UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06637 | ||
The UBS Funds
(Exact name of registrant as specified in charter)
One North Wacker Drive, Chicago, IL 60606-2807
(Address of principal executive offices) (Zip code)
Keith A. Weller, Esq.
UBS Asset Management
One North Wacker Drive
Chicago, IL 60606
(Name and address of agent for service)
Copy to:
Bruce G. Leto, Esq.
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 260
Philadelphia, PA 19103-7098
Registrant’s telephone number, including area code: 312-525-7100
Date of fiscal year end: June 30
Date of reporting period: June 30, 2020
Item 1. Reports to Stockholders.
The UBS Funds
Annual Report | June 30, 2020
Table of contents | Page | ||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
UBS Dynamic Alpha Fund | 5 | ||||||
UBS Global Allocation Fund | 20 | ||||||
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 | 166 | ||||||
Federal tax information | 168 | ||||||
Board approval of investment advisory agreements | 170 | ||||||
Trustee and officer information | 175 |
President's letter
August 14, 2020
Dear Shareholder,
I'm writing to you after a frankly unprecedented first and second quarter of 2020, both in the world and the markets, that remind me of the title of the Dickens' classic, A Tale of Two Cities.
The onset of a global pandemic, commodity price collapse, and broader illiquidity in fixed income and particularly credit markets created a perfect storm for markets and for real economic activity, as major economies essentially shut down for unknown durations in an effort to control the spread of COVID-19. Shortly after it was clear that the spread of the virus would be a global problem, risk assets cratered amid fears for economic growth, and we witnessed massive dislocations in pricing and liquidity across financial markets.
Economic growth did suffer globally in the form of what is likely one of the sharpest economic contractions in history. But after massive government and central bank support for markets and economies around the world, markets have largely recovered, and the global activity appears to be on the mend. Lingering uncertainty and the potential for ongoing volatility in markets and economic activity cloud the outlook. Nonetheless, we are generally optimistic about the future, as policymakers introduced measures to provide a bridge until a time when a vaccine for COVID-19 becomes broadly available and allows for a return to pre-pandemic behaviors and patterns of spending.
The nascent recovery looked V-shaped at first, but we knew that pace of improvement would prove unsustainable. A more gradual rebound is now underway. The differing character of economic expansions across the world will most likely be a function of the strength and persistence of the various evolving policy responses, but ultimately captive to progress on public health outcomes, most importantly accelerating the development and deployment of a vaccine.
A lengthy list of fiscal and monetary support measures catalyzed the bounce back in markets. The Federal Reserve swiftly cut rates to zero, and expanded quantitative easing on an unlimited basis to remedy market dislocations. In coordination with the Treasury, the central bank brought back some of the 2008-2009 'alphabet soup' of programs, supporting key asset classes and, importantly, introduced new facilities to prevent corporate liquidity pressures from leading to undue insolvencies. The Fed also enhanced access to dollar swap lines to mitigate funding pressures, fulfilling its perceived role as the world's central bank. The US Congress, for its part, acted quite swiftly relative to history in passing the CARES Act, a USD 2.2 trillion (~10% of gross domestic product ("GDP")) bill that provided crucial income support for businesses to retain employees as well as substantial benefits to many workers who lost their jobs.
Policymakers around the world also delivered robust policies to defend against the COVID-19 shock. China has stepped up infrastructure investment and introduced tax cuts. In Europe, the European Central Bank (ECB) significantly expanded quantitative easing and introduced negative funding rates, and a collectivist approach to fiscal policy is helping to spur the convergence of Italian yields downwards towards their German counterparts. And, Germany, long reluctant to engage in fiscal stimulus, amended constitutional rules that prevented deficit spending. Countries such as Germany, France, and the UK have stepped in to guarantee business survival and employee wages. In the months after the market meltdown, the net global fiscal stimulus as a percent of GDP already surpassed that of 2008-2009.
Looking back to the sell-off in the first quarter, global stocks, as measured by the MSCI All Country World Index (net), had their worst performance over a calendar quarter since the depth of the financial crisis, returning -21.7%. Most major markets reacted in a broadly uniform manner, with regions such as the US (-19.6%, S&P 500 Index), Europe (-24.3%, MSCI Europe Index (net)) and Emerging Markets (-23.6%, MSCI Emerging Market Index (net)) all
1
President's letter
losing roughly a fifth of their value during this period. Despite being the first country to be afflicted by the virus, Chinese stocks (-11.5%, CSI 300 Index (net)) ended up as relative outperformers.
Globally, on average, fixed income markets posted negative returns over the first quarter but generally held up better than equities (-0.3%, Bloomberg Barclays Global Aggregate Index). Within bond markets, assets perceived as safe havens were heavily in demand. US government bonds (+8.2%, Bloomberg Barclays US Treasury Index) led the way as yields hit new record lows. In contrast, riskier segments of the fixed income universe like high yield bonds (-12.0%, Markit iBoxx Liquid High Yield Index) and emerging market debt (-14.9%, JPM GBI-EM Global Core Index) lagged given the search for quality and safety. Oil prices also sold off significantly (-66.8%, S&P GSCI Crude Index).
That reversed quite abruptly in the second quarter with many markets making up all or most of the losses. All told, global stocks, as measured by the MSCI All Country World Index (net), returned +19.2%. Most notably, US stocks (+20.5%, S&P 500 Index) delivered the strongest performance over the quarter, followed by emerging market stocks (+18.1%, MSCI Emerging Markets Index (net)) and developed market ex-US equities (+15.3%, MSCI World ex-USA Index (net)).
Globally, fixed income markets in the second quarter posted positive returns (+3.3%, Bloomberg Barclays Global Aggregate Index) but lagged the gains seen in equities. Within fixed income, US dollar denominated emerging market debt (+12.9%, JPMorgan EMBI Global Core Index), US investment grade corporate credit (+9.0%, Bloomberg Barclays US Corporate Bond Index), and US high yield bonds (+7.7%, Markit iBoxx Liquid High Yield Index) delivered the strongest performance. The broad and unexpected nature of the volatility in the first half of the year is a reminder to not forget the importance of diversification. We believe that spreading risk exposures across a range of asset classes and investment styles remains paramount to delivering sustainable results and mitigating damage during adverse events.
With the potential for continued volatility ahead, the timeless challenge of building a genuinely diversified portfolio capable of delivering growth and downside protection takes on an added degree of difficulty given the low starting point for sovereign bond yields across advanced economies.
We believe that there are many diverse and 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.
Sincerely,
Igor Lasun
President
The UBS Funds
Executive Director
UBS Asset Management (Americas) Inc.
2
The markets in review
A global recession
After initially expanding, the global economy fell into a recession as the fallout from the COVID-19 pandemic triggered a severe contraction. Lockdowns were instituted around the world in an attempt to stem the spread of the virus—with varying degrees of success. In the US, the US Commerce Department reported that gross domestic product ("GDP") grew at a 2.4% seasonally adjusted annualized rate during the fourth quarter of 2019. GDP growth was then -5.0% during the first quarter of 2020. This marked the sharpest quarterly decline since the fourth quarter of 2008. The Commerce Department's initial estimate for second quarter annualized GDP growth—released after the reporting period ended—was -32.9%—the steepest decline on record.
The US Federal Reserve Board (the "Fed") took a number of unprecedented actions to support the economy and maintain the proper functioning of the financial markets. After lowering the federal funds rate three times in 2019, the Fed moved decisively in March 2020. On March 3, 2020, it lowered the federal funds rate to a range between 1.00% and 1.25% and, on March 15, this was reduced to a range between 0.00% and 0.25%. Later in the month, the Fed announced it would make unlimited purchases of Treasury and mortgage securities. The Fed also expanded its credit facilities to include the purchase of individual corporate bonds. Meanwhile, in March 2020, the US government passed a $2 trillion fiscal stimulus bill to aid the economy.
From a global perspective, in its June 2020 World Economic Outlook Update, the International Monetary Fund ("IMF") said, "The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast...As with the April 2020 WEO [World Economic Outlook] projections, there is a higher-than-usual degree of uncertainty around this forecast. The baseline projection rests on key assumptions about the fallout from the pandemic. In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020... For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity." From a regional perspective, the IMF projects the US economy will contract 8.0% in 2020, compared to the 2.3% GDP expansion in 2019. Elsewhere, the IMF anticipates that 2020 GDP growth in the eurozone, UK and Japan will be -10.2%, -10.2% and -5.8%, respectively. For comparison purposes, the GDP of these economies expanded 1.3%, 1.4% and 0.7%, respectively, in 2019.
Global equities post mixed results
The global equity market generated mixed results during the reporting period. US stocks initially moved higher and reached an all-time high in mid-February 2020. Supporting the market was optimism over the completion of the first phase of the trade agreement between the US and China, and overall positive corporate results. However, over the next six weeks the impact from the pandemic triggered a rapid decline, as the US market experienced the fastest fall on record from an all-time high to a bear market. A similar dynamic also played out in stock markets overseas. In a surprise to many, global equities then sharply rallied over the second quarter of 2020. This turnaround occurred given the aggressive actions by global central banks, reopenings of some economies and hopes for a COVID-19 vaccine. For the 12-months ended June 30, 2020, the S&P 500 Index1 gained 7.51%. Returns were significantly weaker outside the US. International developed equities, as measured by the MSCI EAFE Index (net),2 returned -5.13% during the reporting period, while emerging markets equities, as measured by the MSCI Emerging Markets Index (net),3 returned -3.39%.
1 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
2 The MSCI EAFE Index (net) is an index of stocks 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.
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 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 overall fixed income market rallies
The global fixed income market generated strong results during the reporting period, as it was aided by periods of elevated investor risk aversion. In the US, both short- and long-term Treasury yields moved significantly lower (bond yields and prices move in the opposite direction). For the 12-month reporting period as a whole, the yield on the US 10-year Treasury fell from 2.00% to 0.66%. Government bond yields outside the US also moved lower given the fallout from the pandemic. The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Index,4 returned 8.74% during the 12-months ended June 30, 2020. Returns of riskier fixed income securities were less robust. High yield bonds, as measured by the ICE BofAML US High Yield Cash Pay Constrained Index,5 returned -1.14%. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),6 gained 1.52% during the reporting period.
4 The Bloomberg Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
5 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.
6 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
4
UBS Dynamic Alpha Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned -1.45% (Class A shares returned -6.87% after the deduction of the maximum sales charge), while Class P shares returned -1.28%. For purposes of comparison, the ICE BofA US Treasury 1-5 Year Index returned 5.25% during the same time period, the MSCI World Index (net) returned 2.84%, and the FTSE One-Month US Treasury Bill Index returned 1.37%. (Class P shares have lower expenses than other share classes of the Fund.)
Returns for all share classes over various time periods are shown on page 7; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a negative return over the reporting period. Both market allocation decisions and active currency allocation decisions detracted from performance. On the upside, performance was positively impacted by strategic allocations to global equities and fixed income.
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:
• Overall, the portfolio's strategic allocations to equities and bonds contributed to performance.
– Our strategic allocation to global equities proved successful over the reporting period, as the asset class recovered from the COVID-19 induced selloff and delivered positive returns over the last 12 months.
– Strategic exposure to fixed income, particularly to corporate debt, was also additive for returns.
• Certain market allocation decisions contributed to results.
– Within equities, performance was positively impacted by a few equity relative value trades, including a long Japanese versus French equities position. This benefited from the relative outperformance of Japanese equities over French equities, as Japan initially managed the COVID-19 outbreak more successfully than France. Elsewhere, a long FTSE 250 versus FTSE 100 position (closed in 2019) benefited from lowered probabilities of a "hard Brexit" in the second half of 2019 given that FTSE 250 stocks are more domestically focused. Finally, a preference for Chinese equities over broader emerging market equities (closed in 2019) was supported by the improvement in trade relations between the US and China at the end of 2019.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Dynamic Alpha Fund
– Within fixed income, a long US investment grade credit directional trade (closed in June 2020) benefited performance. This was due to the explicit support for corporate bonds by the US Federal Reserve Board, lower interest rates, and spread tightening. Additionally, a long US two-year Treasury versus US 10-year Treasury trade initiated last year also contributed to performance over the period.
• Certain active currency positions added to results during the period.
– Most notably, short positions in the Canadian dollar, New Zealand dollar and Australian dollar versus the US dollar were beneficial, as the US dollar outperformed many currencies on the back of a general retracement in risk taking amid the COVID-19 pandemic. Over the second quarter of 2020, we saw a rebound in these cyclically sensitive currencies versus the US dollar, although the trades still ended the 12 month reporting period in positive territory. Lastly, it was also beneficial to have had a short position in the Thai baht versus the US dollar given the risk-off dynamic discussed above.
What didn't work:
• Overall, market allocation decisions detracted from results.
– Most notably within equities, performance was negatively impacted by a long MSCI EAFE versus S&P 500 relative value trade. This was closed towards the end of the reporting period as international stocks, which are more trade dependent and cyclical than their US counterparts, underperformed on a relative basis. Another detractor was a long position in European banks versus European stocks overall, as the banking sector lagged broader equity markets in Europe. However, banks tend to outperform during economic recoveries, which should help returns going forward. Performance was also weighed down by a long China H shares versus Taiwanese equities trade which we closed in 2019. Taiwanese equities outperformed over the period that the trade was in the portfolio, as the country's technology sector attracted capital in the wake of the US-China trade war.
• Overall, active currency positions detracted from returns:
– Most notably, long positions versus the US dollar in certain Latin American, European, and Asian currencies, such as the Brazilian real, Colombian peso, Mexican peso, Chilean peso, Norwegian krone, Euro, Swiss Franc, and Japanese yen weighed on performance, as the US dollar appreciated against them over the period as a whole. For the most part, the US dollar was benefited by global growth concerns amid the COVID-19 pandemic as it maintained its stance as a global safe haven.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2020. The views and opinions in the letter were current as of August 14, 2020. 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 06/30/20 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | (1.45 | )% | (1.67 | )% | 1.80 | % | |||||||||
Class P2 | (1.28 | ) | (1.42 | ) | 2.06 | ||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (6.87 | )% | (2.76 | )% | 1.22 | % | |||||||||
ICE BofA US Treasury 1-5 Year Index3 | 5.25 | 2.31 | 1.84 | ||||||||||||
MSCI World Index (net)4 | 2.84 | 6.90 | 9.95 | ||||||||||||
FTSE One-Month US Treasury Bill Index5 | 1.37 | 1.09 | 0.57 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—2.05% and 1.38%; Class P—1.73% and 1.13%. 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 28, 2020, 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 $2,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS Dynamic Alpha Fund Class A and Class P shares versus the ICE BofA 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, 2020. 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 BofA 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, 2010 = $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 BofA 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, 2010 = $2,000,000
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, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
U.S. Treasury Bills, 0.173% due 10/15/20 | 23.0 | % | |||||
U.S. Treasury Notes, 2.000% due 02/15/22 | 3.7 | ||||||
U.S. Treasury Bills, 0.361% due 12/03/20 | 3.4 | ||||||
U.S. Treasury Notes, 0.250% due 05/31/25 | 3.2 | ||||||
Bundesobligation, 0.010% due 04/11/25 | 3.0 | ||||||
U.S. Treasury Notes, 1.875% due 07/31/22 | 3.0 | ||||||
New Zealand Government Bond, 3.000% due 09/20/30 | 1.9 | ||||||
Ireland Government Bond, 1.000% due 05/15/26 | 1.7 | ||||||
U.S. Treasury Notes, 0.375% due 04/30/25 | 1.6 | ||||||
Canadian Government Bond, 1.500% due 09/01/24 | 1.5 | ||||||
Total | 46.0 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 55.9 | % | |||||
United Kingdom | 4.9 | ||||||
France | 4.1 | ||||||
Germany | 3.7 | ||||||
Spain | 2.3 | ||||||
Total | 70.9 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
9
UBS Dynamic Alpha Fund
Industry diversification—June 30, 2020 (unaudited)1,2
Corporate bonds | Percentage of net assets | ||||||
Advertising | 0.1 | % | |||||
Aerospace & defense | 0.1 | ||||||
Agriculture | 0.6 | ||||||
Airlines | 0.2 | ||||||
Apparel | 0.0 | † | |||||
Auto manufacturers | 1.6 | ||||||
Banks | 9.6 | ||||||
Beverages | 0.1 | ||||||
Biotechnology | 0.2 | ||||||
Chemicals | 1.8 | ||||||
Commercial services | 0.1 | ||||||
Computers | 0.2 | ||||||
Diversified financial services | 0.1 | ||||||
Electric | 3.0 | ||||||
Engineering & construction | 0.5 | ||||||
Food | 0.2 | ||||||
Gas | 1.3 | ||||||
Healthcare-services | 0.1 | ||||||
Insurance | 2.5 | ||||||
Machinery-diversified | 0.1 | ||||||
Media | 0.9 | ||||||
Mining | 0.3 | ||||||
Miscellaneous manufacturers | 0.3 | ||||||
Oil & gas | 1.2 |
Corporate bonds—(concluded) | Percentage of net assets | ||||||
Pharmaceuticals | 1.6 | ||||||
Pipelines | 0.7 | ||||||
Real estate | 0.3 | ||||||
Real estate investment trusts | 0.8 | ||||||
Retail | 0.0 | † | |||||
Savings & loans | 0.3 | ||||||
Semiconductors | 0.2 | ||||||
Software | 0.1 | ||||||
Telecommunications | 0.5 | ||||||
Transportation | 0.1 | ||||||
Water | 1.1 | ||||||
Total corporate bonds | 30.8 | % | |||||
Mortgage-backed securities | 0.0 | %† | |||||
Non-U.S. government agency obligations | 11.8 | ||||||
U.S. Treasury obligations | 13.0 | ||||||
Short-term investments | 4.4 | ||||||
Short-term U.S. Treasury obligations | 26.4 | ||||||
Investment of cash collateral from securities loaned | 0.9 | ||||||
Total investments | 87.3 | % | |||||
Other assets in excess of liabilities | 12.7 | ||||||
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, 2020
Face amount1 | Value | ||||||||||
Corporate bonds: 30.8% | |||||||||||
Australia: 1.2% | |||||||||||
APT Pipelines Ltd. 4.200%, due 03/23/252 | $ | 15,000 | $ | 16,445 | |||||||
Aurizon Network Pty Ltd., MTN 4.000%, due 06/21/242 | AUD | 30,000 | 22,066 | ||||||||
Ausgrid Finance Pty Ltd., MTN 3.750%, due 10/30/242 | AUD | 30,000 | 22,230 | ||||||||
Commonwealth Bank of Australia, EMTN (fixed, converts to FRN on 10/03/24), 1.936%, due 10/03/292 | EUR | 100,000 | 115,680 | ||||||||
Glencore Funding LLC 4.875%, due 03/12/293 | 40,000 | 45,362 | |||||||||
Origin Energy Finance Ltd. 5.450%, due 10/14/212 | 45,000 | 47,160 | |||||||||
Scentre Group Trust 1/Scentre Group Trust 2 2.375%, due 04/28/212 | 45,000 | 45,212 | |||||||||
Westpac Banking Corp. 2.000%, due 01/13/23 | 30,000 | 31,059 | |||||||||
(fixed, converts to FRN on 09/21/27), 5.000%, due 09/21/27 4 | 80,000 | 79,050 | |||||||||
424,264 | |||||||||||
Belgium: 0.4% | |||||||||||
Anheuser-Busch InBev Worldwide, Inc. 4.150%, due 01/23/255 | 25,000 | 28,368 | |||||||||
RESA SA 1.000%, due 07/22/262 | EUR | 100,000 | 114,392 | ||||||||
142,760 | |||||||||||
Bermuda: 0.1% | |||||||||||
XLIT Ltd. 5.250%, due 12/15/43 | 30,000 | 40,169 | |||||||||
Canada: 0.6% | |||||||||||
Canadian Natural Resources Ltd. 2.950%, due 01/15/23 | 35,000 | 36,192 | |||||||||
3.850%, due 06/01/27 | 35,000 | 37,400 | |||||||||
Cenovus Energy, Inc. 4.250%, due 04/15/275 | 35,000 | 31,763 | |||||||||
Royal Bank of Canada 1.650%, due 07/15/21 | CAD | 85,000 | 63,240 | ||||||||
Suncor Energy, Inc. 3.100%, due 05/15/25 | 15,000 | 16,021 | |||||||||
TELUS Corp. 3.750%, due 01/17/25 | CAD | 15,000 | 12,052 | ||||||||
196,668 | |||||||||||
China: 0.1% | |||||||||||
Nexen, Inc. 6.400%, due 05/15/37 | 35,000 | 50,028 | |||||||||
Czech Republic: 0.3% | |||||||||||
NET4GAS sro, EMTN 2.500%, due 07/28/212 | EUR | 100,000 | 114,401 |
Face amount1 | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
France: 3.3% | |||||||||||
AXA SA, EMTN (fixed, converts to FRN on 05/28/29), 3.250%, due 05/28/492 | EUR | 100,000 | $ | 122,839 | |||||||
BNP Paribas SA, EMTN 1.000%, due 04/17/242 | EUR | 100,000 | 114,104 | ||||||||
BPCE SA, EMTN 1.375%, due 03/23/262 | EUR | 100,000 | 116,029 | ||||||||
Credit Agricole SA, EMTN 1.375%, due 03/13/252 | EUR | 100,000 | 116,299 | ||||||||
Credit Logement SA | |||||||||||
3 mo. Euribor + 1.150%, 0.784%, due 09/16/202,4,6 | EUR | 100,000 | 91,004 | ||||||||
Electricite de France SA (fixed, converts to FRN on 01/22/24), 5.625%, due 01/22/242,4 | 100,000 | 103,375 | |||||||||
SCOR SE (fixed, converts to FRN on 03/13/29), 5.250%, due 03/13/292,4 | 200,000 | 193,000 | |||||||||
TDF Infrastructure SASU 2.875%, due 10/19/222 | EUR | 100,000 | 115,295 | ||||||||
Terega SA 2.200%, due 08/05/252 | EUR | 100,000 | 118,556 | ||||||||
Unibail-Rodamco-Westfield SE (fixed, converts to FRN on 01/25/26), 2.875%, due 01/25/262,4 | EUR | 100,000 | 98,868 | ||||||||
1,189,369 | |||||||||||
Germany: 0.7% | |||||||||||
Volkswagen International Finance N.V. 4.125%, due 11/16/382 | EUR | 100,000 | 137,376 | ||||||||
Series NC6, (fixed, converts to FRN on 06/27/24), 3.375%, due 06/27/24 2,4 | EUR | 100,000 | 111,106 | ||||||||
248,482 | |||||||||||
Guernsey: 0.3% | |||||||||||
Globalworth Real Estate Investments Ltd., EMTN 3.000%, due 03/29/252 | EUR | 100,000 | 112,642 | ||||||||
Hong Kong: 0.6% | |||||||||||
CNAC HK Finbridge Co. Ltd. 4.625%, due 03/14/232 | 200,000 | 212,270 | |||||||||
Israel: 0.4% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 20,000 | 19,917 | |||||||||
Teva Pharmaceutical Finance Netherlands II BV 1.125%, due 10/15/242 | EUR | 100,000 | 98,271 | ||||||||
Teva Pharmaceutical Finance Netherlands III BV 2.800%, due 07/21/23 | 40,000 | 37,988 | |||||||||
156,176 |
11
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Face amount1 | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
Japan: 0.1% | |||||||||||
Mitsubishi UFJ Financial Group, Inc. 2.665%, due 07/25/22 | 25,000 | $ | 25,986 | ||||||||
Luxembourg: 0.3% | |||||||||||
ADO Properties SA 1.500%, due 07/26/242 | EUR | 100,000 | 106,373 | ||||||||
Mexico: 1.4% | |||||||||||
Mexico City Airport Trust 5.500%, due 07/31/472 | 200,000 | 176,300 | |||||||||
Orbia Advance Corp. SAB de CV 5.500%, due 01/15/483 | 200,000 | 207,250 | |||||||||
Petroleos Mexicanos, EMTN 3.750%, due 02/21/242 | EUR | 100,000 | 103,221 | ||||||||
486,771 | |||||||||||
Netherlands: 0.7% | |||||||||||
ING Groep N.V., EMTN 1.125%, due 02/14/252 | EUR | 100,000 | 115,426 | ||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. 2.700%, due 05/01/253 | 5,000 | 5,252 | |||||||||
3.150%, due 05/01/273 | 15,000 | 15,914 | |||||||||
Volkswagen International Finance N.V. 1.125%, due 10/02/232 | EUR | 100,000 | 112,283 | ||||||||
248,875 | |||||||||||
Poland: 0.3% | |||||||||||
Tauron Polska Energia SA 2.375%, due 07/05/272 | EUR | 100,000 | 112,448 | ||||||||
Portugal: 0.3% | |||||||||||
Galp Gas Natural Distribuicao SA, EMTN 1.375%, due 09/19/232 | EUR | 100,000 | 114,058 | ||||||||
Singapore: 0.6% | |||||||||||
DBS Group Holdings Ltd., GMTN (fixed, converts to FRN on 09/07/21), 3.600%, due 09/07/212,4 | 200,000 | 200,500 | |||||||||
Spain: 1.7% | |||||||||||
Banco Santander SA 3.250%, due 04/04/262 | EUR | 100,000 | 121,142 | ||||||||
Banco Santander SA, EMTN 4.000%, due 01/19/232 | AUD | 200,000 | 143,065 | ||||||||
Canal de Isabel II Gestion SA, EMTN 1.680%, due 02/26/252 | EUR | 100,000 | 118,622 | ||||||||
Iberdrola International BV, EMTN (fixed, converts to FRN on 03/26/24), 2.625%, due 03/26/242,4 | EUR | 100,000 | 115,435 | ||||||||
Redexis Gas Finance BV, EMTN 1.875%, due 04/27/272 | EUR | 100,000 | 116,136 | ||||||||
614,400 |
Face amount1 | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
Switzerland: 0.4% | |||||||||||
Argentum Netherlands BV for Swiss Life AG (fixed, converts to FRN on 06/16/25), 4.375%, due 06/16/252,4 | EUR | 100,000 | $ | 123,739 | |||||||
United Kingdom: 4.9% | |||||||||||
Anglian Water Services Financing PLC, EMTN 4.500%, due 02/22/262 | GBP | 100,000 | 135,496 | ||||||||
Barclays Bank PLC 9.500%, due 08/07/212 | GBP | 40,000 | 53,299 | ||||||||
Barclays PLC EMTN (fixed, converts to FRN on 10/06/22), 2.375%, due 10/06/232 | GBP | 100,000 | 125,388 | ||||||||
Barclays PLC, EMTN (fixed, converts to FRN on 11/11/20), 2.625%, due 11/11/252 | EUR | 100,000 | 112,193 | ||||||||
BAT Capital Corp. 3.557%, due 08/15/27 | 35,000 | 37,870 | |||||||||
BAT International Finance PLC, EMTN 0.875%, due 10/13/232 | EUR | 100,000 | 112,849 | ||||||||
BUPA Finance PLC (fixed, converts to FRN on 09/16/20), 6.125%, due 09/16/204 | GBP | 20,000 | 24,661 | ||||||||
Lloyds Banking Group PLC, EMTN 2.250%, due 10/16/242 | GBP | 100,000 | 127,712 | ||||||||
Nationwide Building Society, EMTN (fixed, converts to FRN on 07/25/24), 2.000%, due 07/25/292 | EUR | 100,000 | 112,233 | ||||||||
Phoenix Group Holdings PLC, EMTN 4.125%, due 07/20/222 | GBP | 150,000 | 191,725 | ||||||||
Reynolds American, Inc. 4.450%, due 06/12/25 | 25,000 | 28,165 | |||||||||
Royal Bank of Scotland Group PLC (fixed, converts to FRN on 06/25/23), 4.519%, due 06/25/24 | 200,000 | 217,280 | |||||||||
6.100%, due 06/10/23 | 40,000 | 44,289 | |||||||||
SSE PLC (fixed, converts to FRN on 09/01/20), 3.875%, due 09/10/202,4 | GBP | 100,000 | 123,833 | ||||||||
Virgin Money UK PLC, GMTN (fixed, converts to FRN on 04/24/25), 3.375%, due 04/24/262 | GBP | 100,000 | 122,035 | ||||||||
WPP Finance 2010 3.750%, due 09/19/24 | 25,000 | 26,968 | |||||||||
Yorkshire Water Finance PLC, EMTN (fixed, converts to FRN on 03/22/23), 3.750%, due 03/22/462 | GBP | 100,000 | 127,543 | ||||||||
1,723,539 | |||||||||||
United States: 12.1% | |||||||||||
3M Co. 2.650%, due 04/15/25 | 20,000 | 21,629 | |||||||||
AbbVie, Inc. 2.125%, due 06/01/293 | EUR | 100,000 | 121,120 |
12
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Face amount1 | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
United States—(continued) | |||||||||||
3.450%, due 03/15/223 | 25,000 | $ | 25,973 | ||||||||
4.250%, due 11/14/28 | 35,000 | 41,304 | |||||||||
4.750%, due 03/15/453 | 15,000 | 18,567 | |||||||||
Air Products and Chemicals, Inc. 2.050%, due 05/15/30 | 20,000 | 21,016 | |||||||||
Albemarle Corp. 5.450%, due 12/01/44 | 50,000 | 52,529 | |||||||||
Altria Group, Inc. 4.400%, due 02/14/26 | 25,000 | 28,755 | |||||||||
American Airlines Pass-Through Trust Series 2014-1, Class B, 4.375%, due 10/01/22 | 45,861 | 32,973 | |||||||||
Apache Corp. 4.250%, due 01/15/44 | 60,000 | 45,160 | |||||||||
Archer-Daniels-Midland Co. 2.750%, due 03/27/255 | 15,000 | 16,273 | |||||||||
AT&T, Inc. 3.000%, due 02/15/22 | 45,000 | 46,857 | |||||||||
4.350%, due 03/01/295 | 70,000 | 81,600 | |||||||||
Bank of America Corp. (fixed, converts to FRN on 12/20/22), 3.004%, due 12/20/23 | 90,000 | 94,658 | |||||||||
Bank of America Corp., MTN 3.875%, due 08/01/25 | 100,000 | 113,223 | |||||||||
Biogen, Inc. 2.250%, due 05/01/30 | 55,000 | 55,503 | |||||||||
Bristol-Myers Squibb Co. 3.875%, due 08/15/253 | 70,000 | 79,631 | |||||||||
Broadcom, Inc. 3.150%, due 11/15/253 | 35,000 | 37,160 | |||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital 4.500%, due 02/01/24 | 50,000 | 55,321 | |||||||||
Chevron Corp. 1.141%, due 05/11/23 | 10,000 | 10,172 | |||||||||
Chevron Phillips Chemical Co. LLC/Chevron Phillips Chemical Co. LP 3.300%, due 05/01/233 | 120,000 | 125,367 | |||||||||
5.125%, due 04/01/253 | 25,000 | 28,655 | |||||||||
Cigna Corp. 3.400%, due 09/17/21 | 25,000 | 25,845 | |||||||||
4.375%, due 10/15/28 | 45,000 | 53,254 | |||||||||
Citigroup, Inc. 3.875%, due 10/25/23 | 130,000 | 142,787 | |||||||||
4.600%, due 03/09/26 | 30,000 | 34,253 | |||||||||
Comcast Corp. 3.950%, due 10/15/25 | 45,000 | 51,568 | |||||||||
Conagra Brands, Inc. 3.800%, due 10/22/21 | 15,000 | 15,589 | |||||||||
Costco Wholesale Corp. 1.600%, due 04/20/30 | 10,000 | 10,103 |
Face amount1 | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
United States—(continued) | |||||||||||
CVS Health Corp. 2.625%, due 08/15/24 | 45,000 | $ | 48,049 | ||||||||
3.350%, due 03/09/21 | 17,000 | 17,337 | |||||||||
Dell International LLC/EMC Corp. 5.300%, due 10/01/293,5 | 60,000 | 66,423 | |||||||||
Diamondback Energy, Inc. 3.250%, due 12/01/26 | 50,000 | 50,272 | |||||||||
Enable Midstream Partners LP 3.900%, due 05/15/247 | 25,000 | 24,488 | |||||||||
Energy Transfer Operating LP 4.500%, due 04/15/24 | 35,000 | 37,944 | |||||||||
EnLink Midstream Partners LP 4.400%, due 04/01/24 | 40,000 | 33,220 | |||||||||
ERAC USA Finance LLC 5.625%, due 03/15/423 | 35,000 | 40,674 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 15,000 | 16,704 | |||||||||
Ford Motor Credit Co. LLC, EMTN 3.021%, due 03/06/24 | EUR | 100,000 | 107,372 | ||||||||
Freeport-McMoRan, Inc. 3.875%, due 03/15/23 | 70,000 | 70,091 | |||||||||
General Electric Co. 3.450%, due 05/01/27 | 10,000 | 10,258 | |||||||||
3.625%, due 05/01/30 | 10,000 | 10,009 | |||||||||
General Electric Co., GMTN 3.150%, due 09/07/22 | 30,000 | 31,391 | |||||||||
General Motors Financial Co., Inc. 4.350%, due 04/09/25 | 90,000 | 94,987 | |||||||||
Georgia Power Co., Series A, 2.100%, due 07/30/23 | 25,000 | 26,014 | |||||||||
Goldman Sachs Group, Inc./The 3.375%, due 03/27/252 | EUR | 35,000 | 43,811 | ||||||||
3.500%, due 04/01/25 | 120,000 | 131,581 | |||||||||
Goldman Sachs Group, Inc./The, EMTN 1.625%, due 07/27/262 | EUR | 50,000 | 58,595 | ||||||||
Healthpeak Properties, Inc. 3.875%, due 08/15/24 | 35,000 | 38,470 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 45,000 | 49,636 | |||||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 260,000 | 276,440 | |||||||||
3.625%, due 12/01/27 | 60,000 | 66,307 | |||||||||
Kinder Morgan, Inc. 3.150%, due 01/15/23 | 35,000 | 36,572 | |||||||||
5.625%, due 11/15/233 | 35,000 | 39,519 | |||||||||
Kraft Heinz Foods Co. 5.000%, due 06/04/42 | 45,000 | 47,400 | |||||||||
Liberty Mutual Group, Inc. 4.569%, due 02/01/293 | 25,000 | 29,277 | |||||||||
Lincoln National Corp. 3.800%, due 03/01/28 | 70,000 | 77,600 |
13
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Face amount1 | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
United States—(continued) | |||||||||||
Marathon Oil Corp. 3.850%, due 06/01/255 | 35,000 | $ | 35,282 | ||||||||
Morgan Stanley, GMTN 2.500%, due 04/21/21 | 115,000 | 116,925 | |||||||||
4.000%, due 07/23/25 | 85,000 | 96,372 | |||||||||
4.350%, due 09/08/26 | 50,000 | 57,657 | |||||||||
MPLX LP 4.250%, due 12/01/27 | 30,000 | 32,519 | |||||||||
National Rural Utilities Cooperative Finance Corp. 3.700%, due 03/15/29 | 15,000 | 17,238 | |||||||||
NIKE, Inc. 2.400%, due 03/27/25 | 10,000 | 10,755 | |||||||||
Noble Energy, Inc. 3.850%, due 01/15/285 | 20,000 | 19,319 | |||||||||
Oncor Electric Delivery Co. LLC 3.700%, due 11/15/285 | 25,000 | 29,342 | |||||||||
Oracle Corp. 2.500%, due 04/01/25 | 20,000 | 21,511 | |||||||||
Otis Worldwide Corp. 2.565%, due 02/15/303 | 50,000 | 52,432 | |||||||||
PacifiCorp. 2.700%, due 09/15/30 | 5,000 | 5,446 | |||||||||
PPL Capital Funding, Inc. 4.700%, due 06/01/43 | 60,000 | 68,079 | |||||||||
Raytheon Technologies Corp. 3.950%, due 08/16/25 | 25,000 | 28,544 | |||||||||
Southern California Edison Co., Series E, 3.700%, due 08/01/25 | 20,000 | 22,124 | |||||||||
Southern Co./The 3.250%, due 07/01/26 | 35,000 | 38,787 | |||||||||
Southwestern Electric Power Co. 6.200%, due 03/15/40 | 50,000 | 68,743 | |||||||||
Swiss Re Treasury U.S. Corp. 4.250%, due 12/06/423 | 30,000 | 36,664 | |||||||||
TWDC Enterprises 18 Corp., MTN 1.850%, due 07/30/265 | 10,000 | 10,326 | |||||||||
United Airlines Pass-Through Trust 3.650%, due 01/07/26 | 41,435 | 30,575 | |||||||||
Valero Energy Corp. 2.850%, due 04/15/25 | 10,000 | 10,547 | |||||||||
Verizon Communications, Inc. 3.376%, due 02/15/25 | 25,000 | 27,744 | |||||||||
ViacomCBS, Inc. 4.750%, due 05/15/25 | 75,000 | 85,450 | |||||||||
Virginia Electric and Power Co., Series A, 3.800%, due 04/01/28 | 20,000 | 23,194 | |||||||||
Visa, Inc. 1.900%, due 04/15/27 | 25,000 | 26,129 | |||||||||
Wells Fargo & Co. 3.069%, due 01/24/23 | 60,000 | 62,150 | |||||||||
MTN, 2.625%, due 07/22/22 | 70,000 | 72,930 |
Face amount1 | Value | ||||||||||
Corporate bonds—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
Williams Cos., Inc./The 4.300%, due 03/04/24 | 35,000 | $ | 38,025 | ||||||||
Xcel Energy, Inc. 4.800%, due 09/15/41 | 80,000 | 97,209 | |||||||||
4,309,304 | |||||||||||
Total corporate bonds (cost $10,792,695) | 10,953,222 | ||||||||||
Mortgage-backed securities: 0.0%† | |||||||||||
Cayman Islands: 0.0%† | |||||||||||
LNR CDO IV Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/433,8,9 | 8,000,000 | 0 | |||||||||
United States: 0.0%† | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11, 3.863%, due 04/25/3510 | 31,774 | 405 | |||||||||
Total mortgage-backed securities (cost $8,105,628) | 405 | ||||||||||
Non-U.S. government agency obligations: 11.8% | |||||||||||
Australia: 1.1% | |||||||||||
Australia Government Bond 2.250%, due 05/21/282 | AUD | 520,000 | 400,950 | ||||||||
Canada: 1.5% | |||||||||||
Canadian Government Bond 1.500%, due 09/01/24 | CAD | 690,000 | 532,595 | ||||||||
France: 0.8% | |||||||||||
French Republic Government Bond OAT 0.010%, due 03/25/252 | EUR | 260,000 | 299,474 | ||||||||
Germany: 3.0% | |||||||||||
Bundesobligation 0.010%, due 04/11/252 | EUR | 910,000 | 1,057,426 | ||||||||
Ireland: 1.7% | |||||||||||
Ireland Government Bond 1.000%, due 05/15/262 | EUR | 490,000 | 593,246 | ||||||||
Japan: 1.2% | |||||||||||
Japan Government Two Year Bond 0.100%, due 05/01/22 | JPY | 47,000,000 | 437,279 | ||||||||
New Zealand: 1.9% | |||||||||||
New Zealand Government Bond 3.000%, due 09/20/302 | NZD | 723,756 | 658,302 | ||||||||
Spain: 0.6% | |||||||||||
Spain Government Bond 1.600%, due 04/30/252,3 | EUR | 180,000 | 219,213 | ||||||||
Total non-U.S. government agency obligations (cost $4,170,686) | 4,198,485 |
14
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Face amount1 | Value | ||||||||||
U.S. Treasury obligations: 13.0% | |||||||||||
United States: 13.0% | |||||||||||
U.S. Treasury Notes 1.875%, due 07/31/22 | 1,010,000 | $ | 1,045,863 | ||||||||
1.500%, due 02/28/23 | 210,000 | 217,399 | |||||||||
2.000%, due 02/15/22 | 1,290,000 | 1,328,196 | |||||||||
1.375%, due 09/30/23 | 320,000 | 332,363 | |||||||||
0.375%, due 04/30/25 | 560,000 | 562,538 | |||||||||
0.250%, due 05/31/25 | 1,130,000 | 1,128,543 | |||||||||
Total U.S. Treasury obligations (cost $4,606,179) | 4,614,902 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 4.4% | |||||||||||
Investment companies: 4.4% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%14 (cost $1,563,880) | 1,563,880 | 1,563,880 |
Face amount1 | Value | ||||||||||
Short-term U.S. Treasury obligations: 26.4% | |||||||||||
United States: 26.4% | |||||||||||
U.S. Treasury Bills 0.361%, due 12/03/2011 | 1,200,000 | $ | 1,198,166 | ||||||||
0.173%, due 10/15/2011 | 8,200,000 | 8,195,895 | |||||||||
Total short-term U.S. Treasury obligations (cost $9,394,061) | 9,394,061 | ||||||||||
Number of shares | |||||||||||
Investment of cash collateral from securities loaned: 0.9% | |||||||||||
Money market funds: 0.9% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%14 (cost $328,563) | 328,563 | 328,563 | |||||||||
Total investments (cost $38,961,692) — 87.3% | 31,053,518 | ||||||||||
Other assets in excess of liabilities: 12.7% | 4,502,521 | ||||||||||
Net assets: 100.0% | $ | 35,556,039 |
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: | |||||||||||||||||||||||||||
2 | AUD | ASX SPI 200 Index Futures | September 2020 | $ | 198,579 | $ | 203,303 | $ | 4,724 | ||||||||||||||||||
2 | CAD | S&P/TSX 60 Index Futures | September 2020 | 265,260 | 273,571 | 8,311 | |||||||||||||||||||||
144 | EUR | EURO STOXX 600 Bank Index Futures | September 2020 | 747,919 | 762,002 | 14,083 | |||||||||||||||||||||
7 | EUR | FTSE MIB Index Futures | September 2020 | 734,367 | 758,491 | 24,124 | |||||||||||||||||||||
5 | GBP | FTSE 100 Index Futures | September 2020 | 373,037 | 380,869 | 7,832 | |||||||||||||||||||||
15 | JPY | TOPIX Index Futures | September 2020 | 2,254,046 | 2,165,084 | (88,962 | ) | ||||||||||||||||||||
61 | USD | Mini MSCI Emerging Markets (EM) Index Futures | September 2020 | 2,911,646 | 3,006,385 | 94,739 | |||||||||||||||||||||
18 | USD | S&P 500 E-Mini Index Futures | September 2020 | 2,727,639 | 2,781,180 | 53,541 | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
3 | CAD | Canada Government Bond 10 Year Futures | September 2020 | 340,687 | 339,909 | (778 | ) | ||||||||||||||||||||
U.S. Treasury futures buy contracts: | |||||||||||||||||||||||||||
29 | USD | U.S. Treasury Note 2 Year Futures | September 2020 | 6,402,925 | 6,404,016 | 1,091 | |||||||||||||||||||||
17 | USD | U.S. Treasury Note 5 Year Futures | September 2020 | 2,133,017 | 2,137,617 | 4,600 | |||||||||||||||||||||
Total | $ | 19,089,122 | $ | 19,212,427 | $ | 123,305 |
15
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Futures contracts—(concluded)
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
28 | EUR | CAC 40 Index Futures | July 2020 | $ | (1,501,678 | ) | $ | (1,545,688 | ) | $ | (44,010 | ) | |||||||||||||||
43 | EUR | EURO STOXX 600 Index Futures | September 2020 | (843,451 | ) | (866,932 | ) | (23,481 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
5 | EUR | German Euro Bund Futures | September 2020 | (979,776 | ) | (991,601 | ) | (11,825 | ) | ||||||||||||||||||
1 | EUR | German Euro Buxl 30 Year Futures | September 2020 | (237,934 | ) | (247,125 | ) | (9,191 | ) | ||||||||||||||||||
5 | GBP | United Kingdom Long Gilt Bond Futures | September 2020 | (850,502 | ) | (852,749 | ) | (2,247 | ) | ||||||||||||||||||
U.S. Treasury futures sell contracts: | |||||||||||||||||||||||||||
13 | USD | U.S. Treasury Note 10 Year Futures | September 2020 | (1,799,047 | ) | (1,809,234 | ) | (10,187 | ) | ||||||||||||||||||
2 | USD | U.S. Ultra Long Treasury Bond Futures | September 2020 | (438,761 | ) | (436,312 | ) | 2,449 | |||||||||||||||||||
4 | USD | U.S. Ultra Treasury Note 10 Year Futures | September 2020 | (621,682 | ) | (629,938 | ) | (8,256 | ) | ||||||||||||||||||
Total | $ | (7,272,831 | ) | $ | (7,379,579 | ) | $ | (106,748 | ) | ||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | 16,557 |
Centrally cleared credit default swap agreements on credit indices—sell protection12
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio13 | Upfront payments received (made) | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
CDX North American High Yield 34 Index | USD | 1,102 | 06/20/25 | Quarterly | 5.000 | % | $ | 36,949 | $ | (6,650 | ) | $ | 30,299 | ||||||||||||||||||
iTraxx Europe Crossover Series 33 Index | EUR | 400 | 06/20/25 | Quarterly | 5.000 | 35,948 | 23,767 | 59,715 | |||||||||||||||||||||||
Total | $ | 72,897 | $ | 17,117 | $ | 90,014 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | NOK | 3,330,000 | USD | 356,892 | 07/22/20 | $ | 10,901 | ||||||||||||
BB | USD | 192,579 | NZD | 315,000 | 07/22/20 | 10,703 | |||||||||||||
BB | USD | 545,000 | ZAR | 9,333,049 | 07/22/20 | (8,339 | ) | ||||||||||||
BOA | AUD | 790,000 | USD | 542,420 | 07/22/20 | (2,823 | ) | ||||||||||||
BOA | USD | 134,661 | NZD | 210,000 | 07/22/20 | 861 | |||||||||||||
CIBC | USD | 215,895 | AUD | 310,000 | 07/22/20 | (1,939 | ) | ||||||||||||
CITI | AUD | 390,000 | USD | 268,206 | 07/22/20 | (964 | ) | ||||||||||||
CITI | GBP | 165,000 | USD | 210,906 | 07/22/20 | 6,428 | |||||||||||||
CITI | JPY | 22,300,000 | USD | 207,368 | 07/22/20 | 789 | |||||||||||||
CITI | USD | 818,371 | BRL | 4,330,000 | 07/22/20 | (22,915 | ) |
16
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Forward foreign currency contracts—(concluded)
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
GSI | GBP | 480,000 | MXN | 14,827,278 | 07/22/20 | $ | 48,542 | ||||||||||||
GSI | KRW | 327,000,000 | USD | 271,214 | 07/22/20 | (654 | ) | ||||||||||||
GSI | MXN | 4,270,000 | USD | 196,800 | 07/22/20 | 11,516 | |||||||||||||
GSI | THB | 16,790,000 | USD | 543,982 | 07/22/20 | 775 | |||||||||||||
GSI | TWD | 8,100,000 | USD | 275,145 | 07/22/20 | 585 | |||||||||||||
GSI | USD | 537,738 | COP | 2,006,730,000 | 07/22/20 | (4,649 | ) | ||||||||||||
GSI | USD | 90,421 | MYR | 387,000 | 07/22/20 | (182 | ) | ||||||||||||
HSBC | USD | 179,311 | EUR | 165,000 | 07/22/20 | 6,146 | |||||||||||||
HSBC | USD | 535,000 | NOK | 5,535,014 | 07/22/20 | 40,095 | |||||||||||||
JPMCB | AUD | 815,000 | USD | 538,788 | 07/22/20 | (23,708 | ) | ||||||||||||
JPMCB | GBP | 430,000 | SEK | 5,276,858 | 07/22/20 | 33,549 | |||||||||||||
JPMCB | USD | 535,986 | BRL | 3,060,000 | 07/22/20 | 26,160 | |||||||||||||
MSCI | USD | 788,563 | CLP | 669,600,000 | 07/22/20 | 26,975 | |||||||||||||
MSCI | USD | 1,614,598 | COP | 6,357,559,000 | 07/22/20 | 74,291 | |||||||||||||
MSCI | USD | 496,748 | MYR | 2,177,000 | 07/22/20 | 10,873 | |||||||||||||
SSC | AUD | 1,890,000 | USD | 1,188,851 | 07/22/20 | (115,590 | ) | ||||||||||||
SSC | AUD | 610,000 | USD | 427,876 | 07/22/20 | 6,866 | |||||||||||||
SSC | CAD | 4,755,000 | USD | 3,347,562 | 07/22/20 | (155,136 | ) | ||||||||||||
SSC | CAD | 685,000 | USD | 507,551 | 07/22/20 | 2,956 | |||||||||||||
SSC | CHF | 3,175,000 | USD | 3,279,421 | 07/22/20 | (73,623 | ) | ||||||||||||
SSC | EUR | 4,555,000 | USD | 4,942,990 | 07/22/20 | (176,747 | ) | ||||||||||||
SSC | EUR | 1,060,000 | USD | 1,203,005 | 07/22/20 | 11,584 | |||||||||||||
SSC | GBP | 425,000 | NOK | 5,406,721 | 07/22/20 | 35,079 | |||||||||||||
SSC | GBP | 1,410,000 | USD | 1,747,767 | 07/22/20 | 411 | |||||||||||||
SSC | HKD | 365,000 | USD | 47,042 | 07/22/20 | (48 | ) | ||||||||||||
SSC | HUF | 257,500,000 | USD | 783,967 | 07/22/20 | (32,848 | ) | ||||||||||||
SSC | JPY | 53,800,000 | USD | 502,786 | 07/22/20 | 4,402 | |||||||||||||
SSC | NZD | 2,275,000 | USD | 1,356,379 | 07/22/20 | (111,770 | ) | ||||||||||||
SSC | NZD | 865,000 | USD | 559,298 | 07/22/20 | 1,079 | |||||||||||||
SSC | THB | 52,590,000 | USD | 1,615,088 | 07/22/20 | (86,355 | ) | ||||||||||||
SSC | USD | 543,951 | CHF | 515,000 | 07/22/20 | (71 | ) | ||||||||||||
SSC | USD | 853,185 | HUF | 257,500,000 | 07/22/20 | (36,370 | ) | ||||||||||||
SSC | USD | 2,524,702 | JPY | 270,600,000 | 07/22/20 | (17,961 | ) | ||||||||||||
SSC | USD | 1,456,380 | MXN | 35,720,000 | 07/22/20 | 93,586 | |||||||||||||
SSC | USD | 3,136,758 | NOK | 33,030,000 | 07/22/20 | 295,099 | |||||||||||||
SSC | USD | 1,585,689 | SEK | 15,930,000 | 07/22/20 | 124,276 | |||||||||||||
Net unrealized appreciation (depreciation) | $ | 11,835 |
17
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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 | $ | — | $ | 10,953,222 | $ | — | $ | 10,953,222 | |||||||||||
Mortgage-backed securities | — | 405 | 0 | 405 | |||||||||||||||
Non-U.S. government agency obligations | — | 4,198,485 | — | 4,198,485 | |||||||||||||||
U.S. Treasury obligations | — | 4,614,902 | — | 4,614,902 | |||||||||||||||
Short-term investments | — | 1,563,880 | — | 1,563,880 | |||||||||||||||
Short-term U.S. Treasury obligations | — | 9,394,061 | — | 9,394,061 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 328,563 | — | 328,563 | |||||||||||||||
Futures contracts | 164,731 | 50,763 | — | 215,494 | |||||||||||||||
Swap agreements | — | 23,767 | — | 23,767 | |||||||||||||||
Forward foreign currency contracts | — | 884,527 | — | 884,527 | |||||||||||||||
Total | $ | 164,731 | $ | 32,012,575 | $ | 0 | $ | 32,177,306 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (42,484 | ) | $ | (156,453 | ) | $ | — | $ | (198,937 | ) | ||||||||
Swap agreements | — | (6,650 | ) | — | (6,650 | ) | |||||||||||||
Forward foreign currency contracts | — | (872,692 | ) | — | (872,692 | ) | |||||||||||||
Total | $ | (42,484 | ) | $ | (1,035,795 | ) | $ | — | $ | (1,078,279 | ) |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
† Amount represents less than 0.05%.
