UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-06637 | |||||||
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The UBS Funds | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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One North Wacker Drive, Chicago, IL |
| 60606-2807 | ||||||
(Address of principal executive offices) |
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Joseph J. Allessie, Esq. UBS Global Asset Management (Americas) Inc. 1285 Avenue of the Americas New York, NY 10019 | ||||||||
(Name and address of agent for service) | ||||||||
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Copy to: | ||||||||
Bruce Leto, Esq. Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 | ||||||||
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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: | December 31, 2013 |
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Item 1. Reports to Stockholders.
UBS Fixed
Income Funds
December 31, 2013
The UBS Funds—Fixed Income
Semiannual Report
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
Fixed Income Funds | |||||||
UBS Core Plus Bond Fund | 5 | ||||||
UBS Emerging Markets Debt Fund | 19 | ||||||
UBS Fixed Income Opportunities Fund | 31 | ||||||
Explanation of expense disclosure | 51 | ||||||
Statement of assets and liabilities | 54 | ||||||
Statement of operations | 58 | ||||||
Statement of changes in net assets | 60 | ||||||
Financial highlights | 62 | ||||||
Notes to financial statements | 68 | ||||||
General information | 89 | ||||||
Board approval of investment advisory agreement | 90 |
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President's letter
February 14, 2014
Dear Shareholder,
The importance of investment discipline to achieving better investment outcomes is well known to individual investors and financial advisors alike. But even the most disciplined investors, faced with breaking news or market-moving events, can sometimes be distracted from their long-term financial plans. The year 2013 and the early part of this year have offered no shortage of distractions. After the broad, steady market recoveries of the last several years, 2013 presented us with the much anticipated "great rotation" out of fixed income into risk assets. Although it didn't fully play out, this was set in motion by the Federal Reserve Board's (the "Fed") decision to "taper" its quantitative easing program ("QE") due to improving prospects for the American economy. Bond investors, some of whom may be risk averse, learned firsthand that it is possible for their fixed income investments to lose value when interest rates rise. Yet, they still seem to accept this tradeoff in exchange for the relative security of their principal, as evidenced by the number of investors with assets still in fixed income investments. In 2013, stocks rallied despite questions over what effects the taper and a change in leadership at the Fed would have on stock prices. While flows into equities improved, many investors didn't participate in this rally and are now faced with the decision of what to do next.
The financial advisor community and asset managers like UBS Global Asset Management understand the drivers of investor behavior and have collaborated to create solutions that help clients build and maintain diversified, well allocated portfolios. Integrated in these solutions are the core/traditional asset classes that have built and protected wealth for decades. Increasingly, however, wealth managers' and asset managers' solutions are including new diversifiers, designed to potentially enhance the likelihood that clients remain committed to their long-term financial plans through the markets' ups and downs. By offering solutions that help better diversify client portfolios, we aim to soften what can sometimes be a bumpy ride.
At UBS Global Asset Management, we are committed to traditional asset classes but have also enhanced our product offerings. We remain vigilant in adding value through active management in our core investment solutions. But, as I have mentioned in past letters, we were among the early leaders to evolve our product offering to meet the challenges to investment discipline described above. We launched these types of funds before the terms "liquid alternatives," "absolute return" or "multi-alternative funds" were well known in the investment vernacular. We have invested resources to better enable our investment professionals across equities, fixed income and multi-asset class solutions, to focus on improved investor outcomes. We continue to build strong track records in these areas, so that we can play an integral role in helping financial advisors meet their clients' needs by staying focused on investors' real, long-term objectives.
1
President's letter
The markets will undoubtedly continue to challenge investors' fortitude with respect to their commitment to their long-term financial plans. As we begin 2014, new distractions have arisen: concerns over emerging markets and uncertainty about security at the Olympic Games in Sochi, Russia, among others. As such, we understand that it is our responsibility to deliver sustained performance in our funds, enabling our clients to experience the outcomes they need. To help us stay focused on these challenges, we rely on our firm's culture, based on the foundations of client focus, excellence and sustained performance. We embrace this responsibility and these challenges and thank you for your continued trust in our skill and commitment to serve you.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
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. A prospectus or summary prospectus for the 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.
2
The markets in review
Improving growth in the developed world
Despite a number of headwinds, including the sequestration, higher taxes and rising interest rates, the overall US economy continued to expand during the six-month reporting period ended December 31, 2013. Looking back, the Commerce Department reported that gross domestic product ("GDP") growth in the US was a tepid 1.1% during the first quarter of 2013. The economy then gained some traction, as GDP grew 2.5% and 4.1% during the second and third quarters of 2013, respectively. Third quarter GDP was the highest reading since the fourth quarter of 2011. The Commerce Department's initial estimate for fourth quarter 2013 GDP growth was 3.2%.1
The Federal Reserve Board (the "Fed") took a number of actions during the reporting period to stimulate the economy. As has been the case since December 2008, the Fed kept the federal funds rate (the federal funds rate, or the "fed funds rate," which is the rate banks charge one another for funds they borrow on an overnight basis) at a historically low level between 0% and 0.25%. However, at his press conference following the central bank's meeting in June 2013, Fed Chairman Ben Bernanke signaled that the Fed might moderate the monthly pace of its bond purchases later in the year. This triggered a substantial sell-off in the fixed income market, as Treasury yields rose sharply and bond prices declined. At its meeting that concluded on September 18, 2013, the Fed surprised the market by delaying the tapering of its asset purchases.
At its final meeting of 2013, in December, the Fed announced that it would begin paring back its monthly asset purchases, saying, "Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a [reduced] pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a [reduced] pace of $40 billion per month rather than $45 billion per month."
At its meeting that concluded on January 29, 2014, the Fed said it would further taper its asset purchases. Beginning in February 2014, the central bank will scale back its monthly purchases to a total of $65 billion ($30 billion of agency mortgage-backed securities and $35 billion of longer-term Treasury securities).2
Growth in other developed countries generally improved during the reporting period, albeit from relatively low levels. In its October 2013 World Economic Outlook, the International Monetary Fund ("IMF") stated that "Advanced economies are gradually strengthening. At the same time, growth in emerging market economies has slowed." From a regional perspective, the IMF anticipated that 2013 growth in the eurozone would contract 0.4%, but increase to 1.0% in 2014. While growth in emerging market countries remains higher than in developed countries, the IMF projects that this gap is narrowing. It projected that emerging market growth would moderate from 4.9%, in 2012 to 4.5% in 2013. In particular, China's economy was expected to grow 7.6% in 2013, versus 7.7% in 2012.
1 Based on the Commerce Department's third estimate announced on January 30, 2014, after the reporting period had ended.
2 The Fed's decision to further taper was made at its meeting that concluded on January 29, 2014, after the reporting period had ended.
3
The markets in review
Generally weak results for the fixed income market
The fortunes of the fixed income market were often tied to expectations regarding future Fed monetary policy. With the US economy gaining momentum and the Fed signaling a tapering of its asset purchases, US Treasury yields moved higher and negatively impacted the overall bond market over the last six months of 2013 (yields and bond prices move in opposite directions). Against this backdrop, the overall US bond market, as measured by the Barclays US Aggregate Index,3 rose 0.43%. US taxable spread sectors (non-US Treasury fixed income securities) generated mixed results during the six-month period. One notable standout was high yield bonds, as they generated strong results. Supporting the high yield market were continued solid corporate fundamentals, low defaults and overall solid demand. All told, the BofA Merrill Lynch US High Yield Cash Pay Constrained Index4 rose 5.83% during the reporting period. In contrast, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),5 rose 1.79%. This weaker performance was triggered by decelerating emerging market growth, generally falling commodity prices, higher US interest rates and periods of weak demand.
3 The Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 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 capitalization 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. The index is not leveraged. Investors should note that indices do not reflect the deduction of fees and expenses.
5 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.
4
UBS Core Plus Bond Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Core Plus Bond Fund (the "Fund") returned 1.31% (Class A shares declined 3.26% after the deduction of the maximum sales charge), while Class Y shares returned 1.44%. The Fund's benchmark, the Barclays US Aggregate Index (the "Index"), returned 0.43% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 7; 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 and issue selection.
The Fund used derivatives during the reporting period. Certain interest rate derivatives (such as swaps, futures and options) were utilized to facilitate specific duration and yield curve strategies. Credit derivatives (such as credit default swaps and options on credit default swaps and, to a smaller extent, total return swaps) were used to implement specific credit-related investment strategies as part of the Fund's sector allocation and security selection. Throughout the period, the Fund engaged in foreign exchange forwards to help implement its active currency positions. While derivatives play a role in the overall portfolio construction process, they are just one of the tools we use to manage the Fund's overall risk exposure and to implement the aforementioned strategies. That said, overall, sector allocation and security selection were additive to performance, as was currency management. Duration and yield curve management did not materially impact results.
Portfolio performance summary1
What worked
• Overall, sector allocation contributed to performance during the reporting period. We tactically adjusted the Fund's exposure to investment grade corporate bonds, commercial mortgage-backed securities ("CMBS"), and high yield corporate bonds during the reporting period. For the majority of the reporting period, we had overweight positions in these three sectors, which was beneficial for performance, given generally solid demand from investors seeking yield in the low interest rate environment.
• Security selection was additive to performance during the six months.
– Security selection of investment grade corporate bonds and CMBS contributed to performance.
– Within the investment grade corporate bond sector, we generally maintained an overweight to financials with an emphasis on more liquid, higher beta (higher risk) bank holding companies.
– In CMBS, we favored senior tranches which performed well for much of the reporting period.
1 For a detailed commentary on the market environment in general during the reporting period, see pages 3-4.
5
UBS Core Plus Bond Fund
• Within currency, positioning in the Japanese yen was additive for results. The Fund's short position in the Japanese yen, which continued to weaken relative to the US dollar, contributed to overall returns.
What didn't work
• Within currency, positioning in the euro detracted from results. We traded the euro with a bias to having a short position. This detracted from results as the euro strengthened versus the US dollar.
• The Fund's allocation to agency mortgage-backed securities was a drag on results. Agency MBS were subject to volatility given shifting expectations for the Federal Reserve Board's asset purchase tapering. We tactically traded agency MBS during the reporting period and, overall, our exposure to the sector negatively impacted the Fund's performance.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
6
UBS Core Plus Bond Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 1.31 | % | (1.29 | )% | 5.93 | % | 2.49 | % | |||||||||||
Class C2 | 1.05 | (1.79 | ) | 5.40 | 1.96 | ||||||||||||||
Class Y3 | 1.44 | (1.05 | ) | 6.18 | 2.74 | ||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (3.26 | )% | (5.78 | )% | 4.95 | % | 2.02 | % | |||||||||||
Class C2 | 0.31 | (2.51 | ) | 5.40 | 1.96 | ||||||||||||||
Barclays US Aggregate Index4 | 0.43 | % | (2.02 | )% | 4.44 | % | 4.55 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.59% and 0.65%; Class C—2.03% and 1.15%; Class Y—1.21% and 0.40%. 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 0.64% for Class A 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 distribution and service 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.
3 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 distribution and service fees.
4 The Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. 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 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://globalam-us.ubs.com/corpweb/performance.do.
7
UBS Core Plus Bond Fund
Top ten long-term fixed income holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
US Treasury Notes, 0.250%, due 05/31/15 | 3.4 | % | |||||
Federal National Mortgage Association Pools, 3.000%, TBA | 2.5 | ||||||
US Treasury Notes, 0.125%, due 04/30/15 | 2.5 | ||||||
Federal National Mortgage Association Pools, 4.500%, TBA | 2.5 | ||||||
Federal National Mortgage Association Pools, 3.500%, TBA | 2.0 | ||||||
US Treasury Notes, 1.375%, due 06/30/18 | 1.8 | ||||||
US Treasury Notes, 2.625%, due 01/31/18 | 1.6 | ||||||
Ford Motor Credit Co. LLC, 8.125%, due 01/15/20 | 1.4 | ||||||
Federal National Mortgage Association Pools, #AE9202, 4.000%, due 09/01/41 | 1.4 | ||||||
Federal National Mortgage Association Pools, #AT2725, 3.000%, due 05/01/43 | 1.3 | ||||||
Total | 20.4 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Bonds | |||||||
Corporate bonds | |||||||
Beverages | 0.23 | % | |||||
Biotechnology | 0.31 | ||||||
Building products | 0.07 | ||||||
Capital markets | 3.04 | ||||||
Chemicals | 0.20 | ||||||
Commercial banks | 2.70 | ||||||
Commercial services & supplies | 0.27 | ||||||
Communications equipment | 0.40 | ||||||
Consumer finance | 1.36 | ||||||
Diversified financial services | 3.54 | ||||||
Diversified telecommunication services | 0.99 | ||||||
Electric utilities | 0.54 | ||||||
Electronic equipment, instruments & components | 0.23 | ||||||
Energy equipment & services | 0.48 | ||||||
Food & staples retailing | 0.24 | ||||||
Gas utilities | 0.41 | ||||||
Insurance | 2.24 | ||||||
Media | 1.40 | ||||||
Metals & mining | 1.85 | ||||||
Multi-utilities | 0.61 | ||||||
Oil, gas & consumable fuels | 5.88 | ||||||
Pharmaceuticals | 0.54 | ||||||
Real estate investment trust (REIT) | 0.68 | ||||||
Road & rail | 0.60 | ||||||
Semiconductors & semiconductor equipment | 0.14 | ||||||
Tobacco | 1.31 | ||||||
Trading companies & distributors | 0.29 | ||||||
Wireless telecommunication services | 0.39 | ||||||
Total corporate bonds | 30.94 | % | |||||
Asset-backed securities | 1.62 | ||||||
Commercial mortgage-backed securities | 7.40 | ||||||
Mortgage & agency debt securities | 29.07 | ||||||
Municipal bonds | 2.50 | ||||||
US government obligations | 13.34 | ||||||
Non-US government obligations | 1.08 | ||||||
Total bonds | 85.95 | % | |||||
Investment company | |||||||
UBS High Yield Relationship Fund | 4.20 | ||||||
Short-term investments | 20.52 | ||||||
Options purchased | 0.13 | ||||||
Total investments | 110.80 | % | |||||
Liabilities, in excess of cash and other assets | (10.80 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Core Plus Bond Fund. Figures might be different if a breakdown of the affiliated underlying investment company was included.
8
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds: 85.95% | |||||||||||
Corporate bonds: 30.94% | |||||||||||
Brazil: 1.27% | |||||||||||
Caixa Economica Federal, 2.375%, due 11/06/171 | $ | 150,000 | $ | 138,750 | |||||||
Petrobras International Finance Co., 2.875%, due 02/06/15 | 150,000 | 152,127 | |||||||||
5.375%, due 01/27/21 | 120,000 | 119,505 | |||||||||
Total Brazil corporate bonds | 410,382 | ||||||||||
Canada: 0.90% | |||||||||||
Barrick Gold Corp., 3.850%, due 04/01/22 | 90,000 | 81,057 | |||||||||
Cenovus Energy, Inc., 3.800%, due 09/15/23 | 100,000 | 97,488 | |||||||||
Goldcorp, Inc., 3.700%, due 03/15/23 | 80,000 | 71,549 | |||||||||
Teck Resources Ltd., 6.250%, due 07/15/41 | 40,000 | 39,817 | |||||||||
Total Canada corporate bonds | 289,911 | ||||||||||
Cayman Islands: 0.91% | |||||||||||
Transocean, Inc., 3.800%, due 10/15/22 | 65,000 | 61,609 | |||||||||
6.800%, due 03/15/38 | 85,000 | 94,606 | |||||||||
Vale Overseas Ltd., 4.375%, due 01/11/22 | 110,000 | 106,975 | |||||||||
6.875%, due 11/21/36 | 30,000 | 30,992 | |||||||||
Total Cayman Islands corporate bonds | 294,182 | ||||||||||
Curacao: 0.45% | |||||||||||
Teva Pharmaceutical Finance Co. BV, 2.400%, due 11/10/16 | 70,000 | 71,828 | |||||||||
Teva Pharmaceutical Finance IV BV, 3.650%, due 11/10/21 | 75,000 | 73,561 | |||||||||
Total Curacao corporate bonds | 145,389 | ||||||||||
France: 0.32% | |||||||||||
BNP Paribas SA, 2.700%, due 08/20/18 | 100,000 | 101,875 | |||||||||
Mexico: 0.94% | |||||||||||
America Movil SAB de CV, 5.000%, due 03/30/20 | 115,000 | 125,228 | |||||||||
Petroleos Mexicanos, 4.875%, due 01/24/22 | 175,000 | 179,375 | |||||||||
Total Mexico corporate bonds | 304,603 | ||||||||||
Norway: 0.55% | |||||||||||
Eksportfinans ASA, 3.000%, due 11/17/14 | 175,000 | 175,700 |
Face amount | Value | ||||||||||
Singapore: 0.23% | |||||||||||
Flextronics International Ltd., 5.000%, due 02/15/23 | $ | 80,000 | $ | 75,040 | |||||||
Spain: 0.79% | |||||||||||
Santander US Debt SA Unipersonal, 3.724%, due 01/20/151 | 100,000 | 101,993 | |||||||||
Telefonica Emisiones SAU, 3.192%, due 04/27/18 | 150,000 | 152,762 | |||||||||
Total Spain corporate bonds | 254,755 | ||||||||||
United Kingdom: 1.61% | |||||||||||
Barclays Bank PLC, 5.140%, due 10/14/20 | 100,000 | 106,487 | |||||||||
Imperial Tobacco Finance PLC, 3.500%, due 02/11/231 | 110,000 | 102,590 | |||||||||
Lloyds TSB Bank PLC, 6.500%, due 09/14/201 | 100,000 | 113,674 | |||||||||
Sinopec Group Overseas Development 2013 Ltd., 2.500%, due 10/17/181 | 200,000 | 197,510 | |||||||||
Total United Kingdom corporate bonds | 520,261 | ||||||||||
United States: 22.97% | |||||||||||
21st Century Fox America, Inc., 6.200%, due 12/15/34 | 35,000 | 38,744 | |||||||||
ADT Corp., 3.500%, due 07/15/22 | 100,000 | 87,045 | |||||||||
Altria Group, Inc., 5.375%, due 01/31/44 | 100,000 | 100,414 | |||||||||
9.950%, due 11/10/38 | 18,000 | 27,457 | |||||||||
American International Group, Inc., 3.000%, due 03/20/15 | 115,000 | 118,114 | |||||||||
4.250%, due 09/15/14 | 50,000 | 51,250 | |||||||||
Anadarko Petroleum Corp., 5.950%, due 09/15/16 | 95,000 | 105,836 | |||||||||
6.450%, due 09/15/36 | 50,000 | 56,147 | |||||||||
Anheuser-Busch InBev Worldwide, Inc., 8.200%, due 01/15/39 | 50,000 | 73,128 | |||||||||
Bank of America Corp., 5.625%, due 07/01/20 | 75,000 | 85,703 | |||||||||
Berkshire Hathaway Finance Corp., 3.000%, due 05/15/22 | 35,000 | 33,553 | |||||||||
Boston Properties LP, REIT, 3.800%, due 02/01/24 | 110,000 | 105,486 | |||||||||
Burlington Northern Santa Fe LLC, 6.150%, due 05/01/37 | 35,000 | 39,848 | |||||||||
Capital One Financial Corp., 2.150%, due 03/23/15 | 65,000 | 66,078 | |||||||||
Celgene Corp., 4.000%, due 08/15/23 | 100,000 | 98,460 |
9
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
CenterPoint Energy Resources Corp., 6.000%, due 05/15/18 | $ | 115,000 | $ | 132,494 | |||||||
CF Industries, Inc., 3.450%, due 06/01/23 | 70,000 | 63,926 | |||||||||
Citigroup, Inc., 5.375%, due 08/09/20 | 40,000 | 45,506 | |||||||||
5.500%, due 02/15/17 | 180,000 | 198,330 | |||||||||
5.500%, due 09/13/25 | 100,000 | 105,324 | |||||||||
6.125%, due 05/15/18 | 155,000 | 179,380 | |||||||||
8.500%, due 05/22/19 | 65,000 | 83,303 | |||||||||
Comcast Corp., 6.300%, due 11/15/17 | 90,000 | 104,817 | |||||||||
6.950%, due 08/15/37 | 50,000 | 61,465 | |||||||||
DIRECTV Holdings LLC, 6.000%, due 08/15/40 | 40,000 | 39,500 | |||||||||
DPL, Inc., 7.250%, due 10/15/21 | 85,000 | 86,062 | |||||||||
El Paso Pipeline Partners Operating Co., LLC, 5.000%, due 10/01/21 | 80,000 | 83,785 | |||||||||
Energy Transfer Partners LP, 5.200%, due 02/01/22 | 105,000 | 110,544 | |||||||||
9.000%, due 04/15/19 | 130,000 | 164,304 | |||||||||
ERAC USA Finance LLC, 2.800%, due 11/01/181 | 80,000 | 80,843 | |||||||||
ERP Operating LP, REIT, 4.750%, due 07/15/20 | 35,000 | 37,735 | |||||||||
Ford Motor Credit Co. LLC, 8.125%, due 01/15/20 | 350,000 | 437,658 | |||||||||
General Electric Capital Corp., 2.150%, due 01/09/15 | 100,000 | 101,831 | |||||||||
Series A, 6.750%, due 03/15/32 | 110,000 | 136,214 | |||||||||
Glencore Funding LLC, 2.500%, due 01/15/191 | 120,000 | 116,198 | |||||||||
Goldman Sachs Group, Inc., 5.750%, due 01/24/22 | 80,000 | 90,055 | |||||||||
6.150%, due 04/01/18 | 160,000 | 183,468 | |||||||||
Hartford Financial Services Group, Inc., 5.950%, due 10/15/36 | 80,000 | 88,577 | |||||||||
International Lease Finance Corp., 7.125%, due 09/01/181 | 80,000 | 92,600 | |||||||||
JPMorgan Chase & Co., 3.700%, due 01/20/15 | 200,000 | 206,241 | |||||||||
Kinder Morgan Energy Partners LP, 3.950%, due 09/01/22 | 145,000 | 141,297 | |||||||||
6.500%, due 09/01/39 | 45,000 | 49,335 | |||||||||
Kroger Co., 3.850%, due 08/01/23 | 80,000 | 78,764 |
Face amount | Value | ||||||||||
Marathon Oil Corp., 6.600%, due 10/01/37 | $ | 30,000 | $ | 35,942 | |||||||
Markel Corp., 3.625%, due 03/30/23 | 40,000 | 37,648 | |||||||||
Marsh & McLennan Cos., Inc., 9.250%, due 04/15/19 | 65,000 | 84,205 | |||||||||
Maxim Integrated Products, Inc., 3.375%, due 03/15/23 | 50,000 | 45,778 | |||||||||
Merrill Lynch & Co., Inc., Series C, 5.000%, due 01/15/15 | 150,000 | 156,289 | |||||||||
6.110%, due 01/29/37 | 100,000 | 107,847 | |||||||||
6.875%, due 04/25/18 | 60,000 | 70,942 | |||||||||
Morgan Stanley, 3.750%, due 02/25/23 | 60,000 | 58,384 | |||||||||
4.875%, due 11/01/22 | 45,000 | 46,065 | |||||||||
7.300%, due 05/13/19 | 200,000 | 242,881 | |||||||||
Motorola Solutions, Inc., 3.500%, due 03/01/23 | 140,000 | 129,520 | |||||||||
Mylan, Inc., 2.550%, due 03/28/19 | 30,000 | 29,701 | |||||||||
Northern Trust Corp., 3.950%, due 10/30/25 | 25,000 | 24,362 | |||||||||
Owens Corning, 6.500%, due 12/01/16 | 21,000 | 23,303 | |||||||||
Petrohawk Energy Corp., 7.250%, due 08/15/18 | 185,000 | 199,430 | |||||||||
Principal Financial Group, Inc., 8.875%, due 05/15/19 | 90,000 | 115,068 | |||||||||
Prudential Financial, Inc., 5.200%, due 03/15/442 | 95,000 | 91,913 | |||||||||
6.625%, due 12/01/37 | 85,000 | 101,925 | |||||||||
Regions Financial Corp., 2.000%, due 05/15/18 | 70,000 | 67,782 | |||||||||
Reynolds American, Inc., 6.150%, due 09/15/43 | 100,000 | 107,985 | |||||||||
7.750%, due 06/01/18 | 70,000 | 84,295 | |||||||||
Ryder System, Inc., 2.350%, due 02/26/19 | 75,000 | 73,440 | |||||||||
Sempra Energy, 4.050%, due 12/01/23 | 100,000 | 98,743 | |||||||||
9.800%, due 02/15/19 | 75,000 | 99,078 | |||||||||
Southern Copper Corp., 3.500%, due 11/08/22 | 95,000 | 87,078 | |||||||||
Southwestern Electric Power Co., 3.550%, due 02/15/22 | 90,000 | 87,911 | |||||||||
TCI Communications, Inc., 7.875%, due 02/15/26 | 50,000 | 64,774 | |||||||||
Time Warner Cable, Inc., 6.550%, due 05/01/37 | 35,000 | 32,387 | |||||||||
Time Warner Entertainment Co. LP, 8.375%, due 03/15/23 | 120,000 | 138,022 |
10
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Time Warner, Inc., 6.100%, due 07/15/40 | $ | 35,000 | $ | 38,198 | |||||||
Valero Energy Corp., 6.625%, due 06/15/37 | 110,000 | 125,481 | |||||||||
Ventas Realty LP/Ventas Capital Corp., 2.700%, due 04/01/20 | 80,000 | 76,496 | |||||||||
Verizon Communications, Inc., 1.993%, due 09/14/182 | 50,000 | 52,575 | |||||||||
6.400%, due 09/15/33 | 100,000 | 115,012 | |||||||||
Williams Cos., Inc., 3.700%, due 01/15/23 | 90,000 | 78,553 | |||||||||
Total United States corporate bonds | 7,415,832 | ||||||||||
Total corporate bonds (cost $9,997,734) | 9,987,930 | ||||||||||
Asset-backed securities: 1.62% | |||||||||||
United States: 1.62% | |||||||||||
Capital Auto Receivables Asset Trust, Series 2013-3, Class B, 2.320%, due 07/20/18 | 150,000 | 150,581 | |||||||||
MBNA Credit Card Master Note Trust, Series 2004-C2, Class C2, 1.067%, due 11/15/162 | 350,000 | 350,768 | |||||||||
Renaissance Home Equity Loan Trust, Series 2006-4, Class AF1, 5.545%, due 01/25/373 | 39,719 | 22,599 | |||||||||
Total asset-backed securities (cost $526,450) | 523,948 | ||||||||||
Commercial mortgage-backed securities: 7.40% | |||||||||||
United States: 7.40% | |||||||||||
Banc of America Commercial Mortgage, Inc., Series 2007-4, Class AM, 5.813%, due 02/10/512 | 300,000 | 330,827 | |||||||||
Boca Hotel Portfolio Trust, Series 2013-BOCA, Class D, 3.217%, due 08/15/261,2 | 150,000 | 150,180 | |||||||||
Commercial Mortgage Loan Trust, Series 2008-LS1, Class A4B, 6.007%, due 12/10/492 | 250,000 | 277,514 | |||||||||
FDIC Structured Sale Guaranteed Notes, Series 2010-C1, Class A, 2.980%, due 12/06/201 | 144,599 | 149,050 | |||||||||
Greenwich Capital Commercial Funding Corp., Series 2007-GG11, Class A4, 5.736%, due 12/10/49 | 88,000 | 98,275 |
Face amount | Value | ||||||||||
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.804%, due 08/10/452 | $ | 75,000 | $ | 82,355 | |||||||
Hilton USA Trust, Series 2013-HLT, Class DFX, 4.407%, due 11/05/301 | 100,000 | 100,082 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP8, Class AJ, 5.480%, due 05/15/452 | 200,000 | 208,243 | |||||||||
Series 2007-LD11, Class A4, 5.806%, due 06/15/492 | 275,000 | 305,888 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C7, Class B, 3.769%, due 02/15/46 | 50,000 | 46,963 | |||||||||
Morgan Stanley Re-REMIC Trust, Series 2009-GG10, Class A4B, 5.804%, due 08/12/451,2 | 175,000 | 191,158 | |||||||||
Wachovia Bank Commercial Mortgage Trust, Series 2007-C32, Class A3, 5.733%, due 06/15/492 | 175,000 | 193,674 | |||||||||
Series 2007-C34, Class AM, 5.818%, due 05/15/462 | 125,000 | 137,056 | |||||||||
WF-RBS Commercial Mortgage Trust, Series 2013-C12, Class B, 3.863%, due 03/15/482 | 125,000 | 118,914 | |||||||||
Total commercial mortgage-backed securities (cost $2,397,268) | 2,390,179 | ||||||||||
Mortgage & agency debt securities: 29.07% | |||||||||||
United States: 29.07% | |||||||||||
Federal Home Loan Mortgage Corp. Gold Pools,4 #G08540, 3.000%, due 08/01/43, | 24,779 | 23,505 | |||||||||
3.500%, TBA | 300,000 | 297,656 | |||||||||
#A96140, 4.000%, due 01/01/41, | 108,318 | 111,341 | |||||||||
#FG A96792, 4.500%, due 02/01/41, | 54,917 | 58,166 | |||||||||
#G08451, 4.500%, due 06/01/41, | 148,664 | 157,571 | |||||||||
#C63008, 6.000%, due 01/01/32, | 78,575 | 87,896 | |||||||||
#G06019, 6.000%, due 10/01/36, | 84,509 | 93,149 | |||||||||
#G01717, 6.500%, due 11/01/29, | 58,125 | 65,775 |
11
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Mortgage & agency debt securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Federal National Mortgage Association Pools,4 2.500%, TBA | $ | 425,000 | $ | 420,617 | |||||||
3.000%, TBA | 100,000 | 102,051 | |||||||||
3.000%, TBA | 850,000 | 806,902 | |||||||||
3.500%, TBA | 225,000 | 235,292 | |||||||||
3.500%, TBA | 650,000 | 645,684 | |||||||||
4.000%, TBA | 175,000 | 180,141 | |||||||||
4.500%, TBA | 750,000 | 794,678 | |||||||||
5.000%, TBA | 100,000 | 108,601 | |||||||||
#AK7377, 3.000%, due 03/01/27, | 407,424 | 416,265 | |||||||||
#AP1589, 3.000%, due 08/01/27, | 88,270 | 90,189 | |||||||||
#AT2725, 3.000%, due 05/01/43, | 447,528 | 425,323 | |||||||||
#AP6056, 3.000%, due 07/01/43, | 74,094 | 70,421 | |||||||||
#AS0302, 3.000%, due 08/01/43, | 26,144 | 24,849 | |||||||||
#AU3735, 3.000%, due 08/01/43, | 100,000 | 95,049 | |||||||||
#AP3098, 3.500%, due 10/01/42, | 110,804 | 110,252 | |||||||||
#AQ0600, 3.500%, due 10/01/42, | 120,130 | 119,569 | |||||||||
#AH4568, 4.000%, due 03/01/41, | 114,176 | 117,600 | |||||||||
#AE9202, 4.000%, due 09/01/41, | 424,401 | 437,141 | |||||||||
#AE0106, 4.500%, due 06/01/40, | 1,370 | 1,451 | |||||||||
#AI6578, 4.500%, due 07/01/41, | 325,462 | 344,990 | |||||||||
#AJ1415, 4.500%, due 09/01/41, | 183,357 | 194,326 | |||||||||
#890209, 5.000%, due 05/01/40, | 211,146 | 229,363 | |||||||||
#AD9114, 5.000%, due 07/01/40, | 261,871 | 285,511 | |||||||||
#AJ1422, 5.000%, due 09/01/41, | 214,284 | 233,651 | |||||||||
#688066, 5.500%, due 03/01/33, | 117,713 | 131,161 | |||||||||
#688314, 5.500%, due 03/01/33, | 127,557 | 140,990 | |||||||||
#802481, 5.500%, due 11/01/34, | 231,292 | 256,265 | |||||||||
#408267, 6.000%, due 03/01/28, | 15,248 | 17,188 |
Face amount | Value | ||||||||||
#323715, 6.000%, due 05/01/29, | $ | 10,177 | $ | 11,432 | |||||||
#522564, 6.000%, due 07/01/29, | 19,179 | 21,254 | |||||||||
#676733, 6.000%, due 01/01/33, | 90,886 | 101,594 | |||||||||
#708631, 6.000%, due 06/01/33, | 31,490 | 35,461 | |||||||||
#AE0405, 6.000%, due 08/01/37, | 114,865 | 128,596 | |||||||||
#831730, 6.500%, due 09/01/36, | 105,005 | 120,187 | |||||||||
#253824, 7.000%, due 03/01/31, | 6,521 | 7,455 | |||||||||
Federal National Mortgage Association Pools REMIC, Series 2005-29, Class KA, 4.500%, due 02/25/35 | 29,272 | 30,074 | |||||||||
First Horizon Asset Securities, Inc., Series 2004-FL1, Class 1A1, 0.435%, due 02/25/352 | 45,468 | 41,486 | |||||||||
Government National Mortgage Association Pools, #738970, 3.500%, due 11/15/26, | 135,580 | 141,652 | |||||||||
#G2 AB2784, 3.500%, due 08/20/42, | 185,821 | 188,045 | |||||||||
#G2 779425, 4.000%, due 06/20/42, | 108,261 | 113,163 | |||||||||
#AA8267, 4.000%, due 07/15/42, | 66,309 | 69,277 | |||||||||
4.000%, TBA | 75,000 | 77,980 | |||||||||
4.000%, TBA | 200,000 | 207,820 | |||||||||
#G2 2687, 6.000%, due 12/20/28, | 19,545 | 21,777 | |||||||||
#G2 2794, 6.000%, due 08/20/29, | 61,631 | 68,639 | |||||||||
#G2 4245, 6.000%, due 09/20/38, | 60,551 | 68,180 | |||||||||
Total United States mortgage & agency debt securities | 9,384,651 | ||||||||||
Total mortgage & agency debt securities (cost $9,357,597) | 9,384,651 | ||||||||||
Municipal bonds: 2.50% | |||||||||||
Chicago Transit Authority, Series 2008-A, 6.899%, due 12/01/40 | 50,000 | 56,046 | |||||||||
Los Angeles Unified School District, 6.758%, due 07/01/34 | 110,000 | 135,661 |
12
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Municipal bonds—(Concluded) | |||||||||||
Massachusetts Water Resources Authority Revenue Bonds, Series A, 5.000%, due 08/01/32 | $ | 60,000 | $ | 64,587 | |||||||
New York State Dormitory Authority, State Personal Taxable General Purpose, Series C, 5.000%, due 03/15/34 | 60,000 | 62,878 | |||||||||
State of California, GO Bonds, 7.300%, due 10/01/39 | 90,000 | 113,183 | |||||||||
State of Illinois, GO Bonds, 5.100%, due 06/01/33 | 110,000 | 102,498 | |||||||||
5.877%, due 03/01/19 | 180,000 | 195,914 | |||||||||
State of Washington, GO Bonds, Series A, 5.000%, due 08/01/33 | 70,000 | 74,949 | |||||||||
Total municipal bonds (cost $755,466) | 805,716 | ||||||||||
US government obligations: 13.34% | |||||||||||
US Treasury Bonds, 3.625%, due 08/15/43 | 210,000 | 198,319 | |||||||||
3.750%, due 11/15/43 | 375,000 | 362,461 | |||||||||
US Treasury Notes, 0.125%, due 04/30/15 | 800,000 | 799,063 | |||||||||
0.250%, due 05/31/15 | 1,105,000 | 1,105,518 | |||||||||
0.375%, due 06/30/15 | 300,000 | 300,621 | |||||||||
1.375%, due 06/30/18 | 600,000 | 595,453 | |||||||||
1.375%, due 09/30/18 | 425,000 | 419,820 | |||||||||
2.625%, due 01/31/185 | 500,000 | 525,781 | |||||||||
Total US government obligations (cost $4,327,832) | 4,307,036 | ||||||||||
Non-US government obligations: 1.08% | |||||||||||
Brazil: 0.62% | |||||||||||
Banco Nacional de Desenvolvimento Economico e Social, 3.375%, due 09/26/161 | 200,000 | 202,000 | |||||||||
Jordan: 0.12% | |||||||||||
Hashemite Kingdom of Jordan, 2.503%, due 10/30/20 | 40,000 | 39,178 | |||||||||
Turkey: 0.34% | |||||||||||
Republic of Turkey, 6.750%, due 04/03/18 | 100,000 | 108,875 | |||||||||
Total Non-US government obligations (cost $352,167) | 350,053 | ||||||||||
Total bonds (cost $27,714,514) | 27,749,513 |
Shares | Value | ||||||||||
Investment company: 4.20% | |||||||||||
UBS High Yield Relationship Fund*6 (cost $1,286,143) | 40,769 | $ | 1,356,046 | ||||||||
Short-term investments: 20.52% | |||||||||||
Investment company: 12.16% | |||||||||||
UBS Cash Management Prime Relationship Fund6 (cost $3,926,944) | 3,926,944 | 3,926,944 | |||||||||
Face amount | |||||||||||
US government obligations: 8.36% | |||||||||||
US Treasury Bills, 0.085%, due 06/26/147 | $ | 1,500,000 | 1,499,399 | ||||||||
0.093%, due 05/22/147 | 1,200,000 | 1,199,720 | |||||||||
(cost $2,698,940) | 2,699,119 | ||||||||||
Total short-term investments (cost $6,625,884) | 6,626,063 | ||||||||||
Number of contracts | |||||||||||
Options purchased: 0.13% | |||||||||||
Put options: 0.13% | |||||||||||
3 Year Euro-Dollar Midcurve, strike @ USD 97.75, expires June 2016 | 26 | 28,275 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires March 2015 | 49 | 14,700 | |||||||||
42,975 | |||||||||||
Total options purchased (cost $73,250) | 42,975 | ||||||||||
Total investments: 110.80% (cost $35,699,791) | 35,774,597 | ||||||||||
Liabilities, in excess of cash and other assets: (10.80%) | (3,487,387 | ) | |||||||||
Net assets: 100.00% | $ | 32,287,210 |
13
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 537,013 | |||||
Gross unrealized depreciation | (462,207 | ) | |||||
Net unrealized appreciation of investments | $ | 74,806 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 50. Portfolio footnotes begin on page 17.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
JPMCB | EUR | 470,000 | USD | 638,819 | 03/11/14 | $ | (7,746 | ) | |||||||||||
JPMCB | JPY | 95,900,000 | USD | 936,600 | 03/11/14 | 25,652 | |||||||||||||
RBS | EUR | 225,000 | USD | 309,456 | 03/11/14 | (69 | ) | ||||||||||||
Net unrealized appreciation on forward foreign currency contracts | $ | 17,837 |
Futures contracts
Expiration date | Cost (Proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Ultra Bond, 18 contracts (USD) | March 2014 | $ | 2,475,397 | $ | 2,452,501 | $ | (22,896 | ) | |||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Long Bond, 5 contracts (USD) | March 2014 | (653,010 | ) | (641,563 | ) | 11,447 | |||||||||||||
2 Year US Treasury Notes, 16 contracts (USD) | March 2014 | (3,522,981 | ) | (3,517,000 | ) | 5,981 | |||||||||||||
10 Year US Treasury Notes, 21 contracts (USD) | March 2014 | (2,601,850 | ) | (2,583,984 | ) | 17,866 | |||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
3 Month EURIBOR, 10 contracts (EUR) | March 2015 | 3,415,427 | 3,423,773 | 8,346 | |||||||||||||||
Australian Government 10 Year Bond, 5 contracts (AUD) | March 2014 | 511,325 | 511,914 | 589 | |||||||||||||||
Net unrealized appreciation on futures contracts | $ | 21,333 |
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund8 | Payments received by the Fund8 | Upfront payments | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
JPMCB | USD | 20,000,000 | 02/12/16 | 0.825% | 3 month USD LIBOR | $ | — | $ | (18,507 | ) | $ | (18,507 | ) | ||||||||||||||||||
MLI | CAD | 20,000,000 | 02/08/16 | 3 month BA | 1.785% | — | 35,610 | 35,610 | |||||||||||||||||||||||
MLI | USD | 965,000 | 08/15/39 | 3.219 | 3 month USD LIBOR | — | 103,563 | 103,563 | |||||||||||||||||||||||
$ | 120,666 | $ | 120,666 |
14
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Credit default swaps on corporate issues—buy protection9
Counterparty | Referenced obligation10 | Notional amount | Termination date | Payments made by the Fund8 | Upfront payments (made)/ received | Value | Unrealized depreciation | ||||||||||||||||||||||||
CITI | Allstate Corp. bond, 6.750%, due 05/15/18 | USD | 350,000 | 06/20/18 | 1.000 | % | $ | 8,212 | $ | (10,872 | ) | $ | (2,660 | ) | |||||||||||||||||
JPMCB | Nucor Corp. bond, 5.750%, due 12/01/17 | USD | 350,000 | 06/20/18 | 1.000 | 4,061 | (9,035 | ) | (4,974 | ) | |||||||||||||||||||||
MSC | Deutsche Bank AG bond, 5.125%, due 08/31/17 | EUR | 140,000 | 06/20/17 | 1.000 | (5,073 | ) | (3,222 | ) | (8,295 | ) | ||||||||||||||||||||
$ | 7,200 | $ | (23,129 | ) | $ | (15,929 | ) |
Credit default swaps on corporate issues—sell protection11
Counterparty | Referenced obligation10 | Notional amount | Termination date | Payments received by the Fund8 | Upfront payments received | Value | Unrealized appreciation | Credit spread12 | |||||||||||||||||||||||||||
CITI | The Hartford Financial Services Group, Inc. bond, 6.000%, due 01/15/19 | USD | 350,000 | 06/20/18 | 1.000 | % | $ | 445 | $ | 6,094 | $ | 6,539 | 0.609 | % | |||||||||||||||||||||
MSC | Barrick Gold Corp. bond, 5.800%, due 11/15/34 | USD | 350,000 | 06/20/18 | 1.000 | 13,311 | (8,722 | ) | 4,589 | 1.591 | |||||||||||||||||||||||||
$ | 13,756 | $ | (2,628 | ) | $ | 11,128 |
Credit default swaps on credit indices—sell protection11
Counterparty | Referenced index10 | Notional amount | Termination date | Payments received by the Fund8 | Upfront payments received | Value | Unrealized appreciation | Credit spread12 | |||||||||||||||||||||||||||
CSI | CMBX.NA.BBB. Series 6 Index | USD | 350,000 | 05/11/63 | 3.000 | % | $ | 14,151 | $ | (5,612 | ) | $ | 8,539 | 2.080 | % | ||||||||||||||||||||
MSC | CMBX.NA.A. Series 6 Index | USD | 350,000 | 05/11/63 | 2.000 | 4,480 | (1,138 | ) | 3,342 | 3.330 | |||||||||||||||||||||||||
$ | 18,631 | $ | (6,750 | ) | $ | 11,881 |
Total return swap agreements13
Counterparty | Notional amount | Termination date | Payments made by the Fund8 | Payments received by the Fund8 | Upfront payments | Value | Unrealized depreciation | ||||||||||||||||||||||||
JPMCB | GBP | 235,000 | 06/20/14 | 3 month GBP LIBOR | —14 | $ | — | $ | (669 | ) | $ | (669 | ) |
15
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
Centrally cleared interest rate swap agreements
Notional amount | Termination date | Payments made by the Fund8 | Payments received by the Fund8 | Value | Unrealized appreciation | ||||||||||||||||||
AUD | 570,000 | 10/18/23 | 6 month BBSW | 4.535 | % | $ | 575 | $ | 575 |
Options written
Expiration date | Premiums received | Value | |||||||||||||
Call options | |||||||||||||||
3 Year Euro-Dollar Midcurve, 26 contracts, strike @ USD 98.75 | June 2016 | $ | 21,034 | $ | (20,637 | ) | |||||||||
Put options | |||||||||||||||
3 Year Euro-Dollar Midcurve, 26 contracts, strike @ USD 96.75 | June 2016 | 21,034 | (15,113 | ) | |||||||||||
90 Day Euro-Dollar Time Deposit, 49 contracts, strike @ USD 98.25 | March 2015 | 12,691 | (4,594 | ) | |||||||||||
Options written on credit default swaps on credit indices13 | |||||||||||||||
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 21 Index and Fund pays quarterly fixed rate of 5.000%. Underlying credit default swap terminating 12/20/18. European style. Counterparty: MLI, Notional Amount USD 1,000,000 | March 2014 | 14,000 | (3,353 | ) | |||||||||||
Total options written | $ | 68,759 | $ | (43,697 | ) |
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 61 | $ | 22,607 | ||||||||
Options written | 52 | 42,068 | |||||||||
Options terminated in closing purchase transactions | (12 | ) | (9,916 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | 101 | $ | 54,759 |
Written swaptions activity for the period ended December 31, 2013 was as follows:
Premiums received | |||||||
Swaptions outstanding at June 30, 2013 | $ | — | |||||
Swaptions written | 32,300 | ||||||
Swaptions terminated in closing purchase transactions | (18,300 | ) | |||||
Swaptions expired prior to exercise | — | ||||||
Swaptions outstanding at December 31, 2013 | $ | 14,000 |
16
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | — | $ | 9,987,930 | $ | — | $ | 9,987,930 | |||||||||||
Asset-backed securities | — | 523,948 | — | 523,948 | |||||||||||||||
Commercial mortgage-backed securities | — | 2,390,179 | — | 2,390,179 | |||||||||||||||
Mortgage & agency debt securities | — | 9,384,651 | — | 9,384,651 | |||||||||||||||
Municipal bonds | — | 805,716 | — | 805,716 | |||||||||||||||
US government obligations | — | 4,307,036 | — | 4,307,036 | |||||||||||||||
Non-US government obligations | — | 350,053 | — | 350,053 | |||||||||||||||
Investment company | — | 1,356,046 | — | 1,356,046 | |||||||||||||||
Short-term investments | — | 6,626,063 | — | 6,626,063 | |||||||||||||||
Options purchased | 42,975 | — | — | 42,975 | |||||||||||||||
Forward foreign currency contracts, net | — | 17,837 | — | 17,837 | |||||||||||||||
Futures contracts, net | 21,333 | — | — | 21,333 | |||||||||||||||
Swap agreements, net | — | 88,065 | — | 88,065 | |||||||||||||||
Options written | (40,344 | ) | (3,353 | ) | — | (43,697 | ) | ||||||||||||
Total | $ | 23,964 | $ | 35,834,171 | $ | — | $ | 35,858,135 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* 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 December 31, 2013, the value of these securities amounted to $1,736,628 or 5.38% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of December 31, 2013 and changes periodically.
3 Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of December 31, 2013. Maturity date disclosed is the ultimate maturity date.
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 Security, or portion thereof, was on loan at December 31, 2013.
17
UBS Core Plus Bond Fund
Portfolio of investments
December 31, 2013 (unaudited)
6 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Net realized gain (loss) during the six months ended 12/31/13 | Change in net unrealized appreciation/ (depreciation) during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 4,494,940 | $ | 9,523,295 | $ | 10,091,291 | $ | — | $ | — | $ | 3,926,944 | $ | 2,042 | |||||||||||||||||
UBS Private Money Market Fund LLCa | 800,921 | 1,906,816 | 2,707,737 | — | — | — | 18 | ||||||||||||||||||||||||
UBS High Yield Relationship Fund | 1,851,702 | — | 600,000 | 36,143 | 68,201 | 1,356,046 | — | ||||||||||||||||||||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund | 342,988 | — | 346,464 | (22,006 | ) | 25,482 | — | — | |||||||||||||||||||||||
$ | 7,490,551 | $ | 11,430,111 | $ | 13,745,492 | $ | 14,137 | $ | 93,683 | $ | 5,282,990 | $ | 2,060 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
7 Interest rate shown is the discount rate at date of purchase.
8 Payments made or received are based on the notional amount.
9 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.
10 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
11 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. (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.
12 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.
13 Illiquid investment. At December 31, 2013, the value of these investments amounted to $4,022 or 0.01% of net assets.
14 Payment is based on the performance of the underlying iBoxx GBP Corporates Total Return Index.
See accompanying notes to financial statements.
18
UBS Emerging Markets Debt Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Emerging Markets Debt Fund declined 1.59% (Class A shares declined 6.04% after the deduction of the maximum sales charge), while Class Y shares declined 1.36%. For comparison purposes, the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) returned 1.79%, and the Emerging Markets Debt Benchmark Index (the "Index") declined 0.09% 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 21; 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.)
Comments below relate to the Fund's positioning and performance relative to the Index, which represents investments in both US dollar-denominated and local currency debt.
The emerging markets debt asset class experienced periods of heighted volatility during the reporting period. This was triggered by a number of factors, including decelerating growth in many developing countries, generally falling commodity prices and sharply rising US interest rates. Against this backdrop, the Fund generated a negative return and underperformed the Index, partially due to its overweight to emerging market local currencies.
The Fund used derivatives during the reporting period. Certain foreign exchange instruments, including currency forwards, options and swaps, were utilized to manage the Fund's currency exposure. Overall, the Fund's currency allocations detracted from performance. The Fund also utilized interest rate derivatives, including US Treasury futures and interest rate swaps, to adjust its duration and yield curve positioning. In aggregate, the Fund's duration and yield curve positioning were neutral for performance. Credit default swaps and credit-linked notes were used to express our views regarding specific country exposures, as well as for hedging purposes. Overall, the Fund's country allocations and spread management were negative for its performance. Although derivatives play a role in the overall portfolio construction process, they are just one of the tools we utilize to manage the Fund's overall risk exposure and to implement the aforementioned strategies.
Portfolio performance summary1
What worked
• Underweights to a number of countries contributed to performance.
– Our underweight exposure to US dollar-denominated and local currency-denominated Indonesian debt was beneficial for results, as those bonds performed poorly given Indonesia's rising current account deficit.
1 For a detailed commentary on the market environment in general during the reporting period, see pages 3-4.
19
UBS Emerging Markets Debt Fund
– An underweight to US dollar-denominated and local currency-denominated Turkish debt was positive for the Fund's performance, as those bonds were dragged down by Turkey's mounting current account deficit, as well as political unrest toward the end of the reporting period.
• The Fund's tactical exposure to the Argentine peso was rewarded. Argentina's high yielding currency was volatile during the reporting period. The Fund initially benefited from its overweight position, as the peso appreciated. In October 2013, we moved to a small underweight position. This was additive for the Fund's relative performance, as spreads came somewhat under pressure towards the end of the year, raising investors' concern on that credit.
What didn't work
• The Fund's allocation to longer-term Brazilian local currency-denominated debt was a drag on results. Brazil performed poorly due to the negative economic sentiment and fears of higher inflation. In addition, rising US interest rates negatively impacted the country's local yields, as they followed US Treasury yields upward.
• An overweight to Venezuelan US dollar-denominated debt was not rewarded. The bonds did not perform well, especially in November, amid concerns about the country's upcoming local elections, as well as its weakening financial situation.
• Our underweights to Polish US dollar-denominated debt and Hungarian local currency-denominated debt detracted from performance. The Fund's underweight positions were small detractors from results, as both markets outperformed the Index.
This letter is intended to assist shareholders in understanding how the Fund performed during the six month period ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
20
UBS Emerging Markets Debt Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | (1.59 | )% | (11.05 | )% | (2.33 | )% | |||||||||
Class C3 | (2.33 | ) | (12.48 | ) | (3.58 | ) | |||||||||
Class Y4 | (1.36 | ) | (10.80 | ) | (1.75 | ) | |||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | (6.04 | )% | (15.09 | )% | (5.39 | )% | |||||||||
Class C3 | (3.05 | ) | (13.11 | ) | (3.58 | ) | |||||||||
J.P. Morgan Emerging Markets Bond Index Global (EMBI Global)5 | 1.79 | % | (6.58 | )% | (0.64 | )% | |||||||||
Emerging Markets Debt Benchmark Index6 | (0.09 | ) | (7.76 | ) | (1.31 | ) |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—36.21% and 1.25%; Class C—2,391.59% and 1.75%; Class Y—2.10% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2023, do not exceed 1.25% for Class A shares, 1.75% for Class C shares and 1.00% 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Emerging Markets Debt Fund is July 23, 2012. Inception date of the indices, for the purpose of this illustration, is July 31, 2012.
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 C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service 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 distribution and service fees.
5 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.
6 The Emerging Markets Debt Benchmark Index is an unmanaged index compiled by the Advisor, constructed as follows: from Fund's inception to current—50% J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) and 50% J.P. Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified). 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 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://globalam-us.ubs.com/corpweb/performance.do.
21
UBS Emerging Markets Debt Fund
Top ten long-term fixed income holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Federative Republic of Brazil, 6.000%, due 08/15/50 | 4.1 | % | |||||
Republic of Poland, 5.750%, due 09/23/22 | 3.1 | ||||||
Mexican Udibonos, Series M, 8.000%, due 12/17/15 | 3.1 | ||||||
Government of Malaysia, 3.580%, due 09/28/18 | 3.0 | ||||||
RSHB Capital SA for OJSC Russian Agricultural Bank, 8.625%, due 02/17/17 | 2.8 | ||||||
Peruvian Government International Bond, 7.840%, due 08/12/20 | 2.7 | ||||||
Republic of Turkey, 7.500%, due 11/07/19 | 2.5 | ||||||
Republic of Indonesia, 7.000%, due 05/15/22 | 2.0 | ||||||
Government of Thailand, 1.200%, due 07/14/21 | 1.9 | ||||||
Republic of Indonesia, 5.875%, due 03/13/20 | 1.7 | ||||||
Total | 26.9 | % |
Country exposure by issuer, top five (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Russia | 9.8 | % | |||||
Turkey | 8.1 | ||||||
Indonesia | 7.4 | ||||||
Mexico | 7.2 | ||||||
Brazil | 6.9 | ||||||
Total | 39.4 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Bonds | |||||||
Corporate bonds | |||||||
Commercial banks | 4.75 | % | |||||
Diversified financial services | 7.14 | ||||||
Electric utilities | 0.86 | ||||||
Metals & mining | 0.83 | ||||||
Oil, gas & consumable fuels | 5.23 | ||||||
Road & rail | 0.89 | ||||||
Total corporate bonds | 19.70 | % | |||||
Non-US government obligations | 64.71 | ||||||
Structured notes | 3.72 | ||||||
Total bonds | 88.13 | % | |||||
Short-term investment | 10.40 | ||||||
Options purchased | 0.01 | ||||||
Total investments | 98.54 | % | |||||
Cash and other assets, less liabilities | 1.46 | ||||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Emerging Markets Debt Fund.
22
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds: 88.13% | |||||||||||
Corporate bonds: 19.70% | |||||||||||
Brazil: 2.86% | |||||||||||
Banco do Brasil SA, 5.875%, due 01/26/221 | $ | 200,000 | $ | 192,000 | |||||||
Centrais Eletricas Brasileiras SA, 5.750%, due 10/27/211 | 200,000 | 192,500 | |||||||||
Petrobras Global Finance BV, 2.384%, due 01/15/192 | 70,000 | 68,425 | |||||||||
State of Minas Gerais, 5.333%, due 02/15/283 | 200,000 | 184,000 | |||||||||
Total Brazil corporate bonds | 636,925 | ||||||||||
Indonesia: 1.29% | |||||||||||
Pertamina Persero PT, 5.250%, due 05/23/211 | 300,000 | 287,250 | |||||||||
Kazakhstan: 0.89% | |||||||||||
Kazakhstan Temir Zholy Finance BV, 6.950%, due 07/10/423 | 200,000 | 198,750 | |||||||||
Malaysia: 0.89% | |||||||||||
Malayan Banking Bhd, 3.250%, due 09/20/221,2 | 200,000 | 197,042 | |||||||||
Mexico: 1.81% | |||||||||||
Petroleos Mexicanos, 4.875%, due 01/24/22 | 100,000 | 102,500 | |||||||||
5.500%, due 06/27/44 | 100,000 | 91,500 | |||||||||
6.500%, due 06/02/41 | 200,000 | 208,500 | |||||||||
Total Mexico corporate bonds | 402,500 | ||||||||||
Peru: 0.89% | |||||||||||
Corp Financiera Desarrollo, 4.750%, due 02/08/221 | 200,000 | 198,000 | |||||||||
Russia: 7.19% | |||||||||||
RSHB Capital SA for OJSC Russian Agricultural Bank, 7.750%, due 05/29/181 | 250,000 | 281,875 | |||||||||
8.625%, due 02/17/171 | RUB | 21,000,000 | 629,725 | ||||||||
Sberbank of Russia, 5.717%, due 06/16/211 | $ | 200,000 | 209,000 | ||||||||
VEB Finance Ltd., 6.025%, due 07/05/221 | 200,000 | 204,500 | |||||||||
6.902%, due 07/09/201 | 250,000 | 275,625 | |||||||||
Total Russia corporate bonds | 1,600,725 |
Face amount | Value | ||||||||||
Turkey: 2.06% | |||||||||||
Turkiye Halk Bankasi AS, 3.875%, due 02/05/201 | $ | 300,000 | $ | 262,500 | |||||||
4.875%, due 07/19/173 | 200,000 | 197,000 | |||||||||
Total Turkey corporate bonds | 459,500 | ||||||||||
Venezuela: 1.82% | |||||||||||
Petroleos de Venezuela SA, 8.500%, due 11/02/171 | 50,000 | 41,255 | |||||||||
9.000%, due 11/17/211 | 300,000 | 222,750 | |||||||||
9.750%, due 05/17/351 | 200,000 | 140,500 | |||||||||
Total Venezuela corporate bonds | 404,505 | ||||||||||
Total corporate bonds (cost $4,680,435) | 4,385,197 | ||||||||||
Non-US government obligations: 64.71% | |||||||||||
Argentina: 1.52% | |||||||||||
Republic of Argentina, 0.000%, due 12/15/354 | 1,400,000 | 119,000 | |||||||||
0.000%, due 12/15/354 | 1,480,000 | 127,280 | |||||||||
Series 1, 8.750%, due 06/02/17 | 100,000 | 91,250 | |||||||||
337,530 | |||||||||||
Belarus: 1.81% | |||||||||||
Republic of Belarus, 8.750%, due 08/03/151 | 250,000 | 252,500 | |||||||||
8.950%, due 01/26/181 | 150,000 | 151,125 | |||||||||
403,625 | |||||||||||
Brazil: 4.08% | |||||||||||
Federative Republic of Brazil, 6.000%, due 08/15/505 | BRL | 980,000 | 907,039 | ||||||||
China: 1.09% | |||||||||||
China Government Bond, 1.400%, due 08/18/161 | CNY | 500,000 | 80,422 | ||||||||
2.560%, due 06/29/171 | 1,000,000 | 162,705 | |||||||||
243,127 | |||||||||||
Colombia: 1.70% | |||||||||||
Republic of Colombia, 6.125%, due 01/18/41 | $ | 110,000 | 117,425 | ||||||||
9.850%, due 06/28/27 | COP | 400,000,000 | 260,491 | ||||||||
377,916 | |||||||||||
Croatia: 0.49% | |||||||||||
Republic of Croatia, 6.750%, due 11/05/191 | $ | 100,000 | 108,250 |
23
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Non-US government obligations—(Continued) | |||||||||||
El Salvador: 0.44% | |||||||||||
Republic of El Salvador, 7.650%, due 06/15/351 | $ | 100,000 | $ | 97,500 | |||||||
Hungary: 3.19% | |||||||||||
Government of Hungary, 5.375%, due 02/21/23 | 100,000 | 98,905 | |||||||||
5.750%, due 11/22/23 | 150,000 | 149,380 | |||||||||
6.750%, due 02/24/17 | HUF | 60,000,000 | 297,573 | ||||||||
7.625%, due 03/29/41 | $ | 150,000 | 163,594 | ||||||||
709,452 | |||||||||||
Indonesia: 6.12% | |||||||||||
Republic of Indonesia, 5.875%, due 03/13/201 | 360,000 | 380,250 | |||||||||
6.625%, due 02/17/371 | 200,000 | 201,500 | |||||||||
7.000%, due 05/15/22 | IDR | 6,000,000,000 | 448,593 | ||||||||
8.500%, due 10/12/351 | $ | 275,000 | 331,375 | ||||||||
1,361,718 | |||||||||||
Lithuania: 0.49% | |||||||||||
Republic of Lithuania, 5.125%, due 09/14/171 | 100,000 | 109,035 | |||||||||
Malaysia: 4.36% | |||||||||||
Government of Malaysia, 3.434%, due 08/15/14 | MYR | 1,000,000 | 305,907 | ||||||||
3.580%, due 09/28/18 | 2,200,000 | 665,105 | |||||||||
971,012 | |||||||||||
Mexico: 5.36% | |||||||||||
Mexican Udibonos, Series M, 6.500%, due 06/10/21 | MXN | 900,000 | 70,761 | ||||||||
Series M, 8.000%, due 12/17/15 | 8,250,000 | 682,107 | |||||||||
Series S, 4.000%, due 11/15/405 | 3,543,784 | 277,270 | |||||||||
United Mexican States, 6.050%, due 01/11/40 | $ | 150,000 | 163,125 | ||||||||
1,193,263 | |||||||||||
Mongolia: 1.59% | |||||||||||
Development Bank of Mongolia LLC, 5.750%, due 03/21/171 | 200,000 | 188,000 |
Face amount | Value | ||||||||||
Mongolia Government International Bond, 5.125%, due 12/05/223 | $ | 200,000 | $ | 165,500 | |||||||
353,500 | |||||||||||
Montenegro: 0.97% | |||||||||||
Republic of Montenegro, 7.250%, due 04/08/161 | EUR | 150,000 | 216,673 | ||||||||
Nigeria: 1.56% | |||||||||||
Nigeria Government Bond, 15.100%, due 04/27/17 | NGN | 27,000,000 | 177,320 | ||||||||
Nigeria Treasury Bills, 9.969%, due 01/23/146 | 3,000,000 | 18,628 | |||||||||
10.326%, due 04/10/146 | 25,000,000 | 151,065 | |||||||||
347,013 | |||||||||||
Peru: 2.88% | |||||||||||
Peruvian Government International Bond, 5.625%, due 11/18/50 | $ | 50,000 | 50,125 | ||||||||
7.840%, due 08/12/201 | PEN | 1,450,000 | 591,226 | ||||||||
641,351 | |||||||||||
Philippines: 2.27% | |||||||||||
Republic of Philippines, 6.500%, due 01/20/20 | $ | 200,000 | 235,250 | ||||||||
7.000%, due 01/27/16 | PHP | 11,000,000 | 270,986 | ||||||||
506,236 | |||||||||||
Poland: 3.57% | |||||||||||
Republic of Poland, 4.000%, due 10/25/23 | PLN | 150,000 | 48,260 | ||||||||
5.000%, due 03/23/22 | $ | 50,000 | 53,140 | ||||||||
5.750%, due 09/23/22 | PLN | 1,900,000 | 693,886 | ||||||||
795,286 | |||||||||||
Romania: 0.48% | |||||||||||
Government of Romania, 5.750%, due 01/27/16 | RON | 300,000 | 95,740 | ||||||||
6.750%, due 02/07/221 | $ | 10,000 | 11,325 | ||||||||
107,065 | |||||||||||
Russia: 2.61% | |||||||||||
Russian Federation, 7.000%, due 01/25/23 | RUB | 2,300,000 | 67,522 | ||||||||
7.050%, due 01/19/28 | 5,000,000 | 141,543 | |||||||||
7.600%, due 04/14/21 | 7,500,000 | 231,098 | |||||||||
8.150%, due 02/03/27 | 4,500,000 | 141,381 | |||||||||
581,544 |
24
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Non-US government obligations—(Concluded) | |||||||||||
South Africa: 4.20% | |||||||||||
Republic of South Africa, 5.875%, due 09/16/25 | $ | 200,000 | $ | 207,250 | |||||||
6.750%, due 03/31/21 | ZAR | 1,800,000 | 162,914 | ||||||||
7.000%, due 02/28/31 | 3,500,000 | 278,956 | |||||||||
7.750%, due 02/28/23 | 1,850,000 | 174,619 | |||||||||
10.500%, due 12/21/26 | 1,000,000 | 112,103 | |||||||||
935,842 | |||||||||||
Sri Lanka: 1.10% | |||||||||||
Republic of Sri Lanka, 6.250%, due 10/04/201 | $ | 100,000 | 98,750 | ||||||||
6.250%, due 07/27/211 | 150,000 | 145,875 | |||||||||
244,625 | |||||||||||
Thailand: 2.84% | |||||||||||
Government of Thailand, 1.200%, due 07/14/211,5 | THB | 14,687,991 | 416,695 | ||||||||
3.775%, due 06/25/32 | 1,000,000 | 27,685 | |||||||||
3.875%, due 03/07/18 | 200,000 | 6,189 | |||||||||
3.875%, due 06/13/19 | 5,500,000 | 171,196 | |||||||||
5.125%, due 03/13/18 | 300,000 | 9,747 | |||||||||
631,512 | |||||||||||
Turkey: 6.03% | |||||||||||
Export Credit Bank of Turkey, 5.875%, due 04/24/191 | $ | 200,000 | 203,000 | ||||||||
Government of Turkey, 9.500%, due 01/12/22 | TRY | 800,000 | 356,393 | ||||||||
Republic of Turkey, 7.100%, due 03/08/23 | 250,000 | 94,370 | |||||||||
7.500%, due 11/07/19 | $ | 500,000 | 561,250 | ||||||||
8.500%, due 09/14/22 | TRY | 300,000 | 126,479 | ||||||||
1,341,492 | |||||||||||
Ukraine: 0.89% | |||||||||||
Government of Ukraine, 9.250%, due 07/24/173 | $ | 200,000 | 198,750 |
Face amount | Value | ||||||||||
Venezuela: 3.07% | |||||||||||
Republic of Venezuela, 7.750%, due 10/13/191 | $ | 140,000 | $ | 104,300 | |||||||
8.250%, due 10/13/241 | 190,000 | 132,525 | |||||||||
9.250%, due 09/15/27 | 100,000 | 77,000 | |||||||||
9.250%, due 05/07/281 | 300,000 | 221,250 | |||||||||
9.375%, due 01/13/34 | 200,000 | 147,500 | |||||||||
682,575 | |||||||||||
Total Non-US government obligations (cost $15,937,696) | 14,402,931 | ||||||||||
Structured notes: 3.72% | |||||||||||
Bangladesh: 1.18% | |||||||||||
Standard Chartered Bank, 11.700%, due 06/14/183 (linked to People's Republic of Bangladesh, 11.700%, due 06/05/18) | 264,780 | 261,219 | |||||||||
Ghana: 1.02% | |||||||||||
Citigroup Funding, Inc., 23.000%, due 08/23/173 (linked to Republic of Ghana, 23.000%, due 08/21/17) | GHS | 500,000 | 227,061 | ||||||||
Sri Lanka: 0.66% | |||||||||||
Citigroup Funding, Inc., 8.000%, due 06/20/173 (linked to Sri Lanka Government Bonds, 8.000%, due 06/15/17) | LKR | 10,000,000 | 73,678 | ||||||||
Citigroup Funding, Inc., 8.500%, due 02/06/183 (linked to Sri Lanka Government Bonds, 8.500%, due 02/01/18) | 10,000,000 | 73,922 | |||||||||
Total Sri Lanka structured notes | 147,600 | ||||||||||
Vietnam: 0.86% | |||||||||||
Citigroup Funding, Inc., 7.600%, due 05/05/163 (linked to Socialist Republic of Vietnam, 7.600%, due 04/30/16) | VND | 4,000,000,000 | 191,071 | ||||||||
Total structured notes (cost $847,752) | 826,951 | ||||||||||
Total bonds (cost $21,465,883) | 19,615,079 |
25
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Short-term investment: 10.40% | |||||||||||
Investment company: 10.40% | |||||||||||
UBS Cash Management Prime Relationship Fund7 (cost $2,315,358) | 2,315,358 | $ | 2,315,358 | ||||||||
Face amount covered by contracts | |||||||||||
Options purchased: 0.01% | |||||||||||
Put options: 0.01% | |||||||||||
Foreign Exchange Option, Buy EUR/BRL, strike @ BRL 2.80, expires June 2014, counterparty: BB | EUR | 460,000 | 220 | ||||||||
Foreign Exchange Option, Buy EUR/PLN, strike @ PLN 4.00, expires January 2014, counterparty: GSI | 260,000 | 0 | |||||||||
Foreign Exchange Option, Buy USD/BRL, strike @ BRL 1.90, expires April 2014, counterparty: GSI | $ | 870,000 | 2 |
Face amount covered by contracts | Value | ||||||||||
Foreign Exchange Option, Buy USD/BRL, strike @ BRL 2.03, expires June 2014, counterparty: MLI | $ | 360,000 | $ | 106 | |||||||
Foreign Exchange Option, Buy USD/BRL, strike @ BRL 2.03, expires June 2014, counterparty: GSI | 240,000 | 73 | |||||||||
Foreign Exchange Option, Buy USD/TRY, strike @ TRY 1.92, expires June 2014, counterparty: BB | 660,000 | 485 | |||||||||
886 | |||||||||||
Total options purchased (cost $37,545) | 886 | ||||||||||
Total investments: 98.54% (cost $23,818,786) | 21,931,323 | ||||||||||
Cash and other assets, less liabilities: 1.46% | 325,724 | ||||||||||
Net assets: 100.00% | $ | 22,257,047 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes and net unrealized depreciation consisted of:
Gross unrealized appreciation | $ | 267,683 | |||||
Gross unrealized depreciation | (2,155,146 | ) | |||||
Net unrealized depreciation of investments | $ | (1,887,463 | ) |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 50. Portfolio footnotes begin on page 29.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
BB | KRW | 6,173,400 | USD | 5,844 | 03/18/14 | $ | 21 | ||||||||||||
BB | USD | 424,327 | BRL | 971,000 | 06/10/14 | (27,758 | ) | ||||||||||||
BB | USD | 384,252 | HUF | 84,520,000 | 03/18/14 | 5,301 | |||||||||||||
BB | USD | 103,585 | MXN | 1,342,000 | 03/18/14 | (1,408 | ) | ||||||||||||
CSI | INR | 250,000 | USD | 3,987 | 03/18/14 | 16 | |||||||||||||
CSI | PEN | 1,000,000 | USD | 352,983 | 03/18/14 | (642 | ) | ||||||||||||
CSI | USD | 341,960 | BRL | 812,000 | 03/18/14 | (3,943 | ) | ||||||||||||
CSI | USD | 54,777 | MYR | 177,100 | 03/18/14 | (949 | ) |
26
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
Forward foreign currency contracts—(Concluded)
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
CSI | USD | 493,561 | PLN | 1,510,000 | 03/18/14 | $ | 3,987 | ||||||||||||
CSI | USD | 242,279 | RUB | 8,060,000 | 03/18/14 | (196 | ) | ||||||||||||
DB | TRY | 250,000 | USD | 118,147 | 03/18/14 | 3,626 | |||||||||||||
DB | USD | 242,900 | CLP | 130,267,000 | 03/18/14 | 2,968 | |||||||||||||
DB | USD | 178,346 | COP | 347,150,000 | 03/18/14 | 821 | |||||||||||||
DB | USD | 281,980 | THB | 9,170,000 | 03/18/14 | (3,857 | ) | ||||||||||||
DB | USD | 571,417 | TRY | 1,180,000 | 03/18/14 | (30,877 | ) | ||||||||||||
GSI | BRL | 971,000 | USD | 402,654 | 06/10/14 | 6,085 | |||||||||||||
GSI | PHP | 1,133,000 | USD | 25,686 | 03/18/14 | 131 | |||||||||||||
GSI | TWD | 242,600 | USD | 8,259 | 03/18/14 | 101 | |||||||||||||
GSI | USD | 433,110 | IDR | 5,285,170,000 | 03/18/14 | (4,615 | ) | ||||||||||||
GSI | USD | 15,442 | RON | 50,000 | 03/18/14 | (107 | ) | ||||||||||||
GSI | USD | 543,426 | ZAR | 5,700,000 | 03/18/14 | (5,843 | ) | ||||||||||||
RBS | EUR | 310,000 | USD | 420,340 | 01/21/14 | (6,122 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (63,260 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Long Bond, 5 contracts (USD) | March 2014 | $ | 653,502 | $ | 641,562 | $ | (11,940 | ) | |||||||||||
10 Year US Treasury Notes, 10 contracts (USD) | March 2014 | 1,254,128 | 1,230,469 | (23,659 | ) | ||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
5 Year US Treasury Notes, 7 contracts (USD) | March 2014 | (846,205 | ) | (835,188 | ) | 11,017 | |||||||||||||
Net unrealized depreciation on futures contracts | $ | (24,582 | ) |
Currency swap agreements8
Counterparty | Pay contracts | Receive contracts | Termination date | Pay rate9 | Receive rate9 | Upfront payments | Value | Unrealized appreciation | |||||||||||||||||||||||||||
BB | PHP | 8,238,200 | USD | 200,614 | 12/18/15 | 1.300 | % | 6 month USD LIBOR | $ | — | $ | 12,771 | $ | 12,771 |
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund9 | Payments received by the Fund9 | Upfront payments | Value | Unrealized depreciation | ||||||||||||||||||||||||
DB | BRL | 865,272 | 01/02/17 | 1 Day CDI | 8.645 | % | $ | — | $ | (35,132 | ) | $ | (35,132 | ) | |||||||||||||||||
MLI | ZAR | 2,000,000 | 06/04/18 | 3 month JIBAR | 6.400 | — | (5,572 | ) | (5,572 | ) | |||||||||||||||||||||
$ | (40,704 | ) | $ | (40,704 | ) |
27
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
Credit default swaps on sovereign issues—sell protection10
Counterparty | Referenced obligation11 | Notional amount | Termination date | Payments received by the Fund9 | Upfront payments received | Value | Unrealized appreciation/ (depreciation) | Credit spread12 | |||||||||||||||||||||||||||
BB | Russian Federation bond, 2.250%, due 03/31/30 | USD | 300,000 | 12/20/22 | 1.000 | % | $ | 25,391 | $ | (24,434 | ) | $ | 957 | 2.090 | % | ||||||||||||||||||||
GSI | United Mexican States bond, 5.950%, due 03/19/19 | USD | 250,000 | 09/20/22 | 1.000 | 15,632 | (6,066 | ) | 9,566 | 2.330 | |||||||||||||||||||||||||
GSI | Federative Republic of Brazil bond, 12.250%, due 03/06/30 | USD | 250,000 | 09/20/22 | 1.000 | 19,720 | (24,133 | ) | (4,413 | ) | 1.320 | ||||||||||||||||||||||||
$ | 60,743 | $ | (54,633 | ) | $ | 6,110 |
Options written
Expiration date | Premiums received | Value | |||||||||||||
Put options | |||||||||||||||
Foreign Exchange Option, Sell EUR/BRL, EUR 460,000 face amount covered by contracts, strike @ BRL 2.60, counterparty: BB | June 2014 | $ | 3,914 | $ | (12 | ) | |||||||||
Foreign Exchange Option, Sell EUR/PLN, EUR 260,000 face amount covered by contracts, strike @ PLN 3.90, counterparty: GSI | January 2014 | 1,084 | 0 | ||||||||||||
Foreign Exchange Option, Sell USD/BRL, USD 870,000 face amount covered by contracts, strike @ BRL 1.80, counterparty: GSI | April 2014 | 2,309 | 0 | ||||||||||||
Foreign Exchange Option, Sell USD/BRL, USD 720,000 face amount covered by contracts, strike @ BRL 1.96, counterparty: MLI | June 2014 | 3,243 | (53 | ) | |||||||||||
Foreign Exchange Option, Sell USD/BRL, USD 480,000 face amount covered by contracts, strike @ BRL 1.96, counterparty: GSI | June 2014 | 2,377 | (37 | ) | |||||||||||
Foreign Exchange Option, Sell USD/TRY, USD 330,000 face amount covered by contracts, strike @ TRY 1.98, counterparty: BB | June 2014 | 10,428 | (643 | ) | |||||||||||
Total options written | $ | 23,355 | $ | (745 | ) |
Foreign exchange written options activity for the period ended December 31, 2013 was as follows:
Premiums received | |||||||
Foreign exchange options outstanding at June 30, 2013 | $ | 42,727 | |||||
Foreign exchange options written | 3,347 | ||||||
Foreign exchange options terminated in closing purchase transactions | (21,116 | ) | |||||
Foreign exchange options expired prior to exercise | (1,603 | ) | |||||
Foreign exchange options outstanding at December 31, 2013 | $ | 23,355 |
28
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | — | $ | 4,385,197 | $ | — | $ | 4,385,197 | |||||||||||
Non-US government obligations | — | 14,402,931 | — | 14,402,931 | |||||||||||||||
Structured notes | — | 826,951 | — | 826,951 | |||||||||||||||
Short-term investment | — | 2,315,358 | — | 2,315,358 | |||||||||||||||
Options purchased | — | 886 | — | 886 | |||||||||||||||
Forward foreign currency contracts, net | — | (63,260 | ) | — | (63,260 | ) | |||||||||||||
Futures contracts, net | (24,582 | ) | — | — | (24,582 | ) | |||||||||||||
Swap agreements, net | — | (82,566 | ) | — | (82,566 | ) | |||||||||||||
Options written | — | (745 | ) | — | (745 | ) | |||||||||||||
Total | $ | (24,582 | ) | $ | 21,784,752 | $ | — | $ | 21,760,170 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
1 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 December 31, 2013, the value of these securities amounted to $7,538,803 or 33.87% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of December 31, 2013 and changes periodically.
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 December 31, 2013, the value of these securities amounted to $1,770,951 or 7.96% of net assets.
4 Security pays, when required, a floating rate that is determined annually based on the Argentina GDP.
5 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional security of the same maturity.
6 Rate shown is the discount rate at date of purchase.
7 The table below details the Fund's investment in a fund 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 671,558 | $ | 4,714,981 | $ | 3,071,181 | $ | 2,315,358 | $ | 837 |
29
UBS Emerging Markets Debt Fund
Portfolio of investments
December 31, 2013 (unaudited)
8 Illiquid investment. At December 31, 2013, the value of this investment amounted to $12,771 or 0.06% of net assets.
9 Payments made or received are based on the notional amount.
10 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.
11 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
12 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.
See accompanying notes to financial statements.
30
UBS Fixed Income Opportunities Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Fixed Income Opportunities Fund (the "Fund") declined 0.42% (Class A shares declined 4.90% after the deduction of the maximum sales charge), while Class Y shares declined 0.30%. For comparison purposes, the BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity 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 33; 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 negative return during the reporting period. Factors driving this weak performance included interest rate strategies, exposure to emerging markets debt and overall currency management, which more than offset the positive impact from spread management.
The Fund made extensive use of derivatives as part of its investment strategy across global interest rate, credit and currency markets. To facilitate specific duration and yield curve strategies, the Fund utilized different interest rate derivatives, including, but not limited to, futures, options, swaps and swaptions. Credit default swaps, credit default swaptions and, to a more limited extent, total return swaps, were used to help implement credit-related investment strategies as part of the Fund's sector allocation and security selection. Lastly, the Fund utilized currency derivatives, such as currency forwards and swaps, as part of its currency management strategy.
While derivatives play a role in the overall portfolio construction process, they are just one of the tools we utilize to manage the Fund's overall risk exposure and to implement the aforementioned strategies. That said, the Fund's active interest rate strategies detracted from results. While most spread sector hedging strategies generally detracted from performance, spread management overall was additive for results. Currency positioning detracted somewhat from results during the reporting period.
Portfolio performance summary1
What worked
• The Fund's allocation to several spread sectors2 was positive for results during the reporting period.
– The Fund's allocations to both high yield and investment grade corporate bonds were rewarded. These credit sectors were supported by accelerating economic growth in the US, largely improving fundamentals and low defaults. Against this backdrop, investor demand was generally solid, as they looked to generate incremental yield in the low interest rate environment. The performance of our long high yield bond exposures more than offset hedging strategies employed in the sectors over the course of the reporting period.
1 For a detailed commentary on the market environment in general during the reporting period, pages 3-4.
2 Spread sectors typically refer to any non-Treasury credit oriented fixed income sectors, such as investment grade or high yield corporate bonds, commercial mortgage-backed securities ("CMBS"), etc.
31
UBS Fixed Income Opportunities Fund
– A small allocation to commercial mortgage-backed securities ("CMBS") was rewarded, particularly given our emphasis on positions lower in the capital structure, which we believed presented a more attractive risk-return profile.
– The Fund's small allocation to collateralized loan obligations was also a modest contributor to results, as the structured credit market was supported by stronger demand and a more robust new issuance calendar.
• A short position in the Japanese yen was rewarded during the reporting period. While the Fund's overall management of developed market currencies produced mixed results, our short position in the Japanese yen added to returns. The yen continued to weaken relative to the US dollar, given aggressive actions by the Bank of Japan to stimulate growth and address its lengthy deflationary cycle.
• The Fund's short position in the Australian dollar versus the US dollar contributed to results.
What didn't work
• The Fund's allocation to emerging markets debt detracted from performance. The emerging markets debt asset class experienced periods of heightened volatility during the reporting period. This was triggered by a number of factors, including decelerating growth in many developing countries, generally falling commodity prices, sharply rising US interest rates and concerns regarding the unwinding of the Fed's asset purchases.
• Certain hedging strategies detracted from performance. The Fund's beta hedging strategies within corporate credit were negative for performance as corporate debt closed the six-month period with positive returns.
• Overall, currency positioning was negative for Fund results.
– Our positioning within developed markets produced mixed results, as the Fund continued to maintain its preference for the US dollar versus several other developed market currencies. The Fund's short positions in the euro and Great Britain pound were negative for results, especially in September 2013, as the Fed surprised markets by delaying the tapering of its asset purchase program, and the US dollar weakened against major developed market currencies.
– Finally, the Fund's exposure to certain emerging market currencies, albeit small, detracted from performance as those currencies weakened over the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
32
UBS Fixed Income Opportunities Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | (0.42 | )% | 1.16 | % | 2.52 | % | |||||||||
Class C3 | (0.66 | ) | 0.78 | 2.01 | |||||||||||
Class Y4 | (0.30 | ) | 1.50 | 2.83 | |||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | (4.90 | )% | (3.39 | )% | 1.01 | % | |||||||||
Class C3 | (1.41 | ) | 0.04 | 2.01 | |||||||||||
BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index5 | 0.14 | % | 0.29 | % | 0.35 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.52% and 1.05%; Class C—2.02% and 1.55%; Class Y—1.23% 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
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 4.5%. 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 distribution and service 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 distribution and service 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 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://globalam-us.ubs.com/corpweb/performance.do.
33
UBS Fixed Income Opportunities Fund
Top ten long-term fixed income holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
US Treasury Notes, 2.000%, due 02/15/22 | 5.7 | % | |||||
Bank of America Corp., 4.625%, due 09/14/18 | 2.4 | ||||||
Citigroup, Inc., 0.974%, due 05/31/17 | 2.4 | ||||||
Case New Holland, Inc., 7.875%, due 12/01/17 | 1.8 | ||||||
Lloyds Bank PLC, 6.500%, due 03/24/20 | 1.6 | ||||||
EDP Finance BV, 4.750%, due 09/26/16 | 1.5 | ||||||
Morgan Stanley, 6.625%, due 04/01/18 | 1.5 | ||||||
Santander US Debt SA Unipersonal, 3.724%, due 01/20/15 | 1.4 | ||||||
HeidelbergCement Finance BV, 8.500%, due 10/31/19 | 1.4 | ||||||
Kinder Morgan Finance Co. LLC, 5.700%, due 01/05/16 | 1.3 | ||||||
Total | 21.0 | % |
Country exposure by issuer, top five (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
United States | 53.7 | % | |||||
United Kingdom | 4.9 | ||||||
Netherlands | 3.3 | ||||||
Spain | 3.2 | ||||||
Cayman Islands | 2.6 | ||||||
Total | 67.7 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Bonds | |||||||
Corporate bonds | |||||||
Automobiles | 0.46 | % | |||||
Capital markets | 2.08 | ||||||
Chemicals | 1.27 | ||||||
Commercial banks | 12.36 | ||||||
Commercial services & supplies | 0.57 | ||||||
Construction materials | 1.98 | ||||||
Consumer finance | 4.45 | ||||||
Containers & packaging | 1.04 | ||||||
Diversified financial services | 8.38 | ||||||
Diversified telecommunication services | 1.38 | ||||||
Electronic equipment, instruments & components | 1.57 | ||||||
Gas utilities | 0.21 | ||||||
Health care providers & services | 0.70 | ||||||
Hotels, restaurants & leisure | 2.30 | ||||||
Insurance | 1.64 | ||||||
Leisure equipment & products | 0.44 | ||||||
Machinery | 1.78 | ||||||
Media | 1.91 | ||||||
Metals & mining | 1.97 | ||||||
Oil, gas & consumable fuels | 6.70 | ||||||
Real estate management & development | 1.29 | ||||||
Tobacco | 0.22 | ||||||
Trading companies & distributors | 1.42 | ||||||
Transportation infrastructure | 1.17 | ||||||
Total corporate bonds | 57.29 | % | |||||
Asset-backed securities | 1.17 | ||||||
Collateralized debt obligations | 5.15 | ||||||
Commercial mortgage-backed securities | 5.36 | ||||||
Mortgage & agency debt securities | 2.70 | ||||||
Municipal bonds | 2.65 | ||||||
US government obligations | 7.12 | ||||||
Non-US government obligations | 1.43 | ||||||
Total bonds | 82.87 | % | |||||
Investment company | |||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund | 17.97 | ||||||
Short-term investment | 0.79 | ||||||
Options purchased | 3.01 | ||||||
Total investments | 104.64 | % | |||||
Liabilities, in excess of cash and other assets | (4.64 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Fixed Income Opportunities Fund. Figures might be different if a breakdown of the affiliated underlying investment company was included.
