UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-06637 | |||||||
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The UBS Funds | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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One North Wacker Drive, Chicago, IL |
| 60606-2807 | ||||||
(Address of principal executive offices) |
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Keith A. Weller, Esq. UBS Asset Management One North Wacker Drive Chicago, IL 60606 | ||||||||
(Name and address of agent for service) | ||||||||
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Copy to: | ||||||||
Bruce G. Leto, Esq. Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 260 Philadelphia, PA 19103-7098 | ||||||||
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Registrant’s telephone number, including area code: | 312-525-7100 |
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Date of fiscal year end: | June 30 |
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Date of reporting period: | June 30, 2019 |
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Item 1. Reports to Stockholders.
(a) Copy of the report transmitted to shareholders:
(b) Copy of each notice transmitted to shareholders in reliance on Rule 30e-3 under the Investment Company Act of 1940, as amended (the “1940 Act”), that contains disclosures specified by paragraph (c)(3) of that rule: Not applicable to the registrant.
The UBS Funds
Annual Report | June 30, 2019
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 | 34 | ||||||
UBS Engage For Impact Fund | 41 | ||||||
UBS International Sustainable Equity Fund | 49 | ||||||
UBS U.S. Small Cap Growth Fund | 58 | ||||||
UBS U.S. Sustainable Equity Fund | 68 | ||||||
UBS Municipal Bond Fund | 76 | ||||||
UBS Sustainable Development Bank Bond Fund | 84 | ||||||
UBS Total Return Bond Fund | 91 | ||||||
Explanation of expense disclosure | 106 | ||||||
Statement of assets and liabilities | 110 | ||||||
Statement of operations | 118 | ||||||
Statement of changes in net assets | 122 | ||||||
Financial highlights | 126 | ||||||
Notes to financial statements | 136 | ||||||
Report of independent registered public accounting firm | 167 | ||||||
Federal tax information | 169 | ||||||
General information | 170 | ||||||
Board approval of investment advisory agreements | 171 | ||||||
Trustee and officer information | 175 |
President's letter
August 14, 2019
Dear Shareholder,
The last time we wrote to you, markets were in the red—almost all asset classes had posted significant losses in the fourth quarter of 2018 amid a significant spike in volatility—and there seemed to be "nowhere to hide."
While the volatility has continued, in the six months ending June 30, 2019, the tide has certainly turned. In the first half of 2019 despite some ups and downs, markets have been very robust, with some hitting new record highs. There was a very different market mindset on the Federal Reserve and interest rates.
Whereas at the end of 2018, with the Fed on a "pause" in a hiking cycle and officials making comments suggesting there could be another hike, in the first half of this year, after the market rout and renewed fears about the escalation of a trade war slowing global growth, Fed officials sent a very different message. In fact, Fed officials began suggesting their next move could be a rate cut, and markets recovered aggressively in the first three months of the year. While there were gyrations in the second quarter, markets generally held up, and we ended the six month period with most markets holding onto solid gains.
In the US the S&P 500 hit repeated record highs, threatening to break over 3,000 for the first time in history, and the yield curve continued to flatten, with investors getting more compensation to own a three-month Treasury-bill than a five-year Treasury note. However, continued uncertainty about global economic events, and a US economic recovery that is extremely long in tooth, left many still wondering about what is next to come.
This is an important reminder to not forget the importance of diversification—not only within a fund but across an overall fund allocation. Spreading risk exposures across a range of asset classes and investment styles remains paramount.
With a natural home bias, there is a gap in many American investors' overall investment Allocations—for example, many US investors have not looked to emerging markets (EM) when considering their overall asset allocation strategy. However, EM countries and companies may pose the largest potential for growth over the coming years. That is one of the reasons we launched the UBS Emerging Markets Equity Opportunity Fund. With a seasoned EM portfolio management and research team, and a long history of EM investing, we believe UBS Asset Management is in a good position to help investors to harness this important potential growth opportunity.
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.
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.
As always, we thank you for being a part of the UBS family of funds.
1
President's letter
Sincerely,
Igor Lasun
President
The UBS Funds
Executive Director
UBS Asset Management (Americas) Inc.
The views expressed are those of UBS Asset Management (Americas) Inc. as of August 14, 2019. The views are subject to change based on market conditions; they are not intended to predict or guarantee the future performance of the markets, any individual security or market segment, or any UBS mutual fund.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. A prospectus or summary prospectus for the funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our web site at www.ubs.com/am-us.
2
The markets in review
Headwinds for global growth
Shortly after the reporting period ended, the US economy reached a new record for the longest expansion on record, exceeding the previous mark of 120 months.1 However, trade conflicts, less robust manufacturing activity and several other factors have led to moderating global growth. Looking back, the US Commerce Department reported that gross domestic product (GDP) grew at 3.4% and 2.2% seasonally adjusted annualized rates during the third and fourth quarters of 2018, respectively. GDP growth then bounced back to 3.1% during the first quarter of 2019. Finally, the US Commerce Department's initial estimate for second quarter GDP growth in the US, released after the reporting period ended, was 2.1%.
Headwinds facing the economy were acknowledged by the US Federal Reserve Board (the Fed). After raising interest rates four times in 2018, in January 2019 the Fed started to reverse course, saying it would pause from additional rate hikes as it monitored incoming economic data. At its meeting that concluded on March 20, 2019, most Federal Open Market Committee (FOMC)2 members indicated that they did not feel additional rate hikes would be needed in 2019. Finally, after its June 2019 meeting, Fed Chair Jerome Powell said, "The case for somewhat more accommodative policy has strengthened", and the market anticipates one or two rate cuts by the end of the year.
From a global perspective, in its April 2019 World Economic Outlook, the International Monetary Fund (IMF) said: "Trade tensions increasingly took a toll on business confidence and, so, financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand. Conditions have eased in 2019 as the U.S. Federal Reserve signaled a more accommodative monetary policy stance and markets became more optimistic about a U.S.—China trade deal, but they remain slightly more restrictive than in the fall of 2018." From a regional perspective, the IMF projects 2019 growth in the Eurozone will be 1.3%, versus 1.8% in 2018. Japan's economy is expected to expand 1.0% in 2019, compared to 0.8% in 2018. Elsewhere, the IMF projects that overall growth in emerging market countries will decelerate to 4.4% in 2019, versus 4.5% in 2018.
Global equities generate mixed results
The global equity market generated mixed results during the reporting period. US equities experienced several setbacks, but they proved to be only temporary in nature, as the market reached several new all-time record highs. Supporting the market were corporate profits that often exceeded expectations, hopes for a resolution in the US and China trade war, and the Fed's indication that it was poised to lower interest rates to support the economy. All told, the S&P 500 Index3 gained 10.42% during the 12 months ended June 30, 2019. Returns were weaker outside the US, as slower growth, political issues and concerns over trade disputes negatively impacted investor sentiment. International developed equities, as measured by the MSCI EAFE Index (net),4 returned 1.08% during the reporting period, while emerging markets equities, as measured by the MSCI Emerging Markets Index (net),5 gained 1.21%.
1 Source: The National Bureau of Economic Research, 7/19
2 The Federal Open Market Committee ("FOMC") is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments.
3 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3
The markets in review
The fixed income market produces solid results
The global fixed income market posted solid results during the reporting period. In the US, both short- and long-term Treasury yields declined (bond yields and prices move in the opposite direction). Periods of investor risk aversion, the Fed's monetary policy reversal and modest inflation helped to push yields lower. For the 12-month reporting period as a whole, the yield on the US 10-year Treasury fell from 2.85% to 2.00%. Government bond yields outside the US also generally moved lower, as the European Central Bank, the Bank of Japan and the Bank of England largely maintained their highly accommodative monetary policies. The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Bond Index,6 returned 7.87% for the 12 months ended June 30, 2019. Returns of riskier fixed income securities were also positive. High yield bonds, as measured by the ICE BofAML US High Yield Cash Pay Constrained Index,7 returned 7.60% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),8 gained 11.32%.
6 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, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
7 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.
8 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
4
UBS Dynamic Alpha Fund
Portfolio performance
For the twelve months ended June 30, 2019, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned 0.60% (Class A shares returned -4.92% after the deduction of the maximum sales charge), while Class P shares returned 0.83%. For purposes of comparison, the ICE BofAML US Treasury 1-5 Year Index returned 4.89% during the same time period, the MSCI World Index (net) returned 6.33%, and the FTSE One-Month US Treasury Bill Index returned 2.28%. (Class P shares have lower expenses than the other share class of 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 positive absolute return during the reporting period. Market allocation decisions generally detracted from performance. However, active currency allocation decisions were additive and helped offset some of the negative contribution from market allocation.
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 had a direct positive 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 local currency emerging market (EM) debt was beneficial. Spreads on local currency EM debt relative to US Treasuries widened substantially in 2018 in the face of higher geopolitical risks, a strengthening US dollar and higher US dollar funding rates. However, in 2019 local currency EM debt has rallied along with US Treasuries, delivering strong results.
– Long exposure to high yield credit contributed to performance. High yield has benefited from the rally seen across risk assets from the fourth quarter 2018 lows and historically low default rates.
– Overall, active currency positions added to results during the period.
– A long Mexican peso versus US dollar position contributed to results, supported by tailwinds such as valuation and carry, as it relates to currency investing, which is the profit or loss that can be made from interest rate differentials in two countries.
– A long Japanese yen versus South Korean won position was additive over the period given the yen's safe haven nature and the won's susceptibility to global trade uncertainty.
– A short Chilean peso position added to results as the US dollar strengthened. This position was closed at the end of August 2018 on the back of positive performance and more normalized valuations.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Dynamic Alpha Fund
What didn't work:
– Overall, market allocation detracted from results.
– The Fund's preference for ex-US equities (developed & emerging markets/emerging market minimum volatility) over US equities negatively impacted 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. Additionally, US equities had the strongest rally from the fourth quarter 2018 lows witnessed across global equity markets.
– Performance was negatively impacted by a few equity relative value trades during the reporting period, 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 (which we closed in June of 2019).
– Within fixed income, short positions in government bonds, specifically US Treasuries, weighed on performance as yields have decreased. First, government bonds rallied in the fourth quarter of 2018 as investors flocked into safe haven assets. Then, lower US interest rate expectations throughout 2019 and more dovish central banks around the world put downward pressure on yields.
– Certain currency positions did detract:
– 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 by 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 peso's sensitivity to falling oil prices. This position was closed in mid-August 2018.
– Long positions in certain European currencies, such as the Swedish krona and Norwegian krone also weighed on performance as they depreciated relative to the US dollar.
This letter is intended to assist shareholders in understanding how the Fund performed during the twelve months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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 06/30/19 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 0.60 | % | (0.99 | )% | 3.31 | % | |||||||||
Class P2 | 0.83 | (0.71 | ) | 3.59 | |||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (4.92 | )% | (2.10 | )% | 2.73 | % | |||||||||
ICE BofAML US Treasury 1-5 Year Index3 | 4.89 | 1.54 | 1.73 | ||||||||||||
MSCI World Index (net)4 | 6.33 | 6.60 | 10.72 | ||||||||||||
FTSE One-Month US Treasury Bill Index5 | 2.28 | 0.81 | 0.44 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) 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. 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
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depicts the performance of UBS Dynamic Alpha Fund Class A and Class P shares versus the ICE BofAML US Treasury 1-5 Year Index, the MSCI World Index (net) and the FTSE One-Month US Treasury Bill Index over the 10 years ended June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Dynamic Alpha Fund Class A vs. ICE BofAML US Treasury 1-5 Year Index, MSCI World Index (net) and FTSE One-Month US Treasury Bill Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2009 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS Dynamic Alpha Fund Class P vs. ICE BofAML US Treasury 1-5 Year Index, MSCI World Index (net) and FTSE One-Month US Treasury Bill Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2009 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
8
UBS Dynamic Alpha Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 0.6 | % | |||||
Cooperatieve Rabobank UA 5.500%, due 06/29/20 | 0.6 | ||||||
Mirvac Group Finance Ltd., EMTN 3.625%, due 03/18/27 | 0.5 | ||||||
Bank of America Corp., MTN 3.875%, due 08/01/25 | 0.5 | ||||||
Telefonica Emisiones SA 5.520%, due 03/01/49 | 0.5 | ||||||
Tesco Property Finance 4 PLC 5.801%, due 10/13/40 | 0.5 | ||||||
Lloyds Banking Group PLC 3.574%, due 11/07/28 | 0.4 | ||||||
Mylan N.V. 3.125%, due 11/22/28 | 0.4 | ||||||
AA Bond Co. Ltd., EMTN 2.875%, due 01/31/22 | 0.4 | ||||||
Royal Bank of Scotland Group PLC 4.519%, due 06/25/24 | 0.4 | ||||||
Total | 4.8 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 71.6 | % | |||||
United Kingdom | 5.2 | ||||||
France | 3.2 | ||||||
Netherlands | 2.9 | ||||||
Australia | 1.7 | ||||||
Total | 84.6 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
9
UBS Dynamic Alpha Fund
Industry diversification—June 30, 2019 (unaudited)1,2
Corporate bonds | Percentage of net assets | ||||||
Advertising | 0.1 | % | |||||
Aerospace & defense | 0.2 | ||||||
Agriculture | 0.8 | ||||||
Airlines | 0.2 | ||||||
Auto manufacturers | 1.4 | ||||||
Banks | 8.3 | ||||||
Beverages | 0.3 | ||||||
Biotechnology | 0.3 | ||||||
Chemicals | 0.8 | ||||||
Commercial banks | 1.4 | ||||||
Commercial services | 0.5 | ||||||
Computers | 0.3 | ||||||
Construction materials | 0.2 | ||||||
Diversified financial services | 0.6 | ||||||
Electric | 3.1 | ||||||
Engineering & construction | 0.4 | ||||||
Food | 0.6 | ||||||
Gas | 1.4 | ||||||
Healthcare-products | 0.1 | ||||||
Healthcare-services | 0.3 | ||||||
Household products/wares | 0.1 | ||||||
Insurance | 3.5 | ||||||
Internet | 0.3 | ||||||
Investment company security | 0.4 | ||||||
IT services | 0.1 | ||||||
Machinery-constr & mining | 0.1 | ||||||
Media | 1.4 | ||||||
Mining | 0.4 | ||||||
Miscellaneous manufacturers | 0.6 | ||||||
Oil & gas | 1.4 | ||||||
Oil & gas services | 0.1 | ||||||
Pharmaceuticals | 1.7 | ||||||
Pipelines | 1.4 | ||||||
Real estate | 2.0 | ||||||
Real estate investment trusts | 0.9 | ||||||
Retail | 0.2 | ||||||
Savings & loans | 0.2 | ||||||
Semiconductors | 0.2 | ||||||
Software | 0.3 | ||||||
Telecommunications | 1.8 | ||||||
Transportation | 0.4 | ||||||
Water | 1.3 | ||||||
Total corporate bonds | 40.1 | % |
Percentage of net assets | |||||||
Collateralized mortgage obligation | 0.0 | %† | |||||
Collateralized debt obligation | 0.0 | † | |||||
Non-US government obligation | 0.2 | ||||||
Exchange traded funds | 8.9 | ||||||
Short-term investments | 40.4 | ||||||
Investment of cash collateral from securities loaned | 5.0 | ||||||
Swaptions purchased | 0.0 | † | |||||
Total investments | 94.6 | % | |||||
Other assets in excess of liabilities | 5.4 | ||||||
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.
10
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds: 40.1% | |||||||||||
Australia: 1.7% | |||||||||||
APT Pipelines Ltd. 4.200%, due 03/23/252 | 20,000 | $ | 20,969 | ||||||||
Commonwealth Bank of Australia, EMTN (fixed, converts to FRN on 10/03/24), 1.936%, due 10/03/292 | EUR | 100,000 | 116,130 | ||||||||
Mirvac Group Finance Ltd., EMTN 3.625%, due 03/18/272 | 270,000 | 269,623 | |||||||||
Origin Energy Finance Ltd. 5.450%, due 10/14/212 | 50,000 | 52,865 | |||||||||
Scentre Group Trust 1 2.375%, due 04/28/212 | 50,000 | 49,821 | |||||||||
SGSP Australia Assets Pty. Ltd., EMTN 3.250%, due 07/29/262 | 200,000 | 202,168 | |||||||||
Telstra Corp. Ltd. 4.800%, due 10/12/212 | 30,000 | 31,551 | |||||||||
Westpac Banking Corp. 2.800%, due 01/11/22 | 20,000 | 20,259 | |||||||||
(fixed, converts to FRN on 09/21/27), 5.000%, due 09/21/273 | 80,000 | 77,153 | |||||||||
Total Australia corporate bonds | 840,539 | ||||||||||
Belgium: 0.7% | |||||||||||
AG Insurance SA (fixed, converts to FRN on 06/30/27), 3.500%, due 06/30/472 | EUR | 100,000 | 122,380 | ||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc. 3.650%, due 02/01/26 | 40,000 | 42,071 | |||||||||
Anheuser-Busch InBev Worldwide, Inc. 4.150%, due 01/23/254 | 30,000 | 32,466 | |||||||||
4.750%, due 01/23/29 | 40,000 | 45,311 | |||||||||
RESA SA 1.000%, due 07/22/262 | EUR | 100,000 | 116,416 | ||||||||
Total Belgium corporate bonds | 358,644 | ||||||||||
Bermuda: 0.1% | |||||||||||
XLIT Ltd. 5.250%, due 12/15/43 | 30,000 | 36,587 | |||||||||
Brazil: 0.1% | |||||||||||
Yamana Gold, Inc. 4.950%, due 07/15/24 | 50,000 | 52,798 | |||||||||
Canada: 0.7% | |||||||||||
Bell Canada, Inc., MTN 4.750%, due 09/29/44 | CAD | 10,000 | 8,694 | ||||||||
Canadian Natural Resources Ltd. 2.950%, due 01/15/23 | 40,000 | 40,396 | |||||||||
3.850%, due 06/01/27 | 40,000 | 41,530 | |||||||||
Cenovus Energy, Inc. 4.250%, due 04/15/274 | 40,000 | 41,365 | |||||||||
Royal Bank of Canada 1.650%, due 07/15/21 | CAD | 100,000 | 75,961 | ||||||||
Suncor Energy, Inc. 6.500%, due 06/15/38 | 50,000 | 66,948 |
Face amount1 | Value | ||||||||||
TELUS Corp. 3.750%, due 01/17/25 | CAD | 30,000 | $ | 24,299 | |||||||
Toronto Dominion Bank/The 2.045%, due 03/08/21 | CAD | 70,000 | 53,570 | ||||||||
Total Canada corporate bonds | 352,763 | ||||||||||
China: 0.1% | |||||||||||
Nexen, Inc. 6.400%, due 05/15/37 | 40,000 | 53,388 | |||||||||
Czech Republic: 0.2% | |||||||||||
NET4GAS sro, EMTN 2.500%, due 07/28/212 | EUR | 100,000 | 118,714 | ||||||||
Denmark: 0.5% | |||||||||||
Ap Moller Maersk A/S, EMTN 1.750%, due 03/16/262 | EUR | 100,000 | 116,413 | ||||||||
Danske Bank A/S, EMTN 1.375%, due 05/24/222 | EUR | 100,000 | 116,311 | ||||||||
Orsted A/S (fixed, converts to FRN on 11/16/20), 3.000%, due 11/06/30152 | EUR | 20,000 | 23,420 | ||||||||
Total Denmark corporate bonds | 256,144 | ||||||||||
France: 3.2% | |||||||||||
AXA SA, EMTN (fixed, converts to FRN on 05/28/29), 3.250%, due 05/28/492 | EUR | 100,000 | 125,060 | ||||||||
Banque Federative du Credit Mutuel SA, EMTN 3.000%, due 09/11/252 | EUR | 100,000 | 127,981 | ||||||||
BNP Paribas SA, EMTN 1.000%, due 04/17/242 | EUR | 100,000 | 117,122 | ||||||||
1.250%, due 03/19/252 | EUR | 100,000 | 118,030 | ||||||||
BPCE SA, EMTN 1.375%, due 03/23/262 | EUR | 100,000 | 118,726 | ||||||||
Credit Agricole SA, EMTN 1.375%, due 03/13/252 | EUR | 100,000 | 119,166 | ||||||||
Credit Logement SA 3 mo. Euribor + 1.150%, 0.839%, due 09/16/192,3,5 | EUR | 100,000 | 91,210 | ||||||||
Electricite de France SA (fixed, converts to FRN on 01/22/24), 5.625%, due 01/22/242,3 | 100,000 | 102,750 | |||||||||
Engie SA (fixed, converts to FRN on 07/10/21), 4.750%, due 07/10/212,3 | EUR | 100,000 | 124,160 | ||||||||
SCOR SE (fixed, converts to FRN on 03/13/29), 5.250%, due 03/13/292,3 | 200,000 | 184,300 | |||||||||
TDF Infrastructure SAS 2.875%, due 10/19/222 | EUR | 100,000 | 120,687 | ||||||||
Terega SA 2.200%, due 08/05/252 | EUR | 100,000 | 124,281 | ||||||||
Unibail-Rodamco SE (fixed, converts to FRN on 01/25/26), 2.875%, due 01/25/262,3 | EUR | 100,000 | 116,991 | ||||||||
Total France corporate bonds | 1,590,464 |
11
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Germany: 0.7% | |||||||||||
Henkel AG & Co. KGaA, EMTN 1.500%, due 09/13/192 | 60,000 | $ | 59,856 | ||||||||
Volkswagen International Finance N.V. 1.125%, due 10/02/232 | EUR | 100,000 | 115,893 | ||||||||
Series NC6, (fixed, converts to FRN on 06/27/24), 3.375%, due 06/27/242,3 | EUR | 100,000 | 117,028 | ||||||||
Volkswagen Leasing GmbH, EMTN 1.000%, due 02/16/232 | EUR | 20,000 | 23,114 | ||||||||
1.625%, due 08/15/252 | EUR | 40,000 | 46,879 | ||||||||
Total Germany corporate bonds | 362,770 | ||||||||||
Guernsey: 0.3% | |||||||||||
Globalworth Real Estate Investments Ltd., EMTN 3.000%, due 03/29/252 | EUR | 100,000 | 120,505 | ||||||||
Israel: 0.3% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 20,000 | 19,135 | |||||||||
Teva Pharmaceutical Finance Netherlands II BV 1.125%, due 10/15/242,4 | EUR | 100,000 | 94,129 | ||||||||
Teva Pharmaceutical Finance Netherlands III BV 2.800%, due 07/21/23 | 40,000 | 34,394 | |||||||||
Total Israel corporate bonds | 147,658 | ||||||||||
Italy: 0.9% | |||||||||||
Buzzi Unicem SpA 2.125%, due 04/28/232 | EUR | 100,000 | 117,974 | ||||||||
CDP Reti SpA 1.875%, due 05/29/222 | EUR | 155,000 | 178,645 | ||||||||
Italgas SpA, EMTN 1.625%, due 01/19/272 | EUR | 100,000 | 120,673 | ||||||||
Total Italy corporate bonds | 417,292 | ||||||||||
Japan: 0.1% | |||||||||||
Mitsubishi UFJ Financial Group, Inc. 2.665%, due 07/25/22 | 30,000 | 30,083 | |||||||||
Jersey: 0.5% | |||||||||||
AA Bond Co. Ltd., EMTN 2.875%, due 01/31/222 | GBP | 174,000 | 210,228 | ||||||||
HSBC Bank Capital Funding Sterling 2 LP (fixed, converts to FRN on 04/07/20), 5.862%, due 04/07/203 | GBP | 20,000 | 26,097 | ||||||||
Total Jersey corporate bonds | 236,325 | ||||||||||
Luxembourg: 0.7% | |||||||||||
ADO Properties SA 1.500%, due 07/26/242 | EUR | 100,000 | 111,633 | ||||||||
Allergan Funding SCS 2.125%, due 06/01/29 | EUR | 100,000 | 119,829 | ||||||||
Dream Global Funding I SARL 1.375%, due 12/21/212 | EUR | 100,000 | 115,692 | ||||||||
Total Luxembourg corporate bonds | 347,154 |
Face amount1 | Value | ||||||||||
Mexico: 1.1% | |||||||||||
Mexichem SAB de CV 5.500%, due 01/15/486 | 200,000 | $ | 199,300 | ||||||||
Mexico City Airport Trust 5.500%, due 07/31/472 | 200,000 | 198,937 | |||||||||
Petroleos Mexicanos 5.500%, due 02/24/252 | EUR | 20,000 | 24,348 | ||||||||
Petroleos Mexicanos, EMTN 3.750%, due 02/21/242 | EUR | 100,000 | 112,985 | ||||||||
Total Mexico corporate bonds | 535,570 | ||||||||||
Netherlands: 2.9% | |||||||||||
Argentum Netherlands BV for Swiss Life AG (fixed, converts to FRN on 06/16/25), 4.375%, due 06/16/252,3 | EUR | 100,000 | 129,061 | ||||||||
ATF Netherlands BV (fixed, converts to FRN on 01/20/23), 3.750%, due 01/20/232,3 | EUR | 100,000 | 118,551 | ||||||||
Cooperatieve Rabobank UA (fixed, converts to FRN on 06/29/20), 5.500%, due 06/29/202,3 | EUR | 250,000 | 295,646 | ||||||||
Iberdrola International BV, EMTN (fixed, converts to FRN on 12/26/23), 2.625%, due 12/26/232,3 | EUR | 100,000 | 119,196 | ||||||||
ING Groep N.V., EMTN 1.125%, due 02/14/252 | EUR | 100,000 | 117,555 | ||||||||
Mylan N.V. 3.125%, due 11/22/282 | EUR | 180,000 | 211,487 | ||||||||
Redexis Gas Finance BV, EMTN 1.875%, due 04/27/272 | EUR | 100,000 | 114,294 | ||||||||
Shell International Finance BV 4.375%, due 05/11/45 | 40,000 | 46,069 | |||||||||
Volkswagen International Finance N.V. 4.125%, due 11/16/382 | EUR | 100,000 | 138,294 | ||||||||
Vonovia Finance BV (fixed, converts to FRN on 12/17/21), 4.000%, due 12/17/212,3 | EUR | 100,000 | 121,528 | ||||||||
Total Netherlands corporate bonds | 1,411,681 | ||||||||||
Poland: 0.2% | |||||||||||
Tauron Polska Energia SA 2.375%, due 07/05/272 | EUR | 100,000 | 116,569 | ||||||||
Portugal: 0.2% | |||||||||||
Galp Gas Natural Distribuicao SA, EMTN 1.375%, due 09/19/232 | EUR | 100,000 | 118,244 | ||||||||
Singapore: 0.4% | |||||||||||
DBS Group Holdings Ltd., GMTN (fixed, converts to FRN on 09/07/21), 3.600%, due 09/07/212,3 | 200,000 | 199,200 | |||||||||
Spain: 1.6% | |||||||||||
Banco Santander SA 3.250%, due 04/04/262 | EUR | 100,000 | 128,275 | ||||||||
Banco Santander SA, EMTN 4.000%, due 01/19/232 | AUD | 200,000 | 146,354 |
12
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Spain—(Concluded) | |||||||||||
Canal de Isabel II Gestion SA, EMTN 1.680%, due 02/26/252 | EUR | 100,000 | $ | 118,323 | |||||||
FCC Aqualia SA 1.413%, due 06/08/222 | EUR | 150,000 | 175,302 | ||||||||
Telefonica Emisiones SA 5.520%, due 03/01/49 | 200,000 | 231,356 | |||||||||
Total Spain corporate bonds | 799,610 | ||||||||||
Sweden: 0.2% | |||||||||||
Akelius Residential Property AB, EMTN 1.750%, due 02/07/252 | EUR | 100,000 | 118,709 | ||||||||
Switzerland: 0.2% | |||||||||||
ABB Finance USA, Inc. 2.875%, due 05/08/22 | 40,000 | 40,663 | |||||||||
Glencore Funding LLC 4.125%, due 05/30/236 | 50,000 | 51,984 | |||||||||
Total Switzerland corporate bonds | 92,647 | ||||||||||
United Kingdom: 5.2% | |||||||||||
Anglian Water Services Financing PLC, EMTN 4.500%, due 02/22/262 | GBP | 100,000 | 139,206 | ||||||||
Barclays Bank PLC 9.500%, due 08/07/212 | GBP | 40,000 | 58,580 | ||||||||
Barclays PLC (fixed, converts to FRN on 10/06/22), 2.375%, due 10/06/232 | GBP | 100,000 | 127,061 | ||||||||
Barclays PLC, EMTN (fixed, converts to FRN on 11/11/20), 2.625%, due 11/11/252 | EUR | 100,000 | 115,162 | ||||||||
BAT Capital Corp. 3.557%, due 08/15/27 | 40,000 | 39,803 | |||||||||
BAT International Finance PLC, EMTN 0.875%, due 10/13/232 | EUR | 100,000 | 115,026 | ||||||||
BUPA Finance PLC (fixed, converts to FRN on 09/16/20), 6.125%, due 09/16/203 | GBP | 20,000 | 26,572 | ||||||||
Diageo Capital PLC 3.875%, due 04/29/43 | 30,000 | 32,192 | |||||||||
HSBC Holdings PLC 5.100%, due 04/05/21 | 60,000 | 62,688 | |||||||||
Lloyds Banking Group PLC (fixed, converts to FRN on 11/07/27), 3.574%, due 11/07/28 | 220,000 | 219,883 | |||||||||
Nationwide Building Society, EMTN (fixed, converts to FRN on 07/25/24), 2.000%, due 07/25/292 | EUR | 100,000 | 113,873 | ||||||||
Phoenix Group Holdings PLC, EMTN 4.125%, due 07/20/222 | GBP | 150,000 | 197,967 | ||||||||
Prudential PLC 5.625%, due 10/20/51 | GBP | 100,000 | 139,683 | ||||||||
Prudential PLC, EMTN (fixed, converts to FRN on 07/20/35), 5.000%, due 07/20/552 | GBP | 100,000 | 135,375 |
Face amount1 | Value | ||||||||||
Reynolds American, Inc. 4.450%, due 06/12/25 | 30,000 | $ | 31,795 | ||||||||
5.700%, due 08/15/35 | 10,000 | 10,981 | |||||||||
Royal Bank of Scotland Group PLC 6.100%, due 06/10/23 | 40,000 | 43,409 | |||||||||
(fixed, converts to FRN on 06/25/23), 4.519%, due 06/25/24 | 200,000 | 208,226 | |||||||||
SSE PLC (fixed, converts to FRN on 09/10/20), 3.875%, due 09/10/202,3 | GBP | 100,000 | 128,611 | ||||||||
Tesco Property Finance 4 PLC 5.801%, due 10/13/402 | GBP | 136,694 | 228,874 | ||||||||
Thames Water Utilities Finance PLC, EMTN 5.125%, due 09/28/372 | GBP | 50,000 | 82,577 | ||||||||
Virgin Money Holdings UK PLC, GMTN (fixed, converts to FRN on 04/24/25), 3.375%, due 04/24/262 | GBP | 100,000 | 127,906 | ||||||||
Vodafone Group PLC 4.375%, due 02/19/43 | 15,000 | 14,726 | |||||||||
WPP Finance 2010 3.750%, due 09/19/24 | 30,000 | 31,043 | |||||||||
Yorkshire Water Finance PLC, EMTN (fixed, converts to FRN on 03/22/23), 3.750%, due 03/22/462 | GBP | 100,000 | 131,723 | ||||||||
Total United Kingdom corporate bonds | 2,562,942 | ||||||||||
United States: 17.3% | |||||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 20,000 | 21,615 | |||||||||
4.900%, due 11/30/46 | 40,000 | 49,270 | |||||||||
AbbVie, Inc. 4.250%, due 11/14/28 | 40,000 | 42,721 | |||||||||
4.400%, due 11/06/424 | 30,000 | 29,678 | |||||||||
4.875%, due 11/14/48 | 40,000 | 42,081 | |||||||||
Albemarle Corp. 5.450%, due 12/01/44 | 50,000 | 53,616 | |||||||||
Allergan Funding SCS 3.450%, due 03/15/22 | 30,000 | 30,621 | |||||||||
4.750%, due 03/15/45 | 20,000 | 20,522 | |||||||||
Alphabet, Inc. 1.998%, due 08/15/26 | 70,000 | 68,246 | |||||||||
Altria Group, Inc. 4.250%, due 08/09/42 | 100,000 | 92,323 | |||||||||
4.400%, due 02/14/26 | 30,000 | 32,069 | |||||||||
5.950%, due 02/14/49 | 40,000 | 45,490 | |||||||||
Amazon.com, Inc. 2.800%, due 08/22/24 | 80,000 | 82,344 | |||||||||
American Airlines Pass-Through Trust 4.375%, due 10/01/22 | 54,648 | 55,785 | |||||||||
American Express Co. 3.400%, due 02/27/23 | 70,000 | 72,440 | |||||||||
Amgen, Inc. 4.400%, due 05/01/45 | 30,000 | 31,899 | |||||||||
Andeavor Logistics LP/Tesoro Logistics Finance Corp. 4.250%, due 12/01/27 | 30,000 | 31,675 |
13
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Apache Corp. 4.250%, due 01/15/44 | 70,000 | $ | 63,259 | ||||||||
Apple, Inc. 3.850%, due 08/04/46 | 50,000 | 53,225 | |||||||||
AT&T, Inc. 3.000%, due 02/15/22 | 50,000 | 50,784 | |||||||||
4.350%, due 03/01/29 | 80,000 | 85,823 | |||||||||
4.750%, due 05/15/46 | 80,000 | 84,108 | |||||||||
5.550%, due 08/15/41 | 60,000 | 69,188 | |||||||||
Baltimore Gas & Electric Co. 3.500%, due 08/15/46 | 40,000 | 39,632 | |||||||||
Bank of America Corp., MTN 3.875%, due 08/01/25 | 250,000 | 267,412 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.625%, due 01/15/24 | 80,000 | 80,812 | |||||||||
Burlington Northern Santa Fe LLC 5.400%, due 06/01/41 | 30,000 | 37,908 | |||||||||
Capital One Financial Corp. 3.200%, due 02/05/25 | 70,000 | 71,339 | |||||||||
Celgene Corp. 3.875%, due 08/15/25 | 70,000 | 74,986 | |||||||||
CF Industries, Inc. 5.150%, due 03/15/34 | 30,000 | 29,250 | |||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital 4.500%, due 02/01/24 | 60,000 | 63,862 | |||||||||
5.375%, due 05/01/47 | 20,000 | 21,044 | |||||||||
Chevron Phillips Chemical Co. LLC/Chevron Phillips Chemical Co. LP 3.300%, due 05/01/236 | 120,000 | 122,500 | |||||||||
Chubb INA Holdings, Inc. 2.500%, due 03/15/38 | EUR | 100,000 | 129,955 | ||||||||
Cigna Corp. 3.400%, due 09/17/216 | 30,000 | 30,575 | |||||||||
4.375%, due 10/15/286 | 50,000 | 53,924 | |||||||||
4.900%, due 12/15/486 | 30,000 | 32,624 | |||||||||
Citigroup, Inc. 3.875%, due 10/25/23 | 150,000 | 158,574 | |||||||||
4.600%, due 03/09/26 | 30,000 | 32,447 | |||||||||
4.650%, due 07/23/48 | 80,000 | 93,028 | |||||||||
Comcast Corp. 3.950%, due 10/15/25 | 50,000 | 53,912 | |||||||||
4.150%, due 10/15/28 | 20,000 | 22,044 | |||||||||
4.700%, due 10/15/48 | 20,000 | 23,437 | |||||||||
4.750%, due 03/01/44 | 20,000 | 23,299 | |||||||||
4.950%, due 10/15/58 | 20,000 | 24,376 | |||||||||
Conagra Brands, Inc. 3.800%, due 10/22/21 | 20,000 | 20,549 | |||||||||
4.600%, due 11/01/25 | 30,000 | 32,639 | |||||||||
5.400%, due 11/01/48 | 40,000 | 43,852 | |||||||||
Consumers Energy Co. 3.250%, due 08/15/46 | 10,000 | 9,553 | |||||||||
CVS Health Corp. 3.350%, due 03/09/21 | 40,000 | 40,541 |
Face amount1 | Value | ||||||||||
4.300%, due 03/25/28 | 40,000 | $ | 42,157 | ||||||||
5.050%, due 03/25/48 | 40,000 | 42,543 | |||||||||
5.125%, due 07/20/45 | 40,000 | 42,658 | |||||||||
Dell International LLC/EMC Corp. 5.300%, due 10/01/296 | 70,000 | 73,669 | |||||||||
8.350%, due 07/15/466 | 80,000 | 101,096 | |||||||||
Dominion Energy, Inc., Series D, 2.850%, due 08/15/26 | 30,000 | 29,740 | |||||||||
DTE Energy Co. 6.375%, due 04/15/33 | 20,000 | 25,720 | |||||||||
Duke Energy Carolinas LLC 4.000%, due 09/30/42 | 40,000 | 42,902 | |||||||||
Eaton Corp. 4.150%, due 11/02/42 | 30,000 | 31,690 | |||||||||
Enable Midstream Partners LP 3.900%, due 05/15/247 | 30,000 | 30,384 | |||||||||
Energy Transfer Operating LP 4.500%, due 04/15/24 | 40,000 | 42,545 | |||||||||
6.000%, due 06/15/48 | 50,000 | 57,013 | |||||||||
6.050%, due 06/01/41 | 50,000 | 55,933 | |||||||||
EnLink Midstream Partners LP 4.400%, due 04/01/24 | 40,000 | 40,449 | |||||||||
Enterprise Products Operating LLC 4.850%, due 03/15/44 | 30,000 | 33,168 | |||||||||
ERAC USA Finance LLC 5.625%, due 03/15/426 | 40,000 | 48,295 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 20,000 | 20,527 | |||||||||
FedEx Corp. 4.550%, due 04/01/46 | 20,000 | 20,607 | |||||||||
Ford Motor Credit Co. LLC, EMTN 3.021%, due 03/06/24 | EUR | 100,000 | 120,433 | ||||||||
Freeport-McMoRan, Inc. 3.875%, due 03/15/23 | 70,000 | 70,000 | |||||||||
GE Capital International Funding Co. Unlimited Co. 4.418%, due 11/15/35 | 200,000 | 197,232 | |||||||||
General Electric Co. 2.125%, due 05/17/37 | EUR | 100,000 | 107,017 | ||||||||
4.125%, due 10/09/42 | 30,000 | 27,603 | |||||||||
General Electric Co., GMTN 3.150%, due 09/07/22 | 30,000 | 30,384 | |||||||||
General Electric Co., MTN 4.375%, due 09/16/20 | 30,000 | 30,645 | |||||||||
General Motors Financial Co., Inc. 3.200%, due 07/06/21 | 50,000 | 50,425 | |||||||||
4.350%, due 04/09/25 | 90,000 | 92,843 | |||||||||
Gilead Sciences, Inc. 4.750%, due 03/01/46 | 30,000 | 34,046 | |||||||||
4.800%, due 04/01/44 | 20,000 | 22,766 | |||||||||
Goldman Sachs Group, Inc./The 5.150%, due 05/22/45 | 40,000 | 45,712 | |||||||||
Goldman Sachs Group, Inc./The, EMTN 1.625%, due 07/27/262 | EUR | 60,000 | 72,260 | ||||||||
2.000%, due 07/27/232 | EUR | 140,000 | 169,914 |
14
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
2.000%, due 11/01/282 | EUR | 40,000 | $ | 49,262 | |||||||
Hartford Financial Services Group, Inc./The 4.300%, due 04/15/43 | 40,000 | 42,248 | |||||||||
4.400%, due 03/15/48 | 40,000 | 43,560 | |||||||||
HCP, Inc. 3.875%, due 08/15/24 | 40,000 | 41,916 | |||||||||
Home Depot, Inc./The 4.875%, due 02/15/44 | 30,000 | 36,446 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 50,000 | 50,494 | |||||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 300,000 | 307,735 | |||||||||
3.625%, due 12/01/27 | 70,000 | 72,102 | |||||||||
Kinder Morgan, Inc. 3.150%, due 01/15/23 | 40,000 | 40,675 | |||||||||
5.625%, due 11/15/236 | 40,000 | 44,276 | |||||||||
Kraft Heinz Foods Co. 4.875%, due 02/15/256 | 50,000 | 51,570 | |||||||||
5.000%, due 06/04/42 | 50,000 | 51,317 | |||||||||
Kroger Co./The 3.700%, due 08/01/274 | 60,000 | 61,810 | |||||||||
3.875%, due 10/15/46 | 20,000 | 17,946 | |||||||||
4.650%, due 01/15/48 | 20,000 | 20,090 | |||||||||
Liberty Mutual Group, Inc. 2.750%, due 05/04/262 | EUR | 140,000 | 175,827 | ||||||||
4.569%, due 02/01/296 | 30,000 | 32,958 | |||||||||
Lincoln National Corp. 3.800%, due 03/01/28 | 80,000 | 83,941 | |||||||||
Lowe's Cos., Inc. 4.250%, due 09/15/44 | 40,000 | 40,575 | |||||||||
Marathon Oil Corp. 3.850%, due 06/01/25 | 40,000 | 41,447 | |||||||||
Merck & Co., Inc. 3.700%, due 02/10/45 | 20,000 | 21,130 | |||||||||
Microsoft Corp. 2.400%, due 08/08/26 | 30,000 | 30,129 | |||||||||
3.500%, due 11/15/42 | 20,000 | 20,829 | |||||||||
3.700%, due 08/08/46 | 50,000 | 53,780 | |||||||||
Monongahela Power Co. 5.400%, due 12/15/436 | 30,000 | 37,674 | |||||||||
Morgan Stanley 6.375%, due 07/24/42 | 20,000 | 27,984 | |||||||||
Morgan Stanley, GMTN 2.500%, due 04/21/21 | 130,000 | 130,221 | |||||||||
4.000%, due 07/23/25 | 50,000 | 53,524 | |||||||||
4.350%, due 09/08/26 | 50,000 | 53,595 | |||||||||
Motiva Enterprises LLC 6.850%, due 01/15/406 | 30,000 | 36,387 | |||||||||
MPLX LP 5.200%, due 03/01/47 | 40,000 | 43,344 | |||||||||
National Rural Utilities Cooperative Finance Corp. 3.700%, due 03/15/29 | 20,000 | 21,543 |
Face amount1 | Value | ||||||||||
NBCUniversal Media LLC 4.375%, due 04/01/21 | 70,000 | $ | 72,573 | ||||||||
Oncor Electric Delivery Co. LLC 3.700%, due 11/15/28 | 40,000 | 43,054 | |||||||||
7.000%, due 05/01/32 | 50,000 | 69,739 | |||||||||
PacifiCorp 6.000%, due 01/15/39 | 40,000 | 53,620 | |||||||||
Philip Morris International, Inc. 4.250%, due 11/10/44 | 30,000 | 31,422 | |||||||||
Phillips 66 4.650%, due 11/15/34 | 30,000 | 33,368 | |||||||||
Phillips 66 Partners LP 4.680%, due 02/15/45 | 10,000 | 10,340 | |||||||||
PPL Capital Funding, Inc. 4.700%, due 06/01/43 | 70,000 | 74,278 | |||||||||
QUALCOMM, Inc. 4.300%, due 05/20/47 | 30,000 | 31,486 | |||||||||
Rowan Cos., Inc. 7.875%, due 08/01/19 | 30,000 | 30,000 | |||||||||
Schlumberger Holdings Corp. 3.000%, due 12/21/206 | 30,000 | 30,240 | |||||||||
Sempra Energy 6.000%, due 10/15/39 | 40,000 | 48,477 | |||||||||
Southern Co./The 3.250%, due 07/01/26 | 40,000 | 40,608 | |||||||||
4.400%, due 07/01/46 | 20,000 | 21,119 | |||||||||
Southwestern Electric Power Co. 6.200%, due 03/15/40 | 60,000 | 76,913 | |||||||||
SunTrust Banks, Inc. 2.700%, due 01/27/22 | 50,000 | 50,350 | |||||||||
Swiss Re Treasury US Corp. 4.250%, due 12/06/426 | 30,000 | 32,493 | |||||||||
Teachers Insurance & Annuity Association of America 4.900%, due 09/15/446 | 30,000 | 35,067 | |||||||||
Time Warner Cable LLC 4.500%, due 09/15/42 | 30,000 | 28,188 | |||||||||
5.000%, due 02/01/20 | 50,000 | 50,656 | |||||||||
TWDC Enterprises 18 Corp., MTN 1.850%, due 07/30/26 | 10,000 | 9,687 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 20,000 | 20,853 | |||||||||
United Airlines Pass-Through Trust 3.650%, due 01/07/26 | 45,718 | 45,729 | |||||||||
United Technologies Corp. 3.350%, due 08/16/21 | 30,000 | 30,659 | |||||||||
3.950%, due 08/16/25 | 30,000 | 32,338 | |||||||||
4.625%, due 11/16/48 | 20,000 | 23,305 | |||||||||
Valero Energy Corp. 4.900%, due 03/15/45 | 55,000 | 60,535 | |||||||||
Verizon Communications, Inc. 3.376%, due 02/15/25 | 30,000 | 31,305 | |||||||||
3.875%, due 02/08/29 | 20,000 | 21,442 | |||||||||
5.250%, due 03/16/37 | 20,000 | 23,902 | |||||||||
5.500%, due 03/16/47 | 70,000 | 88,405 | |||||||||
2.875%, due 01/15/38 | EUR | 100,000 | 135,098 |
15
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Virginia Electric & Power Co., Series C, 4.000%, due 11/15/46 | 30,000 | $ | 31,634 | ||||||||
VMware, Inc. 3.900%, due 08/21/27 | 40,000 | 40,512 | |||||||||
Walt Disney Co./The 6.200%, due 12/15/346 | 120,000 | 162,589 | |||||||||
Wells Fargo & Co. 2.100%, due 07/26/21 | 50,000 | 49,743 | |||||||||
3.069%, due 01/24/23 | 60,000 | 60,911 | |||||||||
Wells Fargo & Co., MTN 2.625%, due 07/22/22 | 70,000 | 70,532 | |||||||||
Williams Cos., Inc./The 4.300%, due 03/04/24 | 40,000 | 42,468 | |||||||||
4.550%, due 06/24/24 | 30,000 | 32,307 | |||||||||
4.900%, due 01/15/45 | 20,000 | 21,063 | |||||||||
Xcel Energy, Inc. 4.800%, due 09/15/41 | 80,000 | 86,817 | |||||||||
Total United States corporate bonds | 8,517,392 | ||||||||||
Total corporate bonds (cost $19,323,127) | 19,794,392 | ||||||||||
Collateralized debt obligation: 0.0%† | |||||||||||
Cayman Islands: 0.0%† | |||||||||||
LNR CDO IV Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/436,8 (cost $8,093,538) | 8,000,000 | 0 | |||||||||
Collateralized mortgage obligation: 0.0%† | |||||||||||
United States: 0.0%† | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11, 4.623%, due 04/25/359 (cost $7,197) | 54,222 | 691 | |||||||||
Non-US government obligation: 0.2% | |||||||||||
Italy: 0.2% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.350%, due 04/15/22 (cost $77,980) | EUR | 70,000 | 80,975 |
Number of shares | Value | ||||||||||
Exchange traded funds: 8.9% | |||||||||||
iShares JP Morgan EM Local Currency Bond ETF | 48,639 | $ | 2,249,068 | ||||||||
Xtrackers Harvest CSI 300 China A-Shares ETF4 | 76,900 | 2,165,504 | |||||||||
Total exchange traded funds (cost $4,157,800) | 4,414,572 | ||||||||||
Short-term investments: 40.4% | |||||||||||
Investment company: 4.1% | |||||||||||
State Street Institutional U.S. Government Money Market Fund | 2,046,829 | 2,046,829 | |||||||||
Face amount1 | |||||||||||
U.S. treasury obligations: 36.3%10 | |||||||||||
US Treasury Bills 3.183%, due 07/25/19 | 10,200,000 | 10,184,048 | |||||||||
2.174%, due 11/14/19 | 7,800,000 | 7,737,383 | |||||||||
Total U.S. treasury obligations (cost $17,921,431) | 17,921,431 | ||||||||||
Total short-term investments (cost $19,968,260) | 19,968,260 | ||||||||||
Number of shares | |||||||||||
Investment of cash collateral from securities loaned: 5.0% | |||||||||||
Money market fund: 5.0% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $2,479,035) | 2,479,035 | 2,479,035 |
Number of contracts | Notional amount | ||||||||||||||
Swaptions purchased: 0.0%† | |||||||||||||||
Put swaptions: 0.0%† | |||||||||||||||
CDX North American Investment Grade Series 32 Index strike, @ 0.700%, expires 07/17/19 (Counterparty: BOA) (cost $3,900) | 2,000,000 | USD | 2,000,000 | 143 | |||||||||||
Total investments: 94.6% (cost $54,110,837) | 46,738,068 | ||||||||||||||
Other assets in excess of liabilities: 5.4% | 2,644,037 | ||||||||||||||
Net assets: 100.0% | $ | 49,382,105 |
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 105.