1 In U.S. dollars unless otherwise indicated.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
3 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $1,194,453, represented 3.4% of the Fund's net assets at period end.
4 Perpetual investment. Date shown reflects the next call date.
5 Security, or portion thereof, was on loan at the period end.
6 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
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 Security fair valued by the Valuation Committee under the direction of the Board of Trustees.
10 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
11 Rate shown is the discount rate at the date of purchase unless otherwise noted.
18
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2020
12 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
13 Payments made or received are based on the notional amount.
14 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
19
UBS Global Allocation Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS Global Allocation Fund (the "Fund") returned 0.79% (Class A shares returned -4.75% after the deduction of the maximum sales charge), while Class P shares returned 1.02%. In contrast, the Fund's benchmark, the MSCI All Country World Index (net) returned 2.11%. For comparison purposes, the 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD), returned 4.58% and the FTSE World Government Bond Index (Hedged in USD) returned 6.75% during the same time period. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 22; please note that 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. Security selection was additive for performance, whereas the Fund's market allocation decisions and currency strategy detracted from results.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, utilizing currency forwards had a negative impact on performance. We used a variety of equity and fixed income options, futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, were additive to performance during the reporting period.
Portfolio performance summary
What worked:
• Overall, bottom-up security selection contributed to performance.
– Both developed market ex-US and emerging market equities were areas of strong security selection, which was additive for performance.
• Certain market allocations were positive for returns.
– Within fixed income, an overall underweight to US government fixed income over the second half of 2019 contributed to performance, as fixed income lagged equities over that period. At the start of 2020, we added to US government bonds, which also contributed to returns as the COVID-19 selloff saw increased demand for safe haven assets. In the second quarter of 2020, we then reduced our allocation to US government bonds again, which was beneficial as risk assets rallied. An overweight to US investment grade credit was also beneficial over the period, thanks to explicit support for corporate bonds by the US Federal Reserve Board (the "Fed"), lower interest rates and spread tightening.
– Within equities, performance was positively impacted by a relative preference for Japanese versus French equities thanks to the relative outperformance of Japanese equities as Japan initially managed the COVID-19 outbreak more successfully than France.
• Certain active currency positions added to results during the period.
– Most notably, short positions in the Canadian dollar, New Zealand dollar and Australian dollar versus the US dollar were beneficial over the period, as the US dollar outperformed many currencies on the back of a general retracement in risk taking amid the COVID-19 pandemic. Over the second quarter of 2020, we saw a rebound in these cyclically sensitive currencies versus the US dollar, although the trades still ended the 12 month reporting period in positive territory.
20
UBS Global Allocation Fund
What didn't work:
• Bottom-up security selection detracted from results in some areas.
– Most notably, security selection within the US large-cap growth active strategy was weak and, therefore, was a drag on performance.
• Overall, market allocations detracted from results.
– Within equites, the Fund's underweight to US equities and preference for non-US equities detracted over the reporting period. The US economy remained resilient, and US equities outperformed other developed and emerging market equities over the period.
– Within fixed income, overweight positions in US high-yield and emerging market debt were detrimental as both asset classes underperformed safer fixed income areas during the COVID-19 induced selloff. A preference for Canadian bonds over US bonds throughout much of the reporting period (particularly over the second half of 2019) was also detrimental. While both countries saw rates fall, US bonds appreciated more quickly amid three Fed rate cuts in the second half of 2019.
• Overall, active currency positions hurt performance in this reporting period.
– Most notably, long positions versus the US dollar in certain Latin American, European and Asian currencies, such as the Brazilian real, Colombian peso, Mexican peso, Chilean peso, Norwegian krone, Euro, Swiss Franc and Japanese yen weighed on performance, as the US dollar appreciated against them over the period as a whole. For the most part, the US dollar benefited by global growth concerns amid the pandemic, as it maintained its stance as a global safe haven asset.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2020. The views and opinions in the letter were current as of August 14, 2020. 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.
21
UBS Global Allocation Fund
Average annual total returns for periods ended 06/30/20 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 0.79 | % | 3.60 | % | 5.84 | % | |||||||||
Class P2 | 1.02 | 3.87 | 6.12 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (4.75 | )% | 2.43 | % | 5.25 | % | |||||||||
MSCI All Country World Index (net)3 | 2.11 | 6.46 | 9.16 | ||||||||||||
FTSE World Government Bond Index (Hedged in USD)4 | 6.75 | 4.63 | 4.06 | ||||||||||||
60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)5 | 4.58 | 6.03 | 7.38 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.47% and 1.27%; Class P—1.20% and 1.02%. 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 28, 2020, 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 an 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.
22
UBS Global Allocation Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $2,000,000 in Class P shares (unaudited)
The following two graphs depict 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, 2020. 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), 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 A Shares as of June 30, 2010 = $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, 2010 = $2,000,000
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.
23
UBS Global Allocation Fund
Portfolio statistics—June 30, 2020 (unaudited)1
Top ten equity holdings
Percentage of net assets | |||||||
Microsoft Corp. | 1.5 | % | |||||
Amazon.com, Inc. | 1.4 | ||||||
Apple, Inc. | 1.2 | ||||||
Alphabet, Inc., Class A | 1.0 | ||||||
AbbVie, Inc. | 0.9 | ||||||
Bio-Rad Laboratories, Inc., Class A | 0.7 | ||||||
Visa, Inc., Class A | 0.7 | ||||||
Laboratory Corp. of America Holdings | 0.7 | ||||||
Prologis, Inc. | 0.6 | ||||||
Sony Corp. | 0.6 | ||||||
Total | 9.3 | % |
Top ten fixed income holdings
Percentage of net assets | |||||||
UMBS TBA, 2.500% | 1.8 | % | |||||
New Zealand Government Inflation Linked Bond, 2.000% due 09/20/25 | 1.2 | ||||||
GNMA TBA, 3.000% | 0.7 | ||||||
U.S. Treasury Notes, 1.375% due 09/30/23 | 0.5 | ||||||
U.S. Treasury Bonds, 2.875% due 05/15/43 | 0.4 | ||||||
Canadian Government Bond, 1.500% due 09/01/24 | 0.4 | ||||||
UMBS TBA, 2.000% | 0.4 | ||||||
Japan Government Twenty Year Bond, 0.400% due 03/20/36 | 0.4 | ||||||
BMW Floorplan Master Owner Trust, 3.150% due 05/15/23 | 0.3 | ||||||
U.S. Treasury Notes, 1.875% due 10/31/22 | 0.3 | ||||||
Total | 6.4 | % |
Top five issuer breakdown by country or territory of origin2
Percentage of net assets | |||||||
United States | 79.5 | % | |||||
Japan | 4.9 | ||||||
United Kingdom | 2.8 | ||||||
Germany | 1.7 | ||||||
Canada | 1.5 | ||||||
Total | 90.4 | % |
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: 79.5%, Japan: 4.9%, United Kingdom: 2.8%, Canada: 1.5% and Germany 1.7%.
24
UBS Global Allocation Fund
Industry diversification—June 30, 2020 (unaudited)1,2
Common stocks | Percentage of net assets | ||||||
Airlines | 0.7 | % | |||||
Auto components | 0.6 | ||||||
Banks | 1.5 | ||||||
Beverages | 0.3 | ||||||
Biotechnology | 2.0 | ||||||
Capital markets | 0.6 | ||||||
Chemicals | 1.6 | ||||||
Commercial services & supplies | 0.5 | ||||||
Communications equipment | 0.2 | ||||||
Consumer finance | 0.3 | ||||||
Containers & packaging | 0.4 | ||||||
Diversified financial services | 1.0 | ||||||
Diversified telecommunication services | 0.8 | ||||||
Electric utilities | 0.6 | ||||||
Electrical equipment | 0.5 | ||||||
Electronic equipment, instruments & components | 0.8 | ||||||
Entertainment | 0.9 | ||||||
Equity real estate investment trusts | 0.8 | ||||||
Food products | 1.2 | ||||||
Health care equipment & supplies | 1.7 | ||||||
Health care providers & services | 0.9 | ||||||
Hotels, restaurants & leisure | 0.6 | ||||||
Household durables | 0.6 | ||||||
Insurance | 2.2 | ||||||
Interactive media & services | 1.4 | ||||||
Internet & direct marketing retail | 2.4 | ||||||
IT services | 1.1 | ||||||
Life sciences tools & services | 0.8 | ||||||
Machinery | 0.7 | ||||||
Media | 0.4 | ||||||
Metals & mining | 0.4 | ||||||
Multiline retail | 0.9 | ||||||
Oil, gas & consumable fuels | 1.6 | ||||||
Personal products | 0.6 | ||||||
Pharmaceuticals | 2.1 | ||||||
Professional services | 0.4 | ||||||
Road & rail | 0.2 | ||||||
Semiconductors & semiconductor equipment | 2.0 | ||||||
Software | 4.1 | ||||||
Specialty retail | 0.4 | ||||||
Technology hardware, storage & peripherals | 1.3 | ||||||
Textiles, apparel & luxury goods | 0.2 | ||||||
Tobacco | 1.1 | ||||||
Trading companies & distributors | 1.2 | ||||||
Wireless telecommunication services | 0.4 | ||||||
Total common stocks | 45.0 | % |
Percentage of net assets | |||||||
Preferred stocks | 0.5 | % | |||||
Asset-backed securities | 4.5 | ||||||
Exchange traded funds | 27.1 | ||||||
Investment companies | 6.8 | ||||||
Mortgage-backed securities | 2.2 | ||||||
Non-U.S. government agency obligations | 4.1 | ||||||
U.S. Treasury obligations | 3.6 | ||||||
U.S. government agency obligations | 2.9 | ||||||
Short-term investments | 4.5 | ||||||
Investment of cash collateral from securities loaned | 19.7 | ||||||
Total investments | 120.9 | % | |||||
Liabilities in excess of other assets | (20.9 | ) | |||||
Net assets | 100.0 | % |
1 Figures represent the breakdown of direct investments of UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
25
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks: 45.0% | |||||||||||
Austria: 0.5% | |||||||||||
Erste Group Bank AG* | 46,021 | $ | 1,086,911 | ||||||||
Canada: 1.0% | |||||||||||
Canadian Natural Resources Ltd. | 51,525 | 893,793 | |||||||||
Royal Bank of Canada1 | 17,045 | 1,156,464 | |||||||||
Zymeworks, Inc.* | 3,408 | 122,926 | |||||||||
2,173,183 | |||||||||||
China: 0.7% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 1,261 | 271,998 | |||||||||
Prosus N.V.* | 14,230 | 1,326,768 | |||||||||
1,598,766 | |||||||||||
Denmark: 0.8% | |||||||||||
Genmab A/S* | 2,705 | 912,107 | |||||||||
H Lundbeck A/S | 23,746 | 897,229 | |||||||||
1,809,336 | |||||||||||
Finland: 0.6% | |||||||||||
Sampo Oyj, Class A | 39,300 | 1,354,662 | |||||||||
Germany: 1.2% | |||||||||||
Continental AG* | 5,458 | 536,583 | |||||||||
HUGO BOSS AG | 16,078 | 487,257 | |||||||||
LANXESS AG | 16,262 | 859,959 | |||||||||
SAP SE | 6,639 | 928,062 | |||||||||
2,811,861 | |||||||||||
Hong Kong: 0.6% | |||||||||||
AIA Group Ltd. | 137,117 | 1,283,086 | |||||||||
India: 0.5% | |||||||||||
HDFC Bank Ltd., ADR | 23,400 | 1,063,764 | |||||||||
Ireland: 0.4% | |||||||||||
Ryanair Holdings PLC, ADR* | 12,792 | 848,621 | |||||||||
Italy: 0.8% | |||||||||||
Infrastrutture Wireless Italiane SpA2 | 97,554 | 979,274 | |||||||||
Prysmian SpA | 31,844 | 738,727 | |||||||||
1,718,001 | |||||||||||
Japan: 4.4% | |||||||||||
Hoya Corp. | 8,100 | 775,648 | |||||||||
ITOCHU Corp. | 56,100 | 1,213,882 | |||||||||
Keyence Corp. | 1,500 | 628,592 | |||||||||
Nippon Telegraph & Telephone Corp. | 39,600 | 922,658 | |||||||||
ORIX Corp. | 90,100 | 1,118,794 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 7,400 | 868,475 | |||||||||
SoftBank Group Corp. | 16,300 | 821,971 | |||||||||
Sony Corp. | 21,000 | 1,449,632 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 33,700 | 1,210,771 | |||||||||
TechnoPro Holdings, Inc. | 17,400 | 1,004,495 | |||||||||
10,014,918 |
Number of shares | Value | ||||||||||
Common stocks—(continued) | |||||||||||
Netherlands: 1.0% | |||||||||||
NXP Semiconductors N.V. | 7,706 | $ | 878,792 | ||||||||
Royal Dutch Shell PLC, Class A | 71,939 | 1,151,835 | |||||||||
uniQure N.V.* | 4,800 | 216,288 | |||||||||
2,246,915 | |||||||||||
South Africa: 0.4% | |||||||||||
Anglo American PLC | 39,645 | 913,945 | |||||||||
Sweden: 0.8% | |||||||||||
Hexpol AB* | 102,165 | 762,345 | |||||||||
Swedish Match AB | 15,631 | 1,102,855 | |||||||||
1,865,200 | |||||||||||
Switzerland: 0.9% | |||||||||||
Alcon, Inc.* | 18,664 | 1,072,419 | |||||||||
Novartis AG | 12,032 | 1,048,240 | |||||||||
2,120,659 | |||||||||||
United Kingdom: 2.5% | |||||||||||
Ashtead Group PLC | 36,167 | 1,220,023 | |||||||||
British American Tobacco PLC | 33,529 | 1,285,932 | |||||||||
GlaxoSmithKline PLC, ADR | 9,600 | 391,584 | |||||||||
Sage Group PLC/The | 94,142 | 781,467 | |||||||||
Spectris PLC | 23,848 | 744,834 | |||||||||
Unilever N.V. | 23,286 | 1,241,556 | |||||||||
5,665,396 | |||||||||||
United States: 27.9% | |||||||||||
10X Genomics, Inc., Class A* | 2,434 | 217,381 | |||||||||
Abbott Laboratories | 4,947 | 452,304 | |||||||||
AbbVie, Inc. | 20,111 | 1,974,498 | |||||||||
Adobe, Inc.* | 563 | 245,080 | |||||||||
AGCO Corp. | 12,547 | 695,857 | |||||||||
Alexion Pharmaceuticals, Inc.* | 4,606 | 516,977 | |||||||||
Alphabet, Inc., Class A* | 1,541 | 2,185,215 | |||||||||
Amazon.com, Inc.* | 1,117 | 3,081,602 | |||||||||
Ameriprise Financial, Inc. | 8,984 | 1,347,959 | |||||||||
Amgen, Inc. | 1,764 | 416,057 | |||||||||
Analog Devices, Inc. | 3,655 | 448,249 | |||||||||
Apache Corp. | 33,298 | 449,523 | |||||||||
Apple, Inc. | 7,378 | 2,691,494 | |||||||||
Aptiv PLC | 11,350 | 884,392 | |||||||||
Arista Networks, Inc.* | 2,366 | 496,931 | |||||||||
Autodesk, Inc.* | 3,474 | 830,946 | |||||||||
Berkshire Hathaway, Inc., Class B* | 6,881 | 1,228,327 | |||||||||
Berry Global Group, Inc.* | 21,226 | 940,736 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 3,709 | 1,674,576 | |||||||||
Booking Holdings, Inc.* | 448 | 713,368 | |||||||||
Boston Scientific Corp.* | 17,351 | 609,194 | |||||||||
Bunge Ltd. | 32,323 | 1,329,445 | |||||||||
Carnival Corp.1 | 28,920 | 474,866 | |||||||||
Chevron Corp. | 2,116 | 188,811 | |||||||||
Constellation Brands, Inc., Class A | 1,380 | 241,431 | |||||||||
Cooper Cos., Inc./The | 1,170 | 331,859 | |||||||||
Cree, Inc.* | 9,368 | 554,492 | |||||||||
Crown Castle International Corp. | 2,600 | 435,110 |
26
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
Dollar General Corp. | 3,474 | $ | 661,832 | ||||||||
Dollar Tree, Inc.* | 14,564 | 1,349,791 | |||||||||
Elanco Animal Health, Inc.* | 35,678 | 765,293 | |||||||||
Facebook, Inc., Class A* | 1,414 | 321,077 | |||||||||
Fidelity National Information Services, Inc. | 3,771 | 505,653 | |||||||||
FMC Corp. | 3,515 | 350,164 | |||||||||
HubSpot, Inc.* | 2,051 | 460,142 | |||||||||
IAA, Inc.* | 7,949 | 306,593 | |||||||||
IAC/InterActiveCorp* | 1,830 | 591,822 | |||||||||
Incyte Corp.* | 4,388 | 456,220 | |||||||||
Ingersoll Rand, Inc.* | 33,114 | 931,166 | |||||||||
Jabil, Inc. | 15,824 | 507,634 | |||||||||
Johnson & Johnson | 3,570 | 502,049 | |||||||||
Laboratory Corp. of America Holdings* | 8,894 | 1,477,382 | |||||||||
LivaNova PLC* | 13,100 | 630,503 | |||||||||
Lowe's Cos., Inc. | 6,617 | 894,089 | |||||||||
Madison Square Garden Entertainment Corp.* | 3,684 | 276,300 | |||||||||
Marvell Technology Group Ltd. | 21,513 | 754,246 | |||||||||
Mastercard, Inc., Class A | 1,394 | 412,206 | |||||||||
MetLife, Inc. | 26,126 | 954,121 | |||||||||
Micron Technology, Inc.* | 17,867 | 920,508 | |||||||||
Microsoft Corp. | 16,230 | 3,302,967 | |||||||||
Mondelez International, Inc., Class A | 27,736 | 1,418,142 | |||||||||
Netflix, Inc.* | 791 | 359,937 | |||||||||
NextEra Energy, Inc. | 5,144 | 1,235,434 | |||||||||
ON Semiconductor Corp.* | 19,879 | 394,002 | |||||||||
PepsiCo, Inc. | 3,000 | 396,780 | |||||||||
Progressive Corp./The | 17,395 | 1,393,513 | |||||||||
Prologis, Inc. | 15,700 | 1,465,281 | |||||||||
Qorvo, Inc.* | 3,003 | 331,922 | |||||||||
Rockwell Automation, Inc. | 1,655 | 352,515 | |||||||||
salesforce.com, Inc.* | 5,941 | 1,112,928 | |||||||||
ServiceNow, Inc.* | 1,913 | 774,880 | |||||||||
Southwest Airlines Co. | 19,910 | 680,524 | |||||||||
Splunk, Inc.* | 3,538 | 703,001 | |||||||||
Starbucks Corp. | 9,279 | 682,842 | |||||||||
Stericycle, Inc.*,1 | 14,513 | 812,438 | |||||||||
Synchrony Financial | 27,141 | 601,445 | |||||||||
Take-Two Interactive Software, Inc.* | 9,186 | 1,282,090 | |||||||||
Union Pacific Corp. | 2,422 | 409,488 | |||||||||
United Rentals, Inc.* | 1,542 | 229,820 | |||||||||
UnitedHealth Group, Inc. | 1,793 | 528,845 | |||||||||
Universal Display Corp. | 1,907 | 285,325 | |||||||||
ViacomCBS, Inc., Class B1 | 33,881 | 790,105 | |||||||||
Visa, Inc., Class A | 7,701 | 1,487,602 | |||||||||
Western Digital Corp. | 6,908 | 304,988 | |||||||||
Westlake Chemical Corp. | 14,839 | 796,112 | |||||||||
Williams Cos., Inc./The | 49,333 | 938,314 | |||||||||
Wynn Resorts Ltd. | 2,861 | 213,116 | |||||||||
62,969,827 | |||||||||||
Total common stocks (cost: $90,668,852) | 101,545,051 |
Number of shares | Value | ||||||||||
Preferred stocks: 0.5% | |||||||||||
Germany: 0.5% | |||||||||||
Henkel AG & Co. KGaA (cost: $1,126,589) | 11,499 | $ | 1,072,784 | ||||||||
Exchange traded funds: 28.4% | |||||||||||
United States: 28.4% | |||||||||||
iShares iBoxx $ High Yield Corporate Bond ETF1 | 223,170 | 18,215,135 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF1 | 141,388 | 19,016,686 | |||||||||
Vanguard Emerging Markets Government Bond ETF | 36,000 | 2,799,360 | |||||||||
iShares JPMorgan USD Emerging Markets Bond ETF1 | 174,840 | 19,096,025 | |||||||||
Xtrackers Harvest CSI 300 China A-Shares ETF1 | 162,823 | 4,837,471 | |||||||||
Total exchange traded funds (cost: $63,925,461) | 63,964,677 | ||||||||||
Investment companies: 5.6% | |||||||||||
UBS Emerging Markets Equity Opportunity Fund3 (cost: $13,612,288) | 1,354,768 | 12,599,338 | |||||||||
Face amount | |||||||||||
Asset-backed securities: 4.5% | |||||||||||
United States: 4.5% | |||||||||||
American Express Credit Account Master Trust, Series 2017-5, Class A, 1 mo. LIBOR + 0.380%, 0.565%, due 02/18/254 | $ | 250,000 | 251,024 | ||||||||
AmeriCredit Automobile Receivables Trust, Series 2020-1, Class A2A, 1.100%, due 03/20/23 | 100,000 | 100,301 | |||||||||
BMW Floorplan Master Owner Trust, Series 2018-1, Class A1, 3.150%, due 05/15/232 | 750,000 | 763,496 | |||||||||
Capital Auto Receivables Asset Trust, Series 2017-1, Class A4, 2.220%, due 03/21/222 | 256,987 | 258,170 | |||||||||
Dell Equipment Finance Trust, Series 2017-2, Class B, 2.470%, due 10/24/222 | 108,060 | 108,232 | |||||||||
Series 2017-2, Class C, 2.730%, due 10/24/222 | 394,000 | 394,644 | |||||||||
Drive Auto Receivables Trust, Series 2018-1, Class C, 3.220%, due 03/15/23 | 136,571 | 136,735 | |||||||||
Series 2018-3, Class C, 3.720%, due 09/16/24 | 488,356 | 492,295 | |||||||||
DT Auto Owner Trust, Series 2017-2A, Class D, 3.890%, due 01/15/232 | 79,695 | 80,310 | |||||||||
Series 2017-2A, Class E, 6.030%, due 01/15/242 | 100,000 | 103,225 |
27
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Asset-backed securities—(continued) | |||||||||||
United States—(continued) | |||||||||||
Series 2018-2A, Class C, 3.670%, due 03/15/242 | $ | 263,821 | $ | 266,003 | |||||||
Series 2019-3A, Class C, 2.740%, due 04/15/252 | 235,000 | 237,710 | |||||||||
Exeter Automobile Receivables Trust, Series 2016-2A, Class D, 8.250%, due 04/17/232 | 204,954 | 210,234 | |||||||||
Series 2017-2A, Class B, 2.820%, due 05/16/222 | 93,758 | 93,839 | |||||||||
Flagship Credit Auto Trust, Series 2017-1, Class C, 3.220%, due 05/15/232 | 430,683 | 433,653 | |||||||||
Ford Credit Auto Owner Trust, Series 2018-1, Class A, 3.190%, due 07/15/312 | 600,000 | 642,490 | |||||||||
Ford Credit Floorplan Master Owner Trust, Series 2019-2, Class A, 3.060%, due 04/15/26 | 500,000 | 523,062 | |||||||||
GM Financial Automobile Leasing Trust, Series 2020-2, Class A4, 1.010%, due 07/22/24 | 75,000 | 75,321 | |||||||||
OneMain Direct Auto Receivables Trust, Series 2018-1A, Class C, 3.850%, due 10/14/252 | 216,000 | 217,490 | |||||||||
Series 2018-1A, Class D, 4.400%, due 01/14/282 | 216,000 | 217,287 | |||||||||
Series 2019-1A, Class A, 3.630%, due 09/14/272 | 120,000 | 129,015 | |||||||||
Santander Drive Auto Receivables Trust, Series 2018-1, Class C, 2.960%, due 03/15/24 | 632,277 | 637,070 | |||||||||
Series 2018-2, Class C, 3.350%, due 07/17/23 | 655,000 | 663,654 | |||||||||
Series 2018-4, Class B, 3.270%, due 01/17/23 | 207,348 | 208,053 | |||||||||
Series 2018-5, Class B, 3.520%, due 12/15/22 | 479,671 | 481,791 | |||||||||
Sofi Consumer Loan Program LLC, Series 2017-3, Class A, 2.770%, due 05/25/262 | 475,225 | 478,023 | |||||||||
Sofi Consumer Loan Program Trust, Series 2019-3, Class A, 2.900%, due 05/25/282 | 73,668 | 74,690 | |||||||||
Series 2018-1, Class A2, 3.140%, due 02/25/272 | 465,383 | 468,959 | |||||||||
Series 2018-2, Class A2, 3.350%, due 04/26/272 | 151,241 | 152,462 | |||||||||
Toyota Auto Loan Extended Note Trust, Series 2020-1A, Class A, 1.350%, due 05/25/332 | 200,000 | 202,990 | |||||||||
Verizon Owner Trust, Series 2017-2A, Class B, 2.220%, due 12/20/212 | 375,000 | 375,962 |
Face amount | Value | ||||||||||
Asset-backed securities—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
World Financial Network Credit Card Master Trust, Series 2015-B, Class A, 2.550%, due 06/17/24 | $ | 300,000 | $ | 300,659 | |||||||
World Omni Auto Receivables Trust, Series 2016-B, Class B, 1.730%, due 07/15/23 | 300,000 | 301,024 | |||||||||
World Omni Automobile Lease Securitization Trust, Series 2018-A, Class A4, 2.940%, due 05/15/23 | 130,000 | 130,661 | |||||||||
Total asset-backed securities (cost: $10,028,265) | 10,210,534 | ||||||||||
Mortgage-backed securities: 2.2% | |||||||||||
United States: 2.2% | |||||||||||
Arbor Multifamily Mortgage Securities Trust, Series 2020-MF1, Class B, VRN, 3.719%, due 05/15/532,5 | 500,000 | 534,937 | |||||||||
BANK, Series 2018-BN14, Class A4, VRN, 4.231%, due 09/15/605 | 275,000 | 324,225 | |||||||||
BBCMS Trust, Series 2015-SRCH, Class A2, 4.197%, due 08/10/352 | 210,000 | 232,568 | |||||||||
BX Commercial Mortgage Trust, Series 2018-BIOA, Class A, 1 mo. USD LIBOR + 0.671%, 0.856%, due 03/15/372,4 | 470,000 | 462,947 | |||||||||
CGDBB Commercial Mortgage Trust, Series 2017-BIOC, Class D, 1 mo. USD LIBOR + 1.600%, 1.785%, due 07/15/322,4 | 141,599 | 139,602 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2019-GC43, Class A4, 3.038%, due 11/10/52 | 200,000 | 221,686 | |||||||||
COLT Mortgage Loan Trust, Series 2019-2, Class A1, VRN, 3.337%, due 05/25/492,5 | 61,410 | 62,140 | |||||||||
Series 2020-2, Class A1, 1.853%, due 03/25/652,5 | 98,878 | 98,979 | |||||||||
Series 2020-3, Class A1, 1.506%, due 04/27/652,5 | 100,000 | 100,175 | |||||||||
Deephaven Residential Mortgage Trust, Series 2020-2, Class A1, 1.692%, due 05/25/652 | 100,000 | 100,027 | |||||||||
GS Mortgage Securities Trust, Series 2019-GC40, Class A4, 3.160%, due 07/10/52 | 500,000 | 553,107 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2015-UES, Class D, VRN, 3.742%, due 09/05/322,5 | 300,000 | 296,951 |
28
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Mortgage-backed securities—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
Morgan Stanley Capital I Trust, Series 2019-L3, Class A4, 3.127%, due 11/15/52 | $ | 400,000 | $ | 445,959 | |||||||
MSCG Trust, Series 2018-SELF, Class A, 1 mo. USD LIBOR + 0.900%, 1.085%, due 10/15/372,4 | 550,000 | 541,749 | |||||||||
New Residential Mortgage Loan Trust, Series 2019-NQM2, Class A1, VRN, 3.600%, due 04/25/492,5 | 181,119 | 184,703 | |||||||||
Series 2020-NQM2, Class A1, 1.650%, due 05/24/602,5 | 100,000 | 100,075 | |||||||||
Residential Mortgage Loan Trust, Series 2020-2, Class A1, 1.654%, due 05/25/602,5,9,10 | 100,000 | 99,999 | |||||||||
Verus Securitization Trust, Series 2019-2, Class A1, 3.211%, due 05/25/592,5 | 183,982 | 187,612 | |||||||||
Series 2019-4, Class A1, 2.642%, due 11/25/592,6 | 111,023 | 112,834 | |||||||||
Vista Point Securitization Trust, Series 2020-1, Class A1, 1.763%, due 03/25/652,5,9,10 | 100,000 | 99,999 | |||||||||
Wells Fargo Commercial Mortgage Trust, Series 2018-C45, Class AS, VRN, 4.405%, due 06/15/515 | 130,000 | 145,043 | |||||||||
Total mortgage-backed securities (cost: $4,967,530) | 5,045,317 | ||||||||||
Non-U.S. government agency obligations: 4.1% | |||||||||||
Australia: 0.1% | |||||||||||
Australia Government Bond 3.250%, due 04/21/297 | AUD | 310,000 | 258,399 | ||||||||
Austria: 0.1% | |||||||||||
Republic of Austria Government Bond 1.200%, due 10/20/252,7 | EUR | 37,000 | 45,396 | ||||||||
3.150%, due 06/20/442,7 | EUR | 55,000 | 104,468 | ||||||||
149,864 | |||||||||||
Belgium: 0.1% | |||||||||||
Kingdom of Belgium Government Bond, Series 71, 3.750%, due 06/22/457 | EUR | 83,000 | 164,105 | ||||||||
Canada: 0.5% | |||||||||||
Canadian Government Bond 1.500%, due 09/01/24 | CAD | 1,040,000 | 802,752 | ||||||||
2.250%, due 06/01/25 | CAD | 221,000 | 177,720 | ||||||||
2.750%, due 12/01/64 | CAD | 54,000 | 64,814 | ||||||||
1,045,286 | |||||||||||
Finland: 0.0%† | |||||||||||
Finland Government Bond, Series 30Y, 1.375%, due 04/15/472,7 | EUR | 20,000 | 29,466 |
Face amount | Value | ||||||||||
Non-U.S. government agency obligations—(continued) | |||||||||||
France: 0.3% | |||||||||||
French Republic Government Bond OAT 0.500%, due 05/25/267 | EUR | 220,000 | $ | 261,385 | |||||||
2.500%, due 05/25/307 | EUR | 132,000 | 187,967 | ||||||||
3.250%, due 05/25/457 | EUR | 93,000 | 172,785 | ||||||||
Series OATE, 1.800%, due 07/25/402,7 | EUR | 91,260 | 157,977 | ||||||||
780,114 | |||||||||||
Ireland: 0.1% | |||||||||||
Ireland Government Bond 1.500%, due 05/15/507 | EUR | 110,000 | 152,217 | ||||||||
2.000%, due 02/18/457 | EUR | 48,000 | 72,818 | ||||||||
225,035 | |||||||||||
Italy: 0.4% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.650%, due 03/01/322,7 | EUR | 60,000 | 69,287 | ||||||||
3.000%, due 08/01/297 | EUR | 240,000 | 312,103 | ||||||||
4.000%, due 02/01/372,7 | EUR | 129,000 | 190,309 | ||||||||
Series CPI, 2.550%, due 09/15/412,7 | EUR | 170,874 | 240,395 | ||||||||
812,094 | |||||||||||
Japan: 0.5% | |||||||||||
Japan Government Forty Year Bond 0.500%, due 03/20/59 | JPY | 20,000,000 | 177,456 | ||||||||
Japan Government Thirty Year Bond 0.300%, due 06/20/46 | JPY | 11,100,000 | 97,027 | ||||||||
Japan Government Twenty Year Bond, Series 156, 0.400%, due 03/20/36 | JPY | 83,550,000 | 786,813 | ||||||||
1,061,296 | |||||||||||
Netherlands: 0.0%† | |||||||||||
Netherlands Government Bond 2.750%, due 01/15/472,7 | EUR | 40,000 | 77,647 | ||||||||
New Zealand: 1.2% | |||||||||||
New Zealand Government Inflation Linked Bond, Series 0925, 2.000%, due 09/20/257,8 | NZD | 3,481,211 | 2,727,206 | ||||||||
Spain: 0.5% | |||||||||||
Spain Government Bond 1.450%, due 10/31/272,7 | EUR | 165,000 | 202,606 | ||||||||
1.500%, due 04/30/272,7 | EUR | 325,000 | 400,084 | ||||||||
3.450%, due 07/30/662,7 | EUR | 10,000 | 18,479 | ||||||||
4.200%, due 01/31/372,7 | EUR | 44,000 | 75,151 | ||||||||
4.800%, due 01/31/242,7 | EUR | 296,000 | 393,234 | ||||||||
5.150%, due 10/31/442,7 | EUR | 69,000 | 143,555 | ||||||||
1,233,109 | |||||||||||
United Kingdom: 0.3% | |||||||||||
United Kingdom Gilt 1.000%, due 04/22/247 | GBP | 90,000 | 116,126 |
29
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Non-U.S. government agency obligations—(concluded) | |||||||||||
United Kingdom—(concluded) | |||||||||||
1.500%, due 07/22/477 | GBP | 114,000 | $ | 171,573 | |||||||
1.625%, due 10/22/287 | GBP | 144,000 | 201,791 | ||||||||
3.500%, due 01/22/457 | GBP | 60,000 | 122,599 | ||||||||
612,089 | |||||||||||
Total non-U.S. government agency obligations (cost: $8,428,474) | 9,175,710 | ||||||||||
U.S. government agency obligations: 2.9% | |||||||||||
United States: 2.9% | |||||||||||
UMBS TBA 2.000% | $ | 775,000 | 792,710 | ||||||||
2.500% | 4,000,000 | 4,168,281 | |||||||||
GNMA TBA 3.000% | 1,450,000 | 1,535,811 | |||||||||
Total U.S. government agency obligations (cost: $6,444,013) | 6,496,802 | ||||||||||
U.S. Treasury obligations: 3.5% | |||||||||||
United States: 3.5% | |||||||||||
U.S. Treasury Bonds 2.500%, due 02/15/46 | 302,000 | 373,855 | |||||||||
2.750%, due 11/15/42 | 201,000 | 257,390 | |||||||||
2.750%, due 08/15/47 | 103,000 | 134,516 | |||||||||
2.875%, due 05/15/43 | 717,000 | 936,469 | |||||||||
3.000%, due 11/15/45 | 47,000 | 63,327 | |||||||||
U.S. Treasury Inflation Indexed Bonds (TIPS) 0.750%, due 02/15/45 | 381,161 | 466,487 | |||||||||
U.S. Treasury Inflation Indexed Notes (TIPS) 0.125%, due 01/15/23 | 122,211 | 125,309 | |||||||||
0.375%, due 07/15/25 | 423,909 | 453,247 | |||||||||
U.S. Treasury Notes 1.250%, due 03/31/21 | 325,000 | 327,603 |
Face amount | Value | ||||||||||
U.S. Treasury obligations—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
1.375%, due 09/30/23 | $ | 971,000 | $ | 1,008,512 | |||||||
1.500%, due 08/15/20 | 104,000 | 104,170 | |||||||||
1.500%, due 02/28/23 | 226,000 | 233,963 | |||||||||
1.625%, due 08/15/22 | 186,000 | 191,754 | |||||||||
1.625%, due 11/30/26 | 360,000 | 386,916 | |||||||||
1.625%, due 08/15/29 | 196,000 | 213,824 | |||||||||
1.750%, due 05/15/23 | 345,000 | 360,538 | |||||||||
1.875%, due 07/31/22 | 294,000 | 304,439 | |||||||||
1.875%, due 10/31/22 | 680,000 | 706,987 | |||||||||
2.000%, due 11/30/22 | 528,000 | 551,224 | |||||||||
2.500%, due 05/15/24 | 321,000 | 349,276 | |||||||||
2.750%, due 07/31/23 | 459,000 | 495,182 | |||||||||
Total U.S. Treasury obligations (cost: $7,217,349) | 8,044,988 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 4.5% | |||||||||||
Investment companies: 4.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%13 (cost $10,143,678) | 10,143,678 | 10,143,678 | |||||||||
Investment of cash collateral from securities loaned: 19.7% | |||||||||||
Money market funds: 19.7% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%13 (cost $44,341,867) | 44,341,867 | 44,341,867 | |||||||||
Total investments (cost $260,904,366)—120.9% | 272,640,746 | ||||||||||
Liabilities in excess of other assets: (20.9)% | (47,171,376 | ) | |||||||||
Net assets: 100.0% | $ | 225,469,370 |
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: | |||||||||||||||||||||||||||
206 | EUR | EURO STOXX 50 Index Futures | September 2020 | $ | 7,240,576 | $ | 7,459,341 | $ | 218,765 | ||||||||||||||||||
16 | GBP | FTSE 100 Index Futures | September 2020 | 1,188,266 | 1,218,779 | 30,513 | |||||||||||||||||||||
31 | JPY | TOPIX Index Futures | September 2020 | 4,660,029 | 4,474,508 | (185,521 | ) | ||||||||||||||||||||
24 | USD | Mini MSCI Emerging Markets (EM) Index Futures | September 2020 | 1,145,566 | 1,182,840 | 37,274 | |||||||||||||||||||||
47 | USD | S&P 500 E-Mini Index Futures | September 2020 | 7,105,914 | 7,261,970 | 156,056 |
30
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Futures contracts—(concluded)
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
51 | AUD | Australian Bond 10 Year Futures | September 2020 | $ | 5,128,720 | $ | 5,236,623 | $ | 107,903 | ||||||||||||||||||
144 | CAD | Canada Government Bond 10 Year Futures | September 2020 | 16,260,654 | 16,315,616 | 54,962 | |||||||||||||||||||||
18 | EUR | German Euro Schatz Futures | September 2020 | 2,266,307 | 2,267,806 | 1,499 | |||||||||||||||||||||
19 | GBP | United Kingdom Long Gilt Bond Futures | September 2020 | 3,239,520 | 3,240,446 | 926 | |||||||||||||||||||||
U.S. Treasury futures buy contracts: | |||||||||||||||||||||||||||
10 | USD | U.S. Ultra Treasury Note 10 Year Futures | September 2020 | 1,568,843 | 1,574,844 | 6,001 | |||||||||||||||||||||
Total | $ | 49,804,395 | $ | 50,232,773 | $ | 428,378 | |||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
47 | CAD | S&P TSX 60 Index Futures | September 2020 | (6,233,426 | ) | (6,428,918 | ) | (195,492 | ) | ||||||||||||||||||
65 | EUR | CAC 40 Index Futures | July 2020 | (3,486,040 | ) | (3,588,205 | ) | (102,165 | ) | ||||||||||||||||||
388 | SEK | OMX 30 Index Futures | July 2020 | (6,557,104 | ) | (6,938,089 | ) | (380,985 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
47 | EUR | German Euro Bund Futures | September 2020 | (9,238,093 | ) | (9,321,047 | ) | (82,954 | ) | ||||||||||||||||||
86 | JPY | JGB MINI 10 Year Futures | September 2020 | (12,045,111 | ) | (12,096,948 | ) | (51,837 | ) | ||||||||||||||||||
U.S. Treasury futures sell contracts: | |||||||||||||||||||||||||||
36 | USD | U.S. Treasury Note 2 Year Futures | September 2020 | (7,948,293 | ) | (7,949,813 | ) | (1,520 | ) | ||||||||||||||||||
Total | $ | (45,508,067 | ) | $ | (46,323,020 | ) | $ | (814,953 | ) | ||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (386,575 | ) |
Centrally cleared credit default swap agreements on credit indices—sell protection12
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio11 | Upfront payments received (made) | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
CDX North American High Yield 34 Index | USD | 4,513 | 06/20/25 | Quarterly | 5.000 | % | $ | (110,835 | ) | $ | (27,232 | ) | $ | (138,067 | ) |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | USD | 5,600,000 | COP | 21,067,200,000 | 07/22/20 | $ | (3,487 | ) | |||||||||||
BOA | CNY | 27,865,000 | USD | 3,912,580 | 07/22/20 | (22,297 | ) | ||||||||||||
BOA | USD | 1,316,979 | EUR | 1,175,000 | 07/22/20 | 3,700 | |||||||||||||
BOA | USD | 10,171,095 | JPY | 1,089,900,000 | 07/22/20 | (74,656 | ) | ||||||||||||
CITI | JPY | 361,854,360 | USD | 3,360,000 | 07/22/20 | 7,912 | |||||||||||||
CITI | USD | 2,003,971 | JPY | 213,900,000 | 07/22/20 | (22,479 | ) | ||||||||||||
CITI | USD | 5,600,000 | MXN | 126,035,028 | 07/22/20 | (131,076 | ) | ||||||||||||
HSBC | CNY | 20,500,000 | USD | 2,890,051 | 07/22/20 | (4,798 | ) | ||||||||||||
JPMCB | CAD | 18,640,000 | USD | 13,125,373 | 07/22/20 | (605,497 | ) | ||||||||||||
JPMCB | NZD | 16,465,000 | USD | 9,825,523 | 07/22/20 | (800,005 | ) | ||||||||||||
JPMCB | USD | 2,430,382 | CNY | 17,490,000 | 07/22/20 | 39,418 |
31
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Forward foreign currency contracts—(concluded)
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
JPMCB | USD | 975,821 | NOK | 9,330,000 | 07/22/20 | $ | (6,423 | ) | |||||||||||
MSCI | COP | 388,805,000 | USD | 98,743 | 07/22/20 | (4,543 | ) | ||||||||||||
MSCI | USD | 5,010,128 | CLP | 4,254,300,000 | 07/22/20 | 171,384 | |||||||||||||
MSCI | USD | 887,824 | EUR | 780,000 | 07/22/20 | (11,118 | ) | ||||||||||||
MSCI | USD | 948,770 | NZD | 1,475,000 | 07/22/20 | 3,107 | |||||||||||||
SSC | AUD | 5,375,000 | USD | 3,380,992 | 07/22/20 | (328,727 | ) | ||||||||||||
SSC | CHF | 5,105,000 | USD | 5,272,895 | 07/22/20 | (118,377 | ) | ||||||||||||
SSC | EU | R 810,000 | USD | 878,995 | 07/22/20 | (31,430 | ) | ||||||||||||
SSC | GBP | 1,060,000 | USD | 1,313,924 | 07/22/20 | 309 | |||||||||||||
SSC | MXN | 7,170,000 | USD | 292,336 | 07/22/20 | (18,785 | ) | ||||||||||||
SSC | NOK | 7,460,000 | USD | 708,453 | 07/22/20 | (66,650 | ) | ||||||||||||
SSC | USD | 149,332 | CAD | 200,000 | 07/22/20 | (2,005 | ) | ||||||||||||
SSC | USD | 538,840 | NZD | 840,000 | 07/22/20 | 3,246 | |||||||||||||
SSC | USD | 1,227,341 | SEK | 12,330,000 | 07/22/20 | 96,191 | |||||||||||||
SSC | USD | 455,332 | SGD | 650,000 | 07/22/20 | 11,105 | |||||||||||||
Net unrealized appreciation (depreciation) | $ | (1,915,981 | ) |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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 | $ | 68,814,057 | $ | 32,730,994 | $ | — | $ | 101,545,051 | |||||||||||
Preferred stocks | — | 1,072,784 | — | 1,072,784 | |||||||||||||||
Exchange traded funds | 63,964,677 | — | — | 63,964,677 | |||||||||||||||
Investment companies | 12,599,338 | — | — | 12,599,338 | |||||||||||||||
Asset-backed securities | — | 10,210,534 | — | 10,210,534 | |||||||||||||||
Mortgage-backed securities | — | 4,845,319 | 199,998 | 5,045,317 | |||||||||||||||
Non-U.S. government agency obligations | — | 9,175,710 | — | 9,175,710 | |||||||||||||||
U.S. government agency obligations | — | 6,496,802 | — | 6,496,802 | |||||||||||||||
U.S. Treasury obligations | — | 8,044,988 | — | 8,044,988 | |||||||||||||||
Short-term investments | — | 10,143,678 | — | 10,143,678 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 44,341,867 | — | 44,341,867 | |||||||||||||||
Futures contracts | 364,621 | 249,278 | — | 613,899 | |||||||||||||||
Forward foreign currency contracts | — | 336,372 | — | 336,372 | |||||||||||||||
Total | $ | 145,742,693 | $ | 127,648,326 | $ | 199,998 | $ | 273,591,017 |
32
UBS Global Allocation Fund
Portfolio of investments
June 30, 2020
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (331,803 | ) | $ | (668,671 | ) | $ | — | $ | (1,000,474 | ) | ||||||||
Swap agreements | — | (27,232 | ) | — | (27,232 | ) | |||||||||||||
Forward foreign currency contracts | — | (2,252,353 | ) | — | (2,252,353 | ) | |||||||||||||
Total | $ | (331,803 | ) | $ | (2,948,256 | ) | $ | — | $ | (3,280,059 | ) |
At June 30, 2020, there were no transfers in or out of Level 3.