34
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds: 82.87% | |||||||||||
Corporate bonds: 57.29% | |||||||||||
Australia: 1.74% | |||||||||||
Crown Group Finance Ltd., 5.750%, due 07/18/17 | AUD | 620,000 | $ | 569,881 | |||||||
Sydney Airport Finance Co., Pty Ltd., 3.900%, due 03/22/231 | $ | 730,000 | 692,138 | ||||||||
8.000%, due 07/06/15 | AUD | 500,000 | 470,955 | ||||||||
Total Australia corporate bonds | 1,732,974 | ||||||||||
Brazil: 1.96% | |||||||||||
Caixa Economica Federal, 2.375%, due 11/06/171 | $ | 870,000 | 804,750 | ||||||||
Petrobras International Finance Co., 5.375%, due 01/27/21 | 1,150,000 | 1,145,262 | |||||||||
Total Brazil corporate bonds | 1,950,012 | ||||||||||
Cayman Islands: 1.23% | |||||||||||
Evergrande Real Estate Group Ltd., 13.000%, due 01/27/152 | 325,000 | 346,125 | |||||||||
Fantasia Holdings Group Co. Ltd., 10.750%, due 01/22/202 | 315,000 | 316,575 | |||||||||
Kaisa Group Holdings Ltd., 10.250%, due 01/08/202 | 400,000 | 410,000 | |||||||||
XLIT Ltd., 5.250%, due 12/15/43 | 150,000 | 151,005 | |||||||||
Total Cayman Islands corporate bonds | 1,223,705 | ||||||||||
China: 0.42% | |||||||||||
China Oil & Gas Group Ltd., 5.250%, due 04/25/181 | 210,000 | 209,475 | |||||||||
Gemdale International Investment Ltd., 7.125%, due 11/16/172 | 200,000 | 207,000 | |||||||||
Total China corporate bonds | 416,475 | ||||||||||
Germany: 2.18% | |||||||||||
HeidelbergCement Finance BV, 8.500%, due 10/31/192 | EUR | 800,000 | 1,400,462 | ||||||||
Unitymedia GmbH, 9.625%, due 12/01/192 | 500,000 | 761,794 | |||||||||
Total Germany corporate bonds | 2,162,256 | ||||||||||
Ireland: 1.40% | |||||||||||
Ardagh Packaging Finance PLC, 7.375%, due 10/15/172 | 700,000 | 1,031,651 |
Face amount | Value | ||||||||||
The Governor & Co. of the Bank of Ireland, 4.000%, due 01/28/15 | EUR | 250,000 | $ | 353,933 | |||||||
Total Ireland corporate bonds | 1,385,584 | ||||||||||
Luxembourg: 2.47% | |||||||||||
ArcelorMittal, 5.000%, due 02/25/17 | $ | 400,000 | 429,000 | ||||||||
6.000%, due 03/01/21 | 900,000 | 954,000 | |||||||||
Intelsat Jackson Holdings SA, 7.500%, due 04/01/21 | 975,000 | 1,074,938 | |||||||||
Total Luxembourg corporate bonds | 2,457,938 | ||||||||||
Mexico: 0.92% | |||||||||||
Cemex SAB de CV, 5.875%, due 03/25/191 | 400,000 | 401,000 | |||||||||
9.000%, due 01/11/181 | 150,000 | 165,563 | |||||||||
Petroleos Mexicanos, 3.500%, due 07/18/18 | 340,000 | 349,350 | |||||||||
Total Mexico corporate bonds | 915,913 | ||||||||||
Netherlands: 3.32% | |||||||||||
Basell Finance Co. BV, 8.100%, due 03/15/271 | 1,000,000 | 1,262,689 | |||||||||
EDP Finance BV, 4.750%, due 09/26/162 | EUR | 1,050,000 | 1,526,850 | ||||||||
4.900%, due 10/01/191 | $ | 500,000 | 508,750 | ||||||||
Total Netherlands corporate bonds | 3,298,289 | ||||||||||
Norway: 2.27% | |||||||||||
Eksportfinans ASA, 1.600%, due 03/20/14 | JPY | 124,000,000 | 1,171,306 | ||||||||
5.500%, due 05/25/16 | $ | 780,000 | 822,900 | ||||||||
5.500%, due 06/26/17 | 250,000 | 263,625 | |||||||||
Total Norway corporate bonds | 2,257,831 | ||||||||||
Singapore: 0.44% | |||||||||||
Flextronics International Ltd., 5.000%, due 02/15/23 | 470,000 | 440,860 | |||||||||
Spain: 3.19% | |||||||||||
BBVA US Senior SAU, 4.664%, due 10/09/15 | 960,000 | 1,009,227 | |||||||||
Cirsa Funding Luxembourg SA, 8.750%, due 05/15/182 | EUR | 300,000 | 437,472 | ||||||||
Santander US Debt SA Unipersonal, 3.724%, due 01/20/151 | $ | 1,400,000 | 1,427,898 |
35
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Concluded) | |||||||||||
Spain—(Concluded) | |||||||||||
Telefonica Emisiones SAU, 3.192%, due 04/27/18 | $ | 290,000 | $ | 295,341 | |||||||
Total Spain corporate bonds | 3,169,938 | ||||||||||
United Kingdom: 4.87% | |||||||||||
Barclays Bank PLC, 5.140%, due 10/14/20 | 100,000 | 106,487 | |||||||||
6.050%, due 12/04/171 | 990,000 | 1,106,803 | |||||||||
HBOS PLC, 6.750%, due 05/21/181 | 700,000 | 791,789 | |||||||||
Lloyds Bank PLC, 6.500%, due 03/24/202 | EUR | 1,000,000 | 1,593,511 | ||||||||
6.500%, due 09/14/201 | $ | 200,000 | 227,348 | ||||||||
Royal Bank of Scotland Group PLC, 6.100%, due 06/10/23 | 1,010,000 | 1,018,177 | |||||||||
Total United Kingdom corporate bonds | 4,844,115 | ||||||||||
United States: 30.88% | |||||||||||
ADT Corp., 3.500%, due 07/15/22 | 650,000 | 565,794 | |||||||||
Allstate Corp., 5.750%, due 08/15/533 | 400,000 | 403,000 | |||||||||
Ally Financial, Inc., 3.296%, due 06/15/154 | 1,340,000 | 1,286,400 | |||||||||
8.300%, due 02/12/15 | 200,000 | 215,000 | |||||||||
Bank of America Corp., 4.625%, due 09/14/18 | EUR | 1,590,000 | 2,368,258 | ||||||||
Barrick North America Finance LLC, 5.750%, due 05/01/43 | $ | 425,000 | 382,162 | ||||||||
Caesars Entertainment Operating Co., Inc., 11.250%, due 06/01/17 | 1,150,000 | 1,170,125 | |||||||||
Case New Holland, Inc., 7.875%, due 12/01/17 | 1,500,000 | 1,770,000 | |||||||||
CIT Group, Inc., 5.000%, due 05/15/17 | 500,000 | 533,750 | |||||||||
5.000%, due 08/15/22 | 275,000 | 268,125 | |||||||||
5.250%, due 04/01/141 | 900,000 | 909,000 | |||||||||
Citigroup, Inc., 0.974%, due 05/31/173 | EUR | 1,750,000 | 2,341,270 | ||||||||
5.500%, due 09/13/25 | $ | 550,000 | 579,281 | ||||||||
DISH DBS Corp., 7.875%, due 09/01/19 | 990,000 | 1,133,550 | |||||||||
El Paso LLC, 7.250%, due 06/01/18 | 900,000 | 1,027,476 |
Face amount | Value | ||||||||||
Energy Transfer Partners LP, 6.050%, due 06/01/41 | $ | 380,000 | $ | 389,511 | |||||||
9.000%, due 04/15/19 | 570,000 | 720,410 | |||||||||
Fidelity National Financial, Inc., 5.500%, due 09/01/22 | 110,000 | 114,088 | |||||||||
Ford Motor Credit Co., LLC, 8.125%, due 01/15/20 | 850,000 | 1,062,882 | |||||||||
General Motors Co., 3.500%, due 10/02/181 | 450,000 | 460,125 | |||||||||
General Motors Financial Co., Inc., 4.750%, due 08/15/171 | 810,000 | 859,612 | |||||||||
Glencore Funding LLC, 2.500%, due 01/15/191 | 200,000 | 193,664 | |||||||||
HCA, Inc., 7.875%, due 02/15/20 | 650,000 | 697,937 | |||||||||
International Lease Finance Corp., 8.625%, due 09/15/15 | 1,000,000 | 1,110,000 | |||||||||
Kinder Morgan Finance Co. LLC, 5.700%, due 01/05/16 | 1,230,000 | 1,321,182 | |||||||||
MetLife, Inc., 6.400%, due 12/15/36 | 570,000 | 585,675 | |||||||||
Morgan Stanley, 6.625%, due 04/01/18 | 1,250,000 | 1,462,617 | |||||||||
7.300%, due 05/13/19 | 500,000 | 607,204 | |||||||||
Plains Exploration & Production Co., 6.125%, due 06/15/19 | 250,000 | 273,424 | |||||||||
6.500%, due 11/15/20 | 770,000 | 850,372 | |||||||||
6.875%, due 02/15/23 | 170,000 | 189,550 | |||||||||
Prudential Financial, Inc., 5.200%, due 03/15/443 | 385,000 | 372,488 | |||||||||
Regions Bank, 7.500%, due 05/15/18 | 750,000 | 887,465 | |||||||||
Reynolds American, Inc., 6.150%, due 09/15/43 | 200,000 | 215,971 | |||||||||
Sabine Pass Liquefaction LLC, 6.250%, due 03/15/221 | 150,000 | 148,875 | |||||||||
Sanmina Corp., 7.000%, due 05/15/191 | 1,060,000 | 1,127,575 | |||||||||
SLM Corp., 3.875%, due 09/10/15 | 970,000 | 1,002,738 | |||||||||
Tesoro Corp., 9.750%, due 06/01/19 | 230,000 | 248,975 | |||||||||
WESCO Distribution, Inc., 5.375%, due 12/15/211 | 300,000 | 300,000 | |||||||||
Wyndham Worldwide Corp., 3.900%, due 03/01/23 | 575,000 | 541,630 | |||||||||
Total United States corporate bonds | 30,697,161 | ||||||||||
Total corporate bonds (cost $55,584,253) | 56,953,051 |
36
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Asset-backed securities: 1.17% | |||||||||||
United States: 1.17% | |||||||||||
Octagon Investment Partners XVII Ltd., Series 2013-1A, Class C, 3.020%, due 10/25/251,3 | $ | 350,000 | $ | 346,500 | |||||||
Saxon Asset Securities Trust, Series 2006-2, Class A3C, 0.315%, due 09/25/363 | 931,825 | 816,857 | |||||||||
Total asset-backed securities (cost $1,062,328) | 1,163,357 | ||||||||||
Collateralized debt obligations: 5.15% | |||||||||||
Cayman Islands: 1.38% | |||||||||||
Babson CLO Ltd., Series 2013-IIA, Class B1, 2.929%, due 01/18/251,3 | 650,000 | 636,106 | |||||||||
CIFC Funding Ltd., Series 2013-3A, Class B, 2.906%, due 10/24/251,3 | 400,000 | 389,720 | |||||||||
Race Point VIII CLO Ltd., Series 2013-8A, Class C, 3.037%, due 02/20/251,3 | 350,000 | 342,615 | |||||||||
Total Cayman Islands collateralized debt obligations | 1,368,441 | ||||||||||
United States: 3.77% | |||||||||||
Apidos CLO XIV, Series 2013-14A, Class C1, 3.094%, due 04/15/251,3 | 300,000 | 294,000 | |||||||||
Ares XXVII CLO Ltd., Series 2013-2A, Class C, 3.001%, due 07/28/251,3 | 500,000 | 491,250 | |||||||||
BlueMountain CLO Ltd., Series 2013-1A, Class B, 2.891%, due 05/15/251,3 | 500,000 | 487,750 | |||||||||
Series 2013-4A, Class C, 2.891%, due 04/15/251,3,5,6 | 300,000 | 293,280 | |||||||||
Denali Capital CLO X Ltd., Series 2013-1A, Class A3L, 3.138%, due 04/28/251,3 | 550,000 | 533,500 | |||||||||
Galaxy CLO Ltd., Series 2013-16A, Class C, 2.838%, due 11/16/251,3 | 500,000 | 485,000 | |||||||||
Galaxy CLO XV Ltd., Series 2013-15A, Class C, 2.844%, due 04/15/251,3 | 500,000 | 486,250 | |||||||||
KKR Financial CLO Trust, Series 2013-1A, Class B, 2.844%, due 07/15/251,3 | 300,000 | 283,830 |
Face amount | Value | ||||||||||
Marathon CLO V Ltd., Series 2013-5A, Class A2A, 2.589%, due 02/21/251,3 | $ | 400,000 | $ | 399,371 | |||||||
Total United States collateralized debt obligations | 3,754,231 | ||||||||||
Total collateralized debt obligations (cost $5,132,301) | 5,122,672 | ||||||||||
Commercial mortgage-backed securities: 5.36% | |||||||||||
United States: 5.36% | |||||||||||
Americold 2010 LLC Trust, Series 2010-ARTA, Class D, 7.443%, due 01/14/291 | 290,000 | 322,063 | |||||||||
BAMLL Commercial Mortgage Securities Trust, Series 2013-DSNY, Class E, 2.767%, due 09/15/261,3 | 200,000 | 200,000 | |||||||||
Boca Hotel Portfolio Trust, Series 2013-BOCA, Class D, 3.217%, due 08/15/261,3 | 400,000 | 400,479 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2007-C6, Class AM, 5.705%, due 12/10/493 | 425,000 | 468,269 | |||||||||
Commercial Mortgage Pass Through Certificates, Series 2013-THL, Class D, 2.820%, due 06/08/301,3 | 450,000 | 451,602 | |||||||||
Series 2013-FL3, Class MMHP, 3.767%, due 10/13/281,3 | 300,000 | 300,589 | |||||||||
Extended Stay America Trust, Series 2013-ESH7, Class B7, 3.604%, due 12/05/311 | 500,000 | 488,142 | |||||||||
GS Mortgage Securities Corp. II, Series 2013-KYO, Class D, 2.768%, due 11/08/291,3 | 250,000 | 248,458 | |||||||||
Irvine Core Office Trust, Series 2013-IRV, Class C, 3.173%, due 05/15/481,3 | 250,000 | 219,837 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-HSBC, Class E, 4.524%, due 07/05/321,3 | 200,000 | 192,759 | |||||||||
Madison Avenue Trust, Series 2013-650M, Class D, 4.034%, due 10/12/321,3 | 500,000 | 486,212 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C7, Class B, 3.769%, due 02/15/46 | 150,000 | 140,890 |
37
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Commercial mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Wells Fargo Commercial Mortgage Trust, Series 2013-120B, Class C, 2.710%, due 03/18/281,3 | $ | 500,000 | $ | 456,199 | |||||||
WF-RBS Commercial Mortgage Trust, Series 2013-C11, Class B, 3.714%, due 03/15/453 | 500,000 | 473,414 | |||||||||
Series 2013-C12, Class B, 3.863%, due 03/15/483 | 500,000 | 475,658 | |||||||||
Total commercial mortgage-backed securities (cost $5,442,259) | 5,324,571 | ||||||||||
Mortgage & agency debt securities: 2.70% | |||||||||||
United States: 2.70% | |||||||||||
Federal Home Loan Mortgage Corp. REMICS, IO,7 3.000%, due 05/15/27 | 1,250,918 | 153,151 | |||||||||
3.500%, due 10/15/42 | 1,702,531 | 404,342 | |||||||||
Federal National Mortgage Association REMICS, IO,7 Series 2013-15, Class IO, 2.500%, due 03/25/28 | 2,239,936 | 254,838 | |||||||||
Series 2013-87, Class IW, 2.500%, due 06/25/28 | 3,915,228 | 440,872 | |||||||||
Series 2013-64, Class LI, 3.000%, due 06/25/33 | 2,387,173 | 353,860 | |||||||||
Series 2012-146, Class IO, 3.500%, due 01/25/43 | 1,720,186 | 399,972 | |||||||||
Government National Mortgage Association, IO, Series 2013-22, Class IO, 3.000%, due 02/20/43 | 1,682,322 | 368,266 | |||||||||
Series 2013-53, Class OI, 3.500%, due 04/20/43 | 1,658,758 | 311,794 | |||||||||
Total mortgage & agency debt securities (cost $2,576,466) | 2,687,095 | ||||||||||
Municipal bonds: 2.65% | |||||||||||
State of California, GO Bonds, 7.300%, due 10/01/39 | 800,000 | 1,006,072 | |||||||||
7.550%, due 04/01/39 | 200,000 | 259,198 | |||||||||
State of Illinois, GO Bonds, 5.665%, due 03/01/18 | 1,055,000 | 1,150,140 | |||||||||
5.877%, due 03/01/19 | 200,000 | 217,682 | |||||||||
Total municipal bonds (cost $2,383,015) | 2,633,092 |
Face amount | Value | ||||||||||
US government obligations: 7.12% | |||||||||||
US Treasury Bonds, PO, 3.123%, due 08/15/424,8 | $ | 1,750,000 | $ | 532,166 | |||||||
4.813%, due 05/15/404,8 | 2,500,000 | 852,658 | |||||||||
US Treasury Notes, 2.000%, due 02/15/228 | 6,000,000 | 5,693,904 | |||||||||
Total US government obligations (cost $7,576,783) | 7,078,728 | ||||||||||
Non-US government obligations: 1.43% | |||||||||||
Brazil: 0.35% | |||||||||||
Banco Nacional de Desenvolvimento Economico e Social, 3.375%, due 09/26/161 | 350,000 | 353,500 | |||||||||
Croatia: 0.54% | |||||||||||
Republic of Croatia, 6.250%, due 04/27/172 | 500,000 | 532,500 | |||||||||
Greece: 0.54% | |||||||||||
Hellenic Republic, 2.000%, due 02/24/242,9 | EUR | 400,000 | 353,695 | ||||||||
2.000%, due 02/24/262,9 | 220,000 | 182,394 | |||||||||
536,089 | |||||||||||
Total Non-US government obligations (cost $1,326,794) | 1,422,089 | ||||||||||
Total bonds (cost $81,084,199) | 82,384,655 | ||||||||||
Shares | |||||||||||
Investment company: 17.97% | |||||||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund*10 (cost $16,455,628) | 932,797 | 17,865,107 | |||||||||
Short-term investment: 0.79% | |||||||||||
Investment company: 0.79% | |||||||||||
UBS Cash Management Prime Relationship Fund10 (cost $783,840) | 783,840 | 783,840 |
38
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Number of contracts | Value | ||||||||||
Options purchased: 3.01% | |||||||||||
Call options: 0.10% | |||||||||||
10 Year US Treasury Notes, strike @ USD 123.00, expires February 2014 | 98 | $ | 94,938 | ||||||||
Put options: 0.83% | |||||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 98.75, expires March 2014 | 206 | 139,050 | |||||||||
3 Year Euro-Dollar Midcurve, strike @ USD 97.75, expires June 2016 | 151 | 164,212 | |||||||||
US Long Bond, strike @ USD 128.00, expires January 2014 | 178 | 158,531 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires March 2015 | 234 | 70,200 | |||||||||
10 Year US Treasury Notes, strike @ USD 123.00, expires February 2014 | 98 | 90,344 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 98.75, expires June 2015 | 433 | 129,900 | |||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 98.38, expires March 2014 | 206 | 50,213 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.38, expires September 2014 | 203 | 22,838 | |||||||||
1 Year Euro-Dollar Midcurve, strike @ USD 99.00, expires March 2014 | 97 | 1,212 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.50, expires June 2014 | 49 | 3,675 | |||||||||
830,175 | |||||||||||
Notional amount | |||||||||||
Options purchased on interest rate swaps5: 2.08% | |||||||||||
Expiring 05/22/15. If option exercised the Fund pays semi-annually 2.350% and receives semi-annually floating 6 month JPY LIBOR. Underlying interest rate swap terminating 05/27/35. European style. Counterparty: BB | JPY | 475,000,000 | 85,649 |
Notional amount | Value | ||||||||||
Expiring 09/30/14. If option exercised the Fund pays annually 1.700% and receives semi-annually floating 6 month EURIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI | EUR | 15,800,000 | $ | 11,322 | |||||||
Expiring 09/30/14. If option exercised the Fund pays semi-annually 1.300% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI | $ | 26,350,000 | 70,094 | ||||||||
Expiring 11/02/15. If option exercised the Fund pays semi-annually 6.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: DB | 3,050,000 | 20,960 | |||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | 8,650,000 | 594,075 | |||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | 3,500,000 | 240,623 | |||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | 3,500,000 | 28,902 |
39
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Notional amount | Value | ||||||||||
Options purchased—(Concluded) | |||||||||||
Options purchased on interest rate swaps5—(Concluded) | |||||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | $ | 8,650,000 | $ | 71,273 | |||||||
Expiring 12/19/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: BB | 8,650,000 | 597,195 | |||||||||
Expiring 12/19/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: JPMCB | 3,500,000 | 241,640 |
Notional amount | Value | ||||||||||
Expiring 12/19/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: BB | $ | 8,650,000 | $ | 72,012 | |||||||
Expiring 12/19/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: JPMCB | 3,500,000 | 29,138 | |||||||||
2,062,883 | |||||||||||
Total options purchased (cost $2,995,521) | 2,987,996 | ||||||||||
Total investments: 104.64% (cost $101,319,188) | 104,021,598 | ||||||||||
Liabilities, in excess of cash and other assets: (4.64%) | (4,610,857 | ) | |||||||||
Net assets: 100.00% | $ | 99,410,741 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 5,236,325 | |||||
Gross unrealized depreciation | (2,533,915 | ) | |||||
Net unrealized appreciation of investments | $ | 2,702,410 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 50. Portfolio footnotes begin on page 48.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
BB | USD | 1,015,629 | AUD | 1,150,000 | 03/04/14 | $ | 7,227 | ||||||||||||
JPMCB | AUD | 4,585,000 | USD | 4,151,034 | 03/04/14 | 72,952 | |||||||||||||
JPMCB | JPY | 643,500,000 | USD | 6,322,903 | 03/04/14 | 210,590 | |||||||||||||
JPMCB | USD | 411,047 | CAD | 435,000 | 03/04/14 | (2,136 | ) | ||||||||||||
JPMCB | USD | 1,200,720 | EUR | 875,000 | 03/04/14 | 2,992 | |||||||||||||
MSCI | EUR | 11,875,000 | USD | 16,139,848 | 03/04/14 | (196,233 | ) | ||||||||||||
Net unrealized appreciation on forward foreign currency contracts | $ | 95,392 |
40
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Long Bond, 19 contracts (USD) | March 2014 | $ | 2,432,773 | $ | 2,437,938 | $ | 5,165 | ||||||||||||
US Ultra Bond, 84 contracts (USD) | March 2014 | 11,521,193 | 11,445,000 | (76,193 | ) | ||||||||||||||
10 Year US Treasury Notes, 29 contracts (USD) | March 2014 | 3,567,381 | 3,568,359 | 978 | |||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Long Bond, 3 contracts (USD) | March 2014 | (391,806 | ) | (384,938 | ) | 6,868 | |||||||||||||
5 Year US Treasury Notes, 55 contracts (USD) | March 2014 | (6,640,195 | ) | (6,562,188 | ) | 78,007 | |||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | December 2014 | 10,966,578 | 10,964,880 | (1,698 | ) | ||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | March 2015 | 10,958,081 | 10,956,075 | (2,006 | ) | ||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | June 2015 | 10,947,316 | 10,945,069 | (2,247 | ) | ||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | September 2015 | 10,934,666 | 10,932,412 | (2,254 | ) | ||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | March 2014 | (3,989,744 | ) | (3,989,000 | ) | 744 | |||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | June 2014 | (3,988,944 | ) | (3,987,400 | ) | 1,544 | |||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | September 2014 | (3,987,744 | ) | (3,985,400 | ) | 2,344 | |||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | December 2014 | (3,985,744 | ) | (3,982,800 | ) | 2,944 | |||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | March 2015 | (3,982,144 | ) | (3,978,800 | ) | 3,344 | |||||||||||||
90 Day Euro-Dollar Time Deposit, 176 contracts (USD) | June 2015 | (43,486,784 | ) | (43,703,000 | ) | (216,216 | ) | ||||||||||||
90 Day Euro-Dollar Time Deposit, 257 contracts (USD) | December 2015 | (63,606,601 | ) | (63,527,188 | ) | 79,413 | |||||||||||||
Long Gilt, 17 contracts (GBP) | March 2014 | (3,069,934 | ) | (2,999,787 | ) | 70,147 | |||||||||||||
Net unrealized depreciation on futures contracts | $ | (49,116 | ) |
Currency swap agreements5
Counterparty | Pay contracts | Receive contracts | Termination date | Pay rate11 | Receive rate11 | Upfront payments | Value | Unrealized appreciation/ (depreciation) | |||||||||||||||||||||||||||
BB | USD | 7,225,484 | AUD | 8,158,397 | 12/24/22 | 3 month USD LIBOR | 3 month BBSW | $ | — | $ | 103,072 | $ | 103,072 | ||||||||||||||||||||||
CITI | AUD | 8,158,397 | USD | 7,220,181 | 12/24/14 | 3 month BBSW | 3 month USD LIBOR | — | (77,860 | ) | (77,860 | ) | |||||||||||||||||||||||
JPMCB | AUD | 1,884,491 | USD | 1,715,735 | 09/05/14 | 3 month BBSW | 3 month USD LIBOR | — | 26,122 | 26,122 | |||||||||||||||||||||||||
JPMCB | USD | 1,715,735 | AUD | 1,884,491 | 09/05/23 | 3 month USD LIBOR | 3 month BBSW | — | (21,733 | ) | (21,733 | ) | |||||||||||||||||||||||
$ | 29,601 | $ | 29,601 |
41
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
CITI | CAD | 1,750,000 | 06/07/16 | 3 month BA | 2.288% | $ | — | $ | 7,485 | $ | 7,485 | ||||||||||||||||||||
CITI | USD | 4,750,000 | 06/11/16 | 1.106% | 3 month USD LIBOR | — | (4,104 | ) | (4,104 | ) | |||||||||||||||||||||
CITI | USD | 1,860,000 | 02/15/36 | 4.668 | 3 month USD LIBOR | 509,297 | (273,378 | ) | 235,919 | ||||||||||||||||||||||
CSI | CAD | 6,125,000 | 02/11/14 | 2.775 | 3 month BA | — | (43,196 | ) | (43,196 | ) | |||||||||||||||||||||
CSI | CAD | 5,490,000 | 02/11/17 | 3 month BA | 3.500 | (35,605 | ) | 323,810 | 288,205 | ||||||||||||||||||||||
CSI | CAD | 1,550,000 | 02/11/22 | 4.145 | 3 month BA | — | (145,563 | ) | (145,563 | ) | |||||||||||||||||||||
CSI | USD | 2,650,000 | 08/12/16 | 3 month USD LIBOR | 1.194 | — | 45,417 | 45,417 | |||||||||||||||||||||||
DB | EUR | 5,850,000 | 05/04/22 | 2.130 | 6 month EURIBOR | 333,786 | (245,439 | ) | 88,347 | ||||||||||||||||||||||
DB | EUR | 2,600,000 | 05/04/42 | 6 month EURIBOR | 2.460 | — | (140,932 | ) | (140,932 | ) | |||||||||||||||||||||
DB | USD | 3,000,000 | 12/15/15 | 1.521 | 3 month USD LIBOR | (41,000 | ) | (63,023 | ) | (104,023 | ) | ||||||||||||||||||||
DB | USD | 1,250,000 | 09/23/20 | 2.690 | 3 month USD LIBOR | (23,000 | ) | (33,539 | ) | (56,539 | ) | ||||||||||||||||||||
DB | USD | 1,450,000 | 02/15/38 | 3 month 3.669 | USD LIBOR | 350,897 | 25,876 | 376,773 | |||||||||||||||||||||||
DB | USD | 4,550,000 | 02/15/38 | 4.474 | 3 month USD LIBOR | 1,743,668 | (527,633 | ) | 1,216,035 | ||||||||||||||||||||||
DB | USD | 695,000 | 05/15/40 | 4.560 | 3 month USD LIBOR | — | (165,830 | ) | (165,830 | ) | |||||||||||||||||||||
DB | USD | 875,000 | 05/15/40 | 3.470 | 3 month USD LIBOR | (157,000 | ) | 69,645 | (87,355 | ) | |||||||||||||||||||||
DB | USD | 1,250,000 | 06/27/42 | 3.489 | 3 month USD LIBOR | 277,212 | 92,483 | 369,695 | |||||||||||||||||||||||
JPMCB | CAD | 6,125,000 | 02/11/14 | 3 month BA | 2.775 | — | 43,196 | 43,196 | |||||||||||||||||||||||
JPMCB | CAD | 4,750,000 | 06/07/16 | 3 month BA | 1.893 | — | 3,155 | 3,155 | |||||||||||||||||||||||
JPMCB | CAD | 5,490,000 | 02/11/17 | 3.500 | 3 month BA | — | (323,811 | ) | (323,811 | ) | |||||||||||||||||||||
JPMCB | CAD | 1,550,000 | 02/11/22 | 3 month BA | 4.145 | — | 145,563 | 145,563 | |||||||||||||||||||||||
JPMCB | EUR | 5,850,000 | 05/04/22 | 6 month EURIBOR | 2.130 | — | 245,439 | 245,439 | |||||||||||||||||||||||
JPMCB | EUR | 2,600,000 | 05/04/42 | 2.460 | 6 month EURIBOR | — | 140,932 | 140,932 | |||||||||||||||||||||||
JPMCB | USD | 66,000,000 | 02/12/16 | 0.825 | 3 month USD LIBOR | — | (61,073 | ) | (61,073 | ) | |||||||||||||||||||||
JPMCB | USD | 4,500,000 | 02/18/16 | 2.532 | 3 month USD LIBOR | — | (232,190 | ) | (232,190 | ) | |||||||||||||||||||||
JPMCB | USD | 70,000,000 | 07/03/42 | 1 month USD LIBOR | 3 month USD LIBOR | — | 236,991 | 236,991 | |||||||||||||||||||||||
MLI | CAD | 66,000,000 | 02/08/16 | 3 month BA | 1.785 | — | 117,512 | 117,512 |
42
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Interest rate swap agreements—(Concluded)
Counterparty | Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
MLI | CAD | 9,280,000 | 04/09/17 | 3 month BA | 1.978% | $ | — | $ | 71,426 | $ | 71,426 | ||||||||||||||||||||
MLI | CAD | 3,030,000 | 02/04/21 | 3.725% | 3 month BA | 79,133 | (209,249 | ) | (130,116 | ) | |||||||||||||||||||||
MLI | CAD | 3,000,000 | 02/04/31 | 3 month BA | 4.310 | 5,192 | 241,760 | 246,952 | |||||||||||||||||||||||
MLI | CAD | 1,060,000 | 02/04/41 | 4.208 | 3 month BA | — | (93,481 | ) | (93,481 | ) | |||||||||||||||||||||
MLI | USD | 3,670,000 | 06/27/42 | 4.449 | 3 month USD LIBOR | 1,533,211 | (352,642 | ) | 1,180,569 | ||||||||||||||||||||||
MSCI | CAD | 8,870,000 | 04/08/17 | 3.600 | 3 month BA | — | (530,980 | ) | (530,980 | ) | |||||||||||||||||||||
MSCI | USD | 3,000,000 | 06/27/22 | 2.970 | 3 month USD LIBOR | 292,599 | (39,404 | ) | 253,195 | ||||||||||||||||||||||
$ | 4,868,390 | $ | (1,674,777 | ) | $ | 3,193,613 |
Credit default swaps on credit indices—buy protection12
Counterparty | Referenced index13 | Notional amount | Termination date | Payments made by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
CITI | CDX.EM.Series 20 Index | USD | 10,000,000 | 12/20/18 | 5.000 | % | $ | 1,063,030 | $ | (1,031,586 | ) | $ | 31,444 | ||||||||||||||||||
MLI | iTraxx Europe Crossover Series 19 Index | EUR | 9,000,000 | 06/20/18 | 1.000 | (94,332 | ) | (209,924 | ) | (304,256 | ) | ||||||||||||||||||||
MLI | iTraxx Europe Crossover Series 19 Index | EUR | 3,250,000 | 06/20/18 | 5.000 | 31,747 | (461,906 | ) | (430,159 | ) | |||||||||||||||||||||
MSCI | iTraxx Europe Senior Financials Series 19 Index | EUR | 3,750,000 | 06/20/18 | 1.000 | (132,967 | ) | (52,843 | ) | (185,810 | ) | ||||||||||||||||||||
$ | 867,478 | $ | (1,756,259 | ) | $ | (888,781 | ) |
Credit default swaps on corporate and sovereign issues—buy protection12
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments made by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
BB | Credit Suisse Group Finance Guernsey Ltd. bond, 5.000%, due 07/29/19 | EUR | 1,250,000 | 09/20/16 | 1.000 | % | $ | (18,013 | ) | $ | (31,374 | ) | $ | (49,387 | ) | ||||||||||||||||
BB | Verizon Communications bond, 4.900%, due 09/15/15 | USD | 2,750,000 | 12/20/16 | 1.000 | 27,467 | (63,971 | ) | (36,504 | ) | |||||||||||||||||||||
BB | Cox Communications, Inc. bond, 6.800%, due 08/01/28 | USD | 875,000 | 03/20/17 | 1.000 | 13,368 | (17,970 | ) | (4,602 | ) | |||||||||||||||||||||
CITI | Commerzbank AG bond, 4.000%, due 09/16/20 | EUR | 655,000 | 06/20/18 | 1.000 | (19,877 | ) | (2,560 | ) | (22,437 | ) | ||||||||||||||||||||
DB | ING Bank NV bond, 5.250%, due 06/07/19 | EUR | 2,500,000 | 06/20/16 | 1.000 | (9,883 | ) | (59,599 | ) | (69,482 | ) |
43
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Credit default swaps on corporate and sovereign issues—buy protection12—(Concluded)
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments made by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
JPMCB | Government of France bond, 4.250%, due 04/25/19 | USD | 3,025,000 | 09/20/16 | 0.250 | % | $ | (97,127 | ) | $ | (1,481 | ) | $ | (98,608 | ) | ||||||||||||||||
JPMCB | XL Group PLC bond, 6.250%, due 05/15/27 | USD | 875,000 | 03/20/17 | 1.000 | (5,301 | ) | (18,699 | ) | (24,000 | ) | ||||||||||||||||||||
JPMCB | Government of Japan bond, 2.000%, due 03/21/22 | USD | 2,500,000 | 12/20/17 | 1.000 | 12,582 | (71,751 | ) | (59,169 | ) | |||||||||||||||||||||
MLI | Deutsche Bank AG bond, 5.125%, due 08/31/17 | EUR | 1,250,000 | 06/20/17 | 1.000 | (39,187 | ) | (28,765 | ) | (67,952 | ) | ||||||||||||||||||||
MLI | United Parcel Service of America, Inc. bond, 8.375%, due 04/01/30 | USD | 3,500,000 | 06/20/16 | 1.000 | 110,916 | (82,597 | ) | 28,319 | ||||||||||||||||||||||
MLI | Allstate Corp. bond, 6.750%, due 05/15/18 | USD | 875,000 | 03/20/18 | 1.000 | 13,945 | (26,532 | ) | (12,587 | ) | |||||||||||||||||||||
MLI | Nucor Corp. bond, 5.750%, due 12/01/17 | USD | 875,000 | 03/20/18 | 1.000 | 9,605 | (22,848 | ) | (13,243 | ) | |||||||||||||||||||||
MLI | XL Group PLC bond, 6.250%, due 05/15/27 | USD | 125,000 | 09/20/18 | 1.000 | 2,268 | (2,795 | ) | (527 | ) | |||||||||||||||||||||
MSCI | V.F. Corp. bond, 5.950%, due 11/01/17 | USD | 2,750,000 | 12/20/16 | 1.000 | 21,117 | (71,021 | ) | (49,904 | ) | |||||||||||||||||||||
$ | 21,880 | $ | (501,963 | ) | $ | (480,083 | ) |
Credit default swaps on credit indices—sell protection14
Counterparty | Referenced Index13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments received | Value | Unrealized appreciation | Credit spread15 | |||||||||||||||||||||||||||
CSI | CMBX.NA.BBB. Series 6 Index | USD | 2,550,000 | 05/11/63 | 3.000 | % | $ | 103,103 | $ | (40,886 | ) | $ | 62,217 | 2.080 | % | ||||||||||||||||||||
MLI | CDX.NA.HY.Series 15 Index | USD | 1,150,000 | 12/20/15 | 5.000 | 48,407 | 104,160 | 152,567 | 0.660 | ||||||||||||||||||||||||||
MSCI | CMBX.NA.A. Series 6 Index | USD | 2,550,000 | 05/11/63 | 2.000 | 32,640 | (8,292 | ) | 24,348 | 3.330 | |||||||||||||||||||||||||
$ | 184,150 | $ | 54,982 | $ | 239,132 |
Credit default swaps on corporate and sovereign issues—sell protection14
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | Credit spread15 | |||||||||||||||||||||||||||
BB | Lloyds TSB Bank PLC bond, 3.375%, due 04/20/15 | EUR | 655,000 | 06/20/18 | 1.000 | % | $ | 21,574 | $ | 11,810 | $ | 33,384 | 0.708 | % | |||||||||||||||||||||
CITI | State of Illinois bond, 5.000%, due 06/01/29 | USD | 800,000 | 12/20/23 | 1.000 | 58,831 | (57,310 | ) | 1,521 | 1.994 |
44
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Credit default swaps on corporate and sovereign issues—sell protection14—(Concluded)
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | Credit spread15 | |||||||||||||||||||||||||||
JPMCB | People's Republic of China bond, 4.250%, due 10/28/14 | USD | 2,500,000 | 12/20/17 | 1.000 | % | $ | (7,603 | ) | $ | 44,042 | $ | 36,439 | 0.558 | % | ||||||||||||||||||||
MLI | Aegon NV bond, 4.125%, due 12/08/14 | EUR | 900,000 | 03/20/16 | 1.000 | 36,430 | 19,255 | 55,685 | 0.317 | ||||||||||||||||||||||||||
MLI | JPMorgan Chase & Co. bond, 4.750%, due 03/01/15 | USD | 875,000 | 03/20/17 | 1.000 | 4,775 | 16,557 | 21,332 | 0.418 | ||||||||||||||||||||||||||
MLI | Barrick Gold Corp. bond, 5.800%, due 11/15/34 | USD | 875,000 | 03/20/18 | 1.000 | 14,173 | (14,876 | ) | (703 | ) | 1.427 | ||||||||||||||||||||||||
MLI | The Hartford Financial Services Group, Inc. bond, 6.000%, due 01/15/19 | USD | 875,000 | 03/20/18 | 1.000 | 8,011 | 15,914 | 23,925 | 0.568 | ||||||||||||||||||||||||||
MLI | JPMorgan Chase & Co. bond, 4.750%, due 03/01/15 | USD | 125,000 | 09/20/18 | 1.000 | (1,068 | ) | 2,301 | 1,233 | 0.606 | |||||||||||||||||||||||||
$ | 135,123 | $ | 37,693 | $ | 172,816 |
Total return swap agreements5
Counterparty | Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Upfront payments | Value | Unrealized depreciation | ||||||||||||||||||||||||
JPMCB | GBP | 1,785,000 | 06/25/14 | 3 month GBP LIBOR | —16 | $ | — | $ | (5,081 | ) | $ | (5,081 | ) |
Centrally cleared interest rate swap agreements
Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||
AUD | 11,775,000 | 10/18/23 | 6 month BBSW | 4.535% | $ | 11,871 | $ | 11,871 | |||||||||||||||
EUR | 15,800,000 | 10/01/16 | 6 month EURIBOR | 0.918 | 51,040 | 51,040 | |||||||||||||||||
EUR | 12,350,000 | 12/27/16 | 6 month EURIBOR | 0.726 | (9,615 | ) | (9,615 | ) | |||||||||||||||
EUR | 4,500,000 | 09/24/19 | 1.810% | 6 month EURIBOR | (69,624 | ) | (69,624 | ) | |||||||||||||||
USD | 1,750,000 | 06/11/16 | 1.403 | 3 month USD LIBOR | (6,134 | ) | (6,134 | ) | |||||||||||||||
USD | 26,350,000 | 10/01/16 | 1.025 | 3 month USD LIBOR | (40,420 | ) | (40,420 | ) | |||||||||||||||
USD | 11,000,000 | 11/21/18 | 1.582 | 3 month USD LIBOR | 141,269 | 141,269 | |||||||||||||||||
USD | 5,250,000 | 09/24/19 | 2.347 | 3 month USD LIBOR | (233 | ) | (233 | ) | |||||||||||||||
USD | 8,250,000 | 12/12/23 | 3.200 | 3 month USD LIBOR | 140,112 | 140,112 | |||||||||||||||||
USD | 5,600,000 | 05/21/24 | 3.047 | 3 month USD LIBOR | 113,942 | 113,942 | |||||||||||||||||
USD | 950,000 | 08/15/39 | 3.680 | 3 month USD LIBOR | 31,330 | 31,330 | |||||||||||||||||
USD | 30,000,000 | 06/06/43 | 1 month USD LIBOR | 3 month USD LIBOR | 53,247 | 53,247 | |||||||||||||||||
$ | 416,785 | $ | 416,785 |
45
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Centrally cleared credit default swaps on credit indices—buy protection12
Referenced index13 | Notional amount | Termination date | Payments made by the Fund11 | Value | Unrealized depreciation | ||||||||||||||||||
CDX.NA.HY. Series 20 Index | USD | 8,550,000 | 06/20/18 | 5.000 | % | $ | (826,500 | ) | $ | (573,299 | ) | ||||||||||||
CDX.NA.HY. Series 20 Index | USD | 8,750,000 | 06/20/18 | 5.000 | (845,833 | ) | (411,792 | ) | |||||||||||||||
CDX.NA.IG. Series 20 Index | USD | 23,000,000 | 06/20/18 | 1.000 | (464,217 | ) | (394,467 | ) | |||||||||||||||
$ | (2,136,550 | ) | $ | (1,379,558 | ) |
Options written
Expiration date | Premiums received | Value | |||||||||||||
Call options | |||||||||||||||
3 Year Euro-Dollar Midcurve, 151 contracts, strike @ USD 98.75 | June 2016 | $ | 118,109 | $ | (119,856 | ) | |||||||||
Put options | |||||||||||||||
2 Year Euro-Dollar Midcurve, 412 contracts, strike @ USD 98.50 | March 2014 | 101,558 | (144,200 | ) | |||||||||||
3 Year Euro-Dollar Midcurve, 151 contracts, strike @ USD 96.75 | June 2016 | 128,922 | (87,769 | ) | |||||||||||
90 Day Euro-Dollar Time Deposit, 193 contracts, strike @ USD 98.25 | March 2015 | 49,987 | (18,094 | ) | |||||||||||
90 Day Euro-Dollar Time Deposit, 240 contracts, strike @ USD 97.75 | June 2015 | 77,160 | (30,000 | ) | |||||||||||
Options written on interest rate swaps5 | |||||||||||||||
If option exercised the Fund receives annually 1.200% and pays semi-annually floating 6 month EURIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI, Notional Amount EUR 15,800,000 | September 2014 | 68,400 | (30,218 | ) | |||||||||||
If option exercised the Fund receives quarterly floating 3 month EURIBOR and pays annually 1.825%. Underlying interest rate swap terminating 12/10/15. European style. Counterparty: BB, Notional Amount EUR 32,000,000 | December 2014 | 180,156 | (583,331 | ) | |||||||||||
If option exercised the Fund receives semi-annually 1.800% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI, Notional Amount USD 26,350,000 | September 2014 | 47,430 | (40,343 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB, Notional Amount USD 17,300,000 | December 2017 | 194,625 | (437,756 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB, Notional Amount USD 7,000,000 | December 2017 | 148,750 | (177,417 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: BB, Notional Amount USD 17,300,000 | December 2017 | 216,250 | (441,609 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: JPMCB, Notional Amount USD 7,000,000 | December 2017 | 140,000 | (178,686 | ) | |||||||||||
If option exercised the Fund receives semi-annually 7.250% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: DB, Notional Amount USD 3,050,000 | November 2015 | 63,135 | (7,312 | ) | |||||||||||
If option exercised the Fund receives semi-annually 8.760% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: DB, Notional Amount USD 3,050,000 | November 2015 | 38,735 | (2,371 | ) | |||||||||||
If option exercised the Fund receives semi-annually floating 6 month JPY LIBOR and pays semi-annually 1.750%. Underlying interest rate swap terminating 05/27/35. European style. Counterparty: BB, Notional Amount JPY 475,000,000 | May 2015 | 146,276 | (145,641 | ) | |||||||||||
Total options written | $ | 1,719,493 | $ | (2,444,603 | ) |
46
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 628 | $ | 369,502 | ||||||||
Options written | 2,267 | 753,876 | |||||||||
Options terminated in closing purchase transactions | (1,748 | ) | (647,642 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | 1,147 | $ | 475,736 |
Written swaptions activity for the period ended December 31, 2013 was as follows:
Swaptions outstanding at June 30, 2013 | $ | 1,375,942 | |||||
Swaptions written | 573,580 | ||||||
Swaptions terminated in closing purchase transactions | (705,765 | ) | |||||
Swaptions expired prior to exercise | — | ||||||
Swaptions outstanding at December 31, 2013 | $ | 1,243,757 |
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | — | $ | 56,953,051 | $ | — | $ | 56,953,051 | |||||||||||
Asset-backed securities | — | 1,163,357 | — | 1,163,357 | |||||||||||||||
Collateralized debt obligations | — | 2,061,092 | 3,061,580 | 5,122,672 | |||||||||||||||
Commercial mortgage-backed securities | — | 4,823,982 | 500,589 | 5,324,571 | |||||||||||||||
Mortgage & agency debt securities | — | 2,687,095 | — | 2,687,095 | |||||||||||||||
Municipal bonds | — | 2,633,092 | — | 2,633,092 | |||||||||||||||
US government obligations | — | 7,078,728 | — | 7,078,728 | |||||||||||||||
Non-US government obligations | — | 1,422,089 | — | 1,422,089 | |||||||||||||||
Investment company | — | 17,865,107 | — | 17,865,107 | |||||||||||||||
Short-term investment | — | 783,840 | — | 783,840 | |||||||||||||||
Options purchased | 925,113 | 2,062,883 | — | 2,987,996 | |||||||||||||||
Forward foreign currency contracts, net | — | 95,392 | — | 95,392 | |||||||||||||||
Futures contracts, net | (49,116 | ) | — | — | (49,116 | ) | |||||||||||||
Swap agreements, net | — | (5,535,569 | ) | — | (5,535,569 | ) | |||||||||||||
Options written | (399,919 | ) | (2,044,684 | ) | — | (2,444,603 | ) | ||||||||||||
Total | $ | 476,078 | $ | 92,049,455 | $ | 3,562,169 | $ | 96,087,702 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
47
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Level 3 rollforward disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
Collateralized debt obligations | Commercial mortgage- backed securities | Total | |||||||||||||
Assets | |||||||||||||||
Beginning balance | $ | 1,554,247 | $ | — | $ | 1,554,247 | |||||||||
Purchases | 477,480 | 500,000 | 977,480 | ||||||||||||
Issuances | — | — | — | ||||||||||||
Sales | — | — | — | ||||||||||||
Accrued discounts (premiums) | 586 | — | 586 | ||||||||||||
Total realized gain | — | — | — | ||||||||||||
Change in net unrealized appreciation (depreciation) | 4,517 | 589 | 5,106 | ||||||||||||
Transfers into Level 317 | 1,024,750 | — | 1,024,750 | ||||||||||||
Transfers out of Level 3 | — | — | — | ||||||||||||
Ending balance | $ | 3,061,580 | $ | 500,589 | $ | 3,562,169 |
The change in net unrealized appreciation/depreciation relating to the Level 3 investments held at December 31, 2013 was $5,106.
Portfolio footnotes
* 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 December 31, 2013, the value of these securities amounted to $21,186,066 or 21.31% of net assets.
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 December 31, 2013, the value of these securities amounted to $9,100,029 or 9.15% of net assets.
3 Variable or floating rate security—The interest rate shown is the current rate as of December 31, 2013 and changes periodically.
4 Rate shown is the discount rate at date of purchase.
5 Illiquid investment. At December 31, 2013, the value of these investments amounted to $4,634,715 or 4.66% of net assets.
6 Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At December 31, 2013, the value of this security amounted to $293,280 or 0.30% of net assets.
7 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.
8 All or a portion of these securities have been designated as collateral for open swap agreements.
9 Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of December 31, 2013. Maturity date disclosed is the ultimate maturity date.
10 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.
48
UBS Fixed Income Opportunities Fund
Portfolio of investments
December 31, 2013 (unaudited)
Security description | Value 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Change in net unrealized appreciation (depreciation) during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | |||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 9,654,845 | $ | 27,820,586 | $ | 36,691,591 | $ | — | $ | 783,840 | $ | 1,768 | |||||||||||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund | 16,719,829 | 1,000,000 | — | 145,278 | 17,865,107 | — | |||||||||||||||||||||
$ | 26,374,674 | $ | 28,820,586 | $ | 36,691,591 | $ | 145,278 | $ | 18,648,947 | $ | 1,768 |
11 Payments made or received are based on the notional amount.
12 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.
13 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or or restructuring event with respect to the referenced index/obligation.
14 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.
15 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.
16 Payment is based on the performance of the underlying iBoxx GBP Corporates Total Return Index.
17 Transfers into Level 3 represent the value at the end of the period. At December 31, 2013, securities were transferred from Level 2 to Level 3 as the valuations are based primarily on unobservable inputs.
See accompanying notes to financial statements.
49
The UBS Funds
Portfolio acronyms
BA Canadian Bankers' Acceptance Rate
BBSW Bank Bill Swap Reference Rate (Australian Financial Market)
CDI Certificate of Interbank Deposits
CLO Collateralized Loan Obligations
EURIBOR Euro Interbank Offered Rate
FDIC Federal Deposit Insurance Co.
GDP Gross Domestic Product
GO General Obligation
GS Goldman Sachs
IO Interest only—This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.
JIBAR Johannesburg Interbank Agreed Rate
LIBOR London Interbank Offered Rate
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.
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
Re-REMIC Combined Real Estate Mortgage Investment Conduit
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.
Counterparty abbreviations
BB Barclays Bank PLC
CITI Citibank NA
CSI Credit Suisse International
DB Deutsche Bank AG
GSI Goldman Sachs International
JPMCB JPMorgan Chase Bank
MLI Merrill Lynch International
MSC Morgan Stanley & Co., Inc.
MSCI Morgan Stanley & Co. International PLC
RBS Royal Bank of Scotland PLC
Currency abbreviations
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CLP Chilean Peso
CNY Chinese Yuan
COP Colombian Peso
EUR Euro
GBP Great Britain Pound
GHS Ghanaian Cedi
HUF Hungarian Forint
IDR Indonesian Rupiah
INR Indian Rupee
JPY Japanese Yen
KRW Korean Won
LKR Sri Lankan Rupee
MXN Mexican Peso
MYR Malaysian Ringgit
NGN Nigerian Naira
PEN Peruvian Nuevo Sol
PHP Philippine Peso
PLN Polish Zloty
RON Romanian Leu
RUB Russian Ruble
THB Thai Baht
TRY Turkish Lira
TWD Taiwan Dollar
USD United States Dollar
VND Vietnamese Dong
ZAR South African Rand
See accompanying notes to financial statements.
50
The UBS Funds
December 31, 2013 (unaudited)
Explanation of expense disclosure
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, July 1, 2013 to December 31, 2013.
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 July 1, 2013 to December 31, 2013.
51
The UBS Funds
December 31, 2013 (unaudited)
Beginning account value July 1, 2013 | Ending account value December 31, 2013 | Expenses paid during period* 07/01/13 – 12/31/13 | Expense ratio during period | ||||||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,013.10 | $ | 3.25 | 0.64 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.98 | 3.26 | 0.64 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,010.50 | 5.78 | 1.14 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.46 | 5.80 | 1.14 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,014.40 | 1.98 | 0.39 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.24 | 1.99 | 0.39 | |||||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 984.10 | 6.25 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.90 | 6.36 | 1.25 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 976.70 | 8.72 | 1.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,016.38 | 8.89 | 1.75 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 986.40 | 5.01 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.16 | 5.09 | 1.00 | |||||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 995.80 | 4.78 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.42 | 4.84 | 0.95 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 993.40 | 7.29 | 1.45 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,017.90 | 7.38 | 1.45 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 997.00 | 3.52 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.68 | 5.57 | 0.70 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
52
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53
The UBS Funds
Financial statements
Statement of assets and liabilities
December 31, 2013 (unaudited)
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost: | |||||||||||
Unaffiliated issuers | $ | 30,486,704 | $ | 21,503,428 | |||||||
Affiliated issuers | 5,213,087 | 2,315,358 | |||||||||
Foreign currency, at cost | 8,787 | 70,310 | |||||||||
$ | 35,708,578 | $ | 23,889,096 | ||||||||
Investments, at value: | |||||||||||
Unaffiliated issuers1 | $ | 30,491,607 | $ | 19,615,965 | |||||||
Affiliated issuers | 5,282,990 | 2,315,358 | |||||||||
Foreign currency, at value | 8,867 | 70,308 | |||||||||
Cash | — | 3,882 | |||||||||
Receivables: | |||||||||||
Investment securities sold | 4,298,043 | 32,871 | |||||||||
Interest | 191,590 | 381,447 | |||||||||
Fund shares sold | 101,371 | — | |||||||||
Foreign tax reclaims | — | 27,919 | |||||||||
Due from advisor | 9,961 | 3,827 | |||||||||
Dividends | 328 | 198 | |||||||||
Variation margin on futures contracts | 21,645 | — | |||||||||
Variation margin on centrally cleared swap agreements | 6,562 | — | |||||||||
Due from broker for futures contracts | 7,671 | 26,642 | |||||||||
Cash collateral for futures contracts | 45,967 | 23,932 | |||||||||
Cash collateral for swap agreements | 23,996 | — | |||||||||
Outstanding swap agreements, at value2 | 145,267 | 12,771 | |||||||||
Unrealized appreciation on forward foreign currency contracts | 25,652 | 23,057 | |||||||||
Other assets | 36,060 | 31,317 | |||||||||
Total assets | 40,697,577 | 22,569,494 | |||||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Investment securities purchased | 8,183,649 | 32,934 | |||||||||
Investment advisory and administration fee | — | — | |||||||||
Fund shares redeemed | 34,477 | — | |||||||||
Custody and fund accounting fees | 12,999 | 18,295 | |||||||||
Distribution and service fees | 2,348 | 23 | |||||||||
Trustees' fees | 5,328 | 5,013 | |||||||||
Due to custodian | 11,580 | — | |||||||||
Variation margin on futures contracts | — | 24,582 | |||||||||
Due to broker for swap agreements | — | — | |||||||||
Accrued expenses | 50,697 | 49,201 | |||||||||
Options written, at value3 | 43,697 | 745 | |||||||||
Outstanding swap agreements, at value2 | 57,777 | 95,337 | |||||||||
Unrealized depreciation on forward foreign currency contracts | 7,815 | 86,317 | |||||||||
Total liabilities | 8,410,367 | 312,447 | |||||||||
Net assets | $ | 32,287,210 | $ | 22,257,047 |
1 The market value of securities loaned by UBS Core Plus Bond Fund as of December 31, 2013, was $377,481.
2 Net upfront payments received by UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund were $39,587, $60,743 and $6,077,021, respectively.
3 Premiums received by UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund were $68,759, $23,355 and $1,719,493, respectively.
54
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||
Assets: | |||||||
Investments, at cost: | |||||||
Unaffiliated issuers | $ | 84,079,720 | |||||
Affiliated issuers | 17,239,468 | ||||||
Foreign currency, at cost | 162,232 | ||||||
$ | 101,481,420 | ||||||
Investments, at value: | |||||||
Unaffiliated issuers1 | $ | 85,372,651 | |||||
Affiliated issuers | 18,648,947 | ||||||
Foreign currency, at value | 162,367 | ||||||
Cash | 38,141 | ||||||
Receivables: | |||||||
Investment securities sold | 380,694 | ||||||
Interest | 997,858 | ||||||
Fund shares sold | 54,994 | ||||||
Foreign tax reclaims | 6,650 | ||||||
Due from advisor | — | ||||||
Dividends | 39 | ||||||
Variation margin on futures contracts | — | ||||||
Variation margin on centrally cleared swap agreements | 643,535 | ||||||
Due from broker for futures contracts | 418,896 | ||||||
Cash collateral for futures contracts | 550,775 | ||||||
Cash collateral for swap agreements | 592,381 | ||||||
Outstanding swap agreements, at value2 | 2,153,923 | ||||||
Unrealized appreciation on forward foreign currency contracts | 293,761 | ||||||
Other assets | 46,931 | ||||||
Total assets | 110,362,543 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Investment securities purchased | 690,791 | ||||||
Investment advisory and administration fee | 24,101 | ||||||
Fund shares redeemed | 1,391,264 | ||||||
Custody and fund accounting fees | 22,514 | ||||||
Distribution and service fees | 18,317 | ||||||
Trustees' fees | 6,981 | ||||||
Due to custodian | — | ||||||
Variation margin on futures contracts | 48,365 | ||||||
Due to broker for swap agreements | 49,354 | ||||||
Accrued expenses | 87,416 | ||||||
Options written, at value3 | 2,444,603 | ||||||
Outstanding swap agreements, at value2 | 5,969,727 | ||||||
Unrealized depreciation on forward foreign currency contracts | 198,369 | ||||||
Total liabilities | 10,951,802 | ||||||
Net assets | $ | 99,410,741 |
See accompanying notes to financial statements.
55
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
December 31, 2013 (unaudited)
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 66,540,461 | $ | 25,071,836 | |||||||
Accumulated undistributed (distributions in excess of) net investment income | 312,299 | (340,435 | ) | ||||||||
Accumulated net realized loss | (34,833,520 | ) | (498,131 | ) | |||||||
Net unrealized appreciation (depreciation) | 267,970 | (1,976,223 | ) | ||||||||
Net assets | $ | 32,287,210 | $ | 22,257,047 | |||||||
Class A: | |||||||||||
Net assets | $ | 6,210,888 | $ | 81,021 | |||||||
Shares outstanding | 698,953 | 9,155 | |||||||||
Net asset value and redemption proceeds per share | $ | 8.89 | $ | 8.85 | |||||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 9.31 | $ | 9.27 | |||||||
Class C: | |||||||||||
Net assets | $ | 1,590,724 | $ | 12,895 | |||||||
Shares outstanding | 179,683 | 1,455 | |||||||||
Net asset value and offering price per share | $ | 8.85 | $ | 8.86 | |||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 8.78 | $ | 8.79 | |||||||
Class Y: | |||||||||||
Net assets | $ | 24,485,598 | $ | 22,163,131 | |||||||
Shares outstanding | 2,760,208 | 2,500,010 | |||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 8.87 | $ | 8.87 |
1 For Class A, the maximum sales charge is 4.50% for each Fund, Classes C and Y have no front-end sales charges. For Class A shares of each 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 C, the maximum contingent deferred sales charge is 0.75% for each Fund. Class Y has no contingent deferred sales charge. 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.
56
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||
Net assets consist of: | |||||||
Beneficial interest | $ | 100,206,082 | |||||
Accumulated undistributed (distributions in excess of) net investment income | 1,281,079 | ||||||
Accumulated net realized loss | (5,399,485 | ) | |||||
Net unrealized appreciation (depreciation) | 3,323,065 | ||||||
Net assets | $ | 99,410,741 | |||||
Class A: | |||||||
Net assets | $ | 57,027,554 | |||||
Shares outstanding | 5,876,493 | ||||||
Net asset value and redemption proceeds per share | $ | 9.70 | |||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 10.16 | |||||
Class C: | |||||||
Net assets | $ | 9,491,981 | |||||
Shares outstanding | 979,396 | ||||||
Net asset value and offering price per share | $ | 9.69 | |||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 9.62 | |||||
Class Y: | |||||||
Net assets | $ | 32,891,206 | |||||
Shares outstanding | 3,384,967 | ||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 9.72 |
See accompanying notes to financial statements.
57
The UBS Funds
Financial statements
Statement of operations
For the six months ended December 31, 2013 (unaudited)
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||
Investment income: | |||||||||||
Interest and other | $ | 410,334 | $ | 576,946 | |||||||
Affiliated income | 2,042 | 837 | |||||||||
Securities lending1 | 2,570 | — | |||||||||
Foreign tax withheld | — | — | |||||||||
Total income | 414,946 | 577,783 | |||||||||
Expenses: | |||||||||||
Advisory and administration | 96,230 | 95,334 | |||||||||
Distribution and service: | |||||||||||
Class A | 8,063 | 50 | |||||||||
Class C | 6,122 | 12 | |||||||||
Transfer agency and related service fees: | |||||||||||
Class A | 2,086 | 3,273 | |||||||||
Class C | 1,371 | 667 | |||||||||
Class Y | 3,362 | 631 | |||||||||
Custodian and fund accounting | 26,998 | 36,773 | |||||||||
Federal and state registration | 18,582 | 13,388 | |||||||||
Professional services | 47,452 | 51,529 | |||||||||
Shareholder reports | 5,444 | 1,007 | |||||||||
Trustees | 10,753 | 10,115 | |||||||||
Amortization of offering costs | — | 7,309 | |||||||||
Other | 5,039 | 6,019 | |||||||||
Total expenses | 231,502 | 226,107 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (152,049 | ) | (110,518 | ) | |||||||
Net expenses | 79,453 | 115,589 | |||||||||
Net investment income | 335,493 | 462,194 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | (207,111 | ) | (264,185 | ) | |||||||
Investments in affiliated issuers | 14,137 | — | |||||||||
Futures contracts | (142,790 | ) | (62,139 | ) | |||||||
Options written | 26,295 | 15,534 | |||||||||
Swap agreements | (36,334 | ) | 23,807 | ||||||||
Forward foreign currency contracts | (45,443 | ) | (160,131 | ) | |||||||
Foreign currency transactions | 899 | (16,755 | ) | ||||||||
Net realized loss | (390,347 | ) | (463,869 | ) | |||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||
Investments | 242,491 | (315,035 | ) | ||||||||
Futures contracts | 53,671 | 10,572 | |||||||||
Options written | 24,261 | 5,973 | |||||||||
Swap agreements | 156,667 | (22,367 | ) | ||||||||
Forward foreign currency contracts | 20,259 | (7,494 | ) | ||||||||
Translation of other assets and liabilities denominated in foreign currency | 1,259 | 5,960 | |||||||||
Change in net unrealized appreciation/depreciation | 498,608 | (322,391 | ) | ||||||||
Net realized and unrealized gain (loss) | 108,261 | (786,260 | ) | ||||||||
Net increase (decrease) in net assets resulting from operations | $ | 443,754 | $ | (324,066 | ) |
1 Includes affiliated income from UBS Private Money Market Fund LLC of $18 for UBS Core Plus Bond Fund.
58
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||
Investment income: | |||||||
Interest and other | $ | 1,861,464 | |||||
Affiliated income | 1,768 | ||||||
Securities lending1 | — | ||||||
Foreign tax withheld | (2,965 | ) | |||||
Total income | 1,860,267 | ||||||
Expenses: | |||||||
Advisory and administration | 370,507 | ||||||
Distribution and service: | |||||||
Class A | 72,684 | ||||||
Class C | 35,235 | ||||||
Transfer agency and related service fees: | |||||||
Class A | 12,280 | ||||||
Class C | 2,141 | ||||||
Class Y | 63 | ||||||
Custodian and fund accounting | 42,676 | ||||||
Federal and state registration | 18,605 | ||||||
Professional services | 62,175 | ||||||
Shareholder reports | 29,043 | ||||||
Trustees | 14,493 | ||||||
Amortization of offering costs | — | ||||||
Other | 9,543 | ||||||
Total expenses | 669,445 | ||||||
Fee waivers and/or expense reimbursements by Advisor | (203,778 | ) | |||||
Net expenses | 465,667 | ||||||
Net investment income | 1,394,600 | ||||||
Net realized gain (loss) on: | |||||||
Investments in unaffiliated issuers | (1,449,368 | ) | |||||
Investments in affiliated issuers | — | ||||||
Futures contracts | 570,858 | ||||||
Options written | 976,865 | ||||||
Swap agreements | (294,931 | ) | |||||
Forward foreign currency contracts | (1,229,767 | ) | |||||
Foreign currency transactions | 42,258 | ||||||
Net realized loss | (1,384,085 | ) | |||||
Change in net unrealized appreciation/depreciation on: | |||||||
Investments | 757,898 | ||||||
Futures contracts | 136,832 | ||||||
Options written | (598,091 | ) | |||||
Swap agreements | (1,302,748 | ) | |||||
Forward foreign currency contracts | 383,838 | ||||||
Translation of other assets and liabilities denominated in foreign currency | 4,168 | ||||||
Change in net unrealized appreciation/depreciation | (618,103 | ) | |||||
Net realized and unrealized gain (loss) | (2,002,188 | ) | |||||
Net increase (decrease) in net assets resulting from operations | $ | (607,588 | ) |
See accompanying notes to financial statements.
59
The UBS Funds
Financial statements
Statement of changes in net assets
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | Six months ended December 31, 2013 (unaudited) | Period ended June 30, 20131 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income | $ | 335,493 | $ | 763,581 | $ | 462,194 | $ | 1,171,167 | |||||||||||
Net realized gain (loss) | (390,347 | ) | 525,939 | (463,869 | ) | 312,880 | |||||||||||||
Change in net unrealized appreciation/depreciation | 498,608 | (1,068,323 | ) | (322,391 | ) | (1,653,832 | ) | ||||||||||||
Net increase (decrease) in net assets from operations | 443,754 | 221,197 | (324,066 | ) | (169,785 | ) | |||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (96,358 | ) | (151,841 | ) | (1,728 | ) | (576 | ) | |||||||||||
Return of capital | — | — | — | — | |||||||||||||||
Net realized gain | — | — | — | (1 | ) | ||||||||||||||
Total Class A dividends and distributions | (96,358 | ) | (151,841 | ) | (1,728 | ) | (577 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | (20,563 | ) | (40,360 | ) | (217 | ) | (4 | ) | |||||||||||
Return of capital | — | — | — | — | |||||||||||||||
Net realized gain | — | — | — | (1 | ) | ||||||||||||||
Total Class C dividends and distributions | (20,563 | ) | (40,360 | ) | (217 | ) | (5 | ) | |||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (411,891 | ) | (845,766 | ) | (766,003 | ) | (1,387,506 | ) | |||||||||||
Return of capital | — | — | — | — | |||||||||||||||
Net realized gain | — | — | — | (193,501 | ) | ||||||||||||||
Total Class Y dividends and distributions | (411,891 | ) | (845,766 | ) | (766,003 | ) | (1,581,007 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (528,812 | ) | (1,037,967 | ) | (767,948 | ) | (1,581,589 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 469,561 | 6,067,870 | 60,915 | 25,037,036 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 465,064 | 962,122 | 1,939 | 572 | |||||||||||||||
Cost of shares redeemed | (3,663,182 | ) | (14,408,311 | ) | (27 | ) | — | ||||||||||||
Redemption fees | 1,090 | 631 | — | — | |||||||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (2,727,467 | ) | (7,377,688 | ) | 62,827 | 25,037,608 | |||||||||||||
Increase (decrease) in net assets | (2,812,525 | ) | (8,194,458 | ) | (1,029,187 | ) | 23,286,234 | ||||||||||||
Net assets, beginning of period | 35,099,735 | 43,294,193 | 23,286,234 | — | |||||||||||||||
Net assets, end of period | $ | 32,287,210 | $ | 35,099,735 | $ | 22,257,047 | $ | 23,286,234 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | 312,299 | $ | 505,618 | $ | (340,435 | ) | $ | (34,681 | ) |
1 For the period July 23, 2012 (commencement of operations) to June 30, 2013.
60
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||
Operations: | |||||||||||
Net investment income | $ | 1,394,600 | $ | 2,435,713 | |||||||
Net realized gain (loss) | (1,384,085 | ) | (3,031,625 | ) | |||||||
Change in net unrealized appreciation/depreciation | (618,103 | ) | 3,800,155 | ||||||||
Net increase (decrease) in net assets from operations | (607,588 | ) | 3,204,243 | ||||||||
Dividends and distributions to shareholders by class: | |||||||||||
Class A: | |||||||||||
Net investment income | (178,954 | ) | (772,176 | ) | |||||||
Return of capital | — | (345,784 | ) | ||||||||
Net realized gain | — | — | |||||||||
Total Class A dividends and distributions | (178,954 | ) | (1,117,960 | ) | |||||||
Class C: | |||||||||||
Net investment income | (5,017 | ) | (113,518 | ) | |||||||
Return of capital | — | (63,792 | ) | ||||||||
Net realized gain | — | — | |||||||||
Total Class C dividends and distributions | (5,017 | ) | (177,310 | ) | |||||||
Class Y: | |||||||||||
Net investment income | (143,736 | ) | (1,074,527 | ) | |||||||
Return of capital | — | (271,348 | ) | ||||||||
Net realized gain | — | — | |||||||||
Total Class Y dividends and distributions | (143,736 | ) | (1,345,875 | ) | |||||||
Decrease in net assets from dividends and distributions | (327,707 | ) | (2,641,145 | ) | |||||||
Beneficial interest transactions: | |||||||||||
Proceeds from shares sold | 31,170,914 | 47,534,097 | |||||||||
Shares issued on reinvestment of dividends and distributions | 185,172 | 1,281,575 | |||||||||
Cost of shares redeemed | (23,105,385 | ) | (27,919,018 | ) | |||||||
Redemption fees | 35,113 | 1,524 | |||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | 8,285,814 | 20,898,178 | |||||||||
Increase (decrease) in net assets | 7,350,519 | 21,461,276 | |||||||||
Net assets, beginning of period | 92,060,222 | 70,598,946 | |||||||||
Net assets, end of period | $ | 99,410,741 | $ | 92,060,222 | |||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | 1,281,079 | $ | 214,186 |
See accompanying notes to financial statements.
61
UBS Core Plus Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 8.91 | $ | 9.13 | $ | 8.70 | $ | 8.69 | $ | 8.17 | $ | 9.13 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.08 | 0.16 | 0.20 | 0.24 | 0.28 | 0.23 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.04 | (0.15 | ) | 0.46 | 0.18 | 0.73 | (0.56 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.12 | 0.01 | 0.66 | 0.42 | 1.01 | (0.33 | ) | ||||||||||||||||||||
Redemption fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | 0.01 | |||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.23 | ) | (0.23 | ) | (0.41 | ) | (0.49 | ) | (0.64 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.89 | $ | 8.91 | $ | 9.13 | $ | 8.70 | $ | 8.69 | $ | 8.17 | |||||||||||||||
Total investment return2 | 1.31 | % | 0.06 | % | 7.64 | % | 5.00 | % | 12.72 | % | (3.29 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.53 | %4 | 1.58 | % | 1.45 | % | 1.45 | % | 1.39 | % | 1.27 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.64 | %4 | 0.64 | % | 0.64 | % | 0.64 | % | 0.64 | % | 0.85 | % | |||||||||||||||
Net investment income | 1.84 | %4 | 1.77 | % | 2.18 | % | 2.76 | % | 3.30 | % | 2.71 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 6,211 | $ | 6,951 | $ | 7,606 | $ | 5,996 | $ | 8,956 | $ | 9,128 | |||||||||||||||
Portfolio turnover rate | 223 | % | 374 | % | 509 | % | 400 | % | 283 | % | 247 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 8.89 | $ | 9.11 | $ | 8.69 | $ | 8.68 | $ | 8.16 | $ | 9.13 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.09 | 0.19 | 0.22 | 0.26 | 0.30 | 0.24 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.04 | (0.16 | ) | 0.45 | 0.19 | 0.74 | (0.55 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.13 | 0.03 | 0.67 | 0.45 | 1.04 | (0.31 | ) | ||||||||||||||||||||
Redemption fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | — | |||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.25 | ) | (0.25 | ) | (0.44 | ) | (0.52 | ) | (0.66 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.87 | $ | 8.89 | $ | 9.11 | $ | 8.69 | $ | 8.68 | $ | 8.16 | |||||||||||||||
Total investment return2 | 1.44 | % | 0.31 | % | 7.80 | % | 5.26 | % | 13.02 | % | (3.15 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.29 | %4 | 1.20 | % | 1.12 | % | 1.12 | % | 1.09 | % | 0.96 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.39 | %4 | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.60 | % | |||||||||||||||
Net investment income | 2.09 | %4 | 2.04 | % | 2.44 | % | 3.02 | % | 3.53 | % | 2.88 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 24,486 | $ | 26,425 | $ | 33,501 | $ | 31,047 | $ | 34,659 | $ | 55,149 | |||||||||||||||
Portfolio turnover rate | 223 | % | 374 | % | 509 | % | 400 | % | 283 | % | 247 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
62
UBS Core Plus Bond Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 8.88 | $ | 9.10 | $ | 8.68 | $ | 8.66 | $ | 8.15 | $ | 9.12 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.06 | 0.12 | 0.15 | 0.20 | 0.24 | 0.19 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.02 | (0.16 | ) | 0.45 | 0.19 | 0.72 | (0.57 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.08 | (0.04 | ) | 0.60 | 0.39 | 0.96 | (0.38 | ) | |||||||||||||||||||
Redemption fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | 0.01 | |||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.18 | ) | (0.18 | ) | (0.37 | ) | (0.45 | ) | (0.60 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.85 | $ | 8.88 | $ | 9.10 | $ | 8.68 | $ | 8.66 | $ | 8.15 | |||||||||||||||
Total investment return2 | 1.05 | % | (0.55 | )% | 7.01 | % | 4.60 | % | 12.06 | % | (3.76 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.18 | %4 | 2.02 | % | 1.91 | % | 1.92 | % | 1.86 | % | 1.76 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.14 | %4 | 1.14 | % | 1.14 | % | 1.14 | % | 1.14 | % | 1.35 | % | |||||||||||||||
Net investment income | 1.34 | %4 | 1.29 | % | 1.70 | % | 2.27 | % | 2.80 | % | 2.35 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 1,591 | $ | 1,724 | $ | 2,187 | $ | 2,175 | $ | 2,628 | $ | 2,574 | |||||||||||||||
Portfolio turnover rate | 223 | % | 374 | % | 509 | % | 400 | % | 283 | % | 247 | % |
3 Amount represents less than $0.005 per share.
4 Annualized.
See accompanying notes to financial statements.
63
UBS Emerging Markets Debt 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 | ||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | For the period ended June 30, 20133 | Six months ended December 31, 2013 (unaudited) | For the period ended June 30, 20133 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.29 | $ | 10.00 | $ | 9.31 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.17 | 0.39 | 0.16 | 0.27 | |||||||||||||||
Net realized and unrealized (loss) | (0.31 | ) | (0.52 | ) | (0.37 | ) | (0.52 | ) | |||||||||||
Total loss from investment operations | (0.14 | ) | (0.13 | ) | (0.21 | ) | (0.25 | ) | |||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | (0.30 | ) | (0.50 | ) | (0.24 | ) | (0.36 | ) | |||||||||||
From net realized gains | — | (0.08 | ) | — | (0.08 | ) | |||||||||||||
Total dividends/distributions | (0.30 | ) | (0.58 | ) | (0.24 | ) | (0.44 | ) | |||||||||||
Net asset value, end of period | $ | 8.85 | $ | 9.29 | $ | 8.86 | $ | 9.31 | |||||||||||
Total investment return2 | (1.59 | )% | (1.78 | )% | (2.33 | )% | (2.85 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 18.62 | %4 | 36.21 | %4 | 45.37 | %4 | 2,391.59 | %4 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.25 | %4 | 1.25 | %4 | 1.75 | %4 | 1.75 | %4 | |||||||||||
Net investment income | 3.80 | %4 | 4.80 | %4 | 3.43 | %4 | 2.78 | %4 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 81 | $ | 34 | $ | 13 | $ | —5 | |||||||||||
Portfolio turnover rate | 11 | % | 41 | % | 11 | % | 41 | % |
Class Y | |||||||||||
Six months ended December 31, 2013 (unaudited) | For the period ended June 30, 20133 | ||||||||||
Net asset value, beginning of period | $ | 9.30 | $ | 10.00 | |||||||
Income (loss) from investment operations: | |||||||||||
Net investment income1 | 0.18 | 0.47 | |||||||||
Net realized and unrealized (loss) | (0.30 | ) | (0.54 | ) | |||||||
Total loss from investment operations | (0.12 | ) | (0.07 | ) | |||||||
Less dividends/distributions: | |||||||||||
From net investment income | (0.31 | ) | (0.55 | ) | |||||||
From net realized gains | — | (0.08 | ) | ||||||||
Total dividends/distributions | (0.31 | ) | (0.63 | ) | |||||||
Net asset value, end of period | $ | 8.87 | $ | 9.30 | |||||||
Total investment return2 | (1.36 | )% | (1.16 | )% | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.92 | %4 | 2.10 | %4 | |||||||
Expenses after fee waivers and/or expense reimbursement | 1.00 | %4 | 1.00 | %4 | |||||||
Net investment income | 4.00 | %4 | 4.83 | %4 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 22,163 | $ | 23,253 | |||||||
Portfolio turnover rate | 11 | % | 41 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 For the period of July 23, 2012 (commencement of operations) through June 30, 2013.
4 Annualized.
5 Amount rounds to less than $1,000.
See accompanying notes to financial statements.
64
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65
UBS Fixed Income Opportunities Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | For the period ended | |||||||||||||||||
(unaudited) | 2013 | 2012 | June 30, 20113 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.78 | $ | 9.66 | $ | 9.93 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.13 | 0.28 | 0.37 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.18 | ) | 0.13 | (0.05 | ) | (0.15 | ) | ||||||||||||
Total income (loss) from investment operations | (0.05 | ) | 0.41 | 0.32 | 0.06 | ||||||||||||||
Redemption fees | 0.004 | 0.004 | 0.004 | 0.02 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | (0.03 | ) | (0.22 | ) | (0.34 | ) | (0.05 | ) | |||||||||||
Return of capital | — | (0.07 | ) | — | (0.10 | ) | |||||||||||||
From net realized gains | — | — | (0.25 | ) | — | ||||||||||||||
Total dividends/distributions | (0.03 | ) | (0.29 | ) | (0.59 | ) | (0.15 | ) | |||||||||||
Net asset value, end of period | $ | 9.70 | $ | 9.78 | $ | 9.66 | $ | 9.93 | |||||||||||
Total investment return2 | (0.42 | )% | 4.15 | % | 3.33 | % | 0.76 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.36 | %5 | 1.42 | % | 1.42 | % | 1.39 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.95 | %5 | 0.95 | % | 0.95 | % | 0.95 | %5 | |||||||||||
Net investment income | 2.69 | %5 | 2.84 | % | 3.80 | % | 3.53 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 57,028 | $ | 47,140 | $ | 37,935 | $ | 67,314 | |||||||||||
Portfolio turnover rate | 15 | % | 60 | % | 63 | % | 48 | % |
Class Y | |||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | For the period ended | |||||||||||||||||
(unaudited) | 2013 | 2012 | June 30, 20113 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.79 | $ | 9.67 | $ | 9.94 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.14 | 0.30 | 0.40 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.17 | ) | 0.13 | (0.05 | ) | (0.13 | ) | ||||||||||||
Total income (loss) from investment operations | (0.03 | ) | 0.43 | 0.35 | 0.10 | ||||||||||||||
Redemption fees | 0.004 | 0.004 | 0.004 | — | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | (0.04 | ) | (0.24 | ) | (0.37 | ) | (0.06 | ) | |||||||||||
Return of capital | — | (0.07 | ) | — | (0.10 | ) | |||||||||||||
From net realized gains | — | — | (0.25 | ) | — | ||||||||||||||
Total dividends/distributions | (0.04 | ) | (0.31 | ) | (0.62 | ) | (0.16 | ) | |||||||||||
Net asset value, end of period | $ | 9.72 | $ | 9.79 | $ | 9.67 | $ | 9.94 | |||||||||||
Total investment return2 | (0.30 | )% | 4.50 | % | 3.60 | % | 0.97 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.07 | %5 | 1.13 | % | 1.14 | % | 1.29 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.70 | %5 | 0.70 | % | 0.70 | % | 0.70 | %5 | |||||||||||
Net investment income | 2.94 | %5 | 3.06 | % | 4.06 | % | 3.91 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 32,891 | $ | 36,112 | $ | 26,145 | $ | 25,523 | |||||||||||
Portfolio turnover rate | 15 | % | 60 | % | 63 | % | 48 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
66
UBS Fixed Income Opportunities Fund
Financial highlights
Class C | |||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | For the period ended | |||||||||||||||||
(unaudited) | 2013 | 2012 | June 30, 20113 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.76 | $ | 9.65 | $ | 9.92 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.11 | 0.23 | 0.32 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.17 | ) | 0.12 | (0.05 | ) | (0.14 | ) | ||||||||||||
Total income (loss) from investment operations | (0.06 | ) | 0.35 | 0.27 | 0.04 | ||||||||||||||
Redemption fees | 0.004 | 0.004 | 0.004 | 0.004 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | (0.01 | ) | (0.17 | ) | (0.29 | ) | (0.02 | ) | |||||||||||
Return of capital | — | (0.07 | ) | — | (0.10 | ) | |||||||||||||
From net realized gains | — | — | (0.25 | ) | — | ||||||||||||||
Total dividends/distributions | (0.01 | ) | (0.24 | ) | (0.54 | ) | (0.12 | ) | |||||||||||
Net asset value, end of period | $ | 9.69 | $ | 9.76 | $ | 9.65 | $ | 9.92 | |||||||||||
Total investment return2 | (0.66 | )% | 3.65 | % | 2.82 | % | 0.43 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.87 | %5 | 1.92 | % | 1.93 | % | 1.94 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.45 | %5 | 1.45 | % | 1.45 | % | 1.45 | %5 | |||||||||||
Net investment income | 2.19 | %5 | 2.34 | % | 3.31 | % | 3.06 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 9,492 | $ | 8,808 | $ | 6,519 | $ | 8,116 | |||||||||||
Portfolio turnover rate | 15 | % | 60 | % | 63 | % | 48 | % |
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.
67
The UBS Funds
Notes to financial statements
1. Organization and significant accounting policies
The UBS Funds (the "Trust") is registered with the US 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 13 Funds available for investment, each having its own investment objectives and policies. The following three funds are covered in this report: UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund, and UBS Fixed Income Opportunities Fund (each a "Fund", and collectively, the "Funds").
Each of the Funds covered by this report is diversified, except for UBS Emerging Markets Debt Fund which is non-diversified. The Funds currently offer Class A, Class C and Class Y 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 distribution and service charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its distribution and/or service plan, if any. Class Y shares have no distribution or service 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 ("US 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 US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US 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 on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share will be calculated as of the time trading was halted.
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 investments 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 "evaluation" systems that derive values based on comparable investments. An evaluation 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 investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings. Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc.
68
The UBS Funds
Notes to financial statements
("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. Investments 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 investments are traded on more than one exchange, the investments 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 investment, that investment 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 an investment'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 investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments 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 investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments 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 investments 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 an investment is valued at "fair value," that value is likely to be different from the last quoted market price for the investment. 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. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
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 are 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.
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.
69
The UBS Funds
Notes to financial statements
The Board has delegated to the UBS Global AM Global Valuation Committee ("GVC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, as discussed below, investments of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment'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 investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US 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 Funds' 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.
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 below as well as in the Portfolio of investments. Swap agreements, forward foreign currency contracts, swaptions and options written entered into by a Fund may contain credit-risk related contingent features that could be triggered subject to certain
70
The UBS Funds
Notes to financial statements
circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of December 31, 2013 is reflected in the Statement of assets and liabilities. If the applicable credit-risk related contingent features were triggered as of December 31, 2013, the Fund would be required to post additional collateral or may be required to terminate the contracts and settle any amounts outstanding. 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). The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the period ended December 31, 2013, except for forward foreign currency contracts for UBS Emerging Markets Debt Fund for which the average volume during the year ended was greater than at year end.
Disclosure of derivatives by underlying risk as of and for the period ended December 31, 2013 is as follows:
Asset derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | 25,652 | $ | 25,652 | |||||||||||
Futures contracts2 | 44,229 | — | — | 44,229 | |||||||||||||||
Options purchased1 | 42,975 | — | — | 42,975 | |||||||||||||||
Swap agreements1,2 | 139,748 | 6,094 | — | 145,842 | |||||||||||||||
Total value | $ | 226,952 | $ | 6,094 | $ | 25,652 | $ | 258,698 |
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
Liability derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (7,815 | ) | $ | (7,815 | ) | |||||||||
Futures contracts2 | (22,896 | ) | — | — | (22,896 | ) | |||||||||||||
Options written1 | (40,344 | ) | (3,353 | ) | — | (43,697 | ) | ||||||||||||
Swap agreements1 | (19,176 | ) | (38,601 | ) | — | (57,777 | ) | ||||||||||||
Total value | $ | (82,416 | ) | $ | (41,954 | ) | $ | (7,815 | ) | $ | (132,185 | ) |
1 Statement of assets and liabilities location: Options written, at value, outstanding swap agreements, at value and 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 Variation margin on futures contracts.
