UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-06637 | |||||||
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The UBS Funds | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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One North Wacker Drive, Chicago, IL |
| 60606-2807 | ||||||
(Address of principal executive offices) |
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Tammie Lee, Esq. UBS Global Asset Management (Americas) Inc. 1285 Avenue of the Americas New York, NY 10019 | ||||||||
(Name and address of agent for service) | ||||||||
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Copy to: Bruce Leto, Esq. Stradley Ronon Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 | ||||||||
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Registrant’s telephone number, including area code: | 212-821-3000 |
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Date of fiscal year end: | June 30 |
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Date of reporting period: | June 30, 2014 |
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Item 1. Reports to Stockholders.
UBS Fixed
Income Funds
June 30, 2014
The UBS Funds—Fixed Income
Annual Report
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
Fixed Income | |||||||
UBS Core Plus Bond Fund | 5 | ||||||
UBS Emerging Markets Debt Fund | 19 | ||||||
UBS Fixed Income Opportunities Fund | 31 | ||||||
Explanation of expense disclosure | 51 | ||||||
Statement of assets and liabilities | 54 | ||||||
Statement of operations | 58 | ||||||
Statement of changes in net assets | 60 | ||||||
Financial highlights | 62 | ||||||
Notes to financial statements | 68 | ||||||
Report of independent registered public accounting firm | 90 | ||||||
General information | 91 | ||||||
Board approval of investment advisory agreements | 92 | ||||||
Trustee and Officer information | 97 | ||||||
Federal tax information | 103 |
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President's letter
August 14, 2014
Dear Shareholder,
Investors cheered earlier this year as the bull market in US equities turned five years old. It has been a remarkable five years for US equity investors. In the depths of the "Great Recession," on March 9, 2009, the S&P 500 closed at 676.53, but on the same date this year, the index closed at 1,878.04, a gain of 178%. The anniversary of the equity bull market has inspired much reflection among investors, as opposing arguments have formed about the longevity of the market going forward.
Currently, both bullish and bearish investors have compelling arguments to support their positions. The case for a continuation of the bull market rests on expectations of low inflation, continued economic and corporate growth, and rising equity valuations. In this view, further equity market gains will be driven by a low inflationary environment, downward trending unemployment, continued consumer deleveraging and rising confidence, as well as increasing capital expenditures as corporations begin to focus on expansion. Conversely, the case for a market correction rests on assumptions of declining valuations, deteriorating profit margins and earnings disappointments. Those who support this view believe that a market correction could be led by rising interest rates, equity valuations that may appear to be overstretched versus historical averages and profit margins that, while currently above historical levels, may regress back toward their long-term mean. For mutual fund shareholders, however, long-term success will have less to do with how long the equity bull market runs and more with a long-term investment approach that will help achieve their desired outcomes despite the ups and downs of markets.
At UBS Global Asset Management, we are focused on managing funds that achieve our clients' objectives through sustainable investment outcomes. In addition to single-strategy, equity and fixed-income products, we have added funds that utilize innovative diversifiers intended to soften the impact of market swings. These funds diversify risk through strategies that are not bound by benchmarks, are expected often to benefit from both rising and falling security prices, and utilize cost-effective defensive investment strategies. UBS Global Asset Management was among the early leaders to evolve its product offerings with the intention of providing sustainable returns in up and down markets using these strategies. We believe that diversification is paramount to successful investment outcomes, irrespective of market conditions, and we will continue to offer clients products that aim to mitigate downside risk and provide durable returns through both up and down market cycles.
I am pleased to share that the client focus, investment discipline and strength of our firm recently garnered a prestigious accolade from Euromoney magazine. In its July 2014 issue, Euromoney named UBS "Best Global Bank," describing our firm as "a global wealth manager first and foremost, underpinned by a Swiss universal bank and a powerful asset management business...." This award is just one measure of how UBS is succeeding as a business by focusing on meeting clients' needs.
1
President's letter
Whatever the outcome of the current equity bull market, we remain focused on enabling our clients to achieve the outcomes they desire. As we continue to evolve our funds to provide sustainable performance in a variety of market conditions, we rely on our firm's client-oriented culture to guide everything we do. We embrace the responsibility of helping our clients meet their financial objectives and thank you for your continued trust in our skill and commitment to serve you.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. A prospectus or summary prospectus for the funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com.
2
The markets in review
Improving growth in the developed world
After three consecutive years of generally modest growth, the overall US economy contracted in the first quarter of 2014. Looking back, gross domestic product ("GDP") in the US grew at annualized rates of 4.5% and 3.5% during the third and fourth quarters of 2013, respectively. The Commerce Department then reported that first quarter 2014 GDP contracted at a 2.1% annualized rate. This was the first negative reading since the first quarter of 2011 and the downturn was partially attributed to severe winter weather in parts of the country. However, this proved to be a temporary setback for the economy, as GDP growth was 4.0% during the second quarter of 2014.1
The Federal Reserve Board (the "Fed") took a number of actions during the reporting period. In December 2013, the Fed announced that it would begin paring back its monthly asset purchases, stating "Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a [reduced] pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a [reduced] pace of $40 billion per month rather than $45 billion per month." At its meetings in January, March, April and June 2014, the Fed said it would further taper its asset purchases, in each case paring its total purchases a total of $10 billion per month. Beginning in July, it will buy a total of $35 billion per month ($15 billion per month of agency mortgage-backed securities and $20 billion per month of longer-term Treasuries). In the Fed's official statement it stated, "Information received since the Federal Open Market Committee met in April indicates that growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated. Household spending appears to be rising moderately and business fixed investment resumed its advance, while the recovery in the housing sector remained slow."
Growth outside the US generally improved. In its April 2014 World Economic Outlook Update, the International Monetary Fund ("IMF") reported that "Global activity has broadly strengthened and is expected to improve further in 2014-15, with much of the impetus coming from advanced economies." From a regional perspective, the IMF anticipates 2014 growth will be 1.2% in the Eurozone, versus a 0.5% contraction in 2013. Economic activity in Japan is expected to be relatively stable, with growth of 1.4% in 2014, compared with 1.5% in 2013. After decelerating in 2013, the IMF projects that overall growth in emerging market countries will experience an uptick to 4.9% in 2014, versus 4.7% in 2013.
1 Based on the Commerce Department's first estimate announced on July 30, 2014, after the reporting period had ended.
3
The markets in review
The fixed income market performs well
The fixed income market surprised many investors, as it posted positive results during the reporting period as a whole. During the first half of the period, US Treasury yields moved higher and negatively impacted the overall bond market (yields and bond prices move in opposite directions). This was due to a number of factors, including continued economic growth and expectations that the Fed would begin tapering its asset purchase program. However, as discussed, the US economy weakened during the first quarter of 2014, and geopolitical concerns triggered several flights to quality. All told, the yield on the 10-year Treasury fell from 3.04% to 2.53% during the first six months of 2014. The overall US bond market, as measured by the Barclays US Aggregate Index,2 gained 4.37% during the 12 month reporting period and the US taxable spread sectors (non-US Treasury fixed income securities) generated positive absolute returns. Taking on greater risk was often rewarded, as investors looked to generate incremental yield in the low interest rate environment. For example, high yield bonds, as measured by the BofA Merrill Lynch US High Yield Cash Pay Constrained Index3 rose 11.70% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),4 gained 11.05%.
2 The Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed non-convertible, coupon-bearing US dollar denominated below investment grade corporate debt with a term to maturity of at least one year. The index is market capitalization weighted, so that larger bond issuers have a greater effect on the index's return. However, the representation of any single bond issuer is restricted to a maximum of 2% of the total index. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
4
UBS Core Plus Bond Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Core Plus Bond Fund (the "Fund") gained 5.68% (Class A shares returned 0.92% after the deduction of the maximum sales charge), while Class Y shares gained 6.08%. The Fund's benchmark, the Barclays US Aggregate Index (the "Index"), returned 4.37% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 7; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a positive return and outperformed the Index during the reporting period, largely due to sector allocation and issue selection.
The Fund used derivatives during the reporting period. Certain interest rate derivatives were utilized to facilitate specific duration and yield curve strategies. Credit derivatives (such as credit default swaps and options on credit default swaps) were used to implement specific credit-related investment strategies as part of the Fund's sector allocation and security selection. Throughout the period, the Fund engaged in foreign exchange forwards to help implement its active currency positions. Derivatives play a role in the overall portfolio construction process, but are just one of the tools we use to manage the Fund's overall risk exposure and to implement the aforementioned strategies. That said, overall, spread sector1 management was additive to performance, duration and yield curve positioning detracted from performance, and currency management produced mixed results, but on the balance was moderately negative.
Portfolio performance summary2
What worked
• Overall, sector allocation contributed to performance during the reporting period.
– We tactically adjusted the Fund's exposure to investment grade corporate bonds and commercial mortgage-backed securities ("CMBS"). For the majority of the period, we had overweight positions in these sectors, which was beneficial for performance given generally solid demand from investors seeking yield in the low interest rate environment.
• An allocation to high yield corporate bonds was beneficial. The Fund tactically had an out-of-Index exposure to high yield bonds, which benefited performance over the reporting period. High yield corporate bonds were supported by the low default environment and investor demand for income and yield oriented assets.
• Security selection was additive to performance.
– Security selection of investment grade corporate bonds and CMBS contributed to performance.
– Within the investment grade corporate bond sector we generally maintained exposure to select industrial and financial credits, which benefited performance.
1 A spread sector refers to non-government fixed income sectors, such as investment grade or high yield bonds, commercial mortgage-backed securities (CMBS), etc.
2 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Core Plus Bond Fund
What didn't work
• From a currency perspective, our positioning in the euro detracted from results.
– We traded the euro with a bias toward being short. This detracted from results, as the euro strengthened versus the US dollar over the 12 month period.
• Duration positioning in the latter half of the reporting period was negative for results. We generally maintained a short duration bias during the first half of 2014. This was not rewarded, as interest rates fell due to weaker than expected economic data and geopolitical concerns.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
6
UBS Core Plus Bond Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 5.68 | % | 6.14 | % | 2.92 | % | |||||||||
Class C2 | 5.30 | 5.61 | 2.40 | ||||||||||||
Class Y3 | 6.08 | 6.41 | 3.18 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 0.92 | % | 5.18 | % | 2.45 | % | |||||||||
Class C2 | 4.55 | 5.61 | 2.40 | ||||||||||||
Barclays US Aggregate Index4 | 4.37 | % | 4.85 | % | 4.93 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.59% and 0.65%; Class C—2.03% and 1.15%; Class Y—1.21% and 0.40%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 0.64% for Class A shares, 1.14% for Class C shares and 0.39% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.
2 Maximum contingent deferred sales charge for Class C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
3 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
4 The Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
7
UBS Core Plus Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Core Plus Bond Fund Class A and Class Y shares versus the Barclays US Aggregate Index over the 10 years ended June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
8
UBS Core Plus Bond Fund
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
US Treasury Bond, 3.375%, due 05/15/44 | 3.8 | % | |||||
US Treasury Inflation Indexed Notes (TIPS), 0.125%, due 04/15/18 | 2.6 | ||||||
Federal National Mortgage Association Pools, 3.500%, TBA | 2.1 | ||||||
Federal National Mortgage Association Pools, 4.000%, TBA | 1.9 | ||||||
Government National Mortgage Association Pools, 4.000%, TBA | 1.8 | ||||||
Government National Mortgage Association Pools, 4.500%, TBA | 1.7 | ||||||
Federal National Mortgage Association Pools, 3.000%, TBA | 1.6 | ||||||
Federal National Mortgage Association Pools, #AE9202, 4.000%, due 09/01/41 | 1.5 | ||||||
Federal National Mortgage Association Pools, #AT2725, 3.000%, due 05/01/43 | 1.4 | ||||||
Federal National Mortgage Association Pools, 5.000%, TBA | 1.3 | ||||||
Total | 19.7 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Bonds | |||||||
Corporate bonds | |||||||
Banks | 5.21 | % | |||||
Beverages | 0.26 | ||||||
Biotechnology | 0.17 | ||||||
Building products | 0.08 | ||||||
Capital markets | 1.75 | ||||||
Chemicals | 0.63 | ||||||
Commercial services & supplies | 0.30 | ||||||
Communications equipment | 0.45 | ||||||
Consumer finance | 1.10 | ||||||
Diversified financial services | 0.22 | ||||||
Diversified telecommunication services | 0.94 | ||||||
Electric utilities | 0.72 | ||||||
Electronic equipment, instruments & components | 0.28 | ||||||
Energy equipment & services | 0.54 | ||||||
Food & staples retailing | 0.17 | ||||||
Food products | 0.34 | ||||||
Health care providers & services | 0.20 | ||||||
Hotels, restaurants & leisure | 0.22 | ||||||
Independent power and renewable electricity producers | 0.04 | ||||||
Insurance | 2.26 | ||||||
IT services | 0.30 | ||||||
Media | 1.44 | ||||||
Metals & mining | 1.77 | ||||||
Multi-utilities | 0.33 | ||||||
Oil, gas & consumable fuels | 6.97 | ||||||
Pharmaceuticals | 0.60 | ||||||
Real estate investment trust (REIT) | 0.79 | ||||||
Road & rail | 0.79 | ||||||
Semiconductors & semiconductor equipment | 0.16 | ||||||
Tobacco | 0.65 | ||||||
Trading companies & distributors | 0.35 | ||||||
Wireless telecommunication services | 0.60 | ||||||
Total corporate bonds | 30.63 | % | |||||
Asset-backed securities | 1.59 | ||||||
Commercial mortgage-backed securities | 9.08 | ||||||
Mortgage & agency debt securities | 31.97 | ||||||
Municipal bonds | 1.79 | ||||||
US government obligations | 9.05 | ||||||
Non-US government obligations | 1.54 | ||||||
Total bonds | 85.65 | % | |||||
Investment company | |||||||
UBS High Yield Relationship Fund | 5.62 | ||||||
Short-term investments | 32.31 | ||||||
Options purchased | 0.29 | ||||||
Investment of cash collateral from securities loaned | 0.78 | ||||||
Total investments | 124.65 | % | |||||
Liabilities, in excess of cash and other assets | (24.65 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Core Plus Bond Fund. Figures might be different if a breakdown of the underlying investment companies was included.
9
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds: 85.65% | |||||||||||
Corporate bonds: 30.63% | |||||||||||
Brazil: 1.81% | |||||||||||
Caixa Economica Federal, 2.375%, due 11/06/171 | $ | 150,000 | $ | 146,250 | |||||||
Petrobras Global Finance BV, 3.250%, due 03/17/17 | 150,000 | 152,931 | |||||||||
Petrobras International Finance Co., 5.375%, due 01/27/212 | 120,000 | 124,380 | |||||||||
Vale Overseas Ltd., 4.375%, due 01/11/222 | 85,000 | 87,270 | |||||||||
6.875%, due 11/21/36 | 30,000 | 33,211 | |||||||||
Total Brazil corporate bonds | 544,042 | ||||||||||
Canada: 1.09% | |||||||||||
Barrick Gold Corp., 3.850%, due 04/01/22 | 90,000 | 89,543 | |||||||||
Cenovus Energy, Inc., 3.800%, due 09/15/23 | 100,000 | 103,086 | |||||||||
Goldcorp, Inc., 3.700%, due 03/15/23 | 40,000 | 39,453 | |||||||||
Rogers Communications, Inc., 5.000%, due 03/15/44 | 50,000 | 52,141 | |||||||||
Teck Resources Ltd., 6.250%, due 07/15/41 | 40,000 | 43,424 | |||||||||
Total Canada corporate bonds | 327,647 | ||||||||||
Cayman Islands: 0.08% | |||||||||||
XLIT Ltd., 6.375%, due 11/15/24 | 21,000 | 25,384 | |||||||||
China: 0.66% | |||||||||||
Sinopec Group Overseas Development 2013 Ltd., 2.500%, due 10/17/181 | 200,000 | 199,728 | |||||||||
France: 0.34% | |||||||||||
BNP Paribas SA, 2.700%, due 08/20/18 | 100,000 | 102,301 | |||||||||
Israel: 0.50% | |||||||||||
Teva Pharmaceutical Finance Co. BV, 2.400%, due 11/10/16 | 70,000 | 72,175 | |||||||||
Teva Pharmaceutical Finance IV BV, 3.650%, due 11/10/21 | 75,000 | 76,966 | |||||||||
Total Israel corporate bonds | 149,141 | ||||||||||
Mexico: 0.69% | |||||||||||
America Movil SAB de CV, 5.000%, due 03/30/20 | 115,000 | 127,652 | |||||||||
Petroleos Mexicanos, 4.875%, due 01/24/222 | 75,000 | 81,135 | |||||||||
Total Mexico corporate bonds | 208,787 |
Face amount | Value | ||||||||||
Netherlands: 0.14% | |||||||||||
LYB International Finance BV, 4.875%, due 03/15/44 | $ | 40,000 | $ | 41,704 | |||||||
Norway: 0.33% | |||||||||||
Eksportfinans ASA, 3.000%, due 11/17/14 | 100,000 | 100,610 | |||||||||
Spain: 0.86% | |||||||||||
Santander US Debt SA Unipersonal, 3.724%, due 01/20/151 | 100,000 | 101,480 | |||||||||
Telefonica Emisiones SAU, 3.192%, due 04/27/18 | 150,000 | 156,761 | |||||||||
Total Spain corporate bonds | 258,241 | ||||||||||
United Kingdom: 1.53% | |||||||||||
Barclays Bank PLC, 5.140%, due 10/14/20 | 100,000 | 109,530 | |||||||||
HSBC Holdings PLC, 6.500%, due 09/15/37 | 100,000 | 123,306 | |||||||||
Imperial Tobacco Finance PLC, 3.500%, due 02/11/231 | 110,000 | 108,980 | |||||||||
Lloyds Bank PLC, 6.500%, due 09/14/201,2 | 100,000 | 117,377 | |||||||||
Total United Kingdom corporate bonds | 459,193 | ||||||||||
United States: 22.60% | |||||||||||
21st Century Fox America, Inc., 6.200%, due 12/15/34 | 35,000 | 42,847 | |||||||||
ADT Corp., 3.500%, due 07/15/22 | 100,000 | 91,000 | |||||||||
Ally Financial, Inc., 8.000%, due 03/15/20 | 10,000 | 12,150 | |||||||||
Altria Group, Inc., 5.375%, due 01/31/44 | 50,000 | 54,767 | |||||||||
9.950%, due 11/10/38 | 18,000 | 29,985 | |||||||||
Anadarko Petroleum Corp., 5.950%, due 09/15/16 | 95,000 | 105,218 | |||||||||
6.450%, due 09/15/36 | 50,000 | 63,762 | |||||||||
Anheuser-Busch InBev Worldwide, Inc., 8.200%, due 01/15/39 | 50,000 | 76,509 | |||||||||
Bank of America Corp., 5.625%, due 07/01/20 | 75,000 | 86,283 | |||||||||
6.110%, due 01/29/37 | 100,000 | 115,364 | |||||||||
6.875%, due 04/25/18 | 60,000 | 70,688 | |||||||||
Berkshire Hathaway Finance Corp., 3.000%, due 05/15/22 | 35,000 | 35,192 | |||||||||
Boston Properties LP, REIT, 3.800%, due 02/01/24 | 60,000 | 60,678 | |||||||||
Celgene Corp., 4.000%, due 08/15/23 | 50,000 | 52,070 |
10
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
CF Industries, Inc., 3.450%, due 06/01/23 | $ | 150,000 | $ | 148,678 | |||||||
CIT Group, Inc., 5.500%, due 02/15/191 | 10,000 | 10,837 | |||||||||
Citigroup, Inc., 5.375%, due 08/09/20 | 40,000 | 45,838 | |||||||||
5.500%, due 09/13/25 | 200,000 | 223,094 | |||||||||
6.125%, due 05/15/18 | 55,000 | 63,367 | |||||||||
8.500%, due 05/22/19 | 65,000 | 83,082 | |||||||||
Comcast Corp., 6.300%, due 11/15/17 | 45,000 | 52,320 | |||||||||
6.950%, due 08/15/37 | 25,000 | 33,701 | |||||||||
Continental Resources, Inc., 4.900%, due 06/01/441 | 50,000 | 51,665 | |||||||||
DIRECTV Holdings LLC, 6.000%, due 08/15/40 | 40,000 | 46,053 | |||||||||
DISH DBS Corp., 7.875%, due 09/01/19 | 10,000 | 11,875 | |||||||||
DPL, Inc., 7.250%, due 10/15/21 | 85,000 | 93,500 | |||||||||
El Paso Pipeline Partners Operating Co., LLC, 5.000%, due 10/01/21 | 80,000 | 87,460 | |||||||||
Energy Transfer Partners LP, 5.200%, due 02/01/22 | 105,000 | 116,194 | |||||||||
9.000%, due 04/15/19 | 130,000 | 166,130 | |||||||||
ERAC USA Finance LLC, 2.800%, due 11/01/181 | 80,000 | 82,626 | |||||||||
ERP Operating LP, REIT, 4.750%, due 07/15/20 | 35,000 | 39,076 | |||||||||
FirstEnergy Transmission LLC, 5.450%, due 07/15/441 | 40,000 | 40,528 | |||||||||
Flextronics International Ltd., 5.000%, due 02/15/23 | 80,000 | 82,694 | |||||||||
Ford Motor Credit Co. LLC, 8.125%, due 01/15/20 | 250,000 | 319,198 | |||||||||
Frontier Communications Corp., 8.500%, due 04/15/20 | 10,000 | 11,800 | |||||||||
General Electric Capital Corp., Series A, 6.750%, due 03/15/32 | 50,000 | 65,958 | |||||||||
Glencore Funding LLC, 2.500%, due 01/15/191 | 120,000 | 119,695 | |||||||||
Goldman Sachs Group, Inc., 5.750%, due 01/24/22 | 80,000 | 92,575 | |||||||||
6.150%, due 04/01/18 | 100,000 | 114,682 | |||||||||
Hartford Financial Services Group, Inc., 5.950%, due 10/15/36 | 80,000 | 96,507 | |||||||||
Host Hotels & Resorts LP, Series D, 3.750%, due 10/15/23 | 60,000 | 59,459 |
Face amount | Value | ||||||||||
International Lease Finance Corp., 7.125%, due 09/01/181 | $ | 90,000 | $ | 104,400 | |||||||
Kinder Morgan Energy Partners LP, 3.950%, due 09/01/22 | 145,000 | 148,306 | |||||||||
6.500%, due 09/01/39 | 45,000 | 53,085 | |||||||||
Kroger Co., 3.850%, due 08/01/23 | 50,000 | 51,373 | |||||||||
Marathon Oil Corp., 6.600%, due 10/01/37 | 30,000 | 38,663 | |||||||||
Markel Corp., 3.625%, due 03/30/23 | 40,000 | 39,906 | |||||||||
Marsh & McLennan Cos., Inc., 9.250%, due 04/15/19 | 65,000 | 84,844 | |||||||||
Maxim Integrated Products, Inc., 3.375%, due 03/15/23 | 50,000 | 48,813 | |||||||||
Mondelez International, Inc., 4.000%, due 02/01/24 | 100,000 | 103,579 | |||||||||
Morgan Stanley, 4.875%, due 11/01/22 | 45,000 | 48,304 | |||||||||
7.300%, due 05/13/19 | 200,000 | 244,549 | |||||||||
Motorola Solutions, Inc., 3.500%, due 03/01/23 | 140,000 | 135,451 | |||||||||
Mylan, Inc., 2.550%, due 03/28/19 | 30,000 | 30,220 | |||||||||
Northern Trust Corp., 3.950%, due 10/30/25 | 25,000 | 25,982 | |||||||||
NRG Energy, Inc., 8.250%, due 09/01/20 | 10,000 | 10,925 | |||||||||
Owens Corning, 6.500%, due 12/01/16 | 21,000 | 23,420 | |||||||||
Petrohawk Energy Corp., 7.250%, due 08/15/18 | 185,000 | 193,325 | |||||||||
Plains Exploration & Production Co., 6.500%, due 11/15/20 | 60,000 | 66,975 | |||||||||
6.875%, due 02/15/23 | 60,000 | 70,200 | |||||||||
PPL Capital Funding, Inc., 3.950%, due 03/15/24 | 30,000 | 31,161 | |||||||||
Principal Financial Group, Inc., 8.875%, due 05/15/19 | 90,000 | 116,196 | |||||||||
Prudential Financial, Inc., 5.200%, due 03/15/443 | 95,000 | 96,900 | |||||||||
6.625%, due 12/01/37 | 145,000 | 186,573 | |||||||||
Regions Financial Corp., 2.000%, due 05/15/18 | 70,000 | 69,754 | |||||||||
Ryder System, Inc., 2.350%, due 02/26/19 | 75,000 | 75,617 | |||||||||
2.550%, due 06/01/19 | 80,000 | 80,984 | |||||||||
Sempra Energy, 9.800%, due 02/15/19 | 75,000 | 99,671 | |||||||||
Southern Copper Corp., 3.500%, due 11/08/22 | 50,000 | 48,688 | |||||||||
Southwestern Electric Power Co., 3.550%, due 02/15/22 | 50,000 | 51,289 |
11
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
TCI Communications, Inc., 7.875%, due 02/15/26 | $ | 50,000 | $ | 69,992 | |||||||
Tenet Healthcare Corp., 6.000%, due 10/01/20 | 10,000 | 10,850 | |||||||||
Time Warner Cable, Inc., 6.550%, due 05/01/37 | 35,000 | 43,550 | |||||||||
Time Warner Entertainment Co. LP, 8.375%, due 03/15/23 | 120,000 | 162,292 | |||||||||
Time Warner, Inc., 6.100%, due 07/15/40 | 35,000 | 41,084 | |||||||||
Transocean, Inc., 3.800%, due 10/15/22 | 65,000 | 64,332 | |||||||||
6.800%, due 03/15/38 | 85,000 | 96,947 | |||||||||
Valero Energy Corp., 6.625%, due 06/15/37 | 110,000 | 136,679 | |||||||||
Ventas Realty LP, 3.750%, due 05/01/24 | 50,000 | 49,932 | |||||||||
Ventas Realty LP/Ventas Capital Corp., 2.700%, due 04/01/20 | 80,000 | 79,620 | |||||||||
Verizon Communications, Inc., 1.981%, due 09/14/183 | 50,000 | 52,753 | |||||||||
6.400%, due 09/15/33 | 50,000 | 61,247 | |||||||||
Williams Cos., Inc., 3.700%, due 01/15/232 | 90,000 | 86,574 | |||||||||
Williams Partners LP, 4.300%, due 03/04/24 | 50,000 | 52,145 | |||||||||
Wyndham Worldwide Corp., 5.625%, due 03/01/21 | 60,000 | 67,624 | |||||||||
Xerox Corp., 3.800%, due 05/15/24 | 90,000 | 89,513 | |||||||||
Total United States corporate bonds | 6,799,392 | ||||||||||
Total corporate bonds (cost $8,892,252) | 9,216,170 | ||||||||||
Asset-backed securities: 1.59% | |||||||||||
United States: 1.59% | |||||||||||
AmeriCredit Automobile Receivables Trust, Series 2014-1, Class D, 2.540%, due 06/08/20 | 125,000 | 125,657 | |||||||||
Capital Auto Receivables Asset Trust, Series 2013-3, Class B, 2.320%, due 07/20/18 | 150,000 | 152,942 | |||||||||
Ford Credit Auto Owner Trust, Series 2014-A, Class C, 1.900%, due 09/15/19 | 175,000 | 176,110 | |||||||||
Renaissance Home Equity Loan Trust, Series 2006-4, Class AF1, 5.545%, due 01/25/374 | 39,597 | 24,224 | |||||||||
Total asset-backed securities (cost $486,522) | 478,933 |
Face amount | Value | ||||||||||
Commercial mortgage-backed securities: 9.08% | |||||||||||
United States: 9.08% | |||||||||||
Boca Hotel Portfolio Trust, Series 2013-BOCA, Class D, 3.202%, due 08/15/261,3 | $ | 150,000 | $ | 150,429 | |||||||
CG-CCRE Commercial Mortgage Trust, Series 2014-FL1, Class C, 1.902%, due 06/15/311,3,5 | 225,000 | 225,000 | |||||||||
Commercial Mortage Loan Trust, Series 2008-LS1, Class A4B, 6.213%, due 12/10/493 | 250,000 | 275,426 | |||||||||
Commercial Mortgage Pass Through Certificates, Series 2013-GAM, Class B, 3.531%, due 02/10/281,3 | 200,000 | 197,388 | |||||||||
Series 2013-LC13, Class C, 5.217%, due 08/10/461,3 | 200,000 | 217,500 | |||||||||
FDIC Structured Sale Guaranteed Notes, Series 2010-C1, Class A, 2.980%, due 12/06/201 | 126,599 | 131,474 | |||||||||
Greenwich Capital Commercial Funding Corp., Series 2007-GG11, Class A4, 5.736%, due 12/10/49 | 88,000 | 97,830 | |||||||||
Hilton USA Trust, Series 2013-HLT, Class DFX, 4.407%, due 11/05/301 | 100,000 | 103,551 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Corp., Series 2007-LD11, Class A4, 5.991%, due 06/15/493 | 275,000 | 302,409 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C7, Class B, 3.769%, due 02/15/46 | 50,000 | 50,264 | |||||||||
Series 2013-C10, Class C, 4.218%, due 07/15/463 | 100,000 | 99,769 | |||||||||
Series 2014-C14, Class C, 4.996%, due 02/15/473 | 125,000 | 131,705 | |||||||||
Morgan Stanley Re-REMIC Trust, Series 2009-GG10, Class A4B, 5.997%, due 08/12/451,3 | 175,000 | 191,787 | |||||||||
Wachovia Bank Commercial Mortgage Trust, Series 2007-C34, Class AM, 5.818%, due 05/15/463 | 125,000 | 138,545 | |||||||||
Series 2007-C32, Class A3, 5.933%, due 06/15/493 | 175,000 | 191,494 | |||||||||
WF-RBS Commercial Mortgage Trust, Series 2013-C12, Class B, 3.863%, due 03/15/483 | 225,000 | 228,208 | |||||||||
Total commercial mortgage-backed securities (cost $2,745,390) | 2,732,779 |
12
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Mortgage & agency debt securities: 31.97% | |||||||||||
United States: 31.97% | |||||||||||
Federal Home Loan Mortgage Corp. Gold Pools,6 3.500%, TBA | $ | 125,000 | $ | 128,486 | |||||||
4.000%, TBA | 125,000 | 132,422 | |||||||||
4.500%, TBA | 100,000 | 108,228 | |||||||||
#A96140, 4.000%, due 01/01/41 | 103,875 | 110,193 | |||||||||
#FG A96792, 4.500%, due 02/01/41 | 54,381 | 59,084 | |||||||||
#G08451, 4.500%, due 06/01/41 | 137,357 | 148,769 | |||||||||
#C63008, 6.000%, due 01/01/32 | 58,480 | 65,662 | |||||||||
#G01717, 6.500%, due 11/01/29 | 52,303 | 59,518 | |||||||||
Federal National Mortgage Association Pools,6 2.500%, TBA | 375,000 | 380,918 | |||||||||
3.000%, TBA | 700,000 | 701,695 | |||||||||
3.500%, TBA | 875,000 | 909,082 | |||||||||
4.000%, TBA | 550,000 | 583,749 | |||||||||
4.500%, TBA | 250,000 | 270,742 | |||||||||
5.000%, TBA | 350,000 | 388,664 | |||||||||
#AP1589, 3.000%, due 08/01/27 | 84,055 | 87,420 | |||||||||
#AT2725, 3.000%, due 05/01/43 | 435,502 | 430,733 | |||||||||
#AP6056, 3.000%, due 07/01/43 | 71,441 | 70,659 | |||||||||
#AS0302, 3.000%, due 08/01/43 | 25,585 | 25,305 | |||||||||
#AU3735, 3.000%, due 08/01/43 | 97,938 | 96,866 | |||||||||
#AV1735, 3.000%, due 11/01/43 | 74,642 | 73,824 | |||||||||
#AP3098, 3.500%, due 10/01/42 | 102,536 | 105,743 | |||||||||
#AQ0600, 3.500%, due 10/01/42 | 112,865 | 116,500 | |||||||||
#AH4568, 4.000%, due 03/01/41 | 107,389 | 114,129 | |||||||||
#AE9202, 4.000%, due 09/01/41 | 413,552 | 439,894 | |||||||||
#AE0106, 4.500%, due 06/01/40 | 1,271 | 1,377 | |||||||||
#AI6578, 4.500%, due 07/01/41 | 298,785 | 323,717 | |||||||||
#AS1587, 4.500%, due 01/01/44 | 49,902 | 54,089 | |||||||||
#890209, 5.000%, due 05/01/40 | 191,276 | 212,940 | |||||||||
#AD9114, 5.000%, due 07/01/40 | 238,801 | 266,358 | |||||||||
#AJ1422, 5.000%, due 09/01/41 | 187,030 | 208,391 | |||||||||
#688066, 5.500%, due 03/01/33 | 108,801 | 123,530 | |||||||||
#688314, 5.500%, due 03/01/33 | 117,535 | 133,493 | |||||||||
#802481, 5.500%, due 11/01/34 | 209,218 | 236,280 | |||||||||
#408267, 6.000%, due 03/01/28 | 13,764 | 15,676 | |||||||||
#323715, 6.000%, due 05/01/29 | 9,047 | 10,315 | |||||||||
#676733, 6.000%, due 01/01/33 | 77,326 | 87,604 | |||||||||
#831730, 6.500%, due 09/01/36 | 91,534 | 103,209 | |||||||||
First Horizon Asset Securities, Inc., Series 2004-FL1, Class 1A1, 0.422%, due 02/25/353 | 45,346 | 40,955 | |||||||||
Government National Mortgage Association Pools, 3.000%, TBA | 250,000 | 252,344 | |||||||||
3.500%, TBA | 350,000 | 364,574 | |||||||||
4.000%, TBA | 675,000 | 722,000 | |||||||||
4.500%, TBA | 475,000 | 518,659 | |||||||||
#G2 AB2784, 3.500%, due 08/20/42 | 89,088 | 92,979 |
Face amount | Value | ||||||||||
#G2 779425, 4.000%, due 06/20/42 | $ | 101,451 | $ | 108,749 | |||||||
#G2 2687, 6.000%, due 12/20/28 | 17,608 | 19,839 | |||||||||
#G2 2794, 6.000%, due 08/20/29 | 53,191 | 59,763 | |||||||||
#G2 4245, 6.000%, due 09/20/38 | 50,117 | 57,017 | |||||||||
Total mortgage & agency debt securities (cost $9,442,948) | 9,622,143 | ||||||||||
Municipal bonds: 1.79% | |||||||||||
Chicago Transit Authority, Series 2008-A, 6.899%, due 12/01/40 | 50,000 | 62,047 | |||||||||
Los Angeles Unified School District, 6.758%, due 07/01/34 | 110,000 | 147,414 | |||||||||
State of California, GO Bonds, 7.300%, due 10/01/39 | 90,000 | 126,750 | |||||||||
State of Illinois, GO Bonds, 5.877%, due 03/01/19 | 180,000 | 201,326 | |||||||||
Total municipal bonds (cost $458,780) | 537,537 | ||||||||||
US government obligations: 9.05% | |||||||||||
US Treasury Bonds, 3.375%, due 05/15/44 | 1,150,000 | 1,157,727 | |||||||||
3.625%, due 02/15/442 | 60,000 | 63,319 | |||||||||
US Treasury Inflation Indexed Bonds (TIPS), 1.375%, due 02/15/447 | 150,000 | 167,818 | |||||||||
US Treasury Inflation Indexed Notes (TIPS), 0.125%, due 04/15/187 | 725,000 | 768,052 | |||||||||
0.625%, due 01/15/247 | 300,000 | 315,858 | |||||||||
US Treasury Note, 1.625%, due 04/30/19 | 250,000 | 250,469 | |||||||||
Total US government obligations (cost $2,684,051) | 2,723,243 | ||||||||||
Non-US government obligations: 1.54% | |||||||||||
Brazil: 0.69% | |||||||||||
Banco Nacional de Desenvolvimento Economico e Social, 3.375%, due 09/26/161 | 200,000 | 206,750 | |||||||||
Greece: 0.48% | |||||||||||
Hellenic Republic, 2.000%, due 02/24/314,8 | EUR | 150,000 | 143,875 | ||||||||
Turkey: 0.37% | |||||||||||
Republic of Turkey, 6.750%, due 04/03/18 | $ | 100,000 | 112,750 | ||||||||
Total Non-US government obligations (cost $455,353) | 463,375 | ||||||||||
Total bonds (cost $25,165,296) | 25,774,180 |
13
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investment company: 5.62% | |||||||||||
UBS High Yield Relationship Fund*9 (cost $1,550,630) | 48,228 | $ | 1,690,858 | ||||||||
Short-term investments: 32.31% | |||||||||||
Investment company: 25.67% | |||||||||||
UBS Cash Management Prime Relationship Fund9 (cost $7,725,321) | 7,725,321 | 7,725,321 | |||||||||
Face amount | |||||||||||
US government obligation: 6.64% | |||||||||||
US Treasury Bill, 0.091%, due 05/28/1510 (cost $1,998,345) | $ | 2,000,000 | 1,998,300 | ||||||||
Total short-term investments (cost $9,723,666) | 9,723,621 | ||||||||||
Number of contracts | |||||||||||
Options purchased: 0.29% | |||||||||||
Call options: 0.22% | |||||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 97.88, expires September 2014 | 59 | 64,900 |
Number of contracts | Value | ||||||||||
Put options: 0.07% | |||||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 97.88, expires September 2014 | 59 | $ | 4,425 | ||||||||
3 Year Euro-Dollar Midcurve, strike @ USD 97.75, expires June 2016 | 26 | 11,862 | |||||||||
30 Year US Treasury Bonds, strike @ USD 135.00, expires August 2014 | 7 | 4,594 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires March 2015 | 49 | 1,225 | |||||||||
22,106 | |||||||||||
Total options purchased (cost $171,076) | 87,006 | ||||||||||
Shares | |||||||||||
Investment of cash collateral from securities loaned: 0.78% | |||||||||||
UBS Private Money Market Fund LLC9 (cost $236,033) | 236,033 | 236,033 | |||||||||
Total investments: 124.65% (cost $36,846,701) | 37,511,698 | ||||||||||
Liabilities, in excess of cash and other assets: (24.65%) | (7,419,634 | ) | |||||||||
Net assets: 100.00% | $ | 30,092,064 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $36,805,446; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 911,349 | |||||
Gross unrealized depreciation | (205,097 | ) | |||||
Net unrealized appreciation of investments | $ | 706,252 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 50. Portfolio footnotes begin on page 17.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized depreciation | |||||||||||||||
CIBC | JPY | 30,136,669 | USD | 295,000 | 09/11/14 | $ | (2,640 | ) | |||||||||||
GSI | CHF | 139,363 | USD | 155,000 | 09/11/14 | (2,249 | ) | ||||||||||||
JPMCB | CHF | 240,000 | USD | 268,133 | 09/11/14 | (2,670 | ) | ||||||||||||
JPMCB | EUR | 640,000 | USD | 872,068 | 09/11/14 | (4,521 | ) | ||||||||||||
JPMCB | JPY | 57,700,000 | USD | 562,715 | 09/11/14 | (7,150 | ) | ||||||||||||
MSCI | EUR | 340,000 | USD | 460,608 | 09/11/14 | (5,080 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (24,310 | ) |
14
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Long Bond, 1 contract (USD) | September 2014 | $ | 138,220 | $ | 137,187 | $ | (1,033 | ) | |||||||||||
US Ultra Bond, 7 contracts (USD) | September 2014 | 1,055,116 | 1,049,562 | (5,554 | ) | ||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
5 Year US Treasury Notes, 47 contracts (USD) | September 2014 | (5,618,278 | ) | (5,614,664 | ) | 3,614 | |||||||||||||
10 Year US Treasury Notes, 6 contracts (USD) | September 2014 | (752,406 | ) | (751,031 | ) | 1,375 | |||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
3 Month EURIBOR, 10 contracts (EUR) | March 2015 | 3,399,546 | 3,417,601 | 18,055 | |||||||||||||||
Australian Government 10 Year Bond, 5 contracts (AUD) | September 2014 | 556,297 | 567,997 | 11,700 | |||||||||||||||
Net unrealized appreciation on futures contracts | $ | 28,157 |
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Upfront payments | Value | Unrealized depreciation | ||||||||||||||||||||||||
MLI | USD | 965,000 | 08/15/39 | 3.219 | % | 3 month USD LIBOR | $ | — | $ | (5,304 | ) | $ | (5,304 | ) |
Credit default swaps on corporate issues—buy protection12
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments made by the Fund11 | Upfront payments made | Value | Unrealized depreciation | ||||||||||||||||||||||||
MSC | Deutsche Bank AG bond, 5.125%, due 08/31/17 | EUR | 140,000 | 06/20/17 | 1.000 | % | $ | (4,270 | ) | $ | (2,826 | ) | $ | (7,096 | ) |
Credit default swaps on credit indices—sell protection14
Counterparty | Referenced index13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | Credit spread15 | |||||||||||||||||||||||||||
CSI | CMBX.NA.BBB. Series 6 Index | USD | 350,000 | 05/11/63 | 3.000 | % | $ | 14,151 | $ | 6,577 | $ | 20,728 | 2.750 | % | |||||||||||||||||||||
MLI | CMBX.NA.A. Series 6 Index | USD | 300,000 | 05/11/63 | 2.000 | (827 | ) | 6,372 | 5,545 | 1.740 | |||||||||||||||||||||||||
MLI | CMBX.NA.BB. Series 6 Index | USD | 300,000 | 05/11/63 | 5.000 | (9,368 | ) | 7,385 | (1,983 | ) | 4.670 | ||||||||||||||||||||||||
MSC | CMBX.NA.A. Series 6 Index | USD | 350,000 | 05/11/63 | 2.000 | 4,480 | 7,434 | 11,914 | 1.740 | ||||||||||||||||||||||||||
$ | 8,436 | $ | 27,768 | $ | 36,204 |
15
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Centrally cleared interest rate swap agreements
Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Value | Unrealized appreciation | ||||||||||||||||||
AUD | 570,000 | 10/18/23 | 6 month BBSW | 4.535 | % | $ | 30,935 | $ | 30,935 |
Options written
Expiration date | Premiums received | Value | |||||||||||||
Call options | |||||||||||||||
3 Year Euro-Dollar Midcurve, 26 contracts, strike @ USD 98.75 | June 2016 | $ | 21,034 | $ | (21,125 | ) | |||||||||
4 Year Euro-Dollar Midcurve, 59 contracts, strike @ USD 96.38 | September 2014 | 41,094 | (81,125 | ) | |||||||||||
30 Year US Treasury Bonds, 7 contracts, strike @ USD 140.00 | August 2014 | 5,457 | (3,500 | ) | |||||||||||
Put options | |||||||||||||||
3 Year Euro-Dollar Midcurve, 26 contracts, strike @ USD 96.75 | June 2016 | 21,034 | (3,900 | ) | |||||||||||
4 Year Euro-Dollar Midcurve, 59 contracts, strike @ USD 96.38 | September 2014 | 37,331 | (2,950 | ) | |||||||||||
30 Year US Treasury Bonds, 7 contracts, strike @ USD 130.00 | August 2014 | 3,050 | (547 | ) | |||||||||||
90 Day Euro-Dollar Time Deposit, 49 contracts, strike @ USD 98.25 | March 2015 | 12,691 | (306 | ) | |||||||||||
Options written on credit default swaps on credit indices16 | |||||||||||||||
If option exercised payment from the counterparty will be made upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of the referenced obligation specified in the CDX.NA.HY Series 22 Index and the Fund receives quarterly fixed rate of 5.000% per annum. Underlying credit default swap terminating 06/20/19. European style. Counterparty: JPMCB, Notional Amount USD 330,000 | September 2014 | 3,267 | (2,734 | ) | |||||||||||
If option exercised payment from the counterparty will be made upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of the referenced obligation specified in the CDX.NA.HY Series 22 Index and the Fund receives quarterly fixed rate of 5.000% per annum. Underlying credit default swap terminating 06/20/19. European style. Counterparty: MLI, Notional Amount USD 2,000,000 | September 2014 | 8,910 | (7,356 | ) | |||||||||||
Total options written | $ | 153,868 | $ | (123,543 | ) |
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 61 | $ | 22,607 | ||||||||
Options written | 326 | 139,936 | |||||||||
Options terminated in closing purchase transactions | (154 | ) | (20,852 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | 233 | $ | 141,691 |
16
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
Written swaptions activity for the year ended June 30, 2014 was as follows:
Premiums received | |||||||
Swaptions outstanding at June 30, 2013 | $ | — | |||||
Swaptions written | 66,677 | ||||||
Swaptions terminated in closing purchase transactions | (54,500 | ) | |||||
Swaptions expired prior to exercise | — | ||||||
Swaptions outstanding at June 30, 2014 | $ | 12,177 |
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 9,216,170 | $ | — | $ | 9,216,170 | |||||||||||
Asset-backed securities | — | 478,933 | — | 478,933 | |||||||||||||||
Commercial mortgage-backed securities | — | 2,732,779 | — | 2,732,779 | |||||||||||||||
Mortgage & agency debt securities | — | 9,622,143 | — | 9,622,143 | |||||||||||||||
Municipal bonds | — | 537,537 | — | 537,537 | |||||||||||||||
US government obligations | — | 2,723,243 | — | 2,723,243 | |||||||||||||||
Non-US government obligations | — | 463,375 | — | 463,375 | |||||||||||||||
Investment company | — | 1,690,858 | — | 1,690,858 | |||||||||||||||
Short-term investments | — | 9,723,621 | — | 9,723,621 | |||||||||||||||
Options purchased | 87,006 | — | — | 87,006 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 236,033 | — | 236,033 | |||||||||||||||
Futures contracts | 34,744 | — | — | 34,744 | |||||||||||||||
Swap agreements | — | 58,703 | — | 58,703 | |||||||||||||||
Total | $ | 121,750 | $ | 37,483,395 | $ | — | $ | 37,605,145 | |||||||||||
Liabilities | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (24,310 | ) | $ | — | $ | (24,310 | ) | |||||||||
Futures contracts | (6,587 | ) | — | — | (6,587 | ) | |||||||||||||
Swap agreements | — | (8,130 | ) | — | (8,130 | ) | |||||||||||||
Options written | (113,453 | ) | (10,090 | ) | — | (123,543 | ) | ||||||||||||
Total | $ | (120,040 | ) | $ | (42,530 | ) | $ | — | $ | (162,570 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of these securities amounted to $2,507,445 or 8.33% of net assets.
2 Security, or portion thereof, was on loan at June 30, 2014.
3 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2014 and changes periodically.
17
UBS Core Plus Bond Fund
Portfolio of investments
June 30, 2014
4 Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2014. Maturity date disclosed is the ultimate maturity date.
5 Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2014, the value of this security amounted to $225,000 or 0.75% of net assets.
6 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
7 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 government security of the same maturity.
8 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of this security amounted to $143,875 or 0.48% of net assets.
9 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Funds.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Net realized gain (loss) during the year ended 06/30/14 | Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 4,494,940 | $ | 25,091,076 | $ | 21,860,695 | $ | — | $ | — | $ | 7,725,321 | $ | 4,135 | |||||||||||||||||
UBS Private Money Market Fund LLCa | 800,921 | 4,190,264 | 4,755,152 | — | — | 236,033 | 21 | ||||||||||||||||||||||||
UBS High Yield Relationship Fund | 1,851,702 | 450,000 | 800,000 | 50,629 | 138,527 | 1,690,858 | — | ||||||||||||||||||||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund | 342,988 | — | 346,464 | (22,006 | ) | 25,482 | — | — | |||||||||||||||||||||||
$ | 7,490,551 | $ | 29,731,340 | $ | 27,762,311 | $ | 28,623 | $ | 164,009 | $ | 9,652,212 | $ | 4,156 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
10 Rate shown is the discount rate at date of purchase.
11 Payments made or received are based on the notional amount.
12 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation.
13 Payments to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
14 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the underlying securities comprising the referenced index.
15 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity. Credit spreads are unaudited.
16 Illiquid investment as of June 30, 2014.
See accompanying notes to financial statements.
18
UBS Emerging Markets Debt Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Emerging Markets Debt Fund (the "Fund") returned 4.65% (Class A shares declined 0.09% after the deduction of the maximum sales charge), while Class Y shares returned 5.01%. For comparison purposes, the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) gained 11.05%, and the Emerging Markets Debt Benchmark Index (the "Index") returned 7.46% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 21; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
Comments below relate to the Fund's positioning and performance relative to the Index, which represents investments in both US dollar-denominated and local currency debt.
The emerging markets debt asset class was weak during the first half of the reporting period, but then rallied sharply and generated strong results for the 12-months ended June 30, 2014. The asset class was initially weak due to concerns about decelerating global growth, geopolitical issues and rising US interest rates. However, the asset class moved sharply higher over the last five months of the reporting period as investor demand was largely robust, US interest rates declined and China's economy appeared to stabilize. Over the 12 month period, US dollar denominated emerging markets debt substantially outperformed local currency denominated emerging markets debt. While the Fund generated a positive absolute return, it underperformed the Index, partially due to its overweight to emerging markets local currencies.
The Fund used a number of derivatives during the reporting period, the following of which were more commonly utilized. Certain foreign exchange instruments, including currency forwards and options, were utilized to manage the Fund's currency exposure. Overall, the Fund's currency allocations detracted from performance. The Fund also utilized interest rate derivatives, including US Treasury futures and interest rate swaps, to adjust its duration and yield curve positioning. In aggregate, the Fund's duration and yield curve positioning were negative for performance. Credit default swaps and credit-linked notes were used to express our views regarding specific country exposures, as well as for hedging purposes. Overall, the Fund's country allocation and spread sector1 management were negative for its performance. Although derivatives play a role in the overall portfolio construction process, they are just one of the tools we utilize to manage the Fund's overall risk exposure and to implement the aforementioned strategies.
Portfolio performance summary2
What worked
• An overweight to US dollar-denominated debt from Sri Lanka and Belarus contributed to performance. Investor demand was solid overall given attractive yields.
• The Fund's overweights to certain quasi-sovereign debt was rewarded. In particular, the Fund's allocations in Indonesia, India and Venezuela were additive for performance.
1 A spread sector refers to non-government fixed income sectors, such as investment grade or high yield bonds, commercial mortgage-backed securities (CMBS), etc.
2 For a detailed commentary on the market environment in general during the reporting period, see page __.
19
UBS Emerging Markets Debt Fund
• A small overweight in Russian local debt was a modest contributor to results. While performance was volatile given geopolitical issues, overall the Fund's exposure to Russian local debt was slightly positive for performance. While we continue to have a favorable view of the country's debt overall, given the recent implementation of sanctions against Russia, our future investments may be more constrained if the magnitude and range of sanctions increase.
What didn't work
• Underweights to Mexican local and US dollar-denominated debt hurt performance. This positioning was a drag on results, as these bonds rallied when US Treasury yields declined during the second half of the reporting period.
• The Fund's allocation to longer-term Brazilian local debt was negative for results. Brazil's local debt performed poorly overall due to negative economic sentiment, fears of higher inflation and a severe unwinding of positions from foreign investors. While Brazil's local debt rallied during the second half of the reporting period, when US interest rates declined, it was not enough to offset earlier losses.
• A lack of exposure to certain Eastern European countries detracted from performance. The Fund's underweights to Hungarian and Polish local debt was a drag on performance. This positioning hurt results as these bonds rallied late in the period, partially driven by aggressive actions by the European Central Bank to stimulate growth.
• An overweight to Ghana local debt was not beneficial as it performed poorly.
• The Fund's small duration underweight was modestly negative for performance.
• An overweight to the Russian ruble detracted from the Fund's results. On the whole, the currency depreciated during the 12 month period due to negative investor sentiment about escalating tensions between Russia and the west over the situation in Ukraine.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
20
UBS Emerging Markets Debt Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class A2 | 4.65 | % | 1.43 | % | |||||||
Class C3 | 3.72 | 0.40 | |||||||||
Class Y4 | 5.01 | 1.94 | |||||||||
After deducting maximum sales charge | |||||||||||
Class A2 | (0.09 | )% | (0.95 | )% | |||||||
Class C3 | 2.98 | 0.40 | |||||||||
J.P. Morgan Emerging Markets Bond Index Global (EMBI Global)5 | 11.05 | % | 4.15 | % | |||||||
Emerging Markets Debt Benchmark Index6 | 7.46 | 2.87 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—36.21% and 1.25%; Class C—2,391.59% and 1.75%; Class Y—2.10% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2023, do not exceed 1.25% for Class A shares, 1.75% for Class C shares and 1.00% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Emerging Markets Debt Fund is July 23, 2012. Inception date of the indices, for the purpose of this illustration, is July 31, 2012.
2 Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The Emerging Markets Debt Benchmark Index is an unmanaged index compiled by the Advisor, constructed as follows: from the Fund's inception to present—50% J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) and 50% J.P. Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified). Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
21
UBS Emerging Markets Debt Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Emerging Markets Debt Fund Class A and Class Y shares versus the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) and the Emerging Markets Debt Benchmark Index from July 23, 2012, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
22
UBS Emerging Markets Debt Fund
Top ten long-term fixed income holdings (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
Republic of Poland, 4.750%, due 04/25/17 | 3.6 | % | |||||
Federative Republic of Brazil, 6.000%, due 08/15/50 | 3.4 | ||||||
Government of Malaysia, 3.580%, due 09/28/18 | 2.9 | ||||||
Mexican Udibonos, Series M, 8.000%, due 12/17/15 | 2.9 | ||||||
RSHB Capital SA for OJSC Russian Agricultural Bank, 8.625%, due 02/17/17 | 2.6 | ||||||
Peruvian Government International Bond, 7.840%, due 08/12/20 | 2.6 | ||||||
Republic of Indonesia, 9.000%, due 03/15/29 | 2.1 | ||||||
Republic of Indonesia, 7.000%, due 05/15/22 | 2.0 | ||||||
Government of Thailand, 1.200%, due 07/14/21 | 1.9 | ||||||
Republic of Colombia, 9.850%, due 06/28/27 | 1.7 | ||||||
Total | 25.7 | % |
Country exposure by issuer, top five (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
Russia | 10.5 | % | |||||
Turkey | 8.1 | ||||||
Indonesia | 8.0 | ||||||
Brazil | 7.3 | ||||||
Mexico | 7.2 | ||||||
Total | 41.1 | % |
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2014
Bonds | |||||||
Corporate bonds | |||||||
Banks | 7.41 | % | |||||
Diversified financial services | 8.14 | ||||||
Electric utilities | 0.89 | ||||||
Metals & mining | 0.87 | ||||||
Oil, gas & consumable fuels | 6.11 | ||||||
Road & rail | 0.94 | ||||||
Total corporate bonds | 24.36 | % | |||||
Non-US government obligations | 66.92 | ||||||
Structured notes | 1.78 | ||||||
Total bonds | 93.06 | % | |||||
Short-term investment | 5.25 | ||||||
Total investments | 98.31 | % | |||||
Cash and other assets, less liabilities | 1.69 | ||||||
Net assets | 100.00 | % |
23
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds: 93.06% | |||||||||||
Corporate bonds: 24.36% | |||||||||||
Brazil: 2.99% | |||||||||||
Banco do Brasil SA, 5.875%, due 01/26/221 | $ | 200,000 | $ | 205,500 | |||||||
Centrais Eletricas Brasileiras SA, 5.750%, due 10/27/211 | 200,000 | 205,176 | |||||||||
Petrobras Global Finance BV, 2.366%, due 01/15/192 | 30,000 | 30,037 | |||||||||
3.112%, due 03/17/202 | 50,000 | 51,190 | |||||||||
State of Minas Gerais, 5.333%, due 02/15/283 | 200,000 | 201,500 | |||||||||
Total Brazil corporate bonds | 693,403 | ||||||||||
Costa Rica: 0.88% | |||||||||||
Banco Nacional de Costa Rica, 4.875%, due 11/01/181 | 200,000 | 203,500 | |||||||||
India: 0.89% | |||||||||||
ICICI Bank Ltd., 6.375%, due 04/30/221,2 | 200,000 | 207,000 | |||||||||
Indonesia: 1.34% | |||||||||||
Pertamina Persero PT, 5.250%, due 05/23/211 | 300,000 | 309,000 | |||||||||
Kazakhstan: 0.94% | |||||||||||
Kazakhstan Temir Zholy Finance BV, 6.950%, due 07/10/423 | 200,000 | 218,500 | |||||||||
Malaysia: 0.87% | |||||||||||
Malayan Banking Bhd, 3.250%, due 09/20/221,2 | 200,000 | 201,920 | |||||||||
Mexico: 1.92% | |||||||||||
Petroleos Mexicanos, 4.875%, due 01/24/22 | 100,000 | 108,180 | |||||||||
5.500%, due 06/27/44 | 100,000 | 103,200 | |||||||||
6.500%, due 06/02/41 | 200,000 | 233,050 | |||||||||
Total Mexico corporate bonds | 444,430 | ||||||||||
Peru: 0.90% | |||||||||||
Corp Financiera Desarrollo, 4.750%, due 02/08/221 | 200,000 | 209,000 | |||||||||
Russia: 8.15% | |||||||||||
RSHB Capital SA for OJSC Russian Agricultural Bank, 7.750%, due 05/29/181 | 250,000 | 274,375 | |||||||||
8.625%, due 02/17/171 | RUB | 21,000,000 | 596,227 | ||||||||
8.700%, due 03/17/16 | 6,000,000 | 172,616 | |||||||||
Sberbank of Russia, 5.717%, due 06/16/211 | $ | 200,000 | 210,750 |
Face amount | Value | ||||||||||
VEB Finance Ltd., 6.025%, due 07/05/221 | $ | 200,000 | $ | 204,500 | |||||||
6.800%, due 11/22/251 | 150,000 | 159,375 | |||||||||
6.902%, due 07/09/201 | 250,000 | 270,625 | |||||||||
Total Russia corporate bonds | 1,888,468 | ||||||||||
Turkey: 2.97% | |||||||||||
TC Ziraat Bankasi AS, 4.250%, due 07/03/193 | 200,000 | 199,000 | |||||||||
Turkiye Halk Bankasi AS, 3.875%, due 02/05/201 | 300,000 | 283,500 | |||||||||
4.875%, due 07/19/173 | 200,000 | 205,250 | |||||||||
Total Turkey corporate bonds | 687,750 | ||||||||||
Venezuela: 2.51% | |||||||||||
Petroleos de Venezuela SA, 6.000%, due 11/15/261 | 185,000 | 119,325 | |||||||||
8.500%, due 11/02/171 | 50,000 | 46,133 | |||||||||
9.000%, due 11/17/211 | 300,000 | 252,000 | |||||||||
9.750%, due 05/17/351 | 200,000 | 163,250 | |||||||||
Total Venezuela corporate bonds | 580,708 | ||||||||||
Total corporate bonds (cost $5,672,619) | 5,643,679 | ||||||||||
Non-US government obligations: 66.92% | |||||||||||
Argentina: 0.61% | |||||||||||
Republic of Argentina, 0.000%, due 12/15/354 | 50,000 | 4,000 | |||||||||
0.000%, due 12/15/354 | 320,000 | 25,920 | |||||||||
7.000%, due 10/03/15 | 20,000 | 19,054 | |||||||||
Series 1, 8.750%, due 06/02/17 | 100,000 | 91,250 | |||||||||
140,224 | |||||||||||
Belarus: 1.80% | |||||||||||
Republic of Belarus, 8.750%, due 08/03/151 | 250,000 | 256,875 | |||||||||
8.950%, due 01/26/181 | 150,000 | 160,875 | |||||||||
417,750 | |||||||||||
Brazil: 4.32% | |||||||||||
Federative Republic of Brazil, 6.000%, due 08/15/505 | BRL | 720,000 | 778,890 | ||||||||
Notas do Tesouro Nacional, 6.000%, due 08/15/225 | 200,000 | 222,467 | |||||||||
1,001,357 | |||||||||||
China: 1.04% | |||||||||||
China Government Bond, 1.400%, due 08/18/161 | CNY | 500,000 | 78,634 | ||||||||
2.560%, due 06/29/171 | 1,000,000 | 161,402 | |||||||||
240,036 |
24
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Non-US government obligations—(Continued) | |||||||||||
Colombia: 2.69% | |||||||||||
Republic of Colombia, 6.125%, due 01/18/41 | $ | 110,000 | $ | 132,000 | |||||||
9.850%, due 06/28/27 | COP | 562,000,000 | 392,980 | ||||||||
12.000%, due 10/22/15 | 170,000,000 | 98,954 | |||||||||
623,934 | |||||||||||
El Salvador: 0.46% | |||||||||||
Republic of El Salvador, 7.650%, due 06/15/351 | $ | 100,000 | 107,000 | ||||||||
Ghana: 0.69% | |||||||||||
Republic of Ghana, 8.500%, due 10/04/171 | 150,000 | 158,775 | |||||||||
Hungary: 2.72% | |||||||||||
Government of Hungary, 5.375%, due 02/21/23 | 100,000 | 107,480 | |||||||||
5.750%, due 11/22/23 | 150,000 | 164,834 | |||||||||
6.750%, due 02/24/17 | HUF | 60,000,000 | 292,485 | ||||||||
7.625%, due 03/29/41 | $ | 50,000 | 64,031 | ||||||||
628,830 | |||||||||||
Indonesia: 6.67% | |||||||||||
Republic of Indonesia, 6.625%, due 02/17/371 | 200,000 | 222,000 | |||||||||
7.000%, due 05/15/22 | IDR | 6,000,000,000 | 471,953 | ||||||||
8.500%, due 10/12/351 | $ | 275,000 | 364,031 | ||||||||
9.000%, due 03/15/29 | IDR | 5,600,000,000 | 486,546 | ||||||||
1,544,530 | |||||||||||
Kenya: 0.88% | |||||||||||
Republic of Kenya, 5.875%, due 06/24/193 | 200,000 | 204,000 | |||||||||
Lithuania: 0.48% | |||||||||||
Republic of Lithuania, 5.125%, due 09/14/171 | 100,000 | 109,938 | |||||||||
Malaysia: 4.29% | |||||||||||
Government of Malaysia, 3.434%, due 08/15/14 | MYR | 1,000,000 | 311,611 | ||||||||
3.580%, due 09/28/18 | 2,200,000 | 682,473 | |||||||||
994,084 | |||||||||||
Mexico: 5.23% | |||||||||||
Mexican Udibonos, Series M, 6.500%, due 06/10/21 | MXN | 900,000 | 74,365 | ||||||||
8.000%, due 12/17/15 | 8,250,000 | 679,367 |
Face amount | Value | ||||||||||
Series S, 4.000%, due 11/15/405 | MXN | 3,592,164 | $ | 312,931 | |||||||
United Mexican States, 6.050%, due 01/11/40 | $ | 120,000 | 145,200 | ||||||||
1,211,863 | |||||||||||
Mongolia: 1.58% | |||||||||||
Development Bank of Mongolia LLC, 5.750%, due 03/21/171 | 200,000 | 192,500 | |||||||||
Mongolia Government International Bond, 5.125%, due 12/05/223 | 200,000 | 174,000 | |||||||||
366,500 | |||||||||||
Montenegro: 0.93% | |||||||||||
Republic of Montenegro, 7.250%, due 04/08/161 | EUR | 150,000 | 215,665 | ||||||||
Nigeria: 2.26% | |||||||||||
Nigeria Government Bond, 15.100%, due 04/27/17 | NGN | 27,000,000 | 179,942 | ||||||||
Nigeria Government International Bond, 5.125%, due 07/12/181 | $ | 200,000 | 208,000 | ||||||||
Nigeria Treasury Bills, 4.208%, due 04/09/156 | NGN | 12,500,000 | 70,605 | ||||||||
4.980%, due 04/23/156 | 11,500,000 | 64,682 | |||||||||
523,229 | |||||||||||
Peru: 2.66% | |||||||||||
Peruvian Government International Bond, 5.625%, due 11/18/50 | $ | 20,000 | 22,400 | ||||||||
7.840%, due 08/12/201 | PEN | 1,450,000 | 594,676 | ||||||||
617,076 | |||||||||||
Philippines: 1.52% | |||||||||||
Republic of Philippines, 4.200%, due 01/21/24 | $ | 220,000 | 232,100 | ||||||||
Republic of the Philippines, 4.950%, due 01/15/21 | PHP | 5,000,000 | 120,848 | ||||||||
352,948 | |||||||||||
Poland: 5.03% | |||||||||||
Republic of Poland, 4.750%, due 04/25/17 | PLN | 2,400,000 | 834,614 | ||||||||
5.000%, due 04/25/16 | 800,000 | 274,807 | |||||||||
5.000%, due 03/23/22 | $ | 50,000 | 55,200 | ||||||||
1,164,621 |
25
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Non-US government obligations—(Concluded) | |||||||||||
Romania: 1.09% | |||||||||||
Government of Romania, 5.750%, due 01/27/16 | RON | 300,000 | $ | 98,199 | |||||||
5.900%, due 07/26/17 | 250,000 | 84,674 | |||||||||
6.125%, due 01/22/443 | $ | 50,000 | 56,812 | ||||||||
6.750%, due 02/07/221 | 10,000 | 11,913 | |||||||||
251,598 | |||||||||||
Russia: 2.32% | |||||||||||
Russian Federation, 7.000%, due 01/25/23 | RUB | 2,300,000 | 62,807 | ||||||||
7.050%, due 01/19/28 | 5,000,000 | 131,054 | |||||||||
7.600%, due 04/14/21 | 7,500,000 | 214,528 | |||||||||
8.150%, due 02/03/27 | 4,500,000 | 130,066 | |||||||||
538,455 | |||||||||||
South Africa: 4.64% | |||||||||||
Republic of South Africa, 5.875%, due 09/16/25 | $ | 200,000 | 222,000 | ||||||||
6.250%, due 03/31/36 | ZAR | 1,100,000 | 76,825 | ||||||||
6.750%, due 03/31/21 | 1,800,000 | 158,570 | |||||||||
7.000%, due 02/28/31 | 3,500,000 | 277,222 | |||||||||
7.750%, due 02/28/23 | 1,850,000 | 169,372 | |||||||||
10.500%, due 12/21/26 | 1,000,000 | 109,750 | |||||||||
13.500%, due 09/15/15 | 600,000 | 60,739 | |||||||||
1,074,478 | |||||||||||
Sri Lanka: 1.14% | |||||||||||
Republic of Sri Lanka, 6.250%, due 10/04/201 | $ | 100,000 | 105,750 | ||||||||
6.250%, due 07/27/211 | 150,000 | 158,063 | |||||||||
263,813 | |||||||||||
Thailand: 2.87% | |||||||||||
Government of Thailand, 1.200%, due 07/14/211,5 | THB | 14,928,322 | 443,623 | ||||||||
3.775%, due 06/25/32 | 1,000,000 | 29,545 | |||||||||
3.875%, due 03/07/18 | 200,000 | 6,289 | |||||||||
3.875%, due 06/13/19 | 5,500,000 | 174,884 | |||||||||
5.125%, due 03/13/18 | 300,000 | 9,850 | |||||||||
664,191 | |||||||||||
Turkey: 5.14% | |||||||||||
Export Credit Bank of Turkey, 5.875%, due 04/24/191 | $ | 200,000 | 212,250 | ||||||||
Republic of Turkey, 3.000%, due 02/23/225 | TRY | 478,185 | 242,317 | ||||||||
7.100%, due 03/08/23 | 250,000 | 106,291 |
Face amount | Value | ||||||||||
7.500%, due 11/07/19 | $ | 250,000 | $ | 295,625 | |||||||
8.500%, due 09/14/22 | TRY | 300,000 | 138,655 | ||||||||
9.500%, due 01/12/22 | 400,000 | 196,547 | |||||||||
1,191,685 | |||||||||||
Ukraine: 0.87% | |||||||||||
Government of Ukraine, 9.250%, due 07/24/173 | $ | 200,000 | 201,750 | ||||||||
Venezuela: 2.99% | |||||||||||
Republic of Venezuela, 7.750%, due 10/13/191 | 140,000 | 120,400 | |||||||||
8.250%, due 10/13/241 | 190,000 | 151,525 | |||||||||
9.250%, due 09/15/27 | 100,000 | 85,500 | |||||||||
9.250%, due 05/07/281 | 300,000 | 250,500 | |||||||||
9.375%, due 01/13/34 | 100,000 | 83,750 | |||||||||
691,675 | |||||||||||
Total Non-US government obligations (cost $16,293,760) | 15,500,005 | ||||||||||
Structured notes: 1.78% | |||||||||||
Bangladesh: 1.17% | |||||||||||
Standard Chartered Bank, 11.700%, due 06/14/183 (linked to People's Republic of Bangladesh, 11.700%, due 06/05/18) | 264,780 | 270,516 | |||||||||
Ghana: 0.61% | |||||||||||
Citigroup Funding, Inc., 23.000%, due 08/23/173 (linked to Republic of Ghana, 23.000%, due 08/21/17) | GHS | 500,000 | 140,636 | ||||||||
Total structured notes (cost $523,914) | 411,152 | ||||||||||
Total bonds (cost $22,490,293) | 21,554,836 | ||||||||||
Shares | |||||||||||
Short-term investment: 5.25% | |||||||||||
Investment company: 5.25% | |||||||||||
UBS Cash Management Prime Relationship Fund7 (cost $1,216,930) | 1,216,930 | 1,216,930 | |||||||||
Total investments: 98.31% (cost $23,707,223) | 22,771,766 | ||||||||||
Cash and other assets, less liabilities: 1.69% | 392,057 | ||||||||||
Net assets: 100.00% | $ | 23,163,823 |
26
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $23,707,271; and net unrealized depreciation consisted of:
Gross unrealized appreciation | $ | 469,995 | |||||
Gross unrealized depreciation | (1,405,500 | ) | |||||
Net unrealized depreciation of investments | $ | (935,505 | ) |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 50. Portfolio footnotes begin on page 30.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
BB | EUR | 175,000 | USD | 239,936 | 07/22/14 | $ | 289 | ||||||||||||
BB | IDR | 370,630,000 | USD | 31,237 | 09/17/14 | 432 | |||||||||||||
BB | PEN | 796,000 | USD | 281,900 | 09/17/14 | (167 | ) | ||||||||||||
BB | RUB | 14,520,000 | USD | 414,561 | 09/17/14 | (5,077 | ) | ||||||||||||
BB | USD | 6,558 | PLN | 20,000 | 09/17/14 | (4 | ) | ||||||||||||
BB | USD | 381,236 | TRY | 820,000 | 09/17/14 | (335 | ) | ||||||||||||
BB | USD | 272,952 | ZAR | 2,960,000 | 09/17/14 | 1,763 | |||||||||||||
CIBC | EUR | 170,000 | USD | 234,488 | 07/22/14 | 1,688 | |||||||||||||
CSI | USD | 115,395 | BRL | 264,000 | 09/17/14 | 1,451 | |||||||||||||
CSI | USD | 13,892 | CLP | 7,782,425 | 09/17/14 | 65 | |||||||||||||
CSI | USD | 157,104 | MYR | 507,100 | 09/17/14 | (145 | ) | ||||||||||||
DB | USD | 116,558 | BRL | 267,000 | 09/17/14 | 1,615 | |||||||||||||
DB | USD | 228,652 | INR | 13,687,200 | 09/17/14 | (5,398 | ) | ||||||||||||
DB | USD | 66,857 | KRW | 68,341,600 | 09/17/14 | 475 | |||||||||||||
DB | USD | 178,412 | MXN | 2,338,000 | 09/17/14 | 839 | |||||||||||||
DB | USD | 245,663 | PHP | 10,750,200 | 09/17/14 | 253 | |||||||||||||
DB | USD | 64,951 | THB | 2,120,000 | 09/17/14 | 136 | |||||||||||||
GSI | COP | 79,350,000 | USD | 41,697 | 09/17/14 | (336 | ) | ||||||||||||
GSI | USD | 356,120 | HUF | 80,720,000 | 09/17/14 | (269 | ) | ||||||||||||
GSI | USD | 15,363 | RON | 50,000 | 09/17/14 | 200 | |||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (2,525 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Ultra Bond, 2 contracts (USD) | September 2014 | $ | 301,752 | $ | 299,875 | $ | (1,877 | ) | |||||||||||
10 Year US Treasury Notes, 20 contracts (USD) | September 2014 | 2,514,351 | 2,503,437 | (10,914 | ) | ||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Long Bond, 1 contract (USD) | September 2014 | (137,787 | ) | (137,187 | ) | 600 | |||||||||||||
5 Year US Treasury Notes, 18 contracts (USD) | September 2014 | (2,157,592 | ) | (2,150,297 | ) | 7,295 | |||||||||||||
Net unrealized depreciation on futures contracts | $ | (4,896 | ) |
27
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Currency swap agreements8
Notional Amount | |||||||||||||||||||||||||||||||||||
Counterparty | Pay contracts | Receive contracts | Termination date | Pay rate9 | Receive rate9 | Upfront payments | Value | Unrealized appreciation | |||||||||||||||||||||||||||
BB | PHP | 8,238,200 | USD | 200,614 | 12/18/15 | 1.300 | % | 6 month USD LIBOR | $ | — | $ | 11,092 | $ | 11,092 |
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund9 | Payments received by the Fund9 | Upfront payments | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
CITI | BRL | 617,573 | 01/02/17 | 1 Day CDI | 12.280 | % | $ | — | $ | 6,605 | $ | 6,605 | |||||||||||||||||||
CITI | BRL | 256,675 | 01/04/21 | 12.570 | % | 1 Day CDI | — | (6,032 | ) | (6,032 | ) | ||||||||||||||||||||
CITI | MXN | 2,550,000 | 03/21/19 | 5.510 | 1 month MXIBTIIE | — | (5,774 | ) | (5,774 | ) | |||||||||||||||||||||
CITI | MXN | 1,500,000 | 03/14/24 | 1 month MXIBTIIE | 6.570 | — | 4,965 | 4,965 | |||||||||||||||||||||||
DB | BRL | 865,272 | 01/02/17 | 1 Day CDI | 8.645 | — | (27,772 | ) | (27,772 | ) | |||||||||||||||||||||
GSI | KRW | 892,000,000 | 01/21/19 | 3.380 | 3 month CD KSDA | — | (12,430 | ) | (12,430 | ) | |||||||||||||||||||||
MLI | MXN | 3,300,000 | 03/05/19 | 5.530 | 1 month MXNTIIE | — | (7,984 | ) | (7,984 | ) | |||||||||||||||||||||
MLI | ZAR | 2,000,000 | 06/04/18 | 3 month JIBAR | 6.400 | — | (6,009 | ) | (6,009 | ) | |||||||||||||||||||||
$ | (54,431 | ) | $ | (54,431 | ) |
Credit default swaps on credit indices—buy protection10
Counterparty | Referenced index11 | Notional amount | Termination date | Payments made by the Fund9 | Upfront payments received | Value | Unrealized depreciation | ||||||||||||||||||||||||
GSI | CDX.EM.Series 21 Index | USD | 700,000 | 06/20/19 | 5.000 | % | $ | 74,232 | $ | (84,629 | ) | $ | (10,397 | ) | |||||||||||||||||
MLI | CDX.EM.Series 20 Index | USD | 300,000 | 12/20/18 | 5.000 | 19,465 | (33,795 | ) | (14,330 | ) | |||||||||||||||||||||
$ | 93,697 | $ | (118,424 | ) | $ | (24,727 | ) |
Credit default swaps on sovereign issues—buy protection10
Counterparty | Referenced obligation11 | Notional amount | Termination date | Payments made by the Fund9 | Upfront payments made | Value | Unrealized depreciation | ||||||||||||||||||||||||
DB | Federation of Russia bond, 7.500%, due 03/31/30 | USD | 90,000 | 03/20/16 | 1.000 | % | $ | (1,296 | ) | $ | 56 | $ | (1,240 | ) |
28
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Credit default swaps on sovereign issues—sell protection12
Counterparty | Referenced obligation11 | Notional amount | Termination date | Payments received by the Fund9 | Upfront payments received | Value | Unrealized appreciation | Credit spread13 | |||||||||||||||||||||||||||
BB | Federation of Russia bond, 7.500%, due 03/31/30 | USD | 300,000 | 12/20/22 | 1.000 | % | $ | 23,988 | $ | (23,966 | ) | $ | 22 | 2.110 | % | ||||||||||||||||||||
GSI | United Mexican States bond, 5.950%, due 03/19/19 | USD | 250,000 | 09/20/22 | 1.000 | 15,632 | (277 | ) | 15,355 | 1.020 | |||||||||||||||||||||||||
GSI | Federative Republic of Brazil bond, 12.250%, due 03/06/30 | USD | 250,000 | 09/20/22 | 1.000 | 19,720 | (15,327 | ) | 4,393 | 1.860 | |||||||||||||||||||||||||
$ | 59,340 | $ | (39,570 | ) | $ | 19,770 |
Options written
Foreign exchange written options activity for the year ended June 30, 2014 was as follows:
Premiums received | |||||||
Foreign exchange options outstanding at June 30, 2013 | $ | 42,727 | |||||
Foreign exchange options written | 24,690 | ||||||
Foreign exchange options terminated in closing purchase transactions | (65,814 | ) | |||||
Foreign exchange options expired prior to exercise | (1,603 | ) | |||||
Foreign exchange options outstanding at June 30, 2014 | $ | — |
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 5,643,679 | $ | — | $ | 5,643,679 | |||||||||||
Non-US government obligations | — | 15,500,005 | — | 15,500,005 | |||||||||||||||
Structured notes | — | 411,152 | — | 411,152 | |||||||||||||||
Short-term investment | — | 1,216,930 | — | 1,216,930 | |||||||||||||||
Forward foreign currency contracts | — | 9,206 | — | 9,206 | |||||||||||||||
Futures contracts | 7,895 | — | — | 7,895 | |||||||||||||||
Swap agreements | — | 22,718 | — | 22,718 | |||||||||||||||
Total | $ | 7,895 | $ | 22,803,690 | $ | — | $ | 22,811,585 | |||||||||||
Liabilities | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (11,731 | ) | $ | — | $ | (11,731 | ) | |||||||||
Futures contracts | (12,791 | ) | — | — | (12,791 | ) | |||||||||||||
Swap agreements | — | (223,995 | ) | — | (223,995 | ) | |||||||||||||
Total | $ | (12,791 | ) | $ | (235,726 | ) | $ | — | $ | (248,517 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
29
UBS Emerging Markets Debt Fund
Portfolio of investments
June 30, 2014
Portfolio footnotes
1 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of these securities amounted to $8,405,551 or 36.29% of net assets.
2 Variable or floating rate security—the interest rate shown is the current rate as of June 30, 2014 and changes periodically.
3 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of these securities amounted to $1,871,963 or 8.08% of net assets.
4 Security pays, when required, a floating rate that is determined annually based on the Argentina GDP.
5 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional government security of the same maturity.
6 Rate shown is the discount rate at date of purchase.
7 The table below details the Fund's investment in a fund advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 671,558 | $ | 7,622,705 | $ | 7,077,333 | $ | 1,216,930 | $ | 1,688 |
8 Illiquid investment as of June 30, 2014.
9 Payments made or received are based on the notional amount.
10 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
11 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
12 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation.
13 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity. Credit spreads are unaudited.
See accompanying notes to financial statements.
30
UBS Fixed Income Opportunities Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Fixed Income Opportunities Fund (the "Fund") declined 1.14% (Class A shares fell 5.58% after the deduction of the maximum sales charge), while Class Y shares declined 0.99%. For comparison purposes, The BofA Merrill Lynch US Dollar 3-Month Deposit Offered Rate Constant Maturity Index (the "Index") gained 0.26% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 33; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund generated a negative return during the reporting period. Factors driving this weak performance included interest rate strategies, exposure to emerging markets debt and active currency management. These negatives more than offset the positive impact from the Fund's credit assets.
The Fund extensively uses derivatives as part of its investment strategy across global interest rate, credit and currency markets. To facilitate specific duration and yield curve strategies, the Fund utilized different interest rate derivatives, including, but not limited to, futures, options, swaps and swaptions. Credit default swaps, credit default swaptions and, to a more limited extent, total return swaps were used to help implement credit-related investment strategies as part of the Fund's sector allocation and security selection. Lastly, the Fund utilized currency derivatives, such as currency forwards and swaps, as part of its currency management strategy.
While derivatives play a role in the overall portfolio construction process, they are just one of the tools we utilize to manage the Fund's overall risk exposure and to implement the aforementioned strategies. That said, the Fund's active interest rate strategies detracted from results. While most spread sector1 hedging strategies generally detracted from performance, spread management overall was additive to results. Currency positioning negatively contributed to results during the reporting period.
Portfolio performance summary2
What worked
• The Fund's allocation to several spread sectors was positive for results during the reporting period.
– The Fund's allocations to corporate bonds were rewarded. High yield bonds in particular performed very well as investors sought additional yield in the low interest rate environment. Credit markets experienced strong fundamentals as defaults and volatility remained low, while demand for new issuance was high.
– Securitized assets contributed to performance during the period, particularly the Fund's holdings of commercial mortgage-backed securities, as they outperformed other spread products. We think these securities offer the most attractive yield profiles on a risk-adjusted basis. Mortgage-backed securities also contributed to performance during the period.
– The Fund's allocation to collateralized loan obligations, which were tactically traded and increased over the period, contributed modestly to results.
1 A spread sector refers to non-government fixed income sectors, such as investment grade or high yield bonds, commercial mortgage-backed securities (CMBS), etc.
2 For a detailed commentary on the market environment in general during the reporting period, see page 3.
31
UBS Fixed Income Opportunities Fund
What didn't work
• The Fund's allocation to emerging markets debt detracted from performance. The Fund's exposure to US dollar-denominated emerging-market bonds detracted from performance in the first part of the reporting period, but was additive in recent months. Growth in emerging markets slowed considerably as some developing countries dealt with structural problems, while the initial delay of the US Federal Reserve Board's tapering of its asset-purchase program increased volatility globally.
• Interest rate strategies generally detracted from results during the reporting period. The Fund was generally positioned for higher US interest rates and higher volatility in interest rate markets, neither of which materialized during the reporting period.
• Overall, currency positioning was a negative for performance. We traded the euro with a bias toward short positioning versus the US dollar. This detracted from results as the euro remained resilient and strengthened versus the US dollar during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed for the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
32
UBS Fixed Income Opportunities Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class A2 | (1.14 | )% | 1.96 | % | |||||||
Class C3 | (1.65 | ) | 1.44 | ||||||||
Class Y4 | (0.99 | ) | 2.23 | ||||||||
After deducting maximum sales charge | |||||||||||
Class A2 | (5.58 | )% | 0.66 | % | |||||||
Class C3 | (2.39 | ) | 1.44 | ||||||||
BofA Merrill Lynch US Dollar 3-Month Deposit Offered Rate Constant Maturity Index5 | 0.26 | % | 0.34 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.52% and 1.05%; Class C—2.02% and 1.55%; Class Y—1.23% and 0.80%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 0.95% for Class A shares, 1.45% for Class C shares and 0.70% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS Fixed Income Opportunities Fund and the index is November 29, 2010.
2 Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The BofA Merrill Lynch US Dollar 3-Month Deposit Offered Rate Constant Maturity Index (formerly BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index) is designed to track the performance of a synthetic asset paying LIBOR to a stated maturity. The index is based on the assumed purchase at par of a synthetic instrument having exactly its stated maturity and with a coupon equal to that day's fixing rate. That issue is assumed to be sold the following business day (priced at a yield equal to the current day fixing rate) and rolled into a new instrument. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
33
UBS Fixed Income Opportunities Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Fixed Income Opportunities Fund Class A and Class Y shares versus the BofA Merrill Lynch US Dollar 3-Month Deposit Offered Rate Constant Maturity Index (formerly BofA Merrill Lynch US Dollar 3-Month LIBOR Constant Maturity Index) from November 29, 2010, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
34
UBS Fixed Income Opportunities Fund
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
US Treasury Notes, 2.000%, due 02/15/22 | 6.7 | % | |||||
Lloyds Bank PLC, 6.500%, due 03/24/20 | 2.4 | ||||||
Citigroup, Inc., 0.843%, due 05/31/17 | 2.3 | ||||||
Petrobras International Finance Co., 5.375%, due 01/27/21 | 1.7 | ||||||
Sanmina-SCI Corp., 7.000%, due 05/15/19 | 1.6 | ||||||
Royal Bank of Scotland Group PLC, 6.100%, due 06/10/23 | 1.6 | ||||||
EDP Finance BV, 4.750%, due 09/26/16 | 1.6 | ||||||
Intelsat Jackson Holdings SA, 7.500%, due 04/01/21 | 1.6 | ||||||
Case New Holland Industrial, Inc., 7.875%, due 12/01/17 | 1.5 | ||||||
US Treasury Bonds, PO, 4.734%, due 05/15/40 | 1.5 | ||||||
Total | 22.5 | % |
Country exposure by issuer, top five (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
United States | 51.0 | % | |||||
United Kingdom | 5.1 | ||||||
Brazil | 3.9 | ||||||
Luxembourg | 3.7 | ||||||
Netherlands | 3.4 | ||||||
Total | 67.1 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Bonds | |||||||
Corporate bonds | |||||||
Banks | 17.03 | % | |||||
Capital markets | 0.29 | ||||||
Chemicals | 0.49 | ||||||
Commercial services & supplies | 0.87 | ||||||
Construction materials | 3.25 | ||||||
Consumer finance | 1.48 | ||||||
Containers & packaging | 1.27 | ||||||
Diversified financial services | 2.90 | ||||||
Diversified telecommunication services | 2.03 | ||||||
Electronic equipment, instruments & components | 3.10 | ||||||
Energy equipment & services | 0.72 | ||||||
Food & staples retailing | 0.38 | ||||||
Gas utilities | 0.32 | ||||||
Hotels, restaurants & leisure | 2.03 | ||||||
Insurance | 2.63 | ||||||
Machinery | 1.53 | ||||||
Media | 2.36 | ||||||
Metals & mining | 3.37 | ||||||
Oil, gas & consumable fuels | 7.92 | ||||||
Real estate management & development | 0.92 | ||||||
Tobacco | 0.33 | ||||||
Trading companies & distributors | 1.56 | ||||||
Transportation infrastructure | 0.72 | ||||||
Total corporate bonds | 57.50 | % | |||||
Collateralized debt obligations | 7.96 | ||||||
Commercial mortgage-backed securities | 2.85 | ||||||
Mortgage & agency debt securities | 3.21 | ||||||
Municipal bonds | 2.37 | ||||||
US government obligations | 9.14 | ||||||
Non-US government obligations | 2.42 | ||||||
Total bonds | 85.45 | % | |||||
Investment company | |||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund | 17.85 | ||||||
Short-term investment | 1.70 | ||||||
Options purchased | 2.75 | ||||||
Total investments | 107.75 | % | |||||
Liabilities, in excess of cash and other assets | (7.75 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Fixed Income Opportunities Fund. Figures might be different if a breakdown of the underlying investment companies was included.
