UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-06637 | |||||||
| ||||||||
The UBS Funds | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
| ||||||||
One North Wacker Drive, Chicago, IL |
| 60606-2807 | ||||||
(Address of principal executive offices) |
| (Zip code) | ||||||
| ||||||||
Keith Weller, Esq. UBS Asset Management One North Wacker Drive Chicago, IL 60606 | ||||||||
(Name and address of agent for service) | ||||||||
Copy to: Bruce Leto, Esq. Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098
| ||||||||
Registrant’s telephone number, including area code: | 312-525 7100 |
| ||||||
| ||||||||
Date of fiscal year end: | June 30 |
| ||||||
| ||||||||
Date of reporting period: | December 31, 2018 |
| ||||||
Item 1. Reports to Stockholders.
The UBS Funds
Semiannual Report | December 31, 2018
Table of contents | Page | ||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
UBS Dynamic Alpha Fund | 5 | ||||||
UBS Global Allocation Fund | 21 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 33 | ||||||
UBS Engage For Impact Fund | 39 | ||||||
UBS International Sustainable Equity Fund | 47 | ||||||
UBS U.S. Small Cap Growth Fund | 55 | ||||||
UBS U.S. Sustainable Equity Fund | 63 | ||||||
UBS Municipal Bond Fund | 70 | ||||||
UBS Sustainable Development Bank Bond Fund | 77 | ||||||
UBS Total Return Bond Fund | 83 | ||||||
Explanation of expense disclosure | 97 | ||||||
Statement of assets and liabilities | 100 | ||||||
Statement of operations | 108 | ||||||
Statement of changes in net assets | 112 | ||||||
Financial highlights | 116 | ||||||
Notes to financial statements | 126 | ||||||
General information | 156 |
This page intentionally left blank.
President's letter
February 13, 2019
Dear Shareholder,
While the sharp drawdown in global risk assets in the fourth quarter of 2018 stands in stark contrast to their placid uptrends in 2017, there is still something familiar in recent price action. In several ways, market behavior late in 2018 and to start 2019 resembles that of late 2015/early 2016.
Drawdowns across global equity indexes in 2018 have generally been more severe than those of three years ago, while the rise in credit spreads and decline in Treasury yields have been roughly half those in the prior period. A sharp decline in oil prices, driven by both supply and demand factors, has been a common element that has fed into weakness in the prices of risk assets. Arguably, the underlying concerns among investors in these two periods are similar as well—fears of a Fed policy mistake amid slowing global growth.
With the potential for continued volatility ahead, the timeless challenge of building a genuinely diversified portfolio capable of delivering growth and the potential for downside protection takes on a new dimension. At UBS Asset Management, our teams have distinct viewpoints and philosophies, but they all share one goal—to provide you with access to a broad range of investment solutions and superior investment performance.
In recent years, UBS Asset Management (Americas) Inc. ("UBS AM") has committed to being an industry leader in sustainable investment strategies that screen potential opportunities based on environmental, social and corporate governance criteria, in addition to traditional investment analysis. We believe that the integration of material sustainability criteria often leads to better-informed investment decisions and provides powerful diversification benefits to a portfolio across all asset classes.
At UBS AM our goal is to integrate environmental, social and governance considerations into all of our investment decisions. Over the past few years, greater levels of corporate disclosure have provided the opportunity to integrate ESG into fixed income, particularly corporate credit. Our credit analysts are at the center of ESG integration in fixed income because we believe they are best placed to make use of their in-depth knowledge of issuers and experience in fundamental analysis to provide the context in which to consider sustainability issues. They aggregate quantitative and qualitative data, consider its relevance and materiality, put it into an appropriate recommendation framework, and then also make judgements based on sometimes incomplete and imperfect information.
Our commitment to sustainable investing and to offer our clients the broadest range of sustainable investment options is evident in the two new funds we launched in 2018: the UBS Sustainable Development Bank Bond Fund and the UBS Engage For Impact Fund1. The fund complex now includes four distinct sustainability focused investment options.
The UBS Sustainable Development Bank Bond Fund seeks to invest in bonds issued by development banks. The fund focuses primarily on bonds issued by multilateral development banks. Development banks are formed by their member states with the objective to provide financial and technical assistance to improve overall living standards through sustainable economic development and growth. While each development bank has a distinct focus, development banks generally use their capital for projects that seek to improve the state of the developing world, promote sustainable growth and raise living standards.
1 Mutual Funds are sold by prospectus and you should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information 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 website at www.ubs.com.
1
President's letter
Impact and engagement investing is a natural progression within the growing sustainable investing universe as well as the fastest growing category of sustainable investing. The UBS Engage For Impact Fund is one of the first dedicated engagement and impact funds in the US. Impact and engagement investing involves asset managers engaging with companies to encourage them to improve their business models, the policies and operations they have in place, and the products and services they sell.
The UBS Engage For Impact Fund seeks to invest in companies that the portfolio managers believe are attractively valued, that integrate sustainability factors into the business model to build a competitive advantage, and whose products and services can create meaningful, intentional, verifiable and measurable impact on society and the environment. In addition, the fund targets companies which have a clearly identified potential for additional positive impact that can be driven through engagement with the companies.
These new sustainable offerings continue to broaden the depth and breadth of UBS mutual fund offerings. Our goal is to give investors the ability to build portfolios that can help them meet their financial goals. And, in the end, diversification across a range of asset classes and investment styles remains imperative, particularly in the late stages of an economic recovery.
Amid the return of volatility, we believe active managers are in a better position to take advantage of market dislocations and to seek to add value over broad market returns. We continue to believe that there are compelling opportunities across global asset classes and that the right strategies in the hands of skilled investment professionals have the potential to deliver better investment outcomes for our clients.
Sincerely,
Igor Lasun
President
The UBS Funds
Executive Director
UBS Asset Management (Americas) Inc.
2
The markets in review
Global growth moderates
The US economic expansion continued during the reporting period. Looking back, the US Commerce Department reported that gross domestic product ("GDP") grew at a 4.2% seasonally adjusted annualized rate during the second quarter of 2018—the strongest pace since the third quarter of 2014. GDP growth then moderated to 3.4% during the third quarter. Finally, the US Commerce Department's initial estimate for fourth quarter GDP growth in the US was delayed due to the partial government shutdown.
As expected, the US Federal Reserve Board (the "Fed") continued to tighten monetary policy during the reporting period. Specifically, the Fed raised rates at its meetings in March, June, September and December 2018. With its last rate hike, the federal funds rate1 moved to a range between 2.25% and 2.50%. In addition, the Fed continued reducing its balance sheet. The Fed currently anticipates making two additional 0.25% rate hikes in 2019, although this will be data dependent.
From a global perspective, in its October 2018 World Economic Outlook Update, the International Monetary Fund ("IMF") said, "Global growth for 2018—19 is projected to remain steady at its 2017 level, but its pace is less vigorous than projected in April 2018 and it has become less balanced. Downside risks to global growth have risen in the past six months and the potential for upside surprises has receded." The IMF projected that 2018 growth in the eurozone would be 2.0%, versus 2.4% in 2017. Japan's economy was expected to expand 1.1% in 2018, compared to 1.7% in 2017. Meanwhile, the IMF projected that overall growth in emerging market countries would be 4.7% in 2018, unchanged from 2017.
Global equities: A broad-based decline
The global equity market generated poor results during the reporting period. US equities posted positive returns during the first half of the period. Supporting the market were corporate profits that often exceeded expectations, in part fueled by the December 2017 tax reform bill. However, those gains were more than offset by a sharp decline over the second half of the period. In late December 2018, the US stock market, as measured by the S&P 500 Index,2 narrowly averted its first bear market (a decline of 20% from its peak) in a decade. Signs of moderating global growth, an ongoing trade dispute between the US and China, concerns over future Fed rate hikes and a partial government shutdown negatively impacted investor sentiment. All told, the S&P 500 Index declined 6.85% during the six months ended December 31, 2018. Returns were even weaker outside the US. International developed equities, as measured by the MSCI EAFE Index (net),3 returned -11.35% during the reporting period, while emerging markets equities, as measured by the MSCI Emerging Markets Index (net),4 fell 8.49%.
1 The federal funds rate or the "fed funds rate," is the rate US banks charge one another for funds they borrow on an overnight basis.
2 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.
3 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.
4 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.
3
The markets in review
The fixed income market produces mixed results
The global fixed income market generated mixed results during the reporting period. In the US, despite two Fed rate hikes, short-term Treasury yields modestly declined. Longer-term Treasury yields also fell, partially due to a flight to quality toward the end of the year. For the six months ended December 31, 2018, the yield on the US 10-year Treasury fell from 2.85% to 2.69% (bond yields and prices move in the opposite direction). The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Index,5 rose 1.65% during the reporting period. Returns of riskier fixed income securities were generally weak. High yield bonds, as measured by the ICE BofAML US High Yield Cash Pay Constrained Index,6 declined 2.34% for the six months ended December 31, 2018. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),7 gained 0.65%.
5 The Bloomberg 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.
6 The ICE BofAML 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 issuer is restricted to a maximum of 2% of the total index. Investors should note that indices do not reflect the deduction of fees and expenses.
7 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 Dynamic Alpha Fund
Portfolio performance
For the six months ended December 31, 2018, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned -3.83% (Class A shares returned -9.10% after the deduction of the maximum sales charge), while Class P shares returned -3.81%. For purposes of comparison, the ICE BofA Merrill Lynch US Treasury 1-5 Year Index retuned 1.77% during the same time period, the MSCI World Index (net) returned -9.10%, and the Citigroup One-Month US Treasury Bill Index returned 1.04%. (Class P shares have lower expenses than the other share class in the Fund.)
Returns for all share classes over various time periods are shown on page 7; 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 negative absolute return during the reporting period, with market and currency allocations detracting from results. Active currency allocation decisions did not meaningfully impact performance during the reporting period.
During the reporting 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 did not positively or negatively impact on Fund performance. We used a variety of equity and fixed income 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, detracted from performance during the reporting period.
Portfolio performance summary1
What worked:
• Certain market allocations were positive for returns.
– A long exposure to investment-grade credit contributed to performance. While spreads widened slightly over the reporting period amid concerns around global growth and normalizing US monetary policy, the yield pick-up from corporate bonds offset any negative price impacts.
– A preference for emerging market minimum volatility equities versus US equities was beneficial for performance amid greater turbulence in both markets. This view is part of a relative value view of preferring emerging market equities over US equities, but was primarily expressed via a minimum volatility position during the reporting period.
– A larger allocation to cash added to performance as increased volatility led to negative returns across most other asset classes.
• Certain active currency positions were positive for performance.
– A long Mexican peso versus US dollar position contributed to results, supported by tailwinds such as valuation and carry, and the trade deal with the US.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Dynamic Alpha Fund
– A short Chilean peso position added to results as the US dollar strengthened. This position was closed in the end of August 2018 on the back of positive performance and more normalized valuations.
– Short positions in the Australian and Canadian dollars relative to the US dollar were additive for returns. The Australian dollar depreciated on the back of underperforming economic growth relative to the US, divergence in monetary policy and Chinese growth slowdown concerns. The Canadian dollar depreciated due to falling oil prices.
What didn't work:
• Overall, market allocations detracted from results.
– The Fund's preference for ex-US equities (developed and emerging markets) over US equities was a drag on performance. Rising trade tensions between the US and China, negative European political developments and slower global growth had a larger negative impact on ex-US equities over the reporting period.
– The Fund was negatively impacted by a few equity relative value trades, including long China H shares versus Taiwanese equities, long Japanese versus French equities (TOPIX versus CAC 40) and long European bank stocks versus European stocks.
• Several active currency positions detracted from results:
– The largest detractor during the reporting period was our long Turkish lira versus US dollar position, which was closed in mid-August 2018. The underperformance of the Turkish lira versus the US dollar was primarily driven Turkey's current deficit and runaway inflation problem, coupled with political risks and sanctions from the US government.
– A long Colombian peso position versus the US dollar detracted from results due to tighter US monetary policy and the Colombian peso's sensitivity to falling oil prices. This position was closed in mid-August 2018.
– Long positions in certain European currencies, such as the Norwegian Krone and Swedish Krona, were headwind for returns and they both depreciated relative to the US dollar during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
6
UBS Dynamic Alpha Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | (3.83 | )% | (6.18 | )% | (1.63 | )% | 3.56 | % | |||||||||||
Class P2 | (3.81 | ) | (5.97 | ) | (1.40 | ) | 3.80 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (9.10 | )% | (11.34 | )% | (2.74 | )% | 2.96 | % | |||||||||||
ICE BofAML US Treasury 1-5 Year Index3 | 1.77 | 1.52 | 1.09 | 1.33 | |||||||||||||||
MSCI World Index (net)4 | (9.10 | ) | (8.71 | ) | 4.56 | 9.67 | |||||||||||||
FTSE One-Month US Treasury Bill Index5 | 1.04 | 1.82 | 0.57 | 0.32 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectuses were as follows: Class A—1.71% and 1.37%; Class P—1.45% and 1.12%. 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 Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 1.35% for Class A shares and 1.10% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The ICE BofAML 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.
4 The MSCI World 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 FTSE 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.
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 www.ubs.com/us-mutualfundperformance.
7
UBS Dynamic Alpha Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
JPMorgan Chase & Co. 3.200% due 01/25/23 | 0.8 | % | |||||
Bank of America Corp. 3.875% due 08/01/25 | 0.8 | ||||||
Citigroup, Inc. 3.875% due 10/25/23 | 0.5 | ||||||
Goldman Sachs Group, Inc./The 2.000% due 07/27/23 | 0.5 | ||||||
Cooperatieve Rabobank UA 5.500% due 06/29/20 | 0.5 | ||||||
Morgan Stanley 2.500% due 04/21/21 | 0.4 | ||||||
Mirvac Group Finance Ltd. 3.625% due 03/18/27 | 0.4 | ||||||
Dream Global Funding I Sarl 1.375% due 12/21/21 | 0.4 | ||||||
Credit Agricole SA 1.375% due 03/13/25 | 0.4 | ||||||
BNP Paribas SA 1.250% due 03/19/25 | 0.4 | ||||||
Total | 5.1 | % |
Top five breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 67.6 | % | |||||
United Kingdom | 4.7 | ||||||
Netherlands | 3.5 | ||||||
France | 2.8 | ||||||
Australia | 2.2 | ||||||
Total | 80.8 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
8
UBS Dynamic Alpha Fund
Industry diversification—December 31, 2018 (unaudited)1,2
Corporate bonds | Percentage of net assets | ||||||
Advertising | 0.1 | % | |||||
Aerospace & defense | 0.2 | ||||||
Agriculture | 0.9 | ||||||
Airlines | 0.2 | ||||||
Auto manufacturers | 1.0 | ||||||
Banks | 11.1 | ||||||
Beverages | 0.8 | ||||||
Biotechnology | 0.4 | ||||||
Chemicals | 1.1 | ||||||
Commercial banks | 1.2 | ||||||
Commercial services | 0.6 | ||||||
Computers | 0.4 | ||||||
Construction materials | 0.2 | ||||||
Cosmetics & personal care | 0.1 | ||||||
Diversified financial services | 0.5 | ||||||
Electric | 4.6 | ||||||
Electronics | 0.1 | ||||||
Engineering & construction | 0.3 | ||||||
Food | 0.7 | ||||||
Gas | 1.0 | ||||||
Healthcare-products | 0.3 | ||||||
Healthcare-services | 0.8 | ||||||
Household products/wares | 0.2 | ||||||
Insurance | 4.3 | ||||||
Internet | 0.8 | ||||||
Investment company security | 0.3 | ||||||
Iron & steel | 0.1 | ||||||
Machinery-constr & mining | 0.1 | ||||||
Media | 2.0 | ||||||
Mining | 0.6 | ||||||
Miscellaneous manufacturers | 0.6 | ||||||
Oil & gas | 2.0 | ||||||
Oil & gas services | 0.1 | ||||||
Pharmaceuticals | 2.3 | ||||||
Pipelines | 1.5 | ||||||
Real estate | 1.6 | ||||||
Real estate investment trusts | 0.7 | ||||||
Retail | 0.2 | ||||||
Savings & loans | 0.2 | ||||||
Semiconductors | 0.4 | ||||||
Software | 0.4 | ||||||
Telecommunications | 1.8 | ||||||
Transportation | 0.9 | ||||||
Water | 1.4 | ||||||
Total corporate bonds | 49.1 | % |
Percentage of net assets | |||||||
Collateralized debt obligation | 0.0 | %† | |||||
Collateralized mortgage obligation | 0.0 | † | |||||
Non-US government obligation | 0.3 | ||||||
Exchange traded funds | 7.9 | ||||||
Short-term investments | 36.3 | ||||||
Total investments | 93.6 | % | |||||
Other assets in excess of liabilities | 6.4 | ||||||
Net assets | 100.0 | % |
† Amount represents less than 0.05%
1 Figures represent the breakdown of direct investments of UBS Dynamic Alpha Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
9
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds: 49.1% | |||||||||||
Australia: 2.2% | |||||||||||
APT Pipelines Ltd. 4.200%, due 03/23/252 | 20,000 | $ | 19,486 | ||||||||
Aurizon Network Pty. Ltd. Series EMTN, 2.000%, due 09/18/242 | EUR | 100,000 | 117,538 | ||||||||
Australia Pacific Airports Melbourne Pty. Ltd. Series EMTN, 1.750%, due 10/15/242 | EUR | 150,000 | 178,385 | ||||||||
Commonwealth Bank of Australia Series EMTN, (fixed, converts to FRN on 10/03/24), 1.936%, due 10/03/292 | EUR | 100,000 | 108,533 | ||||||||
2.050%, due 09/18/203 | 60,000 | 58,834 | |||||||||
Mirvac Group Finance Ltd. Series EMTN, 3.625%, due 03/18/272 | 270,000 | 248,332 | |||||||||
Origin Energy Finance Ltd. 5.450%, due 10/14/212 | 115,000 | 119,448 | |||||||||
Scentre Group Trust 1 2.375%, due 04/28/212 | 80,000 | 78,014 | |||||||||
SGSP Australia Assets Pty. Ltd. Series EMTN, 3.250%, due 07/29/262 | 200,000 | 184,401 | |||||||||
Telstra Corp. Ltd. 4.800%, due 10/12/212 | 60,000 | 62,337 | |||||||||
Westpac Banking Corp. 2.800%, due 01/11/22 | 40,000 | 39,246 | |||||||||
(fixed, converts to FRN on 09/21/27), 5.000%, due 09/21/274 | 120,000 | 99,719 | |||||||||
Total Australia corporate bonds | 1,314,273 | ||||||||||
Belgium: 0.5% | |||||||||||
AG Insurance SA (fixed, converts to FRN on 06/30/27), 3.500%, due 06/30/472 | EUR | 100,000 | 112,111 | ||||||||
Anheuser-Busch InBev SA/N.V. Series EMTN, 1.500%, due 03/17/252 | EUR | 70,000 | 81,560 | ||||||||
RESA SA 1.000%, due 07/22/262 | EUR | 100,000 | 113,118 | ||||||||
Total Belgium corporate bonds | 306,789 | ||||||||||
Bermuda: 0.3% | |||||||||||
Bacardi Ltd. 2.750%, due 07/03/232 | EUR | 170,000 | 204,594 | ||||||||
British Virgin Islands: 0.3% | |||||||||||
Sinopec Capital 2013 Ltd. 3.125%, due 04/24/232 | 200,000 | 194,202 | |||||||||
Canada: 1.4% | |||||||||||
Bell Canada, Inc. Series MTN, 4.750%, due 09/29/44 | CAD | 40,000 | 28,898 |
Face amount1 | Value | ||||||||||
Canadian Natural Resources Ltd. 2.950%, due 01/15/23 | CAD | 55,000 | $ | 52,571 | |||||||
3.850%, due 06/01/27 | 60,000 | 56,630 | |||||||||
Series GMTN, 4.950%, due 06/01/47 | 20,000 | 19,211 | |||||||||
Cenovus Energy, Inc. 4.250%, due 04/15/27 | 70,000 | 63,792 | |||||||||
Nexen Energy ULC 6.400%, due 05/15/37 | 80,000 | 97,472 | |||||||||
Royal Bank of Canada 1.650%, due 07/15/21 | CAD | 230,000 | 164,000 | ||||||||
Suncor Energy, Inc. 6.500%, due 06/15/38 | 90,000 | 103,591 | |||||||||
TELUS Corp. 3.750%, due 01/17/25 | CAD | 45,000 | 33,350 | ||||||||
Toronto Dominion Bank/The 2.045%, due 03/08/21 | CAD | 200,000 | 144,631 | ||||||||
Yamana Gold, Inc. 4.950%, due 07/15/24 | 90,000 | 88,885 | |||||||||
Total Canada corporate bonds | 853,031 | ||||||||||
Cayman Islands: 1.1% | |||||||||||
Alibaba Group Holding Ltd. 3.400%, due 12/06/27 | 200,000 | 184,634 | |||||||||
Phoenix Group Holdings 4.125%, due 07/20/22 | GBP | 150,000 | 189,331 | ||||||||
Vale Overseas Ltd. 6.250%, due 08/10/26 | 80,000 | 86,400 | |||||||||
XLIT Ltd. 5.250%, due 12/15/43 | 45,000 | 48,205 | |||||||||
Yorkshire Water Finance PLC Series EMTN, (fixed, converts to FRN on 03/22/23), 3.750%, due 03/22/462 | GBP | 100,000 | 131,005 | ||||||||
Total Cayman Islands corporate bonds | 639,575 | ||||||||||
Curacao: 0.1% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 40,000 | 37,900 | |||||||||
Czech Republic: 0.2% | |||||||||||
NET4GAS sro Series EMTN, 2.500%, due 07/28/212 | EUR | 100,000 | 119,597 | ||||||||
Denmark: 0.3% | |||||||||||
Ap Moller Maersk A/S Series EMTN, 1.750%, due 03/16/262 | EUR | 100,000 | 108,934 | ||||||||
Orsted A/S (fixed, converts to FRN on 11/06/20), 3.000%, due 11/06/30152 | EUR | 40,000 | 46,518 | ||||||||
Total Denmark corporate bonds | 155,452 |
10
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Finland: 0.4% | |||||||||||
Elenia Finance OYJ Series EMTN, 2.875%, due 12/17/202 | EUR | 100,000 | $ | 120,164 | |||||||
Teollisuuden Voima OYJ Series EMTN, 2.500%, due 03/17/212 | EUR | 125,000 | 148,312 | ||||||||
Total Finland corporate bonds | 268,476 | ||||||||||
France: 2.8% | |||||||||||
AXA SA Series EMTN, (fixed, converts to FRN on 05/28/29), 3.250%, due 05/28/492 | EUR | 100,000 | 109,205 | ||||||||
Series EMTN, (fixed, converts to FRN on 07/06/27), 3.375%, due 07/06/472 | EUR | 100,000 | 114,650 | ||||||||
Banque Federative du Credit Mutuel SA Series EMTN, 3.000%, due 09/11/252 | EUR | 100,000 | 120,519 | ||||||||
BNP Paribas SA Series EMTN, 1.000%, due 04/17/242 | EUR | 100,000 | 112,163 | ||||||||
Series EMTN, 1.250%, due 03/19/252 | EUR | 200,000 | 224,530 | ||||||||
BPCE SA Series EMTN, 1.375%, due 03/23/262 | EUR | 100,000 | 112,049 | ||||||||
Credit Agricole SA Series EMTN, 1.375%, due 03/13/252 | EUR | 200,000 | 226,816 | ||||||||
Credit Logement SA 3 mo. Euribor + 1.150%, 0.839%, due 03/16/192,4,5 | EUR | 100,000 | 98,944 | ||||||||
Electricite de France SA 6.950%, due 01/26/393 | 50,000 | 58,302 | |||||||||
Engie SA (fixed, converts to FRN on 07/10/21), 4.750%, due 07/10/212,4 | EUR | 100,000 | 121,478 | ||||||||
SCOR SE (fixed, converts to FRN on 03/13/29), 5.250%, due 03/13/292,4 | 200,000 | 163,000 | |||||||||
TDF Infrastructure SAS 2.875%, due 10/19/222 | EUR | 100,000 | 121,878 | ||||||||
Terega SA 2.200%, due 08/05/252 | EUR | 100,000 | 118,954 | ||||||||
Total France corporate bonds | 1,702,488 | ||||||||||
Germany: 1.1% | |||||||||||
ADLER Real Estate AG 3.000%, due 04/27/262 | EUR | 100,000 | 105,117 | ||||||||
Allianz SE Series EMTN, (fixed, converts to FRN on 10/24/23), 4.750%, due 10/24/232,4 | EUR | 100,000 | 125,776 |
Face amount1 | Value | ||||||||||
Deutsche Bank AG 3.150%, due 01/22/21 | EUR | 155,000 | $ | 149,797 | |||||||
Henkel AG & Co. KGaA Series EMTN, 1.500%, due 09/13/192 | 150,000 | 148,362 | |||||||||
Volkswagen Leasing GmbH Series EMTN, 1.000%, due 02/16/232 | EUR | 50,000 | 56,115 | ||||||||
Series EMTN, 1.625%, due 08/15/252 | EUR | 70,000 | 77,297 | ||||||||
Total Germany corporate bonds | 662,464 | ||||||||||
Hong Kong: 0.3% | |||||||||||
CNAC HK Finbridge Co. Ltd. 3.500%, due 07/19/222 | 200,000 | 195,065 | |||||||||
Ireland: 0.8% | |||||||||||
Aquarius & Investments PLC for Swiss Reinsurance Co. Ltd. (fixed, converts to FRN on 09/01/19), 6.375%, due 09/01/242 | 200,000 | 201,340 | |||||||||
Fresenius Finance Ireland PLC 1.500%, due 01/30/242 | EUR | 50,000 | 57,283 | ||||||||
GE Capital International Funding Co., Unlimited Co. 4.418%, due 11/15/35 | 200,000 | 168,262 | |||||||||
Shire Acquisitions Investments Ireland DAC 3.200%, due 09/23/26 | 50,000 | 45,270 | |||||||||
Total Ireland corporate bonds | 472,155 | ||||||||||
Italy: 0.8% | |||||||||||
Autostrade per l'Italia SpA Series EMTN, 1.125%, due 11/04/212 | EUR | 100,000 | 108,568 | ||||||||
Buzzi Unicem SpA 2.125%, due 04/28/232 | EUR | 100,000 | 114,326 | ||||||||
CDP Reti SpA 1.875%, due 05/29/222 | EUR | 155,000 | 171,001 | ||||||||
Italgas SpA, Series EMTN, 1.625%, due 01/19/272 | EUR | 100,000 | 109,457 | ||||||||
Total Italy corporate bonds | 503,352 | ||||||||||
Japan: 0.3% | |||||||||||
Mitsubishi UFJ Financial Group, Inc. 2.665%, due 07/25/22 | 60,000 | 58,310 | |||||||||
Sumitomo Mitsui Financial Group, Inc. 2.934%, due 03/09/21 | 40,000 | 39,577 | |||||||||
3.102%, due 01/17/23 | 110,000 | 107,898 | |||||||||
Total Japan corporate bonds | 205,785 | ||||||||||
Jersey: 0.4% | |||||||||||
AA Bond Co. Ltd. Series EMTN, 2.875%, due 01/31/222 | GBP | 174,000 | 206,090 |
11
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Jersey—(Concluded) | |||||||||||
HSBC Bank Capital Funding Sterling 2 LP (fixed, converts to FRN on 04/07/20), 5.862%, due 04/07/204 | GBP | 40,000 | $ | 52,020 | |||||||
Total Jersey corporate bonds | 258,110 | ||||||||||
Luxembourg: 1.2% | |||||||||||
ADO Properties SA 1.500%, due 07/26/242 | EUR | 100,000 | 107,046 | ||||||||
Allergan Funding SCS 1.250%, due 06/01/24 | EUR | 100,000 | 111,903 | ||||||||
2.125%, due 06/01/29 | EUR | 100,000 | 109,367 | ||||||||
3.450%, due 03/15/22 | 70,000 | 68,926 | |||||||||
4.750%, due 03/15/45 | 20,000 | 19,010 | |||||||||
Aroundtown SA Series EMTN, 1.000%, due 01/07/252 | EUR | 100,000 | 106,015 | ||||||||
Dream Global Funding I Sarl 1.375%, due 12/21/212 | EUR | 200,000 | 227,570 | ||||||||
Total Luxembourg corporate bonds | 749,837 | ||||||||||
Mexico: 0.8% | |||||||||||
Mexichem SAB de CV 5.500%, due 01/15/483 | 200,000 | 171,000 | |||||||||
Mexico City Airport Trust 5.500%, due 07/31/472 | 200,000 | 175,500 | |||||||||
Petroleos Mexicanos Series EMTN, 3.750%, due 02/21/242 | EUR | 100,000 | 109,969 | ||||||||
5.500%, due 02/24/252 | EUR | 30,000 | 35,619 | ||||||||
Total Mexico corporate bonds | 492,088 | ||||||||||
Netherlands: 3.5% | |||||||||||
Argentum Netherlands BV for Swiss Life AG (fixed, converts to FRN on 06/16/25), 4.375%, due 06/16/252,4 | EUR | 100,000 | 118,004 | ||||||||
Cooperatieve Rabobank UA (fixed, converts to FRN on 06/29/20), 5.500%, due 06/29/202,4 | EUR | 250,000 | 293,240 | ||||||||
Deutsche Telekom International Finance BV Series EMTN, 6.500%, due 04/08/222 | GBP | 40,000 | 58,346 | ||||||||
ELM BV for Swiss Reinsurance Co. Ltd. (fixed, converts to FRN on 09/01/25), 2.600%, due 09/01/252,4 | EUR | 130,000 | 147,823 | ||||||||
Iberdrola International BV (fixed, converts to FRN on 05/22/23), 1.875%, due 05/22/232,4 | EUR | 100,000 | 107,093 | ||||||||
Series EMTN, (fixed, converts to FRN on 03/26/24), 2.625%, due 03/26/242,4 | EUR | 100,000 | 110,708 | ||||||||
ING Groep N.V. Series EMTN, 1.125%, due 02/14/252 | EUR | 100,000 | 112,208 |
Face amount1 | Value | ||||||||||
Mylan N.V. 3.125%, due 11/22/282 | EUR | 180,000 | $ | 207,100 | |||||||
Redexis Gas Finance BV Series EMTN, 1.875%, due 04/27/272 | EUR | 100,000 | 108,884 | ||||||||
Ren Finance BV Series EMTN, 2.500%, due 02/12/252 | EUR | 180,000 | 217,367 | ||||||||
Shell International Finance BV 4.375%, due 05/11/45 | 110,000 | 113,217 | |||||||||
Teva Pharmaceutical Finance Netherlands II BV 1.125%, due 10/15/242 | EUR | 100,000 | 95,985 | ||||||||
Teva Pharmaceutical Finance Netherlands III BV 2.800%, due 07/21/23 | 75,000 | 64,313 | |||||||||
Volkswagen International Finance N.V. 1.125%, due 10/02/232 | EUR | 100,000 | 112,044 | ||||||||
Series NC6, (fixed, converts to FRN on 06/27/24), 3.375%, due 06/27/242,4 | EUR | 100,000 | 107,128 | ||||||||
Vonovia Finance BV (fixed, converts to FRN on 12/17/21), 4.000%, due 12/17/212,4 | EUR | 100,000 | 117,898 | ||||||||
Total Netherlands corporate bonds | 2,091,358 | ||||||||||
Poland: 0.2% | |||||||||||
Tauron Polska Energia SA 2.375%, due 07/05/272 | EUR | 100,000 | 110,303 | ||||||||
Portugal: 0.2% | |||||||||||
Galp Gas Natural Distribuicao SA Series EMTN, 1.375%, due 09/19/232 | EUR | 100,000 | 113,661 | ||||||||
Singapore: 0.3% | |||||||||||
DBS Group Holdings Ltd. Series GMTN, (fixed, converts to FRN on 09/07/21), 3.600%, due 09/07/212,4 | 200,000 | 191,000 | |||||||||
Spain: 1.3% | |||||||||||
Aigues de Barcelona Finance SAU 1.944%, due 09/15/212 | EUR | 175,000 | 206,784 | ||||||||
Banco Santander SA 3.250%, due 04/04/262 | EUR | 100,000 | 117,183 | ||||||||
Series EMTN, 4.000%, due 01/19/232 | AUD | 200,000 | 142,087 | ||||||||
Canal de Isabel II Gestion SA Series EMTN, 1.680%, due 02/26/252 | EUR | 100,000 | 114,254 | ||||||||
FCC Aqualia SA 1.413%, due 06/08/222 | EUR | 150,000 | 171,578 | ||||||||
Total Spain corporate bonds | 751,886 | ||||||||||
Sweden: 0.2% | |||||||||||
Akelius Residential Property AB Series EMTN, 1.750%, due 02/07/252 | EUR | 100,000 | 109,820 |
12
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United Kingdom: 4.7% | |||||||||||
Anglian Water Services Financing PLC Series EMTN, 4.500%, due 02/22/262 | GBP | 100,000 | $ | 136,390 | |||||||
Barclays Bank PLC Series EMTN, 6.625%, due 03/30/222 | EUR | 50,000 | 64,197 | ||||||||
9.500%, due 08/07/212 | GBP | 80,000 | 117,528 | ||||||||
Barclays PLC (fixed, converts to FRN on 10/06/22), 2.375%, due 10/06/232 | GBP | 100,000 | 123,498 | ||||||||
Series EMTN, (fixed, converts to FRN on 11/11/20), 2.625%, due 11/11/252 | EUR | 100,000 | 113,074 | ||||||||
BAT International Finance PLC Series EMTN, 0.875%, due 10/13/232 | EUR | 200,000 | 222,671 | ||||||||
BUPA Finance PLC (fixed, converts to FRN on 09/16/20), 6.125%, due 09/16/204 | GBP | 45,000 | 59,637 | ||||||||
Cadent Finance PLC Series EMTN, 2.750%, due 09/22/462 | GBP | 100,000 | 109,264 | ||||||||
Diageo Capital PLC 3.875%, due 04/29/43 | 50,000 | 48,938 | |||||||||
HSBC Holdings PLC 5.100%, due 04/05/21 | 150,000 | 155,111 | |||||||||
Lloyds Banking Group PLC (fixed, converts to FRN on 11/07/27), 3.574%, due 11/07/28 | 220,000 | 195,808 | |||||||||
Nationwide Building Society Series EMTN, (fixed, converts to FRN on 07/25/24), 2.000%, due 07/25/292 | EUR | 100,000 | 106,091 | ||||||||
Prudential PLC Series EMTN, (fixed, converts to FRN on 07/20/35), 5.000%, due 07/20/552 | GBP | 100,000 | 126,307 | ||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 200,000 | 191,725 | |||||||||
(fixed, converts to FRN on 06/25/23), 4.519%, due 06/25/24 | 200,000 | 196,234 | |||||||||
6.100%, due 06/10/23 | 80,000 | 81,259 | |||||||||
SSE PLC (fixed, converts to FRN on 09/10/20), 3.875%, due 09/10/202,4 | GBP | 100,000 | 125,261 | ||||||||
Standard Chartered PLC (fixed, converts to FRN on 03/15/23), 3.885%, due 03/15/242 | 200,000 | 193,599 | |||||||||
Tesco Property Finance 4 PLC 5.801%, due 10/13/402 | GBP | 136,935 | 197,535 | ||||||||
Thames Water Utilities Finance PLC Series EMTN, 5.125%, due 09/28/372 | GBP | 50,000 | 77,063 |
Face amount1 | Value | ||||||||||
Virgin Money Holdings UK PLC Series GMTN, (fixed, converts to FRN on 04/24/25), 3.375%, due 04/24/262 | GBP | 100,000 | $ | 119,028 | |||||||
Vodafone Group PLC 4.375%, due 02/19/43 | 25,000 | 21,300 | |||||||||
WPP Finance 2010 3.750%, due 09/19/24 | 50,000 | 46,723 | |||||||||
Total United Kingdom corporate bonds | 2,828,241 | ||||||||||
United States: 23.4% | |||||||||||
21st Century Fox America, Inc. 6.200%, due 12/15/34 | 120,000 | 146,036 | |||||||||
ABB Finance USA, Inc. 2.875%, due 05/08/22 | 70,000 | 68,923 | |||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 40,000 | 39,525 | |||||||||
4.900%, due 11/30/46 | 80,000 | 84,092 | |||||||||
AbbVie, Inc. 1.375%, due 05/17/24 | EUR | 100,000 | 115,530 | ||||||||
2.900%, due 11/06/22 | 50,000 | 48,649 | |||||||||
4.250%, due 11/14/28 | 80,000 | 77,712 | |||||||||
4.400%, due 11/06/42 | 60,000 | 53,045 | |||||||||
4.875%, due 11/14/48 | 55,000 | 51,384 | |||||||||
Albemarle Corp. 5.450%, due 12/01/44 | 70,000 | 70,060 | |||||||||
Alphabet, Inc. 1.998%, due 08/15/26 | 160,000 | 145,534 | |||||||||
Altria Group, Inc. 4.250%, due 08/09/42 | 160,000 | 129,206 | |||||||||
Amazon.com, Inc. 2.800%, due 08/22/24 | 180,000 | 174,939 | |||||||||
American Airlines Pass-Through Trust Series 2014-1, Class B, 4.375%, due 10/01/22 | 59,233 | 58,604 | |||||||||
American Express Co. 3.400%, due 02/27/23 | 115,000 | 113,923 | |||||||||
Amgen, Inc. 4.400%, due 05/01/45 | 40,000 | 37,506 | |||||||||
Andeavor Logistics LP 3.500%, due 12/01/22 | 30,000 | 29,035 | |||||||||
4.250%, due 12/01/27 | 30,000 | 28,336 | |||||||||
Anheuser-Busch Cos. LLC/ Anheuser-Busch InBev Worldwide, Inc. 3.650%, due 02/01/263 | 30,000 | 28,357 | |||||||||
Anheuser-Busch InBev Worldwide, Inc. 3.750%, due 01/15/22 | 100,000 | 100,069 | |||||||||
Apache Corp. 4.250%, due 01/15/44 | 120,000 | 96,738 | |||||||||
Apple, Inc. 3.850%, due 08/04/46 | 130,000 | 122,581 | |||||||||
AT&T, Inc. 3.000%, due 02/15/22 | 80,000 | 78,484 | |||||||||
4.750%, due 05/15/46 | 140,000 | 124,603 | |||||||||
5.000%, due 03/01/21 | 100,000 | 103,397 | |||||||||
5.550%, due 08/15/41 | 80,000 | 78,526 |
13
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
AXA Equitable Holdings, Inc. 3.900%, due 04/20/233 | 50,000 | $ | 49,378 | ||||||||
Baltimore Gas & Electric Co. 3.500%, due 08/15/46 | 50,000 | 44,157 | |||||||||
Bank of America Corp. Series MTN, 3.875%, due 08/01/25 | 460,000 | 455,266 | |||||||||
BAT Capital Corp. 3.557%, due 08/15/27 | 50,000 | 44,412 | |||||||||
Berkshire Hathaway, Inc. 3.125%, due 03/15/26 | 50,000 | 48,486 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.625%, due 01/15/24 | 160,000 | 151,366 | |||||||||
Burlington Northern Santa Fe LLC 5.400%, due 06/01/41 | 60,000 | 67,979 | |||||||||
Capital One Financial Corp. 3.200%, due 02/05/25 | 120,000 | 112,073 | |||||||||
Celgene Corp. 3.875%, due 08/15/25 | 100,000 | 96,310 | |||||||||
CF Industries, Inc. 5.150%, due 03/15/34 | 60,000 | 50,400 | |||||||||
Charter Communications Operating LLC/ Charter Communications Operating Capital 4.464%, due 07/23/22 | 80,000 | 80,765 | |||||||||
4.500%, due 02/01/24 | 80,000 | 79,873 | |||||||||
5.375%, due 05/01/47 | 40,000 | 36,291 | |||||||||
Chevron Phillips Chemical Co. LLC/ Chevron Phillips Chemical Co. LP 3.300%, due 05/01/233 | 155,000 | 153,312 | |||||||||
Chubb INA Holdings, Inc. 2.500%, due 03/15/38 | EUR | 100,000 | 112,713 | ||||||||
Cigna Corp. 3.400%, due 09/17/213 | 65,000 | 64,849 | |||||||||
4.375%, due 10/15/283 | 70,000 | 70,433 | |||||||||
4.900%, due 12/15/483 | 30,000 | 29,392 | |||||||||
Citigroup, Inc. 3.875%, due 10/25/23 | 320,000 | 320,909 | |||||||||
4.600%, due 03/09/26 | 40,000 | 39,496 | |||||||||
4.650%, due 07/23/48 | 135,000 | 132,122 | |||||||||
Comcast Corp. 3.450%, due 10/01/21 | 75,000 | 75,757 | |||||||||
3.950%, due 10/15/25 | 85,000 | 86,045 | |||||||||
4.150%, due 10/15/28 | 55,000 | 55,883 | |||||||||
4.700%, due 10/15/48 | 30,000 | 30,524 | |||||||||
4.750%, due 03/01/44 | 20,000 | 20,058 | |||||||||
4.950%, due 10/15/58 | 35,000 | 35,638 | |||||||||
Conagra Brands, Inc. 3.800%, due 10/22/21 | 20,000 | 20,006 | |||||||||
4.600%, due 11/01/25 | 65,000 | 65,235 | |||||||||
5.400%, due 11/01/48 | 55,000 | 50,717 | |||||||||
Consumers Energy Co. 3.250%, due 08/15/46 | 30,000 | 25,431 | |||||||||
CVS Health Corp. 3.350%, due 03/09/21 | 55,000 | 54,816 |
Face amount1 | Value | ||||||||||
4.300%, due 03/25/28 | 90,000 | $ | 88,127 | ||||||||
5.050%, due 03/25/48 | 40,000 | 38,956 | |||||||||
5.125%, due 07/20/45 | 90,000 | 87,717 | |||||||||
Dell International LLC 8.350%, due 07/15/463 | 120,000 | 130,064 | |||||||||
Dominion Energy, Inc. Series D, 2.850%, due 08/15/26 | 40,000 | 36,879 | |||||||||
DowDuPont, Inc. 4.493%, due 11/15/25 | 50,000 | 51,502 | |||||||||
DTE Energy Co. 6.375%, due 04/15/33 | 80,000 | 95,538 | |||||||||
Duke Energy Carolinas LLC 4.000%, due 09/30/42 | 70,000 | 67,342 | |||||||||
Eaton Corp. 4.150%, due 11/02/42 | 60,000 | 55,775 | |||||||||
Eli Lilly & Co. 3.100%, due 05/15/27 | 20,000 | 19,375 | |||||||||
Enable Midstream Partners LP 3.900%, due 05/15/246 | 60,000 | 57,550 | |||||||||
Energy Transfer Operating LP 6.000%, due 06/15/48 | 70,000 | 68,249 | |||||||||
6.050%, due 06/01/41 | 90,000 | 86,087 | |||||||||
EnLink Midstream Partners LP 4.400%, due 04/01/24 | 80,000 | 75,385 | |||||||||
Enterprise Products Operating LLC 4.850%, due 03/15/44 | 50,000 | 48,543 | |||||||||
ERAC USA Finance LLC 5.625%, due 03/15/423 | 40,000 | 43,781 | |||||||||
ERP Operating LP 3.375%, due 06/01/25 | 70,000 | 68,811 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 55,000 | 52,316 | |||||||||
Exxon Mobil Corp. 3.567%, due 03/06/45 | 30,000 | 28,344 | |||||||||
FedEx Corp. 4.550%, due 04/01/46 | 20,000 | 18,201 | |||||||||
Fifth Third Bancorp 2.600%, due 06/15/22 | 70,000 | 68,089 | |||||||||
Five Corners Funding Trust 4.419%, due 11/15/233 | 100,000 | 102,871 | |||||||||
Freeport-McMoRan, Inc. 3.550%, due 03/01/22 | 100,000 | 94,625 | |||||||||
3.875%, due 03/15/23 | 100,000 | 92,500 | |||||||||
General Electric Co. 2.125%, due 05/17/37 | EUR | 100,000 | 89,264 | ||||||||
4.125%, due 10/09/42 | 30,000 | 23,401 | |||||||||
Series MTN, 4.375%, due 09/16/20 | 40,000 | 39,936 | |||||||||
Series MTNA, 6.750%, due 03/15/32 | 50,000 | 52,149 | |||||||||
General Motors Financial Co., Inc. 3.200%, due 07/06/21 | 80,000 | 78,141 | |||||||||
4.350%, due 04/09/25 | 160,000 | 151,607 | |||||||||
Gilead Sciences, Inc. 2.050%, due 04/01/19 | 40,000 | 39,908 |
14
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
4.750%, due 03/01/46 | 30,000 | $ | 29,803 | ||||||||
4.800%, due 04/01/44 | 45,000 | 45,191 | |||||||||
Glencore Funding LLC 2.500%, due 01/15/193 | 9,000 | 8,996 | |||||||||
4.125%, due 05/30/233 | 70,000 | 68,739 | |||||||||
Goldman Sachs Group, Inc./The Series EMTN, 1.625%, due 07/27/262 | EUR | 100,000 | 110,958 | ||||||||
Series EMTN, 2.000%, due 07/27/232 | EUR | 270,000 | 318,491 | ||||||||
Series EMTN, 2.000%, due 11/01/282 | EUR | 60,000 | 66,262 | ||||||||
5.150%, due 05/22/45 | 60,000 | 55,910 | |||||||||
Hartford Financial Services Group, Inc./The 4.300%, due 04/15/43 | 60,000 | 55,811 | |||||||||
4.400%, due 03/15/48 | 90,000 | 84,058 | |||||||||
HCP, Inc. 3.875%, due 08/15/24 | 70,000 | 68,886 | |||||||||
Home Depot, Inc./The 4.875%, due 02/15/44 | 40,000 | 42,748 | |||||||||
Honeywell International, Inc. 1.800%, due 10/30/19 | 60,000 | 59,413 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 100,000 | 92,973 | |||||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 470,000 | 463,126 | |||||||||
3.625%, due 12/01/27 | 120,000 | 111,733 | |||||||||
Kinder Morgan, Inc. 3.150%, due 01/15/23 | 140,000 | 135,830 | |||||||||
5.625%, due 11/15/233 | 30,000 | 31,745 | |||||||||
Kraft Heinz Foods Co. 4.875%, due 02/15/253 | 50,000 | 50,206 | |||||||||
5.000%, due 06/04/42 | 80,000 | 71,625 | |||||||||
Kroger Co./The 3.700%, due 08/01/27 | 100,000 | 94,455 | |||||||||
3.875%, due 10/15/46 | 20,000 | 16,290 | |||||||||
4.650%, due 01/15/48 | 30,000 | 27,561 | |||||||||
Liberty Mutual Group, Inc. 2.750%, due 05/04/262 | EUR | 140,000 | 164,660 | ||||||||
4.250%, due 06/15/233 | 100,000 | 100,816 | |||||||||
Lincoln National Corp. 3.800%, due 03/01/28 | 110,000 | 106,749 | |||||||||
Lowe's Cos., Inc. 4.250%, due 09/15/44 | 70,000 | 61,999 | |||||||||
Marathon Oil Corp. 3.850%, due 06/01/25 | 70,000 | 65,697 | |||||||||
Medtronic, Inc. 4.625%, due 03/15/45 | 30,000 | 31,496 | |||||||||
Merck & Co., Inc. 3.700%, due 02/10/45 | 20,000 | 19,237 | |||||||||
Metropolitan Life Global Funding I Series GMTN, 1.250%, due 09/17/212 | EUR | 100,000 | 117,553 |
Face amount1 | Value | ||||||||||
Microsoft Corp. 2.400%, due 08/08/26 | 50,000 | $ | 46,790 | ||||||||
3.500%, due 11/15/42 | 50,000 | 46,576 | |||||||||
3.700%, due 08/08/46 | 90,000 | 86,642 | |||||||||
Molson Coors Brewing Co. 3.000%, due 07/15/26 | 40,000 | 35,642 | |||||||||
Monongahela Power Co. 5.400%, due 12/15/433 | 40,000 | 46,661 | |||||||||
Morgan Stanley Series GMTN, 2.500%, due 04/21/21 | 270,000 | 264,569 | |||||||||
Series GMTN, 4.000%, due 07/23/25 | 90,000 | 88,829 | |||||||||
Series GMTN, 4.350%, due 09/08/26 | 70,000 | 68,061 | |||||||||
6.375%, due 07/24/42 | 40,000 | 49,009 | |||||||||
MPLX LP 5.200%, due 03/01/47 | 60,000 | 55,299 | |||||||||
NBCUniversal Media LLC 4.375%, due 04/01/21 | 180,000 | 184,490 | |||||||||
Oncor Electric Delivery Co. LLC 3.700%, due 11/15/283 | 50,000 | 50,560 | |||||||||
7.000%, due 05/01/32 | 70,000 | 90,401 | |||||||||
Pacific Gas & Electric Co. 6.050%, due 03/01/34 | 130,000 | 120,591 | |||||||||
PacifiCorp 6.000%, due 01/15/39 | 80,000 | 96,152 | |||||||||
Philip Morris International, Inc. 4.250%, due 11/10/44 | 50,000 | 45,660 | |||||||||
Phillips 66 4.650%, due 11/15/34 | 50,000 | 48,748 | |||||||||
Phillips 66 Partners LP 4.680%, due 02/15/45 | 35,000 | 31,558 | |||||||||
PPL Capital Funding, Inc. 4.700%, due 06/01/43 | 90,000 | 88,262 | |||||||||
Procter & Gamble Co./The 2.450%, due 11/03/26 | 60,000 | 56,215 | |||||||||
QUALCOMM, Inc. 3.250%, due 05/20/27 | 90,000 | 84,106 | |||||||||
4.300%, due 05/20/47 | 40,000 | 35,575 | |||||||||
Reynolds American, Inc. 4.450%, due 06/12/25 | 70,000 | 67,526 | |||||||||
5.700%, due 08/15/35 | 45,000 | 43,980 | |||||||||
Roche Holdings, Inc. 2.625%, due 05/15/262 | 200,000 | 189,248 | |||||||||
Rowan Cos., Inc. 7.875%, due 08/01/19 | 30,000 | 29,700 | |||||||||
Schlumberger Holdings Corp. 3.000%, due 12/21/203 | 70,000 | 69,379 | |||||||||
Sempra Energy 6.000%, due 10/15/39 | 70,000 | 77,908 | |||||||||
Southern Co./The 3.250%, due 07/01/26 | 80,000 | 74,979 | |||||||||
4.400%, due 07/01/46 | 30,000 | 27,621 | |||||||||
Southwestern Electric Power Co. 6.200%, due 03/15/40 | 105,000 | 124,402 |
15
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
SunTrust Banks, Inc. 2.700%, due 01/27/22 | 110,000 | $ | 107,277 | ||||||||
Swiss Re Treasury US Corp. 4.250%, due 12/06/423 | 50,000 | 48,785 | |||||||||
Teachers Insurance & Annuity Association of America 4.900%, due 09/15/443 | 40,000 | 41,531 | |||||||||
Time Warner Cable LLC 4.500%, due 09/15/42 | 60,000 | 48,291 | |||||||||
5.000%, due 02/01/20 | 150,000 | 152,086 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 36,468 | |||||||||
United Airlines Pass-Through Trust Series 2016-1, Class B, 3.650%, due 01/07/26 | 47,859 | 46,778 | |||||||||
United Technologies Corp. 3.350%, due 08/16/21 | 50,000 | 49,863 | |||||||||
3.950%, due 08/16/25 | 55,000 | 54,599 | |||||||||
4.625%, due 11/16/48 | 30,000 | 29,011 | |||||||||
Valero Energy Corp. 4.900%, due 03/15/45 | 70,000 | 65,878 | |||||||||
Verizon Communications, Inc. 2.875%, due 01/15/38 | EUR | 110,000 | 126,329 | ||||||||
2.946%, due 03/15/22 | 150,000 | 148,112 | |||||||||
3.376%, due 02/15/25 | 50,000 | 48,510 | |||||||||