71
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (45,443 | ) | $ | (45,443 | ) | |||||||||
Futures contracts | (142,790 | ) | — | — | (142,790 | ) | |||||||||||||
Options purchased2 | 24,520 | — | — | 24,520 | |||||||||||||||
Options written | 8,395 | 17,900 | — | 26,295 | |||||||||||||||
Swap agreements | (11,106 | ) | (25,228 | ) | — | (36,334 | ) | ||||||||||||
Total net realized loss | $ | (120,981 | ) | $ | (7,328 | ) | $ | (45,443 | ) | $ | (173,752 | ) | |||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | 20,259 | $ | 20,259 | |||||||||||
Futures contracts | 53,671 | — | — | 53,671 | |||||||||||||||
Options purchased2 | (27,551 | ) | — | — | (27,551 | ) | |||||||||||||
Options written | 13,614 | 10,647 | — | 24,261 | |||||||||||||||
Swap agreements | 121,023 | 35,644 | — | 156,667 | |||||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 160,757 | $ | 46,291 | $ | 20,259 | $ | 227,307 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Foreign exchange risk | Total | |||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | 23,057 | $ | 23,057 | |||||||||||||
Futures contracts2 | 11,017 | — | 11,017 | ||||||||||||||||
Options purchased1 | — | 886 | 886 | ||||||||||||||||
Swap agreements1 | — | 12,771 | 12,771 | ||||||||||||||||
Total value | $ | 11,017 | $ | 36,714 | $ | 47,731 |
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, outstanding swap agreements, at value and 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 Variation margin on futures contracts.
Liability derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (86,317 | ) | $ | (86,317 | ) | |||||||||
Futures contracts2 | (35,599 | ) | — | — | (35,599 | ) | |||||||||||||
Options written1 | — | — | (745 | ) | (745 | ) | |||||||||||||
Swap agreements1 | (40,704 | ) | (54,633 | ) | — | (95,337 | ) | ||||||||||||
Total value | $ | (76,303 | ) | $ | (54,633 | ) | $ | (87,062 | ) | $ | (217,998 | ) |
1 Statement of assets and liabilities location: Options written, at value, outstanding swap agreements, at value and 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 Variation margin on futures contracts.
72
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (160,131 | ) | $ | (160,131 | ) | |||||||||
Futures contracts | (62,139 | ) | — | — | (62,139 | ) | |||||||||||||
Options purchased2 | — | — | (49,708 | ) | (49,708 | ) | |||||||||||||
Options written | — | — | 15,534 | 15,534 | |||||||||||||||
Swap agreements | 1,276 | 23,340 | (809 | ) | 23,807 | ||||||||||||||
Total net realized gain (loss) | $ | (60,863 | ) | $ | 23,340 | $ | (195,114 | ) | $ | (232,637 | ) | ||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (7,494 | ) | $ | (7,494 | ) | |||||||||
Futures contracts | 10,572 | — | — | 10,572 | |||||||||||||||
Options purchased2 | — | — | 12,823 | 12,823 | |||||||||||||||
Options written | — | — | 5,973 | 5,973 | |||||||||||||||
Swap agreements | (12,767 | ) | (9,329 | ) | (271 | ) | (22,367 | ) | |||||||||||
Total change in net unrealized appreciation/depreciation | $ | (2,195 | ) | $ | (9,329 | ) | $ | 11,031 | $ | (493 | ) |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | 293,761 | $ | 293,761 | |||||||||||
Futures contracts2 | 251,498 | — | — | 251,498 | |||||||||||||||
Options purchased1 | 2,987,996 | — | — | 2,987,996 | |||||||||||||||
Swap agreements1,2 | 2,353,501 | 214,039 | 129,194 | 2,696,734 | |||||||||||||||
Total value | $ | 5,592,995 | $ | 214,039 | $ | 422,955 | $ | 6,229,989 |
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
73
The UBS Funds
Notes to financial statements
Liability derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (198,369 | ) | $ | (198,369 | ) | |||||||||
Futures contracts2 | (300,614 | ) | — | — | (300,614 | ) | |||||||||||||
Options written1 | (2,444,603 | ) | — | — | (2,444,603 | ) | |||||||||||||
Swap agreements1,2 | (3,616,574 | ) | (4,516,136 | ) | (99,593 | ) | (8,232,303 | ) | |||||||||||
Total value | $ | (6,361,791 | ) | $ | (4,516,136 | ) | $ | (297,962 | ) | $ | (11,175,889 | ) |
1 Statement of assets and liabilities location: Options written, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (1,229,767 | ) | $ | (1,229,767 | ) | |||||||||
Futures contracts | 570,858 | — | — | 570,858 | |||||||||||||||
Options purchased2 | (1,743,143 | ) | — | — | (1,743,143 | ) | |||||||||||||
Options written | 679,538 | 297,327 | — | 976,865 | |||||||||||||||
Swap agreements | 30,787 | (390,974 | ) | 65,256 | (294,931 | ) | |||||||||||||
Total net realized loss | $ | (461,960 | ) | $ | (93,647 | ) | $ | (1,164,511 | ) | $ | (1,720,118 | ) | |||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | 383,838 | $ | 383,838 | |||||||||||
Futures contracts | 136,832 | — | — | 136,832 | |||||||||||||||
Options purchased2 | (786,912 | ) | — | — | (786,912 | ) | |||||||||||||
Options written | (544,949 | ) | (53,142 | ) | — | (598,091 | ) | ||||||||||||
Swap agreements | 1,294,615 | (2,630,319 | ) | 32,956 | (1,302,748 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 99,586 | $ | (2,683,461 | ) | $ | 416,794 | $ | (2,167,081 | ) |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
74
The UBS Funds
Notes to financial statements
Offsetting of financial and derivative assets and liabilities
In January 2013, Accounting Standards Update 2013-01 ("ASU 2013-01"), "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities", replaced Accounting Standards Update 2011-11 ("ASU 2011-11"), "Disclosures about Offsetting Assets and Liabilities". ASU 2013-01 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. ASU 2011-11 was intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. ASU 2013-01 limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase and reverse repurchase agreements, and securities lending and borrowing transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement.
The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Included within the below tables are forward foreign currency contracts, foreign exchange options, non-centrally cleared swap agreements and swaptions, as applicable.
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Core Plus Bond Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty | |||||||||||||||||||
CITI | $ | 6,094 | $ | (6,094 | ) | $ | — | $ | — | ||||||||||
JPMCB | 25,652 | (25,652 | ) | — | — | ||||||||||||||
MLI | 139,173 | (3,353 | ) | — | 135,820 | ||||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | 170,919 | $ | (35,099 | ) | $ | — | $ | 135,820 |
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
Counterparty | statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | |||||||||||||||
CITI | $ | (10,872 | ) | $ | 6,094 | $ | — | $ | (4,778 | ) | |||||||||
CSI | (5,612 | ) | — | — | (5,612 | ) | |||||||||||||
JPMCB | (35,957 | ) | 25,652 | — | (10,305 | ) | |||||||||||||
MLI | (3,353 | ) | 3,353 | — | — | ||||||||||||||
MSC | (13,082 | ) | — | — | (13,082 | ) | |||||||||||||
RBS | (69 | ) | — | — | (69 | ) | |||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | (68,945 | ) | $ | 35,099 | $ | — | $ | (33,846 | ) |
75
The UBS Funds
Notes to financial statements
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Emerging Markets Debt Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty | |||||||||||||||||||
BB | $ | 18,798 | $ | (18,798 | ) | $ | — | $ | — | ||||||||||
CSI | 4,003 | (4,003 | ) | — | — | ||||||||||||||
DB | 7,415 | (7,415 | ) | — | — | ||||||||||||||
GSI | 6,392 | (6,392 | ) | — | — | ||||||||||||||
MLI | 106 | (106 | ) | — | — | ||||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | 36,714 | $ | (36,714 | ) | $ | — | $ | — |
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
Counterparty | statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | |||||||||||||||
BB | $ | (54,255 | ) | $ | 18,798 | $ | — | $ | (35,457 | ) | |||||||||
CSI | (5,730 | ) | 4,003 | — | (1,727 | ) | |||||||||||||
DB | (69,866 | ) | 7,415 | — | (62,451 | ) | |||||||||||||
GSI | (40,801 | ) | 6,392 | — | (34,409 | ) | |||||||||||||
MLI | (5,625 | ) | 106 | — | (5,519 | ) | |||||||||||||
RBS | (6,122 | ) | — | — | (6,122 | ) | |||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | (182,399 | ) | $ | 36,714 | $ | — | $ | (145,685 | ) |
76
The UBS Funds
Notes to financial statements
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Fixed Income Opportunities Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty | |||||||||||||||||||
BB | $ | 1,811,838 | $ | (1,811,838 | ) | $ | — | $ | — | ||||||||||
CITI | 7,485 | (7,485 | ) | — | — | ||||||||||||||
CSI | 369,227 | (229,645 | ) | — | 139,582 | ||||||||||||||
DB | 208,964 | (208,964 | ) | — | — | ||||||||||||||
JPMCB | 1,442,752 | (916,641 | ) | — | 526,111 | ||||||||||||||
MLI | 670,301 | (670,301 | ) | — | — | ||||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | 4,510,567 | $ | (3,844,874 | ) | $ | — | $ | 665,693 |
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
Counterparty | statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | |||||||||||||||
BB | $ | (1,899,069 | ) | $ | 1,811,838 | $ | — | $ | (87,231 | ) | |||||||||
CITI | (1,446,798 | ) | 7,485 | — | (1,439,313 | ) | |||||||||||||
CSI | (229,645 | ) | 229,645 | — | — | ||||||||||||||
DB | (1,245,678 | ) | 208,964 | — | (1,036,714 | ) | |||||||||||||
JPMCB | (916,641 | ) | 916,641 | — | — | ||||||||||||||
MLI | (1,576,176 | ) | 670,301 | — | (905,875 | ) | |||||||||||||
MSCI | (898,773 | ) | — | — | (898,773 | ) | |||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | (8,212,780 | ) | $ | 3,844,874 | $ | — | $ | (4,367,906 | ) |
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 expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Portfolio of investments footnotes.
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. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
77
The UBS Funds
Notes to financial statements
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 realized 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.
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.
78
The UBS Funds
Notes to financial statements
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin". Subsequent payments, known as "variation margin", are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized gain or loss on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
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 to receive or pay amounts based on changes in currency exchange rates in order 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.
Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation or depreciation. Total return swap agreements are subject to general market risk, liquidity risk, counterparty risk, interest risk, credit risk and the risk that there may be unfavorable changes in the underlying investments or instruments.
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
79
The UBS Funds
Notes to financial statements
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 retain 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 December 31, 2013 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.
Certain clearinghouses currently offer clearing for limited types of derivatives transactions, such as interest and credit derivatives. In a cleared derivative transaction, a Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund's exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Only a limited number of transactions are currently eligible for clearing. Centrally cleared swaps, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
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
80
The UBS Funds
Notes to financial statements
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 on 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 a 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. Dividends and distributions: It is each Fund's policy to distribute its respective net investment income monthly except UBS Fixed Income Opportunities Fund which will distribute its 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 US 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.
L. 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
81
The UBS Funds
Notes to financial statements
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.
Investments in bonds with ratings of BB (Standard & Poor's Ratings Group) or Ba (Moody's Investors Service, Inc.) or below (commonly referred to as "high yield" bonds), or deemed of equivalent quality, have an increased risk of defaulting or otherwise being unable to honor a financial obligation. These securities are considered to be predominately speculative with respect to an issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. Lower-quality bonds are more likely to be subject to an issuer's default or downgrade than investment grade (higher-quality) bonds.
M. 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 Asset Management (US) Inc. ("UBS Global AM (US)"). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the period ended December 31, 2013, redemption fees for each Fund amounted to less than $0.01 per share and less than 0.01% of average 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 Core Plus Bond Fund | 0.500 | % | 0.475 | % | 0.450 | % | 0.425 | % | 0.400 | % | |||||||||||||
UBS Emerging Markets Debt Fund | 0.750 | 0.750 | 0.750 | 0.750 | 0.750 | ||||||||||||||||||
UBS Fixed Income Opportunities Fund | 0.650 | 0.650 | 0.650 | 0.650 | 0.650 |
For UBS Core Plus 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 class of shares as indicated in the following table. For UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short) do not exceed the expense limit of each class of
82
The UBS Funds
Notes to financial statements
shares as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed, for the period ended December 31, 2013, were as follows:
Fund | Class A expense cap | Class C expense cap | Class Y expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | |||||||||||||||||||||
UBS Core Plus Bond Fund | 0.64 | % | 1.14 | % | 0.39 | % | $ | (12,025 | ) | $ | 83,678 | $ | 152,049 | ||||||||||||||
UBS Emerging Markets Debt Fund | 1.25 | 1.75 | 1.00 | (5,368 | ) | 86,667 | 110,518 | ||||||||||||||||||||
UBS Fixed Income Opportunities Fund | 0.95 | 1.45 | 0.70 | 17,724 | 332,179 | 203,778 |
Each Fund will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or 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 or reimbursed for the period ended December 31, 2013 are subject to repayment through June 30, 2016. At December 31, 2013, 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, 2014 | Expires June 30, 2015 | Expires June 30, 2016 | Expires June 30, 2017 | ||||||||||||||||||
UBS Core Plus Bond Fund—Class A | $ | 222,275 | $ | 70,796 | $ | 63,846 | $ | 58,776 | $ | 28,857 | |||||||||||||
UBS Core Plus Bond Fund—Class C | 61,773 | 18,459 | 17,126 | 17,658 | 8,530 | ||||||||||||||||||
UBS Core Plus Bond Fund—Class Y | 849,799 | 243,234 | 241,662 | 250,241 | 114,662 | ||||||||||||||||||
UBS Emerging Markets Debt Fund—Class A | 7,983 | — | — | 4,525 | 3,458 | ||||||||||||||||||
UBS Emerging Markets Debt Fund—Class C | 2,997 | — | — | 2,316 | 681 | ||||||||||||||||||
UBS Emerging Markets Debt Fund—Class Y | 372,061 | — | — | 265,682 | 106,379 | ||||||||||||||||||
UBS Fixed Income Opportunities Fund—Class A | 633,654 | 99,909 | 242,230 | 171,521 | 119,994 | ||||||||||||||||||
UBS Fixed Income Opportunities Fund—Class C | 102,509 | 15,057 | 35,078 | 32,820 | 19,554 | ||||||||||||||||||
UBS Fixed Income Opportunities Fund—Class Y | 438,008 | 89,544 | 112,949 | 171,285 | 64,230 |
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 period ended December 31, 2013, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Core Plus Bond Fund | $ | 2,064 | $ | 12,552 | |||||||
UBS Emerging Markets Debt Fund | 1,541 | 8,667 | |||||||||
UBS Fixed Income Opportunities Fund | 6,377 | 38,328 |
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the period ended December 31, 2013 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 income in the Statement of operations. Amounts relating to those investments at
83
The UBS Funds
Notes to financial statements
December 31, 2013 and for the period then 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 income in the Statement of operations. Amounts relating to those investments at December 31, 2013 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
3. Distribution and service plans
UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A 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 C | |||||||||
UBS Core Plus Bond Fund | 0.25 | % | 0.75 | % | |||||||
UBS Emerging Markets Debt Fund | 0.25 | 0.75 | |||||||||
UBS Fixed Income Opportunities Fund | 0.25 | 0.75 |
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 and Class C. At December 31, 2013, certain Funds owed UBS Global AM (US) distribution and service fees, and for the period ended December 31, 2013, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:
Fund | Distribution and service fees owed | Sales charges earned | |||||||||
UBS Core Plus Bond Fund—Class A | $ | 1,325 | $ | 169 | |||||||
UBS Core Plus Bond Fund—Class C | 1,023 | — | |||||||||
UBS Emerging Markets Debt Fund—Class A | 15 | 853 | |||||||||
UBS Emerging Markets Debt Fund—Class C | 8 | — | |||||||||
UBS Fixed Income Opportunities Fund—Class A | 12,336 | 25,172 | |||||||||
UBS Fixed Income Opportunities Fund—Class C | 5,981 | 752 |
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The UBS Funds
Notes to financial statements
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 period ended December 31, 2013, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
Fund | Amount paid | ||||||
UBS Core Plus Bond Fund | $ | 929 | |||||
UBS Emerging Markets Debt Fund | 33 | ||||||
UBS Fixed Income Opportunities Fund | 8,427 |
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 Core Plus Bond Fund loaned securities to certain qualified broker-dealers, with the Funds' custodian acting as the Funds' lending agent. In addition, UBS Core Plus Bond Fund received US government agency securities as collateral with a market value of $385,069, which can not be resold. The value of loaned securities and related collateral at December 31, 2013 was 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 | $ | 377,481 | $ | 385,069 | $ | — |
6. Purchases and sales of securities
For the period ended December 31, 2013, 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 Core Plus Bond Fund | $ | 58,425,510 | $ | 62,594,757 | |||||||
UBS Emerging Markets Debt Fund | 2,339,118 | 3,226,155 | |||||||||
UBS Fixed Income Opportunities Fund | 29,417,892 | 14,522,873 |
85
The UBS Funds
Notes to financial statements
For the period ended December 31, 2013, aggregate purchases and sales of US Government and agency securities, excluding short-term investments, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Core Plus Bond Fund | $ | 12,398,461 | $ | 13,578,196 | |||||||
UBS Fixed Income Opportunities Fund | — | 1,206,205 |
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 year ended June 30, 2013 were as follows:
2013 | |||||||||||||||||||
Fund | Distributions paid from ordinary income | Return of capital | Distributions paid from net long-term capital gains | Total distributions paid | |||||||||||||||
UBS Core Plus Bond Fund | $ | 1,037,967 | $ | — | $ | �� | $ | 1,037,967 | |||||||||||
UBS Emerging Markets Debt Fund | 1,491,519 | — | 90,070 | 1,581,589 | |||||||||||||||
UBS Fixed Income Opportunities Fund | 1,960,221 | 680,924 | — | 2,641,145 |
The tax character of distributions paid and components of accumulated earnings (deficit) on a tax basis for the current fiscal year will be determined after the Trust's fiscal year ending June 30, 2014.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At June 30, 2013, the following Funds had post-enactment net capital losses that will be carried forward indefinitely, as follows:
Fund | Short-term losses | Long-term losses | Total capital losses | ||||||||||||
UBS Fixed Income Opportunities Fund | $ | 2,572,344 | $ | 141,296 | $ | 2,713,640 |
At June 30, 2013, the following Funds had pre-enactment 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 Core Plus Bond Fund | $ | 2,127,033 | $ | 32,070,048 |
86
The UBS Funds
Notes to financial statements
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2013, the following Funds incurred, and elected to defer, losses of the following:
Post October capital losses | |||||||||||
Fund | Short-term | Long-term | |||||||||
UBS Core Plus Bond Fund | $ | 258,798 | $ | — | |||||||
UBS Emerging Markets Debt Fund | 77,388 | 43,467 | |||||||||
UBS Fixed Income Opportunities Fund | 1,245,189 | — |
As of and during the period ended December 31, 2013, the Funds did not have any liabilities for any uncertain tax positions. The Funds recognize interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of operations. During the period, the Funds did not incur any interest or penalties. Foreign taxes have been accrued by the applicable Funds in the accompanying financial statements. Capital gains realized by the Funds on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Each of the tax years in the four year period ended June 30, 2013, or since inception in the case of UBS Emerging Markets Debt Fund and 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 $50 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 outstanding as of or during the period ended December 31, 2013.
9. Shares of beneficial interest
For the period ended December 31, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Core Plus Bond Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 8,402 | $ | 74,784 | 1,696 | $ | 15,135 | 42,711 | $ | 379,642 | ||||||||||||||||||
Shares repurchased | (94,051 | ) | (834,925 | ) | (18,272 | ) | (161,578 | ) | (300,060 | ) | (2,666,679 | ) | |||||||||||||||
Dividends reinvested | 4,273 | 38,009 | 2,029 | 17,988 | 46,044 | 409,067 | |||||||||||||||||||||
Redemption fees | — | 214 | — | 54 | — | 822 | |||||||||||||||||||||
Net decrease | (81,376 | ) | $ | (721,918 | ) | (14,547 | ) | $ | (128,401 | ) | (211,305 | ) | $ | (1,877,148 | ) |
87
The UBS Funds
Notes to financial statements
UBS Emerging Markets Debt Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 5,355 | $ | 47,873 | 1,424 | $ | 13,042 | — | $ | — | ||||||||||||||||||
Shares repurchased | — | — | (3 | ) | (27 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 192 | 1,725 | 24 | 214 | — | — | |||||||||||||||||||||
Net increase | 5,547 | $ | 49,598 | 1,445 | $ | 13,229 | — | $ | — |
UBS Fixed Income Opportunities Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,977,563 | $ | 28,988,451 | 224,855 | $ | 2,182,463 | — | $ | — | ||||||||||||||||||
Shares repurchased | (1,933,369 | ) | (18,680,087 | ) | (147,823 | ) | (1,425,298 | ) | (311,850 | ) | (3,000,000 | ) | |||||||||||||||
Dividends reinvested | 10,997 | 106,159 | 334 | 3,206 | 7,839 | 75,807 | |||||||||||||||||||||
Redemption fees | — | 19,814 | — | 3,210 | — | 12,089 | |||||||||||||||||||||
Net increase (decrease) | 1,055,191 | $ | 10,434,337 | 77,366 | $ | 763,581 | (304,011 | ) | $ | (2,912,104 | ) |
For the year ended June 30, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Core Plus Bond Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 443,666 | $ | 4,104,420 | 15,484 | $ | 142,505 | 197,384 | $ | 1,820,945 | ||||||||||||||||||
Shares repurchased | (506,145 | ) | (4,660,804 | ) | (65,560 | ) | (603,036 | ) | (992,947 | ) | (9,144,471 | ) | |||||||||||||||
Dividends reinvested | 9,363 | 86,253 | 3,903 | 35,836 | 91,327 | 840,033 | |||||||||||||||||||||
Redemption fees | — | 96 | — | 33 | — | 502 | |||||||||||||||||||||
Net decrease | (53,116 | ) | $ | (470,035 | ) | (46,173 | ) | $ | (424,662 | ) | (704,236 | ) | $ | (6,482,991 | ) |
UBS Emerging Markets Debt Fund1
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 3,551 | $ | 36,836 | 10 | $ | 100 | 2,500,010 | $ | 25,000,100 | ||||||||||||||||||
Dividends reinvested | 57 | 572 | — | — | — | — | |||||||||||||||||||||
Net increase | 3,608 | $ | 37,408 | 10 | $ | 100 | 2,500,010 | $ | 25,000,100 |
UBS Fixed Income Opportunities Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,547,355 | $ | 25,102,256 | 318,489 | $ | 3,131,840 | 1,964,234 | $ | 19,300,001 | ||||||||||||||||||
Shares repurchased | (1,708,570 | ) | (16,738,448 | ) | (105,668 | ) | (1,037,700 | ) | (1,037,810 | ) | (10,142,870 | ) | |||||||||||||||
Dividends reinvested | 57,234 | 560,256 | 13,836 | 135,287 | 59,810 | 586,032 | |||||||||||||||||||||
Redemption fees | — | 748 | — | 139 | — | 637 | |||||||||||||||||||||
Net increase | 896,019 | $ | 8,924,812 | 226,657 | $ | 2,229,566 | 986,234 | $ | 9,743,800 |
1 For the period July 23, 2012 (commencement of operations) to June 30, 2013.
88
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 1-202-551 8090. 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).
89
The UBS Funds
Board approval of investment advisory agreement
(unaudited)
At a meeting (the "Meeting") of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), the Board, including those 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, considered the initial approval of the investment advisory agreement (the "Advisory Agreement") between the Trust and the Advisor for the UBS Emerging Markets Debt Fund (the "Fund").
At the Meeting, the Board considered a number of factors in connection with its deliberations concerning the approval of the Advisory Agreement for the Fund, including: (i) the nature, extent, and quality of the services to be 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 will be 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 to be provided by the Advisor to the Fund, the Board reviewed the material presented by the Advisor describing the various services to be provided to the Fund. The Board noted that in addition to investment management services, the Advisor would provide the 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 that will be providing investment management and other services to the Fund. 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 other series of the Trust and the Advisor's other investment management clients. The Board also noted and discussed the services that the Advisor and its affiliates would provide to the Fund under other agreements with the Trust including administration services to be provided by the Advisor, underwriting services to be provided by UBS Global Asset Management (US) Inc., and sub-transfer agency services to be provided by UBS Financial Services Inc. 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, to the existing series of the Trust. The Board also discussed the compliance program for the Advisor. After analyzing the services to be provided by the Advisor to the Fund, both quantitatively and qualitatively, including the likely impact of these services on investment performance, the Board concluded that the nature, extent, and quality of services expected to be provided to the Fund were consistent with the operational requirements of the Fund, and would meet the needs of the Fund's shareholders.
Performance.
The Board also noted that, as the Fund had not yet commenced investment operations, there was no investment performance for either the Fund or the Advisor in managing the Fund for the Board to evaluate.
Fund fees and expenses.
When considering the fees and expenses to be borne by the Fund, and the reasonableness of the management fees to be paid to the Advisor in light of the services to be provided to the Fund, the Board compared the fees to be charged by the Advisor to the Fund to the fees charged to the funds in its peer group for comparable services. In examining these reports, and in reviewing comparative costs, it was noted that the results of such expense comparisons showed that the anticipated actual management fee rate and total expenses for the fund were comparable to similar funds. The Board also considered that the Advisor had agreed to an expense limit arrangement for a one-year period. The Board, after reviewing all pertinent material, concluded that the management fee payable
90
The UBS Funds
Board approval of investment advisory agreement
(unaudited)
under the 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 noted that the Advisor could not report any financial results from its relationship with the Fund because the Fund had not yet commenced investment operations, and thus, the Board could not evaluate the profitability of the Fund. The Board considered the expected "fall-out" or ancillary benefits to the Advisor and its affiliates as the result of their relationship with the Fund; for example, the ability to attract other clients due to the Advisor's role as investment adviser to the Fund. The Board then concluded that the level of profits to be realized by the Advisor and its affiliates with respect to the Fund, if any, were expected to be reasonable in relation to the nature and quality of the services that were to be provided.
Economies of scale.
The Board also discussed whether economies of scale will be realized by the Advisor with respect to the Fund, as it grows larger, and the extent to which this is reflected in the level of advisory fees to be charged. The Board noted that, since the Fund had not yet commenced investment operations, economies of scale were not likely to be realized in the near future.
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 approval of the Advisory Agreement for the Fund was in the best interests of the Fund and its shareholders.
91
The UBS Funds
Funds' privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds managed by UBS Global Asset Management (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information and to comply with applicable laws and regulations.
The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as otherwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1173
UBS Equity
Funds
December 31, 2013
The UBS Funds—Equities
Semiannual Report
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
Equity Funds | |||||||
UBS Equity Long-Short Multi-Strategy Fund | 5 | ||||||
UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund) | 18 | ||||||
UBS U.S. Defensive Equity Fund | 26 | ||||||
UBS U.S. Equity Opportunity Fund | 37 | ||||||
UBS U.S. Large Cap Equity Fund | 45 | ||||||
UBS U.S. Small Cap Growth Fund | 53 | ||||||
Explanation of expense disclosure | 62 | ||||||
Statement of assets and liabilities | 66 | ||||||
Statement of operations | 70 | ||||||
Statement of changes in net assets | 72 | ||||||
Statement of cash flows | 76 | ||||||
Financial highlights | 78 | ||||||
Notes to financial statements | 90 | ||||||
General information | 108 |
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President's letter
February 14, 2014
Dear Shareholder,
The importance of investment discipline to achieving better investment outcomes is well known to individual investors and financial advisors alike. But even the most disciplined investors, faced with breaking news or market-moving events, can sometimes be distracted from their long-term financial plans. The year 2013 and the early part of this year have offered no shortage of distractions. After the broad, steady market recoveries of the last several years, 2013 presented us with the much anticipated "great rotation" out of fixed income into risk assets. Although it didn't fully play out, this was set in motion by the Federal Reserve Board's (the "Fed") decision to "taper" its quantitative easing program ("QE") due to improving prospects for the American economy. Bond investors, some of whom may be risk averse, learned firsthand that it is possible for their fixed income investments to lose value when interest rates rise. Yet, they still seem to accept this tradeoff in exchange for the relative security of their principal, as evidenced by the number of investors with assets still in fixed income investments. In 2013, stocks rallied despite questions over what effects the taper and a change in leadership at the Fed would have on stock prices. While flows into equities improved, many investors didn't participate in this rally and are now faced with the decision of what to do next.
The financial advisor community and asset managers like UBS Global Asset Management understand the drivers of investor behavior and have collaborated to create solutions that help clients build and maintain diversified, well allocated portfolios. Integrated in these solutions are the core/traditional asset classes that have built and protected wealth for decades. Increasingly, however, wealth managers' and asset managers' solutions are including new diversifiers, designed to potentially enhance the likelihood that clients remain committed to their long-term financial plans through the markets' ups and downs. By offering solutions that help better diversify client portfolios, we aim to soften what can sometimes be a bumpy ride.
At UBS Global Asset Management, we are committed to traditional asset classes but have also enhanced our product offerings. We remain vigilant in adding value through active management in our core investment solutions. But, as I have mentioned in past letters, we were among the early leaders to evolve our product offering to meet the challenges to investment discipline described above. We launched these types of funds before the terms "liquid alternatives," "absolute return" or "multi-alternative funds" were well known in the investment vernacular. We have invested resources to better enable our investment professionals across equities, fixed income and multi-asset class solutions, to focus on improved investor outcomes. We continue to build strong track records in these areas, so that we can play an integral role in helping financial advisors meet their clients' needs by staying focused on investors' real, long-term objectives.
1
President's letter
The markets will undoubtedly continue to challenge investors' fortitude with respect to their commitment to their long-term financial plans. As we begin 2014, new distractions have arisen: concerns over emerging markets and uncertainty about security at the Olympic Games in Sochi, Russia, among others. As such, we understand that it is our responsibility to deliver sustained performance in our funds, enabling our clients to experience the outcomes they need. To help us stay focused on these challenges, we rely on our firm's culture, based on the foundations of client focus, excellence and sustained performance. We embrace this responsibility and these challenges and thank you for your continued trust in our skill and commitment to serve you.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
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. A prospectus or summary prospectus for these 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
2
The markets in review
Improving growth in the developed world
Despite a number of headwinds, including the sequestration, higher taxes and rising interest rates, the overall US economy continued to expand during the reporting period. Looking back, the Commerce Department reported that gross domestic product ("GDP") growth in the US was a tepid 1.1% during the first quarter of 2013. The economy then gained some traction, as GDP grew 2.5% and 4.1% during the second and third quarters of 2013, respectively. Third quarter GDP was the highest reading since the fourth quarter of 2011. The Commerce Department's initial estimate for fourth quarter 2013 GDP growth was 3.2%.1
The Federal Reserve Board (the "Fed") took a number of actions during the reporting period. As has been the case since December 2008, the Fed kept the federal funds rate (the federal funds rate, or the "fed funds rate," which is the rate banks charge one another for funds they borrow on an overnight basis) at a historically low level between 0% and 0.25%. However, at his press conference following the central bank's meeting in June 2013, Fed Chairman Ben Bernanke said "...the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year." This triggered a substantial sell-off in the fixed income market, as Treasury yields rose sharply and bond prices declined. At its meeting that concluded on September 18, 2013, the Fed surprised the market by delaying the tapering of its asset purchases.
At its final meeting of 2013, in December, the Fed announced that it would begin paring back its monthly asset purchases, saying, "Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a [reduced] pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a [reduced] pace of $40 billion per month rather than $45 billion per month."
At its meeting that concluded on January 29, 2014, the Fed further tapered its asset purchases. Beginning in February 2014, the central bank will scale back its monthly purchases to a total of $65 billion ($30 billion of agency mortgage-backed securities and $35 billion of longer-term Treasury securities).2
Growth in other developed countries generally improved during the reporting period, albeit from relatively low levels. In its October 2013 World Economic Outlook, the International Monetary Fund ("IMF") stated that "Advanced economies are gradually strengthening. At the same time, growth in emerging market economies has slowed." From a regional perspective, the IMF anticipated that 2013 growth in the eurozone would contract -0.4%, but increase to 1.0% in 2014. While growth in emerging market countries remains higher than in their developed country counterparts, the IMF projects that this gap is narrowing. The IMF projected that emerging markets growth would moderate from 4.9% in 2012 to 4.5% in 2013. In particular, China's economy was expected to grow 7.6% in 2013, versus 7.7% in 2012.
1 Based on the Commerce Department's third estimate announced on January 30, 2014, after the reporting period had ended.
2 The Fed's decision to further taper was made at its meeting that concluded on January 29, 2014, after the reporting period had ended.
3
The markets in review
Equities largely produce strong returns
Developed market equities produced outstanding results during the reporting period. In the US, generally positive economic data and corporate profits that often exceeded expectations supported the market. Volatility was elevated at times, due to moderating emerging market growth, geopolitical events and uncertainty regarding future central bank monetary policy. However, periodic setbacks were generally quickly replaced by solid demand from investors looking to generate incremental returns in the low interest rate environment. All told, the US stock market, as measured by the S&P 500 Index,3 gained 16.31% for the six months ended December 31, 2013 and ended the year at an all-time high. International developed equities, as measured by the MSCI EAFE Index (net),4 also rose sharply, returning 17.94% during the six-month period. Emerging market equities, as measured by the MSCI Emerging Markets Index (net),5 generated less robust returns, gaining 7.70% over the same period. This was due to several factors, including decelerating emerging market growth, generally falling commodity prices and rising US interest rates.
3 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.
4 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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.
5 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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.
4
UBS Equity Long-Short Multi-Strategy Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Equity Long-Short Multi-Strategy Fund (the "Fund") returned 1.89% (Class A shares declined 3.76% after the deduction of the maximum sales charge), while Class Y shares returned 2.07%. The Fund's benchmark, the Citigroup Three-Month US Treasury Bill Index (the "Index"), returned 0.02% 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 7; 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 return and outperformed the Index during the six months ended December 31, 2013. The Fund invested in two distinct investment "sleeves" during the reporting period: US fundamental long-short and equity opportunity long-short. Both sleeves contributed to the Fund's performance during the reporting period.
During the six-month period, the sleeves in which the Fund invests used derivative instruments for efficient portfolio and risk management purposes. Currency forwards were used to hedge the Fund's currency exposure. Swaps were used on individual stocks to gain exposure to the shares in a more efficient manner. The use of these derivatives was successful in helping the sleeves manage both their portfolios and risk.
Portfolio performance summary1
What worked
• Overall, the US fundamental long-short sleeve contributed to performance during the reporting period.
– At the stock level, the sleeve had strong contributions from its long positions in Amazon.com, an online retailer, Micron Technology, Inc., a global semiconductor manufacturing company, and Apple, Inc., a consumer electronics, computer software and personal computer company.
– The sectors that added the most value were the information technology, industrials and consumer discretionary sectors.
• In aggregate, the equity opportunity long-short sleeve was beneficial for performance.
– The sleeve's long positions in Investment AB Kinnevik, an investment firm, Legal & General Group PLC, an asset manager, and Algeta, a pharmaceutical research company, aided relative results. We sold out of our position in Algeta in December, following the approach by Bayer to bid for the company in November. We saw limited upside on the name, given the 30% premium reflected in the price.
– The best performing sectors in the sleeve were healthcare, financials and consumer discretionary.
– From a country perspective, the sleeve's allocations to the UK, Germany and the US were the most beneficial during the reporting period.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Equity Long-Short Multi-Strategy Fund
What didn't work
• Certain strategies in the US fundamental long-short sleeve detracted from performance.
– The sleeve's short positions in packaging and shipping-related company Pitney Bowes, Inc. and document management company Xerox Corp., along with a long position in mobile communications company NII Holdings, Inc. were negative for results.
– The sleeve's allocation to the telecommunications sector detracted from performance during the reporting period.
• Several positions in the equity opportunity long-short sleeve were drags on performance.
– The sleeve's short positions in a Spanish media company, an international oil tanker firm and Nokia, a telecommunications company, were the largest individual detractors from results. We closed our position in Nokia following the announced sale of its devices business to Microsoft, when the downside on the stock was more limited, as it improved the financial position of the company.
– Allocations to the materials, industrials and utilities sectors were negative for performance.
– In terms of countries, the sleeve's allocations to Spain, Italy and France were the largest detractors.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
6
UBS Equity Long-Short Multi-Strategy Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 1.89 | % | 9.74 | % | 0.72 | % | |||||||||
Class C3 | 1.42 | 8.94 | (0.01 | ) | |||||||||||
Class Y4 | 2.07 | 9.99 | 1.00 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | (3.76 | )% | 3.75 | % | (0.88 | )% | |||||||||
Class C3 | 0.42 | 7.94 | (0.01 | ) | |||||||||||
Citigroup Three-Month US Treasury Bill Index5 | 0.02 | % | 0.05 | % | 0.08 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—6.85% and 4.17%; Class C—7.05% and 4.92%; Class Y—6.27% and 3.92%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS Equity Long-Short 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 distribution and service 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 distribution and service 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. 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://globalam-us.ubs.com/corpweb/performance.do.
7
UBS Equity Long-Short Multi-Strategy Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Apple, Inc. | 2.0 | % | |||||
Citigroup, Inc. | 1.8 | ||||||
Amazon.com, Inc. | 1.7 | ||||||
Morgan Stanley | 1.6 | ||||||
US Bancorp | 1.6 | ||||||
Broadcom Corp., Class A | 1.6 | ||||||
Hertz Global Holdings, Inc. | 1.5 | ||||||
General Motors Co. | 1.5 | ||||||
NXP Semiconductor NV | 1.4 | ||||||
Baxter International, Inc. | 1.4 | ||||||
Total | 16.1 | % |
1 Only long positions are considered for top ten holdings.
8
UBS Equity Long-Short Multi-Strategy Fund
Industry diversification (unaudited)
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Aerospace & defense | 1.46 | % | |||||
Air freight & logistics | 1.13 | ||||||
Auto components | 0.73 | ||||||
Automobiles | 2.63 | ||||||
Biotechnology | 5.67 | ||||||
Capital markets | 2.19 | ||||||
Chemicals | 1.38 | ||||||
Commercial banks | 6.35 | ||||||
Commercial services & supplies | 0.36 | ||||||
Communications equipment | 0.58 | ||||||
Computers & peripherals | 3.18 | ||||||
Consumer finance | 0.71 | ||||||
Diversified financial services | 4.83 | ||||||
Diversified telecommunication services | 1.42 | ||||||
Electric utilities | 0.66 | ||||||
Electronic equipment, instruments & components | 1.19 | ||||||
Energy equipment & services | 1.14 | ||||||
Food & staples retailing | 0.46 | ||||||
Food products | 1.64 | ||||||
Health care equipment & supplies | 1.37 | ||||||
Health care providers & services | 2.20 | ||||||
Hotels, restaurants & leisure | 1.35 | ||||||
Industrial conglomerates | 1.34 | ||||||
Insurance | 5.57 | ||||||
Internet & catalog retail | 2.37 | ||||||
Internet software & services | 1.24 | ||||||
IT services | 2.84 | ||||||
Life sciences tools & services | 1.24 | ||||||
Machinery | 0.52 | ||||||
Marine | 0.67 | ||||||
Media | 2.29 | ||||||
Metals & mining | 0.28 | ||||||
Multiline retail | 0.87 | ||||||
Oil, gas & consumable fuels | 1.88 | ||||||
Pharmaceuticals | 11.10 | ||||||
Real estate investment trust (REIT) | 1.11 | ||||||
Real estate management & development | 0.80 | ||||||
Road & rail | 2.55 | ||||||
Semiconductors & semiconductor equipment | 6.21 | ||||||
Software | 2.91 | ||||||
Textiles, apparel & luxury goods | 1.28 | ||||||
Tobacco | 1.18 | ||||||
Wireless telecommunication services | 0.98 | ||||||
Total common stocks | 91.86 | % | |||||
Preferred stock | 0.69 | ||||||
Rights | 0.01 | ||||||
Short-term investment | 33.71 | ||||||
Total investments before investments sold short | 126.27 | % |
Investments sold short | |||||||
Common stocks | |||||||
Aerospace & defense | (0.57 | )% | |||||
Auto components | (0.32 | ) | |||||
Automobiles | (0.59 | ) | |||||
Beverages | (1.18 | ) | |||||
Biotechnology | (1.81 | ) | |||||
Capital markets | (3.43 | ) | |||||
Chemicals | (3.64 | ) | |||||
Commercial banks | (4.62 | ) | |||||
Commercial services & supplies | (3.01 | ) | |||||
Communications equipment | (0.37 | ) | |||||
Computers & peripherals | (2.18 | ) | |||||
Construction & engineering | (0.49 | ) | |||||
Construction materials | (0.77 | ) | |||||
Consumer finance | (0.39 | ) | |||||
Distributors | (0.46 | ) | |||||
Diversified financial services | (1.27 | ) | |||||
Diversified telecommunication services | (0.87 | ) | |||||
Electric utilities | (1.16 | ) | |||||
Electrical equipment | (0.75 | ) | |||||
Electronic equipment, instruments & components | (0.38 | ) | |||||
Energy equipment & services | (2.01 | ) | |||||
Food & staples retailing | (0.77 | ) | |||||
Food products | (0.26 | ) | |||||
Health care equipment & supplies | (3.60 | ) | |||||
Health care providers & services | (1.25 | ) | |||||
Hotels, restaurants & leisure | (1.91 | ) | |||||
Household durables | (1.01 | ) | |||||
Household products | (0.23 | ) | |||||
Insurance | (1.56 | ) | |||||
Internet & catalog retail | (0.78 | ) | |||||
Internet software & services | (0.27 | ) | |||||
IT services | (1.73 | ) | |||||
Life sciences tools & services | (1.29 | ) | |||||
Machinery | (2.47 | ) | |||||
Media | (2.21 | ) | |||||
Metals & mining | (1.37 | ) | |||||
Multiline retail | (0.45 | ) | |||||
Office electronics | (0.81 | ) | |||||
Oil, gas & consumable fuels | (0.98 | ) | |||||
Pharmaceuticals | (1.73 | ) | |||||
Real estate investment trust (REIT) | (0.78 | ) | |||||
Road & rail | (0.61 | ) | |||||
Semiconductors & semiconductor equipment | (2.36 | ) | |||||
Software | (2.02 | ) | |||||
Specialty retail | (0.73 | ) | |||||
Textiles, apparel & luxury goods | (0.32 | ) | |||||
Thrifts & mortgage finance | (0.50 | ) | |||||
Trading companies & distributors | (0.59 | ) | |||||
Transportation infrastructure | (1.59 | ) | |||||
Wireless telecommunication services | (1.57 | ) | |||||
Total investments sold short | (66.02 | )% | |||||
Total investments, net of investments sold short | 60.25 | ||||||
Cash and other assets, less liabilities | 39.75 | ||||||
Net assets | 100.00 | % |
9
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 91.86% | |||||||||||
Austria: 0.28% | |||||||||||
Voestalpine AG | 930 | $ | 44,689 | ||||||||
Canada: 0.90% | |||||||||||
Nordion, Inc.*1 | 4,700 | 39,903 | |||||||||
Valeant Pharmaceuticals International, Inc.*1 | 900 | 105,660 | |||||||||
Total Canada common stocks | 145,563 | ||||||||||
China: 0.55% | |||||||||||
Baidu, Inc. ADR* | 500 | 88,940 | |||||||||
Denmark: 2.14% | |||||||||||
AP Moeller - Maersk A/S, Class B | 10 | 108,524 | |||||||||
Novo Nordisk A/S, Class B | 655 | 120,063 | |||||||||
Pandora A/S | 2,179 | 118,137 | |||||||||
Total Denmark common stocks | 346,724 | ||||||||||
Finland: 0.40% | |||||||||||
Sampo Oyj, Class A | 1,314 | 64,570 | |||||||||
France: 5.16% | |||||||||||
AXA SA | 3,388 | 94,196 | |||||||||
Credit Agricole SA* | 6,804 | 87,097 | |||||||||
Electricite de France | 3,010 | 106,358 | |||||||||
Ingenico | 992 | 79,535 | |||||||||
Publicis Groupe SA | 965 | 88,295 | |||||||||
Safran SA | 1,890 | 131,330 | |||||||||
Societe Generale SA | 1,509 | 87,646 | |||||||||
Total SA | 1,513 | 92,686 | |||||||||
Vivendi SA | 2,611 | 68,804 | |||||||||
Total France common stocks | 835,947 | ||||||||||
Germany: 5.12% | |||||||||||
Allianz SE | 547 | 98,089 | |||||||||
Bayer AG | 1,243 | 174,334 | |||||||||
Continental AG | 539 | 118,195 | |||||||||
Deutsche Post AG | 2,702 | 98,504 | |||||||||
Deutsche Telekom AG | 4,278 | 73,154 | |||||||||
Freenet AG* | 3,170 | 94,982 | |||||||||
Fresenius SE & Co KGaA | 554 | 85,055 | |||||||||
SAP AG | 1,010 | 86,577 | |||||||||
Total Germany common stocks | 828,890 | ||||||||||
India: 0.72% | |||||||||||
Tata Motors Ltd. ADR1 | 3,800 | 117,040 | |||||||||
Ireland: 0.74% | |||||||||||
Mallinckrodt PLC*1 | 2,300 | 120,198 |
Shares | Value | ||||||||||
Israel: 2.35% | |||||||||||
Check Point Software Technologies Ltd.*1 | 3,100 | $ | 200,012 | ||||||||
Mellanox Technologies Ltd.*1 | 2,600 | 103,922 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 1,900 | 76,152 | |||||||||
Total Israel common stocks | 380,086 | ||||||||||
Italy: 0.35% | |||||||||||
Newron Pharmaceuticals SpA* | 3,041 | 57,271 | |||||||||
Japan: 2.25% | |||||||||||
Daiwa House Industry Co. Ltd. | 3,000 | 57,972 | |||||||||
Mitsui Fudosan Co., Ltd. | 2,000 | 71,883 | |||||||||
ORIX Corp. | 4,600 | 80,678 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 1,700 | 87,494 | |||||||||
Toyota Motor Corp. | 1,100 | 67,059 | |||||||||
Total Japan common stocks | 365,086 | ||||||||||
Netherlands: 3.57% | |||||||||||
Koninklijke Ahold NV | 4,148 | 74,469 | |||||||||
Koninklijke DSM NV | 1,189 | 93,497 | |||||||||
Koninklijke Philips NV | 2,751 | 100,839 | |||||||||
NXP Semiconductor NV*1 | 4,900 | 225,057 | |||||||||
TNT Express NV | 8,979 | 83,354 | |||||||||
Total Netherlands common stocks | 577,216 | ||||||||||
Norway: 1.86% | |||||||||||
Aker ASA, Class A | 2,894 | 105,925 | |||||||||
Gjensidige Forsikring ASA | 5,661 | 107,988 | |||||||||
SpareBank 1 SMN | 9,674 | 87,723 | |||||||||
Total Norway common stocks | 301,636 | ||||||||||
Spain: 0.81% | |||||||||||
Grifols SA | 1,379 | 65,953 | |||||||||
Repsol SA | 2,565 | 64,645 | |||||||||
Total Spain common stocks | 130,598 | ||||||||||
Sweden: 2.25% | |||||||||||
Investment AB Kinnevik, Class B | 3,589 | 166,230 | |||||||||
Nordea Bank AB | 8,107 | 109,218 | |||||||||
TeliaSonera AB | 10,589 | 88,161 | |||||||||
Total Sweden common stocks | 363,609 | ||||||||||
Switzerland: 2.74% | |||||||||||
Actelion Ltd.* | 1,043 | 88,100 | |||||||||
Aryzta AG* | 751 | 57,585 | |||||||||
Novartis AG | 2,168 | 173,041 | |||||||||
Roche Holding AG (Non-voting) | 445 | 124,314 | |||||||||
Total Switzerland common stocks | 443,040 |
10
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United Kingdom: 0.54% | |||||||||||
Aon PLC1 | 600 | $ | 50,334 | ||||||||
Noble Corp. PLC1 | 1,000 | 37,470 | |||||||||
Total United Kingdom common stocks | 87,804 | ||||||||||
United States: 59.13% | |||||||||||
Acorda Therapeutics, Inc.*1 | 6,600 | 192,720 | |||||||||
Adobe Systems, Inc.*1 | 2,300 | 137,724 | |||||||||
Alexion Pharmaceuticals, Inc.*1 | 900 | 119,754 | |||||||||
Allergan, Inc.1 | 730 | 81,088 | |||||||||
Alliance Data Systems Corp.*1 | 400 | 105,172 | |||||||||
Alnylam Pharmaceuticals, Inc.*1 | 1,600 | 102,928 | |||||||||
Amazon.com, Inc.*1 | 670 | 267,189 | |||||||||
American Campus Communities, Inc.1 | 1,000 | 32,210 | |||||||||
Apple, Inc.1 | 580 | 325,444 | |||||||||
Applied Materials, Inc.1 | 11,900 | 210,511 | |||||||||
Baker Hughes, Inc.1 | 1,300 | 71,838 | |||||||||
Baxter International, Inc.1 | 3,200 | 222,560 | |||||||||
BB&T Corp.1 | 1,500 | 55,980 | |||||||||
Bio-Rad Laboratories, Inc., Class A*1 | 1,300 | 160,693 | |||||||||
Broadcom Corp., Class A1 | 8,500 | 252,025 | |||||||||
Capital One Financial Corp.1 | 1,500 | 114,915 | |||||||||
Cardinal Health, Inc.1 | 900 | 60,129 | |||||||||
Celgene Corp.*1 | 500 | 84,480 | |||||||||
Citigroup, Inc.1 | 5,540 | 288,689 | |||||||||
Comcast Corp., Class A1 | 3,300 | 171,485 | |||||||||
ConocoPhillips1 | 900 | 63,585 | |||||||||
Danaher Corp.1 | 1,500 | 115,800 | |||||||||
Digital Realty Trust, Inc.1 | 3,000 | 147,360 | |||||||||
Dow Chemical Co.1 | 1,600 | 71,040 | |||||||||
Eli Lilly & Co.1 | 2,300 | 117,300 | |||||||||
Epizyme, Inc.*1 | 1,100 | 22,880 | |||||||||
Fifth Third Bancorp1 | 4,100 | 86,223 | |||||||||
Fiserv, Inc.*1 | 1,100 | 64,955 | |||||||||
Freescale Semiconductor Ltd.*1 | 2,400 | 38,520 | |||||||||
General Dynamics Corp.1 | 1,100 | 105,105 | |||||||||
General Motors Co.*1 | 5,900 | 241,133 | |||||||||
Gilead Sciences, Inc.*1 | 2,100 | 157,815 | |||||||||
Google, Inc., Class A*1 | 100 | 112,071 | |||||||||
Hertz Global Holdings, Inc.*1 | 8,600 | 246,132 | |||||||||
Hess Corp.1 | 1,000 | 83,000 | |||||||||
Hospira, Inc.*1 | 4,200 | 173,376 | |||||||||
Illinois Tool Works, Inc.1 | 1,000 | 84,080 | |||||||||
Impax Laboratories, Inc.*1 | 4,900 | 123,186 | |||||||||
Invesco Ltd.1 | 2,500 | 91,000 | |||||||||
Jabil Circuit, Inc.1 | 6,500 | 113,360 | |||||||||
JC Penney Co., Inc.*1 | 4,300 | 39,345 | |||||||||
Johnson & Johnson1 | 1,600 | 146,544 | |||||||||
JPMorgan Chase & Co.1 | 2,400 | 140,352 |
Shares | Value | ||||||||||
KaloBios Pharmaceuticals, Inc.*1 | 6,800 | $ | 30,056 | ||||||||
Lexicon Pharmaceuticals, Inc.*1 | 29,500 | 53,100 | |||||||||
Lincoln National Corp.1 | 4,000 | 206,480 | |||||||||
Macy's, Inc.1 | 1,900 | 101,460 | |||||||||
MasterCard, Inc., Class A1 | 100 | 83,546 | |||||||||
McDermott International, Inc.*1 | 8,300 | 76,028 | |||||||||
MetLife, Inc.1 | 3,900 | 210,288 | |||||||||
Micron Technology, Inc.*1 | 8,000 | 174,080 | |||||||||
Mondelez International, Inc., Class A1 | 5,900 | 208,270 | |||||||||
Monsanto Co.1 | 500 | 58,275 | |||||||||
Morgan Stanley1 | 8,400 | 263,424 | |||||||||
Motorola Solutions, Inc.1 | 1,400 | 94,500 | |||||||||
NetApp, Inc.1 | 4,600 | 189,244 | |||||||||
NII Holdings, Inc.*1 | 23,200 | 63,800 | |||||||||
Norfolk Southern Corp.1 | 1,800 | 167,094 | |||||||||
Perrigo Co. PLC1 | 700 | 107,422 | |||||||||
Philip Morris International, Inc.1 | 2,200 | 191,686 | |||||||||
PNC Financial Services Group, Inc.1 | 700 | 54,306 | |||||||||
Priceline.com, Inc.*1 | 100 | 116,240 | |||||||||
Principal Financial Group, Inc.1 | 1,400 | 69,034 | |||||||||
Ralph Lauren Corp.1 | 500 | 88,285 | |||||||||
Salix Pharmaceuticals Ltd.*1 | 1,100 | 98,934 | |||||||||
ServiceSource International, Inc.*1 | 24,600 | 206,148 | |||||||||
Symantec Corp.1 | 2,000 | 47,160 | |||||||||
Time Warner, Inc.1 | 1,600 | 111,552 | |||||||||
UnitedHealth Group, Inc.1 | 2,800 | 210,840 | |||||||||
US Bancorp1 | 6,400 | 258,560 | |||||||||
Waste Management, Inc.1 | 1,300 | 58,331 | |||||||||
Wells Fargo & Co.1 | 2,500 | 113,500 | |||||||||
Yum! Brands, Inc.1 | 2,900 | 219,269 | |||||||||
Total United States common stocks | 9,572,608 | ||||||||||
Total common stocks (cost $12,247,038) | 14,871,515 | ||||||||||
Preferred stock: 0.69% | |||||||||||
Germany: 0.69% | |||||||||||
Henkel AG & Co KGaA, Preference shares (cost $86,511) | 965 | 111,926 | |||||||||
Number of rights | |||||||||||
Rights: 0.01% | |||||||||||
Spain: 0.01% | |||||||||||
Repsol SA, expires 01/09/14* (cost $0) | 2,565 | 1,750 |
11
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Short-term investment: 33.71% | |||||||||||
Investment company: 33.71% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $5,457,224) | 5,457,224 | $ | 5,457,224 | ||||||||
Total investments before investments sold short: 126.27% (cost $17,790,773) | 20,442,415 | ||||||||||
Investments sold short: (66.02)% | |||||||||||
Common stocks: (66.02)% | |||||||||||
Austria: (0.80)% | |||||||||||
Raiffeisen Bank International AG | (2,518 | ) | (88,748 | ) | |||||||
Vienna Insurance Group AG Wiener Versicherung Gruppe | (824 | ) | (41,064 | ) | |||||||
Total Austria common stocks | (129,812 | ) | |||||||||
Bermuda: (1.00)% | |||||||||||
Frontline Ltd. | (19,930 | ) | (77,547 | ) | |||||||
Marvell Technology Group Ltd. | (5,900 | ) | (84,842 | ) | |||||||
Total Bermuda common stocks | (162,389 | ) | |||||||||
Finland: (2.14)% | |||||||||||
Fortum Oyj | (2,266 | ) | (51,841 | ) | |||||||
Konecranes Oyj | (2,818 | ) | (100,252 | ) | |||||||
Metso Oyj | (2,012 | ) | (85,861 | ) | |||||||
Stockmann Oyj Abp, Class B | (1,953 | ) | (29,662 | ) | |||||||
YIT Oyj | (5,668 | ) | (79,222 | ) | |||||||
Total Finland common stocks | (346,838 | ) | |||||||||
France: (2.15)% | |||||||||||
Arkema SA | (509 | ) | (59,373 | ) | |||||||
Bourbon SA | (3,161 | ) | (86,972 | ) | |||||||
CGG SA | (1,960 | ) | (33,920 | ) | |||||||
Groupe Eurotunnel SA | (8,996 | ) | (94,551 | ) | |||||||
Orange SA | (5,927 | ) | (73,384 | ) | |||||||
Total France common stocks | (348,200 | ) | |||||||||
Germany: (3.91)% | |||||||||||
Deutsche Boerse AG | (1,083 | ) | (89,691 | ) | |||||||
H&R AG | (3,526 | ) | (42,191 | ) | |||||||
Hamburger Hafen und Logistik AG | (3,470 | ) | (84,876 | ) | |||||||
HeidelbergCement AG | (684 | ) | (51,895 | ) | |||||||
K+S AG NPV | (2,323 | ) | (71,505 | ) | |||||||
LANXESS AG | (1,222 | ) | (81,492 | ) | |||||||
MTU Aero Engines AG | (946 | ) | (92,908 | ) | |||||||
Salzgitter AG | (1,286 | ) | (54,844 | ) | |||||||
SGL Carbon SE | (1,592 | ) | (63,020 | ) | |||||||
Total Germany common stocks | (632,422 | ) |
Shares | Value | ||||||||||
Italy: (1.12)% | |||||||||||
Fiat SpA | (9,931 | ) | $ | (81,221 | ) | ||||||
Italcementi SpA | (8,560 | ) | (73,247 | ) | |||||||
Saras SpA | (23,360 | ) | (26,705 | ) | |||||||
Total Italy common stocks | (181,173 | ) | |||||||||
Japan: (0.33)% | |||||||||||
Nintendo Co., Ltd. | (400 | ) | (53,214 | ) | |||||||
Luxembourg: (0.83)% | |||||||||||
APERAM SA NPV | (3,642 | ) | (67,263 | ) | |||||||
Millicom International Cellular SA SDR | (667 | ) | (66,422 | ) | |||||||
Total Luxembourg common stocks | (133,685 | ) | |||||||||
Mexico: (1.09)% | |||||||||||
America Movil SAB de CV ADR | (4,200 | ) | (98,154 | ) | |||||||
Wal-Mart de Mexico SAB de CV ADR | (3,000 | ) | (78,360 | ) | |||||||
Total Mexico common stocks | (176,514 | ) | |||||||||
Netherlands: (1.54)% | |||||||||||
Fugro NV CVA | (1,721 | ) | (102,552 | ) | |||||||
Koninklijke Vopak NV | (1,329 | ) | (77,739 | ) | |||||||
LyondellBasell Industries NV, Class A | (850 | ) | (68,238 | ) | |||||||
Total Netherlands common stocks | (248,529 | ) | |||||||||
Norway: (0.76)% | |||||||||||
Tomra Systems ASA | (4,267 | ) | (39,749 | ) | |||||||
Yara International ASA | (1,936 | ) | (83,309 | ) | |||||||
Total Norway common stocks | (123,058 | ) | |||||||||
Portugal: (0.33)% | |||||||||||
EDP - Energias de Portugal SA | (14,355 | ) | (52,728 | ) | |||||||
Singapore: (0.38)% | |||||||||||
Flextronics International Ltd. | (7,900 | ) | (61,383 | ) | |||||||
Spain: (2.74)% | |||||||||||
Atresmedia Corp. de Medios de Comunicaion SA | (3,739 | ) | (61,828 | ) | |||||||
Banco Santander SA | (9,505 | ) | (85,073 | ) | |||||||
Iberdrola SA | (12,927 | ) | (82,427 | ) | |||||||
Tecnicas Reunidas SA | (1,866 | ) | (101,360 | ) | |||||||
Zardoya Otis SA | (6,251 | ) | (113,083 | ) | |||||||
Total Spain common stocks | (443,771 | ) | |||||||||
Sweden: (3.25)% | |||||||||||
Electrolux AB, Series B | (3,504 | ) | (91,797 | ) | |||||||
Lundin Petroleum AB | (2,800 | ) | (54,591 | ) | |||||||
Modern Times Group AB, Class B | (1,764 | ) | (91,384 | ) | |||||||
Ratos AB, Class B | (9,731 | ) | (87,977 | ) |
12
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Investments sold short—(Continued) | |||||||||||
Common stocks—(Continued) | |||||||||||
Sweden—(Concluded) | |||||||||||
Sandvik AB | (7,168 | ) | $ | (101,081 | ) | ||||||
SSAB AB, Class A | (13,061 | ) | (100,112 | ) | |||||||
Total Sweden common stocks | (526,942 | ) | |||||||||
Switzerland: (1.31)% | |||||||||||
Coca-Cola HBC AG CDI | (2,379 | ) | (69,414 | ) | |||||||
Straumann Holding AG | (303 | ) | (56,656 | ) | |||||||
Tyco International Ltd. | (2,100 | ) | (86,184 | ) | |||||||
Total Switzerland common stocks | (212,254 | ) | |||||||||
Turkey: (0.44)% | |||||||||||
Arcelik AS | (12,607 | ) | (71,277 | ) | |||||||
United Kingdom: (0.27)% | |||||||||||
Debenhams PLC | (36,136 | ) | (43,683 | ) | |||||||
United States: (41.63)% | |||||||||||
Abaxis, Inc. | (1,200 | ) | (48,024 | ) | |||||||
AbbVie, Inc. | (1,600 | ) | (84,496 | ) | |||||||
ADT Corp. | (2,272 | ) | (91,948 | ) | |||||||
Advanced Micro Devices, Inc. | (14,000 | ) | (54,180 | ) | |||||||
American Express Co. | (700 | ) | (63,511 | ) | |||||||
American International Group, Inc. | (2,800 | ) | (142,940 | ) | |||||||
Amgen, Inc. | (500 | ) | (57,080 | ) | |||||||
Associated Banc-Corp. | (4,700 | ) | (81,780 | ) | |||||||
AT&T, Inc. | (1,900 | ) | (66,804 | ) | |||||||
Bank of America Corp. | (7,400 | ) | (115,218 | ) | |||||||
Bank of New York Mellon Corp. | (2,300 | ) | (80,362 | ) | |||||||
Beam, Inc. | (600 | ) | (40,836 | ) | |||||||
Best Buy Co., Inc. | (900 | ) | (35,892 | ) | |||||||
Bio-Reference Labs, Inc. | (1,200 | ) | (30,648 | ) | |||||||
Boston Scientific Corp. | (3,200 | ) | (38,464 | ) | |||||||
Brocade Communications Systems, Inc. | (6,800 | ) | (60,316 | ) | |||||||
Brown-Forman Corp., Class B | (500 | ) | (37,785 | ) | |||||||
Celgene Corp. | (680 | ) | (114,893 | ) | |||||||
Centene Corp. | (800 | ) | (47,160 | ) | |||||||
Cepheid, Inc. | (900 | ) | (42,048 | ) | |||||||
Charles Schwab Corp. | (5,100 | ) | (132,600 | ) | |||||||
Choice Hotels International, Inc. | (800 | ) | (39,288 | ) | |||||||
Citrix Systems, Inc. | (900 | ) | (56,925 | ) | |||||||
City National Corp. | (600 | ) | (47,532 | ) | |||||||
Clorox Co. | (400 | ) | (37,104 | ) | |||||||
Cognizant Technology Solutions Corp., Class A | (1,600 | ) | (161,568 | ) | |||||||
Constellation Brands, Inc., Class A | (600 | ) | (42,228 | ) | |||||||
Cullen/Frost Bankers, Inc. | (600 | ) | (44,658 | ) | |||||||
Darden Restaurants, Inc. | (1,100 | ) | (59,807 | ) | |||||||
DENTSPLY International, Inc. | (900 | ) | (43,632 | ) | |||||||
DexCom, Inc. | (1,300 | ) | (46,033 | ) |
Shares | Value | ||||||||||
Discovery Communications, Inc., Class A | (400 | ) | $ | (36,168 | ) | ||||||
Douglas Emmett, Inc. | (1,000 | ) | (23,290 | ) | |||||||
Ecolab, Inc. | (600 | ) | (62,562 | ) | |||||||
Electronic Arts, Inc. | (3,100 | ) | (71,114 | ) | |||||||
Endo Health Solutions, Inc. | (900 | ) | (60,714 | ) | |||||||
Equity Residential | (500 | ) | (25,935 | ) | |||||||
Fastenal Co. | (2,000 | ) | (95,020 | ) | |||||||
Federal Realty Investment Trust | (200 | ) | (20,282 | ) | |||||||
First Solar, Inc. | (1,400 | ) | (76,496 | ) | |||||||
Fiserv, Inc. | (2,000 | ) | (118,100 | ) | |||||||
Gannett Co., Inc. | (3,600 | ) | (106,488 | ) | |||||||
Genuine Parts Co. | (900 | ) | (74,871 | ) | |||||||
Groupon, Inc. | (3,800 | ) | (44,726 | ) | |||||||
Hartford Financial Services Group, Inc. | (1,900 | ) | (68,837 | ) | |||||||
Healthcare Services Group, Inc. | (2,700 | ) | (76,599 | ) | |||||||
Hewlett-Packard Co. | (4,700 | ) | (131,506 | ) | |||||||
Hyatt Hotels Corp., Class A | (2,200 | ) | (108,812 | ) | |||||||
IDEXX Laboratories, Inc. | (850 | ) | (90,414 | ) | |||||||
Intel Corp. | (6,400 | ) | (166,144 | ) | |||||||
Johnson Controls, Inc. | (1,000 | ) | (51,300 | ) | |||||||
Kansas City Southern | (800 | ) | (99,064 | ) | |||||||
Lamar Advertising Co., Class A | (1,200 | ) | (62,700 | ) | |||||||
Lexmark International, Inc., Class A | (2,100 | ) | (74,592 | ) | |||||||
McCormick & Co. Inc. (Non-voting) | (600 | ) | (41,352 | ) | |||||||
Meridian Bioscience, Inc. | (2,300 | ) | (61,019 | ) | |||||||
Mettler-Toledo International, Inc. | (560 | ) | (135,850 | ) | |||||||
NCR Corp. | (2,100 | ) | (71,526 | ) | |||||||
Netflix, Inc. | (110 | ) | (40,499 | ) | |||||||
New York Community Bancorp, Inc. | (4,800 | ) | (80,880 | ) | |||||||
Northern Trust Corp. | (700 | ) | (43,323 | ) | |||||||
Owens & Minor, Inc. | (2,400 | ) | (87,744 | ) | |||||||
PAREXEL International Corp. | (700 | ) | (31,626 | ) | |||||||
Patterson Cos., Inc. | (900 | ) | (37,080 | ) | |||||||
PerkinElmer, Inc. | (1,000 | ) | (41,230 | ) | |||||||
Perrigo Co. PLC | (600 | ) | (92,076 | ) | |||||||
Pitney Bowes, Inc. | (5,800 | ) | (135,140 | ) | |||||||
Praxair, Inc. | (500 | ) | (65,015 | ) | |||||||
Priceline.com, Inc. | (35 | ) | (40,684 | ) | |||||||
Public Storage | (250 | ) | (37,630 | ) | |||||||
QLogic Corp. | (6,400 | ) | (75,712 | ) | |||||||
RadioShack Corp. | (15,700 | ) | (40,820 | ) | |||||||
Red Hat, Inc. | (2,600 | ) | (145,704 | ) | |||||||
Rockwell Automation, Inc. | (500 | ) | (59,080 | ) | |||||||
Sagent Pharmaceuticals, Inc. | (1,700 | ) | (43,146 | ) | |||||||
SBA Communications Corp., Class A | (1,000 | ) | (89,840 | ) | |||||||
Sigma-Aldrich Corp. | (600 | ) | (56,406 | ) | |||||||
Signature Bank | (800 | ) | (85,936 | ) | |||||||
Starwood Hotels & Resorts Worldwide, Inc. | (800 | ) | (63,560 | ) | |||||||
Stericycle, Inc. | (500 | ) | (58,085 | ) | |||||||
STERIS Corp. | (950 | ) | (45,648 | ) |
13
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Investments sold short—(Concluded) | |||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Stifel Financial Corp. | (1,000 | ) | $ | (47,920 | ) | ||||||
SVB Financial Group | (900 | ) | (94,374 | ) | |||||||
T. Rowe Price Group, Inc. | (1,100 | ) | (92,147 | ) | |||||||
Taubman Centers, Inc. | (300 | ) | (19,176 | ) | |||||||
TCF Financial Corp. | (4,900 | ) | (79,625 | ) | |||||||
TD Ameritrade Holding Corp. | (2,300 | ) | (70,472 | ) | |||||||
TearLab Corp. | (4,400 | ) | (41,096 | ) | |||||||
Tesla Motors, Inc. | (100 | ) | (15,038 | ) | |||||||
Under Armour, Inc., Class A | (600 | ) | (52,380 | ) | |||||||
United Therapeutics Corp. | (700 | ) | (79,156 | ) | |||||||
Valley National Bancorp | (5,600 | ) | (56,672 | ) | |||||||
WebMD Health Corp. | (1,100 | ) | (43,450 | ) | |||||||
Wendy's Corp. | (4,300 | ) | (37,496 | ) | |||||||
Whole Foods Market, Inc. | (800 | ) | (46,264 | ) |
Shares | Value | ||||||||||
Williams-Sonoma, Inc. | (700 | ) | $ | (40,796 | ) | ||||||
Wright Medical Group, Inc. | (2,100 | ) | (64,491 | ) | |||||||
Xerox Corp. | (10,800 | ) | (131,436 | ) | |||||||
Zimmer Holdings, Inc. | (500 | ) | (46,595 | ) | |||||||
Zions Bancorporation | (2,800 | ) | (83,888 | ) | |||||||
Total United States common stocks | (6,740,577 | ) | |||||||||
Total investments sold short (proceeds $9,103,275) | (10,688,449 | ) | |||||||||
Total investments, net of investments sold short: 60.25% | 9,753,966 | ||||||||||
Cash and other assets, less liabilities: 39.75% | 6,436,354 | ||||||||||
Net assets: 100.00% | $ | 16,190,320 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 2,897,463 | |||||
Gross unrealized depreciation | (245,821 | ) | |||||
Net unrealized appreciation of investments | $ | 2,651,642 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 61. Portfolio footnotes begin on page 17.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
CSI | CHF | 50,000 | USD | 56,131 | 01/06/14 | $ | 78 | ||||||||||||
JPMCB | AUD | 335,000 | USD | 304,594 | 01/22/14 | 5,854 | |||||||||||||
JPMCB | GBP | 385,000 | USD | 615,334 | 01/22/14 | (22,123 | ) | ||||||||||||
JPMCB | JPY | 72,900,000 | USD | 735,395 | 01/22/14 | 43,087 | |||||||||||||
JPMCB | TRY | 600,871 | EUR | 216,969 | 01/22/14 | 20,006 | |||||||||||||
JPMCB | TRY | 85,000 | USD | 39,873 | 01/22/14 | 480 | |||||||||||||
JPMCB | USD | 621,242 | EUR | 460,000 | 01/22/14 | 11,573 | |||||||||||||
Net unrealized appreciation on forward foreign currency contracts | $ | 58,955 |
14
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio Swap Outstanding3
Counterparty | Description | Termination Date4 | Value | ||||||||||||
CSI | The Fund receives or pays the total return on a portfolio of long and | Twelve month maturities | $ 49,719 |
Additional Information for Portfolio Swap
Portfolio swap positions | Notional Values5 | Current Values6 | Value7 | ||||||||||||
Long Positions | |||||||||||||||
United Kingdom | |||||||||||||||
Berkeley Group Holdings PLC | $ | 59,421 | $ | 66,941 | $ | 7,520 | |||||||||
BT Group PLC | 87,957 | 89,516 | 1,559 | ||||||||||||
Filtrona PLC | 133,547 | 139,828 | 6,281 | ||||||||||||
GlaxoSmithKline PLC | 81,737 | 81,391 | (346 | ) | |||||||||||
Halma PLC | 60,257 | 61,911 | 1,654 | ||||||||||||
Legal & General Group PLC | 153,539 | 159,781 | 6,242 | ||||||||||||
Meggitt PLC | 99,803 | 105,406 | 5,603 | ||||||||||||
Mondi PLC | 77,979 | 81,133 | 3,154 | ||||||||||||
Nichols PLC | 71,069 | 70,841 | (228 | ) | |||||||||||
Pearson PLC | 104,285 | 103,592 | (693 | ) | |||||||||||
Playtech Ltd. | 86,198 | 90,727 | 4,529 | ||||||||||||
Prudential PLC | 61,456 | 62,996 | 1,540 | ||||||||||||
Qinetiq Group PLC | 122,341 | 122,068 | (273 | ) | |||||||||||
Reckitt Benckiser Group PLC | 133,193 | 130,087 | (3,106 | ) | |||||||||||
Rightmove PLC | 87,606 | 94,512 | 6,906 | ||||||||||||
Taylor Wimpey PLC | 57,058 | 58,329 | 1,271 | ||||||||||||
William Hill PLC | 85,992 | 90,512 | 4,520 | ||||||||||||
WPP PLC | 93,826 | 95,819 | 1,993 | ||||||||||||
Total United Kingdom | 1,657,264 | 1,705,390 | 48,126 | ||||||||||||
Total Long Positions of Portfolio Swap | 1,657,264 | 1,705,390 | 48,126 |
15
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio swap positions | Notional Values5 | Current Values6 | Value7 | ||||||||||||
Short Positions | |||||||||||||||
Hong Kong | |||||||||||||||
China Coal Energy | $ | (104,932 | ) | $ | (89,847 | ) | $ | 15,085 | |||||||
South Korea | |||||||||||||||
Hyundai Steel Co., Ltd | (56,435 | ) | (59,122 | ) | (2,687 | ) | |||||||||
Korean Air Lines Co., Ltd | (95,857 | ) | (100,339 | ) | (4,482 | ) | |||||||||
Total South Korea | (152,292 | ) | (159,461 | ) | (7,169 | ) | |||||||||
Taiwan | |||||||||||||||
Taiwan Glass Industry Corp. | (110,555 | ) | (119,015 | ) | (8,460 | ) | |||||||||
United Kingdom | |||||||||||||||
Anglo American PLC | (69,721 | ) | (69,751 | ) | (30 | ) | |||||||||
AstraZeneca PLC | (55,770 | ) | (56,410 | ) | (640 | ) | |||||||||
Croda International PLC | (48,185 | ) | (50,899 | ) | (2,714 | ) | |||||||||
De La Rue PLC | (55,985 | ) | (55,039 | ) | 946 | ||||||||||
J Sainsbury PLC | (53,521 | ) | (51,684 | ) | 1,837 | ||||||||||
Total United Kingdom | (283,182 | ) | (283,783 | ) | (601 | ) | |||||||||
Total Short Positions of Portfolio Swap | (650,961 | ) | (652,106 | ) | (1,145 | ) | |||||||||
Net Long and Short Positions of Portfolio Swap | 1,006,303 | 1,053,284 | 46,981 | ||||||||||||
Financing Costs and Other Receivables | 2,738 | ||||||||||||||
Net Swap Agreement, at value | $ | 49,719 |
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 14,871,515 | $ | — | $ | — | $ | 14,871,515 | |||||||||||
Preferred stock | 111,926 | — | — | 111,926 | |||||||||||||||
Rights | 1,750 | — | — | 1,750 | |||||||||||||||
Short-term investment | — | 5,457,224 | — | 5,457,224 | |||||||||||||||
Common stocks sold short | (10,688,449 | ) | — | — | (10,688,449 | ) | |||||||||||||
Forward foreign currency contracts, net | — | 58,955 | — | 58,955 | |||||||||||||||
Swap agreements, net | — | 49,719 | — | 49,719 | |||||||||||||||
Total | $ | 4,296,742 | $ | 5,565,898 | $ | — | $ | 9,862,640 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
16
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio footnotes
* 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 investment in a fund 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 4,066,550 | $ | 6,118,919 | $ | 4,728,245 | $ | 5,457,224 | $ | 2,681 |
3 Illiquid investment. At December 31, 2013, the value of these investments amounted to $49,719 or 0.31% of net assets.
4 The twelve month maturity dates are measured from the commencement of investment in each underlying portfolio swap market.
5 Notional value represents the market value (including any fees or commissions) of the long and short positions at the time they are established.
6 Current value represents the market value of these positions based on the securities' last sale or closing price on the principal exchange on which the securities are traded.
7 Value represents the unrealized gain (loss) of the positions at December 31, 2013.
See accompanying notes to financial statements.
17
UBS Global Sustainable Equity Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Global Sustainable Equity Fund (the "Fund") (previously UBS International Equity Fund) returned 14.27% (Class A shares returned 7.97% after the deduction of the maximum sales charge), while Class Y shares returned 14.34%. The Fund's new benchmark, the MSCI World Free Index (net) (the "Index") returned 16.83%, whereas the Fund's previous benchmark, the MSCI World Free ex USA Index (net), returned 17.49% 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 21; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
Special Fund Update
The Board of Trustees of The UBS Funds approved changes to UBS International Equity Fund, including changing its name, its listed portfolio managers and adjusting certain investment policies to allow the Fund to pursue a sustainable investment approach. These changes went into effect on October 28, 2013. Specifically:
• The Fund's name changed from UBS International Equity Fund to UBS Global Sustainable Equity Fund.
• The Fund's benchmark changed from the MSCI World Free ex USA Index (net), to the MSCI World Free Index (net). This increased the Fund's investable universe and allows for its investment in US equities.
• The investment process for the Fund was enhanced by the use of a positive screening approach that integrates sustainability analysis and a long-term perspective with a rigorous fundamental valuation framework. The investment process for the Fund also incorporates some negative screening for controversial industries.
The Fund posted a strong absolute return but underperformed its benchmark during the reporting period, primarily due to stock selection.
Portfolio performance summary1
What worked
• Several individual stocks had a positive impact on performance.
– Sands China, Ltd. is an owner and operator of resorts and casinos in Macau. Its shares rose sharply given better than expected quarterly operating results. After the Fund transitioned in October, we no longer held our position in Sands China, Ltd.
– German car manufacturer Volkswagen performed well during the reporting period. Its positive performance was supported by increased demand in both the US and Europe.
– Carrefour is the largest retailer in France and the second largest chain store retailer in the world. Its shares rallied sharply during the reporting period. (For additional details, see "Portfolio Highlights.")
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
18
UBS Global Sustainable Equity Fund
– Shares of UK online retailer ASOS performed well, as its results generally surpassed analyst expectations and the company reaffirmed its sales outlook for 2014. Moreover, the company provided more detailed information regarding its Chinese expansion plans, which include a local third party distribution center for next day delivery and the goal of initially carrying 10% of its product range. After the Fund transitioned in October, we no longer held our position in ASOS.
– Sector allocation decisions, overall, positively contributed to relative performance. The Fund's overall sector allocations are a byproduct of its bottom-up stock selection process. During the reporting period, an overweight to information technology and an underweight to utilities were the most beneficial sector allocations for the Fund's relative performance.
What didn't work
• Overall, stock selection detracted from performance during the reporting period.
– Paris-based Technip provides project management, engineering and construction for the energy industry. Its shares declined during the reporting period given weakening exploration activity, falling oil prices and moderating demand from emerging market countries.
– NII Holdings, Inc. is a holding company that, through its various subsidiaries, provides mobile communication services under the Nextel brand in five Latin American countries. The company experienced pricing pressures and lost customers during the reporting period. In addition, its technology transition did not work out as planned. We no longer held our position in NII Holdings, after the Fund transitioned in October.
– PT Bank Rakyat Indonesia is a finance company based in Indonesia. It performed poorly during the reporting period, and we eliminated our position in the holding. (For additional details, see "Portfolio Highlights.")
– Shin-Etsu-Chemical Company is a Japanese supplier of semiconductor materials and polyvinyl chloride. Its shares declined as the company experienced pricing pressures in both of its product lines.
• Sector allocation in several areas detracted from results. Underweights to telecommunication services and industrials were negative for the Fund's relative performance during the reporting period.
Portfolio highlights
– Shares of Carrefour rose sharply during the reporting period. The company has been under new leadership since early 2012 and has been recovering its competitiveness in its domestic market and rationalizing its international footprint. The company's restructuring efforts have helped Carrefour generate improved same-store sales and boost its margins. Investors have also appeared to gain confidence in the economic recovery in Europe.
– US-based retailer Macy's generated strong results during the reporting period. Its shares were supported by improving same-store sales and rising margins.
19
UBS Global Sustainable Equity Fund
– Shares of PT Bank Rakyat Indonesia declined after Indonesia reported a higher than expected current account deficit. The country as a whole also underperformed as investors rotated away from the inflation-protected securities market during the summer following the US Federal Reserve Board's comments about tapering its asset purchase program.
– ServiceSource International Inc. is a US-based software service company. Sentiment for the company weakened as it reported disappointing quarterly results that caused investors to question its future growth prospects.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
20
UBS Global Sustainable Equity Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 14.27 | % | 15.65 | % | 11.90 | % | 5.30 | % | |||||||||||
Class C2 | 13.76 | 14.68 | 11.07 | 4.52 | |||||||||||||||
Class Y3 | 14.34 | 15.87 | 12.18 | 5.53 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 7.97 | % | 9.34 | % | 10.65 | % | 4.71 | % | |||||||||||
Class C2 | 12.76 | 13.68 | 11.07 | 4.52 | |||||||||||||||
The MSCI World Free Index (net)4,6 | 16.83 | % | 26.68 | % | 15.02 | % | 6.98 | % | |||||||||||
The MSCI World Free ex USA Index (net)5,6 | 17.49 | 21.02 | 12.49 | 7.07 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—2.65% and 1.25%; Class C—3.40% and 2.00%; Class Y—2.40% 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 C shares and 1.00% for Class Y shares. This fee waiver and expense arrangement may only be amended or terminated by shareholders.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 distribution and service 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.
3 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 distribution and service fees.
4 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. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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.
5 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. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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 Effective October 28, 2013, the Fund's performance benchmark changed from the MSCI World Free ex USA Index (net) to the MSCI World Index (net) in connection with changes to the Fund's investment strategies effective on that date.
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 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://globalam-us.ubs.com/corpweb/performance.do.