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 $12,391,509, represented 5.5% of the Fund's net assets at period end.
3 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 Funds.
Security description | Value 06/30/19 | Purchases during the year ended 06/30/20 | Sales during the year ended 06/30/20 | Net realized gain (loss) during the year ended 06/30/20 | Change in net unrealized appreciation (depreciation) during the year ended 06/30/20 | Value 06/30/20 | Net income earned from affiliate for the year ended 06/30/20 | Shares 06/30/20 | |||||||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | $ | 20,816,127 | $ | 3,214,198 | $ | 9,600,000 | $ | (2,360,800 | ) | $ | 529,813 | $ | 12,599,338 | $ | 614,199 | 1,354,768 |
4 Variable or floating rate security. The interest rate shown is the current rate as of June 30, 2020 and changes periodically.
5 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.
6 Step bond—coupon rate increases in increments to maturity. The rate disclosed is the rate at the period end; the maturity date disclosed is the ultimate maturity date.
7 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.
8 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional security of the same maturity.
9 Significant unobservable inputs were used in the valuation of this security; i.e. Level 3.
10 Security fair valued by the Valuation Committee under the direction of the Board of Trustees.
11 Payments made or received are based on the notional amount.
12 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
13 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
33
UBS Emerging Markets Equity Opportunity Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class P2 shares of UBS Emerging Markets Equity Opportunity Fund (the "Fund") returned 2.66%, while Class P shares returned 1.84%. The Fund's benchmark, the MSCI Emerging Markets Index (net) (the "Index"), returned -3.39%. 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 positive return and outperformed its benchmark during the reporting period.
Portfolio performance summary1
What worked:
• On a sector level, stock selection within consumer discretionary and consumer staples added value.
• Tal Education (China, consumer discretionary) and Jiangsu Hengrui (China, health care) were among the top contributors to performance over the reporting period.
• Shares of Tal Education outperformed, as the COVID-19 pandemic may accelerate the growth of its online business longer term. The company's online revenues have been rapidly growing off a small base, and they are much better positioned than their competitors in this segment. Against this backdrop, we believe their market share gain should accelerate. Shares of Jiangsu Hengrui outperformed, as the health care sector has been more defensive relative to other sectors in the general market correction triggered by the pandemic outbreak in China
What didn't work:
• On a sector level, stock selection within financials and energy detracted from performance.
• On a stock level, Bank Mandiri and Banco Bradesco were among the main detractors
• The Fund's position in Bank Mandiri (Indonesia, financials) was a headwind for returns. The stock fell as the COVID-19 pandemic worsened in the country and concerns that declining economic growth may negatively impact asset quality for banks. We continue to hold this stock.
• The Fund's position in Banco Bradesco (Brazil, financials) also detracted from performance. Similar to Bank Mandiri, the stock fell given the pandemic and concerns over asset quality for banks. In addition, the company reported first quarter 2020 results that fell short of expectations. 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 12 months ended June 30, 2020. The views and opinions in the letter were current as of August 14, 2020. 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 06/30/20 (unaudited)
1 year | Inception1 | ||||||||||
Class P22 | 2.66 | % | (3.84 | )% | |||||||
Class P4 | 1.84 | 5.95 | |||||||||
MSCI Emerging Markets Index (net)3 | (3.39 | ) | (8.43 | ) |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class P2—1.44% and 0.42%; Class P—1.24% and 1.02%. 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 28, 2020, do not exceed 1.00% 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. Benchmark's inception return is based on Class P2 inception date.
2 Class P2 shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P2 shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to nonresident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 Inception date of Class P of UBS Emerging Markets Equity Opportunity Fund is January 31, 2019.
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.
35
UBS Emerging Markets Equity Opportunity Fund
Illustration of an assumed investment of $2,000,000 in Class P shares and $10,000 in Class P2 shares (unaudited)
The following two graphs depict 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, 2020. 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 = $2,000,000
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, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 7.7 | % | |||||
Alibaba Group Holding Ltd., ADR | 7.7 | ||||||
Samsung Electronics Co. Ltd. | 6.7 | ||||||
Tencent Holdings Ltd. | 4.9 | ||||||
Naspers Ltd., N Shares | 4.6 | ||||||
TAL Education Group, ADR | 4.4 | ||||||
Kweichow Moutai Co. Ltd., Class A | 4.0 | ||||||
Jiangsu Hengrui Medicine Co. Ltd., Class A | 3.9 | ||||||
HDFC Bank Ltd. | 3.8 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 3.7 | ||||||
Total | 51.4 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
China | 42.8 | % | |||||
South Korea | 10.3 | ||||||
Russia | 7.9 | ||||||
Taiwan | 7.7 | ||||||
India | 7.2 | ||||||
Total | 75.9 | % |
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, 2020 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Automobiles | 2.4 | % | |||||
Banks | 15.9 | ||||||
Beverages | 4.0 | ||||||
Diversified consumer services | 6.1 | ||||||
Entertainment | 3.0 | ||||||
Household durables | 2.7 | ||||||
Insurance | 3.7 | ||||||
Interactive media & services | 7.8 | ||||||
Internet & direct marketing retail | 17.1 | ||||||
IT services | 3.4 | ||||||
Metals & mining | 1.7 | ||||||
Oil, gas & consumable fuels | 4.9 | ||||||
Pharmaceuticals | 3.9 | ||||||
Real estate management & development | 2.4 | ||||||
Semiconductors & semiconductor equipment | 11.3 | ||||||
Technology hardware, storage & peripherals | 6.7 | ||||||
Total common stocks | 97.0 | % | |||||
Short-term investments | 2.0 | ||||||
Investment of cash collateral from securities loaned | 2.1 | ||||||
Total investments | 101.1 | % | |||||
Liabilities in excess of other assets | (1.1 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
38
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks: 97.0% | |||||||||||
Argentina: 3.3% | |||||||||||
MercadoLibre, Inc.* | 15,978 | $ | 15,750,633 | ||||||||
Brazil: 4.0% | |||||||||||
Petroleo Brasileiro SA, ADR1 | 702,600 | 5,599,722 | |||||||||
Petroleo Brasileiro SA, ADR | 673,500 | 5,569,845 | |||||||||
Vale SA | 788,337 | 8,106,472 | |||||||||
19,276,039 | |||||||||||
China: 42.8% | |||||||||||
Alibaba Group Holding Ltd.* | 253,000 | 6,826,898 | |||||||||
Alibaba Group Holding Ltd., ADR* | 169,281 | 36,513,912 | |||||||||
China Jinmao Holdings Group Ltd.1 | 16,080,000 | 11,443,505 | |||||||||
China Merchants Bank Co. Ltd., Class H | 2,979,000 | 13,805,106 | |||||||||
Gree Electric Appliances, Inc. of Zhuhai, Class A | 1,625,989 | 13,059,194 | |||||||||
Jiangsu Hengrui Medicine Co. Ltd., Class A | 1,432,857 | 18,726,056 | |||||||||
Kweichow Moutai Co. Ltd., Class A | 91,938 | 19,092,535 | |||||||||
NetEase, Inc., ADR | 33,450 | 14,362,761 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 61,273 | 7,979,583 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 1,758,000 | 17,525,479 | |||||||||
TAL Education Group, ADR* | 305,400 | 20,883,252 | |||||||||
Tencent Holdings Ltd. | 365,600 | 23,426,868 | |||||||||
203,645,149 | |||||||||||
Hungary: 2.4% | |||||||||||
OTP Bank Nyrt* | 326,421 | 11,475,425 | |||||||||
India: 7.2% | |||||||||||
HDFC Bank Ltd. | 1,283,137 | 18,035,158 | |||||||||
Tata Consultancy Services Ltd. | 586,334 | 16,140,323 | |||||||||
34,175,481 | |||||||||||
Indonesia: 5.2% | |||||||||||
Astra International Tbk. PT | 34,065,900 | 11,522,366 | |||||||||
Bank Mandiri Persero Tbk. PT | 38,025,400 | 13,203,551 | |||||||||
24,725,917 | |||||||||||
Mexico: 1.6% | |||||||||||
Grupo Financiero Banorte SAB de CV, Class O | 2,126,200 | 7,374,564 |
Number of shares | Value | ||||||||||
Common stocks—(concluded) | |||||||||||
Russia: 7.9% | |||||||||||
LUKOIL PJSC, ADR | 1,854 | $ | 137,815 | ||||||||
LUKOIL PJSC, ADR1 | 160,164 | 11,887,372 | |||||||||
Sberbank of Russia PJSC | 4,180,926 | 11,914,030 | |||||||||
Yandex N.V., Class A*,1 | 275,800 | 13,795,516 | |||||||||
37,734,733 | |||||||||||
South Africa: 4.6% | |||||||||||
Naspers Ltd., N Shares | 120,415 | 22,129,904 | |||||||||
South Korea: 10.3% | |||||||||||
Samsung Electronics Co. Ltd. | 717,950 | 31,781,946 | |||||||||
SK Hynix, Inc. | 241,742 | 17,260,008 | |||||||||
49,041,954 | |||||||||||
Taiwan: 7.7% | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 3,441,000 | 36,748,200 | |||||||||
Total common stocks (cost $430,794,086) | 462,077,999 | ||||||||||
Short-term investments: 2.0% | |||||||||||
Investment companies: 2.0% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%2 (cost $9,632,455) | 9,632,455 | 9,632,455 | |||||||||
Investment of cash collateral from securities loaned: 2.1% | |||||||||||
Money market funds: 2.1% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%2 (cost $9,804,566) | 9,804,566 | 9,804,566 | |||||||||
Total investments (cost $450,231,107)—101.1% | 481,515,020 | ||||||||||
Liabilities in excess of other assets: (1.1)% | (5,180,720 | ) | |||||||||
Net assets: 100.0% | $ | 476,334,300 |
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, 2020
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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 | $ | 159,737,662 | $ | 302,340,337 | $ | — | $ | 462,077,999 | |||||||||||
Short-term investments | — | 9,632,455 | — | 9,632,455 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 9,804,566 | — | 9,804,566 | |||||||||||||||
Total | $ | 159,737,662 | $ | 321,777,358 | $ | — | $ | 481,515,020 |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
40
UBS Engage For Impact Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class P shares of UBS Engage For Impact Fund (the "Fund") returned -3.77%. The Fund's benchmark, the MSCI All Country World Index (net) (the "Index"), returned 2.11% over the same time period. (Please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund underperformed its benchmark during a period of severe market volatility related to the global pandemic. The Fund's returns were driven primarily by stock allocation, which detracted from performance. Allocation to sectors was a small positive contributor.
Portfolio performance summary1
What worked:
• Stock selection within the industrials, real estate and consumer staples sectors contributed positively to Fund performance during the reporting period. The Fund's relative overweight to the health care sector contributed positively, as well.
• Several individual stock positions were positive for relative performance during the 12-month period.
– Genmab recently signed a broad collaboration agreement with AbbVie to develop and commercialize three of Genmab's candidates for future differentiated antibody therapeutics for cancer. The collaboration combines Genmab's world-class discovery and development engine with AbbVie's deep clinical expertise and global commercial leadership in hematological cancers.
– Conagra Brands is pursuing the rationalization of its portfolio brands, with a greater focus on healthy food, as well as improved margins.
– Incyte engages in the discovery, development and commercialization of therapeutics. The company announced in early April that it was starting a Phase 3 study to evaluate Ruxolitinib (Jakafi®) as a treatment for patients with a COVID-19 associated cytokine storm (over-active immune system response). The same drug also showed encouraging results in terms of best-available therapy in patients with acute graft-versus-host disease.
What didn't work:
• Stock selection in financials and health care detracted from Fund performance during the 12-month period. An underweight to the information technology sector, as well as stock selection within the sector, hindered performance.
• Certain stock selection decisions made a negative contribution to relative returns.
– The Fund suffered from a lack of exposure to Apple, the largest stock in the benchmark, which continued to post strong performance. We do not believe Apple qualifies for this Fund, as the technology giant does not derive revenues from impactful product and services.
– The share price of Grupo Financiero Banorte, a large Mexican bank, was affected by fears that emerging market banks would be shattered by the impact of the pandemic, as well as weak market expectations regarding the current administration and the Mexican economy.
– KasikornBank was hit by fears that the banking sector, especially in emerging markets, would not be strong enough to survive the COVID-19 crisis. We believe that the Thai bank has a relatively strong balance sheet in comparison to its peers.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
41
UBS Engage For Impact Fund
Portfolio highlights
• Takeda is one of the top 10 global pharmaceutical companies. The company has a balanced product portfolio that includes Entyvio, ADHD and IVIG. Investor frustration about the surprise $60 billion Shire acquisition resulted in a depressed valuation. We believe concerns around the ability to grow the plasma business in line with the market and to improve historically weak research and development (R&D) productivity are more than priced in. We see the potential for upside surprises on both fronts. Although the company's financial leverage remains elevated, we see a clear path to deleveraging within the next three years, even without additional divestitures of non-core assets. Takeda's Access to Medicine (AtM) is very strong, as evidenced by a # 5 rank in the 2018 Access to Medicine Index. With the integration of Shire, Takeda is able to expand its AtM strategy to include rare diseases. Takeda has formulated "Vision 2025," a strategy for sustainable growth with clear performance targets.
• Infineon's technology and strategy are centered on the efficient use of energy, environmentally friendly mobility, and security in a connected world. With Infineon's products focused on energy efficiency, alternative energy generation and LED-related offerings, the company has capitalized on the opportunities presented by the growing market for clean technologies. The company's semiconductors make end products more energy efficient during their lifetimes, and thus make an essential contribution to the improvement of the environmental footprint. Infineon exited from the low quality and volatile DRAM business, together with the volatile and R&D-intensive wireless and wireline businesses. Today, 90% of Infineon's sales come from the far higher quality automotive, industrial power control (IPC) and power management & multimarket (PMM) divisions, which benefit from lower capital intensity and volatility of earnings. In both markets, Infineon is one of the market leaders.
• Trimble's core technologies in connectivity and data analytics enable customers to enhance safety and compliance, to improve productivity and quality, and to reduce the environmental impact of customers' applications. Trimble also creates impact by helping its customers manage water resources, mainly in the agriculture, construction, geospatial and transportation industries. Trimble has generated positive organic growth in all but two of the past 20 years, and converts over 100% of adjusted net income to free cash flow (6% of sales). Trimble is also relatively unique among its peers in that it can leverage a strong market position in technology hardware. As customers try to tie together the physical and digital worlds, Trimble appears to have an advantage. The company is transitioning to a more software-centric business with improved margins, as well as more reliable and visible revenue growth.
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, 2020. The views and opinions in the letter were current as of August 14, 2020. 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 06/30/20 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class P2 | (3.77 | )% | 4.19 | % | |||||||
MSCI All Country World Index (net) | 2.11 | 13.66 |
The annualized gross and net expense ratios, respectively, for Class P shares as in the October 28, 2019 prospectus were as follows: Class P—3.87% 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 28, 2020, 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. Benchmark's inception return is based on Class P inception date.
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. 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 $2,000,000 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, 2020. 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 = $2,000,000
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, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Takeda Pharmaceutical Co. Ltd. | 3.6 | % | |||||
Infineon Technologies AG | 3.2 | ||||||
Linde PLC | 3.1 | ||||||
Trimble, Inc. | 3.1 | ||||||
Conagra Brands, Inc. | 3.0 | ||||||
Prysmian SpA | 2.8 | ||||||
Incyte Corp. | 2.7 | ||||||
Koninklijke Ahold Delhaize N.V. | 2.7 | ||||||
Aptiv PLC | 2.6 | ||||||
Genmab A/S | 2.5 | ||||||
Total | 29.3 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 49.0 | % | |||||
Japan | 7.5 | ||||||
Germany | 7.1 | ||||||
China | 5.6 | ||||||
Denmark | 4.7 | ||||||
Total | 73.9 | % |
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, 2020 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Auto components | 4.6 | % | |||||
Banks | 9.4 | ||||||
Biotechnology | 8.2 | ||||||
Building products | 2.9 | ||||||
Chemicals | 5.5 | ||||||
Commercial services & supplies | 1.7 | ||||||
Distributors | 2.5 | ||||||
Diversified consumer services | 1.7 | ||||||
Electrical equipment | 2.8 | ||||||
Electronic equipment, instruments & components | 6.9 | ||||||
Equity real estate investment trusts | 2.3 | ||||||
Food & staples retailing | 2.6 | ||||||
Food products | 6.0 | ||||||
Health care equipment & supplies | 6.6 | ||||||
Health care providers & services | 1.1 | ||||||
Machinery | 1.9 | ||||||
Metals & mining | 1.4 | ||||||
Oil, gas & consumable fuels | 3.6 | ||||||
Pharmaceuticals | 7.2 | ||||||
Road & rail | 3.5 | ||||||
Semiconductors & semiconductor equipment | 7.0 | ||||||
Software | 2.2 | ||||||
Wireless telecommunication services | 2.4 | ||||||
Total common stocks | 94.0 | % | |||||
Preferred stocks | 1.9 | ||||||
Short-term investments | 3.2 | ||||||
Investment of cash collateral from securities loaned | 2.0 | ||||||
Total investments | 101.1 | % | |||||
Liabilities in excess of other assets | (1.1 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
46
UBS Engage For Impact Fund
Portfolio of Investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks: 94.0% | |||||||||||
Austria: 2.0% | |||||||||||
Erste Group Bank AG* | 21,998 | $ | 519,543 | ||||||||
China: 5.6% | |||||||||||
China Mengniu Dairy Co. Ltd. | 102,000 | 391,127 | |||||||||
China Mobile Ltd. | 95,000 | 641,445 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 3,400 | 442,782 | |||||||||
1,475,354 | |||||||||||
Denmark: 4.7% | |||||||||||
Genmab A/S* | 1,949 | 657,189 | |||||||||
H Lundbeck A/S | 15,067 | 569,298 | |||||||||
1,226,487 | |||||||||||
Germany: 5.2% | |||||||||||
Continental AG* | 5,313 | 522,328 | |||||||||
Infineon Technologies AG | 36,155 | 847,190 | |||||||||
1,369,518 | |||||||||||
Indonesia: 1.7% | |||||||||||
Bank Mandiri Persero Tbk. PT | 1,304,700 | 453,031 | |||||||||
Ireland: 1.2% | |||||||||||
Kingspan Group PLC | 4,988 | 322,007 | |||||||||
Italy: 2.8% | |||||||||||
Prysmian SpA | 31,715 | 735,735 | |||||||||
Japan: 7.5% | |||||||||||
Sumitomo Mitsui Financial Group, Inc. | 21,800 | 615,235 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 25,953 | 932,438 | |||||||||
West Japan Railway Co. | 7,400 | 415,058 | |||||||||
1,962,731 | |||||||||||
Mexico: 1.8% | |||||||||||
Grupo Financiero Banorte SAB de CV, Class O | 139,050 | 482,284 | |||||||||
Netherlands: 2.7% | |||||||||||
Koninklijke Ahold Delhaize N.V. | 25,574 | 696,995 | |||||||||
New Zealand: 1.4% | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 15,582 | 358,959 | |||||||||
Norway: 2.3% | |||||||||||
Equinor ASA | 41,122 | 592,390 | |||||||||
Portugal: 1.4% | |||||||||||
Galp Energia SGPS SA | 30,670 | 355,771 | |||||||||
Switzerland: 1.8% | |||||||||||
Alcon, Inc.* | 8,357 | 480,187 | |||||||||
Thailand: 1.5% | |||||||||||
Kasikornbank PCL | 132,600 | 400,846 | |||||||||
United Kingdom: 4.6% | |||||||||||
Linde PLC | 3,889 | 824,896 | |||||||||
Spectris PLC | 12,440 | 388,533 | |||||||||
1,213,429 |
Number of shares | Value | ||||||||||
Common stocks—(concluded) | |||||||||||
United States: 45.8% | |||||||||||
Abbott Laboratories | 5,781 | $ | 528,557 | ||||||||
AGCO Corp. | 9,024 | 500,471 | |||||||||
Aptiv PLC | 8,652 | 674,164 | |||||||||
Bunge Ltd. | 9,373 | 385,511 | |||||||||
Conagra Brands, Inc. | 22,429 | 788,828 | |||||||||
Digital Realty Trust, Inc. | 4,319 | 613,773 | |||||||||
Ecolab, Inc. | 3,126 | 621,918 | |||||||||
Elanco Animal Health, Inc.* | 17,942 | 384,856 | |||||||||
Incyte Corp.* | 6,935 | 721,032 | |||||||||
IPG Photonics Corp.* | 3,898 | 625,200 | |||||||||
Ironwood Pharmaceuticals, Inc.* | 53,355 | 550,624 | |||||||||
Laboratory Corp. of America Holdings* | 1,794 | 298,001 | |||||||||
LivaNova PLC* | 7,635 | 367,473 | |||||||||
LKQ Corp.* | 24,800 | 649,760 | |||||||||
Lyft, Inc., Class A1 | 15,070 | 497,461 | |||||||||
Masco Corp. | 8,528 | 428,191 | |||||||||
Micron Technology, Inc.* | 9,020 | 464,710 | |||||||||
Mirati Therapeutics, Inc.* | 1,936 | 221,033 | |||||||||
Sims Ltd. | 68,807 | 382,423 | |||||||||
Stericycle, Inc.* | 7,791 | 436,140 | |||||||||
Trimble, Inc.* | 18,630 | 804,630 | |||||||||
Universal Display Corp. | 3,465 | 518,433 | |||||||||
VMware, Inc., Class A*,1 | 3,662 | 567,098 | |||||||||
12,030,287 | |||||||||||
Total common stocks (cost $24,436,810) | 24,675,554 | ||||||||||
Preferred stocks: 1.9% | |||||||||||
Germany: 1.9% | |||||||||||
Henkel AG & Co. KGaA (cost $547,945) | 5,492 | 512,369 | |||||||||
Short-term investments: 3.2% | |||||||||||
Investment companies: 3.2% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%2 (cost $837,454) | 837,454 | 837,454 | |||||||||
Investment of cash collateral from securities loaned: 2.0% | |||||||||||
Money market funds: 2.0% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%2 (cost $508,613) | 508,613 | 508,613 | |||||||||
Total investments (cost $26,330,822)—101.1% | 26,533,990 | ||||||||||
Liabilities in excess of other assets: (1.1)% | (292,890 | ) | |||||||||
Net assets: 100.0% | $ | 26,241,100 |
47
UBS Engage For Impact Fund
Portfolio of Investments
June 30, 2020
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.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 13,397,826 | $ | 11,277,728 | $ | — | $ | 24,675,554 | |||||||||||
Preferred stocks | — | 512,369 | — | 512,369 | |||||||||||||||
Short-term investments | — | 837,454 | — | 837,454 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 508,613 | — | 508,613 | |||||||||||||||
Total | $ | 13,397,826 | $ | 13,136,164 | $ | — | $ | 26,533,990 |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
48
UBS International Sustainable Equity Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS International Sustainable Equity Fund (the "Fund") returned -2.73% (Class A shares returned -8.06% after the deduction of the maximum sales charge), while Class P shares returned -2.40%. The Fund's new benchmark, (MSCI ACWI ex-US Index) (the "Index"), returned -4.80%. For comparison purposes, the Fund's previous benchmark, the MSCI World ex USA Index (net), returned -5.42%.1 (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 outperformed its benchmark during the reporting period. This was driven by a combination of sector allocation and, to a lesser extent, stock selection within sectors.
Portfolio performance summary2
What worked:
• Stock selection in the energy, financials and consumer staples sectors contributed to performance.
• Genmab signed a broad collaboration agreement with AbbVie to develop and commercialize three of Genmab's candidates for future differentiated antibody therapeutics for cancer. The collaboration combines Genmab's world-class discovery and development engine with AbbVie's deep clinical expertise and global commercial leadership in hematological cancers.
• ASML is the dominant supplier of lithography equipment and the sole supplier of Extreme Ultraviolet (EUV) lithography equipment used in the manufacturing process for semiconductors. Despite disturbances from the US-China trade war and, later in 2020, the COVID-19 pandemic, the company maintained strong results.
• While electronics manufacturing and the release of new movies was impacted by COVID-19 restrictions, Sony's games division overall benefited in this environment, notably its gaming division. Also, Sony announced the split of its remaining electronics business from its headquartering, which is simplifying its corporate structure.
• The Fund's average overweight to health care and underweight to energy contributed the most to relative performance.
What didn't work:
• Stock selection in the health care, information technology and consumer discretionary sectors detracted from performance during the reporting period.
– Axis Bank's share price fell during the reporting period on fears over the Indian banking sector's stability. Although Axis Bank missed the market's estimates for the first quarter of 2020, its net profit rose 95%. We continue to hold this stock.
– Not owning social media giant Tencent in the portfolio was detrimental to performance relative to the benchmark. Tencent is a large component of the benchmark and performed well over the period.
– Along with the rest of the sector, Erste Group Bank's share price plunged over worries about bad debt books and financial system instability during the pandemic. We continue to hold this stock.
1 Effective October 28, 2019, the MSCI ACWI ex-US Index replaced MSCI World ex USA Index (net) as the Fund's primary benchmark because it more closely aligns with the Fund's investment strategy.
2 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
• In terms of sector allocation, an average underweight to consumer discretionary and an average overweight to consumer staples slightly detracted from relative performance.
Portfolio highlights
• Sony is a conglomerate engaged in the production of various kinds of electronic equipment and production and licensing of music and films. Sony has transformed its business portfolio significantly over several years. We believe the company will be able to grow its earnings in a sustainable way for the next three- to five-years. Keys to achieving this are its game and network services segment and the successful launch of PS5. The restructuring of its Mobile Communication and Pictures businesses is also very important. There is clearly a positive sign in Pictures as it has had higher movie successes in the last few years. Sony has the top-rated score based on our sustainability model, lifted by its environmental efficiency.
• Royal Ahold Delhaize is Dutch food retailer with a major US presence (€14.5 billlion of sales, 60% of company revenue), and market leading positions in the Netherlands and Belgium. The company operates through supermarkets with a total of over 6,750 stores. An estimated 25% of its total food sales comes from healthy products. While the company operates in a highly competitive industry where cost control, location and engagement are key, we continue to see potential in the company. Royal Ahold Delhaize has held its ground against competitive disruptions in the US from online retail and hard discounters and remains the dominant player in the Netherlands. Royal Ahold Delhaize conducts ESG materiality assessments on a yearly basis, and we continue to engage with them on their sustainability priorities, including healthy eating, waste reduction and greater transparency.
• Takeda is one of the 10 largest global pharmaceutical companies with a balanced product portfolio. Investor frustration around the surprise $60 billion Shire acquisition resulted in a depressed valuation. At current levels, we believe concerns around the ability to grow the plasma business in-line with the market and to improve historically weak research and development (R&D) productivity are more than priced in to its share price, and see the potential for upside surprises on both fronts. Although its financial leverage remains elevated, we see a clear path to deleveraging within the next three years, even without additional divestitures of non-core assets. Their Access to Medicine (AtM) is very strong, as evidenced by a #5 rank in the 2018 Access to Medicine Index. With the integration of Shire, Takeda is able to expand its AtM strategy to include rare diseases. Takeda has formulated "Vision 2025" as outlining its strategy for sustainable growth with clear performance targets.
• 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, 2020. The views and opinions in the letter were current as of August 14, 2020. 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 06/30/20 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | (2.73 | )% | 1.76 | % | 5.84 | % | |||||||||
Class P2 | (2.40 | ) | 2.03 | 6.10 | |||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (8.06 | )% | 0.62 | % | 5.23 | % | |||||||||
MSCI World ex USA Index (net)3 | (5.42 | ) | 2.01 | 5.43 | |||||||||||
MSCI ACWI ex-US Index4 | (4.80 | ) | 2.26 | 4.97 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.53% and 1.25%; Class P—1.26% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. UBS 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.
4 Effective October 28, 2019, the MSCI ACWI ex-US Index replaced MSCI World ex USA Index (net) as the Fund's primary benchmark because it more closely aligns with the Fund's investment strategy
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 $2,000,000 in Class P shares (unaudited)
The following graphs depict the performance of UBS International Sustainable Equity Fund Class A and Class P shares versus the MSCI World ex USA Index (net) and MSCI ACWI ex-US Index over the 10 years ended June 30, 2020. 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) and MSCI ACWI ex-US Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2010 = $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) and MSCI ACWI ex-US Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2010 = $2,000,000
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, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Sony Corp. | 3.4 | % | |||||
Koninklijke Ahold Delhaize N.V. | 2.8 | ||||||
Alibaba Group Holding Ltd., ADR | 2.7 | ||||||
Takeda Pharmaceutical Co. Ltd. | 2.5 | ||||||
ASML Holding N.V. | 2.4 | ||||||
Nintendo Co. Ltd. | 2.1 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 2.1 | ||||||
Kao Corp. | 2.0 | ||||||
LG Chem Ltd. | 2.0 | ||||||
SAP SE | 2.0 | ||||||
Total | 24.0 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
Japan | 23.1 | % | |||||
United Kingdom | 11.7 | ||||||
China | 7.3 | ||||||
Germany | 6.3 | ||||||
Netherlands | 6.1 | ||||||
Total | 54.5 | % |
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, 2020 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Auto components | 1.8 | % | |||||
Automobiles | 0.8 | ||||||
Banks | 6.0 | ||||||
Biotechnology | 2.9 | ||||||
Chemicals | 4.5 | ||||||
Commercial services & supplies | 1.1 | ||||||
Construction & engineering | 0.6 | ||||||
Construction materials | 1.0 | ||||||
Diversified financial services | 2.8 | ||||||
Diversified telecommunication services | 3.0 | ||||||
Electrical equipment | 0.8 | ||||||
Electronic equipment, instruments & components | 1.3 | ||||||
Energy equipment & services | 0.5 | ||||||
Entertainment | 3.8 | ||||||
Equity real estate investment trusts | 1.2 | ||||||
Food & staples retailing | 2.8 | ||||||
Food products | 2.4 | ||||||
Health care equipment & supplies | 4.9 | ||||||
Household durables | 3.4 | ||||||
Insurance | 8.7 | ||||||
Internet & direct marketing retail | 5.4 | ||||||
IT services | 0.6 | ||||||
Machinery | 3.3 | ||||||
Oil, gas & consumable fuels | 4.3 | ||||||
Paper & forest products | 0.9 | ||||||
Personal products | 5.3 | ||||||
Pharmaceuticals | 6.2 | ||||||
Real estate management & development | 1.1 | ||||||
Road & rail | 0.5 | ||||||
Semiconductors & semiconductor equipment | 6.2 | ||||||
Software | 3.6 | ||||||
Textiles, apparel & luxury goods | 0.5 | ||||||
Trading companies & distributors | 3.0 | ||||||
Wireless telecommunication services | 2.8 | ||||||
Total common stocks | 98.0 | % | |||||
Preferred stocks | 1.1 | ||||||
Short-term investments | 2.0 | ||||||
Total investments | 101.1 | % | |||||
Liabilities in excess of other assets | (1.1 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
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UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks: 98.0% | |||||||||||
Australia: 2.3% | |||||||||||
Brambles Ltd. | 311,602 | $ | 2,362,688 | ||||||||
Mirvac Group | 1,688,974 | 2,551,368 | |||||||||
4,914,056 | |||||||||||
Austria: 1.0% | |||||||||||
Erste Group Bank AG* | 88,960 | 2,101,032 | |||||||||
Belgium: 2.3% | |||||||||||
Galapagos N.V.* | 9,849 | 1,942,935 | |||||||||
KBC Group N.V. | 50,281 | 2,888,703 | |||||||||
4,831,638 | |||||||||||
China: 7.3% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 26,649 | 5,748,189 | |||||||||
China Mobile Ltd. | 420,000 | 2,835,863 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 436,500 | 4,351,463 | |||||||||
Prosus N.V.* | 27,189 | 2,535,032 | |||||||||
15,470,547 | |||||||||||
Denmark: 3.4% | |||||||||||
Genmab A/S* | 12,067 | 4,068,908 | |||||||||
H Lundbeck A/S | 84,168 | 3,180,238 | |||||||||
7,249,146 | |||||||||||
Finland: 2.6% | |||||||||||
Neste Oyj | 88,001 | 3,456,332 | |||||||||
Sampo Oyj, Class A | 59,548 | 2,052,606 | |||||||||
5,508,938 | |||||||||||
France: 1.8% | |||||||||||
Ubisoft Entertainment SA* | 44,500 | 3,685,063 | |||||||||
Germany: 5.2% | |||||||||||
Continental AG* | 20,908 | 2,055,491 | |||||||||
HUGO BOSS AG | 33,056 | 1,001,789 | |||||||||
Infineon Technologies AG | 158,735 | 3,719,507 | |||||||||
SAP SE | 29,889 | 4,178,165 | |||||||||
10,954,952 | |||||||||||
Hong Kong: 1.1% | |||||||||||
Sun Hung Kai Properties Ltd. | 182,500 | 2,331,479 | |||||||||
India: 2.3% | |||||||||||
Axis Bank Ltd., GDR | 68,783 | 1,836,676 | |||||||||
Infosys Ltd., ADR | 133,799 | 1,292,498 | |||||||||
Mahindra & Mahindra Ltd., GDR | 264,882 | 1,753,519 | |||||||||
4,882,693 | |||||||||||
Indonesia: 2.8% | |||||||||||
Bank Central Asia Tbk. PT | 2,025,100 | 4,051,822 | |||||||||
Bank Mandiri Persero Tbk. PT | 5,202,500 | 1,806,463 | |||||||||
5,858,285 |
Number of shares | Value | ||||||||||
Common stocks—(continued) | |||||||||||
Italy: 4.0% | |||||||||||
Banca Mediolanum SpA | 452,292 | $ | 3,255,007 | ||||||||
Infrastrutture Wireless Italiane SpA1 | 335,597 | 3,368,814 | |||||||||
Prysmian SpA | 73,806 | 1,712,175 | |||||||||
8,335,996 | |||||||||||
Japan: 23.1% | |||||||||||
Hoya Corp. | 38,100 | 3,648,417 | |||||||||
Inpex Corp. | 191,800 | 1,197,649 | |||||||||
ITOCHU Corp. | 108,200 | 2,341,212 | |||||||||
Kao Corp.2 | 53,600 | 4,253,579 | |||||||||
Kissei Pharmaceutical Co. Ltd. | 52,482 | 1,325,919 | |||||||||
Kubota Corp.2 | 179,200 | 2,680,606 | |||||||||
Nabtesco Corp.2 | 94,500 | 2,924,507 | |||||||||
Nintendo Co. Ltd. | 9,900 | 4,425,979 | |||||||||
Nippon Telegraph & Telephone Corp. | 130,500 | 3,040,576 | |||||||||
ORIX Corp. | 214,800 | 2,667,226 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 31,000 | 3,638,206 | |||||||||
SoftBank Group Corp. | 61,900 | 3,121,472 | |||||||||
Sony Corp. | 102,400 | 7,068,685 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 148,561 | 5,337,490 | |||||||||
West Japan Railway Co. | 18,700 | 1,048,864 | |||||||||
48,720,387 | |||||||||||
Mexico: 1.0% | |||||||||||
Cemex SAB de CV, ADR | 726,800 | 2,093,184 | |||||||||
Netherlands: 6.1% | |||||||||||
ASML Holding N.V. | 13,616 | 4,980,908 | |||||||||
Koninklijke Ahold Delhaize N.V. | 214,329 | 5,841,334 | |||||||||
NXP Semiconductors N.V. | 17,404 | 1,984,752 | |||||||||
12,806,994 | |||||||||||
New Zealand: 1.2% | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 111,963 | 2,579,268 | |||||||||
Norway: 2.0% | |||||||||||
Equinor ASA | 160,895 | 2,317,800 | |||||||||
Mowi ASA | 98,045 | 1,868,900 | |||||||||
4,186,700 | |||||||||||
Portugal: 1.0% | |||||||||||
Galp Energia SGPS SA | 175,765 | 2,038,871 | |||||||||
South Africa: 1.5% | |||||||||||
Naspers Ltd., N Shares | 17,082 | 3,139,335 | |||||||||
South Korea: 5.0% | |||||||||||
LG Chem Ltd. | 10,152 | 4,189,517 | |||||||||
LG Household & Health Care Ltd. | 2,426 | 2,719,084 | |||||||||
Samsung Engineering Co. Ltd.* | 131,852 | 1,358,903 | |||||||||
SK Hynix, Inc. | 32,109 | 2,292,533 | |||||||||
10,560,037 | |||||||||||
Sweden: 0.8% | |||||||||||
Hexpol AB* | 225,388 | 1,681,822 |
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UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks—(concluded) | |||||||||||
Switzerland: 4.6% | |||||||||||
Alcon, Inc.* | 49,315 | $ | 2,833,602 | ||||||||
Nestle SA (Registered) | 28,855 | 3,199,172 | |||||||||
Zurich Insurance Group AG | 10,333 | 3,661,295 | |||||||||
9,694,069 | |||||||||||
United Kingdom: 11.7% | |||||||||||
Ashtead Group PLC | 116,615 | 3,933,780 | |||||||||
GlaxoSmithKline PLC | 155,070 | 3,132,365 | |||||||||
Mondi PLC | 101,697 | 1,902,240 | |||||||||
Prudential PLC | 273,501 | 4,121,130 | |||||||||
Sage Group PLC/The | 404,170 | 3,354,989 | |||||||||
Spectris PLC | 91,107 | 2,845,506 | |||||||||
Unilever N.V. | 76,634 | 4,085,949 | |||||||||
Weir Group PLC/The | 94,902 | 1,247,132 | |||||||||
24,623,091 | |||||||||||
United States: 3.9% | |||||||||||
Aon PLC, Class A | 21,382 | 4,118,173 | |||||||||
Aptiv PLC | 21,037 | 1,639,203 | |||||||||
LivaNova PLC* | 25,000 | 1,203,250 | |||||||||
Schlumberger Ltd. | 62,747 | 1,153,918 | |||||||||
8,114,544 | |||||||||||
Total common stocks (cost $201,535,379) | 206,362,127 |
Number of shares | Value | ||||||||||
Preferred stocks: 1.1% | |||||||||||
Germany: 1.1% | |||||||||||
Henkel AG & Co. KGaA (cost $2,514,164) | 25,096 | $ | 2,341,298 | ||||||||
Short-term investments: 2.0% | |||||||||||
Investment companies: 2.0% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%3 (cost $4,228,261) | 4,228,261 | 4,228,261 | |||||||||
Total investments (cost $208,277,804)—101.1% | 212,931,686 | ||||||||||
Liabilities in excess of other assets: (1.1)% | (2,411,754 | ) | |||||||||
Net assets: 100.0% | $ | 210,519,932 |
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, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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 | $ | 22,483,616 | $ | 183,878,511 | $ | — | $ | 206,362,127 | |||||||||||
Preferred stocks | — | 2,341,298 | — | 2,341,298 | |||||||||||||||
Short-term investments | — | 4,228,261 | — | 4,228,261 | |||||||||||||||
Total | $ | 22,483,616 | $ | 190,448,070 | $ | — | $ | 212,931,686 |
At June 30, 2020, there were no transfers in or out of Level 3.