5.250%, due 03/16/37 | 30,000 | 31,283 | |||||||||
5.500%, due 03/16/47 | 120,000 | 127,776 | |||||||||
Virginia Electric & Power Co. Series C, 4.000%, due 11/15/46 | 50,000 | 47,362 | |||||||||
VMware, Inc. 3.900%, due 08/21/27 | 80,000 | 71,001 | |||||||||
Walt Disney Co./The Series MTN, 1.850%, due 07/30/26 | 30,000 | 26,696 | |||||||||
Wells Fargo & Co. 2.100%, due 07/26/21 | 100,000 | 96,874 | |||||||||
Series MTN, 2.625%, due 07/22/22 | 110,000 | 106,063 | |||||||||
3.069%, due 01/24/23 | 130,000 | 126,614 | |||||||||
Williams Cos., Inc./The 4.300%, due 03/04/24 | 80,000 | 79,716 | |||||||||
4.550%, due 06/24/24 | 40,000 | 40,386 | |||||||||
4.900%, due 01/15/45 | 20,000 | 18,169 | |||||||||
Xcel Energy, Inc. 4.800%, due 09/15/41 | 100,000 | 101,893 | |||||||||
Total United States corporate bonds | 14,097,426 | ||||||||||
Total corporate bonds (cost $31,044,326) | 29,628,928 |
Face amount1 | Value | ||||||||||
Collateralized debt obligation: 0.0%† | |||||||||||
Cayman Islands: 0.0%† | |||||||||||
LNR CDO IV Ltd. Series 2006-1A, Class FFX, 7.592%, due 05/28/433,7,8,9 (cost $8,094,229) | 8,000,000 | $ | 0 | ||||||||
Collateralized mortgage obligation: 0.0%† | |||||||||||
United States: 0.0%† | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust Series 2005-7, Class B11, 4.370%, due 04/25/3510 (cost $9,830) | 80,080 | 1,866 | |||||||||
Non-US government obligation: 0.3% | |||||||||||
Italy: 0.3% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.350%, due 04/15/22 (cost $166,110) | EUR | 150,000 | 172,352 | ||||||||
Number of shares | |||||||||||
Exchange traded funds: 7.9% | |||||||||||
iShares Edge MSCI Minimum Volatility Emerging Markets ETF | 51,500 | 2,877,305 | |||||||||
iShares JP Morgan EM Local Currency Bond ETF | 43,500 | 1,873,980 | |||||||||
Total exchange traded funds (cost $4,666,063) | 4,751,285 | ||||||||||
Short-term investments: 36.3% | |||||||||||
Investment company: 3.7% | |||||||||||
State Street Institutional U.S. Government Money Market Fund | 2,253,024 | 2,253,024 | |||||||||
Face amount1 | |||||||||||
U.S. treasury obligations: 32.6% | |||||||||||
US Treasury Bills 2.281%, due 02/28/1911 | 9,750,000 | 9,712,588 | |||||||||
2.427%, due 04/04/1911 | 10,000,000 | 9,938,840 | |||||||||
Total U.S. treasury obligations (cost $19,653,881) | 19,651,428 | ||||||||||
Total short-term investments (cost $21,906,905) | 21,904,452 | ||||||||||
Total investments: 93.6% (cost $65,887,463) | 56,458,883 | ||||||||||
Other assets in excess of liabilities: 6.4% | 3,883,017 | ||||||||||
Net assets: 100.0% | $ | 60,341,900 |
For a listing of defined portfolio acronyms, counterparty acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
16
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
26 | CAD | S&P TSX 60 Index Futures | March 2019 | $ | 3,368,859 | $ | 3,265,427 | $ | (103,432 | ) | |||||||||||||||||
2 | EUR | DAX Index Futures | March 2019 | 616,329 | 605,042 | (11,287 | ) | ||||||||||||||||||||
294 | EUR | EURO STOXX 600 Bank Index Futures | March 2019 | 2,275,640 | 2,197,949 | (77,691 | ) | ||||||||||||||||||||
14 | EUR | FTSE MIB Index Futures | March 2019 | 1,499,808 | 1,460,166 | (39,642 | ) | ||||||||||||||||||||
17 | GBP | FTSE 100 Index Futures | March 2019 | 1,458,498 | 1,442,885 | (15,613 | ) | ||||||||||||||||||||
29 | HKD | Hang Seng Index Futures | January 2019 | 1,883,216 | 1,870,621 | (12,595 | ) | ||||||||||||||||||||
37 | JPY | TOPIX Index Futures | March 2019 | 5,347,657 | 5,041,696 | (305,961 | ) | ||||||||||||||||||||
75 | USD | Mini MSCI Emerging Markets (EM) Index Futures | March 2019 | 3,710,008 | 3,625,500 | (84,508 | ) | ||||||||||||||||||||
4 | USD | S&P 500 E-Mini Index Futures | March 2019 | 531,262 | 501,040 | (30,222 | ) | ||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
3 | CAD | Canada Government Bond 10 Year Futures | March 2019 | $ | 290,902 | $ | 300,549 | $ | 9,647 | ||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
18 | USD | US Treasury Note 5 Year Futures | March 2019 | $ | 2,032,339 | $ | 2,064,375 | $ | 32,036 | ||||||||||||||||||
Total | $ | 23,014,518 | $ | 22,375,250 | $ | (639,268 | ) | ||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
27 | AUD | ASX SPI 200 Index Futures | March 2019 | $ | (2,652,435 | ) | $ | (2,643,900 | ) | $ | 8,535 | ||||||||||||||||
39 | EUR | CAC 40 Index Futures | January 2019 | (2,144,369 | ) | (2,112,894 | ) | 31,475 | |||||||||||||||||||
65 | EUR | EURO STOXX 50 Index Futures | March 2019 | (2,270,656 | ) | (2,214,849 | ) | 55,807 | |||||||||||||||||||
80 | USD | MSCI Taiwan Index Futures | January 2019 | (2,829,440 | ) | (2,875,200 | ) | (45,760 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
34 | EUR | German Euro Bund Futures | March 2019 | $ | (6,329,579 | ) | $ | (6,370,780 | ) | $ | (41,201 | ) | |||||||||||||||
13 | GBP | United Kingdom Long Gilt Bond Futures | March 2019 | (2,023,631 | ) | (2,040,902 | ) | (17,271 | ) | ||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
21 | USD | Ultra Long US Treasury Bond Futures | March 2019 | $ | (3,202,610 | ) | $ | (3,373,781 | ) | $ | (171,171 | ) | |||||||||||||||
7 | USD | US Treasury Note 10 Year Futures | March 2019 | (832,726 | ) | (854,110 | ) | (21,384 | ) | ||||||||||||||||||
Total | $ | (22,285,446 | ) | $ | (22,486,416 | ) | $ | (200,970 | ) | ||||||||||||||||||
Net unrealized depreciation | $ | (840,238 | ) |
17
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BOA | EUR | 7,295,000 | USD | 8,420,166 | 01/23/19 | $ | 48,013 | ||||||||||||
CITI | USD | 1,983,864 | GBP | 1,550,000 | 01/23/19 | (6,280 | ) | ||||||||||||
CSI | BRL | 1,610,000 | USD | 431,983 | 01/23/19 | 17,100 | |||||||||||||
HSBC | KRW | 5,733,000,000 | USD | 5,108,032 | 01/23/19 | (32,906 | ) | ||||||||||||
HSBC | TWD | 14,400,000 | USD | 470,819 | 01/23/19 | 1,517 | |||||||||||||
JPMCB | NZD | 9,390,000 | USD | 6,175,123 | 01/23/19 | (129,651 | ) | ||||||||||||
JPMCB | USD | 360,607 | KRW | 409,000,000 | 01/23/19 | 6,155 | |||||||||||||
SSC | AUD | 3,740,000 | USD | 2,661,149 | 01/23/19 | 25,789 | |||||||||||||
SSC | CAD | 3,745,000 | USD | 2,873,294 | 01/23/19 | 128,621 | |||||||||||||
SSC | CHF | 2,245,000 | USD | 2,273,694 | 01/23/19 | (14,426 | ) | ||||||||||||
SSC | CNY | 7,870,000 | USD | 1,130,422 | 01/23/19 | (15,908 | ) | ||||||||||||
SSC | EUR | 460,000 | USD | 525,896 | 01/23/19 | (2,026 | ) | ||||||||||||
SSC | GBP | 3,745,000 | USD | 4,903,843 | 01/23/19 | 125,744 | |||||||||||||
SSC | HKD | 720,000 | USD | 91,980 | 01/23/19 | (21 | ) | ||||||||||||
SSC | HKD | 1,710,000 | USD | 218,830 | 01/23/19 | 327 | |||||||||||||
SSC | JPY | 89,700,000 | USD | 800,929 | 01/23/19 | (18,510 | ) | ||||||||||||
SSC | NOK | 2,680,000 | USD | 310,691 | 01/23/19 | 453 | |||||||||||||
SSC | USD | 205,000 | AUD | 283,556 | 01/23/19 | (5,194 | ) | ||||||||||||
SSC | USD | 349,713 | CHF | 345,000 | 01/23/19 | 1,913 | |||||||||||||
SSC | USD | 967,735 | EUR | 845,000 | 01/23/19 | 2,034 | |||||||||||||
SSC | USD | 664,649 | GBP | 525,000 | 01/23/19 | 5,178 | |||||||||||||
SSC | USD | 5,835,540 | JPY | 651,200,000 | 01/23/19 | 113,385 | |||||||||||||
SSC | USD | 414,545 | KRW | 464,000,000 | 01/23/19 | 1,537 | |||||||||||||
SSC | USD | 3,738,106 | MXN | 72,440,000 | 01/23/19 | (62,795 | ) | ||||||||||||
SSC | USD | 2,272,664 | NOK | 18,700,000 | 01/23/19 | (107,944 | ) | ||||||||||||
SSC | USD | 868,977 | NZD | 1,280,000 | 01/23/19 | (9,540 | ) | ||||||||||||
SSC | USD | 2,080,875 | SEK | 18,610,000 | 01/23/19 | 22,330 | |||||||||||||
Net unrealized appreciation | $ | 94,895 |
Credit default swap agreements on corporate issues—sell protection12
Counterparty | Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio13 | Upfront payments received | Value | Unrealized appreciation | |||||||||||||||||||||||||||
JPMCB | Teck Resources Ltd. bond, 3.150%, due 03/20/20 | USD 90 | 03/20/20 | Quarterly | 1.000% | $1,768 | $777 | $2,545 |
18
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
Centrally cleared credit default swap agreements on credit indices—buy protection14
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments made by the Portfolio13 | Upfront payments received | Value | Unrealized appreciation | ||||||||||||||||||||||||
CDX North America Investment Grade 31 Index | USD | 15,000 | 12/20/23 | Quarterly | 1.000 | % | $ | 262,065 | $ | (88,589 | ) | $ | 173,476 | ||||||||||||||||||
iTraxx Europe Series 30 Index | EUR | 7,000 | 12/20/23 | Quarterly | 1.000 | 127,495 | (46,506 | ) | 80,989 | ||||||||||||||||||||||
Total | $ | 389,560 | $ | (135,095 | ) | $ | 254,465 |
Centrally cleared credit default swap agreements on credit indices—sell protection12
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio13 | Upfront payments made | Value | Unrealized depreciation | ||||||||||||||||||||||||
CDX North America High Yield 31 Index | USD | 1,800 | 12/20/23 | Quarterly | 5.000 | % | $ | (123,969 | ) | $ | 39,542 | $ | (84,427 | ) | |||||||||||||||||
iTraxx Europe Crossover Series 30 Index | EUR | 691 | 12/20/23 | Quarterly | 5.000 | (85,491 | ) | 51,351 | (34,140 | ) | |||||||||||||||||||||
Total | $ | (209,460 | ) | $ | 90,893 | $ | (118,567 | ) |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 29,628,928 | $ | — | $ | 29,628,928 | |||||||||||
Collateralized debt obligation | — | — | 0 | 0 | |||||||||||||||
Collateralized mortgage obligation | — | 1,866 | — | 1,866 | |||||||||||||||
Non-US government obligation | — | 172,352 | — | 172,352 | |||||||||||||||
Exchange traded funds | 4,751,285 | — | — | 4,751,285 | |||||||||||||||
Short-term investments | — | 21,904,452 | — | 21,904,452 | |||||||||||||||
Futures contracts | 137,500 | — | — | 137,500 | |||||||||||||||
Forward foreign currency contracts | — | 500,096 | — | 500,096 | |||||||||||||||
Swap agreements | — | 91,670 | — | 91,670 | |||||||||||||||
Total | $ | 4,888,785 | $ | 52,299,364 | $ | 0 | $ | 57,188,149 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (977,738 | ) | $ | — | $ | — | $ | (977,738 | ) | |||||||||
Forward foreign currency contracts | — | (405,201 | ) | — | (405,201 | ) | |||||||||||||
Swap agreements | — | (135,095 | ) | — | (135,095 | ) | |||||||||||||
Total | $ | (977,738 | ) | $ | (540,296 | ) | $ | — | $ | (1,518,034 | ) |
19
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2018 (unaudited)
At December 31, 2018, there were no transfers between Level 1 and Level 2. At June 30, 2018, $38,046 and $(538,903) of futures contracts were classified within Level 2 of the fair value hierarchy pursuant to the Fund's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
Level 3 rollforward disclosure
The following is a rollforward of the Fund's investment that were valued using unobservable inputs for the period ended December 31, 2018:
Collaterallized debt obligation | |||||||
Assets | |||||||
Beginning balance | $ | 0 | |||||
Purchases | — | ||||||
Sales | — | ||||||
Accrued discounts/(premiums) | (666 | ) | |||||
Total realized gain/(loss) | — | ||||||
Net change in unrealized appreciation/depreciation | 666 | ||||||
Transfers into Level 3 | — | ||||||
Transfers out of Level 3 | — | ||||||
Ending balance | $ | 0 |
The change in net unrealized appreciation (depreciation) relating to the Level 3 investments held at December 31, 2018 was $666.
Portfolio footnotes
† Amount represents less than 0.05%.
1 In US dollars unless otherwise indicated.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
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. Securities exempt from registration pursuant to Rule 144A, in the amount of $1,477,991, represented 2.6% of the Fund's net assets at period end.
4 Perpetual investment. Date shown reflects the next call date.
5 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
6 Step bond—coupon rate increases in increments to maturity. The rate disclosed is the rate at the period end; the maturity date disclosed is the ultimate maturity date.
7 Illiquid investment at period end. Illiquid assets, in the amount of $0, represented 0.0% of the Fund's net assets at period end.
8 Significant unobservable inputs were used in the valuation of this security; i.e. Level 3.
9 Security fair valued by the Valuation Committee under the direction of the Board of Trustees.
10 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
11 Rate shown is the discount rate at the date of purchase unless otherwise noted.
12 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 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 or underlying securities comprising the referenced obligation.
13 Payments made or received are based on the notional amount.
14 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 obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
20
UBS Global Allocation Fund
Portfolio performance
For the six months ended December 31, 2018, Class A shares of UBS Global Allocation Fund (the "Fund") returned -7.04% (Class A shares returned-12.13% after the deduction of the maximum sales charge), while Class P shares returned -6.96%. In contrast, the Fund's secondary benchmark, the 60% MSCI All Country World Index (net)/40% Citigroup World Government Bond Index (Hedged in USD), returned -4.66% during the same time period. For comparison purposes, the Fund's primary benchmark, the MSCI All Country World Index (net) returned -9.02% and the Citigroup World Government Bond Index (Hedged in USD) returned 1.81%. (Class P shares have lower expenses than the other share class in the Fund. Returns for all share classes over various time periods are shown on page 23; 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 negative absolute return during the reporting period. Market allocation and security selection were negative for results, whereas the currency strategy was additive for performance.
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 positive 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, detracted from market allocation performance during the reporting period.
Portfolio performance summary
What worked:
• Overall, active currency positions were positive for results
– A long US dollar versus short Canadian dollar position added value as the Canadian dollar depreciated in the second half of 2018 due to falling oil prices.
– A short Chilean peso position contributed to results as the US dollar strengthened. This position was closed in early September on the back of positive performance and more normalized valuations.
– A long Mexican peso versus US dollar position contributed to returns, supported by tailwinds such as valuation and carry, along with the recently agreed upon trade deal with the US.
• Certain market allocations were positive for returns.
– The Fund's performance was positively impacted by a long exposure to emerging market fixed income.
What didn't work:
• Overall, the portfolio's bottom-up security selection was negative for results.
– Negative security selection came from US, non-US developed and emerging market equities.
21
UBS Global Allocation Fund
• Overall, market allocations detracted from results.
– The Fund's preference for global equities over fixed income and a reduced overall allocation to fixed income negatively impacted performance.
– Specifically, an underweight to global government bonds detracted from results as global equity markets came under pressure and government bonds rallied in the fourth quarter of 2018 given rising trade tensions between the US and China, fear of a Federal Reserve Board policy mistake, European political developments and slower global growth.
– The Fund's performance was negatively impacted by a few equity relative value trades, including long developed ex-US equities versus US equities, long Japanese versus French equities, and long S&P 500 versus Swedish equities.
• Certain active currency positions were negative for performance
– A long Colombian peso position versus the US dollar detracted from returns due to tighter US monetary policy and the peso's sensitivity to falling oil prices. This position was closed in early September 2018.
– A long euro versus Swiss franc position detracted from results as the Swiss franc appreciated given its tendency to act as a safe haven currency amid increased political risks and slowing growth across Europe.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
22
UBS Global Allocation Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | (7.04 | )% | (7.72 | )% | 2.59 | % | 7.00 | % | |||||||||||
Class P2 | (6.96 | ) | (7.56 | ) | 2.86 | 7.29 | |||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (12.13 | )% | (12.81 | )% | 1.44 | % | 6.39 | % | |||||||||||
MSCI All Country World Index (net)3 | (9.02 | ) | (9.42 | ) | 4.26 | 9.46 | |||||||||||||
FTSE World Government Bond Index (Hedged in USD)4 | 1.81 | 2.60 | 3.60 | 3.25 | |||||||||||||||
60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)5 | (4.66 | ) | (4.53 | ) | 4.17 | 7.24 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectuses were as follows: Class A—1.49% and 1.29%; Class P—1.23% 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 Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 1.20% for Class A shares and 0.95% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI All Country World Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging 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.
4 The FTSE World Government Bond Index (Hedged in USD) 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 and is hedged back to the US dollar. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD) is a unmanaged blended benchmark compiled by the Advisor. Investors should note that indices do not reflect the deduction of fees and expenses.
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 www.ubs.com/us-mutualfundperformance.
23
UBS Global Allocation Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten equity holdings
Percentage of net assets | |||||||
Amazon.com, Inc. | 1.4 | % | |||||
Microsoft Corp. | 0.8 | ||||||
Visa, Inc., Class A | 0.8 | ||||||
Facebook, Inc., Class A | 0.6 | ||||||
American Express Co. | 0.6 | ||||||
Sony Corp. | 0.6 | ||||||
Johnson & Johnson | 0.6 | ||||||
Deutsche Telekom AG (Registered) | 0.6 | ||||||
Alphabet, Inc., Class A | 0.6 | ||||||
Sanofi | 0.5 | ||||||
Total | 7.1 | % |
Top ten long-term fixed income holdings
Percentage of net assets | |||||||
US Treasury Notes 1.000%, due 03/15/19 | 1.6 | % | |||||
New Zealand Government Bond 2.000%, due 09/20/25 | 1.2 | ||||||
US Treasury Notes 1.500%, due 08/15/20 | 1.1 | ||||||
US Treasury Notes 1.875%, due 07/31/22 | 0.9 | ||||||
US Treasury Notes 2.500%, due 05/15/24 | 0.7 | ||||||
US Treasury Notes 1.375%, due 09/30/23 | 0.7 | ||||||
Japan Government Twenty Year Bond 0.400%, due 03/20/36 | 0.6 | ||||||
US Treasury Notes 2.000%, due 11/30/22 | 0.6 | ||||||
Japan Government Five Year Bond 0.100%, due 12/20/19 | 0.5 | ||||||
US Treasury Notes 1.875%, due 10/31/22 | 0.5 | ||||||
Total | 8.4 | % |
Top five issuer breakdown by country or territory of origin2
Percentage of net assets | |||||||
United States | 33.0 | % | |||||
Japan | 6.2 | ||||||
United Kingdom | 4.7 | ||||||
France | 1.9 | ||||||
Germany | 1.6 | ||||||
Total | 85.2 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
2 Figures represent the direct investments of UBS Global Allocation Fund. If a breakdown of the underlying investment companies and exchange traded funds was included, the country or territory of origin breakdown would be as follows: United States: 37.5%, Japan: 6.3%, United Kingdom: 4.9%, France: 1.9%, and Germany: 1.6%.
24
UBS Global Allocation Fund
Industry diversification—December 31, 2018 (unaudited)1,2
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 0.5 | % | |||||
Airlines | 0.5 | ||||||
Auto components | 0.7 | ||||||
Automobiles | 0.4 | ||||||
Banks | 3.4 | ||||||
Biotechnology | 1.0 | ||||||
Building products | 0.4 | ||||||
Capital markets | 0.2 | ||||||
Chemicals | 0.8 | ||||||
Commercial services & supplies | 0.4 | ||||||
Communications equipment | 0.1 | ||||||
Construction & engineering | 0.1 | ||||||
Consumer finance | 1.1 | ||||||
Distributors | 0.2 | ||||||
Diversified financial services | 0.7 | ||||||
Diversified telecommunication services | 1.0 | ||||||
Electric utilities | 0.2 | ||||||
Electrical equipment | 0.3 | ||||||
Electronic equipment, instruments & components | 0.3 | ||||||
Energy equipment & services | 0.2 | ||||||
Entertainment | 1.5 | ||||||
Equity real estate investment trusts | 0.5 | ||||||
Food & staples retailing | 0.7 | ||||||
Food products | 0.6 | ||||||
Health care equipment & supplies | 0.9 | ||||||
Health care providers & services | 0.9 | ||||||
Hotels, restaurants & leisure | 0.5 | ||||||
Household durables | 0.9 | ||||||
Industrial conglomerates | 0.2 | ||||||
Insurance | 2.4 | ||||||
Interactive media & services | 1.3 | ||||||
Internet & direct marketing retail | 1.5 | ||||||
IT services | 1.5 | ||||||
Life sciences tools & services | 0.2 | ||||||
Machinery | 1.4 | ||||||
Marine | 0.2 | ||||||
Media | 0.2 | ||||||
Metals & mining | 1.1 | ||||||
Multi-utilities | 0.3 | ||||||
Multiline retail | 0.2 | ||||||
Oil, gas & consumable fuels | 1.9 | ||||||
Personal products | 0.7 | ||||||
Pharmaceuticals | 3.2 | ||||||
Real estate management & development | 0.1 | ||||||
Road & rail | 0.3 | ||||||
Semiconductors & semiconductor equipment | 2.5 | ||||||
Software | 2.5 | ||||||
Specialty retail | 0.6 |
Common stocks—(Concluded) | Percentage of net assets | ||||||
Technology hardware, storage & peripherals | 0.7 | % | |||||
Textiles, apparel & luxury goods | 0.5 | ||||||
Tobacco | 0.8 | ||||||
Trading companies & distributors | 0.6 | ||||||
Wireless telecommunication services | 0.2 | ||||||
Total common stocks | 44.1 | % | |||||
Non-US government obligations | 5.8 | ||||||
U.S. treasury obligations | 9.6 | ||||||
Exchange traded funds | 9.7 | ||||||
Investment company | 7.3 | ||||||
Investment of cash collateral from securities loaned | 1.2 | ||||||
Short-term investments | 19.6 | ||||||
Total investments | 97.3 | % | |||||
Other assets in excess of liabilities | 2.7 | ||||||
Net assets | 100.0 | % |
1 Figures represent the breakdown of direct investments of UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
25
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 44.1% | |||||||||||
Australia: 0.4% | |||||||||||
Coles Group Ltd.* | 49,848 | $ | 412,197 | ||||||||
Rio Tinto Ltd. | 9,281 | 513,666 | |||||||||
Total Australia common stocks | 925,863 | ||||||||||
Austria: 0.3% | |||||||||||
Erste Group Bank AG* | 24,331 | 806,756 | |||||||||
Belgium: 0.1% | |||||||||||
Euronav N.V. | 26,164 | 186,356 | |||||||||
Galapagos N.V.* | 1,958 | 179,472 | |||||||||
Total Belgium common stocks | 365,828 | ||||||||||
Bermuda: 0.8% | |||||||||||
Jardine Matheson Holdings Ltd. | 7,300 | 508,289 | |||||||||
Marvell Technology Group Ltd. | 68,003 | 1,100,969 | |||||||||
Norwegian Cruise Line Holdings Ltd.* | 12,270 | 520,125 | |||||||||
Total Bermuda common stocks | 2,129,383 | ||||||||||
Canada: 1.1% | |||||||||||
Canadian Natural Resources Ltd. | 21,959 | 529,834 | |||||||||
Enerplus Corp.1 | 47,688 | 370,969 | |||||||||
Entertainment One Ltd. | 77,032 | 350,078 | |||||||||
Husky Energy, Inc. | 60,622 | 626,558 | |||||||||
Paramount Resources Ltd., Class A*,1 | 20,621 | 108,452 | |||||||||
Toronto-Dominion Bank/The | 15,817 | 786,216 | |||||||||
Total Canada common stocks | 2,772,107 | ||||||||||
Cayman Islands: 0.2% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 1,067 | 146,254 | |||||||||
WH Group Ltd.2 | 636,000 | 488,477 | |||||||||
Total Cayman Islands common stocks | 634,731 | ||||||||||
Denmark: 0.2% | |||||||||||
AP Moller—Maersk A/S, Class B | 311 | 391,216 | |||||||||
Genmab A/S* | 1,600 | 263,073 | |||||||||
Total Denmark common stocks | 654,289 | ||||||||||
Finland: 0.2% | |||||||||||
Sampo Oyj, Class A | 14,543 | 644,541 | |||||||||
France: 1.2% | |||||||||||
Publicis Groupe SA | 9,382 | 535,305 | |||||||||
Sanofi | 16,436 | 1,425,820 | |||||||||
Thales SA | 5,894 | 688,756 | |||||||||
Valeo SA | 12,756 | 372,036 | |||||||||
Total France common stocks | 3,021,917 | ||||||||||
Germany: 1.5% | |||||||||||
Deutsche Telekom AG (Registered) | 89,272 | 1,517,331 | |||||||||
Infineon Technologies AG | 28,241 | 565,432 | |||||||||
LANXESS AG | 11,236 | 516,591 | |||||||||
SAP SE | 9,080 | 901,186 | |||||||||
thyssenkrupp AG | 26,989 | 463,616 | |||||||||
Total Germany common stocks | 3,964,156 |
Number of shares | Value | ||||||||||
Hong Kong: 0.7% | |||||||||||
AIA Group Ltd. | 169,117 | $ | 1,404,823 | ||||||||
Power Assets Holdings Ltd. | 56,500 | 392,528 | |||||||||
Total Hong Kong common stocks | 1,797,351 | ||||||||||
Ireland: 0.8% | |||||||||||
Allegion PLC | 6,353 | 506,398 | |||||||||
Allergan PLC | 7,135 | 953,664 | |||||||||
Ryanair Holdings PLC, ADR* | 7,192 | 513,077 | |||||||||
Total Ireland common stocks | 1,973,139 | ||||||||||
Italy: 0.4% | |||||||||||
Autogrill SpA | 37,000 | 312,161 | |||||||||
Banca Mediolanum SpA | 147,512 | 860,105 | |||||||||
Total Italy common stocks | 1,172,266 | ||||||||||
Japan: 4.9% | |||||||||||
Chiyoda Corp. | 48,900 | 137,402 | |||||||||
Inpex Corp. | 79,600 | 705,321 | |||||||||
ITOCHU Corp. | 49,800 | 845,742 | |||||||||
Katitas Co. Ltd.1 | 14,500 | 343,549 | |||||||||
Kissei Pharmaceutical Co. Ltd. | 11,500 | 292,810 | |||||||||
Kose Corp. | 2,800 | 439,818 | |||||||||
Makita Corp. | 13,600 | 483,018 | |||||||||
MINEBEA MITSUMI, Inc. | 43,900 | 633,038 | |||||||||
Nabtesco Corp.1 | 17,400 | 376,725 | |||||||||
Nintendo Co. Ltd. | 1,600 | 424,862 | |||||||||
ORIX Corp. | 68,900 | 1,006,761 | |||||||||
Otsuka Holdings Co. Ltd. | 18,900 | 772,335 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 10,800 | 829,794 | |||||||||
Sony Corp. | 32,300 | 1,557,171 | |||||||||
Sumitomo Electric Industries Ltd. | 41,000 | 542,977 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 23,700 | 781,272 | |||||||||
Takeda Pharmaceutical Co. Ltd.1 | 27,000 | 915,151 | |||||||||
Tokyo Electron Ltd. | 2,300 | 258,921 | |||||||||
Toyota Industries Corp. | 12,000 | 552,598 | |||||||||
Toyota Motor Corp. | 16,500 | 955,128 | |||||||||
Total Japan common stocks | 12,854,393 | ||||||||||
Jersey: 0.3% | |||||||||||
Aptiv PLC | 6,716 | 413,504 | |||||||||
Glencore PLC* | 121,379 | 451,295 | |||||||||
Total Jersey common stocks | 864,799 | ||||||||||
Netherlands: 1.6% | |||||||||||
ABN AMRO Group N.V. CVA2 | 43,659 | 1,027,377 | |||||||||
ASR Nederland N.V. | 24,751 | 979,371 | |||||||||
Koninklijke Ahold Delhaize N.V. | 29,725 | 750,918 | |||||||||
NXP Semiconductors N.V. | 5,166 | 378,564 | |||||||||
Unilever N.V. CVA | 16,775 | 908,740 | |||||||||
Total Netherlands common stocks | 4,044,970 | ||||||||||
Norway: 0.3% | |||||||||||
Telenor ASA | 44,676 | 867,621 |
26
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Spain: 0.5% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 116,679 | $ | 619,777 | ||||||||
Banco Santander SA | 124,837 | 566,884 | |||||||||
Total Spain common stocks | 1,186,661 | ||||||||||
Switzerland: 0.9% | |||||||||||
Nestle SA (Registered) | 6,228 | 505,482 | |||||||||
Novartis AG (Registered) | 12,622 | 1,081,001 | |||||||||
Zurich Insurance Group AG | 2,530 | 754,164 | |||||||||
Total Switzerland common stocks | 2,340,647 | ||||||||||
United Kingdom: 4.3% | |||||||||||
Anglo American PLC | 40,671 | 909,430 | |||||||||
Ashtead Group PLC | 34,661 | 723,007 | |||||||||
Babcock International Group PLC | 67,386 | 420,305 | |||||||||
Barclays PLC | 351,100 | 671,749 | |||||||||
BP PLC | 206,712 | 1,306,769 | |||||||||
British American Tobacco PLC | 25,053 | 797,162 | |||||||||
Centrica PLC | 512,718 | 884,423 | |||||||||
GlaxoSmithKline PLC | 47,366 | 902,702 | |||||||||
HSBC Holdings PLC | 130,444 | 1,076,128 | |||||||||
LivaNova PLC* | 9,300 | 850,671 | |||||||||
Sage Group PLC/The | 122,252 | 937,604 | |||||||||
Sensata Technologies Holding PLC* | 9,014 | 404,188 | |||||||||
Spectris PLC | 15,053 | 437,453 | |||||||||
Tesco PLC | 320,754 | 777,880 | |||||||||
Total United Kingdom common stocks | 11,099,471 | ||||||||||
United States: 23.4% | |||||||||||
Abbott Laboratories | 7,501 | 542,547 | |||||||||
AGCO Corp. | 11,277 | 627,791 | |||||||||
Alexion Pharmaceuticals, Inc.* | 4,859 | 473,072 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 5,088 | 370,966 | |||||||||
Alphabet, Inc., Class A* | 1,413 | 1,476,528 | |||||||||
Amazon.com, Inc.* | 2,331 | 3,501,092 | |||||||||
American Express Co. | 16,963 | 1,616,913 | |||||||||
Ameriprise Financial, Inc. | 5,393 | 562,867 | |||||||||
Anthem, Inc. | 1,934 | 507,926 | |||||||||
Apple, Inc. | 7,507 | 1,184,154 | |||||||||
Arista Networks, Inc.* | 1,629 | 343,230 | |||||||||
Ashland Global Holdings, Inc. | 7,941 | 563,493 | |||||||||
Autodesk, Inc.* | 4,381 | 563,440 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 1,974 | 458,402 | |||||||||
Bluebird Bio, Inc.* | 1,305 | 129,456 | |||||||||
Broadcom, Inc. | 2,558 | 650,448 | |||||||||
Caterpillar, Inc. | 5,012 | 636,875 | |||||||||
Cirrus Logic, Inc.* | 9,775 | 324,335 | |||||||||
Coherus Biosciences, Inc.*,1 | 10,761 | 97,387 | |||||||||
Concho Resources, Inc.* | 5,846 | 600,910 | |||||||||
Cooper Cos., Inc./The | 2,068 | 526,306 | |||||||||
Crown Castle International Corp. | 6,200 | 673,506 | |||||||||
Danaher Corp. | 4,783 | 493,223 | |||||||||
Delta Air Lines, Inc. | 15,322 | 764,568 | |||||||||
Dollar General Corp. | 5,569 | 601,898 | |||||||||
Electronic Arts, Inc.* | 4,189 | 330,554 |
Number of shares | Value | ||||||||||
Eli Lilly & Co. | 4,698 | $ | 543,653 | ||||||||
Estee Lauder Cos., Inc./The, Class A | 2,922 | 380,152 | |||||||||
Expedia Group, Inc. | 3,352 | 377,603 | |||||||||
Facebook, Inc., Class A* | 12,671 | 1,661,041 | |||||||||
First Republic Bank | 2,675 | 232,458 | |||||||||
Gardner Denver Holdings, Inc.* | 40,920 | 836,814 | |||||||||
GoDaddy, Inc., Class A* | 5,380 | 353,036 | |||||||||
Halliburton Co. | 19,220 | 510,868 | |||||||||
HealthEquity, Inc.* | 2,831 | 168,869 | |||||||||
Hess Corp. | 15,230 | 616,815 | |||||||||
Hyatt Hotels Corp., Class A | 4,493 | 303,727 | |||||||||
IAC/InterActiveCorp* | 1,785 | 326,726 | |||||||||
Incyte Corp.* | 11,589 | 736,945 | |||||||||
Ironwood Pharmaceuticals, Inc.*,1 | 30,688 | 317,928 | |||||||||
Jabil, Inc. | 16,725 | 414,613 | |||||||||
Johnson & Johnson | 11,802 | 1,523,048 | |||||||||
JPMorgan Chase & Co. | 11,556 | 1,128,097 | |||||||||
Laboratory Corp. of America Holdings* | 4,747 | 599,831 | |||||||||
Lam Research Corp. | 2,699 | 367,523 | |||||||||
Lexicon Pharmaceuticals, Inc.*,1 | 15,306 | 101,632 | |||||||||
LKQ Corp.* | 21,006 | 498,472 | |||||||||
Lululemon Athletica, Inc.* | 3,648 | 443,633 | |||||||||
Marsh & McLennan Cos., Inc. | 17,836 | 1,422,421 | |||||||||
Masco Corp. | 17,774 | 519,712 | |||||||||
McDonald's Corp. | 1,403 | 249,131 | |||||||||
MetLife, Inc. | 22,311 | 916,090 | |||||||||
Michaels Cos., Inc./The*,1 | 33,909 | 459,128 | |||||||||
Microchip Technology, Inc. | 5,493 | 395,057 | |||||||||
Micron Technology, Inc.* | 23,692 | 751,747 | |||||||||
Microsoft Corp. | 20,862 | 2,118,953 | |||||||||
Mondelez International, Inc., Class A | 16,077 | 643,562 | |||||||||
MSA Safety ,Inc. | 5,213 | 491,430 | |||||||||
Netflix, Inc.* | 2,042 | 546,562 | |||||||||
Newell Brands, Inc.1 | 40,554 | 753,899 | |||||||||
NIKE, Inc., Class B | 10,506 | 778,915 | |||||||||
NVIDIA Corp. | 2,899 | 387,016 | |||||||||
Philip Morris International, Inc. | 18,487 | 1,234,192 | |||||||||
Rockwell Automation, Inc. | 3,291 | 495,230 | |||||||||
Ross Stores, Inc. | 6,608 | 549,786 | |||||||||
salesforce.com, Inc.* | 8,145 | 1,115,621 | |||||||||
ServiceNow, Inc.* | 2,798 | 498,184 | |||||||||
Sherwin-Williams Co./The | 652 | 256,536 | |||||||||
Simon Property Group, Inc. | 4,453 | 748,059 | |||||||||
Skyworks Solutions, Inc. | 4,771 | 319,752 | |||||||||
Spirit AeroSystems Holdings, Inc., Class A | 9,083 | 654,793 | |||||||||
Square, Inc., Class A* | 4,449 | 249,544 | |||||||||
Steel Dynamics, Inc. | 18,372 | 551,895 | |||||||||
Stericycle, Inc.* | 6,021 | 220,910 | |||||||||
Synchrony Financial | 48,257 | 1,132,109 | |||||||||
T-Mobile US, Inc.* | 6,871 | 437,064 | |||||||||
Take-Two Interactive Software, Inc.* | 7,987 | 822,182 | |||||||||
Teradyne, Inc. | 10,650 | 334,197 | |||||||||
TJX Cos., Inc./The | 14,228 | 636,561 | |||||||||
Ultimate Software Group, Inc./The* | 1,341 | 328,371 | |||||||||
Union Pacific Corp. | 4,918 | 679,815 | |||||||||
UnitedHealth Group, Inc. | 4,434 | 1,104,598 |
27
27
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Universal Display Corp.1 | 6,107 | $ | 571,432 | ||||||||
Verizon Communications, Inc. | 3,590 | 201,830 | |||||||||
Visa, Inc., Class A | 15,384 | 2,029,765 | |||||||||
Wabtec Corp.1 | 1,885 | 132,421 | |||||||||
Walt Disney Co./The | 12,462 | 1,366,458 | |||||||||
Wells Fargo & Co. | 23,196 | 1,068,872 | |||||||||
Western Digital Corp. | 16,630 | 614,811 | |||||||||
Worldpay, Inc., Class A* | 15,096 | 1,162,148 | |||||||||
Total United States common stocks | 61,016,130 | ||||||||||
Total common stocks (cost $122,144,881) | 115,137,019 | ||||||||||
Face amount | |||||||||||
Non-US government obligations: 5.8% | |||||||||||
Australia: 0.3% | |||||||||||
Commonwealth of Australia 2.250%, due 05/21/283 | AUD | 130,000 | 90,987 | ||||||||
4.500%, due 04/15/203 | 625,000 | 454,497 | |||||||||
4.500%, due 04/21/333 | 122,000 | 106,860 | |||||||||
5.500%, due 04/21/233 | 230,000 | 185,843 | |||||||||
838,187 | |||||||||||
Austria: 0.1% | |||||||||||
Republic of Austria 1.200%, due 10/20/252,3 | EUR | 47,000 | 57,708 | ||||||||
3.150%, due 06/20/442,3 | 86,000 | 140,136 | |||||||||
197,844 | |||||||||||
Belgium: 0.1% | |||||||||||
Kingdom of Belgium 3.750%, due 06/22/453 | EUR | 161,000 | 265,486 | ||||||||
Canada: 0.1% | |||||||||||
Government of Canada 2.250%, due 06/01/25 | CAD | 381,000 | 284,673 | ||||||||
2.750%, due 12/01/64 | 82,000 | 70,464 | |||||||||
355,137 | |||||||||||
Finland: 0.1% | |||||||||||
Republic of Finland 0.500%, due 04/15/262,3 | EUR | 85,000 | 99,318 | ||||||||
France: 0.7% | |||||||||||
France Government Bond OAT 0.500%, due 05/25/263 | EUR | 952,000 | 1,102,208 | ||||||||
2.500%, due 05/25/303 | 336,000 | 454,328 | |||||||||
3.250%, due 05/25/453 | 216,000 | 340,215 | |||||||||
1,896,751 | |||||||||||
Germany: 0.1% | |||||||||||
Federal Republic of Germany 1.500%, due 05/15/233 | EUR | 270,000 | 335,089 |
Face amount | Value | ||||||||||
Ireland—0.0%† | |||||||||||
Republic of Ireland 2.000%, due 02/18/453 | EUR | 48,000 | $ | 58,020 | |||||||
Italy: 0.7% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.650%, due 03/01/322,3 | EUR | 60,000 | 59,512 | ||||||||
2.550%, due 09/15/412,3 | 373,210 | 454,218 | |||||||||
3.250%, due 09/01/462,3 | 215,000 | 239,759 | |||||||||
4.000%, due 02/01/372,3 | 309,000 | 392,426 | |||||||||
4.250%, due 02/01/192,3 | 560,000 | 643,341 | |||||||||
4.750%, due 09/01/442,3 | 25,000 | 34,540 | |||||||||
1,823,796 | |||||||||||
Japan: 1.3% | |||||||||||
Japan Government Five Year Bond 0.100%, due 12/20/19 | JPY | 155,000,000 | 1,417,549 | ||||||||
Japan Government Thirty Year Bond 0.300%, due 06/20/46 | 41,000,000 | 337,681 | |||||||||
Japan Government Twenty Year Bond 0.400%, due 03/20/36 | 176,350,000 | 1,609,539 | |||||||||
3,364,769 | |||||||||||
New Zealand: 1.2% | |||||||||||
New Zealand Government Bond 2.000%, due 09/20/253,4 | NZD | 4,010,625 | 3,054,077 | ||||||||
Spain: 0.7% | |||||||||||
Kingdom of Spain 1.450%, due 10/31/272,3 | EUR | 250,000 | 290,452 | ||||||||
2.900%, due 10/31/462,3 | 340,000 | 417,019 | |||||||||
3.450%, due 07/30/662,3 | 10,000 | 13,068 | |||||||||
4.200%, due 01/31/372,3 | 44,000 | 66,147 | |||||||||
4.800%, due 01/31/242,3 | 640,000 | 891,615 | |||||||||
5.150%, due 10/31/442,3 | 110,000 | 190,252 | |||||||||
1,868,553 | |||||||||||
United Kingdom: 0.4% | |||||||||||
United Kingdom Gilt 1.500%, due 07/22/473 | GBP | 623,000 | 734,559 | ||||||||
3.500%, due 01/22/453 | 120,000 | 204,673 | |||||||||
939,232 | |||||||||||
Total non-US government obligations (cost $14,838,374) | 15,096,259 | ||||||||||
U.S. treasury obligations: 9.6% | |||||||||||
US Treasury Bonds 2.250%, due 08/15/46 | $ | 630,000 | 539,451 | ||||||||
2.500%, due 02/15/46 | 590,000 | 533,656 | |||||||||
2.750%, due 11/15/42 | 543,000 | 520,108 | |||||||||
2.750%, due 08/15/47 | 430,000 | 407,972 | |||||||||
2.875%, due 05/15/43 | 1,045,000 | 1,021,969 | |||||||||
2.875%, due 08/15/45 | 50,000 | 48,788 | |||||||||
3.000%, due 11/15/45 | 125,000 | 124,967 |
28
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount | Value | ||||||||||
U.S. treasury obligations—(Concluded) | |||||||||||
US Treasury Inflation Index Notes (TIPS) 0.125%, due 01/15/23 | $ | 1,029,789 | $ | 994,673 | |||||||
0.375%, due 07/15/25 | 1,279,584 | 1,233,674 | |||||||||
0.750%, due 02/15/45 | 375,844 | 336,106 | |||||||||
US Treasury Notes 1.000%, due 03/15/19 | 4,100,000 | 4,088,498 | |||||||||
1.250%, due 03/31/21 | 637,000 | 619,964 | |||||||||
1.375%, due 09/30/23 | 1,900,000 | 1,803,817 | |||||||||
1.500%, due 08/15/20 | 3,000,000 | 2,950,574 | |||||||||
1.500%, due 02/28/23 | 444,000 | 426,583 | |||||||||
1.625%, due 12/31/19 | 770,000 | 762,329 | |||||||||
1.750%, due 05/15/23 | 680,000 | 658,915 | |||||||||
1.875%, due 07/31/22 | 2,300,000 | 2,252,308 | |||||||||
1.875%, due 10/31/22 | 1,330,000 | 1,300,323 | |||||||||
2.000%, due 11/30/22 | 1,575,000 | 1,546,382 | |||||||||
2.500%, due 05/15/24 | 1,840,000 | 1,836,601 | |||||||||
2.750%, due 07/31/23 | 900,000 | 909,583 | |||||||||
Total U.S. treasury obligations (cost $25,102,988) | 24,917,241 | ||||||||||
Number of shares | |||||||||||
Exchange traded funds: 9.7% | |||||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 113,400 | 12,793,788 | |||||||||
iShares JPMorgan USD Emerging Markets Bond ETF | 120,800 | 12,552,328 | |||||||||
Total exchange traded funds (cost $27,655,097) | 25,346,116 |
Number of shares | Value | ||||||||||
Investment company: 7.3% | |||||||||||
UBS Emerging Markets Equity Opportunity Fund*,5 (cost $23,455,566) | 2,348,375 | $ | 19,045,321 | ||||||||
Investment of cash collateral from securities loaned: 1.2% | |||||||||||
Money market fund: 1.2% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $3,151,316) | 3,151,316 | 3,151,316 | |||||||||
Short-term investments: 19.6% | |||||||||||
Investment company: 7.8% | |||||||||||
State Street Institutional U.S. Government Money Market Fund | 20,241,745 | 20,241,745 | |||||||||
Face amount | |||||||||||
U.S. treasury obligations: 11.8% | |||||||||||
US Treasury Bills 2.281%, due 02/28/196 | $ | 15,000,000 | 14,942,443 | ||||||||
2.427%, due 04/04/196 | 16,000,000 | 15,902,143 | |||||||||
Total U.S. treasury obligations (cost $30,848,360) | 30,844,586 | ||||||||||
Total short-term investments (cost $51,090,105) | 51,086,331 | ||||||||||
Total investments: 97.3% (cost $267,438,327) | 253,779,603 | ||||||||||
Other assets in excess of liabilities: 2.7% | 6,980,779 | ||||||||||
Net assets: 100.0% | $ | 260,760,382 |
For a listing of defined portfolio acronyms, counterparty acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
211 | EUREURO STOXX 50 Index Futures | March 2019 | $ | 7,356,704 | $ | 7,189,740 | $ | (166,964 | ) | ||||||||||||||||||
77 | JPYTOPIX Index Futures | March 2019 | 11,128,907 | 10,492,176 | (636,731 | ) | |||||||||||||||||||||
324 | USDMini MSCI Emerging Markets (EM) Index Futures | March 2019 | 15,762,762 | 15,662,160 | (100,602 | ) | |||||||||||||||||||||
251 | USDRussell 1000 Value E-Mini Index Futures | March 2019 | 14,019,731 | 13,709,620 | (310,111 | ) | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
84 | AUDAustralian Bond 10 Year Futures | March 2019 | $ | 7,767,563 | $ | 7,849,766 | $ | 82,203 | |||||||||||||||||||
293 | CADCanada Government Bond 10 Year Futures | March 2019 | 28,452,460 | 29,353,655 | 901,195 | ||||||||||||||||||||||
46 | GBPUnited Kingdom Long Gilt Bond Futures | March 2019 | 7,172,989 | 7,221,653 | 48,664 |
29
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Futures contracts—(Concluded)
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
77 | USD | Ultra Long US Treasury Bond Futures | March 2019 | $ | 11,724,974 | $ | 12,370,531 | $ | 645,557 | ||||||||||||||||||
Total | $ | 103,386,090 | $ | 103,849,301 | $ | 463,211 | |||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
24 | CAD | S&P TSX 60 Index Futures | March 2019 | $ | (3,104,126 | ) | $ | (3,014,240 | ) | $ | 89,886 | ||||||||||||||||
93 | EUR | CAC 40 Index Futures | March 2019 | (5,084,681 | ) | (5,032,579 | ) | 52,102 | |||||||||||||||||||
526 | SEK | OMX 30 Index Futures | January 2019 | (8,612,757 | ) | (8,357,708 | ) | 255,049 | |||||||||||||||||||
114 | USD | S&P 500 E-Mini Index Futures | March 2019 | (14,564,868 | ) | (14,279,640 | ) | 285,228 | |||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
188 | EUR | German Euro Bund Futures | March 2019 | $ | (34,976,804 | ) | $ | (35,226,669 | ) | $ | (249,865 | ) | |||||||||||||||
21 | JPY | JGB MINI 10 Year Futures | March 2019 | (2,908,444 | ) | (2,924,347 | ) | (15,903 | ) | ||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
202 | USD | US Treasury Note 2 Year Futures | March 2019 | $ | (42,590,154 | ) | $ | (42,887,125 | ) | $ | (296,971 | ) | |||||||||||||||
Total | $ | (111,841,834 | ) | $ | (111,722,308 | ) | $ | 119,526 | |||||||||||||||||||
Net unrealized appreciation | $ | 582,737 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | USD | 5,500,204 | GBP | 4,310,000 | 01/23/19 | $ | (1,243 | ) | |||||||||||
BOA | EUR | 6,640,000 | USD | 7,664,140 | 01/23/19 | 43,702 | |||||||||||||
BOA | USD | 1,865,153 | CAD | 2,435,000 | 01/23/19 | (80,566 | ) | ||||||||||||
CIBC | CHF | 6,700,000 | USD | 6,784,137 | 01/23/19 | (44,550 | ) | ||||||||||||
CIBC | USD | 6,223,728 | SEK | 55,680,000 | 01/23/19 | 68,934 | |||||||||||||
CITI | AUD | 7,550,000 | USD | 5,462,673 | 01/23/19 | 142,627 | |||||||||||||
CITI | CAD | 18,045,000 | USD | 13,845,515 | 01/23/19 | 620,518 | |||||||||||||
CITI | USD | 1,579,640 | NZD | 2,325,000 | 01/23/19 | (18,554 | ) | ||||||||||||
CITI | USD | 11,391,655 | MXN | 220,970,000 | 01/23/19 | (180,538 | ) | ||||||||||||
HSBC | USD | 1,855,599 | JPY | 205,800,000 | 01/23/19 | 24,452 | |||||||||||||
HSBC | USD | 5,490,000 | CAD | 7,355,394 | 01/23/19 | (99,306 | ) | ||||||||||||
JPMCB | USD | 5,509,259 | EUR | 4,840,000 | 01/23/19 | 45,398 | |||||||||||||
JPMCB | NZD | 14,630,000 | USD | 9,621,092 | 01/23/19 | (202,001 | ) | ||||||||||||
SSC | USD | 2,264,851 | EUR | 1,980,000 | 01/23/19 | 7,509 | |||||||||||||
SSC | GBP | 4,530,000 | USD | 5,931,752 | 01/23/19 | 152,102 | |||||||||||||
SSC | CNY | 8,400,000 | USD | 1,206,550 | 01/23/19 | (16,980 | ) | ||||||||||||
SSC | USD | 577,197 | ILS | 2,100,000 | 01/23/19 | (14,686 | ) | ||||||||||||
SSC | USD | 1,678,006 | SGD | 2,310,000 | 01/23/19 | 17,573 | |||||||||||||
SSC | USD | 2,147,106 | JPY | 239,600,000 | 01/23/19 | 41,719 | |||||||||||||
SSC | USD | 4,799,331 | NOK | 39,490,000 | 01/23/19 | (227,953 | ) | ||||||||||||
SSC | USD | 659,457 | DKK | 4,260,000 | 01/23/19 | (4,575 | ) | ||||||||||||
SSC | USD | 1,515,119 | HKD | 11,860,000 | 01/23/19 | 350 | |||||||||||||
Net unrealized appreciation | $ | 273,932 |
30
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Centrally cleared credit default swap agreements on credit indices—sell protection8
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio7 | Upfront payments made (received) | Value | Unrealized depreciation | ||||||||||||||||||||||||
CDX Emerging Markets Series 30 Index | USD | 15,800 | 12/20/23 | Quarterly | 1.000 | % | $ | 694,408 | $ | (738,855 | ) | $ | (44,447 | ) | |||||||||||||||||
CDX North America Investment Grade 30 Index | USD | 11,000 | 12/20/23 | Quarterly | 1.000 | (192,586 | ) | 65,507 | (127,079 | ) | |||||||||||||||||||||
iTraxx Europe Series 30 Index | EUR | 17,000 | 12/20/23 | Quarterly | 1.000 | (306,065 | ) | 119,268 | (186,797 | ) | |||||||||||||||||||||
Total | $ | 195,757 | $ | (554,080 | ) | $ | (358,323 | ) |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 75,476,878 | $ | 39,660,141 | $ | — | $ | 115,137,019 | |||||||||||
Non-US government obligations | — | 15,096,259 | — | 15,096,259 | |||||||||||||||
U.S. treasury obligations | — | 24,917,241 | — | 24,917,241 | |||||||||||||||
Exchange traded funds | 25,346,116 | — | — | 25,346,116 | |||||||||||||||
Investment company | 19,045,321 | — | — | 19,045,321 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 3,151,316 | — | 3,151,316 | |||||||||||||||
Short-term investments | — | 51,086,331 | — | 51,086,331 | |||||||||||||||
Futures contracts | 2,359,884 | — | — | 2,359,884 | |||||||||||||||
Forward foreign currency contracts | — | 1,164,884 | — | 1,164,884 | |||||||||||||||
Swap agreements | — | 184,775 | — | 184,775 | |||||||||||||||
Total | $ | 122,228,199 | $ | 135,260,947 | $ | — | $ | 257,489,146 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (1,777,147 | ) | $ | — | $ | — | $ | (1,777,147 | ) | |||||||||
Forward foreign currency contracts | — | (890,952 | ) | — | (890,952 | ) | |||||||||||||
Swap agreements | — | (738,855 | ) | — | (738,855 | ) | |||||||||||||
Total | $ | (1,777,147 | ) | $ | (1,629,807 | ) | $ | — | $ | (3,406,954 | ) |
At December 31, 2018, $39,660,141 of foreign investments were classified within Level 2 of the fair value hierarchy pursuant to the Fund's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
31
UBS Global Allocation Fund
Portfolio of investments
December 31, 2018 (unaudited)
Portfolio footnotes
* Non-income producing security.