21
UBS Global Sustainable Equity Fund
Top ten equity holdings (unaudited)
As of December 31, 2013
Percentage of net assets | |||||||
BG Group PLC | 2.5 | % | |||||
Koninklijke DSM NV | 2.4 | ||||||
AIA Group Ltd. | 2.4 | ||||||
Nordea Bank AB | 2.3 | ||||||
Check Point Software Technologies Ltd. | 2.3 | ||||||
NXP Semiconductor NV | 2.2 | ||||||
KDDI Corp. | 2.2 | ||||||
Amazon.com, Inc. | 2.2 | ||||||
Telenor ASA | 2.1 | ||||||
Volkswagen AG, Preference shares | 2.1 | ||||||
Total | 22.7 | % |
Country exposure by issuer, top five (unaudited)
As of December 31, 2013
Percentage of net assets | |||||||
United States | 34.2 | % | |||||
Japan | 13.6 | ||||||
United Kingdom | 7.7 | ||||||
Germany | 7.4 | ||||||
France | 5.0 | ||||||
Total | 67.9 | % |
Industry diversification (unaudited)
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Airlines | 0.68 | % | |||||
Automobiles | 2.54 | ||||||
Biotechnology | 5.50 | ||||||
Building products | 1.07 | ||||||
Capital markets | 1.21 | ||||||
Chemicals | 3.14 | ||||||
Commercial banks | 11.75 | ||||||
Commercial services & supplies | 1.19 | ||||||
Computers & peripherals | 2.02 | ||||||
Construction materials | 1.73 | ||||||
Diversified financial services | 1.35 | ||||||
Diversified telecommunication services | 2.12 | ||||||
Electrical equipment | 1.54 | ||||||
Electronic equipment, instruments & components | 1.48 | ||||||
Energy equipment & services | 1.71 | ||||||
Food & staples retailing | 1.77 | ||||||
Food products | 1.51 | ||||||
Health care equipment & supplies | 0.75 | ||||||
Health care providers & services | 1.18 | ||||||
Hotels, restaurants & leisure | 1.85 | ||||||
Household durables | 1.08 | ||||||
Household products | 1.05 | ||||||
Insurance | 5.10 | ||||||
Internet & catalog retail | 2.16 | ||||||
IT services | 0.71 | ||||||
Life sciences tools & services | 1.68 | ||||||
Machinery | 1.76 | ||||||
Marine | 1.34 | ||||||
Media | 1.01 | ||||||
Metals & mining | 0.92 | ||||||
Multiline retail | 2.19 | ||||||
Oil, gas & consumable fuels | 5.88 | ||||||
Personal products | 3.06 | ||||||
Pharmaceuticals | 1.69 | ||||||
Professional services | 2.27 | ||||||
Real estate investment trust (REIT) | 1.68 | ||||||
Road & rail | 1.34 | ||||||
Semiconductors & semiconductor equipment | 6.78 | ||||||
Software | 5.68 | ||||||
Wireless telecommunication services | 2.18 | ||||||
Total common stocks | 95.65 | % | |||||
Preferred stocks | 2.77 | ||||||
Short-term investment | 1.42 | ||||||
Investment of cash collateral from securities loaned | 0.60 | ||||||
Total investments | 100.44 | % | |||||
Liabilities, in excess of cash and other assets | (0.44 | ) | |||||
Net assets | 100.00 | % |
22
UBS Global Sustainable Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 95.65% | |||||||||||
Australia: 1.91% | |||||||||||
Brambles Ltd. | 28,264 | $ | 230,918 | ||||||||
Westfield Group | 15,598 | 140,528 | |||||||||
Total Australia common stocks | 371,446 | ||||||||||
Canada: 2.24% | |||||||||||
Royal Bank of Canada | 3,800 | 255,456 | |||||||||
Teck Resources Ltd., Class B | 6,900 | 179,604 | |||||||||
Total Canada common stocks | 435,060 | ||||||||||
China: 3.09% | |||||||||||
AIA Group Ltd. | 93,438 | 468,739 | |||||||||
Cathay Pacific Airways Ltd. | 62,000 | 131,127 | |||||||||
Total China common stocks | 599,866 | ||||||||||
Denmark: 1.34% | |||||||||||
AP Moeller - Maersk A/S, Class B | 24 | 260,458 | |||||||||
France: 5.02% | |||||||||||
Carrefour SA | 8,673 | 343,745 | |||||||||
Schneider Electric SA | 3,427 | 298,901 | |||||||||
Technip SA | 3,454 | 331,951 | |||||||||
Total France common stocks | 974,597 | ||||||||||
Germany: 5.33% | |||||||||||
Deutsche Bank AG | 4,929 | 235,125 | |||||||||
HeidelbergCement AG | 4,426 | 335,800 | |||||||||
Infineon Technologies AG | 18,578 | 198,328 | |||||||||
SAP AG | 3,101 | 265,818 | |||||||||
Total Germany common stocks | 1,035,071 | ||||||||||
Israel: 3.25% | |||||||||||
Check Point Software Technologies Ltd.* | 6,800 | 438,736 | |||||||||
Mellanox Technologies Ltd.* | 4,800 | 191,856 | |||||||||
Total Israel common stocks | 630,592 | ||||||||||
Italy: 0.97% | |||||||||||
Intesa Sanpaolo SpA | 76,690 | 189,271 | |||||||||
Japan: 13.58% | |||||||||||
Hitachi Ltd. | 23,000 | 173,849 | |||||||||
Kao Corp. | 10,000 | 314,310 | |||||||||
KDDI Corp. | 6,900 | 423,920 | |||||||||
ORIX Corp. | 14,900 | 261,326 | |||||||||
Panasonic Corp. | 18,000 | 209,211 | |||||||||
Shin-Etsu Chemical Co., Ltd. | 2,400 | 139,930 | |||||||||
Shiseido Co., Ltd. | 17,500 | 281,004 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 6,300 | 324,243 | |||||||||
THK Co., Ltd. | 9,000 | 224,252 | |||||||||
Toyota Motor Corp. | 4,700 | 286,525 | |||||||||
Total Japan common stocks | 2,638,570 |
Shares | Value | ||||||||||
Netherlands: 4.66% | |||||||||||
Koninklijke DSM NV | 5,965 | $ | 469,058 | ||||||||
NXP Semiconductor NV* | 9,500 | 436,335 | |||||||||
Total Netherlands common stocks | 905,393 | ||||||||||
Norway: 3.39% | |||||||||||
Statoil ASA | 10,128 | 245,464 | |||||||||
Telenor ASA | 17,302 | 412,489 | |||||||||
Total Norway common stocks | 657,953 | ||||||||||
Spain: 2.35% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 16,289 | 200,514 | |||||||||
Banco Santander SA | 28,537 | 255,415 | |||||||||
Total Spain common stocks | 455,929 | ||||||||||
Sweden: 3.57% | |||||||||||
Lundin Petroleum AB* | 12,254 | 238,913 | |||||||||
Nordea Bank AB | 33,713 | 454,182 | |||||||||
Total Sweden common stocks | 693,095 | ||||||||||
Switzerland: 3.08% | |||||||||||
Novartis AG | 4,124 | 329,162 | |||||||||
SGS SA | 117 | 269,137 | |||||||||
Total Switzerland common stocks | 598,299 | ||||||||||
United Kingdom: 7.71% | |||||||||||
Aviva PLC | 41,586 | 309,683 | |||||||||
BG Group PLC | 22,331 | 479,802 | |||||||||
Compass Group PLC | 22,398 | 359,031 | |||||||||
Intertek Group PLC | 3,278 | 170,880 | |||||||||
Premier Oil PLC | 34,153 | 177,359 | |||||||||
Total United Kingdom common stocks | 1,496,755 | ||||||||||
United States: 34.16% | |||||||||||
Acorda Therapeutics, Inc.* | 10,100 | 294,920 | |||||||||
Adobe Systems, Inc.* | 3,400 | 203,592 | |||||||||
Agilent Technologies, Inc. | 2,300 | 131,537 | |||||||||
Alexion Pharmaceuticals, Inc.* | 1,720 | 228,863 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 5,200 | 334,516 | |||||||||
Amazon.com, Inc.* | 1,050 | 418,729 | |||||||||
Apple, Inc. | 700 | 392,777 | |||||||||
Applied Materials, Inc. | 8,400 | 148,596 | |||||||||
Baxter International, Inc. | 2,100 | 146,055 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 1,570 | 194,068 | |||||||||
Broadcom Corp., Class A | 11,500 | 340,975 | |||||||||
Cinemark Holdings, Inc. | 5,900 | 196,647 | |||||||||
Digital Realty Trust, Inc.1 | 3,800 | 186,656 | |||||||||
General Motors Co.* | 5,050 | 206,394 | |||||||||
Gilead Sciences, Inc.* | 1,700 | 127,755 | |||||||||
Jabil Circuit, Inc. | 6,500 | 113,360 | |||||||||
JC Penney Co., Inc.* | 13,200 | 120,780 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 45,900 | 82,620 |
23
UBS Global Sustainable Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Macy's, Inc. | 5,700 | $ | 304,380 | ||||||||
Mondelez International, Inc., Class A | 8,300 | 292,990 | |||||||||
Norfolk Southern Corp. | 2,800 | 259,924 | |||||||||
Owens Corning* | 5,100 | 207,672 | |||||||||
PNC Financial Services Group, Inc. | 3,200 | 248,256 | |||||||||
Principal Financial Group, Inc. | 4,320 | 213,019 | |||||||||
Procter & Gamble Co. | 2,500 | 203,525 | |||||||||
ServiceSource International, Inc.* | 16,500 | 138,270 | |||||||||
Symantec Corp. | 8,300 | 195,714 | |||||||||
Timken Co. | 2,150 | 118,401 | |||||||||
UnitedHealth Group, Inc. | 3,050 | 229,665 | |||||||||
US Bancorp | 8,800 | 355,520 | |||||||||
Total United States common stocks | 6,636,176 | ||||||||||
Total common stocks (cost $17,484,340) | 18,578,531 | ||||||||||
Preferred stocks: 2.77% | |||||||||||
Brazil: 0.71% | |||||||||||
Banco Bradesco SA, Preference Shares | 11,200 | 138,098 |
Shares | Value | ||||||||||
Germany: 2.06% | |||||||||||
Volkswagen AG, Preference shares | 1,427 | $ | 400,772 | ||||||||
Total preferred stocks (cost $495,955) | 538,870 | ||||||||||
Short-term investment: 1.42% | |||||||||||
Investment company: 1.42% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $275,656) | 275,656 | 275,656 | |||||||||
Investment of cash collateral from securities loaned: 0.60% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $116,450) | 116,450 | 116,450 | |||||||||
Total investments: 100.44% (cost $18,372,401) | 19,509,507 | ||||||||||
Liabilities, in excess of cash and other assets: (0.44)% | (85,239 | ) | |||||||||
Net assets: 100.00% | $ | 19,424,268 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 1,533,776 | |||||
Gross unrealized depreciation | (396,670 | ) | |||||
Net unrealized appreciation of investments | $ | 1,137,106 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 61. Portfolio footnotes begin on page 25.
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 18,578,531 | $ | — | $ | — | $ | 18,578,531 | |||||||||||
Preferred stocks | 538,870 | — | — | 538,870 | |||||||||||||||
Short-term investment | — | 275,656 | — | 275,656 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 116,450 | — | 116,450 | |||||||||||||||
Total | $ | 19,117,401 | $ | 392,106 | $ | — | $ | 19,509,507 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
24
UBS Global Sustainable Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at December 31, 2013.
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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 385,436 | $ | 3,617,703 | $ | 3,727,483 | $ | 275,656 | $ | 128 | |||||||||||||
UBS Private Money Market Fund LLCa | 567,869 | 4,338,644 | 4,790,063 | 116,450 | 16 | ||||||||||||||||||
$ | 953,305 | $ | 7,956,347 | $ | 8,517,546 | $ | 392,106 | $ | 144 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
25
UBS U.S. Defensive Equity Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS U.S. Defensive Equity Fund (the "Fund") returned 10.45% (Class A shares returned 4.37% after the deduction of the maximum sales charge), while Class Y shares returned 10.65%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 16.86% 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 29; 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 lagged the Index primarily due to stock selection decisions.
Portfolio performance summary1
What worked
• Amazon.com was the largest contributor to the Fund's performance during the six months. The company's stock price rose nearly 28% during the fourth quarter of 2013. Amazon began shipping its new Kindle Fire HD in October 2013 and its new Kindle Fire HDX in November 2013. The stock benefited from strong holiday season sales and continued growth in its Prime Membership subscriber base. (For details, see "Portfolio highlights.")
• Several technology stocks contributed to the Fund's relative performance.
– Shares of Micron Technology rose as the company posted solid financial results during the reporting period. Micron is completing its acquisition of Elpida at the same time the industry has seen significant consolidation, resulting in increased pricing power. The stock price reached a new 52-week high in November 2013, after investor David Einhorn disclosed that he owned a 2% stake in the company. (For details, see "Portfolio highlights.")
– NXP Semiconductors was a top holding for the Fund. Shares of NXP gained after the company announced second quarter earnings that were in line with the high end of guidance. NXP achieved double-digit revenue growth for both the sequential and year-over-year periods, including better-than-expected results in the company's automotive business.
– Adobe Systems positively contributed to Fund performance during the six months. The company posted strong results following its successful transition to a subscription-based business model. Shares traded higher as the market rewarded this shift.
• Stock selection in the healthcare sector was positive for relative performance.
– The stock price of Alnylam Pharmaceuticals was up more than 106% during the third quarter of 2013. The company reported positive data in its effort to treat TTR-mediated amyloidosis (ATTR), a major unmet medical need with significant morbidity and mortality. Analysts believe that there is a high probability of Alnylam's treatment becoming a marketed product in 2014.
– Shares of Ligand Pharmaceuticals performed strongly in 2013, based on positive pretrial data for its type 1 diabetes treatment and the potentially lucrative licensing of Kyprolis, a multiple myeloma treatment. We sold out of our position in Ligand, during the reporting period, as it reached our estimate of fair value.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
26
UBS U.S. Defensive Equity Fund
What didn't work
• Certain individual stock positions detracted from relative performance during the six-month period.
– NII Holdings was the top detractor for the reporting period. The stock was down due to disappointing earnings results for the third quarter and a net subscriber loss. The company's consolidated operating revenue failed to meet investor expectations. In addition, although NII met all of its network building goals, it failed to address challenges in Mexico and Brazil. We believe that there are signs of improvement in these markets, and we continue to watch developments closely. We also believe that there is significant asset value in the company's network, which should provide protection against further downside.
– J. C. Penney detracted from Fund returns after reporting earnings and revenue that were below expectations. Activist investor Bill Ackman publicly criticized the company's strategy and subsequently resigned from his seat on its board. The company attempted to raise cash by selling roughly $800 million of new stock before the critical holiday shopping season, eroding investor confidence. While the mid-tier department store faces some challenges, we believe that the current valuation does not reflect J.C. Penney's future cash generation potential.
– Digital Realty Trust, Inc., a real estate investment trust ("REIT"), detracted from Fund performance. While fundamental concerns about the wholesale data center industry continue to linger, we see encouraging long-term prospects for the business. We believe that Digital Realty will benefit from improved occupancy levels at higher rents. The REIT's 6% dividend yield offers additional support for the stock price.
– Shares of Philip Morris International Inc. declined as the consumer staples sector underperformed. Investor sentiment about the decline in the number of smokers worsened, leading to poor performance for the company's stock price. However, we believe that Philip Morris is attractively valued. (For details, see "Portfolio highlights.")
– The stock price of Edison International, a Northern California utility, came under pressure during the reporting period, as higher interest rates caused many utilities to underperform. We sold out of our position in Edison International during the reporting period, as we believed there were more compelling opportunities elsewhere.
Portfolio highlights
• We believe that Amazon.com will sustain its high revenue growth rate due to the increased number of Amazon Prime customers, who demonstrate high repeat purchase patterns. We expect the company to increase the number of product lines served and the speed of deliveries through the expansion of its fulfillment network. Amazon appears well-positioned to defend its books, music and movies business, and plans to continue to innovate with the Kindle. We believe that Amazon will aggressively support the tablets and smartphone devices of third parties. As Amazon gains scale across its businesses, we expect operating margins to increase.
• Micron Technology is a leading manufacturer of semiconductor memories, including DRAM and NAND Flash. The markets for these products are extremely cyclical, driven by periods of over/underspending on manufacturing capacity. This leads to over/under supply and falling/rising average selling prices. The industry has turned of late, and is now experiencing growth in demand and increases in selling prices. The DRAM industry, which used to include more than 20 participants, has undergone significant consolidation. Three players, including Micron following the Elpida acquisition, are positioned to capture 97% of industry revenues. We believe that Micron will benefit from the cyclical turnaround in both DRAM and NAND Flash memory.
27
UBS U.S. Defensive Equity Fund
• We believe that the market underappreciates the persistence and predictability of Philip Morris's cash flows and returns to shareholders. While governments have an interest in public health and declining tobacco consumption, they have become reliant on steady and predictable tobacco tax flows. Philip Morris has proven skillful at modeling cigarette demand, even with variables such as regulation, taxation and demographics. Over time, governments are learning to trust the company's models. Governments have learned that aggressive tax increases tend to encourage the illicit cigarette trade, which reduces tax revenue and increases consumption. Philip Morris's regulatory and consumption risk is well diversified, as the company operates in more than 180 markets globally.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
28
UBS U.S. Defensive Equity Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | Inception1 | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A2 | 10.45 | % | 27.97 | % | 15.48 | % | 3.65 | % | |||||||||||
Class C3 | 10.02 | 26.98 | 14.61 | 2.87 | |||||||||||||||
Class Y4 | 10.65 | 28.36 | 15.80 | 3.90 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A2 | 4.37 | % | 20.97 | % | 14.18 | % | 2.85 | % | |||||||||||
Class C3 | 9.02 | 25.98 | 14.61 | 2.87 | |||||||||||||||
Russell 1000 Index5 | 16.86 | % | 33.11 | % | 18.59 | % | 7.18 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—4.79% and 2.81%; Class C—5.61% and 3.59%; Class Y—4.51% and 2.57%. 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS U.S. Defensive Equity 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 distribution and service 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 distribution and service fees.
5 The Russell 1000 Index measures 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 US market. 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. 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://globalam-us.ubs.com/corpweb/performance.do.
29
UBS U.S. Defensive Equity Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Apple, Inc. | 4.4 | % | |||||
Mondelez International, Inc., Class A | 3.8 | ||||||
Philip Morris International, Inc. | 3.5 | ||||||
General Motors Co. | 3.5 | ||||||
Yum! Brands, Inc. | 3.4 | ||||||
Hertz Global Holdings, Inc. | 3.3 | ||||||
Citigroup, Inc. | 3.3 | ||||||
Amazon.com, Inc. | 3.1 | ||||||
Comcast Corp., Class A | 3.1 | ||||||
JPMorgan Chase & Co. | 2.8 | ||||||
Total | 34.2 | % |
1 Only long positions are considered for top ten holdings.
30
UBS U.S. Defensive Equity Fund
Industry diversification (unaudited)
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Aerospace & defense | 2.23 | % | |||||
Automobiles | 3.46 | ||||||
Biotechnology | 5.68 | ||||||
Building products | 1.03 | ||||||
Capital markets | 3.69 | ||||||
Chemicals | 1.56 | ||||||
Commercial banks | 3.90 | ||||||
Commercial services & supplies | 1.86 | ||||||
Computers & peripherals | 6.27 | ||||||
Construction materials | 2.07 | ||||||
Consumer finance | 1.69 | ||||||
Diversified financial services | 6.12 | ||||||
Electronic equipment, instruments & components | 1.13 | ||||||
Energy equipment & services | 6.13 | ||||||
Food products | 3.84 | ||||||
Health care equipment & supplies | 2.23 | ||||||
Health care providers & services | 3.85 | ||||||
Hotels, restaurants & leisure | 3.43 | ||||||
Industrial conglomerates | 2.47 | ||||||
Insurance | 5.74 | ||||||
Internet & catalog retail | 3.14 | ||||||
IT services | 1.57 | ||||||
Life sciences tools & services | 1.07 | ||||||
Machinery | 1.68 | ||||||
Media | 8.13 | ||||||
Multiline retail | 2.49 | ||||||
Oil, gas & consumable fuels | 4.16 | ||||||
Pharmaceuticals | 12.06 | ||||||
Real estate investment trust (REIT) | 3.33 | ||||||
Road & rail | 5.05 | ||||||
Semiconductors & semiconductor equipment | 8.80 | ||||||
Software | 5.36 | ||||||
Textiles, apparel & luxury goods | 1.65 | ||||||
Tobacco | 3.55 | ||||||
Wireless telecommunication services | 0.56 | ||||||
Total common stocks | 130.98 | % | |||||
Short-term investment | 0.42 | ||||||
Options purchased | 0.07 | ||||||
Total investments before investments sold short | 131.47 | % |
Investments sold short | |||||||
Common stocks | |||||||
Beverages | (0.69 | )% | |||||
Biotechnology | (1.50 | ) | |||||
Capital markets | (1.85 | ) | |||||
Chemicals | (1.03 | ) | |||||
Commercial banks | (1.74 | ) | |||||
Commercial services & supplies | (1.48 | ) | |||||
Computers & peripherals | (1.11 | ) | |||||
Consumer finance | (0.36 | ) | |||||
Diversified financial services | (0.43 | ) | |||||
Electronic equipment, instruments & components | (0.33 | ) | |||||
Food & staples retailing | (0.27 | ) | |||||
Health care equipment & supplies | (3.52 | ) | |||||
Health care providers & services | (1.40 | ) | |||||
Hotels, restaurants & leisure | (2.33 | ) | |||||
Household products | (0.37 | ) | |||||
Insurance | (0.95 | ) | |||||
Internet & catalog retail | (0.83 | ) | |||||
Internet software & services | (0.42 | ) | |||||
IT services | (0.54 | ) | |||||
Life sciences tools & services | (1.06 | ) | |||||
Media | (2.23 | ) | |||||
Office electronics | (0.65 | ) | |||||
Pharmaceuticals | (1.89 | ) | |||||
Real estate investment trust (REIT) | (0.17 | ) | |||||
Road & rail | (0.41 | ) | |||||
Semiconductors & semiconductor equipment | (1.87 | ) | |||||
Software | (0.79 | ) | |||||
Specialty retail | (0.32 | ) | |||||
Textiles, apparel & luxury goods | (0.73 | ) | |||||
Trading companies & distributors | (0.35 | ) | |||||
Wireless telecommunication services | (0.36 | ) | |||||
Total investments sold short | (31.98 | )% | |||||
Total investments, net of investments sold short | 99.49 | ||||||
Cash and other assets, less liabilities | 0.51 | ||||||
Net assets | 100.00 | % |
31
UBS U.S. Defensive Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 130.98% | |||||||||||
Aerospace & defense: 2.23% | |||||||||||
General Dynamics Corp.1 | 3,500 | $ | 334,425 | ||||||||
Automobiles: 3.46% | |||||||||||
General Motors Co.* | 12,700 | 519,049 | |||||||||
Biotechnology: 5.68% | |||||||||||
Acorda Therapeutics, Inc.*1 | 6,450 | 188,340 | |||||||||
Alexion Pharmaceuticals, Inc.*1 | 1,400 | 186,284 | |||||||||
Alnylam Pharmaceuticals, Inc.*1 | 1,900 | 122,227 | |||||||||
Bluebird Bio, Inc.*1 | 800 | 16,784 | |||||||||
Epizyme, Inc.*1 | 700 | 14,560 | |||||||||
Gilead Sciences, Inc.*1 | 2,850 | 214,178 | |||||||||
KaloBios Pharmaceuticals, Inc.* | 5,100 | 22,542 | |||||||||
Lexicon Pharmaceuticals, Inc.*1 | 37,050 | 66,690 | |||||||||
MacroGenics, Inc.* | 700 | 19,201 | |||||||||
850,806 | |||||||||||
Building products: 1.03% | |||||||||||
Owens Corning* | 3,800 | 154,736 | |||||||||
Capital markets: 3.69% | |||||||||||
Invesco Ltd.1 | 4,850 | 176,540 | |||||||||
Morgan Stanley1 | 12,000 | 376,320 | |||||||||
552,860 | |||||||||||
Chemicals: 1.56% | |||||||||||
Monsanto Co. | 2,000 | 233,100 | |||||||||
Commercial banks: 3.90% | |||||||||||
US Bancorp1 | 6,600 | 266,640 | |||||||||
Wells Fargo & Co.1 | 7,000 | 317,800 | |||||||||
584,440 | |||||||||||
Commercial services & supplies: 1.86% | |||||||||||
Waste Management, Inc.1 | 6,200 | 278,194 | |||||||||
Computers & peripherals: 6.27% | |||||||||||
Apple, Inc.1 | 1,175 | 659,304 | |||||||||
NetApp, Inc.1 | 6,800 | 279,752 | |||||||||
939,056 | |||||||||||
Construction materials: 2.07% | |||||||||||
Martin Marietta Materials, Inc. | 3,100 | 309,814 | |||||||||
Consumer finance: 1.69% | |||||||||||
Capital One Financial Corp.1 | 3,300 | 252,813 | |||||||||
Diversified financial services: 6.12% | |||||||||||
Citigroup, Inc.1 | 9,519 | 496,035 | |||||||||
JPMorgan Chase & Co.1 | 7,200 | 421,056 | |||||||||
917,091 |
Shares | Value | ||||||||||
Electronic equipment, instruments & components: 1.13% | |||||||||||
Jabil Circuit, Inc. | 9,700 | $ | 169,168 | ||||||||
Energy equipment & services: 6.13% | |||||||||||
Baker Hughes, Inc.1 | 5,000 | 276,300 | |||||||||
Halliburton Co.1 | 3,950 | 200,463 | |||||||||
McDermott International, Inc.*1 | 15,500 | 141,980 | |||||||||
Noble Corp. PLC1 | 8,000 | 299,760 | |||||||||
918,503 | |||||||||||
Food products: 3.84% | |||||||||||
Mondelez International, Inc., Class A1 | 16,300 | 575,390 | |||||||||
Health care equipment & supplies: 2.23% | |||||||||||
Baxter International, Inc.1 | 4,800 | 333,840 | |||||||||
Health care providers & services: 3.85% | |||||||||||
Cardinal Health, Inc.1 | 3,150 | 210,452 | |||||||||
Envision Healthcare Holdings, Inc.*1 | 3,100 | 110,112 | |||||||||
UnitedHealth Group, Inc.1 | 3,400 | 256,020 | |||||||||
576,584 | |||||||||||
Hotels, restaurants & leisure: 3.43% | |||||||||||
Yum! Brands, Inc.1 | 6,800 | 514,148 | |||||||||
Industrial conglomerates: 2.47% | |||||||||||
Danaher Corp.1 | 4,800 | 370,560 | |||||||||
Insurance: 5.74% | |||||||||||
Aon PLC | 2,500 | 209,725 | |||||||||
Lincoln National Corp.1 | 5,650 | 291,653 | |||||||||
MetLife, Inc.1 | 6,650 | 358,568 | |||||||||
859,946 | |||||||||||
Internet & catalog retail: 3.14% | |||||||||||
Amazon.com, Inc.*1 | 1,180 | 470,572 | |||||||||
IT services: 1.57% | |||||||||||
ServiceSource International, Inc.*1 | 28,150 | 235,897 | |||||||||
Life sciences tools & services: 1.07% | |||||||||||
Bio-Rad Laboratories, Inc., Class A*1 | 1,300 | 160,693 | |||||||||
Machinery: 1.68% | |||||||||||
Illinois Tool Works, Inc.1 | 3,000 | 252,240 | |||||||||
Media: 8.13% | |||||||||||
Comcast Corp., Class A1 | 9,000 | 467,685 | |||||||||
Time Warner, Inc.1 | 3,050 | 212,646 | |||||||||
Viacom, Inc., Class B1 | 2,300 | 200,882 | |||||||||
Walt Disney Co. | 4,400 | 336,160 | |||||||||
1,217,373 |
32
UBS U.S. Defensive Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Multiline retail: 2.49% | |||||||||||
JC Penney Co., Inc.*1 | 11,300 | $ | 103,395 | ||||||||
Macy's, Inc.1 | 5,050 | 269,670 | |||||||||
373,065 | |||||||||||
Oil, gas & consumable fuels: 4.16% | |||||||||||
EOG Resources, Inc.1 | 1,300 | 218,192 | |||||||||
Exxon Mobil Corp.1 | 4,000 | 404,800 | |||||||||
622,992 | |||||||||||
Pharmaceuticals: 12.06% | |||||||||||
Allergan, Inc.1 | 1,400 | 155,512 | |||||||||
Eli Lilly & Co.1 | 5,600 | 285,600 | |||||||||
Hospira, Inc.*1 | 5,500 | 227,040 | |||||||||
Impax Laboratories, Inc.*1 | 9,300 | 233,802 | |||||||||
Johnson & Johnson1 | 800 | 73,272 | |||||||||
Mallinckrodt PLC* | 2,600 | 135,876 | |||||||||
Merck & Co., Inc.1 | 6,050 | 302,802 | |||||||||
Salix Pharmaceuticals Ltd.*1 | 2,450 | 220,353 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 4,300 | 172,344 | |||||||||
1,806,601 | |||||||||||
Real estate investment trust (REIT): 3.33% | |||||||||||
American Campus Communities, Inc.1 | 2,000 | 64,420 | |||||||||
Digital Realty Trust, Inc.1 | 4,500 | 221,040 | |||||||||
Simon Property Group, Inc. | 1,400 | 213,024 | |||||||||
498,484 | |||||||||||
Road & rail: 5.05% | |||||||||||
Hertz Global Holdings, Inc.*1 | 17,350 | 496,557 | |||||||||
Norfolk Southern Corp.1 | 2,800 | 259,924 | |||||||||
756,481 | |||||||||||
Semiconductors & semiconductor equipment: 8.80% | |||||||||||
Applied Materials, Inc. | 14,900 | 263,581 | |||||||||
Broadcom Corp., Class A1 | 10,700 | 317,255 | |||||||||
Freescale Semiconductor Ltd.*1 | 3,250 | 52,162 | |||||||||
Mellanox Technologies Ltd.* | 4,500 | 179,865 | |||||||||
Micron Technology, Inc.*1 | 11,600 | 252,416 | |||||||||
NXP Semiconductor NV*1 | 5,500 | 252,615 | |||||||||
1,317,894 | |||||||||||
Software: 5.36% | |||||||||||
Adobe Systems, Inc.*1 | 5,700 | 341,316 | |||||||||
Check Point Software Technologies Ltd.*1 | 4,000 | 258,080 | |||||||||
Symantec Corp.1 | 8,600 | 202,788 | |||||||||
802,184 | |||||||||||
Textiles, apparel & luxury goods: 1.65% | |||||||||||
Ralph Lauren Corp.1 | 1,400 | 247,198 |
Shares | Value | ||||||||||
Tobacco: 3.55% | |||||||||||
Philip Morris International, Inc.1 | 6,100 | $ | 531,493 | ||||||||
Wireless telecommunication services: 0.56% | |||||||||||
NII Holdings, Inc.*1 | 30,250 | 83,188 | |||||||||
Total common stocks (cost $14,891,079) | 19,620,878 | ||||||||||
Short-term investment: 0.42% | |||||||||||
Investment company: 0.42% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $63,109) | 63,109 | 63,109 | |||||||||
Number of contracts | |||||||||||
Options purchased: 0.07% | |||||||||||
Put options: 0.07% | |||||||||||
S&P 500 Index, strike @ USD 1,675, expires January 2014 (cost $114,412) | 81 | 10,530 | |||||||||
Total investments before investments sold short: 131.47% (cost $15,068,600) | 19,694,517 | ||||||||||
Shares | |||||||||||
Investments sold short: (31.98)% | |||||||||||
Common stocks: (31.98)% | |||||||||||
Beverages: (0.69)% | |||||||||||
Beam, Inc. | (700 | ) | (47,642 | ) | |||||||
Constellation Brands, Inc., Class A | (800 | ) | (56,304 | ) | |||||||
(103,946 | ) | ||||||||||
Biotechnology: (1.50)% | |||||||||||
Celgene Corp. | (500 | ) | (84,480 | ) | |||||||
Cepheid, Inc. | (1,300 | ) | (60,736 | ) | |||||||
United Therapeutics Corp. | (700 | ) | (79,156 | ) | |||||||
(224,372 | ) | ||||||||||
Capital markets: (1.85)% | |||||||||||
Charles Schwab Corp. | (5,000 | ) | (130,000 | ) | |||||||
Northern Trust Corp. | (800 | ) | (49,512 | ) | |||||||
T. Rowe Price Group, Inc. | (500 | ) | (41,885 | ) | |||||||
TD Ameritrade Holding Corp. | (1,800 | ) | (55,152 | ) | |||||||
(276,549 | ) | ||||||||||
Chemicals: (1.03)% | |||||||||||
Ecolab, Inc. | (500 | ) | (52,135 | ) | |||||||
LyondellBasell Industries NV, Class A | (800 | ) | (64,224 | ) |
33
UBS U.S. Defensive Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Investments sold short—(Continued) | |||||||||||
Common stocks—(Continued) | |||||||||||
Chemicals—(Concluded) | |||||||||||
Sigma-Aldrich Corp. | (400 | ) | $ | (37,604 | ) | ||||||
(153,963 | ) | ||||||||||
Commercial banks: (1.74)% | |||||||||||
Associated Banc-Corp. | (2,750 | ) | (47,850 | ) | |||||||
Signature Bank | (500 | ) | (53,710 | ) | |||||||
SVB Financial Group | (600 | ) | (62,916 | ) | |||||||
TCF Financial Corp. | (2,750 | ) | (44,687 | ) | |||||||
Zions Bancorporation | (1,700 | ) | (50,932 | ) | |||||||
(260,095 | ) | ||||||||||
Commercial services & supplies: (1.48)% | |||||||||||
Healthcare Services Group, Inc. | (2,300 | ) | (65,251 | ) | |||||||
Pitney Bowes, Inc. | (5,200 | ) | (121,160 | ) | |||||||
Stericycle, Inc. | (300 | ) | (34,851 | ) | |||||||
(221,262 | ) | ||||||||||
Computers & peripherals: (1.11)% | |||||||||||
Hewlett-Packard Co. | (2,200 | ) | (61,556 | ) | |||||||
Lexmark International, Inc., Class A | (1,600 | ) | (56,832 | ) | |||||||
NCR Corp. | (1,400 | ) | (47,684 | ) | |||||||
(166,072 | ) | ||||||||||
Consumer finance: (0.36)% | |||||||||||
American Express Co. | (600 | ) | (54,438 | ) | |||||||
Diversified financial services: (0.43)% | |||||||||||
Bank of America Corp. | (4,150 | ) | (64,615 | ) | |||||||
Electronic equipment, instruments & components: (0.33)% | |||||||||||
Flextronics International Ltd. | (6,300 | ) | (48,951 | ) | |||||||
Food & staples retailing: (0.27)% | |||||||||||
Whole Foods Market, Inc. | (700 | ) | (40,481 | ) | |||||||
Health care equipment & supplies: (3.52)% | |||||||||||
Abaxis, Inc. | (800 | ) | (32,016 | ) | |||||||
Boston Scientific Corp. | (4,400 | ) | (52,888 | ) | |||||||
DENTSPLY International, Inc. | (1,300 | ) | (63,024 | ) | |||||||
DexCom, Inc. | (2,450 | ) | (86,754 | ) | |||||||
IDEXX Laboratories, Inc. | (500 | ) | (53,185 | ) | |||||||
Meridian Bioscience, Inc. | (1,800 | ) | (47,754 | ) | |||||||
PhotoMedex, Inc. | (3,300 | ) | (42,735 | ) | |||||||
STERIS Corp. | (900 | ) | (43,245 | ) | |||||||
Wright Medical Group, Inc. | (1,600 | ) | (49,136 | ) | |||||||
Zimmer Holdings, Inc. | (600 | ) | (55,914 | ) | |||||||
(526,651 | ) |
Shares | Value | ||||||||||
Health care providers & services: (1.40)% | |||||||||||
Bio-Reference Labs, Inc. | (1,700 | ) | $ | (43,418 | ) | ||||||
Centene Corp. | (1,100 | ) | (64,845 | ) | |||||||
Owens & Minor, Inc. | (1,200 | ) | (43,872 | ) | |||||||
Patterson Cos., Inc. | (1,400 | ) | (57,680 | ) | |||||||
(209,815 | ) | ||||||||||
Hotels, restaurants & leisure: (2.33)% | |||||||||||
Choice Hotels International, Inc. | (3,000 | ) | (147,330 | ) | |||||||
Hyatt Hotels Corp., Class A | (1,700 | ) | (84,082 | ) | |||||||
Starwood Hotels & Resorts Worldwide, Inc. | (750 | ) | (59,588 | ) | |||||||
Wendy's Corp. | (6,600 | ) | (57,552 | ) | |||||||
(348,552 | ) | ||||||||||
Household products: (0.37)% | |||||||||||
Clorox Co. | (600 | ) | (55,656 | ) | |||||||
Insurance: (0.95)% | |||||||||||
American International Group, Inc. | (2,800 | ) | (142,940 | ) | |||||||
Internet & catalog retail: (0.83)% | |||||||||||
Groupon, Inc. | (5,900 | ) | (69,443 | ) | |||||||
Netflix, Inc. | (150 | ) | (55,226 | ) | |||||||
(124,669 | ) | ||||||||||
Internet software & services: (0.42)% | |||||||||||
WebMD Health Corp. | (1,600 | ) | (63,200 | ) | |||||||
IT services: (0.54)% | |||||||||||
Cognizant Technology Solutions Corp., Class A | (800 | ) | (80,784 | ) | |||||||
Life sciences tools & services: (1.06)% | |||||||||||
Mettler-Toledo International, Inc. | (400 | ) | (97,036 | ) | |||||||
PerkinElmer, Inc. | (1,500 | ) | (61,845 | ) | |||||||
(158,881 | ) | ||||||||||
Media: (2.23)% | |||||||||||
Discovery Communications, Inc., Class A | (1,300 | ) | (117,546 | ) | |||||||
Gannett Co., Inc. | (5,000 | ) | (147,900 | ) | |||||||
Lamar Advertising Co., Class A | (1,300 | ) | (67,925 | ) | |||||||
(333,371 | ) | ||||||||||
Office electronics: (0.65)% | |||||||||||
Xerox Corp. | (8,050 | ) | (97,969 | ) | |||||||
Pharmaceuticals: (1.89)% | |||||||||||
Endo Health Solutions, Inc. | (1,400 | ) | (94,444 | ) | |||||||
Perrigo Co. PLC | (800 | ) | (122,768 | ) | |||||||
Sagent Pharmaceuticals, Inc. | (2,600 | ) | (65,988 | ) | |||||||
(283,200 | ) |
34
UBS U.S. Defensive Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Investments sold short—(Concluded) | |||||||||||
Common stocks—(Concluded) | |||||||||||
Real estate investment trust (REIT): (0.17)% | |||||||||||
Equity Residential | (500 | ) | $ | (25,935 | ) | ||||||
Road & rail: (0.41)% | |||||||||||
Kansas City Southern | (500 | ) | (61,915 | ) | |||||||
Semiconductors & semiconductor equipment: (1.87)% | |||||||||||
Advanced Micro Devices, Inc. | (15,700 | ) | (60,759 | ) | |||||||
First Solar, Inc. | (1,700 | ) | (92,888 | ) | |||||||
Intel Corp. | (1,900 | ) | (49,324 | ) | |||||||
Marvell Technology Group Ltd. | (5,400 | ) | (77,652 | ) | |||||||
(280,623 | ) | ||||||||||
Software: (0.79)% | |||||||||||
Citrix Systems, Inc. | (700 | ) | (44,275 | ) | |||||||
Electronic Arts, Inc. | (2,000 | ) | (45,880 | ) | |||||||
Red Hat, Inc. | (500 | ) | (28,020 | ) | |||||||
(118,175 | ) | ||||||||||
Specialty retail: (0.32)% | |||||||||||
Best Buy Co., Inc. | (1,200 | ) | (47,856 | ) |
Shares | Value | ||||||||||
Textiles, apparel & luxury goods: (0.73)% | |||||||||||
Michael Kors Holdings Ltd. | (600 | ) | $ | (48,714 | ) | ||||||
Under Armour, Inc., Class A | (700 | ) | (61,110 | ) | |||||||
(109,824 | ) | ||||||||||
Trading companies & distributors: (0.35)% | |||||||||||
Fastenal Co. | (1,100 | ) | (52,261 | ) | |||||||
Wireless telecommunication services: (0.36)% | |||||||||||
SBA Communications Corp., Class A | (600 | ) | (53,904 | ) | |||||||
Total investments sold short (proceeds $3,413,379) | (4,790,925 | ) | |||||||||
Total investments, net of investments sold short: 99.49% | 14,903,592 | ||||||||||
Cash and other assets, less liabilities: 0.51% | 76,496 | ||||||||||
Net assets: 100.00% | $ | 14,980,088 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 5,170,388 | |||||
Gross unrealized depreciation | (544,471 | ) | |||||
Net unrealized appreciation of investments | $ | 4,625,917 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 61. Portfolio footnotes begin on page 36.
Options written
Expiration date | Premiums received | Value | |||||||||||||
Put option | |||||||||||||||
S&P 500 Index, 81 contracts, strike @ USD 1,500.00 | January 2014 | $ | 20,048 | $ | (3,402 | ) |
35
UBS U.S. Defensive Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 92 | $ | 64,170 | ||||||||
Options written | 257 | 89,768 | |||||||||
Options terminated in closing purchase transactions | (268 | ) | (133,890 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | 81 | $ | 20,048 |
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 19,620,878 | $ | — | $ | — | $ | 19,620,878 | |||||||||||
Options purchased | 10,530 | — | — | 10,530 | |||||||||||||||
Short-term investment | — | 63,109 | — | 63,109 | |||||||||||||||
Common stocks sold short | (4,790,925 | ) | — | — | (4,790,925 | ) | |||||||||||||
Options written | (3,402 | ) | — | — | (3,402 | ) | |||||||||||||
Total | $ | 14,837,081 | $ | 63,109 | $ | — | $ | 14,900,190 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* 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 investment in a fund 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 288 | $ | 2,898,589 | $ | 2,835,768 | $ | 63,109 | $ | 51 |
See accompanying notes to financial statements.
36
UBS U.S. Equity Opportunity Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS U.S. Equity Opportunity Fund (the "Fund") returned 14.63% (Class A shares returned 8.39% after the deduction of the maximum sales charge), while Class Y shares returned 14.80%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 16.86% 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 40; 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 lagged the Index primarily due to stock selection decisions.
Portfolio performance summary1
What worked
• Amazon.com was the Fund's largest contributor to performance. The company's stock price rose nearly 28% in the fourth quarter of 2013. Amazon began shipping its new Kindle Fire HD in October 2013 and its new Kindle Fire HDX in November 2013. The stock benefited from strong holiday season sales and continued growth in its Prime Membership subscriber base.
• A sizable overweight to the technology sector, as well as stock selection within the sector, were positive for performance.
– Shares of Micron Technology rose as the company posted solid financial results during the reporting period. Micron is completing its acquisition of Elpida at the same time the industry has seen significant consolidation, resulting in increased pricing power. The stock price reached a new 52-week high in November 2013 after investor David Einhorn disclosed that he owned a 2% stake in the company. (For details, see "Portfolio highlights.")
– NXP Semiconductors was a top holding for the Fund. Shares of NXP gained after the company announced second quarter earnings that were in line with the high end of guidance. NXP achieved double-digit revenue growth for both the sequential and year-over-year periods, including better-than-expected results in the company's automotive business.
• Several stock positions made a positive contribution to Fund returns.
– The stock price of Alnylam Pharmaceuticals was up more than 106% during the third quarter of 2013. The company reported positive data in its effort to treat TTR-mediated amyloidosis (ATTR), a major unmet medical need with significant morbidity and mortality. Analysts believe that there is a high probability of Alnylam's treatment becoming a marketed product in 2014.
– Lincoln National was a top contributor to Fund performance during the reporting period. The insurance and financial services firm increased its quarterly dividend by more than 33% in November 2013, leading the stock to trade higher. (For details, see "Portfolio highlights.")
– Norfolk Southern Corp. was up over 20% for the fourth quarter of 2013 as the company reported solid third quarter earnings. (For details, see "Portfolio highlights.")
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
37
UBS U.S. Equity Opportunity Fund
• The Fund successfully underweighted the consumer staples and utilities sectors. Defensive and higher-yielding sectors were punished during the period, as economic growth proceeded. The Fund's reduced position in these areas proved successful for relative returns.
What didn't work
• Certain individual stock positions detracted from relative performance during the six-month period.
– NII Holdings was the top detractor for the reporting period. The stock was down due to disappointing earnings results for the third quarter and a net subscriber loss. The company's consolidated operating revenue failed to meet investor expectations. In addition, although NII met all of its network building goals, it failed to address challenges in Mexico and Brazil. We believe that there are signs of improvement in these markets, and we continue to watch developments closely. We also believe that there is significant asset value in the company's network, which should provide protection against further downside.
– ServiceSource International detracted from the Fund's relative returns. The company's shares declined after it lowered revenue and earnings before interest, taxes, depreciation and amortization guidance for the fourth quarter of 2013. The announcement of a reorganization of its sales group also put downward pressure on the stock. (For details, see "Portfolio highlights.")
– The stock price of Lululemon Athletica Inc. declined during the reporting period as an onslaught of increased competition led to declining growth. The athletic clothing retailer also struggled with management changes, including the departure of its chief executive officer.
– Digital Realty Trust, Inc., a real estate investment trust, detracted from Fund performance. While fundamental concerns about the wholesale data center industry continue to linger, we see encouraging long-term prospects for the business. We believe that Digital Realty will benefit from improved occupancy levels at higher rents. The REIT's 6% dividend yield offers additional support for the stock price.
– Shares of Jabil Circuit, Inc. underperformed during the six-month period. Investors were disappointed when the manufacturing services company withdrew from its business with Blackberry. (For details, see "Portfolio highlights.")
Portfolio highlights
• Micron Technology, Inc. is a leading manufacturer of semiconductor memories, including DRAM and NAND Flash. The markets for these products are extremely cyclical, driven by periods of over/underspending on manufacturing capacity. This leads to over/under supply and falling/rising average selling prices. The industry has turned of late, and is now experiencing growth in demand and increases in selling prices. The DRAM industry, which used to include more than 20 participants, has undergone significant consolidation. Three players, including Micron following the Elpida acquisition, are positioned to capture 97% of industry revenues. We believe that Micron will benefit from the cyclical turnaround in both DRAM and NAND Flash memory.
• Lincoln National Corp. operates multiple insurance and retirement businesses through four segments: annuities, retirement plan services, life insurance and group protection. The company has operated its business effectively through a challenging low interest rate environment, and stands to benefit from any further increase in rates. We expect to see pricing increases and, therefore, margin improvements in the group insurance business. We believe that Lincoln's variable annuity business is better positioned than most in the group insurance business due to its conservative product lineup. We also expect Lincoln to continue to utilize significant free cash flow to repurchase shares.
38
UBS U.S. Equity Opportunity Fund
• Norfolk Southern Corp. engages in the rail transportation of raw materials, intermediate products and finished goods, primarily in the eastern region of the United States. Rail transport continues to gain a competitive advantage over trucking. Although Norfolk Southern had experienced price weakness due to concerns about short-term coal volumes, we viewed the issue as minor, since coal is not the majority of the company's business. Norfolk Southern has significantly invested in its intermodal freight corridors, which we believe will lead to improved routing, service and pricing power. We believe that these trends should be positive for Norfolk Southern over the long-term.
• ServiceSource International, Inc. is engaged in service revenue management, providing solutions that drive renewals of maintenance, support and subscription agreements for technology companies. Its business is built on its pay-for-performance model, in which customers pay the company based on renewal sales that it generates on their behalf. The company has significantly invested in new sales force members. We believe that ServiceSource will accelerate revenue growth by further penetrating current customers, adding new customers, and through sales of its new Renew OnDemand product.
• Jabil Circuit, Inc. provides electronics design, production and product management services to companies in the aerospace, automotive, computing and healthcare sectors. The manufacturing services industry is highly volatile, as sales are a function of gross domestic product growth, inventory ebbs and flows, and market share gains or losses. While many in the industry have been unable to profitably deliver across a business cycle, Jabil has been consistently profitable over several years. In July of 2013, Jabil completed its acquisition of Nypro Inc. We believe this will benefit Jabil by further expanding its market to higher margin businesses.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
39
UBS U.S. Equity Opportunity Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 14.63 | % | 31.85 | % | 13.99 | % | 5.48 | % | |||||||||||
Class C2 | 14.25 | 31.03 | 13.16 | 4.70 | |||||||||||||||
Class Y3 | 14.80 | 32.31 | 14.33 | 5.77 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 8.39 | % | 24.52 | % | 12.73 | % | 4.88 | % | |||||||||||
Class C2 | 13.25 | 30.03 | 13.16 | 4.70 | |||||||||||||||
Russell 1000 Index4 | 16.86 | % | 33.11 | % | 18.59 | % | 7.78 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.84% and 1.21%; Class C—2.63% and 1.96%; Class Y—1.68% 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, extraordinary expenses, and dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.20% for Class A 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 distribution and service 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.
3 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 distribution and service fees.
4 The Russell 1000 Index measures 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 US market. 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. 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://globalam-us.ubs.com/corpweb/performance.do.
40
UBS U.S. Equity Opportunity Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Apple, Inc. | 5.6 | % | |||||
Citigroup, Inc. | 4.4 | ||||||
Google, Inc., Class A | 4.2 | ||||||
Amazon.com, Inc. | 3.7 | ||||||
Mondelez International, Inc., Class A | 3.4 | ||||||
MetLife, Inc. | 3.2 | ||||||
Yum! Brands, Inc. | 3.2 | ||||||
US Bancorp | 3.2 | ||||||
Lincoln National Corp. | 3.1 | ||||||
Philip Morris International, Inc. | 3.1 | ||||||
Total | 37.1 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Automobiles | 2.94 | % | |||||
Biotechnology | 6.49 | ||||||
Capital markets | 2.96 | ||||||
Commercial banks | 3.16 | ||||||
Computers & peripherals | 7.56 | ||||||
Diversified financial services | 4.43 | ||||||
Electronic equipment, instruments & components | 1.34 | ||||||
Energy equipment & services | 3.84 | ||||||
Food products | 3.38 | ||||||
Health care equipment & supplies | 2.77 | ||||||
Health care providers & services | 2.34 | ||||||
Hotels, restaurants & leisure | 3.19 | ||||||
Insurance | 6.33 | ||||||
Internet & catalog retail | 3.72 | ||||||
Internet software & services | 4.24 | ||||||
IT services | 2.45 | ||||||
Life sciences tools & services | 1.62 | ||||||
Multi-utilities | 1.42 | ||||||
Oil, gas & consumable fuels | 3.01 | ||||||
Pharmaceuticals | 3.70 | ||||||
Real estate investment trust (REIT) | 1.20 | ||||||
Road & rail | 4.89 | ||||||
Semiconductors & semiconductor equipment | 9.22 | ||||||
Software | 3.86 | ||||||
Textiles, apparel & luxury goods | 1.97 | ||||||
Tobacco | 3.06 | ||||||
Wireless telecommunication services | 0.75 | ||||||
Total common stocks | 95.84 | % | |||||
Investment company | |||||||
SPDR S&P 500 ETF Trust | 0.41 | ||||||
Short-term investment | 4.02 | ||||||
Investment of cash collateral from securities loaned | 4.27 | ||||||
Total investments | 104.54 | % | |||||
Liabilities, in excess of cash and other assets | (4.54 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS U.S. Equity Opportunity Fund. Figures might be different if a breakdown of the underlying investment company was included.
41
UBS U.S. Equity Opportunity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 95.84% | |||||||||||
Automobiles: 2.94% | |||||||||||
General Motors Co.* | 32,400 | $ | 1,324,188 | ||||||||
Biotechnology: 6.49% | |||||||||||
Acorda Therapeutics, Inc.* | 28,200 | 823,440 | |||||||||
Alexion Pharmaceuticals, Inc.* | 5,700 | 758,442 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 10,600 | 681,898 | |||||||||
Bluebird Bio, Inc.*1 | 4,800 | 100,704 | |||||||||
Epizyme, Inc.*1 | 4,300 | 89,440 | |||||||||
KaloBios Pharmaceuticals, Inc.* | 33,200 | 146,744 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 98,400 | 177,120 | |||||||||
MacroGenics, Inc.* | 5,100 | 139,893 | |||||||||
2,917,681 | |||||||||||
Capital markets: 2.96% | |||||||||||
Morgan Stanley | 42,400 | 1,329,664 | |||||||||
Commercial banks: 3.16% | |||||||||||
US Bancorp | 35,200 | 1,422,080 | |||||||||
Computers & peripherals: 7.56% | |||||||||||
Apple, Inc. | 4,525 | 2,539,023 | |||||||||
NetApp, Inc. | 20,900 | 859,826 | |||||||||
3,398,849 | |||||||||||
Diversified financial services: 4.43% | |||||||||||
Citigroup, Inc. | 38,254 | 1,993,416 | |||||||||
Electronic equipment, instruments & components: 1.34% | |||||||||||
Jabil Circuit, Inc. | 34,500 | 601,680 | |||||||||
Energy equipment & services: 3.84% | |||||||||||
Baker Hughes, Inc. | 20,500 | 1,132,830 | |||||||||
Noble Corp. PLC | 15,800 | 592,026 | |||||||||
1,724,856 | |||||||||||
Food products: 3.38% | |||||||||||
Mondelez International, Inc., Class A | 43,100 | 1,521,430 | |||||||||
Health care equipment & supplies: 2.77% | |||||||||||
Baxter International, Inc. | 17,900 | 1,244,945 | |||||||||
Health care providers & services: 2.34% | |||||||||||
UnitedHealth Group, Inc. | 14,000 | 1,054,200 | |||||||||
Hotels, restaurants & leisure: 3.19% | |||||||||||
Yum! Brands, Inc. | 19,000 | 1,436,590 | |||||||||
Insurance: 6.33% | |||||||||||
Lincoln National Corp. | 27,200 | 1,404,064 | |||||||||
MetLife, Inc. | 26,800 | 1,445,056 | |||||||||
2,849,120 |
Shares | Value | ||||||||||
Internet & catalog retail: 3.72% | |||||||||||
Amazon.com, Inc.* | 4,200 | $ | 1,674,918 | ||||||||
Internet software & services: 4.24% | |||||||||||
Google, Inc., Class A* | 1,700 | 1,905,207 | |||||||||
IT services: 2.45% | |||||||||||
ServiceSource International, Inc.* | 131,700 | 1,103,646 | |||||||||
Life sciences tools & services: 1.62% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 5,900 | 729,299 | |||||||||
Multi-utilities: 1.42% | |||||||||||
PG&E Corp. | 15,900 | 640,452 | |||||||||
Oil, gas & consumable fuels: 3.01% | |||||||||||
BP PLC ADR | 27,837 | 1,353,157 | |||||||||
Pharmaceuticals: 3.70% | |||||||||||
Hospira, Inc.* | 21,300 | 879,264 | |||||||||
Impax Laboratories, Inc.* | 15,400 | 387,156 | |||||||||
Mallinckrodt PLC* | 7,600 | 397,176 | |||||||||
1,663,596 | |||||||||||
Real estate investment trust (REIT): 1.20% | |||||||||||
Digital Realty Trust, Inc.1 | 11,000 | 540,320 | |||||||||
Road & rail: 4.89% | |||||||||||
Hertz Global Holdings, Inc.* | 45,700 | 1,307,934 | |||||||||
Norfolk Southern Corp. | 9,600 | 891,168 | |||||||||
2,199,102 | |||||||||||
Semiconductors & semiconductor equipment: 9.22% | |||||||||||
Applied Materials, Inc. | 54,800 | 969,412 | |||||||||
Broadcom Corp., Class A | 34,000 | 1,008,100 | |||||||||
Micron Technology, Inc.* | 48,100 | 1,046,656 | |||||||||
NXP Semiconductor NV* | 24,400 | 1,120,692 | |||||||||
4,144,860 | |||||||||||
Software: 3.86% | |||||||||||
Adobe Systems, Inc.* | 12,300 | 736,524 | |||||||||
Check Point Software Technologies Ltd.* | 15,500 | 1,000,060 | |||||||||
1,736,584 | |||||||||||
Textiles, apparel & luxury goods: 1.97% | |||||||||||
Lululemon Athletica, Inc.*1 | 14,981 | 884,328 | |||||||||
Tobacco: 3.06% | |||||||||||
Philip Morris International, Inc. | 15,800 | 1,376,654 |
42
UBS U.S. Equity Opportunity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Wireless telecommunication services: 0.75% | |||||||||||
NII Holdings, Inc.*1 | 123,200 | $ | 338,800 | ||||||||
Total common stocks (cost $35,490,404) | 43,109,622 | ||||||||||
Investment company: 0.41% | |||||||||||
SPDR S&P 500 ETF Trust (cost $169,140) | 1,000 | 184,670 | |||||||||
Short-term investment: 4.02% | |||||||||||
Investment company: 4.02% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $1,806,225) | 1,806,225 | 1,806,225 |
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 4.27% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $1,918,799) | 1,918,799 | $ | 1,918,799 | ||||||||
Total investments: 104.54% (cost $39,384,568) | 47,019,316 | ||||||||||
Liabilities, in excess of cash and other assets: (4.54)% | (2,040,692 | ) | |||||||||
Net assets: 100.00% | $ | 44,978,624 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 9,061,908 | |||||
Gross unrealized depreciation | (1,427,160 | ) | |||||
Net unrealized appreciation of investments | $ | 7,634,748 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 61. Portfolio footnotes begin on page 44.
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 43,109,622 | $ | — | $ | — | $ | 43,109,622 | |||||||||||
Investment company | 184,670 | — | — | 184,670 | |||||||||||||||
Short-term investment | — | 1,806,225 | — | 1,806,225 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 1,918,799 | — | 1,918,799 | |||||||||||||||
Total | $ | 43,294,292 | $ | 3,725,024 | $ | — | $ | 47,019,316 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
43
UBS U.S. Equity Opportunity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at December 31, 2013.
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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 1,419,399 | $ | 5,683,855 | $ | 5,297,029 | $ | 1,806,225 | $ | 528 | |||||||||||||
UBS Private Money Market Fund LLCª | 4,275,608 | 17,038,765 | 19,395,574 | 1,918,799 | 97 | ||||||||||||||||||
$ | 5,695,007 | $ | 22,722,620 | $ | 24,692,603 | $ | 3,725,024 | $ | 625 |
ª The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
44
UBS U.S. Large Cap Equity Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS U.S. Large Cap Equity Fund (the "Fund") returned 15.63% (Class A shares returned 9.24% after the deduction of the maximum sales charge), while Class Y shares returned 15.82%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 16.86% 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 48; 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 slightly underperformed the Index, primarily due to stock selection decisions.
Portfolio performance summary1
What worked
• Several technology stocks contributed positively to Fund performance.
– Apple, Inc., the consumer electronics company, was among the largest contributors for the six-month period, as the company's revenue and margins remain stronger than previously anticipated.
– NXP Semiconductors NV was a top holding for the Fund. Shares of NXP gained after the company announced second quarter earnings that were in line with the high end of guidance. NXP achieved double-digit revenue growth for both the sequential and year-over-year periods, including better-than-expected results in the company's automotive business.
– Shares of Micron Technology, Inc. rose as the company posted solid financial results during the reporting period. Micron is completing its acquisition of Elpida at the same time the industry has seen significant consolidation, resulting in increased pricing power. The stock price reached a new 52-week high in November 2013 after investor David Einhorn disclosed that he owned a 2% stake in the company.
• Stock selection in the healthcare sector was positive for relative performance.
– The stock price of Alnylam Pharmaceuticals, Inc was up more than 106% during the third quarter of 2013. The company reported positive data in its effort to treat TTR-mediated amyloidosis (ATTR), a major unmet medical need with significant morbidity and mortality. Analysts believe that there is a high probability of Alnylam's treatment becoming a marketed product in 2014.
– Shares of Envision Healthcare Holdings, Inc., a highly diversified medical service company, were up nearly 20% in the month of December. The stock has benefited from analyst reports that Envision is well-positioned to gain from the coming changes in health coverage in 2014. The company owns Evolution Health, which specializes in caring for chronically ill patients. This area of the business is expected to receive broader coverage under the Affordable Care Act.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
45
UBS U.S. Large Cap Equity Fund
• Several of the Fund's other stock selection decisions were additive for relative performance.
– Amazon.com, Inc. was the Fund's largest contributor to performance, with a gain of nearly 28% in the fourth quarter of 2013. The company began shipping its new Kindle Fire HD in October 2013 and its new Kindle Fire HDX in November 2013. The stock benefited from strong holiday season sales and continued growth in its Prime Membership subscriber base. (For details, see "Portfolio highlights.")
– Shares of Norfolk Southern Corp were up more than 20% for the fourth quarter of 2013 as the company reported solid third quarter earnings. (For details, see "Portfolio highlights.")
– Morgan Stanley was a positive contributor to the Fund's relative returns. Following the completion of its Smith Barney acquisition, and on the back of strong capital markets, the company's shares headed higher. (For details, see "Portfolio highlights.")
• Sector allocations positively contributed to the Fund's performance. The Fund benefited from underweight positions in defensive and higher-yielding sectors. As consumer staples, telecom and utilities underperformed the broad market during the reporting period, the Fund's reduced position proved successful.
What didn't work
• Individual stock positions detracted from relative performance during the six-month period.
– NII Holdings, Inc was the top detractor for the reporting period. The stock was down due to disappointing earnings results for the third quarter and a net subscriber loss. The company's consolidated operating revenue failed to meet investor expectations. In addition, although NII met all of its network building goals, it failed to address challenges in Mexico and Brazil. We believe that there are signs of improvement in these markets, and we continue to watch developments closely. We also believe that there is significant asset value in the company's network, which should provide protection against further downside.
– J. C. Penney Co., Inc detracted from Fund returns after reporting earnings and revenue that were below expectations. Activist investor Bill Ackman publicly criticized the company's strategy and subsequently resigned from his seat on its board. The company attempted to raise cash by selling roughly $800 million of new stock before the critical holiday shopping season, eroding investor confidence. While the mid-tier department store faces some challenges, we believe that the current valuation does not reflect J.C. Penney's future cash generation potential.
– Digital Realty Trust, Inc, a real estate investment trust, detracted from Fund performance. Fundamental concerns about the wholesale data center industry continue to linger, but we see encouraging long-term prospects for the business. We believe that Digital Realty will benefit from improved occupancy levels at higher rents. The REIT's 6% dividend yield offers additional support for the stock price.
– Shares of Philip Morris International Inc. declined as the consumer staples sector underperformed. Investor sentiment about the decline in the number of smokers worsened, leading to poor performance for the company's stock price. However, we believe that Philip Morris is attractively valued. (For details, see "Portfolio highlights.")
– Eli Lilly & Co. underperformed for the six-month reporting period, negatively affecting the Fund's relative returns. (For details, see "Portfolio highlights.")
46
UBS U.S. Large Cap Equity Fund
Portfolio highlights
• We believe that Amazon.com, Inc. will sustain its high revenue growth rate due to the increased number of Amazon Prime customers, who demonstrate high repeat purchase patterns. We expect the company to increase the number of product lines served and the speed of deliveries through the expansion of its fulfillment network. Amazon appears well-positioned to defend its books, music and movies business, and plans to continue to innovate with the Kindle. We believe that Amazon will aggressively support the tablets and smartphone devices of third parties. As Amazon gains scale across its businesses, we expect operating margins to increase.
• Norfolk Southern Corp engages in the rail transportation of raw materials, intermediate products and finished goods, primarily in the eastern region of the United States. Rail transport continues to gain a competitive advantage over trucking. Although Norfolk Southern had experienced price weakness due to concerns about short-term coal volumes, we viewed the issue as minor, since coal is not the majority of the company's business. Norfolk Southern has significantly invested in its intermodal freight corridors, which we believe will lead to improved routing, service and pricing power. We believe that these trends should be positive for Norfolk Southern over the long term.
• Morgan Stanley continues to leverage its core Global Wealth Management, Institutional Securities and Asset Management businesses to produce above-average earnings growth and profitability metrics. The company maintains strong global positions within the high margin equity capital markets, mergers and acquisitions advisory and asset management businesses. It Is also gaining share within its fixed income, currency and commodity business. As management reallocates capital and resources to the more client-centric, less capital intensive businesses over time, we expect earnings volatility to decline and return on capital to improve.
• We believe that the market underappreciates the persistence and predictability of Philip Morris International Inc.'s cash flows and returns to shareholders. While governments have an interest in public health and declining tobacco consumption, they have become reliant on steady and predictable tobacco tax flows. Philip Morris has proven skill at modeling cigarette demand, even with variables such as regulation, taxation and demographics. Over time, governments are learning to trust the company's models. Governments have learned that aggressive tax increases tend to encourage the illicit cigarette trade, which reduces tax revenue and increases consumption. Philip Morris's regulatory and consumption risk is well diversified, as the company operates in more than 180 markets globally.
• We expect Eli Lilly & Co to improve margins through a combination of pipeline success and cost cutting. The company currently has two programs under Food and Drug Administration review, with another 12 in phase-three testing. We like that Lilly's pipeline success does not depend on one or two key programs, as do some of their larger competitors. We also believe that the market is not fully pricing in the company's broad diabetes portfolio, which should account for approximately 20% of revenues in 2014.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
47
UBS U.S. Large Cap Equity Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 15.63 | % | 35.25 | % | 17.09 | % | 6.35 | % | |||||||||||
Class C2 | 15.21 | 34.22 | 16.22 | 5.56 | |||||||||||||||
Class Y3 | 15.82 | 35.62 | 17.41 | 6.64 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 9.24 | % | 27.79 | % | 15.77 | % | 5.75 | % | |||||||||||
Class C2 | 14.21 | 33.22 | 16.22 | 5.56 | |||||||||||||||
Russell 1000 Index4 | 16.86 | % | 33.11 | % | 18.59 | % | 7.78 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.28% and 1.20%; Class C—2.04% and 1.95%; Class Y—0.98% 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.20% for Class A 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 distribution and service 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.
3 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 distribution and service fees.
4 The Russell 1000 Index measures 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 US market. 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. 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://globalam-us.ubs.com/corpweb/performance.do.
48
UBS U.S. Large Cap Equity Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Apple, Inc. | 4.4 | % | |||||
Mondelez International, Inc., Class A | 2.8 | ||||||
JPMorgan Chase & Co. | 2.8 | ||||||
Philip Morris International, Inc. | 2.7 | ||||||
Citigroup, Inc. | 2.7 | ||||||
Yum! Brands, Inc. | 2.6 | ||||||
Exxon Mobil Corp. | 2.4 | ||||||
Norfolk Southern Corp. | 2.3 | ||||||
Walt Disney Co. | 2.2 | ||||||
Amazon.com, Inc. | 2.1 | ||||||
Total | 27.0 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Aerospace & defense | 1.55 | % | |||||
Automobiles | 2.10 | ||||||
Biotechnology | 4.26 | ||||||
Building products | 1.07 | ||||||
Capital markets | 2.97 | ||||||
Chemicals | 1.10 | ||||||
Commercial banks | 3.59 | ||||||
Commercial services & supplies | 1.47 | ||||||
Computers & peripherals | 5.82 | ||||||
Construction materials | 1.72 | ||||||
Consumer finance | 1.45 | ||||||
Diversified financial services | 5.49 | ||||||
Electronic equipment, instruments & components | 0.73 | ||||||
Energy equipment & services | 5.12 | ||||||
Food products | 2.85 | ||||||
Health care equipment & supplies | 1.74 | ||||||
Health care providers & services | 3.31 | ||||||
Hotels, restaurants & leisure | 2.58 | ||||||
Insurance | 4.19 | ||||||
Internet & catalog retail | 2.14 | ||||||
IT services | 1.18 | ||||||
Life sciences tools & services | 0.85 | ||||||
Machinery | 1.17 | ||||||
Media | 4.31 | ||||||
Multiline retail | 2.33 | ||||||
Oil, gas & consumable fuels | 4.05 | ||||||
Pharmaceuticals | 6.39 | ||||||
Real estate investment trust (REIT) | 3.27 | ||||||
Road & rail | 3.94 | ||||||
Semiconductors & semiconductor equipment | 7.68 | ||||||
Software | 3.77 | ||||||
Textiles, apparel & luxury goods | 1.02 | ||||||
Tobacco | 2.74 | ||||||
Wireless telecommunication services | 0.64 | ||||||
Total common stocks | 98.59 | % | |||||
Investment company | |||||||
SPDR S&P 500 ETF Trust | 0.50 | ||||||
Short-term investment | 0.90 | ||||||
Investment of cash collateral from securities loaned | 3.53 | ||||||
Total investments | 103.52 | % | |||||
Liabilities, in excess of cash and other assets | (3.52 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS U.S. Large Cap Equity Fund. Figures might be different if a breakdown of the underlying investment company was included.
49
UBS U.S. Large Cap Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 98.59% | |||||||||||
Aerospace & defense: 1.55% | |||||||||||
General Dynamics Corp. | 28,300 | $ | 2,704,065 | ||||||||
Automobiles: 2.10% | |||||||||||
General Motors Co.* | 90,000 | 3,678,300 | |||||||||
Biotechnology: 4.26% | |||||||||||
Acorda Therapeutics, Inc.* | 47,200 | 1,378,240 | |||||||||
Alexion Pharmaceuticals, Inc.* | 12,400 | 1,649,944 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 18,100 | 1,164,373 | |||||||||
Bluebird Bio, Inc.*1 | 9,000 | 188,820 | |||||||||
Epizyme, Inc.*1 | 8,100 | 168,480 | |||||||||
Gilead Sciences, Inc.* | 27,300 | 2,051,595 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 371,300 | 668,340 | |||||||||
MacroGenics, Inc.*1 | 6,800 | 186,524 | |||||||||
7,456,316 | |||||||||||
Building products: 1.07% | |||||||||||
Owens Corning* | 45,800 | 1,864,976 | |||||||||
Capital markets: 2.97% | |||||||||||
Invesco Ltd. | 44,200 | 1,608,880 | |||||||||
Morgan Stanley | 114,000 | 3,575,040 | |||||||||
5,183,920 | |||||||||||
Chemicals: 1.10% | |||||||||||
Monsanto Co. | 16,500 | 1,923,075 | |||||||||
Commercial banks: 3.59% | |||||||||||
US Bancorp | 76,200 | 3,078,480 | |||||||||
Wells Fargo & Co. | 70,550 | 3,202,970 | |||||||||
6,281,450 | |||||||||||
Commercial services & supplies: 1.47% | |||||||||||
Waste Management, Inc. | 57,200 | 2,566,564 | |||||||||
Computers & peripherals: 5.82% | |||||||||||
Apple, Inc. | 13,800 | 7,743,318 | |||||||||
NetApp, Inc. | 58,900 | 2,423,146 | |||||||||
10,166,464 | |||||||||||
Construction materials: 1.72% | |||||||||||
Martin Marietta Materials, Inc. | 30,100 | 3,008,194 | |||||||||
Consumer finance: 1.45% | |||||||||||
Capital One Financial Corp. | 33,100 | 2,535,791 | |||||||||
Diversified financial services: 5.49% | |||||||||||
Citigroup, Inc. | 91,630 | 4,774,839 | |||||||||
JPMorgan Chase & Co. | 82,500 | 4,824,600 | |||||||||
9,599,439 |
Shares | Value | ||||||||||
Electronic equipment, instruments & components: 0.73% | |||||||||||
Jabil Circuit, Inc. | 73,200 | $ | 1,276,608 | ||||||||
Energy equipment & services: 5.12% | |||||||||||
Baker Hughes, Inc. | 42,500 | 2,348,550 | |||||||||
Halliburton Co. | 56,400 | 2,862,300 | |||||||||
McDermott International, Inc.* | 176,900 | 1,620,404 | |||||||||
Noble Corp. PLC | 56,500 | 2,117,055 | |||||||||
8,948,309 | |||||||||||
Food products: 2.85% | |||||||||||
Mondelez International, Inc., Class A | 141,000 | 4,977,300 | |||||||||
Health care equipment & supplies: 1.74% | |||||||||||
Baxter International, Inc. | 43,800 | 3,046,290 | |||||||||
Health care providers & services: 3.31% | |||||||||||
Cardinal Health, Inc. | 25,600 | 1,710,336 | |||||||||
Envision Healthcare Holdings, Inc.* | 44,200 | 1,569,984 | |||||||||
UnitedHealth Group, Inc. | 33,200 | 2,499,960 | |||||||||
5,780,280 | |||||||||||
Hotels, restaurants & leisure: 2.58% | |||||||||||
Yum! Brands, Inc. | 59,700 | 4,513,917 | |||||||||
Insurance: 4.19% | |||||||||||
Aon PLC | 21,800 | 1,828,802 | |||||||||
Lincoln National Corp. | 45,000 | 2,322,900 | |||||||||
MetLife, Inc. | 58,900 | 3,175,888 | |||||||||
7,327,590 | |||||||||||
Internet & catalog retail: 2.14% | |||||||||||
Amazon.com, Inc.* | 9,400 | 3,748,626 | |||||||||
IT services: 1.18% | |||||||||||
ServiceSource International, Inc.* | 247,200 | 2,071,536 | |||||||||
Life sciences tools & services: 0.85% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 12,000 | 1,483,320 | |||||||||
Machinery: 1.17% | |||||||||||
Illinois Tool Works, Inc. | 24,400 | 2,051,552 | |||||||||
Media: 4.31% | |||||||||||
Comcast Corp., Class A | 72,100 | 3,746,676 | |||||||||
Walt Disney Co. | 49,600 | 3,789,440 | |||||||||
7,536,116 | |||||||||||
Multiline retail: 2.33% | |||||||||||
JC Penney Co., Inc.*1 | 136,600 | 1,249,890 | |||||||||
Macy's, Inc. | 52,900 | 2,824,860 | |||||||||
4,074,750 |
50
UBS U.S. Large Cap Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Oil, gas & consumable fuels: 4.05% | |||||||||||
EOG Resources, Inc. | 17,300 | $ | 2,903,632 | ||||||||
Exxon Mobil Corp. | 41,200 | 4,169,440 | |||||||||
7,073,072 | |||||||||||
Pharmaceuticals: 6.39% | |||||||||||
Allergan, Inc. | 12,300 | 1,366,284 | |||||||||
Eli Lilly & Co. | 70,800 | 3,610,800 | |||||||||
Hospira, Inc.* | 40,100 | 1,655,328 | |||||||||
Impax Laboratories, Inc.* | 41,000 | 1,030,740 | |||||||||
Mallinckrodt PLC* | 22,100 | 1,154,946 | |||||||||
Salix Pharmaceuticals Ltd.* | 15,300 | 1,376,082 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 24,500 | 981,960 | |||||||||
11,176,140 | |||||||||||
Real estate investment trust (REIT): 3.27% | |||||||||||
Digital Realty Trust, Inc.1 | 58,500 | 2,873,520 | |||||||||
Simon Property Group, Inc. | 18,700 | 2,845,392 | |||||||||
5,718,912 | |||||||||||
Road & rail: 3.94% | |||||||||||
Hertz Global Holdings, Inc.* | 103,000 | 2,947,860 | |||||||||
Norfolk Southern Corp. | 42,400 | 3,935,992 | |||||||||
6,883,852 | |||||||||||
Semiconductors & semiconductor equipment: 7.68% | |||||||||||
Applied Materials, Inc. | 175,500 | 3,104,595 | |||||||||
Broadcom Corp., Class A | 106,100 | 3,145,865 | |||||||||
Freescale Semiconductor Ltd.* | 33,100 | 531,255 | |||||||||
Mellanox Technologies Ltd.*1 | 39,800 | 1,590,806 | |||||||||
Micron Technology, Inc.* | 83,300 | 1,812,608 | |||||||||
NXP Semiconductor NV* | 70,700 | 3,247,251 | |||||||||
13,432,380 |
Shares | Value | ||||||||||
Software: 3.77% | |||||||||||
Adobe Systems, Inc.* | 35,200 | $ | 2,107,776 | ||||||||
Check Point Software Technologies Ltd.* | 40,100 | 2,587,252 | |||||||||
Symantec Corp. | 80,100 | 1,888,758 | |||||||||
6,583,786 | |||||||||||
Textiles, apparel & luxury goods: 1.02% | |||||||||||
Ralph Lauren Corp. | 10,100 | 1,783,357 | |||||||||
Tobacco: 2.74% | |||||||||||
Philip Morris International, Inc. | 54,950 | 4,787,794 | |||||||||
Wireless telecommunication services: 0.64% | |||||||||||
NII Holdings, Inc.*1 | 406,400 | 1,117,600 | |||||||||
Total common stocks (cost $138,301,804) | 172,361,641 | ||||||||||
Investment company: 0.50% | |||||||||||
SPDR S&P 500 ETF Trust (cost $843,622) | 4,700 | 867,949 | |||||||||
Short-term investment: 0.90% | |||||||||||
Investment company: 0.90% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $1,571,874) | 1,571,874 | 1,571,874 | |||||||||
Investment of cash collateral from securities loaned: 3.53% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $6,164,945) | 6,164,945 | 6,164,945 | |||||||||
Total investments: 103.52% (cost $146,882,245) | 180,966,409 | ||||||||||
Liabilities, in excess of cash and other assets: (3.52)% | (6,147,968 | ) | |||||||||
Net assets: 100.00% | $ | 174,818,441 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 37,941,105 | |||||
Gross unrealized depreciation | (3,856,941 | ) | |||||
Net unrealized appreciation of investments | $ | 34,084,164 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 61. Portfolio footnotes begin on page 52.
51
UBS U.S. Large Cap Equity Fund
Portfolio of investments
December 31, 2013 (unaudited)
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 172,361,641 | $ | — | $ | — | $ | 172,361,641 | |||||||||||
Investment company | 867,949 | — | — | 867,949 | |||||||||||||||
Short-term investment | — | 1,571,874 | — | 1,571,874 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 6,164,945 | — | 6,164,945 | |||||||||||||||
Total | $ | 173,229,590 | $ | 7,736,819 | $ | — | $ | 180,966,409 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at December 31, 2013.
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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 3,425,892 | $ | 21,451,927 | $ | 23,305,945 | $ | 1,571,874 | $ | 990 | |||||||||||||
UBS Private Money Market Fund LLCa | 5,190,420 | 27,481,185 | 26,506,660 | 6,164,945 | 293 | ||||||||||||||||||
$ | 8,616,312 | $ | 48,933,112 | $ | 49,812,605 | $ | 7,736,819 | $ | 1,283 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
52
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 23.15% (Class A shares returned 16.36% after the deduction of the maximum sales charge), while Class Y shares returned 23.33%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 22.02% 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 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 outpaced the Index primarily due to stock selection decisions.
Portfolio performance summary1
What worked
• Stock selection in the consumer discretionary sector, as well as several initial public offerings ("IPO"), positively contributed to Fund returns.
– RetailMeNot made a significant contribution to relative performance during the six months. The company, a provider of online coupons and deals, had a successful IPO in July 2013. We view RetailMeNot as a favorable competitor to other daily deal websites. We liquidated our position in RetailMeNot in November, after its valuations exceeded those of its industry peers.
– The Container Store Group, Inc., a national retailer devoted to selling storage and organization products, saw its shares rise following its IPO during the reporting period. The company operates 62 stores that have an average size of roughly 19,000 square feet in 22 states and the District of Columbia. We believe that The Container Store will grow by expanding its store base, driving comparable store sales growth and growing the company's multi-channel presence.
– The stock price of Zulily, Inc., Class A, an e-commerce flash sale marketplace focusing on mothers and their children, rose after the company's IPO in November 2013. Zulily is a disruptive, first-mover platform that provides a unique, contagious shopping experience. We believe that Zulily will grow by acquiring new customers, increasing repeat purchasing, adding new vendors, expanding internationally and improving its mobile platform.
• Several stock positions within the information technology sector were positive for performance during the reporting period.
– Nimble Storage, Inc. a provider of enterprise storage and back-up solutions, performed well following a successful IPO in early December 2013. The company both designs and sells a flash-optimized hybrid storage platform that provides superior data protection and helps lower both capital and operating expenditures for its customers. (For details, see "Portfolio highlights.")
– Shares of Stratasys, Ltd., a manufacturer of three-dimensional ("3-D") printers, continued to advance during the reporting period, along with other key competitors in the 3-D printing space. The company announced a new expansion into Korea, and received positive coverage from a number of sell-side research companies. (For details, see "Portfolio highlights.")
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
53
UBS U.S. Small Cap Growth Fund
• Sprouts Farmers Markets was another holding that contributed to the Fund's relative performance. Sprouts, a specialty retailer of natural and organic food, saw its shares rise following a successful IPO. The company currently operates 163 stores in eight Southwestern states and California. We believe that the company has significant growth opportunities in existing and new markets, with the potential for approximately 1,200 locations operating under its current format. We liquidated our position in Sprouts Farmers Markets in September, after its valuation exceeded those of its industry peers.
What didn't work
• Stock selection in the information technology sector detracted from relative performance during the six months.
– OSI Systems Inc. was the largest detractor from Fund returns during the reporting period. The diversified manufacturer of security screening systems, medical monitors and electrical components suffered a price decline after the Transportation Security Administration ("TSA") canceled its $60 million order for AT-2 X-ray systems. The cancellation was made after OSI swapped out a component of its checkpoint X-ray system without notifying the TSA of the change.
– Shares of Cyan, Inc., a networking solutions company, fell after it provided revenue guidance for the fourth quarter of 2013 and for the 2014 fiscal year that was sharply below consensus estimates. The disappointing guidance was partially due to a larger-than-anticipated sequential decline in revenues from Windstream, Cyan's largest customer, as well as slower-than-expected adoption of the company's systems in international markets.
– Shares of Mellanox Technologies traded down during the six-month period. The company, a designer and developer of semiconductor-based high performance interconnect products, saw its shares fall based on concerns about potential competitive pressure from Intel. We liquidated our position in Mellanox in September, over concerns with the competitive landscape.
– Silver Spring Networks, Inc. detracted from the Fund's relative performance. The provider of smart grid network and security technology solutions underperformed following news that it had failed to win a piece of the lucrative Smart Meter grid contract in the UK.
• The Fund's position in Ariad Pharmaceuticals disappointed during the reporting period. Ariad is a biotechnology company focused on the development of small molecules for the treatment of cancers. Its share price fell after the company's Iclusig drug was put on partial clinical hold by the Food and Drug Administration in response to an increase in serious adverse events in a longer term analysis of one of Ariad's studies. In November 2013, Ariad discontinued a phase III trial of the drug in patients with newly diagnosed chronic myeloid leukemia and temporarily suspended the drug's marketing and commercial distribution. Due to these headwinds, we sold out of our position in Ariad in October.
• Restoration Hardware Holding, Inc detracted from relative returns. The stock price of the home furnishings retailer declined when it announced the departure of Co-CEO Carlos Alberini. In addition, the company released results that were slightly below consensus. (For details, see "Portfolio highlights.")
54
UBS U.S. Small Cap Growth Fund
Portfolio highlights
• Nimble Storage Inc is a platform provider of efficient data storage. The company's flexible architecture allows customers to scale for their specific needs, whether that is speed, storage space or both. The company is experiencing rapid growth, with more than 1,000 new customers in the past 12 months. Historical growth has been driven by clients in the small and mid-sized business segment that offer opportunities to move upstream in the enterprise. Incremental adoption is being driven by end-of-life situations and application upgrades, with service providers as one of the company's fastest growing segments.
• Stratasys Ltd. is one of the two leaders in the rapidly growing 3D printing, rapid prototyping and direct digital manufacturing industries. Stratasys has a global unit share of roughly 40%, though it has a lower revenue market share due to its strength in the small- and mid-size market, while its main competitor is focused on higher-end systems. The company recently completed a merger with Objet, an Israeli-based company that focuses on the same markets. We believe that the merger will produce millions in cost synergies, and the lower Israeli tax rate should also benefit earnings. We expect the industry to continue to benefit from a broadening addressable market, which should support strong double-digit growth in the years ahead.
• Cyan, Inc. provides carrier-grade networking solutions that transform legacy networks into open high-performance networks in North America, Asia and Europe. Its solutions enable network operators to virtualize their networks, accelerate service delivery and enhance both scalability and performance. We believe that Cyan has strong growth potential due to investments in sales and marketing resources to raise awareness of the company's successes. These include virtualizing high performance networks, introducing new software and hardware products, expanding the customer base, selling additional solutions to existing customers and expanding internationally. Additionally, Cyan's valuations are compelling relative to the industry and its peers.
• Restoration Hardware Holdings Inc is a specialty retailer of furniture, bathware, hardware, lighting, textiles, accessories and related merchandise. The company is transitioning its largely mall-based units to larger-format galleries. The galleries are roughly 20,000 square feet and have the capacity to showcase a significant portion of the company's merchandise under one roof. We believe that additional growth will come from planned product line expansions and new category introductions.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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. Small Cap Growth Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 23.15 | % | 46.81 | % | 25.59 | % | 8.80 | % | |||||||||||
Class C2 | 22.69 | 45.79 | 24.64 | 7.99 | |||||||||||||||
Class Y3 | 23.33 | 47.29 | 25.91 | 9.07 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 16.36 | % | 38.72 | % | 24.17 | % | 8.19 | % | |||||||||||
Class C2 | 21.69 | 44.79 | 24.64 | 7.99 | |||||||||||||||
Russell 2000 Growth Index4 | 22.02 | % | 43.30 | % | 22.58 | % | 9.41 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A — 1.56% and 1.41%; Class C — 2.33% and 2.16%; Class Y — 1.14% and 1.14%. 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 distribution and service 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.
3 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 distribution and service fees.
4 The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000 Index companies with higher price-to-value 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. 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://globalam-us.ubs.com/corpweb/performance.do.
56
UBS U.S. Small Cap Growth Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Proofpoint, Inc. | 2.2 | % | |||||
Ultimate Software Group, Inc. | 2.1 | ||||||
Spirit Airlines, Inc. | 2.1 | ||||||
Nimble Storage, Inc. | 2.1 | ||||||
Stratasys Ltd. | 1.9 | ||||||
Infoblox, Inc. | 1.7 | ||||||
Grand Canyon Education, Inc. | 1.7 | ||||||
Chart Industries, Inc. | 1.7 | ||||||
EnerSys | 1.7 | ||||||
HomeAway, Inc. | 1.6 | ||||||
Total | 18.8 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Aerospace & defense | 0.75 | % | |||||
Airlines | 2.06 | ||||||
Auto components | 3.08 | ||||||
Biotechnology | 6.58 | ||||||
Building products | 0.92 | ||||||
Capital markets | 1.04 | ||||||
Commercial banks | 1.92 | ||||||
Commercial services & supplies | 0.58 | ||||||
Communications equipment | 2.75 | ||||||
Computers & peripherals | 3.92 | ||||||
Construction & engineering | 1.17 | ||||||
Containers & packaging | 0.88 | ||||||
Distributors | 1.26 | ||||||
Diversified consumer services | 1.71 | ||||||
Electrical equipment | 1.68 | ||||||
Electronic equipment, instruments & components | 3.46 | ||||||
Energy equipment & services | 2.95 | ||||||
Food & staples retailing | 2.92 | ||||||
Health care equipment & supplies | 2.95 | ||||||
Health care providers & services | 3.12 | ||||||
Health care technology | 0.68 | ||||||
Hotels, restaurants & leisure | 3.17 | ||||||
Household durables | 3.01 | ||||||
Internet & catalog retail | 3.88 | ||||||
Internet software & services | 0.86 | ||||||
IT services | 1.24 | ||||||
Machinery | 3.44 | ||||||
Media | 1.41 | ||||||
Oil, gas & consumable fuels | 4.27 | ||||||
Paper & forest products | 1.03 | ||||||
Pharmaceuticals | 1.35 | ||||||
Road & rail | 2.12 | ||||||
Semiconductors & semiconductor equipment | 2.71 | ||||||
Software | 14.70 | ||||||
Specialty retail | 5.14 | ||||||
Thrifts & mortgage finance | 1.81 | ||||||
Total common stocks | 96.52 | % | |||||
Investment company | |||||||
iShares Russell 2000 Growth ETF | 1.70 | ||||||
Short-term investment | 2.08 | ||||||
Investment of cash collateral from securities loaned | 16.96 | ||||||
Total investments | 117.26 | % | |||||
Liabilities, in excess of cash and other assets | (17.26 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS U.S. Small Cap Growth Fund. Figures might be different if a breakdown of the underlying investment company was included.