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UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2020
Portfolio footnotes
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $3,368,814, represented 1.6% of the Fund's net assets at period end.
2 Security, or portion thereof, was on loan at the period end.
3 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
57
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 9.33% (Class A shares returned 3.33% after the deduction of the maximum sales charge), while Class P shares returned 9.62%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 3.48% over the same time period. (Class P shares have lower expenses than other share classes 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 successful stock selection decisions.
Portfolio performance summary1
What worked:
• Stock selection within the health care sector made a positive contribution to Fund performance during the 12 months ended June 30, 2020.
– Moderna, a clinical stage biotechnology company focused on the development of messenger RNA therapeutics and vaccines, outperformed based on its potential leadership position in developing a COVID-19 vaccine. We sold the stock during the reporting period.
– Teladoc Health, a comprehensive virtual healthcare service provider, benefited from the potential of telemedicine to treat COVID-19 patients, as well as patients who would prefer not to risk going to a doctor's office. We sold the stock after the reporting period.
• Several information technology stocks also benefited performance during the 12-month period.
– Cloudflare is a designer and developer of application software for network security, reliability and performance optimization. The company performed strongly as the COVID-19 global pandemic accelerated enterprises' shift to the cloud, which increased demand for the company's services. (For details, see "Portfolio highlights.")
– Shares of Wix.com, a cloud-based website creation platform, advanced after the company saw accelerated demand for its solutions due to the COVID-19 global pandemic. (For details, see "Portfolio highlights.")
• Other stock selection decisions that were positive for performance included Chegg.
– Chegg, an online educational platform, saw its shares rise after reporting strong first quarter results, which benefited from good student engagement and a tightening of account sharing policies. (For details, see "Portfolio highlights.")
What didn't work:
• Certain stock selection decisions made a negative contribution to Fund returns during the 12-month period.
– PROS Holdings, a developer of pricing and revenue optimization software, saw its shares fall during the period on concern that the upheaval in global airline travel due to the ongoing COVID-19 pandemic will slow new business growth going forward. We sold the stock during the reporting period.
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
– Quidel, a developer and manufacturer of diagnostic healthcare products, outperformed due to growth in the company's rapid flu immunoassay products. Quidel also benefited from the receipt of FDA Emergency Use Authorization to market its rapid point of care COVID-19 antigen diagnostic test. Quidel was a negative contributor to performance relative to the benchmark as the Fund did not own any shares in this company during the reporting period.
– Webster Financial is a bank holding company that offers a wide range of financial services throughout southern New England and eastern New York State, and is a player in the U.S. Health Savings Account market. The company's stock price declined during the reporting period primarily due to investors' concern about the abrupt shutdown in economic activity in the bank's major regions of operations due to the COVID-19 pandemic. We continue to hold this stock.
• Several industrial stocks detracted from relative returns.
– Chart Industries, a global manufacturer of equipment used in the production, storage, and end-use of hydrocarbon and industrial gases, underperformed following the dramatic fall in oil prices around the world. We continue to hold this stock.
– Woodward, a designer and manufacturer of energy control systems and components for aircraft and industrial engines, underperformed. The COVID-19 pandemic resulted in a significant weakening of its commercial aerospace end market customers, which may lead to reduced or cancelled order activity across many of the new Airbus and Boeing planes for which Woodward provides content. We sold the stock during the reporting period.
Portfolio highlights
• 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 student-first connected learning platform designed to improve student outcomes. The company operates an integrated platform of educational services that are connected, online, on-demand, personalized, adaptive, affordable and backed up by human help. Chegg benefited from increased subscriber growth and higher average revenue per user as colleges increased the number of classes offered online.
• Avalara provides a comprehensive suite of tax compliance software that helps businesses address complex and rapidly changing tax regulations. The company's software automates tax determinations in real-time with technology that is focused on transaction taxes: sales, excise, communications, lodging, VAT and tariffs. Customers range from Fortune 100 companies to small and medium-sized businesses (SMBs). We believe that Avalara has multiple growth opportunities, including a push both up- and downstream from its current focus on the SMB segment, expansion into international tax calculations, the introduction of additional tax compliance modules and further gains in automation.
59
UBS U.S. Small Cap Growth Fund
• Cloudflare designs and develops application software that enhances network security, optimizes performance and increases reliability. We believe Cloudflare is well-positioned to grow as the company continues to replace on-premises equipment with cloud-based software solutions.
• Generac is a manufacturer of backup power generation products for the residential, light commercial and industrial markets. The company is executing well with a favorable backdrop for sales. Opportunities for upside include a recovery in the energy sector; interest from the telecom market, whose national account customers are interested in protecting the uptime of their network; as well as power outages ahead of current baseline expectations.
• 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, 2020. The views and opinions in the letter were current as of August 14, 2020. 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 06/30/20 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 9.33 | % | 8.31 | % | 15.21 | % | |||||||||
Class P2 | 9.62 | 8.59 | 15.51 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 3.33 | % | 7.10 | % | 14.55 | % | |||||||||
Russell 2000 Growth Index3 | 3.48 | 6.86 | 12.92 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.58% and 1.25%; Class P—1.31% 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 28, 2020, 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 $2,000,000 in Class P shares (unaudited)
The following two graphs depict 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, 2020. 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, 2010 = $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, 2010 = $2,000,000
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, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Wix.com Ltd. | 2.2 | % | |||||
Chegg, Inc. | 2.1 | ||||||
Avalara, Inc. | 2.0 | ||||||
Staar Surgical Co. | 2.0 | ||||||
Cloudflare, Inc., Class A | 2.0 | ||||||
Generac Holdings, Inc. | 1.9 | ||||||
Grocery Outlet Holding Corp. | 1.8 | ||||||
Universal Display Corp. | 1.7 | ||||||
QTS Realty Trust, Inc., Class A | 1.7 | ||||||
LHC Group, Inc. | 1.7 | ||||||
Total | 19.1 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 94.3 | % | |||||
Israel | 2.2 | ||||||
Canada | 2.0 | ||||||
Switzerland | 1.2 | ||||||
Netherlands | 0.8 | ||||||
Total | 100.5 | % |
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, 2020 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 1.6 | % | |||||
Banks | 1.5 | ||||||
Biotechnology | 17.6 | ||||||
Building products | 0.4 | ||||||
Chemicals | 0.7 | ||||||
Commercial services & supplies | 2.4 | ||||||
Construction & engineering | 1.4 | ||||||
Distributors | 1.3 | ||||||
Diversified consumer services | 2.1 | ||||||
Diversified telecommunication services | 1.0 | ||||||
Electrical equipment | 3.0 | ||||||
Entertainment | 1.0 | ||||||
Equity real estate investment trusts | 2.1 | ||||||
Food & staples retailing | 4.6 | ||||||
Health care equipment & supplies | 5.2 | ||||||
Health care providers & services | 1.7 | ||||||
Health care technology | 4.6 | ||||||
Hotels, restaurants & leisure | 3.9 | ||||||
Insurance | 0.6 | ||||||
Internet & direct marketing retail | 0.8 | ||||||
IT services | 2.8 | ||||||
Life sciences tools & services | 5.7 | ||||||
Machinery | 4.0 | ||||||
Multiline retail | 1.3 | ||||||
Oil, gas & consumable fuels | 0.2 | ||||||
Paper & forest products | 1.4 | ||||||
Road & rail | 1.4 | ||||||
Semiconductors & semiconductor equipment | 7.4 | ||||||
Software | 10.8 | ||||||
Specialty retail | 1.9 | ||||||
Textiles, apparel & luxury goods | 1.0 | ||||||
Thrifts & mortgage finance | 0.8 | ||||||
Trading companies & distributors | 0.6 | ||||||
Total common stocks | 96.8 | % | |||||
Exchange traded funds | 0.4 | ||||||
Short-term investments | 3.2 | ||||||
Investment of cash collateral from securities loaned | 5.4 | ||||||
Total investments | 105.8 | % | |||||
Liabilities in excess of other assets | (5.8 | ) | |||||
Net assets | 100.0 | % |
1 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, 2020
Number of shares | Value | ||||||||||
Common stocks: 96.8% | |||||||||||
Aerospace & defense: 1.6% | |||||||||||
Mercury Systems, Inc.* | 23,911 | $ | 1,880,839 | ||||||||
Banks: 1.5% | |||||||||||
National Bank Holdings Corp., Class A | 32,433 | 875,691 | |||||||||
Webster Financial Corp. | 29,113 | 832,923 | |||||||||
1,708,614 | |||||||||||
Biotechnology: 17.6% | |||||||||||
ADC Therapeutics SA* | 9,854 | 461,266 | |||||||||
Adverum Biotechnologies, Inc.* | 61,501 | 1,284,141 | |||||||||
Allogene Therapeutics, Inc.*,1 | 20,355 | 871,601 | |||||||||
Arena Pharmaceuticals, Inc.* | 11,667 | 734,438 | |||||||||
Argenx SE, ADR* | 3,873 | 872,316 | |||||||||
Avrobio, Inc.* | 32,507 | 567,247 | |||||||||
Bridgebio Pharma, Inc.*,1 | 21,852 | 712,594 | |||||||||
CareDx, Inc.* | 42,865 | 1,518,707 | |||||||||
Castle Biosciences, Inc.* | 19,196 | 723,497 | |||||||||
CRISPR Therapeutics AG*,1 | 12,600 | 925,974 | |||||||||
Dicerna Pharmaceuticals, Inc.* | 35,949 | 913,105 | |||||||||
Fate Therapeutics, Inc.* | 22,447 | 770,156 | |||||||||
Fusion Pharmaceuticals, Inc.* | 21,785 | 380,584 | |||||||||
Generation Bio Co.* | 3,354 | 70,434 | |||||||||
Gritstone Oncology, Inc.* | 42,369 | 281,330 | |||||||||
IGM Biosciences, Inc.* | 8,637 | 630,501 | |||||||||
Immunomedics, Inc.*,1 | 20,861 | 739,314 | |||||||||
Iovance Biotherapeutics, Inc.* | 18,677 | 512,684 | |||||||||
Legend Biotech Corp., ADR* | 3,200 | 136,192 | |||||||||
Magenta Therapeutics, Inc.* | 71,969 | 540,487 | |||||||||
MeiraGTx Holdings PLC* | 44,317 | 554,849 | |||||||||
Momenta Pharmaceuticals, Inc.* | 31,150 | 1,036,360 | |||||||||
ORIC Pharmaceuticals, Inc.* | 1,596 | 53,833 | |||||||||
Repare Therapeutics, Inc.* | 22,829 | 708,155 | |||||||||
Sage Therapeutics, Inc.* | 17,661 | 734,344 | |||||||||
Twist Bioscience Corp.* | 20,300 | 919,590 | |||||||||
Vir Biotechnology, Inc.* | 18,877 | 773,391 | |||||||||
Xencor, Inc.*,1 | 21,269 | 688,903 | |||||||||
Xenon Pharmaceuticals, Inc.* | 44,671 | 560,174 | |||||||||
Zymeworks, Inc.* | 18,212 | 656,907 | |||||||||
20,333,074 | |||||||||||
Building products: 0.4% | |||||||||||
AZEK Co., Inc./The* | 12,900 | 410,994 | |||||||||
Chemicals: 0.7% | |||||||||||
Ingevity Corp.* | 15,135 | 795,647 | |||||||||
Commercial services & supplies: 2.4% | |||||||||||
Casella Waste Systems, Inc., Class A* | 24,559 | 1,280,015 | |||||||||
IAA, Inc.* | 37,773 | 1,456,905 | |||||||||
2,736,920 | |||||||||||
Construction & engineering: 1.4% | |||||||||||
MasTec, Inc.*,1 | 35,319 | 1,584,764 | |||||||||
Distributors: 1.3% | |||||||||||
Pool Corp. | 5,356 | 1,456,136 |
Number of shares | Value | ||||||||||
Common stocks—(continued) | |||||||||||
Diversified consumer services: 2.1% | |||||||||||
Chegg, Inc.* | 35,334 | $ | 2,376,565 | ||||||||
Diversified telecommunication services: 1.0% | |||||||||||
Vonage Holdings Corp.* | 119,003 | 1,197,170 | |||||||||
Electrical equipment: 3.0% | |||||||||||
Generac Holdings, Inc.* | 17,821 | 2,172,915 | |||||||||
Regal Beloit Corp. | 15,204 | 1,327,613 | |||||||||
3,500,528 | |||||||||||
Entertainment: 1.0% | |||||||||||
Glu Mobile, Inc.* | 124,532 | 1,154,412 | |||||||||
Equity real estate investment trusts: 2.1% | |||||||||||
QTS Realty Trust, Inc., Class A1 | 30,462 | 1,952,309 | |||||||||
Ryman Hospitality Properties, Inc. | 14,958 | 517,547 | |||||||||
2,469,856 | |||||||||||
Food & staples retailing: 4.6% | |||||||||||
BJ's Wholesale Club Holdings, Inc.* | 49,158 | 1,832,118 | |||||||||
Grocery Outlet Holding Corp.* | 51,670 | 2,108,136 | |||||||||
Performance Food Group Co.* | 46,798 | 1,363,694 | |||||||||
5,303,948 | |||||||||||
Health care equipment & supplies: 5.2% | |||||||||||
AtriCure, Inc.* | 33,213 | 1,492,924 | |||||||||
Haemonetics Corp.* | 5,667 | 507,536 | |||||||||
Inari Medical, Inc.* | 1,961 | 94,991 | |||||||||
Penumbra, Inc.* | 574 | 102,643 | |||||||||
Staar Surgical Co.* | 36,970 | 2,275,134 | |||||||||
Tandem Diabetes Care, Inc.* | 15,562 | 1,539,393 | |||||||||
6,012,621 | |||||||||||
Health care providers & services: 1.7% | |||||||||||
LHC Group, Inc.* | 11,037 | 1,923,970 | |||||||||
Health care technology: 4.6% | |||||||||||
Inspire Medical Systems, Inc.* | 19,159 | 1,667,216 | |||||||||
Livongo Health, Inc.* | 24,175 | 1,817,718 | |||||||||
Tabula Rasa HealthCare, Inc.*,1 | 23,815 | 1,303,395 | |||||||||
Teladoc Health, Inc.* | 2,854 | 544,658 | |||||||||
5,332,987 | |||||||||||
Hotels, restaurants & leisure: 3.9% | |||||||||||
Churchill Downs, Inc. | 10,712 | 1,426,303 | |||||||||
Planet Fitness, Inc., Class A* | 17,379 | 1,052,646 | |||||||||
Wendy's Co./The | 57,540 | 1,253,221 | |||||||||
Wingstop, Inc. | 5,937 | 825,065 | |||||||||
4,557,235 | |||||||||||
Insurance: 0.6% | |||||||||||
Selectquote, Inc.* | 25,263 | 639,912 | |||||||||
Internet & direct marketing retail: 0.8% | |||||||||||
Rubicon Project, Inc./The* | 136,562 | 910,869 |
65
UBS U.S. Small Cap Growth Fund
Portfolio of Investments
June 30, 2020
Number of shares | Value | ||||||||||
Common stocks—(continued) | |||||||||||
IT services: 2.8% | |||||||||||
Shift4 Payments, Inc., Class A* | 19,331 | $ | 686,250 | ||||||||
Wix.com Ltd.* | 9,912 | 2,539,653 | |||||||||
3,225,903 | |||||||||||
Life sciences tools & services: 5.7% | |||||||||||
Adaptive Biotechnologies Corp.* | 18,890 | 913,898 | |||||||||
Charles River Laboratories International, Inc.* | 8,033 | 1,400,553 | |||||||||
NanoString Technologies, Inc.* | 52,789 | 1,549,357 | |||||||||
NeoGenomics, Inc.* | 43,019 | 1,332,729 | |||||||||
Repligen Corp.* | 11,752 | 1,452,665 | |||||||||
6,649,202 | |||||||||||
Machinery: 4.0% | |||||||||||
Altra Industrial Motion Corp. | 41,781 | 1,331,143 | |||||||||
Astec Industries, Inc. | 32,771 | 1,517,625 | |||||||||
Chart Industries, Inc.* | 22,688 | 1,100,141 | |||||||||
Kadant, Inc. | 7,207 | 718,249 | |||||||||
4,667,158 | |||||||||||
Multiline retail: 1.3% | |||||||||||
Ollie's Bargain Outlet Holdings, Inc.* | 14,945 | 1,459,379 | |||||||||
Oil, gas & consumable fuels: 0.2% | |||||||||||
Matador Resources Co.* | 31,919 | 271,312 | |||||||||
Paper & forest products: 1.4% | |||||||||||
Boise Cascade Co. | 42,431 | 1,595,830 | |||||||||
Road & rail: 1.4% | |||||||||||
Werner Enterprises, Inc. | 37,710 | 1,641,516 | |||||||||
Semiconductors & semiconductor equipment: 7.4% | |||||||||||
Brooks Automation, Inc. | 32,915 | 1,456,159 | |||||||||
Enphase Energy, Inc.* | 31,924 | 1,518,625 | |||||||||
Entegris, Inc. | 17,874 | 1,055,460 | |||||||||
Lattice Semiconductor Corp.* | 42,346 | 1,202,203 | |||||||||
Monolithic Power Systems, Inc. | 5,762 | 1,365,594 | |||||||||
Universal Display Corp. | 13,198 | 1,974,685 | |||||||||
8,572,726 | |||||||||||
Software: 10.8% | |||||||||||
Alteryx, Inc., Class A*,1 | 10,933 | 1,796,073 | |||||||||
Avalara, Inc.* | 17,372 | 2,312,039 | |||||||||
Cloudflare, Inc., Class A* | 63,038 | 2,266,216 |
Number of shares | Value | ||||||||||
Common stocks—(concluded) | |||||||||||
Software—(concluded) | |||||||||||
Everbridge, Inc.*,1 | 12,477 | $ | 1,726,318 | ||||||||
LivePerson, Inc.*,1 | 37,553 | 1,555,821 | |||||||||
Smartsheet, Inc., Class A* | 27,800 | 1,415,576 | |||||||||
Tenable Holdings, Inc.* | 49,285 | 1,469,186 | |||||||||
12,541,229 | |||||||||||
Specialty retail: 1.9% | |||||||||||
National Vision Holdings, Inc.* | 51,691 | 1,577,609 | |||||||||
Vroom, Inc.* | 11,193 | 583,603 | |||||||||
2,161,212 | |||||||||||
Textiles, apparel & luxury goods: 1.0% | |||||||||||
PVH Corp. | 25,312 | 1,216,242 | |||||||||
Thrifts & mortgage finance: 0.8% | |||||||||||
Essent Group Ltd. | 24,652 | 894,128 | |||||||||
Trading companies & distributors: 0.6% | |||||||||||
Herc Holdings, Inc.* | 23,958 | 736,229 | |||||||||
Total common stocks (cost $88,452,248) | 111,919,127 | ||||||||||
Exchange traded funds: 0.4% | |||||||||||
iShares Russell 2000 Growth ETF1 (cost $511,217) | 2,511 | 519,450 | |||||||||
Short-term investments: 3.2% | |||||||||||
Investment companies: 3.2% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%2 (cost $3,757,375) | 3,757,375 | 3,757,375 | |||||||||
Investment of cash collateral from securities loaned: 5.4% | |||||||||||
Money market funds: 5.4% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%2 (cost $6,212,859) | 6,212,859 | 6,212,859 | |||||||||
Total investments (cost $98,933,699)—105.8% | 122,408,811 | ||||||||||
Liabilities in excess of other assets: (5.8)% | (6,746,430 | ) | |||||||||
Net assets: 100.0% | $ | 115,662,381 |
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, 2020
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event the Fund holds investments (other than a money market fund) 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 | $ | 111,919,127 | $ | — | $ | — | $ | 111,919,127 | |||||||||||
Exchange traded funds | 519,450 | — | — | 519,450 | |||||||||||||||
Short-term investments | — | 3,757,375 | — | 3,757,375 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 6,212,859 | — | 6,212,859 | |||||||||||||||
Total | $ | 112,438,577 | $ | 9,970,234 | $ | — | $ | 122,408,811 |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
67
UBS U.S. Sustainable Equity Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS U.S. Sustainable Equity Fund (the "Fund") returned 2.43% (Class A shares returned -3.20% after the deduction of the maximum sales charge), while Class P shares returned 2.70%. The Fund's benchmark, the S&P 500 Index (the "Index"), returned 7.51% 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 underperformed its benchmark primarily due to stock selection decisions. During this challenging time for investors, the Fund's managers maintained their adherence to their price-to-intrinsic-value philosophy.
Portfolio performance summary1
What worked:
• Several stock selection decisions contributed positively to Fund performance during the 12 months ended June 30, 2020.
– Carnival was the top performer for the reporting period. The company's share price continued to increase in the second quarter of 2020 after a sharp decline in March, as investors gradually regained trust in the company's resilience during the pandemic. Carnival plans to sell 13 ships in the near term in order to reduce its cash burn in the coming year. It seeks to purchase a more efficient fleet on the other end, both in terms of profitability—the new ships will be 10% larger—and carbon footprint. We sold out of the Fund's position in pursuit of other opportunities.
– Digital Realty Trust outperformed due to the company's higher resilience to the effects of the coronavirus outbreak. The company did not experience any major delays in its construction timelines. In addition, it has agreements in place with major contractors across its top markets. We sold the stock during the reporting period, after it reached our estimate for fair value.
– Best Buy is a traditional retailer that has been able to manage the Amazon threat and continue to thrive. The company benefited from building up its online capability, and from providing high touch service as many customers needed to enhance their work-from-home capabilities. We added to the position on the weakness during the first quarter of 2020.
– Reynolds Consumer Products managed to maintain its share price during the pandemic due to strong fundamentals and its product line of household staples and sanitary items. The company is also positioned to benefit from the increase in at-home dining. (For details, see "Portfolio highlights.")
– Stericycle was an investment in a management transition. The company had expanded into business areas beyond its expertise. We believed Stericycle would benefit from a stronger commercial focus. As execution improved, the stock price improved as well, and we exited the position as it began to approach fair value.
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:
• Several stock selection decisions detracted from relative performance during the 12-month period.
– An underweight to Amazon.com was negative for Fund performance. Unlike traditional retailers, Amazon's shares surged since the beginning of the COVID-19 outbreak. The e-commerce company benefited from the crisis, with first quarter revenues coming in at $75 billion, outpacing 2019 guidance of $69-$73 billion. Market sentiment expects Amazon to seal some of the market share gains that it recorded due to global store closures. We sold the stock during the reporting period.
– Prudential's share price dropped more than 50% due to concern about the COVID-19 outbreak. The stock market drop impacted company earnings by less than 10%, and Prudential's capital base was strong enough to maintain its dividend. All of the company's funding needs were met through year-end 2021. We maintained our position in the stock.
– OneSpaWorld's share price declined in line with the rest of the consumer discretionary sector due to the coronavirus outbreak. We closed out the position in an effort to reduce exposure to this stressed sector.
• The decision not to hold certain stocks had a negative impact on relative performance for the 12 months ended June 30, 2020.
– Apple and Microsoft detracted from relative returns due to the Fund's underweight position in the stocks. Both companies are seen by investors as relative safe havens. Their shares traded higher as concerns grew that the US economic recovery might be postponed by the escalating number of cases of the virus.
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 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 transparency and LTC block characteristics within its public filings.
• Reynolds Consumer Products is a manufacturer and seller of household products. The company has strong market share in its core categories: bags, wraps and tableware. Reynolds participates in categories where growth should be a bit stronger than gross domestic product (GDP). We believe that its history of innovation will enable the company to maintain or grow market share. Reynolds' focus on efficiency ("Reyvolution") should help it slowly raise profit margins. The company is focused on the sustainability of its products, as well as its environmental footprint.
69
UBS U.S. Sustainable Equity Fund
• Marsh & McLennan is an insurance broker operator that is less exposed to the broader macroeconomic issues affecting the financial services sector than its competitors. We believe the company is well positioned to generate solid organic top-line growth, with additional upside should more niche lines of insurance coverage—such as cyber insurance and flood coverage—gain more widespread adoption in the market.
• Prologis provides real estate investment trust (REIT) services. We believe that the company is uniquely positioned to take advantage of the growth in global e-commerce through its position as the world's largest warehouse/industrial REIT. The company estimates that 2% of global GDP flows through its warehouses.
• 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, 2020. The views and opinions in the letter were current as of August 14, 2020. 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.
70
UBS U.S. Sustainable Equity Fund
Average annual total returns for periods ended 06/30/20 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 2.43 | % | 7.09 | % | 12.05 | % | |||||||||
Class P2 | 2.70 | 7.35 | 12.32 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (3.20 | )% | 5.88 | % | 11.42 | % | |||||||||
S&P 500 Index3 | 7.51 | 10.73 | 13.99 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses, supplemented from time to time, were as follows: Class A—2.14% and 0.95%; Class P—1.85% 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 28, 2020, 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.
71
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 $2,000,000 in Class P shares (unaudited)
The following two graphs depict 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, 2020. 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, 2010 = $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, 2010 = $2,000,000
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.
72
UBS U.S. Sustainable Equity Fund
Portfolio statistics and industry diversification—June 30, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Reynolds Consumer Products, Inc. | 4.9 | % | |||||
Visa, Inc., Class A | 4.7 | ||||||
Marsh & McLennan Cos., Inc. | 4.6 | ||||||
Prologis, Inc. | 4.3 | ||||||
Costco Wholesale Corp. | 4.1 | ||||||
UnitedHealth Group, Inc. | 4.0 | ||||||
Ameriprise Financial, Inc. | 4.0 | ||||||
Walt Disney Co./The | 3.8 | ||||||
Align Technology, Inc. | 3.7 | ||||||
Laboratory Corp. of America Holdings | 3.6 | ||||||
Total | 41.7 | % |
Issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 97.3 | % | |||||
Netherlands | 3.2 | ||||||
Total | 100.5 | % |
Common stocks | Percentage of net assets | ||||||
Airlines | 1.3 | % | |||||
Auto components | 3.3 | ||||||
Biotechnology | 6.0 | ||||||
Capital markets | 4.0 | ||||||
Commercial services & supplies | 3.5 | ||||||
Consumer finance | 2.0 | ||||||
Distributors | 2.9 | ||||||
Electronic equipment, instruments & components | 3.1 | ||||||
Entertainment | 7.4 | ||||||
Equity real estate investment trusts | 4.3 | ||||||
Food & staples retailing | 4.1 | ||||||
Health care equipment & supplies | 3.7 | ||||||
Health care providers & services | 7.6 | ||||||
Household durables | 2.6 | ||||||
Household products | 4.9 | ||||||
Insurance | 7.4 | ||||||
IT services | 7.5 | ||||||
Life sciences tools & services | 3.6 | ||||||
Machinery | 3.5 | ||||||
Semiconductors & semiconductor equipment | 8.6 | ||||||
Software | 3.2 | ||||||
Specialty retail | 3.0 | ||||||
Technology hardware, storage & peripherals | 2.5 | ||||||
Total common stocks | 100.0 | % | |||||
Short-term investments | 0.5 | ||||||
Total investments | 100.5 | % | |||||
Liabilities in excess of other assets | (0.5 | ) | |||||
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, 2020
Number of shares | Value | ||||||||||
Common stocks: 100.0% | |||||||||||
Airlines: 1.3% | |||||||||||
Southwest Airlines Co. | 9,528 | $ | 325,667 | ||||||||
Auto components: 3.3% | |||||||||||
Aptiv PLC | 10,696 | 833,432 | |||||||||
Biotechnology: 6.0% | |||||||||||
AbbVie, Inc. | 8,069 | 792,215 | |||||||||
Incyte Corp.* | 6,886 | 715,937 | |||||||||
1,508,152 | |||||||||||
Capital markets: 4.0% | |||||||||||
Ameriprise Financial, Inc. | 6,668 | 1,000,467 | |||||||||
Commercial services & supplies: 3.5% | |||||||||||
MSA Safety, Inc. | 7,819 | 894,806 | |||||||||
Consumer finance: 2.0% | |||||||||||
Synchrony Financial | 23,203 | 514,179 | |||||||||
Distributors: 2.9% | |||||||||||
LKQ Corp.* | 28,051 | 734,936 | |||||||||
Electronic equipment, instruments & components: 3.1% | |||||||||||
Trimble, Inc.* | 18,075 | 780,659 | |||||||||
Entertainment: 7.4% | |||||||||||
Take-Two Interactive Software, Inc.* | 6,498 | 906,926 | |||||||||
Walt Disney Co./The | 8,769 | 977,831 | |||||||||
1,884,757 | |||||||||||
Equity real estate investment trusts: 4.3% | |||||||||||
Prologis, Inc. | 11,600 | 1,082,628 | |||||||||
Food & staples retailing: 4.1% | |||||||||||
Costco Wholesale Corp. | 3,393 | 1,028,792 | |||||||||
Health care equipment & supplies: 3.7% | |||||||||||
Align Technology, Inc.* | 3,428 | 940,780 | |||||||||
Health care providers & services: 7.6% | |||||||||||
Laboratory Corp. of America Holdings* | 5,481 | 910,449 | |||||||||
UnitedHealth Group, Inc. | 3,452 | 1,018,167 | |||||||||
1,928,616 | |||||||||||
Household durables: 2.6% | |||||||||||
Mohawk Industries, Inc.* | 6,405 | 651,773 | |||||||||
Household products: 4.9% | |||||||||||
Reynolds Consumer Products, Inc. | 35,671 | 1,239,211 |
Number of shares | Value | ||||||||||
Common stocks—(concluded) | |||||||||||
Insurance: 7.4% | |||||||||||
Marsh & McLennan Cos., Inc. | 10,923 | $ | 1,172,802 | ||||||||
Prudential Financial, Inc. | 11,664 | 710,338 | |||||||||
1,883,140 | |||||||||||
IT services: 7.5% | |||||||||||
LiveRamp Holdings, Inc.* | 16,639 | 706,658 | |||||||||
Visa, Inc., Class A | 6,189 | 1,195,529 | |||||||||
1,902,187 | |||||||||||
Life sciences tools & services: 3.6% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 2,003 | 904,334 | |||||||||
Machinery: 3.5% | |||||||||||
AGCO Corp. | 16,207 | 898,840 | |||||||||
Semiconductors & semiconductor equipment: 8.6% | |||||||||||
Lam Research Corp. | 2,224 | 719,375 | |||||||||
NXP Semiconductors N.V. | 7,120 | 811,965 | |||||||||
ON Semiconductor Corp.* | 32,085 | 635,925 | |||||||||
2,167,265 | |||||||||||
Software: 3.2% | |||||||||||
VMware, Inc., Class A*,1 | 5,191 | 803,878 | |||||||||
Specialty retail: 3.0% | |||||||||||
Best Buy Co., Inc. | 8,736 | 762,391 | |||||||||
Technology hardware, storage & peripherals: 2.5% | |||||||||||
Western Digital Corp. | 14,210 | 627,372 | |||||||||
Total common stocks (cost $24,217,891) | 25,298,262 | ||||||||||
Short-term investments: 0.5% | |||||||||||
Investment companies: 0.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%2 (cost $114,616) | 114,616 | 114,616 | |||||||||
Total investments (cost $24,332,507)—100.5% | 25,412,878 | ||||||||||
Liabilities in excess of other assets: (0.5)% | (120,759 | ) | |||||||||
Net assets: 100.0% | $ | 25,292,119 |
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.
74
UBS U.S. Sustainable Equity Fund
Portfolio of Investments
June 30, 2020
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 25,298,262 | $ | — | $ | — | $ | 25,298,262 | |||||||||||
Short-term investments | — | 114,616 | — | 114,616 | |||||||||||||||
Total | $ | 25,298,262 | $ | 114,616 | $ | — | $ | 25,412,878 |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
75
UBS Municipal Bond Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS Municipal Bond Fund (the "Fund") returned 3.98% (Class A shares returned 1.67% after the deduction of the maximum sales charge), while Class P shares returned 4.24%. For comparison purposes, the Fund's benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), returned 4.45%, and the Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index returned 5.44% 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, but underperformed its benchmark. This was partially due to security selection and its positioning in a number of sectors.
Portfolio performance summary1
What worked
• Yield curve positioning along some portions of the curve contributed to performance. In particular, overweights to the 10, 15 and 20 year portions of the curve were beneficial for performance. (The yield curve plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.)
• Our quality biases were positive in certain ratings categories. An overweight to relatively higher quality A-rated securities was positive for results. Our positioning in securities rated AAA was also positive, as was a small underweight to securities rated BBB.
• An underweight to the hospital sector and an overweight to the education sector were beneficial for relative results.
What didn't work
• Allocations to certain portions of the yield curve detracted from performance. Having an overweight allocation to the short end of the municipal yield curve (three years and less) and an underweight to the 22+ year portion of the curve were negative for results relative to the benchmark.
• An underweight in the power/electric sector and an overweight to the transportation sector detracted from relative performance.
• An allocation to relatively lower quarter A-rated securities was a headwind for returns. Certain AA-rated holdings were also a drag on returns.
• Security selection, overall, was a modest headwind for performance.
• 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, 2020. The views and opinions in the letter were current as of August 14, 2020. 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.
76
UBS Municipal Bond Fund
Average annual total returns for periods ended 06/30/20 (unaudited)
1 year | 5 years | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 3.98 | % | 3.50 | % | 3.15 | % | |||||||||
Class P3 | 4.24 | 3.76 | 3.41 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 1.67 | % | 3.02 | % | 2.74 | % | |||||||||
Bloomberg Barclays Municipal Bond Index4 | 4.45 | 3.93 | 3.67 | ||||||||||||
Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index5 | 5.44 | 3.91 | 3.60 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.07% and 0.65%; Class P—0.82% 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 28, 2020, do not exceed 0.65% for Class A shares and 0.40% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS Municipal Bond Fund and the indices is November 10, 2014.
2 Maximum sales charge for Class A shares is 2.25%. Class A shares bear ongoing 12b-1 service fees.
3 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Bloomberg Barclays Municipal Bond Index is an unmanaged index designed to measure the total return of the US dollar denominated tax exempt bond market. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index is an unmanaged sub-index of the Barclays Municipal Managed Money Index, which is a rules-based, market-value-weighted index designed to track the performance of municipal securities issued by state and local municipalities whose interest is exempt from federal income tax and the federal alternative minimum tax. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. 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 $2,000,000 in Class P shares (unaudited)
The following two graphs depict 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, 2020. 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 = $2,000,000
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.