16
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
19 | CAD | S&P TSX 60 Index Futures | September 2019 | $ | 2,809,876 | $ | 2,837,051 | $ | 27,175 | ||||||||||||||||||
1 | EUR | DAX Index Futures | September 2019 | 343,917 | 352,160 | 8,243 | |||||||||||||||||||||
18 | EUR | EURO STOXX 50 Index Futures | September 2019 | 702,263 | 709,414 | 7,151 | |||||||||||||||||||||
7 | EUR | FTSE MIB Index Futures | September 2019 | 816,677 | 841,978 | 25,301 | |||||||||||||||||||||
36 | GBP | FTSE 250 Index Futures | September 2019 | 1,741,751 | 1,769,019 | 27,268 | |||||||||||||||||||||
21 | HKD | Hang Seng China Enterprises Index Futures | July 2019 | 1,452,247 | 1,456,373 | 4,126 | |||||||||||||||||||||
30 | JPY | TOPIX Index Futures | September 2019 | 4,239,303 | 4,315,726 | 76,423 | |||||||||||||||||||||
21 | USD | S&P 500 E-Mini Index Futures | September 2019 | 3,043,541 | 3,091,410 | 47,869 | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
3 | CAD | Canada Government Bond 10 Year Futures | September 2019 | 323,793 | 327,433 | 3,640 | |||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
21 | USD | US Treasury Note 5 Year Futures | September 2019 | 2,456,046 | 2,481,281 | 25,235 | |||||||||||||||||||||
Total | $ | 17,929,414 | $ | 18,181,845 | $ | 252,431 | |||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
20 | AUD | ASX SPI 200 Index Futures | September 2019 | (2,271,816 | ) | (2,302,373 | ) | (30,557 | ) | ||||||||||||||||||
30 | EUR | CAC 40 Index Futures | July 2019 | (1,825,024 | ) | (1,887,473 | ) | (62,449 | ) | ||||||||||||||||||
6 | GBP | FTSE 100 Index Futures | September 2019 | (554,671 | ) | (561,495 | ) | (6,824 | ) | ||||||||||||||||||
13 | USD | Mini MSCI Emerging Markets (EM) Index Futures | September 2019 | (652,269 | ) | (684,710 | ) | (32,441 | ) | ||||||||||||||||||
38 | USD | MSCI Taiwan Index Futures | July 2019 | (1,473,565 | ) | (1,468,700 | ) | 4,865 | |||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
28 | EUR | German Euro Bund Futures | September 2019 | (5,436,885 | ) | (5,499,835 | ) | (62,950 | ) | ||||||||||||||||||
11 | GBP | United Kingdom Long Gilt Bond Futures | September 2019 | (1,803,976 | ) | (1,820,218 | ) | (16,242 | ) | ||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
14 | USD | Ultra Long US Treasury Bond Futures | September 2019 | (2,416,210 | ) | (2,485,875 | ) | (69,665 | ) | ||||||||||||||||||
5 | USD | US Treasury Note 10 Year Futures | September 2019 | (628,624 | ) | (639,844 | ) | (11,220 | ) | ||||||||||||||||||
Total | $ | (17,063,040 | ) | $ | (17,350,523 | ) | $ | (287,483 | ) | ||||||||||||||||||
Net unrealized depreciation | $ | (35,052 | ) |
Centrally cleared credit default swap agreements on credit indices—buy protection12
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments made by the Portfolio11 | Upfront payments received | Value | Unrealized depreciation | ||||||||||||||||||||||||
CDX North American Investment Grade 32 Index | USD | 11,200 | 06/20/24 | Quarterly | 1.000 | % | $ | 167,219 | $ | (241,895 | ) | $ | (74,676 | ) | |||||||||||||||||
iTraxx Europe Series 31 Index | EUR | 5,500 | 06/20/24 | Quarterly | 1.000 | 106,397 | (151,182 | ) | (44,785 | ) | |||||||||||||||||||||
Total | $ | 273,616 | $ | (393,077 | ) | $ | (119,461 | ) |
17
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Centrally cleared credit default swap agreements on credit indices—sell protection13
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio11 | Upfront payments made | Value | Unrealized appreciation | ||||||||||||||||||||||||
CDX North American High Yield 32 Index | USD | 1,600 | 06/20/24 | Quarterly | 5.000 | % | $ | (86,239 | ) | $ | 122,476 | $ | 36,237 | ||||||||||||||||||
iTraxx Europe Crossover Series 31 Index | EUR | 600 | 06/20/24 | Quarterly | 5.000 | (73,442 | ) | 78,342 | 4,900 | ||||||||||||||||||||||
Total | $ | (159,681 | ) | $ | 200,818 | $ | 41,137 |
OTC credit default swap agreements on corporate issues—sell protection13
Counterparty | Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio11 | 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 | % | $ | 1,047 | $ | 625 | $ | 1,672 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | CNY | 5,720,000 | USD | 851,862 | 07/23/19 | $ | 19,016 | ||||||||||||
BB | KRW | 2,810,000,000 | USD | 2,482,223 | 07/23/19 | 47,073 | |||||||||||||
BB | TWD | 14,400,000 | USD | 468,643 | 07/23/19 | 4,437 | |||||||||||||
BB | USD | 780,000 | COP | 2,576,028,000 | 07/23/19 | 20,546 | |||||||||||||
BB | USD | 906,024 | MYR | 3,760,000 | 07/23/19 | 3,574 | |||||||||||||
BB | USD | 1,501,548 | NZD | 2,310,000 | 07/23/19 | 51,063 | |||||||||||||
CITI | BRL | 1,610,000 | USD | 413,138 | 07/23/19 | (5,331 | ) | ||||||||||||
CITI | INR | 14,470,000 | USD | 206,918 | 07/23/19 | (2,163 | ) | ||||||||||||
CITI | USD | 405,641 | BRL | 1,610,000 | 07/23/19 | 12,828 | |||||||||||||
CITI | USD | 1,725,000 | KRW | 2,002,897,500 | 07/23/19 | 10,713 | |||||||||||||
GSI | THB | 24,784,500 | USD | 780,000 | 07/23/19 | (28,531 | ) | ||||||||||||
GSI | USD | 917,517 | COP | 2,864,801,000 | 07/23/19 | (27,230 | ) | ||||||||||||
GSI | USD | 681,090 | NZD | 1,025,000 | 07/23/19 | 7,839 | |||||||||||||
HSBC | USD | 827,271 | CNY | 5,720,000 | 07/23/19 | 5,575 | |||||||||||||
HSBC | USD | 205,958 | INR | 14,470,000 | 07/23/19 | 3,123 | |||||||||||||
HSBC | USD | 680,072 | KRW | 807,102,500 | 07/23/19 | 19,364 | |||||||||||||
HSBC | USD | 455,941 | TWD | 14,400,000 | 07/23/19 | 8,265 | |||||||||||||
MSCI | CHF | 1,454,798 | GBP | 1,175,000 | 07/23/19 | 533 | |||||||||||||
SSC | AUD | 3,000,000 | USD | 2,163,167 | 07/23/19 | 55,457 | |||||||||||||
SSC | CAD | 4,080,000 | USD | 3,060,586 | 07/23/19 | (56,549 | ) | ||||||||||||
SSC | CHF | 1,900,000 | USD | 1,902,011 | 07/23/19 | (48,194 | ) | ||||||||||||
SSC | EUR | 230,000 | USD | 258,519 | 07/23/19 | (3,470 | ) | ||||||||||||
SSC | EUR | 5,185,000 | USD | 5,911,692 | 07/23/19 | 5,533 | |||||||||||||
SSC | GBP | 1,885,000 | USD | 2,468,445 | 07/23/19 | 72,052 | |||||||||||||
SSC | HKD | 4,315,000 | USD | 550,922 | 07/23/19 | (1,517 | ) | ||||||||||||
SSC | JPY | 50,800,000 | USD | 458,900 | 07/23/19 | (13,050 | ) | ||||||||||||
SSC | MXN | 8,190,000 | USD | 424,817 | 07/23/19 | (428 | ) |
18
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
Forward foreign currency contracts—(Concluded)
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
SSC | NOK | 2,400,000 | USD | 275,558 | 07/23/19 | $ | (5,986 | ) | |||||||||||
SSC | NZD | 8,110,000 | USD | 5,474,323 | 07/23/19 | 23,382 | |||||||||||||
SSC | SEK | 3,580,000 | USD | 376,346 | 07/23/19 | (9,792 | ) | ||||||||||||
SSC | THB | 28,970,000 | USD | 909,909 | 07/23/19 | (35,163 | ) | ||||||||||||
SSC | USD | 231,755 | AUD | 330,000 | 07/23/19 | 93 | |||||||||||||
SSC | USD | 321,356 | CHF | 325,000 | 07/23/19 | 12,231 | |||||||||||||
SSC | USD | 699,115 | EUR | 620,000 | 07/23/19 | 7,118 | |||||||||||||
SSC | USD | 2,702,725 | JPY | 300,100,000 | 07/23/19 | 85,311 | |||||||||||||
SSC | USD | 3,453,695 | MXN | 66,020,000 | 07/23/19 | (25,777 | ) | ||||||||||||
SSC | USD | 1,894,526 | NOK | 16,020,000 | 07/23/19 | (15,218 | ) | ||||||||||||
SSC | USD | 3,566,016 | SEK | 32,670,000 | 07/23/19 | (42,241 | ) | ||||||||||||
Net unrealized appreciation | $ | 154,486 |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | — | $ | 19,794,392 | $ | — | $ | 19,794,392 | |||||||||||
Collateralized debt obligation | — | — | 0 | 0 | |||||||||||||||
Collateralized mortgage obligation | — | 691 | — | 691 | |||||||||||||||
Non-US government obligation | — | 80,975 | — | 80,975 | |||||||||||||||
Exchange traded funds | 4,414,572 | — | — | 4,414,572 | |||||||||||||||
Short-term investments | — | 19,968,260 | — | 19,968,260 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 2,479,035 | — | 2,479,035 | |||||||||||||||
Swaptions purchased | — | 143 | — | 143 | |||||||||||||||
Futures contracts | 257,296 | — | — | 257,296 | |||||||||||||||
Swap agreements | — | 201,443 | — | 201,443 | |||||||||||||||
Forward foreign currency contracts | — | 475,126 | — | 475,126 | |||||||||||||||
Total | $ | 4,671,868 | $ | 43,000,065 | $ | 0 | $ | 47,671,933 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (292,348 | ) | $ | — | $ | — | $ | (292,348 | ) | |||||||||
Swap agreements | — | (393,077 | ) | — | (393,077 | ) | |||||||||||||
Forward foreign currency contracts | — | (320,640 | ) | — | (320,640 | ) | |||||||||||||
Total | $ | (292,348 | ) | $ | (713,717 | ) | $ | — | $ | (1,006,065 | ) |
At June 30, 2019, there were no transfers between Level 1 and Level 2.
Securities valued using unobservable inputs, i.e. Level 3, were not considered significant to the Fund.
19
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2019
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 Perpetual investment. Date shown reflects the next call date.
4 Security, or portion thereof, was on loan at the period end.
5 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
6 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 $1,177,221, represented 2.4% of the Fund's net assets at period end.
7 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.
8 Significant unobservable inputs were used in the valuation of this security; i.e. Level 3.
9 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.
10 Rate shown is the discount rate at the date of purchase unless otherwise noted.
11 Payments made or received are based on the notional amount.
12 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced 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.
13 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced 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.
20
UBS Global Allocation Fund
Portfolio performance
For the one year ended June 30, 2019, Class A shares of UBS Global Allocation Fund (the "Fund") returned 3.97% (Class A shares returned -1.72% after the deduction of the maximum sales charge), while Class P shares returned 4.21%. In contrast, the Fund's benchmark, the 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD), returned 6.96% during the same time period. For comparison purposes, the MSCI All Country World Index (net) returned 5.74% and the FTSE World Government Bond Index (Hedged in USD) returned 7.82%. (Class P shares have lower expenses than the other share class of 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 positive 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 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 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 absolute, contributed to performance during the reporting period.
Portfolio performance summary
What worked:
– Bottom-up security selection was positive in some strategies.
– In the US large cap growth strategy, security selection contributed to performance.
– Overall, active currency positions were positive for results
– A long Mexican peso versus US dollar position was additive as the currency provided an exceptional return from carry, as it relates to currency investing, which is the profit or loss that can be made from interest rate differentials in two countries, and valuation was attractive as well.
– A short Chilean peso position added to results as the US dollar strengthened. This position was closed in early September 2018, on the back of positive performance and more normalized valuations.
– A long US dollar versus Australian dollar position added value, as the US economy showed relative economic strength and the US dollar acted as a safe haven in the fourth quarter of 2018's market distress
– Certain market allocations were positive for returns.
– The Fund's performance was positively impacted by an overall underweight to fixed income, as it lagged equities over the reporting period. Within fixed income, long duration exposure within US government fixed income was additive, with long 30-year Treasuries outperforming.
What didn't work:
– Overall, the portfolio's bottom-up security selection was negative for results.
– Negative security selection came from the US large cap core, non-US developed and emerging market equities active managers.
21
UBS Global Allocation Fund
– Overall, market allocations detracted from results.
– The Fund's preference for non-US equities over US equities detracted over the reporting period as the US economy was relatively strong, especially compared to other major developed markets.
– More specifically, performance was hurt by a few relative value trades. For example, long Japanese equities versus going short French equities was a significant detractor. In addition, long emerging markets equities versus US equities was negative for performance.
– Certain active currency positions were negative for performance
– A long Colombian peso position versus the US dollar detracted from results due to tighter US monetary policy and the peso's sensitivity to falling oil prices. This position was closed in September 2018.
– A short euro position versus the Swedish krona was a headwind for results as the euro weakened amid Brexit fears, but the Krona depreciated more significantly.
– A long position in the Norwegian krone versus sterling detracted from performance. The trade was taken off in December 2018 as the krone depreciated at a faster rate than sterling.
This letter is intended to assist shareholders in understanding how the Fund performed during the one year ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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 06/30/19 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 3.97 | % | 3.86 | % | 7.07 | % | |||||||||
Class P2 | 4.21 | 4.13 | 7.37 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (1.72 | )% | 2.70 | % | 6.46 | % | |||||||||
MSCI All Country World Index (net)3 | 5.74 | 6.16 | 10.15 | ||||||||||||
FTSE World Government Bond Index (Hedged in USD)4 | 7.82 | 3.99 | 3.93 | ||||||||||||
60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)5 | 6.96 | 5.49 | 7.88 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) 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.
Prior to August 3, 2015, a 1% redemption fee was imposed on sales or exchanges of any class of shares of the Fund made during the specified holding period.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
23
UBS Global Allocation Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depicts the performance of UBS Global Allocation Fund Class A and Class P shares versus the MSCI All Country World Index (net), FTSE World Government Bond Index (Hedged in USD), and the 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD) over the 10 years ended June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Global Allocation Fund Class A vs. MSCI All Country World Index (net), FTSEWorld Government Bond Index (Hedged in USD) and 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2009 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS Global Allocation Fund Class P vs. MSCI All Country World Index (net), FTSE World Government Bond Index (Hedged in USD) and 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2009 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
24
UBS Global Allocation Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten equity holdings
Percentage of net assets | |||||||
Amazon.com, Inc. | 1.4 | % | |||||
Visa, Inc., Class A | 0.8 | ||||||
Microsoft Corp. | 0.8 | ||||||
Walt Disney Co./The | 0.7 | ||||||
AIA Group Ltd. | 0.7 | ||||||
Johnson & Johnson | 0.6 | ||||||
Marsh & McLennan Cos., Inc. | 0.6 | ||||||
Facebook, Inc., Class A | 0.6 | ||||||
JPMorgan Chase & Co. | 0.6 | ||||||
Philip Morris International, Inc. | 0.6 | ||||||
Total | 7.4 | % |
Top ten long-term fixed income holdings
Percentage of net assets | |||||||
New Zealand Government Bond 2.000%, due 09/20/25 | 1.2 | % | |||||
US Treasury Notes 1.500%, due 08/15/20 | 0.9 | ||||||
US Treasury Notes 1.875%, due 07/31/22 | 0.7 | ||||||
US Treasury Notes 2.500%, due 05/15/24 | 0.6 | ||||||
US Treasury Notes 1.375%, due 09/30/23 | 0.6 | ||||||
Japan Government Twenty Year Bond 0.400%, due 03/20/36 | 0.5 | ||||||
US Treasury Inflation Index Notes (TIPS) 0.375%, due 07/15/25 | 0.5 | ||||||
US Treasury Notes 2.000%, due 11/30/22 | 0.5 | ||||||
US Treasury Notes 1.875%, due 10/31/22 | 0.4 | ||||||
France Government Bond OAT 0.500%, 05/25/26 | 0.3 | ||||||
Total | 6.2 | % |
Top five issuer breakdown by country or territory of origin2
Percentage of net assets | |||||||
United States | 42.0 | % | |||||
Japan | 5.6 | ||||||
United Kingdom | 4.2 | ||||||
Switzerland | 1.9 | ||||||
France | 1.6 | ||||||
Total | 55.3 | % |
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: 42.0%, Japan: 5.6%, United Kingdom: 4.20, Switzerland: 1.9% and France: 1.6%.
25
UBS Global Allocation Fund
Industry diversification—June 30, 20191,2
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 0.7 | % | |||||
Airlines | 0.6 | ||||||
Auto components | 0.6 | ||||||
Automobiles | 0.1 | ||||||
Banks | 2.8 | ||||||
Biotechnology | 1.3 | ||||||
Building products | 0.5 | ||||||
Capital markets | 0.4 | ||||||
Chemicals | 1.5 | ||||||
Commercial services & supplies | 0.4 | ||||||
Communications equipment | 0.1 | ||||||
Consumer finance | 1.1 | ||||||
Distributors | 0.2 | ||||||
Diversified financial services | 0.8 | ||||||
Diversified telecommunication services | 0.7 | ||||||
Electric utilities | 0.1 | ||||||
Electrical equipment | 0.1 | ||||||
Electronic equipment, instruments & components | 0.5 | ||||||
Energy equipment & services | 0.0 | † | |||||
Entertainment | 2.2 | ||||||
Equity real estate investment trusts | 0.8 | ||||||
Food & staples retailing | 0.8 | ||||||
Food products | 0.8 | ||||||
Health care equipment & supplies | 0.9 | ||||||
Health care providers & services | 0.8 | ||||||
Hotels, restaurants & leisure | 0.8 | ||||||
Household durables | 0.5 | ||||||
Industrial conglomerates | 0.2 | ||||||
Insurance | 2.8 | ||||||
Interactive media & services | 1.2 | ||||||
Internet & direct marketing retail | 1.6 | ||||||
IT services | 1.3 | ||||||
Life sciences tools & services | 0.2 | ||||||
Machinery | 1.6 | ||||||
Marine | 0.1 | ||||||
Media | 0.2 | ||||||
Metals & mining | 1.0 | ||||||
Multi-utilities | 0.2 | ||||||
Multiline retail | 0.2 | ||||||
Oil, gas & consumable fuels | 2.2 | ||||||
Personal products | 0.6 | ||||||
Pharmaceuticals | 2.7 | ||||||
Real estate management & development | 0.2 | ||||||
Road & rail | 0.5 | ||||||
Semiconductors & semiconductor equipment | 2.4 | ||||||
Software | 2.8 | ||||||
Specialty retail | 0.4 | ||||||
Technology hardware, storage & peripherals | 0.8 |
Common stocks—(Concluded) | Percentage of net assets | ||||||
Textiles, apparel & luxury goods | 0.7 | % | |||||
Tobacco | 0.9 | ||||||
Trading companies & distributors | 0.7 | ||||||
Wireless telecommunication services | 0.5 | ||||||
Total common stocks | 46.1 | % | |||||
Non-US government obligations | 4.3 | ||||||
U.S. treasury obligations | 6.3 | ||||||
Exchange traded funds | 9.6 | ||||||
Investment company | 7.8 | ||||||
Investment of cash collateral from securities loaned | 6.0 | ||||||
Short-term investments | 22.8 | ||||||
Option purchased | 0.1 | ||||||
Total investments | 103.0 | % | |||||
Other in excess of liabilities | (3.0 | ) | |||||
Net assets | 100.0 | % |
† Amount represents less than 0.05%
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.
26
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks: 46.1% | |||||||||||
Australia: 0.4% | |||||||||||
Coles Group Ltd.* | 48,180 | $ | 451,561 | ||||||||
Rio Tinto Ltd.1 | 7,557 | 550,487 | |||||||||
Total Australia common stocks | 1,002,048 | ||||||||||
Austria: 0.4% | |||||||||||
Erste Group Bank AG* | 28,283 | 1,049,722 | |||||||||
Belgium: 0.3% | |||||||||||
Euronav N.V. 1 | 54,845 | 512,946 | |||||||||
Galapagos N.V.*,1 | 2,922 | 376,950 | |||||||||
Total Belgium common stocks | 889,896 | ||||||||||
Canada: 0.8% | |||||||||||
Canadian Natural Resources Ltd. | 20,855 | 562,323 | |||||||||
Entertainment One Ltd. | 100,997 | 509,196 | |||||||||
Husky Energy, Inc. | 45,608 | 432,206 | |||||||||
Toronto-Dominion Bank/The | 9,450 | 552,185 | |||||||||
Total Canada common stocks | 2,055,910 | ||||||||||
China: 0.1% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 1,903 | 322,463 | |||||||||
Denmark: 0.4% | |||||||||||
AP Moller—Maersk A/S, Class B | 300 | 372,112 | |||||||||
Genmab A/S* | 3,567 | 655,891 | |||||||||
Total Denmark common stocks | 1,028,003 | ||||||||||
Finland: 0.4% | |||||||||||
Sampo Oyj, Class A | 22,783 | 1,075,122 | |||||||||
France: 0.9% | |||||||||||
Publicis Groupe SA | 10,973 | 579,326 | |||||||||
Sanofi | 10,013 | 864,295 | |||||||||
Thales SA | 5,709 | 705,324 | |||||||||
Ubisoft Entertainment SA* | 4,258 | 333,307 | |||||||||
Total France common stocks | 2,482,252 | ||||||||||
Germany: 1.2% | |||||||||||
Continental AG | 3,923 | 571,970 | |||||||||
Daimler AG (Registered) | 6,057 | 336,967 | |||||||||
Infineon Technologies AG | 27,422 | 484,873 | |||||||||
LANXESS AG | 10,901 | 647,790 | |||||||||
SAP SE | 8,941 | 1,227,744 | |||||||||
Total Germany common stocks | 3,269,344 | ||||||||||
Hong Kong: 1.2% | |||||||||||
AIA Group Ltd. | 166,317 | 1,793,746 | |||||||||
Jardine Matheson Holdings Ltd. | 7,100 | 447,442 | |||||||||
Power Assets Holdings Ltd. | 56,500 | 406,480 | |||||||||
WH Group Ltd.2 | 459,500 | 465,871 | |||||||||
Total Hong Kong common stocks | 3,113,539 | ||||||||||
Ireland: 0.2% | |||||||||||
Ryanair Holdings PLC, ADR* | 6,992 | 448,467 |
Number of shares | Value | ||||||||||
Italy: 1.0% | |||||||||||
Autogrill SpA | 63,315 | $ | 663,439 | ||||||||
Banca Mediolanum SpA1 | 147,512 | 1,086,090 | |||||||||
Infrastrutture Wireless Italiane SpA2 | 93,129 | 913,891 | |||||||||
Total Italy common stocks | 2,663,420 | ||||||||||
Japan: 4.9% | |||||||||||
Inpex Corp. | 65,700 | 591,888 | |||||||||
ITOCHU Corp. | 49,100 | 938,372 | |||||||||
Katitas Co. Ltd.1 | 12,600 | 468,052 | |||||||||
Kissei Pharmaceutical Co. Ltd. | 15,700 | 391,717 | |||||||||
Kose Corp. | 2,700 | 452,525 | |||||||||
Makita Corp. | 16,400 | 556,731 | |||||||||
MINEBEA MITSUMI, Inc. | 47,800 | 809,117 | |||||||||
Nabtesco Corp. | 26,000 | 722,014 | |||||||||
Nintendo Co. Ltd. | 2,800 | 1,025,572 | |||||||||
ORIX Corp. | 67,800 | 1,011,199 | |||||||||
Otsuka Holdings Co. Ltd.1 | 14,500 | 472,866 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 12,600 | 1,172,759 | |||||||||
SoftBank Group Corp. | 13,200 | 632,361 | |||||||||
Sony Corp. | 24,100 | 1,262,503 | |||||||||
Sumitomo Electric Industries Ltd. | 39,800 | 522,164 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 26,600 | 943,206 | |||||||||
Tokyo Electron Ltd. | 3,000 | 420,721 | |||||||||
West Japan Railway Co. | 10,000 | 808,422 | |||||||||
Total Japan common stocks | 13,202,189 | ||||||||||
Netherlands: 0.9% | |||||||||||
ASR Nederland N.V. | 24,376 | 991,194 | |||||||||
Koninklijke Ahold Delhaize N.V. | 29,370 | 660,519 | |||||||||
NXP Semiconductors N.V. | 6,546 | 638,955 | |||||||||
Total Netherlands common stocks | 2,290,668 | ||||||||||
Norway: 0.3% | |||||||||||
Telenor ASA | 44,058 | 935,344 | |||||||||
South Africa: 0.4% | |||||||||||
Anglo American PLC1 | 35,886 | 1,022,895 | |||||||||
Spain: 0.4% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 196,712 | 1,099,841 | |||||||||
Switzerland: 1.9% | |||||||||||
Alcon, Inc.* | 9,239 | 570,505 | |||||||||
Cie Financiere Richemont SA (Registered) | 13,489 | 1,144,672 | |||||||||
Glencore PLC* | 117,882 | 409,216 | |||||||||
Nestle SA (Registered) | 8,487 | 878,607 | |||||||||
Novartis AG (Registered) | 12,414 | 1,134,326 | |||||||||
Zurich Insurance Group AG | 3,003 | 1,045,605 | |||||||||
Total Switzerland common stocks | 5,182,931 | ||||||||||
United Kingdom: 4.1% | |||||||||||
Ashtead Group PLC | 34,163 | 977,904 | |||||||||
Babcock International Group PLC | 65,388 | 380,487 | |||||||||
Barclays PLC | 397,604 | 756,395 | |||||||||
BP PLC | 200,230 | 1,394,991 | |||||||||
British American Tobacco PLC | 24,685 | 861,776 |
27
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
Centrica PLC | 497,647 | $ | 554,758 | ||||||||
GlaxoSmithKline PLC | 57,835 | 1,157,974 | |||||||||
HSBC Holdings PLC | 128,442 | 1,071,501 | |||||||||
Sage Group PLC/The | 120,416 | 1,227,048 | |||||||||
Spectris PLC | 21,274 | 777,546 | |||||||||
Tesco PLC | 316,036 | 909,860 | |||||||||
Unilever N.V. CVA | 16,531 | 1,006,789 | |||||||||
Total United Kingdom common stocks | 11,077,029 | ||||||||||
United States: 25.9% | |||||||||||
Abbott Laboratories | 6,657 | 559,854 | |||||||||
Activision Blizzard, Inc. | 13,626 | 643,147 | |||||||||
AGCO Corp. | 10,607 | 822,785 | |||||||||
Alexion Pharmaceuticals, Inc.* | 4,049 | 530,338 | |||||||||
Align Technology, Inc.* | 622 | 170,241 | |||||||||
Allegion PLC | 5,153 | 569,664 | |||||||||
Allergan PLC | 1,512 | 253,154 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 2,098 | 152,231 | |||||||||
Alphabet, Inc., Class A* | 1,273 | 1,378,404 | |||||||||
Amazon.com, Inc.* | 1,933 | 3,660,387 | |||||||||
American Express Co. | 11,621 | 1,434,496 | |||||||||
Ameriprise Financial, Inc. | 6,648 | 965,024 | |||||||||
Apache Corp. | �� | 25,594 | 741,458 | ||||||||
Apple, Inc. | 5,528 | 1,094,102 | |||||||||
Aptiv PLC | 7,870 | 636,132 | |||||||||
Arista Networks, Inc.* | 1,210 | 314,140 | |||||||||
Autodesk, Inc.* | 3,009 | 490,166 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 1,865 | 582,980 | |||||||||
Bluebird Bio, Inc.*,1 | 958 | 121,858 | |||||||||
Burlington Stores, Inc.* | 2,422 | 412,103 | |||||||||
Carnival Corp. | 11,105 | 516,938 | |||||||||
Carvana Co.*,1 | 1,274 | 79,740 | |||||||||
Caterpillar, Inc. | 3,563 | 485,601 | |||||||||
CF Industries Holdings, Inc. | 13,085 | 611,200 | |||||||||
Coherus Biosciences, Inc.*,1 | 10,109 | 223,409 | |||||||||
Concho Resources, Inc. | 7,439 | 767,556 | |||||||||
Cooper Cos., Inc./The | 844 | 284,335 | |||||||||
Cree, Inc.* | 5,016 | 281,799 | |||||||||
Crown Castle International Corp. | 2,100 | 273,735 | |||||||||
Cyclerion Therapeutics, Inc.* | 3,282 | 37,579 | |||||||||
Delta Air Lines, Inc. | 20,106 | 1,141,016 | |||||||||
Digital Realty Trust, Inc. | 6,654 | 783,775 | |||||||||
Dollar General Corp. | 3,130 | 423,051 | |||||||||
Domino's Pizza, Inc. | 1,562 | 434,673 | |||||||||
Elanco Animal Health, Inc.* | 11,449 | 386,976 | |||||||||
Electronic Arts, Inc.* | 3,860 | 390,864 | |||||||||
Estee Lauder Cos., Inc./The, Class A | 1,160 | 212,408 | |||||||||
Expedia Group, Inc. | 2,889 | 384,324 | |||||||||
Facebook, Inc., Class A* | 8,371 | 1,615,603 | |||||||||
First Republic Bank | 1,982 | 193,542 | |||||||||
FMC Corp. | 4,238 | 351,542 | |||||||||
Gardner Denver Holdings, Inc.* | 25,396 | 878,702 | |||||||||
GoDaddy, Inc., Class A* | 4,316 | 302,767 | |||||||||
Halliburton Co. | 4,610 | 104,831 |
Number of shares | Value | ||||||||||
HEICO Corp., Class A | 2,887 | $ | 298,429 | ||||||||
Hess Corp. | 13,355 | 848,977 | |||||||||
Hyatt Hotels Corp., Class A | 5,025 | 382,553 | |||||||||
IAC/InterActiveCorp* | 1,625 | 353,486 | |||||||||
Incyte Corp.* | 8,795 | 747,223 | |||||||||
IPG Photonics Corp.* | 4,242 | 654,329 | |||||||||
Ironwood Pharmaceuticals, Inc.*,1 | 60,948 | 666,771 | |||||||||
Johnson & Johnson | 12,085 | 1,683,199 | |||||||||
JPMorgan Chase & Co. | 13,843 | 1,547,647 | |||||||||
KLA-Tencor Corp. | 3,030 | 358,146 | |||||||||
Laboratory Corp. of America Holdings* | 4,441 | 767,849 | |||||||||
Lam Research Corp. | 2,071 | 389,017 | |||||||||
Las Vegas Sands Corp. | 4,433 | 261,946 | |||||||||
LivaNova PLC* | 10,000 | 719,600 | |||||||||
LKQ Corp.* | 19,760 | 525,814 | |||||||||
LogMeIn, Inc. | 4,135 | 304,667 | |||||||||
Marsh & McLennan Cos., Inc. | 16,774 | 1,673,206 | |||||||||
Marvell Technology Group Ltd.1 | 18,822 | 449,281 | |||||||||
Masco Corp. | 16,719 | 656,054 | |||||||||
MetLife, Inc. | 20,851 | 1,035,669 | |||||||||
Micron Technology, Inc.* | 24,690 | 952,787 | |||||||||
Microsoft Corp. | 15,938 | 2,135,054 | |||||||||
Mondelez International, Inc., Class A | 15,123 | 815,130 | |||||||||
Monolithic Power Systems, Inc. | 2,304 | 312,837 | |||||||||
MSA Safety, Inc. | 4,880 | 514,303 | |||||||||
NetApp, Inc. | 5,096 | 314,423 | |||||||||
Netflix, Inc.* | 1,676 | 615,628 | |||||||||
NIKE, Inc., Class B | 7,507 | 630,213 | |||||||||
NVIDIA Corp. | 2,144 | 352,109 | |||||||||
ON Semiconductor Corp.* | 15,518 | 313,619 | |||||||||
Palo Alto Networks, Inc.* | 1,622 | 330,499 | |||||||||
Philip Morris International, Inc. | 18,752 | 1,472,595 | |||||||||
Qorvo, Inc.* | 4,851 | 323,125 | |||||||||
Rockwell Automation, Inc. | 2,119 | 347,156 | |||||||||
salesforce.com, Inc.* | 7,514 | 1,140,099 | |||||||||
ServiceNow, Inc.* | 1,832 | 503,012 | |||||||||
Sherwin-Williams Co./The | 841 | 385,422 | |||||||||
Simon Property Group, Inc. | 7,017 | 1,121,036 | |||||||||
Skyworks Solutions, Inc. | 4,432 | 342,461 | |||||||||
Spirit AeroSystems Holdings, Inc., Class A | 11,377 | 925,746 | |||||||||
Square, Inc., Class A* | 2,617 | 189,811 | |||||||||
Steel Dynamics, Inc. | 23,462 | 708,552 | |||||||||
Stericycle, Inc.*,1 | 5,663 | 270,408 | |||||||||
Synchrony Financial | 41,147 | 1,426,566 | |||||||||
T-Mobile US, Inc.* | 8,628 | 639,680 | |||||||||
Take-Two Interactive Software, Inc.* | 3,169 | 359,777 | |||||||||
Teradyne, Inc. | 7,096 | 339,969 | |||||||||
TJX Cos., Inc./The | 11,229 | 593,790 | |||||||||
Union Pacific Corp. | 3,243 | 548,424 | |||||||||
UnitedHealth Group, Inc. | 5,562 | 1,357,184 | |||||||||
Universal Display Corp. | 1,832 | 344,526 | |||||||||
Visa, Inc., Class A | 12,537 | 2,175,796 | |||||||||
Walt Disney Co./The | 14,076 | 1,965,573 | |||||||||
Wells Fargo & Co. | 24,400 | 1,154,608 | |||||||||
Western Digital Corp. | 14,681 | 698,082 |
28
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Westlake Chemical Corp. | 10,323 | $ | 717,036 | ||||||||
Worldpay, Inc., Class A* | 5,835 | 715,079 | |||||||||
Total United States common stocks | 69,074,608 | ||||||||||
Total common stocks (cost $111,487,378) | 123,285,691 | ||||||||||
Face amount | |||||||||||
Non-US government obligations: 4.3% | |||||||||||
Australia: 0.1% | |||||||||||
Australia Government Bond, Series 126, 4.500%, due 04/15/203 | AUD | 486,000 | 350,520 | ||||||||
Austria: 0.1% | |||||||||||
Republic of Austria Government Bond 1.200%, due 10/20/252,3 | EUR | 37,000 | 46,379 | ||||||||
3.150%, due 06/20/442,3 | EUR | 67,000 | 121,722 | ||||||||
168,101 | |||||||||||
Belgium: 0.1% | |||||||||||
Kingdom of Belgium Government Bond, Series 71, | |||||||||||
3.750%, due 06/22/453 | EUR | 125,000 | 238,279 | ||||||||
Canada: 0.1% | |||||||||||
Canadian Government Bond 2.250%, due 06/01/25 | CAD | 221,000 | 176,763 | ||||||||
2.750%, due 12/01/64 | CAD | 82,000 | 84,596 | ||||||||
261,359 | |||||||||||
France: 0.7% | |||||||||||
French Republic Government Bond OAT 0.500%, due 05/25/263 | EUR | 741,000 | 890,207 | ||||||||
2.500%, due 05/25/303 | EUR | 262,000 | 376,687 | ||||||||
3.250%, due 05/25/453 | EUR | 116,000 | 208,677 | ||||||||
Series OATE, 1.800%, due 07/25/402,3 | EUR | 209,687 | 361,835 | ||||||||
1,837,406 | |||||||||||
Ireland: 0.0%† | |||||||||||
Ireland Government Bond 2.000%, due 02/18/453 | EUR | 48,000 | 67,826 | ||||||||
Italy: 0.5% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.650%, due 03/01/322,3 | EUR | 60,000 | 64,089 | ||||||||
3.250%, due 09/01/462,3 | EUR | 215,000 | 262,163 | ||||||||
4.000%, due 02/01/372,3 | EUR | 309,000 | 420,358 | ||||||||
4.750%, due 09/01/442,3 | EUR | 25,000 | 37,448 | ||||||||
Series CPI, 2.550%, due 09/15/412,3 | EUR | 375,114 | 475,467 | ||||||||
1,259,525 |
Face amount | Value | ||||||||||
Japan: 0.8% | |||||||||||
Japan Government Five Year Bond, Series 122, | |||||||||||
0.100%, due 12/20/19 | JPY | 55,000,000 | $ | 510,791 | |||||||
Japan Government Thirty Year Bond, Series 51, | |||||||||||
0.300%, due 06/20/46 | JPY | 32,000,000 | 293,947 | ||||||||
Japan Government Twenty Year Bond, Series 156, | |||||||||||
0.400%, due 03/20/36 | JPY | 137,350,000 | 1,328,479 | ||||||||
2,133,217 | |||||||||||
New Zealand: 1.2% | |||||||||||
New Zealand Government Inflation Linked Bond, Series 0925, | |||||||||||
2.000%, due 09/20/253,4 | NZD | 4,034,478 | 3,204,516 | ||||||||
Spain: 0.5% | |||||||||||
Spain Government Bond 1.450%, due 10/31/272,3 | EUR | 250,000 | 312,733 | ||||||||
3.450%, due 07/30/662,3 | EUR | 10,000 | 17,728 | ||||||||
4.200%, due 01/31/372,3 | EUR | 44,000 | 76,812 | ||||||||
4.800%, due 01/31/242,3 | EUR | 451,000 | 631,202 | ||||||||
5.150%, due 10/31/442,3 | EUR | 110,000 | 231,631 | ||||||||
1,270,106 | |||||||||||
United Kingdom: 0.2% | |||||||||||
United Kingdom Gilt 1.500%, due 07/22/473 | GBP | 263,000 | 336,061 | ||||||||
3.500%, due 01/22/453 | GBP | 120,000 | 218,113 | ||||||||
554,174 | |||||||||||
Total non-US government obligations (cost $10,444,148) | 11,345,029 | ||||||||||
U.S. treasury obligations: 6.3% | |||||||||||
US Treasury Bonds 2.750%, due 11/15/42 | 423,000 | 443,043 | |||||||||
2.875%, due 05/15/43 | 817,000 | 873,009 | |||||||||
2.875%, due 08/15/45 | 37,000 | 39,502 | |||||||||
3.000%, due 11/15/45 | 97,000 | 106,029 | |||||||||
2.500%, due 02/15/46 | 461,000 | 457,975 | |||||||||
2.250%, due 08/15/46 | 490,000 | 462,303 | |||||||||
2.750%, due 08/15/47 | 333,000 | 347,035 | |||||||||
US Treasury Inflation Index Bonds (TIPS) 0.750%, due 02/15/45 | 683,563 | 676,348 | |||||||||
US Treasury Inflation Index Notes (TIPS) 0.125%, due 01/15/23 | 188,178 | 187,113 | |||||||||
0.375%, due 07/15/25 | 1,292,904 | 1,307,079 | |||||||||
US Treasury Notes 1.625%, due 12/31/19 | 600,000 | 598,547 | |||||||||
1.500%, due 08/15/20 | 2,339,000 | 2,328,036 | |||||||||
1.250%, due 03/31/21 | 497,000 | 492,224 | |||||||||
1.875%, due 07/31/22 | 1,794,000 | 1,801,428 | |||||||||
1.875%, due 10/31/22 | 1,037,000 | 1,041,699 | |||||||||
2.000%, due 11/30/22 | 1,228,000 | 1,238,697 | |||||||||
1.500%, due 02/28/23 | 346,000 | 343,108 |
29
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
Face amount | Value | ||||||||||
U.S. treasury obligations—(Concluded) | |||||||||||
1.750%, due 05/15/23 | 530,000 | $ | 530,103 | ||||||||
2.750%, due 07/31/23 | 702,000 | 729,532 | |||||||||
1.375%, due 09/30/23 | 1,483,000 | 1,460,234 | |||||||||
2.500%, due 05/15/24 | 1,437,000 | 1,485,611 | |||||||||
Total U.S. treasury obligations (cost $16,453,610) | 16,948,655 | ||||||||||
Number of shares | |||||||||||
Exchange traded funds: 9.6% | |||||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF1 | 103,700 | 12,897,169 | |||||||||
iShares JPMorgan USD Emerging Markets Bond ETF | 112,800 | 12,779,112 | |||||||||
Total exchange traded funds (cost $25,559,497) | 25,676,281 | ||||||||||
Investment company: 7.8% | |||||||||||
UBS Emerging Markets Equity Opportunity Fund5 (cost $22,358,890) | 2,235,889 | 20,816,127 | |||||||||
Investment of cash collateral from securities loaned: 6.0% | |||||||||||
Money market fund: 6.0% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $16,152,725) | 16,152,725 | 16,152,725 |
Number of shares | Value | ||||||||||
Short-term investments: 22.8% | |||||||||||
Investment company: 13.1% | |||||||||||
State Street Institutional U.S. Government Money Market Fund | 34,985,795 | $ | 34,985,795 | ||||||||
Face amount | |||||||||||
U.S. treasury obligations: 9.7% | |||||||||||
US Treasury Bills 2.411%, due 07/25/196 | 16,000,000 | 15,974,827 | |||||||||
2.174%, due 11/14/196 | 10,000,000 | 9,919,722 | |||||||||
Total U.S. treasury obligations (cost $25,894,549) | 25,894,549 | ||||||||||
Total short-term investments (cost $60,880,344) | 60,880,344 |
Number of contracts | Notional amount | ||||||||||||||
Option purchased: 0.1% | |||||||||||||||
Put option: 0.1% | |||||||||||||||
S&P 500 Index, strike @ $2,750, expires 09/20/19 (cost $363,475) | 70 | USD | 19,250,000 | 198,800 | |||||||||||
Total investments: 103.0% (cost $263,700,067) | 275,303,652 | ||||||||||||||
Liabilities in excess of other assets: (3.0)% | (8,093,900 | ) | |||||||||||||
Net assets: 100.0% | $ | 267,209,752 |
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 105.
