||||||
|
10 Year US Treasury Notes, strike @ USD 122.00, expires August 2011* |
317 | 401,203 | |||||||||
|
30 Year US Treasury Bond, strike @ USD 123.00, expires July 2011* |
123 | 153,750 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.50, expires August 2011* |
298 | 22,350 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 98.50, expires September 2011* |
10 | 125 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.50, expires December 2011* |
525 | 114,844 | |||||||||
|
Number of contracts |
Value | ||||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 98.25, expires December 2011* |
160 | $ | 4,000 | ||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires December 2011* |
525 | 65,625 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.50, expires March 2012* |
105 | 36,750 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 98.00, expires December 2012* |
130 | 53,625 | |||||||||
| 890,272 | |||||||||||
|
Notional Amount |
|||||||||||
| Options purchased on interest rate swaps: 0.99% | |||||||||||
|
Expiring 09/23/11. If exercised the Fund pays semi annually 3.716% and receives quarterly floating 3 month LIBOR terminating 09/27/21. European style. Counterparty: Merrill Lynch International* |
$ | 18,625,000 | 111,481 | ||||||||
|
Expiring 06/14/13. If exercised the Fund pays quarterly floating 3 month LIBOR and receives semi annually 3.410% terminating 06/18/18. European style. Counterparty: Deutsche Bank AG* |
8,240,000 | 219,939 | |||||||||
|
Expiring 06/14/13. If exercised the Fund pays semi annually 3.410% and receives quarterly floating 3 month LIBOR terminating 06/18/18. European style. Counterparty: Deutsche Bank AG* |
8,240,000 | 245,473 | |||||||||
|
Expiring 11/02/15. If exercised the Fund pays semi annually 6.000% and receives quarterly floating 3 month LIBOR terminating 11/04/25. European style. Counterparty: Deutsche Bank AG* |
3,050,000 | 109,701 | |||||||||
42
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
|
Notional amount |
Value | ||||||||||
| Options purchased—(Concluded) | |||||||||||
|
Expiring 06/14/21. If exercised the Fund pays quarterly floating 3 month LIBOR and receives semi annually 5.080% terminating 06/16/26. European style. Counterparty: Deutsche Bank AG* |
$ | 4,050,000 | $ | 156,821 | |||||||
|
Expiring 06/14/21. If exercised the Fund pays semi annually 5.080% and receives quarterly floating 3 month LIBOR terminating 06/16/26. European style. Counterparty: Deutsche Bank AG* |
4,050,000 | 159,817 | |||||||||
| 1,003,232 | |||||||||||
|
Total options purchased (cost $3,113,431) |
2,099,754 | ||||||||||
|
Total investments: 103.36% (cost $104,645,224) |
104,347,394 | ||||||||||
|
Liabilities, in excess of cash and other assets: (3.36%) |
(3,393,801 | ) | |||||||||
| Net assets: 100.00% | $ | 100,953,593 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $104,819,024; and net unrealized depreciation consisted of:
| Gross unrealized appreciation | $ | 1,981,114 | |||||
| Gross unrealized depreciation | (2,452,744 | ) | |||||
| Net unrealized depreciation of investments | $ | (471,630 | ) | ||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 81.
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $11,837,363 or 11.73% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2011 and changes periodically.
3 Perpetual bond security. The maturity date reflects the next call date.
4 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of these securities amounted to $6,110,435 or 6.05% of net assets.
5 Rate shown reflects annualized yield at June 30, 2011 on zero coupon bond.
6 Security is illiquid. At June 30, 2011, the value of these securities amounted to $2,052,645 or 2.03% of net assets.
43
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
7 This security, which represents 0.47% of net assets as of June 30, 2011, is considered restricted. (See restricted security table below for more information.)
| Restricted security |
Acquisition date |
Acquisition cost |
Acquisition cost as a percentage of net assets |
Value 06/30/11 |
Value as a percentage of net assets |
||||||||||||||||||
|
GSC Partners CDO Fund Ltd., Series 2003-4A, Class B, 2.208%, due 12/16/15 |
12/14/10 | $ | 455,500 | 0.45 | % | $ | 475,000 | 0.47 | % | ||||||||||||||
8 Step bond—Coupon rate increases in increments to maturity. Rate disclosed is the rate as of June 30, 2011. Maturity date disclosed is the ultimate maturity date.
9 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
10 All or a portion of these securities have been designated as collateral for open swap agreements.
11 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Funds.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Net realized gain during the year ended 06/30/11 |
Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | — | $ | 65,663,293 | $ | 60,823,559 | $ | — | $ | — | $ | 4,839,734 | $ | 5,603 | |||||||||||||||||
| UBS High Yield Relationship Fund | — | 3,000,000 | 3,002,596 | 2,596 | — | — | — | ||||||||||||||||||||||||
|
UBS Opportunitic Emerging Markets Debt Relationship Fund |
— | 15,000,000 | — | — | 623,479 | 15,623,479 | — | ||||||||||||||||||||||||
| $ | — | $ | 83,663,293 | $ | 63,826,155 | $ | 2,596 | $ | 623,479 | $ | 20,463,213 | $ | 5,603 | ||||||||||||||||||
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| Barclays Bank PLC | EUR | 11,135,000 | USD | 15,609,822 | 09/01/11 | $ | (510,725 | ) | |||||||||||
| Goldman Sachs International | CAD | 1,530,000 | USD | 1,551,819 | 09/01/11 | (32,202 | ) | ||||||||||||
| JPMorgan Chase Bank | AUD | 1,045,000 | USD | 1,083,348 | 09/01/11 | (28,981 | ) | ||||||||||||
| JPMorgan Chase Bank | GBP | 250,000 | USD | 404,890 | 09/01/11 | 3,943 | |||||||||||||
| JPMorgan Chase Bank | JPY | 47,300,000 | USD | 576,976 | 09/01/11 | (10,753 | ) | ||||||||||||
| Royal Bank of Scotland | AUD | 2,155,000 | USD | 2,249,544 | 09/01/11 | (44,303 | ) | ||||||||||||
| Royal Bank of Scotland | EUR | 1,435,000 | USD | 2,026,391 | 09/01/11 | (51,111 | ) | ||||||||||||
| Net unrealized depreciation on forward foreign currency contracts | $ | (674,132 | ) | ||||||||||||||||
44
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures buy contracts: | |||||||||||||||||||
| US Long Bond, 76 contracts (USD) | September 2011 | $ | 9,378,013 | $ | 9,350,375 | $ | (27,638 | ) | |||||||||||
| US Ultra Bond Futures, 74 contracts (USD) | September 2011 | 9,617,995 | 9,342,500 | (275,495 | ) | ||||||||||||||
| 2 Year US Treasury Notes, 413 contracts (USD) | September 2011 | 90,704,582 | 90,588,969 | (115,613 | ) | ||||||||||||||
| 10 Year US Treasury Notes, 49 contracts (USD) | September 2011 | 6,003,803 | 5,994,078 | (9,725 | ) | ||||||||||||||
| US Treasury futures sell contracts: | |||||||||||||||||||
| US Long Bond, 49 contracts (USD) | September 2011 | (6,094,680 | ) | (6,028,531 | ) | 66,149 | |||||||||||||
| 2 Year US Treasury Notes, 43 contracts (USD) | September 2011 | (9,417,590 | ) | (9,431,781 | ) | (14,191 | ) | ||||||||||||
| 5 Year US Treasury Notes, 37 contracts (USD) | September 2011 | (4,446,870 | ) | (4,410,227 | ) | 36,643 | |||||||||||||
| 10 Year US Treasury Notes, 71 contracts (USD) | September 2011 | (8,840,496 | ) | (8,685,297 | ) | 155,199 | |||||||||||||
| Interest rate futures buy contracts: | |||||||||||||||||||
| 90 Day Euro-Dollar Futures, 120 contracts (USD) | March 2015 | 28,784,066 | 28,995,000 | 210,934 | |||||||||||||||
| Interest rate futures sell contracts: | |||||||||||||||||||
| 1 Month Euro-Dollar Futures, 34 contracts (USD) | July 2011 | (8,481,950 | ) | (8,483,637 | ) | (1,687 | ) | ||||||||||||
| 1 Month Euro-Dollar Futures, 34 contracts (USD) | August 2011 | (8,478,113 | ) | (8,481,513 | ) | (3,400 | ) | ||||||||||||
| 90 Day Euro-Dollar Futures, 114 contracts (USD) | September 2011 | (28,389,876 | ) | (28,401,675 | ) | (11,799 | ) | ||||||||||||
| 90 Day Euro-Dollar Futures, 120 contracts (USD) | March 2013 | (29,583,614 | ) | (29,604,000 | ) | (20,386 | ) | ||||||||||||
| Euro-Bobl, 16 contracts (EUR) | September 2011 | (2,700,291 | ) | (2,704,936 | ) | (4,645 | ) | ||||||||||||
| Euro-Bund, 14 contracts (EUR) | September 2011 | (2,540,563 | ) | (2,547,507 | ) | (6,944 | ) | ||||||||||||
| Japanese 10 Year Bond, 6 contracts (JPY) | September 2011 | (10,475,714 | ) | (10,511,645 | ) | (35,931 | ) | ||||||||||||
| 30 Day Fed Fund Futures, 113 contracts (USD) | July 2011 | (47,030,814 | ) | (47,040,013 | ) | (9,199 | ) | ||||||||||||
| Net unrealized depreciation on futures contracts | $ | (67,728 | ) | ||||||||||||||||
Currency swap agreements
| Counterparty |
Pay currency |
Pay contracts |
Receive currency |
Receive contracts |
Termination date |
Pay rate |
Receive rate |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
|||||||||||||||||||||||||||||||||
|
Deutsche |
|||||||||||||||||||||||||||||||||||||||||||
| Bank AG | USD | 2,700,000 | EUR | 1,964,350 | 03/16/40 | 0.2453 | %1 | 1.4770 | %2 | $ | (16,829 | ) | $ | 146,055 | $ | 129,226 | |||||||||||||||||||||||||||
|
Deutsche Bank AG |
USD | 3,907,301 | EUR | 2,701,397 | 01/13/41 | 0.28281 | 1.31102 | 407,300 | 11,604 | 418,904 | |||||||||||||||||||||||||||||||||
|
Deutsche Bank AG |
EUR | 1,964,350 | USD | 2,700,000 | 03/16/20 | 1.47702 | 0.24531 | 1,551 | (147,051 | ) | (145,500 | ) | |||||||||||||||||||||||||||||||
|
Deutsche Bank AG |
EUR | 2,701,397 | USD | 3,907,301 | 01/13/21 | 1.31102 | 0.28281 | (407,300 | ) | 1,148 | (406,152 | ) | |||||||||||||||||||||||||||||||
|
Merrill Lynch International |
USD | 3,430,105 | CAD | 3,322,400 | 03/16/20 | 0.24531 | 1.28863 | 102,647 | 16,459 | 119,106 | |||||||||||||||||||||||||||||||||
|
Merrill Lynch International |
CAD | 3,322,400 | USD | 3,430,105 | 03/16/40 | 1.28863 | 0.24531 | (93,962 | ) | 16,443 | (77,519 | ) | |||||||||||||||||||||||||||||||
| $ | (6,593 | ) | $ | 44,658 | $ | 38,065 | |||||||||||||||||||||||||||||||||||||
1 Rate based on 3 month USD LIBOR.
2 Rate based on 3 month EURIBOR.
3 Rate based on 3 month Canadian Bankers Acceptance Rate.
45
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
Interest rate swap agreements
UBS Fixed Income Opportunities Fund had outstanding interest rate swap agreements with the following terms as of June 30, 2011:
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Barclays Bank PLC | USD | 102,000,000 | 06/20/21 | 0.1858 | %2 | 0.2465 | %3 | $ | — | $ | (16,881 | ) | $ | (16,881 | ) | ||||||||||||||||
| Deutsche Bank AG | AUD | 3,600,000 | 09/21/19 | 4.87504 | 5.9700 | (102,849 | ) | 78,108 | (24,741 | ) | |||||||||||||||||||||
| Deutsche Bank AG | AUD | 2,840,000 | 02/11/21 | —5 | 6.5850 | — | 38,092 | 38,092 | |||||||||||||||||||||||
| Deutsche Bank AG | AUD | 1,660,000 | 09/21/39 | 5.6200 | 4.87504 | 41,245 | 9,928 | 51,173 | |||||||||||||||||||||||
| Deutsche Bank AG | CAD | 11,600,000 | 10/03/13 | —6 | 1.8750 | 41,249 | (4,996 | ) | 36,253 | ||||||||||||||||||||||
| Deutsche Bank AG | CAD | 10,350,000 | 10/03/16 | 2.4850 | —6 | (134,496 | ) | 77,778 | (56,718 | ) | |||||||||||||||||||||
| Deutsche Bank AG | CAD | 2,850,000 | 10/03/21 | —6 | 3.2600 | 76,335 | (67,062 | ) | 9,273 | ||||||||||||||||||||||
| Deutsche Bank AG | EUR | 4,060,000 | 03/15/16 | 1.48907 | 2.9300 | — | 69,620 | 69,620 | |||||||||||||||||||||||
| Deutsche Bank AG | KRW | 2,585,000,000 | 01/26/21 | 4.8100 | —8 | — | (48,628 | ) | (48,628 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 86,500,000 | 06/30/13 | 0.8150 | —9 | — | (116,853 | ) | (116,853 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 3,000,000 | 12/15/15 | 1.5210 | 0.24703 | (41,000 | ) | 31,918 | (9,082 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 1,250,000 | 09/23/20 | 2.6900 | 0.24553 | (23,000 | ) | 34,412 | 11,412 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,450,000 | 02/15/36 | 3.6300 | 0.26083 | (50,000 | ) | 66,855 | 16,855 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 4,550,000 | 05/15/38 | 4.4125 | 0.26083 | 124,000 | (325,585 | ) | (201,585 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 875,000 | 05/15/40 | 3.4700 | 0.26083 | (157,000 | ) | 172,312 | 15,312 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 695,000 | 05/15/40 | 4.5600 | 0.26083 | — | (54,318 | ) | (54,318 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 1,250,000 | 09/17/40 | 3.4730 | 0.24503 | (83,000 | ) | 113,189 | 30,189 | ||||||||||||||||||||||
| JPMorgan Chase Bank | AUD | 2,585,000 | 01/27/21 | —5 | 6.4650 | — | 23,956 | 23,956 | |||||||||||||||||||||||
| JPMorgan Chase Bank | AUD | 5,000,000 | 01/28/21 | 5.13004 | 6.0650 | — | 134,818 | 134,818 | |||||||||||||||||||||||
| JPMorgan Chase Bank | AUD | 2,680,000 | 01/28/41 | 5.7450 | 5.13004 | — | (49,837 | ) | (49,837 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | CAD | 6,125,000 | 02/11/14 | —6 | 2.7750 | — | 81,200 | 81,200 | |||||||||||||||||||||||
| JPMorgan Chase Bank | CAD | 4,950,000 | 03/11/16 | 2.7950 | 1.290010 | — | (102,747 | ) | (102,747 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | CAD | 5,490,000 | 02/11/17 | 3.5000 | —6 | — | (180,853 | ) | (180,853 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | CAD | 1,550,000 | 02/11/22 | —6 | 4.1450 | — | 66,121 | 66,121 | |||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 1,180,000 | 12/17/15 | 1.74807 | 2.6375 | — | 18,146 | 18,146 | |||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 6,100,000 | 04/27/22 | —11 | 3.8650 | — | 150,765 | 150,765 | |||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 2,910,000 | 04/27/42 | 3.9190 | —11 | — | 12,579 | 12,579 | |||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 5,400,000 | 12/08/15 | 1.8050 | 0.25183 | (1,300 | ) | (12,775 | ) | (14,075 | ) | ||||||||||||||||||||
| JPMorgan Chase Bank | USD | 4,500,000 | 02/18/16 | 2.5320 | 0.26053 | — | (178,001 | ) | (178,001 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | USD | 5,490,000 | 12/08/20 | 0.25183 | 3.1250 | (118 | ) | 72 | (46 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,390,000 | 12/08/40 | 3.9975 | 0.25183 | — | 8,476 | 8,476 | |||||||||||||||||||||||
| Merrill Lynch International | AUD | 175,000 | 02/15/21 | —5 | 6.6350 | — | 2,652 | 2,652 | |||||||||||||||||||||||
| Merrill Lynch International | CAD | 1,340,000 | 12/15/15 | 2.6770 | 1.292110 | — | (17,385 | ) | (17,385 | ) | |||||||||||||||||||||
| Merrill Lynch International | CAD | 2,400,000 | 02/04/21 | 3.7250 | 1.300010 | — | (98,796 | ) | (98,796 | ) | |||||||||||||||||||||
| Merrill Lynch International | CAD | 3,000,000 | 02/04/31 | 1.300010 | 4.3100 | 5,192 | 149,681 | 154,873 | |||||||||||||||||||||||
| Merrill Lynch International | CAD | 1,200,000 | 02/04/41 | 4.2075 | 1.300010 | — | (64,032 | ) | (64,032 | ) | |||||||||||||||||||||
| Merrill Lynch International | JPY | 841,000,000 | 04/26/13 | 0.345612 | 0.4513 | — | 12,100 | 12,100 | |||||||||||||||||||||||
| Merrill Lynch International | JPY | 676,000,000 | 04/26/16 | 0.7063 | 0.345612 | — | (70,126 | ) | (70,126 | ) | |||||||||||||||||||||
| Merrill Lynch International | JPY | 176,000,000 | 04/26/21 | 0.345612 | 1.3338 | — | 45,101 | 45,101 | |||||||||||||||||||||||
| Merrill Lynch International | KRW | 3,015,000,000 | 02/11/21 | 4.8400 | —8 | — | (59,443 | ) | (59,443 | ) | |||||||||||||||||||||
46
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Merrill Lynch International | USD | 15,650,000 | 03/21/18 | 2.7625 | % | 0.2465 | %3 | $ | — | $ | (315,837 | ) | $ | (315,837 | ) | ||||||||||||||||
| Merrill Lynch International | USD | 8,200,000 | 06/20/18 | 3.4025 | 0.24703 | — | (420,400 | ) | (420,400 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 3,090,000 | 09/27/21 | —9 | 3.7160 | — | 98,267 | 98,267 | |||||||||||||||||||||||
| Merrill Lynch International | USD | 3,670,000 | 02/17/41 | 4.4225 | 0.26053 | — | (303,282 | ) | (303,282 | ) | |||||||||||||||||||||
| Morgan Stanley & Co. Inc. | CAD | 8,870,000 | 04/08/17 | 3.6000 | 1.790410 | — | (300,813 | ) | (300,813 | ) | |||||||||||||||||||||
| Morgan Stanley & Co. Inc. | CAD | 5,020,000 | 04/08/22 | —6 | 4.2300 | — | 224,686 | 224,686 | |||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | USD | 3,500,000 | 09/23/20 | 2.6900 | 0.24553 | (60,500 | ) | 96,353 | 35,853 | ||||||||||||||||||||||
| $ | (365,242 | ) | $ | (991,465 | ) | $ | (1,356,707 | ) | |||||||||||||||||||||||
1 Payments made or received are based on the notional amount.
2 Rate based on 1 month LIBOR (USD BBA).
3 Rate based on 3 month LIBOR (USD BBA).
4 Rate based on 6 month BBSW.
5 Rate based on 6 month BBSW. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
6 Rate based on 3 month Canadian Bankers Acceptance Rate. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
7 Rate based on 6 month EURIBOR.
8 Rate based on 3 month KORIBOR. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
9 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, 2011.
10 Rate based on 3 month Canadian Bankers Acceptance Rate.
11 Rate based on 6 month EURIBOR. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
12 Rate based on 6 month LIBOR (JPY BBA).
Credit default swaps on credit indices—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments received/ (made) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Barclays Bank PLC | USD | 11,750,000 | 06/20/16 | 5.0000 | % | —3 | $ | 124,028 | $ | (112,159 | ) | $ | 11,869 | ||||||||||||||||||
| Credit Suisse International | USD | 15,250,000 | 06/20/16 | 5.0000 | —3 | 173,681 | (145,568 | ) | 28,113 | ||||||||||||||||||||||
| Deutsche Bank | EUR | 3,250,000 | 12/20/15 | 1.0000 | —4 | 6,046 | 6,468 | 12,514 | |||||||||||||||||||||||
| Deutsche Bank | USD | 9,000,000 | 12/20/15 | 5.0000 | —5 | 1,172,611 | (1,081,670 | ) | 90,941 | ||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,000,000 | 06/20/16 | 5.0000 | —6 | 145,611 | (129,207 | ) | 16,404 | ||||||||||||||||||||||
| Merrill Lynch International | EUR | 1,800,000 | 12/20/15 | 1.0000 | —4 | 6,873 | 3,583 | 10,456 | |||||||||||||||||||||||
| Merrill Lynch International | EUR | 10,000,000 | 06/20/16 | 1.0000 | —7 | 27,897 | 66,381 | 94,278 | |||||||||||||||||||||||
| Merrill Lynch International | USD | 1,500,000 | 12/20/15 | 1.0000 | —8 | (70,295 | ) | 15,493 | (54,802 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 2,500,000 | 12/20/15 | 5.0000 | —5 | 323,750 | (300,464 | ) | 23,286 | ||||||||||||||||||||||
| Merrill Lynch International | USD | 1,500,000 | 06/20/16 | 5.0000 | —6 | 219,500 | (193,811 | ) | 25,689 | ||||||||||||||||||||||
| Merrill Lynch International | USD | 52,000,000 | 06/20/16 | 1.0000 | —9 | 258,937 | (143,687 | ) | 115,250 | ||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | USD | 10,000,000 | 12/20/15 | 1.0000 | —10 | 61,257 | (81,240 | ) | (19,983 | ) | |||||||||||||||||||||
| $ | 2,449,896 | $ | (2,095,881 | ) | $ | 354,015 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or
47
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments made are based on the notional amount.
3 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the CDX.NA.HY.Series 16 Index.
4 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the iTraxx Europe Series 14 Index.
5 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the CDX.EM Series 14 Index.
6 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the CDX.EM Series 15 Index.
7 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the iTraxx Europe Series 15 Index.
8 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the MCDX.NA.Series 15 Index.
9 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the CDX.NA.IG.Series 16 Index.
10 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the CDX.NA.IG.Series 15 Index.
Credit default swaps on corporate issues—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Deutsche Bank AG | EUR | 1,500,000 | 03/20/14 | 5.0000 | % | —3 | $ | 236,056 | $ | (167,588 | ) | $ | 68,468 | ||||||||||||||||||
| Deutsche Bank AG | EUR | 2,500,000 | 06/20/16 | 1.0000 | —4 | (9,883 | ) | 15,027 | 5,144 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,515,000 | 03/20/14 | 1.0000 | —5 | 13,182 | (24,053 | ) | (10,871 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 2,250,000 | 03/20/14 | 1.0000 | —6 | 16,250 | (6,015 | ) | 10,235 | ||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,125,000 | 06/20/16 | 1.0000 | —7 | (398 | ) | 4,861 | 4,463 | ||||||||||||||||||||||
| Merrill Lynch International | EUR | 2,750,000 | 06/20/16 | 1.0000 | —8 | (88,491 | ) | 65,403 | (23,088 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 400,000 | 03/20/16 | 1.0000 | —9 | (12,191 | ) | 15,646 | 3,455 | ||||||||||||||||||||||
| Merrill Lynch International | USD | 3,500,000 | 06/20/16 | 1.0000 | —10 | 110,916 | (104,634 | ) | 6,282 | ||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | EUR | 2,500,000 | 06/20/16 | 1.0000 | —11 | (10,692 | ) | 22,654 | 11,962 | ||||||||||||||||||||||
| $ | 254,749 | $ | (178,699 | ) | $ | 76,050 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments made are based on the notional amount.
3 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the ITV PLC 5.375% bond, due 10/19/15.
4 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the ING Bank NV 5.250% bond, due 06/07/19.
5 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions, Inc. 6.500% bond, due 09/01/25.
6 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Computer Sciences Corp. 6.500% bond, due 03/15/18.
7 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Constellation Energy Group, Inc. 4.550% bond, due 06/15/15.
8 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Credit Agricole SA 5.065% bond, due 08/10/22.
48
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
9 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the JC Penney Corp., Inc. 6.375% bond, due 10/15/36.
10 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the United Parcel Service of America, Inc. 8.375% bond, due 01/04/30.
11 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the BNP Paribas 4.250% bond, due 01/16/14.
Credit default swaps on corporate and sovereign issues—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
| Deutsche Bank AG | EUR | 1,000,000 | 03/20/16 | —4 | 5.0000 | % | $ | (190,725 | ) | $ | 109,140 | $ | (81,585 | ) | 3.1855 | % | |||||||||||||||||||
| Deutsche Bank AG | USD | 1,000,000 | 03/20/16 | —5 | 1.0000 | 17,887 | 4,973 | 22,860 | 0.8829 | ||||||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,500,000 | 03/20/16 | —6 | 1.0000 | 33,597 | (42,111 | ) | (8,514 | ) | 1.6135 | ||||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 900,000 | 03/20/16 | —7 | 1.0000 | 47,675 | (66,086 | ) | (18,411 | ) | 2.1846 | ||||||||||||||||||||||||
| Merrill Lynch International | EUR | 900,000 | 03/20/16 | —8 | 1.0000 | 36,430 | (43,760 | ) | (7,330 | ) | 1.7814 | ||||||||||||||||||||||||
| Merrill Lynch International | USD | 1,125,000 | 06/20/16 | —9 | 1.0000 | 21,061 | (20,555 | ) | 506 | 1.3833 | |||||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | USD | 5,250,000 | 03/20/16 | —10 | 1.0000 | (64,257 | ) | 38,452 | (25,805 | ) | 0.8375 | ||||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | USD | 1,300,000 | 06/20/16 | —11 | 1.0000 | 23,959 | (35,016 | ) | (11,057 | ) | 1.5758 | ||||||||||||||||||||||||
| $ | (74,373 | ) | $ | (54,963 | ) | $ | (129,336 | ) | |||||||||||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments received are based on the notional amount.
3 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
4 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the ITV PLC 5.375% bond, due 10/19/15.
5 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions Inc. 6.500% bond, due 09/01/25.
6 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Computer Sciences Corp. 6.500% bond, due 03/15/18.
7 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Renault SA 2.647% bond, due 08/04/14.
8 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Aegon NV 4.125% bond, due 12/08/14.
9 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Exelon Generation Co. LLC 6.200% bond, due 10/01/17.
10 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Government of Japan 2.000% bond, due 03/21/22.
11 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the MetLife, Inc. 5.000% bond, due 06/15/15.
49
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
Options written
|
Expiration date |
Premiums received |
Value | |||||||||||||
| Call options | |||||||||||||||
| 5 Year US Treasury Notes, 123 contracts, strike @ USD 121.50 | July 2011 | $ | 26,644 | $ | (2,883 | ) | |||||||||
| Put options | |||||||||||||||
| 90 Day Euro-Dollar Time Deposit, 1,050 contracts, strike @ USD 99.38 | December 2011 | 127,575 | (170,625 | ) | |||||||||||
| 90 Day Euro-Dollar Time Deposit, 105 contracts, strike @ USD 99.63 | December 2011 | 23,257 | (31,500 | ) | |||||||||||
| 90 Day Euro-Dollar Time Deposit, 130 contracts, strike @ USD 96.00 | December 2012 | 58,045 | (11,375 | ) | |||||||||||
| Options written on interest rate swaps | |||||||||||||||
|
If option exercised the Fund pays semi annually 7.25% and receives quarterly floating 3 month LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 3,050,000 |
November 2015 | 63,135 | (55,591 | ) | |||||||||||
|
If option exercised the Fund pays semi annually 8.76% and receives quarterly floating 3 month LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 3,050,000 |
November 2015 | 38,735 | (22,642 | ) | |||||||||||
|
If option exercised the Fund pays quarterly floating 3 month LIBOR and receives semi annually 4.70%. Underlying interest rate swap terminating 06/16/21. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 10,200,000 |
June 2016 | 402,116 | (400,143 | ) | |||||||||||
|
If option exercised the Fund pays semi annually 4.70% and receives quarterly floating 3 month LIBOR. Underlying interest rate swap terminating 06/16/21. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 10,200,000 |
June 2016 | 402,115 | (413,098 | ) | |||||||||||
| Receiver options written on credit default swap on credit indices | |||||||||||||||
|
If option exercised 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 CDX.NA.HY Series 16 Index and Fund pays fixed rate of 5.000%.Underlying credit default swap terminating 06/20/16. European style. Counterparty: Credit Suisse, Notional Amount USD 27,000,000 |
June 2016 | 639,900 | (477,099 | ) | |||||||||||
| Total options written | $ | 1,781,522 | $ | (1,584,956 | ) | ||||||||||
Written option activity for the period ended June 30, 2011 for UBS Fixed Income Opportunities Fund was as follows:
|
Number of contracts |
Amount of premiums received |
||||||||||
| Options outstanding at June 30, 2010 | — | $ | — | ||||||||
| Options written | 7,501 | 1,336,801 | |||||||||
| Options terminated in closing purchase transactions | (6,093 | ) | (1,101,280 | ) | |||||||
| Options expired prior to exercise | — | — | |||||||||
| Options outstanding at June 30, 2011 | 1,408 | $ | 235,521 | ||||||||
Swaption and foreign exchange option activity for the period ended June 30, 2011 for UBS Fixed Income Opportunities Fund was as follows:
| Swaptions & Foreign exchange options outstanding at June 30, 2010 | $ | — | |||||
| Swaptions & Foreign exchange options written | 2,009,626 | ||||||
| Swaptions & Foreign exchange options terminated in closing purchase transactions | (32,825 | ) | |||||
| Swaptions & Foreign exchange options expired prior to exercise | (430,800 | ) | |||||
| Swaptions & Foreign exchange options outstanding at June 30, 2011 | $ | 1,546,001 | |||||
50
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Corporate bonds | $ | — | $ | 56,429,577 | $ | — | $ | 56,429,577 | |||||||||||
| Asset-backed securities | — | 3,272,504 | — | 3,272,504 | |||||||||||||||
| Collateralized debt obligations | — | 1,577,645 | 475,000 | 2,052,645 | |||||||||||||||
| Commercial mortgage-backed securities | — | 8,287,620 | — | 8,287,620 | |||||||||||||||
| Mortgage & agency debt securities | — | 3,523,667 | — | 3,523,667 | |||||||||||||||
| Municipal bonds | — | 4,587,495 | — | 4,587,495 | |||||||||||||||
| US government obligations | — | 2,603,073 | — | 2,603,073 | |||||||||||||||
| Non-US government obligations | — | 823,046 | — | 823,046 | |||||||||||||||
| Preferred stock | 204,800 | — | — | 204,800 | |||||||||||||||
| Investment company | — | 15,623,479 | — | 15,623,479 | |||||||||||||||
| Short-term investment | — | 4,839,734 | — | 4,839,734 | |||||||||||||||
| Options purchased | 1,096,522 | 1,003,232 | — | 2,099,754 | |||||||||||||||
| Forward foreign currency contracts | — | (674,132 | ) | — | (674,132 | ) | |||||||||||||
| Futures contracts | (67,728 | ) | — | — | (67,728 | ) | |||||||||||||
| Swap agreements | — | (3,276,350 | ) | — | (3,276,350 | ) | |||||||||||||
| Options written | (216,383 | ) | (1,368,573 | ) | — | (1,584,956 | ) | ||||||||||||
| Total | $ | 1,017,211 | $ | 97,252,017 | $ | 475,000 | $ | 98,744,228 | |||||||||||
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
| Measurements using unobservable inputs (Level 3) | |||||||||||
|
Collateralized debt obligations |
Total | ||||||||||
| Assets | |||||||||||
| Beginning balance | $ | — | $ | — | |||||||
| Purchases | 455,500 | 455,500 | |||||||||
| Issuances | — | — | |||||||||
| Sales | — | — | |||||||||
| Settlements | — | — | |||||||||
| Accrued discounts (premiums) | 4,367 | 4,367 | |||||||||
| Total realized gain (loss) | — | — | |||||||||
| Net change in unrealized appreciation/depreciation | 15,133 | 15,133 | |||||||||
| Transfers into Level 3 | — | — | |||||||||
| Transfers out of Level 3 | — | — | |||||||||
| Ending balance | $ | 475,000 | $ | 475,000 | |||||||
The change in unrealized appreciation/depreciation relating to the Level 3 investments still held at June 30, 2011 was $15,133.
See accompanying notes to financial statements.
51
UBS Global Bond Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Global Bond Fund (the "Fund") returned 11.55% (Class A shares returned 6.46% after the deduction of the maximum sales charge), while Class Y shares returned 11.77%. The Fund's benchmark, the Barclays Capital Global Aggregate Bond Index (the "Index"), returned 10.51% 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 54; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund's outperformance was due to a variety of factors, including its overweight exposure to the corporate bond sector.
Portfolio performance summary1
What worked
• An overweight to the corporate bond sector was the largest contributor to performance. In particular, our overweights to US and European financials were rewarded. In addition, an overweight to US industrials was beneficial. Spreads in these sectors narrowed as corporate profits were generally better than expected, and because there was overall strong demand from investors seeking to generate additional yield in the low interest rate environment. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
• The Fund held investment grade bonds in several sectors that contributed to performance. Holdings in the European financials and US industrials sectors performed well over the period. Investor sentiment for the European financial sector improved as banks raised their capital reserves and deleveraged their balance sheets. In addition, increased regulatory oversight was viewed as a positive by fixed income investors.
• Currency management, overall, generated positive results. We actively managed the Fund's currency exposure throughout the reporting period, which added to Fund performance. In particular, the Fund's exposures to the Australian dollar, the euro and the US dollar positively contributed to results.
• Several derivative instruments were used during the period. Certain bond futures and options were utilized to manage the Fund's duration and yield curve exposure. Credit default swaps were used to implement specific credit-related investment strategies. Additionally, foreign exchange futures were utilized to manage the Fund's currency exposures. Overall, the Fund's use of derivatives was within our expectations, and these strategies were successful in helping us to manage the Fund's overall risk exposure.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
52
UBS Global Bond Fund
What didn't work
• Duration positioning detracted from results. In particular, we kept the Fund's duration in the US shorter than the Index, as we felt US yields were unsustainably low, and that they would move higher as the US economic expansion continued. However, this positioning was not rewarded, as yields in the US declined given signs of decelerating growth and several flights to quality. (Duration is a measure of a portfolio's sensitivity to changes in interest rates.)
• Overall, the Fund's yield curve positioning strategies were not rewarded. We tactically adjusted the Fund's yield curve positioning throughout the period. In aggregate, this was a negative for performance.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
53
UBS Global Bond Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 11.55 | % | 2.49 | % | N/A | 4.76 | % | ||||||||||||
| Class B3 | 10.81 | 1.74 | N/A | 4.606 | |||||||||||||||
| Class C4 | 10.88 | 1.99 | N/A | 3.79 | |||||||||||||||
| Class Y5 | 11.77 | 2.77 | 5.72 | % | 4.87 | ||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 6.46 | % | 1.55 | % | N/A | 4.27 | % | ||||||||||||
| Class B3 | 5.81 | 1.44 | N/A | 4.606 | |||||||||||||||
| Class C4 | 10.13 | 1.99 | N/A | 3.79 | |||||||||||||||
| Barclays Capital Global Aggregate Index7 | 10.51 | % | 7.10 | % | 7.41 | % | 6.35 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—2.05% and 1.15%; Class B—2.85% and 1.90%; Class C—2.52% and 1.65%; Class Y—1.73% and 0.90%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the 12-month period ending October 27, 2011, do not exceed 1.15% for Class A shares, 1.90% for Class B shares, 1.65% for Class C shares and 0.90% for Class Y shares. 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 November 5, 2001. Inception dates of Class B and Class C shares are November 26, 2001 and July 2, 2002, respectively. Inception date of Class Y shares and the Index is July 31, 1993.
2 Maximum sales charge for Class A shares is 4.50%. 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 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The Barclays Capital Global Aggregate Index is an unmanaged broad-based, market capitalization weighted index which is designed to measure the broad global markets for US and non US corporate, government, governmental agency, supranational, mortgage-backed and asset-backed fixed income securities. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
54
UBS Global Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The first graph depicts the performance of UBS Global Bond Fund Class A versus the Barclays Capital Global Aggregate Index from November 5, 2001, which is the inception date of the class, through June 30, 2011. The second graph depicts the performance of UBS Global Bond Fund Class Y versus the Barclays Capital Global Aggregate Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
55
UBS Global Bond Fund
Top ten long-term fixed income holdings (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
Government of Japan, 1.800%, due 06/20/17 |
7.4 | % | |||||
|
Government of Japan, 1.500%, due 03/20/14 |
3.7 | ||||||
|
Government of Japan, 0.600%, due 03/20/16 |
3.6 | ||||||
|
Bundesrepublik Deutschland, 6.250%, due 01/04/24 |
3.2 | ||||||
|
Government of Japan, 1.900%, due 06/20/25 |
2.8 | ||||||
|
Instituto de Credito Oficial, 5.375%, due 07/02/12 |
2.6 | ||||||
|
US Treasury Notes, 1.750%, due 05/31/16 |
2.6 | ||||||
|
Canadian Government Bond, 3.500%, due 06/01/20 |
2.3 | ||||||
|
Kreditanstalt fuer Wiederaufbau, 5.500%, due 12/07/15 |
2.3 | ||||||
|
European Investment Bank, 6.250%, due 04/15/14 |
2.2 | ||||||
| Total | 32.7 | % | |||||
Country exposure by issuer, top five (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
| United States | 32.7 | % | |||||
| Japan | 17.7 | ||||||
| United Kingdom | 10.9 | ||||||
| Italy | 7.2 | ||||||
| Germany | 5.8 | ||||||
| Total | 74.3 | % | |||||
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Bonds | |||||||
| Corporate bonds | |||||||
| Building products | 0.31 | % | |||||
| Chemicals | 0.51 | ||||||
| Commercial banks | 9.64 | ||||||
| Commercial services & supplies | 0.31 | ||||||
| Construction & engineering | 0.47 | ||||||
| Diversified financial services | 6.04 | ||||||
| Diversified telecommunication services | 1.82 | ||||||
| Electric utilities | 0.48 | ||||||
| Gas utilities | 0.47 | ||||||
| Health care equipment & supplies | 0.34 | ||||||
| Insurance | 0.78 | ||||||
| Leisure equipment & products | 0.33 | ||||||
| Media | 1.92 | ||||||
| Metals & mining | 1.59 | ||||||
| Oil, gas & consumable fuels | 1.77 | ||||||
| Semiconductors & semiconductor equipment | 0.14 | ||||||
| Specialty retail | 0.13 | ||||||
| Telecommunications | 0.68 | ||||||
| Thrifts & mortgage finance | 1.30 | ||||||
| Tobacco | 1.75 | ||||||
| Wireless telecommunication services | 1.22 | ||||||
| Total corporate bonds | 32.00 | % | |||||
| Asset-backed securities | 2.34 | ||||||
| Collateralized debt obligations | 1.82 | ||||||
| Mortgage & agency debt securities | 8.81 | ||||||
| US government obligations | 8.32 | ||||||
| Non-US government obligations | 38.63 | ||||||
| Supranational bonds | 3.20 | ||||||
| Total bonds | 95.12 | % | |||||
| Short-term investment | 2.39 | ||||||
| Total investments | 97.51 | % | |||||
| Cash and other assets, less liabilities | 2.49 | ||||||
| Net assets | 100.00 | % | |||||
1 Figures represent the industry breakdown of direct investments of UBS Global Bond Fund. Figures would be different if a breakdown of the derivatives exposure was included.
56
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds: 95.12% | |||||||||||
| Corporate bonds: 32.00% | |||||||||||
| Australia: 1.10% | |||||||||||
|
Rio Tinto Finance USA Ltd., 4.125%, due 05/20/21 |
$ | 100,000 | $ | 99,331 | |||||||
|
Westpac Banking Corp., 4.200%, due 02/27/15 |
70,000 | 74,073 | |||||||||
| Total Australia corporate bonds | 173,404 | ||||||||||
| Canada: 0.59% | |||||||||||
|
Barrick Gold Corp., 2.900%, due 05/30/161 |
50,000 | 49,960 | |||||||||
|
Nova Chemicals Corp., 8.625%, due 11/01/19 |
25,000 | 27,844 | |||||||||
|
Teck Resources Ltd., 3.150%, due 01/15/17 |
15,000 | 15,010 | |||||||||
| Total Canada corporate bonds | 92,814 | ||||||||||
| Cayman Islands: 0.55% | |||||||||||
|
Vale Overseas Ltd., 5.625%, due 09/15/19 |
50,000 | 53,363 | |||||||||
| 6.875%, due 11/21/36 | 30,000 | 32,573 | |||||||||
|
Total Cayman Islands corporate bonds |
85,936 | ||||||||||
| France: 1.73% | |||||||||||
|
AXA SA, 6.667%, due 07/06/162,3 |
GBP | 50,000 | 71,821 | ||||||||
|
CM-CIC Covered Bonds, 4.375%, due 03/17/214 |
EUR | 100,000 | 146,911 | ||||||||
|
France Telecom SA, 8.500%, due 03/01/31 |
$ | 40,000 | 53,836 | ||||||||
| Total France corporate bonds | 272,568 | ||||||||||
| Germany: 2.61% | |||||||||||
|
HeidelbergCement Finance BV, 8.500%, due 10/31/19 |
EUR | 30,000 | 48,616 | ||||||||
|
Kreditanstalt fuer Wiederaufbau, 5.500%, due 12/07/15 |
GBP | 200,000 | 363,220 | ||||||||
| Total Germany corporate bonds | 411,836 | ||||||||||
| Ireland: 0.54% | |||||||||||
|
GE Capital UK Funding, 6.000%, due 04/11/13 |
50,000 | 85,221 | |||||||||
| Italy: 1.52% | |||||||||||
|
Telecom Italia SpA, 2.226%, due 06/07/162 |
EUR | 50,000 | 70,475 | ||||||||
| 7.375%, due 12/15/17 | GBP | 50,000 | 87,792 | ||||||||
|
Wind Acquisition Finance SA, 11.750%, due 07/15/174 |
EUR | 50,000 | 81,571 | ||||||||
| Total Italy corporate bonds | 239,838 | ||||||||||
|
Face amount |
Value | ||||||||||
| Luxembourg: 0.64% | |||||||||||
|
Enel Finance International SA, 5.625%, due 08/14/24 |
GBP | 50,000 | $ | 76,683 | |||||||
|
Intelsat Jackson Holdings SA, 7.250%, due 10/15/201 |
$ | 25,000 | 24,875 | ||||||||
|
Total Luxembourg corporate bonds |
101,558 | ||||||||||
| Mexico: 0.67% | |||||||||||
|
America Movil SAB de CV, 3.625%, due 03/30/15 |
100,000 | 104,796 | |||||||||
| Netherlands: 0.53% | |||||||||||
|
Rabobank Nederland NV, 4.000%, due 09/10/15 |
GBP | 50,000 | 84,281 | ||||||||
| Norway: 1.00% | |||||||||||
|
DnB NOR Boligkreditt, 3.875%, due 06/16/21 |
EUR | 110,000 | 157,815 | ||||||||
| Qatar: 0.70% | |||||||||||
|
Qtel International Finance Ltd., 6.500%, due 06/10/141 |
$ | 100,000 | 110,625 | ||||||||
| Spain: 1.07% | |||||||||||
|
Bankia SAU, 4.125%, due 03/24/36 |
EUR | 100,000 | 93,854 | ||||||||
|
Gas Natural Capital Markets SA, 5.250%, due 07/09/14 |
50,000 | 74,319 | |||||||||
| Total Spain corporate bonds | 168,173 | ||||||||||
| United Kingdom: 5.48% | |||||||||||
|
Aviva PLC, 4.729%, due 11/28/142,3 |
40,000 | 50,755 | |||||||||
|
BAA Funding Ltd., 3.975%, due 02/15/121 |
50,000 | 73,085 | |||||||||
|
Barclays Bank PLC, 4.750%, due 03/15/202,3 |
40,000 | 41,330 | |||||||||
| 4.875%, due 12/15/142,3 | 60,000 | 72,217 | |||||||||
|
Imperial Tobacco Finance PLC, 4.500%, due 07/05/18 |
100,000 | 145,160 | |||||||||
|
Lloyds TSB Bank PLC, 4.500%, due 09/15/144 |
100,000 | 146,526 | |||||||||
|
Nationwide Building Society, 1.730%, due 12/22/162 |
150,000 | 204,852 | |||||||||
|
WPP PLC, 6.625%, due 05/12/16 |
80,000 | 129,480 | |||||||||
|
Total United Kingdom corporate bonds |
863,405 | ||||||||||
57
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United States: 13.27% | |||||||||||
|
Alltel Corp., 7.875%, due 07/01/32 |
$ | 40,000 | $ | 52,528 | |||||||
|
Ally Financial, Inc., 4.500%, due 02/11/14 |
15,000 | 15,000 | |||||||||
|
Altria Group, Inc., 9.250%, due 08/06/19 |
100,000 | 130,395 | |||||||||
|
American Honda Finance Corp., 3.875%, due 09/16/14 |
EUR | 50,000 | 74,527 | ||||||||
|
Anadarko Petroleum Corp., 5.750%, due 06/15/14 |
$ | 100,000 | 110,397 | ||||||||
|
Bank of America Corp., 7.375%, due 05/15/14 |
125,000 | 140,524 | |||||||||
|
Bear Stearns Cos. LLC, 5.700%, due 11/15/14 |
150,000 | 165,671 | |||||||||
|
Boston Scientific Corp., 6.000%, due 01/15/20 |
50,000 | 54,127 | |||||||||
|
Celanese US Holdings LLC, 6.625%, due 10/15/18 |
25,000 | 26,375 | |||||||||
|
Citigroup, Inc., 4.750%, due 05/31/172 |
EUR | 50,000 | 66,725 | ||||||||
| 5.625%, due 08/27/12 | $ | 70,000 | 73,128 | ||||||||
|
Comcast Corp., 6.300%, due 11/15/17 |
150,000 | 173,869 | |||||||||
|
Enterprise Products Operating LLC, 3.700%, due 06/01/15 |
30,000 | 31,451 | |||||||||
| 5.000%, due 03/01/15 | 20,000 | 21,774 | |||||||||
|
Freescale Semiconductor, Inc., 9.250%, due 04/15/181 |
20,000 | 21,550 | |||||||||
|
General Electric Capital Corp., Series A, 6.750%, due 03/15/32 |
110,000 | 122,216 | |||||||||
|
Goldman Sachs Group, Inc., 7.500%, due 02/15/19 |
200,000 | 232,709 | |||||||||
|
Hasbro, Inc., 6.350%, due 03/15/40 |
50,000 | 51,685 | |||||||||
|
Kinder Morgan Energy Partners LP, 5.800%, due 03/15/35 |
75,000 | 72,566 | |||||||||
|
Morgan Stanley, 5.450%, due 01/09/17 |
250,000 | 264,381 | |||||||||
|
Nalco Co., 6.625%, due 01/15/191 |
25,000 | 25,625 | |||||||||
|
Petrohawk Energy Corp., 7.875%, due 06/01/15 |
20,000 | 20,950 | |||||||||
|
Quicksilver Resources, Inc., 11.750%, due 01/01/16 |
20,000 | 22,900 | |||||||||
|
SLM Corp., 6.250%, due 01/25/16 |
50,000 | 51,875 | |||||||||
|
Toys R Us Property Co. II LLC, 8.500%, due 12/01/17 |
20,000 | 20,900 | |||||||||
|
Face amount |
Value | ||||||||||
|
Waste Management, Inc., 7.375%, due 03/11/19 |
$ | 40,000 | $ | 48,589 | |||||||
|
Total United States corporate bonds |
2,092,437 | ||||||||||
|
Total corporate bonds (cost $4,872,614) |
5,044,707 | ||||||||||
| Asset-backed securities: 2.34% | |||||||||||
| United Kingdom: 1.37% | |||||||||||
|
Chester Asset Receivables Dealings, Series 2004-1, Class A, 1.012%, due 04/15/162 |
GBP | 20,000 | 31,266 | ||||||||
|
2003-B PLC, Class A, 4.650%, due 07/15/13 |
30,000 | 50,008 | |||||||||
|
Permanent Financing PLC, Series 6, Class 5A2, 0.984%, due 06/10/422,4,5 |
40,000 | 64,049 | |||||||||
|
Whinstone Capital Management Ltd., Series 1A, Class B2, 3.149%, due 10/25/442 |
EUR | 77,108 | 69,886 | ||||||||
|
Total United Kingdom asset-backed securities |
215,209 | ||||||||||
| United States: 0.97% | |||||||||||
|
Bank of America Corp., Series 2004-A1, 4.500%, due 01/17/14 |
40,000 | 59,305 | |||||||||
|
MBNA Credit Card Master Note Trust, Series 2002-A2, Class A, 5.600%, due 07/17/14 |
50,000 | 73,676 | |||||||||
|
Merrill Lynch Mortgage Investors, Inc., Series 2006-SL1, Class A, 0.366%, due 09/25/362 |
$ | 32,639 | 19,994 | ||||||||
|
Total United States asset-backed securities |
152,975 | ||||||||||
|
Total asset-backed securities (cost $390,567) |
368,184 | ||||||||||
| Collateralized debt obligations: 1.82% | |||||||||||
| Netherlands: 0.55% | |||||||||||
|
Queen Street CLO, Series 2007-1A, Class F, due 08/15/241,6,7,8 |
EUR | 100,000 | 87,009 | ||||||||
58
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Collateralized debt obligations—(Concluded) | |||||||||||
| United States: 1.27% | |||||||||||
|
Hewett's Island CDO Ltd., Series 2007-6A, Class D, 2.502%, due 06/09/191,2,6,7 |
$ | 250,000 | $ | 200,000 | |||||||
|
Total collateralized debt obligations (cost $379,921) |
287,009 | ||||||||||
| Mortgage & agency debt securities: 8.81% | |||||||||||
| United States: 8.81% | |||||||||||
|
Federal Home Loan Mortgage Corp. Gold Pools,9 #G04461, 5.000%, due 07/01/38 |
147,357 | 156,657 | |||||||||
|
Federal National Mortgage Association Pools,9 #AA5244, 4.000%, due 05/01/39 |
68,749 | 68,932 | |||||||||
|
#909356, 5.000%, due 02/01/37 |
163,373 | 174,019 | |||||||||
|
#914467, 5.000%, due 04/01/37 |
125,209 | 133,290 | |||||||||
|
#928197, 5.500%, due 03/01/37 |
129,062 | 139,815 | |||||||||
|
#AC1466, 5.500%, due 08/01/39 |
155,647 | 169,479 | |||||||||
|
#900568, 6.000%, due 09/01/36 |
74,093 | 81,657 | |||||||||
|
#940642, 6.000%, due 08/01/37 |
136,979 | 151,350 | |||||||||
|
#889579, 6.000%, due 05/01/38 |
105,035 | 115,561 | |||||||||
|
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates9 Series K-012, Class A-1, 3.427%, due 10/25/20 |
138,624 | 143,585 | |||||||||
|
Government National Mortgage Association Pools, #781276, 6.500%, due 04/15/31 |
46,924 | 53,538 | |||||||||
|
Total mortgage & agency debt securities (cost $1,292,910) |
1,387,883 | ||||||||||
| US government obligations: 8.32% | |||||||||||
|
US Treasury Bonds, 4.375%, due 05/15/40 |
325,000 | 324,799 | |||||||||
|
US Treasury Notes, 1.250%, due 10/31/15 |
125,000 | 123,945 | |||||||||
|
Face amount |
Value | ||||||||||
| 1.750%, due 05/31/16 | $ | 400,000 | $ | 400,624 | |||||||
| 2.625%, due 08/15/20 | 270,000 | 261,352 | |||||||||
| 3.625%, due 02/15/20 | 190,000 | 200,999 | |||||||||
|
Total US government obligations (cost $1,348,153) |
1,311,719 | ||||||||||
| Non-US government obligations: 38.63% | |||||||||||
| Canada: 2.32% | |||||||||||
|
Canadian Government Bond, 3.500%, due 06/01/20 |
CAD | 340,000 | 365,724 | ||||||||
| Denmark: 0.66% | |||||||||||
|
Government of Denmark, 4.000%, due 11/15/17 |
DKK | 500,000 | 104,342 | ||||||||
| Germany: 3.23% | |||||||||||
|
Bundesrepublik Deutschland, 6.250%, due 01/04/24 |
EUR | 270,000 | 508,924 | ||||||||
| Italy: 5.69% | |||||||||||
|
Buoni Poliennali Del Tesoro, 4.000%, due 09/01/20 |
200,000 | 276,256 | |||||||||
| 5.000%, due 08/01/39 | 235,000 | 312,909 | |||||||||
|
Republic of Italy, 4.750%, due 01/25/16 |
$ | 290,000 | 308,052 | ||||||||
| 897,217 | |||||||||||
| Japan: 17.64% | |||||||||||
|
Government of Japan, 0.600%, due 03/20/16 |
JPY | 45,000,000 | 563,801 | ||||||||
| 1.500%, due 03/20/14 | 45,000,000 | 578,067 | |||||||||
| 1.800%, due 06/20/17 | 88,000,000 | 1,172,629 | |||||||||
| 1.900%, due 06/20/25 | 33,800,000 | 438,896 | |||||||||
| 2.500%, due 09/20/35 | 2,000,000 | 27,266 | |||||||||
| 2,780,659 | |||||||||||
| Netherlands: 0.42% | |||||||||||
|
Government of Netherlands, 4.000%, due 01/15/37 |
EUR | 45,000 | 66,445 | ||||||||
| Spain: 4.58% | |||||||||||
|
Kingdom of Spain, 4.200%, due 07/30/13 |
55,000 | 80,613 | |||||||||
| 4.700%, due 07/30/41 | 190,000 | 227,253 | |||||||||
|
Instituto de Credito Oficial, 5.375%, due 07/02/12 |
$ | 400,000 | 413,156 | ||||||||
| 721,022 | |||||||||||
59
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| Non-US government obligations—(Concluded) | |||||||||||
| United Kingdom: 4.09% | |||||||||||
|
UK Gilts, 2.000%, due 01/22/16 |
GBP | 200,000 | $ | 320,043 | |||||||
| 4.500%, due 12/07/42 | 140,000 | 233,885 | |||||||||
| 5.000%, due 03/07/12 | 55,000 | 90,909 | |||||||||
| 644,837 | |||||||||||
|
Total Non-US government obligations (cost $5,695,830) |
6,089,170 | ||||||||||
| Supranational bonds: 3.20% | |||||||||||
|
European Investment Bank, 6.125%, due 01/23/17 |
AUD | 150,000 | 162,214 | ||||||||
| 6.250%, due 04/15/14 | GBP | 190,000 | 342,104 | ||||||||
|
Total supranational bonds (cost $522,047) |
504,318 | ||||||||||
|
Total bonds (cost $14,502,042) |
14,992,990 | ||||||||||
| Shares | Value | ||||||||||
| Short-term investment: 2.39% | |||||||||||
| Investment company: 2.39% | |||||||||||
|
UBS Cash Management Prime Relationship Fund10 (cost $377,148) |
377,148 | $ | 377,148 | ||||||||
|
Total investments: 97.51% (cost $14,879,190) |
15,370,138 | ||||||||||
|
Cash and other assets, less liabilities: 2.49% |
392,970 | ||||||||||
| Net assets: 100.00% | $ | 15,763,108 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $14,886,717; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 783,430 | |||||
| Gross unrealized depreciation | (300,009 | ) | |||||
| Net unrealized appreciation of investments | $ | 483,421 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 81.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $592,729 or 3.76% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2011 and changes periodically.
3 Perpetual bond security. The maturity date reflects the next call date.
4 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of these securities amounted to $439,057 or 2.79% of net assets.
5 Step bond—Coupon rate increases in increments to maturity. Rate disclosed is the rate as of June 30, 2011. Maturity date disclosed is the ultimate maturity date.
6 Security is illiquid. At June 30, 2011, the value of these securities amounted to $287,009 or 1.82% of net assets.
60
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
7 These securities, which represent 1.82% of net assets as of June 30, 2011, are considered restricted. (See restricted securities table below for more information.)
| Restricted securities |
Acquisition date |
Acquisition cost |
Acquisition cost as a percentage of net assets |
Value 06/30/11 |
Value as a percentage of net assets |
||||||||||||||||||
|
Hewett's Island CDO Ltd., Series 2007-6A, Class D, 2.502%, due 06/09/19 |
05/09/07-09/25/09 | $ | 247,508 | 1.57 | % | $ | 200,000 | 1.27 | % | ||||||||||||||
|
Queen Street CLO, Series 2007-1A, Class F, due 08/15/24 |
05/18/07 | 132,413 | 0.84 | 87,009 | 0.55 | ||||||||||||||||||
| $ | 379,921 | 2.41 | % | $ | 287,009 | 1.82 | % | ||||||||||||||||
8 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.
9 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
10 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | 570,589 | $ | 6,210,436 | $ | 6,403,877 | $ | 377,148 | $ | 1,219 | |||||||||||||
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| Barclays Bank PLC | JPY | 12,898,576 | USD | 160,000 | 09/06/11 | $ | (277 | ) | |||||||||||
| Barclays Bank PLC | SEK | 1,053,286 | GBP | 100,000 | 09/06/11 | (5,518 | ) | ||||||||||||
| JPMorgan Chase Bank | CAD | 120,000 | USD | 122,566 | 09/06/11 | (1,655 | ) | ||||||||||||
| JPMorgan Chase Bank | GBP | 965,000 | USD | 1,569,719 | 09/06/11 | 22,149 | |||||||||||||
| JPMorgan Chase Bank | JPY | 22,800,000 | USD | 283,881 | 09/06/11 | 569 | |||||||||||||
| JPMorgan Chase Bank | SEK | 555,068 | EUR | 60,000 | 09/06/11 | (569 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 131,440 | CHF | 110,000 | 09/06/11 | (554 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 178,550 | EUR | 125,000 | 09/06/11 | 2,391 | |||||||||||||
| JPMorgan Chase Bank | USD | 228,283 | KRW | 249,000,000 | 09/06/11 | 4,007 | |||||||||||||
| JPMorgan Chase Bank | USD | 61,814 | NOK | 340,000 | 09/06/11 | 942 | |||||||||||||
| JPMorgan Chase Bank | USD | 749,334 | SEK | 4,780,000 | 09/06/11 | 3,496 | |||||||||||||
| Morgan Stanley & Co. Inc. | EUR | 100,000 | JPY | 11,460,820 | 09/06/11 | (2,342 | ) | ||||||||||||
| Net unrealized appreciation on forward foreign currency contracts | $ | 22,639 | |||||||||||||||||
61
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures sell contracts: | |||||||||||||||||||
| 10 Year US Treasury Notes, 2 contracts (USD) | September 2011 | $ | (244,950 | ) | $ | (244,656 | ) | $ | 294 | ||||||||||
| Interest rate futures buy contracts: | |||||||||||||||||||
| Euro-Bund, 5 contracts (EUR) | September 2011 | 907,738 | 909,824 | 2,086 | |||||||||||||||
| 10 Year Japanese Government Bond, 3 contracts (JPY) | September 2011 | 524,572 | 525,880 | 1,308 | |||||||||||||||
| Interest rate futures sell contracts: | |||||||||||||||||||
| Long Gilt, 2 contracts (GBP) | September 2011 | (384,598 | ) | (385,669 | ) | (1,071 | ) | ||||||||||||
| Net unrealized appreciation on futures contracts | $ | 2,617 | |||||||||||||||||
Interest rate swap agreements
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments made |
Value |
Unrealized depreciation |
||||||||||||||||||||||||
| Deutsche Bank AG | CHF | 710,000 | 02/03/16 | 1.5575 | % | 0.2400 | %2 | — | $ | (16,307 | ) | $ | (16,307 | ) | |||||||||||||||||
1 Payments made or received are based on the notional amount.
2 Rate based on 6 month LIBOR (CHF BBA).
Credit default swaps on credit indices—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation |
||||||||||||||||||||||||
| Morgan Stanley & Co. Inc. | EUR | 100,000 | 06/20/16 | 1.0000 | % | —3 | $ | (289 | ) | $ | 664 | $ | 375 | ||||||||||||||||||
| Morgan Stanley & Co. Inc. | EUR | 50,000 | 06/20/16 | 5.0000 | —4 | 3,296 | (2,707 | ) | 589 | ||||||||||||||||||||||
| $ | 3,007 | $ | (2,043 | ) | $ | 964 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments made are based on the notional amount.
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 iTraxx Europe Series 15 Index.
4 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 iTraxx Europe Crossover Series 15 Index.
62
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
Credit default swaps on credit indices—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments made |
Value |
Unrealized (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 150,000 | 06/20/16 | —4 | 5.0000 | % | $ | (1,885 | ) | $ | 1,432 | $ | (453 | ) | 4.8062 | % | |||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments received are based on the notional amount.
3 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
4 Payment to 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 CDX.NA.HY Series 16 Index.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Corporate bonds | $ | — | $ | 5,044,707 | $ | — | $ | 5,044,707 | |||||||||||
| Asset-backed securities | — | 368,184 | — | 368,184 | |||||||||||||||
| Collateralized debt obligations | — | — | 287,009 | 287,009 | |||||||||||||||
| Mortgage & agency debt securities | — | 1,387,883 | — | 1,387,883 | |||||||||||||||
| US government obligations | — | 1,311,719 | — | 1,311,719 | |||||||||||||||
| Non-US government obligations | — | 6,089,170 | — | 6,089,170 | |||||||||||||||
| Supranational bonds | — | 504,318 | — | 504,318 | |||||||||||||||
| Short-term investment | — | 377,148 | — | 377,148 | |||||||||||||||
| Forward foreign currency contracts | — | 22,639 | — | 22,639 | |||||||||||||||
| Futures contracts | 2,617 | — | — | 2,617 | |||||||||||||||
| Swap agreements | — | (16,918 | ) | — | (16,918 | ) | |||||||||||||
| Total | $ | 2,617 | $ | 15,088,850 | $ | 287,009 | $ | 15,378,476 | |||||||||||
63
UBS Global Bond Fund
Portfolio of investments
June 30, 2011
Concluded
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
| Measurements using unobservable inputs (Level 3) | |||||||||||
|
Collateralized debt obligations |
Total | ||||||||||
| Assets | |||||||||||
| Beginning balance | $ | 269,435 | $ | 269,435 | |||||||
| Purchases | — | — | |||||||||
| Issuances | — | — | |||||||||
| Sales | (101,540 | ) | (101,540 | ) | |||||||
| Settlements | — | — | |||||||||
| Accrued discounts (premiums) | — | — | |||||||||
| Total realized gain (loss) | (98,460 | ) | (98,460 | ) | |||||||
| Net change in unrealized appreciation/depreciation | 217,574 | 217,574 | |||||||||
| Transfers into Level 3 | — | — | |||||||||
| Transfers out of Level 3 | — | — | |||||||||
| Ending balance | $ | 287,009 | $ | 287,009 | |||||||
The change in unrealized appreciation/depreciation relating to the Level 3 investments still held at June 30, 2011 was $100,324.
See accompanying notes to financial statements.
64
UBS High Yield Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS High Yield Fund (the "Fund") returned 14.30% (Class A shares returned 9.12% after the deduction of the maximum sales charge), while Class Y shares returned 14.47%. The Fund's benchmark, the BofA Merrill Lynch US High Yield Cash Pay Constrained Index (the "Index"), returned 15.21% 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 67; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund generated a strong return during the reporting period, but underperformed the Index. Certain sector allocations and issue selection detracted from performance.
Portfolio performance summary1
What worked
• The Fund's positioning in the insurance subsector contributed to performance during the reporting period. Within the financials sector, an overweight to the insurance subsector aided the Fund's results. There was a broad recovery in the insurance industry and spreads in this space continued to narrow from their elevated levels during the credit crisis. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
• Issue selection contributed positively within the forestry/paper and media industries. A combination of successful refinancing and increased merger and acquisition activity aided the Fund's holdings during the reporting period.
• Overall, the Fund's positioning from a credit-quality perspective enhanced results.
– The Fund's overweight to securities rated CCC and lower was beneficial for performance, as investor risk appetite was generally robust during the review period.2
– Having an underweight to BB-rated securities was rewarded, as these higher rated securities lagged their lower-rated counterparts.3
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
2 Debt rated CCC has a current identifiable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payments of interest and repayment of principal.
3 Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments.
65
UBS High Yield Fund
What didn't work
• An underweight in banking was not rewarded, as the sector rallied sharply during the reporting period. We increased the Fund's exposure to banking during the first half of the reporting period, but remained underweight.
• Issue selection in several sectors detracted from the Fund's relative performance. Issue selection was disappointing in a number of sectors, including technology, banks, gaming and printing/publishing.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
66
UBS High Yield Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 14.30 | % | 6.89 | % | 7.43 | % | 5.92 | % | |||||||||||
| Class B3 | 13.24 | 6.08 | N/A | 7.306 | |||||||||||||||
| Class C4 | 13.72 | 6.39 | N/A | 7.29 | |||||||||||||||
| Class Y5 | 14.47 | 7.18 | 7.70 | 6.38 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 9.12 | % | 5.93 | % | 6.93 | % | 5.53 | % | |||||||||||
| Class B3 | 8.24 | 5.79 | N/A | 7.306 | |||||||||||||||
| Class C4 | 12.97 | 6.39 | N/A | 7.29 | |||||||||||||||
| BofA Merrill Lynch US High Yield Cash Pay Constrained Index7 | 15.21 | % | 9.18 | % | 8.84 | % | 7.00 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.38% and 1.20%; Class B—2.20% and 1.95%; Class C—1.88% and 1.70%; Class Y—1.05% and 0.95%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, do not exceed 1.20% for Class A shares, 1.95% for Class B shares, 1.70% for Class C shares and 0.95% for Class Y shares. 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 December 31, 1998. Inception date of Class B and Class C shares is November 7, 2001. Inception date of Class Y shares and the index is September 30, 1997.
2 Maximum sales charge for Class A shares is 4.5%. 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 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 service and distribution fees. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed non-convertible, coupon-bearing US dollar denominated below investment grade corporate 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. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
67
UBS High Yield Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS High Yield Fund Class A and Class Y versus the BofA Merrill Lynch US High Yield Cash Pay Constrained Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
68
UBS High Yield Fund
Top ten long-term fixed income holdings (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
CIT Group, Inc., 7.000%, due 05/01/17 |
2.2 | % | |||||
|
Ford Motor Credit Co. LLC, 12.000%, due 05/15/15 |
1.2 | ||||||
|
FireKeepers Development Authority, 13.875%, due 05/01/15 |
1.1 | ||||||
|
MGM Resorts International, 10.000%, due 11/01/16 |
1.1 | ||||||
|
Caesars Entertainment Operating Co., Inc., 11.250%, due 06/01/17 |
1.0 | ||||||
|
Clearwire Communications LLC, 12.000%, due 12/01/15 |
0.9 | ||||||
|
Marina District Finance Co., Inc., 9.500%, due 10/15/15 |
0.8 | ||||||
|
Kinove German Bondco GmbH, 9.625%, due 06/15/18 |
0.8 | ||||||
|
Intelsat Jackson Holdings SA, 11.250%, due 06/15/16 |
0.8 | ||||||
|
CIT Group, Inc., 7.000%, due 05/01/16 |
0.8 | ||||||
| Total | 10.7 | % | |||||
69
UBS High Yield Fund
Industry diversification (unaudited)
As a percentage of net assets
As of June 30, 2011
| Bonds | |||||||
| Corporate bonds | |||||||
| Aerospace | 0.68 | % | |||||
| Air transportation | 0.19 | ||||||
| Automotive & auto parts distributors | 3.79 | ||||||
| Banks & thrifts | 3.71 | ||||||
| Broadcasting | 1.39 | ||||||
| Building materials | 1.04 | ||||||
| Cable TV | 2.05 | ||||||
| Capital goods | 0.73 | ||||||
| Chemicals | 3.43 | ||||||
| Commercial banks | 0.58 | ||||||
| Consumer products | 0.37 | ||||||
| Containers | 1.54 | ||||||
| Diversified financial services | 6.22 | ||||||
| Diversified media | 1.03 | ||||||
| Electric utilities | 4.24 | ||||||
| Energy | 10.70 | ||||||
| Entertainment/film | 0.46 | ||||||
| Environmental | 0.15 | ||||||
| Food & drug retail | 0.56 | ||||||
| Food/beverage/tobacco | 1.97 | ||||||
| Gaming | 8.52 | ||||||
| Healthcare | 3.49 | ||||||
| Homebuilders/real estate | 2.85 | ||||||
| Hotel | 0.60 | ||||||
| Insurance | 3.69 | ||||||
| Leisure | 0.94 | ||||||
| Machinery | 0.79 | ||||||
| Metals/mining | 1.12 | ||||||
| Paper | 2.07 | % | |||||
| Paper & forest products | 0.21 | ||||||
| Publishing/printing | 1.00 | ||||||
| Restaurants | 0.36 | ||||||
| Services | 2.56 | ||||||
| Specialty retail | 0.88 | ||||||
| Steels | 2.05 | ||||||
| Super retail index | 3.84 | ||||||
| Technology | 4.74 | ||||||
| Telecommunications | 7.77 | ||||||
| Textile/apparel | 0.13 | ||||||
| Transportation excluding air/rail | 1.16 | ||||||
| Total corporate bonds | 93.60 | % | |||||
| Commercial mortgage-backed securities | 0.46 | ||||||
| Total bonds | 94.06 | % | |||||
| Common stocks | 0.06 | % | |||||
| Preferred stocks | 0.40 | ||||||
| Warrants | 0.001 | ||||||
| Short-term investment | 3.17 | ||||||
| Total investments | 97.69 | % | |||||
| Cash and other assets, less liabilities | 2.31 | ||||||
| Net assets | 100.00 | % | |||||
1 Amount represents less than 0.005%.
70
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds: 94.06% | |||||||||||
| Corporate bonds: 93.60% | |||||||||||
| Australia: 0.13% | |||||||||||
|
Mirabela Nickel Ltd., 8.750%, due 04/15/181 |
$ | 125,000 | $ | 124,375 | |||||||
| Austria: 0.28% | |||||||||||
|
PE Paper Escrow GmbH, 12.000%, due 08/01/141 |
235,000 | 265,550 | |||||||||
| Bermuda: 0.34% | |||||||||||
|
Intelsat Bermuda Ltd., 11.250%, due 02/04/17 |
300,000 | 322,125 | |||||||||
| Brazil: 0.27% | |||||||||||
|
OGX Petroleo e Gas Participacoes SA, 8.500%, due 06/01/181 |
250,000 | 257,125 | |||||||||
| Canada: 1.94% | |||||||||||
|
Bombardier, Inc., 7.500%, due 03/15/181 |
110,000 | 123,200 | |||||||||
| 7.750%, due 03/15/201 | 150,000 | 168,750 | |||||||||
|
CHC Helicopter SA, 9.250%, due 10/15/201 |
250,000 | 225,625 | |||||||||
|
Connacher Oil and Gas Ltd., 8.500%, due 08/01/191 |
285,000 | 270,750 | |||||||||
|
Nova Chemicals Corp., 8.625%, due 11/01/19 |
675,000 | 751,781 | |||||||||
|
Reliance Intermediate Holdings LP, 9.500%, due 12/15/191 |
200,000 | 218,250 | |||||||||
|
Trinidad Drilling Ltd., 7.875%, due 01/15/191 |
95,000 | 98,325 | |||||||||
| Total Canada corporate bonds | 1,856,681 | ||||||||||
| Cayman Islands: 0.86% | |||||||||||
|
Sable International Finance Ltd., 7.750%, due 02/15/171 |
125,000 | 125,625 | |||||||||
|
Seagate HDD Cayman, 7.750%, due 12/15/181 |
665,000 | 698,250 | |||||||||
| Total Cayman Islands corporate bonds | 823,875 | ||||||||||
| France: 0.56% | |||||||||||
|
Cie Generale de Geophysique-Veritas, 7.750%, due 05/15/17 |
135,000 | 139,050 | |||||||||
|
CMA CGM SA, 8.500%, due 04/15/171 |
475,000 | 399,000 | |||||||||
| Total France corporate bonds | 538,050 | ||||||||||
| Germany: 1.36% | |||||||||||
|
HT1 Funding GmbH, 6.352%, due 06/30/172 |
EUR | 375,000 | 443,202 | ||||||||
|
Face amount |
Value | ||||||||||
|
Kinove German Bondco GmbH, 9.625%, due 06/15/181 |
$ | 740,000 | $ | 771,450 | |||||||
|
Unitymedia Hessen, 8.125%, due 12/01/171 |
75,000 | 79,688 | |||||||||
| Total Germany corporate bonds | 1,294,340 | ||||||||||
| Ireland: 0.56% | |||||||||||
|
Ardagh Packaging Finance PLC, 7.375%, due 10/15/171 |
200,000 | 206,000 | |||||||||
|
Governor & Co. of the Bank of Ireland, 4.625%, due 04/08/13 |
EUR | 275,000 | 327,009 | ||||||||
| Total Ireland corporate bonds | 533,009 | ||||||||||
| Italy: 0.32% | |||||||||||
|
Wind Acquisition Finance SA, 11.750%, due 07/15/171 |
$ | 270,000 | 305,775 | ||||||||
| Luxembourg: 2.06% | |||||||||||
|
APERAM, 7.750%, due 04/01/181 |
150,000 | 151,125 | |||||||||
|
ConvaTec Healthcare E SA, 10.500%, due 12/15/181 |
400,000 | 414,000 | |||||||||
|
Expro Finance Luxembourg SCA, 8.500%, due 12/15/161 |
555,000 | 535,575 | |||||||||
|
Intelsat Jackson Holdings SA, 7.250%, due 10/15/201 |
100,000 | 99,500 | |||||||||
| 11.250%, due 06/15/16 | 727,000 | 770,620 | |||||||||
| Total Luxembourg corporate bonds | 1,970,820 | ||||||||||
| Mexico: 0.22% | |||||||||||
|
Cemex Finance LLC, 9.500%, due 12/14/161 |
200,000 | 206,750 | |||||||||
| Netherlands: 0.65% | |||||||||||
|
ING Groep NV, 5.775%, due 12/08/152,3 |
245,000 | 225,400 | |||||||||
|
VimpelCom Holdings BV, 6.255%, due 03/01/171 |
200,000 | 197,506 | |||||||||
| 7.504%, due 03/01/221 | 200,000 | 200,200 | |||||||||
| Total Netherlands corporate bonds | 623,106 | ||||||||||
| Russia: 0.24% | |||||||||||
|
Evraz Group SA, 9.500%, due 04/24/181 |
200,000 | 230,500 | |||||||||
| South Africa: 0.33% | |||||||||||
|
Edcon Proprietary Ltd., 4.721%, due 06/15/143,4 |
EUR | 250,000 | 317,220 | ||||||||
| Spain: 0.26% | |||||||||||
|
Cemex Espana Luxembourg, 9.250%, due 05/12/201 |
$ | 252,000 | 249,480 | ||||||||
71
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| United Kingdom: 2.38% | |||||||||||
|
Global Crossing UK Finance PLC, 10.750%, due 12/15/14 |
$ | 300,000 | $ | 313,125 | |||||||
|
Hanson Ltd., 6.125%, due 08/15/16 |
200,000 | 211,000 | |||||||||
|
HBOS Capital Funding LP, 6.071%, due 06/30/141,2,3 |
300,000 | 259,500 | |||||||||
|
Ineos Finance PLC, 9.000%, due 05/15/151 |
100,000 | 105,000 | |||||||||
|
Ineos Group Holdings PLC, 8.500%, due 02/15/161 |
155,000 | 153,063 | |||||||||
|
Lloyds TSB Bank PLC, 6.900%, due 08/22/112 |
525,000 | 480,375 | |||||||||
|
Vedanta Resources PLC, 8.250%, due 06/07/211 |
200,000 | 201,500 | |||||||||
| 9.500%, due 07/18/181 | 100,000 | 109,000 | |||||||||
|
Virgin Media Finance PLC, 9.125%, due 08/15/16 |
150,000 | 157,875 | |||||||||
| 9.500%, due 08/15/16 | 100,000 | 113,000 | |||||||||
|
Virgin Media Secured Finance PLC, 6.500%, due 01/15/18 |
150,000 | 164,437 | |||||||||
| Total United Kingdom corporate bonds | 2,267,875 | ||||||||||
| United States: 80.84% | |||||||||||
|
Accellent, Inc., 8.375%, due 02/01/17 |
275,000 | 284,281 | |||||||||
|
ACCO Brands Corp., 10.625%, due 03/15/15 |
75,000 | 83,719 | |||||||||
|
Advanced Micro Devices, Inc., 8.125%, due 12/15/17 |
135,000 | 141,075 | |||||||||
|
AES Corp., 8.000%, due 10/15/17 |
60,000 | 63,600 | |||||||||
| 8.000%, due 06/01/20 | 550,000 | 585,750 | |||||||||
|
AK Steel Corp., 7.625%, due 05/15/20 |
200,000 | 205,000 | |||||||||
|
Allison Transmission, Inc., 11.000%, due 11/01/151 |
190,000 | 202,350 | |||||||||
|
Ally Financial, Inc., 7.500%, due 09/15/20 |
150,000 | 156,750 | |||||||||
| 8.000%, due 03/15/20 | 425,000 | 451,563 | |||||||||
| 8.300%, due 02/12/15 | 500,000 | 558,750 | |||||||||
|
Alta Mesa Holdings, 9.625%, due 10/15/181 |
215,000 | 215,000 | |||||||||
|
AMC Entertainment, Inc., 8.750%, due 06/01/19 |
275,000 | 290,125 | |||||||||
|
American General Institutional Capital, Series A, 7.570%, due 12/01/451 |
600,000 | 624,000 | |||||||||
|
American International Group, Inc., 6.250%, due 03/15/37 |
175,000 | 159,250 | |||||||||
| 8.175%, due 05/15/583 | 130,000 | 142,038 | |||||||||
|
Face amount |
Value | ||||||||||
|
AMGH Merger Sub, Inc., 9.250%, due 11/01/181 |
$ | 135,000 | $ | 142,425 | |||||||
|
Aquilex Holdings LLC, 11.125%, due 12/15/16 |
70,000 | 68,075 | |||||||||
|
ARAMARK Corp., 8.500%, due 02/01/15 |
460,000 | 477,825 | |||||||||
|
Ashland, Inc., 9.125%, due 06/01/17 |
165,000 | 185,625 | |||||||||
|
Aspect Software, Inc., 10.625%, due 05/07/17 |
60,000 | 64,500 | |||||||||
|
ATP Oil & Gas Corp., 11.875%, due 05/01/15 |
50,000 | 50,750 | |||||||||
|
Avis Budget Car Rental LLC, 7.750%, due 05/15/16 |
125,000 | 127,188 | |||||||||
| 9.625%, due 03/15/18 | 100,000 | 106,750 | |||||||||
|
Bank of America Corp., 8.000%, due 01/30/182,3 |
75,000 | 78,323 | |||||||||
|
BankAmerica Capital II, 8.000%, due 12/15/26 |
380,000 | 386,650 | |||||||||
|
BE Aerospace, Inc., 6.875%, due 10/01/20 |
175,000 | 183,313 | |||||||||
|
Beazer Homes USA, Inc., 6.875%, due 07/15/15 |
15,000 | 13,312 | |||||||||
| 8.125%, due 06/15/16 | 150,000 | 131,625 | |||||||||
|
Belden, Inc., 9.250%, due 06/15/19 |
100,000 | 111,250 | |||||||||
|
Berry Petroleum Co., 6.750%, due 11/01/20 |
100,000 | 100,500 | |||||||||
|
Berry Plastics Corp., 8.250%, due 11/15/15 |
125,000 | 131,875 | |||||||||
| 9.500%, due 05/15/18 | 140,000 | 138,950 | |||||||||
|
Boise Paper Holdings LLC, 9.000%, due 11/01/17 |
70,000 | 76,125 | |||||||||
|
Bon-Ton Department Stores, Inc., 10.250%, due 03/15/14 |
320,000 | 320,000 | |||||||||
|
Boyd Gaming Corp., 9.125%, due 12/01/181 |
495,000 | 503,662 | |||||||||
|
Brigham Exploration Co., 6.875%, due 06/01/191 |
60,000 | 59,700 | |||||||||
|
Brocade Communications Systems, Inc., 6.875%, due 01/15/20 |
50,000 | 53,875 | |||||||||
|
Brunswick Corp., 11.250%, due 11/01/161 |
80,000 | 96,400 | |||||||||
|
Burlington Coat Factory Warehouse Corp., 10.000%, due 02/15/191 |
500,000 | 495,000 | |||||||||
|
Cablevision Systems Corp., 8.625%, due 09/15/17 |
445,000 | 482,269 | |||||||||
|
Caesars Entertainment Operating Co., Inc., 5.625%, due 06/01/15 |
135,000 | 109,012 | |||||||||
| 10.000%, due 12/15/15 | 225,000 | 228,375 | |||||||||
| 10.000%, due 12/15/18 | 780,000 | 703,950 | |||||||||
| 11.250%, due 06/01/17 | 880,000 | 971,300 | |||||||||
72
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| United States—(Continued) | |||||||||||
|
Calpine Construction Finance Co. LP, 8.000%, due 06/01/161 |
$ | 200,000 | $ | 216,000 | |||||||
|
Calpine Corp., 7.500%, due 02/15/211 |
285,000 | 290,700 | |||||||||
| 7.875%, due 07/31/201 | 645,000 | 674,025 | |||||||||
|
Capella Healthcare, Inc., 9.250%, due 07/01/171 |
55,000 | 58,025 | |||||||||
|
Carriage Services, Inc., 7.875%, due 01/15/15 |
250,000 | 250,000 | |||||||||
|
Case New Holland, Inc., 7.875%, due 12/01/171 |
225,000 | 247,500 | |||||||||
|
Casella Waste Systems, Inc., 11.000%, due 07/15/14 |
125,000 | 139,062 | |||||||||
|
CB Richard Ellis Services, Inc., 11.625%, due 06/15/17 |
100,000 | 115,875 | |||||||||
|
CDW Finance Corp., 12.535%, due 10/12/17 |
375,000 | 404,062 | |||||||||
|
Celanese US Holdings LLC, 6.625%, due 10/15/18 |
95,000 | 100,225 | |||||||||
|
Cengage Learning Acquisitions, Inc., 10.500%, due 01/15/151 |
180,000 | 162,900 | |||||||||
|
Cequel Communications Holdings I LLC, 8.625%, due 11/15/171 |
50,000 | 52,000 | |||||||||
|
Ceridian Corp., 11.250%, due 11/15/15 |
390,000 | 390,000 | |||||||||
|
Chesapeake Energy Corp., 6.625%, due 08/15/20 |
106,000 | 111,565 | |||||||||
| 9.500%, due 02/15/15 | 475,000 | 551,000 | |||||||||
|
Chrysler Group LLC, 8.000%, due 06/15/191 |
480,000 | 471,600 | |||||||||
|
CIT Group, Inc., 7.000%, due 05/01/15 |
480,000 | 480,600 | |||||||||
| 7.000%, due 05/01/16 | 755,000 | 752,169 | |||||||||
| 7.000%, due 05/01/17 | 2,075,000 | 2,069,812 | |||||||||
|
Citigroup Capital XXI, 8.300%, due 12/21/573 |
700,000 | 715,750 | |||||||||
|
Claire's Stores, Inc., 9.625%, due 06/01/155 |
352,378 | 342,688 | |||||||||
| 10.500%, due 06/01/17 | 150,000 | 141,375 | |||||||||
|
Clear Channel Communications, Inc., 5.500%, due 09/15/14 |
130,000 | 113,750 | |||||||||
| 10.750%, due 08/01/16 | 430,000 | 388,075 | |||||||||
|
Clear Channel Worldwide Holdings, Inc., Series B, 9.250%, due 12/15/17 |
105,000 | 114,450 | |||||||||
| 9.250%, due 12/15/17 | 25,000 | 27,188 | |||||||||
|
Clearwater Paper Corp., 7.125%, due 11/01/18 |
125,000 | 128,125 | |||||||||
|
Face amount |
Value | ||||||||||
|
Clearwire Communications LLC, 12.000%, due 12/01/151 |
$ | 815,000 | $ | 871,006 | |||||||
|
CMP Susquehanna Corp., 16.611%, due 05/15/146 |
50,000 | 38,228 | |||||||||
|
Community Health Systems, Inc., 8.875%, due 07/15/15 |
250,000 | 257,500 | |||||||||
|
Comstock Resources, Inc., 8.375%, due 10/15/17 |
100,000 | 105,000 | |||||||||
|
Consol Energy, Inc., 8.000%, due 04/01/17 |
200,000 | 218,000 | |||||||||
|
Constellation Brands, Inc., 8.375%, due 12/15/14 |
350,000 | 398,125 | |||||||||
|
CPM Holdings, Inc., 10.875%, due 09/01/14 |
150,000 | 162,750 | |||||||||
|
Cricket Communications, Inc., 7.750%, due 05/15/16 |
200,000 | 212,000 | |||||||||
| 10.000%, due 07/15/15 | 125,000 | 134,687 | |||||||||
|
Crosstex Energy LP, 8.875%, due 02/15/18 |
280,000 | 298,200 | |||||||||
|
CSC Holdings LLC, 8.625%, due 02/15/19 |
125,000 | 140,937 | |||||||||
|
Delta Air Lines, Inc., 12.250%, due 03/15/151 |
160,000 | 177,200 | |||||||||
|
Denbury Resources, Inc., 8.250%, due 02/15/20 |
125,000 | 136,250 | |||||||||
| 9.750%, due 03/01/16 | 335,000 | 374,362 | |||||||||
|
Developers Diversified Realty Corp., REIT, 9.625%, due 03/15/16 |
310,000 | 374,054 | |||||||||
|
Diamond Resorts Corp., 12.000%, due 08/15/181 |
670,000 | 710,200 | |||||||||
|
DISH DBS Corp., 6.625%, due 10/01/14 |
400,000 | 421,000 | |||||||||
| 7.875%, due 09/01/19 | 200,000 | 215,750 | |||||||||
|
Domtar Corp., 10.750%, due 06/01/17 |
85,000 | 110,606 | |||||||||
|
DuPont Fabros Technology LP, REIT, 8.500%, due 12/15/17 |
400,000 | 437,000 | |||||||||
|
Dynegy Holdings, Inc., 7.500%, due 06/01/15 |
200,000 | 163,000 | |||||||||
| 8.375%, due 05/01/16 | 160,000 | 128,000 | |||||||||
|
E*Trade Financial Corp., 7.875%, due 12/01/15 |
250,000 | 251,250 | |||||||||
| 12.500%, due 11/30/175 | 324,000 | 379,080 | |||||||||
|
Eagle Parent, Inc., 8.625%, due 05/01/191 |
50,000 | 48,187 | |||||||||
|
EH Holding Corp., 6.500%, due 06/15/191 |
55,000 | 55,962 | |||||||||
| 7.625%, due 06/15/211 | 55,000 | 56,100 | |||||||||
|
El Paso Corp., 7.750%, due 01/15/32 |
560,000 | 651,432 | |||||||||
|
Encore Acquisition Co., 9.500%, due 05/01/16 |
140,000 | 155,575 | |||||||||
73
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| United States—(Continued) | |||||||||||
|
Energy Future Holdings Corp., Series P, 5.550%, due 11/15/14 |
$ | 145,000 | $ | 114,550 | |||||||
|
Energy Future Intermediate Holding Co. LLC, 10.000%, due 12/01/20 |
296,000 | 315,672 | |||||||||
|
Entravision Communications Corp., 8.750%, due 08/01/17 |
175,000 | 181,125 | |||||||||
|
Equinix, Inc., 8.125%, due 03/01/18 |
400,000 | 435,500 | |||||||||
|
Ferrellgas Partners-LP, 9.125%, due 10/01/17 |
435,000 | 467,081 | |||||||||
|
FireKeepers Development Authority, 13.875%, due 05/01/151 |
930,000 | 1,074,150 | |||||||||
|
First Data Corp., 9.875%, due 09/24/15 |
380,000 | 390,450 | |||||||||
| 11.250%, due 03/31/16 | 195,000 | 192,075 | |||||||||
|
Ford Motor Co., 7.450%, due 07/16/31 |
615,000 | 697,187 | |||||||||
|
Ford Motor Credit Co. LLC, 8.700%, due 10/01/14 |
250,000 | 279,872 | |||||||||
| 12.000%, due 05/15/15 | 895,000 | 1,109,906 | |||||||||
|
Forest Oil Corp., 8.500%, due 02/15/14 |
140,000 | 151,900 | |||||||||
|
Freescale Semiconductor, Inc., 9.125%, due 12/15/145 |
135,000 | 141,244 | |||||||||
| 9.250%, due 04/15/181 | 115,000 | 123,912 | |||||||||
| 10.125%, due 03/15/181 | 125,000 | 138,750 | |||||||||
| 10.750%, due 08/01/201 | 150,000 | 169,500 | |||||||||
|
Frontier Communications Corp., 8.250%, due 04/15/17 |
60,000 | 65,250 | |||||||||
| 8.500%, due 04/15/20 | 60,000 | 65,400 | |||||||||
| 9.000%, due 08/15/31 | 380,000 | 389,500 | |||||||||
|
FTI Consulting, Inc., 6.750%, due 10/01/20 |
100,000 | 101,000 | |||||||||
|
Gannett Co., Inc., 9.375%, due 11/15/17 |
150,000 | 165,000 | |||||||||
|
GenOn Energy, Inc., 9.500%, due 10/15/18 |
340,000 | 353,600 | |||||||||
| 9.875%, due 10/15/20 | 200,000 | 209,000 | |||||||||
|
Geo Group, Inc., 7.750%, due 10/15/17 |
125,000 | 132,500 | |||||||||
|
Georgia Gulf Corp., 9.000%, due 01/15/171 |
235,000 | 250,275 | |||||||||
|
Georgia-Pacific LLC, 5.400%, due 11/01/201 |
200,000 | 203,826 | |||||||||
| 8.250%, due 05/01/161 | 375,000 | 425,085 | |||||||||
| 8.875%, due 05/15/31 | 215,000 | 271,631 | |||||||||
|
Glen Meadow Pass-Through Trust, 6.505%, due 02/12/671,3 |
300,000 | 264,000 | |||||||||
|
Face amount |
Value | ||||||||||
|
Goodyear Tire & Rubber Co., 10.500%, due 05/15/16 |
$ | 246,000 | $ | 276,750 | |||||||
|
Graham Packaging Co. LP, 8.250%, due 10/01/18 |
45,000 | 50,062 | |||||||||
|
Graphic Packaging International, Inc., 7.875%, due 10/01/18 |
120,000 | 127,200 | |||||||||
| 9.500%, due 06/15/17 | 55,000 | 60,225 | |||||||||
|
Gulfmark Offshore, Inc., 7.750%, due 07/15/14 |
215,000 | 217,150 | |||||||||
|
Harland Clarke Holdings Corp., 9.500%, due 05/15/15 |
450,000 | 411,187 | |||||||||
|
Hartford Financial Services Group, Inc., 8.125%, due 06/15/383 |
460,000 | 495,650 | |||||||||
|
HCA Holdings, Inc., 7.750%, due 05/15/211 |
280,000 | 290,500 | |||||||||
|
Helix Energy Solutions Group, Inc., 9.500%, due 01/15/161 |
470,000 | 484,100 | |||||||||
|
Hertz Corp., 7.375%, due 01/15/211 |
240,000 | 244,200 | |||||||||
|
Hexion US Finance Corp., 8.875%, due 02/01/18 |
145,000 | 150,800 | |||||||||
|
Hilcorp Finance Co., 7.625%, due 04/15/211 |
90,000 | 94,050 | |||||||||
| 8.000%, due 02/15/201 | 85,000 | 91,375 | |||||||||
|
Hilton Worldwide, Inc., 4.761%, due 11/15/131,3 |
250,000 | 246,875 | |||||||||
|
Host Hotels & Resorts LP, REIT, 9.000%, due 05/15/17 |
285,000 | 320,625 | |||||||||
|
Huntington Ingalls Industries, Inc., 6.875%, due 03/15/181 |
95,000 | 97,375 | |||||||||
| 7.125%, due 03/15/211 | 75,000 | 77,625 | |||||||||
|
Icahn Enterprises LP, 8.000%, due 01/15/18 |
125,000 | 126,875 | |||||||||
|
ILFC E-Capital Trust I, 5.740%, due 12/21/651,3 |
420,000 | 342,800 | |||||||||
|
Inergy LP, 6.875%, due 08/01/211 |
175,000 | 175,000 | |||||||||
| 7.000%, due 10/01/18 | 80,000 | 80,800 | |||||||||
|
ING Capital Funding Trust III, 3.846%, due 09/30/112,3 |
215,000 | 203,041 | |||||||||
|
Ingles Markets, Inc., 8.875%, due 05/15/17 |
205,000 | 219,350 | |||||||||
|
Insight Communications Co., Inc., 9.375%, due 07/15/181 |
50,000 | 54,875 | |||||||||
|
Interactive Data Corp., 10.250%, due 08/01/181 |
25,000 | 27,250 | |||||||||
|
International Lease Finance Corp., 7.125%, due 09/01/181 |
425,000 | 454,750 | |||||||||
| 8.625%, due 09/15/15 | 405,000 | 438,919 | |||||||||
| 8.750%, due 03/15/17 | 130,000 | 142,187 | |||||||||
|
Iron Mountain, Inc., 8.000%, due 06/15/20 |
125,000 | 129,375 | |||||||||
| 8.375%, due 08/15/21 | 300,000 | 315,000 | |||||||||
74
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| United States—(Continued) | |||||||||||
|
Jabil Circuit, Inc., 8.250%, due 03/15/18 |
$ | 150,000 | $ | 171,375 | |||||||
|
Jacobs Entertainment, Inc., 9.750%, due 06/15/14 |
180,000 | 182,700 | |||||||||
|
JC Penney Corp., Inc., 7.125%, due 11/15/23 |
325,000 | 338,000 | |||||||||
|
JMC Steel Group, 8.250%, due 03/15/181 |
130,000 | 131,950 | |||||||||
|
K Hovnanian Enterprises, Inc., 10.625%, due 10/15/16 |
180,000 | 179,550 | |||||||||
|
KB Home, 5.875%, due 01/15/15 |
150,000 | 142,500 | |||||||||
| 6.250%, due 06/15/15 | 150,000 | 143,250 | |||||||||
|
KEMET Corp., 10.500%, due 05/01/18 |
100,000 | 110,500 | |||||||||
|
Key Energy Services, Inc., 6.750%, due 03/01/21 |
200,000 | 200,000 | |||||||||
|
Land O'Lakes Capital Trust I, 7.450%, due 03/15/281 |
340,000 | 323,850 | |||||||||
|
Landry's Restaurants, Inc., 11.625%, due 12/01/15 |
325,000 | 347,750 | |||||||||
|
Level 3 Financing, Inc., 9.250%, due 11/01/14 |
241,000 | 247,929 | |||||||||
| 10.000%, due 02/01/18 | 150,000 | 161,062 | |||||||||
|
Libbey Glass, Inc., 10.000%, due 02/15/15 |
68,000 | 73,780 | |||||||||
|
Liberty Mutual Group, Inc., 7.800%, due 03/15/371 |
125,000 | 124,687 | |||||||||
| 10.750%, due 06/15/581,3 | 335,000 | 444,712 | |||||||||
|
Limited Brands, Inc., 7.600%, due 07/15/37 |
100,000 | 98,000 | |||||||||
| 8.500%, due 06/15/19 | 155,000 | 176,700 | |||||||||
|
Lincoln National Corp., 7.000%, due 05/17/663 |
550,000 | 550,990 | |||||||||
|
Linn Energy LLC, 6.500%, due 05/15/191 |
200,000 | 198,000 | |||||||||
| 7.750%, due 02/01/211 | 240,000 | 249,600 | |||||||||
|
Longview Fibre Paper & Packaging, Inc., 8.000%, due 06/01/161 |
50,000 | 50,250 | |||||||||
|
Lyondell Chemical Co., 8.000%, due 11/01/171 |
243,000 | 270,337 | |||||||||
| 11.000%, due 05/01/18 | 175,000 | 196,000 | |||||||||
|
Macy's Retail Holdings, Inc., 6.375%, due 03/15/37 |
225,000 | 233,877 | |||||||||
|
Manitowoc Co., Inc., 8.500%, due 11/01/20 |
325,000 | 346,938 | |||||||||
|
Marina District Finance Co., Inc., 9.500%, due 10/15/151 |
780,000 | 811,200 | |||||||||
|
Marquette Transportation Finance Corp., 10.875%, due 01/15/17 |
100,000 | 100,750 | |||||||||
|
Face amount |
Value | ||||||||||
|
McClatchy Co., 11.500%, due 02/15/17 |
$ | 210,000 | $ | 223,125 | |||||||
|
McJunkin Red Man Corp., 9.500%, due 12/15/161 |
355,000 | 361,212 | |||||||||
|
MedAssets, Inc., 8.000%, due 11/15/181 |
225,000 | 222,750 | |||||||||
|
Mediacom LLC, 9.125%, due 08/15/19 |
75,000 | 79,125 | |||||||||
|
Mercer International, Inc., 9.500%, due 12/01/17 |
205,000 | 219,862 | |||||||||
|
Meritage Homes Corp., 6.250%, due 03/15/15 |
100,000 | 98,500 | |||||||||
|
Meritor, Inc., 10.625%, due 03/15/18 |
150,000 | 168,375 | |||||||||
|
MGM Resorts International, 10.000%, due 11/01/161 |
1,010,000 | 1,070,600 | |||||||||
| 10.375%, due 05/15/14 | 125,000 | 141,875 | |||||||||
| 11.125%, due 11/15/17 | 410,000 | 468,425 | |||||||||
| 13.000%, due 11/15/13 | 260,000 | 308,750 | |||||||||
|
Michael Foods, Inc., 9.750%, due 07/15/181 |
220,000 | 235,400 | |||||||||
|
Michaels Stores, Inc., 11.375%, due 11/01/16 |
215,000 | 228,975 | |||||||||
|
Mirant Americas Generation LLC, 9.125%, due 05/01/31 |
240,000 | 241,200 | |||||||||
|
Momentive Performance Materials, Inc., 12.500%, due 06/15/14 |
80,000 | 87,000 | |||||||||
|
Multiplan, Inc., 9.875%, due 09/01/181 |
485,000 | 515,312 | |||||||||
|
Murray Energy Corp., 10.250%, due 10/15/151 |
210,000 | 220,500 | |||||||||
|
Mylan, Inc., 7.625%, due 07/15/171 |
250,000 | 272,500 | |||||||||
|
Nalco Co., 6.625%, due 01/15/191 |
250,000 | 256,250 | |||||||||
|
Navios Maritime Acquisition Corp., 8.625%, due 11/01/17 |
450,000 | 443,250 | |||||||||
|
Navios Maritime Holdings, Inc., 8.875%, due 11/01/17 |
160,000 | 164,800 | |||||||||
|
Navistar International Corp., 8.250%, due 11/01/21 |
125,000 | 133,750 | |||||||||
|
NB Capital Trust II, 7.830%, due 12/15/26 |
115,000 | 116,725 | |||||||||
|
Neiman Marcus Group, Inc., 10.375%, due 10/15/15 |
115,000 | 120,750 | |||||||||
|
Nexstar Broadcasting, Inc., 8.875%, due 04/15/17 |
125,000 | 131,562 | |||||||||
|
Nextel Communications, Inc., Series D, 7.375%, due 08/01/15 |
250,000 | 250,000 | |||||||||
|
Nielsen Finance LLC, 7.750%, due 10/15/181 |
35,000 | 36,750 | |||||||||
| 11.625%, due 02/01/14 | 91,000 | 106,243 | |||||||||
75
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| United States—(Continued) | |||||||||||
|
Niska Gas Storage US LLC, 8.875%, due 03/15/18 |
$ | 290,000 | $ | 304,500 | |||||||
|
North American Energy Alliance LLC, 10.875%, due 06/01/161 |
200,000 | 220,000 | |||||||||
|
NRG Energy, Inc., 7.625%, due 05/15/191 |
105,000 | 104,475 | |||||||||
| 8.500%, due 06/15/19 | 100,000 | 103,500 | |||||||||
|
Omnicare, Inc., 7.750%, due 06/01/20 |
42,000 | 44,573 | |||||||||
|
Owens-Brockway Glass Container, Inc., 7.375%, due 05/15/16 |
120,000 | 130,500 | |||||||||
|
PAETEC Holding Corp., 9.875%, due 12/01/181 |
300,000 | 310,875 | |||||||||
|
Patriot Coal Corp., 8.250%, due 04/30/18 |
125,000 | 129,375 | |||||||||
|
Peabody Energy Corp., 6.500%, due 09/15/20 |
50,000 | 53,750 | |||||||||
|
Peninsula Gaming LLC, 8.375%, due 08/15/15 |
100,000 | 105,000 | |||||||||
|
Petco Animal Supplies, Inc., 9.250%, due 12/01/181 |
215,000 | 228,438 | |||||||||
|
Petrohawk Energy Corp., 7.875%, due 06/01/15 |
200,000 | 209,500 | |||||||||
| 10.500%, due 08/01/14 | 445,000 | 500,625 | |||||||||
|
Pinafore LLC, Inc., 9.000%, due 10/01/181 |
270,000 | 290,925 | |||||||||
|
Pinnacle Foods Finance LLC, 10.625%, due 04/01/17 |
230,000 | 245,238 | |||||||||
|
Plains Exploration & Production Co., 7.625%, due 06/01/18 |
127,000 | 133,350 | |||||||||
| 10.000%, due 03/01/16 | 305,000 | 343,125 | |||||||||
|
Production Resource Group, Inc., 8.875%, due 05/01/191 |
50,000 | 49,625 | |||||||||
|
Prospect Medical Holdings, Inc., 12.750%, due 07/15/14 |
200,000 | 223,000 | |||||||||
|
QEP Resources, Inc., 6.875%, due 03/01/21 |
105,000 | 110,775 | |||||||||
|
Quicksilver Resources, Inc., 7.125%, due 04/01/16 |
350,000 | 344,750 | |||||||||
| 11.750%, due 01/01/16 | 140,000 | 160,300 | |||||||||
|
Quiksilver, Inc., 6.875%, due 04/15/15 |
125,000 | 121,563 | |||||||||
|
QVC, Inc., 7.125%, due 04/15/171 |
70,000 | 73,500 | |||||||||
| 7.500%, due 10/01/191 | 130,000 | 137,800 | |||||||||
|
Qwest Communications International, Inc., 7.125%, due 04/01/18 |
450,000 | 483,188 | |||||||||
|
Radiation Therapy Services, Inc., 9.875%, due 04/15/17 |
100,000 | 99,875 | |||||||||
|
RBS Global, Inc., 8.500%, due 05/01/18 |
140,000 | 147,875 | |||||||||
|
Face amount |
Value | ||||||||||
|
Realogy Corp., 10.500%, due 04/15/14 |
$ | 435,000 | $ | 430,650 | |||||||
|
Regal Entertainment Group, 9.125%, due 08/15/18 |
100,000 | 103,500 | |||||||||
|
Residential Capital LLC, 9.625%, due 05/15/15 |
125,000 | 124,063 | |||||||||
|
Reynolds Group Issuer, Inc., 8.500%, due 10/15/161 |
200,000 | 208,500 | |||||||||
| 8.750%, due 05/15/181 | 325,000 | 319,313 | |||||||||
|
Rite Aid Corp., 10.375%, due 07/15/16 |
300,000 | 318,750 | |||||||||
|
Roofing Supply Group LLC, 8.625%, due 12/01/171 |
180,000 | 179,775 | |||||||||
|
Royal Caribbean Cruises Ltd., 7.500%, due 10/15/27 |
190,000 | 192,375 | |||||||||
|
Ryerson, Inc., 12.000%, due 11/01/15 |
580,000 | 616,250 | |||||||||
|
Ryland Group, Inc., 6.625%, due 05/01/20 |
275,000 | 259,875 | |||||||||
|
Salem Communications Corp., 9.625%, due 12/15/16 |
49,000 | 51,634 | |||||||||
|
SandRidge Energy, Inc., 8.750%, due 01/15/20 |
210,000 | 223,650 | |||||||||
| 9.875%, due 05/15/161 | 190,000 | 208,525 | |||||||||
|
Sanmina-SCI Corp., 7.000%, due 05/15/191 |
325,000 | 307,125 | |||||||||
|
SBA Telecommunications, Inc., 8.250%, due 08/15/19 |
180,000 | 192,600 | |||||||||
|
Scientific Games Corp., 8.125%, due 09/15/18 |
55,000 | 57,063 | |||||||||
|
Sealy Mattress Co., 10.875%, due 04/15/161 |
87,000 | 96,570 | |||||||||
|
Severstal Columbus LLC, 10.250%, due 02/15/18 |
200,000 | 221,000 | |||||||||
|
Shingle Springs Tribal Gaming Authority, 9.375%, due 06/15/151 |
365,000 | 251,850 | |||||||||
|
Sinclair Television Group, Inc., 9.250%, due 11/01/171 |
225,000 | 246,938 | |||||||||
|
Smithfield Foods, Inc., 10.000%, due 07/15/14 |
102,000 | 118,320 | |||||||||
|
Solo Cup Co., 8.500%, due 02/15/14 |
100,000 | 93,250 | |||||||||
|
Sprint Capital Corp., 6.875%, due 11/15/28 |
175,000 | 165,813 | |||||||||
| 8.750%, due 03/15/32 | 430,000 | 465,475 | |||||||||
|
Sprint Nextel Corp., 6.000%, due 12/01/16 |
175,000 | 174,781 | |||||||||
| 8.375%, due 08/15/17 | 300,000 | 329,625 | |||||||||
|
SPX Corp., 7.625%, due 12/15/14 |
400,000 | 442,000 | |||||||||
|
SquareTwo Financial Corp., 11.625%, due 04/01/17 |
355,000 | 370,975 | |||||||||
76
UBS High Yield Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Standard Pacific Corp., 10.750%, due 09/15/16 |
$ | 115,000 | $ | 130,238 | |||||||
|
SunGard Data Systems, Inc., 10.250%, due 08/15/15 |
540,000 | 558,900 | |||||||||
|
Susser Holdings LLC, 8.500%, due 05/15/16 |
50,000 | 52,625 | |||||||||
|
Swift Energy Co., 8.875%, due 01/15/20 |
125,000 | 133,750 | |||||||||
|
Tenet Healthcare Corp., 6.875%, due 11/15/31 |
150,000 | 125,250 | |||||||||
|
Tesoro Corp., 9.750%, due 06/01/19 |
205,000 | 229,088 | |||||||||
|
Texas Competitive Electric Holdings Co. LLC, Series A, 10.250%, due 11/01/15 |
445,000 | 269,225 | |||||||||
|
Toll Brothers Finance Corp., 8.910%, due 10/15/17 |
225,000 | 263,697 | |||||||||
|
Toys R Us Property Co. II LLC, 8.500%, due 12/01/17 |
505,000 | 527,725 | |||||||||
|
Tube City IMS Corp., 9.750%, due 02/01/15 |
240,000 | 247,800 | |||||||||
|
Tunica-Biloxi Gaming Authority, 9.000%, due 11/15/151 |
600,000 | 613,500 | |||||||||
|
Tyson Foods, Inc., 10.500%, due 03/01/14 |
175,000 | 207,813 | |||||||||
|
U.S. Foodservice, 8.500%, due 06/30/191 |
140,000 | 135,800 | |||||||||
|
Unisys Corp., 12.750%, due 10/15/141 |
154,000 | 179,410 | |||||||||
|
United States Steel Corp., 7.375%, due 04/01/20 |
150,000 | 154,125 | |||||||||
|
Universal Hospital Services, Inc., 8.500%, due 06/01/155 |
130,000 | 133,900 | |||||||||
|
Univision Communications, Inc., 7.875%, due 11/01/201 |
35,000 | 35,875 | |||||||||
| 8.500%, due 05/15/211 | 185,000 | 184,538 | |||||||||
|
USG Corp., 8.375%, due 10/15/181 |
35,000 | 34,475 | |||||||||
| 9.750%, due 08/01/141 | 100,000 | 106,000 | |||||||||
|
Vanguard Health Holding Co. II LLC, 8.000%, due 02/01/18 |
225,000 | 232,313 | |||||||||
|
Verso Paper Holdings LLC, Series B, 11.500%, due 07/01/14 |
234,000 | 249,210 | |||||||||
|
Viskase Cos., Inc., 9.875%, due 01/15/181 |
200,000 | 208,500 | |||||||||
|
West Corp., 7.875%, due 01/15/191 |
250,000 | 242,500 | |||||||||
| 11.000%, due 10/15/16 | 300,000 | 318,000 | |||||||||
|
Face amount |
Value | ||||||||||
|
Weyerhaeuser Co., 7.375%, due 03/15/32 |
$ | 170,000 | $ | 176,907 | |||||||
|
Whiting Petroleum Corp., 6.500%, due 10/01/18 |
150,000 | 156,000 | |||||||||
|
WMG Acquisition Corp., 9.500%, due 06/15/16 |
485,000 | 511,675 | |||||||||
|
XL Group PLC, Series E, 6.500%, due 04/15/172,3 |
315,000 | 289,013 | |||||||||
|
XM Satellite Radio, Inc., 13.000%, due 08/01/131 |
115,000 | 134,838 | |||||||||
|
Yankee Candle Co., Inc., Series B, 9.750%, due 02/15/17 |
245,000 | 257,863 | |||||||||
|
Yankee Finance, Inc., 10.250%, due 02/15/161,5 |
425,000 | 426,063 | |||||||||
|
Yonkers Racing Corp., 11.375%, due 07/15/161 |
500,000 | 542,500 | |||||||||
|
Zions Bancorp., 5.500%, due 11/16/15 |
140,000 | 144,156 | |||||||||
| Total United States corporate bonds | 77,200,049 | ||||||||||
|
Total corporate bonds (cost $83,783,832) |
89,386,705 | ||||||||||
| Commercial mortgage-backed securities: 0.46% | |||||||||||
| United States: 0.46% | |||||||||||
|
CW Capital Cobalt Ltd., Series 2007-C3, Class AJ, 6.010%, due 05/15/463 |
250,000 | 181,950 | |||||||||
|
GE Capital Commercial Mortgage Corp., Series 2007-C1, Class AJ, 5.677%, due 12/10/493 |
225,000 | 164,503 | |||||||||
|
Wachovia Bank Commercial Mortgage Trust, Series 2007-C33, Class AM, 6.096%, due 02/15/513 |
100,000 | 96,734 | |||||||||
|
Total commercial mortgage-backed securities (cost $397,957) |
443,187 | ||||||||||
|
Total bonds (cost $84,181,789) |
89,829,892 | ||||||||||
| Shares | |||||||||||
| Common stocks: 0.06% | |||||||||||
| United States: 0.06% | |||||||||||
| American Restaurant Group, Inc.*,6,7 | 972 | 0 | |||||||||
| Knology, Inc.* | 3,926 | 58,301 | |||||||||
| Pliant Corp.*,6,7,9 | 1 | 0 | |||||||||
|
Total common stocks (cost $0) |
58,301 | ||||||||||
77
UBS High Yield Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Preferred stocks: 0.40% | |||||||||||
| United States: 0.40% | |||||||||||
|
CMP Susquehanna Radio Holdings Corp., Series A*,1,2,3,6,7,9 |
11,661 | $ | 117 | ||||||||
| GMAC Capital Trust I* | 15,000 | 384,000 | |||||||||
| Total United States preferred stocks | 384,117 | ||||||||||
|
Total preferred stocks (cost $375,135) |
384,117 | ||||||||||
|
Number of warrants |
|||||||||||
| Warrants: 0.00%8 | |||||||||||
|
CMP Susquehanna Radio Holdings Corp., strike @ $0.01, expires 03/26/19*,6,7 |
13,325 | 133 | |||||||||
|
Sabreliner Corp., strike @ $0.01, expires 06/08/18*,6,7 |
8,400 | 0 | |||||||||
|
Total warrants (cost $153,135) |
133 | ||||||||||
| Shares | Value | ||||||||||
| Short-term investment: 3.17% | |||||||||||
| Investment company: 3.17% | |||||||||||
|
UBS Cash Management Prime Relationship Fund10 (cost $3,024,386) |
3,024,386 | $ | 3,024,386 | ||||||||
|
Total investments: 97.69% (cost $87,734,445) |
93,296,829 | ||||||||||
|
Cash and other assets, less liabilities: 2.31% |
2,202,680 | ||||||||||
| Net assets: 100.00% | $ | 95,499,509 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $87,825,277; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 6,436,682 | |||||
| Gross unrealized depreciation | (965,130 | ) | |||||
| Net unrealized appreciation of investments | $ | 5,471,552 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 81.