35
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds: 85.45% | |||||||||||
Corporate bonds: 57.50% | |||||||||||
Australia: 1.61% | |||||||||||
Crown Group Finance Ltd., 5.750%, due 07/18/17 | AUD | 620,000 | $ | 611,566 | |||||||
Sydney Airport Finance Co., Pty Ltd., 8.000%, due 07/06/15 | 500,000 | 491,791 | |||||||||
Total Australia corporate bonds | 1,103,357 | ||||||||||
Brazil: 3.85% | |||||||||||
Banco do Brasil SA, 9.000%, due 06/18/241,2,3 | $ | 285,000 | 283,575 | ||||||||
Caixa Economica Federal, 2.375%, due 11/06/171 | 870,000 | 848,250 | |||||||||
Petrobras International Finance Co., 5.375%, due 01/27/21 | 1,150,000 | 1,191,975 | |||||||||
Vale Overseas Ltd., 4.375%, due 01/11/22 | 300,000 | 308,010 | |||||||||
Total Brazil corporate bonds | 2,631,810 | ||||||||||
Canada: 0.29% | |||||||||||
Barrick Gold Corp., 3.850%, due 04/01/22 | 200,000 | 198,984 | |||||||||
China: 1.24% | |||||||||||
China Oil & Gas Group Ltd., 5.250%, due 04/25/181 | 210,000 | 215,775 | |||||||||
Gemdale International Investment Ltd., 7.125%, due 11/16/174 | 200,000 | 205,500 | |||||||||
Kaisa Group Holdings Ltd., 10.250%, due 01/08/204 | 400,000 | 421,000 | |||||||||
Total China corporate bonds | 842,275 | ||||||||||
Croatia: 0.38% | |||||||||||
Agrokor DD, 8.875%, due 02/01/201 | 230,000 | 257,956 | |||||||||
France: 0.56% | |||||||||||
Credit Agricole SA, 7.875%, due 01/23/241,2,3 | 350,000 | 382,375 | |||||||||
Germany: 3.00% | |||||||||||
HeidelbergCement Finance BV, 8.500%, due 10/31/194 | EUR | 450,000 | 800,090 | ||||||||
Trionista Holdco GmbH, 5.000%, due 04/30/201 | 360,000 | 515,969 | |||||||||
Unitymedia GmbH, 9.625%, due 12/01/194 | 500,000 | 734,471 | |||||||||
Total Germany corporate bonds | 2,050,530 |
Face amount | Value | ||||||||||
Ireland: 1.27% | |||||||||||
Ardagh Packaging Finance PLC, 7.375%, due 10/15/174 | EUR | 600,000 | $ | 864,713 | |||||||
Luxembourg: 3.70% | |||||||||||
ArcelorMittal, 6.000%, due 03/01/21 | $ | 900,000 | 974,250 | ||||||||
Intelsat Jackson Holdings SA, 7.500%, due 04/01/21 | 975,000 | 1,067,625 | |||||||||
Pacific Drilling SA, 5.375%, due 06/01/201 | 500,000 | 490,000 | |||||||||
Total Luxembourg corporate bonds | 2,531,875 | ||||||||||
Mexico: 1.55% | |||||||||||
Cemex SAB de CV, 5.875%, due 03/25/191 | 400,000 | 418,000 | |||||||||
9.000%, due 01/11/181 | 600,000 | 644,100 | |||||||||
Total Mexico corporate bonds | 1,062,100 | ||||||||||
Netherlands: 3.39% | |||||||||||
Basell Finance Co. BV, 8.100%, due 03/15/271 | 250,000 | 335,855 | |||||||||
EDP Finance BV, 4.750%, due 09/26/164 | EUR | 750,000 | 1,097,949 | ||||||||
4.900%, due 10/01/191 | $ | 500,000 | 528,800 | ||||||||
Generali Finance BV, 6.214%, due 06/16/162,3 | GBP | 200,000 | 355,116 | ||||||||
Total Netherlands corporate bonds | 2,317,720 | ||||||||||
Norway: 1.61% | |||||||||||
Eksportfinans ASA, 5.500%, due 05/25/16 | $ | 780,000 | 830,700 | ||||||||
5.500%, due 06/26/17 | 250,000 | 267,800 | |||||||||
Total Norway corporate bonds | 1,098,500 | ||||||||||
Spain: 2.25% | |||||||||||
BBVA US Senior SAU, 4.664%, due 10/09/15 | 500,000 | 522,756 | |||||||||
Santander US Debt SA Unipersonal, 3.724%, due 01/20/151 | 1,000,000 | 1,014,798 | |||||||||
Total Spain corporate bonds | 1,537,554 | ||||||||||
Switzerland: 0.29% | |||||||||||
Credit Suisse Group AG, 6.250%, due 12/18/241,2,3 | 200,000 | 200,760 | |||||||||
United Kingdom: 5.05% | |||||||||||
Barclays Bank PLC, 5.140%, due 10/14/20 | 100,000 | 109,530 | |||||||||
HBOS PLC, 6.750%, due 05/21/181 | 500,000 | 576,014 |
36
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Concluded) | |||||||||||
United Kingdom—(Continued) | |||||||||||
Lloyds Bank PLC, 6.500%, due 03/24/204 | EUR | 1,000,000 | $ | 1,664,094 | |||||||
Royal Bank of Scotland Group PLC, 6.100%, due 06/10/23 | $ | 1,010,000 | 1,105,540 | ||||||||
Total United Kingdom corporate bonds | 3,455,178 | ||||||||||
United States: 27.46% | |||||||||||
ADT Corp., 3.500%, due 07/15/22 | 650,000 | 591,500 | |||||||||
Allstate Corp., 5.750%, due 08/15/532 | 400,000 | 429,622 | |||||||||
Bank of America Corp., 4.625%, due 09/14/18 | EUR | 590,000 | 898,774 | ||||||||
Barrick North America Finance LLC, 5.750%, due 05/01/43 | $ | 425,000 | 440,256 | ||||||||
Caesars Entertainment Operating Co., Inc., 11.250%, due 06/01/17 | 850,000 | 777,750 | |||||||||
Case New Holland Industrial, Inc., 7.875%, due 12/01/17 | 900,000 | 1,048,500 | |||||||||
Cemex Finance LLC, 6.000%, due 04/01/241 | 350,000 | 364,437 | |||||||||
CIT Group, Inc., 5.000%, due 05/15/17 | 500,000 | 532,812 | |||||||||
5.000%, due 08/15/22 | 275,000 | 284,625 | |||||||||
Citigroup, Inc., 0.843%, due 05/31/172 | EUR | 1,150,000 | 1,551,075 | ||||||||
5.500%, due 09/13/25 | $ | 550,000 | 613,508 | ||||||||
6.300%, due 05/15/242,3 | 150,000 | 152,812 | |||||||||
DISH DBS Corp., 7.875%, due 09/01/19 | 740,000 | 878,750 | |||||||||
El Paso LLC, 7.250%, due 06/01/18 | 900,000 | 1,024,875 | |||||||||
Energy Transfer Partners LP, 6.050%, due 06/01/41 | 380,000 | 431,616 | |||||||||
Fidelity National Financial, Inc., 5.500%, due 09/01/22 | 110,000 | 120,058 | |||||||||
Flextronics International Ltd., 5.000%, due 02/15/23 | 470,000 | 485,828 | |||||||||
Frontier Communications Corp., 7.125%, due 01/15/23 | 300,000 | 318,000 | |||||||||
General Motors Financial Co., Inc., 4.750%, due 08/15/17 | 500,000 | 531,875 | |||||||||
Glencore Funding LLC, 4.625%, due 04/29/241 | 375,000 | 386,588 | |||||||||
International Lease Finance Corp., 8.625%, due 09/15/15 | 700,000 | 757,750 |
Face amount | Value | ||||||||||
Kinder Morgan Finance Co. LLC, 5.700%, due 01/05/16 | $ | 830,000 | $ | 871,500 | |||||||
MetLife, Inc., 6.400%, due 12/15/36 | 570,000 | 636,975 | |||||||||
Midstates Petroleum Co., Inc., 10.750%, due 10/01/20 | 500,000 | 567,500 | |||||||||
Navient Corp., 3.875%, due 09/10/15 | 470,000 | 479,400 | |||||||||
Plains Exploration & Production Co., 6.500%, due 11/15/20 | 770,000 | 859,513 | |||||||||
6.875%, due 02/15/23 | 170,000 | 198,900 | |||||||||
Prudential Financial, Inc., 5.200%, due 03/15/442 | 385,000 | 392,700 | |||||||||
5.875%, due 09/15/422 | 200,000 | 217,250 | |||||||||
Reynolds American, Inc., 6.150%, due 09/15/43 | 200,000 | 229,029 | |||||||||
Sabine Pass Liquefaction LLC, 6.250%, due 03/15/221 | 250,000 | 271,875 | |||||||||
Sanmina-SCI Corp., 7.000%, due 05/15/191 | 1,060,000 | 1,115,650 | |||||||||
WESCO Distribution, Inc., 5.375%, due 12/15/211 | 300,000 | 306,750 | |||||||||
Total United States corporate bonds | 18,768,053 | ||||||||||
Total corporate bonds (cost $37,384,370) | 39,303,740 | ||||||||||
Collateralized debt obligations: 7.96% | |||||||||||
Cayman Islands: 1.99% | |||||||||||
Babson CLO Ltd., Series 2013-IIA, Class B1, 2.929%, due 01/18/251,2 | 650,000 | 631,366 | |||||||||
CIFC Funding Ltd., Series 2013-3A, Class B, 2.906%, due 10/24/251,2 | 400,000 | 388,932 | |||||||||
Race Point VIII CLO Ltd., Series 2013-8A, Class C, 3.029%, due 02/20/251,2 | 350,000 | 338,002 | |||||||||
Total Cayman Islands collateralized debt obligations | 1,358,300 | ||||||||||
United States: 5.97% | |||||||||||
Apidos XIV CLO, Series 2013-14A, Class C1, 3.076%, due 04/15/251,2 | 300,000 | 294,000 | |||||||||
Ares XXVII CLO Ltd., Series 2013-2A, Class C, 2.978%, due 07/28/251,2 | 500,000 | 486,250 |
37
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Collateralized debt obligations—(Concluded) | |||||||||||
United States—(Continued) | |||||||||||
BlueMountain CLO Ltd., Series 2013-1A, Class B, 2.874%, due 05/15/251,2 | $ | 500,000 | $ | 486,755 | |||||||
Series 2013-4A, Class C, 2.884%, due 04/15/251,2 | 300,000 | 294,780 | |||||||||
Denali Capital CLO X Ltd., Series 2013-1A, Class A3L, 3.128%, due 04/28/251,2 | 550,000 | 536,250 | |||||||||
Galaxy CLO XV Ltd., Series 2013-15A, Class C, 2.826%, due 04/15/251,2 | 500,000 | 481,250 | |||||||||
Galaxy CLO XVI Ltd., Series 2013-16A, Class C, 2.751%, due 11/16/251,2 | 500,000 | 480,750 | |||||||||
KKR Financial CLO Trust, Series 2013-1A, Class B, 2.826%, due 07/15/251,2 | 300,000 | 282,330 | |||||||||
Marathon CLO V Ltd., Series 2013-5A, Class A2A, 2.577%, due 02/21/251,2 | 400,000 | 399,569 | |||||||||
Octagon Investment Partners XVII Ltd., Series 2013-1A, Class C, 3.039%, due 10/25/251,2 (cost $340,297) | 350,000 | 346,675 | |||||||||
Total United States collateralized debt obligations | 4,088,609 | ||||||||||
Total collateralized debt obligations (cost $5,135,726) | 5,446,909 | ||||||||||
Commercial mortgage-backed securities: 2.85% | |||||||||||
United States: 2.85% | |||||||||||
Americold 2010 LLC Trust, Series 2010-ARTA, Class D, 7.443%, due 01/14/291 | 290,000 | 333,918 | |||||||||
BAMLL Commercial Mortgage Securities Trust, Series 2013-DSNY, Class E, 2.752%, due 09/15/261,2 | 200,000 | 200,996 | |||||||||
Boca Hotel Portfolio Trust, Series 2013-BOCA, Class D, 3.202%, due 08/15/261,2 | 400,000 | 401,143 | |||||||||
Commercial Mortgage Pass Through Certificates, Series 2013-THL, Class D, 2.801%, due 06/08/301,2 | 450,000 | 452,255 |
Face amount | Value | ||||||||||
Series 2013-FL3, Class MMHP, 3.752%, due 10/13/281,2 | $ | 300,000 | $ | 304,683 | |||||||
GS Mortgage Securities Corp. II, Series 2013-KYO, Class D, 2.751%, due 11/08/291,2 | 250,000 | 254,542 | |||||||||
Total commercial mortgage-backed securities (cost $1,926,307) | 1,947,537 | ||||||||||
Mortgage & agency debt securities: 3.21% | |||||||||||
United States: 3.21% | |||||||||||
Federal Home Loan Mortgage Corp. REMIC, IO,5 3.000%, due 05/15/27 | 1,162,121 | 125,424 | |||||||||
3.500%, due 10/15/42 | 1,640,223 | 353,455 | |||||||||
Federal National Mortgage Association REMIC, IO,5 Series 2013-15, Class IO, 2.500%, due 03/25/28 | 2,084,900 | 226,457 | |||||||||
Series 2013-87, Class IW, 2.500%, due 06/25/28 | 3,692,828 | 394,836 | |||||||||
Series 2013-64, Class LI, 3.000%, due 06/25/33 | 2,304,049 | 384,811 | |||||||||
Series 2012-146, Class IO, 3.500%, due 01/25/43 | 1,658,492 | 355,655 | |||||||||
Government National Mortgage Association, IO, Series 2013-22, Class IO, 3.000%, due 02/20/43 | 1,626,089 | 353,290 | |||||||||
Total mortgage & agency debt securities (cost $2,064,490) | 2,193,928 | ||||||||||
Municipal bonds: 2.37% | |||||||||||
State of California, GO Bonds, 7.300%, due 10/01/39 | 500,000 | 704,165 | |||||||||
7.550%, due 04/01/39 | 200,000 | 297,602 | |||||||||
State of Illinois, GO Bonds, 5.665%, due 03/01/18 | 555,000 | 616,638 | |||||||||
Total municipal bonds (cost $1,358,074) | 1,618,405 | ||||||||||
US government obligations: 9.14% | |||||||||||
US Treasury Bonds, PO, 3.174%, due 08/15/426,7 | 1,750,000 | 660,174 | |||||||||
4.734%, due 05/15/406,7 | 2,500,000 | 1,038,385 | |||||||||
US Treasury Notes 2.000%, due 02/15/22 | 4,621,000 | 4,549,157 | |||||||||
Total US government obligations (cost $6,199,736) | 6,247,716 |
38
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Non-US government obligations: 2.42% | |||||||||||
Croatia: 0.79% | |||||||||||
Republic of Croatia, 6.250%, due 04/27/174 | $ | 500,000 | $ | 539,375 | |||||||
Greece: 1.63% | |||||||||||
Hellenic Republic, 2.000%, due 02/24/244,8 | EUR | 400,000 | 442,667 | ||||||||
2.000%, due 02/24/264,8 | 220,000 | 229,089 | |||||||||
2.000%, due 02/24/314,8 | 460,000 | 441,217 | |||||||||
1,112,973 | |||||||||||
Total Non-US government obligations (cost $1,421,094) | 1,652,348 | ||||||||||
Total bonds (cost $55,830,094) | 58,410,583 | ||||||||||
Shares | |||||||||||
Investment company: 17.85% | |||||||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund*9 (cost $11,349,025) | 623,508 | 12,199,300 | |||||||||
Short-term investment: 1.70% | |||||||||||
Investment company: 1.70% | |||||||||||
UBS Cash Management Prime Relationship Fund9 (cost $1,161,062) | 1,161,062 | 1,161,062 | |||||||||
Number of contracts | |||||||||||
Options purchased: 2.75% | |||||||||||
Call options: 0.57% | |||||||||||
30 Year US Treasury Bonds, strike @ USD 137.00, expires July 2014 | 163 | 175,734 | |||||||||
30 Year US Treasury Bonds, strike @ USD 139.00, expires July 2014 | 141 | 46,266 | |||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 97.88, expires September 2014 | 152 | 167,200 | |||||||||
389,200 | |||||||||||
Put options: 0.53% | |||||||||||
3 Year Euro-Dollar Midcurve, strike @ USD 97.75, expires June 2016 | 105 | 47,906 |
Number of contracts | Value | ||||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 98.25, expires September 2014 | 140 | $ | 45,500 | ||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 97.75, expires December 2014 | 210 | 70,875 | |||||||||
2 Year Euro-Dollar Midcurve, strike @ USD 97.88, expires September 2014 | 152 | 11,400 | |||||||||
10 Year US Treasury Notes, strike @ USD 124.00, expires July 2014 | 97 | 16,672 | |||||||||
30 Year US Treasury Bonds, strike @ USD 133.00, expires July 2014 | 163 | 12,734 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires June 2015 | 361 | 54,150 | |||||||||
30 Year US Treasury Bonds, strike @ USD 135.00, expires July 2014 | 223 | 62,719 | |||||||||
1 Year Euro-Dollar Midcurve, strike @ USD 99.25, expires July 2014 | 388 | 19,400 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.25, expires March 2015 | 234 | 5,850 | |||||||||
90 Day Euro-Dollar Time Deposit, strike @ USD 99.38, expires September 2014 | 203 | 1,269 | |||||||||
1 Year Euro-Dollar Midcurve, strike @ USD 99.13, expires July 2014 | 49 | 306 | |||||||||
US Ultra Bond, strike @ USD 142.00, expires August 2014 | 63 | 15,750 | |||||||||
364,531 | |||||||||||
Notional amount | |||||||||||
Options purchased on interest rate swaps10: 1.65% | |||||||||||
Expiring 01/17/18. If option exercised the Fund pays semi-annually 4.380% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 01/19/48. European style. Counterparty: JPMCB | $ | 3,222,000 | 155,144 |
39
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Notional amount | Value | ||||||||||
Options purchased—(Continued) | |||||||||||
Options purchased on interest rate swaps10—(Continued) | |||||||||||
Expiring 05/22/15. If option exercised the Fund pays semi-annually 2.350% and receives semi-annually floating 6 month JPY LIBOR. Underlying interest rate swap terminating 05/27/35. European style. Counterparty: BB | JPY | 350,000,000 | $ | 5,922 | |||||||
Expiring 06/17/15. If option exercised the Fund pays semi-annually 2.190% and receives semi-annually floating 6 month GBP LIBOR. Underlying interest rate swap terminating 06/17/17. European style. Counterparty: JPMCB | GBP | 9,120,000 | 72,650 | ||||||||
Expiring 06/17/15. If option exercised the Fund receives semi-annually 2.190% and pays semi-annually floating 6 month GBP LIBOR. Underlying interest rate swap terminating 06/17/17. European style. Counterparty: JPMCB | GBP | 9,120,000 | 102,249 | ||||||||
Expiring 09/30/14. If option exercised the Fund pays annually 1.700% and receives semi-annually floating 6 month EURIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI | EUR | 15,800,000 | 2 | ||||||||
Expiring 09/30/14. If option exercised the Fund pays semi-annually 1.300% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI | $ | 26,350,000 | 3,223 | ||||||||
Expiring 11/02/15. If option exercised the Fund pays semi-annually 6.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: DB | 3,050,000 | 1,347 |
Notional amount | Value | ||||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | $ | 3,500,000 | $ | 127,290 | |||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | 8,650,000 | 314,174 | |||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | 3,500,000 | 5,231 | |||||||||
Expiring 12/07/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB | 8,650,000 | 12,888 | |||||||||
Expiring 12/19/17. If option exercised the Fund pays semi-annually 3.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: BB | 8,650,000 | 316,698 |
40
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Notional amount | Value | ||||||||||
Options purchased—(Concluded) | |||||||||||
Options purchased on interest rate swaps10—(Concluded) | |||||||||||
Expiring 12/19/17. If option exercised the Fund pays semi-annually 7.000% and receives quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: BB | $ | 8,650,000 | $ | 13,222 | |||||||
1,130,040 | |||||||||||
Total options purchased (cost $3,070,199) | 1,883,771 | ||||||||||
Total investments: 107.75% (cost $71,410,380) | 73,654,716 | ||||||||||
Liabilities, in excess of cash and other assets: (7.75%) | (5,294,854 | ) | |||||||||
Net assets: 100.00% | $ | 68,359,862 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $75,035,577; and net unrealized depreciation consisted of:
Gross unrealized appreciation | $ | 1,704,692 | |||||
Gross unrealized depreciation | (3,085,553 | ) | |||||
Net unrealized depreciation of investments | $ | (1,380,861 | ) |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 50. Portfolio footnotes begin on page 49.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
JPMCB | AUD | 2,050,000 | USD | 1,881,575 | 09/04/14 | $ | (42,449 | ) | |||||||||||
JPMCB | CHF | 1,430,000 | USD | 1,593,430 | 09/04/14 | (19,996 | ) | ||||||||||||
JPMCB | GBP | 265,000 | USD | 442,396 | 09/04/14 | (10,886 | ) | ||||||||||||
JPMCB | JPY | 187,700,000 | USD | 1,845,995 | 09/04/14 | (7,702 | ) | ||||||||||||
JPMCB | USD | 399,477 | CAD | 435,000 | 09/04/14 | 7,531 | |||||||||||||
JPMCB | USD | 196,330 | CHF | 175,000 | 09/04/14 | 1,118 | |||||||||||||
JPMCB | USD | 1,423,145 | EUR | 1,045,000 | 09/04/14 | 8,124 | |||||||||||||
JPMCB | USD | 288,957 | JPY | 29,400,000 | 09/04/14 | 1,393 | |||||||||||||
MSCI | EUR | 9,595,000 | USD | 13,049,907 | 09/04/14 | (91,748 | ) | ||||||||||||
MSCI | JPY | 81,087,180 | USD | 790,000 | 09/04/14 | (10,805 | ) | ||||||||||||
MSCI | NZD | 925,000 | USD | 773,541 | 09/04/14 | (31,396 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (196,816 | ) |
41
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Ultra Bond, 57 contracts (USD) | September 2014 | $ | 8,549,786 | $ | 8,546,437 | $ | (3,349 | ) | |||||||||||
2 Year US Treasury Notes, 26 contracts (USD) | September 2014 | 5,712,311 | 5,709,438 | (2,873 | ) | ||||||||||||||
5 Year US Treasury Notes, 36 contracts (USD) | September 2014 | 4,298,199 | 4,300,594 | 2,395 | |||||||||||||||
10 Year US Treasury Notes, 16 contracts (USD) | September 2014 | 1,993,020 | 2,002,750 | 9,730 | |||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Long Bond, 59 contracts (USD) | September 2014 | (8,087,334 | ) | (8,094,063 | ) | (6,729 | ) | ||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | December 2014 | 10,915,728 | 10,936,873 | 21,145 | |||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | March 2015 | 10,907,261 | 10,936,325 | 29,064 | |||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | June 2015 | 10,896,547 | 10,935,229 | 38,682 | |||||||||||||||
3 Month EURIBOR, 32 contracts (EUR) | September 2015 | 10,883,941 | 10,933,587 | 49,646 | |||||||||||||||
Euro-Bund, 12 contracts (EUR) | September 2014 | 2,392,687 | 2,415,610 | 22,923 | |||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | September 2014 | (3,987,744 | ) | (3,990,400 | ) | (2,656 | ) | ||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | December 2014 | (3,985,744 | ) | (3,989,000 | ) | (3,256 | ) | ||||||||||||
90 Day Euro-Dollar Time Deposit, 16 contracts (USD) | March 2015 | (3,982,144 | ) | (3,985,800 | ) | (3,656 | ) | ||||||||||||
Euro-BTP, 16 contracts (EUR) | September 2014 | (2,708,666 | ) | (2,764,452 | ) | (55,786 | ) | ||||||||||||
Euro-Bund, 2 contracts (EUR) | September 2014 | (398,830 | ) | (402,602 | ) | (3,772 | ) | ||||||||||||
Net unrealized appreciation on futures contracts | $ | 91,508 |
Currency swap agreements10
Notional Amount | |||||||||||||||||||||||||||||||||||
Counterparty | Pay contracts | Receive contracts | Termination date | Pay rate11 | Receive rate11 | Upfront payments | Value | Unrealized appreciation/ (depreciation) | |||||||||||||||||||||||||||
BB | USD | 7,666,854 | AUD | 8,158,397 | 12/24/22 | 3 month USD LIBOR | 3 month BBSW | $ | — | $ | 69,454 | $ | 69,454 | ||||||||||||||||||||||
CITI | AUD | 8,158,397 | USD | 7,666,854 | 12/24/14 | 3 month BBSW | 3 month USD LIBOR | — | (37,215 | ) | (37,215 | ) | |||||||||||||||||||||||
CITI | JPY | 762,000,000 | USD | 7,453,781 | 03/20/19 | 3 month JPY LIBOR | 3 month USD LIBOR | — | (52,624 | ) | (52,624 | ) | |||||||||||||||||||||||
CITI | USD | 7,453,781 | JPY | 762,000,000 | 03/20/15 | 3 month USD LIBOR | 3 month JPY LIBOR | — | 72,304 | 72,304 | |||||||||||||||||||||||||
JPMCB | AUD | 1,884,491 | USD | 1,740,893 | 09/05/14 | 3 month BBSW | 3 month USD LIBOR | — | (41,040 | ) | (41,040 | ) | |||||||||||||||||||||||
JPMCB | USD | 1,740,893 | AUD | 1,884,491 | 09/05/23 | 3 month USD LIBOR | 3 month BBSW | — | 47,904 | 47,904 | |||||||||||||||||||||||||
$ | — | $ | 58,783 | $ | 58,783 |
42
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
CITI | USD | 900,000 | 02/15/36 | 4.668 | % | 3 month USD LIBOR | $ | 240,913 | $ | (226,832 | ) | $ | 14,081 | ||||||||||||||||||
CSFB | CAD | 5,490,000 | 02/11/17 | 3 month BA | 3.500 | % | (30,660 | ) | 302,293 | 271,633 | |||||||||||||||||||||
CSFB | CAD | 1,550,000 | 02/11/22 | 4.145 | 3 month BA | — | (196,703 | ) | (196,703 | ) | |||||||||||||||||||||
CSFB | USD | 2,650,000 | 08/12/16 | 3 month USD LIBOR | 1.194 | — | 43,072 | 43,072 | |||||||||||||||||||||||
DB | EUR | 5,850,000 | 05/04/22 | 2.130 | 6 month EURIBOR | 333,786 | (621,681 | ) | (287,895 | ) | |||||||||||||||||||||
DB | EUR | 2,600,000 | 05/04/42 | 6 month EURIBOR | 2.460 | — | 221,209 | 221,209 | |||||||||||||||||||||||
DB | USD | 3,000,000 | 12/15/15 | 1.521 | 3 month USD LIBOR | (41,000 | ) | (50,697 | ) | (91,697 | ) | ||||||||||||||||||||
DB | USD | 1,250,000 | 09/23/20 | 2.690 | 3 month USD LIBOR | (23,000 | ) | (60,753 | ) | (83,753 | ) | ||||||||||||||||||||
DB | USD | 4,550,000 | 02/15/38 | 4.474 | 3 month USD LIBOR | 1,707,848 | (1,031,392 | ) | 676,456 | ||||||||||||||||||||||
DB | USD | 695,000 | 05/15/40 | 4.560 | 3 month USD LIBOR | — | (362,273 | ) | (362,273 | ) | |||||||||||||||||||||
DB | USD | 875,000 | 05/15/40 | 3.470 | 3 month USD LIBOR | (157,000 | ) | (114,657 | ) | (271,657 | ) | ||||||||||||||||||||
JPMCB | CAD | 5,490,000 | 02/11/17 | 3.500 | 3 month BA | — | (302,293 | ) | (302,293 | ) | |||||||||||||||||||||
JPMCB | CAD | 1,550,000 | 02/11/22 | 3 month BA | 4.145 | — | 196,703 | 196,703 | |||||||||||||||||||||||
JPMCB | EUR | 5,850,000 | 05/04/22 | 6 month EURIBOR | 2.130 | — | 621,681 | 621,681 | |||||||||||||||||||||||
JPMCB | EUR | 2,600,000 | 05/04/42 | 2.460 | 6 month EURIBOR | — | (221,209 | ) | (221,209 | ) | |||||||||||||||||||||
JPMCB | USD | 4,500,000 | 02/18/16 | 2.532 | 3 month USD LIBOR | — | (193,015 | ) | (193,015 | ) | |||||||||||||||||||||
JPMCB | USD | 70,000,000 | 07/03/42 | 1 month USD LIBOR | 3 month USD LIBOR | — | 302,194 | 302,194 | |||||||||||||||||||||||
MLI | CAD | 9,280,000 | 04/09/17 | 3 month BA | 1.978 | — | 110,046 | 110,046 | |||||||||||||||||||||||
MLI | USD | 3,670,000 | 06/27/42 | 4.449 | 3 month USD LIBOR | 1,506,538 | (889,338 | ) | 617,200 | ||||||||||||||||||||||
MSCI | CAD | 8,870,000 | 04/08/17 | 3.600 | 3 month BA | — | (502,307 | ) | (502,307 | ) | |||||||||||||||||||||
$ | 3,537,425 | $ | (2,975,952 | ) | $ | 561,473 |
Credit default swaps on credit indices—buy protection12
Counterparty | Referenced index13 | Notional amount | Termination date | Payments made by the Fund11 | Upfront payments (made)/ received | Value | Unrealized depreciation | ||||||||||||||||||||||||
CITI | iTraxx Europe Sub Financials Series 21 Index | EUR | 4,000,000 | 06/20/19 | 1.000 | % | $ | (68,970 | ) | $ | 5,986 | $ | (62,984 | ) | |||||||||||||||||
CITI | CDX.EM.Series 20 Index | USD | 4,650,000 | 12/20/18 | 5.000 | 444,987 | (523,823 | ) | (78,836 | ) | |||||||||||||||||||||
JPMCB | CDX.EM.Series 21 Index | USD | 1,000,000 | 06/20/19 | 5.000 | 101,471 | (120,898 | ) | (19,427 | ) | |||||||||||||||||||||
MLI | iTraxx Europe Crossover Series 19 Index | EUR | 4,000,000 | 06/20/18 | 1.000 | (36,953 | ) | (113,256 | ) | (150,209 | ) | ||||||||||||||||||||
MSCI | CDX.EM.Series 21 Index | USD | 4,700,000 | 06/20/19 | 5.000 | 509,053 | (568,222 | ) | (59,169 | ) | |||||||||||||||||||||
$ | 949,588 | $ | (1,320,213 | ) | $ | (370,625 | ) |
43
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Credit default swaps on corporate and sovereign issues—buy protection12
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments made by the Fund11 | Upfront payments (made)/ received | Value | Unrealized depreciation | ||||||||||||||||||||||||
BB | Cox Communications, Inc. bond, 6.800%, due 08/01/28 | USD | 875,000 | 03/20/17 | 1.000 | % | $ | 11,307 | $ | (18,346 | ) | $ | (7,039 | ) | |||||||||||||||||
JPMCB | Government of France bond, 4.250%, due 04/25/19 | USD | 3,025,000 | 09/20/16 | 0.250 | (97,127 | ) | (8,619 | ) | (105,746 | ) | ||||||||||||||||||||
JPMCB | XL Group PLC bond, 6.250%, due 05/15/27 | USD | 875,000 | 03/20/17 | 1.000 | (4,484 | ) | (19,108 | ) | (23,592 | ) | ||||||||||||||||||||
JPMCB | Government of Japan bond, 2.000%, due 03/21/22 | USD | 2,500,000 | 12/20/17 | 1.000 | 12,581 | (67,446 | ) | (54,865 | ) | |||||||||||||||||||||
MLI | XL Group PLC bond, 6.250%, due 05/15/27 | USD | 125,000 | 09/20/18 | 1.000 | 2,031 | (3,469 | ) | (1,438 | ) | |||||||||||||||||||||
MLI | American International | ||||||||||||||||||||||||||||||
| Group Inc. bond, 6.250%, | ||||||||||||||||||||||||||||||
| due 05/01/36 | USD | 840,000 | 06/20/19 | 1.000 | 17,633 | (19,636 | ) | (2,003 | ) | |||||||||||||||||||||
MSCI | V.F. Corp. bond, 5.950%, due 11/01/17 | USD | 2,750,000 | 12/20/16 | 1.000 | 17,591 | (60,684 | ) | (43,093 | ) | |||||||||||||||||||||
$ | (40,468 | ) | $ | (197,308 | ) | $ | (237,776 | ) |
Credit default swaps on credit indices—sell protection14
Counterparty | Referenced index13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | Credit spread15 | |||||||||||||||||||||||||||
CSFB | CMBX.NA.BBB Series 6 Index | USD | 2,550,000 | 05/11/63 | 3.000 | % | $ | 103,103 | $ | 47,917 | $ | 151,020 | 2.750 | % | |||||||||||||||||||||
MLI | CDX.NA.HY.Series 15 Index | USD | 1,150,000 | 12/20/15 | 5.000 | 36,204 | 83,772 | 119,976 | 1.520 | ||||||||||||||||||||||||||
MLI | CMBX.NA.BB Series 6 Index | USD | 700,000 | 05/11/63 | 5.000 | (21,859 | ) | 17,232 | (4,627 | ) | 4.670 | ||||||||||||||||||||||||
MSCI | CMBX.NA.A Series 6 Index | USD | 2,550,000 | 05/11/63 | 2.000 | 32,640 | 54,160 | 86,800 | 1.740 | ||||||||||||||||||||||||||
$ | 150,088 | $ | 203,081 | $ | 353,169 |
Credit default swaps on corporate and sovereign issues—sell protection14
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation | Credit spread15 | |||||||||||||||||||||||||||
CITI | State of Illinois bond, 5.000%, due 06/01/29 | USD | 800,000 | 12/20/23 | 1.000 | % | $ | 55,905 | $ | (52,396 | ) | $ | 3,509 | 1.910 | % | ||||||||||||||||||||
JPMCB | People's Republic of China bond, 4.250%, due 10/28/14 | USD2,500,000 | 12/20/17 | 1.000 | (6,654) | 49,147 | 42,493 | 0.440 | |||||||||||||||||||||||||||
MLI | JPMorgan Chase & Co. bond, 4.750%, due 03/01/15 | USD875,000 | 03/20/17 | 1.000 | 4,039 | 16,302 | 20,341 | 0.330 |
44
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Credit default swaps on corporate and sovereign issues—sell protection14 (concluded)
Counterparty | Referenced obligation13 | Notional amount | Termination date | Payments received by the Fund11 | Upfront payments (made)/ received | Value | Unrealized appreciation | Credit spread15 | |||||||||||||||||||||||||||
MLI JPMorgan Chase & Co. bond, | 4.750%, due 03/01/15 | USD | 125,000 | 09/20/18 | 1.000 | % | $ | (956 | ) | $ | 2,928 | $ | 1,972 | 0.440 | % | ||||||||||||||||||||
MLI General Electric Capital Corp. | bond, 5.625%, due 09/15/17 | USD | 840,000 | 06/20/19 | 1.000 | (19,678 | ) | 22,800 | 3,122 | 0.440 | |||||||||||||||||||||||||
$ | 32,656 | $ | 38,781 | $ | 71,437 |
Centrally cleared interest rate swap agreements
Notional amount | Termination date | Payments made by the Fund11 | Payments received by the Fund11 | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||
AUD | 8,625,000 | 10/18/23 | 6 month BBSW | 4.535 | % | $ | 468,091 | $ | 468,091 | ||||||||||||||||||
EUR | 4,500,000 | 09/24/19 | 1.810 | % | 6 month EURIBOR | (334,808 | ) | (334,808 | ) | ||||||||||||||||||
GBP | 10,000,000 | 06/11/16 | 6 month GBP LIBOR | 1.166 | (39,849 | ) | (39,849 | ) | |||||||||||||||||||
GBP | 4,900,000 | 04/16/25 | 3.050 | 6 month GBP LIBOR | (30,095 | ) | (30,095 | ) | |||||||||||||||||||
GBP | 1,140,000 | 04/16/45 | 6 month GBP LIBOR | 3.840 | 16,478 | 16,478 | |||||||||||||||||||||
GBP | 4,405,000 | 04/16/20 | 6 month GBP LIBOR | 2.477 | (24,758 | ) | (24,758 | ) | |||||||||||||||||||
USD | 4,800,000 | 01/17/19 | 2.171 | 3 month USD LIBOR | (79,241 | ) | (79,241 | ) | |||||||||||||||||||
USD | 1,750,000 | 08/31/18 | 2.033 | 3 month USD LIBOR | (7,871 | ) | (7,871 | ) | |||||||||||||||||||
USD | 11,000,000 | 11/21/18 | 1.582 | 3 month USD LIBOR | (48,654 | ) | (48,654 | ) | |||||||||||||||||||
USD | 5,250,000 | 09/24/19 | 2.347 | 3 month USD LIBOR | (130,268 | ) | (130,268 | ) | |||||||||||||||||||
USD | 8,250,000 | 12/12/23 | 3.200 | 3 month USD LIBOR | (355,107 | ) | (355,107 | ) | |||||||||||||||||||
$ | (566,082 | ) | $ | (566,082 | ) |
Centrally cleared credit default swaps on credit indices—buy protection12
Referenced index13 | Notional amount | Termination date | Payments made by the Fund11 | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||
CDX.NA.HY. Series 20 Index | USD | 11,805,750 | 06/20/18 | 5.000 | % | $ | (1,145,474 | ) | $ | (685,020 | ) | ||||||||||||
iTraxx Europe Crossover Series 20 Index | EUR | 2,150,000 | 12/20/18 | 5.000 | (367,810 | ) | (144,631 | ) | |||||||||||||||
CDX.NA.IG. Series 22 Index | USD | 25,350,000 | 06/20/19 | 1.000 | (508,079 | ) | 17,674 | ||||||||||||||||
$ | (2,021,363 | ) | $ | (811,977 | ) |
Centrally cleared credit default swaps on credit indices—sell protection14
Referenced index13 | Notional amount | Termination date | Payments received by the Fund11 | Value | Unrealized appreciation | Credit spread15 | |||||||||||||||||||||
CDX.NA.HY. Series 21 Index | USD | 1,358,280 | 12/20/18 | 5.000 | % | $ | 127,176 | $ | 40 | 2.720 | % |
45
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Options written
Expiration date | Premiums received | Value | |||||||||||||
Call options | |||||||||||||||
2 Year Euro-Dollar Midcurve, 140 contracts, strike @ USD 98.50 | September 2014 | $ | 34,510 | $ | (20,125 | ) | |||||||||
2 Year Euro-Dollar Midcurve, 210 contracts, strike @ USD 98.25 | December 2014 | 70,140 | (70,875 | ) | |||||||||||
3 Year Euro-Dollar Midcurve, 105 contracts, strike @ USD 98.75 | June 2016 | 90,970 | (85,313 | ) | |||||||||||
4 Year Euro-Dollar Midcurve, 152 contracts, strike @ USD 96.38 | September 2014 | 105,868 | (209,000 | ) | |||||||||||
Put options | |||||||||||||||
1 Year Euro-Dollar Midcurve, 194 contracts, strike @ USD 99.25 | August 2014 | 28,179 | (23,038 | ) | |||||||||||
2 Year Euro-Dollar Midcurve, 140 contracts, strike @ USD 98.00 | September 2014 | 34,965 | (18,375 | ) | |||||||||||
2 Year Euro-Dollar Midcurve, 210 contracts, strike @ USD 97.25 | December 2014 | 72,765 | (21,000 | ) | |||||||||||
3 Year Euro-Dollar Midcurve, 105 contracts, strike @ USD 96.75 | June 2016 | 67,857 | (15,750 | ) | |||||||||||
4 Year Euro-Dollar Midcurve, 152 contracts, strike @ USD 96.38 | September 2014 | 95,268 | (7,600 | ) | |||||||||||
Options written on interest rate swaps10 | |||||||||||||||
If option exercised the Fund receives annually 1.200% and pays semi-annually floating 6 month EURIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI, Notional Amount EUR 15,800,000 | September 2014 | 68,400 | (17 | ) | |||||||||||
If option exercised the Fund receives quarterly floating 3 month EURIBOR and pays annually 1.825%. Underlying interest rate swap terminating 12/10/15. European style. Counterparty: BB, Notional Amount EUR 32,000,000 | December 2014 | 180,156 | (721,587 | ) | |||||||||||
If option exercised the Fund receives semi-annually 1.800% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 10/02/16. European style. Counterparty: MLI, Notional Amount USD 26,350,000 | September 2014 | 47,430 | (491 | ) | |||||||||||
If option exercised the Fund receives semi-annually 3.145% and pays semi-annually floating 6 month GBP LIBOR. Underlying interest rate swap terminating 06/17/25. European style. Counterparty: MLI, Notional Amount GBP 2,400,000 | June 2015 | 100,341 | (81,014 | ) | |||||||||||
If option exercised the Fund receives semi-annually 4.320% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 01/19/20. European style. Counterparty: JPMCB, Notional Amount USD 27,900,000 | January 2018 | 303,861 | (149,712 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB, Notional Amount USD 17,300,000 | December 2017 | 194,625 | (139,322 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/11/22. European style. Counterparty: BB, Notional Amount USD 7,000,000 | December 2017 | 148,750 | (56,501 | ) | |||||||||||
If option exercised the Fund receives semi-annually 5.000% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 12/21/22. European style. Counterparty: BB, Notional Amount USD 17,300,000 | December 2017 | 216,250 | (141,694 | ) | |||||||||||
If option exercised the Fund receives semi-annually 7.250% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: DB, Notional Amount USD 3,050,000 | November 2015 | 63,135 | (296 | ) | |||||||||||
If option exercised the Fund receives semi-annually 8.760% and pays quarterly floating 3 month USD LIBOR. Underlying interest rate swap terminating 11/04/25. European style. Counterparty: DB, Notional Amount USD 3,050,000 | November 2015 | 38,735 | (62 | ) |
46
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Options written (concluded)
Expiration date | Premiums received | Value | |||||||||||||
If option exercised the Fund receives semi-annually floating 6 month GBP LIBOR and pays semi-annually 3.145%. Underlying interest rate swap terminating 06/17/25. European style. Counterparty: MLI, Notional Amount GBP 2,400,000 | June 2015 | $ | 100,341 | $ | (108,236 | ) | |||||||||
If option exercised the Fund receives semi-annually floating 6 month JPY LIBOR and pays semi-annually 1.750%. Underlying interest rate swap terminating 05/27/35. European style. Counterparty: BB, Notional Amount JPY 350,000,000 | May 2015 | 107,782 | (146,754 | ) | |||||||||||
Options written on credit default swaps on credit indices10 | |||||||||||||||
If option exercised payment from the counterparty will be made upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of the referenced obligation specified in the CDX.NA.HY Series 22 Index and the Fund receives quarterly fixed rate of 5.000% per annum. Underlying credit default swap terminating 06/20/19. European style. Counterparty: MLI, Notional Amount USD 7,000,000 | September 2014 | 31,185 | (25,746 | ) | |||||||||||
Total options written | $ | 2,201,513 | $ | (2,042,508 | ) |
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 628 | $ | 369,502 | ||||||||
Options written | 4,517 | 1,432,393 | |||||||||
Options terminated in closing purchase transactions | (3,737 | ) | (1,201,373 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | 1,408 | $ | 600,522 |
Written swaptions activity for the year ended June 30, 2014 was as follows:
Swaptions outstanding at June 30, 2013 | $ | 1,375,942 | |||||
Swaptions written | 1,367,374 | ||||||
Swaptions terminated in closing purchase transactions | (1,142,325 | ) | |||||
Swaptions expired prior to exercise | — | ||||||
Swaptions outstanding at June 30, 2014 | $ | 1,600,991 |
47
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 39,303,740 | $ | — | $ | 39,303,740 | |||||||||||
Collateralized debt obligations | — | 4,371,374 | 1,075,535 | 5,446,909 | |||||||||||||||
Commercial mortgage-backed securities | — | 1,947,537 | — | 1,947,537 | |||||||||||||||
Mortgage & agency debt securities | — | 2,193,928 | — | 2,193,928 | |||||||||||||||
Municipal bonds | — | 1,618,405 | — | 1,618,405 | |||||||||||||||
US government obligations | — | 6,247,716 | — | 6,247,716 | |||||||||||||||
Non-US government obligations | — | 1,652,348 | — | 1,652,348 | |||||||||||||||
Investment company | — | 12,199,300 | — | 12,199,300 | |||||||||||||||
Short-term investment | — | 1,161,062 | — | 1,161,062 | |||||||||||||||
Options purchased | 753,731 | 1,130,040 | — | 1,883,771 | |||||||||||||||
Forward foreign currency contracts | — | 18,166 | — | 18,166 | |||||||||||||||
Futures contracts | 173,585 | — | — | 173,585 | |||||||||||||||
Swap agreements | — | 2,898,849 | — | 2,898,849 | |||||||||||||||
Total | $ | 927,316 | $ | 74,742,465 | $ | 1,075,535 | $ | 76,745,316 | |||||||||||
Liabilities | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (214,982 | ) | $ | — | $ | (214,982 | ) | |||||||||
Futures contracts | (82,077 | ) | — | — | (82,077 | ) | |||||||||||||
Swap agreements | — | (9,551,946 | ) | — | (9,551,946 | ) | |||||||||||||
Options written | (471,076 | ) | (1,571,432 | ) | — | (2,042,508 | ) | ||||||||||||
Total | $ | (553,153 | ) | $ | (11,338,360 | ) | $ | — | $ | (11,891,513 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Level 3 rollforward disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period.
Collateralized debt obligations | Total | ||||||||||
Assets | |||||||||||
Beginning balance | $ | 1,554,247 | $ | 1,554,247 | |||||||
Purchases | 293,280 | 293,280 | |||||||||
Issuances | — | — | |||||||||
Sales | — | — | |||||||||
Accrued discounts (premiums) | 898 | 898 | |||||||||
Total realized gain | — | — | |||||||||
Change in net unrealized appreciation/depreciation | (9,310 | ) | (9,310 | ) | |||||||
Transfers into Level 3 | — | — | |||||||||
Transfers out of Level 316 | (763,580 | ) | (763,580 | ) | |||||||
Ending balance | $ | 1,075,535 | $ | 1,075,535 |
The change in net unrealized appreciation/depreciation relating to the Level 3 investments held at June 30, 2014 was $(9,310).
48
UBS Fixed Income Opportunities Fund
Portfolio of investments
June 30, 2014
Portfolio footnotes
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of these securities amounted to $16,551,973 or 24.21% of net assets.
2 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2014 and changes periodically.
3 Perpetual bond security. The maturity date reflects the next call date.
4 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of these securities amounted to $7,440,165 or 10.88% of net assets.
5 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
6 Rate shown is the discount rate at date of purchase.
7 All or a portion of these securities have been designated as collateral for open swap agreements.
8 Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of June 30, 2014. Maturity date disclosed is the ultimate maturity date.
9 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Funds.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Net realized gain during the year ended 06/30/14 | Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 9,654,845 | $ | 49,388,826 | $ | 57,882,609 | $ | — | $ | — | $ | 1,161,062 | $ | 2,256 | |||||||||||||||||
UBS Opportunistic Emerging Markets Debt Relationship Fund | 16,719,829 | 1,000,000 | 5,900,000 | 793,397 | (413,926 | ) | 12,199,300 | — | |||||||||||||||||||||||
$ | 26,374,674 | $ | 50,388,826 | $ | 63,782,609 | $ | 793,397 | $ | (413,926 | ) | $ | 13,360,362 | $ | 2,256 |
10 Illiquid investment as of June 30, 2014.
11 Payments made or received are based on the notional amount.
12 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
13 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
14 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
15 Credit spreads, where available, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity. Credit spreads are unaudited.
16 Transfers out of Level 3 represent the value at the end of the year. At June 30, 2014, securities were transferred from Level 3 to Level 2 as the valuations are based on observable inputs from an established pricing source.
See accompanying notes to financial statements.
49
The UBS Funds
June 30, 2014
Portfolio acronyms
BA Canadian Bankers' Acceptance Rate
BBSW Bank Bill Swap Reference Rate (Australian Financial Market)
CD KSDA Korean Securities Dealer Association 91-day Certificate of Deposit Rate
CDI Certificate of Interbank Deposits
CLO Collateralized Loan Obligations
EURIBOR Euro Interbank Offered Rate
FDIC Federal Deposit Insurance Co.
GDP Gross Domestic Product
GO General Obligation
GS Goldman Sachs
IO Interest only—This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.
JIBAR Johannesburg Interbank Agreed Rate
LIBOR London Interbank Offered Rate
MXNTIIE Mexico Interbank Equilibrium Interest Rate
PO Principal only security—This security entitles the holder to receive principal payments from an underlying pool of assets or on the security itself. In the case of asset-backed securities, high prepayments return principal faster than expected and cause the yield to increase. Low prepayments return principal slower than expected and cause the yield to decrease.
OJSC Open Joint Stock Company
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
Re-REMIC Combined Real Estate Mortgage Investment Conduit
TBA (To be announced) Security is purchased on a forward commitment basis with an approximate principal amount (generally +/-1.0%) and no definite maturity date. The actual principal amount and maturity date will be determined upon settlement, when the specific mortgage pools are assigned.
TIPS Treasury inflation protected securities ("TIPS") are debt securities issued by the US Treasury whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the TIPS is fixed, while the principal value rises or falls based on changes in a published Consumer Price Index ("CPI"). Thus, if inflation occurs, the principal and interest payments on the TIPS are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the TIPS principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the TIPS generally pay lower interest rates than typical US Treasury securities. Only if inflation occurs will TIPS offer a higher real yield than a conventional Treasury security of the same maturity.
Counterparty abbreviations
BB Barclays Bank PLC
CIBC Canadian Imperial Bank of Commerce
CITI Citibank NA
CSFB Credit Suisse First Boston
CSI Credit Suisse International
DB Deutsche Bank AG
GSI Goldman Sachs International
JPMCB JPMorgan Chase Bank
MLI Merrill Lynch International
MSC Morgan Stanley & Co., Inc.
MSCI Morgan Stanley & Co. International PLC
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
GHS Ghanaian Cedi
HUF Hungarian Forint
IDR Indonesian Rupiah
INR Indian Rupee
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NGN Nigerian Naira
NZD New Zealand Dollar
PEN Peruvian Nuevo Sol
PHP Philippine Peso
PLN Polish Zloty
RON Romanian Leu
RUB Russian Ruble
THB Thai Baht
TRY Turkish Lira
USD United States Dollar
ZAR South African Rand
See accompanying notes to financial statements.
50
The UBS Funds
June 30, 2014 (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, 2014 to June 30, 2014.
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on that Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not that Fund's actual return for each class of shares. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
This projection assumes that annualized expense ratios were in effect during the period January 1, 2014 to June 30, 2014.
51
The UBS Funds
June 30, 2014 (unaudited)
Beginning account value January 1, 2014 | Ending account value June 30, 2014 | Expenses paid during period* 01/01/14 – 06/30/14 | Expense ratio during period | ||||||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,043.20 | $ | 3.24 | 0.64 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.62 | 3.21 | 0.64 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,041.90 | 5.77 | 1.14 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.14 | 5.71 | 1.14 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,045.80 | 1.98 | 0.39 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.86 | 1.96 | 0.39 | |||||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,063.40 | 6.40 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.60 | 6.26 | 1.25 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,062.00 | 8.95 | 1.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,016.12 | 8.75 | 1.75 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,064.60 | 5.12 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.84 | 5.01 | 1.00 | |||||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 992.80 | 4.69 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 990.00 | 7.15 | 1.45 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,017.60 | 7.25 | 1.45 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 993.10 | 3.46 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.32 | 3.51 | 0.70 |
52
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53
The UBS Funds
Financial statements
Statement of assets and liabilities
June 30, 2014
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost: | |||||||||||
Unaffiliated issuers | $ | 27,334,717 | $ | 22,490,293 | |||||||
Affiliated issuers | 9,275,951 | 1,216,930 | |||||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | 236,033 | — | |||||||||
Foreign currency | 96,819 | 130,875 | |||||||||
$ | 36,943,520 | $ | 23,838,098 | ||||||||
Investments, at value: | |||||||||||
Unaffiliated issuers | $ | 27,859,486 | $ | 21,554,836 | |||||||
Affiliated issuers | 9,416,179 | 1,216,930 | |||||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | 236,033 | — | |||||||||
Foreign currency | 100,734 | 131,413 | |||||||||
Cash | — | 30,050 | |||||||||
Receivables: | |||||||||||
Investment securities sold | 2,341,204 | 299,114 | |||||||||
Interest | 165,140 | 352,200 | |||||||||
Fund shares sold | 15,393 | — | |||||||||
Foreign tax reclaims | — | 20,853 | |||||||||
Due from advisor | 22,545 | 10,400 | |||||||||
Dividends | 459 | 102 | |||||||||
Variation margin on futures contracts | 28,533 | — | |||||||||
Variation margin on centrally cleared swap agreements | 56,078 | — | |||||||||
Due from broker for futures contracts | — | 6,120 | |||||||||
Cash collateral from securities loaned | 121,749 | — | |||||||||
Cash collateral for futures contracts | 70,930 | 22,584 | |||||||||
Cash collateral for swap agreements | 14,905 | — | |||||||||
Outstanding swap agreements, at value2 | 27,768 | 22,718 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 9,206 | |||||||||
Other assets | 28,791 | 37,068 | |||||||||
Total assets | 40,505,927 | 23,713,594 | |||||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Cash collateral from securities loaned | 357,782 | — | |||||||||
Investment securities purchased | 9,759,555 | 199,190 | |||||||||
Custody and fund accounting fees | 18,408 | 24,311 | |||||||||
Fund shares redeemed | 31,241 | — | |||||||||
Distribution and service fees | 1,560 | 28 | |||||||||
Due to custodian | 1,404 | — | |||||||||
Due to broker for futures contracts | 7,823 | — | |||||||||
Due to broker for swap agreements | — | — | |||||||||
Variation margin on futures contracts | — | 4,896 | |||||||||
Accrued expenses | 80,107 | 85,620 | |||||||||
Options written, at value3 | 123,543 | — | |||||||||
Outstanding swap agreements, at value2 | 8,130 | 223,995 | |||||||||
Unrealized depreciation on forward foreign currency contracts | 24,310 | 11,731 | |||||||||
Total liabilities | 10,413,863 | 549,771 | |||||||||
Net assets | $ | 30,092,064 | $ | 23,163,823 |
1 The market value of securities loaned by UBS Core Plus Bond Fund as of June 30, 2014, was $420,516.
2 Net upfront payments received by UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund were $4,166, $151,741 and $4,629,289, respectively.
3 Premiums received by UBS Core Plus Bond Fund and UBS Fixed Income Opportunities Fund were $153,868 and $2,201,513, respectively.
54
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||
Assets: | |||||||
Investments, at cost: | |||||||
Unaffiliated issuers | $ | 58,900,293 | |||||
Affiliated issuers | 12,510,087 | ||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | — | ||||||
Foreign currency | 152,784 | ||||||
$ | 71,563,164 | ||||||
Investments, at value: | |||||||
Unaffiliated issuers | $ | 60,294,354 | |||||
Affiliated issuers | 13,360,362 | ||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | — | ||||||
Foreign currency | 153,812 | ||||||
Cash | — | ||||||
Receivables: | |||||||
Investment securities sold | 95,851 | ||||||
Interest | 700,369 | ||||||
Fund shares sold | 6,810 | ||||||
Foreign tax reclaims | 4,492 | ||||||
Due from advisor | 511 | ||||||
Dividends | 54 | ||||||
Variation margin on futures contracts | 93,613 | ||||||
Variation margin on centrally cleared swap agreements | 53,080 | ||||||
Due from broker for futures contracts | — | ||||||
Cash collateral from securities loaned | — | ||||||
Cash collateral for futures contracts | 508,214 | ||||||
Cash collateral for swap agreements | 988,875 | ||||||
Outstanding swap agreements, at value2 | 2,287,104 | ||||||
Unrealized appreciation on forward foreign currency contracts | 18,166 | ||||||
Other assets | 28,895 | ||||||
Total assets | 78,594,562 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Cash collateral from securities loaned | — | ||||||
Investment securities purchased | 95,819 | ||||||
Custody and fund accounting fees | 26,674 | ||||||
Fund shares redeemed | 789,339 | ||||||
Distribution and service fees | 12,926 | ||||||
Due to custodian | 3,010 | ||||||
Due to broker for futures contracts | 349,558 | ||||||
Due to broker for swap agreements | 87,400 | ||||||
Variation margin on futures contracts | — | ||||||
Accrued expenses | 132,552 | ||||||
Options written, at value3 | 2,042,508 | ||||||
Outstanding swap agreements, at value2 | 6,479,932 | ||||||
Unrealized depreciation on forward foreign currency contracts | 214,982 | ||||||
Total liabilities | 10,234,700 | ||||||
Net assets | $ | 68,359,862 |
See accompanying notes to financial statements.
55
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
June 30, 2014
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 63,321,755 | $ | 24,626,533 | |||||||
Accumulated undistributed (distributions in excess of) net investment income | 465,952 | (166,264 | ) | ||||||||
Accumulated net realized loss | (34,455,128 | ) | (304,662 | ) | |||||||
Net unrealized appreciation (depreciation) | 759,485 | (991,784 | ) | ||||||||
Net assets | $ | 30,092,064 | $ | 23,163,823 | |||||||
Class A: | |||||||||||
Net assets | $ | 3,225,644 | $ | 70,208 | |||||||
Shares outstanding | 351,266 | 7,619 | |||||||||
Net asset value and redemption proceeds per share | $ | 9.18 | $ | 9.21 | |||||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 9.61 | $ | 9.64 | |||||||
Class C: | |||||||||||
Net assets | $ | 1,435,252 | $ | 20,669 | |||||||
Shares outstanding | 156,879 | 2,240 | |||||||||
Net asset value and offering price per share | $ | 9.15 | $ | 9.23 | |||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 9.08 | $ | 9.16 | |||||||
Class Y: | |||||||||||
Net assets | $ | 25,431,168 | $ | 23,072,946 | |||||||
Shares outstanding | 2,774,099 | 2,500,010 | |||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 9.17 | $ | 9.23 |
1 For Class A, the maximum sales charge is 4.50% for each Fund, Classes C and Y have no front-end sales charges. For Class A shares of each Fund, the maximum contingent deferred sales charge of 1.00% of the shares' offering price or the net asset value at the time of sales by the shareholder, whichever is less, is charged on sales of shares on original purchases of $1,000,000 or more that were not subject to a front-end sales charge made within one year of the purchase date. For Class C, the maximum contingent deferred sales charge is 0.75% for each Fund. Class Y has no contingent deferred sales charge. If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
56
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||
Net assets consist of: | |||||||
Beneficial interest | $ | 69,505,473 | |||||
Accumulated undistributed (distributions in excess of) net investment income | 1,207,970 | ||||||
Accumulated net realized loss | (3,713,589 | ) | |||||
Net unrealized appreciation (depreciation) | 1,360,008 | ||||||
Net assets | $ | 68,359,862 | |||||
Class A: | |||||||
Net assets | $ | 40,365,904 | |||||
Shares outstanding | 4,203,959 | ||||||
Net asset value and redemption proceeds per share | $ | 9.60 | |||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 10.05 | |||||
Class C: | |||||||
Net assets | $ | 6,854,512 | |||||
Shares outstanding | 714,649 | ||||||
Net asset value and offering price per share | $ | 9.59 | |||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 9.52 | |||||
Class Y: | |||||||
Net assets | $ | 21,139,446 | |||||
Shares outstanding | 2,198,747 | ||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 9.61 |
See accompanying notes to financial statements.
57
The UBS Funds
Financial statements
Statement of operations
For the year ended June 30, 2014
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||
Investment income: | |||||||||||
Interest and other | $ | 791,288 | $ | 1,206,572 | |||||||
Affiliated income | 4,135 | 1,688 | |||||||||
Securities lending1 | 2,967 | — | |||||||||
Foreign tax withheld | — | (5,235 | ) | ||||||||
Total income | 798,390 | 1,203,025 | |||||||||
Expenses: | |||||||||||
Advisory and administration | 181,784 | 186,889 | |||||||||
Distribution and service: | |||||||||||
Class A | 12,479 | 135 | |||||||||
Class C | 11,829 | 71 | |||||||||
Transfer agency and related services fees: | |||||||||||
Class A | 5,631 | 7,087 | |||||||||
Class C | 2,692 | 1,235 | |||||||||
Class Y | 4,798 | 678 | |||||||||
Custodian and fund accounting | 55,564 | 72,362 | |||||||||
Federal and state registration | 41,682 | 36,738 | |||||||||
Professional services | 99,114 | 112,400 | |||||||||
Shareholder reports | 11,550 | 6,258 | |||||||||
Trustees | 21,430 | 20,422 | |||||||||
Amortization of offering costs | — | 7,309 | |||||||||
Other | 17,682 | 14,578 | |||||||||
Total expenses | 466,235 | 466,162 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (318,611 | ) | (239,427 | ) | |||||||
Net expenses | 147,624 | 226,735 | |||||||||
Net investment income | 650,766 | 976,290 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 70,386 | (400,435 | ) | ||||||||
Investments in affiliated issuers | 28,623 | — | |||||||||
Futures contracts | (6,540 | ) | (3,928 | ) | |||||||
Options written | 54,508 | 46,556 | |||||||||
Swap agreements | 49,794 | 22,363 | |||||||||
Forward foreign currency contracts | (62,887 | ) | (184,794 | ) | |||||||
Foreign currency transactions | 1,436 | (19,892 | ) | ||||||||
Net realized gain (loss) | 135,320 | (540,130 | ) | ||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||
Investments | 832,682 | 636,971 | |||||||||
Futures contracts | 60,495 | 30,258 | |||||||||
Options written | 29,524 | (16,637 | ) | ||||||||
Swap agreements | 83,754 | (50,080 | ) | ||||||||
Forward foreign currency contracts | (21,888 | ) | 53,241 | ||||||||
Translation of other assets and liabilities denominated in foreign currency | 5,556 | 8,295 | |||||||||
Change in net unrealized appreciation/depreciation | 990,123 | 662,048 | |||||||||
Net realized and unrealized gain (loss) | 1,125,443 | 121,918 | |||||||||
Net increase (decrease) in net assets resulting from operations | $ | 1,776,209 | $ | 1,098,208 |
1 Includes affiliated income from UBS Private Money Market Fund LLC of $21 for UBS Core Plus Bond Fund.
58
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||
Investment income: | |||||||
Interest and other | $ | 3,537,855 | |||||
Affiliated income | 2,256 | ||||||
Securities lending1 | — | ||||||
Foreign tax withheld | (3,002 | ) | |||||
Total income | 3,537,109 | ||||||
Expenses: | |||||||
Advisory and administration | 693,492 | ||||||
Distribution and service: | |||||||
Class A | 134,952 | ||||||
Class C | 66,371 | ||||||
Transfer agency and related services fees: | |||||||
Class A | 27,218 | ||||||
Class C | 4,497 | ||||||
Class Y | 39 | ||||||
Custodian and fund accounting | 81,103 | ||||||
Federal and state registration | 42,804 | ||||||
Professional services | 126,792 | ||||||
Shareholder reports | 67,474 | ||||||
Trustees | 28,525 | ||||||
Amortization of offering costs | — | ||||||
Other | 43,786 | ||||||
Total expenses | 1,317,053 | ||||||
Fee waivers and/or expense reimbursements by Advisor | (442,979 | ) | |||||
Net expenses | 874,074 | ||||||
Net investment income | 2,663,035 | ||||||
Net realized gain (loss) on: | |||||||
Investments in unaffiliated issuers | (3,233,990 | ) | |||||
Investments in affiliated issuers | 793,397 | ||||||
Futures contracts | 2,350,568 | ||||||
Options written | 1,439,375 | ||||||
Swap agreements | (1,055,450 | ) | |||||
Forward foreign currency contracts | (1,420,667 | ) | |||||
Foreign currency transactions | (266,414 | ) | |||||
Net realized gain (loss) | (1,393,181 | ) | |||||
Change in net unrealized appreciation/depreciation on: | |||||||
Investments | 299,824 | ||||||
Futures contracts | 277,456 | ||||||
Options written | 286,024 | ||||||
Swap agreements | (3,542,750 | ) | |||||
Forward foreign currency contracts | 91,630 | ||||||
Translation of other assets and liabilities denominated in foreign currency | 6,656 | ||||||
Change in net unrealized appreciation/depreciation | (2,581,160 | ) | |||||
Net realized and unrealized gain (loss) | (3,974,341 | ) | |||||
Net increase (decrease) in net assets resulting from operations | $ | (1,311,306 | ) |
See accompanying notes to financial statements.
59
The UBS Funds
Financial statements
Statement of changes in net assets
UBS Core Plus Bond Fund | UBS Emerging Markets Debt Fund | ||||||||||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | Year ended June 30, 2014 | Period ended June 30, 20131 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income | $ | 650,766 | $ | 763,581 | $ | 976,290 | $ | 1,171,167 | |||||||||||
Net realized gain (loss) | 135,320 | 525,939 | (540,130 | ) | 312,880 | ||||||||||||||
Change in net unrealized appreciation/depreciation | 990,123 | (1,068,323 | ) | 662,048 | (1,653,832 | ) | |||||||||||||
Net increase (decrease) in net assets from operations | 1,776,209 | 221,197 | 1,098,208 | (169,785 | ) | ||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (130,087 | ) | (151,841 | ) | (2,092 | ) | (576 | ) | |||||||||||
Return of capital | — | — | (1,096 | ) | — | ||||||||||||||
Net realized gain | — | — | — | (1 | ) | ||||||||||||||
Total Class A dividends and distributions | (130,087 | ) | (151,841 | ) | (3,188 | ) | (577 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | (32,432 | ) | (40,360 | ) | (349 | ) | (4 | ) | |||||||||||
Return of capital | — | — | (183 | ) | — | ||||||||||||||
Net realized gain | — | — | — | (1 | ) | ||||||||||||||
Total Class C dividends and distributions | (32,432 | ) | (40,360 | ) | (532 | ) | (5 | ) | |||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (698,024 | ) | (845,766 | ) | (835,702 | ) | (1,387,506 | ) | |||||||||||
Return of capital | — | — | (438,053 | ) | — | ||||||||||||||
Net realized gain | — | — | — | (193,501 | ) | ||||||||||||||
Total Class Y dividends and distributions | (698,024 | ) | (845,766 | ) | (1,273,755 | ) | (1,581,007 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (860,543 | ) | (1,037,967 | ) | (1,277,475 | ) | (1,581,589 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 2,857,644 | 6,067,870 | 71,901 | 25,037,036 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 783,676 | 962,122 | 3,711 | 572 | |||||||||||||||
Cost of shares redeemed | (9,567,176 | ) | (14,408,311 | ) | (18,756 | ) | — | ||||||||||||
Redemption fees | 2,519 | 631 | — | — | |||||||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (5,923,337 | ) | (7,377,688 | ) | 56,856 | 25,037,608 | |||||||||||||
Increase (decrease) in net assets | (5,007,671 | ) | (8,194,458 | ) | (122,411 | ) | 23,286,234 | ||||||||||||
Net assets, beginning of period | 35,099,735 | 43,294,193 | 23,286,234 | — | |||||||||||||||
Net assets, end of period | $ | 30,092,064 | $ | 35,099,735 | $ | 23,163,823 | $ | 23,286,234 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | 465,952 | $ | 505,618 | $ | (166,264 | ) | $ | (34,681 | ) |
1 For the period July 23, 2012 (commencement of operations) to June 30, 2013.
60
The UBS Funds
Financial statements
UBS Fixed Income Opportunities Fund | |||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||
Operations: | |||||||||||
Net investment income | $ | 2,663,035 | $ | 2,435,713 | |||||||
Net realized gain (loss) | (1,393,181 | ) | (3,031,625 | ) | |||||||
Change in net unrealized appreciation/depreciation | (2,581,160 | ) | 3,800,155 | ||||||||
Net increase (decrease) in net assets from operations | (1,311,306 | ) | 3,204,243 | ||||||||
Dividends and distributions to shareholders by class: | |||||||||||
Class A: | |||||||||||
Net investment income | — | (772,176 | ) | ||||||||
Return of capital | (323,641 | ) | (345,784 | ) | |||||||
Net realized gain | — | — | |||||||||
Total Class A dividends and distributions | (323,641 | ) | (1,117,960 | ) | |||||||
Class C: | |||||||||||
Net investment income | — | (113,518 | ) | ||||||||
Return of capital | (7,814 | ) | (63,792 | ) | |||||||
Net realized gain | — | — | |||||||||
Total Class C dividends and distributions | (7,814 | ) | (177,310 | ) | |||||||
Class Y: | |||||||||||
Net investment income | — | (1,074,527 | ) | ||||||||
Return of capital | (277,596 | ) | (271,348 | ) | |||||||
Net realized gain | — | — | |||||||||
Total Class Y dividends and distributions | (277,596 | ) | (1,345,875 | ) | |||||||
Decrease in net assets from dividends and distributions | (609,051 | ) | (2,641,145 | ) | |||||||
Beneficial interest transactions: | |||||||||||
Proceeds from shares sold | 35,696,320 | 47,534,097 | |||||||||
Shares issued on reinvestment of dividends and distributions | 362,694 | 1,281,575 | |||||||||
Cost of shares redeemed | (57,876,190 | ) | (27,919,018 | ) | |||||||
Redemption fees | 37,173 | 1,524 | |||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (21,780,003 | ) | 20,898,178 | ||||||||
Increase (decrease) in net assets | (23,700,360 | ) | 21,461,276 | ||||||||
Net assets, beginning of period | 92,060,222 | 70,598,946 | |||||||||
Net assets, end of period | $ | 68,359,862 | $ | 92,060,222 | |||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | 1,207,970 | $ | 214,186 |
See accompanying notes to financial statements.
61
UBS Core Plus Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 8.91 | $ | 9.13 | $ | 8.70 | $ | 8.69 | $ | 8.17 | |||||||||||||
Income from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.17 | 0.16 | 0.20 | 0.24 | 0.28 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.33 | (0.15 | ) | 0.46 | 0.18 | 0.73 | |||||||||||||||||
Total income from investment operations | 0.50 | 0.01 | 0.66 | 0.42 | 1.01 | ||||||||||||||||||
Redemption fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.23 | ) | (0.23 | ) | (0.41 | ) | (0.49 | ) | |||||||||||||
Net asset value, end of year | $ | 9.18 | $ | 8.91 | $ | 9.13 | $ | 8.70 | $ | 8.69 | |||||||||||||
Total investment return2 | 5.68 | % | 0.06 | % | 7.64 | % | 5.00 | % | 12.72 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.69 | % | 1.58 | % | 1.45 | % | 1.45 | % | 1.39 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.64 | % | 0.64 | % | 0.64 | % | 0.64 | % | 0.64 | % | |||||||||||||
Net investment income | 1.89 | % | 1.77 | % | 2.18 | % | 2.76 | % | 3.30 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 3,226 | $ | 6,951 | $ | 7,606 | $ | 5,996 | $ | 8,956 | |||||||||||||
Portfolio turnover rate | 506 | % | 374 | % | 509 | % | 400 | % | 283 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 8.88 | $ | 9.10 | $ | 8.68 | $ | 8.66 | $ | 8.15 | |||||||||||||
Income from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.12 | 0.12 | 0.15 | 0.20 | 0.24 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.33 | (0.16 | ) | 0.45 | 0.19 | 0.72 | |||||||||||||||||
Total income from investment operations | 0.45 | (0.04 | ) | 0.60 | 0.39 | 0.96 | |||||||||||||||||
Redemption fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.18 | ) | (0.18 | ) | (0.37 | ) | (0.45 | ) | |||||||||||||
Net asset value, end of year | $ | 9.15 | $ | 8.88 | $ | 9.10 | $ | 8.68 | $ | 8.66 | |||||||||||||
Total investment return2 | 5.30 | % | (0.55 | )% | 7.01 | % | 4.60 | % | 12.06 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.28 | % | 2.02 | % | 1.91 | % | 1.92 | % | 1.86 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.14 | % | 1.14 | % | 1.14 | % | 1.14 | % | 1.14 | % | |||||||||||||
Net investment income | 1.38 | % | 1.29 | % | 1.70 | % | 2.27 | % | 2.80 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 1,435 | $ | 1,724 | $ | 2,187 | $ | 2,175 | $ | 2,628 | |||||||||||||
Portfolio turnover rate | 506 | % | 374 | % | 509 | % | 400 | % | 283 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
62
UBS Core Plus Bond Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 8.89 | $ | 9.11 | $ | 8.69 | $ | 8.68 | $ | 8.16 | |||||||||||||
Income from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.19 | 0.19 | 0.22 | 0.26 | 0.30 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.34 | (0.16 | ) | 0.45 | 0.19 | 0.74 | |||||||||||||||||
Total income from investment operations | 0.53 | 0.03 | 0.67 | 0.45 | 1.04 | ||||||||||||||||||
Redemption fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.44 | ) | (0.52 | ) | |||||||||||||
Net asset value, end of year | $ | 9.17 | $ | 8.89 | $ | 9.11 | $ | 8.69 | $ | 8.68 | |||||||||||||
Total investment return2 | 6.08 | % | 0.31 | % | 7.80 | % | 5.26 | % | 13.02 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.38 | % | 1.20 | % | 1.12 | % | 1.12 | % | 1.09 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | |||||||||||||
Net investment income | 2.13 | % | 2.04 | % | 2.44 | % | 3.02 | % | 3.53 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 25,431 | $ | 26,425 | $ | 33,501 | $ | 31,047 | $ | 34,659 | |||||||||||||
Portfolio turnover rate | 506 | % | 374 | % | 509 | % | 400 | % | 283 | % |
See accompanying notes to financial statements.
63
UBS Emerging Markets Debt Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | Class C | ||||||||||||||||||
Year ended June 30, 2014 | For the period ended June 30, 20133 | Year ended June 30, 2014 | For the period ended June 30, 20133 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.29 | $ | 10.00 | $ | 9.31 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.36 | 0.39 | 0.31 | 0.27 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.05 | (0.52 | ) | 0.02 | (0.52 | ) | |||||||||||||
Total income (loss) from investment operations | 0.41 | (0.13 | ) | 0.33 | (0.25 | ) | |||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | (0.32 | ) | (0.50 | ) | (0.27 | ) | (0.36 | ) | |||||||||||
Return of capital | (0.17 | ) | — | (0.14 | ) | — | |||||||||||||
From net realized gains | — | (0.08 | ) | — | (0.08 | ) | |||||||||||||
Total dividends/distributions | (0.49 | ) | (0.58 | ) | (0.41 | ) | (0.44 | ) | |||||||||||
Net asset value, end of period | $ | 9.21 | $ | 9.29 | $ | 9.23 | $ | 9.31 | |||||||||||
Total investment return2 | 4.65 | % | (1.78 | )% | 3.72 | % | (2.85 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 15.41 | % | 36.21 | %4 | 15.92 | % | 2,391.59 | %4 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.25 | % | 1.25 | %4 | 1.75 | % | 1.75 | %4 | |||||||||||
Net investment income | 4.03 | % | 4.80 | %4 | 3.46 | % | 2.78 | %4 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 70 | $ | 34 | $ | 21 | $ | —5 | |||||||||||
Portfolio turnover rate | 39 | % | 41 | % | 39 | % | 41 | % |
Class Y | |||||||||||
Year ended June 30, 2014 | For the period ended June 30, 20133 | ||||||||||
Net asset value, beginning of period | $ | 9.30 | $ | 10.00 | |||||||
Income (loss) from investment operations: | |||||||||||
Net investment income1 | 0.39 | 0.47 | |||||||||
Net realized and unrealized gain (loss) | 0.05 | (0.54 | ) | ||||||||
Total income (loss) from investment operations | 0.44 | (0.07 | ) | ||||||||
Less dividends/distributions: | |||||||||||
From net investment income | (0.33 | ) | (0.55 | ) | |||||||
Return of capital | (0.18 | ) | — | ||||||||
From net realized gains | — | (0.08 | ) | ||||||||
Total dividends/distributions | (0.51 | ) | (0.63 | ) | |||||||
Net asset value, end of period | $ | 9.23 | $ | 9.30 | |||||||
Total investment return2 | 5.01 | % | (1.16 | )% | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.02 | % | 2.10 | %4 | |||||||
Expenses after fee waivers and/or expense reimbursement | 1.00 | % | 1.00 | %4 | |||||||
Net investment income | 4.31 | % | 4.83 | %4 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 23,073 | $ | 23,253 | |||||||
Portfolio turnover rate | 39 | % | 41 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 For the period July 23, 2012 (commencement of operations) through June 30, 2013.
4 Annualized.
5 Amount rounds to less than $1,000.
See accompanying notes to financial statements.
64
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65
UBS Fixed Income Opportunities Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||||||
Year ended June 30, | For the period ended | ||||||||||||||||||
2014 | 2013 | 2012 | June 30, 20113 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.78 | $ | 9.66 | $ | 9.93 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.27 | 0.28 | 0.37 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.39 | ) | 0.13 | (0.05 | ) | (0.15 | ) | ||||||||||||
Total income (loss) from investment operations | (0.12 | ) | 0.41 | 0.32 | 0.06 | ||||||||||||||
Redemption fees | 0.004 | 0.004 | 0.004 | 0.02 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | — | (0.22 | ) | (0.34 | ) | (0.05 | ) | ||||||||||||
Return of capital | (0.06 | ) | (0.07 | ) | — | (0.10 | ) | ||||||||||||
From net realized gains | — | — | (0.25 | ) | — | ||||||||||||||
Total dividends/distributions | (0.06 | ) | (0.29 | ) | (0.59 | ) | (0.15 | ) | |||||||||||
Net asset value, end of period | $ | 9.60 | $ | 9.78 | $ | 9.66 | $ | 9.93 | |||||||||||
Total investment return2 | (1.14 | )% | 4.15 | % | 3.33 | % | 0.76 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.43 | % | 1.42 | % | 1.42 | % | 1.39 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | %5 | |||||||||||
Net investment income | 2.75 | % | 2.84 | % | 3.80 | % | 3.53 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 40,366 | $ | 47,140 | $ | 37,935 | $ | 67,314 | |||||||||||
Portfolio turnover rate | 38 | % | 60 | % | 63 | % | 48 | % |
Class Y | |||||||||||||||||||
Year ended June 30, | For the period ended | ||||||||||||||||||
2014 | 2013 | 2012 | June 30, 20113 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.79 | $ | 9.67 | $ | 9.94 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.29 | 0.30 | 0.40 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.39 | ) | 0.13 | (0.05 | ) | (0.13 | ) | ||||||||||||
Total income (loss) from investment operations | (0.10 | ) | 0.43 | 0.35 | 0.10 | ||||||||||||||
Redemption fees | 0.004 | 0.004 | 0.004 | — | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | — | (0.24 | ) | (0.37 | ) | (0.06 | ) | ||||||||||||
Return of capital | (0.08 | ) | (0.07 | ) | — | (0.10 | ) | ||||||||||||
From net realized gains | — | — | (0.25 | ) | — | ||||||||||||||
Total dividends/distributions | (0.08 | ) | (0.31 | ) | (0.62 | ) | (0.16 | ) | |||||||||||
Net asset value, end of period | $ | 9.61 | $ | 9.79 | $ | 9.67 | $ | 9.94 | |||||||||||
Total investment return2 | (0.99 | )% | 4.50 | % | 3.60 | % | 0.97 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.14 | % | 1.13 | % | 1.14 | % | 1.29 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.70 | % | 0.70 | % | 0.70 | % | 0.70 | %5 | |||||||||||
Net investment income | 2.99 | % | 3.06 | % | 4.06 | % | 3.91 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 21,139 | $ | 36,112 | $ | 26,145 | $ | 25,523 | |||||||||||
Portfolio turnover rate | 38 | % | 60 | % | 63 | % | 48 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
66
UBS Fixed Income Opportunities Fund
Financial highlights
3 For the period November 29, 2010 (commencement of operations) through June 30, 2011.
Class C | |||||||||||||||||||
Year ended June 30, | For the period ended | ||||||||||||||||||
2014 | 2013 | 2012 | June 30, 20113 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.76 | $ | 9.65 | $ | 9.92 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.22 | 0.23 | 0.32 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.38 | ) | 0.12 | (0.05 | ) | (0.14 | ) | ||||||||||||
Total income (loss) from investment operations | (0.16 | ) | 0.35 | 0.27 | 0.04 | ||||||||||||||
Redemption fees | 0.004 | 0.004 | 0.004 | 0.004 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net investment income | — | (0.17 | ) | (0.29 | ) | (0.02 | ) | ||||||||||||
Return of capital | (0.01 | ) | (0.07 | ) | — | (0.10 | ) | ||||||||||||
From net realized gains | — | — | (0.25 | ) | — | ||||||||||||||
Total dividends/distributions | (0.01 | ) | (0.24 | ) | (0.54 | ) | (0.12 | ) | |||||||||||
Net asset value, end of period | $ | 9.59 | $ | 9.76 | $ | 9.65 | $ | 9.92 | |||||||||||
Total investment return2 | (1.65 | )% | 3.65 | % | 2.82 | % | 0.43 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.93 | % | 1.92 | % | 1.93 | % | 1.94 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.45 | % | 1.45 | % | 1.45 | % | 1.45 | %5 | |||||||||||
Net investment income | 2.24 | % | 2.34 | % | 3.31 | % | 3.06 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 6,855 | $ | 8,808 | $ | 6,519 | $ | 8,116 | |||||||||||
Portfolio turnover rate | 38 | % | 60 | % | 63 | % | 48 | % |
4 Amount represents less than $0.005 per share.
5 Annualized.
See accompanying notes to financial statements.
67
The UBS Funds
Notes to financial statements
1. Organization and significant accounting policies
The UBS Funds (the "Trust") is registered with the US Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act"), as amended, as an open-end management investment company currently offering multiple series representing separate investment portfolios. The Trust is a Delaware statutory trust organized on August 13, 1993. The trustees of the Trust have the authority to issue an unlimited number of shares of beneficial interest at a par value of $0.001 per share.
The Trust has 13 Funds available for investment, each having its own investment objectives and policies. The following three funds are covered in this report: UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund, and UBS Fixed Income Opportunities Fund (each a "Fund", and collectively, the "Funds"). At Board meetings held in December 2013 and April 2014, the Board of Trustees (the "Board") approved certain changes to the Class Y shares of each series of the Trust to permit wrap fee advisory program accounts to purchase Class Y shares. The Board also approved the tax-free conversion of wrap fee advisory program accounts currently holding Class A shares or Class C shares (post-CDSC) into Class Y shares. In connection with these changes, the Board approved the redesignation of Class Y shares as Class P shares, effective on or about July 28, 2014.
Each of the Funds covered by this report is diversified, except for UBS Emerging Markets Debt Fund which is non-diversified. The Funds currently offer Class A, Class C and Class Y shares. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing distribution and service charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its distribution and/or service plan, if any. Class Y shares have no distribution or service plan.
In the normal course of business, the Funds may enter into contracts that contain a variety of representations that provide general indemnification for certain liabilities. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had any prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("US GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies:
A. Valuation of investments: Each Fund calculates its net asset value on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share will be calculated as of the time trading was halted.
Each Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Funds normally obtain market values for their investments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "evaluation" systems that derive values based on comparable
68
The UBS Funds
Notes to financial statements
investments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings. Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Investments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where investments are traded on more than one exchange, the investments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM" or the "Advisor"), the investment advisor of the Funds. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG, an internationally diversified organization with headquarters in Zurich and Basel, Switzerland and operations in many areas of the financial services industry. If a market value is not readily available from an independent pricing source for a particular investment, that investment is valued at fair value as determined in good faith by or under the direction of the Board. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments in which the Funds invest are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m., Eastern time, will not be reflected in the Fund's net asset value. However, if any of the Funds determine that such developments are so significant that they will materially affect the value of the Fund's investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value investments principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If an investment is valued at "fair value," that value is likely to be different from the last quoted market price for the investment. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Funds' use of the practical expedient within ASC Topic 820, investments in non-registered investment companies are also valued at the daily net asset value. All investments quoted in foreign currencies are valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using forward exchange rates quoted by independent pricing services.
69
The UBS Funds
Notes to financial statements
Swaps are marked-to-market daily based upon values from third party vendors or quotations from market makers to the extent available, and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of assets and liabilities. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
The Board has delegated to the UBS Global AM Global Valuation Committee ("GVC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, investments of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US GAAP requires disclosure regarding the various inputs that are used in determining the value of the Funds' investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Funds' own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of the Fund's Portfolio of investments.
The provisions of ASC Topic 815 "Derivatives and Hedging" ("ASC Topic 815") require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk related contingent features in derivative agreements. Since investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of operations, they do not qualify for hedge accounting under ASC Topic 815. Accordingly, even though a Fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under ASC Topic 815. ASC Topic 815 requires that (1) objectives for using derivative
70
The UBS Funds
Notes to financial statements
instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. Details of this disclosure can be found below as well as in the Portfolio of investments. Swap agreements, forward foreign currency contracts, swaptions and options written entered into by a Fund may contain credit-risk related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of June 30, 2014 is reflected in the Statement of assets and liabilities. If the applicable credit-risk related contingent features were triggered as of June 30, 2014, the Fund would be required to post additional collateral or may be required to terminate the contracts and settle any amounts outstanding. The Funds may be sellers of protection through credit default swap agreements which are by nature credit-risk contingent (the terms of these agreements can be found within the Portfolio of investments, with further discussion in the Notes to financial statements). The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2014, except for forward foreign currency contracts and options for UBS Emerging Markets Debt Fund for which the average volume during the year was greater than at year end.
Disclosure of derivatives by underlying risk as of and for the year ended June 30, 2014 is as follows:
Asset derivatives
Interest rate risk | Credit risk | Total | |||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||
Futures contracts1 | $ | 34,744 | $ | — | $ | 34,744 | |||||||||
Options purchased2 | 87,006 | — | 87,006 | ||||||||||||
Swap agreements1,2 | 30,935 | 27,768 | 58,703 | ||||||||||||
Total value | $ | 152,685 | $ | 27,768 | $ | 180,453 |
1 Includes cumulative appreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
2 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers at value. Outstanding swap agreements are shown at value, except centrally cleared swap.
Liability derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (24,310 | ) | $ | (24,310 | ) | |||||||||
Futures contracts2 | (6,587 | ) | — | — | (6,587 | ) | |||||||||||||
Options written1 | (113,453 | ) | (10,090 | ) | — | (123,543 | ) | ||||||||||||
Swap agreements1 | (5,304 | ) | (2,826 | ) | — | (8,130 | ) | ||||||||||||
Total value | $ | (125,344 | ) | $ | (12,916 | ) | $ | (24,310 | ) | $ | (162,570 | ) |
1 Statement of assets and liabilities location: Options written, at value, outstanding swap agreements, at value and unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
71
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Core Plus Bond Fund | |||||||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | — | $ | (62,887 | ) | $ | (62,887 | ) | |||||||||||
Futures contracts | (6,540 | ) | — | — | — | (6,540 | ) | ||||||||||||||||
Options purchased2 | (25,347 | ) | — | — | — | (25,347 | ) | ||||||||||||||||
Options written | 1,658 | — | 52,850 | — | 54,508 | ||||||||||||||||||
Swap agreements | 48,682 | 4,399 | (3,287 | ) | — | 49,794 | |||||||||||||||||
Total net realized gain (loss) | $ | 18,453 | $ | 4,399 | $ | 49,563 | $ | (62,887 | ) | $ | 9,528 | ||||||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | — | $ | (21,888 | ) | $ | (21,888 | ) | |||||||||||
Futures contracts | 60,495 | — | — | — | 60,495 | ||||||||||||||||||
Options purchased2 | (81,345 | ) | — | — | — | (81,345 | ) | ||||||||||||||||
Options written | 27,437 | — | 2,087 | — | 29,524 | ||||||||||||||||||
Swap agreements | 26,081 | — | 57,673 | — | 83,754 | ||||||||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 32,668 | $ | — | $ | 59,760 | $ | (21,888 | ) | $ | 70,540 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | 9,206 | $ | 9,206 | |||||||||||
Futures contracts2 | 7,895 | — | — | 7,895 | |||||||||||||||
Swap agreements1 | 11,570 | 56 | 11,092 | 22,718 | |||||||||||||||
Total value | $ | 19,465 | $ | 56 | $ | 20,298 | $ | 39,819 |
1 Statement of assets and liabilities location: Outstanding swap agreements, at value and unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
Liability derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (11,731 | ) | $ | (11,731 | ) | |||||||||
Futures contracts2 | (12,791 | ) | — | — | (12,791 | ) | |||||||||||||
Swap agreements1 | (66,001 | ) | (157,994 | ) | — | (223,995 | ) | ||||||||||||
Total value | $ | (78,792 | ) | $ | (157,994 | ) | $ | (11,731 | ) | $ | (248,517 | ) |
1 Statement of assets and liabilities location: Outstanding swap agreements, at value and unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
72
The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Emerging Markets Debt Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (184,794 | ) | $ | (184,794 | ) | |||||||||
Futures contracts | (3,928 | ) | — | — | (3,928 | ) | |||||||||||||
Options purchased2 | — | — | (108,204 | ) | (108,204 | ) | |||||||||||||
Options written | — | — | 46,556 | 46,556 | |||||||||||||||
Swap agreements | 1,102 | 22,922 | (1,661 | ) | 22,363 | ||||||||||||||
Total net realized gain (loss) | $ | (2,826 | ) | $ | 22,922 | $ | (248,103 | ) | $ | (228,007 | ) | ||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | 53,241 | $ | 53,241 | |||||||||||
Futures contracts | 30,258 | — | — | 30,258 | |||||||||||||||
Options purchased2 | — | — | 49,482 | 49,482 | |||||||||||||||
Options written | — | — | (16,637 | ) | (16,637 | ) | |||||||||||||
Swap agreements | (26,494 | ) | (21,636 | ) | (1,950 | ) | (50,080 | ) | |||||||||||
Total change in net unrealized appreciation/depreciation | $ | 3,764 | $ | (21,636 | ) | $ | 84,136 | $ | 66,264 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, swap agreements and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | 18,166 | $ | 18,166 | |||||||||||
Futures contracts2 | 173,585 | — | — | 173,585 | |||||||||||||||
Options purchased1 | 1,883,771 | — | — | 1,883,771 | |||||||||||||||
Swap agreements1,2 | 2,281,767 | 427,420 | 189,662 | 2,898,849 | |||||||||||||||
Total value | $ | 4,339,123 | $ | 427,420 | $ | 207,828 | $ | 4,974,371 |
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
73
The UBS Funds
Notes to financial statements
Liability derivatives
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (214,982 | ) | $ | (214,982 | ) | |||||||||
Futures contracts2 | (82,077 | ) | — | — | (82,077 | ) | |||||||||||||
Options written1 | (2,016,762 | ) | (25,746 | ) | — | (2,042,508 | ) | ||||||||||||
Swap agreements1,2 | (5,823,801 | ) | (3,597,266 | ) | (130,879 | ) | (9,551,946 | ) | |||||||||||
Total value | $ | (7,922,640 | ) | $ | (3,623,012 | ) | $ | (345,861 | ) | $ | (11,891,513 | ) |
1 Statement of assets and liabilities location: Options written, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (1,420,667 | ) | $ | (1,420,667 | ) | |||||||||
Futures contracts | 2,350,568 | — | — | 2,350,568 | |||||||||||||||
Options purchased2 | (4,399,431 | ) | — | — | (4,399,431 | ) | |||||||||||||
Options written | 1,093,963 | 345,412 | — | 1,439,375 | |||||||||||||||
Swap agreements | 1,262,717 | (2,397,728 | ) | 79,561 | (1,055,450 | ) | |||||||||||||
Total net realized gain (loss) | $ | 307,817 | $ | (2,052,316 | ) | $ | (1,341,106 | ) | $ | (3,085,605 | ) | ||||||||
Interest rate risk | Credit risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Fixed Income Opportunities Fund | |||||||||||||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | 91,630 | $ | 91,630 | |||||||||||
Futures contracts | 277,456 | — | — | 277,456 | |||||||||||||||
Options purchased2 | (1,965,815 | ) | — | — | (1,965,815 | ) | |||||||||||||
Options written | 333,727 | (47,703 | ) | — | 286,024 | ||||||||||||||
Swap agreements | (2,315,311 | ) | (1,289,577 | ) | 62,138 | (3,542,750 | ) | ||||||||||||
Total change in net unrealized appreciation/depreciation | $ | (3,669,943 | ) | $ | (1,337,280 | ) | $ | 153,768 | $ | (4,853,455 | ) |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
74
The UBS Funds
Notes to financial statements
The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
The provisions of ASC Topic 210 "Disclosures about Offsetting Assets and Liabilities" require disclosure on the offsetting of financial assets and liabilities. The offsetting disclosures are limited to derivatives, repurchase and reverse repurchase agreements, and security lending and borrowing transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement ("MNA") or similar agreement.
UBS Core Plus Bond Fund
Derivative financial instruments: | Assets ($) | Liabilities ($) | |||||||||
Forward foreign currency contracts | — | (24,310 | ) | ||||||||
Futures contracts1 | 34,744 | (6,587 | ) | ||||||||
Options purchased | 87,006 | — | |||||||||
Options written | — | (123,543 | ) | ||||||||
Swap agreements1 | 58,703 | (8,130 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 180,453 | (162,570 | ) | ||||||||
Derivatives not subject to a master netting agreement or similar agreement ("MNA") | (152,685 | ) | 120,040 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | 27,768 | (42,530 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps as reported In the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
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 June 30, 2014.
Counterparty | Gross amount of assets ($) | Financial instruments and derivatives available for offset ($) | Collateral received ($) | Net amount of assets ($) | |||||||||||||||
CSI | 6,577 | — | — | 6,577 | |||||||||||||||
MLI | 13,757 | (12,660 | ) | — | 1,097 | ||||||||||||||
MSC | 7,434 | (2,826 | ) | — | 4,608 | ||||||||||||||
Total | 27,768 | (15,486 | ) | — | 12,282 | ||||||||||||||
Counterparty | Gross amount of liabilities ($) | Financial instruments and derivatives available for offset ($) | Collateral pledged ($) | Net amount of liabilities ($) | |||||||||||||||
CIBC | (2,640 | ) | — | — | (2,640 | ) | |||||||||||||
GSI | (2,249 | ) | — | — | (2,249 | ) | |||||||||||||
JPMCB | (17,075 | ) | — | — | (17,075 | ) | |||||||||||||
MLI | (12,660 | ) | 12,660 | — | — | ||||||||||||||
MSC | (2,826 | ) | 2,826 | — | — | ||||||||||||||
MSCI | (5,080 | ) | — | — | (5,080 | ) | |||||||||||||
Total | (42,530 | ) | 15,486 | — | (27,044 | ) |
75
The UBS Funds
Notes to financial statements
UBS Emerging Markets Debt Fund
Derivative financial instruments: | Assets ($) | Liabilities ($) | |||||||||
Forward foreign currency contracts | 9,206 | (11,731 | ) | ||||||||
Futures contracts1 | 7,895 | (12,791 | ) | ||||||||
Swap agreements1 | 22,718 | (223,995 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 39,819 | (248,517 | ) | ||||||||
Derivatives not subject to a master netting agreement or similar agreement ("MNA") | (7,895 | ) | 12,791 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | 31,924 | (235,726 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps as reported In the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
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 June 30, 2014.
UBS Emerging Markets Debt Fund
Counterparty | Gross amount of assets ($) | Financial instruments and derivatives available for offset ($) | Collateral received ($) | Net amount of assets ($) | |||||||||||||||
BB | 13,576 | (13,576 | ) | — | — | ||||||||||||||
CIBC | 1,688 | — | — | 1,688 | |||||||||||||||
CITI | 11,570 | (11,570 | ) | — | — | ||||||||||||||
CSI | 1,516 | (145 | ) | — | 1,371 | ||||||||||||||
DB | 3,374 | (3,374 | ) | — | — | ||||||||||||||
GSI | 200 | (200 | ) | — | — | ||||||||||||||
Total | 31,924 | (28,865 | ) | — | 3,059 | ||||||||||||||
Counterparty | Gross amount of liabilities ($) | Financial instruments and derivatives available for offset ($) | Collateral pledged ($) | Net amount of liabilities ($) | |||||||||||||||
BB | (29,549 | ) | 13,576 | — | (15,973 | ) | |||||||||||||
CITI | (11,806 | ) | 11,570 | — | (236 | ) | |||||||||||||
CSI | (145 | ) | 145 | — | — | ||||||||||||||
DB | (33,170 | ) | 3,374 | — | (29,796 | ) | |||||||||||||
GSI | (113,268 | ) | 200 | — | (113,068 | ) | |||||||||||||
MLI | (47,788 | ) | — | — | (47,788 | ) | |||||||||||||
Total | (235,726 | ) | 28,865 | — | (206,861 | ) |
UBS Fixed Income Opportunities Fund
Derivative financial instruments: | Assets ($) | Liabilities ($) | |||||||||
Forward foreign currency contracts | 18,166 | (214,982 | ) | ||||||||
Futures contracts1 | 173,585 | (82,077 | ) | ||||||||
Options purchased | 1,883,771 | — | |||||||||
Options written | — | (2,042,508 | ) | ||||||||
Swap agreements1 | 2,898,849 | (9,551,946 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 4,974,371 | (11,891,513 | ) | ||||||||
Derivatives not subject to a master netting agreement or similar agreement ("MNA") | (1,539,061 | ) | 3,625,167 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | 3,435,310 | (8,266,346 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps as reported In the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
76
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 June 30, 2014.
Counterparty | Gross amount of assets ($) | Financial instruments and derivatives available for offset ($) | Collateral received ($) | Net amount of assets ($) | |||||||||||||||
BB | 864,879 | (864,879 | ) | — | — | ||||||||||||||
CITI | 78,290 | (78,290 | ) | — | — | ||||||||||||||
CSFB | 393,282 | (196,703 | ) | — | 196,579 | ||||||||||||||
DB | 222,556 | (222,556 | ) | — | — | ||||||||||||||
JPMCB | 1,565,838 | (1,204,373 | ) | — | 361,465 | ||||||||||||||
MLI | 256,305 | (256,305 | ) | — | — | ||||||||||||||
MSCI | 54,160 | (54,160 | ) | — | — | ||||||||||||||
Total | 3,435,310 | (2,877,266 | ) | — | 558,044 | ||||||||||||||
Counterparty | Gross amount of liabilities ($) | Financial instruments and derivatives available for offset ($) | Collateral pledged ($) | Net amount of liabilities ($) | |||||||||||||||
BB | (1,224,204 | ) | 864,879 | — | (359,325 | ) | |||||||||||||
CITI | (892,890 | ) | 78,290 | — | (814,600 | ) | |||||||||||||
CSFB | (196,703 | ) | 196,703 | — | — | ||||||||||||||
DB | (2,241,811 | ) | 222,556 | — | (2,019,255 | ) | |||||||||||||
JPMCB | (1,204,373 | ) | 1,204,373 | — | — | ||||||||||||||
MLI | (1,241,203 | ) | 256,305 | — | (984,898 | ) | |||||||||||||
MSCI | (1,265,162 | ) | 54,160 | — | (1,211,002 | ) | |||||||||||||
Total | (8,266,346 | ) | 2,877,266 | — | (5,389,080 | ) |
B. Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Portfolio of investments footnotes.
C. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
D. Foreign currency translation: The Funds use the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities and other assets and liabilities—at the exchange rates prevailing at the end of each
77
The UBS Funds
Notes to financial statements
Fund's fiscal period; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of each Fund's portfolio are presented at the foreign exchange rates at the end of each Fund's fiscal period, the Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the realized gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. Certain foreign exchange gains and losses included in realized and unrealized gains and losses are included in or are a reduction of ordinary income in accordance with US federal income tax regulations.
E. Forward foreign currency contracts: A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the US dollar and the potential inability of the counterparty to meet the terms of the contract. The Funds may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk).
A Fund will enter into forward contracts to sell, for a fixed amount of US dollars or other appropriate currency, an amount of foreign currency, to the extent that the value of the short forward contract is covered by the underlying value of securities denominated in the currency being sold. Alternatively, when a Fund enters into a non-cash settled forward contract to sell an amount of foreign currency, the Fund's custodian or sub-custodian will place assets in a segregated account of the Fund in an amount equal to the contract's full notional value. However, currency contracts with respect to identical currencies may be netted against each other and, in such cases, a Fund's custodian or sub-custodian will place assets in a segregated account of the Fund, in an amount equal to the net amount owed (the unrealized loss) by a Fund. If the assets placed in the account decline in value, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Fund's commitments with respect to such contracts.
The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of the open forward foreign currency contracts are recorded daily for book purposes as unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by each Fund on contracts which have been sold or matured.
F. Futures contracts: The Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realize gains. Using financial futures contracts involves various market risks, including interest rate and equity risk. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin". Subsequent payments, known as "variation margin", are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized gain or loss on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
78
The UBS Funds
Notes to financial statements
G. Securities traded on to-be-announced basis: Certain Funds may from time to time purchase, or sell short, securities on a to-be-announced ("TBA") basis. In a TBA transaction, the Fund commits to purchasing or selling securities for which all specific information is not yet known at the time of the trade, particularly the face amount and maturity date of the underlying security transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, US government securities or other liquid high grade debt obligations are segregated in the Funds' records in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
H. Swap agreements: Certain Funds may engage in swap agreements, including but not limited to interest rate, currency, total return, and credit default swap agreements. The Funds expect to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio's duration, to protect against any increase in the price of securities a Fund anticipates purchasing at a later date, to gain exposure to certain markets in the most economical way possible or in an attempt to enhance income or gains.
Certain Funds may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect itself from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Certain Funds may enter into currency swap agreements with another party to receive or pay amounts based on changes in currency exchange rates in order to protect itself from or take advantage of exchange rate fluctuations. The Fund utilizes currency swaps to earn income and enhance returns as well as to manage the risk profile of the Fund. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified currency exchange rate(s) for a specified amount. Currency swap agreements are subject to general market risk, liquidity risk, counterparty risk, foreign exchange risk and interest rate risk.
Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation or depreciation. Total return swap agreements are subject to general market risk, liquidity risk, counterparty risk, interest risk, credit risk and the risk that there may be unfavorable changes in the underlying investments or instruments.
Credit default swap agreements involve commitments to make or receive payments in the event of a default or other credit event of a referenced security. As a buyer, a Fund would make periodic payments to the counterparty, and a Fund would receive payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event does occur, a Fund typically would receive full notional value for a reference obligation that may have little or no value. As a seller, a Fund would receive periodic payments from the counterparty, and a Fund would make payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will retain the periodic stream of payments it received over the term of the contract. However, if a credit event occurs, a Fund will pay full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if a Fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk.
79
The UBS Funds
Notes to financial statements
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in delivery of a security with a value other than had been anticipated (such as a party's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swaps on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where a Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer's default.
The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of June 30, 2014 for which a Fund is the seller of protection are disclosed under the section "Credit default swaps on credit indices—sell protection", "Credit default swaps on corporate and sovereign issues—sell protection" and "Centrally cleared credit default swaps on credit indices—sell protection" in the Notes to Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
Certain clearinghouses currently offer clearing for limited types of derivatives transactions, such as interest and credit derivatives. In a cleared derivative transaction, a Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund's exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Only a limited number of transactions are currently eligible for clearing. Centrally cleared swaps, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
The use of swap agreements involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If UBS Global AM is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of a Fund will be less favorable than it would have been if this investment technique was never used. Swap agreements do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap agreement defaults and fails to consummate the transaction, a Fund's risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, a Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
A Fund accrues for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap agreements on the Statement of assets and liabilities. Once interim payments are settled in cash, the net amount is recorded as realized gain/loss on swap agreements, in addition to realized gain/loss recorded upon the termination of swap agreements on the Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
I. Option writing: Certain Funds may write (sell) put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains. When a Fund writes a call or a put
80
The UBS Funds
Notes to financial statements
option, an amount equal to the premium received by the Fund is included in the Fund's Statement of assets and liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option which a Fund has written is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, the Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, index or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
J. Purchased options: Certain Funds may purchase put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), as well as exchange listed call options on particular market segment indices to achieve temporary exposure to a specific security, currency, industry or geographic region. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Fund pays a premium which is included in the Statement of assets and liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying futures, security or currency transaction to determine the realized gain or loss.
K. Dividends and distributions: It is each Fund's policy to distribute its respective net investment income monthly except UBS Fixed Income Opportunities Fund which will distribute its net investment income, if any, quarterly. Net realized capital gains, if any, are paid annually. Dividends and distributions to shareholders are recorded on the ex-distribution date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from US GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
L. Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which the Funds invest. The ability of the issuers of debt securities held by a Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
Investments in bonds with ratings of BB (Standard & Poor's Ratings Group) or Ba (Moody's Investors Service, Inc.) or below (commonly referred to as "high yield" bonds), or deemed of equivalent quality, have an increased risk of defaulting or otherwise being unable to honor a financial obligation. These securities are considered to be
81
The UBS Funds
Notes to financial statements
predominately speculative with respect to an issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. Lower-quality bonds are more likely to be subject to an issuer's default or downgrade than investment grade (higher-quality) bonds.
M. Redemption fees: Each class of each series of The UBS Funds will impose a 1% redemption fee on shares sold or exchanged within 90 days of their purchase date, subject to limited exceptions. This amount is paid to the applicable Fund, not the Advisor or UBS Global Asset Management (US) Inc., ("UBS Global AM (US)"). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the year ended June 30, 2014, redemption fees for each Fund amounted to less than $0.01 per share and less than 0.01% of average net assets.