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
211 | EUR | EURO STOXX 50 Index Futures | September 2019 | $ | 8,090,526 | $ | 8,315,909 | $ | 225,383 | ||||||||||||||||||
77 | JPY | TOPIX Index Futures | September 2019 | 10,880,875 | 11,077,030 | 196,155 | |||||||||||||||||||||
221 | USD | Russell 1000 Value E-Mini Index Futures | September 2019 | 13,582,771 | 13,883,220 | 300,449 | |||||||||||||||||||||
306 | USD | SGX FTSE China A50 Index Futures | July 2019 | 4,122,049 | 4,132,530 | 10,481 | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
84 | AUD | Australian Bond 10 Year Futures | September 2019 | 8,366,428 | 8,471,364 | 104,936 | |||||||||||||||||||||
252 | CAD | Canada Government Bond 10 Year Futures | September 2019 | 27,198,605 | 27,504,380 | 305,775 | |||||||||||||||||||||
33 | GBP | United Kingdom Long Gilt Bond Futures | September 2019 | 5,417,070 | 5,460,655 | 43,585 | |||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
60 | USD | Ultra Long US Treasury Bond Futures | September 2019 | 10,321,115 | 10,653,750 | 332,635 | |||||||||||||||||||||
Total | $ | 87,979,439 | $ | 89,498,838 | $ | 1,519,399 |
30
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
Futures contracts—(Concluded)
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
24 | CAD | S&P TSX 60 Index Futures | September 2019 | $ | (3,549,280 | ) | $ | (3,583,643 | ) | $ | (34,363 | ) | |||||||||||||||
93 | EUR | CAC 40 Index Futures | July 2019 | (5,657,574 | ) | (5,851,165 | ) | (193,591 | ) | ||||||||||||||||||
526 | SEK | OMX 30 Index Futures | July 2019 | (8,984,934 | ) | (9,180,495 | ) | (195,561 | ) | ||||||||||||||||||
18 | USD | S&P 500 E-Mini Index Futures | September 2019 | (2,608,731 | ) | (2,649,780 | ) | (41,049 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
159 | EUR | German Euro Bund Futures | September 2019 | (30,869,608 | ) | (31,231,206 | ) | (361,598 | ) | ||||||||||||||||||
21 | JPY | JGB MINI 10 Year Futures | September 2019 | (2,990,233 | ) | (2,997,635 | ) | (7,402 | ) | ||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
170 | USD | US Treasury Note 2 Year Futures | September 2019 | (36,376,994 | ) | (36,580,547 | ) | (203,553 | ) | ||||||||||||||||||
Total | $ | (91,037,354 | ) | $ | (92,074,471 | ) | $ | (1,037,117 | ) | ||||||||||||||||||
Net unrealized appreciation | $ | 482,282 |
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 received (made) | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
CDX Emerging Markets Series 31 Index | USD | 14,200 | 06/20/24 | Quarterly | 1.000 | % | $ | 416,531 | $ | (442,896 | ) | $ | (26,365 | ) | |||||||||||||||||
CDX North America Investment Grade 32 Index | USD | 10,100 | 06/20/24 | Quarterly | 1.000 | (165,142 | ) | 218,138 | 52,996 | ||||||||||||||||||||||
iTraxx Europe Series 31 Index | EUR | 15,900 | 06/20/24 | Quarterly | 1.000 | (299,893 | ) | 437,053 | 137,160 | ||||||||||||||||||||||
Total | $ | (48,504 | ) | $ | 212,295 | $ | 163,791 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | CNY | 8,400,000 | USD | 1,250,987 | 07/23/19 | $ | 27,925 | ||||||||||||
BOA | NZD | 12,305,000 | USD | 8,309,074 | 07/23/19 | 38,565 | |||||||||||||
CITI | CHF | 7,675,000 | USD | 7,680,453 | 07/23/19 | (197,348 | ) | ||||||||||||
HSBC | MXN | 28,290,000 | USD | 1,471,493 | 07/23/19 | 2,608 | |||||||||||||
JPMCB | USD | 6,076,699 | SEK | 55,680,000 | 07/23/19 | (71,072 | ) | ||||||||||||
JPMCB | CAD | 8,255,000 | USD | 6,191,819 | 07/23/19 | (115,032 | ) | ||||||||||||
SSC | �� | USD | 4,670,090 | NOK | 39,490,000 | 07/23/19 | (37,514 | ) | |||||||||||
SSC | USD | 1,514,639 | HKD | 11,860,000 | 07/23/19 | 3,769 | |||||||||||||
SSC | USD | 609,387 | GBP | 465,000 | 07/23/19 | (18,234 | ) | ||||||||||||
SSC | USD | 2,742,067 | EUR | 2,405,000 | 07/23/19 | (2,566 | ) | ||||||||||||
SSC | USD | 11,573,030 | MXN | 220,970,000 | 07/23/19 | (99,734 | ) | ||||||||||||
SSC | USD | 1,707,861 | SGD | 2,310,000 | 07/23/19 | 143 | |||||||||||||
SSC | USD | 3,687,990 | JPY | 409,500,000 | 07/23/19 | 116,411 | |||||||||||||
SSC | AUD | 7,550,000 | USD | 5,443,969 | 07/23/19 | 139,567 | |||||||||||||
SSC | USD | 1,024,676 | JPY | 110,100,000 | 07/23/19 | (1,808 | ) | ||||||||||||
Net unrealized depreciation | $ | (214,320 | ) |
31
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | 123,285,691 | $ | — | $ | — | $ | 123,285,691 | |||||||||||
Non-US government obligations | — | 11,345,029 | — | 11,345,029 | |||||||||||||||
U.S. treasury obligations | — | 16,948,655 | — | 16,948,655 | |||||||||||||||
Exchange traded funds | 25,676,281 | — | — | 25,676,281 | |||||||||||||||
Investment company | 20,816,127 | — | — | 20,816,127 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 16,152,725 | — | 16,152,725 | |||||||||||||||
Short-term investments | — | 60,880,344 | — | 60,880,344 | |||||||||||||||
Option purchased | 198,800 | — | — | 198,800 | |||||||||||||||
Futures contracts | 1,519,399 | — | — | 1,519,399 | |||||||||||||||
Swap agreements | — | 655,191 | — | 655,191 | |||||||||||||||
Forward foreign currency contracts | — | 328,988 | — | 328,988 | |||||||||||||||
Total | $ | 171,496,298 | $ | 106,310,932 | $ | — | $ | 277,807,230 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (1,037,117 | ) | $ | — | $ | — | $ | (1,037,117 | ) | |||||||||
Swap agreements | — | (442,896 | ) | — | (442,896 | ) | |||||||||||||
Forward foreign currency contracts | — | (543,308 | ) | — | (543,308 | ) | |||||||||||||
Total | $ | (1,037,117 | ) | $ | (986,204 | ) | $ | — | $ | (2,023,321 | ) |
At June 30, 2019, there were no transfers between Level 1 and Level 2. At June 30, 2018, $57,620,704 of foreign investments, $339,957 and $(394,233) 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.
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 $4,439,329, represented 1.7% 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.
32
UBS Global Allocation Fund
Portfolio of investments
June 30, 2019
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 on the assets invested into the affiliated UBS Fund.
Security description | Value 6/30/18 | Purchases during the year ended 6/30/19 | Sales during the year ended 6/30/19 | Net realized loss during the year ended 6/30/19 | Change in net unrealized appreciation (depreciation) during the year ended 6/30/19 | Value 6/30/19 | Net income earned from affiliate for the year ended 6/30/19 | Shares 6/30/19 | |||||||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | $ | 21,964,938 | $ | 113,443 | $ | 1,000,000 | $ | (96,676 | ) | $ | (165,578 | ) | $ | 20,816,127 | $ | 113,443 | 2,235,889 |
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.
33
UBS Emerging Markets Equity Opportunity Fund
Portfolio performance
From its inception on January 31, 2019, through June 30, 2019, Class P shares of UBS Emerging Markets Equity Opportunity Fund (the "Fund") returned 4.04%. The Fund's benchmark, the MSCI Emerging Markets Index (net) (the "Index"), returned 1.68% over the same time period. For the 12 months ended June 30, 2019, Class P2 shares of UBS Emerging Markets Equity Opportunity Fund (the "Fund") returned -0.46%. The Fund's benchmark, the MSCI Emerging Markets Index (net) (the "Index"), returned 1.21%. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.
The Fund posted a negative return and underperformed its benchmark during the reporting period.
Portfolio performance summary1
What worked:
– The Fund's holding in Bradesco, a leading Brazilian bank, was the top contributor to results over the reporting period. The company 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 Kweichow Moutai was additive for returns. Shares of Kweichow Moutai, a leading Chinese high-end liquor producer, continued to rally as the company improves its channel strategy by going direct to consumers.
What didn't work:
– 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.
– The Fund's position 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 did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the period from the 12 months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
34
UBS Emerging Markets Equity Opportunity Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class P2 | N/A | 4.04 | % | ||||||||
Class P22 | (0.46 | )% | (5.93 | ) | |||||||
MSCI Emerging Markets Index (net)3 | 1.21 | (4.91 | ) |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) were as follows: Class P—1.41% and 1.16%, 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 1.15% 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, and for Class P is January 31, 2019. Since inception performance for the index MSCI Emerging Markets Index (net) is shown in reference to Class P2. The index's performance in reference to Class P is 1.68%.
2 Class P and 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.
35
UBS Emerging Markets Equity Opportunity Fund
Illustration of an assumed investment of $5,000,000 in Class P shares and $10,000 in Class P2 shares (unaudited)
The following graph depicts the performance of UBS Emerging Markets Equity Opportunity Fund Class P and Class P2 shares versus the MSCI Emerging Markets Index (net) from January 31, 2019, the inception date of Class P and June 4, 2018, the inception date of Class P2, through June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Emerging Markets Equity Opportunity Fund Class P vs. MSCI Emerging Markets Index (net)
Wealth value with dividends reinvested. Initial investment for Class P shares as of January 31, 2019 = $5,000,000
UBS Emerging Markets Equity Opportunity Fund Class P2 vs. MSCI Emerging Markets Index (net)
Wealth value with dividends reinvested. Initial investment for Class P2 shares as of June 4, 2018 = $10,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
36
UBS Emerging Markets Equity Opportunity Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Alibaba Group Holding Ltd., ADR | 6.7 | % | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 6.6 | ||||||
Samsung Electronics Co. Ltd. | 6.2 | ||||||
Tencent Holdings Ltd. | 4.5 | ||||||
Banco Bradesco SA | 4.4 | ||||||
Naspers Ltd., N Shares | 4.3 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 4.3 | ||||||
Sberbank of Russia PJSC | 3.7 | ||||||
TAL Education Group, ADR | 3.7 | ||||||
Bank Mandiri Persero Tbk. PT | 3.5 | ||||||
Total | 47.9 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
China | 31.0 | % | |||||
South Korea | 13.0 | ||||||
India | 11.3 | ||||||
Russia | 7.1 | ||||||
Brazil | 6.7 | ||||||
Total | 69.1 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
37
UBS Emerging Markets Equity Opportunity Fund
Industry diversification—June 30, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Automobiles | 2.3 | % | |||||
Banks | 18.9 | ||||||
Beverages | 4.9 | ||||||
Diversified consumer services | 4.5 | ||||||
Electric utilities | 2.2 | ||||||
Insurance | 4.3 | ||||||
Interactive media & services | 4.5 | ||||||
Internet & direct marketing retail | 11.0 | ||||||
Metals & mining | 2.3 | ||||||
Oil, gas & consumable fuels | 8.2 | ||||||
Paper & forest products | 1.9 | ||||||
Personal products | 1.9 | ||||||
Pharmaceuticals | 2.8 | ||||||
Real estate management & development | 2.2 | ||||||
Semiconductors & semiconductor equipment | 9.8 | ||||||
Technology hardware, storage & peripherals | 6.2 | ||||||
Thrifts & mortgage finance | 3.4 | ||||||
Total common stocks | 91.3 | % | |||||
Preferred stock | 4.4 | ||||||
Short-term investment | 2.3 | ||||||
Total investments | 98.0 | % | |||||
Other assets in excess of liabilities | 2.0 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
38
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks: 91.3% | |||||||||||
Brazil: 2.3% | |||||||||||
Vale SA | 379,232 | $ | 5,117,723 | ||||||||
China: 31.0% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 88,705 | 15,031,062 | |||||||||
China Jinmao Holdings Group Ltd. | 4,918,000 | 2,990,450 | |||||||||
China Vanke Co. Ltd., H Shares | 507,000 | 1,901,648 | |||||||||
CNOOC Ltd. | 4,098,000 | 7,008,626 | |||||||||
Jiangsu Hengrui Medicine Co. Ltd., Class A | 653,772 | 6,282,334 | |||||||||
Kweichow Moutai Co. Ltd., Class A | 46,837 | 6,710,191 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 19,293 | 1,863,318 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 801,500 | 9,624,115 | |||||||||
TAL Education Group, ADR* | 217,600 | 8,290,560 | |||||||||
Tencent Holdings Ltd. | 226,100 | 10,205,571 | |||||||||
Total China common stocks | 69,907,875 | ||||||||||
Hungary: 1.0% | |||||||||||
OTP Bank PLC | 55,021 | 2,188,378 | |||||||||
India: 11.3% | |||||||||||
HDFC Bank Ltd. | 128,072 | 4,534,076 | |||||||||
HDFC Bank Ltd., ADR | 24,000 | 3,120,960 | |||||||||
Housing Development Finance Corp. Ltd. | 240,249 | 7,629,565 | |||||||||
Mahindra & Mahindra Ltd. | 345,150 | 3,276,869 | |||||||||
Mahindra & Mahindra Ltd., GDR | 214,103 | 1,991,158 | |||||||||
Power Grid Corp. of India Ltd. | 1,637,114 | 4,907,014 | |||||||||
Total India common stocks | 25,459,642 | ||||||||||
Indonesia: 3.5% | |||||||||||
Bank Mandiri Persero Tbk. PT | 13,785,500 | 7,830,730 | |||||||||
Malaysia: 2.0% | |||||||||||
CIMB Group Holdings Berhad | 3,562,425 | 4,637,833 | |||||||||
Mexico: 4.8% | |||||||||||
Fomento Economico Mexicano SAB de CV | 449,500 | 4,355,012 | |||||||||
Grupo Financiero Banorte SAB de CV, Class O | 1,110,200 | 6,441,257 | |||||||||
Total Mexico common stocks | 10,796,269 |
Number of shares | Value | ||||||||||
Russia: 7.1% | |||||||||||
LUKOIL PJSC, ADR | 92,498 | $ | 7,771,682 | ||||||||
Sberbank of Russia PJSC | 2,209,592 | 8,335,381 | |||||||||
Total Russia common stocks | 16,107,063 | ||||||||||
South Africa: 4.3% | |||||||||||
Naspers Ltd., N Shares | 39,788 | 9,659,628 | |||||||||
South Korea: 13.0% | |||||||||||
LG Household & Health Care Ltd. | 3,795 | 4,315,450 | |||||||||
Samsung Electronics Co. Ltd. | 344,691 | 14,030,639 | |||||||||
SK Hynix, Inc. | 120,925 | 7,278,645 | |||||||||
SK Innovation Co. Ltd. | 27,098 | 3,731,505 | |||||||||
Total South Korea common stocks | 29,356,239 | ||||||||||
Taiwan: 6.6% | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 1,921,000 | 14,781,919 | |||||||||
Thailand: 2.5% | |||||||||||
Bangkok Bank PCL NVDR | 868,200 | 5,577,090 | |||||||||
United Kingdom: 1.9% | |||||||||||
Mondi PLC | 190,386 | 4,327,872 | |||||||||
Total common stocks (cost $201,676,817) | 205,748,261 | ||||||||||
Preferred stock: 4.4% | |||||||||||
Brazil: 4.4% | |||||||||||
Banco Bradesco SA (cost $8,344,478) | 1,011,600 | 9,942,261 | |||||||||
Short-term investment: 2.3% | |||||||||||
Investment company: 2.3% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $5,228,067) | 5,228,067 | 5,228,067 | |||||||||
Total investments: 98.0% (cost $215,249,362) | 220,918,589 | ||||||||||
Other assets in excess of liabilities: 2.0% | 4,487,309 | ||||||||||
Net assets: 100.0% | $ | 225,405,898 |
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 105.
39
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | 205,748,261 | $ | — | $ | — | $ | 205,748,261 | |||||||||||
Preferred stock | 9,942,261 | — | — | 9,942,261 | |||||||||||||||
Short-term investment | — | 5,228,067 | — | 5,228,067 | |||||||||||||||
Total | $ | 215,690,522 | $ | 5,228,067 | $ | — | $ | 220,918,589 |
At June 30, 2019, there were no transfers between Levels 1 and Level 2. At June 30, 2018, $45,053,040 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.
40
UBS Engage For Impact Fund
Portfolio performance
From its inception on October 24, 2018, through June 30, 2019, Class P shares of UBS Engage For Impact Fund (the "Fund") returned 8.27%. The Fund's benchmark, the MSCI All Country World Index (net) (the "Index"), returned 11.31% 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 posted positive absolute returns and underperformed its benchmark during the reporting period. This was driven by weak stock selection, while sector allocation was positive.
Portfolio performance summary1
What worked:
– Stock selection within the industrials and materials sectors contributed positively to Fund performance during the reporting period.
– Several individual stock positions were positive for relative performance.
– New Oriental Education & Technology share price increased strongly over the period as the company continues to post strong enrollment growth. Most recent results showed quick margin recovery following the previous wave of capacity expansion (learning centers and classroom areas). Management guidance for FY2020 of +30% revenue growth shows confidence in the positive impact of regulation, increase in utilization rate, and cost savings efforts. High quality public education services (both K12 and tertiary) are greatly undersupplied in China.
– Danaher released strong revenue growth results in the first quarter of 2019, with all-time high margins of 55.6%. The life science and health diagnostics company has been shifting its portfolio, spinning off the dental division and has finalized the integration of Integrated DNA Technologies (IDT) into the life science business.
– Universal Display, the leader in energy-efficient Organic Light Emitting Diode (OLED) display, is a licensing company that is utilizing few capital assets and demonstrating high and improving margins. In May, management raised 2019 revenue guidance from a range of $325-$350 million to $345-$365 million. Current earnings growth for the year is about 40%. We forecast the company to experience solid long-term growth.
What didn't work:
– Stock selection in utilities and financials detracted from Fund performance during the period.
– Certain stock selection decisions made a negative contribution to relative performance.
– The loss of customers as well as the market's low conviction in the ability of Centrica's management to execute its plan have been dragging the share price lower. A radical change in strategy and change of CEO was announced in July, yet the plan failed to convince investors. We held this stock at the end of the reporting period and we are reviewing our investment thesis.
– LivaNova shares traded off sharply in April after pre-announcing flat revenue growth for the first quarter of the year. Management also suspended the Earnings Per Share (EPS) guidance for 2019 driven primarily by weakness in U.S. Neuromodulation and drug Perceval sales. The medical technology company has an interesting portfolio in cardiopulmonary products, treatment of epilepsy, depression, and obstructive sleep apnea; and devices such as oxygenators. We held this stock at the end of the reporting period.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
41
UBS Engage For Impact Fund
– Equinor's share price decreased over low European gas prices and fears of recession. Valuation is attractive relative to peers, in our view, and the company has one of the best environmental and social (E&S) risk management profiles in the industry. Equinor interests us from a sustainability and investment perspective, as the company is gradually complementing its energy-producing portfolio with renewable and other low-carbon energy solutions. We actively engaged with the company to develop a joint statement on the alignment of the business strategy to the Paris Agreement. We held this stock at the end of the reporting period.
– The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the period from inception on October 24, 2018, through June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
42
UBS Engage For Impact Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
Inception1 | |||||||
Class P2 | 8.27 | % | |||||
MSCI All Country World Index (net)3 | 11.31 |
The annualized gross and net expense ratios, respectively, for Class P shares as in the October 23, 2018 prospectus(es) 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 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.
43
UBS Engage For Impact Fund
Illustration of an assumed investment of $5,000,000 in Class P shares (unaudited)
The following graph depicts the performance of UBS Engage For Impact Fund Class P shares versus the MSCI All Country World Index (net) from October 24, 2018, the inception date of Class P through June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Engage For Impact Fund Class P vs. MSCI All Country World Index (net)
Wealth value with dividends reinvested. Initial investment for Class P shares as of October 24, 2018 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
44
UBS Engage For Impact Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
West Japan Railway Co. | 3.4 | % | |||||
Takeda Pharmaceutical Co. Ltd. | 3.4 | ||||||
Conagra Brands, Inc. | 3.3 | ||||||
China Mobile Ltd. | 3.1 | ||||||
Danaher Corp. | 3.0 | ||||||
Grupo Financiero Banorte SAB de CV, Class O | 3.0 | ||||||
Erste Group Bank AG | 3.0 | ||||||
New Oriental Education & Technology Group, Inc., ADR | 3.0 | ||||||
Linde PLC | 2.9 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 2.8 | ||||||
Total | 30.9 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 47.2 | % | |||||
Japan | 9.6 | ||||||
China | 8.4 | ||||||
Germany | 7.8 | ||||||
United Kingdom | 7.5 | ||||||
Total | 80.5 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
45
UBS Engage For Impact Fund
Industry diversification—June 30, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Auto components | 3.3 | % | |||||
Banks | 13.7 | ||||||
Biotechnology | 5.9 | ||||||
Building products | 1.8 | ||||||
Chemicals | 7.6 | ||||||
Commercial services & supplies | 4.7 | ||||||
Distributors | 2.6 | ||||||
Diversified consumer services | 3.0 | ||||||
Electrical equipment | 2.4 | ||||||
Electronic equipment, instruments & components | 3.8 | ||||||
Food products | 5.6 | ||||||
Health care equipment & supplies | 6.7 | ||||||
Health care providers & services | 1.6 | ||||||
Machinery | 4.5 | ||||||
Metals & mining | 2.1 | ||||||
Multi-utilities | 2.0 | ||||||
Oil, gas & consumable fuels | 3.7 | ||||||
Personal products | 2.7 | ||||||
Pharmaceuticals | 7.7 | ||||||
Real estate management & development | 1.0 | ||||||
Road & rail | 3.4 | ||||||
Semiconductors & semiconductor equipment | 4.3 | ||||||
Wireless telecommunication services | 3.1 | ||||||
Total common stocks | 97.2 | % | |||||
Short-term investment | 4.5 | ||||||
Investment of cash collateral from securities loaned | 2.5 | ||||||
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.
46
UBS Engage For Impact Fund
Portfolio of Investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks: 97.2% | |||||||||||
Austria: 3.0% | |||||||||||
Erste Group Bank AG* | 12,861 | $ | 477,335 | ||||||||
China: 8.4% | |||||||||||
China Mengniu Dairy Co. Ltd.* | 41,000 | 158,768 | |||||||||
China Mobile Ltd. | 54,000 | 491,839 | |||||||||
China Suntien Green Energy Corp., Class H | 820,000 | 216,240 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 4,930 | 476,140 | |||||||||
Total China common stocks | 1,342,987 | ||||||||||
Denmark: 1.5% | |||||||||||
Genmab A/S* | 1,257 | 231,134 | |||||||||
Germany: 7.8% | |||||||||||
Continental AG | 1,639 | 238,964 | |||||||||
Infineon Technologies AG | 16,953 | 299,761 | |||||||||
KION Group AG | 5,647 | 355,992 | |||||||||
LANXESS AG | 5,750 | 341,693 | |||||||||
Total Germany common stocks | 1,236,410 | ||||||||||
Hong Kong: 1.0% | |||||||||||
Sun Hung Kai Properties Ltd. | 9,500 | 161,137 | |||||||||
Indonesia: 2.4% | |||||||||||
Bank Mandiri Persero Tbk. PT | 656,900 | 373,146 | |||||||||
Ireland: 1.8% | |||||||||||
Kingspan Group PLC | 5,255 | 285,388 | |||||||||
Italy: 2.4% | |||||||||||
Prysmian SpA1 | 18,232 | 376,279 | |||||||||
Japan: 9.6% | |||||||||||
Sumitomo Mitsui Financial Group, Inc. | 12,800 | 451,856 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 15,253 | 540,854 | |||||||||
West Japan Railway Co. | 6,700 | 541,643 | |||||||||
Total Japan common stocks | 1,534,353 | ||||||||||
Mexico: 3.0% | |||||||||||
Grupo Financiero Banorte SAB de CV, Class O | 83,050 | 481,847 | |||||||||
Norway: 2.3% | |||||||||||
Equinor ASA | 18,589 | 367,075 | |||||||||
South Africa: 1.3% | |||||||||||
Tiger Brands Ltd. | 13,204 | 209,708 | |||||||||
Thailand: 2.5% | |||||||||||
Kasikornbank PCL | 65,400 | 404,118 |
Number of shares | Value | ||||||||||
United Kingdom: 7.5% | |||||||||||
Centrica PLC | 283,755 | $ | 316,319 | ||||||||
Linde PLC | 2,279 | 457,623 | |||||||||
Unilever N.V. CVA | 6,956 | 423,642 | |||||||||
Total United Kingdom common stocks | 1,197,584 | ||||||||||
United States: 42.7% | |||||||||||
Abbott Laboratories | 4,553 | 382,907 | |||||||||
AGCO Corp. | 4,724 | 366,441 | |||||||||
Allergan PLC | 1,667 | 279,106 | |||||||||
Aptiv PLC | 3,578 | 289,210 | |||||||||
Conagra Brands, Inc. | 19,831 | 525,918 | |||||||||
Cyclerion Therapeutics, Inc.* | 7,014 | 80,310 | |||||||||
Danaher Corp. | 3,376 | 482,498 | |||||||||
Ecolab, Inc. | 2,059 | 406,529 | |||||||||
Incyte Corp.* | 4,584 | 389,457 | |||||||||
IPG Photonics Corp.* | 1,645 | 253,741 | |||||||||
Ironwood Pharmaceuticals, Inc.*,1 | 21,925 | 239,860 | |||||||||
Johnson & Johnson | 2,919 | 406,558 | |||||||||
Laboratory Corp. of America Holdings* | 1,529 | 264,364 | |||||||||
LivaNova PLC* | 2,735 | 196,811 | |||||||||
LKQ Corp.* | 15,322 | 407,718 | |||||||||
Micron Technology, Inc.* | 5,472 | 211,164 | |||||||||
MSA Safety, Inc. | 3,728 | 392,894 | |||||||||
Sims Metal Management Ltd. | 43,697 | 333,157 | |||||||||
Stericycle, Inc.*,1 | 7,535 | 359,796 | |||||||||
Trimble, Inc.* | 7,905 | 356,595 | |||||||||
Universal Display Corp. | 916 | 172,263 | |||||||||
Total United States common stocks | 6,797,297 | ||||||||||
Total common stocks (cost $14,894,428) | 15,475,798 | ||||||||||
Short-term investment: 4.5% | |||||||||||
Investment company: 4.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $721,819) | 721,819 | 721,819 | |||||||||
Investment of cash collateral from securities loaned: 2.5% | |||||||||||
Money market fund: 2.5% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $389,351) | 389,351 | 389,351 | |||||||||
Total investments: 104.2% (cost $16,005,598) | 16,586,968 | ||||||||||
Liabilities in excess of other assets: (4.2)% | (669,239 | ) | |||||||||
Net assets: 100.0% | $ | 15,917,729 |
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 105.
47
UBS Engage For Impact Fund
Portfolio of Investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | 15,475,798 | $ | — | $ | — | $ | 15,475,798 | |||||||||||
Short-term investment | — | 721,819 | — | 721,819 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 389,351 | — | 389,351 | |||||||||||||||
Total | $ | 15,475,798 | $ | 1,111,170 | $ | — | $ | 16,586,968 |
At June 30, 2019, there were no transfers between Levels 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
See accompanying notes to financial statements.
48
UBS International Sustainable Equity Fund
Portfolio performance
For the 12 months ended June 30, 2019, Class A shares of UBS International Sustainable Equity Fund (the "Fund") returned -0.14% (Class A shares returned -5.60% after the deduction of the maximum sales charge), while Class P shares returned 0.10%. The Fund's benchmark, the MSCI World ex USA Index (net) (the "Index"), returned 1.29%. (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 51; 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 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, real estate and information technology sectors contributed the most to performance.
– Australian real-estate developer Mirvac Group reported earnings that were in line with the top-end of their guidance. While residential sales were softer than expected, retail assets recorded moderate growth in line with previous year. Interest costs were lower than expected, and we believe Mirvac Group will continue to deliver sustainable growth in the coming year.
– PT Bank Central Asia continues to generate one of the highest returns in the Indonesian and regional banking sectors. This is being driven by positive domestic structural macro momentum and better leverage of its depositor franchise. Investment loans and infrastructure has been growing, but management approached it with caution. The bank continued to raise deposits at a rapid pace, supporting first-time access to banking services and financial literacy in general.
– Aon consistently generated solid mid-single-digit revenue growth (8% on an adjusted basis) during the period, benefiting from positive commercial rates in most of its key regions. In addition, its margins have improved due to economies of scale. We expect growth drivers to come from commercial non-life insurance, mergers and acquisitions (M&A), cyber-insurance proliferation and streamlining.
– From a sector allocation perspective, an average underweight to the consumer discretionary and average overweight to the communication services sectors contributed to relative performance.
What didn't work:
– Stock selection in the industrials, utilities and energy sectors detracted from performance during the reporting period.
– Sino Biopharma's share price continued to significantly decrease as the company reported financial results below expectations. In addition, Chinese health care stocks fell sharply due to concerns over generic prices, driven by a government GPO (group purchasing organisation) trial plan in China. We eliminated the position in January 2019.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
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UBS International Sustainable Equity Fund
– Centrica detracted from results. The loss of customers as well as the market's low conviction in the company's ability to execute its plan has been dragging down its share price. A radical change in strategy and change of CEO was announced in July, yet the plan failed to convince investors. We held this stock at the end of the reporting period and we are reviewing our investment thesis.
– Schlumberger's shares fell sharply after management lowered both fourth quarter 2018 guidance and its outlook for 2019. We subsequently eliminated our position.
– In terms of sector allocation, an average underweight to consumer staples and an average overweight to information technology detracted from relative performance.
Portfolio highlights
– Mirvac is a diversified property group that owns a portfolio of retail, commercial, residential and car park properties across Australia. Its principal activities 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. We also believe Mirvac is in a solid position as retail and office markets are expected to experience difficult 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.
– Zurich Insurance has a global franchise in both commercial and retail property and casualty (P&C) insurance. The company recently strengthen their competitive position in Australia and Latin America and exited some non-core operations like Taiwan. Since 2016 its Chief Executive Officer Greco has been focusing on reducing the volatility of earnings, shifting the business mix to more profitable less volatile line of business, strengthening the balance sheet, as well as improving its footprint thanks to mergers and acquisitions activity. Going forward, we think the market still underappreciates the business shift impact on the company's earnings stability and cash flow generation.
– During the reporting period, we initiated several new positions, including Orix Corp., Glencore, Naspers, Centrica, Entertainment One and Publicis Groupe. We sold the Fund's positions in Sino Biopharmaceutical, Schlumberger, Sumitomo Mitsui Financials, Mediobanca, Nordea, Lyondellbasel and Banco Bilbao.
– The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
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UBS International Sustainable Equity Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | (0.14 | )% | 3.75 | % | 7.01 | % | |||||||||
Class P2 | 0.10 | 3.99 | 7.28 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (5.60 | )% | 2.58 | % | 6.41 | % | |||||||||
MSCI World ex USA Index (net)3 | 1.29 | 2.04 | 6.75 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) 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. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
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UBS International Sustainable Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following graph depicts the performance of UBS International Sustainable Equity Fund Class A and Class P shares versus the MSCI World ex USA Index (net) over the 10 years ended June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS International Sustainable Equity Fund Class A vs. MSCI World ex USA Index (net)
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2009 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS International Sustainable Equity Fund Class P vs. MSCI World ex USA Index (net)
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2009 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
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UBS International Sustainable Equity Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Mirvac Group, REIT | 2.9 | % | |||||
Zurich Insurance Group AG | 2.8 | ||||||
Aon PLC | 2.7 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 2.4 | ||||||
SAP SE | 2.4 | ||||||
Unilever N.V. CVA | 2.4 | ||||||
Brambles Ltd. | 2.4 | ||||||
Takeda Pharmaceutical Co. Ltd. | 2.4 | ||||||
Prudential PLC | 2.3 | ||||||
Bank Central Asia Tbk. PT | 2.3 | ||||||
Total | 25.0 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
Japan | 19.0 | % | |||||
United Kingdom | 15.0 | ||||||
Switzerland | 10.3 | ||||||
United States | 7.8 | ||||||
Germany | 7.6 | ||||||
Total | 59.7 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
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UBS International Sustainable Equity Fund
Industry diversification—June 30, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Airlines | 0.6 | % | |||||
Auto components | 1.1 | ||||||
Automobiles | 1.0 | ||||||
Banks | 8.1 | ||||||
Biotechnology | 1.3 | ||||||
Chemicals | 3.3 | ||||||
Commercial services & supplies | 2.4 | ||||||
Diversified financial services | 3.3 | ||||||
Diversified telecommunication services | 1.9 | ||||||
Electronic equipment, instruments & components | 1.6 | ||||||
Entertainment | 4.5 | ||||||
Equity real estate investment trusts | 2.9 | ||||||
Food & staples retailing | 0.9 | ||||||
Food products | 1.4 | ||||||
Health care equipment & supplies | 1.6 | ||||||
Household durables | 1.4 | ||||||
Insurance | 10.2 | ||||||
Internet & direct marketing retail | 2.3 | ||||||
Machinery | 6.2 | ||||||
Marine | 1.3 | ||||||
Media | 1.3 | ||||||
Metals & mining | 1.3 | ||||||
Multi-utilities | 1.4 | ||||||
Oil, gas & consumable fuels | 3.3 | ||||||
Personal products | 4.1 | ||||||
Pharmaceuticals | 8.6 | ||||||
Real estate management & development | 1.5 | ||||||
Road & rail | 0.7 | ||||||
Semiconductors & semiconductor equipment | 3.5 | ||||||
Software | 4.4 | ||||||
Textiles, apparel & luxury goods | 2.1 | ||||||
Trading companies & distributors | 1.4 | ||||||
Wireless telecommunication services | 3.1 | ||||||
Total common stocks | 94.0 | % | |||||
Preferred stock | 0.7 | ||||||
Short-term investment | 4.4 | ||||||
Investment of cash collateral from securities loaned | 0.6 | ||||||
Total investments | 99.7 | % | |||||
Other assets in excess of liabilities | 0.3 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
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UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks: 94.0% | |||||||||||
Australia: 6.9% | |||||||||||
Brambles Ltd. | 413,457 | $ | 3,738,645 | ||||||||
Mirvac Group | 2,091,720 | 4,596,380 | |||||||||
Santos Ltd. | 510,506 | 2,537,477 | |||||||||
Total Australia common stocks | 10,872,502 | ||||||||||
Austria: 1.6% | |||||||||||
Erste Group Bank AG* | 66,583 | 2,471,225 | |||||||||
Belgium: 0.6% | |||||||||||
Galapagos N.V.*,1 | 7,404 | 955,146 | |||||||||
Canada: 1.4% | |||||||||||
Entertainment One Ltd. | 427,823 | 2,156,955 | |||||||||
China: 3.8% | |||||||||||
China Mobile Ltd. | 234,000 | 2,131,303 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 318,500 | 3,824,430 | |||||||||
Total China common stocks | 5,955,733 | ||||||||||
Denmark: 2.0% | |||||||||||
AP Moller—Maersk A/S, Class B | 1,645 | 2,040,415 | |||||||||
Genmab A/S* | 5,948 | 1,093,704 | |||||||||
Total Denmark common stocks | 3,134,119 | ||||||||||
France: 3.9% | |||||||||||
Publicis Groupe SA | 37,858 | 1,998,734 | |||||||||
Sanofi | 29,678 | 2,561,724 | |||||||||
Ubisoft Entertainment SA* | 20,146 | 1,576,988 | |||||||||
Total France common stocks | 6,137,446 | ||||||||||
Germany: 6.9% | |||||||||||
Bayerische Motoren Werke AG | 21,332 | 1,578,864 | |||||||||
Continental AG | 11,935 | 1,740,111 | |||||||||
Infineon Technologies AG | 61,887 | 1,094,280 | |||||||||
KION Group AG | 16,025 | 1,010,229 | |||||||||
LANXESS AG | 26,040 | 1,547,423 | |||||||||
SAP SE | 27,492 | 3,775,098 | |||||||||
Total Germany common stocks | 10,746,005 | ||||||||||
Hong Kong: 1.5% | |||||||||||
Sun Hung Kai Properties Ltd. | 136,500 | 2,315,277 | |||||||||
India: 1.7% | |||||||||||
Axis Bank Ltd., GDR* | 44,857 | 2,610,677 | |||||||||
Indonesia: 3.5% | |||||||||||
Bank Central Asia Tbk. PT | 1,690,100 | 3,585,967 | |||||||||
Bank Mandiri Persero Tbk. PT | 3,273,200 | 1,859,312 | |||||||||
Total Indonesia common stocks | 5,445,279 | ||||||||||
Ireland: 0.6% | |||||||||||
Ryanair Holdings PLC, ADR* | 15,500 | 994,170 |
Number of shares | Value | ||||||||||
Italy: 2.6% | |||||||||||
Banca Mediolanum SpA | 371,352 | $ | 2,734,162 | ||||||||
Infrastrutture Wireless Italiane SpA2 | 143,170 | 1,404,952 | |||||||||
Total Italy common stocks | 4,139,114 | ||||||||||
Japan: 19.0% | |||||||||||
Inpex Corp. | 158,700 | 1,429,720 | |||||||||
Kao Corp.1 | 35,100 | 2,672,829 | |||||||||
KDDI Corp. | 105,100 | 2,674,413 | |||||||||
Kissei Pharmaceutical Co. Ltd. | 48,500 | 1,210,082 | |||||||||
Kubota Corp. | 134,600 | 2,238,444 | |||||||||
Makita Corp. | 45,200 | 1,534,406 | |||||||||
MINEBEA MITSUMI, Inc. | 73,000 | 1,235,682 | |||||||||
Nabtesco Corp. | 71,000 | 1,971,655 | |||||||||
Nintendo Co. Ltd. | 8,800 | 3,223,225 | |||||||||
ORIX Corp. | 157,700 | 2,352,007 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 22,800 | 2,122,135 | |||||||||
Sony Corp. | 42,000 | 2,200,213 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 104,161 | 3,693,433 | |||||||||
West Japan Railway Co. | 13,800 | 1,115,622 | |||||||||
Total Japan common stocks | 29,673,866 | ||||||||||
Netherlands: 3.1% | |||||||||||
ASML Holding N.V. | 10,035 | 2,096,620 | |||||||||
Koninklijke Ahold Delhaize N.V. | 64,898 | 1,459,528 | |||||||||
NXP Semiconductors N.V. | 13,087 | 1,277,422 | |||||||||
Total Netherlands common stocks | 4,833,570 | ||||||||||
Norway: 1.7% | |||||||||||
Equinor ASA | 62,063 | 1,225,552 | |||||||||
Telenor ASA | 70,780 | 1,502,648 | |||||||||
Total Norway common stocks | 2,728,200 | ||||||||||
South Africa: 2.3% | |||||||||||
Naspers Ltd., N Shares | 14,613 | 3,547,706 | |||||||||
South Korea: 0.7% | |||||||||||
SK Hynix, Inc. | 17,046 | 1,026,023 | |||||||||
Spain: 1.4% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 395,310 | 2,210,226 | |||||||||
Switzerland: 10.3% | |||||||||||
Alcon, Inc.* | 20,097 | 1,240,982 | |||||||||
Cie Financiere Richemont SA (Registered) | 38,578 | 3,273,716 | |||||||||
Glencore PLC* | 601,430 | 2,087,808 | |||||||||
Nestle SA (Registered) | 21,470 | 2,222,657 | |||||||||
Novartis AG (Registered) | 32,808 | 2,997,822 | |||||||||
Zurich Insurance Group AG | 12,500 | 4,352,336 | |||||||||
Total Switzerland common stocks | 16,175,321 | ||||||||||
United Kingdom: 15.0% | |||||||||||
Ashtead Group PLC | 73,685 | 2,109,208 | |||||||||
Centrica PLC | 1,916,566 | 2,136,514 | |||||||||
Croda International PLC | 23,021 | 1,496,858 | |||||||||
GlaxoSmithKline PLC | 151,243 | 3,028,191 | |||||||||
Prudential PLC | 165,183 | 3,599,722 |
55
UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
Sage Group PLC/The | 296,486 | $ | 3,021,214 | ||||||||
Spectris PLC | 68,354 | 2,498,280 | |||||||||
Unilever N.V. CVA | 61,669 | 3,755,832 | |||||||||
Weir Group PLC/The | 89,531 | 1,758,368 | |||||||||
Total United Kingdom common stocks | 23,404,187 | ||||||||||
United States: 3.5% | |||||||||||
Aon PLC | 22,000 | 4,245,560 | |||||||||
LivaNova PLC* | 17,100 | 1,230,516 | |||||||||
Total United States common stocks | 5,476,076 | ||||||||||
Total common stocks (cost $141,911,755) | 147,008,823 | ||||||||||
Preferred stock: 0.7% | |||||||||||
Germany: 0.7% | |||||||||||
Jungheinrich AG (cost $1,286,616) | 35,865 | 1,105,195 |
Number of shares | Value | ||||||||||
Short-term investment: 4.4% | |||||||||||
Investment company: 4.4% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $6,795,560) | 6,795,560 | $ | 6,795,560 | ||||||||
Total investment companies short-term investment | 6,795,560 | ||||||||||
Investment of cash collateral from securities loaned: 0.6% | |||||||||||
Money market fund: 0.6% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $970,516) | 970,516 | 970,516 | |||||||||
Total investments: 99.7% (cost $150,964,447) | 155,880,094 | ||||||||||
Other assets in excess of liabilities: 0.3% | 504,265 | ||||||||||
Net assets: 100.0% | $ | 156,384,359 |
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 105.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | 147,008,823 | $ | — | $ | — | $ | 147,008,823 | |||||||||||
Preferred stock | 1,105,195 | — | — | 1,105,195 | |||||||||||||||
Short-term investment | — | 6,795,560 | — | 6,795,560 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 970,516 | — | 970,516 | |||||||||||||||
Total | $ | 148,114,018 | $ | 7,766,076 | $ | — | $ | 155,880,094 |
At June 30, 2019, there were no transfers between Levels 1 and Level 2. At June 30, 2018, $67,729,121 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.
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UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2019
Portfolio footnotes
* Non-income producing security.
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 $1,404,952, represented 0.9% of the Fund's net assets at period end.
See accompanying notes to financial statements.
57
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the 12 months ended June 30, 2019, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 5.95% (Class A shares returned 0.11% after the deduction of the maximum sales charge), while Class P shares returned 6.24%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned -0.49% over the same time period. (Class P shares have lower expenses than the other share class of the Fund. Returns for all share classes over various time periods are shown on page 61; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund's outperformance was driven primarily by stock selection decisions.
Portfolio performance summary1
What worked:
– The Fund's overweight to the information technology sector made a positive contribution to performance during the 12-month period. Stock selection within the sector was also positive for relative performance.
– Shares of Alteryx, a leader in data science and self-service analytics, rallied strongly during the 12 months. The company continued to report revenue and billings well above consensus expectations, with revenue growth accelerating over the prior year. (For details, see "Portfolio highlights.")
– Universal Display is a manufacturer of emitters and materials that support organic light emitting diodes (OLED) display technology. Shares rose sharply in the first half of 2019 after the company beat consensus expectations for the first quarter and guided to strong revenue growth for 2019. Management and investors remain optimistic about the long-term growth drivers for OLED displays. (For details, see "Portfolio highlights.")
– Paycom Software is a cloud-based provider of human capital management and payroll applications. The company's shares traded higher throughout the year as the company continued to report 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. We sold the stock after the reporting period.
– Several individual stock selection decisions benefited performance during the 12 months.