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $31,084,862 or 32.55% of net assets.
2 Perpetual bond security. The maturity date reflects the next call date.
3 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2011 and changes periodically.
4 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of these securities amounted to $317,220 or 0.33% of net assets.
5 PIK—Payment-in kind security. Income may be paid in cash or additional notes, at the discretion of the issuer.
6 Security is illiquid. At June 30, 2011, the value of these securities amounted to $38,478 or 0.04% of net assets.
7 Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2011, the value of these securities amounted to $250 or 0.00% of net assets.
8 Amount represents less than 0.005%.
78
UBS High Yield Fund
Portfolio of investments
June 30, 2011
9 These securities, which represent 0.00% of net assets as of June 30, 2011, is considered restricted. (See restricted securities table below for more information.)
| Restricted securities |
Acquisition date |
Acquisition cost |
Acquisition cost as a percentage of net assets |
06/30/11 Market value |
Market value as a percentage of net assets |
||||||||||||||||||
| CMP Susquehanna Radio Holdings Corp., Series A | 03/30/09 | $ | 135 | 0.00 | %8 | $ | 117 | 0.00 | %8 | ||||||||||||||
| Pliant Corp. | 10/20/00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||
| $ | 135 | 0.00 | %8 | $ | 117 | 0.00 | %8 | ||||||||||||||||
10 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | 1,804,675 | $ | 37,295,209 | $ | 36,075,498 | $ | 3,024,386 | $ | 3,374 | |||||||||||||
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized depreciation |
|||||||||||||||
| JPMorgan Chase Bank | EUR | 825,000 | USD | 1,183,355 | 07/20/11 | $ | (12,524 | ) | |||||||||||
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Corporate bonds | $ | — | $ | 89,386,705 | $ | — | $ | 89,386,705 | |||||||||||
| Commercial mortgage-backed securities | — | 443,187 | — | 443,187 | |||||||||||||||
| Common stocks | 58,301 | — | 0 | 58,301 | |||||||||||||||
| Preferred stocks | 384,000 | — | 117 | 384,117 | |||||||||||||||
| Warrants | — | — | 133 | 133 | |||||||||||||||
| Short-term investment | — | 3,024,386 | — | 3,024,386 | |||||||||||||||
| Forward foreign currency contracts | — | (12,524 | ) | — | (12,524 | ) | |||||||||||||
| Total | $ | 442,301 | $ | 92,841,754 | $ | 250 | $ | 93,284,305 | |||||||||||
79
UBS High Yield Fund
Portfolio of investments
June 30, 2011
Concluded
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
| Measurements using unobservable inputs (Level 3) | |||||||||||||||||||||||
|
Corporate bonds |
Common stocks |
Preferred stock |
Warrants | Total | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Beginning balance | $ | 17,750 | $ | 0 | $ | 117 | $ | 133 | $ | 18,000 | |||||||||||||
| Purchases | — | — | — | — | — | ||||||||||||||||||
| Issuances | — | — | — | — | — | ||||||||||||||||||
| Sales | — | — | — | — | — | ||||||||||||||||||
| Settlements | — | — | — | — | — | ||||||||||||||||||
| Accrued discounts (premiums) | (79,481 | ) | — | — | — | (79,481 | ) | ||||||||||||||||
| Total realized gain (loss) | — | — | — | — | — | ||||||||||||||||||
| Net change in unrealized appreciation/depreciation | 99,959 | — | — | — | 99,959 | ||||||||||||||||||
| Transfers into Level 3 | — | — | — | — | — | ||||||||||||||||||
| Transfers out of Level 31 | (38,228 | ) | — | — | — | (38,228 | ) | ||||||||||||||||
| Ending balance | $ | — | $ | 0 | $ | 117 | $ | 133 | $ | 250 | |||||||||||||
The change in unrealized appreciation/depreciation relating to the Level 3 investments still held at June 30, 2011 was $0.
1 Transfers out of Level 3 represent the value at the beginning of the period. At June 30, 2011, a security was transferred from Level 3 to Level 2 as the valuation is based on observable inputs from an established pricing source.
See accompanying notes to financial statements.
80
The UBS Funds
Portfolio acronyms
BBA British Bankers Association
BBSW Bank Bill Swap Rate
CDO Collateralized debt obligations
CLO Collateralized loan obligations
EURIBOR Euro Interbank Offered Rate
GE General Electric
GMAC General Motors Acceptance Corp.
GO General Obligation
GS Goldman Sachs
KORIBOR Korea Interbank Offered Rate
LIBOR London Interbank Offered Rate
PO Principal only security—This security entitles the holder to receive principal payments from an underlying pool of assets or on the security itself. In the case of asset-backed securities, high prepayments return principal faster than expected and cause the yield to increase. Low prepayments return principal slower than expected and cause the yield to decrease.
REIT Real estate investment trust
Re-REMIC Combined Real Estate Mortgage Investment Conduits
TBA (To be announced) Security is purchased on a forward commitment basis with an approximate principal amount (generally +/-1.0%) and no definite maturity date. The actual principal amount and maturity date will be determined upon settlement, when the specific mortgage pools are assigned.
Currency abbreviations
AUD Australian Dollar
CAD Canadian Dollar
CHF Swiss Franc
DKK Danish Krone
EUR Euro
GBP Great Britain Pound
JPY Japanese Yen
KRW Korean Won
NOK Norwegian Krone
SEK Swedish Krona
USD United States Dollar
See accompanying notes to financial statements.
81
The UBS Funds
June 30, 2011 (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, 2011 to June 30, 2011.
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line 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.
This projection assumes that annualized expense ratios were in effect during the period January 1, 2011 to June 30, 2011.
82
The UBS Funds
June 30, 2011 (unaudited)
|
Beginning account value January 1, 2011 |
Ending account value June 30, 2011 |
Expenses paid during period* 01/01/11 – 06/30/11 |
Expense ratio during period |
||||||||||||||||||||
| UBS Absolute Return Bond Fund | |||||||||||||||||||||||
| Class A | Actual | $ | 1,000.00 | $ | 1,002.60 | $ | 4.97 | 1.00 | % | ||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.84 | 5.01 | 1.00 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,000.80 | 6.70 | 1.35 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,018.10 | 6.76 | 1.35 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,001.90 | 4.02 | 0.81 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,020.78 | 4.06 | 0.81 | |||||||||||||||||||
| UBS Core Plus Bond Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 1,024.50 | 3.21 | 0.64 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,021.62 | 3.21 | 0.64 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,020.70 | 6.96 | 1.39 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,017.90 | 6.95 | 1.39 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,023.20 | 5.72 | 1.14 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.14 | 5.71 | 1.14 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,027.00 | 1.96 | 0.39 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,022.86 | 1.96 | 0.39 | |||||||||||||||||||
| UBS Fixed Income Opportunities Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 985.70 | 4.68 | 0.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 983.50 | 7.13 | 1.45 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,017.60 | 7.25 | 1.45 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 986.60 | 3.45 | 0.70 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,021.32 | 3.51 | 0.70 | |||||||||||||||||||
* 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).
83
The UBS Funds
June 30, 2011 (unaudited)
|
Beginning account value January 1, 2011 |
Ending account value June 30, 2011 |
Expenses paid during period* 01/01/11 – 06/30/11 |
Expense ratio during period |
||||||||||||||||||||
| UBS Global Bond Fund | |||||||||||||||||||||||
| Class A | Actual | $ | 1,000.00 | $ | 1,049.30 | $ | 5.84 | 1.15 | % | ||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.09 | 5.76 | 1.15 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,046.60 | 9.64 | 1.90 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.37 | 9.49 | 1.90 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,046.90 | 8.37 | 1.65 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,016.61 | 8.25 | 1.65 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,051.10 | 4.58 | 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 | 1,042.00 | 6.08 | 1.20 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,036.40 | 9.85 | 1.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,039.40 | 8.60 | 1.70 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,016.36 | 8.50 | 1.70 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,041.30 | 4.81 | 0.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
* 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).
84
This page has been left blank intentionally.
85
The UBS Funds
Financial statements
Statement of assets and liabilities
June 30, 2011
|
UBS Absolute Return Bond Fund |
UBS Core Plus Bond Fund |
UBS Fixed Income Opportunities Fund |
|||||||||||||
| Assets: | |||||||||||||||
| Investments, at cost: | |||||||||||||||
| Unaffiliated issuers | $ | 131,102,922 | $ | 35,332,820 | $ | 84,805,490 | |||||||||
| Affiliated issuers | 9,946,180 | 4,345,594 | 19,839,734 | ||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | — | 223,105 | — | ||||||||||||
| Foreign currency, at cost | 2,214,470 | — | 206,555 | ||||||||||||
| $ | 143,263,572 | $ | 39,901,519 | $ | 104,851,779 | ||||||||||
| Investments, at value: | |||||||||||||||
| Unaffiliated issuers | $ | 136,488,795 | $ | 35,993,359 | $ | 83,884,181 | |||||||||
| Affiliated issuers | 9,946,180 | 4,475,354 | 20,463,213 | ||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | — | 223,105 | — | ||||||||||||
| Foreign currency, at value | 2,235,796 | — | 207,433 | ||||||||||||
| Cash | — | 856,534 | 247,400 | ||||||||||||
| Receivables: | |||||||||||||||
| Interest | 1,736,439 | 233,372 | 1,034,979 | ||||||||||||
| Investment securities sold | 1,289,219 | 4,487,056 | 1,934,941 | ||||||||||||
| Fund shares sold | 17,742 | 30,071 | 237,719 | ||||||||||||
| Foreign tax reclaims | 3,321 | — | — | ||||||||||||
| Deferred offering costs | — | — | 22,635 | ||||||||||||
| Due from broker | 366,983 | 3,192 | — | ||||||||||||
| Cash collateral for futures contracts | 753,690 | 22,865 | 647,213 | ||||||||||||
| Cash collateral for swap agreements | — | — | 210,000 | ||||||||||||
| Outstanding swap agreements, at value2 | 389,307 | 5,785 | 2,376,975 | ||||||||||||
| Unrealized appreciation on forward foreign currency contracts | 505,054 | — | 3,943 | ||||||||||||
| Other assets | 24,218 | 21,891 | 7,641 | ||||||||||||
| Total assets | 153,756,744 | 46,352,584 | 111,278,273 | ||||||||||||
| Liabilities: | |||||||||||||||
| Payables: | |||||||||||||||
| Cash collateral from securities loaned | — | 223,105 | — | ||||||||||||
| Investment securities purchased | 4,257,115 | 6,587,687 | 1,837,354 | ||||||||||||
| Investment advisory and administration fee | 153,566 | 9,589 | 57,172 | ||||||||||||
| Fund shares redeemed | 22,192 | 16,514 | 185,042 | ||||||||||||
| Custody and fund accounting fees | 19,924 | 12,747 | 18,358 | ||||||||||||
| Distribution and service fees | 3,783 | 5,377 | 39,254 | ||||||||||||
| Trustees' fees | 5,907 | 4,224 | 5,230 | ||||||||||||
| Offering costs | — | — | 54,000 | ||||||||||||
| Due to custodian | 365 | — | — | ||||||||||||
| Accrued expenses | 91,161 | 71,181 | 91,126 | ||||||||||||
| Due to broker | — | — | 120,788 | ||||||||||||
| Options written, at value3 | — | — | 1,584,956 | ||||||||||||
| Outstanding swap agreements, at value2 | 1,077,672 | 148,729 | 5,653,325 | ||||||||||||
| Unrealized depreciation on forward foreign currency contracts | 996,113 | — | 678,075 | ||||||||||||
| Total liabilities | 6,627,798 | 7,079,153 | 10,324,680 | ||||||||||||
| Net assets | $ | 147,128,946 | $ | 39,273,431 | $ | 100,953,593 | |||||||||
1 The market value of securities loaned by UBS Core Plus Bond Fund, as of June 30, 2011 was $565,293.
2 Net upfront payments received by UBS Absolute Return Bond Fund, UBS Core Plus Bond Fund, UBS Fixed Income Opportunities Fund and UBS Global Bond Fund were $472,435, $4,894, $2,258,437 and $1,122, respectively.
3 Premiums received by UBS Fixed Income Opportunities Fund were $1,781,522.
86
The UBS Funds
Financial statements
|
UBS Global Bond Fund |
UBS High Yield Fund |
||||||||||
| Assets: | |||||||||||
| Investments, at cost: | |||||||||||
| Unaffiliated issuers | $ | 14,502,042 | $ | 84,710,059 | |||||||
| Affiliated issuers | 377,148 | 3,024,386 | |||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | — | — | |||||||||
| Foreign currency, at cost | 218,164 | 34,408 | |||||||||
| $ | 15,097,354 | $ | 87,768,853 | ||||||||
| Investments, at value: | |||||||||||
| Unaffiliated issuers | $ | 14,992,990 | $ | 90,272,443 | |||||||
| Affiliated issuers | 377,148 | 3,024,386 | |||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | — | — | |||||||||
| Foreign currency, at value | 219,794 | 34,894 | |||||||||
| Cash | — | 812,158 | |||||||||
| Receivables: | |||||||||||
| Interest | 211,135 | 1,657,597 | |||||||||
| Investment securities sold | 629,479 | 773,506 | |||||||||
| Fund shares sold | 3,468 | 169,186 | |||||||||
| Foreign tax reclaims | — | — | |||||||||
| Deferred offering costs | — | — | |||||||||
| Due from broker | — | — | |||||||||
| Cash collateral for futures contracts | 26,015 | — | |||||||||
| Cash collateral for swap agreements | — | — | |||||||||
| Outstanding swap agreements, at value2 | 2,096 | — | |||||||||
| Unrealized appreciation on forward foreign currency contracts | 33,554 | — | |||||||||
| Other assets | 23,920 | 20,421 | |||||||||
| Total assets | 16,519,599 | 96,764,591 | |||||||||
| Liabilities: | |||||||||||
| Payables: | |||||||||||
| Cash collateral from securities loaned | — | — | |||||||||
| Investment securities purchased | 160,155 | 953,375 | |||||||||
| Investment advisory and administration fee | 5,323 | 86,049 | |||||||||
| Fund shares redeemed | 463,921 | 66,232 | |||||||||
| Custody and fund accounting fees | 12,734 | 10,516 | |||||||||
| Distribution and service fees | 6,259 | 29,676 | |||||||||
| Trustees' fees | 3,838 | 5,087 | |||||||||
| Offering costs | — | — | |||||||||
| Due to custodian | — | — | |||||||||
| Accrued expenses | 73,091 | 101,623 | |||||||||
| Due to broker | 1,241 | — | |||||||||
| Options written, at value3 | — | — | |||||||||
| Outstanding swap agreements, at value2 | 19,014 | — | |||||||||
| Unrealized depreciation on forward foreign currency contracts | 10,915 | 12,524 | |||||||||
| Total liabilities | 756,491 | 1,265,082 | |||||||||
| Net assets | $ | 15,763,108 | $ | 95,499,509 | |||||||
See accompanying notes to financial statements.
87
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
June 30, 2011
|
UBS Absolute Return Bond Fund1 |
UBS Core Plus Bond Fund |
UBS Fixed Income Opportunities Fund1 |
|||||||||||||
| Net assets consist of: | |||||||||||||||
| Beneficial interest | $ | 276,296,450 | $ | 74,422,322 | $ | 103,314,706 | |||||||||
| Accumulated undistributed (distributions in excess of) net investment income | (3,605,208 | ) | 379,766 | 4,803 | |||||||||||
| Accumulated net realized loss | (130,042,371 | ) | (36,163,764 | ) | (509,199 | ) | |||||||||
| Net unrealized appreciation (depreciation) | 4,480,075 | 635,107 | (1,856,717 | ) | |||||||||||
| Net assets | $ | 147,128,946 | $ | 39,273,431 | $ | 100,953,593 | |||||||||
| Class A: | |||||||||||||||
| Net assets | $ | 7,790,615 | $ | 5,995,815 | $ | 67,313,930 | |||||||||
| Shares outstanding | 1,245,263 | 688,967 | 6,781,609 | ||||||||||||
| Net asset value and redemption proceeds per share | $ | 6.26 | $ | 8.70 | $ | 9.93 | |||||||||
| Offering price per share (NAV per share plus maximum sales charge)2 | $ | 6.42 | $ | 9.11 | $ | 10.40 | |||||||||
| Class B: | |||||||||||||||
| Net assets | N/A | $ | 55,198 | N/A | |||||||||||
| Shares outstanding | N/A | 6,335 | N/A | ||||||||||||
| Net asset value and offering price per share | N/A | $ | 8.71 | N/A | |||||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | N/A | $ | 8.27 | N/A | |||||||||||
| Class C: | |||||||||||||||
| Net assets | $ | 2,037,596 | $ | 2,174,997 | $ | 8,116,200 | |||||||||
| Shares outstanding | 325,611 | 250,709 | 818,552 | ||||||||||||
| Net asset value and offering price per share | $ | 6.26 | $ | 8.68 | $ | 9.92 | |||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 6.23 | $ | 8.61 | $ | 9.85 | |||||||||
| Class Y: | |||||||||||||||
| Net assets | $ | 137,300,735 | $ | 31,047,421 | $ | 25,523,463 | |||||||||
| Shares outstanding | 21,957,476 | 3,571,670 | 2,568,560 | ||||||||||||
| Net asset value per share, offering price per share, and redemption proceeds per share2 | $ | 6.25 | $ | 8.69 | $ | 9.94 | |||||||||
1 UBS Absolute Return Bond Fund and UBS Fixed Income Opportunities Fund do not offer Class B shares.
2 For Class A, the maximum sales charge is 4.50% for UBS Global Bond Fund, UBS Core Plus Bond Fund, UBS Fixed Income Opportunities Fund and UBS High Yield Fund, and 2.50% for UBS Absolute Return Bond Fund, Classes B, C and Y have no front-end sales charges. For Class A shares of each Fund except UBS Absolute Return Bond Fund, 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 $1,000,000 or more that were not subject to a front-end sales charge made within one year of the purchase date. For Class A shares of UBS Absolute Return Bond Fund, the maximum contingent deferred sales charge of 0.50% 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 $250,000 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%. For Class C, the maximum contingent deferred sales charge is 0.75% for UBS Global Bond Fund, UBS Core Plus Bond Fund, UBS Fixed Income Opportunities Fund and UBS High Yield Fund, and 0.50% for UBS Absolute Return Bond Fund. Class Y has no contingent deferred sales charge.
88
The UBS Funds
Financial statements
|
UBS Global Bond Fund |
UBS High Yield Fund |
||||||||||
| Net assets consist of: | |||||||||||
| Beneficial interest | $ | 31,200,120 | $ | 175,937,862 | |||||||
| Accumulated undistributed (distributions in excess of) net investment income | 456,862 | 556,833 | |||||||||
| Accumulated net realized loss | (16,398,513 | ) | (86,545,576 | ) | |||||||
| Net unrealized appreciation (depreciation) | 504,639 | 5,550,390 | |||||||||
| Net assets | $ | 15,763,108 | $ | 95,499,509 | |||||||
| Class A: | |||||||||||
| Net assets | $ | 6,768,241 | $ | 40,987,009 | |||||||
| Shares outstanding | 913,945 | 6,589,889 | |||||||||
| Net asset value and redemption proceeds per share | $ | 7.41 | $ | 6.22 | |||||||
| Offering price per share (NAV per share plus maximum sales charge)2 | $ | 7.76 | $ | 6.51 | |||||||
| Class B: | |||||||||||
| Net assets | $ | 45,149 | $ | 597,991 | |||||||
| Shares outstanding | 6,073 | 96,074 | |||||||||
| Net asset value and offering price per share | $ | 7.43 | $ | 6.22 | |||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 7.06 | $ | 5.91 | |||||||
| Class C: | |||||||||||
| Net assets | $ | 2,699,928 | $ | 9,164,527 | |||||||
| Shares outstanding | 365,869 | 1,472,119 | |||||||||
| Net asset value and offering price per share | $ | 7.38 | $ | 6.23 | |||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 7.32 | $ | 6.18 | |||||||
| Class Y: | |||||||||||
| Net assets | $ | 6,249,790 | $ | 44,749,982 | |||||||
| Shares outstanding | 728,909 | 7,132,960 | |||||||||
| Net asset value per share, offering price per share, and redemption proceeds per share2 | $ | 8.57 | $ | 6.27 | |||||||
See accompanying notes to financial statements.
89
The UBS Funds
Financial statements
Statement of operations
For the year ended June 30, 2011
|
UBS Absolute Return Bond Fund |
UBS Core Plus Bond Fund |
UBS Fixed Income Opportunities Fund2 |
|||||||||||||
| Investment income: | |||||||||||||||
| Interest and other | $ | 5,431,402 | $ | 1,502,583 | $ | 1,845,853 | |||||||||
| Affiliated interest | 16,199 | 11,710 | 5,603 | ||||||||||||
| Securities lending1 | — | 955 | — | ||||||||||||
| Foreign tax withheld | (25,142 | ) | — | — | |||||||||||
| Total income | 5,422,459 | 1,515,248 | 1,851,456 | ||||||||||||
| Expenses: | |||||||||||||||
| Advisory and administration | $ | 932,280 | $ | 255,920 | $ | 296,388 | |||||||||
| Service and distribution: | |||||||||||||||
| Class A | 14,280 | 21,860 | 56,706 | ||||||||||||
| Class B | — | 472 | — | ||||||||||||
| Class C | 13,007 | 17,709 | 22,961 | ||||||||||||
| Transfer agency and related service fees: | |||||||||||||||
| Class A | 17,664 | 9,088 | 7,026 | ||||||||||||
| Class B | — | 85 | — | ||||||||||||
| Class C | 2,912 | 1,797 | 1,454 | ||||||||||||
| Class Y | 152 | 7,032 | 55 | ||||||||||||
| Custodian and fund accounting | 77,855 | 50,697 | 36,121 | ||||||||||||
| Federal and state registration | 36,178 | 49,459 | 878 | ||||||||||||
| Professional services | 101,180 | 87,501 | 81,062 | ||||||||||||
| Shareholder reports | 15,687 | 12,298 | 11,780 | ||||||||||||
| Trustees | 26,164 | 19,276 | 14,792 | ||||||||||||
| Amortization of offering costs | — | — | 31,365 | ||||||||||||
| Other | 21,746 | 13,409 | 9,675 | ||||||||||||
| Total expenses | 1,259,105 | 546,603 | 570,263 | ||||||||||||
| Fee waivers and/or expense reimbursements by Advisor | (16,003 | ) | (332,908 | ) | (204,510 | ) | |||||||||
| Net expenses | 1,243,102 | 213,695 | 365,753 | ||||||||||||
| Net investment income | 4,179,357 | 1,301,553 | 1,485,703 | ||||||||||||
| Net realized gain (loss) on: | |||||||||||||||
| Investments in unaffiliated issuers | (350,906 | ) | 902,478 | (1,718,299 | ) | ||||||||||
| Investments in affiliated issuers | — | 127,521 | 2,596 | ||||||||||||
| Futures contracts | (4,422,906 | ) | (31,740 | ) | 488,387 | ||||||||||
| Options written | — | 14,744 | 1,243,020 | ||||||||||||
| Swap agreements | (165,197 | ) | (20,420 | ) | (1,185,279 | ) | |||||||||
| Forward foreign currency contracts | (7,052,099 | ) | 4,896 | (519,344 | ) | ||||||||||
| Foreign currency transactions | 1,423,444 | 9,835 | 89,326 | ||||||||||||
| Net realized gain (loss) | (10,567,664 | ) | 1,007,314 | (1,599,593 | ) | ||||||||||
| Change in net unrealized appreciation/depreciation on: | |||||||||||||||
| Investments | 9,195,793 | (29,365 | ) | (297,830 | ) | ||||||||||
| Futures contracts | 1,114,799 | (53,898 | ) | (67,728 | ) | ||||||||||
| Options written | — | — | 196,566 | ||||||||||||
| Swap agreements | 176,568 | 58,056 | (1,017,913 | ) | |||||||||||
| Forward foreign currency contracts | (368,751 | ) | (14,370 | ) | (674,132 | ) | |||||||||
| Translation of other assets and liabilities denominated in foreign currency | 111,937 | — | 4,320 | ||||||||||||
| Change in net unrealized appreciation/depreciation | 10,230,346 | (39,577 | ) | (1,856,717 | ) | ||||||||||
| Net realized and unrealized gain (loss) | (337,318 | ) | 967,737 | (3,456,310 | ) | ||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 3,842,039 | $ | 2,269,290 | $ | (1,970,607 | ) | ||||||||
1 Includes affiliated income from UBS Private Money Market Fund LLC of $172 for UBS Core Plus Bond Fund.
2 For the period November 29, 2010 (commencement of operations) through June 30, 2011.
90
The UBS Funds
Financial statements
|
UBS Global Bond Fund |
UBS High Yield Fund |
||||||||||
| Investment income: | |||||||||||
| Interest and other | $ | 622,168 | $ | 7,976,482 | |||||||
| Affiliated interest | 1,219 | 3,374 | |||||||||
| Securities lending1 | — | — | |||||||||
| Foreign tax withheld | — | (1,560 | ) | ||||||||
| Total income | 623,387 | 7,978,296 | |||||||||
| Expenses: | |||||||||||
| Advisory and administration | $ | 122,814 | $ | 603,189 | |||||||
| Service and distribution: | |||||||||||
| Class A | 17,451 | 94,901 | |||||||||
| Class B | 1,069 | 7,423 | |||||||||
| Class C | 18,152 | 69,603 | |||||||||
| Transfer agency and related service fees: | |||||||||||
| Class A | 7,434 | 42,330 | |||||||||
| Class B | 132 | 1,270 | |||||||||
| Class C | 1,635 | 9,942 | |||||||||
| Class Y | 4,484 | 10,313 | |||||||||
| Custodian and fund accounting | 50,940 | 41,146 | |||||||||
| Federal and state registration | 44,787 | 44,388 | |||||||||
| Professional services | 88,581 | 91,181 | |||||||||
| Shareholder reports | 16,476 | 80,090 | |||||||||
| Trustees | 17,453 | 22,262 | |||||||||
| Amortization of offering costs | — | — | |||||||||
| Other | 9,595 | 17,099 | |||||||||
| Total expenses | 401,003 | 1,135,137 | |||||||||
| Fee waivers and/or expense reimbursements by Advisor | (211,853 | ) | (114,150 | ) | |||||||
| Net expenses | 189,150 | 1,020,987 | |||||||||
| Net investment income | 434,237 | 6,957,309 | |||||||||
| Net realized gain (loss) on: | |||||||||||
| Investments in unaffiliated issuers | 149,261 | 3,691,078 | |||||||||
| Investments in affiliated issuers | — | — | |||||||||
| Futures contracts | (49,210 | ) | — | ||||||||
| Options written | — | — | |||||||||
| Swap agreements | 23,842 | — | |||||||||
| Forward foreign currency contracts | (32,391 | ) | (38,451 | ) | |||||||
| Foreign currency transactions | 383,014 | (93 | ) | ||||||||
| Net realized gain (loss) | 474,516 | 3,652,534 | |||||||||
| Change in net unrealized appreciation/depreciation on: | |||||||||||
| Investments | 911,234 | 998,183 | |||||||||
| Futures contracts | 3,636 | — | |||||||||
| Options written | — | — | |||||||||
| Swap agreements | (100 | ) | — | ||||||||
| Forward foreign currency contracts | 53,601 | (12,524 | ) | ||||||||
| Translation of other assets and liabilities denominated in foreign currency | 2,684 | 530 | |||||||||
| Change in net unrealized appreciation/depreciation | 971,055 | 986,189 | |||||||||
| Net realized and unrealized gain (loss) | 1,445,571 | 4,638,723 | |||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 1,879,808 | $ | 11,596,032 | |||||||
See accompanying notes to financial statements.
91
The UBS Funds
Financial statements
Statement of changes in net assets
| UBS Absolute Return Bond Fund | UBS Core Plus Bond Fund |
UBS Fixed Income Opportunities Fund |
|||||||||||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Period ended June 30, 20111 |
|||||||||||||||||||
| Operations: | |||||||||||||||||||||||
| Net investment income | $ | 4,179,357 | $ | 3,885,147 | $ | 1,301,553 | $ | 1,906,138 | $ | 1,485,703 | |||||||||||||
| Net realized gain (loss) | (10,567,664 | ) | (4,186,552 | ) | 1,007,314 | 2,124,339 | (1,599,593 | ) | |||||||||||||||
| Change in net unrealized appreciation/depreciation | 10,230,346 | 3,698,343 | (39,577 | ) | 2,918,815 | (1,856,717 | ) | ||||||||||||||||
| Net increase (decrease) in net assets from operations | 3,842,039 | 3,396,938 | 2,269,290 | 6,949,292 | (1,970,607 | ) | |||||||||||||||||
| Dividends and distributions to shareholders by class: | |||||||||||||||||||||||
| Class A: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (118,806 | ) | (337,877 | ) | (440,852 | ) | (518,764 | ) | (374,094 | ) | |||||||||||||
| Return of capital | (165,746 | ) | (50,071 | ) | — | — | (368,635 | ) | |||||||||||||||
| Total Class A dividends and distributions | (284,552 | ) | (387,948 | ) | (440,852 | ) | (518,764 | ) | (742,729 | ) | |||||||||||||
| Class B: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | — | — | (1,595 | ) | (4,783 | ) | — | ||||||||||||||||
| Total Class B dividends and distributions | — | — | (1,595 | ) | (4,783 | ) | — | ||||||||||||||||
| Class C: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (21,772 | ) | (84,610 | ) | (100,168 | ) | (138,464 | ) | (26,993 | ) | |||||||||||||
| Return of capital | (45,290 | ) | (12,539 | ) | — | — | (49,759 | ) | |||||||||||||||
| Total Class C dividends and distributions | (67,062 | ) | (97,149 | ) | (100,168 | ) | (138,464 | ) | (76,752 | ) | |||||||||||||
| Class Y: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (2,064,203 | ) | (3,446,259 | ) | (1,660,450 | ) | (2,592,086 | ) | (155,605 | ) | |||||||||||||
| Return of capital | (2,385,897 | ) | (510,709 | ) | — | — | (246,080 | ) | |||||||||||||||
| Total Class Y dividends and distributions | (4,450,100 | ) | (3,956,968 | ) | (1,660,450 | ) | (2,592,086 | ) | (401,685 | ) | |||||||||||||
| Decrease in net assets from dividends and distributions | (4,801,714 | ) | (4,442,065 | ) | (2,203,065 | ) | (3,254,097 | ) | (1,221,166 | ) | |||||||||||||
| Beneficial interest transactions: | |||||||||||||||||||||||
| Proceeds from shares sold | 1,032,723 | 1,856,827 | 5,635,622 | 13,516,769 | 116,091,420 | ||||||||||||||||||
| Shares issued on reinvestment of dividends and distributions | 4,758,182 | 4,394,016 | 2,100,969 | 3,123,358 | 911,111 | ||||||||||||||||||
| Cost of shares redeemed | (6,063,863 | ) | (10,775,409 | ) | (14,834,259 | ) | (41,004,427 | ) | (12,945,222 | ) | |||||||||||||
| Redemption fees | 686 | 493 | 5,674 | 8,940 | 88,057 | ||||||||||||||||||
|
Net increase (decrease) in net assets resulting from beneficial interest transactions |
(272,272 | ) | (4,524,073 | ) | (7,091,994 | ) | (24,355,360 | ) | 104,145,366 | ||||||||||||||
| Increase (decrease) in net assets | (1,231,947 | ) | (5,569,200 | ) | (7,025,769 | ) | (20,660,165 | ) | 100,953,593 | ||||||||||||||
| Net assets, beginning of period | 148,360,893 | 153,930,093 | 46,299,200 | 66,959,365 | — | ||||||||||||||||||
| Net assets, end of period | $ | 147,128,946 | $ | 148,360,893 | $ | 39,273,431 | $ | 46,299,200 | $ | 100,953,593 | |||||||||||||
|
Net assets include accumulated undistributed (distributions in excess of) net investment income |
$ | (3,605,208 | ) | $ | 157,160 | $ | 379,766 | $ | 1,084,803 | $ | 4,803 | ||||||||||||
1 For the period November 29, 2010 (commencement of operations) through June 30, 2011.
92
The UBS Funds
Financial statements
| UBS Global Bond Fund | UBS High Yield Fund | ||||||||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
Year ended June 30, 2010 |
||||||||||||||||
| Operations: | |||||||||||||||||||
| Net investment income | $ | 434,237 | $ | 643,076 | $ | 6,957,309 | $ | 8,757,347 | |||||||||||
| Net realized gain (loss) | 474,516 | 1,281,408 | 3,652,534 | 3,810,693 | |||||||||||||||
| Change in net unrealized appreciation/depreciation | 971,055 | 369,576 | 986,189 | 7,962,022 | |||||||||||||||
| Net increase (decrease) in net assets from operations | 1,879,808 | 2,294,060 | 11,596,032 | 20,530,062 | |||||||||||||||
| Dividends and distributions to shareholders by class: | |||||||||||||||||||
| Class A: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (659,803 | ) | (231,955 | ) | (3,000,404 | ) | (3,411,268 | ) | |||||||||||
| Return of capital | — | — | — | — | |||||||||||||||
| Total Class A dividends and distributions | (659,803 | ) | (231,955 | ) | (3,000,404 | ) | (3,411,268 | ) | |||||||||||
| Class B: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (9,797 | ) | (3,025 | ) | (53,266 | ) | (81,622 | ) | |||||||||||
| Total Class B dividends and distributions | (9,797 | ) | (3,025 | ) | (53,266 | ) | (81,622 | ) | |||||||||||
| Class C: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (212,238 | ) | (51,974 | ) | (687,533 | ) | (754,944 | ) | |||||||||||
| Return of capital | — | — | — | — | |||||||||||||||
| Total Class C dividends and distributions | (212,238 | ) | (51,974 | ) | (687,533 | ) | (754,944 | ) | |||||||||||
| Class Y: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (617,857 | ) | (427,927 | ) | (3,330,657 | ) | (4,118,309 | ) | |||||||||||
| Return of capital | — | — | — | — | |||||||||||||||
| Total Class Y dividends and distributions | (617,857 | ) | (427,927 | ) | (3,330,657 | ) | (4,118,309 | ) | |||||||||||
| Decrease in net assets from dividends and distributions | (1,499,695 | ) | (714,881 | ) | (7,071,860 | ) | (8,366,143 | ) | |||||||||||
| Beneficial interest transactions: | |||||||||||||||||||
| Proceeds from shares sold | 1,967,712 | 8,359,734 | 20,020,501 | 12,200,138 | |||||||||||||||
| Shares issued on reinvestment of dividends and distributions | 1,330,191 | 673,245 | 5,403,254 | 6,616,743 | |||||||||||||||
| Cost of shares redeemed | (5,923,183 | ) | (26,950,230 | ) | (17,758,604 | ) | (56,934,196 | ) | |||||||||||
| Redemption fees | 580 | 540 | 2,033 | 9,441 | |||||||||||||||
|
Net increase (decrease) in net assets resulting from beneficial interest transactions |
(2,624,700 | ) | (17,916,711 | ) | 7,667,184 | (38,107,874 | ) | ||||||||||||
| Increase (decrease) in net assets | (2,244,587 | ) | (16,337,532 | ) | 12,191,356 | (25,943,955 | ) | ||||||||||||
| Net assets, beginning of period | 18,007,695 | 34,345,227 | 83,308,153 | 109,252,108 | |||||||||||||||
| Net assets, end of period | $ | 15,763,108 | $ | 18,007,695 | $ | 95,499,509 | $ | 83,308,153 | |||||||||||
|
Net assets include accumulated undistributed (distributions in excess of) net investment income |
$ | 456,862 | $ | 1,141,237 | $ | 556,833 | $ | 671,477 | |||||||||||
See accompanying notes to financial statements.
93
UBS Absolute Return Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
| Class A | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.30 | $ | 6.35 | $ | 7.81 | $ | 10.05 | $ | 10.14 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.17 | 0.15 | 0.13 | 0.34 | 0.35 | ||||||||||||||||||
| Net realized and unrealized loss from investment activities | (0.01 | ) | (0.02 | ) | (0.88 | ) | (2.13 | ) | (0.06 | ) | |||||||||||||
| Total income (loss) from investment operations | 0.16 | 0.13 | (0.75 | ) | (1.79 | ) | 0.29 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.09 | ) | (0.16 | ) | (0.71 | ) | (0.45 | ) | (0.30 | ) | |||||||||||||
| From return of capital | (0.11 | ) | (0.02 | ) | — | — | — | ||||||||||||||||
| From net realized gains | — | — | — | — | (0.08 | ) | |||||||||||||||||
| Total dividends/distributions | (0.20 | ) | (0.18 | ) | (0.71 | ) | (0.45 | ) | (0.38 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.26 | $ | 6.30 | $ | 6.35 | $ | 7.81 | $ | 10.05 | |||||||||||||
| Total investment return2 | 2.47 | % | 1.99 | % | (9.48 | )% | (18.07 | )% | 2.87 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 1.15 | % | 1.14 | % | 1.12 | % | 0.99 | % | 0.95 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.00 | % | 1.00 | % | 1.00 | % | 0.99 | % | 0.95 | % | |||||||||||||
| Net investment income | 2.64 | % | 2.36 | % | 1.85 | % | 3.68 | % | 3.43 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 7,791 | $ | 11,333 | $ | 17,850 | $ | 50,761 | $ | 257,180 | |||||||||||||
| Portfolio turnover rate | 72 | % | 37 | % | 99 | % | 33 | % | 56 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.30 | $ | 6.34 | $ | 7.81 | $ | 10.05 | $ | 10.15 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.18 | 0.16 | 0.13 | 0.36 | 0.37 | ||||||||||||||||||
| Net realized and unrealized loss from investment activities | (0.02 | ) | (0.01 | ) | (0.88 | ) | (2.12 | ) | (0.07 | ) | |||||||||||||
| Total income (loss) from investment operations | 0.16 | 0.15 | (0.75 | ) | (1.76 | ) | 0.30 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.10 | ) | (0.17 | ) | (0.72 | ) | (0.48 | ) | (0.32 | ) | |||||||||||||
| From return of capital | (0.11 | ) | (0.02 | ) | — | — | — | ||||||||||||||||
| From net realized gains | — | — | — | — | (0.08 | ) | |||||||||||||||||
| Total dividends/distributions | (0.21 | ) | (0.19 | ) | (0.72 | ) | (0.48 | ) | (0.40 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.25 | $ | 6.30 | $ | 6.34 | $ | 7.81 | $ | 10.05 | |||||||||||||
| Total investment return2 | 2.50 | % | 2.34 | % | (9.32 | )% | (17.92 | )% | 2.96 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses | 0.81 | % | 0.80 | % | 0.83 | % | 0.76 | % | 0.75 | % | |||||||||||||
| Net investment income | 2.82 | % | 2.56 | % | 1.94 | % | 3.92 | % | 3.63 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 137,301 | $ | 133,822 | $ | 130,933 | $ | 187,445 | $ | 259,089 | |||||||||||||
| Portfolio turnover rate | 72 | % | 37 | % | 99 | % | 33 | % | 56 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
3 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
94
UBS Absolute Return Bond Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.30 | $ | 6.35 | $ | 7.81 | $ | 10.04 | $ | 10.14 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.15 | 0.13 | 0.10 | 0.31 | 0.31 | ||||||||||||||||||
| Net realized and unrealized loss from investment activities | (0.02 | ) | (0.03 | ) | (0.87 | ) | (2.12 | ) | (0.06 | ) | |||||||||||||
| Total income (loss) from investment operations | 0.13 | 0.10 | (0.77 | ) | (1.81 | ) | 0.25 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.06 | ) | (0.13 | ) | (0.69 | ) | (0.42 | ) | (0.27 | ) | |||||||||||||
| From return of capital | (0.11 | ) | (0.02 | ) | — | — | — | ||||||||||||||||
| From net realized gains | — | — | — | — | (0.08 | ) | |||||||||||||||||
| Total dividends/distributions | (0.17 | ) | (0.15 | ) | (0.69 | ) | (0.42 | ) | (0.35 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.26 | $ | 6.30 | $ | 6.35 | $ | 7.81 | $ | 10.04 | |||||||||||||
| Total investment return2 | 2.08 | % | 1.61 | % | (9.81 | )% | (18.27 | )% | 2.42 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 1.42 | % | 1.42 | % | 1.42 | % | 1.32 | % | 1.29 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.35 | % | 1.35 | % | 1.35 | % | 1.32 | % | 1.30 | %3 | |||||||||||||
| Net investment income | 2.29 | % | 2.01 | % | 1.46 | % | 3.35 | % | 3.07 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 2,038 | $ | 3,206 | $ | 5,147 | $ | 9,971 | $ | 37,548 | |||||||||||||
| Portfolio turnover rate | 72 | % | 37 | % | 99 | % | 33 | % | 56 | % | |||||||||||||
See accompanying notes to financial statements.
95
UBS Core Plus Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
| Class A | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.69 | $ | 8.17 | $ | 9.13 | $ | 10.46 | $ | 10.27 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.24 | 0.28 | 0.23 | 0.25 | 0.32 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.18 | 0.73 | (0.56 | ) | (1.06 | ) | 0.24 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | — | — | 0.003 | ||||||||||||||||||
| Total income (loss) from investment operations | 0.42 | 1.01 | (0.33 | ) | (0.81 | ) | 0.56 | ||||||||||||||||
| Redemption fees | 0.003 | 0.003 | 0.01 | 0.01 | — | ||||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.41 | ) | (0.49 | ) | (0.64 | ) | (0.53 | ) | (0.37 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.70 | $ | 8.69 | $ | 8.17 | $ | 9.13 | $ | 10.46 | |||||||||||||
| Total investment return2 | 5.00 | % | 12.72 | % | (3.29 | )% | (8.03 | )% | 5.39 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.45 | % | 1.39 | % | 1.27 | % | 1.02 | % | 1.07 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 0.64 | % | 0.64 | % | 0.85 | % | 0.85 | % | 0.85 | % | |||||||||||||
| Net investment income | 2.76 | % | 3.30 | % | 2.71 | % | 2.05 | % | 3.08 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 5,996 | $ | 8,956 | $ | 9,128 | $ | 9,330 | $ | 29,356 | |||||||||||||
| Portfolio turnover rate | 400 | % | 283 | % | 247 | % | 192 | % | 209 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.70 | $ | 8.18 | $ | 9.14 | $ | 10.47 | $ | 10.28 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.18 | 0.21 | 0.16 | 0.18 | 0.25 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.18 | 0.74 | (0.54 | ) | (1.07 | ) | 0.23 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | — | — | 0.003 | ||||||||||||||||||
| Total income (loss) from investment operations | 0.36 | 0.95 | (0.38 | ) | (0.89 | ) | 0.48 | ||||||||||||||||
| Redemption fees | — | — | 0.003 | 0.01 | — | ||||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.35 | ) | (0.43 | ) | (0.58 | ) | (0.45 | ) | (0.29 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.71 | $ | 8.70 | $ | 8.18 | $ | 9.14 | $ | 10.47 | |||||||||||||
| Total investment return2 | 4.20 | % | 11.85 | % | (4.01 | )% | (8.72 | )% | 4.70 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.28 | % | 2.22 | % | 2.10 | % | 1.91 | % | 1.84 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.39 | % | 1.39 | % | 1.60 | % | 1.60 | % | 1.60 | % | |||||||||||||
| Net investment income | 2.02 | % | 2.52 | % | 1.89 | % | 1.77 | % | 2.39 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 55 | $ | 56 | $ | 109 | $ | 250 | $ | 442 | |||||||||||||
| Portfolio turnover rate | 400 | % | 283 | % | 247 | % | 192 | % | 209 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
96
UBS Core Plus Bond Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.66 | $ | 8.15 | $ | 9.12 | $ | 10.45 | $ | 10.26 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.20 | 0.24 | 0.19 | 0.20 | 0.27 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.19 | 0.72 | (0.57 | ) | (1.05 | ) | 0.24 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | — | — | 0.003 | ||||||||||||||||||
| Total income (loss) from investment operations | 0.39 | 0.96 | (0.38 | ) | (0.85 | ) | 0.51 | ||||||||||||||||
| Redemption fees | 0.003 | 0.003 | 0.01 | — | — | ||||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.37 | ) | (0.45 | ) | (0.60 | ) | (0.48 | ) | (0.32 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.68 | $ | 8.66 | $ | 8.15 | $ | 9.12 | $ | 10.45 | |||||||||||||
| Total investment return2 | 4.60 | % | 12.06 | % | (3.76 | )% | (8.58 | )% | 4.98 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.92 | % | 1.86 | % | 1.76 | % | 1.58 | % | 1.55 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.14 | % | 1.14 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||
| Net investment income | 2.27 | % | 2.80 | % | 2.35 | % | 2.01 | % | 2.56 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 2,175 | $ | 2,628 | $ | 2,574 | $ | 1,117 | $ | 1,525 | |||||||||||||
| Portfolio turnover rate | 400 | % | 283 | % | 247 | % | 192 | % | 209 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.68 | $ | 8.16 | $ | 9.13 | $ | 10.46 | $ | 10.27 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.26 | 0.30 | 0.24 | 0.28 | 0.34 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.19 | 0.74 | (0.55 | ) | (1.06 | ) | 0.25 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | — | — | 0.003 | ||||||||||||||||||
| Total income (loss) from investment operations | 0.45 | 1.04 | (0.31 | ) | (0.78 | ) | 0.59 | ||||||||||||||||
| Redemption fees | 0.003 | 0.003 | — | — | — | ||||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.44 | ) | (0.52 | ) | (0.66 | ) | (0.55 | ) | (0.40 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.69 | $ | 8.68 | $ | 8.16 | $ | 9.13 | $ | 10.46 | |||||||||||||
| Total investment return2 | 5.26 | % | 13.02 | % | (3.15 | )% | (7.78 | )% | 5.76 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.12 | % | 1.09 | % | 0.96 | % | 0.78 | % | 0.76 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 0.39 | % | 0.39 | % | 0.60 | % | 0.60 | % | 0.60 | % | |||||||||||||
| Net investment income | 3.02 | % | 3.53 | % | 2.88 | % | 2.77 | % | 3.27 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 31,047 | $ | 34,659 | $ | 55,149 | $ | 102,473 | $ | 163,172 | |||||||||||||
| Portfolio turnover rate | 400 | % | 283 | % | 247 | % | 192 | % | 209 | % | |||||||||||||
See accompanying notes to financial statements.
97
UBS Fixed Income Opportunities Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented.
| Class A | Class C | Class Y | |||||||||||||
|
For the period ended June 30, 20113 |
For the period ended June 30, 20113 |
For the period ended June 30, 20113 |
|||||||||||||
| Net asset value, beginning of period | $ | 10.00 | $ | 10.00 | $ | 10.00 | |||||||||
| Income (loss) from investment operations: | |||||||||||||||
| Net investment income1 | 0.21 | 0.18 | 0.23 | ||||||||||||
| Net realized and unrealized loss from investment activities | (0.15 | ) | (0.14 | ) | (0.13 | ) | |||||||||
| Total income from investment operations | 0.06 | 0.04 | 0.10 | ||||||||||||
| Redemption fees | 0.02 | 0.004 | — | ||||||||||||
| Less dividends/distributions: | |||||||||||||||
| From net investment income | (0.05 | ) | (0.02 | ) | (0.06 | ) | |||||||||
| From return of capital | (0.10 | ) | (0.10 | ) | (0.10 | ) | |||||||||
| Total dividends/distributions | (0.15 | ) | (0.12 | ) | (0.16 | ) | |||||||||
| Net asset value, end of period | $ | 9.93 | $ | 9.92 | $ | 9.94 | |||||||||
| Total investment return2 | 0.76 | % | 0.43 | % | 0.97 | % | |||||||||
| Ratios to average net assets: | |||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.39 | %5 | 1.94 | %5 | 1.29 | %5 | |||||||||
| Expenses after fee waivers and/or expense reimbursement | 0.95 | %5 | 1.45 | %5 | 0.70 | %5 | |||||||||
| Net investment income | 3.53 | %5 | 3.06 | %5 | 3.91 | %5 | |||||||||
| Supplemental data: | |||||||||||||||
| Net assets, end of period (000's) | $ | 67,314 | $ | 8,116 | $ | 25,523 | |||||||||
| Portfolio turnover rate | 48 | % | 48 | % | 48 | % | |||||||||
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of the 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. Returns do not reflect the deduction of taxes that a shareholder would pay on dividends/distributions or the redemption of Fund shares. Total investment return for periods of less than one year has not been annualized.
3 For the period November 29, 2010 (commencement of operations) through June 30, 2011.
4 Amount represents less than $0.005 per share.
5 Annualized.
See accompanying notes to financial statements.
98
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99
UBS Global Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
| Class A | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 7.33 | $ | 7.12 | $ | 9.17 | $ | 9.41 | $ | 9.50 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.19 | 0.18 | 0.22 | 0.27 | 0.26 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.61 | 0.25 | (0.92 | ) | (0.08 | ) | (0.10 | ) | |||||||||||||||
| Total income (loss) from investment operations | 0.80 | 0.43 | (0.70 | ) | 0.19 | 0.16 | |||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.72 | ) | (0.22 | ) | (1.35 | ) | (0.43 | ) | (0.25 | ) | |||||||||||||
| Net asset value, end of year | $ | 7.41 | $ | 7.33 | $ | 7.12 | $ | 9.17 | $ | 9.41 | |||||||||||||
| Total investment return2 | 11.55 | % | 5.94 | % | (7.66 | )% | 1.94 | % | 1.67 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.43 | % | 2.05 | % | 1.68 | % | 1.31 | % | 1.40 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||||||||||
| Net investment income | 2.53 | % | 2.34 | % | 2.90 | % | 2.81 | % | 2.67 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 6,768 | $ | 7,240 | $ | 7,930 | $ | 12,123 | $ | 14,093 | |||||||||||||
| Portfolio turnover rate | 63 | % | 61 | % | 116 | % | 137 | % | 74 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 7.35 | $ | 7.14 | $ | 9.20 | $ | 9.43 | $ | 9.52 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.13 | 0.12 | 0.17 | 0.20 | 0.18 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.62 | 0.25 | (0.93 | ) | (0.08 | ) | (0.09 | ) | |||||||||||||||
| Total income (loss) from investment operations | 0.75 | 0.37 | (0.76 | ) | 0.12 | 0.09 | |||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.67 | ) | (0.16 | ) | (1.30 | ) | (0.35 | ) | (0.18 | ) | |||||||||||||
| Net asset value, end of year | $ | 7.43 | $ | 7.35 | $ | 7.14 | $ | 9.20 | $ | 9.43 | |||||||||||||
| Total investment return2 | 10.81 | % | 5.14 | % | (8.45 | )% | 1.27 | % | 0.90 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 3.20 | % | 2.85 | % | 2.55 | % | 2.20 | % | 2.17 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.90 | % | 1.90 | % | 1.90 | % | 1.90 | % | 1.90 | % | |||||||||||||
| Net investment income | 1.79 | % | 1.59 | % | 2.15 | % | 2.06 | % | 1.92 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 45 | $ | 146 | $ | 122 | $ | 131 | $ | 215 | |||||||||||||
| Portfolio turnover rate | 63 | % | 61 | % | 116 | % | 137 | % | 74 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
100
UBS Global Bond Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 7.31 | $ | 7.09 | $ | 9.15 | $ | 9.38 | $ | 9.47 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.15 | 0.14 | 0.18 | 0.22 | 0.21 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.61 | 0.26 | (0.92 | ) | (0.07 | ) | (0.10 | ) | |||||||||||||||
| Total income (loss) from investment operations | 0.76 | 0.40 | (0.74 | ) | 0.15 | 0.11 | |||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.69 | ) | (0.18 | ) | (1.32 | ) | (0.38 | ) | (0.20 | ) | |||||||||||||
| Net asset value, end of year | $ | 7.38 | $ | 7.31 | $ | 7.09 | $ | 9.15 | $ | 9.38 | |||||||||||||
| Total investment return2 | 10.88 | % | 5.58 | % | (8.27 | )% | 1.56 | % | 1.17 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.89 | % | 2.52 | % | 2.17 | % | 1.79 | % | 1.77 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.65 | % | 1.65 | % | 1.65 | % | 1.65 | % | 1.65 | % | |||||||||||||
| Net investment income | 2.01 | % | 1.84 | % | 2.37 | % | 2.31 | % | 2.17 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 2,700 | $ | 2,242 | $ | 1,856 | $ | 1,716 | $ | 1,491 | |||||||||||||
| Portfolio turnover rate | 63 | % | 61 | % | 116 | % | 137 | % | 74 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.37 | $ | 8.10 | $ | 10.24 | $ | 10.45 | $ | 10.51 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.24 | 0.22 | 0.28 | 0.32 | 0.31 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.70 | 0.28 | (1.05 | ) | (0.08 | ) | (0.10 | ) | |||||||||||||||
| Total income (loss) from investment operations | 0.94 | 0.50 | (0.77 | ) | 0.24 | 0.21 | |||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.74 | ) | (0.23 | ) | (1.37 | ) | (0.45 | ) | (0.27 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.57 | $ | 8.37 | $ | 8.10 | $ | 10.24 | $ | 10.45 | |||||||||||||
| Total investment return2 | 11.77 | % | 6.33 | % | (7.54 | )% | 2.28 | % | 2.03 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.13 | % | 1.73 | % | 1.44 | % | 1.04 | % | 1.03 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | |||||||||||||
| Net investment income | 2.78 | % | 2.60 | % | 3.15 | % | 3.06 | % | 2.93 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 6,250 | $ | 8,379 | $ | 24,437 | $ | 52,620 | $ | 107,465 | |||||||||||||
| Portfolio turnover rate | 63 | % | 61 | % | 116 | % | 137 | % | 74 | % | |||||||||||||
See accompanying notes to financial statements.
101
UBS High Yield Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
| Class A | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.89 | $ | 5.16 | $ | 6.19 | $ | 6.92 | $ | 6.89 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.48 | 0.57 | 0.50 | 0.51 | 0.50 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.34 | 0.71 | (1.00 | ) | (0.75 | ) | 0.08 | ||||||||||||||||
| Total income (loss) from investment operations | 0.82 | 1.28 | (0.50 | ) | (0.24 | ) | 0.58 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.49 | ) | (0.55 | ) | (0.53 | ) | (0.49 | ) | (0.55 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.22 | $ | 5.89 | $ | 5.16 | $ | 6.19 | $ | 6.92 | |||||||||||||
| Total investment return2 | 14.30 | % | 25.49 | % | (7.12 | )% | (3.55 | )% | 8.60 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.37 | % | 1.38 | % | 1.33 | % | 1.29 | % | 1.28 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | |||||||||||||
| Net investment income | 7.73 | % | 9.80 | % | 9.96 | % | 7.81 | % | 7.16 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 40,987 | $ | 36,334 | $ | 39,859 | $ | 40,582 | $ | 45,031 | |||||||||||||
| Portfolio turnover rate | 55 | % | 61 | % | 92 | % | 39 | % | 46 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.90 | $ | 5.16 | $ | 6.20 | $ | 6.93 | $ | 6.89 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.44 | 0.52 | 0.46 | 0.46 | 0.45 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.33 | 0.73 | (1.01 | ) | (0.75 | ) | 0.09 | ||||||||||||||||
| Total income (loss) from investment operations | 0.77 | 1.25 | (0.55 | ) | (0.29 | ) | 0.54 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.45 | ) | (0.51 | ) | (0.49 | ) | (0.44 | ) | (0.50 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.22 | $ | 5.90 | $ | 5.16 | $ | 6.20 | $ | 6.93 | |||||||||||||
| Total investment return2 | 13.24 | % | 24.76 | % | (7.98 | )% | (4.27 | )% | 7.93 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.17 | % | 2.20 | % | 2.15 | % | 2.07 | % | 2.04 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | |||||||||||||
| Net investment income | 7.02 | % | 9.05 | % | 9.01 | % | 7.02 | % | 6.42 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 598 | $ | 921 | $ | 900 | $ | 1,480 | $ | 2,386 | |||||||||||||
| Portfolio turnover rate | 55 | % | 61 | % | 92 | % | 39 | % | 46 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
102
UBS High Yield Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.90 | $ | 5.16 | $ | 6.19 | $ | 6.93 | $ | 6.89 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.45 | 0.54 | 0.48 | 0.48 | 0.47 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.34 | 0.72 | (1.01 | ) | (0.76 | ) | 0.08 | ||||||||||||||||
| Total income (loss) from investment operations | 0.79 | 1.26 | (0.53 | ) | (0.28 | ) | 0.55 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.46 | ) | (0.52 | ) | (0.50 | ) | (0.46 | ) | (0.51 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.23 | $ | 5.90 | $ | 5.16 | $ | 6.19 | $ | 6.93 | |||||||||||||
| Total investment return2 | 13.72 | % | 25.07 | % | (7.60 | )% | (4.03 | )% | 8.05 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.86 | % | 1.88 | % | 1.86 | % | 1.79 | % | 1.78 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % | |||||||||||||
| Net investment income | 7.24 | % | 9.27 | % | 9.41 | % | 7.31 | % | 6.66 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 9,165 | $ | 8,902 | $ | 7,072 | $ | 8,453 | $ | 11,330 | |||||||||||||
| Portfolio turnover rate | 55 | % | 61 | % | 92 | % | 39 | % | 46 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.94 | $ | 5.20 | $ | 6.23 | $ | 6.96 | $ | 6.92 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.50 | 0.59 | 0.52 | 0.53 | 0.52 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 0.34 | 0.71 | (1.01 | ) | (0.75 | ) | 0.09 | ||||||||||||||||
| Total income (loss) from investment operations | 0.84 | 1.30 | (0.49 | ) | (0.22 | ) | 0.61 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.51 | ) | (0.56 | ) | (0.54 | ) | (0.51 | ) | (0.57 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.27 | $ | 5.94 | $ | 5.20 | $ | 6.23 | $ | 6.96 | |||||||||||||
| Total investment return2 | 14.47 | % | 25.80 | % | (6.83 | )% | (3.28 | )% | 8.98 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.03 | % | 1.05 | % | 1.06 | % | 0.99 | % | 0.98 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | |||||||||||||
| Net investment income | 7.97 | % | 10.08 | % | 10.07 | % | 8.13 | % | 7.43 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 44,750 | $ | 37,152 | $ | 61,421 | $ | 99,538 | $ | 47,768 | |||||||||||||
| Portfolio turnover rate | 55 | % | 61 | % | 92 | % | 39 | % | 46 | % | |||||||||||||
See accompanying notes to financial statements.
103
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 ("SEC") 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 13, 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 15 Funds available for investment, each having its own investment objectives and policies. The following five funds are covered in this report: UBS Absolute Return Bond Fund, UBS Core Plus Bond Fund (formerly UBS U.S. Bond Fund), UBS Fixed Income Opportunities Fund, UBS Global Bond Fund, and UBS High Yield Fund (each a "Fund", and collectively, the "Funds").
Each of the Funds is classified as a "diversified" investment company with the exception of 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 C and Class Y shares. For each Fund except UBS Absolute Return Bond Fund and UBS Fixed Income Opportunities Fund, Class B shares are offered only to existing Class B shareholders with respect to the reinvestment of dividends and distributions and exchanges of Class B shares of the Funds for Class B shares of other series of the UBS Family of Funds. "UBS Family of Funds" include other UBS Funds, PACE Select Advisor Trust and other funds for which UBS Global Asset Management (US) Inc. ("UBS Global AM (US)") serves as principal underwriter. UBS Absolute Return Bond Fund and UBS Fixed Income Opportunities Fund do not offer Class B shares. 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 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 Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. 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, where available, for its portfolio securities. The Funds normally obtain market values for their securities and other instruments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities or instruments. A matrix system incorporates parameters such as
104
The UBS Funds
Notes to financial statements
security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities or instruments. Securities and other instruments also may be valued based on appraisals derived from information concerning the security or instrument or similar securities or instruments received from recognized dealers in those holdings. Securities and instruments 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 on the valuation date available prior to valuation. Securities and instruments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities or instruments are traded on more than one exchange, the securities or instruments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM" or the "Advisor"), the investment advisor 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 or instrument, that security or instrument 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 or instrument'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 or instruments; and the evaluation of forces which influence the market in which the securities or instruments are purchased and sold. Foreign currency exchange rates are generally determined as of the close of the New York Stock Exchange ("NYSE").
Certain securities or instruments 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 net asset value. 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 or instruments, the Fund may adjust the previous closing prices to reflect what the Board believes to be the fair value of these securities or instruments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value securities or instruments 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. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If a security or instrument is valued at a "fair value," that value is likely to be different from the last quoted market price for the security or instrument. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Funds' use of the practical expedient within ASC Topic 820, investments in non-registered investment companies are also valued at the daily net asset value. All investments quoted in foreign currencies will be valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally 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.
105
The UBS Funds
Notes to financial statements
Swaps are marked-to-market daily based upon values from third party vendors or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of assets and liabilities. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
GAAP requires disclosure regarding the various inputs that are used in determining the value of the Funds' investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Fund's own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
In January 2010, FASB issued Accounting Standards Update No. 2010-06 "Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"). ASU 2010-06 requires reporting entities to make new disclosures about amounts and reasons for significant transfer in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, including information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements. The new and revised disclosures have been implemented for annual and interim periods beginning after December 15, 2009. The disclosures surrounding purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements have been implemented for annual and interim periods beginning after December 15, 2010.
In May 2011, FASB issued Accounting Standards Update No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS") (ASU 2011-04)". ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
The provisions of ASC Topic 815 "Derivatives and Hedging" ("ASC Topic 815") require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit risk related contingent features in derivative agreements. Since investment companies value their derivatives at fair value and recognize changes in fair value through the statement of operations, they do not qualify for hedge accounting under ASC Topic 815. Accordingly, even though a fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under ASC Topic 815. ASC Topic 815 requires that (1) objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative
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The UBS Funds
Notes to financial statements
instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. Details of this disclosure can be found below as well as in the Portfolio of investments. The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2011, except for outstanding swap contracts for UBS Absolute Return Bond Fund, for which the average volume during the year was lower than at year end. The Funds may be sellers of protection through credit default swap agreements which are by nature credit-risk contingent (the terms of these agreements can be found within the Portfolio of investments, with further discussion in the Notes to financial statements); however, the Funds are not aware of any additional credit-risk contingent features on other derivative contracts held by the Funds.
Disclosure of derivatives by underlying risk for each Fund as of and for the year ended June 30, 2011 is as follows:
Asset derivatives
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Absolute Return Bond Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | 505,054 | $ | 505,054 | |||||||||||
| Futures contracts2 | 16,158 | — | — | 16,158 | |||||||||||||||
| Swap agreements1 | — | 389,307 | — | 389,307 | |||||||||||||||
| Total value | $ | 16,158 | $ | 389,307 | $ | 505,054 | $ | 910,519 | |||||||||||
1 Statement of assets and liabilities location: Unrealized appreciation on forward foreign currency contracts and outstanding swap agreements, at value.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
Liability derivatives
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Absolute Return Bond Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | (996,113 | ) | $ | (996,113 | ) | |||||||||
| Futures contracts2 | (253,017 | ) | — | — | (253,017 | ) | |||||||||||||
| Swap agreements1 | (149,064 | ) | (928,608 | ) | — | (1,077,672 | ) | ||||||||||||
| Total value | $ | (402,081 | ) | $ | (928,608 | ) | $ | (996,113 | ) | $ | (2,326,802 | ) | |||||||
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts and outstanding swap agreements, at value
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
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The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2011, were as follows:
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Absolute Return Bond Fund | |||||||||||||||||||
| Net realized gain (loss)1 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | (7,052,099 | ) | $ | (7,052,099 | ) | |||||||||
| Futures contracts | (4,422,906 | ) | — | — | (4,422,906 | ) | |||||||||||||
| Swap agreements | 175,142 | (340,339 | ) | — | (165,197 | ) | |||||||||||||
| Total net realized gain (loss) | $ | (4,247,764 | ) | $ | (340,339 | ) | $ | (7,052,099 | ) | $ | (11,640,202 | ) | |||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | (368,751 | ) | $ | (368,751 | ) | |||||||||
| Futures contracts | 1,114,799 | — | — | 1,114,799 | |||||||||||||||
| Swap agreements | (149,064 | ) | 325,632 | — | 176,568 | ||||||||||||||
| Total net change in unrealized appreciation/depreciation | $ | 965,735 | $ | 325,632 | $ | (368,751 | ) | $ | 922,616 | ||||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts, swap agreements and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, swap agreements and forward foreign currency contracts.
Asset derivatives
|
Interest rate risk |
Credit risk | Total | |||||||||||||
| UBS Core Plus Bond Fund | |||||||||||||||
| Futures contracts2 | $ | 14,601 | $ | — | $ | 14,601 | |||||||||
| Swap agreements1 | — | 5,785 | 5,785 | ||||||||||||
| Total value | $ | 14,601 | $ | 5,785 | $ | 20,386 | |||||||||
1 Statement of assets and liabilities location: Outstanding swap agreements, at value.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
Liability derivatives
|
Interest rate risk |
Credit risk | Total | |||||||||||||
| UBS Core Plus Bond Fund | |||||||||||||||
| Futures contracts2 | $ | (31,743 | ) | $ | — | $ | (31,743 | ) | |||||||
| Swap agreements1 | (138,075 | ) | (10,654 | ) | (148,729 | ) | |||||||||
| Total value | $ | (169,818 | ) | $ | (10,654 | ) | $ | (180,472 | ) | ||||||
1 Statement of assets and liabilities location: Outstanding swap agreements, at value.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
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The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2011, were as follows:
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Core Plus Bond Fund | |||||||||||||||||||
| Net realized gain (loss)1 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | 4,896 | $ | 4,896 | |||||||||||
| Futures contracts | (31,740 | ) | — | — | (31,740 | ) | |||||||||||||
| Options purchased3 | (30,938 | ) | — | — | (30,938 | ) | |||||||||||||
| Options written | 14,744 | — | — | 14,744 | |||||||||||||||
| Swap agreements | (21,477 | ) | 1,057 | — | (20,420 | ) | |||||||||||||
| Total net realized gain (loss) | $ | (69,411 | ) | $ | 1,057 | $ | 4,896 | $ | (63,458 | ) | |||||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||
| Futures contracts | $ | (53,898 | ) | $ | — | $ | — | $ | (53,898 | ) | |||||||||
| Forward contracts | — | — | (14,370 | ) | (14,370 | ) | |||||||||||||
| Swap agreements | 58,031 | 25 | — | 58,056 | |||||||||||||||
| Total net change in unrealized appreciation/depreciation | $ | 4,133 | $ | 25 | $ | (14,370 | ) | $ | (10,212 | ) | |||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, forward foreign currency contracts, options written and swap agreements.
3 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments and net change in unrealized appreciation/depreciation on investments.
Asset derivatives
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Fixed Income Opportunities Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | 3,943 | $ | 3,943 | |||||||||||
| Futures contracts2 | 468,925 | — | — | 468,925 | |||||||||||||||
| Options purchased1 | 2,099,754 | — | — | 2,099,754 | |||||||||||||||
| Swap agreements1 | 1,817,185 | 368,081 | 191,709 | 2,376,975 | |||||||||||||||
| Total value | $ | 4,385,864 | $ | 368,081 | $ | 195,652 | $ | 4,949,597 | |||||||||||
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, unrealized appreciation on forward foreign currency contracts and outstanding swap agreements, at value.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
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Notes to financial statements
Liability derivatives
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Fixed Income Opportunities Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | (678,075 | ) | $ | (678,075 | ) | |||||||||
| Futures contracts2 | (536,653 | ) | — | — | (536,653 | ) | |||||||||||||
| Options written1 | (1,107,857 | ) | (477,099 | ) | — | (1,584,956 | ) | ||||||||||||
| Swap agreements1 | (2,808,650 | ) | (2,697,624 | ) | (147,051 | ) | (5,653,325 | ) | |||||||||||
| Total value | $ | (4,453,160 | ) | $ | (3,174,723 | ) | $ | (825,126 | ) | $ | (8,453,009 | ) | |||||||
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts, outstanding swap agreements, at value and options written, at value.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
Activities in derivative instruments during the period ended June 30, 2011, were as follows:
|
Interest rate risk |
Equity risk | Credit risk |
Foreign exchange risk |
Total | |||||||||||||||||||
| UBS Fixed Income Opportunities Fund | |||||||||||||||||||||||
| Net realized gain (loss)1 | |||||||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | — | $ | (519,344 | ) | $ | (519,344 | ) | |||||||||||
| Futures contracts | 491,955 | (3,568 | ) | — | — | 488,387 | |||||||||||||||||
| Options purchased3 | (1,904,824 | ) | — | — | — | (1,904,824 | ) | ||||||||||||||||
| Options written | 784,545 | — | 458,475 | — | 1,243,020 | ||||||||||||||||||
| Swap agreements | (75,819 | ) | — | (1,174,660 | ) | 65,200 | (1,185,279 | ) | |||||||||||||||
| Total net realized gain (loss) | $ | (704,143 | ) | $ | (3,568 | ) | $ | (716,185 | ) | $ | (454,144 | ) | $ | (1,878,040 | ) | ||||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | — | $ | (674,132 | ) | $ | (674,132 | ) | |||||||||||
| Futures contracts | (67,728 | ) | — | — | — | (67,728 | ) | ||||||||||||||||
| Options purchased3 | (1,013,677 | ) | — | — | — | (1,013,677 | ) | ||||||||||||||||
| Options written | 196,566 | — | — | — | 196,566 | ||||||||||||||||||
| Swap agreements | (1,356,707 | ) | — | 300,729 | 38,065 | (1,017,913 | ) | ||||||||||||||||
|
Total net change in unrealized appreciation/depreciation |
$ | (2,241,546 | ) | $ | — | $ | 300,729 | $ | (636,067 | ) | $ | (2,576,884 | ) | ||||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
3 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments and net change in unrealized appreciation/depreciation on investments.
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The UBS Funds
Notes to financial statements
Asset derivatives
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Bond Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | 33,554 | $ | 33,554 | |||||||||||
| Futures contracts2 | 3,688 | — | — | 3,688 | |||||||||||||||
| Swap agreements1 | — | 2,096 | — | 2,096 | |||||||||||||||
| Total value | $ | 3,688 | $ | 2,096 | $ | 33,554 | $ | 39,338 | |||||||||||
1 Statement of assets and liabilities location: Unrealized appreciation on forward foreign currency contracts and outstanding swap agreements, at value.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
Liability derivatives
|
Interest rate risk |
Credit risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Bond Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | (10,915 | ) | $ | (10,915 | ) | |||||||||
| Futures contracts2 | (1,071 | ) | — | — | (1,071 | ) | |||||||||||||
| Swap agreements1 | (16,307 | ) | (2,707 | ) | — | (19,014 | ) | ||||||||||||
| Total value | $ | (17,378 | ) | $ | (2,707 | ) | $ | (10,915 | ) | $ | (31,000 | ) | |||||||
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts and outstanding swap agreements, at value.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
Activities in derivative instruments during the year ended June 30, 2011, were as follows:
|
Interest rate risk |
Credit Risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Bond Fund | |||||||||||||||||||
| Net realized gain(loss)1 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | (32,391 | ) | $ | (32,391 | ) | |||||||||
| Futures contracts | (49,210 | ) | — | — | (49,210 | ) | |||||||||||||
| Swap agreements | 19,065 | 4,777 | — | 23,842 | |||||||||||||||
| Total net realized gain(loss) | $ | (30,145 | ) | $ | 4,777 | $ | (32,391 | ) | $ | (57,759 | ) | ||||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | 53,601 | $ | 53,601 | |||||||||||
| Futures contracts | 3,636 | — | — | 3,636 | |||||||||||||||
| Swap agreements | (16,307 | ) | 16,207 | — | (100 | ) | |||||||||||||
| Total net change in unrealized appreciation/depreciation | $ | (12,671 | ) | $ | 16,207 | $ | 53,601 | $ | 57,137 | ||||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts, swap agreements, and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, swap agreements and forward foreign currency contracts.
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The UBS Funds
Notes to financial statements
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, if any, is included in each Fund's Notes to portfolio of investments.
C. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. 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.
D. Foreign currency translation: The Funds use the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities and other assets and liabilities—at the exchange rates prevailing at the end of each Fund's fiscal period; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of each Fund's portfolio are presented at the foreign exchange rates at the end of each Fund's fiscal period, the Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. 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.
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, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk).
A Fund will 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 non-cash settled 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 equal to the contract's full notional value. However, currency contracts with respect to identical currencies may be netted against each other and, in such cases, a Fund's custodian or sub-custodian will place assets in a segregated account of the Fund, in an amount equal to the net amount owed (the unrealized loss) by a Fund. 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.
112
The UBS Funds
Notes to financial statements
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 unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by each Fund on contracts which have been sold or matured.
F. Futures contracts: Each Fund may purchase or sell financial futures contracts. The Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance the Fund's overall total return, income or realize gains. Using financial futures contracts involves various market risks, including interest rate and equity risk. 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. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or 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 as part of Due to or Due from broker 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.
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 the Funds' records 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: Certain Funds may engage in swap agreements, including but not limited to interest rate, currency, total return, and credit default swap agreements. The Funds expect to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio's duration, to protect against any increase in the price of securities a Fund anticipates purchasing at a later date, to gain exposure to certain markets in the most economical way possible or in an attempt to enhance income or gains.
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 itself 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. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Certain Funds may enter into currency swap agreements with another party in order to receive or pay amounts based on changes in currency exchange rates to protect itself from or take advantage of exchange rate fluctuations. The Fund utilizes currency swaps to earn income and enhance returns as well as to manage the risk profile of the Fund. 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 currency exchange rate(s) for a specified amount.
113
The UBS Funds
Notes to financial statements
Currency swap agreements are subject to general market risk, liquidity risk, counterparty risk, foreign exchange risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default or other credit event of a referenced security. As a buyer, a Fund would make periodic payments to the counterparty, and a Fund would receive payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event does occur, a Fund typically would receive full notional value for a reference obligation that may have little or no value. As a seller, a Fund would receive periodic payments from the counterparty, and a Fund would make payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will gain the periodic stream of payments it received over the term of the contract. However, if a credit event occurs, a 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 a Fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk.
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in delivery of a security with a value other than had been anticipated (such as a party's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swaps on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where a Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer's default.
The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of June 30, 2011 for which a Fund is the seller of protection are disclosed under the section "Credit default swaps on credit indices—sell protection" and "Credit default swaps on corporate and sovereign issues—sell protection" in the Notes to Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
The use of swap agreements 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 a Fund will be less favorable than it would have been if this investment technique was never used. Swap agreements do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap agreement defaults and fails to consummate the transaction, a Fund's risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, a Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
A Fund accrues for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap agreements on the Statement 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 Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation of swap agreements.
114
The UBS Funds
Notes to financial statements
I. Option writing: Certain Funds may write (sell) put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains. 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 a 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 Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, index or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
J. Purchased options: Certain Funds may purchase put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), as well as exchange listed call options on particular market segment indices to achieve temporary exposure to a specific security, currency, 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: Occasionally, UBS Absolute Return Bond Fund and UBS High Yield Fund may enter into short sales whereby they sell a security they generally do 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 a Fund shorts a security while 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. A Fund 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). The Fund is liable to the lender for any dividends or interest payable on securities while those securities are in a short position. These dividends or interest are booked as an expense or liability of the Fund. The Fund segregates collateral consisting of cash, US government securities or other liquid assets sufficient to collateralize the market value of short positions. The Fund is charged a securities loan fee in connection with short sale transactions.
For the year ended June 30, 2011, there were no short positions held by either of these Funds.
115
The UBS Funds
Notes to financial statements
L. Dividends and distributions: It is the Funds' policy to distribute their respective net investment income monthly except UBS Absolute Return Bond Fund and UBS Fixed Income Opportunities Fund which will distribute their net investment income, if any, quarterly. Net realized capital gains, if any, are paid annually. Dividends and distributions to shareholders are recorded on the ex-distribution date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
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 the Funds invest. The ability of the issuers of debt securities held by a Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
N. Redemption fees: 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. This amount is paid to the applicable Fund, not the Advisor or UBS Global AM (US). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets.
2. Investment advisory fees and other transactions with affiliates
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 $1.0 billion |
$1.0 billion to $1.5 billion |
$1.5 billion to $2.0 billion |
$2.0 billion and over |
||||||||||||||||||
| UBS Absolute Return Bond Fund | 0.550 | % | 0.500 | % | 0.475 | % | 0.450 | % | 0.425 | % | |||||||||||||
| UBS Core Plus Bond Fund | 0.500 | 0.475 | 0.450 | 0.425 | 0.400 | ||||||||||||||||||
| UBS Fixed Income Opportunities Fund | 0.650 | 0.650 | 0.650 | 0.650 | 0.650 | ||||||||||||||||||
| UBS Global Bond Fund | 0.650 | 0.650 | 0.650 | 0.600 | 0.550 | ||||||||||||||||||
| UBS High Yield Fund | 0.600 | 0.550 | 0.525 | 0.525 | 0.525 | ||||||||||||||||||
For UBS Core Plus Bond Fund, UBS Fixed Income Opportunities Fund and UBS Global Bond Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each Fund as indicated in the following table. For UBS Absolute Return Bond Fund and UBS High Yield Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that each Fund's operating expenses excluding
116
The UBS Funds
Notes to financial statements
expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) do not exceed the expense limit of each Fund as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed, for the year ended June 30, 2011, 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 Absolute Return Bond Fund | 1.00 | % | N/A* | 1.35 | % | 0.85 | % | $ | 820,406 | $ | 16,003 | ||||||||||||||||
| UBS Core Plus Bond Fund | 0.64 | 1.39 | 1.14 | 0.39 | 222,539 | 332,908 | |||||||||||||||||||||
| UBS Fixed Income Opportunities Fund | 0.95 | N/A* | 1.45 | 0.70 | 265,727 | 204,510 | |||||||||||||||||||||
| UBS Global Bond Fund | 1.15 | 1.90 | 1.65 | 0.90 | 110,115 | 211,853 | |||||||||||||||||||||
| UBS High Yield Fund | 1.20 | 1.95 | 1.70 | 0.95 | 536,168 | 114,150 | |||||||||||||||||||||
* UBS Absolute Return Bond Fund and UBS Fixed Income Opportunities Fund do not offer Class B shares.
Each Fund will reimburse the Advisor for expenses it reimburses for a period of three years following such expense reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived for the year ended June 30, 2011 are subject to repayment through June 30, 2014. At June 30, 2011, 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, 2012 |
Expires June 30, 2013 |
Expires June 30, 2014 |
|||||||||||||||
| UBS Absolute Return Bond Fund—Class A | $ | 70,868 | $ | 35,057 | $ | 21,740 | $ | 14,071 | |||||||||||
| UBS Absolute Return Bond Fund—Class C | 9,755 | 4,733 | 3,090 | 1,932 | |||||||||||||||
| UBS Core Plus Bond Fund—Class A | 173,961 | 34,710 | 68,455 | 70,796 | |||||||||||||||
| UBS Core Plus Bond Fund—Class B | 1,885 | 738 | 728 | 419 | |||||||||||||||
| UBS Core Plus Bond Fund—Class C | 43,838 | 6,551 | 18,828 | 18,459 | |||||||||||||||
| UBS Core Plus Bond Fund—Class Y | 820,328 | 275,353 | 301,741 | 243,234 | |||||||||||||||
| UBS Fixed Income Opportunities Fund—Class A | 99,909 | — | — | 99,909 | |||||||||||||||
| UBS Fixed Income Opportunities Fund—Class C | 15,057 | — | — | 15,057 | |||||||||||||||
| UBS Fixed Income Opportunities Fund—Class Y | 89,544 | — | — | 89,544 | |||||||||||||||
| UBS Global Bond Fund—Class A | 212,679 | 50,263 | 73,286 | 89,130 | |||||||||||||||
| UBS Global Bond Fund—Class B | 3,499 | 761 | 1,350 | 1,388 | |||||||||||||||
| UBS Global Bond Fund—Class C | 57,502 | 8,446 | 18,996 | 30,060 | |||||||||||||||
| UBS Global Bond Fund—Class Y | 440,075 | 217,046 | 131,754 | 91,275 | |||||||||||||||
| UBS High Yield Fund—Class A | 173,668 | 46,068 | 63,865 | 63,735 | |||||||||||||||
| UBS High Yield Fund—Class B | 6,031 | 2,019 | 2,384 | 1,628 | |||||||||||||||
| UBS High Yield Fund—Class C | 40,597 | 10,727 | 14,851 | 15,019 | |||||||||||||||
| UBS High Yield Fund—Class Y | 153,902 | 75,272 | 44,862 | 33,768 | |||||||||||||||
117
The UBS Funds
Notes to financial statements
Each Fund pays UBS Global AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the year ended June 30, 2011, the Funds owed and incurred administrative fees as follows:
| Fund |
Administrative fees owed |
Administrative fees incurred |
|||||||||
| UBS Absolute Return Bond Fund | $ | 18,579 | $ | 111,874 | |||||||
| UBS Core Plus Bond Fund | 5,080 | 33,381 | |||||||||
| UBS Fixed Income Opportunities Fund | 13,002 | 30,661 | |||||||||
| UBS Global Bond Fund | 2,030 | 12,699 | |||||||||
| UBS High Yield Fund | 11,908 | 67,021 | |||||||||
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the year ended June 30, 2011 have been included near the end of each Fund's Portfolio of investments.
The Funds may invest in UBS 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 Statement of operations. Amounts relating to those investments at June 30, 2011 and for the year ended have been included near the end of each Fund's Portfolio of investments.
Under normal conditions, the Funds invest cash collateral from securities lending activities into an affiliated private money market fund, UBS Private Money Market Fund LLC ("Private Money Market"), which operates in compliance with most of the substantive provisions of Rule 2a-7 of the 1940 Act. Private Money Market 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. UBS Global AM acts as managing member and receives a management fee from Private Money Market payable monthly in arrears at the annual rate of 0.10% of Private Money Market's average daily members' equity, minus the aggregate operating expenses of, and incurred by, Private Money Market during each such related month, not including investment expenses (including brokerage commissions, taxes, interest charges and other costs with respect to transactions in securities) and extraordinary expenses including litigation expenses, if any. The Advisor may, in its sole discretion, waive all or any portion of the management fee to which it may be entitled from time to time in order to maintain operating expenses at a certain level. Distributions received from Private Money Market, net of fee rebates paid to borrowers, are reflected as securities lending in the Statement of operations. Amounts relating to those investments at June 30, 2011 and for the year then ended have been included near the end of each Fund's Portfolio of investments.
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 1940 Act 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 Absolute Return Bond Fund | 0.15 | % | N/A* | 0.50 | % | ||||||||||
| UBS Core Plus Bond Fund | 0.25 | 1.00 | 0.75 | ||||||||||||
| UBS Fixed Income Opportunities Fund | 0.25 | N/A* | 0.75 | ||||||||||||
| UBS Global Bond Fund | 0.25 | 1.00 | 0.75 | ||||||||||||
| UBS High Yield Fund | 0.25 | 1.00 | 0.75 | ||||||||||||
* UBS Absolute Return Bond Fund and UBS Fixed Income Opportunities Fund do not offer Class B shares.
118
The UBS Funds
Notes to financial statements
UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A, Class B, and Class C. At June 30, 2011, certain Funds owed UBS Global AM (US) service and distribution fees, and for the year ended June 30, 2011, 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 Absolute Return Bond Fund—Class A | $ | 2,032 | $ | 118 | |||||||
| UBS Absolute Return Bond Fund—Class C | 1,751 | — | |||||||||
| UBS Core Plus Bond Fund—Class A | 2,524 | 4,856 | |||||||||
| UBS Core Plus Bond Fund—Class B | 86 | 167 | |||||||||
| UBS Core Plus Bond Fund—Class C | 2,767 | 97 | |||||||||
| UBS Fixed Income Opportunities Fund—Class A | 29,201 | 167,204 | |||||||||
| UBS Fixed Income Opportunities Fund—Class C | 10,053 | 809 | |||||||||
| UBS Global Bond Fund—Class A | 2,830 | 232 | |||||||||
| UBS Global Bond Fund—Class B | 82 | 119 | |||||||||
| UBS Global Bond Fund—Class C | 3,347 | 12 | |||||||||
| UBS High Yield Fund—Class A | 17,265 | 12,076 | |||||||||
| UBS High Yield Fund—Class B | 1,011 | 4,384 | |||||||||
| UBS High Yield Fund—Class C | 11,400 | 150 | |||||||||
4. Transfer agency and related services fees
UBS Financial Services Inc. provides certain services pursuant to a delegation of authority from BNY Mellon Investment Servicing ("BNY Mellon"), as each Fund's transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the year ended June 30, 2011, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
| Fund | Amount paid | ||||||
| UBS Absolute Return Bond Fund | $ | 10,470 | |||||
| UBS Core Plus Bond Fund | 2,900 | ||||||
| UBS Fixed Income Opportunities Fund | 4,318 | ||||||
| UBS Global Bond Fund | 4,743 | ||||||
| UBS High Yield Fund | 21,603 | ||||||
5. Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities, 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, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash
119
The UBS Funds
Notes to financial statements
equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees.
UBS Core Plus Bond Fund loaned securities to certain qualified broker-dealers, with the Funds' custodian acting as the Funds' lending agent. Cash collateral received is invested in Private Money Market, which is included in each Fund's respective Portfolio of investments. In addition, UBS Core Plus Bond Fund received US Government Agency securities as collateral amounting to $355,892. The market value of loaned securities and related collateral outstanding at June 30, 2011, were as follows:
| Fund |
Market value of securities loaned |
Market value of collateral received from securities loaned |
Market value of investments of cash collateral received |
||||||||||||
| UBS Core Plus Bond Fund | $ | 565,293 | $ | 578,997 | $ | 223,105 | |||||||||
6. Purchases and sales of securities
For the year ended June 30, 2011, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government and agency securities, were as follows:
| Fund | Purchases | Sales proceeds | |||||||||
| UBS Absolute Return Bond Fund | $ | 98,112,229 | $ | 103,704,676 | |||||||
| UBS Core Plus Bond Fund | 103,824,170 | 106,822,272 | |||||||||
| UBS Fixed Income Opportunities Fund | 124,468,715 | 30,757,842 | |||||||||
| UBS Global Bond Fund | 8,428,724 | 12,758,343 | |||||||||
| UBS High Yield Fund | 52,637,572 | 47,519,602 | |||||||||
For the year ended June 30, 2011, aggregate purchases and sales of US Government and agency securities, excluding short-term investments, were as follows:
| Fund | Purchases | Sales proceeds | |||||||||
| UBS Absolute Return Bond Fund | $ | 3,040,078 | $ | 8,102,011 | |||||||
| UBS Core Plus Bond Fund | 67,984,545 | 72,487,475 | |||||||||
| UBS Fixed Income Opportunities Fund | 2,599,679 | — | |||||||||
| UBS Global Bond Fund | 1,642,589 | 851,466 | |||||||||
7. Federal income taxes
It is each Fund's policy to comply with all requirements of the Internal Revenue 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.
120
The UBS Funds
Notes to financial statements
The tax character of distributions paid during the fiscal years ended June 30, 2011 and June 30, 2010 were as follows:
| 2011 | 2010 | ||||||||||||||||||||||||||
| Fund |
Distributions paid from ordinary income |
Return of capital |
Total distributions paid |
Distributions paid from ordinary income |
Return of capital |
Total distributions paid |
|||||||||||||||||||||
| UBS Absolute Return Bond Fund | $ | 2,204,781 | $ | 2,596,933 | $ | 4,801,714 | $ | 3,868,746 | $ | 573,319 | $ | 4,442,065 | |||||||||||||||
| UBS Core Plus Bond Fund | 2,203,065 | — | 2,203,065 | 3,254,097 | — | 3,254,097 | |||||||||||||||||||||
| UBS Fixed Income Opportunities Fund1 | 556,692 | 664,474 | 1,221,166 | — | — | — | |||||||||||||||||||||
| UBS Global Bond Fund | 1,499,695 | — | 1,499,695 | 714,881 | — | 714,881 | |||||||||||||||||||||
| UBS High Yield Fund | 7,071,860 | — | 7,071,860 | 8,366,143 | — | 8,366,143 | |||||||||||||||||||||
1 UBS Fixed Income Opportunities Fund commenced operations on November 29, 2010.
At June 30, 2011, the components of accumulated earnings (deficit) on a tax basis were as follows:
| Fund |
Undistributed ordinary income |
Accumulated capital and other losses |
Unrealized appreciation/ (depreciation) |
Total | |||||||||||||||
| UBS Absolute Return Bond Fund | $ | — | $ | (133,366,425 | ) | $ | 4,198,921 | $ | (129,167,504 | ) | |||||||||
| UBS Core Plus Bond Fund | 357,891 | (36,178,013 | ) | 390,201 | (35,429,921 | ) | |||||||||||||
| UBS Fixed Income Opportunities Fund | — | (1,809,670 | ) | (695,261 | ) | (2,504,931 | ) | ||||||||||||
| UBS Global Bond Fund | 823,573 | (16,739,849 | ) | 479,264 | (15,437,012 | ) | |||||||||||||
| UBS High Yield Fund | 556,927 | (86,467,361 | ) | 5,472,081 | (80,438,353 | ) | |||||||||||||
Due to inherent differences in the recognition of income, expenses and realized gains/losses under US GAAP 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, 2011 were as follows:
| Fund |
Undistributed net investment income |
Accumulated net realized gain/(loss) |
Beneficial interest |
||||||||||||
| UBS Absolute Return Bond Fund | $ | (5,736,944 | ) | $ | 5,736,944 | $ | — | ||||||||
| UBS Core Plus Bond Fund | 196,475 | (202,988 | ) | 6,513 | |||||||||||
| UBS Fixed Income Opportunities Fund | (924,208 | ) | 1,090,394 | (166,186 | ) | ||||||||||
| UBS Global Bond Fund | 381,083 | (381,083 | ) | — | |||||||||||
| UBS High Yield Fund | (93 | ) | 33,835,863 | (33,835,770 | ) | ||||||||||
121
The UBS Funds
Notes to financial statements
At June 30, 2011, 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, 2012 |
June 30, 2013 |
June 30, 2014 |
June 30, 2015 |
June 30, 2016 |
June 30, 2017 |
June 30, 2018 |
June 30, 2019 |
|||||||||||||||||||||||||||
|
UBS Absolute Return Bond Fund |
$ | — | $ | — | $ | — | $ | 564,587 | $ | 8,900,102 | $ | 70,926,250 | $ | 38,038,802 | $ | 10,014,427 | |||||||||||||||||||
|
UBS Core Plus Bond Fund |
— | — | — | 1,013,774 | — | 3,069,977 | 32,070,048 | — | |||||||||||||||||||||||||||
|
UBS Fixed Income Opportunities Fund |
— | — | — | — | — | — | — | 1,787,007 | |||||||||||||||||||||||||||
|
UBS Global Bond Fund |
— | — | — | 262,929 | 577,591 | 3,369,482 | 12,176,817 | — | |||||||||||||||||||||||||||
|
UBS High Yield Fund |
15,791,570 | 11,067,780 | 22,213,870 | 5,885,761 | 1,000,707 | 4,782,241 | 25,725,339 | — | |||||||||||||||||||||||||||
During the fiscal year ended June 30, 2011, the following Funds utilized capital loss carryforwards to offset current year realized gains:
| Fund | Amount | ||||||
| UBS Core Plus Bond Fund | $ | 623,495 | |||||
| UBS Global Bond Fund | 96,568 | ||||||
| UBS High Yield Fund | 3,589,867 | ||||||
UBS High Yield Fund had capital loss carryforwards in the amount of $33,835,770 that expired as of June 30, 2011.
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, 2011, the following Funds incurred, and elected to defer, losses of the following:
| Fund |
Net capital losses |
Net currency losses |
|||||||||
| UBS Absolute Return Bond Fund | $ | 195,649 | $ | 3,725,112 | |||||||
| UBS High Yield Fund | — | 93 | |||||||||
As of and during the year ended June 30, 2011, the Funds did not have any liabilities for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of operations. During the period, the Funds did not incur any interest or penalties.
Each of the tax years in the four year period ended June 30, 2011, or since inception in the case of UBS Fixed Income Opportunities Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
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 sales 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 prevailing rates in effect at the time of borrowing. Under the Committed Credit Facility arrangement, each
122
The UBS Funds
Notes to financial statements
Fund has agreed to pay commitment fees, pro rata, based on the relative asset size of the Funds in the Committed Credit Facility. There were no borrowings from the Committed Credit Facility during the year ended June 30, 2011.
9. Shares of beneficial interest
For the year ended June 30, 2011, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Absolute Return Bond Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 147,821 | $ | 941,394 | 14,070 | $ | 89,075 | 255 | $ | 2,254 | ||||||||||||||||||
| Shares repurchased | (741,044 | ) | (4,714,057 | ) | (207,035 | ) | (1,317,005 | ) | (5,159 | ) | (32,801 | ) | |||||||||||||||
| Dividends reinvested | 39,253 | 248,044 | 9,495 | 60,038 | 704,933 | 4,450,100 | |||||||||||||||||||||
| Redemption fees | — | 360 | — | 326 | — | — | |||||||||||||||||||||
| Net increase (decrease) | (553,970 | ) | $ | (3,524,259 | ) | (183,470 | ) | $ | (1,167,566 | ) | 700,029 | $ | 4,419,553 | ||||||||||||||
UBS Core Plus Bond Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 309,990 | $ | 2,712,353 | 3,048 | $ | 26,309 | |||||||||||||
| Shares repurchased | (697,246 | ) | (6,048,838 | ) | (616 | ) | (5,439 | ) | |||||||||||
| Shares converted from Class B to Class A | 2,710 | 23,647 | (2,707 | ) | (23,647 | ) | |||||||||||||
| Dividends reinvested | 42,676 | 369,281 | 175 | 1,518 | |||||||||||||||
| Redemption fees | — | 1,982 | — | — | |||||||||||||||
| Net decrease | (341,870 | ) | $ | (2,941,575 | ) | (100 | ) | $ | (1,259 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 15,999 | $ | 137,474 | 314,144 | $ | 2,735,839 | |||||||||||||
| Shares repurchased | (79,141 | ) | (688,107 | ) | (926,110 | ) | (8,068,228 | ) | |||||||||||
| Dividends reinvested | 10,456 | 90,180 | 189,546 | 1,639,990 | |||||||||||||||
| Redemption fees | — | 315 | — | 3,377 | |||||||||||||||
| Net decrease | (52,686 | ) | $ | (460,138 | ) | (422,420 | ) | $ | (3,689,022 | ) | |||||||||
UBS Fixed Income Opportunities Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 8,001,031 | $ | 82,263,982 | 830,015 | $ | 8,517,271 | 2,528,626 | $ | 25,310,167 | ||||||||||||||||||
| Shares repurchased | (1,263,856 | ) | (12,764,240 | ) | (17,869 | ) | (180,982 | ) | — | — | |||||||||||||||||
| Dividends reinvested | 44,434 | 445,259 | 6,406 | 64,167 | 39,934 | 401,685 | |||||||||||||||||||||
| Redemption fees | — | 87,471 | — | 586 | — | — | |||||||||||||||||||||
| Net increase | 6,781,609 | $ | 70,032,472 | 818,552 | $ | 8,401,042 | 2,568,560 | $ | 25,711,852 | ||||||||||||||||||
123
The UBS Funds
Notes to financial statements
UBS Global Bond Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 42,530 | $ | 316,402 | — | $ | — | |||||||||||||
| Shares repurchased | (207,548 | ) | (1,557,130 | ) | (3,112 | ) | (22,784 | ) | |||||||||||
| Shares converted from Class B to Class A | 11,930 | 89,985 | (11,892 | ) | (89,985 | ) | |||||||||||||
| Dividends reinvested | 79,262 | 565,787 | 1,231 | 8,796 | |||||||||||||||
| Redemption fees | — | 35 | — | — | |||||||||||||||
| Net decrease | (73,826 | ) | $ | (584,921 | ) | (13,773 | ) | $ | (103,973 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 102,740 | $ | 744,499 | 94,578 | $ | 816,826 | |||||||||||||
| Shares repurchased | (68,774 | ) | (497,604 | ) | (436,167 | ) | (3,755,680 | ) | |||||||||||
| Dividends reinvested | 25,051 | 177,950 | 69,958 | 577,658 | |||||||||||||||
| Redemption fees | — | 12 | — | 533 | |||||||||||||||
| Net increase (decrease) | 59,017 | $ | 424,857 | (271,631 | ) | $ | (2,360,663 | ) | |||||||||||
UBS High Yield Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 1,280,817 | $ | 8,106,143 | — | $ | — | |||||||||||||
| Shares repurchased | (1,151,730 | ) | (7,189,565 | ) | (49,329 | ) | (305,228 | ) | |||||||||||
| Shares converted from Class B to Class A | 14,288 | 89,305 | (14,280 | ) | (89,305 | ) | |||||||||||||
| Dividends reinvested | 280,657 | 1,738,044 | 3,434 | 21,203 | |||||||||||||||
| Redemption fees | — | 1,633 | — | — | |||||||||||||||
| Net increase (decrease) | 424,032 | $ | 2,745,560 | (60,175 | ) | $ | (373,330 | ) | |||||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 133,030 | $ | 829,023 | 1,748,491 | $ | 10,996,030 | |||||||||||||
| Shares repurchased | (231,863 | ) | (1,451,699 | ) | (1,391,821 | ) | (8,722,807 | ) | |||||||||||
| Dividends reinvested | 61,456 | 381,252 | 521,701 | 3,262,755 | |||||||||||||||
| Redemption fees | — | 244 | — | 156 | |||||||||||||||
| Net increase (decrease) | (37,377 | ) | $ | (241,180 | ) | 878,371 | $ | 5,536,134 | |||||||||||
For the year ended June 30, 2010, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Absolute Return Bond Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 217,038 | $ | 1,401,201 | 70,592 | $ | 455,064 | 20 | $ | 562 | ||||||||||||||||||
| Shares repurchased | (1,285,276 | ) | (8,274,781 | ) | (385,497 | ) | (2,484,236 | ) | (2,543 | ) | (16,392 | ) | |||||||||||||||
| Dividends reinvested | 55,176 | 353,982 | 12,969 | 83,173 | 617,551 | 3,956,861 | |||||||||||||||||||||
| Redemption fees | — | 493 | — | — | — | — | |||||||||||||||||||||
| Net increase (decrease) | (1,013,062 | ) | $ | (6,519,105 | ) | (301,936 | ) | $ | (1,945,999 | ) | 615,028 | $ | 3,941,031 | ||||||||||||||
124
The UBS Funds
Notes to financial statements
UBS Core Plus Bond Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 262,271 | $ | 2,233,905 | — | $ | — | |||||||||||||
| Shares repurchased | (404,919 | ) | (3,461,690 | ) | (1,035 | ) | (8,898 | ) | |||||||||||
| Shares converted from Class B to Class A | 6,393 | 54,084 | (6,386 | ) | (54,084 | ) | |||||||||||||
| Dividends reinvested | 50,240 | 425,583 | 519 | 4,384 | |||||||||||||||
| Redemption fees | — | 2,823 | — | — | |||||||||||||||
| Net decrease | (86,015 | ) | $ | (745,295 | ) | (6,902 | ) | $ | (58,598 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 59,234 | $ | 502,420 | 1,273,659 | $ | 10,726,360 | |||||||||||||
| Shares repurchased | (86,427 | ) | (734,856 | ) | (4,338,818 | ) | (36,744,899 | ) | |||||||||||
| Dividends reinvested | 14,810 | 125,041 | 303,875 | 2,568,350 | |||||||||||||||
| Redemption fees | — | 201 | — | 5,916 | |||||||||||||||
| Net decrease | (12,383 | ) | $ | (107,194 | ) | (2,761,284 | ) | $ | (23,444,273 | ) | |||||||||
UBS Global Bond Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 251,384 | $ | 1,895,900 | 3,919 | $ | 30,661 | |||||||||||||
| Shares repurchased | (406,539 | ) | (3,054,815 | ) | (733 | ) | (5,816 | ) | |||||||||||
| Shares converted from Class B to Class A | 841 | 6,421 | (838 | ) | (6,421 | ) | |||||||||||||
| Dividends reinvested | 28,230 | 211,673 | 369 | 2,775 | |||||||||||||||
| Redemption fees | — | 12 | — | — | |||||||||||||||
| Net increase (decrease) | (126,084 | ) | $ | (940,809 | ) | 2,717 | $ | 21,199 | |||||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 84,908 | $ | 637,045 | 680,645 | $ | 5,789,707 | |||||||||||||
| Shares repurchased | (45,365 | ) | (342,107 | ) | (2,744,310 | ) | (23,541,071 | ) | |||||||||||
| Dividends reinvested | 5,755 | 43,010 | 48,617 | 415,787 | |||||||||||||||
| Redemption fees | — | 4 | — | 524 | |||||||||||||||
| Net increase (decrease) | 45,298 | $ | 337,952 | (2,015,048 | ) | $ | (17,335,053 | ) | |||||||||||
UBS High Yield Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 932,338 | $ | 5,419,062 | 4,005 | $ | 22,493 | |||||||||||||
| Shares repurchased | (2,860,458 | ) | (15,823,923 | ) | (22,957 | ) | (127,320 | ) | |||||||||||
| Shares converted from Class B to Class A | 6,102 | 35,866 | (6,102 | ) | (35,866 | ) | |||||||||||||
| Dividends reinvested | 360,925 | 2,087,179 | 6,853 | 39,638 | |||||||||||||||
| Redemption fees | — | 2,539 | — | — | |||||||||||||||
| Net decrease | (1,561,093 | ) | $ | (8,279,277 | ) | (18,201 | ) | $ | (101,055 | ) | |||||||||
125
The UBS Funds
Notes to financial statements
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 279,977 | $ | 1,626,635 | 872,636 | $ | 5,096,082 | |||||||||||||
| Shares repurchased | (217,274 | ) | (1,264,177 | ) | (7,136,983 | ) | (39,682,910 | ) | |||||||||||
| Dividends reinvested | 76,798 | 444,474 | 697,236 | 4,045,452 | |||||||||||||||
| Redemption fees | — | 83 | — | 6,819 | |||||||||||||||
| Net increase (decrease) | 139,501 | $ | 807,015 | (5,567,111 | ) | $ | (30,534,557 | ) | |||||||||||
126
The UBS Funds
Report of 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, including the portfolios of investments, of UBS Absolute Return Bond Fund, UBS Core Plus Bond Fund (formerly UBS U.S. Bond Fund), UBS Fixed Income Opportunities Fund, UBS Global Bond Fund and UBS High Yield Fund (five of the series comprising The UBS Funds) (collectively the "Funds") as of June 30, 2011, 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. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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, 2011, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Absolute Return Bond Fund, UBS Core Plus Bond Fund, UBS Fixed Income Opportunities Fund, UBS Global Bond Fund and UBS High Yield Fund at June 30, 2011, 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 29, 2011
127
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their 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, procedures and 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 UBS's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).
128
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 9 and 10, 2011 (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 Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Frontier 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 Value Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Absolute Return Bond Fund, UBS Global Bond Fund, UBS High Yield Fund and UBS Core Plus Bond 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 23, 2011, June 9, 2011 and June 10, 2011, 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 its 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 the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addition, the Board considered the presentations provided with respect to distribution strategies for the Funds. The
129
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
Board also discussed the annual written compliance report from the Chief Compliance Officer and noted enhancements undertaken and planned with respect to the compliance program. 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. The Board also reviewed a memorandum provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Lipper Reports, the Board noted that UBS Global Allocation Fund, UBS Global Frontier Fund, UBS International Equity Fund, UBS U.S. Small Cap Growth Fund, UBS High Yield Fund and UBS Core Plus Bond Fund each had appeared in one of the top three performance quintiles for the one-year performance period. At the Board's request, the Advisor further addressed the performance data for the UBS Dynamic Alpha Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS Global Equity Fund, UBS Global Bond Fund and UBS Absolute Return 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 Dynamic Alpha Fund, the Advisor discussed the factors that had affected the short-term and longer-term performance of the Fund. The Advisor explained that after the market turmoil in 2008, the Advisor implemented strategy enhancements to provide the Fund with more protection against downside risk in order to further the Fund's goal of providing positive returns in a variety of market environments. The Advisor stated that during the one-year performance period, the Fund's more conservative stance with respect to risk may have impacted the UBS Dynamic Alpha Fund's performance relative to its peers. The Advisor also described for the Board the modifications that had been made to the UBS Dynamic Alpha Fund's security selection process, which management believes will enhance the Fund's performance.
With respect to the performance of the UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Large Cap Equity Fund over the past year, the Advisor noted that each Fund had positive returns but also noted that each Fund underperformed relative to its peer universe. The Advisor stated that stock selection was the primary reason for each Fund's underperformance compared to its peer universe. The Advisor discussed each Fund's stock selection process and stated that each Fund was well positioned in the next year to take advantage of attractively priced stocks that fit each Fund's long-term investment focus. With respect to the UBS U.S. Large Cap Equity Fund, it also was noted that while the Fund had underperformed during the last year, the Fund's performance for the longer-term, ten-year performance period compared very favorably to most of its peers.
The Advisor then discussed the factors that had a negative effect on the relative performance of the UBS Global Equity Fund during the one-year performance period. Although the UBS Global Equity Fund experienced a positive return during the past year, the Fund underperformed relative to its peer universe. The Advisor noted that stock selection was the primary factor that contributed to the Fund's relative underperformance. The Advisor discussed the stock selection process for the UBS Global Equity Fund and explained the steps the Advisor was taking to improve the Fund's performance. The Advisor also noted that while the UBS Global Equity Fund underperformed relative to its peer universe for the one-year performance period, it exceeded its peer universe median for the three year performance period.
With respect to the UBS Global Bond Fund, the Advisor noted that while the Fund underperformed relative to its peer universe for the one-year period, the Fund experienced a positive return and outperformed its benchmark index during this time period. The Fund's weaker peer group relative performance was partially attributable to its more conservative posture with respect to credit sectors. The Advisor discussed with the Board the performance
130
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
outlook for the Fund in the upcoming year and stated that it believed that the previous enhancements that had been made to the investment process should continue to contribute positively to the performance of the Fund in the future.
The Advisor next addressed the relative underperformance of the UBS Absolute Return Bond Fund with respect to the Fund's peers. The Advisor discussed with the Board the Fund's strategy of attempting to generate positive returns over time regardless of market conditions by managing the risks and market exposures of the Fund's portfolio. The Advisor stated that the UBS Absolute Return Bond Fund's more conservative strategy with respect to the emerging markets and high yield asset classes resulted in its relative underperformance in comparison to its peers. The Advisor noted that the ability of UBS Absolute Return Bond Fund to maintain a negative duration posture may allow the Fund to be more competitive with its peers in the future as global yields remain at historically low levels.
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, the expectations of the shareholder base, the current market environment and the Advisor's efforts to address the underperformance issues of each Fund.
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). 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 Dynamic Alpha Fund and UBS Global Allocation Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except the UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS Core Plus Bond Fund and UBS Global Bond Fund, had a contractual fee rate comparable to, or lower than, the Lipper median in its respective Lipper expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund, except the UBS Dynamic Alpha Fund, UBS Global Equity Fund, UBS U.S. Equity Alpha Fund and UBS High Yield Fund, had total expenses that were comparable to, or lower than, the Lipper median in its respective Lipper expense group.