57
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 96.52% | |||||||||||
Aerospace & defense: 0.75% | |||||||||||
KEYW Holding Corp.*1 | 149,400 | $ | 2,007,936 | ||||||||
Airlines: 2.06% | |||||||||||
Spirit Airlines, Inc.* | 121,300 | 5,508,233 | |||||||||
Auto components: 3.08% | |||||||||||
Drew Industries, Inc. | 49,500 | 2,534,400 | |||||||||
Tenneco, Inc.* | 49,100 | 2,777,587 | |||||||||
Tower International, Inc.* | 136,300 | 2,916,820 | |||||||||
8,228,807 | |||||||||||
Biotechnology: 6.58% | |||||||||||
Acceleron Pharma, Inc.*1 | 36,300 | 1,437,480 | |||||||||
Agios Pharmaceuticals, Inc.*1 | 36,000 | 862,200 | |||||||||
Celldex Therapeutics, Inc.* | 6,200 | 150,102 | |||||||||
Cepheid, Inc.*1 | 76,200 | 3,560,064 | |||||||||
Exact Sciences Corp.* | 122,100 | 1,427,349 | |||||||||
Incyte Corp. Ltd.* | 39,200 | 1,984,696 | |||||||||
Insmed, Inc.* | 116,700 | 1,985,067 | |||||||||
Karyopharm Therapeutics, Inc.* | 26,400 | 605,088 | |||||||||
Medivation, Inc.* | 40,800 | 2,603,856 | |||||||||
Seattle Genetics, Inc.* | 45,000 | 1,795,050 | |||||||||
Synageva BioPharma Corp.*1 | 18,500 | 1,197,320 | |||||||||
17,608,272 | |||||||||||
Building products: 0.92% | |||||||||||
NCI Building Systems, Inc.* | 140,700 | 2,467,878 | |||||||||
Capital markets: 1.04% | |||||||||||
FXCM, Inc., Class A1 | 155,800 | 2,779,472 | |||||||||
Commercial banks: 1.92% | |||||||||||
Columbia Banking System, Inc. | 42,700 | 1,174,677 | |||||||||
National Bank Holdings Corp., Class A | 98,500 | 2,107,900 | |||||||||
Webster Financial Corp. | 59,200 | 1,845,856 | |||||||||
5,128,433 | |||||||||||
Commercial services & supplies: 0.58% | |||||||||||
Clean Harbors, Inc.* | 25,900 | 1,552,964 | |||||||||
Communications equipment: 2.75% | |||||||||||
Ciena Corp.* | 129,600 | 3,101,328 | |||||||||
Finisar Corp.* | 108,821 | 2,602,998 | |||||||||
Procera Networks, Inc.* | 110,500 | 1,659,710 | |||||||||
7,364,036 | |||||||||||
Computers & peripherals: 3.92% | |||||||||||
Nimble Storage, Inc.*1 | 121,500 | 5,503,950 | |||||||||
Stratasys Ltd.* | 37,000 | 4,983,900 | |||||||||
10,487,850 |
Shares | Value | ||||||||||
Construction & engineering: 1.17% | |||||||||||
EMCOR Group, Inc. | 73,800 | $ | 3,132,072 | ||||||||
Containers & packaging: 0.88% | |||||||||||
Rock Tenn Co., Class A | 22,356 | 2,347,604 | |||||||||
Distributors: 1.26% | |||||||||||
LKQ Corp.* | 102,200 | 3,362,380 | |||||||||
Diversified consumer services: 1.71% | |||||||||||
Grand Canyon Education, Inc.* | 104,800 | 4,569,280 | |||||||||
Electrical equipment: 1.68% | |||||||||||
EnerSys | 64,100 | 4,492,769 | |||||||||
Electronic equipment, instruments & components: 3.46% | |||||||||||
InvenSense, Inc.*1 | 185,700 | 3,858,846 | |||||||||
OSI Systems, Inc.* | 52,100 | 2,767,031 | |||||||||
Universal Display Corp.*1 | 76,700 | 2,635,412 | |||||||||
9,261,289 | |||||||||||
Energy equipment & services: 2.95% | |||||||||||
Bristow Group, Inc. | 41,800 | 3,137,508 | |||||||||
Hornbeck Offshore Services, Inc.* | 61,500 | 3,027,645 | |||||||||
Pioneer Energy Services Corp.* | 215,300 | 1,724,553 | |||||||||
7,889,706 | |||||||||||
Food & staples retailing: 2.92% | |||||||||||
Susser Holdings Corp.*1 | 60,800 | 3,981,792 | |||||||||
United Natural Foods, Inc.* | 50,800 | 3,829,812 | |||||||||
7,811,604 | |||||||||||
Health care equipment & supplies: 2.95% | |||||||||||
Antares Pharma, Inc.*1 | 263,800 | 1,181,824 | |||||||||
Insulet Corp.* | 83,900 | 3,112,690 | |||||||||
Tandem Diabetes Care, Inc.* | 80,300 | 2,069,331 | |||||||||
Thoratec Corp.* | 41,600 | 1,522,560 | |||||||||
7,886,405 | |||||||||||
Health care providers & services: 3.12% | |||||||||||
Air Methods Corp.* | 70,200 | 4,094,766 | |||||||||
IPC The Hospitalist Co., Inc.* | 43,700 | 2,595,343 | |||||||||
Mednax, Inc.* | 31,200 | 1,665,456 | |||||||||
8,355,565 | |||||||||||
Health care technology: 0.68% | |||||||||||
HMS Holdings Corp.* | 79,635 | 1,810,104 | |||||||||
Hotels, restaurants & leisure: 3.17% | |||||||||||
AFC Enterprises, Inc.* | 75,600 | 2,910,600 | |||||||||
Buffalo Wild Wings, Inc.* | 22,500 | 3,312,000 | |||||||||
Noodles & Co.*1 | 29,900 | 1,074,008 |
58
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Hotels, restaurants & leisure—(Concluded) | |||||||||||
Potbelly Corp.1 | 48,500 | $ | 1,177,580 | ||||||||
8,474,188 | |||||||||||
Household durables: 3.01% | |||||||||||
Meritage Homes Corp.* | 68,000 | 3,263,320 | |||||||||
Ryland Group, Inc. | 83,400 | 3,620,394 | |||||||||
TRI Pointe Homes, Inc.*1 | 57,800 | 1,151,954 | |||||||||
8,035,668 | |||||||||||
Internet & catalog retail: 3.88% | |||||||||||
HomeAway, Inc.* | 104,700 | 4,280,136 | |||||||||
Shutterfly, Inc.* | 65,300 | 3,325,729 | |||||||||
zulily, Inc., Class A*1 | 66,800 | 2,767,524 | |||||||||
10,373,389 | |||||||||||
Internet software & services: 0.86% | |||||||||||
Benefitfocus, Inc.*1 | 39,600 | 2,286,504 | |||||||||
IT services: 1.24% | |||||||||||
EPAM Systems, Inc.* | 95,100 | 3,322,794 | |||||||||
Machinery: 3.44% | |||||||||||
Chart Industries, Inc.* | 47,000 | 4,495,080 | |||||||||
Wabash National Corp.* | 187,949 | 2,321,170 | |||||||||
Woodward, Inc. | 52,000 | 2,371,720 | |||||||||
9,187,970 | |||||||||||
Media: 1.41% | |||||||||||
Imax Corp.*1 | 127,800 | 3,767,544 | |||||||||
Oil, gas & consumable fuels: 4.27% | |||||||||||
Bonanza Creek Energy, Inc.* | 69,400 | 3,016,818 | |||||||||
Gulfport Energy Corp.* | 43,900 | 2,772,285 | |||||||||
Kodiak Oil & Gas Corp.* | 300,900 | 3,373,089 | |||||||||
Solazyme, Inc.*1 | 208,000 | 2,265,120 | |||||||||
11,427,312 | |||||||||||
Paper & forest products: 1.03% | |||||||||||
Boise Cascade Co.* | 93,500 | 2,756,380 | |||||||||
Pharmaceuticals: 1.35% | |||||||||||
Nektar Therapeutics* | 78,100 | 886,435 | |||||||||
Pacira Pharmaceuticals, Inc.* | 25,500 | 1,465,995 | |||||||||
Questcor Pharmaceuticals, Inc.1 | 23,300 | 1,268,685 | |||||||||
3,621,115 | |||||||||||
Road & rail: 2.12% | |||||||||||
Con-way, Inc. | 70,800 | 2,811,468 | |||||||||
Saia, Inc.* | 89,300 | 2,862,065 | |||||||||
5,673,533 |
Shares | Value | ||||||||||
Semiconductors & semiconductor equipment: 2.71% | |||||||||||
Cavium, Inc.* | 81,900 | $ | 2,826,369 | ||||||||
Magnachip Semiconductor Corp.* | 145,900 | 2,845,050 | |||||||||
Skyworks Solutions, Inc.* | 55,500 | 1,585,080 | |||||||||
7,256,499 | |||||||||||
Software: 14.70% | |||||||||||
Cyan, Inc.*1 | 166,900 | 882,901 | |||||||||
FactSet Research Systems, Inc.1 | 23,100 | 2,508,198 | |||||||||
FireEye, Inc.* | 45,300 | 1,975,533 | |||||||||
FleetMatics Group PLC* | 86,000 | 3,719,500 | |||||||||
Infoblox, Inc.* | 140,000 | 4,622,800 | |||||||||
NICE Systems Ltd. ADR | 38,700 | 1,585,152 | |||||||||
Proofpoint, Inc.* | 176,000 | 5,837,920 | |||||||||
Qlik Technologies, Inc.* | 109,100 | 2,905,333 | |||||||||
Silver Spring Networks, Inc.* | 110,300 | 2,316,300 | |||||||||
Splunk, Inc.* | 45,500 | 3,124,485 | |||||||||
Synchronoss Technologies, Inc.* | 84,300 | 2,619,201 | |||||||||
Tableau Software, Inc., Class A* | 24,100 | 1,661,213 | |||||||||
Ultimate Software Group, Inc.* | 36,304 | 5,562,499 | |||||||||
39,321,035 | |||||||||||
Specialty retail: 5.14% | |||||||||||
ANN, Inc.* | 69,000 | 2,522,640 | |||||||||
Asbury Automotive Group, Inc.* | 73,700 | 3,960,638 | |||||||||
Container Store Group, Inc.*1 | 52,800 | 2,461,008 | |||||||||
Francesca's Holdings Corp.*1 | 54,517 | 1,003,658 | |||||||||
Restoration Hardware Holdings, Inc.* | 56,600 | 3,809,180 | |||||||||
13,757,124 | |||||||||||
Thrifts & mortgage finance: 1.81% | |||||||||||
Essent Group Ltd.* | 105,500 | 2,538,330 | |||||||||
EverBank Financial Corp. | 125,900 | 2,309,006 | |||||||||
4,847,336 | |||||||||||
Total common stocks (cost $173,364,826) | 258,161,050 | ||||||||||
Investment company: 1.70% | |||||||||||
iShares Russell 2000 Growth ETF1 (cost $4,300,972) | 33,500 | 4,539,585 | |||||||||
Short-term investment: 2.08% | |||||||||||
Investment company: 2.08% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $5,572,872) | 5,572,872 | 5,572,872 |
59
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 16.96% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $45,367,777) | 45,367,777 | $ | 45,367,777 | ||||||||
Total investments: 117.26% (cost $228,606,447) | 313,641,284 | ||||||||||
Liabilities, in excess of cash and other assets: (17.26)% | (46,174,663 | ) | |||||||||
Net assets: 100.00% | $ | 267,466,621 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 88,177,713 | |||||
Gross unrealized depreciation | (3,142,876 | ) | |||||
Net unrealized appreciation of investments | $ | 85,034,837 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 61. Portfolio footnotes begin below.
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 258,161,050 | $ | — | $ | — | $ | 258,161,050 | |||||||||||
Investment company | 4,539,585 | — | — | 4,539,585 | |||||||||||||||
Short-term investment | — | 5,572,872 | — | 5,572,872 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 45,367,777 | — | 45,367,777 | |||||||||||||||
Total | $ | 262,700,635 | $ | 50,940,649 | $ | — | $ | 313,641,284 |
At December 31, 2013 there were no transfers between Levels 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at December 31, 2013.
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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 3,491,150 | $ | 27,570,629 | $ | 25,488,907 | $ | 5,572,872 | $ | 2,768 | |||||||||||||
UBS Private Money Market Fund LLCa | 27,876,921 | 147,238,916 | 129,748,060 | 45,367,777 | 1,501 | ||||||||||||||||||
$ | 31,368,071 | $ | 174,809,545 | $ | 155,236,967 | $ | 50,940,649 | $ | 4,269 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
60
The UBS Funds
Portfolio acronyms
ADR | American Depositary Receipt | ||||||
CDI | CHESS depositary interest | ||||||
CVA | Dutch Certification—Depository Certificate | ||||||
ETF | Exchange Traded Fund | ||||||
LIBOR | London Interbank Offered Rate | ||||||
NPV | No Par Value |
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 | ||||||
SDR | Special depositary receipt | ||||||
SPDR | Standard & Poor's Depository Receipts |
Counterparty abbreviations
CSI | Credit Suisse International | ||||||
JPMCB | JPMorgan Chase Bank |
Currency abbreviations
AUD | Australian Dollar | ||||||
CHF | Swiss Franc | ||||||
EUR | Euro | ||||||
GBP | Great Britain Pound |
JPY | Japanese Yen | ||||||
TRY | Turkish Lira | ||||||
USD | United States Dollar |
See accompanying notes to financial statements.
61
The UBS Funds
December 31, 2013 (unaudited)
Explanation of expense disclosure
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; distribution and/or service (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, July 1, 2013 to December 31, 2013.
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 July 1, 2013 to December 31, 2013.
62
The UBS Funds
December 31, 2013 (unaudited)
Beginning account value July 1, 2013 | Ending account value December 31, 2013 | Expenses paid during period* 07/01/13 – 12/31/13 | Expense ratio during period | ||||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,018.90 | $ | 16.64 | 3.28 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,008.67 | 16.61 | 3.28 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,014.20 | 20.46 | 4.03 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,004.89 | 20.37 | 4.03 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,020.70 | 15.43 | 3.03 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,009.93 | 15.35 | 3.03 | |||||||||||||||||||
UBS Global Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,142.70 | 6.75 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.90 | 6.36 | 1.25 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,137.60 | 10.78 | 2.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.12 | 10.16 | 2.00 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,143.40 | 5.40 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.16 | 5.09 | 1.00 | |||||||||||||||||||
UBS U.S. Defensive Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,104.50 | 11.40 | 2.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.37 | 10.92 | 2.15 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,100.20 | 15.35 | 2.90 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,010.59 | 14.70 | 2.90 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,106.50 | 10.04 | 1.89 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.68 | 9.60 | 1.89 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
63
The UBS Funds
December 31, 2013 (unaudited)
Beginning account value July 1, 2013 | Ending account value December 31, 2013 | Expenses paid during period* 07/01/13 – 12/31/13 | Expense ratio during period | ||||||||||||||||||||
UBS U.S. Equity Opportunity Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,146.30 | $ | 6.49 | 1.20 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.16 | 6.11 | 1.20 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,142.50 | 10.53 | 1.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.38 | 9.91 | 1.95 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,148.00 | 5.14 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.42 | 4.84 | 0.95 | |||||||||||||||||||
UBS U.S. Large Cap Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,156.30 | 6.52 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.16 | 6.11 | 1.20 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,152.10 | 10.58 | 1.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.38 | 9.91 | 1.95 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,158.20 | 5.17 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.42 | 4.84 | 0.95 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,231.50 | 7.87 | 1.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.15 | 7.12 | 1.40 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,226.90 | 12.07 | 2.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.37 | 10.92 | 2.15 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,233.30 | 6.14 | 1.09 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.71 | 5.55 | 1.09 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
64
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65
The UBS Funds
Financial statements
Statement of assets and liabilities
December 31, 2013 (unaudited)
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | UBS U.S. Defensive Equity Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost: | |||||||||||||||
Unaffiliated issuers | $ | 12,333,549 | $ | 17,980,295 | $ | 15,005,491 | |||||||||
Affiliated issuers | 5,457,224 | 275,656 | 63,109 | ||||||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | — | 116,450 | — | ||||||||||||
Foreign currency, at cost | 11,213 | 22,800 | — | ||||||||||||
$ | 17,801,986 | $ | 18,395,201 | $ | 15,068,600 | ||||||||||
Investments, at value: | |||||||||||||||
Unaffiliated issuers | $ | 14,985,191 | $ | 19,117,401 | $ | 19,631,408 | |||||||||
Affiliated issuers | 5,457,224 | 275,656 | 63,109 | ||||||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | — | 116,450 | — | ||||||||||||
Foreign currency, at value | 11,156 | 23,435 | — | ||||||||||||
Cash | — | — | 4,281 | ||||||||||||
Receivables: | |||||||||||||||
Investment securities sold | 513,473 | — | 58,580 | ||||||||||||
Interest | — | 262 | — | ||||||||||||
Fund shares sold | — | 30,266 | — | ||||||||||||
Foreign tax reclaims | 11,422 | 39,116 | — | ||||||||||||
Due from advisor | 6,896 | 11,195 | 8,220 | ||||||||||||
Dividends | 12,348 | 15,736 | 24,049 | ||||||||||||
Cash collateral for securities sold short | 6,376,205 | — | 98,001 | ||||||||||||
Outstanding swap agreements, at value | 49,719 | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 81,078 | — | — | ||||||||||||
Other assets | 29,723 | 32,399 | 31,308 | ||||||||||||
Total assets | 27,534,435 | 19,661,916 | 19,918,956 | ||||||||||||
Liabilities: | |||||||||||||||
Payables: | |||||||||||||||
Cash collateral from securities loaned | — | 116,450 | — | ||||||||||||
Investment securities purchased | 501,385 | — | — | ||||||||||||
Investment advisory and administration fee | — | — | — | ||||||||||||
Custody and fund accounting fees | 21,499 | 12,788 | 16,600 | ||||||||||||
Fund shares redeemed | — | 58,915 | 64,486 | ||||||||||||
Distribution and service fees | 598 | 1,857 | 4,243 | ||||||||||||
Trustees' fees | 4,782 | 4,852 | 4,751 | ||||||||||||
Dividends payable and security loan fees for securities sold short | 17,895 | — | 6,871 | ||||||||||||
Accrued expenses | 71,455 | 42,659 | 47,590 | ||||||||||||
Due to custodian | 4,168 | 127 | — | ||||||||||||
Due to broker | 11,761 | — | — | ||||||||||||
Options written, at value2 | — | — | 3,402 | ||||||||||||
Securities sold short, at value3 | 10,688,449 | — | 4,790,925 | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 22,123 | �� | — | — | |||||||||||
Total liabilities | 11,344,115 | 237,648 | 4,938,868 | ||||||||||||
Net assets | $ | 16,190,320 | $ | 19,424,268 | $ | 14,980,088 |
1 The market value of securities loaned by UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund, as of December 31, 2013 was $114,028, $1,853,992, $5,953,771 and $44,290,513, respectively.
2 Premiums received by UBS U.S. Defensive Equity Fund were $20,048.
3 Proceeds from securities sold short by UBS Equity Long-Short Multi-Strategy Fund and UBS U.S. Defensive Equity Fund were $9,103,275 and $3,413,379, respectively.
66
The UBS Funds
Financial statements
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | UBS U.S. Small Cap Growth Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost: | |||||||||||||||
Unaffiliated issuers | $ | 35,659,544 | $ | 139,145,426 | $ | 177,665,798 | |||||||||
Affiliated issuers | 1,806,225 | 1,571,874 | 5,572,872 | ||||||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | 1,918,799 | 6,164,945 | 45,367,777 | ||||||||||||
Foreign currency, at cost | 9,300 | — | — | ||||||||||||
$ | 39,393,868 | $ | 146,882,245 | $ | 228,606,447 | ||||||||||
Investments, at value: | |||||||||||||||
Unaffiliated issuers | $ | 43,294,292 | $ | 173,229,590 | $ | 262,700,635 | |||||||||
Affiliated issuers | 1,806,225 | 1,571,874 | 5,572,872 | ||||||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | 1,918,799 | 6,164,945 | 45,367,777 | ||||||||||||
Foreign currency, at value | 9,708 | — | — | ||||||||||||
Cash | — | — | 23 | ||||||||||||
Receivables: | |||||||||||||||
Investment securities sold | — | — | — | ||||||||||||
Interest | 1,021 | 6,310 | 39,508 | ||||||||||||
Fund shares sold | 3,294 | 95,360 | 283,024 | ||||||||||||
Foreign tax reclaims | — | — | — | ||||||||||||
Due from advisor | — | — | — | ||||||||||||
Dividends | 54,705 | 210,572 | 99,381 | ||||||||||||
Cash collateral for securities sold short | — | — | — | ||||||||||||
Outstanding swap agreements, at value | — | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Other assets | 30,905 | 46,164 | 69,863 | ||||||||||||
Total assets | 47,118,949 | 181,324,815 | 314,133,083 | ||||||||||||
Liabilities: | |||||||||||||||
Payables: | |||||||||||||||
Cash collateral from securities loaned | 1,918,799 | 6,164,945 | 45,367,777 | ||||||||||||
Investment securities purchased | — | — | 38,080 | ||||||||||||
Investment advisory and administration fee | 6,057 | 104,898 | 199,466 | ||||||||||||
Custody and fund accounting fees | 10,230 | 18,739 | 21,431 | ||||||||||||
Fund shares redeemed | 85,939 | 133,524 | 944,854 | ||||||||||||
Distribution and service fees | 11,929 | 4,534 | 11,165 | ||||||||||||
Trustees' fees | 5,542 | 8,930 | 10,464 | ||||||||||||
Dividends payable and security loan fees for securities sold short | — | — | — | ||||||||||||
Accrued expenses | 101,756 | 70,731 | 73,225 | ||||||||||||
Due to custodian | 73 | 73 | — | ||||||||||||
Due to broker | — | — | — | ||||||||||||
Options written, at value2 | — | — | — | ||||||||||||
Securities sold short, at value3 | — | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Total liabilities | 2,140,325 | 6,506,374 | 46,666,462 | ||||||||||||
Net assets | $ | 44,978,624 | $ | 174,818,441 | $ | 267,466,621 |
See accompanying notes to financial statements.
67
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
December 31, 2013 (unaudited)
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | UBS U.S. Defensive Equity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 15,640,957 | $ | 28,175,540 | $ | 31,616,483 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | (253,278 | ) | (11,535 | ) | (15,082 | ) | |||||||||
Accumulated net realized gain (loss) | (372,784 | ) | (9,881,329 | ) | (19,886,330 | ) | |||||||||
Net unrealized appreciation | 1,175,425 | 1,141,592 | 3,265,017 | ||||||||||||
Net assets | $ | 16,190,320 | $ | 19,424,268 | $ | 14,980,088 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 1,202,465 | $ | 6,290,072 | $ | 9,841,921 | |||||||||
Shares outstanding | 117,291 | 746,564 | 824,626 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 10.25 | $ | 8.43 | $ | 11.94 | |||||||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 10.85 | $ | 8.92 | $ | 12.63 | |||||||||
Class C: | |||||||||||||||
Net assets | $ | 408,534 | $ | 684,907 | $ | 2,638,698 | |||||||||
Shares outstanding | 40,884 | 82,352 | 228,784 | ||||||||||||
Net asset value and offering price per share | $ | 9.99 | $ | 8.32 | $ | 11.53 | |||||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 9.89 | $ | 8.24 | $ | 11.41 | |||||||||
Class Y: | |||||||||||||||
Net assets | $ | 14,579,321 | $ | 12,449,289 | $ | 2,499,469 | |||||||||
Shares outstanding | 1,409,035 | 1,473,699 | 209,208 | ||||||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 10.35 | $ | 8.45 | $ | 11.95 |
1 For Class A, the maximum sales charge is 5.50%. Classes 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 $1,000,000 or more that were not subject to a front-end sales charge made within one year of the purchase date. Class C maximum contingent deferred sales charge is 1.00%. Class Y has no contingent deferred sales charge. 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.
68
The UBS Funds
Financial statements
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | UBS U.S. Small Cap Growth Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 49,452,582 | $ | 272,042,136 | $ | 179,427,335 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | 8,079 | 577,113 | (1,239,293 | ) | |||||||||||
Accumulated net realized gain (loss) | (12,117,193 | ) | (131,884,972 | ) | 4,243,742 | ||||||||||
Net unrealized appreciation | 7,635,156 | 34,084,164 | 85,034,837 | ||||||||||||
Net assets | $ | 44,978,624 | $ | 174,818,441 | $ | 267,466,621 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 39,167,498 | $ | 9,519,330 | $ | 40,414,787 | |||||||||
Shares outstanding | 4,389,446 | 417,803 | 1,675,521 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 8.92 | $ | 22.78 | $ | 24.12 | |||||||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 9.44 | $ | 24.11 | $ | 25.52 | |||||||||
Class C: | |||||||||||||||
Net assets | $ | 4,446,810 | $ | 3,083,364 | $ | 3,606,895 | |||||||||
Shares outstanding | 508,712 | 140,667 | 165,294 | ||||||||||||
Net asset value and offering price per share | $ | 8.74 | $ | 21.92 | $ | 21.82 | |||||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 8.65 | $ | 21.70 | $ | 21.60 | |||||||||
Class Y: | |||||||||||||||
Net assets | $ | 1,364,316 | $ | 162,215,747 | $ | 223,444,939 | |||||||||
Shares outstanding | 152,135 | 7,097,020 | 8,836,030 | ||||||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 8.97 | $ | 22.86 | $ | 25.29 |
See accompanying notes to financial statements.
69
The UBS Funds
Financial statements
Statement of operations
For the six months ended December 31, 2013 (unaudited)
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | UBS U.S. Defensive Equity Fund | |||||||||||||
Investment income: | |||||||||||||||
Dividends | $ | 78,191 | $ | 160,260 | $ | 150,792 | |||||||||
Affiliated income | 2,681 | 128 | 51 | ||||||||||||
Securities lending1 | — | 2,036 | — | ||||||||||||
Foreign tax withheld | (1,065 | ) | (13,545 | ) | — | ||||||||||
Total income | 79,807 | 148,879 | 150,843 | ||||||||||||
Expenses: | |||||||||||||||
Advisory and administration | 107,243 | 83,260 | 80,079 | ||||||||||||
Distribution and service: | |||||||||||||||
Class A | 1,616 | 7,425 | 11,798 | ||||||||||||
Class C | 2,055 | 3,296 | 13,453 | ||||||||||||
Transfer agency and related service fees: | |||||||||||||||
Class A | 4,038 | 3,545 | 2,900 | ||||||||||||
Class C | 117 | 579 | 1,867 | ||||||||||||
Class Y | 103 | 6,114 | 1,245 | ||||||||||||
Custodian and fund accounting | 39,130 | 26,986 | 33,724 | ||||||||||||
Federal and state registration | 13,023 | 17,144 | 17,687 | ||||||||||||
Professional services | 61,905 | 62,714 | 48,222 | ||||||||||||
Shareholder reports | 2,866 | 5,855 | 8,059 | ||||||||||||
Trustees | 9,704 | 9,834 | 9,631 | ||||||||||||
Dividend expense and security loan fees for securities sold short | 123,553 | — | 47,995 | ||||||||||||
Other | 10,750 | 9,637 | 5,427 | ||||||||||||
Total expenses | 376,103 | 236,389 | 282,087 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (127,456 | ) | (130,453 | ) | (115,665 | ) | |||||||||
Net expenses | 248,647 | 105,936 | 166,422 | ||||||||||||
Net investment income (loss) | (168,840 | ) | 42,943 | (15,579 | ) | ||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 1,262,364 | 2,784,713 | 1,655,567 | ||||||||||||
Options written | — | — | 118,362 | ||||||||||||
Securities sold short | (889,030 | ) | — | (495,545 | ) | ||||||||||
Swap agreements | 11,447 | — | — | ||||||||||||
Forward foreign currency contracts | (13,205 | ) | 53,810 | — | |||||||||||
Foreign currency transactions | (6,858 | ) | (23,284 | ) | — | ||||||||||
Net realized gain | 364,718 | 2,815,239 | 1,278,384 | ||||||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||||||
Investments | 1,162,054 | (384,452 | ) | 491,932 | |||||||||||
Options written | — | — | 34,816 | ||||||||||||
Securities sold short | (1,121,943 | ) | — | (327,781 | ) | ||||||||||
Swap agreements | 27,791 | — | — | ||||||||||||
Forward foreign currency contracts | 44,306 | 32,555 | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | 3,145 | (19,813 | ) | — | |||||||||||
Change in net unrealized appreciation/depreciation | 115,353 | (371,710 | ) | 198,967 | |||||||||||
Net realized and unrealized gain | 480,071 | 2,443,529 | 1,477,351 | ||||||||||||
Net increase in net assets resulting from operations | $ | 311,231 | $ | 2,486,472 | $ | 1,461,772 |
1 Includes affiliated income from UBS Private Money Market Fund LLC of $16, $97, $293 and $1,501, for UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund, respectively.
70
The UBS Funds
Financial statements
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | UBS U.S. Small Cap Growth Fund | |||||||||||||
Investment income: | |||||||||||||||
Dividends | $ | 278,441 | $ | 1,365,324 | $ | 374,034 | |||||||||
Affiliated income | 528 | 990 | 2,768 | ||||||||||||
Securities lending1 | 9,884 | 39,705 | 323,099 | ||||||||||||
Foreign tax withheld | — | — | — | ||||||||||||
Total income | 288,853 | 1,406,019 | 699,901 | ||||||||||||
Expenses: | |||||||||||||||
Advisory and administration | 171,527 | 657,256 | 1,127,977 | ||||||||||||
Distribution and service: | |||||||||||||||
Class A | 48,252 | 11,782 | 46,488 | ||||||||||||
Class C | 21,624 | 14,396 | 16,507 | ||||||||||||
Transfer agency and related service fees: | |||||||||||||||
Class A | 16,705 | 3,987 | 26,372 | ||||||||||||
Class C | 2,581 | 1,399 | 2,785 | ||||||||||||
Class Y | 1,269 | 36,132 | 21,264 | ||||||||||||
Custodian and fund accounting | 28,612 | 35,270 | 44,322 | ||||||||||||
Federal and state registration | 17,381 | 18,292 | 22,730 | ||||||||||||
Professional services | 51,412 | 48,678 | 47,317 | ||||||||||||
Shareholder reports | 31,523 | 11,218 | 19,334 | ||||||||||||
Trustees | 11,243 | 18,166 | 21,688 | ||||||||||||
Dividend expense and security loan fees for securities sold short | — | — | — | ||||||||||||
Other | 11,870 | 16,273 | 15,348 | ||||||||||||
Total expenses | 413,999 | 872,849 | 1,412,132 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (133,678 | ) | (40,425 | ) | (11,665 | ) | |||||||||
Net expenses | 280,321 | 832,424 | 1,400,467 | ||||||||||||
Net investment income (loss) | 8,532 | 573,595 | (700,566 | ) | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 2,656,545 | 14,324,393 | 18,656,114 | ||||||||||||
Options written | — | — | — | ||||||||||||
Securities sold short | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Foreign currency transactions | — | — | — | ||||||||||||
Net realized gain | 2,656,545 | 14,324,393 | 18,656,114 | ||||||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||||||
Investments | �� | 3,274,702 | 9,579,098 | 30,804,182 | |||||||||||
Options written | — | — | — | ||||||||||||
Securities sold short | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | 606 | — | — | ||||||||||||
Change in net unrealized appreciation/depreciation | 3,275,308 | 9,579,098 | 30,804,182 | ||||||||||||
Net realized and unrealized gain | 5,931,853 | 23,903,491 | 49,460,296 | ||||||||||||
Net increase in net assets resulting from operations | $ | 5,940,385 | $ | 24,477,086 | $ | 48,759,730 |
See accompanying notes to financial statements.
71
The UBS Funds
Financial statements
Statement of changes in net assets
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | ||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (168,840 | ) | $ | (304,219 | ) | $ | 42,943 | $ | 300,201 | |||||||||
Net realized gain | 364,718 | 217,177 | 2,815,239 | 1,176,312 | |||||||||||||||
Change in net unrealized appreciation/depreciation | 115,353 | 1,155,860 | (371,710 | ) | 1,325,263 | ||||||||||||||
Net increase in net assets from operations | 311,231 | 1,068,818 | 2,486,472 | 2,801,776 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | — | — | (137,135 | ) | (174,245 | ) | |||||||||||||
Total Class A dividends and distributions | — | — | (137,135 | ) | (174,245 | ) | |||||||||||||
Class C: | |||||||||||||||||||
Net investment income | — | — | (10,296 | ) | (16,321 | ) | |||||||||||||
Total Class C dividends and distributions | — | — | (10,296 | ) | (16,321 | ) | |||||||||||||
Class Y: | |||||||||||||||||||
Net investment income | — | — | (301,607 | ) | (459,040 | ) | |||||||||||||
Total Class Y dividends and distributions | — | — | (301,607 | ) | (459,040 | ) | |||||||||||||
Decrease in net assets from dividends and distributions | — | — | (449,038 | ) | (649,606 | ) | |||||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 117,156 | 190,285 | 826,617 | 847,379 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | — | — | 425,485 | 634,993 | |||||||||||||||
Redemption fees | — | 259 | 7 | 1,194 | |||||||||||||||
Cost of shares redeemed | (397,777 | ) | (2,493,069 | ) | (1,642,416 | ) | (5,104,108 | ) | |||||||||||
Net decrease in net assets resulting from beneficial interest transactions | (280,621 | ) | (2,302,525 | ) | (390,307 | ) | (3,620,542 | ) | |||||||||||
Increase (decrease) in net assets | 30,610 | (1,233,707 | ) | 1,647,127 | (1,468,372 | ) | |||||||||||||
Net assets, beginning of period | 16,159,710 | 17,393,417 | 17,777,141 | 19,245,513 | |||||||||||||||
Net assets, end of period | $ | 16,190,320 | $ | 16,159,710 | $ | 19,424,268 | $ | 17,777,141 | |||||||||||
Accumulated (distributions in excess of) undistributed net investment income (loss) | $ | (253,278 | ) | $ | (84,438 | ) | $ | (11,535 | ) | $ | 394,560 |
72
The UBS Funds
Financial statements
UBS U.S. Defensive Equity Fund | |||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | (15,579 | ) | $ | (67,148 | ) | |||||
Net realized gain | 1,278,384 | 1,058,279 | |||||||||
Change in net unrealized appreciation/depreciation | 198,967 | 2,479,234 | |||||||||
Net increase in net assets from operations | 1,461,772 | 3,470,365 | |||||||||
Dividends and distributions to shareholders by class: | |||||||||||
Class A: | |||||||||||
Net investment income | — | (15,570 | ) | ||||||||
Total Class A dividends and distributions | — | (15,570 | ) | ||||||||
Class C: | |||||||||||
Net investment income | — | — | |||||||||
Total Class C dividends and distributions | — | — | |||||||||
Class Y: | |||||||||||
Net investment income | — | (11,047 | ) | ||||||||
Total Class Y dividends and distributions | — | (11,047 | ) | ||||||||
Decrease in net assets from dividends and distributions | — | (26,617 | ) | ||||||||
Beneficial interest transactions: | |||||||||||
Proceeds from shares sold | 357,507 | 325,180 | |||||||||
Shares issued on reinvestment of dividends and distributions | — | 25,364 | |||||||||
Redemption fees | 245 | 623 | |||||||||
Cost of shares redeemed | (1,492,886 | ) | (5,770,197 | ) | |||||||
Net decrease in net assets resulting from beneficial interest transactions | (1,135,134 | ) | (5,419,030 | ) | |||||||
Increase (decrease) in net assets | 326,638 | (1,975,282 | ) | ||||||||
Net assets, beginning of period | 14,653,450 | 16,628,732 | |||||||||
Net assets, end of period | $ | 14,980,088 | $ | 14,653,450 | |||||||
Accumulated (distributions in excess of) undistributed net investment income (loss) | $ | (15,082 | ) | $ | 497 |
See accompanying notes to financial statements.
73
The UBS Funds
Financial statements
Statement of changes in net assets (continued)
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | ||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 8,532 | $ | 155,664 | $ | 573,595 | $ | 1,675,443 | |||||||||||
Net realized gain | 2,656,545 | 4,562,968 | 14,324,393 | 32,514,296 | |||||||||||||||
Change in net unrealized appreciation/depreciation | 3,275,308 | 4,311,162 | 9,579,098 | 13,988,632 | |||||||||||||||
Net increase in net assets from operations | 5,940,385 | 9,029,794 | 24,477,086 | 48,178,371 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (139,293 | ) | (314,372 | ) | (68,839 | ) | (42,587 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class A dividends and distributions | (139,293 | ) | (314,372 | ) | (68,839 | ) | (42,587 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | — | (2,897 | ) | (5,290 | ) | — | |||||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class C dividends and distributions | — | (2,897 | ) | (5,290 | ) | — | |||||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (7,817 | ) | (15,975 | ) | (1,588,113 | ) | (1,751,528 | ) | |||||||||||
Net realized gain | — | — | |||||||||||||||||
Total Class Y dividends and distributions | (7,817 | ) | (15,975 | ) | (1,588,113 | ) | (1,751,528 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (147,110 | ) | (333,244 | ) | (1,662,242 | ) | (1,794,115 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 434,613 | 269,354 | 9,070,932 | 23,658,767 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 130,167 | 294,842 | 1,652,916 | 1,786,736 | |||||||||||||||
Redemption fees | 4 | 10 | 15,375 | 12,780 | |||||||||||||||
Cost of shares redeemed | (2,978,665 | ) | (8,621,706 | ) | (16,031,274 | ) | (117,442,606 | ) | |||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (2,413,881 | ) | (8,057,500 | ) | (5,292,051 | ) | (91,984,323 | ) | |||||||||||
Increase (decrease) in net assets | 3,379,394 | 639,050 | 17,522,793 | (45,600,067 | ) | ||||||||||||||
Net assets, beginning of period | 41,599,230 | 40,960,180 | 157,295,648 | 202,895,715 | |||||||||||||||
Net assets, end of period | $ | 44,978,624 | $ | 41,599,230 | $ | 174,818,441 | $ | 157,295,648 | |||||||||||
Accumulated undistributed net investment income (loss) | $ | 8,079 | $ | 146,657 | $ | 577,113 | $ | 1,665,760 |
74
The UBS Funds
Financial statements
UBS U.S. Small Cap Growth Fund | |||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | (700,566 | ) | $ | (761,739 | ) | |||||
Net realized gain | 18,656,114 | 14,356,038 | |||||||||
Change in net unrealized appreciation/depreciation | 30,804,182 | 22,468,800 | |||||||||
Net increase in net assets from operations | 48,759,730 | 36,063,099 | |||||||||
Dividends and distributions to shareholders by class: | |||||||||||
Class A: | |||||||||||
Net investment income | — | — | |||||||||
Net realized gain | (859,809 | ) | — | ||||||||
Total Class A dividends and distributions | (859,809 | ) | — | ||||||||
Class C: | |||||||||||
Net investment income | — | — | |||||||||
Net realized gain | (86,066 | ) | — | ||||||||
Total Class C dividends and distributions | (86,066 | ) | — | ||||||||
Class Y: | |||||||||||
Net investment income | — | — | |||||||||
Net realized gain | (4,582,035 | ) | — | ||||||||
Total Class Y dividends and distributions | (4,582,035 | ) | — | ||||||||
Decrease in net assets from dividends and distributions | (5,527,910 | ) | — | ||||||||
Beneficial interest transactions: | |||||||||||
Proceeds from shares sold | 25,766,555 | 64,623,738 | |||||||||
Shares issued on reinvestment of dividends and distributions | 5,401,278 | — | |||||||||
Redemption fees | 9,612 | 10,101 | |||||||||
Cost of shares redeemed | (15,162,487 | ) | (33,380,685 | ) | |||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | 16,014,958 | 31,253,154 | |||||||||
Increase (decrease) in net assets | 59,246,778 | 67,316,253 | |||||||||
Net assets, beginning of period | 208,219,843 | 140,903,590 | |||||||||
Net assets, end of period | $ | 267,466,621 | $ | 208,219,843 | |||||||
Accumulated undistributed net investment income (loss) | $ | (1,239,293 | ) | $ | (538,727 | ) |
See accompanying notes to financial statements.
75
The UBS Funds
Financial statements
Statement of cash flows
For the six months ended December 31, 2013 (unaudited)
UBS Equity Long-Short Multi-Strategy Fund | |||||||
Cash provided by operating activities: | |||||||
Net increase in net assets from operations | $ | 311,231 | |||||
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | |||||||
Purchases of investment securities | (7,709,924 | ) | |||||
Proceeds from disposition of investment securities | 9,226,862 | ||||||
Covers of securities sold short | (7,048,801 | ) | |||||
Proceeds from securities sold short | 5,583,812 | ||||||
Purchases of short-term investments, net | (1,390,674 | ) | |||||
Net realized (gain)/loss on investments | (1,262,364 | ) | |||||
Net realized (gain)/loss on securities sold short | 889,030 | ||||||
Change in net unrealized appreciation/depreciation on investments | (1,162,054 | ) | |||||
Change in net unrealized appreciation/depreciation on securities sold short | 1,121,943 | ||||||
Change in net unrealized appreciation/depreciation on swap agreements, at value | (27,791 | ) | |||||
Change in net unrealized appreciation/depreciation on forward foreign currency contracts | (44,306 | ) | |||||
Decrease in foreign tax reclaims receivable | 1,020 | ||||||
Decrease in due from advisor | 42,492 | ||||||
Decrease in dividends and interest receivable | 15,730 | ||||||
Decrease in due from broker | 254,352 | ||||||
Decrease in cash collateral for securities sold short | 1,408,512 | ||||||
Increase in in other assets | (7,852 | ) | |||||
Decrease in dividends payable and security loan fees for securities sold short | (3,931 | ) | |||||
Decrease in accrued expenses and other liabilities | (11,443 | ) | |||||
Net cash provided by operating activities | 185,844 | ||||||
Cash used in financing activities: | |||||||
Proceeds from shares issued | 117,250 | ||||||
Payment on shares redeemed | (397,777 | ) | |||||
Net cash used in financing activities | (280,527 | ) | |||||
Net decrease in cash | (94,683 | ) | |||||
Cash: | |||||||
Beginning of period | 101,671 | ||||||
End of period | $ | 6,988 |
For the purposes of reporting the Statement of cash flows, the Fund considers all cash accounts (including foreign currencies) that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents.
76
The UBS Funds
Financial statements
Statement of cash flows
For the six months ended December 31, 2013 (unaudited)
UBS U.S. Defensive Equity Fund | |||||||
Cash provided by operating activities: | |||||||
Net increase in net assets from operations | $ | 1,461,772 | |||||
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | |||||||
Purchases of investment securities | (7,222,418 | ) | |||||
Proceeds from disposition of investment securities | 9,493,441 | ||||||
Covers of securities sold short | (2,323,231 | ) | |||||
Proceeds from securities sold short | 1,193,041 | ||||||
Proceeds from options written | 89,768 | ||||||
Cost of closing transactions on options written | (15,528 | ) | |||||
Purchase of short-term investments, net | (62,821 | ) | |||||
Net realized (gain)/loss on investments | (1,655,567 | ) | |||||
Net realized (gain)/loss on securities sold short | 495,545 | ||||||
Net realized gain/loss on options written | (118,362 | ) | |||||
Change in net unrealized appreciation/depreciation on investments | (491,932 | ) | |||||
Change in net unrealized appreciation/depreciation on securities sold short | 327,781 | ||||||
Change in net unrealized appreciation/depreciation on options written | (34,816 | ) | |||||
Decrease in due from advisor | 31,459 | ||||||
Decrease in dividends and interest receivable | 18,776 | ||||||
Decrease in cash collateral for securities sold short | 43,516 | ||||||
Increase in in other assets | (20,632 | ) | |||||
Decrease in dividends payable and security loan fees for securities sold short | (3,004 | ) | |||||
Decrease in accrued expenses and other liabilities | (15,944 | ) | |||||
Net cash provided by operating activities | 1,190,844 | ||||||
Cash used in financing activities: | |||||||
Proceeds from shares issued | 357,507 | ||||||
Payment on shares redeemed | (1,550,429 | ) | |||||
Redemption fees retained | 245 | ||||||
Net cash used in financing activities | (1,192,677 | ) | |||||
Net decrease in cash | (1,833 | ) | |||||
Cash: | |||||||
Beginning of period | 6,114 | ||||||
End of period | $ | 4,281 |
See accompanying notes to financial statements.
77
UBS Equity Long-Short 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 | |||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.06 | $ | 9.43 | $ | 9.70 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment (loss)1 | (0.12 | ) | (0.19 | ) | (0.22 | ) | (0.20 | ) | |||||||||||
Net realized and unrealized gain (loss) | 0.31 | 0.82 | (0.04 | ) | (0.12 | ) | |||||||||||||
Total income (loss) from investment operations | 0.19 | 0.63 | (0.26 | ) | (0.32 | ) | |||||||||||||
Redemption fees | — | 0.003 | 0.003 | 0.02 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net realized gains | — | — | (0.01 | ) | — | ||||||||||||||
Net asset value, end of period | $ | 10.25 | $ | 10.06 | $ | 9.43 | $ | 9.70 | |||||||||||
Total investment return2 | 1.89 | % | 6.68 | % | (2.73 | )% | (3.00 | )% | |||||||||||
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 | 5.42 | %4 | 6.61 | % | 5.76 | % | 5.26 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 3.28 | %4 | 3.93 | % | 4.25 | % | 4.13 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.75 | %4 | 1.75 | % | 1.75 | % | 1.75 | % | |||||||||||
Net investment loss | (2.29 | )%4 | (2.04 | )% | (2.27 | )% | (2.07 | )% | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 1,202 | $ | 1,377 | $ | 2,578 | $ | 4,466 | |||||||||||
Portfolio turnover rate | 62 | % | 167 | % | 242 | % | 460 | % |
Class Y | |||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.14 | $ | 9.48 | $ | 9.72 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment (loss)1 | (0.10 | ) | (0.18 | ) | (0.19 | ) | (0.18 | ) | |||||||||||
Net realized and unrealized gain (loss) | 0.31 | 0.84 | (0.04 | ) | (0.10 | ) | |||||||||||||
Total income (loss) from investment operations | 0.21 | 0.66 | (0.23 | ) | (0.28 | ) | |||||||||||||
Redemption fees | — | 0.003 | — | — | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net realized gains | — | — | (0.01 | ) | — | ||||||||||||||
Net asset value, end of period | $ | 10.35 | $ | 10.14 | $ | 9.48 | $ | 9.72 | |||||||||||
Total investment return2 | 2.07 | % | 6.96 | % | (2.51 | )% | (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 | 4.55 | %4 | 6.16 | % | 5.33 | % | 4.83 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 3.03 | %4 | 3.81 | % | 4.08 | % | 3.82 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.50 | %4 | 1.50 | % | 1.50 | % | 1.50 | % | |||||||||||
Net investment loss | (2.04 | )%4 | (1.84 | )% | (2.00 | )% | (1.81 | )% | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 14,579 | $ | 14,370 | $ | 14,215 | $ | 14,583 | |||||||||||
Portfolio turnover rate | 62 | % | 167 | % | 242 | % | 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 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 Fund dividends/distributions or the redemption of Fund shares.
78
UBS Equity Long-Short Multi-Strategy Fund
Financial highlights
Class C | |||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.85 | $ | 9.29 | $ | 9.63 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment (loss)1 | (0.15 | ) | (0.27 | ) | (0.28 | ) | (0.28 | ) | |||||||||||
Net realized and unrealized gain (loss) | 0.29 | 0.83 | (0.05 | ) | (0.09 | ) | |||||||||||||
Total income (loss) from investment operations | 0.14 | 0.56 | (0.33 | ) | (0.37 | ) | |||||||||||||
Redemption fees | — | 0.003 | — | 0.003 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net realized gains | — | — | (0.01 | ) | — | ||||||||||||||
Net asset value, end of period | $ | 9.99 | $ | 9.85 | $ | 9.29 | $ | 9.63 | |||||||||||
Total investment return2 | 1.42 | % | 6.03 | % | (3.58 | )% | (3.60 | )% | |||||||||||
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 | 5.61 | %4 | 6.88 | % | 6.47 | % | 5.94 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 4.03 | %4 | 4.75 | % | 5.05 | % | 4.94 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 2.50 | %4 | 2.50 | % | 2.50 | % | 2.50 | % | |||||||||||
Net investment loss | (3.04 | )%4 | (2.84 | )% | (3.01 | )% | (2.84 | )% | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 409 | $ | 413 | $ | 600 | $ | 904 | |||||||||||
Portfolio turnover rate | 62 | % | 167 | % | 242 | % | 460 | % |
3 Amount represents less than $0.005 per share.
4 Annualized.
See accompanying notes to financial statements.
79
UBS Global Sustainable Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.55 | $ | 6.75 | $ | 8.21 | $ | 6.62 | $ | 6.48 | $ | 9.97 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | 0.01 | 0.11 | 0.08 | 0.07 | 0.06 | 0.10 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.06 | 0.93 | (1.40 | ) | 1.78 | 0.54 | (2.89 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.07 | 1.04 | (1.32 | ) | 1.85 | 0.60 | (2.79 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.24 | ) | (0.14 | ) | (0.26 | ) | (0.46 | ) | (0.16 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.54 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.19 | ) | (0.24 | ) | (0.14 | ) | (0.26 | ) | (0.46 | ) | (0.70 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.43 | $ | 7.55 | $ | 6.75 | $ | 8.21 | $ | 6.62 | $ | 6.48 | |||||||||||||||
Total investment return2 | 14.27 | % | 15.49 | % | (15.99 | )% | 28.14 | % | 8.65 | % | (26.75 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.63 | %3 | 2.65 | % | 2.28 | % | 2.04 | % | 1.76 | % | 1.57 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.25 | %3 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||||
Net investment income (loss) | 0.32 | %3 | 1.49 | % | 1.20 | % | 0.93 | % | 0.83 | % | 1.50 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 6,290 | $ | 5,433 | $ | 5,576 | $ | 9,207 | $ | 6,875 | $ | 7,809 | |||||||||||||||
Portfolio turnover rate | 119 | % | 41 | % | 49 | % | 76 | % | 71 | % | 124 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.58 | $ | 6.77 | $ | 8.25 | $ | 6.65 | $ | 6.51 | $ | 10.05 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.02 | 0.13 | 0.11 | 0.09 | 0.06 | 0.12 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.06 | 0.94 | (1.43 | ) | 1.79 | 0.57 | (2.91 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.08 | 1.07 | (1.32 | ) | 1.88 | 0.63 | (2.79 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.21 | ) | (0.26 | ) | (0.16 | ) | (0.28 | ) | (0.49 | ) | (0.21 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.54 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.21 | ) | (0.26 | ) | (0.16 | ) | (0.28 | ) | (0.49 | ) | (0.75 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.45 | $ | 7.58 | $ | 6.77 | $ | 8.25 | $ | 6.65 | $ | 6.51 | |||||||||||||||
Total investment return2 | 14.34 | % | 15.95 | % | (15.88 | )% | 28.46 | % | 8.94 | % | (26.62 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.36 | %3 | 2.40 | % | 2.06 | % | 1.78 | % | 1.55 | % | 1.42 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.00 | %3 | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||||
Net investment income | 0.56 | %3 | 1.69 | % | 1.52 | % | 1.13 | % | 0.84 | % | 1.81 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 12,449 | $ | 11,740 | $ | 12,966 | $ | 17,829 | $ | 18,724 | $ | 66,665 | |||||||||||||||
Portfolio turnover rate | 119 | % | 41 | % | 49 | % | 76 | % | 71 | % | 124 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 Annualized.
80
UBS Global Sustainable Equity Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.43 | $ | 6.63 | $ | 8.02 | $ | 6.47 | $ | 6.34 | $ | 9.69 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.02 | ) | 0.05 | 0.03 | 0.03 | 0.01 | 0.05 | ||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.04 | 0.92 | (1.36 | ) | 1.72 | 0.53 | (2.80 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.02 | 0.97 | (1.33 | ) | 1.75 | 0.54 | (2.75 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.17 | ) | (0.06 | ) | (0.20 | ) | (0.41 | ) | (0.06 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.54 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.13 | ) | (0.17 | ) | (0.06 | ) | (0.20 | ) | (0.41 | ) | (0.60 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.32 | $ | 7.43 | $ | 6.63 | $ | 8.02 | $ | 6.47 | $ | 6.34 | |||||||||||||||
Total investment return2 | 13.76 | % | 14.72 | % | (16.59 | )% | 27.14 | % | 7.86 | % | (27.33 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 3.44 | %3 | 3.40 | % | 3.06 | % | 2.82 | % | 2.56 | % | 2.38 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 2.00 | %3 | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | |||||||||||||||
Net investment income (loss) | (0.43 | )%3 | 0.65 | % | 0.45 | % | 0.32 | % | 0.10 | % | 0.75 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 685 | $ | 605 | $ | 703 | $ | 1,405 | $ | 866 | $ | 914 | |||||||||||||||
Portfolio turnover rate | 119 | % | 41 | % | 49 | % | 76 | % | 71 | % | 124 | % |
See accompanying notes to financial statements.
81
UBS U.S. Defensive Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.81 | $ | 8.66 | $ | 8.94 | $ | 7.01 | $ | 6.31 | $ | 8.82 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.01 | ) | (0.03 | ) | 0.02 | 0.02 | (0.01 | ) | 0.04 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.14 | 2.20 | (0.29 | ) | 1.91 | 0.71 | (2.48 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.13 | 2.17 | (0.27 | ) | 1.93 | 0.70 | (2.44 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | — | (0.02 | ) | (0.01 | ) | — | — | (0.07 | ) | ||||||||||||||||||
Net asset value, end of period | $ | 11.94 | $ | 10.81 | $ | 8.66 | $ | 8.94 | $ | 7.01 | $ | 6.31 | |||||||||||||||
Total investment return2 | 10.45 | % | 25.04 | % | (3.02 | )% | 27.53 | % | 11.09 | % | (27.52 | )% | |||||||||||||||
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 | 3.68 | %3 | 4.79 | % | 3.21 | % | 2.54 | % | 2.44 | % | 2.47 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.15 | %3 | 2.81 | % | 2.21 | % | 2.03 | % | 2.24 | % | 2.24 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.50 | %3 | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | |||||||||||||||
Net investment income (loss) | (0.12 | )%3 | (0.34 | )% | 0.26 | % | 0.24 | % | (0.10 | )% | 0.63 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 9,842 | $ | 9,072 | $ | 9,682 | $ | 16,726 | $ | 22,938 | $ | 33,137 | |||||||||||||||
Portfolio turnover rate | 38 | % | 58 | % | 85 | % | 85 | % | 130 | % | 154 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.80 | $ | 8.65 | $ | 8.94 | $ | 7.01 | $ | 6.30 | $ | 8.82 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | 0.01 | (0.01 | ) | 0.04 | 0.04 | 0.01 | 0.004 | ||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.14 | 2.19 | (0.29 | ) | 1.92 | 0.70 | (2.41 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.15 | 2.18 | (0.25 | ) | 1.96 | 0.71 | (2.41 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.04 | ) | (0.03 | ) | — | (0.11 | ) | |||||||||||||||||
Net asset value, end of period | $ | 11.95 | $ | 10.80 | $ | 8.65 | $ | 8.94 | $ | 7.01 | $ | 6.30 | |||||||||||||||
Total investment return2 | 10.65 | % | 25.26 | % | (2.80 | )% | 27.91 | % | 11.27 | % | (27.22 | )% | |||||||||||||||
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 | 3.45 | %3 | 4.51 | % | 2.85 | % | 2.26 | % | 2.16 | % | 2.33 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.89 | %3 | 2.57 | % | 1.93 | % | 1.78 | % | 2.00 | % | 2.25 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.25 | %3 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||||
Net investment income (loss) | 0.12 | %3 | (0.09 | )% | 0.50 | % | 0.48 | % | 0.12 | % | 0.07 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 2,499 | $ | 2,950 | $ | 3,806 | $ | 10,764 | $ | 12,132 | $ | 95,804 | |||||||||||||||
Portfolio turnover rate | 38 | % | 58 | % | 85 | % | 85 | % | 130 | % | 154 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
82
UBS U.S. Defensive Equity Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.48 | $ | 8.45 | $ | 8.78 | $ | 6.93 | $ | 6.29 | $ | 8.74 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.05 | ) | (0.11 | ) | (0.04 | ) | (0.04 | ) | (0.06 | ) | (0.01 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 1.10 | 2.14 | (0.29 | ) | 1.89 | 0.70 | (2.44 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.05 | 2.03 | (0.33 | ) | 1.85 | 0.64 | (2.45 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | — | |||||||||||||||||||||
Net asset value, end of period | $ | 11.53 | $ | 10.48 | $ | 8.45 | $ | 8.78 | $ | 6.93 | $ | 6.29 | |||||||||||||||
Total investment return2 | 10.02 | % | 24.02 | % | (3.76 | )% | 26.70 | % | 10.18 | % | (28.03 | )% | |||||||||||||||
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 | 4.51 | %3 | 5.61 | % | 4.04 | % | 3.36 | % | 3.27 | % | 3.30 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.90 | %3 | 3.59 | % | 2.96 | % | 2.78 | % | 2.98 | % | 2.99 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 2.25 | %3 | 2.25 | % | 2.25 | % | 2.25 | % | 2.25 | % | 2.25 | % | |||||||||||||||
Net investment income (loss) | (0.87 | )%3 | (1.13 | )% | (0.49 | )% | (0.52 | )% | (0.85 | )% | (0.12 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 2,639 | $ | 2,632 | $ | 3,141 | $ | 5,029 | $ | 6,810 | $ | 9,003 | |||||||||||||||
Portfolio turnover rate | 38 | % | 58 | % | 85 | % | 85 | % | 130 | % | 154 | % |
3 Annualized.
4 Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
83
UBS U.S. Equity Opportunity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.81 | $ | 6.31 | $ | 6.74 | $ | 5.33 | $ | 4.94 | $ | 8.42 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | 0.003 | 0.03 | 0.05 | 0.06 | 0.05 | 0.11 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.14 | 1.53 | (0.42 | ) | 1.41 | 0.46 | (2.66 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.14 | 1.56 | (0.37 | ) | 1.47 | 0.51 | (2.55 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.06 | ) | (0.06 | ) | (0.06 | ) | (0.12 | ) | (0.06 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.87 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.03 | ) | (0.06 | ) | (0.06 | ) | (0.06 | ) | (0.12 | ) | (0.93 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.92 | $ | 7.81 | $ | 6.31 | $ | 6.74 | $ | 5.33 | $ | 4.94 | |||||||||||||||
Total investment return2 | 14.63 | % | 24.92 | % | (5.33 | )% | 27.57 | % | 10.16 | % | (29.74 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.80 | %4 | 1.83 | % | 1.89 | % | 1.61 | % | 1.61 | % | 1.52 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.20 | %4 | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.10 | % | |||||||||||||||
Net investment income (loss) | 0.10 | %4 | 0.45 | % | 0.87 | % | 0.88 | % | 0.83 | % | 1.89 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 39,167 | $ | 36,269 | $ | 35,538 | $ | 43,766 | $ | 41,012 | $ | 43,951 | |||||||||||||||
Portfolio turnover rate | 28 | % | 89 | % | 138 | % | 85 | % | 70 | % | 67 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.86 | $ | 6.35 | $ | 6.79 | $ | 5.36 | $ | 4.97 | $ | 8.46 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.02 | 0.05 | 0.07 | 0.07 | 0.06 | 0.12 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.14 | 1.54 | (0.43 | ) | 1.43 | 0.47 | (2.67 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.16 | 1.59 | (0.36 | ) | 1.50 | 0.53 | (2.55 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.08 | ) | (0.08 | ) | (0.07 | ) | (0.14 | ) | (0.07 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.87 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.05 | ) | (0.08 | ) | (0.08 | ) | (0.07 | ) | (0.14 | ) | (0.94 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.97 | $ | 7.86 | $ | 6.35 | $ | 6.79 | $ | 5.36 | $ | 4.97 | |||||||||||||||
Total investment return2 | 14.80 | % | 25.27 | % | (5.14 | )% | 28.13 | % | 10.39 | % | (29.53 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.65 | %4 | 1.67 | % | 1.73 | % | 1.48 | % | 1.50 | % | 1.45 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.95 | %4 | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.85 | % | |||||||||||||||
Net investment income | 0.35 | %4 | 0.70 | % | 1.12 | % | 1.13 | % | 1.07 | % | 2.08 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 1,364 | $ | 1,304 | $ | 1,444 | $ | 1,576 | $ | 1,515 | $ | 2,174 | |||||||||||||||
Portfolio turnover rate | 28 | % | 89 | % | 138 | % | 85 | % | 70 | % | 67 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
4 Annualized.
84
UBS U.S. Equity Opportunity Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.65 | $ | 6.18 | $ | 6.59 | $ | 5.20 | $ | 4.83 | $ | 8.26 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.03 | ) | (0.02 | ) | 0.01 | 0.01 | 0.003 | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) | 1.12 | 1.50 | (0.41 | ) | 1.39 | 0.45 | (2.60 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 1.09 | 1.48 | (0.40 | ) | 1.40 | 0.45 | (2.54 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | — | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.08 | ) | (0.02 | ) | ||||||||||||||||
From net realized gains | — | — | — | — | — | (0.87 | ) | ||||||||||||||||||||
Total dividends/distributions | — | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.08 | ) | (0.89 | ) | ||||||||||||||||
Net asset value, end of period | $ | 8.74 | $ | 7.65 | $ | 6.18 | $ | 6.59 | $ | 5.20 | $ | 4.83 | |||||||||||||||
Total investment return2 | 14.25 | % | 23.88 | % | (6.07 | )% | 26.87 | % | 9.08 | % | (30.25 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.58 | %4 | 2.62 | % | 2.67 | % | 2.40 | % | 2.41 | % | 2.33 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.95 | %4 | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | 1.85 | % | |||||||||||||||
Net investment income (loss) | (0.65 | )%4 | (0.30 | )% | 0.12 | % | 0.13 | % | 0.08 | % | 1.13 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 4,447 | $ | 4,026 | $ | 3,978 | $ | 4,992 | $ | 4,889 | $ | 5,429 | |||||||||||||||
Portfolio turnover rate | 28 | % | 89 | % | 138 | % | 85 | % | 70 | % | 67 | % |
See accompanying notes to financial statements.
85
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 | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 19.85 | $ | 15.96 | $ | 16.46 | $ | 12.79 | $ | 11.48 | $ | 16.63 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | 0.05 | 0.11 | 0.10 | 0.09 | 0.06 | 0.13 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 3.04 | 3.86 | (0.51 | ) | 3.65 | 1.54 | (4.84 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 3.09 | 3.97 | (0.41 | ) | 3.74 | 1.60 | (4.71 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.08 | ) | (0.09 | ) | (0.07 | ) | (0.29 | ) | (0.07 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.37 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.16 | ) | (0.08 | ) | (0.09 | ) | (0.07 | ) | (0.29 | ) | (0.44 | ) | |||||||||||||||
Net asset value, end of period | $ | 22.78 | $ | 19.85 | $ | 15.96 | $ | 16.46 | $ | 12.79 | $ | 11.48 | |||||||||||||||
Total investment return2 | 15.63 | % | 24.99 | % | (2.47 | )% | 29.28 | % | 13.75 | % | (28.04 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 1.28 | %3 | 1.28 | % | 1.24 | % | 1.19 | % | 1.33 | % | 1.28 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 1.20 | %3 | 1.20 | % | 1.20 | % | 1.20 | %4 | 1.20 | % | 1.28 | % | |||||||||||||||
Net investment income (loss) | 0.46 | %3 | 0.63 | % | 0.64 | % | 0.57 | % | 0.47 | % | 1.05 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 9,519 | $ | 8,534 | $ | 14,113 | $ | 19,832 | $ | 23,164 | $ | 34,406 | |||||||||||||||
Portfolio turnover rate | 33 | % | 58 | % | 65 | % | 60 | % | 50 | % | 62 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 19.94 | $ | 16.07 | $ | 16.60 | $ | 12.91 | $ | 11.62 | $ | 16.85 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.08 | 0.15 | 0.14 | 0.13 | 0.10 | 0.17 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 3.07 | 3.88 | (0.52 | ) | 3.68 | 1.56 | (4.91 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 3.15 | 4.03 | (0.38 | ) | 3.81 | 1.66 | (4.74 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.16 | ) | (0.15 | ) | (0.12 | ) | (0.37 | ) | (0.12 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.37 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.23 | ) | (0.16 | ) | (0.15 | ) | (0.12 | ) | (0.37 | ) | (0.49 | ) | |||||||||||||||
Net asset value, end of period | $ | 22.86 | $ | 19.94 | $ | 16.07 | $ | 16.60 | $ | 12.91 | $ | 11.62 | |||||||||||||||
Total investment return2 | 15.82 | % | 25.28 | % | (2.23 | )% | 29.57 | % | 14.04 | % | (27.85 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 1.00 | %3 | 0.98 | % | 0.97 | % | 0.94 | % | 0.99 | % | 0.96 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 0.95 | %3 | 0.95 | % | 0.95 | % | 0.95 | %4 | 0.95 | % | 0.96 | % | |||||||||||||||
Net investment income | 0.71 | %3 | 0.87 | % | 0.90 | % | 0.82 | % | 0.72 | % | 1.39 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 162,216 | $ | 146,145 | $ | 185,910 | $ | 206,555 | $ | 188,636 | $ | 217,821 | |||||||||||||||
Portfolio turnover rate | 33 | % | 58 | % | 65 | % | 60 | % | 50 | % | 62 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 Annualized.
4 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
86
UBS U.S. Large Cap Equity Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 19.06 | $ | 15.36 | $ | 15.88 | $ | 12.37 | $ | 11.14 | $ | 16.21 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.03 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.04 | ) | 0.04 | ||||||||||||||||
Net realized and unrealized gain (loss) | 2.93 | 3.72 | (0.50 | ) | 3.54 | 1.50 | (4.71 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 2.90 | 3.70 | (0.52 | ) | 3.51 | 1.46 | (4.67 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.04 | ) | — | — | — | (0.23 | ) | (0.03 | ) | ||||||||||||||||||
From net realized gains | — | — | — | — | — | (0.37 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.04 | ) | — | — | — | (0.23 | ) | (0.40 | ) | ||||||||||||||||||
Net asset value, end of period | $ | 21.92 | $ | 19.06 | $ | 15.36 | $ | 15.88 | $ | 12.37 | $ | 11.14 | |||||||||||||||
Total investment return2 | 15.21 | % | 24.09 | % | (3.28 | )% | 28.38 | % | 12.92 | % | (28.57 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 2.05 | %3 | 2.04 | % | 2.02 | % | 2.00 | % | 2.01 | % | 1.96 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 1.95 | %3 | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | 1.96 | % | |||||||||||||||
Net investment income (loss) | (0.29 | )%3 | (0.11 | )% | (0.11 | )% | (0.18 | )% | (0.28 | )% | 0.35 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 3,083 | $ | 2,617 | $ | 2,873 | $ | 3,467 | $ | 3,539 | $ | 4,719 | |||||||||||||||
Portfolio turnover rate | 33 | % | 58 | % | 65 | % | 60 | % | 50 | % | 62 | % |
See accompanying notes to financial statements.
87
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 | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 20.10 | $ | 16.19 | $ | 16.00 | $ | 10.60 | $ | 8.56 | $ | 13.31 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment (loss)1 | (0.09 | ) | (0.11 | ) | (0.14 | ) | (0.13 | ) | (0.10 | ) | (0.06 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 4.64 | 4.02 | 0.33 | 5.53 | 2.14 | (4.69 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 4.55 | 3.91 | 0.19 | 5.40 | 2.04 | (4.75 | ) | ||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net realized gains | (0.53 | ) | — | — | — | — | (0.00 | )3 | |||||||||||||||||||
Net asset value, end of period | $ | 24.12 | $ | 20.10 | $ | 16.19 | $ | 16.00 | $ | 10.60 | $ | 8.56 | |||||||||||||||
Total investment return2 | 23.15 | % | 23.78 | % | 1.19 | % | 50.94 | % | 23.83 | % | (35.68 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.46 | %4 | 1.55 | % | 1.57 | % | 1.54 | % | 1.60 | % | 1.67 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.40 | %4 | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.28 | % | |||||||||||||||
Net investment loss | (0.83 | )%4 | (0.64 | )% | (0.93 | )% | (0.95 | )% | (1.00 | )% | (0.60 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 40,415 | $ | 32,848 | $ | 31,015 | $ | 38,319 | $ | 28,586 | $ | 41,141 | |||||||||||||||
Portfolio turnover rate | 27 | % | 42 | % | 48 | % | 55 | % | 72 | % | 73 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 21.01 | $ | 16.88 | $ | 16.64 | $ | 11.00 | $ | 8.86 | $ | 13.74 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment (loss)1 | (0.06 | ) | (0.08 | ) | (0.11 | ) | (0.10 | ) | (0.08 | ) | (0.03 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 4.87 | 4.21 | 0.35 | 5.74 | 2.22 | (4.85 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 4.81 | 4.13 | 0.24 | 5.64 | 2.14 | (4.88 | ) | ||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net realized gains | (0.53 | ) | — | — | — | — | (0.00 | )3 | |||||||||||||||||||
Net asset value, end of period | $ | 25.29 | $ | 21.01 | $ | 16.88 | $ | 16.64 | $ | 11.00 | $ | 8.86 | |||||||||||||||
Total investment return2 | 23.33 | % | 24.17 | % | 1.44 | % | 51.27 | % | 24.15 | % | (35.51 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 1.09 | %4 | 1.13 | % | 1.15 | % | 1.13 | % | 1.21 | % | 1.25 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 1.09 | %4 | 1.15 | %5 | 1.15 | %5 | 1.15 | %5 | 1.15 | % | 1.03 | % | |||||||||||||||
Net investment loss | (0.51 | )%4 | (0.41 | )% | (0.68 | )% | (0.70 | )% | (0.74 | )% | (0.36 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 223,445 | $ | 172,436 | $ | 107,447 | $ | 112,186 | $ | 94,725 | $ | 134,378 | |||||||||||||||
Portfolio turnover rate | 27 | % | 42 | % | 48 | % | 55 | % | 72 | % | 73 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
4 Annualized.
5 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
88
UBS U.S. Small Cap Growth Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 18.29 | $ | 14.85 | $ | 14.78 | $ | 9.87 | $ | 8.03 | $ | 12.57 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment (loss)1 | (0.16 | ) | (0.22 | ) | (0.23 | ) | (0.22 | ) | (0.17 | ) | (0.12 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 4.22 | 3.66 | 0.30 | 5.13 | 2.01 | (4.42 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 4.06 | 3.44 | 0.07 | 4.91 | 1.84 | (4.54 | ) | ||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net realized gains | (0.53 | ) | — | — | — | — | (0.00 | )3 | |||||||||||||||||||
Net asset value, end of period | $ | 21.82 | $ | 18.29 | $ | 14.85 | $ | 14.78 | $ | 9.87 | $ | 8.03 | |||||||||||||||
Total investment return2 | 22.69 | % | 22.83 | % | 0.47 | % | 49.75 | % | 22.91 | % | (36.11 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.23 | %4 | 2.32 | % | 2.35 | % | 2.37 | % | 2.50 | % | 2.45 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 2.15 | %4 | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | 2.03 | % | |||||||||||||||
Net investment loss | (1.58 | )%4 | (1.39 | )% | (1.68 | )% | (1.70 | )% | (1.75 | )% | (1.38 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 3,607 | $ | 2,937 | $ | 2,442 | $ | 2,961 | $ | 2,336 | $ | 2,471 | |||||||||||||||
Portfolio turnover rate | 27 | % | 42 | % | 48 | % | 55 | % | 72 | % | 73 | % |
See accompanying notes to financial statements.
89
The UBS Funds
Notes to financial statements
1. Organization and significant accounting policies
The UBS Funds (the "Trust") is registered with the US 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 13 Funds available for investment, each having its own investment objectives and policies. The following six funds are covered in this report: UBS Equity Long-Short Multi-Strategy Fund, UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund), UBS U.S. Defensive Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap 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. The Funds currently offer Class A, Class C and Class Y 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 distribution and service charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its distribution and/or service plan, if any. Class Y shares have no distribution or service 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 ("US 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 US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US 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 on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share will be calculated as of the time trading was halted.
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 investments 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 "evaluation" systems that derive values based on comparable investments. An evaluation 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 investments. Investments also may be valued based on appraisals derived
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The UBS Funds
Notes to financial statements
from information concerning the investment or similar investments received from recognized dealers in those holdings. Investments 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. Investments 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 investments are traded on more than one exchange, the investments 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 investment, that investment 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 an investment'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 investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments 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 investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments 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 investments 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 an investment is valued at "fair value," that value is likely to be different from the last quoted market price for the investment. 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. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
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 are 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.
The Board has delegated to the UBS Global AM Global Valuation Committee ("GVC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
91
The UBS Funds
Notes to financial statements
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, as discussed below, investments of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment'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 investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US 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 Funds' 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.
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 below as well as in the Portfolio of investments. Forward foreign currency contracts entered into by a Fund may contain credit-risk related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of December 31, 2013 is reflected in the Statement of assets and
92
The UBS Funds
Notes to financial statements
liabilities. If the applicable credit-risk related contingent features were triggered as of December 31, 2013, the Fund would be required to post additional collateral or may be required to terminate the contracts and settle any amounts outstanding. The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the period ended December 31, 2013, except for forward foreign currency contracts for UBS Global Sustainable Equity Fund for which the average volume during the year was greater than at year end.
Disclosure of derivatives by underlying risk as of and for the period ended December 31, 2013 is as follows:
Asset derivatives
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | 81,078 | $ | 81,078 | |||||||||
Swap agreements1 | 49,719 | — | 49,719 | ||||||||||||
Total value | $ | 49,719 | $ | 81,078 | $ | 130,797 |
1 Statement of assets and liabilities location: Outstanding swap agreements, at value and unrealized appreciation on forward foreign currency contracts.
Liability derivatives
Foreign exchange risk | Total | ||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||
Forward foreign currency contracts1 | $ | (22,123 | ) | $ | (22,123 | ) | |||||
Total value | $ | (22,123 | ) | $ | (22,123 | ) |
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts.
93
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||
Net realized gain (loss)1 | |||||||||||||||
Forward foreign currency contracts | $ | — | $ | (13,205 | ) | $ | (13,205 | ) | |||||||
Swap agreements | 11,447 | — | 11,447 | ||||||||||||
Total net realized gain (loss) | $ | 11,447 | $ | (13,205 | ) | $ | (1,758 | ) | |||||||
Change in net unrealized appreciation/depreciation2 | |||||||||||||||
Forward foreign currency contracts | $ | — | $ | 44,306 | $ | 44,306 | |||||||||
Swap agreements | 27,791 | — | 27,791 | ||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 27,791 | $ | 44,306 | $ | 72,097 |
1 Statement of operations location: Net realized gain (loss) on swap agreements and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on swap agreements and forward foreign currency contracts.
Offsetting of financial and derivative assets and liabilities
In January 2013, Accounting Standards Update 2013-01 ("ASU 2013-01"), "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities", replaced Accounting Standards Update 2011-11 ("ASU 2011-11"), "Disclosures about Offsetting Assets and Liabilities". ASU 2013-01 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. ASU 2011-11 was intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. ASU 2013-01 limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase and reverse repurchase agreements, and securities lending and borrowing transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Included within the below tables are forward foreign currency contracts, non-centrally cleared swap agreements and swaptions, as applicable.
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty | |||||||||||||||||||
CSI | $ | 49,797 | $ | — | $ | — | $ | 49,797 | |||||||||||
JPMCB | 81,000 | (22,123 | ) | — | 58,877 | ||||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | 130,797 | $ | (22,123 | ) | $ | — | $ | 108,674 |
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The UBS Funds
Notes to financial statements
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | ||||||||||||||||
Counterparty—JPMCB | $ | (22,123 | ) | $ | 22,123 | $ | — | $ | — |
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 expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Portfolio of investments footnotes.
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. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
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 realized 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. Portfolio swap: UBS Equity Long-Short Multi-Strategy Fund entered into a portfolio swap agreement to obtain exposure to a portfolio of long and short securities. This is a highly specialized activity and a significant aspect of the Fund's investment strategy.
Under the terms of the agreement, the swap is designed to function as a portfolio of direct investments in long and short equity positions. This means that the Fund has the ability to trade in and out of long and short positions within the swap and will receive all of the economic benefits and risks equivalent to direct investments in these position such as: capital appreciation (depreciation), corporate actions and dividends received and paid, all of which are reflected in the swap value. The swap value also includes interest charges and credits related to the notional
95
The UBS Funds
Notes to financial statements
values of the long and short positions and cash balances within the swap. These interest charges and credits are based on defined market rates plus or minus a specified spread and are referred to herein as "financing costs". Positions within the swap are reset periodically, usually annually and financing costs are reset monthly. During a reset, any unrealized gains (losses) on positions and accrued financing costs become available for cash settlement between the Fund and the swap counterparty. Cash settlement in and out of the swap may occur at a reset date or any other date, at the discretion of the Fund and counterparty, over the life of the agreement, and is generally determined based on limits and thresholds established at both the Fund and counterparty.
The swap involves additional risks than if the Fund had invested in the underlying positions directly including: the risk that changes in the value of the swap may not correlate perfectly with the underlying long and short securities; credit risk related to the counterparty's failure to perform under contract terms; liquidity risk related to the lack of a liquid market for the swap contract, which may limit the ability of the Fund to close out its position(s); and, documentation risk relating to disagreement over contract terms. The Fund's activities in the portfolio swap are currently concentrated with a single highly rated counterparty. Investing in swaps results in a form of leverage (i.e., the Fund's risk of loss associated with these instruments may exceed their value as recorded on the Statement of assets and liabilities).
The value of the swap is derived from a combination of (i) the net value of the underlying positions, which are valued daily using the last sale or closing prices on the principal exchange on which the securities are traded; (ii) financing costs; (iii) the value of dividends; (iv) cash balances within the swap; (v) other factors, as applicable. The value of the swap is recognized as changes in unrealized appreciation or depreciation in the Statement of operations.
Cash settlements between the Fund and counterparty are recognized as realized gains or losses in the Statement of operations.
F. 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.
96
The UBS Funds
Notes to financial statements
G. 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 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.
H. 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 a 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.
I. Short sales: UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity Fund and UBS U.S. Small Cap Growth 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 Equity Long-Short Multi-Strategy Fund will, at times, hold the same security both long and short (which may technically result in a "short against the box").
97
The UBS Funds
Notes to financial statements
There were no short sales transaction for UBS U.S. Small Cap Growth Fund during the period ended December 31, 2013.
J. Dividends and distributions: It is each Fund's policy to distribute its 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 US 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.
K. 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.
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.
L. 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 period ended December 31, 2013, the following Fund recorded recapture commissions which are reflected on the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS U.S. Equity Opportunity Fund | $ | 36 |
M. 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 Asset Management (US) Inc., ("UBS Global AM (US)"). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the period ended December 31, 2013, redemption fees for each Fund amounted to less than $0.01 per share and less than 0.01% of average net assets.
98
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 and over | ||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | 1.250 | % | 1.250 | % | 1.250 | % | 1.250 | % | 1.250 | % | |||||||||||||
UBS Global Sustainable Equity Fund | 0.800 | 0.750 | 0.700 | 0.675 | 0.650 | ||||||||||||||||||
UBS U.S. Defensive Equity Fund | 1.000 | 0.900 | 0.850 | 0.850 | 0.850 | ||||||||||||||||||
UBS U.S. Equity Opportunity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 | ||||||||||||||||||
UBS U.S. Large Cap 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 |
For UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund and UBS U.S. Large Cap 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 class of shares as indicated in the following table. For UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity 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 companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees 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 dividend expense and security loan fees 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 period ended December 31, 2013, were as follows:
Fund | Class A expense cap | Class C expense cap | Class Y expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | |||||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | 1.75 | % | 2.50 | % | 1.50 | % | $ | (7,918 | ) | $ | 101,173 | $ | 127,456 | ||||||||||||||
UBS Global Sustainable Equity Fund | 1.25 | 2.00 | 1.00 | (12,406 | ) | 76,123 | 130,453 | ||||||||||||||||||||
UBS U.S. Defensive Equity Fund | 1.50 | 2.25 | 1.25 | (9,152 | ) | 74,492 | 115,665 | ||||||||||||||||||||
UBS U.S. Equity Opportunity Fund | 1.20 | 1.95 | 0.95 | 3,232 | 154,928 | 133,678 | |||||||||||||||||||||
UBS U.S. Large Cap Equity Fund | 1.20 | 1.95 | 0.95 | 94,025 | 593,651 | 40,425 | |||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.40 | 2.15 | 1.15 | 183,081 | 1,036,519 | 11,665 |
99
The UBS Funds
Notes to financial statements
Each Fund, except for UBS Global Sustainable Equity Fund, will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or 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 or reimbursed for the period ended December 31, 2013 are subject to repayment through June 30, 2016. At December 31, 2013, 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, 2014 | Expires June 30, 2015 | Expires June 30, 2016 | Expires June 30, 2017 | ||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class A | $ | 162,344 | $ | 48,384 | $ | 50,539 | $ | 49,550 | $ | 13,871 | |||||||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class C | 30,680 | 7,708 | 9,695 | 10,033 | 3,244 | ||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class Y | 814,162 | 199,178 | 180,234 | 324,409 | 110,341 | ||||||||||||||||||
UBS U.S. Defensive Equity Fund—Class A | 482,878 | 104,994 | 120,672 | 184,778 | 72,434 | ||||||||||||||||||
UBS U.S. Defensive Equity Fund—Class C | 156,097 | 35,648 | 41,247 | 57,542 | 21,660 | ||||||||||||||||||
UBS U.S. Defensive Equity Fund—Class Y | 205,122 | 57,119 | 60,343 | 66,089 | 21,571 | ||||||||||||||||||
UBS U.S. Equity Opportunity Fund—Class A | 780,213 | 183,453 | 259,111 | 222,296 | 115,353 | ||||||||||||||||||
UBS U.S. Equity Opportunity Fund—Class C | 94,653 | 23,692 | 31,196 | 26,132 | 13,633 | ||||||||||||||||||
UBS U.S. Equity Opportunity Fund—Class Y | 35,966 | 8,976 | 12,732 | 9,566 | 4,692 | ||||||||||||||||||
UBS U.S. Large Cap Equity Fund—Class A | 19,142 | — | 7,040 | 8,181 | 3,921 | ||||||||||||||||||
UBS U.S. Large Cap Equity Fund—Class C | 7,764 | 1,932 | 2,019 | 2,443 | 1,370 | ||||||||||||||||||
UBS U.S. Large Cap Equity Fund—Class Y | 112,280 | — | 31,133 | 46,013 | 35,134 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 160,755 | 47,545 | 54,371 | 48,524 | 10,315 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class C | 17,023 | 6,270 | 4,925 | 4,478 | 1,350 |
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 period ended December 31, 2013, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 1,022 | $ | 6,070 | |||||||
UBS Global Sustainable Equity Fund | 1,211 | 7,137 | |||||||||
UBS U.S. Defensive Equity Fund | 932 | 5,587 | |||||||||
UBS U.S. Equity Opportunity Fund | 2,825 | 16,599 | |||||||||
UBS U.S. Large Cap Equity Fund | 10,873 | 63,605 | |||||||||
UBS U.S. Small Cap Growth Fund | 16,385 | 91,458 |
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the period ended December 31, 2013 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 income in the Statement of operations. Amounts relating to those investments at December 31, 2013 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
100
The UBS Funds
Notes to financial statements
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 income in the Statement of operations. Amounts relating to those investments at December 31, 2013 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
The following Funds have incurred brokerage commissions with UBS AG, an affiliated broker-dealer. Amounts relating to those transactions for the period ended December 31, 2013, were as follows:
Fund | UBS AG | ||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 2,045 | |||||
UBS Global Sustainable Equity Fund | 4,972 | ||||||
UBS U.S. Defensive Equity Fund | 121 | ||||||
UBS U.S. Equity Opportunity Fund | 557 |
3. Distribution and service plans
UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A 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 C | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | 0.25 | % | 1.00 | % | |||||||
UBS Global Sustainable Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Defensive Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Equity Opportunity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Large Cap Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Small Cap Growth Fund | 0.25 | 1.00 |
101
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 and Class C. At December 31, 2013, certain Funds owed UBS Global AM (US) distribution and service fees, and for the period ended December 31, 2013, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:
Fund | Distribution and service fees owed | Sales charges earned | |||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class A | $ | 254 | $ | 332 | |||||||
UBS Equity Long-Short Multi-Strategy Fund—Class C | 344 | — | |||||||||
UBS Global Sustainable Equity Fund—Class A | 1,289 | 15,368 | |||||||||
UBS Global Sustainable Equity Fund—Class C | 568 | — | |||||||||
UBS U.S. Defensive Equity Fund—Class A | 2,023 | 681 | |||||||||
UBS U.S. Defensive Equity Fund—Class C | 2,220 | — | |||||||||
UBS U.S. Equity Opportunity Fund—Class A | 8,200 | 6,512 | |||||||||
UBS U.S. Equity Opportunity Fund—Class C | 3,729 | — | |||||||||
UBS U.S. Large Cap Equity Fund—Class A | 1,982 | 21 | |||||||||
UBS U.S. Large Cap Equity Fund—Class C | 2,552 | — | |||||||||
UBS U.S. Small Cap Growth Fund—Class A | 8,200 | 14,327 | |||||||||
UBS U.S. Small Cap Growth Fund—Class C | 2,965 | 209 |
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 period ended December 31, 2013, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
Fund | Amount paid | ||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 618 | |||||
UBS Global Sustainable Equity Fund | 1,100 | ||||||
UBS U.S. Defensive Equity Fund | 2,171 | ||||||
UBS U.S. Equity Opportunity Fund | 6,361 | ||||||
UBS U.S. Large Cap Equity Fund | 1,349 | ||||||
UBS U.S. Small Cap Growth Fund | 4,424 |
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.