2. Investment advisory fees and other transactions with affiliates
The Advisor, a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee, accrued daily and paid monthly, based on each Fund's respective average daily net assets in accordance with the following per annum schedule:
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion and over | ||||||||||||||||||
UBS Core Plus Bond Fund | 0.500 | % | 0.475 | % | 0.450 | % | 0.425 | % | 0.400 | % | |||||||||||||
UBS Emerging Markets Debt Fund | 0.750 | 0.750 | 0.750 | 0.750 | 0.750 | ||||||||||||||||||
UBS Fixed Income Opportunities Fund | 0.650 | 0.650 | 0.650 | 0.650 | 0.650 |
For UBS Core Plus Bond Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) do not exceed the expense limit of each class of shares as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed, for the year ended June 30, 2014, were as follows:
Fund | Class A expense cap | Class C expense cap | Class Y expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | |||||||||||||||||||||
UBS Core Plus Bond Fund | 0.64 | % | 1.14 | % | 0.39 | % | $ | (24,386 | ) | $ | 158,073 | $ | 318,611 | ||||||||||||||
UBS Emerging Markets Debt Fund | 1.25 | 1.75 | 1.00 | (11,934 | ) | 169,899 | 239,427 | ||||||||||||||||||||
UBS Fixed Income Opportunities Fund | 0.95 | 1.45 | 0.70 | (5,152 | ) | 621,751 | 442,979 |
Each Fund will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived or reimbursed for the year ended June 30, 2014 are subject to repayment through June 30, 2017.
82
The UBS Funds
Notes to financial statements
At June 30, 2014, 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, 2015 | Expires June 30, 2016 | Expires June 30, 2017 | |||||||||||||||
UBS Core Plus Bond Fund—Class A | $ | 175,206 | $ | 63,846 | $ | 58,776 | $ | 52,584 | |||||||||||
UBS Core Plus Bond Fund—Class C | 52,736 | 17,126 | 17,658 | 17,952 | |||||||||||||||
UBS Core Plus Bond Fund—Class Y | 739,978 | 241,662 | 250,241 | 248,075 | |||||||||||||||
UBS Emerging Markets Debt Fund—Class A | 12,179 | — | 4,525 | 7,654 | |||||||||||||||
UBS Emerging Markets Debt Fund—Class C | 3,656 | — | 2,316 | 1,340 | |||||||||||||||
UBS Emerging Markets Debt Fund—Class Y | 496,115 | — | 265,682 | 230,433 | |||||||||||||||
UBS Fixed Income Opportunities Fund—Class A | 672,454 | 242,230 | 171,521 | 258,703 | |||||||||||||||
UBS Fixed Income Opportunities Fund—Class C | 110,460 | 35,078 | 32,820 | 42,562 | |||||||||||||||
UBS Fixed Income Opportunities Fund—Class Y | 425,948 | 112,949 | 171,285 | 141,714 |
Each Fund pays UBS Global AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the year ended June 30, 2014, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Core Plus Bond Fund | $ | 1,841 | $ | 23,711 | |||||||
UBS Emerging Markets Debt Fund | 1,534 | 16,990 | |||||||||
UBS Fixed Income Opportunities Fund | 4,641 | 71,741 |
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the year ended June 30, 2014 have been included near the end of each Fund's Portfolio of investments.
The Funds may invest in UBS Cash Management Prime Relationship Fund ("Cash Prime"). Cash Prime is offered as a cash management option only to mutual funds and certain other accounts. Distributions received from Cash Prime are reflected as affiliated income in the Statement of operations. Amounts relating to those investments at June 30, 2014 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
Under normal conditions, the Funds invest cash collateral from securities lending activities into an affiliated private money market fund, UBS Private Money Market Fund LLC ("Private Money Market"), which operates in compliance with most of the substantive provisions of Rule 2a-7 of the 1940 Act. Private Money Market is managed by the Advisor and is offered as a cash management option only to mutual funds and certain other accounts managed by the Advisor. UBS Global AM acts as managing member and receives a management fee from Private Money Market payable monthly in arrears at the annual rate of 0.10% of Private Money Market's average daily members' equity, minus the aggregate operating expenses of, and incurred by, Private Money Market during each such related month, not including investment expenses (including brokerage commissions, taxes, interest charges and other costs with respect to transactions in securities) and extraordinary expenses including litigation expenses, if any. The Advisor may, in its sole discretion, waive all or any portion of the management fee to which it may be entitled from time to time in order to maintain operating expenses at a certain level. Distributions received from Private Money Market, net of fee rebates paid to borrowers, are reflected as securities lending income in the Statement of operations. Amounts relating to those investments at June 30, 2014 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
83
The UBS Funds
Notes to financial statements
3. Distribution and service plans
UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A and Class C. Annual fees under the Plans as a percentage of the average daily net assets of each representative class of each of the Funds are as follows:
Fund | Class A | Class C | |||||||||
UBS Core Plus Bond Fund | 0.25 | % | 0.75 | % | |||||||
UBS Emerging Markets Debt Fund | 0.25 | 0.75 | |||||||||
UBS Fixed Income Opportunities Fund | 0.25 | 0.75 |
UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A and Class C. At June 30, 2014, certain Funds owed UBS Global AM (US) distribution and service fees, and for the year ended June 30, 2014, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:
Fund | Distribution and service fees owed | Sales charges earned | |||||||||
UBS Core Plus Bond Fund—Class A | $ | 666 | $ | 455 | |||||||
UBS Core Plus Bond Fund—Class C | 894 | — | |||||||||
UBS Emerging Markets Debt Fund—Class A | 15 | 1,058 | |||||||||
UBS Emerging Markets Debt Fund—Class C | 13 | — | |||||||||
UBS Fixed Income Opportunities Fund—Class A | 8,533 | 31,583 | |||||||||
UBS Fixed Income Opportunities Fund—Class C | 4,393 | 3,543 |
4. Transfer agency and related services fees
UBS Financial Services Inc. provides certain services pursuant to a delegation of authority from BNY Mellon Investment Servicing ("BNY Mellon"), as each Fund's transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the year ended June 30, 2014, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
Fund | Amount paid | ||||||
UBS Core Plus Bond Fund | $ | 1,805 | |||||
UBS Emerging Markets Debt Fund | 94 | ||||||
UBS Fixed Income Opportunities Fund | 17,057 |
5. Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly.
84
The UBS Funds
Notes to financial statements
Each Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees.
UBS Core Plus Bond Fund loaned securities to certain qualified broker-dealers, with the Funds' custodian acting as the Funds' lending agent. In addition, UBS Core Plus Bond Fund received US government agency securities as collateral with a market value of $71,506, which can not be resold. The value of loaned securities and related collateral at June 30, 2014 was as follows:
Fund | Market value of securities loaned | Market value of collateral received from securities loaned | Cash collateral received | ||||||||||||
UBS Core Plus Bond Fund | $ | 420,516 | $ | 429,288 | $ | 357,782 |
6. Purchases and sales of securities
For the year ended June 30, 2014, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government and agency securities, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Core Plus Bond Fund | $ | 128,637,135 | $ | 133,689,023 | |||||||
UBS Emerging Markets Debt Fund | 8,248,560 | 7,968,786 | |||||||||
UBS Fixed Income Opportunities Fund | 33,344,871 | 48,880,718 |
For the year ended June 30, 2014, aggregate purchases and sales of US Government and agency securities, excluding short-term investments, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Core Plus Bond Fund | $ | 22,759,820 | $ | 25,637,911 | |||||||
UBS Fixed Income Opportunities Fund | 3,457,839 | 5,983,235 |
7. Federal income taxes
It is each Fund's policy to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, each Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
85
The UBS Funds
Notes to financial statements
The tax character of distributions paid during the fiscal years ended June 30, 2014 and June 30, 2013 were as follows:
2014 | |||||||||||||||
Fund | Distributions paid from ordinary income | Return of capital | Total distributions paid | ||||||||||||
UBS Core Plus Bond Fund | $ | 860,543 | $ | — | $ | 860,543 | |||||||||
UBS Emerging Markets Debt Fund | 838,143 | 439,332 | 1,277,475 | ||||||||||||
UBS Fixed Income Opportunities Fund | — | 609,051 | 609,051 |
2013 | |||||||||||||||||||
Fund | Distributions paid from ordinary income | Return of capital | Distributions paid from net long-term capital gains | Total distributions paid | |||||||||||||||
UBS Core Plus Bond Fund | $ | 1,037,967 | $ | — | $ | — | $ | 1,037,967 | |||||||||||
UBS Emerging Markets Debt Fund | 1,491,519 | — | 90,070 | 1,581,589 | |||||||||||||||
UBS Fixed Income Opportunities Fund | 1,960,221 | 680,924 | — | 2,641,145 |
At June 30, 2014, the components of accumulated earnings (deficit) on a tax basis were as follows:
Fund | Undistributed ordinary income | Accumulated capital and other losses | Unrealized appreciation/ (depreciation) | Total | |||||||||||||||
UBS Core Plus Bond Fund | $ | 461,492 | $ | (34,492,571 | ) | $ | 760,503 | $ | (33,270,576 | ) | |||||||||
UBS Emerging Markets Debt Fund | — | (409,157 | ) | (977,452 | ) | (1,386,609 | ) | ||||||||||||
UBS Fixed Income Opportunities Fund | — | (4,294,205 | ) | (923,469 | ) | (5,217,674 | ) |
Due to inherent differences in the recognition of income, expenses and realized gains/losses under US GAAP and federal income tax purposes, permanent differences between book and tax basis reporting for the current fiscal year have been identified and appropriately reclassified. Reclassifications for the year ended June 30, 2014 were as follows:
Fund | Undistributed net investment income | Accumulated net realized gain/(loss) | Beneficial interest | ||||||||||||
UBS Core Plus Bond Fund | $ | 170,111 | $ | (147,275 | ) | $ | (22,836 | ) | |||||||
UBS Emerging Markets Debt Fund | (269,730 | ) | 269,730 | — | |||||||||||
UBS Fixed Income Opportunities Fund | (1,669,251 | ) | 1,694,992 | (25,741 | ) |
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
86
The UBS Funds
Notes to financial statements
At June 30, 2014, the following Funds had post-enactment net capital losses that will be carried forward indefinitely, as follows:
Fund | Short-term losses | Long-term losses | Net capital losses | ||||||||||||
UBS Core Plus Bond Fund | $ | 265,127 | $ | 25,588 | $ | 290,715 | |||||||||
UBS Emerging Markets Debt Fund | 180,424 | 134,009 | 314,433 | ||||||||||||
UBS Fixed Income Opportunities Fund | 4,055,307 | — | 4,055,307 |
At June 30, 2014, the following Funds had pre-enactment capital loss carryforwards for federal income tax purposes available to offset future capital gains through the indicated expiration dates:
Expiration dates | |||||||||||
Fund | June 30, 2017 | June 30, 2018 | |||||||||
UBS Core Plus Bond Fund | $ | 2,127,033 | $ | 32,070,048 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2014, the Funds incurred no late year losses.
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, 2014 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 year ended June 30, 2014, the Funds did not incur any interest or penalties. Capital gains realized by the Funds on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Each of the tax years in the four year period ended June 30, 2014, or since inception in the case of UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
8. Line of credit
The Trust has entered into an agreement with JPMorgan Chase Bank to provide a $50 million committed line of credit to the Funds ("Committed Credit Facility") to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of each Fund at the request of shareholders and other temporary or emergency purposes. Interest on amounts borrowed is calculated based on the prevailing rates in effect at the time of borrowing. Under the Committed Credit Facility arrangement, each Fund has agreed to pay commitment fees, pro rata, based on the relative asset size of the Funds in the Committed Credit Facility. There were no borrowings from the Committed Credit Facility outstanding as of or during the year ended June 30, 2014.
87
The UBS Funds
Notes to financial statements
9. Shares of beneficial interest
For the year ended June 30, 2014, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Core Plus Bond Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 20,408 | $ | 182,793 | 2,395 | $ | 21,408 | 294,057 | $ | 2,653,443 | ||||||||||||||||||
Shares repurchased | (456,390 | ) | (4,085,317 | ) | (42,911 | ) | (384,376 | ) | (568,982 | ) | (5,097,483 | ) | |||||||||||||||
Dividends reinvested | 6,919 | 61,956 | 3,165 | 28,236 | 77,511 | 693,484 | |||||||||||||||||||||
Redemption fees | — | 376 | — | 130 | — | 2,013 | |||||||||||||||||||||
Net decrease | (429,063 | ) | $ | (3,840,192 | ) | (37,351 | ) | $ | (334,602 | ) | (197,414 | ) | $ | (1,748,543 | ) |
UBS Emerging Markets Debt Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 5,824 | $ | 52,132 | 2,174 | $ | 19,769 | — | $ | — | ||||||||||||||||||
Shares repurchased | (2,170 | ) | (18,729 | ) | (3 | ) | (27 | ) | — | — | |||||||||||||||||
Dividends reinvested | 357 | 3,183 | 59 | 528 | — | — | |||||||||||||||||||||
Net increase | 4,011 | $ | 36,586 | 2,230 | $ | 20,270 | — | $ | — |
UBS Fixed Income Opportunities Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 3,404,144 | $ | 33,107,641 | 266,789 | $ | 2,588,679 | — | $ | — | ||||||||||||||||||
Shares repurchased | (4,043,059 | ) | (39,006,988 | ) | (454,715 | ) | (4,377,735 | ) | (1,505,689 | ) | (14,491,467 | ) | |||||||||||||||
Dividends reinvested | 21,572 | 208,112 | 545 | 5,249 | 15,458 | 149,333 | |||||||||||||||||||||
Redemption fees | — | 20,977 | — | 3,403 | — | 12,793 | |||||||||||||||||||||
Net decrease | (617,343 | ) | $ | (5,670,258 | ) | (187,381 | ) | $ | (1,780,404 | ) | (1,490,231 | ) | $ | (14,329,341 | ) |
For the year ended June 30, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Core Plus Bond Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 443,666 | $ | 4,104,420 | 15,484 | $ | 142,505 | 197,384 | $ | 1,820,945 | ||||||||||||||||||
Shares repurchased | (506,145 | ) | (4,660,804 | ) | (65,560 | ) | (603,036 | ) | (992,947 | ) | (9,144,471 | ) | |||||||||||||||
Dividends reinvested | 9,363 | 86,253 | 3,903 | 35,836 | 91,327 | 840,033 | |||||||||||||||||||||
Redemption fees | — | 96 | — | 33 | — | 502 | |||||||||||||||||||||
Net decrease | (53,116 | ) | $ | (470,035 | ) | (46,173 | ) | $ | (424,662 | ) | (704,236 | ) | $ | (6,482,991 | ) |
88
The UBS Funds
Notes to financial statements
UBS Emerging Markets Debt Fund1
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 3,551 | $ | 36,836 | 10 | $ | 100 | 2,500,010 | $ | 25,000,100 | ||||||||||||||||||
Dividends reinvested | 57 | 572 | — | — | — | — | |||||||||||||||||||||
Net increase | 3,608 | $ | 37,408 | 10 | $ | 100 | 2,500,010 | $ | 25,000,100 |
UBS Fixed Income Opportunities Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,547,355 | $ | 25,102,256 | 318,489 | $ | 3,131,840 | 1,964,234 | $ | 19,300,001 | ||||||||||||||||||
Shares repurchased | (1,708,570 | ) | (16,738,448 | ) | (105,668 | ) | (1,037,700 | ) | (1,037,810 | ) | (10,142,870 | ) | |||||||||||||||
Dividends reinvested | 57,234 | 560,256 | 13,836 | 135,287 | 59,810 | 586,032 | |||||||||||||||||||||
Redemption fees | — | 748 | — | 139 | — | 637 | |||||||||||||||||||||
Net increase | 896,019 | $ | 8,924,812 | 226,657 | $ | 2,229,566 | 986,234 | $ | 9,743,800 |
1 For the period July 23, 2012 (commencement of operations) to June 30, 2013.
89
The UBS Funds
Report of independent registered public accounting firm
The Board of Trustees and Shareholders of The UBS Funds
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund (three of the series comprising The UBS Funds) (collectively the "Funds") as of June 30, 2014, and the related statements of operations for the year then ended and the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2014, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Core Plus Bond Fund, UBS Emerging Markets Debt Fund and UBS Fixed Income Opportunities Fund at June 30, 2014, the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.
New York, New York
August 28, 2014
90
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-202-551 8090. Additionally, you may obtain copies of Forms N-Q from the Funds upon request by calling 1-800-647 1568.
Proxy voting policies, procedures and record
You may obtain a description of the Funds' (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Funds voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Funds directly at 1-800-647 1568, online on UBS's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site http://www.sec.gov).
91
The UBS Funds
Board approval of investment advisory agreements (unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 5 and 6, 2014 (the "Meeting"), the Board, including those Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust or UBS Global Asset Management (Americas) Inc. (the "Advisor") and its affiliates (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 Asset Growth Fund (formerly, UBS Global Frontier Fund), UBS Multi-Asset Income Fund, UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund), UBS U.S. Defensive Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Small Cap Growth Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS Fixed Income Opportunities Fund, UBS Core Plus Bond Fund and UBS Emerging Markets Debt Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process, on May 30, 2014, June 5, 2014 and June 6, 2014, to discuss the materials provided to them in response to the information request, including materials prepared by the Advisor, as well as reports prepared by Lipper Inc. ("Lipper Reports"), an independent statistical compilation company, providing comparative expense information on an actual and contractual basis and comparative performance information for the Funds. The Board also made reference to information and material that had been provided to the Independent Trustees throughout the year at quarterly Board meetings.
At the Meeting, the Board considered a number of factors in connection with its deliberations concerning the continuation of the Advisory Agreement for each Fund, including: (i) the nature, extent, and quality of the services provided by the Advisor to the Fund; (ii) the performance of the Fund and the Advisor; (iii) the Fund's expenses, costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund; and (iv) whether economies of scale are realized by the Advisor with respect to the Fund, as it grows larger, and the extent to which the economies of scale are reflected in the level of the management fees charged.
Nature, Extent, and Quality of Services.
In considering the nature, extent, and quality of the services provided by the Advisor to a Fund, the Board reviewed the material presented by the Advisor describing the various services provided to each Fund. The Board noted that in addition to investment management services, the Advisor provides each Fund with operational, legal, and compliance support. The Board also considered the scope and depth of the Advisor's organization and the experience and expertise of the professionals currently providing investment management and other services to the Funds. The Board considered that the Advisor was a well-established investment management organization employing investment personnel with significant experience in the investment management industry. The Board also considered the Advisor's in-house research capabilities, as well as other research services available to it, including research services available to the Advisor as a result of securities transactions effected for the Funds and the Advisor's other investment management clients, and noted that the Advisor had extensive global research capabilities. The Board also evaluated the Advisor's portfolio management process for each Fund, including the use of risk management techniques and the proprietary technologies utilized to structure the Fund's portfolio. The Board noted that various presentations had been made by investment personnel at Board meetings throughout the year concerning the Funds' investment performance and investment strategies, 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 Global Asset Management (US) Inc. ("UBS Global AM (US)"), and sub-transfer agency services provided by UBS Financial Services Inc. ("UBS Financial Services"). In connection with the non-investment management services, the Board also considered the quarterly reports that the Advisor provides to the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In
92
The UBS Funds
Board approval of investment advisory agreements (unaudited)
addition, the Board considered the presentations provided with respect to distribution strategies for the Funds. After analyzing the services provided by the Advisor to each Fund, both quantitatively and qualitatively, including the impact of these services on investment performance, the Board concluded that the nature, extent, and quality of services provided to each Fund were consistent with the operational requirements of each Fund, and met the needs of the Fund's shareholders.
Performance.
In evaluating the performance of each Fund, the Board analyzed the Lipper Reports, which compared the performance of each Fund with other funds in its respective peer universe over various time periods. The Board also reviewed the memoranda provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Lipper Reports, the Board noted that the UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Asset Growth Fund, UBS U.S. Large Cap Equity Fund, UBS Equity Opportunity Fund, UBS U.S. Small Cap Growth Fund, and UBS Core Plus Bond Fund each had appeared in one of the top three performance quintiles for the one-year performance period. At the Board's request, the Advisor further addressed the performance data for the UBS Multi-Asset Income Fund, UBS Global Sustainable Equity Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity Fund, UBS Fixed Income Opportunities Fund and UBS Emerging Markets Debt Fund, each of which had appeared in one of the lower performance quintiles for the one-year period.
In explaining the performance of the UBS Multi-Asset Income Fund, the Advisor discussed the factors that had affected the performance of the Fund over the past year. The Advisor noted that the UBS Multi-Asset Income Fund pursues a tactical income strategy to provide risk-managed income over the long-term. The Advisor noted that the Fund produced positive performance for the year and outperformed its benchmark index. The Advisor noted the Fund's relative underperformance compared to its Lipper peer group was due to the variety of different strategies of the funds included in the peer group. The Advisor noted that the UBS Multi-Asset Income Fund was designed for a conservative income investor that seeks a positive income stream through various market conditions. The Advisor stated that the Fund's performance results during the past year were consistent with the Fund's investment objective.
The Advisor then discussed the performance of the UBS Global Sustainable Equity Fund. The Advisor stated that the main reason for the Fund's underperformance relative to its peers was due to the transition in strategy during the past year from international equity to global sustainable equity. Due to the strong performance of the U.S. market over the past year, international strategies on average underperformed global strategies, which distorted this transitioning Fund's performance versus its global equity peers.
The Advisor then discussed the factors that had a negative effect on the relative performance of the UBS Equity Long-Short Multi-Strategy Fund during the one-year performance period. The Advisor noted that strategy changes had been implemented for the Fund in October 2012, and that additional investment sleeves had been added in 2013. The Advisor stated that since the transition to the new strategy, the Fund has experienced better risk-adjusted performance. The Advisor reported that it believed that the Fund's relative performance versus its peers would fare better in down markets.
In discussing the performance of the UBS U.S. Defensive Equity Fund for the one-year performance period, the Advisor explained that the Fund's defensive strategy was the primary reason for the Fund's underperformance as compared to its peer universe. The Advisor noted that the options overlay strategy for the Fund, which reduced the volatility profile of the Fund, detracted from the Fund's performance. The Advisor stated the options overlay strategy should benefit the Fund's relative performance when the U.S. equity market experiences a down turn.
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The Advisor next addressed the relative underperformance of the UBS Fixed Income Opportunities Fund with respect to the Fund's peers. The Fund produced a small positive return over the period; however, produced weaker peer relative rankings. Its weaker relative performance as compared to its peer universe was largely attributable to the composition of the Fund's current absolute return peer group. The peer group contains a wide mix of funds that are managed to varying risk/return objectives and follow investment strategies that may not be similar to the Fund. This includes strategies with sizable allocation to equity markets, such as asset allocation funds, which benefited from equity exposure in a positive equity market.
With respect to the performance of the UBS Emerging Markets Debt Fund, the Advisor noted that the Fund underperformed relative to its peer universe. The Advisor explained that the Fund's relative underperformance as compared to its peers was due primarily to the Fund's investments in longer duration Brazil debt and its overweight to local currencies as compared to its peers. The Advisor explained that U.S. dollar-denominated debt generally outperformed local currency debt during the period and noted that any fund that allocated more heavily to local markets would reflect lower performance rankings.
The Board concluded that the Advisor's explanations provided a sound basis for understanding the performance of each Fund that underperformed in comparison to its peer universe. The Board determined, after analyzing the performance data, that the performance of each Fund was acceptable as compared with relevant performance standards, given the investment strategies and risk profile of each Fund, the expectations of the shareholder base, the current market environment and the Advisor's efforts to address the underperformance issues of each Fund.
Fund Fees and Expenses.
When considering the fees and expenses borne by each Fund, and the reasonableness of the management fees paid to the Advisor in light of the services provided to each Fund, the Board compared the fees charged by the Advisor to each Fund to fees charged to the funds in its peer group for comparable services, as provided in the Lipper Reports, on both an actual (taking into account expense limitation arrangements) and a contractual basis (assuming all funds in the peer expense group were similar in size to the respective Fund). In examining the Lipper Reports, and in reviewing comparative costs, it was noted that the results of such expense comparisons showed that the actual management fee rate for each Fund, except the UBS Global Allocation Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except the UBS Global Allocation Fund, UBS Asset Growth Fund, UBS Multi-Asset Income Fund and UBS U.S. Small Cap Growth Fund, had a contractual fee rate comparable to, or lower than, the Lipper median in its respective Lipper expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund had total expenses that were comparable to, or lower than, the Lipper median in its respective Lipper expense group, except for UBS Global Allocation Fund and UBS Emerging Markets Debt Fund.
The Board first discussed the management fee and expenses of the UBS Global Allocation Fund. It was noted that the contractual management fee, actual management fee and total expenses for the UBS Global Allocation Fund were each slightly higher than the fees and expenses of several of the funds in its Lipper expense group. The Advisor noted that changes to the funds in the peer group and a reduction in the UBS Global Allocation Fund's assets caused the Fund's relative lower rankings. The Board, however, noted that the Fund's management fee and expenses were each reasonable considering that neither the management fee nor the Fund's total expenses were significantly higher than the respective Lipper expense group medians. The Board will continue to monitor the Fund's peers and expenses.
The Board then discussed the management fee of the UBS Asset Growth Fund. It was noted that the UBS Asset Growth Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis. The Board noted that while the UBS Asset Growth Fund's contractual management fee was higher than the
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median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses were each at the median of the Fund's Lipper expense group.
The Board next considered that the management fee of the UBS Multi-Asset Income Fund was slightly higher than the median of its Lipper expense group on a contractual basis, but noted that the Fund's actual management fee compared favorably with the Fund's peers placing in the second quintile of the Lipper expense group. The Board also considered that the UBS Multi-Asset Income Fund's total expenses were lower than the median of the Fund's expense group.
The Board next discussed the management fee of the UBS U.S. Small Cap Growth Fund. It was noted that the UBS U.S. Small Cap Growth Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis, which led the Board to discuss this Fund's management fee with the Advisor. The Board noted that while the UBS U.S. Small Cap Growth Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee compared more favorably to its peers. The Board also noted that the total expenses of the UBS Small Cap Growth Fund were comparable to the other funds in its peer group.
The Board also reviewed the expenses of the UBS Emerging Markets Debt Fund and noted that the Fund's expenses were higher than the Fund's peers. The Board noted that the Fund's management fee on both a contractual and actual basis compared favorably to the management fee of its Lipper peers. The Advisor noted that the Fund's total expenses were higher than its peers primarily because the Fund was relatively newer and had less assets than many of the funds in its peer group. The Advisor also note that some of the UBS Emerging Markets Debt Fund's peers maintain only limited or no exposure to securities denominated in local market currencies, which have additional expenses that are not associated with holding U.S. dollar-denominated debt.
The Board also received and considered information about the fee rates charged to other funds and accounts that are managed by the Advisor. After discussing the information about the other funds and accounts with the Advisor, the Board determined that the fees charged by the Advisor to the Funds were within a reasonable range, giving effect to differences in services performed for such other funds and accounts as compared to such fee rates. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.
Costs and Profitability.
The Board considered the costs of providing services to the Funds and the profitability of the Funds to the Advisor and its affiliates by reviewing the profitability analysis provided by the Advisor, including information about its fee revenues and expenses. The Board reviewed the profitability of each Fund to the Advisor and its affiliates, and the compensation that was received for providing services to each Fund. The profitability analysis, which provided information for the last three calendar years, included schedules relating to the revenue and expenses attributable to: (i) the investment advisory and administration services provided by the Advisor; (ii) the distribution and shareholder services provided by UBS Global AM (US) and UBS Financial Services; (iii) the transfer agency-related services provided by UBS Financial Services; and (iv) all services provided by the Advisor, UBS Global AM (US), and UBS Financial Services shown on a consolidated basis. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. The Advisor also explained to the Board the reasons for an increase or decrease in profitability of each Fund from last calendar year to this calendar year.
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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 AG, in the form of commissions for executing securities transactions for the Funds. Upon closely examining the information provided concerning the Advisor's profitability, the Board concluded that the level of profits realized by the Advisor and its affiliates with respect to each Fund, if any, was reasonable in relation to the nature and quality of the services that were provided.
Economies of Scale.
The Board also discussed whether economies of scale are realized by the Advisor with respect to each Fund as it grows larger, and the extent to which this is reflected in the level of management fees charged. The Board noted that with respect most Funds, any actual or potential economies of scale are, or will be, shared with the Fund and its shareholders through existing management fee breakpoints so that as the Fund grows in size, its effective management fee declines. The Board noted that each Fund, except UBS Asset Growth Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS Multi-Asset Income Fund, UBS Emerging Markets Debt Fund, and UBS Fixed Income Opportunities Fund, had a breakpoint schedule that provided for continuing breakpoints past the current asset level for the Fund. Based on each Fund's fees and expenses and the Advisor's profitability analysis, the Board concluded that any actual or potential economies of scale would be reasonably shared with a Fund and its shareholders.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, including a majority of the Independent Trustees, with the assistance of independent counsel, concluded that the continuation of the Advisory Agreement for each Fund was in the best interests of the Fund and its shareholders.
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The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory trust. Under Delaware law, the Board has overall responsibility for managing the business and affairs of the Trust, including general supervision and review of its investment activities. The Trustees elect the Officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and the Funds.
The table shows, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee or Officer of the Trust, the Trustee's or Officer's principal occupations during the last five years, the number of funds in the UBS Family of Funds overseen by the Trustee or Officer and other directorships held by such Trustee.
The Trust's Statement of Additional Information contains additional information about the Trustees and is available, without charge, upon request, by calling 1-800-647 1568.
Non-interested Trustees:
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Adela Cepeda; 56 A.C. Advisory, Inc. 150 North Wacker Drive Suite 2160 Chicago, Illinois 60601 | Trustee | Since 2004 | Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995). | Ms. Cepeda is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global 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), trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) (since 2008). Ms. Cepeda was a director of Amalgamated Bank of Chicago (since 2003 to 2012) and a director of the Municipal Securities Rulemaking Board (from 2012 to 2012). | ||||||||||||||||||
John J. Murphy; 70 268 Main Street P.O. Box 718 Gladstone, NJ 07934 | Trustee | Since 2009 | Mr. Murphy is the president of Murphy Capital Management (investment advisor) (since 1983) | Mr. Murphy is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Murphy is a director of the Legg Mason Equity Funds (54 portfolios) and a trustee of Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). |
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Non-interested Trustees (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Abbie J. Smith; 61 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 | Trustee | Since 2009 | Ms. Smith is Boris and Irene Stern Professor of Accounting in the University of Chicago Booth School of Business (since 1980). 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 director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation and chair of the human resources and compensation committee (formerly known as HON Industries Inc.) (office furniture) and a director (since 2003) and chair of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee and portfolio performance committee of the Dimensional Funds complex (89 Portfolios). | ||||||||||||||||||
Frank K. Reilly; 78 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5649 | Chairman and Trustee | Since 1992 | Mr. Reilly is the Bernard J. Hank Professor of Finance in the Mendoza College of Business at the University of Notre Dame (since 1982). | Mr. Reilly is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Reilly is a director (since 1994) of Discover Bank, a subsidiary of Discover Financial Services and is Chairman of the Audit Committee for the bank. | ||||||||||||||||||
Edward M. Roob; 79 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 1995 | Mr. Roob is retired (since 1993). | Mr. Roob is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | None. |
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Non-interested Trustees (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
J. Mikesell Thomas; 63 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008); and President and sole shareholder of Mikesell Advisory Corp (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (from 2004 to 2008) and of First Chicago Bancorp (from 2008 to 2011). | Mr. Thomas is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Thomas is a director (since 1992) and chairman of the Audit Committee for NorthShore University HealthSystem, a not for profit healthcare organization, and a director (since 2012) and a member of the Audit and Investment and Finance Commitee of HCC Insurance Holdings Inc. Mr. Thomas was previously a director of First Chicago Bancorp (2008-2010) and First Chicago Bank & Trust (from 2008 to 2010). | ||||||||||||||||||
Interested Trustee: | |||||||||||||||||||||||
Shawn Lytle; 44*2 | Trustee | Since 2011 | Mr. Lytle is a Group Managing Director and Head of Americas at UBS Global Asset Management (Americas) Inc. (since 2010). Mr. Lytle is a member of the UBS Global Asset Management Executive Committee. Prior to his role as Head of Americas, he was Deputy Global Head of Equities (from 2008 to 2010), Head of Equity Capabilities and Business Management in 2008, and a team manager (from 2005 to 2008) at UBS Global Asset Management (Americas) Inc. | Mr. Lytle is a director or trustee of three investment companies (consisting of 31 portfolios) for which UBS Global AM serves as investment advisor or manager. | None |
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Trustee and officer information (unaudited)
Officers:
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Joseph J. Allessie*; 49 | Vice President, Assistant Secretary and Chief Compliance Officer | Since 2005 (Vice President, Assistant Secretary); Since July 2014 (Chief Compliance Officer) | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM—Americas region"). Mr. Allessie is head of compliance and operational risk control for the UBS Global Asset Management Division in the Americas with oversight for traditional and alternative investment businesses in Canada, the US and Cayman Islands. Prior to that he served as deputy general counsel of UBS Global AM—Americas region (from 2005 to 2014). Mr. Allessie is a vice president, assistant secretary and chief compliance officer (prior to which he was interim chief compliance officer) (from January to July 2014) of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Rose Ann Bubloski*; 46 | 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 the US mutual fund treasury administration department of UBS Global AM—Americas region. She was a vice president and assistant treasurer of certain UBS funds (from 2004 to 2007). She is vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mark E. Carver*; 50 | President | Since 2010 | Mr. Carver is a managing director and Head of Product Development and Management—Americas for UBS Global AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is a member of the Americas Management Committee (since 2008) and the Regional Operating Committee (since 2008). Prior to 2008, Mr. Carver held a number of product-related or sales responsibilities with respect to funds, advisory programs and separately managed accounts. Mr. Carver is president of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Thomas Disbrow*; 48 | Vice President, Treasurer and Principal Accounting Officer | Since 2004 and 2006, respectively | Mr. Disbrow is a managing director (since 2011), (prior to which he was an executive director) (since 2007) and head of North Americas Fund Treasury (since 2011) of UBS Global AM—Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Michael J. Flook*; 49 | Vice President and Assistant Treasurer | Since 2006 | Mr. Flook is a director (since 2010) (prior to which he was an associate director) (since 2006) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Flook is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
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Officers (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Christopher S. Ha*; 34 | Vice President and Assistant Secretary | Since September 2012 | Mr. Ha is a director and associate general counsel (since September 2012) at UBS Global AM—Americas region. Prior to joining UBS Global AM—Americas region, Mr. Ha was of counsel at Buhler, Duggal & Henry LLP (law firm) (from March 2012 to July 2012) and an associate attorney at Dechert LLP (law firm) (from 2007 to 2009). Mr. Ha is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mark F. Kemper**; 56 | Vice President and Secretary | Since 1999 | Mr. Kemper is a managing director (since 2006) and head of the legal department of UBS Global AM—Americas region (since 2004). He has been secretary of UBS Global AM—Americas region (since 2004), secretary of UBS Global Asset Management Trust Company (since 1993) and secretary of UBS AM Holdings (USA) Inc. (since 2001). Mr. Kemper is vice president and secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Joanne M. Kilkeary*; 46 | Vice President and Assistant Treasurer | Since 2006 | Ms. Kilkeary is an executive director (since March 2013) (prior to which she was a director) (since 2008) and a senior manager (since 2004) of the US mutual fund treasury administration department of UBS Global AM—Americas region. Ms. Kilkeary is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Tammie Lee*; 43 | Vice President and Assistant Secretary | Since 2005 | Ms. Lee is an executive director (since 2010) (prior to which she was a director) (since 2005) and associate general counsel of UBS Global AM—Americas region (since 2005). Ms. Lee is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Nancy D. Osborn*; 48 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Eric Sanders*; 48 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Andrew Shoup*; 58 | Vice President and Chief Operating Officer | Since 2006 | Mr. Shoup is a managing director and global head of the Fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Shoup is also a director of UBS (IRL) Fund p.l.c. (since 2008). Mr. Shoup is a vice president and chief operating officer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
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Officers (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Keith A. Weller*; 53 | Vice President and Assistant Secretary | Since 2004 | Mr. Weller is an executive director and senior associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Weller is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mandy Yu*, 30 | Vice President | Since March 2013 | Ms. Yu is an authorized officer (since 2012) and tax compliance manager (since March 2013) of the US mutual fund treasury administration department of UBS Global AM—Americas region. She was a Fund Treasury Manager (from 2012 to March 2013) and a Mutual Fund Administrator (from 2007 to 2012) for UBS Global AM. Ms. Yu is a vice president of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
1 Each Trustee holds office for an indefinite term. Officers of the Trust are appointed by the Trustees and serve at the pleasure of the Board.
2 Mr. Lytle is considered to be an interested person of the Trust under the federal securities laws due to his position as an officer of UBS Global AM.
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028.
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
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Federal tax information (unaudited)
For the year ended June 30, 2014, the percentage of income earned from direct US Treasury obligations approximately amounted to the following:
Direct US Treasury obligations | |||||||
UBS Core Plus Bond Fund | 5.74 | % |
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The UBS Funds
Fund's privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds managed by UBS Global Asset Management (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information and to comply with applicable laws and regulations.
The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as otherwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1197
UBS Equity
Funds
June 30, 2014
The UBS Funds—Equities
Annual Report
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
Equity Funds | |||||||
UBS Equity Long-Short Multi-Strategy Fund | 4 | ||||||
UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund) | 21 | ||||||
UBS U.S. Defensive Equity Fund | 30 | ||||||
UBS U.S. Equity Opportunity Fund | 43 | ||||||
UBS U.S. Large Cap Equity Fund | 52 | ||||||
UBS U.S. Small Cap Growth Fund | 61 | ||||||
Explanation of expense disclosure | 71 | ||||||
Statement of assets and liabilities | 74 | ||||||
Statement of operations | 78 | ||||||
Statement of changes in net assets | 80 | ||||||
Statement of cash flows | 84 | ||||||
Financial highlights | 86 | ||||||
Notes to financial statements | 98 | ||||||
Report of independent registered public accounting firm | 116 | ||||||
General information | 117 | ||||||
Board approval of investment advisory agreements | 118 | ||||||
Trustee and officer information | 123 | ||||||
Federal tax information | 129 |
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President's letter
August 14, 2014
Dear Shareholder,
Investors cheered earlier this year as the bull market in US equities turned five years old. It has been a remarkable five years for US equity investors. In the depths of the "Great Recession," on March 9, 2009, the S&P 500 closed at 676.53, but on the same date this year, the index closed at 1,878.04, a gain of 178%. The anniversary of the equity bull market has inspired much reflection among investors, as opposing arguments have formed about the longevity of the market going forward.
Currently, both bullish and bearish investors have compelling arguments to support their positions. The case for a continuation of the bull market rests on expectations of low inflation, continued economic and corporate growth, and rising equity valuations. In this view, further equity market gains will be driven by a low inflationary environment, downward trending unemployment, continued consumer deleveraging and rising confidence, as well as increasing capital expenditures as corporations begin to focus on expansion. Conversely, the case for a market correction rests on assumptions of declining valuations, deteriorating profit margins and earnings disappointments. Those who support this view believe that a market correction could be led by rising interest rates, equity valuations that may appear to be overstretched versus historical averages and profit margins that, while currently above historical levels, may regress back toward their long-term mean. For mutual fund shareholders, however, long-term success will have less to do with how long the equity bull market runs and more with a long-term investment approach that will help achieve their desired outcomes despite the ups and downs of markets.
At UBS Global Asset Management, we are focused on managing funds that achieve our clients' objectives through sustainable investment outcomes. In addition to single-strategy, equity and fixed-income products, we have added funds that utilize innovative diversifiers intended to soften the impact of market swings. These funds diversify risk through strategies that are not bound by benchmarks, are expected often to benefit from both rising and falling security prices, and utilize cost-effective defensive investment strategies. UBS Global Asset Management was among the early leaders to evolve its product offerings with the intention of providing sustainable returns in up and down markets using these strategies. We believe that diversification is paramount to successful investment outcomes, irrespective of market conditions, and we will continue to offer clients products that aim to mitigate downside risk and provide durable returns through both up and down market cycles.
I am pleased to share that the client focus, investment discipline and strength of our firm recently garnered a prestigious accolade from Euromoney magazine. In its July 2014 issue, Euromoney named UBS "Best Global Bank," describing our firm as "a global wealth manager first and foremost, underpinned by a Swiss universal bank and a powerful asset management business...." This award is just one measure of how UBS is succeeding as a business by focusing on meeting clients' needs.
Whatever the outcome of the current equity bull market, we remain focused on enabling our clients to achieve the outcomes they desire. As we continue to evolve our funds to provide sustainable performance in a variety of market conditions, we rely on our firm's client-oriented culture to guide everything we do. We embrace the responsibility
1
President's letter
of helping our clients meet their financial objectives and thank you for your continued trust in our skill and commitment to serve you.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. A prospectus or summary prospectus for the funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com.
2
The markets in review
Improving growth in the developed world
After three consecutive years of generally modest growth, the overall US economy contracted in the first quarter of 2014. Looking back, gross domestic product ("GDP") in the US grew at annualized rates of 4.5% and 3.5% during the third and fourth quarters of 2013, respectively. The Commerce Department then reported that first quarter 2014 GDP contracted at a 2.1% annualized rate. This was the first negative reading since the first quarter of 2011 and the downturn was partially attributed to severe winter weather in parts of the country. However, this proved to be a temporary setback for the economy, as GDP growth was 4.0% during the second quarter of 2014.1
The Federal Reserve Board (the "Fed") took a number of actions during the reporting period. Looking back, in December 2013, the Fed announced that it would begin paring back its monthly asset purchases, stating "Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a [reduced] pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a [reduced] pace of $40 billion per month rather than $45 billion per month." At its meetings in January, March, April and June 2014, the Fed said it would further taper its asset purchases, in each case paring its total purchases a total of $10 billion per month. Beginning in July, it will buy a total of $35 billion per month ($15 billion per month of agency mortgage-backed securities and $20 billion per month of longer-term Treasuries). In the Fed's official statement it said, "Information received since the Federal Open Market Committee met in April indicates that growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated. Household spending appears to be rising moderately and business fixed investment resumed its advance, while the recovery in the housing sector remained slow."
Growth outside the US generally improved. In its April 2014 World Economic Outlook Update, the International Monetary Fund ("IMF") reported that "Global activity has broadly strengthened and is expected to improve further in 2014 - 15, with much of the impetus coming from advanced economies." From a regional perspective, the IMF anticipates 2014 growth will be 1.2% in the Eurozone, versus a 0.5% contraction in 2013. Economic activity in Japan is expected to be relatively stable, with growth of 1.4% in 2014, compared with 1.5% in 2013. After decelerating in 2013, the IMF projects that overall growth in emerging markets countries will experience an uptick to 4.9% in 2014, versus 4.7% in 2013.
Global equities rally sharply
Despite a number of headwinds, the global equity market was highly resilient and generated strong results during the reporting period. The market was volatile at times given mixed global growth, geopolitical issues and questions regarding future central bank monetary policy. However, investor demand was solid overall, as corporate profits often surprised and central banks largely remained highly accommodative. All told, the US stock market, as measured by the S&P 500 Index,2 gained 24.61% for the 12 months ended June 30, 2014. International developed equities, as measured by the MSCI EAFE Index (net),3 also produced very strong results, gaining 23.57% during the period. Returns for emerging market equities, as measured by the MSCI Emerging Markets Index (net),4 were less robust, as they returned 14.31% over the same period. This was due to several factors, including concerns regarding China's ability to provide a soft landing for its economy.
1 Based on the Commerce Department's first estimate announced on July 30, 2014, after the reporting period had ended.
2 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition, and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3
UBS Equity Long-Short Multi-Strategy Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Equity Long-Short Multi-Strategy Fund (the "Fund") gained 3.08% (Class A shares declined 2.63% after the deduction of the maximum sales charge), while Class Y shares rose 3.35%. The Fund's benchmark, the Citigroup Three-Month US Treasury Bill Index (the "Index"), returned 0.04% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 6; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund generated a positive return and outperformed the Index during the 12 months ended June 30, 2014. The Fund invested in three distinct investment "sleeves" during the reporting period: US fundamental long-short, equity opportunity long-short and global equity long-short, the latter of which was added in January 2014. All three sleeves contributed to the Fund's performance during the reporting period.
During the 12 month period, the sleeves in which the Fund invests used derivative instruments for efficient portfolio and risk management purposes. Currency forwards were used to hedge the Fund's currency exposure. Swaps were used on individual stocks to gain exposure to the shares in a more efficient manner. The use of these derivatives was successful in helping manage both the portfolio, and risk within the sleeves.
Portfolio performance summary1
What worked
• Overall, the US fundamental long-short sleeve contributed to performance during the reporting period.
– At the stock level, the sleeve had strong contributions from its long positions in information technology companies Micron Technology Inc., NXP Semiconductor and Apple Inc. Norfolk Southern Corp., a rail transportation company, and Morgan Stanley, a financial firm, added considerable value as well.
– The sectors within the sleeve that added the most value were information technology, health care, industrials and financials.
• In aggregate, the equity opportunity long-short sleeve was beneficial for performance.
– The sleeve's long positions in Pandora, an online radio company, Investment AB Kinnevik, an investment firm, Continental, a tire manufacturer and Novartis, a health care company, were additive to results.
– The best performing sectors within the sleeve were health care, consumer discretionary and financials.
– From a country perspective, the sleeve's allocations to the US, Denmark, Germany and the UK were the most beneficial during the reporting period.
• Overall, the global equity long-short sleeve was beneficial for performance.
– The sleeve's long positions in several energy firms, such as Perpetual Energy, Paramount Resources and Lightstream Resources added value. Pharmaceutical company Shire contributed positively as well, as it became a potential consolidation target.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
4
UBS Equity Long-Short Multi-Strategy Fund
– The best performing sectors within the sleeve were energy, information technology and consumer staples.
– From a country perspective, the sleeve's allocations to the UK, the US and Japan were the most beneficial during the reporting period.
What didn't work
• Certain strategies in the US fundamental long-short sleeve detracted from performance.
– The sleeve's short positions in packaging and shipping-related company Pitney Bowes and information technology company Cognizant Tech, along with long positions in mobile communications company NII Holdings and ServiceSource, a provider of information technology outsourcing solutions, were negative for results.
– The sleeve's allocation to the telecommunications sector detracted from performance during the reporting period.
• Several positions in the equity opportunity long-short sleeve dragged on performance.
– The sleeve's short positions in Aperam, a specialty steel producer, Italcementi, a cement company, and Groupe Eurotunnel, a tunnel operator, were the largest individual detractors from results. We exited these positions before the end of the reporting period.
– Allocations to the materials, industrials and utilities sectors were negative for performance.
– In terms of countries, the sleeve's allocations to Spain, Italy and Finland were the largest detractors.
• Certain positions in the global long-short sleeve detracted from performance.
– The sleeve's short positions in two Canadian oil and gas exploration companies, Petromanas Energy and Bankers Petroleum, as well as hydrogen fuel cell producer Ballard Power, were negative for returns. A short position in Golar LNG, a liquefied natural gas shipping company, also detracted from performance.
– The sleeve's allocation to the financials and industrials sectors detracted from performance during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the twelve months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
5
UBS Equity Long-Short Multi-Strategy Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class A2 | 3.08 | % | 0.93 | % | |||||||
Class C3 | 2.23 | 0.19 | |||||||||
Class Y4 | 3.35 | 1.19 | |||||||||
After deducting maximum sales charge | |||||||||||
Class A2 | (2.63 | )% | (0.49 | )% | |||||||
Class C3 | 1.23 | 0.19 | |||||||||
Citigroup Three-Month US Treasury Bill Index5 | 0.04 | % | 0.07 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—6.85% and 4.17%; Class C—7.05% and 4.92%; Class Y—6.27% and 3.92%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.75% for Class A shares, 2.50% for Class C shares and 1.50% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS Equity Long-Short Multi-Strategy Fund and the index is June 30, 2010.
2 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The Citigroup Three-Month US Treasury Bill Index is an unmanaged index reflecting monthly return equivalents of yield averages that are not marked to the market and an average of the last three 3-month T-bill month-end rates. 3-month T-bills are the short-term debt obligations of the US government. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
6
UBS Equity Long-Short Multi-Strategy Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Equity Long-Short Multi-Strategy Fund Class A and Class Y shares versus the Citigroup Three-Month US Treasury Bill Index from June 30, 2010, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
7
UBS Equity Long-Short Multi-Strategy Fund
Top ten equity holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
Check Point Software Technologies Ltd. | 1.4 | % | |||||
Comcast Corp., Class A | 1.3 | ||||||
Morgan Stanley | 1.2 | ||||||
Novartis AG | 1.0 | ||||||
Celgene Corp | 0.9 | ||||||
Citigroup, Inc. | 0.9 | ||||||
Micron Technology, Inc. | 0.9 | ||||||
HCA Holdings, Inc. | 0.9 | ||||||
Bayer AG | 0.9 | ||||||
Yum! Brands, Inc. | 0.9 | ||||||
Total | 10.3 | % |
1 Only long positions are considered for top ten holdings.
8
UBS Equity Long-Short Multi-Strategy Fund
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Aerospace & defense | 0.83 | % | |||||
Air freight & logistics | 1.31 | ||||||
Airlines | 0.65 | ||||||
Auto components | 1.05 | ||||||
Automobiles | 1.58 | ||||||
Banks | 6.91 | ||||||
Beverages | 0.61 | ||||||
Biotechnology | 4.41 | ||||||
Building products | 0.43 | ||||||
Capital markets | 2.23 | ||||||
Chemicals | 2.00 | ||||||
Commercial services & supplies | 0.66 | ||||||
Communications equipment | 0.35 | ||||||
Construction & engineering | 0.47 | ||||||
Construction materials | 0.16 | ||||||
Consumer finance | 0.67 | ||||||
Containers & packaging | 0.37 | ||||||
Diversified financial services | 1.60 | ||||||
Diversified telecommunication services | 1.21 | ||||||
Electric utilities | 0.44 | ||||||
Electrical equipment | 0.42 | ||||||
Electronic equipment, instruments & components | 1.64 | ||||||
Energy equipment & services | 1.27 | ||||||
Food & staples retailing | 1.45 | ||||||
Food products | 1.81 | ||||||
Gas utilities | 0.75 | ||||||
Health care equipment & supplies | 1.09 | ||||||
Health care providers & services | 2.43 | ||||||
Hotels, restaurants & leisure | 1.04 | ||||||
Household durables | 0.69 | ||||||
Household products | 0.36 | ||||||
Industrial conglomerates | 0.62 | ||||||
Insurance | 4.31 | ||||||
Internet & catalog retail | 1.52 | ||||||
Internet software & services | 1.63 | ||||||
IT services | 1.85 | ||||||
Life sciences tools & services | 0.91 | ||||||
Machinery | 1.34 | ||||||
Marine | 0.39 | ||||||
Media | 3.21 | ||||||
Metals & mining | 0.37 | ||||||
Multiline retail | 0.64 | ||||||
Oil, gas & consumable fuels | 8.12 | ||||||
Personal products | 0.23 | ||||||
Pharmaceuticals | 7.87 | ||||||
Real estate investment trust (REIT) | 0.83 | ||||||
Real estate management & development | 1.12 | ||||||
Road & rail | 0.97 | ||||||
Semiconductors & semiconductor equipment | 5.22 | ||||||
Software | 2.74 | ||||||
Specialty retail | 0.34 | ||||||
Technology hardware, storage & peripherals | 1.86 | ||||||
Textiles, apparel & luxury goods | 0.72 | ||||||
Tobacco | 0.73 | ||||||
Transportation infrastructure | 0.28 | ||||||
Wireless telecommunication services | 1.29 | ||||||
Total common stocks | 90.00 | % | |||||
Preferred stock | 0.67 | ||||||
Short-term investments | 27.79 | ||||||
Total investments before investments sold short | 118.46 | % |
Investments sold short | |||||||
Common stocks | |||||||
Aerospace & defense | (0.57 | )% | |||||
Airlines | (0.24 | ) | |||||
Automobiles | (1.21 | ) | |||||
Banks | (3.71 | ) | |||||
Beverages | (1.16 | ) | |||||
Biotechnology | (1.40 | ) | |||||
Capital markets | (2.00 | ) | |||||
Chemicals | (3.18 | ) | |||||
Commercial services & supplies | (1.53 | ) | |||||
Communications equipment | (0.49 | ) | |||||
Construction & engineering | (0.70 | ) | |||||
Construction materials | (0.40 | ) | |||||
Consumer finance | (0.36 | ) | |||||
Distributors | (0.26 | ) | |||||
Diversified financial services | (0.15 | ) | |||||
Diversified telecommunication services | (1.22 | ) | |||||
Electric utilities | (0.91 | ) | |||||
Electrical equipment | (1.29 | ) | |||||
Electronic equipment, instruments & components | (0.36 | ) | |||||
Energy equipment & services | (3.99 | ) | |||||
Food & staples retailing | (1.55 | ) | |||||
Food products | (1.04 | ) | |||||
Gas utilities | (0.13 | ) | |||||
Health care equipment & supplies | (2.71 | ) | |||||
Health care providers & services | (0.60 | ) | |||||
Hotels, restaurants & leisure | (1.76 | ) | |||||
Household durables | (0.26 | ) | |||||
Household products | (0.26 | ) | |||||
Independent power and renewable electricity producers | (0.33 | ) | |||||
Insurance | (2.26 | ) | |||||
Internet & catalog retail | (0.54 | ) | |||||
Internet software & services | (0.74 | ) | |||||
IT services | (0.53 | ) | |||||
Life sciences tools & services | (1.50 | ) | |||||
Machinery | (3.42 | ) | |||||
Marine | (0.13 | ) | |||||
Media | (1.83 | ) | |||||
Metals & mining | (1.05 | ) | |||||
Multiline retail | (0.68 | ) | |||||
Multi-utilities | (0.54 | ) | |||||
Oil, gas & consumable fuels | (7.48 | ) | |||||
Personal products | (0.45 | ) | |||||
Pharmaceuticals | (1.65 | ) | |||||
Real estate investment trust (REIT) | (0.61 | ) | |||||
Real estate management & development | (0.48 | ) | |||||
Road & rail | (0.14 | ) | |||||
Semiconductors & semiconductor equipment | (2.11 | ) | |||||
Software | (1.27 | ) | |||||
Specialty retail | (0.49 | ) | |||||
Technology hardware, storage & peripherals | (1.70 | ) | |||||
Textiles, apparel & luxury goods | (1.25 | ) | |||||
Thrifts & mortgage finance | (0.46 | ) | |||||
Trading companies & distributors | (0.46 | ) | |||||
Transportation infrastructure | (0.97 | ) | |||||
Wireless telecommunication services | (2.15 | ) | |||||
Total investments sold short | (68.66 | )% | |||||
Total investments, net of investments sold short | 49.80 | ||||||
Cash and other assets, less liabilities | 50.20 | ||||||
Net assets | 100.00 | % |
9
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 90.00% | |||||||||||
Belgium: 0.92% | |||||||||||
Belgacom SA1 | 2,053 | $ | 68,129 | ||||||||
bpost SA1 | 3,179 | 80,313 | |||||||||
Total Belgium common stocks | 148,442 | ||||||||||
Brazil: 0.18% | |||||||||||
Cielo SA | 1,390 | 28,624 | |||||||||
Canada: 4.73% | |||||||||||
Canadian Oil Sands Ltd.1 | 3,510 | 79,539 | |||||||||
Connacher Oil and Gas Ltd.*1 | 90,000 | 18,977 | |||||||||
Gran Tierra Energy, Inc.*1 | 9,230 | 74,996 | |||||||||
Lightstream Resources Ltd.1 | 15,005 | 114,747 | |||||||||
Magna International, Inc. | 800 | 86,114 | |||||||||
Nordion, Inc.*1 | 1,290 | 16,202 | |||||||||
Paramount Resources Ltd., Class A* | 2,135 | 119,150 | |||||||||
Perpetual Energy, Inc.*1 | 60,000 | 124,268 | |||||||||
ShaMaran Petroleum Corp.* | 65,000 | 25,280 | |||||||||
Suncor Energy, Inc.1 | 975 | 41,575 | |||||||||
TransGlobe Energy Corp.1 | 3,485 | 26,103 | |||||||||
Trilogy Energy Corp. | 1,145 | 31,333 | |||||||||
Total Canada common stocks | 758,284 | ||||||||||
China: 2.04% | |||||||||||
AIA Group Ltd. | 10,000 | 50,255 | |||||||||
Hollysys Automation Technologies Ltd.* | 2,690 | 65,878 | |||||||||
Tencent Holdings Ltd. | 8,100 | 123,532 | |||||||||
Tianhe Chemicals Group Ltd.*2 | 118,000 | 31,668 | |||||||||
Vipshop Holdings Ltd. ADR* | 300 | 56,322 | |||||||||
Total China common stocks | 327,655 | ||||||||||
Denmark: 2.12% | |||||||||||
A.P. Moller - Maersk A/S, Class B | 25 | 62,123 | |||||||||
Danske Bank A/S | 2,602 | 73,546 | |||||||||
Novo Nordisk A/S, Class B | 1,892 | 87,079 | |||||||||
Pandora A/S | 622 | 47,694 | |||||||||
TDC A/S | 6,711 | 69,454 | |||||||||
Total Denmark common stocks | 339,896 | ||||||||||
Finland: 0.42% | |||||||||||
Sampo Oyj, Class A | 1,332 | 67,393 | |||||||||
France: 2.13% | |||||||||||
BNP Paribas SA1 | 652 | 44,233 | |||||||||
Credit Agricole SA1 | 4,504 | 63,523 | |||||||||
Safran SA1 | 1,472 | 96,376 | |||||||||
Schneider Electric SE | 714 | 67,216 | |||||||||
Total SA | 979 | 70,754 | |||||||||
Total France common stocks | 342,102 |
Shares | Value | ||||||||||
Germany: 3.42% | |||||||||||
Bayer AG1 | 1,016 | $ | 143,503 | ||||||||
Continental AG1 | 352 | 81,529 | |||||||||
Deutsche Post AG1 | 2,237 | 80,897 | |||||||||
Freenet AG1 | 3,170 | 100,834 | |||||||||
Krones AG1 | 832 | 82,471 | |||||||||
ThyssenKrupp AG* | 2,040 | 59,471 | |||||||||
Total Germany common stocks | 548,705 | ||||||||||
Greece: 0.16% | |||||||||||
Piraeus Bank SA* | 11,500 | 25,510 | |||||||||
Ireland: 0.96% | |||||||||||
Accenture PLC, Class A1 | 440 | 35,569 | |||||||||
Bank of Ireland* | 72,000 | 24,352 | |||||||||
Mallinckrodt PLC*1 | 650 | 52,013 | |||||||||
Ryanair Holdings PLC ADR* | 765 | 42,687 | |||||||||
Total Ireland common stocks | 154,621 | ||||||||||
Israel: 2.33% | |||||||||||
Check Point Software Technologies Ltd.*1 | 3,415 | 228,907 | |||||||||
Mellanox Technologies Ltd.*1 | 2,100 | 73,206 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 1,380 | 72,340 | |||||||||
Total Israel common stocks | 374,453 | ||||||||||
Italy: 1.63% | |||||||||||
Atlantia SpA | 1,586 | 45,215 | |||||||||
Banca Generali SpA | 1,963 | 54,028 | |||||||||
IMMSI SpA*1 | 52,438 | 48,108 | |||||||||
Mediolanum SpA | 3,600 | 27,753 | |||||||||
Snam SpA1 | 8,440 | 50,850 | |||||||||
Unione di Banche Italiane SCPA1 | 4,033 | 34,902 | |||||||||
Total Italy common stocks | 260,856 | ||||||||||
Japan: 5.31% | |||||||||||
Ashikaga Holdings Co. Ltd. | 18,200 | 77,791 | |||||||||
Astellas Pharma, Inc. | 4,100 | 53,868 | |||||||||
Fuji Heavy Industries Ltd. | 1,000 | 27,689 | |||||||||
Hino Motors Ltd. | 2,700 | 37,180 | |||||||||
Hitachi Ltd. | 8,000 | 58,595 | |||||||||
Inpex Corp. | 2,200 | 33,443 | |||||||||
Japan Airlines Co., Ltd. | 1,100 | 60,806 | |||||||||
Japan Petroleum Exploration Co. | 900 | 37,535 | |||||||||
KDDI Corp. | 1,200 | 73,193 | |||||||||
Mitsui Fudosan Co., Ltd. | 3,000 | 101,160 | |||||||||
ORIX Corp. | 2,500 | 41,434 | |||||||||
Panasonic Corp. | 2,500 | 30,453 | |||||||||
Sekisui House Ltd. | 4,100 | 56,215 | |||||||||
Shiseido Co., Ltd. | 2,000 | 36,464 |
10
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Japan—(Concluded) | |||||||||||
Sumitomo Realty & Development Co., Ltd. | 1,000 | $ | 42,910 | ||||||||
THK Co., Ltd. | 2,400 | 56,574 | |||||||||
Tokio Marine Holdings, Inc. | 800 | 26,313 | |||||||||
Total Japan common stocks | 851,623 | ||||||||||
Luxembourg: 0.22% | |||||||||||
Grand City Properties SA* | 2,800 | 35,208 | |||||||||
Netherlands: 2.29% | |||||||||||
ING Groep NV CVA*1 | 4,836 | 67,941 | |||||||||
Koninklijke Ahold NV1 | 3,828 | 71,864 | |||||||||
Koninklijke DSM NV | 720 | 52,440 | |||||||||
NXP Semiconductor NV*1 | 1,890 | 125,080 | |||||||||
TNT Express NV1 | 5,489 | 49,681 | |||||||||
Total Netherlands common stocks | 367,006 | ||||||||||
Norway: 1.87% | |||||||||||
Aker ASA, Class A | 1,948 | 76,855 | |||||||||
Det Norske Oljeselskap ASA* | 2,950 | 32,223 | |||||||||
Gjensidige Forsikring ASA | 3,587 | 64,327 | |||||||||
Statoil ASA | 2,250 | 69,108 | |||||||||
Telenor ASA | 2,505 | 57,052 | |||||||||
Total Norway common stocks | 299,565 | ||||||||||
Russia: 0.16% | |||||||||||
Mobile Telesystems OJSC ADR | 1,310 | 25,859 | |||||||||
South Korea: 0.74% | |||||||||||
Samsung Electronics Co. Ltd. GDR3 | 100 | 65,329 | |||||||||
Wonik IPS Co. Ltd.* | 4,665 | 53,483 | |||||||||
Total South Korea common stocks | 118,812 | ||||||||||
Spain: 1.99% | |||||||||||
Acciona SA1 | 791 | 70,749 | |||||||||
ACS Actividades de Construccion y Servicios SA1 | 1,634 | 74,730 | |||||||||
Atresmedia Corp. de Medios de Comunicacion SA | 1,600 | 22,917 | |||||||||
Bankia SA* | 16,000 | 31,023 | |||||||||
Gas Natural SDG SA1 | 2,187 | 69,072 | |||||||||
Mediaset Espana Comunicacion SA*1 | 2,200 | 25,660 | |||||||||
Melia Hotels International SA | 2,000 | 24,552 | |||||||||
Total Spain common stocks | 318,703 | ||||||||||
Sweden: 1.07% | |||||||||||
Investment AB Kinnevik, Class B | 1,636 | 69,734 | |||||||||
Lundin Petroleum AB* | 1,270 | 25,698 | |||||||||
Nordea Bank AB | 5,372 | 75,818 | |||||||||
Total Sweden common stocks | 171,250 |
Shares | Value | ||||||||||
Switzerland: 2.91% | |||||||||||
Aryzta AG* | 857 | $ | 81,177 | ||||||||
Credit Suisse Group AG* | 1,080 | 30,885 | |||||||||
Givaudan SA* | 43 | 71,715 | |||||||||
Nestle SA | 460 | 35,636 | |||||||||
Novartis AG | 1,732 | 156,833 | |||||||||
Roche Holding AG (Non-voting) | 160 | 47,722 | |||||||||
Zurich Insurance Group AG* | 144 | 43,405 | |||||||||
Total Switzerland common stocks | 467,373 | ||||||||||
Taiwan: 0.42% | |||||||||||
Catcher Technology Co. Ltd. GDR3 | 1,455 | 67,818 | |||||||||
United Kingdom: 1.07% | |||||||||||
Aon PLC1 | 610 | 54,955 | |||||||||
AstraZeneca PLC | 76 | 5,646 | |||||||||
Noble Corp. PLC1 | 2,720 | 91,283 | |||||||||
Poundland Group PLC* | 3,789 | 20,556 | |||||||||
Total United Kingdom common stocks | 172,440 | ||||||||||
United States: 50.90% | |||||||||||
AbbVie, Inc. | 830 | 46,845 | |||||||||
Acorda Therapeutics, Inc.*1 | 3,550 | 119,670 | |||||||||
Alexion Pharmaceuticals, Inc.*1 | 627 | 97,969 | |||||||||
Allergan, Inc.1 | 520 | 87,994 | |||||||||
Alliance Data Systems Corp.*1 | 300 | 84,375 | |||||||||
Alnylam Pharmaceuticals, Inc.*1 | 1,340 | 84,648 | |||||||||
Amazon.com, Inc.*1 | 390 | 126,664 | |||||||||
American Campus Communities, Inc.1 | 730 | 27,915 | |||||||||
American International Group, Inc. | 1,600 | 87,328 | |||||||||
Apple, Inc.1 | 1,450 | 134,748 | |||||||||
Applied Materials, Inc.1 | 5,690 | 128,309 | |||||||||
Baker Hughes, Inc.1 | 630 | 46,903 | |||||||||
BankUnited, Inc.1 | 1,020 | 34,150 | |||||||||
Baxter International, Inc. | 895 | 64,708 | |||||||||
BB&T Corp.1 | 800 | 31,544 | |||||||||
Best Buy Co., Inc.1 | 1,750 | 54,267 | |||||||||
Bio-Rad Laboratories, Inc., Class A*1 | 760 | 90,980 | |||||||||
Bluebird Bio, Inc.*1 | 500 | 19,285 | |||||||||
Boeing Co.1 | 295 | 37,533 | |||||||||
Broadcom Corp., Class A1 | 3,480 | 129,178 | |||||||||
Capital One Financial Corp.1 | 1,310 | 108,206 | |||||||||
Celgene Corp.* | 1,754 | 150,634 | |||||||||
Chevron Corp.1 | 360 | 46,998 | |||||||||
Citigroup, Inc.1 | 3,170 | 149,307 | |||||||||
Colgate-Palmolive Co.1 | 390 | 26,590 | |||||||||
Comcast Corp., Class A1 | 3,840 | 206,131 | |||||||||
Control4 Corp.*1 | 1,500 | 29,340 | |||||||||
CVS Caremark Corp. | 1,000 | 75,370 | |||||||||
Danaher Corp.1 | 1,260 | 99,200 | |||||||||
Digital Realty Trust, Inc.1 | 1,810 | 105,559 | |||||||||
DIRECTV*1 | 1,000 | 85,010 |
11
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Eli Lilly & Co.1 | 2,270 | $ | 141,126 | ||||||||
EOG Resources, Inc.1 | 1,090 | 127,377 | |||||||||
Epizyme, Inc.*1 | 620 | 19,294 | |||||||||
F5 Networks, Inc.*1 | 500 | 55,720 | |||||||||
Fifth Third Bancorp1 | 2,260 | 48,251 | |||||||||
Fiserv, Inc.*1 | 1,100 | 66,352 | |||||||||
Ford Motor Co. | 5,080 | 87,579 | |||||||||
Freescale Semiconductor Ltd.*1 | 2,970 | 69,795 | |||||||||
General Motors Co.1 | 2,470 | 89,661 | |||||||||
Gilead Sciences, Inc.*1 | 1,640 | 135,972 | |||||||||
Google, Inc., Class A*1 | 85 | 49,697 | |||||||||
Google, Inc., Class C*1 | 85 | 48,899 | |||||||||
Halcon Resources Corp.*1 | 5,385 | 39,257 | |||||||||
HCA Holdings, Inc.*1 | 2,570 | 144,897 | |||||||||
HeartWare International, Inc.* | 100 | 8,850 | |||||||||
Herman Miller, Inc.1 | 1,395 | 42,185 | |||||||||
Hertz Global Holdings, Inc.*1 | 4,240 | 118,847 | |||||||||
Hess Corp. | 475 | 46,973 | |||||||||
Hormel Foods Corp.1 | 835 | 41,207 | |||||||||
Hospira, Inc.*1 | 1,965 | 100,942 | |||||||||
Illinois Tool Works, Inc.1 | 460 | 40,278 | |||||||||
Impax Laboratories, Inc.*1 | 3,750 | 112,462 | |||||||||
Incyte Corp. Ltd.*1 | 665 | 37,533 | |||||||||
Invesco Ltd.1 | 2,090 | 78,897 | |||||||||
Jabil Circuit, Inc.1 | 5,190 | 108,471 | |||||||||
JC Penney Co., Inc.*1 | 3,530 | 31,947 | |||||||||
Johnson & Johnson1 | 1,100 | 115,082 | |||||||||
JPMorgan Chase & Co.1 | 2,290 | 131,950 | |||||||||
KaloBios Pharmaceuticals, Inc.*1 | 3,740 | 8,527 | |||||||||
Laboratory Corp. of America Holdings*1 | 750 | 76,800 | |||||||||
Lexicon Pharmaceuticals, Inc.*1 | 16,160 | 26,018 | |||||||||
Lincoln National Corp.1 | 2,280 | 117,283 | |||||||||
LyondellBasell Industries NV, Class A | 715 | 69,820 | |||||||||
MacroGenics, Inc.*1 | 400 | 8,692 | |||||||||
Macy's, Inc.1 | 855 | 49,607 | |||||||||
Martin Marietta Materials, Inc.1 | 190 | 25,089 | |||||||||
McDermott International, Inc.*1 | 8,020 | 64,882 | |||||||||
Merck & Co., Inc.1 | 670 | 38,760 | |||||||||
MetLife, Inc.1 | 2,220 | 123,343 | |||||||||
Micron Technology, Inc.*1 | 4,495 | 148,110 | |||||||||
Microsoft Corp.1 | 1,900 | 79,230 | |||||||||
Mondelez International, Inc., Class A1 | 3,540 | 133,139 | |||||||||
Monsanto Co.1 | 490 | 61,123 | |||||||||
Morgan Stanley1 | 5,985 | 193,495 | |||||||||
NetApp, Inc. | 2,650 | 96,778 | |||||||||
NII Holdings, Inc.*1 | 12,720 | 6,996 | |||||||||
Norfolk Southern Corp.1 | 350 | 36,061 | |||||||||
Oracle Corp.1 | 1,600 | 64,848 |
Shares | Value | ||||||||||
Owens Corning1 | 1,785 | $ | 69,044 | ||||||||
PDC Energy, Inc.*1 | 1,000 | 63,150 | |||||||||
PepsiCo, Inc.1 | 1,090 | 97,381 | |||||||||
Philip Morris International, Inc.1 | 1,390 | 117,191 | |||||||||
PNC Financial Services Group, Inc.1 | 725 | 64,561 | |||||||||
Praxair, Inc.1 | 260 | 34,538 | |||||||||
Priceline.com, Inc.* | 50 | 60,150 | |||||||||
Procter & Gamble Co.1 | 390 | 30,650 | |||||||||
Prudential Financial, Inc.1 | 355 | 31,513 | |||||||||
Ralph Lauren Corp.1 | 420 | 67,490 | |||||||||
Rite Aid Corp.*1 | 7,810 | 55,998 | |||||||||
Rocket Fuel, Inc.*1 | 1,240 | 38,552 | |||||||||
Rock-Tenn Co., Class A1 | 555 | 58,602 | |||||||||
ServiceSource International, Inc.*1 | 14,090 | 81,722 | |||||||||
Symantec Corp.1 | 2,930 | 67,097 | |||||||||
Thermo Fisher Scientific, Inc. | 325 | 38,350 | |||||||||
Thoratec Corp.* | 500 | 17,430 | |||||||||
Time Warner, Inc.1 | 400 | 28,100 | |||||||||
Time, Inc.*1 | 50 | 1,211 | |||||||||
Ultra Petroleum Corp.*1 | 1,970 | 58,489 | |||||||||
UnitedHealth Group, Inc.1 | 1,530 | 125,078 | |||||||||
US Bancorp1 | 3,250 | 140,790 | |||||||||
Varian Medical Systems, Inc.*1 | 1,000 | 83,140 | |||||||||
Veeco Instruments, Inc.*1 | 1,220 | 45,457 | |||||||||
Viacom, Inc., Class B1 | 320 | 27,754 | |||||||||
Walgreen Co.1 | 390 | 28,911 | |||||||||
Walt Disney Co.1 | 1,370 | 117,464 | |||||||||
Waste Management, Inc.1 | 1,450 | 64,859 | |||||||||
WellPoint, Inc.1 | 400 | 43,044 | |||||||||
Wells Fargo & Co.1 | 1,090 | 57,290 | |||||||||
Whirlpool Corp.1 | 175 | 24,364 | |||||||||
Yum! Brands, Inc.1 | 1,760 | 142,912 | |||||||||
Total United States common stocks | 8,167,742 | ||||||||||
Total common stocks (cost $12,341,024) | 14,439,940 | ||||||||||
Preferred stock: 0.67% | |||||||||||
Germany: 0.67% | |||||||||||
Porsche Automobil Holding SE, Preference shares (cost $109,504) | 1,035 | 107,837 | |||||||||
Short-term investments: 27.79% | |||||||||||
Investment company: 20.00% | |||||||||||
UBS Cash Management Prime Relationship Fund4 (cost $3,208,627) | 3,208,627 | 3,208,627 |
12
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Face Amount | Value | ||||||||||
Short-term investments—(Concluded) | |||||||||||
US government obligations: 7.79% | |||||||||||
US Treasury Bill 0.030%, due 08/21/145 (cost $1,249,945) | $ | 1,250,000 | $ | 1,249,979 | |||||||
Total short-term investments (cost $4,458,572) | 4,458,606 | ||||||||||
Total investments before investments sold short: 118.46% (cost $16,909,100) | 19,006,383 | ||||||||||
Shares | |||||||||||
Investments sold short: (68.66)% | |||||||||||
Common stocks: (68.66)% | |||||||||||
Australia: (0.60)% | |||||||||||
Buru Energy Ltd. | (6,085 | ) | (6,369 | ) | |||||||
Energy World Corp. Ltd. | (54,633 | ) | (16,485 | ) | |||||||
InterOil Corp. | (910 | ) | (58,186 | ) | |||||||
Karoon Gas Australia Ltd. | (5,420 | ) | (15,690 | ) | |||||||
Total Australia common stocks | (96,730 | ) | |||||||||
Austria: (0.71)% | |||||||||||
Andritz AG | (1,015 | ) | (58,658 | ) | |||||||
Vienna Insurance Group AG Wiener Versicherung Gruppe | (1,031 | ) | (55,185 | ) | |||||||
Total Austria common stocks | (113,843 | ) | |||||||||
Belgium: (0.91)% | |||||||||||
Mobistar SA | (3,585 | ) | (68,430 | ) | |||||||
Umicore SA | (1,659 | ) | (77,078 | ) | |||||||
Total Belgium common stocks | (145,508 | ) | |||||||||
Bermuda: (1.08)% | |||||||||||
Golar LNG Ltd. | (620 | ) | (37,262 | ) | |||||||
Seadrill Ltd. | (2,950 | ) | (117,345 | ) | |||||||
Teekay Tankers Ltd. | (4,320 | ) | (18,533 | ) | |||||||
Total Bermuda common stocks | (173,140 | ) | |||||||||
Brazil: (0.26)% | |||||||||||
Gafisa SA ADR | (13,700 | ) | (41,922 | ) | |||||||
Canada: (4.52)% | |||||||||||
Alderon Iron Ore Corp. | (7,190 | ) | (8,490 | ) | |||||||
Alterra Power Corp. | (39,000 | ) | (12,792 | ) | |||||||
Altius Minerals Corp. | (900 | ) | (10,602 | ) | |||||||
Americas Petrogas, Inc. | (18,360 | ) | (13,421 | ) | |||||||
Anderson Energy Ltd. | (37,000 | ) | (8,149 | ) | |||||||
Athabasca Oil Corp. | (3,665 | ) | (26,310 | ) | |||||||
Ballard Power Systems, Inc. | (15,105 | ) | (62,417 | ) | |||||||
Bankers Petroleum Ltd. | (7,300 | ) | (46,658 | ) | |||||||
Bombardier, Inc., Class B | (6,360 | ) | (22,471 | ) |
Shares | Value | ||||||||||
Canacol Energy Ltd. | (9,250 | ) | $ | (60,248 | ) | ||||||
Copper Mountain Mining Corp. | (7,165 | ) | (16,451 | ) | |||||||
Crescent Point Energy Corp. | (905 | ) | (40,108 | ) | |||||||
Donnycreek Energy, Inc. | (4,500 | ) | (10,965 | ) | |||||||
Fortune Minerals Ltd. | (34,500 | ) | (11,640 | ) | |||||||
Ivanhoe Energy, Inc. | (7,500 | ) | (2,847 | ) | |||||||
Just Energy Group, Inc. | (4,080 | ) | (23,477 | ) | |||||||
Mart Resources, Inc. | (19,585 | ) | (25,512 | ) | |||||||
Mega Uranium Ltd. | (143,500 | ) | (24,879 | ) | |||||||
MFC Industrial Ltd. | (1,705 | ) | (13,043 | ) | |||||||
Northland Power, Inc. | (785 | ) | (13,411 | ) | |||||||
Petroamerica Oil Corp. | (53,500 | ) | (18,300 | ) | |||||||
Petromanas Energy, Inc. | (183,500 | ) | (58,470 | ) | |||||||
Petrowest Corp. | (13,005 | ) | (16,454 | ) | |||||||
Polaris Minerals Corp. | (8,000 | ) | (20,243 | ) | |||||||
Questerre Energy Corp. | (20,400 | ) | (24,089 | ) | |||||||
Rogers Communications, Inc., Class B | (1,600 | ) | (64,387 | ) | |||||||
Rubicon Minerals Corp. | (9,900 | ) | (14,659 | ) | |||||||
SNC-Lavalin Group, Inc. | (410 | ) | (21,563 | ) | |||||||
Trevali Mining Corp. | (10,520 | ) | (10,746 | ) | |||||||
Whitecap Resources, Inc. | (1,450 | ) | (22,381 | ) | |||||||
Total Canada common stocks | (725,183 | ) | |||||||||
China: (0.44)% | |||||||||||
Lonking Holdings Ltd. | (130,000 | ) | (22,308 | ) | |||||||
MIE Holdings Corp. | (86,000 | ) | (15,868 | ) | |||||||
Newocean Energy Holdings Ltd. | (26,000 | ) | (19,457 | ) | |||||||
Sino Gas & Energy Holdings Ltd. | (84,475 | ) | (12,745 | ) | |||||||
Total China common stocks | (70,378 | ) | |||||||||
Colombia: (0.68)% | |||||||||||
Pacific Rubiales Energy Corp. | (5,405 | ) | (109,817 | ) | |||||||
Cyprus: (0.09)% | |||||||||||
Songa Offshore | (34,000 | ) | (14,578 | ) | |||||||
Denmark: (0.58)% | |||||||||||
Danske Bank A/S | (1,350 | ) | (38,158 | ) | |||||||
FLSmidth & Co. A/S | (395 | ) | (22,069 | ) | |||||||
Novo Nordisk A/S, Class B | (720 | ) | (33,138 | ) | |||||||
Total Denmark common stocks | (93,365 | ) | |||||||||
Finland: (2.77)% | |||||||||||
Fortum Oyj | (2,223 | ) | (59,692 | ) | |||||||
Kone OYJ, Class B | (490 | ) | (20,451 | ) | |||||||
Konecranes Oyj | (2,391 | ) | (77,201 | ) | |||||||
Metso Oyj | (2,012 | ) | (76,232 | ) | |||||||
Stockmann Oyj Abp, Class B | (3,219 | ) | (49,367 | ) | |||||||
Valmet OYJ | (2,534 | ) | (30,326 | ) | |||||||
Wartsila OYJ Abp | (1,276 | ) | (63,285 | ) | |||||||
YIT Oyj | (5,945 | ) | (68,461 | ) | |||||||
Total Finland common stocks | (445,015 | ) |
13
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investments sold short—(Continued) | |||||||||||
Common stocks—(Continued) | |||||||||||
France: (2.54)% | |||||||||||
Air France-KLM | (1,425 | ) | $ | (17,955 | ) | ||||||
Alcatel-Lucent | (16,434 | ) | (58,688 | ) | |||||||
Areva SA | (1,300 | ) | (27,591 | ) | |||||||
Arkema SA | (343 | ) | (33,384 | ) | |||||||
Carrefour SA | (2,196 | ) | (81,008 | ) | |||||||
Dassault Systemes | (480 | ) | (61,757 | ) | |||||||
Electricite de France SA | (1,795 | ) | (56,532 | ) | |||||||
Suez Environnement Co. | (700 | ) | (13,400 | ) | |||||||
Technip SA | (234 | ) | (25,598 | ) | |||||||
Veolia Environnement SA | (1,620 | ) | (30,867 | ) | |||||||
Total France common stocks | (406,780 | ) | |||||||||
Germany: (4.59)% | |||||||||||
adidas AG | (498 | ) | (50,441 | ) | |||||||
Aurubis AG | (564 | ) | (28,810 | ) | |||||||
Deutsche Bank AG | (1,000 | ) | (35,184 | ) | |||||||
Fraport AG Frankfurt Airport Services Worldwide | (910 | ) | (64,297 | ) | |||||||
H&R AG | (5,227 | ) | (51,132 | ) | |||||||
Hamburger Hafen und Logistik AG | (3,421 | ) | (90,854 | ) | |||||||
Hannover Rueck SE | (430 | ) | (38,749 | ) | |||||||
K+S AG | (2,229 | ) | (73,298 | ) | |||||||
LANXESS AG | (757 | ) | (51,097 | ) | |||||||
MTU Aero Engines AG | (741 | ) | (68,174 | ) | |||||||
RWE AG | (440 | ) | (18,897 | ) | |||||||
Salzgitter AG | (1,304 | ) | (54,888 | ) | |||||||
Volkswagen AG | (425 | ) | (109,873 | ) | |||||||
Total Germany common stocks | (735,694 | ) | |||||||||
Guernsey: (0.04)% | |||||||||||
Tethys Petroleum Ltd. | (21,500 | ) | (6,649 | ) | |||||||
Ireland: (0.54)% | |||||||||||
Aer Lingus Group PLC | (10,325 | ) | (20,677 | ) | |||||||
Endo International PLC | (630 | ) | (44,113 | ) | |||||||
King Digital Entertainment PLC | (1,100 | ) | (22,605 | ) | |||||||
Total Ireland common stocks | (87,395 | ) | |||||||||
Italy: (1.39)% | |||||||||||
Mediaset SpA | (9,999 | ) | (48,742 | ) | |||||||
Piaggio & C SpA | (17,662 | ) | (62,880 | ) | |||||||
Saipem SpA | (2,823 | ) | (76,151 | ) | |||||||
Saras SpA | (25,235 | ) | (34,658 | ) | |||||||
UniCredit SpA | (96 | ) | (804 | ) | |||||||
Total Italy common stocks | (223,235 | ) |
Shares | Value | ||||||||||
Japan: (0.24)% | |||||||||||
Mitsui Chemicals, Inc. | (8,000 | ) | $ | (21,875 | ) | ||||||
Tokyo Electric Power Co., Inc. | (3,800 | ) | (15,829 | ) | |||||||
Total Japan common stocks | (37,704 | ) | |||||||||
Luxembourg: (0.40)% | |||||||||||
Oriflame Cosmetics SA SDR | (1,874 | ) | (43,670 | ) | |||||||
Pacific Drilling SA | (2,110 | ) | (21,100 | ) | |||||||
Total Luxembourg common stocks | (64,770 | ) | |||||||||
Mexico: (1.02)% | |||||||||||
America Movil SAB de CV ADR | (3,900 | ) | (80,925 | ) | |||||||
Wal-Mart de Mexico SAB de CV ADR | (3,100 | ) | (82,739 | ) | |||||||
Total Mexico common stocks | (163,664 | ) | |||||||||
Netherlands: (2.03)% | |||||||||||
Aegon NV | (4,300 | ) | (37,530 | ) | |||||||
Akzo Nobel NV | (215 | ) | (16,118 | ) | |||||||
CNH Industrial NV | (1,710 | ) | (17,561 | ) | |||||||
Fugro NV CVA | (1,465 | ) | (83,882 | ) | |||||||
Koninklijke Vopak NV | (1,586 | ) | (77,530 | ) | |||||||
Nutreco NV | (1,081 | ) | (47,774 | ) | |||||||
QIAGEN NV | (1,900 | ) | (46,050 | ) | |||||||
Total Netherlands common stocks | (326,445 | ) | |||||||||
Norway: (1.27)% | |||||||||||
Nordic American Tankers Ltd. | (2,495 | ) | (23,777 | ) | |||||||
Norwegian Property ASA | (62,765 | ) | (77,256 | ) | |||||||
Panoro Energy ASA | (15,845 | ) | (9,119 | ) | |||||||
Yara International ASA | (1,851 | ) | (92,733 | ) | |||||||
Total Norway common stocks | (202,885 | ) | |||||||||
Portugal: (0.45)% | |||||||||||
Jeronimo Martins, SGPS SA | (4,395 | ) | (72,307 | ) | |||||||
Singapore: (0.36)% | |||||||||||
Flextronics International Ltd. | (5,190 | ) | (57,453 | ) | |||||||
South Africa: (0.22)% | |||||||||||
Vodacom Group Ltd. | (2,855 | ) | (35,288 | ) | |||||||
Spain: (1.96)% | |||||||||||
Atresmedia Corp. de Medios de Comunicacion SA | (2,927 | ) | (41,923 | ) | |||||||
Banco Popular Espanol SA | (9,039 | ) | (60,400 | ) | |||||||
Enagas SA | (640 | ) | (20,594 | ) | |||||||
Tecnicas Reunidas SA | (2,146 | ) | (132,748 | ) | |||||||
Telefonica SA | (3,388 | ) | (58,083 | ) | |||||||
Total Spain common stocks | (313,748 | ) |
14
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investments sold short—(Continued) | |||||||||||
Common stocks—(Continued) | |||||||||||
Sweden: (1.77)% | |||||||||||
Modern Times Group AB, Class B | (1,535 | ) | $ | (65,980 | ) | ||||||
Ratos AB, Class B | (4,290 | ) | (39,680 | ) | |||||||
Sandvik AB | (3,834 | ) | (52,390 | ) | |||||||
SKF AB, Class B | (1,756 | ) | (44,810 | ) | |||||||
Svenska Handelsbanken AB, Class A | (760 | ) | (37,206 | ) | |||||||
Volvo AB, Class B | (3,224 | ) | (44,416 | ) | |||||||
Total Sweden common stocks | (284,482 | ) | |||||||||
Switzerland: (1.77)% | |||||||||||
ABB Ltd. | (2,580 | ) | (59,409 | ) | |||||||
Coca-Cola HBC AG CDI | (2,967 | ) | (68,143 | ) | |||||||
Holcim Ltd. | (260 | ) | (22,854 | ) | |||||||
Kuehne + Nagel International AG | (152 | ) | (20,225 | ) | |||||||
STMicroelectronics NV | (2,280 | ) | (20,455 | ) | |||||||
Swiss Life Holding AG | (150 | ) | (35,572 | ) | |||||||
Tyco International Ltd. | (1,240 | ) | (56,544 | ) | |||||||
Total Switzerland common stocks | (283,202 | ) | |||||||||
Turkey: (0.59)% | |||||||||||
Coca-Cola Icecek AS | (1,410 | ) | (34,807 | ) | |||||||
Turkiye Garanti Bankasi AS | (15,305 | ) | (59,888 | ) | |||||||
Total Turkey common stocks | (94,695 | ) | |||||||||
United Kingdom: (0.71)% | |||||||||||
Awilco Drilling PLC | (1,100 | ) | (25,107 | ) | |||||||
Debenhams PLC | (50,788 | ) | (59,496 | ) | |||||||
Ensco PLC, Class A | (530 | ) | (29,452 | ) | |||||||
Total United Kingdom common stocks | (114,055 | ) | |||||||||
United States: (34.13)% | |||||||||||
Abaxis, Inc. | (790 | ) | (35,005 | ) | |||||||
AbbVie, Inc. | (1,340 | ) | (75,630 | ) | |||||||
Acorda Therapeutics, Inc. | (800 | ) | (26,968 | ) | |||||||
Advanced Micro Devices, Inc. | (9,220 | ) | (38,632 | ) | |||||||
AGCO Corp. | (350 | ) | (19,677 | ) | |||||||
American Eagle Energy Corp. | (1,451 | ) | (8,691 | ) | |||||||
American International Group, Inc. | (1,690 | ) | (92,240 | ) | |||||||
Analog Devices, Inc. | (610 | ) | (32,983 | ) | |||||||
Associated Banc-Corp. | (2,980 | ) | (53,878 | ) | |||||||
Astoria Financial Corp. | (2,366 | ) | (31,823 | ) | |||||||
AT&T, Inc. | (2,935 | ) | (103,782 | ) | |||||||
Auxilium Pharmaceuticals, Inc. | (810 | ) | (16,249 | ) | |||||||
BancorpSouth, Inc. | (1,100 | ) | (27,027 | ) | |||||||
Bank of America Corp. | (4,660 | ) | (71,624 | ) | |||||||
Bank of New York Mellon Corp. | (1,240 | ) | (46,475 | ) | |||||||
Baxter International, Inc. | (330 | ) | (23,859 | ) | |||||||
Bio-Reference Labs, Inc. | (930 | ) | (28,105 | ) | |||||||
BNK Petroleum, Inc. | (14,500 | ) | (22,286 | ) | |||||||
Boston Scientific Corp. | (2,260 | ) | (28,860 | ) |
Shares | Value | ||||||||||
BPZ Resources, Inc. | (3,225 | ) | $ | (9,933 | ) | ||||||
Bristol-Myers Squibb Co. | (920 | ) | (44,629 | ) | |||||||
Brown-Forman Corp., Class B | (380 | ) | (35,785 | ) | |||||||
Buffalo Wild Wings, Inc. | (325 | ) | (53,856 | ) | |||||||
C.R. Bard, Inc. | (155 | ) | (22,167 | ) | |||||||
Celgene Corp. | (870 | ) | (74,716 | ) | |||||||
Centene Corp. | (560 | ) | (42,342 | ) | |||||||
Charles River Laboratories International, Inc. | (875 | ) | (46,830 | ) | |||||||
Charles Schwab Corp. | (3,470 | ) | (93,447 | ) | |||||||
Cheniere Energy, Inc. | (450 | ) | (32,265 | ) | |||||||
Choice Hotels International, Inc. | (780 | ) | (36,746 | ) | |||||||
Cinemark Holdings, Inc. | (405 | ) | (14,321 | ) | |||||||
City National Corp. | (320 | ) | (24,243 | ) | |||||||
Clorox Co. | (450 | ) | (41,130 | ) | |||||||
Coach, Inc. | (660 | ) | (22,565 | ) | |||||||
Cognizant Technology Solutions Corp., Class A | (1,170 | ) | (57,225 | ) | |||||||
Constellation Brands, Inc., Class A | (545 | ) | (48,031 | ) | |||||||
Continental Resources, Inc. | (260 | ) | (41,090 | ) | |||||||
Costco Wholesale Corp. | (115 | ) | (13,243 | ) | |||||||
Darden Restaurants, Inc. | (1,300 | ) | (60,151 | ) | |||||||
DENTSPLY International, Inc. | (600 | ) | (28,410 | ) | |||||||
Diebold, Inc. | (1,310 | ) | (52,623 | ) | |||||||
Discovery Communications, Inc., Class A | (360 | ) | (26,741 | ) | |||||||
Douglas Emmett, Inc. | (620 | ) | (17,496 | ) | |||||||
Electronic Arts, Inc. | (1,630 | ) | (58,468 | ) | |||||||
Emerald Oil, Inc. | (3,035 | ) | (23,218 | ) | |||||||
Enanta Pharmaceuticals, Inc. | (320 | ) | (13,782 | ) | |||||||
Equity Residential | (370 | ) | (23,310 | ) | |||||||
Fastenal Co. | (1,240 | ) | (61,368 | ) | |||||||
Federal Realty Investment Trust | (150 | ) | (18,138 | ) | |||||||
First Solar, Inc. | (930 | ) | (66,086 | ) | |||||||
FMC Technologies, Inc. | (580 | ) | (35,421 | ) | |||||||
Ford Motor Co. | (1,320 | ) | (22,757 | ) | |||||||
FreightCar America, Inc. | (855 | ) | (21,409 | ) | |||||||
GameStop Corp., Class A | (730 | ) | (29,543 | ) | |||||||
Gannett Co., Inc. | (1,750 | ) | (54,792 | ) | |||||||
General Moly, Inc. | (5,730 | ) | (6,589 | ) | |||||||
Genie Energy Ltd. | (1,790 | ) | (14,087 | ) | |||||||
Genuine Parts Co. | (480 | ) | (42,144 | ) | |||||||
Hartford Financial Services Group, Inc. | (2,090 | ) | (74,843 | ) | |||||||
Healthcare Services Group, Inc. | (1,940 | ) | (57,114 | ) | |||||||
Helmerich & Payne, Inc. | (300 | ) | (34,833 | ) | |||||||
Herbalife Ltd. | (440 | ) | (28,398 | ) | |||||||
Hess Corp. | (370 | ) | (36,589 | ) | |||||||
Hewlett-Packard Co. | (2,490 | ) | (83,863 | ) | |||||||
Houston American Energy Corp. | (21,000 | ) | (9,660 | ) | |||||||
Hyatt Hotels Corp., Class A | (810 | ) | (49,394 | ) | |||||||
Hyperdynamics Corp. | (4,405 | ) | (14,316 | ) | |||||||
IDEXX Laboratories, Inc. | (460 | ) | (61,442 | ) |
15
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investments sold short—(Concluded) | |||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Intel Corp. | (2,550 | ) | $ | (78,795 | ) | ||||||
International Business Machines Corp. | (155 | ) | (28,097 | ) | |||||||
Intuitive Surgical, Inc. | (102 | ) | (42,004 | ) | |||||||
Juniper Networks, Inc. | (785 | ) | (19,264 | ) | |||||||
Kraft Foods Group, Inc. | (805 | ) | (48,260 | ) | |||||||
Lamar Advertising Co., Class A | (780 | ) | (41,340 | ) | |||||||
Leucadia National Corp. | (900 | ) | (23,598 | ) | |||||||
Lexmark International, Inc., Class A | (2,560 | ) | (123,290 | ) | |||||||
LinnCo LLC | (500 | ) | (15,645 | ) | |||||||
LyondellBasell Industries NV, Class A | (550 | ) | (53,707 | ) | |||||||
McCormick & Co. Inc. (Non-voting) | (595 | ) | (42,596 | ) | |||||||
Medtronic, Inc. | (610 | ) | (38,894 | ) | |||||||
Meridian Bioscience, Inc. | (1,390 | ) | (28,690 | ) | |||||||
Mettler-Toledo International, Inc. | (245 | ) | (62,029 | ) | |||||||
Michael Kors Holdings Ltd. | (450 | ) | (39,892 | ) | |||||||
Microchip Technology, Inc. | (670 | ) | (32,703 | ) | |||||||
Miller Energy Resources, Inc. | (3,255 | ) | (20,832 | ) | |||||||
Molycorp, Inc. | (2,240 | ) | (5,757 | ) | |||||||
Mylan, Inc. | (380 | ) | (19,593 | ) | |||||||
Myriad Genetics, Inc. | (700 | ) | (27,244 | ) | |||||||
NetApp, Inc. | (365 | ) | (13,330 | ) | |||||||
Netflix, Inc. | (130 | ) | (57,278 | ) | |||||||
New York Community Bancorp, Inc. | (2,640 | ) | (42,187 | ) | |||||||
Northern Oil and Gas, Inc. | (715 | ) | (11,647 | ) | |||||||
Northern Trust Corp. | (480 | ) | (30,821 | ) | |||||||
PAREXEL International Corp. | (330 | ) | (17,437 | ) | |||||||
Patterson Cos., Inc. | (650 | ) | (25,681 | ) | |||||||
PerkinElmer, Inc. | (710 | ) | (33,256 | ) | |||||||
Pioneer Natural Resources Co. | (160 | ) | (36,770 | ) | |||||||
Pitney Bowes, Inc. | (3,290 | ) | (90,870 | ) | |||||||
Plug Power, Inc. | (5,400 | ) | (25,272 | ) | |||||||
Post Holdings, Inc. | (550 | ) | (28,001 | ) | |||||||
Priceline.com, Inc. | (25 | ) | (30,075 | ) | |||||||
Public Storage | (130 | ) | (22,275 | ) | |||||||
PVH Corp. | (290 | ) | (33,814 | ) | |||||||
Red Hat, Inc. | (1,115 | ) | (61,626 | ) | |||||||
Repligen Corp. | (1,190 | ) | (27,120 | ) | |||||||
ResMed, Inc. | (340 | ) | (17,214 | ) | |||||||
RF Micro Devices, Inc. | (3,470 | ) | (33,277 | ) | |||||||
Rockwell Automation, Inc. | (260 | ) | (32,542 | ) | |||||||
Sagent Pharmaceuticals, Inc. | (1,220 | ) | (31,549 | ) | |||||||
SandRidge Energy, Inc. | (9,215 | ) | (65,887 | ) | |||||||
Santander Consumer USA Holdings, Inc. | (3,000 | ) | (58,320 | ) | |||||||
SBA Communications Corp., Class A | (580 | ) | (59,334 | ) | |||||||
Sigma-Aldrich Corp. | (390 | ) | (39,577 | ) |
Shares | Value | ||||||||||
Signature Bank | (390 | ) | $ | (49,210 | ) | ||||||
Skyworks Solutions, Inc. | (740 | ) | (34,750 | ) | |||||||
Sprint Corp. | (4,310 | ) | (36,764 | ) | |||||||
Staples, Inc. | (1,965 | ) | (21,301 | ) | |||||||
Starwood Hotels & Resorts Worldwide, Inc. | (510 | ) | (41,218 | ) | |||||||
Stericycle, Inc. | (340 | ) | (40,263 | ) | |||||||
STERIS Corp. | (600 | ) | (32,088 | ) | |||||||
Stifel Financial Corp. | (640 | ) | (30,304 | ) | |||||||
SVB Financial Group | (420 | ) | (48,980 | ) | |||||||
Syntroleum Corp. NPV | (1,235 | ) | (0 | ) | |||||||
Taubman Centers, Inc. | (220 | ) | (16,678 | ) | |||||||
TCF Financial Corp. | (3,100 | ) | (50,747 | ) | |||||||
TD Ameritrade Holding Corp. | (1,430 | ) | (44,830 | ) | |||||||
Textura Corp. | (695 | ) | (16,430 | ) | |||||||
Thermo Fisher Scientific, Inc. | (290 | ) | (34,220 | ) | |||||||
Tidewater, Inc. | (500 | ) | (28,075 | ) | |||||||
Travelers Cos., Inc. | (300 | ) | (28,221 | ) | |||||||
Triangle Petroleum Corp. | (2,135 | ) | (25,086 | ) | |||||||
Twitter, Inc. | (440 | ) | (18,027 | ) | |||||||
Under Armour, Inc., Class A | (910 | ) | (54,136 | ) | |||||||
United Therapeutics Corp. | (440 | ) | (38,936 | ) | |||||||
US Geothermal, Inc. | (17,000 | ) | (10,200 | ) | |||||||
Verizon Communications, Inc. | (680 | ) | (33,272 | ) | |||||||
Vertex Pharmaceuticals, Inc. | (160 | ) | (15,149 | ) | |||||||
Vulcan Materials Co. | (320 | ) | (20,400 | ) | |||||||
WebMD Health Corp. | (760 | ) | (36,708 | ) | |||||||
Wendy's Corp. | (4,710 | ) | (40,176 | ) | |||||||
Werner Enterprises, Inc. | (835 | ) | (22,136 | ) | |||||||
Westamerica Bancorporation | (550 | ) | (28,754 | ) | |||||||
Williams-Sonoma, Inc. | (400 | ) | (28,712 | ) | |||||||
Wright Medical Group, Inc. | (1,320 | ) | (41,448 | ) | |||||||
Zillow, Inc., Class A | (330 | ) | (47,167 | ) | |||||||
Zimmer Holdings, Inc. | (340 | ) | (35,312 | ) | |||||||
Zions Bancorporation | (1,500 | ) | (44,205 | ) | |||||||
Total United States common stocks | (5,476,636 | ) | |||||||||
Total investments sold short (proceeds $10,113,302) | (11,016,566 | ) | |||||||||
Total investments, net of investments sold short: 49.80% | 7,989,817 | ||||||||||
Cash and other assets, less liabilities: 50.20% | 8,054,530 | ||||||||||
Net assets: 100.00% | $ | 16,044,347 |
16
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was $17,029,982; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 2,271,790 | |||||
Gross unrealized depreciation | (295,389 | ) | |||||
Net unrealized appreciation of investments | $ | 1,976,401 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 70. Portfolio footnotes begin on page 20.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
JPMCB | AUD | 270,000 | USD | 250,837 | 07/22/14 | $ | (3,353 | ) | |||||||||||
JPMCB | EUR | 194,682 | JPY | 27,000,000 | 07/22/14 | (34 | ) | ||||||||||||
JPMCB | EUR | 464,808 | TRY | 1,369,741 | 07/22/14 | 7,237 | |||||||||||||
JPMCB | GBP | 300,000 | USD | 501,698 | 07/22/14 | (11,636 | ) | ||||||||||||
JPMCB | JPY | 42,781,170 | USD | 420,100 | 07/22/14 | (2,271 | ) | ||||||||||||
JPMCB | TRY | 574,741 | EUR | 190,000 | 07/22/14 | (9,928 | ) | ||||||||||||
JPMCB | TRY | 1,237,286 | USD | 568,022 | 07/22/14 | (13,477 | ) | ||||||||||||
JPMCB | USD | 773,115 | EUR | 560,000 | 07/22/14 | (6,244 | ) | ||||||||||||
JPMCB | USD | 27,147 | EUR | 20,000 | 07/22/14 | 241 | |||||||||||||
JPMCB | USD | 502,841 | GBP | 300,000 | 07/22/14 | 10,493 | |||||||||||||
JPMCB | ZAR | 1,780,000 | USD | 166,563 | 07/22/14 | (210 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (29,182 | ) |
Portfolio Swap Outstanding6
Counterparty | Description | Termination Date7 | Value | ||||||||||||
CSI | The Fund receives or pays the total return on a portfolio of long and short positions and pays or receives a specified LIBOR floating rate. | Twelve month maturities of 08/04/14—06/18/15 | $ | 65,696 |
Additional Information for Portfolio Swap
Portfolio swap positions | Notional Values8 | Current Values9 | Value10 | ||||||||||||
Long Positions | |||||||||||||||
Chile | |||||||||||||||
GeoPark Ltd. | $ | 34,832 | $ | 39,795 | $ | 4,963 | |||||||||
France | |||||||||||||||
Carrefour SA | 29,384 | 28,220 | (1,164 | ) | |||||||||||
Etablissements Maurel et Prom | 84,019 | 81,828 | (2,191 | ) | |||||||||||
Peugeot SA | 60,461 | 62,192 | 1,731 | ||||||||||||
Schneider Electric SE | 59,193 | 60,249 | 1,056 | ||||||||||||
Total France | 233,057 | 232,489 | (568 | ) |
17
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Portfolio swap positions (continued) | Notional Values8 | Current Values9 | Value10 | ||||||||||||
Ireland | |||||||||||||||
Shire PLC | $ | 104,590 | $ | 140,311 | $ | 35,721 | |||||||||
Netherlands | |||||||||||||||
Royal Dutch Shell PLC | 79,051 | 81,994 | 2,943 | ||||||||||||
Switzerland | |||||||||||||||
Glencore Xstrata PLC | 44,883 | 45,881 | 998 | ||||||||||||
United Kingdom | |||||||||||||||
Ashtead Group PLC | 37,718 | 37,736 | 18 | ||||||||||||
Associated British Foods PLC | 37,645 | 38,614 | 969 | ||||||||||||
AstraZeneca PLC | 70,678 | 67,895 | (2,783 | ) | |||||||||||
Aviva PLC | 104,652 | 101,870 | (2,782 | ) | |||||||||||
Barclays PLC | 31,173 | 26,349 | (4,824 | ) | |||||||||||
Berkeley Group Holdings PLC | 76,990 | 82,474 | 5,484 | ||||||||||||
Big Yellow Group PLC | 31,863 | 30,771 | (1,092 | ) | |||||||||||
BP PLC | 39,099 | 40,315 | 1,216 | ||||||||||||
BT Group PLC | 83,800 | 81,273 | (2,527 | ) | |||||||||||
Burberry Group PLC | 28,198 | 28,172 | (26 | ) | |||||||||||
Capita PLC | 77,340 | 79,950 | 2,610 | ||||||||||||
Dignity PLC | 72,130 | 70,155 | (1,975 | ) | |||||||||||
Direct Line Insurance Group PLC | 57,335 | 61,018 | 3,683 | ||||||||||||
Genel Energy PLC | 73,173 | 76,865 | 3,692 | ||||||||||||
Halma PLC | 54,977 | 54,731 | (246 | ) | |||||||||||
Imperial Tobacco Group PLC | 41,593 | 42,759 | 1,166 | ||||||||||||
Kingfisher PLC | 27,265 | 23,470 | (3,795 | ) | |||||||||||
Lloyds Banking Group PLC | 37,006 | 35,580 | (1,426 | ) | |||||||||||
London Stock Exchange Group PLC | 101,972 | 106,478 | 4,506 | ||||||||||||
Meggitt PLC | 1,445 | 1,507 | 62 | ||||||||||||
Next PLC | 44,843 | 44,768 | (75 | ) | |||||||||||
Nichols PLC | 65,506 | 59,470 | (6,036 | ) | |||||||||||
Playtech PLC | 11,913 | 11,907 | (6 | ) | |||||||||||
Premier Oil PLC | 45,287 | 44,658 | (629 | ) | |||||||||||
Prudential PLC | 46,383 | 44,913 | (1,470 | ) | |||||||||||
Qinetiq Group PLC | 87,913 | 86,979 | (934 | ) | |||||||||||
Reckitt Benckiser Group PLC | 73,765 | 73,753 | (12 | ) | |||||||||||
Rightmove PLC | 81,611 | 76,430 | (5,181 | ) | |||||||||||
Rio Tinto PLC | 53,480 | 51,603 | (1,877 | ) | |||||||||||
Rockhopper Exploration PLC | 42,106 | 36,798 | (5,308 | ) | |||||||||||
SABMiller PLC | 28,963 | 30,441 | 1,478 | ||||||||||||
Taylor Wimpey PLC | 82,230 | 86,531 | 4,301 | ||||||||||||
Vectura Group PLC | 43,545 | 44,799 | 1,254 | ||||||||||||
William Hill PLC | 82,689 | 76,342 | (6,347 | ) | |||||||||||
Total United Kingdom | 1,876,286 | 1,857,374 | (18,912 | ) | |||||||||||
Total Long Positions of Portfolio Swap | 2,372,699 | 2,397,844 | 25,145 |
18
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
Portfolio swap positions (continued) | Notional Values8 | Current Values9 | Value10 | ||||||||||||
Short Positions | |||||||||||||||
Bermuda | |||||||||||||||
Gulf Keystone Petroleum Ltd. | $ | (12,071 | ) | $ | (14,023 | ) | $ | (1,952 | ) | ||||||
Brazil | |||||||||||||||
Sul America SA | (38,192 | ) | (35,415 | ) | 2,777 | ||||||||||
Hong Kong | |||||||||||||||
China Coal Energy | (85,425 | ) | (77,889 | ) | 7,536 | ||||||||||
Indonesia | |||||||||||||||
Bank Mandiri Persero Tbk PT | (37,318 | ) | (36,915 | ) | 403 | ||||||||||
Ireland | |||||||||||||||
San Leon Energy PLC | (9,893 | ) | (6,594 | ) | 3,299 | ||||||||||
Isle of Man | |||||||||||||||
Bahamas Petroleum Company PLC | (32,979 | ) | (20,549 | ) | 12,430 | ||||||||||
Malaysia | |||||||||||||||
Maxis Bhd | (32,140 | ) | (31,743 | ) | 397 | ||||||||||
Taiwan | |||||||||||||||
Acer, Inc. | (13,562 | ) | (15,731 | ) | (2,169 | ) | |||||||||
Compal Electronics, Inc. | (15,670 | ) | (17,978 | ) | (2,308 | ) | |||||||||
HTC Corp. | (10,246 | ) | (9,244 | ) | 1,002 | ||||||||||
Taiwan Glass Industry Corp. | (52,528 | ) | (49,796 | ) | 2,732 | ||||||||||
Total Taiwan | (92,006 | ) | (92,749 | ) | (743 | ) | |||||||||
United Kingdom | |||||||||||||||
African Minerals Ltd. | (6,559 | ) | (3,687 | ) | 2,872 | ||||||||||
Aggreko PLC | (24,150 | ) | (24,031 | ) | 119 | ||||||||||
B&M Retail Ltd. | (26,889 | ) | (26,356 | ) | 533 | ||||||||||
Cable & Wireless Communications PLC | (28,119 | ) | (26,276 | ) | 1,843 | ||||||||||
Chemring Group PLC | (19,156 | ) | (17,585 | ) | 1,571 | ||||||||||
Croda International PLC | (65,474 | ) | (54,844 | ) | 10,630 | ||||||||||
De La Rue PLC | (45,914 | ) | (43,306 | ) | 2,608 | ||||||||||
GlaxoSmithKline PLC | (56,390 | ) | (54,068 | ) | 2,322 | ||||||||||
Iofina PLC | (21,366 | ) | (25,058 | ) | (3,692 | ) | |||||||||
J Sainsbury PLC | (28,873 | ) | (27,294 | ) | 1,579 | ||||||||||
Legal & General Group PLC | (38,718 | ) | (37,803 | ) | 915 | ||||||||||
Marks & Spencer Group PLC | (66,163 | ) | (62,639 | ) | 3,524 | ||||||||||
Ocado Group PLC | (26,305 | ) | (29,802 | ) | (3,497 | ) | |||||||||
Tesco PLC | (74,110 | ) | (69,450 | ) | 4,660 | ||||||||||
Tullow Oil PLC | (25,801 | ) | (24,832 | ) | 969 | ||||||||||
Xcite Energy Ltd. | (16,468 | ) | (17,297 | ) | (829 | ) | |||||||||
Total United Kingdom | (570,455 | ) | (544,328 | ) | 26,127 | ||||||||||
United States | |||||||||||||||
FuelCell Energy, Inc. | (19,891 | ) | (21,360 | ) | (1,469 | ) | |||||||||
Total Short Positions of Portfolio Swap | (930,370 | ) | (881,565 | ) | 48,805 | ||||||||||
Net Long and Short Positions of Portfolio Swap | 1,442,329 | 1,516,279 | 73,950 | ||||||||||||
Financing Costs and Other Receivables | (8,254 | ) | |||||||||||||
Net Swap Agreement, at value | $ | 65,696 |
19
UBS Equity Long-Short Multi-Strategy Fund
Portfolio of investments
June 30, 2014
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 14,439,940 | $ | — | $ | — | $ | 14,439,940 | |||||||||||
Preferred stock | 107,837 | — | — | 107,837 | |||||||||||||||
Short-term investments | — | 4,458,606 | — | 4,458,606 | |||||||||||||||
Forward foreign currency contracts | — | 17,971 | — | 17,971 | |||||||||||||||
Swap agreement | — | 65,696 | — | 65,696 | |||||||||||||||
Total | $ | 14,547,777 | $ | 4,542,273 | $ | — | $ | 19,090,050 | |||||||||||
Liabilities | |||||||||||||||||||
Common stocks sold short | $ | (11,016,566 | ) | $ | — | $ | — | $ | (11,016,566 | ) | |||||||||
Forward foreign currency contracts | — | (47,153 | ) | — | (47,153 | ) | |||||||||||||
Total | $ | (11,016,566 | ) | $ | (47,153 | ) | $ | — | $ | (11,063,719 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 All or a portion of these securities have been delivered to cover open short positions.