The Board first discussed the management fee and total expenses of the UBS Dynamic Alpha Fund. It was noted that the UBS Dynamic Alpha Fund's actual management fee was higher than the median of the Fund's Lipper expense group, which led the Board to discuss this Fund's management fee 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, including the use of 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 but also noted that the Fund's management fee was not among the highest of its peers, ranking in the third quintile of its Lipper expense group. The Advisor also noted that the UBS Dynamic Alpha Fund's management fee included breakpoints, which would decrease the level of management fees as assets grew. The Board also considered that the UBS Dynamic Alpha Fund's total expenses were higher than the total expenses of the Fund's Lipper expense
131
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
group. The Advisor noted that the UBS Dynamic Alpha Fund's total expenses were in the third quintile of its Lipper expense group and were not significantly higher than the expense group median.
The Board also noted that the actual management fee for the UBS Global Allocation Fund was higher than the management fee of several of the funds in its Lipper expense group. The Board, however, determined that the UBS Global Allocation Fund's management fee was reasonable considering that it was not appreciably higher than its Lipper expense group median and the Fund was in the second quintile in its expense group with respect to total expenses.
The Board next considered that the management fee of the UBS U.S. Equity Alpha Fund was higher than the median of its Lipper expense group on a contractual basis, but noted that the Fund's actual management fee compared favorably with the Fund's peers placing in the second quintile of the Lipper expense group. The Board also considered the UBS U.S. Equity Alpha Fund's total expenses, which were higher than the median of the Fund's expense group. The Advisor explained that the Fund has higher non-management expenses as compared to its peers due to the Fund's smaller asset base.
The Board next discussed the management fee of the UBS U.S. Large Cap Equity Fund. It was noted that the UBS U.S. Large Cap Equity Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis, which led the Board to discuss this Fund's management fee with the Advisor. The Board noted that while the UBS U.S. Large Cap Equity Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses were both at the median of its Lipper expense group.
The Board then considered the management fee of the UBS U.S. Large Cap Value Equity Fund. It was noted that the UBS U.S. Large Cap Value Equity Fund's management fee also was higher than the median of the Fund's Lipper expense group on a contractual basis. The Board noted that while the UBS U.S. Large Cap Value Equity Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses each placed in the first quintile in the Fund's Lipper expense group.
The Board also reviewed the management fee of the UBS Core Plus Bond Fund and noted that the contractual management fee for the UBS Core Plus Bond Fund was not significantly higher than the median of the Fund's expense group. The Board also considered that the UBS Core Plus Bond Fund's actual management fee and actual total expenses were each in the first quintile of the Fund's Lipper expense group.
With respect to the fees and expenses of the UBS Global Bond Fund, the Board noted that the Fund was above the median of its Lipper expense group with respect to contractual management fees. The Board, however, also noted that the Fund's actual management fee was lower than the median of its Lipper expense group placing in the first quintile of its expense group. The Board also considered that the UBS Global Bond Fund had total expenses that compared favorably with the Fund's peers, placing in the second quintile of the Lipper expense group.
The Board then considered the total expenses of the UBS Global Equity Fund and UBS High Yield Fund, noting that the total expenses of each Fund were not significantly higher than each Fund's Lipper expense group median. The Board also noted each Fund's management fees, on both an actual and contractual basis, were very competitive with the management fees of the funds in each respective Lipper expense group.
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 with 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. The
132
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
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 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 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. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. 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.
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. 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 most Funds, 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 each Fund, except UBS Global Frontier 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.
133
The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory 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 shows, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as Trustee or Officer of the Trust, the Trustee's or Officer's principal occupation 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 office1 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 |
||||||||||||||||||
|
Adela Cepeda; 53 A.C. Advisory, Inc. 150 No. Clark Street, Suite 2160 Chicago, Illinois 60601 |
Trustee | Since 2004 | Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995). Ms. Cepeda is also a director of the Municipal Securities Rulemaking Board (since October 2010). | Ms. Cepeda is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Ms. Cepeda is a director of the MGI Funds (7 portfolios) (since 2005), trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) and director of Amalgamated Bank of Chicago. Ms. Cepeda was a director of Lincoln National Income Fund, Inc. (1992-2006), a director of Lincoln National Convertible Securities Fund, Inc. (1992-2006) and a director of Wyndham International, Inc. (2004-2006). | ||||||||||||||||||
|
John J. Murphy; 66 268 Main Street P.O. Box 718 Gladstone, NJ 07934 |
Trustee | Since 2009 | Mr. Murphy is the president of Murphy Capital Management (investment advisor) (since 1983) | Mr. Murphy is a director or trustee of three investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Murphy is a Director of the Nicholas Applegate funds (12 portfolios); a Director of the Legg Mason Equity Funds (54 portfolios); trustee, Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). | ||||||||||||||||||
134
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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 |
||||||||||||||||||
|
Abbie J. Smith; 57 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 |
Trustee | Since 2009 | Ms. Smith is Boris and Irene Stern Professor of Accounting in the University of Chicago Booth School of Business (since 1980). In addition, Ms. Smith is also a co-founding partner and Director of Research of Fundamental Investment Advisors, a hedge fund (co-founded in 2004, commenced operations in 2008) (since 2008). Formerly, Ms. Smith was a Marvin Bower Fellow, Harvard Business School (2001-2002). | Ms. Smith is a director or trustee of three investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation and chair of the human resources and compensation committee (formerly known as HON Industries Inc.) (office furniture) and a director (since 2003) and chair of the audit committee of Ryder System Inc. (transportation, logistics and supply- chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee and portfolio performance committee of the Dimensional Funds complex (89 Portfolios). | ||||||||||||||||||
|
Frank K. Reilly; 75 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5649 |
Chairman and Trustee | Since 1992 | Mr. Reilly is a Professor of Finance at the University of Notre Dame (since 1982). | Mr. Reilly is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Reilly is a Director of Discover Bank, a subsidiary of Discover Financial Services. | ||||||||||||||||||
|
Edward M. Roob; 76 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 |
Trustee | Since 1995 | Mr. Roob is retired (since 1993). | Mr. Roob is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | None. | ||||||||||||||||||
135
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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 |
||||||||||||||||||
|
J. Mikesell Thomas; 60 1353 Aster Place Chicago, IL 60610 |
Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008), President and CEO of First Chicago Bancorp. (since 2008), CEO of First Chicago Bank of Trust (since 2008) and President and sole shareholder of Mikesell Advisory Corp (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (2004-2008). Mr. Thomas was an Independent financial advisor (2001-2004). | Mr. Thomas is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Thomas is a director and chairman of the Audit Committee for NorthShore University Health System. Mr. Thomas was previously a director of First Chicago Bancorp (2008-2010) and First Chicago Bank & Trust (2008-2010). | ||||||||||||||||||
| Interested Trustee: | |||||||||||||||||||||||
| Shawn Lytle; 40*2 | Trustee | Since February 2011 | Mr. Lytle is a Group Managing Director and Head of Americas at UBS Global Asset Management (Americas) Inc. (since 2010). Mr. Lytle is a member of the UBS Global Asset Management Executive Committee. Prior to his role as Head of Americas, he was Deputy Global Head of Equities (2008-2010), Head of Equity Capabilities and Business Management in 2008, and a team manager (2005-2008) at UBS Global Asset Management (Americas) Inc. | Mr. Lytle is a director or trustee of three investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | None | ||||||||||||||||||
136
The UBS Funds
Trustee and officer information (unaudited)
Officers:
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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*; 46 |
Vice President and Assistant Secretary | Since 2005 | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) and deputy general counsel (since 2005) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM—Americas region"). Mr. Allessie is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | ||||||||||||
| Rose Ann Bubloski*; 43 | Vice President and Assistant Treasurer | Since May 2011 | Ms. Bubloski is an associate director (2003-2007 and 2008 to present) and senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region. From 2004 through 2007 she was a vice president and assistant treasurer of certain UBS funds. From 2007 to 2008 she was vice president at Cohen & Steers Capital Management, Inc. (investment manager). She is vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
| Mark E. Carver* 47 | President | Since 2010 | Mr. Carver is a managing director and Head of Product Development and Management—Americas for UBS Global AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is a member of the Americas Management Committee (since 2008) and the Regional Operating Committee (since 2008). Prior to 2008, Mr. Carver held a number of product-related or sales responsibilities with respect to funds, advisory programs and separately managed accounts. Mr. Carver is president of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | ||||||||||||
| Thomas Disbrow*; 45 | Vice President, Treasurer and Principal Accounting Officer | Since 2004 and 2006, respectively | Mr. Disbrow is a managing director (since March 2011), (prior to which he was an executive director) (since 2007) and head of North Americas Fund Treasury (since March 2011) of UBS Global AM—Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Michael J. Flook*; 46 | Vice President and Assistant Treasurer | Since 2006 | Mr. Flook is a director (since 2010) (prior to which he was an associate director) (since 2006) 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 2005 to 2006. Mr. Flook is a vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
137
The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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**; 53 |
Vice President and Secretary | Since 1999 and 2004, respectively | Mr. Kemper is a managing director (since 2006) and head of the legal department of UBS Global AM—Americas region (since 2004). He has been secretary of UBS Global AM—Americas region since 2004, secretary of UBS Global Asset Management Trust Company since 1993 and secretary of UBS AM Holdings (USA) Inc. since 2001. Mr. Kemper is vice president and secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Joanne M. Kilkeary*; 43 | Vice President and Assistant Treasurer | Since 2006 | Ms. Kilkeary is a director (since 2008) (prior to which she was 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 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Tammie Lee*; 40 | Vice President and Assistant Secretary | Since 2005 | Ms. Lee is an executive director (since 2010) (prior to which she was a director) (since 2005) and associate general counsel of UBS Global AM—Americas region (since 2005). Ms. Lee is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Joseph McGill*; 49 | 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. Mr. McGill is a vice president and chief compliance officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Nancy D. Osborn*; 45 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Eric Sanders*; 45 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
138
The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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*; 55 |
Since 2006 | Mr. Shoup is a managing director and global head of the Fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Shoup is also a director of UBS (IRL) Fund p.l.c. (since 2008) 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 2003 to 2006. Mr. Shoup is a vice president and chief operating officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | |||||||||||||
| Keith A. Weller*; 50 | 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). Mr. Weller is a vice president and assistant secretary of 19 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment 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.
2 Mr. Lytle is considered to be an interested person of the Trust under the federal securities laws due to his position as an officer of UBS Global AM.
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028.
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
139
The UBS Funds
Federal tax information (unaudited)
For the year ended June 30, 2011, the percentage of income earned from direct US Treasury obligations approximately amounted to the following:
| Fund |
Direct US Treasury obligations |
||||||
| UBS Absolute Return Bond Fund | 5.47 | % | |||||
| UBS Core Plus Bond Fund | 12.05 | ||||||
| UBS Fixed Income Opportunities Fund | 9.49 | ||||||
| UBS High Yield Fund | 14.72 | ||||||
140
PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
One North Wacker Drive
Chicago, IL 60606
S1197
UBS Equity
Funds
June 30, 2011
The UBS Funds—Equities
Annual Report
| Table of contents | |||||||
| President's letter | 1 | ||||||
| Market commentary | 2 | ||||||
| Equities | |||||||
| UBS Global Equity Fund | 3 | ||||||
| UBS International Equity Fund | 12 | ||||||
| UBS Market Neutral Multi-Strategy Fund | 23 | ||||||
| UBS U.S. Equity Alpha Fund | 42 | ||||||
| UBS U.S. Large Cap Equity Fund | 53 | ||||||
| UBS U.S. Large Cap Value Equity Fund | 62 | ||||||
| UBS U.S. Small Cap Growth Fund | 71 | ||||||
| Explanation of expense disclosure | 80 | ||||||
| Statement of assets and liabilities | 84 | ||||||
| Statement of operations | 88 | ||||||
| Statement of changes in net assets | 90 | ||||||
| Financial highlights | 94 | ||||||
| Notes to financial statements | 108 | ||||||
| Report of independent registered public accounting firm | 126 | ||||||
| General information | 127 | ||||||
| Board approval of investment advisory agreements | 128 | ||||||
| Trustee and Officer information | 133 | ||||||
| Federal tax information | 139 | ||||||
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President's letter
August 15, 2011
Dear Shareholder,
I'm writing this letter to you following what have easily been two of the most tumultuous weeks that the financial markets have seen in a while.
Standard & Poor's decision to downgrade US long-term sovereign debt from AAA to AA+ on Friday, August 5, 2011, came at the end of a five-day period that had already seen the Dow Jones Industrial Average (DJIA) fall over 700 points. News of the downgrade triggered further volatility in the equity market, and the ensuing days were characterized by sharp market declines, and equally steep gains.
Today, the equity market is in calmer territory, having already reclaimed, for the time being, the losses of the past week. While no one can predict with any certainty what will transpire in the days and weeks to come, we believe that the longer term implications of the downgrade, though still unclear, are likely to be limited. However, in the near-term, we expect market volatility to persist.
When I last wrote to you six months ago, I noted that irrational fear has the unfortunate result of leading investors to make the wrong decisions, for the wrong reasons, at the wrong times—and, ultimately, may have a profound negative impact on their portfolios.1 This is an important point to remember in the current atmosphere of uncertainty. The truth is, ups and downs in the market—though never welcome—are a fact of life. A market decline of 15% or more, similar to that which we have just seen, has occurred in the DJIA, on average, once every two years.2 However, equally as certain is that every market decline is also followed by a market recovery.
Against the current market backdrop, it is never more important for investors to maintain a long-term perspective. History has shown that investors with the fortitude to remain invested through a crisis have been rewarded, while those reacting to short-term volatility have met with less success. Arguably, staying the course is easier said than done. To that end, an actively managed, diversified portfolio of stocks and bonds may provide you with smoother returns, and thus make it easier for you to stay on track.3
In a few months, UBS Global Asset Management will reach a major milestone: 30 years of managing clients' assets in a constantly evolving global marketplace. For as long as we have been managing money, our formidable history of experience has shown us that only by adhering to our disciplined processes through up and down markets are we best positioned to seek to achieve the type of long-term investment results that will help our clients achieve their financial goals. This is a standard that we will resolutely adhere to in managing our asset allocation, equity and fixed income funds in the days and weeks, and years to come.
As always, we remain firmly dedicated to your investment success. Thank you for your continued support.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
1 Source: Dalbar.
2 Source: Ned Davis. Covers the period from 1/2/1900 to 8/15/2011.
3 Diversification and asset allocation do not ensure gains or guarantee against loss.
1
The markets in review
Decelerating Growth in Developed Countries
The US and many developed countries abroad experienced decelerating economic growth during the reporting period. Oil and food prices moved higher during this time, which had a negative impact on consumer spending. In addition, supply disruptions following the devastating earthquake and tsunami in Japan in March led to moderating growth in the manufacturing sector. In the US, gross domestic product ("GDP") growth was 2.5% and 2.3% during the third and fourth quarters of 2010, followed by first and second quarter 2011 GDP growth of 0.4% and 1.3%, respectively.
In contrast to their developed country counterparts, growth in most emerging market economies, such as China and India, remained robust. Against a backdrop of higher inflation, several emerging market central banks raised their interest rates and took other actions in an effort to cool growth and stem rising prices. By the end of the period, commodity prices had declined from their peaks, and inflationary pressures appeared to have eased.
Global equities produce strong returns
While the global equity markets gave back a portion of their earlier gains late in the reporting period, overall they generated impressive results. Expectations for strengthening growth, corporate profits that were often better than expected and robust demand supported the US stock market during the first nine months of the period. However, risk appetite was later replaced with increased risk aversion as a result of the European sovereign debt crisis, fears that the US may default on its debt obligations and overall disappointing economic data. Despite weakening stock prices during the last two months of the period, the US stock market, as measured by the S&P 500 Index,1 returned 30.69% during the 12-months ended June 30, 2011.
International developed equities, as measured by the MSCI EAFE Index (net),2 proved resilient as well, gaining 30.36% during the reporting period. However, they experienced heightened volatility at times in light of fears that the European debt crisis may escalate. Emerging markets equities (as measured by the MSCI Emerging Markets Index (net)3) also posted strong returns, gaining 27.80% over the period. Continued robust growth in developing countries and higher commodity prices supported emerging markets equities.
1 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition, and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
2 The MSCI EAFE Index (net) is an index of stocks from 22 countries designed to measure the investment returns of developed economies outside of North America. Dividends are reinvested after the deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. The Index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The MSCI Emerging Markets Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance of emerging markets. As of May 2010, the index consisted of 21 emerging market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
2
UBS Global Equity Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Global Equity Fund (the "Fund") returned 25.52% (Class A shares returned 18.65% after the deduction of the maximum sales charge), while Class Y shares returned 25.98%. The Fund's benchmark, the MSCI World Free Index (net) (the "Index"), returned 30.51% over the same time period. (Class Y shares have lower expenses than other share classes in the series. Returns for all share classes over various time periods are shown on page 5; 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 the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a strong absolute return, but underperformed its benchmark Index during the reporting period, primarily due to overall stock selection decisions.
Portfolio performance summary1
What worked
• Several individual stocks were positive for performance during the period.
– Autodesk, a global leader in 3D design and engineering software, was the Fund's leading contributor to performance during the reporting period. Its shares moved sharply higher given strong demand for its products amid an upturn in corporate capital spending. We exited the position in May 2011, as the stock had performed extremely well, and we felt it was approaching fair value.
– An overweight in Naspers, a South African Internet and traditional publishing company that generated strong results, benefited Fund performance. (For details, see "Portfolio highlights.")
– Volkswagen is Europe's largest auto manufacturer, with substantial operations in Asia and the Americas. Volkswagen has experienced improving business fundamentals, as sales volumes in Europe have risen and the company increased market share year-over-year in most markets. Volkswagen is also strengthening its market presence in the US as it opened a new low-cost assembly plant. In addition, we feel that the US version of the Jetta will be successful in returning Volkswagen's US operations to profitability.
– UnitedHealth Group, a diversified health care benefits company, was another large contributor to the Fund's performance during the reporting period. (For additional details, see "Portfolio highlights.")
• Sector allocation decisions positively contributed to relative performance in a number of areas. The Fund's sector allocations are a by-product of our bottom-up stock selection process. During the reporting period, having underweights to the defensive consumer staples and utilities sectors were beneficial to the Fund's relative performance.
What didn't work
• Overall, individual stock selection had a negative impact on performance.
– Lloyds Banking Group, a major British financial institution, was the largest detractor from the Fund's results during the reporting period. The company announced disappointing earnings results over the period, while concerns regarding valuations in its balance sheet and the company's exposure to distressed assets also dragged down its shares.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
3
UBS Global Equity Fund
– Research in Motion, the manufacturer of the Blackberry mobile device, saw its shares move sharply lower during the period, and we eliminated the stock in June 2011. (For additional details, see "Portfolio highlights.")
– Petrobank Energy is a Canadian oil and natural gas exploration and production company. It posted disappointing earnings due, in part, to a shortage of available rigs. We feel that this is a temporary setback, and that the company is well-positioned for future solid earnings growth.
– New World Development Company is a real estate development company headquartered in Hong Kong. Its shares declined during the reporting period as rising interest rates in the country triggered slower growth in real estate prices.
• Sector allocations in several areas detracted from results. During the reporting period, having an underweight to the energy sector and an overweight to the financials sector were negatives for the Fund's relative performance.
Portfolio highlights
• Naspers is a South Africa-based multinational media company. We believe it offers attractive exposure to the media industry in the underdeveloped and growing African continent and the BRIC countries (Brazil, Russia, India and China). Naspers has a significant interest in Tencent Holdings Limited, an operator of an instant messaging platform in China. Tencent Holdings' shares rose sharply in the Chinese stock market during the reporting period, which helped to drive the shares of Naspers higher.
• UnitedHealth Group benefited as sentiment toward managed care stocks has improved now that investors are more comfortable with health care reform legislation. Among the managed care companies, we feel that UnitedHealth Group has among the most desirable mix of assets, with exposure to each of the key growth segments: Medicare, Medicaid and Pharmacy Benefit Management. Wall Street analysts have been increasing their earnings estimates for the company. Additionally, UnitedHealth Group received high scores in the American Medical Association's 2011 National Health Insurer Report Card.
• Research in Motion's (RIM) new product delays led to a profit warning which, coupled with market share loss data in the US, caused its share price to fall sharply. Although the company's issues in its US operations were not unexpected, its weakness outside of the US was a surprise and contrary to our thesis. While RIM's stock could rebound, especially given its very low valuation, we sold out of the position due to the risks associated with its global business prospects.
• Shares of Hewlett-Packard moved sharply lower after CEO Mark Hurd resigned amid allegations of misconduct. The company also reported weak earnings as the personal computer market was not as strong as anticipated. In addition, there were uncertainties regarding the new CEO's ability to execute his strategy. Given these factors, we eliminated the stock from the portfolio.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
4
UBS Global Equity Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 25.52 | % | 2.13 | % | 4.02 | % | 4.00 | % | |||||||||||
| Class B3 | 24.59 | 1.40 | N/A | 4.196 | |||||||||||||||
| Class C4 | 24.48 | 1.36 | N/A | 3.87 | |||||||||||||||
| Class Y5 | 25.98 | 2.48 | 4.37 | 6.08 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 18.65 | % | 0.97 | % | 3.44 | % | 3.59 | % | |||||||||||
| Class B3 | 19.59 | 1.02 | N/A | 4.196 | |||||||||||||||
| Class C4 | 23.48 | 1.36 | N/A | 3.87 | |||||||||||||||
| MSCI World Free Index (net)7 | 30.51 | % | 2.28 | % | 3.99 | % | 6.06 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.55% and 1.50%; Class B—2.27% and 2.25%; Class C—2.34% and 2.25%; Class Y—1.15% and 1.15%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the 12-month period ending October 27, 2011, do not exceed 1.50% for Class A shares, 2.25% for Class B shares, 2.25% for Class C shares and 1.25% for Class Y shares. 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 June 30, 1997. Inception dates of Class B and Class C shares are December 11, 2001 and November 27, 2001, respectively. Inception date of Class Y shares is January 28, 1994. The inception return of the index is calculated as of January 31, 1994, 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.
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. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of May 2010, the index consisted of 24 developed market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
5
UBS Global Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Global Equity Fund Class A and Class Y shares versus the MSCI World Free Index (net) over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://www.ubs.com.
6
UBS Global Equity Fund
Top ten equity holdings (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Citigroup, Inc. | 2.4 | % | |||||
| Apple, Inc. | 2.2 | ||||||
| Colgate-Palmolive Co. | 2.1 | ||||||
| HON HAI Precision Industry Co., Ltd. | 2.1 | ||||||
| Microsoft Corp. | 2.0 | ||||||
| Imperial Tobacco Group PLC | 2.0 | ||||||
| Wells Fargo & Co. | 2.0 | ||||||
| China Construction Bank Corp., H Shares | 1.9 | ||||||
| Wolters Kluwer NV | 1.9 | ||||||
| Fresenius Medical Care AG & Co. KGaA | 1.9 | ||||||
| Total | 20.5 | % | |||||
Country exposure by issuer, top five (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
| United States | 33.1 | % | |||||
| Germany | 8.4 | ||||||
| Canada | 7.8 | ||||||
| United Kingdom | 7.1 | ||||||
| Japan | 5.7 | ||||||
| Total | 62.1 | % | |||||
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 1.17 | % | |||||
| Automobiles | 0.95 | ||||||
| Beverages | 1.55 | ||||||
| Biotechnology | 1.87 | ||||||
| Building products | 1.65 | ||||||
| Capital markets | 2.14 | ||||||
| Chemicals | 2.94 | ||||||
| Commercial banks | 12.43 | ||||||
| Commercial services & supplies | 1.62 | ||||||
| Communications equipment | 0.75 | ||||||
| Computers & peripherals | 2.19 | ||||||
| Construction & engineering | 1.49 | ||||||
| Construction materials | 1.03 | ||||||
| Diversified financial services | 2.39 | ||||||
| Diversified telecommunication services | 1.86 | ||||||
| Electronic equipment, instruments & components | 2.10 | ||||||
| Energy equipment & services | 0.91 | ||||||
| Food & staples retailing | 1.69 | ||||||
| Health care equipment & supplies | 1.44 | ||||||
| Health care providers & services | 4.57 | ||||||
| Hotels, restaurants & leisure | 1.21 | ||||||
| Household products | 2.12 | ||||||
| Insurance | 5.39 | ||||||
| Internet software & services | 1.77 | ||||||
| IT services | 1.10 | ||||||
| Leisure equipment & products | 1.01 | ||||||
| Machinery | 1.81 | ||||||
| Media | 4.43 | ||||||
| Metals & mining | 3.20 | ||||||
| Multi-utilities | 1.13 | ||||||
| Oil, gas & consumable fuels | 11.05 | ||||||
| Personal products | 1.31 | ||||||
| Pharmaceuticals | 1.51 | ||||||
| Professional services | 1.46 | ||||||
| Real estate management & development | 1.90 | ||||||
| Semiconductors & semiconductor equipment | 2.60 | ||||||
| Software | 3.29 | ||||||
| Specialty retail | 0.94 | ||||||
| Tobacco | 2.01 | ||||||
| Trading companies & distributors | 1.72 | ||||||
| Wireless telecommunication services | 1.70 | ||||||
| Total common stocks | 99.40 | % | |||||
| Preferred stock | 1.79 | ||||||
| Participation note | 0.83 | ||||||
| Short-term investment | 0.06 | ||||||
| Investment of cash collateral from securities loaned | 3.10 | ||||||
| Total investments | 105.18 | % | |||||
| Liabilities, in excess of cash and other assets | (5.18 | ) | |||||
| Net assets | 100.00 | % | |||||
7
UBS Global Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 99.40% | |||||||||||
| Australia: 1.12% | |||||||||||
| Orica Ltd. | 43,348 | $ | 1,257,138 | ||||||||
| Brazil: 1.49% | |||||||||||
| Vale SA ADR | 52,100 | 1,664,595 | |||||||||
| Canada: 7.76% | |||||||||||
| Canadian Oil Sands Ltd. | 48,400 | 1,396,622 | |||||||||
| Gran Tierra Energy, Inc.* | 221,700 | 1,459,687 | |||||||||
| Petrobank Energy & Resources Ltd.* | 86,500 | 1,269,988 | |||||||||
| Petrominerales Ltd.1 | 61,200 | 1,796,435 | |||||||||
| Suncor Energy, Inc. | 35,100 | 1,375,686 | |||||||||
| Teck Resources Ltd., Class B | 27,100 | 1,377,409 | |||||||||
| Total Canada common stocks | 8,675,827 | ||||||||||
| China: 5.25% | |||||||||||
| AIA Group Ltd.* | 458,255 | 1,594,903 | |||||||||
|
China Construction Bank Corp., H Shares |
2,580,450 | 2,147,768 | |||||||||
|
China Overseas Land & Investment Ltd. |
428,000 | 926,047 | |||||||||
| New World Development Co., Ltd. | 792,000 | 1,203,063 | |||||||||
| Total China common stocks | 5,871,781 | ||||||||||
| Denmark: 1.49% | |||||||||||
| FLSmidth & Co. A/S | 19,543 | 1,661,949 | |||||||||
| France: 1.69% | |||||||||||
| Carrefour SA1 | 46,062 | 1,891,799 | |||||||||
| Germany: 6.64% | |||||||||||
| Allianz SE | 9,280 | 1,296,576 | |||||||||
| Beiersdorf AG NPV | 22,557 | 1,463,772 | |||||||||
|
Fresenius Medical Care AG & Co. KGaA |
28,034 | 2,095,984 | |||||||||
| HeidelbergCement AG | 18,047 | 1,150,452 | |||||||||
| SAP AG | 23,411 | 1,415,947 | |||||||||
| Total Germany common stocks | 7,422,731 | ||||||||||
| Indonesia: 1.77% | |||||||||||
| Bank Rakyat Indonesia PT | 2,596,500 | 1,975,550 | |||||||||
| Ireland: 2.54% | |||||||||||
| Accenture PLC, Class A | 20,400 | 1,232,568 | |||||||||
| Covidien PLC | 30,304 | 1,613,082 | |||||||||
| Total Ireland common stocks | 2,845,650 | ||||||||||
| Italy: 1.81% | |||||||||||
| Fiat Industrial SpA* | 156,854 | 2,027,771 | |||||||||
| Shares | Value | ||||||||||
| Japan: 5.68% | |||||||||||
| ITOCHU Corp. | 184,800 | $ | 1,922,323 | ||||||||
| KDDI Corp. | 128 | 920,973 | |||||||||
| Sankyo Co., Ltd. | 21,800 | 1,126,680 | |||||||||
| Shin-Etsu Chemical Co., Ltd. | 20,700 | 1,110,332 | |||||||||
|
Sumitomo Mitsui Financial Group, Inc. |
41,500 | 1,277,202 | |||||||||
| Total Japan common stocks | 6,357,510 | ||||||||||
| Netherlands: 5.22% | |||||||||||
| ASML Holding NV | 29,337 | 1,080,850 | |||||||||
| Heineken NV | 28,793 | 1,731,812 | |||||||||
|
LyondellBasell Industries NV, Class A |
23,925 | 921,591 | |||||||||
| Wolters Kluwer NV | 94,863 | 2,102,107 | |||||||||
| Total Netherlands common stocks | 5,836,360 | ||||||||||
| Norway: 2.23% | |||||||||||
| Petroleum Geo-Services ASA* | 29,307 | 418,860 | |||||||||
| Telenor ASA | 126,798 | 2,076,523 | |||||||||
| Total Norway common stocks | 2,495,383 | ||||||||||
| Russia: 4.04% | |||||||||||
| Gazprom OAO ADR | 98,018 | 1,435,626 | |||||||||
| Mobile Telesystems OJSC ADR | 52,400 | 996,648 | |||||||||
| Sberbank of Russia | 566,032 | 2,088,024 | |||||||||
| Total Russia common stocks | 4,520,298 | ||||||||||
| South Africa: 1.53% | |||||||||||
| Naspers Ltd., Class N | 30,273 | 1,713,289 | |||||||||
| South Korea: 1.63% | |||||||||||
| Samsung Electronics Co., Ltd. | 2,345 | 1,822,626 | |||||||||
| Spain: 1.20% | |||||||||||
| Banco Santander SA | 116,063 | 1,339,188 | |||||||||
| Switzerland: 2.97% | |||||||||||
| Novartis AG | 27,587 | 1,689,910 | |||||||||
| SGS SA | 857 | 1,626,942 | |||||||||
| Total Switzerland common stocks | 3,316,852 | ||||||||||
| Taiwan: 2.10% | |||||||||||
|
HON HAI Precision Industry Co., Ltd. |
681,840 | 2,351,945 | |||||||||
| Thailand: 1.17% | |||||||||||
| Bank of Ayudhya PCL1 | 1,408,500 | 1,307,515 | |||||||||
8
UBS Global Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| United Kingdom: 7.08% | |||||||||||
| BP PLC | 235,106 | $ | 1,732,260 | ||||||||
| Imperial Tobacco Group PLC | 67,703 | 2,251,011 | |||||||||
| Lloyds Banking Group PLC* | 1,931,234 | 1,517,494 | |||||||||
| Prudential PLC | 116,179 | 1,342,626 | |||||||||
| Tullow Oil PLC | 27,104 | 539,446 | |||||||||
| Xstrata PLC | 24,587 | 542,236 | |||||||||
|
Total United Kingdom common stocks |
7,925,073 | ||||||||||
| United States: 32.99% | |||||||||||
| Apple, Inc.* | 7,300 | 2,450,391 | |||||||||
| Bank of New York Mellon Corp. | 55,200 | 1,414,224 | |||||||||
| Boeing Co. | 17,700 | 1,308,561 | |||||||||
| Carnival Corp. | 36,100 | 1,358,443 | |||||||||
| Citigroup, Inc. | 64,100 | 2,669,124 | |||||||||
| Colgate-Palmolive Co. | 27,100 | 2,368,811 | |||||||||
| Comcast Corp., Class A | 45,100 | 1,142,834 | |||||||||
| EOG Resources, Inc. | 13,000 | 1,359,150 | |||||||||
| F5 Networks, Inc.* | 7,600 | 837,900 | |||||||||
| General Motors Co.* | 34,948 | 1,061,021 | |||||||||
| Gilead Sciences, Inc.* | 50,600 | 2,095,346 | |||||||||
| Goldman Sachs Group, Inc. | 7,400 | 984,866 | |||||||||
| Google, Inc., Class A* | 3,900 | 1,974,882 | |||||||||
| Helmerich & Payne, Inc. | 9,100 | 601,692 | |||||||||
| Lowe's Cos., Inc. | 45,200 | 1,053,612 | |||||||||
| MDU Resources Group, Inc. | 56,100 | 1,262,250 | |||||||||
| MetLife, Inc. | 40,700 | 1,785,509 | |||||||||
| Microsoft Corp. | 86,900 | 2,259,400 | |||||||||
| Owens Corning* | 49,400 | 1,845,090 | |||||||||
| Republic Services, Inc. | 58,800 | 1,813,980 | |||||||||
| UnitedHealth Group, Inc. | 27,700 | 1,428,766 | |||||||||
|
Universal Health Services, Inc., Class B |
30,900 | 1,592,277 | |||||||||
| Wells Fargo & Co. | 80,000 | 2,244,800 | |||||||||
| Total United States common stocks | 36,912,929 | ||||||||||
|
Total common stocks (cost $101,905,708) |
111,193,759 | ||||||||||
| Shares | Value | ||||||||||
| Preferred stock: 1.79% | |||||||||||
| Germany: 1.79% | |||||||||||
|
Volkswagen AG, Preference shares (cost $1,854,865) |
9,724 | $ | 2,004,847 | ||||||||
| Participation note: 0.83% | |||||||||||
| India: 0.83% | |||||||||||
|
Housing Development & Infrastructure Limited, expires 08/10/12* (cost $1,373,009) |
258,401 | 923,139 | |||||||||
| Short-term investment: 0.06% | |||||||||||
| Investment company: 0.06% | |||||||||||
|
UBS Cash Management Prime Relationship Fund2 (cost $71,213) |
71,213 | 71,213 | |||||||||
| Investment of cash collateral from securities loaned: 3.10% | |||||||||||
|
UBS Private Money Market Fund LLC2 (cost $3,462,365) |
3,462,365 | 3,462,365 | |||||||||
|
Total investments: 105.18% (cost $108,667,160) |
117,655,323 | ||||||||||
|
Liabilities, in excess of cash and other assets: (5.18)% |
(5,791,432 | ) | |||||||||
| Net assets: 100.00% | $ | 111,863,891 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $108,891,440; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 12,382,244 | |||||
| Gross unrealized depreciation | (3,618,361 | ) | |||||
| Net unrealized appreciation of investments | $ | 8,763,883 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
9
UBS Global Equity Fund
Portfolio of investments
June 30, 2011
2 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 760,855 | $ | 40,535,904 | $ | 41,225,546 | $ | 71,213 | $ | 1,736 | |||||||||||||
| UBS Private Money Market Fund LLCa | 2,220,517 | 65,174,064 | 63,932,216 | 3,462,365 | 966 | ||||||||||||||||||
| $ | 2,981,372 | $ | 105,709,968 | $ | 105,157,762 | $ | 3,533,578 | $ | 2,702 | ||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| Goldman Sachs International | EUR | 6,450,000 | USD | 9,241,463 | 09/06/11 | $ | (95,105 | ) | |||||||||||
| JPMorgan Chase Bank | BRL | 1,950,000 | USD | 1,205,564 | 09/06/11 | (25,773 | ) | ||||||||||||
| JPMorgan Chase Bank | CAD | 2,025,000 | USD | 2,068,304 | 09/06/11 | (27,926 | ) | ||||||||||||
| JPMorgan Chase Bank | CHF | 605,000 | USD | 722,919 | 09/06/11 | 3,049 | |||||||||||||
| JPMorgan Chase Bank | DKK | 8,070,000 | USD | 1,550,147 | 09/06/11 | (16,366 | ) | ||||||||||||
| JPMorgan Chase Bank | EUR | 1,350,000 | USD | 1,931,359 | 09/06/11 | (22,807 | ) | ||||||||||||
| JPMorgan Chase Bank | HKD | 21,950,000 | USD | 2,821,065 | 09/06/11 | (798 | ) | ||||||||||||
| JPMorgan Chase Bank | KRW | 1,679,000,000 | USD | 1,539,308 | 09/06/11 | (27,018 | ) | ||||||||||||
| JPMorgan Chase Bank | MYR | 3,357,000 | USD | 1,100,295 | 09/06/11 | (6,045 | ) | ||||||||||||
| JPMorgan Chase Bank | NOK | 13,020,000 | USD | 2,367,101 | 09/06/11 | (36,085 | ) | ||||||||||||
| JPMorgan Chase Bank | SGD | 710,000 | USD | 573,076 | 09/06/11 | (4,964 | ) | ||||||||||||
| JPMorgan Chase Bank | THB | 41,330,000 | USD | 1,348,043 | 09/06/11 | 9,091 | |||||||||||||
| JPMorgan Chase Bank | TWD | 64,900,000 | USD | 2,253,472 | 09/06/11 | (7,671 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 1,038,114 | CAD | 1,020,000 | 09/06/11 | 17,765 | |||||||||||||
| JPMorgan Chase Bank | USD | 724,291 | CHF | 605,000 | 09/06/11 | (4,421 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 569,576 | EUR | 400,000 | 09/06/11 | 9,436 | |||||||||||||
| JPMorgan Chase Bank | USD | 935,325 | GBP | 575,000 | 09/06/11 | (13,197 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 446,233 | HKD | 3,475,000 | 09/06/11 | 509 | |||||||||||||
| JPMorgan Chase Bank | USD | 4,804,452 | JPY | 385,800,000 | 09/06/11 | (10,521 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 252,054 | KRW | 273,000,000 | 09/06/11 | 2,625 | |||||||||||||
| JPMorgan Chase Bank | USD | 2,621,419 | MXN | 31,450,000 | 09/06/11 | 49,081 | |||||||||||||
| JPMorgan Chase Bank | USD | 212,230 | MYR | 649,000 | 09/06/11 | 1,656 | |||||||||||||
| JPMorgan Chase Bank | USD | 4,337,670 | SEK | 27,670,000 | 09/06/11 | 20,236 | |||||||||||||
| JPMorgan Chase Bank | USD | 3,729,160 | SGD | 4,615,000 | 09/06/11 | 28,096 | |||||||||||||
| JPMorgan Chase Bank | USD | 203,728 | THB | 6,340,000 | 09/06/11 | 1,667 | |||||||||||||
| JPMorgan Chase Bank | ZAR | 9,150,000 | USD | 1,329,241 | 09/06/11 | (11,136 | ) | ||||||||||||
| Morgan Stanley & Co., Inc. | SEK | 16,496,014 | EUR | 1,790,000 | 09/06/11 | (6,973 | ) | ||||||||||||
| Net unrealized depreciation on forward foreign currency contracts | $ | (173,595 | ) | ||||||||||||||||
10
UBS Global Equity Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 52,017,240 | $ | 59,176,519 | $ | — | $ | 111,193,759 | |||||||||||
| Preferred stock | — | 2,004,847 | — | 2,004,847 | |||||||||||||||
| Participation note | — | 923,139 | — | 923,139 | |||||||||||||||
| Short-term investment | — | 71,213 | — | 71,213 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 3,462,365 | — | 3,462,365 | |||||||||||||||
| Forward foreign currency contracts | — | (173,595 | ) | — | (173,595 | ) | |||||||||||||
| Total | $ | 52,017,240 | $ | 65,464,488 | $ | — | $ | 117,481,728 | |||||||||||
See accompanying notes to financial statements.
11
UBS International Equity Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS International Equity Fund (the "Fund") returned 28.14% (Class A shares returned 21.01% after the deduction of the maximum sales charge), while Class Y shares returned 28.46%. The Fund's benchmark, the MSCI World Free ex USA Index (net) (the "Index"), returned 30.33% over the same time period. (Class Y shares have lower expenses than other share classes in the series. Returns for all share classes over various time periods are shown on page 15; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a strong absolute return, but underperformed its benchmark Index during the reporting period, primarily due to overall stock selection.
Portfolio performance summary1
What worked
• Several individual stocks contributed to performance during the period.
– Vancouver-based Western Coal Corp. was the largest contributor to the Fund's performance. The company reported impressive production gains and benefited from rising coal prices. In November 2010, southern Appalachia coal company Walter Energy agreed to purchase Western Coal at more than a 50% premium to its share price. We subsequently sold our position in Western Coal.
– Hyundai Mobis is the largest auto parts company in Korea and a member of the Hyundai Motor Group. Its share price rose as the company reported strong auto sales in Korea, which was driven by rising global auto demand and robust interest in its new model lineup.
– Volkswagen is Europe's largest auto manufacturer, with substantial operations in Asia and the Americas. Volkswagen has experienced improving business fundamentals, as sales volumes in Europe have risen and the company increased market share year-over-year in most markets. Volkswagen is also strengthening its market presence in the US as it opened a new low-cost assembly plant. In addition, we feel that the US version of the Jetta will be successful in returning Volkswagen's US operations to profitability.
– Tokyo Electric Power Co. is a distributor of electricity in the Kanto area of Japan. The company suffered due to the March 2011 earthquake and resulting tsunami in Japan, which damaged its nuclear reactors. The Fund's relative performance benefited by not holding the stock, as it fell sharply over the period.
• Sector allocation decisions positively contributed to relative performance in a number of areas. The Fund's overall sector allocations are a byproduct of our bottom-up stock selection process. During the reporting period, an underweight to the defensive utilities sector was beneficial to the Fund's relative performance. Overweights to the more cyclical consumer discretionary and industrials sectors were also positive for performance.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
12
UBS International Equity Fund
What didn't work
• Overall, individual stock selection had a negative impact on performance.
– Lloyds Banking Group, a major British financial institution, was the largest detractor from the Fund's results during the reporting period. The company announced disappointing earnings results over the period, while concerns regarding valuations in its balance sheet and the company's exposure to distressed assets also dragged down its shares.
– Research in Motion, the manufacturer of the Blackberry mobile device, saw its shares move sharply lower during the period, and we eliminated the stock in June 2011. (For additional details, see "Portfolio highlights.")
– Sino-Ocean Land Holdings2 is an investment holding company that operates as a real estate development company in China. Its shares suffered due to negative investor sentiment stemming from the Chinese government's decision to raise interest rates and lending requirements, as it sought to temper economic growth in the face of rising inflation.
– Youku.com is the leading Chinese online video content website. Its shares performed poorly due to concerns of accounting fraud. In addition, we believe that investor profit-taking, following a period of very strong performance, negatively impacted Youku.com's performance. However, we believe the company is well-positioned for growth, as evidenced by a recent cooperative agreement with Warner Brothers to add between 400 and 450 movie titles to Youku's video-on-demand channel.
• Sector allocations in several areas detracted from results. During the reporting period, an overweight to the information technology sector and an underweight to the materials sector were negative for the Fund's relative performance.
Portfolio highlights
• Naspers is a South Africa-based multinational media company. We believe it offers attractive exposure to the media industry in the underdeveloped and growing African continent, and the BRIC countries (Brazil, Russia, India and China). Naspers has a significant interest in Tencent Holdings Limited, an operator of an instant messaging platform in China. Tencent Holdings' shares rose sharply in the Chinese stock market during the reporting period, which helped to drive the shares of Naspers higher.
• Baidu Inc. is the dominant Chinese Internet search engine and provider of online Internet advertising. Baidu, which commands over 70% of the Chinese search market, has been the largest beneficiary of US Internet company Google's gradual withdrawal from China over censorship issues related to its Internet search business in China. With increased scale and faster-than-expected top line growth, the company continues to deliver improving operating margin expansion above market expectations. We view Baidu as one of the best opportunities to capitalize on increasing Internet advertising spending in the still nascent, but rapidly growing, Chinese Internet and e-commerce market.
• Research in Motion's (RIM) new product delays led to a profit warning which, coupled with market share loss data in the US, caused its share price to fall sharply. While the company's issues in its US operations were not unexpected, its weakness outside of the US was a surprise and contrary to our thesis. While RIM's stock could rebound, especially given its very low valuation, we sold out of the position due to the risks associated with its global business prospects.
2 As of June 30, 2011, this position was no longer held by the Fund.
13
UBS International Equity Fund
• New World Development Company is a real estate development company headquartered in Hong Kong. Its shares declined during the reporting period as rising interest rates in the country triggered slower growth in real estate prices.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
14
UBS International Equity Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 28.14 | % | 1.85 | % | 4.77 | % | 3.43 | % | |||||||||||
| Class B3 | 27.27 | 1.12 | N/A | 5.736 | |||||||||||||||
| Class C4 | 27.14 | 1.08 | N/A | 5.38 | |||||||||||||||
| Class Y5 | 28.46 | 2.06 | 4.99 | 5.03 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 21.01 | % | 0.70 | % | 4.17 | % | 3.02 | % | |||||||||||
| Class B3 | 22.27 | 0.82 | N/A | 5.736 | |||||||||||||||
| Class C4 | 26.14 | 1.08 | N/A | 5.38 | |||||||||||||||
| MSCI World Free ex USA Index (net)7 | 30.33 | % | 2.02 | % | 6.13 | % | 5.58 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.76% and 1.25%; Class B—2.56% and 2.00%; Class C—2.56% and 2.00%; Class Y—1.55% 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. UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), has agreed irrevocably to waive its fees and reimburse certain expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) 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 June 30, 1997. Inception dates of Class B and Class C shares are February 12, 2002 and January 25, 2002, respectively. Inception date of Class Y shares and the index is August 31, 1993.
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. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The MSCI World Free ex USA Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets excluding the United States. As of May 2010, the index consisted of 23 developed market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is contructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
15
UBS International Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS International Equity Fund Class A and Class Y shares versus the MSCI World Free ex USA Index (net) over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
16
UBS International Equity Fund
Top ten equity holdings (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
| BNP Paribas SA | 1.7 | % | |||||
| Novartis AG | 1.6 | ||||||
| BP PLC | 1.5 | ||||||
| Volkswagen AG, Preference shares | 1.4 | ||||||
| Rio Tinto PLC | 1.4 | ||||||
| Suncor Energy, Inc. | 1.3 | ||||||
| Hyundai Mobis | 1.3 | ||||||
| Imperial Tobacco Group PLC | 1.2 | ||||||
| Telenor ASA | 1.2 | ||||||
| Vodafone Group PLC | 1.2 | ||||||
| Total | 13.8 | % | |||||
Country exposure by issuer, top five (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
| United Kingdom | 17.0 | % | |||||
| Japan | 14.2 | ||||||
| Germany | 10.1 | ||||||
| Canada | 6.6 | ||||||
| China | 6.5 | ||||||
| Total | 54.4 | % | |||||
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 0.74 | % | |||||
| Airlines | 0.88 | ||||||
| Auto components | 2.02 | ||||||
| Automobiles | 1.59 | ||||||
| Beverages | 1.15 | ||||||
| Building products | 1.42 | ||||||
| Capital markets | 0.44 | ||||||
| Chemicals | 3.63 | ||||||
| Commercial banks | 13.48 | ||||||
| Commercial services & supplies | 0.93 | ||||||
| Computers & peripherals | 0.54 | ||||||
| Construction & engineering | 1.44 | ||||||
| Construction materials | 0.74 | ||||||
| Diversified financial services | 1.32 | ||||||
| Diversified telecommunication services | 1.18 | ||||||
| Electric utilities | 1.36 | ||||||
| Electrical equipment | 0.42 | ||||||
| Electronic equipment, instruments & components | 1.63 | ||||||
| Energy equipment & services | 1.96 | ||||||
| Food & staples retailing | 1.48 | ||||||
| Food products | 1.18 | ||||||
| Health care equipment & supplies | 0.58 | ||||||
| Health care providers & services | 1.08 | ||||||
| Hotels, restaurants & leisure | 1.84 | ||||||
| Household durables | 0.29 | ||||||
| Household products | 0.52 | ||||||
| Industrial conglomerates | 0.42 | ||||||
| Insurance | 4.06 | ||||||
| Internet software & services | 1.60 | ||||||
| Leisure equipment & products | 0.71 | ||||||
| Machinery | 6.30 | ||||||
| Media | 2.52 | ||||||
| Metals & mining | 7.26 | ||||||
| Multiline retail | 0.22 | ||||||
| Office electronics | 0.27 | ||||||
| Oil, gas & consumable fuels | 9.27 | ||||||
| Personal products | 0.63 | ||||||
| Pharmaceuticals | 3.92 | ||||||
| Professional services | 0.81 | ||||||
| Real estate management & development | 0.45 | ||||||
| Semiconductors & semiconductor equipment | 3.16 | ||||||
| Software | 1.30 | ||||||
| Specialty retail | 0.96 | ||||||
| Textiles, apparel & luxury goods | 1.41 | ||||||
| Thrifts & mortgage finance | 0.41 | ||||||
| Tobacco | 1.63 | ||||||
| Trading companies & distributors | 1.70 | ||||||
| Wireless telecommunication services | 2.74 | ||||||
| Total common stocks | 95.59 | % | |||||
| Preferred stock | 1.41 | ||||||
| Participation note | 0.52 | ||||||
| Short-term investment | 1.33 | ||||||
| Investment of cash collateral from securities loaned | 5.61 | ||||||
| Total investments | 104.46 | % | |||||
| Liabilities, in excess of cash and other assets | (4.46 | ) | |||||
| Net assets | 100.00 | % | |||||
17
UBS International Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 95.59% | |||||||||||
| Australia: 3.22% | |||||||||||
| Alumina Ltd. | 55,507 | $ | 127,081 | ||||||||
| BHP Billiton Ltd. | 1,969 | 93,061 | |||||||||
| Incitec Pivot Ltd. | 27,811 | 115,897 | |||||||||
| Mount Gibson Iron Ltd.* | 27,096 | 53,801 | |||||||||
| National Australia Bank Ltd. | 4,058 | 111,961 | |||||||||
| Orica Ltd. | 9,484 | 275,046 | |||||||||
| Qantas Airways Ltd.* | 70,630 | 140,003 | |||||||||
| Total Australia common stocks | 916,850 | ||||||||||
| Belgium: 0.24% | |||||||||||
| Anheuser-Busch InBev NV | 1,178 | 68,307 | |||||||||
| Brazil: 1.49% | |||||||||||
| Cia Hering | 5,700 | 131,118 | |||||||||
| Vale SA ADR | 9,200 | 293,940 | |||||||||
| Total Brazil common stocks | 425,058 | ||||||||||
| Canada: 6.60% | |||||||||||
| Bombardier, Inc., Class B | 24,200 | 174,390 | |||||||||
| Canadian Oil Sands Ltd. | 6,400 | 184,677 | |||||||||
| Gran Tierra Energy, Inc.* | 28,300 | 186,329 | |||||||||
| Imax Corp.* | 2,600 | 84,318 | |||||||||
| Petrobank Energy & Resources Ltd.* | 10,100 | 148,288 | |||||||||
| Petrominerales Ltd.1 | 7,700 | 226,022 | |||||||||
| Royal Bank of Canada | 4,400 | 251,513 | |||||||||
| Suncor Energy, Inc. | 9,600 | 376,256 | |||||||||
| Teck Resources Ltd., Class B | 2,400 | 121,985 | |||||||||
| Trican Well Service Ltd.1 | 5,400 | 126,874 | |||||||||
| Total Canada common stocks | 1,880,652 | ||||||||||
| China: 6.48% | |||||||||||
| AIA Group Ltd.* | 78,038 | 271,602 | |||||||||
| Baidu, Inc. ADR* | 2,100 | 294,273 | |||||||||
| China Construction Bank Corp., H Shares | 375,280 | 312,354 | |||||||||
| China Merchants Bank Co., Ltd., H Shares | 86,259 | 209,495 | |||||||||
| Ctrip.com International Ltd. ADR* | 2,400 | 103,392 | |||||||||
| Dongfang Electric Corp. Ltd., H Shares | 32,000 | 119,142 | |||||||||
| Intime Department Store Group Co., Ltd. | 37,000 | 62,927 | |||||||||
| Melco Crown Entertainment Ltd. ADR*1 | 8,100 | 103,437 | |||||||||
| New World Development Ltd. | 84,000 | 127,598 | |||||||||
| Sina Corp.*1 | 900 | 93,690 | |||||||||
| Xinyi Glass Holdings Ltd. | 78,000 | 77,743 | |||||||||
| Youku.com, Inc. ADR*1 | 2,000 | 68,700 | |||||||||
| Total China common stocks | 1,844,353 | ||||||||||
| Denmark: 1.67% | |||||||||||
| FLSmidth & Co. A/S | 3,485 | 296,367 | |||||||||
| Novo Nordisk A/S, Class B | 1,437 | 180,161 | |||||||||
| Total Denmark common stocks | 476,528 | ||||||||||
| Shares | Value | ||||||||||
| Finland: 1.18% | |||||||||||
| Sampo Oyj, Class A | 6,865 | $ | 221,654 | ||||||||
| YIT Oyj | 4,569 | 114,229 | |||||||||
| Total Finland common stocks | 335,883 | ||||||||||
| France: 3.18% | |||||||||||
| BNP Paribas SA | 6,438 | 496,534 | |||||||||
| Carrefour SA1 | 6,838 | 280,842 | |||||||||
| Valeo SA1 | 1,865 | 127,338 | |||||||||
| Total France common stocks | 904,714 | ||||||||||
| Germany: 8.72% | |||||||||||
| Aareal Bank AG* | 3,409 | 116,683 | |||||||||
| Aixtron SE NA1 | 2,685 | 91,636 | |||||||||
| Bayer AG | 2,817 | 226,476 | |||||||||
| Beiersdorf AG NPV | 2,774 | 180,011 | |||||||||
| Dialog Semiconductor PLC* | 4,650 | 84,511 | |||||||||
| E.ON AG | 7,460 | 211,774 | |||||||||
| Fresenius Medical Care AG & Co. KGaA | 4,132 | 308,932 | |||||||||
| GEA Group AG | 3,995 | 142,857 | |||||||||
| HeidelbergCement AG | 3,318 | 211,514 | |||||||||
| Kabel Deutschland Holding AG* | 2,438 | 149,900 | |||||||||
| Lanxess AG | 1,382 | 113,300 | |||||||||
| MAN SE1 | 1,433 | 190,930 | |||||||||
| Metro AG | 2,339 | 141,594 | |||||||||
| SAP AG | 2,691 | 162,757 | |||||||||
| ThyssenKrupp AG | 2,926 | 151,787 | |||||||||
| Total Germany common stocks | 2,484,662 | ||||||||||
| Hong Kong: 0.77% | |||||||||||
| Hong Kong Exchanges & Clearing Ltd. | 6,200 | 130,526 | |||||||||
| Shangri-La Asia Ltd. | 36,000 | 88,662 | |||||||||
| Total Hong Kong common stocks | 219,188 | ||||||||||
| Indonesia: 1.67% | |||||||||||
| Astra International Tbk PT | 21,500 | 159,524 | |||||||||
| Bank Rakyat Indonesia PT | 416,000 | 316,514 | |||||||||
| Total Indonesia common stocks | 476,038 | ||||||||||
| Ireland: 0.39% | |||||||||||
| Ryanair Holdings PLC ADR | 3,800 | 111,492 | |||||||||
| Israel: 0.42% | |||||||||||
| Teva Pharmaceutical Industries Ltd. | 2,473 | 119,224 | |||||||||
| Italy: 2.36% | |||||||||||
| DiaSorin SpA | 1,200 | 57,602 | |||||||||
| Fiat Industrial SpA* | 22,105 | 285,768 | |||||||||
| Saipem SpA | 4,031 | 208,115 | |||||||||
| Tod's SpA | 902 | 120,605 | |||||||||
| Total Italy common stocks | 672,090 | ||||||||||
18
UBS International Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| Japan: 14.21% | |||||||||||
| Asahi Glass Co., Ltd.1 | 28,000 | $ | 326,944 | ||||||||
| Canon, Inc. | 1,600 | 76,299 | |||||||||
| Denki Kagaku Kogyo KK | 32,000 | 154,145 | |||||||||
| Disco Corp. | 2,000 | 126,771 | |||||||||
| FANUC Corp. | 1,600 | 266,803 | |||||||||
| Ibiden Co., Ltd. | 2,900 | 90,702 | |||||||||
| Isuzu Motors Ltd. | 30,000 | 142,165 | |||||||||
| ITOCHU Corp. | 31,500 | 327,669 | |||||||||
| KDDI Corp. | 23 | 165,487 | |||||||||
| Komatsu Ltd. | 6,200 | 192,902 | |||||||||
| Makino Milling Machine Co., Ltd. | 12,000 | 111,698 | |||||||||
| Mitsubishi Corp. | 6,200 | 155,341 | |||||||||
| Mitsubishi UFJ Financial Group, Inc. | 14,700 | 71,564 | |||||||||
| Nippon Sheet Glass Co., Ltd. | 25,000 | 77,616 | |||||||||
| Nissan Motor Co., Ltd. | 14,500 | 152,210 | |||||||||
| ORIX Corp. | 1,350 | 131,328 | |||||||||
| OSAKA Titanium Technologies Co.1 | 2,100 | 154,201 | |||||||||
| Sankyo Co., Ltd. | 3,900 | 201,562 | |||||||||
| Shin-Etsu Chemical Co., Ltd. | 3,300 | 177,009 | |||||||||
| Sony Financial Holdings, Inc. | 16,400 | 296,542 | |||||||||
| Sumitomo Mitsui Financial Group, Inc. | 8,100 | 249,285 | |||||||||
| THK Co., Ltd. | 11,900 | 302,919 | |||||||||
| Toshiba Corp. | 18,000 | 95,264 | |||||||||
| Total Japan common stocks | 4,046,426 | ||||||||||
| Luxembourg: 1.03% | |||||||||||
| ArcelorMittal | 8,436 | 293,550 | |||||||||
| Malaysia: 0.50% | |||||||||||
| Petronas Chemicals Group Bhd* | 60,700 | 142,681 | |||||||||
| Netherlands: 4.16% | |||||||||||
| ASM International NV | 2,050 | 80,902 | |||||||||
| ASML Holding NV | 6,510 | 239,845 | |||||||||
| Gemalto NV | 1,234 | 59,000 | |||||||||
| Heineken NV | 4,323 | 260,015 | |||||||||
| ING Groep NV CVA* | 9,325 | 115,027 | |||||||||
| Royal Dutch Shell PLC, Class A | 5,316 | 189,421 | |||||||||
| Wolters Kluwer NV | 10,916 | 241,892 | |||||||||
| Total Netherlands common stocks | 1,186,102 | ||||||||||
| Norway: 2.44% | |||||||||||
| Petroleum Geo-Services ASA* | 6,163 | 88,083 | |||||||||
| Storebrand ASA | 15,973 | 136,078 | |||||||||
| Subsea 7 SA* | 5,277 | 134,987 | |||||||||
| Telenor ASA | 20,430 | 334,574 | |||||||||
| Total Norway common stocks | 693,722 | ||||||||||
| Russia: 2.83% | |||||||||||
| Gazprom OAO ADR* | 14,412 | 211,086 | |||||||||
| Shares | Value | ||||||||||
| Mobile Telesystems OJSC ADR | 5,950 | $ | 113,169 | ||||||||
| NovaTek OAO GDR2 | 1,022 | 141,148 | |||||||||
| Sberbank of Russia Federation | 72,041 | 265,751 | |||||||||
| VTB Bank OJSC GDR2 | 11,938 | 73,533 | |||||||||
| Total Russia common stocks | 804,687 | ||||||||||
| Singapore: 1.18% | |||||||||||
| Biosensors International Group Ltd.* | 103,000 | 108,177 | |||||||||
| DBS Group Holdings Ltd. | 266 | 3,187 | |||||||||
| Golden Agri-Resources Ltd. | 190,000 | 105,591 | |||||||||
| Keppel Corp. Ltd. | 13,200 | 119,437 | |||||||||
| Total Singapore common stocks | 336,392 | ||||||||||
| South Africa: 1.45% | |||||||||||
| MTN Group Ltd. | 8,069 | 171,928 | |||||||||
| Naspers Ltd., Class N | 4,252 | 240,640 | |||||||||
| Total South Africa common stocks | 412,568 | ||||||||||
| South Korea: 2.26% | |||||||||||
| Hyundai Mobis | 984 | 369,264 | |||||||||
| Samsung Electronics Co., Ltd. | 354 | 275,143 | |||||||||
| Total South Korea common stocks | 644,407 | ||||||||||
| Spain: 1.63% | |||||||||||
| Banco Santander SA | 23,023 | 265,650 | |||||||||
| Inditex SA | 1,553 | 141,815 | |||||||||
| Viscofan SA | 1,397 | 55,658 | |||||||||
| Total Spain common stocks | 463,123 | ||||||||||
| Sweden: 1.63% | |||||||||||
| JM AB NPV | 3,499 | 82,503 | |||||||||
|
Skandinaviska Enskilda Banken AB, Class A |
13,661 | 111,668 | |||||||||
| Swedish Match AB | 3,742 | 125,483 | |||||||||
| Volvo AB, Class B | 8,217 | 143,560 | |||||||||
| Total Sweden common stocks | 463,214 | ||||||||||
| Switzerland: 4.67% | |||||||||||
| Cie Financiere Richemont SA, Class A | 1,917 | 125,531 | |||||||||
| GAM Holding AG* | 7,571 | 124,230 | |||||||||
| Meyer Burger Technology AG*1 | 1,222 | 53,978 | |||||||||
| Nestle SA | 2,798 | 173,893 | |||||||||
| Novartis AG | 7,613 | 466,353 | |||||||||
| SGS SA | 122 | 231,606 | |||||||||
| Swatch Group AG | 1,707 | 153,299 | |||||||||
| Total Switzerland common stocks | 1,328,890 | ||||||||||
| Taiwan: 1.31% | |||||||||||
| AU Optronics Corp.* | 104,000 | 71,261 | |||||||||
| HON HAI Precision Industry Co., Ltd. | 87,624 | 302,251 | |||||||||
| Total Taiwan common stocks | 373,512 | ||||||||||
19
UBS International Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| Thailand: 0.92% | |||||||||||
| Kasikornbank PCL | 64,200 | $ | 262,335 | ||||||||
| United Kingdom: 16.98% | |||||||||||
| Afren PLC* | 34,299 | 86,927 | |||||||||
| Aggreko PLC | 8,581 | 265,679 | |||||||||
| Anglo American PLC | 1,867 | 92,524 | |||||||||
| Barclays PLC | 71,563 | 294,568 | |||||||||
| BG Group PLC | 7,424 | 168,492 | |||||||||
| BP PLC | 58,656 | 432,177 | |||||||||
| Carnival PLC | 5,911 | 229,102 | |||||||||
| Cobham PLC | 10,687 | 36,268 | |||||||||
| Croda International PLC | 1,872 | 56,696 | |||||||||
| HSBC Holdings PLC | 17,772 | 176,307 | |||||||||
| Imperial Tobacco Group PLC | 10,203 | 339,233 | |||||||||
| Lloyds Banking Group PLC* | 239,060 | 187,845 | |||||||||
| Prudential PLC | 19,958 | 230,645 | |||||||||
| Reckitt Benckiser Group PLC | 2,689 | 148,468 | |||||||||
| Rio Tinto PLC | 5,449 | 393,468 | |||||||||
| Sage Group PLC | 44,814 | 207,799 | |||||||||
| Scottish & Southern Energy PLC | 7,904 | 176,790 | |||||||||
| Shire PLC | 4,007 | 125,089 | |||||||||
| Standard Chartered PLC | 6,805 | 178,819 | |||||||||
| Tullow Oil PLC | 14,501 | 288,611 | |||||||||
| Vodafone Group PLC | 123,571 | 328,406 | |||||||||
| Weir Group PLC | 2,990 | 102,078 | |||||||||
| Xstrata PLC | 13,213 | 291,398 | |||||||||
| Total United Kingdom common stocks | 4,837,389 | ||||||||||
|
Total common stocks (cost $22,377,539) |
27,224,037 | ||||||||||
| Shares | Value | ||||||||||
| Preferred stock: 1.41% | |||||||||||
| Germany: 1.41% | |||||||||||
|
Volkswagen AG, Preference shares (cost $231,923) |
1,953 | $ | 402,660 | ||||||||
| Participation note: 0.52% | |||||||||||
| India: 0.52% | |||||||||||
|
Housing Development & Infrastructure Limited, expires 08/10/12* (cost $206,645) |
41,383 | 147,841 | |||||||||
| Short-term investment: 1.33% | |||||||||||
| Investment company: 1.33% | |||||||||||
|
UBS Cash Management Prime Relationship Fund3 (cost $379,602) |
379,602 | 379,602 | |||||||||
| Investment of cash collateral from securities loaned: 5.61% | |||||||||||
|
UBS Private Money Market Fund LLC3 (cost $1,597,843) |
1,597,843 | 1,597,843 | |||||||||
|
Total investments: 104.46% (cost $24,793,552) |
29,751,983 | ||||||||||
|
Liabilities, in excess of cash and other assets: (4.46)% |
(1,269,887 | ) | |||||||||
| Net assets: 100.00% | $ | 28,482,096 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, was $25,533,187; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 4,994,878 | |||||
| Gross unrealized depreciation | (776,082 | ) | |||||
| Net unrealized appreciation of investments | $ | 4,218,796 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
2 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of these securities amounted to $214,681 or 0.75% of net assets.
20
UBS International Equity Fund
Portfolio of investments
June 30, 2011
3 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 722,032 | $ | 12,177,434 | $ | 12,519,864 | $ | 379,602 | $ | 1,199 | |||||||||||||
| UBS Private Money Market Fund LLCa | 471,729 | 13,849,455 | 12,723,341 | 1,597,843 | 380 | ||||||||||||||||||
| $ | 1,193,761 | $ | 26,026,889 | $ | 25,243,205 | $ | 1,977,445 | $ | 1,579 | ||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| JPMorgan Chase Bank | AUD | 150,000 | USD | 156,941 | 09/06/11 | $ | (2,623 | ) | |||||||||||
| JPMorgan Chase Bank | BRL | 630,000 | USD | 389,490 | 09/06/11 | (8,327 | ) | ||||||||||||
| JPMorgan Chase Bank | DKK | 720,000 | USD | 138,303 | 09/06/11 | (1,460 | ) | ||||||||||||
| JPMorgan Chase Bank | EUR | 160,000 | USD | 231,788 | 09/06/11 | 184 | |||||||||||||
| JPMorgan Chase Bank | EUR | 755,000 | USD | 1,080,764 | 09/06/11 | (12,121 | ) | ||||||||||||
| JPMorgan Chase Bank | HKD | 3,080,000 | USD | 395,849 | 09/06/11 | (112 | ) | ||||||||||||
| JPMorgan Chase Bank | JPY | 22,900,000 | USD | 284,548 | 09/06/11 | (6 | ) | ||||||||||||
| JPMorgan Chase Bank | KRW | 558,000,000 | USD | 511,575 | 09/06/11 | (8,979 | ) | ||||||||||||
| JPMorgan Chase Bank | MYR | 458,000 | USD | 150,115 | 09/06/11 | (825 | ) | ||||||||||||
| JPMorgan Chase Bank | NOK | 3,300,000 | USD | 599,956 | 09/06/11 | (9,146 | ) | ||||||||||||
| JPMorgan Chase Bank | THB | 7,880,000 | USD | 257,019 | 09/06/11 | 1,733 | |||||||||||||
| JPMorgan Chase Bank | TWD | 11,600,000 | USD | 402,778 | 09/06/11 | (1,371 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 331,950 | CAD | 325,000 | 09/06/11 | 4,482 | |||||||||||||
| JPMorgan Chase Bank | USD | 412,243 | CHF | 345,000 | 09/06/11 | (1,739 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 249,567 | CHF | 210,000 | 09/06/11 | 305 | |||||||||||||
| JPMorgan Chase Bank | USD | 173,303 | EUR | 120,000 | 09/06/11 | 401 | |||||||||||||
| JPMorgan Chase Bank | USD | 1,570,254 | JPY | 126,100,000 | 09/06/11 | (3,342 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 232,089 | KRW | 253,000,000 | 09/06/11 | 3,933 | |||||||||||||
| JPMorgan Chase Bank | USD | 177,540 | MXN | 2,130,000 | 09/06/11 | 3,324 | |||||||||||||
| JPMorgan Chase Bank | USD | 186,465 | PLN | 515,000 | 09/06/11 | 57 | |||||||||||||
| JPMorgan Chase Bank | USD | 406,020 | SEK | 2,590,000 | 09/06/11 | 1,894 | |||||||||||||
| JPMorgan Chase Bank | USD | 315,140 | SGD | 390,000 | 09/06/11 | 2,374 | |||||||||||||
| JPMorgan Chase Bank | ZAR | 3,230,000 | USD | 469,229 | 09/06/11 | (3,931 | ) | ||||||||||||
| Morgan Stanley & Co., Inc. | SEK | 1,797,052 | EUR | 195,000 | 09/06/11 | (760 | ) | ||||||||||||
| Net unrealized depreciation on forward foreign currency contracts | $ | (36,055 | ) | ||||||||||||||||
21
UBS International Equity Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 3,193,862 | $ | 24,030,175 | $ | — | $ | 27,224,037 | |||||||||||
| Preferred stock | — | 402,660 | — | 402,660 | |||||||||||||||
| Participation note | — | 147,841 | — | 147,841 | |||||||||||||||
| Short-term investment | — | 379,602 | — | 379,602 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 1,597,843 | — | 1,597,843 | |||||||||||||||
| Forward foreign currency contracts | — | (36,055 | ) | — | (36,055 | ) | |||||||||||||
| Total | $ | 3,193,862 | $ | 26,522,066 | $ | — | $ | 29,715,928 | |||||||||||
See accompanying notes to financial statements.
22
UBS Market Neutral Multi-Strategy Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Market Neutral Multi-Strategy Fund (the "Fund") declined 3.00% (Class A shares declined 8.32% after the deduction of the maximum sales charge), while Class Y shares declined 2.70%. The Fund's benchmark, the Citigroup Three-Month US Treasury Bill Index (the "Index"), returned 0.14% 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 25; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect fees and expenses.)
The Fund generated a negative return during the reporting period and lagged the Index. For a portion of the period, the Fund's portfolio was allocated among five unique components, or "sleeves," consisting of US fundamental, European fundamental, global quantitative, event-driven and concentrated European disciplines. The Fund's underperformance was driven by the negative returns generated by the concentrated European and European fundamental sleeves.
During the reporting period, Japanese futures were used to hedge stock-specific exposure, while currency forwards were used to reduce an unwanted currency exposure. The use of these derivatives during the period were successful in helping to manage the Fund's overall risk.
Portfolio performance summary1
What worked
• The global quantitative sleeve was the largest contributor to performance during the reporting period. The global quantitative sleeve is based on our proprietary multi-factor model that captures key fundamental-driven investment themes: valuation, capital use, quality, growth and market behavior. Each factor is designed to have zero correlation to all other factors. During the period, our research indicated that strong growth would continue in emerging market countries and, therefore, we selectively invested in companies that had exposure to these countries. Our research further indicated that momentum stocks (including those in emerging market countries) would generate strong results, and we likewise positioned the sleeve to benefit accordingly. Both of these positions generated strong performance over the period.
• Overall, the event-driven sleeve modestly added value over the 12-months ended June 30, 2011. The event-driven sleeve seeks to identify and capitalize on specific events, such as changes in major global equity indexes. The Fund benefited the most from positions triggered by changes to the Russell 2000 Index.
• The US fundamental sleeve was slightly positive for performance. This sleeve added minimal value, as macro events tended to drive the global equity markets, rather than fundamental stock-specific factors.
• Our strategic allocation among the various sleeves was beneficial. In particular, allocating a larger portion of the Fund's portfolio to the global quantitative sleeve, and a smaller portion to the concentrated European and European fundamental sleeves, was positive for performance.
What didn't work
• The concentrated European sleeve significantly detracted from performance. As its name implies, this sleeve takes larger positions in a relatively small number of stocks. Within this sleeve, having an overweight to higher quality companies and an underweight to more cyclical companies was a negative for performance. As the
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
23
UBS Market Neutral Multi-Strategy Fund
reporting period progressed, investor risk aversion abated, which resulted in the outperformance of lower quality companies. In addition, robust growth in emerging market countries led to strong results for cyclical European companies.
Given a change in the lead manager in early 2011, we chose to eliminate the sleeve from the Fund's portfolio.
• The European fundamental sleeve has produced disappointing results since its inclusion early this year. The European sovereign debt crisis hurt the performance of this sleeve as undervalued, economically-sensitive stocks generated weak results. The manager's decision to emphasize undervalued European companies that, in its view, would benefit from improving economic conditions, has yet to be rewarded. We believe macro concerns have swamped any fundamental valuations for the time being, but we do not expect this situation to be permanent, or even necessarily to last as long as the debt crisis lasts.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
24
UBS Market Neutral Multi-Strategy Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | Inception1 | ||||||||||
| Before deducting maximum sales charge | |||||||||||
| Class A2 | (3.00 | )% | (3.00 | )% | |||||||
| Class C3 | (3.60 | ) | (3.60 | ) | |||||||
| Class Y4 | (2.70 | ) | (2.70 | ) | |||||||
| After deducting maximum sales charge | |||||||||||
| Class A2 | (8.32 | )% | (8.32 | )% | |||||||
| Class C3 | (4.56 | ) | (4.56 | ) | |||||||
| Citigroup Three-Month US Treasury Bill Index5 | 0.14 | % | 0.14 | % | |||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—4.13% and 3.55%; Class C—4.88% and 4.30%; Class Y—3.88% and 3.30%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, do not exceed 1.75% for Class A shares, 2.50% for Class C shares and 1.50% for Class Y shares. 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 Market Neutral Multi-Strategy Fund and the index is June 30, 2010.
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 Citigroup Three-Month US Treasury Bill Index is an unmanaged index reflecting monthly return equivalents of yield averages that are not marked to the market and an average of the last three 3-month T-bill month-end rates. 3-month T-bills are the short-term debt obligations of the US government. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
25
UBS Market Neutral Multi-Strategy Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Market Neutral Multi-Strategy Fund Class A and Class Y shares versus the Citigroup Three-Month US Treasury Bill Index from June 30, 2010, which is the inception date of the two classes, through June 30, 2011. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
26
UBS Market Neutral Multi-Strategy Fund
Top ten equity holdings (unaudited)1,2
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Enagas SA | 1.3 | % | |||||
| Imperial Tobacco Group PLC | 1.3 | ||||||
| Telenor ASA | 1.2 | ||||||
| Xstrata PLC | 1.1 | ||||||
| Linde AG | 1.1 | ||||||
| BAE Systems PLC | 1.1 | ||||||
| Sampo Oyj, Class A | 1.1 | ||||||
| Illinois Tool Works, Inc. | 1.0 | ||||||
| Finmeccanica SpA | 1.0 | ||||||
| Vedanta Resources PLC | 1.0 | ||||||
| Total | 11.2 | % | |||||
1 Only long positions are considered for top ten holdings.
2 Figures represent the direct investments of UBS Market Neutral Multi-Strategy Fund. Figures would be different if a breakdown of the underlying investment companies diversification and derivatives exposure was included.
27
UBS Market Neutral Multi-Strategy Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 3.01 | % | |||||
| Air freight & logistics | 1.21 | ||||||
| Airlines | 0.84 | ||||||
| Auto components | 0.41 | ||||||
| Automobiles | 0.41 | ||||||
| Beverages | 2.02 | ||||||
| Biotechnology | 2.10 | ||||||
| Building products | 0.24 | ||||||
| Capital markets | 1.57 | ||||||
| Chemicals | 2.56 | ||||||
| Commercial banks | 1.86 | ||||||
| Communications equipment | 0.84 | ||||||
| Computers & peripherals | 1.48 | ||||||
| Construction & engineering | 1.08 | ||||||
| Consumer finance | 0.21 | ||||||
| Containers & packaging | 0.10 | ||||||
| Distributors | 0.18 | ||||||
| Diversified consumer services | 0.84 | ||||||
| Diversified financial services | 0.21 | ||||||
| Diversified telecommunication services | 3.51 | ||||||
| Electric utilities | 4.35 | ||||||
| Electrical equipment | 0.41 | ||||||
| Electronic equipment, instruments & components | 0.60 | ||||||
| Energy equipment & services | 1.74 | ||||||
| Food & staples retailing | 1.78 | ||||||
| Food products | 1.71 | ||||||
| Gas utilities | 1.41 | ||||||
| Health care equipment & supplies | 2.00 | ||||||
| Health care providers & services | 1.86 | ||||||
| Health care technology | 0.11 | ||||||
| Hotels, restaurants & leisure | 0.69 | ||||||
| Household durables | 0.58 | ||||||
| Household products | 0.35 | ||||||
| Independent power producers & energy traders | 0.37 | ||||||
| Industrial conglomerates | 0.67 | ||||||
| Insurance | 2.18 | ||||||
| Internet & catalog retail | 0.69 | ||||||
| IT services | 1.81 | ||||||
| Leisure equipment & products | 0.30 | ||||||
| Life sciences tools & services | 0.44 | ||||||
| Machinery | 2.98 | ||||||
| Marine | 0.10 | ||||||
| Media | 2.58 | ||||||
| Metals & mining | 3.01 | ||||||
| Multiline retail | 0.59 | ||||||
| Oil, gas & consumable fuels | 3.04 | ||||||
| Personal products | 0.69 | ||||||
| Pharmaceuticals | 2.39 | ||||||
| Professional services | 0.32 | ||||||
| Real estate investment trust (REIT) | 1.23 | ||||||
| Real estate management & development | 0.43 | ||||||
| Road & rail | 0.93 | ||||||
| Semiconductors & semiconductor equipment | 2.54 | ||||||
| Software | 2.25 | ||||||
| Specialty retail | 2.16 | % | |||||
| Textiles, apparel & luxury goods | 0.99 | ||||||
| Thrifts & mortgage finance | 0.65 | ||||||
| Tobacco | 1.39 | ||||||
| Trading companies & distributors | 0.10 | ||||||
| Transportation infrastructure | 0.10 | ||||||
| Wireless telecommunication services | 0.27 | ||||||
| Total common stocks | 77.47 | % | |||||
| Preferred stock | 0.26 | ||||||
| Investment companies | |||||||
| iShares Russell 1000 Index Fund | 0.90 | ||||||
| iShares Russell 2000 Index Fund | 0.91 | ||||||
| Total investment companies | 1.81 | % | |||||
| Rights | 0.002 | ||||||
| Short-term investment | 49.26 | ||||||
| Total investments before investments sold short | 128.80 | % | |||||
| Investments sold short | |||||||
| Common stocks | |||||||
| Aerospace & defense | (1.73 | ) | |||||
| Air freight & logistics | (1.61 | ) | |||||
| Airlines | (0.46 | ) | |||||
| Auto components | (0.19 | ) | |||||
| Automobiles | (0.57 | ) | |||||
| Beverages | (1.80 | ) | |||||
| Biotechnology | (0.57 | ) | |||||
| Building products | (0.81 | ) | |||||
| Capital markets | (1.14 | ) | |||||
| Chemicals | (3.34 | ) | |||||
| Commercial banks | (1.90 | ) | |||||
| Commercial services & supplies | (0.66 | ) | |||||
| Communications equipment | (0.52 | ) | |||||
| Computers & peripherals | (1.52 | ) | |||||
| Construction & engineering | (0.34 | ) | |||||
| Construction materials | (0.21 | ) | |||||
| Consumer finance | (0.20 | ) | |||||
| Containers & packaging | (0.10 | ) | |||||
| Distributors | (0.04 | ) | |||||
| Diversified consumer services | (0.57 | ) | |||||
| Diversified financial services | (0.29 | ) | |||||
| Diversified telecommunication services | (3.26 | ) | |||||
| Electric utilities | (2.52 | ) | |||||
| Electrical equipment | (1.15 | ) | |||||
| Electronic equipment, instruments & components | (0.60 | ) | |||||
| Energy equipment & services | (1.62 | ) | |||||
| Food & staples retailing | (1.75 | ) | |||||
| Food products | (4.05 | ) | |||||
| Gas utilities | (0.70 | ) | |||||
| Health care equipment & supplies | (1.96 | ) | |||||
| Health care providers & services | (1.38 | ) | |||||
| Hotels, restaurants & leisure | (1.39 | ) | |||||
| Household durables | (0.38 | ) | |||||
28
UBS Market Neutral Multi-Strategy Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Investments sold short—(Concluded) | |||||||
| Common stocks—(Concluded) | |||||||
| Household products | (0.52 | )% | |||||
| Independent power producers & energy traders | (0.76 | ) | |||||
| Industrial conglomerates | (0.54 | ) | |||||
| Insurance | (3.22 | ) | |||||
| Internet & catalog retail | (0.63 | ) | |||||
| Internet software & services | (0.42 | ) | |||||
| IT services | (0.75 | ) | |||||
| Leisure equipment & products | (0.10 | ) | |||||
| Life sciences tools & services | (1.43 | ) | |||||
| Machinery | (3.26 | ) | |||||
| Marine | (0.35 | ) | |||||
| Media | (1.61 | ) | |||||
| Metals & mining | (3.77 | ) | |||||
| Multiline retail | (0.89 | ) | |||||
| Multi-utilities | (1.95 | ) | |||||
| Oil, gas & consumable fuels | (3.44 | ) | |||||
| Paper & forest products | (0.21 | ) | |||||
| Pharmaceuticals | (3.87 | ) | |||||
| Professional services | (0.21 | ) | |||||
| Real estate investment trust (REIT) | (1.49 | ) | |||||
| Real estate management & development | (0.39 | ) | |||||
| Road & rail | (0.93 | ) | |||||
| Semiconductors & semiconductor equipment | (3.20 | ) | |||||
| Software | (2.35 | ) | |||||
| Specialty retail | (1.22 | ) | |||||
| Textiles, apparel & luxury goods | (0.50 | ) | |||||
| Thrifts & mortgage finance | (0.46 | ) | |||||
| Trading companies & distributors | (1.03 | ) | |||||
| Transportation infrastructure | (0.10 | ) | |||||
| Water utilities | (0.57 | ) | |||||
| Wireless telecommunication services | (0.21 | ) | |||||
| Total common stocks | (79.71 | ) | |||||
| Preferred stock | (0.10 | ) | |||||
| Investment companies | |||||||
| SPDR S&P 500 ETF Trust | (1.05 | ) | |||||
| SPDR S&P MidCap 400 ETF Trust | (0.51 | ) | |||||
| Total investment companies | (1.56 | ) | |||||
| Rights | (0.00 | )2 | |||||
| Total investments sold short | (81.37 | )% | |||||
| Total investments, net of investments sold short | 47.43 | ||||||
| Cash and other assets, less liabilities | 52.57 | ||||||
| Net assets | 100.00 | % | |||||
1 Figures represent the industry breakdown of direct investments of UBS Market Neutral Multi-Strategy Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification and derivatives exposure was included.