102
The UBS Funds
Notes to financial statements
UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap 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, which is included in the Fund's Portfolio of investments. The value of loaned securities and related collateral at December 31, 2013 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 Sustainable Equity Fund | $ | 114,028 | $ | 116,450 | $ | 116,450 | |||||||||
UBS U.S. Equity Opportunity Fund | 1,853,992 | 1,918,799 | 1,918,799 | ||||||||||||
UBS U.S. Large Cap Equity Fund | 5,953,771 | 6,164,945 | 6,164,945 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 44,290,513 | 45,367,777 | 45,367,777 |
6. Purchases and sales of securities
For the period ended December 31, 2013, 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 Equity Long-Short Multi-Strategy Fund (long transactions) | $ | 7,622,738 | $ | 9,367,953 | |||||||
UBS Equity Long-Short Multi-Strategy Fund (short sale transactions) | 7,369,538 | 5,638,081 | |||||||||
UBS Global Sustainable Equity Fund | 21,870,809 | 22,265,298 | |||||||||
UBS U.S. Defensive Equity Fund (long transactions) | 6,760,670 | 9,291,842 | |||||||||
UBS U.S. Defensive Equity Fund (short sale transactions) | 2,323,231 | 1,290,640 | |||||||||
UBS U.S. Equity Opportunity Fund | 11,778,327 | 14,992,292 | |||||||||
UBS U.S. Large Cap Equity Fund | 55,237,987 | 61,391,974 | |||||||||
UBS U.S. Small Cap Growth Fund | 72,930,007 | 64,274,740 |
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 year ended June 30, 2013 were as follows:
2013 | |||||||
Fund | Distributions paid from ordinary income | ||||||
UBS Global Sustainable Equity Fund | $ | 649,606 | |||||
UBS U.S. Defensive Equity Fund | 26,617 | ||||||
UBS U.S. Equity Opportunity Fund | 333,244 | ||||||
UBS U.S. Large Cap Equity Fund | 1,794,115 |
103
The UBS Funds
Notes to financial statements
The tax character of distributions paid and components of accumulated earnings / (deficit) on a tax basis for the current fiscal year will be determined after the Trust's fiscal year ending June 30, 2014.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At June 30, 2013, the following Funds had post-enactment net capital losses that will be carried forward indefinitely as follows:
Fund | Short-term losses | Long-term losses | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | — | $ | 170,608 | |||||||
UBS Global Sustainable Equity Fund | 52,989 | — |
At June 30, 2013, the following Funds had pre-enactment 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 Sustainable Equity Fund | $ | 247,360 | $ | 12,259,376 | |||||||
UBS U.S. Defensive Equity Fund | 8,110,289 | 12,503,688 | |||||||||
UBS U.S. Equity Opportunity Fund | — | 14,528,621 | |||||||||
UBS U.S. Large Cap Equity Fund | — | 144,537,733 | |||||||||
UBS U.S. Small Cap Growth Fund | — | 8,464,021 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2013, the following Funds incurred, and elected to defer, losses of the following:
Post October capital losses | |||||||||||
Fund | Late year ordinary losses | Short-term | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | — | $ | 433,214 | |||||||
UBS U.S. Defensive Equity Fund | 924 | 194,336 | |||||||||
UBS U.S. Small Cap Growth Fund | 653,955 | — |
As of and during the period ended December 31, 2013, the Funds did not have any liabilities for any uncertain tax positions. The Funds recognize interest and penalties, if any, related to uncertain tax positions 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, 2013, or since inception in the case of UBS Equity Long-Short Multi-Strategy Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
104
The UBS Funds
Notes to financial statements
8. Line of credit
The Trust has entered into an agreement with JPMorgan Chase Bank to provide a $50 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 outstanding as of or during the period ended December 31, 2013.
9. Shares of beneficial interest
For the period ended December 31, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Equity Long-Short Multi-Strategy Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 11,568 | $ | 117,156 | — | $ | — | — | $ | — | ||||||||||||||||||
Shares repurchased | (31,084 | ) | (311,298 | ) | (1,053 | ) | (10,457 | ) | (7,534 | ) | (76,022 | ) | |||||||||||||||
Net decrease | (19,516 | ) | $ | (194,142 | ) | (1,053 | ) | $ | (10,457 | ) | (7,534 | ) | $ | (76,022 | ) |
UBS Global Sustainable Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 87,997 | $ | 727,072 | 6 | $ | 49 | 11,981 | $ | 99,496 | ||||||||||||||||||
Shares repurchased | (75,494 | ) | (625,954 | ) | (317 | ) | (2,490 | ) | (123,330 | ) | (1,013,972 | ) | |||||||||||||||
Dividends reinvested | 14,790 | 119,798 | 1,280 | 10,226 | 36,386 | 295,461 | |||||||||||||||||||||
Redemption fees | — | 2 | — | — | — | 5 | |||||||||||||||||||||
Net increase (decrease) | 27,293 | $ | 220,918 | 969 | $ | 7,785 | (74,963 | ) | $ | (619,010 | ) |
UBS U.S. Defensive Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 25,294 | $ | 292,937 | 2,220 | $ | 24,662 | 3,380 | $ | 39,908 | ||||||||||||||||||
Shares repurchased | (40,125 | ) | (458,410 | ) | (24,468 | ) | (270,582 | ) | (67,174 | ) | (763,894 | ) | |||||||||||||||
Redemption fees | — | 160 | — | 44 | — | 41 | |||||||||||||||||||||
Net decrease | (14,831 | ) | $ | (165,313 | ) | (22,248 | ) | $ | (245,876 | ) | (63,794 | ) | $ | (723,945 | ) |
105
The UBS Funds
Notes to financial statements
UBS U.S. Equity Opportunity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 41,795 | $ | 358,516 | 3,255 | $ | 27,306 | 6,032 | $ | 48,791 | ||||||||||||||||||
Shares repurchased | (309,291 | ) | (2,636,485 | ) | (20,576 | ) | (171,520 | ) | (20,674 | ) | (170,660 | ) | |||||||||||||||
Dividends reinvested | 14,194 | 122,350 | — | — | 903 | 7,817 | |||||||||||||||||||||
Redemption fees | — | 4 | — | — | — | — | |||||||||||||||||||||
Net decrease | (253,302 | ) | $ | (2,155,615 | ) | (17,321 | ) | $ | (144,214 | ) | (13,739 | ) | $ | (114,052 | ) |
UBS U.S. Large Cap Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 51,141 | $ | 1,088,197 | 6,300 | $ | 128,813 | 366,997 | $ | 7,853,922 | ||||||||||||||||||
Shares repurchased | (66,189 | ) | (1,429,617 | ) | (3,143 | ) | (64,015 | ) | (670,005 | ) | (14,537,642 | ) | |||||||||||||||
Dividends reinvested | 2,940 | 64,232 | 232 | 4,885 | 72,254 | 1,583,799 | |||||||||||||||||||||
Redemption fees | — | 860 | — | 261 | — | 14,254 | |||||||||||||||||||||
Net increase (decrease) | (12,108 | ) | $ | (276,328 | ) | 3,389 | $ | 69,944 | (230,754 | ) | $ | (5,085,667 | ) |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 233,346 | $ | 5,293,849 | 13,129 | $ | 279,817 | 848,873 | $ | 20,192,889 | ||||||||||||||||||
Shares repurchased | (225,417 | ) | (5,083,333 | ) | (12,052 | ) | (246,288 | ) | (409,951 | ) | (9,832,866 | ) | |||||||||||||||
Dividends reinvested | 33,014 | 755,042 | 3,672 | 75,974 | 190,666 | 4,570,262 | |||||||||||||||||||||
Redemption fees | — | 1,459 | — | 129 | — | 8,024 | |||||||||||||||||||||
Net increase | 40,943 | $ | 967,017 | 4,749 | $ | 109,632 | 629,588 | $ | 14,938,309 |
For the year ended June 30, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Equity Long-Short Multi-Strategy Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 13,397 | $ | 125,414 | 6,878 | $ | 64,871 | — | $ | — | ||||||||||||||||||
Shares repurchased | (150,124 | ) | (1,435,730 | ) | (29,518 | ) | (269,902 | ) | (83,158 | ) | (787,437 | ) | |||||||||||||||
Redemption fees | — | 35 | — | 8 | — | 216 | |||||||||||||||||||||
Net decrease | (136,727 | ) | $ | (1,310,281 | ) | (22,640 | ) | $ | (205,023 | ) | (83,158 | ) | $ | (787,221 | ) |
UBS Global Sustainable Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 55,594 | $ | 424,091 | 9,602 | $ | 73,918 | 46,547 | $ | 349,370 | ||||||||||||||||||
Shares repurchased | (185,747 | ) | (1,352,570 | ) | (36,597 | ) | (268,982 | ) | (473,056 | ) | (3,482,556 | ) | |||||||||||||||
Dividends reinvested | 22,828 | 168,244 | 2,238 | 16,293 | 60,955 | 450,456 | |||||||||||||||||||||
Redemption fees | — | 346 | — | 44 | — | 804 | |||||||||||||||||||||
Net decrease | (107,325 | ) | $ | (759,889 | ) | (24,757 | ) | $ | (178,727 | ) | (365,554 | ) | $ | (2,681,926 | ) |
106
The UBS Funds
Notes to financial statements
UBS U.S. Defensive Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 7,705 | $ | 75,758 | 5,811 | $ | 55,380 | 20,576 | $ | 194,042 | ||||||||||||||||||
Shares repurchased | (287,534 | ) | (2,775,350 | ) | (126,409 | ) | (1,178,282 | ) | (188,644 | ) | (1,816,565 | ) | |||||||||||||||
Dividends reinvested | 1,536 | 14,317 | — | — | 1,188 | 11,047 | |||||||||||||||||||||
Redemption fees | — | 365 | — | 120 | — | 138 | |||||||||||||||||||||
Net decrease | (278,293 | ) | $ | (2,684,910 | ) | (120,598 | ) | $ | (1,122,782 | ) | (166,880 | ) | $ | (1,611,338 | ) |
UBS U.S. Equity Opportunity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 31,441 | $ | 219,609 | 2,690 | $ | 19,283 | 4,297 | $ | 30,462 | ||||||||||||||||||
Shares repurchased | (1,061,493 | ) | (7,345,464 | ) | (121,071 | ) | (808,897 | ) | (68,220 | ) | (467,345 | ) | |||||||||||||||
Dividends reinvested | 41,120 | 276,332 | 384 | 2,535 | 2,367 | 15,975 | |||||||||||||||||||||
Redemption fees | — | 9 | — | 1 | — | — | |||||||||||||||||||||
Net decrease | (988,932 | ) | $ | (6,849,514 | ) | (117,997 | ) | $ | (787,078 | ) | (61,556 | ) | $ | (420,908 | ) |
UBS U.S. Large Cap Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 63,722 | $ | 1,123,135 | 11,712 | $ | 201,939 | 1,224,671 | $ | 22,333,693 | ||||||||||||||||||
Shares repurchased | (520,621 | ) | (9,087,635 | ) | (61,449 | ) | (1,040,021 | ) | (5,571,039 | ) | (107,314,950 | ) | |||||||||||||||
Dividends reinvested | 2,349 | 39,632 | — | — | 103,257 | 1,747,104 | |||||||||||||||||||||
Redemption fees | — | 726 | — | 173 | — | 11,881 | |||||||||||||||||||||
Net decrease | (454,550 | ) | $ | (7,924,142 | ) | (49,737 | ) | $ | (837,909 | ) | (4,243,111 | ) | $ | (83,222,272 | ) |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 382,244 | $ | 6,549,654 | 25,282 | $ | 411,257 | 2,998,179 | $ | 57,662,827 | ||||||||||||||||||
Shares repurchased | (663,409 | ) | (11,538,713 | ) | (29,257 | ) | (467,672 | ) | (1,155,373 | ) | (21,374,300 | ) | |||||||||||||||
Dividends reinvested | — | — | — | — | — | — | |||||||||||||||||||||
Redemption fees | — | 2,026 | — | 170 | — | 7,905 | |||||||||||||||||||||
Net increase (decrease) | (281,165 | ) | $ | (4,987,033 | ) | (3,975 | ) | $ | (56,245 | ) | 1,842,806 | $ | 36,296,432 |
107
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 1-202-551 8090. 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).
108
The UBS Funds
Funds' privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE® Funds and all closed-end funds managed by UBS Global Asset Management (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information and to comply with applicable laws and regulations.
The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to nonaffiliated third parties as otherwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1174
UBS Asset
Allocation Funds
December 31, 2013
The UBS Funds—Asset Allocation
Semiannual Report
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
Asset Allocation Funds | |||||||
UBS Asset Growth Fund (formerly UBS Global Frontier Fund) | 5 | ||||||
UBS Dynamic Alpha Fund | 13 | ||||||
UBS Global Allocation Fund | 31 | ||||||
UBS Multi-Asset Income Fund | 44 | ||||||
Explanation of expense disclosure | 59 | ||||||
Statement of assets and liabilities | 62 | ||||||
Statement of operations | 66 | ||||||
Statement of changes in net assets | 68 | ||||||
Financial highlights | 70 | ||||||
Notes to financial statements | 77 | ||||||
General information | 100 |
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President's letter
February 14, 2014
Dear Shareholder,
The importance of investment discipline to achieving better investment outcomes is well known to individual investors and financial advisors alike. But even the most disciplined investors, faced with breaking news or market-moving events, can sometimes be distracted from their long-term financial plans. The year 2013 and the early part of this year have offered no shortage of distractions. After the broad, steady market recoveries of the last several years, 2013 presented us with the much anticipated "great rotation" out of fixed income into risk assets. Although it didn't fully play out, this was set in motion by the Federal Reserve Board's (the "Fed") decision to "taper" its quantitative easing program ("QE") due to improving prospects for the American economy. Bond investors, some of whom may be risk averse, learned firsthand that it is possible for their fixed income investments to lose value when interest rates rise. Yet, they still seem to accept this tradeoff in exchange for the relative security of their principal, as evidenced by the number of investors with assets still in fixed income investments. In 2013, stocks rallied despite questions over what effects the taper and a change in leadership at the Fed would have on stock prices. While flows into equities improved, many investors didn't participate in this rally and are now faced with the decision of what to do next.
The financial advisor community and asset managers like UBS Global Asset Management understand the drivers of investor behavior and have collaborated to create solutions that help clients build and maintain diversified, well allocated portfolios. Integrated in these solutions are the core/traditional asset classes that have built and protected wealth for decades. Increasingly, however, wealth managers' and asset managers' solutions are including new diversifiers, designed to potentially enhance the likelihood that clients remain committed to their long-term financial plans through the markets' ups and downs. By offering solutions that help better diversify client portfolios, we aim to soften what can sometimes be a bumpy ride.
At UBS Global Asset Management, we are committed to traditional asset classes but have also enhanced our product offerings. We remain vigilant in adding value through active management in our core investment solutions. But, as I have mentioned in past letters, we were among the early leaders to evolve our product offering to meet the challenges to investment discipline described above. We launched these types of funds before the terms "liquid alternatives," "absolute return" or "multi-alternative funds" were well known in the investment vernacular. We have invested resources to better enable our investment professionals across equities, fixed income and multi-asset class solutions, to focus on improved investor outcomes. We continue to build strong track records in these areas, so that we can play an integral role in helping financial advisors meet their clients' needs by staying focused on investors' real, long-term objectives.
1
President's letter
The markets will undoubtedly continue to challenge investors' fortitude with respect to their commitment to their long-term financial plans. As we begin 2014, new distractions have arisen: concerns over emerging markets and uncertainty about security at the Olympic Games in Sochi, Russia, among others. As such, we understand that it is our responsibility to deliver sustained performance in our funds, enabling our clients to experience the outcomes they need. To help us stay focused on these challenges, we rely on our firm's culture, based on the foundations of client focus, excellence and sustained performance. We embrace this responsibility and these challenges and thank you for your continued trust in our skill and commitment to serve you.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
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. A prospectus or summary prospectus for these 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.
2
The markets in review
Improving growth in the developed world
Despite a number of headwinds, including the sequestration, higher taxes and rising interest rates, the overall US economy continued to expand during the reporting period. Looking back, the Commerce Department reported that gross domestic product ("GDP") growth in the US was a tepid 1.1% during the first quarter of 2013. The economy then gained some traction, as GDP grew 2.5% and 4.1% during the second and third quarters of 2013, respectively. Third quarter GDP was the highest reading since the fourth quarter of 2011. The Commerce Department's initial estimate for fourth quarter 2013 GDP growth was 3.2%.1
The Federal Reserve Board (the "Fed") took a number of actions during the reporting period. As has been the case since December 2008, the Fed kept the federal funds rate (the federal funds rate, or the "fed funds rate," which is the rate banks charge one another for funds they borrow on an overnight basis) at a historically low level between 0% and 0.25%. However, at his press conference following the central bank's meeting in June 2013, Fed Chairman Ben Bernanke signaled that the Fed might moderate the monthly pace of its bond purchases later in the year. This triggered a substantial sell-off in the fixed income market, as Treasury yields rose sharply and bond prices declined. At its meeting that concluded on September 18, 2013, the Fed surprised the market by delaying the tapering of its asset purchases.
At its final meeting of 2013, in December, the Fed announced that it would begin paring back its monthly asset purchases, saying, "Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a [reduced] pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a [reduced] pace of $40 billion per month rather than $45 billion per month."
At its meeting that concluded on January 29, 2014, the Fed said it would further taper its asset purchases. Beginning in February 2014, the central bank will scale back its monthly purchases to a total of $65 billion ($30 billion of agency mortgage-backed securities and $35 billion of longer-term Treasury securities).2
Growth in other developed countries generally improved during the reporting period, albeit from relatively low levels. In its October 2013 World Economic Outlook, the International Monetary Fund ("IMF") stated that "Advanced economies are gradually strengthening. At the same time, growth in emerging market economies has slowed." From a regional perspective, the IMF anticipated that 2013 growth in the eurozone would contract 0.4%, but increase to 1.0% in 2014. While growth in emerging market countries remains higher than in developed countries, the IMF projects that this gap is narrowing. The IMF projected that emerging market growth would moderate from 4.9% in 2012 to 4.5% in 2013. In particular, China's economy was expected to grow 7.6% in 2013, versus 7.7% in 2012.
1 Based on the Commerce Department's third estimate announced on January 30, 2014, after the reporting period had ended.
2 The Fed's decision to further taper was made at its meeting that concluded on January 29, 2014, after the reporting period had ended.
3
The markets in review
Equities largely produce strong returns
Developed market equities produced outstanding results during the reporting period. In the US, generally positive economic data and corporate profits that often exceeded expectations supported the market. Volatility was elevated at times, due to moderating emerging market growth, geopolitical events and uncertainty regarding future central bank monetary policy. However, periodic setbacks were generally quickly replaced by solid demand from investors looking to generate incremental returns in the low interest rate environment. All told, the US stock market, as measured by the S&P 500 Index,3 gained 16.31% for the six months ended December 31, 2013 and ended the year at an all-time high. International developed equities, as measured by the MSCI EAFE Index (net),4 also rose sharply, gaining 17.94% during the period. Emerging market equities, as measured by the MSCI Emerging Markets Index (net),5 generated less robust returns, gaining 7.70% over the same period. This was due to several factors, including decelerating emerging market growth, generally falling commodity prices and rising US interest rates.
Generally weak results for the fixed income market
The fortunes of the fixed income market were often tied to expectations regarding future Fed monetary policy. With the US economy gaining momentum and the Fed signaling a tapering of its asset purchases, US Treasury yields moved higher and negatively impacted the overall bond market (yields and bond prices move in opposite directions). Against this backdrop, the overall US bond market, as measured by the Barclays US Aggregate Index,6 rose 0.43%. US taxable spread sectors (non-US Treasury fixed income securities) generated mixed results during the six months ended December 31, 2013. One notable standout was high yield bonds, as they generated strong results. Supporting the high yield market were continued solid corporate fundamentals, low defaults and overall solid demand. All told, the BofA Merrill Lynch US High Yield Cash Pay Constrained Index7 rose 5.83% during the reporting period. In contrast, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),8 rose 1.79%. This weaker performance was triggered by decelerating emerging market growth, higher US interest rates and periods of weak demand.
3 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.
4 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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.
5 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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 Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
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 capitalization 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. The index is not leveraged. Investors should note that indices do not reflect the deduction of fees and expenses.
8 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.
4
UBS Asset Growth Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Asset Growth Fund (the "Fund") (previously UBS Global Frontier Fund) returned 11.12% (Class A shares returned 5.01% after the deduction of the maximum sales charge), while Class Y shares returned 11.21%. The Fund's benchmark, the MSCI World Free Index (net) (the "Index") returned 16.83%. (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 8; 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.)
Please note, the GSMI Mutual Fund Index was the Fund's secondary benchmark against which the Fund's portfolio was actively managed for the majority of the reporting period. Effective October 30, 2013, the Fund no longer utilizes the GSMI Mutual Fund Index. That said, the below comments regarding the Fund's performance are versus the GSMI Mutual Fund Index. For reference purposes, the GSMI Mutual Fund Index returned 10.64% for the six months ended December 31, 2013.
Special Fund Update
The Board of Trustees of The UBS Funds approved a name change and investment policy modifications to UBS Global Frontier Fund, which went into effect on October 30, 2013. Specifically:
• The Fund's name was changed from UBS Global Frontier Fund to UBS Asset Growth Fund.
• The Fund implemented a managed volatility strategy to seek to target a defined level of portfolio risk of 15% annual volatility or lower. The Fund may continue to use leverage to help implement the managed volatility strategy. While the Advisor will attempt to manage the Fund's volatility, there can be no guarantee that the Fund will achieve its target and the actual volatility may be higher or lower than 15% over any period.
• The Fund's exposure to underlying asset classes will now be achieved primarily through passive index exposures and derivatives.
Please note, the transition of the Fund's portfolio largely occurred in December 2013.
The Fund produced a strong absolute return during the six-month reporting period, but underperformed the Index.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, the utilization of currency forwards had a direct negative impact on Fund performance. Various equity and fixed income options and futures were used to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. In aggregate, these derivatives contributed to performance during the reporting period.
5
UBS Asset Growth Fund
Portfolio performance summary1
What worked
• Overall, the Fund's fixed income positioning contributed to performance.
– The Fund maintained an underweight to fixed income during the reporting period. This was beneficial, as the overall fixed income market performed poorly given the Federal Reserve Board's (the "Fed") indications that it would begin tapering its asset purchase program.
– We tactically managed the Fund's duration and were generally short versus the GSMI Mutual Fund index. This was beneficial for results as interest rates moved higher during the reporting period.
• Several of the Fund's currency strategies were positive for performance.
– A short position in the Canadian dollar versus the US dollar contributed to results.
– Our long position in the Polish zloty was beneficial during the reporting period.
– The Fund's net long position in the euro was additive for performance.
• The Fund's positioning in the equity market was beneficial in a number of cases.
– An overweight to global equities was positive for performance, as it was the best performing asset class during the six months.
– US large-cap core/value and US large-cap growth security selection was additive for results.
• Leverage contributed to performance during the reporting period. The Fund maintained a leverage factor of approximately 25% through November 20, 2013. After this time, the underlying portfolio switched from UBS Global Allocation Fund to a global balanced asset allocation portfolio. As of the end of the six months, the total market exposure of the portfolio was 169% to achieve a volatility at or below the 15% risk target. Given that leverage magnifies returns on the upside and the downside, the positive impact from our equity exposure was amplified and benefited the Fund's results.
What didn't work
• Overall, currency strategies were negative for performance. A short position in the New Zealand dollar versus the US dollar was the largest detractor from results during the six months.
• Certain of the Fund's fixed income exposures detracted from results. In particular, while our allocation to high yield corporate bonds was additive for absolute results, the bonds lagged the GSMI Mutual Fund Index on a relative basis.
1 For a detailed commentary on the market environment in general during the reporting period, see pages 3-4.
6
UBS Asset Growth Fund
• A bias toward non-US equities versus US equities detracted from results.
– Our preference for international developed equities, largely in Europe, over US equities was not rewarded, as the former lagged their US counterparts.
– An overweight to emerging market equities was negative for Fund performance. They generated weak results as growth decelerated in many developing countries, commodity prices generally declined and investor demand was often poor.
– International core equity security selection was a drag on performance.
• Overall, the Fund's positioning among risk assets was negative for performance.
– We tactically adjusted the Fund's allocation to equities during the six months. When the reporting period began, 64% of the portfolio was allocated to equities, versus 65% for the GSMI Mutual Fund Index. While this exposure fluctuated during the reporting period, we ended with a 69% allocation to equities.
– We started the reporting period with a 20% allocation to fixed income and an elevated cash exposure of 16%. This higher than normal cash position was due to our reducing the Fund's fixed income exposure in May and June 2013, prior to the beginning of the reporting period, in the wake of the Fed's comments about tapering its asset purchases. As the reporting period progressed, we redeployed our cash position into the fixed income and equity markets.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
7
UBS Asset Growth Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | Inception1 | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A2 | 11.12 | % | 13.86 | % | 15.19 | % | 0.79 | % | |||||||||||
Class C3 | 10.66 | 12.95 | 14.33 | 0.03 | |||||||||||||||
Class Y4 | 11.21 | 14.10 | 15.44 | 1.03 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A2 | 5.01 | % | 7.58 | % | 13.90 | % | (0.09 | )% | |||||||||||
Class C3 | 9.66 | 11.95 | 14.33 | 0.03 | |||||||||||||||
MSCI World Free Index (net)5 | 16.83 | % | 26.68 | % | 15.02 | % | 3.14 | % | |||||||||||
GSMI Mutual Fund Index6 | 10.64 | 13.25 | 11.46 | 4.24 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—2.06% and 1.56%; Class C—2.83% and 2.31%; Class Y—1.83% and 1.31%. 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Asset Growth Fund 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 distribution and service 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 distribution and service 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. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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 and is a composite of five indexes compiled by independent data providers: 65% MSCI All Country World Index (net), 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 US 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. 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://globalam-us.ubs.com/corpweb/performance.do.
8
UBS Asset Growth Fund
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Investment companies | |||||||
iShares Emerging Markets Local Currency Bond ETF | 1.67 | % | |||||
iShares iBoxx $ High Yield Corporate Bond ETF | 16.26 | ||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 14.67 | ||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 1.68 | ||||||
iShares MSCI Switzerland Capped ETF | 1.74 | ||||||
iShares TIPS Bond ETF | 3.32 | ||||||
SPDR Barclays Convertible Securities ETF | 3.41 | ||||||
Total investment companies | 42.75 | % | |||||
Short-term investments | 44.01 | ||||||
Investment of cash collateral from securities loaned | 16.17 | ||||||
Total investments | 102.93 | % | |||||
Liabilities, in excess of cash and other assets | (2.93 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Asset Growth Fund. Figures might be different if a breakdown of the underlying investment companies was included.
9
UBS Asset Growth Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Investment companies: 42.75% | |||||||||||
iShares Emerging Markets Local Currency Bond ETF | 11,552 | $ | 564,777 | ||||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 59,052 | 5,484,750 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF1 | 43,330 | 4,948,719 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF1 | 5,256 | 568,489 | |||||||||
iShares MSCI Switzerland Capped ETF1 | 17,789 | 586,859 | |||||||||
iShares TIPS Bond ETF | 10,186 | 1,119,441 | |||||||||
SPDR Barclays Convertible Securities ETF1 | 24,646 | 1,151,708 | |||||||||
Total investment companies (cost $14,468,888) | 14,424,743 | ||||||||||
Face Amount | |||||||||||
Short-term investments: 44.01% | |||||||||||
US government obligations: 20.74% | |||||||||||
US Treasury Bills 0.040%, due 02/06/142 | $ | 2,000,000 | 1,999,960 | ||||||||
0.089%, due 04/24/142 | 2,000,000 | 1,999,626 | |||||||||
0.101%, due 05/29/142 | 2,000,000 | 1,999,530 | |||||||||
0.093%, due 05/01/142 | 1,000,000 | 999,826 | |||||||||
Total US government obligations (cost $6,998,223) | 6,998,942 | ||||||||||
Shares | |||||||||||
Investment company: 23.27% | |||||||||||
UBS Cash Management Prime Relationship Fund3 (cost $7,850,088) | 7,850,088 | 7,850,088 | |||||||||
Total short-term investments (cost $14,848,311) | 14,849,030 |
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 16.17% | |||||||||||
UBS Private Money Market Fund LLC3 (cost $5,456,410) | 5,456,410 | $ | 5,456,410 | ||||||||
Total investments: 102.93% (cost $34,773,609) | 34,730,183 | ||||||||||
Liabilities, in excess of cash and other assets: (2.93)% | (989,167 | ) | |||||||||
Net assets: 100.00% | $ | 33,741,016 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized depreciation consisted of:
Gross unrealized appreciation | $ | 31,195 | |||||
Gross unrealized depreciation | (74,621 | ) | |||||
Net unrealized depreciation of investments | $ | (43,426 | ) |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 58. Portfolio footnotes begin on page 12.
10
UBS Asset Growth Fund
Portfolio of investments
December 31, 2013 (unaudited)
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
5 Year US Treasury Notes, 23 contracts (USD) | March 2014 | $ | 2,782,302 | $ | 2,744,187 | $ | (38,115 | ) | |||||||||||
Index futures buy contracts: | |||||||||||||||||||
E-mini S&P 500 Index, 99 contracts (USD) | March 2014 | 8,754,298 | 9,113,445 | 359,147 | |||||||||||||||
EURO STOXX 50 Index, 216 contracts (EUR) | March 2014 | 8,789,314 | 9,235,459 | 446,145 | |||||||||||||||
FTSE 100 Index, 57 contracts (GBP) | March 2014 | 6,082,195 | 6,321,713 | 239,518 | |||||||||||||||
Mini MSCI Emerging Markets Index, 133 contracts (USD) | March 2014 | 6,614,556 | 6,761,720 | 147,164 | |||||||||||||||
SPI 200 Index, 23 contracts (AUD) | March 2014 | 2,612,291 | 2,730,354 | 118,063 | |||||||||||||||
TOPIX Index, 36 contracts (JPY) | March 2014 | 4,297,491 | 4,452,569 | 155,078 | |||||||||||||||
Currency futures buy contracts: | |||||||||||||||||||
Australian Dollar, 10 contracts (USD) | March 2014 | 899,335 | 888,200 | (11,135 | ) | ||||||||||||||
Euro, 17 contracts (USD) | March 2014 | 2,928,309 | 2,929,950 | 1,641 | |||||||||||||||
Great Britain Pound, 20 contracts (USD) | March 2014 | 2,045,945 | 2,069,750 | 23,805 | |||||||||||||||
Japanese Yen, 12 contracts (USD) | March 2014 | 1,462,542 | 1,425,450 | (37,092 | ) | ||||||||||||||
Currency futures sell contracts: | |||||||||||||||||||
Swiss Franc, 3 contracts (USD) | March 2014 | (422,765 | ) | (422,137 | ) | 628 | |||||||||||||
Net unrealized appreciation on futures contracts | $ | 1,404,847 |
Options written
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 8 | $ | 67,311 | ||||||||
Options written | — | — | |||||||||
Options terminated in closing purchase transactions | (8 | ) | (67,311 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | — | $ | — |
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Investment companies | $ | 14,424,743 | $ | — | $ | — | $ | 14,424,743 | |||||||||||
Short-term investments | — | 14,849,030 | — | 14,849,030 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 5,456,410 | — | 5,456,410 | |||||||||||||||
Futures contracts, net | 1,404,847 | — | — | 1,404,847 | |||||||||||||||
Total | $ | 15,829,590 | $ | 20,305,440 | $ | — | $ | 36,135,030 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
11
UBS Asset Growth Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio footnotes
1 Security, or portion thereof, was on loan at December 31, 2013.
2 Interest rate is the discount rate at the date of purchase.
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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Net realized gain during the six months ended 12/31/13 | Change in net unrealized appreciation (depreciation) during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 8,739,483 | $ | 16,419,409 | $ | 17,308,804 | $ | — | $ | — | $ | 7,850,088 | $ | 3,712 | |||||||||||||||||
UBS Private Money Market Fund LLCa | 274,676 | 6,196,956 | 1,015,222 | — | — | 5,456,410 | 16 | ||||||||||||||||||||||||
UBS Emerging Markets Equity Relationship Fund | 4,625,410 | — | 4,763,744 | 65,878 | 72,456 | — | — | ||||||||||||||||||||||||
UBS Global Corporate Bond Relationship Fund | — | 835,000 | 855,550 | 20,550 | — | — | — | ||||||||||||||||||||||||
UBS High Yield Relationship Fund | 2,457,795 | 435,000 | 3,020,532 | 475,616 | (347,879 | ) | — | — | |||||||||||||||||||||||
UBS International Equity Relationship Fund | 5,251,216 | — | 5,901,640 | 1,860,481 | (1,210,057 | ) | — | — | |||||||||||||||||||||||
$ | 21,348,580 | $ | 23,886,365 | $ | 32,865,492 | $ | 2,422,525 | $ | (1,485,480 | ) | $ | 13,306,498 | $ | 3,728 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements
12
UBS Dynamic Alpha Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned 4.99% (Class A shares declined 0.83% after the deduction of the maximum sales charge), while Class Y shares returned 5.15%. For purposes of comparison, the BofA Merrill Lynch US Treasury 1-5 Year Index returned 0.35% during the same time period, the MSCI World Free Index (net) returned 16.83% and the Citigroup One-Month US Treasury Bill Index returned 0.01%. (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 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 produced a positive absolute return during the reporting period. Performance was primarily due to our market allocation strategy.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, utilizing currency forwards had a direct negative impact on Fund performance. We used a variety of equity and fixed income options, futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, contributed to performance during the period.
Portfolio performance summary1
What worked
• Our long position in equities aided the Fund's results during the reporting period.
– Net long positions in both developed and emerging market equities were additive for results.
– A preference for Italian equities versus French equities was beneficial for the Fund's performance, as was our preference for Canadian versus Australian equities.
• Overall, the Fund's fixed income positioning contributed to performance.
– A long high yield bond position versus US Treasuries was beneficial. High yield spreads narrowed during the reporting period, given generally strong demand and improving fundamentals. In contrast, US Treasury yields moved higher (and their prices lower) as the economy gained momentum and the Federal Reserve Board (the "Fed") announced its intention to taper its asset purchases.
– The Fund's allocation to short-dated Italian bonds was additive for performance.
– Our short US Treasury position more than offset a long position in Australian bonds.
– An allocation to investment grade corporate bonds, as well as security selection within the sector, enhanced the Fund's results.
1 For a detailed commentary on the market environment in general during the reporting period, see pages 3-4.
13
UBS Dynamic Alpha Fund
• Several of the Fund's currency strategies were positive for performance.
– A short position in the Canadian dollar versus the US dollar contributed to results.
– Our long position in the Polish zloty was beneficial.
– Our net long position in the euro was additive for the Fund's results.
• Overall, the Fund's positioning among risk assets was positive for performance during the reporting period.
– We tactically adjusted the Fund's allocation to equities during the reporting period. We began the six-month period with a 36% net equity exposure. We allowed this to drift higher, reaching a high in the upper-40% range. Prior to the Fed's final meeting of 2013, in December, we reduced the Fund's net equity exposure to 20%. Following the meeting, with clearer forward guidance on the path of tapering, we increased the allocation, ending the reporting period with a 33% net position.
– The Fund began the reporting period with a 30% allocation to fixed income and had an elevated 34% cash exposure. This higher than normal cash position was due to our reducing the Fund's market exposure, particularly in fixed income in May and June 2013, prior to the beginning of the reporting period. The decision to reduce the Fund's market exposure was made in the wake of the Fed's comments about tapering its asset purchases. As the reporting period progressed, we redeployed our cash position into the fixed income and equity markets. At the end of the six-month period, the Fund's fixed income allocation was 64% and its cash position had fallen to 3%.
What didn't work
• A bias toward non-US equities versus US equities detracted from results. The Fund's preference for international developed equities, largely in Europe, over US equities was not rewarded, as the former lagged their US counterparts.
• While, as previously mentioned, several of the Fund's currency strategies were positive for performance, overall, the Fund's currency strategies were negative for results. A short position in the New Zealand dollar versus the US dollar was the largest detractor from the Fund's performance.
• Certain of the Fund's fixed income exposures detracted from results.
– Our long UK gilt versus German bund position was a negative for performance.
– Our net long duration exposure was a drag on results given rising interest rates.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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 Dynamic Alpha Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | Inception1 | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A2 | 4.99 | % | 5.76 | % | 9.01 | % | 3.42 | % | |||||||||||
Class C3 | 4.49 | 4.98 | 8.20 | 2.63 | |||||||||||||||
Class Y4 | 5.15 | 6.06 | 9.27 | 3.73 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A2 | (0.83 | )% | 0.00 | % | 7.77 | % | 2.77 | % | |||||||||||
Class C3 | 3.49 | 3.98 | 8.20 | 2.63 | |||||||||||||||
BofA Merrill Lynch US Treasury 1-5 Year Index5 | 0.35 | % | (0.19 | )% | 1.57 | % | 3.33 | % | |||||||||||
MSCI World Free Index (net)6 | 16.83 | 26.68 | 15.02 | 6.48 | |||||||||||||||
Citigroup One-Month US Treasury Bill Index7 | 0.01 | 0.03 | 0.07 | 1.53 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.44% and 1.36%; Class C—2.20% and 2.11%; Class Y—1.13% and 1.11%. 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.35% for Class A 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
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 C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service 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 distribution and service fees.
5 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.
6 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. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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.
7 The Citigroup One-Month US Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last one month Treasury Bill issue. 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 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://globalam-us.ubs.com/corpweb/performance.do.
15
UBS Dynamic Alpha Fund
Top ten long-term fixed income holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Buoni Poliennali Del Tesoro, 3.500%, due 11/01/17 | 2.2 | % | |||||
Buoni Poliennali Del Tesoro, 4.750%, due 08/01/23 | 2.2 | ||||||
Buoni Poliennali Del Tesoro, 3.750%, due 08/01/16 | 2.1 | ||||||
Government of Australia, 4.750%, due 06/15/16 | 1.9 | ||||||
Government of Australia, 4.250%, due 07/21/17 | 1.9 | ||||||
Government of Australia, 4.500%, due 04/15/20 | 1.9 | ||||||
JPMorgan Chase & Co., 3.200%, due 01/25/23 | 0.7 | ||||||
Bank of America Corp., 1.500%, due 10/09/15 | 0.7 | ||||||
Buoni Poliennali Del Tesoro, 3.000%, due 04/01/14 | 0.5 | ||||||
Wachovia Corp., 5.750%, due 02/01/18 | 0.5 | ||||||
Total | 14.6 | % |
Country exposure by issuer, top five (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
United States | 21.5 | % | |||||
Italy | 8.5 | ||||||
Australia | 7.5 | ||||||
United Kingdom | 7.3 | ||||||
Netherlands | 4.0 | ||||||
Total | 48.8 | % |
1 Figures represent the direct investments of UBS Dynamic Alpha Fund. Figures might be different if a breakdown of the underlying investment companies was included.
16
UBS Dynamic Alpha Fund
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Bonds | |||||||
Corporate bonds | |||||||
Beverages | 1.38 | % | |||||
Building materials | 0.14 | ||||||
Capital markets | 1.82 | ||||||
Chemicals | 0.28 | ||||||
Commercial banks | 8.68 | ||||||
Commercial services & supplies | 0.42 | ||||||
Communications equipment | 0.38 | ||||||
Computers & peripherals | 0.39 | ||||||
Construction & engineering | 0.27 | ||||||
Consumer finance | 1.24 | ||||||
Containers & packaging | 0.27 | ||||||
Diversified financial services | 5.40 | ||||||
Diversified telecommunication services | 2.85 | ||||||
Electric utilities | 2.56 | ||||||
Energy equipment & services | 0.29 | ||||||
Engineering & construction | 0.29 | ||||||
Food & staples retailing | 0.14 | ||||||
Food products | 0.86 | ||||||
Gas utilities | 0.87 | ||||||
Health care equipment & supplies | 0.39 | ||||||
Health care providers & services | 0.13 | ||||||
Hotels, restaurants & leisure | 0.14 | ||||||
Industrial conglomerates | 0.29 | ||||||
Insurance | 4.00 | ||||||
Internet & catalog retail | 0.07 | ||||||
IT services | 0.16 | ||||||
Life sciences tools & services | 0.05 | ||||||
Marine | 0.21 | ||||||
Media | 2.20 |
Metals & mining | 1.38 | % | |||||
Multi-utilities | 0.61 | ||||||
Oil, gas & consumable fuels | 4.71 | ||||||
Pharmaceuticals | 0.74 | ||||||
Real estate investment trust (REIT) | 0.05 | ||||||
Real estate management & development | 0.12 | ||||||
Road & rail | 0.50 | ||||||
Software | 0.36 | ||||||
Specialty retail | 0.15 | ||||||
Thrifts & mortgage finance | 0.24 | ||||||
Tobacco | 1.95 | ||||||
Transportation infrastructure | 0.39 | ||||||
Water utilities | 0.10 | ||||||
Wireless telecommunication services | 0.60 | ||||||
Total corporate bonds | 48.07 | % | |||||
Collateralized debt obligation | 0.002 | ||||||
Mortgage & agency debt security | 0.02 | ||||||
Non-US government obligations | 12.78 | ||||||
Supranational bonds | 0.55 | ||||||
Total bonds | 61.42 | % | |||||
Short-term investments | 22.37 | ||||||
Options purchased | 1.19 | ||||||
Investment of cash collateral from securities loaned | 0.37 | ||||||
Total investments | 85.35 | % | |||||
Cash and other assets, less liabilities | 14.65 | ||||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Dynamic Alpha Fund. Figures might be different if a breakdown of the underlying investment companies was included.
2 Amount represents less than 0.005%.
17
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds: 61.42% | |||||||||||
Corporate bonds: 48.07% | |||||||||||
Australia: 1.71% | |||||||||||
BHP Billiton Finance USA Ltd., 5.000%, due 09/30/43 | $ | 285,000 | $ | 289,771 | |||||||
Commonwealth Bank of Australia, 2.250%, due 03/16/171 | 1,130,000 | 1,161,961 | |||||||||
National Australia Bank, 2.750%, due 03/09/17 | 1,050,000 | 1,088,178 | |||||||||
Origin Energy Finance Ltd., 2.500%, due 10/23/202 | EUR | 500,000 | 672,685 | ||||||||
3.500%, due 10/09/181 | $ | 400,000 | 401,975 | ||||||||
Santos Finance Ltd., 8.250%, due 09/22/703 | EUR | 245,000 | 379,651 | ||||||||
Telstra Corp. Ltd., 4.800%, due 10/12/211 | $ | 300,000 | 323,031 | ||||||||
Transurban Finance Co. Pty Ltd., 2.500%, due 10/08/20 | EUR | 210,000 | 287,120 | ||||||||
Westpac Banking Corp., 5.000%, due 10/21/192 | GBP | 400,000 | 730,918 | ||||||||
Total Australia corporate bonds | 5,335,290 | ||||||||||
Belgium: 0.13% | |||||||||||
Elia System Operator SA, 3.250%, due 04/04/282 | EUR | 300,000 | 408,178 | ||||||||
Bermuda: 0.19% | |||||||||||
Bacardi Ltd., 2.750%, due 07/03/232 | 440,000 | 592,730 | |||||||||
Brazil: 0.30% | |||||||||||
BRF SA, 3.950%, due 05/22/231 | $ | 420,000 | 363,300 | ||||||||
Vale SA, 5.625%, due 09/11/42 | 630,000 | 565,230 | |||||||||
Total Brazil corporate bonds | 928,530 | ||||||||||
Canada: 2.12% | |||||||||||
Bank of Montreal, 1.300%, due 07/15/16 | 535,000 | 539,486 | |||||||||
6.020%, due 05/02/18 | CAD | 415,000 | 444,696 | ||||||||
Bank of Nova Scotia, 4.100%, due 06/08/17 | 615,000 | 614,861 | |||||||||
Barrick Gold Corp., 4.100%, due 05/01/23 | $ | 285,000 | 257,609 | ||||||||
Canadian Imperial Bank of Commerce, 1.350%, due 07/18/16 | 420,000 | 422,999 | |||||||||
3.400%, due 01/14/16 | CAD | 455,000 | 442,141 | ||||||||
Greater Toronto Airports Authority, 6.980%, due 10/15/32 | 285,000 | 348,313 |
Face amount | Value | ||||||||||
Hydro One, Inc., 5.360%, due 05/20/36 | CAD | 285,000 | $ | 297,320 | |||||||
Nexen, Inc., 6.400%, due 05/15/37 | $ | 420,000 | 475,591 | ||||||||
Royal Bank of Canada, 2.980%, due 05/07/19 | CAD | 400,000 | 376,868 | ||||||||
Suncor Energy, Inc., 6.500%, due 06/15/38 | $ | 525,000 | 611,173 | ||||||||
Teck Resources Ltd., 5.400%, due 02/01/434 | 250,000 | 228,037 | |||||||||
Thomson Reuters Corp., 1.300%, due 02/23/17 | 520,000 | 517,706 | |||||||||
Toronto-Dominion Bank, 3.367%, due 11/02/203 | CAD | 550,000 | 531,003 | ||||||||
Total Capital Canada Ltd., 1.875%, due 07/09/202 | EUR | 200,000 | 271,096 | ||||||||
Xstrata Finance Canada Ltd., 2.700%, due 10/25/171 | $ | 240,000 | 242,724 | ||||||||
Total Canada corporate bonds | 6,621,623 | ||||||||||
Cayman Islands: 1.09% | |||||||||||
Hutchison Whampoa Europe Finance 13 Ltd., 3.750%, due 05/10/182,3,5 | EUR | 320,000 | 427,017 | ||||||||
Hutchison Whampoa International Ltd., 7.625%, due 04/09/191 | $ | 550,000 | 664,532 | ||||||||
Monumental Global Funding Ltd., 6.000%, due 01/30/14 | GBP | 250,000 | 415,609 | ||||||||
New York Life Funding, 5.125%, due 02/03/15 | 300,000 | 518,519 | |||||||||
Principal Financial Global Funding II LLC, 4.500%, due 01/26/17 | EUR | 550,000 | 819,459 | ||||||||
Transocean, Inc., 6.800%, due 03/15/38 | $ | 375,000 | 417,380 | ||||||||
XLIT Ltd., 5.250%, due 12/15/43 | 140,000 | 140,938 | |||||||||
Total Cayman Islands corporate bonds | 3,403,454 | ||||||||||
China: 0.18% | |||||||||||
AIA Group Ltd., 1.750%, due 03/13/182 | 560,000 | 546,683 | |||||||||
Curacao: 0.12% | |||||||||||
Teva Pharmaceutical Finance IV BV, 3.650%, due 11/10/21 | 390,000 | 382,520 |
18
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
Denmark: 0.34% | |||||||||||
AP Moeller - Maersk A/S, 3.375%, due 08/28/192 | EUR | 450,000 | $ | 654,599 | |||||||
DONG Energy A/S, 4.875%, due 01/12/322 | GBP | 250,000 | 415,918 | ||||||||
Total Denmark corporate bonds | 1,070,517 | ||||||||||
Finland: 0.22% | |||||||||||
Teollisuuden Voima Oyj, 4.625%, due 02/04/192 | EUR | 460,000 | 698,618 | ||||||||
France: 1.70% | |||||||||||
Autoroutes du Sud de la France SA, 5.625%, due 07/04/22 | 350,000 | 589,142 | |||||||||
AXA SA, 5.250%, due 04/16/402,3 | 300,000 | 440,667 | |||||||||
BNP Paribas SA, 2.700%, due 08/20/18 | $ | 415,000 | 422,782 | ||||||||
5.186%, due 06/29/152,3,5 | 235,000 | 239,994 | |||||||||
Credit Logement SA, 1.427%, due 03/16/142,3,5 | EUR | 200,000 | 222,677 | ||||||||
Dexia Credit Local SA, 5.375%, due 07/21/142 | 595,000 | 836,424 | |||||||||
EDF SA, 6.950%, due 01/26/391 | $ | 250,000 | 305,448 | ||||||||
Electricite De France, 5.250%, due 01/29/231,3,5 | 490,000 | 487,305 | |||||||||
Rhodia SA, 6.875%, due 09/15/201 | 340,000 | 376,366 | |||||||||
Total Capital International SA, 1.550%, due 06/28/17 | 1,055,000 | 1,055,227 | |||||||||
Veolia Environnement SA, 6.750%, due 04/24/19 | EUR | 195,000 | 330,205 | ||||||||
Total France corporate bonds | 5,306,237 | ||||||||||
Germany: 0.88% | |||||||||||
Allianz SE, 5.500%, due 01/15/143,5 | 70,000 | 96,351 | |||||||||
Mondi Consumer Packaging International AG, 9.750%, due 07/15/172 | 560,000 | 840,297 | |||||||||
Muenchener Rueckversicherungs AG, 6.000%, due 05/26/412,3 | 900,000 | 1,432,055 | |||||||||
RWE AG, 4.625%, due 09/28/152,3,5 | 275,000 | 387,775 | |||||||||
Total Germany corporate bonds | 2,756,478 |
Face amount | Value | ||||||||||
Ireland: 0.42% | |||||||||||
CRH Finance Ltd., 7.375%, due 05/28/142 | EUR | 300,000 | $ | 423,312 | |||||||
GE Capital European Funding, 6.025%, due 03/01/38 | 390,000 | 704,062 | |||||||||
Perrigo Co. PLC, 4.000%, due 11/15/231 | $ | 200,000 | 196,219 | ||||||||
Total Ireland corporate bonds | 1,323,593 | ||||||||||
Italy: 1.45% | |||||||||||
Assicurazioni Generali SpA, 4.875%, due 11/11/142 | EUR | 195,000 | 277,345 | ||||||||
Ei Towers SpA, 3.875%, due 04/26/18 | 285,000 | 401,916 | |||||||||
Intesa Sanpaolo SpA, 3.625%, due 08/12/151 | $ | 235,000 | 241,802 | ||||||||
3.875%, due 01/16/18 | 320,000 | 327,674 | |||||||||
4.375%, due 10/15/192 | EUR | 500,000 | 731,310 | ||||||||
Snam SpA, 3.875%, due 03/19/182 | 560,000 | 832,704 | |||||||||
Telecom Italia SpA, 6.125%, due 12/14/18 | 650,000 | 986,587 | |||||||||
UniCredit SpA, 6.375%, due 05/02/232,3,4 | $ | 690,000 | 721,659 | ||||||||
Total Italy corporate bonds | 4,520,997 | ||||||||||
Japan: 0.13% | |||||||||||
Japan Tobacco, Inc., 2.100%, due 07/23/181 | 250,000 | 249,309 | |||||||||
Nippon Telegraph & Telephone Corp., 1.400%, due 07/18/17 | 160,000 | 158,073 | |||||||||
Total Japan corporate bonds | 407,382 | ||||||||||
Jersey, Channel Islands: 0.66% | |||||||||||
AA Bond Co., Ltd., 4.720%, due 07/31/182 | GBP | 275,000 | 472,404 | ||||||||
Gatwick Funding Ltd., 5.250%, due 01/23/242 | 250,000 | 442,976 | |||||||||
Heathrow Funding Ltd., 6.750%, due 12/03/26 | 450,000 | 912,296 | |||||||||
HSBC Capital Funding LP, 5.130%, due 03/29/163,5 | EUR | 170,000 | 245,387 | ||||||||
Total Jersey, Channel Islands corporate bonds | 2,073,063 | ||||||||||
Luxembourg: 0.40% | |||||||||||
ArcelorMittal, 9.500%, due 02/15/15 | $ | 655,000 | 711,493 |
19
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
Luxembourg—(Concluded) | |||||||||||
Enel Finance International SA, 6.000%, due 10/07/391 | $ | 450,000 | $ | 431,611 | |||||||
SES, 3.600%, due 04/04/231 | 125,000 | 116,465 | |||||||||
Total Luxembourg corporate bonds | 1,259,569 | ||||||||||
Mexico: 0.34% | |||||||||||
America Movil SAB de CV, 5.000%, due 03/30/20 | 695,000 | 756,813 | |||||||||
Coca-Cola Femsa SAB de CV, 2.375%, due 11/26/18 | 300,000 | 297,471 | |||||||||
Total Mexico corporate bonds | 1,054,284 | ||||||||||
Netherlands: 3.99% | |||||||||||
ABN Amro Bank NV, 4.875%, due 01/16/192 | GBP | 350,000 | 624,694 | ||||||||
Allianz Finance II BV, 4.375%, due 02/17/173,5 | EUR | 395,000 | 565,138 | ||||||||
British American Tobacco Holdings The Netherlands BV, 2.375%, due 01/19/232 | 550,000 | 735,525 | |||||||||
Coca-Cola HBC Finance BV, 2.375%, due 06/18/202 | 540,000 | 735,515 | |||||||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 3.875%, due 02/08/22 | $ | 850,000 | 854,633 | ||||||||
Deutsche Telekom International Finance BV, 4.000%, due 01/19/15 | EUR | 580,000 | 826,500 | ||||||||
6.500%, due 04/08/22 | GBP | 170,000 | 329,748 | ||||||||
E.ON International Finance BV, 6.650%, due 04/30/381 | $ | 90,000 | 108,101 | ||||||||
EDP Finance BV, 3.250%, due 03/16/152 | EUR | 300,000 | 419,520 | ||||||||
Generali Finance BV, 4.750%, due 05/12/14 | 100,000 | 139,420 | |||||||||
Heineken NV, 2.125%, due 08/04/202 | 545,000 | 739,560 | |||||||||
Koninklijke KPN NV, 6.500%, due 01/15/16 | 550,000 | 836,823 | |||||||||
LYB International Finance BV, 5.250%, due 07/15/43 | $ | 255,000 | 256,336 | ||||||||
Nomura Europe Finance NV, 1.875%, due 05/29/182 | EUR | 500,000 | 673,914 | ||||||||
Petrobras Global Finance BV, 3.250%, due 04/01/192,4 | 250,000 | 346,934 | |||||||||
4.375%, due 05/20/23 | $ | 185,000 | 166,034 | ||||||||
5.625%, due 05/20/43 | 90,000 | 73,688 |
Face amount | Value | ||||||||||
Repsol International Finance BV, 4.250%, due 02/12/162 | EUR | 400,000 | $ | 584,638 | |||||||
4.750%, due 02/16/17 | 350,000 | 527,850 | |||||||||
Royal Bank of Scotland NV, 0.942%, due 03/09/153 | $ | 400,000 | 394,000 | ||||||||
Siemens Financieringsmaatschappij NV, 6.125%, due 09/14/663 | GBP | 260,000 | 466,059 | ||||||||
SPP Infrastructure Financing BV, 3.750%, due 07/18/202 | EUR | 205,000 | 290,724 | ||||||||
TenneT Holding BV, 6.655%, due 06/01/173,5 | 250,000 | 379,452 | |||||||||
Volkswagen International Finance NV, 2.125%, due 01/19/152 | 470,000 | 656,265 | |||||||||
Ziggo BV, 3.625%, due 03/27/201 | 530,000 | 729,695 | |||||||||
Total Netherlands corporate bonds | 12,460,766 | ||||||||||
Norway: 0.37% | |||||||||||
DNB Bank ASA, 3.200%, due 04/03/171 | $ | 450,000 | 470,452 | ||||||||
Statoil ASA, 3.125%, due 08/17/17 | 370,000 | 388,400 | |||||||||
4.800%, due 11/08/43 | 295,000 | 298,036 | |||||||||
Total Norway corporate bonds | 1,156,888 | ||||||||||
Portugal: 0.14% | |||||||||||
Caixa Geral de Depositos SA, 3.750%, due 01/18/18 | EUR | 300,000 | 424,007 | ||||||||
Qatar: 0.11% | |||||||||||
Qtel International Finance Ltd., 3.875%, due 01/31/281 | $ | 400,000 | 339,000 | ||||||||
South Korea: 0.24% | |||||||||||
GS Caltex Corp., 5.500%, due 10/15/152 | 700,000 | 747,089 | |||||||||
Spain: 1.11% | |||||||||||
Banco de Sabadell SA, 3.375%, due 01/23/18 | EUR | 200,000 | 286,020 | ||||||||
BBVA Senior Finance SAU, 3.250%, due 03/21/16 | 100,000 | 142,757 | |||||||||
BBVA US Senior SAU, 4.664%, due 10/09/15 | $ | 460,000 | 483,588 | ||||||||
Santander International Debt SAU, 4.625%, due 03/21/162 | EUR | 1,000,000 | 1,468,524 |
20
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
Spain—(Concluded) | |||||||||||
Telefonica Emisiones SAU, 4.710%, due 01/20/202 | EUR | 700,000 | $ | 1,067,247 | |||||||
Total Spain corporate bonds | 3,448,136 | ||||||||||
Sweden: 0.79% | |||||||||||
Svenska Handelsbanken AB, 5.125%, due 03/30/201 | $ | 700,000 | 781,725 | ||||||||
Swedbank Hypotek AB, 2.375%, due 04/05/171 | 890,000 | 919,815 | |||||||||
Telefonaktiebolaget LM Ericsson, 4.125%, due 05/15/22 | 440,000 | 427,667 | |||||||||
Vattenfall AB, 6.750%, due 01/31/19 | EUR | 200,000 | 338,433 | ||||||||
Total Sweden corporate bonds | 2,467,640 | ||||||||||
Turkey: 0.07% | |||||||||||
Coca-Cola Icecek AS, 4.750%, due 10/01/181 | $ | 200,000 | 203,667 | ||||||||
United Kingdom: 7.34% | |||||||||||
Abbey National Treasury Services PLC, 1.750%, due 01/15/182 | EUR | 540,000 | 744,200 | ||||||||
Anglian Water Services Financing PLC, 4.500%, due 02/22/262 | GBP | 200,000 | 317,776 | ||||||||
Arqiva Financing PLC, 4.040%, due 06/30/202 | 525,000 | 863,798 | |||||||||
4.882%, due 12/31/322 | 250,000 | 408,876 | |||||||||
Aviva PLC, 4.729%, due 11/28/143,5 | EUR | 445,000 | 615,401 | ||||||||
Barclays Bank PLC, 2.250%, due 05/10/171 | $ | 660,000 | 680,130 | ||||||||
5.750%, due 08/17/212 | GBP | 255,000 | 478,268 | ||||||||
6.625%, due 03/30/222 | EUR | 250,000 | 404,778 | ||||||||
BG Energy Capital PLC, 5.125%, due 12/07/172 | GBP | 220,000 | 403,727 | ||||||||
BP Capital Markets PLC, 1.375%, due 05/10/18 | $ | 410,000 | 397,925 | ||||||||
2.750%, due 05/10/23 | 210,000 | 191,750 | |||||||||
British Telecommunications PLC, 8.500%, due 12/07/162 | GBP | 350,000 | 683,218 | ||||||||
BUPA Finance PLC, 6.125%, due 09/16/203,5 | 250,000 | 432,203 | |||||||||
Centrica PLC, 5.375%, due 10/16/431 | $ | 200,000 | 197,328 |
Face amount | Value | ||||||||||
Diageo Capital PLC, 3.875%, due 04/29/43 | $ | 285,000 | $ | 245,139 | |||||||
Everything Everywhere Finance PLC, 4.375%, due 03/28/192 | GBP | 345,000 | 586,648 | ||||||||
GlaxoSmithKline Capital PLC, 1.500%, due 05/08/17 | $ | 470,000 | 470,210 | ||||||||
HSBC Holdings PLC, 5.100%, due 04/05/21 | 855,000 | 950,289 | |||||||||
6.500%, due 09/15/37 | 1,125,000 | 1,330,578 | |||||||||
Imperial Tobacco Finance PLC, 2.050%, due 02/11/181 | 620,000 | 613,069 | |||||||||
4.500%, due 07/05/182 | EUR | 800,000 | 1,221,082 | ||||||||
9.000%, due 02/17/222 | GBP | 170,000 | 372,355 | ||||||||
Liverpool Victoria Friendly Society Ltd., 6.500%, due 05/22/432,3 | 535,000 | 833,720 | |||||||||
Lloyds Bank PLC, 1.025%, due 07/11/163 | EUR | 265,000 | 357,269 | ||||||||
6.500%, due 03/24/202 | 260,000 | 414,313 | |||||||||
7.500%, due 04/15/24 | GBP | 340,000 | 710,796 | ||||||||
Lloyds Banking Group PLC, 5.875%, due 07/08/14 | EUR | 230,000 | 323,849 | ||||||||
National Express Group PLC, 6.250%, due 01/13/17 | GBP | 200,000 | 362,662 | ||||||||
National Grid Electricity Transmission PLC, 4.000%, due 06/08/272 | 330,000 | 523,704 | |||||||||
Northern Gas Networks Finance PLC, 5.875%, due 07/08/19 | 225,000 | 422,707 | |||||||||
Royal Bank of Scotland PLC, 5.375%, due 09/30/192 | EUR | 215,000 | 341,251 | ||||||||
6.934%, due 04/09/18 | 260,000 | 405,969 | |||||||||
Santander UK PLC, 5.000%, due 11/07/231 | $ | 200,000 | 200,744 | ||||||||
Scottish & Southern Energy PLC, 5.453%, due 10/01/153,5 | GBP | 172,000 | 294,496 | ||||||||
Sinopec Capital 2013 Ltd., 3.125%, due 04/24/231 | $ | 930,000 | 830,732 | ||||||||
Standard Chartered PLC, 4.000%, due 07/12/222,3 | 950,000 | 961,438 | |||||||||
Tesco Property Finance 4 PLC, 5.801%, due 10/13/402 | GBP | 248,102 | 439,957 | ||||||||
Thames Water Utilities Finance Ltd., 5.125%, due 09/28/37 | 400,000 | 697,448 | |||||||||
Wales & West Utilities Finance PLC, 5.125%, due 12/02/162 | 650,000 | 1,173,374 |
21
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
Western Power Distribution West Midlands PLC, 5.750%, due 04/16/322 | GBP | 200,000 | $ | 372,648 | |||||||
WPP PLC, 6.625%, due 05/12/162 | EUR | 405,000 | 628,937 | ||||||||
Total United Kingdom corporate bonds | 22,904,762 | ||||||||||
United States: 21.46% | |||||||||||
21st Century Fox America, Inc., 6.200%, due 12/15/34 | $ | 665,000 | 736,132 | ||||||||
ABB Finance USA, Inc., 2.875%, due 05/08/22 | 415,000 | 392,146 | |||||||||
AbbVie, Inc., 2.900%, due 11/06/22 | 510,000 | 476,674 | |||||||||
4.400%, due 11/06/42 | 305,000 | 284,466 | |||||||||
Alcoa, Inc., 6.150%, due 08/15/20 | 530,000 | 571,184 | |||||||||
Allstate Corp., 5.750%, due 08/15/533 | 270,000 | 272,025 | |||||||||
Alltel Corp., 7.875%, due 07/01/32 | 415,000 | 540,295 | |||||||||
Altria Group, Inc., 4.250%, due 08/09/42 | 1,170,000 | 998,500 | |||||||||
American Express Credit Corp., 1.300%, due 07/29/16 | 275,000 | 277,128 | |||||||||
American International Group, Inc., 3.375%, due 08/15/20 | 545,000 | 548,170 | |||||||||
American Tower Corp., 3.400%, due 02/15/19 | 160,000 | 162,889 | |||||||||
Anadarko Petroleum Corp., 6.375%, due 09/15/17 | 975,000 | 1,119,367 | |||||||||
Apache Corp., 4.750%, due 04/15/43 | 705,000 | 683,812 | |||||||||
Apple, Inc., 3.850%, due 05/04/43 | 170,000 | 142,022 | |||||||||
AT&T, Inc., 2.500%, due 03/15/23 | EUR | 310,000 | 412,193 | ||||||||
5.550%, due 08/15/41 | $ | 515,000 | 522,653 | ||||||||
Bank of America Corp., 1.500%, due 10/09/15 | 2,270,000 | 2,292,856 | |||||||||
5.875%, due 02/07/42 | 285,000 | 325,952 | |||||||||
Bank of New York Mellon Corp., 1.350%, due 03/06/18 | 1,065,000 | 1,042,592 | |||||||||
Baxter International, Inc., 3.200%, due 06/15/23 | 655,000 | 625,754 | |||||||||
BB&T Corp., 1.600%, due 08/15/17 | 280,000 | 277,501 |
Face amount | Value | ||||||||||
Berkshire Hathaway Finance Corp., 1.300%, due 05/15/18 | $ | 245,000 | $ | 239,410 | |||||||
Boston Scientific Corp., 6.000%, due 01/15/20 | 510,000 | 585,496 | |||||||||
Burlington Northern Santa Fe LLC, 3.450%, due 09/15/21 | 715,000 | 706,123 | |||||||||
Capital One Financial Corp., 1.000%, due 11/06/15 | 795,000 | 794,653 | |||||||||
Chevron Corp., 2.355%, due 12/05/22 | 225,000 | 204,657 | |||||||||
2.427%, due 06/24/20 | 215,000 | 209,208 | |||||||||
Citigroup, Inc., 0.974%, due 05/31/173 | EUR | 565,000 | 755,896 | ||||||||
4.050%, due 07/30/22 | $ | 410,000 | 405,431 | ||||||||
5.500%, due 02/15/17 | 425,000 | 468,280 | |||||||||
6.000%, due 08/15/17 | 1,230,000 | 1,401,905 | |||||||||
Coca-Cola Co., 1.800%, due 09/01/16 | 525,000 | 537,611 | |||||||||
Comcast Corp., 5.700%, due 07/01/19 | 1,005,000 | 1,161,545 | |||||||||
ConocoPhillips, 4.600%, due 01/15/15 | 525,000 | 547,247 | |||||||||
DIRECTV Holdings LLC, 5.000%, due 03/01/21 | 840,000 | 882,428 | |||||||||
Duke Energy Corp., 3.050%, due 08/15/22 | 510,000 | 484,422 | |||||||||
Energy Transfer Partners LP, 6.050%, due 06/01/41 | 540,000 | 553,515 | |||||||||
Enterprise Products Operating LLC, 4.850%, due 03/15/44 | 410,000 | 385,565 | |||||||||
5.200%, due 09/01/20 | 285,000 | 317,027 | |||||||||
ERAC USA Finance LLC, 5.625%, due 03/15/421 | 400,000 | 408,540 | |||||||||
Ford Motor Credit Co. LLC, 3.000%, due 06/12/17 | 1,170,000 | 1,216,002 | |||||||||
Freeport-McMoRan Copper & Gold, Inc., 3.100%, due 03/15/20 | 350,000 | 340,036 | |||||||||
3.875%, due 03/15/23 | 715,000 | 676,136 | |||||||||
General Electric Capital Corp., 1.000%, due 12/11/15 | 765,000 | 771,129 | |||||||||
4.375%, due 09/16/20 | 525,000 | 568,989 | |||||||||
Series A, 6.750%, due 03/15/32 | 1,200,000 | 1,485,966 | |||||||||
General Electric Co., 4.125%, due 10/09/42 | 245,000 | 226,345 | |||||||||
Georgia Power Co., 0.750%, due 08/10/15 | 375,000 | 375,693 | |||||||||
5.400%, due 06/01/40 | 380,000 | 396,713 | |||||||||
Glencore Funding LLC, 2.500%, due 01/15/191 | 425,000 | 411,535 |
22
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Goldman Sachs Group, Inc., 3.250%, due 02/01/232 | EUR | 640,000 | $ | 888,425 | |||||||
4.375%, due 03/16/172 | 900,000 | 1,344,275 | |||||||||
Halliburton Co., 4.750%, due 08/01/43 | $ | 495,000 | 486,114 | ||||||||
Hartford Financial Services Group, Inc., 4.300%, due 04/15/43 | 265,000 | 233,114 | |||||||||
5.500%, due 03/30/20 | 275,000 | 309,089 | |||||||||
Hewlett-Packard Co., 2.625%, due 12/09/14 | 1,045,000 | 1,062,363 | |||||||||
International Business Machines Corp., 3.375%, due 08/01/23 | 525,000 | 511,510 | |||||||||
JPMorgan Chase & Co., 1.800%, due 01/25/18 | 475,000 | 470,830 | |||||||||
3.200%, due 01/25/23 | 2,460,000 | 2,332,144 | |||||||||
Kellogg Co., 1.875%, due 11/17/16 | 385,000 | 391,607 | |||||||||
Kinder Morgan Energy Partners LP, 2.650%, due 02/01/19 | 145,000 | 143,392 | |||||||||
5.000%, due 03/01/43 | 485,000 | 447,632 | |||||||||
Kraft Foods Group, Inc., 5.000%, due 06/04/42 | 400,000 | 394,317 | |||||||||
Laboratory Corp. of America Holdings, 2.500%, due 11/01/18 | 220,000 | 216,975 | |||||||||
Lincoln National Corp., 4.200%, due 03/15/22 | 680,000 | 692,934 | |||||||||
Lorillard Tobacco Co., 6.875%, due 05/01/204 | 110,000 | 126,948 | |||||||||
Merck & Co., Inc., 6.550%, due 09/15/37 | 305,000 | 380,296 | |||||||||
MetLife, Inc., 4.875%, due 11/13/43 | 580,000 | 569,235 | |||||||||
Metropolitan Life Global Funding I, 2.375%, due 09/30/192 | EUR | 1,053,000 | 1,471,578 | ||||||||
Microsoft Corp., 2.625%, due 05/02/33 | 400,000 | 499,720 | |||||||||
3.500%, due 11/15/42 | $ | 395,000 | 326,224 | ||||||||
Mondelez International, Inc., 2.375%, due 01/26/21 | EUR | 730,000 | 992,053 | ||||||||
5.375%, due 02/10/20 | $ | 414,000 | 467,568 | ||||||||
Monongahela Power Co., 5.400%, due 12/15/431 | 220,000 | 228,506 |
Face amount | Value | ||||||||||
Morgan Stanley, 2.125%, due 04/25/18 | $ | 330,000 | $ | 327,154 | |||||||
4.750%, due 03/22/17 | 1,040,000 | 1,134,970 | |||||||||
6.375%, due 07/24/42 | 220,000 | 257,682 | |||||||||
Mosaic Co., 5.450%, due 11/15/33 | 250,000 | 254,712 | |||||||||
Motorola Solutions, Inc., 6.000%, due 11/15/17 | 310,000 | 352,611 | |||||||||
Mylan, Inc., 2.600%, due 06/24/181 | 130,000 | 130,075 | |||||||||
NBCUniversal Media LLC, 5.150%, due 04/30/20 | 620,000 | 693,002 | |||||||||
NuStar Logistics LP, 4.800%, due 09/01/20 | 50,000 | 47,118 | |||||||||
Oncor Electric Delivery Co. LLC, 7.000%, due 05/01/32 | 246,000 | 299,715 | |||||||||
Oracle Corp., 2.250%, due 01/10/21 | EUR | 205,000 | 283,256 | ||||||||
PacifiCorp, 6.000%, due 01/15/39 | $ | 475,000 | 550,270 | ||||||||
Pemex Project Funding Master Trust, 5.500%, due 02/24/252 | EUR | 295,000 | 462,948 | ||||||||
PepsiCo, Inc., 1.250%, due 08/13/17 | $ | 280,000 | 277,000 | ||||||||
Philip Morris International, Inc., 1.750%, due 03/19/20 | EUR | 450,000 | 604,703 | ||||||||
PNC Funding Corp., 2.700%, due 09/19/16 | $ | 375,000 | 391,149 | ||||||||
PPL Capital Funding, Inc., 4.700%, due 06/01/43 | 255,000 | 229,699 | |||||||||
Prudential Financial, Inc., 4.500%, due 11/15/20 | 950,000 | 1,019,152 | |||||||||
QVC, Inc., 4.375%, due 03/15/23 | 250,000 | 233,735 | |||||||||
Republic Services, Inc., 5.250%, due 11/15/21 | 875,000 | 953,964 | |||||||||
Reynolds American, Inc., 6.150%, due 09/15/43 | 430,000 | 464,337 | |||||||||
6.750%, due 06/15/17 | 610,000 | 698,243 | |||||||||
SABMiller Holdings, Inc., 1.875%, due 01/20/202 | EUR | 500,000 | 676,644 | ||||||||
Sempra Energy, 6.000%, due 10/15/39 | $ | 415,000 | 455,862 | ||||||||
SLM Corp., 6.250%, due 01/25/16 | 650,000 | 702,000 | |||||||||
Southwestern Electric Power Co., 6.200%, due 03/15/40 | 555,000 | 604,871 | |||||||||
SunTrust Banks, Inc., 2.350%, due 11/01/18 | 320,000 | 318,305 | |||||||||
Swiss Re Treasury US Corp., 4.250%, due 12/06/421 | 360,000 | 309,363 |
23
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Thermo Fisher Scientific, Inc., 4.150%, due 02/01/24 | $ | 80,000 | $ | 79,240 | |||||||
5.300%, due 02/01/44 | 80,000 | 80,894 | |||||||||
Time Warner Cable, Inc., 5.000%, due 02/01/20 | 990,000 | 1,005,205 | |||||||||
Time Warner, Inc., 5.350%, due 12/15/43 | 290,000 | 293,692 | |||||||||
Travelers Cos., Inc., 4.600%, due 08/01/43 | 110,000 | 107,476 | |||||||||
Union Pacific Corp., 4.750%, due 12/15/43 | 95,000 | 92,541 | |||||||||
US Bancorp, 1.650%, due 05/15/17 | 515,000 | 516,083 | |||||||||
Valero Energy Corp., 6.625%, due 06/15/37 | 515,000 | 587,478 | |||||||||
Verizon Communications, Inc., 2.500%, due 09/15/16 | 790,000 | 816,888 | |||||||||
4.500%, due 09/15/20 | 410,000 | 438,932 | |||||||||
6.550%, due 09/15/43 | 980,000 | 1,146,560 | |||||||||
Viacom, Inc., 2.500%, due 09/01/18 | 95,000 | 95,766 | |||||||||
Virginia Electric and Power Co., 6.000%, due 05/15/37 | 265,000 | 309,574 | |||||||||
Wachovia Corp., 5.750%, due 02/01/18 | 1,330,000 | 1,533,594 | |||||||||
Waste Management, Inc., 6.125%, due 11/30/39 | 320,000 | 365,597 | |||||||||
WEA Finance LLC, 5.750%, due 09/02/151 | 350,000 | 377,519 | |||||||||
WellPoint, Inc., 5.100%, due 01/15/444 | 200,000 | 198,329 | |||||||||
WM Wrigley Jr Co., 2.000%, due 10/20/171 | 80,000 | 79,778 | |||||||||
Xcel Energy, Inc., 4.700%, due 05/15/20 | 240,000 | 263,394 | |||||||||
4.800%, due 09/15/41 | 230,000 | 223,971 | |||||||||
Yum! Brands, Inc., 5.350%, due 11/01/43 | 460,000 | 446,958 | |||||||||
Total United States corporate bonds | 67,000,672 | ||||||||||
Virgin Islands, British: 0.07% | |||||||||||
CNPC General Capital Ltd., 3.400%, due 04/16/231 | 250,000 | 229,021 | |||||||||
Total corporate bonds (cost $146,726,340) | 150,071,394 |
Face amount | Value | ||||||||||
Collateralized debt obligation: 0.00%6 | |||||||||||
Cayman Islands: 0.00%6 | |||||||||||
LNR CDO Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/437 (cost $8,111,048) | $ | 8,000,000 | $ | 8,000 | |||||||
Mortgage & agency debt security: 0.02% | |||||||||||
United States: 0.02% | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11, 2.765%, due 04/25/353 (cost $104,036) | 849,606 | 51,676 | |||||||||
Non-US government obligations: 12.78% | |||||||||||
Australia: 5.76% | |||||||||||
Government of Australia, 4.250%, due 07/21/17 | AUD | 6,482,000 | 6,012,864 | ||||||||
4.500%, due 04/15/20 | 6,376,000 | 5,954,616 | |||||||||
4.750%, due 06/15/16 | 6,440,000 | 6,018,009 | |||||||||
17,985,489 | |||||||||||
Italy: 7.02% | |||||||||||
Buoni Poliennali Del Tesoro, 3.000%, due 04/01/14 | EUR | 1,195,000 | 1,653,056 | ||||||||
3.500%, due 11/01/17 | 4,728,000 | 6,787,709 | |||||||||
3.750%, due 08/01/16 | 4,630,000 | 6,705,839 | |||||||||
4.750%, due 08/01/232 | 4,604,000 | 6,763,656 | |||||||||
21,910,260 | |||||||||||
Total Non-US government obligations (cost $38,795,845) | 39,895,749 | ||||||||||
Supranational bonds: 0.55% | |||||||||||
Asian Development Bank, 1.000%, due 12/15/15 | 250,000 | 415,341 | |||||||||
European Investment Bank, 3.000%, due 12/07/15 | 275,000 | 473,789 | |||||||||
Inter-American Development Bank, 0.625%, due 12/15/15 | 275,000 | 453,428 | |||||||||
International Finance Corp., 0.625%, due 12/15/15 | 225,000 | 371,080 | |||||||||
Total supranational bonds (cost $1,622,717) | 1,713,638 | ||||||||||
Total bonds (cost $195,359,986) | 191,740,457 |
24
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face Amount | Value | ||||||||||
Short-term investments: 22.37% | |||||||||||
US government obligations: 19.99% | |||||||||||
US Treasury Bills 0.105%, due 05/29/148 | $ | 31,300,000 | $ | 31,292,645 | |||||||
0.098%, due 05/01/148 (cost $62,402,321) | 31,126,000 | 31,120,584 | |||||||||
62,413,229 | |||||||||||
Shares | |||||||||||
Investment company: 2.38% | |||||||||||
UBS Cash Management Prime Relationship Fund9 (cost $7,419,813) | 7,419,813 | 7,419,813 | |||||||||
Total short-term investments (cost $69,822,134) | 69,833,042 | ||||||||||
Number of contracts | |||||||||||
Options purchased: 1.19% | |||||||||||
Call options: 1.19% | |||||||||||
E-mini S&P 500 Index, strike @ USD 1,750, expires March 2014 | 87 | 940,035 | |||||||||
EURO STOXX 50 Index, strike @ EUR 3,000, expires March 2014 | 382 | 844,506 | |||||||||
FTSE 100 Index, strike @ GBP 7,000, expires March 2014 | 155 | 85,985 | |||||||||
Hong Kong Hang Seng Index, strike @ HKD 23,600, expires March 2014 | 219 | 749,836 | |||||||||
S&P 500 Index, strike @ USD 1,825, expires March 2014 | 210 | 1,092,000 |
Notional Amount | Value | ||||||||||
Options purchased on credit default swaps on credit indicies7: 0.00%6 | |||||||||||
Expiring 03/19/14. If exercised the payment from the counterparty will be received upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of referenced obligation specified in the CDX.NA.IG Series 21 Index and the Fund pays quarterly fixed rate of net 1.000% per annum. Underlying credit default swap terminating 12/20/18. European style. Counterparty: GSI | $ | 3,765,000 | $ | 2,820 | |||||||
Total options purchased (cost $2,346,077) | 3,715,182 | ||||||||||
Shares | |||||||||||
Investment of cash collateral from securities loaned: 0.37% | |||||||||||
UBS Private Money Market Fund LLC9 (cost $1,158,890) | 1,158,890 | 1,158,890 | |||||||||
Total investments: 85.35% (cost $268,687,087) | 266,447,571 | ||||||||||
Cash and other assets, less liabilities: 14.65% | 45,741,624 | ||||||||||
Net assets: 100.00% | $ | 312,189,195 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized depreciation consisted of:
Gross unrealized appreciation | $ | 8,903,800 | |||||
Gross unrealized depreciation | (11,143,316 | ) | |||||
Net unrealized depreciation of investments | $ | (2,239,516 | ) |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 58. Portfolio footnotes begin on page 29.
25
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
BB | CHF | 20,860,000 | USD | 23,122,925 | 03/11/14 | $ | (274,162 | ) | |||||||||||
BB | GBP | 16,290,000 | USD | 26,634,997 | 03/11/14 | (327,869 | ) | ||||||||||||
BB | USD | 5,967,778 | NOK | 36,630,000 | 03/11/14 | 56,593 | |||||||||||||
CIBC | EUR | 47,665,000 | USD | 64,787,698 | 03/11/14 | (783,613 | ) | ||||||||||||
HSBC | USD | 5,997,187 | PLN | 18,635,000 | 03/11/14 | 145,801 | |||||||||||||
JPMCB | AUD | 35,630,000 | USD | 31,980,419 | 03/11/14 | 304,720 | |||||||||||||
JPMCB | CLP | 3,139,000,000 | USD | 5,821,588 | 03/11/14 | (107,619 | ) | ||||||||||||
JPMCB | HKD | 12,495,000 | USD | 1,611,889 | 03/11/14 | 406 | |||||||||||||
JPMCB | USD | 2,083,075 | EUR | 1,525,000 | 03/11/14 | 14,821 | |||||||||||||
JPMCB | USD | 1,086,937 | GBP | 665,000 | 03/11/14 | 13,757 | |||||||||||||
JPMCB | USD | 2,175,960 | JPY | 222,800,000 | 03/11/14 | (59,597 | ) | ||||||||||||
JPMCB | USD | 6,242,504 | KRW | 6,662,000,000 | 03/11/14 | 43,406 | |||||||||||||
JPMCB | USD | 5,099,783 | MXN | 67,540,000 | 03/11/14 | 45,485 | |||||||||||||
JPMCB | USD | 5,109,966 | PHP | 223,050,000 | 03/11/14 | (79,405 | ) | ||||||||||||
JPMCB | USD | 5,845,980 | ZAR | 61,670,000 | 03/11/14 | (23,408 | ) | ||||||||||||
MSCI | AUD | 2,150,000 | USD | 1,914,154 | 03/11/14 | 2,766 | |||||||||||||
SSB | CAD | 16,190,000 | USD | 15,152,082 | 03/11/14 | (64,275 | ) | ||||||||||||
SSB | NZD | 38,350,000 | USD | 31,202,902 | 03/11/14 | (185,103 | ) | ||||||||||||
SSB | SEK | 43,410,000 | USD | 6,657,924 | 03/11/14 | (83,565 | ) | ||||||||||||
SSB | USD | 1,602,978 | CHF | 1,420,000 | 03/11/14 | (10,272 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (1,371,133 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
2 Year US Treasury Notes, 143 contracts (USD) | March 2014 | $ | (31,488,878 | ) | $ | (31,433,188 | ) | $ | 55,690 | ||||||||||
5 Year US Treasury Notes, 260 contracts (USD) | March 2014 | (31,426,418 | ) | (31,021,250 | ) | 405,168 | |||||||||||||
10 Year US Treasury Notes, 121 contracts (USD) | March 2014 | (15,176,962 | ) | (14,888,672 | ) | 288,290 | |||||||||||||
Index futures buy contracts: | |||||||||||||||||||
EURO STOXX 50 Index, 602 contracts (EUR) | March 2014 | 25,125,167 | 25,739,568 | 614,401 | |||||||||||||||
FTSE 100 Index, 114 contracts (GBP) | March 2014 | 12,636,069 | 12,643,427 | 7,358 | |||||||||||||||
FTSE MIB Index, 86 contracts (EUR) | March 2014 | 10,778,001 | 11,254,258 | 476,257 | |||||||||||||||
MSCI Taiwan Index, 165 contracts (USD) | January 2014 | 4,886,442 | 5,002,800 | 116,358 | |||||||||||||||
S&P Toronto Stock Exchange 60 Index, 106 contracts (CAD) | March 2014 | 14,980,865 | 15,584,919 | 604,054 | |||||||||||||||
TOPIX Index, 40 contracts (JPY) | March 2014 | 4,767,652 | 4,947,298 | 179,646 | |||||||||||||||
Index futures sell contracts: | |||||||||||||||||||
CAC 40 Euro Index, 187 contracts (EUR) | January 2014 | (10,535,151 | ) | (11,058,145 | ) | (522,994 | ) | ||||||||||||
SPI 200 Index, 74 contracts (AUD) | March 2014 | (8,335,058 | ) | (8,784,618 | ) | (449,560 | ) | ||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
Australian Government 3 Year Bond, 397 contracts (AUD) | March 2014 | 38,403,120 | 38,477,449 | 74,329 | |||||||||||||||
Euro-Bobl, 14 contracts (EUR) | March 2014 | 2,407,631 | 2,396,497 | (11,134 | ) | ||||||||||||||
Long Gilt, 84 contracts (GBP) | March 2014 | 15,139,356 | 14,822,475 | (316,881 | ) | ||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||
Euro-Bund, 75 contracts (EUR) | March 2014 | (14,513,125 | ) | (14,359,213 | ) | 153,912 | |||||||||||||
Long Gilt, 11 contracts (GBP) | March 2014 | (1,975,573 | ) | (1,941,038 | ) | 34,535 | |||||||||||||
Net unrealized appreciation on futures contracts | $ | 1,709,429 |
26
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund10 | Payments received by the Fund10 | Upfront payments | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
DB | EUR | 32,600,000 | 11/01/21 | 2.698 | % | 6 month EURIBOR | $ | — | $ | (3,054,018 | ) | $ | (3,054,018 | ) | |||||||||||||||||
GSI | EUR | 31,200,000 | 06/21/21 | 6 month EURIBOR | 3.325 | % | — | 5,490,371 | 5,490,371 | ||||||||||||||||||||||
$ | — | $ | 2,436,353 | $ | 2,436,353 |
Credit default swaps on corporate issues—buy protection11
Counterparty | Referenced obligation12 | Notional amount | Termination date | Payments made by the Fund10 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
BB | Next PLC bond, 5.375%, due 10/26/21 | EUR | 300,000 | 03/20/18 | 1.000 | % | $ | (2,745 | ) | $ | (10,920 | ) | $ | (13,665 | ) | ||||||||||||||||
CITI | Imperial Tobacco Group PLC bond, 6.250%, due 12/04/18 | EUR | 1,020,000 | 03/20/18 | 1.000 | (2,131 | ) | (29,180 | ) | (31,311 | ) | ||||||||||||||||||||
GSI | Gas Natural Capital Markets SA bond, 4.500%, due 01/27/20 | EUR | 635,000 | 09/20/18 | 1.000 | (38,870 | ) | (4,916 | ) | (43,786 | ) | ||||||||||||||||||||
GSI | Iberdrola Finanzas SAU bond, 3.500%, due 06/22/15 | EUR | 635,000 | 09/20/18 | 1.000 | (38,870 | ) | (5,509 | ) | (44,379 | ) | ||||||||||||||||||||
GSI | Solvay SA bond, 4.625%, due 06/27/18 | EUR | 590,000 | 09/20/18 | 1.000 | (7,464 | ) | (14,652 | ) | (22,116 | ) | ||||||||||||||||||||
JPMCB | Bayer AG bond, 5.625%, due 05/23/18 | EUR | 585,000 | 03/20/18 | 1.000 | 10,387 | (22,175 | ) | (11,788 | ) | |||||||||||||||||||||
JPMCB | Holcim Ltd bond, 4.375%, due 12/09/14 | EUR | 630,000 | 06/20/18 | 1.000 | (14,240 | ) | (6,451 | ) | (20,691 | ) | ||||||||||||||||||||
JPMCB | HSBC Bank PLC bond, 4.000%, due 01/15/21 | EUR | 305,000 | 09/20/18 | 1.000 | 363 | (8,268 | ) | (7,905 | ) | |||||||||||||||||||||
JPMCB | Deutsche Bank AG bond, 5.125%, due 08/31/17 | EUR | 325,000 | 03/20/20 | 1.000 | 733 | (435 | ) | 298 | ||||||||||||||||||||||
$ | (92,837 | ) | $ | (102,506 | ) | $ | (195,343 | ) |
27
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
Credit default swaps on corporate issues—sell protection13
Counterparty | Referenced obligation12 | Notional amount | Termination date | Payments received by the Fund10 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | Credit spread14 | |||||||||||||||||||||||||||
BB | RWE AG bond, 5.750%, due 02/14/33 | EUR | 595,000 | 06/20/17 | 1.000 | % | $ | 1,840 | $ | 14,392 | $ | 16,232 | 0.499 | % | |||||||||||||||||||||
JPMCB | Linde Finance BV bond, 5.875%, due 04/24/23 | EUR | 585,000 | 03/20/18 | 1.000 | (11,630 | ) | 24,199 | 12,569 | 0.289 | |||||||||||||||||||||||||
JPMCB | Standard Chartered Bank PLC bond, 0.782%, due 10/15/14 | EUR | 305,000 | 09/20/18 | 1.000 | 8,537 | 804 | 9,341 | 0.965 | ||||||||||||||||||||||||||
JPMCB | Barrick Gold Corp. bond, 5.800%, due 11/15/34 | USD | 415,000 | 12/20/18 | 1.000 | 15,157 | (17,157 | ) | (2,000 | ) | 1.891 | ||||||||||||||||||||||||
JPMCB | Barclays Bank PLC bond, 1.788%, due 10/27/15 | EUR | 325,000 | 03/20/20 | 1.000 | 6,006 | (2,058 | ) | 3,948 | 1.084 | |||||||||||||||||||||||||
$ | 19,910 | $ | 20,180 | $ | 40,090 |
Centrally cleared credit default swap on credit indices—buy protection11
Referenced index12 | Notional amount | Termination date | Payments made by the Fund10 | Value | Unrealized depreciation | ||||||||||||||||||
CDX.NA.IG.Series 20 Index | USD | 63,200,000 | 06/20/18 | 1.000 | % | $ | (1,277,535 | ) | $ | (1,069,302 | ) |
Centrally cleared credit default swap on credit indices—sell protection13
Referenced index12 | Notional amount | Termination date | Payments received by the Fund10 | Value | Unrealized appreciation | Credit spread14 | |||||||||||||||||||||
CDX.NA.HY.Series 20 Index | USD | 61,700,000 | 06/20/18 | 5.000 | % | $ | 5,964,179 | $ | 2,067,196 | 2.662 | % |
Options written
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | — | $ | — | ||||||||
Options written | 447 | 756,516 | |||||||||
Options terminated in closing purchase transactions | (447 | ) | (756,516 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | — | $ | — |
28
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | — | $ | 150,071,394 | $ | — | $ | 150,071,394 | |||||||||||
Collateralized debt obligation | — | — | 8,000 | 8,000 | |||||||||||||||
Mortgage & agency debt security | — | 51,676 | — | 51,676 | |||||||||||||||
Non-US government obligations | — | 39,895,749 | — | 39,895,749 | |||||||||||||||
Supranational bonds | — | 1,713,638 | — | 1,713,638 | |||||||||||||||
Short-term investments | — | 69,833,042 | — | 69,833,042 | |||||||||||||||
Options purchased | 3,712,362 | 2,820 | — | 3,715,182 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 1,158,890 | — | 1,158,890 | |||||||||||||||
Forward foreign currency contracts, net | — | (1,371,133 | ) | — | (1,371,133 | ) | |||||||||||||
Futures contracts, net | 1,709,429 | — | — | 1,709,429 | |||||||||||||||
Swap agreements, net | — | 7,040,671 | — | 7,040,671 | |||||||||||||||
Total | $ | 5,421,791 | $ | 268,396,747 | $ | 8,000 | $ | 273,826,538 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
Collateralized debt obligation | Total | ||||||||||
Assets | |||||||||||
Beginning balance | $ | 8,000 | $ | 8,000 | |||||||
Purchases | — | 0 | |||||||||
Issuances | — | 0 | |||||||||
Sales | — | 0 | |||||||||
Accrued discounts (premiums) | (1,903 | ) | (1,903 | ) | |||||||
Total realized gain | — | 0 | |||||||||
Change in net unrealized appreciation/depreciation | 1,903 | 1,903 | |||||||||
Transfers into Level 3 | — | 0 | |||||||||
Transfers out of Level 3 | — | 0 | |||||||||
Ending balance | $ | 8,000 | $ | 8,000 |
The change in net unrealized appreciation/depreciation relating to the Level 3 investment held at December 31, 2013 was $1,903.