78
UBS Municipal Bond Fund
Portfolio statistics—June 30, 2020 (unaudited)1
Summary of municipal securities by state
Percentage of net assets | |||||||
Municipal bonds | |||||||
California | 2.0 | % | |||||
Connecticut | 8.1 | ||||||
District of Columbia | 1.7 | ||||||
Florida | 9.0 | ||||||
Georgia | 1.7 | ||||||
Illinois | 8.2 | ||||||
Maryland | 4.5 | ||||||
Massachusetts | 2.6 | ||||||
Michigan | 2.9 | ||||||
Minnesota | 2.6 | ||||||
Mississippi | 0.2 | ||||||
Missouri | 0.4 | ||||||
Nevada | 1.9 | ||||||
New Jersey | 3.1 | ||||||
New York | 25.1 | ||||||
North Carolina | 0.9 | ||||||
Ohio | 1.3 | ||||||
Oregon | 1.5 | ||||||
Pennsylvania | 6.7 | ||||||
Rhode Island | 0.9 | ||||||
South Carolina | 2.1 | ||||||
Texas | 8.9 | ||||||
Virginia | 1.1 | ||||||
Washington | 1.9 | ||||||
Total municipal bonds | 99.3 | % | |||||
Total investments | 99.3 | % | |||||
Other assets in excess of liabilities | 0.7 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
79
UBS Municipal Bond Fund
Portfolio of Investments
June 30, 2020
Face amount | Value | ||||||||||
Municipal bonds: 99.3% | |||||||||||
California: 2.0% | |||||||||||
State of California, GO Bonds 5.000%, due 03/01/22 | $ | 1,000,000 | $ | 1,077,950 | |||||||
5.000%, due 03/01/35 | 1,000,000 | 1,331,470 | |||||||||
2,409,420 | |||||||||||
Connecticut: 8.1% | |||||||||||
State of Connecticut Special Tax Revenue, Transportation Infrastructure Revenue Bonds, Series A, 5.000%, due 01/01/30 | 1,665,000 | 2,076,238 | |||||||||
State of Connecticut, GO Bonds, Series A, 5.000%, due 04/15/25 | 1,250,000 | 1,492,575 | |||||||||
Series B, 5.000%, due 04/15/25 | 2,000,000 | 2,388,120 | |||||||||
Series C, 5.000%, due 06/15/23 | 1,000,000 | 1,127,260 | |||||||||
Series F, 5.000%, due 09/15/25 | 2,140,000 | 2,585,056 | |||||||||
9,669,249 | |||||||||||
District of Columbia: 1.7% | |||||||||||
District of Columbia, Series A, 5.000%, due 03/01/31 | 1,465,000 | 1,969,443 | |||||||||
Florida: 9.0% | |||||||||||
Central Florida Expressway Authority, Senior Lien Revenue Bonds, Series B, 5.000%, due 07/01/34 | 1,000,000 | 1,166,980 | |||||||||
Miami-Dade County Revenue Bonds 5.000%, due 10/01/26 | 1,000,000 | 1,220,010 | |||||||||
School Board of St. Lucie County, Sales Tax Revenue Bonds, AGM 5.000%, due 10/01/26 | 1,020,000 | 1,235,924 | |||||||||
School Board of Volusia County, Master Lease Program, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,152,810 | |||||||||
School District of Broward County, COP, Series B, 5.000%, due 07/01/30 | 2,000,000 | 2,344,960 | |||||||||
School District of Palm Beach County, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,194,170 | |||||||||
South Florida Water Management District, COP 5.000%, due 10/01/34 | 1,000,000 | 1,187,320 | |||||||||
The School Board of Miami-Dade County, COP, Series A, 5.000%, due 05/01/31 | 1,000,000 | 1,179,510 | |||||||||
10,681,684 |
Face amount | Value | ||||||||||
Municipal bonds—(continued) | |||||||||||
Georgia: 1.7% | |||||||||||
Brookhaven Development Authority, Childrens Healthcare of Atlanta Revenue Bonds, Series A, 5.000%, due 07/01/29 | $ | 1,500,000 | $ | 1,981,230 | |||||||
Illinois: 8.2% | |||||||||||
Chicago O'Hare International Airport Revenue Bonds, Series B, 5.000%, due 01/01/30 | 1,000,000 | 1,146,260 | |||||||||
Series B, 5.000%, due 01/01/31 | 1,050,000 | 1,199,163 | |||||||||
County of Cook, GO Bonds, Series A, 5.000%, due 11/15/20 | 1,830,000 | 1,846,031 | |||||||||
Series A, 5.000%, due 11/15/26 | 1,500,000 | 1,708,200 | |||||||||
Illinois Finance Authority Revenue Bonds 5.000%, due 07/01/37 | 1,000,000 | 1,271,180 | |||||||||
Illinois State Toll Highway Authority Revenue Bonds, Series B, 5.000%, due 01/01/27 | 1,000,000 | 1,210,950 | |||||||||
Railsplitter Tobacco Settlement Authority Revenue Bonds 5.000%, due 06/01/25 | 1,235,000 | 1,436,786 | |||||||||
9,818,570 | |||||||||||
Maryland: 4.5% | |||||||||||
County of Anne Arundel MD, Consolidated Water and Sewer, GO Bonds, Series B, 5.000%, due 10/01/38 | 1,000,000 | 1,309,100 | |||||||||
County of Prince George's MD, GO Bonds, Series A, 5.000%, due 07/15/30 | 1,000,000 | 1,352,180 | |||||||||
State of Maryland, GO Bonds, Series A, 5.000%, due 08/01/30 | 1,000,000 | 1,354,510 | |||||||||
Washington Suburban Sanitary Commission, Consolidated Public Improvement Revenue Bonds 5.000%, due 06/01/29 | 1,000,000 | 1,318,940 | |||||||||
5,334,730 | |||||||||||
Massachusetts: 2.6% | |||||||||||
The Commonwealth of Massachusetts, GO Bonds, Series A, 5.000%, due 01/01/40 | 1,500,000 | 1,869,180 | |||||||||
Series B, 5.000%, due 07/01/36 | 1,000,000 | 1,280,200 | |||||||||
3,149,380 |
80
UBS Municipal Bond Fund
Portfolio of Investments
June 30, 2020
Face amount | Value | ||||||||||
Municipal bonds—(continued) | |||||||||||
Michigan: 2.9% | |||||||||||
Michigan Finance Authority, Trinity Health Credit Group, Hospital Revenue Bonds, Series A, 5.000%, due 12/01/35 | $ | 1,000,000 | $ | 1,216,050 | |||||||
Michigan State Building Authority Revenue Bonds, Series I, 5.000%, due 10/15/29 | 1,800,000 | 2,229,858 | |||||||||
3,445,908 | |||||||||||
Minnesota: 2.6% | |||||||||||
State of Minnesota, GO Bonds, Series A, 5.000%, due 08/01/33 | 1,350,000 | 1,790,127 | |||||||||
Series A, 5.000%, due 08/01/36 | 1,000,000 | 1,310,690 | |||||||||
3,100,817 | |||||||||||
Mississippi: 0.2% | |||||||||||
Mississippi Business Finance Corp., Gulf Opportunity Zone, Industrial Development (Chevron USA, Inc. Project), Revenue Bonds, Series C, 0.110%, due 12/01/30 | 200,000 | 200,000 | |||||||||
Series K, 0.110%, due 11/01/35 | 100,000 | 100,000 | |||||||||
300,000 | |||||||||||
Missouri: 0.4% | |||||||||||
Missouri State Health & Educational Facilities Authority Educational Facilities Revenue (Washington University) Revenue Bonds, Series B, 0.120%, due 03/01/40 | 200,000 | 200,000 | |||||||||
Series B, 0.130%, due 09/01/30 | 300,000 | 300,000 | |||||||||
500,000 | |||||||||||
Nevada: 1.9% | |||||||||||
County of Clark Department of Aviation, Las Vegas-McCarran International Airport Revenue Bonds, Series C, 5.000%, due 07/01/27 | 1,815,000 | 2,253,177 | |||||||||
New Jersey: 3.1% | |||||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series AA, 5.000%, due 06/15/27 | 1,500,000 | 1,595,835 | |||||||||
New Jersey Turnpike Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 1,000,000 | 1,153,070 | |||||||||
Series E, 5.000%, due 01/01/34 | 860,000 | 980,168 | |||||||||
3,729,073 |
Face amount | Value | ||||||||||
Municipal bonds—(continued) | |||||||||||
New York: 25.1% | |||||||||||
City of New York, GO Bonds, Series B-1, 5.000%, due 10/01/42 | $ | 1,200,000 | $ | 1,493,556 | |||||||
Subseries F-1, 5.000%, due 04/01/34 | 1,100,000 | 1,363,835 | |||||||||
Subseries F-1, 5.000%, due 04/01/40 | 1,000,000 | 1,216,430 | |||||||||
Metropolitan Transportation Authority Revenue Bonds, Series B-2A, 5.000%, due 05/15/21 | 1,060,000 | 1,082,154 | |||||||||
New York City Municipal Water Finance Authority, Water & Sewer System Revenue Bonds, Series EE, 5.000%, due 06/15/40 | 1,000,000 | 1,242,710 | |||||||||
New York City Municipal Water Finance Authority, Water & Sewer System, Second General Resolution Fiscal 2017 Revenue Bonds, Series EE, 5.000%, due 06/15/33 | 1,000,000 | 1,250,240 | |||||||||
New York City Municipal Water Finance Authority, Water & Sewer System, Second General Resolution Revenue Bonds, Series A, 0.130%, due 06/15/32 | 200,000 | 200,000 | |||||||||
Series EE2, 5.000%, due 06/15/40 | 1,200,000 | 1,532,124 | |||||||||
Series FF, 5.000%, due 06/15/39 | 2,000,000 | 2,501,380 | |||||||||
New York City Transitional Finance Authority Future Tax Secured Revenue Bonds, Series A-2, 5.000%, due 08/01/38 | 1,000,000 | 1,218,900 | |||||||||
Series A-4, 0.120%, due 08/01/43 | 1,000,000 | 1,000,000 | |||||||||
Series B, 5.000%, due 11/01/25 | 1,000,000 | 1,100,770 | |||||||||
Series C-2, 5.000%, due 05/01/35 | 3,000,000 | 3,729,750 | |||||||||
Series E4, 0.120%, due 02/01/45 | 2,100,000 | 2,100,000 | |||||||||
New York State Dormitory Authority, State Sales Tax Revenue Bonds, Series A, 5.000%, due 03/15/43 | 1,500,000 | 1,832,835 | |||||||||
New York State Urban Development Corp., Sales Tax Revenue Bonds, Series A, 5.000%, due 03/15/41 | 4,060,000 | 5,109,916 | |||||||||
New York State Urban Development Corp., State Personal Income Tax Revenue Bonds, Series A, 5.000%, due 03/15/36 | 1,500,000 | 1,881,090 | |||||||||
29,855,690 |
81
UBS Municipal Bond Fund
Portfolio of Investments
June 30, 2020
Face amount | Value | ||||||||||
Municipal bonds—(continued) | |||||||||||
North Carolina: 0.9% | |||||||||||
County of Wake NC Revenue Bonds, Series A, 5.000%, due 12/01/20 | $ | 1,000,000 | $ | 1,019,850 | |||||||
Ohio: 1.3% | |||||||||||
State of Ohio, GO Bonds, Series A, 5.000%, due 06/15/30 | 1,110,000 | 1,530,746 | |||||||||
Oregon: 1.5% | |||||||||||
Tri-County Metropolitan Transportation District of Oregon Revenue Bonds, Series A, 5.000%, due 09/01/43 | 1,500,000 | 1,844,490 | |||||||||
Pennsylvania: 6.7% | |||||||||||
City of Philadelphia, GO Bonds 5.000%, due 08/01/20 | 1,590,000 | 1,595,454 | |||||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment Revenue Bonds 5.000%, due 06/01/24 | 1,625,000 | 1,873,170 | |||||||||
Pennsylvania Turnpike Commission Revenue Bonds, Series 2017-3, 5.000%, due 12/01/28 | 1,000,000 | 1,213,030 | |||||||||
Series A-2, 5.000%, due 12/01/28 | 1,000,000 | 1,229,330 | |||||||||
Series REF, 5.000%, due 12/01/30 | 1,750,000 | 2,102,222 | |||||||||
8,013,206 | |||||||||||
Rhode Island: 0.9% | |||||||||||
Tobacco Settlement Financing Corp., Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/21 | 1,000,000 | 1,030,850 | |||||||||
South Carolina: 2.1% | |||||||||||
South Carolina Public Service Authority (Escrowed to Maturity) Revenue Bonds, Series B, 5.000%, due 12/01/20 1 | 555,000 | 565,778 | |||||||||
South Carolina Public Service Authority Revenue Bonds, Series A, 5.000%, due 12/01/26 | 1,010,000 | 1,177,226 | |||||||||
South Carolina Public Service Authority-Unrefunded Balance Revenue Bonds, Series B, 5.000%, due 12/01/20 | 690,000 | 701,744 | |||||||||
2,444,748 |
Face amount | Value | ||||||||||
Municipal bonds—(concluded) | |||||||||||
Texas: 8.9% | |||||||||||
County of Williamson TX, GO Bonds 5.000%, due 02/15/29 | $ | 1,000,000 | $ | 1,337,440 | |||||||
Harris County Cultural Education Facilities Finance Corp., (Methodist Hospital) Revenue Bonds, Subseries C-1, 0.120%, due 12/01/24 | 300,000 | 300,000 | |||||||||
Subseries C-2, 0.120%, due 12/01/27 | 600,000 | 600,000 | |||||||||
Lower Colorado River Authority Refunding LCRA Transmission Services Revenue Bonds 5.000%, due 05/15/31 | 1,000,000 | 1,294,840 | |||||||||
North Texas Tollway Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 3,030,000 | 3,448,261 | |||||||||
Series B, 5.000%, due 01/01/29 | 1,140,000 | 1,440,538 | |||||||||
State of Texas, Revenue Anticipation Notes 4.000%, due 08/27/20 | 900,000 | 905,274 | |||||||||
The University of Texas System Revenue Bonds, Series A, 5.000%, due 08/15/38 | 1,000,000 | 1,296,640 | |||||||||
10,622,993 | |||||||||||
Virginia: 1.1% | |||||||||||
County of Fairfax VA, GO Bonds, Series A, 5.000%, due 10/01/29 | 1,000,000 | 1,275,040 | |||||||||
Washington: 1.9% | |||||||||||
State of Washington, GO Bonds, Series D, 5.000%, due 06/01/38 | 1,725,000 | 2,258,767 | |||||||||
Total municipal bonds (cost $112,883,176) | 118,239,061 | ||||||||||
Total investments (cost $112,883,176)—99.3% | 118,239,061 | ||||||||||
Other assets in excess of liabilities: 0.7% | 790,038 | ||||||||||
Net assets: 100.0% | $ | 119,029,099 |
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, 2020
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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 | |||||||||||||||||||
Municipal bonds | $ | — | $ | 118,239,061 | $ | — | $ | 118,239,061 |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
1 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 12 months ended June 30, 2020 (the "reporting period"), Class P shares of UBS Sustainable Development Bank Bond Fund (the "Fund") returned 8.03%. For comparison purposes, the Bloomberg Barclays U.S. Treasury Index (the "Index") returned 10.45%. The Fund's secondary benchmark, the Solactive Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index, returned 8.32% 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.
Market review
The global COVID-19 pandemic took center stage and previous major global themes, such as the trade war between the US and China, as well as Brexit, went out of focus. With large parts of the world in lockdown, a severe negative impact on the global economies was visible.
The US economy couldn't brace itself from the global trend. Economic activity started to decline between March and May 2020. This was countered by almost unprecedented responses from the US government, as well as the Federal Reserve Board (the "Fed"). On a global scale, the support delivered through multilateral development and central banks was notable.
The uncertainty caused by the pandemic outbreak initially led to a steep rise in volatility in financial markets, especially in equities and corporate bonds. The measures taken, especially by the Fed, helped to normalized this effect towards the end of the reporting period. Ten-year US Treasury yields fell from 2.00% at the start of the reporting period to 0.66%.
Led by the direction of US Treasury yields, yields of sustainable development banks (SDB) closed the reporting period lower. The rise in volatility on financial markets led to a slight widening of credit spreads of SDB bonds versus Treasuries. However, the high quality and good liquidity of SDB bonds proved beneficial for investors. The SDB bond segment was able to outperform credit markets and investors saw positive returns.
84
UBS Sustainable Development Bank Bond Fund
Portfolio performance summary
The Fund is passively managed and seeks to minimize tracking error relative to its secondary benchmark (before fees and expenses), which is constructed from a blend of two market indexes designed to measure the performance of the US dollar-denominated multilateral development bank bond market. During the reporting period, the Fund's underperformance relative to its secondary benchmark was largely driven by transaction costs associated with the management of the Fund's portfolio, along with fees and expenses. Additionally, the performance deviation between the Fund and the primary index is explained by the longer duration of the Index, as well as a slightly higher credit-quality.
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, 2020. The views and opinions in the letter were current as of August 14, 2020. 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 06/30/20 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class P2 | 8.03 | % | 16.39 | % | |||||||
Bloomberg Barclays U.S. Treasury Index3 | 10.45 | 19.50 | |||||||||
Solactive Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index.4 | 8.32 | 17.03 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class P—2.19% 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 28, 2020, 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. Benchmark's inception return is based on Class P inception date.
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 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. 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 $2,000,000 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 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, 2020. 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 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 = $2,000,000
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, 20201
Top ten holdings
Percentage of net assets | |||||||
International Bank for Reconstruction & Development, 1.750%, due 10/23/29 | 5.9 | % | |||||
International Bank for Reconstruction & Development, 2.500%, due 11/22/27 | 5.7 | ||||||
Inter-American Development Bank, 3.125%, due 09/18/28 | 5.4 | ||||||
Inter-American Development Bank, 2.250%, due 06/18/29 | 5.2 | ||||||
International Bank for Reconstruction & Development, 1.875%, due 10/27/26 | 4.0 | ||||||
Asian Infrastructure Investment Bank/The, 2.250%, due 05/16/24 | 4.0 | ||||||
Nordic Investment Bank, 2.875%, due 07/19/23 | 3.9 | ||||||
Inter-American Development Bank, 1.750%, due 03/14/25 | 3.5 | ||||||
International Development Association, 2.750%, due 04/24/23 | 3.5 | ||||||
International Bank for Reconstruction & Development, 0.875%, due 05/14/30 | 3.5 | ||||||
Total | 44.6 | % | |||||
Sector allocation | Percentage of net assets | ||||||
Non-U.S. government agency obligations | 98.3 | % | |||||
Short-term investments | 1.0 | ||||||
Investment of cash collateral from securities loaned | 2.2 | ||||||
Total investments | 101.5 | % | |||||
Liabilities in excess of other assets | (1.5 | ) | |||||
Total | 100.0 | % |
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, 2020
Face amount | Value | ||||||||||
Non-U.S. government agency obligations: 98.3% | |||||||||||
Supranationals: 98.3% | |||||||||||
African Development Bank 0.750%, due 04/03/23 | $ | 200,000 | $ | 202,385 | |||||||
(Series GDIF), 1.250%, due 07/26/21 | 800,000 | 808,129 | |||||||||
(Series GDIF), 2.625%, due 03/22/21 | 200,000 | 203,317 | |||||||||
3.000%, due 09/20/231 | 400,000 | 433,741 | |||||||||
Agence Francaise de Developpement, EMTN 2.750%, due 03/22/212 | 800,000 | 813,608 | |||||||||
2.750%, due 01/22/222 | 200,000 | 207,198 | |||||||||
Asian Development Bank 1.875%, due 01/24/30 | 450,000 | 490,430 | |||||||||
Asian Development Bank, GMTN 1.750%, due 09/19/29 | 400,000 | 430,600 | |||||||||
2.750%, due 01/19/28 | 240,000 | 275,433 | |||||||||
3.125%, due 09/26/28 | 400,000 | 471,740 | |||||||||
Asian Infrastructure Investment Bank/The 0.500%, due 05/28/25 | 100,000 | 99,817 | |||||||||
2.250%, due 05/16/24 | 1,400,000 | 1,498,165 | |||||||||
Corp. Andina de Fomento 2.125%, due 09/27/21 | 125,000 | 125,783 | |||||||||
4.375%, due 06/15/22 | 300,000 | 317,397 | |||||||||
Council of Europe Development Bank 2.500%, due 02/27/24 | 650,000 | 699,732 | |||||||||
European Bank for Reconstruction & Development 1.500%, due 02/13/25 | 750,000 | 781,492 | |||||||||
1.625%, due 09/27/24 | 100,000 | 104,982 | |||||||||
European Bank for Reconstruction & Development, EMTN 1.875%, due 07/15/21 | 200,000 | 203,253 | |||||||||
European Bank for Reconstruction & Development, GMTN 2.750%, due 03/07/23 | 550,000 | 585,233 | |||||||||
European Investment Bank 1.875%, due 02/10/251 | 900,000 | 959,882 | |||||||||
2.625%, due 03/15/24 | 425,000 | 460,388 | |||||||||
IDB Trust Services Ltd. 2.843%, due 04/25/242 | 400,000 | 426,415 | |||||||||
3.389%, due 09/26/232 | 800,000 | 862,172 | |||||||||
IDB Trust Services Ltd., EMTN 2.393%, due 04/12/222 | 200,000 | 205,476 | |||||||||
Inter-American Development Bank 0.875%, due 04/03/25 | 300,000 | 305,816 | |||||||||
1.750%, due 03/14/25 | 1,250,000 | 1,323,672 | |||||||||
2.000%, due 07/23/26 | 450,000 | 485,652 | |||||||||
2.125%, due 01/15/25 | 500,000 | 537,132 | |||||||||
2.250%, due 06/18/29 | 1,732,000 | 1,936,925 | |||||||||
2.375%, due 07/07/27 | 1,135,000 | 1,262,494 | |||||||||
3.125%, due 09/18/28 | 1,700,000 | 2,007,785 | |||||||||
Inter-American Development Bank, GMTN 2.000%, due 06/02/26 | 950,000 | 1,027,147 | |||||||||
Inter-American Investment Corp. 1.750%, due 10/02/242 | 700,000 | 735,686 |
Face amount | Value | ||||||||||
Non-U.S. government agency obligations—(concluded) | |||||||||||
Supranationals—(concluded) | |||||||||||
International Bank for Reconstruction & Development 0.625%, due 04/22/25 | $ | 500,000 | $ | 504,009 | |||||||
0.875%, due 05/14/30 | 1,300,000 | 1,297,131 | |||||||||
1.625%, due 01/15/25 | 600,000 | 631,774 | |||||||||
(Series GDIF), 1.750%, due 10/23/29 | 2,060,000 | 2,220,989 | |||||||||
(Series GDIF), 1.875%, due 10/27/26 | 1,400,000 | 1,503,411 | |||||||||
(Series GDIF), 2.125%, due 03/03/25 | 200,000 | 215,450 | |||||||||
(Series GDIF), 2.500%, due 07/29/25 | 550,000 | 605,048 | |||||||||
(Series GDIF), 2.500%, due 11/22/27 | 1,893,000 | 2,137,893 | |||||||||
International Development Association 0.750%, due 06/10/27 | 350,000 | 351,430 | |||||||||
2.750%, due 04/24/232 | 1,225,000 | 1,308,081 | |||||||||
International Finance Corp., GMTN 1.125%, due 07/20/21 | 250,000 | 252,052 | |||||||||
1.375%, due 10/16/24 | 400,000 | 415,991 | |||||||||
2.125%, due 04/07/26 | 775,000 | 843,841 | |||||||||
2.875%, due 07/31/23 | 100,000 | 107,892 | |||||||||
Kreditanstalt fuer Wiederaufbau 2.000%, due 05/02/251 | 600,000 | 644,115 | |||||||||
2.875%, due 04/03/28 | 684,000 | 795,026 | |||||||||
Nordic Investment Bank 2.250%, due 05/21/24 | 200,000 | 213,985 | |||||||||
2.875%, due 07/19/23 | 1,350,000 | 1,453,697 | |||||||||
Total non-U.S. government agency obligations (cost $34,676,992) | 36,790,892 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 1.0% | |||||||||||
Investment companies: 1.0% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%3 (cost $376,645) | 376,645 | 376,645 | |||||||||
Investment of cash collateral from securities loaned: 2.2% | |||||||||||
Money market funds: 2.2% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%3 (cost $804,293) | 804,293 | 804,293 | |||||||||
Total investments (cost $35,857,930)—101.5% | 37,971,830 | ||||||||||
Liabilities in excess of other assets: (1.5)% | (557,837 | ) | |||||||||
Net assets: 100.0% | $ | 37,413,993 |
89
UBS Sustainable Development Bank Bond Fund
Portfolio of Investments
June 30, 2020
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, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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-U.S. government agency obligations | $ | — | $ | 36,790,892 | $ | — | $ | 36,790,892 | |||||||||||
Short-term investments | — | 376,645 | — | 376,645 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 804,293 | — | 804,293 | |||||||||||||||
Total | $ | — | $ | 37,971,830 | $ | — | $ | 37,971,830 |
At June 30, 2020, there were no transfers in or out of Level 3.
Portfolio footnotes
1 Security, or portion thereof, was on loan at the period end.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
3 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
90
UBS Total Return Bond Fund
Portfolio performance
For the 12 months ended June 30, 2020, Class A shares of UBS Total Return Bond Fund (the "Fund") returned 6.34% (Class A shares returned 2.34% after the deduction of the maximum sales charge), while Class P shares returned 6.60%.For comparison purposes, the Bloomberg Barclays U.S. Aggregate Bond Index (the "Index") returned 8.74%. (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 swaps and index (CDX) options, were used to manage the Fund's credit exposure. For active currency management, we utilized foreign exchange (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 mitigant to other existing positions in the portfolio.
Portfolio performance summary
What worked:
• Duration management: The Fund's duration exposure relative to the index contributed to performance during the reporting period.
• Yield curve: The Fund's positioning along the yield curve contributed to performance over the course of the past 12 months.
• Sector allocation—corporates: Sector allocation to investment-grade corporates contributed to performance, particularly overweight exposures to financials and utilities.
• Derivatives: Credit derivatives added to performance over the period, particularly when used as a hedge to existing credit exposures.
What didn't work:
• Commercial mortgage-backed securities (CMBS): Exposure to CMBS was the primary negative for performance during the reporting period.
• Emerging market debt: A modest out-of-index allocation to emerging markets detracted from performance.
• Sector allocation: US Treasuries: An underweight to US Treasuries detracted from relative performance during the period.
91
UBS Total Return Bond Fund
Market outlook
The global economy continues on an uncertain and unpredictable path to recovery. US data has recently, however, exceeded expectations, including retail sales, PMIs (manufacturing) and nonfarm payrolls. Our base case of an uneven and non-traditional recovery remains intact. Consumer behavior will drive the sustainability and duration of the rebound. The messaging from the Federal Reserve (the "Fed") remains cautionary and continues to signal a very accommodative monetary policy for an extended period of time, measured in years not months.
The recovery in developed economies is expected to resume given accommodative monetary policy and prior fiscal measures that have yet to be employed. Ongoing positive and negative COVID-19 developments will not materially impact this momentum barring faster progress on a vaccine or another broad government mandated economic shutdown.
We remain upbeat on risk assets (non-US Treasurys) and expect continued outperformance. The next stage of healing in the global economy has begun to shift from downside risks to the resilience and duration of the recovery. We continue to be confident that monetary policy will remain accommodative, although lingering damage to the global economy and reversal of the globalization of supply chains will certainly be headwinds. In addition to the tendency for consumers and businesses to be cautious in the aftermath of a deep recession, we have to monitor behavioral changes based on lingering fears of further virus spread.
At a country level, the severity of the virus, effectiveness of public health infrastructure and measures, including testing and contact tracing, are expected to become more apparent into the third quarter. We remain convinced, regardless of the path of the pandemic, that policy makers in the US will continue to act swiftly and aggressively to offset the downside risks as the Fed has suggested. We do fear that the indirect benefits of prior policy actions that supported emerging markets and lower quality corporate bonds may be less impactful. In the coming weeks, we will likely consider moving up the quality spectrum as valuations have improved and the risk/reward outlook has evolved.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2020. The views and opinions in the letter were current as of August 14, 2020. 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.
92
UBS Total Return Bond Fund
Average annual total returns for periods ended 06/30/20 (unaudited)
1 year | 5 years | 10 years or Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 6.34 | % | N/A | 3.27 | % | ||||||||||
Class P3 | 6.60 | 3.13 | % | 4.51 | |||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 2.34 | % | N/A | 2.23 | % | ||||||||||
Bloomberg Barclays US Aggregate Index4 | 8.74 | 4.30 | % | 3.95 |
The annualized gross and net expense ratios as in the October 28, 2019 prospectuses were as follows: Class A—1.68% and 0.75%; Class P—1.45% and 0.50%. 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 28, 2020, 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 Index is 3.82%. The Fund's Class P shares acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end fund (the "Predecessor Fund"), prior to the opening of business on May 23, 2016 (the "Reorganization"). The Predecessor Fund was also managed by the Advisor, and the day-to-day management of, and investment decisions for, the Fund and the Predecessor Fund are made by the same portfolio management team. The Funds have generally similar investment objectives and strategies. Therefore, the information shown above reflects the historical performance of the Predecessor Fund for periods prior to the Reorganization. The performance information shown for periods prior to the Reorganization is for the Predecessor Fund and may not be representative of performance of the Fund.
2 Maximum sales charge for Class A shares is 3.75%. Class A shares bear ongoing 12b-1 service fees.
3 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Bloomberg Barclays US Aggregate Bond Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, assetbacked and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
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 $2,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS Total Return Bond Fund Class A and Class P shares versus the Bloomberg Barclays US Aggregate Index from September 29, 2016 for Class A and over 10 years for Class P, both ending June 30, 2020. 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 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 Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2010 = $2,000,000
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, 2020 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
UMBS TBA, 2.500% | 2.3 | % | |||||
AmeriCredit Automobile Receivables, 3.720% due 12/08/21 | 1.5 | ||||||
U.S. Treasury Inflation Indexed Notes (TIPS), 0.250% due 07/15/29 | 1.3 | ||||||
VNDO Mortgage Trust, 4.079% due 12/13/29 | 1.3 | ||||||
GNMA TBA, 3.000% | 1.2 | ||||||
CHT Mortgage Trust, 3.185% due 11/15/36 | 1.2 | ||||||
UMBS TBA, 3.000% | 1.1 | ||||||
State of California, GO Bonds, 7.300% due 10/01/39 | 1.1 | ||||||
U.S. Treasury Notes, 1.500% due 02/15/30 | 1.1 | ||||||
U.S. Treasury Notes, 1.125% due 02/28/25 | 1.1 | ||||||
Total | 13.2 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 92.6 | % | |||||
United Kingdom | 2.4 | ||||||
Canada | 0.9 | ||||||
Brazil | 0.7 | ||||||
Colombia | 0.7 | ||||||
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, 2020 (unaudited)1
Corporate bonds | Percentage of net assets | ||||||
Agriculture | 0.1 | % | |||||
Auto manufacturers | 0.5 | ||||||
Banks | 10.9 | ||||||
Beverages | 0.5 | ||||||
Biotechnology | 1.1 | ||||||
Chemicals | 1.5 | ||||||
Commercial services | 0.6 | ||||||
Computers | 1.0 | ||||||
Diversified financial services | 2.2 | ||||||
Electric | 2.3 | ||||||
Food | 0.3 | ||||||
Healthcare-products | 0.1 | ||||||
Insurance | 1.5 | ||||||
Internet | 0.4 | ||||||
Lodging | 0.5 | ||||||
Media | 1.5 | ||||||
Mining | 0.1 | ||||||
Miscellaneous manufacturers | 1.0 | ||||||
Oil & gas | 1.6 | ||||||
Pharmaceuticals | 1.4 | ||||||
Pipelines | 1.8 | ||||||
Real estate | 1.1 | ||||||
Real estate investment trust | 0.6 | ||||||
Retail | 0.5 | ||||||
Semiconductors | 1.1 | ||||||
Software | 1.6 | ||||||
Telecommunications | 1.9 | ||||||
Transportation | 0.3 | ||||||
Total corporate bonds | 38.0 | % |
Percentage of net assets | |||||||
Asset-backed securities | 12.8 | % | |||||
Mortgage-backed securities | 19.1 | ||||||
Municipal bonds | 1.1 | ||||||
Non-U.S. government agency obligations | 2.3 | ||||||
U.S. government agency obligations | 15.6 | ||||||
U.S. Treasury obligations | 6.6 | ||||||
Short-term investments | 7.1 | ||||||
Investment of cash collateral from securities loaned | 2.9 | ||||||
Total investments | 105.5 | % | |||||
Liabilities in excess of other assets | (5.5 | ) | |||||
Net assets | 100.0 | % |
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, 2020
Face amount | Value | ||||||||||
Asset-backed securities: 12.8% | |||||||||||
United States: 12.8% | |||||||||||
AmeriCredit Automobile Receivables, Series 2015-4, Class D, 3.720%, due 12/08/21 | $ | 562,439 | $ | 562,837 | |||||||
AmeriCredit Automobile Receivables Trust, Series 2018-1, Class D, 3.820%, due 03/18/24 | 100,000 | 103,561 | |||||||||
CPS Auto Trust, Series 2018-C, Class D, 4.400%, due 06/17/241 | 150,000 | 153,892 | |||||||||
Dell Equipment Finance Trust, Series 2018-1, Class D, 3.850%, due 06/24/241 | 120,000 | 121,267 | |||||||||
Drive Auto Receivables Trust, Series 2017-1, Class D, 3.840%, due 03/15/23 | 48,916 | 49,654 | |||||||||
Series 2018-1, Class C, 3.220%, due 03/15/23 | 113,489 | 113,625 | |||||||||
Series 2018-1, Class D, 3.810%, due 05/15/24 | 225,000 | 227,695 | |||||||||
Series 2018-2, Class D, 4.140%, due 08/15/24 | 200,000 | 205,179 | |||||||||
Series 2018-3, Class D, 4.300%, due 09/16/24 | 300,000 | 308,756 | |||||||||
Series 2018-4, Class D, 4.090%, due 01/15/26 | 150,000 | 153,608 | |||||||||
Exeter Automobile Receivables Trust, Series 2018-1A, Class D, 3.530%, due 11/15/231 | 100,000 | 100,989 | |||||||||
Flagship Credit Auto Trust, Series 2016-3, Class C, 2.720%, due 07/15/221 | 52,676 | 52,870 | |||||||||
HPEFS Equipment Trust, Series 2019-1A, Class D, 2.720%, due 09/20/291 | 200,000 | 196,675 | |||||||||
Series 2020-1A, Class D, 2.260%, due 02/20/301 | 200,000 | 193,017 | |||||||||
Invitation Homes Trust, Series 2018-SFR1, Class C, 1 mo. USD LIBOR + 1.250%, 1.444%, due 03/17/371,2 | 100,000 | 98,311 | |||||||||
Series 2018-SFR2, Class D, 1 mo. USD LIBOR + 1.450%, 1.635%, due 06/17/371,2 | 150,000 | 145,302 | |||||||||
New Residential Advance Receivables Trust Advance Receivables Backed, Series 2019-T5, Class AT5, 2.425%, due 10/15/511 | 300,000 | 298,173 | |||||||||
OneMain Direct Auto Receivables Trust, Series 2018-1A, Class C, 3.850%, due 10/14/251 | 300,000 | 302,070 | |||||||||
PSNH Funding LLC, Series 2018-1, Class A3, 3.814%, due 02/01/35 | 175,000 | 197,845 |
Face amount | Value | ||||||||||
Asset-backed securities—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
Santander Drive Auto Receivables Trust, Series 2017-2, Class D, 3.490%, due 07/17/23 | $ | 100,000 | $ | 101,709 | |||||||
Series 2017-3, Class D, 3.200%, due 11/15/23 | 225,000 | 228,520 | |||||||||
Series 2018-4, Class D, 3.980%, due 12/15/25 | 225,000 | 231,016 | |||||||||
Sofi Consumer Loan Program Trust, Series 2017-6, Class B, 3.520%, due 11/25/261 | 225,000 | 225,443 | |||||||||
Series 2018-1, Class B, 3.650%, due 02/25/271 | 100,000 | 100,609 | |||||||||
Series 2018-2, Class A2, 3.350%, due 04/26/271 | 92,867 | 93,617 | |||||||||
Series 2018-2, Class B, 3.790%, due 04/26/271 | 125,000 | 128,810 | |||||||||
Series 2018-3, Class B, 4.020%, due 08/25/271 | 125,000 | 126,823 | |||||||||
Total asset-backed securities (cost $4,765,981) | 4,821,873 | ||||||||||
Corporate bonds: 38.0% | |||||||||||
Belgium: 0.5% | |||||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc. 4.900%, due 02/01/46 | 165,000 | 201,817 | |||||||||
Brazil: 0.7% | |||||||||||
Petrobras Global Finance BV 7.375%, due 01/17/27 | 250,000 | 278,125 | |||||||||
British Virgin Islands: 0.5% | |||||||||||
Fortune Star BVI Ltd. 6.875%, due 01/31/213 | 200,000 | 201,000 | |||||||||
Canada: 0.9% | |||||||||||
Cenovus Energy, Inc. 5.400%, due 06/15/474 | 80,000 | 68,657 | |||||||||
NOVA Chemicals Corp. 5.250%, due 08/01/231,4 | 210,000 | 202,650 | |||||||||
Rogers Communications, Inc. 5.000%, due 03/15/44 | 60,000 | 76,585 | |||||||||
347,892 | |||||||||||
Cayman Islands: 0.5% | |||||||||||
Powerlong Real Estate Holdings Ltd. 5.950%, due 07/19/203 | 200,000 | 199,840 | |||||||||
China: 0.5% | |||||||||||
Sunac China Holdings Ltd. 8.625%, due 07/27/203 | 200,000 | 200,500 | |||||||||
Colombia: 0.2% | |||||||||||
Ecopetrol SA 5.375%, due 06/26/26 | 70,000 | 73,591 |
97
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
Germany: 0.4% | |||||||||||
Deutsche Bank AG 4.250%, due 02/04/214 | $ | 150,000 | $ | 151,692 | |||||||
Israel: 0.2% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/214 | 57,000 | 56,763 | |||||||||
Luxembourg: 0.5% | |||||||||||
INEOS Group Holdings SA 5.625%, due 08/01/241,4 | 200,000 | 193,444 | |||||||||
Netherlands: 0.2% | |||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. 3.875%, due 06/18/261,4 | 65,000 | 72,730 | |||||||||
Peru: 0.2% | |||||||||||
Southern Copper Corp. 6.750%, due 04/16/40 | 40,000 | 54,237 | |||||||||
United Kingdom: 2.4% | |||||||||||
Barclays PLC 4.836%, due 05/09/28 | 200,000 | 219,496 | |||||||||
HSBC Holdings PLC 6.500%, due 09/15/37 | 100,000 | 135,562 | |||||||||
Lloyds Banking Group PLC 4.582%, due 12/10/25 | 200,000 | 221,965 | |||||||||
Reynolds American, Inc. 7.250%, due 06/15/37 | 35,000 | 46,772 | |||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 250,000 | 269,536 | |||||||||
893,331 | |||||||||||
United States: 30.2% | |||||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 45,000 | 52,356 | |||||||||
ADT Security Corp./The 3.500%, due 07/15/22 | 140,000 | 139,160 | |||||||||
AEP Texas, Inc., Series E, 6.650%, due 02/15/33 | 50,000 | 67,874 | |||||||||
Series G, 4.150%, due 05/01/49 | 50,000 | 59,068 | |||||||||
Alabama Power Co. 6.000%, due 03/01/39 | 100,000 | 144,329 | |||||||||
Allstate Corp./The, Series B, (fixed, converts to FRN on 08/15/23), 5.750%, due 08/15/53 | 25,000 | 25,826 | |||||||||
Ally Financial, Inc. 4.625%, due 05/19/22 | 100,000 | 104,071 | |||||||||
American International Group, Inc. 2.500%, due 06/30/25 | 50,000 | 52,904 | |||||||||
Amgen, Inc. 4.663%, due 06/15/51 | 50,000 | 66,308 | |||||||||
Apple, Inc. 4.650%, due 02/23/46 | 100,000 | 136,923 |
Face amount | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
United States—(continued) | |||||||||||
AT&T, Inc. 4.300%, due 02/15/30 | $ | 316,000 | $ | 369,186 | |||||||
Bank of America Corp. 5.700%, due 01/24/22 | 350,000 | 378,463 | |||||||||
6.110%, due 01/29/37 | 125,000 | 177,500 | |||||||||
Bank of America Corp. MTN 4.200%, due 08/26/24 | 150,000 | 166,447 | |||||||||
Bank of New York Mellon Corp./The MTN 1.600%, due 04/24/254 | 100,000 | 103,569 | |||||||||
Berkshire Hathaway Energy Co. 4.450%, due 01/15/494 | 100,000 | 128,013 | |||||||||
Biogen, Inc. 4.050%, due 09/15/25 | 100,000 | 114,568 | |||||||||
5.200%, due 09/15/45 | 50,000 | 65,631 | |||||||||
Boston Properties LP, REIT 2.750%, due 10/01/26 | 210,000 | 225,008 | |||||||||
Bristol-Myers Squibb Co. 3.200%, due 06/15/261 | 150,000 | 168,335 | |||||||||
4.125%, due 06/15/391 | 50,000 | 63,851 | |||||||||
Broadcom Corp./ Broadcom Cayman Finance Ltd. 3.125%, due 01/15/25 | 30,000 | 32,046 | |||||||||
Burlington Northern Santa Fe LLC 5.150%, due 09/01/43 | 50,000 | 69,084 | |||||||||
CCO Holdings LLC/ CCO Holdings Capital Corp. 5.500%, due 05/01/261 | 150,000 | 155,438 | |||||||||
Citigroup, Inc. 4.125%, due 07/25/28 | 50,000 | 56,510 | |||||||||
5.500%, due 09/13/25 | 300,000 | 355,452 | |||||||||
6.675%, due 09/13/43 | 50,000 | 77,255 | |||||||||
Comcast Corp. 3.969%, due 11/01/47 | 88,000 | 106,278 | |||||||||
4.600%, due 10/15/38 | 50,000 | 63,674 | |||||||||
4.700%, due 10/15/48 | 50,000 | 67,103 | |||||||||
CVS Health Corp. 4.300%, due 03/25/28 | 120,000 | 140,291 | |||||||||
Dell International LLC/EMC Corp. 4.420%, due 06/15/211 | 100,000 | 102,786 | |||||||||
Duke Energy Ohio, Inc. 4.300%, due 02/01/49 | 100,000 | 126,840 | |||||||||
DuPont de Nemours, Inc. 4.725%, due 11/15/284 | 100,000 | 120,235 | |||||||||
Eaton Corp. 2.750%, due 11/02/224 | 190,000 | 199,855 | |||||||||
Energy Transfer Operating LP 5.500%, due 06/01/27 | 50,000 | 55,764 | |||||||||
Enterprise Products Operating LLC 2.850%, due 04/15/21 | 105,000 | 106,661 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 150,000 | 167,041 | |||||||||
4.450%, due 04/15/46 | 50,000 | 60,769 | |||||||||
Fiserv, Inc. 3.200%, due 07/01/26 | 60,000 | 66,409 | |||||||||
4.400%, due 07/01/49 | 50,000 | 60,820 |
98
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Corporate bonds—(continued) | |||||||||||
United States—(continued) | |||||||||||
Fox Corp. 3.050%, due 04/07/25 | $ | 25,000 | $ | 27,053 | |||||||
5.576%, due 01/25/49 | 50,000 | 70,345 | |||||||||
GE Capital International Funding Co. Unlimited Co. 2.342%, due 11/15/20 | 200,000 | 201,295 | |||||||||
3.373%, due 11/15/25 | 200,000 | 209,854 | |||||||||
General Electric Co., Series D, (fixed, converts to FRN on 01/21/21), 5.000%, due 01/21/214,5 | 99,000 | 77,725 | |||||||||
General Motors Co. 6.600%, due 04/01/36 | 170,000 | 184,838 | |||||||||
Gilead Sciences, Inc. 3.650%, due 03/01/26 | 75,000 | 85,833 | |||||||||
4.750%, due 03/01/46 | 50,000 | 67,541 | |||||||||
Goldman Sachs Group, Inc./The 5.150%, due 05/22/45 | 80,000 | 105,744 | |||||||||
5.750%, due 01/24/22 | 305,000 | 329,056 | |||||||||
Home Depot, Inc./The 2.125%, due 09/15/26 | 100,000 | 107,468 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 80,000 | 88,242 | |||||||||
International Lease Finance Corp. 5.875%, due 08/15/22 | 120,000 | 126,249 | |||||||||
JPMorgan Chase & Co. (fixed, converts to FRN on 01/23/28), 3.509%, due 01/23/29 | 150,000 | 167,521 | |||||||||
3.875%, due 09/10/24 | 350,000 | 388,053 | |||||||||
Series I, 3 mo. USD LIBOR + 3.470%, 4.230%, due 07/30/20 2,5 | 97,000 | 88,299 | |||||||||
Kinder Morgan, Inc. 5.550%, due 06/01/45 | 40,000 | 48,555 | |||||||||
6.500%, due 09/15/20 | 100,000 | 101,104 | |||||||||
Kroger Co./The 6.900%, due 04/15/38 | 25,000 | 37,315 | |||||||||
Liberty Mutual Group, Inc. 4.250%, due 06/15/231 | 45,000 | 48,844 | |||||||||
4.569%, due 02/01/291 | 155,000 | 181,519 | |||||||||
LYB International Finance BV 4.875%, due 03/15/444 | 50,000 | 58,978 | |||||||||
Marathon Petroleum Corp. 4.750%, due 09/15/444 | 70,000 | 73,084 | |||||||||
McDonald's Corp. MTN 4.875%, due 12/09/45 | 50,000 | 64,579 | |||||||||
MetLife, Inc. 6.400%, due 12/15/36 | 110,000 | 129,836 | |||||||||
Microsoft Corp. 2.375%, due 02/12/22 | 250,000 | 258,281 | |||||||||
2.525%, due 06/01/50 | 60,000 | 62,083 | |||||||||
Morgan Stanley 4.300%, due 01/27/45 | 50,000 | 62,901 | |||||||||
4.875%, due 11/01/22 | 350,000 | 380,623 |
Face amount | Value | ||||||||||
Corporate bonds—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
Morgan Stanley, GMTN 4.350%, due 09/08/26 | $ | 140,000 | $ | 161,440 | |||||||
MPLX LP 4.875%, due 06/01/25 | 70,000 | 78,101 | |||||||||
Nabors Industries, Inc. 4.625%, due 09/15/21 | 150,000 | 116,955 | |||||||||
NCR Corp. 5.000%, due 07/15/22 | 40,000 | 39,950 | |||||||||
Netflix, Inc. 5.500%, due 02/15/22 | 140,000 | 145,985 | |||||||||
Oncor Electric Delivery Co. LLC 3.750%, due 04/01/45 | 50,000 | 59,859 | |||||||||
Oracle Corp. 2.800%, due 04/01/27 | 100,000 | 109,192 | |||||||||
4.000%, due 11/15/47 | 50,000 | 59,234 | |||||||||
Prudential Financial, Inc. MTN 6.625%, due 06/21/40 | 50,000 | 75,822 | |||||||||
QUALCOMM, Inc. 3.250%, due 05/20/27 | 60,000 | 68,052 | |||||||||
Quicken Loans LLC 5.750%, due 05/01/251 | 110,000 | 112,452 | |||||||||
Sabine Pass Liquefaction LLC 5.000%, due 03/15/27 | 200,000 | 223,744 | |||||||||
Seagate HDD Cayman 5.750%, due 12/01/34 | 80,000 | 88,195 | |||||||||
Shire Acquisitions Investments Ireland DAC 2.400%, due 09/23/21 | 100,000 | 101,999 | |||||||||
Smithfield Foods, Inc. 3.350%, due 02/01/221 | 80,000 | 79,385 | |||||||||