2 Amount represents less than 0.005%.
29
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 77.47% | |||||||||||
| Australia: 0.66% | |||||||||||
| Charter Hall Office REIT | 5,609 | $ | 20,174 | ||||||||
| CSL Ltd. | 600 | 21,267 | |||||||||
| Echo Entertainment Group Ltd.* | 1,423 | 6,273 | |||||||||
| Fairfax Media Ltd. | 19,852 | 20,968 | |||||||||
| OneSteel Ltd. | 10,803 | 21,530 | |||||||||
| Suncorp Group Ltd. | 2,356 | 20,635 | |||||||||
| Telstra Corp. Ltd. | 6,515 | 20,231 | |||||||||
| Total Australia common stocks | 131,078 | ||||||||||
| Austria: 0.51% | |||||||||||
| Telekom Austria AG | 8,030 | 102,427 | |||||||||
| Belgium: 0.24% | |||||||||||
| Anheuser-Busch InBev NV | 90 | 5,219 | |||||||||
| Delhaize Group SA | 273 | 20,468 | |||||||||
| KBC Groep NV | 551 | 21,644 | |||||||||
| Total Belgium common stocks | 47,331 | ||||||||||
| Canada: 0.42% | |||||||||||
| Ensign Energy Services, Inc. | 1,000 | 19,825 | |||||||||
| Precision Drilling Corp.* | 1,500 | 21,541 | |||||||||
| Teck Resources Ltd., Class B | 400 | 20,331 | |||||||||
| Trican Well Service Ltd. | 900 | 21,145 | |||||||||
| Total Canada common stocks | 82,842 | ||||||||||
| China: 0.35% | |||||||||||
|
Changsha Zoomlion Heavy Industry Science and Technology Development Co., Ltd., H Shares |
3,420 | 6,556 | |||||||||
| New World Development Ltd. | 14,000 | 21,266 | |||||||||
| NWS Holdings Ltd. | 16,000 | 21,439 | |||||||||
| Yangzijiang Shipbuilding Holdings Ltd. | 17,000 | 20,300 | |||||||||
| Total China common stocks | 69,561 | ||||||||||
| Denmark: 1.08% | |||||||||||
| Carlsberg A/S, Class B | 1,589 | 172,905 | |||||||||
| H Lundbeck A/S | 810 | 21,321 | |||||||||
| TDC A/S* | 2,267 | 20,719 | |||||||||
| Total Denmark common stocks | 214,945 | ||||||||||
| Finland: 1.27% | |||||||||||
| Orion Oyj, Class B | 827 | 21,312 | |||||||||
| Sampo Oyj, Class A | 6,523 | 210,611 | |||||||||
| Wartsila Oyj | 635 | 21,426 | |||||||||
| Total Finland common stocks | 253,349 | ||||||||||
| France: 3.21% | |||||||||||
| Alstom SA | 968 | 59,616 | |||||||||
| BNP Paribas | 339 | 26,146 | |||||||||
| Carrefour SA* | 2,322 | 95,366 | |||||||||
| Shares | Value | ||||||||||
| EDF SA | 2,861 | $ | 112,316 | ||||||||
| France Telecom SA | 2,699 | 57,417 | |||||||||
| LVMH Moet Hennessy Louis Vuitton SA | 405 | 72,891 | |||||||||
| Total SA | 362 | 20,937 | |||||||||
| Vinci SA | 2,720 | 174,237 | |||||||||
| Vivendi SA | 746 | 20,745 | |||||||||
| Total France common stocks | 639,671 | ||||||||||
| Germany: 4.33% | |||||||||||
| Allianz SE | 841 | 117,502 | |||||||||
| Bayer AG | 1,737 | 139,648 | |||||||||
| Fresenius Medical Care AG & Co. KGaA | 1,809 | 135,251 | |||||||||
| Hamburger Hafen und Logistik AG | 477 | 20,716 | |||||||||
| Kabel Deutschland Holding AG* | 325 | 19,983 | |||||||||
| Linde AG | 1,245 | 218,282 | |||||||||
| Salzgitter AG | 418 | 31,874 | |||||||||
| SAP AG | 2,636 | 159,431 | |||||||||
| Suedzucker AG | 586 | 20,823 | |||||||||
| Total Germany common stocks | 863,510 | ||||||||||
| Greece: 0.82% | |||||||||||
|
Hellenic Telecommunications Organization SA |
15,295 | 143,382 | |||||||||
| OPAP SA | 1,361 | 21,266 | |||||||||
| Total Greece common stocks | 164,648 | ||||||||||
| Hong Kong: 0.23% | |||||||||||
| Hopewell Holdings Ltd. | 7,000 | 22,264 | |||||||||
| Shangri-La Asia Ltd. | 666 | 1,640 | |||||||||
| Swire Pacific Ltd., Class A | 1,500 | 22,118 | |||||||||
| Total Hong Kong common stocks | 46,022 | ||||||||||
| Ireland: 1.45% | |||||||||||
| Accenture PLC, Class A | 1,995 | 120,538 | |||||||||
| Covidien PLC1 | 1,100 | 58,553 | |||||||||
| Experian PLC | 1,631 | 20,772 | |||||||||
| Kerry Group PLC, Class A | 1,275 | 52,721 | |||||||||
| Seagate Technology PLC | 2,230 | 36,037 | |||||||||
| Total Ireland common stocks | 288,621 | ||||||||||
| Italy: 2.17% | |||||||||||
| Azimut Holding SpA | 12,544 | 116,981 | |||||||||
| Enel SpA | 3,186 | 20,810 | |||||||||
| Fiat SpA | 1,920 | 21,079 | |||||||||
| Finmeccanica SpA | 16,332 | 197,651 | |||||||||
| Mediaset SpA | 4,543 | 21,359 | |||||||||
| UniCredit SpA | 25,913 | 54,810 | |||||||||
| Total Italy common stocks | 432,690 | ||||||||||
| Japan: 3.71% | |||||||||||
| Aozora Bank Ltd. | 9,000 | 20,867 | |||||||||
| Asahi Glass Co., Ltd. | 2,000 | 23,353 | |||||||||
30
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| Japan—(Concluded) | |||||||||||
| Asahi Group Holdings Ltd. | 1,000 | $ | 20,150 | ||||||||
| Autobacs Seven Co., Ltd. | 1,300 | 54,865 | |||||||||
| Bridgestone Corp. | 900 | 20,713 | |||||||||
| Central Glass Co., Ltd. | 4,000 | 19,253 | |||||||||
| Central Japan Railway Co. | 3 | 23,579 | |||||||||
| Dainippon Sumitomo Pharma Co., Ltd. | 2,200 | 20,924 | |||||||||
| Eisai Co., Ltd. | 500 | 19,528 | |||||||||
| Fujitsu Ltd. | 4,000 | 22,861 | |||||||||
| Gunma Bank Ltd. | 4,000 | 21,145 | |||||||||
| Hachijuni Bank Ltd. | 4,000 | 22,486 | |||||||||
| Hokuhoku Financial Group, Inc. | 10,000 | 19,854 | |||||||||
| Izumi Co., Ltd. | 3,400 | 51,122 | |||||||||
| JTEKT Corp. | 1,400 | 20,569 | |||||||||
| KDDI Corp. | 3 | 21,585 | |||||||||
| Makino Milling Machine Co., Ltd. | 2,000 | 18,616 | |||||||||
| Marubeni Corp. | 3,000 | 19,939 | |||||||||
| Mitsubishi UFJ Financial Group, Inc. | 4,300 | 20,934 | |||||||||
| Mizuho Securities Co., Ltd.* | 9,000 | 21,688 | |||||||||
| Mori Seiki Co., Ltd. | 1,500 | 19,867 | |||||||||
| Nippon Meat Packers, Inc. | 1,000 | 14,338 | |||||||||
| Nishi-Nippon City Bank Ltd. | 7,000 | 20,725 | |||||||||
| NTT Data Corp. | 6 | 19,939 | |||||||||
| Oriental Land Co., Ltd. | 200 | 16,954 | |||||||||
| Sapporo Holdings Ltd. | 5,000 | 20,615 | |||||||||
| Sekisui Chemical Co., Ltd. | 2,000 | 17,073 | |||||||||
| Sumitomo Rubber Industries Ltd. | 1,700 | 20,583 | |||||||||
| Toho Co., Ltd. | 1,200 | 19,966 | |||||||||
| Toyota Industries Corp. | 600 | 19,765 | |||||||||
| Tsumura & Co. | 600 | 19,198 | |||||||||
| Yamada Denki Co., Ltd. | 260 | 21,210 | |||||||||
| Yamazaki Baking Co., Ltd. | 2,000 | 26,802 | |||||||||
| Total Japan common stocks | 741,066 | ||||||||||
| Luxembourg: 0.10% | |||||||||||
| Ternium SA ADR | 700 | 20,671 | |||||||||
| Macau: 0.11% | |||||||||||
| Sands China Ltd.* | 8,000 | 21,798 | |||||||||
| Mexico: 0.10% | |||||||||||
| Fresnillo PLC | 892 | 20,105 | |||||||||
| Netherlands: 1.24% | |||||||||||
| ASML Holding NV | 553 | 20,374 | |||||||||
| Koninklijke DSM NV | 341 | 22,132 | |||||||||
| Koninklijke KPN NV | 1,413 | 20,539 | |||||||||
| Koninklijke Philips Electronics NV | 4,346 | 111,537 | |||||||||
| LyondellBasell Industries NV, Class A | 500 | 19,260 | |||||||||
| Wolters Kluwer NV | 2,399 | 53,160 | |||||||||
| Total Netherlands common stocks | 247,002 | ||||||||||
| Shares | Value | ||||||||||
| Norway: 1.57% | |||||||||||
| Petroleum Geo-Services ASA* | 2,601 | $ | 37,174 | ||||||||
| Statoil ASA | 827 | 20,940 | |||||||||
| Telenor ASA | 15,123 | 247,663 | |||||||||
| Yara International ASA | 136 | 7,687 | |||||||||
| Total Norway common stocks | 313,464 | ||||||||||
| Portugal: 0.45% | |||||||||||
| Portugal Telecom, SGPS, SA | 9,134 | 90,452 | |||||||||
| Singapore: 0.48% | |||||||||||
| Golden Agri-Resources Ltd. | 37,000 | 20,562 | |||||||||
| Jardine Cycle & Carriage Ltd. | 1,000 | 35,147 | |||||||||
| Olam International Ltd. | 9,000 | 20,014 | |||||||||
| UOL Group Ltd. | 5,000 | 20,325 | |||||||||
| Total Singapore common stocks | 96,048 | ||||||||||
| Spain: 2.14% | |||||||||||
| Acciona SA | 431 | 45,747 | |||||||||
| EDP Renovaveis SA* | 5,089 | 33,573 | |||||||||
| Enagas SA | 10,793 | 261,719 | |||||||||
|
Fomento de Construcciones y Contratas SA |
717 | 21,862 | |||||||||
| Gamesa Corp.Tecnologica SA* | 2,651 | 21,476 | |||||||||
| Gas Natural SDG SA | 1,010 | 21,175 | |||||||||
| Repsol YPF SA | 623 | 21,630 | |||||||||
| Total Spain common stocks | 427,182 | ||||||||||
| Sweden: 0.59% | |||||||||||
| Getinge AB, Class B | 783 | 21,016 | |||||||||
| Hennes & Mauritz AB, Class B | 964 | 33,223 | |||||||||
| Lundin Petroleum AB* | 1,641 | 22,314 | |||||||||
| Scania AB, Class B | 921 | 21,362 | |||||||||
| Swedish Match AB | 613 | 20,556 | |||||||||
| Total Sweden common stocks | 118,471 | ||||||||||
| Switzerland: 2.08% | |||||||||||
| Actelion Ltd.* | 425 | 20,927 | |||||||||
| Aryzta AG | 1,254 | 67,196 | |||||||||
| Ferrexpo PLC | 2,723 | 20,523 | |||||||||
| Kuehne & Nagel International AG | 136 | 20,642 | |||||||||
| Meyer Burger Technology AG* | 473 | 20,893 | |||||||||
| Nestle SA | 322 | 20,012 | |||||||||
| Novartis AG | 1,253 | 76,756 | |||||||||
| Straumann Holding AG | 544 | 131,300 | |||||||||
| Weatherford International Ltd.* | 1,950 | 36,562 | |||||||||
| Total Switzerland common stocks | 414,811 | ||||||||||
| United Kingdom: 8.26% | |||||||||||
| Aberdeen Asset Management PLC | 29,693 | 106,256 | |||||||||
| BAE Systems PLC | 42,620 | 217,876 | |||||||||
| BG Group PLC | 1,688 | 38,310 | |||||||||
31
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| United Kingdom—(Concluded) | |||||||||||
| BP PLC | 1,412 | $ | 10,404 | ||||||||
| British Land Co., PLC | 32 | 312 | |||||||||
| Croda International PLC | 674 | 20,413 | |||||||||
| Drax Group PLC | 2,540 | 20,519 | |||||||||
| Ensco International PLC ADR1 | 1,400 | 74,620 | |||||||||
| Home Retail Group PLC | 7,748 | 20,340 | |||||||||
| Imperial Tobacco Group PLC | 7,751 | 257,708 | |||||||||
| Premier Oil PLC* | 2,908 | 20,845 | |||||||||
| Reed Elsevier PLC | 4,702 | 42,762 | |||||||||
| Sage Group PLC | 19,374 | 89,836 | |||||||||
| Scottish & Southern Energy PLC | 7,386 | 165,203 | |||||||||
| Smith & Nephew PLC | 1,959 | 20,900 | |||||||||
| Tesco PLC | 16,848 | 108,812 | |||||||||
| Tullow Oil PLC | 600 | 11,942 | |||||||||
| Vedanta Resources PLC | 5,787 | 194,666 | |||||||||
| Xstrata PLC | 10,264 | 226,360 | |||||||||
| Total United Kingdom common stocks | 1,648,084 | ||||||||||
| United States: 39.90% | |||||||||||
| Acorda Therapeutics, Inc.*1 | 2,300 | 74,313 | |||||||||
| Adobe Systems, Inc.*1 | 3,100 | 97,495 | |||||||||
| Aeropostale, Inc.* | 1,100 | 19,250 | |||||||||
| Aflac, Inc.1 | 1,400 | 65,352 | |||||||||
| Agilent Technologies, Inc.*1 | 400 | 20,444 | |||||||||
| Alaska Air Group, Inc.* | 300 | 20,538 | |||||||||
| Alexion Pharmaceuticals, Inc.*1 | 2,600 | 122,278 | |||||||||
| Allergan, Inc.1 | 800 | 66,600 | |||||||||
| Alliant Techsystems, Inc. | 300 | 21,399 | |||||||||
| Allied Healthcare International, Inc.* | 14,710 | 36,628 | |||||||||
| Amazon.com, Inc.* | 400 | 81,796 | |||||||||
| AMC Networks, Inc., Class A* | 1,280 | 55,680 | |||||||||
| American Electric Power Co., Inc.1 | 3,600 | 135,648 | |||||||||
| American National Bankshares, Inc. | 1,950 | 35,861 | |||||||||
| Amgen, Inc.*1 | 300 | 17,505 | |||||||||
| Amylin Pharmaceuticals, Inc.* | 2,600 | 34,736 | |||||||||
| Analog Devices, Inc.1 | 500 | 19,570 | |||||||||
| ANN, Inc.*1 | 700 | 18,270 | |||||||||
| Apollo Group, Inc., Class A*1 | 1,400 | 61,152 | |||||||||
| Apple, Inc.*1 | 430 | 144,338 | |||||||||
| Ashland, Inc.1 | 300 | 19,386 | |||||||||
| Atlas Air Worldwide Holdings, Inc.*1 | 300 | 17,853 | |||||||||
| Avon Products, Inc.1 | 4,900 | 137,200 | |||||||||
| Baxter International, Inc.1 | 700 | 41,783 | |||||||||
| Biogen Idec, Inc.*1 | 150 | 16,038 | |||||||||
| Bio-Rad Laboratories, Inc., Class A*1 | 400 | 47,744 | |||||||||
| Boise, Inc.1 | 2,600 | 20,254 | |||||||||
| Brinker International, Inc.1 | 800 | 19,568 | |||||||||
| Broadcom Corp., Class A*1 | 3,600 | 121,104 | |||||||||
| C.H. Robinson Worldwide, Inc. | 300 | 23,652 | |||||||||
| CA, Inc. | 900 | 20,556 | |||||||||
| Shares | Value | ||||||||||
| Capital One Financial Corp.1 | 400 | $ | 20,668 | ||||||||
| Career Education Corp.* | 1,000 | 21,150 | |||||||||
| Carnival Corp.1 | 1,300 | 48,919 | |||||||||
| CBL & Associates Properties, Inc.1 | 1,100 | 19,943 | |||||||||
| Celanese Corp., Series A1 | 2,300 | 122,613 | |||||||||
| CF Industries Holdings, Inc.1 | 138 | 19,550 | |||||||||
| Cisco Systems, Inc.1 | 3,400 | 53,074 | |||||||||
| Citigroup, Inc.1 | 540 | 22,486 | |||||||||
| Cliffs Natural Resources, Inc.1 | 260 | 24,037 | |||||||||
| Coach, Inc.1 | 1,300 | 83,109 | |||||||||
| Colgate-Palmolive Co.1 | 800 | 69,928 | |||||||||
| Comcast Corp., Class A1 | 1,400 | 35,476 | |||||||||
| Comerica, Inc.1 | 600 | 20,742 | |||||||||
| Commercial Metals Co. | 1,400 | 20,090 | |||||||||
| Complete Production Services, Inc.*1 | 600 | 20,016 | |||||||||
| Comverge, Inc.* | 12,730 | 37,808 | |||||||||
| CPI Corp. | 2,860 | 37,609 | |||||||||
| Crown Castle International Corp.*1 | 800 | 32,632 | |||||||||
| Cubist Pharmaceuticals, Inc.*1 | 600 | 21,594 | |||||||||
| Culp, Inc.* | 4,330 | 40,659 | |||||||||
| Cutera, Inc.* | 4,225 | 36,039 | |||||||||
| Dell, Inc.* | 1,200 | 20,004 | |||||||||
| Delta Air Lines, Inc.*1 | 2,100 | 19,257 | |||||||||
| Diamond Offshore Drilling, Inc. | 300 | 21,123 | |||||||||
| Discover Financial Services1 | 800 | 21,400 | |||||||||
| Dolby Laboratories, Inc., Class A*1 | 1,000 | 42,460 | |||||||||
| Dover Corp.1 | 1,900 | 128,820 | |||||||||
| Dow Chemical Co. | 600 | 21,600 | |||||||||
| Dun & Bradstreet Corp. | 300 | 22,662 | |||||||||
| Eastman Chemical Co.1 | 200 | 20,414 | |||||||||
| Eastman Kodak Co.* | 5,800 | 20,764 | |||||||||
| EchoStar Corp., Class A*1 | 600 | 21,858 | |||||||||
| Edison International | 3,200 | 124,000 | |||||||||
| Emdeon, Inc., Class A*1 | 1,600 | 20,992 | |||||||||
| EOG Resources, Inc.1 | 530 | 55,412 | |||||||||
| Equifax, Inc. | 600 | 20,832 | |||||||||
| Expeditors International Washington, Inc. | 400 | 20,476 | |||||||||
| Federal Realty Investment Trust | 200 | 17,036 | |||||||||
| FedEx Corp.1 | 1,900 | 180,215 | |||||||||
| Fidelity National Information Services, Inc.1 | 2,700 | 83,133 | |||||||||
| FirstEnergy Corp.1 | 2,900 | 128,035 | |||||||||
| Flextronics International Ltd.*1 | 3,200 | 20,544 | |||||||||
| Fortune Brands, Inc.1 | 1,000 | 63,770 | |||||||||
| Frontier Oil Corp.1 | 600 | 19,386 | |||||||||
| Gaiam, Inc., Class A | 7,265 | 36,107 | |||||||||
| GameStop Corp., Class A*1 | 4,100 | 109,347 | |||||||||
| General Dynamics Corp.1 | 1,900 | 141,588 | |||||||||
| General Motors Co.* | 2,000 | 60,720 | |||||||||
| Georgia Gulf Corp.*1 | 800 | 19,312 | |||||||||
| Goldman Sachs Group, Inc.1 | 200 | 26,618 | |||||||||
| Harte-Hanks, Inc. | 6,390 | 51,887 | |||||||||
| Hasbro, Inc. | 400 | 17,572 | |||||||||
32
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| United States—(Concluded) | |||||||||||
| Helix Energy Solutions Group, Inc.*1 | 1,200 | $ | 19,872 | ||||||||
| Hertz Global Holdings, Inc.* | 2,400 | 38,112 | |||||||||
| Hess Corp.1 | 400 | 29,904 | |||||||||
| Hewlett-Packard Co.1 | 1,500 | 54,600 | |||||||||
| HollyFrontier Corp.*1 | 300 | 20,820 | |||||||||
| Hooker Furniture Corp. | 3,890 | 34,465 | |||||||||
| Hudson City Bancorp, Inc. | 2,500 | 20,475 | |||||||||
| Illinois Tool Works, Inc.1 | 3,600 | 203,364 | |||||||||
| International Business Machines Corp.1 | 135 | 23,159 | |||||||||
| Interpublic Group of Cos., Inc.1 | 4,700 | 58,750 | |||||||||
| Intersil Corp., Class A1 | 9,200 | 118,220 | |||||||||
| Intuit, Inc.* | 400 | 20,744 | |||||||||
| ITT Educational Services, Inc.* | 300 | 23,472 | |||||||||
| John B Sanfilippo & Son, Inc.* | 4,380 | 37,055 | |||||||||
| Johnson & Johnson1 | 700 | 46,564 | |||||||||
| JPMorgan Chase & Co.1 | 500 | 20,470 | |||||||||
| KBR, Inc.1 | 500 | 18,845 | |||||||||
| Kimco Realty Corp. | 1,100 | 20,504 | |||||||||
| Kinder Morgan, Inc. | 700 | 20,111 | |||||||||
| KKR & Co. LP | 1,300 | 21,216 | |||||||||
| KLA-Tencor Corp. | 500 | 20,240 | |||||||||
| Kohl's Corp.1 | 900 | 45,009 | |||||||||
| Kraft Foods, Inc., Class A | 1,700 | 59,891 | |||||||||
| Kroger Co.1 | 4,400 | 109,120 | |||||||||
| Landstar System, Inc. | 400 | 18,592 | |||||||||
| LCA-Vision, Inc.* | 7,600 | 36,328 | |||||||||
| Lear Corp. | 400 | 21,392 | |||||||||
| Lender Processing Services, Inc. | 1,000 | 20,910 | |||||||||
| Liberty Property Trust | 600 | 19,548 | |||||||||
| LodgeNet Interactive Corp.* | 10,480 | 31,754 | |||||||||
| Lowe's Cos., Inc.1 | 2,600 | 60,606 | |||||||||
| Mack-Cali Realty Corp. | 600 | 19,764 | |||||||||
| Macy's, Inc.1 | 700 | 20,468 | |||||||||
| Magellan Health Services, Inc.* | 400 | 21,896 | |||||||||
| Marathon Oil Corp.1 | 400 | 21,072 | |||||||||
| Marvell Technology Group Ltd.*1 | 5,000 | 73,825 | |||||||||
| Masco Corp. | 500 | 6,015 | |||||||||
| Maxim Integrated Products, Inc. | 800 | 20,448 | |||||||||
| McKesson Corp.1 | 600 | 50,190 | |||||||||
| Medtronic, Inc.1 | 900 | 34,677 | |||||||||
| Merck & Co., Inc.1 | 1,300 | 45,877 | |||||||||
| Microsoft Corp. | 800 | 20,800 | |||||||||
| Midas, Inc.* | 5,930 | 37,478 | |||||||||
| Molson Coors Brewing Co., Class B1 | 900 | 40,266 | |||||||||
| Motorola Solutions, Inc.* | 400 | 18,416 | |||||||||
| NextEra Energy, Inc.1 | 2,400 | 137,904 | |||||||||
| Noble Corp.1 | 1,900 | 74,879 | |||||||||
| Norfolk Southern Corp.1 | 1,400 | 104,902 | |||||||||
| Northwest Bancshares, Inc. | 6,910 | 86,928 | |||||||||
| Novellus Systems, Inc.* | 600 | 21,684 | |||||||||
| Shares | Value | ||||||||||
| NRG Energy, Inc.* | 800 | $ | 19,664 | ||||||||
| PACCAR, Inc.1 | 1,400 | 71,526 | |||||||||
| Pall Corp.1 | 700 | 39,361 | |||||||||
| PepsiCo, Inc. | 2,050 | 144,381 | |||||||||
| Pharmasset, Inc.*1 | 800 | 89,760 | |||||||||
| Pinnacle Airlines Corp.* | 8,065 | 36,615 | |||||||||
| Polaris Industries, Inc.1 | 200 | 22,234 | |||||||||
| Power-One, Inc.* | 2,500 | 20,250 | |||||||||
| Principal Financial Group, Inc. | 700 | 21,294 | |||||||||
| QLogic Corp.* | 1,300 | 20,696 | |||||||||
| QUALCOMM, Inc. | 1,300 | 73,827 | |||||||||
| Radian Group, Inc. | 5,100 | 21,573 | |||||||||
| RadioShack Corp. | 5,540 | 73,737 | |||||||||
| Rayonier, Inc.1 | 300 | 19,605 | |||||||||
| Rochester Medical Corp.* | 4,040 | 36,522 | |||||||||
| SEI Investments Co. | 900 | 20,259 | |||||||||
| SL Green Realty Corp.1 | 200 | 16,574 | |||||||||
| Smithfield Foods, Inc.* | 900 | 19,683 | |||||||||
| Sotheby's1 | 500 | 21,750 | |||||||||
| Southwest Airlines Co.1 | 8,000 | 91,360 | |||||||||
| StarTek, Inc.* | 14,700 | 50,715 | |||||||||
| Stone Energy Corp.*1 | 700 | 21,273 | |||||||||
| Symantec Corp.*1 | 2,100 | 41,412 | |||||||||
| Teradyne, Inc.*1 | 1,400 | 20,720 | |||||||||
| Tesoro Corp.* | 900 | 20,619 | |||||||||
| Texas Instruments, Inc.1 | 1,600 | 52,528 | |||||||||
| Textron, Inc. | 900 | 21,249 | |||||||||
| Ultra Petroleum Corp.*1 | 4,100 | 187,780 | |||||||||
| UnitedHealth Group, Inc.1 | 1,400 | 72,212 | |||||||||
| US Bancorp1 | 1,200 | 30,612 | |||||||||
| Valero Energy Corp. | 800 | 20,456 | |||||||||
| Veeco Instruments, Inc.*1 | 400 | 19,364 | |||||||||
| Ventas, Inc. | 1,365 | 71,949 | |||||||||
| Viacom, Inc., Class B1 | 1,600 | 81,600 | |||||||||
| Visa, Inc., Class A1 | 500 | 42,130 | |||||||||
| W&T Offshore, Inc. | 800 | 20,896 | |||||||||
| Waters Corp.* | 200 | 19,148 | |||||||||
| Weingarten Realty Investors | 800 | 20,128 | |||||||||
| WellCare Health Plans, Inc.* | 400 | 20,564 | |||||||||
| Wells Fargo & Co.1 | 2,000 | 56,120 | |||||||||
| Zimmer Holdings, Inc.*1 | 300 | 18,960 | |||||||||
| Total United States common stocks | 7,962,184 | ||||||||||
|
Total common stocks (cost $14,678,733) |
15,458,033 | ||||||||||
| Preferred stocks: 0.26% | |||||||||||
| Germany: 0.26% | |||||||||||
|
Volkswagen AG, Preference shares (cost $44,510) |
252 | 51,956 | |||||||||
33
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investment companies: 1.81% | |||||||||||
| iShares Russell 1000 Index Fund | 2,435 | $ | 179,922 | ||||||||
| iShares Russell 2000 Index Fund | 2,180 | 180,504 | |||||||||
|
Total investment companies (cost $347,257) |
360,426 | ||||||||||
|
Number of rights |
|||||||||||
| Rights: 0.00%2 | |||||||||||
| France: 0.00%2 | |||||||||||
| Sanofi-Aventis SA, expires 12/31/20* | 500 | 1,205 | |||||||||
|
Total rights (cost $1,177) |
1,205 | ||||||||||
| Shares | |||||||||||
| Short-term investment: 49.26% | |||||||||||
| Investment company: 49.26% | |||||||||||
|
UBS Cash Management Prime Relationship Fund3 (cost $9,830,068) |
9,830,068 | 9,830,068 | |||||||||
|
Total investments before investments sold short: 128.80% (cost $24,901,745) |
25,701,688 | ||||||||||
| Investments sold short: (81.37)% | |||||||||||
| Common stocks: (79.71)% | |||||||||||
| Australia: (1.13)% | |||||||||||
| ASX Ltd. | (636 | ) | (20,802 | ) | |||||||
| BlueScope Steel Ltd. | (11,506 | ) | (14,939 | ) | |||||||
| Caltex Australia Ltd. | (581 | ) | (7,352 | ) | |||||||
| CSR Ltd. | (6,694 | ) | (20,898 | ) | |||||||
| Dexus Property Group | (21,484 | ) | (20,329 | ) | |||||||
| DUET Group | (4,619 | ) | (8,435 | ) | |||||||
| Foster's Group Ltd. | (3,677 | ) | (20,356 | ) | |||||||
| Newcrest Mining Ltd. | (523 | ) | (21,229 | ) | |||||||
| Origin Energy Ltd. | (1,276 | ) | (21,698 | ) | |||||||
| Paladin Energy Ltd. | (7,955 | ) | (21,656 | ) | |||||||
| Ramsay Health Care Ltd. | (1,078 | ) | (21,072 | ) | |||||||
| Tatts Group Ltd. | (2,489 | ) | (6,422 | ) | |||||||
| Transurban Group | (3,685 | ) | (20,749 | ) | |||||||
| Total Australia common stocks | (225,937 | ) | |||||||||
| Austria: (0.72)% | |||||||||||
|
Verbund - Oesterreichische Elektrizitaetswirtschafts AG, Class A |
(3,300 | ) | (143,862 | ) | |||||||
| Belgium: (0.60)% | |||||||||||
| Colruyt SA | (2,392 | ) | (119,639 | ) | |||||||
| Shares | Value | ||||||||||
| Bermuda: (0.20)% | |||||||||||
| Frontline Ltd. | (1,358 | ) | $ | (19,559 | ) | ||||||
| Seadrill Ltd. | (592 | ) | (20,839 | ) | |||||||
| Total Bermuda common stocks | (40,398 | ) | |||||||||
| Canada: (1.07)% | |||||||||||
| BCE, Inc. | (500 | ) | (19,607 | ) | |||||||
| Crescent Point Energy Corp. | (500 | ) | (23,106 | ) | |||||||
| Fairfax Financial Holdings Ltd. | (50 | ) | (20,011 | ) | |||||||
| Fortis, Inc. | (600 | ) | (20,125 | ) | |||||||
| George Weston Ltd. | (100 | ) | (7,252 | ) | |||||||
| Ivanhoe Mines Ltd. | (800 | ) | (20,215 | ) | |||||||
| Onex Corp. | (500 | ) | (19,374 | ) | |||||||
| Potash Corp. of Saskatchewan, Inc. | (340 | ) | (19,417 | ) | |||||||
| Provident Energy Ltd. | (2,400 | ) | (21,451 | ) | |||||||
| Ritchie Bros Auctioneers, Inc. | (800 | ) | (22,031 | ) | |||||||
| Uranium One, Inc. | (7,900 | ) | (21,789 | ) | |||||||
| Total Canada common stocks | (214,378 | ) | |||||||||
| China: (0.05)% | |||||||||||
| Zijin Mining Group Co., Ltd., H Shares | (18,000 | ) | (9,082 | ) | |||||||
| Denmark: (1.02)% | |||||||||||
| H Lundbeck A/S | (3,293 | ) | (86,678 | ) | |||||||
| Novo Nordisk A/S, Class B | (453 | ) | (56,794 | ) | |||||||
| William Demant Holding A/S | (659 | ) | (59,461 | ) | |||||||
| Total Denmark common stocks | (202,933 | ) | |||||||||
| Finland: (1.21)% | |||||||||||
| Fortum Oyj | (1,807 | ) | (52,332 | ) | |||||||
| Metso Oyj | (2,949 | ) | (167,495 | ) | |||||||
| Sampo Oyj, Class A | (652 | ) | (21,051 | ) | |||||||
| Total Finland common stocks | (240,878 | ) | |||||||||
| France: (5.16)% | |||||||||||
| Accor SA | (1,152 | ) | (51,580 | ) | |||||||
| Air France-KLM | (1,337 | ) | (20,525 | ) | |||||||
| Air Liquide SA | (77 | ) | (11,037 | ) | |||||||
| Alstom SA | (334 | ) | (20,570 | ) | |||||||
| Atos Origin SA | (171 | ) | (9,663 | ) | |||||||
| Carrefour SA | (508 | ) | (20,864 | ) | |||||||
| Cie de Saint-Gobain | (1,535 | ) | (99,409 | ) | |||||||
|
Cie Generale d'Optique Essilor International SA |
(333 | ) | (27,010 | ) | |||||||
| Credit Agricole SA | (45 | ) | (677 | ) | |||||||
| Danone | (2,913 | ) | (217,352 | ) | |||||||
| Dassault Systemes SA | (1,597 | ) | (135,972 | ) | |||||||
| Edenred | (699 | ) | (21,316 | ) | |||||||
| EDF Energies Nouvelles SA | (351 | ) | (20,208 | ) | |||||||
| Pernod-Ricard SA | (2,001 | ) | (197,243 | ) | |||||||
| Renault SA | (823 | ) | (48,726 | ) | |||||||
| Schneider Electric SA | (183 | ) | (30,574 | ) | |||||||
34
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investments sold short—(Continued) | |||||||||||
| Common stocks—(Continued) | |||||||||||
| France—(Concluded) | |||||||||||
| Unibail-Rodamco SE | (325 | ) | $ | (75,106 | ) | ||||||
| Vallourec SA | (175 | ) | (21,310 | ) | |||||||
| Total France common stocks | (1,029,142 | ) | |||||||||
| Germany: (3.13)% | |||||||||||
| Axel Springer AG | (427 | ) | (21,090 | ) | |||||||
| Commerzbank AG | (4,834 | ) | (20,787 | ) | |||||||
| Deutsche Bank AG | (1,235 | ) | (72,974 | ) | |||||||
| Deutsche Lufthansa AG | (935 | ) | (20,364 | ) | |||||||
| GEA Group AG | (4,233 | ) | (151,367 | ) | |||||||
| Hochtief AG | (255 | ) | (21,289 | ) | |||||||
| K&S AG NPV | (780 | ) | (59,947 | ) | |||||||
| Merck KGaA | (808 | ) | (87,805 | ) | |||||||
| RWE AG | (636 | ) | (35,199 | ) | |||||||
| Siemens AG | (644 | ) | (88,424 | ) | |||||||
| ThyssenKrupp AG | (408 | ) | (21,165 | ) | |||||||
| United Internet AG | (1,177 | ) | (24,739 | ) | |||||||
| Total Germany common stocks | (625,150 | ) | |||||||||
| Hong Kong: (0.09)% | |||||||||||
| Orient Overseas International Ltd. | (2,500 | ) | (16,193 | ) | |||||||
| Shangri-La Asia Ltd. | (666 | ) | (1,640 | ) | |||||||
| Total Hong Kong common stocks | (17,833 | ) | |||||||||
| Ireland: (0.38)% | |||||||||||
| James Hardie Industries SE CDI | (3,464 | ) | (21,922 | ) | |||||||
| Seagate Technology PLC | (521 | ) | (8,419 | ) | |||||||
| Warner Chilcott PLC, Class A | (1,900 | ) | (45,847 | ) | |||||||
| Total Ireland common stocks | (76,188 | ) | |||||||||
| Italy: (2.58)% | |||||||||||
| Assicurazioni Generali SpA | (4,141 | ) | (87,327 | ) | |||||||
| Luxottica Group SpA | (1,638 | ) | (52,508 | ) | |||||||
| Pirelli & Co. SpA NPV | (1,950 | ) | (21,071 | ) | |||||||
| Snam Rete Gas SpA | (23,488 | ) | (139,049 | ) | |||||||
| Terna-Rete Elettrica Nazionale SpA | (41,926 | ) | (194,826 | ) | |||||||
| Unione di Banche Italiane SCPA | (3,683 | ) | (20,735 | ) | |||||||
| Total Italy common stocks | (515,516 | ) | |||||||||
| Japan: (3.51)% | |||||||||||
| Acom Co., Ltd. | (1,240 | ) | (20,579 | ) | |||||||
| All Nippon Airways Co., Ltd. | (6,000 | ) | (19,615 | ) | |||||||
| Benesse Holdings, Inc. | (400 | ) | (17,214 | ) | |||||||
| Chiyoda Corp. | (2,000 | ) | (23,016 | ) | |||||||
| Chugoku Electric Power Co., Inc. | (1,200 | ) | (20,817 | ) | |||||||
| Cosmo Oil Co., Ltd. | (7,000 | ) | (19,893 | ) | |||||||
| Daito Trust Construction Co., Ltd. | (200 | ) | (16,986 | ) | |||||||
| Denki Kagaku Kogyo KK | (4,000 | ) | (19,268 | ) | |||||||
| Denso Corp. | (500 | ) | (18,564 | ) | |||||||
| Shares | Value | ||||||||||
| Electric Power Development Co., Ltd. | (800 | ) | $ | (21,608 | ) | ||||||
| Hitachi Chemical Co., Ltd. | (1,000 | ) | (19,900 | ) | |||||||
| JSR Corp. | (1,100 | ) | (21,342 | ) | |||||||
| Kaneka Corp. | (3,000 | ) | (19,749 | ) | |||||||
| Kawasaki Kisen Kaisha Ltd. | (6,000 | ) | (20,989 | ) | |||||||
| Mazda Motor Corp. | (2,000 | ) | (5,275 | ) | |||||||
| McDonald's Holdings Co. Japan Ltd. | (800 | ) | (20,367 | ) | |||||||
| Mitsubishi Gas Chemical Co., Inc. | (3,000 | ) | (22,012 | ) | |||||||
| NEC Corp. | (3,000 | ) | (6,869 | ) | |||||||
| Nippon Yusen KK | (5,000 | ) | (18,616 | ) | |||||||
| Nissin Foods Holdings Co., Ltd. | (600 | ) | (21,836 | ) | |||||||
| Nitto Denko Corp. | (400 | ) | (20,318 | ) | |||||||
| Odakyu Electric Railway Co., Ltd. | (3,000 | ) | (23,827 | ) | |||||||
| Olympus Corp. | (1,000 | ) | (33,704 | ) | |||||||
| Senshu Ikeda Holdings, Inc. | (13,600 | ) | (19,880 | ) | |||||||
| Square Enix Holdings Co., Ltd. | (1,200 | ) | (21,642 | ) | |||||||
|
Sumitomo Realty & Development Co., Ltd. |
(1,000 | ) | (22,357 | ) | |||||||
| Toagosei Co., Ltd. | (11,000 | ) | (55,453 | ) | |||||||
| Tobu Railway Co., Ltd. | (5,000 | ) | (21,066 | ) | |||||||
| Toyota Motor Corp. ADR | (300 | ) | (24,726 | ) | |||||||
| Unicharm Corp. | (500 | ) | (21,851 | ) | |||||||
| Yakult Honsha Co., Ltd. | (700 | ) | (20,267 | ) | |||||||
| Yamaha Corp. | (1,800 | ) | (20,469 | ) | |||||||
| Yamato Holdings Co., Ltd. | (1,300 | ) | (20,419 | ) | |||||||
| Total Japan common stocks | (700,494 | ) | |||||||||
| Jersey (Channel Islands): (0.10)% | |||||||||||
| Heritage Oil PLC | (5,761 | ) | (20,287 | ) | |||||||
| Luxembourg: (0.07)% | |||||||||||
| Tenaris SA | (563 | ) | (12,855 | ) | |||||||
| Netherlands: (1.86)% | |||||||||||
| Koninklijke KPN NV | (8,864 | ) | (128,848 | ) | |||||||
| LyondellBasell Industries NV, Class A | (920 | ) | (35,438 | ) | |||||||
| QIAGEN NV | (1,830 | ) | (34,807 | ) | |||||||
| TNT NV | (2,469 | ) | (20,949 | ) | |||||||
| Unilever NV, CVA | (4,586 | ) | (150,238 | ) | |||||||
| Total Netherlands common stocks | (370,280 | ) | |||||||||
| Norway: (1.56)% | |||||||||||
| Renewable Energy Corp. ASA | (12,107 | ) | (20,802 | ) | |||||||
| Subsea 7 SA | (4,123 | ) | (105,467 | ) | |||||||
| Telenor ASA | (1,277 | ) | (20,913 | ) | |||||||
| Yara International ASA | (2,916 | ) | (164,813 | ) | |||||||
| Total Norway common stocks | (311,995 | ) | |||||||||
| Portugal: (0.11)% | |||||||||||
| Jeronimo Martins, SGPS, SA | (1,113 | ) | (21,381 | ) | |||||||
35
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investments sold short—(Continued) | |||||||||||
| Common stocks—(Continued) | |||||||||||
| Singapore: (0.67)% | |||||||||||
| Ascendas Real Estate Investment Trust | (12,000 | ) | $ | (19,943 | ) | ||||||
| CapitaMall Trust | (13,000 | ) | (19,827 | ) | |||||||
| DBS Group Holdings Ltd. | (2,000 | ) | (23,939 | ) | |||||||
| Global Logistic Properties Ltd. | (12,000 | ) | (20,157 | ) | |||||||
| Keppel Land Ltd. | (7,000 | ) | (20,720 | ) | |||||||
| Singapore Technologies Engineering Ltd. | (3,000 | ) | (7,378 | ) | |||||||
| Wilmar International Ltd. | (5,000 | ) | (22,106 | ) | |||||||
| Total Singapore common stocks | (134,070 | ) | |||||||||
| Spain: (1.12)% | |||||||||||
| Acerinox SA | (3,992 | ) | (72,767 | ) | |||||||
| EDP Renovaveis SA | (3,106 | ) | (20,491 | ) | |||||||
| Iberdrola Renovables SA | (4,641 | ) | (20,501 | ) | |||||||
| Telefonica SA | (4,462 | ) | (109,113 | ) | |||||||
| Zardoya Otis SA | (30 | ) | (437 | ) | |||||||
| Total Spain common stocks | (223,309 | ) | |||||||||
| Sweden: (0.53)% | |||||||||||
| Hennes & Mauritz AB, Class B | (598 | ) | (20,610 | ) | |||||||
| Holmen AB, Class B | (662 | ) | (20,639 | ) | |||||||
| Modern Times Group AB, Class B | (325 | ) | (21,474 | ) | |||||||
| Skanska AB, Class B | (1,212 | ) | (21,692 | ) | |||||||
| Svenska Handelsbanken AB, Class A | (687 | ) | (21,191 | ) | |||||||
| Total Sweden common stocks | (105,606 | ) | |||||||||
| Switzerland: (1.59)% | |||||||||||
| Credit Suisse Group AG | (519 | ) | (20,173 | ) | |||||||
| EFG International AG | (1,893 | ) | (20,977 | ) | |||||||
| Kuehne & Nagel International AG | (92 | ) | (13,963 | ) | |||||||
| Roche Holding AG (Non-voting) | (121 | ) | (20,243 | ) | |||||||
| Sonova Holding AG | (283 | ) | (26,490 | ) | |||||||
| Swiss Re Ltd. | (3,702 | ) | (207,875 | ) | |||||||
| Swisscom AG | (16 | ) | (7,333 | ) | |||||||
| Total Switzerland common stocks | (317,054 | ) | |||||||||
| United Kingdom: (8.32)% | |||||||||||
| 3i Group PLC | (4,613 | ) | (20,809 | ) | |||||||
| Antofagasta PLC | (3,529 | ) | (78,963 | ) | |||||||
| ARM Holdings PLC | (5,692 | ) | (53,832 | ) | |||||||
| AstraZeneca PLC | (1,880 | ) | (93,872 | ) | |||||||
| Autonomy Corp. PLC | (1,934 | ) | (52,988 | ) | |||||||
| BHP Billiton PLC | (4,069 | ) | (159,486 | ) | |||||||
| BP PLC | (26 | ) | (192 | ) | |||||||
| British Land Co., PLC | (2,153 | ) | (21,031 | ) | |||||||
| British Sky Broadcasting Group PLC | (1,471 | ) | (19,979 | ) | |||||||
| BT Group PLC, Class A | (71,474 | ) | (231,836 | ) | |||||||
| Burberry Group PLC | (1,233 | ) | (28,667 | ) | |||||||
| Cable & Wireless Worldwide PLC | (135,975 | ) | (100,453 | ) | |||||||
| Capital Shopping Centres Group PLC | (3,189 | ) | (20,448 | ) | |||||||
| Shares | Value | ||||||||||
| HSBC Holdings PLC | (2,335 | ) | $ | (23,164 | ) | ||||||
| Invensys PLC | (4,065 | ) | (21,004 | ) | |||||||
| ITV PLC | (39,996 | ) | (45,862 | ) | |||||||
| Kazakhmys | (3,741 | ) | (82,971 | ) | |||||||
| Lloyds Banking Group PLC | (28,211 | ) | (22,167 | ) | |||||||
| Lonmin PLC | (2,036 | ) | (47,484 | ) | |||||||
| Rolls-Royce Holdings PLC | (17,851 | ) | (184,803 | ) | |||||||
| Rolls-Royce Holdings PLC, Class C5 | (914,112 | ) | (1,467 | ) | |||||||
| RSA Insurance Group PLC | (24,064 | ) | (52,058 | ) | |||||||
| Shire PLC | (654 | ) | (20,416 | ) | |||||||
| Smith & Nephew PLC | (4,685 | ) | (49,983 | ) | |||||||
| Standard Life PLC | (35,388 | ) | (119,563 | ) | |||||||
| TUI Travel PLC | (5,611 | ) | (20,225 | ) | |||||||
| WM Morrison Supermarkets PLC | (18,020 | ) | (86,102 | ) | |||||||
| Total United Kingdom common stocks | (1,659,825 | ) | |||||||||
| United States: (42.93)% | |||||||||||
| Accuride Corp. | (2,870 | ) | (36,248 | ) | |||||||
| Acme Packet, Inc. | (300 | ) | (21,039 | ) | |||||||
| Actuant Corp., Class A | (800 | ) | (21,464 | ) | |||||||
| Advanced Micro Devices, Inc. | (7,100 | ) | (49,629 | ) | |||||||
| AGCO Corp. | (700 | ) | (34,552 | ) | |||||||
| AK Steel Holding Corp. | (1,400 | ) | (22,064 | ) | |||||||
| Alliant Energy Corp. | (2,000 | ) | (81,320 | ) | |||||||
| Altera Corp. | (2,600 | ) | (120,510 | ) | |||||||
| Amazon.com, Inc. | (100 | ) | (20,449 | ) | |||||||
| American Water Works Co., Inc. | (2,200 | ) | (64,790 | ) | |||||||
| Amylin Pharmaceuticals, Inc. | (1,600 | ) | (21,376 | ) | |||||||
| AO Smith Corp. | (500 | ) | (21,150 | ) | |||||||
| Aqua America, Inc. | (2,200 | ) | (48,356 | ) | |||||||
| Atlantic Power Corp. | (2,255 | ) | (34,321 | ) | |||||||
| BankUnited, Inc. | (1,295 | ) | (34,369 | ) | |||||||
| BB&T Corp. | (900 | ) | (24,156 | ) | |||||||
| Berkshire Hathaway, Inc., Class B | (300 | ) | (23,217 | ) | |||||||
| BioMarin Pharmaceutical, Inc. | (800 | ) | (21,768 | ) | |||||||
| Bio-Reference Labs, Inc. | (1,800 | ) | (37,620 | ) | |||||||
| BMC Software, Inc. | (2,800 | ) | (153,160 | ) | |||||||
| Booz Allen Hamilton Holding Corp. | (220 | ) | (4,204 | ) | |||||||
| Bristol-Myers Squibb Co. | (1,400 | ) | (40,544 | ) | |||||||
| Brown-Forman Corp., Class B | (1,000 | ) | (74,690 | ) | |||||||
| Bruker Corp. | (1,000 | ) | (20,360 | ) | |||||||
| C.H. Robinson Worldwide, Inc. | (1,800 | ) | (141,912 | ) | |||||||
| Calpine Corp. | (2,200 | ) | (35,486 | ) | |||||||
| Cardinal Health, Inc. | (1,100 | ) | (49,962 | ) | |||||||
| Caterpillar, Inc. | (1,000 | ) | (106,460 | ) | |||||||
| Cell Therapeutics, Inc. | (18,425 | ) | (29,019 | ) | |||||||
| CenturyLink, Inc. | (800 | ) | (32,344 | ) | |||||||
|
Charles River Laboratories International, Inc. |
(1,400 | ) | (56,910 | ) | |||||||
| Charter Communications, Inc., Class A | (630 | ) | (34,184 | ) | |||||||
| Chemtura Corp. | (2,000 | ) | (36,400 | ) | |||||||
| Chesapeake Energy Corp. | (2,500 | ) | (74,225 | ) | |||||||
36
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investments sold short—(Continued) | |||||||||||
| Common stocks—(Continued) | |||||||||||
| United States—(Continued) | |||||||||||
| Chevron Corp. | (300 | ) | $ | (30,852 | ) | ||||||
| Church & Dwight Co., Inc. | (2,000 | ) | (81,080 | ) | |||||||
| Ciena Corp. | (1,100 | ) | (20,218 | ) | |||||||
| CIT Group, Inc. | (500 | ) | (22,130 | ) | |||||||
| Clean Energy Fuels Corp. | (700 | ) | (9,205 | ) | |||||||
| Cobalt International Energy, Inc. | (1,500 | ) | (20,445 | ) | |||||||
|
Cognizant Technology Solutions Corp., Class A |
(900 | ) | (66,006 | ) | |||||||
| Compuware Corp. | (1,800 | ) | (17,568 | ) | |||||||
| ConocoPhillips | (600 | ) | (45,114 | ) | |||||||
| CONSOL Energy, Inc. | (700 | ) | (33,936 | ) | |||||||
| Consolidated Edison, Inc. | (2,100 | ) | (111,804 | ) | |||||||
| Constellation Brands, Inc., Class A | (2,200 | ) | (45,804 | ) | |||||||
| CoreLogic, Inc. | (1,200 | ) | (20,052 | ) | |||||||
| Corning, Inc. | (2,600 | ) | (47,190 | ) | |||||||
| Cree, Inc. | (600 | ) | (20,154 | ) | |||||||
| CSX Corp. | (3,200 | ) | (83,904 | ) | |||||||
| CVR Energy, Inc. | (700 | ) | (17,234 | ) | |||||||
| Dell, Inc. | (6,800 | ) | (113,356 | ) | |||||||
| DISH Network Corp., Class A | (700 | ) | (21,469 | ) | |||||||
| Dollar General Corp. | (1,500 | ) | (50,835 | ) | |||||||
| Douglas Emmett, Inc. | (1,000 | ) | (19,890 | ) | |||||||
|
DreamWorks Animation SKG, Inc., Class A |
(1,000 | ) | (20,100 | ) | |||||||
| DuPont Fabros Technology, Inc. | (800 | ) | (20,160 | ) | |||||||
| eBay, Inc. | (600 | ) | (19,362 | ) | |||||||
| Edison International | (500 | ) | (19,375 | ) | |||||||
| EI Du Pont de Nemours & Co. | (1,500 | ) | (81,075 | ) | |||||||
| El Paso Corp. | (1,000 | ) | (20,200 | ) | |||||||
| Eli Lilly & Co. | (4,000 | ) | (150,120 | ) | |||||||
| EMC Corp. | (3,100 | ) | (85,405 | ) | |||||||
| Entropic Communications, Inc. | (5,810 | ) | (51,651 | ) | |||||||
| Equinix, Inc. | (200 | ) | (20,204 | ) | |||||||
|
Expeditors International Washington, Inc. |
(2,700 | ) | (138,213 | ) | |||||||
| Fastenal Co. | (1,900 | ) | (68,381 | ) | |||||||
| First American Financial Corp. | (1,300 | ) | (20,345 | ) | |||||||
| First Niagara Financial Group, Inc. | (1,500 | ) | (19,800 | ) | |||||||
| First Republic Bank | (1,035 | ) | (33,410 | ) | |||||||
| Fiserv, Inc. | (800 | ) | (50,104 | ) | |||||||
| Flowers Foods, Inc. | (3,000 | ) | (66,120 | ) | |||||||
| Forest Laboratories, Inc. | (2,700 | ) | (106,218 | ) | |||||||
| Franklin Resources, Inc. | (100 | ) | (13,129 | ) | |||||||
| Freeport-McMoRan Copper & Gold, Inc. | (800 | ) | (42,320 | ) | |||||||
| General Growth Properties, Inc. | (1,262 | ) | (21,063 | ) | |||||||
| General Motors Co. | (1,160 | ) | (35,218 | ) | |||||||
| GeoEye, Inc. | (500 | ) | (18,700 | ) | |||||||
| Global Power Equipment Group, Inc. | (1,375 | ) | (36,465 | ) | |||||||
| GNC Holdings, Inc., Class A | (1,740 | ) | (37,949 | ) | |||||||
| Shares | Value | ||||||||||
| Gold Resource Corp. | (1,340 | ) | $ | (33,406 | ) | ||||||
| Goodrich Corp. | (1,400 | ) | (133,700 | ) | |||||||
| GrafTech International Ltd. | (1,000 | ) | (20,270 | ) | |||||||
| Grand Canyon Education, Inc. | (567 | ) | (8,040 | ) | |||||||
| Green Mountain Coffee Roasters, Inc. | (200 | ) | (17,852 | ) | |||||||
| Greenhill & Co., Inc. | (373 | ) | (20,075 | ) | |||||||
| GSI Group, Inc. | (3,000 | ) | (36,150 | ) | |||||||
| Halliburton Co. | (300 | ) | (15,300 | ) | |||||||
| Haynes International, Inc. | (1,530 | ) | (94,753 | ) | |||||||
| HCA Holdings, Inc. | (1,055 | ) | (34,815 | ) | |||||||
| Hershey Co. | (1,400 | ) | (79,590 | ) | |||||||
| Hertz Global Holdings, Inc. | (1,300 | ) | (20,644 | ) | |||||||
| Hormel Foods Corp. | (1,400 | ) | (41,734 | ) | |||||||
| Hospira, Inc. | (800 | ) | (45,328 | ) | |||||||
| Hudson City Bancorp, Inc. | (2,300 | ) | (18,837 | ) | |||||||
| Human Genome Sciences, Inc. | (800 | ) | (19,632 | ) | |||||||
| Humana, Inc. | (900 | ) | (72,486 | ) | |||||||
| IDEXX Laboratories, Inc. | (400 | ) | (31,024 | ) | |||||||
| Illumina, Inc. | (300 | ) | (22,545 | ) | |||||||
| Innospec, Inc. | (1,090 | ) | (36,635 | ) | |||||||
| Integrys Energy Group, Inc. | (800 | ) | (41,472 | ) | |||||||
| Intrepid Potash, Inc. | (600 | ) | (19,500 | ) | |||||||
| Intuitive Surgical, Inc. | (200 | ) | (74,422 | ) | |||||||
| Invesco Ltd. | (900 | ) | (21,060 | ) | |||||||
| JC Penney Co., Inc. | (600 | ) | (20,724 | ) | |||||||
| JetBlue Airways Corp. | (5,200 | ) | (31,720 | ) | |||||||
| KB Home | (1,700 | ) | (16,626 | ) | |||||||
| Kemet Corp. | (2,500 | ) | (35,725 | ) | |||||||
| Kraft Foods, Inc., Class A | (600 | ) | (21,138 | ) | |||||||
| Laboratory Corp. of America Holdings | (400 | ) | (38,716 | ) | |||||||
| Lamar Advertising Co., Class A | (2,700 | ) | (73,899 | ) | |||||||
| Lennar Corp., Class A | (1,100 | ) | (19,965 | ) | |||||||
| Lennox International, Inc. | (500 | ) | (21,535 | ) | |||||||
| Lincoln Educational Services Corp. | (5,030 | ) | (86,264 | ) | |||||||
| LKQ Corp. | (300 | ) | (7,827 | ) | |||||||
| Longtop Financial Technologies Ltd. ADR4,5 | (700 | ) | (4,638 | ) | |||||||
| LSI Corp. | (6,700 | ) | (47,704 | ) | |||||||
| M&T Bank Corp. | (200 | ) | (17,590 | ) | |||||||
| Manitowoc Co., Inc. | (1,260 | ) | (21,218 | ) | |||||||
| McDonald's Corp. | (800 | ) | (67,456 | ) | |||||||
| McMoRan Exploration Co. | (1,200 | ) | (22,176 | ) | |||||||
| Mead Johnson Nutrition Co. | (300 | ) | (20,265 | ) | |||||||
| MEMC Electronic Materials, Inc. | (2,500 | ) | (21,325 | ) | |||||||
| MetroPCS Communications, Inc. | (1,200 | ) | (20,652 | ) | |||||||
| MGIC Investment Corp. | (3,500 | ) | (20,825 | ) | |||||||
| MGM Resorts International | (500 | ) | (6,605 | ) | |||||||
| Micron Technology, Inc. | (3,000 | ) | (22,440 | ) | |||||||
| Molycorp, Inc. | (400 | ) | (24,424 | ) | |||||||
| Morgan Stanley | (739 | ) | (17,004 | ) | |||||||
| Motorola Mobility Holdings, Inc. | (912 | ) | (20,100 | ) | |||||||
| MSCI, Inc., Class A | (500 | ) | (18,840 | ) | |||||||
| Nanometrics, Inc. | (5,145 | ) | (97,704 | ) | |||||||
37
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investments sold short—(Concluded) | |||||||||||
| Common stocks—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
| Navistar International Corp. | (900 | ) | $ | (50,814 | ) | ||||||
| Nektar Therapeutics | (2,800 | ) | (20,356 | ) | |||||||
| NetApp, Inc. | (1,700 | ) | (89,726 | ) | |||||||
| Netflix, Inc. | (400 | ) | (105,076 | ) | |||||||
| Newell Rubbermaid, Inc. | (1,300 | ) | (20,514 | ) | |||||||
| Nielsen Holdings NV | (700 | ) | (21,812 | ) | |||||||
| NII Holdings, Inc. | (500 | ) | (21,190 | ) | |||||||
| Nordstrom, Inc. | (600 | ) | (28,164 | ) | |||||||
| Northern Trust Corp. | (400 | ) | (18,384 | ) | |||||||
| Novellus Systems, Inc. | (2,400 | ) | (86,736 | ) | |||||||
| NSTAR | (2,300 | ) | (105,754 | ) | |||||||
| Nuance Communications, Inc. | (1,000 | ) | (21,470 | ) | |||||||
| NuVasive, Inc. | (2,655 | ) | (87,296 | ) | |||||||
| NVIDIA Corp. | (1,700 | ) | (27,090 | ) | |||||||
| Occidental Petroleum Corp. | (600 | ) | (62,424 | ) | |||||||
| Office Depot, Inc. | (4,700 | ) | (19,834 | ) | |||||||
| Old Republic International Corp. | (1,700 | ) | (19,975 | ) | |||||||
| Olin Corp. | (900 | ) | (20,394 | ) | |||||||
| Omnicare, Inc. | (700 | ) | (22,323 | ) | |||||||
| O'Reilly Automotive, Inc. | (1,250 | ) | (81,888 | ) | |||||||
| Owens Corning | (500 | ) | (18,675 | ) | |||||||
| OYO Geospace Corp. | (905 | ) | (90,500 | ) | |||||||
| Parexel International Corp. | (900 | ) | (21,204 | ) | |||||||
| PepsiCo, Inc. | (300 | ) | (21,129 | ) | |||||||
| PerkinElmer, Inc. | (1,900 | ) | (51,129 | ) | |||||||
| PG&E Corp. | (100 | ) | (4,203 | ) | |||||||
| Pioneer Natural Resources Co. | (700 | ) | (62,699 | ) | |||||||
| PNC Financial Services Group, Inc. | (1,000 | ) | (59,610 | ) | |||||||
| Polypore International, Inc. | (300 | ) | (20,352 | ) | |||||||
| PulteGroup, Inc. | (2,500 | ) | (19,150 | ) | |||||||
| Quad/Graphics, Inc. | (880 | ) | (34,197 | ) | |||||||
| Quicksilver Resources, Inc. | (2,400 | ) | (35,424 | ) | |||||||
| Range Resources Corp. | (400 | ) | (22,200 | ) | |||||||
| RLJ Lodging Trust | (2,015 | ) | (35,001 | ) | |||||||
| Rockwell Automation, Inc. | (1,200 | ) | (104,112 | ) | |||||||
| Salesforce.com, Inc. | (150 | ) | (22,347 | ) | |||||||
| Sanderson Farms, Inc. | (400 | ) | (19,112 | ) | |||||||
| SandRidge Energy, Inc. | (1,900 | ) | (20,254 | ) | |||||||
| Sara Lee Corp. | (2,200 | ) | (41,778 | ) | |||||||
| Schlumberger Ltd. | (700 | ) | (60,480 | ) | |||||||
| Schweitzer-Mauduit International, Inc. | (400 | ) | (22,460 | ) | |||||||
| Sears Holdings Corp. | (1,100 | ) | (78,584 | ) | |||||||
| SemGroup Corp., Class A | (1,350 | ) | (34,655 | ) | |||||||
| Sirius XM Radio, Inc. | (9,800 | ) | (21,462 | ) | |||||||
| Six Flags Entertainment Corp. | (940 | ) | (35,203 | ) | |||||||
| Skechers U.S.A., Inc., Class A | (1,400 | ) | (20,272 | ) | |||||||
| SLM Corp. | (1,200 | ) | (20,172 | ) | |||||||
| Smithfield Foods, Inc. | (3,100 | ) | (67,797 | ) | |||||||
| Southern Co. | (1,800 | ) | (72,684 | ) | |||||||
| Shares | Value | ||||||||||
|
Starwood Hotels & Resorts Worldwide, Inc. |
(1,200 | ) | $ | (67,248 | ) | ||||||
| State Bank Financial Corp. | (2,090 | ) | (34,213 | ) | |||||||
| Sterling Financial Corp. | (2,175 | ) | (34,952 | ) | |||||||
| Swift Transportation Co. | (2,660 | ) | (36,043 | ) | |||||||
| Swisher Hygiene, Inc. | (6,320 | ) | (35,582 | ) | |||||||
| Tellabs, Inc. | (4,300 | ) | (19,823 | ) | |||||||
| Temple-Inland, Inc. | (700 | ) | (20,818 | ) | |||||||
| Terex Corp. | (700 | ) | (19,915 | ) | |||||||
| Thermo Fisher Scientific, Inc. | (1,200 | ) | (77,268 | ) | |||||||
| Time Warner Cable, Inc. | (500 | ) | (39,020 | ) | |||||||
| TJX Cos., Inc. | (1,600 | ) | (84,048 | ) | |||||||
| Travelers Cos., Inc. | (1,200 | ) | (70,056 | ) | |||||||
|
Varian Semiconductor Equipment Associates, Inc. |
(325 | ) | (19,968 | ) | |||||||
| Verint Systems, Inc. | (1,000 | ) | (37,040 | ) | |||||||
| VeriSign, Inc. | (600 | ) | (20,076 | ) | |||||||
| Verisk Analytics, Inc., Class A | (600 | ) | (20,772 | ) | |||||||
| Vertex Pharmaceuticals, Inc. | (400 | ) | (20,796 | ) | |||||||
| Viasat, Inc. | (500 | ) | (21,635 | ) | |||||||
| Vulcan Materials Co. | (500 | ) | (19,265 | ) | |||||||
| Waste Management, Inc. | (500 | ) | (18,635 | ) | |||||||
| Weyerhaeuser Co. | (1,000 | ) | (21,860 | ) | |||||||
| Whole Foods Market, Inc. | (1,500 | ) | (95,175 | ) | |||||||
| WW Grainger, Inc. | (900 | ) | (138,285 | ) | |||||||
| Total United States common stocks | (8,566,524 | ) | |||||||||
|
Total common stocks (proceeds $14,828,158) |
(15,904,616 | ) | |||||||||
| Preferred Stocks: (0.10)% | |||||||||||
| Germany: (0.10)% | |||||||||||
|
Porsche Automobil Holding SE, Preference shares |
(261 | ) | (20,703 | ) | |||||||
|
Total preferred stocks (proceeds $20,667) |
(20,703 | ) | |||||||||
| Investment companies: (1.56)% | |||||||||||
| SPDR S&P 500 ETF Trust | (1,585 | ) | (209,172 | ) | |||||||
| SPDR S&P MidCap 400 ETF Trust | (580 | ) | (102,892 | ) | |||||||
|
Total investment companies (proceeds $310,170) |
(312,064 | ) | |||||||||
38
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
|
Number of Rights |
Value | ||||||||||
| Rights: 0.00%2 | |||||||||||
| China: 0.00%2 | |||||||||||
|
China CITIC Bank, expires 07/25/11* (proceeds $0) |
(1,200 | ) | $ | (135 | ) | ||||||
|
Total investments sold short (proceeds $15,158,995) |
(16,237,518 | ) | |||||||||
|
Total investments, net of investments sold short: 47.43% |
9,464,170 | ||||||||||
|
Cash and other assets, less liabilities: 52.57% |
10,488,813 | ||||||||||
| Net assets: 100.00% | $ | 19,952,983 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was $25,164,264; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 881,880 | |||||
| Gross unrealized depreciation | (344,456 | ) | |||||
| Net unrealized appreciation of investments | $ | 537,424 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 All or a portion of these securities have been delivered to cover open short positions.
2 Amount represents less than 0.005%.
3 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | — | $ | 69,505,047 | $ | 59,674,979 | $ | 9,830,068 | $ | 17,221 | |||||||||||||
4 Security is illiquid. At June 30, 2011, the value of this security amounted to $(4,638) or (0.02)% of net assets.
5 Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2011, the value of these securities amounted to $(6,105) or (0.03)% of net assets.
39
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| JPMorgan Chase Bank | GBP | 455,000 | USD | 739,170 | 12/05/11 | $ | 10,297 | ||||||||||||
| JPMorgan Chase Bank | JPY | 45,100,000 | USD | 561,873 | 12/05/11 | 996 | |||||||||||||
| JPMorgan Chase Bank | USD | 736,286 | GBP | 455,000 | 12/05/11 | (7,412 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 474,613 | JPY | 38,400,000 | 12/05/11 | 2,940 | |||||||||||||
| JPMorgan Chase Bank | USD | 83,713 | JPY | 6,700,000 | 12/05/11 | (390 | ) | ||||||||||||
| Net unrealized appreciation on forward foreign currency contracts | $ | 6,431 | |||||||||||||||||
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| Index futures buy contracts: | |||||||||||||||||||
| Mini TPX Index, 5 contracts (JPY) | September 2011 | $ | 51,807 | $ | 53,004 | $ | 1,197 | ||||||||||||
| Index futures sell contracts: | |||||||||||||||||||
| TOPIX Index, 1 contract (JPY) | September 2011 | (104,183 | ) | (106,008 | ) | (1,825 | ) | ||||||||||||
| Interest rate futures buy contracts: | |||||||||||||||||||
| S&P SmallCap 600 E-MINI, 8 contracts (USD) | September 2011 | 335,417 | 355,120 | 19,703 | |||||||||||||||
| Net unrealized appreciation on futures contracts | $ | 19,075 | |||||||||||||||||
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 9,607,400 | $ | 5,850,633 | $ | — | $ | 15,458,033 | |||||||||||
| Common stocks sold short | (10,216,523 | ) | (5,681,988 | ) | (6,105 | ) | (15,904,616 | ) | |||||||||||
| Rights | 1,205 | — | — | 1,205 | |||||||||||||||
| Rights sold short | — | (134 | ) | — | (134 | ) | |||||||||||||
| Preferred stock | — | 51,956 | — | 51,956 | |||||||||||||||
| Preferred stocks sold short | — | (20,703 | ) | — | (20,703 | ) | |||||||||||||
| Investment companies | 360,426 | — | — | 360,426 | |||||||||||||||
| Investment companies sold short | (312,064 | ) | — | — | (312,064 | ) | |||||||||||||
| Short-term investment | — | 9,830,068 | — | 9,830,068 | |||||||||||||||
| Forward foreign currency contracts | — | 6,431 | — | 6,431 | |||||||||||||||
| Futures contracts | 19,703 | (628 | ) | — | 19,075 | ||||||||||||||
| Total | $ | (539,853 | ) | $ | 10,035,635 | $ | (6,105 | ) | $ | 9,489,677 | |||||||||
40
UBS Market Neutral Multi-Strategy Fund
Portfolio of investments
June 30, 2011
Concluded
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
| Measurements using unobservable inputs (Level 3) | |||||||||||
|
Common stocks sold short |
Total | ||||||||||
| Assets | |||||||||||
| Beginning balance | $ | — | $ | — | |||||||
| Purchases | 3,199 | 3,199 | |||||||||
| Issuances | 0 | 0 | |||||||||
| Sales | (30,486 | ) | (30,486 | ) | |||||||
| Settlements | — | — | |||||||||
| Accrued discounts (premiums) | — | — | |||||||||
| Total realized gain (loss) | 663 | 663 | |||||||||
| Net change in unrealized appreciation/depreciation | 20,519 | 20,519 | |||||||||
| Transfers into Level 3 | — | — | |||||||||
| Transfers out of Level 3 | — | — | |||||||||
| Ending balance | $ | (6,105 | ) | $ | (6,105 | ) | |||||
The change in unrealized appreciation/depreciation relating to the Level 3 investments still held at June 30, 2011 was $20,519.
See accompanying notes to financial statements.
41
UBS U.S. Equity Alpha Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS U.S. Equity Alpha Fund (the "Fund") returned 27.53% (Class A shares returned 20.49% after the deduction of the maximum sales charge), while Class Y shares returned 27.91%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 31.93% 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 45; please note that the Fund's returns do not reflect the deduction of taxes that an investor would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a strong absolute return, but lagged the Index. Stock selection in the financials sector was negative for the Fund's relative performance, whereas industry allocation was a positive for results.
Portfolio performance summary1
What worked
• Stock selection in the health care sector was positive for performance. A number of the Fund's holdings generated strong returns and boosted its performance.
– UnitedHealth Group, a diversified health care benefits company, was among the largest contributors to the Fund's performance during the reporting period. (For additional details, see "Portfolio highlights.")
– Biopharmaceutical company Acorda Therapeutics generated strong results. We continue to feel that its shares are attractively valued. (For additional details, see "Portfolio highlights.")
– Having a short position in Amedisys2, a provider of home health care and hospice services, was a positive for performance as it generated weak results during the reporting period. Amedisys's shares were negatively impacted by allegations that it abused Medicare's reimbursement system for at-home therapy care services.
• The Fund's holdings in the materials sector contributed to performance. A noteworthy performer was Celanese, a global, integrated producer of chemical products. The company announced that it had engineered a cost-efficient process to produce ethanol from traditional hydrocarbons. It's believed that this process could be used as a substitute for corn in the production of ethanol.
• Several stock selection decisions added to relative performance.
– An overweight in Fortune Brands, a producer of home and hardware products, office products, golf equipment, and spirits and wine, was the Fund's largest contributor to performance during the reporting period. (For additional details, see "Portfolio highlights.")
– Shares of information technology company Autodesk2 rose sharply, as demand for its design software increased and its earnings exceeded expectations.
• Industry allocations, overall, were a modest positive for the period. Industry weighting slightly enhanced the Fund's results during the reporting period. In particular, underweights to financials and consumer staples, along with an overweight to healthcare, were rewarded.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
2 As of June 30, 2011, this position was no longer held by the Fund.
42
UBS U.S. Equity Alpha Fund
What didn't work
• The Fund's holdings in the financials sector were the main driver of underperformance versus the Index. While the Fund benefited from its underweight exposure to financials, this was more than offset by weak stock selection in the sector. Examples of Fund holdings that performed poorly were Morgan Stanley, Wells Fargo and Goldman Sachs. Uncertainties regarding new financial regulations and the potential impact on future earnings dragged down the share prices of these companies. We remain confident in the stocks that we own in the financials sector, as we feel they offer the potential to outperform over the long run.
• Several stocks in the energy sector detracted from the Fund's results.
– Ultra Petroleum was negatively impacted as natural gas prices remained weak. We expect to see firming prices as the economic recovery continues.
– We held a short position in Halliburton, given our concerns over the company's ability to execute its business plan. This position was not rewarded, as the company's share price rose.
• A number of individual holdings generated weak returns.
– Hewlett-Packard was a negative contributor to relative returns, as its share price declined over the period. (For additional details, see "Portfolio highlights.")
– Networking leader Cisco Systems performed poorly during the reporting period, when its earnings did not meet expectations and it provided disappointing guidance for future earnings. (For additional details, see "Portfolio highlights.")
– An underweight to Netflix was a detractor from relative performance, as its share price moved sharply higher over the reporting period. (For additional details, see "Portfolio highlights.")
• Several Industry group weightings subtracted from performance. In aggregate, industry positioning was modestly positive for performance. However, underweights to the telecommunications services and materials sectors detracted from results.
Portfolio highlights
• UnitedHealth Group benefited as sentiment toward managed care stocks has improved now that investors are more comfortable with health care reform legislation. Among the managed care companies, we feel that UnitedHealth Group has among the most desirable mix of assets, with exposure to each of the key growth segments: Medicare, Medicaid and Pharmacy Benefit Management. Wall Street analysts have been increasing their earnings estimates for the company. Additionally, UnitedHealth Group received high scores in the American Medical Association's 2011 National Health Insurer Report Card.
• Acorda Therapeutics is engaged in the identification, development and commercialization of therapies that improve neurological functioning in people with multiple sclerosis (MS), spinal cord injury and other disorders of the nervous system. In January 2010, the US Food and Drug Administration (FDA) approved Acorda Therapeutics product Ampyra, a treatment to improve walking in patients with MS. We feel that sales of Ampyra will surpass expectations, and that the company could be an acquisition candidate.
• Fortune Brands has devoted significant resources in recent years to strengthen its market positioning in its home, spirits and golf markets, as well as to improve its cost structure. These investments have started to bear
43
UBS U.S. Equity Alpha Fund
fruit with consistent market share gains across all three business segments despite the continuously sluggish or weak respective markets. We believe as the economy continues to recover, the advantages of Fortune Brands' market share gains and improved cost structure should translate into stronger earnings power than currently anticipated by the market. In addition, management has a strong track record on execution and capital deployment.
• Shares of Hewlett-Packard moved sharply lower after CEO Mark Hurd resigned amid allegations of misconduct. In addition, there were uncertainties regarding the new CEO's ability to execute his strategy. We continue to own Hewlett-Packard, as we like the sustainability of its revenue streams, including Hewlett-Packard's high-margin ink cartridge business.
• The Fund's position in Cisco Systems, a global leader in network communications, detracted from performance. Concerns regarding potential cuts in US government spending, along with fears that Cisco Systems' margins would be negatively impacted by increased foreign competition, dragged its shares lower. We still have confidence in the long-term prospects for the company, as router and bandwidth needs should remain robust in our ever-increasing digital world.
• Netflix was among the top performing stocks during the reporting period. Therefore, the Fund's short position was a negative for relative results. The number of subscribers to the company's on-demand internet streaming video service soared during the period, which helped to drive its stock price higher. The short position was taken as the company's costs continue to exceed its revenues. In addition, Netflix could experience rising costs and lower margins in the future as content providers renegotiate their contracts with the company.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
44
UBS U.S. Equity Alpha Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | Inception1 | ||||||||||
| Before deducting maximum sales charge | |||||||||||
| Class A2 | 27.53 | % | (0.67 | )% | |||||||
| Class C3 | 26.70 | (1.39 | ) | ||||||||
| Class Y4 | 27.91 | (0.42 | ) | ||||||||
| After deducting maximum sales charge | |||||||||||
| Class A2 | 20.49 | % | (1.84 | )% | |||||||
| Class C3 | 25.70 | (1.39 | ) | ||||||||
| Russell 1000 Index5 | 31.93 | % | 2.39 | % | |||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—2.47% and 2.27%; Class C—3.30% and 3.01%; Class Y—2.19% and 2.03%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, otherwise do not exceed 1.50% for Class A shares, 2.25% for Class C shares and 1.25% for Class Y shares. 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 U.S. Equity Alpha Fund and the index is September 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 is designed to measure the performance of the large-cap segment of the US equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the Russell 3000 Index. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
45
UBS U.S. Equity Alpha Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Equity Alpha Fund Class A and Class Y shares versus the Russell 1000 Index from September 26, 2006, which is the inception date of the two classes, through June 30, 2011. The performance of Class C shares will vary based upon the class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
46
UBS U.S. Equity Alpha Fund
Top ten equity holdings (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Exxon Mobil Corp. | 5.3 | % | |||||
| Apple, Inc. | 3.6 | ||||||
| PepsiCo, Inc. | 3.1 | ||||||
| Johnson & Johnson | 2.9 | ||||||
| General Dynamics Corp. | 2.8 | ||||||
| Kraft Foods, Inc., Class A | 2.7 | ||||||
| Time Warner, Inc. | 2.7 | ||||||
| JPMorgan Chase & Co. | 2.6 | ||||||
| Adobe Systems, Inc. | 2.5 | ||||||
| Wells Fargo & Co. | 2.5 | ||||||
| Total | 30.7 | % | |||||
1 Only long positions are considered for top ten holdings.
47
UBS U.S. Equity Alpha Fund
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 5.00 | % | |||||
| Air freight & logistics | 1.46 | ||||||
| Airlines | 1.26 | ||||||
| Automobiles | 1.78 | ||||||
| Beverages | 3.10 | ||||||
| Biotechnology | 3.12 | ||||||
| Capital markets | 3.08 | ||||||
| Chemicals | 1.20 | ||||||
| Commercial banks | 3.96 | ||||||
| Communications equipment | 3.79 | ||||||
| Computers & peripherals | 5.39 | ||||||
| Construction materials | 0.73 | ||||||
| Diversified consumer services | 0.79 | ||||||
| Diversified financial services | 5.07 | ||||||
| Electric utilities | 5.90 | ||||||
| Energy equipment & services | 3.39 | ||||||
| Food & staples retailing | 3.61 | ||||||
| Food products | 2.69 | ||||||
| Health care equipment & supplies | 4.75 | ||||||
| Health care providers & services | 3.34 | ||||||
| Health care technology | 0.29 | ||||||
| Hotels, restaurants & leisure | 3.54 | ||||||
| Household durables | 1.16 | ||||||
| Household products | 2.37 | ||||||
| Insurance | 3.22 | ||||||
| Internet & catalog retail | 1.70 | ||||||
| IT services | 2.23 | ||||||
| Life sciences tools & services | 0.70 | ||||||
| Machinery | 3.81 | ||||||
| Media | 6.72 | ||||||
| Metals & mining | 0.60 | ||||||
| Oil, gas & consumable fuels | 9.64 | ||||||
| Personal products | 1.18 | ||||||
| Pharmaceuticals | 7.13 | ||||||
| Real estate investment trust (REIT) | 1.19 | ||||||
| Road & rail | 2.95 | ||||||
| Semiconductors & semiconductor equipment | 2.29 | ||||||
| Software | 4.41 | ||||||
| Specialty retail | 1.27 | ||||||
| Total common stocks | 119.81 | % | |||||
| Short-term investment | 0.68 | ||||||
| Total investments before investments sold short | 120.49 | % | |||||
| Investments sold short | |||||||
| Common stocks | |||||||
| Aerospace & defense | (0.94 | )% | |||||
| Beverages | (0.47 | ) | |||||
| Computers & peripherals | (0.47 | ) | |||||
| Diversified telecommunication services | (0.81 | ) | |||||
| Energy equipment & services | (0.85 | ) | |||||
| Food products | (0.75 | ) | |||||
| Health care providers & services | (1.00 | ) | |||||
| Hotels, restaurants & leisure | (0.64 | ) | |||||
| Household products | (0.67 | ) | |||||
| Insurance | (0.68 | ) | |||||
| Internet & catalog retail | (0.56 | ) | |||||
| IT services | (0.52 | ) | |||||
| Media | (1.02 | ) | |||||
| Multiline retail | (1.94 | ) | |||||
| Multi-utilities | (1.83 | ) | |||||
| Oil, gas & consumable fuels | (0.85 | ) | |||||
| Pharmaceuticals | (0.73 | ) | |||||
| Semiconductors & semiconductor equipment | (2.01 | ) | |||||
| Software | (1.36 | ) | |||||
| Specialty retail | (0.76 | ) | |||||
| Trading companies & distributors | (0.76 | ) | |||||
| Water utilities | (1.25 | ) | |||||
| Total investments sold short | (20.87 | )% | |||||
| Total investments, net of investments sold short | 99.62 | ||||||
| Cash and other assets, less liabilities | 0.38 | ||||||
| Net assets | 100.00 | % | |||||
48
UBS U.S. Equity Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 119.81% | |||||||||||
| Aerospace & defense: 5.00% | |||||||||||
| Boeing Co.1 | 9,500 | $ | 702,335 | ||||||||
| General Dynamics Corp.1 | 12,400 | 924,048 | |||||||||
| 1,626,383 | |||||||||||
| Air freight & logistics: 1.46% | |||||||||||
| FedEx Corp.1 | 5,000 | 474,250 | |||||||||
| Airlines: 1.26% | |||||||||||
| Southwest Airlines Co.1 | 35,900 | 409,978 | |||||||||
| Automobiles: 1.78% | |||||||||||
| General Motors Co.*1 | 19,100 | 579,876 | |||||||||
| Beverages: 3.10% | |||||||||||
| PepsiCo, Inc.1 | 14,300 | 1,007,149 | |||||||||
| Biotechnology: 3.12% | |||||||||||
| Acorda Therapeutics, Inc.*1 | 5,900 | 190,629 | |||||||||
| Alexion Pharmaceuticals, Inc.*1 | 5,700 | 268,071 | |||||||||
| Amgen, Inc.*1 | 4,900 | 285,915 | |||||||||
| Amylin Pharmaceuticals, Inc.*1 | 6,800 | 90,848 | |||||||||
| Pharmasset, Inc.*1 | 1,600 | 179,520 | |||||||||
| 1,014,983 | |||||||||||
| Capital markets: 3.08% | |||||||||||
| Goldman Sachs Group, Inc.1 | 4,200 | 558,978 | |||||||||
| Morgan Stanley1 | 19,200 | 441,792 | |||||||||
| 1,000,770 | |||||||||||
| Chemicals: 1.20% | |||||||||||
| Celanese Corp., Series A1 | 7,300 | 389,163 | |||||||||
| Commercial banks: 3.96% | |||||||||||
| US Bancorp1 | 18,200 | 464,282 | |||||||||
| Wells Fargo & Co.1 | 29,300 | 822,158 | |||||||||
| 1,286,440 | |||||||||||
| Communications equipment: 3.79% | |||||||||||
| Cisco Systems, Inc.1 | 31,200 | 487,032 | |||||||||
| QUALCOMM, Inc.1 | 13,100 | 743,949 | |||||||||
| 1,230,981 | |||||||||||
| Computers & peripherals: 5.39% | |||||||||||
| Apple, Inc.*1 | 3,500 | 1,174,845 | |||||||||
| Hewlett-Packard Co.1 | 15,900 | 578,760 | |||||||||
| 1,753,605 | |||||||||||
| Construction materials: 0.73% | |||||||||||
| Vulcan Materials Co. | 6,200 | 238,886 | |||||||||
| Shares | Value | ||||||||||
| Diversified consumer services: 0.79% | |||||||||||
| Apollo Group, Inc., Class A*1 | 5,900 | $ | 257,712 | ||||||||
| Diversified financial services: 5.07% | |||||||||||
| Citigroup, Inc.1 | 19,719 | 821,099 | |||||||||
| JPMorgan Chase & Co.1 | 20,200 | 826,988 | |||||||||
| 1,648,087 | |||||||||||
| Electric utilities: 5.90% | |||||||||||
| American Electric Power Co., Inc.1 | 10,600 | 399,408 | |||||||||
| Edison International1 | 13,000 | 503,750 | |||||||||
| FirstEnergy Corp.1 | 10,800 | 476,820 | |||||||||
| NextEra Energy, Inc.1 | 9,400 | 540,124 | |||||||||
| 1,920,102 | |||||||||||
| Energy equipment & services: 3.39% | |||||||||||
| Ensco PLC ADR | 8,700 | 463,710 | |||||||||
| Noble Corp.1 | 16,200 | 638,442 | |||||||||
| 1,102,152 | |||||||||||
| Food & staples retailing: 3.61% | |||||||||||
| Kroger Co.1 | 30,600 | 758,880 | |||||||||
| Wal-Mart Stores, Inc. | 7,800 | 414,492 | |||||||||
| 1,173,372 | |||||||||||
| Food products: 2.69% | |||||||||||
| Kraft Foods, Inc., Class A1 | 24,800 | 873,704 | |||||||||
| Health care equipment & supplies: 4.75% | |||||||||||
| Baxter International, Inc.1 | 9,400 | 561,086 | |||||||||
| Covidien PLC1 | 7,100 | 377,933 | |||||||||
| Medtronic, Inc.1 | 15,700 | 604,921 | |||||||||
| 1,543,940 | |||||||||||
| Health care providers & services: 3.34% | |||||||||||
| HCA Holdings, Inc.*1 | 12,600 | 415,800 | |||||||||
| UnitedHealth Group, Inc.1 | 13,000 | 670,540 | |||||||||
| 1,086,340 | |||||||||||
| Health care technology: 0.29% | |||||||||||
| Emdeon, Inc., Class A*1 | 7,300 | 95,776 | |||||||||
| Hotels, restaurants & leisure: 3.54% | |||||||||||
| Carnival Corp.1 | 16,400 | 617,132 | |||||||||
| International Game Technology1 | 30,400 | 534,432 | |||||||||
| 1,151,564 | |||||||||||
| Household durables: 1.16% | |||||||||||
| Fortune Brands, Inc.1 | 5,900 | 376,243 | |||||||||
| Household products: 2.37% | |||||||||||
| Colgate-Palmolive Co.1 | 8,800 | 769,208 | |||||||||
49
UBS U.S. Equity Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| Insurance: 3.22% | |||||||||||
| Aflac, Inc.1 | 8,500 | $ | 396,780 | ||||||||
| MetLife, Inc.1 | 14,800 | 649,276 | |||||||||
| 1,046,056 | |||||||||||
| Internet & catalog retail: 1.70% | |||||||||||
| Amazon.com, Inc.*1 | 2,700 | 552,123 | |||||||||
| IT services: 2.23% | |||||||||||
| Visa, Inc., Class A1 | 8,600 | 724,636 | |||||||||
| Life sciences tools & services: 0.70% | |||||||||||
| Bio-Rad Laboratories, Inc., Class A*1 | 1,900 | 226,784 | |||||||||
| Machinery: 3.81% | |||||||||||
| Illinois Tool Works, Inc.1 | 13,900 | 785,211 | |||||||||
| PACCAR, Inc.1 | 8,900 | 454,701 | |||||||||
| 1,239,912 | |||||||||||
| Media: 6.72% | |||||||||||
| Comcast Corp., Class A1 | 24,800 | 628,432 | |||||||||
| Time Warner, Inc.1 | 24,000 | 872,880 | |||||||||
| Viacom, Inc., Class B1 | 13,400 | 683,400 | |||||||||
| 2,184,712 | |||||||||||
| Metals & mining: 0.60% | |||||||||||
| Steel Dynamics, Inc.1 | 12,100 | 196,625 | |||||||||
| Oil, gas & consumable fuels: 9.64% | |||||||||||
| EOG Resources, Inc.1 | 4,400 | 460,020 | |||||||||
| Exxon Mobil Corp.1 | 21,300 | 1,733,394 | |||||||||
| Hess Corp.1 | 4,400 | 328,944 | |||||||||
| Ultra Petroleum Corp.*1 | 13,400 | 613,720 | |||||||||
| 3,136,078 | |||||||||||
| Personal products: 1.18% | |||||||||||
| Avon Products, Inc.1 | 13,700 | 383,600 | |||||||||
| Pharmaceuticals: 7.13% | |||||||||||
| Allergan, Inc.1 | 5,900 | 491,175 | |||||||||
| Johnson & Johnson1 | 14,100 | 937,932 | |||||||||
| Merck & Co., Inc.1 | 20,700 | 730,503 | |||||||||
| Teva Pharmaceutical Industries Ltd. ADR | 3,300 | 159,126 | |||||||||
| 2,318,736 | |||||||||||
| Real estate investment trust (REIT): 1.19% | |||||||||||
| Annaly Capital Management, Inc. | 21,500 | 387,860 | |||||||||
| Road & rail: 2.95% | |||||||||||
| Hertz Global Holdings, Inc.*1 | 33,500 | 531,980 | |||||||||
| Norfolk Southern Corp. | 5,700 | 427,101 | |||||||||
| 959,081 | |||||||||||
| Shares | Value | ||||||||||
| Semiconductors & semiconductor equipment: 2.29% | |||||||||||
| Broadcom Corp., Class A*1 | 12,400 | $ | 417,136 | ||||||||
| Intersil Corp., Class A1 | 25,600 | 328,960 | |||||||||
| 746,096 | |||||||||||
| Software: 4.41% | |||||||||||
| Adobe Systems, Inc.*1 | 26,200 | 823,990 | |||||||||
| Symantec Corp.*1 | 31,000 | 611,320 | |||||||||
| 1,435,310 | |||||||||||
| Specialty retail: 1.27% | |||||||||||
| GameStop Corp., Class A*1 | 15,500 | 413,385 | |||||||||
|
Total common stocks (cost $34,384,065) |
38,961,658 | ||||||||||
| Short-term investment: 0.68% | |||||||||||
| Investment company: 0.68% | |||||||||||
|
UBS Cash Management Prime Relationship Fund2 (cost $221,096) |
221,096 | 221,096 | |||||||||
|
Total investments before investments sold short: 120.49% (cost $34,605,161) |
39,182,754 | ||||||||||
| Investments sold short: (20.87)% | |||||||||||
| Common stocks: (20.87)% | |||||||||||
| Aerospace & defense: (0.94)% | |||||||||||
| Goodrich Corp. | (3,200 | ) | (305,600 | ) | |||||||
| Beverages: (0.47)% | |||||||||||
| Constellation Brands, Inc., Class A | (7,400 | ) | (154,068 | ) | |||||||
| Computers & peripherals: (0.47)% | |||||||||||
| NetApp, Inc. | (2,900 | ) | (153,062 | ) | |||||||
| Diversified telecommunication services: (0.81)% | |||||||||||
| CenturyLink, Inc. | (6,488 | ) | (262,310 | ) | |||||||
| Energy equipment & services: (0.85)% | |||||||||||
| Halliburton Co. | (5,400 | ) | (275,400 | ) | |||||||
| Food products: (0.75)% | |||||||||||
| Smithfield Foods, Inc. | (11,100 | ) | (242,757 | ) | |||||||
| Health care providers & services: (1.00)% | |||||||||||
| Bio-Reference Labs, Inc. | (5,500 | ) | (114,950 | ) | |||||||
| Humana, Inc. | (2,600 | ) | (209,404 | ) | |||||||
| (324,354 | ) | ||||||||||
| Hotels, restaurants & leisure: (0.64)% | |||||||||||
| Starwood Hotels & Resorts Worldwide, Inc. | (3,700 | ) | (207,348 | ) | |||||||
50
UBS U.S. Equity Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investments sold short—(Concluded) | |||||||||||
| Common stocks—(Concluded) | |||||||||||
| Household products: (0.67)% | |||||||||||
| Church & Dwight Co., Inc. | (5,400 | ) | $ | (218,916 | ) | ||||||
| Insurance: (0.68)% | |||||||||||
| Travelers Cos., Inc. | (3,800 | ) | (221,844 | ) | |||||||
| Internet & catalog retail: (0.56)% | |||||||||||
| Netflix, Inc. | (700 | ) | (183,883 | ) | |||||||
| IT services: (0.52)% | |||||||||||
|
Cognizant Technology Solutions Corp., Class A |
(2,300 | ) | (168,682 | ) | |||||||
| Media: (1.02)% | |||||||||||
| Discovery Communications, Inc., Class A | (4,000 | ) | (163,840 | ) | |||||||
| Lamar Advertising Co., Class A | (6,100 | ) | (166,957 | ) | |||||||
| (330,797 | ) | ||||||||||
| Multiline retail: (1.94)% | |||||||||||
| Dollar General Corp. | (7,600 | ) | (257,564 | ) | |||||||
| JC Penney Co., Inc. | (6,300 | ) | (217,602 | ) | |||||||
| Sears Holdings Corp. | (2,200 | ) | (157,168 | ) | |||||||
| (632,334 | ) | ||||||||||
| Multi-utilities: (1.83)% | |||||||||||
| Consolidated Edison, Inc. | (4,700 | ) | (250,228 | ) | |||||||
| Integrys Energy Group, Inc. | (3,900 | ) | (202,176 | ) | |||||||
| NSTAR | (3,100 | ) | (142,538 | ) | |||||||
| (594,942 | ) | ||||||||||
| Oil, gas & consumable fuels: (0.85)% | |||||||||||
| Pioneer Natural Resources Co. | (3,100 | ) | (277,667 | ) | |||||||
| Shares | Value | ||||||||||
| Pharmaceuticals: (0.73)% | |||||||||||
| Eli Lilly & Co. | (6,300 | ) | $ | (236,439 | ) | ||||||
| Semiconductors & semiconductor equipment: (2.01)% | |||||||||||
| Altera Corp. | (5,700 | ) | (264,195 | ) | |||||||
| Novellus Systems, Inc. | (6,900 | ) | (249,366 | ) | |||||||
| NVIDIA Corp. | (8,700 | ) | (138,634 | ) | |||||||
| (652,195 | ) | ||||||||||
| Software: (1.36)% | |||||||||||
| BMC Software, Inc. | (5,600 | ) | (306,320 | ) | |||||||
| Compuware Corp. | (14,100 | ) | (137,616 | ) | |||||||
| (443,936 | ) | ||||||||||
| Specialty retail: (0.76)% | |||||||||||
| O'Reilly Automotive, Inc. | (3,800 | ) | (248,938 | ) | |||||||
| Trading companies & distributors: (0.76)% | |||||||||||
| WW Grainger, Inc. | (1,600 | ) | (245,840 | ) | |||||||
| Water utilities: (1.25)% | |||||||||||
| American Water Works Co., Inc. | (7,500 | ) | (220,875 | ) | |||||||
| Aqua America, Inc. | (8,400 | ) | (184,632 | ) | |||||||
| (405,507 | ) | ||||||||||
|
Total investments sold short (proceeds $5,306,832) |
(6,786,819 | ) | |||||||||
|
Total investments, net of investments sold short: 99.62% |
32,395,935 | ||||||||||
|
Cash and other assets, less liabilities: 0.38% |
123,304 | ||||||||||
| Net assets: 100.00% | $ | 32,519,239 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was $35,188,573; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 5,163,833 | |||||
| Gross unrealized depreciation | (1,169,652 | ) | |||||
| Net unrealized appreciation of investments | $ | 3,994,181 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 All or a portion of these securities have been delivered to cover open short positions.
2 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 443,436 | $ | 18,405,180 | $ | 18,627,520 | $ | 221,096 | $ | 843 | |||||||||||||
51
UBS U.S. Equity Alpha Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 38,961,658 | $ | — | $ | — | $ | 38,961,658 | |||||||||||
| Common stocks sold short | (6,786,819 | ) | — | — | (6,786,819 | ) | |||||||||||||
| Short-term investment | — | 221,096 | — | 221,096 | |||||||||||||||
| Total | $ | 32,174,839 | $ | 221,096 | $ | — | $ | 32,395,935 | |||||||||||
See accompanying notes to financial statements.
52
UBS U.S. Large Cap Equity Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS U.S. Large Cap Equity Fund (the "Fund") returned 29.28% (Class A shares returned 22.21% after the deduction of the maximum sales charge), while Class Y shares returned 29.57%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 31.93% 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 56; please note that the Fund's returns do not reflect the deduction of taxes that an investor would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a strong absolute return, but lagged the Index. Stock selection, notably in the financials sector, was a negative for the Fund's relative performance, whereas industry allocation was a positive for results.
Portfolio performance summary1
What worked
• Stock selection in the health care sector was positive for performance. A number of the Fund's holdings generated strong returns and boosted performance.
– UnitedHealth Group, a diversified health care benefits company, was among the largest contributors to the Fund's performance during the reporting period. (For additional details, see "Portfolio highlights.")
– Biopharmaceutical company Pharmasset performed well. Its shares gained momentum after reports surfaced that the company's two-pill combination treatment for hepatitis C was successful for 94% of patients after two weeks.
– Another of the Fund's biopharmaceutical holdings, Acorda Therapeutics, generated strong results. We continue to feel that its shares are attractively valued. (For additional details, see "Portfolio highlights.")
• The Fund's holdings in the materials sector contributed to performance. A noteworthy performer was Celanese, a global, integrated producer of chemical products. The company announced that it had engineered a cost-efficient process to produce ethanol from traditional hydrocarbons. It's believed that this process could be used as a substitute for corn in the production of ethanol.
• Several stock selection decisions added to relative performance.
– An overweight in Fortune Brands,2 a producer of home and hardware products, office products, golf equipment, and spirits and wine, was the Fund's largest contributor to performance during the reporting period. (For additional details, see "Portfolio highlights.")
– Shares of information technology company Autodesk2 rose sharply, as demand for its design software increased, and its earnings exceeded expectations.
• Industry allocations, overall, were positive for the period. Industry weightings, which are a by-product of our bottom-up stock selection, enhanced the Fund's results during the reporting period. In particular, underweights to financials and consumer staples, along with an overweight to consumer discretionary, were rewarded.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
2 As of June 30, 2011, this position was no longer held by the Fund.
53
UBS U.S. Large Cap Equity Fund
What didn't work
• The Fund's holdings in the financials sector were the main drivers of underperformance versus the Index. While the Fund benefited from its underweight exposure to financials, this was more than offset by weak stock selection in the sector. Examples of Fund holdings that performed poorly were Morgan Stanley, Wells Fargo, JPMorgan Chase and Goldman Sachs. Uncertainties regarding new financial regulations and the potential impact on future earnings dragged down the share prices of these companies. We remain confident in the stocks that we own in the financials sector, as we feel they offer the potential to outperform over the long run.
• Several stocks in the energy sector detracted from the Fund's results. Ultra Petroleum and EOG Resources were both negatively impacted as natural gas prices remained weak. We expect to see firming prices as the economic recovery continues.
• A number of individual holdings generated weak returns.
– Hewlett-Packard was a negative contributor to relative returns, as its share price declined. (For additional details, see "Portfolio highlights.")
– Networking leader Cisco Systems performed poorly during the reporting period. The company's earnings did not meet expectations, and it provided disappointing guidance for future earnings. (For additional details, see "Portfolio highlights.")
– Avon Products is a distributor of cosmetics, perfume and other products in more than 140 countries across the world. A number of issues dragged down its stock over the reporting period. (For additional details, see "Portfolio highlights.")
• Several Industry group weightings subtracted from performance. In aggregate, industry positioning was positive for performance. However, underweights to the materials and telecommunications services sectors detracted from results.
Portfolio highlights
• UnitedHealth Group benefited as sentiment toward managed care stocks has improved now that investors are more comfortable with health care reform legislation. Among the managed care companies, we feel that UnitedHealth Group has among the most desirable mix of assets, with exposure to each of the key growth segments: Medicare, Medicaid and Pharmacy Benefit Management. Wall Street analysts have been increasing their earnings estimates for the company. Additionally, UnitedHealth Group received high scores in the American Medical Association's 2011 National Health Insurer Report Card.
• Acorda Therapeutics is engaged in the identification, development and commercialization of therapies that improve neurological functioning in people with multiple sclerosis (MS), spinal cord injury and other disorders of the nervous system. In January 2010, the US Food and Drug Administration (FDA) approved Acorda Therapeutics product Ampyra, a treatment to improve walking in patients with MS. We believe that sales of Ampyra will surpass expectations, and that the company could be an acquisition candidate.
• Fortune Brands has devoted significant resources in recent years to strengthen its market positioning in its home, spirits and golf markets, as well as to improve its cost structure. These investments have started to bear fruit with consistent market share gains across all three business segments, despite the continuously sluggish or weak respective markets.
54
UBS U.S. Large Cap Equity Fund
• Shares of Hewlett-Packard moved sharply lower after CEO Mark Hurd resigned amid allegations of misconduct. In addition, there were uncertainties regarding the new CEO's ability to execute his strategy. We continue to own Hewlett-Packard, as we like the sustainability of its revenue streams, including Hewlett-Packard's high-margin ink cartridge business.
• Cisco Systems, a global leader in network communications, detracted from performance. Concerns regarding potential cuts in US government spending, along with fears that Cisco Systems' margins would be negatively impacted by increased foreign competition, dragged its shares lower. We still have confidence in the long-term prospects for the company, as router and bandwidth needs should remain robust in our ever-increasing digital world.
• Avon Products was a weak performer given a protracted internal investigation regarding allegations of corruption, resulting in approximately $90 million in legal and accounting fees. Disappointing growth in China also weighed on the company's share price. We feel the company's valuation is very attractive given the value of its brand and global footprint.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
55
UBS U.S. Large Cap Equity Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 29.28 | % | 1.08 | % | 3.48 | % | 4.25 | % | |||||||||||
| Class B3 | 28.32 | 0.33 | N/A | 3.956 | |||||||||||||||
| Class C4 | 28.38 | 0.36 | N/A | 3.40 | |||||||||||||||
| Class Y5 | 29.57 | 1.36 | 3.77 | 7.97 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 22.21 | % | (0.06 | )% | 2.90 | % | 3.83 | % | |||||||||||
| Class B3 | 23.32 | (0.03 | ) | N/A | 3.956 | ||||||||||||||
| Class C4 | 27.38 | 0.36 | N/A | 3.40 | |||||||||||||||
| Russell 1000 Index7 | 31.93 | % | 3.30 | % | 3.21 | % | 8.35 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.33% and 1.20%; Class B—2.10% and 1.95%; Class C—2.01% and 1.95%; Class Y—0.99% and 0.95%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the 12-month period ending October 27, 2011, do not exceed 1.20% for Class A shares, 1.95% for Class B shares, 1.95% for Class C shares and 0.95% for Class Y shares. 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 June 30, 1997. Inception dates of Class B and Class C shares are November 5, 2001 and November 13, 2001, respectively. Inception date of Class Y shares and the index is February 22, 1994.
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. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The Russell 1000 Index is designed to measure the performance of the large-cap segment of the US equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the Russell 3000 Index. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
56
UBS U.S. Large Cap Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Large Cap Equity Fund Class A and Class Y shares versus the Russell 1000 Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
57
UBS U.S. Large Cap Equity Fund
Top ten equity holdings (unaudited)
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Exxon Mobil Corp. | 4.5 | % | |||||
| Apple, Inc. | 3.2 | ||||||
| Johnson & Johnson | 2.6 | ||||||
| General Dynamics Corp. | 2.5 | ||||||
| JPMorgan Chase & Co. | 2.4 | ||||||
| PepsiCo, Inc. | 2.3 | ||||||
| Citigroup, Inc. | 2.2 | ||||||
| Kraft Foods, Inc., Class A | 2.2 | ||||||
| Illinois Tool Works, Inc. | 2.2 | ||||||
| Visa, Inc., Class A | 2.2 | ||||||
| Total | 26.3 | % | |||||
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 4.38 | % | |||||
| Air freight & logistics | 1.37 | ||||||
| Airlines | 1.23 | ||||||
| Automobiles | 1.50 | ||||||
| Beverages | 2.35 | ||||||
| Biotechnology | 3.07 | ||||||
| Capital markets | 3.08 | ||||||
| Chemicals | 1.21 | ||||||
| Commercial banks | 3.48 | ||||||
| Communications equipment | 3.24 | ||||||
| Computers & peripherals | 4.68 | ||||||
| Construction materials | 0.58 | ||||||
| Diversified consumer services | 0.71 | ||||||
| Diversified financial services | 4.63 | ||||||
| Electric utilities | 3.62 | ||||||
| Energy equipment & services | 2.92 | ||||||
| Food & staples retailing | 1.51 | ||||||
| Food products | 2.20 | ||||||
| Health care equipment & supplies | 3.46 | ||||||
| Health care providers & services | 2.50 | ||||||
| Health care technology | 0.30 | ||||||
| Hotels, restaurants & leisure | 2.95 | ||||||
| Household products | 2.07 | ||||||
| Insurance | 2.84 | ||||||
| Internet & catalog retail | 1.73 | ||||||
| IT services | 2.16 | ||||||
| Life sciences tools & services | 0.49 | ||||||
| Machinery | 3.37 | ||||||
| Media | 5.31 | ||||||
| Oil, gas & consumable fuels | 8.46 | ||||||
| Personal products | 1.24 | ||||||
| Pharmaceuticals | 6.01 | ||||||
| Real estate investment trust (REIT) | 0.95 | ||||||
| Road & rail | 2.51 | ||||||
| Semiconductors & semiconductor equipment | 2.00 | ||||||
| Software | 3.83 | ||||||
| Specialty retail | 1.02 | ||||||
| Total common stocks | 98.96 | % | |||||
| Short-term investment | 1.33 | ||||||
| Investment of cash collateral from securities loaned | 4.62 | ||||||
| Total investments | 104.91 | % | |||||
| Liabilities, in excess of cash and other assets | (4.91 | ) | |||||
| Net assets | 100.00 | % | |||||
58
UBS U.S. Large Cap Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 98.96% | |||||||||||
| Aerospace & defense: 4.38% | |||||||||||
| Boeing Co. | 58,200 | $ | 4,302,726 | ||||||||
| General Dynamics Corp. | 77,500 | 5,775,300 | |||||||||
| 10,078,026 | |||||||||||
| Air freight & logistics: 1.37% | |||||||||||
| FedEx Corp. | 33,200 | 3,149,020 | |||||||||
| Airlines: 1.23% | |||||||||||
| Southwest Airlines Co. | 248,100 | 2,833,302 | |||||||||
| Automobiles: 1.50% | |||||||||||
| General Motors Co.* | 113,500 | 3,445,860 | |||||||||
| Beverages: 2.35% | |||||||||||
| PepsiCo, Inc. | 76,600 | 5,394,938 | |||||||||
| Biotechnology: 3.07% | |||||||||||
| Acorda Therapeutics, Inc.* | 42,500 | 1,373,175 | |||||||||
| Alexion Pharmaceuticals, Inc.* | 40,100 | 1,885,903 | |||||||||
| Amgen, Inc.* | 34,500 | 2,013,075 | |||||||||
| Amylin Pharmaceuticals, Inc.* | 37,200 | 496,992 | |||||||||
| Pharmasset, Inc.* | 11,600 | 1,301,520 | |||||||||
| 7,070,665 | |||||||||||
| Capital markets: 3.08% | |||||||||||
| Goldman Sachs Group, Inc. | 29,700 | 3,952,773 | |||||||||
| Morgan Stanley | 135,800 | 3,124,758 | |||||||||
| 7,077,531 | |||||||||||
| Chemicals: 1.21% | |||||||||||
| Celanese Corp., Series A | 52,300 | 2,788,113 | |||||||||
| Commercial banks: 3.48% | |||||||||||
| US Bancorp | 123,000 | 3,137,730 | |||||||||
| Wells Fargo & Co. | 173,400 | 4,865,604 | |||||||||
| 8,003,334 | |||||||||||
| Communications equipment: 3.24% | |||||||||||
| Cisco Systems, Inc. | 215,600 | 3,365,516 | |||||||||
| QUALCOMM, Inc. | 72,000 | 4,088,880 | |||||||||
| 7,454,396 | |||||||||||
| Computers & peripherals: 4.68% | |||||||||||
| Apple, Inc.* | 21,700 | 7,284,039 | |||||||||
| Hewlett-Packard Co. | 95,900 | 3,490,760 | |||||||||
| 10,774,799 | |||||||||||
| Construction materials: 0.58% | |||||||||||
| Vulcan Materials Co.1 | 34,900 | 1,344,697 | |||||||||
| Shares | Value | ||||||||||
| Diversified consumer services: 0.71% | |||||||||||
| Apollo Group, Inc., Class A*1 | 37,300 | $ | 1,629,264 | ||||||||
| Diversified financial services: 4.63% | |||||||||||
| Citigroup, Inc. | 122,830 | 5,114,641 | |||||||||
| JPMorgan Chase & Co. | 135,400 | 5,543,276 | |||||||||
| 10,657,917 | |||||||||||
| Electric utilities: 3.62% | |||||||||||
| American Electric Power Co., Inc. | 67,700 | 2,550,936 | |||||||||
| FirstEnergy Corp. | 67,100 | 2,962,465 | |||||||||
| NextEra Energy, Inc.1 | 49,000 | 2,815,540 | |||||||||
| 8,328,941 | |||||||||||
| Energy equipment & services: 2.92% | |||||||||||
| Ensco PLC ADR1 | 59,300 | 3,160,690 | |||||||||
| Noble Corp. | 90,100 | 3,550,841 | |||||||||
| 6,711,531 | |||||||||||
| Food & staples retailing: 1.51% | |||||||||||
| Kroger Co. | 140,200 | 3,476,960 | |||||||||
| Food products: 2.20% | |||||||||||
| Kraft Foods, Inc., Class A | 143,800 | 5,066,074 | |||||||||
| Health care equipment & supplies: 3.46% | |||||||||||
| Baxter International, Inc. | 40,200 | 2,399,538 | |||||||||
| Covidien PLC | 47,400 | 2,523,102 | |||||||||
| Medtronic, Inc. | 78,600 | 3,028,458 | |||||||||
| 7,951,098 | |||||||||||
| Health care providers & services: 2.50% | |||||||||||
| HCA Holdings, Inc.* | 53,100 | 1,752,300 | |||||||||
| UnitedHealth Group, Inc. | 77,700 | 4,007,766 | |||||||||
| 5,760,066 | |||||||||||
| Health care technology: 0.30% | |||||||||||
| Emdeon, Inc., Class A* | 52,200 | 684,864 | |||||||||
| Hotels, restaurants & leisure: 2.95% | |||||||||||
| Carnival Corp. | 114,800 | 4,319,924 | |||||||||
| International Game Technology | 139,700 | 2,455,926 | |||||||||
| 6,775,850 | |||||||||||
| Household products: 2.07% | |||||||||||
| Colgate-Palmolive Co. | 54,600 | 4,772,586 | |||||||||
| Insurance: 2.84% | |||||||||||
| Aflac, Inc. | 58,500 | 2,730,780 | |||||||||
| MetLife, Inc. | 86,700 | 3,803,529 | |||||||||
| 6,534,309 | |||||||||||
59
UBS U.S. Large Cap Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| Internet & catalog retail: 1.73% | |||||||||||
| Amazon.com, Inc.* | 19,500 | $ | 3,987,555 | ||||||||
| IT services: 2.16% | |||||||||||
| Visa, Inc., Class A | 58,900 | 4,962,914 | |||||||||
| Life sciences tools & services: 0.49% | |||||||||||
| Bio-Rad Laboratories, Inc., Class A* | 9,400 | 1,121,984 | |||||||||
| Machinery: 3.37% | |||||||||||
| Illinois Tool Works, Inc. | 89,000 | 5,027,610 | |||||||||
| PACCAR, Inc. | 53,450 | 2,730,760 | |||||||||
| 7,758,370 | |||||||||||
| Media: 5.31% | |||||||||||
| Comcast Corp., Class A | 174,100 | 4,411,694 | |||||||||
| Time Warner, Inc. | 128,600 | 4,677,182 | |||||||||
| Viacom, Inc., Class B | 61,100 | 3,116,100 | |||||||||
| 12,204,976 | |||||||||||
| Oil, gas & consumable fuels: 8.46% | |||||||||||
| EOG Resources, Inc. | 33,500 | 3,502,425 | |||||||||
| Exxon Mobil Corp. | 126,600 | 10,302,708 | |||||||||
| Hess Corp. | 30,300 | 2,265,228 | |||||||||
| Ultra Petroleum Corp.*1 | 73,977 | 3,388,147 | |||||||||
| 19,458,508 | |||||||||||
| Personal products: 1.24% | |||||||||||
| Avon Products, Inc. | 101,600 | 2,844,800 | |||||||||
| Pharmaceuticals: 6.01% | |||||||||||
| Allergan, Inc. | 33,200 | 2,763,900 | |||||||||
| Johnson & Johnson | 89,200 | 5,933,584 | |||||||||
| Merck & Co., Inc. | 113,100 | 3,991,299 | |||||||||
| Teva Pharmaceutical Industries Ltd. ADR | 23,300 | 1,123,526 | |||||||||
| 13,812,309 | |||||||||||
| Shares | Value | ||||||||||
| Real estate investment trust (REIT): 0.95% | |||||||||||
| Annaly Capital Management, Inc.1 | 121,400 | $ | 2,190,056 | ||||||||
| Road & rail: 2.51% | |||||||||||
| Hertz Global Holdings, Inc.* | 186,400 | 2,960,032 | |||||||||
| Norfolk Southern Corp. | 37,400 | 2,802,382 | |||||||||
| 5,762,414 | |||||||||||
| Semiconductors & semiconductor equipment: 2.00% | |||||||||||
| Broadcom Corp., Class A* | 67,000 | 2,253,880 | |||||||||
| Intersil Corp., Class A | 182,100 | 2,339,985 | |||||||||
| 4,593,865 | |||||||||||
| Software: 3.83% | |||||||||||
| Adobe Systems, Inc.* | 157,400 | 4,950,230 | |||||||||
| Symantec Corp.* | 195,300 | 3,851,316 | |||||||||
| 8,801,546 | |||||||||||
| Specialty retail: 1.02% | |||||||||||
| GameStop Corp., Class A*1 | 88,100 | 2,349,627 | |||||||||
|
Total common stocks (cost $196,952,883) |
227,613,065 | ||||||||||
| Short-term investment: 1.33% | |||||||||||
| Investment company—1.33% | |||||||||||
|
UBS Cash Management Prime Relationship Fund2 (cost $3,069,181) |
3,069,181 | 3,069,181 | |||||||||
| Investment of cash collateral from securities loaned: 4.62% | |||||||||||
|
UBS Private Money Market Fund LLC2 (cost $10,614,564) |
10,614,564 | 10,614,564 | |||||||||
|
Total investments: 104.91% (cost $210,636,628) |
241,296,810 | ||||||||||
|
Liabilities, in excess of cash and other assets: (4.91)% |
(11,299,365 | ) | |||||||||
| Net assets: 100.00% | $ | 229,997,445 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, was $213,548,311; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 33,433,184 | |||||
| Gross unrealized depreciation | (5,684,685 | ) | |||||
| Net unrealized appreciation of investments | $ | 27,748,499 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
60
UBS U.S. Large Cap Equity Fund
Portfolio of investments
June 30, 2011
Concluded
2 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 5,489,875 | $ | 64,314,867 | $ | 66,735,561 | $ | 3,069,181 | $ | 9,104 | |||||||||||||
| UBS Private Money Market Fund LLCa | — | 125,865,300 | 115,250,736 | 10,614,564 | 660 | ||||||||||||||||||
| $ | 5,489,875 | $ | 190,180,167 | $ | 181,986,297 | $ | 13,683,745 | $ | 9,764 | ||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 227,613,065 | $ | — | $ | — | $ | 227,613,065 | |||||||||||
| Short-term investment | — | 3,069,181 | — | 3,069,181 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 10,614,564 | — | 10,614,564 | |||||||||||||||
| Total | $ | 227,613,065 | $ | 13,683,745 | $ | — | $ | 241,296,810 | |||||||||||
See accompanying notes to financial statements.
61
UBS U.S. Large Cap Value Equity Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS U.S. Large Cap Value Equity Fund (the "Fund") returned 27.57% (Class A shares returned 20.56% after the deduction of the maximum sales charge), while Class Y shares returned 28.13%. The Fund's benchmark, the Russell 1000 Value Index (the "Index"), returned 28.94% 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 65; please note that the Fund's returns do not reflect the deduction of taxes that an investor would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a strong absolute return, but modestly lagged the Index. Stock selection, notably in the financials sector, was a negative for the Fund's relative performance, whereas industry allocation was a positive for results.
Portfolio performance summary1
What worked
• The Fund's holdings in the materials sector contributed to performance. A noteworthy performer was Celanese, a global, integrated producer of chemical products. The company announced that it had engineered a cost-efficient process to produce ethanol from traditional hydrocarbons. It's believed that this process could be used as a substitute for corn in the production of ethanol.
• Stock selection in the industrials sector was positive for performance. In particular, a number of the Fund's cyclical holdings, whose performance is often tied to the economy, contributed to the Fund's results during the reporting period. For example, FedEx, Illinois Tool Works and Paccar2 all performed poorly in mid-2010, when many cyclical stocks experienced a setback given fears of a double-dip recession. While gross domestic product (GDP) growth in the US has been far from robust, the economy has continued to expand, which has helped to improve investor sentiment for cyclical stocks in general. In addition, all three companies have been able to grow their earnings, which has further helped to drive their share prices higher.
• Several stock selection decisions added to relative performance.
– UnitedHealth Group, a diversified health care benefits company, was among the largest contributors to the Fund's performance during the reporting period. (For additional details, see "Portfolio highlights.")
– An overweight in Fortune Brands,2 a producer of home and hardware products, office products, golf equipment, and spirits and wine, was the Fund's largest contributor to performance during the reporting period. (For additional details, see "Portfolio highlights.")
• Industry allocations, overall, were positive for the period. Industry weightings, which are a by-product of our bottom-up stock selection, enhanced the Fund's results during the reporting period. In particular, underweights to financials and energy, along with an overweight to consumer discretionary, were rewarded.
What didn't work
• The Fund's holdings in the financials sector were the main drivers of underperformance versus the Index. While the Fund benefited from its underweight exposure to financials, this was more than offset by weak stock selection in the sector. Examples of Fund holdings that performed poorly were Morgan Stanley, Wells
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
62
UBS U.S. Large Cap Value Equity Fund
Fargo and Goldman Sachs. Uncertainties regarding new financial regulations and the potential impact on future earnings dragged down the share prices of these companies. We remain confident in the stocks that we own in the financials sector, as we feel they offer the potential to outperform over the long run.
• Several stocks in the energy sector detracted from the Fund's results.
– Ultra Petroleum and EOG Resources were both negatively impacted as natural gas prices remained weak. We expect to see firming prices as the economic recovery continues.
– Having an underweight to Chevron Corp.2 was also a negative, as the company was the beneficiary of higher oil prices during the reporting period
• A number of individual holdings generated weak returns.
– Hewlett-Packard was a negative contributor to relative returns as its shares lagged the Index. (For additional details, see "Portfolio highlights.")
– The Fund's exposure to cable, high speed Internet and phone service provider Time Warner2 was not rewarded as its share price declined during the reporting period. (For additional details, see "Portfolio highlights.")
– Avon Products is a distributor of cosmetics, perfume and other products in more than 140 countries across the world. A number of issues dragged down its stock over the reporting period. (For additional details, see "Portfolio highlights.")
• Several Industry group weightings subtracted from performance. In aggregate, industry positioning was positive for performance. However, an underweight to telecommunications services, and an overweight to information technology, detracted from results.
Portfolio highlights
• UnitedHealth Group benefited as sentiment toward managed care stocks has improved now that investors are more comfortable with health care reform legislation. Among the managed care companies, we feel that UnitedHealth Group has among the most desirable mix of assets, with exposure to each of the key growth segments: Medicare, Medicaid and Pharmacy Benefit Management. Wall Street analysts have been increasing their earnings estimates for the company. Additionally, UnitedHealth Group received high scores in the American Medical Association's 2011 National Health Insurer Report Card.
• Fortune Brands has devoted significant resources in recent years to strengthen its market position in its home, spirits and golf markets, as well as to improve its cost structure. These investments have started to bear fruit with consistent market share gains across all three business segments, despite the continuously sluggish or weak respective markets.
• Rising oil prices and the increasing number of US oil rigs helped to move Baker Hughes'2 share price higher during the reporting period. Even though there continue to be delays in permitting new offshore work in the Gulf of Mexico, the company has benefited from an increasing amount of wells drilled in the shallow waters of the Gulf.
• Shares of Hewlett-Packard moved sharply lower after CEO Mark Hurd resigned amid allegations of misconduct. In addition, there were uncertainties regarding the new CEO's ability to execute his strategy. We continue to own
2 As of June 30, 2011, this position was no longer held by the Fund.
63
UBS U.S. Large Cap Value Equity Fund
Hewlett-Packard, as we like the sustainability of its revenue streams, including Hewlett-Packard's high-margin ink cartridge business.
• Avon Products was a weak performer given a protracted internal investigation regarding allegations of corruption, resulting in approximately $90 million in legal and accounting fees. Disappointing growth in China also weighed on the company's share price. We feel the company's valuation is very attractive given the value of its brand and global footprint.
• Time Warner's stock was under pressure during the reporting period. Investors were concerned that on-line movie and TV providers, such as Netflix, would adversely impact Time Warner's profitability. We eliminated the stock from the portfolio.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
64
UBS U.S. Large Cap Value Equity Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 27.57 | % | (0.71 | )% | N/A | 3.46 | % | ||||||||||||
| Class B3 | 26.84 | (1.44 | ) | N/A | 3.316 | ||||||||||||||
| Class C4 | 26.87 | (1.43 | ) | N/A | 2.96 | ||||||||||||||
| Class Y5 | 28.13 | (0.42 | ) | 3.53 | % | 3.53 | |||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 20.56 | % | (1.82 | )% | N/A | 2.85 | % | ||||||||||||
| Class B3 | 21.84 | (1.71 | ) | N/A | 3.316 | ||||||||||||||
| Class C4 | 25.87 | (1.43 | ) | N/A | 2.96 | ||||||||||||||
| Russell 1000 Value Index7 | 28.94 | % | 1.15 | % | 3.99 | % | 3.99 | % | |||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.62% and 1.21%; Class B—2.63% and 1.96%; Class C—2.42% and 1.96%; Class Y—1.51% and 0.96%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the 12-month period ending October 27, 2011, do not exceed 1.20% for Class A shares, 1.95% for Class B shares, 1.95% for Class C shares and 0.95% for Class Y shares. 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 Value Equity Fund Class A shares is December 7, 2001. Inception dates of Class B and Class C shares are November 8, 2001 and December 12, 2001, respectively. Inception date of Class Y shares and the index is June 29, 2001.
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. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The Russell 1000 Value Index is designed to measure the performance of the large-cap value segment of the US equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The Russell 1000 Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
65
UBS U.S. Large Cap Value Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The first graph depicts the performance of UBS U.S. Large Cap Value Equity Fund Class A versus the Russell 1000 Value Index from December 7, 2001, which is the inception date of the class, through June 30, 2011. The second graph depicts the performance of UBS U.S. Large Cap Value Equity Fund Class Y versus the Russell 1000 Value Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
66
UBS U.S. Large Cap Value Equity Fund
Top ten equity holdings (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Johnson & Johnson | 4.1 | % | |||||
| Exxon Mobil Corp. | 3.7 | ||||||
| JPMorgan Chase & Co. | 3.5 | ||||||
| Wells Fargo & Co. | 3.2 | ||||||
| Merck & Co., Inc. | 3.1 | ||||||
| AT&T, Inc. | 2.9 | ||||||
| Citigroup, Inc. | 2.9 | ||||||
| Viacom, Inc., Class B | 2.8 | ||||||
| Kraft Foods, Inc., Class A | 2.8 | ||||||
| PepsiCo, Inc. | 2.6 | ||||||
| Total | 31.6 | % | |||||
Industry diversification (unaudited)2
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 4.50 | % | |||||
| Air freight & logistics | 1.32 | ||||||
| Airlines | 1.12 | ||||||
| Automobiles | 1.75 | ||||||
| Beverages | 2.63 | ||||||
| Capital markets | 3.70 | ||||||
| Chemicals | 1.81 | ||||||
| Commercial banks | 5.33 | ||||||
| Computers & peripherals | 1.18 | ||||||
| Construction materials | 0.72 | ||||||
| Diversified consumer services | 0.79 | ||||||
| Diversified financial services | 6.42 | ||||||
| Diversified telecommunication services | 2.93 | ||||||
| Electric utilities | 6.99 | ||||||
| Energy equipment & services | 2.35 | ||||||
| Food & staples retailing | 2.35 | ||||||
| Food products | 2.79 | ||||||
| Health care equipment & supplies | 3.60 | ||||||
| Health care providers & services | 2.12 | ||||||
| Hotels, restaurants & leisure | 1.84 | ||||||
| Household products | 2.29 | ||||||
| Insurance | 3.41 | ||||||
| Life sciences tools & services | 0.71 | ||||||
| Machinery | 2.46 | ||||||
| Media | 5.25 | ||||||
| Oil, gas & consumable fuels | 8.36 | ||||||
| Personal products | 1.14 | ||||||
| Pharmaceuticals | 7.16 | ||||||
| Real estate investment trust (REIT) | 0.93 | ||||||
| Road & rail | 3.45 | ||||||
| Semiconductors & semiconductor equipment | 1.01 | ||||||
| Software | 3.64 | ||||||
| Specialty retail | 1.09 | ||||||
| Total common stocks | 97.14 | % | |||||
| Investment company | |||||||
| SPDR S&P 500 ETF Trust | 2.02 | ||||||
| Short-term investment | 0.81 | ||||||
| Investment of cash collateral from securities loaned | 4.05 | ||||||
| Total investments | 104.02 | % | |||||
| Liabilities, in excess of cash and other assets | (4.02 | ) | |||||
| Net assets | 100.00 | % | |||||
1 Figures represent the direct investments of UBS U.S. Large Cap Value Equity Fund. Figures would be different if a breakdown of the underlying investment company was included.
2 Figures represent the industry breakdown of direct investments of UBS U.S. Large Cap Value Equity Fund. Figures would be different if a breakdown of the underlying investment company`s industry diversification was included.
67
UBS U.S. Large Cap Value Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 97.14% | |||||||||||
| Aerospace & defense: 4.50% | |||||||||||
| Boeing Co. | 12,800 | $ | 946,304 | ||||||||
| General Dynamics Corp. | 17,700 | 1,319,004 | |||||||||
| 2,265,308 | |||||||||||
| Air freight & logistics: 1.32% | |||||||||||
| FedEx Corp. | 7,000 | 663,950 | |||||||||
| Airlines: 1.12% | |||||||||||
| Southwest Airlines Co. | 49,400 | 564,148 | |||||||||
| Automobiles: 1.75% | |||||||||||
| General Motors Co.* | 29,000 | 880,440 | |||||||||
| Beverages: 2.63% | |||||||||||
| PepsiCo, Inc. | 18,800 | 1,324,084 | |||||||||
| Capital markets: 3.70% | |||||||||||
| Goldman Sachs Group, Inc. | 7,200 | 958,248 | |||||||||
| Morgan Stanley | 39,400 | 906,594 | |||||||||
| 1,864,842 | |||||||||||
| Chemicals: 1.81% | |||||||||||
| Celanese Corp., Series A | 17,100 | 911,601 | |||||||||
| Commercial banks: 5.33% | |||||||||||
| US Bancorp | 41,600 | 1,061,216 | |||||||||
| Wells Fargo & Co. | 57,900 | 1,624,674 | |||||||||
| 2,685,890 | |||||||||||
| Computers & peripherals: 1.18% | |||||||||||
| Hewlett-Packard Co. | 16,300 | 593,320 | |||||||||
| Construction materials: 0.72% | |||||||||||
| Vulcan Materials Co.1 | 9,476 | 365,110 | |||||||||
| Diversified consumer services: 0.79% | |||||||||||
| Apollo Group, Inc., Class A* | 9,100 | 397,488 | |||||||||
| Diversified financial services: 6.42% | |||||||||||
| Citigroup, Inc. | 34,870 | 1,451,987 | |||||||||
| JPMorgan Chase & Co. | 43,570 | 1,783,756 | |||||||||
| 3,235,743 | |||||||||||
| Diversified telecommunication services: 2.93% | |||||||||||
| AT&T, Inc. | 47,050 | 1,477,840 | |||||||||
| Electric utilities: 6.99% | |||||||||||
| American Electric Power Co., Inc. | 25,100 | 945,768 | |||||||||
| Edison International | 21,600 | 837,000 | |||||||||
| FirstEnergy Corp. | 24,200 | 1,068,430 | |||||||||
| Shares | Value | ||||||||||
| NextEra Energy, Inc.1 | 11,700 | $ | 672,282 | ||||||||
| 3,523,480 | |||||||||||
| Energy equipment & services: 2.35% | |||||||||||
| Noble Corp. | 30,100 | 1,186,241 | |||||||||
| Food & staples retailing: 2.35% | |||||||||||
| Kroger Co. | 47,700 | 1,182,960 | |||||||||
| Food products: 2.79% | |||||||||||
| Kraft Foods, Inc., Class A | 39,900 | 1,405,677 | |||||||||
| Health care equipment & supplies: 3.60% | |||||||||||
| Baxter International, Inc. | 9,200 | 549,148 | |||||||||
| Covidien PLC | 10,900 | 580,207 | |||||||||
| Medtronic, Inc. | 17,700 | 681,981 | |||||||||
| 1,811,336 | |||||||||||
| Health care providers & services: 2.12% | |||||||||||
| UnitedHealth Group, Inc. | 20,700 | 1,067,706 | |||||||||
| Hotels, restaurants & leisure: 1.84% | |||||||||||
| Carnival Corp. | 24,700 | 929,461 | |||||||||
| Household products: 2.29% | |||||||||||
| Colgate-Palmolive Co. | 13,200 | 1,153,812 | |||||||||
| Insurance: 3.41% | |||||||||||
| Aflac, Inc. | 14,100 | 658,188 | |||||||||
| MetLife, Inc. | 24,100 | 1,057,267 | |||||||||
| 1,715,455 | |||||||||||
| Life sciences tools & services: 0.71% | |||||||||||
| Bio-Rad Laboratories, Inc., Class A* | 3,000 | 358,080 | |||||||||
| Machinery: 2.46% | |||||||||||
| Illinois Tool Works, Inc. | 21,900 | 1,237,131 | |||||||||
| Media: 5.25% | |||||||||||
| Comcast Corp., Class A | 48,700 | 1,234,058 | |||||||||
| Viacom, Inc., Class B | 27,700 | 1,412,700 | |||||||||
| 2,646,758 | |||||||||||
| Oil, gas & consumable fuels: 8.36% | |||||||||||
| EOG Resources, Inc. | 5,900 | 616,845 | |||||||||
| Exxon Mobil Corp. | 22,650 | 1,843,257 | |||||||||
| Hess Corp. | 9,700 | 725,172 | |||||||||
| Ultra Petroleum Corp.*1 | 22,400 | 1,025,920 | |||||||||
| 4,211,194 | |||||||||||
| Personal products: 1.14% | |||||||||||
| Avon Products, Inc. | 20,500 | 574,000 | |||||||||
68
UBS U.S. Large Cap Value Equity Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| Pharmaceuticals: 7.16% | |||||||||||
| Johnson & Johnson | 30,900 | $ | 2,055,468 | ||||||||
| Merck & Co., Inc. | 43,900 | 1,549,231 | |||||||||
| 3,604,699 | |||||||||||
| Real estate investment trust (REIT): 0.93% | |||||||||||
| Annaly Capital Management, Inc.1 | 25,900 | 467,236 | |||||||||
| Road & rail: 3.45% | |||||||||||
| Hertz Global Holdings, Inc.* | 47,500 | 754,300 | |||||||||
| Norfolk Southern Corp. | 13,100 | 981,583 | |||||||||
| 1,735,883 | |||||||||||
| Semiconductors & semiconductor equipment: 1.01% | |||||||||||
| Intersil Corp., Class A | 39,500 | 507,575 | |||||||||
| Software: 3.64% | |||||||||||
| Adobe Systems, Inc.* | 30,600 | 962,370 | |||||||||
| Symantec Corp.* | 44,100 | 869,652 | |||||||||
| 1,832,022 | |||||||||||
| Specialty retail: 1.09% | |||||||||||
| GameStop Corp., Class A* | 20,600 | 549,402 | |||||||||
|
Total common stocks (cost $44,266,670) |
48,929,872 | ||||||||||
| Shares | Value | ||||||||||
| Investment company: 2.02% | |||||||||||
|
SPDR S&P 500 ETF Trust (cost $1,006,929) |
7,700 | $ | 1,016,169 | ||||||||
| Short-term investment: 0.81% | |||||||||||
| Investment company: 0.81% | |||||||||||
|
UBS Cash Management Prime Relationship Fund2 (cost $406,762) |
406,762 | 406,762 | |||||||||
| Investment of cash collateral from securities loaned: 4.05% | |||||||||||
|
UBS Private Money Market Fund LLC2 (cost $2,040,331) |
2,040,331 | 2,040,331 | |||||||||
|
Total investments: 104.02% (cost $47,720,692) |
52,393,134 | ||||||||||
|
Liabilities, in excess of cash and other assets: (4.02)% |
(2,023,947 | ) | |||||||||
| Net assets: 100.00% | $ | 50,369,187 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $48,113,797; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 5,245,858 | |||||
| Gross unrealized depreciation | (966,521 | ) | |||||
| Net unrealized appreciation of investments | $ | 4,279,337 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
69
UBS U.S. Large Cap Value Equity Fund
Portfolio of investments
June 30, 2011
Concluded
2 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 2,293,816 | $ | 16,554,193 | $ | 18,441,247 | $ | 406,762 | $ | 1,267 | |||||||||||||
| UBS Private Money Market Fund LLCa | — | 28,497,662 | 26,457,331 | 2,040,331 | 211 | ||||||||||||||||||
| $ | 2,293,816 | $ | 45,051,855 | $ | 44,898,578 | $ | 2,447,093 | $ | 1,478 | ||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 48,929,872 | $ | — | $ | — | $ | 48,929,872 | |||||||||||
| Investment company | 1,016,169 | — | — | 1,016,169 | |||||||||||||||
| Short-term investment | — | 406,762 | — | 406,762 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 2,040,331 | — | 2,040,331 | |||||||||||||||
| Total | $ | 49,946,041 | $ | 2,447,093 | $ | — | $ | 52,393,134 | |||||||||||
See accompanying notes to financial statements.
70
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 50.94% (Class A shares returned 42.60% after the deduction of the maximum sales charge), while Class Y shares returned 51.27%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 43.50% 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 73; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund generated a very strong return and outperformed its benchmark, largely due to stock selection.
Portfolio performance summary1
What worked
• The information technology sector was the Fund's largest source of relative outperformance during the period.
– The Fund benefited from holding F5 Networks,2 a provider of integrated internet traffic management solutions. (For details, see "Portfolio highlights.")
– ArcSight provides security and compliance management solutions. Its shares rose sharply during the period on news that it would be acquired at a significant premium. We subsequently sold the stock and captured profits.
• Stock selection in the health care sector was positive for performance.
– Pharmasset was a large contributor to performance. The biotechnology company's shares moved higher given expectations for rising profits from its product to treat Hepatitis C.
– Questcor Pharmaceuticals is a specialty pharmaceutical company focused on providing prescription drugs for central nervous system disorders. During the reporting period, the company's Acthar product received FDA approval for the treatment of infantile spasms. Its shares rose as the company surpassed earning expectations.
• Sector allocation decisions positively contributed to relative performance in a number of areas. The Fund's sector allocations are a byproduct of our bottom-up stock selection process. Overall, overweights in energy and consumer staples and an underweight in financials were beneficial for results during the reporting period.
What didn't work
• Stock selection in the financials sector was a negative for performance. One example is NetSpend, a provider of general-purpose reloadable (GPR) prepaid debit cards and related financial services for individuals in the US who do not have a traditional bank account. Its shares fell sharply after the Attorney General of Florida issued a series of subpoenas regarding the company's possible breaches of fiduciary responsibility. We subsequently eliminated the stock from the portfolio.
• Stock selection within the industrials sector detracted from relative returns. The Fund's holdings of Landstar System and Knight Transportation, two short-haul truck carriers, detracted from relative
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
71
UBS U.S. Small Cap Growth Fund
performance. Shares of both companies fell given concerns that higher oil prices would negatively impact their profit margins.
• Several individual Fund holdings generated poor results during the reporting period.
– WMS Industries is a manufacturer of lottery terminals, as well as video slot and poker machines. Its sales were disappointing as its customers have delayed purchasing replacement units given concerns regarding the economy. We sold the stock during the reporting period.
– The Fund's holding in Talbots2 was a large detractor from performance. (For details, see "Portfolio highlights.")
• Sector allocations in several areas detracted from results. During the reporting period, having an overweight to consumer discretionary and underweights to materials and telecommunications services were negative for the Fund's relative performance.
Portfolio highlights
• F5 Networks is an Internet solutions provider. The company's software-based solutions manage, control and optimize Internet traffic and content for its customers, while at the same time offering a layer of security protection. F5 Networks' stock price moved sharply higher during the reporting period as it posted strong earnings results and gained market share. The company has also strengthened its security and WAN (Wide Area Network) optimization capabilities through a series of acquisitions. The position was sold from the Fund's portfolio during the reporting period, as it exceeded the Fund's market capitalization limit.
• Tenneco is a leading global supplier of exhaust and ride control products for automakers and the aftermarket. Tenneco's reputation as a technology leader is enabling it to begin selling emission control products to off-road and commercial vehicles. This expands its potential market by more than 30%. In addition, governments outside Europe and the US have laws in place that will require more sophisticated emission controls on light vehicles. This could lead to further growth opportunities for Tenneco.
• Talbots, a specialty retailer of women's apparel and accessories, saw its share price move sharply lower after reporting disappointing sales and earnings. Investors were also concerned with the company's higher inventory levels and poor earnings guidance by management. We eliminated the stock from the portfolio.