Portfolio footnotes
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 December 31, 2013, the value of these securities amounted to $13,810,843 or 4.42% of net assets.
29
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2013 (unaudited)
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 December 31, 2013, the value of these securities amounted to $46,591,784 or 14.92% of net assets.
3 Variable or floating rate security—The interest rate shown is the current rate as of December 31, 2013 and changes periodically.
4 Security, or portion thereof, was on loan at December 31, 2013.
5 Perpetual bond security. The maturity date reflects the next call date.
6 Amount represents less than 0.005%.
7 Illiquid investment. At December 31, 2013, the value of these investments amounted to $10,280 or 0.00% of net assets.
8 Interest rate is the discount rate at the date of purchase.
9 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 124,331,234 | $ | 76,175,965 | $ | 193,087,386 | $ | 7,419,813 | $ | 7,066 | |||||||||||||
UBS Private Money Market Fund LLCa | 851,700 | 8,421,260 | 8,114,070 | 1,158,890 | 45 | ||||||||||||||||||
$ | 125,182,934 | $ | 84,597,225 | $ | 201,201,456 | $ | 8,578,703 | $ | 7,111 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
10 Payments made or received are based on the notional amount.
11 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.
12 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
13 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.
14 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.
See accompanying notes to financial statements
30
UBS Global Allocation Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Global Allocation Fund (the "Fund") returned 8.61% (Class A shares returned 2.63% after the deduction of the maximum sales charge), while Class Y shares returned 8.76%. The Fund's benchmark, the GSMI Mutual Fund Index (the "Index"), returned 10.64% during the same time period. For comparison purposes, the Russell 3000 Index returned 17.09%, the MSCI World Free Index (net) returned 16.83%, and the Citigroup World Government Bond Index returned 1.77% 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 33; 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 produced a positive absolute return during the reporting period, but lagged the Index. Performance was primarily due to our market allocation strategy and currency positioning.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, the utilization of currency forwards had a direct negative impact on Fund performance. We used a variety of equity and fixed income options and futures to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, contributed to performance during the reporting period.
Portfolio performance summary1
What worked
• Overall, the Fund's fixed income positioning contributed to performance.
– The Fund maintained an underweight to fixed income during the reporting period. This was beneficial for performance, as the overall fixed income market performed poorly given the Federal Reserve Board's (the "Fed") indications that it would begin tapering its asset purchase program.
– We tactically managed the Fund's duration and were generally short versus the Index. This was beneficial for performance, as interest rates moved higher during the reporting period.
• Several of the Fund's currency strategies were positive for performance.
– A short position in the Canadian dollar versus the US dollar contributed to results.
– Our long position in the Polish zloty was beneficial during the reporting period.
– The Fund's net long position in the euro was additive for performance.
• The Fund's positioning in the equity market was beneficial in a number of cases.
– An overweight to global equities was positive for performance, as it was the best performing asset class during the six months.
– US large-cap core/value and US large-cap growth security selection was additive for results.
1 For a detailed commentary on the market environment in general during the reporting period, see pages 3-4.
31
UBS Global Allocation Fund
What didn't work
• Overall, currency strategies were negative for performance. A short position in the New Zealand dollar versus the US dollar was the largest detractor from results during the six months.
• Certain of the Fund's fixed income exposures detracted from results. In particular, while our allocation to high yield corporate bonds was additive for absolute results, the bonds lagged the Index on a relative basis.
• A bias toward non-US equities versus US equities detracted from results.
– Our preference for international developed equities, largely in Europe, over US equities was not rewarded, as the former lagged their US counterparts.
– An overweight to emerging market equities was negative for Fund performance. They generated weak results, as growth decelerated in many developing countries, commodity prices generally declined, and investor demand was often poor.
– Our international core equity security selection was a drag on performance.
• Overall, the Fund's positioning among risk assets was negative for performance.
– We tactically adjusted the Fund's allocation to equities during the six months. When the reporting period began, 64% of the portfolio was allocated to equities, versus 65% for the benchmark. While this exposure fluctuated during the reporting period, we ended with a 66% allocation to equities.
– We began the reporting period with a 20% allocation to fixed income and an elevated cash exposure of 16%. This higher than normal cash position was due to our reducing the Fund's fixed income exposure in May and June 2013, prior to the beginning of the reporting period, in the wake of the Fed's comments about tapering its asset purchases. As the reporting period progressed, we redeployed our cash position into the fixed income and equity markets.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
32
UBS Global Allocation Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 8.61 | % | 10.30 | % | 11.60 | % | 4.78 | % | |||||||||||
Class C2 | 8.06 | 9.31 | 10.71 | 3.96 | |||||||||||||||
Class Y3 | 8.76 | 10.53 | 11.91 | 5.08 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 2.63 | % | 4.25 | % | 10.34 | % | 4.19 | % | |||||||||||
Class C2 | 7.06 | 8.31 | 10.71 | 3.96 | |||||||||||||||
Russell 3000 Index4 | 17.09 | % | 33.55 | % | 18.71 | % | 7.88 | % | |||||||||||
MSCI World Free Index (net)5 | 16.83 | 26.68 | 15.02 | 6.98 | |||||||||||||||
Citigroup World Government Bond Index6 | 1.77 | (4.00 | ) | 2.28 | 4.15 | ||||||||||||||
GSMI Mutual Fund Index7 | 10.64 | 13.25 | 11.46 | 6.55 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.36% and 1.36%; Class C—2.14% and 2.14%; Class Y—1.06% and 1.06%. 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 period ending October 28, 2014, do not exceed 1.35% for Class A 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 distribution and service 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.
3 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 distribution and service fees.
4 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.
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. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. 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 Citigroup World Government Bond Index is an unmanaged market capitalization-weighted index designed to measure the performance of fixed-rate, local currency, investment-grade sovereign bonds with a one-year minimum maturity. Investors should note that indices do not reflect the deduction of fees and expenses.
7 The GSMI Mutual Fund Index is an unmanaged index compiled by the Advisor and is a composite of five indexes compiled by independent data providers: 65% MSCI All Country World Index (net), 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 US 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. 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://globalam-us.ubs.com/corpweb/performance.do.
33
UBS Global Allocation Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Apple, Inc. | 0.8 | % | |||||
Novartis AG | 0.8 | ||||||
Nestle SA | 0.7 | ||||||
Bayer AG | 0.7 | ||||||
Toyota Motor Corp. | 0.7 | ||||||
BP PLC | 0.6 | ||||||
Carrefour SA | 0.5 | ||||||
Imperial Tobacco Group PLC | 0.5 | ||||||
Check Point Software Technologies Ltd. | 0.5 | ||||||
Vodafone Group PLC | 0.5 | ||||||
Total | 6.3 | % |
Country exposure by issuer, top five (unaudited)2
As of December 31, 2013
Percentage of net assets | |||||||
United States | 20.5 | % | |||||
United Kingdom | 6.4 | ||||||
Japan | 6.0 | ||||||
Germany | 3.9 | ||||||
Switzerland | 2.4 | ||||||
Total | 39.2 | % |
Top ten long-term fixed income holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Government of Australia, 5.750%, due 05/15/21 | 1.2 | % | |||||
Bundesrepublik Deutschland, 3.250%, due 07/04/21 | 0.9 | ||||||
US Treasury Notes, 0.125%, due 12/31/14 | 0.8 | ||||||
Government of Finland, 4.375%, due 07/04/19 | 0.8 | ||||||
US Treasury Notes, 0.750%, due 12/31/17 | 0.6 | ||||||
Kingdom of Sweden, 5.000%, due 12/01/20 | 0.6 | ||||||
US Treasury Notes, 2.500%, due 04/30/15 | 0.6 | ||||||
Buoni Poliennali Del Tesoro, 2.100%, due 09/15/21 | 0.6 | ||||||
Bundesobligation, 1.250%, due 10/14/16 | 0.6 | ||||||
US Treasury Notes, 0.250%, due 11/30/14 | 0.4 | ||||||
Total | 7.1 | % |
1 Figures represent the direct investments of UBS Global Allocation Fund. Figures might 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 affiliated investment companies was included, the top five country exposure percentages would be as follows: United States: 27.8%, United Kingdom: 6.8%, Japan: 6.0%, Germany: 3.9% and China: 2.5%.
34
UBS Global Allocation Fund
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Aerospace & defense | 0.46 | % | |||||
Air freight & logistics | 0.01 | ||||||
Airlines | 0.60 | ||||||
Auto components | 0.25 | ||||||
Automobiles | 1.30 | ||||||
Beverages | 0.72 | ||||||
Biotechnology | 0.85 | ||||||
Building products | 0.30 | ||||||
Capital markets | 1.09 | ||||||
Chemicals | 1.14 | ||||||
Commercial banks | 2.96 | ||||||
Commercial services & supplies | 0.13 | ||||||
Communications equipment | 0.18 | ||||||
Computers & peripherals | 0.92 | ||||||
Construction & engineering | 0.04 | ||||||
Construction materials | 0.53 | ||||||
Consumer finance | 0.31 | ||||||
Diversified financial services | 1.10 | ||||||
Diversified telecommunication services | 0.43 | ||||||
Electric utilities | 0.28 | ||||||
Electrical equipment | 0.42 | ||||||
Electronic equipment, instruments & components | 0.48 | ||||||
Energy equipment & services | 1.02 | ||||||
Food & staples retailing | 0.61 | ||||||
Food products | 1.57 | ||||||
Health care equipment & supplies | 0.26 | ||||||
Health care providers & services | 0.44 | ||||||
Hotels, restaurants & leisure | 0.75 | ||||||
Household durables | 0.44 | ||||||
Industrial conglomerates | 0.91 | ||||||
Insurance | 2.85 | ||||||
Internet & catalog retail | 0.64 | ||||||
Internet software & services | 0.75 | ||||||
IT services | 0.47 | ||||||
Leisure equipment & products | 0.25 | ||||||
Life sciences tools & services | 0.06 | ||||||
Machinery | 0.74 | ||||||
Marine | 0.24 | ||||||
Media | 1.35 | ||||||
Metals & mining | 1.24 |
Multiline retail | 0.27 | % | |||||
Multi-utilities | 0.40 | ||||||
Oil, gas & consumable fuels | 2.18 | ||||||
Paper & forest products | 0.11 | ||||||
Personal products | 0.46 | ||||||
Pharmaceuticals | 3.11 | ||||||
Professional services | 0.25 | ||||||
Real estate investment trust (REIT) | 0.39 | ||||||
Real estate management & development | 0.34 | ||||||
Road & rail | 0.74 | ||||||
Semiconductors & semiconductor equipment | 1.46 | ||||||
Software | 1.60 | ||||||
Specialty retail | 0.28 | ||||||
Textiles, apparel & luxury goods | 0.80 | ||||||
Tobacco | 0.75 | ||||||
Trading companies & distributors | 0.45 | ||||||
Wireless telecommunication services | 1.22 | ||||||
Total common stocks | 43.90 | % | |||||
Bonds | |||||||
Mortgage & agency debt securities | 0.13 | ||||||
US government obligations | 3.91 | ||||||
Non-US government obligations | 7.78 | ||||||
Total bonds | 11.82 | % | |||||
Investment companies | |||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 2.13 | ||||||
UBS Emerging Markets Equity Relationship Fund | 6.97 | ||||||
UBS Global Corporate Bond Relationship Fund | 2.11 | ||||||
UBS High Yield Relationship Fund | 7.52 | ||||||
Total investment companies | 18.73 | % | |||||
Warrant | 0.04 | ||||||
Short-term investment | 21.67 | ||||||
Investment of cash collateral from securities loaned | 2.91 | ||||||
Total investments | 99.07 | % | |||||
Cash and other assets, less liabilities | 0.93 | ||||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Global Allocation Fund. Figures might be different if a breakdown of the underlying investment companies was included.
35
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 43.90% | |||||||||||
Australia: 0.20% | |||||||||||
Westfield Group | 148,607 | $ | 1,338,854 | ||||||||
Brazil: 0.12% | |||||||||||
AMBEV SA ADR | 10,000 | 73,500 | |||||||||
BRF SA | 7,700 | 160,740 | |||||||||
Cia Brasileira de Distribuicao Grupo Pao de Acucar ADR1 | 4,000 | 178,680 | |||||||||
Cielo SA | 12,700 | 353,398 | |||||||||
Cosan Ltd., Class A | 4,000 | 54,880 | |||||||||
Total Brazil common stocks | 821,198 | ||||||||||
Canada: 1.50% | |||||||||||
Canadian Oil Sands Ltd. | 93,000 | 1,749,249 | |||||||||
Canadian Pacific Railway Ltd. | 1,600 | 242,112 | |||||||||
Lightstream Resources Ltd.1 | 103,675 | 573,885 | |||||||||
Lululemon Athletica, Inc.* | 6,000 | 354,180 | |||||||||
Petrobank Energy & Resources Ltd.* | 101,000 | 33,279 | |||||||||
Royal Bank of Canada | 49,000 | 3,294,036 | |||||||||
Suncor Energy, Inc. | 71,400 | 2,503,117 | |||||||||
Teck Resources Ltd., Class B | 46,100 | 1,199,967 | |||||||||
Total Canada common stocks | 9,949,825 | ||||||||||
China: 1.43% | |||||||||||
AIA Group Ltd. | 620,917 | 3,114,875 | |||||||||
Airtac International Group | 12,000 | 97,438 | |||||||||
Angang Steel Co., Ltd., H Shares* | 138,000 | 102,508 | |||||||||
Baidu, Inc. ADR* | 3,620 | 643,926 | |||||||||
Brilliance China Automotive Holdings Ltd. | 324,000 | 528,141 | |||||||||
China Overseas Land & Investment Ltd. | 18,000 | 50,604 | |||||||||
China Railway Group Ltd., H Shares | 487,000 | 251,215 | |||||||||
China Shenhua Energy Co., Ltd., H Shares | 70,000 | 220,716 | |||||||||
China Unicom Hong Kong Ltd. | 52,000 | 77,789 | |||||||||
CIMC Enric Holdings Ltd. | 124,000 | 199,889 | |||||||||
Guangzhou Automobile Group Co., Ltd., H Shares | 70,000 | 76,551 | |||||||||
Industrial & Commercial Bank of China Ltd., H Shares | 251,000 | 169,614 | |||||||||
Jardine Matheson Holdings Ltd. | 36,800 | 1,925,008 | |||||||||
Kerry Logistics Network Ltd.* | 33,000 | 46,898 | |||||||||
Kingboard Chemical Holdings Ltd. | 22,000 | 57,452 | |||||||||
Minth Group Ltd. | 44,000 | 91,356 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 63,500 | 568,726 | |||||||||
Shimao Property Holdings Ltd. | 71,500 | 164,313 | |||||||||
Sohu.com, Inc.*1 | 2,500 | 182,325 |
Shares | Value | ||||||||||
Tencent Holdings Ltd. | 9,300 | $ | 593,191 | ||||||||
ZTE Corp., H Shares* | 140,600 | 279,231 | |||||||||
Total China common stocks | 9,441,766 | ||||||||||
Denmark: 0.24% | |||||||||||
AP Moeller - Maersk A/S, Class B | 144 | 1,562,750 | |||||||||
Finland: 0.44% | |||||||||||
Sampo Oyj, Class A | 58,788 | 2,888,843 | |||||||||
France: 1.09% | |||||||||||
Carrefour SA | 85,762 | 3,399,084 | |||||||||
Peugeot SA* | 128,575 | 1,669,400 | |||||||||
Schneider Electric SA | 24,835 | 2,166,093 | |||||||||
Total France common stocks | 7,234,577 | ||||||||||
Germany: 2.15% | |||||||||||
Bayer AG | 31,072 | 4,357,929 | |||||||||
Deutsche Bank AG | 44,488 | 2,122,184 | |||||||||
E.ON SE | 84,391 | 1,557,437 | |||||||||
HeidelbergCement AG | 29,536 | 2,240,892 | |||||||||
Infineon Technologies AG | 214,182 | 2,286,486 | |||||||||
ThyssenKrupp AG* | 69,133 | 1,682,430 | |||||||||
Total Germany common stocks | 14,247,358 | ||||||||||
India: 0.06% | |||||||||||
Dr Reddy's Laboratories Ltd. ADR | 9,300 | 381,579 | |||||||||
Indonesia: 0.02% | |||||||||||
Adaro Energy Tbk PT | 438,500 | 39,274 | |||||||||
Harum Energy Tbk PT | 125,000 | 28,246 | |||||||||
Media Nusantara Citra Tbk PT | 233,500 | 50,364 | |||||||||
Tambang Batubara Bukit Asam Persero Tbk PT | 31,500 | 26,401 | |||||||||
Total Indonesia common stocks | 144,285 | ||||||||||
Ireland: 0.75% | |||||||||||
Mallinckrodt PLC* | 9,000 | 470,340 | |||||||||
Ryanair Holdings PLC ADR* | 36,500 | 1,712,945 | |||||||||
Shire PLC | 58,497 | 2,762,678 | |||||||||
Total Ireland common stocks | 4,945,963 | ||||||||||
Israel: 0.68% | |||||||||||
Check Point Software Technologies Ltd.* | 51,600 | 3,329,232 | |||||||||
Mellanox Technologies Ltd.*1 | 19,700 | 787,409 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 10,316 | 413,465 | |||||||||
Total Israel common stocks | 4,530,106 |
36
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Italy: 0.28% | |||||||||||
Intesa Sanpaolo SpA | 755,993 | $ | 1,865,795 | ||||||||
Japan: 5.97% | |||||||||||
Asahi Glass Co., Ltd.1 | 216,000 | 1,341,411 | |||||||||
Astellas Pharma, Inc. | 38,600 | 2,283,525 | |||||||||
Bridgestone Corp. | 36,400 | 1,375,672 | |||||||||
Hitachi Ltd. | 248,000 | 1,874,542 | |||||||||
ITOCHU Corp. | 240,600 | 2,967,804 | |||||||||
Japan Airlines Co., Ltd. | 40,100 | 1,976,251 | |||||||||
KDDI Corp. | 53,100 | 3,262,340 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 449,700 | 2,963,553 | |||||||||
ORIX Corp. | 159,600 | 2,799,176 | |||||||||
Panasonic Corp. | 212,000 | 2,464,039 | |||||||||
Sankyo Co., Ltd. | 36,000 | 1,657,962 | |||||||||
Shin-Etsu Chemical Co., Ltd. | 35,900 | 2,093,115 | |||||||||
Shiseido Co., Ltd. | 144,900 | 2,326,711 | |||||||||
Sumitomo Realty & Development Co., Ltd. | 32,000 | 1,589,213 | |||||||||
THK Co., Ltd. | 93,000 | 2,317,273 | |||||||||
Tokio Marine Holdings, Inc. | 55,700 | 1,859,135 | |||||||||
Toyota Motor Corp. | 71,200 | 4,340,556 | |||||||||
Total Japan common stocks | 39,492,278 | ||||||||||
Luxembourg: 0.03% | |||||||||||
Ternium SA ADR | 6,200 | 194,060 | |||||||||
Macau: 0.20% | |||||||||||
Melco Crown Entertainment Ltd. ADR* | 15,100 | 592,222 | |||||||||
Sands China Ltd. | 91,200 | 745,073 | |||||||||
Total Macau common stocks | 1,337,295 | ||||||||||
Malaysia: 0.07% | |||||||||||
Axiata Group Bhd | 79,100 | 166,628 | |||||||||
Malayan Banking Bhd | 13,700 | 41,575 | |||||||||
Sapurakencana Petroleum Bhd* | 149,800 | 224,094 | |||||||||
Total Malaysia common stocks | 432,297 | ||||||||||
Mexico: 0.22% | |||||||||||
Alfa SAB de CV, Class A | 118,000 | 330,959 | |||||||||
Alsea SAB de CV | 96,000 | 299,915 | |||||||||
Cemex SAB de CV ADR*1 | 15,452 | 182,797 | |||||||||
Grupo Financiero Banorte SAB de CV, Class O | 68,000 | 475,815 | |||||||||
Grupo Televisa SAB ADR | 6,300 | 190,638 | |||||||||
Total Mexico common stocks | 1,480,124 | ||||||||||
Netherlands: 1.40% | |||||||||||
Aegon NV | 189,243 | 1,786,464 | |||||||||
Heineken NV | 29,538 | 1,994,387 |
Shares | Value | ||||||||||
Koninklijke DSM NV | 33,070 | $ | 2,600,460 | ||||||||
NXP Semiconductor NV* | 18,100 | 831,333 | |||||||||
Wolters Kluwer NV | 72,748 | 2,076,147 | |||||||||
Total Netherlands common stocks | 9,288,791 | ||||||||||
Norway: 0.41% | |||||||||||
Telenor ASA | 114,060 | 2,719,252 | |||||||||
Panama: 0.03% | |||||||||||
Copa Holdings SA, Class A | 1,200 | 192,132 | |||||||||
Philippines: 0.10% | |||||||||||
Alliance Global Group, Inc. | 565,000 | 328,441 | |||||||||
Metropolitan Bank & Trust Co. | 119,905 | 204,108 | |||||||||
SM Investments Corp. | 9,796 | 156,930 | |||||||||
Total Philippines common stocks | 689,479 | ||||||||||
Russia: 0.07% | |||||||||||
Magnit OJSC GDR2 | 4,517 | 299,025 | |||||||||
MegaFon OAO GDR2 | 5,000 | 167,500 | |||||||||
Total Russia common stocks | 466,525 | ||||||||||
South Africa: 0.18% | |||||||||||
Aspen Pharmacare Holdings Ltd. | 15,916 | 407,717 | |||||||||
Life Healthcare Group Holdings Ltd. | 40,970 | 163,489 | |||||||||
Naspers Ltd., Class N | 4,219 | 440,807 | |||||||||
Standard Bank Group Ltd. | 14,571 | 179,769 | |||||||||
Total South Africa common stocks | 1,191,782 | ||||||||||
South Korea: 0.52% | |||||||||||
Doosan Infracore Co., Ltd.* | 6,850 | 81,783 | |||||||||
Hankook Tire Co., Ltd.* | 3,178 | 182,787 | |||||||||
Hyundai Motor Co.* | 1,595 | 357,434 | |||||||||
Kia Motors Corp.* | 570 | 30,300 | |||||||||
LG Chem Ltd.* | 604 | 171,411 | |||||||||
NAVER Corp.* | 328 | 225,017 | |||||||||
NCSoft Corp.* | 2,009 | 473,053 | |||||||||
Samsung Electronics Co., Ltd. | 526 | 683,822 | |||||||||
Seoul Semiconductor Co., Ltd.* | 9,298 | 355,938 | |||||||||
Shinhan Financial Group Co., Ltd.* | 4,040 | 181,070 | |||||||||
SK Hynix, Inc.* | 16,260 | 566,985 | |||||||||
Sung Kwang Bend Co., Ltd.* | 4,555 | 115,240 | |||||||||
Total South Korea common stocks | 3,424,840 | ||||||||||
Spain: 0.61% | |||||||||||
Acciona SA1 | 14,150 | 813,004 | |||||||||
Banco Santander SA | 360,985 | 3,230,926 | |||||||||
Total Spain common stocks | 4,043,930 | ||||||||||
Sweden: 0.15% | |||||||||||
Lundin Petroleum AB* | 50,726 | 988,991 |
37
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Switzerland: 2.37% | |||||||||||
Credit Suisse Group AG* | 74,460 | $ | 2,276,245 | ||||||||
Glencore Xstrata PLC* | 385,625 | 1,996,826 | |||||||||
Nestle SA | 65,209 | 4,773,441 | |||||||||
Novartis AG | 62,660 | 5,001,280 | |||||||||
SGS SA | 715 | 1,644,728 | |||||||||
Total Switzerland common stocks | 15,692,520 | ||||||||||
Taiwan: 0.23% | |||||||||||
Ginko International Co., Ltd. | 11,000 | 207,795 | |||||||||
Hiwin Technologies Corp. | 22,000 | 185,649 | |||||||||
Largan Precision Co., Ltd. | 10,000 | 407,670 | |||||||||
MediaTek, Inc. | 7,000 | 104,166 | |||||||||
President Chain Store Corp. | 27,000 | 187,075 | |||||||||
Siliconware Precision Industries Co. | 19,000 | 22,695 | |||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 19,700 | 343,568 | |||||||||
Uni-President Enterprises Corp. | 49,664 | 89,485 | |||||||||
Total Taiwan common stocks | 1,548,103 | ||||||||||
Thailand: 0.03% | |||||||||||
Banpu PCL | 44,000 | 40,505 | |||||||||
Jasmine International PCL | 337,000 | 68,713 | |||||||||
Minor International PCL | 87,400 | 55,057 | |||||||||
Total Thailand common stocks | 164,275 | ||||||||||
Turkey: 0.03% | |||||||||||
Ford Otomotiv Sanayi AS | 9,169 | 96,853 | |||||||||
Turk Hava Yollari | 41,938 | 125,677 | |||||||||
Total Turkey common stocks | 222,530 | ||||||||||
United Kingdom: 5.82% | |||||||||||
Aon PLC | 10,200 | 855,678 | |||||||||
Associated British Foods PLC | 35,025 | 1,418,091 | |||||||||
Aviva PLC | 286,077 | 2,130,360 | |||||||||
Barclays PLC | 555,003 | 2,499,376 | |||||||||
BP PLC | 492,187 | 3,977,788 | |||||||||
Burberry Group PLC | 57,663 | 1,447,584 | |||||||||
Carnival PLC | 30,199 | 1,250,701 | |||||||||
HSBC Holdings PLC | 242,819 | 2,663,485 | |||||||||
Imperial Tobacco Group PLC | 87,138 | 3,373,644 | |||||||||
Kingfisher PLC | 294,155 | 1,873,897 | |||||||||
Liberty Global PLC, Series A* | 7,700 | 685,223 | |||||||||
Noble Corp. PLC | 26,500 | 992,955 | |||||||||
Premier Oil PLC | 262,151 | 1,361,366 | |||||||||
Prudential PLC | 139,001 | 3,084,395 | |||||||||
Rio Tinto PLC | 53,329 | 3,010,935 | |||||||||
SABMiller PLC | 39,187 | 2,012,292 | |||||||||
Sage Group PLC | 380,609 | 2,544,398 | |||||||||
Vodafone Group PLC | 844,866 | 3,315,762 | |||||||||
Total United Kingdom common stocks | 38,497,930 |
Shares | Value | ||||||||||
United States: 16.50% | |||||||||||
3M Co. | 6,000 | $ | 841,500 | ||||||||
Acorda Therapeutics, Inc.* | 17,800 | 519,760 | |||||||||
Adobe Systems, Inc.* | 16,400 | 982,032 | |||||||||
Alexion Pharmaceuticals, Inc.* | 5,300 | 705,218 | |||||||||
Allergan, Inc. | 9,500 | 1,055,260 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 7,800 | 501,774 | |||||||||
Amazon.com, Inc.* | 8,000 | 3,190,320 | |||||||||
American Express Co. | 6,900 | 626,037 | |||||||||
AMETEK, Inc. | 11,100 | 584,637 | |||||||||
Apple, Inc. | 9,430 | 5,291,267 | |||||||||
Applied Materials, Inc. | 48,100 | 850,889 | |||||||||
Baker Hughes, Inc. | 29,400 | 1,624,644 | |||||||||
Baxter International, Inc. | 15,200 | 1,057,160 | |||||||||
Biogen Idec, Inc.* | 2,200 | 615,450 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 3,200 | 395,552 | |||||||||
Bluebird Bio, Inc.*1 | 4,300 | 90,214 | |||||||||
Broadcom Corp., Class A | 54,600 | 1,618,890 | |||||||||
Capital One Financial Corp. | 10,500 | 804,405 | |||||||||
Cardinal Health, Inc. | 7,500 | 501,075 | |||||||||
Catamaran Corp.* | 10,200 | 484,296 | |||||||||
Citigroup, Inc. | 43,920 | 2,288,671 | |||||||||
Coach, Inc. | 9,400 | 527,622 | |||||||||
Comcast Corp., Class A | 27,400 | 1,423,841 | |||||||||
Concho Resources, Inc.* | 5,100 | 550,800 | |||||||||
Crown Castle International Corp.* | 9,400 | 690,242 | |||||||||
Cummins, Inc. | 3,500 | 493,395 | |||||||||
Danaher Corp. | 31,700 | 2,447,240 | |||||||||
Digital Realty Trust, Inc.1 | 25,500 | 1,252,560 | |||||||||
Discover Financial Services | 9,400 | 525,930 | |||||||||
Dollar General Corp.* | 5,900 | 355,888 | |||||||||
Dow Chemical Co. | 22,600 | 1,003,440 | |||||||||
Edison International | 10,900 | 504,670 | |||||||||
Eli Lilly & Co. | 17,300 | 882,300 | |||||||||
Envision Healthcare Holdings, Inc.* | 16,800 | 596,736 | |||||||||
EOG Resources, Inc. | 5,000 | 839,200 | |||||||||
Epizyme, Inc.*1 | 3,800 | 79,040 | |||||||||
Estee Lauder Cos., Inc., Class A | 9,300 | 700,476 | |||||||||
Facebook, Inc., Class A* | 17,800 | 972,948 | |||||||||
First Cash Financial Services, Inc.* | 1,500 | 92,760 | |||||||||
FMC Technologies, Inc.* | 7,000 | 365,470 | |||||||||
Freescale Semiconductor Ltd.* | 25,300 | 406,065 | |||||||||
General Dynamics Corp. | 12,900 | 1,232,595 | |||||||||
General Motors Co.* | 37,400 | 1,528,538 | |||||||||
Gilead Sciences, Inc.* | 25,300 | 1,901,295 | |||||||||
Google, Inc., Class A* | 1,615 | 1,809,947 | |||||||||
Hain Celestial Group, Inc.* | 4,000 | 363,120 | |||||||||
Halliburton Co. | 36,300 | 1,842,225 | |||||||||
Hertz Global Holdings, Inc.* | 78,000 | 2,232,360 | |||||||||
Hess Corp. | 17,600 | 1,460,800 | |||||||||
Hospira, Inc.* | 25,100 | 1,036,128 | |||||||||
Illinois Tool Works, Inc. | 17,900 | 1,505,032 |
38
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Impax Laboratories, Inc.* | 23,700 | $ | 595,818 | ||||||||
International Paper Co. | 15,200 | 745,256 | |||||||||
Intuitive Surgical, Inc.* | 1,190 | 457,055 | |||||||||
Invesco Ltd. | 21,600 | 786,240 | |||||||||
Jabil Circuit, Inc. | 48,500 | 845,840 | |||||||||
JC Penney Co., Inc.*1 | 47,600 | 435,540 | |||||||||
JPMorgan Chase & Co. | 37,300 | 2,181,304 | |||||||||
Kellogg Co. | 11,400 | 696,198 | |||||||||
Las Vegas Sands Corp. | 10,100 | 796,587 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 198,000 | 356,400 | |||||||||
Lincoln National Corp. | 26,900 | 1,388,578 | |||||||||
MacroGenics, Inc.* | 3,300 | 90,519 | |||||||||
Macy's, Inc. | 18,500 | 987,900 | |||||||||
Martin Marietta Materials, Inc. | 11,000 | 1,099,340 | |||||||||
MasterCard, Inc., Class A | 855 | 714,318 | |||||||||
McDermott International, Inc.* | 102,000 | 934,320 | |||||||||
MetLife, Inc. | 22,500 | 1,213,200 | |||||||||
Michael Kors Holdings Ltd.* | 6,900 | 560,211 | |||||||||
Micron Technology, Inc.* | 38,200 | 831,232 | |||||||||
Mohawk Industries, Inc.* | 3,000 | 446,700 | |||||||||
Mondelez International, Inc., Class A | 81,200 | 2,866,360 | |||||||||
Monsanto Co. | 9,400 | 1,095,570 | |||||||||
Monster Beverage Corp.* | 10,000 | 677,700 | |||||||||
Morgan Stanley | 64,400 | 2,019,584 | |||||||||
NetApp, Inc. | 19,300 | 794,002 | |||||||||
NextEra Energy, Inc. | 6,200 | 530,844 | |||||||||
NII Holdings, Inc.*1 | 183,200 | 503,800 | |||||||||
NIKE, Inc., Class B | 11,900 | 935,816 | |||||||||
Norfolk Southern Corp. | 19,200 | 1,782,336 | |||||||||
Owens Corning* | 12,700 | 517,144 | |||||||||
PG&E Corp. | 26,600 | 1,071,448 | |||||||||
Philip Morris International, Inc. | 18,100 | 1,577,053 | |||||||||
Precision Castparts Corp. | 3,650 | 982,945 | |||||||||
Priceline.com, Inc.* | 900 | 1,046,160 | |||||||||
QUALCOMM, Inc. | 12,400 | 920,700 | |||||||||
Quintiles Transnational Holdings, Inc.* | 4,700 | 217,798 | |||||||||
Ralph Lauren Corp. | 8,500 | 1,500,845 | |||||||||
Realogy Holdings Corp.* | 9,000 | 445,230 | |||||||||
Regeneron Pharmaceuticals, Inc.* | 2,050 | 564,242 | |||||||||
Salesforce.com, Inc.* | 18,700 | 1,032,053 | |||||||||
Salix Pharmaceuticals Ltd.* | 6,500 | 584,610 | |||||||||
Schlumberger Ltd. | 8,300 | 747,913 | |||||||||
ServiceNow, Inc.* | 7,300 | 408,873 | |||||||||
ServiceSource International, Inc.* | 103,400 | 866,492 | |||||||||
Sherwin-Williams Co. | 3,100 | 568,850 | |||||||||
Symantec Corp. | 46,000 | 1,084,680 | |||||||||
Time Warner, Inc. | 18,700 | 1,303,764 | |||||||||
Union Pacific Corp. | 4,000 | 672,000 | |||||||||
United Technologies Corp. | 7,400 | 842,120 | |||||||||
UnitedHealth Group, Inc. | 15,900 | 1,197,270 | |||||||||
US Bancorp | 30,000 | 1,212,000 |
Shares | Value | ||||||||||
Viacom, Inc., Class B | 16,900 | $ | 1,476,046 | ||||||||
Visa, Inc., Class A | 5,280 | 1,175,751 | |||||||||
VMware, Inc., Class A* | 8,400 | 753,564 | |||||||||
Walt Disney Co. | 16,700 | 1,275,880 | |||||||||
Waste Management, Inc. | 19,000 | 852,530 | |||||||||
Wells Fargo & Co. | 13,400 | 608,360 | |||||||||
Yelp, Inc.* | 8,300 | 572,285 | |||||||||
Yum! Brands, Inc. | 15,900 | 1,202,199 | |||||||||
Zoetis, Inc. | 10,300 | 336,707 | |||||||||
Total United States common stocks | 109,237,794 | ||||||||||
Total common stocks (cost $239,645,228) | 290,657,827 | ||||||||||
Face amount | |||||||||||
Bonds: 11.82% | |||||||||||
Mortgage & agency debt securities: 0.13% | |||||||||||
United States: 0.13% | |||||||||||
Federal Home Loan Mortgage Corp. Gold Pools,3 #G00194, 7.500%, due 02/01/24 | $ | 27,785 | 30,978 | ||||||||
Government National Mortgage Association, Series 2001-35, Class AZ, 6.500%, due 08/20/31 | 722,530 | 815,432 | |||||||||
Total mortgage & agency debt securities (cost $781,853) | 846,410 | ||||||||||
US government obligations: 3.91% | |||||||||||
US Treasury Bonds, 2.750%, due 08/15/42 | 555,000 | 439,751 | |||||||||
2.750%, due 11/15/42 | 1,305,000 | 1,031,766 | |||||||||
3.625%, due 08/15/43 | 250,000 | 236,094 | |||||||||
3.750%, due 11/15/43 | 500,000 | 483,281 | |||||||||
5.375%, due 02/15/31 | 650,000 | 796,555 | |||||||||
6.250%, due 08/15/231 | 1,500,000 | 1,926,796 | |||||||||
8.000%, due 11/15/211 | 960,000 | 1,333,499 | |||||||||
US Treasury Notes, 0.125%, due 12/31/141 | 5,205,000 | 5,203,376 | |||||||||
0.250%, due 11/30/141 | 2,715,000 | 2,717,438 | |||||||||
0.625%, due 04/30/181 | 1,675,000 | 1,615,328 | |||||||||
0.750%, due 12/31/17 | 4,145,000 | 4,053,031 | |||||||||
1.625%, due 11/15/221 | 605,000 | 546,107 | |||||||||
2.500%, due 04/30/15 | 3,775,000 | 3,888,986 | |||||||||
3.125%, due 04/30/17 | 1,500,000 | 1,605,821 | |||||||||
Total US government obligations (cost $26,039,958) | 25,877,829 |
39
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Non-US government obligations: 7.78% | |||||||||||
Australia: 1.19% | |||||||||||
Government of Australia, 5.750%, due 05/15/21 | AUD | 7,870,000 | $ | 7,861,664 | |||||||
Belgium: 0.40% | |||||||||||
Kingdom of Belgium, 1.250%, due 06/22/182 | EUR | 1,900,000 | 2,619,905 | ||||||||
Finland: 0.76% | |||||||||||
Government of Finland, 4.375%, due 07/04/192,4 | 3,152,000 | 5,047,214 | |||||||||
France: 0.78% | |||||||||||
Government of France, 0.250%, due 07/25/185 | 1,867,086 | 2,611,368 | |||||||||
3.750%, due 04/25/21 | 1,660,000 | 2,579,935 | |||||||||
5,191,303 | |||||||||||
Germany: 1.72% | |||||||||||
Bundesobligation, 1.250%, due 10/14/16 | 2,610,000 | 3,680,657 | |||||||||
Bundesrepublik Deutschland, 3.250%, due 07/04/21 | 3,675,000 | 5,682,164 | |||||||||
3.250%, due 07/04/42 | 850,000 | 1,282,987 | |||||||||
4.000%, due 01/04/37 | 460,000 | 765,418 | |||||||||
11,411,226 | |||||||||||
Italy: 1.34% | |||||||||||
Buoni Poliennali Del Tesoro, 2.100%, due 09/15/165 | 1,131,826 | 1,605,172 | |||||||||
2.100%, due 09/15/212,5 | 2,868,993 | 3,842,400 | |||||||||
3.000%, due 04/15/15 | 1,125,000 | 1,586,354 | |||||||||
4.250%, due 02/01/192 | 1,260,000 | 1,855,239 | |||||||||
8,889,165 | |||||||||||
Netherlands: 0.40% | |||||||||||
Kingdom of the Netherlands, 1.250%, due 01/15/182,4 | 1,900,000 | 2,651,056 | |||||||||
Sweden: 0.60% | |||||||||||
Kingdom of Sweden, 5.000%, due 12/01/20 | SEK | 21,630,000 | 3,977,006 |
Face amount | Value | ||||||||||
United Kingdom: 0.59% | |||||||||||
UK Gilts, 3.750%, due 09/07/212 | GBP | 1,470,000 | $ | 2,620,661 | |||||||
4.750%, due 12/07/382 | 655,000 | 1,286,934 | |||||||||
3,907,595 | |||||||||||
Total Non-US government obligations (cost $50,686,025) | 51,556,134 | ||||||||||
Total bonds (cost $77,507,836) | 78,280,373 | ||||||||||
Shares | |||||||||||
Investment companies: 18.73% | |||||||||||
iShares JPMorgan USD Emerging Markets Bond ETF1 | 130,100 | 14,071,616 | |||||||||
UBS Emerging Markets Equity Relationship Fund*6 | 1,300,386 | 46,179,949 | |||||||||
UBS Global Corporate Bond Relationship Fund*6 | 1,123,387 | 13,994,931 | |||||||||
UBS High Yield Relationship Fund*6 | 1,497,331 | 49,803,338 | |||||||||
Total investment companies (cost $109,735,375) | 124,049,834 | ||||||||||
Number of warrants | |||||||||||
Warrant: 0.04% | |||||||||||
Russia: 0.04% | |||||||||||
Sberbank of Russia, strike @ $0.00001, expires 10/14/15* (cost $257,771) | 84,680 | 260,160 | |||||||||
Shares | |||||||||||
Short-term investment: 21.67% | |||||||||||
Investment company: 21.67% | |||||||||||
UBS Cash Management Prime Relationship Fund6 (cost $143,501,898) | 143,501,898 | 143,501,898 | |||||||||
Investment of cash collateral from securities loaned: 2.91% | |||||||||||
UBS Private Money Market Fund LLC6 (cost $19,237,595) | 19,237,595 | 19,237,595 | |||||||||
Total investments: 99.07% (cost $589,885,703) | 655,987,687 | ||||||||||
Cash and other assets, less liabilities: 0.93% | 6,132,274 | ||||||||||
Net assets: 100.00% | $ | 662,119,961 |
40
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 74,596,863 | |||||
Gross unrealized depreciation | (8,494,879 | ) | |||||
Net unrealized appreciation of investments | $ | 66,101,984 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 58. Portfolio footnotes begin on page 43.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
BB | AUD | 25,300,000 | USD | 22,894,476 | 03/05/14 | $ | 393,170 | ||||||||||||
BB | CAD | 34,175,000 | USD | 32,285,339 | 03/05/14 | 160,744 | |||||||||||||
BB | GBP | 8,645,000 | USD | 14,006,110 | 03/05/14 | (303,587 | ) | ||||||||||||
BB | SEK | 107,550,000 | USD | 16,330,987 | 03/05/14 | (373,033 | ) | ||||||||||||
CIBC | USD | 45,800,996 | EUR | 33,700,000 | 03/05/14 | 559,083 | |||||||||||||
CIBC | USD | 25,128,175 | NOK | 153,700,000 | 03/05/14 | 156,170 | |||||||||||||
DB | USD | 2,697,632 | CHF | 2,400,000 | 03/05/14 | (5,879 | ) | ||||||||||||
GSI | NOK | 82,647,607 | GBP | 8,210,000 | 03/05/14 | (6,245 | ) | ||||||||||||
GSI | USD | 14,015,173 | CAD | 14,890,000 | 03/05/14 | (18,531 | ) | ||||||||||||
HSBC | EUR | 2,510,000 | USD | 3,446,466 | 03/05/14 | (6,465 | ) | ||||||||||||
JPMCB | CLP | 6,980,100,000 | USD | 13,182,436 | 03/05/14 | (10,986 | ) | ||||||||||||
JPMCB | EUR | 2,780,000 | USD | 3,808,386 | 03/05/14 | (15,977 | ) | ||||||||||||
JPMCB | HKD | 29,100,000 | USD | 3,754,574 | 03/05/14 | 1,571 | |||||||||||||
JPMCB | IDR | 51,519,500,000 | USD | 4,231,581 | 03/05/14 | 44,179 | |||||||||||||
JPMCB | ILS | 13,560,000 | USD | 3,828,562 | 03/05/14 | (72,867 | ) | ||||||||||||
JPMCB | INR | 213,760,000 | USD | 3,339,478 | 03/05/14 | (67,175 | ) | ||||||||||||
JPMCB | JPY | 345,200,000 | USD | 3,383,557 | 03/05/14 | 104,641 | |||||||||||||
JPMCB | THB | 118,700,000 | USD | 3,651,184 | 03/05/14 | 48,971 | |||||||||||||
JPMCB | USD | 13,390,132 | KRW | 14,302,000,000 | 03/05/14 | 109,183 | |||||||||||||
JPMCB | USD | 13,134,337 | MXN | 172,840,000 | 03/05/14 | 39,096 | |||||||||||||
JPMCB | USD | 13,102,853 | PHP | 569,450,000 | 03/05/14 | (260,627 | ) | ||||||||||||
JPMCB | USD | 15,606,955 | PLN | 48,515,000 | 03/05/14 | 391,970 | |||||||||||||
JPMCB | USD | 2,579,469 | SEK | 16,910,000 | 03/05/14 | 46,890 | |||||||||||||
JPMCB | USD | 3,884,325 | SGD | 4,865,000 | 03/05/14 | (29,086 | ) | ||||||||||||
JPMCB | USD | 13,325,366 | ZAR | 137,150,000 | 03/05/14 | (364,351 | ) | ||||||||||||
MSCI | CHF | 36,455,000 | USD | 40,279,819 | 03/05/14 | (606,800 | ) | ||||||||||||
MSCI | NZD | 83,055,000 | USD | 67,601,064 | 03/05/14 | (410,322 | ) | ||||||||||||
MSCI | USD | 41,448,647 | JPY | 4,211,900,000 | 03/05/14 | (1,441,498 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (1,937,761 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
10 Year US Treasury Notes, 67 contracts (USD) | March 2014 | $ | 8,258,317 | $ | 8,244,141 | $ | (14,176 | ) | |||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
2 Year US Treasury Notes, 276 contracts (USD) | March 2014 | (60,775,735 | ) | (60,668,250 | ) | 107,485 |
41
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Futures contracts (Concluded)
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||
Amsterdam Exchange Index, 81 contracts (EUR) | January 2014 | $ | 8,462,070 | $ | 8,966,909 | $ | 504,839 | ||||||||||||
DAX Index, 37 contracts (EUR) | March 2014 | 11,632,916 | 12,223,215 | 590,299 | |||||||||||||||
E-mini S&P 500 Index, 366 contracts (USD) | March 2014 | 32,743,248 | 33,692,130 | 948,882 | |||||||||||||||
EURO STOXX 50 Index, 640 contracts (EUR) | March 2014 | 26,338,908 | 27,364,324 | 1,025,416 | |||||||||||||||
FTSE 100 Index, 186 contracts (GBP) | March 2014 | 20,015,946 | 20,628,749 | 612,803 | |||||||||||||||
FTSE MIB Index, 107 contracts (EUR) | March 2014 | 13,409,839 | 14,002,391 | 592,552 | |||||||||||||||
S&P Toronto Stock Exchange 60 Index, 91 contracts (CAD) | March 2014 | 12,925,591 | 13,379,506 | 453,915 | |||||||||||||||
TOPIX Index, 212 contracts (JPY) | March 2014 | 25,307,448 | 26,220,682 | 913,234 | |||||||||||||||
Index futures sell contracts: | |||||||||||||||||||
CAC 40 Euro Index, 234 contracts (EUR) | January 2014 | (13,183,023 | ) | (13,837,465 | ) | (654,442 | ) | ||||||||||||
E-mini NASDAQ 100 Index, 110 contracts (USD) | March 2014 | (7,633,846 | ) | (7,884,250 | ) | (250,404 | ) | ||||||||||||
Mini MSCI Emerging Markets Index, 267 contracts (USD) | March 2014 | (13,181,833 | ) | (13,574,280 | ) | (392,447 | ) | ||||||||||||
SPI 200 Index, 107 contracts (AUD) | March 2014 | (12,149,950 | ) | (12,702,083 | ) | (552,133 | ) | ||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
Australian Government 3 Year Bond, 342 contracts (AUD) | March 2014 | 33,082,789 | 33,146,820 | 64,031 | |||||||||||||||
Euro-BTP, 98 contracts (EUR) | March 2014 | 15,370,519 | 15,479,872 | 109,353 | |||||||||||||||
Long Gilt, 123 contracts (GBP) | March 2014 | 22,168,342 | 21,704,338 | (464,004 | ) | ||||||||||||||
Net unrealized appreciation on futures contracts | $ | 3,595,203 |
Options written
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 133 | $ | 1,119,052 | ||||||||
Options written | — | — | |||||||||
Options terminated in closing purchase transactions | (133 | ) | (1,119,052 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | — | $ | — |
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 290,657,827 | $ | — | $ | — | $ | 290,657,827 | |||||||||||
Mortgage & agency debt securities | — | 846,410 | — | 846,410 | |||||||||||||||
US government obligations | — | 25,877,829 | �� | — | 25,877,829 | ||||||||||||||
Non-US government obligations | — | 51,556,134 | — | 51,556,134 | |||||||||||||||
Investment companies | 14,071,616 | 109,978,218 | — | 124,049,834 | |||||||||||||||
Warrant | — | 260,160 | — | 260,160 | |||||||||||||||
Short-term investment | — | 143,501,898 | — | 143,501,898 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 19,237,595 | — | 19,237,595 | |||||||||||||||
Forward foreign currency contracts, net | — | (1,937,761 | ) | — | (1,937,761 | ) | |||||||||||||
Futures contracts, net | 3,595,203 | — | — | 3,595,203 | |||||||||||||||
Total | $ | 308,324,646 | $ | 349,320,483 | $ | — | $ | 657,645,129 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
42
UBS Global Allocation Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at December 31, 2013.
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 December 31, 2013, the value of these securities amounted to $20,389,934 or 3.08% of net assets.
3 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.
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 December 31, 2013, the value of these securities amounted to $7,698,270 or 1.16% of net assets.
5 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional security of the same maturity.
6 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Net realized gain during the six months ended 12/31/13 | Change in net unrealized appreciation/ (depreciation) during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 177,549,105 | $ | 83,597,473 | $ | 117,644,680 | $ | — | $ | — | $ | 143,501,898 | $ | 87,312 | |||||||||||||||||
UBS Private Money Market Fund LLCa | 22,183,419 | 74,709,535 | 77,655,359 | — | — | 19,237,595 | 1,046 | ||||||||||||||||||||||||
UBS Emerging Markets Equity Relationship Fund | 51,518,582 | — | 6,500,000 | 3,235,227 | (2,073,860 | ) | 46,179,949 | — | |||||||||||||||||||||||
UBS Global Corporate Bond Relationship Fund | — | 13,625,000 | — | — | 369,931 | 13,994,931 | — | ||||||||||||||||||||||||
UBS High Yield Relationship Fund | 36,525,431 | 10,726,000 | — | — | 2,551,907 | 49,803,338 | — | ||||||||||||||||||||||||
$ | 287,776,537 | $ | 182,658,008 | $ | 201,800,039 | $ | 3,235,227 | $ | 847,978 | $ | 272,717,711 | $ | 88,358 |
a The advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
43
UBS Multi-Asset Income Fund
Portfolio performance
For the six months ended December 31, 2013, Class A shares of UBS Multi-Asset Income Fund (the "Fund") returned 4.74% (Class A shares returned 0.05% after the deduction of the maximum sales charge), while Class Y shares returned 4.97%. For comparison purposes, the Barclays US Corporate Investment Grade Index (the "Index") returned 1.94% during the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 47; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The portfolio was managed in accordance with our somewhat less cautious view on the markets. That said, we continued to place a strong emphasis on minimizing interest rate risk and protecting capital during the review period. If this is considered within the context of the Fund's goal of providing a monthly income payout of between 3% and 6% per year, the Fund was positioned at the lower end of its payout range.1 For the six months ended December 31, 2013, the Fund's yield was 4.29% and 4.54% for Class A and Class Y shares, respectively. We believe this was an attractive level of income, given the relatively low interest rate environment.
During the reporting period, we used derivatives, including writing covered calls to increase cash flow and reduce the risk profile of the Fund's allocation to international equities. We also utilized derivatives, including currency forwards, to hedge our exposures to international currency risk, as well as Treasury futures to manage duration and the Fund's yield curve positioning. In summary, while our derivatives exposure was limited in the portfolio, our ability to increase cash flow and manage unwanted risks relating to currency and duration positively contributed to our ability to meet our low-to-moderate risk targets.
Portfolio performance summary2
What worked
• The Fund's allocation to international and US dividend paying stocks was beneficial for performance.
– The Fund maintained an 8% to 10% allocation to US high dividend stocks during the reporting period. While the stocks experienced periods of volatility as US interest rates fluctuated, they generated strong results overall.
– Throughout the six-month reporting period, the Fund maintained roughly a 6% to 9% allocation to international dividend stocks. They were a strong contributor to both yield and total returns.
1 While there is no guarantee that the Fund will achieve its target payout, UBS Multi-Asset Income Fund seeks a target payout of 3%-6% per year, based on the current interest rate environment. UBS Global Asset Management (Americas) Inc., the Fund's Advisor, does not represent or guarantee that the Fund will meet this target payout.
In an attempt to achieve its target payout, the Fund will actively allocate among traditional and nontraditional asset classes. The allocation of investments across each asset class will vary over time and will be driven by:
• Valuation based on the Advisor's 30-year fundamental value philosophy;
• Economic factors, including the current and projected interest rate environment and credit conditions; and
• A focus on diversification and risk management to meet the Fund's payout objective while minimizing volatility.
The Fund seeks to achieve its target payout by investing primarily in a combination of equities, fixed income securities, third party ETFs, TIPS, listed exchange options, and other derivative securities. The Fund will also engage in derivative strategies, most notably, call overwriting, and purchase currencies in accordance with its target asset allocation. The strategies that the Fund will employ include a combination of active and passive investment strategies; however, the Fund may invest directly in equity and fixed income securities, and cash equivalents, including money market securities, futures, and currency contracts. In addition, the Fund will engage in covered call option writing to enhance returns and for risk management purposes. Covered calls against equity ETFs will be written to generate premiums that typically would be classified as short-term capital gains and can potentially contribute to enhancing the overall payout of the Fund. Currency forwards could also be used to potentially enhance income using positive carry strategies whereby higher-yielding currencies are bought in exchange for lower-yielding currencies.
2 For a detailed commentary on the market environment in general during the reporting period, see pages 3-4.
44
UBS Multi-Asset Income Fund
• The Fund's high yield corporate bond exposure was beneficial for performance. Our high yield bond allocation represented the largest portion of the Fund's portfolio and was a meaningful contributor to its performance. The sector was supported by accelerating economic growth, generally solid corporate fundamentals, low defaults and overall robust investor demand.
• An allocation to high dividend emerging market equities was additive for results. The Fund had upwards of 5% of its portfolio allocated to high dividend emerging market equities. Although they lagged their US and European counterparts, they helped increase the Fund's yield and provided another layer of diversification in the portfolio.
• Exposures to global infrastructure stocks and emerging markets debt enhanced the Fund's yield.
– The Fund had approximately 5% of its assets in global infrastructure stocks during the reporting period. We emphasized securities with roughly 5.5%-6.0% yields, delivered through the combination of secure, long-term and operational contracts with intrinsic inflation protection, which provided an attractive prospect for yield-seeking investors.
– We maintained roughly a 4% allocation to emerging markets debt during the six-months. While the asset class was impacted by rising US Treasury rates, our holdings typically offered higher yields which helped buffer the rise in interest rates.
• Our asset allocation strategies were beneficial for the Fund's performance.
– We adjusted the Fund's asset allocation strategy in anticipation of a rising interest rate environment. In particular, we reduced our allocation to global real estate from 10% to roughly 5% of the portfolio.
– We utilized call overwriting3 at times during the reporting period to increase the Fund's cash flow and help manage the portfolio's risk exposure.
– The Fund's tactical asset allocation strategy was rewarded, as it helped the Fund outperform its benchmark, as well as achieve its risk-managed income target during the reporting period.
– The Fund's standard deviation, a measure of market volatility, was in line with its low to moderate volatility range.
3 Call overwriting involves selling options while already owning the underlying security. As the seller of a call option, we believe that the price of the security will not rise. If the stock price rises, then we can sell the security and receive the call option premium, but our upside is capped. If the stock price falls, then the call option is worthless; we would still receive the call option premium, but the underlying position would fall in price.
45
UBS Multi-Asset Income Fund
What didn't work
• Our allocation to US Treasury Inflation-Protected Securities ("TIPS") was a negative for performance. The Fund had approximately 5% to 7% of its assets in TIPS. This detracted from results, as TIPS performed poorly given rising US interest rates, benign inflation and weak investor demand.
• Certain hedging instruments detracted from results. Given the market's overall positive performance during the reporting period, certain hedging instruments, which were used to manage the portfolio's overall risk, were a modest drag on performance.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2013. The views and opinions in the letter were current as of February 14, 2014. 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.
46
UBS Multi-Asset Income Fund
Average annual total returns for periods ended 12/31/2013 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 4.74 | % | 2.77 | % | 5.50 | % | |||||||||
Class C3 | 4.44 | 2.11 | 4.78 | ||||||||||||
Class Y4 | 4.97 | 3.12 | 5.81 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 0.05 | % | (1.87 | )% | 2.67 | % | |||||||||
Class C3 | 3.69 | 1.36 | 4.78 | ||||||||||||
Barclays US Corporate Investment Grade Index5 | 1.94 | % | (1.53 | )% | 2.90 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—2.10% and 1.29%; Class C—2.86% and 2.04%; Class Y—1.84% and 1.04%. 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 dividend expense and security loan fees 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 dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 0.95% for Class A shares, 1.70% 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. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Multi-Asset Income Fund and the index is April 25, 2012.
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 C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service 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 distribution and service fees.
5 The Barclays US Corporate Investment Grade Index is a sub-index of the Barclays US Credit Index, and includes USD-denominated securities publicly issued by US and non-US industrial, utility, and financial issuers that meet the specified maturity, liquidity and quality requirements. Investors should note that the 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 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://globalam-us.ubs.com/corpweb/performance.do.
47
UBS Multi-Asset Income Fund
Top ten equity holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
John Laing Infrastructure Fund Ltd. | 2.6 | % | |||||
Simon Property Group, Inc. | 0.3 | ||||||
Mitsubishi Estate Co., Ltd. | 0.2 | ||||||
Mitsui Fudosan Co., Ltd. | 0.2 | ||||||
Unibail-Rodamco SE | 0.1 | ||||||
Public Storage | 0.1 | ||||||
Sun Hung Kai Properties Ltd. | 0.1 | ||||||
Equity Residential | 0.1 | ||||||
Prologis, Inc. | 0.1 | ||||||
Westfield Group | 0.1 | ||||||
Total | 3.9 | % |
Country exposure by issuer, top five (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
United States | 15.2 | % | |||||
Italy | 4.8 | ||||||
United Kingdom | 3.0 | ||||||
Japan | 0.9 | ||||||
China | 0.4 | ||||||
Total | 24.3 | % |
Top ten long-term fixed income holdings (unaudited)1
As of December 31, 2013
Percentage of net assets | |||||||
Buoni Poliennali Del Tesoro, 2.100%, due 09/15/17 | 4.8 | % | |||||
US Treasury Inflation Indexed Notes (TIPS), 2.000%, due 01/15/16 | 1.8 | ||||||
US Treasury Inflation Indexed Bonds (TIPS), 3.875%, due 04/15/29 | 1.5 | ||||||
US Treasury Inflation Indexed Notes (TIPS), 2.625%, due 07/15/17 | 1.4 | ||||||
Government National Mortgage Association Pools, #G2 779424, 4.000%, due 06/20/42 | 0.6 | ||||||
Government National Mortgage Association Pools, #732230, 4.500%, due 03/15/40 | 0.5 | ||||||
Federal National Mortgage Association Pools, 5.000%, TBA | 0.5 | ||||||
Government National Mortgage Association Pools, #747264, 4.500%, due 09/15/40 | 0.5 | ||||||
Federal Home Loan Mortgage Corp. REMICS, IO, 3.500%, due 10/15/42 | 0.5 | ||||||
Federal National Mortgage Association REMICS, IO, Series 2013-15, Class IO, 2.500%, due 03/25/28 | 0.5 | ||||||
Total | 12.6 | % |
1 Figures represent the direct investments of UBS Multi-Asset Income Fund. Figures might be different if a breakdown of the underlying investment companies was included.
48
UBS Multi-Asset Income Fund
Industry diversification (unaudited)1
As a percentage of net assets as of December 31, 2013
Common stocks | |||||||
Capital markets | 2.61 | % | |||||
Health care providers & services | 0.002 | ||||||
Real estate investment trust (REIT) | 4.42 | ||||||
Real estate management & development | 1.53 | ||||||
Total common stocks | 8.56 | % | |||||
Bonds | |||||||
Commercial mortgage-backed securities | 0.90 | ||||||
Mortgage & agency debt securities | 6.83 | ||||||
US government obligations | 4.68 | ||||||
Non-US government obligation | 4.75 | ||||||
Total bonds | 17.16 | % | |||||
Investment companies | |||||||
HICL Infrastructure Co., Ltd. | 2.59 | ||||||
iShares Core S&P 500 ETF | 7.29 | ||||||
iShares Emerging Markets Local Currency Bond ETF | 2.05 | ||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 22.56 | ||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 14.61 | ||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 2.08 | ||||||
iShares MSCI EAFE ETF | 9.40 | ||||||
iShares U.S. Industrials ETF | 3.20 | ||||||
SPDR Barclays Short Term High Yield Bond ETF | 4.13 | ||||||
WisdomTree Emerging Markets Equity Income Fund | 4.90 | ||||||
Total investment companies | 72.81 | % | |||||
Short-term investment | 2.68 | ||||||
Total investments | 101.21 | % | |||||
Liabilities, in excess of cash and other assets | (1.21 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Multi-Asset Income Fund. Figures might be different if a breakdown of the underlying investment companies was included.
2 Amount represents less than 0.005%.
49
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks: 8.56% | |||||||||||
Australia: 0.39% | |||||||||||
BWP Trust | 2,029 | $ | 3,968 | ||||||||
CFS Retail Property Trust Group | 6,382 | 11,084 | |||||||||
Charter Hall Retail REIT | 955 | 3,061 | |||||||||
Commonwealth Property Office Fund | 8,829 | 9,815 | |||||||||
Dexus Property Group | 15,852 | 14,225 | |||||||||
Federation Centres Ltd. | 4,449 | 9,296 | |||||||||
Goodman Group | 5,380 | 22,722 | |||||||||
GPT Group | 4,990 | 15,149 | |||||||||
Investa Office Fund | 2,007 | 5,609 | |||||||||
Mirvac Group | 11,900 | 17,851 | |||||||||
Stockland | 7,402 | 23,859 | |||||||||
Westfield Group | 6,510 | 58,651 | |||||||||
Westfield Retail Trust | 9,376 | 24,864 | |||||||||
Total Australia common stocks | 220,154 | ||||||||||
Austria: 0.01% | |||||||||||
CA Immobilien Anlagen AG* | 226 | 4,005 | |||||||||
Conwert Immobilien Invest SE* | 114 | 1,463 | |||||||||
Total Austria common stocks | 5,468 | ||||||||||
Belgium: 0.02% | |||||||||||
Aedifica | 40 | 2,835 | |||||||||
Befimmo | 47 | 3,262 | |||||||||
Cofinimmo | 44 | 5,433 | |||||||||
Total Belgium common stocks | 11,530 | ||||||||||
Canada: 0.23% | |||||||||||
Allied Properties REIT | 229 | 7,062 | |||||||||
Artis REIT | 368 | 5,148 | |||||||||
Boardwalk REIT | 131 | 7,381 | |||||||||
Calloway REIT | 315 | 7,461 | |||||||||
Canadian Apartment Properties REIT | 324 | 6,482 | |||||||||
Canadian REIT | 246 | 10,044 | |||||||||
Chartwell Retirement Residences | 522 | 4,909 | |||||||||
Cominar REIT | 372 | 6,458 | |||||||||
Crombie REIT | 186 | 2,371 | |||||||||
Dundee International REIT | 200 | 1,585 | |||||||||
Dundee REIT, Class A | 330 | 8,953 | |||||||||
Extendicare, Inc. | 270 | 1,733 | |||||||||
First Capital Realty, Inc. | 283 | 4,718 | |||||||||
Granite Real Estate, Inc. | 200 | 7,279 | |||||||||
H&R REIT | 805 | 16,217 | |||||||||
InnVest REIT | 434 | 1,908 | |||||||||
Killam Properties, Inc. | 156 | 1,539 | |||||||||
Morguard REIT | 129 | 1,998 | |||||||||
Northern Property REIT | 132 | 3,448 | |||||||||
NorthWest Healthcare Properties REIT | 125 | 1,229 | |||||||||
RioCan REIT | 948 | 22,106 | |||||||||
Total Canada common stocks | 130,029 |
Shares | Value | ||||||||||
China: 0.41% | |||||||||||
Agile Property Holdings Ltd. | 4,000 | $ | 4,287 | ||||||||
Champion REIT | 8,000 | 3,539 | |||||||||
Country Garden Holdings Co., Ltd. | 11,540 | 6,965 | |||||||||
Hang Lung Properties Ltd. | 7,000 | 22,117 | |||||||||
Henderson Land Development Co., Ltd. | 3,788 | 21,616 | |||||||||
Hongkong Land Holdings Ltd. | 4,000 | 23,600 | |||||||||
Hysan Development Co., Ltd. | 2,030 | 8,744 | |||||||||
Kerry Properties Ltd. | 2,000 | 6,938 | |||||||||
Link REIT | 7,100 | 34,427 | |||||||||
New World China Land Ltd. | 8,000 | 3,869 | |||||||||
New World Development Co., Ltd. | 12,441 | 15,706 | |||||||||
Shimao Property Holdings Ltd. | 4,500 | 10,341 | |||||||||
Shui On Land Ltd. | 11,666 | 3,581 | |||||||||
Sino Land Co., Ltd. | 10,202 | 13,946 | |||||||||
Soho China Ltd. | 4,500 | 3,877 | |||||||||
Swire Properties Ltd. | 4,000 | 10,110 | |||||||||
Wharf Holdings Ltd. | 5,000 | 38,237 | |||||||||
Total China common stocks | 231,900 | ||||||||||
Finland: 0.02% | |||||||||||
Citycon Oyj | 1,163 | 4,096 | |||||||||
Sponda Oyj | 1,054 | 4,959 | |||||||||
Technopolis Oyj | 378 | 2,262 | |||||||||
Total Finland common stocks | 11,317 | ||||||||||
France: 0.21% | |||||||||||
ANF Immobilier | 48 | 1,474 | |||||||||
Fonciere Des Regions | 101 | 8,719 | |||||||||
Gecina SA | 58 | 7,662 | |||||||||
ICADE | 94 | 8,751 | |||||||||
Klepierre | 309 | 14,319 | |||||||||
Mercialys SA | 105 | 2,203 | |||||||||
Societe de la Tour Eiffel | 23 | 1,537 | |||||||||
Unibail-Rodamco SE | 305 | 78,148 | |||||||||
Total France common stocks | 122,813 | ||||||||||
Germany: 0.08% | |||||||||||
Alstria Office REIT-AG* | 199 | 2,506 | |||||||||
Deutsche Annington Immobilien SE* | 160 | 3,962 | |||||||||
Deutsche Euroshop AG | 163 | 7,136 | |||||||||
Deutsche Wohnen AG* | 918 | 17,420 | |||||||||
DIC Asset AG | 93 | 856 | |||||||||
Hamborner REIT AG | 269 | 2,715 | |||||||||
LEG Immobilien AG* | 98 | 5,791 | |||||||||
TAG Immobilien AG | 306 | 3,696 | |||||||||
Total Germany common stocks | 44,082 | ||||||||||
Hong Kong: 0.11% | |||||||||||
Sun Hung Kai Properties Ltd. | 5,000 | 63,416 |
50
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Israel: 0.01% | |||||||||||
Azrieli Group | 100 | $ | 3,324 | ||||||||
Italy: 0.00%1 | |||||||||||
Beni Stabili SpA | 2,803 | 1,889 | |||||||||
Japan: 0.90% | |||||||||||
Activia Properties, Inc. | 1 | 7,872 | |||||||||
Advance Residence Investment Corp. | 4 | 8,622 | |||||||||
Aeon Mall Co., Ltd. | 360 | 10,088 | |||||||||
Daiwahouse Residential Investment Corp. | 1 | 3,983 | |||||||||
Frontier Real Estate Investment Corp. | 2 | 9,876 | |||||||||
GLP J-REIT | 5 | 4,881 | |||||||||
Hulic Co., Ltd. | 1,000 | 14,766 | |||||||||
Japan Excellent, Inc. | 5 | 5,854 | |||||||||
Japan Prime Realty Investment Corp. | 3 | 9,600 | |||||||||
Japan Real Estate Investment Corp. | 4 | 21,422 | |||||||||
Japan Retail Fund Investment Corp. | 7 | 14,238 | |||||||||
Kenedix Realty Investment Corp. | 1 | 4,743 | |||||||||
Mitsubishi Estate Co., Ltd. | 4,000 | 119,457 | |||||||||
Mitsui Fudosan Co., Ltd. | 3,000 | 107,825 | |||||||||
Mori Hills REIT Investment Corp. | 1 | 6,628 | |||||||||
Mori Trust Sogo Reit, Inc. | 1 | 7,957 | |||||||||
Nippon Accommodations Fund, Inc. | 1 | 6,723 | |||||||||
Nippon Building Fund, Inc. | 4 | 23,246 | |||||||||
Nippon Prologis REIT, Inc. | 1 | 9,553 | |||||||||
Nomura Real Estate Holdings, Inc. | 400 | 8,994 | |||||||||
Nomura Real Estate Master Fund, Inc. | 5 | 5,147 | |||||||||
Nomura Real Estate Office Fund, Inc. | 1 | 4,643 | |||||||||
NTT Urban Development Corp. | 300 | 3,444 | |||||||||
Orix JREIT, Inc. | 5 | 6,253 | |||||||||
Premier Investment Corp. | 1 | 3,865 | |||||||||
Sumitomo Realty & Development Co., Ltd. | 1,000 | 49,663 | |||||||||
Tokyo Tatemono Co., Ltd. | 1,000 | 11,091 | |||||||||
Tokyu REIT, Inc. | 1 | 6,163 | |||||||||
Top REIT, Inc. | 1 | 4,691 | |||||||||
United Urban Investment Corp. | 7 | 10,057 | |||||||||
Total Japan common stocks | 511,345 | ||||||||||
Luxembourg: 0.01% | |||||||||||
GAGFAH SA* | 456 | 6,712 | |||||||||
Netherlands: 0.04% | |||||||||||
Corio NV | 198 | 8,873 | |||||||||
Eurocommercial Properties NV CVA | 105 | 4,458 | |||||||||
Nieuwe Steen Investments NV | 119 | 753 | |||||||||
Vastned Retail NV | 70 | 3,176 | |||||||||
Wereldhave NV | 61 | 4,798 | |||||||||
Total Netherlands common stocks | 22,058 | ||||||||||
New Zealand: 0.01% | |||||||||||
Kiwi Income Property Trust | 4,879 | 4,333 |
Shares | Value | ||||||||||
Norway: 0.00%1 | |||||||||||
Norwegian Property ASA | 2,619 | $ | 3,139 | ||||||||
Singapore: 0.26% | |||||||||||
Ascendas REIT | 7,000 | 12,203 | |||||||||
CapitaCommercial Trust | 7,000 | 8,043 | |||||||||
CapitaLand Ltd. | 8,000 | 19,208 | |||||||||
CapitaMall Trust | 10,000 | 15,096 | |||||||||
CapitaMalls Asia Ltd. | 4,000 | 6,213 | |||||||||
CDL Hospitality Trusts | 2,000 | 2,599 | |||||||||
City Developments Ltd. | 2,000 | 15,215 | |||||||||
Global Logistic Properties Ltd. | 10,000 | 22,901 | |||||||||
Keppel Land Ltd. | 2,000 | 5,293 | |||||||||
Keppel REIT | 4,000 | 3,756 | |||||||||
Mapletree Commercial Trust | 5,000 | 4,715 | |||||||||
Mapletree Industrial Trust | 4,112 | 4,350 | |||||||||
Mapletree Logistics Trust | 6,096 | 5,096 | |||||||||
Suntec REIT | 7,000 | 8,542 | |||||||||
UOL Group Ltd. | 2,000 | 9,810 | |||||||||
Wing Tai Holdings Ltd. | 1,550 | 2,414 | |||||||||
Yanlord Land Group Ltd. | 2,000 | 1,942 | |||||||||
Total Singapore common stocks | 147,396 | ||||||||||
Sweden: 0.06% | |||||||||||
Castellum AB | 569 | 8,855 | |||||||||
Fabege AB | 365 | 4,358 | |||||||||
Fastighets AB Balder, Class B* | 366 | 3,756 | |||||||||
Hufvudstaden AB, Class A | 306 | 4,099 | |||||||||
Klovern AB | 633 | 2,805 | |||||||||
Kungsleden AB | 503 | 3,378 | |||||||||
Wallenstam AB, Class B | 316 | 4,778 | |||||||||
Wihlborgs Fastigheter AB | 238 | 4,265 | |||||||||
Total Sweden common stocks | 36,294 | ||||||||||
Switzerland: 0.05% | |||||||||||
Allreal Holding AG* | 25 | 3,461 | |||||||||
Mobimo Holding AG* | 15 | 3,129 | |||||||||
PSP Swiss Property AG* | 125 | 10,580 | |||||||||
Swiss Prime Site AG* | 177 | 13,701 | |||||||||
Total Switzerland common stocks | 30,871 | ||||||||||
United Kingdom: 2.96% | |||||||||||
Big Yellow Group PLC | 397 | 3,142 | |||||||||
British Land Co., PLC | 3,185 | 33,175 | |||||||||
Capital & Counties Properties PLC | 1,852 | 10,096 | |||||||||
Daejan Holdings PLC | 16 | 1,196 | |||||||||
Derwent London PLC | 260 | 10,742 | |||||||||
Development Securities PLC | 729 | 3,220 | |||||||||
F&C Commercial Property Trust Ltd. | 1,939 | 3,869 | |||||||||
Grainger PLC | 1,328 | 4,482 | |||||||||
Great Portland Estates PLC | 1,049 | 10,405 | |||||||||
Hammerson PLC | 2,258 | 18,770 |
51
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
Hansteen Holdings PLC | 2,361 | $ | 4,230 | ||||||||
Helical Bar PLC | 506 | 2,736 | |||||||||
Intu Properties PLC | 2,005 | 10,291 | |||||||||
John Laing Infrastructure Fund Ltd. | 779,000 | 1,486,063 | |||||||||
Land Securities Group PLC | 2,456 | 39,183 | |||||||||
Londonmetric Property PLC | 1,954 | 4,475 | |||||||||
Medicx Fund Ltd. | 1,435 | 1,996 | |||||||||
Mucklow A & J Group PLC | 263 | 2,086 | |||||||||
Picton Property Income Ltd. | 1,958 | 1,816 | |||||||||
Primary Health Properties PLC | 442 | 2,584 | |||||||||
Quintain Estates & Development PLC* | 2,071 | 3,241 | |||||||||
Safestore Holdings PLC | 620 | 1,653 | |||||||||
Schroder REIT | 896 | 742 | |||||||||
Segro PLC | 2,186 | 12,091 | |||||||||
Shaftesbury PLC | 726 | 7,538 | |||||||||
ST Modwen Properties PLC | 530 | 3,224 | |||||||||
UK Commercial Property Trust Ltd. | 1,288 | 1,642 | |||||||||
Unite Group PLC | 500 | 3,333 | |||||||||
Workspace Group PLC | 288 | 2,518 | |||||||||
Total United Kingdom common stocks | 1,690,539 | ||||||||||
United States: 2.78% | |||||||||||
Acadia Realty Trust | 156 | 3,874 | |||||||||
Agree Realty Corp. | 77 | 2,235 | |||||||||
Alexander's, Inc. | 8 | 2,640 | |||||||||
Alexandria Real Estate Equities, Inc. | 234 | 14,887 | |||||||||
American Assets Trust, Inc. | 124 | 3,897 | |||||||||
American Campus Communities, Inc. | 329 | 10,597 | |||||||||
American Homes 4 Rent, Class A | 166 | 2,689 | |||||||||
American Realty Capital Properties, Inc. | 500 | 6,430 | |||||||||
Apartment Investment & Management Co., Class A | 452 | 11,711 | |||||||||
Ashford Hospitality Trust, Inc. | 177 | 1,466 | |||||||||
Associated Estates Realty Corp. | 146 | 2,343 | |||||||||
AvalonBay Communities, Inc. | 419 | 49,538 | |||||||||
BioMed Realty Trust, Inc. | 605 | 10,963 | |||||||||
Boston Properties, Inc. | 492 | 49,382 | |||||||||
Brandywine Realty Trust | 465 | 6,552 | |||||||||
BRE Properties, Inc. | 248 | 13,568 | |||||||||
Brixmor Property Group, Inc.* | 134 | 2,724 | |||||||||
Brookfield Office Properties, Inc. | 768 | 14,785 | |||||||||
Camden Property Trust | 278 | 15,813 | |||||||||
Campus Crest Communities, Inc. | 235 | 2,211 | |||||||||
CBL & Associates Properties, Inc. | 520 | 9,339 | |||||||||
Cedar Realty Trust, Inc. | 258 | 1,615 | |||||||||
Chambers Street Properties | 800 | 6,120 | |||||||||
Chesapeake Lodging Trust | 165 | 4,173 | |||||||||
Cole Real Estate Investment, Inc. | 1,450 | 20,358 | |||||||||
CommonWealth REIT | 378 | 8,811 | |||||||||
Corporate Office Properties Trust | 254 | 6,017 |
Shares | Value | ||||||||||
Cousins Properties, Inc. | 601 | $ | 6,190 | ||||||||
CubeSmart | 412 | 6,567 | |||||||||
DCT Industrial Trust, Inc. | 975 | 6,952 | |||||||||
DDR Corp. | 987 | 15,170 | |||||||||
DiamondRock Hospitality Co. | 629 | 7,265 | |||||||||
Digital Realty Trust, Inc. | 415 | 20,385 | |||||||||
Douglas Emmett, Inc. | 422 | 9,827 | |||||||||
Duke Realty Corp. | 1,036 | 15,581 | |||||||||
DuPont Fabros Technology, Inc. | 200 | 4,942 | |||||||||
EastGroup Properties, Inc. | 106 | 6,141 | |||||||||
Education Realty Trust, Inc. | 356 | 3,140 | |||||||||
Empire State Realty Trust, Inc., Class A | 225 | 3,443 | |||||||||
EPR Properties | 152 | 7,472 | |||||||||
Equity Lifestyle Properties, Inc. | 248 | 8,985 | |||||||||
Equity One, Inc. | 204 | 4,578 | |||||||||
Equity Residential | 1,150 | 59,651 | |||||||||
Essex Property Trust, Inc. | 128 | 18,369 | |||||||||
Excel Trust, Inc. | 200 | 2,278 | |||||||||
Extra Space Storage, Inc. | 366 | 15,420 | |||||||||
Federal Realty Investment Trust | 215 | 21,803 | |||||||||
FelCor Lodging Trust, Inc.* | 394 | 3,215 | |||||||||
First Industrial Realty Trust, Inc. | 312 | 5,444 | |||||||||
First Potomac Realty Trust | 200 | 2,326 | |||||||||
Forest City Enterprises, Inc., Class A* | 407 | 7,774 | |||||||||
Franklin Street Properties Corp. | 276 | 3,298 | |||||||||
General Growth Properties, Inc. | 1,770 | 35,524 | |||||||||
Getty Realty Corp. | 134 | 2,462 | |||||||||
Glimcher Realty Trust | 416 | 3,894 | |||||||||
Government Properties Income Trust | 185 | 4,597 | |||||||||
HCP, Inc. | 1,466 | 53,245 | |||||||||
Health Care REIT, Inc. | 919 | 49,231 | |||||||||
Healthcare Realty Trust, Inc. | 276 | 5,882 | |||||||||
Hersha Hospitality Trust | 487 | 2,713 | |||||||||
Highwoods Properties, Inc. | 254 | 9,187 | |||||||||
Home Properties, Inc. | 168 | 9,008 | |||||||||
Hospitality Properties Trust | 447 | 12,082 | |||||||||
Host Hotels & Resorts, Inc. | 2,408 | 46,812 | |||||||||
Hudson Pacific Properties, Inc. | 220 | 4,811 | |||||||||
Inland Real Estate Corp. | 256 | 2,693 | |||||||||
Investors Real Estate Trust | 325 | 2,789 | |||||||||
Kilroy Realty Corp. | 249 | 12,495 | |||||||||
Kimco Realty Corp. | 1,305 | 25,774 | |||||||||
Kite Realty Group Trust | 236 | 1,551 | |||||||||
LaSalle Hotel Properties | 298 | 9,196 | |||||||||
Lexington Realty Trust | 691 | 7,055 | |||||||||
Liberty Property Trust | 478 | 16,190 | |||||||||
LTC Properties, Inc. | 121 | 4,282 | |||||||||
Macerich Co. | 442 | 26,029 | |||||||||
Mack-Cali Realty Corp. | 276 | 5,928 | |||||||||
Medical Properties Trust, Inc. | 461 | 5,633 | |||||||||
Mid-America Apartment Communities, Inc. | 223 | 13,545 | |||||||||
National Health Investors, Inc. | 90 | 5,049 |
52
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
National Retail Properties, Inc. | 362 | $ | 10,979 | ||||||||
Omega Healthcare Investors, Inc. | 363 | 10,817 | |||||||||
Parkway Properties, Inc. | 140 | 2,701 | |||||||||
Pebblebrook Hotel Trust | 205 | 6,306 | |||||||||
Pennsylvania REIT | 162 | 3,075 | |||||||||
Piedmont Office Realty Trust, Inc., Class A | 524 | 8,656 | |||||||||
Post Properties, Inc. | 171 | 7,734 | |||||||||
Prologis, Inc. | 1,613 | 59,600 | |||||||||
PS Business Parks, Inc. | 66 | 5,044 | |||||||||
Public Storage | 464 | 69,841 | |||||||||
Ramco-Gershenson Properties Trust | 165 | 2,597 | |||||||||
Realty Income Corp. | 630 | 23,518 | |||||||||
Regency Centers Corp. | 295 | 13,659 | |||||||||
Retail Opportunity Investments Corp. | 177 | 2,605 | |||||||||
RLJ Lodging Trust | 378 | 9,193 | |||||||||
Rouse Properties, Inc. | 111 | 2,463 | |||||||||
Sabra Health Care REIT, Inc. | 134 | 3,503 | |||||||||
Saul Centers, Inc. | 64 | 3,055 | |||||||||
Select Income REIT | 99 | 2,647 | |||||||||
Senior Housing Properties Trust | 577 | 12,827 | |||||||||
Silver Bay Realty Trust Corp. | 100 | 1,599 | |||||||||
Simon Property Group, Inc. | 993 | 151,095 | |||||||||
SL Green Realty Corp. | 299 | 27,622 | |||||||||
Sovran Self Storage, Inc. | 111 | 7,234 | |||||||||
Spirit Realty Capital, Inc. | 1,161 | 11,413 | |||||||||
STAG Industrial, Inc. | 150 | 3,059 | |||||||||
Strategic Hotels & Resorts, Inc.* | 519 | 4,905 | |||||||||
Sun Communities, Inc. | 123 | 5,245 | |||||||||
Sunstone Hotel Investors, Inc. | 504 | 6,754 | |||||||||
Tanger Factory Outlet Centers | 298 | 9,542 | |||||||||
Taubman Centers, Inc. | 203 | 12,976 | |||||||||
UDR, Inc. | 804 | 18,773 | |||||||||
Universal Health Realty Income Trust | 56 | 2,243 | |||||||||
Urstadt Biddle Properties, Inc., Class A | 151 | 2,786 | |||||||||
Ventas, Inc. | 948 | 54,301 | |||||||||
Vornado Realty Trust | 541 | 48,035 | |||||||||
Washington REIT | 212 | 4,952 | |||||||||
Weingarten Realty Investors | 338 | 9,268 | |||||||||
Winthrop Realty Trust | 116 | 1,282 | |||||||||
WP Carey, Inc. | 188 | 11,534 | |||||||||
Total United States common stocks | 1,584,049 | ||||||||||
Venezuela: 0.00%1 | |||||||||||
Warehouses De Pauw SCA | 36 | 2,610 | |||||||||
Total common stocks (cost $4,706,324) | 4,885,268 |
Face amount | Value | ||||||||||
Bonds: 17.16% | |||||||||||
Commercial mortgage-backed securities: 0.90% | |||||||||||
United States: 0.90% | |||||||||||
Banc of America Commercial Mortgage, Inc., Series 2007-4, Class AM, 5.813%, due 02/10/512 | $ | 100,000 | $ | 110,275 | |||||||
Boca Hotel Portfolio Trust 2013-BOCA, Series 2013-BOCA, Class C, 2.317%, due 08/15/262,3 | 100,000 | 100,126 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2007-LD11, Class A4, 5.806%, due 06/15/492 | 100,000 | 111,232 | |||||||||
Morgan Stanley Re-REMIC Trust, Series 2009-GG10, Class A4B, 5.804%, due 08/12/452,3 | 175,000 | 191,158 | |||||||||
Total commercial mortgage-backed securities (cost $500,775) | 512,791 | ||||||||||
Mortgage & agency debt securities: 6.83% | |||||||||||
United States: 6.83% | |||||||||||
Federal Home Loan Mortgage Corp. Gold Pools,4 #G05132, 5.000%, due 12/01/38 | 22,274 | 23,979 | |||||||||
Federal Home Loan Mortgage Corp. REMIC, IO,4 3.000%, due 05/15/27 | 143,706 | 17,594 | |||||||||
Federal Home Loan Mortgage Corp. REMICS, IO,4 3.500%, due 10/15/42 | 1,087,728 | 258,330 | |||||||||
Federal National Mortgage Association Pools,4 2.500%, TBA | 100,000 | 98,968 | |||||||||
3.500%, TBA | 175,000 | 183,005 | |||||||||
4.000%, TBA | 50,000 | 51,469 | |||||||||
5.000%, TBA | 250,000 | 271,504 | |||||||||
#AP1589, 3.000%, due 08/01/27 | 220,676 | 225,474 | |||||||||
#AB6198, 3.000%, due 09/01/27 | 82,814 | 84,615 | |||||||||
Federal National Mortgage Association REMICS, IO,4 Series 2013-15, Class IO, 2.500%, due 03/25/28 | 2,262,562 | 257,412 | |||||||||
Series 2013-87, Class IW, 2.500%, due 06/25/28 | 1,945,750 | 219,100 | |||||||||
Series 2013-64, Class LI, 3.000%, due 06/25/33 | 1,519,110 | 225,184 | |||||||||
Series 2011-91, Class EI, 3.500%, due 08/25/26 | 1,199,773 | 147,297 |
53
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Mortgage & agency debt securities—(Concluded) | |||||||||||
Series 2012-146, Class IO, 3.500%, due 01/25/43 | $ | 612,669 | $ | 142,456 | |||||||
Government National Mortgage Association Pools, #G2 779424, 4.000%, due 06/20/42 | 329,021 | 343,988 | |||||||||
#732230, 4.500%, due 03/15/40 | 289,162 | 309,214 | |||||||||
#747264, 4.500%, due 09/15/40 | 253,701 | 271,185 | |||||||||
Government National Mortgage Association, IO, Series 2013-22, Class IO, 3.000%, due 02/20/43 | 985,360 | 215,698 | |||||||||
Series 2012-26, Class GI, 3.500%, due 02/20/27 | 876,491 | 112,717 | |||||||||
Series 2012-16, Class AI, 3.500%, due 10/20/38 | 1,156,427 | 186,247 | |||||||||
Series 2013-53, Class OI, 3.500%, due 04/20/43 | 1,327,006 | 249,435 | |||||||||
Total mortgage & agency debt securities (cost $3,891,463) | 3,894,871 | ||||||||||
US government obligations: 4.68% | |||||||||||
US Treasury Inflation Indexed Bonds (TIPS), 3.875%, due 04/15/295 | 425,000 | 827,457 | |||||||||
US Treasury Inflation Indexed Notes (TIPS), 2.000%, due 01/15/165 | 810,000 | 1,015,741 | |||||||||
2.625%, due 07/15/175 | 650,000 | 823,895 | |||||||||
Total US government obligations (cost $2,777,987) | 2,667,093 | ||||||||||
Non-US government obligation: 4.75% | |||||||||||
Italy: 4.75% | |||||||||||
Buoni Poliennali Del Tesoro, 2.100%, due 09/15/175,6 (cost $2,500,154) | EUR | 1,917,317 | 2,710,716 | ||||||||
Total bonds (cost $9,670,379) | 9,785,471 |
Shares | Value | ||||||||||
Investment companies: 72.81% | |||||||||||
HICL Infrastructure Co., Ltd. | 662,943 | $ | 1,476,542 | ||||||||
iShares Core S&P 500 ETF | 22,400 | 4,158,560 | |||||||||
iShares Emerging Markets Local Currency Bond ETF | 23,965 | 1,171,649 | |||||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 138,571 | 12,870,474 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 72,968 | 8,333,675 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 10,953 | 1,184,676 | |||||||||
iShares MSCI EAFE ETF | 79,980 | 5,363,459 | |||||||||
iShares U.S. Industrials ETF | 18,000 | 1,824,840 | |||||||||
SPDR Barclays Short Term High Yield Bond ETF | 76,331 | 2,355,575 | |||||||||
WisdomTree Emerging Markets Equity Income Fund | 54,760 | 2,794,403 | |||||||||
Total investment companies (cost $41,182,192) | 41,533,853 | ||||||||||
Short-term investment: 2.68% | |||||||||||
Investment company: 2.68% | |||||||||||
UBS Cash Management Prime Relationship Fund7 (cost $1,530,327) | 1,530,327 | 1,530,327 | |||||||||
Total investments: 101.21% (cost $57,089,222) | 57,734,919 | ||||||||||
Liabilities, in excess of cash and other assets: (1.21)% | (687,636 | ) | |||||||||
Net assets: 100.00% | $ | 57,047,283 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 1,786,046 | |||||
Gross unrealized depreciation | (1,140,349 | ) | |||||
Net unrealized appreciation of investments | $ | 645,697 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 58. Portfolio footnotes begin on page 57.