Sunoco Logistics Partners Operations LP 5.400%, due 10/01/47 | 50,000 | 49,184 | |||||||||
Synchrony Financial 4.500%, due 07/23/25 | 90,000 | 95,625 | |||||||||
Teachers Insurance & Annuity Association of America 4.270%, due 05/15/471 | 60,000 | 71,186 | |||||||||
Texas Instruments, Inc. 1.850%, due 05/15/22 | 220,000 | 225,568 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 47,526 | |||||||||
Verizon Communications, Inc. 5.250%, due 03/16/37 | 190,000 | 257,143 | |||||||||
Virginia Electric and Power Co. 4.600%, due 12/01/48 | 50,000 | 65,824 | |||||||||
Walt Disney Co./The 4.950%, due 10/15/45 | 50,000 | 64,316 | |||||||||
Wells Fargo & Co. MTN (fixed, converts to FRN on 06/17/26), 3.196%, due 06/17/27 | 70,000 | 75,901 | |||||||||
Yale University 1.482%, due 04/15/30 | 100,000 | 101,050 | |||||||||
11,406,207 | |||||||||||
Total corporate bonds (cost $13,448,061) | 14,331,169 |
99
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Mortgage-backed securities: 19.1% | |||||||||||
United States: 19.1% | |||||||||||
Angel Oak Mortgage Trust, Series 2019-5, Class A1, 2.593%, due 10/25/491,6 | $ | 146,229 | $ | 148,146 | |||||||
Angel Oak Mortgage Trust I LLC, Series 2018-3, Class A1, 3.649%, due 09/25/481,6 | 90,899 | 92,657 | |||||||||
Series 2019-4, Class A1, 2.993%, due 07/26/491,6 | 189,128 | 190,696 | |||||||||
Ashford Hospitality Trust, Series 2018-ASHF, Class D, 1 mo. USD LIBOR + 2.100%, 2.285%, due 04/15/351,2 | 100,000 | 87,222 | |||||||||
BANK, Series 2017-BNK7, Class C, 4.185%, due 09/15/606 | 100,000 | 89,793 | |||||||||
Series 2018-BN14, Class E, 3.000%, due 09/15/601 | 250,000 | 145,707 | |||||||||
Series 2018-BN15, Class A4, 4.407%, due 11/15/616 | 150,000 | 179,012 | |||||||||
BBCMS Trust, Series 2015-SRCH, Class B, 4.498%, due 08/10/351 | 135,000 | 147,410 | |||||||||
BENCHMARK Mortgage Trust, Series 2018-B4, Class D, 2.964%, due 07/15/511,6 | 100,000 | 64,113 | |||||||||
Series 2018-B5, Class A3, 3.944%, due 07/15/51 | 100,000 | 115,968 | |||||||||
Series 2019-B10, Class C, 3.750%, due 03/15/62 | 200,000 | 183,171 | |||||||||
CHT Mortgage Trust, Series 2017-CSMO, Class E, 1 mo. USD LIBOR + 3.000%, 3.185%, due 11/15/361,2 | 475,000 | 434,571 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2015-GC33, Class A4, 3.778%, due 09/10/58 | 143,000 | 158,326 | |||||||||
Series 2017-P8, Class D, 3.000%, due 09/15/501 | 300,000 | 184,390 | |||||||||
COLT Mortgage Loan Trust, Series 2020-2, Class A1, 1.853%, due 03/25/651,6 | 98,878 | 98,979 | |||||||||
Series 2020-3, Class A1, 1.506%, due 04/27/651,6 | 100,000 | 100,175 | |||||||||
COMM Mortgage Trust, Series 2015-CR24, Class D, 3.463%, due 08/10/486 | 150,000 | 112,460 | |||||||||
Series 2017-COR2, Class C, 4.713%, due 09/10/506 | 200,000 | 180,022 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2017-C8, Class D, 4.470%, due 06/15/501 | 141,000 | 112,424 | |||||||||
Deephaven Residential Mortgage Trust, Series 2018-3A, Class A1, 3.789%, due 08/25/581,6 | 116,391 | 118,352 |
Face amount | Value | ||||||||||
Mortgage-backed securities—(continued) | |||||||||||
United States—(continued) | |||||||||||
FREMF Mortgage Trust, Series 2017-K64, Class B, 4.117%, due 05/25/501,6 | $ | 50,000 | $ | 53,760 | |||||||
Series 2017-K724, Class B, 3.598%, due 11/25/231,6 | 265,000 | 277,129 | |||||||||
GS Mortgage Securities Corp. Trust, Series 2017-SLP, Class E, 4.744%, due 10/10/321,6 | 225,000 | 195,753 | |||||||||
GS Mortgage Securities Trust, Series 2020-GC47, Class A5, 2.377%, due 05/12/53 | 100,000 | 105,376 | |||||||||
Hilton USA Trust, Series 2016-SFP, Class E, 5.519%, due 11/05/351 | 125,000 | 118,847 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-C6, Class D, 5.324%, due 05/15/456 | 150,000 | 119,442 | |||||||||
Series 2018-ASH8, Class D, 1 mo. USD LIBOR + 2.050%, 2.235%, due 02/15/35 1,2 | 100,000 | 82,284 | |||||||||
JPMBB Commercial Mortgage Securities Trust, Series 2014-C26, Class AS, 3.800%, due 01/15/48 | 200,000 | 210,396 | |||||||||
Series 2015-C29, Class D, 3.852%, due 05/15/486 | 100,000 | 62,009 | |||||||||
Series 2015-C30, Class A5, 3.822%, due 07/15/48 | 170,000 | 187,492 | |||||||||
JPMDB Commercial Mortgage Securities Trust, Series 2016-C2, Class D, 3.551%, due 06/15/491,6 | 175,000 | 105,356 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C24, Class A4, 3.732%, due 05/15/48 | 100,000 | 109,785 | |||||||||
Series 2015-C24, Class AS, 4.036%, due 05/15/486 | 75,000 | 80,098 | |||||||||
Series 2016-C32, Class AS, 3.994%, due 12/15/496 | 273,000 | 294,156 | |||||||||
Series 2017-C34, Class C, 4.324%, due 11/15/526 | 100,000 | 86,477 | |||||||||
Morgan Stanley Capital I, Inc., Series 2017-HR2, Class C, 4.366%, due 12/15/506 | 175,000 | 151,012 | |||||||||
Series 2017-HR2, Class D, 2.730%, due 12/15/50 | 100,000 | 64,484 | |||||||||
New Residential Mortgage Loan Trust, Series 2020-NQM2, Class A1, 1.650%, due 05/24/601,6 | 100,000 | 100,075 | |||||||||
Residential Mortgage Loan Trust, Series 2019-3, Class A1, 2.633%, due 09/25/591,6 | 163,953 | 165,375 | |||||||||
Series 2020-2, Class A1, 1.654%, due 05/25/601,6,8,9 | 125,000 | 124,999 |
100
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
Mortgage-backed securities—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
RETL, Series 2019-RVP, Class C, 1 mo. USD LIBOR + 2.100%, 2.285%, due 03/15/361,2 | $ | 200,000 | $ | 175,827 | |||||||
Rosslyn Portfolio Trust, Series 2017-ROSS, Class E, 1 mo. USD LIBOR + 3.000%, 3.989%, due 06/15/331,2 | 275,000 | 260,016 | |||||||||
Starwood Retail Property Trust, Series 2014-STAR, Class C, 1 mo. USD LIBOR + 2.750%, 2.935%, due 11/15/271,2 | 125,000 | 6,875 | |||||||||
Verus Securitization Trust, Series 2019-1, Class A1, 3.836%, due 02/25/591,6 | 124,695 | 127,118 | |||||||||
Series 2019-3, Class A1, 2.784%, due 07/25/591,7 | 124,593 | 127,059 | |||||||||
Series 2019-4, Class A1, 2.642%, due 11/25/591,7 | 128,104 | 130,193 | |||||||||
Vista Point Securitization Trust, Series 2020-1, Class A1, 1.763%, due 03/25/651,6,8,9 | 100,000 | 99,999 | |||||||||
VNDO Mortgage Trust, Series 2013-PENN, Class D, 4.079%, due 12/13/291,6 | 500,000 | 491,049 | |||||||||
Wells Fargo Commercial Mortgage Trust, Series 2018-C44, Class C, 4.996%, due 05/15/516 | 150,000 | 139,843 | |||||||||
Total mortgage-backed securities (cost $7,715,900) | 7,195,878 | ||||||||||
Municipal bonds: 1.1% | |||||||||||
California: 1.1% | |||||||||||
State of California, GO Bonds 7.300%, due 10/01/39 (cost $362,467) | 250,000 | 417,960 | |||||||||
Non-U.S. government agency obligations: 2.3% | |||||||||||
Colombia: 0.5% | |||||||||||
Colombia Government International Bond 8.125%, due 05/21/24 | 155,000 | 186,048 | |||||||||
Ecuador: 0.2% | |||||||||||
Ecuador Government International Bond, 10.650%, due 01/31/293,7 | 200,000 | 82,300 | |||||||||
Indonesia: 0.4% | |||||||||||
Indonesia Government International Bond, 6.625%, due 02/17/371 | 100,000 | 136,938 | |||||||||
Mexico: 0.4% | |||||||||||
Mexico Government International Bond, MTN 4.750%, due 03/08/44 | 150,000 | 157,828 |
Face amount | Value | ||||||||||
Non-U.S. government agency obligations—(concluded) | |||||||||||
Panama: 0.1% | |||||||||||
Panama Government International Bond 3.870%, due 07/23/60 | $ | 50,000 | $ | 56,719 | |||||||
Turkey: 0.3% | |||||||||||
Turkey Government International Bond 6.875%, due 03/17/36 | 100,000 | 97,250 | |||||||||
Uruguay: 0.4% | |||||||||||
Uruguay Government International Bond 7.625%, due 03/21/36 | 100,000 | 151,625 | |||||||||
Total non-U.S. government agency obligations (cost $933,859) | 868,708 | ||||||||||
U.S. government agency obligations: 15.6% | |||||||||||
United States: 15.6% | |||||||||||
FHLMC 2.500%, due 04/01/33 | 238,448 | 250,195 | |||||||||
3.500%, due 08/01/47 | 264,778 | 280,277 | |||||||||
3.500%, due 11/01/47 | 293,528 | 309,875 | |||||||||
4.000%, due 01/01/46 | 92,329 | 100,879 | |||||||||
4.000%, due 05/01/47 | 116,933 | 124,994 | |||||||||
4.000%, due 10/01/47 | 64,949 | 69,105 | |||||||||
4.500%, due 04/01/46 | 88,629 | 98,560 | |||||||||
FNMA 3.000%, due 02/01/33 | 201,067 | 211,545 | |||||||||
3.000%, due 02/01/43 | 60,878 | 66,071 | |||||||||
3.000%, due 05/01/43 | 69,721 | 75,369 | |||||||||
3.000%, due 07/01/43 | 94,053 | 101,053 | |||||||||
3.000%, due 09/01/43 | 129,538 | 141,175 | |||||||||
3.000%, due 05/01/46 | 126,514 | 133,958 | |||||||||
3.500%, due 04/01/32 | 76,552 | 82,905 | |||||||||
3.500%, due 06/01/45 | 101,812 | 111,277 | |||||||||
3.500%, due 06/01/46 | 171,215 | 187,882 | |||||||||
3.500%, due 11/01/47 | 357,807 | 378,026 | |||||||||
3.500%, due 07/01/49 | 3,492 | 3,669 | |||||||||
4.000%, due 09/01/40 | 106,015 | 115,681 | |||||||||
4.000%, due 03/01/41 | 34,206 | 37,481 | |||||||||
4.000%, due 12/01/43 | 155,182 | 173,918 | |||||||||
4.000%, due 02/01/45 | 110,984 | 124,398 | |||||||||
4.500%, due 02/01/44 | 21,249 | 24,129 | |||||||||
4.500%, due 04/01/44 | 102,983 | 116,942 | |||||||||
4.500%, due 12/01/44 | 20,783 | 23,260 | |||||||||
4.500%, due 02/01/45 | 34,579 | 38,456 | |||||||||
4.500%, due 06/01/46 | 142,237 | 161,300 | |||||||||
4.500%, due 08/01/46 | 19,242 | 21,560 | |||||||||
4.500%, due 05/01/47 | 60,657 | 66,144 | |||||||||
4.500%, due 02/01/49 | 110,529 | 119,598 | |||||||||
5.500%, due 03/01/33 | 30,201 | 34,488 | |||||||||
5.500%, due 09/01/34 | 92,081 | 102,746 | |||||||||
5.500%, due 11/01/34 | 24,935 | 28,590 | |||||||||
6.000%, due 11/01/28 | 29,367 | 33,061 | |||||||||
GNMA 6.500%, due 05/15/29 | 7,569 | 8,813 |
101
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Face amount | Value | ||||||||||
U.S. government agency obligations—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
GNMA II 3.000%, due 09/20/44 | $ | 65,417 | $ | 69,963 | |||||||
3.500%, due 02/20/43 | 15,507 | 16,860 | |||||||||
4.000%, due 06/20/44 | 11,079 | 12,082 | |||||||||
4.000%, due 09/20/44 | 42,595 | 46,412 | |||||||||
4.000%, due 05/20/45 | 10,669 | 11,569 | |||||||||
5.000%, due 08/20/48 | 21,531 | 23,458 | |||||||||
GNMA TBA 3.000%, due 12/31/99 | 425,000 | 450,151 | |||||||||
UMBS TBA 2.500% | 850,000 | 885,760 | |||||||||
3.000% | 400,000 | 421,156 | |||||||||
Total U.S. government agency obligations (cost $5,707,486) | 5,894,791 | ||||||||||
U.S. Treasury obligations: 6.6% | |||||||||||
United States: 6.6% | |||||||||||
U.S. Treasury Bonds 2.000%, due 02/15/50 | 35,000 | 40,061 | |||||||||
U.S. Treasury Inflation Indexed Bonds (TIPS) 1.000%, due 02/15/49 | 66,243 | 88,471 | |||||||||
U.S. Treasury Inflation Indexed Notes (TIPS) 0.250%, due 07/15/29 | 451,148 | 493,842 | |||||||||
U.S. Treasury Notes 0.125%, due 04/30/22 | 375,000 | 374,736 | |||||||||
1.125%, due 02/28/25 | 400,000 | 416,031 | |||||||||
1.500%, due 02/15/30 | 385,000 | 416,146 |
Face amount | Value | ||||||||||
U.S. Treasury obligations—(concluded) | |||||||||||
United States—(concluded) | |||||||||||
1.625%, due 08/15/29 | $ | 200,000 | $ | 218,188 | |||||||
1.750%, due 12/31/24 | 185,000 | 197,379 | |||||||||
2.375%, due 05/15/29 | 200,000 | 230,797 | |||||||||
Total U.S. Treasury obligations (cost $2,396,761) | 2,475,651 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 7.1% | |||||||||||
Investment companies: 7.1% | |||||||||||
State Street Institutional U.S. Government Money Market Fund, 0.28%10 (cost $2,673,676) | 2,673,676 | 2,673,676 | |||||||||
Investment of cash collateral from securities loaned: 2.9% | |||||||||||
Money market funds: 2.9% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 0.13%10 (cost $1,087,083) | 1,087,083 | 1,087,083 | |||||||||
Total investments (cost $39,091,274)—105.5% | 39,766,789 | ||||||||||
Liabilities in excess of other assets: (5.5)% | (2,069,705 | ) | |||||||||
Net assets: 100.0% | $ | 37,697,084 |
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) | ||||||||||||||||||||||
U.S. Treasury futures buy contracts: | |||||||||||||||||||||||||||
8 | USD | U.S. Treasury Note 10 Year Futures | September 2020 | $ | 1,112,465 | $ | 1,113,375 | $ | 910 | ||||||||||||||||||
10 | USD | U.S. Treasury Note 2 Year Futures | September 2020 | 2,207,702 | 2,208,281 | 579 | |||||||||||||||||||||
19 | USD | U.S. Treasury Note 5 Year Futures | September 2020 | 2,381,606 | 2,389,102 | 7,496 | |||||||||||||||||||||
10 | USD | U.S. Ultra Bond Futures | September 2020 | 2,197,441 | 2,181,562 | (15,879 | ) | ||||||||||||||||||||
5 | USD | U.S. Ultra Treasury Note 10 Year Futures | September 2020 | 784,062 | 787,422 | 3,360 | |||||||||||||||||||||
Total | $ | 8,683,276 | $ | 8,679,742 | $ | (3,534 | ) | ||||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
2 | EUR | German Euro Bund Futures | September 2020 | $ | (389,110 | ) | $ | (396,640 | ) | $ | (7,530 | ) | |||||||||||||||
3 | GBP | United Kingdom Long Gilt Bond Futures | September 2020 | (510,284 | ) | (511,649 | ) | (1,365 | ) | ||||||||||||||||||
Total | $ | (899,394 | ) | $ | (908,289 | ) | $ | (8,895 | ) | ||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (12,429 | ) |
102
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BOA | AUD | 120,000 | USD | 83,119 | 09/17/20 | $ | 286 | ||||||||||||
JPMCB | GBP | 20,000 | USD | 25,309 | 09/17/20 | 516 | |||||||||||||
JPMCB | THB | 12,000,000 | USD | 388,290 | 07/15/20 | 44 | |||||||||||||
MSCI | EUR | 55,000 | USD | 62,465 | 09/17/20 | 568 | |||||||||||||
Net unrealized appreciation (depreciation) | $ | 1,414 |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2020 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) 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 | |||||||||||||||||||
Asset-backed securities | $ | — | $ | 4,821,873 | $ | — | $ | 4,821,873 | |||||||||||
Corporate bonds | — | 14,331,169 | — | 14,331,169 | |||||||||||||||
Mortgage-backed securities | — | 6,970,880 | 224,998 | 7,195,878 | |||||||||||||||
Municipal bonds | — | 417,960 | — | 417,960 | |||||||||||||||
Non-U.S. government agency obligations | — | 868,708 | — | 868,708 | |||||||||||||||
U.S. government agency obligations | — | 5,894,791 | — | 5,894,791 | |||||||||||||||
U.S. Treasury obligations | — | 2,475,651 | — | 2,475,651 | |||||||||||||||
Short-term investments | — | 2,673,676 | — | 2,673,676 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 1,087,083 | — | 1,087,083 | |||||||||||||||
Futures contracts | 12,345 | — | — | 12,345 | |||||||||||||||
Forward foreign currency contracts | — | 1,414 | — | 1,414 | |||||||||||||||
Total | $ | 12,345 | $ | 39,543,205 | $ | 224,998 | $ | 39,780,548 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (24,774 | ) | $ | — | $ | — | $ | (24,774 | ) |
At June 30, 2020, there were no transfers in or out of Level 3.
103
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2020
Portfolio footnotes
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $8,572,685, represented 22.7% of the Fund's net assets at period end.
2 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
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 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.
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 Security fair valued by the Valuation Committee under the direction of the Board of Trustees.
10 Rates shown reflect yield at June 30, 2020.
See accompanying notes to financial statements.
104
The UBS Funds
June 30, 2020
Portfolio acronyms
ADR American Depositary Receipt
AGM Assured Guaranty Municipal Corporation
CDO Collateralized Debt Obligation
COP Certificate of Participation
CSI Credit Suisse International
DAC Designated Activity Company
EMTN Euro Medium-Term Notes
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 Depositary Receipt
GMTN Global Medium Term Note
GNMA Government National Mortgage Association
GO General Obligation
LIBOR London Interbank Offered Rate
MTN Medium Term Note
OAT Obligation Assimilables du Trésor (French Government Bonds)
PJSC Private Joint Stock Company
REIT Real Estate Investment Trust
TBA To-Be-Announced Security
TIPS Treasury inflation protected securities
UMBS Uniform Mortgage-Backed Securities
Counterparty acronyms
BB Barclays Bank PLC
BOA Bank of America NA
CITI Citibank NA
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
CLP Chilean Peso
CNY Chinese Yuan
COP Colombian Peso
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
HUF Hungarian Forint
JPY Japanese Yen
KRW South Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
THB Thailand Baht
TWD Taiwan Dollar
USD United States Dollar
ZAR South African Rand
See accompanying notes to financial statements
105
The UBS Funds
June 30, 2020 (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, 2020 to June 30, 2020 (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 hypo- thetical 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, 2020 (unaudited)
Beginning account value January 1, 2020 | Ending account value June 30, 2020 | Expenses paid during period 01/01/20 to 06/30/20* | Expense ratio during the period | ||||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 955.30 | $ | 6.56 | 1.35 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.15 | 6.77 | 1.35 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 956.30 | 5.35 | 1.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.39 | 5.52 | 1.10 | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 949.40 | 5.82 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.90 | 6.02 | 1.20 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 950.60 | 4.61 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.14 | 4.77 | 0.95 | |||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 928.60 | 4.80 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.89 | 5.02 | 1.00 | |||||||||||||||||||
Class P2 | Actual | 1,000.00 | 931.90 | 1.15 | 0.24 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.67 | 1.21 | 0.24 | |||||||||||||||||||
UBS Engage for Impact Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 904.50 | 4.02 | 0.85 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.64 | 4.27 | 0.85 | |||||||||||||||||||
UBS International Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 909.30 | 5.93 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.65 | 6.27 | 1.25 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 911.30 | 4.75 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.89 | 5.02 | 1.00 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,081.10 | 6.42 | 1.24 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.70 | 6.22 | 1.24 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,082.80 | 5.13 | 0.99 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.94 | 4.97 | 0.99 | |||||||||||||||||||
UBS U.S. Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 918.70 | 4.53 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.14 | 4.77 | 0.95 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 919.70 | 3.34 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.38 | 3.52 | 0.70 |
* Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 182 divided by 366 (to reflect the one-half year period).
107
The UBS Funds
June 30, 2020 (unaudited)
Beginning account value January 1, 2020 | Ending account value June 30, 2020 | Expenses paid during period 01/01/20 to 06/30/20* | Expense ratio during the period | ||||||||||||||||||||
UBS Municipal Bond Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,020.20 | $ | 3.26 | 0.65 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.63 | 3.27 | 0.65 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,022.50 | 2.01 | 0.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.87 | 2.01 | 0.40 | |||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,067.10 | 1.28 | 0.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.62 | 1.26 | 0.25 | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,032.90 | 3.79 | 0.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.13 | 3.77 | 0.75 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,034.20 | 2.53 | 0.50 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.38 | 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 182 divided by 366 (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, 2020
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 38,961,692 | $ | 247,292,078 | $ | 450,231,107 | |||||||||
Affiliated issuers | — | 13,612,288 | — | ||||||||||||
Foreign currency | 1,177,981 | 736,503 | 2,159,041 | ||||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 31,053,518 | $ | 260,041,408 | $ | 481,515,020 | |||||||||
Affiliated issuers | — | 12,599,338 | — | ||||||||||||
Foreign currency | 1,181,089 | 738,626 | 2,162,547 | ||||||||||||
Cash | 17,255 | — | — | ||||||||||||
Cash collateral on futures | 1,202,911 | 5,265,711 | — | ||||||||||||
Cash collateral on swap agreements | 191,807 | 617,964 | — | ||||||||||||
Cash collateral for forward foreign currency contracts | — | 410,000 | — | ||||||||||||
Due from broker | 2,124,324 | 518,317 | — | ||||||||||||
Receivable for investments sold | 641,743 | 2,553,721 | 3,285,397 | ||||||||||||
Receivable for fund shares sold | 3,804 | 18,979 | 511,848 | ||||||||||||
Receivable for dividends and interest | 153,176 | 195,059 | 1,028,400 | ||||||||||||
Receivable for foreign tax reclaims | 468 | 131,112 | 1,036 | ||||||||||||
Receivable from affiliate | — | — | — | ||||||||||||
Receivable for variation margin on futures contracts | 16,967 | — | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | 27,424 | 89,315 | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 884,527 | 336,372 | — | ||||||||||||
Other assets | 21,988 | 36,632 | 47,690 | ||||||||||||
Total assets | 37,521,001 | 283,552,554 | 488,551,938 | ||||||||||||
Liabilities: | |||||||||||||||
Due to broker | 879 | — | — | ||||||||||||
Payable for cash collateral from securities loaned | 328,563 | 44,341,867 | 9,804,566 | ||||||||||||
Payable for investments purchased | 472,476 | 9,408,138 | 214,500 | ||||||||||||
Payable for fund shares redeemed | 33,389 | 963,137 | 1,685,047 | ||||||||||||
Payable to affiliate | 29,255 | 109,571 | 51,755 | ||||||||||||
Payable to Trustees | 7,837 | 16,516 | 23,068 | ||||||||||||
Payable to custodian | 20,753 | 318,504 | 120,586 | ||||||||||||
Payable for foreign withholding taxes | — | 1,637 | 162,647 | ||||||||||||
Payable for variation margin on futures contracts | — | 385,466 | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 872,692 | 2,252,353 | — | ||||||||||||
Accrued expenses and other liabilities | 199,118 | 285,995 | 155,469 | ||||||||||||
Total liabilities | 1,964,962 | 58,083,184 | 12,217,638 | ||||||||||||
Net assets | $ | 35,556,039 | $ | 225,469,370 | $ | 476,334,300 |
1 Includes $321,771; $44,018,792; $10,451,860; $793,401 and $9,550,941, respectively of investments in securities on loan, at value, plus accrued interest and dividends, if any.
110
The UBS Funds
UBS Engage for Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 26,330,822 | $ | 208,277,804 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 131,120 | 711,794 | |||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 26,533,990 | $ | 212,931,686 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 135,457 | 707,940 | |||||||||
Cash | — | — | |||||||||
Cash collateral on futures | — | — | |||||||||
Cash collateral on swap agreements | — | — | |||||||||
Cash collateral for forward foreign currency contracts | — | — | |||||||||
Due from broker | — | — | |||||||||
Receivable for investments sold | — | — | |||||||||
Receivable for fund shares sold | 118,260 | 540,148 | |||||||||
Receivable for dividends and interest | 1,593 | 219,557 | |||||||||
Receivable for foreign tax reclaims | 6,560 | 276,696 | |||||||||
Receivable from affiliate | 61,687 | — | |||||||||
Receivable for variation margin on futures contracts | — | — | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | |||||||||
Other assets | 12,377 | 36,006 | |||||||||
Total assets | 26,869,924 | 214,712,033 | |||||||||
Liabilities: | |||||||||||
Due to broker | — | — | |||||||||
Payable for cash collateral from securities loaned | 508,613 | — | |||||||||
Payable for investments purchased | — | 1,945,835 | |||||||||
Payable for fund shares redeemed | 4,764 | 1,903,899 | |||||||||
Payable to affiliate | — | 77,965 | |||||||||
Payable to Trustees | 7,136 | 14,766 | |||||||||
Payable to custodian | 12,532 | 50,633 | |||||||||
Payable for foreign withholding taxes | — | 32,140 | |||||||||
Payable for variation margin on futures contracts | — | — | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | |||||||||
Accrued expenses and other liabilities | 95,779 | 166,863 | |||||||||
Total liabilities | 628,824 | 4,192,101 | |||||||||
Net assets | $ | 26,241,100 | $ | 210,519,932 |
See accompanying notes to financial statements.
111
The UBS Funds
Financial statements
Statement of assets and liabilities—June 30, 2020 (continued)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 80,492,858 | $ | 212,776,267 | $ | 459,136,698 | |||||||||
Distributable earnings (losses) | (44,936,819 | ) | 12,693,103 | 17,197,602 | |||||||||||
Net assets | $ | 35,556,039 | $ | 225,469,370 | $ | 476,334,300 | |||||||||
Class A | |||||||||||||||
Net assets | $ | 21,273,085 | $ | 174,158,784 | $ | — | |||||||||
Shares outstanding | 3,557,271 | 14,732,336 | — | ||||||||||||
Net asset value and redemption proceeds per share | $ | 5.98 | $ | 11.82 | $ | — | |||||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | 6.33 | $ | 12.51 | $ | — | |||||||||
Class P | |||||||||||||||
Net assets | $ | 14,282,954 | $ | 51,310,586 | $ | 100,543,016 | |||||||||
Shares outstanding | 2,330,600 | 4,230,889 | 10,898,347 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 6.13 | $ | 12.13 | $ | 9.23 | |||||||||
Class P2 | |||||||||||||||
Net assets | $ | — | $ | — | $ | 375,791,284 | |||||||||
Shares outstanding | — | — | 40,420,909 | ||||||||||||
Net asset value, offering price and redemption value per share2 | $ | — | $ | — | $ | 9.30 |
2 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 | $ | 25,919,650 | $ | 213,205,730 | |||||||
Distributable earnings (losses) | 321,450 | (2,685,798 | ) | ||||||||
Net assets | $ | 26,241,100 | $ | 210,519,932 | |||||||
Class A | |||||||||||
Net assets | $ | — | $ | 7,441,756 | |||||||
Shares outstanding | — | 773,442 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 9.62 | |||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 10.18 | |||||||
Class P | |||||||||||
Net assets | $ | 26,241,100 | $ | 203,078,176 | |||||||
Shares outstanding | 2,588,118 | 21,032,661 | |||||||||
Net asset value, offering price and redemption value per share | $ | 10.14 | $ | 9.66 | |||||||
Class P2 | |||||||||||
Net assets | $ | — | $ | — | |||||||
Shares outstanding | — | — | |||||||||
Net asset value, offering price and redemption value per share2 | $ | — | $ | — |
See accompanying notes to financial statements.
113
The UBS Funds
Financial statements
Statement of assets and liabilities—June 30, 2020 (continued)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 98,933,699 | $ | 24,332,507 | $ | 112,883,176 | |||||||||
Foreign currency | — | — | — | ||||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 122,408,811 | $ | 25,412,878 | $ | 118,239,061 | |||||||||
Foreign currency | — | — | — | ||||||||||||
Cash | 171,993 | — | — | ||||||||||||
Cash collateral on futures | — | — | — | ||||||||||||
Cash collateral on swap agreements | — | — | — | ||||||||||||
Due from broker | — | — | — | ||||||||||||
Receivable for investments sold | 808,001 | 19,394 | — | ||||||||||||
Receivable for fund shares sold | 21,018 | — | 158,988 | ||||||||||||
Receivable for dividends and interest | 25,611 | 8,183 | 1,282,633 | ||||||||||||
Receivable from affiliate | — | 36,957 | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Other assets | 22,904 | 27,006 | 23,907 | ||||||||||||
Total assets | 123,458,338 | 25,504,418 | 119,704,589 | ||||||||||||
Liabilities: | |||||||||||||||
Payable for cash collateral from securities loaned | 6,212,859 | — | — | ||||||||||||
Payable for investments purchased | 948,532 | 21,297 | — | ||||||||||||
Payable for fund shares redeemed | 418,237 | 44,672 | 136,747 | ||||||||||||
Payable to affiliate | 33,580 | — | 14,752 | ||||||||||||
Payable to Trustees | 10,307 | 7,110 | 11,233 | ||||||||||||
Payable to custodian | 23,770 | 21,372 | 401,921 | ||||||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | — | 333 | — | ||||||||||||
Payable for variation margin on futures contracts | — | — | — | ||||||||||||
Accrued expenses and other liabilities | 148,672 | 117,515 | 110,837 | ||||||||||||
Total liabilities | 7,795,957 | 212,299 | 675,490 | ||||||||||||
Net assets | $ | 115,662,381 | $ | 25,292,119 | $ | 119,029,099 |
1 Includes $12,246,830; $45,146; $0; $787,611 and $1,168,693, respectively of investments in securities on loan, at value, plus accrued interest and dividends, if any.
114
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 35,857,930 | $ | 39,091,274 | |||||||
Foreign currency | — | 53,708 | |||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 37,971,830 | $ | 39,766,789 | |||||||
Foreign currency | — | 53,262 | |||||||||
Cash | — | 131,342 | |||||||||
Cash collateral on futures | — | 172,428 | |||||||||
Cash collateral on swap agreements | — | — | |||||||||
Due from broker | — | 363,063 | |||||||||
Receivable for investments sold | 1,079,770 | 280,881 | |||||||||
Receivable for fund shares sold | 40,316 | 6,000 | |||||||||
Receivable for dividends and interest | 197,627 | 244,515 | |||||||||
Receivable from affiliate | 103,634 | 47,510 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 1,414 | |||||||||
Other assets | 17,276 | 27,687 | |||||||||
Total assets | 39,410,453 | 41,094,891 | |||||||||
Liabilities: | |||||||||||
Payable for cash collateral from securities loaned | 804,293 | 1,087,083 | |||||||||
Payable for investments purchased | 1,086,588 | 2,111,127 | |||||||||
Payable for fund shares redeemed | 5,717 | 21,994 | |||||||||
Payable to affiliate | — | — | |||||||||
Payable to Trustees | 8,154 | 7,917 | |||||||||
Payable to custodian | 5,001 | 15,754 | |||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | — | — | |||||||||
Payable for variation margin on futures contracts | — | 12,342 | |||||||||
Accrued expenses and other liabilities | 86,707 | 141,590 | |||||||||
Total liabilities | 1,996,460 | 3,397,807 | |||||||||
Net assets | $ | 37,413,993 | $ | 37,697,084 |
See accompanying notes to financial statements.
115
The UBS Funds
Financial statements
Statement of assets and liabilities—June 30, 2020 (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 82,378,952 | $ | 24,594,327 | $ | 113,685,598 | |||||||||
Distributable earnings (losses) | 33,283,429 | 697,792 | 5,343,501 | ||||||||||||
Net assets | $ | 115,662,381 | $ | 25,292,119 | $ | 119,029,099 | |||||||||
Class A | |||||||||||||||
Net assets | $ | 22,908,690 | $ | 10,019,701 | $ | 12,496,230 | |||||||||
Shares outstanding | 1,160,251 | 280,824 | 1,152,343 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 19.74 | $ | 35.68 | $ | 10.84 | |||||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | 20.89 | $ | 37.76 | $ | 11.09 | |||||||||
Class P | |||||||||||||||
Net assets | $ | 92,753,691 | $ | 15,272,418 | $ | 106,532,869 | |||||||||
Shares outstanding | 4,146,966 | 425,886 | 9,831,540 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 22.37 | $ | 35.86 | $ | 10.84 |
116
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 34,255,137 | $ | 39,009,050 | |||||||
Distributable earnings (losses) | 3,158,856 | (1,311,966 | ) | ||||||||
Net assets | $ | 37,413,993 | $ | 37,697,084 | |||||||
Class A | |||||||||||
Net assets | $ | — | $ | 649,549 | |||||||
Shares outstanding | — | 41,537 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 15.64 | |||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 16.25 | |||||||
Class P | |||||||||||
Net assets | $ | 37,413,993 | $ | 37,047,535 | |||||||
Shares outstanding | 3,350,566 | 2,367,768 | |||||||||
Net asset value, offering price and redemption value per share | $ | 11.17 | $ | 15.65 |
See accompanying notes to financial statements.
117
The UBS Funds
Statement of operations
For the year ended June 30, 2020
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Investment income: | |||||||||||||||
Unaffiliated dividends | $ | 104,262 | $ | 3,584,143 | $ | 10,967,831 | |||||||||
Affiliated dividends | — | 614,199 | — | ||||||||||||
Interest | 894,898 | 1,301,018 | 71,655 | ||||||||||||
Securities lending | 13,862 | 131,120 | 3,552 | ||||||||||||
Foreign tax withheld | (331 | ) | (132,387 | ) | (853,577 | ) | |||||||||
Total income | 1,012,691 | 5,498,093 | 10,189,461 | ||||||||||||
Expenses: | |||||||||||||||
Investment management and administration fees | 389,107 | 2,169,426 | 3,164,923 | ||||||||||||
Service and distribution fees—Class A | 63,309 | 478,573 | — | ||||||||||||
Transfer agency and related services fees—Class A | 25,936 | 136,652 | — | ||||||||||||
Transfer agency and related services fees—Class P | 19,060 | 23,137 | 36,255 | ||||||||||||
Transfer agency and related services fees—Class P2 | — | — | 20,636 | ||||||||||||
Custody and fund accounting fees | 17,825 | 67,406 | 232,218 | ||||||||||||
Trustees fees | 31,252 | 67,178 | 88,012 | ||||||||||||
Professional services fees | 171,599 | 182,053 | 169,846 | ||||||||||||
Printing and shareholder report fees | 10,485 | 89,766 | 27,008 | ||||||||||||
Federal and state registration fees | 32,136 | 36,653 | 51,541 | ||||||||||||
Interest expense | 308 | 6,966 | — | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other expenses | 38,713 | 95,498 | 46,747 | ||||||||||||
Total expenses | 799,730 | 3,353,308 | 3,837,186 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (273,391 | ) | (512,393 | ) | (2,445,906 | ) | |||||||||
Net expenses | 526,339 | 2,840,915 | 1,391,280 | ||||||||||||
Net investment income (loss) | 486,352 | 2,657,178 | 8,798,181 | ||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 626,506 | 2,893,148 | (10,547,988 | ) | |||||||||||
Investments in affiliated issuers | — | (2,360,800 | ) | — | |||||||||||
Futures contracts | (705,405 | ) | 1,397,497 | — | |||||||||||
Swap agreements | (286,680 | ) | 192,535 | — | |||||||||||
Forward foreign currency contracts | (206,794 | ) | (813,916 | ) | 10,400 | ||||||||||
Foreign currency transactions | (8,834 | ) | 175,654 | (530,845 | ) | ||||||||||
Net realized gain (loss) | (581,207 | ) | 1,484,118 | (11,068,433 | ) | ||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (535,393 | ) | (397,018 | ) | 25,614,686 | ||||||||||
Investments in affiliated issuers | — | 529,813 | — | ||||||||||||
Futures contracts | 51,609 | (868,857 | ) | — | |||||||||||
Swap agreements | 166,666 | (301,858 | ) | — | |||||||||||
Forward foreign currency contracts | (142,651 | ) | (1,701,661 | ) | — | ||||||||||
Translation of other assets and liabilities denominated in foreign currency | (34,395 | ) | (12,975 | ) | (47,436 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | (494,164 | ) | (2,752,556 | ) | 25,567,250 | ||||||||||
Net realized and unrealized gain (loss) | (1,075,371 | ) | (1,268,438 | ) | 14,498,817 | ||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (589,019 | ) | $ | 1,388,740 | $ | 23,296,998 |
118
The UBS Funds
UBS Engage for Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Investment income: | |||||||||||
Unaffiliated dividends | $ | 355,538 | $ | 5,664,139 | |||||||
Affiliated dividends | — | — | |||||||||
Interest | 9,310 | 47,921 | |||||||||
Securities lending | 4,548 | 19,992 | |||||||||
Foreign tax withheld | (35,204 | ) | (459,636 | ) | |||||||
Total income | 334,192 | 5,272,416 | |||||||||
Expenses: | |||||||||||
Investment management and administration fees | 171,989 | 1,633,354 | |||||||||
Service and distribution fees—Class A | — | 22,593 | |||||||||
Transfer agency and related services fees—Class A | — | 6,497 | |||||||||
Transfer agency and related services fees—Class P | 10,625 | 53,500 | |||||||||
Transfer agency and related services fees—Class P2 | — | — | |||||||||
Custody and fund accounting fees | 20,681 | 65,899 | |||||||||
Trustees fees | 28,349 | 58,777 | |||||||||
Professional services fees | 144,531 | 138,888 | |||||||||
Printing and shareholder report fees | 6,736 | 32,029 | |||||||||
Federal and state registration fees | 18,542 | 40,110 | |||||||||
Interest expense | — | 316 | |||||||||
Amortization of offering costs | 40,342 | — | |||||||||
Other expenses | 31,206 | 63,320 | |||||||||
Total expenses | 473,001 | 2,115,283 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (295,800 | ) | (225,685 | ) | |||||||
Net expenses | 177,201 | 1,889,598 | |||||||||
Net investment income (loss) | 156,991 | 3,382,818 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 134,992 | (5,637,608 | ) | ||||||||
Investments in affiliated issuers | — | — | |||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | 1,567 | — | |||||||||
Foreign currency transactions | (14,184 | ) | 87,167 | ||||||||
Net realized gain (loss) | 122,375 | (5,550,441 | ) | ||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | (378,202 | ) | (261,765 | ) | |||||||
Investments in affiliated issuers | — | — | |||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | — | — | |||||||||
Translation of other assets and liabilities denominated in foreign currency | 3,614 | 4,895 | |||||||||
Net change in unrealized appreciation (depreciation) | (374,588 | ) | (256,870 | ) | |||||||
Net realized and unrealized gain (loss) | (252,213 | ) | (5,807,311 | ) | |||||||
Net increase (decrease) in net assets resulting from operations | $ | (95,222 | ) | $ | (2,424,493 | ) |
See accompanying notes to financial statements.
119
The UBS Funds
Statement of operations
For the year ended June 30, 2020 (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Investment income: | |||||||||||||||
Unaffiliated dividends | $ | 573,797 | $ | 407,154 | $ | — | |||||||||
Interest | 37,658 | 7,651 | 2,472,093 | ||||||||||||
Securities lending | 86,309 | 4,893 | — | ||||||||||||
Foreign tax withheld | — | (614 | ) | — | |||||||||||
Total income | 697,764 | 419,084 | 2,472,093 | ||||||||||||
Expenses: | |||||||||||||||
Investment management and administration fees | 1,045,961 | 223,378 | 508,162 | ||||||||||||
Service and distribution fees—Class A | 56,828 | 28,422 | 32,340 | ||||||||||||
Transfer agency and related services fees—Class A | 35,361 | 7,744 | 2,811 | ||||||||||||
Transfer agency and related services fees—Class P | 88,917 | 5,066 | 16,743 | ||||||||||||
Custody and fund accounting fees | 22,978 | 10,743 | 20,656 | ||||||||||||
Trustees fees | 43,410 | 31,183 | 43,758 | ||||||||||||
Professional services fees | 120,594 | 136,862 | 123,371 | ||||||||||||
Printing and shareholder report fees | 24,407 | 6,324 | 17,354 | ||||||||||||
Federal and state registration fees | 33,985 | 33,463 | 36,231 | ||||||||||||
Interest expense | 247 | 95 | 196 | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other expenses | 53,487 | 33,422 | 24,719 | ||||||||||||
Total expenses | 1,526,175 | 516,702 | 826,341 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (349,640 | ) | (286,424 | ) | (365,879 | ) | |||||||||
Net expenses | 1,176,535 | 230,278 | 460,462 | ||||||||||||
Net investment income (loss) | (478,771 | ) | 188,806 | 2,011,631 | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 13,974,311 | (431,062 | ) | 988,296 | |||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Foreign currency transactions | — | — | — | ||||||||||||
Net realized gain (loss) | 13,974,311 | (431,062 | ) | 988,296 | |||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (4,482,062 | ) | 41,393 | 1,442,243 | |||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | — | — | — | ||||||||||||
Net change in unrealized appreciation (depreciation) | (4,482,062 | ) | 41,393 | 1,442,243 | |||||||||||
Net realized and unrealized gain (loss) | 9,492,249 | (389,669 | ) | 2,430,539 | |||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 9,013,478 | $ | (200,863 | ) | $ | 4,442,170 |
120
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Investment income: | |||||||||||
Unaffiliated dividends | $ | — | $ | 2,725 | |||||||
Interest | 794,189 | 1,309,264 | |||||||||
Securities lending | 1,014 | 2,348 | |||||||||
Foreign tax withheld | — | — | |||||||||
Total income | 795,203 | 1,314,337 | |||||||||
Expenses: | |||||||||||
Investment management and administration fees | 81,822 | 220,670 | |||||||||
Service and distribution fees—Class A | — | 1,578 | |||||||||
Transfer agency and related services fees—Class A | — | 290 | |||||||||
Transfer agency and related services fees—Class P | 6,375 | 34,187 | |||||||||
Custody and fund accounting fees | 9,417 | 26,869 | |||||||||
Trustees fees | 31,855 | 31,334 | |||||||||
Professional services fees | 135,303 | 139,784 | |||||||||
Printing and shareholder report fees | 7,385 | 19,090 | |||||||||
Federal and state registration fees | 21,885 | 32,729 | |||||||||
Interest expense | 404 | 205 | |||||||||
Amortization of offering costs | 46,980 | — | |||||||||
Other expenses | 46,794 | 25,708 | |||||||||
Total expenses | 388,220 | 532,444 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (296,902 | ) | (338,774 | ) | |||||||
Net expenses | 91,318 | 193,670 | |||||||||
Net investment income (loss) | 703,885 | 1,120,667 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 1,093,551 | 659,260 | |||||||||
Options and swaptions written | — | (142,681 | ) | ||||||||
Futures contracts | — | 1,041,887 | |||||||||
Swap agreements | — | 173,556 | |||||||||
Forward foreign currency contracts | — | (56,746 | ) | ||||||||
Foreign currency transactions | — | (4,434 | ) | ||||||||
Net realized gain (loss) | 1,093,551 | 1,670,842 | |||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | 1,094,854 | (321,263 | ) | ||||||||
Options and swaptions written | — | 51,153 | |||||||||
Futures contracts | — | (179,206 | ) | ||||||||
Swap agreements | — | 18,267 | |||||||||
Forward foreign currency contracts | — | 15,093 | |||||||||
Translation of other assets and liabilities denominated in foreign currency | — | (6,112 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | 1,094,854 | (422,068 | ) | ||||||||
Net realized and unrealized gain (loss) | 2,188,405 | 1,248,774 | |||||||||
Net increase (decrease) in net assets resulting from operations | $ | 2,892,290 | $ | 2,369,441 |
See accompanying notes to financial statements.