• SFN Group is a temporary staffing company that recruits, screens, employs and outsources workers in the US. Its shares fell sharply after the company announced poor first quarter earnings results.
2 As of June 30, 2011, this position was no longer held by the Fund.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
72
UBS U.S. Small Cap Growth Fund
Average annual total returns for periods ended 6/30/2011 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 50.94 | % | 4.26 | % | 5.24 | % | 8.37 | % | |||||||||||
| Class B3 | 49.75 | 3.49 | N/A | 6.536 | |||||||||||||||
| Class C4 | 49.75 | 3.48 | N/A | 6.04 | |||||||||||||||
| Class Y5 | 51.27 | 4.53 | 5.51 | 6.85 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 42.60 | % | 3.09 | % | 4.65 | % | 7.88 | % | |||||||||||
| Class B3 | 44.75 | 3.14 | N/A | 6.536 | |||||||||||||||
| Class C4 | 48.75 | 3.48 | N/A | 6.04 | |||||||||||||||
| Russell 2000 Growth Index7 | 43.50 | 5.79 | 4.63 | 3.59 | |||||||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.61% and 1.41%; Class B—2.92% and 2.16%; Class C—2.51% and 2.16%; Class Y—1.22% and 1.16%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions , extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, do not exceed 1.40% for Class A shares, 2.15% for Class B shares, 2.15% for Class C shares and 1.15% for Class Y shares. 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 December 31, 1998. Inception dates of Class B and Class C shares are November 7, 2001 and November 19, 2001, respectively. Inception date of Class Y shares and the index is September 30, 1997.
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. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The Russell 2000 Growth Index is designed to measure the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
The Fund invests in IPOs which may have a magnified impact on performance.
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.
73
UBS U.S. Small Cap Growth Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Small Cap Growth Fund Class A and Class Y versus the Russell 2000 Growth Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
74
UBS U.S. Small Cap Growth Fund
Top ten equity holdings (unaudited)
As a percentage of net assets as of June 30, 2011
|
Percentage of net assets |
|||||||
| Polycom, Inc. | 2.2 | % | |||||
| Diamond Foods, Inc. | 2.1 | ||||||
| Imax Corp. | 2.0 | ||||||
| SM Energy Co. | 2.0 | ||||||
| Tenneco, Inc. | 2.0 | ||||||
| Key Energy Services, Inc. | 1.7 | ||||||
| Cavium Networks, Inc. | 1.7 | ||||||
| The Men's Wearhouse, Inc. | 1.7 | ||||||
| Robbins & Myers, Inc. | 1.6 | ||||||
| Rock-Tenn Co., Class A | 1.6 | ||||||
| Total | 18.6 | % | |||||
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 0.70 | % | |||||
| Air freight & logistics | 1.35 | ||||||
| Auto components | 2.89 | ||||||
| Biotechnology | 8.15 | ||||||
| Chemicals | 3.12 | ||||||
| Commercial banks | 0.23 | ||||||
| Commercial services & supplies | 0.80 | ||||||
| Communications equipment | 5.93 | ||||||
| Computers & peripherals | 0.71 | ||||||
| Construction & engineering | 1.29 | ||||||
| Containers & packaging | 1.63 | ||||||
| Distributors | 1.10 | ||||||
| Electrical equipment | 3.83 | ||||||
| Electronic equipment, instruments & components | 2.62 | ||||||
| Energy equipment & services | 3.25 | ||||||
| Food & staples retailing | 1.29 | ||||||
| Food products | 3.33 | ||||||
| Health care equipment & supplies | 4.77 | ||||||
| Health care providers & services | 4.43 | ||||||
| Health care technology | 1.23 | ||||||
| Hotels, restaurants & leisure | 5.48 | ||||||
| Household durables | 0.53 | ||||||
| Internet & catalog retail | 1.31 | ||||||
| Internet software & services | 0.78 | ||||||
| Machinery | 3.16 | ||||||
| Media | 2.81 | ||||||
| Metals & mining | 0.54 | ||||||
| Oil, gas & consumable fuels | 5.33 | ||||||
| Pharmaceuticals | 2.13 | ||||||
| Professional services | 0.83 | ||||||
| Real estate investment trust (REIT) | 1.55 | ||||||
| Road & rail | 2.12 | ||||||
| Semiconductors & semiconductor equipment | 6.26 | ||||||
| Software | 8.00 | ||||||
| Specialty retail | 4.07 | ||||||
| Textiles, apparel & luxury goods | 1.02 | ||||||
| Total common stocks | 98.57 | % | |||||
| Short-term investment | 0.94 | ||||||
| Investment of cash collateral from securities loaned | 11.17 | ||||||
| Total investments | 110.68 | % | |||||
| Liabilities, in excess of cash and other assets | (10.68 | ) | |||||
| Net assets | 100.00 | % | |||||
75
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—98.57% | |||||||||||
| Aerospace & defense—0.70% | |||||||||||
| DigitalGlobe, Inc.* | 42,500 | $ | 1,079,925 | ||||||||
| Air freight & logistics—1.35% | |||||||||||
| Hub Group, Inc., Class A* | 55,200 | 2,078,832 | |||||||||
| Auto components—2.89% | |||||||||||
| Cooper Tire & Rubber Co. | 70,600 | 1,397,174 | |||||||||
| Tenneco, Inc.* | 68,900 | 3,036,423 | |||||||||
| 4,433,597 | |||||||||||
| Biotechnology—8.15% | |||||||||||
| Amarin Corp. PLC ADR*1 | 68,400 | 989,748 | |||||||||
| Cepheid, Inc.* | 69,600 | 2,410,944 | |||||||||
| Emergent Biosolutions, Inc.* | 43,600 | 983,180 | |||||||||
| Exact Sciences Corp.* | 131,800 | 1,133,480 | |||||||||
| Exelixis, Inc.* | 67,500 | 604,800 | |||||||||
| Incyte Corp. Ltd.*1 | 50,800 | 962,152 | |||||||||
| Ironwood Pharmaceuticals, Inc.* | 69,700 | 1,095,684 | |||||||||
| Pharmasset, Inc.* | 18,200 | 2,042,040 | |||||||||
| Regeneron Pharmaceuticals, Inc.* | 19,200 | 1,088,832 | |||||||||
| Seattle Genetics, Inc.*1 | 58,600 | 1,202,472 | |||||||||
| 12,513,332 | |||||||||||
| Chemicals—3.12% | |||||||||||
| LSB Industries, Inc.* | 53,800 | 2,309,096 | |||||||||
| Solutia, Inc.* | 108,600 | 2,481,510 | |||||||||
| 4,790,606 | |||||||||||
| Commercial banks—0.23% | |||||||||||
| Columbia Banking System, Inc. | 20,800 | 358,176 | |||||||||
| Commercial services & supplies—0.80% | |||||||||||
| Clean Harbors, Inc.* | 11,900 | 1,228,675 | |||||||||
| Communications equipment—5.93% | |||||||||||
| Acme Packet, Inc.* | 30,000 | 2,103,900 | |||||||||
| Finisar Corp.* | 99,421 | 1,792,561 | |||||||||
| Polycom, Inc.* | 51,600 | 3,317,880 | |||||||||
| Riverbed Technology, Inc.* | 47,500 | 1,880,525 | |||||||||
| 9,094,866 | |||||||||||
| Computers & peripherals—0.71% | |||||||||||
| Fusion-io, Inc.*1 | 36,000 | 1,083,240 | |||||||||
| Construction & engineering—1.29% | |||||||||||
| EMCOR Group, Inc.* | 67,500 | 1,978,425 | |||||||||
| Containers & packaging—1.63% | |||||||||||
| Rock-Tenn Co., Class A | 37,756 | 2,504,733 | |||||||||
| Shares | Value | ||||||||||
| Distributors—1.10% | |||||||||||
| LKQ Corp.* | 64,900 | $ | 1,693,241 | ||||||||
| Electrical equipment—3.83% | |||||||||||
| EnerSys* | 58,600 | 2,017,012 | |||||||||
| Regal-Beloit Corp. | 32,900 | 2,196,733 | |||||||||
| Woodward, Inc. | 47,600 | 1,659,336 | |||||||||
| 5,873,081 | |||||||||||
| Electronic equipment, instruments & components—2.62% | |||||||||||
| OSI Systems, Inc.* | 52,000 | 2,236,000 | |||||||||
| Tech Data Corp.* | 36,500 | 1,784,485 | |||||||||
| 4,020,485 | |||||||||||
| Energy equipment & services—3.25% | |||||||||||
| Key Energy Services, Inc.* | 148,900 | 2,680,200 | |||||||||
| Pioneer Drilling Co.* | 151,700 | 2,311,908 | |||||||||
| 4,992,108 | |||||||||||
| Food & staples retailing—1.29% | |||||||||||
| United Natural Foods, Inc.* | 46,500 | 1,984,155 | |||||||||
| Food products—3.33% | |||||||||||
| Diamond Foods, Inc.1 | 41,900 | 3,198,646 | |||||||||
| TreeHouse Foods, Inc.* | 35,000 | 1,911,350 | |||||||||
| 5,109,996 | |||||||||||
| Health care equipment & supplies—4.77% | |||||||||||
| HeartWare International, Inc.*1 | 11,100 | 822,288 | |||||||||
| Insulet Corp.* | 76,900 | 1,704,873 | |||||||||
| ResMed, Inc.*1 | 42,700 | 1,321,565 | |||||||||
| Thoratec Corp.* | 38,200 | 1,253,724 | |||||||||
| Zoll Medical Corp.* | 39,200 | 2,221,072 | |||||||||
| 7,323,522 | |||||||||||
| Health care providers & services—4.43% | |||||||||||
| HMS Holdings Corp.* | 24,245 | 1,863,713 | |||||||||
| IPC The Hospitalist Co., Inc.* | 40,000 | 1,854,000 | |||||||||
| Mednax, Inc.* | 14,300 | 1,032,317 | |||||||||
| PSS World Medical, Inc.*1 | 73,300 | 2,053,133 | |||||||||
| 6,803,163 | |||||||||||
| Health care technology—1.23% | |||||||||||
| ePocrates, Inc.* | 25,900 | 477,596 | |||||||||
| SXC Health Solutions Corp.* | 23,932 | 1,410,073 | |||||||||
| 1,887,669 | |||||||||||
76
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| Hotels, restaurants & leisure—5.48% | |||||||||||
| BJ's Restaurants, Inc.* | 38,300 | $ | 2,005,388 | ||||||||
| Buffalo Wild Wings, Inc.* | 24,100 | 1,598,071 | |||||||||
| Panera Bread Co., Class A* | 9,500 | 1,193,770 | |||||||||
| Texas Roadhouse, Inc. | 105,300 | 1,846,435 | |||||||||
| The Cheesecake Factory, Inc.* | 56,400 | 1,769,268 | |||||||||
| 8,412,932 | |||||||||||
| Household durables—0.53% | |||||||||||
| Ryland Group, Inc. | 49,300 | 814,929 | |||||||||
| Internet & catalog retail—1.31% | |||||||||||
| Shutterfly, Inc.* | 35,000 | 2,009,700 | |||||||||
| Internet software & services—0.78% | |||||||||||
| VistaPrint NV* | 25,100 | 1,201,035 | |||||||||
| Machinery—3.16% | |||||||||||
| Chart Industries, Inc.* | 43,000 | 2,321,140 | |||||||||
| Robbins & Myers, Inc. | 47,700 | 2,520,945 | |||||||||
| 4,842,085 | |||||||||||
| Media—2.81% | |||||||||||
| Imax Corp.*1 | 95,900 | 3,110,037 | |||||||||
| Pandora Media, Inc.*1 | 63,900 | 1,208,349 | |||||||||
| 4,318,386 | |||||||||||
| Metals & mining—0.54% | |||||||||||
| Steel Dynamics, Inc. | 50,800 | 825,500 | |||||||||
| Oil, gas & consumable fuels—5.33% | |||||||||||
| Approach Resources, Inc.*1 | 65,100 | 1,475,817 | |||||||||
| Resolute Energy Corp.*1 | 134,800 | 2,178,368 | |||||||||
| SM Energy Co. | 41,800 | 3,071,464 | |||||||||
| Whiting Petroleum Corp.* | 25,500 | 1,451,205 | |||||||||
| 8,176,854 | |||||||||||
| Pharmaceuticals—2.13% | |||||||||||
| Nektar Therapeutics* | 72,100 | 524,167 | |||||||||
| Questcor Pharmaceuticals, Inc.* | 54,000 | 1,301,400 | |||||||||
| Viropharma, Inc.* | 78,000 | 1,443,000 | |||||||||
| 3,268,567 | |||||||||||
| Professional services—0.83% | |||||||||||
| SFN Group, Inc.* | 140,800 | 1,279,872 | |||||||||
| Real estate investment trust (REIT)—1.55% | |||||||||||
| BioMed Realty Trust, Inc. | 34,800 | 669,552 | |||||||||
| DuPont Fabros Technology, Inc.1 | 35,800 | 902,160 | |||||||||
| Franklin Street Properties Corp. | 62,000 | 800,420 | |||||||||
| 2,372,132 | |||||||||||
| Shares | Value | ||||||||||
| Road & rail—2.12% | |||||||||||
| Knight Transportation, Inc. | 75,200 | $ | 1,277,648 | ||||||||
| Landstar System, Inc. | 42,500 | 1,975,400 | |||||||||
| 3,253,048 | |||||||||||
| Semiconductors & semiconductor equipment—6.26% | |||||||||||
| Cavium, Inc.* | 59,400 | 2,589,246 | |||||||||
| Cirrus Logic, Inc.* | 79,600 | 1,265,640 | |||||||||
| Cymer, Inc.* | 29,000 | 1,435,790 | |||||||||
| Mellanox Technologies Ltd.* | 50,792 | 1,514,110 | |||||||||
| Skyworks Solutions, Inc.* | 50,900 | 1,169,682 | |||||||||
| Veeco Instruments, Inc.*1 | 33,600 | 1,626,576 | |||||||||
| 9,601,044 | |||||||||||
| Software—8.00% | |||||||||||
| Factset Research Systems, Inc. | 21,100 | 2,158,952 | |||||||||
| NICE Systems Ltd. ADR* | 51,500 | 1,872,540 | |||||||||
| Radiant Systems, Inc.* | 99,500 | 2,079,550 | |||||||||
| Rovi Corp.* | 36,700 | 2,105,112 | |||||||||
| Synchronoss Technologies, Inc.* | 58,700 | 1,862,551 | |||||||||
| Ultimate Software Group, Inc.* | 40,504 | 2,204,633 | |||||||||
| 12,283,338 | |||||||||||
| Specialty retail—4.07% | |||||||||||
| Chico's FAS, Inc. | 108,800 | 1,657,024 | |||||||||
| Children's Place Retail Stores, Inc.* | 18,800 | 836,412 | |||||||||
| The Men's Wearhouse, Inc. | 76,500 | 2,578,050 | |||||||||
| Wet Seal, Inc., Class A* | 263,500 | 1,177,845 | |||||||||
| 6,249,331 | |||||||||||
| Textiles, apparel & luxury goods—1.02% | |||||||||||
| Phillips-Van Heusen Corp. | 23,900 | 1,564,733 | |||||||||
|
Total common stocks (cost $102,881,459) |
151,305,313 | ||||||||||
| Short-term investment—0.94% | |||||||||||
| Investment company—0.94% | |||||||||||
|
UBS Cash Management Prime Relationship Fund2 (cost $1,436,127) |
1,436,127 | 1,436,127 | |||||||||
| Investment of cash collateral from securities loaned—11.17% | |||||||||||
|
UBS Private Money Market Fund LLC2 (cost $17,143,760) |
17,143,760 | 17,143,760 | |||||||||
|
Total investments—110.68% (cost $121,461,346) |
169,885,200 | ||||||||||
|
Liabilities, in excess of cash and other assets — (10.68)% |
(16,387,708 | ) | |||||||||
| Net assets — 100.00% | $ | 153,497,492 | |||||||||
77
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2011
Concluded
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $121,802,111; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 50,290,335 | |||||
| Gross unrealized depreciation | (2,207,246 | ) | |||||
| Net unrealized appreciation of investments | $ | 48,083,089 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of Investments as well as the tables that follow, please refer to page 79.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
2 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 2,089,534 | $ | 60,500,145 | $ | 61,153,552 | $ | 1,436,127 | $ | 5,683 | |||||||||||||
| UBS Private Money Market Fund LLCa | 6,773,043 | 147,153,674 | 136,782,957 | 17,143,760 | 6,494 | ||||||||||||||||||
| $ | 8,862,577 | $ | 207,653,819 | $ | 197,936,509 | $ | 18,579,887 | $ | 12,177 | ||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 151,305,313 | $ | — | $ | — | $ | 151,305,313 | |||||||||||
| Short-term investment | — | 1,436,127 | — | 1,436,127 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 17,143,760 | — | 17,143,760 | |||||||||||||||
| Total | $ | 151,305,313 | $ | 18,579,887 | $ | — | $ | 169,885,200 | |||||||||||
See accompanying notes to financial statements.
78
The UBS Funds
Portfolio acronyms
| ADR | American depositary receipt | ||||||
| CDI | Chess depositary interest | ||||||
| CVA | Dutch certification—depository certificate | ||||||
| ETF | Exchange Traded Fund | ||||||
| GDR | Global depositary receipt | ||||||
| NPV | No par value | ||||||
| OJSC | Open joint stock company | ||||||
|
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. | ||||||
| REIT | Real estate investment trust | ||||||
| SPDR | Standard & Poor's Depository Receipts | ||||||
Currency abbreviations
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CHF Swiss Franc
DKK Danish Krone
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
PLN Polish Zloty
SEK Swedish Krona
SGD Singapore Dollar
THB Thailand Baht
TWD Taiwan Dollar
USD United States Dollar
ZAR South African Rand
See accompanying notes to financial statements.
79
The UBS Funds
June 30, 2011 (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, 2011 to June 30, 2011.
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line 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.
This projection assumes that annualized expense ratios were in effect during the period January 1, 2011 to June 30, 2011.
80
The UBS Funds
June 30, 2011 (unaudited)
|
Beginning account value January 1, 2011 |
Ending account value June 30, 2011 |
Expenses paid during period* 01/01/11 – 06/30/11 |
Expense ratio during period |
||||||||||||||||||||
| UBS Global Equity Fund | |||||||||||||||||||||||
| Class A | Actual | $ | 1,000.00 | $ | 1,008.80 | $ | 7.47 | 1.50 | % | ||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,017.36 | 7.50 | 1.50 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,005.70 | 10.99 | 2.21 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,013.84 | 11.03 | 2.21 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,005.00 | 11.19 | 2.25 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,013.64 | 11.23 | 2.25 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,010.80 | 5.73 | 1.15 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.09 | 5.76 | 1.15 | |||||||||||||||||||
| UBS International Equity Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 1,013.60 | 6.24 | 1.25 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,018.60 | 6.26 | 1.25 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,009.60 | 9.87 | 1.98 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.98 | 9.89 | 1.98 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,008.80 | 9.96 | 2.00 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.88 | 9.99 | 2.00 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,014.80 | 5.00 | 1.00 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.84 | 5.01 | 1.00 | |||||||||||||||||||
| UBS Market Neutral Multi-Strategy Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 984.80 | 21.80 | 4.43 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,002.83 | 22.00 | 4.43 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 981.70 | 25.70 | 5.23 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 998.86 | 25.92 | 5.23 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 985.80 | 20.83 | 4.23 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,003.82 | 21.02 | 4.23 | |||||||||||||||||||
* 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).
81
The UBS Funds
June 30, 2011 (unaudited)
|
Beginning account value January 1, 2011 |
Ending account value June 30, 2011 |
Expenses paid during period* 01/01/11 – 06/30/11 |
Expense ratio during period |
||||||||||||||||||||
| UBS U.S. Equity Alpha Fund | |||||||||||||||||||||||
| Class A | Actual | $ | 1,000.00 | $ | 1,046.80 | $ | 10.20 | 2.01 | % | ||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.83 | 10.04 | 2.01 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,042.80 | 14.03 | 2.77 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,011.06 | 13.81 | 2.77 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,048.10 | 8.99 | 1.77 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,016.02 | 8.85 | 1.77 | |||||||||||||||||||
| UBS U.S. Large Cap Equity Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 1,048.40 | 6.09 | 1.20 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,045.00 | 9.89 | 1.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,044.70 | 9.89 | 1.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,050.00 | 4.83 | 0.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
| UBS U.S. Large Cap Value Equity Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 1,048.20 | 6.09 | 1.20 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,045.20 | 9.89 | 1.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,046.00 | 9.89 | 1.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,049.50 | 4.83 | 0.95 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
* 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).
82
The UBS Funds
June 30, 2011 (unaudited)
|
Beginning account value January 1, 2011 |
Ending account value June 30, 2011 |
Expenses paid during period* 01/01/11 – 06/30/11 |
Expense ratio during period |
||||||||||||||||||||
| UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
| Class A | Actual | $ | 1,000.00 | $ | 1,100.40 | $ | 7.29 | 1.40 | % | ||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,017.85 | 7.00 | 1.40 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,095.40 | 11.17 | 2.15 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.13 | 10.74 | 2.15 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,096.40 | 11.18 | 2.15 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.13 | 10.74 | 2.15 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,101.30 | 5.99 | 1.15 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.09 | 5.76 | 1.15 | |||||||||||||||||||
* 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).
83
The UBS Funds
Financial statements
Statement of assets and liabilities
June 30, 2011
|
UBS Global Equity Fund |
UBS International Equity Fund |
UBS Market Neutral Multi-Strategy Fund |
UBS U.S. Equity Alpha Fund |
||||||||||||||||
| Assets: | |||||||||||||||||||
| Investments, at cost: | |||||||||||||||||||
| Unaffiliated issuers | $ | 105,133,582 | $ | 22,816,107 | $ | 15,071,677 | $ | 34,384,065 | |||||||||||
| Affiliated issuers | 71,213 | 379,602 | 9,830,068 | 221,096 | |||||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | 3,462,365 | 1,597,843 | — | — | |||||||||||||||
| Foreign currency, at cost | 120,376 | 392,291 | 80,058 | — | |||||||||||||||
| $ | 108,787,536 | $ | 25,185,843 | $ | 24,981,803 | $ | 34,605,161 | ||||||||||||
| Investments, at value: | |||||||||||||||||||
| Unaffiliated issuers | $ | 114,121,745 | $ | 27,774,538 | $ | 15,871,620 | $ | 38,961,658 | |||||||||||
| Affiliated issuers | 71,213 | 379,602 | 9,830,068 | 221,096 | |||||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | 3,462,365 | 1,597,843 | — | — | |||||||||||||||
| Foreign currency, at value | 120,752 | 395,337 | 81,817 | — | |||||||||||||||
| Cash | — | 279 | 42,332 | 6,278 | |||||||||||||||
| Receivables: | |||||||||||||||||||
| Investment securities sold | 7,186,441 | 889,364 | 7,845,424 | 125,923 | |||||||||||||||
| Foreign tax reclaims | 344,460 | 120,304 | 6,135 | — | |||||||||||||||
| Dividends | 187,980 | 54,516 | 20,084 | 61,016 | |||||||||||||||
| Fund shares sold | 25,053 | 59,212 | 3,719 | 68,178 | |||||||||||||||
| Interest | 2,472 | 1,634 | 1,117 | 20 | |||||||||||||||
| Cash collateral for futures contracts | — | — | 25,072 | — | |||||||||||||||
| Cash collateral for securities sold short | — | — | 10,564,829 | 253,971 | |||||||||||||||
| Unrealized appreciation on forward foreign currency contracts | 143,211 | 18,687 | 14,233 | — | |||||||||||||||
| Due from broker | — | — | 104,137 | — | |||||||||||||||
| Other assets | 28,175 | 24,467 | 23,233 | 13,230 | |||||||||||||||
| Total assets | 125,693,867 | 31,315,783 | 44,433,820 | 39,711,370 | |||||||||||||||
| Liabilities: | |||||||||||||||||||
| Payables: | |||||||||||||||||||
| Cash collateral from securities loaned | 3,462,365 | 1,597,843 | — | — | |||||||||||||||
| Investment securities purchased | 5,733,725 | 929,711 | 8,099,853 | 142,592 | |||||||||||||||
| Investment advisory and administration fee | 147,665 | 28,864 | 23,206 | 33,947 | |||||||||||||||
| Fund shares redeemed | 3,938,159 | 112,756 | 1,150 | 111,030 | |||||||||||||||
| Custody and fund accounting fees | 15,423 | 12,390 | 21,500 | 16,253 | |||||||||||||||
| Distribution and service fees | 65,359 | 6,194 | 3,396 | 15,753 | |||||||||||||||
| Trustees fees | 5,480 | 4,042 | 3,979 | 4,113 | |||||||||||||||
| Dividends payable for securities sold short | — | — | 13,253 | 2,711 | |||||||||||||||
| Accrued expenses | 144,994 | 87,145 | 69,180 | 78,913 | |||||||||||||||
| Securities sold short, at value2 | — | — | 16,237,518 | 6,786,819 | |||||||||||||||
| Unrealized depreciation on forward foreign currency contracts | 316,806 | 54,742 | 7,802 | — | |||||||||||||||
| Total liabilities | 13,829,976 | 2,833,687 | 24,480,837 | 7,192,131 | |||||||||||||||
| Net assets | $ | 111,863,891 | $ | 28,482,096 | $ | 19,952,983 | $ | 32,519,239 | |||||||||||
1 The market value of securities loaned by UBS Global Equity Fund, UBS International Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Small Cap Growth Fund, as of June 30, 2011 was $3,232,999, $1,543,205, $10,408,025, $1,993,505 and $16,813,387, respectively.
2 Proceeds from securities sold short by UBS Market Neutral Multi-Strategy Fund and UBS U.S. Equity Alpha Fund were $15,158,995 and $5,306,832, respectively.
84
The UBS Funds
Financial statements
|
UBS U.S. Large Cap Equity Fund |
UBS U.S. Large Cap Value Equity Fund |
UBS U.S. Small Cap Growth Fund |
|||||||||||||
| Assets: | |||||||||||||||
| Investments, at cost: | |||||||||||||||
| Unaffiliated issuers | $ | 196,952,883 | $ | 45,273,599 | $ | 102,881,459 | |||||||||
| Affiliated issuers | 3,069,181 | 406,762 | 1,436,127 | ||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | 10,614,564 | 2,040,331 | 17,143,760 | ||||||||||||
| Foreign currency, at cost | — | — | — | ||||||||||||
| $ | 210,636,628 | $ | 47,720,692 | $ | 121,461,346 | ||||||||||
| Investments, at value: | |||||||||||||||
| Unaffiliated issuers | $ | 227,613,065 | $ | 49,946,041 | $ | 151,305,313 | |||||||||
| Affiliated issuers | 3,069,181 | 406,762 | 1,436,127 | ||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | 10,614,564 | 2,040,331 | 17,143,760 | ||||||||||||
| Foreign currency, at value | — | — | — | ||||||||||||
| Cash | — | — | — | ||||||||||||
| Receivables: | |||||||||||||||
| Investment securities sold | 842,096 | 1,754,781 | 1,455,413 | ||||||||||||
| Foreign tax reclaims | — | — | — | ||||||||||||
| Dividends | 298,554 | 89,600 | 31,006 | ||||||||||||
| Fund shares sold | 274,647 | 813 | 251,721 | ||||||||||||
| Interest | 728 | 133 | 20,674 | ||||||||||||
| Cash collateral for futures contracts | — | — | — | ||||||||||||
| Cash collateral for securities sold short | — | — | — | ||||||||||||
| Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
| Due from broker | — | — | — | ||||||||||||
| Other assets | 26,793 | 18,852 | 22,181 | ||||||||||||
| Total assets | 242,739,628 | 54,257,313 | 171,666,195 | ||||||||||||
| Liabilities: | |||||||||||||||
| Payables: | |||||||||||||||
| Cash collateral from securities loaned | 10,614,564 | 2,040,331 | 17,143,760 | ||||||||||||
| Investment securities purchased | 847,718 | 1,230,404 | 399,600 | ||||||||||||
| Investment advisory and administration fee | 335,910 | 30,964 | 271,875 | ||||||||||||
| Fund shares redeemed | 793,246 | 447,366 | 204,248 | ||||||||||||
| Custody and fund accounting fees | 23,280 | 10,001 | 15,311 | ||||||||||||
| Distribution and service fees | 14,851 | 27,045 | 20,813 | ||||||||||||
| Trustees fees | 7,548 | 4,405 | 6,051 | ||||||||||||
| Dividends payable for securities sold short | — | — | — | ||||||||||||
| Accrued expenses | 105,066 | 97,610 | 107,045 | ||||||||||||
| Securities sold short, at value2 | — | — | — | ||||||||||||
| Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
| Total liabilities | 12,742,183 | 3,888,126 | 18,168,703 | ||||||||||||
| Net assets | $ | 229,997,445 | $ | 50,369,187 | $ | 153,497,492 | |||||||||
See accompanying notes to financial statements.
85
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
June 30, 2011
|
UBS Global Equity Fund |
UBS International Equity Fund |
UBS Market Neutral Multi-Strategy Fund1 |
UBS U.S. Equity Alpha Fund1 |
||||||||||||||||
| Net assets consist of: | |||||||||||||||||||
| Beneficial interest | $ | 130,943,895 | $ | 36,426,062 | $ | 20,637,566 | $ | 52,473,946 | |||||||||||
| Accumulated undistributed net investment income (loss) | 334,928 | 499,345 | (63,458 | ) | 35,310 | ||||||||||||||
| Accumulated net realized gain (loss) | (28,297,970 | ) | (13,406,491 | ) | (370,126 | ) | (23,087,623 | ) | |||||||||||
| Net unrealized appreciation (depreciation) | 8,883,038 | 4,963,180 | (250,999 | ) | 3,097,606 | ||||||||||||||
| Net assets | $ | 111,863,891 | $ | 28,482,096 | $ | 19,952,983 | $ | 32,519,239 | |||||||||||
| Class A: | |||||||||||||||||||
| Net assets | $ | 67,171,855 | $ | 9,207,254 | $ | 4,465,718 | $ | 16,725,753 | |||||||||||
| Shares outstanding | 5,301,119 | 1,122,146 | 460,585 | 1,870,534 | |||||||||||||||
| Net asset value and redemption proceeds per share | $ | 12.67 | $ | 8.21 | $ | 9.70 | $ | 8.94 | |||||||||||
| Offering price per share (NAV per share plus maximum sales charge)2 | $ | 13.41 | $ | 8.69 | $ | 10.26 | $ | 9.46 | |||||||||||
| Class B: | |||||||||||||||||||
| Net assets | $ | 598,380 | $ | 39,973 | N/A | N/A | |||||||||||||
| Shares outstanding | 48,334 | 4,760 | N/A | N/A | |||||||||||||||
| Net asset value and offering price per share | $ | 12.38 | $ | 8.40 | N/A | N/A | |||||||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 11.76 | $ | 7.98 | N/A | N/A | |||||||||||||
| Class C: | |||||||||||||||||||
| Net assets | $ | 20,863,344 | $ | 1,405,435 | $ | 904,341 | $ | 5,029,641 | |||||||||||
| Shares outstanding | 1,716,722 | 175,250 | 93,897 | 573,024 | |||||||||||||||
| Net asset value and offering price per share | $ | 12.15 | $ | 8.02 | $ | 9.63 | $ | 8.78 | |||||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 12.03 | $ | 7.94 | $ | 9.53 | $ | 8.69 | |||||||||||
| Class Y: | |||||||||||||||||||
| Net assets | $ | 23,230,312 | $ | 17,829,434 | $ | 14,582,924 | $ | 10,763,845 | |||||||||||
| Shares outstanding | 1,781,286 | 2,162,041 | 1,499,721 | 1,203,583 | |||||||||||||||
| Net asset value per share, offering price per share, and redemption proceeds per share2 | $ | 13.04 | $ | 8.25 | $ | 9.72 | $ | 8.94 | |||||||||||
1 UBS Market Neutral Multi-Strategy Fund and UBS U.S. Equity Alpha Fund do not offer Class B shares.
2 For Class A, the maximum sales charge is 5.50%. 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 share's 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 $1,000,000 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%. Class Y has no contingent deferred sales charge.
86
The UBS Funds
Financial statements
|
UBS U.S. Large Cap Equity Fund |
UBS U.S. Large Cap Value Equity Fund |
UBS U.S. Small Cap Growth Fund |
|||||||||||||
| Net assets consist of: | |||||||||||||||
| Beneficial interest | $ | 389,144,007 | $ | 66,133,928 | $ | 147,226,197 | |||||||||
| Accumulated undistributed net investment income (loss) | 1,851,053 | 418,812 | 73,800 | ||||||||||||
| Accumulated net realized gain (loss) | (191,657,797 | ) | (20,855,995 | ) | (42,226,359 | ) | |||||||||
| Net unrealized appreciation (depreciation) | 30,660,182 | 4,672,442 | 48,423,854 | ||||||||||||
| Net assets | $ | 229,997,445 | $ | 50,369,187 | $ | 153,497,492 | |||||||||
| Class A: | |||||||||||||||
| Net assets | $ | 19,831,905 | $ | 43,766,045 | $ | 38,319,479 | |||||||||
| Shares outstanding | 1,204,677 | 6,489,126 | 2,395,281 | ||||||||||||
| Net asset value and redemption proceeds per share | $ | 16.46 | $ | 6.74 | $ | 16.00 | |||||||||
| Offering price per share (NAV per share plus maximum sales charge)2 | $ | 17.42 | $ | 7.13 | $ | 16.93 | |||||||||
| Class B: | |||||||||||||||
| Net assets | $ | 143,969 | $ | 34,931 | $ | 30,760 | |||||||||
| Shares outstanding | 8,976 | 5,206 | 2,076 | ||||||||||||
| Net asset value and offering price per share | $ | 16.04 | $ | 6.71 | $ | 14.81 | |||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 15.24 | $ | 6.37 | $ | 14.07 | |||||||||
| Class C: | |||||||||||||||
| Net assets | $ | 3,466,733 | $ | 4,991,923 | $ | 2,961,165 | |||||||||
| Shares outstanding | 218,376 | 757,721 | 200,363 | ||||||||||||
| Net asset value and offering price per share | $ | 15.88 | $ | 6.59 | $ | 14.78 | |||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 15.72 | $ | 6.52 | $ | 14.63 | |||||||||
| Class Y: | |||||||||||||||
| Net assets | $ | 206,554,838 | $ | 1,576,288 | $ | 112,186,088 | |||||||||
| Shares outstanding | 12,441,385 | 232,100 | 6,741,883 | ||||||||||||
| Net asset value per share, offering price per share, and redemption proceeds per share2 | $ | 16.60 | $ | 6.79 | $ | 16.64 | |||||||||
See accompanying notes to financial statements.
87
The UBS Funds
Financial statements
Statement of operations
For the year ended June 30, 2011
|
UBS Global Equity Fund |
UBS International Equity Fund |
UBS Market Neutral Multi-Strategy Fund |
UBS U.S. Equity Alpha Fund |
||||||||||||||||
| Investment income: | |||||||||||||||||||
| Dividends | $ | 2,329,258 | $ | 647,634 | $ | 515,010 | $ | 867,388 | |||||||||||
| Interest | — | 2,290 | — | — | |||||||||||||||
| Affiliated interest | 1,736 | 1,199 | 17,221 | 843 | |||||||||||||||
| Securities lending1 | 39,824 | 23,051 | — | — | |||||||||||||||
| Foreign tax withheld | (217,865 | ) | (58,230 | ) | (31,742 | ) | — | ||||||||||||
| Total income | 2,152,953 | 615,944 | 500,489 | 868,231 | |||||||||||||||
| Expenses: | |||||||||||||||||||
| Advisory and administration | 1,008,347 | 250,293 | 328,310 | 412,700 | |||||||||||||||
| Service and distribution: | |||||||||||||||||||
| Class A | 178,090 | 21,161 | 10,670 | 51,348 | |||||||||||||||
| Class B | 6,915 | 1,024 | — | — | |||||||||||||||
| Class C | 224,780 | 11,198 | 7,718 | 61,137 | |||||||||||||||
| Transfer agency and related service fees: | |||||||||||||||||||
| Class A | 109,897 | 5,941 | 6,784 | 14,350 | |||||||||||||||
| Class B | 537 | 162 | — | — | |||||||||||||||
| Class C | 43,058 | 1,092 | 274 | 8,746 | |||||||||||||||
| Class Y | 7,944 | 10,762 | 742 | 4,762 | |||||||||||||||
| Custodian and fund accounting | 63,680 | 51,444 | 72,077 | 65,106 | |||||||||||||||
| Federal and state registration | 45,582 | 44,666 | 1,597 | 34,350 | |||||||||||||||
| Professional services | 100,212 | 97,414 | 89,378 | 86,715 | |||||||||||||||
| Shareholder reports | 101,911 | 7,862 | 7,567 | 19,680 | |||||||||||||||
| Trustees | 24,247 | 18,193 | 18,003 | 18,795 | |||||||||||||||
| Interest expense | — | 141 | — | — | |||||||||||||||
| Dividend expense and security loan fees for securities sold short | — | — | 578,671 | 202,619 | |||||||||||||||
| Amortization of offering costs | — | — | 77,760 | — | |||||||||||||||
| Other | 32,194 | 22,097 | 24,439 | 12,837 | |||||||||||||||
| Total expenses | 1,947,394 | 543,450 | 1,223,990 | 993,145 | |||||||||||||||
| Fee waivers and/or expense reimbursements by Advisor | (35,751 | ) | (223,717 | ) | (255,270 | ) | (197,761 | ) | |||||||||||
| Recoupment of expenses previously waived and/or reimbursed | 216 | — | — | — | |||||||||||||||
| Net expenses | 1,911,859 | 319,733 | 968,720 | 795,384 | |||||||||||||||
| Net investment income (loss) | 241,094 | 296,211 | (468,231 | ) | 72,847 | ||||||||||||||
| Net realized gain (loss) on: | |||||||||||||||||||
| Investments in unaffiliated issuers | 23,684,046 | 5,938,251 | 5,016,771 | 8,486,574 | |||||||||||||||
| Futures contracts | — | — | 37,045 | — | |||||||||||||||
| Securities sold short | — | — | (5,112,743 | ) | (2,120,457 | ) | |||||||||||||
| Forward foreign currency contracts | (276,233 | ) | 210,393 | 70,060 | — | ||||||||||||||
| Foreign currency transactions | 80,970 | (7,408 | ) | (6,496 | ) | — | |||||||||||||
| Net realized gain | 23,488,783 | 6,141,236 | 4,637 | 6,366,117 | |||||||||||||||
| Change in net unrealized appreciation/depreciation on: | |||||||||||||||||||
| Investments | 3,930,674 | 552,959 | 799,943 | 3,838,924 | |||||||||||||||
| Futures contracts | — | — | 19,075 | — | |||||||||||||||
| Securities sold short | — | — | (1,078,523 | ) | (377,267 | ) | |||||||||||||
| Forward foreign currency contracts | (280,326 | ) | (102,248 | ) | 6,431 | — | |||||||||||||
| Translation of other assets and liabilities denominated in foreign currency | 48,544 | 19,719 | 2,075 | — | |||||||||||||||
| Change in net unrealized appreciation/depreciation | 3,698,892 | 470,430 | (250,999 | ) | 3,461,657 | ||||||||||||||
| Net realized and unrealized gain (loss) | 27,187,675 | 6,611,666 | (246,362 | ) | 9,827,774 | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 27,428,769 | $ | 6,907,877 | $ | (714,593 | ) | $ | 9,900,621 | ||||||||||
1 Includes affiliated income from UBS Private Money Market Fund LLC of $966, $380, $660, $211 and $6,494, for UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Small Cap Growth Fund respectively.
88
The UBS Funds
Financial statements
|
UBS U.S. Large Cap Equity Fund |
UBS U.S. Large Cap Value Equity Fund |
UBS U.S. Small Cap Growth Fund |
|||||||||||||
| Investment income: | |||||||||||||||
| Dividends | $ | 4,220,043 | $ | 1,074,806 | $ | 459,224 | |||||||||
| Interest | — | — | — | ||||||||||||
| Affiliated interest | 9,104 | 1,267 | 5,683 | ||||||||||||
| Securities lending1 | 1,733 | 439 | 194,938 | ||||||||||||
| Foreign tax withheld | — | — | — | ||||||||||||
| Total income | 4,230,880 | 1,076,512 | 659,845 | ||||||||||||
| Expenses: | |||||||||||||||
| Advisory and administration | 1,850,380 | 400,357 | 1,356,030 | ||||||||||||
| Service and distribution: | |||||||||||||||
| Class A | 58,801 | 111,444 | 86,377 | ||||||||||||
| Class B | 1,559 | 782 | 511 | ||||||||||||
| Class C | 36,739 | 53,055 | 28,110 | ||||||||||||
| Transfer agency and related service fees: | |||||||||||||||
| Class A | 10,392 | 48,657 | 65,911 | ||||||||||||
| Class B | 248 | 185 | 76 | ||||||||||||
| Class C | 3,800 | 7,691 | 7,775 | ||||||||||||
| Class Y | 89,647 | 3,826 | 38,649 | ||||||||||||
| Custodian and fund accounting | 88,789 | 40,092 | 57,715 | ||||||||||||
| Federal and state registration | 49,750 | 42,130 | 46,346 | ||||||||||||
| Professional services | 88,482 | 93,683 | 85,981 | ||||||||||||
| Shareholder reports | 8,652 | 38,532 | 12,184 | ||||||||||||
| Trustees | 31,863 | 19,691 | 25,920 | ||||||||||||
| Interest expense | 1,138 | — | — | ||||||||||||
| Dividend expense and security loan fees for securities sold short | — | — | — | ||||||||||||
| Amortization of offering costs | — | — | — | ||||||||||||
| Other | 30,988 | 12,838 | 26,366 | ||||||||||||
| Total expenses | 2,351,228 | 872,963 | 1,837,951 | ||||||||||||
| Fee waivers and/or expense reimbursements by Advisor | (2,101 | ) | (216,533 | ) | (53,866 | ) | |||||||||
| Recoupment of expenses previously waived and/or reimbursed | 16,602 | — | 16,758 | ||||||||||||
| Net expenses | 2,365,729 | 656,430 | 1,800,843 | ||||||||||||
| Net investment income (loss) | 1,865,151 | 420,082 | (1,140,998 | ) | |||||||||||
| Net realized gain (loss) on: | |||||||||||||||
| Investments in unaffiliated issuers | 35,759,829 | 3,079,528 | 29,906,662 | ||||||||||||
| Futures contracts | 386,945 | — | — | ||||||||||||
| Securities sold short | — | — | — | ||||||||||||
| Forward foreign currency contracts | — | — | — | ||||||||||||
| Foreign currency transactions | — | — | — | ||||||||||||
| Net realized gain | 36,146,774 | 3,079,528 | 29,906,662 | ||||||||||||
| Change in net unrealized appreciation/depreciation on: | |||||||||||||||
| Investments | 21,518,194 | 8,981,555 | 28,817,918 | ||||||||||||
| Futures contracts | 174,642 | — | — | ||||||||||||
| Securities sold short | — | — | — | ||||||||||||
| Forward foreign currency contracts | — | — | — | ||||||||||||
| Translation of other assets and liabilities denominated in foreign currency | — | — | — | ||||||||||||
| Change in net unrealized appreciation/depreciation | 21,692,836 | 8,981,555 | 28,817,918 | ||||||||||||
| Net realized and unrealized gain (loss) | 57,839,610 | 12,061,083 | 58,724,580 | ||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 59,704,761 | $ | 12,481,165 | $ | 57,583,582 | |||||||||
See accompanying notes to financial statements.
89
The UBS Funds
Financial statements
Statement of changes in net assets
| UBS Global Equity Fund | UBS International Equity Fund |
UBS Market Neutral Multi-Strategy Fund |
|||||||||||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
|||||||||||||||||||
| Operations: | |||||||||||||||||||||||
| Net investment income (loss) | $ | 241,094 | $ | 602,937 | $ | 296,211 | $ | 442,387 | $ | (468,231 | ) | ||||||||||||
| Net realized gain | 23,488,783 | 27,141,705 | 6,141,236 | 19,806,830 | 4,637 | ||||||||||||||||||
| Change in net unrealized appreciation/depreciation | 3,698,892 | (3,256,800 | ) | 470,430 | (9,002,969 | ) | (250,999 | ) | |||||||||||||||
| Net increase (decrease) in net assets from operations | 27,428,769 | 24,487,842 | 6,907,877 | 11,246,248 | (714,593 | ) | |||||||||||||||||
| Dividends and distributions to shareholders by class: | |||||||||||||||||||||||
| Class A: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (1,879,257 | ) | (1,823,227 | ) | (283,789 | ) | (502,754 | ) | — | ||||||||||||||
| Class B: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (9,881 | ) | (16,105 | ) | — | (14,771 | ) | — | |||||||||||||||
| Class C: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (440,427 | ) | (531,429 | ) | (24,784 | ) | (58,439 | ) | — | ||||||||||||||
| Class Y: | |||||||||||||||||||||||
| Net investment income and net foreign currency gains | (789,580 | ) | (1,055,564 | ) | (650,195 | ) | (2,971,270 | ) | — | ||||||||||||||
| Decrease in net assets from dividends and distributions | (3,119,145 | ) | (3,426,325 | ) | (958,768 | ) | (3,547,234 | ) | — | ||||||||||||||
| Beneficial interest transactions: | |||||||||||||||||||||||
| Proceeds from shares sold | 3,549,078 | 5,126,587 | 3,572,353 | 5,021,294 | 28,856,571 | ||||||||||||||||||
| Shares issued on reinvestment of dividends and distributions | 2,899,995 | 3,259,302 | 929,537 | 3,488,259 | — | ||||||||||||||||||
| Cost of shares redeemed | (30,334,527 | ) | (80,709,652 | ) | (8,643,523 | ) | (65,141,997 | ) | (8,196,091 | ) | |||||||||||||
| Redemption fees | 721 | 2,824 | 2,247 | 42 | 7,096 | ||||||||||||||||||
|
Net increase (decrease) in net assets resulting from beneficial interest transactions |
(23,884,733 | ) | (72,320,939 | ) | (4,139,386 | ) | (56,632,402 | ) | 20,667,576 | ||||||||||||||
| Increase (decrease) in net assets | 424,891 | (51,259,422 | ) | 1,809,723 | (48,933,388 | ) | 19,952,983 | ||||||||||||||||
| Net assets, beginning of year | 111,439,000 | 162,698,422 | 26,672,373 | 75,605,761 | — | ||||||||||||||||||
| Net assets, end of year | $ | 111,863,891 | $ | 111,439,000 | $ | 28,482,096 | $ | 26,672,373 | $ | 19,952,983 | |||||||||||||
| Net assets include accumulated undistributed net investment income (loss) | $ | 334,928 | $ | 2,912,230 | $ | 499,345 | $ | 872,408 | $ | (63,458 | ) | ||||||||||||
90
The UBS Funds
Financial statements
| UBS U.S. Equity Alpha Fund | UBS U.S. Large Cap Equity Fund | ||||||||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
Year ended June 30, 2010 |
||||||||||||||||
| Operations: | |||||||||||||||||||
| Net investment income (loss) | $ | 72,847 | $ | (50,043 | ) | $ | 1,865,151 | $ | 1,698,358 | ||||||||||
| Net realized gain | 6,366,117 | 30,810,569 | 36,146,774 | 23,744,545 | |||||||||||||||
| Change in net unrealized appreciation/depreciation | 3,461,657 | (6,659,609 | ) | 21,692,836 | 13,507,829 | ||||||||||||||
| Net increase (decrease) in net assets from operations | 9,900,621 | 24,100,917 | 59,704,761 | 38,950,732 | |||||||||||||||
| Dividends and distributions to shareholders by class: | |||||||||||||||||||
| Class A: | |||||||||||||||||||
| Net investment income and net foreign currency gains | — | — | (114,184 | ) | (615,929 | ) | |||||||||||||
| Class B: | |||||||||||||||||||
| Net investment income and net foreign currency gains | — | — | — | (1,397 | ) | ||||||||||||||
| Class C: | |||||||||||||||||||
| Net investment income and net foreign currency gains | — | — | — | (72,171 | ) | ||||||||||||||
| Class Y: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (35,347 | ) | — | (1,583,968 | ) | (5,270,317 | ) | ||||||||||||
| Decrease in net assets from dividends and distributions | (35,347 | ) | — | (1,698,152 | ) | (5,959,814 | ) | ||||||||||||
| Beneficial interest transactions: | |||||||||||||||||||
| Proceeds from shares sold | 1,854,588 | 7,197,109 | 40,477,462 | 27,903,444 | |||||||||||||||
| Shares issued on reinvestment of dividends and distributions | 35,347 | — | 1,683,123 | 5,904,189 | |||||||||||||||
| Cost of shares redeemed | (21,118,475 | ) | (127,363,698 | ) | (85,698,301 | ) | (108,531,808 | ) | |||||||||||
| Redemption fees | 2,172 | 1,582 | 19,317 | 31,717 | |||||||||||||||
|
Net increase (decrease) in net assets resulting from beneficial interest transactions |
(19,226,368 | ) | (120,165,007 | ) | (43,518,399 | ) | (74,692,458 | ) | |||||||||||
| Increase (decrease) in net assets | (9,361,094 | ) | (96,064,090 | ) | 14,488,210 | (41,701,540 | ) | ||||||||||||
| Net assets, beginning of year | 41,880,333 | 137,944,423 | 215,509,235 | 257,210,775 | |||||||||||||||
| Net assets, end of year | $ | 32,519,239 | $ | 41,880,333 | $ | 229,997,445 | $ | 215,509,235 | |||||||||||
| Net assets include accumulated undistributed net investment income (loss) | $ | 35,310 | $ | — | $ | 1,851,053 | $ | 1,697,631 | |||||||||||
See accompanying notes to financial statements.
91
The UBS Funds
Financial statements
Statement of changes in net assets (continued)
|
UBS U.S. Large Cap Value Equity Fund |
UBS U.S. Small Cap Growth Fund |
||||||||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
Year ended June 30, 2010 |
||||||||||||||||
| Operations: | |||||||||||||||||||
| Net investment income (loss) | $ | 420,082 | $ | 425,248 | $ | (1,140,998 | ) | $ | (1,373,343 | ) | |||||||||
| Net realized gain (loss) | 3,079,528 | (1,295,466 | ) | 29,906,662 | 15,023,871 | ||||||||||||||
| Change in net unrealized appreciation/depreciation | 8,981,555 | 6,741,046 | 28,817,918 | 24,224,475 | |||||||||||||||
| Net increase in net assets from operations | 12,481,165 | 5,870,828 | 57,583,582 | 37,875,003 | |||||||||||||||
| Dividends and distributions to shareholders by class: | |||||||||||||||||||
| Class A: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (399,917 | ) | (1,002,633 | ) | — | — | |||||||||||||
| Class B: | |||||||||||||||||||
| Net investment income and net foreign currency gains | — | (896 | ) | — | — | ||||||||||||||
| Class C: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (5,988 | ) | (78,334 | ) | — | — | |||||||||||||
| Class Y: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (19,421 | ) | (54,618 | ) | — | — | |||||||||||||
| Decrease in net assets from dividends and distributions | (425,326 | ) | (1,136,481 | ) | — | — | |||||||||||||
| Beneficial interest transactions: | |||||||||||||||||||
| Proceeds from shares sold | 471,989 | 749,584 | 35,363,698 | 29,302,395 | |||||||||||||||
| Shares issued on reinvestment of dividends and distributions | 373,492 | 1,014,890 | — | — | |||||||||||||||
| Cost of shares redeemed | (10,043,500 | ) | (10,789,645 | ) | (65,190,814 | ) | (119,644,217 | ) | |||||||||||
| Redemption fees | 927 | 364 | 20,306 | 19,963 | |||||||||||||||
| Net decrease in net assets resulting from beneficial interest transactions | (9,197,092 | ) | (9,024,807 | ) | (29,806,810 | ) | (90,321,859 | ) | |||||||||||
| Increase (decrease) in net assets | 2,858,747 | (4,290,460 | ) | 27,776,772 | (52,446,856 | ) | |||||||||||||
| Net assets, beginning of year | 47,510,440 | 51,800,900 | 125,720,720 | 178,167,576 | |||||||||||||||
| Net assets, end of year | $ | 50,369,187 | $ | 47,510,440 | $ | 153,497,492 | $ | 125,720,720 | |||||||||||
| Net assets include accumulated undistributed net investment income | $ | 418,812 | $ | 424,833 | $ | 73,800 | $ | 52,994 | |||||||||||
See accompanying notes to financial statements.
92
This page has been left blank intentionally.
93
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, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 10.36 | $ | 9.46 | $ | 13.54 | $ | 15.47 | $ | 12.99 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.03 | 0.05 | 0.10 | 0.15 | 0.13 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 2.61 | 1.12 | (3.57 | ) | (2.08 | ) | 2.47 | ||||||||||||||||
| Total income (loss) from investment operations | 2.64 | 1.17 | (3.47 | ) | (1.93 | ) | 2.60 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.33 | ) | (0.27 | ) | (0.61 | ) | — | (0.12 | ) | ||||||||||||||
| Net asset value, end of year | $ | 12.67 | $ | 10.36 | $ | 9.46 | $ | 13.54 | $ | 15.47 | |||||||||||||
| Total investment return2 | 25.52 | % | 12.05 | % | (24.86 | )% | (12.48 | )% | 20.11 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.53 | % | 1.55 | % | 1.48 | % | 1.31 | % | 1.35 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.50 | % | 1.50 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||
| Net investment income (loss) | 0.26 | % | 0.47 | % | 1.10 | % | 0.98 | % | 0.91 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 67,172 | $ | 64,979 | $ | 72,280 | $ | 117,601 | $ | 168,208 | |||||||||||||
| Portfolio turnover rate | 83 | % | 83 | % | 76 | % | 66 | % | 32 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 10.08 | $ | 9.22 | $ | 13.13 | $ | 15.11 | $ | 12.69 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.06 | ) | (0.04 | ) | 0.02 | 0.02 | 0.01 | ||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 2.54 | 1.09 | (3.43 | ) | (2.00 | ) | 2.43 | ||||||||||||||||
| Total income (loss) from investment operations | 2.48 | 1.05 | (3.41 | ) | (1.98 | ) | 2.44 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.18 | ) | (0.19 | ) | (0.50 | ) | — | (0.02 | ) | ||||||||||||||
| Net asset value, end of year | $ | 12.38 | $ | 10.08 | $ | 9.22 | $ | 13.13 | $ | 15.11 | |||||||||||||
| Total investment return2 | 24.59 | % | 11.27 | % | (25.39 | )% | (13.10 | )% | 19.25 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 2.20 | % | 2.27 | % | 2.25 | % | 2.05 | % | 2.17 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 2.23 | %3 | 2.25 | % | 2.00 | % | 2.00 | % | 2.00 | % | |||||||||||||
| Net investment income (loss) | (0.49 | )% | (0.34 | )% | 0.26 | % | 0.17 | % | 0.10 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 598 | $ | 733 | $ | 1,254 | $ | 3,814 | $ | 7,439 | |||||||||||||
| Portfolio turnover rate | 83 | % | 83 | % | 76 | % | 66 | % | 32 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
94
UBS Global Equity Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 9.94 | $ | 9.13 | $ | 13.05 | $ | 15.02 | $ | 12.65 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.06 | ) | (0.03 | ) | 0.03 | 0.03 | 0.02 | ||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 2.50 | 1.07 | (3.44 | ) | (2.00 | ) | 2.42 | ||||||||||||||||
| Total income (loss) from investment operations | 2.44 | 1.04 | (3.41 | ) | (1.97 | ) | 2.44 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.23 | ) | (0.23 | ) | (0.51 | ) | — | (0.07 | ) | ||||||||||||||
| Net asset value, end of year | $ | 12.15 | $ | 9.94 | $ | 9.13 | $ | 13.05 | $ | 15.02 | |||||||||||||
| Total investment return2 | 24.48 | % | 11.29 | % | (25.46 | )% | (13.12 | )% | 19.28 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.32 | % | 2.34 | % | 2.30 | % | 2.11 | % | 2.14 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 2.25 | % | 2.25 | % | 2.00 | % | 2.00 | % | 2.00 | % | |||||||||||||
| Net investment income (loss) | (0.49 | )% | (0.28 | )% | 0.34 | % | 0.23 | % | 0.16 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 20,863 | $ | 20,499 | $ | 22,519 | $ | 35,900 | $ | 52,378 | |||||||||||||
| Portfolio turnover rate | 83 | % | 83 | % | 76 | % | 66 | % | 32 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 10.65 | $ | 9.69 | $ | 13.84 | $ | 15.78 | $ | 13.23 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.08 | 0.08 | 0.13 | 0.19 | 0.17 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 2.68 | 1.16 | (3.63 | ) | (2.13 | ) | 2.52 | ||||||||||||||||
| Total income (loss) from investment operations | 2.76 | 1.24 | (3.50 | ) | (1.94 | ) | 2.69 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.37 | ) | (0.28 | ) | (0.65 | ) | — | (0.14 | ) | ||||||||||||||
| Net asset value, end of year | $ | 13.04 | $ | 10.65 | $ | 9.69 | $ | 13.84 | $ | 15.78 | |||||||||||||
| Total investment return2 | 25.98 | % | 12.51 | % | (24.52 | )% | (12.29 | )% | 20.44 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 1.15 | % | 1.15 | % | 1.08 | % | 0.96 | % | 0.99 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.15 | % | 1.15 | % | 1.00 | % | 1.00 | %3 | 0.99 | % | |||||||||||||
| Net investment income (loss) | 0.62 | % | 0.67 | % | 1.27 | % | 1.29 | % | 1.16 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 23,230 | $ | 25,227 | $ | 66,646 | $ | 164,307 | $ | 180,027 | |||||||||||||
| Portfolio turnover rate | 83 | % | 83 | % | 76 | % | 66 | % | 32 | % | |||||||||||||
3 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
See accompanying notes to financial statements.
95
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, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.62 | $ | 6.48 | $ | 9.97 | $ | 12.99 | $ | 10.98 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.07 | 0.06 | 0.10 | 0.17 | 0.17 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.78 | 0.54 | (2.89 | ) | (1.83 | ) | 2.47 | ||||||||||||||||
| Total income (loss) from investment operations | 1.85 | 0.60 | (2.79 | ) | (1.66 | ) | 2.64 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.26 | ) | (0.46 | ) | (0.16 | ) | (0.20 | ) | (0.11 | ) | |||||||||||||
| From net realized gains | — | — | (0.54 | ) | (1.16 | ) | (0.52 | ) | |||||||||||||||
| Total dividends/distributions | (0.26 | ) | (0.46 | ) | (0.70 | ) | (1.36 | ) | (0.63 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.21 | $ | 6.62 | $ | 6.48 | $ | 9.97 | $ | 12.99 | |||||||||||||
| Total investment return2 | 28.14 | % | 8.65 | % | (26.75 | )% | (13.93 | )% | 24.84 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.04 | % | 1.76 | % | 1.57 | % | 1.32 | % | 1.38 | %3 | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.26 | %3 | |||||||||||||
| Net investment income | 0.93 | % | 0.83 | % | 1.50 | % | 1.43 | % | 1.42 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 9,207 | $ | 6,875 | $ | 7,809 | $ | 17,023 | $ | 26,564 | |||||||||||||
| Portfolio turnover rate | 76 | % | 71 | % | 124 | % | 55 | % | 72 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.60 | $ | 6.49 | $ | 9.79 | $ | 12.81 | $ | 10.82 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.01 | ) | 0.01 | 0.06 | 0.08 | 0.06 | |||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.81 | 0.54 | (2.82 | ) | (1.79 | ) | 2.46 | ||||||||||||||||
| Total income (loss) from investment operations | 1.80 | 0.55 | (2.76 | ) | (1.71 | ) | 2.52 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | — | (0.44 | ) | — | (0.15 | ) | (0.01 | ) | |||||||||||||||
| From net realized gains | — | — | (0.54 | ) | (1.16 | ) | (0.52 | ) | |||||||||||||||
| Total dividends/distributions | — | (0.44 | ) | (0.54 | ) | (1.31 | ) | (0.53 | ) | ||||||||||||||
| Net asset value, end of year | $ | 8.40 | $ | 6.60 | $ | 6.49 | $ | 9.79 | $ | 12.81 | |||||||||||||
| Total investment return2 | 27.27 | % | 7.85 | % | (27.30 | )% | (14.55 | )% | 23.97 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.87 | % | 2.56 | % | 2.52 | % | 2.25 | % | 2.25 | %3 | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | 2.01 | %3 | |||||||||||||
| Net investment income (loss) | (0.09 | )% | 0.08 | % | 0.93 | % | 0.67 | % | 0.51 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 40 | $ | 208 | $ | 218 | $ | 324 | $ | 555 | |||||||||||||
| Portfolio turnover rate | 76 | % | 71 | % | 124 | % | 55 | % | 72 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
3 Includes interest expense of 0.01%.
96
UBS International Equity Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.47 | $ | 6.34 | $ | 9.69 | $ | 12.71 | $ | 10.76 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.03 | 0.01 | 0.05 | 0.09 | 0.08 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.72 | 0.53 | (2.80 | ) | (1.79 | ) | 2.42 | ||||||||||||||||
| Total income (loss) from investment operations | 1.75 | 0.54 | (2.75 | ) | (1.70 | ) | 2.50 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.20 | ) | (0.41 | ) | (0.06 | ) | (0.16 | ) | (0.03 | ) | |||||||||||||
| From net realized gains | — | — | (0.54 | ) | (1.16 | ) | (0.52 | ) | |||||||||||||||
| Total dividends/distributions | (0.20 | ) | (0.41 | ) | (0.60 | ) | (1.32 | ) | (0.55 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.02 | $ | 6.47 | $ | 6.34 | $ | 9.69 | $ | 12.71 | |||||||||||||
| Total investment return2 | 27.14 | % | 7.86 | % | (27.33 | )% | (14.51 | )% | 23.85 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.82 | % | 2.56 | % | 2.38 | % | 2.13 | % | 2.16 | %3 | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | 2.01 | %3 | |||||||||||||
| Net investment income | 0.32 | % | 0.10 | % | 0.75 | % | 0.75 | % | 0.66 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 1,405 | $ | 866 | $ | 914 | $ | 1,949 | $ | 2,576 | |||||||||||||
| Portfolio turnover rate | 76 | % | 71 | % | 124 | % | 55 | % | 72 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.65 | $ | 6.51 | $ | 10.05 | $ | 13.07 | $ | 11.04 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.09 | 0.06 | 0.12 | 0.21 | 0.20 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.79 | 0.57 | (2.91 | ) | (1.85 | ) | 2.49 | ||||||||||||||||
| Total income (loss) from investment operations | 1.88 | 0.63 | (2.79 | ) | (1.64 | ) | 2.69 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.28 | ) | (0.49 | ) | (0.21 | ) | (0.22 | ) | (0.14 | ) | |||||||||||||
| From net realized gains | — | — | (0.54 | ) | (1.16 | ) | (0.52 | ) | |||||||||||||||
| Total dividends/distributions | (0.28 | ) | (0.49 | ) | (0.75 | ) | (1.38 | ) | (0.66 | ) | |||||||||||||
| Net asset value, end of year | $ | 8.25 | $ | 6.65 | $ | 6.51 | $ | 10.05 | $ | 13.07 | |||||||||||||
| Total investment return2 | 28.46 | % | 8.94 | % | (26.62 | )% | (13.63 | )% | 24.83 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.78 | % | 1.55 | % | 1.42 | % | 1.13 | % | 1.16 | %3 | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.01 | %3 | |||||||||||||
| Net investment income (loss) | 1.13 | % | 0.84 | % | 1.81 | % | 1.79 | % | 1.63 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 17,829 | $ | 18,724 | $ | 66,665 | $ | 129,573 | $ | 172,150 | |||||||||||||
| Portfolio turnover rate | 76 | % | 71 | % | 124 | % | 55 | % | 72 | % | |||||||||||||
See accompanying notes to financial statements.
97
UBS Market Neutral Multi-Strategy 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 | Class Y | |||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2011 |
Year ended June 30, 2011 |
|||||||||||||
| Net asset value, beginning of year | $ | 10.00 | $ | 10.00 | $ | 10.00 | |||||||||
| Income (loss) from investment operations: | |||||||||||||||
| Net investment loss1 | (0.20 | ) | (0.28 | ) | (0.18 | ) | |||||||||
| Net realized and unrealized loss from investment activities | (0.12 | ) | (0.09 | ) | (0.10 | ) | |||||||||
| Total loss from investment operations | (0.32 | ) | (0.37 | ) | (0.28 | ) | |||||||||
| Redemption fees | 0.02 | 0.003 | — | ||||||||||||
| Net asset value, end of year | $ | 9.70 | $ | 9.63 | $ | 9.72 | |||||||||
| Total investment return2 | (3.00 | )% | (3.60 | )% | (2.70 | )% | |||||||||
| Ratios to average net assets: | |||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
5.26 | % | 5.94 | % | 4.83 | % | |||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
4.13 | % | 4.94 | % | 3.82 | % | |||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
1.75 | % | 2.50 | % | 1.50 | % | |||||||||
| Net investment loss | (2.07 | )% | (2.84 | )% | (1.81 | )% | |||||||||
| Supplemental data: | |||||||||||||||
| Net assets, end of year (000's) | $ | 4,466 | $ | 904 | $ | 14,583 | |||||||||
| Portfolio turnover rate | 460 | % | 460 | % | 460 | % | |||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
98
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99
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 | |||||||||||||||||||||||
| Year ended June 30, |
For the period ended |
||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | June 30, 20073 | |||||||||||||||||||
| Net asset value, beginning of period | $ | 7.01 | $ | 6.31 | $ | 8.82 | $ | 11.55 | $ | 10.00 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.02 | (0.01 | ) | 0.04 | 0.05 | 0.02 | |||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.91 | 0.71 | (2.48 | ) | (2.10 | ) | 1.55 | ||||||||||||||||
| Total income (loss) from investment operations | 1.93 | 0.70 | (2.44 | ) | (2.05 | ) | 1.57 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | — | — | (0.07 | ) | (0.03 | ) | (0.01 | ) | |||||||||||||||
| From net realized gains | — | — | — | (0.65 | ) | (0.01 | ) | ||||||||||||||||
| Total dividends/distributions | — | — | (0.07 | ) | (0.68 | ) | (0.02 | ) | |||||||||||||||
| Net asset value, end of period | $ | 8.94 | $ | 7.01 | $ | 6.31 | $ | 8.82 | $ | 11.55 | |||||||||||||
| Total investment return2 | 27.53 | % | 11.09 | % | (27.52 | )% | (18.49 | )% | 15.73 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.54 | % | 2.44 | % | 2.47 | % | 1.93 | % | 1.93 | %4 | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.03 | % | 2.24 | % | 2.24 | % | 1.93 | % | 1.88 | %4 | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | %4 | |||||||||||||
| Net investment income (loss) | 0.24 | % | (0.10 | )% | 0.63 | % | 0.47 | % | 0.30 | %4 | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of period (000's) | $ | 16,726 | $ | 22,938 | $ | 33,137 | $ | 93,344 | $ | 187,444 | |||||||||||||
| Portfolio turnover rate | 85 | % | 130 | % | 154 | % | 72 | % | 81 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, |
For the period ended |
||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | June 30, 20073 | |||||||||||||||||||
| Net asset value, beginning of period | $ | 7.01 | $ | 6.30 | $ | 8.82 | $ | 11.55 | $ | 10.00 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.04 | 0.01 | 0.005 | 0.08 | 0.04 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.92 | 0.70 | (2.41 | ) | (2.10 | ) | 1.54 | ||||||||||||||||
| Total income (loss) from investment operations | 1.96 | 0.71 | (2.41 | ) | (2.02 | ) | 1.58 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.03 | ) | — | (0.11 | ) | (0.06 | ) | (0.02 | ) | ||||||||||||||
| From net realized gains | — | — | — | (0.65 | ) | (0.01 | ) | ||||||||||||||||
| Total dividends/distributions | (0.03 | ) | — | (0.11 | ) | (0.71 | ) | (0.03 | ) | ||||||||||||||
| Net asset value, end of period | $ | 8.94 | $ | 7.01 | $ | 6.30 | $ | 8.82 | $ | 11.55 | |||||||||||||
| Total investment return2 | 27.91 | % | 11.27 | % | (27.22 | )% | (18.34 | )% | 15.88 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.26 | % | 2.16 | % | 2.33 | % | 1.70 | % | 1.67 | %4 | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
1.78 | % | 2.00 | % | 2.25 | % | 1.70 | % | 1.67 | %4 | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | %4 | |||||||||||||
| Net investment income | 0.48 | % | 0.12 | % | 0.07 | % | 0.74 | % | 0.43 | %4 | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of period (000's) | $ | 10,764 | $ | 12,132 | $ | 95,804 | $ | 9,121 | $ | 5,405 | |||||||||||||
| Portfolio turnover rate | 85 | % | 130 | % | 154 | % | 72 | % | 81 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
100
UBS U.S. Equity Alpha Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, |
For the period ended |
||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | June 30, 20073 | |||||||||||||||||||
| Net asset value, beginning of period | $ | 6.93 | $ | 6.29 | $ | 8.74 | $ | 11.50 | $ | 10.00 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.04 | ) | (0.06 | ) | (0.01 | ) | (0.03 | ) | (0.04 | ) | |||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.89 | 0.70 | (2.44 | ) | (2.08 | ) | 1.55 | ||||||||||||||||
| Total income (loss) from investment operations | 1.85 | 0.64 | (2.45 | ) | (2.11 | ) | 1.51 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | — | — | — | — | — | ||||||||||||||||||
| From net realized gains | — | — | — | (0.65 | ) | (0.01 | ) | ||||||||||||||||
| Total dividends/distributions | — | — | — | (0.65 | ) | (0.01 | ) | ||||||||||||||||
| Net asset value, end of period | $ | 8.78 | $ | 6.93 | $ | 6.29 | $ | 8.74 | $ | 11.50 | |||||||||||||
| Total investment return2 | 26.70 | % | 10.18 | % | (28.03 | )% | (19.11 | )% | 15.12 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
3.36 | % | 3.27 | % | 3.30 | % | 2.74 | % | 2.72 | %4 | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.78 | % | 2.98 | % | 2.99 | % | 2.68 | % | 2.64 | %4 | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
2.25 | % | 2.25 | % | 2.25 | % | 2.25 | % | 2.25 | %4 | |||||||||||||
| Net investment income (loss) | (0.52 | )% | (0.85 | )% | (0.12 | )% | (0.28 | )% | (0.44 | )%4 | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of period (000's) | $ | 5,029 | $ | 6,810 | $ | 9,003 | $ | 22,823 | $ | 42,750 | |||||||||||||
| Portfolio turnover rate | 85 | % | 130 | % | 154 | % | 72 | % | 81 | % | |||||||||||||
3 For the period September 26, 2006 (commencement of operations) through June 30, 2007.
4 Annualized.
5 Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
101
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, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 12.79 | $ | 11.48 | $ | 16.63 | $ | 21.19 | $ | 18.24 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.09 | 0.06 | 0.13 | 0.16 | 0.15 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 3.65 | 1.54 | (4.84 | ) | (3.68 | ) | 3.52 | ||||||||||||||||
| Total income (loss) from investment operations | 3.74 | 1.60 | (4.71 | ) | (3.52 | ) | 3.67 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.07 | ) | (0.29 | ) | (0.07 | ) | (0.16 | ) | (0.10 | ) | |||||||||||||
| From net realized gains | — | — | (0.37 | ) | (0.88 | ) | (0.62 | ) | |||||||||||||||
| Total dividends/distributions | (0.07 | ) | (0.29 | ) | (0.44 | ) | (1.04 | ) | (0.72 | ) | |||||||||||||
| Net asset value, end of year | $ | 16.46 | $ | 12.79 | $ | 11.48 | $ | 16.63 | $ | 21.19 | |||||||||||||
| Total investment return2 | 29.28 | % | 13.75 | % | (28.04 | )% | (17.17 | )% | 20.39 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 1.19 | % | 1.33 | % | 1.28 | % | 1.16 | % | 1.18 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.20 | %3 | 1.20 | % | 1.28 | % | 1.16 | % | 1.18 | % | |||||||||||||
| Net investment income (loss) | 0.57 | % | 0.47 | % | 1.05 | % | 0.83 | % | 0.75 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 19,832 | $ | 23,164 | $ | 34,406 | $ | 90,558 | $ | 158,138 | |||||||||||||
| Portfolio turnover rate | 60 | % | 50 | % | 62 | % | 47 | % | 34 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 12.50 | $ | 11.14 | $ | 16.20 | $ | 20.66 | $ | 17.84 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.02 | ) | (0.04 | ) | 0.04 | 0.01 | 0.004 | ||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 3.56 | 1.49 | (4.71 | ) | (3.58 | ) | 3.44 | ||||||||||||||||
| Total income (loss) from investment operations | 3.54 | 1.45 | (4.67 | ) | (3.57 | ) | 3.44 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | — | (0.09 | ) | (0.02 | ) | (0.01 | ) | — | |||||||||||||||
| From net realized gains | — | — | (0.37 | ) | (0.88 | ) | (0.62 | ) | |||||||||||||||
| Total dividends/distributions | — | (0.09 | ) | (0.39 | ) | (0.89 | ) | (0.62 | ) | ||||||||||||||
| Net asset value, end of year | $ | 16.04 | $ | 12.50 | $ | 11.14 | $ | 16.20 | $ | 20.66 | |||||||||||||
| Total investment return2 | 28.32 | % | 12.96 | % | (28.61 | )% | (17.79 | )% | 19.50 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 2.06 | % | 2.10 | % | 2.02 | % | 1.93 | % | 1.95 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.95 | % | 1.95 | % | 2.02 | % | 1.93 | % | 1.95 | % | |||||||||||||
| Net investment income (loss) | (0.17 | )% | (0.28 | )% | 0.33 | % | 0.07 | % | (0.01 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 144 | $ | 170 | $ | 265 | $ | 635 | $ | 870 | |||||||||||||
| Portfolio turnover rate | 60 | % | 50 | % | 62 | % | 47 | % | 34 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
102
UBS U.S. Large Cap Equity Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 12.37 | $ | 11.14 | $ | 16.21 | $ | 20.66 | $ | 17.83 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.03 | ) | (0.04 | ) | 0.04 | 0.02 | 0.004 | ||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 3.54 | 1.50 | (4.71 | ) | (3.59 | ) | 3.45 | ||||||||||||||||
| Total income (loss) from investment operations | 3.51 | 1.46 | (4.67 | ) | (3.57 | ) | 3.45 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | — | (0.23 | ) | (0.03 | ) | — | — | ||||||||||||||||
| From net realized gains | — | — | (0.37 | ) | (0.88 | ) | (0.62 | ) | |||||||||||||||
| Total dividends/distributions | — | (0.23 | ) | (0.40 | ) | (0.88 | ) | (0.62 | ) | ||||||||||||||
| Net asset value, end of year | $ | 15.88 | $ | 12.37 | $ | 11.14 | $ | 16.21 | $ | 20.66 | |||||||||||||
| Total investment return2 | 28.38 | % | 12.92 | % | (28.57 | )% | (17.76 | )% | 19.56 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 2.00 | % | 2.01 | % | 1.96 | % | 1.91 | % | 1.92 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.95 | % | 1.95 | % | 1.96 | % | 1.91 | % | 1.92 | % | |||||||||||||
| Net investment income (loss) | (0.18 | )% | (0.28 | )% | 0.35 | % | 0.09 | % | 0.01 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 3,467 | $ | 3,539 | $ | 4,719 | $ | 6,382 | $ | 10,591 | |||||||||||||
| Portfolio turnover rate | 60 | % | 50 | % | 62 | % | 47 | % | 34 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 12.91 | $ | 11.62 | $ | 16.85 | $ | 21.44 | $ | 18.43 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.13 | 0.10 | 0.17 | 0.22 | 0.21 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 3.68 | 1.56 | (4.91 | ) | (3.72 | ) | 3.56 | ||||||||||||||||
| Total income (loss) from investment operations | 3.81 | 1.66 | (4.74 | ) | (3.50 | ) | 3.77 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.12 | ) | (0.37 | ) | (0.12 | ) | (0.21 | ) | (0.14 | ) | |||||||||||||
| From net realized gains | — | — | (0.37 | ) | (0.88 | ) | (0.62 | ) | |||||||||||||||
| Total dividends/distributions | (0.12 | ) | (0.37 | ) | (0.49 | ) | (1.09 | ) | (0.76 | ) | |||||||||||||
| Net asset value, end of year | $ | 16.60 | $ | 12.91 | $ | 11.62 | $ | 16.85 | $ | 21.44 | |||||||||||||
| Total investment return2 | 29.57 | % | 14.04 | % | (27.85 | )% | (16.87 | )% | 20.73 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 0.94 | % | 0.99 | % | 0.96 | % | 0.87 | % | 0.89 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 0.95 | %3 | 0.95 | % | 0.96 | % | 0.87 | % | 0.89 | % | |||||||||||||
| Net investment income (loss) | 0.82 | % | 0.72 | % | 1.39 | % | 1.13 | % | 1.04 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 206,555 | $ | 188,636 | $ | 217,821 | $ | 645,803 | $ | 833,023 | |||||||||||||
| Portfolio turnover rate | 60 | % | 50 | % | 62 | % | 47 | % | 34 | % | |||||||||||||
3 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
4 Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
103
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, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.33 | $ | 4.94 | $ | 8.42 | $ | 11.66 | $ | 10.54 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.06 | 0.05 | 0.11 | 0.14 | 0.13 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.41 | 0.46 | (2.66 | ) | (2.25 | ) | 2.03 | ||||||||||||||||
| Total income (loss) from investment operations | 1.47 | 0.51 | (2.55 | ) | (2.11 | ) | 2.16 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.06 | ) | (0.12 | ) | (0.06 | ) | (0.14 | ) | (0.11 | ) | |||||||||||||
| From net realized gains | — | — | (0.87 | ) | (0.99 | ) | (0.93 | ) | |||||||||||||||
| Total dividends/distributions | (0.06 | ) | (0.12 | ) | (0.93 | ) | (1.13 | ) | (1.04 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.74 | $ | 5.33 | $ | 4.94 | $ | 8.42 | $ | 11.66 | |||||||||||||
| Total investment return2 | 27.57 | % | 10.16 | % | (29.74 | )% | (19.38 | )% | 21.20 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.61 | % | 1.61 | % | 1.52 | % | 1.32 | % | 1.29 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.20 | % | 1.20 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||
| Net investment income | 0.88 | % | 0.83 | % | 1.89 | % | 1.35 | % | 1.12 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 43,766 | $ | 41,012 | $ | 43,951 | $ | 78,989 | $ | 113,213 | |||||||||||||
| Portfolio turnover rate | 85 | % | 70 | % | 67 | % | 52 | % | 27 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.29 | $ | 4.87 | $ | 8.33 | $ | 11.50 | $ | 10.39 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.003 | 0.003 | 0.06 | 0.06 | 0.04 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.42 | 0.45 | (2.62 | ) | (2.21 | ) | 2.00 | ||||||||||||||||
| Total income (loss) from investment operations | 1.42 | 0.45 | (2.56 | ) | (2.15 | ) | 2.04 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | — | (0.03 | ) | (0.03 | ) | (0.03 | ) | — | |||||||||||||||
| From net realized gains | — | — | (0.87 | ) | (0.99 | ) | (0.93 | ) | |||||||||||||||
| Total dividends/distributions | — | (0.03 | ) | (0.90 | ) | (1.02 | ) | (0.93 | ) | ||||||||||||||
| Net asset value, end of year | $ | 6.71 | $ | 5.29 | $ | 4.87 | $ | 8.33 | $ | 11.50 | |||||||||||||
| Total investment return2 | 26.84 | % | 9.18 | % | (30.23 | )% | (19.92 | )% | 20.21 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.48 | % | 2.62 | % | 2.48 | % | 2.17 | % | 2.19 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.95 | % | 1.95 | % | 1.85 | % | 1.85 | % | 1.85 | % | |||||||||||||
| Net investment income | 0.08 | % | 0.09 | % | 1.14 | % | 0.59 | % | 0.39 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 35 | $ | 94 | $ | 247 | $ | 471 | $ | 1,061 | |||||||||||||
| Portfolio turnover rate | 85 | % | 70 | % | 67 | % | 52 | % | 27 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
104
UBS U.S. Large Cap Value Equity Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.20 | $ | 4.83 | $ | 8.26 | $ | 11.42 | $ | 10.34 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.01 | 0.003 | 0.06 | 0.06 | 0.04 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.39 | 0.45 | (2.60 | ) | (2.18 | ) | 1.99 | ||||||||||||||||
| Total income (loss) from investment operations | 1.40 | 0.45 | (2.54 | ) | (2.12 | ) | 2.03 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.01 | ) | (0.08 | ) | (0.02 | ) | (0.05 | ) | (0.02 | ) | |||||||||||||
| From net realized gains | — | — | (0.87 | ) | (0.99 | ) | (0.93 | ) | |||||||||||||||
| Total dividends/distributions | (0.01 | ) | (0.08 | ) | (0.89 | ) | (1.04 | ) | (0.95 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.59 | $ | 5.20 | $ | 4.83 | $ | 8.26 | $ | 11.42 | |||||||||||||
| Total investment return2 | 26.87 | % | 9.08 | % | (30.25 | )% | (19.83 | )% | 20.24 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.40 | % | 2.41 | % | 2.33 | % | 2.10 | % | 2.06 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.95 | % | 1.95 | % | 1.85 | % | 1.85 | % | 1.85 | % | |||||||||||||
| Net investment income | 0.13 | % | 0.08 | % | 1.13 | % | 0.60 | % | 0.37 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 4,992 | $ | 4,889 | $ | 5,429 | $ | 9,795 | $ | 15,919 | |||||||||||||
| Portfolio turnover rate | 85 | % | 70 | % | 67 | % | 52 | % | 27 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.36 | $ | 4.97 | $ | 8.46 | $ | 11.71 | $ | 10.58 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.07 | 0.06 | 0.12 | 0.16 | 0.15 | ||||||||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 1.43 | 0.47 | (2.67 | ) | (2.25 | ) | 2.05 | ||||||||||||||||
| Total income (loss) from investment operations | 1.50 | 0.53 | (2.55 | ) | (2.09 | ) | 2.20 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.07 | ) | (0.14 | ) | (0.07 | ) | (0.17 | ) | (0.14 | ) | |||||||||||||
| From net realized gains | — | — | (0.87 | ) | (0.99 | ) | (0.93 | ) | |||||||||||||||
| Total dividends/distributions | (0.07 | ) | (0.14 | ) | (0.94 | ) | (1.16 | ) | (1.07 | ) | |||||||||||||
| Net asset value, end of year | $ | 6.79 | $ | 5.36 | $ | 4.97 | $ | 8.46 | $ | 11.71 | |||||||||||||
| Total investment return2 | 28.13 | % | 10.39 | % | (29.53 | )% | (19.15 | )% | 21.52 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.48 | % | 1.50 | % | 1.45 | % | 1.13 | % | 1.06 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 0.95 | % | 0.95 | % | 0.85 | % | 0.85 | % | 0.85 | % | |||||||||||||
| Net investment income | 1.13 | % | 1.07 | % | 2.08 | % | 1.60 | % | 1.36 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 1,576 | $ | 1,515 | $ | 2,174 | $ | 5,694 | $ | 9,074 | |||||||||||||
| Portfolio turnover rate | 85 | % | 70 | % | 67 | % | 52 | % | 27 | % | |||||||||||||
3 Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
105
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, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 10.60 | $ | 8.56 | $ | 13.31 | $ | 15.94 | $ | 14.41 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment loss1 | (0.13 | ) | (0.10 | ) | (0.06 | ) | (0.12 | ) | (0.14 | ) | |||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 5.53 | 2.14 | (4.69 | ) | (1.47 | ) | 2.14 | ||||||||||||||||
| Total income (loss) from investment operations | 5.40 | 2.04 | (4.75 | ) | (1.59 | ) | 2.00 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net realized gains | — | — | 0.003 | (1.04 | ) | (0.47 | ) | ||||||||||||||||
| Net asset value, end of year | $ | 16.00 | $ | 10.60 | $ | 8.56 | $ | 13.31 | $ | 15.94 | |||||||||||||
| Total investment return2 | 50.94 | % | 23.83 | % | (35.68 | )% | (10.25 | )% | 14.18 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.54 | % | 1.60 | % | 1.67 | % | 1.47 | % | 1.65 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.40 | % | 1.40 | % | 1.28 | % | 1.28 | % | 1.28 | % | |||||||||||||
| Net investment loss | (0.95 | )% | (1.00 | )% | (0.60 | )% | (0.81 | )% | (0.93 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 38,319 | $ | 28,586 | $ | 41,141 | $ | 92,759 | $ | 149,362 | |||||||||||||
| Portfolio turnover rate | 55 | % | 72 | % | 73 | % | 51 | % | 34 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 9.89 | $ | 8.05 | $ | 12.59 | $ | 15.25 | $ | 13.91 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment loss1 | (0.21 | ) | (0.17 | ) | (0.12 | ) | (0.22 | ) | (0.24 | ) | |||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 5.13 | 2.01 | (4.42 | ) | (1.40 | ) | 2.05 | ||||||||||||||||
| Total income (loss) from investment operations | 4.92 | 1.84 | (4.54 | ) | (1.62 | ) | 1.81 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net realized gains | — | — | 0.003 | (1.04 | ) | (0.47 | ) | ||||||||||||||||
| Net asset value, end of year | $ | 14.81 | $ | 9.89 | $ | 8.05 | $ | 12.59 | $ | 15.25 | |||||||||||||
| Total investment return2 | 49.75 | % | 22.86 | % | (36.06 | )% | (10.94 | )% | 13.32 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 2.25 | % | 2.91 | % | 2.55 | % | 2.20 | % | 2.29 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 2.15 | % | 2.15 | % | 2.03 | % | 2.03 | % | 2.03 | % | |||||||||||||
| Net investment income (loss) | (1.68 | )% | (1.75 | )% | (1.38 | )% | (1.58 | )% | (1.69 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 31 | $ | 74 | $ | 177 | $ | 661 | $ | 1,798 | |||||||||||||
| Portfolio turnover rate | 55 | % | 72 | % | 73 | % | 51 | % | 34 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
106
UBS U.S. Small Cap Growth Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 9.87 | $ | 8.03 | $ | 12.57 | $ | 15.23 | $ | 13.89 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment loss1 | (0.22 | ) | (0.17 | ) | (0.12 | ) | (0.21 | ) | (0.24 | ) | |||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 5.13 | 2.01 | (4.42 | ) | (1.41 | ) | 2.05 | ||||||||||||||||
| Total income (loss) from investment operations | 4.91 | 1.84 | (4.54 | ) | (1.62 | ) | 1.81 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net realized gains | — | — | 0.003 | (1.04 | ) | (0.47 | ) | ||||||||||||||||
| Net asset value, end of year | $ | 14.78 | $ | 9.87 | $ | 8.03 | $ | 12.57 | $ | 15.23 | |||||||||||||
| Total investment return2 | 49.75 | % | 22.91 | % | (36.11 | )% | (10.95 | )% | 13.33 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.37 | % | 2.50 | % | 2.45 | % | 2.25 | % | 2.28 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement | 2.15 | % | 2.15 | % | 2.03 | % | 2.03 | % | 2.03 | % | |||||||||||||
| Net investment loss | (1.70 | )% | (1.75 | )% | (1.38 | )% | (1.55 | )% | (1.68 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 2,961 | $ | 2,336 | $ | 2,471 | $ | 6,042 | $ | 7,877 | |||||||||||||
| Portfolio turnover rate | 55 | % | 72 | % | 73 | % | 51 | % | 34 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 11.00 | $ | 8.86 | $ | 13.74 | $ | 16.38 | $ | 14.75 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment loss1 | (0.10 | ) | (0.08 | ) | (0.03 | ) | (0.08 | ) | (0.10 | ) | |||||||||||||
| Net realized and unrealized gain (loss) from investment activities | 5.74 | 2.22 | (4.85 | ) | (1.52 | ) | 2.20 | ||||||||||||||||
| Total income (loss) from investment operations | 5.64 | 2.14 | (4.88 | ) | (1.60 | ) | 2.10 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net realized gains | — | — | 0.003 | (1.04 | ) | (0.47 | ) | ||||||||||||||||
| Net asset value, end of year | $ | 16.64 | $ | 11.00 | $ | 8.86 | $ | 13.74 | $ | 16.38 | |||||||||||||
| Total investment return2 | 51.27 | % | 24.15 | % | (35.51 | )% | (10.03 | )% | 14.54 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement/recoupment | 1.13 | % | 1.21 | % | 1.25 | % | 1.12 | % | 1.18 | % | |||||||||||||
| Expenses after fee waivers and/or expense reimbursement/recoupment | 1.15 | %4 | 1.15 | % | 1.03 | % | 1.03 | % | 1.03 | % | |||||||||||||
| Net investment income (loss) | (0.70 | )% | (0.74 | )% | (0.36 | )% | (0.55 | )% | (0.68 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 112,186 | $ | 94,725 | $ | 134,378 | $ | 272,666 | $ | 303,029 | |||||||||||||
| Portfolio turnover rate | 55 | % | 72 | % | 73 | % | 51 | % | 34 | % | |||||||||||||
3 Amount represents less than $0.005 per share.
4 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
See accompanying notes to financial statements.
107
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 ("SEC") 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 13, 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 15 Funds available for investment, each having its own investment objectives and policies. The following seven funds are covered in this report: UBS Global Equity Fund, UBS International Equity Fund, UBS Market Neutral Multi-Strategy Fund (commenced operations July 1, 2010), UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, and UBS U.S. Small Cap Growth Fund (each a "Fund", and collectively, the "Funds").
Each of the Funds is classified as a "diversified" investment company for purposes of the 1940 Act. Each Fund currently offers Class A, Class C and Class Y shares. For each Fund, except UBS U.S. Equity Alpha Fund and UBS Market Neutral Multi-Strategy Fund, Class B shares are offered only to existing Class B shareholders with respect to the reinvestment of dividends and distributions and exchanges of Class B shares of the Funds for Class B shares of other series of the UBS Family of Funds. "UBS Family of Funds" include other UBS Funds, PACE Select Advisor Trust and other funds for which UBS Global Asset Management (US) Inc. ("UBS Global AM (US)") serves as principal underwriter. UBS U.S. Equity Alpha Fund and UBS Market Neutral Multi-Strategy Fund do not offer Class B shares. 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 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 Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. 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, where available, for its portfolio securities. The Funds normally obtain market values for their securities and other instruments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities or instruments. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer
108
The UBS Funds
Notes to financial statements
market price quotations, if available, in determining the valuation of the portfolio securities or instruments. Securities and other instruments also may be valued based on appraisals derived from information concerning the security or instrument or similar securities or instruments received from recognized dealers in those holdings. Securities and instruments 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 on the valuation date available prior to valuation. Securities and instruments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities or instruments are traded on more than one exchange, the securities or instruments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM" or the "Advisor"), the investment advisor 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 or instrument, that security or instrument 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 or instrument'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 or instruments; and the evaluation of forces which influence the market in which the securities or instruments are purchased and sold. Foreign currency exchange rates are generally determined as of the close of the New York Stock Exchange ("NYSE").
Certain securities or instruments 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 net asset value. 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 or instruments, the Fund may adjust the previous closing prices to reflect what the Board believes to be the fair value of these securities or instruments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value securities or instruments 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. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If a security or instrument is valued at a "fair value," that value is likely to be different from the last quoted market price for the security or instrument. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the use of the practical expedient within ASC Topic 820, investments in non-registered investment companies are also valued at the daily net asset value. All investments quoted in foreign currencies will be valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally 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.
GAAP requires disclosure regarding the various inputs that are used in determining the value of the Funds' investments.
109
The UBS Funds
Notes to financial statements
These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Fund's own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
In January 2010, FASB issued Accounting Standards Update No. 2010-06 "Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"). ASU 2010-06 requires reporting entities to make new disclosures about amounts and reasons for significant transfer in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, including information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements. The new and revised disclosures have been implemented for annual and interim periods beginning after December 15, 2009. The disclosures surrounding purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements have been implemented for annual and interim period beginning after December 15, 2010.
In May 2011, FASB issued Accounting Standards Update No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS")" ("ASU 2011-04"). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
The provisions of ASC Topic 815 "Derivatives and Hedging" ("ASC Topic 815") require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk related contingent features in derivative agreements. Since investment companies value their derivatives at fair value and recognize changes in fair value through the statement of operations, they do not qualify for hedge accounting under ASC Topic 815. Accordingly, even though a fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under ASC Topic 815. ASC Topic 815 requires that (1) objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. Details of this disclosure can be found in the Portfolio of investments. The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2011, except for forward foreign currency contracts for UBS Global Equity Fund and UBS International Equity Fund, for which the average volume during the year was greater than at year end.
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
110
The UBS Funds
Notes to financial statements
sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Notes to portfolio of investments.
C. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. 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.
D. Foreign currency translation: The Funds use the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities and other assets and liabilities—at the exchange rates prevailing at the end of each Fund's fiscal period; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of each Fund's portfolio are presented at the foreign exchange rates at the end of each Fund's fiscal period, the Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. 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.
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, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk).
A Fund will 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 non-cash settled 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 equal to the contract's full notional value. However, currency contracts with respect to identical currencies may be netted against each other and, in such cases, a Fund's custodian or sub-custodian will place assets in a segregated account of the Fund, in an amount equal to the net amount owed (the unrealized loss) by a Fund. 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 unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by each Fund on contracts which have been sold or matured.
111
The UBS Funds
Notes to financial statements
F. Futures contracts: Each Fund may purchase or sell financial futures contracts. The Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realize gains. Using financial futures contracts involves various market risks, including equity risk. 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. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or 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 as part of Due to or Due from broker 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.
G. Short sales: UBS U.S. Equity Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Market Neutral Multi-Strategy Fund may each enter 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 a Fund shorts a security while 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. A Fund will realize a gain or loss upon closing of the short sale (returning the security to the lender by way of purchase or delivery of a long position owned). A Fund is liable to the lender for any dividends payable on securities while those securities are in a short position. These dividends are booked as an expense or liability of the Fund. Each Fund segregates collateral consisting of cash, US government securities or other liquid assets sufficient to collateralize the market value of short positions. Each Fund is charged a securities loan fee in connection with short sale transactions. Due to the independence of portfolio management teams that manage the various Fund components, it is likely that UBS Market Neutral Multi-Strategy Fund will, at times, hold the same security both long and short (which may technically result in a "short against the box").
H. Dividends and distributions: It is the Funds' policy to distribute their respective net investment income and net capital gains, if any, annually. Dividends and distributions to shareholders are recorded on the ex-distribution date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
I. 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 the Funds 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. 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.
112
The UBS Funds
Notes to financial statements
The ability of the issuers of debt securities held by a Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
J. Commission recapture program: The Funds participate in a brokerage commission recapture program, whereby the 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. For the year ended June 30, 2011, the following Funds recorded recaptured commissions which are reflected on the Statement of operations within the net realized gains (losses) on investment activities:
| Fund | Amount | ||||||
| UBS Global Equity Fund | $ | 13,800 | |||||
| UBS U.S. Equity Alpha Fund | 9,871 | ||||||
| UBS U.S. Large Cap Equity Fund | 42,613 | ||||||
| UBS U.S. Large Cap Value Equity Fund | 14,399 | ||||||
K. Redemption fees: 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. This amount is paid to the applicable Fund, not the Advisor or UBS Global AM (US). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets.
2. Investment advisory fees and other transactions with affiliates
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 $1.0 billion |
$1.0 billion to $1.5 billion |
$1.5 billion to $2.0 billion |
$2.0 billion and over |
||||||||||||||||||
| UBS International Equity Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | |||||||||||||
| UBS U.S. Equity Alpha Fund | 1.000 | 0.900 | 0.850 | 0.850 | 0.850 | ||||||||||||||||||
| UBS U.S. Large Cap Equity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 | ||||||||||||||||||
| UBS U.S. Large Cap Value Equity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 | ||||||||||||||||||
| UBS U.S. Small Cap Growth Fund | 0.850 | 0.850 | 0.825 | 0.825 | 0.825 | ||||||||||||||||||
| Fund |
$0 to $250 mm |
$250 mm to $500 mm |
$500 mm to $1.0 billion |
$1.0 billion and over |
|||||||||||||||
| UBS Global Equity Fund | 0.750 | % | 0.700 | % | 0.680 | % | 0.650 | % | |||||||||||
| UBS Market Neutral Multi-Strategy Fund | 1.250 | 1.250 | 1.250 | 1.250 | |||||||||||||||
For UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Large Cap Value Equity Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each Fund as indicated in the following table. For UBS Market Neutral Multi-Strategy Fund, UBS U.S. Equity Alpha Fund and UBS U.S. Small Cap Growth Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment
113
The UBS Funds
Notes to financial statements
companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that each Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) do not exceed the expense limit of each Fund as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed, for the year ended June 30, 2011, 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 and/or (recouped) |
|||||||||||||||||||||
| UBS Global Equity Fund | 1.50 | % | 2.25 | % | 2.25 | % | 1.25 | % | $ | 916,647 | $ | 35,5351 | |||||||||||||||
| UBS International Equity Fund | 1.25 | 2.00 | 2.00 | 1.00 | 228,833 | 223,717 | |||||||||||||||||||||
| UBS Market Neutral Multi-Strategy Fund | 1.75 | N/A* | 2.50 | 1.50 | 309,726 | 255,270 | |||||||||||||||||||||
| UBS U.S. Equity Alpha Fund | 1.50 | N/A* | 2.25 | 1.25 | 383,898 | 197,761 | |||||||||||||||||||||
| UBS U.S. Large Cap Equity Fund | 1.20 | 1.95 | 1.95 | 0.95 | 1,671,255 | (14,501 | )2 | ||||||||||||||||||||
| UBS U.S. Large Cap Value Equity Fund | 1.20 | 1.95 | 1.95 | 0.95 | 361,600 | 216,533 | |||||||||||||||||||||
| UBS U.S. Small Cap Growth Fund | 1.40 | 2.15 | 2.15 | 1.15 | 1,245,999 | 37,1083 | |||||||||||||||||||||
* UBS Market Neutral Multi-Strategy Fund and UBS U.S. Equity Alpha Fund do not offer Class B shares.
1 Includes recoupment of $216 for Class B.
2 Includes recoupment of $1,030 for Class A and $15,572 for Class Y.
3 Includes recoupment of $16,758 for Class Y.
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, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived for the year ended June 30, 2011 are subject to repayment through June 30, 2014. At June 30, 2011, 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, 2012 |
Expires June 30, 2013 |
Expires June 30, 2014 |
|||||||||||||||
| UBS Global Equity Fund—Class A | $ | 239,149 | $ | 183,038 | $ | 35,216 | $ | 20,895 | |||||||||||
| UBS Global Equity Fund—Class B | 5,661 | 5,646 | 15 | — | |||||||||||||||
| UBS Global Equity Fund—Class C | 108,362 | 71,037 | 22,469 | 14,856 | |||||||||||||||
| UBS Global Equity Fund—Class Y | 76,072 | 76,072 | — | — | |||||||||||||||
| UBS Market Neutral Multi-Strategy Fund—Class A | 48,384 | — | — | 48,384 | |||||||||||||||
| UBS Market Neutral Multi-Strategy Fund—Class C | 7,708 | — | — | 7,708 | |||||||||||||||
| UBS Market Neutral Multi-Strategy Fund—Class Y | 199,178 | — | — | 199,178 | |||||||||||||||
| UBS U.S. Equity Alpha Fund—Class A | 287,135 | 117,100 | 65,041 | 104,994 | |||||||||||||||
| UBS U.S. Equity Alpha Fund—Class C | 101,942 | 40,859 | 25,435 | 35,648 | |||||||||||||||
| UBS U.S. Equity Alpha Fund—Class Y | 157,415 | 23,783 | 76,513 | 57,119 | |||||||||||||||
| UBS U.S. Large Cap Equity Fund—Class A | 38,849 | — | 38,849 | — | |||||||||||||||
| UBS U.S. Large Cap Equity Fund—Class B | 487 | — | 318 | 169 | |||||||||||||||
| UBS U.S. Large Cap Equity Fund—Class C | 4,592 | — | 2,660 | 1,932 | |||||||||||||||
| UBS U.S. Large Cap Equity Fund—Class Y | 69,235 | — | 69,235 | —- | |||||||||||||||
114
The UBS Funds
Notes to financial statements
| Fund |
Fee waivers/ expense reimbursements subject to repayment |
Expires June 30, 2012 |
Expires June 30, 2013 |
Expires June 30, 2014 |
|||||||||||||||
| UBS U.S. Large Cap Value Equity Fund—Class A | $ | 604,595 | $ | 224,763 | $ | 196,379 | $ | 183,453 | |||||||||||
| UBS U.S. Large Cap Value Equity Fund—Class B | 3,676 | 2,049 | 1,215 | 412 | |||||||||||||||
| UBS U.S. Large Cap Value Equity Fund—Class C | 81,294 | 30,998 | 26,604 | 23,692 | |||||||||||||||
| UBS U.S. Large Cap Value Equity Fund—Class Y | 37,468 | 16,498 | 11,994 | 8,976 | |||||||||||||||
| UBS U.S. Small Cap Growth Fund—Class A | 340,670 | 218,473 | 74,652 | 47,545 | |||||||||||||||
| UBS U.S. Small Cap Growth Fund—Class B | 2,672 | 1,681 | 940 | 51 | |||||||||||||||
| UBS U.S. Small Cap Growth Fund—Class C | 29,605 | 14,437 | 8,898 | 6,270 | |||||||||||||||
| UBS U.S. Small Cap Growth Fund—Class Y | 418,948 | 356,380 | 62,568 | — | |||||||||||||||
Each Fund pays UBS Global AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the year ended June 30, 2011, the Funds owed and incurred administrative fees as follows:
| Fund |
Administrative fees owed |
Administrative fees incurred |
|||||||||
| UBS Global Equity Fund | $ | 14,770 | $ | 91,700 | |||||||
| UBS International Equity Fund | 3,575 | 21,460 | |||||||||
| UBS Market Neutral Multi-Strategy Fund | 3,059 | 18,584 | |||||||||
| UBS U.S. Equity Alpha Fund | 4,181 | 28,802 | |||||||||
| UBS U.S. Large Cap Equity Fund | 30,398 | 179,125 | |||||||||
| UBS U.S. Large Cap Value Equity Fund | 6,428 | 38,757 | |||||||||
| UBS U.S. Small Cap Growth Fund | 19,668 | 110,031 | |||||||||
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the year ended June 30, 2011 have been included near the end of each Fund's Portfolio of investments.
The Funds may invest in UBS 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 Statement of operations.
Under normal conditions, the Funds invest cash collateral from securities lending activities into an affiliated private money market fund, UBS Private Money Market Fund LLC ("Private Money Market"), which operates in compliance with most of the substantive provisions of Rule 2a-7 of the 1940 Act. Private Money Market 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. UBS Global AM acts as managing member and receives a management fee from Private Money Market payable monthly in arrears at the annual rate of 0.10% of Private Money Market's average daily members' equity, minus the aggregate operating expenses of, and incurred by, Private Money Market during each such related month, not including investment expenses (including brokerage commissions, taxes, interest charges and other costs with respect to transactions in securities) and extraordinary expenses including litigation expenses, if any. The Advisor may, in its sole discretion, waive all or any portion of the management fee to which it may be entitled from time to time in order to maintain operating expenses at a certain level. Distributions received from Private Money Market, net of fee rebates paid to borrowers, are reflected as securities lending in the Statement of operations.
115
The UBS Funds
Notes to financial statements
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, 2011, were as follows:
| Fund | UBS AG | ||||||
| UBS International Equity Fund | $ | 434 | |||||
| UBS Market Neutral Multi-Strategy Fund | 11,371 | ||||||
| UBS U.S. Equity Alpha Fund | 237 | ||||||
| UBS U.S. Large Cap Equity Fund | 2,648 | ||||||
| UBS U.S. Large Cap Value Equity Fund | 361 | ||||||
| UBS U.S. Small Cap Growth Fund | 326 | ||||||
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 1940 Act 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 Global Equity Fund | 0.25 | % | 1.00 | % | 1.00 | % | |||||||||
| UBS International Equity Fund | 0.25 | 1.00 | 1.00 | ||||||||||||
| UBS Market Neutral Multi-Strategy Fund | 0.25 | N/A* | 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 Value Equity Fund | 0.25 | 1.00 | 1.00 | ||||||||||||
| UBS U.S. Small Cap Growth Fund | 0.25 | 1.00 | 1.00 | ||||||||||||
* UBS Market Neutral Multi-Strategy Fund and UBS U.S. Equity Alpha Fund do not offer Class B shares.
UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A, Class B and Class C. At June 30, 2011, certain Funds owed UBS Global AM (US) service and distribution fees, and for the year ended June 30, 2011, 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 Global Equity Fund—Class A | $ | 28,533 | $ | 18,851 | |||||||
| UBS Global Equity Fund—Class B | 1,041 | 315 | |||||||||
| UBS Global Equity Fund—Class C | 35,785 | 64 | |||||||||
| UBS International Equity Fund—Class A | 3,784 | 1,477 | |||||||||
| UBS International Equity Fund—Class B | 69 | 1,501 | |||||||||
| UBS International Equity Fund—Class C | 2,341 | 18 | |||||||||
| UBS Market Neutral Multi-Strategy Fund—Class A | 1,861 | 19,548 | |||||||||
| UBS Market Neutral Multi-Strategy Fund—Class C | 1,535 | 590 | |||||||||
| UBS U.S. Equity Alpha Fund—Class A | 7,208 | 1,886 | |||||||||
| UBS U.S. Equity Alpha Fund—Class C | 8,545 | 26 | |||||||||
| UBS U.S. Large Cap Equity Fund—Class A | 8,619 | 485 | |||||||||
| UBS U.S. Large Cap Equity Fund—Class B | 243 | 681 | |||||||||
| UBS U.S. Large Cap Equity Fund—Class C | 5,989 | 52 | |||||||||
116
The UBS Funds
Notes to financial statements
| Fund |
Service and distribution fees owed |
Sales charges earned |
|||||||||
| UBS U.S. Large Cap Value Equity Fund—Class A | $ | 18,492 | $ | 712 | |||||||
| UBS U.S. Large Cap Value Equity Fund—Class B | 60 | 59 | |||||||||
| UBS U.S. Large Cap Value Equity Fund—Class C | 8,493 | — | |||||||||
| UBS U.S. Small Cap Growth Fund—Class A | 15,783 | 3,203 | |||||||||
| UBS U.S. Small Cap Growth Fund—Class B | 51 | 119 | |||||||||
| UBS U.S. Small Cap Growth Fund—Class C | 4,979 | 9 | |||||||||
4. Transfer agency and related services fees
UBS Financial Services Inc. provides certain services pursuant to a delegation of authority from BNY Mellon Investment Servicing ("BNY Mellon"), as each Fund's transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the year ended June 30, 2011, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
| Fund | Amount paid | ||||||
| UBS Global Equity Fund | $ | 69,317 | |||||
| UBS International Equity Fund | 3,722 | ||||||
| UBS Market Neutral Multi-Strategy Fund | 2,174 | ||||||
| UBS U.S. Equity Alpha Fund | 11,670 | ||||||
| UBS U.S. Large Cap Equity Fund | 5,224 | ||||||
| UBS U.S. Large Cap Value Equity Fund | 20,592 | ||||||
| UBS U.S. Small Cap Growth Fund | 13,271 | ||||||
5. Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities, 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, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees.
UBS Global Equity Fund, UBS International Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Small Cap Growth Fund loaned securities to certain qualified broker dealers, with the Funds' custodian acting as the Funds' lending agent. Cash collateral received is invested in Private Money Market,
117
The UBS Funds
Notes to financial statements
which is included in each Fund's respective Portfolio of investments. The value of loaned securities and related collateral outstanding at June 30, 2011, were as follows:
| Fund |
Market value of securities loaned |
Market value of collateral received from securities loaned |
Market value of investments of cash collateral received |
||||||||||||
| UBS Global Equity Fund | $ | 3,232,999 | $ | 3,462,365 | $ | 3,462,365 | |||||||||
| UBS International Equity Fund | 1,543,205 | 1,597,843 | 1,597,843 | ||||||||||||
| UBS U.S. Large Cap Equity Fund | 10,408,025 | 10,614,564 | 10,614,564 | ||||||||||||
| UBS U.S. Large Cap Value Equity Fund | 1,993,505 | 2,040,331 | 2,040,331 | ||||||||||||
| UBS U.S. Small Cap Growth Fund | 16,813,387 | 17,143,760 | 17,143,760 | ||||||||||||
6. Purchases and sales of securities
For the year ended June 30, 2011, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government and agency securities, were as follows:
| Fund | Purchases | Sales Proceeds | |||||||||
| UBS Global Equity Fund | $ | 99,325,243 | $ | 123,136,451 | |||||||
| UBS International Equity Fund | 21,017,487 | 25,334,111 | |||||||||
| UBS Market Neutral Multi-Strategy Fund | 190,478,847 | 190,470,194 | |||||||||
| UBS U.S. Equity Alpha Fund | 46,515,674 | 66,123,332 | |||||||||
| UBS U.S. Large Cap Equity Fund | 139,189,537 | 179,655,246 | |||||||||
| UBS U.S. Large Cap Value Equity Fund | 42,972,653 | 51,821,842 | |||||||||
| UBS U.S. Small Cap Growth Fund | 79,794,891 | 111,595,574 | |||||||||
7. Federal income taxes
It is each Fund's policy to comply with all requirements of the Internal Revenue 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.