† Amount represents less than 0.05%.
1 Security, or portion thereof, was on loan at the period end.
2 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. Securities exempt from registration pursuant to Rule 144A, in the amount of $5,505,365, represented 2.1% of the Fund's net assets at period end.
3 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
4 Debt security whose principal and interest payments are adjusted for inflation, unlike debt securities that make fixed payments. The interest rate paid is fixed, while the principal value rises and falls based on changes in an index. If inflation occurs, the principal and interest payments on the securities are increased to provide protection from inflationary loss. During a deflationary period, the principal and interest payments may decrease, although the security's principal will not drop below its face amount at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country.
5 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 Funds.
Security description | Value 6/30/18 | Purchases during the Period ended 12/31/18 | Sales during the Period ended 12/31/18 | Net realized gain during the Period ended 12/31/18 | Change in net unrealized appreciation (depreciation) during the Period ended 12/31/18 | Value 12/31/18 | Net income earned from affiliate for the Period ended 12/31/18 | Shares 12/31/18 | |||||||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | $ | 21,964,938 | $ | 113,443 | $ | — | $ | — | $ | (3,033,060 | ) | $ | 19,045,321 | $ | — | 2,348,375 |
6 Rate shown is the discount rate at the date of purchase unless otherwise noted.
7 Payments made or received are based on the notional amount.
8 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 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 or underlying securities comprising the referenced obligation.
See accompanying notes to financial statements.
32
UBS Emerging Markets Equity Opportunity Fund
Portfolio performance
For the six months ended December 31, 2018, Class P2 shares of UBS Emerging Markets Equity Opportunity Fund (the "Fund") returned -13.29%. The Fund's benchmark, the MSCI Emerging Markets Index (net) (the "Index"), returned -8.49%. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.
The Fund posted a negative return and underperformed its benchmark during the reporting period.
Portfolio performance summary1
What worked:
• The Fund's holdings in Bradesco, a leading Brazilian bank, contributed the most to performance over the reporting period. Banks, more geared to an economic recovery, benefited from the rally fueled by the expectation of, and thereafter the victory by a more market-friendly presidential candidate in Brazil.
• The Fund's position in Bank Mandiri, one of Indonesia's leading banks, was also additive for results. The stock recovered after being excessively sold down in the first half of 2018. The company delivered very stable operating performance and the country's currency stabilized over the reporting period.
What didn't work:
• The Fund's holding in Hangzhou Hikvision, a leading surveillance company, detracted from performance. This weakness was driven by concerns around its overseas business given the growing unease by foreign governments with Chinese surveillance companies. The stock was sold during the reporting period.
• The Fund's position in Brilliance China Auto, a joint venture with BMW in China, was a headwind for returns. The opening of the auto sector to foreign competition in China weighed on its shares given the uncertainty about the future of the joint venture. The stock was sold during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
33
UBS Emerging Markets Equity Opportunity Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | Inception1 | ||||||||||
Class P22 | (13.29 | )% | (18.41 | )% | |||||||
MSCI Emerging Markets Index (net)3 | (8.49 | ) | (14.30 | ) |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 23, 2018 prospectuses were as follows: Class P2—1.41% and 0.41%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 1.40% for Class A shares, 1.15% for Class P shares and 0.40% for Class P2 shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 AM (Americas)'s three year recoupment rights will survive.
1 Inception date of Class P2 of UBS Emerging Markets Equity Opportunity Fund is June 4, 2018.
2 Class P2 shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P2 shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 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 nonresident 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.
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 www.ubs.com/us-mutualfundperformance.
34
UBS Emerging Markets Equity Opportunity Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 6.3 | % | |||||
Samsung Electronics Co. Ltd. | 6.1 | ||||||
Alibaba Group Holding Ltd., ADR | 5.3 | ||||||
Tencent Holdings Ltd. | 4.8 | ||||||
Banco Bradesco SA | 4.4 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 4.0 | ||||||
Naspers Ltd., N Shares | 3.9 | ||||||
China Mobile Ltd. | 3.7 | ||||||
Vale SA | 3.6 | ||||||
China Construction Bank Corp., H Shares | 3.3 | ||||||
Total | 45.4 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
South Korea | 17.2 | % | |||||
Cayman Islands | 13.3 | ||||||
China | 12.8 | ||||||
India | 9.2 | ||||||
Brazil | 8.0 | ||||||
Total | 60.5 | % |
1 The Portfolio is actively managed and its composition will vary over time.
35
UBS Emerging Markets Equity Opportunity Fund
Industry diversification—December 31, 2018 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Automobiles | 3.4 | % | |||||
Banks | 20.0 | ||||||
Beverages | 5.1 | ||||||
Chemicals | 2.7 | ||||||
Diversified consumer services | 3.2 | ||||||
Electric utilities | 2.4 | ||||||
Insurance | 4.0 | ||||||
Interactive media & services | 4.8 | ||||||
Internet & direct marketing retail | 5.2 | ||||||
Media | 3.9 | ||||||
Metals & mining | 5.7 | ||||||
Oil, gas & consumable fuels | 5.9 | ||||||
Paper & forest products | 2.1 | ||||||
Personal products | 3.2 | ||||||
Real estate management & development | 2.4 | ||||||
Semiconductors & semiconductor equipment | 9.4 | ||||||
Technology hardware, storage & peripherals | 6.1 | ||||||
Wireless telecommunication services | 3.7 | ||||||
Total common stocks | 93.2 | % | |||||
Preferred stock | 4.4 | ||||||
Short-term investment | 5.3 | ||||||
Total investments | 102.9 | % | |||||
Liabilities in excess of other assets | (2.9 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
36
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 93.2% | |||||||||||
Brazil: 3.6% | |||||||||||
Vale SA | 251,263 | $ | 3,306,305 | ||||||||
Cayman Islands: 13.3% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 35,503 | 4,866,396 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 8,500 | 465,885 | |||||||||
TAL Education Group, ADR* | 95,100 | 2,537,268 | |||||||||
Tencent Holdings Ltd. | 111,400 | 4,464,948 | |||||||||
Total Cayman Islands common stocks | 12,334,497 | ||||||||||
China: 12.8% | |||||||||||
China Construction Bank Corp., H Shares | 3,811,000 | 3,120,649 | |||||||||
China Vanke Co. Ltd., H Shares | 650,100 | 2,201,652 | |||||||||
Kweichow Moutai Co. Ltd., Class A | 33,337 | 2,879,607 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 418,500 | 3,692,013 | |||||||||
Total China common stocks | 11,893,921 | ||||||||||
Hong Kong: 6.7% | |||||||||||
China Mobile Ltd. | 359,500 | 3,478,735 | |||||||||
CNOOC Ltd. | 1,796,000 | 2,766,420 | |||||||||
Total Hong Kong common stocks | 6,245,155 | ||||||||||
Hungary: 1.2% | |||||||||||
OTP Bank PLC | 27,498 | 1,111,279 | |||||||||
India: 9.2% | |||||||||||
HDFC Bank Ltd. | 19,370 | 589,232 | |||||||||
HDFC Bank Ltd., ADR | 25,000 | 2,589,750 | |||||||||
Mahindra & Mahindra Ltd. | 63,900 | 735,240 | |||||||||
Mahindra & Mahindra Ltd., GDR | 214,103 | 2,430,069 | |||||||||
Power Grid Corp. of India Ltd. | 792,240 | 2,253,331 | |||||||||
Total India common stocks | 8,597,622 | ||||||||||
Indonesia: 3.3% | |||||||||||
Bank Mandiri Persero Tbk. PT | 6,064,100 | 3,110,706 | |||||||||
Malaysia: 2.0% | |||||||||||
CIMB Group Holdings Berhad | 1,333,425 | 1,841,190 | |||||||||
Mexico: 4.0% | |||||||||||
Fomento Economico Mexicano SAB de CV | 217,500 | 1,867,456 | |||||||||
Grupo Financiero Banorte SAB de CV, Class O | 386,200 | 1,882,287 | |||||||||
Total Mexico common stocks | 3,749,743 |
Number of shares | Value | ||||||||||
Russia: 5.6% | |||||||||||
Lukoil PJSC, ADR | 38,800 | $ | 2,767,992 | ||||||||
Sberbank of Russia PJSC | 903,165 | 2,436,810 | |||||||||
Total Russia common stocks | 5,204,802 | ||||||||||
South Africa: 3.9% | |||||||||||
Naspers Ltd., N Shares | 18,097 | 3,623,317 | |||||||||
South Korea: 17.2% | |||||||||||
LG Chem Ltd.* | 8,052 | 2,509,960 | |||||||||
LG Household & Health Care Ltd.* | 3,029 | 2,993,608 | |||||||||
POSCO | 9,000 | 1,968,584 | |||||||||
Samsung Electronics Co. Ltd. | 162,005 | 5,639,667 | |||||||||
SK Hynix, Inc.* | 52,246 | 2,848,268 | |||||||||
Total South Korea common stocks | 15,960,087 | ||||||||||
Taiwan: 6.3% | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 807,000 | 5,859,812 | |||||||||
Thailand: 2.0% | |||||||||||
Bangkok Bank PCL NVDR | 302,300 | 1,886,676 | |||||||||
United Kingdom: 2.1% | |||||||||||
Mondi PLC | 92,022 | 1,916,609 | |||||||||
Total common stocks (cost $97,288,548) | 86,641,721 | ||||||||||
Preferred stock: 4.4% | |||||||||||
Brazil: 4.4% | |||||||||||
Banco Bradesco SA (cost $3,223,359) | 411,200 | 4,100,595 | |||||||||
Short-term investment: 5.3% | |||||||||||
Investment company: 5.3% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $4,920,608) | 4,920,608 | 4,920,608 | |||||||||
Total investments: 102.9% (cost $105,432,515) | 95,662,924 | ||||||||||
Liabilities in excess of other assets: (2.9)% | (2,651,340 | ) | |||||||||
Net assets: 100.0% | $ | 93,011,584 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
37
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 25,150,218 | $ | 61,491,503 | $ | — | $ | 86,641,721 | |||||||||||
Preferred stock | 4,100,595 | — | — | 4,100,595 | |||||||||||||||
Short-term investment | — | 4,920,608 | — | 4,920,608 | |||||||||||||||
Total | $ | 29,250,813 | $ | 66,412,111 | $ | — | $ | 95,662,924 |
At December 31, 2018, $61,491,503 of foreign investments were classified within Level 2 of the fair value hierarchy pursuant to the Fund's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
Portfolio footnotes
* Non-income producing security.
See accompanying notes to financial statements.
38
UBS Engage For Impact Fund
Portfolio performance
From its inception on October 24, 2018, through December 31, 2018, Class P shares of UBS Engage For Impact Fund (the "Fund") returned -6.84%. The Fund's benchmark, the MSCI All Country World Index (net) (the "Index"), returned -4.23% over the same time period. (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 underperformed the Index primarily due to stock selection decisions.
Portfolio performance summary1
What worked:
• Stock selection within the consumer staples sector contributed positively to Fund performance during the reporting period.
• Several individual stock positions were positive for relative performance.
• Eli Lilly beat top- and bottom-line expectations. The company raised its 2019 outlook based on higher volume, research & development (R&D) expenses and margins, but guided toward a lower tax rate. Eli Lilly and NextCure announced a multi-year collaboration focused on the discovery and development of immuno-oncology therapies.
• Shares of Koninklijke Ahold Delhaize rose after the company published strong third quarter results. Earnings beat consensus estimates, driven by healthy sales trends in the U.S. and the Netherlands. The company also raised its free cash flow guidance for the year, mainly explained by a reduced capital expenditure (capex) budget. Koninklijke Ahold also announced a new share buyback program of one billion euros for 2019.
• The Fund did not hold Apple which contributed during the period and thus is a top contributor to portfolio performance relative to the benchmark. The company traded lower due to investor concerns that the most recently introduced generation of iPhones was not selling as well as expected.
What didn't work:
• Stock selection in consumer discretionary, healthcare and financials detracted from Fund performance during the period.
• Certain stock selection decisions made a negative contribution to relative performance.
• Lanxess posted disappointing third quarter results, which weighed on its share price during the period. On the positive side, the European Union (EU) cleared Saudi Aramco's acquisition of the remainder of Arlanxeo from Lanxess. We continue to hold the stock.
• Stericycle's stock underperformed as the company's ongoing turnaround hit a slight bump in the road during the third quarter. Stericycle reduced earnings guidance twice in 2018, causing shares to trade lower. We believe the company is at trough valuations, which creates a potentially favorable risk/reward profile. We maintain our position in the stock.
• The share price of Wabtec declined in conjunction with rising investor concerns regarding potential trade correction in China, slowing global gross domestic product (GDP) growth and rising interest rates in the U.S. We continue to hold the stock.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
39
UBS Engage For Impact Fund
Engagement activity
During the fourth quarter of 2018, we voted at five meetings and against approximately 24% of the resolutions (eight out of 33 total). We abstained on the item to "Transact Other Business" at the meeting of shareholders of the SPDR MSCI ACWI UCITS ETF due to a lack of disclosure about what the proposal may include. At the meeting of Sun Hung Kai Properties, we voted against the election of five directors due to lack of committee independence, poor meeting attendance and overboarding. We also voted against management's request to approve the issuance of new and repurchased shares due to the limit requested without pre-emptive rights being above our threshold of 10%.
Finally, in the fourth quarter we engaged with several companies, including Unilever, on the impact measurement model development for food security metrics. In each case, the corporate representatives were responsive and interested in our model development. They noted that this type of work is important and necessary, and that they have been attempting this themselves. The representatives offered to provide documentation and to work further on this initiative with our partners from the Harvard School of Public Health and the University of Wageningen. Input from corporate experts will be incorporated into the food security impact model development.
Additional engagements focused on governance (Stericycle, Infineon, Unilever and Wabtec). Our discussion with Wabtec also focused on operational issues, which have plagued the company over the past two years. Of note are delays in several U.K. projects and the need to bring in new talent from outside the industry to senior management and board roles. We offered to provide examples of peer firms that have employed that tactic, as well as a skill set profile to consider for the turn-around we believe is necessary. We decided to vote against the Wabtec/GE Transportation deal, which was undermined by significant overstatement of profitability and liquidity by GE. We raised concerns about the remuneration policy and board tenure. Overall, Wabtec's leverage and the execution risk associated with integrating GE Transport makes relative valuation less appealing than alternatives, in our view, and we have been trimming our position.
Our conversations with Stericycle focused on governance and business model. The company has been refreshing its board (half of the board has been replaced in the past three years, with a new audit committee chair) and added new leadership in COO Cindy Miller. We continue to push for the adoption of longer-term compensation structures and an increased proportion of performance shares.
Our engagement with Nabtesco determined that the company is focused on social issues related to employees and within its supply chain. The company is implementing stricter processes to guide supplier selection and monitor performance, particularly for smaller suppliers. A follow-up conversation confirmed that key impact technologies include industrial robots for factory automation, where the company has a 60% market share. Nabtesco has created incentives across its business divisions to promote eco-friendly design, with the aim to improve energy efficiency and reduce waste generation.
40
UBS Engage For Impact Fund
We discussed changes to compensation that Microsoft had implemented in 2016, which included a more structured approach even though there is a high level of discretion in the annual cash bonus (19% of total comp). An additional input to performance is based on an anonymous employee poll. Metrics such as diversity are also included in the qualitative judgement as part of Microsoft's cultural transformation initiative. The company has been researching the ethical and practical implications of greater reliance on AI, particularly with respect to its impact on job creation and destruction. Microsoft established the AI Ethics in Engineering and Research Committee. The company's AI for Earth program has a $50 million five-year budget to help organizations solve the climate change crisis using AI tools.
This letter is intended to assist shareholders in understanding how the Fund performed during the period from inception on October 24, 2018, through December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
41
UBS Engage For Impact Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
Inception1 | |||||||
Class P2 | (6.84 | )% | |||||
MSCI All Country World Index (net)3 | (4.23 | ) |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 23, 2018 prospectuses were as follows: Class P—1.19% and 0.85%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 1.10% for Class A shares and 0.85% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 AM (Americas)'s three year recoupment rights will survive.
1 Inception date of Class P of UBS Engage For Impact Fund is October 24, 2018.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI All Country World Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging 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."
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 www.ubs.com/us-mutualfundperformance.
42
UBS Engage For Impact Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Ecolab, Inc. | 5.0 | % | |||||
Danaher Corp. | 3.8 | ||||||
Eli Lilly & Co. | 3.6 | ||||||
Abbott Laboratories | 3.2 | ||||||
Koninklijke Ahold Delhaize N.V. | 3.1 | ||||||
SAP SE | 2.3 | ||||||
Microsoft Corp. | 2.3 | ||||||
Unilever N.V. CVA | 2.3 | ||||||
Sanofi | 2.2 | ||||||
Kasikornbank PCL | 2.2 | ||||||
Total | 30.0 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 49.8 | % | |||||
Japan | 9.4 | ||||||
Germany | 7.7 | ||||||
Netherlands | 5.3 | ||||||
Hong Kong | 3.9 | ||||||
Total | 76.1 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
43
UBS Engage For Impact Fund
Industry diversification—December 31, 2018 (unaudited)
Common stocks | Percentage of net assets | ||||||
Auto components | 1.3 | % | |||||
Banks | 7.7 | ||||||
Biotechnology | 4.1 | ||||||
Building products | 2.3 | ||||||
Chemicals | 6.6 | ||||||
Commercial services & supplies | 3.2 | ||||||
Distributors | 1.7 | ||||||
Diversified consumer services | 1.7 | ||||||
Electrical equipment | 1.7 | ||||||
Electronic equipment, instruments & components | 1.6 | ||||||
Food & staples retailing | 3.1 | ||||||
Food products | 2.4 | ||||||
Health care equipment & supplies | 12.1 | ||||||
Health care providers & services | 1.4 | ||||||
Internet & direct marketing retail | 2.1 | ||||||
Machinery | 7.7 | ||||||
Metals & mining | 0.7 | ||||||
Multi-utilities | 1.0 | ||||||
Oil, gas & consumable fuels | 1.8 | ||||||
Personal products | 2.3 | ||||||
Pharmaceuticals | 12.7 | ||||||
Real estate management & development | 3.3 | ||||||
Semiconductors & semiconductor equipment | 6.4 | ||||||
Software | 5.8 | ||||||
Total common stocks | 94.7 | % | |||||
Short-term investment | 2.2 | ||||||
Investment of cash collateral from securities loaned | 3.5 | ||||||
Total investments | 100.4 | % | |||||
Liabilities in excess of other assets | (0.4 | ) | |||||
Net Assets | 100.0 | % |
44
UBS Engage For Impact Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 94.7% | |||||||||||
Australia: 0.7% | |||||||||||
Sims Metal Management Ltd. | 10,679 | $ | 75,487 | ||||||||
Cayman Islands: 1.7% | |||||||||||
New Oriental Education & Technology Group, Inc., ADR* | 3,230 | 177,036 | |||||||||
France: 2.8% | |||||||||||
Sanofi | 2,608 | 226,244 | |||||||||
Valeo SA | 2,053 | 59,877 | |||||||||
Total France common stocks | 286,121 | ||||||||||
Germany: 7.7% | |||||||||||
Infineon Technologies AG | 10,627 | 212,770 | |||||||||
KION Group AG | 3,217 | 163,597 | |||||||||
LANXESS AG | 3,723 | 171,170 | |||||||||
SAP SE | 2,432 | 241,375 | |||||||||
Total Germany common stocks | 788,912 | ||||||||||
Hong Kong: 3.9% | |||||||||||
China Everbright International Ltd. | 225,000 | 201,629 | |||||||||
Sun Hung Kai Properties Ltd. | 6,500 | 92,765 | |||||||||
Swire Properties Ltd. | 31,600 | 111,031 | |||||||||
Total Hong Kong common stocks | 405,425 | ||||||||||
Ireland: 3.1% | |||||||||||
Allergan PLC | 1,365 | 182,446 | |||||||||
Kingspan Group PLC | 3,217 | 137,904 | |||||||||
Total Ireland common stocks | 320,350 | ||||||||||
Italy: 3.8% | |||||||||||
Intesa Sanpaolo SpA | 95,919 | 213,575 | |||||||||
Prysmian SpA | 9,093 | 176,923 | |||||||||
Total Italy common stocks | 390,498 | ||||||||||
Japan: 9.4% | |||||||||||
Kubota Corp. | 6,100 | 86,704 | |||||||||
Mitsubishi Estate Co. Ltd. | 8,700 | 136,881 | |||||||||
Nabtesco Corp. | 8,900 | 192,693 | |||||||||
Shionogi & Co. Ltd. | 3,100 | 176,934 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 5,800 | 191,197 | |||||||||
Takeda Pharmaceutical Co. Ltd.1 | 5,300 | 179,641 | |||||||||
Total Japan common stocks | 964,050 | ||||||||||
Jersey: 2.7% | |||||||||||
Aptiv PLC | 1,139 | 70,128 | |||||||||
Shire PLC | 3,537 | 205,810 | |||||||||
Total Jersey common stocks | 275,938 | ||||||||||
Mexico: 1.6% | |||||||||||
Grupo Financiero Banorte SAB de CV, Class O | 34,750 | 169,367 | |||||||||
Netherlands: 5.3% | |||||||||||
Koninklijke Ahold Delhaize N.V. | 12,481 | 315,297 | |||||||||
Unilever N.V. CVA | 4,295 | 232,670 | |||||||||
Total Netherlands common stocks | 547,967 |
Number of shares | Value | ||||||||||
Norway: 1.8% | |||||||||||
Equinor ASA | 8,820 | $ | 187,091 | ||||||||
South Africa: 1.3% | |||||||||||
Tiger Brands Ltd. | 7,303 | 138,888 | |||||||||
Thailand: 2.2% | |||||||||||
Kasikornbank PCL | 39,300 | 222,949 | |||||||||
United Kingdom: 2.6% | |||||||||||
Centrica PLC | 56,809 | 97,994 | |||||||||
LivaNova PLC* | 1,835 | 167,847 | |||||||||
Total United Kingdom common stocks | 265,841 | ||||||||||
United States: 44.1% | |||||||||||
Abbott Laboratories | 4,570 | 330,548 | |||||||||
AGCO Corp. | 3,289 | 183,099 | |||||||||
Amazon.com, Inc.* | 145 | 217,786 | |||||||||
Conagra Brands, Inc. | 5,049 | 107,847 | |||||||||
Danaher Corp. | 3,763 | 388,041 | |||||||||
Ecolab, Inc. | 3,473 | 511,746 | |||||||||
Eli Lilly & Co. | 3,246 | 375,627 | |||||||||
Incyte Corp.* | 3,433 | 218,304 | |||||||||
Insulet Corp.*,1 | 1,965 | 155,864 | |||||||||
Johnson & Johnson | 1,262 | 162,861 | |||||||||
Laboratory Corp. of America Holdings* | 1,158 | 146,325 | |||||||||
LKQ Corp.* | 7,591 | 180,134 | |||||||||
Masco Corp. | 3,477 | 101,667 | |||||||||
Maxim Integrated Products, Inc. | 2,607 | 132,566 | |||||||||
Micron Technology, Inc.* | 4,138 | 131,299 | |||||||||
Microsoft Corp. | 2,357 | 239,400 | |||||||||
Stericycle, Inc.* | 3,620 | 132,818 | |||||||||
Trimble, Inc.* | 4,964 | 163,365 | |||||||||
Ultimate Software Group, Inc./The* | 455 | 111,416 | |||||||||
Universal Display Corp.1 | 1,903 | 178,064 | |||||||||
Wabtec Corp.1 | 2,358 | 165,649 | |||||||||
Zimmer Biomet Holdings, Inc. | 1,965 | 203,810 | |||||||||
Total United States common stocks | 4,538,236 | ||||||||||
Total common stocks (cost $10,553,563) | 9,754,156 | ||||||||||
Short-term investment: 2.2% | |||||||||||
Investment company: 2.2% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $220,425) | 220,425 | 220,425 | |||||||||
Investment of cash collateral from securities loaned: 3.5% | |||||||||||
Money market fund: 3.5% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $361,644) | 361,644 | 361,644 | |||||||||
Total investments: 100.4% (cost $11,135,632) | 10,336,225 | ||||||||||
Liabilities in excess of other assets: (0.4)% | (40,436 | ) | |||||||||
Net assets: 100.0% | $ | 10,295,789 |
45
UBS Engage For Impact Fund
Portfolio of investments
December 31, 2018 (unaudited)
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 5,305,060 | $ | 4,449,096 | $ | — | $ | 9,754,156 | |||||||||||
Short-term investment | — | 220,425 | — | 220,425 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 361,644 | — | 361,644 | |||||||||||||||
Total | $ | 5,305,060 | $ | 5,031,165 | $ | — | $ | 10,336,225 |
At December 31, 2018, 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 the period end.
See accompanying notes to financial statements.
46
UBS International Sustainable Equity Fund
Portfolio performance
For the six months ended December 31, 2018, Class A shares of UBS International Sustainable Equity Fund (the "Fund") returned -12.71% (Class A shares returned -17.48% after the deduction of the maximum sales charge), while Class P shares declined 12.56%. The Fund's benchmark, the MSCI World Free ex USA Index (net) (the "Index"), returned -11.64%. (Class P shares have lower expenses than the other share class in the series. Returns for all share classes over various time periods are shown on page 49; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted negative absolute returns and underperformed its benchmark during the reporting period. This was driven by a combination of weak stock selection and sector allocation.
Portfolio performance summary1
What worked:
• Stock selection in the financials, consumer staples and real estate sectors contributed the most to performance.
• PT Bank Central Asia outperformed on the back of rising interest rates in Indonesia which, in turn, should benefit the bank's net interest margins. The company is also gaining market share of private sector corporate, small- and mid-sized enterprises and retail loans. Against this backdrop, the company's profitability is expected to increase.
• Carl Zeiss Meditec continued to outperform the market given consistently sound financial results, supported by the innovation cycle with several new products in Ophthalmology and Microsurgery. Furthermore, the company has provided a favorable outlook for the coming year.
• Brambles outperformed the market after disclosing in line fiscal year 2018 results. The company also announced its intention to sell its IFCO brand by the end of 2019. While Brambles' sales rose 6% during the second half of 2018, its margins remained under material inflationary cost pressures. This highlights that Brambles' recently announced transformation benefits have not yet had a material impact.
• From a sector allocation perspective, an average underweight to the consumer discretionary and average overweight to the communication services sectors contributed to performance.
What didn't work:
• Stock selection in the industrials, energy and consumer discretionary sectors detracted from performance during the reporting period.
• Shares of Sino Biopharmaceutical sold off significantly as the company reported financial results below expectations. In addition, Chinese healthcare stocks fell sharply due to concerns over generic prices driven by a government GPO (group purchasing organisation) trial plan in China. We are supportive of management's efforts to centralize procurement and we expect further organic growth due to to a solid pipeline. We maintain our position in this stock.
• Schlumberger's shares fell sharply after management lowered both fourth quarter 2018 guidance and its outlook for 2019. We maintain our position in this stock.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
47
UBS International Sustainable Equity Fund
• Shares of Weir Group weakened after the oil-field services provider said the demand for some equipment in the US is showing considerable softening. The company generated about 30% of its revenue from the US in 2018. We maintain our position in this stock.
• In terms of sector allocation, an average underweight to consumer staples and an average overweight to information technology detracted from performance.
Portfolio highlights
• Zurich Insurance is a global diversified insurance company that offers property & casualty (P&C), life insurance and non-claims management services. The group operates in Europe, North America (where it has a leading position in commercial P&C), Latin America, Asia and in the Middle East. Our thesis for owning Zurich Insurance is that we expect operating improvement in general insurance and cost take-out opportunities to further enhance its profitability. The company has strong cash flow generation, an attractive franchise and a solid balance sheet. Significant events effected the governance of the company in recent years and we stayed closely engaged on transition planning, merger and acquisition (M&A), capital allocation and its remuneration plans. In our view, Zurich Insurance has strong risk management structures and research initiatives that analyze climate change risk. It offers insurance products to small- and mid-sized enterprises and pursues financial services access initiatives in developing countries.
• Mirvac is a diversified property group that owns a portfolio of retail, commercial, residential and car park properties across Australia. The principal activities of Mirvac consist of real estate investment, development and investment management. Given the mix of assets, we expect the company's lease structures will provide fixed and recurring growth. Mirvac is in a solid position, in our view, as retail and office markets are expected to experience tough leasing conditions. The developer performs life cycle assessment on every new project and acts to reduce direct and indirect pollution from construction phase to usage.
• During the reporting period, we initiated several new positions, including GlaxoSmithKline, Sony, Novartis, Bank Mandiri, Entertainment One, Centrica, Publicis Groupe, Nestle, Naspers and Banca Mediolanum. We sold the Fund's positions in Banco Bilbao, Uni-Charm, ICICI Bank, Lyondellbasell, Schneider Electric, Nordea and Mediobanca.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
48
UBS International Sustainable Equity Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | (12.71 | )% | (16.94 | )% | 2.21 | % | 6.95 | % | |||||||||||
Class P2 | (12.56 | ) | (16.71 | ) | 2.47 | 7.21 | |||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (17.48 | )% | (21.48 | )% | 1.06 | % | 6.35 | % | |||||||||||
MSCI World ex USA Index (net)3 | (11.64 | ) | (14.09 | ) | 0.34 | 6.24 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectuses were as follows: Class A—2.03% and 1.26%; Class P—1.71% and 1.01%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 and 1.00% for Class P 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI World 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.
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 www.ubs.com/us-mutualfundperformance.
49
UBS International Sustainable Equity Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Zurich Insurance Group AG | 2.6 | % | |||||
Novartis AG (Registered) | 2.6 | ||||||
Deutsche Telekom AG (Registered) | 2.5 | ||||||
Unilever N.V. CVA | 2.5 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 2.4 | ||||||
Mirvac Group, REIT | 2.3 | ||||||
Centrica PLC | 2.3 | ||||||
Aon PLC | 2.3 | ||||||
Brambles Ltd. | 2.3 | ||||||
Bank Central Asia Tbk. PT | 2.2 | ||||||
Total | 24.0 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
Japan | 20.0 | % | |||||
United Kingdom | 14.6 | ||||||
Germany | 9.5 | ||||||
Netherlands | 7.0 | ||||||
Switzerland | 6.4 | ||||||
Total | 57.5 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
50
UBS International Sustainable Equity Fund
Industry diversification—December 31, 2018 (unaudited)
Common stocks | Percentage of net assets | ||||||
Airlines | 0.8 | % | |||||
Auto components | 0.7 | ||||||
Automobiles | 0.9 | ||||||
Banks | 9.1 | ||||||
Biotechnology | 1.9 | ||||||
Chemicals | 3.9 | ||||||
Commercial services & supplies | 2.3 | ||||||
Diversified financial services | 1.6 | ||||||
Diversified telecommunication services | 3.7 | ||||||
Electronic equipment, instruments & components | 1.2 | ||||||
Energy equipment & services | 1.1 | ||||||
Entertainment | 4.1 | ||||||
Equity real estate investment trusts | 2.3 | ||||||
Food & staples retailing | 1.0 | ||||||
Food products | 2.3 | ||||||
Health care equipment & supplies | 1.5 | ||||||
Household durables | 1.8 | ||||||
Insurance | 9.0 | ||||||
Machinery | 7.2 | ||||||
Marine | 1.5 | ||||||
Media | 3.6 | ||||||
Multi-utilities | 2.3 | ||||||
Oil, gas & consumable fuels | 3.9 | ||||||
Personal products | 4.4 | ||||||
Pharmaceuticals | 9.8 | ||||||
Real estate management & development | 1.4 | ||||||
Semiconductors & semiconductor equipment | 3.2 | ||||||
Software | 3.5 | ||||||
Trading companies & distributors | 1.1 | ||||||
Wireless telecommunication services | 2.9 | ||||||
Total common stocks | 94.0 | % | |||||
Preferred stock | 0.8 | ||||||
Short-term investment | 2.3 | ||||||
Investment of cash collateral from securities loaned | 3.5 | ||||||
Total investments | 100.6 | % | |||||
Liabilities in excess of other assets | (0.6 | ) | |||||
Net assets | 100.0 | % |
51
UBS International Sustainable Equity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 94.0% | |||||||||||
Australia: 6.0% | |||||||||||
Brambles Ltd. | 312,041 | $ | 2,232,544 | ||||||||
Mirvac Group, REIT | 1,469,423 | 2,320,695 | |||||||||
Santos Ltd. | 361,153 | 1,392,832 | |||||||||
Total Australia common stocks | 5,946,071 | ||||||||||
Austria: 0.9% | |||||||||||
Erste Group Bank AG* | 26,604 | 882,123 | |||||||||
Belgium: 0.5% | |||||||||||
Galapagos N.V.* | 5,361 | 491,395 | |||||||||
Canada: 1.4% | |||||||||||
Entertainment One Ltd. | 304,886 | 1,385,581 | |||||||||
Cayman Islands: 1.4% | |||||||||||
China Biologic Products Holdings, Inc.*,1 | 6,000 | 455,460 | |||||||||
Sino Biopharmaceutical Ltd. | 705,000 | 464,093 | |||||||||
Tencent Music Entertainment Group, ADR*,1 | 35,700 | 471,954 | |||||||||
Total Cayman Islands common stocks | 1,391,507 | ||||||||||
China: 2.0% | |||||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 224,500 | 1,980,542 | |||||||||
Curacao: 1.1% | |||||||||||
Schlumberger Ltd. | 30,877 | 1,114,042 | |||||||||
Denmark: 1.5% | |||||||||||
AP Moller—Maersk A/S, Class B | 1,162 | 1,461,716 | |||||||||
France: 5.1% | |||||||||||
Publicis Groupe SA | 26,780 | 1,527,976 | |||||||||
Sanofi | 24,646 | 2,138,036 | |||||||||
Ubisoft Entertainment SA* | 8,573 | 690,658 | |||||||||
Valeo SA | 22,765 | 663,955 | |||||||||
Total France common stocks | 5,020,625 | ||||||||||
Germany: 8.7% | |||||||||||
Bayerische Motoren Werke AG | 11,212 | 909,350 | |||||||||
Carl Zeiss Meditec AG | 13,838 | 1,079,800 | |||||||||
Deutsche Telekom AG (Registered) | 146,031 | 2,482,048 | |||||||||
Infineon Technologies AG | 45,229 | 905,560 | |||||||||
KION Group AG | 9,817 | 499,231 | |||||||||
LANXESS AG | 18,751 | 862,104 | |||||||||
SAP SE | 19,294 | 1,914,922 | |||||||||
Total Germany common stocks | 8,653,015 | ||||||||||
Hong Kong: 2.5% | |||||||||||
China Mobile Ltd. | 114,000 | 1,103,131 | |||||||||
Sun Hung Kai Properties Ltd. | 97,000 | 1,384,347 | |||||||||
Total Hong Kong common stocks | 2,487,478 | ||||||||||
India: 1.4% | |||||||||||
Axis Bank Ltd., GDR*,2 | 32,044 | 1,437,775 |
Number of shares | Value | ||||||||||
Indonesia: 3.4% | |||||||||||
Bank Central Asia Tbk. PT | 1,186,700 | $ | 2,146,085 | ||||||||
Bank Mandiri Persero Tbk. PT | 2,323,600 | 1,191,939 | |||||||||
Total Indonesia common stocks | 3,338,024 | ||||||||||
Ireland: 0.8% | |||||||||||
Ryanair Holdings PLC, ADR* | 11,500 | 820,410 | |||||||||
Italy: 1.6% | |||||||||||
Banca Mediolanum SpA | 264,635 | 1,543,019 | |||||||||
Japan: 20.0% | |||||||||||
Hino Motors Ltd. | 92,000 | 866,320 | |||||||||
Inpex Corp. | 86,600 | 767,347 | |||||||||
Kao Corp. | 25,000 | 1,850,440 | |||||||||
KDDI Corp. | 74,900 | 1,789,729 | |||||||||
Kissei Pharmaceutical Co. Ltd. | 34,400 | 875,884 | |||||||||
Kubota Corp. | 92,400 | 1,313,348 | |||||||||
Makita Corp. | 27,100 | 962,485 | |||||||||
MINEBEA MITSUMI, Inc. | 51,100 | 736,862 | |||||||||
Nabtesco Corp.1 | 40,900 | 885,522 | |||||||||
Nintendo Co. Ltd. | 5,700 | 1,513,572 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 15,900 | 1,221,642 | |||||||||
Sony Corp. | 36,100 | 1,740,367 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 72,600 | 2,393,263 | |||||||||
Takeda Pharmaceutical Co. Ltd.1 | 60,800 | 2,060,784 | |||||||||
THK Co. Ltd. | 44,200 | 825,739 | |||||||||
Total Japan common stocks | 19,803,304 | ||||||||||
Jersey: 0.9% | |||||||||||
Shire PLC | 15,925 | 926,637 | |||||||||
Netherlands: 7.0% | |||||||||||
ABN AMRO Group N.V. CVA3 | 39,910 | 939,156 | |||||||||
ASML Holding N.V. | 8,122 | 1,272,388 | |||||||||
Koninklijke Ahold Delhaize N.V. | 39,250 | 991,540 | |||||||||
Koninklijke DSM N.V. | 10,163 | 824,480 | |||||||||
NXP Semiconductors N.V. | 5,881 | 430,960 | |||||||||
Unilever N.V. CVA | 45,642 | 2,472,530 | |||||||||
Total Netherlands common stocks | 6,931,054 | ||||||||||
Norway: 2.9% | |||||||||||
Equinor ASA | 81,090 | 1,720,091 | |||||||||
Telenor ASA | 61,209 | 1,188,697 | |||||||||
Total Norway common stocks | 2,908,788 | ||||||||||
South Africa: 2.1% | |||||||||||
Naspers Ltd., N Shares | 10,255 | 2,053,220 | |||||||||
South Korea: 0.6% | |||||||||||
SK Hynix, Inc.* | 10,721 | 584,471 | |||||||||
Switzerland: 6.4% | |||||||||||
Nestle SA (Registered) | 13,179 | 1,069,644 | |||||||||
Novartis AG (Registered) | 30,391 | 2,602,813 | |||||||||
Zurich Insurance Group AG | 8,798 | 2,622,583 | |||||||||
Total Switzerland common stocks | 6,295,040 |
52
UBS International Sustainable Equity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Taiwan: 1.2% | |||||||||||
Uni-President Enterprises Corp. | 547,000 | $ | 1,240,956 | ||||||||
United Kingdom: 14.6% | |||||||||||
Aon PLC | 15,500 | 2,253,080 | |||||||||
Ashtead Group PLC | 50,895 | 1,061,638 | |||||||||
Centrica PLC | 1,341,552 | 2,314,138 | |||||||||
Croda International PLC | 16,537 | 987,605 | |||||||||
GlaxoSmithKline PLC | 79,450 | 1,514,159 | |||||||||
LivaNova PLC* | 4,700 | 429,909 | |||||||||
Prudential PLC | 115,952 | 2,070,491 | |||||||||
Sage Group PLC/The | 204,907 | 1,571,521 | |||||||||
Spectris PLC | 41,413 | 1,203,498 | |||||||||
Weir Group PLC/The | 61,712 | 1,021,904 | |||||||||
Total United Kingdom common stocks | 14,427,943 | ||||||||||
Total common stocks (cost $107,213,249) | 93,124,736 |
Number of shares | Value | ||||||||||
Preferred stock: 0.8% | |||||||||||
Germany: 0.8% | |||||||||||
Jungheinrich AG (cost $1,112,728) | 29,351 | $ | 769,287 | ||||||||
Short-term investment: 2.3% | |||||||||||
Investment company: 2.3% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $2,278,317) | 2,278,317 | 2,278,317 | |||||||||
Investment of cash collateral from securities loaned: 3.5% | |||||||||||
Money market fund: 3.5% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $3,522,975) | 3,522,975 | 3,522,975 | |||||||||
Total investments: 100.6% (cost $114,127,269) | 99,695,315 | ||||||||||
Liabilities in excess of other assets: (0.6)% | (632,430 | ) | |||||||||
Net assets: 100.0% | $ | 99,062,885 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 13,709,567 | $ | 79,415,169 | $ | — | $ | 93,124,736 | |||||||||||
Preferred stock | — | 769,287 | — | 769,287 | |||||||||||||||
Short-term investment | — | 2,278,317 | — | 2,278,317 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 3,522,975 | — | 3,522,975 | |||||||||||||||
Total | $ | 13,709,567 | $ | 85,985,748 | $ | — | $ | 99,695,315 |
At December 31, 2018, $80,184,456 of foreign investments were classified within Level 2 of the fair value hierarchy pursuant to the Fund's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
53
UBS International Sustainable Equity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
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. Securities exempt from registration pursuant to Rule 144A, in the amount of $939,156, represented 0.9% of the Fund's net assets at period end.