– Exact Sciences, a developer and manufacturer of Cologuard, a non-invasive molecular diagnostic test for the early detection of colorectal cancer, outperformed after reporting better than expected adoption throughout the year.
– Roku, a leading platform for streaming TV, advanced after delivering accelerating revenue growth throughout the year. As of the company's first quarter earnings report, active Roku accounts increased 40% year-over-year to 29.1 million, with hours streamed growing to 8.9 billion, up 74% year-over-year. The company's dominant position in the over-the-top streaming landscape continued to improve, as one in three connected TVs sold are Roku enabled, up from one in five a year ago.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
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UBS U.S. Small Cap Growth Fund
What didn't work:
– The Fund's allocation to the communication services sector detracted from relative performance for the 12 months ended June 30, 2019.
– Certain stock selection decisions made a negative contribution to Fund returns.
– USA Technologies is a provider of credit card payment systems and logistics solutions for vending machines. The company's shares declined after announcing that it would not be able to file its 10-K for fiscal 2018 on a timely basis, due to an ongoing audit committee review of certain contracts and internal controls. We sold the stock during the reporting period.
– Green Dot offers personal banking products and services including prepaid debit cards, prepaid card reloading services and mobile banking accounts. Shares underperformed following the company's decision to spend $60 million on investments in its banking-as-a-service (BaaS) initiative, which will dampen Green Dot's profitability profile for the year. The company expects these investments to result in more than one million incremental accounts over time, which should enhance the company's growth profile in 2020. We held this stock at the end of the reporting period.
– Several health care stocks underperformed during the period.
– Sientra, a manufacturer of breast implants and other aesthetic devices, declined over concerns regarding the potential impact of a March 2019 FDA meeting focused on safety issues related to textured implants, as well as the company's need to raise additional capital to help bridge the gap from negative to positive cash flow. The company successfully addressed the financing overhang, raising an additional $75 million in June 2019 through an equity offering. We held this stock at the end of the reporting period.
– Inogen develops, manufactures and distributes portable oxygen concentrators (POC) for obstructive pulmonary disease patients. The company underperformed after lowering 2019 revenue guidance by $25 million due in large part to a slowdown in orders from a large national distributor that impacted Inogen's business-to-business sales. A slower than expected expansion of the company's sales force also presented headwinds. We held this stock at the end of the reporting period.
– Evolent Health is a health care technology company that enables providers to migrate their economic models from fee-for-service to value-based payment models. The company underperformed as investors weighed the impact of potential headwinds, including delayed deployments, on the company's revenues for the first half of 2019. We sold the stock during the reporting period.
Portfolio highlights
– 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 in the coming years as manufacturing capacity continues to grow and adoption across mobile, TV, auto and other form factors continues to broaden.
– 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.
59
UBS U.S. Small Cap Growth Fund
– 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.
– 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 earnings before interest, taxes, depreciation, and amortization will ramp up as this transition progresses.
– The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
60
UBS U.S. Small Cap Growth Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 5.95 | % | 9.53 | % | 16.65 | % | |||||||||
Class P2 | 6.24 | 9.82 | 16.96 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 0.11 | % | 8.30 | % | 15.99 | % | |||||||||
Russell 2000 Growth Index3 | (0.49 | ) | 8.63 | 14.41 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) 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. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
61
UBS U.S. Small Cap Growth Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depicts the performance of UBS U.S. Small Cap Growth Fund Class A and Class P versus the Russell 2000 Growth Index over the 10 years ended June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS U.S. Small Cap Growth Fund Class A vs. Russell 2000 Growth Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2009 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS U.S. Small Cap Growth Fund Class P vs. Russell 2000 Growth Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2009 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
62
UBS U.S. Small Cap Growth Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Universal Display Corp. | 2.8 | % | |||||
Alteryx, Inc., Class A | 2.6 | ||||||
Wix.com Ltd. | 2.4 | ||||||
Chegg, Inc. | 2.4 | ||||||
Exact Sciences Corp. | 2.1 | ||||||
Planet Fitness, Inc., Class A | 2.1 | ||||||
Novocure Ltd. | 1.8 | ||||||
Array BioPharma, Inc. | 1.7 | ||||||
Generac Holdings, Inc. | 1.7 | ||||||
Upland Software, Inc. | 1.6 | ||||||
Total | 21.2 | % |
Top issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 97.0 | % | |||||
Israel | 2.4 | ||||||
Netherlands | 0.7 | ||||||
United Kingdom | 0.2 | ||||||
Total | 100.3 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
63
UBS U.S. Small Cap Growth Fund
Industry diversification—June 30, 2019 (unaudited)1,2
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 1.6 | % | |||||
Airlines | 1.2 | ||||||
Banks | 3.5 | ||||||
Biotechnology | 13.8 | ||||||
Chemicals | 1.5 | ||||||
Construction & engineering | 2.7 | ||||||
Consumer finance | 0.6 | ||||||
Diversified consumer services | 3.5 | ||||||
Electrical equipment | 2.9 | ||||||
Energy equipment & services | 0.4 | ||||||
Entertainment | 0.8 | ||||||
Equity real estate investment trusts | 2.6 | ||||||
Food & staples retailing | 2.7 | ||||||
Health care equipment & supplies | 4.2 | ||||||
Health care providers & services | 1.3 | ||||||
Health care technology | 2.4 | ||||||
Hotels, restaurants & leisure | 5.8 | ||||||
Household durables | 1.9 | ||||||
Internet & direct marketing retail | 0.2 | ||||||
IT services | 2.4 | ||||||
Life sciences tools & services | 1.2 | ||||||
Machinery | 6.2 | ||||||
Multiline retail | 1.5 | ||||||
Oil, gas & consumable fuels | 0.8 | ||||||
Paper & forest products | 0.9 | ||||||
Pharmaceuticals | 1.0 | ||||||
Professional services | 1.0 | ||||||
Road & rail | 0.9 | ||||||
Semiconductors & semiconductor equipment | 5.6 | ||||||
Software | 16.3 | ||||||
Specialty retail | 3.1 | ||||||
Textiles, apparel & luxury goods | 1.2 | ||||||
Thrifts & mortgage finance | 1.1 | ||||||
Total common stocks | 96.8 | % | |||||
Exchange traded fund | 0.7 | ||||||
Short-term investment | 2.8 | ||||||
Investment of cash collateral from securities loaned | 9.2 | ||||||
Total investments | 109.5 | % | |||||
Liabilities in excess of other assets | (9.5 | ) | |||||
Net assets | 100.0 | % |
1 Figures represent the breakdown of direct investments of UBS U.S. Small Cap Growth 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.
64
UBS U.S. Small Cap Growth Fund
Portfolio of Investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks: 96.8% | |||||||||||
Aerospace & defense: 1.6% | |||||||||||
Mercury Systems, Inc.* | 28,223 | $ | 1,985,488 | ||||||||
Airlines: 1.2% | |||||||||||
SkyWest, Inc. | 25,235 | 1,531,007 | |||||||||
Banks: 3.5% | |||||||||||
Columbia Banking System, Inc. | 28,997 | 1,049,112 | |||||||||
FB Financial Corp. | 9,752 | 356,923 | |||||||||
National Bank Holdings Corp., Class A | 36,895 | 1,339,289 | |||||||||
Origin Bancorp, Inc. | 6,800 | 224,400 | |||||||||
Webster Financial Corp. | 26,746 | 1,277,656 | |||||||||
4,247,380 | |||||||||||
Biotechnology: 13.8% | |||||||||||
Allogene Therapeutics, Inc.* | 23,670 | 635,540 | |||||||||
AnaptysBio, Inc.*,1 | 10,674 | 602,227 | |||||||||
Argenx SE, ADR* | 5,912 | 837,021 | |||||||||
Array BioPharma, Inc.*,1 | 45,105 | 2,089,715 | |||||||||
Avrobio, Inc.*,1 | 17,943 | 291,753 | |||||||||
Biohaven Pharmaceutical Holding Co. Ltd.* | 18,700 | 818,873 | |||||||||
Blueprint Medicines Corp.* | 12,481 | 1,177,333 | |||||||||
Bridgebio Pharma, Inc.* | 9,800 | 264,306 | |||||||||
Exact Sciences Corp.*,1 | 21,935 | 2,589,207 | |||||||||
G1 Therapeutics, Inc.*,1 | 30,030 | 920,720 | |||||||||
Gritstone Oncology, Inc.*,1 | 52,458 | 584,382 | |||||||||
Immunomedics, Inc.*,1 | 59,584 | 826,430 | |||||||||
Ligand Pharmaceuticals, Inc.*,1 | 6,409 | 731,587 | |||||||||
MeiraGTx Holdings PLC* | 15,996 | 429,972 | |||||||||
NuCana PLC, ADR*,1 | 22,000 | 228,360 | |||||||||
Ra Pharmaceuticals, Inc.* | 38,926 | 1,170,505 | |||||||||
REGENXBIO, Inc.* | 11,996 | 616,235 | |||||||||
Voyager Therapeutics, Inc.*,1 | 38,140 | 1,038,171 | |||||||||
Xencor, Inc.* | 24,723 | 1,011,912 | |||||||||
16,864,249 | |||||||||||
Chemicals: 1.5% | |||||||||||
Ingevity Corp.* | 17,622 | 1,853,306 | |||||||||
Construction & engineering: 2.7% | |||||||||||
EMCOR Group, Inc. | 19,571 | 1,724,205 | |||||||||
MasTec, Inc.*,1 | 29,766 | 1,533,842 | |||||||||
3,258,047 | |||||||||||
Consumer finance: 0.6% | |||||||||||
Green Dot Corp., Class A* | 16,265 | 795,359 | |||||||||
Diversified consumer services: 3.5% | |||||||||||
Adtalem Global Education, Inc.* | 30,542 | 1,375,917 | |||||||||
Chegg, Inc.* | 76,046 | 2,934,615 | |||||||||
4,310,532 | |||||||||||
Electrical equipment: 2.9% | |||||||||||
Generac Holdings, Inc.* | 29,089 | 2,019,067 | |||||||||
Regal Beloit Corp. | 18,276 | 1,493,332 | |||||||||
3,512,399 |
Number of shares | Value | ||||||||||
Energy equipment & services: 0.4% | |||||||||||
Patterson-UTI Energy, Inc. | 9,460 | $ | 108,885 | ||||||||
ProPetro Holding Corp.* | 17,783 | 368,108 | |||||||||
476,993 | |||||||||||
Entertainment: 0.8% | |||||||||||
Glu Mobile, Inc.* | 144,299 | 1,036,067 | |||||||||
Equity real estate investment trusts: 2.6% | |||||||||||
QTS Realty Trust, Inc., Class A | 36,053 | 1,664,927 | |||||||||
Ryman Hospitality Properties, Inc. | 18,199 | 1,475,757 | |||||||||
3,140,684 | |||||||||||
Food & staples retailing: 2.7% | |||||||||||
Grocery Outlet Holding Corp.*,1 | 42,037 | 1,382,177 | |||||||||
Performance Food Group Co.* | 46,903 | 1,877,527 | |||||||||
3,259,704 | |||||||||||
Health care equipment & supplies: 4.2% | |||||||||||
Haemonetics Corp.* | 3,273 | 393,873 | |||||||||
Inogen, Inc.* | 9,351 | 624,273 | |||||||||
Novocure Ltd.* | 34,848 | 2,203,439 | |||||||||
Sientra, Inc.*,1 | 71,414 | 439,910 | |||||||||
Tactile Systems Technology, Inc.*,1 | 25,391 | 1,445,256 | |||||||||
5,106,751 | |||||||||||
Health care providers & services: 1.3% | |||||||||||
LHC Group, Inc.* | 13,196 | 1,577,978 | |||||||||
Health care technology: 2.4% | |||||||||||
Tabula Rasa HealthCare, Inc.*,1 | 18,573 | 927,350 | |||||||||
Teladoc Health, Inc.*,1 | 29,545 | 1,962,083 | |||||||||
2,889,433 | |||||||||||
Hotels, restaurants & leisure: 5.8% | |||||||||||
Dave & Buster's Entertainment, Inc.1 | 13,431 | 543,553 | |||||||||
Del Taco Restaurants, Inc.* | 67,413 | 864,235 | |||||||||
Planet Fitness, Inc., Class A* | 33,969 | 2,460,714 | |||||||||
Shake Shack, Inc., Class A* | 23,197 | 1,674,823 | |||||||||
Wendy's Co./The | 79,296 | 1,552,616 | |||||||||
7,095,941 | |||||||||||
Household durables: 1.9% | |||||||||||
Roku, Inc.*,1 | 17,096 | 1,548,556 | |||||||||
Sonos, Inc.*,1 | 73,663 | 835,338 | |||||||||
2,383,894 | |||||||||||
Internet & direct marketing retail: 0.2% | |||||||||||
RealReal, Inc./The* | 10,310 | 297,959 | |||||||||
IT services: 2.4% | |||||||||||
Wix.com Ltd.* | 21,102 | 2,998,594 | |||||||||
Life sciences tools & services: 1.2% | |||||||||||
Adaptive Biotechnologies Corp.* | 6,600 | 318,780 | |||||||||
Charles River Laboratories International, Inc.* | 4,961 | 703,966 | |||||||||
Personalis, Inc.*,1 | 15,800 | 428,970 | |||||||||
1,451,716 |
65
UBS U.S. Small Cap Growth Fund
Portfolio of Investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Machinery: 6.2% | |||||||||||
Altra Industrial Motion Corp. | 48,680 | $ | 1,746,638 | ||||||||
Chart Industries, Inc.* | 22,585 | 1,736,335 | |||||||||
Kadant, Inc. | 13,948 | 1,266,618 | |||||||||
Kennametal, Inc. | 29,467 | 1,089,984 | |||||||||
Woodward, Inc. | 15,691 | 1,775,594 | |||||||||
7,615,169 | |||||||||||
Multiline retail: 1.5% | |||||||||||
Ollie's Bargain Outlet Holdings, Inc.*,1 | 21,331 | 1,858,143 | |||||||||
Oil, gas & consumable fuels: 0.8% | |||||||||||
Callon Petroleum Co.*,1 | 18,746 | 123,536 | |||||||||
Matador Resources Co.*,1 | 44,605 | 886,748 | |||||||||
1,010,284 | |||||||||||
Paper & forest products: 0.9% | |||||||||||
Boise Cascade Co. | 41,337 | 1,161,983 | |||||||||
Pharmaceuticals: 1.0% | |||||||||||
Amphastar Pharmaceuticals, Inc.* | 32,864 | 693,759 | |||||||||
Collegium Pharmaceutical, Inc.* | 36,585 | 481,093 | |||||||||
WaVe Life Sciences Ltd.* | 1,061 | 27,681 | |||||||||
1,202,533 | |||||||||||
Professional services: 1.0% | |||||||||||
ASGN, Inc.* | 20,453 | 1,239,452 | |||||||||
Road & rail: 0.9% | |||||||||||
Werner Enterprises, Inc. | 35,444 | 1,101,600 | |||||||||
Semiconductors & semiconductor equipment: 5.6% | |||||||||||
MaxLinear, Inc.* | 49,567 | 1,161,850 | |||||||||
Monolithic Power Systems, Inc. | 9,164 | 1,244,288 | |||||||||
Semtech Corp.* | 21,665 | 1,041,003 | |||||||||
Universal Display Corp. | 18,464 | 3,472,340 | |||||||||
6,919,481 | |||||||||||
Software: 16.3% | |||||||||||
8x8, Inc.*,1 | 79,723 | 1,921,324 | |||||||||
Alteryx, Inc., Class A* | 29,065 | 3,171,573 | |||||||||
Crowdstrike Holdings, Inc., Class A* | 23,500 | 1,604,815 | |||||||||
ForeScout Technologies, Inc.* | 43,033 | 1,457,097 | |||||||||
LivePerson, Inc.*,1 | 60,321 | 1,691,401 | |||||||||
Mimecast Ltd.* | 31,287 | 1,461,416 | |||||||||
Paycom Software, Inc.*,1 | 6,176 | 1,400,223 | |||||||||
Proofpoint, Inc.* | 14,500 | 1,743,625 | |||||||||
SailPoint Technologies Holding, Inc.* | 48,645 | 974,846 | |||||||||
Tenable Holdings, Inc.*,1 | 40,712 | 1,161,920 | |||||||||
Upland Software, Inc.* | 43,825 | 1,995,352 | |||||||||
Varonis Systems, Inc.* | 22,286 | 1,380,395 | |||||||||
19,963,987 |
Number of shares | Value | ||||||||||
Specialty retail: 3.1% | |||||||||||
American Eagle Outfitters, Inc. | 66,040 | $ | 1,116,076 | ||||||||
Children's Place, Inc./The1 | 11,981 | 1,142,748 | |||||||||
Dick's Sporting Goods, Inc.1 | 43,234 | 1,497,193 | |||||||||
3,756,017 | |||||||||||
Textiles, apparel & luxury goods: 1.2% | |||||||||||
Steven Madden Ltd. | 42,544 | 1,444,369 | |||||||||
Thrifts & mortgage finance: 1.1% | |||||||||||
Essent Group Ltd.* | 28,157 | 1,323,097 | |||||||||
Total common stocks (cost $90,738,632) | 118,669,596 | ||||||||||
Exchange traded fund: 0.7% | |||||||||||
iShares Russell 2000 Growth ETF1 (cost $795,348) | 4,090 | 821,558 | |||||||||
Short-term investment: 2.8% | |||||||||||
Investment company: 2.8% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $3,508,363) | 3,508,363 | 3,508,363 | |||||||||
Investment of cash collateral from securities loaned: 9.2% | |||||||||||
Money market fund: 9.2% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $11,278,586) | 11,278,586 | 11,278,586 | |||||||||
Total investments: 109.5% (cost $106,320,929) | 134,278,103 | ||||||||||
Liabilities in excess of other assets: (9.5)% | (11,679,059 | ) | |||||||||
Net assets: 100.0% | $ | 122,599,044 |
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 105.
66
UBS U.S. Small Cap Growth Fund
Portfolio of Investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | 118,669,596 | $ | — | $ | — | $ | 118,669,596 | |||||||||||
Exchange traded fund | 821,558 | — | — | 821,558 | |||||||||||||||
Short-term investment | — | 3,508,363 | — | 3,508,363 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 11,278,586 | — | 11,278,586 | |||||||||||||||
Total | $ | 119,491,154 | $ | 14,786,949 | $ | — | $ | 134,278,103 |
At June 30, 2019, 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.
67
UBS U.S. Sustainable Equity Fund
Portfolio performance
For the 12 months ended June 30, 2019, Class A shares of UBS U.S. Sustainable Equity Fund (the "Fund") returned 6.95% (Class A shares returned 1.08% after the deduction of the maximum sales charge), while Class P shares returned 7.20%. The Fund's benchmark, the S&P 500 Index (the "Index"), returned 10.42% 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 would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund's underperformance was primarily due to stock selection decisions.
Portfolio performance summary1
What worked:
– Stock selection within the financial and industrial sectors was beneficial for Fund performance during the 12 months ended June 30, 2019. Underweights to the energy and communication services sectors were also positive for relative performance.
– Several stock selection decisions contributed positively to Fund performance during the 12-month period.
– Walgreens Boots was the largest positive contributor to relative returns for the 12-month period. During the fourth quarter of 2018, the company's shares rebounded sharply due to an aggressive share repurchase program and optimism about the potential for more concerted efforts to address declining store traffic. We exited the position, and since then, Walgreens' shares have underperformed significantly. Industry consolidation drove another round of reimbursement pressure, and the company suffered from growing fears that drug retailers and distributors would be drawn into opioid-related litigation.
– Shares of AGCO Corp. traded higher during the period after management guided expectations toward 10% profit margins. The company benefited from presenting smart pricing initiatives, growth initiatives and cost control measures. (For details, see "Portfolio highlights.")
– Ameriprise Financial's shares have outperformed in recent quarters as the market has grown more comfortable with the persistence of the company's strong return on equity (ROE). The re-establishment of Ameriprise's capital return story, as well as strong growth in both net loans and card spending activity, contributed to the meaningful increase in the stock price.
– Gardner Denver's share price increased after the company announced it would buy the industrial segment of Ingersoll-Rand. Gardner Denver will remain intact, removing the risk that its upstream energy and subscale medical businesses would be sold. The new entity will be run by Gardner Denver's management and board. The merger will make Gardner Denver the second largest compressor company in the world.
– Walt Disney outperformed after its investor day, at which the company debuted its upcoming Disney+ offering, scheduled to launch in November 2019. The offering's content is broader than anticipated and is highly differentiated. The $6.99 offering is competitive, with rival Netflix charging $13. The company's guidance of 60 to 90 million subscribers seems reasonable, particularly given the attractive pricing of Disney+.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
68
UBS U.S. Sustainable Equity Fund
What didn't work:
– Stock selection in the information technology sector, particularly semiconductor memory stocks, detracted from performance for the 12 months ended June 30, 2019.
– Western Digital and Micron Technology were the two largest detractors during the 12-month period. The companies' underperformance was driven by concerns that increased US-China trade tensions would delay the expected recovery of the semiconductor memory market beyond the second half of 2019. Investors were also concerned that the US's ban on the sale of components to Huawei would disproportionately hurt Micron.
– While near-term weakness in NAND and DRAM memory pricing affected both Western Digital and Micron Technology, we believe the future of the memory industry will be more profitable than the past. We continue to allocate a large portfolio weight to these stocks.
– Stock selection in the consumer discretionary sector hindered relative returns.
– Newell Brands detracted from relative returns during the 12-month period. Following a thorough review by our team, and the issuance of lowered earning guidance by the company, the underlying value of Newell was in question. We exited the position in February of 2019, and will reconsider investing in Newell if a deeper analysis suggests the company offers a potential value opportunity.
– Other stock selection decisions that detracted from relative performance included two health care names.
– Allergan underperformed during the 12 months, but the share price bounced late in the reporting period after the company entered into a definitive agreement to be acquired by Abbvie. The purchase price of approximately $63 billion, mainly in cash, represented a 45% premium to the share price at the time of the announcement. We sold this stock prior to the end of the reporting period.
– Despite splitting its gastrointestinal business and research & development arm into two new publicly traded companies, shares of Ironwood Pharmaceuticals underperformed during the reporting period. Investors remained concerned about slowing growth prospects for Linzess, the company's flagship product. The recent announcement that Allergan, Ironwood's commercial partner, will be acquired by Abbvie introduces some near-term uncertainty. But we believe it also increases the likelihood that the economics of Linzess will eventually be consolidated, either by Abbvie acquiring Ironwood, or by Ironwood buying out Abbvie/Allergan's 50% share. In our view, either scenario would create shareholder value. Several key clinical trial results due in 2020 offer additional potential for upside. We held this stock at the end of the reporting period.
Portfolio highlights
– Ameriprise Financial provides financial planning, asset management and insurance services. The company has achieved double-digit margins in its flagship advice and wealth management business, benefitting from its strategy to carefully manage the success and happiness of its most productive advisors. Ameriprise has shifted its earnings focus away from more capital-intensive insurance and annuity products, and is relying more heavily on the balance sheet-light asset accumulation and management businesses. This has resulted in strong return on equity (ROE) improvement that we believe should remain fairly stable. Management has expressed confidence that its long-term care (LTC) reserves are sufficient, and says it intends to increase reserve transparency and LTC block characteristics within its public filings.
– 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
69
UBS U.S. Sustainable Equity Fund
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.
– Simon Property Group operates as a self-administered and self-managed real estate investment trust (REIT). Simon seems well positioned to generate strong, high-single-digit cash flow growth over the next few years. This conviction comes in spite of elevated fears about the future of brick and mortar retail as e-commerce continues to increase its share of US retail sales. Given Simon's position as the largest owner/partner/manager of the world's high-quality shopping centers, we believe the market has overly discounted its growth prospects, which we believe remain attractive.
– 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 US, the company manages to sustain a high growth profile thanks to disciplined pricing and innovative products such as Elite access.
– UnitedHealth provides health care coverage, software and consultancy services. We believe the company is uniquely positioned to benefit from the increased consumerization of health care, as it holds industry-leading positions across five key growth markets. Investors have come to appreciate the value of Optum, the company's health services platform, particularly the Insight and Rx businesses. However, we believe the importance of Optum Care, which offers alternative site care delivery, remains underappreciated, both as a longer-term driver of revenues and profits, and as a way of bending the cost curve.
– The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
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UBS U.S. Sustainable Equity Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 7.15 | % | 8.79 | % | 13.25 | % | |||||||||
Class P2 | 7.44 | % | 9.06 | % | 13.53 | % | |||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 1.27 | % | 7.56 | % | 12.61 | % | |||||||||
S&P 500 Index3 | 10.42 | 10.71 | 14.70 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) 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. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
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UBS U.S. Sustainable Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depicts the performance of UBS U.S. Sustainable Equity Fund Class A and Class P shares versus the S&P 500 Index over the 10 years ended June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS U.S. Sustainable Equity Fund Class A vs. S&P 500 Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2009 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS U.S. Sustainable Equity Fund Class P vs. S&P 500 Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2009 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
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UBS U.S. Sustainable Equity Fund
Portfolio statistics and industry diversification—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Amazon.com, Inc. | 4.8 | % | |||||
Walt Disney Co./The | 4.6 | ||||||
Ameriprise Financial, Inc. | 4.5 | ||||||
Simon Property Group, Inc. | 4.3 | ||||||
Eli Lilly & Co. | 4.3 | ||||||
US Bancorp | 4.1 | ||||||
AGCO Corp. | 4.1 | ||||||
Prudential Financial, Inc. | 4.1 | ||||||
Comerica, Inc. | 4.1 | ||||||
UnitedHealth Group, Inc. | 3.9 | ||||||
Total | 42.8 | % |
Issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 103.3 | % | |||||
Bahamas | 3.2 | ||||||
Total | 106.5 | % |
Common stocks | Percentage of net assets | ||||||
Airlines | 3.1 | % | |||||
Auto components | 2.4 | ||||||
Banks | 8.2 | ||||||
Biotechnology | 6.0 | ||||||
Building products | 1.9 | ||||||
Capital markets | 4.5 | ||||||
Commercial services & supplies | 3.4 | ||||||
Diversified consumer services | 3.2 | ||||||
Entertainment | 4.6 | ||||||
Equity real estate investment trusts | 4.3 | ||||||
Food products | 3.7 | ||||||
Health care providers & services | 3.9 | ||||||
Insurance | 4.1 | ||||||
Internet & direct marketing retail | 4.8 | ||||||
IT services | 3.6 | ||||||
Life sciences tools & services | 2.6 | ||||||
Machinery | 6.5 | ||||||
Pharmaceuticals | 7.8 | ||||||
Semiconductors & semiconductor equipment | 5.5 | ||||||
Software | 7.5 | ||||||
Specialty retail | 1.3 | ||||||
Technology hardware, storage & peripherals | 5.2 | ||||||
Total common stocks | 98.1 | % | |||||
Short-term investment | 4.4 | ||||||
Investment of cash collateral from securities loaned | 4.0 | ||||||
Total investments | 106.5 | % | |||||
Liabilities in excess of other assets | (6.5 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
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UBS U.S. Sustainable Equity Fund
Portfolio of Investments
June 30, 2019
Number of shares | Value | ||||||||||
Common stocks: 98.1% | |||||||||||
Airlines: 3.1% | |||||||||||
Delta Air Lines, Inc. | 16,467 | $ | 934,502 | ||||||||
Auto components: 2.4% | |||||||||||
Aptiv PLC | 8,794 | 710,819 | |||||||||
Banks: 8.2% | |||||||||||
Comerica, Inc. | 16,864 | 1,225,001 | |||||||||
US Bancorp | 24,168 | 1,266,403 | |||||||||
2,491,404 | |||||||||||
Biotechnology: 6.0% | |||||||||||
Cyclerion Therapeutics, Inc.* | 10,775 | 123,374 | |||||||||
Incyte Corp.* | 8,322 | 707,037 | |||||||||
Ironwood Pharmaceuticals, Inc.*,1 | 90,214 | 986,941 | |||||||||
1,817,352 | |||||||||||
Building products: 1.9% | |||||||||||
Masco Corp. | 14,924 | 585,618 | |||||||||
Capital markets: 4.5% | |||||||||||
Ameriprise Financial, Inc. | 9,437 | 1,369,875 | |||||||||
Commercial services & supplies: 3.4% | |||||||||||
Stericycle, Inc.*,1 | 21,429 | 1,023,235 | |||||||||
Diversified consumer services: 3.2% | |||||||||||
OneSpaWorld Holdings Ltd.*,1 | 61,670 | 955,885 | |||||||||
Entertainment: 4.6% | |||||||||||
Walt Disney Co./The | 9,965 | 1,391,513 | |||||||||
Equity real estate investment trusts: 4.3% | |||||||||||
Simon Property Group, Inc. | 8,168 | 1,304,920 | |||||||||
Food products: 3.7% | |||||||||||
Conagra Brands, Inc. | 42,723 | 1,133,014 | |||||||||
Health care providers & services: 3.9% | |||||||||||
UnitedHealth Group, Inc. | 4,805 | 1,172,468 | |||||||||
Insurance: 4.1% | |||||||||||
Prudential Financial, Inc. | 12,223 | 1,234,523 | |||||||||
Internet & direct marketing retail: 4.8% | |||||||||||
Amazon.com, Inc.* | 766 | 1,450,520 | |||||||||
IT services: 3.6% | |||||||||||
Visa, Inc., Class A | 6,205 | 1,076,878 | |||||||||
Life sciences tools & services: 2.6% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 2,534 | 792,103 |
Number of shares | Value | ||||||||||
Machinery: 6.5% | |||||||||||
AGCO Corp. | 16,100 | $ | 1,248,877 | ||||||||
Gardner Denver Holdings, Inc.* | 20,688 | 715,805 | |||||||||
1,964,682 | |||||||||||
Pharmaceuticals: 7.8% | |||||||||||
Eli Lilly & Co. | 11,639 | 1,289,485 | |||||||||
Johnson & Johnson | 7,694 | 1,071,620 | |||||||||
2,361,105 | |||||||||||
Semiconductors & semiconductor equipment: 5.5% | |||||||||||
Micron Technology, Inc.* | 23,125 | 892,394 | |||||||||
ON Semiconductor Corp.* | 38,441 | 776,892 | |||||||||
1,669,286 | |||||||||||
Software: 7.5% | |||||||||||
Adobe, Inc.* | 3,969 | 1,169,466 | |||||||||
LogMeIn, Inc. | 14,746 | 1,086,485 | |||||||||
2,255,951 | |||||||||||
Specialty retail: 1.3% | |||||||||||
TJX Cos., Inc./The | 7,395 | 391,048 | |||||||||
Technology hardware, storage & peripherals: 5.2% | |||||||||||
NetApp, Inc. | 13,152 | 811,478 | |||||||||
Western Digital Corp. | 15,876 | 754,904 | |||||||||
1,566,382 | |||||||||||
Total common stocks (cost $28,614,105) | 29,653,083 | ||||||||||
Short-term investment: 4.4% | |||||||||||
Investment company: 4.4% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $1,324,592) | 1,324,592 | 1,324,592 | |||||||||
Investment of cash collateral from securities loaned: 4.0% | |||||||||||
Money market fund: 4.0% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $1,211,056) | 1,211,056 | 1,211,056 | |||||||||
Total investments: 106.5% (cost $31,149,753) | 32,188,731 | ||||||||||
Liabilities in excess of other assets: (6.5)% | (1,969,110 | ) | |||||||||
Net assets: 100.0% | $ | 30,219,621 |
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 105.
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UBS U.S. Sustainable Equity Fund
Portfolio of Investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | 29,653,083 | $ | — | $ | — | $ | 29,653,083 | |||||||||||
Short-term investment | — | 1,324,592 | — | 1,324,592 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 1,211,056 | — | 1,211,056 | |||||||||||||||
Total | $ | 29,653,083 | $ | 2,535,648 | $ | — | $ | 32,188,731 |
At June 30, 2019, 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.
75
UBS Municipal Bond Fund
Portfolio performance
For the 12 months ended June 30, 2019, Class A shares of UBS Municipal Bond Fund (the "Fund") returned 7.17% (Class A shares returned 4.78% after the deduction of the maximum sales charge), while Class P shares returned 7.55%. For comparison purposes, the Fund's benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), returned 6.71%, and the Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index returned 6.81% over the same time period. (Class P shares have lower expenses than the other share class of the Fund. Returns for all share classes over various time periods are shown on page 77; 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 and outperformed its benchmark. This was primarily due to positioning on the municipal yield curve and security selection.
Portfolio performance summary1
What worked:
– Yield curve positioning contributed to performance. In particular, underweights to the three and five year portions of the curve, along with overweights to the seven, ten, 15 and 20 year portions of the curve, were beneficial for relative performance. (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, overall, was beneficial for results. The Fund's holdings of municipal securities rated A, AA and AAA were additive for returns. The Fund's holdings in the transportation sector, as well as state and local general obligation bonds, were also beneficial.
– An overweight to the leasing sector contributed to returns.
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.
– Having no allocation to the long end of the municipal yield curve (22+ years) detracted from performance as it outperformed the benchmark.
– Positioning in a number of sectors detracted from performance. In particular, underweights to the industrial development/pollution control revenue and hospital sectors were drags on relative results.
– The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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 Web site at www.ubs.com.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
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UBS Municipal Bond Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class A2 | 7.17 | % | 2.97 | % | |||||||
Class P3 | 7.55 | 3.23 | |||||||||
After deducting maximum sales charge | |||||||||||
Class A2 | 4.78 | % | 2.47 | % | |||||||
Bloomberg Barclays Municipal Bond Index4 | 6.71 | 3.51 | |||||||||
Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index5 | 6.81 | 3.21 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 26, 2018 prospectus(es) 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 share classes 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. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
77
UBS Municipal Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 2.25% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depicts the performance of UBS Municipal Bond Fund Class A and Class P shares versus the Bloomberg Barclays Municipal Bond Index and Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index from November 10, 2014, which is the inception date of the two classes, through June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Municipal Bond Fund Class A vs. Bloomberg Barclays Municipal Bond Index and Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of November 10, 2014 = $9,775
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 2.25%.
UBS Municipal Bond Fund Class P vs. Bloomberg Barclays Municipal Bond Index and Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of November 10, 2014 = $5,000,000
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. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
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UBS Municipal Bond Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Summary of municipal securities by state
Percentage of net assets | |||||||
Long-term municipal bonds | |||||||
California | 2.3 | % | |||||
Connecticut | 7.4 | ||||||
Florida | 11.6 | ||||||
Illinois | 13.2 | ||||||
Maryland | 1.9 | ||||||
Massachusetts | 1.8 | ||||||
Michigan | 3.3 | ||||||
Mississippi | 1.0 | ||||||
Nebraska | 1.4 | ||||||
Nevada | 2.2 | ||||||
New Jersey | 3.7 | ||||||
New York | 21.1 | ||||||
North Carolina | 1.5 | ||||||
Ohio | 1.2 | ||||||
Pennsylvania | 13.3 | ||||||
Rhode Island | 1.0 | ||||||
South Carolina | 2.4 | ||||||
Texas | 8.8 | ||||||
Utah | 1.1 | ||||||
Washington | 1.2 | ||||||
Total long-term municipal bonds | 101.4 | % | |||||
Short-term investment | 0.3 | ||||||
Total investments | 101.7 | % | |||||
Liabilities in excess of other assets | (1.7 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
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UBS Municipal Bond Fund
Portfolio of investments
June 30, 2019
Face amount | Value | ||||||||||
Long-term municipal bonds: 101.4% | |||||||||||
California: 2.3% | |||||||||||
California State Kindergarten, GO Bonds, Series A5, 1.250%, due 05/01/341 | $ | 300,000 | $ | 300,000 | |||||||
Golden State Tobacco Securitization Corp., Enhanced Tobacco Settlement, Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/32 | 1,000,000 | 1,185,510 | |||||||||
Series A, 5.000%, due 06/01/33 | 650,000 | 762,541 | |||||||||
Irvine Improvement Bond Act 1915 Limited Obligation (Assessment District 03-19), Series B, 1.500%, due 09/02/291,2 | 100,000 | 100,000 | |||||||||
2,348,051 | |||||||||||
Connecticut: 7.4% | |||||||||||
State of Connecticut, GO Bonds 5.000%, due 09/15/25 | 2,140,000 | 2,546,686 | |||||||||
Series A, 5.000%, due 04/15/25 | 1,250,000 | 1,473,787 | |||||||||
Series B, 5.000%, due 04/15/25 | 2,000,000 | 2,358,060 | |||||||||
Series C, 5.000%, due 06/15/23 | 1,000,000 | 1,131,520 | |||||||||
7,510,053 | |||||||||||
Florida: 11.6% | |||||||||||
Central Florida Expressway Authority Revenue Bonds, Series B, 5.000%, due 07/01/34 | 1,000,000 | 1,202,690 | |||||||||
Miami-Dade County Revenue Bonds 5.000%, due 10/01/26 | 1,000,000 | 1,234,910 | |||||||||
School Board of Volusia County, Certificates Refunding, Master Lease Program, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,145,780 | |||||||||
School District of St. Lucie County, Sales Tax Revenue Bonds, AGM 5.000%, due 10/01/26 | 1,020,000 | 1,213,045 | |||||||||
South Florida Water Management District, COP 5.000%, due 10/01/34 | 1,000,000 | 1,172,600 | |||||||||
The School Board of Broward County, COP, Series B, 5.000%, due 07/01/30 | 2,000,000 | 2,343,240 | |||||||||
The School Board of Miami-Dade County, COP, Series A, 5.000%, due 05/01/31 | 1,000,000 | 1,162,950 | |||||||||
Series D, 5.000%, due 11/01/31 | 1,000,000 | 1,150,280 | |||||||||
The School Board of Palm Beach County, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,175,940 | |||||||||
11,801,435 |
Face amount | Value | ||||||||||
Illinois: 13.2% | |||||||||||
City of Chicago O'Hare International Airport, Senior Lien Revenue Bonds, Series B, 5.000%, due 01/01/30 | $ | 1,000,000 | $ | 1,156,090 | |||||||
Series B, 5.000%, due 01/01/31 | 1,050,000 | 1,207,605 | |||||||||
County of Cook, GO Bonds, Series A, 5.000%, due 11/15/20 | 1,830,000 | 1,913,393 | |||||||||
Series A, 5.000%, due 11/15/26 | 1,500,000 | 1,752,015 | |||||||||
Illinois Finance Authority Revenue Bonds 5.000%, due 07/01/37 | 1,000,000 | 1,237,240 | |||||||||
Illinois State Toll Highway Authority Revenue Bonds, Series B, 5.000%, due 01/01/27 | 1,000,000 | 1,215,810 | |||||||||
Railsplitter Tobacco Settlement Authority Revenue Bonds 5.000%, due 06/01/25 | 1,235,000 | 1,451,915 | |||||||||
State of Illinois, GO Bonds, Series B, 5.000%, due 10/01/21 | 1,000,000 | 1,067,200 | |||||||||
State of Illinois, Sales Tax Revenue Bonds 5.000%, due 06/15/20 | 1,190,000 | 1,224,653 | |||||||||
5.000%, due 06/15/22 | 1,105,000 | 1,194,450 | |||||||||
13,420,371 | |||||||||||
Maryland: 1.9% | |||||||||||
County of Prince George's MD, GO Bonds, Series A, 5.000%, due 07/15/30 | 1,000,000 | 1,292,950 | |||||||||
Montgomery County Consolidated Public (Improvement Bond), GO Bonds, Series E, 1.920%, due 11/01/371 | 600,000 | 600,000 | |||||||||
1,892,950 | |||||||||||
Massachusetts: 1.8% | |||||||||||
The Commonwealth of Massachusetts, Consolidated Loan, GO Bonds, Series A, 5.000%, due 01/01/40 | 1,500,000 | 1,804,230 | |||||||||
Michigan: 3.3% | |||||||||||
Michigan Finance Authority, Trinity Health Credit Group, Hospital Revenue Bonds, Series A, 5.000%, due 12/01/35 | 1,000,000 | 1,203,510 | |||||||||
Michigan State Building Authority Revenue Bonds, Series I, 5.000%, due 10/15/29 | 1,800,000 | 2,191,680 | |||||||||
3,395,190 |
80
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2019
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 L, 2.000%, due 11/01/351 | $ | 1,000,000 | $ | 1,000,000 | |||||||
Nebraska: 1.4% | |||||||||||
Douglas County Hospital Authority No. 2 Revenue Bonds 5.000%, due 05/15/25 | 1,250,000 | 1,482,675 | |||||||||
Nevada: 2.2% | |||||||||||
Clark County, Las Vegas-McCarran International Airport Revenue Bonds, Series C, 5.000%, due 07/01/27 | 1,815,000 | 2,269,785 | |||||||||
New Jersey: 3.7% | |||||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series AA, 5.000%, due 06/15/27 | 1,500,000 | 1,652,700 | |||||||||
New Jersey Turnpike Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 1,000,000 | 1,168,730 | |||||||||
Series E, 5.000%, due 01/01/34 | 860,000 | 991,184 | |||||||||
3,812,614 | |||||||||||
New York: 21.1% | |||||||||||
City of New York, GO Bonds, Subseries F-1, 5.000%, due 04/01/34 | 1,100,000 | 1,353,187 | |||||||||
Subseries F-1, 5.000%, due 04/01/40 | 1,000,000 | 1,203,940 | |||||||||
New York City Municipal Water Finance Authority, Water & Sewer System, Revenue Bonds, Series EE, 5.000%, due 06/15/40 | 1,000,000 | 1,200,590 | |||||||||
New York City Municipal Water Finance Authority, Water & Sewer System, Second General Resolution Revenue Bonds, Series A, 1.950%, due 06/15/321 | 900,000 | 900,000 | |||||||||
Series DD-2, 1.950%, due 06/15/431 | 300,000 | 300,000 | |||||||||
Series EE-2, 5.000%, due 06/15/40 | 1,200,000 | 1,476,252 | |||||||||
Series FF, 5.000%, due 06/15/39 | 2,000,000 | 2,428,340 | |||||||||
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 | 1,220,120 |
Face amount | Value | ||||||||||
New York City Transitional Finance Authority Future Tax Secured Revenue Bonds, Series A-2, 5.000%, due 08/01/38 | $ | 1,000,000 | $ | 1,195,170 | |||||||
Series C-2, 5.000%, due 05/01/35 | 3,000,000 | 3,668,730 | |||||||||
Series E-4, 1.950%, due 02/01/451 | 900,000 | 900,000 | |||||||||
Subseries A1, 5.000%, due 08/01/33 | 1,230,000 | 1,528,152 | |||||||||
New York City Transitional Finance Authority Revenue Bonds, Subseries B-1, 5.000%, due 08/01/33 | 1,000,000 | 1,157,350 | |||||||||
Subseries E-1, 5.000%, due 02/01/32 | 1,000,000 | 1,194,010 | |||||||||
New York State Urban Development Corp., State Personal Income Tax, Revenue Bonds, Series A, 5.000%, due 03/15/36 | 1,500,000 | 1,844,580 | |||||||||
21,570,421 | |||||||||||
North Carolina: 1.5% | |||||||||||
Charlotte-Mecklenburg Hospital Authority Health Care Systems Revenue Bonds, AGM, Series E, 1.920%, due 01/15/441 | 1,500,000 | 1,500,000 | |||||||||
Ohio: 1.2% | |||||||||||
State of Ohio, Cleveland Clinic Health System Revenue Bonds, Series A, 5.000%, due 01/01/32 | 1,000,000 | 1,227,200 | |||||||||
Pennsylvania: 13.3% | |||||||||||
City of Philadelphia, GO Bonds 5.000%, due 08/01/20 | 1,590,000 | 1,652,026 | |||||||||
Series A, 5.000%, due 08/01/22 | 1,000,000 | 1,106,890 | |||||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment Revenue Bonds 5.000%, due 06/01/24 | 1,625,000 | 1,868,328 | |||||||||
Commonwealth of Pennsylvania, GO Bonds 5.000%, due 09/15/25 | 1,500,000 | 1,808,550 | |||||||||
Pennsylvania Turnpike Commission Revenue Bonds 5.000%, due 12/01/253 | 2,170,000 | 2,582,994 | |||||||||
5.000%, due 12/01/30 | 1,750,000 | 2,095,030 | |||||||||
Series 2017-3, 5.000%, due 12/01/28 | 1,000,000 | 1,211,690 | |||||||||
Series A-2, 5.000%, due 12/01/28 | 1,000,000 | 1,242,910 | |||||||||
13,568,418 |
81
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2019
Face amount | Value | ||||||||||
Long-term municipal bonds—(Concluded) | |||||||||||
Rhode Island: 1.0% | |||||||||||
Tobacco Settlement Financing Corp., Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/21 | $ | 1,000,000 | $ | 1,059,340 | |||||||
South Carolina: 2.4% | |||||||||||
South Carolina Public Service Authority (Escrowed to Maturity), Revenue Bonds, Series B, 5.000%, due 12/01/204 | 555,000 | 583,188 | |||||||||
South Carolina Public Service Authority Revenue Bonds, Series A, 5.000%, due 12/01/26 | 1,010,000 | 1,189,356 | |||||||||
South Carolina Public Service Authority-Unrefunded Balance, Revenue Bonds, Series B, 5.000%, due 12/01/20 | 690,000 | 721,968 | |||||||||
2,494,512 | |||||||||||
Texas: 8.8% | |||||||||||
Austin Community College District Public Facility Corp., Round Rock Campus Revenue Bonds 5.000%, due 08/01/24 | 1,000,000 | 1,168,000 | |||||||||
Harris County Cultural Education Facilities Finance Corp. Revenue Bonds (Methodist Hospital), Subseries C-1, 1.950%, due 12/01/241 | 1,000,000 | 1,000,000 | |||||||||
Subseries C-2, 1.950%, due 12/01/271 | 700,000 | 700,000 | |||||||||
Lower Colorado River Authority Refunding LCRA Transmission Services, Revenue Bonds 5.000%, due 05/15/31 | 1,000,000 | 1,261,740 |
Face amount | Value | ||||||||||
Lower Neches Valley Texas Authority Industrial Development Corp. Revenue Bonds (ExxonMobil Project) 1.890%, due 11/01/381 | $ | 100,000 | $ | 100,000 | |||||||
North Texas Tollway Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 3,030,000 | 3,466,260 | |||||||||
University of Texas Revenue Bonds, Series A, 5.000%, due 08/15/38 | 1,000,000 | 1,248,970 | |||||||||
8,944,970 | |||||||||||
Utah: 1.1% | |||||||||||
Murray City Hospital Revenue (IHC Health Services, Inc.), Revenue Bonds, Series C, 1.890%, due 05/15/361 | 1,140,000 | 1,140,000 | |||||||||
Washington: 1.2% | |||||||||||
Washington State, GO Bonds, Series C, 5.000%, due 02/01/37 | 1,000,000 | 1,235,190 | |||||||||
Total long-term municipal bonds (cost $99,563,763) | 103,477,405 | ||||||||||
Number of shares | |||||||||||
Short-term investment: 0.3% | |||||||||||
Investment company: 0.3% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $280,004) | 280,004 | 280,004 | |||||||||
Total investments: 101.7% (cost $99,843,767) | 103,757,409 | ||||||||||
Liabilities in excess of other assets: (1.7)% | (1,739,897 | ) | |||||||||
Net assets: 100.0% | $ | 102,017,512 |
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 105.