The tax character of distributions paid during the fiscal years ended June 30, 2011 and June 30, 2010 were as follows:
| 2011 | 2010 | ||||||||||
| Fund |
Distributions paid from ordinary income |
Distributions paid from ordinary income |
|||||||||
| UBS Global Equity Fund | $ | 3,119,145 | $ | 3,426,325 | |||||||
| UBS International Equity Fund | 958,768 | 3,547,234 | |||||||||
| UBS U.S. Equity Alpha Fund | 35,347 | — | |||||||||
| UBS U.S. Large Cap Equity Fund | 1,698,152 | 5,959,814 | |||||||||
| UBS U.S. Large Cap Value Equity Fund | 425,326 | 1,136,481 | |||||||||
118
The UBS Funds
Notes to financial statements
At June 30, 2011, the components of accumulated earnings (deficit) on a tax basis were as follows:
| Fund |
Undistributed ordinary income |
Undistributed long-term capital gains |
Accumulated capital and other losses |
Unrealized appreciation/ (depreciation) |
Total | ||||||||||||||||||
| UBS Global Equity Fund | $ | 156,158 | $ | — | $ | (28,073,690 | ) | $ | 8,837,528 | $ | (19,080,004 | ) | |||||||||||
| UBS International Equity Fund | 462,950 | — | (12,666,856 | ) | 4,259,940 | (7,943,966 | ) | ||||||||||||||||
| UBS Market Neutral Multi-Strategy Fund | — | 10,476 | — | (640,378 | ) | (629,902 | ) | ||||||||||||||||
| UBS U.S. Equity Alpha Fund | 35,310 | — | (22,504,210 | ) | 2,514,193 | (19,954,707 | ) | ||||||||||||||||
| UBS U.S. Large Cap Equity Fund | 1,851,053 | — | (188,746,115 | ) | 27,748,500 | (159,146,562 | ) | ||||||||||||||||
| UBS U.S. Large Cap Value Equity Fund | 418,812 | — | (20,462,890 | ) | 4,279,337 | (15,764,741 | ) | ||||||||||||||||
| UBS U.S. Small Cap Growth Fund | — | — | (41,811,793 | ) | 48,083,088 | 6,271,295 | |||||||||||||||||
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, 2011 were as follows:
| Fund |
Undistributed net investment income |
Accumulated net realized gain/(loss) |
Beneficial interest |
||||||||||||
| UBS Global Equity Fund | $ | 300,749 | $ | (300,749 | ) | $ | — | ||||||||
| UBS International Equity Fund | 289,494 | (289,494 | ) | — | |||||||||||
| UBS Market Neutral Multi-Strategy Fund | 404,773 | (374,763 | ) | (30,010 | ) | ||||||||||
| UBS U.S. Equity Alpha Fund | (2,190 | ) | 2,190 | — | |||||||||||
| UBS U.S. Large Cap Equity Fund | (13,577 | ) | 13,577 | — | |||||||||||
| UBS U.S. Large Cap Value Equity Fund | (777 | ) | 777 | — | |||||||||||
| UBS U.S. Small Cap Growth Fund | 1,161,804 | 34,033 | (1,195,837 | ) | |||||||||||
At June 30, 2011, 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, 2017 |
June 30, 2018 |
|||||||||
| UBS Global Equity Fund | $ | — | $ | (28,073,690 | ) | ||||||
| UBS International Equity Fund | (407,480 | ) | (12,259,376 | ) | |||||||
| UBS U.S. Equity Alpha Fund | (10,000,522 | ) | (12,503,688 | ) | |||||||
| UBS U.S. Large Cap Equity Fund | (21,228,626 | ) | (167,517,489 | ) | |||||||
| UBS U.S. Large Cap Value Equity Fund | (246,302 | ) | (20,216,588 | ) | |||||||
| UBS U.S. Small Cap Growth Fund | — | (41,811,793 | ) | ||||||||
During the fiscal year ended June 30, 2011, the following Funds utilized capital loss carryforwards to offset current year realized gains:
| Fund | Amount | ||||||
| UBS Global Equity Fund | $ | 20,915,183 | |||||
| UBS International Equity Fund | 5,230,810 | ||||||
| UBS U.S. Equity Alpha Fund | 5,529,973 | ||||||
| UBS U.S. Large Cap Equity Fund | 30,844,209 | ||||||
| UBS U.S. Large Cap Value Equity Fund | 1,788,425 | ||||||
| UBS U.S. Small Cap Growth Fund | 29,834,563 | ||||||
119
The UBS Funds
Notes to financial statements
As of and during the year ended June 30, 2011, the Funds did not have any liabilities for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of operations. During the period, the Funds did not incur any interest or penalties.
Each of the tax years in the four year period ended June 30, 2011, remains subject to examination by the Internal Revenue Service and state taxing authorities.
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 sales 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 prevailing rates in effect at the time of borrowing. 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, 2011, were as follows:
| Fund |
Average daily borrowings |
Number of days outstanding |
Interest expense |
Weighted average annualized interest rate |
|||||||||||||||
| UBS International Equity Fund | $ | 1,013,000 | 5 | $ | 141 | 1.00 | % | ||||||||||||
| UBS U.S. Large Cap Equity Fund | 11,371,015 | 4 | 1,138 | 0.90 | |||||||||||||||
There were no borrowings from the Committed Credit Facility outstanding as of June 30, 2011.
9. Shares of beneficial interest
For the year ended June 30, 2011, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Global Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 149,340 | $ | 1,920,017 | 325 | $ | 3,955 | |||||||||||||
| Shares repurchased | (1,272,205 | ) | (15,817,784 | ) | (9,813 | ) | (116,256 | ) | |||||||||||
| Shares converted from Class B to Class A | 14,757 | 175,773 | (15,153 | ) | (175,773 | ) | |||||||||||||
| Dividends reinvested | 137,883 | 1,709,749 | 234 | 2,843 | |||||||||||||||
| Redemption fees | — | 611 | — | — | |||||||||||||||
| Net decrease | (970,225 | ) | $ | (12,011,634 | ) | (24,407 | ) | $ | (285,231 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 16,431 | $ | 197,648 | 96,980 | $ | 1,251,685 | |||||||||||||
| Shares repurchased | (394,695 | ) | (4,714,816 | ) | (746,159 | ) | (9,509,898 | ) | |||||||||||
| Dividends reinvested | 33,701 | 402,393 | 61,666 | 785,010 | |||||||||||||||
| Redemption fees | — | 26 | — | 84 | |||||||||||||||
| Net decrease | (344,563 | ) | $ | (4,114,749 | ) | (587,513 | ) | $ | (7,473,119 | ) | |||||||||
120
The UBS Funds
Notes to financial statements
UBS International Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 249,435 | $ | 2,003,310 | — | $ | — | |||||||||||||
| Shares repurchased | (202,651 | ) | (1,587,735 | ) | (23,771 | ) | (189,375 | ) | |||||||||||
| Shares converted from Class B to Class A | 2,906 | 20,748 | (2,898 | ) | (20,748 | ) | |||||||||||||
| Dividends reinvested | 34,276 | 272,493 | — | — | |||||||||||||||
| Redemption fees | — | 1,407 | — | — | |||||||||||||||
| Net increase (decrease) | 83,966 | $ | 710,223 | (26,669 | ) | $ | (210,123 | ) | |||||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 69,592 | $ | 553,419 | 124,651 | $ | 994,876 | |||||||||||||
| Shares repurchased | (31,259 | ) | (237,769 | ) | (856,335 | ) | (6,607,896 | ) | |||||||||||
| Dividends reinvested | 3,173 | 24,751 | 79,234 | 632,293 | |||||||||||||||
| Redemption fees | — | 173 | — | 667 | |||||||||||||||
| Net increase (decrease) | 41,506 | $ | 340,574 | (652,450 | ) | $ | (4,980,060 | ) | |||||||||||
UBS Market Neutral Multi-Strategy Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 777,025 | $ | 7,714,287 | 101,962 | $ | 1,010,977 | 2,012,541 | $ | 20,131,307 | ||||||||||||||||||
| Shares repurchased | (316,440 | ) | (3,117,135 | ) | (8,065 | ) | (78,956 | ) | (512,820 | ) | (5,000,000 | ) | |||||||||||||||
| Dividends reinvested | — | — | — | — | — | — | |||||||||||||||||||||
| Redemption fees | — | 6,897 | — | 199 | — | — | |||||||||||||||||||||
| Net increase | 460,585 | $ | 4,604,049 | 93,897 | $ | 932,220 | 1,499,721 | $ | 15,131,307 | ||||||||||||||||||
UBS U.S. Equity Alpha Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 179,920 | $ | 1,500,075 | 2,316 | $ | 18,343 | 40,956 | $ | 336,170 | ||||||||||||||||||
| Shares repurchased | (1,583,001 | ) | (13,094,969 | ) | (412,009 | ) | (3,366,542 | ) | (571,800 | ) | (4,656,964 | ) | |||||||||||||||
| Dividends reinvested | — | — | — | — | 4,203 | 35,347 | |||||||||||||||||||||
| Redemption fees | — | 1,189 | — | 70 | — | 913 | |||||||||||||||||||||
| Net decrease | (1,403,081 | ) | $ | (11,593,705 | ) | (409,693 | ) | $ | (3,348,129 | ) | (526,641 | ) | $ | (4,284,534 | ) | ||||||||||||
UBS U.S. Large Cap Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 213,632 | $ | 3,246,905 | — | $ | — | |||||||||||||
| Shares repurchased | (827,199 | ) | (12,817,491 | ) | (3,733 | ) | (50,295 | ) | |||||||||||
| Shares converted from Class B to Class A | 866 | 13,311 | (887 | ) | (13,311 | ) | |||||||||||||
| Dividends reinvested | 6,676 | 103,343 | — | — | |||||||||||||||
| Redemption fees | — | 2,579 | — | — | |||||||||||||||
| Net decrease | (606,025 | ) | $ | (9,451,353 | ) | (4,620 | ) | $ | (63,606 | ) | |||||||||
121
The UBS Funds
Notes to financial statements
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 11,660 | $ | 172,260 | 2,464,964 | $ | 37,044,986 | |||||||||||||
| Shares repurchased | (79,289 | ) | (1,160,430 | ) | (4,738,066 | ) | (71,656,774 | ) | |||||||||||
| Dividends reinvested | — | — | — | 1,579,780 | |||||||||||||||
| Redemption fees | — | 90 | 101,333 | 16,648 | |||||||||||||||
| Net decrease | (67,629 | ) | $ | (988,080 | ) | (2,171,769 | ) | $ | (33,015,360 | ) | |||||||||
UBS U.S. Large Cap Value Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 34,230 | $ | 218,247 | — | $ | — | |||||||||||||
| Shares repurchased | (1,310,446 | ) | (8,274,037 | ) | (2,132 | ) | (13,071 | ) | |||||||||||
| Shares converted from Class B to Class A | 10,412 | 69,198 | (10,460 | ) | (69,198 | ) | |||||||||||||
| Dividends reinvested | 55,116 | 348,885 | — | — | |||||||||||||||
| Redemption fees | — | 756 | — | — | |||||||||||||||
| Net decrease | (1,210,688 | ) | $ | (7,636,951 | ) | (12,592 | ) | $ | (82,269 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 24,844 | $ | 155,122 | 4,632 | $ | 29,422 | |||||||||||||
| Shares repurchased | (207,858 | ) | (1,310,763 | ) | (57,989 | ) | (376,431 | ) | |||||||||||
| Dividends reinvested | 878 | 5,453 | 3,007 | 19,154 | |||||||||||||||
| Redemption fees | — | 160 | — | 11 | |||||||||||||||
| Net decrease | (182,136 | ) | $ | (1,150,028 | ) | (50,350 | ) | $ | (327,844 | ) | |||||||||
UBS U.S. Small Cap Growth Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 571,513 | $ | 8,030,544 | — | $ | — | |||||||||||||
| Shares repurchased | (876,247 | ) | (11,899,215 | ) | (1,360 | ) | (15,253 | ) | |||||||||||
| Shares converted from Class B to Class A | 3,726 | 50,744 | (4,007 | ) | (50,744 | ) | |||||||||||||
| Redemption fees | — | 3,633 | — | — | |||||||||||||||
| Net decrease | (301,008 | ) | $ | (3,814,294 | ) | (5,367 | ) | $ | (65,997 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 20,977 | $ | 283,069 | 1,835,735 | $ | 26,999,341 | |||||||||||||
| Shares repurchased | (57,351 | ) | (744,060 | ) | (3,705,564 | ) | (52,481,542 | ) | |||||||||||
| Redemption fees | — | 9 | — | 16,664 | |||||||||||||||
| Net decrease | (36,374 | ) | $ | (460,982 | ) | (1,869,829 | ) | $ | (25,465,537 | ) | |||||||||
122
The UBS Funds
Notes to financial statements
For the year ended June 30, 2010, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Global Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 145,285 | $ | 1,671,360 | 370 | $ | 3,963 | |||||||||||||
| Shares repurchased | (1,710,774 | ) | (19,257,996 | ) | (12,210 | ) | (130,804 | ) | |||||||||||
| Shares converted from Class B to Class A | 50,653 | 548,079 | (52,051 | ) | (548,079 | ) | |||||||||||||
| Dividends reinvested | 148,169 | 1,703,949 | 610 | 6,849 | |||||||||||||||
| Redemption fees | — | 2,645 | — | — | |||||||||||||||
| Net decrease | (1,366,667 | ) | $ | (15,331,963 | ) | (63,281 | ) | $ | (668,071 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 51,808 | $ | 561,877 | 198,746 | $ | 2,341,308 | |||||||||||||
| Shares repurchased | (500,865 | ) | (5,481,257 | ) | (4,795,448 | ) | (55,291,516 | ) | |||||||||||
| Dividends reinvested | 44,968 | 498,254 | 89,155 | 1,050,250 | |||||||||||||||
| Redemption fees | — | 179 | — | — | |||||||||||||||
| Net decrease | (404,089 | ) | $ | (4,420,947 | ) | (4,507,547 | ) | $ | (51,899,958 | ) | |||||||||
UBS International Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 69,558 | $ | 517,761 | — | $ | — | |||||||||||||
| Shares repurchased | (302,849 | ) | (2,206,513 | ) | (3,341 | ) | (24,442 | ) | |||||||||||
| Shares converted from Class B to Class A | 872 | 6,532 | (873 | ) | (6,532 | ) | |||||||||||||
| Dividends reinvested | 65,443 | 477,730 | 2,021 | 14,771 | |||||||||||||||
| Redemption fees | — | 18 | — | — | |||||||||||||||
| Net decrease | (166,976 | ) | $ | (1,204,472 | ) | (2,193 | ) | $ | (16,203 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 27,365 | $ | 195,421 | 574,341 | $ | 4,301,580 | |||||||||||||
| Shares repurchased | (45,826 | ) | (325,595 | ) | (8,401,530 | ) | (62,578,915 | ) | |||||||||||
| Dividends reinvested | 8,153 | 58,374 | 401,282 | 2,937,384 | |||||||||||||||
| Redemption fees | — | 24 | — | — | |||||||||||||||
| Net decrease | (10,308 | ) | $ | (71,776 | ) | (7,425,907 | ) | $ | (55,339,951 | ) | |||||||||
UBS U.S. Equity Alpha Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 425,830 | $ | 3,263,919 | 32,228 | $ | 247,136 | 582,815 | $ | 3,686,054 | ||||||||||||||||||
| Shares repurchased | (2,400,367 | ) | (18,257,508 | ) | (480,716 | ) | (3,582,496 | ) | (14,052,092 | ) | (105,523,694 | ) | |||||||||||||||
| Redemption fees | — | 1,576 | — | 6 | — | — | |||||||||||||||||||||
| Net decrease | (1,974,537 | ) | $ | (14,992,013 | ) | (448,488 | ) | $ | (3,335,354 | ) | (13,469,277 | ) | $ | (101,837,640 | ) | ||||||||||||
123
The UBS Funds
Notes to financial statements
UBS U.S. Large Cap Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 211,919 | $ | 2,862,468 | — | $ | — | |||||||||||||
| Shares repurchased | (1,441,915 | ) | (19,457,342 | ) | (8,841 | ) | (110,351 | ) | |||||||||||
| Shares converted from Class B to Class A | 1,396 | 18,466 | (1,434 | ) | (18,466 | ) | |||||||||||||
| Dividends reinvested | 42,141 | 581,128 | 86 | 1,161 | |||||||||||||||
| Redemption fees | — | 1,524 | — | — | |||||||||||||||
| Net decrease | (1,186,459 | ) | $ | (15,993,756 | ) | (10,189 | ) | $ | (127,656 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 29,251 | $ | 383,526 | 1,787,956 | $ | 24,638,984 | |||||||||||||
| Shares repurchased | (171,958 | ) | (2,193,369 | ) | (6,301,552 | ) | (86,752,280 | ) | |||||||||||
| Dividends reinvested | 5,224 | 69,956 | 377,838 | 5,251,944 | |||||||||||||||
| Redemption fees | — | 334 | — | 29,859 | |||||||||||||||
| Net decrease | (137,483 | ) | $ | (1,739,553 | ) | (4,135,758 | ) | $ | (56,831,493 | ) | |||||||||
UBS U.S. Large Cap Value Equity Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 50,208 | $ | 292,843 | — | $ | — | |||||||||||||
| Shares repurchased | (1,420,888 | ) | (8,212,013 | ) | (6,448 | ) | (36,185 | ) | |||||||||||
| Shares converted from Class B to Class A | 26,216 | 152,591 | (26,548 | ) | (152,591 | ) | |||||||||||||
| Dividends reinvested | 151,731 | 886,108 | 122 | 713 | |||||||||||||||
| Redemption fees | — | 208 | — | — | |||||||||||||||
| Net decrease | (1,192,733 | ) | $ | (6,880,263 | ) | (32,874 | ) | $ | (188,063 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 21,177 | $ | 122,270 | 31,414 | $ | 181,880 | |||||||||||||
| Shares repurchased | (219,077 | ) | (1,252,208 | ) | (195,293 | ) | (1,136,648 | ) | |||||||||||
| Dividends reinvested | 12,907 | 73,960 | 9,218 | 54,109 | |||||||||||||||
| Redemption fees | — | 53 | — | 103 | |||||||||||||||
| Net decrease | (184,993 | ) | $ | (1,055,925 | ) | (154,661 | ) | $ | (900,556 | ) | |||||||||
124
The UBS Funds
Notes to financial statements
UBS U.S. Small Cap Growth Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 606,902 | $ | 6,271,903 | — | $ | — | |||||||||||||
| Shares repurchased | (2,724,947 | ) | (27,696,331 | ) | (3,736 | ) | (35,773 | ) | |||||||||||
| Shares converted from Class B to Class A | 10,168 | 100,987 | (10,847 | ) | (100,987 | ) | |||||||||||||
| Redemption fees | — | 1,782 | — | — | |||||||||||||||
| Net decrease | (2,107,877 | ) | $ | (21,321,659 | ) | (14,583 | ) | $ | (136,760 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 8,354 | $ | 82,926 | 2,133,702 | $ | 22,846,579 | |||||||||||||
| Shares repurchased | (79,320 | ) | (756,398 | ) | (8,682,682 | ) | (91,054,728 | ) | |||||||||||
| Redemption fees | — | 9 | — | 18,172 | |||||||||||||||
| Net decrease | (70,966 | ) | $ | (673,463 | ) | (6,548,980 | ) | $ | (68,189,977 | ) | |||||||||
125
The UBS Funds
Report of 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, including the portfolios of investments, of UBS Global Equity Fund, UBS International Equity Fund, UBS Market Neutral Multi-Strategy Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Small Cap Growth Fund (seven of the series comprising The UBS Funds) (collectively the "Funds") as of June 30, 2011, 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. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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, 2011, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Global Equity Fund, UBS International Equity Fund, UBS Market Neutral Multi-Strategy Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Small Cap Growth Fund at June 30, 2011, 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 29, 2011
126
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their 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, procedures and 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 UBS's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).
127
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 9 and 10, 2011 (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 Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Frontier 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 Value Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Absolute Return Bond Fund, UBS Global Bond Fund, UBS High Yield Fund and UBS Core Plus Bond 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 23, 2011, June 9, 2011 and June 10, 2011, 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 its 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 the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addition, the Board considered the presentations provided with respect to distribution strategies for the Funds. The
128
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
Board also discussed the annual written compliance report from the Chief Compliance Officer and noted enhancements undertaken and planned with respect to the compliance program. 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. The Board also reviewed a memorandum provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Lipper Reports, the Board noted that UBS Global Allocation Fund, UBS Global Frontier Fund, UBS International Equity Fund, UBS U.S. Small Cap Growth Fund, UBS High Yield Fund and UBS Core Plus Bond Fund each had appeared in one of the top three performance quintiles for the one-year performance period. At the Board's request, the Advisor further addressed the performance data for the UBS Dynamic Alpha Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS Global Equity Fund, UBS Global Bond Fund and UBS Absolute Return 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 Dynamic Alpha Fund, the Advisor discussed the factors that had affected the short-term and longer-term performance of the Fund. The Advisor explained that after the market turmoil in 2008, the Advisor implemented strategy enhancements to provide the Fund with more protection against downside risk in order to further the Fund's goal of providing positive returns in a variety of market environments. The Advisor stated that during the one-year performance period, the Fund's more conservative stance with respect to risk may have impacted the UBS Dynamic Alpha Fund's performance relative to its peers. The Advisor also described for the Board the modifications that had been made to the UBS Dynamic Alpha Fund's security selection process, which management believes will enhance the Fund's performance.
With respect to the performance of the UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Large Cap Equity Fund over the past year, the Advisor noted that each Fund had positive returns but also noted that each Fund underperformed relative to its peer universe. The Advisor stated that stock selection was the primary reason for each Fund's underperformance compared to its peer universe. The Advisor discussed each Fund's stock selection process and stated that each Fund was well positioned in the next year to take advantage of attractively priced stocks that fit each Fund's long-term investment focus. With respect to the UBS U.S. Large Cap Equity Fund, it also was noted that while the Fund had underperformed during the last year, the Fund's performance for the longer-term, ten-year performance period compared very favorably to most of its peers.
The Advisor then discussed the factors that had a negative effect on the relative performance of the UBS Global Equity Fund during the one-year performance period. Although the UBS Global Equity Fund experienced a positive return during the past year, the Fund underperformed relative to its peer universe. The Advisor noted that stock selection was the primary factor that contributed to the Fund's relative underperformance. The Advisor discussed the stock selection process for the UBS Global Equity Fund and explained the steps the Advisor was taking to improve the Fund's performance. The Advisor also noted that while the UBS Global Equity Fund underperformed relative to its peer universe for the one-year performance period, it exceeded its peer universe median for the three year performance period.
With respect to the UBS Global Bond Fund, the Advisor noted that while the Fund underperformed relative to its peer universe for the one-year period, the Fund experienced a positive return and outperformed its benchmark index during this time period. The Fund's weaker peer group relative performance was partially attributable to its more conservative posture with respect to credit sectors. The Advisor discussed with the Board the performance
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outlook for the Fund in the upcoming year and stated that it believed that the previous enhancements that had been made to the investment process should continue to contribute positively to the performance of the Fund in the future.
The Advisor next addressed the relative underperformance of the UBS Absolute Return Bond Fund with respect to the Fund's peers. The Advisor discussed with the Board the Fund's strategy of attempting to generate positive returns over time regardless of market conditions by managing the risks and market exposures of the Fund's portfolio. The Advisor stated that the UBS Absolute Return Bond Fund's more conservative strategy with respect to the emerging markets and high yield asset classes resulted in its relative underperformance in comparison to its peers. The Advisor noted that the ability of UBS Absolute Return Bond Fund to maintain a negative duration posture may allow the Fund to be more competitive with its peers in the future as global yields remain at historically low levels.
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, the expectations of the shareholder base, the current market environment and the Advisor's efforts to address the underperformance issues of each Fund.
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). 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 Dynamic Alpha Fund and UBS Global Allocation Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except the UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS Core Plus Bond Fund and UBS Global Bond Fund, had a contractual fee rate comparable to, or lower than, the Lipper median in its respective Lipper expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund, except the UBS Dynamic Alpha Fund, UBS Global Equity Fund, UBS U.S. Equity Alpha Fund and UBS High Yield Fund, had total expenses that were comparable to, or lower than, the Lipper median in its respective Lipper expense group.
The Board first discussed the management fee and total expenses of the UBS Dynamic Alpha Fund. It was noted that the UBS Dynamic Alpha Fund's actual management fee was higher than the median of the Fund's Lipper expense group, which led the Board to discuss this Fund's management fee 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, including the use of 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 but also noted that the Fund's management fee was not among the highest of its peers, ranking in the third quintile of its Lipper expense group. The Advisor also noted that the UBS Dynamic Alpha Fund's management fee included breakpoints, which would decrease the level of management fees as assets grew. The Board also considered that the UBS Dynamic Alpha Fund's total expenses were higher than the total expenses of the Fund's Lipper expense
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group. The Advisor noted that the UBS Dynamic Alpha Fund's total expenses were in the third quintile of its Lipper expense group and were not significantly higher than the expense group median.
The Board also noted that the actual management fee for the UBS Global Allocation Fund was higher than the management fee of several of the funds in its Lipper expense group. The Board, however, determined that the UBS Global Allocation Fund's management fee was reasonable considering that it was not appreciably higher than its Lipper expense group median and the Fund was in the second quintile in its expense group with respect to total expenses.
The Board next considered that the management fee of the UBS U.S. Equity Alpha Fund was higher than the median of its Lipper expense group on a contractual basis, but noted that the Fund's actual management fee compared favorably with the Fund's peers placing in the second quintile of the Lipper expense group. The Board also considered the UBS U.S. Equity Alpha Fund's total expenses, which were higher than the median of the Fund's expense group. The Advisor explained that the Fund has higher non-management expenses as compared to its peers due to the Fund's smaller asset base.
The Board next discussed the management fee of the UBS U.S. Large Cap Equity Fund. It was noted that the UBS U.S. Large Cap Equity Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis, which led the Board to discuss this Fund's management fee with the Advisor. The Board noted that while the UBS U.S. Large Cap Equity Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses were both at the median of its Lipper expense group.
The Board then considered the management fee of the UBS U.S. Large Cap Value Equity Fund. It was noted that the UBS U.S. Large Cap Value Equity Fund's management fee also was higher than the median of the Fund's Lipper expense group on a contractual basis. The Board noted that while the UBS U.S. Large Cap Value Equity Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses each placed in the first quintile in the Fund's Lipper expense group.
The Board also reviewed the management fee of the UBS Core Plus Bond Fund and noted that the contractual management fee for the UBS Core Plus Bond Fund was not significantly higher than the median of the Fund's expense group. The Board also considered that the UBS Core Plus Bond Fund's actual management fee and actual total expenses were each in the first quintile of the Fund's Lipper expense group.
With respect to the fees and expenses of the UBS Global Bond Fund, the Board noted that the Fund was above the median of its Lipper expense group with respect to contractual management fees. The Board, however, also noted that the Fund's actual management fee was lower than the median of its Lipper expense group placing in the first quintile of its expense group. The Board also considered that the UBS Global Bond Fund had total expenses that compared favorably with the Fund's peers, placing in the second quintile of the Lipper expense group.
The Board then considered the total expenses of the UBS Global Equity Fund and UBS High Yield Fund, noting that the total expenses of each Fund were not significantly higher than each Fund's Lipper expense group median. The Board also noted each Fund's management fees, on both an actual and contractual basis, were very competitive with the management fees of the funds in each respective Lipper expense group.
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 with 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. The
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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 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 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. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. 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.
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. 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 most Funds, 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 each Fund, except UBS Global Frontier 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.
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The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory 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 shows, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee 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 office1 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 |
||||||||||||||||||
|
Adela Cepeda; 53 A.C. Advisory, Inc. 150 No. Clark Street, Suite 2160 Chicago, Illinois 60601 |
Trustee | Since 2004 | Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995). Ms. Cepeda is also a director of the Municipal Securities Rulemaking Board (since October 2010). | Ms. Cepeda is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Ms. Cepeda is a director of the MGI Funds (7 portfolios) (since 2005), trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) and director of Amalgamated Bank of Chicago. Ms. Cepeda was a director of Lincoln National Income Fund, Inc. (1992-2006), a director of Lincoln National Convertible Securities Fund, Inc. (1992-2006) and a director of Wyndham International, Inc. (2004-2006). | ||||||||||||||||||
|
John J. Murphy; 66 268 Main Street P.O. Box 718 Gladstone, NJ 07934 |
Trustee | Since 2009 | Mr. Murphy is the president of Murphy Capital Management (investment advisor) (since 1983) | Mr. Murphy is a director or trustee of three investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Murphy is a director of the Nicholas Applegate funds (12 portfolios); a director of the Legg Mason Equity Funds (54 portfolios) and a trustee of Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). | ||||||||||||||||||
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Non-interested Trustees (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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 |
||||||||||||||||||
|
Abbie J. Smith; 57 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 |
Trustee | Since 2009 | Ms. Smith is Boris and Irene Stern Professor of Accounting in the University of Chicago Booth School of Business (since 1980). In addition, Ms. Smith is also a co-founding partner and Director of Research of Fundamental Investment Advisors, a hedge Fund (co-founded in 2004, commenced operations in 2008) (since 2008). Formerly, Ms. Smith was a Marvin Bower Fellow, Harvard Business School (2001-2002). | Ms. Smith is a director or trustee of three investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation and chair of the human resources and compensation committee (formerly known as HON Industries Inc.) (office furniture) and a director (since 2003) and chair of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director and a member of the audit committee and portfolio performance committee of the Dimensional Funds complex (89 Portfolios). | ||||||||||||||||||
|
Frank K. Reilly; 75 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5649 |
Chairman and Trustee | Since 1992 | Mr. Reilly is a Professor of Finance at the University of Notre Dame (since 1982). | Mr. Reilly is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Reilly is a director of Discover Bank, a subsidiary of Discover Financial Services. | ||||||||||||||||||
|
Edward M. Roob; 76 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 |
Trustee | Since 1995 | Mr. Roob is retired (since 1993). | Mr. Roob is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | None. | ||||||||||||||||||
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Non-interested Trustees (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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 |
||||||||||||||||||
|
J. Mikesell Thomas; 60 1353 Aster Place Chicago, IL 60610 |
Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008), President and CEO of First Chicago Bancorp. (since 2008), CEO of First Chicago Bank of Trust (since 2008) and President and sole shareholder of Mikesell Advisory Corp (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (2004-2008). Mr. Thomas was an Independent financial advisor (2001-2004). | Mr. Thomas is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Thomas is a director and chairman of the Audit Committee for NorthShore University Health System. Mr. Thomas was previously a director of First Chicago Bancorp (2008-2010) and First Chicago Bank & Trust (2008-2010). | ||||||||||||||||||
Interested Trustee:
| Shawn Lytle; 40*2 | Trustee | Since February 2011 | Mr. Lytle is a Group Managing Director and Head of Americas at UBS Global Asset Management (Americas) Inc. (since 2010). Mr. Lytle is a member of the UBS Global Asset Management Executive Committee. Prior to his role as Head of Americas, he was Deputy Global Head of Equities (2008-2010), Head of Equity Capabilities and Business Management in 2008, and a team manager (2005-2008) at UBS Global Asset Management (Americas) Inc. | Mr. Lytle is a director or trustee of three investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | None | ||||||||||||||||||
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Officers:
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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*; 46 | Vice President and Assistant Secretary | Since 2005 | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) and deputy general counsel (since 2005) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM—Americas region"). Mr. Allessie is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Rose Ann Bubloski*; 43 | Vice President and Assistant Treasurer | Since May 2011 | Ms. Bubloski is an associate director (2003-2007 and 2008 to present) and senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region. From 2004 through 2007 she was a vice president and assistant treasurer of certain UBS funds. From 2007 to 2008 she was vice president at Cohen & Steers Capital Management, Inc. (investment manager). She is vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
| Mark E. Carver*; 47 | President | Since 2010 | Mr. Carver is a managing director and Head of Product Development and Management—Americas for UBS Global AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is a member of the Americas Management Committee (since 2008) and the Regional Operating Committee (since 2008). Prior to 2008, Mr. Carver held a number of product-related or sales responsibilities with respect to funds, advisory programs and separately managed accounts. Mr. Carver is president of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Thomas Disbrow*; 45 | Vice President, Treasurer and Principal Accounting Officer | Since 2004 and 2006, respectively | Mr. Disbrow is a managing director (since March 2011), (prior to which he was an executive director) (since 2007) and head of North Americas Fund Treasury (since March 2011) of UBS Global AM—Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Michael J. Flook*; 46 | Vice President and Assistant Treasurer | Since 2006 | Mr. Flook is a director (since 2010) (prior to which he was an associate director) (since 2006) 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 2005 to 2006. Mr. Flook is a vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
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Officers (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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**; 53 | Vice President and Secretary | Since 1999 and 2004, respectively | Mr. Kemper is a managing director (since 2006) and head of the legal department of UBS Global AM—Americas region (since 2004). He has been secretary of UBS Global AM—Americas region since 2004, secretary of UBS Global Asset Management Trust Company since 1993 and secretary of UBS AM Holdings (USA) Inc. since 2001. Mr. Kemper is vice president and secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Joanne M. Kilkeary*; 43 | Vice President and Assistant Treasurer | Since 2006 | Ms. Kilkeary is a director (since 2008) (prior to which she was 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 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Tammie Lee*; 40 | Vice President and Assistant Secretary | Since 2005 | Ms. Lee is an executive director (since 2010) (prior to which she was a director) (since 2005) and associate general counsel of UBS Global AM—Americas region (since 2005). Ms. Lee is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Joseph McGill*; 49 | 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. Mr. McGill is a vice president and chief compliance officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Nancy D. Osborn*; 45 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Eric Sanders*; 45 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
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Officers (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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*; 55 | Vice President and Chief Operating Officer | Since 2006 | Mr. Shoup is a managing director and global head of the Fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Shoup is also a director of UBS (IRL) Fund p.l.c. (since 2008) 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 2003 to 2006. Mr. Shoup is a vice president and chief operating officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Keith A. Weller*; 50 | 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). Mr. Weller is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment 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.
2 Mr. Lytle is considered to be an interested person of the Trust under the federal securities laws due to his position as an officer of UBS Global AM.
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
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The UBS Funds
Federal tax information (unaudited)
For the year ended June 30, 2011, 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:
| Fund |
Dividends received deduction |
Foreign tax credit |
|||||||||
| UBS Global Equity Fund | 33.59 | % | $ | 150,339 | |||||||
| UBS International Equity Fund | 0.36 | 49,157 | |||||||||
| UBS U.S. Equity Alpha Fund | 100.00 | — | |||||||||
| UBS U.S. Large Cap Equity Fund | 100.00 | — | |||||||||
| UBS U.S. Large Cap Value Equity Fund | 100.00 | — | |||||||||
In addition, for the year ended June 30, 2011, gross income derived from sources within foreign countries amounted to $1,736,371 for UBS Global Equity Fund and $650,339 for UBS International Equity Fund.
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PRESORTED
STANDARD
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COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
One North Wacker Drive
Chicago, IL 60606
S1198
UBS Asset
Allocation Funds
June 30, 2011
The UBS Funds—Asset Allocation
Annual Report
| Table of contents | |||||||
| President's letter | 1 | ||||||
| Market commentary | 2 | ||||||
| Asset Allocations | |||||||
| UBS Dynamic Alpha Fund | 4 | ||||||
| UBS Global Allocation Fund | 33 | ||||||
| UBS Global Frontier Fund | 48 | ||||||
| Explanation of expense disclosure | 58 | ||||||
| Statement of assets and liabilities | 60 | ||||||
| Statement of operations | 62 | ||||||
| Statement of changes in net assets | 64 | ||||||
| Financial highlights | 66 | ||||||
| Notes to financial statements | 72 | ||||||
| Report of independent registered public accounting firm | 91 | ||||||
| General information | 92 | ||||||
| Board approval of investment advisory agreements | 93 | ||||||
| Trustee and Officer information | 98 | ||||||
| Federal tax information | 104 | ||||||
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President's letter
August 15, 2011
Dear Shareholder,
I'm writing this letter to you following what have easily been two of the most tumultuous weeks that the financial markets have seen in a while.
Standard & Poor's decision to downgrade US long-term sovereign debt from AAA to AA+ on Friday, August 5, 2011, came at the end of a five-day period that had already seen the Dow Jones Industrial Average (DJIA) fall over 700 points. News of the downgrade triggered further volatility in the equity market, and the ensuing days were characterized by sharp market declines, and equally steep gains.
Today, the equity market is in calmer territory, having already reclaimed, for the time being, the losses of the past week. While no one can predict with any certainty what will transpire in the days and weeks to come, we believe that the longer term implications of the downgrade, though still unclear, are likely to be limited. However, in the near-term, we expect market volatility to persist.
When I last wrote to you six months ago, I noted that irrational fear has the unfortunate result of leading investors to make the wrong decisions, for the wrong reasons, at the wrong times—and, ultimately, may have a profound negative impact on their portfolios.1 This is an important point to remember in the current atmosphere of uncertainty. The truth is, ups and downs in the market—though never welcome—are a fact of life. A market decline of 15% or more, similar to that which we have just seen, has occurred in the DJIA, on average, once every two years.2 However, equally as certain is that every market decline is also followed by a market recovery.
Against the current market backdrop, it is never more important for investors to maintain a long-term perspective. History has shown that investors with the fortitude to remain invested through a crisis have been rewarded, while those reacting to short-term volatility have met with less success. Arguably, staying the course is easier said than done. To that end, an actively managed, diversified portfolio of stocks and bonds may provide you with smoother returns, and thus make it easier for you to stay on track.3
In a few months, UBS Global Asset Management will reach a major milestone: 30 years of managing clients' assets in a constantly evolving global marketplace. For as long as we have been managing money, our formidable history of experience has shown us that only by adhering to our disciplined processes through up and down markets are we best positioned to seek to achieve the type of long-term investment results that will help our clients achieve their financial goals. This is a standard that we will resolutely adhere to in managing our asset allocation, equity and fixed income funds in the days and weeks, and years to come.
As always, we remain firmly dedicated to your investment success. Thank you for your continued support.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
1 Source: Dalbar.
2 Source: Ned Davis. Covers the period from 1/2/1900 to 8/15/2011.
3 Diversification and asset allocation do not ensure gains or guarantee against loss.
1
The markets in review
Decelerating Growth in Developed Countries
The US and many developed countries abroad experienced decelerating economic growth during the reporting period. Oil and food prices moved higher during this time, which had a negative impact on consumer spending. In addition, supply disruptions following the devastating earthquake and tsunami in Japan last March led to moderating growth in the manufacturing sector. In the US, gross domestic product ("GDP") growth was 2.5% and 2.3% during the third and fourth quarters of 2010, followed by first and second quarter 2011 GDP growth of 0.4% and 1.3%, respectively.
In contrast to their developed country counterparts, growth in most emerging market economies, such as China and India, remained robust. Against a backdrop of higher inflation, several emerging market central banks raised their interest rates and took other actions in an effort to cool growth and stem rising prices. By the end of the period, commodity prices had declined from their peaks, and inflationary pressures appeared to have eased.
Global equities produce strong returns
While the global equity markets gave back a portion of their earlier gains late in the reporting period, overall they generated impressive results. Expectations for strengthening growth, corporate profits that were often better than expected and robust demand supported the US stock market during the first nine months of the period. However, risk appetite was later replaced with increased risk aversion as a result of the European sovereign debt crisis, fears that the US may default on its debt obligations and overall disappointing economic data. Despite weakening stock prices during the last three months of the period, the US stock market, as measured by the S&P 500 Index,1 returned 30.69% during the 12-months ended June 30, 2011.
International developed equities (as measured by the MSCI EAFE Index (net)2) proved resilient as well, gaining 30.36% during the reporting period. However, they experienced heightened volatility at times in light of fears that the European debt crisis may escalate. Emerging markets equities (as measured by the MSCI Emerging Markets Index (net)3) also posted strong returns, gaining 27.80% over the period. Continued robust growth in developing countries and higher commodity prices supported emerging markets equities.
1 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition, and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
2 The MSCI EAFE Index (net) is an index of stocks from 22 countries designed to measure the investment returns of developed economies outside of North America. Dividends are reinvested after the deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. The Index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The MSCI Emerging Markets Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance of emerging markets. As of May 2010, the index consisted of 21 emerging market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
2
The markets in review
Riskier fixed income securities outperform
There was also a meaningful shift in investor sentiment in the fixed income market during the reporting period. This, in turn, impacted the performance of the spread sectors (non-Treasuries). During the first nine months of the period, there were hopes for improving economic conditions, coupled with sharply rising oil and commodity prices. Despite hostilities in the Middle East and Northern Africa, the natural disaster in Japan and the European sovereign debt crisis, most spread sectors outperformed Treasuries and yields moved higher. Nonetheless, it was a different story during the last three months of the period. High oil prices hurt consumer spending and economic data pointed to a soft patch in many developed countries. Against this backdrop, Treasury yields declined and nearly every spread sector lagged Treasuries. All told, during 12 months ended June 30, 2011, the spread sectors typically outperformed Treasuries, and the overall US bond market, (as measured by the Barclays Capital US Aggregate Index4) returned 3.90%.
Despite increased volatility and periodic flights to quality, riskier fixed income asset classes generated solid gains during the reporting period, as the BofA Merrill Lynch US High Yield Cash Pay Constrained Index5 returned 15.21%, and the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global)6 rose 11.73%.
4 The Barclays Capital US Aggregate Index is an unmanaged broad based index designed to measure the US-dollar-denominated, investment-grade, fixed rate taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. US agency hybrid adjustable rate mortgage (ARM) securities were added to the Index on April 1, 2007. Investors should note that indices do not reflect the deduction of fees and expenses
5 The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed non-convertible, coupon-bearing US-dollar-denominated below investment grade corporate 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. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US-dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
3
UBS Dynamic Alpha Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned 3.58% (Class A shares declined 2.19% after the deduction of the maximum sales charge), while Class Y shares returned 3.89%. For purposes of comparison, the BofA Merrill Lynch US Treasury 1-5 Year Index returned 2.16% over the same time period, the MSCI World Free Index (net) returned 30.51% and the US Consumer Price Index (CPI) increased 3.56%. (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 6; 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 the Index returns do not reflect the deduction of fees and expenses.)
The Fund's positive absolute performance was primarily due to market allocation decisions.
Portfolio performance summary1
What worked
• A focus on risk assets contributed to performance during the period.
– The Fund had an emphasis on equities throughout the period, finishing the 12 months at a 30% equity market exposure. This position was rewarded as corporate profits often exceeded expectations, and investor risk appetite was generally robust.
– Within equities, the Fund's allocation to US stocks was beneficial, as they outperformed their international counterparts.
• The Fund's emphasis on investment grade corporate and high yield bonds enhanced results.
– The Fund's allocation to investment grade financials was a positive for performance as their spreads narrowed during the period. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
– Having an emphasis in high yield bonds was beneficial, as they generated solid performance during most of the period.
• Security selection made a positive contribution to relative performance during the six months.
– A major driver of outperformance was the Fixed Income Best Ideas portion of the Fund. This sleeve—a duration-neutral portfolio that invests in global bonds—performed strongly during the period.
– The Fund's exposure to large cap growth stocks added value during the period, as well.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
4
UBS Dynamic Alpha Fund
• Certain currency strategies were positive for performance.
– The Fund's long position to the Swedish krona was beneficial. The currency appreciated as Sweden's economic fundamentals were relatively strong, and its banking system was not as adversely impacted by the European sovereign debt crisis.
– Long positions to Asia ex-Japan currencies enhanced results, as the economies of these countries continued to expand at a solid pace.
What didn't work
• Several currency strategies hurt the Fund's performance.
– The Fund's short position to the euro was not rewarded. Despite the European sovereign debt crisis, the euro strengthened during the period.
– Having a short position to the strong-performing Australian dollar detracted from performance, as it benefited from rising commodity prices.
• A number of relative value trades detracted from performance.
– Having long positions to core European countries such as Germany and France, and short positions to peripheral countries such as Spain and Italy, contributed negatively to performance.
– A long position to large cap equities, and a short position to small cap equities, worked against the Fund.
– Having a preference for European versus US equities was detrimental for performance.
• Having a short US Treasuries futures position was not rewarded, as rates declined across the US yield curve during the period.
• Derivatives use had a negative impact on performance. During the review period, the Fund used derivatives for risk management purposes and as part of the Fund's investment strategies to enhance return across markets, securities and currencies. Performance across market allocation and currencies was negatively impacted by the use of derivatives.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
5
UBS Dynamic Alpha Fund
Average annual total returns for periods ended 06/30/11 (unaudited)
| 1 year | 5 years | Inception1 | |||||||||||||
| Before deducting maximum sales charge | |||||||||||||||
| Class A2 | 3.58 | % | (0.07 | )% | 1.64 | % | |||||||||
| Class B3 | 2.86 | (0.85 | ) | 0.92 | |||||||||||
| Class C4 | 2.82 | (0.85 | ) | 0.85 | |||||||||||
| Class Y5 | 3.89 | 0.25 | 1.95 | ||||||||||||
| After deducting maximum sales charge | |||||||||||||||
| Class A2 | (2.19 | )% | (1.19 | )% | 0.75 | % | |||||||||
| Class B3 | (2.14 | ) | (1.07 | ) | 0.92 | ||||||||||
| Class C4 | 1.82 | (0.85 | ) | 0.85 | |||||||||||
| BofA Merrill Lynch US Treasury 1-5 Year Index6 | 2.16 | % | 5.05 | % | 4.24 | % | |||||||||
| MSCI World Free Index (net)7 | 30.51 | 2.28 | 4.54 | ||||||||||||
| US Consumer Price Index (CPI)8 | 3.56 | 2.15 | 2.66 | ||||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.98% and 1.96%; Class B—2.82% and 2.71%; Class C—2.74% and 2.71%; Class Y—1.66% and 1.66%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, do not exceed 1.35% for Class A shares, 2.10% for Class B shares, 2.10% for Class C shares and 1.10% for Class Y shares. 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 January 27, 2005. Inception date of the indices, for the purpose of this illustration, is January 31, 2005.
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 BofA Merrill Lynch US Treasury 1-5 Year Index is an unmanaged index designed to track US Treasury securities with maturities between 1 and 5 years. Investors should note that indices do not reflect the deduction of fees and expenses.
7 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of May 2010, the index consisted of 24 developed market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
8 The US 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. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
6
UBS Dynamic Alpha Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Dynamic Alpha Fund Class A and Class Y shares versus the BofA Merrill Lynch US Treasury 1-5 Year Index, the MSCI World Free Index (net), and the US Consumer Price Index (CPI) from January 27, 2005, which is the inception date of the two classes, through June 30, 2011. The performance of Class B and Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://www.ubs.com.
7
UBS Dynamic Alpha Fund
Top ten equity holdings (unaudited)1,2
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Apple, Inc. | 1.6 | % | |||||
| Amazon.com, Inc. | 1.1 | ||||||
| Royal Dutch Shell PLC, Class A | 1.0 | ||||||
| Sage Group PLC | 0.9 | ||||||
| Allergan, Inc. | 0.8 | ||||||
| Illinois Tool Works, Inc. | 0.8 | ||||||
| Ultra Petroleum Corp. | 0.7 | ||||||
| QUALCOMM, Inc. | 0.7 | ||||||
| EMC Corp. | 0.7 | ||||||
| FedEx Corp. | 0.7 | ||||||
| Total | 9.0 | % | |||||
Country exposure by issuer, top five (unaudited)2,3
As of June 30, 2011
|
Percentage of net assets |
|||||||
| United States | 25.0 | % | |||||
| United Kingdom | 10.7 | ||||||
| Germany | 3.9 | ||||||
| Netherlands | 3.4 | ||||||
| Switzerland | 2.5 | ||||||
| Total | 45.5 | % | |||||
Top ten long-term fixed income holdings (unaudited)2
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
US Treasury Bonds, PO, 4.002%, due 08/15/29 |
0.4 | % | |||||
|
Federal Home Loan Bank of Chicago, 5.625%, due 06/13/16 |
0.4 | ||||||
|
Citigroup, Inc., 4.750%, due 05/31/17 |
0.3 | ||||||
|
Federal National Mortgage Association, 6.112%, due 10/09/19 |
0.3 | ||||||
|
Greenwich Capital Commercial Funding Corp., Series 2007-GG9, Class AM, 5.475%, due 03/10/39 |
0.3 | ||||||
|
FM Leveraged Capital Fund II, due 11/20/20 |
0.3 | ||||||
|
Regent's Park CDO BV, Series 1A, Class F, 6.465%, due 01/26/23 |
0.2 | ||||||
|
Ares Euro CLO BV, Series 2007-1A, Class G1, 13.138%, due 05/15/24 |
0.2 | ||||||
|
State of California, GO, 7.300%, due 10/01/39, |
0.2 | ||||||
|
Commercial Industrial Finance Corp., Series 2007-1A, Class A1LB, 0.607%, due 05/10/21 |
0.2 | ||||||
| Total | 2.8 | % | |||||
1 Only long positions are considered for top ten holdings.
2 Figures represent the direct investments of UBS Dynamic Alpha Fund. Figures would be different if a breakdown of the underlying investment companies was included.
3 This table includes long and short positions.
8
UBS Dynamic Alpha Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 1.92 | % | |||||
| Air freight & logistics | 1.34 | ||||||
| Airlines | 0.36 | ||||||
| Auto components | 0.50 | ||||||
| Automobiles | 0.49 | ||||||
| Beverages | 1.38 | ||||||
| Biotechnology | 1.25 | ||||||
| Building products | 0.43 | ||||||
| Capital markets | 0.73 | ||||||
| Chemicals | 2.70 | ||||||
| Commercial banks | 3.94 | ||||||
| Commercial services & supplies | 0.23 | ||||||
| Communications equipment | 1.46 | ||||||
| Computers & peripherals | 2.80 | ||||||
| Construction & engineering | 0.10 | ||||||
| Construction materials | 0.15 | ||||||
| Diversified consumer services | 0.13 | ||||||
| Diversified financial services | 1.25 | ||||||
| Diversified telecommunication services | 1.30 | ||||||
| Electric utilities | 2.85 | ||||||
| Electrical equipment | 1.10 | ||||||
| Electronic equipment, instruments & components | 0.33 | ||||||
| Energy equipment & services | 1.61 | ||||||
| Food & staples retailing | 1.24 | ||||||
| Food products | 1.58 | ||||||
| Gas utilities | 0.31 | ||||||
| Health care equipment & supplies | 1.40 | ||||||
| Health care providers & services | 1.26 | ||||||
| Health care technology | 0.07 | ||||||
| Hotels, restaurants & leisure | 1.80 | ||||||
| Household durables | 0.36 | ||||||
| Household products | 0.65 | ||||||
| Industrial conglomerates | 0.21 | ||||||
| Insurance | 1.75 | ||||||
| Internet & catalog retail | 1.88 | ||||||
| Internet software & services | 1.87 | ||||||
| IT services | 1.26 | ||||||
| Life sciences tools & services | 0.71 | ||||||
| Machinery | 3.55 | ||||||
| Media | 2.04 | ||||||
| Metals & mining | 2.58 | ||||||
| Multiline retail | 0.20 | ||||||
| Office electronics | 0.07 | ||||||
| Oil, gas & consumable fuels | 5.70 | ||||||
| Personal products | 0.92 | ||||||
| Pharmaceuticals | 3.33 | ||||||
| Road & rail | 1.24 | ||||||
| Semiconductors & semiconductor equipment | 2.01 | ||||||
| Software | 3.22 | ||||||
| Specialty retail | 0.98 | ||||||
| Textiles, apparel & luxury goods | 1.46 | ||||||
| Thrifts & mortgage finance | 0.10 | ||||||
| Tobacco | 0.66 | ||||||
| Trading companies & distributors | 0.35 | % | |||||
| Wireless telecommunication services | 0.86 | ||||||
| Total common stocks | 73.97 | % | |||||
| Preferred stocks | 0.82 | ||||||
| Bonds | |||||||
| Corporate bonds | |||||||
| Building materials | 0.04 | ||||||
| Capital markets | 0.14 | ||||||
| Chemicals | 0.07 | ||||||
| Commercial banks | 1.71 | ||||||
| Commercial services & supplies | 0.20 | ||||||
| Construction materials | 0.15 | ||||||
| Consumer finance | 0.29 | ||||||
| Containers & packaging | 0.06 | ||||||
| Diversified financial services | 0.59 | ||||||
| Electric utilities | 0.14 | ||||||
| Energy equipment & services | 0.17 | ||||||
| Health care providers & services | 0.18 | ||||||
| Hotels, restaurants & leisure | 0.17 | ||||||
| Household durables | 0.08 | ||||||
| Insurance | 0.18 | ||||||
| Media | 0.15 | ||||||
| Metals & mining | 0.22 | ||||||
| Oil, gas & consumable fuels | 0.48 | ||||||
| Pharmaceuticals | 0.17 | ||||||
| Road & rail | 0.01 | ||||||
| Specialty retail | 0.08 | ||||||
| Tobacco | 0.09 | ||||||
| Wireless telecommunication services | 0.21 | ||||||
| Total corporate bonds | 5.58 | % | |||||
| Asset-backed securities | 0.70 | ||||||
| Collateralized debt obligations | 1.06 | ||||||
| Commercial mortgage-backed securities | 1.03 | ||||||
| Mortgage & agency debt securities | 0.91 | ||||||
| Municipal bonds | 0.52 | ||||||
| US government obligation | 0.42 | ||||||
| Non-US government obligation | 0.05 | ||||||
| Total bonds | 10.27 | % | |||||
| Investment companies | |||||||
|
UBS Opportunistic Emerging Markets Debt Relationship Fund |
2.07 | ||||||
| UBS U.S. Equity Alpha Relationship Fund | 10.45 | ||||||
| Total investment companies | 12.52 | % | |||||
| Short-term investment | 12.33 | ||||||
| Options purchased | 3.70 | ||||||
| Investment of cash collateral from securities loaned | 2.18 | ||||||
| Total investments before investments sold short | 115.79 | % | |||||
9
UBS Dynamic Alpha Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Investments sold short | |||||||
| Common stocks | |||||||
| Aerospace & defense | (0.76 | )% | |||||
| Air freight & logistics | (1.11 | ) | |||||
| Airlines | (0.19 | ) | |||||
| Beverages | (0.47 | ) | |||||
| Capital markets | (0.11 | ) | |||||
| Chemicals | (0.33 | ) | |||||
| Commercial banks | (0.38 | ) | |||||
| Communications equipment | (0.07 | ) | |||||
| Computers & peripherals | (1.16 | ) | |||||
| Diversified telecommunication services | (0.11 | ) | |||||
| Electric utilities | (0.40 | ) | |||||
| Electrical equipment | (0.42 | ) | |||||
| Electronic equipment, instruments & components | (0.29 | ) | |||||
| Energy equipment & services | (0.30 | ) | |||||
| Food & staples retailing | (0.34 | ) | |||||
| Food products | (1.09 | ) | |||||
| Health care equipment & supplies | (0.41 | ) | |||||
| Health care providers & services | (0.78 | ) | |||||
| Hotels, restaurants & leisure | (0.53 | ) | |||||
| Household products | (0.42 | ) | |||||
| Independent power producers & energy traders | (0.13 | ) | |||||
| Insurance | (0.26 | ) | |||||
| Internet & catalog retail | (0.39 | ) | |||||
| Internet software & services | (0.06 | ) | |||||
| IT services | (0.53 | ) | |||||
| Life sciences tools & services | (0.80 | ) | |||||
| Machinery | (0.96 | )% | |||||
| Media | (0.50 | ) | |||||
| Metals & mining | (0.14 | ) | |||||
| Multiline retail | (0.62 | ) | |||||
| Multi-utilities | (1.35 | ) | |||||
| Oil, gas & consumable fuels | (1.49 | ) | |||||
| Pharmaceuticals | (1.32 | ) | |||||
| Road & rail | (0.33 | ) | |||||
| Semiconductors & semiconductor equipment | (1.31 | ) | |||||
| Software | (0.80 | ) | |||||
| Specialty retail | (0.66 | ) | |||||
| Thrifts & mortgage finance | (0.07 | ) | |||||
| Trading companies & distributors | (0.68 | ) | |||||
| Water utilities | (0.41 | ) | |||||
| Total investments sold short | (22.48 | )% | |||||
| Total investments, net of investments sold short | 93.31 | ||||||
| Cash and other assets, less liabilities | 6.69 | ||||||
| Net assets | 100.00 | % | |||||
1 Figures represent the industry breakdown of direct investments of UBS Dynamic Alpha Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification and derivatives exposure was included.
10
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 73.97% | |||||||||||
| Argentina: 0.19% | |||||||||||
| MercadoLibre, Inc.1 | 8,900 | $ | 706,126 | ||||||||
| Australia: 0.44% | |||||||||||
| Alumina Ltd.1 | 185,935 | 425,690 | |||||||||
| BHP Billiton Ltd. | 6,272 | 296,435 | |||||||||
| Incitec Pivot Ltd. | 89,630 | 373,515 | |||||||||
| Mount Gibson Iron Ltd.* | 87,373 | 173,484 | |||||||||
| National Australia Bank Ltd. | 12,927 | 356,660 | |||||||||
| Total Australia common stocks | 1,625,784 | ||||||||||
| Austria: 0.66% | |||||||||||
|
Bwin.Party Digital Entertainment PLC* |
48,163 | 115,591 | |||||||||
| Erste Group Bank AG | 23,871 | 1,250,350 | |||||||||
| Wiener Staedtische Versicherung AG | 19,901 | 1,093,886 | |||||||||
| Total Austria common stocks | 2,459,827 | ||||||||||
| Belgium: 0.22% | |||||||||||
| Anheuser-Busch InBev NV | 3,796 | 220,111 | |||||||||
| Nyrstar NV* | 40,495 | 586,075 | |||||||||
| Total Belgium common stocks | 806,186 | ||||||||||
| Brazil: 0.11% | |||||||||||
| Cia Hering | 18,500 | 425,560 | |||||||||
| Canada: 0.77% | |||||||||||
| Bombardier, Inc., Class B | 78,100 | 562,803 | |||||||||
| Imax Corp.* | 7,000 | 227,010 | |||||||||
| Potash Corp. of Saskatchewan, Inc. | 16,100 | 917,539 | |||||||||
| Suncor Energy, Inc. | 9,100 | 356,659 | |||||||||
| Teck Resources Ltd., Class B | 7,600 | 386,284 | |||||||||
| Trican Well Service Ltd.1 | 17,400 | 408,818 | |||||||||
| Total Canada common stocks | 2,859,113 | ||||||||||
| China: 1.71% | |||||||||||
| Baidu, Inc. ADR* | 18,900 | 2,648,457 | |||||||||
| Ctrip.com International Ltd. ADR* | 7,700 | 331,716 | |||||||||
|
Dongfang Electric Corp. Ltd., H Shares |
103,400 | 384,977 | |||||||||
| Focus Media Holding Ltd. ADR*1 | 29,000 | 901,900 | |||||||||
|
Intime Department Store Group Co., Ltd. |
119,000 | 202,389 | |||||||||
|
Melco Crown Entertainment Ltd. ADR*1 |
26,200 | 334,574 | |||||||||
| Sina Corp.*1 | 10,700 | 1,113,870 | |||||||||
| Xinyi Glass Holdings Ltd. | 250,000 | 249,176 | |||||||||
| Youku.com, Inc. ADR*1 | 6,400 | 219,840 | |||||||||
| Total China common stocks | 6,386,899 | ||||||||||
| Shares | Value | ||||||||||
| Denmark: 0.28% | |||||||||||
| Jyske Bank A/S* | 12,085 | $ | 477,491 | ||||||||
| Novo Nordisk A/S, Class B | 4,580 | 574,209 | |||||||||
| Total Denmark common stocks | 1,051,700 | ||||||||||
| Finland: 0.27% | |||||||||||
| Sampo Oyj, Class A | 19,353 | 624,859 | |||||||||
| YIT Oyj | 14,729 | 368,238 | |||||||||
| Total Finland common stocks | 993,097 | ||||||||||
| France: 1.33% | |||||||||||
| Alstom SA1 | 14,914 | 918,506 | |||||||||
| BNP Paribas | 6,541 | 504,478 | |||||||||
| Credit Agricole SA1 | 58,967 | 886,848 | |||||||||
|
LVMH Moet Hennessy Louis Vuitton SA |
3,194 | 574,848 | |||||||||
| Sanofi-Aventis SA | 5,068 | 407,336 | |||||||||
| Schneider Electric SA | 2,289 | 382,428 | |||||||||
| Societe Generale1 | 14,675 | 869,810 | |||||||||
| Valeo SA1 | 6,012 | 410,487 | |||||||||
| Total France common stocks | 4,954,741 | ||||||||||
| Germany: 3.02% | |||||||||||
| Aareal Bank AG* | 11,014 | 376,986 | |||||||||
| Aixtron SE NA1 | 9,132 | 311,664 | |||||||||
| Allianz SE | 6,783 | 947,702 | |||||||||
| Bayer AG | 19,118 | 1,537,012 | |||||||||
| Dialog Semiconductor PLC* | 14,950 | 271,707 | |||||||||
| E.ON AG | 48,998 | 1,390,954 | |||||||||
|
Fresenius Medical Care AG & Co. KGaA |
16,600 | 1,241,112 | |||||||||
| GEA Group AG | 12,730 | 455,211 | |||||||||
| Kabel Deutschland Holding AG* | 7,851 | 482,716 | |||||||||
| Lanxess AG | 4,454 | 365,150 | |||||||||
| Linde AG | 7,118 | 1,247,974 | |||||||||
| SAP AG | 31,595 | 1,910,933 | |||||||||
| Sky Deutschland AG* | 40,946 | 221,160 | |||||||||
| ThyssenKrupp AG | 9,323 | 483,633 | |||||||||
| Total Germany common stocks | 11,243,914 | ||||||||||
| Greece: 0.36% | |||||||||||
|
Hellenic Telecommunications Organization SA |
143,168 | 1,342,119 | |||||||||
| Guernsey: 0.01% | |||||||||||
| Resolution Ltd. | 8,270 | 39,024 | |||||||||
| Hong Kong: 0.19% | |||||||||||
|
Hong Kong Exchanges & Clearing Ltd.1 |
19,900 | 418,946 | |||||||||
| Shangri-La Asia Ltd. | 112,000 | 275,837 | |||||||||
| Total Hong Kong common stocks | 694,783 | ||||||||||
11
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| Ireland: 0.35% | |||||||||||
| Covidien PLC2 | 14,200 | $ | 755,866 | ||||||||
| CRH PLC | 24,866 | 550,640 | |||||||||
| Total Ireland common stocks | 1,306,506 | ||||||||||
| Italy: 1.61% | |||||||||||
| Azimut Holding SpA | 68,495 | 638,759 | |||||||||
| DiaSorin SpA | 3,877 | 186,103 | |||||||||
| ENI SpA | 57,163 | 1,355,134 | |||||||||
| Finmeccanica SpA | 119,048 | 1,440,726 | |||||||||
| Saipem SpA | 13,556 | 699,877 | |||||||||
| Tod's SpA | 2,907 | 388,688 | |||||||||
| UniCredit SpA | 616,983 | 1,305,000 | |||||||||
| Total Italy common stocks | 6,014,287 | ||||||||||
| Japan: 1.96% | |||||||||||
| Asahi Glass Co., Ltd.1 | 39,000 | 455,386 | |||||||||
| Canon, Inc.1 | 5,300 | 252,740 | |||||||||
| Denki Kagaku Kogyo KK | 102,000 | 491,336 | |||||||||
| Disco Corp. | 6,500 | 412,007 | |||||||||
| FANUC Corp. | 5,000 | 833,758 | |||||||||
| Ibiden Co., Ltd. | 9,600 | 300,253 | |||||||||
| Isuzu Motors Ltd. | 95,000 | 450,189 | |||||||||
| Komatsu Ltd. | 20,000 | 622,265 | |||||||||
| Makino Milling Machine Co., Ltd.1 | 36,000 | 335,093 | |||||||||
| Mitsubishi Corp. | 20,000 | 501,099 | |||||||||
| Mitsubishi UFJ Financial Group, Inc. | 47,200 | 229,783 | |||||||||
| Nippon Sheet Glass Co., Ltd. | 81,000 | 251,477 | |||||||||
| Nissan Motor Co., Ltd.1 | 46,800 | 491,272 | |||||||||
| ORIX Corp. | 4,360 | 424,140 | |||||||||
| OSAKA Titanium Technologies Co.1 | 6,900 | 506,662 | |||||||||
| THK Co., Ltd. | 16,800 | 427,651 | |||||||||
| Toshiba Corp. | 57,000 | 301,670 | |||||||||
| Total Japan common stocks | 7,286,781 | ||||||||||
| Luxembourg: 0.33% | |||||||||||
| ArcelorMittal | 35,445 | 1,233,389 | |||||||||
| Netherlands: 2.88% | |||||||||||
| ASM International NV | 6,625 | 261,451 | |||||||||
| ASML Holding NV | 27,478 | 1,012,359 | |||||||||
| Gemalto NV | 3,996 | 191,057 | |||||||||
| Heineken NV | 15,749 | 947,255 | |||||||||
| Hunter Douglas NV | 4,477 | 219,184 | |||||||||
| ING Groep NV CVA* | 128,709 | 1,587,664 | |||||||||
| Koninklijke DSM NV | 12,105 | 785,645 | |||||||||
| Ordina NV* | 23,453 | 113,141 | |||||||||
| Reed Elsevier NV | 77,816 | 1,045,033 | |||||||||
| Royal Dutch Shell PLC, Class A | 105,556 | 3,761,212 | |||||||||
| TNT Express NV* | 42,441 | 440,176 | |||||||||
| TNT NV | 42,441 | 360,113 | |||||||||
| Total Netherlands common stocks | 10,724,290 | ||||||||||
| Shares | Value | ||||||||||
| Norway: 1.13% | |||||||||||
| Petroleum Geo-Services ASA* | 70,771 | $ | 1,011,470 | ||||||||
| Storebrand ASA | 51,547 | 439,143 | |||||||||
| Subsea 7 SA* | 16,819 | 430,234 | |||||||||
| Telenor ASA | 141,194 | 2,312,281 | |||||||||
| Total Norway common stocks | 4,193,128 | ||||||||||
| Portugal: 0.32% | |||||||||||
| Portugal Telecom, SGPS, SA | 121,647 | 1,204,641 | |||||||||
| Russia: 0.19% | |||||||||||
| NovaTek OAO GDR3 | 3,395 | 468,883 | |||||||||
| VTB Bank OJSC GDR3 | 38,437 | 236,755 | |||||||||
| Total Russia common stocks | 705,638 | ||||||||||
| Singapore: 0.29% | |||||||||||
| Biosensors International Group Ltd.* | 329,000 | 345,538 | |||||||||
| Golden Agri-Resources Ltd. | 614,000 | 341,226 | |||||||||
| Keppel Corp. Ltd. | 42,900 | 388,171 | |||||||||
| Total Singapore common stocks | 1,074,935 | ||||||||||
| South Korea: 0.32% | |||||||||||
| Hyundai Mobis | 3,171 | 1,189,976 | |||||||||
| Spain: 1.63% | |||||||||||
| Acciona SA | 7,405 | 785,981 | |||||||||
| Banco Santander SA | 185,367 | 2,138,849 | |||||||||
| Enagas SA | 47,689 | 1,156,407 | |||||||||
| Inditex SA | 5,004 | 456,949 | |||||||||
| Repsol YPF SA1 | 38,547 | 1,338,306 | |||||||||
| Viscofan SA | 4,502 | 179,363 | |||||||||
| Total Spain common stocks | 6,055,855 | ||||||||||
| Sweden: 1.45% | |||||||||||
| Assa Abloy AB, Class B | 33,717 | 906,212 | |||||||||
| JM AB, NPV | 11,291 | 266,231 | |||||||||
| Nordea Bank AB | 168,766 | 1,813,498 | |||||||||
|
Skandinaviska Enskilda Banken AB, Class A |
43,538 | 355,889 | |||||||||
| Swedish Match AB | 25,968 | 870,801 | |||||||||
|
Telefonaktiebolaget LM Ericsson, Class B |
50,537 | 726,851 | |||||||||
| Volvo AB, Class B | 26,514 | 463,227 | |||||||||
| Total Sweden common stocks | 5,402,709 | ||||||||||
| Switzerland: 2.50% | |||||||||||
| ABB Ltd.* | 58,957 | 1,528,834 | |||||||||
|
Cie Financiere Richemont SA, Class A |
6,172 | 404,160 | |||||||||
| GAM Holding AG* | 24,131 | 395,957 | |||||||||
| Givaudan SA* | 900 | 952,192 | |||||||||
| Meyer Burger Technology AG*1 | 3,937 | 173,904 | |||||||||
12
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| Switzerland—(Concluded) | |||||||||||
| Nestle SA | 17,593 | $ | 1,093,392 | ||||||||
| Nobel Biocare Holding AG* | 78,843 | 1,606,807 | |||||||||
| Novartis AG | 7,819 | 478,972 | |||||||||
| Roche Holding AG | 1,031 | 182,058 | |||||||||
| Roche Holding AG (Non-voting) | 10,441 | 1,746,769 | |||||||||
| STMicroelectronics NV | 27,010 | 269,190 | |||||||||
| Swatch Group AG | 5,443 | 488,814 | |||||||||
| Total Switzerland common stocks | 9,321,049 | ||||||||||
| United Kingdom: 10.25% | |||||||||||
| Aberdeen Asset Management PLC | 362,848 | 1,298,447 | |||||||||
| Afren PLC* | 110,443 | 279,906 | |||||||||
| Aggreko PLC | 27,655 | 856,236 | |||||||||
| Anglo American PLC | 42,153 | 2,089,005 | |||||||||
| BAE Systems PLC | 236,060 | 1,206,751 | |||||||||
| Barclays PLC | 468,096 | 1,926,780 | |||||||||
| BG Group PLC | 85,297 | 1,935,861 | |||||||||
| BP PLC | 197,661 | 1,456,365 | |||||||||
| Croda International PLC | 6,049 | 183,201 | |||||||||
| Diageo PLC | 61,225 | 1,250,956 | |||||||||
| Ensco PLC ADR1,2 | 19,200 | 1,023,360 | |||||||||
| Firstgroup PLC | 75,331 | 412,264 | |||||||||
| GlaxoSmithKline PLC | 64,381 | 1,378,439 | |||||||||
| Halma PLC | 56,242 | 373,988 | |||||||||
| Hiscox Ltd. | 30,089 | 202,301 | |||||||||
| HSBC Holdings PLC | 56,670 | 562,196 | |||||||||
| Imperial Tobacco Group PLC | 48,201 | 1,602,602 | |||||||||
| Jardine Lloyd Thompson Group PLC | 33,324 | 364,239 | |||||||||
| Kingfisher PLC | 88,427 | 379,235 | |||||||||
| Pearson PLC | 38,741 | 733,852 | |||||||||
| Prudential PLC | 157,334 | 1,818,235 | |||||||||
| Reckitt Benckiser Group PLC | 24,290 | 1,341,130 | |||||||||
| Rio Tinto PLC | 6,872 | 496,222 | |||||||||
| Sage Group PLC | 689,046 | 3,195,050 | |||||||||
| Shire PLC | 12,921 | 403,364 | |||||||||
| Smiths Group PLC | 19,733 | 380,382 | |||||||||
| Sportingbet PLC | 461,659 | 407,264 | |||||||||
| Stagecoach Group PLC | 223,491 | 915,785 | |||||||||
| Standard Chartered PLC | 21,987 | 577,766 | |||||||||
| Tesco PLC | 240,889 | 1,555,777 | |||||||||
| Tullow Oil PLC | 61,316 | 1,220,362 | |||||||||
| Unilever PLC | 51,379 | 1,658,040 | |||||||||
| Vodafone Group PLC | 465,701 | 1,237,661 | |||||||||
| Weir Group PLC | 9,665 | 329,961 | |||||||||
| William Hill PLC | 123,407 | 452,844 | |||||||||
| Wolseley PLC | 23,509 | 766,740 | |||||||||
| Xstrata PLC | 86,803 | 1,914,334 | |||||||||
|
Total United Kingdom common stocks |
38,186,901 | ||||||||||
| Shares | Value | ||||||||||
| United States: 39.20% | |||||||||||
| Acorda Therapeutics, Inc.*2 | 31,400 | $ | 1,014,534 | ||||||||
| Adobe Systems, Inc.*2 | 45,400 | 1,427,830 | |||||||||
| Aflac, Inc.2 | 20,400 | 952,272 | |||||||||
| Agilent Technologies, Inc.*2 | 39,300 | 2,008,623 | |||||||||
| Alexion Pharmaceuticals, Inc.*2 | 37,600 | 1,768,328 | |||||||||
| Allergan, Inc.2 | 35,900 | 2,988,675 | |||||||||
| Amazon.com, Inc.*2 | 20,800 | 4,253,392 | |||||||||
| American Electric Power Co., Inc.2 | 52,800 | 1,989,504 | |||||||||
| Amylin Pharmaceuticals, Inc.*2 | 37,000 | 494,320 | |||||||||
| Anadarko Petroleum Corp. | 11,100 | 852,036 | |||||||||
| Apollo Group, Inc., Class A*2 | 12,300 | 537,264 | |||||||||
| Apple, Inc.*2 | 17,700 | 5,941,359 | |||||||||
| Avon Products, Inc.2 | 72,500 | 2,030,000 | |||||||||
| Baxter International, Inc.2 | 9,100 | 543,179 | |||||||||
| Becton Dickinson & Co.2 | 5,300 | 456,701 | |||||||||
| Bio-Rad Laboratories, Inc., Class A*2 | 5,200 | 620,672 | |||||||||
| Boeing Co.2 | 3,500 | 258,755 | |||||||||
| Boston Scientific Corp.*2 | 33,100 | 228,721 | |||||||||
| Broadcom Corp., Class A*2 | 53,400 | 1,796,376 | |||||||||
| C.H. Robinson Worldwide, Inc.2 | 18,800 | 1,482,192 | |||||||||
| Carnival Corp.2 | 17,600 | 662,288 | |||||||||
| Celanese Corp., Series A2 | 34,000 | 1,812,540 | |||||||||
| Cimarex Energy Co.2 | 15,200 | 1,366,784 | |||||||||
| Cisco Systems, Inc.2 | 46,200 | 721,182 | |||||||||
| Citigroup, Inc.2 | 6,920 | 288,149 | |||||||||
| CME Group, Inc.2 | 5,700 | 1,662,063 | |||||||||
| Coach, Inc.2 | 13,400 | 856,662 | |||||||||
| Colgate-Palmolive Co.2 | 12,400 | 1,083,884 | |||||||||
| Comcast Corp., Class A2 | 19,300 | 489,062 | |||||||||
| Concho Resources, Inc.*2 | 13,400 | 1,230,790 | |||||||||
| CONSOL Energy, Inc. | 19,900 | 964,752 | |||||||||
| Crown Castle International Corp.*2 | 48,200 | 1,966,078 | |||||||||
| CVS Caremark Corp. | 38,300 | 1,439,314 | |||||||||
| Danaher Corp.2 | 41,700 | 2,209,683 | |||||||||
|
Discovery Communications, Inc., Class A* |
27,400 | 1,122,304 | |||||||||
| Dolby Laboratories, Inc., Class A*2 | 13,500 | 573,210 | |||||||||
| Dover Corp.2 | 27,800 | 1,884,840 | |||||||||
| Edison International2 | 46,500 | 1,801,875 | |||||||||
| EMC Corp.*2 | 99,500 | 2,741,225 | |||||||||
| Emdeon, Inc., Class A* | 19,700 | 258,464 | |||||||||
| EOG Resources, Inc.2 | 7,800 | 815,490 | |||||||||
| Estee Lauder Cos., Inc., Class A2 | 13,200 | 1,388,508 | |||||||||
| Exelon Corp.2 | 16,100 | 689,724 | |||||||||
| Express Scripts, Inc.*2 | 32,400 | 1,748,952 | |||||||||
| FedEx Corp.2 | 28,100 | 2,665,285 | |||||||||
|
Fidelity National Information Services, Inc.2 |
39,400 | 1,213,126 | |||||||||
| FirstEnergy Corp.2 | 43,300 | 1,911,695 | |||||||||
| FMC Corp. | 8,400 | 722,568 | |||||||||
| FMC Technologies, Inc.* | 32,700 | 1,464,633 | |||||||||
13
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
| Fortune Brands, Inc.2 | 13,500 | $ | 860,895 | ||||||||
|
Freeport-McMoRan Copper & Gold, Inc. |
20,000 | 1,058,000 | |||||||||
| GameStop Corp., Class A*2 | 59,400 | 1,584,198 | |||||||||
| General Dynamics Corp.2 | 28,100 | 2,094,012 | |||||||||
| General Motors Co.*2 | 29,500 | 895,620 | |||||||||
| Goldman Sachs Group, Inc. | 2,700 | 359,343 | |||||||||
| Google, Inc., Class A*2 | 4,500 | 2,278,710 | |||||||||
| Hertz Global Holdings, Inc.*2 | 31,700 | 503,396 | |||||||||
| Hess Corp.2 | 5,100 | 381,276 | |||||||||
| Hewlett-Packard Co.2 | 20,100 | 731,640 | |||||||||
| Illinois Tool Works, Inc.2 | 51,900 | 2,931,831 | |||||||||
| Interpublic Group of Cos., Inc.2 | 63,200 | 790,000 | |||||||||
| Intersil Corp., Class A2 | 134,700 | 1,730,895 | |||||||||
| JB Hunt Transport Services, Inc.2 | 14,800 | 696,932 | |||||||||
| Johnson & Johnson2 | 10,100 | 671,852 | |||||||||
| JPMorgan Chase & Co.2 | 5,900 | 241,546 | |||||||||
| Kellogg Co.2 | 32,400 | 1,792,368 | |||||||||
| Kohl's Corp.2 | 11,100 | 555,111 | |||||||||
| Kraft Foods, Inc., Class A2 | 23,500 | 827,905 | |||||||||
| Kroger Co.2 | 64,400 | 1,597,120 | |||||||||
| Las Vegas Sands Corp.*2 | 46,900 | 1,979,649 | |||||||||
| Lowe's Cos., Inc.2 | 34,800 | 811,188 | |||||||||
| Marvell Technology Group Ltd.*2 | 48,900 | 722,008 | |||||||||
| McDonald's Corp.2 | 25,800 | 2,175,456 | |||||||||
| McKesson Corp.2 | 8,900 | 744,485 | |||||||||
| Medtronic, Inc.2 | 11,900 | 458,507 | |||||||||
| Merck & Co., Inc.2 | 18,000 | 635,220 | |||||||||
| Microsoft Corp.2 | 43,100 | 1,120,600 | |||||||||
| Molson Coors Brewing Co., Class B2 | 13,000 | 581,620 | |||||||||
| Netflix, Inc.* | 3,700 | 971,953 | |||||||||
| NextEra Energy, Inc.2 | 35,600 | 2,045,576 | |||||||||
| NIKE, Inc., Class B2 | 15,800 | 1,421,684 | |||||||||
| Noble Corp.2 | 24,100 | 949,781 | |||||||||
| Norfolk Southern Corp.2 | 16,600 | 1,243,838 | |||||||||
| Omnicom Group, Inc.2 | 11,100 | 534,576 | |||||||||
| Oracle Corp.2 | 59,500 | 1,958,145 | |||||||||
| PACCAR, Inc.2 | 18,700 | 955,383 | |||||||||
| Pall Corp.2 | 9,700 | 545,431 | |||||||||
| Parker Hannifin Corp. | 11,100 | 996,114 | |||||||||
| PepsiCo, Inc.2 | 30,200 | 2,126,986 | |||||||||
| Pharmasset, Inc.*2 | 12,200 | 1,368,840 | |||||||||
| Polo Ralph Lauren Corp. | 10,200 | 1,352,622 | |||||||||
| Praxair, Inc. | 8,500 | 921,315 | |||||||||
| Precision Castparts Corp.2 | 9,700 | 1,597,105 | |||||||||
| Priceline.com, Inc.* | 3,500 | 1,791,755 | |||||||||
| Procter & Gamble Co. | 100 | 6,357 | |||||||||
| QLogic Corp.*2 | 31,000 | 493,520 | |||||||||
| QUALCOMM, Inc.2 | 48,900 | 2,777,031 | |||||||||
| Red Hat, Inc.* | 15,500 | 711,450 | |||||||||
| ResMed, Inc.*1 | 21,700 | 671,615 | |||||||||
| Shares | Value | ||||||||||
| Riverbed Technology, Inc.* | 30,300 | $ | 1,199,577 | ||||||||
| Roper Industries, Inc. | 10,900 | 907,970 | |||||||||
| Salesforce.com, Inc.* | 7,300 | 1,087,554 | |||||||||
| Sherwin-Williams Co. | 15,300 | 1,283,211 | |||||||||
| Southwest Airlines Co.2 | 116,700 | 1,332,714 | |||||||||
| Sunoco, Inc.2 | 14,400 | 600,624 | |||||||||
| Symantec Corp.*2 | 29,300 | 577,796 | |||||||||
| Teradata Corp.*2 | 27,200 | 1,637,440 | |||||||||
| Texas Instruments, Inc.2 | 22,300 | 732,109 | |||||||||
| Ultra Petroleum Corp.*2 | 60,700 | 2,780,060 | |||||||||
| Union Pacific Corp. | 7,800 | 814,320 | |||||||||
| UnitedHealth Group, Inc.2 | 19,100 | 985,178 | |||||||||
| US Bancorp2 | 15,300 | 390,303 | |||||||||
| Viacom, Inc., Class B2 | 21,400 | 1,091,400 | |||||||||
| Visa, Inc., Class A2 | 20,400 | 1,718,904 | |||||||||
| Watson Pharmaceuticals, Inc.* | 20,600 | 1,415,838 | |||||||||
| Wells Fargo & Co.2 | 27,100 | 760,426 | |||||||||
| Total United States common stocks | 145,967,747 | ||||||||||
|
Total common stocks (cost $233,764,627) |
275,456,705 | ||||||||||
| Preferred stocks: 0.82% | |||||||||||
| Germany: 0.78% | |||||||||||
|
Henkel AG & Co KGaA, Preference shares |
20,371 | 1,412,328 | |||||||||
| Volkswagen AG, Preference shares | 7,145 | 1,473,121 | |||||||||
| Total Germany preferred stocks | 2,885,449 | ||||||||||
| United States: 0.04% | |||||||||||
| GMAC Capital Trust I* | 6,000 | 153,600 | |||||||||
|
Total preferred stocks (cost $2,065,338) |
3,039,049 | ||||||||||
|
Face amount |
|||||||||||
| Bonds: 10.27% | |||||||||||
| Corporate bonds: 5.58% | |||||||||||
| Australia: 0.15% | |||||||||||
|
Leighton Finance Ltd., 9.500%, due 07/28/14 |
AUD | 250,000 | 277,172 | ||||||||
|
Wesfarmers Ltd., 8.250%, due 09/11/14 |
250,000 | 281,945 | |||||||||
| Total Australia corporate bonds | 559,117 | ||||||||||
| Brazil: 0.12% | |||||||||||
|
Banco do Brasil SA, 5.875%, due 01/26/224 |
$ | 250,000 | 245,000 | ||||||||
|
Petrobras International Finance Co., 5.375%, due 01/27/21 |
200,000 | 205,362 | |||||||||
| Total Brazil corporate bonds | 450,362 | ||||||||||
14
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Continued) | |||||||||||
| Canada: 0.27% | |||||||||||
|
ING Bank of Canada, 4.300%, due 12/05/165 |
CAD | 200,000 | $ | 195,967 | |||||||
|
Kinder Morgan Finance Co. ULC, 5.700%, due 01/05/16 |
587,500 | 611,734 | |||||||||
|
Rogers Communications, Inc., 5.340%, due 03/22/21 |
200,000 | 209,271 | |||||||||
| Total Canada corporate bonds | 1,016,972 | ||||||||||
| France: 0.07% | |||||||||||
|
Credit Agricole SA, 6.637%, due 05/31/174,5,6 |
$ | 300,000 | 255,750 | ||||||||
| Germany: 0.15% | |||||||||||
|
HeidelbergCement AG, 8.000%, due 01/31/17 |
EUR | 350,000 | 553,232 | ||||||||
| Greece: 0.08% | |||||||||||
|
OTE PLC, 3.750%, due 11/11/11 |
200,000 | 288,065 | |||||||||
| Ireland: 0.47% | |||||||||||
|
Allied Irish Banks PLC, 1.355%, due 04/11/125 |
500,000 | 619,939 | |||||||||
| 1.546%, due 09/15/115 | 300,000 | 418,731 | |||||||||
|
Ardagh Packaging Finance PLC, 7.375%, due 10/15/173 |
150,000 | 218,610 | |||||||||
|
Governor & Co. of the Bank of Ireland, 2.750%, due 03/02/124 |
$ | 350,000 | 328,155 | ||||||||
| 4.000%, due 01/28/15 | EUR | 150,000 | 158,639 | ||||||||
| Total Ireland corporate bonds | 1,744,074 | ||||||||||
| Luxembourg: 0.08% | |||||||||||
|
ArcelorMittal, 5.500%, due 03/01/21 |
$ | 300,000 | 300,468 | ||||||||
| Mexico: 0.11% | |||||||||||
|
Petroleos Mexicanos, 6.500%, due 06/02/414 |
250,000 | 253,662 | |||||||||
|
Cemex Finance LLC, 9.500%, due 12/14/164 |
150,000 | 155,062 | |||||||||
| 408,724 | |||||||||||
| Portugal: 0.14% | |||||||||||
|
EDP Finance BV, 4.900%, due 10/01/194 |
600,000 | 514,033 | |||||||||
| Spain: 0.13% | |||||||||||
|
Santander US Debt SA Unipersonal, 3.724%, due 01/20/154 |
500,000 | 483,983 | |||||||||
|
Face amount |
Value | ||||||||||
| Sweden: 0.05% | |||||||||||
|
Nordea Bank AB, 4.875%, due 05/13/214 |
$ | 200,000 | $ | 192,074 | |||||||
| United Kingdom: 0.41% | |||||||||||
|
Barclays Bank PLC, 5.140%, due 10/14/20 |
275,000 | 260,814 | |||||||||
|
FCE Bank PLC, 7.125%, due 01/15/13 |
EUR | 250,000 | 375,226 | ||||||||
|
Lloyds TSB Bank PLC, 5.800%, due 01/13/204 |
$ | 600,000 | 600,869 | ||||||||
|
Virgin Media Finance PLC, 9.125%, due 08/15/16 |
275,000 | 289,437 | |||||||||
|
Total United Kingdom corporate bonds |
1,526,346 | ||||||||||
| United States: 3.35% | |||||||||||
|
Ally Financial, Inc., 3.453%, due 12/01/127 |
200,000 | 187,000 | |||||||||
| 6.625%, due 05/15/12 | 150,000 | 154,675 | |||||||||
|
Apria Healthcare Group, Inc., 11.250%, due 11/01/14 |
650,000 | 672,750 | |||||||||
|
Axcan Intermediate Holdings, Inc., 12.750%, due 03/01/16 |
600,000 | 650,250 | |||||||||
|
Chesapeake Energy Corp., 6.500%, due 08/15/17 |
250,000 | 264,375 | |||||||||
|
Citigroup, Inc., 4.750%, due 05/31/175 |
EUR | 900,000 | 1,201,047 | ||||||||
|
Discover Financial Services, 10.250%, due 07/15/19 |
$ | 300,000 | 387,645 | ||||||||
|
DISH DBS Corp., 6.625%, due 10/01/14 |
250,000 | 263,125 | |||||||||
|
FireKeepers Development Authority, 13.875%, due 05/01/154 |
300,000 | 346,500 | |||||||||
|
Ford Motor Credit Co. LLC, 5.000%, due 05/15/18 |
150,000 | 149,487 | |||||||||
|
Frontier Communications Corp., 8.250%, due 05/01/14 |
250,000 | 274,687 | |||||||||
|
Goldman Sachs Group, Inc., 4.100%, due 11/03/15 |
CAD | 200,000 | 205,607 | ||||||||
| 5.000%, due 05/03/18 | 300,000 | 309,307 | |||||||||
|
Hertz Corp., 8.875%, due 01/01/14 |
$ | 45,000 | 46,125 | ||||||||
|
International Lease Finance Corp., 8.625%, due 09/15/15 |
675,000 | 731,531 | |||||||||
|
JP Morgan Chase Capital XXVII, 7.000%, due 11/01/39 |
400,000 | 399,504 | |||||||||
|
Merrill Lynch & Co., Inc., 6.400%, due 08/28/17 |
700,000 | 764,106 | |||||||||
15
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
|
Momentive Performance Materials, Inc., 11.500%, due 12/01/16 |
$ | 250,000 | $ | 266,250 | |||||||
|
Morgan Stanley, 7.300%, due 05/13/19 |
600,000 | 680,416 | |||||||||
|
Pacific Life Insurance Co., 9.250%, due 06/15/394 |
500,000 | 651,605 | |||||||||
|
Petrohawk Energy Corp., 10.500%, due 08/01/14 |
550,000 | 618,750 | |||||||||
|
Plains Exploration & Production Co., 7.750%, due 06/15/15 |
450,000 | 466,313 | |||||||||
|
Regions Financial Corp., 5.750%, due 06/15/15 |
100,000 | 98,500 | |||||||||
|
Reynolds American, Inc., 6.750%, due 06/15/17 |
300,000 | 346,373 | |||||||||
|
Ryerson, Inc., 12.000%, due 11/01/15 |
500,000 | 531,250 | |||||||||
|
SLM Corp., 1.670%, due 11/15/115 |
EUR | 250,000 | 357,575 | ||||||||
|
Springleaf Finance Corp., 5.625%, due 08/17/111 |
$ | 300,000 | 298,820 | ||||||||
|
Wachovia Capital Trust III, 5.570%, due 08/01/115,6 |
600,000 | 549,000 | |||||||||
|
Yankee Acquisition Corp., 8.500%, due 02/15/151 |
300,000 | 309,000 | |||||||||
|
Yonkers Racing Corp., 11.375%, due 07/15/164 |
270,000 | 292,951 | |||||||||
|
Total United States corporate bonds |
12,474,524 | ||||||||||
|
Total corporate bonds (cost $19,939,947) |
20,767,724 | ||||||||||
| Asset-backed securities: 0.70% | |||||||||||
| Cayman Islands: 0.22% | |||||||||||
|
Commercial Industrial Finance Corp., Series 2007-1A, Class A1LB, 0.607%, due 05/10/214,5,8,9 |
1,000,000 | 806,900 | |||||||||
| United States: 0.48% | |||||||||||
|
Ameriquest Mortgage Securities, Inc., Series 2005-R6, Class A2, 0.386%, due 08/25/355 |
68,382 | 65,074 | |||||||||
|
First Franklin Mortgage Loan Asset Backed Certificates, Series 2006-FF15, Class A3, 0.236%, due 11/25/365 |
14,942 | 14,871 | |||||||||
|
Face amount |
Value | ||||||||||
|
Series 2005-FF10, Class A4, 0.506%, due 11/25/355 |
$ | 209,876 | $ | 173,354 | |||||||
|
Home Equity Asset Trust, Series 2006-3, Class 2A3, 0.366%, due 07/25/365 |
252,193 | 242,278 | |||||||||
|
Home Equity Mortgage Trust, Series 2006-6, Class 2A1, 0.286%, due 03/25/375 |
2,505,210 | 185,831 | |||||||||
|
Nomura Asset Acceptance Corp., Series 2006-S4, Class A1, 0.356%, due 08/25/365 |
879,340 | 286,095 | |||||||||
|
Popular ABS Mortgage Pass-Through Trust, Series 2006-E, Class A1, 0.276%, due 01/25/375 |
7,351 | 7,295 | |||||||||
|
Renaissance Home Equity Loan Trust, Series 2005-3, Class AF3, 4.814%, due 11/25/355 |
46,949 | 43,900 | |||||||||
|
Residential Asset Securities Corp., Series 2006-KS2, Class A3, 0.376%, due 03/25/365 |
266,758 | 254,143 | |||||||||
|
Series 2005-KS11, Class AI3, 0.386%, due 12/25/355 |
22,706 | 22,363 | |||||||||
|
SACO I Trust, Series 2006-3, Class A1, 0.546%, due 04/25/365 |
1,312,109 | 477,715 | |||||||||
|
Total United States asset-backed securities |
1,772,919 | ||||||||||
|
Total asset-backed securities (cost $5,150,371) |
2,579,819 | ||||||||||
| Collateralized debt obligations: 1.06% | |||||||||||
| Cayman Islands: 0.29% | |||||||||||
|
FM Leveraged Capital Fund II, due 11/20/204,5,8,9,10 |
5,300,000 | 1,060,000 | |||||||||
|
LNR CDO Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/434,8,9 |
8,000,000 | 313 | |||||||||
|
Total Cayman Islands collateralized debt obligations |
1,060,313 | ||||||||||
| Ireland: 0.19% | |||||||||||
|
Eurocredit CDO BV, Series VI-X, Class SUB, due 01/16/225,8,10 |
1,000,000 | 725,075 | |||||||||
| Luxembourg: 0.09% | |||||||||||
|
GSC European CDO SA, Series I-RA, Class SUB, due 12/15/224,5,8,9,10 |
EUR | 2,400,000 | 348,036 | ||||||||
16
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Collateralized debt obligations—(Concluded) | |||||||||||
| Netherlands: 0.49% | |||||||||||
|
Ares Euro CLO BV, Series 2007-1A, Class G1, 13.138%, due 05/15/244,5,8,9 |
EUR | 1,400,000 | $ | 893,292 | |||||||
|
Regent's Park CDO BV, Series 1A, Class F, 6.465%, due 01/26/234,5,8,9 |
1,000,000 | 928,096 | |||||||||
|
Total Netherlands collateralized debt obligations |
1,821,388 | ||||||||||
|
Total collateralized debt obligations (cost $21,057,350) |
3,954,812 | ||||||||||
| Commercial mortgage-backed securities: 1.03% | |||||||||||
| United States: 1.03% | |||||||||||
|
Banc of America Commercial Mortgage, Inc., Series 2007-2, Class AM, 5.833%, due 04/10/495 |
$ | 450,000 | 426,070 | ||||||||
|
Citigroup Commercial Mortgage Trust, Series 2007-C6, Class AM, 5.886%, due 12/10/495 |
650,000 | 634,663 | |||||||||
|
Commercial Mortgage Loan Trust, Series 2008-LS1, Class AM, 6.213%, due 12/10/495 |
150,000 | 144,619 | |||||||||
|
Commercial Mortgage Pass Through Certificates, Series 2006-C8, Class AM, 5.347%, due 12/10/46 |
300,000 | 285,822 | |||||||||
|
Greenwich Capital Commercial Funding Corp., Series 2007-GG9, Class AM, 5.475%, due 03/10/39 |
1,200,000 | 1,162,209 | |||||||||
|
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.992%, due 08/10/451,5 |
375,000 | 402,600 | |||||||||
|
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-CB17, Class AM, 5.464%, due 12/12/43 |
300,000 | 298,458 | |||||||||
|
Morgan Stanley Re-REMIC Trust, Series 2009-GG10, Class A4B, 5.992%, due 08/12/454,5 |
500,000 | 498,700 | |||||||||
|
Total commercial mortgage-backed securities (cost $2,818,021) |
3,853,141 | ||||||||||
|
Face amount |
Value | ||||||||||
| Mortgage & agency debt securities: 0.91% | |||||||||||
| United States: 0.91% | |||||||||||
|
American Home Mortgage Investment Trust, Series 2006-3, Class 4A, 0.376%, due 11/25/355 |
$ | 2,497,588 | $ | 523,944 | |||||||
|
Credit Suisse Mortgage Capital Certificates, Series 2006-4, Class CB1, 5.488%, due 05/25/365 |
463,571 | 22,614 | |||||||||
|
Federal Home Loan Bank of Chicago, 5.625%, due 06/13/16 |
1,300,000 | 1,444,299 | |||||||||
|
Federal National Mortgage Association, 6.112%, due 10/09/197,11 |
1,700,000 | 1,190,051 | |||||||||
|
GSR Mortgage Loan Trust, Series 2006-5F, Class B1, 6.017%, due 06/25/365 |
743,963 | 3,891 | |||||||||
|
Harborview Mortgage Loan Trust, Series 2005-3, Class 2A1A, 0.426%, due 06/19/355 |
243,529 | 159,659 | |||||||||
|
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11, 3.062%, due 04/25/355 |
1,656,907 | 46,264 | |||||||||
|
WaMu Mortgage Pass-Through Certificates, Series 2006-AR16, Class 3B1, 3.398%, due 12/25/365 |
676,420 | 6,196 | |||||||||
|
Wells Fargo Mortgage Backed Securities Trust, Series 2006-AR12, Class 2B1, 5.877%, due 09/25/365 |
124,317 | 1,243 | |||||||||
|
Series 2006-18, Class B1, 6.000%, due 12/26/36 |
757,539 | 8 | |||||||||
|
Total mortgage & agency debt securities (cost $5,234,153) |
3,398,169 | ||||||||||
| Municipal bonds: 0.52% | |||||||||||
|
State of California, GO, 7.300%, due 10/01/39 |
750,000 | 838,635 | |||||||||
|
State of Illinois, GO, Series 2010, 4.421%, due 01/01/15 |
165,000 | 170,189 | |||||||||
| 5.365%, due 03/01/17 | 600,000 | 619,524 | |||||||||
| 5.665%, due 03/01/18 | 300,000 | 310,161 | |||||||||
|
Total municipal bonds (cost $1,828,740) |
1,938,509 | ||||||||||
17
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| US government obligation: 0.42% | |||||||||||
|
US Treasury Bonds, PO, 4.002%, due 08/15/297,12 (cost $1,725,651) |
$ | 3,500,000 | $ | 1,550,111 | |||||||
| Non-US government obligation: 0.05% | |||||||||||
| Greece: 0.05% | |||||||||||
|
Hellenic Republic Government Bond, 4.300%, due 03/20/12 (cost $212,352) |
EUR | 160,000 | 198,589 | ||||||||
|
Total bonds (cost $57,966,585) |
38,240,874 | ||||||||||
| Shares | |||||||||||
| Investment companies: 12.52% | |||||||||||
|
UBS Opportunistic Emerging Markets Debt Relationship Fund*12 |
445,164 | 7,694,043 | |||||||||
|
UBS U.S. Equity Alpha Relationship Fund*13 |
3,267,632 | 38,923,054 | |||||||||
|
Total investment companies (cost $32,434,965) |
46,617,097 | ||||||||||
| Short-term investment: 12.33% | |||||||||||
| Investment company: 12.33% | |||||||||||
|
UBS Cash Management Prime Relationship Fund13 (cost $45,918,039) |
45,918,039 | 45,918,039 | |||||||||
|
Number of contracts |
|||||||||||
| Options purchased: 3.70% | |||||||||||
| Call options: 3.39% | |||||||||||
|
10 Year US Treasury Notes, strike @ USD 125.00, expires August 2011* |
217 | 91,547 | |||||||||
|
5 Year US Treasury Notes, strike @ USD 120.50, expires July 2011* |
50 | 5,469 | |||||||||
|
5 Year US Treasury Notes, strike @ USD 121.00, expires July 2011* |
50 | 2,344 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.63, expires September 2011* |
88 | 19,800 | |||||||||
|
Dow Jones EURO STOXX 50 Index, strike @ EUR 2,850.00, expires August 2011* |
4,730 | 5,398,198 | |||||||||
|
Dow Jones EURO STOXX 50 Index, strike @ EUR 2,850.00, expires September 2011* |
2,412 | 3,564,219 | |||||||||
|
Number of contracts |
Value | ||||||||||
|
S&P 500 Index, strike @ USD 1,310.00, expires September 2011* |
914 | $ | 3,564,600 | ||||||||
| Put options: 0.13% | |||||||||||
|
1 Year Euro-Dollar Mid Curve, strike @ USD 98.50, expires September 2011* |
254 | 11,113 | |||||||||
|
1 Year Euro-Dollar Mid Curve, strike @ USD 98.25, expires December 2011* |
127 | 24,606 | |||||||||
|
10 Year US Treasury Notes, strike @ USD 121.00, expires July 2011* |
50 | 20,312 | |||||||||
|
10 Year US Treasury Notes, strike @ USD 122.00, expires August 2011* |
179 | 226,547 | |||||||||
|
30 Year US Treasury Bond, strike @ USD 123.00, expires July 2011* |
50 | 62,500 | |||||||||
|
90 Day Euro-Dollar Futures, strike @ USD 99.50, expires August 2011* |
102 | 7,650 | |||||||||
|
90 Day Euro-Dollar Futures, strike @ USD 96.00, expires September 2011* |
528 | 3,300 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 98.50, expires September 2011* |
17 | 213 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 98.25, expires December 2011* |
127 | 3,175 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires December 2011* |
175 | 21,875 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.50, expires December 2011* |
175 | 38,281 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 99.50, expires March 2012* |
49 | 17,150 | |||||||||
|
90 Day Euro-Dollar Time Deposit, strike @ USD 98.00, expires December 2012* |
100 | 41,250 | |||||||||
|
Face amount covered by contracts |
|||||||||||
|
Foreign Exchange Option, Buy AUD/USD, strike @ USD 0.98, expires July 2011* |
AUD | 8,432,000 | 0 | ||||||||
18
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Notional Amount |
Value | ||||||||||
| Options purchased—(Concluded) | |||||||||||
| Options purchased on interest rate swaps: 0.18% | |||||||||||
|
Expiring 06/14/13. If option exercised the Fund pays quarterly floating 3 month LIBOR and receives semi-annually 3.410% terminating 06/18/18. European style. Counterparty: Deutsche Bank AG* |
$ | 3,630,000 | $ | 96,891 | |||||||
|
Expiring 06/14/13. If option exercised the Fund pays quarterly 3.410% and receives quarterly floating 3 month LIBOR terminating 06/18/18. European style. Counterparty: Deutsche Bank AG* |
3,630,000 | 108,139 | |||||||||
|
Expiring 06/14/21. If option exercised the Fund pays quarterly floating 3 month LIBOR and receives semi-annually 5.080% terminating 06/16/26. European style. Counterparty: Deutsche Bank AG* |
1,780,000 | 68,924 | |||||||||
|
Expiring 06/14/21. If option exercised the Fund pays quarterly 5.080% and receives quarterly floating 3 month LIBOR terminating 06/16/26. European style. Counterparty: Deutsche Bank AG* |
1,780,000 | 70,241 | |||||||||
|
Expiring 09/23/11. If option exercised the Fund pays quarterly 3.716% and receives quarterly floating 3 month LIBOR terminating 09/27/21. European style. Counterparty: Merrill Lynch International* |
10,625,000 | 63,596 | |||||||||
|
Expiring 11/02/15. If option exercised the Fund pays quarterly 6.000% and receives quarterly floating 3 month LIBOR terminating 11/04/25. European style. Counterparty: Deutsche Bank AG* |
7,050,000 | 253,571 | |||||||||
|
Total options purchased (cost $11,660,402) |
13,785,511 | ||||||||||
| Shares | Value | ||||||||||
| Investment of cash collateral from securities loaned: 2.18% | |||||||||||
|
UBS Private Money Market Fund LLC13 (cost $8,124,287) |
8,124,287 | $ | 8,124,287 | ||||||||
|
Total investments before investments sold short: 115.79% (cost $391,934,243) |
431,181,562 | ||||||||||
| Investments sold short: (22.48)% | |||||||||||
| Common stocks: (22.48)% | |||||||||||
| Ireland: (0.09)% | |||||||||||
| Warner Chilcott PLC, Class A | (14,400 | ) | (347,472 | ) | |||||||
| United Kingdom: (0.00)%14 | |||||||||||
| BP PLC | (23 | ) | (170 | ) | |||||||
| United States: (22.39)% | |||||||||||
| Advanced Micro Devices, Inc. | (95,500 | ) | (667,545 | ) | |||||||
| AGCO Corp. | (10,600 | ) | (523,216 | ) | |||||||
| Alliant Energy Corp. | (29,900 | ) | (1,215,734 | ) | |||||||
| Altera Corp. | (38,100 | ) | (1,765,935 | ) | |||||||
| Amedisys, Inc. | (9,400 | ) | (250,322 | ) | |||||||
| American Water Works Co., Inc. | (30,100 | ) | (886,445 | ) | |||||||
| AMR Corp. | (49,900 | ) | (269,460 | ) | |||||||
| Aqua America, Inc. | (29,200 | ) | (641,816 | ) | |||||||
| BB&T Corp. | (12,600 | ) | (338,184 | ) | |||||||
| Bio-Reference Labs, Inc. | (24,200 | ) | (505,780 | ) | |||||||
| BMC Software, Inc. | (41,300 | ) | (2,259,110 | ) | |||||||
| Bristol-Myers Squibb Co. | (19,100 | ) | (553,136 | ) | |||||||
| Brown-Forman Corp., Class B | (15,300 | ) | (1,142,757 | ) | |||||||
| C.H. Robinson Worldwide, Inc. | (26,600 | ) | (2,097,144 | ) | |||||||
| Calpine Corp. | (29,200 | ) | (470,996 | ) | |||||||
| Cardinal Health, Inc. | (14,000 | ) | (635,880 | ) | |||||||
| Caterpillar, Inc. | (15,200 | ) | (1,618,192 | ) | |||||||
| CenturyLink, Inc. | (10,500 | ) | (424,515 | ) | |||||||
|
Charles River Laboratories International, Inc. |
(20,700 | ) | (841,455 | ) | |||||||
| Chesapeake Energy Corp. | (33,500 | ) | (994,615 | ) | |||||||
| Chevron Corp. | (3,800 | ) | (390,792 | ) | |||||||
| Church & Dwight Co., Inc. | (29,000 | ) | (1,175,660 | ) | |||||||
| Clorox Co. | (5,300 | ) | (357,432 | ) | |||||||
|
Cognizant Technology Solutions Corp., Class A |
(7,400 | ) | (542,716 | ) | |||||||
| Compuware Corp. | (24,300 | ) | (237,168 | ) | |||||||
| ConocoPhillips | (9,300 | ) | (699,267 | ) | |||||||
| CONSOL Energy, Inc. | (9,700 | ) | (470,256 | ) | |||||||
| Consolidated Edison, Inc. | (31,600 | ) | (1,682,384 | ) | |||||||
| Constellation Brands, Inc., Class A | (28,800 | ) | (599,616 | ) | |||||||
| Corning, Inc. | (35,200 | ) | (638,880 | ) | |||||||
| Covance, Inc. | (7,700 | ) | (457,149 | ) | |||||||
| CSX Corp. | (47,100 | ) | (1,234,962 | ) | |||||||
19
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investments sold short—(Concluded) | |||||||||||
| Common stocks—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
| Dell, Inc. | (98,400 | ) | $ | (1,640,328 | ) | ||||||
| Diebold, Inc. | (12,000 | ) | (372,120 | ) | |||||||
| Dollar General Corp. | (18,600 | ) | (630,354 | ) | |||||||
| eBay, Inc. | (6,900 | ) | (222,663 | ) | |||||||
| EI Du Pont de Nemours & Co. | (22,500 | ) | (1,216,125 | ) | |||||||
| Eli Lilly & Co. | (59,200 | ) | (2,221,776 | ) | |||||||
| EMC Corp. | (41,200 | ) | (1,135,060 | ) | |||||||
|
Expeditors International Washington, Inc. |
(40,100 | ) | (2,052,719 | ) | |||||||
| Fastenal Co. | (16,200 | ) | (583,038 | ) | |||||||
| Fiserv, Inc. | (10,600 | ) | (663,878 | ) | |||||||
| Flextronics International Ltd. | (70,900 | ) | (455,178 | ) | |||||||
| Flowers Foods, Inc. | (40,500 | ) | (892,620 | ) | |||||||
| Forest Laboratories, Inc. | (31,600 | ) | (1,243,144 | ) | |||||||
| Franklin Resources, Inc. | (1,600 | ) | (210,064 | ) | |||||||
|
Freeport-McMoRan Copper & Gold, Inc. |
(9,800 | ) | (518,420 | ) | |||||||
| Goodrich Corp. | (21,100 | ) | (2,015,050 | ) | |||||||
| Halliburton Co. | (4,400 | ) | (224,400 | ) | |||||||
| Hershey Co. | (20,800 | ) | (1,182,480 | ) | |||||||
| Honeywell International, Inc. | (13,700 | ) | (816,383 | ) | |||||||
| Hormel Foods Corp. | (19,000 | ) | (566,390 | ) | |||||||
| Hospira, Inc. | (9,600 | ) | (543,936 | ) | |||||||
| Hudson City Bancorp, Inc. | (32,700 | ) | (267,813 | ) | |||||||
| Humana, Inc. | (11,500 | ) | (926,210 | ) | |||||||
| IDEXX Laboratories, Inc. | (4,700 | ) | (364,532 | ) | |||||||
| Integrys Energy Group, Inc. | (10,700 | ) | (554,688 | ) | |||||||
|
International Business Machines Corp. |
(4,300 | ) | (737,665 | ) | |||||||
| Intuitive Surgical, Inc. | (3,100 | ) | (1,153,541 | ) | |||||||
| JC Penney Co., Inc. | (8,100 | ) | (279,774 | ) | |||||||
| JetBlue Airways Corp. | (70,400 | ) | (429,440 | ) | |||||||
| Joy Global, Inc. | (8,100 | ) | (771,444 | ) | |||||||
|
Laboratory Corp. of America Holdings |
(5,900 | ) | (571,061 | ) | |||||||
| Lamar Advertising Co., Class A | (39,300 | ) | (1,075,641 | ) | |||||||
|
Longtop Financial Technologies Ltd. ADR8,15 |
(600 | ) | (3,975 | ) | |||||||
| LSI Corp. | (82,300 | ) | (585,976 | ) | |||||||
| M&T Bank Corp. | (2,400 | ) | (211,080 | ) | |||||||
| McDonald's Corp. | (11,700 | ) | (986,544 | ) | |||||||
| Micron Technology, Inc. | (41,000 | ) | (306,680 | ) | |||||||
| Navistar International Corp. | (12,100 | ) | (683,166 | ) | |||||||
| NetApp, Inc. | (22,900 | ) | (1,208,662 | ) | |||||||
| Netflix, Inc. | (5,600 | ) | (1,471,064 | ) | |||||||
| Nordstrom, Inc. | (7,600 | ) | (356,744 | ) | |||||||
| Northern Trust Corp. | (4,300 | ) | (197,628 | ) | |||||||
| Novellus Systems, Inc. | (32,600 | ) | (1,178,164 | ) | |||||||
| NSTAR | (34,300 | ) | (1,577,114 | ) | |||||||
| Shares | Value | ||||||||||
| Nvidia Corp. | (22,800 | ) | $ | (363,318 | ) | ||||||
| Occidental Petroleum Corp. | (8,400 | ) | (873,936 | ) | |||||||
| O'Reilly Automotive, Inc. | (19,000 | ) | (1,244,690 | ) | |||||||
| PerkinElmer, Inc. | (25,300 | ) | (680,823 | ) | |||||||
| Pioneer Natural Resources Co. | (10,000 | ) | (895,700 | ) | |||||||
| PNC Financial Services Group, Inc. | (14,100 | ) | (840,501 | ) | |||||||
| Procter & Gamble Co. | (100 | ) | (6,357 | ) | |||||||
| Quicksilver Resources, Inc. | (32,800 | ) | (484,128 | ) | |||||||
| Red Hat, Inc. | (10,800 | ) | (495,720 | ) | |||||||
| Rockwell Automation, Inc. | (18,000 | ) | (1,561,680 | ) | |||||||
| Sara Lee Corp. | (27,400 | ) | (520,326 | ) | |||||||
| Schlumberger Ltd. | (10,300 | ) | (889,920 | ) | |||||||
| Sears Holdings Corp. | (14,400 | ) | (1,028,736 | ) | |||||||
| Smithfield Foods, Inc. | (41,500 | ) | (907,605 | ) | |||||||
| Southern Co. | (36,600 | ) | (1,477,908 | ) | |||||||
| Spectra Energy Corp. | (26,600 | ) | (729,106 | ) | |||||||
|
Starwood Hotels & Resorts Worldwide, Inc. |
(17,800 | ) | (997,512 | ) | |||||||
| Tellabs, Inc. | (58,000 | ) | (267,380 | ) | |||||||
| Thermo Fisher Scientific, Inc. | (15,800 | ) | (1,017,362 | ) | |||||||
| Time Warner Cable, Inc. | (6,100 | ) | (476,044 | ) | |||||||
| TJX Cos., Inc. | (23,400 | ) | (1,229,202 | ) | |||||||
| Travelers Cos., Inc. | (16,400 | ) | (957,432 | ) | |||||||
| Walt Disney Co. | (7,500 | ) | (292,800 | ) | |||||||
| Whole Foods Market, Inc. | (20,200 | ) | (1,281,690 | ) | |||||||
| WW Grainger, Inc. | (12,700 | ) | (1,951,355 | ) | |||||||
|
Total United States common stocks |
(83,364,482 | ) | |||||||||
|
Total common stocks and investments sold short (proceeds $59,714,445) |
(83,712,124 | ) | |||||||||
|
Total investments, net of investments sold short: 93.31% |
347,469,438 | ||||||||||
|
Cash and other assets, less liabilities: 6.69% |
24,922,582 | ||||||||||
| Net assets: 100.00% | $ | 372,392,020 | |||||||||
20
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was $418,521,792; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 48,778,715 | |||||
| Gross unrealized depreciation | (36,118,945 | ) | |||||
| Net unrealized appreciation of investments | $ | 12,659,770 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 57.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
2 All or a portion of these securities have been delivered to cover open short positions.
3 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of these securities amounted to $924,248 or 0.25% of net assets.