54
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
JPMCB | AUD | 550,800 | USD | 502,298 | 01/16/14 | $ | 10,915 | ||||||||||||
JPMCB | CAD | 131,900 | USD | 123,930 | 01/16/14 | (200 | ) | ||||||||||||
JPMCB | CHF | 283,900 | USD | 312,213 | 01/16/14 | (6,077 | ) | ||||||||||||
JPMCB | EUR | 3,156,500 | USD | 4,275,624 | 01/16/14 | (66,733 | ) | ||||||||||||
JPMCB | GBP | 2,638,800 | USD | 4,323,014 | 01/16/14 | (46,317 | ) | ||||||||||||
JPMCB | HKD | 2,642,700 | USD | 340,923 | 01/16/14 | 116 | |||||||||||||
JPMCB | JPY | 147,237,600 | USD | 1,433,373 | 01/16/14 | 35,144 | |||||||||||||
JPMCB | SGD | 262,700 | USD | 209,373 | 01/16/14 | 1,205 | |||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (71,947 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Ultra Bond, 21 contracts (USD) | March 2014 | $ | (2,909,232 | ) | $ | (2,861,250 | ) | $ | 47,982 | ||||||||||
Index futures sell contracts: | |||||||||||||||||||
Mini MSCI Emerging Markets Index, 23 contracts (USD) | March 2014 | (1,132,669 | ) | (1,169,320 | ) | (36,651 | ) | ||||||||||||
Net unrealized appreciation on futures contracts | $ | 11,331 |
Options written
Written options activity for the period ended December 31, 2013 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 3,640,473 | $ | 21,013 | ||||||||
Options written | 7,383,830 | 18,807 | |||||||||
Options terminated in closing purchase transactions | (11,024,303 | ) | (39,820 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at December 31, 2013 | — | $ | — |
55
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
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 | $ | 4,885,268 | $ | — | $ | — | $ | 4,885,268 | |||||||||||
Commercial mortgage-backed securities | — | 512,791 | — | 512,791 | |||||||||||||||
Mortgage & agency debt securities | — | 3,595,907 | 298,964 | 3,894,871 | |||||||||||||||
US government obligations | — | 2,667,093 | — | 2,667,093 | |||||||||||||||
Non-US government obligation | — | 2,710,716 | — | 2,710,716 | |||||||||||||||
Investment companies | 41,533,853 | — | — | 41,533,853 | |||||||||||||||
Short-term investment | — | 1,530,327 | — | 1,530,327 | |||||||||||||||
Forward foreign currency contracts, net | — | (71,947 | ) | — | (71,947 | ) | |||||||||||||
Futures contracts, net | 11,331 | — | — | 11,331 | |||||||||||||||
Total | $ | 46,430,452 | $ | 10,944,887 | $ | 298,964 | $ | 57,674,303 |
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period:
Rights | Mortgage & agency debt securities | Total | |||||||||||||
Assets | |||||||||||||||
Beginning balance | $ | 0 | $ | 290,343 | $ | 290,343 | |||||||||
Purchases | — | — | — | ||||||||||||
Issuances | — | — | — | ||||||||||||
Sales | (0 | ) | — | — | |||||||||||
Accrued discounts (premiums) | — | (35,746 | ) | (35,746 | ) | ||||||||||
Total realized gain | — | — | — | ||||||||||||
Change in net unrealized appreciation/depreciation | — | 44,367 | 44,367 | ||||||||||||
Transfers into Level 3 | — | — | — | ||||||||||||
Transfers out of Level 3 | — | — | — | ||||||||||||
Ending balance | $ | — | $ | 298,964 | $ | 298,964 |
The change in net unrealized appreciation/depreciation relating to the Level 3 investments held at December 31, 2013 was $9,849.
56
UBS Multi-Asset Income Fund
Portfolio of investments
December 31, 2013 (unaudited)
Portfolio footnotes
* Non-income producing security.
1 Amount represents less than 0.005%.
2 Variable or floating rate security—The interest rate shown is the current rate as of December 31, 2013 and changes periodically.
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 December 31, 2013, the value of these securities amounted to $291,284 or 0.51% 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 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional security of the same maturity.
6 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 December 31, 2013, the value of this security amounted to $2,710,716 or 4.75% of net assets.
7 The table below details the Fund's investment in a fund 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 06/30/13 | Purchases during the six months ended 12/31/13 | Sales during the six months ended 12/31/13 | Value 12/31/13 | Net income earned from affiliate for the six months ended 12/31/13 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 6,120,598 | $ | 8,714,555 | $ | 13,304,826 | $ | 1,530,327 | $ | 2,010 |
See accompanying notes to financial statements.
57
The UBS Funds
Portfolio acronyms
ADR American Depositary Receipt
CDO Collateralized Debt Obligations
CVA Dutch Certification—Depositary Certificate
ETF Exchange Traded Fund
EURIBOR Euro Interbank Offered Rate
GE General Electric
GDR Global Depositary Receipt
IO Interest only—This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydown. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.
OJSC Open Joint Stock Company
REMIC Real Estate Mortgage Investment Conduit
REIT Real Estate Investment Trust
SPDR Standard & Poor's Depository Receipts
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.
TIPS Treasury inflation protected securities ("TIPS") are debt securities issued by the US Treasury whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the TIPS is fixed, while the principal value rises or falls based on changes in a published Consumer Price Index ("CPI"). Thus, if inflation occurs, the principal and interest payments on the TIPS are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the TIPS principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the TIPS generally pay lower interest rates than typical US Treasury securities. Only if inflation occurs will TIPS offer a higher real yield than a conventional Treasury security of the same maturity.
Counterparty abbreviations
BB Barclays Bank PLC
CIBC Canadian Imperial Bank of Commerce
CITI Citibank NA
DB Deutsche Bank AG
GSI Goldman Sachs International
HSBC HSBC Bank NA
JPMCB JPMorgan Chase Bank
MSCI Morgan Stanley & Co. International PLC
SSB State Street Bank
Currency abbreviations
AUD Australian Dollar
CAD Canadian Dollar
CHF Swiss Franc
CLP Chilean Peso
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
IDR Indonesian Rupiah
ILS Israel New Shekel
INR Indian Rupee
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
NOK Norwegian Krone
NZD New Zealand Dollar
PHP Philippine Peso
PLN Polish Zloty
SEK Swedish Krona
SGD Singapore Dollar
THB Thai Baht
USD United States Dollar
ZAR South African Rand
See accompanying notes to financial statements.
58
The UBS Funds
December 31, 2013 (unaudited)
Explanation of expense disclosure
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, July 1, 2013 to December 31, 2013.
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 July 1, 2013 to December 31, 2013.
59
The UBS Funds
December 31, 2013 (unaudited)
Beginning account value July 1, 2013 | Ending account value December 31, 2013 | Expenses paid during period* 07/01/13 – 12/31/13 | Expense ratio during period | ||||||||||||||||||||
UBS Asset Growth Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,111.20 | $ | 7.45 | 1.40 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.15 | 7.12 | 1.40 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,106.60 | 11.42 | 2.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.37 | 10.92 | 2.15 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,112.10 | 6.12 | 1.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.41 | 5.85 | 1.15 | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,049.90 | 6.98 | 1.35 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.40 | 6.87 | 1.35 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,044.90 | 10.82 | 2.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.62 | 10.66 | 2.10 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,051.50 | 5.69 | 1.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.66 | 5.60 | 1.10 | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,086.10 | 6.78 | 1.29 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.70 | 6.56 | 1.29 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,080.60 | 10.86 | 2.07 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.77 | 10.51 | 2.07 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,087.60 | 5.21 | 0.99 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.21 | 5.04 | 0.99 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
60
The UBS Funds
December 31, 2013 (unaudited)
Beginning account value July 1, 2013 | Ending account value December 31, 2013 | Expenses paid during period* 07/01/13 – 12/31/13 | Expense ratio during period | ||||||||||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,047.40 | $ | 4.90 | 0.95 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.42 | 4.84 | 0.95 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,044.40 | 8.76 | 1.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,016.64 | 8.64 | 1.70 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,049.70 | 3.62 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.68 | 3.57 | 0.70 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
61
The UBS Funds
Financial statements
Statement of assets and liabilities
December 31, 2013 (unaudited)
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost: | |||||||||||
Unaffiliated issuers | $ | 21,467,111 | $ | 260,108,384 | |||||||
Affiliated issuers | 7,850,088 | 7,419,813 | |||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | 5,456,410 | 1,158,890 | |||||||||
Foreign currency, at cost | 16,289 | 7,328,798 | |||||||||
$ | 34,789,898 | $ | 276,015,885 | ||||||||
Investments, at value: | |||||||||||
Unaffiliated issuers | $ | 21,423,685 | $ | 257,868,868 | |||||||
Affiliated issuers | 7,850,088 | 7,419,813 | |||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | 5,456,410 | 1,158,890 | |||||||||
Foreign currency, at value | 16,604 | 7,355,757 | |||||||||
Cash | — | — | |||||||||
Receivables: | |||||||||||
Investment securities sold | 110 | — | |||||||||
Interest | 1,088 | 2,796,629 | |||||||||
Fund shares sold | 82 | 188,625 | |||||||||
Foreign tax reclaims | — | 90,789 | |||||||||
Dividends | 58,284 | 403 | |||||||||
Variation margin on futures contracts | 1,410,114 | 1,708,731 | |||||||||
Variation margin on centrally cleared swap agreements | — | 1,831,899 | |||||||||
Due from broker for futures contracts | 933,659 | 21,202,781 | |||||||||
Cash collateral for futures contracts | 2,171,933 | 6,868,294 | |||||||||
Cash collateral for swap agreements | — | 6,391,152 | |||||||||
Outstanding swap agreements, at value2 | — | 5,529,766 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 627,755 | |||||||||
Other assets | 31,587 | 66,540 | |||||||||
Total assets | 39,353,644 | 321,106,692 | |||||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Cash collateral from securities loaned | 5,456,410 | 1,158,890 | |||||||||
Investment securities purchased | 110 | — | |||||||||
Investment advisory and administration fee | 7,781 | 225,092 | |||||||||
Custody and fund accounting fees | 12,759 | 43,036 | |||||||||
Fund shares redeemed | 40,888 | 1,366,254 | |||||||||
Distribution and service fees | 11,391 | 90,333 | |||||||||
Trustees' fees | 5,377 | 13,488 | |||||||||
Due to custodian | 57,709 | 734,076 | |||||||||
Due to broker | — | — | |||||||||
Accrued expenses | 20,203 | 111,701 | |||||||||
Outstanding swap agreements, at value2 | — | 3,175,739 | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | 1,998,888 | |||||||||
Total liabilities | 5,612,628 | 8,917,497 | |||||||||
Net assets | $ | 33,741,016 | $ | 312,189,195 |
1 The market value of securities loaned by UBS Asset Growth Fund, UBS Dynamic Alpha Fund, and UBS Global Allocation Fund, as of December 31, 2013 was $5,338,690, $1,140,932, and $32,066,426, respectively.
2 Net upfront payments made by UBS Dynamic Alpha Fund were $72,927.
62
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost: | |||||||||||
Unaffiliated issuers | $ | 332,471,211 | $ | 55,558,895 | |||||||
Affiliated issuers | 238,176,897 | 1,530,327 | |||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at cost1 | 19,237,595 | — | |||||||||
Foreign currency, at cost | 1,274,484 | 121,110 | |||||||||
$ | 591,160,187 | $ | 57,210,332 | ||||||||
Investments, at value: | |||||||||||
Unaffiliated issuers | $ | 383,269,976 | $ | 56,204,592 | |||||||
Affiliated issuers | 253,480,116 | 1,530,327 | |||||||||
Investments of cash collateral in affiliated issuers received from securities loaned, at value1 | 19,237,595 | — | |||||||||
Foreign currency, at value | 1,284,667 | 121,771 | |||||||||
Cash | 132,229 | — | |||||||||
Receivables: | |||||||||||
Investment securities sold | 1,800,932 | 618,889 | |||||||||
Interest | 667,248 | 80,645 | |||||||||
Fund shares sold | 32,476 | 385 | |||||||||
Foreign tax reclaims | 199,106 | 655 | |||||||||
Dividends | 313,038 | 165,999 | |||||||||
Variation margin on futures contracts | 3,604,733 | 11,331 | |||||||||
Variation margin on centrally cleared swap agreements | — | — | |||||||||
Due from broker for futures contracts | 15,272,044 | — | |||||||||
Cash collateral for futures contracts | 11,461,658 | 140,125 | |||||||||
Cash collateral for swap agreements | — | — | |||||||||
Outstanding swap agreements, at value2 | — | — | |||||||||
Unrealized appreciation on forward foreign currency contracts | 2,055,668 | 47,380 | |||||||||
Other assets | 85,063 | 28,746 | |||||||||
Total assets | 692,896,549 | 58,950,845 | |||||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Cash collateral from securities loaned | 19,237,595 | — | |||||||||
Investment securities purchased | 3,907,057 | 1,223,707 | |||||||||
Investment advisory and administration fee | 484,160 | 8,862 | |||||||||
Custody and fund accounting fees | 67,637 | 13,023 | |||||||||
Fund shares redeemed | 2,631,615 | 406,568 | |||||||||
Distribution and service fees | 231,624 | 11,882 | |||||||||
Trustees' fees | 25,038 | 6,008 | |||||||||
Due to custodian | — | 35,832 | |||||||||
Due to broker | — | 16,636 | |||||||||
Accrued expenses | 198,433 | 61,717 | |||||||||
Outstanding swap agreements, at value2 | — | — | |||||||||
Unrealized depreciation on forward foreign currency contracts | 3,993,429 | 119,327 | |||||||||
Total liabilities | 30,776,588 | 1,903,562 | |||||||||
Net assets | $ | 662,119,961 | $ | 57,047,283 |
See accompanying notes to financial statements.
63
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
December 31, 2013 (unaudited)
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 57,467,337 | $ | 684,268,360 | |||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | (12,941 | ) | 1,842,430 | ||||||||
Accumulated net realized gain (loss) | (25,050,192 | ) | (376,074,158 | ) | |||||||
Net unrealized appreciation | 1,336,812 | 2,152,563 | |||||||||
Net assets | $ | 33,741,016 | $ | 312,189,195 | |||||||
Class A: | |||||||||||
Net assets | $ | 24,259,160 | $ | 205,599,630 | |||||||
Shares outstanding | 2,777,119 | 28,736,945 | |||||||||
Net asset value and redemption proceeds per share | $ | 8.74 | $ | 7.15 | |||||||
Offering price per share (NAV per share plus maximum sales charge)1,2 | $ | 9.25 | $ | 7.57 | |||||||
Class C: | |||||||||||
Net assets | $ | 7,617,847 | $ | 55,014,913 | |||||||
Shares outstanding | 873,750 | 8,145,830 | |||||||||
Net asset value and offering price per share | $ | 8.72 | $ | 6.75 | |||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1,2 | $ | 8.63 | $ | 6.68 | |||||||
Class Y: | |||||||||||
Net assets | $ | 1,864,009 | $ | 51,574,652 | |||||||
Shares outstanding | 213,762 | 7,077,792 | |||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1,2 | $ | 8.72 | $ | 7.29 |
1 For UBS Asset Growth Fund, UBS Dynamic Alpha Fund, and UBS Global Allocation Fund Class A, the maximum sales charge is 5.50%. Classes 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 shareholders, 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. Class C maximum contingent deferred sales charge is 1.00%. Class Y has no contingent deferred sales charge. 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.
2 For UBS Multi Asset Income Fund Class A, the maximum sales charge is 4.50%. Classes 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 shareholders, 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 charge made within one year of the purchase date. Class C maximum contingent deferred sales charge is 0.75%. Class Y has no contingent deferred sales charge. 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.
64
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 1,626,454,734 | $ | 56,338,075 | |||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | (2,087,372 | ) | (194,217 | ) | |||||||
Accumulated net realized gain (loss) | (1,028,970,338 | ) | 317,328 | ||||||||
Net unrealized appreciation | 66,722,937 | 586,097 | |||||||||
Net assets | $ | 662,119,961 | $ | 57,047,283 | |||||||
Class A: | |||||||||||
Net assets | $ | 345,568,296 | $ | 21,183,746 | |||||||
Shares outstanding | 32,920,373 | 2,060,139 | |||||||||
Net asset value and redemption proceeds per share | $ | 10.50 | $ | 10.28 | |||||||
Offering price per share (NAV per share plus maximum sales charge)1,2 | $ | 11.11 | $ | 10.76 | |||||||
Class C: | |||||||||||
Net assets | $ | 186,739,298 | $ | 8,506,756 | |||||||
Shares outstanding | 18,139,600 | 827,790 | |||||||||
Net asset value and offering price per share | $ | 10.29 | $ | 10.28 | |||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1,2 | $ | 10.19 | $ | 10.20 | |||||||
Class Y: | |||||||||||
Net assets | $ | 129,812,367 | $ | 27,356,781 | |||||||
Shares outstanding | 12,153,394 | 2,659,682 | |||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1,2 | $ | 10.68 | $ | 10.29 |
See accompanying notes to financial statements.
65
The UBS Funds
Financial statements
Statement of operations
For the six months ended December 31, 2013 (unaudited)
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||
Investment income: | |||||||||||
Dividends | $ | 149,716 | $ | — | |||||||
Interest and other | 35,764 | 3,332,600 | |||||||||
Affiliated income | 3,712 | 7,066 | |||||||||
Securities lending1 | 4,886 | 1,481 | |||||||||
Foreign tax withheld | — | (3,627 | ) | ||||||||
Total income | 194,078 | 3,337,520 | |||||||||
Expenses: | |||||||||||
Advisory and administration | $ | 175,137 | $ | 1,458,455 | |||||||
Distribution and service: | |||||||||||
Class A | 30,256 | 263,356 | |||||||||
Class C | 40,994 | 275,565 | |||||||||
Transfer agency and related service fees: | |||||||||||
Class A | 5,364 | 73,690 | |||||||||
Class C | 2,691 | 21,494 | |||||||||
Class Y | 435 | 5,456 | |||||||||
Custodian and fund accounting | 25,385 | 94,476 | |||||||||
Federal and state registration | 15,750 | 19,527 | |||||||||
Professional services | 52,171 | 71,423 | |||||||||
Shareholder reports | 3,118 | 28,515 | |||||||||
Trustees | 10,797 | 27,157 | |||||||||
Other | 8,444 | 24,528 | |||||||||
Total expenses | 370,542 | 2,363,642 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (102,705 | ) | (89,750 | ) | |||||||
Net expenses | 267,837 | 2,273,892 | |||||||||
Net investment income (loss) | (73,759 | ) | 1,063,628 | ||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 1,705,369 | 8,896,631 | |||||||||
Investments in affiliated issuers | 2,422,525 | — | |||||||||
Futures contracts | 345,595 | 1,338,331 | |||||||||
Options written | 21,175 | (777,180 | ) | ||||||||
Swap agreements | — | (995,628 | ) | ||||||||
Forward foreign currency contracts | (300,184 | ) | (5,301,887 | ) | |||||||
Foreign currency transactions | (12,541 | ) | 613,714 | ||||||||
Net realized gain | 4,181,939 | 3,773,981 | |||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||
Investments | (2,193,922 | ) | 8,413,059 | ||||||||
Futures contracts | 1,565,153 | 1,817,447 | |||||||||
Options written | (12,058 | ) | — | ||||||||
Swap agreements | — | 2,352,561 | |||||||||
Forward foreign currency contracts | 80,839 | (2,998,273 | ) | ||||||||
Translation of other assets and liabilities denominated in foreign currency | 31,633 | 602,476 | |||||||||
Change in net unrealized appreciation/depreciation | (528,355 | ) | 10,187,270 | ||||||||
Net realized and unrealized gain | 3,653,584 | 13,961,251 | |||||||||
Net increase in net assets resulting from operations | $ | 3,579,825 | $ | 15,024,879 |
1 Includes affiliated income from UBS Private Money Market Fund LLC of $16, $45 and $1,046 for UBS Asset Growth Fund, UBS Dynamic Alpha Fund and UBS Global Allocation Fund, respectively.
66
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||
Investment income: | |||||||||||
Dividends | $ | 2,555,122 | $ | 1,062,657 | |||||||
Interest and other | 715,894 | 98,459 | |||||||||
Affiliated income | 87,312 | 2,010 | |||||||||
Securities lending1 | 278,808 | — | |||||||||
Foreign tax withheld | (79,055 | ) | (1,969 | ) | |||||||
Total income | 3,558,081 | 1,161,157 | |||||||||
Expenses: | |||||||||||
Advisory and administration | $ | 2,973,942 | $ | 193,751 | |||||||
Distribution and service: | |||||||||||
Class A | 459,383 | 27,888 | |||||||||
Class C | 967,522 | 45,037 | |||||||||
Transfer agency and related service fees: | |||||||||||
Class A | 124,496 | 6,137 | |||||||||
Class C | 90,501 | 2,225 | |||||||||
Class Y | 10,502 | 416 | |||||||||
Custodian and fund accounting | 134,957 | 37,883 | |||||||||
Federal and state registration | 18,463 | 16,315 | |||||||||
Professional services | 74,346 | 57,976 | |||||||||
Shareholder reports | 59,684 | 3,550 | |||||||||
Trustees | 49,377 | 12,132 | |||||||||
Other | 59,419 | 12,655 | |||||||||
Total expenses | 5,022,592 | 415,965 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | — | (139,054 | ) | ||||||||
Net expenses | 5,022,592 | 276,911 | |||||||||
Net investment income (loss) | (1,464,511 | ) | 884,246 | ||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 25,552,907 | 755,167 | |||||||||
Investments in affiliated issuers | 3,235,227 | — | |||||||||
Futures contracts | 6,109,733 | 135,370 | |||||||||
Options written | 352,028 | (51,868 | ) | ||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | (3,529,349 | ) | (451,024 | ) | |||||||
Foreign currency transactions | (259 | ) | 9,531 | ||||||||
Net realized gain | 31,720,287 | 397,176 | |||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||
Investments | 22,880,305 | 1,461,999 | |||||||||
Futures contracts | 4,613,985 | 17,151 | |||||||||
Options written | (200,470 | ) | (1,395 | ) | |||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | (1,070,652 | ) | (66,571 | ) | |||||||
Translation of other assets and liabilities denominated in foreign currency | (352,524 | ) | 34,901 | ||||||||
Change in net unrealized appreciation/depreciation | 25,870,644 | 1,446,085 | |||||||||
Net realized and unrealized gain | 57,590,931 | 1,843,261 | |||||||||
Net increase in net assets resulting from operations | $ | 56,126,420 | $ | 2,727,507 |
See accompanying notes to financial statements.
67
The UBS Funds
Financial statements
Statement of changes in net assets
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (73,759 | ) | $ | (356,643 | ) | $ | 1,063,628 | $ | 2,585,072 | |||||||||
Net realized gain | 4,181,939 | 5,533,699 | 3,773,981 | 19,552,253 | |||||||||||||||
Change in net unrealized appreciation/depreciation | (528,355 | ) | (239,070 | ) | 10,187,270 | 555,861 | |||||||||||||
Net increase in net assets from operations | 3,579,825 | 4,937,986 | 15,024,879 | 22,693,186 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (101,975 | ) | (341,776 | ) | (294,356 | ) | (2,871,492 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class A dividends and distributions | (101,975 | ) | (341,776 | ) | (294,356 | ) | (2,871,492 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | — | (30,588 | ) | — | (499,843 | ) | |||||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class C dividends and distributions | — | (30,588 | ) | — | (499,843 | ) | |||||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (12,725 | ) | (25,302 | ) | (198,514 | ) | (1,081,741 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class Y dividends and distributions | (12,725 | ) | (25,302 | ) | (198,514 | ) | (1,081,741 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (114,700 | ) | (397,666 | ) | (492,870 | ) | (4,453,076 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 771,981 | 843,857 | 28,584,556 | 103,654,014 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 109,407 | 375,857 | 454,047 | 4,159,701 | |||||||||||||||
Cost of shares redeemed | (6,127,181 | ) | (13,456,956 | ) | (41,301,594 | ) | (77,912,582 | ) | |||||||||||
Redemption fees | 51 | 1,330 | 33,458 | 9,739 | |||||||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (5,245,742 | ) | (12,235,912 | ) | (12,229,533 | ) | 29,910,872 | ||||||||||||
Increase (decrease) in net assets | (1,780,617 | ) | (7,695,592 | ) | 2,302,476 | 48,150,982 | |||||||||||||
Net assets, beginning of period | 35,521,633 | 43,217,225 | 309,886,719 | 261,735,737 | |||||||||||||||
Net assets, end of period | $ | 33,741,016 | $ | 35,521,633 | $ | 312,189,195 | $ | 309,886,719 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | $ | (12,941 | ) | $ | 175,518 | $ | 1,842,430 | $ | 1,271,672 |
68
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (1,464,511 | ) | $ | (306,223 | ) | $ | 884,246 | $ | 1,361,383 | |||||||||
Net realized gain | 31,720,287 | 98,842,364 | 397,176 | 519,974 | |||||||||||||||
Change in net unrealized appreciation/depreciation | 25,870,644 | (20,231,336 | ) | 1,446,085 | (1,008,105 | ) | |||||||||||||
Net increase in net assets from operations | 56,126,420 | 78,304,805 | 2,727,507 | 873,252 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (4,280,585 | ) | (9,975,586 | ) | (382,041 | ) | (517,726 | ) | |||||||||||
Net realized gain | — | — | (93,081 | ) | (58,627 | ) | |||||||||||||
Total Class A dividends and distributions | (4,280,585 | ) | (9,975,586 | ) | (475,122 | ) | (576,353 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | (719,266 | ) | (3,212,883 | ) | (120,174 | ) | (146,284 | ) | |||||||||||
Net realized gain | — | — | (38,755 | ) | (22,403 | ) | |||||||||||||
Total Class C dividends and distributions | (719,266 | ) | (3,212,883 | ) | (158,929 | ) | (168,687 | ) | |||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (2,051,341 | ) | (3,517,045 | ) | (499,839 | ) | (910,683 | ) | |||||||||||
Net realized gain | — | — | (113,528 | ) | (103,515 | ) | |||||||||||||
Total Class Y dividends and distributions | (2,051,341 | ) | (3,517,045 | ) | (613,367 | ) | (1,014,198 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (7,051,192 | ) | (16,705,514 | ) | (1,247,418 | ) | (1,759,238 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 5,744,962 | 14,631,050 | 2,053,845 | 32,378,244 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 6,342,675 | 15,105,995 | 1,072,421 | 1,409,695 | |||||||||||||||
Cost of shares redeemed | (100,005,882 | ) | (255,982,741 | ) | (6,850,056 | ) | (2,646,087 | ) | |||||||||||
Redemption fees | 3,252 | 6,857 | 918 | 9,355 | |||||||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (87,914,993 | ) | (226,238,839 | ) | (3,722,872 | ) | 31,151,207 | ||||||||||||
Increase (decrease) in net assets | (38,839,765 | ) | (164,639,548 | ) | (2,242,783 | ) | 30,265,221 | ||||||||||||
Net assets, beginning of period | 700,959,726 | 865,599,274 | 59,290,066 | 29,024,845 | |||||||||||||||
Net assets, end of period | $ | 662,119,961 | $ | 700,959,726 | $ | 57,047,283 | $ | 59,290,066 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | $ | (2,087,372 | ) | $ | 6,428,331 | $ | (194,217 | ) | $ | (76,409 | ) |
See accompanying notes to financial statements.
69
UBS Asset Growth Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.90 | $ | 7.08 | $ | 8.36 | $ | 6.32 | $ | 5.59 | $ | 8.75 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment (loss)1 | (0.01 | ) | (0.06 | ) | (0.06 | ) | (0.09 | ) | (0.07 | ) | (0.06 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 0.89 | 0.98 | (0.84 | ) | 2.38 | 1.12 | (2.98 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.88 | 0.92 | (0.90 | ) | 2.29 | 1.05 | (3.04 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.04 | ) | (0.10 | ) | (0.38 | ) | (0.25 | ) | (0.32 | ) | (0.12 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.74 | $ | 7.90 | $ | 7.08 | $ | 8.36 | $ | 6.32 | $ | 5.59 | |||||||||||||||
Total investment return2 | 11.12 | % | 12.98 | % | (10.38 | )% | 36.53 | % | 18.30 | % | (34.51 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.00 | %3 | 1.90 | % | 1.73 | % | 1.64 | % | 1.62 | % | 1.66 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.40 | %3 | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | |||||||||||||||
Net investment loss | (0.26 | )%3 | (0.73 | )% | (0.78 | )% | (1.14 | )% | (1.01 | )% | (1.01 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 24,259 | $ | 25,047 | $ | 31,337 | $ | 50,167 | $ | 48,479 | $ | 48,395 | |||||||||||||||
Portfolio turnover rate | 89 | % | 49 | % | 109 | % | 33 | % | 54 | % | 148 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.90 | $ | 7.09 | $ | 8.36 | $ | 6.32 | $ | 5.60 | $ | 8.77 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment (loss)1 | (0.00 | )4 | (0.04 | ) | (0.04 | ) | (0.07 | ) | (0.05 | ) | (0.04 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 0.88 | 0.97 | (0.83 | ) | 2.38 | 1.11 | (2.99 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.88 | 0.93 | (0.87 | ) | 2.31 | 1.06 | (3.03 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.12 | ) | (0.40 | ) | (0.27 | ) | (0.34 | ) | (0.14 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.72 | $ | 7.90 | $ | 7.09 | $ | 8.36 | $ | 6.32 | $ | 5.60 | |||||||||||||||
Total investment return2 | 11.21 | % | 13.21 | % | (10.07 | )% | 36.66 | % | 18.54 | % | (34.30 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.75 | %3 | 1.67 | % | 1.51 | % | 1.43 | % | 1.35 | % | 1.35 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.15 | %3 | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||||||||||||
Net investment loss | (0.02 | )%3 | (0.48 | )% | (0.54 | )% | (0.87 | )% | (0.72 | )% | (0.73 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 1,864 | $ | 1,835 | $ | 1,949 | $ | 1,395 | $ | 185 | $ | 1,699 | |||||||||||||||
Portfolio turnover rate | 89 | % | 49 | % | 109 | % | 33 | % | 54 | % | 148 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 Annualized.
4 Amount represents less than $0.005 per share.
70
UBS Asset Growth Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.88 | $ | 7.05 | $ | 8.34 | $ | 6.31 | $ | 5.58 | $ | 8.71 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment (loss)1 | (0.04 | ) | (0.11 | ) | (0.11 | ) | (0.15 | ) | (0.12 | ) | (0.10 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 0.88 | 0.97 | (0.83 | ) | 2.37 | 1.12 | (2.96 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.84 | 0.86 | (0.94 | ) | 2.22 | 1.00 | (3.06 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.35 | ) | (0.19 | ) | (0.27 | ) | (0.07 | ) | ||||||||||||||||
Net asset value, end of period | $ | 8.72 | $ | 7.88 | $ | 7.05 | $ | 8.34 | $ | 6.31 | $ | 5.58 | |||||||||||||||
Total investment return2 | 10.66 | % | 12.15 | % | (11.00 | )% | 35.39 | % | 17.50 | % | (35.03 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.77 | %3 | 2.67 | % | 2.51 | % | 2.41 | % | 2.41 | % | 2.48 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 2.15 | %3 | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | |||||||||||||||
Net investment loss | (1.04 | )%3 | (1.48 | )% | (1.53 | )% | (1.89 | )% | (1.76 | )% | (1.76 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 7,618 | $ | 8,640 | $ | 9,931 | $ | 14,989 | $ | 13,792 | $ | 14,559 | |||||||||||||||
Portfolio turnover rate | 89 | % | 49 | % | 109 | % | 33 | % | 54 | % | 148 | % |
See accompanying notes to financial statements.
71
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.82 | $ | 6.36 | $ | 5.98 | $ | 5.92 | $ | 5.45 | $ | 9.89 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | 0.03 | 0.07 | 0.08 | 0.06 | 0.02 | 0.14 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.31 | 0.50 | 0.30 | 0.16 | 0.75 | (1.84 | ) | ||||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | — | 0.003 | |||||||||||||||||||||
Total income (loss) from investment operations | 0.34 | 0.57 | 0.38 | 0.22 | 0.77 | (1.70 | ) | ||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.11 | ) | — | (0.16 | ) | (0.30 | ) | — | |||||||||||||||||
From net realized gains | — | — | — | — | — | (2.74 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.01 | ) | (0.11 | ) | — | (0.16 | ) | (0.30 | ) | (2.74 | ) | ||||||||||||||||
Net asset value, end of period | $ | 7.15 | $ | 6.82 | $ | 6.36 | $ | 5.98 | $ | 5.92 | $ | 5.45 | |||||||||||||||
Total investment return2 | 4.99 | % | 9.05 | % | 6.18 | % | 3.58 | % | 14.19 | % | (14.31 | )%4 | |||||||||||||||
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 | 1.41 | %5 | 1.43 | % | 1.60 | % | 1.79 | % | 1.74 | % | 1.54 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.35 | %5 | 1.35 | % | 1.54 | % | 1.76 | % | 1.72 | % | 1.54 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.35 | %5 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.30 | % | |||||||||||||||
Net investment income (loss) | 0.77 | %5 | 0.98 | % | 1.33 | % | 0.95 | % | 0.31 | % | 1.99 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 205,600 | $ | 208,369 | $ | 160,773 | $ | 216,297 | $ | 334,131 | $ | 398,321 | |||||||||||||||
Portfolio turnover rate | 20 | % | 74 | % | 164 | % | 65 | % | 58 | % | 139 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.96 | $ | 6.48 | $ | 6.09 | $ | 6.03 | $ | 5.54 | $ | 9.96 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.04 | 0.09 | 0.10 | 0.08 | 0.03 | 0.17 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.32 | 0.52 | 0.29 | 0.16 | 0.78 | (1.85 | ) | ||||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | — | 0.003 | |||||||||||||||||||||
Total income (loss) from investment operations | 0.36 | 0.61 | 0.39 | 0.24 | 0.81 | (1.68 | ) | ||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.13 | ) | — | (0.18 | ) | (0.32 | ) | — | |||||||||||||||||
From net realized gains | — | — | — | — | — | (2.74 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.03 | ) | (0.13 | ) | — | (0.18 | ) | (0.32 | ) | (2.74 | ) | ||||||||||||||||
Net asset value, end of period | $ | 7.29 | $ | 6.96 | $ | 6.48 | $ | 6.09 | $ | 6.03 | $ | 5.54 | |||||||||||||||
Total investment return2 | 5.15 | % | 9.29 | % | 6.57 | % | 3.89 | % | 14.49 | % | (13.99 | )%4 | |||||||||||||||
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 | 1.12 | %5 | 1.12 | % | 1.28 | % | 1.49 | % | 1.42 | % | 1.22 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.10 | %5 | 1.10 | % | 1.28 | % | 1.49 | % | 1.42 | % | 1.22 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.10 | %5 | 1.10 | % | 1.10 | % | 1.07 | % | 1.04 | % | 1.00 | % | |||||||||||||||
Net investment income | 1.01 | %5 | 1.25 | % | 1.56 | % | 1.25 | % | 0.56 | % | 2.23 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 51,575 | $ | 48,113 | $ | 51,807 | $ | 87,743 | $ | 83,561 | $ | 77,254 | |||||||||||||||
Portfolio turnover rate | 20 | % | 74 | % | 164 | % | 65 | % | 58 | % | 139 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
72
UBS Dynamic Alpha Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.46 | $ | 6.02 | $ | 5.71 | $ | 5.65 | $ | 5.21 | $ | 9.68 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | 0.003 | 0.02 | 0.03 | 0.01 | (0.03 | ) | 0.08 | ||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.29 | 0.48 | 0.28 | 0.15 | 0.72 | (1.81 | ) | ||||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | — | 0.003 | |||||||||||||||||||||
Total income (loss) from investment operations | 0.29 | 0.50 | 0.31 | 0.16 | 0.69 | (1.73 | ) | ||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | — | (0.06 | ) | — | (0.10 | ) | (0.25 | ) | — | ||||||||||||||||||
From net realized gains | — | — | — | — | — | (2.74 | ) | ||||||||||||||||||||
Total dividends/distributions | — | (0.06 | ) | — | (0.10 | ) | (0.25 | ) | (2.74 | ) | |||||||||||||||||
Net asset value, end of period | $ | 6.75 | $ | 6.46 | $ | 6.02 | $ | 5.71 | $ | 5.65 | $ | 5.21 | |||||||||||||||
Total investment return2 | 4.49 | % | 8.22 | % | 5.60 | % | 2.82 | % | 13.15 | % | (14.98 | )%4 | |||||||||||||||
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 | 2.17 | %5 | 2.19 | % | 2.36 | % | 2.55 | % | 2.50 | % | 2.32 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.10 | %5 | 2.10 | % | 2.29 | % | 2.51 | % | 2.47 | % | 2.32 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 2.10 | %5 | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | 2.07 | % | |||||||||||||||
Net investment income (loss) | 0.02 | %5 | 0.24 | % | 0.58 | % | 0.20 | % | (0.44 | )% | 1.24 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 55,015 | $ | 53,405 | $ | 49,155 | $ | 66,349 | $ | 104,146 | $ | 131,745 | |||||||||||||||
Portfolio turnover rate | 20 | % | 74 | % | 164 | % | 65 | % | 58 | % | 139 | % |
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%.
5 Annualized.
See accompanying notes to financial statements.
73
UBS Global Allocation Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.79 | $ | 9.12 | $ | 10.27 | $ | 8.66 | $ | 8.18 | $ | 12.59 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.01 | ) | 0.01 | (0.00 | )3 | 0.003 | 0.003 | 0.08 | |||||||||||||||||||
Net realized and unrealized gain (loss) | 0.85 | 0.88 | (0.72 | ) | 2.05 | 1.11 | (3.08 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.84 | 0.89 | (0.72 | ) | 2.05 | 1.11 | (3.00 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.22 | ) | (0.43 | ) | (0.44 | ) | (0.63 | ) | (0.46 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.95 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.13 | ) | (0.22 | ) | (0.43 | ) | (0.44 | ) | (0.63 | ) | (1.41 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.50 | $ | 9.79 | $ | 9.12 | $ | 10.27 | $ | 8.66 | $ | 8.18 | |||||||||||||||
Total investment return2 | 8.61 | % | 9.86 | % | (6.83 | )% | 23.87 | % | 13.11 | % | (22.36 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses | 1.29 | %4 | 1.28 | % | 1.25 | % | 1.21 | % | 1.21 | % | 1.19 | % | |||||||||||||||
Net investment income (loss) | (0.26 | )%4 | 0.12 | % | (0.03 | )% | 0.05 | % | 0.01 | % | 0.84 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 345,568 | $ | 377,781 | $ | 494,604 | $ | 753,750 | $ | 814,760 | $ | 996,059 | |||||||||||||||
Portfolio turnover rate | 26 | % | 54 | % | 93 | % | 68 | % | 90 | % | 122 | % |
Class Y | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.98 | $ | 9.30 | $ | 10.48 | $ | 8.84 | $ | 8.34 | $ | 12.80 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.003 | 0.04 | 0.03 | 0.04 | 0.03 | 0.10 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.87 | 0.90 | (0.75 | ) | 2.07 | 1.14 | (3.13 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.87 | 0.94 | (0.72 | ) | 2.11 | 1.17 | (3.03 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.26 | ) | (0.46 | ) | (0.47 | ) | (0.67 | ) | (0.48 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.95 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.17 | ) | (0.26 | ) | (0.46 | ) | (0.47 | ) | (0.67 | ) | (1.43 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.68 | $ | 9.98 | $ | 9.30 | $ | 10.48 | $ | 8.84 | $ | 8.34 | |||||||||||||||
Total investment return2 | 8.76 | % | 10.22 | % | (6.59 | )% | 24.15 | % | 13.54 | % | (22.12 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses | 0.99 | %4 | 0.98 | % | 0.95 | % | 0.92 | % | 0.93 | % | 0.90 | % | |||||||||||||||
Net investment income | 0.04 | %4 | 0.44 | % | 0.27 | % | 0.35 | % | 0.29 | % | 1.14 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 129,812 | $ | 127,751 | $ | 132,941 | $ | 179,875 | $ | 170,517 | $ | 224,281 | |||||||||||||||
Portfolio turnover rate | 26 | % | 54 | % | 93 | % | 68 | % | 90 | % | 122 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
4 Annualized.
74
UBS Global Allocation Fund
Financial highlights
Class C | |||||||||||||||||||||||||||
Six months ended December 31, 2013 | Year ended June 30, | ||||||||||||||||||||||||||
(unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.55 | $ | 8.89 | $ | 10.00 | $ | 8.42 | $ | 7.96 | $ | 12.29 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)1 | (0.05 | ) | (0.06 | ) | (0.07 | ) | (0.07 | ) | (0.07 | ) | 0.003 | ||||||||||||||||
Net realized and unrealized gain (loss) | 0.83 | 0.86 | (0.71 | ) | 1.99 | 1.07 | (2.99 | ) | |||||||||||||||||||
Total income (loss) from investment operations | 0.78 | 0.80 | (0.78 | ) | 1.92 | 1.00 | (2.99 | ) | |||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.04 | ) | (0.14 | ) | (0.33 | ) | (0.34 | ) | (0.54 | ) | (0.39 | ) | |||||||||||||||
From net realized gains | — | — | — | — | — | (0.95 | ) | ||||||||||||||||||||
Total dividends/distributions | (0.04 | ) | (0.14 | ) | (0.33 | ) | (0.34 | ) | (0.54 | ) | (1.34 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.29 | $ | 9.55 | $ | 8.89 | $ | 10.00 | $ | 8.42 | $ | 7.96 | |||||||||||||||
Total investment return2 | 8.06 | % | 9.11 | % | (7.66 | )% | 22.90 | % | 12.29 | % | (22.93 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses | 2.07 | %4 | 2.06 | % | 2.02 | % | 1.99 | % | 2.00 | % | 1.97 | % | |||||||||||||||
Net investment income (loss) | (1.04 | )%4 | (0.65 | )% | (0.80 | )% | (0.73 | )% | (0.78 | )% | 0.06 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 186,739 | $ | 195,427 | $ | 238,054 | $ | 348,721 | $ | 381,137 | $ | 456,577 | |||||||||||||||
Portfolio turnover rate | 26 | % | 54 | % | 93 | % | 68 | % | 90 | % | 122 | % |
See accompanying notes to financial statements.
75
UBS Multi-Asset Income Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each period presented.
Class A | Class C | ||||||||||||||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | For the period ended June 30, 20123 | Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | For the period ended June 30, 20123 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.03 | $ | 10.00 | $ | 10.00 | $ | 10.02 | $ | 10.00 | $ | 10.00 | |||||||||||||||
Income from investment operations: | |||||||||||||||||||||||||||
Net investment income1 | 0.16 | 0.29 | 0.04 | 0.12 | 0.22 | 0.03 | |||||||||||||||||||||
Net realized and unrealized gain | 0.31 | 0.11 | 0.01 | 0.32 | 0.10 | 0.01 | |||||||||||||||||||||
Total income from investment operations | 0.47 | 0.40 | 0.05 | 0.44 | 0.32 | 0.04 | |||||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.33 | ) | (0.05 | ) | (0.14 | ) | (0.26 | ) | (0.04 | ) | |||||||||||||||
From net realized gains | (0.04 | ) | (0.04 | ) | — | (0.04 | ) | (0.04 | ) | — | |||||||||||||||||
Total dividends/distributions | (0.22 | ) | (0.37 | ) | (0.05 | ) | (0.18 | ) | (0.30 | ) | (0.04 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.28 | $ | 10.03 | $ | 10.00 | $ | 10.28 | $ | 10.02 | $ | 10.00 | |||||||||||||||
Total investment return2 | 4.74 | % | 3.98 | % | 0.50 | % | 4.44 | % | 3.14 | % | 0.42 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.45 | %4 | 1.76 | % | 2.97 | %4 | 2.20 | %4 | 2.52 | % | 3.81 | %4 | |||||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.95 | %4 | 0.95 | % | 0.95 | %4 | 1.70 | %4 | 1.70 | % | 1.70 | %4 | |||||||||||||||
Net investment income | 3.03 | %4 | 2.83 | % | 2.32 | %4 | 2.27 | %4 | 2.09 | % | 1.82 | %4 | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 21,184 | $ | 24,390 | $ | 2,743 | $ | 8,507 | $ | 8,824 | $ | 1,164 | |||||||||||||||
Portfolio turnover rate | 39 | % | 116 | % | 17 | % | 39 | % | 116 | % | 17 | % |
Class Y | |||||||||||||||
Six months ended December 31, 2013 (unaudited) | Year ended June 30, 2013 | For the period ended June 30, 20123 | |||||||||||||
Net asset value, beginning of period | $ | 10.03 | $ | 10.00 | $ | 10.00 | |||||||||
Income (loss) from investment operations: | |||||||||||||||
Net investment income1 | 0.17 | 0.31 | 0.06 | ||||||||||||
Net realized and unrealized gain (loss) | 0.32 | 0.12 | (0.01 | ) | |||||||||||
Total income from investment operations | 0.49 | 0.43 | 0.05 | ||||||||||||
Less dividends/distributions: | |||||||||||||||
From net investment income | (0.19 | ) | (0.36 | ) | (0.05 | ) | |||||||||
From net realized gains | (0.04 | ) | (0.04 | ) | — | ||||||||||
Total dividends/distributions | (0.23 | ) | (0.40 | ) | (0.05 | ) | |||||||||
Net asset value, end of period | $ | 10.29 | $ | 10.03 | $ | 10.00 | |||||||||
Total investment return2 | 4.97 | % | 4.23 | % | 0.53 | % | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.15 | %4 | 1.50 | % | 2.73 | %4 | |||||||||
Expenses after fee waivers and/or expense reimbursement | 0.70 | %4 | 0.70 | % | 0.70 | %4 | |||||||||
Net investment income | 3.30 | %4 | 3.01 | % | 3.42 | %4 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 27,357 | $ | 26,077 | $ | 25,118 | |||||||||
Portfolio turnover rate | 39 | % | 116 | % | 17 | % |
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 Fund dividends/distributions or the redemption of Fund shares.
3 For the period April 25, 2012 (commencement of operations) through June 30, 2012.
4 Annualized.
See accompanying notes to financial statements.
76
The UBS Funds
Notes to financial statements
1. Organization and significant accounting policies
The UBS Funds (the "Trust") is registered with the US 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 13 Funds available for investment, each having its own investment objectives and policies. The following four funds are covered in this report: UBS Asset Growth Fund (formerly, UBS Global Frontier Fund), UBS Dynamic Alpha Fund, UBS Global Allocation Fund, and UBS Multi-Asset Income 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. The Funds currently offer Class A, Class C and Class Y 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 distribution and service charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its distribution and/or service plan, if any. Class Y shares have no distribution or service 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 ("US 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 US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US 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 on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share will be calculated as of the time trading was halted.
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 investments 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 "evaluation" systems that derive values based on comparable investments. An evaluation 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 investments. Investments also may be valued based on appraisals derived
77
The UBS Funds
Notes to financial statements
from information concerning the investment or similar investments received from recognized dealers in those holdings. Investments 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. Investments 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 investments are traded on more than one exchange, the investments 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 investment, that investment 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 an investment'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 investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments 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 investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments 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 investments 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 an investment is valued at "fair value," that value is likely to be different from the last quoted market price for the investment. 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. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
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 are 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.
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.
78
The UBS Funds
Notes to financial statements
The Board has delegated to the UBS Global AM Global Valuation Committee ("GVC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, as discussed below, investments of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment'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 investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US 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 Funds' 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.
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 below as well as in the Portfolio of investments. Swap agreements, forward foreign currency contracts, swaptions and options written entered into by a Fund may contain credit-risk related contingent features that could be triggered subject to certain
79
The UBS Funds
Notes to financial statements
circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of December 31, 2013 is reflected in the Statement of assets and liabilities. If the applicable credit-risk related contingent features were triggered as of December 31, 2013, the Fund would be required to post additional collateral or may be required to terminate the contracts and settle any amounts outstanding. 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). The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the period ended December 31, 2013, except for forward foreign currency contracts for UBS Asset Growth Fund, UBS Global Allocation Fund and UBS Multi-Asset Income Fund for which the average volume during the year was greater than at year end.
Disclosure of derivatives by underlying risk as of and for the period ended December 31, 2013 is as follows:
Asset derivatives
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Asset Growth Fund | |||||||||||||||
Futures contracts1 | $ | 1,465,115 | $ | 26,074 | $ | 1,491,189 | |||||||||
Total value | $ | 1,465,115 | $ | 26,074 | $ | 1,491,189 |
1 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 Variation margin on futures contracts.
Liability derivatives
Interest rate risk | Foreign exchange risk | Total | |||||||||||||
UBS Asset Growth Fund | |||||||||||||||
Futures contracts1 | $ | (38,115 | ) | $ | (48,227 | ) | $ | (86,342 | ) | ||||||
Total value | $ | (38,115 | ) | $ | (48,227 | ) | $ | (86,342 | ) |
1 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 Variation margin on futures contracts.
80
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Asset Growth Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (300,184 | ) | $ | (300,184 | ) | |||||||||
Futures contracts | (91,508 | ) | 394,456 | 42,647 | 345,595 | ||||||||||||||
Options purchased2 | — | 143,896 | — | 143,896 | |||||||||||||||
Options written | — | 21,175 | — | 21,175 | |||||||||||||||
Total net realized gain (loss) | $ | (91,508 | ) | $ | 559,527 | $ | (257,537 | ) | $ | 210,482 | |||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | 80,839 | $ | 80,839 | |||||||||||
Futures contracts | 33,888 | 1,553,418 | (22,153 | ) | 1,565,153 | ||||||||||||||
Options purchased2 | — | 37,138 | — | 37,138 | |||||||||||||||
Options written | — | (12,058 | ) | — | (12,058 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 33,888 | $ | 1,578,498 | $ | 58,686 | $ | 1,671,072 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | — | $ | 627,755 | $ | 627,755 | |||||||||||||
Futures contracts2 | 1,011,924 | 1,998,074 | — | — | 3,009,998 | ||||||||||||||||||
Options purchased1 | — | 3,712,362 | 2,820 | — | 3,715,182 | ||||||||||||||||||
Swap agreements1,2 | 5,490,371 | — | 6,003,574 | — | 11,493,945 | ||||||||||||||||||
Total value | $ | 6,502,295 | $ | 5,710,436 | $ | 6,006,394 | $ | 627,755 | $ | 18,846,880 |
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
81
The UBS Funds
Notes to financial statements
Liability derivatives
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | — | $ | (1,998,888 | ) | $ | (1,998,888 | ) | |||||||||||
Futures contracts2 | (328,015 | ) | (972,554 | ) | — | — | (1,300,569 | ) | |||||||||||||||
Swap agreements1,2 | (3,054,018 | ) | — | (1,399,256 | ) | — | (4,453,274 | ) | |||||||||||||||
Total value | $ | (3,382,033 | ) | $ | (972,554 | ) | $ | (1,399,256 | ) | $ | (1,998,888 | ) | $ | (7,752,731 | ) |
1 Statement of assets and liabilities location: Outstanding swap agreements, at value (except centrally cleared swaps) and unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | — | $ | (5,301,887 | ) | $ | (5,301,887 | ) | |||||||||||
Futures contracts | (945,090 | ) | 2,283,421 | — | — | 1,338,331 | |||||||||||||||||
Options purchased2 | (14,665 | ) | 9,189,769 | — | — | 9,175,104 | |||||||||||||||||
Options written | — | (777,180 | ) | — | — | (777,180 | ) | ||||||||||||||||
Swap agreements | (1,197,397 | ) | — | 201,769 | — | (995,628 | ) | ||||||||||||||||
Total net realized gain (loss) | $ | (2,157,152 | ) | $ | 10,696,010 | $ | 201,769 | $ | (5,301,887 | ) | $ | 3,438,740 | |||||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | — | $ | (2,998,273 | ) | $ | (2,998,273 | ) | |||||||||||
Futures contracts | 810,036 | 1,007,411 | — | — | 1,817,447 | ||||||||||||||||||
Options purchased2 | 12,417 | 1,973,689 | (5,727 | ) | — | 1,980,379 | |||||||||||||||||
Swap agreements | 1,289,989 | — | 1,062,572 | — | 2,352,561 | ||||||||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 2,112,442 | $ | 2,981,100 | $ | 1,056,845 | $ | (2,998,273 | ) | $ | 3,152,114 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 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
Asset derivatives
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | 2,055,668 | $ | 2,055,668 | |||||||||||
Futures contracts2 | 280,869 | 5,641,940 | — | 5,922,809 | |||||||||||||||
Total value | $ | 280,869 | $ | 5,641,940 | $ | 2,055,668 | $ | 7,978,477 |
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 Variation margin on futures contracts.
Liability derivatives
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (3,993,429 | ) | $ | (3,993,429 | ) | |||||||||
Futures contracts2 | (478,180 | ) | (1,849,426 | ) | — | (2,327,606 | ) | ||||||||||||
Total value | $ | (478,180 | ) | $ | (1,849,426 | ) | $ | (3,993,429 | ) | $ | (6,321,035 | ) |
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 Variation margin on futures contracts.
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (3,529,349 | ) | $ | (3,529,349 | ) | |||||||||
Futures contracts | 42,649 | 6,067,084 | — | 6,109,733 | |||||||||||||||
Options purchased2 | — | 1,684,466 | — | 1,684,466 | |||||||||||||||
Options written | — | 352,028 | — | 352,028 | |||||||||||||||
Total net realized gain (loss) | $ | 42,649 | $ | 8,103,578 | $ | (3,529,349 | ) | $ | 4,616,878 | ||||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (1,070,652 | ) | $ | (1,070,652 | ) | |||||||||
Futures contracts | 575,672 | 4,038,313 | — | 4,613,985 | |||||||||||||||
Options purchased2 | — | 527,876 | — | 527,876 | |||||||||||||||
Options written | — | (200,470 | ) | — | (200,470 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 575,672 | $ | 4,365,719 | $ | (1,070,652 | ) | $ | 3,870,739 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written and forward foreign currency contracts.
83
The UBS Funds
Notes to financial statements
Asset derivatives
Interest rate risk | Foreign exchange risk | Total | |||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | 47,380 | $ | 47,380 | |||||||||
Futures contracts2 | 47,982 | — | 47,982 | ||||||||||||
Total value | $ | 47,982 | $ | 47,380 | $ | 95,362 |
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 Variation margin on futures contracts.
Liability derivatives
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | (119,327 | ) | $ | (119,327 | ) | |||||||
Futures contracts2 | (36,651 | ) | — | (36,651 | ) | ||||||||||
Total value | $ | (36,651 | ) | $ | (119,327 | ) | $ | (155,978 | ) |
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 Variation margin on futures contracts.
Activities in derivative instruments during the period ended December 31, 2013, were as follows:
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (451,024 | ) | $ | (451,024 | ) | |||||||||
Futures contracts | 103,909 | 31,461 | — | 135,370 | |||||||||||||||
Options written | — | (51,868 | ) | — | (51,868 | ) | |||||||||||||
Total net realized gain (loss) | $ | 103,909 | $ | (20,407 | ) | $ | (451,024 | ) | $ | (367,522 | ) | ||||||||
Change in net unrealized appreciation/depreciation2 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (66,571 | ) | $ | (66,571 | ) | |||||||||
Futures contracts | 53,802 | (36,651 | ) | — | 17,151 | ||||||||||||||
Options written | — | (1,395 | ) | — | (1,395 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 53,802 | $ | (38,046 | ) | $ | (66,571 | ) | $ | (50,815 | ) |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written and forward foreign currency contracts.
84
The UBS Funds
Notes to financial statements
Offsetting of financial and derivative assets and liabilities
In January 2013, Accounting Standards Update 2013-01 ("ASU 2013-01"), "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities", replaced Accounting Standards Update 2011-11 ("ASU 2011-11"), "Disclosures about Offsetting Assets and Liabilities". ASU 2013-01 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. ASU 2011-11 was intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. ASU 2013-01 limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase and reverse repurchase agreements, and securities lending and borrowing transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement.
The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Included within the below tables are forward foreign currency contracts, non-centrally cleared swap agreements and swaptions, as applicable.
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Dynamic Alpha Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty | |||||||||||||||||||
BB | $ | 70,985 | $ | (70,985 | ) | $ | — | $ | — | ||||||||||
GSI | 5,493,191 | (25,077 | ) | 5,468,114 | |||||||||||||||
HSBC | 145,801 | — | — | 145,801 | |||||||||||||||
JPMCB | 447,598 | (326,573 | ) | — | 121,025 | ||||||||||||||
MSCI | 2,766 | — | — | 2,766 | |||||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | 6,160,341 | $ | (422,635 | ) | $ | — | $ | 5,737,706 |
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
Counterparty | statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | |||||||||||||||
BB | $ | (612,951 | ) | $ | 70,985 | $ | — | $ | (541,966 | ) | |||||||||
DB | (3,054,018 | ) | — | 3,054,018 | — | ||||||||||||||
CIBC | (783,613 | ) | — | — | (783,613 | ) | |||||||||||||
CITI | (29,180 | ) | — | — | (29,180 | ) | |||||||||||||
GSI | (25,077 | ) | 25,077 | — | — | ||||||||||||||
JPMCB | (326,573 | ) | 326,573 | — | — | ||||||||||||||
SSB | (343,215 | ) | — | — | (343,215 | ) | |||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | (5,174,627 | ) | $ | 422,635 | $ | 3,054,018 | $ | (1,697,974 | ) |
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The UBS Funds
Notes to financial statements
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Global Allocation Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty | |||||||||||||||||||
BB | $ | 553,914 | $ | (553,914 | ) | $ | — | $ | — | ||||||||||
CIBC | 715,253 | — | — | 715,253 | |||||||||||||||
JPMCB | 786,501 | (786,501 | ) | — | — | ||||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | 2,055,668 | $ | (1,340,415 | ) | $ | — | $ | 715,253 |
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
Counterparty | statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | |||||||||||||||
BB | $ | (676,620 | ) | $ | 553,914 | $ | — | $ | (122,706 | ) | |||||||||
DB | (5,879 | ) | — | — | (5,879 | ) | |||||||||||||
GSI | (24,776 | ) | — | — | (24,776 | ) | |||||||||||||
HSBC | (6,465 | ) | — | — | (6,465 | ) | |||||||||||||
JPMCB | (821,069 | ) | 786,501 | — | (34,568 | ) | |||||||||||||
MSCI | (2,458,620 | ) | — | — | (2,458,620 | ) | |||||||||||||
Total derivatives subject to a master netting arrangement or similar agreement | $ | (3,993,429 | ) | $ | 1,340,415 | $ | — | $ | (2,653,014 | ) |
Assets
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
UBS Multi-Asset Income Fund | statement of assets & liabilities | Financial instruments | Collateral received | Net amount | |||||||||||||||
Counterparty—JPMCB | $ | 47,380 | $ | (47,380 | ) | $ | — | $ | — |
Liabilities
Gross amounts presented in the | Gross amounts not offset in the statement of assets & liabilities | ||||||||||||||||||
statement of assets & liabilities | Financial instruments | Collateral pledged | Net amount | ||||||||||||||||
Counterparty—JPMCB | $ | (119,327 | ) | $ | 47,380 | $ | — | $ | (71,947 | ) |
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 expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Portfolio of investments footnotes.
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. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
86
The UBS Funds
Notes to financial statements
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 realized 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.
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
87
The UBS Funds
Notes to financial statements
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 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 to receive or pay amounts based on changes in currency exchange rates in order 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 retain 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 ref-
88
The UBS Funds
Notes to financial statements
erence 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 December 31, 2013 for which a Fund is the seller of protection are disclosed under the section "Credit default swaps on corporate issues—sell protection"and "Centrally cleared credit default swap on credit indices—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.
Certain clearinghouses currently offer clearing for limited types of derivatives transactions, such as interest and credit derivatives. In a cleared derivative transaction, a Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund's exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Only a limited number of transactions are currently eligible for clearing. Centrally cleared swaps, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
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 on swap agreements.
89
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 a 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: 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.
For the period ended December 31, 2013, there were no short positions held by UBS Dynamic Alpha Fund.
L. Dividends and distributions: It is each Fund's (except UBS Multi-Asset Income Fund) policy to distribute its respective net investment income and net capital gains, if any, annually. Income dividends are normally declared and paid by UBS Multi-Asset Income Fund monthly and net realized capital gains, if any, are declared and distributed at least semi-annually, usually in September and December. Dividends and distributions to shareholders are
90
The UBS Funds
Notes to financial statements
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 US 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 period ended December 31, 2013, the following Fund recorded recapture commissions which are reflected on the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS Global Allocation Fund | $ | 120 |
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 Asset Management (US) Inc., ("UBS Global AM (US)"). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the period ended December 31, 2013, redemption fees for each Fund amounted to less than $0.01 per share and less than 0.01% of average 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 to $3.0 billion | $3.0 billion to $6.0 billion | $6.0 billion and over | ||||||||||||||||||||||||
UBS Asset Growth Fund | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | |||||||||||||||||
UBS Global Allocation Fund | 0.800 | 0.750 | 0.700 | 0.675 | 0.650 | 0.630 | 0.610 |
91
The UBS Funds
Notes to financial statements
$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 | % | |||||||||||||||
UBS Multi-Asset Income Fund | 0.590 | 0.590 | 0.590 | 0.590 | 0.590 | 0.590 |
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, UBS Asset Growth Fund, and UBS Multi-Asset Income 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 dividend expense and security loan fees 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 dividend expense and security loan fees 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 period ended December 31, 2013, were as follows:
Fund | Class A expense cap | Class C expense cap | Class Y expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | |||||||||||||||||||||
UBS Asset Growth Fund | 1.40 | % | 2.15 | % | 1.15 | % | $ | 5,688 | $ | 162,322 | $ | 102,705 | |||||||||||||||
UBS Dynamic Alpha Fund | 1.35 | 2.10 | 1.10 | 205,232 | 1,340,202 | 89,750 | |||||||||||||||||||||
UBS Global Allocation Fund | 1.35 | 2.10 | 1.10 | 442,062 | 2,715,040 | — | |||||||||||||||||||||
UBS Multi-Asset Income Fund | 0.95 | 1.70 | 0.70 | 5,218 | 171,899 | 139,054 |
Each Fund will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or 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 or reimbursed for the period ended December 31, 2013 are subject to repayment through June 30, 2016. At December 31, 2013, 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, 2014 | Expires June 30, 2015 | Expires June 30, 2016 | Expires June 30, 2017 | ||||||||||||||||||
UBS Asset Growth Fund—Class A | $ | 466,545 | $ | 126,291 | $ | 126,044 | $ | 142,026 | $ | 72,184 | |||||||||||||
UBS Asset Growth Fund—Class C | 155,045 | 39,777 | 41,066 | 49,000 | 25,202 | ||||||||||||||||||
UBS Asset Growth Fund—Class Y | 22,622 | 2,315 | 6,265 | 8,723 | 5,319 | ||||||||||||||||||
UBS Dynamic Alpha Fund—Class A | 383,598 | 76,312 | 103,797 | 137,169 | 66,320 | ||||||||||||||||||
UBS Dynamic Alpha Fund—Class C | 141,784 | 38,363 | 40,147 | 43,675 | 19,599 | ||||||||||||||||||
UBS Dynamic Alpha Fund—Class Y | 13,235 | — | — | 9,404 | 3,831 | ||||||||||||||||||
UBS Multi-Asset Income Fund—Class A | 187,833 | — | 4,583 | 127,379 | 55,871 | ||||||||||||||||||
UBS Multi-Asset Income Fund—Class C | 71,121 | — | 1,602 | 47,130 | 22,389 | ||||||||||||||||||
UBS Multi-Asset Income Fund—Class Y | 361,372 | — | 90,384 | 210,194 | 60,794 |
92
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 period ended December 31, 2013, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Asset Growth Fund | $ | 2,093 | $ | 12,815 | |||||||
UBS Dynamic Alpha Fund | 19,860 | 118,253 | |||||||||
UBS Global Allocation Fund | 42,098 | 258,902 | |||||||||
UBS Multi-Asset Income Fund | 3,644 | 21,852 |
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the period ended December 31, 2013 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 income in the Statement of operations. Amounts relating to those investments at December 31, 2013 and for the period then 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 income in the Statement of operations. Amounts relating to those investments at December 31, 2013 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
The following Funds have incurred brokerage commissions with UBS AG, an affiliated broker-dealer. Amounts relating to those transactions for the period ended December 31, 2013, were as follows:
Fund | UBS AG | ||||||
UBS Asset Growth Fund | $ | 30 | |||||
UBS Global Allocation Fund | 428 | ||||||
UBS Multi-Asset Income Fund | 2 |
93
The UBS Funds
Notes to financial statements
3. Distribution and service plans
UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A 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 C | |||||||||
UBS Asset Growth Fund | 0.25 | % | 1.00 | % | |||||||
UBS Dynamic Alpha Fund | 0.25 | 1.00 | |||||||||
UBS Global Allocation Fund | 0.25 | 1.00 | |||||||||
UBS Multi-Asset Income Fund | 0.25 | 1.00 |
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 and Class C. At December 31, 2013, certain Funds owed UBS Global AM (US) distribution and service fees, and for the period ended December 31, 2013, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:
Fund | Distribution and service fees owed | Sales charges earned | |||||||||
UBS Asset Growth Fund—Class A | $ | 5,013 | $ | 4,926 | |||||||
UBS Asset Growth Fund—Class C | 6,378 | 21 | |||||||||
UBS Dynamic Alpha Fund—Class A | 43,534 | 66,518 | |||||||||
UBS Dynamic Alpha Fund—Class C | 46,799 | 7,660 | |||||||||
UBS Global Allocation Fund—Class A | 73,440 | 12,165 | |||||||||
UBS Global Allocation Fund—Class C | 158,184 | 455 | |||||||||
UBS Multi-Asset Income Fund—Class A | 4,556 | 7,670 | |||||||||
UBS Multi-Asset Income Fund—Class C | 7,326 | 1,192 |
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 period ended December 31, 2013, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
Fund | Amount paid | ||||||
UBS Asset Growth Fund | $ | 3,864 | |||||
UBS Dynamic Alpha Fund | 48,392 | ||||||
UBS Global Allocation Fund | 95,144 | ||||||
UBS Multi-Asset Income Fund | 5,282 |
94
The UBS Funds
Notes to financial statements
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 Asset 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, which is included in the Fund's Portfolio of investments. In addition, UBS Global Allocation Fund received US government agency securities as collateral with a market value of $13,668,859, which cannot be resold. The value of loaned securities and related collateral at December 31, 2013 was 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 Asset Growth Fund | $ | 5,338,690 | $ | 5,456,410 | $ | 5,456,410 | |||||||||
UBS Dynamic Alpha Fund | 1,140,932 | 1,158,890 | 1,158,890 | ||||||||||||
UBS Global Allocation Fund | 32,066,426 | 32,906,454 | 19,237,595 |
6. Purchases and sales of securities
For the period ended December 31, 2013, 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 Asset Growth Fund | $ | 18,618,084 | $ | 28,444,516 | |||||||
UBS Dynamic Alpha Fund | 79,979,739 | 36,013,116 | |||||||||
UBS Global Allocation Fund | 120,065,618 | 173,794,676 | |||||||||
UBS Multi-Asset Income Fund | 22,282,072 | 19,789,636 |
For the period ended December 31, 2013, aggregate purchases and sales of US Government and agency securities, excluding short-term investments, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Asset Growth Fund | $ | 69,316 | $ | 1,880,311 | |||||||
UBS Global Allocation Fund | 3,878,343 | 1,279,794 | |||||||||
UBS Multi-Asset Income Fund | 1,290,675 | 1,253,859 |
95
The UBS Funds
Notes to financial statements
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 year ended June 30, 2013 were as follows:
2013 | |||||||
Fund | Distributions paid from ordinary income | ||||||
UBS Asset Growth Fund | $ | 397,666 | |||||
UBS Dynamic Alpha Fund | 4,453,076 | ||||||
UBS Global Allocation Fund | 16,705,514 | ||||||
UBS Multi-Asset Income Fund | 1,759,238 |
The tax character of distributions paid and components of accumulated earnings (deficit) on a tax basis for the current fiscal year will be determined after the Trust's fiscal year ending June 30, 2014.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At June 30, 2013, the following Funds had post-enactment net capital losses that will be carried forward indefinitely, as follows:
Fund | Short-term losses | Long-term losses | Total capital losses | ||||||||||||
UBS Asset Growth Fund | $ | 237,055 | $ | 2,957,296 | $ | 3,194,351 |
At June 30, 2013, the following Funds had pre-enactment 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 Asset Growth Fund | $ | 12,841,328 | $ | 9,543,610 | $ | 3,269,324 | |||||||||
UBS Dynamic Alpha Fund | 117,751,704 | 202,927,795 | 46,428,719 | ||||||||||||
UBS Global Allocation Fund | 195,852,100 | 862,762,158 | — |
96
The UBS Funds
Notes to financial statements
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2013, the following Fund incurred, and elected to defer, losses of the following:
Fund | Post October capital losses long-term | ||||||
UBS Asset Growth Fund | $ | 118,733 |
As of and during the period ended December 31, 2013, the Funds did not have any liabilities for any uncertain tax positions. The Funds recognize interest and penalties, if any, related to uncertain tax positions 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, 2013, or since inception in the case of UBS Multi-Asset Income 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 $50 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 outstanding as of or during the period ended December 31, 2013.
9. Shares of beneficial interest
For the period ended December 31, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Asset Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 50,617 | $ | 423,259 | 23,544 | $ | 194,807 | 17,921 | $ | 153,915 | ||||||||||||||||||
Shares repurchased | (457,149 | ) | (3,769,022 | ) | (246,848 | ) | (2,043,124 | ) | (38,029 | ) | (315,035 | ) | |||||||||||||||
Dividends reinvested | 11,634 | 96,682 | — | — | 1,535 | 12,725 | |||||||||||||||||||||
Redemption fees | — | 36 | — | 12 | — | 3 | |||||||||||||||||||||
Net decrease | (394,898 | ) | $ | (3,249,045 | ) | (223,304 | ) | $ | (1,848,305 | ) | (18,573 | ) | $ | (148,392 | ) |
UBS Dynamic Alpha Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,512,522 | $ | 17,489,200 | 910,197 | $ | 5,989,338 | 715,547 | $ | 5,106,018 | ||||||||||||||||||
Shares repurchased | (4,350,750 | ) | (30,329,113 | ) | (1,036,438 | ) | (6,831,205 | ) | (580,850 | ) | (4,141,276 | ) | |||||||||||||||
Dividends reinvested | 36,238 | 256,205 | — | — | 27,478 | 197,842 | |||||||||||||||||||||
Redemption fees | — | 22,523 | — | 5,797 | — | 5,138 | |||||||||||||||||||||
Net increase (decrease) | (1,801,990 | ) | $ | (12,561,185 | ) | (126,241 | ) | $ | (836,070 | ) | 162,175 | $ | 1,167,722 |
97
The UBS Funds
Notes to financial statements
UBS Global Allocation Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 301,970 | $ | 3,084,920 | 104,454 | $ | 1,051,450 | 153,625 | $ | 1,608,592 | ||||||||||||||||||
Shares repurchased | (6,351,559 | ) | (65,162,474 | ) | (2,483,648 | ) | (24,802,650 | ) | (969,477 | ) | (10,040,758 | ) | |||||||||||||||
Dividends reinvested | 380,019 | 3,895,196 | 65,888 | 662,837 | 171,107 | 1,784,642 | |||||||||||||||||||||
Redemption fees | — | 1,732 | — | 912 | — | 608 | |||||||||||||||||||||
Net decrease | (5,669,570 | ) | $ | (58,180,626 | ) | (2,313,306 | ) | $ | (23,087,451 | ) | (644,745 | ) | $ | (6,646,916 | ) |
UBS Multi-Asset Income Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 164,219 | $ | 1,667,479 | 38,042 | $ | 386,366 | — | $ | — | ||||||||||||||||||
Shares repurchased | (569,098 | ) | (5,800,877 | ) | (102,654 | ) | (1,049,179 | ) | — | — | |||||||||||||||||
Dividends reinvested | 33,092 | 336,840 | 12,013 | 122,213 | 60,246 | 613,368 | |||||||||||||||||||||
Redemption fees | — | 355 | — | 142 | — | 421 | |||||||||||||||||||||
Net increase (decrease) | (371,787 | ) | $ | (3,796,203 | ) | (52,599 | ) | $ | (540,458 | ) | 60,246 | $ | 613,789 |
For the year ended June 30, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Asset Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 66,560 | $ | 534,630 | 2,945 | $ | 22,675 | 36,183 | $ | 286,552 | ||||||||||||||||||
Shares repurchased | (1,362,915 | ) | (10,428,839 | ) | (318,005 | ) | (2,430,109 | ) | (82,178 | ) | (598,008 | ) | |||||||||||||||
Dividends reinvested | 42,346 | 322,676 | 3,654 | 27,879 | 3,325 | 25,302 | |||||||||||||||||||||
Redemption fees | — | 964 | — | 311 | — | 55 | |||||||||||||||||||||
Net decrease | (1,254,009 | ) | $ | (9,570,569 | ) | (311,406 | ) | $ | (2,379,244 | ) | (42,670 | ) | $ | (286,099 | ) |
UBS Dynamic Alpha Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 12,252,337 | $ | 84,313,524 | 1,850,422 | $ | 12,124,178 | 1,036,159 | $ | 7,216,312 | ||||||||||||||||||
Shares repurchased | (7,378,446 | ) | (50,335,272 | ) | (1,812,827 | ) | (11,689,662 | ) | (2,268,279 | ) | (15,887,648 | ) | |||||||||||||||
Dividends reinvested | 388,822 | 2,612,881 | 73,356 | 468,013 | 157,720 | 1,078,807 | |||||||||||||||||||||
Redemption fees | — | 6,332 | — | 1,680 | — | 1,727 | |||||||||||||||||||||
Net increase (decrease) | 5,262,713 | $ | 36,597,465 | 110,951 | $ | 904,209 | (1,074,400 | ) | $ | (7,590,802 | ) |
98
The UBS Funds
Notes to financial statements
UBS Global Allocation Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 707,270 | $ | 6,981,695 | 179,907 | $ | 1,725,958 | 594,901 | $ | 5,923,397 | ||||||||||||||||||
Shares repurchased | (17,320,014 | ) | (167,676,729 | ) | (6,818,760 | ) | (64,517,652 | ) | (2,411,014 | ) | (23,788,360 | ) | |||||||||||||||
Dividends reinvested | 946,587 | 9,039,904 | 314,590 | 2,944,563 | 320,815 | 3,121,528 | |||||||||||||||||||||
Redemption fees | — | 3,759 | — | 1,906 | — | 1,192 | |||||||||||||||||||||
Net decrease | (15,666,157 | ) | $ | (151,651,371 | ) | (6,324,263 | ) | $ | (59,845,225 | ) | (1,495,298 | ) | $ | (14,742,243 | ) |
UBS Multi-Asset Income Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,338,475 | $ | 24,211,553 | 785,673 | $ | 8,116,691 | 4,912 | $ | 50,000 | ||||||||||||||||||
Shares repurchased | (221,474 | ) | (2,291,861 | ) | (34,216 | ) | (354,226 | ) | — | — | |||||||||||||||||
Dividends reinvested | 40,701 | 421,044 | 12,511 | 129,450 | 83,238 | 859,201 | |||||||||||||||||||||
Redemption fees | — | 3,540 | — | 1,287 | — | 4,528 | |||||||||||||||||||||
Net increase | 2,157,702 | $ | 22,344,276 | 763,968 | $ | 7,893,202 | 88,150 | $ | 913,729 |
99
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 1-202-551 8090. 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).
100
The UBS Funds
Funds' privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds managed by UBS Global Asset Management (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information and to comply with applicable laws and regulations.
The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as otherwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1172
Item 2. Code of Ethics.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 3. Audit Committee Financial Expert.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 4. Principal Accountant Fees and Services.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
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 Mark Kemper, 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 — Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
(a) (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.CERT.
(a) (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons — not applicable to the registrant.
(b) Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The UBS Funds |
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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: | March 10, 2014 |
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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.
The UBS Funds |
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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: | March 10, 2014 |
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By: | /s/ Thomas Disbrow |
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| Thomas Disbrow |
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| Vice President, Treasurer and Principal Accounting Officer | |
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Date: | March 10, 2014 |
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