82
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | — | $ | 103,477,405 | $ | — | $ | 103,477,405 | |||||||||||
Short-term investment | — | 280,004 | — | 280,004 | |||||||||||||||
Total | $ | — | $ | 103,757,409 | $ | — | $ | 103,757,409 |
At June 30, 2019 there were no transfers between Level 1 and Level 2.
Portfolio footnotes
1 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
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 $100,000, represented 0.1% of the Fund's net assets at period end.
3 This security is considered restricted. At period end, the value of restricted security was $2,582,994, represented 2.5% of the Fund's net assets. The table below provides further information.
Restricted security | Acquisition date | Acquisition cost | Acquisition cost as a percentage of net assets | Value at 06/30/19 | Value as a percentage of net assets | ||||||||||||||||||
Pennsylvania Turnpike Commission Revenue Bonds, 5.000%, due 12/01/25 | 09/21/2018 | $ | 2,396,505 | 2.3 | % | $ | 2,582,994 | 2.5 | % |
4 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.
83
UBS Sustainable Development Bank Bond Fund
Portfolio performance
For the period from its inception on October 24, 2018 through June 30, 2019 (the "reporting period"), Class P shares of UBS Sustainable Development Bank Bond Fund (the "Fund") returned 7.75%. For comparison purposes, the Bloomberg Barclays U.S. Treasury Index (the "Index") returned 8.20%. 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 8.03% 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
Global economic growth has continued to decelerate amid the uncertainty associated with trade and technology conflicts. There was a high degree of anticipation amongst investors ahead of the G20 meeting of major government leaders in Osaka, Japan in late June. In the end, the burgeoning optimism could be seen as well founded, as there was agreement to resume the stalled trade talks between the US and China, as well as a delay on the introduction of further tariffs on Chinese imports into the US.
After Federal Reserve Board (Fed) policymakers continuously softened their language on the interest rate outlook during the reporting period, Fed Chairman Powell noted the case for easing monetary policy had grown stronger and pledged to act as needed. After expecting further rate hikes, investors started to price a loosening of the monetary policy stance and now expect the central bank to cut interest rates in the second half of 2019.
The US economy showed relatively healthy growth and labour market numbers. However, there were mounting signs of a possible slowdown as global growth spluttered amidst ongoing trade tensions. Measures of services and manufacturing activity, as well as consumer spending, were also muted in the US.
Driven by a healthy but slowing economy and the dovish turn from global central banks, 10-year US Treasury yields breached the 2% mark towards the end of the reporting period after starting the reporting period around the 3.2% mark.
Led by the fall in the US Treasury yields and the resulting rally of US Treasury bonds, sustainable development bank (SDB) bonds also rallied during the reporting period. Driven by robust demand for high quality bonds and a lack of supply, spreads of SDB bonds tightened versus US Treasury bonds.
84
UBS Sustainable Development Bank Bond Fund
Portfolio performance summary
The Fund is managed relative to a composite index, which is a blend of two market indicies designed to measure the performance of the US dollar denominated multilateral development bank bond market. The Fund seeks to minimize tracking error relative to composite index but does not seek to directly replicate the index, which is referred to as its "secondary benchmark" above. 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 given its launch in October 2018, along with fees and expenses attendant to running a mutual fund (the secondary benchmark is a passive composite index and does not reflect fees or expenses). Additionally, the performance deviation between the Fund and the primary index is explained by the longer duration of the Index.
The Fund did not invest in derivatives 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 June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
85
UBS Sustainable Development Bank Bond Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
Inception1 | |||||||
Class P2 | 7.75 | % | |||||
Bloomberg Barclays U.S. Treasury Index3 | 8.20 | ||||||
Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index.4 | 8.03 |
The annualized gross and net expense ratios, respectively, for Class P shares as in the October 23, 2018 prospectus(es) 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 0.25% 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 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.
86
UBS Sustainable Development Bank Bond Fund
Illustration of an assumed investment of $5,000,000 in Class P shares (unaudited)
The following graph depicts the performance of UBS Sustainable Development Bank Bond Fund Class P shares versus the Bloomberg Barclays U.S. Treasury Index and Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index from October 24, 2018, the inception date of Class P through June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Sustainable Development Bank Bond Fund Class P vs. Bloomberg Barclays U.S. Treasury Index and Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of October 24, 2018 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
87
UBS Sustainable Development Bank Bond Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings | Percentage of net assets | ||||||
Inter-American Development Bank, 3.125%, due 09/18/28 | 7.3 | % | |||||
International Bank for Reconstruction & Development, 2.500%, due 11/22/27 | 7.1 | ||||||
Inter-American Development Bank, 2.375%, due 07/07/27 | 4.6 | ||||||
International Bank for Reconstruction & Development, 2.500%, due 11/25/24 | 4.1 | ||||||
International Development Association, 2.750%, due 04/24/23 | 4.0 | ||||||
Inter-American Development Bank, GMTN, 2.000%, due 06/02/26 | 4.0 | ||||||
Asian Infrastructure Investment Bank/The, 2.250%, due 05/16/24 | 3.8 | ||||||
IDB Trust Services Ltd., 3.389%, due 09/26/23 | 3.3 | ||||||
International Bank for Reconstruction & Development, 1.875%, due 10/27/26 | 3.1 | ||||||
International Bank for Reconstruction & Development, 2.500%, due 07/29/25 | 3.1 | ||||||
Total | 44.4 | % |
Sector allocation | Percentage of net assets | ||||||
Non-US government obligations | 98.5 | % | |||||
Short-term investment | 0.6 | ||||||
Investment of cash collateral from securities loaned | 0.0 | † | |||||
Total investments | 99.1 | % | |||||
Other assets in excess of liabilities | 0.9 | ||||||
Net assets | 100.0 | % |
† Amount represents less than 0.05%
1 The Fund's portfolio is actively managed and its composition will vary over time.
88
UBS Sustainable Development Bank Bond Fund
Portfolio of investments
June 30, 2019
Face amount | Value | ||||||||||
Non-US government obligations: 98.5% | |||||||||||
Supranationals: 98.5% | |||||||||||
African Development Bank, 3.000%, due 09/20/23 | $ | 100,000 | $ | 104,462 | |||||||
Series GDIC, 1.875%, due 03/16/20 | 475,000 | 474,005 | |||||||||
Series GDIF, 1.250%, due 07/26/21 | 325,000 | 321,152 | |||||||||
2.125%, due 11/16/22 | 100,000 | 100,969 | |||||||||
Agence Francaise de Developpement 1.625%, due 01/21/201 | 250,000 | 249,161 | |||||||||
Agence Francaise de Developpement, EMTN 2.750%, due 03/22/211 | 600,000 | 607,610 | |||||||||
2.750%, due 01/22/221 | 200,000 | 204,088 | |||||||||
Asian Development Bank, GMTN 2.000%, due 01/22/25 | 75,000 | 75,316 | |||||||||
2.500%, due 11/02/27 | 100,000 | 103,031 | |||||||||
2.625%, due 01/12/27 | 100,000 | 104,346 | |||||||||
2.750%, due 01/19/28 | 340,000 | 357,322 | |||||||||
3.125%, due 09/26/28 | 400,000 | 434,151 | |||||||||
Asian Infrastructure Investment Bank/The 2.250%, due 05/16/24 | 950,000 | 965,584 | |||||||||
Corp. Andina de Fomento 2.125%, due 09/27/21 | 125,000 | 123,866 | |||||||||
4.375%, due 06/15/22 | 300,000 | 315,666 | |||||||||
Council of Europe Development Bank 1.625%, due 03/16/21 | 750,000 | 746,024 | |||||||||
2.500%, due 02/27/24 | 300,000 | 307,986 | |||||||||
European Bank for Reconstruction & Development, GMTN 1.500%, due 11/02/21 | 100,000 | 99,242 | |||||||||
2.125%, due 03/07/22 | 300,000 | 302,203 | |||||||||
2.750%, due 04/26/21 | 300,000 | 304,636 | |||||||||
2.750%, due 03/07/23 | 300,000 | 309,627 | |||||||||
European Investment Bank 1.875%, due 02/10/252 | 375,000 | 374,707 | |||||||||
2.625%, due 03/15/24 | 225,000 | 232,850 | |||||||||
3.250%, due 01/29/24 | 400,000 | 424,383 | |||||||||
IDB Trust Services Ltd. 3.389%, due 09/26/231 | 800,000 | 830,088 | |||||||||
IDB Trust Services Ltd., EMTN 2.393%, due 04/12/221 | 200,000 | 200,094 | |||||||||
Inter-American Development Bank 2.125%, due 01/15/25 | 375,000 | 379,113 | |||||||||
2.250%, due 06/18/29 | 700,000 | 705,654 | |||||||||
2.375%, due 07/07/27 | 1,135,000 | 1,161,675 | |||||||||
2.625%, due 01/16/24 | 400,000 | 412,424 | |||||||||
3.000%, due 02/21/24 | 375,000 | 393,752 | |||||||||
3.125%, due 09/18/28 | 1,700,000 | 1,845,651 |
Face amount | Value | ||||||||||
Inter-American Development Bank, GMTN 1.750%, due 04/14/22 | $ | 100,000 | $ | 99,806 | |||||||
2.000%, due 06/02/26 | 1,000,000 | 1,000,426 | |||||||||
2.625%, due 04/19/21 | 150,000 | 151,910 | |||||||||
International Bank for Reconstruction & Development, 2.000%, due 01/26/22 | 100,000 | 100,501 | |||||||||
2.125%, due 07/01/22 | 550,000 | 557,240 | |||||||||
2.500%, due 03/19/24 | 650,000 | 668,302 | |||||||||
Series GDIF, 1.375%, due 05/24/21 | 350,000 | 346,685 | |||||||||
1.875%, due 10/27/26 | 800,000 | 794,207 | |||||||||
2.500%, due 11/25/24 | 1,000,000 | 1,031,614 | |||||||||
2.500%, due 07/29/25 | 750,000 | 773,278 | |||||||||
2.500%, due 11/22/27 | 1,740,000 | 1,799,253 | |||||||||
International Development Association 2.750%, due 04/24/231 | 975,000 | 1,007,476 | |||||||||
International Finance Corp., GMTN 1.125%, due 07/20/21 | 250,000 | 246,332 | |||||||||
2.125%, due 04/07/26 | 575,000 | 580,646 | |||||||||
2.875%, due 07/31/23 | 100,000 | 103,979 | |||||||||
Kreditanstalt fuer Wiederaufbau 2.000%, due 05/02/25 | 700,000 | 704,368 | |||||||||
2.875%, due 04/03/28 | 275,000 | 292,158 | |||||||||
Nordic Investment Bank 2.125%, due 02/01/22 | 400,000 | 402,931 | |||||||||
2.875%, due 07/19/23 | 600,000 | 623,991 | |||||||||
Total non-US government obligations (cost $23,836,895) | 24,855,941 | ||||||||||
Number of shares | |||||||||||
Short-term investment: 0.6% | |||||||||||
Investment company: 0.6% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $151,259) | 151,259 | 151,259 | |||||||||
Investment of cash collateral from securities loaned: 0.0%† | |||||||||||
Money market fund: 0.0%† | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $5,138) | 5,138 | 5,138 | |||||||||
Total investments: 99.1% (cost $23,993,292) | 25,012,338 | ||||||||||
Other assets in excess of liabilities: 0.9% | 222,940 | ||||||||||
Net assets: 100.0% | $ | 25,235,278 |
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 105.
89
UBS Sustainable Development Bank Bond Fund
Portfolio of investments
June 30, 2019
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | |||||||||||||||||||
Non-US government obligations | $ | — | $ | 24,855,941 | $ | — | $ | 24,855,941 | |||||||||||
Short-term investment | — | 151,259 | — | 151,259 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 5,138 | — | 5,138 | |||||||||||||||
Total | $ | — | $ | 25,012,338 | $ | — | $ | 25,012,338 |
At June 30, 2019, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
† Amount represents less than 0.05%.
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.
2 Security, or portion thereof, was on loan at the period end.
See accompanying notes to financial statements.
90
UBS Total Return Bond Fund
Portfolio performance
For the 12 months ended June 30, 2019, Class A shares of UBS Total Return Bond Fund (the "Fund") returned 7.63% (Class A shares returned 3.61% after the deduction of the maximum sales charge), while Class P shares returned 7.95%.For comparison purposes, the Bloomberg Barclays US Aggregate Index (the "Index") returned 7.87%. (Class P shares have lower expenses than the other share class of the Fund. Returns for all share classes over various time periods are shown on page 93; 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. For active currency management, we utilized FX forwards. For managing interest rate exposure, we utilized interest rate futures during the reporting period. 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 complement or risk mitigate to other existing positions in the portfolio.
Market commentary
The US economy continued to expand during the reporting period. Looking back, the US Commerce Department reported that gross domestic product ("GDP") grew at 3.4% and 2.2% seasonally adjusted annualized rates during the third and fourth quarters of 2018, respectively. GDP growth then bounced back to 3.1% during the first quarter of 2019. Finally, the US Commerce Department's initial estimate for second quarter GDP growth in the US, released after the reporting period ended, was 2.1%.
After raising interest rates four times in 2018, in January 2019 the US Federal Reserve Board (the "Fed"). started to reverse course, saying it would pause from additional rate hikes as it monitored incoming economic data. At its meeting that concluded on March 20, 2019, most Federal Open Market Committee ("FOMC")1 members indicated that they did not feel additional rate hikes would be needed in 2019. Finally, after its June 2019 meeting, Fed Chair Jerome Powell said, "The case for somewhat more accommodative policy has strengthened" and the market anticipates one or two rate cuts by the end of the year.
The global fixed income market posted solid results during the reporting period. In the US, both short- and long-term Treasury yields declined (bond yields and prices move in the opposite direction). Periods of investor risk aversion, the Fed's monetary policy reversal and modest inflation helped to push yields lower. For the 12 month reporting period as a whole, the yield on the US 10-year Treasury fell from 2.85% to 2.00%. Government bond yields outside the US also generally moved lower, as the European Central Bank, the Bank of Japan and the Bank of England largely maintained their highly accommodative monetary policies. The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Bond Index,2 returned 7.87% for the 12 months ended June 30, 2019. Returns of riskier fixed income securities were also positive. High yield bonds, as measured by the ICE
1 The Federal Open Market Committee ("FOMC") is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments.
2 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, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
91
UBS Total Return Bond Fund
BofAML US High Yield Cash Pay Constrained Index,3 returned 7.60% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),4 gained 11.32%.
Portfolio performance summary
What worked:
– Duration management: The Fund's tactical adjustments to duration contributed to returns over the reporting period, as did yield curve positioning. In particular, exposure to long-term US interest rates was beneficial as the yield curve flattened. The Fund also benefited from its exposure to New Zealand, as their yields declined due to slowing growth.
– Commercial mortgage-backed securities ("CMBS"): The Fund's allocation to CMBS contributed to performance.
– Corporate security selection: Issue selection within corporates, particularly in both financials and industrials, was additive for returns.
What didn't work:
– Mortgage-backed security (MBS) security selection: Issue selection of agency MBS detracted from performance.
– Select active FX exposure. The Fund occasionally implemented active foreign exchange positions. Long exposure to both the Swedish krona and Norwegian krone detracted from returns over the course of the reporting period.
Market outlook
US Treasury yields have moved sharply lower on concerns over inflation and an expectation that the Fed will cut rates in July 2019 and again over the remainder of the year. US growth indicators are mixed with the economy decelerating. Trade tensions and geopolitical risks are asserting their influence on the macro and investment environment. Market consensus has shifted towards a more protracted negotiation between the US and China, which will weigh on the economic outlook and potentially financial conditions. Globally, central banks have adopted a dovish tone, which is conducive for diversified carry strategies. Carry, as it relates to currency investing, is the profit or loss that can be made from interest rate differentials in two countries.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2019. The views and opinions in the letter were current as of August 14, 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.
3 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.
4 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.
92
UBS Total Return Bond Fund
Average annual total returns for periods ended 06/30/19 (unaudited)
1 year | 5 years | 10 years or Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 7.63 | % | N/A | 2.18 | % | ||||||||||
Class P3 | 7.95 | 1.72 | % | 5.59 | |||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 3.61 | % | N/A | 0.78 | % | ||||||||||
Bloomberg Barclays US Aggregate Bond Index4 | 7.87 | 2.95 | % | 2.27 |
The annualized gross and net expense ratios as in the October 26, 2018 prospectus(es) 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 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 Bond Index is 3.90%. The Fund 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 in exchange for the Fund's Class P shares (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, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
A temporary redemption fee of 2% was imposed on sales of Class P shares of the Fund between May 23, and August 22, 2016.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
93
UBS Total Return Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 3.75% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depicts the performance of UBS Total Return Bond Fund Class A and Class P shares versus the Bloomberg Barclays US Aggregate Bond Index from September 29, 2016 for Class A and over 10 years for Class P, both ending June 30, 2019. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Total Return Bond Fund Class A vs. Bloomberg Barclays US Aggregate Bond Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of September 29, 2016 = $9,625.
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 3.75%.
UBS Total Return Bond Fund Class P vs. Bloomberg Barclays US Aggregate Bond Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2009 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
94
UBS Total Return Bond Fund
Portfolio statistics—June 30, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
FNMA, 3.500% due 02/01/48 | 2.6 | % | |||||
GNMA II, 3.500% due 10/20/48 | 1.9 | ||||||
FHLMC, 4.000% due 04/01/49 | 1.7 | ||||||
GNMA II, 3.000% due 08/20/46 | 1.7 | ||||||
US Treasury Notes, 2.250% due 04/30/24 | 1.5 | ||||||
FNMA, 3.000% due 08/01/46 | 1.5 | ||||||
FNMA, 3.500% due 03/01/48 | 1.4 | ||||||
VNDO Mortgage Trust, 4.079% due 12/13/29 | 1.3 | ||||||
CHT Mortgage Trust, 5.394% due 11/15/36 | 1.2 | ||||||
Honda Auto Receivables Owner Trust, 1.620% due 08/15/22 | 1.1 | ||||||
Total | 15.9 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 91.7 | % | |||||
United Kingdom | 2.5 | ||||||
Colombia | 1.2 | ||||||
Canada | 1.1 | ||||||
New Zealand | 0.8 | ||||||
Total | 97.3 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
95
UBS Total Return Bond Fund
Industry diversification—June 30, 2019 (unaudited)1
Corporate bonds | Percentage of net assets | ||||||
Agriculture | 0.1 | % | |||||
Auto manufacturers | 0.2 | ||||||
Banks | 6.6 | ||||||
Beverages | 0.5 | ||||||
Biotechnology | 0.6 | ||||||
Chemicals | 1.9 | ||||||
Commercial banks | 0.3 | ||||||
Commercial services | 0.4 | ||||||
Computers | 0.6 | ||||||
Diversified financial services | 1.8 | ||||||
Electric | 1.3 | ||||||
Food | 0.3 | ||||||
Healthcare-products | 0.5 | ||||||
Healthcare-services | 0.8 | ||||||
Insurance | 1.0 | ||||||
Internet | 0.4 | ||||||
IT services | 0.1 | ||||||
Media | 1.5 | ||||||
Mining | 0.3 | ||||||
Miscellaneous manufacturers | 0.9 | ||||||
Oil & gas | 2.3 | ||||||
Pharmaceuticals | 1.6 | ||||||
Pipelines | 1.7 | ||||||
Real estate | 1.6 | ||||||
Real estate investment trust | 0.5 | ||||||
Retail | 0.2 | ||||||
Semiconductors | 1.0 | ||||||
Software | 1.0 | ||||||
Telecommunications | 1.3 | ||||||
Transportation | 0.4 | ||||||
Total corporate bonds | 31.7 | % |
Percentage of net assets | |||||||
Asset-backed securities | 13.1 | % | |||||
Commercial mortgage-backed securities | 15.8 | ||||||
Mortgage-backed securities | 26.0 | ||||||
Municipal bonds and notes | 1.0 | ||||||
Non-US government obligations | 2.7 | ||||||
U.S. treasury obligations | 5.3 | ||||||
Preferred stock | 0.3 | ||||||
Short-term investment | 4.6 | ||||||
Investment of cash collateral from securities loaned | 1.5 | ||||||
Swaptions purchased | 0.0 | † | |||||
Total investments | 102.0 | % | |||||
Liabilities in excess of other assets | (2.0 | ) | |||||
Net assets | 100.0 | % |
† Amount represents less than 0.05%.
1 The Fund's portfolio is actively managed and its composition will vary over time.
96
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds: 31.7% | |||||||||||
Belgium: 0.5% | |||||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc. 4.900%, due 02/01/46 | 165,000 | $ | 183,392 | ||||||||
Brazil: 0.7% | |||||||||||
Petrobras Global Finance BV 7.375%, due 01/17/27 | 250,000 | 286,000 | |||||||||
Canada: 1.1% | |||||||||||
Canadian Natural Resources Ltd., GMTN 4.950%, due 06/01/47 | 50,000 | 56,935 | |||||||||
Cenovus Energy, Inc. 5.400%, due 06/15/47 | 80,000 | 86,511 | |||||||||
NOVA Chemicals Corp. 5.250%, due 08/01/232 | 210,000 | 212,888 | |||||||||
Rogers Communications, Inc. 5.000%, due 03/15/44 | 60,000 | 69,214 | |||||||||
Total Canada corporate bonds | 425,548 | ||||||||||
Cayman Islands: 0.5% | |||||||||||
CIFI Holdings Group Co. Ltd. 5.500%, due 01/23/233 | 200,000 | 194,000 | |||||||||
China: 0.5% | |||||||||||
Country Garden Holdings Co. Ltd. 8.000%, due 01/27/243 | 200,000 | 216,749 | |||||||||
Colombia: 0.2% | |||||||||||
Ecopetrol SA 5.375%, due 06/26/26 | 70,000 | 77,273 | |||||||||
Hong Kong: 0.5% | |||||||||||
Yanlord Land HK Co. Ltd. 6.750%, due 04/23/233 | 200,000 | 204,125 | |||||||||
Israel: 0.1% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 57,000 | 54,535 | |||||||||
Luxembourg: 0.5% | |||||||||||
INEOS Group Holdings SA 5.625%, due 08/01/242,4 | 200,000 | 204,000 | |||||||||
Netherlands: 0.2% | |||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. 3.875%, due 06/18/262 | 65,000 | 66,645 | |||||||||
Peru: 0.3% | |||||||||||
Southern Copper Corp. 6.750%, due 04/16/40 | 90,000 | 113,203 | |||||||||
United Kingdom: 2.5% | |||||||||||
Barclays PLC 4.836%, due 05/09/284 | 200,000 | 204,678 | |||||||||
HSBC Holdings PLC 3.400%, due 03/08/21 | 260,000 | 263,935 | |||||||||
Lloyds Banking Group PLC 4.582%, due 12/10/25 | 200,000 | 208,569 |
Face amount1 | Value | ||||||||||
Reynolds American, Inc. 7.250%, due 06/15/37 | 35,000 | $ | 43,704 | ||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 250,000 | 256,406 | |||||||||
Total United Kingdom corporate bonds | 977,292 | ||||||||||
United States: 24.1% | |||||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 45,000 | 48,634 | |||||||||
AbbVie, Inc. 2.500%, due 05/14/20 | 200,000 | 199,960 | |||||||||
ADT Security Corp./The 3.500%, due 07/15/22 | 140,000 | 139,650 | |||||||||
AEP Texas, Inc., Series E, 6.650%, due 02/15/33 | 50,000 | 66,389 | |||||||||
Alabama Power Co. 6.000%, due 03/01/39 | 100,000 | 131,146 | |||||||||
Apache Corp. 4.375%, due 10/15/284 | 100,000 | 104,451 | |||||||||
Apple, Inc. 4.650%, due 02/23/46 | 50,000 | 59,237 | |||||||||
AT&T, Inc. 4.300%, due 02/15/30 | 266,000 | 284,049 | |||||||||
Bank of America Corp. 6.110%, due 01/29/37 | 125,000 | 159,288 | |||||||||
Bank of America Corp., MTN 4.200%, due 08/26/24 | 150,000 | 159,474 | |||||||||
Berkshire Hathaway Energy Co. 4.450%, due 01/15/49 | 50,000 | 56,365 | |||||||||
Biogen, Inc. 4.050%, due 09/15/25 | 100,000 | 107,206 | |||||||||
5.200%, due 09/15/454 | 50,000 | 56,145 | |||||||||
Boston Properties LP, REIT 2.750%, due 10/01/26 | 210,000 | 206,641 | |||||||||
Bristol-Myers Squibb Co. 3.200%, due 06/15/262 | 150,000 | 155,632 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.125%, due 01/15/25 | 30,000 | 29,303 | |||||||||
Burlington Northern Santa Fe LLC 5.150%, due 09/01/43 | 100,000 | 124,137 | |||||||||
CCO Holdings LLC/CCO Holdings Capital Corp. 5.500%, due 05/01/262 | 150,000 | 156,982 | |||||||||
CF Industries, Inc. 3.450%, due 06/01/234 | 150,000 | 150,375 | |||||||||
Charter Communications Operating LLC/ Charter Communications Operating Capital 3.579%, due 07/23/20 | 150,000 | 151,324 | |||||||||
Citigroup, Inc. 4.125%, due 07/25/28 | 50,000 | 52,824 | |||||||||
5.500%, due 09/13/25 | 300,000 | 339,613 | |||||||||
Comcast Corp. 3.969%, due 11/01/47 | 88,000 | 92,484 | |||||||||
4.600%, due 10/15/38 | 50,000 | 57,200 | |||||||||
4.700%, due 10/15/48 | 50,000 | 58,593 |
97
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
CVS Health Corp. 4.300%, due 03/25/28 | 120,000 | $ | 126,472 | ||||||||
Dell International LLC/EMC Corp. 4.420%, due 06/15/212 | 100,000 | 102,985 | |||||||||
DuPont de Nemours, Inc. 4.725%, due 11/15/28 | 100,000 | 112,958 | |||||||||
Eaton Corp. 2.750%, due 11/02/22 | 190,000 | 192,431 | |||||||||
Energy Transfer Operating LP 5.500%, due 06/01/27 | 50,000 | 55,869 | |||||||||
Enterprise Products Operating LLC 2.850%, due 04/15/21 | 105,000 | 105,775 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 150,000 | 153,953 | |||||||||
Fiserv, Inc. 3.200%, due 07/01/26 | 60,000 | 61,200 | |||||||||
GE Capital International Funding Co. Unlimited Co. 2.342%, due 11/15/20 | 200,000 | 199,012 | |||||||||
General Electric Co., Series D, (fixed, converts to FRN on 01/21/21), 5.000%, due 01/21/214,5 | 99,000 | 94,967 | |||||||||
General Motors Co. 6.600%, due 04/01/36 | 70,000 | 77,490 | |||||||||
Georgia Power Co., Series C, 2.000%, due 09/08/20 | 70,000 | 69,593 | |||||||||
Gilead Sciences, Inc. 3.650%, due 03/01/26 | 75,000 | 79,328 | |||||||||
Goldman Sachs Group, Inc./The 5.150%, due 05/22/45 | 30,000 | 34,284 | |||||||||
5.750%, due 01/24/22 | 305,000 | 329,478 | |||||||||
Home Depot, Inc./The 2.125%, due 09/15/26 | 100,000 | 97,823 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 80,000 | 80,790 | |||||||||
International Lease Finance Corp. 5.875%, due 08/15/22 | 120,000 | 130,675 | |||||||||
JPMorgan Chase & Co., Series I, 3 mo. USD LIBOR + 3.470%, 6.053%, due 07/30/195,6 | 143,000 | 142,687 | |||||||||
Kinder Morgan, Inc. 5.550%, due 06/01/45 | 40,000 | 46,253 | |||||||||
6.500%, due 09/15/20 | 100,000 | 104,791 | |||||||||
Kroger Co./The 6.900%, due 04/15/38 | 25,000 | 31,651 | |||||||||
Liberty Mutual Group, Inc. 4.250%, due 06/15/232 | 45,000 | 47,553 | |||||||||
4.569%, due 02/01/292 | 155,000 | 170,283 | |||||||||
Life Technologies Corp. 6.000%, due 03/01/20 | 135,000 | 137,849 | |||||||||
LYB International Finance BV 4.875%, due 03/15/44 | 50,000 | 53,260 | |||||||||
Marathon Oil Corp. 4.400%, due 07/15/27 | 75,000 | 79,639 |
Face amount1 | Value | ||||||||||
Marathon Petroleum Corp. 4.750%, due 09/15/44 | 70,000 | $ | 72,126 | ||||||||
MetLife, Inc. 6.400%, due 12/15/36 | 35,000 | 40,019 | |||||||||
Microsoft Corp. 2.375%, due 02/12/22 | 250,000 | 252,599 | |||||||||
4.450%, due 11/03/45 | 60,000 | 71,872 | |||||||||
Morgan Stanley 4.875%, due 11/01/22 | 350,000 | 374,666 | |||||||||
Morgan Stanley, GMTN 4.350%, due 09/08/26 | 140,000 | 150,066 | |||||||||
MPLX LP 4.875%, due 06/01/25 | 70,000 | 76,037 | |||||||||
Nabors Industries, Inc. 4.625%, due 09/15/21 | 150,000 | 146,250 | |||||||||
NCR Corp. 5.000%, due 07/15/22 | 40,000 | 40,338 | |||||||||
Netflix, Inc. 5.500%, due 02/15/22 | 140,000 | 147,175 | |||||||||
Oncor Electric Delivery Co. LLC 3.750%, due 04/01/45 | 50,000 | 52,100 | |||||||||
Prudential Financial, Inc., MTN 6.625%, due 06/21/40 | 50,000 | 70,086 | |||||||||
QUALCOMM, Inc. 3.250%, due 05/20/27 | 60,000 | 61,179 | |||||||||
Quicken Loans, Inc. 5.750%, due 05/01/252 | 260,000 | 267,717 | |||||||||
RR Donnelley & Sons Co. 7.875%, due 03/15/21 | 36,000 | 36,720 | |||||||||
Sabine Pass Liquefaction LLC 5.000%, due 03/15/27 | 200,000 | 219,205 | |||||||||
Seagate HDD Cayman 5.750%, due 12/01/34 | 80,000 | 78,602 | |||||||||
Shire Acquisitions Investments Ireland DAC 2.400%, due 09/23/21 | 100,000 | 99,792 | |||||||||
Smithfield Foods, Inc. 3.350%, due 02/01/222 | 80,000 | 79,777 | |||||||||
Sunoco Logistics Partners Operations LP 5.400%, due 10/01/47 | 50,000 | 53,118 | |||||||||
Synchrony Financial 4.500%, due 07/23/25 | 90,000 | 94,433 | |||||||||
Teachers Insurance & Annuity Association of America 4.270%, due 05/15/472 | 60,000 | 64,891 | |||||||||
Tenet Healthcare Corp. 4.625%, due 07/15/24 | 200,000 | 202,500 | |||||||||
Texas Instruments, Inc. 1.850%, due 05/15/22 | 220,000 | 218,553 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 41,705 | |||||||||
UnitedHealth Group, Inc. 4.625%, due 07/15/35 | 100,000 | 114,949 | |||||||||
Verizon Communications, Inc. 5.250%, due 03/16/37 | 140,000 | 167,315 |
98
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Walt Disney Co./The 7.750%, due 12/01/452 | 50,000 | $ | 83,542 | ||||||||
Wells Fargo & Co., MTN (fixed, converts to FRN on 06/17/26), 3.196%, due 06/17/27 | 70,000 | 71,326 | |||||||||
Total United States corporate bonds | 9,514,809 | ||||||||||
Total corporate bonds (cost $12,076,331) | 12,517,571 | ||||||||||
Asset-backed securities: 13.1% | |||||||||||
United States: 13.1% | |||||||||||
American Credit Acceptance Receivables Trust, Series 2018-1, Class B, 3.160%, due 11/10/212 | 97,840 | 97,901 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2018-1, Class D, 3.820%, due 03/18/24 | 100,000 | 102,824 | |||||||||
Capital Auto Receivables Asset Trust, Series 2016-2, Class B, 2.110%, due 03/22/21 | 160,000 | 159,646 | |||||||||
Series 2015-4, Class D, 3.620%, due 05/20/21 | 125,000 | 125,501 | |||||||||
CPS Auto Trust, Series 2018-C, Class D, 4.400%, due 06/17/242 | 150,000 | 155,068 | |||||||||
Dell Equipment Finance Trust, Series 2018-1, Class D, 3.850%, due 06/24/242 | 120,000 | 122,082 | |||||||||
Drive Auto Receivables Trust, Series 2017-2, Class C, 2.750%, due 09/15/23 | 56,184 | 56,218 | |||||||||
Series 2018-1, Class D, 3.810%, due 05/15/24 | 225,000 | 228,949 | |||||||||
Series 2017-1, Class D, 3.840%, due 03/15/23 | 75,000 | 75,902 | |||||||||
Series 2018-4, Class D, 4.090%, due 01/15/26 | 150,000 | 154,098 | |||||||||
Series 2018-2, Class D, 4.140%, due 08/15/24 | 200,000 | 204,809 | |||||||||
Series 2018-3, Class D, 4.300%, due 09/16/24 | 300,000 | 308,995 | |||||||||
Exeter Automobile Receivables Trust, Series 2016-3A, Class B, 2.840%, due 08/16/212 | 140,786 | 140,831 | |||||||||
Series 2018-1A, Class D, 3.530%, due 11/15/232 | 100,000 | 101,769 | |||||||||
Flagship Credit Auto Trust, Series 2016-4, Class B, 2.410%, due 10/15/212 | 323,587 | 323,311 | |||||||||
Honda Auto Receivables Owner Trust, Series 2016-2, Class A4, 1.620%, due 08/15/22 | 440,000 | 439,574 |
Face amount1 | Value | ||||||||||
Hyundai Auto Receivables Trust, Series 2015-C, Class B, 2.150%, due 11/15/21 | 100,000 | $ | 99,904 | ||||||||
OneMain Direct Auto Receivables Trust, Series 2018-1A, Class C, 3.850%, due 10/14/252 | 300,000 | 306,779 | |||||||||
PSNH Funding LLC, Series 2018-1, Class A3, 3.814%, due 02/01/35 | 175,000 | 188,853 | |||||||||
Santander Drive Auto Receivables TrustSantander Drive Auto Receivables TrustSantander Drive Auto Receivables Trust, Series 2017-3, Class D, 3.200%, due 11/15/23 | 225,000 | 227,338 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-2, Class D, 3.490%, due 07/17/23 | 100,000 | 101,088 | |||||||||
Series 2018-4, Class D, 3.980%, due 12/15/25 | 225,000 | 232,412 | |||||||||
Sofi Consumer Loan Program Trust, Series 2018-2, Class A2, 3.350%, due 04/26/272 | 175,000 | 176,739 | |||||||||
Series 2017-6, Class B, 3.520%, due 11/25/262 | 225,000 | 229,438 | |||||||||
Series 2018-1, Class B, 3.650%, due 02/25/272 | 100,000 | 102,349 | |||||||||
Series 2018-2, Class B, 3.790%, due 04/26/272 | 125,000 | 128,005 | |||||||||
Series 2018-3, Class B, 4.020%, due 08/25/272 | 125,000 | 129,679 | |||||||||
Tesla Auto Lease Trust, Series 2018-B, Class A, 3.710%, due 08/20/212 | 171,673 | 174,224 | |||||||||
World Financial Network Credit Card Master Trust, Series 2016-A, Class A, 2.030%, due 04/15/25 | 275,000 | 274,066 | |||||||||
Total asset-backed securities (cost $5,077,379) | 5,168,352 | ||||||||||
Commercial mortgage-backed securities: 15.8% | |||||||||||
United States: 15.8% | |||||||||||
Ashford Hospitality Trust, Series 2018-ASHF, Class D, 1 mo. USD LIBOR + 2.100%, 4.494%, due 04/15/352,6 | 100,000 | 100,406 | |||||||||
BANK, Series 2017-BNK7, Class C, 4.191%, due 09/15/607 | 100,000 | 103,842 | |||||||||
Series 2018-BN14, Class E, 3.000%, due 09/15/602,7 | 250,000 | 205,816 | |||||||||
BBCMS Trust, Series 2015-SRCH, Class B, 4.498%, due 08/10/352 | 135,000 | 147,805 |
99
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Commercial mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
BENCHMARK Mortgage Trust, Series 2018-B4, Class D, 2.965%, due 07/15/512,7 | 100,000 | $ | 88,541 | ||||||||
Series 2019-B10, Class C, 3.750%, due 03/15/62 | 200,000 | 203,443 | |||||||||
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class E, 4.499%, due 10/15/342,7 | 100,000 | 103,190 | |||||||||
CHT Mortgage Trust, Series 2017-CSMO, Class E, 1 mo. USD LIBOR + 3.000%, 5.394%, due 11/15/362,6 | 475,000 | 476,184 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2015-GC33, Class A4, 3.778%, due 09/10/58 | 143,000 | 152,591 | |||||||||
Series 2017-P8, Class D, 3.000%, due 09/15/502 | 300,000 | 249,901 | |||||||||
COMM Mortgage Trust, Series 2015-CR24, Class D, 3.463%, due 08/10/487 | 150,000 | 137,759 | |||||||||
Series 2017-COR2, Class C, 4.714%, due 09/10/507 | 200,000 | 211,402 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2017-C8, Class D, 4.470%, due 06/15/502 | 141,000 | 134,096 | |||||||||
FREMF Mortgage Trust, Series 2017-K64, Class B, 4.117%, due 05/25/502,7 | 50,000 | 52,287 | |||||||||
Series 2017-K724, Class B, 3.599%, due 11/25/232,7 | 265,000 | 269,575 | |||||||||
GS Mortgage Securities Corp. II, Series 2017-SLP, Class E, 4.744%, due 10/10/322,7 | 225,000 | 224,145 | |||||||||
Hilton USA Trust, Series 2016-SFP, Class E, 5.519%, due 11/05/352 | 125,000 | 126,640 | |||||||||
Invitation Homes Trust, Series 2018-SFR1, Class C, 1 mo. USD LIBOR + 1.250%, 3.644%, due 03/17/37 2,6 | 100,000 | 99,471 | |||||||||
Series 2018-SFR2, Class D, 1 mo. USD LIBOR + 1.450%, 3.844%, due 06/17/37 2,6 | 150,000 | 148,772 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-C6, Class D, 5.320%, due 05/15/457 | 150,000 | 152,065 | |||||||||
Series 2018-ASH8, Class D, 1 mo. USD LIBOR + 2.050%, 4.444%, due 02/15/35 2,6 | 100,000 | 100,280 | |||||||||
JPMBB Commercial Mortgage Securities Trust, Series 2014-C26, Class AS, 3.800%, due 01/15/48 | 200,000 | 210,327 |
Face amount1 | Value | ||||||||||
Series 2015-C29, Class D, 3.793%, due 05/15/487 | 100,000 | $ | 83,962 | ||||||||
Series 2015-C30, Class A5, 3.822%, due 07/15/48 | 170,000 | 181,580 | |||||||||
Series 2016-C2, Class D, 3.553%, due 06/15/492,7 | 175,000 | 156,143 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C24, Class A4, 3.732%, due 05/15/48 | 100,000 | 106,587 | |||||||||
Series 2015-C24, Class AS, 4.036%, due 05/15/487 | 75,000 | 79,732 | |||||||||
Series 2016-C32, Class AS, 3.994%, due 12/15/497 | 273,000 | 290,522 | |||||||||
Series 2017-C34, Class C, 4.325%, due 11/15/527 | 100,000 | 103,909 | |||||||||
Morgan Stanley Capital I, Inc., Series 2017-HR2, Class C, 4.367%, due 12/15/507 | 175,000 | 185,145 | |||||||||
Series 2017-HR2, Class D, 2.730%, due 12/15/50 | 100,000 | 88,840 | |||||||||
RETL, Series 2019-RVP, Class C, 1 mo. USD LIBOR + 2.100%, 4.494%, due 03/15/362,6 | 200,000 | 200,749 | |||||||||
Rosslyn Portfolio Trust, Series 2017-ROSS, Class E, 1 mo. USD LIBOR + 3.000%, 5.394%, due 06/15/332,6 | 275,000 | 272,654 | |||||||||
Starwood Retail Property Trust, Series 2014-STAR, Class C, 1 mo. USD LIBOR + 2.500%, 4.894%, due 11/15/272,6 | 125,000 | 123,808 | |||||||||
VNDO Mortgage Trust, Series 2013-PENN, Class D, 4.079%, due 12/13/292,7 | 500,000 | 503,867 | |||||||||
Wells Fargo Commercial Mortgage Trust, Series 2018-C44, Class C, 4.997%, due 05/15/517 | 150,000 | 160,628 | |||||||||
Total commercial mortgage-backed securities (cost $6,058,467) | 6,236,664 | ||||||||||
Mortgage-backed securities: 26.0% | |||||||||||
United States: 26.0% | |||||||||||
FHLMC 3.500%, due 03/01/49 | 218,922 | 224,220 | |||||||||
4.000%, due 01/01/46 | 113,403 | 119,498 | |||||||||
4.000%, due 08/01/47 | 183,789 | 191,730 | |||||||||
4.000%, due 10/01/47 | 95,485 | 99,476 | |||||||||
4.000%, due 03/01/49 | 95,685 | 98,907 | |||||||||
4.000%, due 04/01/49 | 657,667 | 681,529 | |||||||||
4.500%, due 04/01/46 | 106,144 | 113,985 | |||||||||
4.500%, due 03/01/49 | 259,785 | 271,525 | |||||||||
4.500%, due 04/01/49 | 48,140 | 50,382 |
100
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Face amount1 | Value | ||||||||||
Mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
FNMA 2.500%, due 07/01/34 | 200,000 | $ | 201,409 | ||||||||
3.000%, due 07/01/34 | 300,000 | 305,985 | |||||||||
3.000%, due 02/01/43 | 69,275 | 70,650 | |||||||||
3.000%, due 05/01/43 | 81,041 | 82,599 | |||||||||
3.000%, due 07/01/43 | 108,223 | 110,092 | |||||||||
3.000%, due 09/01/43 | 146,901 | 150,088 | |||||||||
3.000%, due 05/01/46 | 160,689 | 162,764 | |||||||||
3.000%, due 08/01/46 | 574,706 | 582,066 | |||||||||
3.500%, due 04/01/32 | 92,610 | 96,872 | |||||||||
3.500%, due 11/01/33 | 44,765 | 46,256 | |||||||||
3.500%, due 06/01/45 | 121,366 | 126,341 | |||||||||
3.500%, due 11/01/47 | 375,377 | 386,558 | |||||||||
3.500%, due 02/01/48 | 991,042 | 1,018,182 | |||||||||
3.500%, due 03/01/48 | 548,741 | 562,145 | |||||||||
3.500%, due 02/01/49 | 48,153 | 49,276 | |||||||||
3.500%, due 06/01/49 | 124,482 | 127,398 | |||||||||
4.000%, due 09/01/40 | 138,393 | 145,923 | |||||||||
4.000%, due 03/01/41 | 41,974 | 44,256 | |||||||||
4.000%, due 12/01/43 | 184,010 | 195,911 | |||||||||
4.000%, due 06/01/47 | 367,684 | 383,559 | |||||||||
4.000%, due 05/01/48 | 22,213 | 23,077 | |||||||||
4.000%, due 10/01/48 | 114,145 | 117,921 | |||||||||
4.500%, due 02/01/44 | 25,388 | 27,534 | |||||||||
4.500%, due 04/01/44 | 121,851 | 132,280 | |||||||||
4.500%, due 12/01/44 | 26,036 | 27,811 | |||||||||
4.500%, due 02/01/45 | 44,489 | 47,593 | |||||||||
4.500%, due 06/01/46 | 168,919 | 183,883 | |||||||||
4.500%, due 08/01/46 | 23,718 | 25,592 | |||||||||
4.500%, due 05/01/47 | 81,642 | 86,724 | |||||||||
5.500%, due 03/01/33 | 32,921 | 36,330 | |||||||||
5.500%, due 09/01/34 | 137,121 | 151,278 | |||||||||
5.500%, due 11/01/34 | 30,298 | 33,614 | |||||||||
6.000%, due 11/01/28 | 36,917 | 41,149 | |||||||||
FNMA TBA 2.500% | 300,000 | 301,945 | |||||||||
3.000% | 100,000 | 100,807 | |||||||||
4.000% | 425,000 | 439,153 | |||||||||
GNMA 6.500%, due 05/15/29 | 9,294 | 10,576 | |||||||||
GNMA II 3.000%, due 09/20/44 | 81,403 | 83,456 | |||||||||
3.000%, due 08/20/46 | 660,629 | 675,940 | |||||||||
3.500%, due 10/20/48 | 719,898 | 743,716 | |||||||||
3.500%, due 03/20/49 | 124,056 | 128,161 | |||||||||
4.000%, due 06/20/44 | 14,063 | 14,827 | |||||||||
4.000%, due 09/20/44 | 53,274 | 56,173 | |||||||||
4.000%, due 05/20/45 | 13,638 | 14,379 | |||||||||
5.000%, due 08/20/48 | 38,910 | 40,714 | |||||||||
Total Mortgage-backed securities (cost $10,060,625) | 10,244,215 |
Face amount1 | Value | ||||||||||
Municipal bonds and notes: 1.0% | |||||||||||
California: 1.0% | |||||||||||
State of California, GO Bonds 7.300%, due 10/01/39 (cost $366,310) | 250,000 | $ | 375,788 | ||||||||
Non-US government obligations: 2.7% | |||||||||||
Colombia: 1.0% | |||||||||||
Republic of Colombia 8.125%, due 05/21/24 | 305,000 | 376,008 | |||||||||
Indonesia: 0.3% | |||||||||||
Republic of Indonesia 6.625%, due 02/17/372 | 100,000 | 130,187 | |||||||||
New Zealand: 0.8% | |||||||||||
New Zealand Government Bond, Series 0935, 2.500%, due 09/20/353 | NZD | 343,330 | 307,836 | ||||||||
Turkey: 0.2% | |||||||||||
Republic of Turkey 6.875%, due 03/17/36 | 100,000 | 96,000 | |||||||||
Uruguay: 0.4% | |||||||||||
Oriental Republic of Uruguay 7.625%, due 03/21/36 | 100,000 | 142,500 | |||||||||
Total non-US government obligations (cost $983,119) | 1,052,531 | ||||||||||
U.S. treasury obligations: 5.3% | |||||||||||
US Treasury Bond 3.375%, due 11/15/48 | 280,000 | 329,131 | |||||||||
US Treasury Inflation Index Notes (TIPS) 0.500%, due 04/15/24 | 415,355 | 420,540 | |||||||||
0.875%, due 01/15/29 | 409,811 | 431,411 | |||||||||
US Treasury Notes 2.250%, due 04/30/24 | 570,000 | 582,669 | |||||||||
2.375%, due 05/15/29 | 200,000 | 206,562 | |||||||||
2.500%, due 02/28/26 | 120,000 | 124,739 | |||||||||
Total U.S. treasury obligations (cost $2,068,224) | 2,095,052 | ||||||||||
Number of shares | |||||||||||
Preferred stock: 0.3% | |||||||||||
United States: 0.3% | |||||||||||
JPMorgan Chase & Co., Series P, 5.450%, due 09/01/194,5 (cost $102,000) | 4,000 | 103,560 | |||||||||
Short-term investment: 4.6% | |||||||||||
Investment company: 4.6% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $1,815,339) | 1,815,339 | 1,815,339 |
101
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Number of shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 1.5% | |||||||||||
Money market fund: 1.5% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $596,493) | 596,493 | $ | 596,493 |
Number of contracts | Notional amount | Value | |||||||||||||
Swaptions purchased: 0.0%† | |||||||||||||||
Put swaptions: 0.0%† | |||||||||||||||
CDX North American Investment Grade 32 Index, strike @ 0.625%, expires 07/17/19 (Counterparty: JPMCB) (cost $5,480) | 4,000,000 | USD | 4,000,000 | $ | 980 | ||||||||||
Total investments: 102.0% (cost $39,209,767) | 40,206,545 | ||||||||||||||
Liabilities in excess of other assets: (2.0)% | (769,213 | ) | |||||||||||||
Net assets: 100.0% | $ | 39,437,332 |
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 105.