See accompanying notes to financial statements.
54
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the six months ended December 31, 2018, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned -17.34% (Class A shares returned -21.90% after the deduction of the maximum sales charge), while Class P shares returned -17.23%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned -17.33% over the same time period. (Class P shares have lower expenses than the other share class in the Fund. Returns for all share classes over various time periods are shown on page 57; 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.)
Portfolio performance summary1
What worked:
• Fund performance benefited from sector allocation, including the Fund's overweight to information technology, underweight to industrials and modest cash position.
• Stock selection within the information technology sector made a positive contribution to relative performance. In particular, software names led the way during the reporting period.
• Shares of Alteryx, a leader in data science and self-service analytics, rallied strongly during the six months. The company reported revenue and billings well above consensus expectations and signed up 375 new customers, a 62% gain over the prior year. (For details, see "Portfolio highlights.")
• Twilio, a developer of communication capabilities for software applications, traded higher during the reporting period due to stronger than expected sales and earnings growth.
• Paycom Software is a cloud-based provider of human capital management and payroll applications. The company saw its shares rise after reporting quarterly sales and earnings that exceeded expectations. We believe the company's leading position in employee self service, which is based on its mobile app, will continue to be a competitive advantage.
• Several individual stock selection decisions benefited performance during the six months.
• Shares of Vocera Communications, a provider of instant voice communication solutions to medical facilities worldwide, outperformed during the six months. Investors rewarded management's conservative policy on earnings guidance, as well as the company's ability to book new wins and customer expansions.
• Quarterly sales and earnings that exceeded consensus expectations led shares of Planet Fitness, an owner, operator and franchiser of fitness clubs, higher during the six-month period.
What didn't work:
• Certain stocks detracted from relative performance during the six months ended December 31, 2018.
• USA Technologies is a provider of credit card payment systems and logistics solutions for vending machines. The company's shares declined after USA announced that it would not be able to file its 10-K for fiscal 2018 on a timely basis, as the audit committee is reviewing certain contracts and internal controls. Subsequent to year end, we no longer hold this position.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
55
UBS U.S. Small Cap Growth Fund
• Shares of Matador Resources, an energy company focused on the Delaware Basin, dropped as the price of oil weakened and investors worried about a projected outspend of cash flow. We maintain our position in this stock.
• Boise Cascade, a manufacturer and marketer of wood products, underperformed during the period. The company's forward-looking commentary on the negative impact of falling wood product prices continued to weigh on its shares. We maintain our position in this stock.
• Although the company reported overall revenue ahead of expectations, shares of Roku, a leading platform for streaming TV, declined during the period. Investors were worried about potential competition, especially given that platform revenue was not as strong as anticipated. We maintain our position in this stock.
• Altra Industrial Motion is a designer, producer and marketer of mechanical power transmission and motion control products. The company's shares lagged as investors grew concerned about a potential slowdown in domestic industrial activity and the challenges of integrating the recent acquisition of Fortive's Automation and Specialty business. Tariff-related concerns also put downward pressure on shares during the six months. We maintain our position in this stock.
Portfolio highlights
• Chegg is a leading connected learning platform that seeks to improve student outcomes. The company operates an integrated platform of educational services that is online, on-demand, personalized, adaptive, affordable, and backed up by human help. It is transitioning from a capital intensive textbook rental company to a digital student services platform, and we believe that EBITDA will ramp up as this transition progresses.
• Wix.com is a web platform that enables businesses, organizations, professionals and individuals to develop customized websites and applications. The company's rapid growth is being driven by the continued move online by small and medium-sized businesses (SMB). Wix.com provides SMBs with an easy to use web design solution that incorporates full e-commerce capabilities.
• Alteryx designs and develops software solutions for data storage, retrieval, management, reporting and analysis. We believe the large and growing addressable market for business intelligence and advanced analytics will lead to better than expected sales and earnings growth for Alteryx.
• Universal Display is a leader in the research, development and commercialization of organic light-emitting diode (OLED) technologies and materials. We remain positive regarding expected OLED industry shipments going forward, and maintain an overweight to the stock.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
56
UBS U.S. Small Cap Growth Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | (17.34 | )% | (4.70 | )% | 4.77 | % | 14.71 | % | |||||||||||
Class P2 | (17.23 | ) | (4.46 | ) | 5.05 | 15.00 | |||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (21.90 | )% | (9.96 | )% | 3.60 | % | 14.06 | % | |||||||||||
Russell 2000 Growth Index3 | (17.33 | ) | (9.31 | ) | 5.13 | 13.52 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectuses were as follows: Class A—1.67% and 1.25%; Class P—1.35% 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 Asset Management (Americas) Inc. the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 1.24% for Class A shares and 0.99% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 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-book ratios and higher forecasted growth values. The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Investors should note that indices do not reflect the deduction of fees and expenses.
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 www.ubs.com/us-mutualfundperformance.
57
UBS U.S. Small Cap Growth Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Chegg, Inc. | 2.5 | % | |||||
Alteryx Inc., Class A | 2.3 | ||||||
Wix.com Ltd. | 2.1 | ||||||
Planet Fitness, Inc., Class A | 1.9 | ||||||
Universal Display Corp. | 1.8 | ||||||
Performance Food Group Co. | 1.6 | ||||||
Evolent Health, Inc., Class A | 1.6 | ||||||
Ingevity Corp. | 1.5 | ||||||
Chart Industries, Inc. | 1.5 | ||||||
Exact Sciences Corp. | 1.5 | ||||||
Total | 18.3 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 94.7 | % | |||||
Jersey | 2.5 | ||||||
Israel | 2.1 | ||||||
Bermuda | 1.0 | ||||||
Singapore | 0.7 | ||||||
Total | 101.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
58
UBS U.S. Small Cap Growth Fund
Industry diversification—December 31, 2018 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 1.4 | % | |||||
Banks | 6.1 | ||||||
Biotechnology | 9.9 | ||||||
Chemicals | 1.5 | ||||||
Construction & engineering | 1.3 | ||||||
Diversified consumer services | 5.5 | ||||||
Electrical equipment | 2.6 | ||||||
Energy equipment & services | 0.3 | ||||||
Equity real estate investment trusts | 2.4 | ||||||
Food & staples retailing | 1.6 | ||||||
Health care equipment & supplies | 6.3 | ||||||
Health care providers & services | 1.3 | ||||||
Health care technology | 5.6 | ||||||
Hotels, restaurants & leisure | 5.7 | ||||||
Household durables | 2.6 | ||||||
IT services | 3.4 | ||||||
Life sciences tools & services | 0.6 | ||||||
Machinery | 6.1 | ||||||
Multiline retail | 1.5 | ||||||
Oil, gas & consumable fuels | 1.2 | ||||||
Paper & forest products | 1.1 | ||||||
Pharmaceuticals | 3.6 | ||||||
Professional services | 1.9 | ||||||
Road & rail | 1.1 | ||||||
Semiconductors & semiconductor equipment | 5.4 | ||||||
Software | 12.7 | ||||||
Specialty retail | 3.5 | ||||||
Technology hardware, storage & peripherals | 0.5 | ||||||
Textiles, apparel & luxury goods | 1.3 | ||||||
Thrifts & mortgage finance | 1.0 | ||||||
Total common stocks | 99.0 | % | |||||
Short-term investment | 2.5 | ||||||
Investment of cash collateral from securities loaned | 13.0 | ||||||
Total investments | 114.5 | % | |||||
Liabilities in excess of other assets | (14.5 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
59
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 99.0% | |||||||||||
Aerospace & defense: 1.4% | |||||||||||
Mercury Systems, Inc.* | 28,223 | $ | 1,334,666 | ||||||||
Banks: 6.1% | |||||||||||
BankUnited, Inc. | 27,892 | 835,087 | |||||||||
Columbia Banking System, Inc. | 30,201 | 1,095,994 | |||||||||
FB Financial Corp. | 11,138 | 390,053 | |||||||||
National Bank Holdings Corp., Class A | 38,774 | 1,196,953 | |||||||||
Origin Bancorp, Inc.1 | 6,800 | 231,744 | |||||||||
South State Corp. | 14,282 | 856,206 | |||||||||
Webster Financial Corp. | 26,746 | 1,318,310 | |||||||||
5,924,347 | |||||||||||
Biotechnology: 9.9% | |||||||||||
Adamas Pharmaceuticals, Inc.*,1 | 11,955 | 102,096 | |||||||||
Allogene Therapeutics, Inc.*,1 | 12,143 | 327,011 | |||||||||
AnaptysBio, Inc.*,1 | 10,674 | 680,894 | |||||||||
Array BioPharma, Inc.*,1 | 51,854 | 738,919 | |||||||||
Avrobio, Inc.*,1 | 20,659 | 343,972 | |||||||||
Bluebird Bio, Inc.*,1 | 2,174 | 215,661 | |||||||||
Blueprint Medicines Corp.*,1 | 12,481 | 672,851 | |||||||||
Editas Medicine, Inc.*,1 | 21,597 | 491,332 | |||||||||
Exact Sciences Corp.* | 23,135 | 1,459,818 | |||||||||
G1 Therapeutics, Inc.* | 17,334 | 331,946 | |||||||||
Gritstone Oncology, Inc.*,1 | 27,351 | 422,573 | |||||||||
Ligand Pharmaceuticals, Inc.*,1 | 6,687 | 907,426 | |||||||||
Loxo Oncology, Inc.* | 7,182 | 1,005,983 | |||||||||
NuCana PLC, ADR*,1 | 24,900 | 361,050 | |||||||||
REGENXBIO, Inc.* | 11,996 | 503,232 | |||||||||
Voyager Therapeutics, Inc.* | 38,140 | 358,516 | |||||||||
Xencor, Inc.* | 17,916 | 647,843 | |||||||||
9,571,123 | |||||||||||
Chemicals: 1.5% | |||||||||||
Ingevity Corp.* | 17,622 | 1,474,785 | |||||||||
Construction & engineering: 1.3% | |||||||||||
EMCOR Group, Inc. | 20,559 | 1,227,167 | |||||||||
Diversified consumer services: 5.5% | |||||||||||
Adtalem Global Education, Inc.* | 30,542 | 1,445,248 | |||||||||
Chegg, Inc.* | 85,988 | 2,443,779 | |||||||||
Grand Canyon Education, Inc.* | 14,981 | 1,440,273 | |||||||||
5,329,300 | |||||||||||
Electrical equipment: 2.6% | |||||||||||
Generac Holdings, Inc.* | 29,089 | 1,445,723 | |||||||||
Regal Beloit Corp. | 14,714 | 1,030,716 | |||||||||
2,476,439 | |||||||||||
Energy equipment & services: 0.3% | |||||||||||
Patterson-UTI Energy, Inc. | 23,787 | 246,195 | |||||||||
Equity real estate investment trusts: 2.4% | |||||||||||
QTS Realty Trust, Inc., Class A | 36,053 | 1,335,764 | |||||||||
Ryman Hospitality Properties, Inc. | 15,007 | 1,000,817 | |||||||||
2,336,581 |
Number of shares | Value | ||||||||||
Food & staples retailing: 1.6% | |||||||||||
Performance Food Group Co.* | 47,997 | $ | 1,548,863 | ||||||||
Health care equipment & supplies: 6.3% | |||||||||||
Inogen, Inc.* | 7,593 | 942,823 | |||||||||
Insulet Corp.*,1 | 7,434 | 589,665 | |||||||||
Novocure Ltd.*,1 | 40,139 | 1,343,854 | |||||||||
Nuvectra Corp.* | 54,186 | 885,399 | |||||||||
Sientra, Inc.*,1 | 74,513 | 947,060 | |||||||||
Tactile Systems Technology, Inc.*,1 | 29,077 | 1,324,457 | |||||||||
6,033,258 | |||||||||||
Health care providers & services: 1.3% | |||||||||||
LHC Group, Inc.* | 13,196 | 1,238,840 | |||||||||
Health care technology: 5.6% | |||||||||||
Evolent Health, Inc., Class A* | 75,246 | 1,501,158 | |||||||||
Tabula Rasa HealthCare, Inc.* | 19,598 | 1,249,568 | |||||||||
Teladoc Health, Inc.*,1 | 25,139 | 1,246,140 | |||||||||
Vocera Communications, Inc.*,1 | 34,459 | 1,355,962 | |||||||||
5,352,828 | |||||||||||
Hotels, restaurants & leisure: 5.7% | |||||||||||
Dave & Buster's Entertainment, Inc. | 13,431 | 598,485 | |||||||||
Del Taco Restaurants, Inc.* | 67,413 | 673,456 | |||||||||
Planet Fitness, Inc., Class A* | 34,847 | 1,868,496 | |||||||||
Shake Shack, Inc., Class A* | 24,382 | 1,107,430 | |||||||||
Wendy's Co./The | 79,296 | 1,237,811 | |||||||||
5,485,678 | |||||||||||
Household durables: 2.6% | |||||||||||
Century Communities, Inc.* | 43,699 | 754,245 | |||||||||
Roku, Inc.*,1 | 32,841 | 1,006,248 | |||||||||
Sonos, Inc.* | 73,663 | 723,371 | |||||||||
2,483,864 | |||||||||||
IT services: 3.4% | |||||||||||
Twilio, Inc., Class A*,1 | 13,971 | 1,247,610 | |||||||||
Wix.com Ltd.*,1 | 22,802 | 2,059,933 | |||||||||
3,307,543 | |||||||||||
Life sciences tools & services: 0.6% | |||||||||||
Charles River Laboratories International, Inc.* | 5,337 | 604,042 | |||||||||
Machinery: 6.1% | |||||||||||
Altra Industrial Motion Corp. | 43,686 | 1,098,703 | |||||||||
Chart Industries, Inc.* | 22,585 | 1,468,703 | |||||||||
Kadant, Inc. | 14,526 | 1,183,288 | |||||||||
Kennametal, Inc. | 30,716 | 1,022,228 | |||||||||
Woodward, Inc. | 14,463 | 1,074,456 | |||||||||
5,847,378 | |||||||||||
Multiline retail: 1.5% | |||||||||||
Ollie's Bargain Outlet Holdings, Inc.* | 21,792 | 1,449,386 | |||||||||
Oil, gas & consumable fuels: 1.2% | |||||||||||
Callon Petroleum Co.*,1 | 51,212 | 332,366 | |||||||||
Matador Resources Co.*,1 | 49,960 | 775,879 | |||||||||
1,108,245 |
60
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Paper & forest products: 1.1% | |||||||||||
Boise Cascade Co. | 43,088 | $ | 1,027,649 | ||||||||
Pharmaceuticals: 3.6% | |||||||||||
Aerie Pharmaceuticals, Inc.* | 10,454 | 377,389 | |||||||||
Amphastar Pharmaceuticals, Inc.* | 35,270 | 701,873 | |||||||||
Collegium Pharmaceutical, Inc.*,1 | 36,585 | 628,165 | |||||||||
Cymabay Therapeutics, Inc.* | 61,583 | 484,658 | |||||||||
Supernus Pharmaceuticals, Inc.* | 16,968 | 563,677 | |||||||||
WaVe Life Sciences Ltd.*,1 | 16,739 | 703,708 | |||||||||
3,459,470 | |||||||||||
Professional services: 1.9% | |||||||||||
ASGN, Inc.* | 21,477 | 1,170,497 | |||||||||
Upwork, Inc.*,1 | 9,300 | 168,423 | |||||||||
WageWorks, Inc.* | 17,396 | 472,475 | |||||||||
1,811,395 | |||||||||||
Road & rail: 1.1% | |||||||||||
Werner Enterprises, Inc. | 36,933 | 1,091,001 | |||||||||
Semiconductors & semiconductor equipment: 5.4% | |||||||||||
MaxLinear, Inc.* | 51,724 | 910,342 | |||||||||
Monolithic Power Systems, Inc. | 9,546 | 1,109,723 | |||||||||
Semtech Corp.* | 30,967 | 1,420,456 | |||||||||
Universal Display Corp.1 | 18,907 | 1,769,128 | |||||||||
5,209,649 | |||||||||||
Software: 12.7% | |||||||||||
8x8, Inc.* | 73,033 | 1,317,515 | |||||||||
Alteryx Inc., Class A*,1 | 36,725 | 2,184,036 | |||||||||
ForeScout Technologies, Inc.* | 45,149 | 1,173,423 | |||||||||
Mimecast Ltd.* | 32,887 | 1,105,990 | |||||||||
Paycom Software, Inc.*,1 | 8,358 | 1,023,437 | |||||||||
Proofpoint, Inc.* | 15,573 | 1,305,173 | |||||||||
SailPoint Technologies Holding, Inc.* | 55,533 | 1,304,470 | |||||||||
Tenable Holdings, Inc.* | 26,653 | 591,430 | |||||||||
Upland Software, Inc.* | 45,980 | 1,249,736 | |||||||||
Varonis Systems, Inc.* | 19,364 | 1,024,356 | |||||||||
12,279,566 |
Number of shares | Value | ||||||||||
Specialty retail: 3.5% | |||||||||||
American Eagle Outfitters, Inc. | 63,273 | $ | 1,223,067 | ||||||||
Children's Place, Inc./The | 9,059 | 816,125 | |||||||||
Dick's Sporting Goods, Inc.1 | 43,234 | 1,348,901 | |||||||||
3,388,093 | |||||||||||
Technology hardware, storage & peripherals: 0.5% | |||||||||||
USA Technologies, Inc.* | 122,355 | 475,961 | |||||||||
Textiles, apparel & luxury goods: 1.3% | |||||||||||
Steven Madden Ltd. | 42,544 | 1,287,381 | |||||||||
Thrifts & mortgage finance: 1.0% | |||||||||||
Essent Group Ltd.* | 29,350 | 1,003,183 | |||||||||
Total common stocks (cost $91,064,842) | 95,413,876 | ||||||||||
Short-term investment: 2.5% | |||||||||||
Investment company: 2.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $2,422,346) | 2,422,346 | 2,422,346 | |||||||||
Investment of cash collateral from securities loaned: 13.0% | |||||||||||
Money market fund: 13.0% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $12,556,432) | 12,556,432 | 12,556,432 | |||||||||
Total investments:114.5% (cost $106,043,620) | 110,392,654 | ||||||||||
Liabilities in excess of other assets: (14.5)% | (14,003,796 | ) | |||||||||
Net assets: 100.0% | $ | 96,388,858 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
61
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2018 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 95,413,876 | $ | — | $ | — | $ | 95,413,876 | |||||||||||
Short-term investment | — | 2,422,346 | — | 2,422,346 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 12,556,432 | — | 12,556,432 | |||||||||||||||
Total | $ | 95,413,876 | $ | 14,978,778 | $ | — | $ | 110,392,654 |
At December 31, 2018, 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 the period end.
See accompanying notes to financial statements.
62
UBS U.S. Sustainable Equity Fund
Portfolio performance
For the six months ended December 31, 2018, Class A shares of UBS U.S. Sustainable Equity Fund (the "Fund") returned -13.07% (Class A shares returned -17.84% after the deduction of the maximum sales charge), while Class P shares returned -12.95%. The Fund's benchmark, the S&P 500 Index (the "Index"), returned -6.85% over the same time period. (Class P shares have lower expenses than the other share class in the Fund. Returns for all share classes over various time periods are shown on page 66; 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 year 2018 saw strong earnings growth and dramatic contraction of price-earnings multiples in the U.S. equity market. Multiples contract when the market believes earnings growth will falter or slow. With the U.S. economy at very strong levels, there is concern that margins may have peaked and that a recession is around the corner. We are not in the recession camp at this time. We believe the U.S. economy will remain strong in 2019. That said, with increasing wages and tariff uncertainty, it is wise to be cautious on margins. Against this backdrop, the U.S. stock market looks very attractive to us today, and we are heartened by the spread in valuation opportunities both within and across sectors.
During times when emotions such as fear or greed dominate the market, our disciplined approach is most challenged. Today, fear is the underlying theme. We believe that adherence to our discipline will generate strong performance over time. We do not know when the fear level will drop, but we do know that prices tend to move to fair value over time. Today, we are presented with and are taking advantage of tremendous price/value opportunities.
We appreciate your continued support of our team and process, which we believe will be rewarded in 2019.
Portfolio performance summary1
What worked:
• Several stock selection decisions contributed positively to Fund performance.
• Walgreens was the largest positive contributor to relative returns during the six months ended December 31, 2018. We sold the stock at the end of November 2018 after it reached our estimate of intrinsic value.
• Stock selection in the healthcare sector was positive for relative returns.
• Johnson & Johnson is a diversified healthcare company. It is only trading in line with the broader S&P 500 Index, despite a balance sheet that is significantly light on debt. At current levels, we believe investors underappreciate the durability of growth for JNJ's key immunology/oncology franchises, as well as the potential to drive further earnings growth through targeted business development.
• UnitedHealth delivered a solid year of growth in 2018. Membership increased, driven by the company's industry-leading Medicare franchise. In addition, the company's Optum subsidiary reported its seventh straight year of earnings growth in excess of 20%. Looking forward, we believe UnitedHealth is uniquely positioned to benefit from the increased consumerization of healthcare, with top positions across five key growth markets.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
63
UBS U.S. Sustainable Equity Fund
• The Fund benefited from certain other stock selection decisions during the six-month period.
• The continued decision not to hold Apple made a positive contribution to Fund performance relative to the benchmark. The stock traded down due to investor concerns that the most recently introduced generation of iPhones was not selling as well as expected. We believe better value lies in holding companies within Apple's supply chain.
• Walt Disney's share price increased during the period as the company's earnings strength demonstrated Disney's ability to execute. Media networks and studio revenues were particularly strong. Additionally, in September 2018, Disney agreed to sell its Fox stake in Sky to Comcast. This gives Disney more flexibility to invest in original or acquired content in order to make its offerings more compelling.
What didn't work:
• Certain information technology stocks made a negative contribution to performance during the reporting period.
• Western Digital was the largest detractor during the six-month period. The company's underperformance was driven by weakening near-term NAND memory pricing and Western Digital's decision to cut wafer starts and capital spending in October 2018. While these moves will be headwinds to near-term revenue, we believe it is the right strategy to bring supply and demand back into balance for the industry. We are encouraged by signs that other industry participants are following Western Digital's lead. We continue to hold the stock, as we believe the memory industry will be more profitable in the future, and we feel confident about Western Digital's future.
• Micron Technology's underperformance was similarly driven by concerns regarding near-term NAND and DRAM memory pricing. We are, however, encouraged by Micron's decision to cut capital spending to bring supply of both product types in line with industry demand. Again, we believe the future of the memory industry will be more profitable than the past, and continue to allocate a large portfolio weight to semiconductor memory stocks including Western Digital and Micron Technology.
• Stock selection in the consumer discretionary sector hindered relative returns. While many discretionary companies are facing general secular headwinds of disruption, we believe in these names and continue to hold them in the Fund.
• Aptiv's share price declined mainly due to macroeconomic headwinds, including uncertainty over China, volatile foreign exchange rates and rising commodity costs. We believe that Aptiv will benefit from a high level of spending on active safety, infotainment, and electrification. We expect this to put Aptiv in a position where it can compound earnings at a rate well above that of its peers. We continue to hold this stock
• Newell Brands detracted from relative returns during the six-month period. The fourth quarter of 2018 was a tough period for consumer discretionary stocks in general and for retail in particular. Most retailers' sales were down from the prior year. In addition, retail had to cope with investor fears of a slowdown, and tariff talk that may impact margins. We continue to hold this stock
• Other stock selection decisions detracted from relative performance during the six months.
• The stock price of Ironwood Pharmaceuticals declined after Allergan offered cautious commentary on future growth prospects for Linzess, the leading irritable bowel syndrome (IBS) drug which the two companies co-promote in the U.S. We believe that the move in Ironwood's price was an overreaction, and we continue to hold the stock.
64
UBS U.S. Sustainable Equity Fund
Portfolio highlights
• AGCO engages in the manufacture and trade of agricultural equipment and accessories. In our view, the company can more than double earnings over the next five years through a combination of market growth, market share initiatives, operating leverage, improving mix and efficiency measures. In particular, having grown through more than 40 acquisitions, AGCO is now introducing a platform strategy across its different products which we believe will enable it to extract significant economies of scale.
• American Express provides credit card, financial and global travel services. Our positive view on American Express is based on our belief that the company will maintain its return on equity over the medium term despite the increased competition in its core credit card issuance business. The credit profile of American Express cardholders tends to be more stable than that of most competitors. This gives us reason to believe the company is relatively better positioned to maintain its current credit quality metrics.
• Jabil is the premier manufacturing services company in the U.S. It has consistently delivered return on invested capital above its weighted average cost of capital. Jabil is a strategic partner of Apple, its largest customer. While this lack of diversification is sometimes viewed as a weakness by investors, we believe it will prove to be a source of strength over time. We expect Jabil to continue to diversify its exposure across Apple's product lines in order to minimize single product success/failure risk. Jabil's strength in diversified manufacturing services and its shift toward a higher margin business give us confidence in forecasting expanding margins for the company.
• Royal Caribbean is a cruise vacation company. Due to the high fixed cost nature of the business, cruise companies attempt to fill every berth at the expense of yields, making this a price-taker market. This has led the industry to be supply-driven, as the competition is not just other ships but all land-based travel options. Cruising tends to be a better value than land-based options, and increased supply normally leads to faster revenue and earnings growth. We believe the company will continue to benefit from favorable demographic tailwinds, including an aging population that will spend more on cruising, a shift in consumer spending from stuff to experiences, and the opening of the Chinese market.
• Prudential Financial is a provider of financial services and products. The company is growing earnings at a high compound annual growth rate. Prudential has a unique franchise in Asia where it benefits from the secular trend of an emerging middle class and an increased need for insurance. In the U.S., the company manages to sustain a high growth profile thanks to disciplined pricing and innovative products.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
65
UBS U.S. Sustainable Equity Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | (13.07 | )% | (9.28 | )% | 6.31 | % | 11.57 | % | |||||||||||
Class P2 | (12.95 | ) | (9.04 | ) | 6.57 | 11.86 | |||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (17.84 | )% | (14.26 | )% | 5.11 | % | 10.94 | % | |||||||||||
S&P 500 Index3 | (6.85 | ) | (4.38 | ) | 8.49 | 13.12 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectuses, supplemented from time to time, were as follows: Class A—2.07% and 0.95%; Class P—1.79% and 0.70%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 0.95% for Class A shares and 0.70% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The S&P 500 Index is an unmanaged, weighted index comprising 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.
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 www.ubs.com/us-mutualfundperformance.
66
UBS U.S. Sustainable Equity Fund
Portfolio statistics and industry diversification—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
UnitedHealth Group, Inc. | 4.9 | % | |||||
AGCO Corp. | 4.8 | ||||||
Johnson & Johnson | 4.8 | ||||||
Amazon.com, Inc. | 4.8 | ||||||
American Express Co. | 4.8 | ||||||
Walt Disney Co./The | 4.3 | ||||||
Jabil, Inc. | 4.1 | ||||||
Royal Caribbean Cruises Ltd. | 4.0 | ||||||
Prudential Financial, Inc. | 4.0 | ||||||
US Bancorp | 4.0 | ||||||
Total | 44.5 | % |
Issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 91.1 | % | |||||
Liberia | 4.0 | ||||||
Ireland | 3.6 | ||||||
Jersey | 2.4 | ||||||
Total | 101.1 | % |
Common stocks | Percentage of net assets | ||||||
Airlines | 3.9 | % | |||||
Auto components | 2.4 | ||||||
Banks | 4.0 | ||||||
Biotechnology | 1.9 | ||||||
Capital markets | 2.9 | ||||||
Chemicals | 2.6 | ||||||
Consumer finance | 4.8 | ||||||
Electronic equipment, instruments & components | 4.1 | ||||||
Entertainment | 4.3 | ||||||
Equity real estate investment trusts | 3.7 | ||||||
Health care providers & services | 4.9 | ||||||
Hotels, restaurants & leisure | 4.0 | ||||||
Household durables | 3.3 | ||||||
Insurance | 6.5 | ||||||
Interactive media & services | 3.2 | ||||||
Internet & direct marketing retail | 4.8 | ||||||
IT services | 3.3 | ||||||
Life sciences tools & services | 2.4 | ||||||
Machinery | 8.0 | ||||||
Pharmaceuticals | 8.4 | ||||||
Semiconductors & semiconductor equipment | 6.6 | ||||||
Software | 3.7 | ||||||
Specialty retail | 2.5 | ||||||
Technology hardware, storage & peripherals | 2.7 | ||||||
Total common stocks | 98.9 | % | |||||
Short-term investment | 0.4 | ||||||
Investment of cash collateral from securities loaned | 1.8 | ||||||
Total investments | 101.1 | % | |||||
Liabilities in excess of other assets | (1.1 | ) | |||||
Net assets | 100.0 | % |
1 The Portfolio is actively managed and its composition will vary over time.
67
UBS U.S. Sustainable Equity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 98.9% | |||||||||||
Airlines: 3.9% | |||||||||||
Delta Air Lines, Inc. | 19,149 | $ | 955,535 | ||||||||
Auto components: 2.4% | |||||||||||
Aptiv PLC | 9,780 | 602,155 | |||||||||
Banks: 4.0% | |||||||||||
US Bancorp | 21,547 | 984,698 | |||||||||
Biotechnology: 1.9% | |||||||||||
Ironwood Pharmaceuticals, Inc.*,1 | 44,518 | 461,207 | |||||||||
Capital markets: 2.9% | |||||||||||
Ameriprise Financial, Inc. | 6,959 | 726,311 | |||||||||
Chemicals: 2.6% | |||||||||||
Ashland Global Holdings, Inc. | 8,923 | 633,176 | |||||||||
Consumer finance: 4.8% | |||||||||||
American Express Co. | 12,292 | 1,171,673 | |||||||||
Electronic equipment, instruments & components: 4.1% | |||||||||||
Jabil, Inc. | 40,791 | 1,011,209 | |||||||||
Entertainment: 4.3% | |||||||||||
Walt Disney Co./The | 9,589 | 1,051,434 | |||||||||
Equity real estate investment trusts: 3.7% | |||||||||||
Simon Property Group, Inc. | 5,473 | 919,409 | |||||||||
Health care providers & services: 4.9% | |||||||||||
UnitedHealth Group, Inc. | 4,830 | 1,203,250 | |||||||||
Hotels, restaurants & leisure: 4.0% | |||||||||||
Royal Caribbean Cruises Ltd. | 10,199 | 997,360 | |||||||||
Household durables: 3.3% | |||||||||||
Newell Brands, Inc.1 | 44,037 | 818,648 | |||||||||
Insurance: 6.5% | |||||||||||
Marsh & McLennan Cos., Inc. | 7,569 | 603,628 | |||||||||
Prudential Financial, Inc. | 12,172 | 992,626 | |||||||||
1,596,254 | |||||||||||
Interactive media & services: 3.2% | |||||||||||
Facebook, Inc., Class A* | 5,959 | 781,165 | |||||||||
Internet & direct marketing retail: 4.8% | |||||||||||
Amazon.com, Inc.* | 794 | 1,192,564 | |||||||||
IT services: 3.3% | |||||||||||
Visa, Inc., Class A | 6,115 | 806,813 |
Number of shares | Value | ||||||||||
Life sciences tools & services: 2.4% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 2,521 | $ | 585,427 | ||||||||
Machinery: 8.0% | |||||||||||
AGCO Corp. | 21,462 | 1,194,789 | |||||||||
Gardner Denver Holdings, Inc.* | 38,344 | 784,135 | |||||||||
1,978,924 | |||||||||||
Pharmaceuticals: 8.4% | |||||||||||
Allergan PLC | 6,648 | 888,571 | |||||||||
Johnson & Johnson | 9,255 | 1,194,358 | |||||||||
2,082,929 | |||||||||||
Semiconductors & semiconductor equipment: 6.6% | |||||||||||
Lam Research Corp. | 5,634 | 767,182 | |||||||||
Micron Technology, Inc.* | 26,819 | 850,967 | |||||||||
1,618,149 | |||||||||||
Software: 3.7% | |||||||||||
salesforce.com, Inc.* | 6,628 | 907,837 | |||||||||
Specialty retail: 2.5% | |||||||||||
TJX Cos., Inc./The | 13,882 | 621,081 | |||||||||
Technology hardware, storage & peripherals: 2.7% | |||||||||||
Western Digital Corp. | 17,829 | 659,138 | |||||||||
Total common stocks (cost $28,594,660) | 24,366,346 | ||||||||||
Short-term investment: 0.4% | |||||||||||
Investment company: 0.4% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $88,701) | 88,701 | 88,701 | |||||||||
Investment of cash collateral from securities loaned: 1.8% | |||||||||||
Money market fund: 1.8% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $456,310) | 456,310 | 456,310 | |||||||||
Total investments: 101.1% (cost $29,139,671) | 24,911,357 | ||||||||||
Liabilities in excess of other assets: (1.1)% | (279,177 | ) | |||||||||
Net assets: 100.0% | $ | 24,632,180 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
68
UBS U.S. Sustainable Equity Fund
Portfolio of investments
December 31, 2018 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 24,366,346 | $ | — | $ | — | $ | 24,366,346 | |||||||||||
Short-term investment | — | 88,701 | — | 88,701 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 456,310 | — | 456,310 | |||||||||||||||
Total | $ | 24,366,346 | $ | 545,011 | $ | — | $ | 24,911,357 |
At December 31, 2018, 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 the period end.
See accompanying notes to financial statements.
69
UBS Municipal Bond Fund
Portfolio performance
For the six months ended December 31, 2018, Class A shares of UBS Municipal Bond Fund (the "Fund") returned 1.68% (Class A shares returned -0.59% after the deduction of the maximum sales charge), while Class P shares returned 1.81%. For comparison purposes, the Fund's benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), returned 1.53%, and the Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index returned 1.80% over the same time period. (Class P shares have lower expenses than the other share class in the Fund. Returns for all share classes over various time periods are shown on page 71; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder could 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 during the reporting period, which was primarily due to positioning on the municipal yield curve.
Portfolio performance summary1
What worked
• Yield curve positioning was the largest contributor to performance. In particular, an overweight to the seven year portion of the yield curve (6-8 year maturities) was rewarded. Having no allocation to the long end of the municipal yield curve (22+ years) was also beneficial for returns as they lagged the benchmark. (The yield curve plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.)
• Security selection in the seven year portion of the yield curve was additive for returns.
• Sector allocation, overall, contributed to performance. Underweight to the hospital and industrial development revenue/pollution control revenue sectors, along with an overweight to the leasing sector, added the most value, relative to the benchmark.
What didn't work
• Duration positioning detracted from performance. Having a shorter duration than that of the benchmark was a headwind for results as yields declined across the curve amid a flight to quality.
• An overweight to the power sector was a modest drag on returns during the reporting period.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 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.
70
UBS Municipal Bond Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 1.68 | % | 0.73 | % | 2.03 | % | |||||||||
Class P3 | 1.81 | 0.98 | 2.26 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | (0.59 | )% | (1.58 | )% | 1.47 | % | |||||||||
Bloomberg Barclays Municipal Bond Index4 | 1.53 | 1.28 | 2.70 | ||||||||||||
Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index5 | 1.80 | 1.22 | 2.40 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectuses were as follows: Class A—1.03% and 0.65%; Class P—0.79% 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 Asset Management (Americas) Inc., the Fund's investment advisor ("UBS 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 29, 2019, do not exceed 0.65% for Class A shares and 0.40% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. 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 AM (Americas)'s three year recoupment rights will survive."
1 Inception date of all shares of UBS Municipal Bond Fund and the indices is November 10, 2014.
2 Maximum sales charge for Class A shares is 2.25%. Class A shares bear ongoing 12b-1 service fees.
3 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Bloomberg Barclays Municipal Bond Index is an unmanaged index designed to measure the total return of the US dollar denominated tax exempt bond market. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index is an unmanaged sub-index of the Barclays Municipal Managed Money Index, which is a rules-based, market-value-weighted index designed to track the performance of municipal securities issued by state and local municipalities whose interest is exempt from federal income tax and the federal alternative minimum tax. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder could 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 www.ubs.com/us-mutualfundperformance.
71
UBS Municipal Bond Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Summary of municipal securities by state
Percentage of net assets | |||||||
Long-term municipal bonds | |||||||
California | 1.8 | % | |||||
Colorado | 0.8 | ||||||
Connecticut | 6.9 | ||||||
Florida | 12.0 | ||||||
Georgia | 1.6 | ||||||
Illinois | 13.5 | ||||||
Maryland | 2.4 | ||||||
Massachusetts | 2.9 | ||||||
Michigan | 1.1 | ||||||
Mississippi | 1.0 | ||||||
Nebraska | 1.4 | ||||||
Nevada | 2.1 | ||||||
New Jersey | 3.6 | ||||||
New York | 9.3 | ||||||
Ohio | 1.1 | ||||||
Pennsylvania | 19.1 | ||||||
Rhode Island | 1.0 | ||||||
South Carolina | 2.3 | ||||||
Texas | 15.9 | ||||||
Wisconsin | 1.2 | ||||||
Total long-term municipal bonds | 101.0 | % | |||||
Short-term investments | 0.1 | ||||||
Total investments | 101.1 | % | |||||
Liabilities in excess of other assets | (1.1 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
72
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount | Value | ||||||||||
Long-term municipal bonds: 101.0% | |||||||||||
California: 1.8% | |||||||||||
Golden State Tobacco Securitization Corp., Enhanced Tobacco Settlement, Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/32 | $ | 1,000,000 | $ | 1,128,270 | |||||||
Series A, 5.000%, due 06/01/33 | 650,000 | 730,938 | |||||||||
1,859,208 | |||||||||||
Colorado: 0.8% | |||||||||||
City and County of Denver, COP, Series A3, 1.700%, due 12/01/311 | 800,000 | 800,000 | |||||||||
Connecticut: 6.9% | |||||||||||
State of Connecticut, GO Bonds, Series A, 5.000%, due 04/15/25 | 1,250,000 | 1,408,150 | |||||||||
Series B, 5.000%, due 04/15/25 | 2,000,000 | 2,253,040 | |||||||||
Series C, 5.000%, due 06/15/23 | 1,000,000 | 1,098,283 | |||||||||
Series F, 5.000%, due 09/15/25 | 2,140,000 | 2,421,517 | |||||||||
7,180,990 | |||||||||||
Florida: 12.0% | |||||||||||
Central Florida Expressway Authority Revenue Bonds, Series B, 5.000%, due 07/01/34 | 1,000,000 | 1,129,050 | |||||||||
Miami-Dade County Revenue Bonds, 5.000%, due 10/01/26 | 1,000,000 | 1,188,160 | |||||||||
School Board of Volusia County, Certificates Refunding, Master Lease Program, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,118,880 | |||||||||
School District of St. Lucie County, Sales Tax Revenue Bonds, AGM, 5.000%, due 10/01/26 | 1,020,000 | 1,178,008 | |||||||||
South Florida Water Management District, COP, 5.000%, due 10/01/34 | 1,000,000 | 1,132,100 | |||||||||
The School Board of Broward County, COP, Series B, 5.000%, due 07/01/30 | 2,000,000 | 2,268,520 | |||||||||
The School Board of Miami-Dade County, COP, Series A, 5.000%, due 05/01/31 | 1,000,000 | 1,122,410 | |||||||||
Series D, 5.000%, due 02/01/23 | 1,000,000 | 1,109,860 | |||||||||
Series D, 5.000%, due 11/01/31 | 1,000,000 | 1,122,070 | |||||||||
The School Board of Palm Beach County, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,133,880 | |||||||||
12,502,938 |
Face amount | Value | ||||||||||
Georgia: 1.6% | |||||||||||
State of Georgia, GO Bonds, Series F, 5.000%, due 07/01/26 | $ | 1,385,000 | $ | 1,658,995 | |||||||
Illinois: 13.5% | |||||||||||
City of Chicago O'Hare International Airport, Senior Lien Revenue Bonds, Series B, 5.000%, due 01/01/30 | 1,000,000 | 1,117,700 | |||||||||
Series B, 5.000%, due 01/01/31 | 1,050,000 | 1,168,083 | |||||||||
County of Cook, GO Bonds, Series A, 5.000%, due 11/15/20 | 1,830,000 | 1,918,700 | |||||||||
Series A, 5.000%, due 11/15/26 | 1,500,000 | 1,698,675 | |||||||||
Illinois Finance Authority, Clean Water Initiative Revolving Fund Revenue Bonds, 5.000%, due 01/01/24 | 1,920,000 | 2,184,652 | |||||||||
Illinois State Toll Highway Authority Revenue Bonds, Series B, 5.000%, due 01/01/27 | 1,000,000 | 1,169,150 | |||||||||
Railsplitter Tobacco Settlement Authority Revenue Bonds, 5.000%, due 06/01/25 | 1,235,000 | 1,400,379 | |||||||||
State of Illinois, GO Bonds, Series B, 5.000%, due 10/01/21 | 1,000,000 | 1,044,210 | |||||||||
State of Illinois, Sales Tax Revenue Bonds, 5.000%, due 06/15/20 | 1,190,000 | 1,228,818 | |||||||||
5.000%, due 06/15/22 | 1,105,000 | 1,175,035 | |||||||||
14,105,402 | |||||||||||
Maryland: 2.4% | |||||||||||
State of Maryland, GO Bonds, 5.000%, due 06/01/26 | 2,180,000 | 2,498,127 | |||||||||
Massachusetts: 2.9% | |||||||||||
The Commonwealth of Massachusetts, Consolidated Loan of 2016, GO Bonds, Series A, 5.000%, due 03/01/34 | 1,125,000 | 1,254,004 | |||||||||
The Commonwealth of Massachusetts, Consolidated Loan, GO Bonds, Series D, 5.000%, due 07/01/26 | 1,500,000 | 1,789,875 | |||||||||
3,043,879 | |||||||||||
Michigan: 1.1% | |||||||||||
Michigan Finance Authority, Trinity Health Credit Group, Hospital Revenue Bonds, Series A, 5.000%, due 12/01/35 | 1,000,000 | 1,139,400 |
73
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount | Value | ||||||||||
Long-term municipal bonds—(Continued) | |||||||||||
Mississippi: 1.0% | |||||||||||
Mississippi Business Finance Corp., Gulf Opportunity Zone, Industrial Development (Chevron USA, Inc. Project), Revenue Bonds, Series A, 1.610%, due 12/01/301 | $ | 1,000,000 | $ | 1,000,000 | |||||||
Series C, 1.610%, due 12/01/301 | 100,000 | 100,000 | |||||||||
1,100,000 | |||||||||||
Nebraska: 1.4% | |||||||||||
Douglas County Hospital Authority No. 2 Revenue Bonds, 5.000%, due 05/15/25 | 1,250,000 | 1,442,388 | |||||||||
Nevada: 2.1% | |||||||||||
Clark County, Las Vegas-McCarran International Airport Revenue Bonds, Series C, 5.000%, due 07/01/27 | 1,815,000 | 2,157,273 | |||||||||
New Jersey: 3.6% | |||||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series AA, 5.000%, due 06/15/27 | 1,500,000 | 1,618,245 | |||||||||
New Jersey Turnpike Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 1,000,000 | 1,133,640 | |||||||||
Series E, 5.000%, due 01/01/34 | 860,000 | 956,716 | |||||||||
3,708,601 | |||||||||||
New York: 9.3% | |||||||||||
City of New York, GO Bonds, Subseries F-1, 5.000%, due 04/01/34 | 1,100,000 | 1,283,183 | |||||||||
New York City Municipal Water Finance Authority, Water and Sewer System, Second General Resolution Fiscal 2017 Revenue Bonds, Series EE, 5.000%, due 06/15/33 | 1,000,000 | 1,162,060 | |||||||||
New York City Transitional Finance Authority Future Tax Secured Revenue Bonds, Subseries A1, 5.000%, due 08/01/33 | 1,230,000 | 1,450,268 | |||||||||
Subseries C-2, 5.000%, due 05/01/35 | 3,000,000 | 3,498,180 | |||||||||
New York City Transitional Finance Authority Revenue Bonds, Subseries B-1, 5.000%, due 08/01/33 | 1,000,000 | 1,121,640 | |||||||||
Subseries E-1, 5.000%, due 02/01/32 | 1,000,000 | 1,141,720 | |||||||||
9,657,051 |
Face amount | Value | ||||||||||
Ohio: 1.1% | |||||||||||
State of Ohio, Cleveland Clinic Health System Revenue Bonds, Series A, 5.000%, due 01/01/32 | $ | 1,000,000 | $ | 1,172,990 | |||||||
Pennsylvania: 19.1% | |||||||||||
City of Philadelphia, GO Bonds, 5.000%, due 08/01/20 | 1,590,000 | 1,660,914 | |||||||||
Series A, 5.000%, due 08/01/22 | 1,000,000 | 1,094,010 | |||||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment Revenue Bonds, 5.000%, due 06/01/24 | 1,625,000 | 1,822,389 | |||||||||
Commonwealth of Pennsylvania, GO Bonds, 5.000%, due 08/15/21 | 1,700,000 | 1,829,353 | |||||||||
5.000%, due 01/01/24 | 2,000,000 | 2,254,420 | |||||||||
5.000%, due 09/15/25 | 1,500,000 | 1,736,985 | |||||||||
Pennsylvania Turnpike Commission Revenue Bonds, 5.000%, due 12/01/252 | 2,170,000 | 2,432,809 | |||||||||
5.000%, due 12/01/28 | 1,000,000 | 1,146,920 | |||||||||
5.000%, due 12/01/30 | 1,750,000 | 1,982,347 | |||||||||
Series A-1, 5.000%, due 12/01/24 | 1,500,000 | 1,719,930 | |||||||||
Series A-2, 5.000%, due 12/01/28 | 1,000,000 | 1,163,840 | |||||||||
Pennsylvania Turnpike Commission, Oil Franchise Tax Revenue Bonds, Series A, 5.000%, due 12/01/22 | 1,000,000 | 1,107,930 | |||||||||
19,951,847 | |||||||||||
Rhode Island: 1.0% | |||||||||||
Tobacco Settlement Financing Corp., Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/21 | 1,000,000 | 1,061,740 | |||||||||
South Carolina: 2.3% | |||||||||||
South Carolina Public Service Authority (Escrowed to Maturity), Revenue Bonds Series B, 5.000%, due 12/01/20 | 555,000 | 587,129 | |||||||||
South Carolina Public Service Authority Revenue Bonds, Series A, 5.000%, due 12/01/26 | 1,010,000 | 1,129,493 | |||||||||
South Carolina Public Service Authority-Unrefunded Balance, Revenue Bonds Series B, 5.000%, due 12/01/20 | 690,000 | 724,886 | |||||||||
2,441,508 | |||||||||||
Texas: 15.9% | |||||||||||
Austin Community College District Public Facility Corp., Round Rock Campus Revenue Bonds, 5.000%, due 08/01/24 | 1,000,000 | 1,137,200 |
74
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount | Value | ||||||||||
Long-term municipal bonds—(Concluded) | |||||||||||
Texas—(Concluded) | |||||||||||
Garland Independent School District, GO Bonds, PSF-GTD, 5.000%, due 02/15/25 | $ | 1,200,000 | $ | 1,393,512 | |||||||
Houston Independent School District, GO Bonds, PSF-GTD, 5.000%, due 02/15/26 | 2,000,000 | 2,359,780 | |||||||||
North Texas Tollway Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 3,030,000 | 3,392,661 | |||||||||
Plano Independent School District, GO Bonds, PSF-GTD, 5.000%, due 02/15/25 | 2,000,000 | 2,320,040 | |||||||||
State of Texas Transportation Commission Highway Fund First Tier Revenue Bonds, Series A, 5.000%, due 10/01/25 | 1,000,000 | 1,175,260 | |||||||||
Texas A&M University, Financing System Revenue Bonds, Series C, 5.000%, due 05/15/26 | 2,275,000 | 2,700,857 | |||||||||
Series E, 5.000%, due 05/15/25 | 1,750,000 | 2,045,242 | |||||||||
16,524,552 |
Face amount | Value | ||||||||||
Wisconsin: 1.2% | |||||||||||
State of Wisconsin Prerefunded, GO Bonds, Series A, 5.000%, due 05/01/243 | $ | 1,165,000 | $ | 1,280,102 | |||||||
Total long-term municipal bonds (cost $105,634,557) | 105,286,991 | ||||||||||
Number of shares | |||||||||||
Short-term investment: 0.1% | |||||||||||
Investment company: 0.1% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $68,793) | 68,793 | 68,793 | |||||||||
Total investments:101.1% (cost $105,703,350) | 105,355,784 | ||||||||||
Liabilities in excess of other assets: (1.1)% | (1,161,088 | ) | |||||||||
Net assets: 100.0% | $ | 104,194,696 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Long-term municipal bonds | $ | — | $ | 105,286,991 | $ | — | $ | 105,286,991 | |||||||||||
Short-term investment | — | 68,793 | — | 68,793 | |||||||||||||||
Total | $ | — | $ | 105,355,784 | $ | — | $ | 105,355,784 |
At December 31, 2018 there were no transfers between Level 1 and Level 2.