2 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security is considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of this security amounted to $31,668 or 0.20% of net assets.
3 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of these securities amounted to $133,147 or 0.83% of net assets.
4 The table below details the Fund's investment in a fund advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 4,066,550 | $ | 17,846,669 | $ | 18,704,592 | $ | 3,208,627 | $ | 4,546 |
5 Rate shown is the discount rate at the date of purchase.
6 Illiquid investment as of June 30, 2014.
7 The twelve month maturity dates are measured from the commencement of investment in each underlying portfolio swap market.
8 Notional value represents the market value (including any fees or commissions) of the long and short positions at the time they are established.
9 Current value represents the market value of these positions based on the securities' last sale or closing price on the principal exchange on which the securities are traded.
10 Value represents the unrealized gain (loss) of the positions at June 30, 2014.
See accompanying notes to financial statements.
20
UBS Global Sustainable Equity Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Global Sustainable Equity Fund (the "Fund") (formerly UBS International Equity Fund) gained 21.32% (Class A shares returned 14.64% after the deduction of the maximum sales charge), while Class Y shares rose 21.65%. The Fund's new benchmark, the MSCI World Free Index (net) (the "Index") returned 24.05%, whereas the Fund's previous benchmark, the MSCI World Free ex-USA Index (net), returned 23.83% over the same time period. (Class Y shares have lower expenses than other share classes in the series. Returns for all share classes over various time periods are shown on page 24; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
Special Fund Update
The Board of Trustees of The UBS Funds approved changes to UBS International Equity Fund, including changing its name, its listed portfolio managers and adjusting certain investment policies to allow the Fund to pursue a sustainable investment approach. These changes went into effect on October 28, 2013. Specifically:
• The Fund's name changed from UBS International Equity Fund to UBS Global Sustainable Equity Fund.
• The Fund's benchmark changed from the MSCI World Free ex USA Index (net), to the MSCI World Free Index (net). This increased the Fund's investable universe and allows for its investment in US equities.
• The investment process for the Fund was enhanced by the use of a positive screening approach that integrates sustainability analysis and a long-term perspective with a rigorous fundamental valuation framework. The investment process for the Fund also incorporates some negative screening for controversial industries.
The Fund posted a strong absolute return but underperformed its benchmark during the reporting period, primarily due to stock selection and sector allocation.
Portfolio performance summary1
What worked
• Several individual stocks had a positive impact on performance.
• NXP Semiconductor, a leading semiconductor manufacturer headquartered in the Netherlands, generated strong results and benefited the Fund's performance. (For additional details, see "Portfolio Highlights.")
• Broadcom Corp. is an American semiconductor company in the wireless and broadband communication business. Investors were pleased by the company's announcement that it would exit its baseband chip business, which will lead to substantial savings. This, in turn, resulted in expectations for improving earnings.
• Aviva plc is a British multinational insurance company headquartered in London. The company has undergone a successful restructuring, which has resulted in increased revenues and lower costs for its business lines.
• Apple, Inc. designs, develops, and sells consumer electronics, computer software, online services, and personal computers. After a period of weakness, its shares rallied in anticipation of several new products being launched in the fall, including the iPhone 6 and iWatch.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
21
UBS Global Sustainable Equity Fund
• Sector allocation in several areas contributed to results. The Fund's overall sector allocations are a byproduct of our bottom-up stock selection process. During the reporting period, underweights to health care, materials and financials were the most beneficial sector allocations to the Fund's relative performance.
What didn't work
• Overall, stock selection detracted from performance during the reporting period.
• ServiceSource International is a US-based software service company. Sentiment for the company weakened as it reported disappointing results that caused investors to question its future growth prospects. In addition, the company has experienced some management turnover that was negatively received by investors.
• Amazon.com is a leading web-based retailer. While its revenues continue to rise sharply, investors were disappointed by rising costs for its distribution facilities and the start-up costs for its new phone product, which depressed earnings.
• NII Holdings is a telecommunications company that performed poorly during the reporting period and was subsequently eliminated from the portfolio. (For additional details, see "Portfolio Highlights.")
• Bank Rakyat Indonesia is a finance company based in Indonesia. It performed poorly and we eliminated the holding. (For additional details, see "Portfolio Highlights.")
• Shin-Etsu Chemical Company is a Japanese supplier of semiconductor materials and polyvinyl chloride. Its shares declined as semiconductor pricing has been weak.
• Sector allocation decisions, overall, detracted from performance. During the reporting period, having an overweight to information technology, along with underweights to energy and telecommunication services, were negative for the Fund's relative performance.
Portfolio highlights
• NXP Semiconductor is highly leveraged to industrial production in Europe, which has shown signs of economic improvement. The company also owns new technology in the area of Near Field Communications, which is expected to be included in the new iPhone 6. This bolstered investor sentiment for NXP Semiconductor and helped to drive its share price sharply higher during the reporting period.
• A.P. Moller is a Danish shipping company. Its shares rallied sharply given expectations for improved pricing, especially in the Pacific. The company's volumes have also increased along with strengthening global growth.
• NII Holdings is a holding company that, through its various subsidiaries, provides mobile communication services under the Nextel brand in five Latin American countries. The company experienced pricing pressures and lost customers during the reporting period. In addition, its 3G technology transition did not work out as planned, and we sold the stock.
22
UBS Global Sustainable Equity Fund
• Shares of Bank Rakyat Indonesia declined during the reporting period, given the volatility in the Indonesian economy. This, in turn, has negatively impacted the country's banking system. We sold the stock during the reporting period and locked in previous profits from the holding.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
23
UBS Global Sustainable Equity Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 21.32 | % | 10.38 | % | 5.71 | % | |||||||||
Class C2 | 20.32 | 9.56 | 4.92 | ||||||||||||
Class Y3 | 21.65 | 10.67 | 5.95 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 14.64 | % | 9.13 | % | 5.11 | % | |||||||||
Class C2 | 19.32 | 9.56 | 4.92 | ||||||||||||
MSCI World Free Index (net)4,6 | 24.05 | % | 14.99 | % | 7.25 | % | |||||||||
MSCI World Free ex USA Index (net)5,6 | 23.83 | 11.67 | 7.18 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—2.65% and 1.25%; Class C—3.40% and 2.00%; Class Y—2.40% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), has agreed irrevocably to waive its fees and reimburse certain expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed 1.25% for Class A shares, 2.00% for Class C shares and 1.00% for Class Y shares. This fee waiver and expense arrangement may only be amended or terminated by shareholders.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
3 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
4 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The MSCI World Free ex USA Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets excluding the United States. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
6 Please note that UBS Global Sustainable Equity Fund (formerly, International Equity Fund) was transitioned from a Global (Ex-US) strategy on October 28, 2013. The benchmark was also changed from the MSCI World Free ex USA Index (net) to the MSCI World Free Index (net), in order to properly reflect the new strategy.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
24
UBS Global Sustainable Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Global Sustainable Equity Fund Class A and Class Y shares versus the MSCI World Free Index (net) and MSCI World Free ex USA Index (net) over the 10 years ended June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
25
UBS Global Sustainable Equity Fund
Top ten equity holdings (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
NXP Semiconductor NV | 2.9 | % | |||||
Koninklijke DSM NV | 2.4 | ||||||
Check Point Software Technologies Ltd. | 2.3 | ||||||
AIA Group Ltd. | 2.3 | ||||||
BG Group PLC | 2.2 | ||||||
A.P. Moller - Maersk A/S, Class B | 2.2 | ||||||
Compass Group PLC | 2.2 | ||||||
Apple, Inc. | 2.1 | ||||||
KDDI Corp. | 2.0 | ||||||
Eli Lilly & Co. | 2.0 | ||||||
Total | 22.6 | % |
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Airlines | 0.56 | % | |||||
Automobiles | 2.07 | ||||||
Banks | 11.99 | ||||||
Biotechnology | 3.81 | ||||||
Building products | 0.97 | ||||||
Capital markets | 1.10 | ||||||
Chemicals | 4.25 | ||||||
Commercial services & supplies | 1.52 | ||||||
Construction materials | 1.84 | ||||||
Containers & packaging | 0.68 | ||||||
Diversified telecommunication services | 1.90 | ||||||
Electrical equipment | 1.89 | ||||||
Electronic equipment, instruments & components | 1.21 | ||||||
Food & staples retailing | 1.75 | ||||||
Food products | 0.51 | ||||||
Health care equipment & supplies | 0.74 | ||||||
Health care providers & services | 1.71 | ||||||
Hotels, restaurants & leisure | 2.16 | ||||||
Household durables | 1.91 | ||||||
Household products | 0.98 | ||||||
Insurance | 7.39 | ||||||
Internet & catalog retail | 1.10 | ||||||
IT services | 0.44 | ||||||
Life sciences tools & services | 0.93 | ||||||
Machinery | 3.31 | ||||||
Marine | 2.25 | ||||||
Media | 1.11 | ||||||
Metals & mining | 0.73 | ||||||
Multiline retail | 2.17 | ||||||
Oil, gas & consumable fuels | 6.31 | ||||||
Personal products | 3.73 | ||||||
Pharmaceuticals | 3.78 | ||||||
Real estate investment trust (REIT) | 1.79 | ||||||
Road & rail | 1.20 | ||||||
Semiconductors & semiconductor equipment | 8.75 | ||||||
Software | 4.14 | ||||||
Technology hardware, storage & peripherals | 2.11 | ||||||
Wireless telecommunication services | 2.01 | ||||||
Total common stocks | 96.80 | % | |||||
Preferred stock | 0.75 | ||||||
Short-term investment | 1.52 | ||||||
Investment of cash collateral from securities loaned | 0.48 | ||||||
Total investments | 99.55 | % | |||||
Cash and other assets, less liabilities | 0.45 | ||||||
Net assets | 100.00 | % |
Country exposure by issuer, top five (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
United States | 34.6 | % | |||||
Japan | 14.1 | ||||||
United Kingdom | 8.6 | ||||||
Netherlands | 5.3 | ||||||
France | 3.6 | ||||||
Total | 66.2 | % |
26
UBS Global Sustainable Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 96.80% | |||||||||||
Australia: 2.28% | |||||||||||
Brambles Ltd. | 37,764 | $ | 327,252 | ||||||||
Scentre Group* | 19,435 | 58,644 | |||||||||
Westfield Corp. | 15,598 | 105,163 | |||||||||
Total Australia common stocks | 491,059 | ||||||||||
Canada: 2.05% | |||||||||||
Royal Bank of Canada | 4,000 | 285,947 | |||||||||
Teck Resources Ltd., Class B | 6,900 | 157,522 | |||||||||
Total Canada common stocks | 443,469 | ||||||||||
China: 2.82% | |||||||||||
AIA Group Ltd. | 96,838 | 486,664 | |||||||||
Cathay Pacific Airways Ltd. | 65,000 | 121,439 | |||||||||
Total China common stocks | 608,103 | ||||||||||
Denmark: 2.25% | |||||||||||
A.P. Moller - Maersk A/S, Class B | 195 | 484,559 | |||||||||
France: 3.63% | |||||||||||
Carrefour SA | 10,229 | 377,337 | |||||||||
Schneider Electric SE | 4,322 | 406,870 | |||||||||
Total France common stocks | 784,207 | ||||||||||
Germany: 2.78% | |||||||||||
HeidelbergCement AG | 4,661 | 397,809 | |||||||||
SAP AG | 2,611 | 201,644 | |||||||||
Total Germany common stocks | 599,453 | ||||||||||
Ireland: 0.64% | |||||||||||
Bank of Ireland* | 408,000 | 137,434 | |||||||||
Israel: 3.37% | |||||||||||
Check Point Software Technologies Ltd.*1 | 7,300 | 489,319 | |||||||||
Mellanox Technologies Ltd.* | 6,800 | 237,048 | |||||||||
Total Israel common stocks | 726,367 | ||||||||||
Italy: 1.15% | |||||||||||
Intesa Sanpaolo SpA | 80,190 | 247,718 | |||||||||
Japan: 14.11% | |||||||||||
Hino Motors Ltd. | 16,300 | 224,456 | |||||||||
Kao Corp. | 10,500 | 413,242 | |||||||||
KDDI Corp. | 7,200 | 439,157 | |||||||||
Panasonic Corp. | 19,000 | 231,440 | |||||||||
Shin-Etsu Chemical Co., Ltd. | 2,600 | 158,046 | |||||||||
Shiseido Co., Ltd. | 21,500 | 391,990 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 6,700 | 280,685 | |||||||||
THK Co., Ltd. | 14,000 | 330,013 | |||||||||
Tokio Marine Holdings, Inc. | 8,400 | 276,282 |
Shares | Value | ||||||||||
Toyota Motor Corp. | 5,000 | $ | 300,281 | ||||||||
Total Japan common stocks | 3,045,592 | ||||||||||
Netherlands: 5.29% | |||||||||||
Koninklijke DSM NV | 7,055 | 513,837 | |||||||||
NXP Semiconductor NV* | 9,500 | 628,710 | |||||||||
Total Netherlands common stocks | 1,142,547 | ||||||||||
Norway: 3.40% | |||||||||||
Statoil ASA | 10,528 | 323,366 | |||||||||
Telenor ASA | 18,002 | 410,000 | |||||||||
Total Norway common stocks | 733,366 | ||||||||||
Spain: 2.52% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 17,329 | 220,889 | |||||||||
Banco Santander SA | 30,844 | 322,251 | |||||||||
Total Spain common stocks | 543,140 | ||||||||||
Sweden: 2.28% | |||||||||||
Lundin Petroleum AB* | 12,854 | 260,098 | |||||||||
Nordea Bank AB | 16,413 | 231,645 | |||||||||
Total Sweden common stocks | 491,743 | ||||||||||
Switzerland: 3.28% | |||||||||||
Novartis AG | 4,344 | 393,351 | |||||||||
Zurich Insurance Group AG* | 1,044 | 314,683 | |||||||||
Total Switzerland common stocks | 708,034 | ||||||||||
Taiwan: 1.75% | |||||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 17,700 | 378,603 | |||||||||
United Kingdom: 8.64% | |||||||||||
Aberdeen Asset Management PLC | 30,500 | 236,925 | |||||||||
Aviva PLC | 43,873 | 383,305 | |||||||||
BG Group PLC | 22,931 | 484,665 | |||||||||
Compass Group PLC | 26,784 | 466,174 | |||||||||
Premier Oil PLC | 51,553 | 294,593 | |||||||||
Total United Kingdom common stocks | 1,865,662 | ||||||||||
United States: 34.56% | |||||||||||
Acorda Therapeutics, Inc.* | 10,700 | 360,697 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 3,900 | 246,363 | |||||||||
Amazon.com, Inc.* | 730 | 237,089 | |||||||||
Apple, Inc. | 4,900 | 455,357 | |||||||||
Applied Materials, Inc. | 11,900 | �� | 268,345 | ||||||||
Baxter International, Inc. | 2,200 | 159,060 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 1,670 | 199,916 | |||||||||
Broadcom Corp., Class A | 10,100 | 374,912 | |||||||||
Cinemark Holdings, Inc. | 6,800 | 240,448 | |||||||||
Citigroup, Inc. | 3,400 | 160,140 | |||||||||
Digital Realty Trust, Inc.1 | 3,800 | 221,616 |
27
UBS Global Sustainable Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Eli Lilly & Co. | 6,800 | $ | 422,756 | ||||||||
Ford Motor Co. | 8,500 | 146,540 | |||||||||
Gilead Sciences, Inc.* | 1,700 | 140,947 | |||||||||
Jabil Circuit, Inc. | 12,500 | 261,250 | |||||||||
JC Penney Co., Inc.*1 | 13,200 | 119,460 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 45,900 | 73,899 | |||||||||
Macy's, Inc. | 6,000 | 348,120 | |||||||||
MetLife, Inc. | 2,400 | 133,344 | |||||||||
Mondelez International, Inc., Class A | 2,900 | 109,069 | |||||||||
Norfolk Southern Corp. | 2,520 | 259,636 | |||||||||
Owens Corning | 5,400 | 208,872 | |||||||||
PNC Financial Services Group, Inc. | 3,400 | 302,770 | |||||||||
Praxair, Inc. | 1,840 | 244,426 | |||||||||
Procter & Gamble Co. | 2,700 | 212,193 | |||||||||
Rock-Tenn Co., Class A | 1,400 | 147,826 | |||||||||
ServiceSource International, Inc.* | 16,500 | 95,700 | |||||||||
Symantec Corp. | 8,800 | 201,520 | |||||||||
Timken Co. | 2,350 | 159,424 | |||||||||
UnitedHealth Group, Inc. | 4,510 | 368,692 | |||||||||
US Bancorp | 9,200 | 398,544 | |||||||||
Whirlpool Corp. | 1,300 | 180,986 | |||||||||
Total United States common stocks | 7,459,917 | ||||||||||
Total common stocks (cost $18,685,436) | 20,890,973 |
Shares | Value | ||||||||||
Preferred stock: 0.75% | |||||||||||
Brazil: 0.75% | |||||||||||
Banco Bradesco SA, Preference shares (cost $166,726) | 11,200 | $ | 162,462 | ||||||||
Short-term investment: 1.52% | |||||||||||
Investment company: 1.52% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $328,482) | 328,482 | 328,482 | |||||||||
Investment of cash collateral from securities loaned: 0.48% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $103,482) | 103,482 | 103,482 | |||||||||
Total investments: 99.55% (cost $19,284,126) | 21,485,399 | ||||||||||
Cash and other assets, less liabilities: 0.45% | 97,343 | ||||||||||
Net assets: 100.00% | $ | 21,582,742 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $19,339,928; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 2,487,509 | |||||
Gross unrealized depreciation | (342,038 | ) | |||||
Net unrealized appreciation of investments | $ | 2,145,471 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 70. Portfolio footnotes begin on page 29.
28
UBS Global Sustainable Equity Fund
Portfolio of investments
June 30, 2014
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 20,890,973 | $ | — | $ | — | $ | 20,890,973 | |||||||||||
Preferred stock | 162,462 | — | — | 162,462 | |||||||||||||||
Short-term investment | — | 328,482 | — | 328,482 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 103,482 | — | 103,482 | |||||||||||||||
Total | $ | 21,053,435 | $ | 431,964 | $ | — | $ | 21,485,399 |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2014.
2 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 385,436 | $ | 6,134,206 | $ | 6,191,160 | $ | 328,482 | $ | 224 | |||||||||||||
UBS Private Money Market Fund LLCa | 567,869 | 8,466,653 | 8,931,040 | 103,482 | 30 | ||||||||||||||||||
$ | 953,305 | $ | 14,600,859 | $ | 15,122,200 | $ | 431,964 | $ | 254 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
29
UBS U.S. Defensive Equity Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS U.S. Defensive Equity Fund (the "Fund") returned 18.78% (Class A shares returned 12.24% after the deduction of the maximum sales charge), while Class Y shares returned 19.17%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 25.35% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 33; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund underperformed the Index primarily due to stock selection decisions.
Portfolio performance summary1
What worked
• Stock selection decisions in the information technology sector contributed strongly to Fund performance.
– Shares of Micron Technology rose 39% during the second quarter of 2014 as the company saw strong upward momentum. Micron benefited from supply disruptions at its key competitor, Hynix. This development increased expectations for improved DRAM pricing and higher margins for Micron.
– NXP Semiconductor was a top holding for the Fund. Shares were up 28% during the first quarter of 2014 after NXP reported quarterly and annual earnings at the high end of guidance. The company's revenue growth reached 13% for the full year, led by its automotive business and its portable and computing business. NXP also benefited from the announcement of an expanded stock repurchase program.
• Several energy and materials stocks made a positive contribution to relative performance.
– Shares of EOG Resources rose 19% during the second quarter of 2014. The company posted strong earnings results in the first quarter due to new Rocky Mountain oil plays, which added to its high quality inventory. EOG is benefiting from strong rig counts, and has raised its production targets from 27% to 29%. (For details, see "Portfolio highlights.")
– Martin Marietta Materials gained 29% during the first quarter of 2014. The company reported full-year results that exceeded expectations, crediting double-digit volume growth in its residential and non-residential aggregates business. Other positive developments included the company's announcement that it would acquire Texas Industries, the second-largest producer of sand, gravel and crushed rock.
• The Fund had a successful overweight to the health care sector.
– Allergan made a significant contribution to Fund returns during the 12 months. The stock price gained 36% during the second quarter of 2014. The spike was due to the announcement in April 2014 that activist investor William Ackman and Valeant Pharmaceuticals were teaming up to pursue a takeover of Allergan.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
30
UBS U.S. Defensive Equity Fund
What didn't work
• Certain individual stock positions detracted from relative performance during the 12-month period.
– NII Holdings was the top detractor for the reporting period. The stock plunged 55% in late February 2014 when NII reported a net subscriber loss of 247,000 and warned about declining liquidity. The company continues to make progress in Brazil, where it has built a 3G network and is selling the iPhone 5. But greater-than-expected customer losses in Mexico are hampering results. We continue to hold the stock, based on the situation in Brazil and an asset base that we believe is undervalued by the market.
– ServiceSource International made a negative contribution to Fund returns. The company saw a significant decline in its stock price due to poor performance in the first quarter of 2014. The stock came under additional pressure after ServiceSource announced negative earnings estimate revisions for the quarter and the current year.
– J. C. Penney detracted from Fund returns after reporting earnings and revenue that were below expectations. Early in the 12 months, Bill Ackman publicly criticized the company's strategy and subsequently resigned from his seat on its board. The company attempted to raise cash by selling roughly $800 million of new stock before the critical 2013 holiday shopping season, but this only eroded investor confidence. While the mid-tier department store faces some challenges, we believe the current valuation does not reflect J.C. Penney's future cash generation potential.
– Shares of Philip Morris suffered along with the broader consumer staples sector. Investor sentiment about the decline in the number of smokers worsened, leading to poor performance for the company's stock price. However, we believe that Philip Morris is attractively valued. (For details, see "Portfolio highlights.")
– The stock price of Citigroup declined during the 12 months. Along with other large global financial services companies, Citigroup suffered from uncertainty about the future regulatory environment. Ongoing concerns about settlements related to the financial crisis also hindered the performance of many banks. In addition, Citigroup failed a regulatory test of balance sheet strength, and was denied the opportunity to increase its dividend and share buyback program. (For details, see "Portfolio highlights.")
• An underweight to the utilities sector detracted from the Fund's relative returns when many of these stocks traded higher during the period.
Portfolio highlights
• EOG Resources is a natural gas and crude oil exploration & production (E&P) company. We believe it is a best-in-class company run by experienced managers. EOG benefits from a disciplined focus on internal rate of return at the project level. The company has core positions in prime acreage of the Eagle Ford, Bakken and Permian basins. It is a first mover in the onshore tight gas and tight oil basins. EOG has a track record of superior innovation and, as a result, is well-positioned with the lowest exploration and development costs.
• We believe the market underappreciates the persistence and predictability of Philip Morris' cash flows and returns to shareholders. While governments have an interest in public health and declining tobacco consumption, they have become reliant on steady and predictable tobacco tax flows. Philip Morris has proven skill at modeling cigarette demand, even with variables such as regulation, taxation and demographics. Over time, governments are learning to trust the company's models. Governments have learned that aggressive tax increases tend to encourage the illicit cigarette trade, which reduces tax revenue and increases consumption. Philip Morris' regulatory and consumption risk is well diversified, as the company operates in more than 180 markets globally.
31
UBS U.S. Defensive Equity Fund
• Citigroup continues to execute its plan to rationalize its balance sheet, wind down Citi Holdings, engineer expense reductions, and improve liquidity and capital metrics. It is successfully taking market share in its core businesses: regional consumer banking, securities and banking, and global transaction services. Additionally, the company has been aggressively selling minority stakes in several banks, which should provide significant capital relief on a Basel III basis. We anticipate superior earnings growth over the next few years due to solid revenue growth, improving expense discipline and better credit quality.
• Mondelez manufactures and markets snack food and beverage products, including cookies, crackers, chocolate, gum, candy, coffee, powdered beverages, and various cheese and grocery products. We believe the company is well-positioned for growth due to its significant exposure to developing markets. We think there is an opportunity for margin expansion from a rebound in Europe and by leveraging synergies across distribution platforms.
• Yum! Brands is the leading multi-concept global restaurant company with three main concepts: KFC, Taco Bell and Pizza Hut. The stock experienced weakness due to supply issues and avian flu concerns in China. We believe the market is undervaluing the long-term value of the KFC and Pizza Hut franchises in China. Unit growth has accelerated in recent years as a result of prior investment in infrastructure. We expect Yum! to continue to grow earnings per share by double digits for the next several years due to strong international growth and return of capital to shareholders through dividends and share repurchases.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
32
UBS U.S. Defensive Equity Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 18.78 | % | 15.33 | % | 4.39 | % | |||||||||
Class C3 | 17.94 | 14.47 | 3.61 | ||||||||||||
Class Y4 | 19.17 | 15.61 | 4.64 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 12.24 | % | 14.03 | % | 3.63 | % | |||||||||
Class C3 | 16.94 | 14.47 | 3.61 | ||||||||||||
Russell 1000 Index5 | 25.35 | % | 19.25 | % | 7.68 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—4.79% and 2.81%; Class C—5.61% and 3.59%; Class Y—4.51% and 2.57%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.50% for Class A shares, 2.25% for Class C shares and 1.25% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS U.S. Defensive Equity Fund and the index is September 26, 2006.
2 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The Russell 1000 Index measures the performance of the large-cap segment of the US equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
33
UBS U.S. Defensive Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Defensive Equity Fund Class A and Class Y shares versus the Russell 1000 Index from September 26, 2006, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
34
UBS U.S. Defensive Equity Fund
Top ten equity holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
Apple, Inc. | 3.8 | % | |||||
Mondelez International, Inc., Class A | 3.3 | ||||||
Yum! Brands, Inc. | 3.2 | ||||||
Philip Morris International, Inc. | 3.0 | ||||||
Comcast Corp., Class A | 2.8 | ||||||
Citigroup, Inc. | 2.8 | ||||||
JPMorgan Chase & Co. | 2.6 | ||||||
PepsiCo, Inc. | 2.6 | ||||||
Amazon.com, Inc. | 2.6 | ||||||
Symantec Corp. | 2.4 | ||||||
Total | 29.1 | % |
1 Only long positions are considered for top ten holdings.
35
UBS U.S. Defensive Equity Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Aerospace & defense | 1.38 | % | |||||
Automobiles | 3.64 | ||||||
Banks | 9.28 | ||||||
Beverages | 2.62 | ||||||
Biotechnology | 5.57 | ||||||
Building products | 0.85 | ||||||
Capital markets | 3.53 | ||||||
Chemicals | 3.61 | ||||||
Commercial services & supplies | 1.62 | ||||||
Construction materials | 1.24 | ||||||
Consumer finance | 1.86 | ||||||
Diversified telecommunication services | 0.81 | ||||||
Electronic equipment, instruments & components | 1.49 | ||||||
Energy equipment & services | 5.38 | ||||||
Food & staples retailing | 2.16 | ||||||
Food products | 3.26 | ||||||
Health care equipment & supplies | 1.17 | ||||||
Health care providers & services | 4.78 | ||||||
Hotels, restaurants & leisure | 3.24 | ||||||
Household durables | 0.71 | ||||||
Industrial conglomerates | 2.21 | ||||||
Insurance | 5.15 | ||||||
Internet & catalog retail | 2.59 | ||||||
IT services | 0.95 | ||||||
Life sciences tools & services | 0.93 | ||||||
Machinery | 1.53 | ||||||
Media | 6.26 | ||||||
Multiline retail | 1.78 | ||||||
Oil, gas & consumable fuels | 6.05 | ||||||
Pharmaceuticals | 12.03 | ||||||
Real estate investment trust (REIT) | 3.31 | ||||||
Road & rail | 3.23 | ||||||
Semiconductors & semiconductor equipment | 10.66 | ||||||
Software | 4.00 | ||||||
Specialty retail | 1.15 | ||||||
Technology hardware, storage & peripherals | 5.28 | ||||||
Textiles, apparel & luxury goods | 1.50 | ||||||
Tobacco | 3.00 | ||||||
Wireless telecommunication services | 0.10 | ||||||
Total common stocks | 129.91 | % | |||||
Investment company | |||||||
SPDR S&P 500 ETF Trust | 1.95 | ||||||
Short-term investment | 1.45 | ||||||
Options purchased | 0.68 | ||||||
Total investments before investments sold short | 133.99 | % |
Investments sold short | |||||||
Common stocks | |||||||
Banks | (2.53 | )% | |||||
Beverages | (0.38 | ) | |||||
Biotechnology | (1.53 | ) | |||||
Capital markets | (1.67 | ) | |||||
Chemicals | (0.68 | ) | |||||
Commercial services & supplies | (1.95 | ) | |||||
Electronic equipment, instruments & components | (0.40 | ) | |||||
Energy equipment & services | (0.58 | ) | |||||
Food products | (0.73 | ) | |||||
Health care equipment & supplies | (3.01 | ) | |||||
Health care providers & services | (1.28 | ) | |||||
Hotels, restaurants & leisure | (2.66 | ) | |||||
Household products | (0.28 | ) | |||||
Insurance | (0.88 | ) | |||||
Internet & catalog retail | (0.87 | ) | |||||
Internet software & services | (0.90 | ) | |||||
IT services | (0.43 | ) | |||||
Life sciences tools & services | (1.33 | ) | |||||
Media | (1.87 | ) | |||||
Oil, gas & consumable fuels | (0.31 | ) | |||||
Pharmaceuticals | (1.88 | ) | |||||
Real estate investment trust (REIT) | (0.20 | ) | |||||
Semiconductors & semiconductor equipment | (2.63 | ) | |||||
Software | (0.77 | ) | |||||
Technology hardware, storage & peripherals | (1.22 | ) | |||||
Textiles, apparel & luxury goods | (0.78 | ) | |||||
Thrifts & mortgage finance | (0.28 | ) | |||||
Trading companies & distributors | (0.31 | ) | |||||
Wireless telecommunication services | (1.11 | ) | |||||
Total investments sold short | (33.45 | )% | |||||
Total investments, net of investments sold short | 100.54 | ||||||
Liabilities, in excess of cash and other assets | (0.54 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS U.S. Defensive Equity Fund. Figures might be different if a breakdown of the underlying investment company was included.
36
UBS U.S. Defensive Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 129.91% | |||||||||||
Aerospace & defense: 1.38% | |||||||||||
General Dynamics Corp.1 | 1,900 | $ | 221,445 | ||||||||
Automobiles: 3.64% | |||||||||||
Ford Motor Co.1 | 18,700 | 322,388 | |||||||||
General Motors Co.1 | 7,200 | 261,360 | |||||||||
583,748 | |||||||||||
Banks: 9.28% | |||||||||||
Citigroup, Inc.1 | 9,569 | 450,700 | |||||||||
JPMorgan Chase & Co.1 | 7,350 | 423,507 | |||||||||
US Bancorp1 | 7,350 | 318,402 | |||||||||
Wells Fargo & Co.1 | 5,600 | 294,336 | |||||||||
1,486,945 | |||||||||||
Beverages: 2.62% | |||||||||||
PepsiCo, Inc.1 | 4,700 | 419,898 | |||||||||
Biotechnology: 5.57% | |||||||||||
Acorda Therapeutics, Inc.*1 | 8,150 | 274,736 | |||||||||
Alexion Pharmaceuticals, Inc.*1 | 900 | 140,625 | |||||||||
Alnylam Pharmaceuticals, Inc.*1 | 1,800 | 113,706 | |||||||||
Bluebird Bio, Inc.*1 | 800 | 30,856 | |||||||||
Epizyme, Inc.*1 | 700 | 21,784 | |||||||||
Gilead Sciences, Inc.*1 | 2,350 | 194,838 | |||||||||
KaloBios Pharmaceuticals, Inc.*1 | 4,700 | 10,716 | |||||||||
Lexicon Pharmaceuticals, Inc.*1 | 56,750 | 91,368 | |||||||||
MacroGenics, Inc.*1 | 600 | 13,038 | |||||||||
891,667 | |||||||||||
Building products: 0.85% | |||||||||||
Owens Corning1 | 3,500 | 135,380 | |||||||||
Capital markets: 3.53% | |||||||||||
Invesco Ltd.1 | 5,400 | 203,850 | |||||||||
Morgan Stanley1 | 11,200 | 362,096 | |||||||||
565,946 | |||||||||||
Chemicals: 3.61% | |||||||||||
Air Products & Chemicals, Inc.1 | 1,200 | 154,344 | |||||||||
Monsanto Co.1 | 1,800 | 224,532 | |||||||||
Praxair, Inc.1 | 1,500 | 199,260 | |||||||||
578,136 | |||||||||||
Commercial services & supplies: 1.62% | |||||||||||
Waste Management, Inc.1 | 5,800 | 259,434 | |||||||||
Construction materials: 1.24% | |||||||||||
Martin Marietta Materials, Inc.1 | 1,500 | 198,075 |
Shares | Value | ||||||||||
Consumer finance: 1.86% | |||||||||||
Capital One Financial Corp.1 | 3,600 | $ | 297,360 | ||||||||
Diversified telecommunication services: 0.81% | |||||||||||
Pacific DataVision, Inc.*2 | 6,100 | 129,625 | |||||||||
Electronic equipment, instruments & components: 1.49% | |||||||||||
Jabil Circuit, Inc.1 | 11,400 | 238,260 | |||||||||
Energy equipment & services: 5.38% | |||||||||||
Baker Hughes, Inc.1 | 3,100 | 230,795 | |||||||||
Halliburton Co.1 | 2,450 | 173,974 | |||||||||
McDermott International, Inc.*1 | 21,050 | 170,295 | |||||||||
Noble Corp. PLC1 | 8,550 | 286,938 | |||||||||
862,002 | |||||||||||
Food & staples retailing: 2.16% | |||||||||||
Rite Aid Corp.*1 | 15,100 | 108,267 | |||||||||
Walgreen Co.1 | 3,200 | 237,216 | |||||||||
345,483 | |||||||||||
Food products: 3.26% | |||||||||||
Mondelez International, Inc., Class A1 | 13,900 | 522,779 | |||||||||
Health care equipment & supplies: 1.17% | |||||||||||
Baxter International, Inc.1 | 2,600 | 187,980 | |||||||||
Health care providers & services: 4.78% | |||||||||||
Envision Healthcare Holdings, Inc.*1 | 2,900 | 104,139 | |||||||||
Laboratory Corp. of America Holdings*1 | 3,500 | 358,400 | |||||||||
UnitedHealth Group, Inc.1 | 3,700 | 302,475 | |||||||||
765,014 | |||||||||||
Hotels, restaurants & leisure: 3.24% | |||||||||||
Yum! Brands, Inc.1 | 6,400 | 519,680 | |||||||||
Household durables: 0.71% | |||||||||||
Lennar Corp., Class A | 2,700 | 113,346 | |||||||||
Industrial conglomerates: 2.21% | |||||||||||
Danaher Corp.1 | 4,500 | 354,285 | |||||||||
Insurance: 5.15% | |||||||||||
Aon PLC1 | 2,300 | 207,207 | |||||||||
Lincoln National Corp.1 | 5,250 | 270,060 | |||||||||
MetLife, Inc.1 | 6,250 | 347,250 | |||||||||
824,517 | |||||||||||
Internet & catalog retail: 2.59% | |||||||||||
Amazon.com, Inc.*1 | 1,280 | 415,718 | |||||||||
IT services: 0.95% | |||||||||||
ServiceSource International, Inc.*1 | 26,250 | 152,250 |
37
UBS U.S. Defensive Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Life sciences tools & services: 0.93% | |||||||||||
Bio-Rad Laboratories, Inc., Class A*1 | 1,250 | $ | 149,638 | ||||||||
Machinery: 1.53% | |||||||||||
Illinois Tool Works, Inc.1 | 2,800 | 245,168 | |||||||||
Media: 6.26% | |||||||||||
Comcast Corp., Class A1 | 8,400 | 450,912 | |||||||||
Time Warner, Inc.1 | 2,850 | 200,213 | |||||||||
Walt Disney Co.1 | 4,100 | 351,534 | |||||||||
1,002,659 | |||||||||||
Multiline retail: 1.78% | |||||||||||
JC Penney Co., Inc.*1 | 10,600 | 95,930 | |||||||||
Macy's, Inc.1 | 3,250 | 188,565 | |||||||||
284,495 | |||||||||||
Oil, gas & consumable fuels: 6.05% | |||||||||||
Chevron Corp.1 | 1,200 | 156,660 | |||||||||
EOG Resources, Inc.1 | 3,250 | 379,795 | |||||||||
Exxon Mobil Corp.1 | 2,200 | 221,496 | |||||||||
PDC Energy, Inc.*1 | 3,350 | 211,553 | |||||||||
969,504 | |||||||||||
Pharmaceuticals: 12.03% | |||||||||||
Allergan, Inc.1 | 1,300 | 219,986 | |||||||||
Eli Lilly & Co.1 | 5,900 | 366,803 | |||||||||
Hospira, Inc.*1 | 5,200 | 267,124 | |||||||||
Impax Laboratories, Inc.*1 | 8,800 | 263,912 | |||||||||
Johnson & Johnson1 | 700 | 73,234 | |||||||||
Mallinckrodt PLC*1 | 2,500 | 200,050 | |||||||||
Merck & Co., Inc.1 | 5,650 | 326,852 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 4,000 | 209,680 | |||||||||
1,927,641 | |||||||||||
Real estate investment trust (REIT): 3.31% | |||||||||||
American Campus Communities, Inc.1 | 1,800 | 68,832 | |||||||||
Digital Realty Trust, Inc.1 | 4,200 | 244,944 | |||||||||
Simon Property Group, Inc.1 | 1,300 | 216,164 | |||||||||
529,940 | |||||||||||
Road & rail: 3.23% | |||||||||||
Hertz Global Holdings, Inc.*1 | 10,750 | 301,323 | |||||||||
Norfolk Southern Corp.1 | 2,100 | 216,363 | |||||||||
517,686 | |||||||||||
Semiconductors & semiconductor equipment: 10.66% | |||||||||||
Applied Materials, Inc.1 | 16,000 | 360,800 | |||||||||
Broadcom Corp., Class A1 | 8,250 | 306,240 | |||||||||
Freescale Semiconductor Ltd.*1 | 7,000 | 164,500 | |||||||||
Mellanox Technologies Ltd.*1 | 6,100 | 212,646 |
Shares | Value | ||||||||||
Micron Technology, Inc.*1 | 9,700 | $ | 319,615 | ||||||||
NXP Semiconductor NV*1 | 5,200 | 344,136 | |||||||||
1,707,937 | |||||||||||
Software: 4.00% | |||||||||||
Check Point Software Technologies Ltd.*1 | 3,800 | 254,714 | |||||||||
Symantec Corp.1 | 16,850 | 385,865 | |||||||||
640,579 | |||||||||||
Specialty retail: 1.15% | |||||||||||
Best Buy Co., Inc.1 | 5,950 | 184,509 | |||||||||
Technology hardware, storage & peripherals: 5.28% | |||||||||||
Apple, Inc.1 | 6,580 | 611,479 | |||||||||
NetApp, Inc.1 | 6,400 | 233,728 | |||||||||
845,207 | |||||||||||
Textiles, apparel & luxury goods: 1.50% | |||||||||||
Ralph Lauren Corp.1 | 1,500 | 241,035 | |||||||||
Tobacco: 3.00% | |||||||||||
Philip Morris International, Inc.1 | 5,700 | 480,567 | |||||||||
Wireless telecommunication services: 0.10% | |||||||||||
NII Holdings, Inc.*1 | 28,550 | 15,703 | |||||||||
Total common stocks (cost $15,696,283) | 20,811,241 | ||||||||||
Investment company: 1.95% | |||||||||||
SPDR S&P 500 ETF Trust (cost $312,480) | 1,600 | 313,152 | |||||||||
Short-term investment: 1.45% | |||||||||||
Investment company: 1.45% | |||||||||||
UBS Cash Management Prime Relationship Fund3 (cost $232,835) | 232,835 | 232,835 | |||||||||
Number of contracts | |||||||||||
Options purchased: 0.68% | |||||||||||
Put options: 0.68% | |||||||||||
S&P 500 Index, strike @ USD 1,840, expires September 2014 (cost $168,200) | 80 | 108,800 | |||||||||
Total investments before investments sold short: 133.99% (cost $16,409,798) | 21,466,028 |
38
UBS U.S. Defensive Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investments sold short: (33.45)% | |||||||||||
Common stocks: (33.45)% | |||||||||||
Banks: (2.53)% | |||||||||||
Associated Banc-Corp. | (2,550 | ) | $ | (46,104 | ) | ||||||
Bank of America Corp. | (3,950 | ) | (60,711 | ) | |||||||
First Niagara Financial Group, Inc. | (4,950 | ) | (43,263 | ) | |||||||
Signature Bank* | (500 | ) | (63,090 | ) | |||||||
SVB Financial Group | (500 | ) | (58,310 | ) | |||||||
TCF Financial Corp. | (2,550 | ) | (41,744 | ) | |||||||
Westamerica Bancorporation | (850 | ) | (44,438 | ) | |||||||
Zions Bancorporation | (1,600 | ) | (47,152 | ) | |||||||
(404,812 | ) | ||||||||||
Beverages: (0.38)% | |||||||||||
Constellation Brands, Inc., Class A | (700 | ) | (61,691 | ) | |||||||
Biotechnology: (1.53)% | |||||||||||
Celgene Corp. | (1,000 | ) | (85,880 | ) | |||||||
Myriad Genetics, Inc. | (1,350 | ) | (52,542 | ) | |||||||
Repligen Corp. | (2,350 | ) | (53,556 | ) | |||||||
United Therapeutics Corp. | (600 | ) | (53,094 | ) | |||||||
(245,072 | ) | ||||||||||
Capital markets: (1.67)% | |||||||||||
Charles Schwab Corp. | (4,600 | ) | (123,878 | ) | |||||||
Northern Trust Corp. | (700 | ) | (44,947 | ) | |||||||
Stifel Financial Corp. | (950 | ) | (44,983 | ) | |||||||
TD Ameritrade Holding Corp. | (1,700 | ) | (53,295 | ) | |||||||
(267,103 | ) | ||||||||||
Chemicals: (0.68)% | |||||||||||
LyondellBasell Industries NV, Class A | (700 | ) | (68,355 | ) | |||||||
Sigma-Aldrich Corp. | (400 | ) | (40,592 | ) | |||||||
(108,947 | ) | ||||||||||
Commercial services & supplies: (1.95)% | |||||||||||
Healthcare Services Group, Inc. | (3,200 | ) | (94,208 | ) | |||||||
Pitney Bowes, Inc. | (4,900 | ) | (135,338 | ) | |||||||
Stericycle, Inc. | (700 | ) | (82,894 | ) | |||||||
(312,440 | ) | ||||||||||
Electronic equipment, instruments & components: (0.40)% | |||||||||||
Flextronics International Ltd. | (5,800 | ) | (64,206 | ) | |||||||
Energy equipment & services: (0.58)% | |||||||||||
FMC Technologies, Inc. | (750 | ) | (45,803 | ) | |||||||
Helmerich & Payne, Inc. | (400 | ) | (46,444 | ) | |||||||
(92,247 | ) |
Shares | Value | ||||||||||
Food products: (0.73)% | |||||||||||
Kraft Foods Group, Inc. | (1,000 | ) | $ | (59,950 | ) | ||||||
McCormick & Co. Inc. (Non-voting) | (800 | ) | (57,272 | ) | |||||||
(117,222 | ) | ||||||||||
Health care equipment & supplies: (3.01)% | |||||||||||
Abaxis, Inc. | (1,500 | ) | (66,465 | ) | |||||||
Boston Scientific Corp. | (4,100 | ) | (52,357 | ) | |||||||
DENTSPLY International, Inc. | (1,200 | ) | (56,820 | ) | |||||||
IDEXX Laboratories, Inc. | (500 | ) | (66,785 | ) | |||||||
Meridian Bioscience, Inc. | (1,700 | ) | (35,088 | ) | |||||||
PhotoMedex, Inc. | (5,100 | ) | (62,475 | ) | |||||||
STERIS Corp. | (800 | ) | (42,784 | ) | |||||||
Wright Medical Group, Inc. | (1,500 | ) | (47,100 | ) | |||||||
Zimmer Holdings, Inc. | (500 | ) | (51,930 | ) | |||||||
(481,804 | ) | ||||||||||
Health care providers & services: (1.28)% | |||||||||||
Bio-Reference Labs, Inc. | (2,600 | ) | (78,572 | ) | |||||||
Centene Corp. | (1,000 | ) | (75,610 | ) | |||||||
Patterson Cos., Inc. | (1,300 | ) | (51,363 | ) | |||||||
(205,545 | ) | ||||||||||
Hotels, restaurants & leisure: (2.66)% | |||||||||||
Buffalo Wild Wings, Inc. | (500 | ) | (82,855 | ) | |||||||
Choice Hotels International, Inc. | (2,800 | ) | (131,908 | ) | |||||||
Hyatt Hotels Corp., Class A | (1,600 | ) | (97,568 | ) | |||||||
Starwood Hotels & Resorts Worldwide, Inc. | (750 | ) | (60,615 | ) | |||||||
Wendy's Corp. | (6,200 | ) | (52,886 | ) | |||||||
(425,832 | ) | ||||||||||
Household products: (0.28)% | |||||||||||
Clorox Co. | (500 | ) | (45,700 | ) | |||||||
Insurance: (0.88)% | |||||||||||
American International Group, Inc. | (2,600 | ) | (141,908 | ) | |||||||
Internet & catalog retail: (0.87)% | |||||||||||
Netflix, Inc. | (180 | ) | (79,308 | ) | |||||||
Priceline.com, Inc. | (50 | ) | (60,150 | ) | |||||||
(139,458 | ) | ||||||||||
Internet software & services: (0.90)% | |||||||||||
WebMD Health Corp. | (1,500 | ) | (72,450 | ) | |||||||
Zillow, Inc., Class A | (500 | ) | (71,465 | ) | |||||||
(143,915 | ) | ||||||||||
IT services: (0.43)% | |||||||||||
Cognizant Technology Solutions Corp., Class A | (1,400 | ) | (68,474 | ) |
39
UBS U.S. Defensive Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investments sold short—(Concluded) | |||||||||||
Common stocks—(Concluded) | |||||||||||
Life sciences tools & services: (1.33)% | |||||||||||
Mettler-Toledo International, Inc. | (350 | ) | $ | (88,613 | ) | ||||||
PerkinElmer, Inc. | (1,400 | ) | (65,576 | ) | |||||||
Thermo Fisher Scientific, Inc. | (500 | ) | (59,000 | ) | |||||||
(213,189 | ) | ||||||||||
Media: (1.87)% | |||||||||||
Discovery Communications, Inc., Class A | (1,200 | ) | (89,136 | ) | |||||||
Gannett Co., Inc. | (4,700 | ) | (147,157 | ) | |||||||
Lamar Advertising Co., Class A | (1,200 | ) | (63,600 | ) | |||||||
(299,893 | ) | ||||||||||
Oil, gas & consumable fuels: (0.31)% | |||||||||||
Hess Corp. | (500 | ) | (49,445 | ) | |||||||
Pharmaceuticals: (1.88)% | |||||||||||
AbbVie, Inc. | (1,700 | ) | (95,948 | ) | |||||||
Auxilium Pharmaceuticals, Inc. | (2,600 | ) | (52,156 | ) | |||||||
Endo International PLC | (1,300 | ) | (91,026 | ) | |||||||
Sagent Pharmaceuticals, Inc. | (2,400 | ) | (62,064 | ) | |||||||
(301,194 | ) | ||||||||||
Real estate investment trust (REIT): (0.20)% | |||||||||||
Equity Residential | (500 | ) | (31,500 | ) | |||||||
Semiconductors & semiconductor equipment: (2.63)% | |||||||||||
Advanced Micro Devices, Inc. | (14,600 | ) | (61,174 | ) | |||||||
Analog Devices, Inc. | (1,100 | ) | (59,477 | ) | |||||||
First Solar, Inc. | (1,600 | ) | (113,696 | ) | |||||||
Microchip Technology, Inc. | (1,250 | ) | (61,012 | ) | |||||||
RF Micro Devices, Inc. | (6,350 | ) | (60,897 | ) | |||||||
Skyworks Solutions, Inc. | (1,400 | ) | (65,744 | ) | |||||||
(422,000 | ) |
Shares | Value | ||||||||||
Software: (0.77)% | |||||||||||
Electronic Arts, Inc. | (1,900 | ) | $ | (68,153 | ) | ||||||
Red Hat, Inc. | (1,000 | ) | (55,270 | ) | |||||||
(123,423 | ) | ||||||||||
Technology hardware, storage & peripherals: (1.22)% | |||||||||||
Diebold, Inc. | (1,500 | ) | (60,255 | ) | |||||||
Hewlett-Packard Co. | (2,000 | ) | (67,360 | ) | |||||||
Lexmark International, Inc., Class A | (1,400 | ) | (67,424 | ) | |||||||
(195,039 | ) | ||||||||||
Textiles, apparel & luxury goods: (0.78)% | |||||||||||
Michael Kors Holdings Ltd. | (600 | ) | (53,190 | ) | |||||||
Under Armour, Inc., Class A | (1,200 | ) | (71,388 | ) | |||||||
(124,578 | ) | ||||||||||
Thrifts & mortgage finance: (0.28)% | |||||||||||
Astoria Financial Corp. | (3,300 | ) | (44,385 | ) | |||||||
Trading companies & distributors: (0.31)% | |||||||||||
Fastenal Co. | (1,000 | ) | (49,490 | ) | |||||||
Wireless telecommunication services: (1.11)% | |||||||||||
SBA Communications Corp., Class A | (600 | ) | (61,380 | ) | |||||||
Sprint Corp. | (13,700 | ) | (116,861 | ) | |||||||
(178,241 | ) | ||||||||||
Total investments sold short (proceeds $3,929,073) | (5,358,753 | ) | |||||||||
Total investments, net of investments sold short: 100.54% | 16,107,275 | ||||||||||
Liabilities, in excess of cash and other assets: (0.54)% | (87,288 | ) | |||||||||
Net assets: 100.00% | $ | 16,019,987 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes, before investments sold short, was $16,573,488; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 5,456,613 | |||||
Gross unrealized depreciation | (564,073 | ) | |||||
Net unrealized appreciation of investments | $ | 4,892,540 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 70. Portfolio footnotes begin on page 42.
40
UBS U.S. Defensive Equity Fund
Portfolio of investments
June 30, 2014
Options written
Expiration date | Premiums received | Value | |||||||||||||
Put options | |||||||||||||||
S&P 500 Index, 80 contracts, strike @ USD 1,650.00 | September 2014 | $ | 39,800 | $ | (22,800 | ) |
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 92 | $ | 64,170 | ||||||||
Options written | 576 | 216,670 | |||||||||
Options terminated in closing purchase transactions | (588 | ) | (241,040 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | 80 | $ | 39,800 |
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 20,681,616 | $ | 129,625 | $ | — | $ | 20,811,241 | |||||||||||
Investment company | 313,152 | — | — | 313,152 | |||||||||||||||
Short-term investment | — | 232,835 | — | 232,835 | |||||||||||||||
Options purchased | 108,800 | — | — | 108,800 | |||||||||||||||
Total | $ | 21,103,568 | $ | 362,460 | $ | — | $ | 21,466,028 | |||||||||||
Liabilities | |||||||||||||||||||
Common stock sold short | $ | (5,358,753 | ) | $ | — | $ | — | $ | (5,358,753 | ) | |||||||||
Options written | (22,800 | ) | — | — | (22,800 | ) | |||||||||||||
Total | $ | (5,381,553 | ) | $ | — | $ | — | $ | (5,381,553 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
41
UBS U.S. Defensive Equity Fund
Portfolio of investments
June 30, 2014
Portfolio footnotes
* Non-income producing security.
1 All or a portion of these securities have been delivered to cover open short positions.
2 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security is considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of this security amounted to $129,625 or 0.81% of net assets.
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 from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 288 | $ | 5,987,002 | $ | 5,754,455 | $ | 232,835 | $ | 139 |
See accompanying notes to financial statements.
42
UBS U.S. Equity Opportunity Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS U.S. Equity Opportunity Fund (the "Fund") returned 24.01% (Class A shares returned 17.26% after the deduction of the maximum sales charge), while Class Y shares returned 24.28%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 25.35% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 46; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund lagged the Index primarily due to stock selection decisions, which were partially offset by successful industry allocations.
Portfolio performance summary1
What worked
• A significant overweight position in the information technology (IT) sector, as well as stock selection within IT, were positive for performance.
– Shares of Micron Technology rose 39% during the second quarter of 2014 as the company saw strong upward momentum. Micron benefited from supply disruptions at its key competitor, Hynix. This development increased expectations for improved DRAM pricing and higher margins for Micron.
– NXP Semiconductor was a top holding for the Fund. Shares rose 28% during the first quarter of 2014 after NXP reported quarterly and annual earnings at the high end of guidance. The company's revenue growth reached 13% for the full year, led by its automotive business and its portable and computing business. NXP also benefited from the announcement of an expanded stock repurchase program. We exited the position during the reporting period in favor of pursuing more compelling opportunities.
– Apple Inc. was a top contributor for the 12 months. Strong shipments of the iPhone and improved margins led to results that exceeded analysts' expectations. The company announced an increase in its buyback authorization from $60 billion to $90 billion, and raised its dividend by 8%. The anticipated release of the iPhone 6 later this year also contributed to a rising stock price.
• The Fund had a successful overweight to the health care sector, and several biotechnology stocks were additive for relative performance.
– Alexion Pharmaceuticals was a top contributor, as it was up 35% during the first quarter of 2014. The company delivered strong performance with quarterly results that exceeded expectations. Its Soliris product posted robust sales numbers, which should be enhanced further by the development of a second use for the drug. During the period, Alexion announced a realignment of operations and the centralization of global supply chains in Ireland, which will have a significant impact on its future non-GAAP tax rates. We exited the position during the reporting period in favor of pursuing more compelling opportunities.
– The stock price of Alnylam Pharmaceuticals nearly doubled during the period. The company reported positive data in its effort to treat TTR-mediated amyloidosis (ATTR), a major unmet medical need with significant morbidity and mortality. Analysts believe there is a high probability of Alnylam's treatment becoming a marketed product in the coming quarters.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
43
UBS U.S. Equity Opportunity Fund
• Several energy and materials stocks made a positive contribution to relative performance.
– Shares of EOG Resources rose 19% during the second quarter of 2014. The company posted strong earnings results in the first quarter due to new Rocky Mountain oil plays, which added to its high quality inventory. EOG is benefiting from strong rig counts, and has raised its production targets from 27% to 29%. (For details, see "Portfolio highlights.")
– Martin Marietta Materials was up 29% during the first quarter of 2014. The company reported full-year results that exceeded expectations, crediting double-digit volume growth in its residential and non-residential aggregates business. Other positive developments included the company's announcement that it would acquire Texas Industries, the second-largest producer of sand, gravel and crushed rock. We exited the position in March 2014.
What didn't work
• Certain individual stock positions detracted from relative performance during the 12-month period.
– ServiceSource International was the top detractor for the reporting period. The company saw a significant decline in its stock price due to poor performance in the first quarter of 2014. The stock came under additional pressure after ServiceSource announced negative earnings estimate revisions for the quarter and the current year.
– NII Holdings made a negative contribution to Fund returns. The stock plunged 55% in late February 2014, when NII reported a net subscriber loss of 247,000 and warned about declining liquidity. The company continues to make progress in Brazil, where it has built a 3G network and is selling the iPhone 5. But greater-than-expected customer losses in Mexico are hampering results. We exited the position before the end of the reporting period.
– The stock price of Citigroup declined during the period. Along with other large global financial services companies, Citigroup suffered from uncertainty about the future regulatory environment. Ongoing concerns about settlements related to the financial crisis also hindered the performance of many banks. In addition, Citigroup failed a regulatory test of balance sheet strength, and was denied the opportunity to increase its dividend and share buyback program. (For details, see "Portfolio highlights.")
– Lululemon Athletica had a negative impact on the Fund's relative performance as an onslaught of increased competition led to declining growth. The athletic clothing retailer also struggled with management changes, including the departure of its chief executive officer, in the second half of 2013. We exited the position in early 2014.
– Acorda Therapeutics detracted from relative returns for the full 12 months but showed signs of improvement in early 2014. Sales of Ampyra, its multiple sclerosis (MS) product, have increased. Acorda has strengthened its balance sheet, and we believe it has further positive developments in its pipeline.
Portfolio highlights
• EOG Resources is a natural gas and crude oil exploration & production (E&P) company. We believe it is a best-in-class company run by experienced managers. EOG benefits from a disciplined focus on internal rate of return at the project level. The company has core positions in prime acreage of the Eagle Ford, Bakken and Permian basins. It is a first mover in the onshore tight gas and tight oil basins. EOG has a track record of superior innovation and, as a result, is well-positioned with the lowest exploration and development costs.
44
UBS U.S. Equity Opportunity Fund
• Citigroup continues to execute its plan to rationalize its balance sheet, wind down Citi Holdings, engineer expense reductions, and improve liquidity and capital metrics. It is successfully taking market share in its core businesses: regional consumer banking, securities and banking, and global transaction services. Additionally, the company has been aggressively selling minority stakes in several banks, which should provide significant capital relief on a Basel III basis. We anticipate superior earnings growth over the next few years due to solid revenue growth, improving expense discipline and better credit quality.
• Mondelez manufactures and markets snack food and beverage products, including cookies, crackers, chocolate, gum, candy, coffee, powdered beverages, and various cheese and grocery products. We believe the company is well-positioned for growth due to its significant exposure to developing markets. We think there is an opportunity for margin expansion from a rebound in Europe and by leveraging synergies across distribution platforms.
• Yum! Brands is the leading multi-concept global restaurant company with three main concepts: KFC, Taco Bell and Pizza Hut. The stock experienced weakness due to supply issues and avian flu concerns in China. We believe the market is undervaluing the long-term value of the KFC and Pizza Hut franchises in China. Unit growth has accelerated in recent years as a result of prior investment in infrastructure. We expect Yum! to continue to grow earnings per share by double digits for the next several years due to strong international growth and return of capital to shareholders through dividends and share repurchases.
• Automaker Ford is poised to benefit from the auto demand cycle, which we believe has several years left to run, absent a material decline in global growth. Ford's fundamentally improved cost structure and competitive position allows the company to earn its cost of capital in what is still a structurally challenged industry. Ford's North American truck business is a well-established franchise that can earn more than the company's cost of capital returns. The launch of the new F-150 appears to have been well-executed and the truck is priced at a premium, allowing for increased margins and slight market share benefits. We believe Ford will have a strong product cycle over the next few years, which should support the company's relatively competitive position.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
45
UBS U.S. Equity Opportunity Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 24.01 | % | 15.56 | % | 5.95 | % | |||||||||
Class C2 | 23.14 | 14.67 | 5.17 | ||||||||||||
Class Y3 | 24.28 | 15.87 | 6.24 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 17.26 | % | 14.25 | % | 5.36 | % | |||||||||
Class C2 | 22.14 | 14.67 | 5.17 | ||||||||||||
Russell 1000 Index4 | 25.35 | % | 19.25 | % | 8.19 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.84% and 1.21%; Class C—2.63% and 1.96%; Class Y—1.68% and 0.96%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.20% for Class A shares, 1.95% for Class C shares and 0.95% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
3 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
4 The Russell 1000 Index measures the performance of the large-cap segment of the US equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
46
UBS U.S. Equity Opportunity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales
charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Equity Opportunity Fund Class A and Class Y shares versus the Russell 1000 Index over the 10 years ended June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
47
UBS U.S. Equity Opportunity Fund
Top ten equity holdings (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
Apple, Inc. | 4.9 | % | |||||
Citigroup, Inc. | 4.2 | ||||||
EOG Resources, Inc. | 3.9 | ||||||
Mondelez International, Inc., Class A | 3.7 | ||||||
Amazon.com, Inc. | 3.6 | ||||||
Yum! Brands, Inc. | 3.6 | ||||||
Morgan Stanley | 3.2 | ||||||
Ford Motor Co. | 3.1 | ||||||
Walt Disney Co. | 3.1 | ||||||
PepsiCo, Inc. | 3.0 | ||||||
Total | 36.3 | % |
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Automobiles | 3.10 | % | |||||
Banks | 6.97 | ||||||
Beverages | 3.05 | ||||||
Biotechnology | 5.48 | ||||||
Capital markets | 3.20 | ||||||
Chemicals | 5.37 | ||||||
Diversified telecommunication services | 0.81 | ||||||
Electronic equipment, instruments & components | 1.67 | ||||||
Energy equipment & services | 4.39 | ||||||
Food products | 3.69 | ||||||
Health care providers & services | 3.02 | ||||||
Hotels, restaurants & leisure | 3.61 | ||||||
Insurance | 4.87 | ||||||
Internet & catalog retail | 3.62 | ||||||
Internet software & services | 4.52 | ||||||
IT services | 1.78 | ||||||
Life sciences tools & services | 1.65 | ||||||
Media | 3.06 | ||||||
Oil, gas & consumable fuels | 3.94 | ||||||
Pharmaceuticals | 3.97 | ||||||
Real estate investment trust (REIT) | 2.53 | ||||||
Semiconductors & semiconductor equipment | 10.10 | ||||||
Software | 2.42 | ||||||
Technology hardware, storage & peripherals | 6.66 | ||||||
Tobacco | 3.03 | ||||||
Total common stocks | 96.51 | % | |||||
Short-term investment | 3.86 | ||||||
Investment of cash collateral from securities loaned | 5.59 | ||||||
Total investments | 105.96 | % | |||||
Liabilities, in excess of cash and other assets | (5.96 | ) | |||||
Net assets | 100.00 | % |
48
UBS U.S. Equity Opportunity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 96.51% | |||||||||||
Automobiles: 3.10% | |||||||||||
Ford Motor Co. | 82,100 | $ | 1,415,404 | ||||||||
Banks: 6.97% | |||||||||||
Citigroup, Inc. | 40,754 | 1,919,513 | |||||||||
US Bancorp | 29,200 | 1,264,944 | |||||||||
3,184,457 | |||||||||||
Beverages: 3.05% | |||||||||||
PepsiCo, Inc. | 15,600 | 1,393,704 | |||||||||
Biotechnology: 5.48% | |||||||||||
Acorda Therapeutics, Inc.* | 30,100 | 1,014,671 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 11,300 | 713,821 | |||||||||
Bluebird Bio, Inc.* | 5,100 | 196,707 | |||||||||
Epizyme, Inc.*1 | 4,700 | 146,264 | |||||||||
KaloBios Pharmaceuticals, Inc.*1 | 35,500 | 80,940 | |||||||||
Lexicon Pharmaceuticals, Inc.*1 | 144,600 | 232,806 | |||||||||
MacroGenics, Inc.* | 5,400 | 117,342 | |||||||||
2,502,551 | |||||||||||
Capital markets: 3.20% | |||||||||||
Morgan Stanley | 45,300 | 1,464,549 | |||||||||
Chemicals: 5.37% | |||||||||||
Air Products & Chemicals, Inc. | 8,700 | 1,118,994 | |||||||||
Monsanto Co. | 10,700 | 1,334,718 | |||||||||
2,453,712 | |||||||||||
Diversified telecommunication services: 0.81% | |||||||||||
Pacific DataVision, Inc.*2 | 17,400 | 369,750 | |||||||||
Electronic equipment, instruments & components: 1.67% | |||||||||||
Jabil Circuit, Inc. | 36,600 | 764,940 | |||||||||
Energy equipment & services: 4.39% | |||||||||||
Baker Hughes, Inc. | 15,800 | 1,176,310 | |||||||||
Noble Corp. PLC | 24,700 | 828,932 | |||||||||
2,005,242 | |||||||||||
Food products: 3.69% | |||||||||||
Mondelez International, Inc., Class A | 44,900 | 1,688,689 | |||||||||
Health care providers & services: 3.02% | |||||||||||
UnitedHealth Group, Inc. | 16,900 | 1,381,575 | |||||||||
Hotels, restaurants & leisure: 3.61% | |||||||||||
Yum! Brands, Inc. | 20,300 | 1,648,360 |
Shares | Value | ||||||||||
Insurance: 4.87% | |||||||||||
Lincoln National Corp. | 19,400 | $ | 997,936 | ||||||||
MetLife, Inc. | 22,100 | 1,227,876 | |||||||||
2,225,812 | |||||||||||
Internet & catalog retail: 3.62% | |||||||||||
Amazon.com, Inc.* | 5,100 | 1,656,378 | |||||||||
Internet software & services: 4.52% | |||||||||||
Google, Inc., Class A* | 1,780 | 1,040,713 | |||||||||
Google, Inc., Class C* | 1,780 | 1,023,998 | |||||||||
2,064,711 | |||||||||||
IT services: 1.78% | |||||||||||
ServiceSource International, Inc.*1 | 140,600 | 815,480 | |||||||||
Life sciences tools & services: 1.65% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 6,300 | 754,173 | |||||||||
Media: 3.06% | |||||||||||
Walt Disney Co. | 16,300 | 1,397,562 | |||||||||
Oil, gas & consumable fuels: 3.94% | |||||||||||
EOG Resources, Inc. | 15,400 | 1,799,644 | |||||||||
Pharmaceuticals: 3.97% | |||||||||||
Hospira, Inc.* | 22,700 | 1,166,099 | |||||||||
Mallinckrodt PLC*1 | 8,100 | 648,162 | |||||||||
1,814,261 | |||||||||||
Real estate investment trust (REIT): 2.53% | |||||||||||
Digital Realty Trust, Inc.1 | 19,800 | 1,154,736 | |||||||||
Semiconductors & semiconductor equipment: 10.10% | |||||||||||
Applied Materials, Inc. | 57,900 | 1,305,645 | |||||||||
Broadcom Corp., Class A | 17,100 | 634,752 | |||||||||
Freescale Semiconductor Ltd.* | 27,100 | 636,850 | |||||||||
Mellanox Technologies Ltd.* | 24,100 | 840,126 | |||||||||
Micron Technology, Inc.* | 36,400 | 1,199,380 | |||||||||
4,616,753 | |||||||||||
Software: 2.42% | |||||||||||
Check Point Software Technologies Ltd.* | 16,500 | 1,105,995 | |||||||||
Technology hardware, storage & peripherals: 6.66% | |||||||||||
Apple, Inc. | 23,975 | 2,227,997 | |||||||||
NetApp, Inc. | 22,300 | 814,396 | |||||||||
3,042,393 |
49
UBS U.S. Equity Opportunity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Tobacco: 3.03% | |||||||||||
Philip Morris International, Inc. | 16,400 | $ | 1,382,684 | ||||||||
Total common stocks (cost $36,052,176) | 44,103,515 | ||||||||||
Short-term investment: 3.86% | |||||||||||
Investment company: 3.86% | |||||||||||
UBS Cash Management Prime Relationship Fund3 (cost $1,765,405) | 1,765,405 | 1,765,405 |
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 5.59% | |||||||||||
UBS Private Money Market Fund LLC3 (cost $2,555,583) | 2,555,583 | $ | 2,555,583 | ||||||||
Total investments: 105.96% (cost $40,373,164) | 48,424,503 | ||||||||||
Liabilities, in excess of cash and other assets: (5.96)% | (2,722,897 | ) | |||||||||
Net assets: 100.00% | $ | 45,701,606 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $40,543,795; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 8,574,851 | |||||
Gross unrealized depreciation | (694,143 | ) | |||||
Net unrealized appreciation of investments | $ | 7,880,708 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 70. Portfolio footnotes begin on page 51.
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Asset | |||||||||||||||||||
Common stocks | $ | 43,733,765 | $ | 369,750 | $ | — | $ | 44,103,515 | |||||||||||
Short-term investment | — | 1,765,405 | — | 1,765,405 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 2,555,583 | — | 2,555,583 | |||||||||||||||
Total | $ | 43,733,765 | $ | 4,690,738 | $ | — | $ | 48,424,503 |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
50
UBS U.S. Equity Opportunity Fund
Portfolio of investments
June 30, 2014
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2014.
2 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security is considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of this security amounted to $369,750 or 0.81% of net assets.
3 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 1,419,399 | $ | 12,486,743 | $ | 12,140,737 | $ | 1,765,405 | $ | 971 | |||||||||||||
UBS Private Money Market Fund LLCa | 4,275,608 | 28,295,642 | 30,015,667 | 2,555,583 | 179 | ||||||||||||||||||
$ | 5,695,007 | $ | 40,782,385 | $ | 42,156,404 | $ | 4,320,988 | $ | 1,150 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
51
UBS U.S. Large Cap Equity Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS U.S. Large Cap Equity Fund (the "Fund") returned 27.05% (Class A shares returned 20.03% after the deduction of the maximum sales charge), while Class Y shares returned 27.38%. The Fund's benchmark, the Russell 1000 Index (the "Index"), returned 25.35% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 55; 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 outperformed the Index primarily due to successful stock selection.
Portfolio performance summary1
What worked
• Stock selection decisions in the information technology sector contributed strongly to Fund performance.
– NXP Semiconductor was a top holding for the Fund. Shares rose 28% during the first quarter of 2014 after NXP reported quarterly and annual earnings at the high end of guidance. The company's revenue growth reached 13% for the full year, led by its automotive business and its portable and computing business. NXP also benefited from the announcement of an expanded stock repurchase program.
– Shares of Micron Technology were up 39% during the second quarter of 2014 as the company saw strong upward momentum. Micron benefited from supply disruptions at its key competitor, Hynix. This development increased expectations for improved DRAM pricing and higher margins for Micron.
– Apple Inc. was a top contributor for the 12 months. Strong shipments of the iPhone and improved margins led to results that exceeded analysts' expectations. The company announced an increase in its buyback authorization from $60 billion to $90 billion, and raised its dividend by 8%. The anticipated release of the iPhone 6 later this year also contributed to a rising stock price. (For details, see "Portfolio highlights.")
• The Fund's energy stocks made a positive contribution to relative performance.
– Shares of EOG Resources rose 19% during the second quarter of 2014. The company posted strong earnings results in the first quarter due to new Rocky Mountain oil plays, which added to its high quality inventory. EOG is benefiting from strong rig counts, and has raised its production targets from 27% to 29%. (For details, see "Portfolio highlights.")
– In addition, Halliburton and Baker Hughes were successful energy holdings during the 12 months.
• Martin Marietta Materials was a top contributor during the period.
– The stock price of Martin Marietta increased 29% during the first quarter of 2014. The company reported full-year results that exceeded expectations, crediting double-digit volume growth in its residential and non-residential aggregates business. Other positive developments included the company's announcement that it would acquire Texas Industries, the second-largest producer of sand, gravel and crushed rock.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
52
UBS U.S. Large Cap Equity Fund
• Sector allocations were additive for relative performance. The Fund benefited from an underweight position in consumer staples stocks, which lagged the rising market. An overweight to health care also proved successful.
What didn't work
• Individual stock positions detracted from relative performance during the 12-month period.
– NII Holdings was the top detractor for the reporting period. The stock plunged 55% in late February 2014 when NII reported a net subscriber loss of 247,000 and warned about declining liquidity. The company continues to make progress in Brazil, where it has built a 3G network and is selling the iPhone 5. But greater-than-expected customer losses in Mexico are hampering results. We continue to hold the stock, based on the situation in Brazil and an asset base that we believe is undervalued by the market.
– ServiceSource International made a negative contribution to Fund returns. The company saw a significant decline in its stock price due to poor performance in the first quarter of 2014. The stock came under additional pressure after ServiceSource announced negative earnings estimate revisions for the quarter and the current year.
– J. C. Penney detracted from Fund returns after reporting earnings and revenue that were below expectations. Early in the 12 months, activist investor Bill Ackman publicly criticized the company's strategy and subsequently resigned from his seat on its board. The company attempted to raise cash by selling roughly $800 million of new stock before the critical 2013 holiday shopping season, but this only eroded investor confidence. While the mid-tier department store faces some challenges, we believe the current valuation does not reflect J.C. Penney's future cash generation potential.
– The stock price of Citigroup declined during the period. Along with other large global financial services companies, Citigroup suffered from uncertainty about the future regulatory environment. Ongoing concerns about settlements related to the financial crisis also hindered the performance of many banks. In addition, Citigroup failed a regulatory test of balance sheet strength, and was denied the opportunity to increase its dividend and share buyback program. (For details, see "Portfolio highlights.")
– Shares of Philip Morris suffered along with the broader consumer staples sector. Investor sentiment about the decline in the number of smokers worsened, leading to poor performance for the company's stock price. However, we believe that Philip Morris is attractively valued. (For details, see "Portfolio highlights.")
Portfolio highlights
• EOG Resources is a natural gas and crude oil exploration & production (E&P) company. We believe it is a best-in-class company run by experienced managers. EOG benefits from a disciplined focus on internal rate of return at the project level. The company has core positions in prime acreage of the Eagle Ford, Bakken and Permian basins. It is a first mover in the onshore tight gas and tight oil basins. EOG has a track record of superior innovation and, as a result, is well-positioned with the lowest exploration and development costs.
• We believe the market underappreciates the persistence and predictability of Philip Morris' cash flows and returns to shareholders. While governments have an interest in public health and declining tobacco consumption, they have become reliant on steady and predictable tobacco tax flows. Philip Morris has proven skill at modeling cigarette demand, even with variables such as regulation, taxation and demographics. Over time, governments are learning to trust the company's models. Governments have learned that aggressive tax increases tend to
53
UBS U.S. Large Cap Equity Fund
encourage the illicit cigarette trade, which reduces tax revenue and increases consumption. Philip Morris' regulatory and consumption risk is well diversified, as the company operates in more than 180 markets globally.
• Citigroup continues to execute its plan to rationalize its balance sheet, wind down Citi Holdings, engineer expense reductions, and improve liquidity and capital metrics. It is successfully taking market share in its core businesses: regional consumer banking, securities and banking, and global transaction services. Additionally, the company has been aggressively selling minority stakes in several banks, which should provide significant capital relief on a Basel III basis. We anticipate superior earnings growth over the next few years due to solid revenue growth, improving expense discipline and better credit quality.
• Apple is a market leader in personal computers and mobile electronic devices. The company continues to offer unmatched innovation in product lines and ease of use. We believe Apple is poised to grow revenue and profit at above-industry rates. We also anticipate that the company will gain market share and expand operating margins. Apple currently has a significant excess cash position and the capability to generate more. This should lead to an increasing return of cash to shareholders.
• Mondelez manufactures and markets snack food and beverage products, including cookies, crackers, chocolate, gum, candy, coffee, powdered beverages, and various cheese and grocery products. We believe the company is well-positioned for growth due to it significant exposure to developing markets. We think there is an opportunity for margin expansion from a rebound in Europe and by leveraging synergies across distribution platforms.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647-1568 or by visiting our Web site at www.ubs.com/globalam-us.