Swaptions written
Notional amount (000) | Number of contracts | Put swaptions | Counterparty | Pay/receive floating rate | Expiration date | Premiums received | Current value | Unrealized appreciation (depreciation) | |||||||||||||||||||||||||||
USD | 4,000 | 4,000,000 | CDX North American Investment Grade 32 Index, strike @ 0.850%, terminating 06/20/24 | JPMCB | Pay | 08/21/19 | $ | 2,160 | $ | (53,313 | ) | $ | (51,153 | ) |
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
13 | USD | Ultra Long US Treasury Bond Futures | September 2019 | $ | 2,186,356 | $ | 2,308,313 | $ | 121,957 | ||||||||||||||||||
7 | USD | US Treasury Note 10 Year Futures | September 2019 | 891,463 | 895,781 | 4,318 | |||||||||||||||||||||
9 | USD | US Treasury Note 2 Year Futures | September 2019 | 1,933,888 | 1,936,617 | 2,729 | |||||||||||||||||||||
35 | USD | US Treasury Note 5 Year Futures | September 2019 | 4,112,942 | 4,135,469 | 22,527 | |||||||||||||||||||||
9 | USD | US Ultra Treasury Note 10 Year Futures | September 2019 | 1,209,263 | 1,243,125 | 33,862 | |||||||||||||||||||||
Total | $ | 10,333,912 | $ | 10,519,305 | $ | 185,393 | |||||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
18 | AUD | Australian Bond 3 Year Futures | September 2019 | $ | (1,447,140 | ) | $ | (1,453,214 | ) | $ | (6,074 | ) | |||||||||||||||
3 | EUR | German Euro Bund Futures | September 2019 | (583,139 | ) | (589,268 | ) | (6,129 | ) | ||||||||||||||||||
5 | GBP | United Kingdom Long Gilt Bond Futures | September 2019 | (820,959 | ) | (827,372 | ) | (6,413 | ) | ||||||||||||||||||
Total | $ | (2,851,238 | ) | $ | (2,869,854 | ) | $ | (18,616 | ) | ||||||||||||||||||
Net unrealized appreciation | $ | 166,777 |
102
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
OTC credit default swap agreements on corporate issues—buy protection8
Counterparty | Referenced obligations | Notional amount (000) | Maturity dates | Payments made by the Portfolio9 | Upfront payments made | Value | Unrealized depreciation | ||||||||||||||||||||||||
BB | United Mexican States bond, 4.150%, due 03/28/27 | USD | 400 | 12/20/23 | 1.000 | % | $ | (8,138 | ) | $ | (69 | ) | $ | (8,207 | ) | ||||||||||||||||
BB | United Mexican States bond, 4.150%, due 03/28/27 | USD | 200 | 12/20/23 | 1.000 | (4,975 | ) | (34 | ) | (5,009 | ) | ||||||||||||||||||||
GS | United Mexican States bond, 4.150%, due 03/28/27 | USD | 200 | 12/20/23 | 1.000 | (5,017 | ) | (34 | ) | (5,051 | ) | ||||||||||||||||||||
Total | $ | (18,130 | ) | $ | (137 | ) | $ | (18,267 | ) |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized depreciation | |||||||||||||||
CITI | NZD | 620,000 | USD | 404,434 | 09/17/19 | $ | (12,683 | ) | |||||||||||
MSCI | EUR | 55,000 | USD | 62,139 | 09/17/19 | (779 | ) | ||||||||||||
MSCI | GBP | 20,000 | USD | 25,269 | 09/17/19 | (217 | ) | ||||||||||||
Net unrealized depreciation | $ | (13,679 | ) |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2019 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 | $ | — | $ | 12,517,571 | $ | — | $ | 12,517,571 | |||||||||||
Asset-backed securities | — | 5,168,352 | — | 5,168,352 | |||||||||||||||
Commercial mortgage-backed securities | — | 6,236,664 | — | 6,236,664 | |||||||||||||||
Mortgage-backed securities | — | 10,244,215 | — | 10,244,215 | |||||||||||||||
Municipal bonds and notes | — | 375,788 | — | 375,788 | |||||||||||||||
Non-US government obligations | — | 1,052,531 | — | 1,052,531 | |||||||||||||||
U.S. treasury obligations | — | 2,095,052 | — | 2,095,052 | |||||||||||||||
Preferred stock | 103,560 | — | — | 103,560 | |||||||||||||||
Short-term investment | — | 1,815,339 | — | 1,815,339 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 596,493 | — | 596,493 | |||||||||||||||
Swaptions purchased | — | 980 | — | 980 | |||||||||||||||
Futures contracts | 185,393 | — | — | 185,393 | |||||||||||||||
Total | $ | 288,953 | $ | 40,102,985 | $ | — | $ | 40,391,938 |
103
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2019
Fair valuation summary—(Concluded)
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Liabilities | |||||||||||||||||||
Swaptions written | $ | — | $ | (53,313 | ) | $ | — | $ | (53,313 | ) | |||||||||
Futures contracts | (18,616 | ) | — | — | (18,616 | ) | |||||||||||||
Swap agreements | — | (137 | ) | — | (137 | ) | |||||||||||||
Forward foreign currency contracts | — | (13,679 | ) | — | (13,679 | ) | |||||||||||||
Total | $ | (18,616 | ) | $ | (67,129 | ) | $ | — | $ | (85,745 | ) |
At June 30, 2019, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
† Amount represents less than 0.05%.
1 In US dollars unless otherwise indicated.
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 $7,715,587, represented 19.6% 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 Security, or portion thereof, was on loan at the period end.
5 Perpetual investment. Date shown reflects the next call date.
6 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
7 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.
8 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.
9 Payments made or received are based on the notional amount.
See accompanying notes to financial statements.
104
The UBS Funds
June 30, 2019
Portfolio acronyms
ADR American Depositary Receipt
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
NVDR Non-Voting Depository Receipt
OAT Obligation Assimilables du Trésor (French Government Bonds)
PJSC Private Joint Stock Company
REIT Real Estate Investment Trust
TIPS Treasury inflation protected securities
Counterparty abbreviations
BB Barclays Bank PLC
BOA Bank of America NA
CITI Citibank NA
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
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CHF Swiss Franc
CNY Chinese Yuan
COP Colombian Peso
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
INR Indian Rupee
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
THB Thai Baht
TWD Taiwan Dollar
USD United States Dollar
See accompanying notes to financial statements.
105
The UBS Funds
June 30, 2019 (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, January 1, 2019 to June 30, 2019 (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.
106
The UBS Funds
June 30, 2019 (unaudited)
Beginning account value January 1, 2019 | Ending account value June 30, 2019 | Expenses paid during period* 01/01/19 to 06/30/19 | Expense ratio during the period | ||||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,046.10 | $ | 6.85 | 1.35 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.10 | 6.76 | 1.35 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,048.20 | 5.59 | 1.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.34 | 5.51 | 1.10 | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,118.40 | 6.30 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,120.10 | 4.99 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||
Class P1 | Actual | 1,000.00 | 1,040.40 | 4.82 | 1.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.82 | 4.76 | 1.15 | |||||||||||||||||||
Class P2 | Actual | 1,000.00 | 1,148.00 | 2.66 | 0.50 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.32 | 2.51 | 0.50 | |||||||||||||||||||
UBS Engage For Impact Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,162.20 | 4.56 | 0.85 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.58 | 4.28 | 0.85 | |||||||||||||||||||
UBS International Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,144.00 | 6.64 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.60 | 6.26 | 1.25 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,144.80 | 5.32 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.84 | 5.01 | 1.00 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,281.80 | 7.02 | 1.24 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.65 | 6.21 | 1.24 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,283.50 | 5.61 | 0.99 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.89 | 4.96 | 0.99 |
* Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).
1 The class commenced operations on February 1, 2019. Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 150 divided by 365 (to reflect the actual days in the period for the actual example) and 181 divided by 365 (to reflect the one-half year period for the hypothetical example).
107
The UBS Funds
June 30, 2019 (unaudited)
Beginning account value January 1, 2019 | Ending account value June 30, 2019 | Expenses paid during period* 01/01/19 to 06/30/19 | Expense ratio during the period | ||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,232.60 | $ | 5.26 | 0.95 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,234.20 | 3.88 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.32 | 3.51 | 0.70 | |||||||||||||||||||
UBS Municipal Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,054.00 | 3.31 | 0.65 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.57 | 3.26 | 0.65 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,056.40 | 2.04 | 0.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.81 | 2.01 | 0.40 | |||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,055.00 | 1.27 | 0.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.55 | 1.25 | 0.25 | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,071.80 | 3.85 | 0.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.08 | 3.76 | 0.75 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,073.10 | 2.57 | 0.50 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.32 | 2.51 | 0.50 |
* Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).
108
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109
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2019
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Assets | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 54,110,837 | $ | 241,341,177 | $ | 215,249,362 | |||||||||
Affiliated issuers | — | 22,358,890 | — | ||||||||||||
Foreign currency | 2,437,940 | 1,982,977 | 905,521 | ||||||||||||
$ | 56,548,777 | $ | 265,683,044 | $ | 216,154,883 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 46,738,068 | $ | 254,487,525 | $ | 220,918,589 | |||||||||
Affiliated issuers | — | 20,816,127 | — | ||||||||||||
Foreign currency | 2,439,710 | 1,987,303 | 906,214 | ||||||||||||
Cash | 3,900 | — | — | ||||||||||||
Cash collateral on futures | 1,153,998 | 4,194,692 | — | ||||||||||||
Cash collateral on swap agreements | 152,186 | 2,459,851 | — | ||||||||||||
Due from broker | 1,215,868 | — | — | ||||||||||||
Receivable for investments sold | 248,932 | 137,236 | 97,899 | ||||||||||||
Receivable for fund shares sold | 6,919 | 451 | 4,189,634 | ||||||||||||
Receivable for dividends and interest | 247,494 | 343,730 | 1,282,579 | ||||||||||||
Receivable for foreign tax reclaims | 328 | 137,866 | 375 | ||||||||||||
Receivable from affiliate | 10,702 | — | — | ||||||||||||
Receivable for variation margin on futures contracts | — | 483,738 | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | 3,238 | 1,034,993 | — | ||||||||||||
OTC swap agreements, at value2 | 625 | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 475,126 | 328,988 | — | ||||||||||||
Deferred offering cost | — | — | — | ||||||||||||
Other assets | 21,126 | 33,654 | 30,339 | ||||||||||||
Total assets | 52,718,220 | 286,446,154 | 227,425,629 | ||||||||||||
Liabilities | |||||||||||||||
Due to broker | — | 433,238 | — | ||||||||||||
Payable for cash collateral from securities loaned | 2,479,035 | 16,152,725 | — | ||||||||||||
Payable for investments purchased | 3,900 | 196,324 | 836,652 | ||||||||||||
Payable for fund shares redeemed | 173,357 | 1,330,953 | 607,748 | ||||||||||||
Payable to affiliate | — | 24,257 | 152,634 | ||||||||||||
Payable to Trustees | 9,043 | 20,046 | 14,622 | ||||||||||||
Payable to custodian | 41,781 | 201,398 | 73,531 | ||||||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | — | 7,295 | 196,906 | ||||||||||||
Payable for variation margin on futures contracts | 34,664 | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 320,640 | 543,308 | — | ||||||||||||
Accrued expenses and other liabilities | 273,695 | 326,858 | 137,638 | ||||||||||||
Total liabilities | 3,336,115 | 19,236,402 | 2,019,731 | ||||||||||||
Net assets | $ | 49,382,105 | $ | 267,209,752 | $ | 225,405,898 |
1 Includes $2,427,584; $18,262,927; $0; $880,093 and $3,495,756, 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 $1,047.
110
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Assets | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 16,005,598 | $ | 150,964,447 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 85,709 | 2,605,178 | |||||||||
$ | 16,091,307 | $ | 153,569,625 | ||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 16,586,968 | $ | 155,880,094 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 86,181 | 2,604,864 | |||||||||
Cash | — | — | |||||||||
Cash collateral on futures | — | — | |||||||||
Cash collateral on swap agreements | — | — | |||||||||
Due from broker | — | — | |||||||||
Receivable for investments sold | — | — | |||||||||
Receivable for fund shares sold | 51,310 | 436,917 | |||||||||
Receivable for dividends and interest | 23,615 | 289,018 | |||||||||
Receivable for foreign tax reclaims | 5,100 | 197,044 | |||||||||
Receivable from affiliate | 38,583 | — | |||||||||
Receivable for variation margin on futures contracts | — | — | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | |||||||||
OTC swap agreements, at value2 | — | — | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | |||||||||
Deferred offering cost | 40,342 | — | |||||||||
Other assets | 7,220 | 27,986 | |||||||||
Total assets | 16,839,319 | 159,435,923 | |||||||||
Liabilities | |||||||||||
Due to broker | — | — | |||||||||
Payable for cash collateral from securities loaned | 389,351 | 970,516 | |||||||||
Payable for investments purchased | 422,753 | 1,550,644 | |||||||||
Payable for fund shares redeemed | 4,145 | 152,197 | |||||||||
Payable to affiliate | — | 96,848 | |||||||||
Payable to Trustees | 6,771 | 13,564 | |||||||||
Payable to custodian | 13,523 | 47,544 | |||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | 2,360 | 61,386 | |||||||||
Payable for variation margin on futures contracts | — | — | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | |||||||||
Accrued expenses and other liabilities | 82,687 | 158,865 | |||||||||
Total liabilities | 921,590 | 3,051,564 | |||||||||
Net assets | $ | 15,917,729 | $ | 156,384,359 |
See accompanying notes to financial statements.
111
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2019 (continued)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 91,666,203 | $ | 238,337,756 | $ | 222,861,377 | |||||||||
Distributable earnings (losses) | (42,284,098 | ) | 28,871,996 | 2,544,521 | |||||||||||
Net assets | $ | 49,382,105 | $ | 267,209,752 | $ | 225,405,898 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 30,024,976 | $ | 209,407,305 | $ | — | |||||||||
Shares outstanding | 4,719,115 | 16,667,373 | — | ||||||||||||
Net asset value and redemption proceeds per share | $ | 6.36 | $ | 12.56 | $ | — | |||||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | 6.73 | $ | 13.29 | $ | — | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 19,357,129 | $ | 57,802,447 | $ | 38,464,569 | |||||||||
Shares outstanding | 2,970,906 | 4,492,142 | 4,145,207 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 6.52 | $ | 12.87 | $ | 9.28 | |||||||||
Class P2: | |||||||||||||||
Net assets | $ | — | $ | — | $ | 186,941,329 | |||||||||
Shares outstanding | — | — | 20,077,242 | ||||||||||||
Net asset value, offering price and redemption value per share3 | $ | — | $ | — | $ | 9.31 |
3 Assumes shares were held a sufficient period or are otherwise not subject to a redemption fee.
112
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 14,933,815 | $ | 153,699,126 | |||||||
Distributable earnings (losses) | 983,914 | 2,685,233 | |||||||||
Net assets | $ | 15,917,729 | $ | 156,384,359 | |||||||
Class A: | |||||||||||
Net assets | $ | — | $ | 9,768,507 | |||||||
Shares outstanding | — | 975,698 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 10.01 | |||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 10.59 | |||||||
Class P: | |||||||||||
Net assets | $ | 15,917,729 | $ | 146,615,852 | |||||||
Shares outstanding | 1,471,844 | 14,597,095 | |||||||||
Net asset value, offering price and redemption value per share | $ | 10.81 | $ | 10.04 | |||||||
Class P2: | |||||||||||
Net assets | $ | — | $ | — | |||||||
Shares outstanding | — | — | |||||||||
Net asset value, offering price and redemption value per share3 | $ | — | $ | — |
See accompanying notes to financial statements.
113
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2019 (continued)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Assets | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 106,320,929 | $ | 31,149,753 | $ | 99,843,767 | |||||||||
Foreign currency | — | — | — | ||||||||||||
$ | 106,320,929 | $ | 31,149,753 | $ | 99,843,767 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 134,278,103 | $ | 32,188,731 | $ | 103,757,409 | |||||||||
Foreign currency | — | — | — | ||||||||||||
Cash | — | — | 300,347 | ||||||||||||
Cash collateral on futures | — | — | — | ||||||||||||
Due from broker | — | — | — | ||||||||||||
Receivable for investments sold | 1,011,702 | 340,485 | — | ||||||||||||
Receivable for fund shares sold | 75,800 | 137 | 14,704 | ||||||||||||
Receivable for dividends and interest | 85,322 | 35,654 | 1,013,694 | ||||||||||||
Receivable from affiliate | — | 10,227 | — | ||||||||||||
Receivable for variation margin on futures contracts | — | — | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | — | ||||||||||||
Deferred offering cost | — | — | — | ||||||||||||
Other assets | 23,038 | 20,567 | 22,574 | ||||||||||||
Total assets | 135,473,965 | 32,595,801 | 105,108,728 | ||||||||||||
Liabilities | |||||||||||||||
Options and swaptions written, at value (premiums received $0; $0; $0; $0 and $2,160, respectively) | — | — | — | ||||||||||||
Payable for cash collateral from securities loaned | 11,278,586 | 1,211,056 | — | ||||||||||||
Payable for investments purchased | 1,319,411 | 766,487 | 2,696,851 | ||||||||||||
Payable for fund shares redeemed | 30,363 | 258,595 | 201,296 | ||||||||||||
Payable to affiliate | 41,684 | — | 10,441 | ||||||||||||
Payable to Trustees | 11,970 | 5,579 | 11,162 | ||||||||||||
Payable to custodian | 18,594 | 8,021 | 7,465 | ||||||||||||
OTC swap agreements, at value2 | — | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Accrued expenses and other liabilities | 174,313 | 126,442 | 164,001 | ||||||||||||
Total liabilities | 12,874,921 | 2,376,180 | 3,091,216 | ||||||||||||
Net assets | $ | 122,599,044 | $ | 30,219,621 | $ | 102,017,512 |
1 Includes $28,465,027; $2,273,083; $0; $5,035 and $848,490, 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 $18,130.
114
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Assets | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 23,993,292 | $ | 39,209,767 | |||||||
Foreign currency | — | 202,095 | |||||||||
$ | 23,993,292 | $ | 39,411,862 | ||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 25,012,338 | $ | 40,206,545 | |||||||
Foreign currency | — | 207,306 | |||||||||
Cash | — | 195,660 | |||||||||
Cash collateral on futures | — | 119,179 | |||||||||
Due from broker | — | 205,404 | |||||||||
Receivable for investments sold | 636,628 | 5,609,590 | |||||||||
Receivable for fund shares sold | 29,327 | 20,000 | |||||||||
Receivable for dividends and interest | 153,854 | 228,700 | |||||||||
Receivable from affiliate | 57,240 | — | |||||||||
Receivable for variation margin on futures contracts | — | 166,884 | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | 3,392 | |||||||||
Deferred offering cost | 46,980 | — | |||||||||
Other assets | 9,103 | 24,787 | |||||||||
Total assets | 25,945,470 | 46,987,447 | |||||||||
Liabilities | |||||||||||
Options and swaptions written, at value (premiums received $0; $0; $0; $0 and $2,160, respectively) | — | 53,313 | |||||||||
Payable for cash collateral from securities loaned | 5,138 | 596,493 | |||||||||
Payable for investments purchased | 608,343 | 6,634,003 | |||||||||
Payable for fund shares redeemed | 5,712 | 49,415 | |||||||||
Payable to affiliate | — | 14,810 | |||||||||
Payable to Trustees | 7,237 | 8,101 | |||||||||
Payable to custodian | 2,616 | 20,839 | |||||||||
OTC swap agreements, at value2 | — | 137 | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | 13,679 | |||||||||
Accrued expenses and other liabilities | 81,146 | 159,325 | |||||||||
Total liabilities | 710,192 | 7,550,115 | |||||||||
Net assets | $ | 25,235,278 | $ | 39,437,332 |
See accompanying notes to financial statements.
115
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2019 (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 90,072,977 | $ | 27,793,424 | $ | 99,105,199 | |||||||||
Distributable earnings (losses) | 32,526,067 | 2,426,197 | 2,912,313 | ||||||||||||
Net assets | $ | 122,599,044 | $ | 30,219,621 | $ | 102,017,512 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 26,114,365 | $ | 12,009,940 | $ | 12,795,986 | |||||||||
Shares outstanding | 1,339,988 | 328,904 | 1,206,761 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 19.49 | $ | 36.51 | $ | 10.60 | |||||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | 20.62 | $ | 38.63 | $ | 10.84 | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 96,484,679 | $ | 18,209,681 | $ | 89,221,526 | |||||||||
Shares outstanding | 4,418,745 | 496,484 | 8,420,411 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 21.84 | $ | 36.68 | $ | 10.60 |
116
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 24,144,329 | $ | 42,116,497 | |||||||
Distributable earnings (losses) | 1,090,949 | (2,679,165 | ) | ||||||||
Net assets | $ | 25,235,278 | $ | 39,437,332 | |||||||
Class A: | |||||||||||
Net assets | $ | — | $ | 488,055 | |||||||
Shares outstanding | — | 32,348 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 15.09 | |||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 15.68 | |||||||
Class P: | |||||||||||
Net assets | $ | 25,235,278 | $ | 38,949,277 | |||||||
Shares outstanding | 2,386,288 | 2,580,095 | |||||||||
Net asset value, offering price and redemption value per share | $ | 10.58 | $ | 15.10 |
See accompanying notes to financial statements.
117
The UBS Funds
Financial Statements
Statement of operations—For the year ended June 30, 2019
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Investment income | |||||||||||||||
Unaffiliated dividends | $ | 109,164 | $ | 4,100,013 | $ | 3,651,054 | |||||||||
Affiliated dividends | — | 113,443 | — | ||||||||||||
Interest | 1,514,428 | 2,141,151 | 65,772 | ||||||||||||
Non-cash dividend income | — | — | — | ||||||||||||
Securities lending | 5,856 | 16,929 | 2,671 | ||||||||||||
Foreign tax withheld | (424 | ) | (171,735 | ) | (449,207 | ) | |||||||||
Total income | 1,629,024 | 6,199,801 | 3,270,290 | ||||||||||||
Expenses | |||||||||||||||
Investment management and administration fees | 575,958 | 2,452,380 | 1,178,501 | ||||||||||||
Service and distribution fees—Class A | 81,149 | 491,014 | — | ||||||||||||
Service and distribution fees—Class C | 11,114 | 78,719 | — | ||||||||||||
Transfer agency and related services fees—Class A | 26,475 | 128,563 | — | ||||||||||||
Transfer agency and related services fees—Class C | 4,161 | 21,929 | — | ||||||||||||
Transfer agency and related services fees—Class P | 9,744 | 27,441 | 6 | ||||||||||||
Transfer agency and related services fees—Class P2 | — | — | 25,280 | ||||||||||||
Custody and fund accounting fees | 83,104 | 115,250 | 85,942 | ||||||||||||
Trustees fees | 41,507 | 92,114 | 57,060 | ||||||||||||
Professional services fees | 189,907 | 176,672 | 147,360 | ||||||||||||
Printing and shareholder report fees | 30,864 | 58,738 | 49,608 | ||||||||||||
Federal and state registration fees | 44,052 | 49,695 | 33,772 | ||||||||||||
Interest expense | 192 | 58 | — | ||||||||||||
Amortization of offering costs | — | — | 85,797 | ||||||||||||
Other | 74,337 | 102,553 | 40,097 | ||||||||||||
Total expenses | 1,172,564 | 3,795,126 | 1,703,423 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (376,310 | ) | (507,246 | ) | (1,190,099 | ) | |||||||||
Net expenses | 796,254 | 3,287,880 | 513,324 | ||||||||||||
Net investment income | 832,770 | 2,911,921 | 2,756,966 | ||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | (72,272 | ) | 4,637,196 | (5,088,172 | ) | ||||||||||
Investments in affiliated issuers | — | 166,440 | — | ||||||||||||
Futures contracts | (3,489,443 | ) | (1,415,378 | ) | — | ||||||||||
Swap agreements | (137,551 | ) | 522,749 | — | |||||||||||
Forward foreign currency contracts | 2,796,584 | 2,226,773 | — | ||||||||||||
Foreign currency transactions | (4,136 | ) | (94,671 | ) | (328,368 | ) | |||||||||
Net realized gain (loss) | (906,818 | ) | 6,043,109 | (5,416,540 | ) | ||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | 1,223,127 | 908,042 | 6,146,460 | ||||||||||||
Investments in affiliated issuers | — | (165,578 | ) | — | |||||||||||
Futures contracts | 1,152,621 | 148,548 | — | ||||||||||||
Swap agreements | (172,395 | ) | 779,220 | — | |||||||||||
Forward foreign currency contracts | (2,059,702 | ) | (926,969 | ) | — | ||||||||||
Translation of other assets and liabilities denominated in foreign currency | 72,904 | 269,748 | 168,297 | ||||||||||||
Change in net unrealized appreciation (depreciation) | 216,555 | 1,013,011 | 6,314,757 | ||||||||||||
Net realized and unrealized gain (loss) | (690,263 | ) | 7,056,120 | 898,217 | |||||||||||
Net increase in net assets resulting from operations | $ | 142,507 | $ | 9,968,041 | $ | 3,655,183 |
* Commenced operations on October 24, 2018.
118
The UBS Funds
UBS Engage For Impact Fund* | UBS International Sustainable Equity Fund | ||||||||||
Investment income | |||||||||||
Unaffiliated dividends | $ | 224,785 | $ | 3,687,093 | |||||||
Affiliated dividends | — | — | |||||||||
Interest | 8,785 | 82,077 | |||||||||
Non-cash dividend income | 15,550 | — | |||||||||
Securities lending | 1,579 | 21,353 | |||||||||
Foreign tax withheld | (17,015 | ) | (386,042 | ) | |||||||
Total income | 233,684 | 3,404,481 | |||||||||
Expenses | |||||||||||
Investment management and administration fees | 64,736 | 1,072,991 | |||||||||
Service and distribution fees—Class A | — | 23,456 | |||||||||
Service and distribution fees—Class C | — | 2,854 | |||||||||
Transfer agency and related services fees—Class A | — | 5,075 | |||||||||
Transfer agency and related services fees—Class C | — | 635 | |||||||||
Transfer agency and related services fees—Class P | 6,750 | 31,242 | |||||||||
Transfer agency and related services fees—Class P2 | — | — | |||||||||
Custody and fund accounting fees | 13,523 | 87,025 | |||||||||
Trustees fees | 21,319 | 58,602 | |||||||||
Professional services fees | 85,227 | 186,329 | |||||||||
Printing and shareholder report fees | 9,131 | 12,550 | |||||||||
Federal and state registration fees | 1,853 | 50,354 | |||||||||
Interest expense | — | — | |||||||||
Amortization of offering costs | 86,596 | — | |||||||||
Other | 14,786 | 41,179 | |||||||||
Total expenses | 303,921 | 1,572,292 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (237,224 | ) | (317,247 | ) | |||||||
Net expenses | 66,697 | 1,255,045 | |||||||||
Net investment income | 166,987 | 2,149,436 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 246,971 | (2,833,612 | ) | ||||||||
Investments in affiliated issuers | — | — | |||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | (334 | ) | — | ||||||||
Foreign currency transactions | (5,349 | ) | 32,720 | ||||||||
Net realized gain (loss) | 241,288 | (2,800,892 | ) | ||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | 581,370 | 4,253,493 | |||||||||
Investments in affiliated issuers | — | — | |||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | — | — | |||||||||
Translation of other assets and liabilities denominated in foreign currency | 713 | 1,738 | |||||||||
Change in net unrealized appreciation (depreciation) | 582,083 | 4,255,231 | |||||||||
Net realized and unrealized gain (loss) | 823,371 | 1,454,339 | |||||||||
Net increase in net assets resulting from operations | $ | 990,358 | $ | 3,603,775 |
See accompanying notes to financial statements.
119
The UBS Funds
Financial Statements
Statement of operations—For the year ended June 30, 2019 (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Investment income | |||||||||||||||
Unaffiliated dividends | $ | 703,495 | $ | 480,790 | $ | — | |||||||||
Interest | 81,735 | 8,486 | 2,630,848 | ||||||||||||
Securities lending | 65,391 | 809 | — | ||||||||||||
Total income | 850,621 | 490,085 | 2,630,848 | ||||||||||||
Expenses | |||||||||||||||
Investment management and administration fees | 1,100,515 | 223,995 | 513,844 | ||||||||||||
Service and distribution fees—Class A | 64,015 | 27,961 | 29,909 | ||||||||||||
Service and distribution fees—Class C | 3,458 | 1,647 | 4,022 | ||||||||||||
Transfer agency and related services fees—Class A | 24,192 | 5,696 | 2,638 | ||||||||||||
Transfer agency and related services fees—Class C | 1,401 | 510 | 475 | ||||||||||||
Transfer agency and related services fees—Class P | 74,963 | 1,692 | 19,267 | ||||||||||||
Custody and fund accounting fees | 26,461 | 12,866 | 16,695 | ||||||||||||
Trustees fees | 55,559 | 34,087 | 52,351 | ||||||||||||
Professional services fees | 155,944 | 177,067 | 156,111 | ||||||||||||
Printing and shareholder report fees | 20,696 | 2,166 | 15,115 | ||||||||||||
Federal and state registration fees | 49,513 | 48,168 | 49,173 | ||||||||||||
Interest expense | — | — | 172 | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other | 42,396 | 34,890 | 57,035 | ||||||||||||
Total expenses | 1,619,113 | 570,745 | 916,807 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (370,472 | ) | (335,456 | ) | (444,858 | ) | |||||||||
Net expenses | 1,248,641 | 235,289 | 471,949 | ||||||||||||
Net investment income (loss) | (398,020 | ) | 254,796 | 2,158,899 | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 8,136,512 | 1,413,142 | (78,589 | ) | |||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Foreign currency transactions | — | — | — | ||||||||||||
Net realized gain (loss) | 8,136,512 | 1,413,142 | (78,589 | ) | |||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (3,158,717 | ) | 422,783 | 5,173,394 | |||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | — | — | — | ||||||||||||
Change in net unrealized appreciation (depreciation) | (3,158,717 | ) | 422,783 | 5,173,394 | |||||||||||
Net realized and unrealized gain | 4,977,795 | 1,835,925 | 5,094,805 | ||||||||||||
Net increase in net assets resulting from operations | $ | 4,579,775 | $ | 2,090,721 | $ | 7,253,704 |
120
The UBS Funds
UBS Sustainable Development Bank Bond Fund** | UBS Total Return Bond Fund | ||||||||||
Investment income | |||||||||||
Unaffiliated dividends | $ | — | $ | 5,450 | |||||||
Interest | 362,704 | 1,505,090 | |||||||||
Securities lending | 199 | 1,549 | |||||||||
Total income | 362,903 | 1,512,089 | |||||||||
Expenses | |||||||||||
Investment management and administration fees | 27,987 | 225,814 | |||||||||
Service and distribution fees—Class A | — | 819 | |||||||||
Service and distribution fees—Class C | — | 55 | |||||||||
Transfer agency and related services fees—Class A | — | 219 | |||||||||
Transfer agency and related services fees—Class C | — | 70 | |||||||||
Transfer agency and related services fees—Class P | 12,194 | 28,868 | |||||||||
Custody and fund accounting fees | 2,616 | 40,270 | |||||||||
Trustees fees | 22,641 | 36,575 | |||||||||
Professional services fees | 78,625 | 164,789 | |||||||||
Printing and shareholder report fees | 9,632 | 14,665 | |||||||||
Federal and state registration fees | 2,707 | 46,562 | |||||||||
Interest expense | — | 130 | |||||||||
Amortization of offering costs | 100,846 | — | |||||||||
Other | 15,559 | 12,759 | |||||||||
Total expenses | 272,807 | 571,595 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (241,710 | ) | (374,150 | ) | |||||||
Net expenses | 31,097 | 197,445 | |||||||||
Net investment income (loss) | 331,806 | 1,314,644 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 71,604 | (391,683 | ) | ||||||||
Options and swaptions written | — | 11,919 | |||||||||
Futures contracts | — | 86,772 | |||||||||
Swap agreements | — | (66,095 | ) | ||||||||
Forward foreign currency contracts | — | 44,533 | |||||||||
Foreign currency transactions | — | (12,294 | ) | ||||||||
Net realized gain (loss) | 71,604 | (326,848 | ) | ||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | 1,019,046 | 1,966,613 | |||||||||
Options and swaptions written | — | (52,140 | ) | ||||||||
Futures contracts | — | 130,103 | |||||||||
Swap agreements | — | (18,267 | ) | ||||||||
Forward foreign currency contracts | — | (30,082 | ) | ||||||||
Translation of other assets and liabilities denominated in foreign currency | — | 13,079 | |||||||||
Change in net unrealized appreciation (depreciation) | 1,019,046 | 2,009,306 | |||||||||
Net realized and unrealized gain | 1,090,650 | 1,682,458 | |||||||||
Net increase in net assets resulting from operations | $ | 1,422,456 | $ | 2,997,102 |
See accompanying notes to financial statements.
121
The UBS Funds
Financial Statements
Statement of changes in net assets
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | ||||||||||||||||||
For the year ended June 30, 2019 | For the year ended June 30, 2018 | For the year ended June 30, 2019 | For the year ended June 30, 2018 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | 832,770 | $ | 812,390 | $ | 2,911,921 | $ | 759,594 | |||||||||||
Net realized gain (loss) | (906,818 | ) | (2,572,439 | ) | 6,043,109 | 34,586,766 | |||||||||||||
Net change in unrealized appreciation (depreciation) | 216,555 | 679,052 | 1,013,011 | (14,628,521 | ) | ||||||||||||||
Net increase (decrease) in net assets resulting from operations | 142,507 | (1,080,997 | ) | 9,968,041 | 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 | 2,734,063 | 3,219,012 | 6,444,682 | 8,935,477 | |||||||||||||||
Cost of shares redeemed | (27,175,324 | ) | (87,796,218 | ) | (56,321,997 | ) | 3,732,469 | ||||||||||||
Shares issued on reinvestment of dividends and distributions | 556,939 | — | — | (59,836,089 | ) | ||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (23,884,322 | ) | (84,577,206 | ) | (49,877,315 | ) | (47,168,143 | ) | |||||||||||
Net increase (decrease) in net assets | (24,358,056 | ) | (85,658,203 | ) | (39,909,274 | ) | (30,541,166 | ) | |||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 73,740,161 | 159,398,364 | 307,119,026 | 337,660,192 | |||||||||||||||
End of year | $ | 49,382,105 | $ | 73,740,1612 | $ | 267,209,752 | $ | 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 June 30, 2019.
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.
122
The UBS Funds
UBS Emerging Markets Equity Opportunity Fund | UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | |||||||||||||||||||||
For the year ended June 30, 2019 | For the period ended June 30, 2018* | For the period ended June 30, 2019** | For the year ended June 30, 2019 | For the year ended June 30, 2018 | |||||||||||||||||||
From operations: | |||||||||||||||||||||||
Net investment income | $ | 2,756,966 | $ | 94,200 | $ | 166,987 | $ | 2,149,436 | $ | 553,946 | |||||||||||||
Net realized gain (loss) | (5,416,540 | ) | (47,837 | ) | 241,288 | (2,800,892 | ) | 3,127,482 | |||||||||||||||
Net change in unrealized appreciation (depreciation) | 6,314,757 | (634,490 | ) | 582,083 | 4,255,231 | (2,939,148 | ) | ||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 3,655,183 | (588,127 | ) | 990,358 | 3,603,775 | 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 | 171,284,237 | 94,963,376 | 22,129,964 | 108,186,440 | 54,066,034 | ||||||||||||||||||
Cost of shares redeemed | (43,473,455 | ) | (26,410 | ) | (7,202,590 | ) | (32,148,876 | ) | (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 | 127,924,411 | 94,936,966 | 14,933,815 | 77,816,748 | 38,809,255 | ||||||||||||||||||
Net increase (decrease) in net assets | 131,057,059 | 94,348,839 | 15,917,729 | 79,544,971 | 39,035,889 | ||||||||||||||||||
Net assets: | |||||||||||||||||||||||
Beginning of year | 94,348,839 | — | — | 76,839,388 | 37,803,499 | ||||||||||||||||||
End of year | $ | 225,405,898 | $ | 94,348,8392 | $ | 15,917,729 | $ | 156,384,359 | $ | 76,839,3882 |
See accompanying notes to financial statements.
123
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 year ended June 30, 2019 | For the year ended June 30, 2018 | For the year ended June 30, 2019 | For the year ended June 30, 2018 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | (398,020 | ) | $ | (731,673 | ) | $ | 254,796 | $ | 177,291 | |||||||||
Net realized gain (loss) | 8,136,512 | 14,562,416 | 1,413,142 | 6,774,958 | |||||||||||||||
Net change in unrealized appreciation (depreciation) | (3,158,717 | ) | 11,582,980 | 422,783 | (3,739,690 | ) | |||||||||||||
Net increase (decrease) in net assets resulting from operations | 4,579,775 | 25,413,723 | 2,090,721 | 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 | 31,560,714 | 18,277,548 | 2,573,638 | 1,749,809 | |||||||||||||||
Cost of shares redeemed | (31,938,307 | ) | (30,381,324 | ) | (3,922,567 | ) | (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 | 10,219,416 | 9,974,474 | (1,066,769 | ) | (4,181,290 | ) | |||||||||||||
Net increase (decrease) in net assets | 3,638,704 | 11,617,260 | 721,595 | (1,121,781 | ) | ||||||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 118,960,340 | 107,343,080 | 29,498,026 | 30,619,807 | |||||||||||||||
End of year | $ | 122,599,044 | $ | 118,960,3404 | $ | 30,219,621 | $ | 29,498,0264 |
* For the period October 24, 2018 (commencement of operations) through June 30, 2019.
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.
124
The UBS Funds
UBS Municipal Bond Fund | UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | |||||||||||||||||||||
For the year ended June 30, 2019 | For the year ended June 30, 2018 | For the period ended June 30, 2019** | For the year ended June 30, 2019 | For the year ended June 30, 2018 | |||||||||||||||||||
From operations: | |||||||||||||||||||||||
Net investment income | $ | 2,158,899 | $ | 2,316,609 | $ | 331,806 | $ | 1,314,644 | $ | 1,517,017 | |||||||||||||
Net realized gain (loss) | (78,589 | ) | (9,176 | ) | 71,604 | (326,848 | ) | (492,375 | ) | ||||||||||||||
Net change in unrealized appreciation (depreciation) | 5,173,394 | (1,986,604 | ) | 1,019,046 | 2,009,306 | (1,386,092 | ) | ||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 7,253,704 | 320,829 | 1,422,456 | 2,997,102 | (361,450 | ) | |||||||||||||||||
Total distributions—Class A1 | (217,914 | ) | (208,985 | ) | — | (9,381 | ) | (1,041 | ) | ||||||||||||||
Total distributions—Class C2 | (17,493 | ) | (60,872 | ) | — | (431 | ) | (815 | ) | ||||||||||||||
Total distributions—Class P3 | (1,922,730 | ) | (2,036,241 | ) | (331,507 | ) | (1,182,844 | ) | (1,214,180 | ) | |||||||||||||
Total distributions | (2,158,137 | ) | (2,306,098 | ) | (331,507 | ) | (1,192,656 | ) | (1,216,036 | ) | |||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||
Proceeds from shares sold | 26,363,694 | 35,084,588 | 35,672,488 | 532,802 | 175,672 | ||||||||||||||||||
Cost of shares redeemed | (52,421,163 | ) | (42,005,574 | ) | (11,831,843 | ) | (5,240,932 | ) | (8,127,941 | ) | |||||||||||||
Shares issued on reinvestment of dividends and distributions | 1,619,544 | 1,843,235 | 303,684 | 925,634 | 938,852 | ||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (24,437,925 | ) | (5,077,751 | ) | 24,144,329 | (3,782,496 | ) | (7,013,417 | ) | ||||||||||||||
Net increase (decrease) in net assets | (19,342,358 | ) | (7,063,020 | ) | 25,235,278 | (1,978,050 | ) | (8,590,903 | ) | ||||||||||||||
Net assets: | |||||||||||||||||||||||
Beginning of year | 121,359,870 | 128,422,890 | — | 41,415,382 | 50,006,285 | ||||||||||||||||||
End of year | $ | 102,017,512 | $ | 121,359,8704 | $ | 25,235,278 | $ | 39,437,332 | $ | 41,415,3824 |
See accompanying notes to financial statements.