Portfolio footnote
1 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
75
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
2 This security is considered illiquid and restricted. At period end, the value of illiquid and restricted securities was $2,432,809, representing 2.3% of the Fund's net assets. The table below provides further information:
Illiquid & restricted security | Acquisition date | Acquisition cost | Acquisition cost as a percentage of net assets | Value at 12/31/18 | Value as a percentage of net assets | ||||||||||||||||||
Pennsylvania Turnpike Commission Revenue Bonds, 5.000%, due 12/01/25 | 04/03/17 | $ | 2,396,505 | 2.3 | % | $ | 2,432,809 | 2.3 | % |
3 Security is prerefunded or escrowed to maturity. The maturity date shown is the earlier of the reset date or the date of the prerefunded call.
See accompanying notes to financial statements.
76
UBS Sustainable Development Bank Bond Fund
Portfolio Performance:
For the period from its inception on October 24, 2018 through December 31, 2018 (the "reporting period"), Class P shares of UBS Sustainable Development Bank Bond Fund (the "Fund") returned 2.13%. For comparison purposes, the Bloomberg Barclays U.S. Treasury Index (the "Index") returned 2.87%. The Fund's secondary benchmark, the Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index, retuned 2.66% during the reporting period. Please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on the redemption of Fund shares, while index returns do not reflect the deduction of fees and expenses.
Fund Overview
The Fund seeks current income. Under normal circumstances, the Fund invests at least 80% of its net assets in bonds and/or instruments that provide exposure to bonds issued by development banks. Development banks are financial organizations formed by government entities to promote economic and social development.
The development bank bond market typically follows high-quality US government bonds. As each of the global Multilateral Development Banks ("MDB") are supranational entities backed by multiple member governments, MDBs historically have a similar credit profile to major sovereign issuers, such as the US government. Consequently, MDB bonds have generally delivered comparable returns to US Treasuries.
Market Review
In 2018, the acceleration in global economic growth moderated as financial conditions tightened and trade tensions impacted business sentiment and overall demand. Regional differences remained pronounced, with the relative strength of the US economy and the continued weakness in Chinese demand most noteworthy. Meanwhile, developed world consumption growth and investment remained healthy and was supported by robust labor markets and continued wage growth.
Against this backdrop, the Federal Reserve Board (Fed) delivered somewhat contradictory signals. Large movements in both equity and bond markets, led to interest in the outlook for monetary policy as the year ended. The Fed raised rates for a fourth time in December 2018 and its outlook was for two additional rate hikes in 2019. Fed chair Jerome Powell also reiterated the intention to reduce the Fed's balance sheet, which captured investors' attention. It was left to John Williams, chair of the New York Fed, to emphasise later that the equity market selloff and threat of a global slowdown were being factored into policy.
Driven by a healthy US economy, 10 year US Treasury yields reached a high of approximately 3.2% during the first part of the reporting period. The moderation of global growth, paired with a more dovish Fed, then led to a rally in US fixed income markets. 10 year US Treasury yields ended 2018 at approximately 2.7%.
77
UBS Sustainable Development Bank Bond Fund
Led by the US Treasury market, sustainable development bank (SDB) bonds also rallied modestly towards the year end. While other spread-products (like US investment-grade corporates) underperformed US Treasuries, SDB bonds performed closer to Treasuries. Driven by high demand for high quality bonds and a lack of supply, spread widening for SDB bonds was limited. Within the universe, liquid AAA-rated issuers like the International Bank for Reconstruction and Development and the Inter-American Development Bank slightly outperformed lower rated issuers in the AA rating space.
Portfolio Performance Summary:
The Fund is passively managed and seeks to minimize tracking error relative to its secondary benchmark (before fees and expenses), which is constructed from a blend of two market indexes designed to measure the performance of the US dollar-denominated multilateral development bank bond market. During the reporting period, the Fund's underperformance relative to its secondary benchmark was largely driven by transaction costs associated with the construction of the Fund's portfolio, along with fees and expenses. No derivatives were used in managing the Fund during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the period from its inception on October 24, 2018 through December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
78
UBS Sustainable Development Bank Bond Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
Inception1 | |||||||
Class P2 | 2.13 | % | |||||
Bloomberg Barclays U.S. Treasury Index3 | 2.87 | ||||||
Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index.4 | 2.66 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 23, 2018 prospectuses were as follows: Class P—0.63% and 0.25%. 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 Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 0.35% for Class A shares, 0.25% for Class P shares and 0.15% for Class P2 shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 AM (Americas)'s three year recoupment rights will survive.
1 Inception date of Class P of UBS Sustainable Development Bank Bond Fund is October 24, 2018.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The Bloomberg Barclays US Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index is a composite index, constructed from a blend of two market indexes designed to measure the performance of the US dollar denominated multilateral development bank bond market. Investors should note that indices do not reflect the deduction of fees and expenses.
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 www.ubs.com/us-mutualfundperformance.
79
UBS Sustainable Development Bank Bond Fund
Portfolio statistics and industry diversification—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
International Bank for Reconstruction & Development, 2.500% due 11/22/27 | 7.7 | % | |||||
Inter-American Development Bank, 3.125% due 09/18/28 | 5.9 | ||||||
International Bank for Reconstruction & Development, 2.500% due 11/25/24 | 5.7 | ||||||
Inter-American Development Bank, 2.375% due 07/07/27 | 5.1 | ||||||
International Development Association, 2.750% due 04/24/23 | 4.8 | ||||||
International Bank for Reconstruction & Development, 2.500% due 07/29/25 | 4.7 | ||||||
Inter-American Development Bank, 2.000% due 06/02/26 | 4.2 | ||||||
Inter-American Development Bank, 2.125% due 01/15/25 | 4.1 | ||||||
Council of Europe Development Bank, 1.625% due 03/16/21 | 3.7 | ||||||
Kreditanstalt fuer Wiederaufbau, 2.000% due 05/02/25 | 3.6 | ||||||
Total | 49.5 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 64.0 | % | |||||
France | 7.2 | ||||||
Philippines | 4.7 | ||||||
United Kingdom | 4.4 | ||||||
Ivory Coast | 4.4 | ||||||
Total | 84.7 | % |
Corporate notes | Percentage of net assets | ||||||
Supranationals | 98.4 | % | |||||
Short-term investment | 5.8 | ||||||
Total investments | 104.2 | % | |||||
Liabilities in excess of other assets | (4.2 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
80
UBS Sustainable Development Bank Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount | Value | ||||||||||
Corporate notes: 98.4% | |||||||||||
Supranationals: 98.4% | |||||||||||
African Development Bank 1.250%, due 07/26/21 | $ | 225,000 | $ | 217,459 | |||||||
1.875%, due 03/16/20 | 475,000 | 469,768 | |||||||||
Agence Francaise de Developpement 1.625%, due 01/21/201 | 350,000 | 345,824 | |||||||||
Series EMTN, 2.750%, due 03/22/211 | 200,000 | 199,750 | |||||||||
Asian Development Bank Series GMTN, 2.000%, due 01/22/25 | 275,000 | 263,689 | |||||||||
Series GMTN, 2.750%, due 01/19/28 | 165,000 | 163,153 | |||||||||
Series GMTN, 3.125%, due 09/26/28 | 300,000 | 306,694 | |||||||||
Corp. Andina de Fomento 2.125%, due 09/27/21 | 125,000 | 121,334 | |||||||||
4.375%, due 06/15/22 | 500,000 | 517,475 | |||||||||
Council of Europe Development Bank 1.625%, due 03/16/21 | 600,000 | 587,393 | |||||||||
European Bank for Reconstruction & Development Series GMTN, 2.125%, due 03/07/22 | 300,000 | 295,319 | |||||||||
Series GMTN, 2.750%, due 04/26/21 | 300,000 | 300,991 | |||||||||
Series GMTN, 2.750%, due 03/07/23 | 100,000 | 100,246 | |||||||||
European Investment Bank 1.875%, due 02/10/25 | 375,000 | 355,774 | |||||||||
3.250%, due 01/29/24 | 300,000 | 307,400 | |||||||||
IDB Trust Services Ltd. Series EMTN, 2.393%, due 04/12/221 | 200,000 | 195,308 | |||||||||
3.389%, due 09/26/231 | 400,000 | 402,276 | |||||||||
Inter-American Development Bank Series GMTN, 1.625%, due 05/12/20 | 375,000 | 370,137 | |||||||||
Series GMTN, 2.000%, due 06/02/26 | 700,000 | 664,584 | |||||||||
2.125%, due 01/15/25 | 675,000 | 652,285 | |||||||||
2.375%, due 07/07/27 | 835,000 | 806,014 | |||||||||
3.000%, due 02/21/24 | 425,000 | 431,011 | |||||||||
3.125%, due 09/18/28 | 900,000 | 920,306 |
Face amount | Value | ||||||||||
International Bank for Reconstruction & Development 1.375%, due 03/30/20 | $ | 325,000 | $ | 320,157 | |||||||
1.375%, due 05/24/21 | 350,000 | 340,353 | |||||||||
1.875%, due 10/27/26 | 300,000 | 280,787 | |||||||||
2.000%, due 01/26/22 | 100,000 | 98,239 | |||||||||
2.500%, due 11/25/24 | 900,000 | 890,646 | |||||||||
2.500%, due 07/29/25 | 750,000 | 738,453 | |||||||||
2.500%, due 11/22/27 | 1,240,000 | 1,208,587 | |||||||||
International Development Association 2.750%, due 04/24/231 | 750,000 | 752,915 | |||||||||
International Finance Corp. Series GMTN, 1.125%, due 07/20/21 | 150,000 | 144,642 | |||||||||
Series GMTN, 2.125%, due 04/07/26 | 575,000 | 551,613 | |||||||||
Kreditanstalt fuer Wiederaufbau 2.000%, due 05/02/25 | 600,000 | 573,123 | |||||||||
Nordic Investment Bank 2.125%, due 02/01/22 | 400,000 | 393,777 | |||||||||
2.875%, due 07/19/23 | 200,000 | 201,712 | |||||||||
Total corporate notes (cost $15,214,137) | 15,489,194 | ||||||||||
Number of shares | |||||||||||
Short-term investment: 5.8% | |||||||||||
Investment company: 5.8% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $913,887) | 913,887 | 913,887 | |||||||||
Total investments: 104.2% (cost $16,128,024) | 16,403,081 | ||||||||||
Liabilities in excess of other assets: (4.2)% | (655,996 | ) | |||||||||
Net assets: 100.0% | $ | 15,747,085 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
81
UBS Sustainable Development Bank Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate notes | $ | — | $ | 15,489,194 | $ | — | $ | 15,489,194 | |||||||||||
Short-term investment | — | 913,887 | — | 913,887 | |||||||||||||||
Total | $ | — | $ | 16,403,081 | $ | — | $ | 16,403,081 |
At December 31, 2018, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
1 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
See accompanying notes to financial statements.
82
UBS Total Return Bond Fund
Portfolio performance:
For the six months ended December 31, 2018, Class A shares of UBS Total Return Bond Fund (the "Fund") returned 0.42% (Class A shares returned -3.34% after the deduction of the maximum sales charge), while Class P shares returned 0.60%.For comparison purposes, the Bloomberg Barclays U.S. Aggregate Bond Index (the "Index") returned 1.65%. (Class P shares have lower expenses than the other share class in the Fund. Returns for all share classes over various time periods are shown on page 85; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on the redemption of Fund shares, while index returns do not reflect the deduction of fees and expenses.)
During the reporting period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. A number of credit derivatives, including credit-default swap index (CDX) options and total return swaps, were used to manage the Fund's credit exposure. Collectively, they had a positive impact to results over the period. With respect to credit derivatives, they were a positive contributor. Active currency management, utilizing currency options, was a modest detractor from performance. In aggregate, the use of derivatives were a headwind for returns. Derivatives were just one tool, among others, that we used to implement our overall strategy. Looking at the impact of derivatives in isolation is not very meaningful and could potentially be misleading, as often times they are used as a compliment or offset to other existing positions in the portfolio.
Market commentary:
The lengthy US economic expansion continued during the reporting period. The US Commerce Department reported that gross domestic product ("GDP") grew at a 3.4% seasonally adjusted annualized rate during the third quarter of 2018. The Federal Reserve raised interest rates twice during the period—at their September and December meetings—bringing the Fed Funds target range to 2.25-2.50% by year-end. The 10-year US Treasury yield began the period at 2.85%. Over the final month and a half of the year, Treasury yields plummeted given concerns over slower growth and the possible future path from the Fed. The 10-year US Treasury finished the year at 2.69%.
The overall US bond market, as measured by the Bloomberg Barclays U.S. Aggregate Index, returned 1.65% for the six months ended December 31, 2018. Returns of riskier fixed income securities were mixed, as a sharp selloff toward the end of the year impacted returns. Factors that led to the decline included tighter financial conditions in the US given the continued path of Fed rate hikes, elevated market volatility, ongoing geopolitical concerns including Brexit and trade wars and concerns over slower growth in the US. Investment-grade corporate bonds, as measured by the Bloomberg Barclays U.S. Corporate Bond Index, ultimately earned a positive return of 0.79% for the reporting period, but underperformed comparable duration US Treasuries. Meanwhile, high-yield bonds, as measured by the Bloomberg Barclays U.S. High Yield Cash Pay Constrained Index, lost 2.24% during the reporting period. Elsewhere, emerging markets debt, as measured by the JP Morgan Emerging Markets Bond Index Global (EMBI Global), returned 0.65%.
Portfolio performance summary:
What worked:
• Duration management: The Fund's tactical adjustments to duration contributed to returns over the reporting period. In particular, exposure to long-term US interest rates as the yield curve flattened was beneficial. The Fund also benefited from its exposure to New Zealand, as their yields declined due to slowing growth.
• Asset-backed securities ("ABS"): The Fund's security selection in ABS contributed to performance.
83
UBS Total Return Bond Fund
What didn't work:
• US corporate bond exposure. The Fund's allocation to and security selection in US corporate bonds, particularly in the industrial sub-segment, detracted from returns. Corporates underperformed along with other risk segments.
• Commercial mortgage-backed securities ("CMBS") exposure. The Fund's security selection within the CMBS sector was negative for results as the Fund owned lower credit quality exposure which lagged the index exposure.
Market outlook:
US Treasury yields have fallen significantly since the October 2018 high, driven by safe haven demand, the sharp selloff in the stock market and falling oil prices. Although some future drop in bond yields cannot be dismissed, yields could reverse higher if the Fed changes its focus and President Trump decides to strike a trade deal with China in order to boost his re-election prospects in 2020. Global growth remains reasonable in spite of the recent stock market selloff and high trade tensions, while core inflation remains moderate to low. We think monetary policies are likely to remain accommodative outside of the US and see the risk/reward for selective carry-oriented investment remaining favorable.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2018. The views and opinions in the letter were current as of February 15, 2019. 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 website at www.ubs.com/am-us.
84
UBS Total Return Bond Fund
Average annual total returns for periods ended 12/31/18 (unaudited)
6 months | 1 year | 5 years | 10 years or Inception1 | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 0.42 | % | (2.38 | )% | N/A | (0.45 | )% | ||||||||||||
Class P3 | 0.60 | (2.08 | ) | 1.36 | % | 5.33 | |||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A2 | (3.34 | )% | (6.06 | )% | N/A | (2.11 | )% | ||||||||||||
Bloomberg Barclays US Aggregate Index4 | 1.65 | 0.01 | 2.52 | % | 0.10 |
The annualized gross and net expense ratios as in the October 26, 2018 prospectuses were as follows: Class A—1.46% and 0.76%; Class P—1.31% and 0.51%. 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 Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS 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 29, 2019, do not exceed 0.75% for Class A shares and 0.50% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. 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 AM (Americas)'s three year recoupment rights will survive.
1 Inception date of Class A shares of UBS Total Return Bond Fund and the index is September 29, 2016. 10 years fund performance is shown for Class P Shares, and the 10 years index performance of the Bloomberg Barclays US Aggregate Index is 3.48%. The Fund's Class P shares acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end fund (the "Predecessor Fund"), prior to the opening of business on May 23, 2016 (the "Reorganization"). The Predecessor Fund was also managed by the Advisor, and the day-to-day management of, and investment decisions for, the Fund and the Predecessor Fund are made by the same portfolio management team. The Funds have generally similar investment objectives and strategies. Therefore, the information shown above reflects the historical performance of the Predecessor Fund for periods prior to the Reorganization. The performance information shown for periods prior to the Reorganization is for the Predecessor Fund and may not be representative of performance of the Fund.
2 Maximum sales charge for Class A shares is 3.75%. Class A shares bear ongoing 12b-1 service fees.
3 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Bloomberg Barclays US Aggregate Bond 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, assetbacked and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
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 www.ubs.com/us-mutualfundperformance.
85
UBS Total Return Bond Fund
Portfolio statistics—December 31, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
GNMA II, 3.500% due 04/20/47 | 3.7 | % | |||||
FHLMC, 4.000% due 12/01/47 | 3.5 | ||||||
FNMA, 3.500% due 02/01/48 | 2.7 | ||||||
US Treasury Notes, 2.875% due 10/31/23 | 2.4 | ||||||
US Treasury Bills, 2.433% due 03/28/19 | 2.0 | ||||||
FNMA, 3.000% due 11/01/46 | 1.9 | ||||||
FNMA, 4.000% due 07/01/48 | 1.9 | ||||||
GNMA II, 3.000% due 01/20/47 | 1.9 | ||||||
GNMA II, 3.000% due 08/20/46 | 1.8 | ||||||
US Treasury Bills, 2.419% due 03/28/19 | 1.7 | ||||||
Total | 23.5 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 85.5 | % | |||||
United Kingdom | 2.3 | ||||||
Cayman Islands | 1.5 | ||||||
Colombia | 1.4 | ||||||
Netherlands | 1.2 | ||||||
Total | 91.9 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
86
UBS Total Return Bond Fund
Industry diversification—December 31, 2018 (unaudited)1
Corporate bonds | Percentage of net assets | ||||||
Agriculture | 0.2 | % | |||||
Auto manufacturers | 0.3 | ||||||
Banks | 7.5 | ||||||
Beverages | 0.4 | ||||||
Biotechnology | 0.7 | ||||||
Chemicals | 1.4 | ||||||
Commercial services | 0.4 | ||||||
Computers | 0.5 | ||||||
Diversified financial services | 2.2 | ||||||
Electric | 1.5 | ||||||
Food | 0.3 | ||||||
Healthcare-products | 0.6 | ||||||
Healthcare-services | 0.8 | ||||||
Insurance | 0.9 | ||||||
Internet | 0.4 | ||||||
Media | 2.0 | ||||||
Mining | 0.3 | ||||||
Miscellaneous manufacturers | 1.1 | ||||||
Oil & gas | 2.1 | ||||||
Pharmaceuticals | 1.9 | ||||||
Pipelines | 1.7 | ||||||
Real estate investment trusts | 2.9 | ||||||
Retail | 0.2 | ||||||
Semiconductors | 0.6 | ||||||
Software | 0.8 | ||||||
Telecommunications | 1.4 | ||||||
Transportation | 0.4 | ||||||
Total corporate bonds | 33.5 | % |
Percentage of net assets | |||||||
Asset-backed securities | 11.1 | % | |||||
Commercial mortgage-backed securities | 13.9 | ||||||
Mortgage-backed securities | 25.8 | ||||||
Municipal bonds and notes | 0.9 | ||||||
Non-US government obligations | 3.6 | ||||||
U.S. treasury obligations | 4.9 | ||||||
Preferred stock | 0.3 | ||||||
Short-term investment | 4.4 | ||||||
Investment of cash collateral from securities loaned | 0.1 | ||||||
Total investments | 98.5 | % | |||||
Other assets in excess of liabilities | 1.5 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
87
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds: 33.5% | |||||||||||
British Virgin Islands: 0.5% | |||||||||||
New Metro Global Ltd. 7.500%, due 03/20/222 | 200,000 | $ | 193,220 | ||||||||
Canada: 0.9% | |||||||||||
Cenovus Energy, Inc. 5.400%, due 06/15/47 | 80,000 | 69,140 | |||||||||
NOVA Chemicals Corp. 5.250%, due 08/01/233 | 210,000 | 198,450 | |||||||||
Rogers Communications, Inc. 5.000%, due 03/15/44 | 60,000 | 62,472 | |||||||||
Total Canada corporate bonds | 330,062 | ||||||||||
Cayman Islands: 1.5% | |||||||||||
CIFI Holdings Group Co. Ltd. 5.500%, due 01/23/232 | 200,000 | 172,750 | |||||||||
Country Garden Holdings Co. Ltd. 8.000%, due 01/27/242 | 200,000 | 193,106 | |||||||||
Seagate HDD Cayman 5.750%, due 12/01/34 | 80,000 | 62,300 | |||||||||
Yuzhou Properties Co. Ltd. 6.000%, due 10/25/232 | 200,000 | 170,377 | |||||||||
Total Cayman Islands corporate bonds | 598,533 | ||||||||||
Colombia: 0.2% | |||||||||||
Ecopetrol SA 5.375%, due 06/26/26 | 70,000 | 70,333 | |||||||||
Curacao: 0.1% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 57,000 | 54,008 | |||||||||
France: 0.5% | |||||||||||
Societe Generale SA 4.000%, due 01/12/273 | 200,000 | 191,187 | |||||||||
Hong Kong: 0.5% | |||||||||||
Yanlord Land HK Co. Ltd. 6.750%, due 04/23/232 | 200,000 | 196,091 | |||||||||
Ireland: 0.7% | |||||||||||
GE Capital International Funding Co. Unlimited Co. 2.342%, due 11/15/20 | 200,000 | 193,004 | |||||||||
Shire Acquisitions Investments Ireland DAC 2.400%, due 09/23/21 | 100,000 | 96,694 | |||||||||
Total Ireland corporate bonds | 289,698 | ||||||||||
Luxembourg: 1.0% | |||||||||||
Allergan Funding SCS 3.800%, due 03/15/25 | 200,000 | 195,328 | |||||||||
INEOS Group Holdings SA 5.625%, due 08/01/243 | 200,000 | 176,834 | |||||||||
Total Luxembourg corporate bonds | 372,162 |
Face amount1 | Value | ||||||||||
Netherlands: 1.2% | |||||||||||
Deutsche Telekom International Finance BV 8.750%, due 06/15/304 | 60,000 | $ | 78,304 | ||||||||
LYB International Finance BV 4.875%, due 03/15/44 | 50,000 | 45,461 | |||||||||
Mylan N.V. 3.950%, due 06/15/26 | 80,000 | 72,949 | |||||||||
Petrobras Global Finance BV 7.375%, due 01/17/27 | 250,000 | 256,875 | |||||||||
Total Netherlands corporate bonds | 453,589 | ||||||||||
United Kingdom: 2.3% | |||||||||||
Barclays PLC 4.836%, due 05/09/28 | 200,000 | 183,410 | |||||||||
HSBC Holdings PLC 3.400%, due 03/08/21 | 260,000 | 259,230 | |||||||||
Lloyds Banking Group PLC 4.582%, due 12/10/25 | 200,000 | 189,427 | |||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 250,000 | 239,657 | |||||||||
Total United Kingdom corporate bonds | 871,724 | ||||||||||
United States: 24.1% | |||||||||||
21st Century Fox America, Inc. 7.750%, due 12/01/45 | 50,000 | 73,500 | |||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 45,000 | 44,465 | |||||||||
AbbVie, Inc. 2.500%, due 05/14/20 | 200,000 | 198,073 | |||||||||
ADT Security Corp./The 3.500%, due 07/15/22 | 140,000 | 129,500 | |||||||||
AEP Texas, Inc., Series E, 6.650%, due 02/15/33 | 50,000 | 63,297 | |||||||||
Alabama Power Co. 6.000%, due 03/01/39 | 100,000 | 120,081 | |||||||||
Anadarko Petroleum Corp. 5.550%, due 03/15/265 | 20,000 | 20,956 | |||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc. 4.900%, due 02/01/463 | 165,000 | 153,214 | |||||||||
AT&T, Inc. 4.300%, due 02/15/30 | 266,000 | 251,537 | |||||||||
Bank of America Corp. 6.110%, due 01/29/37 | 125,000 | 137,516 | |||||||||
Bank of America Corp., Series MTN, 4.200%, due 08/26/24 | 150,000 | 148,759 | |||||||||
Biogen, Inc. 4.050%, due 09/15/25 | 150,000 | 149,384 | |||||||||
5.200%, due 09/15/45 | 50,000 | 51,484 | |||||||||
Boston Properties LP, REIT 2.750%, due 10/01/26 | 210,000 | 189,777 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.125%, due 01/15/25 | 30,000 | 27,094 |
88
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Burlington Northern Santa Fe LLC 5.150%, due 09/01/43 | 100,000 | $ | 112,112 | ||||||||
Capital One Financial Corp. 3.750%, due 07/28/26 | 160,000 | 146,625 | |||||||||
CCO Holdings LLC 5.500%, due 05/01/263 | 150,000 | 144,188 | |||||||||
CF Industries, Inc. 3.450%, due 06/01/23 | 150,000 | 139,500 | |||||||||
Charter Communications Operating LLC/ Charter Communications Operating Capital 3.579%, due 07/23/20 | 150,000 | 149,814 | |||||||||
Citigroup, Inc. 5.500%, due 09/13/25 | 300,000 | 314,954 | |||||||||
Comcast Corp. 3.969%, due 11/01/47 | 88,000 | 78,773 | |||||||||
4.600%, due 10/15/38 | 50,000 | 50,546 | |||||||||
4.700%, due 10/15/48 | 50,000 | 50,874 | |||||||||
CVS Health Corp. 4.300%, due 03/25/28 | 120,000 | 117,503 | |||||||||
Dell International LLC 4.420%, due 06/15/213 | 100,000 | 99,897 | |||||||||
Devon Energy Corp. 5.000%, due 06/15/45 | 40,000 | 35,469 | |||||||||
Eaton Corp. 2.750%, due 11/02/22 | 190,000 | 184,783 | |||||||||
Energy Transfer LP 5.500%, due 06/01/27 | 100,000 | 97,500 | |||||||||
Enterprise Products Operating LLC 2.850%, due 04/15/21 | 105,000 | 103,949 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 150,000 | 142,680 | |||||||||
Ford Motor Co. 7.450%, due 07/16/31 | 55,000 | 56,742 | |||||||||
General Electric Co., Series D, (fixed, converts to FRN on 01/21/21), 5.000%, due 01/21/216 | 199,000 | 152,235 | |||||||||
General Motors Co. 6.600%, due 04/01/36 | 70,000 | 68,203 | |||||||||
Georgia Power Co., Series C, 2.000%, due 09/08/20 | 70,000 | 68,398 | |||||||||
Gilead Sciences, Inc. 3.650%, due 03/01/26 | 75,000 | 73,551 | |||||||||
Goldman Sachs Group, Inc./The 5.150%, due 05/22/45 | 30,000 | 27,955 | |||||||||
5.750%, due 01/24/22 | 305,000 | 319,332 | |||||||||
Home Depot, Inc./The 2.125%, due 09/15/26 | 100,000 | 90,065 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 80,000 | 74,378 | |||||||||
International Lease Finance Corp. 5.875%, due 08/15/22 | 120,000 | 125,689 | |||||||||
Jefferies Finance LLC 7.500%, due 04/15/213 | 200,000 | 199,500 |
Face amount1 | Value | ||||||||||
JPMorgan Chase & Co., Series I, 3 mo. USD LIBOR + 3.470%, 5.990%, due 01/30/196,7 | 143,000 | $ | 141,391 | ||||||||
Kinder Morgan, Inc. 5.550%, due 06/01/45 | 40,000 | 39,663 | |||||||||
6.500%, due 09/15/20 | 100,000 | 104,745 | |||||||||
Kroger Co./The 6.900%, due 04/15/38 | 25,000 | 29,438 | |||||||||
Liberty Mutual Group, Inc. 4.250%, due 06/15/233 | 200,000 | 201,631 | |||||||||
Life Technologies Corp. 6.000%, due 03/01/20 | 135,000 | 138,762 | |||||||||
Marathon Oil Corp. 4.400%, due 07/15/27 | 75,000 | 71,304 | |||||||||
Marathon Petroleum Corp. 4.750%, due 09/15/44 | 120,000 | 105,926 | |||||||||
MetLife, Inc. 6.400%, due 12/15/36 | 35,000 | 35,555 | |||||||||
Microsoft Corp. 2.375%, due 02/12/22 | 250,000 | 247,041 | |||||||||
4.450%, due 11/03/45 | 60,000 | 63,727 | |||||||||
Morgan Stanley 4.875%, due 11/01/22 | 350,000 | 360,654 | |||||||||
Morgan Stanley, Series GMTN, 4.350%, due 09/08/26 | 140,000 | 136,121 | |||||||||
MPLX LP 4.875%, due 06/01/25 | 70,000 | 70,581 | |||||||||
Nabors Industries, Inc. 4.625%, due 09/15/21 | 150,000 | 134,498 | |||||||||
NCR Corp. 5.000%, due 07/15/22 | 40,000 | 37,700 | |||||||||
Netflix, Inc. 5.500%, due 02/15/22 | 140,000 | 141,009 | |||||||||
Noble Energy, Inc. 5.050%, due 11/15/44 | 50,000 | 43,120 | |||||||||
Oncor Electric Delivery Co. LLC 3.750%, due 04/01/45 | 50,000 | 47,530 | |||||||||
Pacific Gas & Electric Co. 2.950%, due 03/01/26 | 150,000 | 123,388 | |||||||||
Prudential Financial, Inc., Series MTN, 6.625%, due 06/21/40 | 50,000 | 61,129 | |||||||||
Quicken Loans, Inc. 5.750%, due 05/01/253 | 260,000 | 243,100 | |||||||||
Reynolds American, Inc. 7.250%, due 06/15/37 | 85,000 | 92,858 | |||||||||
RR Donnelley & Sons Co. 7.875%, due 03/15/21 | 36,000 | 36,000 | |||||||||
Sabine Pass Liquefaction LLC 5.000%, due 03/15/27 | 200,000 | 200,767 | |||||||||
Smithfield Foods, Inc. 3.350%, due 02/01/223 | 80,000 | 76,503 | |||||||||
Southern Copper Corp. 6.750%, due 04/16/40 | 90,000 | 98,888 |
89
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Sunoco Logistics Partners Operations LP 5.400%, due 10/01/47 | 50,000 | $ | 44,847 | ||||||||
Synchrony Financial 4.500%, due 07/23/25 | 90,000 | 82,105 | |||||||||
Teachers Insurance & Annuity Association of America 4.270%, due 05/15/473 | 60,000 | 57,509 | |||||||||
Tenet Healthcare Corp. 4.625%, due 07/15/24 | 200,000 | 186,000 | |||||||||
Texas Instruments, Inc. 1.850%, due 05/15/22 | 220,000 | 212,317 | |||||||||
Thermo Fisher Scientific, Inc. 5.300%, due 02/01/44 | 60,000 | 66,221 | |||||||||
Time Warner Cable LLC 8.750%, due 02/14/19 | 210,000 | 211,172 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 36,468 | |||||||||
UnitedHealth Group, Inc. 4.625%, due 07/15/35 | 100,000 | 106,253 | |||||||||
Verizon Communications, Inc. 5.250%, due 03/16/37 | 140,000 | 145,986 | |||||||||
Wells Fargo & Co. 5.375%, due 11/02/43 | 70,000 | 73,140 | |||||||||
Total United States corporate bonds | 9,288,899 | ||||||||||
Total corporate bonds (cost $13,541,586) | 12,909,506 | ||||||||||
Asset-backed securities: 11.1% | |||||||||||
United States: 11.1% | |||||||||||
AmeriCredit Automobile Receivables Trust, Series 2018-1, Class D, 3.820%, due 03/18/24 | 100,000 | 100,584 | |||||||||
Capital Auto Receivables Asset Trust, Series 2015-4, Class D, 3.620%, due 05/20/21 | 125,000 | 125,346 | |||||||||
CPS Auto Trust, Series 2018-C, Class D, 4.400%, due 06/17/243 | 150,000 | 152,023 | |||||||||
Dell Equipment Finance Trust, Series 2016-1, Class D, 3.240%, due 07/22/223 | 268,000 | 267,928 | |||||||||
Series 2018-1, Class D, 3.850%, due 06/24/243 | 120,000 | 120,465 | |||||||||
Drive Auto Receivables Trust, Series 2017-1, Class D, 3.840%, due 03/15/23 | 75,000 | 75,271 | |||||||||
Series 2017-2, Class C, 2.750%, due 09/15/23 | 100,000 | 99,798 | |||||||||
Series 2017-3, Class B, 2.300%, due 05/17/21 | 84,129 | 84,035 | |||||||||
Series 2018-1, Class D, 3.810%, due 05/15/24 | 225,000 | 225,348 |
Face amount1 | Value | ||||||||||
Series 2018-2, Class D, 4.140%, due 08/15/24 | 200,000 | $ | 201,581 | ||||||||
Series 2018-3, Class D, 4.300%, due 09/16/24 | 300,000 | 303,976 | |||||||||
Series 2018-4, Class D, 4.090%, due 01/15/26 | 150,000 | 151,436 | |||||||||
Exeter Automobile Receivables Trust, Series 2018-1, Class AD, 3.530%, due 11/15/233 | 100,000 | 99,692 | |||||||||
OneMain Direct Auto Receivables Trust, Series 2018-1A, Class C, 3.850%, due 10/14/253 | 300,000 | 304,466 | |||||||||
PSNH Funding LLC, Series 2018-1, Class A3, 3.814%, due 02/01/35 | 175,000 | 179,513 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-2, Class D, 3.490%, due 07/17/23 | 100,000 | 99,470 | |||||||||
Series 2017-3, Class D, 3.200%, due 11/15/23 | 225,000 | 223,997 | |||||||||
Series 2018-4, Class D, 3.980%, due 12/15/25 | 225,000 | 227,366 | |||||||||
Sofi Consumer Loan Program Trust, Series 2017-6, Class B, 3.520%, due 11/25/263 | 225,000 | 222,715 | |||||||||
Series 2018-1, Class B, 3.650%, due 02/25/273 | 100,000 | 99,373 | |||||||||
Series 2018-2, Class A2, 3.350%, due 04/26/273 | 175,000 | 174,752 | |||||||||
Series 2018-2, Class B, 3.790%, due 04/26/273 | 125,000 | 125,241 | |||||||||
Series 2018-3, Class B, 4.020%, due 08/25/273 | 125,000 | 126,182 | |||||||||
Tesla Auto Lease Trust, Series 2018-B, Class A, 3.710%, due 08/20/213 | 200,000 | 200,482 | |||||||||
World Financial Network Credit Card Master Trust, Series 2016-A, Class A, 2.030%, due 04/15/25 | 275,000 | 267,775 | |||||||||
Total asset-backed securities (cost $4,244,101) | 4,258,815 | ||||||||||
Commercial mortgage-backed securities: 13.9% | |||||||||||
United States: 13.9% | |||||||||||
Ashford Hospitality Trust, Series 2018-ASHF, Class D, 1 mo. USD LIBOR + 2.100%, 4.555%, due 04/15/353,7 | 100,000 | 98,502 | |||||||||
BANK 2017, Series 2017-BNK7, Class C, 4.057%, due 09/15/608 | 100,000 | 95,844 | |||||||||
BANK 2018, Series 2018-BN14, Class E, 3.000%, due 09/15/603,8 | 250,000 | 177,130 |
90
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Commercial mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
BBCMS Trust, Series 2015-SRCH, Class B, 4.498%, due 08/10/353 | 135,000 | $ | 134,644 | ||||||||
BENCHMARK Mortgage Trust, Series 2018-B4, Class D, 2.814%, due 07/15/513,8 | 100,000 | 77,952 | |||||||||
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class E, 4.354%, due 10/15/343,8 | 100,000 | 97,698 | |||||||||
CHT Mortgage Trust, Series 2017-CSMO, Class E, 1 mo. USD LIBOR + 3.000%, 5.455%, due 11/15/363,7 | 475,000 | 467,505 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2015-GC33, Class A4, 3.778%, due 09/10/58 | 143,000 | 145,676 | |||||||||
Series 2017-P8, Class D, 3.000%, due 09/15/503 | 150,000 | 115,694 | |||||||||
COMM Mortgage Trust, Series 2015-CCRE24, Class D, 3.463%, due 08/10/488 | 150,000 | 127,218 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2017-C8, Class D, 4.470%, due 06/15/503 | 141,000 | 123,107 | |||||||||
FREMF Mortgage Trust, Series 2017-K64, Class B, 3.981%, due 05/25/503,8 | 50,000 | 48,418 | |||||||||
Series 2017-K724, Class B, 3.487%, due 11/25/233,8 | 265,000 | 262,798 | |||||||||
GS Mortgage Securities Corp. II, Series 2017-SLP, Class E, 4.591%, due 10/10/323,8 | 225,000 | 218,394 | |||||||||
GS Mortgage Securities Trust, Series 2014-GSFL, Class D, 1 mo. USD LIBOR + 3.900%, 5.730%, due 07/15/313,7 | 116,524 | 116,425 | |||||||||
Hilton USA Trust, Series 2016-SPF, Class E, 5.519%, due 11/05/353 | 125,000 | 127,080 | |||||||||
Invitation Homes Trust, Series 2018-SFR1, Class C, 1 mo. USD LIBOR + 1.250%, 3.705%, due 03/17/373,7 | 100,000 | 98,888 | |||||||||
Series 2018-SFR2, Class D, 1 mo. USD LIBOR + 1.450%, 3.905%, due 06/17/373,7 | 150,000 | 147,466 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-C6, Class D, 5.140%, due 05/15/458 | 150,000 | 148,077 | |||||||||
JPMBB Commercial Mortgage Securities Trust, Series 2014-C26, Class AS, 3.800%, due 01/15/48 | 200,000 | 198,716 |
Face amount1 | Value | ||||||||||
Series 2015-C29, Class D, 3.670%, due 05/15/488 | 100,000 | $ | 77,454 | ||||||||
Series 2015-C30, Class A5, 3.822%, due 07/15/48 | 170,000 | 173,204 | |||||||||
Series 2016-C2, Class D, 3.399%, due 06/15/493,8 | 175,000 | 143,595 | |||||||||
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2018-ASH8, Class D, 1 mo. USD LIBOR + 2.050%, 4.505%, due 02/15/353,7 | 100,000 | 98,570 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C24, Class AS, 4.036%, due 05/15/488 | 75,000 | 76,129 | |||||||||
Series 2015-C24, Class A4, 3.732%, due 05/15/48 | 100,000 | 101,134 | |||||||||
Series 2016-C32, Class AS, 3.994%, due 12/15/498 | 273,000 | 269,994 | |||||||||
Series 2017-C34, Class C, 4.186%, due 11/15/528 | 100,000 | 95,244 | |||||||||
Morgan Stanley Capital I, Inc., Series 2017-HR2, Class C, 4.227%, due 12/15/508 | 175,000 | 170,066 | |||||||||
Series 2017-HR2, Class D, 2.730%, due 12/15/50 | 100,000 | 76,310 | |||||||||
Rosslyn Portfolio Trust, Series 2017-ROSS, Class E, 1 mo. USD LIBOR + 3.000%, 5.455%, due 06/15/333,7 | 275,000 | 271,838 | |||||||||
Starwood Retail Property Trust, Series 2014-STAR, Class C, 1 mo. USD LIBOR + 2.500%, 4.955%, due 11/15/273,7 | 125,000 | 119,855 | |||||||||
VNDO Mortgage Trust, Series 2013-PENN, Class D, 3.947%, due 12/13/293,8 | 500,000 | 498,725 | |||||||||
Wells Fargo Commercial Mortgage Trust, Series 2018-C44, Class C, 4.836%, due 05/15/518 | 150,000 | 150,102 | |||||||||
Total commercial mortgage-backed securities (cost: $5,459,282) | 5,349,452 | ||||||||||
Mortgage-backed securities: 25.8% | |||||||||||
United States: 25.8% | |||||||||||
FHLMC 4.000%, due 08/01/47 | 173,764 | 177,382 | |||||||||
4.000%, due 12/01/47 | 1,324,060 | 1,352,072 | |||||||||
FNMA 3.000%, due 11/01/46 | 761,899 | 743,905 | |||||||||
3.500%, due 11/01/47 | 392,671 | 392,904 | |||||||||
3.500%, due 12/01/47 | 140,576 | 140,630 | |||||||||
3.500%, due 02/01/48 | 1,048,909 | 1,049,323 | |||||||||
3.500%, due 03/01/48 | 583,267 | 583,490 | |||||||||
4.000%, due 09/01/40 | 148,962 | 153,220 |
91
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Face amount1 | Value | ||||||||||
Mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
4.000%, due 06/01/47 | 390,166 | $ | 397,991 | ||||||||
4.000%, due 05/01/48 | 23,836 | 24,310 | |||||||||
4.000%, due 07/01/48 | 726,528 | 741,001 | |||||||||
5.500%, due 03/01/33 | 36,119 | 38,972 | |||||||||
5.500%, due 09/01/34 | 140,622 | 151,019 | |||||||||
5.500%, due 11/01/34 | 30,954 | 33,330 | |||||||||
6.000%, due 11/01/28 | 41,462 | 45,044 | |||||||||
GNMA 3.000%, due 09/20/47 | 459,375 | 452,169 | |||||||||
6.500%, due 05/15/29 | 10,329 | 11,536 | |||||||||
GNMA II 3.000%, due 08/20/46 | 709,155 | 698,800 | |||||||||
3.000%, due 01/20/47 | 741,541 | 730,218 | |||||||||
3.000%, due 07/20/47 | 619,311 | 609,695 | |||||||||
3.500%, due 04/20/47 | 1,391,783 | 1,401,924 | |||||||||
Total Mortgage-backed securities (cost $9,946,914) | 9,928,935 | ||||||||||
Municipal bonds and notes: 0.9% | |||||||||||
California: 0.9% | |||||||||||
State of California, GO Bonds 7.300%, due 10/01/39 (cost $368,161) | 250,000 | 343,180 | |||||||||
Non-US government obligations: 3.6% | |||||||||||
Argentina: 0.5% | |||||||||||
Republic of Argentina 59.257%, due 06/21/208 | ARS | 6,200,000 | 175,148 | ||||||||
Colombia: 1.2% | |||||||||||
Republic of Colombia 8.125%, due 05/21/24 | 230,000 | 269,963 | |||||||||
7.750%, due 04/14/21 | COP | 550,000,000 | 176,220 | ||||||||
446,183 | |||||||||||
Indonesia: 0.3% | |||||||||||
Republic of Indonesia 6.625%, due 02/17/373 | 100,000 | 115,678 | |||||||||
New Zealand: 1.1% | |||||||||||
New Zealand Government Bond 2.500%, due 09/20/352 | NZD | 546,104 | 435,661 | ||||||||
Turkey: 0.2% | |||||||||||
Republic of Turkey 6.875%, due 03/17/36 | 100,000 | 93,625 | |||||||||
Uruguay: 0.3% | |||||||||||
Oriental Republic of Uruguay 7.625%, due 03/21/36 | 100,000 | 129,625 | |||||||||
Total non-US government obligations (cost $1,401,150) | 1,395,920 |
Face amount1 | Value | ||||||||||
U.S. treasury obligations: 4.9% | |||||||||||
US Treasury Bonds 3.375%, due 11/15/48 | 95,000 | $ | 101,761 | ||||||||
US Treasury Inflation Index Notes (TIPS) 0.500%, due 01/15/28 | 230,661 | 220,151 | |||||||||
US Treasury Notes 2.875%, due 10/31/23 | 900,000 | 914,932 | |||||||||
2.875%, due 11/30/23 | 300,000 | 305,208 | |||||||||
3.125%, due 11/15/28 | 350,000 | 363,284 | |||||||||
Total U.S. treasury obligations (cost $1,890,019) | 1,905,336 | ||||||||||
Number of shares | |||||||||||
Preferred stock: 0.3% | |||||||||||
United States: 0.3% | |||||||||||
JPMorgan Chase & Co., Series P, 5.450%, due 03/01/196 (cost $102,000) | 4,000 | 98,000 | |||||||||
Short-term investments: 4.4% | |||||||||||
Investment company: 0.7% | |||||||||||
State Street Institutional U.S. Government Money Market Fund | 285,778 | 285,778 | |||||||||
Face amount1 | |||||||||||
U.S. treasury obligations: 3.7% | |||||||||||
US Treasury Bills 2.433%, due 03/28/199 | 780,000 | 775,556 | |||||||||
2.419%, due 03/28/199 | 655,000 | 651,288 | |||||||||
Total U.S. treasury obligations | 1,426,844 | ||||||||||
Total short-term investments (cost $1,712,622) | 1,712,622 | ||||||||||
Number of shares | |||||||||||
Investment of cash collateral from securities loaned: 0.1% | |||||||||||
Money market fund: 0.1% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $21,650) | 21,650 | 21,650 | |||||||||
Total investments: 98.5% (cost $38,687,485) | 37,923,416 | ||||||||||
Other assets in excess of liabilities: 1.5% | 581,877 | ||||||||||
Net assets: 100.0% | $ | 38,505,293 |
For a listing of defined portfolio acronyms, counterparty acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 96.