54
UBS U.S. Large Cap Equity Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 27.05 | % | 17.89 | % | 7.03 | % | |||||||||
Class C2 | 26.09 | 17.02 | 6.23 | ||||||||||||
Class Y3 | 27.38 | 18.18 | 7.31 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 20.03 | % | 16.56 | % | 6.42 | % | |||||||||
Class C2 | 25.09 | 17.02 | 6.23 | ||||||||||||
Russell 1000 Index4 | 25.35 | % | 19.25 | % | 8.19 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.28% and 1.20%; Class C—2.04% and 1.95%; Class Y—0.98% and 0.95%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.20% for Class A shares, 1.95% for Class C shares and 0.95% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
3 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
4 The Russell 1000 Index measures the performance of the large-cap segment of the US equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
55
UBS U.S. Large Cap Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Large Cap Equity Fund Class A and Class Y shares versus the Russell 1000 Index over the 10 years ended June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
56
UBS U.S. Large Cap Equity Fund
Top ten equity holdings (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
Apple, Inc. | 3.9 | % | |||||
Mondelez International, Inc., Class A | 2.8 | ||||||
PepsiCo, Inc. | 2.7 | ||||||
Philip Morris International, Inc. | 2.7 | ||||||
Yum! Brands, Inc. | 2.5 | ||||||
JPMorgan Chase & Co. | 2.5 | ||||||
Citigroup, Inc. | 2.4 | ||||||
EOG Resources, Inc. | 2.3 | ||||||
Eli Lilly & Co. | 2.3 | ||||||
Walt Disney Co. | 2.2 | ||||||
Total | 26.3 | % |
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Aerospace & defense | 0.57 | % | |||||
Automobiles | 2.66 | ||||||
Banks | 8.00 | ||||||
Beverages | 2.70 | ||||||
Biotechnology | 3.72 | ||||||
Building products | 0.68 | ||||||
Capital markets | 2.80 | ||||||
Chemicals | 3.23 | ||||||
Commercial services & supplies | 1.34 | ||||||
Construction materials | 1.05 | ||||||
Consumer finance | 1.43 | ||||||
Electronic equipment, instruments & components | 1.30 | ||||||
Energy equipment & services | 4.07 | ||||||
Food & staples retailing | 1.86 | ||||||
Food products | 2.78 | ||||||
Health care equipment & supplies | 0.85 | ||||||
Health care providers & services | 3.04 | ||||||
Hotels, restaurants & leisure | 2.54 | ||||||
Household durables | 0.71 | ||||||
Industrial conglomerates | 1.23 | ||||||
Insurance | 3.94 | ||||||
Internet & catalog retail | 2.00 | ||||||
IT services | 0.75 | ||||||
Life sciences tools & services | 0.75 | ||||||
Machinery | 1.03 | ||||||
Media | 4.23 | ||||||
Multiline retail | 1.69 | ||||||
Oil, gas & consumable fuels | 5.52 | ||||||
Pharmaceuticals | 7.08 | ||||||
Real estate investment trust (REIT) | 3.39 | ||||||
Road & rail | 2.36 | ||||||
Semiconductors & semiconductor equipment | 6.79 | ||||||
Software | 2.85 | ||||||
Specialty retail | 0.72 | ||||||
Technology hardware, storage & peripherals | 5.04 | ||||||
Textiles, apparel & luxury goods | 1.25 | ||||||
Tobacco | 2.67 | ||||||
Wireless telecommunication services | 0.12 | ||||||
Total common stocks | 98.74 | % | |||||
Short-term investment | 1.41 | ||||||
Investment of cash collateral from securities loaned | 5.29 | ||||||
Total investments | 105.44 | % | |||||
Liabilities, in excess of cash and other assets | (5.44 | ) | |||||
Net assets | 100.00 | % |
57
UBS U.S. Large Cap Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 98.74% | |||||||||||
Aerospace & defense: 0.57% | |||||||||||
General Dynamics Corp. | 6,800 | $ | 792,540 | ||||||||
Automobiles: 2.66% | |||||||||||
Ford Motor Co. | 115,100 | 1,984,324 | |||||||||
General Motors Co. | 47,500 | 1,724,250 | |||||||||
3,708,574 | |||||||||||
Banks: 8.00% | |||||||||||
Citigroup, Inc. | 72,130 | 3,397,323 | |||||||||
JPMorgan Chase & Co. | 60,300 | 3,474,486 | |||||||||
US Bancorp | 55,700 | 2,412,924 | |||||||||
Wells Fargo & Co. | 35,650 | 1,873,764 | |||||||||
11,158,497 | |||||||||||
Beverages: 2.70% | |||||||||||
PepsiCo, Inc. | 42,200 | 3,770,148 | |||||||||
Biotechnology: 3.72% | |||||||||||
Acorda Therapeutics, Inc.* | 52,300 | 1,763,033 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 15,300 | 966,501 | |||||||||
Bluebird Bio, Inc.* | 6,600 | 254,562 | |||||||||
Epizyme, Inc.*1 | 6,000 | 186,720 | |||||||||
Gilead Sciences, Inc.* | 17,700 | 1,467,507 | |||||||||
Lexicon Pharmaceuticals, Inc.*1 | 271,500 | 437,115 | |||||||||
MacroGenics, Inc.* | 5,000 | 108,650 | |||||||||
5,184,088 | |||||||||||
Building products: 0.68% | |||||||||||
Owens Corning | 24,700 | 955,396 | |||||||||
Capital markets: 2.80% | |||||||||||
Invesco Ltd. | 32,300 | 1,219,325 | |||||||||
Morgan Stanley | 83,300 | 2,693,089 | |||||||||
3,912,414 | |||||||||||
Chemicals: 3.23% | |||||||||||
Air Products & Chemicals, Inc. | 7,700 | 990,374 | |||||||||
Monsanto Co. | 14,400 | 1,796,256 | |||||||||
Praxair, Inc. | 13,000 | 1,726,920 | |||||||||
4,513,550 | |||||||||||
Commercial services & supplies: 1.34% | |||||||||||
Waste Management, Inc. | 41,800 | 1,869,714 | |||||||||
Construction materials: 1.05% | |||||||||||
Martin Marietta Materials, Inc. | 11,100 | 1,465,755 | |||||||||
Consumer finance: 1.43% | |||||||||||
Capital One Financial Corp. | 24,200 | 1,998,920 |
Shares | Value | ||||||||||
Electronic equipment, instruments & components: 1.30% | |||||||||||
Jabil Circuit, Inc. | 87,100 | $ | 1,820,390 | ||||||||
Energy equipment & services: 4.07% | |||||||||||
Baker Hughes, Inc. | 16,400 | 1,220,980 | |||||||||
Halliburton Co. | 19,600 | 1,391,796 | |||||||||
McDermott International, Inc.*1 | 172,500 | 1,395,525 | |||||||||
Noble Corp. PLC | 49,600 | 1,664,576 | |||||||||
5,672,877 | |||||||||||
Food & staples retailing: 1.86% | |||||||||||
Rite Aid Corp.* | 113,300 | 812,361 | |||||||||
Walgreen Co. | 24,000 | 1,779,120 | |||||||||
2,591,481 | |||||||||||
Food products: 2.78% | |||||||||||
Mondelez International, Inc., Class A | 103,000 | 3,873,830 | |||||||||
Health care equipment & supplies: 0.85% | |||||||||||
Baxter International, Inc. | 16,400 | 1,185,720 | |||||||||
Health care providers & services: 3.04% | |||||||||||
Envision Healthcare Holdings, Inc.* | 19,400 | 696,654 | |||||||||
Laboratory Corp. of America Holdings* | 15,300 | 1,566,720 | |||||||||
UnitedHealth Group, Inc. | 24,200 | 1,978,350 | |||||||||
4,241,724 | |||||||||||
Hotels, restaurants & leisure: 2.54% | |||||||||||
Yum! Brands, Inc. | 43,600 | 3,540,320 | |||||||||
Household durables: 0.71% | |||||||||||
Lennar Corp., Class A | 23,700 | 994,926 | |||||||||
Industrial conglomerates: 1.23% | |||||||||||
Danaher Corp. | 21,800 | 1,716,314 | |||||||||
Insurance: 3.94% | |||||||||||
Aon PLC | 15,900 | 1,432,431 | |||||||||
Lincoln National Corp. | 32,500 | 1,671,800 | |||||||||
MetLife, Inc. | 43,000 | 2,389,080 | |||||||||
5,493,311 | |||||||||||
Internet & catalog retail: 2.00% | |||||||||||
Amazon.com, Inc.* | 8,600 | 2,793,108 | |||||||||
IT services: 0.75% | |||||||||||
ServiceSource International, Inc.*1 | 180,600 | 1,047,480 | |||||||||
Life sciences tools & services: 0.75% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 8,700 | 1,041,477 |
58
UBS U.S. Large Cap Equity Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Machinery: 1.03% | |||||||||||
Illinois Tool Works, Inc. | 16,400 | $ | 1,435,984 | ||||||||
Media: 4.23% | |||||||||||
Comcast Corp., Class A | 52,700 | 2,828,936 | |||||||||
Walt Disney Co. | 35,800 | 3,069,492 | |||||||||
5,898,428 | |||||||||||
Multiline retail: 1.69% | |||||||||||
JC Penney Co., Inc.*1 | 99,800 | 903,190 | |||||||||
Macy's, Inc. | 25,100 | 1,456,302 | |||||||||
2,359,492 | |||||||||||
Oil, gas & consumable fuels: 5.52% | |||||||||||
Chevron Corp. | 11,300 | 1,475,215 | |||||||||
EOG Resources, Inc. | 28,000 | 3,272,080 | |||||||||
Exxon Mobil Corp. | 16,300 | 1,641,084 | |||||||||
PDC Energy, Inc.* | 20,700 | 1,307,205 | |||||||||
7,695,584 | |||||||||||
Pharmaceuticals: 7.08% | |||||||||||
Allergan, Inc. | 9,000 | 1,522,980 | |||||||||
Eli Lilly & Co. | 51,700 | 3,214,189 | |||||||||
Hospira, Inc.* | 32,100 | 1,648,977 | |||||||||
Impax Laboratories, Inc.* | 42,000 | 1,259,580 | |||||||||
Mallinckrodt PLC*1 | 16,100 | 1,288,322 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 17,900 | 938,318 | |||||||||
9,872,366 | |||||||||||
Real estate investment trust (REIT): 3.39% | |||||||||||
Digital Realty Trust, Inc.1 | 42,700 | 2,490,264 | |||||||||
Simon Property Group, Inc. | 13,500 | 2,244,780 | |||||||||
4,735,044 | |||||||||||
Road & rail: 2.36% | |||||||||||
Hertz Global Holdings, Inc.* | 61,600 | 1,726,648 | |||||||||
Norfolk Southern Corp. | 15,200 | 1,566,056 | |||||||||
3,292,704 | |||||||||||
Semiconductors & semiconductor equipment: 6.79% | |||||||||||
Applied Materials, Inc. | 85,800 | 1,934,790 | |||||||||
Broadcom Corp., Class A | 44,000 | 1,633,280 | |||||||||
Freescale Semiconductor Ltd.* | 43,600 | 1,024,600 | |||||||||
Mellanox Technologies Ltd.* | 41,500 | 1,446,690 | |||||||||
Micron Technology, Inc.* | 50,000 | 1,647,500 | |||||||||
NXP Semiconductor NV* | 26,900 | 1,780,242 | |||||||||
9,467,102 |
Shares | Value | ||||||||||
Software: 2.85% | |||||||||||
Check Point Software Technologies Ltd.* | 29,300 | $ | 1,963,979 | ||||||||
Symantec Corp. | 88,200 | 2,019,780 | |||||||||
3,983,759 | |||||||||||
Specialty retail: 0.72% | |||||||||||
Best Buy Co., Inc. | 32,300 | 1,001,623 | |||||||||
Technology hardware, storage & peripherals: 5.04% | |||||||||||
Apple, Inc. | 58,700 | 5,454,991 | |||||||||
NetApp, Inc. | 43,000 | 1,570,360 | |||||||||
7,025,351 | |||||||||||
Textiles, apparel & luxury goods: 1.25% | |||||||||||
Ralph Lauren Corp. | 10,900 | 1,751,521 | |||||||||
Tobacco: 2.67% | |||||||||||
Philip Morris International, Inc. | 44,250 | 3,730,718 | |||||||||
Wireless telecommunication services: 0.12% | |||||||||||
NII Holdings, Inc.*1 | 297,200 | 163,460 | |||||||||
Total common stocks (cost $111,572,507) | 137,755,690 | ||||||||||
Short-term investment: 1.41% | |||||||||||
Investment company: 1.41% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $1,970,647) | 1,970,647 | 1,970,647 | |||||||||
Investment of cash collateral from securities loaned: 5.29% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $7,380,954) | 7,380,954 | 7,380,954 | |||||||||
Total investments: 105.44% (cost $120,924,108) | 147,107,291 | ||||||||||
Liabilities, in excess of cash and other assets: (5.44)% | (7,595,300 | ) | |||||||||
Net assets: 100.00% | $ | 139,511,991 |
59
UBS U.S. Large Cap Equity Fund
Portfolio of investments
June 30, 2014
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $122,237,333; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 28,408,371 | |||||
Gross unrealized depreciation | (3,538,413 | ) | |||||
Net unrealized appreciation of investments | $ | 24,869,958 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 70. Portfolio footnotes begin on page 60.
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 137,755,690 | $ | — | $ | — | $ | 137,755,690 | |||||||||||
Short-term investment | — | 1,970,647 | — | 1,970,647 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 7,380,954 | — | 7,380,954 | |||||||||||||||
Total | $ | 137,755,690 | $ | 9,351,601 | $ | — | $ | 147,107,291 |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2014.
2 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 3,425,892 | $ | 35,623,233 | $ | 37,078,478 | $ | 1,970,647 | $ | 1,669 | |||||||||||||
UBS Private Money Market Fund LLCa | 5,190,420 | 59,625,276 | 57,434,742 | 7,380,954 | 574 | ||||||||||||||||||
$ | 8,616,312 | $ | 95,248,509 | $ | 94,513,220 | $ | 9,351,601 | $ | 2,243 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
60
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 26.42% (Class A shares returned 19.44% after the deduction of the maximum sales charge), while Class Y shares returned 26.79%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 24.73% over the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 64; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund outpaced the Index primarily due to stock selection decisions.
Portfolio performance summary1
What worked
• The Fund's consumer discretionary stocks made a positive contribution to relative returns for the 12 months.
– RetailMeNot was one of the Fund's top performers during the reporting period. The company is a provider of online coupons and deals. After a successful initial public offering ("IPO") in July 2013, the stock traded higher for much of the period. We sold out of our position and took profits in November of 2013.
– Tower International outperformed based on continued strength in its end markets. In addition, Tower's management offered an improved outlook on the company's prospects for the remainder of 2014. Tower is an integrated global manufacturer of engineered structural metal components and assemblies that primarily serves automotive original equipment manufacturers (OEMs).
– Asbury Automotive, the sixth largest U.S. auto retailer, was a successful holding for the Fund during the period. The company has a new management team that has focused on improving operations by centralizing processes and implementing best practices throughout the business. This led to a substantial rise in profitability, followed by a higher stock price.
• Within the information technology sector, several stock holdings were positive for performance.
– FireEye was the largest positive contributor to Fund returns for the 12 months. Shares of the network security solutions provider rose following an announcement in January 2014 of preliminary fourth quarter 2013 results that beat expectations. In addition, the company acquired closely held Mandiant Corp., a leading provider of endpoint security products and incident response management solutions. We sold the position in February of 2014, before the market selloff.
– Nimble Storage, a provider of enterprise storage and back-up solutions, performed well following a successful IPO in early December 2013. The company both designs and sells a flash-optimized hybrid storage platform that provides superior data protection. Nimble's platform also helps lower capital and operating expenditures for its customers. Valuations eventually became too high to justify the stock price, and we sold the position in May of 2014.
– Shares of Splunk Inc. traded higher during the period due to investor enthusiasm. The company provides software that collects, indexes and analyzes machine data generated by websites, applications, servers, networks
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
61
UBS U.S. Small Cap Growth Fund
and mobile devices. Anticipation of continued strong adoption of the company's solutions across a developing market opportunity led to strong performance. We sold the stock in February of 2014, prior to the market selloff.
• Several other stock positions were additive for the Fund's relative performance.
– Pioneer Energy Services was one of the top performers during the reporting period. Pioneer provides onshore production services to the oil and natural gas industries. The company's shares continued to outperform following a strong earnings report in late April, coupled with management's confidence that demand remains strong for its services. (For details, see "Portfolio highlights.")
– Spirit Airlines, a low-fare airline with routes to South Florida, the Caribbean and Latin America, saw its shares rise during the 12 months. In the first quarter of 2014, Spirit reported earnings in excess of consensus forecasts. Following that earnings release, the company indicated that the current revenue environment remains strong. Management believes that current inflation pressures remain manageable. (For details, see "Portfolio highlights.")
• Stock selection in the health care sector, particularly among biotech and pharmaceutical companies, was successful during the 12-month period.
What didn't work
• Several information technology stocks detracted from relative performance during the 12 months.
– Infoblox was the largest negative contributor during the reporting period. The company underperformed after reporting results below consensus estimates. In addition, sales execution challenges continued to manifest themselves, and the CEO announced his intention to step down. (For details, see "Portfolio highlights.")
– Silver Spring Networks detracted from the Fund's relative performance. The provider of smart grid network and security technology solutions underperformed following news in the second half of 2013 that it had failed to win a piece of the lucrative Smart Meter grid contract in the UK. (For details, see "Portfolio highlights.")
– Shares of Cyan Inc., a networking solutions company, declined after it provided revenue guidance for the fourth quarter of 2013 and the 2014 fiscal year that was sharply below consensus estimates. The disappointing guidance was partially due to a larger-than-anticipated sequential decline in revenues from Windstream, Cyan's largest customer, as well as slower-than-expected adoption of the company's systems in international markets. We sold the position in March of 2014.
– MagnaChip Semiconductor, a manufacturer of mixed-signal semiconductors, saw its shares fall during the first quarter of 2014. The market reacted negatively to the company's announcement that it was delaying the release of fourth quarter 2013 earnings results in order to conduct a complete review of its financials. The company also announced it would be hiring a new chief financial officer.
– OSI Systems detracted from Fund returns during the reporting period. The diversified manufacturer of security screening systems, medical monitors and electrical components suffered a price decline after the Transportation Security Administration ("TSA") canceled its $60 million order for AT-2 X-ray systems in the second half of 2013. The cancellation was made after OSI swapped out a component of its checkpoint X-ray system without notifying the TSA of the change. (For details, see "Portfolio highlights.")
62
UBS U.S. Small Cap Growth Fund
Portfolio highlights
• Infoblox is a leader in automated network control, and provides an appliance-based solution that enables dynamic networks and next-generation data centers. Infoblox's solution combines real-time IP address management with the automation of key network management processes in purpose-built physical and virtual appliances. The company's proprietary grid technology software allows customers to control appliances across the enterprise, thereby increasing network uptime and reliability, while providing cost savings.
• Silver Spring Networks provides network and security technology solutions that enable utilities to transform the power grid infrastructure into the smart grid. The company's networking platform provides two-way communication between the utility back office and devices on the power grid. We continue to see a large growth opportunity for Silver Spring due to two factors: The company's platform allows utilities to manage their network more efficiently, and its services remain underpenetrated.
• Pioneer Energy Services provides land-based contract drilling and production services to independent and major oil and gas exploration companies. The company currently operates rigs in West Texas, South Texas, Bakken Shale, Utah, Marcellus and Colombia. The company is benefiting from increased drilling and exploration activity across these regions, and from improving rates for their services. We believe Pioneer will be able to continue to raise prices and invest incrementally in new rigs for further growth.
• Spirit Airlines is an ultra-low-cost carrier that operates 40 aircraft on 190 daily flights to over 45 destinations. The airline adopted this approach when new management arrived in 2007, and it has been profitable ever since. Spirit is the most profitable US airline, with a pre-tax margin of 14.3% and a pretax return on investment capital of 28.5%. Spirit's valuation is inexpensive relative to the market and its growth prospects. As investors become more familiar with Spirit's operating model and potential, we believe the company will benefit from higher multiples.
• OSI Systems manufactures security inspection systems and medical monitoring systems. The company's primary division sells inspection systems and scanners for use in the scanning of baggage, cargo and vehicles for weapons, explosives, drugs and other contraband. We believe OSI's healthcare division should see improving results as it starts to benefit from a new product cycle. Most of the company's new monitors now offer increased functionality, as well as touch screen interfaces, and we believe the secular nature of the company's growth is not reflected in its stock price.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
63
UBS U.S. Small Cap Growth Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 26.42 | % | 24.24 | % | 9.12 | % | |||||||||
Class C2 | 25.51 | 23.31 | 8.31 | ||||||||||||
Class Y3 | 26.79 | 24.57 | 9.40 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 19.44 | % | 22.83 | % | 8.50 | % | |||||||||
Class C2 | 24.51 | 23.31 | 8.31 | ||||||||||||
Russell 2000 Growth Index4 | 24.73 | % | 20.50 | % | 9.04 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.56% and 1.41%; Class C—2.33% and 2.16%; Class Y—1.14% and 1.14%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.40% for Class A shares, 2.15% for Class C shares and 1.15% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
3 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
4 The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000 Index companies with higher price-to-value ratios and higher forecasted growth values. The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
The Fund invests in IPOs which may have a magnified impact on performance.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
64
UBS U.S. Small Cap Growth Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS U.S. Small Cap Growth Fund Class A and Class Y versus the Russell 2000 Growth Index over the 10 years ended June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
65
UBS U.S. Small Cap Growth Fund
Top ten equity holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
Spirit Airlines, Inc. | 2.8 | % | |||||
Proofpoint, Inc. | 2.4 | ||||||
Asbury Automotive Group, Inc. | 1.9 | ||||||
Tower International, Inc. | 1.8 | ||||||
Ultimate Software Group, Inc. | 1.8 | ||||||
Susser Holdings Corp. | 1.8 | ||||||
Grand Canyon Education, Inc. | 1.8 | ||||||
EnerSys | 1.6 | ||||||
Kodiak Oil & Gas Corp. | 1.6 | ||||||
Restoration Hardware Holdings, Inc. | 1.5 | ||||||
Total | 19.0 | % |
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Aerospace & defense | 0.69 | % | |||||
Airlines | 2.81 | ||||||
Auto components | 3.93 | ||||||
Banks | 2.57 | ||||||
Biotechnology | 7.17 | ||||||
Building products | 1.30 | ||||||
Capital markets | 0.85 | ||||||
Communications equipment | 2.32 | ||||||
Construction & engineering | 1.20 | ||||||
Distributors | 0.17 | ||||||
Diversified consumer services | 1.77 | ||||||
Diversified telecommunication services | 1.26 | ||||||
Electrical equipment | 1.62 | ||||||
Electronic equipment, instruments & components | 3.96 | ||||||
Energy equipment & services | 3.57 | ||||||
Food & staples retailing | 3.01 | ||||||
Health care equipment & supplies | 3.38 | ||||||
Health care providers & services | 2.55 | ||||||
Hotels, restaurants & leisure | 4.06 | ||||||
Household durables | 2.38 | ||||||
Independent power and renewable electricity producers | 0.75 | ||||||
Internet & catalog retail | 2.37 | ||||||
Internet software & services | 1.38 | ||||||
Life sciences tools & services | 1.23 | ||||||
Machinery | 3.66 | ||||||
Media | 1.33 | ||||||
Metals & mining | 2.71 | ||||||
Oil, gas & consumable fuels | 6.21 | ||||||
Paper & forest products | 1.27 | ||||||
Pharmaceuticals | 1.23 | ||||||
Real estate investment trust (REIT) | 2.55 | ||||||
Road & rail | 2.75 | ||||||
Semiconductors & semiconductor equipment | 3.20 | ||||||
Software | 9.65 | ||||||
Specialty retail | 4.74 | ||||||
Thrifts & mortgage finance | 1.71 | ||||||
Total common stocks | 97.31 | % | |||||
Investment company | |||||||
iShares Russell 2000 Growth ETF | 0.55 | ||||||
Short-term investment | 2.13 | ||||||
Investment of cash collateral from securities loaned | 11.17 | ||||||
Total investments | 111.16 | % | |||||
Liabilities, in excess of cash and other assets | (11.16 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS U.S. Small Cap Growth Fund. Figures might be different if a breakdown of the underlying investment company was included.
66
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 97.31% | |||||||||||
Aerospace & defense: 0.69% | |||||||||||
KEYW Holding Corp.*1 | 149,400 | $ | 1,877,958 | ||||||||
Airlines: 2.81% | |||||||||||
Spirit Airlines, Inc.* | 121,300 | 7,671,012 | |||||||||
Auto components: 3.93% | |||||||||||
Drew Industries, Inc. | 49,500 | 2,475,495 | |||||||||
Tenneco, Inc.* | 49,100 | 3,225,870 | |||||||||
Tower International, Inc.* | 136,300 | 5,021,292 | |||||||||
10,722,657 | |||||||||||
Banks: 2.57% | |||||||||||
Columbia Banking System, Inc. | 74,100 | 1,949,571 | |||||||||
National Bank Holdings Corp., Class A | 98,500 | 1,964,090 | |||||||||
Webster Financial Corp. | 97,700 | 3,081,458 | |||||||||
6,995,119 | |||||||||||
Biotechnology: 7.17% | |||||||||||
Acceleron Pharma, Inc.*1 | 50,800 | 1,725,676 | |||||||||
Celldex Therapeutics, Inc.*1 | 59,000 | 962,880 | |||||||||
Cepheid, Inc.* | 76,200 | 3,653,028 | |||||||||
Dyax Corp.* | 165,200 | 1,585,920 | |||||||||
Exact Sciences Corp.*1 | 203,700 | 3,469,011 | |||||||||
Kite Pharma, Inc.*1 | 32,700 | 945,684 | |||||||||
Medivation, Inc.* | 27,200 | 2,096,576 | |||||||||
Receptos, Inc.* | 40,700 | 1,733,820 | |||||||||
Seattle Genetics, Inc.*1 | 37,300 | 1,426,725 | |||||||||
Synageva BioPharma Corp.* | 18,500 | 1,938,800 | |||||||||
19,538,120 | |||||||||||
Building products: 1.30% | |||||||||||
NCI Building Systems, Inc.* | 182,100 | 3,538,203 | |||||||||
Capital markets: 0.85% | |||||||||||
FXCM, Inc., Class A | 155,800 | 2,330,768 | |||||||||
Communications equipment: 2.32% | |||||||||||
Arista Networks, Inc.* | 21,800 | 1,360,102 | |||||||||
Ciena Corp.* | 129,600 | 2,807,136 | |||||||||
Finisar Corp.*1 | 108,821 | 2,149,215 | |||||||||
6,316,453 | |||||||||||
Construction & engineering: 1.20% | |||||||||||
EMCOR Group, Inc. | 73,800 | 3,286,314 | |||||||||
Distributors: 0.17% | |||||||||||
LKQ Corp.* | 17,900 | 477,751 | |||||||||
Diversified consumer services: 1.77% | |||||||||||
Grand Canyon Education, Inc.* | 104,800 | 4,817,656 |
Shares | Value | ||||||||||
Diversified telecommunication services: 1.26% | |||||||||||
Cogent Communications Holdings, Inc. | 99,200 | $ | 3,427,360 | ||||||||
Electrical equipment: 1.62% | |||||||||||
EnerSys | 64,100 | 4,409,439 | |||||||||
Electronic equipment, instruments & components: 3.96% | |||||||||||
InvenSense, Inc.*1 | 185,700 | 4,213,533 | |||||||||
OSI Systems, Inc.* | 52,100 | 3,477,675 | |||||||||
Universal Display Corp.*1 | 96,600 | 3,100,860 | |||||||||
10,792,068 | |||||||||||
Energy equipment & services: 3.57% | |||||||||||
Bristow Group, Inc. | 49,200 | 3,966,504 | |||||||||
Hornbeck Offshore Services, Inc.* | 61,500 | 2,885,580 | |||||||||
Pioneer Energy Services Corp.* | 163,600 | 2,869,544 | |||||||||
9,721,628 | |||||||||||
Food & staples retailing: 3.01% | |||||||||||
Susser Holdings Corp.* | 60,800 | 4,907,776 | |||||||||
United Natural Foods, Inc.* | 50,800 | 3,307,080 | |||||||||
8,214,856 | |||||||||||
Health care equipment & supplies: 3.38% | |||||||||||
Antares Pharma, Inc.*1 | 400,000 | 1,068,000 | |||||||||
Insulet Corp.* | 94,400 | 3,744,848 | |||||||||
K2M Group Holdings, Inc.* | 110,100 | 1,638,288 | |||||||||
LDR Holding Corp.* | 58,600 | 1,465,586 | |||||||||
Tandem Diabetes Care, Inc.*1 | 80,300 | 1,305,678 | |||||||||
9,222,400 | |||||||||||
Health care providers & services: 2.55% | |||||||||||
Air Methods Corp.* | 61,900 | 3,197,135 | |||||||||
IPC The Hospitalist Co., Inc.* | 43,700 | 1,932,414 | |||||||||
Mednax, Inc.* | 31,200 | 1,814,280 | |||||||||
6,943,829 | |||||||||||
Hotels, restaurants & leisure: 4.06% | |||||||||||
Buffalo Wild Wings, Inc.* | 22,500 | 3,728,475 | |||||||||
Del Frisco's Restaurant Group, Inc.* | 125,000 | 3,445,000 | |||||||||
Popeyes Louisiana Kitchen, Inc.* | 89,100 | 3,894,561 | |||||||||
11,068,036 | |||||||||||
Household durables: 2.38% | |||||||||||
Meritage Homes Corp.* | 76,000 | 3,207,960 | |||||||||
Ryland Group, Inc. | 83,400 | 3,289,296 | |||||||||
6,497,256 | |||||||||||
Independent power and renewable electricity producers: 0.75% | |||||||||||
Abengoa Yield PLC* | 54,400 | 2,057,408 |
67
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Internet & catalog retail: 2.37% | |||||||||||
HomeAway, Inc.*1 | 104,700 | $ | 3,645,654 | ||||||||
Shutterfly, Inc.* | 65,300 | 2,811,818 | |||||||||
6,457,472 | |||||||||||
Internet software & services: 1.38% | |||||||||||
Constant Contact, Inc.* | 116,800 | 3,750,448 | |||||||||
Life sciences tools & services: 1.23% | |||||||||||
Charles River Laboratories International, Inc.* | 62,500 | 3,345,000 | |||||||||
Machinery: 3.66% | |||||||||||
Chart Industries, Inc.* | 47,000 | 3,888,780 | |||||||||
Wabash National Corp.* | 245,249 | 3,494,798 | |||||||||
Woodward, Inc. | 52,000 | 2,609,360 | |||||||||
9,992,938 | |||||||||||
Media: 1.33% | |||||||||||
Imax Corp.*1 | 127,800 | 3,639,744 | |||||||||
Metals & mining: 2.71% | |||||||||||
Constellium NV, Class A* | 123,800 | 3,969,028 | |||||||||
Globe Specialty Metals, Inc. | 164,700 | 3,422,466 | |||||||||
7,391,494 | |||||||||||
Oil, gas & consumable fuels: 6.21% | |||||||||||
Bonanza Creek Energy, Inc.* | 69,400 | 3,968,986 | |||||||||
Gulfport Energy Corp.* | 34,800 | 2,185,440 | |||||||||
Kodiak Oil & Gas Corp.* | 300,900 | 4,378,095 | |||||||||
SemGroup Corp., Class A | 50,100 | 3,950,385 | |||||||||
Solazyme, Inc.*1 | 208,000 | 2,450,240 | |||||||||
16,933,146 | |||||||||||
Paper & forest products: 1.27% | |||||||||||
Boise Cascade Co.* | 120,800 | 3,459,712 | |||||||||
Pharmaceuticals: 1.23% | |||||||||||
Nektar Therapeutics* | 78,100 | 1,001,242 | |||||||||
Pacira Pharmaceuticals, Inc.* | 25,500 | 2,342,430 | |||||||||
3,343,672 | |||||||||||
Real estate investment trust (REIT): 2.55% | |||||||||||
Cousins Properties, Inc. | 290,000 | 3,610,500 | |||||||||
Sovran Self Storage, Inc. | 43,100 | 3,329,475 | |||||||||
6,939,975 | |||||||||||
Road & rail: 2.75% | |||||||||||
Con-way, Inc. | 70,800 | 3,569,028 | |||||||||
Saia, Inc.* | 89,300 | 3,922,949 | |||||||||
7,491,977 |
Shares | Value | ||||||||||
Semiconductors & semiconductor equipment: 3.20% | |||||||||||
Cavium, Inc.* | 81,900 | $ | 4,067,154 | ||||||||
Magnachip Semiconductor Corp.* | 145,900 | 2,057,190 | |||||||||
Skyworks Solutions, Inc. | 55,500 | 2,606,280 | |||||||||
8,730,624 | |||||||||||
Software: 9.65% | |||||||||||
A10 Networks, Inc.*1 | 82,340 | 1,095,122 | |||||||||
FleetMatics Group PLC*1 | 100,000 | 3,234,000 | |||||||||
Imperva, Inc.* | 50,100 | 1,311,618 | |||||||||
Infoblox, Inc.* | 164,400 | 2,161,860 | |||||||||
Proofpoint, Inc.* | 176,000 | 6,592,960 | |||||||||
Qlik Technologies, Inc.* | 109,100 | 2,467,842 | |||||||||
Silver Spring Networks, Inc.*1 | 110,300 | 1,470,299 | |||||||||
Synchronoss Technologies, Inc.* | 84,300 | 2,947,128 | |||||||||
Ultimate Software Group, Inc.* | 36,304 | 5,016,124 | |||||||||
26,296,953 | |||||||||||
Specialty retail: 4.74% | |||||||||||
ANN, Inc.* | 69,000 | 2,838,660 | |||||||||
Asbury Automotive Group, Inc.* | 73,700 | 5,066,138 | |||||||||
Francesca's Holdings Corp.*1 | 54,517 | 803,580 | |||||||||
Restoration Hardware Holdings, Inc.* | 45,400 | 4,224,470 | |||||||||
12,932,848 | |||||||||||
Thrifts & mortgage finance: 1.71% | |||||||||||
Essent Group Ltd.* | 105,500 | 2,119,495 | |||||||||
EverBank Financial Corp. | 125,900 | 2,538,144 | |||||||||
4,657,639 | |||||||||||
Total common stocks (cost $193,835,378) | 265,289,933 | ||||||||||
Investment company: 0.55% | |||||||||||
iShares Russell 2000 Growth ETF1 (cost $1,507,918) | 10,700 | 1,481,094 | |||||||||
Short-term investment: 2.13% | |||||||||||
Investment company: 2.13% | |||||||||||
UBS Cash Management Prime Relationship Fund2 (cost $5,807,848) | 5,807,848 | 5,807,848 | |||||||||
Investment of cash collateral from securities loaned: 11.17% | |||||||||||
UBS Private Money Market Fund LLC2 (cost $30,452,021) | 30,452,021 | 30,452,021 | |||||||||
Total investments: 111.16% (cost $231,603,165) | 303,030,896 | ||||||||||
Liabilities, in excess of cash and other assets: (11.16)% | (30,416,279 | ) | |||||||||
Net assets: 100.00% | $ | 272,614,617 |
68
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2014
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $231,899,953; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 78,511,467 | |||||
Gross unrealized depreciation | (7,380,524 | ) | |||||
Net unrealized appreciation of investments | $ | 71,130,943 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 70. Portfolio footnotes begin on page 69.
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 265,289,933 | $ | — | $ | — | $ | 265,289,933 | |||||||||||
Investment company | 1,481,094 | — | — | 1,481,094 | |||||||||||||||
Short-term investment | — | 5,807,848 | — | 5,807,848 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 30,452,021 | — | 30,452,021 | |||||||||||||||
Total | $ | 266,771,027 | $ | 36,259,869 | $ | — | $ | 303,030,896 |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2014.
2 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 3,491,150 | $ | 64,502,998 | $ | 62,186,300 | $ | 5,807,848 | $ | 5,285 | |||||||||||||
UBS Private Money Market Fund LLCa | 27,876,921 | 290,376,146 | 287,801,046 | 30,452,021 | 3,006 | ||||||||||||||||||
$ | 31,368,071 | $ | 354,879,144 | $ | 349,987,346 | $ | 36,259,869 | $ | 8,291 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
69
The UBS Funds
June 30, 2014
Portfolio acronyms
ADR | American Depositary Receipt | ||||||
CDI | CHESS Depositary Interest | ||||||
CVA | Dutch Certification—Depositary Certificate | ||||||
ETF | Exchange Traded Fund | ||||||
GDR | Global Depositary Receipt | ||||||
LIBOR | London Interbank Offered Rate | ||||||
NPV | No Par Value |
OJSC | Open Joint Stock Company | ||||||
Preference shares | A special type of equity investment that shares in the earnings of the company, has limited voting rights, and may have a dividend preference. Preference shares may also have liquidation preference. | ||||||
SDR | Special Depositary Receipt | ||||||
SPDR | Standard & Poor's Depositary Receipts |
Counterparty abbreviations
CSI | Credit Suisse International |
JPMCB JPMorgan Chase Bank
Currency abbreviations
AUD | Australian Dollar | ||||||
EUR | Euro | ||||||
GBP | Great Britain Pound |
JPY | Japanese Yen | ||||||
TRY | Turkish Lira |
USD | United States Dollar | ||||||
ZAR | South African Rand |
See accompanying notes to financial statements.
70
The UBS Funds
June 30, 2014 (unaudited)
Explanation of expense disclosure
As a shareholder of the Funds, you incur two types of costs: (1) transactional costs (as applicable); including sales charges (loads); and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees (if applicable); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example below is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, January 1, 2014 to June 30, 2014.
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on that Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not that Fund's actual return for each class of shares. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
This projection assumes that annualized expense ratios were in effect during the period January 1, 2014 to June 30, 2014.
71
The UBS Funds
June 30, 2014 (unaudited)
Beginning account value January 1, 2014 | Ending account value June 30, 2014 | Expenses paid during period* 01/01/14 – 06/30/14 | Expense ratio during period | ||||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,011.70 | $ | 24.64 | 4.94 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,000.30 | 24.50 | 4.94 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,008.00 | 28.43 | 5.71 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 996.48 | 28.27 | 5.71 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,012.60 | 23.55 | 4.72 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,001.39 | 23.42 | 4.72 | |||||||||||||||||||
UBS Global Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,061.70 | 6.39 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.60 | 6.26 | 1.25 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,057.70 | 10.20 | 2.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.88 | 9.99 | 2.00 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,063.90 | 5.12 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.84 | 5.01 | 1.00 | |||||||||||||||||||
UBS U.S. Defensive Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,075.40 | 11.12 | 2.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.08 | 10.79 | 2.15 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,072.00 | 14.95 | 2.90 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,010.36 | 14.51 | 2.90 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,077.00 | 9.78 | 1.90 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.37 | 9.49 | 1.90 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).
72
The UBS Funds
June 30, 2014 (unaudited)
Beginning account value January 1, 2014 | Ending account value June 30, 2014 | Expenses paid during period* 01/01/14 – 06/30/14 | Expense ratio during period | ||||||||||||||||||||
UBS U.S. Equity Opportunity Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,081.80 | $ | 6.19 | 1.20 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,077.80 | 10.05 | 1.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,082.50 | 4.91 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
UBS U.S. Large Cap Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,098.80 | 6.24 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,094.40 | 10.13 | 1.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,099.70 | 4.95 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,026.50 | 7.03 | 1.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,017.85 | 7.00 | 1.40 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,022.90 | 10.78 | 2.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.13 | 10.74 | 2.15 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,028.10 | 5.48 | 1.09 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.39 | 5.46 | 1.09 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).
73
The UBS Funds
Financial statements
Statement of assets and liabilities
June 30, 2014
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | UBS U.S. Defensive Equity Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost: | |||||||||||||||
Unaffiliated issuers | $ | 13,700,473 | $ | 18,852,162 | $ | 16,176,963 | |||||||||
Affiliated issuers | 3,208,627 | 328,482 | 232,835 | ||||||||||||
Investments of cash collateral in an affiliated issuer received from securities loaned1 | — | 103,482 | — | ||||||||||||
Foreign currency | 34,559 | 176,207 | — | ||||||||||||
$ | 16,943,659 | $ | 19,460,333 | $ | 16,409,798 | ||||||||||
Investments, at value: | |||||||||||||||
Unaffiliated issuers | $ | 15,797,756 | $ | 21,053,435 | $ | 21,233,193 | |||||||||
Affiliated issuers | 3,208,627 | 328,482 | 232,835 | ||||||||||||
Investments of cash collateral in an affiliated issuer received from securities loaned1 | — | 103,482 | — | ||||||||||||
Foreign currency | 34,890 | 176,216 | — | ||||||||||||
Cash | 3,373,795 | — | 11,301 | ||||||||||||
Receivables: | |||||||||||||||
Investment securities sold | 812,802 | — | — | ||||||||||||
Interest | — | 226 | — | ||||||||||||
Fund shares sold | — | 100,757 | 24,245 | ||||||||||||
Foreign tax reclaims | 10,684 | 13,659 | — | ||||||||||||
Due from advisor | — | 4,823 | 6,389 | ||||||||||||
Dividends | 7,007 | 22,691 | 21,606 | ||||||||||||
Due from broker | 13,300 | — | — | ||||||||||||
Cash collateral for securities sold short | 4,666,195 | — | — | ||||||||||||
Cash collateral received from securities loaned | — | — | — | ||||||||||||
Outstanding swap agreements, at value | 65,696 | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 17,971 | — | — | ||||||||||||
Other assets | 43,904 | 32,839 | 20,807 | ||||||||||||
Total assets | 28,052,627 | 21,836,610 | 21,550,376 | ||||||||||||
Liabilities: | |||||||||||||||
Payables: | |||||||||||||||
Cash collateral from securities loaned | — | 103,482 | — | ||||||||||||
Investment securities purchased | 811,806 | — | — | ||||||||||||
Investment advisory and administration fees | 2,945 | — | — | ||||||||||||
Custody and fund accounting fees | 26,218 | 17,176 | 22,176 | ||||||||||||
Fund shares redeemed | 57 | 40,694 | 9,143 | ||||||||||||
Distribution and service fees | 526 | 2,763 | 4,283 | ||||||||||||
Dividends payable and security loan fees for securities sold short | 22,558 | — | 6,935 | ||||||||||||
Accrued expenses | 80,451 | 89,753 | 73,512 | ||||||||||||
Due to broker for securities sold short | — | — | 32,787 | ||||||||||||
Options written, at value2 | — | — | 22,800 | ||||||||||||
Securities sold short, at value3 | 11,016,566 | — | 5,358,753 | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 47,153 | — | — | ||||||||||||
Total liabilities | 12,008,280 | 253,868 | 5,530,389 | ||||||||||||
Net assets | $ | 16,044,347 | $ | 21,582,742 | $ | 16,019,987 |
1 The market value of securities loaned by UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund, as of June 30, 2014 was $101,057, $2,499,871, $7,074,626 and $30,378,270, respectively.
2 Premiums received by UBS U.S. Defensive Equity Fund were $39,800.
3 Proceeds from securities sold short by UBS Equity Long-Short Multi-Strategy Fund and UBS U.S. Defensive Equity Fund were $10,113,302 and $3,929,073, respectively.
74
The UBS Funds
Financial statements
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | UBS U.S. Small Cap Growth Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost: | |||||||||||||||
Unaffiliated issuers | $ | 36,052,176 | $ | 111,572,507 | $ | 195,343,296 | |||||||||
Affiliated issuers | 1,765,405 | 1,970,647 | 5,807,848 | ||||||||||||
Investments of cash collateral in an affiliated issuer received from securities loaned1 | 2,555,583 | 7,380,954 | 30,452,021 | ||||||||||||
Foreign currency | 9,300 | — | — | ||||||||||||
$ | 40,382,464 | $ | 120,924,108 | $ | 231,603,165 | ||||||||||
Investments, at value: | |||||||||||||||
Unaffiliated issuers | $ | 44,103,515 | $ | 137,755,690 | $ | 266,771,027 | |||||||||
Affiliated issuers | 1,765,405 | 1,970,647 | 5,807,848 | ||||||||||||
Investments of cash collateral in an affiliated issuer received from securities loaned1 | 2,555,583 | 7,380,954 | 30,452,021 | ||||||||||||
Foreign currency | 9,829 | — | — | ||||||||||||
Cash | — | — | — | ||||||||||||
Receivables: | |||||||||||||||
Investment securities sold | — | — | 152,659 | ||||||||||||
Interest | 1,259 | 4,412 | 41,705 | ||||||||||||
Fund shares sold | 360 | 124,127 | 390,740 | ||||||||||||
Foreign tax reclaims | — | — | — | ||||||||||||
Due from advisor | — | — | — | ||||||||||||
Dividends | 35,648 | 123,844 | 9,729 | ||||||||||||
Due from broker | — | — | — | ||||||||||||
Cash collateral for securities sold short | — | — | — | ||||||||||||
Cash collateral received from securities loaned | — | — | 742,150 | ||||||||||||
Outstanding swap agreements, at value | — | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Other assets | 28,387 | 35,011 | 40,314 | ||||||||||||
Total assets | 48,499,986 | 147,394,685 | 304,408,193 | ||||||||||||
Liabilities: | |||||||||||||||
Payables: | |||||||||||||||
Cash collateral from securities loaned | 2,555,583 | 7,380,954 | 31,194,171 | ||||||||||||
Investment securities purchased | — | 299,158 | — | ||||||||||||
Investment advisory and administration fees | 37,612 | 98,727 | 200,165 | ||||||||||||
Custody and fund accounting fees | 13,843 | 18,574 | 33,414 | ||||||||||||
Fund shares redeemed | 83,514 | 500 | 264,862 | ||||||||||||
Distribution and service fees | 11,747 | 4,604 | 11,372 | ||||||||||||
Dividends payable and security loan fees for securities sold short | — | — | — | ||||||||||||
Accrued expenses | 96,081 | 80,177 | 89,592 | ||||||||||||
Due to broker for securities sold short | — | — | — | ||||||||||||
Options written, at value2 | — | — | — | ||||||||||||
Securities sold short, at value3 | — | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Total liabilities | 2,798,380 | 7,882,694 | 31,793,576 | ||||||||||||
Net assets | $ | 45,701,606 | $ | 139,511,991 | $ | 272,614,617 |
See accompanying notes to financial statements.
75
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
June 30, 2014
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | UBS U.S. Defensive Equity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 15,116,513 | $ | 29,072,645 | $ | 31,550,022 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | (220,258 | ) | 302,800 | (14,173 | ) | ||||||||||
Accumulated net realized gain (loss) | (84,634 | ) | (9,994,438 | ) | (19,159,412 | ) | |||||||||
Net unrealized appreciation | 1,232,726 | 2,201,735 | 3,643,550 | ||||||||||||
Net assets | $ | 16,044,347 | $ | 21,582,742 | $ | 16,019,987 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 870,485 | $ | 7,540,857 | $ | 11,473,292 | |||||||||
Shares outstanding | 83,934 | 842,523 | 893,862 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 10.37 | $ | 8.95 | $ | 12.84 | |||||||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 10.97 | $ | 9.47 | $ | 13.59 | |||||||||
Class C: | |||||||||||||||
Net assets | $ | 408,621 | $ | 1,579,499 | $ | 2,400,624 | |||||||||
Shares outstanding | 40,578 | 179,422 | 194,259 | ||||||||||||
Net asset value and offering price per share | $ | 10.07 | $ | 8.80 | $ | 12.36 | |||||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 9.97 | $ | 8.71 | $ | 12.24 | |||||||||
Class Y: | |||||||||||||||
Net assets | $ | 14,765,241 | $ | 12,462,386 | $ | 2,146,071 | |||||||||
Shares outstanding | 1,409,035 | 1,387,010 | 166,812 | ||||||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 10.48 | $ | 8.99 | $ | 12.87 |
1 For Class A, the maximum sales charge is 5.50%. Classes C and Y have no front-end sales charges. For Class A, the maximum contingent deferred sales charge of 1.00% of the shares' offering price or the net asset value at the time of sales by the shareholder, whichever is less, is charged on sales of shares on original purchases of $1,000,000 or more that were not subject to a front-end sales charge made within one year of the purchase date. Class C maximum contingent deferred sales charge is 1.00%. Class Y has no contingent deferred sales charge. If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
76
The UBS Funds
Financial statements
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | UBS U.S. Small Cap Growth Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 46,683,795 | $ | 224,652,372 | $ | 178,139,973 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | 9,806 | 1,011,875 | 13,866 | ||||||||||||
Accumulated net realized gain (loss) | (9,043,863 | ) | (112,335,439 | ) | 23,033,047 | ||||||||||
Net unrealized appreciation | 8,051,868 | 26,183,183 | 71,427,731 | ||||||||||||
Net assets | $ | 45,701,606 | $ | 139,511,991 | $ | 272,614,617 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 39,482,978 | $ | 9,478,412 | $ | 42,551,554 | |||||||||
Shares outstanding | 4,090,376 | 378,743 | 1,718,427 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 9.65 | $ | 25.03 | $ | 24.76 | |||||||||
Offering price per share (NAV per share plus maximum sales charge)1 | $ | 10.21 | $ | 26.49 | $ | 26.20 | |||||||||
Class C: | |||||||||||||||
Net assets | $ | 4,598,766 | $ | 3,298,734 | $ | 3,686,853 | |||||||||
Shares outstanding | 488,140 | 137,522 | 165,192 | ||||||||||||
Net asset value and offering price per share | $ | 9.42 | $ | 23.99 | $ | 22.32 | |||||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1 | $ | 9.33 | $ | 23.75 | $ | 22.10 | |||||||||
Class Y: | |||||||||||||||
Net assets | $ | 1,619,862 | $ | 126,734,845 | $ | 226,376,210 | |||||||||
Shares outstanding | 166,765 | 5,041,483 | 8,706,738 | ||||||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1 | $ | 9.71 | $ | 25.14 | $ | 26.00 |
See accompanying notes to financial statements.
77
The UBS Funds
Financial statements
Statement of operations
For the year ended June 30, 2014
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | UBS U.S. Defensive Equity Fund | |||||||||||||
Investment income: | |||||||||||||||
Dividends | $ | 234,470 | $ | 459,163 | $ | 304,491 | |||||||||
Affiliated income | 4,546 | 224 | 139 | ||||||||||||
Securities lending1 | — | 9,358 | — | ||||||||||||
Foreign tax withheld | (15,025 | ) | (52,755 | ) | (210 | ) | |||||||||
Total income | 223,991 | 415,990 | 304,420 | ||||||||||||
Expenses: | |||||||||||||||
Advisory and administration | $ | 212,644 | $ | 170,937 | $ | 160,379 | |||||||||
Distribution and service: | |||||||||||||||
Class A | 3,036 | 15,916 | 24,527 | ||||||||||||
Class C | 4,034 | 8,817 | 25,901 | ||||||||||||
Transfer agency and related services fees: | |||||||||||||||
Class A | 7,824 | 7,064 | 6,104 | ||||||||||||
Class C | — | 1,200 | 3,605 | ||||||||||||
Class Y | 184 | 9,261 | 1,657 | ||||||||||||
Custodian and fund accounting | 89,172 | 52,964 | 70,685 | ||||||||||||
Federal and state registration | 29,681 | 39,959 | 39,453 | ||||||||||||
Professional services | 117,198 | 150,155 | 100,183 | ||||||||||||
Shareholder reports | 8,555 | 13,372 | 16,220 | ||||||||||||
Trustees | 19,705 | 20,096 | 19,577 | ||||||||||||
Dividend expense and security loan fees for securities sold short | 379,424 | — | 97,245 | ||||||||||||
Interest expense | — | — | — | ||||||||||||
Other | 18,138 | 17,036 | 15,433 | ||||||||||||
Total expenses | 889,595 | 506,777 | 580,969 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (262,345 | ) | (286,587 | ) | (246,697 | ) | |||||||||
Net expenses | 627,250 | 220,190 | 334,272 | ||||||||||||
Net investment income (loss) | (403,259 | ) | 195,800 | (29,852 | ) | ||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 2,831,012 | 2,829,526 | 2,514,536 | ||||||||||||
Options written | — | — | 210,914 | ||||||||||||
Securities sold short | (2,169,084 | ) | — | (722,435 | ) | ||||||||||
Swap agreements | 116,714 | — | — | ||||||||||||
Forward foreign currency contracts | (27,153 | ) | 53,810 | — | |||||||||||
Foreign currency transactions | (11,175 | ) | (19,728 | ) | — | ||||||||||
Net realized gain | 740,314 | 2,863,608 | 2,003,015 | ||||||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||||||
Investments | 607,695 | 679,715 | 922,245 | ||||||||||||
Options written | — | — | 35,170 | ||||||||||||
Securities sold short | (440,033 | ) | — | (379,915 | ) | ||||||||||
Swap agreements | 43,768 | — | — | ||||||||||||
Forward foreign currency contracts | (43,831 | ) | 32,555 | — | |||||||||||
Translation of other assets and liabilities denominated in foreign currency | 5,055 | (23,837 | ) | — | |||||||||||
Change in net unrealized appreciation/depreciation | 172,654 | 688,433 | 577,500 | ||||||||||||
Net realized and unrealized gain | 912,968 | 3,552,041 | 2,580,515 | ||||||||||||
Net increase in net assets resulting from operations | $ | 509,709 | $ | 3,747,841 | $ | 2,550,663 |
1 Includes affiliated income from UBS Private Money Market Fund LLC of $30, $179, $574 and $3,006 for UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund, respectively.
78
The UBS Funds
Financial statements
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | UBS U.S. Small Cap Growth Fund | |||||||||||||
Investment income: | |||||||||||||||
Dividends | $ | 557,478 | $ | 2,445,637 | $ | 619,989 | |||||||||
Affiliated income | 971 | 1,669 | 5,285 | ||||||||||||
Securities lending1 | 16,460 | 82,710 | 605,179 | ||||||||||||
Foreign tax withheld | — | (941 | ) | (929 | ) | ||||||||||
Total income | 574,909 | 2,529,075 | 1,229,524 | ||||||||||||
Expenses: | |||||||||||||||
Advisory and administration | $ | 340,246 | $ | 1,176,933 | $ | 2,367,924 | |||||||||
Distribution and service: | |||||||||||||||
Class A | 95,435 | 23,197 | 97,875 | ||||||||||||
Class C | 43,411 | 29,981 | 33,844 | ||||||||||||
Transfer agency and related services fees: | |||||||||||||||
Class A | 32,210 | 6,129 | 52,474 | ||||||||||||
Class C | 5,160 | 3,106 | 5,636 | ||||||||||||
Class Y | 1,913 | 31,449 | 44,504 | ||||||||||||
Custodian and fund accounting | 52,353 | 65,639 | 97,368 | ||||||||||||
Federal and state registration | 39,532 | 40,820 | 55,144 | ||||||||||||
Professional services | 101,716 | 101,086 | 99,056 | ||||||||||||
Shareholder reports | 39,005 | 16,564 | 30,274 | ||||||||||||
Trustees | 22,837 | 34,936 | 46,899 | ||||||||||||
Dividend expense and security loan fees for securities sold short | — | — | — | ||||||||||||
Interest expense | — | 1,548 | — | ||||||||||||
Other | 12,880 | 34,235 | 40,172 | ||||||||||||
Total expenses | 786,698 | 1,565,623 | 2,971,170 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (230,463 | ) | (67,273 | ) | (23,369 | ) | |||||||||
Net expenses | 556,235 | 1,498,350 | 2,947,801 | ||||||||||||
Net investment income (loss) | 18,674 | 1,030,725 | (1,718,277 | ) | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 5,721,460 | 33,851,558 | 39,716,289 | ||||||||||||
Options written | — | — | — | ||||||||||||
Securities sold short | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Foreign currency transactions | — | — | — | ||||||||||||
Net realized gain | 5,721,460 | 33,851,558 | 39,716,289 | ||||||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||||||
Investments | 3,691,293 | 1,678,117 | 17,197,076 | ||||||||||||
Options written | — | — | — | ||||||||||||
Securities sold short | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | 727 | — | — | ||||||||||||
Change in net unrealized appreciation/depreciation | 3,692,020 | 1,678,117 | 17,197,076 | ||||||||||||
Net realized and unrealized gain | 9,413,480 | 35,529,675 | 56,913,365 | ||||||||||||
Net increase in net assets resulting from operations | $ | 9,432,154 | $ | 36,560,400 | $ | 55,195,088 |
See accompanying notes to financial statements.
79
The UBS Funds
Financial statements
Statement of changes in net assets
UBS Equity Long-Short Multi-Strategy Fund | UBS Global Sustainable Equity Fund | ||||||||||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (403,259 | ) | $ | (304,219 | ) | $ | 195,800 | $ | 300,201 | |||||||||
Net realized gain | 740,314 | 217,177 | 2,863,608 | 1,176,312 | |||||||||||||||
Change in net unrealized appreciation | 172,654 | 1,155,860 | 688,433 | 1,325,263 | |||||||||||||||
Net increase in net assets from operations | 509,709 | 1,068,818 | 3,747,841 | 2,801,776 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | — | — | (137,135 | ) | (174,245 | ) | |||||||||||||
Total Class A dividends and distributions | — | — | (137,135 | ) | (174,245 | ) | |||||||||||||
Class C: | |||||||||||||||||||
Net investment income | — | — | (10,296 | ) | (16,321 | ) | |||||||||||||
Total Class C dividends and distributions | — | — | (10,296 | ) | (16,321 | ) | |||||||||||||
Class Y: | |||||||||||||||||||
Net investment income | — | — | (301,607 | ) | (459,040 | ) | |||||||||||||
Total Class Y dividends and distributions | — | — | (301,607 | ) | (459,040 | ) | |||||||||||||
Decrease in net assets from dividends and distributions | — | — | (449,038 | ) | (649,606 | ) | |||||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 186,609 | 190,285 | 4,275,836 | 847,379 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | — | — | 425,484 | 634,993 | |||||||||||||||
Redemption fees | — | 259 | 3,003 | 1,194 | |||||||||||||||
Cost of shares redeemed | (811,681 | ) | (2,493,069 | ) | (4,197,525 | ) | (5,104,108 | ) | |||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (625,072 | ) | (2,302,525 | ) | 506,798 | (3,620,542 | ) | ||||||||||||
Increase (decrease) in net assets | (115,363 | ) | (1,233,707 | ) | 3,805,601 | (1,468,372 | ) | ||||||||||||
Net assets, beginning of year | 16,159,710 | 17,393,417 | 17,777,141 | 19,245,513 | |||||||||||||||
Net assets, end of year | $ | 16,044,347 | $ | 16,159,710 | $ | 21,582,742 | $ | 17,777,141 | |||||||||||
Accumulated (distributions in excess of) undistributed net investment income (loss) | $ | (220,258 | ) | $ | (84,438 | ) | $ | 302,800 | $ | 394,560 |
80
The UBS Funds
Financial statements
UBS U.S. Defensive Equity Fund | |||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | (29,852 | ) | $ | (67,148 | ) | |||||
Net realized gain | 2,003,015 | 1,058,279 | |||||||||
Change in net unrealized appreciation | 577,500 | 2,479,234 | |||||||||
Net increase in net assets from operations | 2,550,663 | 3,470,365 | |||||||||
Dividends and distributions to shareholders by class: | |||||||||||
Class A: | |||||||||||
Net investment income | — | (15,570 | ) | ||||||||
Total Class A dividends and distributions | — | (15,570 | ) | ||||||||
Class C: | |||||||||||
Net investment income | — | — | |||||||||
Total Class C dividends and distributions | — | — | |||||||||
Class Y: | |||||||||||
Net investment income | — | (11,047 | ) | ||||||||
Total Class Y dividends and distributions | — | (11,047 | ) | ||||||||
Decrease in net assets from dividends and distributions | — | (26,617 | ) | ||||||||
Beneficial interest transactions: | |||||||||||
Proceeds from shares sold | 2,462,360 | 325,180 | |||||||||
Shares issued on reinvestment of dividends and distributions | — | 25,364 | |||||||||
Redemption fees | 2,288 | 623 | |||||||||
Cost of shares redeemed | (3,648,774 | ) | (5,770,197 | ) | |||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (1,184,126 | ) | (5,419,030 | ) | |||||||
Increase (decrease) in net assets | 1,366,537 | (1,975,282 | ) | ||||||||
Net assets, beginning of year | 14,653,450 | 16,628,732 | |||||||||
Net assets, end of year | $ | 16,019,987 | $ | 14,653,450 | |||||||
Accumulated (distributions in excess of) undistributed net investment income (loss) | $ | (14,173 | ) | $ | 497 |
See accompanying notes to financial statements.
81
The UBS Funds
Financial statements
Statement of changes in net assets (continued)
UBS U.S. Equity Opportunity Fund | UBS U.S. Large Cap Equity Fund | ||||||||||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 18,674 | $ | 155,664 | $ | 1,030,725 | $ | 1,675,443 | |||||||||||
Net realized gain | 5,721,460 | 4,562,968 | 33,851,558 | 32,514,296 | |||||||||||||||
Change in net unrealized appreciation | 3,692,020 | 4,311,162 | 1,678,117 | 13,988,632 | |||||||||||||||
Net increase in net assets from operations | 9,432,154 | 9,029,794 | 36,560,400 | 48,178,371 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (139,293 | ) | (314,372 | ) | (68,839 | ) | (42,587 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class A dividends and distributions | (139,293 | ) | (314,372 | ) | (68,839 | ) | (42,587 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | — | (2,897 | ) | (5,290 | ) | — | |||||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class C dividends and distributions | — | (2,897 | ) | (5,290 | ) | — | |||||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (7,817 | ) | (15,975 | ) | (1,588,113 | ) | (1,751,528 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class Y dividends and distributions | (7,817 | ) | (15,975 | ) | (1,588,113 | ) | (1,751,528 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (147,110 | ) | (333,244 | ) | (1,662,242 | ) | (1,794,115 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 901,262 | 269,354 | 15,676,880 | 23,658,767 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 130,167 | 294,842 | 1,652,916 | 1,786,736 | |||||||||||||||
Redemption fees | 18 | 10 | 18,455 | 12,780 | |||||||||||||||
Cost of shares redeemed | (6,214,115 | ) | (8,621,706 | ) | (70,030,066 | ) | (117,442,606 | ) | |||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (5,182,668 | ) | (8,057,500 | ) | (52,681,815 | ) | (91,984,323 | ) | |||||||||||
Increase (decrease) in net assets | 4,102,376 | 639,050 | (17,783,657 | ) | (45,600,067 | ) | |||||||||||||
Net assets, beginning of year | 41,599,230 | 40,960,180 | 157,295,648 | 202,895,715 | |||||||||||||||
Net assets, end of year | $ | 45,701,606 | $ | 41,599,230 | $ | 139,511,991 | $ | 157,295,648 | |||||||||||
Accumulated (distributions in excess of) undistributed net investment income (loss) | $ | 9,806 | $ | 146,657 | $ | 1,011,875 | $ | 1,665,760 |
82
The UBS Funds
Financial statements
UBS U.S. Small Cap Growth Fund | |||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | (1,718,277 | ) | $ | (761,739 | ) | |||||
Net realized gain | 39,716,289 | 14,356,038 | |||||||||
Change in net unrealized appreciation | 17,197,076 | 22,468,800 | |||||||||
Net increase in net assets from operations | 55,195,088 | 36,063,099 | |||||||||
Dividends and distributions to shareholders by class: | |||||||||||
Class A: | |||||||||||
Net investment income | — | — | |||||||||
Net realized gain | (859,809 | ) | — | ||||||||
Total Class A dividends and distributions | (859,809 | ) | — | ||||||||
Class C: | |||||||||||
Net investment income | — | — | |||||||||
Net realized gain | (86,066 | ) | — | ||||||||
Total Class C dividends and distributions | (86,066 | ) | — | ||||||||
Class Y: | |||||||||||
Net investment income | — | — | |||||||||
Net realized gain | (4,582,035 | ) | — | ||||||||
Total Class Y dividends and distributions | (4,582,035 | ) | — | ||||||||
Decrease in net assets from dividends and distributions | (5,527,910 | ) | — | ||||||||
Beneficial interest transactions: | |||||||||||
Proceeds from shares sold | 52,317,437 | 64,623,738 | |||||||||
Shares issued on reinvestment of dividends and distributions | 5,401,279 | — | |||||||||
Redemption fees | 29,689 | 10,101 | |||||||||
Cost of shares redeemed | (43,020,809 | ) | (33,380,685 | ) | |||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | 14,727,596 | 31,253,154 | |||||||||
Increase (decrease) in net assets | 64,394,774 | 67,316,253 | |||||||||
Net assets, beginning of year | 208,219,843 | 140,903,590 | |||||||||
Net assets, end of year | $ | 272,614,617 | $ | 208,219,843 | |||||||
Accumulated (distributions in excess of) undistributed net investment income (loss) | $ | 13,866 | $ | (538,727 | ) |
See accompanying notes to financial statements.
83
The UBS Funds
Financial statements
Statement of cash flows
For the year ended June 30, 2014
UBS Equity Long-Short Multi-Strategy Fund | |||||||
Cash provided by operating activities: | |||||||
Net increase in net assets from operations | $ | 509,709 | |||||
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | |||||||
Purchases of investment securities | (18,637,072 | ) | |||||
Proceeds from disposition of investment securities | 21,869,046 | ||||||
Covers of securities sold short | (17,091,090 | ) | |||||
Proceeds from securities sold short | 15,103,593 | ||||||
Purchases of short-term investments, net | (391,816 | ) | |||||
Net realized (gain)/loss on investments | (2,831,012 | ) | |||||
Net realized (gain)/loss on securities sold short | 2,169,084 | ||||||
Change in net unrealized appreciation/depreciation on investments | (607,695 | ) | |||||
Change in net unrealized appreciation/depreciation on securities sold short | 440,033 | ||||||
Change in net unrealized appreciation/depreciation on swap agreements, at value | (43,768 | ) | |||||
Change in net unrealized appreciation/depreciation on forward foreign currency contracts | 43,831 | ||||||
Decrease in foreign tax reclaims receivable | 1,758 | ||||||
Decrease in due from Advisor | 49,388 | ||||||
Increase in investment advisory and administration fees payable | 2,945 | ||||||
Decrease in cash collateral for securities sold short | 3,118,522 | ||||||
Decrease in dividends and interest receivable | 21,071 | ||||||
Decrease in due from broker | 229,291 | ||||||
Increase in other assets | (22,033 | ) | |||||
Increase in dividends payable and security loan fees for securities sold short | 732 | ||||||
Decrease in accrued expenses and other liabilities | (2,582 | ) | |||||
Net cash provided by operating activities | 3,931,935 | ||||||
Cash used in financing activities: | |||||||
Proceeds from shares issued | 186,703 | ||||||
Payment on shares redeemed | (811,624 | ) | |||||
Net cash used in financing activities | (624,921 | ) | |||||
Net increase in cash | 3,307,014 | ||||||
Cash1: | |||||||
Beginning of year | 101,671 | ||||||
End of year | $ | 3,408,685 |
1 The Fund considers all cash accounts (including foreign currencies) that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents.
84
The UBS Funds
Financial statements
Statement of cash flows
For the year ended June 30, 2014
UBS U.S. Defensive Equity Fund | |||||||
Cash provided by operating activities: | |||||||
Net increase in net assets from operations | $ | 2,550,663 | |||||
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | |||||||
Purchases of investment securities | (11,910,793 | ) | |||||
Proceeds from disposition of investment securities | 13,829,691 | ||||||
Covers of securities sold short | (3,886,150 | ) | |||||
Proceeds from securities sold short | 3,142,966 | ||||||
Proceeds from options written | 216,670 | ||||||
Cost of closing transactions on options written | (30,126 | ) | |||||
Purchase of short-term investments, net | (232,547 | ) | |||||
Net realized (gain)/loss on investments | (2,514,536 | ) | |||||
Net realized (gain)/loss on securities sold short | 722,435 | ||||||
Net realized gain/loss on options written | (210,914 | ) | |||||
Change in net unrealized appreciation/depreciation on investments | (922,245 | ) | |||||
Change in net unrealized appreciation/depreciation on securities sold short | 379,915 | ||||||
Change in net unrealized appreciation/depreciation on options written | (35,170 | ) | |||||
Decrease in due from Advisor | 33,290 | ||||||
Decrease in dividends and interest receivable | 21,219 | ||||||
Increase in due to broker for securities sold short | 174,304 | ||||||
Increase in other assets | (10,131 | ) | |||||
Decrease in dividends payable and security loan fees for securities sold short | (2,940 | ) | |||||
Increase in accrued expenses and other liabilities | 10,843 | ||||||
Net cash provided by operating activities | 1,326,444 | ||||||
Cash used in financing activities: | |||||||
Proceeds from shares issued | 2,438,115 | ||||||
Payment on shares redeemed | (3,761,660 | ) | |||||
Redemption fees retained | 2,288 | ||||||
Net cash used in financing activities | (1,321,257 | ) | |||||
Net increase in cash | 5,187 | ||||||
Cash1: | |||||||
Beginning of year | 6,114 | ||||||
End of year | $ | 11,301 |
1 The Fund considers all cash accounts (including foreign currencies) that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents.
See accompanying notes to financial statements.
85
UBS Equity Long-Short Multi-Strategy Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||
Year ended June 30, | |||||||||||||||||||
2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of year | $ | 10.06 | $ | 9.43 | $ | 9.70 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment (loss)1 | (0.27 | ) | (0.19 | ) | (0.22 | ) | (0.20 | ) | |||||||||||
Net realized and unrealized gain (loss) | 0.58 | 0.82 | (0.04 | ) | (0.12 | ) | |||||||||||||
Total income (loss) from investment operations | 0.31 | 0.63 | (0.26 | ) | (0.32 | ) | |||||||||||||
Redemption fees | — | 0.003 | 0.003 | 0.02 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net realized gains | — | — | (0.01 | ) | — | ||||||||||||||
Net asset value, end of year | $ | 10.37 | $ | 10.06 | $ | 9.43 | $ | 9.70 | |||||||||||
Total investment return2 | 3.08 | % | 6.68 | % | (2.73 | )% | (3.00 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 6.29 | % | 6.61 | % | 5.76 | % | 5.26 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 4.05 | % | 3.93 | % | 4.25 | % | 4.13 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.75 | % | 1.75 | % | 1.75 | % | 1.75 | % | |||||||||||
Net investment loss | (2.68 | )% | (2.04 | )% | (2.27 | )% | (2.07 | )% | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of year (000's) | $ | 870 | $ | 1,377 | $ | 2,578 | $ | 4,466 | |||||||||||
Portfolio turnover rate | 148 | % | 167 | % | 242 | % | 460 | % |
Class C | |||||||||||||||||||
Year ended June 30, | |||||||||||||||||||
2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of year | $ | 9.85 | $ | 9.29 | $ | 9.63 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment (loss)1 | (0.33 | ) | (0.27 | ) | (0.28 | ) | (0.28 | ) | |||||||||||
Net realized and unrealized gain (loss) | 0.55 | 0.83 | (0.05 | ) | (0.09 | ) | |||||||||||||
Total income (loss) from investment operations | 0.22 | 0.56 | (0.33 | ) | (0.37 | ) | |||||||||||||
Redemption fees | — | 0.003 | — | 0.003 | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net realized gains | — | — | (0.01 | ) | — | ||||||||||||||
Net asset value, end of year | $ | 10.07 | $ | 9.85 | $ | 9.29 | $ | 9.63 | |||||||||||
Total investment return2 | 2.23 | % | 6.03 | % | (3.58 | )% | (3.60 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 6.44 | % | 6.88 | % | 6.47 | % | 5.94 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 4.85 | % | 4.75 | % | 5.05 | % | 4.94 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 2.50 | % | 2.50 | % | 2.50 | % | 2.50 | % | |||||||||||
Net investment loss | (3.47 | )% | (2.84 | )% | (3.01 | )% | (2.84 | )% | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of year (000's) | $ | 409 | $ | 413 | $ | 600 | $ | 904 | |||||||||||
Portfolio turnover rate | 148 | % | 167 | % | 242 | % | 460 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each 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 Amount represents less than $0.005 per share.
86
UBS Equity Long-Short Multi-Strategy Fund
Financial highlights
Class Y | |||||||||||||||||||
Year ended June 30, | |||||||||||||||||||
2014 | 2013 | 2012 | 2011 | ||||||||||||||||
Net asset value, beginning of year | $ | 10.14 | $ | 9.48 | $ | 9.72 | $ | 10.00 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment (loss)1 | (0.24 | ) | (0.18 | ) | (0.19 | ) | (0.18 | ) | |||||||||||
Net realized and unrealized gain (loss) | 0.58 | 0.84 | (0.04 | ) | (0.10 | ) | |||||||||||||
Total income (loss) from investment operations | 0.34 | 0.66 | (0.23 | ) | (0.28 | ) | |||||||||||||
Redemption fees | — | 0.003 | — | — | |||||||||||||||
Less dividends/distributions: | |||||||||||||||||||
From net realized gains | — | — | (0.01 | ) | — | ||||||||||||||
Net asset value, end of year | $ | 10.48 | $ | 10.14 | $ | 9.48 | $ | 9.72 | |||||||||||
Total investment return2 | 3.35 | % | 6.96 | % | (2.51 | )% | (2.70 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 5.46 | % | 6.16 | % | 5.33 | % | 4.83 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 3.87 | % | 3.81 | % | 4.08 | % | 3.82 | % | |||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | |||||||||||
Net investment loss | (2.47 | )% | (1.84 | )% | (2.00 | )% | (1.81 | )% | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of year (000's) | $ | 14,765 | $ | 14,370 | $ | 14,215 | $ | 14,583 | |||||||||||
Portfolio turnover rate | 148 | % | 167 | % | 242 | % | 460 | % |
See accompanying notes to financial statements.
87
UBS Global 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 | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.55 | $ | 6.75 | $ | 8.21 | $ | 6.62 | $ | 6.48 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.08 | 0.11 | 0.08 | 0.07 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.51 | 0.93 | (1.40 | ) | 1.78 | 0.54 | |||||||||||||||||
Total income (loss) from investment operations | 1.59 | 1.04 | (1.32 | ) | 1.85 | 0.60 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.24 | ) | (0.14 | ) | (0.26 | ) | (0.46 | ) | |||||||||||||
Net asset value, end of year | $ | 8.95 | $ | 7.55 | $ | 6.75 | $ | 8.21 | $ | 6.62 | |||||||||||||
Total investment return2 | 21.32 | % | 15.49 | % | (15.99 | )% | 28.14 | % | 8.65 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.74 | % | 2.65 | % | 2.28 | % | 2.04 | % | 1.76 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||
Net investment income | 0.91 | % | 1.49 | % | 1.20 | % | 0.93 | % | 0.83 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 7,541 | $ | 5,433 | $ | 5,576 | $ | 9,207 | $ | 6,875 | |||||||||||||
Portfolio turnover rate | 137 | % | 41 | % | 49 | % | 76 | % | 71 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.43 | $ | 6.63 | $ | 8.02 | $ | 6.47 | $ | 6.34 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.03 | 0.05 | 0.03 | 0.03 | 0.01 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.47 | 0.92 | (1.36 | ) | 1.72 | 0.53 | |||||||||||||||||
Total income (loss) from investment operations | 1.50 | 0.97 | (1.33 | ) | 1.75 | 0.54 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.17 | ) | (0.06 | ) | (0.20 | ) | (0.41 | ) | |||||||||||||
Net asset value, end of year | $ | 8.80 | $ | 7.43 | $ | 6.63 | $ | 8.02 | $ | 6.47 | |||||||||||||
Total investment return2 | 20.32 | % | 14.72 | % | (16.59 | )% | 27.14 | % | 7.86 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 3.54 | % | 3.40 | % | 3.06 | % | 2.82 | % | 2.56 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | |||||||||||||
Net investment income | 0.37 | % | 0.65 | % | 0.45 | % | 0.32 | % | 0.10 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 1,579 | $ | 605 | $ | 703 | $ | 1,405 | $ | 866 | |||||||||||||
Portfolio turnover rate | 137 | % | 41 | % | 49 | % | 76 | % | 71 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
88
UBS Global Sustainable Equity Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.58 | $ | 6.77 | $ | 8.25 | $ | 6.65 | $ | 6.51 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.09 | 0.13 | 0.11 | 0.09 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.53 | 0.94 | (1.43 | ) | 1.79 | 0.57 | |||||||||||||||||
Total income (loss) from investment operations | 1.62 | 1.07 | (1.32 | ) | 1.88 | 0.63 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.21 | ) | (0.26 | ) | (0.16 | ) | (0.28 | ) | (0.49 | ) | |||||||||||||
Net asset value, end of year | $ | 8.99 | $ | 7.58 | $ | 6.77 | $ | 8.25 | $ | 6.65 | |||||||||||||
Total investment return2 | 21.65 | % | 15.95 | % | (15.88 | )% | 28.46 | % | 8.94 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.45 | % | 2.40 | % | 2.06 | % | 1.78 | % | 1.55 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||
Net investment income | 1.10 | % | 1.69 | % | 1.52 | % | 1.13 | % | 0.84 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 12,462 | $ | 11,740 | $ | 12,966 | $ | 17,829 | $ | 18,724 | |||||||||||||
Portfolio turnover rate | 137 | % | 41 | % | 49 | % | 76 | % | 71 | % |
See accompanying notes to financial statements.
89
UBS U.S. Defensive Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.81 | $ | 8.66 | $ | 8.94 | $ | 7.01 | $ | 6.31 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.01 | ) | (0.03 | ) | 0.02 | 0.02 | (0.01 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 2.04 | 2.20 | (0.29 | ) | 1.91 | 0.71 | |||||||||||||||||
Total income (loss) from investment operations | 2.03 | 2.17 | (0.27 | ) | 1.93 | 0.70 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | — | (0.02 | ) | (0.01 | ) | — | — | ||||||||||||||||
Net asset value, end of year | $ | 12.84 | $ | 10.81 | $ | 8.66 | $ | 8.94 | $ | 7.01 | |||||||||||||
Total investment return2 | 18.78 | % | 25.04 | % | (3.02 | )% | 27.53 | % | 11.09 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 3.80 | % | 4.79 | % | 3.21 | % | 2.54 | % | 2.44 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.15 | % | 2.81 | % | 2.21 | % | 2.03 | % | 2.24 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | |||||||||||||
Net investment income (loss) | (0.11 | )% | (0.34 | )% | 0.26 | % | 0.24 | % | (0.10 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 11,473 | $ | 9,072 | $ | 9,682 | $ | 16,726 | $ | 22,938 | |||||||||||||
Portfolio turnover rate | 60 | % | 58 | % | 85 | % | 85 | % | 130 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.48 | $ | 8.45 | $ | 8.78 | $ | 6.93 | $ | 6.29 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.10 | ) | (0.11 | ) | (0.04 | ) | (0.04 | ) | (0.06 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.98 | 2.14 | (0.29 | ) | 1.89 | 0.70 | |||||||||||||||||
Total income (loss) from investment operations | 1.88 | 2.03 | (0.33 | ) | 1.85 | 0.64 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | — | — | — | — | — | ||||||||||||||||||
Net asset value, end of year | $ | 12.36 | $ | 10.48 | $ | 8.45 | $ | 8.78 | $ | 6.93 | |||||||||||||
Total investment return2 | 17.94 | % | 24.02 | % | (3.76 | )% | 26.70 | % | 10.18 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 4.61 | % | 5.61 | % | 4.04 | % | 3.36 | % | 3.27 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.90 | % | 3.59 | % | 2.96 | % | 2.78 | % | 2.98 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 2.25 | % | 2.25 | % | 2.25 | % | 2.25 | % | 2.25 | % | |||||||||||||
Net investment income (loss) | (0.87 | )% | (1.13 | )% | (0.49 | )% | (0.52 | )% | (0.85 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 2,401 | $ | 2,632 | $ | 3,141 | $ | 5,029 | $ | 6,810 | |||||||||||||
Portfolio turnover rate | 60 | % | 58 | % | 85 | % | 85 | % | 130 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
90
UBS U.S. Defensive Equity Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 10.80 | $ | 8.65 | $ | 8.94 | $ | 7.01 | $ | 6.30 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.01 | (0.01 | ) | 0.04 | 0.04 | 0.01 | |||||||||||||||||
Net realized and unrealized gain (loss) | 2.06 | 2.19 | (0.29 | ) | 1.92 | 0.70 | |||||||||||||||||
Total income (loss) from investment operations | 2.07 | 2.18 | (0.25 | ) | 1.96 | 0.71 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.04 | ) | (0.03 | ) | — | |||||||||||||||
Net asset value, end of year | $ | 12.87 | $ | 10.80 | $ | 8.65 | $ | 8.94 | $ | 7.01 | |||||||||||||
Total investment return2 | 19.17 | % | 25.26 | % | (2.80 | )% | 27.91 | % | 11.27 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 3.53 | % | 4.51 | % | 2.85 | % | 2.26 | % | 2.16 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.90 | % | 2.57 | % | 1.93 | % | 1.78 | % | 2.00 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||
Net investment income (loss) | 0.12 | % | (0.09 | )% | 0.50 | % | 0.48 | % | 0.12 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 2,146 | $ | 2,950 | $ | 3,806 | $ | 10,764 | $ | 12,132 | |||||||||||||
Portfolio turnover rate | 60 | % | 58 | % | 85 | % | 85 | % | 130 | % |
See accompanying notes to financial statements.
91
UBS U.S. Equity Opportunity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.81 | $ | 6.31 | $ | 6.74 | $ | 5.33 | $ | 4.94 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.01 | 0.03 | 0.05 | 0.06 | 0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.86 | 1.53 | (0.42 | ) | 1.41 | 0.46 | |||||||||||||||||
Total income (loss) from investment operations | 1.87 | 1.56 | (0.37 | ) | 1.47 | 0.51 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.06 | ) | (0.06 | ) | (0.06 | ) | (0.12 | ) | |||||||||||||
Net asset value, end of year | $ | 9.65 | $ | 7.81 | $ | 6.31 | $ | 6.74 | $ | 5.33 | |||||||||||||
Total investment return2 | 24.01 | % | 24.92 | % | (5.33 | )% | 27.57 | % | 10.16 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.72 | % | 1.83 | % | 1.89 | % | 1.61 | % | 1.61 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | |||||||||||||
Net investment income (loss) | 0.11 | % | 0.45 | % | 0.87 | % | 0.88 | % | 0.83 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 39,483 | $ | 36,269 | $ | 35,538 | $ | 43,766 | $ | 41,012 | |||||||||||||
Portfolio turnover rate | 62 | % | 89 | % | 138 | % | 85 | % | 70 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.65 | $ | 6.18 | $ | 6.59 | $ | 5.20 | $ | 4.83 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.05 | ) | (0.02 | ) | 0.01 | 0.01 | 0.003 | ||||||||||||||||
Net realized and unrealized gain (loss) | 1.82 | 1.50 | (0.41 | ) | 1.39 | 0.45 | |||||||||||||||||
Total income (loss) from investment operations | 1.77 | 1.48 | (0.40 | ) | 1.40 | 0.45 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | — | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.08 | ) | ||||||||||||||
Net asset value, end of year | $ | 9.42 | $ | 7.65 | $ | 6.18 | $ | 6.59 | $ | 5.20 | |||||||||||||
Total investment return2 | 23.14 | % | 23.88 | % | (6.07 | )% | 26.87 | % | 9.08 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.50 | % | 2.62 | % | 2.67 | % | 2.40 | % | 2.41 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | |||||||||||||
Net investment income (loss) | (0.64 | )% | (0.30 | )% | 0.12 | % | 0.13 | % | 0.08 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 4,599 | $ | 4,026 | $ | 3,978 | $ | 4,992 | $ | 4,889 | |||||||||||||
Portfolio turnover rate | 62 | % | 89 | % | 138 | % | 85 | % | 70 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
92
UBS U.S. Equity Opportunity Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.86 | $ | 6.35 | $ | 6.79 | $ | 5.36 | $ | 4.97 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.03 | 0.05 | 0.07 | 0.07 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.87 | 1.54 | (0.43 | ) | 1.43 | 0.47 | |||||||||||||||||
Total income (loss) from investment operations | 1.90 | 1.59 | (0.36 | ) | 1.50 | 0.53 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.08 | ) | (0.08 | ) | (0.07 | ) | (0.14 | ) | |||||||||||||
Net asset value, end of year | $ | 9.71 | $ | 7.86 | $ | 6.35 | $ | 6.79 | $ | 5.36 | |||||||||||||
Total investment return2 | 24.28 | % | 25.27 | % | (5.14 | )% | 28.13 | % | 10.39 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.52 | % | 1.67 | % | 1.73 | % | 1.48 | % | 1.50 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | |||||||||||||
Net investment income | 0.36 | % | 0.70 | % | 1.12 | % | 1.13 | % | 1.07 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 1,620 | $ | 1,304 | $ | 1,444 | $ | 1,576 | $ | 1,515 | |||||||||||||
Portfolio turnover rate | 62 | % | 89 | % | 138 | % | 85 | % | 70 | % |
See accompanying notes to financial statements.
93
UBS U.S. Large Cap Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 19.85 | $ | 15.96 | $ | 16.46 | $ | 12.79 | $ | 11.48 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.11 | 0.11 | 0.10 | 0.09 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 5.23 | 3.86 | (0.51 | ) | 3.65 | 1.54 | |||||||||||||||||
Total income (loss) from investment operations | 5.34 | 3.97 | (0.41 | ) | 3.74 | 1.60 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.08 | ) | (0.09 | ) | (0.07 | ) | (0.29 | ) | |||||||||||||
Net asset value, end of year | $ | 25.03 | $ | 19.85 | $ | 15.96 | $ | 16.46 | $ | 12.79 | |||||||||||||
Total investment return2 | 27.05 | % | 24.99 | % | (2.47 | )% | 29.28 | % | 13.75 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 1.29 | % | 1.28 | % | 1.24 | % | 1.19 | % | 1.33 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | %3 | 1.20 | % | |||||||||||||
Net investment income (loss) | 0.47 | % | 0.63 | % | 0.64 | % | 0.57 | % | 0.47 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 9,478 | $ | 8,534 | $ | 14,113 | $ | 19,832 | $ | 23,164 | |||||||||||||
Portfolio turnover rate | 55 | % | 58 | % | 65 | % | 60 | % | 50 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 19.06 | $ | 15.36 | $ | 15.88 | $ | 12.37 | $ | 11.14 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.06 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.04 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 5.03 | 3.72 | (0.50 | ) | 3.54 | 1.50 | |||||||||||||||||
Total income (loss) from investment operations | 4.97 | 3.70 | (0.52 | ) | 3.51 | 1.46 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.04 | ) | — | — | — | (0.23 | ) | ||||||||||||||||
Net asset value, end of year | $ | 23.99 | $ | 19.06 | $ | 15.36 | $ | 15.88 | $ | 12.37 | |||||||||||||
Total investment return2 | 26.09 | % | 24.09 | % | (3.28 | )% | 28.38 | % | 12.92 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 2.08 | % | 2.04 | % | 2.02 | % | 2.00 | % | 2.01 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % | |||||||||||||
Net investment income (loss) | (0.27 | )% | (0.11 | )% | (0.11 | )% | (0.18 | )% | (0.28 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 3,299 | $ | 2,617 | $ | 2,873 | $ | 3,467 | $ | 3,539 | |||||||||||||
Portfolio turnover rate | 55 | % | 58 | % | 65 | % | 60 | % | 50 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
94
UBS U.S. Large Cap Equity Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 19.94 | $ | 16.07 | $ | 16.60 | $ | 12.91 | $ | 11.62 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.16 | 0.15 | 0.14 | 0.13 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 5.27 | 3.88 | (0.52 | ) | 3.68 | 1.56 | |||||||||||||||||
Total income (loss) from investment operations | 5.43 | 4.03 | (0.38 | ) | 3.81 | 1.66 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.16 | ) | (0.15 | ) | (0.12 | ) | (0.37 | ) | |||||||||||||
Net asset value, end of year | $ | 25.14 | $ | 19.94 | $ | 16.07 | $ | 16.60 | $ | 12.91 | |||||||||||||
Total investment return2 | 27.38 | % | 25.28 | % | (2.23 | )% | 29.57 | % | 14.04 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 0.99 | % | 0.98 | % | 0.97 | % | 0.94 | % | 0.99 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | %3 | 0.95 | % | |||||||||||||
Net investment income | 0.71 | % | 0.87 | % | 0.90 | % | 0.82 | % | 0.72 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 126,735 | $ | 146,145 | $ | 185,910 | $ | 206,555 | $ | 188,636 | |||||||||||||
Portfolio turnover rate | 55 | % | 58 | % | 65 | % | 60 | % | 50 | % |
See accompanying notes to financial statements.
95
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 | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 20.10 | $ | 16.19 | $ | 16.00 | $ | 10.60 | $ | 8.56 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment (loss)1 | (0.21 | ) | (0.11 | ) | (0.14 | ) | (0.13 | ) | (0.10 | ) | |||||||||||||
Net realized and unrealized gain | 5.40 | 4.02 | 0.33 | 5.53 | 2.14 | ||||||||||||||||||
Total income from investment operations | 5.19 | 3.91 | 0.19 | 5.40 | 2.04 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net realized gains | (0.53 | ) | — | — | — | — | |||||||||||||||||
Net asset value, end of year | $ | 24.76 | $ | 20.10 | $ | 16.19 | $ | 16.00 | $ | 10.60 | |||||||||||||
Total investment return2 | 26.42 | % | 23.78 | % | 1.19 | % | 50.94 | % | 23.83 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.45 | % | 1.55 | % | 1.57 | % | 1.54 | % | 1.60 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | |||||||||||||
Net investment loss | (0.92 | )% | (0.64 | )% | (0.93 | )% | (0.95 | )% | (1.00 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 42,552 | $ | 32,848 | $ | 31,015 | $ | 38,319 | $ | 28,586 | |||||||||||||
Portfolio turnover rate | 57 | % | 42 | % | 48 | % | 55 | % | 72 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 18.29 | $ | 14.85 | $ | 14.78 | $ | 9.87 | $ | 8.03 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment (loss)1 | (0.35 | ) | (0.22 | ) | (0.23 | ) | (0.22 | ) | (0.17 | ) | |||||||||||||
Net realized and unrealized gain | 4.91 | 3.66 | 0.30 | 5.13 | 2.01 | ||||||||||||||||||
Total income from investment operations | 4.56 | 3.44 | 0.07 | 4.91 | 1.84 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net realized gains | (0.53 | ) | — | — | — | — | |||||||||||||||||
Net asset value, end of year | $ | 22.32 | $ | 18.29 | $ | 14.85 | $ | 14.78 | $ | 9.87 | |||||||||||||
Total investment return2 | 25.51 | % | 22.83 | % | 0.47 | % | 49.75 | % | 22.91 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.24 | % | 2.32 | % | 2.35 | % | 2.37 | % | 2.50 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | |||||||||||||
Net investment loss | (1.67 | )% | (1.39 | )% | (1.68 | )% | (1.70 | )% | (1.75 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 3,687 | $ | 2,937 | $ | 2,442 | $ | 2,961 | $ | 2,336 | |||||||||||||
Portfolio turnover rate | 57 | % | 42 | % | 48 | % | 55 | % | 72 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 The investment manager recouped expenses previously reimbursed by the investment manager on behalf of the Fund, not to exceed the expense cap.
96
UBS U.S. Small Cap Growth Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 21.01 | $ | 16.88 | $ | 16.64 | $ | 11.00 | $ | 8.86 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment (loss)1 | (0.15 | ) | (0.08 | ) | (0.11 | ) | (0.10 | ) | (0.08 | ) | |||||||||||||
Net realized and unrealized gain | 5.67 | 4.21 | 0.35 | 5.74 | 2.22 | ||||||||||||||||||
Total income from investment operations | 5.52 | 4.13 | 0.24 | 5.64 | 2.14 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net realized gains | (0.53 | ) | — | — | — | — | |||||||||||||||||
Net asset value, end of year | $ | 26.00 | $ | 21.01 | $ | 16.88 | $ | 16.64 | $ | 11.00 | |||||||||||||
Total investment return2 | 26.79 | % | 24.17 | % | 1.44 | % | 51.27 | % | 24.15 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement/recoupment | 1.09 | % | 1.13 | % | 1.15 | % | 1.13 | % | 1.21 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement/recoupment | 1.09 | % | 1.15 | %3 | 1.15 | %3 | 1.15 | %3 | 1.15 | % | |||||||||||||
Net investment loss | (0.61 | )% | (0.41 | )% | (0.68 | )% | (0.70 | )% | (0.74 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 226,376 | $ | 172,436 | $ | 107,447 | $ | 112,186 | $ | 94,725 | |||||||||||||
Portfolio turnover rate | 57 | % | 42 | % | 48 | % | 55 | % | 72 | % |
See accompanying notes to financial statements.
97
The UBS Funds
Notes to financial statements
1. Organization and significant accounting policies
The UBS Funds (the "Trust") is registered with the US Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act"), as amended, as an open-end management investment company currently offering multiple series representing separate investment portfolios. The Trust is a Delaware statutory trust organized on August 13, 1993. The trustees of the Trust have the authority to issue an unlimited number of shares of beneficial interest at a par value of $0.001 per share.
The Trust has 13 Funds available for investment, each having its own investment objectives and policies. The following six funds are covered in this report: UBS Equity Long-Short Multi-Strategy Fund, UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund), UBS U.S. Defensive Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund, and UBS U.S. Small Cap Growth Fund (each a "Fund", and collectively, the "Funds"). At Board meetings held in December 2013 and April 2014, the Board of Trustees (the "Board") approved certain changes to the Class Y shares of each series of the Trust to permit wrap fee advisory program accounts to purchase Class Y shares. The Board also approved the tax-free conversion of wrap fee advisory program accounts currently holding Class A shares or Class C shares (post-CDSC) into Class Y shares. In connection with these changes, the Board approved the redesignation of Class Y shares as Class P shares, effective on or about July 28, 2014.
Each of the Funds is classified as a "diversified" investment company for purposes of the 1940 Act. The Funds currently offer Class A, Class C and Class Y shares. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing distribution and service charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its distribution and/or service plan, if any. Class Y shares have no distribution or service plan.
In the normal course of business, the Funds may enter into contracts that contain a variety of representations that provide general indemnification for certain liabilities. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had any prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("US GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies:
A. Valuation of investments: Each Fund calculates its net asset value on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share will be calculated as of the time trading was halted.
Each Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Funds normally obtain market values for their investments from independent pricing sources and broker-
98
The UBS Funds
Notes to financial statements
dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "evaluation" systems that derive values based on comparable investments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings. Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Investments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where investments are traded on more than one exchange, the investments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM" or the "Advisor"), the investment advisor of the Funds. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG, an internationally diversified organization with headquarters in Zurich and Basel, Switzerland and operations in many areas of the financial services industry. If a market value is not readily available from an independent pricing source for a particular investment, that investment is valued at fair value as determined in good faith by or under the direction of the Board. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments in which the Funds invest are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m., Eastern time, will not be reflected in the Fund's net asset value. However, if any of the Funds determine that such developments are so significant that they will materially affect the value of the Fund's investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value investments principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If an investment is valued at "fair value," that value is likely to be different from the last quoted market price for the investment. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Funds' use of the practical expedient within ASC Topic 820, investments in non-registered investment companies are also valued at the daily net asset value. All investments quoted in foreign currencies are valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using forward exchange rates quoted by independent pricing services.
99
The UBS Funds
Notes to financial statements
The Board has delegated to the UBS Global AM Global Valuation Committee ("GVC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, investments of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US GAAP requires disclosure regarding the various inputs that are used in determining the value of the Funds' investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Funds' own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
The provisions of ASC Topic 815 "Derivatives and Hedging" ("ASC Topic 815") require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk related contingent features in derivative agreements. Since investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of operations, they do not qualify for hedge accounting under ASC Topic 815. Accordingly, even though a Fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under ASC Topic 815. ASC Topic 815 requires that (1) objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. Details of this disclosure can be found below as well as in the Portfolio of investments. Forward foreign currency contracts entered into by a Fund may contain credit-risk related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash mar-
100
The UBS Funds
Notes to financial statements
gin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of June 30, 2014 is reflected in the Statement of assets and liabilities. If the applicable credit-risk related contingent features were triggered as of June 30, 2014, the Fund would be required to post additional collateral or may be required to terminate the contracts and settle any amounts outstanding. The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2014, except for forward foreign currency contracts for UBS Global Sustainable Equity Fund for which the average volume during the year was greater than at year end.
Disclosure of derivatives by underlying risk as of and for the year ended June 30, 2014 is as follows:
Asset derivatives
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | 17,971 | $ | 17,971 | |||||||||
Swap agreements1 | 65,696 | — | 65,696 | ||||||||||||
Total value | $ | 65,696 | $ | 17,971 | $ | 83,667 |
1 Statement of assets and liabilities location: Outstanding swap agreements, at value and unrealized appreciation on forward foreign currency contracts.
Liability derivatives
Foreign exchange risk | Total | ||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||
Forward foreign currency contracts1 | $ | (47,153 | ) | $ | (47,153 | ) | |||||||||
Total value | $ | (47,153 | ) | $ | (47,153 | ) |
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts.
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||||||
Net realized gain (loss)1 | |||||||||||||||
Forward foreign currency contracts | $ | — | $ | (27,153 | ) | $ | (27,153 | ) | |||||||
Swap agreements | 116,714 | — | 116,714 | ||||||||||||
Total net realized gain (loss) | $ | 116,714 | $ | (27,153 | ) | $ | 89,561 | ||||||||
Change in net unrealized appreciation/depreciation2 | |||||||||||||||
Forward foreign currency contracts | $ | — | $ | (43,831 | ) | $ | (43,831 | ) | |||||||
Swap agreements | 43,768 | — | 43,768 | ||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 43,768 | $ | (43,831 | ) | $ | (63 | ) |
1 Statement of operations location: Net realized gain (loss) on swap agreements and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on swap agreements and forward foreign currency contracts.
101
The UBS Funds
Notes to financial statements
The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
The provisions of ASC Topic 210 "Disclosures about Offsetting Assets and Liabilities" require disclosure on the offsetting of financial assets and liabilities. The offsetting disclosures are limited to derivatives, repurchase and reverse repurchase agreements, and security lending and borrowing transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement ("MNA") or similar agreement.
Derivative financial instruments: | Assets ($) | Liabilities ($) | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | |||||||||||
Forward foreign currency contracts | 17,971 | (47,153 | ) | ||||||||
Swap agreements | 65,696 | — | |||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 83,667 | (47,153 | ) |
The following tables present the 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 June 30, 2014.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
CSI | $ | 65,696 | $ | — | $ | — | $ | 65,696 | |||||||||||
JPMCB | 17,971 | (17,971 | ) | — | — | ||||||||||||||
Total | $ | 83,667 | $ | (17,971 | ) | $ | — | $ | 65,696 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
JPMCB | $ | (47,153 | ) | $ | 17,971 | $ | — | $ | (29,182 | ) |
B. Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Portfolio of investments footnotes.
C. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
102
The UBS Funds
Notes to financial statements
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
D. Foreign currency translation: The Funds use the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities and other assets and liabilities—at the exchange rates prevailing at the end of each Fund's fiscal period; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of each Fund's portfolio are presented at the foreign exchange rates at the end of each Fund's fiscal period, the Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the realized gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. Certain foreign exchange gains and losses included in realized and unrealized gains and losses are included in or are a reduction of ordinary income in accordance with US federal income tax regulations.
E. Portfolio swap: UBS Equity Long-Short Multi-Strategy Fund entered into a portfolio swap agreement to obtain exposure to a portfolio of long and short securities. This is a highly specialized activity and a significant aspect of the Fund's investment strategy.
Under the terms of the agreement, the swap is designed to function as a portfolio of direct investments in long and short equity positions. This means that the Fund has the ability to trade in and out of long and short positions within the swap and will receive all of the economic benefits and risks equivalent to direct investments in these positions such as: capital appreciation (depreciation), corporate actions and dividends received and paid, all of which are reflected in the swap value. The swap value also includes interest charges and credits related to the notional values of the long and short positions and cash balances within the swap. These interest charges and credits are based on defined market rates plus or minus a specified spread and are referred to herein as "financing costs". Positions within the swap are reset periodically, usually annually and financing costs are reset monthly. During a reset, any unrealized gains (losses) on positions and accrued financing costs become available for cash settlement between the Fund and the swap counterparty. Cash settlement in and out of the swap may occur at a reset date or any other date, at the discretion of the Fund and counterparty, over the life of the agreement, and is generally determined based on limits and thresholds established at both the Fund and counterparty.
The swap involves additional risks than if the Fund had invested in the underlying positions directly including: the risk that changes in the value of the swap may not correlate perfectly with the underlying long and short securities; credit risk related to the counterparty's failure to perform under contract terms; liquidity risk related to the lack of a liquid market for the swap contract, which may limit the ability of the Fund to close out its position(s); and, documentation risk relating to disagreement over contract terms. The Fund's activities in the portfolio swap are currently concentrated with a single highly rated counterparty. Investing in swaps results in a form of leverage (i.e., the Fund's risk of loss associated with these instruments may exceed their value as recorded on the Statement of assets and liabilities).
The value of the swap is derived from a combination of (i) the net value of the underlying positions, which are valued daily using the last sale or closing prices on the principal exchange on which the securities are traded; (ii) financing costs; (iii) the value of dividends; (iv) cash balances within the swap; and (v) other factors, as applica-
103
The UBS Funds
Notes to financial statements
ble. The value of the swap is recognized as changes in unrealized appreciation or depreciation in the Statement of operations.
Cash settlements between the Fund and counterparty are recognized as realized gains or losses in the Statement of operations.
F. Forward foreign currency contracts: A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the US dollar and the potential inability of the counterparty to meet the terms of the contract. The Funds may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk).