125
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | $ | 7.24 | |||||||||||||
Net investment income1 | 0.08 | 0.04 | 0.03 | 0.05 | 0.04 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.04 | ) | (0.18 | ) | 0.32 | (0.79 | ) | 0.11 | |||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | 0.002 | ||||||||||||||||||
Net increase (decrease) from operations | 0.04 | (0.14 | ) | 0.35 | (0.73 | ) | 0.15 | ||||||||||||||||
Dividends from net investment income | (0.06 | ) | — | — | (0.23 | ) | (0.26 | ) | |||||||||||||||
Return of capital | — | — | — | (0.00 | )2 | — | |||||||||||||||||
Total dividends and distributions | (0.06 | ) | — | — | (0.23 | ) | (0.26 | ) | |||||||||||||||
Net asset value, end of year | $ | 6.36 | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | |||||||||||||
Total investment return3 | 0.60 | % | (2.15 | )% | 5.84 | % | (10.48 | )%4 | 2.03 | %5 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.02 | %6 | 1.69 | % | 1.49 | % | 1.45 | % | 1.43 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.35 | %6 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||
Net investment income | 1.29 | % | 0.57 | % | 0.42 | % | 0.82 | % | 0.58 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 30,025 | $ | 31,066 | $ | 43,930 | $ | 65,741 | $ | 89,421 | |||||||||||||
Portfolio turnover | 32 | % | 31 | % | 48 | % | 50 | % | 54 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | $ | 7.38 | |||||||||||||
Net investment income1 | 0.10 | 0.06 | 0.04 | 0.07 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.04 | ) | (0.19 | ) | 0.34 | (0.82 | ) | 0.12 | |||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | 0.002 | ||||||||||||||||||
Net increase (decrease) from operations | 0.06 | (0.13 | ) | 0.38 | (0.74 | ) | 0.18 | ||||||||||||||||
Dividends from net investment income | (0.07 | ) | — | — | (0.25 | ) | (0.29 | ) | |||||||||||||||
Return of capital | — | — | — | (0.00 | )2 | — | |||||||||||||||||
Total dividends and distributions | (0.07 | ) | — | — | (0.25 | ) | (0.29 | ) | |||||||||||||||
Net asset value, end of year | $ | 6.52 | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | |||||||||||||
Total investment return3 | 0.83 | % | (1.80 | )% | 6.05 | % | (10.17 | )%4 | 2.29 | %5 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.70 | %6 | 1.43 | % | 1.27 | % | 1.22 | % | 1.20 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.10 | %6 | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||
Net investment income | 1.52 | % | 0.94 | % | 0.68 | % | 1.07 | % | 0.84 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 19,357 | $ | 30,647 | $ | 98,018 | $ | 132,725 | $ | 192,777 | |||||||||||||
Portfolio turnover | 32 | % | 31 | % | 48 | % | 50 | % | 54 | % |
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 year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/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 Includes interest expense representing less than 0.005%.
See accompanying notes to financial statements.
126
UBS Global Allocation Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | $ | 11.04 | |||||||||||||
Net investment income (loss)1 | 0.12 | 0.05 | 0.02 | 0.01 | (0.00 | )2 | |||||||||||||||||
Net realized and unrealized gain (loss) | 0.36 | 0.68 | 1.27 | (0.56 | ) | 0.23 | |||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | ||||||||||||||||||
Net increase (decrease) from operations | 0.48 | 0.73 | 1.29 | (0.54 | ) | 0.23 | |||||||||||||||||
Dividends from net investment income | — | (0.17 | ) | (0.23 | ) | (0.27 | ) | — | |||||||||||||||
Net asset value, end of year | $ | 12.56 | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | |||||||||||||
Total investment return3 | 3.97 | %6 | 6.34 | % | 12.51 | % | (4.81 | )%4 | 2.08 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.40 | %5 | 1.40 | % | 1.39 | % | 1.36 | % | 1.32 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.20 | %5 | 1.20 | % | 1.25 | % | 1.35 | % | 1.32 | % | |||||||||||||
Net investment income (loss) | 1.04 | % | 0.39 | % | 0.16 | % | 0.09 | % | (0.01 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 209,407 | $ | 159,678 | $ | 174,148 | $ | 190,813 | $ | 234,665 | |||||||||||||
Portfolio turnover | 35 | % | 54 | % | 56 | % | 60 | % | 62 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | $ | 11.25 | |||||||||||||
Net investment income1 | 0.16 | 0.08 | 0.05 | 0.04 | 0.03 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.37 | 0.68 | 1.30 | (0.56 | ) | 0.23 | |||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | ||||||||||||||||||
Net increase (decrease) from operations | 0.53 | 0.76 | 1.35 | (0.51 | ) | 0.26 | |||||||||||||||||
Dividends from net investment income | — | (0.20 | ) | (0.26 | ) | (0.31 | ) | — | |||||||||||||||
Net asset value, end of year | $ | 12.87 | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | |||||||||||||
Total investment return3 | 4.21 | %6 | 6.56 | % | 12.85 | % | (4.50 | )%4 | 2.31 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.13 | %5 | 1.14 | % | 1.12 | % | 1.09 | % | 1.04 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %5 | 0.95 | % | 1.00 | % | 1.09 | % | 1.04 | % | |||||||||||||
Net investment income | 1.27 | % | 0.64 | % | 0.41 | % | 0.34 | % | 0.26 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 57,803 | $ | 64,009 | $ | 67,156 | $ | 91,004 | $ | 124,415 | |||||||||||||
Portfolio turnover | 35 | % | 54 | % | 56 | % | 60 | % | 62 | % |
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 year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on 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 Includes interest expense representing less than 0.005%.
6 During the period, the Fund recorded a gain of $263,116 from affiliated funds that were previously liquidated. If this gain had been excluded, the total return of Class A and Class P would have been 3.89% and 4.13%, respectively.
See accompanying notes to financial statements.
127
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 P | |||||||
Period ended June 30, 20191 | |||||||
Net asset value, beginning of period | $ | 8.92 | |||||
Net investment income3 | 0.21 | ||||||
Net realized and unrealized loss | 0.15 | ||||||
Net decrease from operations | 0.36 | ||||||
Net asset value, end of period | $ | 9.28 | |||||
Total investment return4 | 4.04 | % | |||||
Ratios to average net assets: | |||||||
Expenses before fee waivers and/or expense reimbursements | 1.22 | %5 | |||||
Expenses after fee waivers and/or expense reimbursements | 1.15 | %5 | |||||
Net investment income | 5.73 | %5 | |||||
Supplemental data: | |||||||
Net assets, end of period (000's) | $ | 38,465 | |||||
Portfolio turnover | 52 | % |
Class P2
Year ended June 30, 2019 | Period ended June 30, 20182 | ||||||||||
Net asset value, beginning of period | $ | 9.40 | $ | 10.00 | |||||||
Net investment income3 | 0.19 | 0.03 | |||||||||
Net realized and unrealized loss | (0.23 | )6 | (0.63 | ) | |||||||
Net decrease from operations | (0.04 | ) | (0.60 | ) | |||||||
Dividends from net investment income | (0.05 | ) | — | ||||||||
Net asset value, end of period | $ | 9.31 | $ | 9.40 | |||||||
Total investment return4 | (0.46 | )% | (5.90 | )% | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.42 | % | 4.39 | %5 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | % | 0.44 | %5 | |||||||
Net investment income | 2.16 | % | 4.05 | %5 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 186,941 | $ | 94,349 | |||||||
Portfolio turnover | 52 | % | 0 | % |
1 For the period February 1, 2019 (commencement of operations) through June 30, 2019.
2 For the period June 4, 2018 (commencement of operations) through June 30, 2018.
3 Calculated using the average share method.
4 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 the period of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
5 Annualized.
6 The amount of net realized and unrealized gain per share does not correspond with the net realized and unrealized loss reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
See accompanying notes to financial statements.
128
UBS Engage For Impact Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented.
Class P | |||||||
Period ended June 30, 20191 | |||||||
Net asset value, beginning of period | $ | 10.00 | |||||
Net investment income2 | 0.15 | ||||||
Net realized and unrealized gain | 0.67 | ||||||
Net increase from operations | 0.82 | ||||||
Dividends from net investment income | (0.01 | ) | |||||
Net asset value, end of period | $ | 10.81 | |||||
Total investment return3 | 8.27 | % | |||||
Ratios to average net assets: | |||||||
Expenses before fee waivers and/or expense reimbursements | 3.87 | %4 | |||||
Expenses after fee waivers and/or expense reimbursements | 0.85 | %4 | |||||
Net investment income | 2.13 | %4 | |||||
Supplemental data: | |||||||
Net assets, end of period (000's) | $ | 15,918 | |||||
Portfolio turnover | 67 | % |
1 For the period October 24, 2018 (commencement of operations) through June 30, 2019.
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 each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for the period of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 Annualized.
See accompanying notes to financial statements.
129
UBS International Sustainable Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | $ | 8.95 | |||||||||||||
Net investment income1 | 0.13 | 0.08 | 0.19 | 0.13 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.16 | )4 | 0.66 | 1.51 | (1.47 | ) | 0.53 | ||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | ||||||||||||||||||
Net increase (decrease) from operations | (0.03 | ) | 0.74 | 1.70 | (1.33 | ) | 0.63 | ||||||||||||||||
Dividends from net investment income | (0.06 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | |||||||||||||
Distributions from net realized gains | (0.10 | ) | — | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | |||||||||||||
Net asset value, end of year | $ | 10.01 | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | |||||||||||||
Total investment return2 | (0.14 | )% | 7.67 | % | 21.43 | % | (14.07 | )%3 | 7.14 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.53 | % | 2.02 | % | 2.25 | % | 2.37 | % | 2.47 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||
Net investment income | 1.38 | % | 0.79 | % | 2.16 | % | 1.59 | % | 1.09 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 9,769 | $ | 8,049 | $ | 15,811 | $ | 5,204 | $ | 6,371 | |||||||||||||
Portfolio turnover | 57 | % | 43 | % | 33 | % | 114 | % | 42 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | $ | 8.99 | |||||||||||||
Net investment income1 | 0.17 | 0.14 | 0.14 | 0.16 | 0.13 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.18 | )4 | 0.63 | 1.58 | (1.48 | ) | 0.51 | ||||||||||||||||
Net increase from payment by Advisor | — | — | — | 0.01 | — | ||||||||||||||||||
Net increase (decrease) from operations | (0.01 | ) | 0.77 | 1.72 | (1.31 | ) | 0.64 | ||||||||||||||||
Dividends from net investment income | (0.08 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | |||||||||||||
Distributions from net realized gains | (0.10 | ) | — | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | |||||||||||||
Net asset value, end of year | $ | 10.04 | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | |||||||||||||
Total investment return2 | 0.10 | % | 7.94 | % | 21.68 | % | (13.83 | )%3 | 7.32 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.26 | % | 1.70 | % | 2.06 | % | 2.12 | % | 2.21 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||
Net investment income | 1.80 | % | 1.37 | % | 1.65 | % | 1.92 | % | 1.40 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 146,616 | $ | 65,750 | $ | 19,952 | $ | 16,277 | $ | 17,103 | |||||||||||||
Portfolio turnover | 57 | % | 43 | % | 33 | % | 114 | % | 42 | % |
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. 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 The amount of net realized and unrealized gain per share does not correspond with the net realized and unrealized loss reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
See accompanying notes to financial statements.
130
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 year presented.
Class A
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | $ | 24.76 | |||||||||||||
Net investment loss1 | (0.10 | ) | (0.17 | ) | (0.15 | ) | (0.13 | ) | (0.16 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 0.80 | 4.92 | 4.34 | (3.89 | ) | 3.38 | |||||||||||||||||
Net increase (decrease) from operations | 0.70 | 4.75 | 4.19 | (4.02 | ) | 3.22 | |||||||||||||||||
Distributions from net realized gains | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | |||||||||||||
Net asset value, end of year | $ | 19.49 | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | |||||||||||||
Total investment return2 | 5.95 | % | 26.17 | % | 23.75 | % | (17.58 | )% | 15.61 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.57 | % | 1.66 | % | 1.56 | % | 1.53 | % | 1.51 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.24 | % | 1.24 | % | 1.24 | % | 1.24 | % | 1.35 | % | |||||||||||||
Net investment loss | (0.53 | )% | (0.83 | )% | (0.77 | )% | (0.65 | )% | (0.69 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 26,114 | $ | 26,498 | $ | 27,464 | $ | 28,048 | $ | 46,813 | |||||||||||||
Portfolio turnover | 54 | % | 67 | % | 50 | % | 109 | % | 64 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | $ | 26.00 | |||||||||||||
Net investment income1 | (0.06 | ) | (0.13 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 0.96 | 5.37 | 4.66 | (4.15 | ) | 3.60 | |||||||||||||||||
Net increase (decrease) from operations | 0.90 | 5.24 | 4.55 | (4.23 | ) | 3.49 | |||||||||||||||||
Distributions from net realized gains | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | |||||||||||||
Net asset value, end of year | $ | 21.84 | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | |||||||||||||
Total investment return2 | 6.24 | % | 26.50 | % | 24.09 | % | (17.39 | )% | 15.93 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.30 | % | 1.34 | % | 1.22 | % | 1.17 | % | 1.10 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | 1.07 | % | |||||||||||||
Net investment income | (0.27 | )% | (0.58 | )% | (0.50 | )% | (0.40 | )% | (0.43 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 96,485 | $ | 88,845 | $ | 75,770 | $ | 130,227 | $ | 178,495 | |||||||||||||
Portfolio turnover | 54 | % | 67 | % | 50 | % | 109 | % | 64 | % |
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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
See accompanying notes to financial statements.
131
UBS U.S. Sustainable Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | $ | 25.03 | |||||||||||||
Net investment income1 | 0.26 | 0.16 | 0.14 | 0.21 | 0.14 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 2.13 | 3.20 | 5.84 | (1.88 | ) | 2.50 | |||||||||||||||||
Net increase (decrease) from operations | 2.39 | 3.36 | 5.98 | (1.67 | ) | 2.64 | |||||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.13 | ) | (0.28 | ) | (0.37 | ) | (0.12 | ) | |||||||||||||
Net asset value, end of year | $ | 36.51 | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | |||||||||||||
Total investment return2 | 7.15 | % | 10.79 | % | 23.61 | % | (6.13 | )% | 10.61 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.14 | % | 2.07 | % | 2.04 | % | 1.93 | % | 1.56 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | % | 0.95 | % | 0.95 | % | 1.13 | % | 1.20 | % | |||||||||||||
Net investment income | 0.76 | % | 0.48 | % | 0.49 | % | 0.81 | % | 0.53 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 12,010 | $ | 10,586 | $ | 11,857 | $ | 9,774 | $ | 9,784 | |||||||||||||
Portfolio turnover | 102 | % | 166 | % | 78 | % | 57 | % | 59 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Net asset value, beginning of year | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | $ | 25.14 | |||||||||||||
Net investment income1 | 0.34 | 0.25 | 0.21 | 0.26 | 0.20 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 2.14 | 3.21 | 5.87 | (1.89 | ) | 2.52 | |||||||||||||||||
Net increase (decrease) from operations | 2.48 | 3.46 | 6.08 | (1.63 | ) | 2.72 | |||||||||||||||||
Dividends from net investment income | (0.40 | ) | (0.20 | ) | (0.35 | ) | (0.43 | ) | (0.19 | ) | |||||||||||||
Net asset value, end of year | $ | 36.68 | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | |||||||||||||
Total investment return2 | 7.44 | % | 11.08 | % | 23.87 | % | (5.91 | )% | 10.90 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.85 | % | 1.79 | % | 1.76 | % | 1.64 | % | 1.07 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.70 | % | 0.70 | % | 0.70 | % | 0.90 | % | 0.95 | % | |||||||||||||
Net investment income | 1.00 | % | 0.74 | % | 0.74 | % | 1.00 | % | 0.77 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 18,210 | $ | 17,182 | $ | 16,754 | $ | 15,147 | $ | 28,345 | |||||||||||||
Portfolio turnover | 102 | % | 166 | % | 78 | % | 57 | % | 59 | % |
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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
See accompanying notes to financial statements.
132
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
Years ended June 30, | Period ended | ||||||||||||||||||||||
2019 | 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 | 0.18 | 0.16 | 0.15 | 0.17 | 0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.53 | (0.16 | ) | (0.27 | ) | 0.59 | (0.06 | ) | |||||||||||||||
Net increase (decrease) from operations | 0.71 | — | (0.12 | ) | 0.76 | 0.03 | |||||||||||||||||
Dividends from net investment income | (0.18 | ) | (0.16 | ) | (0.15 | ) | (0.18 | ) | (0.09 | ) | |||||||||||||
Distributions from net realized gains | — | — | (0.02 | ) | — | — | |||||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.16 | ) | (0.17 | ) | (0.18 | ) | (0.09 | ) | |||||||||||||
Net asset value, end of period | $ | 10.60 | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | |||||||||||||
Total investment return3 | 7.17 | % | 0.04 | % | (1.11 | )% | 7.74 | % | 0.30 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.07 | %6 | 1.03 | % | 1.00 | % | 1.15 | % | 1.46 | %4 | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.65 | %6 | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %4 | |||||||||||||
Net investment income | 1.80 | % | 1.61 | % | 1.42 | % | 1.66 | % | 1.43 | %4 | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of period (000's) | $ | 12,796 | $ | 9,378 | $ | 21,007 | $ | 17,671 | $ | 10,929 | |||||||||||||
Portfolio turnover5 | 31 | % | 39 | % | 60 | % | 100 | % | 72 | % |
Class P
Years ended June 30, | Period ended | ||||||||||||||||||||||
2019 | 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 | 0.21 | 0.19 | 0.17 | 0.19 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.54 | (0.16 | ) | (0.28 | ) | 0.60 | (0.05 | ) | |||||||||||||||
Net increase (decrease) from operations | 0.75 | 0.03 | (0.11 | ) | 0.79 | 0.05 | |||||||||||||||||
Dividends from net investment income | (0.21 | ) | (0.19 | ) | (0.17 | ) | (0.21 | ) | (0.11 | ) | |||||||||||||
Distributions from net realized gains | — | — | (0.02 | ) | — | — | |||||||||||||||||
Total dividends and distributions | (0.21 | ) | (0.19 | ) | (0.19 | ) | (0.21 | ) | (0.11 | ) | |||||||||||||
Net asset value, end of period | $ | 10.60 | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | |||||||||||||
Total investment return3 | 7.55 | % | 0.30 | % | (0.97 | )% | 8.01 | % | 0.45 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 0.82 | %6 | 0.79 | % | 0.77 | % | 0.89 | % | 1.23 | %4 | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | %6 | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | %4 | |||||||||||||
Net investment income | 2.03 | % | 1.88 | % | 1.68 | % | 1.89 | % | 1.63 | %4 | |||||||||||||
Net assets, end of period (000's) | $ | 89,222 | $ | 107,153 | $ | 101,601 | $ | 90,146 | $ | 46,993 | |||||||||||||
Portfolio turnover5 | 31 | % | 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 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 Annualized.
5 Effective with the fiscal year 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.
6 Includes interest expense representing less than 0.005%.
See accompanying notes to financial statements.
133
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 June 30, 20191 | |||||||
Net asset value, beginning of period | $ | 10.00 | |||||
Net investment income2 | 0.19 | ||||||
Net realized and unrealized gain | 0.58 | ||||||
Net increase from operations | 0.77 | ||||||
Dividends from net investment income | (0.19 | ) | |||||
Net asset value, end of period | $ | 10.58 | |||||
Total investment return3 | 7.75 | % | |||||
Ratios to average net assets: | |||||||
Expenses before fee waivers and/or expense reimbursements | 2.19 | %4 | |||||
Expenses after fee waivers and/or expense reimbursements | 0.25 | %4 | |||||
Net investment income | 2.67 | %4 | |||||
Supplemental data: | |||||||
Net assets, end of period (000's) | $ | 25,235 | |||||
Portfolio turnover | 20 | % |
1 For the period October 24, 2018 (Commencement of operations) through June 30, 2019.
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.
134
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
Year ended June 30, | Period ended | ||||||||||||||
2019 | 2018 | June 30, 20171 | |||||||||||||
Net asset value, beginning of period | $ | 14.40 | $ | 14.94 | $ | 15.24 | |||||||||
Net investment income2 | 0.45 | 0.47 | 0.25 | ||||||||||||
Net realized and unrealized gain (loss) | 0.65 | (0.65 | ) | (0.30 | ) | ||||||||||
Net increase (decrease) from operations | 1.10 | (0.18 | ) | (0.05 | ) | ||||||||||
Dividends from net investment income | (0.41 | ) | (0.36 | ) | (0.25 | ) | |||||||||
Return of capital | — | — | (0.00 | )3 | |||||||||||
Total dividends and distributions | (0.41 | ) | (0.36 | ) | (0.25 | ) | |||||||||
Net asset value, end of period | $ | 15.09 | $ | 14.40 | $ | 14.94 | |||||||||
Total investment return4 | 7.63 | % | (1.12 | )% | (0.31 | )% | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.68 | %7 | 1.45 | % | 1.74 | %5 | |||||||||
Expenses after fee waivers and/or expense reimbursements | 0.75 | %7 | 0.75 | % | 0.75 | %5 | |||||||||
Net investment income | 3.10 | % | 3.22 | % | 2.28 | %5 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 488 | $ | 108 | $ | 44 | |||||||||
Portfolio turnover | 234 | % | 236 | % | 700 | % |
Class P
Years ended June 30, | Year ended September 30, | ||||||||||||||||||||||||||
Nine months ended | |||||||||||||||||||||||||||
2019 | 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 | 0.49 | 0.49 | 0.37 | 0.36 | 0.64 | 0.60 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.64 | (0.63 | ) | (0.18 | ) | 0.13 | (0.96 | ) | 0.44 | ||||||||||||||||||
Net increase (decrease) from operations | 1.13 | (0.14 | ) | 0.19 | 0.49 | (0.32 | ) | 1.04 | |||||||||||||||||||
Dividends from net investment income | (0.44 | ) | (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 | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.69 | ) | (0.94 | ) | |||||||||||||||
Net asset value, end of period | $ | 15.10 | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | $ | 15.99 | |||||||||||||||
Total investment return4 | 7.95 | % | (0.88 | )% | 1.32 | % | 3.33 | % | (2.05 | )% | 6.77 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.45 | %7 | 1.30 | % | 1.29 | % | 1.21 | %5 | 0.75 | % | 0.83 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.50 | %7 | 0.50 | % | 0.50 | % | 1.16 | %5 | 0.75 | % | 0.83 | % | |||||||||||||||
Net investment income | 3.35 | % | 3.29 | % | 2.45 | % | 3.22 | %5 | 4.04 | % | 3.76 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 38,949 | $ | 41,245 | $ | 49,919 | $ | 126,922 | $ | 131,473 | $ | 140,338 | |||||||||||||||
Portfolio turnover | 234 | % | 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 year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on 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.
7 Includes interest expense representing less than 0.005%.
See accompanying notes to financial statements.
135
The UBS Funds
Notes to financial statements
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. Class C shares converted into Class A shares as a tax-free event for federal income tax purposes.
136
The UBS Funds
Notes to financial statements
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
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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 the 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 the Fund's assets may be affected on those days. If trading on the NYSE is halted for the day
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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. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "evaluation" systems that derive values based on comparable investments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings.
Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("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.
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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
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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 deflation when 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 Fund commits to purchasing 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 Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, US government securities or other liquid 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.
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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 June 30, 2019, 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.
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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 Funds pay 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 June 30, 2019, UBS Total Return Bond Fund had maximum payout amounts of approximately $4,000,000 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.
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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 risks, including market, interest rate and equity risks. 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 rate. 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
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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
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exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return 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 Funds' 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 Funds' Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2019, except forward foreign currency contracts for UBS Total Return Bond Fund for which the volume during the period was higher than at period ended.
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 June 30, 2019 is reflected in the Statement of assets and liabilities.
146
The UBS Funds
Notes to financial statements
At June 30, 2019, 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 | |||||||||||||||||||||||
Swaptions purchased | $ | — | $ | — | $ | 143 | $ | — | $ | 143 | |||||||||||||
Futures contracts | 28,875 | — | — | 228,421 | 257,296 | ||||||||||||||||||
Swap agreements | — | — | 201,443 | — | 201,443 | ||||||||||||||||||
Forward foreign currency contracts | — | 475,126 | — | — | 475,126 | ||||||||||||||||||
Total value | $ | 28,875 | $ | 475,126 | $ | 201,586 | $ | 228,421 | $ | 934,008 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | (160,077 | ) | $ | — | $ | — | $ | (132,271 | ) | $ | (292,348 | ) | ||||||||||
Swap agreements | — | — | (393,077 | ) | — | (393,077 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (320,640 | ) | — | — | (320,640 | ) | ||||||||||||||||
Total value | $ | (160,077 | ) | $ | (320,640 | ) | $ | (393,077 | ) | $ | (132,271 | ) | $ | (1,006,065 | ) |
During the year ended June 30, 2019, 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 | $ | (725,732 | ) | $ | — | $ | — | $ | (2,763,711 | ) | $ | (3,489,443 | ) | ||||||||||
Swap agreements | — | — | (137,551 | ) | — | (137,551 | ) | ||||||||||||||||
Forward foreign currency contracts | — | 2,796,584 | — | — | 2,796,584 | ||||||||||||||||||
Total net realized gain (loss) | $ | (725,732 | ) | $ | 2,796,584 | $ | (137,551 | ) | $ | (2,763,711 | ) | $ | (830,410 | ) | |||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Swaptions purchased | $ | — | $ | — | $ | (3,757 | ) | $ | — | $ | (3,757 | ) | |||||||||||
Futures | 10,017 | — | — | 1,142,604 | 1,152,621 | ||||||||||||||||||
Swap agreements | — | — | (172,395 | ) | — | (172,395 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (2,059,702 | ) | — | — | (2,059,702 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | 10,017 | $ | (2,059,702 | ) | $ | (176,152 | ) | $ | 1,142,604 | $ | (1,083,233 | ) |
Table footnotes begin on page 149
147
The UBS Funds
Notes to financial statements
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Option purchased | $ | — | $ | — | $ | — | $ | 198,800 | $ | 198,800 | |||||||||||||
Futures contracts | 786,931 | — | — | 732,468 | 1,519,399 | ||||||||||||||||||
Swap agreements | — | — | 655,191 | — | 655,191 | ||||||||||||||||||
Forward foreign currency contracts | — | 328,988 | — | — | 328,988 | ||||||||||||||||||
Total value | $ | 786,931 | $ | 328,988 | $ | 655,191 | $ | 931,268 | $ | 2,702,378 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | (572,553 | ) | $ | — | $ | — | $ | (464,564 | ) | $ | (1,037,117 | ) | ||||||||||
Swap agreements | — | — | (442,896 | ) | — | (442,896 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (543,308 | ) | — | — | (543,308 | ) | ||||||||||||||||
Total value | $ | (572,553 | ) | $ | (543,308 | ) | $ | (442,896 | ) | $ | (464,564 | ) | $ | (2,023,321 | ) |
During the period ended June 30, 2019 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 contracts | $ | 1,525,942 | $ | — | $ | — | $ | (2,941,320 | ) | $ | (1,415,378 | ) | |||||||||||
Swap agreements | — | — | 522,749 | — | 522,749 | ||||||||||||||||||
Forward foreign currency contracts | — | 2,226,773 | — | — | 2,226,773 | ||||||||||||||||||
Total net realized gain (loss) | $ | 1,525,942 | $ | 2,226,773 | $ | 522,749 | $ | (2,941,320 | ) | $ | 1,334,144 | ||||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Option purchased | $ | — | $ | — | $ | — | $ | 501,255 | $ | 501,255 | |||||||||||||
Futures contracts | (665,393 | ) | — | — | 813,941 | 148,548 | |||||||||||||||||
Swap agreements | — | — | 779,220 | — | 779,220 | ||||||||||||||||||
Forward foreign currency contracts | — | (926,969 | ) | — | — | (926,969 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | (665,393 | ) | $ | (926,969 | ) | $ | 779,220 | $ | 1,315,196 | $ | 502,054 |
During the period ended June 30, 2019 net realized loss 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 | $ | — | $ | (334 | ) | $ | — | $ | — | $ | (334 | ) |
Table footnotes begin on page 149
148
The UBS Funds
Notes to financial statements
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Swaptions purchased | $ | — | $ | — | $ | 980 | $ | — | $ | 980 | |||||||||||||
Futures contracts | 185,393 | — | — | — | 185,393 | ||||||||||||||||||
Total value | $ | 185,393 | $ | — | $ | 980 | $ | — | $ | 186,373 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Swaptions written | $ | — | $ | — | $ | (53,313 | ) | $ | — | $ | (53,313 | ) | |||||||||||
Futures contracts | (18,616 | ) | — | — | — | (18,616 | ) | ||||||||||||||||
Swap agreements | — | — | (137 | ) | — | (137 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (13,679 | ) | — | — | (13,679 | ) | ||||||||||||||||
Total value | $ | (18,616 | ) | $ | (13,679 | ) | $ | (53,450 | ) | $ | — | $ | (18,745 | ) |
During the period ended June 30, 2019 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)3 | |||||||||||||||||||||||
Swaptions purchased | $ | — | $ | — | $ | (18,965 | ) | $ | — | $ | (18,965 | ) | |||||||||||
Swaptions written | — | — | 11,919 | — | 11,919 | ||||||||||||||||||
Futures contracts | 86,772 | — | — | — | 86,772 | ||||||||||||||||||
Swap agreements | — | — | (66,095 | ) | — | (66,095 | ) | ||||||||||||||||
Forward foreign currency contracts | — | 44,533 | — | — | 44,533 | ||||||||||||||||||
Total net realized gain (loss) | $ | 86,772 | $ | 44,533 | $ | (73,141 | ) | $ | — | $ | 58,164 | ||||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Swaptions purchased | $ | — | $ | 3,905 | $ | (4,500 | ) | $ | — | $ | (595 | ) | |||||||||||
Swaptions written | — | — | (52,140 | ) | — | (52,140 | ) | ||||||||||||||||
Futures contracts | 130,103 | — | — | — | 130,103 | ||||||||||||||||||
Swap agreements | — | — | (18,267 | ) | — | (18,267 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (30,082 | ) | — | — | (30,082 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | 130,103 | $ | (26,177 | ) | $ | (74,907 | ) | $ | — | $ | 29,019 |
1 In the Statement of assets and liabilities, options 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 on futures contracts and centrally cleared swap agreements, if any, 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
149
The UBS Funds
Notes to financial statements
of futures contracts and centrally cleared swap agreements, if any, 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 and swaptions 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.
At June 30, 2019, 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 | |||||||||
Swaptions purchased | $ | 143 | $ | — | |||||||
Futures contracts1 | 257,296 | (292,348 | ) | ||||||||
Swap agreements1 | 201,443 | (393,077 | ) | ||||||||
Forward foreign currency contracts | 475,126 | (320,640 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 934,008 | $ | (1,006,065 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (458,114 | ) | 685,425 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 475,894 | $ | (320,640 | ) |
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 year end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BB | $ | 145,709 | $ | — | $ | — | $ | 145,709 | |||||||||||
BOA | 143 | — | — | 143 | |||||||||||||||
CITI | 23,541 | (7,494 | ) | — | 16,047 | ||||||||||||||
GSI | 7,839 | (7,839 | ) | — | — | ||||||||||||||
HSBC | 36,327 | — | — | 36,327 | |||||||||||||||
JPMCB | 625 | — | — | 625 | |||||||||||||||
MSCI | 533 | — | — | 533 | |||||||||||||||
SSC | 261,177 | (257,385 | ) | — | 3,792 | ||||||||||||||
Total | $ | 475,894 | $ | (272,718 | ) | $ | — | $ | 203,176 |
Table footnotes begin on page 152
150
The UBS Funds
Notes to financial statements
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
CITI | $ | (7,494 | ) | $ | 7,494 | $ | — | $ | — | ||||||||||
GSI | (55,761 | ) | 7,839 | — | (47,922 | ) | |||||||||||||
SSC | (257,385 | ) | 257,385 | — | — | ||||||||||||||
Total | $ | (320,640 | ) | $ | 272,718 | $ | — | $ | (47,922 | ) |
Table footnotes begin on page xxx
At June 30, 2019, 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 Global Allocation Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Options purchased | $ | 198,800 | $ | — | |||||||
Futures contracts1 | 1,519,399 | (1,037,117 | ) | ||||||||
Swap agreements1 | 655,191 | (442,896 | ) | ||||||||
Forward foreign currency contracts | 328,988 | (543,308 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 2,702,378 | $ | 2,023,321 | |||||||
Derivatives not subject to MNA or similar agreements | (2,373,390 | ) | 1,480,013 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 328,988 | $ | (543,308 | ) |
The following tables present the Portfolio'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 Portfolio as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BB | $ | 27,925 | $ | — | $ | — | $ | 27,925 | |||||||||||
BOA | 38,565 | — | — | 38,565 | |||||||||||||||
HSBC | 2,608 | — | — | 2,608 | |||||||||||||||
SSC | 259,890 | (159,856 | ) | — | 100,034 | ||||||||||||||
Total | $ | 328,988 | $ | (159,856 | ) | $ | — | $ | 169,132 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
CITI | $ | (197,348 | ) | $ | — | $ | — | $ | (197,348 | ) | |||||||||
JPMCB | (186,104 | ) | — | — | (186,104 | ) | |||||||||||||
SSC | (159,856 | ) | 159,856 | — | — | ||||||||||||||
Total | $ | (543,308 | ) | $ | 159,856 | $ | — | $ | (383,452 | ) |
Table footnotes begin on page 152
151
The UBS Funds
Notes to financial statements
At June 30, 2019, 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 | |||||||||
Options and swaptions purchased | $ | 980 | $ | — | |||||||
Options and swaptions written | — | (53,313 | ) | ||||||||
Futures contracts1 | 185,393 | (18,616 | ) | ||||||||
Swap agreements1 | — | (137 | ) | ||||||||
Forward foreign currency contracts | — | (13,679 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 186,373 | $ | 85,745 | |||||||
Derivatives not subject to MNA or similar agreements | (185,393 | ) | 71,929 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 980 | $ | (13,816 | ) |
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 year end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
JPMCB | $ | 980 | $ | — | $ | — | $ | 980 | |||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
BB | $ | (103 | ) | $ | — | $ | — | $ | (103 | ) | |||||||||
CITI | (12,683 | ) | — | — | (12,683 | ) | |||||||||||||
GS | (34 | ) | — | — | (34 | ) | |||||||||||||
MSCI | (996 | ) | — | — | (996 | ) | |||||||||||||
Total | $ | (13,816 | ) | $ | — | $ | — | $ | (13,816 | ) |
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.
152
The UBS Funds
Notes to financial statements
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 | % |
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
153
The UBS Funds
Notes to financial statements
Sustainable Equity Fund is irrevocable. Investment advisory fees, including the dollar amount waived or reimbursed, for the period ended June 30, 2019 were as follows:
Fund | Class A expense cap | Class P expense cap | Class P2 expense cap | Amount due to (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | Recoupments | ||||||||||||||||||||||||
UBS Dynamic Alpha Fund | 1.35 | % | 1.10 | % | — | $ | (699 | ) | $ | 529,259 | $ | (376,310 | ) | $ | — | ||||||||||||||||
UBS Global Allocation Fund | 1.20 | 0.95 | — | 113,276 | 2,242,176 | (507,246 | ) | — | |||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 1.15 | 0.40 | % | 146,655 | 1,087,847 | (1,190,099 | ) | — | ||||||||||||||||||||||
UBS Engage For Impact Fund | — | 0.85 | — | (39,517 | ) | 58,851 | (237,224 | ) | — | ||||||||||||||||||||||
UBS International Sustainable Equity Fund | 1.25 | 1.00 | — | 92,692 | 981,020 | (317,247 | ) | — | |||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.24 | 0.99 | — | 36,057 | 1,011,284 | (370,472 | ) | — | |||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.95 | 0.70 | — | (11,285 | ) | 202,318 | (335,456 | ) | — | ||||||||||||||||||||||
UBS Municipal Bond Fund | 0.65 | 0.40 | — | 9,749 | 432,711 | (444,858 | ) | — | |||||||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 0.25 | — | (58,762 | ) | 18,658 | (241,710 | ) | — | ||||||||||||||||||||||
UBS Total Return Bond Fund | 0.75 | 0.50 | — | 12,363 | 196,360 | (374,150 | ) | — |
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 June 30, 2019 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 the 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 June 30, 2019 are subject to repayment through June 30, 2022.
At June 30, 2019, 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, 2020 | Expires June 30, 2021 | Expires June 30, 2022 | |||||||||||||||
UBS Dynamic Alpha Fund—Class A | $ | 427,149 | $ | 78,717 | $ | 131,826 | $ | 216,606 | |||||||||||
UBS Dynamic Alpha Fund—Class P | 575,154 | 197,801 | 217,649 | 159,704 | |||||||||||||||
UBS Global Allocation Fund—Class A | 992,075 | 244,083 | 350,483 | 397,509 | |||||||||||||||
UBS Global Allocation Fund—Class P | 340,185 | 100,857 | 129,591 | 109,737 | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P | 2,946 | — | — | 2,9461 | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P2 | 178,611 | — | 68,961 | 109,650 | |||||||||||||||
UBS Engage For Impact Fund—Class P | 237,224 | — | — | 237,2242 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 287,544 | 92,631 | 111,537 | 83,376 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class P | 847,613 | 289,826 | 270,691 | 287,096 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class A | 371,078 | 112,035 | 125,718 | 133,325 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class P | 560,104 | 171,679 | 189,607 | 198,818 | |||||||||||||||
UBS Municipal Bond Fund—Class A | 179,545 | 78,706 | 50,025 | 50,814 | |||||||||||||||
UBS Municipal Bond Fund—Class P | 1,170,597 | 356,454 | 420,099 | 394,044 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund—Class P | 241,710 | — | — | 241,7102 |
154
The UBS Funds
Notes to financial statements
Fund | Fee waivers/ expense reimbursements subject to repayment | Expires June 30, 2020 | Expires June 30, 2021 | Expires June 30, 2022 | |||||||||||||||
UBS Total Return Bond Fund—Class A | $ | 3,503 | $ | 1933 | $ | 278 | $ | 3,032 | |||||||||||
UBS Total Return Bond Fund—Class P | 1,282,093 | 543,959 | 367,169 | 370,965 |
1 For the period from February 1, 2019 (commencement of operations) through June 30, 2019.
2 For the period from October 24, 2018 (commencement of operations) through June 30, 2019.
3 For the period from September 29, 2016 (commencement of operations) through June 30, 2017.
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 June 30, 2019, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Dynamic Alpha Fund | $ | 3,070 | $ | 46,699 | |||||||
UBS Global Allocation Fund | 16,320 | 210,204 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 5,979 | 90,654 | |||||||||
UBS Engage For Impact Fund | 934 | 5,885 | |||||||||
UBS International Sustainable Equity Fund | 9,287 | 91,971 | |||||||||
UBS U.S. Small Cap Growth Fund | 7,206 | 89,231 | |||||||||
UBS U.S. Sustainable Equity Fund | 1,820 | 21,677 | |||||||||
UBS Municipal Bond Fund | 6,249 | 81,133 | |||||||||
UBS Sustainable Development Bank Bond Fund | 1,522 | 9,329 | |||||||||
UBS Total Return Bond Fund | 2,422 | 29,454 |
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 June 30, 2019 have been included near the end of each Fund's Portfolio of investments.
During the period ended June 30, 2019, UBS Global Allocation Fund received proceeds from affiliated funds that were previously liquidated in the amount of $263,116. The Fund recorded the gain once it was reasonably certain of both the amount and nature of the gain. This amount is disclosed in the Statement of operations as realized gain on Investment in affiliated issuers. This gain related to class action payments received by the previously liquidated funds. Gains of this type are infrequent to the Fund and are not expected to reoccur. If this gain had not occurred, the Fund's performance would have been lower than reported.
During the period ended June 30, 2019, 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 | 17,941 | ||||||
UBS Engage For Impact Fund | 93 | ||||||
UBS International Sustainable Equity Fund | 1,264 |
155
The UBS Funds
Notes to financial statements
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 International Sustainable Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Small Cap Growth Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Sustainable Equity Fund | 0.25 | 1.00 | |||||||||
UBS Municipal Bond Fund | 0.25 | 0.75 | |||||||||
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 June 30, 2019, certain Funds owed UBS AM (US) service and distribution fees, and for the period ended June 30, 2019, 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 | $ | 6,215 | $ | 691 | |||||||
UBS Dynamic Alpha Fund—Class C | (19,288 | ) | — | ||||||||
UBS Global Allocation Fund—Class A | 42,247 | 7,598 | |||||||||
UBS Global Allocation Fund—Class C | (147,586 | ) | — | ||||||||
UBS International Sustainable Equity Fund—Class A | (996 | ) | 5,437 | ||||||||
UBS International Sustainable Equity Fund—Class C | (4,135 | ) | — | ||||||||
UBS U.S. Small Cap Growth Fund—Class A | 5,021 | 7,538 | |||||||||
UBS U.S. Small Cap Growth Fund—Class C | (6,600 | ) | — | ||||||||
UBS U.S. Sustainable Equity Fund—Class A | 5,341 | 15,027 | |||||||||
UBS U.S. Sustainable Equity Fund—Class C | (6,103 | ) | — | ||||||||
UBS Municipal Bond Fund—Class A | 2,553 | 1,743 | |||||||||
UBS Municipal Bond Fund—Class C | (8,110 | ) | 29 | ||||||||
UBS Total Return Bond Fund—Class A | 88 | 1,261 | |||||||||
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.
156
The UBS Funds
Notes to financial statements
For the year ended June 30, 2019, 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 | $ | 26,749 | |||||
UBS Global Allocation Fund | 82,737 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 15,208 | ||||||
UBS Engage For Impact Fund | 1,574 | ||||||
UBS International Sustainable Equity Fund | 9,701 | ||||||
UBS U.S. Small Cap Growth Fund | 5,385 | ||||||
UBS U.S. Sustainable Equity Fund | 2,706 | ||||||
UBS Municipal Bond Fund | 12,957 | ||||||
UBS Sustainable Development Bank Bond Fund | 1,631 | ||||||
UBS Total Return Bond Fund | 1,084 |
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% of the market value 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 Navigator Securities Lending 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 June 30, 2019, 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 type held as non-cash collateral | ||||||||||||||||||
UBS Dynamic Alpha Fund | $ | 2,427,584 | $ | 2,479,035 | $ | — | $ | 2,479,035 | |||||||||||||||
UBS Global Allocation Fund | 18,262,927 | 16,152,725 | 2,589,687 | 18,742,412 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS Engage For Impact Fund | 880,093 | 389,351 | 514,660 | 904,011 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS International Sustainable Equity Fund | 3,495,756 | 970,516 | 2,697,464 | 3,667,980 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 28,465,027 | 11,278,586 | 17,498,210 | 28,776,796 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 2,273,083 | 1,211,056 | 1,121,279 | 2,332,335 | US Treasury Notes and US Treasury Bills | ||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | 5,035 | 5,138 | — | 5,138 | |||||||||||||||||||
UBS Total Return Bond Fund | 848,490 | 596,493 | 267,680 | 864,173 | US Treasury Notes and US Treasury Bills |
* 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.
157
The UBS Funds
Notes to financial statements
The table below represents the disaggregation at June 30, 2019 of the gross amount of recognized liabilities for securities lending transactions. As the securities loaned are subject to termination by the Portfolios 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 Dynamic Alpha Fund | $ | 2,210,875 | $ | 268,160 | $ | 2,479,035 | |||||||||
UBS Global Allocation Fund | 16,152,725 | — | 16,152,725 | ||||||||||||
UBS Engage For Impact Fund | 389,351 | — | 389,351 | ||||||||||||
UBS International Sustainable Equity Fund | 970,516 | — | 970,516 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 11,278,586 | — | 11,278,586 | ||||||||||||
UBS U.S. Sustainable Equity Fund | 1,211,056 | — | 1,211,056 | ||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 5,138 | 5,138 | ||||||||||||
UBS Total Return Bond Fund | 94,500 | 501,993 | 596,493 |
Bank line of credit
The Fund participates with other funds managed by UBS AM in a $185 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. The Funds covered by the Committed Credit Facility have 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 June 30, 2019, the following Portfolios 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 | % | ||||||||||||
UBS Municipal Bond Fund | 899,556 | 2 | 172 | 3.445 |
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 year ended June 30, 2019, the following Funds
158
The UBS Funds
Notes to financial statements
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 | $ | 2,988 | |||||
UBS U.S. Small Cap Growth Fund | 7,190 | ||||||
UBS U.S. Sustainable Equity Fund | 2,532 |
Purchases and sales of securities
For the year ended June 30, 2019, aggregate purchases and sales of portfolio securities, excluding short-term securities, were as follows:
Fund | Purchases | Sales | |||||||||
UBS Dynamic Alpha Fund | $ | 10,274,757 | $ | 24,001,274 | |||||||
UBS Global Allocation Fund | 73,395,670 | 112,199,582 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 194,745,637 | 62,414,357 | |||||||||
UBS Engage For Impact Fund* | 22,041,134 | 7,284,035 | |||||||||
UBS International Sustainable Equity Fund | 139,476,370 | 66,511,014 | |||||||||
UBS U.S. Small Cap Growth Fund | 62,472,229 | 64,556,183 | |||||||||
UBS U.S. Sustainable Equity Fund | 29,274,583 | 31,098,914 | |||||||||
UBS Municipal Bond Fund | 32,644,395 | 55,945,974 | |||||||||
UBS Sustainable Development Bank Bond Fund* | 27,217,986 | 3,516,432 | |||||||||
UBS Total Return Bond Fund | 90,246,928 | 92,587,952 |
* Commenced operations on October 24, 2018.