4 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $8,854,980 or 2.38% of net assets.
5 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2011 and changes periodically.
6 Perpetual bond security. The maturity date reflects the next call date.
7 Rate shown reflects annualized yield at June 30, 2011 on zero coupon bond.
8 Security is illiquid. At June 30, 2011, the value of these securities amounted to $4,757,737 or 1.28% of net assets.
9 These securities, which represent 1.08% of net assets as of June 30, 2011, are considered restricted. (See restricted securities table below for more information.)
| Restricted securities |
Acquisition date |
Acquisition cost |
Acquisition cost as a percentage of net assets |
Value 06/30/11 |
Value as a percentage of net assets |
||||||||||||||||||
|
Ares Euro CLO BV, Series 2007-1A, Class G1, 13.138%, due 05/15/24 |
03/26/07 | $ | 1,863,680 | 0.50 | % | $ | 893,292 | 0.24 | % | ||||||||||||||
|
Commercial Industrial Finance Corp., Series 2007-1A, Class A1LB, 0.607%, due 05/10/21 |
09/30/09 | 692,500 | 0.19 | 806,900 | 0.22 | ||||||||||||||||||
|
FM Leveraged Capital Fund II, due 11/20/20 |
10/31/06 | 5,300,000 | 1.42 | 1,060,000 | 0.28 | ||||||||||||||||||
|
GSC European CDO SA, Series I-RA, Class SUB, due 12/15/22 |
12/01/06 | 3,200,760 | 0.86 | 348,036 | 0.09 | ||||||||||||||||||
|
LNR CDO Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/43 |
11/03/06 | 8,138,056 | 2.19 | 313 | 0.00 | a | |||||||||||||||||
|
Regent's Park CDO BV, Series 1A, Class F, 6.465%, due 01/26/23 |
09/25/06 | 2,551,500 | 0.68 | 928,096 | 0.25 | ||||||||||||||||||
| $ | 21,746,496 | 5.84 | % | $ | 4,036,637 | 1.08 | % | ||||||||||||||||
a Amount represents less than 0.005%.
10 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.
11 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
12 All or a portion of this security has been designated as collateral for open options and futures contracts.
21
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
13 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Funds.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Net realized gain during the year ended 06/30/11 |
Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | 30,452,523 | $ | 337,276,520 | $ | 321,811,004 | $ | — | $ | — | $ | 45,918,039 | $ | 78,146 | |||||||||||||||||
|
UBS Private Money Market Fund LLCa |
4,355,230 | 84,204,417 | 80,435,360 | — | — | 8,124,287 | 2,998 | ||||||||||||||||||||||||
|
UBS Opportunitic Emerging Markets Debt Relationship Fund |
17,369,977 | — | 12,000,000 | 3,750,636 | (1,426,570 | ) | 7,694,043 | — | |||||||||||||||||||||||
|
UBS U.S. Equity Alpha Relationship Fund |
62,547,042 | — | 40,000,000 | 10,407,457 | 5,968,555 | 38,923,054 | — | ||||||||||||||||||||||||
|
UBS Global Corporate Bond Relationship Fund |
53,202,142 | — | 55,167,044 | 3,531,044 | (1,566,142 | ) | — | — | |||||||||||||||||||||||
| $ | 167,926,914 | $ | 421,480,937 | $ | 509,413,408 | $ | 17,689,137 | $ | 2,975,843 | $ | 100,659,423 | $ | 81,144 | ||||||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
14 Amount represents less than 0.005%.
15 Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2011, the value of this security amounted to $(3,975) or 0.00% of net assets.
22
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| Barclays Bank PLC | AUD | 40,985,000 | USD | 43,168,681 | 09/07/11 | $ | (424,195 | ) | |||||||||||
| Barclays Bank PLC | NZD | 62,065,000 | USD | 50,721,380 | 09/07/11 | (474,383 | ) | ||||||||||||
| Barclays Bank PLC | SEK | 12,140,000 | USD | 1,957,971 | 09/07/11 | 46,081 | |||||||||||||
| Barclays Bank PLC | USD | 34,298,268 | SGD | 42,310,000 | 09/07/11 | 148,089 | |||||||||||||
| Goldman Sachs International | AUD | 10,215,000 | USD | 10,827,185 | 09/07/11 | (37,795 | ) | ||||||||||||
| Goldman Sachs International | CAD | 19,100,000 | USD | 19,613,783 | 09/07/11 | (157,588 | ) | ||||||||||||
| Goldman Sachs International | GBP | 19,475,000 | USD | 31,922,836 | 09/07/11 | 691,103 | |||||||||||||
| Goldman Sachs International | SEK | 197,070,000 | EUR | 21,371,173 | 09/07/11 | (101,367 | ) | ||||||||||||
| JPMorgan Chase Bank | AUD | 715,000 | USD | 747,349 | 09/02/11 | (13,619 | ) | ||||||||||||
| JPMorgan Chase Bank | CAD | 880,000 | USD | 897,352 | 09/02/11 | (13,693 | ) | ||||||||||||
| JPMorgan Chase Bank | CNY | 33,935,000 | USD | 5,258,061 | 09/07/11 | 5,019 | |||||||||||||
| JPMorgan Chase Bank | DKK | 15,470,000 | USD | 2,980,818 | 09/07/11 | (22,078 | ) | ||||||||||||
| JPMorgan Chase Bank | EUR | 4,995,000 | USD | 7,060,914 | 09/02/11 | (170,315 | ) | ||||||||||||
| JPMorgan Chase Bank | GBP | 460,000 | USD | 748,376 | 09/02/11 | 10,642 | |||||||||||||
| JPMorgan Chase Bank | KRW | 3,312,000,000 | USD | 3,057,325 | 09/07/11 | (32,238 | ) | ||||||||||||
| JPMorgan Chase Bank | MYR | 12,848,000 | USD | 4,220,069 | 09/07/11 | (13,853 | ) | ||||||||||||
| JPMorgan Chase Bank | NOK | 12,360,000 | USD | 2,279,224 | 09/07/11 | (1,993 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 1,937,918 | EUR | 1,330,000 | 09/07/11 | (12,756 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 1,892,908 | EUR | 1,320,000 | 09/07/11 | 17,779 | |||||||||||||
| JPMorgan Chase Bank | USD | 754,204 | GBP | 460,000 | 09/02/11 | (16,469 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 33,835,279 | KRW | 36,715,000,000 | 09/07/11 | 413,904 | |||||||||||||
| JPMorgan Chase Bank | USD | 48,134,089 | MXN | 561,720,000 | 09/07/11 | (441,229 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 35,483,924 | MYR | 107,165,000 | 09/07/11 | (168,834 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 25,472,992 | PLN | 70,550,000 | 09/07/11 | 76,344 | |||||||||||||
| Morgan Stanley & Co., Inc. | MXN | 185,808,945 | USD | 15,365,000 | 09/07/11 | (411,116 | ) | ||||||||||||
| Royal Bank of Scotland | EUR | 131,825,000 | USD | 189,512,938 | 09/07/11 | (1,302,432 | ) | ||||||||||||
| Royal Bank of Scotland | GBP | 27,290,000 | USD | 44,956,809 | 09/07/11 | 1,192,291 | |||||||||||||
| Royal Bank of Scotland | SGD | 2,430,000 | USD | 1,975,592 | 09/07/11 | (2,773 | ) | ||||||||||||
| Royal Bank of Scotland | USD | 1,957,408 | AUD | 1,845,000 | 09/07/11 | 4,989 | |||||||||||||
| Royal Bank of Scotland | USD | 3,949,026 | EUR | 2,710,000 | 09/07/11 | (26,328 | ) | ||||||||||||
| Royal Bank of Scotland | USD | 8,310,531 | JPY | 677,300,000 | 09/07/11 | 105,621 | |||||||||||||
| Royal Bank of Scotland | USD | 30,717,626 | SEK | 190,480,000 | 09/07/11 | (719,538 | ) | ||||||||||||
| State Street Bank & Trust | CHF | 9,650,000 | USD | 11,319,648 | 09/07/11 | (162,661 | ) | ||||||||||||
| State Street Bank & Trust | USD | 4,220,777 | NZD | 5,210,000 | 09/07/11 | 76,813 | |||||||||||||
| Net unrealized depreciation on forward foreign currency contracts | $ | (1,938,578 | ) | ||||||||||||||||
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures buy contracts: | |||||||||||||||||||
| US Long Bond, 66 contracts (USD) | September 2011 | $ | 8,216,869 | $ | 8,120,062 | $ | (96,807 | ) | |||||||||||
| US Ultra Bond Futures, 80 contracts (USD) | September 2011 | 10,356,302 | 10,100,000 | (256,302 | ) | ||||||||||||||
| 2 Year US Treasury Notes, 168 contracts (USD) | September 2011 | 36,895,119 | 36,849,750 | (45,369 | ) | ||||||||||||||
| 5 Year US Treasury Notes, 98 contracts (USD) | September 2011 | 11,784,460 | 11,681,141 | (103,319 | ) | ||||||||||||||
| 10 Year US Treasury Notes, 24 contracts (USD) | September 2011 | 2,938,721 | 2,935,875 | (2,846 | ) | ||||||||||||||
23
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures sell contracts: | |||||||||||||||||||
| 2 Year US Treasury Notes, 16 contracts (USD) | September 2011 | $ | (3,508,723 | ) | $ | (3,509,500 | ) | $ | (777 | ) | |||||||||
| 5 Year US Treasury Notes, 15 contracts (USD) | September 2011 | (1,802,789 | ) | (1,787,930 | ) | 14,859 | |||||||||||||
| Index futures sell contracts: | |||||||||||||||||||
| Amsterdam Exchange Index, 74 contracts (EUR) | July 2011 | (7,231,807 | ) | (7,304,805 | ) | (72,998 | ) | ||||||||||||
| CAC 40 Euro Index, 93 contracts (EUR) | July 2011 | (5,185,776 | ) | (5,377,859 | ) | (192,083 | ) | ||||||||||||
| DAX Index, 59 contracts (EUR) | September 2011 | (15,421,382 | ) | (15,824,593 | ) | (403,211 | ) | ||||||||||||
| Dow Jones EURO STOXX 50 Index, 535 contracts (EUR) | September 2011 | (21,458,228 | ) | (22,090,917 | ) | (632,689 | ) | ||||||||||||
| FTSE 100 Index, 418 contracts (GBP) | September 2011 | (38,647,490 | ) | (39,631,311 | ) | (983,821 | ) | ||||||||||||
| FTSE/MIB Index, 40 contracts (EUR) | September 2011 | (5,855,065 | ) | (5,872,243 | ) | (17,178 | ) | ||||||||||||
| Hang Seng Stock Index, 7 contracts (HKD) | July 2011 | (981,033 | ) | (1,016,214 | ) | (35,181 | ) | ||||||||||||
| IBEX 35 Index, 42 contracts (EUR) | July 2011 | (6,090,964 | ) | (6,275,950 | ) | (184,986 | ) | ||||||||||||
| MSCI Singapore Index, 19 contracts (SGD) | July 2011 | (1,087,748 | ) | (1,115,045 | ) | (27,297 | ) | ||||||||||||
| NIKKEI 225 Index, 53 contracts (JPY) | September 2011 | (6,273,845 | ) | (6,494,756 | ) | (220,911 | ) | ||||||||||||
| OMXS 30 Index, 318 contracts (SEK) | July 2011 | (5,558,272 | ) | (5,604,860 | ) | (46,588 | ) | ||||||||||||
| Russell 2000 Mini Index, 199 contracts (USD) | September 2011 | (15,410,188 | ) | (16,425,460 | ) | (1,015,272 | ) | ||||||||||||
| S&P 500 Index, 275 contracts (USD) | September 2011 | (87,742,480 | ) | (90,440,625 | ) | (2,698,145 | ) | ||||||||||||
| S&P Toronto Stock Exchange 60 Index, 12 contracts (CAD) | September 2011 | (1,858,110 | ) | (1,896,708 | ) | (38,598 | ) | ||||||||||||
| SPI 200 Index, 18 contracts (AUD) | September 2011 | (2,184,055 | ) | (2,226,497 | ) | (42,442 | ) | ||||||||||||
| Interest rate futures buy contracts: | |||||||||||||||||||
| 90 Day Euro-Dollar Futures, 87 contracts (USD) | March 2015 | 20,871,336 | 21,021,375 | 150,039 | |||||||||||||||
| Long Gilt, 638 contracts (GBP) | September 2011 | 123,581,902 | 123,028,566 | (553,336 | ) | ||||||||||||||
| Interest rate futures sell contracts: | |||||||||||||||||||
| 1 Month Euro-Dollar Futures, 5 contracts (USD) | July 2011 | (1,247,249 | ) | (1,247,594 | ) | (345 | ) | ||||||||||||
| 90 Day Euro-Dollar Futures, 40 contracts (USD) | September 2011 | (9,961,360 | ) | (9,965,500 | ) | (4,140 | ) | ||||||||||||
| 90 Day Euro-Dollar Futures, 87 contracts (USD) | March 2013 | (21,475,841 | ) | (21,462,900 | ) | 12,941 | |||||||||||||
| Japanese 10 Year Bond, 88 contracts (JPY) | September 2011 | (153,633,617 | ) | (154,170,797 | ) | (537,180 | ) | ||||||||||||
| 30 Day Fed Fund Futures, 51 contracts (USD) | July 2011 | (21,225,868 | ) | (21,230,448 | ) | (4,580 | ) | ||||||||||||
| Net unrealized depreciation on futures contracts | $ | (8,038,562 | ) | ||||||||||||||||
Options written
|
Expiration date |
Premiums received |
Value | |||||||||||||
| Call options | |||||||||||||||
| 5 Year US Treasury Notes, 50 contracts, strike @ USD 121.50 | July 2011 | $ | 10,831 | $ | (1,172 | ) | |||||||||
| Dow Jones EURO STOXX 50 Index, 4,730 contracts, strike @ EUR 2,950.00 | August 2011 | 1,683,096 | (2,256,680 | ) | |||||||||||
| Put options | |||||||||||||||
| 90 Day Euro-Dollar Futures, 528 contracts, strike @ USD 95.00 | September 2011 | 394,152 | (3,300 | ) | |||||||||||
| 90 Day Euro-Dollar Time Deposit, 49 contracts, strike @ USD 99.63 | December 2011 | 10,853 | (14,700 | ) | |||||||||||
| 90 Day Euro-Dollar Time Deposit, 350 contracts, strike @ USD 99.38 | December 2011 | 42,525 | (56,875 | ) | |||||||||||
| 90 Day Euro-Dollar Time Deposit, 100 contracts, strike @ USD 96.00 | December 2012 | 44,650 | (8,750 | ) | |||||||||||
|
Foreign Exchange Option, Sell AUD/USD, AUD 8,432,000 face amount covered by contracts, strike @ USD 1.08 |
July 2011 | 68,216 | (25,253 | ) | |||||||||||
24
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
|
Expiration date |
Premiums received |
Value | |||||||||||||
| Options written on interest rate swaps | |||||||||||||||
|
If option exercised the Fund pays quarterly floating 3 month LIBOR and receives semi-annually 4.700%. Underlying interest rate swap terminating 06/16/21. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 4,500,000 |
June 2016 | $ | 177,404 | $ | (176,533 | ) | |||||||||
|
If option exercised the Fund pays quarterly 4.700% and receives quarterly floating 3 month LIBOR. Underlying interest rate swap terminating 06/16/21. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 4,500,000 |
June 2016 | 177,404 | (182,249 | ) | |||||||||||
|
If option exercised the Fund pays quarterly 7.250% and receives quarterly floating 3 month LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 7,050,000 |
November 2015 | 129,720 | (128,499 | ) | |||||||||||
|
If option exercised the Fund pays quarterly 8.760% and receives quarterly floating 3 month LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: Deutsche Bank AG, Notional Amount USD 7,050,000 |
November 2015 | 83,895 | (52,336 | ) | |||||||||||
| Receiver options written on credit default swaps on credit indices | |||||||||||||||
|
If option exercised payment to 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 CDX.HY Series 16V1 Index and the Fund pays fixed rate of 5.000%. Underlying credit default swap terminating 06/20/16. European style. Counterparty: Credit Suisse, Notional Amount USD 14,000,000 |
September 2011 | 331,800 | (247,385 | ) | |||||||||||
| Total options written | $ | 3,154,546 | $ | (3,153,732 | ) | ||||||||||
Written option activity for the year ended June 30, 2011 for UBS Dynamic Alpha Fund was as follows:
|
Number of contracts |
Amount of premiums received |
||||||||||
| Options outstanding at June 30, 2010 | 2,678 | $ | 1,073,661 | ||||||||
| Options written | 21,184 | 5,435,835 | |||||||||
| Options terminated in closing purchase transactions | (18,055 | ) | (4,323,389 | ) | |||||||
| Options expired prior to exercise | — | — | |||||||||
| Options outstanding at June 30, 2011 | 5,807 | $ | 2,186,107 | ||||||||
Swaption & Foreign exchange option activity for the year ended June 30, 2011 for UBS Dynamic Alpha Fund was as follows:
|
Amount of premiums received |
|||||||
| Swaptions & Foreign exchange options outstanding at June 30, 2010 | $ | 779,716 | |||||
| Swaptions & Foreign exchange options written | 4,698,290 | ||||||
| Swaptions & Foreign exchange options terminated in closing purchase transactions | (3,146,476 | ) | |||||
| Swaptions & Foreign exchange options expired prior to exercise | (1,363,091 | ) | |||||
| Swaptions & Foreign exchange options outstanding at June 30, 2011 | $ | 968,439 | |||||
25
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
Currency swap agreements
| Counterparty |
Pay currency |
Pay contracts |
Receive currency |
Receive contracts |
Termination date |
Pay rate1 |
Receive rate1 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
|||||||||||||||||||||||||||||||||
|
Deutsche |
|||||||||||||||||||||||||||||||||||||||||||
| Bank AG | EUR | 3,273,917 | USD | 4,500,000 | 03/16/20 | 1.47702 | 0.24533 | $ | — | $ | (245,084 | ) | $ | (245,084 | ) | ||||||||||||||||||||||||||||
|
Deutsche Bank AG |
USD | 4,500,000 | EUR | 3,273,917 | 03/16/40 | 0.24533 | 1.47702 | — | 243,426 | 243,426 | |||||||||||||||||||||||||||||||||
|
Merrill Lynch |
|||||||||||||||||||||||||||||||||||||||||||
| International | USD | 4,129,672 | CAD | 4,000,000 | 03/16/20 | 0.24533 | 1.28864 | (275,132 | ) | 19,796 | (255,336 | ) | |||||||||||||||||||||||||||||||
|
Merrill Lynch International |
CAD | 4,000,000 | USD | 4,129,672 | 03/16/40 | 1.28864 | 0.24533 | 275,132 | 19,816 | 294,948 | |||||||||||||||||||||||||||||||||
| $ | — | $ | 37,954 | $ | 37,954 | ||||||||||||||||||||||||||||||||||||||
1 Payments made or received are based on the notional amount.
2 Based on 3 month EURIBOR.
3 Based on 3 month USD LIBOR.
4 Based on the 3 month Canadian Bankers Acceptance Rate.
Interest rate swap agreements
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Citibank, N.A. | CAD | 18,600,000 | 06/13/21 | 3.2825 | % | 1.2900 | %2 | $ | — | $ | 210,881 | $ | 210,881 | ||||||||||||||||||
| Citibank, N.A. | USD | 27,444,000 | 08/31/14 | 2.6325 | 0.25403 | — | (1,470,907 | ) | (1,470,907 | ) | |||||||||||||||||||||
| Citibank, N.A. | USD | 20,960,000 | 11/15/16 | 4.0000 | 0.26013 | — | (2,115,840 | ) | (2,115,840 | ) | |||||||||||||||||||||
| Citibank, N.A. | USD | 18,800,000 | 06/15/21 | 0.24703 | 3.0875 | — | (214,611 | ) | (214,611 | ) | |||||||||||||||||||||
| Citibank, N.A. | USD | 5,490,000 | 02/15/36 | 4.6680 | 0.26083 | — | (690,464 | ) | (690,464 | ) | |||||||||||||||||||||
| Citibank, N.A. | USD | 48,000,000 | 06/20/41 | 0.24653 | 3.8963 | — | (1,263,769 | ) | (1,263,769 | ) | |||||||||||||||||||||
| Credit Suisse International | EUR | 10,670,000 | 04/13/15 | 1.61204 | 2.4430 | (340,303 | ) | (42,208 | ) | (382,511 | ) | ||||||||||||||||||||
| Credit Suisse International | EUR | 5,140,000 | 04/13/20 | 3.3300 | 1.61204 | 247,389 | (34,330 | ) | 213,059 | ||||||||||||||||||||||
| Deutsche Bank AG | AUD | 5,600,000 | 09/21/19 | 4.96005 | 5.9700 | — | 118,956 | 118,956 | |||||||||||||||||||||||
| Deutsche Bank AG | AUD | 2,945,000 | 02/11/21 | —6 | 6.5850 | — | 39,500 | 39,500 | |||||||||||||||||||||||
| Deutsche Bank AG | AUD | 2,475,000 | 09/21/39 | 5.6200 | 4.96005 | (3,103 | ) | 15,928 | 12,825 | ||||||||||||||||||||||
| Deutsche Bank AG | CAD | 9,010,000 | 10/03/13 | —7 | 1.8750 | — | (3,881 | ) | (3,881 | ) | |||||||||||||||||||||
| Deutsche Bank AG | CAD | 8,050,000 | 10/03/16 | 2.4850 | —7 | — | 60,494 | 60,494 | |||||||||||||||||||||||
| Deutsche Bank AG | CAD | 2,225,000 | 10/03/21 | —7 | 3.2600 | — | (52,356 | ) | (52,356 | ) | |||||||||||||||||||||
| Deutsche Bank AG | EUR | 1,150,000 | 03/15/16 | 1.48904 | 2.9300 | — | 19,720 | 19,720 | |||||||||||||||||||||||
| Deutsche Bank AG | GBP | 8,750,000 | 04/13/15 | 2.9375 | 1.12068 | — | (468,967 | ) | (468,967 | ) | |||||||||||||||||||||
| Deutsche Bank AG | GBP | 4,250,000 | 04/13/20 | 1.12068 | 3.8660 | — | 295,365 | 295,365 | |||||||||||||||||||||||
| Deutsche Bank AG | KRW | 4,600,000,000 | 01/26/21 | 4.8100 | —9 | — | (86,534 | ) | (86,534 | ) | |||||||||||||||||||||
| Deutsche Bank AG | MXN | 244,663,000 | 03/26/21 | 4.860010 | 7.7500 | — | 813,168 | 813,168 | |||||||||||||||||||||||
| Deutsche Bank AG | USD | 42,950,000 | 06/30/13 | 0.8150 | —11 | — | (58,021 | ) | (58,021 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 31,090,000 | 04/11/16 | 2.4940 | 0.28953 | — | (996,458 | ) | (996,458 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 20,268,000 | 02/15/17 | 0.26083 | 3.4175 | — | 1,556,079 | 1,556,079 | |||||||||||||||||||||||
26
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund1 |
Payments received by the Fund1 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Deutsche Bank AG | USD | 11,000,000 | 10/01/18 | 4.5460 | % | 0.3045 | %3 | $ | — | $ | (1,479,774 | ) | $ | (1,479,774 | ) | ||||||||||||||||
| Deutsche Bank AG | USD | 451,000 | 02/15/36 | 4.5450 | 0.26083 | — | (47,536 | ) | (47,536 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 360,000 | 04/01/39 | 4.5690 | 0.30453 | — | (37,262 | ) | (37,262 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 990,000 | 10/01/39 | 4.0580 | 0.30453 | — | (13,409 | ) | (13,409 | ) | |||||||||||||||||||||
| Goldman Sachs International | CAD | 37,700,000 | 06/08/21 | 3.2813 | 1.29002 | — | 412,335 | 412,335 | |||||||||||||||||||||||
| Goldman Sachs International | EUR | 41,200,000 | 06/21/21 | 1.75904 | 3.3250 | — | (499,527 | ) | (499,527 | ) | |||||||||||||||||||||
| Goldman Sachs International | USD | 38,700,000 | 06/10/21 | 0.25033 | 3.0550 | — | (530,095 | ) | (530,095 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | AUD | 4,600,000 | 01/27/21 | —6 | 6.4650 | — | 42,630 | 42,630 | |||||||||||||||||||||||
| JPMorgan Chase Bank | CAD | 1,950,000 | 03/11/16 | 2.7950 | 1.29002 | — | (40,476 | ) | (40,476 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 4,680,000 | 12/17/15 | 1.74804 | 2.6375 | — | 71,968 | 71,968 | |||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 3,040,000 | 04/27/22 | —12 | 3.8650 | — | 75,135 | 75,135 | |||||||||||||||||||||||
| JPMorgan Chase Bank | EUR | 1,450,000 | 04/27/42 | 3.9190 | —12 | — | 6,268 | 6,268 | |||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 5,290,000 | 12/08/15 | 1.8050 | 0.25183 | 2,078 | (12,514 | ) | (10,436 | ) | |||||||||||||||||||||
| JPMorgan Chase Bank | USD | 119,500,000 | 11/24/18 | 0.185813 | 0.25753 | — | 229,864 | 229,864 | |||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 5,380,000 | 12/08/20 | 0.25183 | 3.1250 | — | 71 | 71 | |||||||||||||||||||||||
| JPMorgan Chase Bank | USD | 1,320,000 | 12/08/40 | 3.9975 | 0.25183 | — | 8,050 | 8,050 | |||||||||||||||||||||||
| Merrill Lynch International | AUD | 245,000 | 02/15/21 | —6 | 6.6350 | — | 3,713 | 3,713 | |||||||||||||||||||||||
| Merrill Lynch International | CAD | 5,290,000 | 12/15/15 | 2.6770 | 1.29212 | — | (68,633 | ) | (68,633 | ) | |||||||||||||||||||||
| Merrill Lynch International | CAD | 1,420,000 | 02/04/21 | 3.7250 | 1.30002 | — | (58,454 | ) | (58,454 | ) | |||||||||||||||||||||
| Merrill Lynch International | CAD | 1,770,000 | 02/04/31 | 1.30002 | 4.3100 | — | 88,312 | 88,312 | |||||||||||||||||||||||
| Merrill Lynch International | CAD | 710,000 | 02/04/41 | 4.2075 | 1.30002 | — | (37,886 | ) | (37,886 | ) | |||||||||||||||||||||
| Merrill Lynch International | JPY | 1,146,000,000 | 04/26/13 | 0.345614 | 0.4513 | — | 16,488 | 16,488 | |||||||||||||||||||||||
| Merrill Lynch International | JPY | 920,000,000 | 04/26/16 | 0.7063 | 0.345614 | — | (95,438 | ) | (95,438 | ) | |||||||||||||||||||||
| Merrill Lynch International | JPY | 239,000,000 | 04/26/21 | 0.345614 | 1.3338 | — | 61,245 | 61,245 | |||||||||||||||||||||||
| Merrill Lynch International | KRW | 3,190,000,000 | 02/11/21 | 4.8400 | —9 | — | (62,893 | ) | (62,893 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 119,500,000 | 11/24/11 | 0.25753 | 0.185813 | — | 60,797 | 60,797 | |||||||||||||||||||||||
| Merrill Lynch International | USD | 1,760,000 | 09/27/21 | —11 | 3.7160 | — | 55,971 | 55,971 | |||||||||||||||||||||||
| Merrill Lynch International | USD | 2,970,000 | 08/15/29 | 4.2625 | 0.26083 | — | (214,324 | ) | (214,324 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 4,080,000 | 06/15/39 | 3.6250 | 0.24703 | — | 279,977 | 279,977 | |||||||||||||||||||||||
| Morgan Stanley & Co., Inc. | CAD | 4,700,000 | 04/08/17 | 3.6000 | —7 | — | (159,394 | ) | (159,394 | ) | |||||||||||||||||||||
| Morgan Stanley & Co., Inc. | CAD | 2,660,000 | 04/08/22 | —7 | 4.2300 | — | 119,057 | 119,057 | |||||||||||||||||||||||
| $ | (93,939 | ) | $ | (6,193,989 | ) | $ | (6,287,928 | ) | |||||||||||||||||||||||
1 Payments made or received are based on the notional amount.
2 Rate based on 3 month Canadian Bankers Acceptance Rate.
3 Rate based on 3 month LIBOR (USD BBA).
4 Rate based on 6 month EURIBOR.
5 Rate based on 6 month BBSW.
6 Rate based on 6 month BBSW. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
7 Rate based on 3 month Canadian Bankers Acceptance Rate. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
8 Rate based on 6 month LIBOR (GBP BBA)
9 Rate based on 6 month KORIBOR. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
10 Rate based on MXIBTIIE.
27
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
11 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, 2011.
12 Rate based on 6 month EURIBOR. This is a forward starting trade, and as such, a floating rate has not yet been assigned as of June 30, 2011.
13 Rate based on 1 month LIBOR (USD BBA).
14 Rate based on 6 month LIBOR (JPY BBA).
Credit default swaps on credit indices—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Barclays Bank PLC | USD | 6,100,000 | 06/20/16 | 5.0000 | % | —3 | $ | 64,389 | $ | (58,227 | ) | $ | 6,162 | ||||||||||||||||||
| Credit Suisse International | USD | 7,900,000 | 06/20/16 | 5.0000 | —3 | 89,972 | (75,409 | ) | 14,563 | ||||||||||||||||||||||
| Deutsche Bank AG | EUR | 81,500,000 | 06/20/16 | 1.0000 | —4 | (324,339 | ) | 541,001 | 216,662 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 9,680,000 | 12/20/12 | 0.6000 | —5 | — | (4,128 | ) | (4,128 | ) | |||||||||||||||||||||
| Goldman Sachs International | USD | 6,500,000 | 12/20/15 | 5.0000 | —6 | 935,639 | (781,206 | ) | 154,433 | ||||||||||||||||||||||
| Merrill Lynch International | EUR | 6,100,000 | 12/20/15 | 1.0000 | —7 | (18,070 | ) | 8,717 | (9,353 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 2,000,000 | 12/20/15 | 1.0000 | —8 | (93,727 | ) | 20,658 | (73,069 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 23,000,000 | 06/20/16 | 1.0000 | —9 | 115,487 | (63,554 | ) | 51,933 | ||||||||||||||||||||||
| $ | 769,351 | $ | (412,148 | ) | $ | 357,203 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments made are based on the notional amount.
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.NA.HY Series 16 Index.
4 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 iTraxx Europe Main Series 15 Index.
5 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.NA.IG Series 9 Index.
6 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 Series 14 Index.
7 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 iTraxx Europe Main Series 14 Index.
8 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 MCDX.NA 15 Index.
9 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.NA.IG Series 16 Index.
28
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
Credit default swaps on corporate and sovereign issues—buy protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund2 |
Payments received by the Fund |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||||||||||
| Deutsche Bank AG | EUR | 1,500,000 | 03/20/14 | 5.0000 | % | —3 | $ | 236,056 | $ | (167,588 | ) | $ | 68,468 | ||||||||||||||||||
| Deutsche Bank AG | EUR | 1,250,000 | 06/20/16 | 1.0000 | —4 | (4,942 | ) | 7,513 | 2,571 | ||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,895,000 | 03/20/14 | 1.0000 | —5 | 16,489 | (30,086 | ) | (13,597 | ) | |||||||||||||||||||||
| Deutsche Bank AG | USD | 1,875,000 | 03/20/14 | 1.0000 | —6 | 13,542 | (5,012 | ) | 8,530 | ||||||||||||||||||||||
| JP Morgan Chase Bank | USD | 500,000 | 06/20/16 | 1.0000 | —7 | (177 | ) | 2,161 | 1,984 | ||||||||||||||||||||||
| Merrill Lynch International | EUR | 1,250,000 | 06/20/16 | 1.0000 | —8 | (40,224 | ) | 29,728 | (10,496 | ) | |||||||||||||||||||||
| Merrill Lynch International | USD | 2,740,000 | 06/20/15 | 0.2500 | —9 | (37,017 | ) | 42,010 | 4,993 | ||||||||||||||||||||||
| Merrill Lynch International | USD | 2,200,000 | 06/20/16 | 1.0000 | —10 | 69,719 | (65,770 | ) | 3,949 | ||||||||||||||||||||||
| Morgan Stanley & Co., Inc. | EUR | 1,250,000 | 06/20/16 | 1.0000 | —11 | (5,346 | ) | 11,327 | 5,981 | ||||||||||||||||||||||
| $ | 248,100 | $ | (175,717 | ) | $ | 72,383 | |||||||||||||||||||||||||
1 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments made are based on the notional amount.
3 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the ITV PLC 5.375% bond, due 10/19/15.
4 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the ING Bank NV 5.250% bond, due 06/07/19.
5 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions, Inc. 6.500% bond, due 09/01/25.
6 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Computer Sciences Corp. 6.500% bond, due 03/15/18.
7 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Constellation Energy Group, Inc. 4.550% bond, due 06/15/15.
8 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Credit Agricole SA 5.065% bond, due 08/10/22.
9 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Government of France 4.250% bond, due 04/25/19.
10 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the United Parcel Service of America, Inc. 8.375% bond, due 04/01/30.
11 Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the BNP Paribas SA 4.250% bond, due 01/16/14.
29
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
Credit default swaps on credit indices—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
| Deutsche Bank AG | USD | 5,000,000 | 07/25/45 | —4 | 0.5400 | % | $ | — | $ | (2,836,203 | ) | $ | (2,836,203 | ) | — | % | |||||||||||||||||||
|
Goldman Sachs International |
USD | 6,500,000 | 06/20/15 | —5 | 1.0000 | 14,442 | 71,953 | 86,395 | 0.7215 | ||||||||||||||||||||||||||
|
Goldman Sachs International |
USD | 39,500,000 | 06/20/16 | —6 | 5.0000 | (1,047,847 | ) | 377,045 | (670,802 | ) | 4.8062 | ||||||||||||||||||||||||
|
Goldman Sachs International |
USD | 115,200,000 | 06/20/16 | —7 | 1.0000 | (284,800 | ) | 318,321 | 33,521 | 0.9484 | |||||||||||||||||||||||||
|
Merrill Lynch International |
USD | 3,100,000 | 07/25/45 | —4 | 0.5400 | — | (1,758,446 | ) | (1,758,446 | ) | — | ||||||||||||||||||||||||
| $ | (1,318,205 | ) | $ | (3,827,330 | ) | $ | (5,145,535 | ) | |||||||||||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
2 Payments received are based on the notional amount.
3 Credit spreads, where available, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
4 Payment to 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-A Series 6 Index.
5 Payment to 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 CDX.NA.IG Series 14 Index.
6 Payment to 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 CDX.NA.HY Series 16 Index.
7 Payment to 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 CDX.NA.IG Series 16 Index.
Credit default swaps on corporate and sovereign issues—sell protection1
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
|
Credit Suisse International |
EUR | 4,700,000 | 12/20/15 | —4 | 0.2500 | % | $ | 54,276 | $ | (66,102 | ) | $ | (11,826 | ) | 0.4800 | % | |||||||||||||||||||
| Deutsche Bank AG | EUR | 1,000,000 | 03/20/16 | —5 | 5.0000 | (190,725 | ) | 109,140 | (81,585 | ) | 3.1855 | ||||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,250,000 | 03/20/16 | —6 | 1.0000 | 22,358 | 6,217 | 28,575 | 0.8829 | ||||||||||||||||||||||||||
| Deutsche Bank AG | USD | 1,250,000 | 03/20/16 | —7 | 1.0000 | 27,997 | (35,093 | ) | (7,096 | ) | 1.6135 | ||||||||||||||||||||||||
|
JP Morgan Chase Bank |
EUR | 800,000 | 03/20/16 | —8 | 1.0000 | 42,378 | (58,743 | ) | (16,365 | ) | 2.1846 | ||||||||||||||||||||||||
|
Merrill Lynch International |
EUR | 800,000 | 03/20/16 | —9 | 1.0000 | 32,382 | (38,898 | ) | (6,516 | ) | 1.7814 | ||||||||||||||||||||||||
|
Merrill Lynch International |
USD | 500,000 | 06/20/16 | —10 | 1.0000 | 9,361 | (9,136 | ) | 225 | 1.3833 | |||||||||||||||||||||||||
30
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
| Counterparty |
Notional amount |
Termination date |
Payments made by the Fund |
Payments received by the Fund2 |
Upfront payments (made)/ received |
Value |
Unrealized appreciation/ (depreciation) |
Credit spread3 |
|||||||||||||||||||||||||||
|
Morgan Stanley & Co., Inc. |
USD | 5,250,000 | 03/20/16 | —11 | 1.0000 | % | $ | (64,257 | ) | $ | 38,452 | $ | (25,805 | ) | 0.8375 | % | |||||||||||||||||||
|
Morgan Stanley & Co., Inc. |
USD | 700,000 | 06/20/16 | —12 | 1.0000 | 12,901 | (18,855 | ) | (5,954 | ) | 1.5758 | ||||||||||||||||||||||||
| $ | (53,329 | ) | $ | (73,018 | ) | $ | (126,347 | ) | |||||||||||||||||||||||||||
1 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
2 Payments received are based on the notional amount.
3 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity.
4 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the United States Treasury Note 4.875% due 08/15/16.
5 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the ITV PLC 5.375% bond, due 10/19/15.
6 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Motorola Solutions, Inc. 6.500% bond, due 09/01/25.
7 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Computer Sciences Corp. 6.500% bond, due 03/15/18.
8 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Renault SA 2.647% bond, due 08/04/14.
9 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Aegon NV 4.125% bond, due 12/08/14.
10 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Exelon Generation Co., LLC 6.200% bond, due 10/01/17.
11 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Government of Japan 2.000% bond, due 03/21/22.
12 Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the MetLife, Inc. 5.000% bond, due 06/15/15.
31
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 157,288,129 | $ | 118,168,576 | $ | — | $ | 275,456,705 | |||||||||||
| Common stocks sold short | (83,707,979 | ) | (170 | ) | (3,975 | ) | (83,712,124 | ) | |||||||||||
| Preferred stocks | 153,600 | 2,885,449 | — | 3,039,049 | |||||||||||||||
| Corporate bonds | — | 20,767,724 | — | 20,767,724 | |||||||||||||||
| Asset-backed securities | — | 1,772,919 | 806,900 | 2,579,819 | |||||||||||||||
| Collateralized debt obligations | — | 725,075 | 3,229,737 | 3,954,812 | |||||||||||||||
| Commercial mortgage-backed securities | — | 3,853,141 | — | 3,853,141 | |||||||||||||||
| Mortgage & agency debt securities | — | 3,398,169 | — | 3,398,169 | |||||||||||||||
| Municipal bonds | — | 1,938,509 | — | 1,938,509 | |||||||||||||||
| US government obligation | — | 1,550,111 | — | 1,550,111 | |||||||||||||||
| Non-US government obligation | — | 198,589 | — | 198,589 | |||||||||||||||
| Investment companies | — | 46,617,097 | — | 46,617,097 | |||||||||||||||
| Short-term investment | — | 45,918,039 | — | 45,918,039 | |||||||||||||||
| Options purchased | 13,124,149 | 661,362 | — | 13,785,511 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 8,124,287 | — | 8,124,287 | |||||||||||||||
| Forward foreign currency contracts | — | (1,938,578 | ) | — | (1,938,578 | ) | |||||||||||||
| Futures contracts | (5,179,177 | ) | (2,859,385 | ) | — | (8,038,562 | ) | ||||||||||||
| Options written | (2,341,477 | ) | (812,255 | ) | — | (3,153,732 | ) | ||||||||||||
| Swap agreements | — | (10,644,248 | ) | — | (10,644,248 | ) | |||||||||||||
| Total | $ | 79,337,245 | $ | 240,324,411 | $ | 4,032,662 | $ | 323,694,318 | |||||||||||
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
| Measurements using unobservable inputs (Level 3) | |||
|
Common stocks |
Common stocks sold short |
Asset-backed securities |
Collateralized debt obligations |
Total | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Beginning balance | $ | 0 | $ | — | $ | 766,614 | $ | 9,334,600 | $ | 10,101,214 | |||||||||||||
| Purchases | — | — | — | — | — | ||||||||||||||||||
| Issuances | — | — | — | — | — | ||||||||||||||||||
| Sales | (6,573 | ) | (19,615 | ) | — | (19,669,239 | ) | (19,695,427 | ) | ||||||||||||||
| Settlements | — | — | — | — | — | ||||||||||||||||||
| Accrued discounts (premiums) | — | — | 21,830 | 48,481 | 70,311 | ||||||||||||||||||
| Total realized gain (loss) | (1,597,897 | ) | — | (3,863 | ) | (16,789,415 | ) | (18,391,175 | ) | ||||||||||||||
| Net change in unrealized appreciation/depreciation | 1,604,470 | 15,640 | 22,319 | 31,030,385 | 32,672,814 | ||||||||||||||||||
| Transfers into Level 3 | — | — | — | — | — | ||||||||||||||||||
| Transfers out of Level 31 | — | — | — | (725,075 | ) | (725,075 | ) | ||||||||||||||||
| Ending balance | $ | — | $ | (3,975 | ) | $ | 806,900 | $ | 3,229,737 | $ | 4,032,662 | ||||||||||||
The change in unrealized appreciation/depreciation relating to the Level 3 investments still held at June 30, 2011 was $8,287,845.
1 Transfers out of Level 3 represent the value at the beginning of the period. At June 30, 2011, a security was transfered from Level 3 to Level 2 as the valuation is based on observable inputs from an established pricing source.
See accompanying notes to financial statements.
32
UBS Global Allocation Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Global Allocation Fund (the "Fund") returned 23.87% (Class A shares returned 17.11% after the deduction of the maximum sales charge), while Class Y shares returned 24.15%.
For comparison purposes, the Fund's benchmark, the GSMI Mutual Fund Index (the "Index"), returned 22.50%, the Russell 3000 Index returned 32.37%, the MSCI World Free Index (net) returned 30.51%, and the Citigroup World Government Bond Index returned 10.54% over the same 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 35; 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 the Index returns do not reflect the deduction of fees and expenses.)
The Fund's positive performance was due primarily to market allocation decisions and currency strategy.
Portfolio performance summary1
What worked
• The Fund's overweight to risk assets made a significant contribution to relative performance.
– The Fund was overweight to equities throughout the period, finishing the 12-month period at a 68% equity allocation, versus the Index weight of 65%. This position was rewarded as corporate profits often exceeded expectations and investor risk appetite was generally robust.
– Within equities, the Fund's modest overweight to US stocks was beneficial, as they outperformed their international counterparts.
– Having an underweight to emerging markets equities was positive for performance as they lagged their developed market peers.
• The Fund's overweights to investment grade corporate and high yield bonds enhanced results.
– We de-emphasized US Treasuries and international sovereigns in favor of corporate bonds. This was beneficial when corporate bonds posted strong returns during the 12-month period, as investors sought to generate incremental yield in the low interest rate environment. In particular, the Fund's long position to investment grade financials was a positive for performance, as their spreads narrowed during the period. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
– Having a long position to high yield bonds was beneficial, as they generated good performance during most of the period.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
33
UBS Global Allocation Fund
• The Fund's currency strategy was an overall positive for performance.
– The Fund's overweight to the Swedish krona was beneficial. The currency appreciated as Sweden's economic fundamentals were relatively strong, and its banking system was not as adversely impacted by the European sovereign debt crisis.
– Long positions to Asia ex-Japan currencies enhanced results, as the economies of these countries continued to expand at a solid pace.
• Overall, security selection modestly contributed to performance. In particular, the Fund's exposure to large cap growth stocks and its investment grade financial holdings performed well.
• Derivatives use contributed to Fund performance. During the review period, the Fund used derivatives for risk management purposes and as part of the Fund's investment strategies to enhance return across markets and currencies. Our use of derivatives had a positive impact on performance across both of these areas.
What didn't work
• An overweight to certain global ex-US equities was a modest negative for performance. In particular an overweight to European equities was a drag on performance, as they were negatively impacted by the sovereign debt crisis in peripheral Europe.
• Certain currency strategies detracted from performance.
– The Fund's underweight to the euro was not rewarded. Despite the European sovereign debt crisis, the euro strengthened during the period.
– Having an underweight to the strong-performing Australian dollar detracted from performance, as it benefited from rising commodity prices.
• Security selection was a drawback in the large cap value equity style space.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
34
UBS Global Allocation Fund
Average annual total returns for periods ended 06/30/11 (unaudited)
| 1 year | 5 years | 10 years | Inception1 | ||||||||||||||||
| Before deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 23.87 | % | 2.74 | % | 6.17 | % | 5.57 | % | |||||||||||
| Class B3 | 22.86 | 1.90 | N/A | 5.806 | |||||||||||||||
| Class C4 | 22.90 | 1.96 | N/A | 5.61 | |||||||||||||||
| Class Y5 | 24.15 | 3.02 | 6.43 | 7.42 | |||||||||||||||
| After deducting maximum sales charge | |||||||||||||||||||
| Class A2 | 17.11 | % | 1.58 | % | 5.57 | % | 5.15 | % | |||||||||||
| Class B3 | 17.86 | 1.62 | N/A | 5.806 | |||||||||||||||
| Class C4 | 21.90 | 1.96 | N/A | 5.61 | |||||||||||||||
| Russell 3000 Index7 | 32.37 | % | 3.35 | % | 3.44 | % | 8.73 | % | |||||||||||
| MSCI World Free Index (net)8 | 30.51 | 2.28 | 3.99 | 7.03 | |||||||||||||||
| Citigroup World Government Bond Index9 | 10.54 | 7.35 | 7.92 | 6.37 | |||||||||||||||
| GSMI Mutual Fund Index10 | 22.50 | 4.93 | 6.03 | 7.92 | |||||||||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.27% and 1.27%; Class B—2.15% and 2.15%; Class C—2.06% and 2.06%; Class Y—0.99% and 0.99%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the 12-month period ending October 27, 2011, do not exceed 1.35% for Class A shares, 2.10% for Class B shares, 2.10% for Class C shares and 1.10% for Class Y shares. 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 Allocation Fund Class A shares is June 30, 1997. Inception dates of Class B and Class C shares are December 13, 2001 and November 22, 2001, respectively. Inception date of Class Y shares and, for purposes of this illustration, the indices, is August 31,1992.
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. Prior to September 30, 2003, Class C shares were subject to a maximum front-end sales charge of 1.00%; this front-end sales charge is not reflected in the average annual total returns presented for the Class C shares shown above.
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 Assumes the conversion of Class B to Class A shares at the end of the sixth year.
7 The Russell 3000 Index is designed to measure the performance of the largest 3,000 US companies representing approximately 98% of the investable US equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
8 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of May 2010, the index consisted of 24 developed market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
9 The Citigroup World Government Bond Index is an unmanaged broad-based market capitalization-weighted index composed of straight (i.e., not floating rate or index-linked) government bonds with a one-year minimum maturity. The index is designed to track the government bond markets of 22 developed countries. Investors should note that indices do not reflect the deduction of fees and expenses.
10 The GSMI Mutual Fund Index is an unmanaged index compiled by the Advisor, constructed as follows: 65% MSCI All Country World Index, 15% Citigroup World Government Bond ex US Index, 15% Citigroup US Government Bond Index, 2% J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),and 3% BofA 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% BofA Merrill Lynch US High Yield Cash Pay Constrained Index replaced the 3% BofA Merrill Lynch US High Yield Cash Pay Index. On April 30, 2009, the 65% MSCI All Country World Index replaced the 40% Russell 3000 Index, 22% MSCI World ex USA Index and 3% MSCI Emerging Markets Index (net); the 15% Citigroup World Government Bond ex US Index and 15% Citigroup US Government Bond Index replaced the 9% Citigroup World Government Bond ex US Index and the 21% Citigroup Broad Investment Grade Index. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
35
UBS Global Allocation Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Global Allocation Fund Class A and Class Y shares versus the Russell 3000 Index, the MSCI World Free Index (net), the Citigroup World Government Bond Index and the GSMI Mutual Fund Index over the 10 years ended June 30, 2011. The performance of Class B and Class C shares will vary based upon the different inception dates, class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
36
UBS Global Allocation Fund
Top ten equity holdings (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Apple, Inc. | 1.0 | % | |||||
| Exxon Mobil Corp. | 0.9 | ||||||
| Amazon.com, Inc. | 0.7 | ||||||
| Johnson & Johnson | 0.7 | ||||||
| JPMorgan Chase & Co. | 0.6 | ||||||
| General Dynamics Corp. | 0.5 | ||||||
| Wells Fargo & Co. | 0.5 | ||||||
| PepsiCo, Inc. | 0.5 | ||||||
| QUALCOMM, Inc. | 0.5 | ||||||
| Citigroup, Inc. | 0.5 | ||||||
| Total | 6.4 | % | |||||
Country exposure by issuer, top five (unaudited)2
As of June 30, 2011
|
Percentage of net assets |
|||||||
| United States | 35.8 | % | |||||
| Germany | 3.9 | ||||||
| United Kingdom | 3.5 | ||||||
| Japan | 2.2 | ||||||
| China | 2.1 | ||||||
| Total | 47.5 | % | |||||
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
US Treasury Notes, 0.750%, due 03/31/13 |
1.8 | % | |||||
|
US Treasury Notes, 0.500%, due 05/31/13 |
0.8 | ||||||
|
Kingdom of Spain, 4.200%, due 01/31/37 |
0.7 | ||||||
|
US Treasury Notes, 2.625%, due 04/30/16 |
0.7 | ||||||
|
Government of Belgium, 3.500%, due 03/28/15 |
0.7 | ||||||
|
Buoni Poliennali Del Tesoro, 4.000%, due 02/01/37 |
0.7 | ||||||
|
Buoni Poliennali Del Tesoro, 3.750%, due 03/01/21 |
0.7 | ||||||
|
Kingdom of Spain, 5.500%, due 04/30/21 |
0.7 | ||||||
|
US Treasury Notes, 3.125%, due 04/30/17 |
0.6 | ||||||
|
Bundesschatzanweisungen, 0.500%, due 06/15/12 |
0.6 | ||||||
| Total | 8.0 | % | |||||
1 Figures represent the direct investments of UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies was included.
2 Figures represent the direct investments of UBS Global Allocation Fund. If a breakdown of the underlying investment companies was included, the country exposure percentages would be as follows: United States 46.8%, United Kingdom 7.2%, Japan 5.1%, Germany 5.0%, China 4.0%.
37
UBS Global Allocation Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2011
| Common stocks | |||||||
| Aerospace & defense | 1.21 | % | |||||
| Air freight & logistics | 0.49 | ||||||
| Airlines | 0.51 | ||||||
| Auto components | 0.05 | ||||||
| Automobiles | 0.70 | ||||||
| Beverages | 1.05 | ||||||
| Biotechnology | 0.45 | ||||||
| Building products | 0.28 | ||||||
| Capital markets | 0.93 | ||||||
| Chemicals | 1.52 | ||||||
| Commercial banks | 3.38 | ||||||
| Communications equipment | 0.92 | ||||||
| Computers & peripherals | 1.72 | ||||||
| Construction & engineering | 0.31 | ||||||
| Construction materials | 0.37 | ||||||
| Distributors | 0.02 | ||||||
| Diversified consumer services | 0.15 | ||||||
| Diversified financial services | 1.53 | ||||||
| Diversified telecommunication services | 0.52 | ||||||
| Electric utilities | 1.60 | ||||||
| Electrical equipment | 0.13 | ||||||
| Electronic equipment, instruments & components | 0.05 | ||||||
| Energy equipment & services | 0.90 | ||||||
| Food & staples retailing | 1.23 | ||||||
| Food products | 0.82 | ||||||
| Health care equipment & supplies | 0.83 | ||||||
| Health care providers & services | 1.08 | ||||||
| Health care technology | 0.04 | ||||||
| Hotels, restaurants & leisure | 1.50 | ||||||
| Household durables | 0.06 | ||||||
| Household products | 0.45 | ||||||
| Industrial conglomerates | 0.25 | ||||||
| Insurance | 1.91 | ||||||
| Internet & catalog retail | 1.07 | ||||||
| Internet software & services | 0.93 | ||||||
| IT services | 0.77 | ||||||
| Leisure equipment & products | 0.17 | ||||||
| Life sciences tools & services | 0.41 | ||||||
| Machinery | 1.77 | ||||||
| Media | 1.72 | ||||||
| Metals & mining | 1.29 | ||||||
| Multiline retail | 0.08 | ||||||
| Oil, gas & consumable fuels | 4.41 | ||||||
| Personal products | 0.70 | ||||||
| Pharmaceuticals | 2.47 | ||||||
| Professional services | 0.27 | ||||||
| Real estate investment trust (REIT) | 0.20 | ||||||
| Real estate management & development | 0.23 | % | |||||
| Road & rail | 0.74 | ||||||
| Semiconductors & semiconductor equipment | 0.58 | ||||||
| Software | 1.75 | ||||||
| Specialty retail | 0.28 | ||||||
| Textiles, apparel & luxury goods | 0.40 | ||||||
| Tobacco | 0.32 | ||||||
| Trading companies & distributors | 0.43 | ||||||
| Transportation infrastructure | 0.02 | ||||||
| Wireless telecommunication services | 0.84 | ||||||
| Total common stocks | 48.81 | % | |||||
| Preferred stock | 0.37 | ||||||
| Bonds | |||||||
| Corporate bonds | |||||||
| Commercial banks | 0.10 | ||||||
| Diversified financial services | 0.14 | ||||||
| Wireless telecommunication services | 0.03 | ||||||
| Total corporate bonds | 0.27 | % | |||||
| Mortgage & agency debt securities | 0.11 | ||||||
| US government obligations | 6.29 | ||||||
| Non-US government obligations | 6.74 | ||||||
| Supranational bond | 0.05 | ||||||
| Total bonds | 13.46 | % | |||||
| Investment companies | |||||||
| UBS Credit Bond Relationship Fund | 3.99 | ||||||
| UBS Emerging Markets Equity Relationship Fund | 4.02 | ||||||
| UBS Global (ex-U.S.) All Cap Growth Relationship Fund | 14.82 | ||||||
| UBS Global Corporate Bond Relationship Fund | 4.63 | ||||||
| UBS High Yield Relationship Fund | 4.04 | ||||||
| UBS Small-Cap Equity Relationship Fund | 2.35 | ||||||
| Total investment companies | 33.85 | % | |||||
| Warrants | 0.11 | ||||||
| Short-term investment | 2.92 | ||||||
| Investment of cash collateral from securities loaned | 1.81 | ||||||
| Total investments | 101.33 | % | |||||
| Liabilities, in excess of cash and other assets | (1.33 | ) | |||||
| Net assets | 100.00 | % | |||||
1 Figures represent the industry breakdown of direct investments of UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification and derivatives exposure was included.
38
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks: 48.81% | |||||||||||
| Argentina: 0.10% | |||||||||||
| MercadoLibre, Inc. | 16,600 | $ | 1,317,044 | ||||||||
| Australia: 0.55% | |||||||||||
| National Australia Bank Ltd. | 86,157 | 2,377,097 | |||||||||
| Orica Ltd. | 106,317 | 3,083,306 | |||||||||
| Qantas Airways Ltd.* | 794,466 | 1,574,799 | |||||||||
| Total Australia common stocks | 7,035,202 | ||||||||||
| Belgium: 0.20% | |||||||||||
| Anheuser-Busch InBev NV | 45,495 | 2,638,033 | |||||||||
| Brazil: 0.47% | |||||||||||
| Banco Bradesco SA ADR1 | 6,764 | 138,594 | |||||||||
| CCR SA NPV | 8,000 | 238,106 | |||||||||
| Cia de Bebidas das Americas ADR1 | 18,700 | 630,751 | |||||||||
| Cia Hering | 13,000 | 299,042 | |||||||||
| Cosan Ltd., Class A | 25,200 | 309,708 | |||||||||
| Diagnosticos da America SA | 31,000 | 417,134 | |||||||||
| Embraer SA ADR | 14,000 | 430,920 | |||||||||
| Itau Unibanco Holding SA ADR | 5,580 | 131,409 | |||||||||
| Lojas Renner SA | 7,000 | 266,876 | |||||||||
| Odontoprev SA | 17,000 | 283,215 | |||||||||
| Petroleo Brasileiro SA ADR | 52,600 | 1,781,036 | |||||||||
| Porto Seguro SA | 15,000 | 233,557 | |||||||||
| Vale SA ADR | 28,000 | 894,600 | |||||||||
| Total Brazil common stocks | 6,054,948 | ||||||||||
| Canada: 1.45% | |||||||||||
| Canadian Oil Sands Ltd. | 73,000 | 2,106,475 | |||||||||
|
Petrobank Energy & Resources Ltd.* |
141,000 | 2,070,154 | |||||||||
| Petrominerales Ltd.1 | 88,658 | 2,602,424 | |||||||||
|
Potash Corp. of Saskatchewan, Inc. |
29,900 | 1,704,001 | |||||||||
| Royal Bank of Canada | 67,200 | 3,841,294 | |||||||||
| Suncor Energy, Inc. | 74,000 | 2,900,306 | |||||||||
| Teck Resources Ltd., Class B | 67,500 | 3,430,816 | |||||||||
| Total Canada common stocks | 18,655,470 | ||||||||||
| China: 2.13% | |||||||||||
| Agile Property Holdings Ltd.1 | 322,000 | 503,800 | |||||||||
|
Agricultural Bank of China Ltd., H Shares |
436,000 | 230,460 | |||||||||
| AIA Group Ltd.* | 960,317 | 3,342,271 | |||||||||
| Air China Ltd., H Shares | 250,000 | 260,466 | |||||||||
| Baidu, Inc. ADR* | 29,900 | 4,189,887 | |||||||||
| BBMG Corp., H Shares | 342,000 | 513,166 | |||||||||
|
China Liansu Group Holdings Ltd.1 |
1,201,000 | 985,596 | |||||||||
| Shares | Value | ||||||||||
|
China Lumena New Materials Corp.1 |
996,000 | $ | 402,986 | ||||||||
|
China Oilfield Services Ltd., H Shares |
260,000 | 477,420 | |||||||||
|
Chongqing Machinery & Electric Co., Ltd., H Shares |
1,304,000 | 420,617 | |||||||||
| CNOOC Ltd. | 391,000 | 918,572 | |||||||||
| CSR Corp. Ltd., H Shares | 258,000 | 242,849 | |||||||||
| Focus Media Holding Ltd. ADR*1 | 69,100 | 2,149,010 | |||||||||
| Haier Electronics Group Co., Ltd.* | 199,000 | 247,655 | |||||||||
|
Industrial & Commercial Bank of China, H Shares |
743,000 | 568,910 | |||||||||
|
International Mining Machinery Holdings Ltd. |
335,000 | 324,295 | |||||||||
| IT Ltd. | 154,000 | 150,588 | |||||||||
| Jardine Matheson Holdings Ltd. | 49,600 | 2,844,118 | |||||||||
|
Melco Crown Entertainment Ltd. ADR*1 |
149,600 | 1,910,392 | |||||||||
| MIE Holdings Corp. | 539,567 | 229,818 | |||||||||
| New World Development Co., Ltd. | 1,249,000 | 1,897,255 | |||||||||
| PetroChina Co., Ltd., H Shares | 354,000 | 516,956 | |||||||||
| Sina Corp.*1 | 13,900 | 1,446,990 | |||||||||
| Skyworth Digital Holdings Ltd.1 | 794,000 | 478,814 | |||||||||
| Tencent Holdings Ltd. | 31,500 | 863,912 | |||||||||
|
Xingda International Holdings Ltd.1 |
1,051,000 | 1,028,096 | |||||||||
| Xinyi Glass Holdings Ltd. | 266,000 | 265,123 | |||||||||
| Total China common stocks | 27,410,022 | ||||||||||
| Cyprus: 0.04% | |||||||||||
| Globaltrans Investment PLC GDR2 | 29,336 | 545,382 | |||||||||
| Denmark: 0.26% | |||||||||||
| FLSmidth & Co. A/S | 40,122 | 3,412,000 | |||||||||
| Finland: 0.20% | |||||||||||
| Sampo Oyj, Class A | 81,170 | 2,620,772 | |||||||||
| France: 0.63% | |||||||||||
| BNP Paribas SA | 56,419 | 4,351,343 | |||||||||
| Carrefour SA*1 | 90,638 | 3,722,567 | |||||||||
| Total France common stocks | 8,073,910 | ||||||||||
| Germany: 2.07% | |||||||||||
| Allianz SE | 28,429 | 3,972,022 | |||||||||
| Bayer AG | 33,467 | 2,690,615 | |||||||||
| Beiersdorf AG | 42,408 | 2,751,946 | |||||||||
| E.ON AG | 119,926 | 3,404,457 | |||||||||
|
Fresenius Medical Care AG & Co. KGaA |
47,861 | 3,578,365 | |||||||||
| HeidelbergCement AG | 40,345 | 2,571,894 | |||||||||
| MAN SE1 | 20,257 | 2,699,008 | |||||||||
39
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| Germany—(Concluded) | |||||||||||
| Metro AG | 35,268 | $ | 2,134,995 | ||||||||
| SAP AG | 47,435 | 2,868,970 | |||||||||
| Total Germany common stocks | 26,672,272 | ||||||||||
| India: 0.12% | |||||||||||
| ICICI Bank Ltd. ADR | 10,500 | 517,650 | |||||||||
| Infosys Technology Ltd. ADR1 | 9,900 | 645,777 | |||||||||
| Reliance Industries Ltd. GDR3 | 10,694 | 430,644 | |||||||||
| Total India common stocks | 1,594,071 | ||||||||||
| Indonesia: 0.13% | |||||||||||
| Astra International Tbk PT | 90,000 | 667,776 | |||||||||
| Bank Rakyat Indonesia Persero Tbk PT | 674,500 | 513,194 | |||||||||
| Harum Energy Tbk PT | 458,000 | 510,917 | |||||||||
| Total Indonesia common stocks | 1,691,887 | ||||||||||
| Ireland: 0.35% | |||||||||||
| Covidien PLC | 56,300 | 2,996,849 | |||||||||
| Ryanair Holdings PLC ADR | 51,800 | 1,519,812 | |||||||||
| Total Ireland common stocks | 4,516,661 | ||||||||||
| Israel: 0.07% | |||||||||||
|
Teva Pharmaceutical Industries Ltd. ADR |
18,800 | 906,536 | |||||||||
| Italy: 0.28% | |||||||||||
| Fiat Industrial SpA* | 279,453 | 3,612,701 | |||||||||
| Japan: 2.22% | |||||||||||
| Asahi Glass Co., Ltd.1 | 222,000 | 2,592,198 | |||||||||
| ITOCHU Corp. | 328,300 | 3,415,035 | |||||||||
| KDDI Corp. | 264 | 1,899,507 | |||||||||
| Mitsubishi Corp. | 88,900 | 2,227,384 | |||||||||
| Nissan Motor Co., Ltd.1 | 198,400 | 2,082,658 | |||||||||
| ORIX Corp. | 21,990 | 2,139,185 | |||||||||
| Sankyo Co., Ltd. | 42,800 | 2,212,014 | |||||||||
| Shin-Etsu Chemical Co., Ltd. | 49,300 | 2,644,415 | |||||||||
| Sony Financial Holdings, Inc. | 200,600 | 3,627,210 | |||||||||
|
Sumitomo Mitsui Financial Group, Inc. |
117,100 | 3,603,864 | |||||||||
| THK Co., Ltd. | 86,800 | 2,209,530 | |||||||||
| Total Japan common stocks | 28,653,000 | ||||||||||
| Luxembourg: 0.23% | |||||||||||
| ArcelorMittal | 85,631 | 2,979,724 | |||||||||
| Malaysia: 0.13% | |||||||||||
| Axiata Group Bhd | 487,200 | 808,867 | |||||||||
| Malayan Banking Bhd | 277,800 | 823,318 | |||||||||
| Total Malaysia common stocks | 1,632,185 | ||||||||||
| Shares | Value | ||||||||||
| Mexico: 0.13% | |||||||||||
| America Movil SAB de CV ADR1 | 8,400 | $ | 452,592 | ||||||||
|
Fomento Economico Mexicano SAB de CV ADR |
12,000 | 797,880 | |||||||||
| Wal-Mart de Mexico SAB de CV | 126,000 | 373,313 | |||||||||
| Total Mexico common stocks | 1,623,785 | ||||||||||
| Netherlands: 0.74% | |||||||||||
| ASML Holding NV | 79,792 | 2,939,740 | |||||||||
| Heineken NV | 50,367 | 3,029,423 | |||||||||
| Wolters Kluwer NV | 161,224 | 3,572,627 | |||||||||
| Total Netherlands common stocks | 9,541,790 | ||||||||||
| Norway: 0.64% | |||||||||||
| Petroleum Geo-Services ASA* | 74,667 | 1,067,152 | |||||||||
| Statoil ASA | 114,037 | 2,887,492 | |||||||||
| Telenor ASA | 259,058 | 4,242,495 | |||||||||
| Total Norway common stocks | 8,197,139 | ||||||||||
| Philippines: 0.15% | |||||||||||
| Alliance Global Group, Inc. | 3,087,000 | 782,767 | |||||||||
| Megaworld Corp. | 10,755,000 | 494,441 | |||||||||
| Metropolitan Bank & Trust | 411,312 | 665,794 | |||||||||
| Total Philippines common stocks | 1,943,002 | ||||||||||
| Russia: 0.18% | |||||||||||
| Gazprom OAO ADR | 65,497 | 959,305 | |||||||||
| Lukoil OAO ADR | 7,019 | 447,461 | |||||||||
| Mechel OAO ADR1 | 30,500 | 728,645 | |||||||||
| United Co. RUSAL PLC* | 170,000 | 233,964 | |||||||||
| Total Russia common stocks | 2,369,375 | ||||||||||
| Singapore: 0.18% | |||||||||||
| DBS Group Holdings Ltd. | 192,089 | 2,299,233 | |||||||||
| South Africa: 0.20% | |||||||||||
| Imperial Holdings Ltd. | 14,902 | 267,435 | |||||||||
| Mr. Price Group Ltd. | 40,783 | 411,716 | |||||||||
| MTN Group Ltd. | 23,860 | 508,389 | |||||||||
| Sasol Ltd. | 12,747 | 671,860 | |||||||||
| Shoprite Holdings Ltd. | 48,407 | 729,282 | |||||||||
| Total South Africa common stocks | 2,588,682 | ||||||||||
| South Korea: 0.69% | |||||||||||
| Amorepacific Corp. | 456 | 509,900 | |||||||||
| Cheil Industries, Inc. | 8,075 | 969,448 | |||||||||
| Hwa Shin Co., Ltd. | 7,760 | 146,390 | |||||||||
| Hyundai Department Store Co., Ltd. | 3,128 | 509,256 | |||||||||
|
Hyundai Engineering & Construction Co., Ltd. |
6,758 | 548,378 | |||||||||
| Hyundai Heavy Industries Co., Ltd. | 1,878 | 784,409 | |||||||||
| Hyundai Mobis | 852 | 319,729 | |||||||||
40
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Continued) | |||||||||||
| South Korea—(Concluded) | |||||||||||
| Hyundai Motor Co. | 9,059 | $ | 2,022,970 | ||||||||
| KB Financial Group, Inc. | 14,915 | 709,413 | |||||||||
| KIWOOM Securities Co., Ltd. | 12,538 | 662,730 | |||||||||
| LG Chem Ltd. | 2,640 | 1,213,357 | |||||||||
| Samsung Heavy Industries Co., Ltd. | 11,810 | 530,281 | |||||||||
| Total South Korea common stocks | 8,926,261 | ||||||||||
| Spain: 0.46% | |||||||||||
| Acciona SA | 24,111 | 2,559,187 | |||||||||
| Banco Santander SA | 293,157 | 3,382,579 | |||||||||
| Total Spain common stocks | 5,941,766 | ||||||||||
| Switzerland: 0.92% | |||||||||||
| Credit Suisse Group AG* | 66,617 | 2,589,289 | |||||||||
| Novartis AG | 95,219 | 5,832,875 | |||||||||
| SGS SA | 1,812 | 3,439,928 | |||||||||
| Total Switzerland common stocks | 11,862,092 | ||||||||||
| Taiwan: 0.26% | |||||||||||
|
Chinatrust Financial Holding Co., Ltd. |
432,000 | 377,179 | |||||||||
|
Far Eastern Department Stores Co., Ltd. |
128,000 | 256,570 | |||||||||
| Formosa Chemicals & Fibre Corp. | 120,000 | 448,437 | |||||||||
| HTC Corp. | 10,000 | 341,605 | |||||||||
| Largan Precision Co., Ltd. | 19,000 | 614,695 | |||||||||
| Taishin Financial Holding Co., Ltd.* | 648,000 | 385,409 | |||||||||
| Uni-President Enterprises Corp. | 595,600 | 866,952 | |||||||||
| Total Taiwan common stocks | 3,290,847 | ||||||||||
| Thailand: 0.18% | |||||||||||
| Bangkok Bank PCL1 | 160,400 | 826,553 | |||||||||
| CP ALL PCL | 373,900 | 538,489 | |||||||||
| Italian-Thai Development PCL1 | 855,500 | 98,567 | |||||||||
| Thanachart Capital PCL | 370,400 | 343,577 | |||||||||
| Tisco Financial Group PCL | 443,000 | 542,237 | |||||||||
| Total Thailand common stocks | 2,349,423 | ||||||||||
| United Kingdom: 3.12% | |||||||||||
| Barclays PLC | 926,237 | 3,812,583 | |||||||||
| BP PLC | 859,742 | 6,334,573 | |||||||||
| Carnival PLC | 71,733 | 2,780,272 | |||||||||
| Cobham PLC | 135,214 | 458,865 | |||||||||
| Ensco PLC ADR1 | 47,700 | 2,542,410 | |||||||||
| Imperial Tobacco Group PLC | 123,651 | 4,111,188 | |||||||||
| Lloyds Banking Group PLC* | 3,065,161 | 2,408,494 | |||||||||
| Prudential PLC | 236,959 | 2,738,424 | |||||||||
| Rio Tinto PLC | 48,726 | 3,518,470 | |||||||||
| Sage Group PLC | 575,132 | 2,666,840 | |||||||||
| Scottish & Southern Energy PLC | 96,939 | 2,168,245 | |||||||||
| Shares | Value | ||||||||||
| Tullow Oil PLC | 31,920 | $ | 635,298 | ||||||||
| Vodafone Group PLC | 1,594,801 | 4,238,392 | |||||||||
| Xstrata PLC | 82,800 | 1,826,053 | |||||||||
|
Total United Kingdom common stocks |
40,240,107 | ||||||||||
| United States: 29.33% | |||||||||||
| Acorda Therapeutics, Inc.* | 34,200 | 1,105,002 | |||||||||
| Adobe Systems, Inc.* | 178,000 | 5,598,100 | |||||||||
| Aflac, Inc. | 70,300 | 3,281,604 | |||||||||
| Agilent Technologies, Inc.* | 73,000 | 3,731,030 | |||||||||
| Alexion Pharmaceuticals, Inc.* | 32,300 | 1,519,069 | |||||||||
| Allergan, Inc. | 70,400 | 5,860,800 | |||||||||
| Amazon.com, Inc.* | 42,500 | 8,690,825 | |||||||||
| American Electric Power Co., Inc. | 96,300 | 3,628,584 | |||||||||
| Amgen, Inc.* | 27,700 | 1,616,295 | |||||||||
| Amylin Pharmaceuticals, Inc.* | 30,000 | 400,800 | |||||||||
| Anadarko Petroleum Corp. | 20,600 | 1,581,256 | |||||||||
| Annaly Capital Management, Inc.1 | 141,200 | 2,547,248 | |||||||||
| Apollo Group, Inc., Class A*1 | 45,100 | 1,969,968 | |||||||||
| Apple, Inc.* | 39,600 | 13,292,532 | |||||||||
| AT&T, Inc. | 78,400 | 2,462,544 | |||||||||
| Avon Products, Inc. | 115,900 | 3,245,200 | |||||||||
| Baxter International, Inc. | 47,700 | 2,847,213 | |||||||||
| Bio-Rad Laboratories, Inc., Class A* | 12,600 | 1,503,936 | |||||||||
| Boeing Co. | 68,000 | 5,027,240 | |||||||||
| Broadcom Corp., Class A* | 53,700 | 1,806,468 | |||||||||
| C.H. Robinson Worldwide, Inc. | 34,800 | 2,743,632 | |||||||||
| Carnival Corp. | 134,000 | 5,042,420 | |||||||||
| Celanese Corp., Series A | 70,600 | 3,763,686 | |||||||||
| Cimarex Energy Co. | 28,200 | 2,535,744 | |||||||||
| Cisco Systems, Inc. | 173,300 | 2,705,213 | |||||||||
| Citigroup, Inc. | 157,390 | 6,553,720 | |||||||||
| CME Group, Inc. | 10,600 | 3,090,854 | |||||||||
| Colgate-Palmolive Co. | 66,200 | 5,786,542 | |||||||||
| Comcast Corp., Class A | 221,200 | 5,605,208 | |||||||||
| Concho Resources, Inc.* | 24,900 | 2,287,065 | |||||||||
| CONSOL Energy, Inc. | 36,900 | 1,788,912 | |||||||||
| Crown Castle International Corp.* | 70,200 | 2,863,458 | |||||||||
| CVS Caremark Corp. | 71,000 | 2,668,180 | |||||||||
| Danaher Corp. | 45,800 | 2,426,942 | |||||||||
|
Discovery Communications, Inc., Class A* |
51,100 | 2,093,056 | |||||||||
| Edison International | 36,100 | 1,398,875 | |||||||||
| EMC Corp.* | 184,800 | 5,091,240 | |||||||||
| Emdeon, Inc., Class A* | 41,500 | 544,480 | |||||||||
| EOG Resources, Inc. | 36,700 | 3,836,985 | |||||||||
| Estee Lauder Cos., Inc., Class A | 24,600 | 2,587,674 | |||||||||
| Express Scripts, Inc.* | 60,200 | 3,249,596 | |||||||||
| Exxon Mobil Corp. | 139,500 | 11,352,510 | |||||||||
| FedEx Corp. | 38,300 | 3,632,755 | |||||||||
| FirstEnergy Corp. | 94,400 | 4,167,760 | |||||||||
41
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Common stocks—(Concluded) | |||||||||||
| United States—(Concluded) | |||||||||||
| FMC Corp. | 15,600 | $ | 1,341,912 | ||||||||
| FMC Technologies, Inc.* | 60,700 | 2,718,753 | |||||||||
|
Freeport-McMoRan Copper & Gold, Inc. |
37,200 | 1,967,880 | |||||||||
| GameStop Corp., Class A*1 | 105,200 | 2,805,684 | |||||||||
| General Dynamics Corp. | 92,100 | 6,863,292 | |||||||||
| General Motors Co.* | 139,800 | 4,244,328 | |||||||||
| Goldman Sachs Group, Inc. | 35,900 | 4,777,931 | |||||||||
| Google, Inc., Class A* | 8,400 | 4,253,592 | |||||||||
| HCA Holdings, Inc.* | 42,600 | 1,405,800 | |||||||||
| Hertz Global Holdings, Inc.* | 229,000 | 3,636,520 | |||||||||
| Hess Corp. | 40,600 | 3,035,256 | |||||||||
| Hewlett-Packard Co. | 104,200 | 3,792,880 | |||||||||
| Illinois Tool Works, Inc. | 107,700 | 6,083,973 | |||||||||
| International Game Technology | 112,400 | 1,975,992 | |||||||||
| Intersil Corp., Class A | 212,200 | 2,726,770 | |||||||||
| Johnson & Johnson | 123,300 | 8,201,916 | |||||||||
| JPMorgan Chase & Co. | 181,800 | 7,442,892 | |||||||||
| Kellogg Co. | 50,600 | 2,799,192 | |||||||||
| Kraft Foods, Inc., Class A | 182,700 | 6,436,521 | |||||||||
| Kroger Co. | 192,500 | 4,774,000 | |||||||||
| Las Vegas Sands Corp.* | 87,300 | 3,684,933 | |||||||||
| McDonald's Corp. | 47,900 | 4,038,928 | |||||||||
| Medtronic, Inc. | 92,400 | 3,560,172 | |||||||||
| Merck & Co., Inc. | 164,000 | 5,787,560 | |||||||||
| MetLife, Inc. | 109,800 | 4,816,926 | |||||||||
| Morgan Stanley | 174,900 | 4,024,449 | |||||||||
| Netflix, Inc.* | 6,900 | 1,812,561 | |||||||||
| NextEra Energy, Inc. | 58,700 | 3,372,902 | |||||||||
| NIKE, Inc., Class B | 29,300 | 2,636,414 | |||||||||
| Noble Corp. | 122,500 | 4,827,725 | |||||||||
| Norfolk Southern Corp. | 51,900 | 3,888,867 | |||||||||
| Oracle Corp. | 110,300 | 3,629,973 | |||||||||
| PACCAR, Inc. | 43,150 | 2,204,533 | |||||||||
| Parker Hannifin Corp. | 20,700 | 1,857,618 | |||||||||
| PepsiCo, Inc. | 93,500 | 6,585,205 | |||||||||
| Pharmasset, Inc.* | 9,400 | 1,054,680 | |||||||||
| Polo Ralph Lauren Corp., Class A | 18,900 | 2,506,329 | |||||||||
| Praxair, Inc. | 15,700 | 1,701,723 | |||||||||
| Precision Castparts Corp. | 18,000 | 2,963,700 | |||||||||
| Priceline.com, Inc.* | 6,500 | 3,327,545 | |||||||||
| QUALCOMM, Inc. | 115,800 | 6,576,282 | |||||||||
| Red Hat, Inc.* | 28,600 | 1,312,740 | |||||||||
| ResMed, Inc.*1 | 40,300 | 1,247,285 | |||||||||
| Riverbed Technology, Inc.* | 56,000 | 2,217,040 | |||||||||
| Roper Industries, Inc. | 20,200 | 1,682,660 | |||||||||
| Salesforce.com, Inc.* | 13,600 | 2,026,128 | |||||||||
| Sherwin-Williams Co. | 28,500 | 2,390,295 | |||||||||
| Southwest Airlines Co. | 281,800 | 3,218,156 | |||||||||
| Symantec Corp.* | 231,800 | 4,571,096 | |||||||||
| Shares | Value | ||||||||||
| Teradata Corp.* | 50,600 | $ | 3,046,120 | ||||||||
| Time Warner, Inc. | 103,300 | 3,757,021 | |||||||||
| Ultra Petroleum Corp.*1 | 96,800 | 4,433,440 | |||||||||
| Union Pacific Corp. | 14,500 | 1,513,800 | |||||||||
| UnitedHealth Group, Inc. | 97,000 | 5,003,260 | |||||||||
| US Bancorp | 168,100 | 4,288,231 | |||||||||
| Viacom, Inc., Class B | 95,200 | 4,855,200 | |||||||||
| Visa, Inc., Class A | 73,000 | 6,150,980 | |||||||||
| Vulcan Materials Co. | 43,800 | 1,687,614 | |||||||||
| Watson Pharmaceuticals, Inc.* | 38,300 | 2,632,359 | |||||||||
| Wells Fargo & Co. | 235,900 | 6,619,354 | |||||||||
|
Total United States common stocks |
378,329,109 | ||||||||||
|
Total common stocks (cost $539,940,126) |
629,524,431 | ||||||||||
| Preferred stock: 0.37% | |||||||||||
| Germany: 0.37% | |||||||||||
|
Volkswagen AG, Preference shares (cost $2,783,954) |
23,437 | 4,832,127 | |||||||||
|
Face amount |
|||||||||||
| Bonds: 13.46% | |||||||||||
| Corporate bonds: 0.27% | |||||||||||
| Austria: 0.07% | |||||||||||
|
Oesterreichische Kontrollbank AG, 3.500%, due 04/28/14 |
EUR | 635,000 | 945,709 | ||||||||
| Netherlands: 0.01% | |||||||||||
|
Rabobank Nederland NV, 4.125%, due 01/14/20 |
100,000 | 144,733 | |||||||||
| Switzerland: 0.01% | |||||||||||
|
Credit Suisse/London, 4.750%, due 08/05/19 |
100,000 | 148,574 | |||||||||
| United Kingdom: 0.13% | |||||||||||
|
Barclays Bank PLC, 4.875%, due 08/13/19 |
120,000 | 176,557 | |||||||||
|
Lloyds TSB Bank PLC, 6.750%, due 10/24/18 |
GBP | 100,000 | 172,656 | ||||||||
|
Network Rail Infrastructure Finance PLC, 4.875%, due 03/07/12 |
235,000 | 386,809 | |||||||||
|
Royal Bank of Scotland PLC, 5.375%, due 09/30/19 |
EUR | 150,000 | 210,241 | ||||||||
|
Vodafone Group PLC, 3.625%, due 11/29/12 |
280,000 | 412,738 | |||||||||
42
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Continued) | |||||||||||
| Corporate bonds—(Concluded) | |||||||||||
| United Kingdom—(Concluded) | |||||||||||
|
Wellcome Trust Finance, 4.750%, due 05/28/21 |
GBP | 215,000 | $ | 362,148 | |||||||
|
Total United Kingdom corporate bonds |
1,721,149 | ||||||||||
| United States: 0.05% | |||||||||||
|
Citigroup, Inc., 5.500%, due 11/18/15 |
100,000 | 170,027 | |||||||||
|
Goldman Sachs Group, Inc., 5.125%, due 10/23/19 |
EUR | 150,000 | 213,521 | ||||||||
|
Morgan Stanley, 5.500%, due 10/02/17 |
125,000 | 185,898 | |||||||||
|
Total United States corporate bonds |
569,446 | ||||||||||
|
Total corporate bonds (cost $3,372,797) |
3,529,611 | ||||||||||
| Mortgage & agency debt securities: 0.11% | |||||||||||
| United States: 0.11% | |||||||||||
|
Federal Home Loan Mortgage Corp. Gold Pools, #G00194,4 7.500%, due 02/01/24 |
$ | 59,389 | 68,838 | ||||||||
|
Government National Mortgage Association, Series 2001-35, Class AZ, 6.500%, due 08/20/31 |
1,222,955 | 1,320,617 | |||||||||
|
Total mortgage & agency debt securities (cost $1,340,320) |
1,389,455 | ||||||||||
| US government obligations: 6.29% | |||||||||||
|
US Treasury Bonds, 4.750%, due 02/15/411 |
6,800,000 | 7,228,189 | |||||||||
| 5.375%, due 02/15/311 | 3,000,000 | 3,516,093 | |||||||||
| 6.250%, due 08/15/23 | 3,500,000 | 4,440,079 | |||||||||
| 8.000%, due 11/15/211 | 1,960,000 | 2,790,856 | |||||||||
|
US Treasury Notes, 0.500%, due 05/31/131 |
10,570,000 | 10,581,151 | |||||||||
| 0.750%, due 03/31/131 | 23,175,000 | 23,310,806 | |||||||||
| 1.750%, due 05/31/161 | 2,465,000 | 2,468,845 | |||||||||
| 2.500%, due 04/30/151 | 6,225,000 | 6,528,469 | |||||||||
| 2.625%, due 04/30/16 | 9,000,000 | 9,404,298 | |||||||||
| 3.125%, due 04/30/17 | 8,000,000 | 8,459,376 | |||||||||
| 3.125%, due 05/15/211 | 2,430,000 | 2,423,172 | |||||||||
|
Total US government obligations (cost $80,313,063) |
81,151,334 | ||||||||||
|
Face amount |
Value | ||||||||||
| Non-US government obligations: 6.74% | |||||||||||
| Australia: 0.02% | |||||||||||
|
Government of Australia, 4.500%, due 10/21/14 |
AUD | 225,000 | $ | 239,191 | |||||||
| Austria: 0.09% | |||||||||||
|
Government of Austria, 4.150%, due 03/15/373 |
EUR | 785,000 | 1,124,252 | ||||||||
| Belgium: 0.72% | |||||||||||
|
Government of Belgium, 3.500%, due 03/28/15 |
6,270,000 | 9,238,829 | |||||||||
| Canada: 0.09% | |||||||||||
|
Government of Canada, 3.750%, due 06/01/19 |
CAD | 170,000 | 187,106 | ||||||||
| 5.250%, due 06/01/12 | 935,000 | 1,004,346 | |||||||||
| 1,191,452 | |||||||||||
| Denmark: 0.06% | |||||||||||
|
Government of Denmark, 4.000%, due 11/15/17 |
DKK | 3,600,000 | 751,264 | ||||||||
| Finland: 0.08% | |||||||||||
|
Government of Finland, 4.375%, due 07/04/19 |
EUR | 667,000 | 1,050,027 | ||||||||
| France: 0.15% | |||||||||||
|
Government of France, 4.000%, due 04/25/14 |
680,000 | 1,039,529 | |||||||||
| 4.000%, due 04/25/55 | 630,000 | 867,458 | |||||||||
| 1,906,987 | |||||||||||
| Germany: 1.37% | |||||||||||
|
Bundesobligation, 2.250%, due 04/10/15 |
830,000 | 1,213,085 | |||||||||
| 4.000%, due 10/11/13 | 1,165,000 | 1,777,815 | |||||||||
|
Bundesrepublik Deutschland, 4.000%, due 07/04/16 |
1,595,000 | 2,493,634 | |||||||||
| 4.000%, due 01/04/37 | 1,230,000 | 1,841,850 | |||||||||
|
Bundesschatzanweisungen, 0.500%, due 06/15/12 |
5,235,000 | 7,525,337 | |||||||||
|
Kreditanstalt fuer Wiederaufbau, 3.875%, due 07/04/13 |
970,000 | 1,461,069 | |||||||||
| 5.500%, due 06/05/14 | AUD | 420,000 | 452,583 | ||||||||
|
Landwirtschaftliche Rentenbank, 3.250%, due 03/12/14 |
EUR | 600,000 | 892,275 | ||||||||
| 17,657,648 | |||||||||||
43
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds—(Concluded) | |||||||||||
| Non-US government obligations—(Concluded) | |||||||||||
| Ireland: 0.52% | |||||||||||
|
Government of Ireland, 3.900%, due 03/05/12 |
EUR | 170,000 | $ | 240,215 | |||||||
| 4.500%, due 04/18/20 | 7,145,000 | 6,501,729 | |||||||||
| 6,741,944 | |||||||||||
| Italy: 1.61% | |||||||||||
|
Buoni Poliennali Del Tesoro, 3.750%, due 03/01/21 |
6,360,000 | 8,539,717 | |||||||||
| 4.000%, due 02/01/17 | 1,330,000 | 1,921,197 | |||||||||
| 4.000%, due 02/01/37 | 7,835,000 | 9,056,477 | |||||||||
| 5.000%, due 08/01/34 | 980,000 | 1,321,951 | |||||||||
| 20,839,342 | |||||||||||
| Mexico: 0.06% | |||||||||||
|
Mexican Bonos, 8.000%, due 06/11/20 |
MXN | 8,500,000 | 781,689 | ||||||||
| Netherlands: 0.08% | |||||||||||
|
Government of the Netherlands, 4.250%, due 07/15/13 |
EUR | 645,000 | 981,085 | ||||||||
| Spain: 1.54% | |||||||||||
|
Kingdom of Spain, 3.900%, due 10/31/12 |
630,000 | 923,827 | |||||||||
| 4.000%, due 04/30/20 | 765,000 | 1,014,514 | |||||||||
| 4.200%, due 01/31/37 | 8,365,000 | 9,413,272 | |||||||||
| 5.500%, due 04/30/21 | 5,820,000 | 8,482,241 | |||||||||
| 19,833,854 | |||||||||||
| Sweden: 0.03% | |||||||||||
|
Government of Sweden, 6.750%, due 05/05/14 |
SEK | 2,320,000 | 410,779 | ||||||||
| United Kingdom: 0.32% | |||||||||||
|
UK Gilts, 2.750%, due 01/22/15 |
GBP | 1,035,000 | 1,723,498 | ||||||||
| 4.250%, due 12/07/49 | 765,000 | 1,228,929 | |||||||||
| 4.750%, due 12/07/38 | 680,000 | 1,178,108 | |||||||||
| 4,130,535 | |||||||||||
|
Total Non-US government obligations (cost $85,333,421) |
86,878,878 | ||||||||||
| Supranational bond: 0.05% | |||||||||||
| Supranational: 0.05% | |||||||||||
|
European Investment Bank, 5.375%, due 10/15/12 (cost $540,620) |
390,000 | 591,185 | |||||||||
|
Total bonds (cost $170,900,221) |
173,540,463 | ||||||||||
| Shares | Value | ||||||||||
| Investment companies: 33.85% | |||||||||||
|
UBS Credit Bond Relationship Fund*5 |
3,512,958 | $ | 51,413,192 | ||||||||
|
UBS Emerging Markets Equity Relationship Fund*5 |
1,266,080 | 51,853,695 | |||||||||
|
UBS Global (ex-U.S.) All Cap Growth Relationship Fund*5 |
13,046,629 | 191,160,516 | |||||||||
|
UBS Global Corporate Bond Relationship Fund*5 |
5,351,787 | 59,740,923 | |||||||||
|
UBS High Yield Relationship Fund*5 |
1,882,320 | 52,179,801 | |||||||||
|
UBS Small-Cap Equity Relationship Fund*5 |
514,661 | 30,331,888 | |||||||||
|
Total investment companies (cost $313,559,928) |
436,680,015 | ||||||||||
|
Number of warrants |
|||||||||||
| Warrants: 0.11% | |||||||||||
| Russia: 0.11% | |||||||||||
|
Aeroflot—Russian Airlines OJSC, strike @ USD 0.00001, expires 04/08/13* |
95,053 | 218,621 | |||||||||
|
Sberbank of Russia, strike @ USD 0.00001, expires 11/05/12* |
326,999 | 1,203,353 | |||||||||
|
Total warrants (cost $1,196,517) |
1,421,974 | ||||||||||
| Shares | |||||||||||
| Short-term investment: 2.92% | |||||||||||
| Investment company: 2.92% | |||||||||||
|
UBS Cash Management Prime Relationship Fund5 (cost $37,647,079) |
37,647,079 | 37,647,079 | |||||||||
| Investment of cash collateral from securities loaned: 1.81% | |||||||||||
|
UBS Private Money Market Fund LLC5 (cost $23,289,247) |
23,289,247 | 23,289,247 | |||||||||
|
Total investments: 101.33% (cost $1,089,317,072) |
1,306,935,336 | ||||||||||
|
Liabilities, in excess of cash and other assets: (1.33)% |
(17,105,347 | ) | |||||||||
| Net assets: 100.00% | $ | 1,289,829,989 | |||||||||
44
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $1,069,283,928; and net unrealized appreciation consisted of:
| Gross unrealized appreciation | $ | 251,234,853 | |||||
| Gross unrealized depreciation | (13,583,445 | ) | |||||
| Net unrealized appreciation of investments | $ | 237,651,408 | |||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 57.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
2 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2011, the value of this security amounted to $545,382 or 0.04% of net assets.
3 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $1,554,896 or 0.12% of net assets.
4 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
5 The table below details the Fund's investments in a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Funds.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Net realized gain during the year ended 06/30/11 |
Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | 17,046,965 | $ | 461,068,837 | $ | 440,468,723 | $ | — | $ | — | $ | 37,647,079 | $ | 94,987 | |||||||||||||||||
|
UBS Private Money Market Fund LLCa |
10,789,467 | 219,121,648 | 206,621,868 | — | — | 23,289,247 | 5,287 | ||||||||||||||||||||||||
|
UBS Credit Bond Relationship Fund |
74,925,815 | — | 28,500,000 | 6,393,076 | (1,405,699 | ) | 51,413,192 | — | |||||||||||||||||||||||
|
UBS Emerging Markets Equity Relationship Fund |
62,461,477 | 2,700,000 | 30,000,000 | 15,017,800 | 1,674,418 | 51,853,695 | — | ||||||||||||||||||||||||
|
UBS Global (ex-U.S.) All Cap Growth Relationship Fund |
193,561,579 | — | 58,000,000 | 16,100,531 | 39,498,406 | 191,160,516 | — | ||||||||||||||||||||||||
|
UBS Global Corporate Bond Relationship Fund |
116,724,130 | — | 62,900,000 | 4,784,230 | 1,132,563 | 59,740,923 | — | ||||||||||||||||||||||||
|
UBS High Yield Relationship Fund |
37,881,974 | 20,000,000 | 13,000,000 | 4,745,837 | 2,551,990 | 52,179,801 | — | ||||||||||||||||||||||||
|
UBS Small-Cap Equity Relationship Fund |
31,361,478 | — | 10,000,000 | 2,794,596 | 6,175,814 | 30,331,888 | — | ||||||||||||||||||||||||
| $ | 544,752,885 | $ | 702,890,485 | $ | 849,490,591 | $ | 49,836,070 | $ | 49,627,492 | $ | 497,616,341 | $ | 100,274 | ||||||||||||||||||
a The advisor does earn a management fee from this affiliated fund, and any income earned is net of expenses. Please see the Notes to financial statements for further information.
45
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| Goldman Sachs International | EUR | 63,425,000 | USD | 90,874,389 | 09/06/11 | $ | (935,202 | ) | |||||||||||
| Goldman Sachs International | USD | 31,454,299 | SEK | 200,680,000 | 09/06/11 | 151,945 | |||||||||||||
| JPMorgan Chase Bank | EUR | 3,585,000 | USD | 5,193,511 | 09/06/11 | 4,116 | |||||||||||||
| JPMorgan Chase Bank | HKD | 91,375,000 | USD | 11,743,727 | 09/06/11 | (3,322 | ) | ||||||||||||
| JPMorgan Chase Bank | NOK | 28,660,000 | USD | 5,210,530 | 09/06/11 | (79,432 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 4,754,546 | CAD | 4,655,000 | 09/06/11 | 64,195 | |||||||||||||
| Morgan Stanley & Co., Inc. | GBP | 12,370,000 | USD | 20,125,062 | 09/06/11 | 287,293 | |||||||||||||
| Morgan Stanley & Co., Inc. | SEK | 162,656,223 | EUR | 17,650,000 | 09/06/11 | (68,756 | ) | ||||||||||||
| Morgan Stanley & Co., Inc. | USD | 96,234,461 | JPY | 7,729,600,000 | 09/06/11 | (186,845 | ) | ||||||||||||
| Morgan Stanley & Co., Inc. | USD | 16,322,512 | MXN | 195,640,000 | 09/06/11 | 289,778 | |||||||||||||
| Morgan Stanley & Co., Inc. | USD | 15,214,004 | PLN | 41,980,000 | 09/06/11 | (9,742 | ) | ||||||||||||
| Morgan Stanley & Co., Inc. | USD | 24,501,307 | SGD | 30,320,000 | 09/06/11 | 183,417 | |||||||||||||
| Net unrealized depreciation on forward foreign currency contracts | $ | (302,555 | ) | ||||||||||||||||
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| US Treasury futures buy contracts: | |||||||||||||||||||
| 10 Year US Treasury Notes, 145 contracts (USD) | September 2011 | $ | 17,971,167 | $ | 17,737,578 | $ | (233,589 | ) | |||||||||||
| Index futures buy contracts: | |||||||||||||||||||
| Dow Jones Euro STOXX 50 Index, 326 contracts (EUR) | September 2011 | 13,095,015 | 13,461,007 | 365,992 | |||||||||||||||
| FTSE 100 Index, 137 contracts (GBP) | September 2011 | 12,667,004 | 12,989,210 | 322,206 | |||||||||||||||
| TOPIX Index, 131 contracts (JPY) | September 2011 | 13,192,117 | 13,887,125 | 695,008 | |||||||||||||||
| Index futures sell contracts: | |||||||||||||||||||
| Russell 2000 Mini Index, 526 contracts (USD) | September 2011 | (41,431,379 | ) | (43,416,040 | ) | (1,984,661 | ) | ||||||||||||
| S&P 500 E-mini Index, 225 contracts (USD) | September 2011 | (14,421,431 | ) | (14,799,375 | ) | (377,944 | ) | ||||||||||||
| Interest rate futures buy contracts: | |||||||||||||||||||
| Euro-Bund, 118 contracts (EUR) | September 2011 | 21,376,206 | 21,471,849 | 95,643 | |||||||||||||||
| Long Gilt, 30 contracts (GBP) | September 2011 | 5,770,032 | 5,785,042 | 15,010 | |||||||||||||||
| Net unrealized depreciation on futures contracts | $ | (1,102,335 | ) | ||||||||||||||||
46
UBS Global Allocation Fund
Portfolio of investments
June 30, 2011
Concluded
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Common stocks | $ | 425,981,775 | $ | 203,542,656 | — | $ | 629,524,431 | ||||||||||||
| Preferred stock | — | 4,832,127 | — | 4,832,127 | |||||||||||||||
| Corporate bonds | — | 3,529,611 | — | 3,529,611 | |||||||||||||||
| Mortgage & agency debt securities | — | 1,389,455 | — | 1,389,455 | |||||||||||||||
| US government obligations | — | 81,151,334 | — | 81,151,334 | |||||||||||||||
| Non-US government obligations | — | 86,878,878 | — | 86,878,878 | |||||||||||||||
| Supranational bond | — | 591,185 | — | 591,185 | |||||||||||||||
| Investment companies | — | 436,680,015 | — | 436,680,015 | |||||||||||||||
| Warrants | — | 1,421,974 | — | 1,421,974 | |||||||||||||||
| Short-term investment | — | 37,647,079 | — | 37,647,079 | |||||||||||||||
| Investment of cash collateral from securities loaned | — | 23,289,247 | — | 23,289,247 | |||||||||||||||
| Forward foreign currency contracts | — | (302,555 | ) | — | (302,555 | ) | |||||||||||||
| Futures contracts | (2,485,541 | ) | 1,383,206 | — | (1,102,335 | ) | |||||||||||||
| Total | $ | 423,496,234 | $ | 882,034,212 | — | $ | 1,305,530,446 | ||||||||||||
See accompanying notes to financial statements.
47
UBS Global Frontier Fund
Portfolio performance
For the 12 months ended June 30, 2011, Class A shares of UBS Global Frontier Fund (the "Fund") returned 36.53% (Class A shares returned 28.98% after the deduction of the maximum sales charge), while Class Y shares returned 36.66%. For comparison purposes, the Fund's benchmark, the GSMI Mutual Fund Index (the "Index"), returned 22.50% and the MSCI World Free Index (net) returned 30.51%. (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 50; 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 the Index returns do not reflect the deduction of fees and expenses.)
The Fund's outperformance was due primarily to market allocation decisions, currency strategy and leverage positioning.
Portfolio performance summary1
What worked
• The Fund's overweight to risk assets made a significant contribution to relative performance.
– The Fund was overweight to equities throughout the period, finishing the 12-month period at a 68% equity allocation, versus the Index weight of 65%. This position was rewarded as corporate profits often exceeded expectations and investor risk appetite was generally robust.
– Within equities, the Fund's modest overweight to US stocks was beneficial, as they outperformed their international counterparts.
– Having an underweight to emerging markets equities was positive for performance as they lagged their developed market peers.
• The Fund's overweights to investment grade corporate and high yield bonds enhanced results.
– We de-emphasized US Treasuries and international sovereigns in favor of corporate bonds. This was beneficial when corporate bonds posted strong returns during the 12-month period, as investors sought to generate incremental yield in the low interest rate environment. In particular, the Fund's long position to investment grade financials was a positive for performance, as their spreads narrowed during the period. (Spread measures the difference in yield between a fixed income security and a government bond of similar duration.)
– Having a long position to high yield bonds was beneficial, as they generated good performance during most of the period.
1 For a detailed commentary on the market environment in general during the reporting period, see page 2.
48
UBS Global Frontier Fund
• The Fund's currency strategy was an overall positive for performance.
– The Fund's overweight to the Swedish krona was beneficial. The currency appreciated as Sweden's economic fundamentals were relatively strong, and its banking system was not as adversely impacted by the European sovereign debt crisis.
– Long positions to Asia ex-Japan currencies enhanced results, as the economies of these countries continued to expand at a solid pace.
• Overall, security selection modestly contributed to performance. In particular, the Fund's exposure to large-cap growth stocks and its investment grade financial holdings performed well.
• The Fund's leverage strategy magnified positive performance during the period. We held the amount of leverage in the Fund at its maximum level of 50% for the 12-month period. This allowed us to take further advantage of the strong performance generated by global equities, and magnified the impact of our underweight to fixed income. We continue to feel that riskier assets such as equities and investment grade corporate bonds offer attractive absolute and risk-adjusted potential returns.
• Derivatives use contributed to Fund performance. During the review period, the Fund used derivatives for risk management purposes and as part of the Fund's investment strategies to enhance return across markets and currencies. Our use of derivatives had a positive impact on performance across both of these areas.
What didn't work
• An overweight to certain global ex-US equities was a modest negative for performance. In particular an overweight to European equities was a drag on performance, as they were negatively impacted by the sovereign debt crisis in peripheral Europe.
• Certain currency strategies detracted from performance.
– The Fund's underweight to the euro was not rewarded. Despite the European sovereign debt crisis, the euro strengthened during the period.
– Having an underweight to the strong-performing Australian dollar detracted from performance, as it benefited from rising commodity prices.
• Security selection was a drawback in the large cap value equity style space.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2011. The views and opinions in the letter were current as of August 15, 2011. They are not guarantees of future 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.
49
UBS Global Frontier Fund
Average annual total returns for periods ended 06/30/11 (unaudited)
| 1 year | Inception1 | ||||||||||
| Before deducting maximum sales charge | |||||||||||
| Class A2 | 36.53 | % | (1.69 | )% | |||||||
| Class C3 | 35.39 | (2.44 | ) | ||||||||
| Class Y4 | 36.66 | (1.46 | ) | ||||||||
| After deducting maximum sales charge | |||||||||||
| Class A2 | 28.98 | % | (3.09 | )% | |||||||
| Class C3 | 34.39 | (2.44 | ) | ||||||||
| MSCI World Free Index (net)5 | 30.51 | % | (1.94 | )% | |||||||
| GSMI Mutual Fund Index6 | 22.50 | 2.43 | |||||||||
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2010 prospectuses were as follows: Class A—1.75% and 1.53%; Class C—2.54% and 2.28%; Class Y—1.48% and 1.28%. 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 UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or 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 expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short), through the 12-month period ending October 27, 2011, do not exceed 1.40% for Class A shares, 2.15% for Class C shares and 1.15% for Class Y shares. 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 Frontier Fund Class A, Class C and Class Y shares is July 26, 2007. Inception date of the indices, for the purpose of this illustration, is July 31, 2007.
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 MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of May 2010, the index consisted of 24 developed market country indices. Dividends are reinvested after deduction of withholding tax, using tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. Had US tax rates been applied, the performance of the index would be different. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The GSMI Mutual Fund Index is an unmanaged index compiled by the Advisor, constructed as follows: 65% MSCI All Country World Index, 15% Citigroup World Government Bond ex US Index, 15% Citigroup US Government Bond Index, 2% J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),and 3% BofA 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% BofA Merrill Lynch US High Yield Cash Pay Constrained Index replaced the 3% BofA Merrill Lynch US High Yield Cash Pay Index. On April 30, 2009, the 65% MSCI All Country World Index replaced the 40% Russell 3000 Index, 22% MSCI World ex USA Index and 3% MSCI Emerging Markets Index (net); the 15% Citigroup World Government Bond ex US Index and 15% Citigroup US Government Bond Index replaced the 9% Citigroup World Government Bond ex US Index and the 21% Citigroup Broad Investment Grade Index. Investors should note that indices do not reflect the deduction of fees and expenses.
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.
50
UBS Global Frontier Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.50% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Global Frontier Fund Class A and Class Y shares versus the MSCI World Free Index (net) and the GSMI Mutual Fund Index from July 26, 2007, which is the inception date of the two classes, through June 30, 2011. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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.
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.
51
UBS Global Frontier Fund
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2011
|
Percentage of net assets |
|||||||
|
Kingdom of Belgium, 3.500%, due 03/28/15 |
1.2 | % | |||||
|
Buoni Poliennali Del Tesoro, 4.000%, due 02/01/37 |
1.1 | ||||||
|
Kingdom of Spain, 5.500%, due 04/30/21 |
1.0 | ||||||
|
Bundesschatzanweisungen, 0.500%, due 06/15/12 |
0.8 | ||||||
|
Bundesrepublik Deutschland, 6.250%, due 01/04/24 |
0.7 | ||||||
|
Buoni Poliennali Del Tesoro, 3.750%, due 03/01/21 |
0.7 | ||||||
|
Bundesrepublik Deutschland, 4.000%, due 07/04/16 |
0.7 | ||||||
|
Kingdom of Spain, 4.200%, due 01/31/37 |
0.6 | ||||||
|
US Treasury Notes, 0.750%, due 03/31/13 |
0.6 | ||||||
|
Government of France, 4.250%, due 10/25/17 |
0.4 | ||||||
| Total | 7.8 | % | |||||
Country exposure by issuer, top five (unaudited)2
As of June 30, 2011
|
Percentage of net assets |
|||||||
| Germany | 4.1 | % | |||||
| Italy | 2.2 | ||||||
| United States | 2.0 | ||||||
| Spain | 1.8 | ||||||
| Belgium | 1.2 | ||||||
| Total | 11.3 | % | |||||
Industry diversification (unaudited)3
As a percentage of net assets as of June 30, 2011
| Bonds | |||||||
| Corporate bond | |||||||
| Diversified financial services | 0.29 | % | |||||
| US government obligations | 1.98 | ||||||
| Non-US government obligations | 11.87 | ||||||
| Total bonds | 14.14 | % | |||||
| Investment companies | |||||||
| UBS Credit Bond Relationship Fund | 6.08 | ||||||
| UBS Emerging Markets Equity Relationship Fund | 12.32 | ||||||
| UBS Global (ex-U.S.) All Cap Growth Relationship Fund | 11.21 | ||||||
| UBS Global Corporate Bond Relationship Fund | 6.65 | ||||||
| UBS High Yield Relationship Fund | 5.94 | ||||||
| UBS International Equity Relationship Fund | 11.01 | ||||||
| UBS U.S. Large Cap Equity Relationship Fund | 17.46 | ||||||
| UBS U.S. Large Cap Growth Equity Relationship Fund | 8.32 | ||||||
| Total investment companies | 78.99 | % | |||||
| Short-term investment | 2.52 | ||||||
| Total investments | 95.65 | % | |||||
| Cash and other assets, less liabilities | 4.35 | ||||||
| Net assets | 100.00 | % | |||||
1 Figures represent the direct investments of UBS Global Frontier Fund. Figures would be different if a breakdown of the underlying investment companies was included.
2 Figures represent the direct investments of UBS Global Frontier Fund. If a breakdown of the underlying investment companies was included, the country exposure percentages would be as follows: United States 39.6%, Germany 6.8%, United Kingdom 6.7%, Japan 3.8%, China 3.8%.
3 Figures represent the industry breakdown of direct investments of UBS Global Frontier Fund. Figures would be different if a breakdown of the underlying investment companies' industry diversification and derivatives exposure was included.