A Fund will enter into forward contracts to sell, for a fixed amount of US dollars or other appropriate currency, an amount of foreign currency, to the extent that the value of the short forward contract is covered by the underlying value of securities denominated in the currency being sold. Alternatively, when a Fund enters into a non-cash settled forward contract to sell an amount of foreign currency, the Fund's custodian or sub-custodian will place assets in a segregated account of the Fund in an amount equal to the contract's full notional value. However, currency contracts with respect to identical currencies may be netted against each other and, in such cases, a Fund's custodian or sub-custodian will place assets in a segregated account of the Fund, in an amount equal to the net amount owed (the unrealized loss) by a Fund. If the assets placed in the account decline in value, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Fund's commitments with respect to such contracts.
The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract. Fluctuations in the value of the open forward foreign currency contracts are recorded daily for book purposes as unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by each Fund on contracts which have been sold or matured.
G. Futures contracts: The Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realize gains. Using financial futures contracts involves various market risks, including interest rate and equity risk. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin". Subsequent payments, known as "variation margin", are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized gain or loss on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
H. Option writing: Certain Funds may write (sell) put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains. When a Fund writes a call or a put option, an amount equal to the premium received by the Fund is included in the Fund's Statement of assets and liabili-
104
The UBS Funds
Notes to financial statements
ties as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option which a Fund has written is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, the Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, index or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
I. Short sales: UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity Fund and UBS U.S. Small Cap Growth Fund may each enter into short sales whereby it sells a security it generally does not own, in anticipation of a decline in the security's price. The initial amount of a short sale is recorded as a liability which is marked to market daily. Fluctuations in the value of this liability are recorded as unrealized gains or losses on the Statement of operations. If a Fund shorts a security while holding a long position in the security (a "short against the box"), as the security price declines, the short position increases in value, offsetting the long position's decrease in value. The opposite effect occurs if the security price rises. A Fund will realize a gain or loss upon closing of the short sale (returning the security to the lender by way of purchase or delivery of a long position owned). A Fund is liable to the lender for any dividends payable on securities while those securities are in a short position. These dividends are booked as an expense or liability of the Fund. Each Fund segregates collateral consisting of cash, US government securities or other liquid assets sufficient to collateralize the market value of short positions. Each Fund is charged a securities loan fee in connection with short sale transactions. Due to the independence of portfolio management teams that manage the various Fund components, it is likely that UBS Equity Long-Short Multi-Strategy Fund will, at times, hold the same security both long and short (which may technically result in a "short against the box"). There were no short sale transactions for UBS U.S. Small Cap Growth Fund during the year ended June 30, 2014.
J. Dividends and distributions: It is each Fund's policy to distribute its respective net investment income and net capital gains, if any, annually. Dividends and distributions to shareholders are recorded on the ex-distribution date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from US GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
K. Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which the Funds invest.
105
The UBS Funds
Notes to financial statements
Small capitalization ("small cap") companies may be more vulnerable than larger capitalization ("large cap") companies to adverse business or economic developments. Small cap companies may also have limited product lines, markets or financial resources, and may be dependent on a relatively small management group. Securities of such companies may be less liquid and more volatile than securities of large cap companies. In addition, small cap companies may not be well-known to the investing public, may not have institutional ownership and may have only cyclical, static or moderated growth prospects.
The ability of the issuers of debt securities held by a Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
L. Commission recapture program: The Funds participate in a brokerage commission recapture program. The Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. For the year ended June 30, 2014, the following Funds recorded recaptured commissions which are reflected on the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS U.S. Large Cap Equity Fund | $ | 57 | |||||
UBS U.S. Equity Opportunity Fund | 4,071 |
M. Redemption fees: Each class of each series of The UBS Funds will impose a 1% redemption fee on shares sold or exchanged within 90 days of their purchase date, subject to limited exceptions. This amount is paid to the applicable Fund, not the Advisor or UBS Global Asset Management (US) Inc., ("UBS Global AM (US)"). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the year ended June 30, 2014, redemption fees for each Fund amounted to less than $0.01 per share and less than 0.01% of average net assets.
2. Investment advisory fees and other transactions with affiliates
The Advisor, a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee, accrued daily and paid monthly, based on each Fund's respective average daily net assets in accordance with the following per annum schedule:
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion and over | ||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | 1.250 | % | 1.250 | % | 1.250 | % | 1.250 | % | 1.250 | % | |||||||||||||
UBS Global Sustainable Equity Fund | 0.800 | 0.750 | 0.700 | 0.675 | 0.650 | ||||||||||||||||||
UBS U.S. Defensive Equity Fund | 1.000 | 0.900 | 0.850 | 0.850 | 0.850 | ||||||||||||||||||
UBS U.S. Equity Opportunity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 | ||||||||||||||||||
UBS U.S. Large Cap Equity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 0.850 | 0.850 | 0.825 | 0.825 | 0.825 |
For UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund and UBS U.S. Large Cap Equity Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through invest-
106
The UBS Funds
Notes to financial statements
ment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity Fund and UBS U.S. Small Cap Growth Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) to the extent necessary so that each Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) do not exceed the expense limit of each class of shares as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed, for the year ended June 30, 2014, were as follows:
Fund | Class A expense cap | Class C expense cap | Class Y expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | |||||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | 1.75 | % | 2.50 | % | 1.50 | % | $ | 1,956 | $ | 200,607 | $ | 262,345 | |||||||||||||||
UBS Global Sustainable Equity Fund | 1.25 | 2.00 | 1.00 | (6,136 | ) | 156,285 | 286,587 | ||||||||||||||||||||
UBS U.S. Defensive Equity Fund | 1.50 | 2.25 | 1.25 | (7,363 | ) | 149,190 | 246,697 | ||||||||||||||||||||
UBS U.S. Equity Opportunity Fund | 1.20 | 1.95 | 0.95 | 34,831 | 307,319 | 230,463 | |||||||||||||||||||||
UBS U.S. Large Cap Equity Fund | 1.20 | 1.95 | 0.95 | 90,209 | 1,063,036 | 67,273 | |||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.40 | 2.15 | 1.15 | 183,872 | 2,175,930 | 23,369 |
Each Fund, except for UBS Global Sustainable Equity Fund, will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived or reimbursed for the year ended June 30, 2014 are subject to repayment through June 30, 2017. At June 30, 2014, 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, 2015 | Expires June 30, 2016 | Expires June 30, 2017 | |||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class A | $ | 127,252 | $ | 50,539 | $ | 49,550 | $ | 27,163 | |||||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class C | 26,113 | 9,695 | 10,033 | 6,385 | |||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class Y | 733,440 | 180,234 | 324,409 | 228,797 | |||||||||||||||
UBS U.S. Defensive Equity Fund—Class A | 466,757 | 120,672 | 184,778 | 161,307 | |||||||||||||||
UBS U.S. Defensive Equity Fund—Class C | 143,133 | 41,247 | 57,542 | 44,344 | |||||||||||||||
UBS U.S. Defensive Equity Fund—Class Y | 167,478 | 60,343 | 66,089 | 41,046 | |||||||||||||||
UBS U.S. Equity Opportunity Fund—Class A | 680,014 | 259,111 | 222,296 | 198,607 | |||||||||||||||
UBS U.S. Equity Opportunity Fund—Class C | 81,329 | 31,196 | 26,132 | 24,001 | |||||||||||||||
UBS U.S. Equity Opportunity Fund—Class Y | 30,153 | 12,732 | 9,566 | 7,855 | |||||||||||||||
UBS U.S. Large Cap Equity Fund—Class A | 23,214 | 7,040 | 8,181 | 7,993 | |||||||||||||||
UBS U.S. Large Cap Equity Fund—Class C | 8,192 | 2,019 | 2,443 | 3,730 | |||||||||||||||
UBS U.S. Large Cap Equity Fund—Class Y | 132,696 | 31,133 | 46,013 | 55,550 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 123,408 | 54,371 | 48,524 | 20,513 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class C | 12,259 | 4,925 | 4,478 | 2,856 |
107
The UBS Funds
Notes to financial statements
Each Fund pays UBS Global AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the year ended June 30, 2014, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 989 | $ | 12,037 | |||||||
UBS Global Sustainable Equity Fund | 1,313 | 14,652 | |||||||||
UBS U.S. Defensive Equity Fund | 974 | 11,189 | |||||||||
UBS U.S. Equity Opportunity Fund | 2,781 | 32,927 | |||||||||
UBS U.S. Large Cap Equity Fund | 8,518 | 113,897 | |||||||||
UBS U.S. Small Cap Growth Fund | 16,293 | 191,994 |
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the year ended June 30, 2014 have been included near the end of each Fund's Portfolio of investments.
The Funds may invest in UBS Cash Management Prime Relationship Fund ("Cash Prime"). Cash Prime is offered as a cash management option only to mutual funds and certain other accounts. Distributions received from Cash Prime are reflected as affiliated income in the Statement of operations. Amounts relating to those investments at June 30, 2014 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
Under normal conditions, the Funds invest cash collateral from securities lending activities into an affiliated private money market fund, UBS Private Money Market Fund LLC ("Private Money Market"), which operates in compliance with most of the substantive provisions of Rule 2a-7 of the 1940 Act. Private Money Market is managed by the Advisor and is offered as a cash management option only to mutual funds and certain other accounts managed by the Advisor. UBS Global AM acts as managing member and receives a management fee from Private Money Market payable monthly in arrears at the annual rate of 0.10% of Private Money Market's average daily members' equity, minus the aggregate operating expenses of, and incurred by, Private Money Market during each such related month, not including investment expenses (including brokerage commissions, taxes, interest charges and other costs with respect to transactions in securities) and extraordinary expenses including litigation expenses, if any. The Advisor may, in its sole discretion, waive all or any portion of the management fee to which it may be entitled from time to time in order to maintain operating expenses at a certain level. Distributions received from Private Money Market, net of fee rebates paid to borrowers, are reflected as securities lending income in the Statement of operations. Amounts relating to those investments at June 30, 2014 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
The following Funds have incurred brokerage commissions with UBS AG, an affiliated broker-dealer. Amounts relating to those transactions for the year ended June 30, 2014, were as follows:
Fund | UBS AG | ||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 3,800 | |||||
UBS Global Sustainable Equity Fund | 5,022 | ||||||
UBS U.S. Defensive Equity Fund | 121 | ||||||
UBS U.S. Equity Opportunity Fund | 650 | ||||||
UBS U.S. Large Cap Equity Fund | 532 |
108
The UBS Funds
Notes to financial statements
3. Distribution and service plans
UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A and Class C. Annual fees under the Plans as a percentage of the average daily net assets of each representative class of each of the Funds are as follows:
Fund | Class A | Class C | |||||||||
UBS Equity Long-Short Multi-Strategy Fund | 0.25 | % | 1.00 | % | |||||||
UBS Global Sustainable Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Defensive Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Equity Opportunity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Large Cap Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Small Cap Growth Fund | 0.25 | 1.00 |
UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A and Class C. At June 30, 2014, certain Funds owed UBS Global AM (US) distribution and service fees, and for the year ended June 30, 2014, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:
Fund | Distribution and service fees owed | Sales charges earned | |||||||||
UBS Equity Long-Short Multi-Strategy Fund—Class A | $ | 193 | $ | 332 | |||||||
UBS Equity Long-Short Multi-Strategy Fund—Class C | 333 | — | |||||||||
UBS Global Sustainable Equity Fund—Class A | 1,506 | 28,336 | |||||||||
UBS Global Sustainable Equity Fund—Class C | 1,257 | — | |||||||||
UBS U.S. Defensive Equity Fund—Class A | 2,319 | 16,421 | |||||||||
UBS U.S. Defensive Equity Fund—Class C | 1,964 | — | |||||||||
UBS U.S. Equity Opportunity Fund—Class A | 8,007 | 11,060 | |||||||||
UBS U.S. Equity Opportunity Fund—Class C | 3,740 | — | |||||||||
UBS U.S. Large Cap Equity Fund—Class A | 1,925 | 203 | |||||||||
UBS U.S. Large Cap Equity Fund—Class C | 2,679 | — | |||||||||
UBS U.S. Small Cap Growth Fund—Class A | 8,473 | 24,935 | |||||||||
UBS U.S. Small Cap Growth Fund—Class C | 2,899 | 293 |
4. Transfer agency and related services fees
UBS Financial Services Inc. provides certain services pursuant to a delegation of authority from BNY Mellon Investment Servicing ("BNY Mellon"), as each Fund's transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the year ended June 30, 2014, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
Fund | Amount paid | ||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 1,154 | |||||
UBS Global Sustainable Equity Fund | 2,305 | ||||||
UBS U.S. Defensive Equity Fund | 4,243 | ||||||
UBS U.S. Equity Opportunity Fund | 12,296 | ||||||
UBS U.S. Large Cap Equity Fund | 2,591 | ||||||
UBS U.S. Small Cap Growth Fund | 8,751 |
109
The UBS Funds
Notes to financial statements
5. Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly.
Each Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees.
UBS Global Sustainable Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund loaned securities to certain qualified broker dealers, with the Funds' custodian acting as the Funds' lending agent. Cash collateral received is invested in Private Money Market, which is included in the Fund's Portfolio of investments. The value of loaned securities and related collateral at June 30, 2014 were as follows:
Fund | Market value of securities loaned | Market value of collateral received from securities loaned | Cash collateral received | ||||||||||||
UBS Global Sustainable Equity Fund | $ | 101,057 | $ | 103,482 | $ | 103,482 | |||||||||
UBS U.S. Equity Opportunity Fund | 2,499,871 | 2,555,583 | 2,555,583 | ||||||||||||
UBS U.S. Large Cap Equity Fund | 7,074,626 | 7,380,954 | 7,380,954 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 30,378,270 | 31,194,171 | 31,194,171 |
6. Purchases and sales of securities
For the year ended June 30, 2014, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government and agency securities, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Equity Long-Short Multi-Strategy Fund (long transactions) | $ | 18,727,604 | $ | 21,941,536 | |||||||
UBS Equity Long-Short Multi-Strategy Fund (short sale transactions) | 17,165,085 | 15,168,034 | |||||||||
UBS Global Sustainable Equity Fund | 26,550,981 | 26,114,163 | |||||||||
UBS U.S. Defensive Equity Fund (long transactions) | 10,858,714 | 13,598,956 | |||||||||
UBS U.S. Defensive Equity Fund (short sale transactions) | 3,886,150 | 3,142,358 | |||||||||
UBS U.S. Equity Opportunity Fund | 26,552,517 | 32,430,993 | |||||||||
UBS U.S. Large Cap Equity Fund | 82,211,945 | 135,409,958 | |||||||||
UBS U.S. Small Cap Growth Fund | 148,258,117 | 142,866,666 |
7. Federal income taxes
It is each Fund's policy to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, each Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
110
The UBS Funds
Notes to financial statements
The tax character of distributions paid during the fiscal years ended June 30, 2014 and June 30, 2013 were as follows:
2014 | 2013 | ||||||||||||||
Fund | Distributions paid from net from long-term gains | Distributions paid from ordinary income | Distributions paid from ordinary income | ||||||||||||
UBS Global Sustainable Equity Fund | $ | — | $ | 449,038 | $ | 649,606 | |||||||||
UBS U.S. Defensive Equity Fund | — | — | 26,617 | ||||||||||||
UBS U.S. Equity Opportunity Fund | — | 147,110 | 333,244 | ||||||||||||
UBS U.S. Large Cap Equity Fund | — | 1,662,242 | 1,794,115 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 5,527,910 | — | — |
At June 30, 2014, the components of accumulated earnings (deficit) on a tax basis were as follows:
Fund | Undistributed long-term gains | Undistributed ordinary income | Accumulated capital and other losses | Unrealized appreciation/ (depreciation) | Total | ||||||||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 102,318 | $ | — | $ | (153,448 | ) | $ | 1,021,927 | $ | 970,797 | ||||||||||||
UBS Global Sustainable Equity Fund | — | 314,454 | (9,950,289 | ) | 2,145,932 | (7,489,903 | ) | ||||||||||||||||
UBS U.S. Defensive Equity Fund | — | — | (18,992,895 | ) | 3,462,860 | (15,530,035 | ) | ||||||||||||||||
UBS U.S. Equity Opportunity Fund | — | 9,806 | (8,873,232 | ) | 7,881,237 | (982,189 | ) | ||||||||||||||||
UBS U.S. Large Cap Equity Fund | — | 1,001,091 | (111,011,430 | ) | 24,869,958 | (85,140,381 | ) | ||||||||||||||||
UBS U.S. Small Cap Growth Fund | 17,901,253 | 5,442,448 | — | 71,130,943 | 94,474,644 |
Due to inherent differences in the recognition of income, expenses and realized gains/losses under US GAAP and federal income tax purposes, permanent differences between book and tax basis reporting for the current fiscal year have been identified and appropriately reclassified. Reclassifications for the year ended June 30, 2014 were as follows:
Fund | Undistributed net investment income | Accumulated net realized gain/(loss) | Beneficial interest | ||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 267,439 | $ | (87,446 | ) | $ | (179,993 | ) | |||||||
UBS Global Sustainable Equity Fund | 161,478 | (161,478 | ) | — | |||||||||||
UBS U.S. Defensive Equity Fund | 15,182 | 2,287 | (17,469 | ) | |||||||||||
UBS U.S. Equity Opportunity Fund | (8,415 | ) | 8,415 | — | |||||||||||
UBS U.S. Large Cap Equity Fund | (22,368 | ) | 22,368 | — | |||||||||||
UBS U.S. Small Cap Growth Fund | 2,270,870 | (2,270,870 | ) | — |
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
111
The UBS Funds
Notes to financial statements
At June 30, 2014, the following Funds had pre-enactment capital loss carryforwards for federal income tax purposes available to offset future capital gains through the indicated expiration dates:
Expiration Dates | |||||||||||
Fund | June 30, 2017 | June 30, 2018 | |||||||||
UBS Global Sustainable Equity Fund | $ | — | $ | 9,840,414 | |||||||
UBS U.S. Defensive Equity Fund | 6,387,417 | 12,503,688 | |||||||||
UBS U.S. Equity Opportunity Fund | — | 8,873,232 | |||||||||
UBS U.S. Large Cap Equity Fund | — | 111,011,430 |
During the fiscal year ended June 30, 2014, the following Funds utilized capital loss carryforwards to offset current year realized capital gains:
Fund | Amount | ||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 170,608 | |||||
UBS Global Sustainable Equity Fund | 2,719,311 | ||||||
UBS U.S. Defensive Equity Fund | 1,722,872 | ||||||
UBS U.S. Equity Opportunity Fund | 5,655,389 | ||||||
UBS U.S. Large Cap Equity Fund | 33,526,303 | ||||||
UBS U.S. Small Cap Growth Fund | 8,464,021 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2014, 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 | Long-term | ||||||||||||
UBS Equity Long-Short Multi-Strategy Fund | $ | 122,810 | $ | — | $— | ||||||||||
UBS Global Sustainable Equity Fund | — | 109,875 | — | ||||||||||||
UBS U.S. Defensive Equity Fund | 16,366 | 85,424 | — |
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, 2014, 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 year ended June 30, 2014, the Funds did not incur any interest or penalties. Capital gains realized by the Funds on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Each of the tax years in the four year period ended June 30, 2014, or since inception in the case of UBS Equity Long-Short Multi-Strategy Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
8. Line of credit
The Trust has entered into an agreement with JPMorgan Chase Bank to provide a $50 million committed line of credit to the Funds ("Committed Credit Facility") to be utilized for temporary financing until the settlement of sales
112
The UBS Funds
Notes to financial statements
or purchases of portfolio securities, the repurchase or redemption of shares of each Fund at the request of shareholders and other temporary or emergency purposes. Interest on amounts borrowed is calculated based on the prevailing rates in effect at the time of borrowing. Under the Committed Credit Facility arrangement, each Fund has agreed to pay commitment fees, pro rata, based on the relative asset size of the Funds in the Committed Credit Facility. The average daily borrowings under the agreement for the year ended June 30, 2014, were as follows:
Fund | Average daily borrowings | Number of days outstanding | Interest expense | Weighted average annualized interest rate | |||||||||||||||
UBS U.S. Large Cap Equity Fund | $ | 9,444,000 | 5 | $ | 1,548 | 1.18 | % |
9. Shares of beneficial interest
For the year ended June 30, 2014, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Equity Long-Short Multi-Strategy Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 18,045 | $ | 183,149 | 343 | $ | 3,460 | — | $ | — | ||||||||||||||||||
Shares repurchased | (70,918 | ) | (718,746 | ) | (1,702 | ) | (16,912 | ) | (7,534 | ) | (76,023 | ) | |||||||||||||||
Net decrease | (52,873 | ) | $ | (535,597 | ) | (1,359 | ) | $ | (13,452 | ) | (7,534 | ) | $ | (76,023 | ) |
UBS Global Sustainable Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 367,672 | $ | 3,105,075 | 110,950 | $ | 929,936 | 28,584 | $ | 240,825 | ||||||||||||||||||
Shares repurchased | (259,210 | ) | (2,185,773 | ) | (14,191 | ) | (114,305 | ) | (226,622 | ) | (1,897,447 | ) | |||||||||||||||
Dividends reinvested | 14,790 | 119,797 | 1,280 | 10,226 | 36,386 | 295,461 | |||||||||||||||||||||
Redemption fees | — | 1,023 | — | 178 | — | 1,802 | |||||||||||||||||||||
Net increase (decrease) | 123,252 | $ | 1,040,122 | 98,039 | $ | 826,035 | (161,652 | ) | $ | (1,359,359 | ) |
UBS U.S. Defensive Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 184,160 | $ | 2,240,912 | 12,948 | $ | 154,734 | 5,576 | $ | 66,714 | ||||||||||||||||||
Shares repurchased | (129,755 | ) | (1,540,412 | ) | (69,721 | ) | (805,290 | ) | (111,766 | ) | (1,303,072 | ) | |||||||||||||||
Redemption fees | — | 1,495 | — | 409 | — | 384 | |||||||||||||||||||||
Net increase (decrease) | 54,405 | $ | 701,995 | (56,773 | ) | $ | (650,147 | ) | (106,190 | ) | $ | (1,235,974 | ) |
113
The UBS Funds
Notes to financial statements
UBS U.S. Equity Opportunity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 60,662 | $ | 525,433 | 7,754 | $ | 66,141 | 34,943 | $ | 309,688 | ||||||||||||||||||
Shares repurchased | (627,228 | ) | (5,519,903 | ) | (45,647 | ) | (394,054 | ) | (34,954 | ) | (300,158 | ) | |||||||||||||||
Dividends reinvested | 14,194 | 122,350 | — | — | 902 | 7,817 | |||||||||||||||||||||
Redemption fees | — | 15 | — | 2 | — | 1 | |||||||||||||||||||||
Net increase (decrease) | (552,372 | ) | $ | (4,872,105 | ) | (37,893 | ) | $ | (327,911 | ) | 891 | $ | 17,348 |
UBS U.S. Large Cap Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 65,719 | $ | 1,425,578 | 9,857 | $ | 208,534 | 631,010 | $ | 14,042,768 | ||||||||||||||||||
Shares repurchased | (119,827 | ) | (2,671,043 | ) | (9,845 | ) | (213,677 | ) | (2,989,555 | ) | (67,145,346 | ) | |||||||||||||||
Dividends reinvested | 2,940 | 64,232 | 232 | 4,885 | 72,254 | 1,583,799 | |||||||||||||||||||||
Redemption fees | — | 1,075 | — | 334 | — | 17,046 | |||||||||||||||||||||
Net increase (decrease) | (51,168 | ) | $ | (1,180,158 | ) | 244 | $ | 76 | (2,286,291 | ) | $ | (51,501,733 | ) |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 506,062 | $ | 11,962,647 | 29,382 | $ | 636,963 | 1,604,174 | $ | 39,717,827 | ||||||||||||||||||
Shares repurchased | (455,228 | ) | (10,512,337 | ) | (28,407 | ) | (607,249 | ) | (1,294,544 | ) | (31,901,223 | ) | |||||||||||||||
Dividends reinvested | 33,015 | 755,043 | 3,672 | 75,974 | 190,666 | 4,570,262 | |||||||||||||||||||||
Redemption fees | — | 4,549 | — | 390 | — | 24,750 | |||||||||||||||||||||
Net increase | 83,849 | $ | 2,209,902 | 4,647 | $ | 106,078 | 500,296 | $ | 12,411,616 |
For the year ended June 30, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Equity Long-Short Multi-Strategy Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 13,397 | $ | 125,414 | 6,878 | $ | 64,871 | — | $ | — | ||||||||||||||||||
Shares repurchased | (150,124 | ) | (1,435,730 | ) | (29,518 | ) | (269,902 | ) | (83,158 | ) | (787,437 | ) | |||||||||||||||
Redemption fees | — | 35 | — | 8 | — | 216 | |||||||||||||||||||||
Net decrease | (136,727 | ) | $ | (1,310,281 | ) | (22,640 | ) | $ | (205,023 | ) | (83,158 | ) | $ | (787,221 | ) |
UBS Global Sustainable Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 55,594 | $ | 424,091 | 9,602 | $ | 73,918 | 46,547 | $ | 349,370 | ||||||||||||||||||
Shares repurchased | (185,747 | ) | (1,352,570 | ) | (36,597 | ) | (268,982 | ) | (473,056 | ) | (3,482,556 | ) | |||||||||||||||
Dividends reinvested | 22,828 | 168,244 | 2,238 | 16,293 | 60,955 | 450,456 | |||||||||||||||||||||
Redemption fees | — | 346 | — | 44 | — | 804 | |||||||||||||||||||||
Net decrease | (107,325 | ) | $ | (759,889 | ) | (24,757 | ) | $ | (178,727 | ) | (365,554 | ) | $ | (2,681,926 | ) |
114
The UBS Funds
Notes to financial statements
UBS U.S. Defensive Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 7,705 | $ | 75,758 | 5,811 | $ | 55,380 | 20,576 | $ | 194,042 | ||||||||||||||||||
Shares repurchased | (287,534 | ) | (2,775,350 | ) | (126,409 | ) | (1,178,282 | ) | (188,644 | ) | (1,816,565 | ) | |||||||||||||||
Dividends reinvested | 1,536 | 14,317 | — | — | 1,188 | 11,047 | |||||||||||||||||||||
Redemption fees | — | 365 | — | 120 | — | 138 | |||||||||||||||||||||
Net decrease | (278,293 | ) | $ | (2,684,910 | ) | (120,598 | ) | $ | (1,122,782 | ) | (166,880 | ) | $ | (1,611,338 | ) |
UBS U.S. Equity Opportunity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 31,441 | $ | 219,609 | 2,690 | $ | 19,283 | 4,297 | $ | 30,462 | ||||||||||||||||||
Shares repurchased | (1,061,493 | ) | (7,345,464 | ) | (121,071 | ) | (808,897 | ) | (68,220 | ) | (467,345 | ) | |||||||||||||||
Dividends reinvested | 41,120 | 276,332 | 384 | 2,535 | 2,367 | 15,975 | |||||||||||||||||||||
Redemption fees | — | 9 | — | 1 | — | — | |||||||||||||||||||||
Net decrease | (988,932 | ) | $ | (6,849,514 | ) | (117,997 | ) | $ | (787,078 | ) | (61,556 | ) | $ | (420,908 | ) |
UBS U.S. Large Cap Equity Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 63,722 | $ | 1,123,135 | 11,712 | $ | 201,939 | 1,224,671 | $ | 22,333,693 | ||||||||||||||||||
Shares repurchased | (520,621 | ) | (9,087,635 | ) | (61,449 | ) | (1,040,021 | ) | (5,571,039 | ) | (107,314,950 | ) | |||||||||||||||
Dividends reinvested | 2,349 | 39,632 | — | — | 103,257 | 1,747,104 | |||||||||||||||||||||
Redemption fees | — | 726 | — | 173 | — | 11,881 | |||||||||||||||||||||
Net decrease | (454,550 | ) | $ | (7,924,142 | ) | (49,737 | ) | $ | (837,909 | ) | (4,243,111 | ) | $ | (83,222,272 | ) |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 382,244 | $ | 6,549,654 | 25,282 | $ | 411,257 | 2,998,179 | $ | 57,662,827 | ||||||||||||||||||
Shares repurchased | (663,409 | ) | (11,538,713 | ) | (29,257 | ) | (467,672 | ) | (1,155,373 | ) | (21,374,300 | ) | |||||||||||||||
Dividends reinvested | — | — | — | — | — | — | |||||||||||||||||||||
Redemption fees | — | 2,026 | — | 170 | — | 7,905 | |||||||||||||||||||||
Net increase (decrease) | (281,165 | ) | $ | (4,987,033 | ) | (3,975 | ) | $ | (56,245 | ) | 1,842,806 | $ | 36,296,432 |
115
The UBS Funds
Report of independent registered public accounting firm
The Board of Trustees and Shareholders of The UBS Funds
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of UBS Equity Long-Short Multi-Strategy Fund, UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund), UBS U.S. Defensive Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund (six of the series comprising The UBS Funds) (collectively the "Funds") as of June 30, 2014, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2014, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Equity Long-Short Multi-Strategy Fund, UBS Global Sustainable Equity Fund, UBS U.S. Defensive Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Small Cap Growth Fund at June 30, 2014, the results of their operations and cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.
New York, New York
August 28, 2014
116
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-202-551 8090. Additionally, you may obtain copies of Forms N-Q from the Funds upon request by calling 1-800-647 1568.
Proxy voting policies, procedures and record
You may obtain a description of the Funds' (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Funds voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Funds directly at 1-800-647 1568, online on UBS's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site http://www.sec.gov).
117
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 5 and 6, 2014 (the "Meeting"), the Board, including those Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust or UBS Global Asset Management (Americas) Inc. (the "Advisor") and its affiliates (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 Asset Growth Fund (formerly, UBS Global Frontier Fund), UBS Multi-Asset Income Fund, UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund), UBS U.S. Defensive Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Small Cap Growth Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS Fixed Income Opportunities Fund, UBS Core Plus Bond Fund and UBS Emerging Markets Debt Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process, on May 30, 2014, June 5, 2014 and June 6, 2014, to discuss the materials provided to them in response to the information request, including materials prepared by the Advisor, as well as reports prepared by Lipper Inc. ("Lipper Reports"), an independent statistical compilation company, providing comparative expense information on an actual and contractual basis and comparative performance information for the Funds. The Board also made reference to information and material that had been provided to the Independent Trustees throughout the year at quarterly Board meetings.
At the Meeting, the Board considered a number of factors in connection with its deliberations concerning the continuation of the Advisory Agreement for each Fund, including: (i) the nature, extent, and quality of the services provided by the Advisor to the Fund; (ii) the performance of the Fund and the Advisor; (iii) the Fund's expenses, costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund; and (iv) whether economies of scale are realized by the Advisor with respect to the Fund, as it grows larger, and the extent to which the economies of scale are reflected in the level of the management fees charged.
Nature, Extent, and Quality of Services.
In considering the nature, extent, and quality of the services provided by the Advisor to a Fund, the Board reviewed the material presented by the Advisor describing the various services provided to each Fund. The Board noted that in addition to investment management services, the Advisor provides each Fund with operational, legal, and compliance support. The Board also considered the scope and depth of the Advisor's organization and the experience and expertise of the professionals currently providing investment management and other services to the Funds. The Board considered that the Advisor was a well-established investment management organization employing investment personnel with significant experience in the investment management industry. The Board also considered the Advisor's in-house research capabilities, as well as other research services available to it, including research services available to the Advisor as a result of securities transactions effected for the Funds and the Advisor's other investment management clients, and noted that the Advisor had extensive global research capabilities. The Board also evaluated the Advisor's portfolio management process for each Fund, including the use of risk management techniques and the proprietary technologies utilized to structure the Fund's portfolio. The Board noted that various presentations had been made by investment personnel at Board meetings throughout the year concerning the Funds' investment performance and investment strategies, 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 Global Asset Management (US) Inc. ("UBS Global AM (US)"), and sub-transfer agency services provided by UBS Financial Services Inc. ("UBS Financial Services"). In connection with the non-investment management services, the Board also considered the quarterly reports that the Advisor provides to the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addition, the
118
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
Board considered the presentations provided with respect to distribution strategies for the Funds. After analyzing the services provided by the Advisor to each Fund, both quantitatively and qualitatively, including the impact of these services on investment performance, the Board concluded that the nature, extent, and quality of services provided to each Fund were consistent with the operational requirements of each Fund, and met the needs of the Fund's shareholders.
Performance.
In evaluating the performance of each Fund, the Board analyzed the Lipper Reports, which compared the performance of each Fund with other funds in its respective peer universe over various time periods. The Board also reviewed the memoranda provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Lipper Reports, the Board noted that the UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Asset Growth Fund, UBS U.S. Large Cap Equity Fund, UBS Equity Opportunity Fund, UBS U.S. Small Cap Growth Fund, and UBS Core Plus Bond Fund each had appeared in one of the top three performance quintiles for the one-year performance period. At the Board's request, the Advisor further addressed the performance data for the UBS Multi-Asset Income Fund, UBS Global Sustainable Equity Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity Fund, UBS Fixed Income Opportunities Fund and UBS Emerging Markets Debt Fund, each of which had appeared in one of the lower performance quintiles for the one-year period.
In explaining the performance of the UBS Multi-Asset Income Fund, the Advisor discussed the factors that had affected the performance of the Fund over the past year. The Advisor noted that the UBS Multi-Asset Income Fund pursues a tactical income strategy to provide risk-managed income over the long-term. The Advisor noted that the Fund produced positive performance for the year and outperformed its benchmark index. The Advisor noted the Fund's relative underperformance compared to its Lipper peer group was due to the variety of different strategies of the funds included in the peer group. The Advisor noted that the UBS Multi-Asset Income Fund was designed for a conservative income investor that seeks a positive income stream through various market conditions. The Advisor stated that the Fund's performance results during the past year were consistent with the Fund's investment objective.
The Advisor then discussed the performance of the UBS Global Sustainable Equity Fund. The Advisor stated that the main reason for the Fund's underperformance relative to its peers was due to the transition in strategy during the past year from international equity to global sustainable equity. Due to the strong performance of the U.S. market over the past year, international strategies on average underperformed global strategies, which distorted this transitioning Fund's performance versus its global equity peers.
The Advisor then discussed the factors that had a negative effect on the relative performance of the UBS Equity Long-Short Multi-Strategy Fund during the one-year performance period. The Advisor noted that strategy changes had been implemented for the Fund in October 2012, and that additional investment sleeves had been added in 2013. The Advisor stated that since the transition to the new strategy, the Fund has experienced better risk-adjusted performance. The Advisor reported that it believed that the Fund's relative performance versus its peers would fare better in down markets.
In discussing the performance of the UBS U.S. Defensive Equity Fund for the one-year performance period, the Advisor explained that the Fund's defensive strategy was the primary reason for the Fund's underperformance as compared to its peer universe. The Advisor noted that the options overlay strategy for the Fund, which reduced the volatility profile of the Fund, detracted from the Fund's performance. The Advisor stated the options overlay strategy should benefit the Fund's relative performance when the U.S. equity market experiences a down turn.
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The UBS Funds
Board approval of investment advisory agreements
(unaudited)
The Advisor next addressed the relative underperformance of the UBS Fixed Income Opportunities Fund with respect to the Fund's peers. The Fund produced a small positive return over the period; however, produced weaker peer relative rankings. Its weaker relative performance as compared to its peer universe was largely attributable to the composition of the Fund's current absolute return peer group. The peer group contains a wide mix of funds that are managed to varying risk/return objectives and follow investment strategies that may not be similar to the Fund. This includes strategies with sizable allocation to equity markets, such as asset allocation funds, which benefited from equity exposure in a positive equity market.
With respect to the performance of the UBS Emerging Markets Debt Fund, the Advisor noted that the Fund underperformed relative to its peer universe. The Advisor explained that the Fund's relative underperformance as compared to its peers was due primarily to the Fund's investments in longer duration Brazil debt and its overweight to local currencies as compared to its peers. The Advisor explained that U.S. dollar-denominated debt generally outperformed local currency debt during the period and noted that any fund that allocated more heavily to local markets would reflect lower performance rankings.
The Board concluded that the Advisor's explanations provided a sound basis for understanding the performance of each Fund that underperformed in comparison to its peer universe. The Board determined, after analyzing the performance data, that the performance of each Fund was acceptable as compared with relevant performance standards, given the investment strategies and risk profile of each Fund, the expectations of the shareholder base, the current market environment and the Advisor's efforts to address the underperformance issues of each Fund.
Fund Fees and Expenses.
When considering the fees and expenses borne by each Fund, and the reasonableness of the management fees paid to the Advisor in light of the services provided to each Fund, the Board compared the fees charged by the Advisor to each Fund to fees charged to the funds in its peer group for comparable services, as provided in the Lipper Reports, on both an actual (taking into account expense limitation arrangements) and a contractual basis (assuming all funds in the peer expense group were similar in size to the respective Fund). In examining the Lipper Reports, and in reviewing comparative costs, it was noted that the results of such expense comparisons showed that the actual management fee rate for each Fund, except the UBS Global Allocation Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except the UBS Global Allocation Fund, UBS Asset Growth Fund, UBS Multi-Asset Income Fund and UBS U.S. Small Cap Growth Fund, had a contractual fee rate comparable to, or lower than, the Lipper median in its respective Lipper expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund had total expenses that were comparable to, or lower than, the Lipper median in its respective Lipper expense group, except for UBS Global Allocation Fund and UBS Emerging Markets Debt Fund.
The Board first discussed the management fee and expenses of the UBS Global Allocation Fund. It was noted that the contractual management fee, actual management fee and total expenses for the UBS Global Allocation Fund were each slightly higher than the fees and expenses of several of the funds in its Lipper expense group. The Advisor noted that changes to the funds in the peer group and a reduction in the UBS Global Allocation Fund's assets caused the Fund's relative lower rankings. The Board, however, noted that the Fund's management fee and expenses were each reasonable considering that neither the management fee nor the Fund's total expenses were significantly higher than the respective Lipper expense group medians. The Board will continue to monitor the Fund's peers and expenses.
The Board then discussed the management fee of the UBS Asset Growth Fund. It was noted that the UBS Asset Growth Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis. The Board noted that while the UBS Asset Growth Fund's contractual management fee was higher than the
120
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses were each at the median of the Fund's Lipper expense group.
The Board next considered that the management fee of the UBS Multi-Asset Income Fund was slightly higher than the median of its Lipper expense group on a contractual basis, but noted that the Fund's actual management fee compared favorably with the Fund's peers placing in the second quintile of the Lipper expense group. The Board also considered that the UBS Multi-Asset Income Fund's total expenses were lower than the median of the Fund's expense group.
The Board next discussed the management fee of the UBS U.S. Small Cap Growth Fund. It was noted that the UBS U.S. Small Cap Growth Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis, which led the Board to discuss this Fund's management fee with the Advisor. The Board noted that while the UBS U.S. Small Cap Growth Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee compared more favorably to its peers. The Board also noted that the total expenses of the UBS Small Cap Growth Fund were comparable to the other funds in its peer group.
The Board also reviewed the expenses of the UBS Emerging Markets Debt Fund and noted that the Fund's expenses were higher than the Fund's peers. The Board noted that the Fund's management fee on both a contractual and actual basis compared favorably to the management fee of its Lipper peers. The Advisor noted that the Fund's total expenses were higher than its peers primarily because the Fund was relatively newer and had less assets than many of the funds in its peer group. The Advisor also note that some of the UBS Emerging Markets Debt Fund's peers maintain only limited or no exposure to securities denominated in local market currencies, which have additional expenses that are not associated with holding U.S. dollar-denominated debt.
The Board also received and considered information about the fee rates charged to other funds and accounts that are managed by the Advisor. After discussing the information about the other funds and accounts with the Advisor, the Board determined that the fees charged by the Advisor to the Funds were within a reasonable range, giving effect to differences in services performed for such other funds and accounts as compared to such fee rates. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.
Costs and Profitability.
The Board considered the costs of providing services to the Funds and the profitability of the Funds to the Advisor and its affiliates by reviewing the profitability analysis provided by the Advisor, including information about its fee revenues and expenses. The Board reviewed the profitability of each Fund to the Advisor and its affiliates, and the compensation that was received for providing services to each Fund. The profitability analysis, which provided information for the last three calendar years, included schedules relating to the revenue and expenses attributable to: (i) the investment advisory and administration services provided by the Advisor; (ii) the distribution and shareholder services provided by UBS Global AM (US) and UBS Financial Services; (iii) the transfer agency-related services provided by UBS Financial Services; and (iv) all services provided by the Advisor, UBS Global AM (US), and UBS Financial Services shown on a consolidated basis. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. The Advisor also explained to the Board the reasons for an increase or decrease in profitability of each Fund from last calendar year to this calendar year.
121
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
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 AG, in the form of commissions for executing securities transactions for the Funds. Upon closely examining the information provided concerning the Advisor's profitability, the Board concluded that the level of profits realized by the Advisor and its affiliates with respect to each Fund, if any, was reasonable in relation to the nature and quality of the services that were provided.
Economies of Scale.
The Board also discussed whether economies of scale are realized by the Advisor with respect to each Fund as it grows larger, and the extent to which this is reflected in the level of management fees charged. The Board noted that with respect most Funds, any actual or potential economies of scale are, or will be, shared with the Fund and its shareholders through existing management fee breakpoints so that as the Fund grows in size, its effective management fee declines. The Board noted that each Fund, except UBS Asset Growth Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS Multi-Asset Income Fund, UBS Emerging Markets Debt Fund, and UBS Fixed Income Opportunities Fund, had a breakpoint schedule that provided for continuing breakpoints past the current asset level for the Fund. Based on each Fund's fees and expenses and the Advisor's profitability analysis, the Board concluded that any actual or potential economies of scale would be reasonably shared with a Fund and its shareholders.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, including a majority of the Independent Trustees, with the assistance of independent counsel, concluded that the continuation of the Advisory Agreement for each Fund was in the best interests of the Fund and its shareholders.
122
The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory trust. Under Delaware law, the Board has overall responsibility for managing the business and affairs of the Trust, including general supervision and review of its investment activities. The Trustees elect the Officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and the Funds.
The table shows, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee or Officer of the Trust, the Trustee's or Officer's principal occupations during the last five years, the number of funds in the UBS Family of Funds overseen by the Trustee or Officer and other directorships held by such Trustee.
The Trust's Statement of Additional Information contains additional information about the Trustees and is available, without charge, upon request, by calling 1-800-647 1568.
Non-interested Trustees:
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Adela Cepeda; 56 A.C. Advisory, Inc. 150 North Wacker Drive Suite 2160 Chicago, Illinois 60601 | Trustee | Since 2004 | Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995). | Ms. Cepeda is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global 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), trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) (since 2008). Ms. Cepeda was a director of Amalgamated Bank of Chicago (since 2003 to 2012) and a director of the Municipal Securities Rulemaking Board (from 2012 to 2012). | ||||||||||||||||||
John J. Murphy; 70 268 Main Street P.O. Box 718 Gladstone, NJ 07934 | Trustee | Since 2009 | Mr. Murphy is the president of Murphy Capital Management (investment advisor) (since 1983) | Mr. Murphy is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Murphy is a director of the Legg Mason Equity Funds (54 portfolios) and a trustee of Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). |
123
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Abbie J. Smith; 61 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 | Trustee | Since 2009 | Ms. Smith is Boris and Irene Stern Professor of Accounting in the University of Chicago Booth School of Business (since 1980). 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 director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation and chair of the human resources and compensation committee (formerly known as HON Industries Inc.) (office furniture) and a director (since 2003) and chair of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee and portfolio performance committee of the Dimensional Funds complex (89 Portfolios). | ||||||||||||||||||
Frank K. Reilly; 78 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5649 | Chairman and Trustee | Since 1992 | Mr. Reilly is the Bernard J. Hank Professor of Finance in the Mendoza College of Business at the University of Notre Dame (since 1982). | Mr. Reilly is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Reilly is a director (since 1994) of Discover Bank, a subsidiary of Discover Financial Services and is Chairman of the Audit Committee for the bank. | ||||||||||||||||||
Edward M. Roob; 79 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 1995 | Mr. Roob is retired (since 1993). | Mr. Roob is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | None. |
124
The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
J. Mikesell Thomas; 63 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008) and President and sole shareholder of Mikesell Advisory Corp (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (from 2004 to 2008) and of First Chicago Bancorp (from 2008 to 2011). | Mr. Thomas is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Thomas is a director (since 1992) and chairman of the Audit Committee for NorthShore University HealthSystem, a not for profit healthcare organization, and a director (since 2012) and member of the Audit and Investment and Finance Committees of HCC Insurance Holdings Inc. Mr. Thomas was previously a director of First Chicago Bancorp (2008-2010) and First Chicago Bank & Trust (from 2008 to 2010). | ||||||||||||||||||
Interested Trustee: | |||||||||||||||||||||||
Shawn Lytle; 44*2 | Trustee | Since 2011 | Mr. Lytle is a Group Managing Director and Head of Americas at UBS Global Asset Management (Americas) Inc. (since 2010). Mr. Lytle is a member of the UBS Global Asset Management Executive Committee. Prior to his role as Head of Americas, he was Deputy Global Head of Equities (from 2008 to 2010), Head of Equity Capabilities and Business Management in 2008, and a team manager (from 2005 to 2008) at UBS Global Asset Management (Americas) Inc. | Mr. Lytle is a director or trustee of three investment companies (consisting of 31 portfolios) for which UBS Global AM serves as investment advisor or manager. | None |
125
The UBS Funds
Trustee and officer information (unaudited)
Officers:
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Joseph J. Allessie*; 49 | Vice President, Assistant Secretary and Chief Compliance Officer | Since 2005 (Vice President and Assistant Secretary); since July 2014 (Chief Compliance Officer) | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM—Americas region"). Mr. Allessie is head of compliance and operational risk control for the UBS Global Asset Management Division in the Americas with oversight for traditional and alternative investment businesses in Canada, the US and Cayman Islands. Prior to that he served as deputy general counsel of UBS Global AM—Americas region (from 2005 to 2014). Mr. Allessie is a vice president, assistant secretary and chief compliance officer (prior to which he was interim chief compliance officer) (from January to July 2014) of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Rose Ann Bubloski*; 46 | 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 the US mutual fund treasury administration department of UBS Global AM—Americas region. She was a vice president and assistant treasurer of certain UBS funds (from 2004 to 2007). She is vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mark E. Carver*; 50 | President | Since 2010 | Mr. Carver is a managing director and Head of Product Development and Management—Americas for UBS Global AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is a member of the Americas Management Committee (since 2008) and the Regional Operating Committee (since 2008). Prior to 2008, Mr. Carver held a number of product-related or sales responsibilities with respect to funds, advisory programs and separately managed accounts. Mr. Carver is president of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Thomas Disbrow*; 48 | Vice President, Treasurer and Principal Accounting Officer | Since 2004 and 2006, respectively | Mr. Disbrow is a managing director (since 2011), (prior to which he was an executive director) (since 2007) and head of North Americas Fund Treasury (since 2011) of UBS Global AM—Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Michael J. Flook*; 49 | Vice President and Assistant Treasurer | Since 2006 | Mr. Flook is a director (since 2010) (prior to which he was an associate director) (since 2006) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Flook is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
126
The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Christopher S. Ha*; 34 | Vice President and Assistant Secretary | Since September 2012 | Mr. Ha is a director and associate general counsel (since September 2012) at UBS Global AM—Americas region. Prior to joining UBS Global AM—Americas region, Mr. Ha was of counsel at Buhler, Duggal & Henry LLP (law firm) (from March 2012 to July 2012) and an associate attorney at Dechert LLP (law firm) (from 2007 to 2009). Mr. Ha is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mark F. Kemper**; 56 | Vice President and Secretary | Since 1999 | Mr. Kemper is a managing director (since 2006) and head of the legal department of UBS Global AM—Americas region (since 2004). He has been secretary of UBS Global AM—Americas region (since 2004), secretary of UBS Global Asset Management Trust Company (since 1993) and secretary of UBS AM Holdings (USA) Inc. (since 2001). Mr. Kemper is vice president and secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Joanne M. Kilkeary*; 46 | Vice President and Assistant Treasurer | Since 2006 | Ms. Kilkeary is an executive director (since March 2013) (prior to which she was a director) (since 2008) and a senior manager (since 2004) of the US mutual fund treasury administration department of UBS Global AM—Americas region. Ms. Kilkeary is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Tammie Lee*; 43 | Vice President and Assistant Secretary | Since 2005 | Ms. Lee is an executive director (since 2010) (prior to which she was a director) (since 2005) and associate general counsel of UBS Global AM—Americas region (since 2005). Ms. Lee is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Nancy D. Osborn*; 48 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Eric Sanders*; 48 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
127
The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Andrew Shoup*; 58 | Vice President and Chief Operating Officer | Since 2006 | Mr. Shoup is a managing director and global head of the Fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Shoup is also a director of UBS (IRL) Fund p.l.c. (since 2008). Mr. Shoup is a vice president and chief operating officer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Keith A. Weller*; 53 | Vice President and Assistant Secretary | Since 2004 | Mr. Weller is an executive director and senior associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Weller is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mandy Yu*; 30 | Vice President | Since March 2013 | Ms. Yu is an authorized officer (since 2012) and tax compliance manager (since March 2013) of the US mutual fund treasury administration department of UBS Global AM—Americas region. She was a Fund Treasury Manager (from 2012 to March 2013) and a Mutual Fund Administrator (from 2007 to 2012) for UBS Global AM—Americas region. Ms. Yu is a vice president of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
1 Each Trustee holds office for an indefinite term. Officers of the Trust are appointed by the Trustees and serve at the pleasure of the Board.
2 Mr. Lytle is considered to be an interested person of the Trust under the federal securities laws due to his position as an officer of UBS Global AM.
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
128
The UBS Funds
Federal tax information (unaudited)
For the year ended June 30, 2014, the percentage of dividends paid that qualify for the 70% dividends received deduction for corporate shareholders, and the amounts expected to be passed through to shareholders as foreign tax credits are approximated as follows:
Fund | Dividends received deduction | Foreign tax credit | |||||||||
UBS Global Sustainable Equity Fund | 0 | % | $ | 36,203 | |||||||
UBS U.S. Defensive Equity Fund | 0 | 0 | |||||||||
UBS U.S. Equity Opportunity Fund | 100 | 0 | |||||||||
UBS U.S. Large Cap Equity Fund | 100 | 0 |
129
The UBS Funds
Fund's privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds managed by UBS Global Asset Management (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information and to comply with applicable laws and regulations.
The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as otherwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1198
UBS Asset
Allocation Funds
June 30, 2014
The UBS Funds—Asset Allocation
Annual Report
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
Asset Allocations | |||||||
UBS Asset Growth Fund (formerly, UBS Global Frontier Fund) | 5 | ||||||
UBS Dynamic Alpha Fund | 14 | ||||||
UBS Global Allocation Fund | 35 | ||||||
UBS Multi-Asset Income Fund | 50 | ||||||
Explanation of expense disclosure | 64 | ||||||
Statement of assets and liabilities | 68 | ||||||
Statement of operations | 72 | ||||||
Statement of changes in net assets | 74 | ||||||
Financial highlights | 76 | ||||||
Notes to financial statements | 84 | ||||||
Report of independent registered public accounting firm | 108 | ||||||
General information | 109 | ||||||
Board approval of investment advisory agreements | 110 | ||||||
Trustee and Officer information | 115 | ||||||
Federal tax information | 121 |
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President's letter
August 14, 2014
Dear Shareholder,
Investors cheered earlier this year as the bull market in US equities turned five years old. It has been a remarkable five years for US equity investors. In the depths of the "Great Recession," on March 9, 2009, the S&P 500 closed at 676.53, but on the same date this year, the index closed at 1,878.04, a gain of 178%. The anniversary of the equity bull market has inspired much reflection among investors, as opposing arguments have formed about the longevity of the market going forward.
Currently, both bullish and bearish investors have compelling arguments to support their positions. The case for a continuation of the bull market rests on expectations of low inflation, continued economic and corporate growth, and rising equity valuations. In this view, further equity market gains will be driven by a low inflationary environment, downward trending unemployment, continued consumer deleveraging and rising confidence, as well as increasing capital expenditures as corporations begin to focus on expansion. Conversely, the case for a market correction rests on assumptions of declining valuations, deteriorating profit margins and earnings disappointments. Those who support this view believe that a market correction could be led by rising interest rates, equity valuations that may appear to be overstretched versus historical averages and profit margins that, while currently above historical levels, may regress back toward their long-term mean. For mutual fund shareholders, however, long-term success will have less to do with how long the equity bull market runs and more with a long-term investment approach that will help achieve their desired outcomes despite the ups and downs of markets.
At UBS Global Asset Management, we are focused on managing funds that achieve our clients' objectives through sustainable investment outcomes. In addition to single-strategy, equity and fixed-income products, we have added funds that utilize innovative diversifiers intended to soften the impact of market swings. These funds diversify risk through strategies that are not bound by benchmarks, are expected often to benefit from both rising and falling security prices, and utilize cost-effective defensive investment strategies. UBS Global Asset Management was among the early leaders to evolve its product offerings with the intention of providing sustainable returns in up and down markets using these strategies. We believe that diversification is paramount to successful investment outcomes, irrespective of market conditions, and we will continue to offer clients products that aim to mitigate downside risk and provide durable returns through both up and down market cycles.
I am pleased to share that the client focus, investment discipline and strength of our firm recently garnered a prestigious accolade from Euromoney magazine. In its July 2014 issue, Euromoney named UBS "Best Global Bank," describing our firm as "a global wealth manager first and foremost, underpinned by a Swiss universal bank and a powerful asset management business...." This award is just one measure of how UBS is succeeding as a business by focusing on meeting clients' needs.
1
President's letter
Whatever the outcome of the current equity bull market, we remain focused on enabling our clients to achieve the outcomes they desire. As we continue to evolve our funds to provide sustainable performance in a variety of market conditions, we rely on our firm's client-oriented culture to guide everything we do. We embrace the responsibility of helping our clients meet their financial objectives and thank you for your continued trust in our skill and commitment to serve you.
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Global Asset Management (Americas) Inc.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. A prospectus or summary prospectus for the funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com.
2
The markets in review
Improving growth in the developed world
After three consecutive years of generally modest growth, the overall US economy contracted in the first quarter of 2014. Looking back, gross domestic product ("GDP") in the US grew at annualized rates of 4.5% and 3.5% during the third and fourth quarters of 2013, respectively. The Commerce Department then reported that first quarter 2014 GDP contracted at a 2.1% annualized rate. This was the first negative reading since the first quarter of 2011, and the downturn was partially attributed to severe winter weather in parts of the country. However, this proved to be a temporary setback for the economy, as GDP growth was 4.0% during the second quarter of 2014.1
The Federal Reserve Board (the "Fed") took a number of actions during the reporting period. In December 2013, the Fed announced that it would begin paring back its monthly asset purchases, stating "Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a [reduced] pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a [reduced] pace of $40 billion per month rather than $45 billion per month." At its meetings in January, March, April and June 2014, the Fed said it would further taper its asset purchases, in each case paring its total purchases a total of $10 billion per month. Beginning in July, the Fed will purchase a total of $35 billion per month ($15 billion per month of agency mortgage-backed securities and $20 billion per month of longer-term Treasuries). In the Fed's official statement it stated, "Information received since the Federal Open Market Committee met in April indicates that growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated. Household spending appears to be rising moderately, and business fixed investment resumed its advance, while the recovery in the housing sector remained slow."
Growth outside the US generally improved. In its April 2014 World Economic Outlook Update, the International Monetary Fund ("IMF") reported that "Global activity has broadly strengthened and is expected to improve further in 2014–15, with much of the impetus coming from advanced economies." From a regional perspective, the IMF anticipates 2014 growth will be 1.2% in the Eurozone, versus a 0.5% contraction in 2013. Economic activity in Japan is expected to be relatively stable, with growth of 1.4% in 2014, compared with 1.5% in 2013. After decelerating in 2013, the IMF projects that overall growth in emerging market countries will experience an uptick to 4.9% in 2014, versus 4.7% in 2013.
Global equities rally sharply
Despite a number of headwinds, the global equity market was highly resilient and generated strong results during the reporting period. The market was volatile at times given mixed global growth, geopolitical issues and questions regarding future central bank monetary policy. However, investor demand was solid overall, as corporate profits often surprised and central banks largely remained highly accommodative. All told, the US stock market, as measured by the S&P 500 Index,2 gained 24.61% for the 12 months ended June 30, 2014. International developed equities, as measured by the MSCI EAFE Index (net),3 also produced very strong results, gaining 23.57% during the period. Returns for emerging market equities, as measured by the MSCI Emerging Markets Index (net),4
1 Based on the Commerce Department's first estimate announced on July 30, 2014, after the reporting period had ended.
2 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition, and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3
The markets in review
were less robust, as they returned 14.31% over the same period. This was due to several factors, including concerns regarding China's ability to provide a soft landing for its economy.
The fixed income market performs well
The fixed income market surprised many investors, as it posted positive results during the reporting period as a whole. During the first half of the period, US Treasury yields moved higher and negatively impacted the overall bond market (yields and bond prices move in opposite directions). This was due to a number of factors, including continued economic growth and expectations that the Fed would begin tapering its asset purchase program. However, as discussed, the US economy weakened during the first quarter of 2014 and geopolitical concerns triggered several flights to quality. All told, the yield on the 10-year Treasury fell from 3.04% to 2.53% during the first six months of 2014. The overall US bond market, as measured by the Barclays US Aggregate Index,5 gained 4.37% during the 12 month reporting period and the US taxable spread sectors (non-US Treasury fixed income securities) generated positive absolute returns. Taking on greater risk was often rewarded, as investors looked to generate incremental yield in the low interest rate environment. For example, high yield bonds, as measured by the BofA Merrill Lynch US High Yield Cash Pay Constrained Index6 rose 11.70% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),7 gained 11.05%.
5 The Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed, non-convertible, coupon-bearing US dollar denominated, below investment grade corporate debt with a term to maturity of at least one year. The index is market capitalization weighted, so that larger bond issuers have a greater effect on the index's return. However, the representation of any single bond issuer is restricted to a maximum of 2% of the total index. Investors should note that indices do not reflect the deduction of fees and expenses.
7 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
4
UBS Asset Growth Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Asset Growth Fund (the "Fund") (previously UBS Global Frontier Fund) gained 18.75% (Class A shares returned 12.22% after the deduction of the maximum sales charge), while Class Y shares rose 19.12%. The Fund's benchmark, the MSCI World Free Index (net) (the "Index") gained 24.05%. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 8; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
Special Fund Update
The Board of Trustees of The UBS Funds approved a name change and investment policy modifications to UBS Global Frontier Fund, which went into effect on October 28, 2013. Specifically:
• The Fund's name was changed from UBS Global Frontier Fund to UBS Asset Growth Fund.
• The Fund implemented a managed volatility strategy to seek to target a defined level of portfolio risk of 15% annual volatility or lower. Volatility is a risk measurement that measures the relative rate at which the price of a security moves up and down and is typically determined by calculating the annualized standard deviation of the daily change in price. Commonly, the higher the volatility the greater the risk of the security. The Fund may continue to use leverage to help implement the managed volatility strategy. While the Advisor will attempt to manage the Fund's volatility, there can be no guarantee that the Fund will achieve its target and the actual volatility may be higher or lower than 15% over any period.
• The Fund's exposure to underlying asset classes is now achieved primarily through passive index exposures and derivatives.
Please note, the transition of the Fund's portfolio largely occurred in December 2013.
The Fund produced a strong absolute return during the reporting period but underperformed the Index.
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, the utilization of currency forwards and currency futures had a direct positive impact on Fund performance. Various equity and fixed income futures and ETFs (exchange traded funds) were used to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. In aggregate, these derivatives contributed to performance during the reporting period.
Portfolio performance summary1
What worked:
• The Fund's long directional position in most equity markets generated positive absolute returns.
– The Fund's developed equity allocation was the greatest contributor to absolute performance, as it was the best performing asset class over the 12-month period.
– Strong positive performance was achieved from the Fund's US large cap equities.
– The Fund's European and UK equities were beneficial for performance.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Asset Growth Fund
• Several of the Fund's currency strategies were positive for performance.
– A long position in the Australian dollar versus the US dollar was additive to results.
– A long position in the Japanese yen relative to the US dollar was rewarded
– A long position in the British pound relative to the US dollar was beneficial.
• The Fund's position in certain alternative assets was beneficial. The Fund's long position in convertible bonds had a positive impact on performance.
• Leverage enhanced the Fund's performance.
– The Fund seeks to maintain a volatility target of 15% or less annually. As volatility of both equity and bond markets remained subdued over the period, the Fund used leverage in an attempt to maintain its target volatility. Given that leverage magnifies returns on the upside and the downside, the positive impact from our equity exposure was amplified and added to the Fund's results. As of June 30, 2014, the Fund's total market exposure was 169%.
• Overall, the Fund's positioning among risk assets was positive for portfolio performance.
– The portfolio uses a managed volatility strategy based around a passive multi-asset portfolio (the "Baseline"). The Baseline takes into account the potential returns and risks of each asset class, as well as the expected diversification benefits from a multi-asset approach. Views of potential returns and risks are based on a 3–5 year time horizon. The Baseline is intended to be a dynamic structure, which may result in changes to the underlying asset allocation strategy as our outlook changes. No changes to the Baseline were made during the period. The Baseline began and ended the period with an allocation of 69% equities, 29% fixed income and 2% alternatives. During the period, market volatility and Fund-realized volatility were subdued and, therefore, the Fund maintained a leverage factor of approximately 170% to achieve target volatility at or below 15%. Actual realized volatility of the Fund over the period was approximately 12%.
What did not work:
• A bias for non-US equities over US equities was not rewarded.
– Our preference for international equities, including European and Japanese equities, detracted from performance, as US equities outperformed international equities.
– While the Fund's position in emerging markets equities was positive on an absolute basis, relative to the benchmark this detracted from performance.
• The Fund's position in fixed income securities detracted from performance on a relative basis.
– The Fund's directional exposure to high yield and investment grade bonds was beneficial on an absolute basis, but since equities outperformed fixed income over the period, this position hindered performance relative to its benchmark.
6
UBS Asset Growth Fund
• Certain currency positions were negative for performance.
– The Fund's short position in the New Zealand dollar versus the US dollar detracted from results over the reporting period.
– The Fund's short position in the Swiss franc versus the euro was not rewarded.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014.They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a Fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our Funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
7
UBS Asset Growth Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 18.75 | % | 14.20 | % | 1.70 | % | |||||||||
Class C3 | 17.89 | 13.36 | 0.95 | ||||||||||||
Class Y4 | 19.12 | 14.46 | 1.97 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 12.22 | % | 12.89 | % | 0.88 | % | |||||||||
Class C3 | 16.89 | 13.36 | 0.95 | ||||||||||||
MSCI World Free Index (net)5 | 24.05 | % | 14.99 | % | 3.67 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—2.06% and 1.56%; Class C—2.83% and 2.31%; Class Y—1.83% and 1.31%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.40% for Class A shares, 2.15% for Class C shares and 1.15% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Asset Growth Fund and the index is July 26, 2007.
2 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
8
UBS Asset Growth Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Asset Growth Fund Class A and Class Y shares versus the MSCI World Free Index (net) from July 26, 2007, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
9
UBS Asset Growth Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Investment companies | |||||||
iShares Emerging Markets Local Currency Bond ETF | 1.83 | % | |||||
iShares iBoxx $ High Yield Corporate Bond ETF | 17.26 | ||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 15.71 | ||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 1.81 | ||||||
iShares MSCI Switzerland Capped ETF | 1.74 | ||||||
iShares TIPS Bond ETF | 3.51 | ||||||
SPDR Barclays Convertible Securities ETF | 3.53 | ||||||
Total investment companies | 45.39 | % | |||||
Short-term investments | 48.59 | ||||||
Investment of cash collateral from securities loaned | 24.18 | ||||||
Total investments | 118.16 | % | |||||
Liabilities, in excess of cash and other assets | (18.16 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Asset Growth Fund. Figures might be different if a breakdown of the underlying investment companies was included.
10
UBS Asset Growth Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investment companies: 45.39% | |||||||||||
iShares Emerging Markets Local Currency Bond ETF | 11,447 | $ | 589,978 | ||||||||
iShares iBoxx $ High Yield Corporate Bond ETF1 | 58,503 | 5,569,486 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF1 | 42,516 | 5,070,458 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF1 | 5,069 | 584,304 | |||||||||
iShares MSCI Switzerland Capped ETF1 | 16,345 | 560,960 | |||||||||
iShares TIPS Bond ETF1 | 9,820 | 1,132,835 | |||||||||
SPDR Barclays Convertible Securities ETF1 | 22,561 | 1,139,332 | |||||||||
Total investment companies (cost $14,133,072) | 14,647,353 | ||||||||||
Face amount | |||||||||||
Short-term investments: 48.59% | |||||||||||
US government obligations: 24.79% | |||||||||||
US Treasury Bills 0.010%, due 07/10/142 | $ | 2,000,000 | 1,999,988 | ||||||||
0.010%, due 07/31/142 | 2,000,000 | 1,999,950 | |||||||||
0.030%, due 08/21/142 | 2,000,000 | 1,999,965 | |||||||||
0.060%, due 08/07/142 | 2,000,000 | 1,999,954 | |||||||||
Total US government obligations (cost $7,999,769) | 7,999,857 | ||||||||||
Shares | |||||||||||
Investment companies: 23.80% | |||||||||||
UBS Cash Management Prime Relationship Fund3 (cost $7,680,934) | 7,680,934 | 7,680,934 | |||||||||
Total short-term investments (cost $15,680,703) | 15,680,791 |
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 24.18% | |||||||||||
UBS Private Money Market Fund LLC3 (cost $7,801,795) | 7,801,795 | $ | 7,801,795 | ||||||||
Total investments: 118.16% (cost $37,615,570) | 38,129,939 | ||||||||||
Liabilities, in excess of cash and other assets: (18.16)% | (5,861,503 | ) | |||||||||
Net assets: 100.00% | $ | 32,268,436 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $37,624,994; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 504,985 | |||||
Gross unrealized depreciation | (40 | ) | |||||
Net unrealized appreciation of investments | $ | 504,945 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 63. Portfolio footnotes begin on page 13.
11
UBS Asset Growth Fund
Portfolio of investments
June 30, 2014
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
5 Year US Treasury Notes, 23 contracts (USD) | September 2014 | $ | 2,749,295 | $ | 2,747,602 | $ | (1,693 | ) | |||||||||||
Index futures buy contracts: | |||||||||||||||||||
E-mini S&P 500 Index, 92 contracts (USD) | September 2014 | 8,870,387 | 8,981,040 | 110,653 | |||||||||||||||
EURO STOXX 50 Index, 199 contracts (EUR) | September 2014 | 8,891,367 | 8,806,899 | (84,468 | ) | ||||||||||||||
FTSE 100 Index, 53 contracts (GBP) | September 2014 | 6,095,283 | 6,087,159 | (8,124 | ) | ||||||||||||||
Mini MSCI Emerging Markets Index, 127 contracts (USD) | September 2014 | 6,582,156 | 6,608,445 | 26,289 | |||||||||||||||
SPI 200 Index, 22 contracts (AUD) | September 2014 | 2,777,779 | 2,776,705 | (1,074 | ) | ||||||||||||||
TOPIX Index, 36 contracts (JPY) | September 2014 | 4,409,285 | 4,486,451 | 77,166 | |||||||||||||||
Currency futures buy contracts: | |||||||||||||||||||
Australian Dollar, 9 contracts (USD) | September 2014 | 839,011 | 843,839 | 4,828 | |||||||||||||||
Euro, 13 contracts (USD) | September 2014 | 2,198,996 | 2,225,926 | 26,930 | |||||||||||||||
Great Britain Pound, 17 contracts (USD) | September 2014 | 1,783,147 | 1,816,344 | 33,197 | |||||||||||||||
Japanese Yen, 12 contracts (USD) | September 2014 | 1,471,392 | 1,482,000 | 10,608 | |||||||||||||||
Currency futures sell contracts: | |||||||||||||||||||
Swiss Franc, 3 contracts (USD) | September 2014 | (417,102 | ) | (423,263 | ) | (6,161 | ) | ||||||||||||
Net unrealized appreciation on futures contracts | $ | 188,151 |
Options written
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 8 | $ | 67,311 | ||||||||
Options written | — | — | |||||||||
Options terminated in closing purchase transactions | (8 | ) | (67,311 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | — | $ | — |
12
UBS Asset Growth Fund
Portfolio of investments
June 30, 2014
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Investment companies | $ | 14,647,353 | $ | — | $ | — | $ | 14,647,353 | |||||||||||
Short-term investments | — | 15,680,791 | — | 15,680,791 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 7,801,795 | — | 7,801,795 | |||||||||||||||
Futures contracts | 289,671 | — | — | 289,671 | |||||||||||||||
Total | $ | 14,937,024 | $ | 23,482,586 | $ | — | $ | 38,419,610 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (101,520 | ) | $ | — | $ | — | $ | (101,520 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
1 Security, or portion thereof, was on loan at June 30, 2014.
2 Rate shown is the discount rate at the date of purchase.
3 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Funds.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Net realized gain during the year ended 06/30/14 | Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 8,739,483 | $ | 35,021,247 | $ | 36,079,796 | $ | — | $ | — | $ | 7,680,934 | $ | 7,193 | |||||||||||||||||
UBS Private Money Market Fund LLCa | 274,676 | 36,593,064 | 29,065,945 | — | — | 7,801,795 | 203 | ||||||||||||||||||||||||
UBS Emerging Markets Equity Relationship Fund | 4,625,410 | — | 4,763,744 | 65,878 | 72,456 | — | — | ||||||||||||||||||||||||
UBS Global Corporate Bond Relationship Fund | — | 835,000 | 855,550 | 20,550 | — | — | — | ||||||||||||||||||||||||
UBS High Yield Relationship Fund | 2,457,795 | 435,000 | 3,020,532 | 475,616 | (347,879 | ) | — | — | |||||||||||||||||||||||
UBS International Equity Relationship Fund | 5,251,216 | — | 5,901,640 | 1,860,481 | (1,210,057 | ) | — | — | |||||||||||||||||||||||
$ | 21,348,580 | $ | 72,884,311 | $ | 79,687,207 | $ | 2,422,525 | $ | (1,485,480 | ) | $ | 15,482,729 | $ | 7,396 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
13
UBS Dynamic Alpha Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Dynamic Alpha Fund (the "Fund") gained 6.31% (Class A shares returned 0.42% after the deduction of the maximum sales charge), while Class Y shares rose 6.45%. For purposes of comparison, the BofA Merrill Lynch US Treasury 1-5 Year Index returned 1.16% during the same time period, the MSCI World Free Index (net) returned 24.05% and the Citigroup One-Month US Treasury Bill Index returned 0.03%. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 16; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a positive absolute return during the reporting period. Performance was primarily due to our market allocation strategy.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, utilizing currency forwards had a direct negative impact on Fund performance. We used a variety of equity and fixed income options, futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, contributed to performance during the period.
Portfolio performance summary1
What worked
• Our long position in equities aided the Fund's results during the reporting period.
– Net long positions in developed equities were additive to results.
– A preference for Italian equities versus French equities was beneficial for the Fund's performance, as was our preference for Canadian versus Australian equities.
– The relative value trade of US industrials over US consumer staples had a positive impact on returns.
• Overall, the Fund's fixed income positioning contributed to performance
– A long high yield bond position was beneficial. High yield spreads narrowed during the reporting period, given generally strong demand and improving fundamentals.
– The Fund's allocation to short-dated Italian bonds was additive to performance.
– An allocation to investment grade corporate bonds, as well as security selection within the sector, enhanced the Fund's results.
– The Fund's position in French government bonds versus Japanese government bonds was rewarded.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
14
UBS Dynamic Alpha Fund
• Overall, the Fund's positioning among risk assets was positive for performance during the reporting period.
– We tactically adjusted the Fund's allocation to equities during the reporting period. We began the 12-month period with a 36% net equity exposure and allowed this to drift higher, reaching a high in the upper 40% range in the fourth quarter of 2013. Prior to the Federal Reserve Board's (the "Fed") final meeting of 2013 in December, we reduced the Fund's net equity exposure to 20%. Following the meeting, with clearer forward guidance on the path of asset purchase tapering, we reallocated our cash back to risk assets. The portfolio ended the reporting period with a net equity position of 34%.
– The Fund began the reporting period with a 30% allocation to fixed income and had an elevated cash exposure of 34%. This higher than usual cash position was due to our reducing the Fund's market exposure, particularly in fixed income during May and June 2013, prior to the beginning of the reporting period. The decision to reduce the Fund's market exposure was made in the wake of the Fed's comments about tapering its asset purchases. As the reporting period progressed, we redeployed our cash position into the fixed income and equity markets. At the end of the 12-month period, the Fund's fixed income allocation was 56% and its cash position had fallen to 10%.
What didn't work
• A bias toward non-US equities versus US equities detracted from results.
– The Fund's preference for international developed equities, which was largely allocated to European over US equities, was not rewarded, as the former lagged their US counterparts.
• Certain of the Fund's fixed income exposures detracted from results.
– The Fund's long position in UK gilts versus German bunds was not rewarded.
• Overall, the Fund's currency strategy was negative for performance.
– The Fund's short position in the New Zealand dollar was the largest detractor from performance during the reporting period.
– The Fund's short position in the Swiss franc was negative over the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
15
UBS Dynamic Alpha Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | 6.31 | % | 7.80 | % | 3.37 | % | |||||||||
Class C3 | 5.42 | 6.99 | 2.59 | ||||||||||||
Class Y4 | 6.45 | 8.08 | 3.66 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | 0.42 | % | 6.58 | % | 2.75 | % | |||||||||
Class C3 | 4.42 | 6.99 | 2.59 | ||||||||||||
BofA Merrill Lynch US Treasury 1-5 Year Index5 | 1.16 | % | 1.92 | % | 3.24 | % | |||||||||
MSCI World Free Index (net)6 | 24.05 | 14.99 | 6.80 | ||||||||||||
Citigroup One-Month US Treasury Bill Index7 | 0.03 | 0.06 | 1.45 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.44% and 1.36%; Class C—2.20% and 2.11%; Class Y—1.13% and 1.11%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 1.35% for Class A shares, 2.10% for Class C shares and 1.10% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Dynamic Alpha Fund is January 27, 2005. Inception date of the indices, for the purpose of this illustration, is January 31, 2005.
2 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The BofA Merrill Lynch US Treasury 1-5 Year Index is an unmanaged index designed to track US Treasury securities with maturities between 1 and 5 years. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
7 The Citigroup One-Month US Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last one month Treasury Bill issue. Investors should note that indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
16
UBS Dynamic Alpha Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Dynamic Alpha Fund Class A and Class Y shares versus the BofA Merrill Lynch US Treasury 1-5 Year Index, the MSCI World Free Index (net) and the Citigroup One-Month US Treasury Bill Index from January 27, 2005, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
17
UBS Dynamic Alpha Fund
Top ten long-term fixed income holdings (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
Buoni Poliennali Del Tesoro, 5.000%, due 09/01/40 | 3.5 | % | |||||
Buoni Poliennali Del Tesoro, 4.750%, due 09/01/44 | 3.0 | ||||||
Government of Australia, 4.500%, due 04/15/20 | 2.0 | ||||||
Government of Australia, 4.250%, due 07/21/17 | 2.0 | ||||||
Government of Australia, 4.750%, due 06/15/16 | 1.9 | ||||||
JPMorgan Chase & Co., 3.200%, due 01/25/23 | 0.7 | ||||||
Bank of America Corp., 1.875%, due 01/10/19 | 0.6 | ||||||
General Electric Capital Corp., Series A, 6.750%, due 03/15/32 | 0.5 | ||||||
Wachovia Corp., 5.750%, due 02/01/18 | 0.5 | ||||||
Citigroup, Inc., 6.000%, due 08/15/17 | 0.4 | ||||||
Total | 15.1 | % |
Country exposure by issuer, top five (unaudited)
As of June 30, 2014
Percentage of net assets | |||||||
United States | 22.0 | % | |||||
Italy | 8.2 | ||||||
Australia | 7.9 | ||||||
United Kingdom | 7.4 | ||||||
Netherlands | 4.3 | ||||||
Total | 49.8 | % |
18
UBS Dynamic Alpha Fund
Industry diversification (unaudited)