121
The UBS Funds
Statement of changes in net assets
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||||
For the years ended June 30, | For the years ended June 30, | For the years ended June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
From operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 486,352 | $ | 832,770 | $ | 2,657,178 | $ | 2,911,921 | $ | 8,798,181 | $ | 2,756,966 | |||||||||||||||
Net realized gain (loss) | (581,207 | ) | (906,818 | ) | 1,484,118 | 6,043,109 | (11,068,433 | ) | (5,416,540 | ) | |||||||||||||||||
Net change in unrealized appreciation (depreciation) | (494,164 | ) | 216,555 | (2,752,556 | ) | 1,013,011 | 25,567,250 | 6,314,757 | |||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | (589,019 | ) | 142,507 | 1,388,740 | 9,968,041 | 23,296,998 | 3,655,183 | ||||||||||||||||||||
Total distributions—Class A | (1,215,326 | ) | (310,989 | ) | (13,406,465 | ) | — | — | — | ||||||||||||||||||
Total distributions—Class P | (848,376 | ) | (305,252 | ) | (4,161,168 | ) | — | (2,126,928 | ) | — | |||||||||||||||||
Total distributions—Class P2 | — | — | — | — | (6,516,989 | ) | (522,535 | ) | |||||||||||||||||||
Total distributions | (2,063,702 | ) | (616,241 | ) | (17,567,633 | ) | — | (8,643,917 | ) | (522,535 | ) | ||||||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||||||
Proceeds from shares sold | 1,087,974 | 2,734,063 | 7,492,574 | 6,444,682 | 344,491,270 | 171,284,237 | |||||||||||||||||||||
Cost of shares redeemed | (14,090,815 | ) | (27,175,324 | ) | (49,228,691 | ) | (56,321,997 | ) | (114,075,956 | ) | (43,473,455 | ) | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 1,829,496 | 556,939 | 16,174,628 | — | 5,860,007 | 113,629 | |||||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (11,173,345 | ) | (23,884,322 | ) | (25,561,489 | ) | (49,877,315 | ) | 236,275,321 | 127,924,411 | |||||||||||||||||
Net increase (decrease) in net assets | (13,826,066 | ) | (24,358,056 | ) | (41,740,382 | ) | (39,909,274 | ) | 250,928,402 | 131,057,059 | |||||||||||||||||
Net assets: | |||||||||||||||||||||||||||
Beginning of year | 49,382,105 | 73,740,161 | 267,209,752 | 307,119,026 | 225,405,898 | 94,348,839 | |||||||||||||||||||||
End of year | $ | 35,556,039 | $ | 49,382,105 | $ | 225,469,370 | $ | 267,209,752 | $ | 476,334,300 | $ | 225,405,898 |
* For the period October 24, 2018 (commencement of operations) through June 30, 2019.
122
The UBS Funds
UBS Engage for Impact Fund | UBS International Sustainable Equity Fund | ||||||||||||||||||
For the years ended June 30, | For the years ended June 30, | ||||||||||||||||||
2020 | 2019* | 2020 | 2019 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income (loss) | $ | 156,991 | $ | 166,987 | $ | 3,382,818 | $ | 2,149,436 | |||||||||||
Net realized gain (loss) | 122,375 | 241,288 | (5,550,441 | ) | (2,800,892 | ) | |||||||||||||
Net change in unrealized appreciation (depreciation) | (374,588 | ) | 582,083 | (256,870 | ) | 4,255,231 | |||||||||||||
Net increase (decrease) in net assets resulting from operations | (95,222 | ) | 990,358 | (2,424,493 | ) | 3,603,775 | |||||||||||||
Total distributions—Class A | — | — | (123,994 | ) | (157,033 | ) | |||||||||||||
Total distributions—Class P | (567,242 | ) | (6,444 | ) | (2,822,544 | ) | (1,718,519 | ) | |||||||||||
Total distributions—Class P2 | — | — | — | — | |||||||||||||||
Total distributions | (567,242 | ) | (6,444 | ) | (2,946,538 | ) | (1,875,552 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 15,119,169 | 22,129,964 | 125,560,872 | 108,186,440 | |||||||||||||||
Cost of shares redeemed | (4,654,704 | ) | (7,202,590 | ) | (68,746,707 | ) | (32,148,876 | ) | |||||||||||
Shares issued on reinvestment of dividends and distributions | 521,370 | 6,441 | 2,692,439 | 1,779,184 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 10,985,835 | 14,933,815 | 59,506,604 | 77,816,748 | |||||||||||||||
Net increase (decrease) in net assets | 10,323,371 | 15,917,729 | 54,135,573 | 79,544,971 | |||||||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 15,917,729 | — | 156,384,359 | 76,839,388 | |||||||||||||||
End of year | $ | 26,241,100 | $ | 15,917,729 | $ | 210,519,932 | $ | 156,384,359 |
See accompanying notes to financial statements.
123
The UBS Funds
Statement of changes in net assets (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||||||||||||||
For the years ended June 30, | For the years ended June 30, | For the years ended June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
From operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (478,771 | ) | $ | (398,020 | ) | $ | 188,806 | $ | 254,796 | $ | 2,011,631 | $ | 2,158,899 | |||||||||||||
Net realized gain (loss) | 13,974,311 | 8,136,512 | (431,062 | ) | 1,413,142 | 988,296 | (78,589 | ) | |||||||||||||||||||
Net change in unrealized appreciation (depreciation) | (4,482,062 | ) | (3,158,717 | ) | 41,393 | 422,783 | 1,442,243 | 5,173,394 | |||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 9,013,478 | 4,579,775 | (200,863 | ) | 2,090,721 | 4,442,170 | 7,253,704 | ||||||||||||||||||||
Total distributions—Class A | (1,775,575 | ) | (2,527,048 | ) | (586,981 | ) | (109,184 | ) | (213,387 | ) | (217,914 | ) | |||||||||||||||
Total distributions—Class C | — | — | — | — | — | (17,493 | ) | ||||||||||||||||||||
Total distributions—Class P | (6,480,541 | ) | (8,633,439 | ) | (940,561 | ) | (193,173 | ) | (1,797,595 | ) | (1,922,730 | ) | |||||||||||||||
Total distributions | (8,256,116 | ) | (11,160,487 | ) | (1,527,542 | ) | (302,357 | ) | (2,010,982 | ) | (2,158,137 | ) | |||||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||||||
Proceeds from shares sold | 21,748,959 | 31,560,714 | 2,935,638 | 2,573,638 | 38,324,671 | 26,363,694 | |||||||||||||||||||||
Cost of shares redeemed | (37,336,837 | ) | (31,938,307 | ) | (7,578,601 | ) | (3,922,567 | ) | (25,262,928 | ) | (52,421,163 | ) | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 7,893,853 | 10,597,009 | 1,443,866 | 282,160 | 1,518,656 | 1,619,544 | |||||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (7,694,025 | ) | 10,219,416 | (3,199,097 | ) | (1,066,769 | ) | 14,580,399 | (24,437,925 | ) | |||||||||||||||||
Net increase (decrease) in net assets | (6,936,663 | ) | 3,638,704 | (4,927,502 | ) | 721,595 | 17,011,587 | (19,342,358 | ) | ||||||||||||||||||
Net assets: | |||||||||||||||||||||||||||
Beginning of year | 122,599,044 | 118,960,340 | 30,219,621 | 29,498,026 | 102,017,512 | 121,359,870 | |||||||||||||||||||||
End of year | $ | 115,662,381 | $ | 122,599,044 | $ | 25,292,119 | $ | 30,219,621 | $ | 119,029,099 | $ | 102,017,512 |
124
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||||||||||
For the years ended June 30, | For the years ended June 30, | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income (loss) | $ | 703,885 | $ | 331,806 | $ | 1,120,667 | $ | 1,314,644 | |||||||||||
Net realized gain (loss) | 1,093,551 | 71,604 | 1,670,842 | (326,848 | ) | ||||||||||||||
Net change in unrealized appreciation (depreciation) | 1,094,854 | 1,019,046 | (422,068 | ) | 2,009,306 | ||||||||||||||
Net increase (decrease) in net assets resulting from operations | 2,892,290 | 1,422,456 | 2,369,441 | 2,997,102 | |||||||||||||||
Total distributions—Class A | — | — | (15,011 | ) | (9,381 | ) | |||||||||||||
Total distributions—Class C | — | — | — | (431 | ) | ||||||||||||||
Total distributions—Class P | (824,383 | ) | (331,507 | ) | (987,231 | ) | (1,182,844 | ) | |||||||||||
Total distributions | (824,383 | ) | (331,507 | ) | (1,002,242 | ) | (1,192,656 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 36,308,770 | 35,672,488 | 443,074 | 532,802 | |||||||||||||||
Cost of shares redeemed | (26,819,184 | ) | (11,831,843 | ) | (4,328,919 | ) | (5,240,932 | ) | |||||||||||
Shares issued on reinvestment of dividends and distributions | 621,222 | 303,684 | 778,398 | 925,634 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 10,110,808 | 24,144,329 | (3,107,447 | ) | (3,782,496 | ) | |||||||||||||
Net increase (decrease) in net assets | 12,178,715 | 25,235,278 | (1,740,248 | ) | (1,978,050 | ) | |||||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 25,235,278 | — | 39,437,332 | 41,415,382 | |||||||||||||||
End of year | $ | 37,413,993 | $ | 25,235,278 | $ | 37,697,084 | $ | 39,437,332 |
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, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.36 | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | |||||||||||||
Net investment income (loss)1 | 0.07 | 0.08 | 0.04 | 0.03 | 0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.15 | ) | (0.04 | ) | (0.18 | ) | 0.32 | (0.79 | ) | ||||||||||||||
Net increase (decrease) from payment by Advisor | — | — | — | — | 0.01 | ||||||||||||||||||
Net increase (decrease) from operations | (0.08 | ) | 0.04 | (0.14 | ) | 0.35 | (0.73 | ) | |||||||||||||||
Dividends from net investment income | (0.30 | ) | (0.06 | ) | — | — | (0.23 | ) | |||||||||||||||
Return of capital | — | — | — | — | (0.00 | )2 | |||||||||||||||||
Total dividends and distributions | (0.30 | ) | (0.06 | ) | — | — | (0.23 | ) | |||||||||||||||
Net asset value, end of year | $ | 5.98 | $ | 6.36 | $ | 6.38 | $ | 6.52 | $ | 6.17 | |||||||||||||
Total investment return3 | (1.45 | )% | 0.60 | % | (2.15 | )% | 5.84 | % | (10.48 | )%4 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.00 | %5 | 2.02 | %5 | 1.69 | % | 1.49 | % | 1.45 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.35 | %5 | 1.35 | %5 | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||
Net investment income (loss) | 1.06 | % | 1.29 | % | 0.57 | % | 0.42 | % | 0.82 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 21,273 | $ | 30,025 | $ | 31,066 | $ | 43,930 | $ | 65,741 | |||||||||||||
Portfolio turnover | 62 | % | 32 | % | 31 | % | 48 | % | 50 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.52 | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | |||||||||||||
Net investment income (loss)1 | 0.08 | 0.10 | 0.06 | 0.04 | 0.07 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.15 | ) | (0.04 | ) | (0.19 | ) | 0.34 | (0.82 | ) | ||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | ||||||||||||||||||
Net increase (decrease) from operations | (0.07 | ) | 0.06 | (0.13 | ) | 0.38 | (0.74 | ) | |||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.07 | ) | — | — | (0.25 | ) | |||||||||||||||
Return of capital | — | — | — | — | (0.00 | )2 | |||||||||||||||||
Total dividends and distributions | (0.32 | ) | (0.07 | ) | — | — | (0.25 | ) | |||||||||||||||
Net asset value, end of year | $ | 6.13 | $ | 6.52 | $ | 6.53 | $ | 6.66 | $ | 6.28 | |||||||||||||
Total investment return3 | (1.28 | )% | 0.83 | % | (1.80 | )% | 6.05 | % | (10.17 | )%4 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.75 | %5 | 1.70 | %5 | 1.43 | % | 1.27 | % | 1.22 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.10 | %5 | 1.10 | %5 | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||
Net investment income (loss) | 1.31 | % | 1.52 | % | 0.94 | % | 0.68 | % | 1.07 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 14,283 | $ | 19,357 | $ | 30,647 | $ | 98,018 | $ | 132,725 | |||||||||||||
Portfolio turnover | 62 | % | 32 | % | 31 | % | 48 | % | 50 | % |
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 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, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 12.56 | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | |||||||||||||
Net investment income (loss)1 | 0.12 | 0.12 | 0.05 | 0.02 | 0.01 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.02 | 0.36 | 0.68 | 1.27 | (0.56 | ) | |||||||||||||||||
Net increase (decrease) from payment by Advisor | — | — | — | — | 0.01 | ||||||||||||||||||
Net increase (decrease) from operations | 0.14 | 0.48 | 0.73 | 1.29 | (0.54 | ) | |||||||||||||||||
Dividends from net investment income | (0.35 | ) | — | (0.17 | ) | (0.23 | ) | (0.27 | ) | ||||||||||||||
Distributions from net realized gains | (0.53 | ) | — | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.88 | ) | — | (0.17 | ) | (0.23 | ) | (0.27 | ) | ||||||||||||||
Net asset value, end of year | $ | 11.82 | $ | 12.56 | $ | 12.08 | $ | 11.52 | $ | 10.46 | |||||||||||||
Total investment return2 | 0.79 | % | 3.97 | %3 | 6.34 | % | 12.51 | % | (4.81 | )%4 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.42 | %5 | 1.40 | %5 | 1.40 | % | 1.39 | % | 1.36 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.20 | %5 | 1.20 | %5 | 1.20 | % | 1.25 | % | 1.35 | % | |||||||||||||
Net investment income (loss) | 1.01 | % | 1.04 | % | 0.39 | % | 0.16 | % | 0.09 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 174,159 | $ | 209,407 | $ | 159,678 | $ | 174,148 | $ | 190,813 | |||||||||||||
Portfolio turnover | 120 | % | 35 | % | 54 | % | 56 | % | 60 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 12.87 | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | |||||||||||||
Net investment income (loss)1 | 0.16 | 0.16 | 0.08 | 0.05 | 0.04 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.02 | 0.37 | 0.68 | 1.30 | (0.56 | ) | |||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | ||||||||||||||||||
Net increase (decrease) from operations | 0.18 | 0.53 | 0.76 | 1.35 | (0.51 | ) | |||||||||||||||||
Dividends from net investment income | (0.39 | ) | — | (0.20 | ) | (0.26 | ) | (0.31 | ) | ||||||||||||||
Distributions from net realized gains | (0.53 | ) | — | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.92 | ) | — | (0.20 | ) | (0.26 | ) | (0.31 | ) | ||||||||||||||
Net asset value, end of year | $ | 12.13 | $ | 12.87 | $ | 12.34 | $ | 11.78 | $ | 10.69 | |||||||||||||
Total investment return2 | 1.02 | % | 4.21 | %3 | 6.56 | % | 12.85 | % | (4.50 | )%4 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.14 | %5 | 1.13 | %5 | 1.14 | % | 1.12 | % | 1.09 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %5 | 0.95 | %5 | 0.95 | % | 1.00 | % | 1.09 | % | |||||||||||||
Net investment income (loss) | 1.27 | % | 1.27 | % | 0.64 | % | 0.41 | % | 0.34 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 51,311 | $ | 57,803 | $ | 64,009 | $ | 67,156 | $ | 91,004 | |||||||||||||
Portfolio turnover | 120 | % | 35 | % | 54 | % | 56 | % | 60 | % |
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, 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.
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%.
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
Year ended June 30, 2020 | Period ended June 30, 20191 | ||||||||||
Net asset value, beginning of period | $ | 9.28 | $ | 8.92 | |||||||
Net investment income (loss)3 | 0.19 | 0.21 | |||||||||
Net realized and unrealized gain (loss) | 0.004 | 0.15 | |||||||||
Net increase (decrease) from operations | 0.19 | 0.36 | |||||||||
Dividends from net investment income | (0.24 | ) | — | ||||||||
Net asset value, end of period | $ | 9.23 | $ | 9.28 | |||||||
Total investment return6 | 1.84 | % | 4.04 | % | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.19 | % | 1.22 | %7 | |||||||
Expenses after fee waivers and/or expense reimbursements | 1.04 | % | 1.15 | %7 | |||||||
Net investment income (loss) | 2.14 | % | 5.73 | %7 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 100,543 | $ | 38,465 | |||||||
Portfolio turnover | 50 | % | 52 | % |
Class P2
Years ended June 30, | Period ended | ||||||||||||||
2020 | 2019 | June 30, 20182 | |||||||||||||
Net asset value, beginning of period | $ | 9.31 | $ | 9.40 | $ | 10.00 | |||||||||
Net investment income (loss)3 | 0.26 | 0.19 | 0.03 | ||||||||||||
Net realized and unrealized gain (loss) | 0.004 | (0.23 | )5 | (0.63 | ) | ||||||||||
Net increase (decrease) from operations | 0.26 | (0.04 | ) | (0.60 | ) | ||||||||||
Dividends from net investment income | (0.27 | ) | (0.05 | ) | — | ||||||||||
Net asset value, end of period | $ | 9.30 | $ | 9.31 | $ | 9.40 | |||||||||
Total investment return6 | 2.66 | % | (0.46 | )% | (5.90 | )% | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.17 | % | 1.42 | % | 4.39 | %7 | |||||||||
Expenses after fee waivers and/or expense reimbursements | 0.22 | % | 0.40 | % | 0.44 | %7 | |||||||||
Net investment income (loss) | 2.88 | % | 2.16 | % | 4.05 | %7 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 375,791 | $ | 186,941 | $ | 94,349 | |||||||||
Portfolio turnover | 50 | % | 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 Amount represents less than $0.005 per share.
5 The amount of net realized and unrealized loss per share does not correspond with the net realized and unrealized gain reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
6 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for 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.
7 Annualized.
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 each period presented.
Class P
Year ended June 30, 2020 | Period ended June 30, 20191 | ||||||||||
Net asset value, beginning of period | $ | 10.81 | $ | 10.00 | |||||||
Net investment income (loss)2 | 0.08 | 0.15 | |||||||||
Net realized and unrealized gain (loss) | (0.45 | ) | 0.67 | ||||||||
Net increase (decrease) from operations | (0.37 | ) | 0.82 | ||||||||
Dividends from net investment income | (0.11 | ) | (0.01 | ) | |||||||
Distributions from net realized gains | (0.19 | ) | — | ||||||||
Total dividends and distributions | (0.30 | ) | (0.01 | ) | |||||||
Net asset value, end of period | $ | 10.14 | $ | 10.81 | |||||||
Total investment return3 | (3.77 | )% | 8.27 | % | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.27 | % | 3.87 | %4 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.85 | % | 0.85 | %4 | |||||||
Net investment income | 0.75 | % | 2.13 | %4 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 26,241 | $ | 15,918 | |||||||
Portfolio turnover | 43 | % | 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 each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 Annualized.
See accompanying notes to financial statements
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, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.01 | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | |||||||||||||
Net investment income (loss)1 | 0.16 | 0.13 | 0.08 | 0.19 | 0.13 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.42 | ) | (0.16 | )2 | 0.66 | 1.51 | (1.47 | ) | |||||||||||||||
Net increase (decrease) from payment by Advisor | — | — | — | — | 0.01 | ||||||||||||||||||
Net increase (decrease) from operations | (0.26 | ) | (0.03 | ) | 0.74 | 1.70 | (1.33 | ) | |||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.06 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | |||||||||||||
Distributions from net realized gains | — | (0.10 | ) | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.16 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | |||||||||||||
Net asset value, end of year | $ | 9.62 | $ | 10.01 | $ | 10.20 | $ | 9.58 | $ | 8.05 | |||||||||||||
Total investment return3 | (2.73 | )% | (0.14 | )% | 7.67 | % | 21.43 | % | (14.07 | )%4 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.41 | %5 | 1.53 | % | 2.02 | % | 2.25 | % | 2.37 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.25 | %5 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||
Net investment income (loss) | 1.60 | % | 1.38 | % | 0.79 | % | 2.16 | % | 1.59 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 7,442 | $ | 9,769 | $ | 8,049 | $ | 15,811 | $ | 5,204 | |||||||||||||
Portfolio turnover | 41 | % | 57 | % | 43 | % | 33 | % | 114 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.04 | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | |||||||||||||
Net investment income (loss)1 | 0.18 | 0.17 | 0.14 | 0.14 | 0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.41 | ) | (0.18 | )2 | 0.63 | 1.58 | (1.48 | ) | |||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | ||||||||||||||||||
Net increase (decrease) from operations | (0.23 | ) | (0.01 | ) | 0.77 | 1.72 | (1.31 | ) | |||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.08 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | |||||||||||||
Distributions from net realized gains | — | (0.10 | ) | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.10 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | |||||||||||||
Net asset value, end of year | $ | 9.66 | $ | 10.04 | $ | 10.23 | $ | 9.61 | $ | 8.08 | |||||||||||||
Total investment return3 | (2.40 | )% | 0.10 | % | 7.94 | % | 21.68 | % | (13.83 | )%4 | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.12 | %5 | 1.26 | % | 1.70 | % | 2.06 | % | 2.12 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.00 | %5 | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||
Net investment income (loss) | 1.82 | % | 1.80 | % | 1.37 | % | 1.65 | % | 1.92 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 203,078 | $ | 146,616 | $ | 65,750 | $ | 19,952 | $ | 16,277 | |||||||||||||
Portfolio turnover | 41 | % | 57 | % | 43 | % | 33 | % | 114 | % |
1 Calculated using the average share method.
2 The amount of net realized and unrealized loss per share does not correspond with the net realized and unrealized gain reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
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 $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.
5 Includes interest expense representing less than 0.005%.
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, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 19.49 | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | |||||||||||||
Net investment income (loss)1 | (0.11 | ) | (0.10 | ) | (0.17 | ) | (0.15 | ) | (0.13 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.79 | 0.80 | 4.92 | 4.34 | (3.89 | ) | |||||||||||||||||
Net increase (decrease) from operations | 1.68 | 0.70 | 4.75 | 4.19 | (4.02 | ) | |||||||||||||||||
Distributions from net realized gains | (1.43 | ) | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | |||||||||||||
Net asset value, end of year | $ | 19.74 | $ | 19.49 | $ | 20.74 | $ | 21.26 | $ | 17.75 | |||||||||||||
Total investment return2 | 9.33 | % | 5.95 | % | 26.17 | % | 23.75 | % | (17.58 | )% | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.60 | %3 | 1.57 | % | 1.66 | % | 1.56 | % | 1.53 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.24 | %3 | 1.24 | % | 1.24 | % | 1.24 | % | 1.24 | % | |||||||||||||
Net investment income (loss) | (0.63 | )% | (0.53 | )% | (0.83 | )% | (0.77 | )% | (0.65 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 22,909 | $ | 26,114 | $ | 26,498 | $ | 27,464 | $ | 28,048 | |||||||||||||
Portfolio turnover | 79 | % | 54 | % | 67 | % | 50 | % | 109 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 21.84 | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | |||||||||||||
Net investment income (loss)1 | (0.08 | ) | (0.06 | ) | (0.13 | ) | (0.11 | ) | (0.08 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 2.04 | 0.96 | 5.37 | 4.66 | (4.15 | ) | |||||||||||||||||
Net increase (decrease) from operations | 1.96 | 0.90 | 5.24 | 4.55 | (4.23 | ) | |||||||||||||||||
Distributions from net realized gains | (1.43 | ) | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | |||||||||||||
Net asset value, end of year | $ | 22.37 | $ | 21.84 | $ | 22.89 | $ | 22.92 | $ | 19.05 | |||||||||||||
Total investment return2 | 9.62 | % | 6.24 | % | 26.50 | % | 24.09 | % | (17.39 | )% | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.29 | %3 | 1.30 | % | 1.34 | % | 1.22 | % | 1.17 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.99 | %3 | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | |||||||||||||
Net investment income (loss) | (0.37 | )% | (0.27 | )% | (0.58 | )% | (0.50 | )% | (0.40 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 92,754 | $ | 96,485 | $ | 88,845 | $ | 75,770 | $ | 130,227 | |||||||||||||
Portfolio turnover | 79 | % | 54 | % | 67 | % | 50 | % | 109 | % |
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 Includes interest expense representing less than 0.005%.
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, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 36.51 | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | |||||||||||||
Net investment income (loss)1 | 0.18 | 0.26 | 0.16 | 0.14 | 0.21 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.782 | 2.13 | 3.20 | 5.84 | (1.88 | ) | |||||||||||||||||
Net increase (decrease) from operations | 0.96 | 2.39 | 3.36 | 5.98 | (1.67 | ) | |||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.32 | ) | (0.13 | ) | (0.28 | ) | (0.37 | ) | |||||||||||||
Distributions from net realized gains | (1.69 | ) | — | — | — | — | |||||||||||||||||
Total dividends and distributions | (1.79 | ) | (0.32 | ) | (0.13 | ) | (0.28 | ) | (0.37 | ) | |||||||||||||
Net asset value, end of year | $ | 35.68 | $ | 36.51 | $ | 34.44 | $ | 31.21 | $ | 25.51 | |||||||||||||
Total investment return3 | 2.24 | % | 7.15 | % | 10.79 | % | 23.61 | % | (6.13 | )% | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.97 | %4 | 2.14 | % | 2.07 | % | 2.04 | % | 1.93 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %4 | 0.95 | % | 0.95 | % | 0.95 | % | 1.13 | % | |||||||||||||
Net investment income (loss) | 0.51 | % | 0.76 | % | 0.48 | % | 0.49 | % | 0.81 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 10,020 | $ | 12,010 | $ | 10,586 | $ | 11,857 | $ | 9,774 | |||||||||||||
Portfolio turnover | 177 | % | 102 | % | 166 | % | 78 | % | 57 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 36.68 | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | |||||||||||||
Net investment income (loss)1 | 0.27 | 0.34 | 0.25 | 0.21 | 0.26 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.792 | 2.14 | 3.21 | 5.87 | (1.89 | ) | |||||||||||||||||
Net increase (decrease) from operations | 1.06 | 2.48 | 3.46 | 6.08 | (1.63 | ) | |||||||||||||||||
Dividends from net investment income | (0.19 | ) | (0.40 | ) | (0.20 | ) | (0.35 | ) | (0.43 | ) | |||||||||||||
Distributions from net realized gains | (1.69 | ) | — | — | — | — | |||||||||||||||||
Total dividends and distributions | (1.88 | ) | (0.40 | ) | (0.20 | ) | (0.35 | ) | (0.43 | ) | |||||||||||||
Net asset value, end of year | $ | 35.86 | $ | 36.68 | $ | 34.60 | $ | 31.34 | $ | 25.61 | |||||||||||||
Total investment return3 | 2.48 | % | 7.44 | % | 11.08 | % | 23.87 | % | (5.91 | )% | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.68 | %4 | 1.85 | % | 1.79 | % | 1.76 | % | 1.64 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.70 | %4 | 0.70 | % | 0.70 | % | 0.70 | % | 0.90 | % | |||||||||||||
Net investment income (loss) | 0.75 | % | 1.00 | % | 0.74 | % | 0.74 | % | 1.00 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 15,272 | $ | 18,210 | $ | 17,182 | $ | 16,754 | $ | 15,147 | |||||||||||||
Portfolio turnover | 177 | % | 102 | % | 166 | % | 78 | % | 57 | % |
1 Calculated using the average share method.
2 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.
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 Includes interest expense representing less than 0.005%.
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 year presented.
Class A
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.60 | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | |||||||||||||
Net investment income (loss)1 | 0.18 | 0.18 | 0.16 | 0.15 | 0.17 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.24 | 0.53 | (0.16 | ) | (0.27 | ) | 0.59 | ||||||||||||||||
Net increase (decrease) from operations | 0.42 | 0.71 | — | (0.12 | ) | 0.76 | |||||||||||||||||
Dividends from net investment income | (0.18 | ) | (0.18 | ) | (0.16 | ) | (0.15 | ) | (0.18 | ) | |||||||||||||
Distributions from net realized gains | — | — | — | (0.02 | ) | — | |||||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.18 | ) | (0.16 | ) | (0.17 | ) | (0.18 | ) | |||||||||||||
Net asset value, end of year | $ | 10.84 | $ | 10.60 | $ | 10.07 | $ | 10.23 | $ | 10.52 | |||||||||||||
Total investment return2 | 3.98 | % | 7.17 | % | 0.04 | % | (1.11 | )% | 7.74 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.00 | %3 | 1.07 | %3 | 1.03 | % | 1.00 | % | 1.15 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.65 | %3 | 0.65 | %3 | 0.65 | % | �� | 0.65 | % | 0.65 | % | ||||||||||||
Net investment income (loss) | 1.66 | % | 1.80 | % | 1.61 | % | 1.42 | % | 1.66 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 12,496 | $ | 12,796 | $ | 9,378 | $ | 21,007 | $ | 17,671 | |||||||||||||
Portfolio turnover4 | 23 | % | 31 | % | 39 | % | 60 | % | 100 | % |
Class P
Years ended June 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.60 | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | |||||||||||||
Net investment income (loss)1 | 0.20 | 0.21 | 0.19 | 0.17 | 0.19 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.24 | 0.54 | (0.16 | ) | (0.28 | ) | 0.60 | ||||||||||||||||
Net increase (decrease) from operations | 0.44 | 0.75 | 0.03 | (0.11 | ) | 0.79 | |||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.21 | ) | (0.19 | ) | (0.17 | ) | (0.21 | ) | |||||||||||||
Distributions from net realized gains | — | — | — | (0.02 | ) | — | |||||||||||||||||
Total dividends and distributions | (0.20 | ) | (0.21 | ) | (0.19 | ) | (0.19 | ) | (0.21 | ) | |||||||||||||
Net asset value, end of year | $ | 10.84 | $ | 10.60 | $ | 10.06 | $ | 10.22 | $ | 10.52 | |||||||||||||
Total investment return2 | 4.24 | % | 7.55 | % | 0.30 | % | (0.97 | )% | 8.01 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 0.74 | %3 | 0.82 | %3 | 0.79 | % | 0.77 | % | 0.89 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | %3 | 0.40 | %3 | 0.40 | % | 0.40 | % | 0.40 | % | |||||||||||||
Net investment income (loss) | 1.91 | % | 2.03 | % | 1.88 | % | 1.68 | % | 1.89 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 106,533 | $ | 89,222 | $ | 107,153 | $ | 101,601 | $ | 90,146 | |||||||||||||
Portfolio turnover4 | 23 | % | 31 | % | 39 | % | 60 | % | 100 | % |
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 Includes interest expense representing less than 0.005%.
4 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.
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
Year ended June 30, 2020 | Period ended June 30, 20191 | ||||||||||
Net asset value, beginning of period | $ | 10.58 | $ | 10.00 | |||||||
Net investment income (loss)2 | 0.21 | 0.19 | |||||||||
Net realized and unrealized gain (loss) | 0.63 | 0.58 | |||||||||
Net increase (decrease) from operations | 0.84 | 0.77 | |||||||||
Dividends from net investment income | (0.21 | ) | (0.19 | ) | |||||||
Distributions from net realized gains | (0.04 | ) | — | ||||||||
Total dividends and distributions | (0.25 | ) | (0.19 | ) | |||||||
Net asset value, end of period | $ | 11.17 | $ | 10.58 | |||||||
Total investment return3 | 8.03 | % | 7.75 | % | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.07 | %5 | 2.19 | %4 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.25 | %5 | 0.25 | %4 | |||||||
Net investment income (loss) | 1.94 | % | 2.67 | %4 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 37,414 | $ | 25,235 | |||||||
Portfolio turnover | 80 | % | 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.
5 Includes interest expense representing less than 0.005%.
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
Years ended June 30, | Period ended | ||||||||||||||||||
2020 | 2019 | 2018 | June 30, 20171 | ||||||||||||||||
Net asset value, beginning of period | $ | 15.09 | $ | 14.40 | $ | 14.94 | $ | 15.24 | |||||||||||
Net investment income (loss)2 | 0.41 | 0.45 | 0.47 | 0.25 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.50 | 0.65 | (0.65 | ) | (0.30 | ) | |||||||||||||
Net increase (decrease) from operations | 0.91 | 1.10 | (0.18 | ) | (0.05 | ) | |||||||||||||
Dividends from net investment income | (0.36 | ) | (0.41 | ) | (0.36 | ) | (0.25 | ) | |||||||||||
Return of capital | — | — | — | (0.00 | )3 | ||||||||||||||
Total dividends and distributions | (0.36 | ) | (0.41 | ) | (0.36 | ) | (0.25 | ) | |||||||||||
Net asset value, end of period | $ | 15.64 | $ | 15.09 | $ | 14.40 | $ | 14.94 | |||||||||||
Total investment return4 | 6.14 | % | 7.63 | % | (1.12 | )% | (0.31 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.59 | %6 | 1.68 | %6 | 1.45 | % | 1.74 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.75 | %6 | 0.75 | %6 | 0.75 | % | 0.75 | %5 | |||||||||||
Net investment income (loss) | 2.66 | % | 3.10 | % | 3.22 | % | 2.28 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 650 | $ | 488 | $ | 108 | $ | 44 | |||||||||||
Portfolio turnover | 209 | % | 234 | % | 236 | % | 700 | % |
Class P
Years ended June 30, | Nine months ended | ||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | June 30, 20167 | |||||||||||||||||||
Net asset value, beginning of period | $ | 15.10 | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | |||||||||||||
Net investment income (loss)2 | 0.45 | 0.49 | 0.49 | 0.37 | 0.36 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.50 | 0.64 | (0.63 | ) | (0.18 | ) | 0.13 | ||||||||||||||||
Net increase (decrease) from operations | 0.95 | 1.13 | (0.14 | ) | 0.19 | 0.49 | |||||||||||||||||
Dividends from net investment income | (0.40 | ) | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | |||||||||||||
Return of capital | — | — | — | (0.00 | )3 | — | |||||||||||||||||
Total dividends and distributions | (0.40 | ) | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | |||||||||||||
Net asset value, end of period | $ | 15.65 | $ | 15.10 | $ | 14.41 | $ | 14.94 | $ | 15.14 | |||||||||||||
Total investment return4 | 6.40 | % | 7.95 | % | (0.88 | )% | 1.32 | % | 3.33 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.38 | %6 | 1.45 | %6 | 1.30 | % | 1.29 | % | 1.21 | %5 | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.50 | %6 | 0.50 | %6 | 0.50 | % | 0.50 | % | 1.16 | %5 | |||||||||||||
Net investment income (loss) | 2.92 | % | 3.35 | % | 3.29 | % | 2.45 | % | 3.22 | %5 | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of period (000's) | $ | 37,048 | $ | 38,949 | $ | 41,245 | $ | 49,919 | $ | 126,922 | |||||||||||||
Portfolio turnover | 209 | % | 234 | % | 236 | % | 700 | % | 251 | % |
1 For the period September 29, 2016 (commencement of operations) through June 30, 2017.
2 Calculated using the average share method.
3 Amount represents less than $0.005 per share.
4 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for period 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 Includes interest expense representing less than 0.005%.
7 On May 23, 2016 Class P shares of the UBS Total Return Bond Fund acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end management investment company (the "Predecessor Fund"). The UBS Total Return Bond Fund's Class P shares have adopted the historical performance of the Predecessor Fund. In connection with the Reorganization, the fiscal year end for UBS Total Return Bond Fund has changed from September 30th to June 30th. As such, the fiscal period ended June 30, 2016 for UBS Total Return Bond Fund reflects the nine month period from October 1, 2015 through June 30, 2016.
See accompanying notes to financial statements
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 separate 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 AM, 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 ("ASU") 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 annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Management has assessed the impact of these changes, and the changes are incorporated within the financial statements.
In August 2018, the FASB issued ("ASU") 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 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management has assessed the potential impact of these changes and the changes are incorporated within the 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 identified cost method. Dividend income and expense are recorded net of withholding taxes 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
137
The UBS Funds
Notes to financial statements
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.
Many financial instruments, financings or other transactions to which a Fund may be a party use or may use a floating rate based on the London Interbank Offered Rate ("LIBOR"). LIBOR is widely used in financial markets. In July 2017, the United Kingdom's financial regulatory body announced that after 2021 it will cease its active encouragement of banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published or utilized after that time. Various financial industry groups have begun planning for that transition, but the effect of the transition process and its ultimate success cannot yet be determined. The transition
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process may lead to increased volatility and illiquidity in markets for instruments the terms of which are based on LIBOR. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based investments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021. The willingness and ability of issuers to include enhanced provisions in new and existing contracts or instruments also remains uncertain. Any of these factors may adversely affect the Fund's performance or NAV.
Certain impacts to public health conditions particular to the coronavirus (COVID-19) outbreak that occurred may have a significant negative impact on the operations and profitability of the Funds' investments. The extent of the impact to the financial performance of the funds will depend on future developments, including (i) the duration and spread of the outbreak, (ii) the restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted.
Valuation of investments
Each Fund generally calculates its net asset value on days that the New York Stock Exchange ("NYSE") is open. The Fund calculates net asset value 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 Fund does not price its shares, on most national holidays and Good Friday. To the extent that the 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 before 4:00 p.m., Eastern time, the 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 the 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 Fund normally obtains market values for its 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 U.S. 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 Fund invests are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m., Eastern time, will not be reflected in the Fund's net asset value. However, if the Fund determines 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.
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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.
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 Fund's 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.
All investments quoted in foreign currencies are valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Fund's 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 Fund's 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.
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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
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.
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. 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
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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.
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.
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.
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, U.S. 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.
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.
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For the period ended June 30, 2020, UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund did not engage in short sale transactions.
Treasury inflation protected securities: The Funds may purchase Treasury inflation protected securities ("TIPS") which are debt securities issued by the US Treasury. TIPS adjust for inflation based on changes in the published 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.
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 Fund trades and holds certain fair valued derivative contracts that constitute guarantees. Such contracts include written put options, where the Fund will be obligated to purchase securities at specified prices (i.e. the options are exercised by the counterparties). It also includes written swaptions, where
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the Fund will be obligated to enter into a swap agreement. 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.
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.
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, except that in the case of certain futures contracts that are held through swap 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.
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 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
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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 credit indices—sell protection" in the Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a 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.
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The UBS Funds
Notes to financial statements
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.
Forward foreign currency contracts: Certain Funds may enter into forward foreign currency contracts as part of their investment objective, for purposes of risk management or to hedge the US dollar value of portfolio securities denominated in a particular 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.
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 Fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under US GAAP.
The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the period ended June 30, 2020.
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 Fund's Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of June 30, 2020 is reflected in the Statement of assets and liabilities.
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At June 30, 2020, the Funds had the following derivatives categorized by underlying risk:
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total value | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | 8,140 | $ | — | $ | — | $ | 207,354 | $ | 215,494 | |||||||||||||
Swap agreements | — | — | 23,767 | — | 23,767 | ||||||||||||||||||
Forward foreign currency contracts | — | 884,527 | — | — | 884,527 | ||||||||||||||||||
Total value | $ | 8,140 | $ | 884,527 | $ | 23,767 | $ | 207,354 | $ | 1,123,788 | |||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | 171,291 | $ | — | $ | — | $ | 442,608 | $ | 613,899 | |||||||||||||
Forward foreign currency contracts | — | 336,372 | — | — | 336,372 | ||||||||||||||||||
Total value | $ | 171,291 | $ | 336,372 | $ | — | $ | 442,608 | $ | 950,271 | |||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Futures contracts | $ | 12,345 | $ | — | $ | — | $ | — | $ | 12,345 | |||||||||||||
Forward foreign currency contracts | — | 1,414 | — | — | 1,414 | ||||||||||||||||||
Total value | $ | 12,345 | $ | 1,414 | $ | — | $ | — | $ | 13,759 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total value | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | (42,484 | ) | $ | — | $ | — | $ | (156,453 | ) | $ | (198,937 | ) | ||||||||||
Swap agreements | — | — | (6,650 | ) | — | (6,650 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (872,692 | ) | — | — | (872,692 | ) | ||||||||||||||||
Total value | $ | (42,484 | ) | $ | (872,692 | ) | $ | (6,650 | ) | $ | (156,453 | ) | $ | (1,078,279 | ) | ||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | (136,311 | ) | $ | — | $ | — | $ | (864,163 | ) | $ | (1,000,474 | ) | ||||||||||
Swap agreements | — | — | (27,232 | ) | — | (27,232 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (2,252,353 | ) | — | — | (2,252,353 | ) | ||||||||||||||||
Total value | $ | (136,311 | ) | $ | (2,252,353 | ) | $ | (27,232 | ) | $ | (864,163 | ) | $ | (3,280,059 | ) | ||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Futures contracts | $ | (24,774 | ) | $ | — | $ | — | $ | — | $ | (24,774 | ) | |||||||||||
Total value | $ | (24,774 | ) | $ | — | $ | — | $ | — | $ | (24,774 | ) |
Table footnotes begin on page 149
147
The UBS Funds
Notes to financial statements
During the period ended June 30, 2020, net realized gain (loss) from derivatives were as follows:
Realized gain (loss)3
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total value | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Options and swaptions purchased | $ | 22,266 | $ | — | $ | — | $ | — | $ | 22,266 | |||||||||||||
Futures contracts | (514,303 | ) | — | — | (191,102 | ) | (705,405 | ) | |||||||||||||||
Swap agreements | — | — | (286,680 | ) | — | (286,680 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (206,794 | ) | — | — | (206,794 | ) | ||||||||||||||||
Total net realized gains (loss) | $ | (492,037 | ) | $ | (206,794 | ) | $ | (286,680 | ) | $ | (191,102 | ) | $ | (1,176,613 | ) | ||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Options and swaptions purchased | $ | — | $ | — | $ | — | $ | (363,475 | ) | $ | (363,475 | ) | |||||||||||
Futures contracts | 3,543,233 | — | — | (2,145,736 | ) | 1,397,497 | |||||||||||||||||
Swap agreements | — | — | 192,535 | — | 192,535 | ||||||||||||||||||
Forward foreign currency contracts | — | (813,916 | ) | — | — | (813,916 | ) | ||||||||||||||||
Total net realized gains (loss) | $ | 3,543,233 | $ | (813,916 | ) | $ | 192,535 | $ | (2,509,211 | ) | $ | 412,641 | |||||||||||
UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 10,400 | $ | — | $ | — | $ | 10,400 | |||||||||||||
UBS Engage for Impact Fund | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 1,567 | $ | — | $ | — | $ | 1,567 | |||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Options and swaptions purchased | $ | 121,684 | $ | — | $ | — | $ | — | $ | 121,684 | |||||||||||||
Swaptions written | (142,681 | ) | — | — | — | (142,681 | ) | ||||||||||||||||
Futures contracts | 1,041,887 | — | — | — | 1,041,887 | ||||||||||||||||||
Swap agreements | 28,407 | — | 145,149 | — | 173,556 | ||||||||||||||||||
Forward foreign currency contracts | — | (56,746 | ) | — | — | (56,746 | ) | ||||||||||||||||
Total net realized gains (loss) | $ | 1,049,297 | $ | (56,746 | ) | $ | 145,149 | $ | — | $ | 1,137,700 |
Table footnotes begin on page 149
148
The UBS Funds
Notes to financial statements
During the period ended June 30, 2020, net unrealized appreciation (depreciation) from derivatives were as follows:
Net change in unrealized appreciation (depreciation)4
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total value | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Options and swaptions purchased | $ | — | $ | — | $ | 3,757 | $ | — | $ | 3,757 | |||||||||||||
Futures contracts | $ | 96,858 | $ | — | $ | — | $ | (45,249 | ) | $ | 51,609 | ||||||||||||
Swap agreements | — | — | 166,666 | — | 166,666 | ||||||||||||||||||
Forward foreign currency contracts | — | (142,651 | ) | — | — | (142,651 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | 96,858 | $ | (142,651 | ) | $ | 170,423 | $ | (45,249 | ) | $ | 79,381 | |||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Options and swaptions purchased | $ | — | $ | — | $ | — | $ | 164,675 | $ | 164,675 | |||||||||||||
Futures contracts | $ | (179,398 | ) | $ | — | $ | — | $ | (689,459 | ) | $ | (868,857 | ) | ||||||||||
Swap agreements | — | — | (301,858 | ) | — | (301,858 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (1,701,661 | ) | — | — | (1,701,661 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | (179,398 | ) | $ | (1,701,661 | ) | $ | (301,858 | ) | $ | (524,784 | ) | $ | (2,707,701 | ) | ||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Options and swaptions purchased | $ | — | $ | — | $ | 4,500 | $ | — | $ | 4,500 | |||||||||||||
Options and swaptions written | — | — | 51,153 | — | 51,153 | ||||||||||||||||||
Futures contracts | (179,206 | ) | — | — | — | (179,206 | ) | ||||||||||||||||
Swap agreements | — | — | 18,267 | — | 18,267 | ||||||||||||||||||
Forward foreign currency contracts | — | 15,093 | — | — | 15,093 | ||||||||||||||||||
Net change in appreciation (depreciation) | $ | (179,206 | ) | $ | 15,093 | $ | 73,920 | $ | — | $ | (90,193 | ) |
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 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.