92
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Credit default swaptions written
Notional amount (000) | Number of contracts | Put swaptions | Counterparty | Buy/sell protection | Expiration date | Premiums received | Current value | Unrealized appreciation (depreciation) | |||||||||||||||||||||||||||
USD | 750 | 750,000 | CDX North America High Yield 31 Index strike @ 1.000%, terminating 02/20/19 | CITI | Sell | 02/20/19 | $ | 6,000 | $ | (7,459 | ) | $ | (1,459 | ) | |||||||||||||||||||||
USD | 750 | 750,000 | CDX North America High Yield 31 Index strike @ 1.010%, terminating 01/16/19 | BOA | Sell | 01/16/19 | 4,350 | (4,240 | ) | 110 | |||||||||||||||||||||||||
Total | $ | 10,350 | $ | (11,699 | ) | $ | (1,349 | ) |
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
17 | USD | Ultra Long US Treasury Bond Futures | March 2019 | $ | 2,607,746 | $ | 2,731,156 | $ | 123,410 | ||||||||||||||||||
3 | USD | US Treasury Note 2 Year Futures | March 2019 | 632,863 | 636,937 | 4,074 | |||||||||||||||||||||
4 | USD | US Ultra Treasury Note 10 Year Futures | March 2019 | 517,506 | 520,313 | 2,807 | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
2 | EUR | Italian Government Bond Futures | March 2019 | $ | 282,107 | $ | 292,900 | $ | 10,793 | ||||||||||||||||||
32 | USD | 90-Day Eurodollar Futures | March 2019 | 7,770,446 | 7,783,200 | 12,754 | |||||||||||||||||||||
Total | $ | 11,810,668 | $ | 11,964,506 | $ | 153,838 | |||||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
1 | USD | US Long Bond Futures | March 2019 | $ | (144,436 | ) | $ | (146,000 | ) | �� | $ | (1,564 | ) | ||||||||||||||
12 | USD | US Treasury Note 10 Year Futures | March 2019 | (1,444,280 | ) | (1,464,188 | ) | (19,908 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
2 | EUR | German Euro Bund Futures | March 2019 | $ | (371,773 | ) | $ | (374,752 | ) | $ | (2,979 | ) | |||||||||||||||
3 | GBP | United Kingdom Long Gilt Bond Futures | March 2019 | (467,574 | ) | (470,977 | ) | (3,403 | ) | ||||||||||||||||||
32 | USD | 90-Day Eurodollar Futures | December 2019 | (7,755,553 | ) | (7,788,000 | ) | (32,447 | ) | ||||||||||||||||||
Total | $ | (10,183,616 | ) | $ | (10,243,917 | ) | $ | (60,301 | ) | ||||||||||||||||||
Net unrealized appreciation | $ | 93,537 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | GBP | 85,000 | USD | 108,795 | 01/29/19 | $ | 314 | ||||||||||||
CITI | NZD | 620,000 | USD | 421,164 | 01/29/19 | 4,830 | |||||||||||||
CITI | USD | 810,352 | SEK | 7,320,000 | 01/29/19 | 17,307 | |||||||||||||
GSI | EUR | 1,430,000 | USD | 1,627,684 | 01/29/19 | (14,288 | ) | ||||||||||||
GSI | INR | 13,500,000 | USD | 183,773 | 03/20/19 | (7,996 | ) | ||||||||||||
GSI | USD | 196,228 | BRL | 770,000 | 03/20/19 | 1,332 | |||||||||||||
GSI | USD | 772,647 | NOK | 6,620,000 | 01/29/19 | (6,103 | ) | ||||||||||||
Net unrealized depreciation | $ | (4,604 | ) |
93
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Credit default swap agreements on corporate issues—buy protection11
Counterparty | Referenced obligations | Notional amount (000) | Maturity Date | Payments made by the Portfolio10 | Upfront payments made | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
BB | United Mexican States bond, 4.150%, due 03/28/27 | USD | 400 | 12/20/23 | 1.000 | % | $ | (9,040 | ) | $ | 9,785 | $ | 745 | ||||||||||||||||||
BB | United Mexican States bond, 4.150%, due 03/28/27 | USD | 200 | 12/20/23 | 1.000 | (5,489 | ) | 4,892 | (597 | ) | |||||||||||||||||||||
GS | United Mexican States bond, 4.150%, due 03/28/27 | USD | 200 | 12/20/23 | 1.000 | (5,572 | ) | 4,892 | (680 | ) | |||||||||||||||||||||
Total | $ | (20,101 | ) | $ | 19,569 | $ | (532 | ) |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2018 in valuing the Fund's investments. In the event a Fund holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Unadjusted quoted prices in active markets for (Level 1) | Other significant identical investments (Level 2) | Unobservable observable inputs (Level 3) | inputs Total | ||||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 12,909,506 | $ | — | $ | 12,909,506 | |||||||||||
Asset-backed securities | — | 4,258,815 | — | 4,258,815 | |||||||||||||||
Commercial mortgage-backed securities | — | 5,349,452 | — | 5,349,452 | |||||||||||||||
Mortgage-backed securities | — | 9,928,935 | — | 9,928,935 | |||||||||||||||
Municipal bonds and notes | — | 343,180 | — | 343,180 | |||||||||||||||
Non-US government obligations | — | 1,395,920 | — | 1,395,920 | |||||||||||||||
U.S. treasury obligations | — | 1,905,336 | — | 1,905,336 | |||||||||||||||
Preferred stock | 98,000 | — | — | 98,000 | |||||||||||||||
Short-term investments | — | 1,712,622 | — | 1,712,622 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 21,650 | — | 21,650 | |||||||||||||||
Futures contracts | 153,838 | — | — | 153,838 | |||||||||||||||
Forward foreign currency contracts | — | 23,783 | — | 23,783 | |||||||||||||||
Swap agreements | — | 19,569 | — | 19,569 | |||||||||||||||
Total | $ | 251,838 | $ | 37,868,768 | $ | — | $ | 38,120,606 | |||||||||||
Liabilities | |||||||||||||||||||
Swaptions written | $ | — | $ | (11,699 | ) | $ | — | $ | (11,699 | ) | |||||||||
Futures contracts | (60,301 | ) | — | — | (60,301 | ) | |||||||||||||
Forward foreign currency contracts | — | (28,387 | ) | — | (28,387 | ) | |||||||||||||
Total | $ | (60,301 | ) | $ | (40,086 | ) | $ | — | $ | (100,387 | ) |
At December 31, 2018, there were no transfers between Level 1 and Level 2.
94
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2018 (unaudited)
Portfolio footnotes
1 In US dollars unless otherwise indicated.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
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. Securities exempt from registration pursuant to Rule 144A, in the amount of $7,195,294, represented 18.7% of the Fund's net assets at period end.
4 Step bond—coupon rate increases in increments to maturity. The rate disclosed is the rate at the period end; the maturity date disclosed is the ultimate maturity date.
5 Security, or portion thereof, was on loan at the period end.
6 Perpetual investment. Date shown reflects the next call date.
7 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
8 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
9 Rate shown is the discount rate at the date of purchase unless otherwise noted.
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 obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
See accompanying notes to financial statements.
95
The UBS Funds
December 31, 2018
Portfolio acronyms
ADR American Depositary Receipt
AGC Assured Guaranty Corp.
AGM Assured Guaranty Municipal
CDO Collateralized Debt Obligation
COP Certificate of Participation
CVA Dutch Certification—Depository Certificate
DAC Designated Activity Company
EMTN Euro Medium Term Note
ETF Exchange Traded Fund
EURIBOR Euro Interbank Offered Rate
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GDR Global Depository Receipt
GMTN Global Medium Term Note
GNMA Government National Mortgage Association
GO General Obligation
LIBOR London Interbank Offered Rate
MTN Medium Term Note
OAT Obligation Assimilables du Trésor (French Government Bonds)
PJSC Private Joint Stock Company
PSF-GTD Permanent School Fund Guaranteed
REIT Real Estate Investment Trust
TIPS Treasury inflation protected securities
Counterparty abbreviations
BB Barclays Bank PLC
BOA Bank of America NA
CIBC Canadian Imperial Bank of Commerce
CITI Citibank NA
CSI Credit Suisse International
GS Goldman Sachs
GSI Goldman Sachs International
HSBC HSBC Bank PLC
JPMCB JPMorgan Chase Bank
MSCI Morgan Stanley & Co. International PLC
SSC State Street Bank and Trust Co.
Currency abbreviations
ARS Argentine Peso
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CHF Swiss Franc
CNY Chinese Yuan
COP Colombian Peso
DKK Danish Krone
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
ILS Israel New Shekel
INR Indian Rupee
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
TWD Taiwan Dollar
USD United States Dollar
See accompanying notes to financial statements.
96
The UBS Funds
December 31, 2018 (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, 2018 to December 31, 2018 (unless otherwise noted).
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.
Please note that the UBS Engage For Impact Fund and the UBS Sustainable Development Bank Bond Fund commenced operations on October 24, 2018, as reflected in the actual example. The hypothetical example reflects activity for the one-half year period from July 1, 2018 to December 31, 2018. This projection assumes that the Funds' expense ratios during their actual period (October, 24, 2018 through December 31, 2018) would have been in effect during the one-half year period from July 1, 2018 to December 31, 2018.
97
The UBS Funds
December 31, 2018 (unaudited)
Beginning account value July 1, 2018 | Ending account value December 31, 2018 | Expenses paid during period* 07/01/18 to 12/31/18 | Expense ratio during the period | ||||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 961.70 | $ | 6.68 | 1.35 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.40 | 6.87 | 1.35 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 961.90 | 5.44 | 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 | 929.60 | 5.84 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.16 | 6.11 | 1.20 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 930.40 | 4.62 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.42 | 4.84 | 0.95 | |||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||
Class P2 | Actual | 1,000.00 | 867.10 | 1.88 | 0.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.19 | 2.04 | 0.40 | |||||||||||||||||||
UBS Engage For Impact Fund1 | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 931.60 | 1.53 | 0.85 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.90 | 4.33 | 0.85 | |||||||||||||||||||
UBS International Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 872.90 | 5.90 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.90 | 6.36 | 1.25 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 874.40 | 4.72 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.16 | 5.09 | 1.00 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 826.60 | 5.71 | 1.24 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.95 | 6.31 | 1.24 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 827.70 | 4.56 | 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 ratio, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
1 The Fund commenced operations on October 24, 2018. Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 68 divided by 365 (to reflect the actual days in the period) for the actual example and 184 divided by 365 (to reflect the one-half year period) for the hypothetical example.
98
The UBS Funds
December 31, 2018 (unaudited)
Beginning account value July 1, 2018 | Ending account value December 31, 2018 | Expenses paid during period* 07/01/18 to 12/31/18 | Expense ratio during the period | ||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 869.30 | $ | 4.48 | 0.95 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.42 | 4.84 | 0.95 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 870.50 | 3.30 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.68 | 3.57 | 0.70 | |||||||||||||||||||
UBS Municipal Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,016.80 | 3.30 | 0.65 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.93 | 3.31 | 0.65 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,018.10 | 2.03 | 0.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.19 | 2.04 | 0.40 | |||||||||||||||||||
UBS Sustainable Development Bank Bond Fund1 | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,021.30 | 0.47 | 0.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023,90 | 1.28 | 0.25 | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,004.20 | 3.79 | 0.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.42 | 3.82 | 0.75 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,006.00 | 2.53 | 0.50 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.68 | 2.55 | 0.50 |
* Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184 divided by 365 (to reflect the one-half year period).
1 The Fund commenced operations on October 24, 2018. Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 68 divided by 365 (to reflect the actual days in the period) for the actual example and 184 divided by 365 (to reflect the one-half year period) for the hypothetical example.
99
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2018
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Assets | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 65,887,463 | $ | 243,982,761 | $ | 105,432,515 | |||||||||
Affiliated issuers | — | 23,455,566 | — | ||||||||||||
Foreign currency | 970,458 | 2,154,174 | 1,041,891 | ||||||||||||
$ | 66,857,921 | $ | 269,592,501 | $ | 106,474,406 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 56,458,883 | $ | 234,734,282 | $ | 95,662,924 | |||||||||
Affiliated issuers | — | 19,045,321 | — | ||||||||||||
Foreign currency | 944,177 | 2,141,802 | 1,043,033 | ||||||||||||
Cash | 2,000 | — | 289,993 | ||||||||||||
Cash collateral on futures | 1,763,849 | 4,919,610 | — | ||||||||||||
Cash collateral on swap agreements | 222,062 | 2,973,788 | — | ||||||||||||
Receivable for investments sold | — | — | 55,264 | ||||||||||||
Receivable for fund shares sold | 26,893 | 32,046 | 1,347,817 | ||||||||||||
Due from broker | 2,010,850 | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 500,096 | 1,164,884 | — | ||||||||||||
Receivable for interest | 357,605 | 390,611 | 129,257 | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | 168,466 | 864,676 | — | ||||||||||||
Receivable for foreign tax reclaims | 881 | 108,840 | 367 | ||||||||||||
Outstanding swap agreements, at value2 | 777 | — | — | ||||||||||||
Receivable from affiliate | — | — | 61,235 | ||||||||||||
Receivable for variation margin on futures contracts | — | 586,090 | — | ||||||||||||
Deferred offering cost | — | — | 23,477 | ||||||||||||
Other assets | 26,487 | 25,951 | 21,608 | ||||||||||||
Total assets | 62,483,026 | 266,987,901 | 98,634,975 | ||||||||||||
Liabilities | |||||||||||||||
Payable for variation margin on futures contracts | 838,745 | — | — | ||||||||||||
Payable for fund shares redeemed | 523,622 | 562,639 | 956,338 | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 405,201 | 890,952 | — | ||||||||||||
Payable to affiliate | 129,628 | 429,009 | — | ||||||||||||
Payable to custodian | 23,795 | 41,852 | 63,411 | ||||||||||||
Payable to Trustees' fees | 14,628 | 32,228 | 9,536 | ||||||||||||
Due to broker | 737 | 751,311 | — | ||||||||||||
Payable for investments purchased | — | 52,989 | 4,526,411 | ||||||||||||
Payable for cash collateral from securities loaned | — | 3,151,316 | — | ||||||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | — | 4,936 | 17,380 | ||||||||||||
Accrued expenses and other liabilities | 204,770 | 310,287 | 50,315 | ||||||||||||
Total liabilities | 2,141,126 | 6,227,519 | 5,623,391 | ||||||||||||
Net assets | $ | 60,341,900 | $ | 260,760,382 | $ | 93,011,584 |
1 Includes $0; $4,017,854; $0; $606,073 and $3,813,221, respectively, of investments in securities on loan, at value plus accrued interest and dividends, if any.
2 Net upfront payments received by UBS Dynamic Alpha Fund were $1,768.
100
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Assets | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 11,135,632 | $ | 114,127,269 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 6,126 | 627,962 | |||||||||
$ | 11,141,758 | $ | 114,755,231 | ||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 10,336,225 | $ | 99,695,315 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 6,182 | 629,855 | |||||||||
Cash | — | — | |||||||||
Cash collateral on futures | — | — | |||||||||
Cash collateral on swap agreements | — | — | |||||||||
Receivable for investments sold | 9,153 | — | |||||||||
Receivable for fund shares sold | 638,314 | 4,166,435 | |||||||||
Due from broker | — | — | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | |||||||||
Receivable for interest | 8,145 | 158,470 | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | |||||||||
Receivable for foreign tax reclaims | 213 | 97,646 | |||||||||
Outstanding swap agreements, at value2 | — | — | |||||||||
Receivable from affiliate | — | — | |||||||||
Receivable for variation margin on futures contracts | — | — | |||||||||
Deferred offering cost | 65,096 | — | |||||||||
Other assets | — | 28,659 | |||||||||
Total assets | 11,063,328 | 104,776,380 | |||||||||
Liabilities | |||||||||||
Payable for variation margin on futures contracts | — | — | |||||||||
Payable for fund shares redeemed | 61,644 | 1,932,500 | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | |||||||||
Payable to affiliate | 34,837 | 110,914 | |||||||||
Payable to custodian | 3,757 | 15,085 | |||||||||
Payable to Trustees' fees | 3,801 | 9,483 | |||||||||
Due to broker | — | — | |||||||||
Payable for investments purchased | 267,147 | — | |||||||||
Payable for cash collateral from securities loaned | 361,644 | 3,522,975 | |||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | 398 | 30,830 | |||||||||
Accrued expenses and other liabilities | 34,311 | 91,708 | |||||||||
Total liabilities | 767,539 | 5,713,495 | |||||||||
Net assets | $ | 10,295,789 | $ | 99,062,885 |
See accompanying notes to financial statements.
101
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2018 (continued)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Assets | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 106,043,620 | $ | 29,139,671 | $ | 105,703,350 | |||||||||
Foreign currency | — | — | — | ||||||||||||
$ | 106,043,620 | $ | 29,139,671 | $ | 105,703,350 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 110,392,654 | $ | 24,911,357 | $ | 105,355,784 | |||||||||
Foreign currency | — | — | — | ||||||||||||
Cash collateral on futures | — | — | — | ||||||||||||
Receivable for investments sold | — | 185,799 | — | ||||||||||||
Receivable for fund shares sold | 105,848 | 9 | 743,205 | ||||||||||||
Receivable for dividends and interest | 58,720 | 32,394 | 1,228,276 | ||||||||||||
Receivable from affiliate | — | 198,529 | — | ||||||||||||
Outstanding swap agreements, at value2 | — | — | — | ||||||||||||
Receivable for variation margin on futures contracts | — | — | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | — | ||||||||||||
Due from broker | — | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Deferred offering cost | — | — | — | ||||||||||||
Other assets | 32,435 | 27,073 | 33,112 | ||||||||||||
Total assets | 110,589,657 | 25,355,161 | 107,360,377 | ||||||||||||
Liabilities | |||||||||||||||
Payable for investments purchased | — | 174,253 | 2,396,505 | ||||||||||||
Payable for cash collateral from securities loaned | 12,556,432 | 456,310 | — | ||||||||||||
Payable for fund shares redeemed | 1,246,505 | — | 635,244 | ||||||||||||
Payable to Trustees' fees | 14,771 | 25,501 | 17,447 | ||||||||||||
Payable to custodian | 17,428 | 9,920 | 12,179 | ||||||||||||
Payable to affiliate | 268,612 | — | 18,979 | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Options and swaptions written, at value (premiums received $0; $0; $0; $0 and $10,350, respectively) | — | — | — | ||||||||||||
Accrued expenses and other liabilities | 97,051 | 56,997 | 85,327 | ||||||||||||
Total liabilities | 14,200,799 | 722,981 | 3,165,681 | ||||||||||||
Net assets | $ | 96,388,858 | $ | 24,632,180 | $ | 104,194,696 |
1 Includes $18,568,032; $1,279,854; $0; $0 and $21,271, respectively, of investments in securities on loan, at value plus accrued interest and dividends, if any.
2 Net upfront payments made by UBS Total Return Bond Fund were $20,101.
102
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Assets | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 16,128,024 | $ | 38,687,485 | |||||||
Foreign currency | — | 199,924 | |||||||||
$ | 16,128,024 | $ | 38,887,409 | ||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 16,403,081 | $ | 37,923,416 | |||||||
Foreign currency | — | 199,137 | |||||||||
Cash collateral on futures | — | 85,097 | |||||||||
Receivable for investments sold | 678,109 | — | |||||||||
Receivable for fund shares sold | 120,453 | 19,926 | |||||||||
Receivable for dividends and interest | 105,279 | 267,859 | |||||||||
Receivable from affiliate | — | 84,739 | |||||||||
Outstanding swap agreements, at value2 | — | 19,569 | |||||||||
Receivable for variation margin on futures contracts | — | 93,669 | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | 2,453 | |||||||||
Due from broker | — | 67,874 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 23,783 | |||||||||
Deferred offering cost | 74,046 | — | |||||||||
Other assets | — | 22,918 | |||||||||
Total assets | 17,380,968 | 38,810,440 | |||||||||
Liabilities | |||||||||||
Payable for investments purchased | 388,874 | — | |||||||||
Payable for cash collateral from securities loaned | — | 21,650 | |||||||||
Payable for fund shares redeemed | 763,558 | 91,264 | |||||||||
Payable to Trustees' fees | 3,800 | 11,517 | |||||||||
Payable to custodian | 402,556 | 23,058 | |||||||||
Payable to affiliate | 43,039 | — | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | 28,387 | |||||||||
Options and swaptions written, at value (premiums received $0; $0; $0; $0 and $10,350, respectively) | — | 11,699 | |||||||||
Accrued expenses and other liabilities | 32,056 | 117,572 | |||||||||
Total liabilities | 1,633,883 | 305,147 | |||||||||
Net assets | $ | 15,747,085 | $ | 38,505,293 |
See accompanying notes to financial statements.
103
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2018 (continued)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 151,786,397 | $ | 270,382,187 | $ | 107,054,524 | |||||||||
Distributable earnings (losses) | (91,444,497 | ) | (9,621,805 | ) | (14,042,940 | ) | |||||||||
Net assets | $ | 60,341,900 | $ | 260,760,382 | $ | 93,011,584 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 33,774,721 | $ | 203,855,965 | $ | — | |||||||||
Shares outstanding | 5,554,912 | 18,144,090 | — | ||||||||||||
Net asset value and redemption proceeds per share | $ | 6.08 | $ | 11.24 | $ | — | |||||||||
Offering price per share (NAV per share plus maximum sales charge) | $ | 6.43 | $ | 11.89 | $ | — | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 26,567,179 | $ | 56,904,417 | $ | — | |||||||||
Shares outstanding | 4,272,233 | 4,949,188 | — | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 6.22 | $ | 11.50 | $ | — | |||||||||
Class P2: | |||||||||||||||
Net assets | $ | — | $ | — | $ | 93,011,584 | |||||||||
Shares outstanding | — | — | 11,466,804 | ||||||||||||
Net asset value, offering price and redemption value per share2 | $ | — | $ | — | $ | 8.11 |
2 Assumes shares were held a sufficient period or are otherwise not subject to a redemption fee.
104
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 11,116,411 | $ | 114,701,516 | |||||||
Distributable earnings (losses) | (820,622 | ) | (15,638,631 | ) | |||||||
Net assets | $ | 10,295,789 | $ | 99,062,885 | |||||||
Class A: | |||||||||||
Net assets | $ | — | $ | 9,042,654 | |||||||
Shares outstanding | — | 1,033,217 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 8.75 | |||||||
Offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 9.26 | |||||||
Class P: | |||||||||||
Net assets | $ | 10,295,789 | $ | 90,020,231 | |||||||
Shares outstanding | 1,106,068 | 10,264,482 | |||||||||
Net asset value, offering price and redemption value per share | $ | 9.31 | $ | 8.77 | |||||||
Class P2: | |||||||||||
Net assets | $ | — | $ | — | |||||||
Shares outstanding | — | — | |||||||||
Net asset value, offering price and redemption value per share2 | $ | — | $ | — |
See accompanying notes to financial statements.
105
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2018 (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 91,163,205 | $ | 28,014,781 | $ | 105,721,490 | |||||||||
Distributable earnings (losses) | 5,225,653 | (3,382,601 | ) | (1,526,794 | ) | ||||||||||
Net assets | $ | 96,388,858 | $ | 24,632,180 | $ | 104,194,696 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 21,891,761 | $ | 10,151,607 | $ | 13,323,971 | |||||||||
Shares outstanding | 1,440,894 | 342,696 | 1,313,195 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 15.19 | $ | 29.62 | $ | 10.15 | |||||||||
Offering price per share (NAV per share plus maximum sales charge) | $ | 16.07 | $ | 31.34 | $ | 10.38 | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 74,497,097 | $ | 14,480,573 | $ | 90,870,725 | |||||||||
Shares outstanding | 4,381,772 | 487,287 | 8,962,357 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 17.00 | $ | 29.72 | $ | 10.14 |
106
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 15,464,870 | $ | 43,325,552 | |||||||
Distributable earnings (losses) | 282,215 | (4,820,259 | ) | ||||||||
Net assets | $ | 15,747,085 | $ | 38,505,293 | |||||||
Class A: | |||||||||||
Net assets | $ | — | $ | 405,092 | |||||||
Shares outstanding | — | 28,368 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 14.28 | |||||||
Offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 14.84 | |||||||
Class P: | |||||||||||
Net assets | $ | 15,747,085 | $ | 38,100,201 | |||||||
Shares outstanding | 1,544,332 | 2,666,652 | |||||||||
Net asset value, offering price and redemption value per share | $ | 10.20 | $ | 14.29 |
See accompanying notes to financial statements.
107
The UBS Funds
Financial Statements
Statement of operations—For the six months ended December 31, 2018 (unaudited)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Investment income | |||||||||||||||
Dividends | $ | 109,164 | $ | 2,114,023 | $ | 826,919 | |||||||||
Interest | 831,952 | 1,040,135 | 21,721 | ||||||||||||
Securities lending | 149 | 2,104 | 26 | ||||||||||||
Foreign tax withheld | — | (62,892 | ) | (96,365 | ) | ||||||||||
Total income | 941,265 | 3,093,370 | 752,301 | ||||||||||||
Expenses | |||||||||||||||
Investment management and administration fees | 317,735 | 1,284,359 | 437,620 | ||||||||||||
Service and distribution fees—Class A | 40,918 | 229,470 | — | ||||||||||||
Service and distribution fees—Class C | 11,114 | 78,719 | — | ||||||||||||
Transfer agency and related services fees—Class A | 11,964 | 52,142 | — | ||||||||||||
Transfer agency and related services fees—Class C | 4,161 | 21,929 | — | ||||||||||||
Transfer agency and related services fees—Class P | 14,771 | 14,974 | — | ||||||||||||
Transfer agency and related services fees—Class P2 | — | — | 10,919 | ||||||||||||
Professional services | 86,797 | 91,101 | 70,144 | ||||||||||||
Trustees' fees | 26,601 | 58,234 | 23,535 | ||||||||||||
Custody and fund accounting | 19,131 | 33,184 | 41,065 | ||||||||||||
Shareholder reports | 22,328 | 46,627 | 16,862 | ||||||||||||
Federal and state registration | 25,108 | 26,529 | 10,016 | ||||||||||||
Interest expense | — | 58 | — | ||||||||||||
Amortization of offering costs | — | — | 28,049 | ||||||||||||
Other | 38,683 | 58,963 | 12,966 | ||||||||||||
Total expenses | 619,311 | 1,996,289 | 651,176 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (170,555 | ) | (238,092 | ) | (471,629 | ) | |||||||||
Net expenses | 448,756 | 1,758,197 | 179,547 | ||||||||||||
Net investment income (loss) | 492,509 | 1,335,173 | 572,754 | ||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments unaffiliated issuers | (126,965 | ) | 3,220,039 | (4,167,670 | ) | ||||||||||
Futures contracts | (2,863,631 | ) | (2,085,890 | ) | — | ||||||||||
Swap agreements | (34,898 | ) | (60,088 | ) | — | ||||||||||
Forward foreign currency contracts | 2,490,919 | 1,704,630 | (2,764 | ) | |||||||||||
Foreign currency transactions | (57,334 | ) | (116,363 | ) | (198,349 | ) | |||||||||
Net realized gain (loss) | (591,909 | ) | 2,662,328 | (4,368,783 | ) | ||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (832,684 | ) | (21,486,785 | ) | (9,292,358 | ) | |||||||||
Investments in affiliated issuers | — | (3,033,060 | ) | — | |||||||||||
Futures contracts | 347,435 | 249,003 | — | ||||||||||||
Swap agreements | 42,700 | 257,106 | — | ||||||||||||
Forward foreign currency contracts | (2,119,293 | ) | (438,717 | ) | — | ||||||||||
Translation of other assets and liabilities denominated in foreign currency | 72,069 | 400,153 | 156,109 | ||||||||||||
Change in net unrealized appreciation (depreciation) | (2,489,773 | ) | (24,052,300 | ) | (9,136,249 | ) | |||||||||
Net realized and unrealized loss | (3,081,682 | ) | (21,389,972 | ) | (13,505,032 | ) | |||||||||
Net increase in net assets resulting from operations | $ | (2,589,173 | ) | $ | (20,054,799 | ) | $ | (12,932,278 | ) |
* Commenced operations on October 24, 2018.
108
The UBS Funds
UBS Engage For Impact Fund* | UBS International Sustainable Equity Fund | ||||||||||
Investment income | |||||||||||
Dividends | $ | 13,040 | $ | 939,529 | |||||||
Interest | 2,806 | 29,030 | |||||||||
Securities lending | 626 | 5,307 | |||||||||
Foreign tax withheld | (780 | ) | (102,755 | ) | |||||||
Total income | 15,692 | 871,111 | |||||||||
Expenses | |||||||||||
Investment management and administration fees | 11,268 | 449,730 | |||||||||
Service and distribution fees—Class A | — | 11,189 | |||||||||
Service and distribution fees—Class C | — | 2,854 | |||||||||
Transfer agency and related services fees—Class A | — | 2,388 | |||||||||
Transfer agency and related services fees—Class C | — | 635 | |||||||||
Transfer agency and related services fees—Class P | 1,677 | 9,807 | |||||||||
Transfer agency and related services fees—Class P2 | — | — | |||||||||
Professional services | 27,212 | 76,103 | |||||||||
Trustees' fees | 3,801 | 26,915 | |||||||||
Custody and fund accounting | 3,757 | 13,936 | |||||||||
Shareholder reports | 1,639 | 5,043 | |||||||||
Federal and state registration | — | 26,229 | |||||||||
Interest expense | — | — | |||||||||
Amortization of offering costs | 14,904 | — | |||||||||
Other | 3,782 | 24,447 | |||||||||
Total expenses | 68,040 | 649,276 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (56,431 | ) | (118,796 | ) | |||||||
Net expenses | 11,609 | 530,480 | |||||||||
Net investment income (loss) | 4,083 | 340,631 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments unaffiliated issuers | (14,138 | ) | 32,824 | ||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | (473 | ) | (23,137 | ) | |||||||
Foreign currency transactions | (4,404 | ) | 20,331 | ||||||||
Net realized gain (loss) | (19,015 | ) | 30,018 | ||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | (799,407 | ) | (15,094,108 | ) | |||||||
Investments in affiliated issuers | — | — | |||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | — | — | |||||||||
Translation of other assets and liabilities denominated in foreign currency | 161 | 3,370 | |||||||||
Change in net unrealized appreciation (depreciation) | (799,246 | ) | (15,090,738 | ) | |||||||
Net realized and unrealized loss | (818,261 | ) | (15,060,720 | ) | |||||||
Net increase in net assets resulting from operations | $ | (814,178 | ) | $ | (14,720,089 | ) |
See accompanying notes to financial statements.
109
The UBS Funds
Financial Statements
Statement of operations—For the six months ended December 31, 2018 (unaudited) (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Investment income | |||||||||||||||
Dividends | $ | 317,791 | $ | 244,265 | $ | — | |||||||||
Interest | 37,337 | 3,915 | 1,376,186 | ||||||||||||
Securities lending | 3,741 | 110 | — | ||||||||||||
Total income | 358,869 | 248,290 | 1,376,186 | ||||||||||||
Expenses | |||||||||||||||
Investment management and administration fees | 581,157 | 113,203 | 276,591 | ||||||||||||
Service and distribution fees—Class A | 33,161 | 13,816 | 13,688 | ||||||||||||
Service and distribution fees—Class C | 3,458 | 1,647 | 4,022 | ||||||||||||
Transfer agency and related services fees—Class A | 16,236 | 2,534 | 1,048 | ||||||||||||
Transfer agency and related services fees—Class C | 1,401 | 510 | 475 | ||||||||||||
Transfer agency and related services fees—Class P | 25,110 | 1,279 | 10,575 | ||||||||||||
Professional services | 68,616 | 70,577 | 68,980 | ||||||||||||
Trustees' fees | 32,268 | 35,604 | 32,909 | ||||||||||||
Federal and state registration | 27,341 | 26,378 | 26,594 | ||||||||||||
Shareholder reports | 11,866 | 4,585 | 9,051 | ||||||||||||
Custody and fund accounting | 11,822 | 7,484 | 8,753 | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other | 17,951 | 12,545 | 24,179 | ||||||||||||
Total expenses | 830,387 | 290,162 | 476,865 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (168,453 | ) | (169,088 | ) | (221,101 | ) | |||||||||
Net expenses | 661,934 | 121,074 | 255,764 | ||||||||||||
Net investment income (loss) | (303,065 | ) | 127,216 | 1,120,422 | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 4,349,283 | 999,216 | (255,091 | ) | |||||||||||
Futures contracts | — | — | — | ||||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Foreign currency transactions | — | — | — | ||||||||||||
Net realized gain (loss) | 4,349,283 | 999,216 | (255,091 | ) | |||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (26,766,857 | ) | (4,844,509 | ) | 912,186 | ||||||||||
Futures contracts | — | — | — | ||||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | — | — | — | ||||||||||||
Change in net unrealized appreciation (depreciation) | (26,766,857 | ) | (4,844,509 | ) | 912,186 | ||||||||||
Net realized and unrealized gain (loss) | (22,417,574 | ) | (3,845,293 | ) | 657,095 | ||||||||||
Net increase in net assets resulting from operations | $ | (22,720,639 | ) | $ | (3,718,077 | ) | $ | 1,777,517 |
* Commenced operations on October 24, 2018.
110
The UBS Funds
UBS Sustainable Development Bank Bond Fund* | UBS Total Return Bond Fund | ||||||||||
Investment income | |||||||||||
Dividends | $ | — | $ | 2,725 | |||||||
Interest | 66,566 | 776,975 | |||||||||
Securities lending | 12 | 48 | |||||||||
Total income | 66,578 | 779,748 | |||||||||
Expenses | |||||||||||
Investment management and administration fees | 5,105 | 115,014 | |||||||||
Service and distribution fees—Class A | — | 259 | |||||||||
Service and distribution fees—Class C | — | 55 | |||||||||
Transfer agency and related services fees—Class A | — | 45 | |||||||||
Transfer agency and related services fees—Class C | — | 70 | |||||||||
Transfer agency and related services fees—Class P | 1,677 | 18,140 | |||||||||
Professional services | 24,959 | 74,889 | |||||||||
Trustees' fees | 3,801 | 22,054 | |||||||||
Federal and state registration | — | 24,436 | |||||||||
Shareholder reports | 1,639 | 11,501 | |||||||||
Custody and fund accounting | 821 | 16,097 | |||||||||
Amortization of offering costs | 16,954 | — | |||||||||
Other | 3,782 | 20,588 | |||||||||
Total expenses | 58,738 | 303,148 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (53,066 | ) | (202,740 | ) | |||||||
Net expenses | 5,672 | 100,408 | |||||||||
Net investment income (loss) | 60,906 | 679,340 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 10,946 | (556,444 | ) | ||||||||
Futures contracts | — | (99,329 | ) | ||||||||
Options and swaptions written | — | 580 | |||||||||
Swap agreements | — | (14,674 | ) | ||||||||
Forward foreign currency contracts | — | 43,156 | |||||||||
Foreign currency transactions | — | (11,523 | ) | ||||||||
Net realized gain (loss) | 10,946 | (638,234 | ) | ||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | 275,057 | 205,766 | |||||||||
Futures contracts | — | 56,863 | |||||||||
Options and swaptions written | — | (2,336 | ) | ||||||||
Swap agreements | — | (532 | ) | ||||||||
Forward foreign currency contracts | — | (21,007 | ) | ||||||||
Translation of other assets and liabilities denominated in foreign currency | — | 3,779 | |||||||||
Change in net unrealized appreciation (depreciation) | 275,057 | 242,533 | |||||||||
Net realized and unrealized gain (loss) | 286,003 | (395,701 | ) | ||||||||
Net increase in net assets resulting from operations | $ | 346,909 | $ | 283,639 |
See accompanying notes to financial statements.
111
The UBS Funds
Financial Statements
Statement of changes in net assets
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | ||||||||||||||||||
For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | 492,509 | $ | 812,390 | $ | 1,335,173 | $ | 759,594 | |||||||||||
Net realized gain (loss) | (591,909 | ) | (2,572,439 | ) | 2,662,328 | 34,586,766 | |||||||||||||
Change in net unrealized appreciation (depreciation) | (2,489,773 | ) | 679,052 | (24,052,300 | ) | (14,628,521 | ) | ||||||||||||
Net increase (decrease) in net assets resulting from operations | (2,589,173 | ) | (1,080,997 | ) | (20,054,799 | ) | 20,717,839 | ||||||||||||
Total distributions—Class A1 | (310,989 | ) | — | — | (2,389,937 | ) | |||||||||||||
Total distributions—Class C1 | — | — | — | (601,488 | ) | ||||||||||||||
Total distributions—Class P1 | (305,252 | ) | — | — | (1,099,437 | ) | |||||||||||||
Total distributions—Class P2 | — | — | — | — | |||||||||||||||
Total distributions | (616,241 | ) | — | — | (4,090,862 | ) | |||||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 12,367,704 | 3,219,012 | 81,615,114 | 8,935,477 | |||||||||||||||
Cost of shares redeemed | (23,117,490 | ) | (87,796,218 | ) | (107,918,959 | ) | (59,836,089 | ) | |||||||||||
Shares issued on reinvestment of dividends and distributions | 556,939 | — | — | 3,732,469 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (10,192,847 | ) | (84,577,206 | ) | (26,303,845 | ) | (47,168,143 | ) | |||||||||||
Net increase (decrease) in net assets | (13,398,261 | ) | (85,658,203 | ) | (46,358,644 | ) | (30,541,166 | ) | |||||||||||
Net assets: | |||||||||||||||||||
Beginning of period | 73,740,161 | 159,398,364 | 307,119,026 | 337,660,192 | |||||||||||||||
End of period | $ | 60,341,900 | $ | 73,740,1612 | $ | 260,760,382 | $ | 307,119,0262 |
* For the period June 4, 2018 (commencement of operations) through June 30, 2018.
** For the period October 24, 2018 (commencement of operations) through December 31, 2018.
1 Distribution balances are presented in total to conform with SEC Regulation S-X amendments, effective November 5, 2018. For the year ended June 30, 2018, all distributions were made from net investment income.
2 Includes undistributed (distributions in excess) net investment income of $(1,219,632), $(680,814), $46,363 and $447,928, respectively.
112
The UBS Funds
UBS Emerging Markets Equity Opportunity Fund | UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | |||||||||||||||||||||
For the six months ended December 31, 2018 (unaudited) | For the period ended June 30, 2018* | For the period ended December 31, 2018 (unaudited)** | For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | |||||||||||||||||||
From operations: | |||||||||||||||||||||||
Net investment income | $ | 572,754 | $ | 94,200 | $ | 4,083 | $ | 340,631 | $ | 553,946 | |||||||||||||
Net realized gain (loss) | (4,368,783 | ) | (47,837 | ) | (19,015 | ) | 30,018 | 3,127,482 | |||||||||||||||
Change in net unrealized appreciation (depreciation) | (9,136,249 | ) | (634,490 | ) | (799,246 | ) | (15,090,738 | ) | (2,939,148 | ) | |||||||||||||
Net increase (decrease) in net assets resulting from operations | (12,932,278 | ) | (588,127 | ) | (814,178 | ) | (14,720,089 | ) | 742,280 | ||||||||||||||
Total distributions—Class A1 | — | — | — | (157,033 | ) | (85,846 | ) | ||||||||||||||||
Total distributions—Class C1 | — | — | — | — | (18,182 | ) | |||||||||||||||||
Total distributions—Class P1 | — | — | (6,444 | ) | (1,718,519 | ) | (411,618 | ) | |||||||||||||||
Total distributions—Class P2 | (522,535 | ) | — | — | — | — | |||||||||||||||||
Total distributions | (522,535 | ) | — | (6,444 | ) | (1,875,552 | ) | (515,646 | ) | ||||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||
Proceeds from shares sold | 38,628,110 | 94,963,376 | 16,586,634 | 58,875,765 | 54,066,034 | ||||||||||||||||||
Cost of shares redeemed | (26,624,181 | ) | (26,410 | ) | (5,476,664 | ) | (21,835,811 | ) | (15,741,755 | ) | |||||||||||||
Shares issued on reinvestment of dividends and distributions | 113,629 | — | 6,441 | 1,779,184 | 484,976 | ||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 12,117,558 | 94,936,966 | 11,116,411 | 38,819,138 | 38,809,255 | ||||||||||||||||||
Net increase (decrease) in net assets | (1,337,255 | ) | 94,348,839 | 10,295,789 | 22,223,497 | 39,035,889 | |||||||||||||||||
Net assets: | |||||||||||||||||||||||
Beginning of period | 94,348,839 | — | — | 76,839,388 | 37,803,499 | ||||||||||||||||||
End of period | $ | 93,011,584 | $ | 94,348,8392 | $ | 10,295,789 | $ | 99,062,885 | $ | 76,839,3882 |
See accompanying notes to financial statements.
113
The UBS Funds
Financial Statements
Statement of changes in net assets (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | ||||||||||||||||||
For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | (303,065 | ) | $ | (731,673 | ) | $ | 127,216 | $ | 177,291 | |||||||||
Net realized gain (loss) | 4,349,283 | 14,562,416 | 999,216 | 6,774,958 | |||||||||||||||
Change in net unrealized appreciation (depreciation) | (26,766,857 | ) | 11,582,980 | (4,844,509 | ) | (3,739,690 | ) | ||||||||||||
Net increase (decrease) in net assets resulting from operations | (22,720,639 | ) | 25,413,723 | (3,718,077 | ) | 3,212,559 | |||||||||||||
Total distributions—Class A1 | (2,527,048 | ) | (6,251,756 | ) | (109,184 | ) | (46,850 | ) | |||||||||||
Total distributions—Class C2 | — | (1,045,852 | ) | — | — | ||||||||||||||
Total distributions—Class P3 | (8,633,439 | ) | (16,473,329 | ) | (193,173 | ) | (106,200 | ) | |||||||||||
Total distributions | (11,160,487 | ) | (23,770,937 | ) | (302,357 | ) | (153,050 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 24,354,058 | 18,277,548 | 2,355,394 | 1,749,809 | |||||||||||||||
Cost of shares redeemed | (23,641,423 | ) | (30,381,324 | ) | (3,482,966 | ) | (6,076,611 | ) | |||||||||||
Shares issued on reinvestment of dividends and distributions | 10,597,009 | 22,078,250 | 282,160 | 145,512 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 11,309,644 | 9,974,474 | (845,412 | ) | (4,181,290 | ) | |||||||||||||
Net increase (decrease) in net assets | (22,571,482 | ) | 11,617,260 | (4,865,846 | ) | (1,121,781 | ) | ||||||||||||
Net assets: | |||||||||||||||||||
Beginning of period | 118,960,340 | 107,343,080 | 29,498,026 | 30,619,807 | |||||||||||||||
End of period | $ | 96,388,858 | $ | 118,960,3404 | $ | 24,632,180 | $ | 29,498,0264 |
* For the period October 24, 2018 (commencement of operations) through December 31, 2018.
1 Distribution balances are presented in total to conform with SEC Regulation S-X amendments, effective November 5, 2018. For the year ended June 30, 2018, distributions from net investment income and net realized gains for Class A were $0 and $(6,251,756), $(46,850) and $0, $(208,985) and $0, $0 and $0, $(1,041) and $0, respectively.
2 Distribution balances are presented in total to conform with SEC Regulation S-X amendments, effective November 5, 2018. For the year ended June 30, 2018, distributions from net investment income and net realized gains for Class C were $0 and $(1,045,852), $0 and $0, $(60,872) and $0, $0 and $0, $(815) and $0, respectively.
3 Distribution balances are presented in total to conform with SEC Regulation S-X amendments, effective November 5, 2018. For the year ended June 30, 2018, distributions from net investment income and net realized gains for Class P were $0 and $(16,473,329), $(106,200) and $0, $(2,036,241) and $0, $0 and $0, $(1,214,180) and $0, respectively.
4 Includes undistributed (distributions in excess) net investment income of $(122,000), $177,865, $(30,058) and $14,747, respectively.