As a percentage of net assets as of June 30, 2014
Bonds | |||||||
Corporate bonds | |||||||
Airlines | 0.10 | % | |||||
Auto components | 0.11 | ||||||
Banks | 11.39 | ||||||
Beverages | 1.22 | ||||||
Biotechnology | 0.20 | ||||||
Capital markets | 1.95 | ||||||
Chemicals | 0.41 | ||||||
Commercial services & supplies | 0.43 | ||||||
Communications equipment | 0.38 | ||||||
Construction & engineering | 0.55 | ||||||
Consumer finance | 1.33 | ||||||
Containers & packaging | 0.25 | ||||||
Diversified financial services | 2.47 | ||||||
Diversified telecommunication services | 3.05 | ||||||
Electric utilities | 3.00 | ||||||
Electrical equipment | 0.15 | ||||||
Energy equipment & services | 0.13 | ||||||
Food & staples retailing | 0.14 | ||||||
Food products | 0.87 | ||||||
Gas utilities | 0.88 | ||||||
Health care equipment & supplies | 0.23 | ||||||
Health care providers & services | 0.38 | ||||||
Hotels, restaurants & leisure | 0.15 | ||||||
Independent power and renewable electricity producers | 0.28 | ||||||
Industrial conglomerates | 0.28 | ||||||
Insurance | 4.02 | ||||||
Internet & catalog retail | 0.08 | ||||||
Internet software & services | 0.14 | ||||||
IT services | 0.16 | ||||||
Life sciences tools & services | 0.05 | ||||||
Machinery | 0.20 | ||||||
Marine | 0.21 |
Media | 1.84 | % | |||||
Metals & mining | 1.08 | ||||||
Multi-utilities | 0.73 | ||||||
Oil, gas & consumable fuels | 5.61 | ||||||
Pharmaceuticals | 0.77 | ||||||
Real estate investment trust (REIT) | 0.05 | ||||||
Real estate management & development | 0.12 | ||||||
Road & rail | 0.61 | ||||||
Software | 0.28 | ||||||
Specialty retail | 0.15 | ||||||
Technology hardware, storage & peripherals | 0.32 | ||||||
Thrifts & mortgage finance | 0.38 | ||||||
Tobacco | 1.35 | ||||||
Transportation infrastructure | 0.74 | ||||||
Water utilities | 0.31 | ||||||
Wireless telecommunication services | 0.96 | ||||||
Total corporate bonds | 50.49 | % | |||||
Collateralized debt obligation | 0.001 | ||||||
Mortgage & agency debt security | 0.02 | ||||||
Non-US government obligations | 12.32 | ||||||
Supranational bonds | 0.54 | ||||||
Total bonds | 63.37 | % | |||||
Short-term investments | 25.42 | ||||||
Options purchased | 0.60 | ||||||
Investment of cash collateral from securities loaned | 0.25 | ||||||
Total investments | 89.64 | % | |||||
Cash and other assets, less liabilities | 10.36 | ||||||
Net assets | 100.00 | % |
1 Amount represents less than 0.005%.
19
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds: 63.37% | |||||||||||
Corporate bonds: 50.49% | |||||||||||
Australia: 2.07% | |||||||||||
Adani Abbot Point Terminal Pty Ltd., 5.750%, due 11/01/18 | AUD | 965,000 | $ | 913,165 | |||||||
BHP Billiton Finance USA Ltd., 5.000%, due 09/30/43 | $ | 285,000 | 314,978 | ||||||||
Commonwealth Bank of Australia, 1.125%, due 03/13/17 | 620,000 | 619,900 | |||||||||
2.250%, due 03/16/171 | 1,130,000 | 1,165,847 | |||||||||
National Australia Bank, 2.750%, due 03/09/17 | 1,050,000 | 1,094,781 | |||||||||
Origin Energy Finance Ltd., 2.500%, due 10/23/202 | EUR | 500,000 | 709,701 | ||||||||
3.500%, due 10/09/181 | $ | 400,000 | 415,110 | ||||||||
QBE Insurance Group Ltd., 2.400%, due 05/01/182 | 405,000 | 404,331 | |||||||||
Santos Finance Ltd., 8.250%, due 09/22/703 | EUR | 295,000 | 463,525 | ||||||||
Telstra Corp. Ltd., 4.800%, due 10/12/211 | $ | 300,000 | 337,006 | ||||||||
Transurban Finance Co. Pty Ltd., 2.500%, due 10/08/20 | EUR | 210,000 | 304,341 | ||||||||
Total Australia corporate bonds | 6,742,685 | ||||||||||
Belgium: 0.14% | |||||||||||
Elia System Operator SA, 3.250%, due 04/04/282 | 300,000 | 445,202 | |||||||||
Bermuda: 0.19% | |||||||||||
Bacardi Ltd., 2.750%, due 07/03/232 | 440,000 | 631,600 | |||||||||
Brazil: 0.50% | |||||||||||
BRF SA, 3.950%, due 05/22/231 | $ | 420,000 | 396,900 | ||||||||
Petrobras Global Finance BV, 3.250%, due 04/01/192 | EUR | 250,000 | 354,734 | ||||||||
4.375%, due 05/20/234 | $ | 185,000 | 176,347 | ||||||||
5.625%, due 05/20/43 | 90,000 | 81,872 | |||||||||
Vale SA, 5.625%, due 09/11/42 | 630,000 | 617,557 | |||||||||
Total Brazil corporate bonds | 1,627,410 | ||||||||||
Canada: 1.82% | |||||||||||
Bank of Montreal, 6.020%, due 05/02/18 | CAD | 415,000 | 444,585 | ||||||||
Bank of Nova Scotia, 4.100%, due 06/08/17 | 615,000 | 612,522 |
Face amount | Value | ||||||||||
Canadian Imperial Bank of Commerce, 1.350%, due 07/18/16 | $ | 420,000 | $ | 425,408 | |||||||
3.400%, due 01/14/16 | CAD | 455,000 | 438,366 | ||||||||
Greater Toronto Airports Authority, 6.980%, due 10/15/32 | 285,000 | 372,470 | |||||||||
Hydro One, Inc., 5.360%, due 05/20/36 | 285,000 | 316,979 | |||||||||
Nexen, Inc., 6.400%, due 05/15/37 | $ | 440,000 | 524,894 | ||||||||
Royal Bank of Canada, 2.980%, due 05/07/19 | CAD | 400,000 | 385,897 | ||||||||
Suncor Energy, Inc., 6.500%, due 06/15/38 | $ | 520,000 | 667,896 | ||||||||
Thomson Reuters Corp., 1.300%, due 02/23/17 | 520,000 | 520,649 | |||||||||
Toronto-Dominion Bank 3.367%, due 11/02/203 | CAD | 550,000 | 527,187 | ||||||||
Total Capital Canada Ltd., 1.875%, due 07/09/202 | EUR | 200,000 | 285,840 | ||||||||
Yamana Gold, Inc., 4.950%, due 07/15/241,4 | $ | 410,000 | 412,696 | ||||||||
Total Canada corporate bonds | 5,935,389 | ||||||||||
Cayman Islands: 1.28% | |||||||||||
Hutchison Whampoa Europe Finance 13 Ltd., 3.750%, due 05/10/182,3,5 | EUR | 320,000 | 442,032 | ||||||||
Hutchison Whampoa International Ltd., 7.625%, due 04/09/191 | $ | 550,000 | 672,017 | ||||||||
New York Life Funding, 5.125%, due 02/03/15 | GBP | 300,000 | 525,843 | ||||||||
Principal Financial Global Funding II LLC, 4.500%, due 01/26/17 | EUR | 550,000 | 817,052 | ||||||||
Tencent Holdings Ltd., 3.375%, due 05/02/191 | $ | 450,000 | 460,067 | ||||||||
Thames Water Utilities Cayman Finance Ltd., 5.375%, due 07/21/253 | GBP | 190,000 | 347,296 | ||||||||
Transocean, Inc., 6.800%, due 03/15/38 | $ | 375,000 | 427,706 | ||||||||
XLIT Ltd., 5.250%, due 12/15/43 | 140,000 | 153,953 | |||||||||
Yorkshire Water Services Bradford Finance Ltd., 6.000%, due 04/24/253 | GBP | 180,000 | 333,112 | ||||||||
Total Cayman Islands corporate bonds | 4,179,078 |
20
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
China: 0.25% | |||||||||||
AIA Group Ltd., 1.750%, due 03/13/182 | $ | 560,000 | $ | 555,772 | |||||||
2.250%, due 03/11/191 | 275,000 | 275,185 | |||||||||
Total China corporate bonds | 830,957 | ||||||||||
Curacao: 0.12% | |||||||||||
Teva Pharmaceutical Finance IV BV, 3.650%, due 11/10/21 | 390,000 | 400,221 | |||||||||
Denmark: 0.35% | |||||||||||
A.P. Moller - Maersk A/S, 3.375%, due 08/28/192 | EUR | 450,000 | 680,484 | ||||||||
DONG Energy A/S, 4.875%, due 01/12/322 | GBP | 250,000 | 449,426 | ||||||||
Total Denmark corporate bonds | 1,129,910 | ||||||||||
Finland: 0.65% | |||||||||||
Elenia Finance Oyj, 2.875%, due 12/17/20 | EUR | 550,000 | 793,075 | ||||||||
Pohjola Bank PLC, 1.750%, due 08/29/18 | 300,000 | 424,503 | |||||||||
Teollisuuden Voima Oyj, 2.500%, due 03/17/21 | 125,000 | 177,783 | |||||||||
4.625%, due 02/04/192 | 460,000 | 719,585 | |||||||||
Total Finland corporate bonds | 2,114,946 | ||||||||||
France: 2.32% | |||||||||||
Alstom SA, 4.500%, due 03/18/20 | 300,000 | 474,480 | |||||||||
Banque Federative du Credit Mutuel SA, 2.000%, due 09/19/19 | EUR | 500,000 | 708,291 | ||||||||
BNP Paribas SA, 2.700%, due 08/20/18 | $ | 415,000 | 424,549 | ||||||||
5.186%, due 06/29/152,3,5 | 235,000 | 239,406 | |||||||||
Credit Logement SA, 1.392%, due 09/16/142,3,5 | EUR | 200,000 | 240,312 | ||||||||
Dexia Credit Local SA, 5.375%, due 07/21/142 | 595,000 | 816,593 | |||||||||
Electricite de France SA, 5.250%, due 01/29/231,3,5 | $ | 175,000 | 178,523 | ||||||||
5.250%, due 01/29/232,3,5 | 130,000 | 132,617 | |||||||||
5.625%, due 01/22/241,3,5 | 280,000 | 292,684 | |||||||||
6.950%, due 01/26/391 | 250,000 | 332,338 | |||||||||
Eutelsat SA, 2.625%, due 01/13/20 | EUR | 200,000 | 288,636 | ||||||||
GDF Suez, 4.750%, due 07/10/213,5 | 500,000 | 749,692 |
Face amount | Value | ||||||||||
Societe Des Autoroutes Paris-Rhin-Rhone, 2.250%, due 01/16/20 | EUR | 600,000 | $ | 858,017 | |||||||
Societe Generale SA, 5.000%, due 01/17/241 | $ | 405,000 | 423,564 | ||||||||
Total Capital International SA, 1.550%, due 06/28/17 | 1,055,000 | 1,070,107 | |||||||||
Veolia Environnement SA, 6.750%, due 04/24/19 | EUR | 195,000 | 336,753 | ||||||||
Total France corporate bonds | 7,566,562 | ||||||||||
Germany: 0.25% | |||||||||||
Mondi Consumer Packaging International AG, 9.750%, due 07/15/172 | 560,000 | 806,107 | |||||||||
Guernsey: 0.10% | |||||||||||
Credit Suisse Group Guernsey I Ltd., 7.875%, due 02/24/412,3 | $ | 310,000 | 334,800 | ||||||||
Indonesia: 0.18% | |||||||||||
Pertamina Persero PT, 6.450%, due 05/30/441 | 600,000 | 595,500 | |||||||||
Ireland: 0.45% | |||||||||||
FGA Capital Ireland PLC, 2.625%, due 04/17/19 | EUR | 335,000 | 470,527 | ||||||||
GE Capital European Funding, 6.025%, due 03/01/38 | 390,000 | 785,114 | |||||||||
Perrigo Co. PLC, 4.000%, due 11/15/231 | $ | 200,000 | 203,273 | ||||||||
Total Ireland corporate bonds | 1,458,914 | ||||||||||
Israel: 0.38% | |||||||||||
Delek & Avner Tamar Bond Ltd., 3.839%, due 12/30/181 | 1,220,000 | 1,230,675 | |||||||||
Italy: 1.73% | |||||||||||
Assicurazioni Generali SpA, 2.875%, due 01/14/20 | EUR | 120,000 | 174,584 | ||||||||
4.875%, due 11/11/142 | 195,000 | 270,908 | |||||||||
Ei Towers SpA, 3.875%, due 04/26/18 | 285,000 | 417,408 | |||||||||
Intesa Sanpaolo SpA, 3.625%, due 08/12/151 | $ | 235,000 | 240,101 | ||||||||
3.875%, due 01/16/18 | 320,000 | 337,260 | |||||||||
4.375%, due 10/15/192 | EUR | 500,000 | 777,098 | ||||||||
Snam SpA, 3.875%, due 03/19/182 | 560,000 | 844,470 | |||||||||
Telecom Italia SpA, 6.125%, due 12/14/18 | 650,000 | 1,019,901 | |||||||||
Terna Rete Elettrica Nazionale SpA, 4.125%, due 02/17/17 | 265,000 | 393,781 |
21
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
Italy—(Concluded) | |||||||||||
UniCredit SpA, 3.250%, due 01/14/21 | EUR | 295,000 | $ | 432,118 | |||||||
6.375%, due 05/02/232,3 | $ | 690,000 | 755,550 | ||||||||
Total Italy corporate bonds | 5,663,179 | ||||||||||
Japan: 0.13% | |||||||||||
Japan Tobacco, Inc., 2.100%, due 07/23/181 | 250,000 | 252,186 | |||||||||
Nippon Telegraph & Telephone Corp., 1.400%, due 07/18/17 | 160,000 | 160,945 | |||||||||
Total Japan corporate bonds | 413,131 | ||||||||||
Jersey, Channel Islands: 0.78% | |||||||||||
AA Bond Co., Ltd., 4.720%, due 07/31/182 | GBP | 275,000 | 496,096 | ||||||||
Gatwick Funding Ltd., 5.250%, due 01/23/242 | 250,000 | 471,446 | |||||||||
Heathrow Funding Ltd., 4.600%, due 02/15/182 | EUR | 565,000 | 873,467 | ||||||||
HSBC Capital Funding LP, 5.130%, due 03/29/163,5 | 170,000 | 245,002 | |||||||||
QBE Capital Funding III Ltd., 7.250%, due 05/24/412,3 | $ | 430,000 | 463,325 | ||||||||
Total Jersey, Channel Islands corporate bonds | 2,549,336 | ||||||||||
Luxembourg: 0.43% | |||||||||||
Actavis Funding SCS, 1.300%, due 06/15/171 | 90,000 | 89,828 | |||||||||
ArcelorMittal, 9.500%, due 02/15/15 | 655,000 | 686,932 | |||||||||
Enel Finance International SA, 6.000%, due 10/07/391 | 450,000 | 512,719 | |||||||||
SES, 3.600%, due 04/04/231 | 125,000 | 126,396 | |||||||||
Total Luxembourg corporate bonds | 1,415,875 | ||||||||||
Mexico: 0.33% | |||||||||||
America Movil SAB de CV, 5.000%, due 03/30/20 | 695,000 | 771,464 | |||||||||
Coca-Cola Femsa SAB de CV, 2.375%, due 11/26/18 | 300,000 | 303,120 | |||||||||
Total Mexico corporate bonds | 1,074,584 | ||||||||||
Netherlands: 4.33% | |||||||||||
ABN Amro Bank NV, 4.875%, due 01/16/192 | GBP | 350,000 | 657,788 |
Face amount | Value | ||||||||||
Achmea BV, 2.500%, due 11/19/20 | EUR | 850,000 | $ | 1,218,434 | |||||||
Allianz Finance II BV, 4.375%, due 02/17/173,5 | 395,000 | 567,917 | |||||||||
Bharti Airtel International Netherlands BV, 3.375%, due 05/20/211 | 100,000 | 140,307 | |||||||||
4.000%, due 12/10/18 | 495,000 | 726,165 | |||||||||
British American Tobacco Holdings The Netherlands BV, 2.375%, due 01/19/232 | 550,000 | 779,491 | |||||||||
Coca-Cola HBC Finance BV, 2.375%, due 06/18/202 | 540,000 | 769,426 | |||||||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 1.700%, due 03/19/184 | $ | 830,000 | 832,686 | ||||||||
Deutsche Telekom International Finance BV, 4.000%, due 01/19/15 | EUR | 580,000 | 809,989 | ||||||||
6.500%, due 04/08/22 | GBP | 170,000 | 349,614 | ||||||||
E.ON International Finance BV, 5.875%, due 10/30/37 | 50,000 | 100,278 | |||||||||
EDP Finance BV, 3.250%, due 03/16/152 | EUR | 300,000 | 416,336 | ||||||||
Heineken NV, 2.125%, due 08/04/202 | 545,000 | 779,813 | |||||||||
Iberdrola International BV, 4.500%, due 09/21/17 | 200,000 | 305,039 | |||||||||
Koninklijke KPN NV, 6.500%, due 01/15/16 | 550,000 | 820,368 | |||||||||
LYB International Finance BV, 5.250%, due 07/15/43 | $ | 255,000 | 279,248 | ||||||||
Nomura Europe Finance NV, 1.875%, due 05/29/182 | EUR | 500,000 | 698,142 | ||||||||
Portugal Telecom International Finance BV, 4.625%, due 05/08/20 | 100,000 | 150,913 | |||||||||
Repsol International Finance BV, 4.250%, due 02/12/162 | 400,000 | 578,726 | |||||||||
4.375%, due 02/20/182 | 300,000 | 459,103 | |||||||||
Royal Bank of Scotland NV, 0.931%, due 03/09/153 | $ | 400,000 | 398,488 | ||||||||
Siemens Financieringsmaatschappij NV, 5.125%, due 02/20/17 | EUR | 320,000 | 489,935 | ||||||||
6.125%, due 09/14/663 | GBP | 260,000 | 478,336 | ||||||||
SPP Infrastructure Financing BV, 3.750%, due 07/18/202 | EUR | 205,000 | 300,510 | ||||||||
TenneT Holding BV, 6.655%, due 06/01/173,5 | 250,000 | 383,839 |
22
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
Netherlands—(Concluded) | |||||||||||
Volkswagen International Finance NV, 2.125%, due 01/19/152 | EUR | 470,000 | $ | 649,760 | |||||||
Total Netherlands corporate bonds | 14,140,651 | ||||||||||
Norway: 0.36% | |||||||||||
DNB Bank ASA, 3.200%, due 04/03/171 | $ | 450,000 | 473,499 | ||||||||
Statoil ASA, 3.125%, due 08/17/17 | 370,000 | 391,602 | |||||||||
4.800%, due 11/08/43 | 295,000 | 325,229 | |||||||||
Total Norway corporate bonds | 1,190,330 | ||||||||||
Portugal: 0.14% | |||||||||||
Caixa Geral de Depositos SA, 3.750%, due 01/18/18 | EUR | 300,000 | 445,106 | ||||||||
Qatar: 0.11% | |||||||||||
Qtel International Finance Ltd., 3.875%, due 01/31/281 | $ | 400,000 | 373,500 | ||||||||
South Korea: 0.10% | |||||||||||
GS Caltex Corp., 5.500%, due 04/24/172 | 300,000 | 326,221 | |||||||||
Spain: 0.96% | |||||||||||
Banco de Sabadell SA, 3.375%, due 01/23/18 | EUR | 200,000 | 295,036 | ||||||||
BBVA Senior Finance SAU, 3.250%, due 03/21/16 | 100,000 | 142,641 | |||||||||
BBVA US Senior SAU, 4.664%, due 10/09/15 | $ | 460,000 | 480,936 | ||||||||
Santander International Debt SAU, 1.375%, due 03/25/17 | EUR | 800,000 | 1,106,362 | ||||||||
Telefonica Emisiones SAU, 4.710%, due 01/20/202 | 700,000 | 1,115,533 | |||||||||
Total Spain corporate bonds | 3,140,508 | ||||||||||
Sweden: 0.63% | |||||||||||
Svenska Handelsbanken AB, 5.125%, due 03/30/201 | $ | 700,000 | 799,757 | ||||||||
Swedbank Hypotek AB, 2.375%, due 04/05/171 | 890,000 | 921,785 | |||||||||
Vattenfall AB, 6.750%, due 01/31/19 | EUR | 200,000 | 343,511 | ||||||||
Total Sweden corporate bonds | 2,065,053 |
Face amount | Value | ||||||||||
United Kingdom: 7.36% | |||||||||||
Abbey National Treasury Services PLC, 1.750%, due 01/15/182 | EUR | 540,000 | $ | 758,092 | |||||||
4.000%, due 03/13/24 | $ | 470,000 | 485,017 | ||||||||
Anglian Water Services Financing PLC, 4.500%, due 02/22/262 | GBP | 200,000 | 341,674 | ||||||||
Aon PLC, 2.875%, due 05/14/26 | EUR | 155,000 | 217,507 | ||||||||
Arqiva Financing PLC, 4.040%, due 06/30/202 | GBP | 525,000 | 915,730 | ||||||||
4.882%, due 12/31/322 | 250,000 | 441,982 | |||||||||
Aviva PLC, 4.729%, due 11/28/143,5 | EUR | 445,000 | 612,988 | ||||||||
Barclays Bank PLC, 2.250%, due 05/10/171 | $ | 660,000 | 680,321 | ||||||||
5.750%, due 08/17/212 | GBP | 255,000 | 499,760 | ||||||||
6.625%, due 03/30/222 | EUR | 250,000 | 426,584 | ||||||||
BG Energy Capital PLC, 5.125%, due 12/07/172 | GBP | 220,000 | 413,843 | ||||||||
BP Capital Markets PLC, 1.375%, due 05/10/18 | $ | 410,000 | 406,184 | ||||||||
2.750%, due 05/10/23 | 210,000 | 201,723 | |||||||||
British Telecommunications PLC, 8.500%, due 12/07/162 | GBP | 350,000 | 690,638 | ||||||||
BUPA Finance PLC, 6.125%, due 09/16/203,5 | 250,000 | 455,874 | |||||||||
Centrica PLC, 5.375%, due 10/16/431 | $ | 200,000 | 210,508 | ||||||||
Diageo Capital PLC, 3.875%, due 04/29/43 | 285,000 | 264,206 | |||||||||
EE Finance PLC, 4.375%, due 03/28/192 | GBP | 345,000 | 618,585 | ||||||||
GlaxoSmithKline Capital PLC, 1.500%, due 05/08/17 | $ | 470,000 | 475,365 | ||||||||
HSBC Holdings PLC, 5.100%, due 04/05/21 | 855,000 | 971,518 | |||||||||
6.500%, due 09/15/37 | 1,125,000 | 1,387,187 | |||||||||
Imperial Tobacco Finance PLC, 2.050%, due 02/11/181 | 620,000 | 623,663 | |||||||||
9.000%, due 02/17/222 | GBP | 90,000 | 205,616 | ||||||||
Liverpool Victoria Friendly Society Ltd., 6.500%, due 05/22/432,3 | 535,000 | 925,890 | |||||||||
Lloyds Bank PLC, 1.127%, due 07/11/163 | EUR | 260,000 | 354,861 | ||||||||
7.500%, due 04/15/24 | GBP | 340,000 | 754,409 | ||||||||
11.875%, due 12/16/212,3 | EUR | 245,000 | 416,948 | ||||||||
Lloyds Banking Group PLC, 5.875%, due 07/08/14 | 230,000 | 315,248 |
23
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
National Express Group PLC, 6.250%, due 01/13/17 | GBP | 200,000 | $ | 373,234 | |||||||
National Grid Electricity Transmission PLC, 4.000%, due 06/08/272 | 330,000 | 561,776 | |||||||||
Northern Gas Networks Finance PLC, 5.875%, due 07/08/19 | 225,000 | 436,011 | |||||||||
Royal Bank of Scotland PLC, 5.375%, due 09/30/192 | EUR | 215,000 | 351,789 | ||||||||
6.934%, due 04/09/18 | 260,000 | 412,080 | |||||||||
Scottish & Southern Energy PLC, 5.453%, due 10/01/153,5 | GBP | 172,000 | 303,192 | ||||||||
Scottish Widows PLC, 5.500%, due 06/16/23 | 300,000 | 534,447 | |||||||||
Sinopec Capital 2013 Ltd., 3.125%, due 04/24/231 | $ | 930,000 | 875,418 | ||||||||
Sinopec Group Overseas Development 2013 Ltd., 2.625%, due 10/17/202 | EUR | 200,000 | 285,068 | ||||||||
SSE PLC, 2.000%, due 06/17/20 | 250,000 | 354,378 | |||||||||
Standard Chartered PLC, 4.000%, due 07/12/222,3 | $ | 950,000 | 981,616 | ||||||||
Tesco Property Finance 4 PLC, 5.801%, due 10/13/402 | GBP | 247,795 | 462,685 | ||||||||
Thames Water Utilities Finance Ltd., 5.125%, due 09/28/37 | 400,000 | 733,972 | |||||||||
Wales & West Utilities Finance PLC, 5.125%, due 12/02/162 | 650,000 | 1,196,958 | |||||||||
6.750%, due 12/17/363 | 50,000 | 97,430 | |||||||||
Western Power Distribution West Midlands PLC, 5.750%, due 04/16/322 | 200,000 | 395,706 | |||||||||
WPP PLC, 6.625%, due 05/12/162 | EUR | 405,000 | 615,402 | ||||||||
Total United Kingdom corporate bonds | 24,043,083 | ||||||||||
United States: 21.98% | |||||||||||
21st Century Fox America, Inc., 6.200%, due 12/15/34 | $ | 685,000 | 838,582 | ||||||||
ABB Finance USA, Inc., 2.875%, due 05/08/22 | 415,000 | 412,076 | |||||||||
AbbVie, Inc., 2.900%, due 11/06/22 | 510,000 | 493,188 | |||||||||
4.400%, due 11/06/42 | 305,000 | 296,095 | |||||||||
Aetna, Inc., 2.200%, due 03/15/19 | 125,000 | 125,329 | |||||||||
4.750%, due 03/15/44 | 85,000 | 89,358 |
Face amount | Value | ||||||||||
Alltel Corp., 7.875%, due 07/01/32 | $ | 415,000 | $ | 575,093 | |||||||
Altria Group, Inc., 4.250%, due 08/09/42 | 1,170,000 | 1,090,071 | |||||||||
American Express Credit Corp., 1.300%, due 07/29/16 | 275,000 | 277,287 | |||||||||
American International Group, Inc., 3.375%, due 08/15/20 | 545,000 | 566,328 | |||||||||
American Tower Corp., 3.400%, due 02/15/19 | 160,000 | 167,385 | |||||||||
Anadarko Petroleum Corp., 6.375%, due 09/15/17 | 975,000 | 1,122,556 | |||||||||
Apache Corp., 4.750%, due 04/15/43 | 705,000 | 738,828 | |||||||||
AT&T, Inc., 2.500%, due 03/15/23 | EUR | 310,000 | 442,804 | ||||||||
5.550%, due 08/15/41 | $ | 540,000 | 605,476 | ||||||||
Bank of America Corp., 1.875%, due 01/10/19 | EUR | 1,375,000 | 1,931,364 | ||||||||
5.875%, due 02/07/42 | $ | 285,000 | 338,463 | ||||||||
Bank of New York Mellon Corp., 1.350%, due 03/06/18 | 1,065,000 | 1,055,156 | |||||||||
BB&T Corp., 1.600%, due 08/15/17 | 280,000 | 282,558 | |||||||||
Berkshire Hathaway Finance Corp., 1.300%, due 05/15/18 | 245,000 | 242,893 | |||||||||
Boston Scientific Corp., 6.000%, due 01/15/20 | 540,000 | 627,752 | |||||||||
Burlington Northern Santa Fe LLC, 3.450%, due 09/15/21 | 715,000 | 742,971 | |||||||||
5.400%, due 06/01/41 | 290,000 | 332,972 | |||||||||
Capital One Financial Corp., 1.000%, due 11/06/15 | 795,000 | 797,180 | |||||||||
Caterpillar, Inc., 4.750%, due 05/15/64 | 330,000 | 343,932 | |||||||||
CF Industries, Inc., 5.150%, due 03/15/34 | 385,000 | 410,160 | |||||||||
Chevron Corp., 2.355%, due 12/05/22 | 225,000 | 216,285 | |||||||||
2.427%, due 06/24/20 | 215,000 | 218,166 | |||||||||
Cisco Systems, Inc., 2.900%, due 03/04/21 | 135,000 | 137,072 | |||||||||
Citigroup, Inc., 0.843%, due 05/31/173 | EUR | 565,000 | 762,050 | ||||||||
5.500%, due 02/15/17 | $ | 425,000 | 467,399 | ||||||||
6.000%, due 08/15/17 | 1,230,000 | 1,392,204 | |||||||||
Coca-Cola Co., 1.800%, due 09/01/16 | 525,000 | 537,329 | |||||||||
Comcast Corp., 4.750%, due 03/01/44 | 135,000 | 142,784 | |||||||||
ConocoPhillips, 4.600%, due 01/15/15 | 525,000 | 536,723 |
24
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
DIRECTV Holdings LLC, 5.000%, due 03/01/21 | $ | 840,000 | $ | 937,710 | |||||||
Duke Energy Corp., 3.050%, due 08/15/22 | 510,000 | 507,954 | |||||||||
Enable Midstream Partners LP, 2.400%, due 05/15/191 | 155,000 | 155,143 | |||||||||
Energy Transfer Partners LP, 6.050%, due 06/01/41 | 540,000 | 613,349 | |||||||||
Enterprise Products Operating LLC, 4.850%, due 03/15/44 | 410,000 | 423,019 | |||||||||
5.200%, due 09/01/20 | 285,000 | 325,377 | |||||||||
ERAC USA Finance LLC, 5.625%, due 03/15/421 | 400,000 | 452,486 | |||||||||
Express Scripts Holding Co., 2.250%, due 06/15/19 | 430,000 | 428,202 | |||||||||
Exxon Mobil Corp., 0.921%, due 03/15/17 | 70,000 | 70,073 | |||||||||
1.819%, due 03/15/19 | 400,000 | 402,822 | |||||||||
Five Corners Funding Trust, 4.419%, due 11/15/231 | 490,000 | 516,623 | |||||||||
Ford Motor Credit Co. LLC, 3.000%, due 06/12/17 | 1,170,000 | 1,220,602 | |||||||||
Freeport-McMoRan Copper & Gold, Inc., 3.100%, due 03/15/20 | 350,000 | 353,461 | |||||||||
3.875%, due 03/15/234 | 385,000 | 383,828 | |||||||||
General Electric Capital Corp., 1.000%, due 12/11/15 | 765,000 | 770,880 | |||||||||
4.375%, due 09/16/20 | 525,000 | 579,822 | |||||||||
Series A, 6.750%, due 03/15/32 | 1,200,000 | 1,582,991 | |||||||||
General Electric Co., 4.125%, due 10/09/42 | 245,000 | 241,974 | |||||||||
Georgia Power Co., 0.750%, due 08/10/15 | 375,000 | 376,055 | |||||||||
5.400%, due 06/01/40 | 380,000 | 441,324 | |||||||||
Gilead Sciences, Inc., 2.050%, due 04/01/19 | 300,000 | 300,201 | |||||||||
4.800%, due 04/01/44 | 320,000 | 337,663 | |||||||||
Glencore Funding LLC, 2.500%, due 01/15/191 | 425,000 | 423,918 | |||||||||
3.125%, due 04/29/191 | 330,000 | 336,534 | |||||||||
Goldman Sachs Group, Inc., 3.250%, due 02/01/232 | EUR | 640,000 | 943,936 | ||||||||
4.375%, due 03/16/172 | 900,000 | 1,343,486 | |||||||||
Hartford Financial Services Group, Inc., 4.300%, due 04/15/43 | $ | 265,000 | 255,247 | ||||||||
Hewlett-Packard Co., 2.625%, due 12/09/14 | 1,045,000 | 1,055,393 |
Face amount | Value | ||||||||||
Illinois Tool Works, Inc., 3.000%, due 05/19/34 | EUR | 215,000 | $ | 299,664 | |||||||
International Business Machines Corp., 3.375%, due 08/01/23 | $ | 525,000 | 531,104 | ||||||||
Johnson Controls, Inc., 3.625%, due 07/02/24 | 210,000 | 210,925 | |||||||||
4.950%, due 07/02/64 | 155,000 | 157,018 | |||||||||
JPMorgan Chase & Co., 1.800%, due 01/25/18 | 475,000 | 477,296 | |||||||||
3.200%, due 01/25/23 | 2,460,000 | 2,442,472 | |||||||||
Juniper Networks, Inc., 4.500%, due 03/15/24 | 330,000 | 345,137 | |||||||||
Kellogg Co., 1.875%, due 11/17/16 | 385,000 | 392,571 | |||||||||
Kinder Morgan Energy Partners LP, 3.500%, due 03/01/21 | 95,000 | 96,337 | |||||||||
5.000%, due 03/01/43 | 565,000 | 560,731 | |||||||||
Kraft Foods Group, Inc., 5.000%, due 06/04/42 | 415,000 | 443,675 | |||||||||
Laboratory Corp. of America Holdings, 2.500%, due 11/01/18 | 220,000 | 224,174 | |||||||||
Liberty Mutual Group, Inc., 4.250%, due 06/15/231 | 530,000 | 549,328 | |||||||||
Lincoln National Corp., 4.200%, due 03/15/22 | 680,000 | 725,291 | |||||||||
Lorillard Tobacco Co., 6.875%, due 05/01/20 | 110,000 | 130,719 | |||||||||
McKesson Corp., 4.883%, due 03/15/44 | 135,000 | 141,771 | |||||||||
Medtronic, Inc., 4.625%, due 03/15/44 | 130,000 | 136,539 | |||||||||
Merck & Co., Inc., 6.550%, due 09/15/37 | 305,000 | 407,285 | |||||||||
MetLife, Inc., 4.875%, due 11/13/43 | 580,000 | 627,177 | |||||||||
Metropolitan Life Global Funding I, 2.375%, due 09/30/192 | EUR | 630,000 | 913,201 | ||||||||
Microsoft Corp., 2.625%, due 05/02/33 | 400,000 | 547,631 | |||||||||
3.500%, due 11/15/42 | $ | 395,000 | 351,825 | ||||||||
Mondelez International, Inc., 2.375%, due 01/26/21 | EUR | 730,000 | 1,041,164 | ||||||||
5.375%, due 02/10/20 | $ | 414,000 | 475,893 | ||||||||
Monongahela Power Co., 5.400%, due 12/15/431 | 220,000 | 251,746 | |||||||||
Monsanto Co., 4.200%, due 07/15/34 | 375,000 | 378,478 | |||||||||
Morgan Stanley, 2.125%, due 04/25/18 | 1,155,000 | 1,167,688 | |||||||||
2.375%, due 03/31/21 | EUR | 280,000 | 396,030 |
25
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Continued) | |||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
2.500%, due 01/24/19 | $ | 475,000 | $ | 480,320 | |||||||
6.375%, due 07/24/42 | 220,000 | 279,145 | |||||||||
Mosaic Co., 5.450%, due 11/15/33 | 250,000 | 280,134 | |||||||||
Motorola Solutions, Inc., 6.000%, due 11/15/17 | 310,000 | 351,992 | |||||||||
Mylan, Inc., 2.600%, due 06/24/18 | 130,000 | 132,046 | |||||||||
Navient Corp., 6.250%, due 01/25/16 | 650,000 | 690,625 | |||||||||
NBCUniversal Media LLC, 4.375%, due 04/01/21 | 825,000 | 910,406 | |||||||||
5.150%, due 04/30/20 | 620,000 | 711,477 | |||||||||
Oncor Electric Delivery Co. LLC, 7.000%, due 05/01/32 | 246,000 | 337,504 | |||||||||
PacifiCorp, 6.000%, due 01/15/39 | 475,000 | 600,050 | |||||||||
Petroleos Mexicanos, 5.500%, due 02/24/252 | EUR | 295,000 | 492,823 | ||||||||
Philip Morris International, Inc., 1.750%, due 03/19/20 | 450,000 | 631,639 | |||||||||
PNC Funding Corp., 2.700%, due 09/19/16 | $ | 375,000 | 389,418 | ||||||||
PPL Capital Funding, Inc., 4.700%, due 06/01/43 | 255,000 | 261,534 | |||||||||
QVC, Inc., 4.375%, due 03/15/23 | 250,000 | 253,950 | |||||||||
Republic Services, Inc., 5.250%, due 11/15/21 | 875,000 | 997,029 | |||||||||
Reynolds American, Inc., 6.750%, due 06/15/17 | 610,000 | 700,323 | |||||||||
SABMiller Holdings, Inc., 1.875%, due 01/20/202 | EUR | 500,000 | 709,234 | ||||||||
Sempra Energy, 6.000%, due 10/15/39 | $ | 415,000 | 514,950 | ||||||||
Southwestern Electric Power Co., 6.200%, due 03/15/40 | 555,000 | 694,878 | |||||||||
SunTrust Banks, Inc., 1.350%, due 02/15/17 | 815,000 | 818,523 | |||||||||
2.350%, due 11/01/18 | 320,000 | 324,092 | |||||||||
Swiss Re Treasury US Corp., 4.250%, due 12/06/421 | 360,000 | 346,769 | |||||||||
Thermo Fisher Scientific, Inc., 4.150%, due 02/01/24 | 80,000 | 83,660 | |||||||||
5.300%, due 02/01/44 | 80,000 | 88,793 | |||||||||
Time Warner Cable, Inc., 5.000%, due 02/01/20 | 990,000 | 1,109,403 | |||||||||
Travelers Cos., Inc., 4.600%, due 08/01/43 | 100,000 | 105,468 |
Face amount | Value | ||||||||||
Union Pacific Corp., 4.750%, due 12/15/43 | $ | 95,000 | $ | 103,205 | |||||||
United Airlines Pass Through Trust, 4.000%, due 04/11/26 | 310,000 | 314,263 | |||||||||
US Bancorp, 1.650%, due 05/15/17 | 515,000 | 522,863 | |||||||||
Valero Energy Corp., 6.625%, due 06/15/37 | 515,000 | 639,906 | |||||||||
Verizon Communications, Inc., 2.500%, due 09/15/16 | 790,000 | 814,287 | |||||||||
2.550%, due 06/17/19 | 215,000 | 218,108 | |||||||||
3.250%, due 02/17/26 | EUR | 130,000 | 193,304 | ||||||||
4.500%, due 09/15/20 | $ | 410,000 | 450,997 | ||||||||
4.750%, due 02/17/34 | GBP | 100,000 | 176,564 | ||||||||
6.550%, due 09/15/434 | $ | 980,000 | 1,233,272 | ||||||||
Viacom, Inc., 2.500%, due 09/01/18 | 95,000 | 97,099 | |||||||||
Virginia Electric and Power Co., Series A, 6.000%, due 05/15/37 | 265,000 | 335,576 | |||||||||
Wachovia Corp., 5.750%, due 02/01/18 | 1,330,000 | 1,522,577 | |||||||||
Waste Management, Inc., 6.125%, due 11/30/39 | 320,000 | 401,081 | |||||||||
WEA Finance LLC, 5.750%, due 09/02/151 | 350,000 | 378,486 | |||||||||
WellPoint, Inc. 5.100%, due 01/15/44 | 200,000 | 217,780 | |||||||||
Williams Partners LP, 4.300%, due 03/04/24 | 155,000 | 161,649 | |||||||||
WM Wrigley Jr Co., 2.000%, due 10/20/171 | 80,000 | 81,174 | |||||||||
Xcel Energy, Inc., 4.700%, due 05/15/20 | 240,000 | 268,101 | |||||||||
4.800%, due 09/15/41 | 230,000 | 247,561 | |||||||||
Yum! Brands, Inc., 5.350%, due 11/01/43 | 460,000 | 503,849 | |||||||||
Total United States corporate bonds | 71,736,699 | ||||||||||
Virgin Islands, British: 0.07% | |||||||||||
CNPC General Capital Ltd., 3.400%, due 04/16/231 | 250,000 | 240,656 | |||||||||
Total corporate bonds (cost $156,907,060) | 164,847,868 | ||||||||||
Collateralized debt obligation: 0.00%6 | |||||||||||
Cayman Islands: 0.00%6 | |||||||||||
LNR CDO Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/437 (cost $8,109,177) | 8,000,000 | 8,000 |
26
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Mortgage & agency debt security: 0.02% | |||||||||||
United States: 0.02% | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11, 2.768%, due 04/25/353 (cost $88,408) | $ | 721,901 | $ | 52,455 | |||||||
Non-US government obligations: 12.32% | |||||||||||
Australia: 5.87% | |||||||||||
Government of Australia, 4.250%, due 07/21/17 | AUD | 6,482,000 | 6,387,923 | ||||||||
4.500%, due 04/15/20 | 6,376,000 | 6,450,482 | |||||||||
4.750%, due 06/15/16 | 6,440,000 | 6,327,647 | |||||||||
19,166,052 | |||||||||||
Italy: 6.45% | |||||||||||
Buoni Poliennali Del Tesoro, | |||||||||||
4.750%, due 09/01/441,2 | EUR | 6,230,000 | 9,725,384 | ||||||||
5.000%, due 09/01/40 | 7,000,000 | 11,334,093 | |||||||||
21,059,477 | |||||||||||
Total Non-US government obligations (cost $39,392,579) | 40,225,529 | ||||||||||
Supranational bonds: 0.54% | |||||||||||
Asian Development Bank, 1.000%, due 12/15/15 | 250,000 | 428,466 | |||||||||
European Investment Bank, 3.000%, due 12/07/15 | 275,000 | 484,361 | |||||||||
Inter-American Development Bank, 0.625%, due 12/15/15 | 275,000 | 468,508 | |||||||||
International Finance Corp., 0.625%, due 12/15/15 | 225,000 | 383,417 | |||||||||
Total supranational bonds (cost $1,617,103) | 1,764,752 | ||||||||||
Total bonds (cost $206,114,327) | 206,898,604 | ||||||||||
Short-term investments: 25.42% | |||||||||||
US government obligations: 20.65% | |||||||||||
US Treasury Bills 0.037%, due 01/08/154,8 | $ | 33,800,000 | 33,792,395 | ||||||||
0.040%, due 11/13/148 | 33,626,000 | 33,619,678 | |||||||||
Total US government obligations (cost $67,414,231) | 67,412,073 |
Shares | Value | ||||||||||
Investment company: 4.77% | |||||||||||
UBS Cash Management Prime Relationship Fund9 (cost $15,567,483) | 15,567,483 | $ | 15,567,483 | ||||||||
Total short-term investments (cost $82,981,714) | 82,979,556 | ||||||||||
Number of contracts | |||||||||||
Options purchased: 0.60% | |||||||||||
Call options: 0.41% | |||||||||||
EURO STOXX Index, strike @ EUR 3,500, expires December 2014 | 737 | 285,596 | |||||||||
FTSE 100 Index, strike @ GBP 7,000, expires December 2014 | 286 | 359,754 | |||||||||
S&P 500 Index, strike @ USD 1,950, expires September 2014 | 170 | 697,000 | |||||||||
1,342,350 | |||||||||||
Put options: 0.19% | |||||||||||
EURO STOXX Index, strike @ EUR 3,200, expires July 2014 | 1,097 | 399,565 | |||||||||
EURO STOXX Index, strike @ EUR 2,700, expires December 2014 | 560 | 174,832 | |||||||||
NIKKEI 225 Index, strike @ JPY 10,000, expires December 2014 | 235 | 44,075 | |||||||||
618,472 |
27
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Notional amount | Value | ||||||||||
Options purchased on credit default swaps on credit indices:7 0.00%6 | |||||||||||
Expiring 09/17/14. If exercised the payment from the counterparty will be received upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of referenced obligation specified in the CDX.NA.IG Series 22 Index and the Fund pays quarterly fixed rate of 1.000% per annum. Underlying credit default swap terminating 06/20/19. European style. Counterparty: DB | $ | 2,100,000 | $ | 2,501 | |||||||
Expiring 09/17/14. If exercised the payment from the counterparty will be received upon the occurrence of a failure to pay, obligation acceleration, repudiation or restructuring of referenced obligation specified in the CDX.NA.IG Series 22 Index and the Fund pays quarterly fixed rate of 1.000% per annum. Underlying credit default swap terminating 06/20/19. European style. Counterparty: GSI | 2,180,000 | 1,912 | |||||||||
4,413 | |||||||||||
Total options purchased (cost $2,694,644) | 1,965,235 |
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned: 0.25% | |||||||||||
UBS Private Money Market Fund LLC8 (cost $816,590) | 816,590 | $ | 816,590 | ||||||||
Total investments: 89.64% (cost $292,607,275) | 292,659,985 | ||||||||||
Cash and other assets, less liabilities: 10.36% | 33,812,162 | ||||||||||
Net assets: 100.00% | $ | 326,472,147 |
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $292,439,931; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 9,552,993 | |||||
Gross unrealized depreciation | (9,332,939 | ) | |||||
Net unrealized appreciation of investments | $ | 220,054 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 63. Portfolio footnotes begin on page 33.
28
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
CIBC | CAD | 11,220,000 | USD | 10,244,751 | 09/11/14 | $ | (251,437 | ) | |||||||||||
CIBC | CHF | 18,095,000 | USD | 20,217,561 | 09/11/14 | (199,810 | ) | ||||||||||||
DB | USD | 11,809,415 | JPY | 1,211,000,000 | 09/11/14 | 150,838 | |||||||||||||
DB | USD | 6,434,561 | MXN | 84,000,000 | 09/11/14 | 8,172 | |||||||||||||
DB | USD | 6,087,053 | PLN | 18,635,000 | 09/11/14 | 21,336 | |||||||||||||
HSBC | EUR | 55,370,000 | USD | 75,447,381 | 09/11/14 | (391,349 | ) | ||||||||||||
JPMCB | AUD | 1,735,000 | USD | 1,615,072 | 09/11/14 | (12,517 | ) | ||||||||||||
JPMCB | USD | 13,619,925 | PHP | 598,800,000 | 09/11/14 | 79,281 | |||||||||||||
MSCI | PLN | 18,635,000 | EUR | 4,516,163 | 09/11/14 | 77,274 | |||||||||||||
SSB | AUD | 35,145,000 | USD | 32,372,762 | 09/11/14 | (596,457 | ) | ||||||||||||
SSB | GBP | 9,040,000 | USD | 15,136,938 | 09/11/14 | (324,983 | ) | ||||||||||||
SSB | NZD | 37,970,000 | USD | 31,685,206 | 09/11/14 | (1,334,200 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (2,773,852 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Ultra Bond, 56 contracts (USD) | September 2014 | $ | 8,306,444 | $ | 8,396,500 | $ | 90,056 | ||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Ultra Bond, 6 contracts (USD) | September 2014 | (904,305 | ) | (899,625 | ) | 4,680 | |||||||||||||
2 Year US Treasury Notes, 143 contracts (USD) | September 2014 | (31,412,887 | ) | (31,401,906 | ) | 10,981 | |||||||||||||
5 Year US Treasury Notes, 261 contracts (USD) | September 2014 | (31,201,701 | ) | (31,179,305 | ) | 22,396 | |||||||||||||
10 Year US Treasury Notes, 784 contracts (USD) | September 2014 | (97,739,483 | ) | (98,134,750 | ) | (395,267 | ) | ||||||||||||
Index futures buy contracts: | |||||||||||||||||||
E-mini Industrial, 308 contracts (USD) | September 2014 | 16,670,038 | 16,613,520 | (56,518 | ) | ||||||||||||||
EURO STOXX 50 Index, 622 contracts (EUR) | September 2014 | 27,813,305 | 27,527,092 | (286,213 | ) | ||||||||||||||
FTSE 100 Index, 57 contracts (GBP) | September 2014 | 6,517,862 | 6,546,567 | 28,705 | |||||||||||||||
FTSE China A50 Index, 3,878 contracts (USD) | July 2014 | 25,614,688 | 25,769,310 | 154,622 | |||||||||||||||
FTSE MIB Index, 22 contracts (EUR) | September 2014 | 3,248,949 | 3,208,722 | (40,227 | ) | ||||||||||||||
S&P 500 Index, 50 contracts (USD) | September 2014 | 24,227,442 | 24,405,001 | 177,559 | |||||||||||||||
S&P Toronto Stock Exchange 60 Index, 65 contracts (CAD) | September 2014 | 10,321,128 | 10,522,563 | 201,435 | |||||||||||||||
TOPIX Index, 128 contracts (JPY) | September 2014 | 15,677,459 | 15,951,828 | 274,369 | |||||||||||||||
Index futures sell contracts: | |||||||||||||||||||
E-mini Consumer Staples, 378 contracts (USD) | September 2014 | (16,781,877 | ) | (16,851,240 | ) | (69,363 | ) | ||||||||||||
Hong Kong Hang Seng Index, 258 contracts (HKD) | July 2014 | (17,101,157 | ) | (17,047,094 | ) | 54,063 | |||||||||||||
SPI 200 Index, 74 contracts (AUD) | September 2014 | (9,320,179 | ) | (9,339,825 | ) | (19,646 | ) |
29
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Futures contracts (Concluded)
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
Australian Government 3 Year Bond, 627 contracts (AUD) | September 2014 | $ | 64,373,860 | $ | 64,727,123 | $ | 353,263 | ||||||||||||
Canadian Government 10 Year Bond, 12 contracts (CAD) | September 2014 | 1,515,440 | 1,529,225 | 13,785 | |||||||||||||||
Euro-Bobl, 16 contracts (EUR) | September 2014 | 2,789,928 | 2,807,174 | 17,246 | |||||||||||||||
Euro-Bund, 12 contracts (EUR) | September 2014 | 2,379,616 | 2,415,610 | 35,994 | |||||||||||||||
Euro-OAT, 135 contracts (EUR) | September 2014 | 25,475,047 | 25,977,744 | 502,697 | |||||||||||||||
Long Gilt, 13 contracts (GBP) | September 2014 | 2,445,425 | 2,445,522 | 97 | |||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||
Euro-Bund, 75 contracts (EUR) | September 2014 | (14,888,806 | ) | (15,097,560 | ) | (208,754 | ) | ||||||||||||
Japanese Government 10 Year Bond, 18 contracts (JPY) | September 2014 | (25,775,098 | ) | (25,879,275 | ) | (104,177 | ) | ||||||||||||
Long Gilt, 10 contracts (GBP) | September 2014 | (1,879,889 | ) | (1,881,171 | ) | (1,282 | ) | ||||||||||||
Net unrealized appreciation on futures contracts | $ | 760,501 |
Interest rate swap agreements
Counterparty | Notional amount | Termination date | Payments made by the Fund10 | Payments received by the Fund10 | Upfront payments | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
DB | EUR | 32,600,000 | 11/01/21 | 2.698 | % | 6 month EURIBOR | $ | — | $ | (5,974,990 | ) | $ | (5,974,990 | ) | |||||||||||||||||
GSI | EUR | 31,200,000 | 06/21/21 | 6 month EURIBOR | 3.325 | % | — | 6,799,865 | 6,799,865 | ||||||||||||||||||||||
$ | — | $ | 824,875 | $ | 824,875 |
Credit default swaps on corporate issues—buy protection11
Counterparty | Referenced obligation12 | Notional amount | Termination date | Payments made by the Fund10 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||||||||||
BB | Next PLC bond, 5.375%, due 10/26/21 | EUR | 300,000 | 03/20/18 | 1.000 | % | $ | (2,400 | ) | $ | (10,533 | ) | $ | (12,933 | ) | ||||||||||||||||
CSFB | Pfizer, Inc. bond, 4.650%, due 03/01/18 | USD | 1,460,000 | 03/20/19 | 1.000 | 54,640 | (54,418 | ) | 222 | ||||||||||||||||||||||
GSI | Gas Natural Capital Markets SA bond, 4.500%, due 01/27/20 | EUR | 605,000 | 09/20/18 | 1.000 | (32,940 | ) | (14,884 | ) | (47,824 | ) | ||||||||||||||||||||
GSI | Iberdrola Finanzas SAU bond, 3.500%, due 06/22/15 | EUR | 605,000 | 09/20/18 | 1.000 | (32,940 | ) | (14,913 | ) | (47,853 | ) | ||||||||||||||||||||
GSI | Solvay SA bond, 4.625%, due 06/27/18 | EUR | 590,000 | 09/20/18 | 1.000 | (6,637 | ) | (18,544 | ) | (25,181 | ) | ||||||||||||||||||||
JPMCB | Bayer AG bond, 5.625%, due 05/23/18 | EUR | 585,000 | 03/20/18 | 1.000 | 9,084 | (22,467 | ) | (13,383 | ) | |||||||||||||||||||||
JPMCB | Holcim Ltd. bond, 4.375%, due 12/09/14 | EUR | 610,000 | 06/20/18 | 1.000 | (12,141 | ) | (15,163 | ) | (27,304 | ) | ||||||||||||||||||||
JPMCB | HSBC Bank PLC bond, 4.000%, due 01/15/21 | EUR | 300,000 | 09/20/18 | 1.000 | 319 | (10,279 | ) | (9,960 | ) | |||||||||||||||||||||
JPMCB | Enel SpA bond, 5.250%, 06/20/17 | EUR | 620,000 | 03/20/19 | 1.000 | (8,574 | ) | (11,568 | ) | (20,142 | ) | ||||||||||||||||||||
$ | (31,589 | ) | $ | (172,769 | ) | $ | (204,358 | ) |
30
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Credit default swaps on corporate issues—sell protection13
Counterparty | Referenced obligation12 | Notional amount | Termination date | Payments received by the Fund10 | Upfront payments (made)/ received | Value | Unrealized appreciation/ (depreciation) | Credit spread14 | |||||||||||||||||||||||||||
CITI | Glencore International AG bond, 6.500%, 02/27/19 | EUR | 355,000 | 06/20/19 | 1.000 | % | $ | 22,238 | $ | (9,431 | ) | $ | 12,807 | 1.800 | % | ||||||||||||||||||||
JPMCB | Standard Chartered Bank PLC bond, 0.782%, due 10/15/14 | EUR | 300,000 | 09/20/18 | 1.000 | 7,489 | 5,393 | 12,882 | 1.080 | ||||||||||||||||||||||||||
JPMCB | Lanxess AG bond, 4.125%, due 05/23/18 | EUR | 595,000 | 06/20/19 | 1.000 | 8,660 | 3,107 | 11,767 | 1.300 | ||||||||||||||||||||||||||
JPMCB | Portugal Telecom International Finance B.V. bond, 4.375%, due 3/24/17 | EUR | 445,000 | 09/20/19 | 5.000 | (87,191 | ) | 74,035 | (13,156 | ) | 1.570 | ||||||||||||||||||||||||
$ | (48,804 | ) | $ | 73,104 | $ | 24,300 |
Centrally cleared credit default swaps on credit indices—buy protection11
Referenced index12 | Notional amount | Termination date | Payments made by the Fund10 | Value | Unrealized depreciation | ||||||||||||||||||
CDX.NA.IG.Series 20 Index | USD | 65,700,000 | 06/20/19 | 1.000 | % | $ | (1,322,567 | ) | $ | (241,335 | ) | ||||||||||||
iTraxx Europe Series 21 | EUR | 5,860,000 | 06/20/19 | 1.000 | (150,103 | ) | (47,792 | ) | |||||||||||||||
$ | (1,472,670 | ) | $ | (289,127 | ) |
Centrally cleared credit default swaps on credit indices—sell protection13
Referenced index12 | Notional amount | Termination date | Payments received by the Fund10 | Value | Unrealized appreciation | Credit spread14 | |||||||||||||||||||||
CDX.NA.HY.Series 22 Index | USD | 32,571,000 | 06/20/19 | 5.000 | % | $ | 2,870,330 | $ | 573,410 | 3.230 | % | ||||||||||||||||
CDX.EM.Series 21 Index | USD | 23,960,000 | 06/20/19 | 5.000 | 2,880,178 | 246,931 | 2.370 | ||||||||||||||||||||
$ | 5,750,508 | $ | 820,341 |
Options written
Put option | Expiration date | Premiums received | Value | ||||||||||||
NIKKEI 225 Index, 235 contracts, strike @ JPY 13,000.00 | December 2014 | $ | 1,122,533 | $ | (336,361 | ) |
31
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | — | $ | — | ||||||||
Options written | 1,300 | 2,619,438 | |||||||||
Options terminated in closing purchase transactions | (1,065 | ) | (1,496,905 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | 235 | $ | 1,122,533 |
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 164,847,868 | $ | — | $ | 164,847,868 | |||||||||||
Collateralized debt obligation | — | — | 8,000 | 8,000 | |||||||||||||||
Mortgage & agency debt security | — | 52,455 | — | 52,455 | |||||||||||||||
Non-US government obligations | — | 40,225,529 | — | 40,225,529 | |||||||||||||||
Supranational bonds | — | 1,764,752 | — | 1,764,752 | |||||||||||||||
Short-term investments | — | 82,979,556 | — | 82,979,556 | |||||||||||||||
Options purchased | 1,960,822 | 4,413 | — | 1,965,235 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 816,590 | — | 816,590 | |||||||||||||||
Forward foreign currency contracts | — | 336,901 | — | 336,901 | |||||||||||||||
Futures contracts | 1,941,948 | — | — | 1,941,948 | |||||||||||||||
Swap agreements | — | 12,632,908 | — | 12,632,908 | |||||||||||||||
Total | $ | 3,902,770 | $ | 303,660,972 | $ | 8,000 | $ | 307,571,742 | |||||||||||
Liabilities | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (3,110,753 | ) | $ | — | $ | (3,110,753 | ) | |||||||||
Futures contracts | (1,181,447 | ) | — | — | (1,181,447 | ) | |||||||||||||
Options written | (336,361 | ) | — | — | (336,361 | ) | |||||||||||||
Swap agreements | — | (7,629,860 | ) | — | (7,629,860 | ) | |||||||||||||
Total | $ | (1,517,808 | ) | $ | (10,740,613 | ) | $ | — | $ | (12,258,421 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
32
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period.
Collateralized debt obligation | Total | ||||||||||
Assets | |||||||||||
Beginning balance | $ | 8,000 | $ | 8,000 | |||||||
Purchases | — | — | |||||||||
Issuances | — | — | |||||||||
Sales | — | — | |||||||||
Accrued discounts (premiums) | (3,774 | ) | (3,774 | ) | |||||||
Total realized gain | — | — | |||||||||
Change in net unrealized appreciation/depreciation | 3,774 | 3,774 | |||||||||
Transfers into Level 3 | — | — | |||||||||
Transfers out of Level 3 | — | — | |||||||||
Ending balance | $ | 8,000 | $ | 8,000 |
The change in net unrealized appreciation/depreciation relating to the Level 3 investments held at June 30, 2014 was $3,774.
Portfolio footnotes
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of these securities amounted to $27,169,620 or 8.32% of net assets.
2 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of these securities amounted to $46,366,157 or 14.20% of net assets.
3 Variable or floating rate security—The interest rate shown is the current rate as of June 30, 2014 and changes periodically.
4 Security, or portion thereof, was on loan at June 30, 2014.
5 Perpetual bond security. The maturity date reflects the next call date.
6 Amount represents less than 0.005%.
7 Illiquid investment as of June 30, 2014.
8 Rate shown is the discount rate at the date of purchase.
9 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 124,331,234 | $ | 247,631,487 | $ | 356,395,238 | $ | 15,567,483 | $ | 20,300 | |||||||||||||
UBS Private Money Market Fund LLCa | 851,700 | 12,073,433 | 12,108,543 | 816,590 | 64 | ||||||||||||||||||
$ | 125,182,934 | $ | 259,704,920 | $ | 368,503,781 | $ | 16,384,073 | $ | 20,364 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
10 Payments made or received are based on the notional amount.
11 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
33
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2014
12 Payments from/to the counterparty will be received/made upon the occurrence of bankruptcy and/or restructuring event with respect to the referenced index/obligation.
13 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
14 Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default or other credit event occurring for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as "Defaulted" indicates a credit event has occurred for the referenced entity. Credit spreads are unaudited.
See accompanying notes to financial statements.
34
UBS Global Allocation Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Global Allocation Fund (the "Fund") returned 14.20% (Class A shares returned 7.91% after the deduction of the maximum sales charge), while Class Y shares returned 14.56%. The Fund's benchmark, the 60% MSCI All Country World Index (net)/40% Citigroup World Government Bond Index (hedged in USD) (the "Index"), returned 15.50% during the same time period. For comparison purposes, the MSCI All Country World Index (net) returned 22.95%, the Citigroup World Government Bond Index (hedged in USD) returned 4.81%, the Russell 3000 Index returned 25.22%, the MSCI World Free Index (net) returned 24.05% and the Citigroup World Government Bond Index returned 6.85% over the same period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 37; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a positive absolute return during the reporting period but lagged the benchmark. Positive performance was primarily due to our market allocation strategy and security selection.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, the use of currency forwards had a direct negative impact on Fund performance. We used a variety of futures and forwards to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, contributed to performance during the period.
Portfolio performance summary1
What worked
• The Fund's positioning in fixed income contributed to performance.
– The Fund maintained an underweight to fixed income during the period which, overall, was beneficial, as bonds underperformed during the period.
– The Fund held a tactically short-duration position relative to the benchmark, particularly in US fixed income, which added to performance.
• The Fund's positioning in the equity market was positive for performance.
– The Fund's overweight to global equities added to performance, as this was the best-performing asset class over the period.
• Overall, the Fund's security selection was beneficial to results.
– The Fund's selection in US large cap equities contributed positively during the period.
• Overall, the Fund's positioning among risk assets was positive for performance during the reporting period.
– We tactically adjusted the Fund's allocation to equities during the reporting period. We began the 12-month period with a net equity exposure of 64%. While net equity exposure fluctuated during the period, the Fund
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
35
UBS Global Allocation Fund
maintained an overweight to equities relative to the benchmark throughout the period. The Fund ended the period with a net equity exposure of 68%, inclusive of futures.
– The Fund began the reporting period with a 20% allocation to fixed income and a cash exposure of 16%. As the reporting period progressed, we redeployed some of the Fund's cash into equity markets. At the end of the 12 month period, the Fund's fixed income allocation was 20% and its cash position had fallen to 12%.
What didn't work
• A bias toward non-US equities versus US equities detracted from results
– The Fund's preference for international developed equities—largely in Europe—over US equities was not rewarded, as US equities outperformed non-US equities during the period.
• Certain of the Fund's fixed income exposures detracted from results.
– The Fund's overweight position in Australian government bonds relative to the benchmark detracted from performance.
• Overall, the Fund's currency strategy detracted from performance.
– The Fund's short position in the New Zealand dollar was the greatest detractor from performance during the period.
– The Fund's long position in the Japanese yen detracted from performance over the period.
– The Fund's short position in the Swiss franc was negative for performance.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
36
UBS Global Allocation Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 14.20 | % | 10.37 | % | 5.11 | % | |||||||||
Class C2 | 13.31 | 9.52 | 4.30 | ||||||||||||
Class Y3 | 14.56 | 10.70 | 5.40 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 7.91 | % | 9.12 | % | 4.52 | % | |||||||||
Class C2 | 12.31 | 9.52 | 4.30 | ||||||||||||
MSCI All Country World Index (net)4,10 | 22.95 | % | 14.28 | % | 7.46 | % | |||||||||
Citigroup World Government Bond Index (hedged in USD)5,10 | 4.81 | 3.86 | 4.59 | ||||||||||||
Russell 3000 Index6,10 | 25.22 | 19.33 | 8.23 | ||||||||||||
MSCI World Free Index (net)7,10 | 24.05 | 14.99 | 7.25 | ||||||||||||
Citigroup World Government Bond Index8,10 | 6.85 | 3.60 | 4.82 | ||||||||||||
60% MSCI All Country World Index (net)/40% Citigroup World Government Bond Index (hedged in USD)9 | 15.50 | 10.34 | 6.71 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—1.36% and 1.36%; Class C—2.14% and 2.14%; Class Y—1.06% and 1.06%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, and extraordinary expenses), through the period ending October 28, 2014, do not exceed 1.35% for Class A shares, 2.10% for Class C shares and 1.10% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Maximum contingent deferred sales charge for Class C shares is 1% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
3 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
4 The MSCI 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.
5 The Citigroup 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.
6 The Russell 3000 Index is designed to measure the performance of the largest 3,000 US companies representing approximately 98% of the investable US equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. Investors should note that indices do not reflect the deduction of fees and expenses.
7 The MSCI World Free Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. 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.
8 The Citigroup World Government Bond Index is an unmanaged market capitalization-weighted index designed to measure the performance of fixed-rate, local currency, investment-grade sovereign bonds with a one-year minimum maturity. Investors should note that indices do not reflect the deduction of fees and expenses.
9 The 60% MSCI All Country World Index (net)/40% Citigroup World Government Bond Index (hedged in USD) is a unmanaged blended index compiled by the Advisor. Investors should note that indices do not reflect the deduction of fees and expenses.
10 Effective on January 31, 2014, the MSCI All Country World Index (net) and Citigroup World Government Bond Index (hedged in USD) replaced the Russell 3000 Index, MSCI World Free Index (net) and Citigroup World Government Bond Index as the Fund's primary benchmark indices because they better represent the Fund's portfolio composition and intended risk profile.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
37
UBS Global Allocation Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Global Allocation Fund Class A and Class Y shares versus the MSCI All Country World Index (net), Citigroup World Government Bond Index (hedged in USD), Russell 3000 Index, MSCI World Free Index (net), Citigroup World Government Bond Index and the 60% MSCI All Country World Index (net)/40% Citigroup World Government Bond Index (hedged in USD) over the 10 years ended June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
38
UBS Global Allocation Fund
Top ten equity holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
Novartis AG | 0.9 | % | |||||
Apple, Inc. | 0.8 | ||||||
Nestle SA | 0.8 | ||||||
Banco Santander SA | 0.6 | ||||||
Imperial Tobacco Group PLC | 0.6 | ||||||
Bayer AG | 0.6 | ||||||
Shire PLC | 0.6 | ||||||
Check Point Software Technologies Ltd. | 0.6 | ||||||
Royal Bank of Canada | 0.5 | ||||||
BP PLC | 0.5 | ||||||
Total | 6.5 | % |
Country exposure by issuer, top five (unaudited)2
As of June 30, 2014
Percentage of net assets | |||||||
United States | 20.2 | % | |||||
United Kingdom | 6.7 | ||||||
Japan | 5.7 | ||||||
Germany | 3.7 | ||||||
Switzerland | 2.7 | ||||||
Total | 39.0 | % |
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
US Treasury Notes, 0.750%, due 12/31/17 | 0.9 | % | |||||
Bundesrepublik Deutschland, 3.250%, due 07/04/21 | 0.8 | ||||||
Kingdom of Sweden, 5.000%, due 12/01/20 | 0.7 | ||||||
US Treasury Notes, 2.500%, due 04/30/15 | 0.6 | ||||||
Bundesrepublik Deutschland, 3.000%, due 07/04/20 | 0.6 | ||||||
Bundesobligation, 1.250%, due 10/14/16 | 0.5 | ||||||
US Treasury Bonds, 8.000%, due 11/15/21 | 0.5 | ||||||
US Treasury Notes, 3.125%, due 04/30/17 | 0.4 | ||||||
Buoni Poliennali Del Tesoro, 2.100%, due 09/15/21 | 0.4 | ||||||
Republic of Ireland, 5.400%, due 03/13/25 | 0.4 | ||||||
Total | 5.8 | % |
1 Figures represent the direct investments of UBS Global Allocation Fund. Figures might be different if a breakdown of the underlying investment companies was included.
2 Figures represent the direct investments of UBS Global Allocation Fund. If a breakdown of the underlying investment companies was included, the country exposure percentages would be as follows: United States: 23.5%, United Kingdom: 7.1%, Japan: 5.7%, Germany: 3.7%, and Switzerland: 2.7%
39
UBS Global Allocation Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Aerospace & defense | 0.32 | % | |||||
Airlines | 0.71 | ||||||
Auto components | 0.11 | ||||||
Automobiles | 1.49 | ||||||
Banks | 4.25 | ||||||
Beverages | 0.66 | ||||||
Biotechnology | 0.95 | ||||||
Building products | 0.15 | ||||||
Capital markets | 0.82 | ||||||
Chemicals | 1.44 | ||||||
Commercial services & supplies | 0.05 | ||||||
Communications equipment | 0.03 | ||||||
Construction & engineering | 0.05 | ||||||
Construction materials | 0.49 | ||||||
Consumer finance | 0.21 | ||||||
Diversified financial services | 0.87 | ||||||
Diversified telecommunication services | 0.55 | ||||||
Electric utilities | 0.41 | ||||||
Electrical equipment | 0.47 | ||||||
Electronic equipment, instruments & components | 0.56 | ||||||
Energy equipment & services | 1.20 | ||||||
Food & staples retailing | 0.69 | ||||||
Food products | 1.56 | ||||||
Health care equipment & supplies | 0.23 | ||||||
Health care providers & services | 0.35 | ||||||
Hotels, restaurants & leisure | 0.53 | ||||||
Household durables | 0.43 | ||||||
Industrial conglomerates | 0.90 | ||||||
Insurance | 3.10 | ||||||
Internet & catalog retail | 0.63 | ||||||
Internet software & services | 0.69 | ||||||
IT services | 0.41 | ||||||
Life sciences tools & services | 0.14 | ||||||
Machinery | 0.87 | ||||||
Marine | 0.33 | ||||||
Media | 1.60 | ||||||
Metals & mining | 1.30 | ||||||
Multiline retail | 0.23 | ||||||
Multi-utilities | 0.26 |
Oil, gas & consumable fuels | 2.50 | % | |||||
Paper & forest products | 0.16 | ||||||
Personal products | 0.49 | ||||||
Pharmaceuticals | 3.64 | ||||||
Real estate investment trust (REIT) | 0.67 | ||||||
Real estate management & development | 0.34 | ||||||
Road & rail | 0.48 | ||||||
Semiconductors & semiconductor equipment | 1.40 | ||||||
Software | 1.49 | ||||||
Specialty retail | 0.59 | ||||||
Technology hardware, storage & peripherals | 0.99 | ||||||
Textiles, apparel & luxury goods | 0.62 | ||||||
Tobacco | 0.88 | ||||||
Trading companies & distributors | 0.48 | ||||||
Wireless telecommunication services | 0.85 | ||||||
Total common stocks | 45.62 | % | |||||
Bonds | |||||||
Mortgage & agency debt securities | 0.13 | ||||||
US government obligations | 3.47 | ||||||
Non-US government obligations | 7.35 | ||||||
Total bonds | 10.95 | % | |||||
Investment companies | |||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 4.58 | ||||||
UBS Emerging Markets Equity Relationship Fund | 6.30 | ||||||
UBS Global Corporate Bond Relationship Fund | 2.40 | ||||||
UBS High Yield Relationship Fund | 3.02 | ||||||
Total investment companies | 16.30 | % | |||||
Warrants | 0.07 | ||||||
Short-term investment | 25.32 | ||||||
Investment of cash collateral from securities loaned | 3.74 | ||||||
Total investments | 102.00 | % | |||||
Liabilities, in excess of cash and other assets | (2.00 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Global Allocation Fund. Figures might be different if a breakdown of the underlying investment companies was included.
40
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 45.62% | |||||||||||
Australia: 0.24% | |||||||||||
Scentre Group* | 171,548 | $ | 517,636 | ||||||||
Westfield Corp. | 137,679 | 928,244 | |||||||||
Total Australia common stocks | 1,445,880 | ||||||||||
Brazil: 0.18% | |||||||||||
AMBEV SA ADR | 10,000 | 70,400 | |||||||||
BRF SA | 7,700 | 186,097 | |||||||||
Cia Brasileira de Distribuicao ADR | 4,000 | 185,320 | |||||||||
Cielo SA | 25,000 | 514,822 | |||||||||
Cosan Ltd., Class A | 11,200 | 151,872 | |||||||||
Total Brazil common stocks | 1,108,511 | ||||||||||
Canada: 1.83% | |||||||||||
Canadian Oil Sands Ltd. | 114,900 | 2,603,704 | |||||||||
Canadian Pacific Railway Ltd.1 | 2,525 | 457,378 | |||||||||
Lightstream Resources Ltd. | 147,375 | 1,127,014 | |||||||||
Royal Bank of Canada | 45,400 | 3,245,501 | |||||||||
Suncor Energy, Inc. | 66,200 | 2,822,829 | |||||||||
Teck Resources Ltd., Class B | 42,600 | 972,528 | |||||||||
Total Canada common stocks | 11,228,954 | ||||||||||
China: 1.36% | |||||||||||
AIA Group Ltd. | 576,117 | 2,895,303 | |||||||||
Airtac International Group | 4,000 | 43,070 | |||||||||
Baidu, Inc. ADR* | 1,120 | 209,227 | |||||||||
Brilliance China Automotive Holdings Ltd. | 88,000 | 165,091 | |||||||||
China Cinda Asset Management Co., Ltd., H Shares* | 767,000 | 381,006 | |||||||||
China Railway Group Ltd., H Shares | 303,000 | 148,169 | |||||||||
CIMC Enric Holdings Ltd. | 62,000 | 81,596 | |||||||||
Coolpad Group Ltd. | 336,000 | 92,775 | |||||||||
Ctrip.com International Ltd. ADR* | 4,840 | 309,954 | |||||||||
Industrial & Commercial Bank of China Ltd., H Shares | 400,000 | 252,890 | |||||||||
Jardine Matheson Holdings Ltd. | 34,400 | 2,039,944 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 30,500 | 236,117 | |||||||||
Qihoo 360 Technology Co., Ltd. ADR* | 5,830 | 536,593 | |||||||||
Tencent Holdings Ltd. | 33,500 | 510,903 | |||||||||
Youku Tudou, Inc. ADR* | 8,700 | 207,582 | |||||||||
ZTE Corp., H Shares | 98,600 | 194,391 | |||||||||
Total China common stocks | 8,304,611 | ||||||||||
Denmark: 0.33% | |||||||||||
A.P. Moller - Maersk A/S, Class B | 822 | 2,042,602 | |||||||||
Finland: 0.42% | |||||||||||
Sampo Oyj, Class A | 51,266 | 2,593,836 |
Shares | Value | ||||||||||
France: 1.24% | |||||||||||
Carrefour SA | 79,573 | $ | 2,935,364 | ||||||||
Peugeot SA* | 154,072 | 2,277,430 | |||||||||
Schneider Electric SE | 25,586 | 2,408,650 | |||||||||
Total France common stocks | 7,621,444 | ||||||||||
Germany: 1.67% | |||||||||||
Aixtron SE* | 76,425 | 1,106,137 | |||||||||
Bayer AG | 25,764 | 3,638,992 | |||||||||
E.ON SE | 78,179 | 1,614,322 | |||||||||
HeidelbergCement AG | 19,996 | 1,706,628 | |||||||||
ThyssenKrupp AG* | 74,217 | 2,163,604 | |||||||||
Total Germany common stocks | 10,229,683 | ||||||||||
India: 0.14% | |||||||||||
Dr Reddy's Laboratories Ltd. ADR | 10,000 | 431,500 | |||||||||
HDFC Bank Ltd. ADR | 1,400 | 65,548 | |||||||||
ICICI Bank Ltd. ADR* | 4,000 | 199,600 | |||||||||
Tata Motors Ltd. ADR | 4,700 | 183,582 | |||||||||
Total India common stocks | 880,230 | ||||||||||
Indonesia: 0.12% | |||||||||||
Alam Sutera Realty Tbk PT | 1,937,100 | 72,223 | |||||||||
Ciputra Development Tbk PT | 991,700 | 77,378 | |||||||||
Lippo Karawaci Tbk PT | 1,095,700 | 88,728 | |||||||||
Media Nusantara Citra Tbk PT | 233,500 | 54,362 | |||||||||
Summarecon Agung Tbk PT* | 401,200 | 38,411 | |||||||||
Surya Citra Media Tbk PT | 304,100 | 91,961 | |||||||||
Surya Semesta Internusa Tbk PT | 972,000 | 56,164 | |||||||||
Telekomunikasi Indonesia Persero Tbk PT | 808,200 | 168,048 | |||||||||
Wijaya Karya Persero Tbk PT | 598,800 | 111,880 | |||||||||
Total Indonesia common stocks | 759,155 | ||||||||||
Ireland: 1.21% | |||||||||||
Bank of Ireland* | 4,115,019 | 1,391,201 | |||||||||
Mallinckrodt PLC*1 | 6,500 | 520,130 | |||||||||
Ryanair Holdings PLC ADR* | 36,600 | 2,042,280 | |||||||||
Shire PLC | 43,937 | 3,436,356 | |||||||||
Total Ireland common stocks | 7,389,967 | ||||||||||
Israel: 0.76% | |||||||||||
Check Point Software Technologies Ltd.*1 | 50,400 | 3,378,312 | |||||||||
Mellanox Technologies Ltd.* | 22,600 | 787,836 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR | 9,516 | 498,829 | |||||||||
Total Israel common stocks | 4,664,977 |
41
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Italy: 0.41% | |||||||||||
Intesa Sanpaolo SpA | 343,464 | $ | 1,061,009 | ||||||||
Mediolanum SpA | 187,601 | 1,446,246 | |||||||||
Total Italy common stocks | 2,507,255 | ||||||||||
Japan: 5.65% | |||||||||||
Astellas Pharma, Inc. | 176,600 | 2,320,266 | |||||||||
Fuji Heavy Industries Ltd. | 57,600 | 1,594,867 | |||||||||
Hino Motors Ltd. | 108,500 | 1,494,077 | |||||||||
Hitachi Ltd. | 226,000 | 1,655,318 | |||||||||
ITOCHU Corp. | 124,600 | 1,600,164 | |||||||||
Japan Airlines Co., Ltd. | 36,900 | 2,039,781 | |||||||||
KDDI Corp. | 49,300 | 3,007,006 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 451,900 | 2,770,149 | |||||||||
ORIX Corp. | 187,100 | 3,100,942 | |||||||||
Panasonic Corp. | 217,100 | 2,644,503 | |||||||||
Shin-Etsu Chemical Co., Ltd. | 33,300 | 2,024,198 | |||||||||
Shiseido Co., Ltd. | 127,300 | 2,320,943 | |||||||||
Sumitomo Realty & Development Co., Ltd. | 40,000 | 1,716,401 | |||||||||
THK Co., Ltd. | 86,200 | 2,031,939 | |||||||||
Tokio Marine Holdings, Inc. | 51,600 | 1,697,164 | |||||||||
Toyota Motor Corp. | 43,400 | 2,606,442 | |||||||||
Total Japan common stocks | 34,624,160 | ||||||||||
Luxembourg: 0.03% | |||||||||||
Ternium SA ADR | 6,200 | 173,166 | |||||||||
Macau: 0.04% | |||||||||||
Sands China Ltd. | 33,200 | 250,808 | |||||||||
Malaysia: 0.10% | |||||||||||
Axiata Group Bhd | 100,600 | 218,369 | |||||||||
Malayan Banking Bhd | 58,400 | 178,783 | |||||||||
SapuraKencana Petroleum Bhd* | 149,800 | 204,336 | |||||||||
Total Malaysia common stocks | 601,488 | ||||||||||
Mexico: 0.35% | |||||||||||
Alfa SAB de CV, Class A | 132,000 | 365,369 | |||||||||
Alsea SAB de CV* | 96,000 | 345,344 | |||||||||
Cemex SAB de CV ADR*1 | 36,598 | 484,192 | |||||||||
Grupo Financiero Banorte SAB de CV, Class O | 52,000 | 371,918 | |||||||||
Grupo Televisa SAB ADR | 16,800 | 576,408 | |||||||||
Total Mexico common stocks | 2,143,231 | ||||||||||
Netherlands: 0.81% | |||||||||||
Koninklijke DSM NV | 30,668 | 2,233,645 | |||||||||
NXP Semiconductor NV* | 11,300 | 747,834 | |||||||||
Wolters Kluwer NV | 67,449 | 1,996,778 | |||||||||
Total Netherlands common stocks | 4,978,257 |
Shares | Value | ||||||||||
Norway: 0.39% | |||||||||||
Telenor ASA | 105,755 | $ | 2,408,597 | ||||||||
Peru: 0.03% | |||||||||||
Credicorp Ltd. | 1,160 | 180,345 | |||||||||
Philippines: 0.18% | |||||||||||
Alliance Global Group, Inc. | 553,000 | 368,667 | |||||||||
Metropolitan Bank & Trust Co. | 141,705 | 283,734 | |||||||||
SM Investments Corp. | 23,051 | 430,919 | |||||||||
Total Philippines common stocks | 1,083,320 | ||||||||||
Russia: 0.01% | |||||||||||
Magnit OJSC GDR2 | 1,298 | 76,582 | |||||||||
South Africa: 0.23% | |||||||||||
Aspen Pharmacare Holdings Ltd. | 15,558 | 437,248 | |||||||||
Life Healthcare Group Holdings Ltd. | 23,182 | 90,439 | |||||||||
Naspers Ltd., Class N | 4,124 | 485,496 | |||||||||
Nedbank Group Ltd. | 8,154 | 175,708 | |||||||||
Standard Bank Group Ltd. | 14,571 | 198,664 | |||||||||
Total South Africa common stocks | 1,387,555 | ||||||||||
South Korea: 0.45% | |||||||||||
Amorepacific Corp. | 168 | 253,046 | |||||||||
CJ Korea Express Co., Ltd.* | 1,307 | 155,657 | |||||||||
CJ O Shopping Co., Ltd. | 208 | 75,117 | |||||||||
Hankook Tire Co., Ltd. | 3,178 | 189,712 | |||||||||
Hyundai Motor Co. | 1,554 | 352,484 | |||||||||
Hyundai Wia Corp. | 1,035 | 200,494 | |||||||||
LG Chem Ltd. | 604 | 176,699 | |||||||||
NAVER Corp. | 107 | 88,303 | |||||||||
Samsung Electronics Co., Ltd. | 242 | 316,193 | |||||||||
Shinhan Financial Group Co., Ltd. | 4,040 | 187,066 | |||||||||
SK Hynix, Inc.* | 16,170 | 775,898 | |||||||||
Total South Korea common stocks | 2,770,669 | ||||||||||
Spain: 1.31% | |||||||||||
Acciona SA | 13,098 | 1,171,520 | |||||||||
Banco Santander SA | 351,962 | 3,677,214 | |||||||||
Bankia SA* | 778,806 | 1,510,050 | |||||||||
Mediaset Espana Comunicacion SA* | 140,536 | 1,639,169 | |||||||||
Total Spain common stocks | 7,997,953 | ||||||||||
Sweden: 0.15% | |||||||||||
Lundin Petroleum AB* | 44,451 | 899,458 | |||||||||
Switzerland: 2.70% | |||||||||||
ACE Ltd. | 7,600 | 788,120 | |||||||||
Credit Suisse Group AG* | 69,042 | 1,974,408 | |||||||||
Glencore PLC* | 357,557 | 1,992,116 | |||||||||
Nestle SA | 60,540 | 4,690,007 |
42
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Switzerland—(Concluded) | |||||||||||
Novartis AG | 58,177 | $ | 5,267,944 | ||||||||
Zurich Insurance Group AG* | 5,971 | 1,799,784 | |||||||||
Total Switzerland common stocks | 16,512,379 | ||||||||||
Taiwan: 0.40% | |||||||||||
Ginko International Co., Ltd. | 14,000 | 242,414 | |||||||||
Hiwin Technologies Corp. | 22,000 | 271,518 | |||||||||
Largan Precision Co., Ltd. | 9,000 | 717,396 | |||||||||
MediaTek, Inc. | 24,000 | 405,921 | |||||||||
President Chain Store Corp. | 21,000 | 168,096 | |||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 19,300 | 412,827 | |||||||||
TPK Holding Co., Ltd. | 24,000 | 239,534 | |||||||||
Total Taiwan common stocks | 2,457,706 | ||||||||||
Thailand: 0.03% | |||||||||||
Jasmine International PCL | 146,100 | 37,363 | |||||||||
Kasikornbank PCL NVDR | 15,700 | 98,684 | |||||||||
Land and Houses PCL NVDR | 203,800 | 61,853 | |||||||||
Total Thailand common stocks | 197,900 | ||||||||||
Turkey: 0.11% | |||||||||||
Turk Hava Yollari | 81,766 | 250,477 | |||||||||
Turkiye Halk Bankasi AS | 57,420 | 430,935 | |||||||||
Total Turkey common stocks | 681,412 | ||||||||||
United Kingdom: 6.10% | |||||||||||
Aon PLC | 9,400 | 846,846 | |||||||||
Ashtead Group PLC | 91,458 | 1,369,561 | |||||||||
Associated British Foods PLC | 39,414 | 2,056,646 | |||||||||
AstraZeneca PLC | 28,779 | 2,137,800 | |||||||||
Aviva PLC | 264,438 | 2,310,315 | |||||||||
Barclays PLC | 514,645 | 1,874,265 | |||||||||
BP PLC | 362,779 | 3,196,808 | |||||||||
Burberry Group PLC | 53,262 | 1,351,793 | |||||||||
Imperial Tobacco Group PLC | 80,878 | 3,640,304 | |||||||||
Kingfisher PLC | 270,819 | 1,663,892 | |||||||||
Lloyds Banking Group PLC* | 1,673,728 | 2,126,830 | |||||||||
London Stock Exchange Group PLC | 52,434 | 1,800,992 | |||||||||
Noble Corp. PLC | 24,700 | 828,932 | |||||||||
Premier Oil PLC | 229,558 | 1,311,778 | |||||||||
Prudential PLC | 83,800 | 1,923,199 | |||||||||
Rio Tinto PLC | 49,477 | 2,632,120 | |||||||||
SABMiller PLC | 36,338 | 2,106,958 | |||||||||
Sage Group PLC | 353,068 | 2,320,888 | |||||||||
Vodafone Group PLC | 570,765 | 1,904,774 | |||||||||
Total United Kingdom common stocks | 37,404,701 |
Shares | Value | ||||||||||
United States: 16.64% | |||||||||||
Acorda Therapeutics, Inc.* | 26,200 | $ | 883,202 | ||||||||
Adobe Systems, Inc.* | 5,300 | 383,508 | |||||||||
Air Products & Chemicals, Inc. | 5,800 | 745,996 | |||||||||
Alexion Pharmaceuticals, Inc.* | 3,500 | 546,875 | |||||||||
Allergan, Inc. | 4,100 | 693,802 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 10,200 | 644,334 | |||||||||
Altera Corp. | 13,700 | 476,212 | |||||||||
Amazon.com, Inc.* | 8,645 | 2,807,723 | |||||||||
American Express Co. | 5,100 | 483,837 | |||||||||
AMETEK, Inc. | 8,500 | 444,380 | |||||||||
Apple, Inc. | 55,235 | 5,132,989 | |||||||||
Applied Materials, Inc. | 42,200 | 951,610 | |||||||||
Baker Hughes, Inc. | 27,200 | 2,025,040 | |||||||||
Baxter International, Inc. | 6,900 | 498,870 | |||||||||
Best Buy Co., Inc. | 28,100 | 871,381 | |||||||||
Biogen Idec, Inc.* | 2,125 | 670,034 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 3,000 | 359,130 | |||||||||
Bluebird Bio, Inc.* | 3,900 | 150,423 | |||||||||
BorgWarner, Inc. | 4,700 | 306,393 | |||||||||
Broadcom Corp., Class A | 23,000 | 853,760 | |||||||||
Capital One Financial Corp. | 9,700 | 801,220 | |||||||||
Catamaran Corp.* | 9,600 | 423,936 | |||||||||
Citigroup, Inc. | 40,520 | 1,908,492 | |||||||||
Comcast Corp., Class A | 25,300 | 1,358,104 | |||||||||
Concho Resources, Inc.* | 2,700 | 390,150 | |||||||||
Cooper Cos., Inc. | 2,000 | 271,060 | |||||||||
Crown Castle International Corp. | 6,000 | 445,560 | |||||||||
Cummins, Inc. | 2,100 | 324,009 | |||||||||
Danaher Corp. | 29,100 | 2,291,043 | |||||||||
Digital Realty Trust, Inc.1 | 23,500 | 1,370,520 | |||||||||
Eli Lilly & Co. | 15,200 | 944,984 | |||||||||
Envision Healthcare Holdings, Inc.* | 13,600 | 488,376 | |||||||||
EOG Resources, Inc. | 9,400 | 1,098,484 | |||||||||
Epizyme, Inc.*1 | 3,600 | 112,032 | |||||||||
Estee Lauder Cos., Inc., Class A | 5,800 | 430,708 | |||||||||
Exxon Mobil Corp. | 6,500 | 654,420 | |||||||||
Facebook, Inc., Class A* | 12,100 | 814,209 | |||||||||
Ford Motor Co. | 57,300 | 987,852 | |||||||||
Freescale Semiconductor Ltd.* | 32,100 | 754,350 | |||||||||
General Dynamics Corp. | 5,000 | 582,750 | |||||||||
General Motors Co. | 26,200 | 951,060 | |||||||||
Gilead Sciences, Inc.* | 20,900 | 1,732,819 | |||||||||
Google, Inc., Class A* | 1,495 | 874,082 | |||||||||
Google, Inc., Class C* | 1,115 | 641,437 | |||||||||
Hain Celestial Group, Inc.* | 4,050 | 359,397 | |||||||||
Halliburton Co. | 37,900 | 2,691,279 | |||||||||
Hertz Global Holdings, Inc.* | 50,000 | 1,401,500 | |||||||||
Home Depot, Inc. | 10,000 | 809,600 | |||||||||
Hospira, Inc.* | 28,000 | 1,438,360 | |||||||||
Illinois Tool Works, Inc. | 12,570 | 1,100,629 | |||||||||
Impax Laboratories, Inc.* | 17,700 | 530,823 |
43
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Intercontinental Exchange, Inc. | 2,400 | $ | 453,360 | ||||||||
International Paper Co. | 19,800 | 999,306 | |||||||||
Intuitive Surgical, Inc.* | 940 | 387,092 | |||||||||
Invesco Ltd. | 19,900 | 751,225 | |||||||||
Jabil Circuit, Inc. | 39,100 | 817,190 | |||||||||
JC Penney Co., Inc.*1 | 44,000 | 398,200 | |||||||||
JPMorgan Chase & Co. | 34,400 | 1,982,128 | |||||||||
Kellogg Co. | 6,800 | 446,760 | |||||||||
Laboratory Corp. of America Holdings* | 4,600 | 471,040 | |||||||||
Las Vegas Sands Corp. | 9,700 | 739,334 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 270,900 | 436,149 | |||||||||
Lincoln National Corp. | 25,100 | 1,291,144 | |||||||||
LinkedIn Corp., Class A* | 1,900 | 325,793 | |||||||||
LyondellBasell Industries NV, Class A | 3,800 | 371,070 | |||||||||
MacroGenics, Inc.* | 3,000 | 65,190 | |||||||||
Macy's, Inc. | 17,200 | 997,944 | |||||||||
Martin Marietta Materials, Inc. | 6,330 | 835,876 | |||||||||
MasterCard, Inc., Class A | 9,050 | 664,903 | |||||||||
McDermott International, Inc.*1 | 94,400 | 763,696 | |||||||||
MetLife, Inc. | 20,800 | 1,155,648 | |||||||||
Michael Kors Holdings Ltd.* | 4,600 | 407,790 | |||||||||
Micron Technology, Inc.* | 29,900 | 985,205 | |||||||||
Mondelez International, Inc., Class A | 47,900 | 1,801,519 | |||||||||
Monsanto Co. | 11,100 | 1,384,614 | |||||||||
Monster Beverage Corp.* | 4,300 | 305,429 | |||||||||
Morgan Stanley | 59,500 | 1,923,635 | |||||||||
NetApp, Inc. | 23,500 | 858,220 | |||||||||
NextEra Energy, Inc. | 13,300 | 1,362,984 | |||||||||
NII Holdings, Inc.*1 | 170,100 | 93,555 | |||||||||
NIKE, Inc., Class B | 8,900 | 690,195 | |||||||||
Norfolk Southern Corp. | 9,100 | 937,573 | |||||||||
Owens Corning | 23,500 | 908,980 | |||||||||
Pacific DataVision, Inc.*3 | 34,500 | 733,125 | |||||||||
PDC Energy, Inc.* | 16,400 | 1,035,660 | |||||||||
PepsiCo, Inc. | 17,500 | 1,563,450 | |||||||||
Philip Morris International, Inc. | 20,700 | 1,745,217 | |||||||||
Praxair, Inc. | 11,200 | 1,487,808 | |||||||||
Precision Castparts Corp. | 2,950 | 744,580 | |||||||||
Priceline.com, Inc.* | 555 | 667,665 | |||||||||
Ralph Lauren Corp. | 8,300 | 1,333,727 | |||||||||
Regeneron Pharmaceuticals, Inc.* | 2,100 | 593,187 | |||||||||
Rite Aid Corp.* | 53,000 | 380,010 | |||||||||
salesforce.com, Inc.* | 12,600 | 731,808 | |||||||||
Schlumberger Ltd. | 7,100 | 837,445 | |||||||||
ServiceNow, Inc.* | 7,600 | 470,896 | |||||||||
ServiceSource International, Inc.*1 | 96,400 | 559,120 | |||||||||
Sherwin-Williams Co. | 1,800 | 372,438 | |||||||||
Simon Property Group, Inc. | 4,900 | 814,772 | |||||||||
Starbucks Corp. | 8,200 | 634,516 | |||||||||
Symantec Corp. | 61,300 | 1,403,770 | |||||||||
Thermo Fisher Scientific, Inc. | 4,400 | 519,200 |
Shares | Value | ||||||||||
Time Warner Cable, Inc. | 2,000 | $ | 294,600 | ||||||||
Time Warner, Inc. | 12,800 | 899,200 | |||||||||
TJX Cos., Inc. | 5,600 | 297,640 | |||||||||
United Technologies Corp. | 5,600 | 646,520 | |||||||||
UnitedHealth Group, Inc. | 8,200 | 670,350 | |||||||||
US Bancorp | 27,700 | 1,199,964 | |||||||||
Viacom, Inc., Class B | 12,700 | 1,101,471 | |||||||||
Visa, Inc., Class A | 3,600 | 758,556 | |||||||||
VMware, Inc., Class A* | 4,800 | 464,688 | |||||||||
Walgreen Co. | 6,500 | 481,845 | |||||||||
Walt Disney Co. | 15,400 | 1,320,396 | |||||||||
Washington Prime Group, Inc.* | 2,450 | 45,913 | |||||||||
Waste Management, Inc. | 6,300 | 281,799 | |||||||||
Wells Fargo & Co. | 12,300 | 646,488 | |||||||||
Yum! Brands, Inc. | 15,800 | 1,282,960 | |||||||||
Total United States common stocks | 101,946,275 | ||||||||||
Total common stocks (cost $230,252,159) | 279,553,067 | ||||||||||
Face amount | |||||||||||
Bonds: 10.95% | |||||||||||
Mortgage & agency debt securities: 0.13% | |||||||||||
United States: 0.13% | |||||||||||
Federal Home Loan Mortgage Corp. Gold Pools,4 #G00194, 7.500%, due 02/01/24 | $ | 25,603 | 28,425 | ||||||||
Government National Mortgage Association,Series 2001-35, Class AZ, 6.500%, due 08/20/31 | 663,404 | 750,448 | |||||||||
Total mortgage & agency debt securities (cost $962,252) | 778,873 | ||||||||||
US government obligations: 3.47% | |||||||||||
US Treasury Bonds, 2.750%, due 08/15/42 | 555,000 | 496,378 | |||||||||
2.750%, due 11/15/42 | 1,305,000 | 1,164,916 | |||||||||
3.625%, due 08/15/43 | 250,000 | 264,063 | |||||||||
3.750%, due 11/15/43 | 500,000 | 540,000 | |||||||||
5.375%, due 02/15/31 | 650,000 | 853,430 | |||||||||
6.250%, due 08/15/23 | 800,000 | 1,055,250 | |||||||||
8.000%, due 11/15/21 | 2,110,000 | 2,955,154 | |||||||||
US Treasury Notes, 0.125%, due 12/31/14 | 1,505,000 | 1,505,294 | |||||||||
0.750%, due 12/31/17 | 5,420,000 | 5,351,404 | |||||||||
1.625%, due 11/15/221 | 835,000 | 789,140 | |||||||||
2.500%, due 04/30/15 | 3,775,000 | 3,850,353 | |||||||||
3.125%, due 04/30/17 | 2,300,000 | 2,448,782 | |||||||||
Total US government obligations (cost $20,977,451) | 21,274,164 |
44
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Non-US government obligations: 7.35% | |||||||||||
Australia: 0.77% | |||||||||||
Government of Australia, 4.500%, due 04/21/33 | AUD | 2,360,000 | $ | 2,355,368 | |||||||
6.250%, due 04/15/15 | 2,410,000 | 2,339,480 | |||||||||
4,694,848 | |||||||||||
Belgium: 0.37% | |||||||||||
Kingdom of Belgium, 1.250%, due 06/22/182 | EUR | 1,620,000 | 2,294,353 | ||||||||
Finland: 0.37% | |||||||||||
Government of Finland, 4.375%, due 07/04/192,3 | 1,382,000 | 2,253,543 | |||||||||
France: 0.30% | |||||||||||
Government of France, 3.750%, due 04/25/21 | 1,120,000 | 1,817,663 | |||||||||
Germany: 1.98% | |||||||||||
Bundesobligation, 1.250%, due 10/14/16 | 2,290,000 | 3,223,026 | |||||||||
Bundesrepublik Deutschland, 3.000%, due 07/04/20 | 2,310,000 | 3,629,005 | |||||||||
3.250%, due 07/04/21 | 2,965,000 | 4,768,400 | |||||||||
4.000%, due 01/04/37 | 290,000 | 529,136 | |||||||||
12,149,567 | |||||||||||
Ireland: 0.39% | |||||||||||
Republic of Ireland, 5.400%, due 03/13/25 | 1,380,000 | 2,394,166 | |||||||||
Italy: 0.74% | |||||||||||
Buoni Poliennali Del Tesoro, 2.100%, due 09/15/212,5 | 1,634,882 | 2,405,064 | |||||||||
2.552%, due 09/15/415 | 697,210 | 973,046 | |||||||||
4.250%, due 02/01/192 | 750,000 | 1,162,199 | |||||||||
4,540,309 | |||||||||||
Netherlands: 0.37% | |||||||||||
Kingdom of the Netherlands, 1.250%, due 01/15/182,3 | 1,610,000 | 2,282,200 | |||||||||
Spain: 0.76% | |||||||||||
Kingdom of Spain, 3.300%, due 07/30/16 | 930,000 | 1,345,526 | |||||||||
3.750%, due 10/31/18 | 920,000 | 1,395,331 | |||||||||
4.200%, due 01/31/37 | 650,000 | 959,113 | |||||||||
4.800%, due 01/31/24 | 590,000 | 955,346 | |||||||||
4,655,316 |
Face amount | Value | ||||||||||
Sweden: 0.73% | |||||||||||
Kingdom of Sweden, 5.000%, due 12/01/20 | SEK | 24,180,000 | $ | 4,445,120 | |||||||
United Kingdom: 0.57% | |||||||||||
UK Gilts, 2.000%, due 01/22/16 | GBP | 1,350,000 | 2,350,706 | ||||||||
4.750%, due 12/07/382 | 555,000 | 1,171,840 | |||||||||
3,522,546 | |||||||||||
Total Non-US government obligations (cost $42,543,760) | 45,049,631 | ||||||||||
Total bonds (cost $64,483,463) | 67,102,668 | ||||||||||
Shares | |||||||||||
Investment companies: 16.30% | |||||||||||
iShares JP Morgan USD Emerging Markets Bond ETF1 | 243,100 | 28,022,137 | |||||||||
UBS Emerging Markets Equity Relationship Fund*6 | 1,027,066 | 38,619,219 | |||||||||
UBS Global Corporate Bond Relationship Fund*6 | 1,123,387 | 14,705,474 | |||||||||
UBS High Yield Relationship Fund*6 | 527,968 | 18,510,237 | |||||||||
Total investment companies (cost $92,433,306) | 99,857,067 | ||||||||||
Number of warrants | |||||||||||
Warrants: 0.07% | |||||||||||
France: 0.04% | |||||||||||
Peugeot SA, strike @ $6.43000, expires 04/29/17* | 98,485 | 215,903 | |||||||||
Russia: 0.03% | |||||||||||
Sberbank of Russia, strike @ $0.00001, expires 10/14/15* | 84,680 | 210,609 | |||||||||
Total warrants (cost $257,771) | 426,512 | ||||||||||
Shares | |||||||||||
Short-term investment: 25.32% | |||||||||||
Investment companies: 25.32% | |||||||||||
UBS Cash Management Prime Relationship Fund6 (cost $155,168,975) | 155,168,975 | 155,168,975 |
45
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Investment of cash collateral from securities loaned : 3.74% | |||||||||||
UBS Private Money Market Fund LLC6 (cost $22,940,033) | 22,940,033 | $ | 22,940,033 | ||||||||
Total investments: 102.00% (cost $565,535,707) | 625,048,322 | ||||||||||
Liabilities, in excess of cash and other assets: (2.00)% | (12,257,856 | ) | |||||||||
Net assets: 100.00% | $ | 612,790,466 |
|
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $577,075,577; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 54,015,655 | |||||
Gross unrealized depreciation | (6,042,910 | ) | |||||
Net unrealized appreciation of investments | $ | 47,972,745 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 63. Portfolio footnotes begin on page 48.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
BB | EUR | 21,630,000 | USD | 29,457,464 | 09/04/14 | $ | (167,755 | ) | |||||||||||
BB | USD | 20,405,377 | JPY | 2,077,800,000 | 09/04/14 | 114,658 | |||||||||||||
CIBC | AUD | 19,325,000 | USD | 17,739,770 | 09/04/14 | (397,682 | ) | ||||||||||||
CIBC | CAD | 11,310,000 | USD | 10,396,539 | 09/04/14 | (185,667 | ) | ||||||||||||
DB | CHF | 33,160,000 | USD | 36,965,857 | 09/04/14 | (447,591 | ) | ||||||||||||
DB | NOK | 84,540,000 | USD | 14,151,758 | 09/04/14 | 403,357 | |||||||||||||
GSI | NZD | 71,650,000 | USD | 60,349,362 | 09/04/14 | (2,000,582 | ) | ||||||||||||
GSI | SEK | 81,994,147 | NOK | 73,630,000 | 09/04/14 | (289,098 | ) | ||||||||||||
HSBC | GBP | 1,835,000 | USD | 3,125,189 | 09/04/14 | (13,575 | ) | ||||||||||||
HSBC | USD | 10,582,449 | MXN | 137,110,000 | 09/04/14 | (61,293 | ) | ||||||||||||
HSBC | USD | 12,971,412 | PLN | 39,845,000 | 09/04/14 | 94,669 | |||||||||||||
HSBC | USD | 11,410,856 | SEK | 75,800,000 | 09/04/14 | (74,019 | ) | ||||||||||||
JPMCB | GBP | 1,145,000 | USD | 1,919,005 | 09/04/14 | (39,515 | ) | ||||||||||||
JPMCB | IDR | 51,519,500,000 | USD | 4,380,537 | 09/04/14 | 87,984 | |||||||||||||
JPMCB | ILS | 13,560,000 | USD | 3,886,946 | 09/04/14 | (63,044 | ) | ||||||||||||
JPMCB | INR | 213,760,000 | USD | 3,570,999 | 09/04/14 | 71,862 | |||||||||||||
JPMCB | RUB | 99,409,826 | USD | 2,815,744 | 09/04/14 | (65,442 | ) | ||||||||||||
JPMCB | THB | 118,700,000 | USD | 3,612,075 | 09/04/14 | (34,310 | ) | ||||||||||||
JPMCB | TWD | 94,800,000 | USD | 3,154,322 | 09/04/14 | (23,037 | ) | ||||||||||||
JPMCB | USD | 26,511,633 | PHP | 1,164,550,000 | 09/04/14 | 133,796 | |||||||||||||
JPMCB | USD | 3,873,901 | SGD | 4,865,000 | 09/04/14 | 27,850 | |||||||||||||
MSCI | PLN | 35,511,859 | EUR | 8,610,000 | 09/04/14 | 147,418 | |||||||||||||
SSB | JPY | 353,100,000 | USD | 3,445,349 | 09/04/14 | (41,813 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (2,822,829 | ) |
46
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||
US Ultra Bond, 125 contracts (USD) | September 2014 | $ | 18,503,593 | $ | 18,742,188 | $ | 238,595 | ||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
2 Year US Treasury Notes, 276 contracts (USD) | September 2014 | (60,629,069 | ) | (60,607,875 | ) | 21,194 | |||||||||||||
10 Year US Treasury Notes, 457 contracts (USD) | September 2014 | (56,873,294 | ) | (57,203,547 | ) | (330,253 | ) | ||||||||||||
Index futures buy contracts: | |||||||||||||||||||
Amsterdam Exchange Index, 81 contracts (EUR) | July 2014 | 9,197,457 | 9,166,984 | (30,473 | ) | ||||||||||||||
DAX Index, 37 contracts (EUR) | September 2014 | 12,644,891 | 12,488,067 | (156,824 | ) | ||||||||||||||
E-mini S&P 500 Index, 387 contracts (USD) | September 2014 | 37,329,923 | 37,778,940 | 449,017 | |||||||||||||||
FTSE 100 Index, 172 contracts (GBP) | September 2014 | 19,761,226 | 19,754,553 | (6,673 | ) | ||||||||||||||
Hong Kong Hang Seng Index, 190 contracts (HKD) | July 2014 | 12,409,834 | 12,554,062 | 144,228 | |||||||||||||||
S&P Toronto Stock Exchange 60 Index, 182 contracts (CAD) | September 2014 | 29,123,923 | 29,463,174 | 339,251 | |||||||||||||||
TOPIX Index, 243 contracts (JPY) | September 2014 | 29,485,123 | 30,283,550 | 798,427 | |||||||||||||||
Index futures sell contracts: | |||||||||||||||||||
E-mini NASDAQ 100 Index, 110 contracts (USD) | September 2014 | (8,299,016 | ) | (8,449,100 | ) | (150,084 | ) | ||||||||||||
Mini MSCI Emerging Markets Index, 267 contracts (USD) | September 2014 | (13,847,154 | ) | (13,893,345 | ) | (46,191 | ) | ||||||||||||
SPI 200 Index, 201 contracts (AUD) | September 2014 | (25,310,906 | ) | (25,368,985 | ) | (58,079 | ) | ||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||
Australian Government 3 Year Bond, 760 contracts (AUD) | September 2014 | 78,028,921 | 78,457,119 | 428,198 | |||||||||||||||
Euro-BTP, 75 contracts (EUR) | September 2014 | 12,668,648 | 12,958,370 | 289,722 | |||||||||||||||
Euro-OAT, 101 contracts (EUR) | September 2014 | 19,059,109 | 19,435,201 | 376,092 | |||||||||||||||
Long Gilt, 103 contracts (GBP) | September 2014 | 19,375,289 | 19,376,060 | 771 | |||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||
Japanese Government 10 Year Bond, 22 contracts (JPY) | September 2014 | (31,502,898 | ) | (31,630,225 | ) | (127,327 | ) | ||||||||||||
Net unrealized appreciation on futures contracts | $ | 2,179,591 |
Options written
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 133 | $ | 1,119,052 | ||||||||
Options written | — | — | |||||||||
Options terminated in closing purchase transactions | (133 | ) | (1,119,052 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | — | $ | — |
47
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 278,819,942 | $ | 733,125 | $ | — | $ | 279,553,067 | |||||||||||
Mortgage & agency debt securities | — | 778,873 | — | 778,873 | |||||||||||||||
US government obligations | — | 21,274,164 | — | 21,274,164 | |||||||||||||||
Non-US government obligations | — | 45,049,631 | — | 45,049,631 | |||||||||||||||
Investment companies | 28,022,137 | 71,834,930 | — | 99,857,067 | |||||||||||||||
Warrants | 215,903 | 210,609 | — | 426,512 | |||||||||||||||
Short-term investment | — | 155,168,975 | — | 155,168,975 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 22,940,033 | — | 22,940,033 | |||||||||||||||
Forward foreign currency contracts | — | 1,081,594 | — | 1,081,594 | |||||||||||||||
Futures contracts | 3,085,495 | — | — | 3,085,495 | |||||||||||||||
Total | $ | 310,143,477 | $ | 319,071,934 | $ | — | $ | 629,215,411 | |||||||||||
Liabilities | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (3,904,423 | ) | $ | — | $ | (3,904,423 | ) | |||||||||
Futures contracts | (905,904 | ) | — | — | (905,904 | ) | |||||||||||||
Total | $ | (905,904 | ) | $ | (3,904,423 | ) | $ | — | $ | (4,810,327 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at June 30, 2014.
2 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of these securities amounted to $11,645,781 or 1.90% of net assets.
3 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of these securities amounted to $5,268,868 or 0.86% of net assets.
4 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
5 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional government security of the same maturity.
48
UBS Global Allocation Fund
Portfolio of investments
June 30, 2014
6 The table below details the Fund's investments in funds advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Funds.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Net realized gain during the year ended 06/30/14 | Change in net unrealized appreciation/ (depreciation) during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 177,549,105 | $ | 196,677,948 | $ | 219,058,078 | $ | — | $ | — | $ | 155,168,975 | $ | 144,900 | |||||||||||||||||
UBS Private Money Market Fund LLCa | 22,183,419 | 230,981,304 | 230,224,690 | — | — | 22,940,033 | 2,040 | ||||||||||||||||||||||||
UBS Emerging Markets Equity Relationship Fund | 51,518,582 | — | 16,500,000 | 8,527,534 | (4,926,897 | ) | 38,619,219 | — | |||||||||||||||||||||||
UBS Global Corporate Bond Relationship Fund | — | 13,625,000 | — | — | 1,080,474 | 14,705,474 | — | ||||||||||||||||||||||||
UBS High Yield Relationship Fund | 36,525,431 | 10,726,000 | 33,700,000 | 8,046,238 | (3,087,432 | ) | 18,510,237 | — | |||||||||||||||||||||||
$ | 287,776,537 | $ | 452,010,252 | $ | 499,482,768 | $ | 16,573,772 | $ | (6,933,855 | ) | $ | 249,943,938 | $ | 146,940 |
a The Advisor does earn a management fee from this affiliated fund. Please see the Notes to financial statements for further information.
See accompanying notes to financial statements.
49
UBS Multi-Asset Income Fund
Portfolio performance
For the 12 months ended June 30, 2014, Class A shares of UBS Multi-Asset Income Fund (the "Fund") gained 8.94% (Class A shares returned 4.06% after the deduction of the maximum sales charge), while Class Y shares rose 9.32%. For comparison purposes, the Barclays US Corporate Investment Grade Index (the "Index"), returned 7.73% during the same time period. (Class Y shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 52; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The portfolio was managed in accordance with our low to moderate risk profile for the Fund. We continued to place a strong emphasis on minimizing interest rate risk and protecting capital during the review period. If this is considered within the context of the Fund's goal of providing a monthly income payout of between 3% and 6% per year, the Fund was positioned at the lower end of its payout range.1 For the 12 months ended June 30, 2014, the Fund's yield was 3.32% and 3.56%% for Class A and Class Y shares, respectively. We believe this was an attractive level of income, given the relatively low interest rate environment.
During the reporting period, we used derivatives, including writing covered calls2, to increase cash flow and reduce the risk profile of the Fund's allocation to international equities. We also utilized derivatives, including currency forwards, to hedge our exposures to international currency risk, as well as Treasury futures to manage duration and the Fund's yield curve positioning. In summary, while our derivatives exposure was limited in the portfolio, our ability to increase cash flow and manage unwanted risks relating to currency and duration positively contributed to the Fund's ability to meet our low-to-moderate risk targets.
Portfolio performance summary3
What worked
The Fund's corporate bond exposure was beneficial for performance
– The Fund's high yield corporate bond allocation represented the largest portion of the Fund's portfolio, as well as the largest contributor to its performance. The sector was supported by accelerating economic growth, generally solid corporate fundamentals, low defaults and overall robust investor demand.
1 While there is no guarantee that the Fund will achieve its target payout, UBS Multi-Asset Income Fund seeks a target payout of 3%-6% per year, based on the current interest rate environment. UBS Global Asset Management (Americas) Inc., the Fund's Advisor, does not represent or guarantee that the Fund will meet this target payout.
In an attempt to achieve its target payout, the Fund will actively allocate among traditional and nontraditional asset classes. The allocation of investments across each asset class will vary over time and will be driven by:
• Valuation based on the Advisor's 30-year fundamental value philosophy;
• Economic factors, including the current and projected interest rate environment and credit conditions; and
• A focus on diversification and risk management to meet the Fund's payout objective while minimizing volatility.
The Fund seeks to achieve its target payout by investing primarily in a combination of equities, fixed income securities, third party ETFs, TIPS, listed exchange options, and other derivative securities. The Fund will also engage in derivative strategies, most notably, call overwriting, and purchase currencies in accordance with its target asset allocation. The strategies that the Fund will employ include a combination of active and passive investment strategies; however, the Fund may invest directly in equity and fixed income securities, and cash equivalents, including money market securities, futures, and currency contracts. In addition, the Fund will engage in covered call option writing to enhance returns and for risk management purposes. Covered calls against equity ETFs will be written to generate premiums that typically would be classified as short-term capital gains and can potentially contribute to enhancing the overall payout of the Fund. Currency forwards could also be used to potentially enhance income using positive carry strategies whereby higher-yielding currencies are bought in exchange for lower-yielding currencies.
2 Call overwriting involves selling options while already owning the underlying security. As the seller of a call option, we believe that the price of the security will not rise. If the stock price rises, then we can sell the security and receive the call option premium, but our upside is capped. If the stock price falls, then the call option is worthless; we would still receive the call option premium, but the underlying position would fall in price.
3 For a detailed commentary on the market environment in general during the reporting period, see page 3.
50
UBS Multi-Asset Income Fund
– Our exposure to investment grade corporate bonds contributed to performance as credit spreads continued to compress as investors bid up high credit quality debt securities seeking yield and stability in the current market environment.
• The Fund's allocation to global dividend paying stocks, including emerging market equities, was beneficial for its performance.
– The Fund maintained on average an estimated 20% allocation to global dividend paying stocks during the reporting period. While these stocks experienced periods of volatility as interest rates fluctuated, they generated strong results overall. They were also a strong contributor to both yield and total returns.
• The Fund's exposures to global infrastructure stocks enhanced the Fund's yield.
– The Fund had approximately 5% of its assets in global infrastructure stocks during the reporting period. We emphasized securities with roughly 5.5%-6.0% yields, delivered through the combination of secure, long-term and operational contracts with intrinsic inflation protection, which provided an attractive prospect for yield-seeking investors.
• Asset allocation strategies were beneficial for the Fund.
– The Fund's tactical asset allocation strategy was rewarded, as it helped the Fund to outperform its benchmark, as well as achieve its risk-managed income target during the reporting period.
– The Fund's standard deviation, a measure of market volatility, was in line with its low to moderate volatility range.
What didn't work
• Certain hedging instruments detracted from results. Given the market's overall positive performance during the reporting period, certain hedging instruments used in emerging markets, as well as duration overlay strategies that were used to manage the Fund's overall risk, were a modest drag on performance.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2014. The views and opinions in the letter were current as of August 14, 2014. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com/globalam-us.
51
UBS Multi-Asset Income Fund
Average annual total returns for periods ended 06/30/14 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class A2 | 8.94 | % | 6.12 | % | |||||||
Class C3 | 8.26 | 5.39 | |||||||||
Class Y4 | 9.32 | 6.43 | |||||||||
After deducting maximum sales charge | |||||||||||
Class A2 | 4.06 | % | 3.91 | % | |||||||
Class C3 | 7.51 | 5.39 | |||||||||
Barclays US Corporate Investment Grade Index5 | 7.73 | % | 4.85 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2013 prospectuses were as follows: Class A—2.10% and 1.29%; Class C—2.86% and 2.04%; Class Y—1.84% and 1.04%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Global Asset Management (Americas) Inc., the Fund's investment advisor ("UBS Global AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2014, do not exceed 0.95% for Class A shares, 1.70% for Class C shares and 0.70% for Class Y shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses for a period of three years following such fee waivers and expense reimbursements to the extent that such reimbursement of the Advisor by the Fund will not cause the Fund to exceed any applicable expense limit that is in place for the Fund. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS Global AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all share classes of UBS Multi-Asset Income Fund and the index is April 25, 2012.