149
The UBS Funds
Notes to financial statements
At June 30, 2020, 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 | |||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities2 | $ | 1,123,788 | $ | (1,078,279 | ) | ||||||
Derivatives not subject to a MNA or similar agreements | (239,261 | ) | 205,587 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 884,527 | $ | (872,692 | ) |
The following tables present the Fund's derivative assets and liabilities subject to MNA by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received1 | Net amount of assets | |||||||||||||||
BB | $ | 21,604 | $ | (8,339 | ) | $ | — | $ | 13,265 | ||||||||||
BOA | 861 | (861 | ) | — | — | ||||||||||||||
CITI | 7,217 | (7,217 | ) | — | — | ||||||||||||||
GSI | 61,418 | (5,485 | ) | — | 55,933 | ||||||||||||||
HSBC | 46,241 | — | — | 46,241 | |||||||||||||||
JPMCB | 59,709 | (23,708 | ) | — | 36,001 | ||||||||||||||
MSCI | 112,139 | — | — | 112,139 | |||||||||||||||
SSC | 575,338 | (575,338 | ) | — | — | ||||||||||||||
Total | $ | 884,527 | $ | (620,948 | ) | $ | — | $ | 263,579 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged1 | Net amount of liabilities | |||||||||||||||
BB | $ | (8,339 | ) | $ | 8,339 | $ | — | $ | — | ||||||||||
BOA | (2,823 | ) | 861 | — | (1,962 | ) | |||||||||||||
CIBC | (1,939 | ) | — | — | (1,939 | ) | |||||||||||||
CITI | (23,879 | ) | 7,217 | — | (16,662 | ) | |||||||||||||
GSI | (5,485 | ) | 5,485 | — | — | ||||||||||||||
JPMCB | (23,708 | ) | 23,708 | — | — | ||||||||||||||
SSC | (806,519 | ) | 575,338 | — | (231,181 | ) | |||||||||||||
Total | $ | (872,692 | ) | $ | 620,948 | $ | — | $ | (251,744 | ) |
Table footnotes begin on page 152.
UBS Global Allocation Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities2 | $ | 950,271 | $ | (3,280,059 | ) | ||||||
Derivatives not subject to a MNA or similar agreements | (613,899 | ) | 1,027,706 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 336,372 | $ | (2,252,353 | ) |
150
The UBS Funds
Notes to financial statements
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received1 | Net amount of assets | |||||||||||||||
BOA | $ | 3,700 | $ | (3,700 | ) | $ | — | $ | — | ||||||||||
CITI | 7,912 | (7,912 | ) | — | — | ||||||||||||||
JPMCB | 39,418 | (39,418 | ) | — | — | ||||||||||||||
MSCI | 174,491 | (15,661 | ) | — | 158,830 | ||||||||||||||
SSC | 110,851 | (110,851 | ) | — | — | ||||||||||||||
Total | $ | 336,372 | $ | (177,542 | ) | $ | — | $ | 158,830 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged1 | Net amount of liabilities | |||||||||||||||
BB | $ | (3,487 | ) | $ | — | $ | 3,487 | $ | — | ||||||||||
BOA | (96,953 | ) | 3,700 | — | (93,253 | ) | |||||||||||||
CITI | (153,555 | ) | 7,912 | — | (145,643 | ) | |||||||||||||
HSBC | (4,798 | ) | — | — | (4,798 | ) | |||||||||||||
JPMCB | (1,411,925 | ) | 39,418 | — | (1,372,507 | ) | |||||||||||||
MSCI | (15,661 | ) | 15,661 | — | — | ||||||||||||||
SSC | (565,974 | ) | 110,851 | — | (455,123 | ) | |||||||||||||
Total | $ | (2,252,353 | ) | $ | 177,542 | $ | 3,487 | $ | (2,071,324 | ) |
Table footnotes begin on page 152.
UBS Total Return Bond Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities2 | $ | 13,759 | $ | (24,774 | ) | ||||||
Derivatives not subject to a MNA or similar agreements | (12,345 | ) | 24,774 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 1,414 | $ | — |
151
The UBS Funds
Notes to financial statements
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received1 | Net amount of assets | |||||||||||||||
BOA | $ | 286 | $ | — | $ | — | $ | 286 | |||||||||||
JPMCB | 560 | — | — | 560 | |||||||||||||||
MSCI | 568 | — | — | 568 | |||||||||||||||
Total | $ | 1,414 | $ | — | $ | — | $ | 1,414 |
1 In some instances, the actual collateral received and/or pledged may be more than the amount shown and may be comprised of cash collateral, non-cash collateral or combination of both.
2 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.
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 |
152
The UBS Funds
Notes to financial statements
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 28, 2020. The fee waiver and/or expense reimbursement for UBS International Sustainable Equity Fund is irrevocable. Investment advisory fees, including the dollar amount waived or reimbursed, for the period ended June 30, 2020 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 | % | — | $ | 22,681 | $ | 357,558 | $ | (273,391 | ) | $ | — | |||||||||||||||||
UBS Global Allocation Fund | 1.20 | 0.95 | — | 60,194 | 1,983,475 | (512,393 | ) | — | |||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund1 | — | 1.00 | 0.40 | % | 40,681 | 2,919,939 | (2,309,304 | ) | — | ||||||||||||||||||||||
UBS Engage For Impact Fund | — | 0.85 | — | (63,290 | ) | 156,354 | (295,800 | ) | — | ||||||||||||||||||||||
UBS International Sustainable Equity Fund | 1.25 | 1.00 | — | 65,038 | 1,493,352 | (225,685 | ) | — | |||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.24 | 0.99 | — | 22,159 | 961,153 | (349,640 | ) | — | |||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.95 | 0.70 | — | (43,493 | ) | 201,761 | (286,424 | ) | — | ||||||||||||||||||||||
UBS Municipal Bond Fund | 0.65 | 0.40 | — | 5,065 | 427,926 | (365,879 | ) | — | |||||||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 0.25 | — | (105,930 | ) | 54,548 | (296,902 | ) | — | ||||||||||||||||||||||
UBS Total Return Bond Fund | 0.75 | 0.50 | — | (49,948 | ) | 191,887 | (338,774 | ) | — |
1 Expense cap for UBS Emerging Markets Equity Opportunity Fund Class P became effective October 30, 2019. Prior to October 30, 2019, expense cap was 1.15%.
For UBS Emerging Markets Equity Opportunity Fund Class P2, the Advisor has entered into a written agreement pursuant to which the Advisor has agreed to waive its management fee. For the year ended June 30, 2020, the advisory fees waived were $2,180,196. This waiver is included within the fees waived/expenses reimbursed amount disclosed in the table above.
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, 2020 are subject to repayment through June 30, 2023.
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, 2020 are subject to repayment through June 30, 2023.
153
The UBS Funds
Notes to financial statements
At June 30, 2020, 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, 2021 | Expires June 30, 2022 | Expires June 30, 2023 | |||||||||||||||
UBS Dynamic Alpha Fund—Class A | $ | 512,299 | $ | 131,826 | $ | 216,606 | $ | 163,867 | |||||||||||
UBS Dynamic Alpha Fund—Class P | 486,877 | 217,649 | 159,704 | 109,524 | |||||||||||||||
UBS Global Allocation Fund—Class A | 1,157,354 | 350,483 | 397,509 | 409,362 | |||||||||||||||
UBS Global Allocation Fund—Class P | 342,359 | 129,591 | 109,737 | 103,031 | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P | 132,054 | — | 2,9461 | 129,108 | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P2 | 178,611 | 68,961 | 109,650 | — | |||||||||||||||
UBS Engage For Impact Fund—Class P | 533,024 | — | 237,2242 | 295,800 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 275,626 | 111,537 | 83,376 | 80,713 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class P | 826,714 | 270,691 | 287,096 | 268,927 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class A | 374,694 | 125,718 | 133,325 | 115,651 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class P | 559,198 | 189,607 | 198,818 | 170,773 | |||||||||||||||
UBS Municipal Bond Fund—Class A | 145,541 | 50,025 | 50,814 | 44,702 | |||||||||||||||
UBS Municipal Bond Fund—Class P | 1,135,320 | 420,099 | 394,044 | 321,177 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund—Class P | 538,612 | — | 241,7102 | 296,902 | |||||||||||||||
UBS Total Return Bond Fund—Class A | 8,581 | 278 | 3,032 | 5,271 | |||||||||||||||
UBS Total Return Bond Fund—Class P | 1,071,637 | 367,169 | 370,965 | 333,503 |
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.
For UBS Emerging Markets Equity Opportunity Fund Class P2, the Advisor has entered into a written agreement pursuant to which the Advisor has agreed to waive its retained administration fees. For the year ended June 30, 2020, the administration fees waived were 136,602.
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, 2020, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Dynamic Alpha Fund | $ | 2,207 | $ | 31,549 | |||||||
UBS Global Allocation Fund | 14,031 | 185,951 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 11,074 | 244,984 | |||||||||
UBS Engage For Impact Fund | 1,603 | 15,635 | |||||||||
UBS International Sustainable Equity Fund | 12,927 | 140,002 | |||||||||
UBS U.S. Small Cap Growth Fund | 6,971 | 84,808 | |||||||||
UBS U.S. Sustainable Equity Fund | 1,551 | 21,617 | |||||||||
UBS Municipal Bond Fund | 7,213 | 80,236 | |||||||||
UBS Sustainable Development Bank Bond Fund | 2,296 | 27,274 | |||||||||
UBS Total Return Bond Fund | 2,313 | 28,783 |
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, 2020 have been included near the end of each Fund's Portfolio of investments.
154
The UBS Funds
Notes to financial statements
During the period ended June 30, 2020, 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 | $ | 90 | |||||
UBS Emerging Markets Equity Opportunity Fund | 25,277 | ||||||
UBS Engage For Impact Fund | 681 | ||||||
UBS International Sustainable Equity Fund | 3,529 |
During the year ended June 30, 2020, the U.S. Sustainable Equity Fund engaged in a sale transaction with a fund that has a common investment adviser, UBS AM. This interfund sale transaction was effected in compliance with Rule 17a-7 under the 1940 Act. The proceeds from the sale were $650,299 and the net realized loss recognized was $264,729.
During the year ended, June 30, 2020, some of the Funds engaged in purchase and sale transactions where an affiliate was underwriter. In such cases, the affiliate underwriter was not compensated and each trade was approved by the board.
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 shares. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A 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 | ||||||
UBS Dynamic Alpha Fund | 0.25 | % | |||||
UBS Global Allocation Fund | 0.25 | ||||||
UBS Engage For Impact Fund | 0.25 | ||||||
UBS International Sustainable Equity Fund | 0.25 | ||||||
UBS U.S. Small Cap Growth Fund | 0.25 | ||||||
UBS U.S. Sustainable Equity Fund | 0.25 | ||||||
UBS Municipal Bond Fund | 0.25 | ||||||
UBS Sustainable Development Bank Bond Fund | 0.10 | ||||||
UBS Total Return Bond Fund | 0.25 |
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, 2020, certain Funds owed UBS AM (US) service and distribution fees, and for the period ended June 30, 2020, 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 | $ | 4,367 | $ | 389 | |||||||
UBS Global Allocation Fund—Class A | 35,346 | 4,323 | |||||||||
UBS International Sustainable Equity Fund—Class A | — | 12,854 | |||||||||
UBS U.S. Small Cap Growth Fund—Class A | 4,450 | 7,779 | |||||||||
UBS U.S. Sustainable Equity Fund—Class A | 4,985 | 12,220 | |||||||||
UBS Municipal Bond Fund—Class A | 2,474 | 5,004 | |||||||||
UBS Total Return Bond Fund—Class A | 125 | 1,435 |
155
The UBS Funds
Notes to financial statements
Transfer agency and related services fees
UBS Financial Services Inc. provides certain services to the Funds pursuant to a delegation of authority from BNY Mellon Investment Servicing (US) Inc. ("BNY Mellon"), the Funds' transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the period ended June 30, 2020, 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 | $ | 20,285 | |||||
UBS Global Allocation Fund | 66,937 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 23,981 | ||||||
UBS Engage For Impact Fund | 4,107 | ||||||
UBS International Sustainable Equity Fund | 11,994 | ||||||
UBS US Small Cap Growth Fund | 4,567 | ||||||
UBS US Sustainable Equity Fund | 2,912 | ||||||
UBS Municipal Bond Fund | 11,097 | ||||||
UBS Sustainable Dev Bank Bond Fund | 4,422 | ||||||
UBS Total Return Bond Fund | 1,120 |
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. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, U.S. 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 the Fund's Portfolio of investments. State Street Bank and Trust Company serves as the Fund's lending agent.
At June 30, 2020, the following Funds had securities on loan at value, cash collateral and non-cash collateral as follows:
Fund | Value of securities on loan | Cash collateral | Non-cash collateral* | Total collateral | Security types held as non-cash collateral | ||||||||||||||||||
UBS Dynamic Alpha Fund | $ | 321,771 | $ | 328,563 | $ | — | $ | 328,563 | |||||||||||||||
UBS Global Allocation Fund | 44,018,792 | 44,341,867 | 690,612 | 45,032,479 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 10,451,860 | 9,804,566 | 977,073 | 10,781,639 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS Engage For Impact Fund | 793,401 | 508,613 | 302,014 | 810,627 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS International Sustainable Equity Fund | 9,550,941 | — | 10,058,325 | 10,058,325 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 12,246,830 | 6,212,859 | 6,299,891 | 12,512,750 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 45,146 | — | 46,073 | 46,073 | U.S. Treasury Notes and U.S. Treasury Bills |
156
The UBS Funds
Notes to financial statements
Fund | Value of securities on loan | Cash collateral | Non-cash collateral* | Total collateral | Security types held as non-cash collateral | ||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | $ | 787,611 | $ | 804,293 | $ | — | $ | 804,293 | |||||||||||||||
UBS Total Return Bond Fund | 1,168,693 | 1,087,083 | 105,916 | 1,192,999 | U.S. Treasury Notes and U.S. 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, this collateral is excluded from the Statement of assets and liabilities.
The table below represents the disaggregation at June 30, 2020 of the gross amount of recognized liabilities for securities lending transactions. As the securities loaned are subject to termination by the Funds or the borrower at any time, the remaining contractual maturities of the transactions presented below are considered to be overnight and continuous.
Type of securities loaned | Total gross amount of recognized | ||||||||||||||
Fund | Equity securities | Corporate bonds | liabilities for securities lending transactions | ||||||||||||
UBS Dynamic Alpha Fund | $ | — | $ | 328,563 | $ | 328,563 | |||||||||
UBS Global Allocation Fund | 44,341,867 | — | 44,341,867 | ||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 9,804,566 | — | 9,804,566 | ||||||||||||
UBS Engage For Impact Fund | 508,613 | — | 508,613 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 6,212,859 | — | 6,212,859 | ||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 804,293 | 804,293 | ||||||||||||
UBS Total Return Bond Fund | — | 1,087,083 | 1,087,083 |
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, 2020, the following Funds had borrowings as follows:
Fund | Average daily amount of borrowing outstanding | Days outstanding | Interest expense | Weighted average annualized interest rate | |||||||||||||||
UBS International Sustainable Equity Fund | $ | 2,840,398 | 2 | $ | 316 | 2.000 | % | ||||||||||||
UBS U.S. Small Cap Growth Fund | 3,289,315 | 1 | 247 | 2.699 | |||||||||||||||
UBS U.S. Sustainable Equity Fund | 574,177 | 4 | 95 | 1.460 | |||||||||||||||
UBS Municipal Bond Fund | 444,033 | 8 | 196 | 1.983 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund | 5,226,184 | 1 | 404 | 2.785 |
157
The UBS Funds
Notes to financial statements
Commission recapture program
Certain Funds participate in a brokerage commission recapture program. These Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. For the period ended June 30, 2020, the following Funds recorded recaptured commissions which are reflected in the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS Global Allocation Fund | $ | 2,312 | |||||
UBS U.S. Small Cap Growth Fund | 18,741 | ||||||
UBS U.S. Sustainable Equity Fund | 1,923 |
Change in accounting principle
In March 2017, the Financial Accounting Standards Board Accounting Standards Update 2017-08 ("ASU 2017-08"), "Receivables-Nonrefundable fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities." ASU 2017-08 changed the amortization period for certain callable debt securities held at a premium. Specifically, it required the premium to be amortized to the earliest call date. The Funds have adopted an applied ASU 2017-08 on a modified retrospective basis through a cumulative-effect adjustment as of the beginning of the period of adoption. As a result of the adoption of ASU 2017-08, as of July 1, 2019, the amortized cost basis of investments was reduced and the unrealized appreciation (depreciation) of investments was increased. The adoption of ASU 2017-08 had no impact on beginning net assets, the current period results from operations, or any prior period information presented in the financial statements.
The table below details the adjustments explained above. Funds not in the table were not impacted by ASU 2017-08.
Fund | Amount of cumulative-effect adjustment | ||||||
UBS Dynamic Alpha Fund | $ | 12 |
Purchases and sales of securities
For the period ended June 30, 2020, aggregate purchases and sales of portfolio securities, excluding short-term securities, were as follows:
Fund | Purchases | Sales | |||||||||
UBS Dynamic Alpha Fund | $ | 12,735,057 | $ | 17,285,456 | |||||||
UBS Global Allocation Fund | 263,812,148 | 244,170,324 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 387,791,986 | 160,697,787 | |||||||||
UBS Engage For Impact Fund | 18,661,819 | 8,704,807 | |||||||||
UBS International Sustainable Equity Fund | 144,087,107 | 74,877,025 | |||||||||
UBS U.S. Small Cap Growth Fund | 87,005,296 | 103,489,584 | |||||||||
UBS U.S. Sustainable Equity Fund | 50,033,917 | 53,977,171 | |||||||||
UBS Municipal Bond Fund | 39,887,282 | 23,279,059 | |||||||||
UBS Sustainable Development Bank Bond Fund | 37,791,354 | 28,037,678 | |||||||||
UBS Total Return Bond Fund | 78,262,716 | 80,408,137 |
158
The UBS Funds
Notes to financial statements
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, 2020 were as follows:
UBS Dynamic Alpha Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 14,558 | $ | 88,921 | 159,175 | $ | 999,053 | |||||||||||||
Shares repurchased | (1,340,311 | ) | (8,252,007 | ) | (925,017 | ) | (5,838,808 | ) | |||||||||||
Dividends reinvested | 163,909 | 1,026,069 | 125,536 | 803,427 | |||||||||||||||
Net increase (decrease) | (1,161,844 | ) | $ | (7,137,017 | ) | (640,306 | ) | $ | (4,036,328 | ) |
UBS Global Allocation Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 81,989 | $ | 952,814 | 506,975 | $ | 6,539,760 | |||||||||||||
Shares repurchased | (3,008,442 | ) | (36,131,245 | ) | (1,073,824 | ) | (13,097,446 | ) | |||||||||||
Dividends reinvested | 991,416 | 12,293,553 | 305,596 | 3,881,075 | |||||||||||||||
Net increase (decrease) | (1,935,037 | ) | $ | (22,884,878 | ) | (261,253 | ) | $ | (2,676,611 | ) |
UBS Emerging Markets Equity Opportunity Fund
Class P | Class P2 | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 13,167,373 | $ | 117,978,657 | 26,872,447 | $ | 226,512,613 | |||||||||||||
Shares repurchased | (6,596,098 | ) | (54,624,088 | ) | (6,939,570 | ) | (59,451,868 | ) | |||||||||||
Dividends reinvested | 181,865 | 1,793,187 | 410,790 | 4,066,820 | |||||||||||||||
Net increase (decrease) | 6,753,140 | $ | 65,147,756 | 20,343,667 | $ | 171,127,565 |
UBS Engage For Impact Fund
Class P | |||||||||||
Shares | Amount | ||||||||||
Shares sold | 1,525,300 | $ | 15,119,169 | ||||||||
Shares repurchased | (455,577 | ) | (4,654,704 | ) | |||||||
Dividends reinvested | 46,551 | 521,370 | |||||||||
Net increase (decrease) | 1,116,274 | $ | 10,985,835 |
UBS International Sustainable Equity Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 95,585 | $ | 916,778 | 13,137,692 | $ | 124,644,094 | |||||||||||||
Shares repurchased | (308,578 | ) | (2,714,895 | ) | (6,947,101 | ) | (66,031,812 | ) | |||||||||||
Dividends reinvested | 10,737 | 112,848 | 244,975 | 2,579,591 | |||||||||||||||
Net increase (decrease) | (202,256 | ) | $ | (1,685,269 | ) | 6,435,566 | $ | 61,191,873 |
159
The UBS Funds
Notes to financial statements
UBS U.S. Small Cap Growth Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 151,607 | $ | 2,744,880 | 936,317 | $ | 19,004,079 | |||||||||||||
Shares repurchased | (415,731 | ) | (7,446,303 | ) | (1,515,406 | ) | (29,890,534 | ) | |||||||||||
Dividends reinvested | 84,387 | 1,541,748 | 307,310 | 6,352,105 | |||||||||||||||
Net increase (decrease) | (179,737 | ) | $ | (3,159,675 | ) | (271,779 | ) | $ | (4,534,350 | ) |
UBS U.S. Sustainable Equity Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 15,167 | $ | 549,525 | 63,314 | $ | 2,386,113 | |||||||||||||
Shares repurchased | (77,263 | ) | (2,124,521 | ) | (156,987 | ) | (5,454,080 | ) | |||||||||||
Dividends reinvested | 14,016 | 544,385 | 23,075 | 899,481 | |||||||||||||||
Net increase (decrease) | (48,080 | ) | $ | (1,030,611 | ) | (70,598 | ) | $ | (2,168,486 | ) |
UBS Municipal Bond Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 93,589 | $ | 1,003,271 | 3,484,559 | $ | 37,321,400 | |||||||||||||
Shares repurchased | (164,173 | ) | (1,760,867 | ) | (2,199,640 | ) | (23,502,061 | ) | |||||||||||
Dividends reinvested | 16,166 | 172,512 | 126,210 | 1,346,144 | |||||||||||||||
Net increase (decrease) | (54,418 | ) | $ | (585,084 | ) | 1,411,129 | $ | 15,165,483 |
UBS Sustainable Development Bank Bond Fund
Class P | |||||||||||
Shares | Amount | ||||||||||
Shares sold | 3,366,710 | $ | 36,308,770 | ||||||||
Shares repurchased | (2,460,300 | ) | (26,819,184 | ) | |||||||
Dividends reinvested | 57,868 | 621,222 | |||||||||
Net increase (decrease) | 964,278 | $ | 10,110,808 |
UBS Total Return Bond Fund
Class A | Class P | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Shares sold | 10,522 | $ | 159,769 | 18,212 | $ | 283,305 | |||||||||||||
Shares repurchased | (2,026 | ) | (31,558 | ) | (280,696 | ) | (4,297,361 | ) | |||||||||||
Dividends reinvested | 693 | 10,611 | 50,157 | 767,787 | |||||||||||||||
Net increase (decrease) | 9,189 | $ | 138,822 | (212,327 | ) | $ | (3,246,269 | ) |
160
The UBS Funds
Notes to financial statements
For the period ended June 30, 2019, 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 | 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 increase (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 | ) |
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 (decrease) | 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 (decrease) | 1,471,844 | $ | 14,933,815 |
* Commencement of operations on October 24, 2018.
161
The UBS Funds
Notes to financial statements
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 | ) |
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 (decrease) | 2,386,288 | $ | 24,144,329 |
* Commencement of operations on October 24, 2018.
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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 | 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 | ) |
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, 2020 and June 30, 2019 were as follows:
2020 | |||||||||||||||||||
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 | $ | — | $ | 2,063,702 | $ | — | $ | 2,063,702 | |||||||||||
UBS Global Allocation Fund | — | 7,143,270 | 10,424,363 | 17,567,633 | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 8,643,917 | — | 8,643,917 | |||||||||||||||
UBS Engage For Impact Fund | — | 567,242 | — | 567,242 | |||||||||||||||
UBS International Sustainable Equity Fund | — | 2,946,538 | — | 2,946,538 | |||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 364,427 | 7,891,689 | 8,256,116 | |||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 1,319,824 | 207,718 | 1,527,542 | |||||||||||||||
UBS Municipal Bond Fund | 2,008,906 | 2,076 | — | 2,010,982 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 824,383 | — | 824,383 | |||||||||||||||
UBS Total Return Bond Fund | — | 1,002,242 | — | 1,002,242 | |||||||||||||||
2019 | |||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from long term realized 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 |
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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, 2020 were as follows:
Portfolio | Cost of investments | Gross unrealized appreciation | Gross unrealized depreciation | Net unrealized appreciation (depreciation) on investments | |||||||||||||||
UBS Dynamic Alpha Fund | $ | 43,349,744 | $ | 558,545 | $ | (13,025,713 | ) | $ | (12,467,168 | ) | |||||||||
UBS Global Allocation Fund | 262,999,986 | 16,419,888 | (7,521,159 | ) | 8,898,728 | ||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 456,428,357 | 44,745,991 | (19,659,328 | ) | 25,086,663 | ||||||||||||||
UBS Engage For Impact Fund | 26,485,094 | 2,346,541 | (2,297,645 | ) | 48,896 | ||||||||||||||
UBS International Sustainable Equity Fund | 210,556,686 | 16,495,867 | (14,120,867 | ) | 2,375,000 | ||||||||||||||
UBS U.S. Small Cap Growth Fund | 99,495,439 | 28,371,786 | (5,458,414 | ) | 22,913,372 | ||||||||||||||
UBS U.S. Sustainable Equity Fund | 24,833,241 | 1,898,767 | (1,319,130 | ) | 579,637 | ||||||||||||||
UBS Municipal Bond Fund | 112,883,176 | 5,374,643 | (18,758 | ) | 5,355,885 | ||||||||||||||
UBS Sustainable Development Bank Bond Fund | 35,861,070 | 2,110,935 | (175 | ) | 2,110,760 | ||||||||||||||
UBS Total Return Bond Fund | 39,103,775 | 1,440,380 | (777,322 | ) | 663,058 |
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, 2020, 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 | $ | — | $ | — | $ | — | $ | (32,471,350 | ) | $ | (12,465,469 | ) | $ | — | $ | (44,936,819 | ) | ||||||||||||||
UBS Global Allocation Fund | — | 1,409,232 | 2,666,863 | (245,304 | ) | 8,862,312 | — | 12,693,103 | |||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 4,624,192 | — | (12,454,148 | ) | 25,050,267 | (22,709 | ) | 17,197,602 | ||||||||||||||||||||||
UBS Engage For Impact Fund | — | 64,407 | 235,656 | — | 53,223 | (31,836 | ) | 321,450 | |||||||||||||||||||||||
UBS International Sustainable Equity Fund | — | 3,529,710 | — | (8,595,504 | ) | 2,379,996 | — | (2,685,798 | ) | ||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 504,305 | 9,865,752 | — | 22,913,372 | — | 33,283,429 | ||||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 188,715 | — | (70,560 | ) | 579,637 | — | 697,792 | |||||||||||||||||||||||
UBS Municipal Bond Fund | 2,076 | — | 16,263 | — | 5,355,885 | (30,723 | ) | 5,343,501 | |||||||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 559,610 | 508,500 | — | 2,110,760 | (20,014 | ) | 3,158,856 | |||||||||||||||||||||||
UBS Total Return Bond Fund | — | 154,319 | — | (2,127,945 | ) | 661,660 | — | (1,311,966 | ) |
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.
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The UBS Funds
Notes to financial statements
At June 30, 2020, the following Funds had 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 | $ | 18,442,082 | $ | 13,203,287 | $ | 31,645,369 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 12,454,148 | — | 12,454,148 | ||||||||||||
UBS International Sustainable Equity Fund | 6,111,171 | 2,484,333 | 8,595,504 | ||||||||||||
UBS U.S. Sustainable Equity Fund | — | 70,560 | 70,560 | ||||||||||||
UBS Total Return Bond Fund | 1,559,190 | 559,699 | 2,118,889 |
During the fiscal year ended June 30, 2020, the following Funds had capital loss carryforwards utilized:
Fund | Capital loss carryforwards utilized | ||||||
UBS Total Return Bond Fund | $ | 1,449,981 | |||||
UBS Municipal Bond Fund | 972,033 |
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, 2020, the following Funds incurred and elected to defer qualified late year losses of the following:
Post October capital loss | |||||||||||||||
Fund | Late year ordinary loss | Short-term losses | Long-term losses | ||||||||||||
UBS Dynamic Alpha Fund | $ | (825,980 | ) | $ | — | $ | — |
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, 2020, 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, 2020, the Funds did not incur any interest or penalties.
Under the applicable foreign tax laws, gains on certain securities held in certain foreign countries may be subject to taxes that will be paid by the Funds.
Each of the tax years in the four year fiscal period ended June 30, 2020 or since inception in the case of UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS Municipal Bond Fund, and UBS Sustainable Development Bank Bond Fund remains subject to examination by the Internal Revenue Service and state taxing authorities.
165
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, 2020, 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, 2020, 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 UBS Municipal Bond Fund | For the year ended June 30, 2020 | For each of the two years in the period ended June 30, 2020 | For each of the five years in the period ended June 30, 2020 | ||||||||||||
UBS Total Return Bond Fund | For the year ended June 30, 2020 | For each of the two years in the period ended June 30, 2020 | For each of the four years in the period ended June 30, 2020 and the nine months ended June 30, 2016 | ||||||||||||
UBS Emerging Markets Equity Opportunity Fund | For the year ended June 30, 2020 | For each of the two years in the period ended June 30, 2020 | For each of the two years in the period ended June 30, 2020 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 year ended June 30, 2020For the year ended June 30, 2020 and 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 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,
166
The UBS Funds
Report of independent registered public accounting firm (concluded)
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, 2020, 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 28, 2020
167
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 Global Allocation Fund | $ | — | $ | 10,424,363 | $ | — | |||||||||
UBS Emerging Markets Equity Opportunity Fund | — | — | 839,027 | ||||||||||||
UBS Engage For Impact Fund | 56,864 | — | 27,067 | ||||||||||||
UBS International Sustainable Equity Fund | — | — | 347,680 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 98,449 | 7,891,689 | — | ||||||||||||
UBS U.S. Sustainable Equity Fund | 320,090 | 207,718 | — | ||||||||||||
UBS Total Return Bond Fund | 180 | — | — |
Also, for the fiscal year ended June 30, 2020, the foreign source income for information reporting purposes for UBS Emerging Markets Equity Opportunity Fund was $9,575,367, for UBS Engage For Impact Fund was $180,015 and for UBS International Sustainable Equity Fund was $3,774,611.
For the taxable year ended June 30, 2020, 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 Global Allocation Fund | $ | 328 | |||||
UBS Emerging Markets Equity Opportunity Fund | 5,611,650 | ||||||
UBS Engage For Impact Fund | 320,893 | ||||||
UBS International Sustainable Equity Fund | 2,837,873 | ||||||
UBS U.S. Small Cap Growth Fund | 101,661 | ||||||
UBS U.S. Sustainable Equity Fund | 364,433 | ||||||
UBS Total Return Bond Fund | 180 |
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 2020. 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 2021. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in each of the Funds.
168
The UBS Funds
General information (unaudited)
Quarterly portfolio schedule
The Funds filed its complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year as an exhibit to its 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 such portfolio holdings schedules 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).
Liquidity Risk Management Program
Pursuant to Rule 22e-4 under the 1940 Act, The UBS Funds (the "Trust") has adopted a liquidity risk management program (the "program") with respect to each of its series (each, a "Fund"). UBS Asset Management (Americas) Inc. ("UBS AM") has been designated by the Trust's Board to administer the program, and UBS AM has delegated the responsibility to carry out certain functions described in the program to an internal group which is comprised of representatives of various investment and non-investment areas of the firm. Liquidity risk is defined as the risk that a Fund could not meet redemption requests without significant dilution of remaining shareholders' interests in that Fund. The program is intended to provide a framework for the assessment, management and periodic review of each Fund's liquidity risks, taking into consideration, as applicable, the Fund's investment strategy and liquidity of portfolio investments during both normal and reasonably foreseeable stressed conditions; short-term and long-term cash flow projections during both normal and reasonably foreseeable stressed conditions; and holdings of cash and cash equivalents, as well as borrowing arrangements and other funding sources. The provisions of the program shall be administered for each Fund in a manner that is appropriately tailored to reflect the Fund's particular liquidity risks. UBS AM's process of determining the degree of liquidity of a Fund's investments is supported by a third-party liquidity assessment vendor. In May 2020, UBS AM provided the Board with a report addressing the operation of the program and assessing its adequacy and effectiveness of implementation (the "report"). The report covered the period from December 1, 2018 through May 1, 2020.
UBS AM's report concluded that the program was reasonably designed to assess and manage each Fund's liquidity risk, including during periods of market volatility and net redemptions. UBS AM reported that the program, including any applicable highly liquid investment minimum ("HLIM"), operated adequately and that the implementation of the program, including any applicable HLIM, was effective to manage each Fund's liquidity risk.
There can be no assurance that the program will achieve its objectives in the future. Please refer to a Fund's prospectus for more information regarding a Fund's exposure to liquidity risk and other risks to which an investment in a Fund may be subject.
169
The UBS Funds
Board approval of investment advisory agreements
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 4 and 5, 2020 (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, UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, and UBS Sustainable Development Bank Bond Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process on May 28, 2020 and June 4, 2020 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 Independent Trustees also reviewed information provided in response to their request for additional information from the Advisor in connection with the Advisory Agreements. 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. As part of the Board's review of these factors, the Board received and considered information on the impact of COVID-19 on the Funds and the Funds' performance and operations.
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
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The UBS Funds
Board approval of investment advisory agreements (continued)
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 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 for the one-year period ended February 29, 2020, the UBS International Sustainable Equity Fund, UBS Total Return Bond Fund, UBS Municipal Bond Fund, and UBS Sustainable Development Bank Bond Fund had appeared in the top performance quintile of their respective performance universe, and the UBS Global Allocation Fund, UBS U.S. Sustainable Equity Fund, and UBS Emerging Markets Equity Opportunity Fund had appeared in the second performance quintile of their respective performance universe. The Board also noted that the UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund, and UBS Engage For Impact Fund appeared in the third performance quintile of their respective performance universe for the one-year period ended February 29, 2020, with each such Fund's annualized total return below the median of its respective performance universe during such period.
At the Board's request, the Advisor further addressed the performance data for the UBS U.S. Small Cap Growth Fund, UBS Engage For Impact Fund, and UBS Dynamic Alpha Fund, each of which had Class P shares' performance ranking below the 50th percentile within its performance universe for the one-year period ended February 29, 2020.
In explaining the performance of the UBS U.S. Small Cap Growth Fund for the one-year period ended February 29, 2020, the Advisor explained that the sell-off in global equity markets due to COVID-19, along with security selection and sector allocation, detracted from the Fund's relative performance versus its performance universe. The Advisor reported that for the year-to-date period through April 30, 2020, the Fund ranked in the 40th percentile within its Lipper category and outperformed its benchmark by 377 basis points.
In discussing the performance of the UBS Engage For Impact Fund for the one-year period ended February 29, 2020, the Advisor explained that security selection and sector allocation detracted from the Fund's relative performance. The Advisor reported that for the year-to-date period through April 30, 2020, the Fund ranked in the 40th percentile within its Lipper category, although it underperformed its benchmark. The Board noted that the Fund had commenced operations on October 24, 2018 and therefore had less than two years of performance.
In next discussing the performance of the UBS Dynamic Alpha Fund for the one-year performance period ended February 29, 2020, the Advisor explained that the main driver of underperformance was the negative impact of the equity market correction in February 2020 due to COVID-19. The Advisor also explained that performance was negatively impacted by relative value trades as well as currency allocation decisions. The Board noted the quarterly progress reports that had been provided at each Board meeting, at the Board's request, during the past year and the Fund's improved performance over the one-year period ended February 29, 2020 as compared to the Fund's
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The UBS Funds
Board approval of investment advisory agreements (continued)
longer term performance. The Advisor reported that the Fund performance had moderately improved for the year-to-date through April 30, 2020.
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, UBS Municipal Bond Fund, and UBS Sustainable Development Bank Bond Fund had a contractual management fee rate 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, UBS Total Return Bond Fund, and UBS Engage For Impact Fund had a contractual management 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 and Emerging Markets Equity Opportunity Fund, was lower than the Broadridge median of the Fund's respective Broadridge expense group. With respect to the Emerging Markets Equity Opportunity Fund, the actual management fee rate was less than two basis points higher than its Broadridge group median. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund had total expenses that were equal to, or lower than, the Broadridge median in its respective Broadridge expense group, except for the UBS Dynamic Alpha Fund, UBS International Sustainable Equity Fund and UBS Total Return Bond Fund. After reviewing the fee and expense information, the Board asked the Advisor to further discuss the fees and expenses of the UBS Dynamic Alpha Fund, UBS International Sustainable Equity Fund and UBS Total Return Bond Fund.
The Advisor first addressed the UBS Dynamic Alpha Fund, which reported total expenses that were higher than the Broadridge peer group median. The Advisor explained that the Fund's total expenses were higher than the Fund's peers due to fixed costs over a small asset base, but noted that total expenses were only four basis points higher than the Broadridge median. The Advisor noted that both the Fund's contractual and actual management fees were competitive with its peers, appearing in the third and first quintile, respectively.
The Advisor and the Board next discussed the management fee and expenses of the UBS International Sustainable Equity Fund, which had contractual management fees, actual management fees and total expenses higher than the Broadridge peer group median. The Advisor noted that the Fund's assets increased by almost 40% year-over-year, thereby reducing the fee waivers and resulting in an increase in current actual management fees. The Advisor reminded the Board that the Fund was subject to an expense cap and that the Fund's total expenses were only 3.1 basis points above the expense group median and remained competitively priced among its peers.
172
The UBS Funds
Board approval of investment advisory agreements (continued)
The Advisor and the Board then considered the management fee and expenses of the UBS Total Return Bond Fund. The Advisor noted that while the Fund's contractual management fee was above the Broadridge peer group median, the Fund's actual management fee was zero due to the expense limitation agreement in place. The Advisor further noted that the Fund's Class P shares' actual management fee ranks in the 1st percentile within its expense peer group. The Advisor also reported that the Fund's Class P shares' actual total expenses were only 1.6 basis points above the expense group median.
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 expense 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 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.
173
The UBS Funds
Board approval of investment advisory agreements (concluded)
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 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; 62 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 15 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; 67 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 15 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 2017). Ms. Smith was also chair (until 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; 84 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 15 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. |
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*; 52 | 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 of UBS Asset Management (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*; 42 | Vice President | Since 2017 | Mr. Dickson is an associate director (since 2015) and tax compliance manager (since 2017) (prior to which he was a product controller (from 2015 to 2017) of product control and investment support 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 2008 through 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**; 62 | Vice President and Assistant Secretary | Since 1999 and 2019, respectively | Mr. Kemper is a managing director (since 2006), Interim Head of Asia Pacific ("APAC") Legal (since March 2020) and Senior Legal Counsel (Since October 2019), prior to which he was Interim Head of Compliance and Operational Risk Control—Americas (since June 2019) 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 2017). | ||||||||||||
Joanne M. Kilkeary*; 52 | 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 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; 41 | President | Since 2018 | Mr. Lasun Is an executive director and head of fund development and management for UBS AM—Americas region (since 2018) (prior to which he was a senior fixed income product specialist from 2007 to 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**; 32 | 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 | ||||||||||||
Frank S. Pluchino*; 60 | Chief Compliance Officer | Since 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 12 investment companies (consisting of 66 portfolios) for which UBS AM or one of its affiliates serves as investment advisor or manager. | ||||||||||||
Eric Sanders**; 54 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel with UBS Business Solutions US LLC (since 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**; 35 | Vice President and Assistant Secretary | Since 2018 | Mr. Stacey is an executive director and associate general counsel with UBS Business Solutions US LLC (since 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**; 59 | Vice President and Secretary | Since 2004 (Vice President) and Since 2019 (Secretary) | Mr. Weller is an executive director (since 2017) and deputy general counsel with UBS Business Solutions US LLC (since 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
(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. |
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: Adela Cepeda. Ms. Cepeda 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, 2020 and June 30, 2019, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $563,572 and $551,886, 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, 2020 and June 30, 2019, 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 $26,046, respectively.
Fees included in the audit-related fees category are those associated with the reading and providing of comments on the 2019 and 2018 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, 2020 and June 30, 2019, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $113,288 and $61,487, 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, 2020 and June 30, 2019, 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, 2020 and June 30, 2019 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, 2020 and June 30, 2019 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, 2020 and June 30, 2019 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, 2020 and June 30, 2019 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, 2020 and June 30, 2019 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, 2020 and June 30, 2019 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, 2020, 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, 2020 and June 30, 2019, the aggregate fees billed by E&Y of $391,074 and $284,773, 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: |
2020 | 2019 | |||||||
Covered Services | $ | 139,334 | $ | 87,533 | ||||
Non-Covered Services | $ | 251,740 | $ | 197,240 |
(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 | |
Igor Lasun | ||
President | ||
Date: | September 8, 2020 |
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 | |
Igor Lasun | ||
President | ||
Date: | September 8, 2020 |
By: | /s/ Joanne M. Kilkeary | |
Joanne M. Kilkeary | ||
Vice President, Treasurer and Principal Accounting Officer | ||
Date: | September 8, 2020 |