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 June 30, 2019 were as follows:
UBS Dynamic Alpha Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 20,153 | $ | 125,896 | 29 | $ | 172 | 404,851 | $ | 2,607,995 | ||||||||||||||||||
Shares repurchased | (1,934,583 | ) | (12,135,248 | ) | (174,078 | ) | (1,023,720 | ) | (2,172,989 | ) | (14,016,356 | ) | |||||||||||||||
Shares converted | 1,721,672 | 10,812,100 | (1,867,375 | ) | (10,812,100 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 43,541 | 263,858 | — | — | 47,271 | 293,081 | |||||||||||||||||||||
Net decrease | (149,217 | ) | $ | (933,394 | ) | (2,041,424 | ) | $ | (11,835,648 | ) | (1,720,867 | ) | $ | (11,115,280 | ) |
UBS Global Allocation Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 108,452 | $ | 1,292,971 | 368 | $ | 4,343 | 419,109 | $ | 5,147,368 | ||||||||||||||||||
Shares repurchased | (3,249,998 | ) | (38,813,492 | ) | (324,397 | ) | (3,850,001 | ) | (1,112,447 | ) | (13,658,504 | ) | |||||||||||||||
Shares converted | 6,588,259 | 77,543,804 | (6,778,305 | ) | (77,543,804 | ) | — | — | |||||||||||||||||||
Net increase (decrease) | 3,446,713 | $ | 40,023,283 | (7,102,334 | ) | $ | (81,389,462 | ) | (693,338 | ) | $ | (8,511,136 | ) |
159
The UBS Funds
Notes to financial statements
UBS Emerging Markets Equity Opportunity Fund
Class P* | Class P2 | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 4,221,277 | $ | 38,256,377 | 15,065,841 | $ | 133,027,860 | |||||||||||||
Shares repurchased | (76,070 | ) | (681,755 | ) | (5,035,235 | ) | (42,791,700 | ) | |||||||||||
Dividends reinvested | — | — | 14,186 | 113,629 | |||||||||||||||
Net increase | 4,145,207 | $ | 37,574,622 | 10,044,792 | $ | 90,349,789 |
* Commenced of operations on February 1, 2019.
UBS Engage For Impact Fund*
Class P | |||||||||||
Shares | Amount | ||||||||||
Shares sold | 2,176,480 | $ | 22,129,964 | ||||||||
Shares repurchased | (705,330 | ) | (7,202,590 | ) | |||||||
Dividends reinvested | 694 | 6,441 | |||||||||
Net increase | 1,471,844 | $ | 14,933,815 |
* Commencement of operations on October 24, 2018.
UBS International Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 167,229 | $ | 1,624,563 | 68 | $ | 677 | 11,068,863 | $ | 106,561,200 | ||||||||||||||||||
Shares repurchased | (269,997 | ) | (2,566,549 | ) | (25,910 | ) | (263,350 | ) | (3,084,176 | ) | (29,318,977 | ) | |||||||||||||||
Shares converted | 272,608 | 2,633,394 | (280,447 | ) | (2,633,394 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 16,761 | 146,495 | — | — | 186,593 | 1,632,689 | |||||||||||||||||||||
Net increase (decrease) | 186,601 | $ | 1,837,903 | (306,289 | ) | $ | (2,896,067 | ) | 8,171,280 | $ | 78,874,912 |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 186,595 | $ | 3,578,194 | 64 | $ | 1,074 | 1,267,640 | $ | 27,981,446 | ||||||||||||||||||
Shares repurchased | (407,588 | ) | (7,967,661 | ) | (41,635 | ) | (737,695 | ) | (1,228,062 | ) | (23,232,951 | ) | |||||||||||||||
Shares converted | 141,492 | 2,835,493 | (179,348 | ) | (2,835,493 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 141,687 | 2,146,557 | — | — | 498,552 | 8,450,452 | |||||||||||||||||||||
Net increase (decrease) | 62,186 | $ | 592,583 | (220,919 | ) | $ | (3,572,114 | ) | 538,130 | $ | 13,198,947 |
UBS U.S. Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 15,808 | $ | 551,173 | 339 | $ | 11,498 | 59,731 | $ | 2,010,967 | ||||||||||||||||||
Shares repurchased | (43,383 | ) | (1,482,939 | ) | (4,908 | ) | (166,563 | ) | (65,994 | ) | (2,273,065 | ) | |||||||||||||||
Shares converted | 45,803 | 1,535,325 | (48,129 | ) | (1,535,325 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 3,335 | 98,945 | — | — | 6,157 | 183,215 | |||||||||||||||||||||
Net increase (decrease) | 21,563 | $ | 702,504 | (52,698 | ) | $ | (1,690,390 | ) | (106 | ) | $ | (78,883 | ) |
160
The UBS Funds
Notes to financial statements
UBS Municipal Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 136,575 | $ | 1,376,134 | — | $ | — | 2,448,797 | $ | 24,987,560 | ||||||||||||||||||
Shares repurchased | (317,027 | ) | (3,229,687 | ) | (42,023 | ) | (423,297 | ) | (4,816,504 | ) | (48,768,179 | ) | |||||||||||||||
Shares converted | 438,383 | 4,361,912 | (439,266 | ) | (4,361,912 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 17,389 | 177,830 | 1,430 | 14,361 | 139,978 | 1,427,353 | |||||||||||||||||||||
Net increase (decrease) | 275,320 | $ | 2,686,189 | (479,859 | ) | $ | (4,770,848 | ) | (2,227,729 | ) | $ | (22,353,266 | ) |
UBS Sustainable Development Bank Bond Fund*
Class P | |||||||||||
Shares | Amount | ||||||||||
Shares sold | 3,528,985 | $ | 35,672,488 | ||||||||
Shares repurchased | (1,172,191 | ) | (11,831,843 | ) | |||||||
Dividends reinvested | 29,494 | 303,684 | |||||||||
Net increase | 2,386,288 | $ | 24,144,329 |
* Commencement of operations on October 24, 2018.
UBS Total Return Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 20,189 | $ | 288,872 | — | $ | — | 16,980 | $ | 243,930 | ||||||||||||||||||
Shares repurchased | (156 | ) | (2,227 | ) | — | — | (362,773 | ) | (5,238,705 | ) | |||||||||||||||||
Shares converted | 4,382 | 62,527 | (4,388 | ) | (62,527 | ) | — | — | |||||||||||||||||||
Dividends reinvested | 460 | 6,668 | 30 | 444 | 63,494 | 918,522 | |||||||||||||||||||||
Net increase (decrease) | 24,875 | $ | 355,840 | (4,358 | ) | $ | (62,083 | ) | (282,299 | ) | $ | (4,076,253 | ) |
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 | ) |
161
The UBS Funds
Notes to financial statements
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 |
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 |
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The UBS Funds
Notes to financial statements
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.
The tax character of distributions paid during the fiscal years ended June 30, 2019 and June 30, 2018 were as follows:
2019 | |||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from net long-term capital gains | Total distributions paid | |||||||||||||||
UBS Dynamic Alpha Fund | $ | — | $ | 616,241 | $ | — | $ | 616,241 | |||||||||||
UBS Global Allocation Fund | — | — | — | — | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 522,535 | — | 522,535 | |||||||||||||||
UBS Engage For Impact Fund | — | 6,444 | — | 6,444 | |||||||||||||||
UBS International Sustainable Equity Fund | — | 843,254 | 1,032,298 | 1,875,552 | |||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 3,772,850 | 7,387,637 | 11,160,487 | |||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 302,357 | — | 302,357 | |||||||||||||||
UBS Municipal Bond Fund | 2,147,143 | 10,994 | — | 2,158,137 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 331,507 | — | 331,507 | |||||||||||||||
UBS Total Return Bond Fund | — | 1,192,656 | — | 1,192,656 | |||||||||||||||
2018 | |||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from long term 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 |
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The UBS Funds
Notes to financial statements
For federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments, including derivatives, held at June 30, 2019 were as follows:
Fund | Cost of investments | Gross unrealized appreciation | Gross unrealized depreciation | Net unrealized appreciation (depreciation) on investments | |||||||||||||||
UBS Dynamic Alpha Fund | $ | 58,493,304 | $ | 1,594,605 | $ | (13,350,253 | ) | $ | (11,755,648 | ) | |||||||||
UBS Global Allocation Fund | 263,928,914 | 21,678,866 | (10,113,777 | ) | 11,565,089 | ||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 215,931,557 | 9,423,754 | (4,436,722 | ) | 4,987,032 | ||||||||||||||
UBS Engage For Impact Fund | 16,059,205 | 1,053,612 | (525,849 | ) | 527,763 | ||||||||||||||
UBS International Sustainable Equity Fund | 152,496,400 | 10,984,902 | (7,601,208 | ) | 3,383,694 | ||||||||||||||
UBS U.S. Small Cap Growth Fund | 106,603,701 | 35,082,062 | (7,407,660 | ) | 27,674,402 | ||||||||||||||
UBS U.S. Sustainable Equity Fund | 31,289,986 | 1,943,522 | (1,044,777 | ) | 898,745 | ||||||||||||||
UBS Municipal Bond Fund | 99,843,767 | 3,913,642 | — | 3,913,642 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund | 23,993,533 | 1,021,699 | (2,894 | ) | 1,018,805 | ||||||||||||||
UBS Total Return Bond Fund | 39,202,874 | 1,096,382 | (149,939 | ) | 946,443 |
The difference between book and tax basis appreciation (depreciation) on investment is primarily attributed to tax deferral of losses on wash sales, tax treatment of certain derivatives and mark-to-market of passive foreign investment companies.
At June 30, 2019, the components of accumulated earnings (deficit) on a tax basis were as follows:
Fund | Undistributed tax-exempt income | Undistributed ordinary income | Undistributed long-term capital gains | Accumulated capital and other losses | Unrealized appreciation (depreciation) | Other temporary differences | Total | ||||||||||||||||||||||||
UBS Dynamic Alpha Fund | $ | — | $ | 108,140 | $ | — | $ | (30,672,682 | ) | $ | (11,719,556 | ) | $ | — | $ | (42,284,098 | ) | ||||||||||||||
UBS Global Allocation Fund | — | 7,141,671 | 10,422,893 | (234,216 | ) | 11,541,648 | — | 28,871,996 | |||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 1,976,892 | — | (4,405,977 | ) | 4,998,072 | (24,466 | ) | 2,544,521 | ||||||||||||||||||||||
UBS Engage For Impact Fund | — | 471,732 | — | — | 528,476 | (16,294 | ) | 983,914 | |||||||||||||||||||||||
UBS International Sustainable Equity Fund | — | 2,945,066 | — | (3,643,627 | ) | 3,383,794 | — | 2,685,233 | |||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 241,373 | 4,610,292 | — | 27,674,402 | — | 32,526,067 | ||||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 1,318,956 | 208,496 | — | 898,745 | — | 2,426,197 | ||||||||||||||||||||||||
UBS Municipal Bond Fund | 4,709 | — | — | (972,033 | ) | 3,913,642 | (34,005 | ) | 2,912,313 | ||||||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 80,969 | — | — | 1,018,805 | (8,825 | ) | 1,090,949 | |||||||||||||||||||||||
UBS Total Return Bond Fund | — | — | — | (3,630,323 | ) | 951,158 | — | (2,679,165 | ) |
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.
164
The UBS Funds
Notes to financial statements
At June 30, 2019, 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 | $ | 18,010,629 | $ | 12,660,174 | $ | 30,670,803 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 4,354,586 | 51,391 | 4,405,977 | ||||||||||||
UBS Municipal Bond Fund | 880,092 | 91,941 | 972,033 | ||||||||||||
UBS Total Return Bond Fund | 2,326,577 | 1,242,293 | 3,568,870 |
During the fiscal year ended June 30, 2019, the following Funds had capital loss carryforwards expire un-utilized:
Fund | Capital loss carryforwards expired | ||||||
UBS Dynamic Alpha Fund | $ | 46,428,719 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the fiscal year ended June 30, 2019, 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 International Sustainable Equity Fund | $ | — | $ | 2,867,499 | $ | 776,128 | |||||||||
UBS Total Return Bond Fund | 58,006 | — | — |
At June 30, 2019, the effect of permanent "book/tax" reclassifications resulted in increases and decreases to components of the Funds' net assets as follows:
Fund | Distributable earnings (losses) | Beneficial interest | |||||||||
UBS Dynamic Alpha Fund | $ | 46,428,719 | $ | (46,428,719 | ) | ||||||
UBS Global Allocation Fund | 8,470,961 | (8,470,961 | ) |
These differences are primarily due to the tax treatment of expiration of capital loss carryforwards and partnership adjustments.
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 June 30, 2019, 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 June 30, 2019, the Funds did not incur any interest or penalties.
165
The UBS Funds
Notes to financial statements
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 June 30, 2019 or since inception in the case of UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, and UBS Sustainable Development Bank Bond Fund remains subject to examination by the Internal Revenue Service and state taxing authorities.
166
The UBS Funds
Report of independent registered public accounting firm
To the Shareholders and the Board of Trustees of The UBS Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of The UBS Funds (the "Trust"), (comprising 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 (collectively referred to as the "Funds")), including the portfolios of investments, as of June 30, 2019, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising The UBS Funds at June 30, 2019, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Funds comprising The UBS Funds | Statement of operations | Statement of changes in net assets | Financial highlights | ||||||||||||
UBS Dynamic Alpha Fund UBS Global Allocation Fund UBS International Sustainable Equity Fund UBS U.S. Small Cap Growth Fund UBS U.S. Sustainable Equity Fund | For the year ended June 30, 2019 | For each of the two years in the period ended June 30, 2019 | For each of the five years in the period ended June 30, 2019 | ||||||||||||
UBS Municipal Bond Fund | For the year ended June 30, 2019 | For each of the two years in the period ended June 30, 2019 | For each of the four years in the period ended June 30, 2019 and the period from November 10, 2014 (commencement of operations) through June 30, 2015 | ||||||||||||
UBS Total Return Bond Fund | For the year ended June 30, 2019 | For each of the two years in the period ended June 30, 2019 | For each of the three years in the period ended June 30, 2019, the nine months ended June 30, 2016 and each of the two years in the period ended September 30, 2015 | ||||||||||||
UBS Emerging Markets Equity Opportunity Fund | For the year ended June 30, 2019 | For the year ended June 30, 2019 and the period from June 4, 2018 (commencement of operations) through June 30, 2018 | |||||||||||||
UBS Engage For Impact Fund UBS Sustainable Development Bank Bond Fund | For the period from October 24, 2018 (commencement of operations) through June 30, 2019 |
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on each of the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent
167
The UBS Funds
Report of independent registered public accounting firm (concluded)
with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more UBS investment companies since 1978.
New York, New York
August 29, 2019
168
The UBS Funds
Federal tax information (unaudited)
We are required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise you in writing as to the federal tax status of distributions received by shareholders during the fiscal year. Accordingly, the amount of ordinary dividends paid that qualify for the dividends received deduction for corporate shareholders and the amount of foreign tax credit to be passed through to shareholders are as follows:
Fund | Dividends received deduction | Long-term capital gain | Foreign tax credit | ||||||||||||
UBS Emerging Markets Equity Opportunity Fund | $ | — | $ | — | $ | 447,020 | |||||||||
UBS Engage For Impact Fund | 1,225 | — | 14,910 | ||||||||||||
UBS International Sustainable Equity Fund | — | 1,032,298 | 333,889 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 360,137 | 7,387,637 | — | ||||||||||||
UBS U.S. Sustainable Equity Fund | 206,557 | — | — | ||||||||||||
UBS Total Return Bond Fund | 3,921 | — | — |
Also, for the fiscal year ended June 30, 2019, the foreign source income for information reporting purposes for UBS Emerging Markets Equity Opportunity Fund was $3,651,054, for UBS Engage For Impact Fund was $201,791 and for UBS International Sustainable Equity Fund was $3,407,378.
For the taxable year ended June 30, 2019, the Funds designate the amounts below as the maximum amount that may be considered qualified dividend income for individual shareholders.
Fund | Maximum amount considered qualified dividend income | ||||||
UBS Emerging Markets Equity Opportunity Fund | $ | 207,282 | |||||
UBS Engage For Impact Fund | 8,977 | ||||||
UBS International Sustainable Equity Fund | 996,374 | ||||||
UBS U.S. Small Cap Growth Fund | 360,137 | ||||||
UBS U.S. Sustainable Equity Fund | 210,804 | ||||||
UBS Total Return Bond Fund | 3,936 |
Shareholders should not use the above information to prepare their tax returns. Since the Funds' fiscal year end is not the calendar year end, another notification will be sent with respect to calendar year 2019. Such notification, which will reflect the amount to be used by calendar year taxpayers on their federal income tax returns, will be made in conjunction with Form 1099 DIV and will be mailed in February 2020. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in each of the Funds.
169
The UBS Funds
General information (unaudited)
Quarterly portfolio schedule
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year as an exhibit to their reports on Form N-PORT. The Funds' Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. (Please note that on the SEC's Web site, the "filing type" designation for this information may be "NPORT-EX.") Additionally, you may obtain copies of Form N-PORT for the first and third quarters of each fiscal year 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).
170
The UBS Funds
Board approval of investment advisory agreements (unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 6 and 7, 2019 (the "Meeting"), 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 (together, the "Independent Trustees"), considered the continuation of the investment advisory agreements (the "Advisory Agreements") between the Trust and the Advisor for the UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS International Sustainable Equity Fund, UBS U.S. Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Total Return Bond Fund, UBS Municipal Bond Fund, and UBS Emerging Markets Equity Opportunity Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process on May 30, 2019 and June 6, 2019 to discuss the materials provided to them in response to the information request, including materials prepared by the Advisor, as well as reports prepared by Broadridge Financial Solutions, Inc. ("Broadridge Reports"), an independent statistical compilation company, providing comparative expense information on an actual and contractual basis and comparative performance information for the Funds. The Board also made reference to information and material that had been provided to the Independent Trustees throughout the year at Board meetings.
At the Meeting, the Board considered a number of factors in connection with its deliberations concerning the continuation of the Advisory Agreement for each Fund, including: (i) the nature, extent, and quality of the services provided by the Advisor to the Fund; (ii) the performance of the Fund and the Advisor; (iii) the Fund's expenses, costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund; and (iv) whether economies of scale are realized by the Advisor with respect to the Fund, as it grows larger, and the extent to which the economies of scale are reflected in the level of the management fees charged.
Nature, Extent, and Quality of Services.
In considering the nature, extent, and quality of the services provided by the Advisor to a Fund, the Board reviewed the material presented by the Advisor describing the various services provided to each Fund. The Board noted that in addition to investment management services, the Advisor provides each Fund with operational, legal, and compliance support. The Board also considered the scope and depth of the Advisor's organization and the experience and expertise of the professionals currently providing investment management and other services to the Funds. The Board considered that the Advisor was a well-established investment management organization employing investment personnel with significant experience in the investment management industry. The Board also considered the Advisor's in-house research capabilities, as well as other research services available to it, including research services available to the Advisor as a result of securities transactions effected for the Funds and the Advisor's other investment management clients, and noted that the Advisor had extensive global research capabilities. The Board also evaluated the Advisor's portfolio management process for each Fund, including the use of risk management techniques and the proprietary technologies utilized to structure the Fund's portfolio. The Board noted that various presentations had been made by investment personnel at Board meetings throughout the year concerning the Funds' investment performance and investment strategies, including the derivative strategies utilized by certain Funds.
The Board also noted and discussed the services that the Advisor and its affiliates provide to the Funds under other agreements with the Trust, including administration services provided by the Advisor, underwriting services provided by UBS Asset Management (US) Inc. ("UBS AM (US)"), and sub-transfer agency services provided by UBS Financial Services Inc. ("UBS Financial Services"). In connection with the non-investment management services, the Board also considered the quarterly reports that the Advisor provides to the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addition, the Board considered the presentations provided with respect to distribution strategies for the Funds. The Board noted
171
The UBS Funds
Board approval of investment advisory agreements (unaudited) (continued)
management's continuing endeavors and expenditures to address areas of heightened concern in the mutual fund industry, such as liquidity risk management. After analyzing the services provided by the Advisor to each Fund, both quantitatively and qualitatively, including the impact of these services on investment performance, the Board concluded that the nature, extent, and quality of services provided to each Fund were consistent with the operational requirements of each Fund, and met the needs of the Fund's shareholders.
Performance.
In evaluating the performance of each Fund, the Board analyzed the Broadridge Reports, which compared the performance of each Fund with other funds in its respective peer universe over various time periods. The Board also reviewed the memoranda provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Broadridge Reports, the Board noted that the UBS Municipal Bond Fund had appeared in the top performance quintile for the one-year performance period ended February 28, 2019. The Board also noted that the UBS U.S. Sustainable Equity Fund and UBS U.S. Small Cap Growth Fund appeared in the third performance quintile of its performance universe for the one-year period ended February 28, 2019, with the UBS U.S. Sustainable Equity Fund's annualized total return above the median of its performance universe and the UBS U.S. Small Cap Growth Fund's annualized total return below the median of its performance universe during such period.
At the Board's request, the Advisor further addressed the performance data for the UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS International Sustainable Equity Fund, UBS Emerging Markets Equity Opportunity Fund, and UBS Total Return Bond Fund, each of which had appeared in the fourth or fifth performance quintile for the one-year period (since inception period for UBS Emerging Markets Equity Opportunity Fund) ended February 28, 2019.
In discussing the performance of the UBS Dynamic Alpha Fund for the one-year performance period ended February 28, 2019, the Advisor explained that the main detractor from performance was asset allocation. The Advisor further explained that a preference for ex-US equities (both developed and emerging markets) over US equities, coupled with rising trade tensions between the US and China, certain European political developments, and slower global growth, had negatively impacted performance. The Advisor reported that the Fund's performance had improved for the year-to-date period through April 30, 2019. The Board noted that a new portfolio manager had begun managing the Fund in April 2018 and more time was needed to fully evaluate the performance of the Fund under the new portfolio manager. At the request of the Board, the Fund's new portfolio manager further presented to the Board on the Fund's strategy, performance, and outlook. Following the portfolio manager's presentation, the Board agreed that the Fund's performance should continue to be monitored.
In explaining the performance of the UBS Global Allocation Fund for the one-year performance period ended February 28, 2019, the Advisor explained that market allocation was the primary detractor from performance. The Advisor further explained certain specific relative-value trades during the reporting period that had negatively impacted the Fund. The Advisor also explained that security selection had detracted from performance. The Advisor noted that for the year-to-date period ended April 30, 2019, the UBS Global Allocation Fund's relative performance had improved. The Board also considered the Fund's more favorable longer-term performance, noting that the Fund appeared in the second performance quintile of its performance universe for the three-, five-, and ten-year periods ended February 28, 2019.
The Advisor next addressed the performance of the UBS International Sustainable Equity Fund. In discussing the performance of the UBS International Sustainable Equity Fund for the one-year performance period ended February 28, 2019, the Advisor explained that the sell-off in global equity markets during the fourth quarter of 2018 had negatively impacted the Fund as intrinsic value equity strategies tend to underperform in periods of risk-off sentiment. The Advisor explained that the Fund's performance had rebounded as markets stabilized, and reported that the
172
The UBS Funds
Board approval of investment advisory agreements (unaudited) (continued)
Fund ranked in the 9th percentile of the international multi-cap core universe and outperformed its benchmark by 159 (i.e., 1.59%) basis points during the year-to-date period ended April 30, 2019. The Board also considered the Fund's more favorable longer-term performance, noting that the Fund appeared in the second performance quintile of its performance universe for the three-year period ended February 28, 2019, and in the top performance quintile for the five- and ten-year periods ended February 28, 2019.
The Advisor next discussed the performance of the UBS Emerging Markets Equity Opportunity Fund for the since inception period ended February 28, 2019. The Advisor explained that security selection had been the main detractor from Fund performance, with sector allocation also detracting from relative performance. The Advisor reported that for the year-to-date period ended April 30, 2019, the Fund ranked in the 18th percentile of its performance universe and outperformed its benchmark by 417 (i.e., 4.17%) basis points. The Board noted that the Fund's inception date was June 4, 2018 and more time was needed to fully evaluate the Fund's performance.
The Advisor then addressed the performance of the UBS Total Return Bond Fund for the performance period ended February 28, 2019. The Advisor reported that the Fund's underperformance was largely attributable to the Fund's opportunistic exposures to certain emerging markets currencies and debt during a sell off period in such sector in the first half of 2018. The Advisor reported that the performance of the Fund had largely recovered, with the Fund ranking in the 33rd percentile of its performance universe and outperforming its benchmark during the year-to-date period ended April 30, 2019.
The Board concluded that the Advisor's explanations provided a sound basis for understanding the performance of each Fund that underperformed in comparison to its peer universe. The Board determined, after analyzing the performance data, that the performance of each Fund was acceptable as compared with relevant performance standards, given the investment strategies and risk profile of each Fund, the expectations of the shareholder base and the current market environment.
Fund Fees and Expenses.
When considering the fees and expenses borne by each Fund, and the reasonableness of the management fees paid to the Advisor in light of the services provided to each Fund, the Board compared the fees charged by the Advisor to each Fund to fees charged to the funds in its peer group for comparable services, as provided in the Broadridge Reports, on both an actual (taking into account expense limitation arrangements) and a contractual basis (assuming all funds in the peer expense group were similar in size to the respective Fund).
In examining the Broadridge Reports, and in reviewing comparative costs, it was noted that UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, and UBS Municipal Bond Fund had a contractual fee rate and actual total expenses lower than, or equal to, the Broadridge median of its respective expense group. The Board noted that UBS International Sustainable Equity Fund, UBS U.S. Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund, and UBS Total Return Bond Fund had a contractual fee rate higher than the Broadridge median in its respective Broadridge expense group. The Advisor noted, however, that the results of such expense comparisons showed that the actual management fee rate for each Fund, except the UBS International Sustainable Equity Fund, was lower than the Broadridge median of the Fund's respective Broadridge expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund had total expenses that were comparable to, or lower than, the Broadridge median in its respective Broadridge expense group, except for the UBS International Sustainable Equity Fund.
The Advisor and the Board discussed the management fee and expenses of the UBS International Sustainable Equity Fund. The Advisor noted that the Fund's Class P actual total expenses ranked in the 55th percentile of its expense group and reflected a fee waiver from the Advisor. The Advisor expressed its belief that the Fund's current total expense ratio remains competitive.
173
The UBS Funds
Board approval of investment advisory agreements (unaudited) (concluded)
The Board also received and considered information about the fee rates charged to other funds and accounts that are managed by the Advisor. After discussing the information about the other funds and accounts with the Advisor, the Board determined that the fees charged by the Advisor to the Funds were within a reasonable range, giving effect to differences in services performed for such other funds and accounts as compared to such fee rates. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.
Costs and Profitability.
The Board considered the costs of providing services to the Funds and the profitability of the Funds to the Advisor and its affiliates by reviewing the profitability analysis provided by the Advisor, including information about its fee revenues and expenses. The Board reviewed the profitability of each Fund to the Advisor and its affiliates, and the compensation that was received for providing services to each Fund. The profitability analysis, which provided information for the last three calendar years, included schedules relating to the revenue and expenses attributable to: (i) the investment advisory and administration services provided by the Advisor; (ii) the distribution and shareholder services provided by UBS AM (US) and UBS Financial Services; (iii) the transfer agency-related services provided by UBS Financial Services; and (iv) all services provided by the Advisor, UBS AM (US), and UBS Financial Services shown on a consolidated basis. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. The Advisor also explained to the Board the reasons for any changes in profitability of each Fund from last calendar year to this calendar year.
The Board also considered "fallout" or ancillary benefits to the Advisor or its affiliates as the result of their relationship with the Funds; for example, the ability to attract other clients due to the Advisor's role as investment advisor to the Funds and the research services available to the Advisor through soft dollar brokerage commissions. The Independent Trustees also considered the ancillary benefits received by the Advisor's affiliates, UBS Securities LLC and UBS Group AG, in the form of commissions for executing securities transactions for the Funds. Upon closely examining the information provided concerning the Advisor's profitability, the Board concluded that the level of profits realized by the Advisor and its affiliates with respect to each Fund, if any, was reasonable in relation to the nature and quality of the services that were provided.
Economies of Scale.
The Board also discussed whether economies of scale are realized by the Advisor with respect to each Fund as it grows larger, and the extent to which this is reflected in the level of management fees charged. The Board noted that with respect to most Funds, any actual or potential economies of scale are, or will be, shared with the Fund and its shareholders through existing management fee breakpoints so that as the Fund grows in size, its effective management fee declines. The Board noted that each Fund, except the UBS Total Return Bond Fund and UBS Municipal Bond Fund, had a breakpoint schedule that provided for continuing breakpoints past the current asset level for the Fund. Based on each Fund's fees and expenses and the Advisor's profitability analysis, the Board concluded that any actual or potential economies of scale would be reasonably shared with a Fund and its shareholders.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, including a majority of the Independent Trustees, with the assistance of independent counsel, concluded that the continuation of the Advisory Agreement for each Fund was in the best interests of the Fund and its shareholders.
174
The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory trust. Under Delaware law, the Board has overall responsibility for managing the business and affairs of the Trust, including general supervision and review of its investment activities. The trustees elect the officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and the Funds.
The table below shows, for each trustee and officer, his or her name, address and age, the position held with the Trust, the length of time served as a trustee or officer of the Trust, the trustee's or officer's principal occupations during the last five years, the number of funds in the UBS Family of Funds overseen by the trustee or officer and other directorships held by such trustee.
The Trust's Statement of Additional Information contains additional information about the trustees and is available, without charge, upon request, by calling 1-800-647 1568.
Non-interested Trustees
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Adela Cepeda; 61 PFM Financial Advisors LLC 222 N. LaSalle Street Suite 910 Chicago, IL 60601 | Trustee | Since 2004 | Ms. Cepeda is a managing director at PFM Financial Advisors LLC (since 2016). Prior to joining PFM Financial Advisors LLC, from 1995 to 2016, Ms. Cepeda was founder and president of A.C. Advisory, Inc. | Ms. Cepeda is a trustee of three investment companies (consisting of 19 portfolios) for which UBS AM serves as investment advisor or manager. | Ms. Cepeda is a director (since 2012) of BMO Financial Corp. (U.S. holding company for BMO Harris Bank N.A.), director of the Mercer Funds (9 portfolios) (since 2005) and trustee of the Morgan Stanley Pathway Funds (11 portfolios) (since 2008). | ||||||||||||||||||
Abbie J. Smith; 66 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 | Trustee | Since 2009 | Ms. Smith is the Boris and Irene Stern Distinguished Service Professor of Accounting in the University of Chicago Booth School of Business (since 1980). Formerly, Ms. Smith was a co-founding partner and Director of Research of Fundamental Investment Advisors, a hedge fund (co-founded in 2004, commenced operations in 2008) (from 2008 to 2010). | Ms. Smith is a trustee of three investment companies (consisting of 19 portfolios) for which UBS AM serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation (formerly known as HON Industries Inc.) (office furniture) and a director and also a member of the audit committee (since May 2017). Ms. Smith was also chair (until October 2015) of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee of the Dimensional Funds complex (128 portfolios). |
175
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued)
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Frank K. Reilly; 83 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5646 | Chairman and Trustee | Since 1992 | Mr. Reilly is the Bernard J. Hank Professor Emeritus of Finance in the Mendoza College of Business at the University of Notre Dame (since 1982), and is a Chartered Financial Analyst (CFA). | Mr. Reilly is a trustee of three investment companies (consisting of 19 portfolios) for which UBS AM serves as investment advisor or manager. | Mr. Reilly is a director (since 1994) of Discover Bank and Bank of New Castle, both banks are subsidaries of Discover Financial Services, and Mr. Reilly is chairman of the audit committee for both banks. | ||||||||||||||||||
J. Mikesell Thomas; 68 c/o UBS AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008) and president and sole shareholder of Mikesell Advisory Corp. (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (from 2004 to 2008) and of First Chicago Bancorp (from 2008 to 2011). | Mr. Thomas is a trustee of three investment companies (consisting of 19 portfolios) for which UBS AM serves as investment advisor or manager. | Mr. Thomas is a director (since 1992) and chairman of the audit committee for NorthShore University HealthSystem, a not-for-profit healthcare organization, and a director and member, (since January 2016) of the audit committee of four indirect subsidiaries of Tokio Marine Holdings, Inc., a publicly traded insurance company headquartered in Tokyo, Japan: HCC Life Insurance Co., U.S. Specialty Insurance Co., Houston Casualty Co., and Producers Agriculture Insurance Co. Mr. Thomas was previously a director (2012-October 2015), a member of the audit committee (2012-October 2015) and chairman of the Investment and Finance Committees (2014-October 2015) of HCC Insurance Holdings Inc.; and a director of First Chicago Bancorp (from 2008 to 2010) and First Chicago Bank & Trust (from 2008 to 2010). |
176
The UBS Funds
Trustee and officer information (unaudited)
Officers
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Rose Ann Bubloski*; 51 | Vice President and Assistant Treasurer | Since 2011 | Ms. Bubloski is a director (since 2012) (prior to which she was an associate director (from 2008 to 2012)) and senior manager of product control and investment support (previously named registered fund product control) of UBS Asset Manangement (Americas) Inc. and/or UBS Asset Management (US) Inc. ("UBS AM—Americas region.") She is vice president and assistant treasurer of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Franklin P. Dickson*; 41 | Vice President | Since 2017 | Mr. Dickson is an associate director (since 2015) and tax compliance manager (since October 2017) (prior to which he was a product controller (from 2015 to 2017) of product control and investment support (previously named registered fund product control) of UBS AM—Americas region. From 2013 through 2015, Mr. Dickson was fund administration and compliance manager for U.S. Bancorp Fund Services, LLC, and from April 2008 through June 2013, Mr. Dickson was vice president, client service manager at BNY Mellon Asset Servicing. Mr. Dickson is a vice president of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Mark F. Kemper**; 61 | Vice President and Assistant Secretary | Since 1999 and March 2019, respectively | Mr. Kemper is a managing director and Interim Head of Compliance and Operational Risk Control—Americas (2006 and June 2019, respectively) and previously had been general counsel of UBS AM—Americas region (from 2004 until June 2019). He has been secretary of UBS AM—Americas region (since 2004) and secretary of UBS Asset Management Trust Company (since 1993). Mr. Kemper is vice president and assistant secretary of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. Mr. Kemper is employed by UBS Business Solutions US LLC (since January 2017). | ||||||||||||
Joanne M. Kilkeary*; 51 | Vice President, Treasurer and Principal Accounting Officer | Since 2006 (Vice President) and Since 2017 (Treasurer and Principal Accounting Officer) | Ms. Kilkeary is an executive director (since 2013) (prior to which she was a director (from 2008 to 2013) and head of regulatory, tax, audit and board governance for product control and investment support (since October 2017) prior to which she was a senior manager of registered fund product control of UBS AM—Americas region (from 2004 to 2017)). Ms. Kilkeary is a vice president and assistant treasurer of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Igor Lasun; 40 | President | Since September 2018 | Mr. Lasun Is an executive director and head of fund development and management for UBS AM—Americas region (since September 2018) (prior to which he was a senior fixed income product specialist from 2007 to September 2018, and had joined the firm in 2005). In this role, he oversees development and management for both wholesale and Institutional businesses. Mr. Lasun serves as president of 7 investment companies (consisting of 61 portfolios) for which UBS AM serves as Investment advisor or manager. | ||||||||||||
William Lawlor**; 31 | Vice President and Assistant Secretary | Since 2018 | Mr. Lawlor is a director and associate general counsel with UBS Business Solutions US LLC (since 2017) and also with UBS AM—Americas region since 2013. Prior to joining UBS AM—Americas region, Mr. Lawlor attended Kent College of Law, where he graduated in 2013. Mr. Lawlor is a vice president and assistant secretary of 7 investment companies (consisting of 61 portfolios) for which UBS AM serves as investment advisor or manager. |
177
The UBS Funds
Trustee and officer information (unaudited)
Officers (concluded)
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Nancy D. Osborn*; 53 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of product control and investment support (previously named registered fund product control) of UBS AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Frank S. Pluchino*; 59 | Chief Compliance Officer | Since March 2018 | Mr. Pluchino is an executive director with UBS Business Solutions US LLC and is also the chief compliance officer of UBS Hedge Fund Solutions LLC (since 2010). Mr. Pluchino serves as chief compliance officer of 13 investment companies (consisting of 67 portfolios) for which UBS AM or one of its affiliates serves as investment advisor or manager. | ||||||||||||
Eric Sanders**; 53 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel with UBS Business Solutions US LLC (since January 2017) and also with UBS AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Philip Stacey**; 34 | Vice President and Assistant Secretary | Since June 2018 | Mr. Stacey is an executive director and associate general counsel with UBS Business Solutions US LLC (since March 2019) and also with UBS AM—Americas region since 2015. Prior to joining UBS AM—Americas region, Mr. Stacey was a legal associate with the Chicago-based investment manager HFR Asset Management, LLC from 2009 through 2015. Mr. Stacey is a vice president and assistant secretary of 7 investment companies (consisting of 61 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Keith A. Weller**; 58 | Vice President and Secretary | Since 2004 (Vice President) and Since March 2019 (Secretary) | Mr. Weller is an executive director (since 2017) and deputy general counsel with UBS Business Solutions US LLC (since February 2019) and also with UBS AM—Americas region (since 2005) and has been an attorney with affiliated entities since 1995. Mr. Weller is a vice president and assistant secretary of 8 investment companies (consisting of 62 portfolios) for which UBS AM serves as investment advisor or manager. |
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
1 Each trustee holds office for an indefinite term. Officers of the Trust are appointed by the trustees and serve at the pleasure of the Board.
178
The UBS Funds
Funds' privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds man- aged by UBS AM (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer serv- ice. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and proce- dural safeguards to protect Personal Information and to comply with applicable laws and regulations. The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes pro- visions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as oth- erwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019-6028
S1197
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of ethics adopted pursuant to Sarbanes-Oxley as a “Code of Conduct” to lessen the risk of confusion with its separate code of ethics adopted pursuant to Rule 17j-1 under the 1940 Act.)
Item 3. Audit Committee Financial Expert.
The registrant’s Board has determined that the following person serving on the registrant’s Audit Committee is an “audit committee financial expert” as defined in item 3 of Form N-CSR: J. Mikesell Thomas. Mr. Thomas is independent as defined in item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees:
For the fiscal years ended June 30, 2019 and June 30, 2018, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $551,886 and $431,769, respectively.
Fees included in the audit fees category are those associated with the annual audits of financial statements and services that are normally provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees:
In each of the fiscal years ended June 30, 2019 and June 30, 2018, the aggregate audit-related fees billed by E&Y for services rendered to the registrant that are reasonably related to the performance of the audits of the financial statements, but not reported as audit fees, were approximately $26,046 and $17,316, respectively.
Fees included in the audit-related fees category are those associated with the reading and providing of comments on the 2018 and 2017 semiannual financial statements.
There were no audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(c) Tax Fees:
In each of the fiscal years ended June 30, 2019 and June 30, 2018, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $61,487 and $53,186, respectively.
Fees included in the tax fees category comprise all services performed by professional staff in the independent accountant’s tax division except those services related to the audits. This category comprises fees for review of tax compliance, tax return preparation and excise tax calculations.
There were no tax fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(d) All Other Fees:
In each of the fiscal years ended June 30, 2019 and June 30, 2018, there were no fees billed by E&Y for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant.
Fees included in the all other fees category would consist of services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the registrant.
There were no “all other fees” required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(e) (1) Audit Committee Pre-Approval Policies and Procedures:
The Audit Committee Charter contains the Audit Committee’s pre-approval policies and procedures. Reproduced below is an excerpt from the Audit Committee Charter regarding pre-approval policies and procedures:
To carry out its purposes, the Audit Committee shall have the following duties and powers:
(a) To pre-approve the engagement of, and to recommend to the Board the engagement, retention or termination of, the independent auditors to provide audit, review or attest services to The UBS Funds, and, in connection therewith, to review and evaluate the capabilities and independence of the auditors, and receive the auditors’ specific representations as to their independence. In evaluating the auditor’s qualifications, performance and independence, the Committee must, among other things, obtain and review a report by the auditors, at least annually, describing the following items: (i) all relationships between the independent auditors and The UBS Funds, as well as with The UBS Funds’ investment advisor or any control affiliate of the investment advisor that provides ongoing services to The UBS Funds; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (iii) the audit firm’s internal quality control procedures.
(b) To pre-approve all non-audit services to be provided to The UBS Funds by the independent auditors when, without such pre-approval, the auditors would not be independent of The UBS Funds under applicable federal securities laws, rules or auditing standards.
(c) To pre-approve all non-audit services to be provided by The UBS Funds’ independent auditors to The UBS Funds’ investment advisor or to any entity, that controls, is controlled by or is under common control with The UBS Funds investment advisor (“advisor affiliate”) and that provides ongoing services to The UBS Funds when, without such pre-approval by the
Committee, the auditors would not be independent of The UBS Funds under applicable federal securities laws, rules or auditing standards.
(d) To establish, if deemed necessary or appropriate as an alternative to Committee pre-approval of services to be provided by the independent auditors as required by paragraphs (b) and (c) above, policies and procedures to permit such services to be pre-approved by other means, such as by action of a designated member or members of the Committee, subject to subsequent Committee review or oversight.
(e) To consider whether the non-audit services provided by The UBS Funds’ independent auditor to The UBS Funds investment advisor or any advisor affiliate that provides on-going services to The UBS Funds, which services were not pre-approved by the Committee, are compatible with maintaining the auditors’ independence.
Pursuant to Section (d), the Committee has delegated its responsibility to pre-approve the audit and permissible non-audit services required by paragraphs (a), (b) and (c) of Section 4, not exceeding $100,000 (excluding reasonable out-of-pocket expenses) on an annual basis to the Chairperson. All such pre-approvals will be subject to subsequent Committee review or oversight, including being reported to the full Committee on a quarterly basis at the Committee’s next regularly scheduled meeting after pre-approval. The Committee may not delegate to management its responsibility to pre-approve services to be performed by the independent auditor. Requests or applications to provide services that require specific pre-approval by the Committee or the Chairperson will be submitted by both the Fund’s independent auditors and the Fund’s Treasurer or other designated Fund officer and must include a joint statement as to whether, in their view, the request or application is consistent with U.S. Securities and Exchange Commission rules on auditor independence.
(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees:
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2019 and June 30, 2018 on behalf of the registrant.
There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2019 and June 30, 2018 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.
Tax Fees:
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2019 and June 30, 2018 on behalf of the registrant.
There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2019 and June 30, 2018 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.
All Other Fees:
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2019 and June 30, 2018 on behalf of the registrant.
There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2019 and June 30, 2018 on behalf of the registrant’s service providers that relate directly to the operations and financial reporting of the registrant.
(f) For the fiscal year ended June 30, 2019, if greater than 50%, specify the percentage of hours spent on the audit of the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons who are not full-time, permanent employees of E&Y. According to E&Y, such amount was below 50%; therefore disclosure item not applicable to this filing.
(g) For the fiscal years ended June 30, 2019 and June 30, 2018, the aggregate fees billed by E&Y of $284,773 and $332,742, respectively, for non-audit services rendered on behalf of the registrant (“covered”), its investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser (“non-covered”) that provides ongoing services (or provided during the relevant fiscal period) to the registrant for each of the last two fiscal years of the registrant is shown in the table below:
|
| 2019 |
| 2018 |
| ||
Covered Services |
| $ | 87,533 |
| $ | 70,502 |
|
Non-Covered Services |
| $ | 197,240 |
| $ | 262,240 |
|
(h) The registrant’s audit committee was not required to consider whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the registrant.
Item 6. 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, Compensation and Governance 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 Keith A. Weller, the 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 period covered by this report 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 as required pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (and designated by registrant as a “Code of Conduct”) is filed herewith as Exhibit EX-99.CODE ETH.
(a) (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are 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 are attached hereto as Exhibit EX-99.906CERT.
(c) Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934, as amended, is attached hereto as Exhibit EX-99.IRANNOTICE.
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 |
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| Igor Lasun |
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| President |
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Date: | September 9, 2019 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Igor Lasun |
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| Igor Lasun |
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| President |
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Date: | September 9, 2019 |
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By: | /s/ Joanne M. Kilkeary |
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| Joanne Kilkeary |
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| Vice President, Treasurer and Principal Accounting Officer |
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Date: | September 9, 2019 |
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