114
The UBS Funds
UBS Municipal Bond Fund | UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | |||||||||||||||||||||
For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | For the period ended December 31, 2018 (unaudited)* | For the six months ended December 31, 2018 (unaudited) | For the year ended June 30, 2018 | |||||||||||||||||||
From operations: | |||||||||||||||||||||||
Net investment income | $ | 1,120,422 | $ | 2,316,609 | $ | 60,906 | $ | 679,340 | $ | 1,517,017 | |||||||||||||
Net realized gain (loss) | (255,091 | ) | (9,176 | ) | 10,946 | (638,234 | ) | (492,375 | ) | ||||||||||||||
Change in net unrealized appreciation (depreciation) | 912,186 | (1,986,604 | ) | 275,057 | 242,533 | (1,386,092 | ) | ||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,777,517 | 320,829 | 346,909 | 283,639 | (361,450 | ) | |||||||||||||||||
Total distributions—Class A1 | (97,424 | ) | (208,985 | ) | — | (3,281 | ) | (1,041 | ) | ||||||||||||||
Total distributions—Class C2 | (17,493 | ) | (60,872 | ) | — | (431 | ) | (815 | ) | ||||||||||||||
Total distributions—Class P3 | (1,006,140 | ) | (2,036,241 | ) | (64,694 | ) | (616,575 | ) | (1,214,180 | ) | |||||||||||||
Total distributions | (1,121,057 | ) | (2,306,098 | ) | (64,694 | ) | (620,287 | ) | (1,216,036 | ) | |||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||
Proceeds from shares sold | 18,327,028 | 35,084,588 | 25,498,071 | 435,183 | 175,672 | ||||||||||||||||||
Cost of shares redeemed | (36,987,304 | ) | (42,005,574 | ) | (10,072,730 | ) | (3,489,294 | ) | (8,127,941 | ) | |||||||||||||
Shares issued on reinvestment of dividends and distributions | 838,642 | 1,843,235 | 39,529 | 480,670 | 938,852 | ||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (17,821,634 | ) | (5,077,751 | ) | 15,464,870 | (2,573,441 | ) | (7,013,417 | ) | ||||||||||||||
Net increase (decrease) in net assets | (17,165,174 | ) | (7,063,020 | ) | 15,747,085 | (2,910,089 | ) | (8,590,903 | ) | ||||||||||||||
Net assets: | |||||||||||||||||||||||
Beginning of period | 121,359,870 | 128,422,890 | — | 41,415,382 | 50,006,285 | ||||||||||||||||||
End of period | $ | 104,194,696 | $ | 121,359,8704 | $ | 15,747,085 | $ | 38,505,293 | $ | 41,415,3824 |
See accompanying notes to financial statements.
115
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | $ | 7.24 | $ | 6.82 | |||||||||||||||
Net investment income1 | 0.05 | 0.04 | 0.03 | 0.05 | 0.04 | 0.05 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.29 | ) | (0.18 | ) | 0.32 | (0.79 | ) | 0.11 | 0.38 | ||||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | 0.002 | — | |||||||||||||||||||||
Net increase (decrease) from operations | (0.24 | ) | (0.14 | ) | 0.35 | (0.73 | ) | 0.15 | 0.43 | ||||||||||||||||||
Dividends from net investment income | (0.06 | ) | — | — | (0.23 | ) | (0.26 | ) | (0.01 | ) | |||||||||||||||||
Return of capital | — | — | — | (0.00 | )2 | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.06 | ) | — | — | (0.23 | ) | (0.26 | ) | (0.01 | ) | |||||||||||||||||
Net asset value, end of period | $ | 6.08 | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | $ | 7.24 | |||||||||||||||
Total investment return3 | (3.83 | )% | (2.15 | )% | 5.84 | % | (10.48 | )%4 | 2.03 | %5 | 6.31 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.89 | %6 | 1.69 | % | 1.49 | % | 1.45 | % | 1.43 | % | 1.42 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.35 | %6 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||||
Net investment income | 1.47 | %6 | 0.57 | % | 0.42 | % | 0.82 | % | 0.58 | % | 0.66 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 33,775 | $ | 31,066 | $ | 43,930 | $ | 65,741 | $ | 89,421 | $ | 194,185 | |||||||||||||||
Portfolio turnover | 14 | % | 31 | % | 48 | % | 50 | % | 54 | % | 45 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | $ | 7.38 | $ | 6.96 | |||||||||||||||
Net investment income1 | 0.05 | 0.06 | 0.04 | 0.07 | 0.06 | 0.06 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.29 | ) | (0.19 | ) | 0.34 | (0.82 | ) | 0.12 | 0.39 | ||||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | 0.002 | — | |||||||||||||||||||||
Net increase (decrease) from operations | (0.24 | ) | (0.13 | ) | 0.38 | (0.74 | ) | 0.18 | 0.45 | ||||||||||||||||||
Dividends from net investment income | (0.07 | ) | — | — | (0.25 | ) | (0.29 | ) | (0.03 | ) | |||||||||||||||||
Return of capital | — | — | — | (0.00 | )2 | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.07 | ) | — | — | (0.25 | ) | (0.29 | ) | (0.03 | ) | |||||||||||||||||
Net asset value, end of period | $ | 6.22 | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | $ | 7.38 | |||||||||||||||
Total investment return3 | (3.81 | )% | (1.80 | )% | 6.05 | % | (10.17 | )%4 | 2.29 | %5 | 6.45 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.66 | %6 | 1.43 | % | 1.27 | % | 1.22 | % | 1.20 | % | 1.15 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.10 | %6 | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||||
Net investment income | 1.65 | %6 | 0.94 | % | 0.68 | % | 1.07 | % | 0.84 | % | 0.87 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 26,567 | $ | 30,647 | $ | 98,018 | $ | 132,725 | $ | 192,777 | $ | 81,168 | |||||||||||||||
Portfolio turnover | 14 | % | 31 | % | 48 | % | 50 | % | 54 | % | 45 | % |
1 Calculated using the average share method.
2 Amount represents less than $0.005 per share.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and other 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 or redemption fees; 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 pay on Portfolio distributions or the redemption of Fund shares.
4 During the year ended June 30, 2016, the Advisor reimbursed the Fund $128,212, which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions, and $86,068 for a trading error, both reimbursements had no impact on the Fund's total return.
5 During the year ended June 30, 2015, the Advisor reimbursed the Fund for a trading error in the amount of $2,068, which had no impact on the Fund's total return.
6 Annualized.
See accompanying notes to financial statements.
116
UBS Global Allocation Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | $ | 11.04 | $ | 9.79 | |||||||||||||||
Net investment income (loss)1 | 0.06 | 0.05 | 0.02 | 0.01 | (0.00 | )2 | 0.02 | ||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.90 | ) | 0.68 | 1.27 | (0.56 | ) | 0.23 | 1.36 | |||||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | — | |||||||||||||||||||||
Net increase (decrease) from operations | (0.84 | ) | 0.73 | 1.29 | (0.54 | ) | 0.23 | 1.38 | |||||||||||||||||||
Dividends from net investment income | — | (0.17 | ) | (0.23 | ) | (0.27 | ) | — | (0.13 | ) | |||||||||||||||||
Net asset value, end of period | $ | 11.24 | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | $ | 11.04 | |||||||||||||||
Total investment return3 | (7.04 | )% | 6.34 | % | 12.51 | % | (4.81 | )%4 | 2.08 | % | 14.20 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.40 | %5 | 1.40 | % | 1.39 | % | 1.36 | % | 1.32 | % | 1.30 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.20 | %5 | 1.20 | % | 1.25 | % | 1.35 | % | 1.32 | % | 1.30 | % | |||||||||||||||
Net investment income (loss) | 0.94 | %5 | 0.39 | % | 0.16 | % | 0.09 | % | (0.01 | )% | 0.17 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 203,856 | $ | 159,678 | $ | 174,148 | $ | 190,813 | $ | 234,665 | $ | 309,296 | |||||||||||||||
Portfolio turnover | 17 | % | 54 | % | 56 | % | 60 | % | 62 | % | 49 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | $ | 11.25 | $ | 9.98 | |||||||||||||||
Net investment income1 | 0.07 | 0.08 | 0.05 | 0.04 | 0.03 | 0.05 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.91 | ) | 0.68 | 1.30 | (0.56 | ) | 0.23 | 1.39 | |||||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | — | |||||||||||||||||||||
Net increase (decrease) from operations | (0.84 | ) | 0.76 | 1.35 | (0.51 | ) | 0.26 | 1.44 | |||||||||||||||||||
Dividends from net investment income | — | (0.20 | ) | (0.26 | ) | (0.31 | ) | — | (0.17 | ) | |||||||||||||||||
Net asset value, end of period | $ | 11.50 | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | $ | 11.25 | |||||||||||||||
Total investment return3 | (6.96 | )% | 6.56 | % | 12.85 | % | (4.50 | )%4 | 2.31 | % | 14.56 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.14 | %5 | 1.14 | % | 1.12 | % | 1.09 | % | 1.04 | % | 1.00 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %5 | 0.95 | % | 1.00 | % | 1.09 | % | 1.04 | % | 1.00 | % | |||||||||||||||
Net investment income | 1.16 | %5 | 0.64 | % | 0.41 | % | 0.34 | % | 0.26 | % | 0.51 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 56,904 | $ | 64,009 | $ | 67,156 | $ | 91,004 | $ | 124,415 | $ | 129,417 | |||||||||||||||
Portfolio turnover | 17 | % | 54 | % | 56 | % | 60 | % | 62 | % | 49 | % |
1 Calculated using the average share method.
2 Amount represents less than $0.005 per share.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
4 During the year ended June 30, 2016, the Advisor reimbursed the Fund $316,557 which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions. If payment from Advisor was not made, the estimated total return would have been -4.90% for A shares and -4.59% for P shares.
5 Annualized.
See accompanying notes to financial statements.
117
UBS Emerging Markets Equity Opportunity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class P2
Six months ended December 31, 2018 (unaudited) | Period ended June 30, 20181 | ||||||||||
Net asset value, beginning of period | $ | 9.40 | $ | 10.00 | |||||||
Net investment income2 | 0.06 | 0.03 | |||||||||
Net realized and unrealized loss | (1.30 | ) | (0.63 | ) | |||||||
Net decrease from operations | (1.24 | ) | (0.60 | ) | |||||||
Dividends from net investment income | (0.05 | ) | — | ||||||||
Net asset value, end of period | $ | 8.11 | $ | 9.40 | |||||||
Total investment return3 | (13.29 | )% | (5.90 | )% | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.45 | %4 | 4.39 | %4 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | %4 | 0.44 | %4 | |||||||
Net investment income | 1.28 | %4 | 4.05 | %4 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 93,012 | $ | 94,349 | |||||||
Portfolio turnover | 34 | % | 0 | % |
1 For the period June 4, 2018 (commencement of operations) through June 30, 2018.
2 Calculated using the average share method.
3 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 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.
4 Annualized.
See accompanying notes to financial statements.
118
UBS Engage For Impact Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period is presented below:
For the period ended, December 31, 20181 (unaudited) | |||||||
Net asset value, beginning of period | $ | 10.00 | |||||
Net investment income2 | 0.01 | ||||||
Net realized and unrealized loss | (0.69 | ) | |||||
Net decrease from operations | (0.68 | ) | |||||
Dividends from net investment income | (0.01 | ) | |||||
Net asset value, end of period | $ | 9.31 | |||||
Total investment return3 | (6.84 | )% | |||||
Ratios to average net assets: | |||||||
Expenses before fee waivers and/or expense reimbursements | 4.98 | %4 | |||||
Expenses after fee waivers and/or expense reimbursements | 0.85 | %4 | |||||
Net investment income | 0.30 | %4 | |||||
Supplemental data: | |||||||
Net assets, end of period (000's) | $ | 10,296 | |||||
Portfolio turnover | 3 | % |
1 For the period October 24, 2018 (commencement of operations) through December 31, 2018.
2 Calculated using the average shares method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of the period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of the period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
4 Annualized.
See accompanying notes to financial statements.
119
UBS International 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 | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | $ | 8.95 | $ | 7.55 | |||||||||||||||
Net investment income1 | 0.02 | 0.08 | 0.19 | 0.13 | 0.10 | 0.08 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (1.31 | ) | 0.66 | 1.51 | (1.47 | ) | 0.53 | 1.51 | |||||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | — | |||||||||||||||||||||
Net increase (decrease) from operations | (1.29 | ) | 0.74 | 1.70 | (1.33 | ) | 0.63 | 1.59 | |||||||||||||||||||
Dividends from net investment income | (0.06 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | (0.19 | ) | |||||||||||||||
Distributions from net realized gains | (0.10 | ) | — | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | (0.19 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.75 | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | $ | 8.95 | |||||||||||||||
Total investment return2 | (12.71 | )% | 7.67 | % | 21.43 | % | (14.07 | )%3 | 7.14 | % | 21.32 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.52 | %4 | 2.02 | % | 2.25 | % | 2.37 | % | 2.47 | % | 2.74 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.25 | %4 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||||
Net investment income | 0.38 | %4 | 0.79 | % | 2.16 | % | 1.59 | % | 1.09 | % | 0.91 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 9,043 | $ | 8,049 | $ | 15,811 | $ | 5,204 | $ | 6,371 | $ | 7,541 | |||||||||||||||
Portfolio turnover | 40 | % | 43 | % | 33 | % | 114 | % | 42 | % | 137 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | $ | 8.99 | $ | 7.58 | |||||||||||||||
Net investment income1 | 0.03 | 0.14 | 0.14 | 0.16 | 0.13 | 0.09 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (1.31 | ) | 0.63 | 1.58 | (1.48 | ) | 0.51 | 1.53 | |||||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | — | |||||||||||||||||||||
Net increase (decrease) from operations | (1.28 | ) | 0.77 | 1.72 | (1.31 | ) | 0.64 | 1.62 | |||||||||||||||||||
Dividends from net investment income | (0.08 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | (0.21 | ) | |||||||||||||||
Distributions from net realized gains | (0.10 | ) | — | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | (0.21 | ) | |||||||||||||||
Net asset value, end of period | $ | 8.77 | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | $ | 8.99 | |||||||||||||||
Total investment return2 | (12.56 | )% | 7.94 | % | 21.68 | % | (13.83 | )%3 | 7.32 | % | 21.65 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.23 | %4 | 1.70 | % | 2.06 | % | 2.12 | % | 2.21 | % | 2.45 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.00 | %4 | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||||
Net investment income | 0.70 | %4 | 1.37 | % | 1.65 | % | 1.92 | % | 1.40 | % | 1.10 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 90,020 | $ | 65,750 | $ | 19,952 | $ | 16,277 | $ | 17,103 | $ | 12,462 | |||||||||||||||
Portfolio turnover | 40 | % | 43 | % | 33 | % | 114 | % | 42 | % | 137 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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 During the year ended June 30, 2016, the Advisor reimbursed the Fund $34,326, which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions, and $5,471 for a trading error. lf payment from Advisor was not made, the estimated total return would have been -14.18% for A shares and -13.94% for P shares.
4 Annualized.
See accompanying notes to financial statements.
120
UBS U.S. Small Cap Growth Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | $ | 24.76 | $ | 20.10 | |||||||||||||||
Net investment loss1 | (0.07 | ) | (0.17 | ) | (0.15 | ) | (0.13 | ) | (0.16 | ) | (0.21 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | (3.53 | ) | 4.92 | 4.34 | (3.89 | ) | 3.38 | 5.40 | |||||||||||||||||||
Net increase (decrease) from operations | (3.60 | ) | 4.75 | 4.19 | (4.02 | ) | 3.22 | 5.19 | |||||||||||||||||||
Distributions from net realized gains | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | (0.53 | ) | |||||||||||||||
Net asset value, end of period | $ | 15.19 | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | $ | 24.76 | |||||||||||||||
Total investment return2 | (17.34 | )% | 26.17 | % | 23.75 | % | (17.58 | )% | 15.61 | % | 26.42 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.57 | %3 | 1.66 | % | 1.56 | % | 1.53 | % | 1.51 | % | 1.45 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.24 | %3 | 1.24 | % | 1.24 | % | 1.24 | % | 1.35 | % | 1.40 | % | |||||||||||||||
Net investment loss | (0.67 | )%3 | (0.83 | )% | (0.77 | )% | (0.65 | )% | (0.69 | )% | (0.92 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 21,892 | $ | 26,498 | $ | 27,464 | $ | 28,048 | $ | 46,813 | $ | 42,552 | |||||||||||||||
Portfolio turnover | 32 | % | 67 | % | 50 | % | 109 | % | 64 | % | 57 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | $ | 26.00 | $ | 21.01 | |||||||||||||||
Net investment loss1 | (0.05 | ) | (0.13 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | (0.15 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | (3.89 | ) | 5.37 | 4.66 | (4.15 | ) | 3.60 | 5.67 | |||||||||||||||||||
Net increase (decrease) from operations | (3.94 | ) | 5.24 | 4.55 | (4.23 | ) | 3.49 | 5.52 | |||||||||||||||||||
Distributions from net realized gains | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | (0.53 | ) | |||||||||||||||
Net asset value, end of period | $ | 17.00 | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | $ | 26.00 | |||||||||||||||
Total investment return2 | (17.23 | )% | 26.50 | % | 24.09 | % | (17.39 | )% | 15.93 | % | 26.79 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.25 | %3 | 1.34 | % | 1.22 | % | 1.17 | % | 1.10 | % | 1.09 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.99 | %3 | 0.99 | % | 0.99 | % | 0.99 | % | 1.07 | % | 1.09 | % | |||||||||||||||
Net investment income | (0.42 | )%3 | (0.58 | )% | (0.50 | )% | (0.40 | )% | (0.43 | )% | (0.61 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 74,497 | $ | 88,845 | $ | 75,770 | $ | 130,227 | $ | 178,495 | $ | 226,376 | |||||||||||||||
Portfolio turnover | 32 | % | 67 | % | 50 | % | 109 | % | 64 | % | 57 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
See accompanying notes to financial statements.
121
UBS U.S. 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 | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | $ | 25.03 | $ | 19.85 | |||||||||||||||
Net investment income1 | 0.13 | 0.16 | 0.14 | 0.21 | 0.14 | 0.11 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (4.63 | ) | 3.20 | 5.84 | (1.88 | ) | 2.50 | 5.23 | |||||||||||||||||||
Net increase (decrease) from operations | (4.50 | ) | 3.36 | 5.98 | (1.67 | ) | 2.64 | 5.34 | |||||||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.13 | ) | (0.28 | ) | (0.37 | ) | (0.12 | ) | (0.16 | ) | |||||||||||||||
Net asset value, end of period | $ | 29.62 | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | $ | 25.03 | |||||||||||||||
Total investment return2 | (13.07 | )% | 10.79 | % | 23.61 | % | (6.13 | )% | 10.61 | % | 27.05 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.14 | %3 | 2.07 | % | 2.04 | % | 1.93 | % | 1.56 | % | 1.29 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %3 | 0.95 | % | 0.95 | % | 1.13 | % | 1.20 | % | 1.20 | % | |||||||||||||||
Net investment income | 0.77 | %3 | 0.48 | % | 0.49 | % | 0.81 | % | 0.53 | % | 0.47 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 10,152 | $ | 10,586 | $ | 11,857 | $ | 9,774 | $ | 9,784 | $ | 9,478 | |||||||||||||||
Portfolio turnover | 28 | % | 166 | % | 78 | % | 57 | % | 59 | % | 55 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | $ | 25.14 | $ | 19.94 | |||||||||||||||
Net investment income1 | 0.17 | 0.25 | 0.21 | 0.26 | 0.20 | 0.16 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (4.65 | ) | 3.21 | 5.87 | (1.89 | ) | 2.52 | 5.27 | |||||||||||||||||||
Net increase (decrease) from operations | (4.48 | ) | 3.46 | 6.08 | (1.63 | ) | 2.72 | 5.43 | |||||||||||||||||||
Dividends from net investment income | (0.40 | ) | (0.20 | ) | (0.35 | ) | (0.43 | ) | (0.19 | ) | (0.23 | ) | |||||||||||||||
Net asset value, end of period | $ | 29.72 | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | $ | 25.14 | |||||||||||||||
Total investment return2 | (12.95 | )% | 11.08 | % | 23.87 | % | (5.91 | )% | 10.90 | % | 27.38 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.87 | %3 | 1.79 | % | 1.76 | % | 1.64 | % | 1.07 | % | 0.99 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.70 | %3 | 0.70 | % | 0.70 | % | 0.90 | % | 0.95 | % | 0.95 | % | |||||||||||||||
Net investment income | 1.00 | %3 | 0.74 | % | 0.74 | % | 1.00 | % | 0.77 | % | 0.71 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 14,481 | $ | 17,182 | $ | 16,754 | $ | 15,147 | $ | 28,345 | $ | 126,735 | |||||||||||||||
Portfolio turnover | 28 | % | 166 | % | 78 | % | 57 | % | 59 | % | 55 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
See accompanying notes to financial statements.
122
UBS Municipal 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, 2018 | Years ended June 30, | Period ended | |||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | June 30, 20151 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||||
Net investment income2 | 0.09 | 0.16 | 0.15 | 0.17 | 0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.08 | (0.16 | ) | (0.27 | ) | 0.59 | (0.06 | ) | |||||||||||||||
Net increase (decrease) from operations | 0.17 | — | (0.12 | ) | 0.76 | 0.03 | |||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.16 | ) | (0.15 | ) | (0.18 | ) | (0.09 | ) | |||||||||||||
Distributions from net realized gains | — | — | (0.02 | ) | — | — | |||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.16 | ) | (0.17 | ) | (0.18 | ) | (0.09 | ) | |||||||||||||
Net asset value, end of period | $ | 10.15 | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | |||||||||||||
Total investment return3 | 1.68 | % | 0.04 | % | (1.11 | )% | 7.74 | % | 0.30 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.04 | %4 | 1.03 | % | 1.00 | % | 1.15 | % | 1.46 | %4 | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.65 | %4 | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %4 | |||||||||||||
Net investment income | 1.72 | %4 | 1.61 | % | 1.42 | % | 1.66 | % | 1.43 | %4 | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of period (000's) | $ | 13,324 | $ | 9,378 | $ | 21,007 | $ | 17,671 | $ | 10,929 | |||||||||||||
Portfolio turnover5 | 14 | % | 39 | % | 60 | % | 100 | % | 72 | % |
Class P
Six months ended December 31, 2018 | Years ended June 30, | Period ended | |||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | June 30, 20151 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||||
Net investment income2 | 0.10 | 0.19 | 0.17 | 0.19 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.08 | (0.16 | ) | (0.28 | ) | 0.60 | (0.05 | ) | |||||||||||||||
Net increase (decrease) from operations | 0.18 | 0.03 | (0.11 | ) | 0.79 | 0.05 | |||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.19 | ) | (0.17 | ) | (0.21 | ) | (0.11 | ) | |||||||||||||
Distributions from net realized gains | — | — | (0.02 | ) | — | — | |||||||||||||||||
Total dividends and distributions | (0.10 | ) | (0.19 | ) | (0.19 | ) | (0.21 | ) | (0.11 | ) | |||||||||||||
Net asset value, end of period | $ | 10.14 | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | |||||||||||||
Total investment return3 | 1.81 | % | 0.30 | % | (0.97 | )% | 8.01 | % | 0.45 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 0.79 | %4 | 0.79 | % | 0.77 | % | 0.89 | % | 1.23 | %4 | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | %4 | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | %4 | |||||||||||||
Net investment income | 1.96 | %4 | 1.88 | % | 1.68 | % | 1.89 | % | 1.63 | %4 | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of period (000's) | $ | 90,871 | $ | 107,153 | $ | 101,601 | $ | 90,146 | $ | 46,993 | |||||||||||||
Portfolio turnover5 | 14 | % | 39 | % | 60 | % | 100 | % | 72 | % |
1 For the period November 10, 2014 (commencement of operations) through June 30, 2015.
2 Calculated using the average share method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
4 Annualized.
5 Effective with the period ended June 30, 2017, calculation of the portfolio turnover rate excludes transactions involving variable-rate demand notes, which are considered short-term instruments due to the ability to demand immediate repayment.
See accompanying notes to financial statements.
123
UBS Sustainable Development Bank Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class P
Period ended December 31, 20181 (unaudited) | |||||||
Net asset value, beginning of period | $ | 10.00 | |||||
Net investment income2 | 0.05 | ||||||
Net realized and unrealized gain | 0.20 | ||||||
Net increase from operations | 0.25 | ||||||
Dividends from net investment income | (0.05 | ) | |||||
Net asset value, end of period | $ | 10.20 | |||||
Total investment return3 | 2.13 | % | |||||
Ratios to average net assets: | |||||||
Expenses before fee waivers and/or expense reimbursements | 2.59 | %4 | |||||
Expenses after fee waivers and/or expense reimbursements | 0.25 | %4 | |||||
Net investment income | 2.68 | %4 | |||||
Supplemental data: | |||||||
Net assets, end of period (000's) | $ | 15,747 | |||||
Portfolio turnover | 12 | % |
1 For the period October 24, 2018 (commencement of operations) through December 31, 2018.
2 Calculated using the average share method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
4 Annualized.
See accompanying notes to financial statements.
124
UBS Total Return Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended December 31, 2018 (unaudited) | Year ended June 30, 2018 | Period ended June 30, 20171 | |||||||||||||
Net asset value, beginning of period | $ | 14.40 | $ | 14.94 | $ | 15.24 | |||||||||
Net investment income2 | 0.23 | 0.47 | 0.25 | ||||||||||||
Net realized and unrealized loss | (0.14 | ) | (0.65 | ) | (0.30 | ) | |||||||||
Net increase (decrease) from operations | 0.09 | (0.18 | ) | (0.05 | ) | ||||||||||
Dividends from net investment income | (0.21 | ) | (0.36 | ) | (0.25 | ) | |||||||||
Return of capital | — | — | (0.00 | )3 | |||||||||||
Total dividends and distributions | (0.21 | ) | (0.36 | ) | (0.25 | ) | |||||||||
Net asset value, end of period | $ | 14.28 | $ | 14.40 | $ | 14.94 | |||||||||
Total investment return4 | 0.42 | % | (1.12 | )% | (0.31 | )% | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.74 | % | 1.45 | % | 1.74 | %5 | |||||||||
Expenses after fee waivers and/or expense reimbursements | 0.75 | % | 0.75 | % | 0.75 | %5 | |||||||||
Net investment income | 3.22 | % | 3.22 | % | 2.28 | %5 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 405 | $ | 108 | $ | 44 | |||||||||
Portfolio turnover | 64 | % | 236 | % | 700 | % |
Class P
Six months ended | Year ended June 30, | Year ended September 30, | |||||||||||||||||||||||||
December 31, 2018 | Nine months ended | ||||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | June 30, 20166 | 2015 | 2014 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | $ | 15.99 | $ | 15.89 | |||||||||||||||
Net investment income2 | 0.25 | 0.49 | 0.37 | 0.36 | 0.64 | 0.60 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (0.15 | ) | (0.63 | ) | (0.18 | ) | 0.13 | (0.96 | ) | 0.44 | |||||||||||||||||
Net increase (decrease) from operations | 0.10 | (0.14 | ) | 0.19 | 0.49 | (0.32 | ) | 1.04 | |||||||||||||||||||
Dividends from net investment income | (0.22 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.64 | ) | (0.62 | ) | |||||||||||||||
Distributions from net realized gains | — | — | — | — | (0.05 | ) | (0.32 | ) | |||||||||||||||||||
Return of capital | — | — | (0.00 | )3 | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.22 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.69 | ) | (0.94 | ) | |||||||||||||||
Net asset value, end of period | $ | 14.29 | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | $ | 15.99 | |||||||||||||||
Total investment return4 | 0.60 | % | (0.88 | )% | 1.32 | % | 3.33 | % | (2.05 | )% | 6.77 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.51 | % | 1.30 | % | 1.29 | % | 1.21 | %5 | 0.75 | % | 0.83 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.50 | % | 0.50 | % | 0.50 | % | 1.16 | %5 | 0.75 | % | 0.83 | % | |||||||||||||||
Net investment income | 3.40 | % | 3.29 | % | 2.45 | % | 3.22 | %5 | 4.04 | % | 3.76 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 38,100 | $ | 41,245 | $ | 49,919 | $ | 126,922 | $ | 131,473 | $ | 140,338 | |||||||||||||||
Portfolio turnover | 64 | % | 236 | % | 700 | % | 251 | % | 26 | % | 44 | % |
1 For the period September 29, 2016 (commencement of operations) through June 30, 2017.
2 Calculated using the average share method.
3 Amount represents less than $0.005 per share.
4 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods 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.
5 Annualized.
6 On May 23, 2016 Class P shares of the UBS Total Return Bond Fund acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end management investment company (the "Predecessor Fund"). The UBS Total Return Bond Fund's Class P shares have adopted the historical performance of the Predecessor Fund. In connection with the Reorganization, the fiscal year end for UBS Total Return Bond Fund has changed from September 30th to June 30th. As such, the fiscal period ended June 30, 2016 for UBS Total Return Bond Fund reflects the nine month period from October 1, 2015 through June 30, 2016.
See accompanying notes to financial statements.
125
The UBS Funds
Notes to financial statements (unaudited)
Organization and significant accounting policies
The UBS Funds (the "Trust") is an open-end management investment company registered with the US Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act"), as amended, currently offering multiple series representing seperate investment portfolios. The Trust is a Delaware statutory trust organized on August 13, 1993. The trustees of the Trust have authority to issue an unlimited number of shares of beneficial interest at par value of $0.001 per share.
The Trust has ten Funds available for investment, each having its own investment objectives and policies: UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS International Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Sustainable Equity Fund, UBS Municipal Bond Fund, UBS Sustainable Development Bank Bond Fund, and UBS Total Return Bond Fund, (each a "Fund", and collectively, the "Funds"). Each of the Funds is classified as a diversified investment company with the exception of UBS Dynamic Alpha Fund, UBS Municipal Bond Fund, and the UBS Sustainable Development Bank Bond Fund which are classified as non-diversified for purposes of the 1940 Act.
UBS Asset Management (Americas) Inc. ("UBS AM" or the "Advisor") serves as the investment advisor and administrator for the Funds. UBS Asset Management (US) Inc. ("UBS AM (US)") serves as principal underwriter for the Funds. UBS AM and UBS AM (US) are indirect wholly owned subsidiaries of UBS Group AG. UBS Group AG is an internationally diversified organization with headquarters in Zurich, Switzerland. UBS Group AG operates in many areas of the financial services industry.
The Funds currently offer Class A and Class P shares, with the exception of UBS Emerging Markets Equity Opportunity Fund, which currently offers Class P2 shares only. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing service and distribution charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plan, if any. Class P and Class P2 shares have no service or distribution plan.
Prior to July 12, 2018, the Funds offered Class C shares. At the recommendation of UBS Asset Management (Americas) Inc., each Fund's investment advisor, the Board of Trustees of the Trust approved the closure of Class C of each Fund and the automatic conversion of Class C shares of each Fund into Class A shares of the same Fund (the "Conversion").
Effective on July 12, 2018 (the "Closure Date"), the Funds ceased offering Class C shares. New or additional investments into Class C shares, including investments through an automatic investment plan, were not permitted after the Closure Date.
On October 12, 2018 (the "Conversion Date"), all outstanding Class C shares of each Fund were automatically converted into Class A shares of the same Fund. From the Closure Date to the Conversion Date (the "Conversion Period"), the 12b-1 distribution fees (0.50% of average net assets for UBS Municipal Bond Fund and UBS Total Return Bond Fund, and 0.75% of average net assets for all other Funds) and any contingent deferred sales charges applicable to Class C shares were waived; 12b-1 service fees (0.25% of average net assets) continued to be assessed. During the Conversion Period, automatic reinvestment of Class C share dividend and capital gain distributions continued. Upon the conversion of Class C shares into Class A shares, each Class C shareholder owned Class A shares having an aggregate value equal to the aggregate value of Class C shares held by that shareholder as of the close of business on the Conversion Date. Any contingent deferred sales charges applicable to Class C shares were waived in connection with the conversion to Class A shares. The 12b-1 service fee applicable to Class A shares applies to the converted shares. It is anticipated that the conversion of Class C shares into Class A shares will be tax-free for federal income tax purposes.
126
The UBS Funds
Notes to financial statements (unaudited)
The Trust accounts separately for the assets, liabilities and operations of each Fund. Expenses directly attributable to each Fund are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them on a pro rata basis.
In the normal course of business, the Funds may enter into contracts that contain a variety of representations that provide 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.
Under certain circumstances, shareholders of the Funds may receive payment for redemptions in securities rather than in cash.
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.
In March 2017, the FASB issued Accounting Standards Update 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): "Premium Amortization On Purchased Callable Debt Securities" ("ASU 2017-08"). The update provides guidance related to the amortization period for certain purchased callable debt securities held at a premium. ASU 2017-08 is effective for those annual periods, and interim periods within those annual periods, that begin after December 15, 2018. Management is currently assessing the potential impact of these changes to future financial statements.
In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The update introduces new fair value disclosure requirements, eliminates some prior fair value disclosure requirements, and modifies certain existing fair value disclosure requirements. ASU 2018-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently assessing the potential impact of these changes to future financial statements.
The following is a summary of significant accounting policies:
Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment transactions and foreign exchange transactions are calculated using the specific identified cost method. Dividend income and expense 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.
Dividends and distributions: Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return
127
The UBS Funds
Notes to financial statements (unaudited)
of capital are 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.
Foreign currency translation: The books and records of the Funds are maintained in US dollars. Foreign currency amounts are translated into US dollars as follows: (1) the foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into US dollars based on the current exchange rates each business day; and (2) purchases and sales of investment securities and income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. The resulting exchange gains and losses are included in the Statement of operations.
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. Net realized foreign currency transaction gain (loss) is treated as ordinary income (loss) for income tax reporting purposes.
Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which some Funds in the Trust invest.
Small capitalization ("small cap") companies may be more vulnerable than larger capitalization ("large cap") companies to adverse business or economic developments. Small cap companies may also have limited product lines, markets or financial resources, and may be dependent on a relatively small management group. Securities of such companies may be less liquid and more volatile than securities of large cap companies or the market averages in general and therefore may involve greater risk than investing in large cap companies. In addition, small cap companies may not be well-known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects.
The ability of the issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
Investments in bonds with ratings of BB (Standard & Poor's Financial Services LLC or Fitch Ratings, Inc.) 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 predominantly 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.
Valuation of investments
Each Fund generally 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). The NYSE normally is not open, and the Funds do not price their shares, on most national holidays and Good Friday. To the extent that a Fund's assets are traded in other markets on days when the NYSE is not open, the value of a Fund's assets may be affected on those days. If trading on the NYSE is halted for the day
128
The UBS Funds
Notes to financial statements (unaudited)
before 4:00 p.m., Eastern time, a Fund's net asset value per share generally will still be calculated as of the close of regular trading on the NYSE. The time at which a Fund calculates its net asset value and until which purchase, sale or exchange orders are accepted may be changed as permitted by the SEC.
Each Fund calculates its net asset value based on the current market value, where available, for its portfolio investments. The Funds normally obtain market values for their investments from independent pricing sources and broker-dealers. Independednt 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. ("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. Investments listed on foreign stock exchanges may be fair valued based on significant events that have occurred subsequent to the close of the foreign markets. 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 AM. 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"). 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 a 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 a "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, Fair Value Measurement, investments in investment companies without publicly published prices are also valued at the daily net asset value.
129
The UBS Funds
Notes to financial statements (unaudited)
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. 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.
The Board has delegated to the Equities, Fixed Income, and Multi-Asset Valuation Committee ("VC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The VC is comprised of representatives of management. The VC 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 VC, 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 VC 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; securities 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 each Fund's 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 risks.
Level 3—Unobservable inputs inclusive of the Funds' own assumptions in determining the fair value of investments.
In accordance with the requirements of US GAAP, a fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
Investments
Treasury Inflation Protected Securities: The Fund may purchase Treasury inflation protected securities ("TIPS") which are debt securities issued by the U.S. Treasury. TIPS adjust for inflation based on changes in the published
130
The UBS Funds
Notes to financial statements (unaudited)
Consumer Price Index ("CPI"). During periods of inflation when the CPI index increases, the principal amount of the debt to which the rate of interest is applied increases, which in turn increases the yield. During periods of deflationwhen the CPI index decreases, the principal amount of the debt to which the rate of interest is applied decreases, which in turn lowers the yield. At maturity, TIPS return the higher of the principal amount at maturity or the initial face amount of the debt.
Real estate investment trusts: Certain Funds may invest in real estate investment trusts ("REITs"). Distributions from a REIT are initially recorded as dividend income and may subsequently be recharacterized by the REIT at the end of its tax year as a return of capital and/or capital gains. The Fund estimates the character of dividends received from REITs for financial reporting purposes based on the distribution history of each REIT. Once actual distribution characterizations are made available by the REITs, typically after calendar year end, the Fund updates its accounting and/or tax books and records.
Securities traded on to-be-announced basis: Certain Funds may from time to time purchase, or short sell, securities on a to-be-announced ("TBA") basis. In a TBA transaction, the Portfolio 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 securities. Securities purchased on a TBA basis are not settled until they are delivered to the Portfolio, normally 15 to 45 days later. Beginning on the date the Portfolio enters into a TBA transaction, cash, US government securities or other liquid securities are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations, and their current value is determined in the same manner as for other securities.
Mortgage-backed securities: Certain Funds may invest in mortgage-backed securities ("MBS"), representing direct or indirect interests in pools of underlying mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.
The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Company or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government.
Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but with some form of non-government credit enhancement.
Collateralized mortgage obligations ("CMO") are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.
The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time.
131
The UBS Funds
Notes to financial statements (unaudited)
Prepayments on a pool of mortgage loans are influenced by a variety of economic, geographic, social and other factors. Generally, prepayments on fixed-rate mortgage loans will increase during a period of falling interest rates and decrease during a period of rising interest rates. Certain classes of CMOs and other MBS are structured in a manner that makes them extremely sensitive to changes in prepayment rates. Such classes include interest-only ("IO") and principal-only ("PO") classes. IOs are entitled to receive all or a portion of the interest, but none (or only a nominal amount) of the principal payments, from the underlying mortgage assets. If the mortgage assets underlying an IO experience greater than anticipated principal prepayments, then the total amount of interest payments allocable to the IO class, and therefore the yield to investors, generally will be reduced. Conversely, PO classes are entitled to receive all or a portion of the principal payments, but none of the interest, from the underlying mortgage assets. PO classes are purchased at substantial discounts from par, and the yield to investors will be reduced if principal payments are slower than expected.
Asset-backed securities: Certain Funds may invest in asset-backed securities ("ABS"), representing interests in pools of certain types of underlying installment loans, home equity loans, leases of various types of real and personal property and receivables from revolving lines of credit (credit cards). Such assets are securitized through the use of trusts or special purpose corporations. The yield characteristics of ABS differ from those of traditional debt securities. One such major difference is that principal may be prepaid at any time because the underlying obligations generally may be prepaid at any time. ABS may decrease in value as a result of increases in interest rates and may benefit less than other fixed-income securities from declining interest rates because of the risk of prepayment.
Short sales: UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund may engage in short sale transactions in which the Fund sells a security it does not own (or does not have the right to acquire at no added cost), in anticipation of a decline in the security's price.
The Fund must borrow the security to make delivery to the buyer. 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 appreciation or depreciation on the Statement of operations. The Fund will realize a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security, and the Fund will realize a gain if the security declines in price between those same dates. The Fund segregates collateral, consisting of cash or liquid assets, sufficient to collateralize the market value of the investments sold short. The Fund incurs transaction costs, including dividend expense, borrowing costs and interest expenses in connection with opening, maintaining and closing short sales. These dividends and interest are booked as an expense or liability to the Fund.
Because a Fund's loss on a short sale arises from increases in the value of the investment sold short, such loss, like the potential increase in price of the security sold short, is theoretically unlimited. The Fund's investments held long could also decline in value at the same time the value of the investment sold short increases, thereby increasing the Fund's potential for loss. There is also the risk that the counterparty to a short sale transaction may fail to honor its contract terms, causing a loss to the Fund.
For the period ended December 31, 2018, UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund did not engage in short sale transactions.
Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's portfolio footnotes.
132
The UBS Funds
Notes to financial statements (unaudited)
Derivative instruments
Purchased options: Certain Funds may purchase put and call options, including, but not limited to, options on foreign or US securities, indices, foreign currencies, options on futures contracts and options on swap agreements (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. 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 on 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. Purchased options are shown as portfolio holdings within the Portfolio of investments and are included in the Statement of assets and liabilities in investments, at value.
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 future, security or currency transaction to determine the realized gain or loss.
Option writing: Certain Funds may write (sell) put and call options, including, but not limited to, options on foreign or US securities, indices, foreign currencies, options on futures contracts and options on swap agreements (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 on the Fund's Statement of assets and liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option, which a 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, a Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, or currency underlying the written option. Exercise of an option written by a Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
In the normal course of trading activities, the Funds trade and hold certain fair valued derivative contracts that constitute guarantees. Such contracts include written put options, where the Funds would be obligated to purchase securities at specified prices (i.e. the options are exercised by the counterparties). The maximum payout for these contracts is limited to the number of put option contracts written and the related strike prices, respectively. Maximum payout amounts could be offset by the subsequent sale, if any, of assets obtained via the execution of a payout event. At December 31, 2018, UBS Total Return Bond Fund had maximum payout amounts of approximately $1,500,000 relating to written put option contracts.
Futures contracts: Certain 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 realized gains. Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference asset, such as a specific security or currency, at a specified price at a specified later date.
133
The UBS Funds
Notes to financial statements (unaudited)
Upon entering into a futures contract, a Fund is required to deliver to a broker an amount of cash and/or US government securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin". Subsequent payments, known as "variation margin", generally are made or received by a Fund, 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 appreciation or depreciation 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.
Using 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.
Forward foreign currency contracts: Certain Funds may enter into forward foreign currency contracts 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. Generally, a forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward date. Non-deliverable forward foreign currency contracts are settled with the counterparty in US dollars, or another fully convertible currency, without the physical delivery of foreign currency.
Fluctuations in the value of open forward foreign currency contracts are recorded daily for book purposes as unrealized appreciation or depreciation on forward foreign currency contracts by the Funds. Realized gains and losses on forward foreign currency contracts include net gains or losses recognized by the Funds on contracts which have been sold or matured.
Risks may arise upon entering into forward foreign currency contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of foreign currencies relative to the US dollar or each other.
Swap agreements: Certain Funds may engage in swap agreements, including, but not limited to, interest rate, credit default and total return swap agreements. A Fund expects 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 the 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.
The Funds accrue for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation or depreciation of swap agreements. Once interim payments are settled in cash, the net amount is recorded as realized gain or loss on swap agreements, in addition to realized gain or 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.
Certain Funds may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect themselves from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default of a security or other credit event of the referenced obligation. As a buyer, the Fund would make periodic payments to
134
The UBS Funds
Notes to financial statements (unaudited)
the counterparty, and the Fund would receive payments only upon the occurrence of a default or credit event. If no default or credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a default or a credit event does occur, the Fund typically would receive full notional value for the referenced obligation that may have little or no value. As a seller, the Fund would receive periodic payments from the counterparty, and the Fund would make payments only upon the occurrence of a default or a credit event. If no default or credit event occurs, the Fund will gain the periodic stream of payments it received over the term of the contract and the counterparty will lose its periodic stream of payments over the term of the contract. However, if a default or credit event occurs, the Fund typically would pay full notional value for the referenced obligation that may have little or no value. Credit default swap agreements may involve greater risks than if the Fund had invested in the referenced obligation directly and are subject to general market risk, liquidity risk and credit risk.
Credit default swap agreements on credit indices 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 write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a list of a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of referenced credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name's weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. A Fund may use credit default swap agreements on credit indices to hedge a portfolio of credit default swaps or bonds with a credit default swap on indices which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. Credit default swap agreements on credit indices are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality.
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 a cheapest-to-deliver option (the buyer of protection's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swap agreements 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 the 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, which may exceed the amount of the value reflected on the Statement of assets and liabilities. Notional amounts of all credit default swap agreements outstanding as of the period end for which a Fund is the seller of protection are disclosed under the section "Credit default swap agreements on corporate issues—sell protection" in the 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.
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 pay-
135
The UBS Funds
Notes to financial statements (unaudited)
ment to the counterparty, respectively. Total return swap agreements 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 rate risk, credit risk and the risk that there may be unfavorable changes in the underlying investments or instruments.
The use of swap agreements involves investment techniques, risks, and transaction costs different from those associated with ordinary portfolio security transactions, including assumptions about market conditions, interest rates, and other applicable factors. As a result, the performance of the Fund will be different than if it had used ordinary portfolio security transactions. OTC 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, the 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, the Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
Certain clearinghouses offer clearing for limited types of derivatives transactions, such as interest rate and credit default swap agreements. Centrally cleared swap agreements must be transacted through a futures commission merchant ("FCM") and cleared through a clearinghouse that serves as a central counterparty. The performance of a centrally cleared swap transaction is effectively guaranteed by a central clearinghouse, thereby reducing 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. Centrally cleared swap agreements, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
Derivatives by underlying risk: Investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of operations. Under US GAAP, investment companies do not qualify for hedge accounting. 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 US GAAP.
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, 2018.
Swap agreements, forward foreign currency contracts, swaptions and options written entered into by the Funds 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, 2018 is reflected in the Statement of assets and liabilities.
136
The UBS Funds
Notes to financial statements (unaudited)
At December 31, 2018, the Fund had the following derivatives categorized by underlying risk:
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | 41,683 | $ | — | $ | — | $ | 95,817 | $ | 137,500 | |||||||||||||
Forward foreign currency contracts | — | 500,096 | — | — | 500,096 | ||||||||||||||||||
Swap agreements | — | — | 91,670 | — | 91,670 | ||||||||||||||||||
Total value | $ | 41,683 | $ | 500,096 | $ | 91,670 | $ | 95,817 | $ | 729,266 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | (251,027 | ) | $ | — | $ | — | $ | (726,711 | ) | $ | (977,738 | ) | ||||||||||
Forward foreign currency contracts | — | (405,201 | ) | — | — | (405,201 | ) | ||||||||||||||||
Swap agreements | — | — | (135,095 | ) | — | (135,095 | ) | ||||||||||||||||
Total value | $ | (251,027 | ) | $ | (405,201 | ) | $ | (135,095 | ) | $ | (726,711 | ) | $ | (1,518,034 | ) |
During the period ended December 31, 2018, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Futures | $ | (54,749 | ) | $ | — | $ | — | $ | (2,808,882 | ) | $ | (2,863,631 | ) | ||||||||||
Forward foreign currency contracts | — | 2,490,919 | — | — | 2,490,919 | ||||||||||||||||||
Swap agreements | — | — | (34,898 | ) | — | (34,898 | ) | ||||||||||||||||
$ | (54,749 | ) | $ | 2,490,919 | $ | (34,898 | ) | $ | (2,808,882 | ) | $ | (407,610 | ) | ||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Futures | $ | 15,076 | $ | — | $ | — | $ | 332,358 | $ | 347,434 | |||||||||||||
Forward foreign currency contracts | — | (2,119,293 | ) | — | — | (2,119,293 | ) | ||||||||||||||||
Swap agreements | — | — | 42,700 | — | 42,700 | ||||||||||||||||||
Net change in appreciation (depreciation) | $ | 15,076 | $ | (2,119,293 | ) | $ | 42,700 | $ | 332,358 | $ | (1,729,159 | ) |
Table footnotes begin on page 140.