52
UBS Global Frontier Fund
Portfolio of investments
June 30, 2011
|
Face amount |
Value | ||||||||||
| Bonds: 14.14% | |||||||||||
| Corporate bond: 0.29% | |||||||||||
| Austria: 0.29% | |||||||||||
|
Oesterreichische Kontrollbank AG, 3.500%, due 04/28/14 (cost $177,252) |
EUR | 130,000 | $ | 193,610 | |||||||
| US government obligations: 1.98% | |||||||||||
|
US Treasury Bonds, 4.750%, due 02/15/41 |
$ | 105,000 | 111,612 | ||||||||
| 6.250%, due 08/15/23 | 70,000 | 88,802 | |||||||||
| 6.625%, due 02/15/27 | 105,000 | 138,912 | |||||||||
|
US Treasury Notes, 0.500%, due 05/31/131 |
115,000 | 115,121 | |||||||||
| 0.750%, due 03/31/131 | 385,000 | 387,256 | |||||||||
| 0.875%, due 01/31/121 | 30,000 | 30,131 | |||||||||
| 1.750%, due 05/31/161 | 140,000 | 140,218 | |||||||||
| 2.500%, due 04/30/15 | 170,000 | 178,288 | |||||||||
| 4.625%, due 07/31/12 | 120,000 | 125,667 | |||||||||
|
Total US government obligations (cost $1,292,562) |
1,316,007 | ||||||||||
| Non-US government obligations: 11.87% | |||||||||||
| Austria: 0.07% | |||||||||||
|
Republic of Austria, 4.350%, due 03/15/192 |
EUR | 30,000 | 46,644 | ||||||||
| Belgium: 1.15% | |||||||||||
|
Kingdom of Belgium, 3.500%, due 03/28/15 |
520,000 | 766,219 | |||||||||
| Canada: 0.20% | |||||||||||
|
Government of Canada, 5.250%, due 06/01/12 |
CAD | 125,000 | 134,271 | ||||||||
| Denmark: 0.11% | |||||||||||
|
Government of Denmark, 4.000%, due 11/15/17 |
DKK | 370,000 | 77,213 | ||||||||
| France: 0.54% | |||||||||||
|
Government of France, 4.250%, due 10/25/17 |
EUR | 190,000 | 295,057 | ||||||||
| 4.750%, due 04/25/35 | 40,000 | 63,099 | |||||||||
| 358,156 | |||||||||||
| Germany: 4.07% | |||||||||||
|
Bundesrepublik Deutschland, 2.250%, due 09/04/20 |
190,000 | 260,595 | |||||||||
| 4.000%, due 07/04/16 | 280,000 | 437,754 | |||||||||
| 4.000%, due 01/04/37 | 145,000 | 217,129 | |||||||||
| 4.750%, due 07/04/34 | 95,000 | 157,754 | |||||||||
| 6.250%, due 01/04/24 | 255,000 | 480,651 | |||||||||
|
Bundesschatzanweisungen, 0.500%, due 06/15/12 |
360,000 | 517,501 | |||||||||
| 1.000%, due 03/16/12 | 100,000 | 144,657 | |||||||||
|
Face amount |
Value | ||||||||||
|
Kreditanstalt fuer Wiederaufbau, 3.875%, due 07/04/13 |
EUR | 160,000 | $ | 241,001 | |||||||
| 4.625%, due 10/12/12 | 30,000 | 45,081 | |||||||||
| 5.500%, due 06/05/14 | AUD | 95,000 | 102,370 | ||||||||
|
Landwirtschaftliche Rentenbank, 3.250%, due 03/12/14 |
EUR | 70,000 | 104,099 | ||||||||
| 2,708,592 | |||||||||||
| Ireland: 0.48% | |||||||||||
|
Republic of Ireland, 3.900%, due 03/05/12 |
25,000 | 35,326 | |||||||||
| 4.500%, due 04/18/20 | 310,000 | 282,090 | |||||||||
| 317,416 | |||||||||||
| Italy: 2.16% | |||||||||||
|
Buoni Poliennali Del Tesoro, 3.750%, due 03/01/21 |
340,000 | 456,526 | |||||||||
| 4.000%, due 02/01/37 | 635,000 | 733,996 | |||||||||
| 4.250%, due 08/01/13 | 165,000 | 244,503 | |||||||||
| 1,435,025 | |||||||||||
| Mexico: 0.10% | |||||||||||
|
Mexican Bonos, Series M, 8.000%, due 06/11/20 |
MXN | 700,000 | 64,374 | ||||||||
| Netherlands: 0.25% | |||||||||||
|
Government of the Netherlands, 4.000%, due 07/15/18 |
EUR | 40,000 | 61,676 | ||||||||
| 5.000%, due 07/15/12 | 70,000 | 105,084 | |||||||||
| 166,760 | |||||||||||
| Spain: 1.78% | |||||||||||
|
Kingdom of Spain, 4.200%, due 01/31/37 |
370,000 | 416,367 | |||||||||
| 4.850%, due 10/31/20 | 85,000 | 118,752 | |||||||||
| 5.500%, due 04/30/21 | 445,000 | 648,556 | |||||||||
| 1,183,675 | |||||||||||
| Sweden: 0.06% | |||||||||||
|
Government of Sweden, 6.750%, due 05/05/14 |
SEK | 240,000 | 42,494 | ||||||||
| United Kingdom: 0.90% | |||||||||||
|
UK Gilts, 2.000%, due 01/22/16 |
GBP | 110,000 | 176,024 | ||||||||
| 2.250%, due 03/07/14 | 50,000 | 82,468 | |||||||||
| 3.750%, due 09/07/19 | 35,000 | 58,662 | |||||||||
| 4.000%, due 03/07/22 | 30,000 | 49,766 | |||||||||
| 4.250%, due 12/07/49 | 65,000 | 104,419 | |||||||||
| 4.750%, due 12/07/38 | 75,000 | 129,938 | |||||||||
| 601,277 | |||||||||||
|
Total non-US government obligations (cost $7,706,831) |
7,902,116 | ||||||||||
|
Total bonds (cost $9,176,645) |
9,411,733 | ||||||||||
53
UBS Global Frontier Fund
Portfolio of investments
June 30, 2011
| Shares | Value | ||||||||||
| Investment companies: 78.99% | |||||||||||
|
UBS Credit Bond Relationship Fund*3 |
276,216 | $ | 4,042,507 | ||||||||
|
UBS Emerging Markets Equity Relationship Fund*3 |
200,111 | 8,195,772 | |||||||||
|
UBS Global (ex-U.S.) All Cap Growth Relationship Fund*3 |
509,390 | 7,463,632 | |||||||||
|
UBS Global Corporate Bond Relationship Fund*3 |
396,242 | 4,423,175 | |||||||||
|
UBS High Yield Relationship Fund*3 |
142,628 | 3,953,787 | |||||||||
|
UBS International Equity Relationship Fund*3 |
393,027 | 7,328,307 | |||||||||
|
UBS U.S. Large Cap Equity Relationship Fund*3 |
563,821 | 11,621,189 | |||||||||
|
UBS U.S. Large Cap Growth Equity Relationship Fund*3 |
379,364 | 5,536,738 | |||||||||
|
Total investment companies (cost $36,573,944) |
52,565,107 | ||||||||||
| Shares | Value | ||||||||||
| Short-term investment: 2.52% | |||||||||||
| Investment company: 2.52% | |||||||||||
|
UBS Cash Management Prime Relationship Fund3 (cost $1,679,454) |
1,679,454 | $ | 1,679,454 | ||||||||
|
Total investments: 95.65% (cost $47,430,043) |
63,656,294 | ||||||||||
|
Cash and other assets, less liabilities: 4.35% |
2,894,238 | ||||||||||
| Net assets: 100.00% | $ | 66,550,532 | |||||||||
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $68,698,608; and net unrealized depreciation consisted of:
| Gross unrealized appreciation | $ | — | |||||
| Gross unrealized depreciation | (5,042,314 | ) | |||||
| Net unrealized depreciation of investments | $ | (5,042,314 | ) | ||||
For a listing of defined portfolio acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 57.
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2011.
2 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security is considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2011, the value of these securities amounted to $46,644 or 0.07% of net assets.
54
UBS Global Frontier Fund
Portfolio of investments
June 30, 2011
3 The table below details the Fund's investments in funds advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Funds.
| Security description |
Value 06/30/10 |
Purchases during the year ended 06/30/11 |
Sales during the year ended 06/30/11 |
Net realized gain during the year ended 06/30/11 |
Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/11 |
Value 06/30/11 |
Income earned from affiliate for the year ended 06/30/11 |
||||||||||||||||||||||||
|
UBS Cash Management Prime Relationship Fund |
$ | 625,102 | $ | 32,912,632 | $ | 31,858,280 | $ | — | $ | — | $ | 1,679,454 | $ | 8,487 | |||||||||||||||||
|
UBS Credit Bond Relationship Fund |
4,005,338 | 1,500,000 | 1,750,000 | 390,326 | (103,157 | ) | 4,042,507 | — | |||||||||||||||||||||||
|
UBS Emerging Markets Equity Relationship Fund |
8,982,575 | 600,000 | 3,700,000 | 1,972,312 | 340,885 | 8,195,772 | — | ||||||||||||||||||||||||
|
UBS Global (ex-U.S.) All Cap Growth Relationship Fund |
6,080,116 | 1,350,000 | 1,900,000 | 447,214 | 1,486,302 | 7,463,632 | — | ||||||||||||||||||||||||
|
UBS Global Corporate Bond Relationship Fund |
7,355,743 | 900,000 | 4,300,000 | 372,708 | 94,724 | 4,423,175 | — | ||||||||||||||||||||||||
|
UBS High Yield Relationship Fund |
2,560,339 | 1,600,000 | 750,000 | 320,521 | 222,927 | 3,953,787 | — | ||||||||||||||||||||||||
|
UBS International Equity Relationship Fund |
6,453,919 | 500,000 | 1,500,000 | 496,383 | 1,378,005 | 7,328,307 | — | ||||||||||||||||||||||||
|
UBS U.S. Large Cap Equity Relationship Fund |
11,425,002 | — | 2,800,000 | 757,519 | 2,238,668 | 11,621,189 | — | ||||||||||||||||||||||||
|
UBS U.S. Large Cap Growth Equity Relationship Fund |
5,368,075 | — | 1,800,000 | 776,662 | 1,192,001 | 5,536,738 | — | ||||||||||||||||||||||||
| $ | 52,856,209 | $ | 39,362,632 | $ | 50,358,280 | $ | 5,533,645 | $ | 6,850,355 | $ | 54,244,561 | $ | 8,487 | ||||||||||||||||||
Forward foreign currency contracts
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| JPMorgan Chase Bank | EUR | 2,400,000 | USD | 3,434,361 | 09/06/11 | $ | (39,712 | ) | |||||||||||
| JPMorgan Chase Bank | USD | 795,166 | AUD | 760,000 | 09/06/11 | 13,292 | |||||||||||||
| JPMorgan Chase Bank | USD | 1,496,329 | CAD | 1,465,000 | 09/06/11 | 20,203 | |||||||||||||
| JPMorgan Chase Bank | USD | 1,248,678 | CHF | 1,045,000 | 09/06/11 | (5,267 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 1,008,524 | GBP | 620,000 | 09/06/11 | (14,230 | ) | ||||||||||||
| JPMorgan Chase Bank | USD | 108,601 | HKD | 845,000 | 09/06/11 | 31 | |||||||||||||
| JPMorgan Chase Bank | USD | 948,888 | KRW | 1,035,000,000 | 09/06/11 | 16,655 | |||||||||||||
| JPMorgan Chase Bank | USD | 1,295,289 | MXN | 15,540,000 | 09/06/11 | 24,252 | |||||||||||||
| JPMorgan Chase Bank | USD | 369,715 | MYR | 1,128,000 | 09/06/11 | 2,031 | |||||||||||||
| JPMorgan Chase Bank | USD | 1,254,566 | PLN | 3,465,000 | 09/06/11 | 383 | |||||||||||||
| JPMorgan Chase Bank | USD | 2,263,678 | SEK | 14,440,000 | 09/06/11 | 10,561 | |||||||||||||
| JPMorgan Chase Bank | USD | 1,886,802 | SGD | 2,335,000 | 09/06/11 | 14,215 | |||||||||||||
| JPMorgan Chase Bank | USD | 422,742 | ZAR | 2,910,000 | 09/06/11 | 3,542 | |||||||||||||
55
UBS Global Frontier Fund
Portfolio of investments
June 30, 2011
Concluded
| Counterparty |
Contracts to deliver |
In exchange for |
Maturity date |
Unrealized appreciation/ (depreciation) |
|||||||||||||||
| Morgan Stanley & Co., Inc. | SEK | 12,579,362 | EUR | 1,365,000 | 09/06/11 | $ | (5,318 | ) | |||||||||||
| Morgan Stanley & Co., Inc. | USD | 9,798,246 | JPY | 787,000,000 | 09/06/11 | (19,024 | ) | ||||||||||||
| Net unrealized appreciation on forward foreign currency contracts | $ | 21,614 | |||||||||||||||||
Futures contracts
|
Expiration date |
Cost/ (proceeds) |
Value |
Unrealized appreciation/ (depreciation) |
||||||||||||||||
| Index futures buy contracts: | |||||||||||||||||||
| Amsterdam Exchange Index, 4 contracts (EUR) | July 2011 | $ | 391,172 | $ | 394,854 | $ | 3,682 | ||||||||||||
| DAX Index, 4 contracts (EUR) | September 2011 | 1,046,941 | 1,072,854 | 25,913 | |||||||||||||||
| Dow Jones Euro STOXX 50 Index, 98 contracts (EUR) | September 2011 | 3,936,538 | 4,046,560 | 110,022 | |||||||||||||||
| E-mini S&P 500 Futures, 189 contracts (USD) | September 2011 | 12,115,325 | 12,431,475 | 316,150 | |||||||||||||||
| FTSE 100 Index, 34 contracts (GBP) | September 2011 | 3,143,636 | 3,223,599 | 79,963 | |||||||||||||||
| Hang Seng Stock Index, 3 contracts (HKD) | July 2011 | 420,466 | 435,520 | 15,054 | |||||||||||||||
| IBEX 35 Index, 2 contracts (EUR) | July 2011 | 290,104 | 298,855 | 8,751 | |||||||||||||||
| OMX Stockholm 30 Index, 50 contracts (SEK) | July 2011 | 873,882 | 881,267 | 7,385 | |||||||||||||||
| S&P 500 Index, 6 contracts (USD) | September 2011 | 1,894,521 | 1,973,250 | 78,729 | |||||||||||||||
| S&P Toronto Stock Exchange 60 Index, 13 contracts (CAD) | September 2011 | 2,013,066 | 2,054,767 | 41,701 | |||||||||||||||
| SPI 200 Index, 12 contracts (AUD) | September 2011 | 1,455,801 | 1,484,332 | 28,531 | |||||||||||||||
| TOPIX Index, 33 contracts (JPY) | September 2011 | 3,323,205 | 3,498,283 | 175,078 | |||||||||||||||
| Index futures sell contracts: | |||||||||||||||||||
| Russell 2000 Mini Index, 15 contracts (USD) | September 2011 | (1,181,503 | ) | (1,238,100 | ) | (56,597 | ) | ||||||||||||
| Net unrealized appreciation on futures contracts | $ | 834,362 | |||||||||||||||||
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments:
| Measurements at 06/30/11 | |||||||||||||||||||
| Description |
Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | |||||||||||||||
| Corporate bonds | $ | — | $ | 193,610 | — | $ | 193,610 | ||||||||||||
| US government obligations | — | 1,316,007 | — | 1,316,007 | |||||||||||||||
| Non-US government obligations | — | 7,902,116 | — | 7,902,116 | |||||||||||||||
| Investment companies | — | 52,565,107 | — | 52,565,107 | |||||||||||||||
| Short-term investment | — | 1,679,454 | — | 1,679,454 | |||||||||||||||
| Forward foreign currency contracts | — | 21,614 | — | 21,614 | |||||||||||||||
| Futures contracts | 379,983 | 454,379 | — | 834,362 | |||||||||||||||
| Total | $ | 379,983 | $ | 64,132,287 | — | $ | 64,512,270 | ||||||||||||
See accompanying notes to financial statements.
56
The UBS Funds
Portfolio of investments
Portfolio acronyms
ABS Asset-backed securities
ADR American depositary receipt
BBA British Banking Association
BBSW Bank Bill Swap Reference Rate
(Australian Financial Market)
CDO Collateralized debt obligations
CLO Collateralized loan obligations
CVA Dutch certification—depository certificate
EURIBOR Euro Interbank Offered Rate
GDR Global depositary receipt
GMAC General Motors Acceptance Corp.
GO General Obligation
GS Goldman Sachs
GSR Goldman Sachs Residential
KORIBOR Korea Interbank Offered Rate
LIBOR London Interbank Offered Rate
MXIBTIIE Mexico Interbank TIIE 28 Day Rate
NPV No Par Value
OJSC Open joint stock company
PO Principal only security—This security entitles the holder to receive principal payments from an underlying pool of assets or on the security itself. In the case of asset-backed securities, high prepayments return principal faster than expected and cause the yield to increase. Low prepayments return principal slower than expected and cause the yield to decrease.
Preference A special type of equity investment that shares in the earn-
shares ings of the company, has limited voting rights, and may have a dividend preference. Preference shares may also have liquidation preference.
Re-REMIC Combined Real Estate Mortgage Investment Conduit
SGPS Sociedade Gestora de Participacões Sociais
Currency abbreviations
AUD Australian Dollar
CAD Canadian Dollar
CHF Swiss Franc
CNY Chinese Yuan
DKK Danish Krone
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
NZD New Zealand Dollar
PLN Polish Zloty
SEK Swedish Krona
SGD Singapore Dollar
USD United States Dollar
ZAR South African Rand
See accompanying notes to financial statements.
57
The UBS Funds
June 30, 2011 (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, 2011 to June 30, 2011.
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line 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.
This projection assumes that annualized expense ratios were in effect during the period January 1, 2011 to June 30, 2011.
58
The UBS Funds
June 30, 2011 (unaudited)
|
Beginning account value January 1, 2011 |
Ending account value June 30, 2011 |
Expenses paid during period* 01/01/11 – 06/30/11 |
Expense ratio during period |
||||||||||||||||||||
| UBS Dynamic Alpha Fund | |||||||||||||||||||||||
| Class A | Actual | $ | 1,000.00 | $ | 975.60 | $ | 8.96 | 1.83 | % | ||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.72 | 9.15 | 1.83 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 971.10 | 12.56 | 2.57 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,012.05 | 12.82 | 2.57 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 971.10 | 12.56 | 2.57 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,012.05 | 12.82 | 2.57 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 977.50 | 7.65 | 1.56 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,017.06 | 7.80 | 1.56 | |||||||||||||||||||
| UBS Global Allocation Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 1,029.10 | 6.04 | 1.20 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
| Class B | Actual | 1,000.00 | 1,025.90 | 10.25 | 2.04 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.68 | 10.19 | 2.04 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,026.70 | 9.90 | 1.97 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,015.03 | 9.84 | 1.97 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,030.50 | 4.58 | 0.91 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,020.28 | 4.56 | 0.91 | |||||||||||||||||||
| UBS Global Frontier Fund | |||||||||||||||||||||||
| Class A | Actual | 1,000.00 | 1,055.60 | 7.14 | 1.40 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,017.85 | 7.00 | 1.40 | |||||||||||||||||||
| Class C | Actual | 1,000.00 | 1,050.40 | 10.93 | 2.15 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,014.13 | 10.74 | 2.15 | |||||||||||||||||||
| Class Y | Actual | 1,000.00 | 1,055.60 | 5.86 | 1.15 | ||||||||||||||||||
|
Hypothetical (5% annual return before expenses) |
1,000.00 | 1,019.09 | 5.76 | 1.15 | |||||||||||||||||||
* 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).
59
The UBS Funds
Financial statements
Statement of assets and liabilities
June 30, 2011
|
UBS Dynamic Alpha Fund |
UBS Global Allocation Fund |
UBS Global Frontier Fund |
|||||||||||||
| Assets: | |||||||||||||||
| Investments, at cost: | |||||||||||||||
| Unaffiliated issuers | $ | 305,456,952 | $ | 714,820,818 | $ | 9,176,645 | |||||||||
| Affiliated issuers | 78,353,004 | 351,207,007 | 38,253,398 | ||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | 8,124,287 | 23,289,247 | — | ||||||||||||
| Foreign currency, at cost | 3,842,606 | 2,968,904 | 35,892 | ||||||||||||
| $ | 395,776,849 | $ | 1,092,285,976 | $ | 47,465,935 | ||||||||||
| Investments, at value: | |||||||||||||||
| Unaffiliated issuers | $ | 330,522,139 | $ | 809,318,995 | $ | 9,411,733 | |||||||||
| Affiliated issuers | 92,535,136 | 474,327,094 | 54,244,561 | ||||||||||||
| Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | 8,124,287 | 23,289,247 | — | ||||||||||||
| Foreign currency, at value | 3,873,322 | 2,981,392 | 35,982 | ||||||||||||
| Cash | 87,924 | — | — | ||||||||||||
| Receivables: | |||||||||||||||
| Investment securities sold | 1,260,947 | 7,102,428 | — | ||||||||||||
| Dividends | 322,158 | 871,313 | — | ||||||||||||
| Fund shares sold | 214,442 | 173,454 | 415,291 | ||||||||||||
| Foreign tax reclaims | 198,194 | 258,652 | — | ||||||||||||
| Interest | 185,378 | 1,847,294 | 146,709 | ||||||||||||
| Due from broker | — | 2,062,987 | 735,183 | ||||||||||||
| Cash collateral for futures contracts | 17,584,905 | 6,109,132 | 2,054,093 | ||||||||||||
| Cash collateral for securities sold short | 26,017,457 | — | — | ||||||||||||
| Cash collateral for swap agreements | 10,840,000 | — | — | ||||||||||||
| Outstanding swap agreements, at value2 | 6,529,253 | — | — | ||||||||||||
| Unrealized appreciation on forward foreign currency contracts | 2,788,675 | 980,744 | 105,165 | ||||||||||||
| Other assets | 35,836 | 61,353 | 29,674 | ||||||||||||
| Total assets | 501,120,053 | 1,329,384,085 | 67,178,391 | ||||||||||||
| Liabilities: | |||||||||||||||
| Payables: | |||||||||||||||
| Cash collateral from securities loaned | 8,124,287 | 23,289,247 | — | ||||||||||||
| Investment securities purchased | 2,215,475 | 8,455,223 | — | ||||||||||||
| Investment advisory and administration fee | 601,464 | 1,834,794 | 90,578 | ||||||||||||
| Fund shares redeemed | 2,510,952 | 3,252,475 | 323,580 | ||||||||||||
| Custody and fund accounting fees | 41,998 | 112,541 | 12,502 | ||||||||||||
| Distribution and service fees | 219,333 | 927,345 | 46,218 | ||||||||||||
| Trustees' fees | 9,830 | 24,669 | 4,661 | ||||||||||||
| Dividends payable for securities sold short | 49,462 | — | — | ||||||||||||
| Accrued expenses | 244,887 | 374,503 | 66,769 | ||||||||||||
| Due to broker | 5,943,735 | — | — | ||||||||||||
| Options written, at value3 | 3,153,732 | — | — | ||||||||||||
| Securities sold short, at value4 | 83,712,124 | — | — | ||||||||||||
| Outstanding swap agreements, at value2 | 17,173,501 | — | — | ||||||||||||
| Unrealized depreciation on forward foreign currency contracts | 4,727,253 | 1,283,299 | 83,551 | ||||||||||||
| Total liabilities | 128,728,033 | 39,554,096 | 627,859 | ||||||||||||
| Net assets | $ | 372,392,020 | $ | 1,289,829,989 | $ | 66,550,532 | |||||||||
1 The market value of securities loaned by UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Global Frontier Fund, as of June 30, 2011 was $7,914,206, $31,344,738 and $673,802, respectively.
2 Net upfront payments made by UBS Dynamic Alpha Fund were $448,022.
3 Premiums received by UBS Dynamic Alpha Fund were $3,154,546.
4 Proceeds from securities sold short by UBS Dynamic Alpha Fund were $59,714,445.
See accompanying notes to financial statements.
60
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
June 30, 2011
|
UBS Dynamic Alpha Fund |
UBS Global Allocation Fund |
UBS Global Frontier Fund1 |
|||||||||||||
| Net assets consist of: | |||||||||||||||
| Beneficial interest | $ | 783,952,612 | $ | 2,188,159,473 | $ | 80,574,353 | |||||||||
| Net investment income | 2,169,453 | 42,084,904 | 2,424,736 | ||||||||||||
| Accumulated net realized loss | (408,155,643 | ) | (1,156,729,484 | ) | (33,541,307 | ) | |||||||||
| Net unrealized appreciation (depreciation) | (5,574,402 | ) | 216,315,096 | 17,092,750 | |||||||||||
| Net assets | $ | 372,392,020 | $ | 1,289,829,989 | $ | 66,550,532 | |||||||||
| Class A: | |||||||||||||||
| Net assets | $ | 216,296,656 | $ | 753,749,821 | $ | 50,166,599 | |||||||||
| Shares outstanding | 36,141,583 | 73,369,260 | 6,003,892 | ||||||||||||
| Net asset value and redemption proceeds per share | $ | 5.98 | $ | 10.27 | $ | 8.36 | |||||||||
| Offering price per share (NAV per share plus maximum sales charge)2 | $ | 6.33 | $ | 10.87 | $ | 8.85 | |||||||||
| Class B: | |||||||||||||||
| Net assets | $ | 2,002,966 | $ | 7,483,961 | N/A | ||||||||||
| Shares outstanding | 350,913 | 728,208 | N/A | ||||||||||||
| Net asset value and offering price per share | $ | 5.71 | $ | 10.28 | N/A | ||||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 5.42 | $ | 9.77 | N/A | ||||||||||
| Class C: | |||||||||||||||
| Net assets | $ | 66,349,331 | $ | 348,721,181 | $ | 14,989,252 | |||||||||
| Shares outstanding | 11,620,176 | 34,887,467 | 1,797,043 | ||||||||||||
| Net asset value and offering price per share | $ | 5.71 | $ | 10.00 | $ | 8.34 | |||||||||
| Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)2 | $ | 5.65 | $ | 9.90 | $ | 8.26 | |||||||||
| Class Y: | |||||||||||||||
| Net assets | $ | 87,743,067 | $ | 179,875,026 | $ | 1,394,681 | |||||||||
| Shares outstanding | 14,417,499 | 17,157,210 | 166,863 | ||||||||||||
| Net asset value per share, offering price per share, and redemption proceeds per share2 | $ | 6.09 | $ | 10.48 | $ | 8.36 | |||||||||
1 UBS Global Frontier Fund does not offer Class B shares.
2 For Class A, the maximum sales charge is 5.50%. 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%. Class Y has no contingent deferred sales charge.
See accompanying notes to financial statements.
61
The UBS Funds
Financial statements
Statement of operations
For the year ended June 30, 2011
|
UBS Dynamic Alpha Fund |
UBS Global Allocation Fund |
UBS Global Frontier Fund |
|||||||||||||
| Investment income: | |||||||||||||||
| Dividends | $ | 6,602,682 | $ | 14,524,214 | $ | — | |||||||||
| Interest and other | 6,559,429 | 3,327,161 | 171,195 | ||||||||||||
| Affiliated interest | 78,146 | 94,987 | 8,487 | ||||||||||||
| Securities lending1 | 142,126 | 242,514 | 323 | ||||||||||||
| Foreign tax withheld | (469,596 | ) | (535,901 | ) | — | ||||||||||
| Total income | 12,912,787 | 17,652,975 | 180,005 | ||||||||||||
| Expenses: | |||||||||||||||
| Advisory and administration | 4,390,653 | 11,610,047 | 712,526 | ||||||||||||
| Service and distribution: | |||||||||||||||
| Class A | 731,372 | 2,068,864 | 133,786 | ||||||||||||
| Class B | 35,196 | 115,322 | — | ||||||||||||
| Class C | 873,592 | 3,812,862 | 151,648 | ||||||||||||
| Transfer agency and related service fees: | |||||||||||||||
| Class A | 221,571 | 464,665 | 20,248 | ||||||||||||
| Class B | 6,293 | 19,734 | — | ||||||||||||
| Class C | 82,003 | 324,667 | 9,829 | ||||||||||||
| Class Y | 14,665 | 27,016 | 634 | ||||||||||||
| Custodian and fund accounting | 199,491 | 467,442 | 50,077 | ||||||||||||
| Federal and state registration | 51,721 | 55,467 | 37,626 | ||||||||||||
| Professional services | 132,738 | 122,147 | 78,815 | ||||||||||||
| Shareholder reports | 75,871 | 152,960 | 17,450 | ||||||||||||
| Trustees | 47,266 | 107,421 | 20,826 | ||||||||||||
| Dividend expense and security loan fees for securities sold short | 1,959,121 | — | — | ||||||||||||
| Other | 93,888 | 169,015 | 20,531 | ||||||||||||
| Total expenses | 8,915,441 | 19,517,629 | 1,253,996 | ||||||||||||
| Fee waivers and/or expense reimbursements by Advisor | (119,133 | ) | — | (168,383 | ) | ||||||||||
| Net expenses | 8,796,308 | 19,517,629 | 1,085,613 | ||||||||||||
| Net investment income (loss) | 4,116,479 | (1,864,654 | ) | (905,608 | ) | ||||||||||
| Net realized gain (loss) on: | |||||||||||||||
| Investments in unaffiliated issuers | 32,077,576 | 102,748,554 | 53,024 | ||||||||||||
| Investments in affiliated issuers | 17,689,137 | 49,836,070 | 5,533,645 | ||||||||||||
| Futures contracts | (26,233,174 | ) | (9,962,066 | ) | 3,555,140 | ||||||||||
| Options written | (701,229 | ) | — | — | |||||||||||
| Securities sold short | (11,191,868 | ) | — | — | |||||||||||
| Swap agreements | (2,759,885 | ) | — | — | |||||||||||
| Forward foreign currency contracts | (36,892,366 | ) | 27,469,574 | 3,767,502 | |||||||||||
| Foreign currency transactions | (1,669,343 | ) | 961,695 | 25,306 | |||||||||||
| Net realized gain (loss) | (29,681,152 | ) | 171,053,827 | 12,934,617 | |||||||||||
| Change in net unrealized appreciation/depreciation on: | |||||||||||||||
| Investments | 69,549,670 | 134,137,278 | 7,262,340 | ||||||||||||
| Futures contracts | (12,345,431 | ) | 1,934,635 | 2,378,448 | |||||||||||
| Options written | (4,372 | ) | — | — | |||||||||||
| Securities sold short | (13,579,589 | ) | — | — | |||||||||||
| Swap agreements | 2,111,209 | — | — | ||||||||||||
| Forward foreign currency contracts | 1,282,928 | (3,018,173 | ) | (459,874 | ) | ||||||||||
| Translation of other assets and liabilities denominated in foreign currency | 64,217 | 100,585 | 14,363 | ||||||||||||
| Change in net unrealized appreciation/depreciation | 47,078,632 | 133,154,325 | 9,195,277 | ||||||||||||
| Net realized and unrealized gain | 17,397,480 | 304,208,152 | 22,129,894 | ||||||||||||
| Net increase in net assets resulting from operations | $ | 21,513,959 | $ | 302,343,498 | $ | 21,224,286 | |||||||||
1 Includes affiliated income from UBS Private Money Market Fund LLC of $2,998 and $5,287, for UBS Dynamic Alpha Fund and UBS Global Allocation Fund, respectively.
See accompanying notes to financial statements.
62
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63
The UBS Funds
Financial statements
Statement of changes in net assets
| UBS Dynamic Alpha Fund | UBS Global Allocation Fund | ||||||||||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
Year ended June 30, 2011 |
Year ended June 30, 2010 |
||||||||||||||||
| Operations: | |||||||||||||||||||
| Net investment income (loss) | $ | 4,116,479 | $ | 1,223,597 | $ | (1,864,654 | ) | $ | (3,123,265 | ) | |||||||||
| Net realized gain (loss) | (29,681,152 | ) | 10,196,316 | 171,053,827 | 194,245,926 | ||||||||||||||
| Change in net unrealized appreciation/depreciation | 47,078,632 | 77,091,341 | 133,154,325 | 50,734,378 | |||||||||||||||
| Net increase in net assets from operations | 21,513,959 | 88,511,254 | 302,343,498 | 241,857,039 | |||||||||||||||
| Dividends and distributions to shareholders by class: | |||||||||||||||||||
| Class A: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (7,507,567 | ) | (18,036,063 | ) | (35,643,712 | ) | (64,679,381 | ) | |||||||||||
| Class B: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (74,697 | ) | (256,998 | ) | (271,858 | ) | (1,173,478 | ) | |||||||||||
| Class C: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (1,529,009 | ) | (5,224,436 | ) | (13,451,079 | ) | (27,111,813 | ) | |||||||||||
| Class Y: | |||||||||||||||||||
| Net investment income and net foreign currency gains | (2,642,703 | ) | (5,942,088 | ) | (8,188,472 | ) | (14,623,794 | ) | |||||||||||
| Decrease in net assets from dividends and distributions | (11,753,976 | ) | (29,459,585 | ) | (57,555,121 | ) | (107,588,466 | ) | |||||||||||
| Beneficial interest transactions: | |||||||||||||||||||
| Proceeds from shares sold | 38,956,835 | 114,313,977 | 77,483,013 | 115,466,913 | |||||||||||||||
| Shares issued on reinvestment of dividends and distributions | 11,063,907 | 28,144,238 | 53,431,280 | 100,642,981 | |||||||||||||||
| Cost of shares redeemed | (213,836,745 | ) | (289,139,327 | ) | (467,500,598 | ) | (679,409,293 | ) | |||||||||||
| Redemption fees | 13,204 | 10,795 | 25,304 | 30,280 | |||||||||||||||
| Net decrease in net assets resulting from beneficial interest transactions | (163,802,799 | ) | (146,670,317 | ) | (336,561,001 | ) | (463,269,119 | ) | |||||||||||
| Increase (decrease) in net assets | (154,042,816 | ) | (87,618,648 | ) | (91,772,624 | ) | (329,000,546 | ) | |||||||||||
| Net assets, beginning of year | 526,434,836 | 614,053,484 | 1,381,602,613 | 1,710,603,159 | |||||||||||||||
| Net assets, end of year | $ | 372,392,020 | $ | 526,434,836 | $ | 1,289,829,989 | $ | 1,381,602,613 | |||||||||||
| Net assets include accumulated undistributed net investment income | $ | 2,169,453 | $ | 2,158,638 | $ | 42,084,904 | $ | 54,381,068 | |||||||||||
| UBS Global Frontier Fund | |||||||||||
|
Year ended June 30, 2011 |
Year ended June 30, 2010 |
||||||||||
| Operations: | |||||||||||
| Net investment income (loss) | $ | (905,608 | ) | $ | (848,300 | ) | |||||
| Net realized gain (loss) | 12,934,617 | 10,120,585 | |||||||||
| Change in net unrealized appreciation/depreciation | 9,195,277 | 3,573,824 | |||||||||
| Net increase in net assets from operations | 21,224,286 | 12,846,109 | |||||||||
| Dividends and distributions to shareholders by class: | |||||||||||
| Class A: | |||||||||||
| Net investment income and net foreign currency gains | (1,678,450 | ) | (2,525,878 | ) | |||||||
| Class B: | |||||||||||
| Net investment income and net foreign currency gains | — | — | |||||||||
| Class C: | |||||||||||
| Net investment income and net foreign currency gains | (361,050 | ) | (614,766 | ) | |||||||
| Class Y: | |||||||||||
| Net investment income and net foreign currency gains | (28,269 | ) | (530 | ) | |||||||
| Decrease in net assets from dividends and distributions | (2,067,769 | ) | (3,141,174 | ) | |||||||
| Beneficial interest transactions: | |||||||||||
| Proceeds from shares sold | 11,145,739 | 14,056,564 | |||||||||
| Shares issued on reinvestment of dividends and distributions | 1,915,760 | 3,011,650 | |||||||||
| Cost of shares redeemed | (28,131,068 | ) | (28,974,906 | ) | |||||||
| Redemption fees | 7,126 | 6,130 | |||||||||
| Net decrease in net assets resulting from beneficial interest transactions | (15,062,443 | ) | (11,900,562 | ) | |||||||
| Increase (decrease) in net assets | 4,094,074 | (2,195,627 | ) | ||||||||
| Net assets, beginning of year | 62,456,458 | 64,652,085 | |||||||||
| Net assets, end of year | $ | 66,550,532 | $ | 62,456,458 | |||||||
| Net assets include accumulated undistributed net investment income | $ | 2,424,736 | $ | 566,294 | |||||||
64
The UBS Funds
Financial statements
See accompanying notes to financial statements.
65
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each year presented.
| Class A | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.92 | $ | 5.45 | $ | 9.89 | $ | 11.42 | $ | 11.04 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.06 | 0.02 | 0.14 | 0.04 | 0.01 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | 0.16 | 0.75 | (1.84 | ) | (0.56 | ) | 0.37 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | 0.003 | — | — | ||||||||||||||||||
| Total income (loss) | 0.22 | 0.77 | (1.70 | ) | (0.52 | ) | 0.38 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.16 | ) | (0.30 | ) | — | (0.01 | ) | 0.003 | |||||||||||||||
| From net realized gains | — | — | (2.74 | ) | (1.00 | ) | — | ||||||||||||||||
| Total dividends/distributions | (0.16 | ) | (0.30 | ) | (2.74 | ) | (1.01 | ) | 0.003 | ||||||||||||||
| Net asset value, end of year | $ | 5.98 | $ | 5.92 | $ | 5.45 | $ | 9.89 | $ | 11.42 | |||||||||||||
| Total investment return2 | 3.58 | % | 14.19 | % | (14.31 | )%4 | (4.95 | )% | 3.44 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
1.79 | % | 1.74 | % | 1.54 | % | 1.20 | % | 1.17 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
1.76 | % | 1.72 | % | 1.54 | % | 1.20 | % | 1.17 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
1.35 | % | 1.35 | % | 1.30 | % | 1.20 | % | 1.17 | % | |||||||||||||
| Net investment income (loss) | 0.95 | % | 0.31 | % | 1.99 | % | 0.35 | % | 0.06 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 216,297 | $ | 334,131 | $ | 398,321 | $ | 1,178,342 | $ | 2,168,596 | |||||||||||||
| Portfolio turnover rate | 65 | % | 58 | % | 139 | % | 39 | % | 28 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.65 | $ | 5.20 | $ | 9.68 | $ | 11.26 | $ | 10.98 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.01 | (0.03 | ) | 0.08 | (0.04 | ) | (0.09 | ) | |||||||||||||||
| Net realized and unrealized gain (loss) | 0.16 | 0.73 | (1.82 | ) | (0.54 | ) | 0.37 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | 0.003 | — | — | ||||||||||||||||||
| Total income (loss) | 0.17 | 0.70 | (1.74 | ) | (0.58 | ) | 0.28 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.11 | ) | (0.25 | ) | — | — | — | ||||||||||||||||
| From net realized gains | — | — | (2.74 | ) | (1.00 | ) | — | ||||||||||||||||
| Total dividends/distributions | (0.11 | ) | (0.25 | ) | (2.74 | ) | (1.00 | ) | — | ||||||||||||||
| Net asset value, end of year | $ | 5.71 | $ | 5.65 | $ | 5.20 | $ | 9.68 | $ | 11.26 | |||||||||||||
| Total investment return2 | 2.86 | % | 13.11 | % | (14.98 | )%4 | (5.62 | )% | 2.64 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.63 | % | 2.58 | % | 2.39 | % | 1.99 | % | 1.95 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.50 | % | 2.47 | % | 2.36 | % | 1.99 | % | 1.95 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
2.10 | % | 2.10 | % | 2.10 | % | 1.99 | % | 1.95 | % | |||||||||||||
| Net investment income (loss) | 0.15 | % | (0.44 | )% | 1.23 | % | (0.42 | )% | (0.78 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 2,003 | $ | 4,597 | $ | 6,733 | $ | 14,905 | $ | 25,790 | |||||||||||||
| Portfolio turnover rate | 65 | % | 58 | % | 139 | % | 39 | % | 28 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
66
UBS Dynamic Alpha Fund
Financial highlights
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 5.65 | $ | 5.21 | $ | 9.68 | $ | 11.26 | $ | 10.97 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.01 | (0.03 | ) | 0.08 | (0.04 | ) | (0.08 | ) | |||||||||||||||
| Net realized and unrealized gain (loss) | 0.15 | 0.72 | (1.81 | ) | (0.54 | ) | 0.37 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | 0.003 | — | — | ||||||||||||||||||
| Total income (loss) | 0.16 | 0.69 | (1.73 | ) | (0.58 | ) | 0.29 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.10 | ) | (0.25 | ) | — | — | — | ||||||||||||||||
| From net realized gains | — | — | (2.74 | ) | (1.00 | ) | — | ||||||||||||||||
| Total dividends/distributions | (0.10 | ) | (0.25 | ) | (2.74 | ) | (1.00 | ) | — | ||||||||||||||
| Net asset value, end of year | $ | 5.71 | $ | 5.65 | $ | 5.21 | $ | 9.68 | $ | 11.26 | |||||||||||||
| Total investment return2 | 2.82 | % | 13.15 | % | (14.98 | )%4 | (5.62 | )% | 2.64 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.55 | % | 2.50 | % | 2.32 | % | 1.97 | % | 1.93 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
2.51 | % | 2.47 | % | 2.32 | % | 1.97 | % | 1.93 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
2.10 | % | 2.10 | % | 2.07 | % | 1.97 | % | 1.93 | % | |||||||||||||
| Net investment income (loss) | 0.20 | % | (0.44 | )% | 1.24 | % | (0.41 | )% | (0.72 | )% | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 66,349 | $ | 104,146 | $ | 131,745 | $ | 317,450 | $ | 579,916 | |||||||||||||
| Portfolio turnover rate | 65 | % | 58 | % | 139 | % | 39 | % | 28 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 6.03 | $ | 5.54 | $ | 9.96 | $ | 11.48 | $ | 11.07 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.08 | 0.03 | 0.17 | 0.08 | 0.05 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | 0.16 | 0.78 | (1.85 | ) | (0.56 | ) | 0.36 | ||||||||||||||||
| Net increase from payment by Advisor | — | — | 0.003 | — | — | ||||||||||||||||||
| Total income (loss) | 0.24 | 0.81 | (1.68 | ) | (0.48 | ) | 0.41 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.18 | ) | (0.32 | ) | — | (0.04 | ) | 0.003 | |||||||||||||||
| From net realized gains | — | — | (2.74 | ) | (1.00 | ) | — | ||||||||||||||||
| Total dividends/distributions | (0.18 | ) | (0.32 | ) | (2.74 | ) | (1.04 | ) | 0.003 | ||||||||||||||
| Net asset value, end of year | $ | 6.09 | $ | 6.03 | $ | 5.54 | $ | 9.96 | $ | 11.48 | |||||||||||||
| Total investment return2 | 3.89 | % | 14.49 | % | (13.99 | )%4 | (4.64 | )% | 3.80 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
|
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
1.49 | % | 1.42 | % | 1.22 | % | 0.91 | % | 0.89 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short |
1.49 | % | 1.42 | % | 1.22 | % | 0.91 | % | 0.89 | % | |||||||||||||
|
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short |
1.07 | % | 1.04 | % | 1.00 | % | 0.91 | % | 0.89 | % | |||||||||||||
| Net investment income (loss) | 1.25 | % | 0.56 | % | 2.23 | % | 0.69 | % | 0.40 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 87,743 | $ | 83,561 | $ | 77,254 | $ | 320,839 | $ | 478,785 | |||||||||||||
| Portfolio turnover rate | 65 | % | 58 | % | 139 | % | 39 | % | 28 | % | |||||||||||||
3 Amount represents less than $0.005 per share.
4 During the fiscal year ended June 30, 2009, the Fund's total investment return included a reimbursement by the Investment Advisor for amounts related to a trading error that had an impact on the total return of less than 0.005%.
See accompanying notes to financial statements.
67
UBS Global Allocation Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each year presented.
| Class A | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.66 | $ | 8.18 | $ | 12.59 | $ | 14.81 | $ | 13.86 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.003 | 0.003 | 0.08 | 0.17 | 0.19 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | 2.05 | 1.11 | (3.08 | ) | (1.34 | ) | 1.83 | ||||||||||||||||
| Total income (loss) | 2.05 | 1.11 | (3.00 | ) | (1.17 | ) | 2.02 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.44 | ) | (0.63 | ) | (0.46 | ) | (0.23 | ) | (0.27 | ) | |||||||||||||
| From net realized gains | — | — | (0.95 | ) | (0.82 | ) | (0.80 | ) | |||||||||||||||
| Total dividends/distributions | (0.44 | ) | (0.63 | ) | (1.41 | ) | (1.05 | ) | (1.07 | ) | |||||||||||||
| Net asset value, end of year | $ | 10.27 | $ | 8.66 | $ | 8.18 | $ | 12.59 | $ | 14.81 | |||||||||||||
| Total investment return2 | 23.87 | % | 13.11 | % | (22.36 | )% | (8.43 | )% | 14.93 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses | 1.21 | % | 1.21 | % | 1.19 | % | 1.09 | % | 1.13 | % | |||||||||||||
| Net investment income (loss) | 0.05 | % | 0.01 | % | 0.84 | % | 1.19 | % | 1.28 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 753,750 | $ | 814,760 | $ | 996,059 | $ | 2,396,937 | $ | 3,094,036 | |||||||||||||
| Portfolio turnover rate | 68 | % | 90 | % | 122 | % | 83 | % | 74 | % | |||||||||||||
| Class B | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.56 | $ | 8.00 | $ | 12.35 | $ | 14.52 | $ | 13.60 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.08 | ) | (0.08 | ) | 0.003 | 0.05 | 0.07 | ||||||||||||||||
| Net realized and unrealized gain (loss) | 2.03 | 1.08 | (3.01 | ) | (1.31 | ) | 1.79 | ||||||||||||||||
| Total income (loss) | 1.95 | 1.00 | (3.01 | ) | (1.26 | ) | 1.86 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.23 | ) | (0.44 | ) | (0.39 | ) | (0.09 | ) | (0.14 | ) | |||||||||||||
| From net realized gains | — | — | (0.95 | ) | (0.82 | ) | (0.80 | ) | |||||||||||||||
| Total dividends/distributions | (0.23 | ) | (0.44 | ) | (1.34 | ) | (0.91 | ) | (0.94 | ) | |||||||||||||
| Net asset value, end of year | $ | 10.28 | $ | 8.56 | $ | 8.00 | $ | 12.35 | $ | 14.52 | |||||||||||||
| Total investment return2 | 22.86 | % | 12.14 | % | (22.98 | )% | (9.14 | )% | 13.96 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses | 2.07 | % | 2.09 | % | 2.02 | % | 1.91 | % | 1.93 | % | |||||||||||||
| Net investment income (loss) | (0.86 | )% | (0.90 | )% | 0.01 | % | 0.36 | % | 0.48 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 7,484 | $ | 15,190 | $ | 33,685 | $ | 90,258 | $ | 139,061 | |||||||||||||
| Portfolio turnover rate | 68 | % | 90 | % | 122 | % | 83 | % | 74 | % | |||||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
68
| Class C | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.42 | $ | 7.96 | $ | 12.29 | $ | 14.48 | $ | 13.58 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | (0.07 | ) | (0.07 | ) | 0.003 | 0.05 | 0.07 | ||||||||||||||||
| Net realized and unrealized gain (loss) | 1.99 | 1.07 | (2.99 | ) | (1.30 | ) | 1.79 | ||||||||||||||||
| Total income (loss) | 1.92 | 1.00 | (2.99 | ) | (1.25 | ) | 1.86 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.34 | ) | (0.54 | ) | (0.39 | ) | (0.12 | ) | (0.16 | ) | |||||||||||||
| From net realized gains | — | — | (0.95 | ) | (0.82 | ) | (0.80 | ) | |||||||||||||||
| Total dividends/distributions | (0.34 | ) | (0.54 | ) | (1.34 | ) | (0.94 | ) | (0.96 | ) | |||||||||||||
| Net asset value, end of year | $ | 10.00 | $ | 8.42 | $ | 7.96 | $ | 12.29 | $ | 14.48 | |||||||||||||
| Total investment return2 | 22.90 | % | 12.29 | % | (22.93 | )% | (9.15 | )% | 14.02 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses | 1.99 | % | 2.00 | % | 1.97 | % | 1.89 | % | 1.90 | % | |||||||||||||
| Net investment income (loss) | (0.73 | )% | (0.78 | )% | 0.06 | % | 0.40 | % | 0.51 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 348,721 | $ | 381,137 | $ | 456,577 | $ | 985,156 | $ | 1,274,539 | |||||||||||||
| Portfolio turnover rate | 68 | % | 90 | % | 122 | % | 83 | % | 74 | % | |||||||||||||
| Class Y | |||||||||||||||||||||||
| Year ended June 30, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net asset value, beginning of year | $ | 8.84 | $ | 8.34 | $ | 12.80 | $ | 15.04 | $ | 14.06 | |||||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||
| Net investment income (loss)1 | 0.04 | 0.03 | 0.10 | 0.21 | 0.23 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | 2.07 | 1.14 | (3.13 | ) | (1.37 | ) | 1.85 | ||||||||||||||||
| Total income (loss) | 2.11 | 1.17 | (3.03 | ) | (1.16 | ) | 2.08 | ||||||||||||||||
| Less dividends/distributions: | |||||||||||||||||||||||
| From net investment income | (0.47 | ) | (0.67 | ) | (0.48 | ) | (0.26 | ) | (0.30 | ) | |||||||||||||
| From net realized gains | — | — | (0.95 | ) | (0.82 | ) | (0.80 | ) | |||||||||||||||
| Total dividends/distributions | (0.47 | ) | (0.67 | ) | (1.43 | ) | (1.08 | ) | (1.10 | ) | |||||||||||||
| Net asset value, end of year | $ | 10.48 | $ | 8.84 | $ | 8.34 | $ | 12.80 | $ | 15.04 | |||||||||||||
| Total investment return2 | 24.15 | % | 13.54 | % | (22.12 | )% | (8.20 | )% | 15.18 | % | |||||||||||||
| Ratios to average net assets: | |||||||||||||||||||||||
| Expenses | 0.92 | % | 0.93 | % | 0.90 | % | 0.82 | % | 0.88 | % | |||||||||||||
| Net investment income (loss) | 0.35 | % | 0.29 | % | 1.14 | % | 1.46 | % | 1.53 | % | |||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Net assets, end of year (000's) | $ | 179,875 | $ | 170,517 | $ | 224,281 | $ | 477,603 | $ | 648,479 | |||||||||||||
| Portfolio turnover rate | 68 | % | 90 | % | 122 | % | 83 | % | 74 | % | |||||||||||||
UBS Global Allocation Fund
Financial highlights
See accompanying notes to financial statements.
69
UBS Global Frontier Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each period presented.
| Class A | |||||||||||||||||||
| Year ended June 30, |
For the period ended |
||||||||||||||||||
| 2011 | 2010 | 2009 | June 30, 20083 | ||||||||||||||||
| Net asset value, beginning of period | $ | 6.32 | $ | 5.59 | $ | 8.75 | $ | 10.00 | |||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||
| Net investment loss1 | (0.09 | ) | (0.07 | ) | (0.06 | ) | (0.05 | ) | |||||||||||
| Net realized and unrealized gain (loss) | 2.38 | 1.12 | (2.98 | ) | (1.10 | ) | |||||||||||||
| Total income (loss) | 2.29 | 1.05 | (3.04 | ) | (1.15 | ) | |||||||||||||
| Less dividends/distributions: | |||||||||||||||||||
| From net investment income | (0.25 | ) | (0.32 | ) | (0.12 | ) | (0.03 | ) | |||||||||||
| From net realized gains | — | — | — | (0.07 | ) | ||||||||||||||
| Total dividends/distributions | (0.25 | ) | (0.32 | ) | (0.12 | ) | (0.10 | ) | |||||||||||
| Net asset value, end of period | $ | 8.36 | $ | 6.32 | $ | 5.59 | $ | 8.75 | |||||||||||
| Total investment return2 | 36.53 | % | 18.30 | % | (34.51 | )% | (11.60 | )% | |||||||||||
| Ratios to average net assets: | |||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.64 | % | 1.62 | % | 1.66 | % | 1.59 | %5 | |||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | %5 | |||||||||||
| Net investment loss | (1.14 | )% | (1.01 | )% | (1.01 | )% | (0.52 | )%5 | |||||||||||
| Supplemental data: | |||||||||||||||||||
| Net assets, end of period (000's) | $ | 50,167 | $ | 48,479 | $ | 48,395 | $ | 79,572 | |||||||||||
| Portfolio turnover rate | 33 | % | 54 | % | 148 | % | 84 | % | |||||||||||
| Class Y | |||||||||||||||||||
| Year ended June 30, |
For the period ended |
||||||||||||||||||
| 2011 | 2010 | 2009 | June 30, 20083 | ||||||||||||||||
| Net asset value, beginning of period | $ | 6.32 | $ | 5.60 | $ | 8.77 | $ | 10.00 | |||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||
| Net investment loss1 | (0.07 | ) | (0.05 | ) | (0.04 | ) | (0.02 | ) | |||||||||||
| Net realized and unrealized gain (loss) | 2.38 | 1.11 | (2.99 | ) | (1.10 | ) | |||||||||||||
| Total income (loss) | 2.31 | 1.06 | (3.03 | ) | (1.12 | ) | |||||||||||||
| Less dividends/distributions: | |||||||||||||||||||
| From net investment income | (0.27 | ) | (0.34 | ) | (0.14 | ) | (0.04 | ) | |||||||||||
| From net realized gains | — | — | — | (0.07 | ) | ||||||||||||||
| Total dividends/distributions | (0.27 | ) | (0.34 | ) | (0.14 | ) | (0.11 | ) | |||||||||||
| Net asset value, end of period | $ | 8.36 | $ | 6.32 | $ | 5.60 | $ | 8.77 | |||||||||||
| Total investment return2 | 36.66 | % | 18.54 | % | (34.30 | )% | (11.33 | )% | |||||||||||
| Ratios to average net assets: | |||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 1.43 | % | 1.35 | % | 1.35 | % | 1.31 | %5 | |||||||||||
| Expenses after fee waivers and/or expense reimbursement | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | %5 | |||||||||||
| Net investment loss | (0.87 | )% | (0.72 | )% | (0.73 | )% | (0.26 | )%5 | |||||||||||
| Supplemental data: | |||||||||||||||||||
| Net assets, end of period (000's) | $ | 1,395 | $ | 185 | $ | 1,699 | $ | 7,395 | |||||||||||
| Portfolio turnover rate | 33 | % | 54 | % | 148 | % | 84 | % | |||||||||||
1 Calculated using the average shares method.
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 dividends/distributions or the redemption of Fund shares.
70
UBS Global Frontier Fund
Financial highlights
| Class C | |||||||||||||||||||
| Year ended June 30, |
For the period ended |
||||||||||||||||||
| 2011 | 2010 | 2009 | June 30, 20083 | ||||||||||||||||
| Net asset value, beginning of period | $ | 6.31 | $ | 5.58 | $ | 8.71 | $ | 10.00 | |||||||||||
| Income (loss) from investment operations: | |||||||||||||||||||
| Net investment loss1 | (0.15 | ) | (0.12 | ) | (0.10 | ) | (0.12 | ) | |||||||||||
| Net realized and unrealized gain (loss) | 2.37 | 1.12 | (2.96 | ) | (1.10 | ) | |||||||||||||
| Total income (loss) | 2.22 | 1.00 | (3.06 | ) | (1.22 | ) | |||||||||||||
| Less dividends/distributions: | |||||||||||||||||||
| From net investment income | (0.19 | ) | (0.27 | ) | (0.07 | ) | (0.00 | )4 | |||||||||||
| From net realized gains | — | — | — | (0.07 | ) | ||||||||||||||
| Total dividends/distributions | (0.19 | ) | (0.27 | ) | (0.07 | ) | (0.07 | ) | |||||||||||
| Net asset value, end of period | $ | 8.34 | $ | 6.31 | $ | 5.58 | $ | 8.71 | |||||||||||
| Total investment return2 | 35.39 | % | 17.50 | % | (35.03 | )% | (12.22 | )% | |||||||||||
| Ratios to average net assets: | |||||||||||||||||||
| Expenses before fee waivers and/or expense reimbursement | 2.41 | % | 2.41 | % | 2.48 | % | 2.40 | %5 | |||||||||||
| Expenses after fee waivers and/or expense reimbursement | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | %5 | |||||||||||
| Net investment loss | (1.89 | )% | (1.76 | )% | (1.76 | )% | (1.27 | )%5 | |||||||||||
| Supplemental data: | |||||||||||||||||||
| Net assets, end of period (000's) | $ | 14,989 | $ | 13,792 | $ | 14,559 | $ | 22,882 | |||||||||||
| Portfolio turnover rate | 33 | % | 54 | % | 148 | % | 84 | % | |||||||||||
3 For the period July 26, 2007 (commencement of operations) through June 30, 2008.
4 Amount represents less than $0.005 per share.
5 Annualized.
See accompanying notes to financial statements.
71
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 ("SEC") 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 13, 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 15 Funds available for investment, each having its own investment objectives and policies. The following three funds are covered in this report: UBS Dynamic Alpha Fund, UBS Global Allocation Fund, and UBS Global Frontier 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, which is classified as "non-diversified" for purposes of the 1940 Act. Each Fund currently offers Class A, Class C and Class Y shares. For each Fund except UBS Global Frontier Fund, Class B shares are offered only to existing Class B shareholders with respect to the reinvestment of dividends and distributions and exchanges of Class B shares of the Funds for Class B shares of other series of the UBS Family of Funds. "UBS Family of Funds" include other UBS Funds, PACE Select Advisor Trust and other funds for which UBS Global Asset Management (US) Inc. ("UBS Global AM (US)") serves as principal underwriter. UBS Global Frontier Fund does not offer Class B shares. 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 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 Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. 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, where available, for its portfolio securities. The Funds normally obtain market values for their securities and other instruments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities or instruments. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities or instruments.
72
The UBS Funds
Notes to financial statements
Securities and other instruments also may be valued based on appraisals derived from information concerning the security or instrument or similar securities or instruments received from recognized dealers in those holdings. Securities and instruments 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 on the valuation date available prior to valuation. Securities and instruments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities or instruments are traded on more than one exchange, the securities or instruments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM" or the "Advisor"), the investment advisor 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 or instrument, that security or instrument 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 or instrument'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 or instruments; and the evaluation of forces which influence the market in which the securities or instruments are purchased and sold. Foreign currency exchange rates are generally determined as of the close of the New York Stock Exchange ("NYSE").
Certain securities or instruments 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 net asset value. 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 or instruments, the Fund may adjust the previous closing prices to reflect what the Board believes to be the fair value of these securities or instruments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value securities or instruments 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. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If a security or instrument is valued at a "fair value," that value is likely to be different from the last quoted market price for the security or instrument. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Funds' use of the practical expedient within ASC Topic 820, investments in non-registered investment companies are also valued at the daily net asset value. All investments quoted in foreign currencies will be valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally 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.
73
The UBS Funds
Notes to financial statements
Swaps are marked-to-market daily based upon values from third party vendors or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of assets and liabilities. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
GAAP requires disclosure regarding the various inputs that are used in determining the value of the Funds' investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Fund's own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
In January 2010, FASB issued Accounting Standards Update No. 2010-06 "Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"). ASU 2010-06 requires reporting entities to make new disclosures about amounts and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3, including information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements. The new and revised disclosures have been implemented for annual and interim periods beginning after December 15, 2009. The disclosures surrounding purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements have been implemented for annual and interim period beginning after December 15, 2010.
In May 2011, FASB issued Accounting Standards Update No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS")" ("ASU 2011-04"). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
The provisions of ASC Topic 815 "Derivatives and Hedging" ("ASC Topic 815") require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk related contingent features in derivative agreements. Since investment companies value their derivatives at fair value and recognize changes in fair value through the statement of operations, they do not qualify for hedge accounting under ASC Topic 815. Accordingly, even though a fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under ASC Topic 815. ASC Topic 815 requires that (1) objectives for using derivative
74
The UBS Funds
Notes to financial statements
instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. Details of this disclosure can be found below as well as in the Portfolio of investments. The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2011, except for forward foreign currency contracts for UBS Global Allocation Fund and UBS Global Frontier Fund, for which the average volume during the year was greater than at year end. The Funds may be sellers of protection through credit default swap agreements which are by nature credit-risk contingent (the terms of these agreements can be found within the Portfolio of investments, with further discussion in the Notes to financial statements); however, the Funds are not aware of any additional credit-risk contingent features on other derivative contracts held by the Funds.
Disclosure of derivatives by underlying risk for each Fund as of and for the year ended June 30, 2011 is as follows:
Asset derivatives
|
Interest rate risk |
Equity risk | Credit risk |
Foreign exchange risk |
Total | |||||||||||||||||||
| UBS Dynamic Alpha Fund | |||||||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | — | $ | 2,788,675 | $ | 2,788,675 | |||||||||||||
| Futures contracts2 | 177,839 | — | — | — | 177,839 | ||||||||||||||||||
| Options purchased1 | 1,258,494 | 12,527,017 | — | 0 | 13,785,511 | ||||||||||||||||||
| Swap agreements1 | 4,661,972 | — | 1,584,243 | 283,038 | 6,529,253 | ||||||||||||||||||
| Total value | $ | 6,098,305 | $ | 12,527,017 | $ | 1,584,243 | $ | 3,071,713 | $ | 23,281,278 | |||||||||||||
1 Statement of assets and liabilities location: Options purchased are shown within Investments in securities of unaffiliated issuers, at value, Unrealized appreciation on forward foreign currency contracts and Outstanding swap agreements, at value.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
Liability derivatives
|
Interest rate risk |
Equity risk | Credit risk |
Foreign exchange risk |
Total | |||||||||||||||||||
| UBS Dynamic Alpha Fund | |||||||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | — | $ | (4,727,253 | ) | $ | (4,727,253 | ) | |||||||||||
| Futures contracts2 | (1,605,001 | ) | (6,611,400 | ) | — | — | (8,216,401 | ) | |||||||||||||||
| Options written1 | (624,414 | ) | (2,256,680 | ) | (247,385 | ) | (25,253 | ) | (3,153,732 | ) | |||||||||||||
| Swap agreements1 | (10,855,961 | ) | — | (6,072,456 | ) | (245,084 | ) | (17,173,501 | ) | ||||||||||||||
| Total value | $ | (13,085,376 | ) | $ | (8,868,080 | ) | $ | (6,319,841 | ) | $ | (4,997,590 | ) | $ | (33,270,887 | ) | ||||||||
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts, Outstanding swap agreements, at value and Options written, at value.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
75
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2011, were as follows:
|
Interest rate risk |
Equity risk | Credit risk |
Foreign exchange risk |
Total | |||||||||||||||||||
| UBS Dynamic Alpha Fund | |||||||||||||||||||||||
| Net realized gain (loss)1 | |||||||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | — | $ | (36,892,366 | ) | $ | (36,892,366 | ) | |||||||||||
| Futures contracts | 210,501 | (26,443,675 | ) | — | — | (26,233,174 | ) | ||||||||||||||||
| Options purchased3 | (6,997,382 | ) | (342,720 | ) | — | (603,051 | ) | (7,943,153 | ) | ||||||||||||||
| Options written | (2,282,152 | ) | 453,696 | 524,175 | 603,052 | (701,229 | ) | ||||||||||||||||
| Swap agreements | (6,082,964 | ) | 1,812,825 | 1,373,652 | 136,602 | (2,759,885 | ) | ||||||||||||||||
| Total net realized gain (loss) | $ | (15,151,997 | ) | $ | (24,519,874 | ) | $ | 1,897,827 | $ | (36,755,763 | ) | $ | (74,529,807 | ) | |||||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | — | $ | 1,282,928 | $ | 1,282,928 | |||||||||||||
| Futures contracts | (1,089,470 | ) | (11,255,961 | ) | — | — | (12,345,431 | ) | |||||||||||||||
| Options purchased3 | (678,845 | ) | 4,288,797 | — | (68,216 | ) | 3,541,736 | ||||||||||||||||
| Options written | 441,296 | (573,584 | ) | 84,953 | 42,963 | (4,372 | ) | ||||||||||||||||
| Swap agreements | (209,839 | ) | — | 2,353,144 | (32,096 | ) | 2,111,209 | ||||||||||||||||
|
Total net change in unrealized appreciation/depreciation |
$ | (1,536,858 | ) | $ | (7,540,748 | ) | $ | 2,438,097 | $ | 1,225,579 | $ | (5,413,930 | ) | ||||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
3 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments and net change in unrealized appreciation/depreciation on investments.
Asset derivatives
|
Interest rate risk |
Equity risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Allocation Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | 980,744 | $ | 980,744 | |||||||||||
| Futures contracts2 | 110,653 | 1,383,206 | — | 1,493,859 | |||||||||||||||
| Total value | $ | 110,653 | $ | 1,383,206 | $ | 980,744 | $ | 2,474,603 | |||||||||||
1 Statement of assets and liabilities location: Unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
Liability derivatives
|
Interest rate risk |
Equity risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Allocation Fund | |||||||||||||||||||
| Forward contracts1 | $ | — | $ | — | $ | (1,283,299 | ) | $ | (1,283,299 | ) | |||||||||
| Futures contracts2 | (233,589 | ) | (2,362,605 | ) | — | (2,596,194 | ) | ||||||||||||
| Total value | $ | (233,589 | ) | $ | (2,362,605 | ) | $ | (1,283,299 | ) | $ | (3,879,493 | ) | |||||||
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
76
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2011 were as follows:
|
Interest rate risk |
Equity risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Allocation Fund | |||||||||||||||||||
| Net realized gain (loss)1 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | 27,469,574 | $ | 27,469,574 | |||||||||||
| Futures contracts | 1,261,849 | (11,223,915 | ) | — | (9,962,066 | ) | |||||||||||||
| Total net realized gain (loss) | $ | 1,261,849 | $ | (11,223,915 | ) | $ | 27,469,574 | $ | 17,507,508 | ||||||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | (3,018,173 | ) | $ | (3,018,173 | ) | |||||||||
| Futures contracts | 1,373,222 | 561,413 | — | 1,934,635 | |||||||||||||||
| Total net change in unrealized appreciation/depreciation | $ | 1,373,222 | $ | 561,413 | $ | (3,018,173 | ) | $ | (1,083,538 | ) | |||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts and forward foreign currency contracts.
Asset derivatives
| Equity risk |
Foreign exchange risk |
Total | |||||||||||||
| UBS Global Frontier Fund | |||||||||||||||
| Forward contracts1 | $ | — | $ | 105,165 | $ | 105,165 | |||||||||
| Futures contracts2 | 890,959 | — | 890,959 | ||||||||||||
| Total value | $ | 890,959 | $ | 105,165 | $ | 996,124 | |||||||||
1 Statement of assets and liabilities location: Unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due from broker.
Liability derivatives
| Equity risk |
Foreign exchange risk |
Total | |||||||||||||
| UBS Global Frontier Fund | |||||||||||||||
| Forward contracts1 | $ | — | $ | (83,551 | ) | $ | (83,551 | ) | |||||||
| Futures contracts2 | (56,597 | ) | — | (56,597 | ) | ||||||||||
| Total value | $ | (56,597 | ) | $ | (83,551 | ) | $ | (140,148 | ) | ||||||
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Due to broker.
77
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2011, were as follows:
|
Interest rate risk |
Equity risk |
Foreign exchange risk |
Total | ||||||||||||||||
| UBS Global Frontier Fund | |||||||||||||||||||
| Net realized gain (loss)1 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | 3,767,502 | $ | 3,767,502 | |||||||||||
| Futures contracts | 67,431 | 3,487,709 | — | 3,555,140 | |||||||||||||||
| Total net realized gain (loss) | $ | 67,431 | $ | 3,487,709 | $ | 3,767,502 | $ | 7,322,642 | |||||||||||
| Net change in unrealized appreciation/depreciation2 | |||||||||||||||||||
| Forward contracts | $ | — | $ | — | $ | (459,874 | ) | $ | (459,874 | ) | |||||||||
| Futures contracts | 27,549 | 2,350,899 | — | 2,378,448 | |||||||||||||||
| Total net change in unrealized appreciation/depreciation | $ | 27,549 | $ | 2,350,899 | $ | (459,874 | ) | $ | 1,918,574 | ||||||||||
1 Statement of operations location: Net realized gain (loss) on futures contracts and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts and forward foreign currency contracts.
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, if any, is included in each Fund's Notes to portfolio of investments.
C. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. 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.
D. Foreign currency translation: The Funds use the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities and other assets and liabilities—at the exchange rates prevailing at the end of each Fund's fiscal period; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of each Fund's portfolio are presented at the foreign exchange rates at the end of each Fund's fiscal period, the Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. 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.
78
The UBS Funds
Notes to financial statements
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, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk).
A Fund will 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 non-cash settled 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 equal to the contract's full notional value. However, currency contracts with respect to identical currencies may be netted against each other and, in such cases, a Fund's custodian or sub-custodian will place assets in a segregated account of the Fund, in an amount equal to the net amount owed (the unrealized loss) by a Fund. 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 unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by each Fund on contracts which have been sold or matured.
F. Futures contracts: Each Fund may purchase or sell financial futures contracts. The Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realize gains. Using financial futures contracts involves various market risks, including interest rate and equity risk. 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. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or 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 as part of Due to or Due from broker 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.
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 the Funds' records 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.
79
The UBS Funds
Notes to financial statements
H. Swap agreements: Certain Funds may engage in swap agreements, including but not limited to interest rate, currency, total return, and credit default swap agreements. The Funds expect to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio's duration, to protect against any increase in the price of securities a Fund anticipates purchasing at a later date, to gain exposure to certain markets in the most economical way possible or in an attempt to enhance income or gains.
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 itself 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. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Certain Funds may enter into currency swap agreements with another party in order to receive or pay amounts based on changes in currency exchange rates to protect itself from or take advantage of exchange rate fluctuations. The Fund utilizes currency swaps to earn income and enhance returns as well as to manage the risk profile of the Fund. 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 currency exchange rate(s) for a specified amount. Currency swap agreements are subject to general market risk, liquidity risk, counterparty risk, foreign exchange risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default or other credit event of a referenced security. As a buyer, a Fund would make periodic payments to the counterparty, and a Fund would receive payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event does occur, a Fund typically would receive full notional value for a reference obligation that may have little or no value. As a seller, a Fund would receive periodic payments from the counterparty, and a Fund would make payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will gain the periodic stream of payments it received over the term of the contract. However, if a credit event occurs, a 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 a Fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk.
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in delivery of a security with a value other than had been anticipated (such as a party's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swaps on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where a Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer's default.
The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of June 30, 2011 for which a Fund is the seller of protection are disclosed under the section "Credit default swaps on credit indices—sell protection" and "Credit default swaps on corporate and sovereign issues—sell protection" in the Notes to Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective
80
The UBS Funds
Notes to financial statements
referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
The use of swap agreements 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 a Fund will be less favorable than it would have been if this investment technique was never used. Swap agreements do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap agreement defaults and fails to consummate the transaction, a Fund's risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, a Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
A Fund accrues for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap agreements on the Statement 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 Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation of swap agreements.
I. Option writing: Certain Funds may write (sell) put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains. 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 a 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 Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, index or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
J. Purchased options: Certain Funds may purchase put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), as well as exchange listed call options on particular market segment indices to achieve temporary exposure to a specific security, currency, 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
81
The UBS Funds
Notes to financial statements
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 Dynamic Alpha Fund may enter 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 the Fund shorts a security while 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. The Fund will realize a gain or loss upon closing of the short sale (returning the security to the lender by way of purchase or delivery of a long position owned). The Fund is liable to the lender for any dividends payable on securities while those securities are in a short position. These dividends are booked as an expense or liability of the Fund. The Fund segregates collateral consisting of cash, US government securities or other liquid assets sufficient to collateralize the market value of short positions. The Fund is charged a securities loan fee in connection with short sale transactions.
L. Dividends and distributions: It is the Funds' policy to distribute their respective net investment income and net capital gains, if any, annually. Dividends and distributions to shareholders are recorded on the ex-distribution date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
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 the Funds invest. The ability of the issuers of debt securities held by a Fund 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 Funds participate in a brokerage commission recapture program. The 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. For the year ended June 30, 2011, UBS Global Allocation Fund recorded $42,313 recaptured commissions which are reflected on the Statement of operations within the net realized gains (losses) on investment activities.
O. Redemption fees: 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. This amount is paid to the applicable Fund, not the Advisor or UBS Global AM (US). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets.
82
The UBS Funds
Notes to financial statements
2. Investment advisory fees and other transactions with affiliates
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 $1.0 billion |
$1.0 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 Global Allocation Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | 0.630 | % | 0.610 | % | |||||||||||||||||
| UBS Global Frontier Fund | 0.950 | 0.950 | 0.950 | 0.950 | 0.950 | 0.950 | 0.950 | ||||||||||||||||||||||||
|
$0 to $500 mm |
$500 mm to $1.0 billion |
$1.0 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 | % | |||||||||||||||
For UBS Global Allocation Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Dynamic Alpha Fund and UBS Global Frontier Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and securities loan fees and dividend expense for securities sold short) do not exceed the expense limit of each class of shares as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed for the year ended June 30, 2011, 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 | % | $ | 4,034,333 | $ | 119,133 | |||||||||||||||
| UBS Global Allocation Fund | 1.35 | 2.10 | 2.10 | 1.10 | 10,558,731 | — | |||||||||||||||||||||
| UBS Global Frontier Fund | 1.40 | N/A1 | 2.15 | 1.15 | 660,372 | 168,383 | |||||||||||||||||||||
1 UBS Global Frontier Fund does not offer Class B shares.
Each Fund will reimburse the Advisor for expenses it reimburses for a period of three years following such expense reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived for the year ended June 30, 2011 are subject to repayment through June 30, 2014. At June 30, 2011, the following Funds
83
The UBS Funds
Notes to financial statements
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, 2012 |
Expires June 30, 2013 |
Expires June 30, 2014 |
|||||||||||||||
| UBS Dynamic Alpha Fund—Class A | $ | 127,439 | $ | — | $ | 51,127 | $ | 76,312 | |||||||||||
| UBS Dynamic Alpha Fund—Class B | 13,446 | 2,654 | 6,334 | 4,458 | |||||||||||||||
| UBS Dynamic Alpha Fund—Class C | 73,846 | — | 35,483 | 38,363 | |||||||||||||||
| UBS Global Frontier Fund—Class A | 382,279 | 137,121 | 118,867 | 126,291 | |||||||||||||||
| UBS Global Frontier Fund—Class C | 132,365 | 50,614 | 41,974 | 39,777 | |||||||||||||||
| UBS Global Frontier Fund—Class Y | 9,513 | 5,653 | 1,545 | 2,315 | |||||||||||||||
Each Fund pays UBS Global AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the year ended June 30, 2011, the Funds owed and incurred administrative fees as follows:
| Fund |
Administrative fees owed |
Administrative fees incurred |
|||||||||
| UBS Dynamic Alpha Fund | $ | 49,880 | $ | 356,320 | |||||||
| UBS Global Allocation Fund | 165,450 | 1,051,316 | |||||||||
| UBS Global Frontier Fund | 8,463 | 52,154 | |||||||||
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the year ended June 30, 2011 have been included near the end of each Fund's Portfolio of investments.
The Funds may invest in UBS 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 Statement of operations.
Under normal conditions, the Funds invest cash collateral from securities lending activities into an affiliated private money market fund, UBS Private Money Market Fund LLC ("Private Money Market"), which operates in compliance with most of the substantive provisions of Rule 2a-7 of the 1940 Act. Private Money Market 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. UBS Global AM acts as managing member and receives a management fee from Private Money Market payable monthly in arrears at the annual rate of 0.10% of Private Money Market's average daily members' equity, minus the aggregate operating expenses of, and incurred by, Private Money Market during each such related month, not including investment expenses (including brokerage commissions, taxes, interest charges and other costs with respect to transactions in securities) and extraordinary expenses including litigation expenses, if any. The Advisor may, in its sole discretion, waive all or any portion of the management fee to which it may be entitled from time to time in order to maintain operating expenses at a certain level. Distributions received from Private Money Market, net of fee rebates paid to borrowers, are included in securities lending in the Statement of operations.
84
The UBS Funds
Notes to financial statements
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, 2011, were as follows:
| Fund | UBS AG | ||||||
| UBS Dynamic Alpha Fund | $ | 18,307 | |||||
| UBS Global Allocation Fund | 9,202 | ||||||
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 1940 Act 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 Frontier Fund | 0.25 | N/A* | 1.00 | ||||||||||||
* UBS Global Frontier Fund does not offer Class B shares.
UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A, Class B, and Class C. At June 30, 2011, certain Funds owed UBS Global AM (US) service and distribution fees, and for the year ended June 30, 2011, 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 | $ | 98,537 | $ | 67,584 | |||||||
| UBS Dynamic Alpha Fund—Class B | 3,583 | 7,246 | |||||||||
| UBS Dynamic Alpha Fund—Class C | 117,213 | 7,528 | |||||||||
| UBS Global Allocation Fund—Class A | 322,874 | 161,467 | |||||||||
| UBS Global Allocation Fund—Class B | 12,969 | 22,932 | |||||||||
| UBS Global Allocation Fund—Class C | 591,502 | 5,863 | |||||||||
| UBS Global Frontier Fund—Class A | 21,381 | 22,300 | |||||||||
| UBS Global Frontier Fund—Class C | 24,837 | 373 | |||||||||
4. Transfer agency and related services fees
UBS Financial Services Inc. provides certain services pursuant to a delegation of authority from BNY Mellon Investment Servicing ("BNY Mellon") as each Fund's transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
85
The UBS Funds
Notes to financial statements
For the year ended June 30, 2011, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total fees as follows:
| Fund | Amount paid | ||||||
| UBS Dynamic Alpha Fund | $ | 162,803 | |||||
| UBS Global Allocation Fund | 382,759 | ||||||
| UBS Global Frontier Fund | 15,505 | ||||||
5. Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities, 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, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees.
UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Global Frontier Fund loaned securities to certain qualified broker-dealers, with the Funds' custodian acting as the Funds' lending agent. Cash collateral received is invested in Private Money Market, which is included in each Fund's respective Portfolio of investments. In addition, UBS Global Allocation Fund and UBS Global Frontier Fund received US Government Agency securities as collateral amounting to $9,069,093 and $687,649, respectively, which cannot be resold. The value of loaned securities and related collateral outstanding at June 30, 2011, were as follows:
| Fund |
Market value of securities loaned |
Market value of collateral received from securities loaned |
Market value of investments of cash collateral received |
||||||||||||
| UBS Dynamic Alpha Fund | $ | 7,914,206 | $ | 8,124,287 | $ | 8,124,287 | |||||||||
| UBS Global Allocation Fund | 31,344,738 | 32,358,340 | 23,289,247 | ||||||||||||
| UBS Global Frontier Fund | 673,802 | 687,649 | — | ||||||||||||
6. Purchases and sales of securities
For the year ended June 30, 2011, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government and agency securities, were as follows:
| Fund | Purchases | Sales proceeds | |||||||||
| UBS Dynamic Alpha Fund | $ | 356,887,441 | $ | 596,740,774 | |||||||
| UBS Global Allocation Fund | 572,172,035 | 897,683,888 | |||||||||
| UBS Global Frontier Fund | 14,766,655 | 22,616,177 | |||||||||
86
The UBS Funds
Notes to financial statements
For the year ended June 30, 2011, aggregate purchases and sales of US Government and agency securities, excluding short-term investments, were as follows:
| Fund | Purchases | Sales proceeds | |||||||||
| UBS Dynamic Alpha Fund | $ | 2,291,464 | $ | 3,272,544 | |||||||
| UBS Global Allocation Fund | 324,947,279 | 375,798,976 | |||||||||
| UBS Global Frontier Fund | 5,508,831 | 6,551,225 | |||||||||
7. Federal income taxes
It is each Fund's policy to comply with all requirements of the Internal Revenue 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.
The tax character of distributions paid during the fiscal years ended June 30, 2011 and June 30, 2010 were as follows:
| 2011 | 2010 | ||||||||||
| Fund |
Distributions paid from ordinary income |
Distributions paid from ordinary income |
|||||||||
| UBS Dynamic Alpha Fund | $ | 11,753,976 | $ | 29,459,585 | |||||||
| UBS Global Allocation Fund | 57,555,121 | 107,588,466 | |||||||||
| UBS Global Frontier Fund | 2,067,769 | 3,141,174 | |||||||||
At June 30, 2011, the components of accumulated earnings (deficit) on a tax basis were as follows:
| Fund |
Undistributed ordinary income |
Accumulated capital and other losses |
Unrealized appreciation/ (depreciation) |
Total | |||||||||||||||
| UBS Dynamic Alpha Fund | $ | — | $ | (402,753,022 | ) | $ | (29,329,745 | ) | $ | (432,082,767 | ) | ||||||||
| UBS Global Allocation Fund | 43,903,055 | (1,143,364,760 | ) | 239,089,868 | (860,371,837 | ) | |||||||||||||
| UBS Global Frontier Fund | 2,624,215 | (25,831,053 | ) | (4,599,395 | ) | (27,806,233 | ) | ||||||||||||
Due to inherent differences in the recognition of income, expenses and realized gains/losses under GAAP 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, 2011 were as follows:
| Fund |
Accumulated undistributed net investment income |
Accumulated net realized gain (loss) |
Beneficial interest |
||||||||||||
| UBS Dynamic Alpha Fund | $ | 7,648,312 | $ | (3,846,431 | ) | $ | (3,801,881 | ) | |||||||
| UBS Global Allocation Fund | 47,123,611 | (28,129,616 | ) | (18,993,995 | ) | ||||||||||
| UBS Global Frontier Fund | 4,831,819 | (7,770,204 | ) | 2,938,385 | |||||||||||
87
The UBS Funds
Notes to financial statements
At June 30, 2011, 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, 2017 |
June 30, 2018 |
June 30, 2019 |
||||||||||||
| UBS Dynamic Alpha Fund | $ | 145,211,340 | $ | 202,927,795 | $ | 46,428,719 | |||||||||
| UBS Global Allocation Fund | 278,395,017 | 862,762,158 | — | ||||||||||||
| UBS Global Frontier Fund | 12,841,328 | 9,543,610 | 3,241,353 | ||||||||||||
During the fiscal year ended June 30, 2011, UBS Global Allocation Fund utilized $10,009,610 of capital loss carryforwards to offset current year realized gains.
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, 2011, the following Funds incurred, and elected to defer, losses of the following:
| Fund |
Net capital losses |
Net currency losses |
|||||||||
| UBS Dynamic Alpha Fund | $ | 4,902,321 | $ | 3,282,847 | |||||||
As of and during the year ended June 30, 2011, the Funds did not have any liabilities for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of operations. During the year, the Funds did not incur any interest or penalties.
Each of the tax years in the four year period ended June 30, 2011, remains subject to examination by the Internal Revenue Service and state taxing authorities.
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 sales 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 prevailing rates in effect at the time of borrowing. 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. There were no borrowings from the Committed Credit Facility during the year ended June 30, 2011.
88
The UBS Funds
Notes to financial statements
9. Shares of beneficial interest
For the year ended June 30, 2011, 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 | 3,877,616 | $ | 23,735,661 | 1,842 | $ | 10,987 | |||||||||||||
| Shares repurchased | (25,525,034 | ) | (156,780,166 | ) | (202,120 | ) | (1,184,499 | ) | |||||||||||
| Shares converted from Class B to Class A | 262,643 | 1,628,864 | (274,367 | ) | (1,628,864 | ) | |||||||||||||
| Dividends reinvested | 1,128,708 | 6,941,554 | 12,288 | 72,375 | |||||||||||||||
| Redemption fees | — | 12,034 | — | — | |||||||||||||||
| Net decrease | (20,256,067 | ) | $ | (124,462,053 | ) | (462,357 | ) | $ | (2,730,001 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 248,263 | $ | 1,456,605 | 1,974,534 | $ | 12,124,718 | |||||||||||||
| Shares repurchased | (7,303,153 | ) | (42,802,216 | ) | (1,838,567 | ) | (11,441,000 | ) | |||||||||||
| Dividends reinvested | 244,384 | 1,439,424 | 418,358 | 2,610,554 | |||||||||||||||
| Redemption fees | — | 561 | — | 609 | |||||||||||||||
| Net increase (decrease) | (6,810,506 | ) | $ | (39,905,626 | ) | 554,325 | $ | 3,294,881 | |||||||||||
UBS Global Allocation Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 5,496,418 | $ | 54,196,160 | 6,667 | $ | 66,091 | |||||||||||||
| Shares repurchased | (30,247,628 | ) | (299,917,346 | ) | (359,847 | ) | (3,473,824 | ) | |||||||||||
| Shares converted from Class B to Class A | 714,938 | 7,085,487 | (719,244 | ) | (7,085,487 | ) | |||||||||||||
| Dividends reinvested | 3,337,041 | 32,702,995 | 25,649 | 252,385 | |||||||||||||||
| Redemption fees | — | 19,046 | — | — | |||||||||||||||
| Net decrease | (20,699,231 | ) | $ | (205,913,658 | ) | (1,046,775 | ) | $ | (10,240,835 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 680,165 | $ | 6,577,919 | 936,573 | $ | 9,557,356 | |||||||||||||
| Shares repurchased | (12,339,415 | ) | (118,547,892 | ) | (3,881,538 | ) | (38,476,049 | ) | |||||||||||
| Dividends reinvested | 1,301,168 | 12,452,180 | 803,980 | 8,023,720 | |||||||||||||||
| Redemption fees | — | 3,791 | — | 2,467 | |||||||||||||||
| Net decrease | (10,358,082 | ) | $ | (99,514,002 | ) | (2,140,985 | ) | $ | (20,892,506 | ) | |||||||||
UBS Global Frontier Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 1,148,039 | $ | 9,053,928 | 128,727 | $ | 1,018,619 | 138,711 | $ | 1,073,192 | ||||||||||||||||||
| Shares repurchased | (3,015,895 | ) | (23,741,744 | ) | (563,344 | ) | (4,351,462 | ) | (4,765 | ) | (37,862 | ) | |||||||||||||||
| Dividends reinvested | 199,143 | 1,539,376 | 44,976 | 348,115 | 3,662 | 28,269 | |||||||||||||||||||||
| Redemption fees | — | 5,441 | — | 1,645 | — | 40 | |||||||||||||||||||||
|
Net increase (decrease) |
(1,668,713 | ) | $ | (13,142,999 | ) | (389,641 | ) | $ | (2,983,083 | ) | 137,608 | $ | 1,063,639 | ||||||||||||||
89
The UBS Funds
Notes to financial statements
For the year ended June 30, 2010, 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 | 8,327,793 | $ | 51,653,337 | 1,338 | $ | 7,948 | |||||||||||||
| Shares repurchased | (27,919,319 | ) | (169,870,197 | ) | (440,378 | ) | (2,587,427 | ) | |||||||||||
| Shares converted from Class B to Class A | 80,825 | 498,728 | (84,617 | ) | (498,728 | ) | |||||||||||||
| Dividends reinvested | 2,795,905 | 16,999,103 | 43,098 | 250,834 | |||||||||||||||
| Redemption fees | — | 10,795 | — | — | |||||||||||||||
| Net decrease | (16,714,796 | ) | $ | (100,708,234 | ) | (480,559 | ) | $ | (2,827,373 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 1,384,171 | $ | 8,180,981 | 9,079,410 | $ | 53,972,983 | |||||||||||||
| Shares repurchased | (9,114,936 | ) | (53,034,892 | ) | (10,125,401 | ) | (63,148,083 | ) | |||||||||||
| Dividends reinvested | 852,122 | 4,959,348 | 961,905 | 5,934,953 | |||||||||||||||
| Net decrease | (6,878,643 | ) | $ | (39,894,563 | ) | (84,086 | ) | $ | (3,240,147 | ) | |||||||||
UBS Global Allocation Fund
| Class A | Class B | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 6,352,517 | $ | 59,062,787 | 10,783 | $ | 100,247 | |||||||||||||
| Shares repurchased | (41,995,018 | ) | (391,321,186 | ) | (1,081,458 | ) | (9,800,513 | ) | |||||||||||
| Shares converted from Class B to Class A | 1,460,114 | 13,447,161 | (1,486,878 | ) | (13,447,161 | ) | |||||||||||||
| Dividends reinvested | 6,494,949 | 59,948,378 | 121,003 | 1,108,390 | |||||||||||||||
| Redemption fees | — | 21,796 | — | — | |||||||||||||||
| Net decrease | (27,687,438 | ) | $ | (258,841,064 | ) | (2,436,550 | ) | $ | (22,039,037 | ) | |||||||||
| Class C | Class Y | ||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||
| Shares sold | 1,764,048 | $ | 16,132,184 | 2,805,782 | $ | 26,724,534 | |||||||||||||
| Shares repurchased | (16,688,832 | ) | (151,047,516 | ) | (11,923,497 | ) | (113,792,917 | ) | |||||||||||
| Dividends reinvested | 2,798,058 | 25,210,500 | 1,529,331 | 14,375,713 | |||||||||||||||
| Redemption fees | — | 7,984 | — | 500 | |||||||||||||||
| Net decrease | (12,126,726 | ) | $ | (109,696,848 | ) | (7,588,384 | ) | $ | (72,692,170 | ) | |||||||||
UBS Global Frontier Fund
| Class A | Class C | Class Y | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
| Shares sold | 1,866,397 | $ | 12,428,452 | 208,061 | $ | 1,436,877 | 27,487 | $ | 191,235 | ||||||||||||||||||
| Shares repurchased | (3,195,448 | ) | (21,825,684 | ) | (714,884 | ) | (4,951,609 | ) | (301,785 | ) | (2,197,613 | ) | |||||||||||||||
| Dividends reinvested | 347,095 | 2,408,840 | 86,529 | 602,239 | 82 | 571 | |||||||||||||||||||||
| Redemption fees | — | 5,142 | — | 988 | — | — | |||||||||||||||||||||
| Net decrease | (981,956 | ) | $ | (6,983,250 | ) | (420,294 | ) | $ | (2,911,505 | ) | (274,216 | ) | $ | (2,005,807 | ) | ||||||||||||
90
The UBS Funds
Report of 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, including the portfolios of investments, of UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Global Frontier Fund (three of the series comprising The UBS Funds) (collectively the "Funds") as of June 30, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the 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. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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, 2011, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Global Frontier Fund at June 30, 2011, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.
New York, New York
August 29, 2011
91
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their 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, procedures and 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 UBS's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).
92
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 9 and 10, 2011 (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 Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Global Frontier 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 Value Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Absolute Return Bond Fund, UBS Global Bond Fund, UBS High Yield Fund and UBS Core Plus Bond 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 23, 2011, June 9, 2011 and June 10, 2011, 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 its 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 the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addition, the Board considered the presentations provided with respect to distribution strategies for the Funds. The
93
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
Board also discussed the annual written compliance report from the Chief Compliance Officer and noted enhancements undertaken and planned with respect to the compliance program. 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. The Board also reviewed a memorandum provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Lipper Reports, the Board noted that UBS Global Allocation Fund, UBS Global Frontier Fund, UBS International Equity Fund, UBS U.S. Small Cap Growth Fund, UBS High Yield Fund and UBS Core Plus Bond Fund each had appeared in one of the top three performance quintiles for the one-year performance period. At the Board's request, the Advisor further addressed the performance data for the UBS Dynamic Alpha Fund, UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS Global Equity Fund, UBS Global Bond Fund and UBS Absolute Return 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 Dynamic Alpha Fund, the Advisor discussed the factors that had affected the short-term and longer-term performance of the Fund. The Advisor explained that after the market turmoil in 2008, the Advisor implemented strategy enhancements to provide the Fund with more protection against downside risk in order to further the Fund's goal of providing positive returns in a variety of market environments. The Advisor stated that during the one-year performance period, the Fund's more conservative stance with respect to risk may have impacted the UBS Dynamic Alpha Fund's performance relative to its peers. The Advisor also described for the Board the modifications that had been made to the UBS Dynamic Alpha Fund's security selection process, which management believes will enhance the Fund's performance.
With respect to the performance of the UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Value Equity Fund and UBS U.S. Large Cap Equity Fund over the past year, the Advisor noted that each Fund had positive returns but also noted that each Fund underperformed relative to its peer universe. The Advisor stated that stock selection was the primary reason for each Fund's underperformance compared to its peer universe. The Advisor discussed each Fund's stock selection process and stated that each Fund was well positioned in the next year to take advantage of attractively priced stocks that fit each Fund's long-term investment focus. With respect to the UBS U.S. Large Cap Equity Fund, it also was noted that while the Fund had underperformed during the last year, the Fund's performance for the longer-term, ten-year performance period compared very favorably to most of its peers.
The Advisor then discussed the factors that had a negative effect on the relative performance of the UBS Global Equity Fund during the one-year performance period. Although the UBS Global Equity Fund experienced a positive return during the past year, the Fund underperformed relative to its peer universe. The Advisor noted that stock selection was the primary factor that contributed to the Fund's relative underperformance. The Advisor discussed the stock selection process for the UBS Global Equity Fund and explained the steps the Advisor was taking to improve the Fund's performance. The Advisor also noted that while the UBS Global Equity Fund underperformed relative to its peer universe for the one-year performance period, it exceeded its peer universe median for the three year performance period.
With respect to the UBS Global Bond Fund, the Advisor noted that while the Fund underperformed relative to its peer universe for the one-year period, the Fund experienced a positive return and outperformed its benchmark index during this time period. The Fund's weaker peer group relative performance was partially attributable to its more conservative posture with respect to credit sectors. The Advisor discussed with the Board the performance
94
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
outlook for the Fund in the upcoming year and stated that it believed that the previous enhancements that had been made to the investment process should continue to contribute positively to the performance of the Fund in the future.
The Advisor next addressed the relative underperformance of the UBS Absolute Return Bond Fund with respect to the Fund's peers. The Advisor discussed with the Board the Fund's strategy of attempting to generate positive returns over time regardless of market conditions by managing the risks and market exposures of the Fund's portfolio. The Advisor stated that the UBS Absolute Return Bond Fund's more conservative strategy with respect to the emerging markets and high yield asset classes resulted in its relative underperformance in comparison to its peers. The Advisor noted that the ability of UBS Absolute Return Bond Fund to maintain a negative duration posture may allow the Fund to be more competitive with its peers in the future as global yields remain at historically low levels.
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, the expectations of the shareholder base, the current market environment and the Advisor's efforts to address the underperformance issues of each Fund.
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). 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 Dynamic Alpha Fund and UBS Global Allocation Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except the UBS U.S. Equity Alpha Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Value Equity Fund, UBS Core Plus Bond Fund and UBS Global Bond Fund, had a contractual fee rate comparable to, or lower than, the Lipper median in its respective Lipper expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund, except the UBS Dynamic Alpha Fund, UBS Global Equity Fund, UBS U.S. Equity Alpha Fund and UBS High Yield Fund, had total expenses that were comparable to, or lower than, the Lipper median in its respective Lipper expense group.
The Board first discussed the management fee and total expenses of the UBS Dynamic Alpha Fund. It was noted that the UBS Dynamic Alpha Fund's actual management fee was higher than the median of the Fund's Lipper expense group, which led the Board to discuss this Fund's management fee 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, including the use of 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 but also noted that the Fund's management fee was not among the highest of its peers, ranking in the third quintile of its Lipper expense group. The Advisor also noted that the UBS Dynamic Alpha Fund's management fee included breakpoints, which would decrease the level of management fees as assets grew. The Board also considered that the UBS Dynamic Alpha Fund's total expenses were higher than the total expenses of the Fund's Lipper expense
95
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
group. The Advisor noted that the UBS Dynamic Alpha Fund's total expenses were in the third quintile of its Lipper expense group and were not significantly higher than the expense group median.
The Board also noted that the actual management fee for the UBS Global Allocation Fund was higher than the management fee of several of the funds in its Lipper expense group. The Board, however, determined that the UBS Global Allocation Fund's management fee was reasonable considering that it was not appreciably higher than its Lipper expense group median and the Fund was in the second quintile in its expense group with respect to total expenses.
The Board next considered that the management fee of the UBS U.S. Equity Alpha Fund was higher than the median of its Lipper expense group on a contractual basis, but noted that the Fund's actual management fee compared favorably with the Fund's peers placing in the second quintile of the Lipper expense group. The Board also considered the UBS U.S. Equity Alpha Fund's total expenses, which were higher than the median of the Fund's expense group. The Advisor explained that the Fund has higher non-management expenses as compared to its peers due to the Fund's smaller asset base.
The Board next discussed the management fee of the UBS U.S. Large Cap Equity Fund. It was noted that the UBS U.S. Large Cap Equity Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis, which led the Board to discuss this Fund's management fee with the Advisor. The Board noted that while the UBS U.S. Large Cap Equity Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses were both at the median of its Lipper expense group.
The Board then considered the management fee of the UBS U.S. Large Cap Value Equity Fund. It was noted that the UBS U.S. Large Cap Value Equity Fund's management fee also was higher than the median of the Fund's Lipper expense group on a contractual basis. The Board noted that while the UBS U.S. Large Cap Value Equity Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses each placed in the first quintile in the Fund's Lipper expense group.
The Board also reviewed the management fee of the UBS Core Plus Bond Fund and noted that the contractual management fee for the UBS Core Plus Bond Fund was not significantly higher than the median of the Fund's expense group. The Board also considered that the UBS Core Plus Bond Fund's actual management fee and actual total expenses were each in the first quintile of the Fund's Lipper expense group.
With respect to the fees and expenses of the UBS Global Bond Fund, the Board noted that the Fund was above the median of its Lipper expense group with respect to contractual management fees. The Board, however, also noted that the Fund's actual management fee was lower than the median of its Lipper expense group placing in the first quintile of its expense group. The Board also considered that the UBS Global Bond Fund had total expenses that compared favorably with the Fund's peers, placing in the second quintile of the Lipper expense group.
The Board then considered the total expenses of the UBS Global Equity Fund and UBS High Yield Fund, noting that the total expenses of each Fund were not significantly higher than each Fund's Lipper expense group median. The Board also noted each Fund's management fees, on both an actual and contractual basis, were very competitive with the management fees of the funds in each respective Lipper expense group.
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 with 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. The
96
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
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 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 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. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. 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.
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. 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 most Funds, 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 each Fund, except UBS Global Frontier 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.
97
The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory 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 shows, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee 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 office1 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 |
||||||||||||||||||
|
Adela Cepeda; 53 A.C. Advisory, Inc. 150 No. Clark Street, Suite 2160 Chicago, Illinois 60601 |
Trustee | Since 2004 | Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995). Ms. Cepeda is also a director of the Municipal Securities Rulemaking Board (since October 2010). | Ms. Cepeda is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Ms. Cepeda is a director of the MGI Funds (7 portfolios) (since 2005), trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) and director of Amalgamated Bank of Chicago. Ms. Cepeda was a director of Lincoln National Income Fund, Inc. (1992-2006), a director of Lincoln National Convertible Securities Fund, Inc. (1992-2006) and a director of Wyndham International, Inc. (2004-2006). | ||||||||||||||||||
|
John J. Murphy; 66 268 Main Street P.O. Box 718 Gladstone, NJ 07934 |
Trustee | Since 2009 | Mr. Murphy is the president of Murphy Capital Management (investment advisor) (since 1983) | Mr. Murphy is a director or trustee of three investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Murphy is a director of the Nicholas Applegate funds (12 portfolios); a director of the Legg Mason Equity Funds (54 portfolios) and a trustee of Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). | ||||||||||||||||||
98
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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 |
||||||||||||||||||
|
Abbie J. Smith; 57 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 |
Trustee | Since 2009 | Ms. Smith is Boris and Irene Stern Professor of Accounting in the University of Chicago Booth School of Business (since 1980). In addition, Ms. Smith is also a co-founding partner and Director of Research of Fundamental Investment Advisors, a hedge Fund (co-founded in 2004, commenced operations in 2008) (since 2008). Formerly, Ms. Smith was a Marvin Bower Fellow, Harvard Business School (2001-2002). | Ms. Smith is a director or trustee of three investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation and chair of the human resources and compensation committee (formerly known as HON Industries Inc.) (office furniture) and a director (since 2003) and chair of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee (since 2000) and portfolio performance committee of the Dimensional Funds complex (89 Portfolios). | ||||||||||||||||||
|
Frank K. Reilly; 75 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5649 |
Chairman and Trustee | Since 1992 | Mr. Reilly is a Professor of Finance at the University of Notre Dame (since 1982). | Mr. Reilly is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Reilly is a director of Discover Bank, a subsidiary of Discover Financial Services. | ||||||||||||||||||
|
Edward M. Roob; 76 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 |
Trustee | Since 1995 | Mr. Roob is retired (since 1993). | Mr. Roob is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | None. | ||||||||||||||||||
99
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
|
Name, address and age |
Position(s) held with Trust |
Term of office1 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 |
||||||||||||||||||
|
J. Mikesell Thomas; 60 1353 Aster Place Chicago, IL 60610 |
Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008), President and CEO of First Chicago Bancorp. (since 2008), CEO of First Chicago Bank of Trust (since 2008) and President and sole shareholder of Mikesell Advisory Corp (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (2004-2008). Mr. Thomas was an Independent financial advisor (2001-2004). | Mr. Thomas is a director or trustee of four investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | Mr. Thomas is a director and chairman of the Audit Committee for NorthShore University Health System. Mr. Thomas was previously a director of First Chicago Bancorp (2008-2010) and First Chicago Bank & Trust (2008-2010). | ||||||||||||||||||
Interested Trustee:
| Shawn Lytle; 40*2 | Trustee | Since February 2011 | Mr. Lytle is a Group Managing Director and Head of Americas at UBS Global Asset Management (Americas) Inc. (since 2010). Mr. Lytle is a member of the UBS Global Asset Management Executive Committee. Prior to his role as Head of Americas, he was Deputy Global Head of Equities (2008-2010), Head of Equity Capabilities and Business Management in 2008, and a team manager (2005-2008) at UBS Global Asset Management (Americas) Inc. | Mr. Lytle is a director or trustee of three investment companies (consisting of 50 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | None | ||||||||||||||||||
100
The UBS Funds
Trustee and officer information (unaudited)
Officers:
|
Name, address and age |
Position(s) held with the Trust |
Term of office1 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*; 46 | Vice President and Assistant Secretary | Since 2005 | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) and deputy general counsel (since 2005) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM—Americas region"). Mr. Allessie is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Rose Ann Bubloski*; 43 | Vice President and Assistant Treasurer | Since May 2011 | Ms. Bubloski is an associate director (2003-2007 and 2008 to present) and senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region. From 2004 through 2007 she was a vice president and assistant treasurer of certain UBS funds. From 2007 to 2008 she was vice president at Cohen & Steers Capital Management, Inc. (investment manager). She is vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
| Mark E. Carver*; 47 | President | Since 2010 | Mr. Carver is a managing director and Head of Product Development and Management—Americas for UBS Global AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is a member of the Americas Management Committee (since 2008) and the Regional Operating Committee (since 2008). Prior to 2008, Mr. Carver held a number of product-related or sales responsibilities with respect to funds, advisory programs and separately managed accounts. Mr. Carver is president of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Thomas Disbrow*; 45 | Vice President, Treasurer and Principal Accounting Officer | Since 2004 and 2006, respectively | Mr. Disbrow is a managing director (since March 2011), (prior to which he was an executive director) (since 2007) and head of North Americas Fund Treasury (since March 2011) of UBS Global AM—Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Michael J. Flook*; 46 | Vice President and Assistant Treasurer | Since 2006 | Mr. Flook is a director (since 2010) (prior to which he was an associate director) (since 2006) 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 2005 to 2006. Mr. Flook is a vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
101
The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
|
Name, address and age |
Position(s) held with the Trust |
Term of office1 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**; 53 | Vice President and Secretary | Since 1999 and 2004, respectively | Mr. Kemper is a managing director (since 2006) and head of the legal department of UBS Global AM—Americas region (since 2004). He has been secretary of UBS Global AM—Americas region since 2004, secretary of UBS Global Asset Management Trust Company since 1993 and secretary of UBS AM Holdings (USA) Inc. since 2001. Mr. Kemper is vice president and secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Joanne M. Kilkeary*; 43 | Vice President and Assistant Treasurer | Since 2006 | Ms. Kilkeary is a director (since 2008) (prior to which she was 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 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Tammie Lee*; 40 | Vice President and Assistant Secretary | Since 2005 | Ms. Lee is an executive director (since 2010) (prior to which she was a director) (since 2005) and associate general counsel of UBS Global AM—Americas region (since 2005). Ms. Lee is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Joseph McGill*; 49 | 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. Mr. McGill is a vice president and chief compliance officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Nancy D. Osborn*; 45 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Eric Sanders*; 45 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
102
The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
|
Name, address and age |
Position(s) held with the Trust |
Term of office1 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*; 55 | Vice President and Chief Operating Officer | Since 2006 | Mr. Shoup is a managing director and global head of the Fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Shoup is also a director of UBS (IRL) Fund p.l.c. (since 2008) 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 2003 to 2006. Mr. Shoup is a vice president and chief operating officer of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment advisor or manager. | ||||||||||||
| Keith A. Weller*; 50 | 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). Mr. Weller is a vice president and assistant secretary of 17 investment companies (consisting of 100 portfolios) for which UBS Global AM—Americas region or one of its affiliates serves as investment 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.
2 Mr. Lytle is considered to be an interested person of the Trust under the federal securities laws due to his position as an officer of UBS Global AM.
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028.
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
103
The UBS Funds
Federal tax information (unaudited)
For the year ended June 30, 2011, 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 |
|||||||
| UBS Dynamic Alpha Fund | 17.20 | % | |||||
| UBS Global Allocation Fund | 13.96 | % | |||||
For the year ended June 30, 2011, the percentage of income earned from direct US Treasury obligations approximately amounted to the following:
|
Direct US Treasury obligations |
|||||||
| UBS Dynamic Alpha Fund | 0.55 | % | |||||
| UBS Global Allocation Fund | 12.20 | % | |||||
| UBS Global Frontier Fund | 20.30 | % | |||||
104
PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
One North Wacker Drive
Chicago, IL 60606
S1196
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, 2011 and June 30, 2010, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $678,900 and $600,700, respectively.
Fees included in the audit fees category are those associated with the annual audits of financial statements and services that are normally provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees:
In each of the fiscal years ended June 30, 2011 and June 30, 2010, 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 $42,500 and $41,000, respectively.
Fees included in the audit-related category are those associated with (1) the reading and providing of comments on the 2010 and 2009 semiannual financial statements and (2) review of Form N-1A.
There were no audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(c) Tax Fees:
In each of the fiscal years ended June 30, 2011 and June 30, 2010, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $63,525 and $64,750, 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, 2011 and June 30, 2010, 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 Audit Committee Charter contains the Audit Committee’s pre-approval policies and procedures. Reproduced below is an excerpt from the Audit Committee Charter regarding pre-approval policies and procedures:
To carry out its purposes, the Audit Committee shall have the following duties and powers:
(a) To pre-approve the engagement of, and to recommend to the Board the engagement, retention or termination of, the independent auditors to provide audit, review or attest services to the UBS Funds, and, in connection therewith, to review and evaluate the capabilities and independence of the auditors, and receive the auditors’ specific representations as to their independence. In evaluating the auditor’s qualifications, performance and independence, the Committee must, among other things, obtain and review a report by the auditors, at least annually, describing the following items: (i) all relationships between the, independent auditors and the UBS Funds, as well as with the UBS Funds, investment advisor or any control affiliate of the investment advisor that provides ongoing services to the UBS Funds; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (iii) the audit firm’s internal quality control procedures.
(b) To pre-approve all non-audit services to be provided to the UBS Funds by the independent auditors when, without such pre-approval, the auditors would not be independent of the UBS Funds under applicable federal securities laws, rules or auditing standards.
(c) To pre-approve all non-audit services to be provided by the UBS Funds’ independent auditors to the UBS Funds’ investment advisor or to any entity, that controls, is controlled by or is under common control with the UBS Funds investment advisor (“advisor affiliate”) and that provides ongoing services to the UBS Funds when, without such pre-approval by the
Committee, the auditors would not be independent of the UBS Funds under applicable federal securities laws, rules or auditing standards.
(d) To establish, if deemed necessary or appropriate as an alternative to Committee pre-approval of services to be provided by the independent auditors as required by paragraphs (b) and (c) above, policies and procedures to permit such services to be pre-approved by other means, such as by action of a designated member or members of the Committee, subject to subsequent Committee review or oversight.
(e) To consider whether the non-audit services provided by the UBS Funds’ independent auditor to the UBS Funds investment advisor or any advisor affiliate that provides on-going services to the UBS Funds, which services were not pre-approved by the Committee, are compatible with maintaining the auditors’ independence.
(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, 2011 and June 30, 2010 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, 2011 and June 30, 2010 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, 2011 and June 30, 2010 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, 2011 and June 30, 2010 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.
All Other Fees:
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2011 and June 30, 2010 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, 2011 and June 30, 2010 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.
(f) According to E&Y, for the fiscal year ended June 30, 2011, the percentage of hours spent on the audit of the registrant’s financial statements for the most recent fiscal year that were
attributed to work performed by persons who are not full-time, permanent employees of E&Y was 0%.
(g) For the fiscal years ended June 30, 2011 and June 30, 2010, the aggregate fees billed by E&Y of $170,400 and $335,750, 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:
|
|
|
2011 |
|
2010 |
| ||
|
Covered Services |
|
$ |
106,025 |
|
$ |
105,750 |
|
|
Non-Covered Services |
|
$ |
64,375 |
|
$ |
230,000 |
|
(h) The registrant’s audit committee has considered 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.
(a) Included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
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, Ms. Adela Cepeda, care of the Secretary of the UBS Funds 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 filed herewith.
(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/ Mark E. Carver |
|
|
|
Mark E. Carver |
|
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President |
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Date: |
September 8, 2011 |
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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.
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By: |
/s/ Mark E. Carver |
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Mark E. Carver |
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President |
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Date: |
September 8, 2011 |
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By: |
/s/ Thomas Disbrow |
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Thomas Disbrow |
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Treasurer and Principal Accounting Officer |
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Date: |
September 8, 2011 |
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