137
The UBS Funds
Notes to financial statements (unaudited)
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | 1,677,619 | $ | — | $ | — | $ | 682,265 | $ | 2,359,884 | |||||||||||||
Forward foreign currency contracts | — | 1,164,884 | — | — | 1,164,884 | ||||||||||||||||||
Swap agreements | — | — | 184,775 | — | 184,775 | ||||||||||||||||||
Total value | $ | 1,677,619 | $ | 1,164,884 | $ | 184,775 | $ | 682,265 | $ | 3,709,543 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | (562,739 | ) | $ | — | $ | — | $ | (1,214,408 | ) | $ | (1,777,147 | ) | ||||||||||
Forward foreign currency contracts | — | (890,952 | ) | — | — | (890,952 | ) | ||||||||||||||||
Swap agreements | — | — | (738,855 | ) | — | (738,855 | ) | ||||||||||||||||
Total value | $ | (562,739 | ) | $ | (890,952 | ) | $ | (738,855 | ) | $ | (1,214,408 | ) | $ | (3,406,954 | ) |
During the period ended December 31, 2018, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Futures | $ | (128,950 | ) | $ | — | $ | — | $ | (1,956,940 | ) | $ | (2,085,890 | ) | ||||||||||
Forward foreign currency contracts | — | 1,704,630 | — | — | 1,704,630 | ||||||||||||||||||
Options purchased | — | — | — | (473,499 | ) | (473,499 | ) | ||||||||||||||||
Swap agreements | — | — | (60,088 | ) | — | (60,088 | ) | ||||||||||||||||
$ | (128,950 | ) | $ | 1,704,630 | $ | (60,088 | ) | $ | (2,430,439 | ) | $ | (914,847 | ) | ||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Futures | $ | 13,894 | $ | — | $ | — | $ | 235,109 | $ | 249,003 | |||||||||||||
Forward foreign currency contracts | — | (438,717 | ) | — | — | (438,717 | ) | ||||||||||||||||
Options purchased | — | — | — | 665,930 | 665,930 | ||||||||||||||||||
Swap agreements | — | — | 257,106 | — | 257,106 | ||||||||||||||||||
Net change in appreciation (depreciation) | $ | 13,894 | $ | (438,717 | ) | $ | 257,106 | $ | 901,039 | $ | 733,322 |
During the period ended December 31, 2018, net realized gains (losses) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||
Net realized (loss)3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (2,764 | ) | $ | — | $ | — | $ | (2,764 | ) |
Table footnotes begin on page 140.
138
The UBS Funds
Notes to financial statements (unaudited)
During the period ended December 31, 2018, net realized gains (losses) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Engage For Impact Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (473 | ) | $ | — | $ | — | $ | (473 | ) |
During the period ended December 31, 2018, net realized gains (losses) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS International Sustainable Equity Fund | |||||||||||||||||||||||
Net realized (loss)3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (23,137 | ) | $ | — | $ | — | $ | (23,137 | ) |
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Futures contracts | $ | 153,838 | $ | — | $ | — | $ | — | $ | 153,838 | |||||||||||||
Forward foreign currency contracts | — | 23,783 | — | — | 23,783 | ||||||||||||||||||
Swap agreements | — | — | 19,569 | — | 19,569 | ||||||||||||||||||
Total value | $ | 153,838 | $ | 23,783 | $ | 19,569 | $ | — | $ | 197,190 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Futures contracts | $ | (60,301 | ) | $ | — | $ | — | $ | — | $ | (60,301 | ) | |||||||||||
Forward foreign currency contracts | — | (28,387 | ) | — | — | (28,387 | ) | ||||||||||||||||
Options and swaptions written | — | — | (11,699 | ) | — | (11,699 | ) | ||||||||||||||||
Total value | $ | (60,301 | ) | $ | (28,387 | ) | $ | (11,699 | ) | $ | — | $ | (100,387 | ) |
Table footnotes begin on page 140.
139
The UBS Funds
Notes to financial statements (unaudited)
During the period ended December 31, 2018, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Net realized gain (loss) | |||||||||||||||||||||||
Futures | $ | (99,329 | ) | $ | — | $ | — | $ | — | $ | (99,329 | ) | |||||||||||
Forward foreign currency contracts | — | 43,156 | — | — | 43,156 | ||||||||||||||||||
Options and swaptions purchased | (5,483 | ) | (4,386 | ) | — | — | (9,869 | ) | |||||||||||||||
Options and swaptions written | 580 | — | — | — | 580 | ||||||||||||||||||
Swap agreements | 17,905 | — | (32,579 | ) | — | (14,674 | ) | ||||||||||||||||
$ | (86,327 | ) | $ | 38,770 | $ | (32,579 | ) | $ | — | $ | (80,136 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) | |||||||||||||||||||||||
Futures | $ | 56,863 | $ | — | $ | — | $ | — | $ | 56,863 | |||||||||||||
Forward foreign currency contracts | — | (21,007 | ) | — | — | (21,007 | ) | ||||||||||||||||
Options and swaptions purchased | — | 3,905 | — | — | 3,905 | ||||||||||||||||||
Options and swaptions written | — | — | (2,336 | ) | — | (2,336 | ) | ||||||||||||||||
Swap agreements | — | — | (532 | ) | — | (532 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | 56,863 | $ | (17,102 | ) | $ | (2,868 | ) | $ | — | $ | 36,893 |
1 In the Statement of assets and liabilities, options and swaptions purchased are shown within investments of unaffiliated issuers, at value, swap agreements (except centrally cleared swap agreements) are shown within outstanding swap agreements, at value, while forward foreign currency contracts are shown within unrealized appreciation on forward foreign currency contracts. Futures contracts are reported in the table above using cumulative appreciation of futures contracts and centrally cleared swap agreements are reported at value, as reported in the futures contracts and centrally cleared swap agreements tables at the end of the Portfolio of investments, respectively, but only the variation margin to be received, if any, is reported within the Statement of assets and liabilities.
2 In the Statement of assets and liabilities, options written are shown within options written, at value, swap agreements (except centrally cleared swap agreements) are shown within outstanding swap agreements, at value, while forward foreign currency contracts are shown within unrealized depreciation on forward foreign currency contracts. Futures contracts are reported in the table above using cumulative depreciation of futures contracts and centrally cleared swap agreements are reported at value, as reported in the futures contracts and centrally cleared swap agreements tables at the end of the Portfolio of investments, respectively, but only the variation margin to be paid, if any, is reported within the Statement of assets and liabilities.
3 The net realized gain (loss) is shown in the Statement of operations in net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts, unless otherwise noted. The net realized gain (loss) on options purchased is shown in the Statement of operations in net realized gain (loss) on investments in unaffiliated issuers.
4 The change in net unrealized appreciation (depreciation) is shown in the Statement of operations in change in net unrealized appreciation (depreciation) on futures contracts, options written, swap agreements and forward foreign currency contracts, unless otherwise noted. The change in net unrealized appreciation (depreciation) of options purchased is shown in the Statement of operations in change in net unrealized appreciation (depreciation) on investments.
Offsetting of certain derivatives: The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar 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. The Statement of assets and liabilities is presented gross of any netting.
140
The UBS Funds
Notes to financial statements (unaudited)
At December 31, 2018, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar were as follows:
UBS Dynamic Alpha Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Forward foreign currency contracts | $ | 500,096 | $ | (405,201 | ) | ||||||
Futures contracts1 | 137,500 | (977,738 | ) | ||||||||
Swap agreements1 | 91,670 | (135,095 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | $ | 729,266 | $ | (1,518,034 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (228,393 | ) | 1,112,833 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 500,873 | $ | (405,201 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BOA | $ | 48,013 | $ | — | $ | — | $ | 48,013 | |||||||||||
CSI | 17,100 | — | — | 17,100 | |||||||||||||||
HSBC | 1,517 | (1,517 | ) | — | — | ||||||||||||||
JPMCB | 6,932 | (6,932 | ) | — | — | ||||||||||||||
SSC | 427,311 | (236,364 | ) | — | 190,947 | ||||||||||||||
Total | $ | 500,873 | $ | (244,813 | ) | $ | — | $ | 256,060 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
CITI | $ | (6,280 | ) | $ | — | $ | — | $ | (6,280 | ) | |||||||||
HSBC | (32,906 | ) | 1,517 | — | (31,389 | ) | |||||||||||||
JPMCB | (129,651 | ) | 6,932 | — | (122,719 | ) | |||||||||||||
SSC | (236,364 | ) | 236,364 | — | — | ||||||||||||||
Total | $ | (405,201 | ) | $ | 244,813 | $ | — | $ | (160,388 | ) |
Table footnotes begin on page 143
141
The UBS Funds
Notes to financial statements (unaudited)
At December 31, 2018, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar agreement were as follows:
UBS Global Allocation Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Forward foreign currency contracts | $ | 1,164,884 | $ | (890,952 | ) | ||||||
Futures contracts1 | 2,359,884 | (1,777,147 | ) | ||||||||
Swap agreements1 | 184,775 | (738,855 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | $ | 3,709,543 | $ | (3,406,954 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (2,544,659 | ) | 2,516,002 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 1,164,884 | $ | (890,952 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BOA | $ | 43,702 | $ | (43,702 | ) | $ | — | $ | — | ||||||||||
CIBC | 68,934 | (44,550 | ) | — | 24,384 | ||||||||||||||
CITI | 763,145 | (199,092 | ) | — | 564,053 | ||||||||||||||
HSBC | 24,452 | (24,452 | ) | — | — | ||||||||||||||
JPMCB | 45,398 | (45,398 | ) | — | — | ||||||||||||||
SSC | 219,253 | (219,253 | ) | — | — | ||||||||||||||
Total | $ | 1,164,884 | $ | (576,447 | ) | $ | — | $ | 588,437 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
BB | $ | (1,243 | ) | $ | — | $ | — | $ | (1,243 | ) | |||||||||
BOA | (80,566 | ) | 43,702 | — | (36,864 | ) | |||||||||||||
CIBC | (44,550 | ) | 44,550 | — | — | ||||||||||||||
CITI | (199,092 | ) | 199,092 | — | — | ||||||||||||||
HSBC | (99,306 | ) | 24,452 | — | (74,854 | ) | |||||||||||||
JPMCB | (202,001 | ) | 45,398 | — | (156,603 | ) | |||||||||||||
SSC | (264,194 | ) | 219,253 | — | (44,941 | ) | |||||||||||||
Total | $ | (890,952 | ) | $ | 576,447 | $ | — | $ | (314,505 | ) |
Table footnotes begin on page 143.
142
The UBS Funds
Notes to financial statements (unaudited)
At December 31, 2018, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar were as follows:
UBS Total Return Bond Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Forward foreign currency contracts | $ | 23,783 | $ | (28,387 | ) | ||||||
Futures contracts1 | 153,838 | (60,301 | ) | ||||||||
Swaptions written | — | (11,699 | ) | ||||||||
Swap agreements1 | 19,569 | — | |||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | $ | 197,190 | $ | (100,387 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (153,838 | ) | 72,000 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 43,352 | $ | (28,387 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BB | $ | 14,991 | $ | — | $ | — | $ | 14,991 | |||||||||||
CITI | 22,137 | — | — | 22,137 | |||||||||||||||
GS | 4,892 | — | — | 4,892 | |||||||||||||||
GSI | 1,332 | (1,332 | ) | — | — | ||||||||||||||
Total | $ | 43,352 | $ | (1,332 | ) | $ | — | $ | 42,020 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
GSI | $ | (28,387 | ) | $ | 1,332 | $ | — | $ | (27,055 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps, at value 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.
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 $4.0 billion | $4.0 billion and over | |||||||||||||||||||||
UBS Dynamic Alpha Fund | 0.850 | % | 0.800 | % | 0.750 | % | 0.725 | % | 0.700 | % | 0.680 | % |
143
The UBS Funds
Notes to financial statements (unaudited)
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $3.0 billion | $3.0 billion to $6.0 billion | $6.0 billion and over | ||||||||||||||||||||||||
UBS Global Allocation Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | 0.630 | % | 0.610 | % |
Fund | $0 to $250 mm | $250 mm to $500 mm | $500 mm to $750 mm | $750 mm to $1.0 billion | $1.0 billion and over | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 0.900 | % | 0.875 | % | 0.850 | % | 0.825 | % | 0.750 | % | |||||||||||||
UBS Sustainable Development Bank Bond Fund | 0.150 | 0.145 | 0.140 | 0.135 | 0.130 | ||||||||||||||||||
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion and over | ||||||||||||||||||
UBS International Sustainable Equity Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | |||||||||||||
UBS U.S. Small Cap Growth Fund | 0.850 | 0.850 | 0.825 | 0.825 | 0.825 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 |
Fund | All assets | ||||||
UBS Engage For Impact Fund | 0.750 | % | |||||
UBS Municipal Bond Fund | 0.400 | ||||||
UBS Total Return Bond Fund | 0.500 |
For UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS International Sustainable Equity Fund, UBS U.S. Sustainable Equity Fund, UBS Municipal Bond Fund, UBS Sustainable Development Bank Bond Fund, and UBS Total Return 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 Funds' operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Dynamic Alpha Fund and UBS 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 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. The contractual fee waiver and/or expense reimbursement agreement for each Fund, except UBS International Sustainable Equity Fund, will remain in place through the period ending October 29, 2019. The fee waiver and/or expense reimbursement for UBS International Sustainable Equity Fund is irrevocable. Investment advisory fees, including the dollar amount waived or reimbursed, for the period ended December 31, 2018 were as follows:
Fund | Class A expense cap | Class P expense cap | Class P2 expense cap | Amount due to or (due from) advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | Recoupments | ||||||||||||||||||||||||
UBS Dynamic Alpha Fund | 1.35 | % | 1.10 | % | — | $ | 130,017 | $ | 291,973 | $ | (170,555 | ) | $ | — | |||||||||||||||||
UBS Global Allocation Fund | 1.20 | 0.95 | — | 470,833 | 1,174,271 | (238,092 | ) | — | |||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 1.40 | 1.15 | 0.40 | % | (66,913 | ) | 403,957 | (471,629 | ) | — | |||||||||||||||||||||
UBS Engage For Impact Fund | 1.10 | 0.85 | — | 34,197 | 10,244 | (56,431 | ) | — | |||||||||||||||||||||||
UBS International Sustainable Equity Fund | 1.25 | 1.00 | — | 105,575 | 411,182 | (118,796 | ) | — | |||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.24 | 0.99 | — | 258,188 | 534,036 | (168,453 | ) | — |
144
The UBS Funds
Notes to financial statements (unaudited)
Fund | Class A expense cap | Class P expense cap | Class P2 expense cap | Amount due to or (due from) advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | Recoupments | ||||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.95 | % | 0.70 | % | — | $ | (199,645 | ) | $ | 102,248 | $ | (169,088 | ) | $ | — | ||||||||||||||||
UBS Municipal Bond Fund | 0.65 | 0.40 | — | 15,029 | 232,919 | (221,101 | ) | — | |||||||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | 0.35 | 0.25 | 0.15 | % | 42,021 | 3,403 | (53,066 | ) | — | ||||||||||||||||||||||
UBS Total Return Bond Fund | 0.75 | 0.50 | — | (89,891 | ) | 100,012 | (202,740 | ) | — |
Each Fund, except for UBS International Sustainable Equity Fund and UBS Emerging Markets Equity Opportunity Fund Class P2, 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, 2018 are subject to repayment through June 30, 2022.
UBS Emerging Markets Equity Opportunity Fund Class P2 will reimburse the Advisor for expenses it reimburses for a period of three years following such expense reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total expense ratio to exceed the contractual limit as then may be in effect for the class. The expenses reimbursed for the period ended December 31, 2018 are subject to repayment through June 30, 2022.
At December 31, 2018, 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, 2019 | Expires June 30, 2020 | Expires June 30, 2021 | Expires June 30, 2022 | ||||||||||||||||||
UBS Dynamic Alpha Fund—Class A | $ | 372,551 | $ | 73,863 | $ | 78,717 | $ | 131,826 | $ | 88,145 | |||||||||||||
UBS Dynamic Alpha Fund—Class C | 140,675 | 44,827 | 39,316 | 56,532 | — | ||||||||||||||||||
UBS Dynamic Alpha Fund—Class P | 692,030 | 194,170 | 197,801 | 217,649 | 82,410 | ||||||||||||||||||
UBS Global Allocation Fund—Class A | 800,435 | 26,083 | 244,083 | 350,483 | 179,786 | ||||||||||||||||||
UBS Global Allocation Fund—Class C | 439,281 | 60,816 | 163,331 | 215,134 | — | ||||||||||||||||||
UBS Global Allocation Fund—Class P | 288,754 | — | 100,857 | 129,591 | 58,306 | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P2 | 133,950 | — | — | 68,961 | 64,989 | ||||||||||||||||||
UBS Engage For Impact Fund—Class P | 56,431 | — | — | — | 56,4311 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 357,455 | 109,706 | 92,631 | 111,537 | 43,581 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class C | 41,159 | 13,652 | 12,605 | 14,902 | — | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class P | 960,179 | 274,790 | 289,826 | 270,691 | 124,872 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund—Class A | 378,542 | 75,018 | 112,035 | 125,718 | 65,771 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund—Class C | 66,353 | 17,727 | 23,567 | 21,746 | 3,313 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund—Class P | 633,350 | 172,060 | 171,679 | 189,607 | 100,004 | ||||||||||||||||||
UBS Municipal Bond Fund—Class A | 215,593 | 65,430 | 78,706 | 50,025 | 21,432 | ||||||||||||||||||
UBS Municipal Bond Fund—Class C | 67,280 | 22,631 | 23,093 | 21,556 | — | ||||||||||||||||||
UBS Municipal Bond Fund—Class P | 1,248,066 | 271,844 | 356,454 | 420,099 | 199,669 | ||||||||||||||||||
UBS Sustainable Development Bank Bond Fund—Class P | 53,066 | — | — | — | 53,0661 | ||||||||||||||||||
UBS Total Return Bond Fund—Class A | 1,492 | — | 1932 | 278 | 1,020 | ||||||||||||||||||
UBS Total Return Bond Fund—Class C | 1,047 | — | 4312 | 463 | 152 | ||||||||||||||||||
UBS Total Return Bond Fund—Class P | 1,155,291 | 42,595 | 543,959 | 367,169 | 201,568 |
1 For the period from October 24, 2018 (commencement of operations) through December 31, 2018.
2 For the period from September 29, 2016 (commencement of operations) through June 30, 2017.
145
The UBS Funds
Notes to financial statements (unaudited)
Each Fund pays UBS 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, 2018, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Dynamic Alpha Fund | $ | 3,957 | $ | 25,762 | |||||||
UBS Global Allocation Fund | 16,965 | 110,088 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 5,678 | 33,663 | |||||||||
UBS Engage For Impact Fund | 640 | 1,024 | |||||||||
UBS International Sustainable Equity Fund | 6,350 | 38,548 | |||||||||
UBS U.S. Small Cap Growth Fund | 6,884 | 47,121 | |||||||||
UBS U.S. Sustainable Equity Fund | 1,660 | 10,955 | |||||||||
UBS Municipal Bond Fund | 6,620 | 43,672 | |||||||||
UBS Sustainable Development Bank Bond Fund | 1,018 | 1,702 | |||||||||
UBS Total Return Bond Fund | 5,085 | 15,002 |
The Funds may invest in shares of certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the period ended December 31, 2018, if any, have been included near the end of each Fund's Portfolio of investments.
During the period ending December 31, 2018, UBS Global Allocation Fund received proceeds from affiliated fund that was previously liquidated in the amount of $263,116.
During the period ended December 31, 2018, the Funds listed below paid broker commissions to affiliates of the investment advisor as detailed in the below table. These broker commissions are reflected in the Statement of assets and liabilities within investments at cost of unaffiliated issuers, and the Statement of operations within net realized gain (loss) on, and/or change in net unrealized appreciation (depreciation) on investments and/or futures contracts.
Fund | UBS Group AG | ||||||
UBS Global Allocation Fund | $ | 403 | |||||
UBS Emerging Markets Equity Opportunity Fund | 5,100 | ||||||
UBS International Sustainable Equity Fund | 1,096 |
Service and distribution plans
UBS 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 shares. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A and Class C shares. 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 C1 | |||||||||
UBS Dynamic Alpha Fund | 0.25 | % | 1.00 | % | |||||||
UBS Global Allocation Fund | 0.25 | 1.00 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 0.25 | — | |||||||||
UBS Engage For Impact Fund | 0.25 | — | |||||||||
UBS International Sustainable Equity Fund | 0.25 | 0.25 | |||||||||
UBS U.S. Small Cap Growth Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Sustainable Equity Fund | 0.25 | 1.00 |
146
The UBS Funds
Notes to financial statements (unaudited)
Fund | Class A | Class C1 | |||||||||
UBS Municipal Bond Fund | 0.25 | % | 0.75 | % | |||||||
UBS Sustainable Development Bank Bond Fund | 0.10 | — | |||||||||
UBS Total Return Bond Fund | 0.25 | 0.75 |
1 Effective July 12, 2018, the distribution fees for Class C were terminated and on October 12, 2018, Class C shares of each Fund were automatically converted into Class A shares of the same Fund.
UBS 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 shares. At December 31, 2018, certain Funds owed UBS AM (US) service and distribution fees, and for the period ended December 31, 2018, certain Funds were informed by UBS AM (US) that it had earned sales charges as follows:
Fund | Service and distribution fees owed | Sales charges earned by distributor | |||||||||
UBS Dynamic Alpha Fund—Class A | $ | 14,942 | $ | — | |||||||
UBS Dynamic Alpha Fund—Class C | (19,288 | ) | — | ||||||||
UBS Global Allocation Fund—Class A | 88,797 | 2,575 | |||||||||
UBS Global Allocation Fund—Class C | (147,586 | ) | — | ||||||||
UBS International Sustainable Equity Fund—Class A | 3,124 | 3,593 | |||||||||
UBS International Sustainable Equity Fund—Class C | (4,135 | ) | — | ||||||||
UBS U.S. Small Cap Growth Fund—Class A | 10,140 | 6,793 | |||||||||
UBS U.S. Small Cap Growth Fund—Class C | (6,600 | ) | — | ||||||||
UBS U.S. Sustainable Equity Fund—Class A | 5,559 | 2,925 | |||||||||
UBS U.S. Sustainable Equity Fund—Class C | (6,103 | ) | — | ||||||||
UBS Municipal Bond Fund—Class A | 5,440 | 1,743 | |||||||||
UBS Municipal Bond Fund—Class C | (8,110 | ) | 29 | ||||||||
UBS Total Return Bond Fund—Class A | 130 | 473 | |||||||||
UBS Total Return Bond Fund—Class C | (63 | ) | — |
Transfer agency and related services fees
UBS Financial Services Inc. provides certain services to the Funds pursuant to a delegation of authority from BNY Mellon Investment Servicing (US) Inc. ("BNY Mellon"), the Funds' transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the period ended December 31, 2018, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total delegated service fees as follows:
Fund | Delegated services fees earned | ||||||
UBS Dynamic Alpha Fund | $ | 14,767 | |||||
UBS Global Allocation Fund | 45,463 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 7,284 | ||||||
UBS Engage For Impact Fund | 200 | ||||||
UBS International Sustainable Equity Fund | 4,762 | ||||||
UBS U.S. Small Cap Growth Fund | 2,882 | ||||||
UBS U.S. Sustainable Equity Fund | 1,407 | ||||||
UBS Municipal Bond Fund | 7,006 | ||||||
UBS Sustainable Development Bank Bond Fund | 213 | ||||||
UBS Total Return Bond Fund | 532 |
147
The UBS Funds
Notes to financial statements (unaudited)
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 initially secured by cash, U.S. government securities and irrevocable letters of credit 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. In the event that the market value of the cash, U.S. government securities, and irrevocable letters of credit securing the loan falls below 100% for domestic securities, and 103% for foreign securities, the borrower must provide additional cash, U.S. government securities, and irrevocable letters of credit so that the total securing the loan is at least 102% of the market value for domestic securities and 105% of the market value for foreign securities.
Each Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, each Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. Each Fund receives compensation for lending its securities from interest or dividends earned on the cash, US government securities and irrevocable letters of credit held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. Cash collateral received is invested in State Street Institutional U.S. Government Money Market Fund, which is included in each Fund's Portfolio of investments. State Street Bank and Trust Company serves as the Funds' lending agent.
At December 31, 2018, the following Funds had securities on loan at value, cash collateral and non-cash collateral as follows:
Funds | Value of securities on loan | Cash collateral | Non-cash collateral* | Total collateral | Security types held as non-cash collateral | ||||||||||||||||||
UBS Global Allocation Fund | $ | 4,017,854 | $ | 3,151,316 | $ | 949,953 | $ | 4,101,269 | US Treasury Notes and US Treasury Bills | ||||||||||||||
UBS Engage For Impact Fund | 606,073 | 361,644 | 252,808 | 614,452 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS International Sustainable Equity Fund | 3,813,221 | 3,522,975 | 431,775 | 3,954,750 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 18,568,032 | 12,556,432 | 6,171,594 | 18,728,026 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 1,279,854 | 456,310 | 825,694 | 1,282,004 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS Total Return Bond Fund | 21,271 | 21,650 | — | 21,650 |
* These securities are held for the benefit of the Fund at the Fund's custodian. The Fund cannot repledge or resell this collateral. As such, collateral is excluded from the Statement of assets and liabilities.
The table below represents the disaggregation at December 31, 2018 of the gross amount of recognized liabilities for securities lending transactions. As the securities loaned are subject to termination by the Funds or the borrower at any time, the remaining contractual maturities of the transactions presented below are considered to be overnight and continuous.
Type of securities loaned | Total amount of recognized | ||||||||||||||
Fund | Equity securities | Corporate bonds | liabilities for securities lending transactions | ||||||||||||
UBS Global Allocation Fund | $ | 4,101,269 | $ | — | $ | 4,101,269 | |||||||||
UBS Engage For Impact Fund | 614,452 | — | 614,452 | ||||||||||||
UBS International Sustainable Equity Fund | 3,954,750 | — | 3,954,750 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 18,728,026 | — | 18,728,026 | ||||||||||||
UBS U.S. Sustainable Equity Fund | 1,282,004 | — | 1,282,004 | ||||||||||||
UBS Total Return Bond Fund | — | 21,650 | 21,650 |
148
The UBS Funds
Notes to financial statements (unaudited)
Bank line of credit
The Funds participate with other funds managed by UBS AM in a $125 million committed credit facility (the "Committed Credit Facility") with State Street Bank and Trust Company. The Committed Credit Facility is to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of a participating 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. Each Fund covered by the Committed Credit Facility has agreed to pay commitment fees on the average daily balance of the Committed Credit Facility not utilized. Commitment fees have been allocated among the Funds in the Committed Credit Facility as follows: 50% of the allocation is based on the relative asset size of Funds and the other 50% of the allocation is based on utilization.
For the period ended December 31, 2018, UBS Global Allocation Fund had borrowings as follows:
Fund | Average daily amount of borrowing outstandng | Days outstanding | Interest expense | Weighted average annualized interest rate | |||||||||||||||
UBS Global Allocation Fund | $ | 603,265 | 1 | $ | 58 | 3.470 | % |
Commission recapture program
Certain Funds participate in a brokerage commission recapture program. These Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. For the period ended December 31, 2018, following Funds recorded recaptured commissions which are reflected in the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS Global Allocation Fund | $ | 849 | |||||
UBS U.S. Small Cap Growth Fund | 5,774 | ||||||
UBS U.S. Sustainable Equity Fund | 263 |
Purchases and sales of securities
For the period ended December 31, 2018, aggregate purchases and sales of portfolio securities, excluding short-term securities, were as follows:
Fund | Purchases | Sales | |||||||||
UBS Dynamic Alpha Fund | $ | 5,044,676 | $ | 6,425,081 | |||||||
UBS Global Allocation Fund | 38,407,752 | 48,560,368 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 51,496,738 | 29,595,350 | |||||||||
UBS Engage For Impact Fund* | 10,777,307 | 209,606 | |||||||||
UBS International Sustainable Equity Fund | 73,299,370 | 38,556,337 | |||||||||
UBS U.S. Small Cap Growth Fund | 39,691,779 | 38,521,873 | |||||||||
UBS U.S. Sustainable Equity Fund | 8,100,471 | 9,532,946 | |||||||||
UBS Municipal Bond Fund | 15,501,294 | 28,516,457 | |||||||||
UBS Sustainable Development Bank Bond Fund* | 16,515,866 | 1,326,620 | |||||||||
UBS Total Return Bond Fund | 24,467,816 | 27,624,253 |
* Commenced operations on October 24, 2018.
149
The UBS Funds
Notes to financial statements (unaudited)
Shares of beneficial interest
There is an unlimited number of $0.001 par value shares of beneficial interest authorized. Transactions in shares of beneficial interest for each of the Funds for the period ended December 31, 2018 were as follows:
UBS Dynamic Alpha Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 1,733,516 | $ | 10,885,266 | 29 | $ | 172 | 229,764 | $ | 1,482,266 | ||||||||||||||||||
Shares repurchased | (1,090,477 | ) | (6,817,745 | ) | (2,041,453 | ) | (11,835,820 | ) | (696,575 | ) | (4,463,925 | ) | |||||||||||||||
Dividends reinvested | 43,541 | 263,858 | — | — | 47,271 | 293,081 | |||||||||||||||||||||
Net increase (decrease) | 686,580 | $ | 4,331,379 | (2,041,424 | ) | $ | (11,835,648 | ) | (419,540 | ) | $ | (2,688,578 | ) |
UBS Global Allocation Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 6,674,364 | $ | 78,565,107 | 368 | $ | 4,343 | 251,654 | $ | 3,045,664 | ||||||||||||||||||
Shares repurchased | (1,750,934 | ) | (20,608,389 | ) | (7,102,702 | ) | (81,393,805 | ) | (487,946 | ) | (5,916,765 | ) | |||||||||||||||
Net increase (decrease) | 4,923,430 | $ | 57,956,718 | (7,102,334 | ) | $ | (81,389,462 | ) | (236,292 | ) | $ | (2,871,101 | ) |
UBS Emerging Markets Equity Opportunity Fund
Class P2 | |||||||||||
Shares | Amount | ||||||||||
Shares sold | 4,631,288 | $ | 38,628,110 | ||||||||
Shares repurchased | (3,211,120 | ) | (26,624,181 | ) | |||||||
Dividends reinvested | 14,186 | 113,629 | |||||||||
Net increase | 1,434,354 | $ | 12,117,558 |
UBS Engage For Impact Fund*
Class P | |||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Shares sold | 1,648,123 | $ | 16,586,634 | ||||||||||||||||||||||||
Shares repurchased | (542,749 | ) | (5,476,664 | ) | |||||||||||||||||||||||
Dividends reinvested | 694 | 6,441 | |||||||||||||||||||||||||
Net increase | 1,106,068 | $ | 11,116,411 |
* Commenced operations on October 24, 2018.
UBS International Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 308,936 | $ | 2,983,139 | 68 | $ | 677 | 5,582,510 | $ | 55,891,949 | ||||||||||||||||||
Shares repurchased | �� | (81,577 | ) | (752,413 | ) | (306,357 | ) | (2,896,134 | ) | (1,930,436 | ) | (18,187,264 | ) | ||||||||||||||
Dividends reinvested | 16,761 | 146,495 | — | — | 186,593 | 1,632,689 | |||||||||||||||||||||
Net increase (decrease) | 244,120 | $ | 2,377,221 | (306,289 | ) | $ | (2,895,457 | ) | 3,838,667 | $ | 39,337,374 |
150
The UBS Funds
Notes to financial statements (unaudited)
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 277,561 | $ | 5,508,043 | 64 | $ | 1,074 | 809,739 | $ | 18,844,941 | ||||||||||||||||||
Shares repurchased | (256,156 | ) | (5,255,160 | ) | (220,983 | ) | (3,573,188 | ) | (807,134 | ) | (14,813,075 | ) | |||||||||||||||
Dividends reinvested | 141,687 | 2,146,557 | — | — | 498,552 | 8,450,452 | |||||||||||||||||||||
Net increase (decrease) | 163,092 | $ | 2,399,440 | (220,919 | ) | $ | (3,572,114 | ) | 501,157 | $ | 12,482,318 |
UBS U.S. Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 48,959 | $ | 1,642,949 | 339 | $ | 11,279 | 20,440 | $ | 701,166 | ||||||||||||||||||
Shares repurchased | (16,939 | ) | (570,160 | ) | (53,037 | ) | (1,701,888 | ) | (35,900 | ) | (1,210,918 | ) | |||||||||||||||
Dividends reinvested | 3,335 | 98,945 | — | — | 6,157 | 183,215 | |||||||||||||||||||||
Net increase (decrease) | 35,355 | $ | 1,171,734 | (52,698 | ) | $ | (1,690,609 | ) | (9,303 | ) | $ | (326,537 | ) |
UBS Municipal Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 549,584 | $ | 5,478,464 | — | $ | — | 1,278,420 | $ | 12,848,564 | ||||||||||||||||||
Shares repurchased | (175,776 | ) | (1,766,503 | ) | (481,289 | ) | (4,785,209 | ) | (3,038,412 | ) | (30,435,592 | ) | |||||||||||||||
Dividends reinvested | 7,946 | 79,737 | 1,430 | 14,361 | 74,209 | 744,544 | |||||||||||||||||||||
Net increase (decrease) | 381,754 | $ | 3,791,698 | (479,859 | ) | $ | (4,770,848 | ) | (1,685,783 | ) | $ | (16,842,484 | ) |
UBS Sustainable Development Bank Bond Fund*
Class P | |||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Shares sold | 2,542,683 | $ | 25,498,071 | ||||||||||||||||||||||||
Shares repurchased | (1,002,261 | ) | (10,072,730 | ) | |||||||||||||||||||||||
Dividends reinvested | 3,910 | 39,529 | |||||||||||||||||||||||||
Net increase | 1,544,332 | $ | 15,464,870 |
* Commenced operations on October 24, 2018.
UBS Total Return Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 20,873 | $ | 297,187 | — | $ | — | 9,773 | $ | 137,996 | ||||||||||||||||||
Shares repurchased | (150 | ) | (2,126 | ) | (4,388 | ) | (62,527 | ) | (238,948 | ) | (3,424,641 | ) | |||||||||||||||
Dividends reinvested | 172 | 2,451 | 30 | 431 | 33,433 | 477,788 | |||||||||||||||||||||
Net increase (decrease) | 20,895 | $ | 297,512 | (4,358 | ) | $ | (62,096 | ) | (195,742 | ) | $ | (2,808,857 | ) |
151
The UBS Funds
Notes to financial statements (unaudited)
For the period ended June 30, 2018, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Dynamic Alpha Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 31,316 | $ | 204,659 | 9,602 | $ | 58,365 | 442,351 | $ | 2,955,988 | ||||||||||||||||||
Shares repurchased | (1,904,131 | ) | (12,419,160 | ) | (846,800 | ) | (5,135,444 | ) | (10,476,773 | ) | (70,241,614 | ) | |||||||||||||||
Net decrease | (1,872,815 | ) | $ | (12,214,501 | ) | (837,198 | ) | $ | (5,077,079 | ) | (10,034,422 | ) | $ | (67,285,626 | ) |
UBS Global Allocation Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 289,406 | $ | 3,564,575 | 28,848 | $ | 341,578 | 409,046 | $ | 5,029,324 | ||||||||||||||||||
Shares repurchased | (2,359,162 | ) | (28,667,203 | ) | (1,571,007 | ) | (18,660,574 | ) | (1,007,646 | ) | (12,508,312 | ) | |||||||||||||||
Dividends reinvested | 179,487 | 2,178,965 | 46,140 | 547,419 | 81,201 | 1,006,085 | |||||||||||||||||||||
Net decrease | (1,890,269 | ) | $ | (22,923,663 | ) | (1,496,019 | ) | $ | (17,771,577 | ) | (517,399 | ) | $ | (6,472,903 | ) |
UBS Emerging Markets Equity Opportunity Fund*
Class P2 | |||||||||||
Shares | Amount | ||||||||||
Shares sold | 10,035,301 | $ | 94,963,376 | ||||||||
Shares repurchased | (2,851 | ) | (26,410 | ) | |||||||
Net increase | 10,032,450 | $ | 94,936,966 |
* Commencement of operations on June 4, 2018.
UBS International Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 196,951 | $ | 2,054,040 | 102,906 | $ | 1,044,928 | 4,773,953 | $ | 50,967,066 | ||||||||||||||||||
Shares repurchased | (1,064,788 | ) | (10,673,023 | ) | (16,388 | ) | (170,155 | ) | (460,563 | ) | (4,898,577 | ) | |||||||||||||||
Dividends reinvested | 6,904 | 73,043 | 1,637 | 16,928 | 37,265 | 395,005 | |||||||||||||||||||||
Net increase (decrease) | (860,933 | ) | $ | (8,545,940 | ) | 88,155 | $ | 891,701 | 4,350,655 | $ | 46,463,494 |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 290,435 | $ | 5,750,755 | 14,650 | $ | 247,378 | 557,112 | $ | 12,279,415 | ||||||||||||||||||
Shares repurchased | (595,980 | ) | (11,835,852 | ) | (88,717 | ) | (1,456,115 | ) | (786,334 | ) | (17,089,357 | ) | |||||||||||||||
Dividends reinvested | 291,339 | 5,232,441 | 65,635 | 934,650 | 803,594 | 15,911,159 | |||||||||||||||||||||
Net increase (decrease) | (14,206 | ) | $ | (852,656 | ) | (8,432 | ) | $ | (274,087 | ) | 574,372 | $ | 11,101,217 |
152
The UBS Funds
Notes to financial statements (unaudited)
UBS U.S. Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 15,561 | $ | 523,438 | 7,139 | $ | 232,242 | 29,771 | $ | 994,129 | ||||||||||||||||||
Shares repurchased | (89,463 | ) | (2,989,898 | ) | (21,726 | ) | (698,276 | ) | (70,821 | ) | (2,388,437 | ) | |||||||||||||||
Dividends reinvested | 1,343 | 44,336 | — | — | 3,057 | 101,176 | |||||||||||||||||||||
Net decrease | (72,559 | ) | $ | (2,422,124 | ) | (14,587 | ) | $ | (466,034 | ) | (37,993 | ) | $ | (1,293,132 | ) |
UBS Municipal Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 87,495 | $ | 891,300 | 43,409 | $ | 445,022 | 3,312,184 | $ | 33,748,266 | ||||||||||||||||||
Shares repurchased | (1,225,823 | ) | (12,579,549 | ) | (137,287 | ) | (1,392,979 | ) | (2,764,240 | ) | (28,033,046 | ) | |||||||||||||||
Dividends reinvested | 15,594 | 158,836 | 4,802 | 48,795 | 161,035 | 1,635,604 | |||||||||||||||||||||
Net increase (decrease) | (1,122,734 | ) | $ | (11,529,413 | ) | (89,076 | ) | $ | (899,162 | ) | 708,979 | $ | 7,350,824 |
UBS Total Return Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 8,147 | $ | 118,949 | 3,138 | $ | 46,135 | 710 | $ | 10,588 | ||||||||||||||||||
Shares repurchased | (3,666 | ) | (54,433 | ) | (1,738 | ) | (26,088 | ) | (542,478 | ) | (8,047,420 | ) | |||||||||||||||
Dividends reinvested | 65 | 950 | 56 | 815 | 63,417 | 937,087 | |||||||||||||||||||||
Net increase (decrease) | 4,546 | $ | 65,466 | 1,456 | $ | 20,862 | (478,351 | ) | $ | (7,099,745 | ) |
Federal tax status
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.
153
The UBS Funds
Notes to financial statements (unaudited)
The tax character of distributions paid during the fiscal year ended June 30, 2018 was as follows:
2018 | |||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from long term realized capital gains | Total distributions paid | |||||||||||||||
UBS Global Allocation Fund | $ | — | $ | 4,090,862 | $ | — | $ | 4,090,862 | |||||||||||
UBS International Sustainable Equity Fund | — | 515,646 | — | 515,646 | |||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 2,899,291 | 20,871,646 | 23,770,937 | |||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 153,050 | — | 153,050 | |||||||||||||||
UBS Municipal Bond Fund | 2,305,211 | 887 | — | 2,306,098 | |||||||||||||||
UBS Total Return Bond Fund | — | 1,216,036 | — | 1,216,036 |
The tax character of distributions paid and components of accumulated earnings (deficit) on a tax basis current fiscal year will be determined after the Trust's fiscal year ending June 30, 2019.
For federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments, including derivatives, held at December 31, 2018 were as follows:
Fund | Cost of investments | Gross unrealized appreciation | Gross unrealized depreciation | Net unrealized appreciation (depreciation) on investments | |||||||||||||||
UBS Dynamic Alpha Fund | $ | 66,346,971 | $ | 1,242,949 | $ | (11,278,430 | ) | $ | (10,035,481 | ) | |||||||||
UBS Global Allocation Fund | 260,074,500 | 14,024,891 | (27,185,269 | ) | (13,160,378 | ) | |||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 105,432,515 | 1,469,865 | (11,239,456 | ) | (9,769,591 | ) | |||||||||||||
UBS Engage For Impact Fund | 11,135,632 | 38,101 | (837,508 | ) | (799,407 | ) | |||||||||||||
UBS International Sustainable Equity Fund | 114,127,269 | 826,930 | (15,258,884 | ) | (14,431,954 | ) | |||||||||||||
UBS U.S. Small Cap Growth Fund | 106,043,620 | 17,422,582 | (13,073,548 | ) | 4,349,034 | ||||||||||||||
UBS U.S. Sustainable Equity Fund | 29,139,671 | 792,902 | (5,021,216 | ) | (4,228,314 | ) | |||||||||||||
UBS Municipal Bond Fund | 105,703,350 | 675,049 | (1,022,615 | ) | (347,566 | ) | |||||||||||||
UBS Sustainable Development Bank Bond Fund | 16,128,024 | 275,057 | — | 275,057 | |||||||||||||||
UBS Total Return Bond Fund | 38,687,485 | 452,464 | (1,129,481 | ) | (677,017 | ) |
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. These carryforwards are available as a reduction, to the extent provided in regulations, of future realized capital gains. To the extent that such losses are used to offset future net realized capital gains, it is probable these gains will not be distributed. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At June 30, 2018, the following Funds had post-enactment net capital losses that will be carried forward indefinitely, as follows:
Fund | Short-term losses | Long-term losses | Net capital losses | ||||||||||||
UBS Dynamic Alpha Fund | $ | 16,063,911 | $ | 12,318,050 | $ | 28,381,961 | |||||||||
UBS Municipal Bond Fund | 874,634 | 18,810 | 893,444 | ||||||||||||
UBS Total Return Bond Fund | 2,443,941 | 1,102,286 | 3,546,227 |
154
The UBS Funds
Notes to financial statements (unaudited)
At June 30, 2018, 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, 2019 | ||||||
UBS Dynamic Alpha Fund | $ | 46,428,719 |
During the fiscal year ended June 30, 2018, the following Funds utilized capital loss carryforwards to offset current capital gains:
Fund | Amount | ||||||
UBS Dynamic Alpha Fund | $ | 1,104,248 | |||||
UBS Global Allocation Fund | 29,685,921 | ||||||
UBS International Sustainable Equity Fund | 2,960,490 | ||||||
UBS U.S. Sustainable Equity Fund | 6,741,326 |
During the fiscal year ended June 30, 2018, the following Funds had capital loss carryforwards expire un-utilized:
Fund | Amount | ||||||
UBS Dynamic Alpha Fund | $ | 202,927,795 | |||||
UBS Global Allocation Fund | 833,882,020 | ||||||
UBS International Sustainable Equity Fund | 5,690,042 | ||||||
UBS U.S. Sustainable Equity Fund | 73,195,633 |
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, 2018, the following Funds incurred and elected to defer qualified late year losses of the following:
Post October capital loss | |||||||||||||||
Fund | Late year ordinary loss | Short-term losses | Long-term losses | ||||||||||||
UBS Dynamic Alpha Fund | $ | 237,385 | $ | — | $ | — | |||||||||
UBS Global Allocation Fund | 111,619 | — | — |
ASC 740-10 "Income Taxes-Overall" sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken. The Funds have conducted an analysis and concluded, as of December 31, 2018, that there are no significant uncertain tax positions taken or expected to be taken that would require recognition in the financial statements. It is each Fund's policy to record any significant foreign tax exposures in the financial statements. 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 ended December 31, 2018, the Funds did not incur any interest or penalties.
Under the applicable foreign tax laws, gains on certain securities held in certain foreign countries may be subject to taxes that will be paid by the Funds.
Each of the tax years in the four year fiscal period ended December 31, 2018 or since inception in the case of UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS Municipal Bond Fund, and UBS Sustainable Development Bank Bond Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
155
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 Fund's (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Fund 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 Fund directly at 1-800-647 1568, online on the Fund's Web site: www.ubs.com/ubsam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).
156
The UBS Funds
Board approval of investment advisory agreements (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 Asset Management (Americas) Inc. (the "Advisor") and its affiliates, considered the initial approval of the investment advisory agreements (each, an "Advisory Agreement" and together, the "Advisory Agreements") between the Trust and the Advisor for each of UBS Engage For Impact Fund and UBS Sustainable Development Bank Bond Fund (the "Funds").
At the Meeting, the Board considered a number of factors in connection with its deliberations concerning the approval of the Advisory Agreement for each Fund, including: (i) the nature, extent, and quality of the services to be provided by the Advisor to the Funds; (ii) 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 Funds; and (iii) whether economies of scale will be realized by the Advisor with respect to the Funds, as they grow larger, and the extent to which the economies of scale are reflected in the level of the proposed management fees to be 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 Funds, the Board reviewed the material presented by the Advisor describing the various services to be provided to the Funds. The Board noted that in addition to investment management services, the Advisor would provide the Funds 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 Funds. The Board considered that the Advisor was a well-established investment management organization employing investment personnel with significant experience in the investment management industry. The Board also considered the Advisor's in-house research capabilities, as well as other research services available to it, including research services available to the Advisor as a result of securities transactions effected for other series of the Trust and the Advisor's other investment management clients, and noted that the Advisor had extensive global research capabilities. The Board also evaluated the Advisor's proposed portfolio management process for each Fund.
The Board also noted and discussed the services that the Advisor and its affiliates would provide to the Funds under other agreements with the Trust including administration services to be provided by the Advisor, underwriting services to be provided by UBS 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 Funds, 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 Funds were consistent with the operational requirements of the Funds, and would meet the needs of the Funds' shareholders.
Performance.
The Board also noted that, as the Funds had not yet commenced investment operations, there was no investment performance for either the Funds or the Advisor in managing the Funds for the Board to evaluate.
Fund Fees and Expenses.
When considering the fees and expenses to be borne by each Fund, and the reasonableness of the management fees to be paid to the Advisor in light of the services to be provided to each Fund, the Board compared the fees to be charged by the Advisor to each Fund to the fees charged to the funds in its peer group for comparable services.
157
The UBS Funds
Board approval of investment advisory agreements (unaudited) (concluded)
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 each Fund were comparable to similar funds. The Board also considered that the Advisor had agreed to an expense limit arrangement through October 29, 2019. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.
Costs and Profitability.
The Board noted that the Advisor could not report any financial results from its relationship with the Funds because the Funds had not yet commenced investment operations, and thus, the Board could not evaluate the profitability of the Funds. The Board considered the expected "fall-out" or ancillary benefits to the Advisor and its affiliates as the result of their relationship with the Funds; for example, the ability to attract other clients due to the Advisor's role as investment adviser to the Funds. The Board then concluded that the level of profits to be realized by the Advisor and its affiliates with respect to the Funds, 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 Funds, as they grows larger, and the extent to which this is reflected in the level of advisory fees to be charged. The Board noted that, because the Funds 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, including a majority of the Independent Trustees, with the assistance of independent counsel, concluded that the approval of the Advisory Agreement for each Fund was in the best interests of the respective Fund and its shareholders.
158
PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019-6028
S1627
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 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 13. 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.
(a) (4) Change in the registrant’s independent public accountant - 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
By: | /s/ Igor Lasun |
|
| Igor Lasun |
|
| President |
|
|
| |
Date: | March 11, 2019 |
|
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
By: | /s/ Igor Lasun |
|
| Igor Lasun |
|
| President |
|
|
| |
Date: | March 11, 2019 |
|
|
| |
By: | /s/ Joanne Kilkeary |
|
| Joanne Kilkeary |
|
| Vice President, Treasurer and Principal Accounting Officer |
|
|
| |
Date: | March 11, 2019 |
|