2 Maximum sales charge for Class A shares is 4.5%. Class A shares bear ongoing 12b-1 service fees.
3 Maximum contingent deferred sales charge for Class C shares is 0.75% imposed on redemptions and is reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution and service fees.
4 The Fund offers Class Y shares to a limited group of eligible investors, including certain qualifying retirement plans. Class Y shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 distribution and service fees.
5 The Barclays US Corporate Investment Grade Index is a sub-index of the Barclays US Credit Index, and includes USD-denominated securities publicly issued by US and non-US industrial, utility, and financial issuers that meet the specified maturity, liquidity and quality requirements. Investors should note that the indices do not reflect the deduction of fees and expenses.
If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
52
UBS Multi-Asset Income Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 4.5% maximum sales charge) and $5,000,000 in Class Y shares (unaudited)
The following two graphs depict the performance of UBS Multi-Asset Income Fund Class A and Class Y shares versus the Barclays US Corporate Investment Grade Index from April 25, 2012, which is the inception date of the two classes, through June 30, 2014. The performance of Class C shares will vary based upon the different class specific expenses and sales charges. The performance provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit http://globalam-us.ubs.com/corpweb/performance.do.
53
UBS Multi-Asset Income Fund
Top ten equity holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
John Laing Infrastructure Fund Ltd. | 1.6 | % | |||||
Simon Property Group, Inc. | 0.3 | ||||||
Sumitomo Realty & Development Co., Ltd. | 0.2 | ||||||
Unibail-Rodamco SE | 0.2 | ||||||
Mitsui Fudosan Co., Ltd. | 0.1 | ||||||
Public Storage | 0.1 | ||||||
Equity Residential | 0.1 | ||||||
Sun Hung Kai Properties Ltd. | 0.1 | ||||||
Prologis, Inc. | 0.1 | ||||||
Mitsubishi Estate Co., Ltd. | 0.1 | ||||||
Total | 2.9 | % |
Country exposure by issuer, top five (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
United States | 20.1 | % | |||||
Italy | 4.9 | ||||||
United Kingdom | 1.9 | ||||||
Japan | 0.8 | ||||||
Australia | 0.4 | ||||||
Total | 28.1 | % |
Top ten long-term fixed income holdings (unaudited)1
As of June 30, 2014
Percentage of net assets | |||||||
US Treasury Inflation Indexed Bonds (TIPS), 3.875%, due 04/15/29 | 3.8 | % | |||||
Buoni Poliennali Del Tesoro, 5.000%, due 09/01/40 | 2.5 | ||||||
US Treasury Inflation Indexed Notes (TIPS), 2.000%, due 01/15/16 | 2.5 | ||||||
Buoni Poliennali Del Tesoro, 4.750%, due 09/01/44 | 2.4 | ||||||
US Treasury Inflation Indexed Notes (TIPS), 2.625%, due 07/15/17 | 1.5 | ||||||
Federal National Mortgage Association REMIC, IO, Series 2013-64, Class LI, 3.000%, due 06/25/33 | 1.0 | ||||||
Federal Home Loan Mortgage Corp. REMIC, IO, 3.500%, due 10/15/42 | 1.0 | ||||||
Government National Mortgage Association, IO, Series 2013-22, Class IO, 3.000%, due 02/20/43 | 0.9 | ||||||
Federal National Mortgage Association REMIC, IO, Series 2013-87, Class IW, 2.500%, due 06/25/28 | 0.8 | ||||||
Federal National Mortgage Association Pools, 4.000%, TBA | 0.8 | ||||||
Total | 17.2 | % |
1 Figures represent the direct investments of UBS Multi-Asset Income Fund. Figures might be different if a breakdown of the underlying investment companies was included.
54
UBS Multi-Asset Income Fund
Industry diversification (unaudited)1
As a percentage of net assets as of June 30, 2014
Common stocks | |||||||
Capital markets | 1.56 | % | |||||
Real estate investment trust (REIT) | 4.98 | ||||||
Real estate management & development | 1.39 | ||||||
Total common stocks | 7.93 | % | |||||
Bonds | |||||||
Mortgage & agency debt securities | 9.14 | ||||||
US government obligations | 7.75 | ||||||
Non-US government obligations | 4.92 | ||||||
Total bonds | 21.81 | % | |||||
Investment companies | |||||||
HICL Infrastructure Co., Ltd. | 2.67 | ||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 17.16 | ||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 10.42 | ||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 6.16 | ||||||
iShares MSCI EAFE ETF | 8.67 | ||||||
iShares Select Dividend Fund | 7.40 | ||||||
iShares U.S. Industrials ETF | 3.23 | ||||||
SPDR Barclays Short Term High Yield Bond ETF | 4.05 | ||||||
WisdomTree Emerging Markets Equity Income Fund | 5.33 | ||||||
Total investment companies | 65.09 | % | |||||
Rights | 0.002 | ||||||
Short-term investments | 6.59 | ||||||
Total investments | 101.42 | % | |||||
Liabilities, in excess of cash and other assets | (1.42 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the direct investments of UBS Multi-Asset Income Fund. Figures might be different if a breakdown of the underlying investment companies was included.
2 Amount represents less than 0.005%.
55
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks: 7.93% | |||||||||||
Australia: 0.42% | |||||||||||
BWP Trust | 976 | $ | 2,282 | ||||||||
CFS Retail Property Trust Group | 2,907 | 5,592 | |||||||||
Dexus Property Group | 8,370 | 8,761 | |||||||||
Federation Centres Ltd. | 2,263 | 5,314 | |||||||||
Goodman Group | 2,192 | 10,438 | |||||||||
GPT Group | 2,124 | 7,691 | |||||||||
Investa Office Fund | 948 | 3,039 | |||||||||
Mirvac Group | 4,871 | 8,199 | |||||||||
Scentre Group* | 6,839 | 20,636 | |||||||||
Stockland | 3,017 | 11,038 | |||||||||
Westfield Corp. | 2,412 | 16,262 | |||||||||
Total Australia common stocks | 99,252 | ||||||||||
Austria: 0.01% | |||||||||||
CA Immobilien Anlagen AG* | 113 | 2,143 | |||||||||
Belgium: 0.02% | |||||||||||
Aedifica SA | 28 | 1,917 | |||||||||
Cofinimmo | 26 | 3,240 | |||||||||
Total Belgium common stocks | 5,157 | ||||||||||
Canada: 0.22% | |||||||||||
Allied Properties REIT | 102 | 3,379 | |||||||||
Artis REIT | 186 | 2,745 | |||||||||
Boardwalk REIT | 60 | 3,670 | |||||||||
Calloway REIT | 134 | 3,335 | |||||||||
Canadian Apartment Properties REIT | 153 | 3,278 | |||||||||
Canadian REIT | 105 | 4,526 | |||||||||
Chartwell Retirement Residences | 258 | 2,621 | |||||||||
Cominar REIT | 174 | 3,074 | |||||||||
Dream Office REIT | 137 | 3,761 | |||||||||
Granite Real Estate, Inc. | 81 | 2,998 | |||||||||
H&R REIT | 347 | 7,532 | |||||||||
Killam Properties, Inc. | 156 | 1,542 | |||||||||
RioCan REIT | 388 | 9,930 | |||||||||
Total Canada common stocks | 52,391 | ||||||||||
China: 0.37% | |||||||||||
Champion REIT | 5,000 | 2,323 | |||||||||
Hang Lung Properties Ltd. | 3,000 | 9,251 | |||||||||
Henderson Land Development Co., Ltd. | 1,966 | 11,504 | |||||||||
Hongkong Land Holdings Ltd. | 1,000 | 6,670 | |||||||||
Hysan Development Co., Ltd. | 1,030 | 4,824 | |||||||||
Kerry Properties Ltd. | 1,000 | 3,497 | |||||||||
Link REIT | 3,100 | 16,679 | |||||||||
New World Development Co., Ltd. | 6,586 | 7,495 | |||||||||
Sino Land Co., Ltd. | 4,317 | 7,107 | |||||||||
Swire Properties Ltd. | 1,600 | 4,676 | |||||||||
Wharf Holdings Ltd. | 2,000 | 14,399 | |||||||||
Total China common stocks | 88,425 |
Shares | Value | ||||||||||
Finland: 0.02% | |||||||||||
Citycon Oyj | 638 | $ | 2,341 | ||||||||
Sponda Oyj | 421 | 2,248 | |||||||||
Total Finland common stocks | 4,589 | ||||||||||
France: 0.24% | |||||||||||
Fonciere Des Regions | 46 | 4,987 | |||||||||
Gecina SA | 26 | 3,792 | |||||||||
ICADE | 42 | 4,503 | |||||||||
Klepierre | 127 | 6,472 | |||||||||
Unibail-Rodamco SE | 124 | 36,072 | |||||||||
Total France common stocks | 55,826 | ||||||||||
Germany: 0.09% | |||||||||||
Deutsche Annington Immobilien SE | 88 | 2,589 | |||||||||
Deutsche Euroshop AG | 62 | 3,065 | |||||||||
Deutsche Wohnen AG | 377 | 8,131 | |||||||||
LEG Immobilien AG* | 69 | 4,648 | |||||||||
TAG Immobilien AG | 176 | 2,147 | |||||||||
Total Germany common stocks | 20,580 | ||||||||||
Hong Kong: 0.12% | |||||||||||
Sun Hung Kai Properties Ltd. | 2,000 | 27,431 | |||||||||
Italy: 0.01% | |||||||||||
Beni Stabili SpA | 1,612 | 1,479 | |||||||||
Japan: 0.83% | |||||||||||
Advance Residence Investment Corp. | 2 | 5,054 | |||||||||
Aeon Mall Co., Ltd. | 160 | 4,216 | |||||||||
Frontier Real Estate Investment Corp. | 1 | 5,439 | |||||||||
GLP J-REIT | 3 | 3,358 | |||||||||
Hulic Co., Ltd. | 400 | 5,271 | |||||||||
Japan Excellent, Inc. | 2 | 2,657 | |||||||||
Japan Prime Realty Investment Corp. | 1 | 3,588 | |||||||||
Japan Real Estate Investment Corp. | 2 | 11,648 | |||||||||
Japan Retail Fund Investment Corp. | 3 | 6,746 | |||||||||
Kenedix Office Investment Corp. | 1 | 5,439 | |||||||||
Mitsubishi Estate Co., Ltd. | 1,000 | 24,688 | |||||||||
Mitsui Fudosan Co., Ltd. | 1,000 | 33,720 | |||||||||
Mori Hills REIT Investment Corp. | 2 | 2,898 | |||||||||
Mori Trust Sogo Reit, Inc. | 1 | 1,687 | |||||||||
Nippon Accommodations Fund, Inc. | 1 | 3,791 | |||||||||
Nippon Building Fund, Inc. | 2 | 11,688 | |||||||||
Nippon Prologis REIT, Inc. | 2 | 4,663 | |||||||||
Nomura Real Estate Holdings, Inc. | 100 | 1,892 | |||||||||
Nomura Real Estate Master Fund, Inc. | 3 | 3,666 | |||||||||
Orix JREIT, Inc. | 3 | 4,205 | |||||||||
Sumitomo Realty & Development Co., Ltd. | 1,000 | 42,910 | |||||||||
Tokyu REIT, Inc. | 1 | 1,395 | |||||||||
United Urban Investment Corp. | 3 | 4,842 | |||||||||
Total Japan common stocks | 195,461 |
56
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Luxembourg: 0.02% | |||||||||||
GAGFAH SA* | 255 | $ | 4,642 | ||||||||
Netherlands: 0.05% | |||||||||||
Corio NV | 95 | 4,852 | |||||||||
Eurocommercial Properties NV CVA | 64 | 3,157 | |||||||||
Nieuwe Steen Investments NV | 119 | 750 | |||||||||
Wereldhave NV | 30 | 2,789 | |||||||||
Total Netherlands common stocks | 11,548 | ||||||||||
New Zealand: 0.01% | |||||||||||
Kiwi Income Property Trust | 2,220 | 2,264 | |||||||||
Norway: 0.01% | |||||||||||
Norwegian Property ASA* | 1,146 | 1,411 | |||||||||
Singapore: 0.24% | |||||||||||
Ascendas REIT | 3,000 | 5,534 | |||||||||
CapitaCommercial Trust | 3,000 | 4,090 | |||||||||
CapitaLand Ltd. | 3,000 | 7,699 | |||||||||
CapitaMall Trust | 3,000 | 4,752 | |||||||||
City Developments Ltd. | 1,000 | 8,204 | |||||||||
Global Logistic Properties Ltd. | 4,000 | 8,661 | |||||||||
Keppel Land Ltd. | 1,000 | 2,711 | |||||||||
Keppel REIT Management Ltd. | 3,000 | 3,080 | |||||||||
Mapletree Commercial Trust | 2,000 | 2,197 | |||||||||
Mapletree Industrial Trust | 2,112 | 2,422 | |||||||||
Mapletree Logistics Trust | 3,096 | 2,893 | |||||||||
Suntec REIT | 3,000 | 4,355 | |||||||||
Total Singapore common stocks | 56,598 | ||||||||||
Sweden: 0.06% | |||||||||||
Castellum AB | 206 | 3,654 | |||||||||
Fabege AB | 174 | 2,462 | |||||||||
Fastighets AB Balder, Class B* | 161 | 2,181 | |||||||||
Kungsleden AB | 254 | 1,910 | |||||||||
Wallenstam AB, Class B | 150 | 2,496 | |||||||||
Wihlborgs Fastigheter AB | 131 | 2,510 | |||||||||
Total Sweden common stocks | 15,213 | ||||||||||
Switzerland: 0.06% | |||||||||||
Allreal Holding AG* | 18 | 2,557 | |||||||||
PSP Swiss Property AG* | 55 | 5,179 | |||||||||
Swiss Prime Site AG* | 78 | 6,465 | |||||||||
Total Switzerland common stocks | 14,201 | ||||||||||
United Kingdom: 1.95% | |||||||||||
Big Yellow Group PLC | 193 | 1,638 | |||||||||
British Land Co., PLC | 1,260 | 15,148 | |||||||||
Capital & Counties Properties PLC | 755 | 4,208 | |||||||||
Daejan Holdings PLC | 16 | 1,303 |
Shares | Value | ||||||||||
Derwent London PLC | 108 | $ | 4,952 | ||||||||
Development Securities PLC | 443 | 1,619 | |||||||||
F&C Commercial Property Trust Ltd. | 1,205 | 2,471 | |||||||||
Grainger PLC | 535 | 1,925 | |||||||||
Great Portland Estates PLC | 415 | 4,574 | |||||||||
Hammerson PLC | 865 | 8,586 | |||||||||
Helical Bar PLC | 236 | 1,414 | |||||||||
Intu Properties PLC | 694 | 3,701 | |||||||||
John Laing Infrastructure Fund Ltd. | 183,528 | 366,229 | |||||||||
Land Securities Group PLC | 993 | 17,606 | |||||||||
Londonmetric Property PLC | 815 | 1,884 | |||||||||
MedicX Fund Ltd. | 1,435 | 2,044 | |||||||||
Picton Property Income Ltd. | 1,958 | 2,044 | |||||||||
Primary Health Properties PLC | 442 | 2,596 | |||||||||
Quintain Estates & Development PLC* | 989 | 1,498 | |||||||||
Schroder REIT | 896 | 801 | |||||||||
Segro PLC | 859 | 5,075 | |||||||||
Shaftesbury PLC | 307 | 3,447 | |||||||||
ST Modwen Properties PLC | 256 | 1,571 | |||||||||
Unite Group PLC | 265 | 1,787 | |||||||||
Workspace Group PLC | 167 | 1,629 | |||||||||
Total United Kingdom common stocks | 459,750 | ||||||||||
United States: 3.17% | |||||||||||
Acadia Realty Trust | 102 | 2,865 | |||||||||
Agree Realty Corp. | 49 | 1,481 | |||||||||
Alexander's, Inc. | 8 | 2,956 | |||||||||
Alexandria Real Estate Equities, Inc. | 96 | 7,453 | |||||||||
American Assets Trust, Inc. | 72 | 2,488 | |||||||||
American Campus Communities, Inc. | 138 | 5,277 | |||||||||
American Homes 4 Rent, Class A | 166 | 2,948 | |||||||||
American Realty Capital Properties, Inc. | 1,167 | 14,623 | |||||||||
Apartment Investment & Management Co., Class A | 185 | 5,970 | |||||||||
AvalonBay Communities, Inc. | 166 | 23,604 | |||||||||
BioMed Realty Trust, Inc. | 263 | 5,741 | |||||||||
Boston Properties, Inc. | 194 | 22,927 | |||||||||
Brandywine Realty Trust | 222 | 3,463 | |||||||||
Brixmor Property Group, Inc. | 94 | 2,157 | |||||||||
Camden Property Trust | 111 | 7,898 | |||||||||
CBL & Associates Properties, Inc. | 216 | 4,104 | |||||||||
Chambers Street Properties | 333 | 2,677 | |||||||||
Chesapeake Lodging Trust | 79 | 2,388 | |||||||||
CommonWealth REIT | 155 | 4,080 | |||||||||
Corporate Office Properties Trust | 111 | 3,087 | |||||||||
Cousins Properties, Inc. | 246 | 3,063 | |||||||||
CubeSmart | 181 | 3,316 | |||||||||
DCT Industrial Trust, Inc. | 462 | 3,793 | |||||||||
DDR Corp. | 394 | 6,946 | |||||||||
DiamondRock Hospitality Co. | 263 | 3,372 | |||||||||
Digital Realty Trust, Inc. | 165 | 9,623 | |||||||||
Douglas Emmett, Inc. | 179 | 5,051 |
57
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
Shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Duke Realty Corp. | 419 | $ | 7,609 | ||||||||
DuPont Fabros Technology, Inc. | 94 | 2,534 | |||||||||
EastGroup Properties, Inc. | 51 | 3,276 | |||||||||
Education Realty Trust, Inc. | 184 | 1,976 | |||||||||
EPR Properties | 81 | 4,526 | |||||||||
Equity Lifestyle Properties, Inc. | 102 | 4,504 | |||||||||
Equity Residential | 456 | 28,728 | |||||||||
Essex Property Trust, Inc. | 80 | 14,793 | |||||||||
Extra Space Storage, Inc. | 140 | 7,455 | |||||||||
Federal Realty Investment Trust | 88 | 10,641 | |||||||||
FelCor Lodging Trust, Inc. | 171 | 1,797 | |||||||||
First Industrial Realty Trust, Inc. | 145 | 2,732 | |||||||||
Forest City Enterprises, Inc., Class A* | 208 | 4,133 | |||||||||
General Growth Properties, Inc. | 639 | 15,055 | |||||||||
Glimcher Realty Trust | 210 | 2,274 | |||||||||
Government Properties Income Trust | 76 | 1,930 | |||||||||
HCP, Inc. | 579 | 23,959 | |||||||||
Health Care REIT, Inc. | 372 | 23,313 | |||||||||
Healthcare Realty Trust, Inc. | 139 | 3,533 | |||||||||
Highwoods Properties, Inc. | 126 | 5,286 | |||||||||
Home Properties, Inc. | 78 | 4,989 | |||||||||
Hospitality Properties Trust | 195 | 5,928 | |||||||||
Host Hotels & Resorts, Inc. | 943 | 20,755 | |||||||||
Hudson Pacific Properties, Inc. | 70 | 1,774 | |||||||||
Kilroy Realty Corp. | 107 | 6,664 | |||||||||
Kimco Realty Corp. | 520 | 11,950 | |||||||||
Kite Realty Group Trust | 236 | 1,449 | |||||||||
LaSalle Hotel Properties | 133 | 4,694 | |||||||||
Lexington Realty Trust | 329 | 3,622 | |||||||||
Liberty Property Trust | 196 | 7,434 | |||||||||
LTC Properties, Inc. | 58 | 2,264 | |||||||||
Macerich Co. | 181 | 12,082 | |||||||||
Mack-Cali Realty Corp. | 124 | 2,664 | |||||||||
Medical Properties Trust, Inc. | 220 | 2,913 | |||||||||
Mid-America Apartment Communities, Inc. | 99 | 7,232 | |||||||||
National Health Investors, Inc. | 44 | 2,753 | |||||||||
National Retail Properties, Inc. | 155 | 5,765 | |||||||||
New York REIT, Inc. | 200 | 2,212 | |||||||||
Omega Healthcare Investors, Inc. | 161 | 5,935 | |||||||||
Parkway Properties, Inc. | 94 | 1,941 | |||||||||
Pebblebrook Hotel Trust | 88 | 3,253 | |||||||||
Pennsylvania REIT | 99 | 1,863 | |||||||||
Piedmont Office Realty Trust, Inc., Class A | 227 | 4,299 | |||||||||
Post Properties, Inc. | 73 | 3,903 | |||||||||
Prologis, Inc. | 637 | 26,174 | |||||||||
PS Business Parks, Inc. | 40 | 3,340 | |||||||||
Public Storage | 183 | 31,357 | |||||||||
Ramco-Gershenson Properties Trust | 113 | 1,878 |
Shares | Value | ||||||||||
Realty Income Corp. | 265 | $ | 11,771 | ||||||||
Regency Centers Corp. | 122 | 6,793 | |||||||||
Retail Properties of America, Inc., Class A | 300 | 4,614 | |||||||||
RLJ Lodging Trust | 170 | 4,911 | |||||||||
Sabra Health Care REIT, Inc. | 62 | 1,780 | |||||||||
Saul Centers, Inc. | 64 | 3,110 | |||||||||
Senior Housing Properties Trust | 246 | 5,975 | |||||||||
Simon Property Group, Inc. | 400 | 66,512 | |||||||||
SL Green Realty Corp. | 123 | 13,457 | |||||||||
Sovran Self Storage, Inc. | 44 | 3,399 | |||||||||
Spirit Realty Capital, Inc. | 481 | 5,464 | |||||||||
Strategic Hotels & Resorts, Inc.* | 216 | 2,529 | |||||||||
Sun Communities, Inc. | 55 | 2,741 | |||||||||
Sunstone Hotel Investors, Inc. | 237 | 3,538 | |||||||||
Tanger Factory Outlet Centers Inc. | 124 | 4,336 | |||||||||
Taubman Centers, Inc. | 82 | 6,216 | |||||||||
UDR, Inc. | 322 | 9,219 | |||||||||
Universal Health Realty Income Trust | 56 | 2,435 | |||||||||
Ventas, Inc. | 376 | 24,102 | |||||||||
Vornado Realty Trust | 214 | 22,840 | |||||||||
Washington Prime Group, Inc.* | 200 | 3,748 | |||||||||
Washington REIT | 112 | 2,910 | |||||||||
Weingarten Realty Investors | 143 | 4,696 | |||||||||
WP Carey, Inc. | 108 | 6,955 | |||||||||
Total United States common stocks | 748,543 | ||||||||||
Venezuela: 0.01% | |||||||||||
Warehouses De Pauw SCA | 26 | 1,948 | |||||||||
Total common stocks (cost $1,662,986) | 1,868,852 | ||||||||||
Face amount | |||||||||||
Bonds: 21.81% | |||||||||||
Mortgage & agency debt securities: 9.14% | |||||||||||
United States: 9.14% | |||||||||||
Federal Home Loan Mortgage Corp. Gold Pools,1 #Q20860, 3.500%, due 08/01/43 | $ | 48,191 | 49,599 | ||||||||
#G05132, 5.000%, due 12/01/38 | 18,851 | 20,861 | |||||||||
Federal Home Loan Mortgage Corp. REMIC, IO,1 3.000%, due 05/15/27 | 133,505 | 14,409 | |||||||||
3.500%, due 10/15/42 | 1,047,920 | 225,818 | |||||||||
Federal National Mortgage Association Pools,1 3.500%, TBA | 125,000 | 128,672 | |||||||||
4.000 | %, TBA | 175,000 | 185,719 | ||||||||
#AP0495, 3.500%, due 08/01/42 | 49,260 | 50,786 |
58
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
Face amount | Value | ||||||||||
Bonds—(Concluded) | |||||||||||
Mortgage & agency debt securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
#AP3839, 3.500%, due 09/01/42 | $ | 68,539 | $ | 70,746 | |||||||
#FN AW3613, 3.500%, due 06/01/44 | 125,000 | 128,873 | |||||||||
#AQ4080, 4.000%, due 06/01/43 | 167,572 | 178,202 | |||||||||
#AS0415, 4.000%, due 09/01/43 | 70,082 | 74,481 | |||||||||
#AE5471, 4.500%, due 10/01/40 | 73,829 | 80,009 | |||||||||
Federal National Mortgage Association REMIC, IO,1 Series 2013-87, Class IW, 2.500%, due 06/25/28 | 1,835,224 | 196,222 | |||||||||
Series 2013-64, Class LI, 3.000%, due 06/25/33 | 1,466,213 | 244,880 | |||||||||
Government National Mortgage Association Pools, #G2 779424, 4.000%, due 06/20/42 | 61,697 | 66,143 | |||||||||
Government National Mortgage Association, IO, Series 2013-22, Class IO, 3.000%, due 02/20/43 | 952,424 | 206,927 | |||||||||
Series 2012-26, Class GI, 3.500%, due 02/20/27 | 791,027 | 90,573 | |||||||||
Series 2012-16, Class AI, 3.500%, due 10/20/38 | 1,059,093 | 143,141 | |||||||||
Total mortgage & agency debt securities (cost $2,130,194) | 2,156,061 | ||||||||||
US government obligations: 7.75% | |||||||||||
US Treasury Inflation Indexed Bonds (TIPS), 3.875%, due 04/15/292 | 425,000 | 895,972 | |||||||||
US Treasury Inflation Indexed Notes (TIPS), 2.000%, due 01/15/162 | 460,000 | 579,280 | |||||||||
2.625%, due 07/15/172 | 275,000 | 352,137 | |||||||||
Total US government obligations (cost $1,814,579) | 1,827,389 |
Face amount | Value | ||||||||||
Non-US government obligation: 4.92% | |||||||||||
Italy: 4.92% | |||||||||||
Buoni Poliennali Del Tesoro, 4.750%, due 09/01/443,4 | EUR | 370,000 | $ | 577,591 | |||||||
5.000%, due 09/01/40 | 360,000 | 582,896 | |||||||||
Total Non-US government obligations (cost $1,156,288) | 1,160,487 | ||||||||||
Total bonds (cost $5,101,061) | 5,143,937 | ||||||||||
Shares | |||||||||||
Investment companies: 65.09% | |||||||||||
HICL Infrastructure Co., Ltd. | 262,943 | 629,551 | |||||||||
iShares iBoxx $ High Yield Corporate Bond ETF | 42,496 | 4,045,619 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 20,608 | 2,457,710 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 12,602 | 1,452,633 | |||||||||
iShares MSCI EAFE ETF | 29,920 | 2,045,630 | |||||||||
iShares Select Dividend Fund | 22,650 | 1,743,597 | |||||||||
iShares U.S. Industrials ETF | 7,350 | 761,460 | |||||||||
SPDR Barclays Short Term High Yield Bond ETF | 30,856 | 955,302 | |||||||||
WisdomTree Emerging Markets Equity Income Fund | 24,260 | 1,257,638 | |||||||||
Total investment companies (cost $14,902,959) | 15,349,140 | ||||||||||
Number of rights | |||||||||||
Rights: 0.00%5 | |||||||||||
Finland: 0.00%5 | |||||||||||
Citycon OYJ, expires 07/02/14* (cost $0) | 638 | 4 | |||||||||
Shares | |||||||||||
Short-term investment: 6.59% | |||||||||||
Investment company: 6.59% | |||||||||||
UBS Cash Management Prime Relationship Fund6 (cost $1,554,008) | 1,554,008 | 1,554,008 | |||||||||
Total investments: 101.42% (cost $23,221,014) | 23,915,941 | ||||||||||
Liabilities, in excess of cash and other assets: (1.42)% | (334,341 | ) | |||||||||
Net assets: 100.00% | $ | 23,581,600 |
59
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
Notes to portfolio of investments
Aggregate cost for federal income tax purposes was $23,530,940; and net unrealized appreciation consisted of:
Gross unrealized appreciation | $ | 470,573 | |||||
Gross unrealized depreciation | (85,572 | ) | |||||
Net unrealized appreciation of investments | $ | 385,001 |
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 63. Portfolio footnotes begin on page 62.
Forward foreign currency contracts
Counterparty | Contracts to deliver | In exchange for | Maturity date | Unrealized appreciation/ (depreciation) | |||||||||||||||
JPMCB | AUD | 265,300 | USD | 247,242 | 07/25/14 | $ | (2,461 | ) | |||||||||||
JPMCB | CHF | 142,900 | USD | 159,261 | 07/25/14 | (1,913 | ) | ||||||||||||
JPMCB | EUR | 1,399,800 | USD | 1,902,087 | 07/25/14 | (14,839 | ) | ||||||||||||
JPMCB | GBP | 1,057,800 | USD | 1,792,181 | 07/25/14 | (17,787 | ) | ||||||||||||
JPMCB | HKD | 1,322,700 | USD | 170,646 | 07/25/14 | 52 | |||||||||||||
JPMCB | JPY | 58,879,700 | USD | 576,526 | 07/25/14 | (4,797 | ) | ||||||||||||
Net unrealized depreciation on forward foreign currency contracts | $ | (41,745 | ) |
Futures contracts
Expiration date | Cost/ (proceeds) | Value | Unrealized appreciation/ (depreciation) | ||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||
US Ultra Bond, 5 contracts (USD) | September 2014 | $ | (738,767 | ) | $ | (749,687 | ) | $ | (10,920 | ) | |||||||||
Index futures sell contracts: | |||||||||||||||||||
Mini MSCI Emerging Markets Index, 10 contracts (USD) | September 2014 | (520,055 | ) | (520,350 | ) | (295 | ) | ||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||
Euro-BTP, 11 contracts (EUR) | September 2014 | (1,902,507 | ) | (1,900,562 | ) | 1,945 | |||||||||||||
Net unrealized depreciation on futures contracts | $ | (9,270 | ) |
Options written
Written options activity for the year ended June 30, 2014 was as follows:
Number of contracts | Premiums received | ||||||||||
Options outstanding at June 30, 2013 | 3,640,473 | $ | 21,013 | ||||||||
Options written | 7,383,830 | 18,807 | |||||||||
Options terminated in closing purchase transactions | (11,024,303 | ) | (39,820 | ) | |||||||
Options expired prior to exercise | — | — | |||||||||
Options outstanding at June 30, 2014 | — | $ | — |
60
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
The following is a summary of the fair valuations according to the inputs used as of June 30, 2014 in valuing the Fund's investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 1,868,852 | $ | — | $ | — | $ | 1,868,852 | |||||||||||
Mortgage & agency debt securities | — | 1,922,347 | 233,714 | 2,156,061 | |||||||||||||||
US government obligations | — | 1,827,389 | — | 1,827,389 | |||||||||||||||
Non-US government obligations | — | 1,160,487 | — | 1,160,487 | |||||||||||||||
Investment companies | 15,349,140 | — | — | 15,349,140 | |||||||||||||||
Rights | — | 4 | — | 4 | |||||||||||||||
Short-term investment | — | 1,554,008 | — | 1,554,008 | |||||||||||||||
Forward foreign currency contracts | — | 52 | — | 52 | |||||||||||||||
Futures contracts | 1,945 | — | — | 1,945 | |||||||||||||||
Total | $ | 17,219,937 | $ | 6,464,287 | $ | 233,714 | $ | 23,917,938 | |||||||||||
Liabilities | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (41,797 | ) | $ | — | $ | (41,797 | ) | |||||||||
Futures contracts | (11,215 | ) | — | — | (11,215 | ) | |||||||||||||
Total | $ | (11,215 | ) | $ | (41,797 | ) | $ | — | $ | (53,012 | ) |
At June 30, 2014, there were no transfers between Level 1 and Level 2.
Level 3 Rollforward Disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period.
Rights | Mortgage & agency debt securities | Total | |||||||||||||
Assets | |||||||||||||||
Beginning balance | $ | 0 | $ | 290,343 | $ | 290,343 | |||||||||
Purchases | — | — | — | ||||||||||||
Issuances | — | — | — | ||||||||||||
Sales | (0 | ) | — | — | |||||||||||
Accrued discounts (premiums) | — | (69,358 | ) | (69,358 | ) | ||||||||||
Total realized gain | — | — | — | ||||||||||||
Change in net unrealized appreciation/depreciation | — | 12,729 | 12,729 | ||||||||||||
Transfers into Level 3 | — | — | — | ||||||||||||
Transfers out of Level 3 | — | — | — | ||||||||||||
Ending balance | $ | — | $ | 233,714 | $ | 233,714 |
The change in net unrealized appreciation/depreciation relating to the Level 3 investments held at June 30, 2014 was $12,729.
61
UBS Multi-Asset Income Fund
Portfolio of investments
June 30, 2014
Portfolio footnotes
* Non-income producing security.
1 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations.
2 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 government security of the same maturity.
3 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security is considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2014, the value of this security amounted to $577,591 or 2.45% of net assets.
4 Security exempt from registration pursuant to Regulation S under the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. At June 30, 2014, the value of this security amounted to $577,591 or 2.45% of net assets.
5 Amount represents less than 0.005%.
6 The table below details the Fund's investment in a fund advised by the same Advisor as the Fund. The Advisor does not earn a management fee from the affiliated UBS Relationship Fund.
Security description | Value 06/30/13 | Purchases during the year ended 06/30/14 | Sales during the year ended 06/30/14 | Value 06/30/14 | Net income earned from affiliate for the year ended 06/30/14 | ||||||||||||||||||
UBS Cash Management Prime Relationship Fund | $ | 6,120,598 | $ | 35,464,998 | $ | 40,031,588 | $ | 1,554,008 | $ | 2,693 |
See accompanying notes to financial statements.
62
The UBS Funds
June 30, 2014
Portfolio acronyms
ADR American Depositary Receipt
CDO Collateralized Debt Obligations
CVA Dutch Certification—Depository Certificate
ETF Exchange Traded Fund
EURIBOR Euro Interbank Offered Rate
GDR Global Depositary Receipt
GE General Electric
IO Interest only—This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydown. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.
NVDR Non-voting Depository Receipt
OJSC Open Joint Stock Company
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
SPDR Standard & Poor's Depository Receipts
TBA (To be announced) Security is purchased on a forward commitment basis with an approximate principal amount
(generally +/-1.0%) and no definite maturity date. The actual principal amount and maturity date will be determined upon settlement, when the specific mortgage pools are assigned.
TIPS Treasury inflation protected securities ("TIPS") are debt securities issued by the US Treasury whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the TIPS is fixed, while the principal value rises or falls based on changes in a published Consumer Price Index ("CPI"). Thus, if inflation occurs, the principal and interest payments on the TIPS are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the TIPS principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the TIPS generally pay lower interest rates than typical US Treasury securities. Only if inflation occurs will TIPS offer a higher real yield than a conventional Treasury security of the same maturity.
Counterparty abbreviations
BB Barclays Bank PLC
CIBC Canadian Imperial Bank of Commerce
CITI Citibank NA
CSFB Credit Suisse First Boston
DB Deutsche Bank AG
GSI Goldman Sachs International
HSBC HSBC Bank NA
JPMCB JPMorgan Chase Bank
MSCI Morgan Stanley & Co. International PLC
SSB State Street Bank
Currency abbreviations
AUD Australian Dollar
CAD Canadian Dollar
CHF Swiss Franc
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
IDR Indonesian Rupiah
ILS Israel New Shekel
INR Indian Rupee
JPY Japanese Yen
MXN Mexican Peso
NOK Norwegian Krone
NZD New Zealand Dollar
PHP Philippine Peso
PLN Polish Zloty
RUB Russian Ruble
SEK Swedish Krona
SGD Singapore Dollar
THB Thai Baht
TWD Taiwan Dollar
USD United States Dollar
See accompanying notes to financial statements.
63
The UBS Funds
June 30, 2014 (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, 2014 to June 30, 2014.
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on that Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not that Fund's actual return for each class of shares. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
This projection assumes that annualized expense ratios were in effect during the period January 1, 2014 to June 30, 2014.
64
The UBS Funds
June 30, 2014 (unaudited)
Beginning account value January 1, 2014 | Ending account value June 30, 2014 | Expenses paid during period* 01/01/14 –06/30/14 | Expense ratio during period | ||||||||||||||||||||
UBS Asset Growth Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,068.60 | $ | 7.18 | 1.40 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,017.85 | 7.00 | 1.40 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,065.40 | 11.01 | 2.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.13 | 10.74 | 2.15 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,071.10 | 5.91 | 1.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.09 | 5.76 | 1.15 | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,012.60 | 6.74 | 1.35 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.10 | 6.76 | 1.35 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,008.90 | 10.46 | 2.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.38 | 10.49 | 2.10 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,012.30 | 5.49 | 1.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.34 | 5.51 | 1.10 | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,051.40 | 6.61 | 1.30 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.35 | 6.51 | 1.30 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,048.60 | 10.57 | 2.08 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.48 | 10.39 | 2.08 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,053.40 | 5.09 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.84 | 5.01 | 1.00 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).
65
The UBS Funds
June 30, 2014 (unaudited)
Beginning account value January 1, 2014 | Ending account value June 30, 2014 | Expenses paid during period* 01/01/14 – 06/30/14 | Expense ratio during period | ||||||||||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,040.10 | $ | 4.81 | 0.95 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,036.60 | 8.58 | 1.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,016.36 | 8.50 | 1.70 | |||||||||||||||||||
Class Y | Actual | 1,000.00 | 1,041.40 | 3.54 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.32 | 3.51 | 0.70 |
* Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 181 divided by 365 (to reflect the one-half year period).
66
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67
The UBS Funds
Financial statements
Statement of assets and liabilities
June 30, 2014
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost: | |||||||||||
Unaffiliated issuers | $ | 22,132,841 | $ | 276,223,202 | |||||||
Affiliated issuers | 7,680,934 | 15,567,483 | |||||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | 7,801,795 | 816,590 | |||||||||
Foreign currency | 8 | 9,219,834 | |||||||||
$ | 37,615,578 | $ | 301,827,109 | ||||||||
Investments, at value: | |||||||||||
Unaffiliated issuers | $ | 22,647,210 | $ | 276,275,912 | |||||||
Affiliated issuers | 7,680,934 | 15,567,483 | |||||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | 7,801,795 | 816,590 | |||||||||
Foreign currency | 8 | 9,325,059 | |||||||||
Cash | — | 546 | |||||||||
Receivables: | |||||||||||
Investment securities sold | — | 36,311,405 | |||||||||
Interest | 7,142 | 2,277,133 | |||||||||
Fund shares sold | 188 | 836,248 | |||||||||
Foreign tax reclaims | — | 83,318 | |||||||||
Due from advisor | 7,829 | — | |||||||||
Due from broker | — | 1,038,342 | |||||||||
Due from custodian | — | — | |||||||||
Dividends | 13,468 | 1,723 | |||||||||
Variation margin on futures contracts | 187,961 | 764,950 | |||||||||
Variation margin on centrally cleared swap agreements | — | 743,857 | |||||||||
Due from broker for futures contracts | — | 6,901,118 | |||||||||
Cash collateral for futures contracts | 1,928,601 | 9,975,724 | |||||||||
Cash collateral for swap agreements | — | 12,137,621 | |||||||||
Cash collateral received from securities loaned | — | — | |||||||||
Outstanding swap agreements, at value2 | — | 6,882,400 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 336,901 | |||||||||
Other assets | 36,502 | 44,538 | |||||||||
Total assets | 40,311,638 | 380,320,868 | |||||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Cash collateral from securities loaned | 7,801,795 | 816,590 | |||||||||
Investment securities purchased | — | 42,398,135 | |||||||||
Investment advisory and administration fees | — | 215,814 | |||||||||
Custody and fund accounting fees | 17,125 | 59,364 | |||||||||
Fund shares redeemed | 52,873 | 519,364 | |||||||||
Distribution and service fees | 11,039 | 82,821 | |||||||||
Due to broker for futures contracts | 81,454 | — | |||||||||
Variation margin on futures contracts | — | — | |||||||||
Accrued expenses | 78,916 | 152,329 | |||||||||
Options written, at value3 | — | 336,361 | |||||||||
Outstanding swap agreements, at value2 | — | 6,157,190 | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | 3,110,753 | |||||||||
Total liabilities | 8,043,202 | 53,848,721 | |||||||||
Net assets | $ | 32,268,436 | $ | 326,472,147 |
1 The market value of securities loaned by UBS Asset Growth Fund, UBS Dynamic Alpha Fund, and UBS Global Allocation Fund, as of June 30, 2014 was $7,640,886, $1,716,170, and $23,380,734, respectively.
2 Net upfront payments made by UBS Dynamic Alpha Fund were $80,393.
3 Premiums received by UBS Dynamic Alpha Fund were $1,122,533.
68
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||
Assets: | |||||||||||
Investments, at cost: | |||||||||||
Unaffiliated issuers | $ | 323,113,156 | $ | 21,667,006 | |||||||
Affiliated issuers | 219,482,518 | 1,554,008 | |||||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | 22,940,033 | — | |||||||||
Foreign currency | 3,213,737 | 321,462 | |||||||||
$ | 568,749,444 | $ | 23,542,476 | ||||||||
Investments, at value: | |||||||||||
Unaffiliated issuers | $ | 375,104,384 | $ | 22,361,933 | |||||||
Affiliated issuers | 227,003,905 | 1,554,008 | |||||||||
Investment of cash collateral in an affiliated issuer received from securities loaned1 | 22,940,033 | — | |||||||||
Foreign currency | 3,239,250 | 323,728 | |||||||||
Cash | — | — | |||||||||
Receivables: | |||||||||||
Investment securities sold | 1,099,476 | 2,869,579 | |||||||||
Interest | 850,796 | 33,212 | |||||||||
Fund shares sold | 84,348 | 13,514 | |||||||||
Foreign tax reclaims | 166,430 | 644 | |||||||||
Due from advisor | — | 8,676 | |||||||||
Due from broker | — | — | |||||||||
Due from custodian | — | 50,678 | |||||||||
Dividends | 350,184 | 56,633 | |||||||||
Variation margin on futures contracts | 2,188,320 | — | |||||||||
Variation margin on centrally cleared swap agreements | — | — | |||||||||
Due from broker for futures contracts | — | 16,801 | |||||||||
Cash collateral for futures contracts | 10,147,471 | 110,999 | |||||||||
Cash collateral for swap agreements | — | — | |||||||||
Cash collateral received from securities loaned | 407,190 | — | |||||||||
Outstanding swap agreements, at value2 | — | — | |||||||||
Unrealized appreciation on forward foreign currency contracts | 1,081,594 | 52 | |||||||||
Other assets | 60,594 | 34,607 | |||||||||
Total assets | 644,723,975 | 27,435,064 | |||||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Cash collateral from securities loaned | 23,347,223 | — | |||||||||
Investment securities purchased | 919,701 | 3,676,836 | |||||||||
Investment advisory and administration fees | 437,062 | — | |||||||||
Custody and fund accounting fees | 78,242 | 17,176 | |||||||||
Fund shares redeemed | 1,611,249 | 6,016 | |||||||||
Distribution and service fees | 207,291 | 9,567 | |||||||||
Due to broker for futures contracts | 1,229,550 | — | |||||||||
Variation margin on futures contracts | — | 9,272 | |||||||||
Accrued expenses | 198,768 | 92,800 | |||||||||
Options written, at value3 | — | — | |||||||||
Outstanding swap agreements, at value2 | — | — | |||||||||
Unrealized depreciation on forward foreign currency contracts | 3,904,423 | 41,797 | |||||||||
Total liabilities | 31,933,509 | 3,853,464 | |||||||||
Net assets | $ | 612,790,466 | $ | 23,581,600 |
See accompanying notes to financial statements.
69
The UBS Funds
Financial statements
Statement of assets and liabilities (continued)
June 30, 2014
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 56,800,109 | $ | 694,672,832 | |||||||
Accumulated undistributed (distributions in excess of) net investment income | (12,334 | ) | 1,688,624 | ||||||||
Accumulated net realized gain (loss) | (25,233,616 | ) | (370,290,481 | ) | |||||||
Net unrealized appreciation | 714,277 | 401,172 | |||||||||
Net assets | $ | 32,268,436 | $ | 326,472,147 | |||||||
Class A: | |||||||||||
Net assets | $ | 22,947,806 | $ | 194,184,926 | |||||||
Shares outstanding | 2,455,811 | 26,814,263 | |||||||||
Net asset value and redemption proceeds per share | $ | 9.34 | $ | 7.24 | |||||||
Offering price per share (NAV per share plus maximum sales charge)1,2 | $ | 9.88 | $ | 7.66 | |||||||
Class C: | |||||||||||
Net assets | $ | 7,563,754 | $ | 51,118,726 | |||||||
Shares outstanding | 814,043 | 7,505,624 | |||||||||
Net asset value and offering price per share | $ | 9.29 | $ | 6.81 | |||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1,2 | $ | 9.20 | $ | 6.74 | |||||||
Class Y: | |||||||||||
Net assets | $ | 1,756,876 | $ | 81,168,495 | |||||||
Shares outstanding | 188,108 | 10,991,056 | |||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1,2 | $ | 9.34 | $ | 7.38 |
1 For UBS Asset Growth Fund, UBS Dynamic Alpha Fund, and UBS Global Allocation Fund, Class A, the maximum sales charge is 5.50%. Classes C and Y have no front-end sales charges. For Class A, the maximum contingent deferred sales charge of 1.00% of the shares' offering price or the net asset value at the time of sales by the shareholders, whichever is less, is charged on sales of shares on original purchases of $1 million or more that were not subject to a front-end sales charge made within one year of the purchase date. Class C maximum contingent deferred sales charge is 1.00%. Class Y has no contingent deferred sales charge. If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
2 For UBS Multi Asset Income Fund Class A, the maximum sales charge is 4.50%. Classes C and Y have no front-end sales charges. For Class A, the maximum contingent deferred sales charge of 1.00% of the shares' offering price or the net asset value at the time of sales by the shareholders, whichever is less, is charged on sales of shares on original purchases of $1 million or more that were not subject to a front-end charge made within one year of the purchase date. Class C maximum contingent deferred sales charge is 0.75%. Class Y has no contingent deferred sales charge. If an investor sells or exchanges shares less than 90 days after purchase, a redemption fee of 1.00% of the amount sold or exchanged will be deducted at the time of the transaction, except as noted otherwise in the prospectus.
70
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 1,560,175,944 | $ | 21,920,930 | |||||||
Accumulated undistributed (distributions in excess of) net investment income | (2,857,802 | ) | 5,324 | ||||||||
Accumulated net realized gain (loss) | (1,003,496,531 | ) | 1,009,727 | ||||||||
Net unrealized appreciation | 58,968,855 | 645,619 | |||||||||
Net assets | $ | 612,790,466 | $ | 23,581,600 | |||||||
Class A: | |||||||||||
Net assets | $ | 309,296,338 | $ | 15,949,196 | |||||||
Shares outstanding | 28,006,863 | 1,509,753 | |||||||||
Net asset value and redemption proceeds per share | $ | 11.04 | $ | 10.56 | |||||||
Offering price per share (NAV per share plus maximum sales charge)1,2 | $ | 11.68 | $ | 11.06 | |||||||
Class C: | |||||||||||
Net assets | $ | 174,077,503 | $ | 7,576,670 | |||||||
Shares outstanding | 16,134,817 | 717,746 | |||||||||
Net asset value and offering price per share | $ | 10.79 | $ | 10.56 | |||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge)1,2 | $ | 10.68 | $ | 10.48 | |||||||
Class Y: | |||||||||||
Net assets | $ | 129,416,625 | $ | 55,734 | |||||||
Shares outstanding | 11,499,626 | 5,273 | |||||||||
Net asset value per share, offering price per share, and redemption proceeds per share1,2 | $ | 11.25 | $ | 10.57 |
See accompanying notes to financial statements.
71
The UBS Funds
Financial statements
Statement of operations
For the year ended June 30, 2014
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||
Investment income: | |||||||||||
Dividends | $ | 403,297 | $ | — | |||||||
Interest and other | 35,205 | 6,369,163 | |||||||||
Affiliated income | 7,193 | 20,300 | |||||||||
Securities lending1 | 32,894 | 2,389 | |||||||||
Foreign tax withheld | — | (1,307 | ) | ||||||||
Total income | 478,589 | 6,390,545 | |||||||||
Expenses: | |||||||||||
Advisory and administration | 338,558 | 2,946,832 | |||||||||
Distribution and service: | |||||||||||
Class A | 58,655 | 509,102 | |||||||||
Class C | 78,131 | 543,119 | |||||||||
Transfer agency and related services fees: | |||||||||||
Class A | 9,173 | 146,464 | |||||||||
Class C | 4,889 | 39,871 | |||||||||
Class Y | 581 | 26,419 | |||||||||
Custodian and fund accounting | 51,061 | 189,507 | |||||||||
Federal and state registration | 38,476 | 46,860 | |||||||||
Professional services | 129,434 | 132,116 | |||||||||
Shareholder reports | 13,263 | 72,467 | |||||||||
Trustees | 21,591 | 54,250 | |||||||||
Other | 35,898 | 68,924 | |||||||||
Total expenses | 779,710 | 4,775,931 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (262,893 | ) | (217,275 | ) | |||||||
Net expenses | 516,817 | 4,558,656 | |||||||||
Net investment income (loss) | (38,228 | ) | 1,831,889 | ||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 1,716,685 | 11,316,250 | |||||||||
Investments in affiliated issuers | 2,422,525 | — | |||||||||
Futures contracts | 3,044,244 | 3,986,771 | |||||||||
Options written | 21,175 | (504,096 | ) | ||||||||
Swap agreements | — | 1,244,612 | |||||||||
Forward foreign currency contracts | (300,184 | ) | (8,757,163 | ) | |||||||
Foreign currency transactions | (24,432 | ) | 1,349,217 | ||||||||
Net realized gain | 6,880,013 | 8,635,591 | |||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||
Investments | (1,636,127 | ) | 10,705,285 | ||||||||
Futures contracts | 348,457 | 868,519 | |||||||||
Options written | (12,058 | ) | 786,172 | ||||||||
Swap agreements | — | 249,598 | |||||||||
Forward foreign currency contracts | 80,839 | (4,400,992 | ) | ||||||||
Translation of other assets and liabilities denominated in foreign currency | 67,999 | 227,297 | |||||||||
Change in net unrealized appreciation/depreciation | (1,150,890 | ) | 8,435,879 | ||||||||
Net realized and unrealized gain | 5,729,123 | 17,071,470 | |||||||||
Net increase from payment by Advisor | — | — | |||||||||
Net increase in net assets resulting from operations | $ | 5,690,895 | $ | 18,903,359 |
1 Includes affiliated income from UBS Private Money Market Fund LLC of $203, $64, and $2,040 for UBS Asset Growth Fund, UBS Dynamic Alpha Fund and UBS Global Allocation Fund, respectively.
72
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||
Investment income: | |||||||||||
Dividends | $ | 8,060,408 | $ | 1,569,705 | |||||||
Interest and other | 1,346,711 | 158,830 | |||||||||
Affiliated income | 144,900 | 2,693 | |||||||||
Securities lending1 | 545,927 | — | |||||||||
Foreign tax withheld | (355,563 | ) | (3,996 | ) | |||||||
Total income | 9,742,383 | 1,727,232 | |||||||||
Expenses: | |||||||||||
Advisory and administration | 5,667,326 | 320,168 | |||||||||
Distribution and service: | |||||||||||
Class A | 859,259 | 48,031 | |||||||||
Class C | 1,846,224 | 85,319 | |||||||||
Transfer agency and related services fees: | |||||||||||
Class A | 219,190 | 12,316 | |||||||||
Class C | 166,309 | 3,845 | |||||||||
Class Y | 16,579 | 1,173 | |||||||||
Custodian and fund accounting | 255,764 | 64,054 | |||||||||
Federal and state registration | 41,964 | 38,322 | |||||||||
Professional services | 170,064 | 125,005 | |||||||||
Shareholder reports | 137,332 | 12,684 | |||||||||
Trustees | 91,438 | 23,268 | |||||||||
Other | 105,858 | 23,508 | |||||||||
Total expenses | 9,577,307 | 757,693 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | — | (287,258 | ) | ||||||||
Net expenses | 9,577,307 | 470,435 | |||||||||
Net investment income (loss) | 165,076 | 1,256,797 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 43,608,110 | 1,911,987 | |||||||||
Investments in affiliated issuers | 16,573,772 | — | |||||||||
Futures contracts | 16,642,458 | 4,088 | |||||||||
Options written | 352,027 | (51,868 | ) | ||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | (7,940,850 | ) | (615,559 | ) | |||||||
Foreign currency transactions | (726,855 | ) | 10,150 | ||||||||
Net realized gain | 68,508,662 | 1,258,798 | |||||||||
Change in net unrealized appreciation/depreciation on: | |||||||||||
Investments | 16,290,936 | 1,511,229 | |||||||||
Futures contracts | 3,198,373 | (3,450 | ) | ||||||||
Options written | (200,470 | ) | (1,395 | ) | |||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | (1,955,720 | ) | (36,369 | ) | |||||||
Translation of other assets and liabilities denominated in foreign currency | 783,443 | 35,592 | |||||||||
Change in net unrealized appreciation/depreciation | 18,116,562 | 1,505,607 | |||||||||
Net realized and unrealized gain | 86,625,224 | 2,764,405 | |||||||||
Net increase from payment by Advisor | — | 32,823 | |||||||||
Net increase in net assets resulting from operations | $ | 86,790,300 | $ | 4,054,025 |
See accompanying notes to financial statements.
73
The UBS Funds
Financial statements
Statement of changes in net assets
UBS Asset Growth Fund | UBS Dynamic Alpha Fund | ||||||||||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (38,228 | ) | $ | (356,643 | ) | $ | 1,831,889 | $ | 2,585,072 | |||||||||
Net realized gain | 6,880,013 | 5,533,699 | 8,635,591 | 19,552,253 | |||||||||||||||
Change in net unrealized appreciation/depreciation | (1,150,890 | ) | (239,070 | ) | 8,435,879 | 555,861 | |||||||||||||
Net increase from payment by Advisor | — | — | — | �� | — | ||||||||||||||
Net increase in net assets from operations | 5,690,895 | 4,937,986 | 18,903,359 | 22,693,186 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (101,974 | ) | (341,776 | ) | (294,356 | ) | (2,871,492 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class A dividends and distributions | (101,974 | ) | (341,776 | ) | (294,356 | ) | (2,871,492 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | — | (30,588 | ) | — | (499,843 | ) | |||||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class C dividends and distributions | — | (30,588 | ) | — | (499,843 | ) | |||||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (12,725 | ) | (25,302 | ) | (198,514 | ) | (1,081,741 | ) | |||||||||||
Net realized gain | — | — | — | — | |||||||||||||||
Total Class Y dividends and distributions | (12,725 | ) | (25,302 | ) | (198,514 | ) | (1,081,741 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (114,699 | ) | (397,666 | ) | (492,870 | ) | (4,453,076 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 1,610,145 | 843,857 | 77,440,021 | 103,654,014 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 109,407 | 375,857 | 454,046 | 4,159,701 | |||||||||||||||
Cost of shares redeemed | (10,549,189 | ) | (13,456,956 | ) | (79,755,521 | ) | (77,912,582 | ) | |||||||||||
Redemption fees | 244 | 1,330 | 36,393 | 9,739 | |||||||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (8,829,393 | ) | (12,235,912 | ) | (1,825,061 | ) | 29,910,872 | ||||||||||||
Increase (decrease) in net assets | (3,253,197 | ) | (7,695,592 | ) | 16,585,428 | 48,150,982 | |||||||||||||
Net assets, beginning of year | 35,521,633 | 43,217,225 | 309,886,719 | 261,735,737 | |||||||||||||||
Net assets, end of year | $ | 32,268,436 | $ | 35,521,633 | $ | 326,472,147 | $ | 309,886,719 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | $ | (12,334 | ) | $ | 175,518 | $ | 1,688,624 | $ | 1,271,672 |
74
The UBS Funds
Financial statements
UBS Global Allocation Fund | UBS Multi-Asset Income Fund | ||||||||||||||||||
Year ended June 30, 2014 | Year ended June 30, 2013 | Year ended June 30, 2014 | Year ended June 30, 2013 | ||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 165,076 | $ | (306,223 | ) | $ | 1,256,797 | $ | 1,361,383 | ||||||||||
Net realized gain | 68,508,662 | 98,842,364 | 1,258,798 | 519,974 | |||||||||||||||
Change in net unrealized appreciation/depreciation | 18,116,562 | (20,231,336 | ) | 1,505,607 | (1,008,105 | ) | |||||||||||||
Net increase from payment by Advisor | — | — | 32,823 | — | |||||||||||||||
Net increase in net assets from operations | 86,790,300 | 78,304,805 | 4,054,025 | 873,252 | |||||||||||||||
Dividends and distributions to shareholders by class: | |||||||||||||||||||
Class A: | |||||||||||||||||||
Net investment income | (4,280,584 | ) | (9,975,586 | ) | (579,873 | ) | (517,726 | ) | |||||||||||
Net realized gain | — | — | (93,081 | ) | (58,627 | ) | |||||||||||||
Total Class A dividends and distributions | (4,280,584 | ) | (9,975,586 | ) | (672,954 | ) | (576,353 | ) | |||||||||||
Class C: | |||||||||||||||||||
Net investment income | (719,266 | ) | (3,212,883 | ) | (192,209 | ) | (146,284 | ) | |||||||||||
Net realized gain | — | — | (38,755 | ) | (22,403 | ) | |||||||||||||
Total Class C dividends and distributions | (719,266 | ) | (3,212,883 | ) | (230,964 | ) | (168,687 | ) | |||||||||||
Class Y: | |||||||||||||||||||
Net investment income | (2,051,341 | ) | (3,517,045 | ) | (605,028 | ) | (910,683 | ) | |||||||||||
Net realized gain | — | — | (113,528 | ) | (103,515 | ) | |||||||||||||
Total Class Y dividends and distributions | (2,051,341 | ) | (3,517,045 | ) | (718,556 | ) | (1,014,198 | ) | |||||||||||
Decrease in net assets from dividends and distributions | (7,051,191 | ) | (16,705,514 | ) | (1,622,474 | ) | (1,759,238 | ) | |||||||||||
Beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 11,160,079 | 14,631,050 | 3,365,992 | 32,378,244 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 6,342,675 | 15,105,995 | 1,408,988 | 1,409,695 | |||||||||||||||
Cost of shares redeemed | (185,419,667 | ) | (255,982,741 | ) | (42,916,041 | ) | (2,646,087 | ) | |||||||||||
Redemption fees | 8,544 | 6,857 | 1,044 | 9,355 | |||||||||||||||
Net increase (decrease) in net assets resulting from beneficial interest transactions | (167,908,369 | ) | (226,238,839 | ) | (38,140,017 | ) | 31,151,207 | ||||||||||||
Increase (decrease) in net assets | (88,169,260 | ) | (164,639,548 | ) | (35,708,466 | ) | 30,265,221 | ||||||||||||
Net assets, beginning of year | 700,959,726 | 865,599,274 | 59,290,066 | 29,024,845 | |||||||||||||||
Net assets, end of year | $ | 612,790,466 | $ | 700,959,726 | $ | 23,581,600 | $ | 59,290,066 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | $ | (2,857,802 | ) | $ | 6,428,331 | $ | 5,324 | $ | (76,409 | ) |
See accompanying notes to financial statements.
75
UBS Asset Growth Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.90 | $ | 7.08 | $ | 8.36 | $ | 6.32 | $ | 5.59 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.003 | (0.06 | ) | (0.06 | ) | (0.09 | ) | (0.07 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | 1.48 | 0.98 | (0.84 | ) | 2.38 | 1.12 | |||||||||||||||||
Total income (loss) from investment operations | 1.48 | 0.92 | (0.90 | ) | 2.29 | 1.05 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.04 | ) | (0.10 | ) | (0.38 | ) | (0.25 | ) | (0.32 | ) | |||||||||||||
Net asset value, end of year | $ | 9.34 | $ | 7.90 | $ | 7.08 | $ | 8.36 | $ | 6.32 | |||||||||||||
Total investment return2 | 18.75 | % | 12.98 | % | (10.38 | )% | 36.53 | % | 18.30 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.19 | % | 1.90 | % | 1.73 | % | 1.64 | % | 1.62 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | |||||||||||||
Net investment income (loss) | 0.05 | % | (0.73 | )% | (0.78 | )% | (1.14 | )% | (1.01 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 22,948 | $ | 25,047 | $ | 31,337 | $ | 50,167 | $ | 48,479 | |||||||||||||
Portfolio turnover rate | 112 | % | 49 | % | 109 | % | 33 | % | 54 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.88 | $ | 7.05 | $ | 8.34 | $ | 6.31 | $ | 5.58 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.06 | ) | (0.11 | ) | (0.11 | ) | (0.15 | ) | (0.12 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.47 | 0.97 | (0.83 | ) | 2.37 | 1.12 | |||||||||||||||||
Total income (loss) from investment operations | 1.41 | 0.86 | (0.94 | ) | 2.22 | 1.00 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | — | (0.03 | ) | (0.35 | ) | (0.19 | ) | (0.27 | ) | ||||||||||||||
Net asset value, end of year | $ | 9.29 | $ | 7.88 | $ | 7.05 | $ | 8.34 | $ | 6.31 | |||||||||||||
Total investment return2 | 17.89 | % | 12.15 | % | (11.00 | )% | 35.39 | % | 17.50 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.96 | % | 2.67 | % | 2.51 | % | 2.41 | % | 2.41 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | 2.15 | % | |||||||||||||
Net investment income (loss) | (0.72 | )% | (1.48 | )% | (1.53 | )% | (1.89 | )% | (1.76 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 7,564 | $ | 8,640 | $ | 9,931 | $ | 14,989 | $ | 13,792 | |||||||||||||
Portfolio turnover rate | 112 | % | 49 | % | 109 | % | 33 | % | 54 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
76
UBS Asset Growth Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 7.90 | $ | 7.09 | $ | 8.36 | $ | 6.32 | $ | 5.60 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.03 | (0.04 | ) | (0.04 | ) | (0.07 | ) | (0.05 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | 1.47 | 0.97 | (0.83 | ) | 2.38 | 1.11 | |||||||||||||||||
Total income (loss) from investment operations | 1.50 | 0.93 | (0.87 | ) | 2.31 | 1.06 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.12 | ) | (0.40 | ) | (0.27 | ) | (0.34 | ) | |||||||||||||
Net asset value, end of year | $ | 9.34 | $ | 7.90 | $ | 7.09 | $ | 8.36 | $ | 6.32 | |||||||||||||
Total investment return2 | 19.12 | % | 13.21 | % | (10.07 | )% | 36.66 | % | 18.54 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.94 | % | 1.67 | % | 1.51 | % | 1.43 | % | 1.35 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||||||||||
Net investment income (loss) | 0.30 | % | (0.48 | )% | (0.54 | )% | (0.87 | )% | (0.72 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 1,757 | $ | 1,835 | $ | 1,949 | $ | 1,395 | $ | 185 | |||||||||||||
Portfolio turnover rate | 112 | % | 49 | % | 109 | % | 33 | % | 54 | % |
See accompanying notes to financial statements.
77
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.82 | $ | 6.36 | $ | 5.98 | $ | 5.92 | $ | 5.45 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.05 | 0.07 | 0.08 | 0.06 | 0.02 | ||||||||||||||||||
Net realized and unrealized gain | 0.38 | 0.50 | 0.30 | 0.16 | 0.75 | ||||||||||||||||||
Total income from investment operations | 0.43 | 0.57 | 0.38 | 0.22 | 0.77 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.11 | ) | — | (0.16 | ) | (0.30 | ) | ||||||||||||||
Net asset value, end of year | $ | 7.24 | $ | 6.82 | $ | 6.36 | $ | 5.98 | $ | 5.92 | |||||||||||||
Total investment return2 | 6.31 | % | 9.05 | % | 6.18 | % | 3.58 | % | 14.19 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.42 | % | 1.43 | % | 1.60 | % | 1.79 | % | 1.74 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.35 | % | 1.35 | % | 1.54 | % | 1.76 | % | 1.72 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||
Net investment income (loss) | 0.66 | % | 0.98 | % | 1.33 | % | 0.95 | % | 0.31 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 194,185 | $ | 208,369 | $ | 160,773 | $ | 216,297 | $ | 334,131 | |||||||||||||
Portfolio turnover rate | 45 | % | 74 | % | 164 | % | 65 | % | 58 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.46 | $ | 6.02 | $ | 5.71 | $ | 5.65 | $ | 5.21 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.01 | ) | 0.02 | 0.03 | 0.01 | (0.03 | ) | ||||||||||||||||
Net realized and unrealized gain | 0.36 | 0.48 | 0.28 | 0.15 | 0.72 | ||||||||||||||||||
Total income from investment operations | 0.35 | 0.50 | 0.31 | 0.16 | 0.69 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | — | (0.06 | ) | — | (0.10 | ) | (0.25 | ) | |||||||||||||||
Net asset value, end of year | $ | 6.81 | $ | 6.46 | $ | 6.02 | $ | 5.71 | $ | 5.65 | |||||||||||||
Total investment return2 | 5.42 | % | 8.22 | % | 5.60 | % | 2.82 | % | 13.15 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.18 | % | 2.19 | % | 2.36 | % | 2.55 | % | 2.50 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 2.10 | % | 2.10 | % | 2.29 | % | 2.51 | % | 2.47 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | |||||||||||||
Net investment income (loss) | (0.09 | )% | 0.24 | % | 0.58 | % | 0.20 | % | (0.44 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 51,119 | $ | 53,405 | $ | 49,155 | $ | 66,349 | $ | 104,146 | |||||||||||||
Portfolio turnover rate | 45 | % | 74 | % | 164 | % | 65 | % | 58 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
78
UBS Dynamic Alpha Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.96 | $ | 6.48 | $ | 6.09 | $ | 6.03 | $ | 5.54 | |||||||||||||
Income from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.06 | 0.09 | 0.10 | 0.08 | 0.03 | ||||||||||||||||||
Net realized and unrealized gain | 0.39 | 0.52 | 0.29 | 0.16 | 0.78 | ||||||||||||||||||
Total income from investment operations | 0.45 | 0.61 | 0.39 | 0.24 | 0.81 | ||||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.13 | ) | — | (0.18 | ) | (0.32 | ) | ||||||||||||||
Net asset value, end of year | $ | 7.38 | $ | 6.96 | $ | 6.48 | $ | 6.09 | $ | 6.03 | |||||||||||||
Total investment return2 | 6.45 | % | 9.29 | % | 6.57 | % | 3.89 | % | 14.49 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.15 | % | 1.12 | % | 1.28 | % | 1.49 | % | 1.42 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and after dividend expense and security loan fees for securities sold short | 1.10 | % | 1.10 | % | 1.28 | % | 1.49 | % | 1.42 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursement and before dividend expense and security loan fees for securities sold short | 1.10 | % | 1.10 | % | 1.10 | % | 1.07 | % | 1.04 | % | |||||||||||||
Net investment income | 0.87 | % | 1.25 | % | 1.56 | % | 1.25 | % | 0.56 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 81,168 | $ | 48,113 | $ | 51,807 | $ | 87,743 | $ | 83,561 | |||||||||||||
Portfolio turnover rate | 45 | % | 74 | % | 164 | % | 65 | % | 58 | % |
See accompanying notes to financial statements.
79
UBS Global Allocation Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each year presented.
Class A | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 9.79 | $ | 9.12 | $ | 10.27 | $ | 8.66 | $ | 8.18 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | 0.02 | 0.01 | (0.00 | )3 | 0.003 | 0.003 | |||||||||||||||||
Net realized and unrealized gain (loss) | 1.36 | 0.88 | (0.72 | ) | 2.05 | 1.11 | |||||||||||||||||
Total income (loss) from investment operations | 1.38 | 0.89 | (0.72 | ) | 2.05 | 1.11 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.22 | ) | (0.43 | ) | (0.44 | ) | (0.63 | ) | |||||||||||||
Net asset value, end of year | $ | 11.04 | $ | 9.79 | $ | 9.12 | $ | 10.27 | $ | 8.66 | |||||||||||||
Total investment return2 | 14.20 | % | 9.86 | % | (6.83 | )% | 23.87 | % | 13.11 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses | 1.30 | % | 1.28 | % | 1.25 | % | 1.21 | % | 1.21 | % | |||||||||||||
Net investment income (loss) | 0.17 | % | 0.12 | % | (0.03 | )% | 0.05 | % | 0.01 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 309,296 | $ | 377,781 | $ | 494,604 | $ | 753,750 | $ | 814,760 | |||||||||||||
Portfolio turnover rate | 49 | % | 54 | % | 93 | % | 68 | % | 90 | % |
Class C | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 9.55 | $ | 8.89 | $ | 10.00 | $ | 8.42 | $ | 7.96 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)1 | (0.06 | ) | (0.06 | ) | (0.07 | ) | (0.07 | ) | (0.07 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 1.34 | 0.86 | (0.71 | ) | 1.99 | 1.07 | |||||||||||||||||
Total income (loss) from investment operations | 1.28 | 0.80 | (0.78 | ) | 1.92 | 1.00 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.04 | ) | (0.14 | ) | (0.33 | ) | (0.34 | ) | (0.54 | ) | |||||||||||||
Net asset value, end of year | $ | 10.79 | $ | 9.55 | $ | 8.89 | $ | 10.00 | $ | 8.42 | |||||||||||||
Total investment return2 | 13.31 | % | 9.11 | % | (7.66 | )% | 22.90 | % | 12.29 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses | 2.08 | % | 2.06 | % | 2.02 | % | 1.99 | % | 2.00 | % | |||||||||||||
Net investment income (loss) | (0.59 | )% | (0.65 | )% | (0.80 | )% | (0.73 | )% | (0.78 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 174,078 | $ | 195,427 | $ | 238,054 | $ | 348,721 | $ | 381,137 | |||||||||||||
Portfolio turnover rate | 49 | % | 54 | % | 93 | % | 68 | % | 90 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 Amount represents less than $0.005 per share.
80
UBS Global Allocation Fund
Financial highlights
Class Y | |||||||||||||||||||||||
Year ended June 30, | |||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
Net asset value, beginning of year | $ | 9.98 | $ | 9.30 | $ | 10.48 | $ | 8.84 | $ | 8.34 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income1 | 0.05 | 0.04 | 0.03 | 0.04 | 0.03 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 1.39 | 0.90 | (0.75 | ) | 2.07 | 1.14 | |||||||||||||||||
Total income (loss) from investment operations | 1.44 | 0.94 | (0.72 | ) | 2.11 | 1.17 | |||||||||||||||||
Less dividends/distributions: | |||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.26 | ) | (0.46 | ) | (0.47 | ) | (0.67 | ) | |||||||||||||
Net asset value, end of year | $ | 11.25 | $ | 9.98 | $ | 9.30 | $ | 10.48 | $ | 8.84 | |||||||||||||
Total investment return2 | 14.56 | % | 10.22 | % | (6.59 | )% | 24.15 | % | 13.54 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses | 1.00 | % | 0.98 | % | 0.95 | % | 0.92 | % | 0.93 | % | |||||||||||||
Net investment income | 0.51 | % | 0.44 | % | 0.27 | % | 0.35 | % | 0.29 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 129,417 | $ | 127,751 | $ | 132,941 | $ | 179,875 | $ | 170,517 | |||||||||||||
Portfolio turnover rate | 49 | % | 54 | % | 93 | % | 68 | % | 90 | % |
See accompanying notes to financial statements.
81
UBS Multi-Asset Income Fund
Financial highlights
The table below sets forth data for one share of beneficial interest outstanding throughout each period presented.
Class A | |||||||||||||||
Year ended June 30, | For the period ended | ||||||||||||||
2014 | 2013 | June 30, 20123 | |||||||||||||
Net asset value, beginning of period | $ | 10.03 | $ | 10.00 | $ | 10.00 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment income1 | 0.28 | 0.29 | 0.04 | ||||||||||||
Net realized and unrealized gain | 0.59 | 0.11 | 0.01 | ||||||||||||
Net increase from payment by Advisor | 0.01 | — | — | ||||||||||||
Total income from investment operations | 0.88 | 0.40 | 0.05 | ||||||||||||
Less dividends/distributions: | |||||||||||||||
From net investment income | (0.31 | ) | (0.33 | ) | (0.05 | ) | |||||||||
From net realized gains | (0.04 | ) | (0.04 | ) | — | ||||||||||
Total dividends/distributions | (0.35 | ) | (0.37 | ) | (0.05 | ) | |||||||||
Net asset value, end of period | $ | 10.56 | $ | 10.03 | $ | 10.00 | |||||||||
Total investment return2 | 8.94 | %5 | 3.98 | % | 0.50 | % | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.64 | % | 1.76 | % | 2.97 | %4 | |||||||||
Expenses after fee waivers and/or expense reimbursement | 0.95 | % | 0.95 | % | 0.95 | %4 | |||||||||
Net investment income | 2.69 | % | 2.83 | % | 2.32 | %4 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 15,949 | $ | 24,390 | $ | 2,743 | |||||||||
Portfolio turnover rate | 130 | % | 116 | % | 17 | % |
Class C | |||||||||||||||
Year ended June 30, | For the period ended | ||||||||||||||
2014 | 2013 | June 30, 20123 | |||||||||||||
Net asset value, beginning of period | $ | 10.02 | $ | 10.00 | $ | 10.00 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment income1 | 0.20 | 0.22 | 0.03 | ||||||||||||
Net realized and unrealized gain | 0.60 | 0.10 | 0.01 | ||||||||||||
Net increase from payment by Advisor | 0.01 | — | — | ||||||||||||
Total income from investment operations | 0.81 | 0.32 | 0.04 | ||||||||||||
Less dividends/distributions: | |||||||||||||||
From net investment income | (0.23 | ) | (0.26 | ) | (0.04 | ) | |||||||||
From net realized gains | (0.04 | ) | (0.04 | ) | — | ||||||||||
Total dividends/distributions | (0.27 | ) | (0.30 | ) | (0.04 | ) | |||||||||
Net asset value, end of period | $ | 10.56 | $ | 10.02 | $ | 10.00 | |||||||||
Total investment return2 | 8.26 | %5 | 3.14 | % | 0.42 | % | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 2.39 | % | 2.52 | % | 3.81 | %4 | |||||||||
Expenses after fee waivers and/or expense reimbursement | 1.70 | % | 1.70 | % | 1.70 | %4 | |||||||||
Net investment income | 1.91 | % | 2.09 | % | 1.82 | %4 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 7,577 | $ | 8,824 | $ | 1,164 | |||||||||
Portfolio turnover rate | 130 | % | 116 | % | 17 | % |
1 Calculated using the average shares method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods of less than one year have not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
82
UBS Multi-Asset Income Fund
Financial highlights
Class Y | |||||||||||||||
Year ended June 30, | For the period ended | ||||||||||||||
2014 | 2013 | June 30, 20123 | |||||||||||||
Net asset value, beginning of period | $ | 10.03 | $ | 10.00 | $ | 10.00 | |||||||||
Income (loss) from investment operations: | |||||||||||||||
Net investment income1 | 0.29 | 0.31 | 0.06 | ||||||||||||
Net realized and unrealized gain (loss) | 0.61 | 0.12 | (0.01 | ) | |||||||||||
Net increase from payment by Advisor | 0.01 | — | — | ||||||||||||
Total income from investment operations | 0.91 | 0.43 | 0.05 | ||||||||||||
Less dividends/distributions: | |||||||||||||||
From net investment income | (0.33 | ) | (0.36 | ) | (0.05 | ) | |||||||||
From net realized gains | (0.04 | ) | (0.04 | ) | — | ||||||||||
Total dividends/distributions | (0.37 | ) | (0.40 | ) | (0.05 | ) | |||||||||
Net asset value, end of period | $ | 10.57 | $ | 10.03 | $ | 10.00 | |||||||||
Total investment return2 | 9.32 | %5 | 4.23 | % | 0.53 | % | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursement | 1.17 | % | 1.50 | % | 2.73 | %4 | |||||||||
Expenses after fee waivers and/or expense reimbursement | 0.70 | % | 0.70 | % | 0.70 | %4 | |||||||||
Net investment income | 2.83 | % | 3.01 | % | 3.42 | %4 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 56 | $ | 26,077 | $ | 25,118 | |||||||||
Portfolio turnover rate | 130 | % | 116 | % | 17 | % |
3 For the period April 25, 2012 (commencement of operations) through June 30, 2012.
4 Annualized.
5 During the year ended June 30, 2014, the Advisor reimbursed the Fund for a trading error in the amount of $32,823. If payment from Advisor was not made, total return would have been 8.84%, 8.16% and 9.22% for Class A, C and Y, respectively.
See accompanying notes to financial statements.
83
The UBS Funds
Notes to financial statements
1. Organization and significant accounting policies
The UBS Funds (the "Trust") is registered with the US Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act"), as amended, as an open-end management investment company currently offering multiple series representing separate investment portfolios. The Trust is a Delaware statutory trust organized on August 13, 1993. The trustees of the Trust have the authority to issue an unlimited number of shares of beneficial interest at a par value of $0.001 per share.
The Trust has 13 Funds available for investment, each having its own investment objectives and policies. The following four funds are covered in this report: UBS Asset Growth Fund (formerly, UBS Global Frontier Fund), UBS Dynamic Alpha Fund, UBS Global Allocation Fund, and UBS Multi-Asset Income Fund (each a "Fund", and collectively, the "Funds"). At Board meetings held in December 2013 and April 2014, the Board of Trustees (the "Board") approved certain changes to the Class Y shares of each series of the Trust to permit wrap fee advisory program accounts to purchase Class Y shares. The Board also approved the tax-free conversion of wrap fee advisory program accounts currently holding Class A shares or Class C shares (post-CDSC) into Class Y shares. In connection with these changes, the Board approved the redesignation of Class Y shares as Class P shares, effective on or about July 28, 2014.
Each of the Funds is classified as a "diversified" investment company with the exception of UBS Dynamic Alpha Fund which is classified as "non-diversified" for purposes of the 1940 Act. The Funds currently offer Class A, Class C and Class Y shares. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing distribution and service charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its distribution and/or service plan, if any. Class Y shares have no distribution or service plan.
In the normal course of business, the Funds may enter into contracts that contain a variety of representations that provide general indemnification for certain liabilities. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had any prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("US GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies:
A. Valuation of investments: Each Fund calculates its net asset value on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share will be calculated as of the time trading was halted.
Each Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Funds normally obtain market values for their investments from independent pricing sources and broker-
84
The UBS Funds
Notes to financial statements
dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "evaluation" systems that derive values based on comparable investments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings. Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Investments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where investments are traded on more than one exchange, the investments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. ("UBS Global AM" or the "Advisor"), the investment advisor of the Funds. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG, an internationally diversified organization with headquarters in Zurich and Basel, Switzerland and operations in many areas of the financial services industry. If a market value is not readily available from an independent pricing source for a particular investment, that investment is valued at fair value as determined in good faith by or under the direction of the Board. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments in which the Funds invest are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m., Eastern time, will not be reflected in the Fund's net asset value. However, if any of the Funds determine that such developments are so significant that they will materially affect the value of the Fund's investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value investments principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If an investment is valued at "fair value," that value is likely to be different from the last quoted market price for the investment. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Funds' use of the practical expedient within ASC Topic 820, investments in non-registered investment companies are also valued at the daily net asset value. All investments quoted in foreign currencies are valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using forward exchange rates quoted by independent pricing services.
85
The UBS Funds
Notes to financial statements
Swaps are marked-to-market daily based upon values from third party vendors or quotations from market makers to the extent available, and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of assets and liabilities. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
The Board has delegated to the UBS Global AM Global Valuation Committee ("GVC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, investments of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US GAAP requires disclosure regarding the various inputs that are used in determining the value of the Funds' investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Funds' own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
The provisions of ASC Topic 815 "Derivatives and Hedging" ("ASC Topic 815") require qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk related contingent features in derivative agreements. Since investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of operations, they do not qualify for hedge accounting under ASC Topic 815. Accordingly, even though
86
The UBS Funds
Notes to financial statements
a Fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under ASC Topic 815. ASC Topic 815 requires that (1) objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. Details of this disclosure can be found below as well as in the Portfolio of investments. Swap agreements, forward foreign currency contracts, swaptions and options written entered into by a Fund may contain credit-risk related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of June 30, 2014 is reflected in the Statement of assets and liabilities. If the applicable credit-risk related contingent features were triggered as of June 30, 2014, the Fund would be required to post additional collateral or may be required to terminate the contracts and settle any amounts outstanding. The Funds may be sellers of protection through credit default swap agreements which are by nature credit-risk contingent (the terms of these agreements can be found within the Portfolio of investments, with further discussion in the Notes to financial statements). The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the year ended June 30, 2014, except for forward foreign currency contracts for UBS Asset Growth Fund, UBS Global Allocation Fund and UBS Multi-Asset Income Fund for which the average volume during the year was greater than at year end.
Asset derivatives
Equity risk | Foreign exchange risk | Total | |||||||||||||
UBS Asset Growth Fund | |||||||||||||||
Futures contracts1 | $ | 214,108 | $ | 75,563 | $ | 289,671 | |||||||||
Total value | $ | 214,108 | $ | 75,563 | $ | 289,671 |
1 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
Liability derivatives
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Asset Growth Fund | |||||||||||||||||||
Futures contracts1 | $ | (1,693 | ) | $ | (93,666 | ) | $ | (6,161 | ) | $ | (101,520 | ) | |||||||
Total value | $ | (1,693 | ) | $ | (93,666 | ) | $ | (6,161 | ) | $ | (101,520 | ) |
1 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
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The UBS Funds
Notes to financial statements
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Asset Growth Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (300,184 | ) | $ | (300,184 | ) | |||||||||
Futures contracts | (83,630 | ) | 3,037,521 | 90,353 | 3,044,244 | ||||||||||||||
Options purchased2 | — | 143,896 | — | 143,896 | |||||||||||||||
Options written | — | 21,175 | — | 21,175 | |||||||||||||||
Total net realized gain (loss) | $ | (83,630 | ) | $ | 3,202,592 | $ | (209,831 | ) | $ | 2,909,131 | |||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | 80,839 | $ | 80,839 | |||||||||||
Futures contracts | 70,310 | 208,745 | 69,402 | 348,457 | |||||||||||||||
Options purchased2 | — | 37,138 | — | 37,138 | |||||||||||||||
Options written | — | (12,058 | ) | — | (12,058 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 70,310 | $ | 233,825 | $ | 150,241 | $ | 454,376 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | — | $ | 336,901 | $ | 336,901 | |||||||||||||
Futures contracts2 | 1,051,195 | 890,753 | — | — | 1,941,948 | ||||||||||||||||||
Options purchased1 | — | 1,960,822 | 4,413 | — | 1,965,235 | ||||||||||||||||||
Swap agreements1,2 | 6,799,865 | — | 5,833,043 | — | 12,632,908 | ||||||||||||||||||
Total value | $ | 7,851,060 | $ | 2,851,575 | $ | 5,837,456 | $ | 336,901 | $ | 16,876,992 |
1 Statement of assets and liabilities location: Options purchased are shown within investments in securities of unaffiliated issuers, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
Liability derivatives
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | — | $ | (3,110,753 | ) | $ | (3,110,753 | ) | |||||||||||
Futures contracts2 | (709,480 | ) | (471,967 | ) | — | — | (1,181,447 | ) | |||||||||||||||
Options written1 | — | (336,361 | ) | — | — | (336,361 | ) | ||||||||||||||||
Swap agreements1,2 | (5,974,990 | ) | — | (1,654,870 | ) | — | (7,629,860 | ) | |||||||||||||||
Total value | $ | (6,684,470 | ) | $ | (808,328 | ) | $ | (1,654,870 | ) | $ | (3,110,753 | ) | $ | (12,258,421 | ) |
1 Statement of assets and liabilities location: Options written, at value, outstanding swap agreements, at value (except centrally cleared swaps) and unrealized depreciation on forward foreign currency contracts.
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The UBS Funds
Notes to financial statements
2 Includes cumulative depreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Equity risk | Credit risk | Foreign exchange risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | — | $ | (8,757,163 | ) | $ | (8,757,163 | ) | |||||||||||
Futures contracts | (157,609 | ) | 4,144,380 | — | — | 3,986,771 | |||||||||||||||||
Options purchased2 | (14,665 | ) | 8,209,853 | (17,244 | ) | — | 8,177,944 | ||||||||||||||||
Options written | — | (504,096 | ) | — | — | (504,096 | ) | ||||||||||||||||
Swap agreements | 228,980 | — | 1,015,632 | — | 1,244,612 | ||||||||||||||||||
Total net realized gain (loss) | $ | 56,706 | $ | 11,850,137 | $ | 998,388 | $ | (8,757,163 | ) | $ | 4,148,068 | ||||||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | — | $ | (4,400,992 | ) | $ | (4,400,992 | ) | |||||||||||
Futures contracts | 467,842 | 400,677 | — | — | 868,519 | ||||||||||||||||||
Options purchased2 | 12,417 | (124,596 | ) | (5,956 | ) | — | (118,135 | ) | |||||||||||||||
Options written | — | 786,172 | — | — | 786,172 | ||||||||||||||||||
Swap agreements | (321,489 | ) | — | 571,087 | — | 249,598 | |||||||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 158,770 | $ | 1,062,253 | $ | 565,131 | $ | (4,400,992 | ) | $ | (2,614,838 | ) |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written, swap agreements and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | 1,081,594 | $ | 1,081,594 | |||||||||||
Futures contracts2 | 1,354,572 | 1,730,923 | — | 3,085,495 | |||||||||||||||
Total value | $ | 1,354,572 | $ | 1,730,923 | $ | 1,081,594 | $ | 4,167,089 |
1 Statement of assets and liabilities location: Unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
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The UBS Funds
Notes to financial statements
Liability derivatives
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (3,904,423 | ) | $ | (3,904,423 | ) | |||||||||
Futures contracts2 | (457,580 | ) | (448,324 | ) | — | (905,904 | ) | ||||||||||||
Total value | $ | (457,580 | ) | $ | (448,324 | ) | $ | (3,904,423 | ) | $ | (4,810,327 | ) |
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (7,940,850 | ) | $ | (7,940,850 | ) | |||||||||
Futures contracts | 3,804,852 | 12,837,606 | — | 16,642,458 | |||||||||||||||
Options purchased2 | — | 1,684,466 | — | 1,684,466 | |||||||||||||||
Options written | — | 352,027 | — | 352,027 | |||||||||||||||
Total net realized gain (loss) | $ | 3,804,852 | $ | 14,874,099 | $ | (7,940,850 | ) | $ | 10,738,101 | ||||||||||
Change in net unrealized appreciation/depreciation3 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (1,955,720 | ) | $ | (1,955,720 | ) | |||||||||
Futures contracts | 1,669,975 | 1,528,398 | — | 3,198,373 | |||||||||||||||
Options purchased2 | — | 527,876 | — | 527,876 | |||||||||||||||
Options written | — | (200,470 | ) | — | (200,470 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | 1,669,975 | $ | 1,855,804 | $ | (1,955,720 | ) | $ | 1,570,059 |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written and forward foreign currency contracts.
2 Realized and unrealized gain (loss) is included in net realized gain (loss) on investments in unaffiliated issuers and change in net unrealized appreciation/depreciation on investments.
3 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written and forward foreign currency contracts.
Asset derivatives
Interest rate risk | Foreign exchange risk | Total | |||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | 52 | $ | 52 | |||||||||
Futures contracts2 | 1,945 | — | 1,945 | ||||||||||||
Total value | $ | 1,945 | $ | 52 | $ | 1,997 |
1 Statement of assets and liabilities location: Unrealized appreciation on forward foreign currency contracts.
2 Includes cumulative appreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
90
The UBS Funds
Notes to financial statements
Liability derivatives
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||||||
Forward foreign currency contracts1 | $ | — | $ | — | $ | (41,797 | ) | $ | (41,797 | ) | |||||||||
Futures contracts2 | (10,920 | ) | (295 | ) | — | (11,215 | ) | ||||||||||||
Total value | $ | (10,920 | ) | $ | (295 | ) | $ | (41,797 | ) | $ | (53,012 | ) |
1 Statement of assets and liabilities location: Unrealized depreciation on forward foreign currency contracts.
2 Includes cumulative depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
Activities in derivative instruments during the year ended June 30, 2014, were as follows:
Interest rate risk | Equity risk | Foreign exchange risk | Total | ||||||||||||||||
UBS Multi-Asset Income Fund | |||||||||||||||||||
Net realized gain (loss)1 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (615,559 | ) | $ | (615,559 | ) | |||||||||
Futures contracts | 26,969 | (22,881 | ) | — | 4,088 | ||||||||||||||
Options written | — | (51,868 | ) | — | (51,868 | ) | |||||||||||||
Total net realized gain (loss) | $ | 26,969 | $ | (74,749 | ) | $ | (615,559 | ) | $ | (663,339 | ) | ||||||||
Change in net unrealized appreciation/depreciation2 | |||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | — | $ | (36,369 | ) | $ | (36,369 | ) | |||||||||
Futures contracts | (3,155 | ) | (295 | ) | — | (3,450 | ) | ||||||||||||
Options written | — | (1,395 | ) | — | (1,395 | ) | |||||||||||||
Total change in net unrealized appreciation/depreciation | $ | (3,155 | ) | $ | (1,690 | ) | $ | (36,369 | ) | $ | (41,214 | ) |
1 Statement of operations location: Net realized gain (loss) on futures contracts, options written and forward foreign currency contracts.
2 Statement of operations location: Change in net unrealized appreciation/depreciation on futures contracts, options written and forward foreign currency contracts.
The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
The provisions of ASC Topic 210 "Disclosures about Offsetting Assets and Liabilities" require disclosure on the offsetting of financial assets and liabilities. The offsetting disclosures are limited to derivatives, repurchase and reverse repurchase agreements, and security lending and borrowing transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement ("MNA") or similar agreement.
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The UBS Funds
Notes to financial statements
UBS Dynamic Alpha Fund
Derivative Financial Instruments: | Assets ($) | Liabilities ($) | |||||||||
Forward foreign currency contracts | 336,901 | (3,110,753 | ) | ||||||||
Futures contracts1 | 1,941,948 | (1,181,447 | ) | ||||||||
Options and swaptions purchased | 1,965,235 | — | |||||||||
Options and swaptions written | — | (336,361 | ) | ||||||||
Swap agreements1 | 12,632,908 | (7,629,860 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 16,876,992 | (12,258,421 | ) | ||||||||
Derivatives not subject to a master netting agreement or similar agreement ("MNA") | (9,653,278 | ) | 2,990,478 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | 7,223,714 | (9,267,943 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts and centrally cleared swap agreements, respectively.
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 June 30, 2014.
Counterparty | Gross amount of assets ($) | Financial instruments and derivatives available for offset ($) | Collateral received ($)* | Net amount of assets ($) | |||||||||||||||
DB | 182,847 | (182,847 | ) | — | — | ||||||||||||||
GSI | 6,801,777 | (48,341 | ) | — | 6,753,436 | ||||||||||||||
JPMCB | 161,816 | (71,994 | ) | — | 89,822 | ||||||||||||||
MSCI | 77,274 | — | — | 77,274 | |||||||||||||||
Total | 7,223,714 | (303,182 | ) | — | 6,920,532 | ||||||||||||||
Counterparty | Gross amount of liabilities ($) | Financial instruments and derivatives available for offset ($) | Collateral pledged ($)* | Net amount of liabilities ($) | |||||||||||||||
BB | (10,533 | ) | — | — | (10,533 | ) | |||||||||||||
CIBC | (451,247 | ) | — | — | (451,247 | ) | |||||||||||||
CITI | (9,431 | ) | — | — | (9,431 | ) | |||||||||||||
CSFB | (54,418 | ) | — | — | (54,418 | ) | |||||||||||||
DB | (5,974,990 | ) | 182,847 | 5,781,000 | (11,143 | ) | |||||||||||||
GSI | (48,341 | ) | 48,341 | — | — | ||||||||||||||
HSBC | (391,349 | ) | — | — | (391,349 | ) | |||||||||||||
JPMCB | (71,994 | ) | 71,994 | — | — | ||||||||||||||
SSB | (2,255,640 | ) | — | — | (2,255,640 | ) | |||||||||||||
Total | (9,267,943 | ) | 303,182 | 5,781,000 | (3,183,761 | ) |
* In some instances, the actual collateral received and/or pledged may be more than the amount shown.
UBS Global Allocation Fund
Derivative Financial Instruments: | Assets ($) | Liabilities ($) | |||||||||
Forward foreign currency contracts | 1,081,594 | (3,904,423 | ) | ||||||||
Futures contracts1 | 3,085,495 | (905,904 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 4,167,089 | (4,810,327 | ) | ||||||||
Derivatives not subject to a master netting agreement or similar agreement ("MNA") | (3,085,495 | ) | 905,904 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | 1,081,594 | (3,904,423 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
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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 June 30, 2014.
Counterparty | Gross amount of assets ($) | Financial instruments and derivatives available for offset ($) | Collateral received ($) | Net amount of assets ($) | |||||||||||||||
BB | 114,658 | (114,658 | ) | — | — | ||||||||||||||
DB | 403,357 | (403,357 | ) | — | — | ||||||||||||||
HSBC | 94,669 | (94,669 | ) | — | — | ||||||||||||||
JPMCB | 321,492 | (225,348 | ) | — | 96,144 | ||||||||||||||
MSCI | 147,418 | — | — | 147,418 | |||||||||||||||
Total | 1,081,594 | (838,032 | ) | — | 243,562 | ||||||||||||||
Counterparty | Gross amount of liabilities ($) | Financial instruments and derivatives available for offset ($) | Collateral pledged ($) | Net amount of liabilities ($) | |||||||||||||||
BB | (167,755 | ) | 114,658 | — | (53,097 | ) | |||||||||||||
CIBC | (583,349 | ) | — | — | (583,349 | ) | |||||||||||||
DB | (447,591 | ) | 403,357 | — | (44,234 | ) | |||||||||||||
GSI | (2,289,680 | ) | — | — | (2,289,680 | ) | |||||||||||||
HSBC | (148,887 | ) | 94,669 | — | (54,218 | ) | |||||||||||||
JPMCB | (225,348 | ) | 225,348 | — | — | ||||||||||||||
SSB | (41,813 | ) | — | — | (41,813 | ) | |||||||||||||
Total | (3,904,423 | ) | 838,032 | — | (3,066,391 | ) |
UBS Multi-Asset Income Fund
Derivative Financial Instruments: | Assets ($) | Liabilities ($) | |||||||||
Forward foreign currency contracts | 52 | (41,797 | ) | ||||||||
Futures contracts1 | 1,945 | (11,215 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | 1,997 | (53,012 | ) | ||||||||
Derivatives not subject to a master netting agreement or similar agreement ("MNA") | (1,945 | ) | 11,215 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | 52 | (41,797 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts as reported in the futures contracts table in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within Variation margin on futures contracts.
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 June 30, 2014.
Counterparty | Gross amount of assets ($) | Financial instruments and derivatives available for offset ($) | Collateral received ($) | Net amount of assets ($) | |||||||||||||||
JPMCB | 52 | (52 | ) | — | — | ||||||||||||||
Counterparty | Gross amount of liabilities ($) | Financial instruments and derivatives available for offset ($) | Collateral pledged ($) | Net amount of liabilities ($) | |||||||||||||||
JPMCB | (41,797 | ) | 52 | — | (41,745 | ) |
93
The UBS Funds
Notes to financial statements
B. Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's Portfolio of investments footnotes.
C. Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
D. Foreign currency translation: The Funds use the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities and other assets and liabilities—at the exchange rates prevailing at the end of each Fund's fiscal period; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of each Fund's portfolio are presented at the foreign exchange rates at the end of each Fund's fiscal period, the Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the realized gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. Certain foreign exchange gains and losses included in realized and unrealized gains and losses are included in or are a reduction of ordinary income in accordance with US federal income tax regulations.
E. Forward foreign currency contracts: A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the US dollar and the potential inability of the counterparty to meet the terms of the contract. The Funds may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk).
A Fund will enter into forward contracts to sell, for a fixed amount of US dollars or other appropriate currency, an amount of foreign currency, to the extent that the value of the short forward contract is covered by the underlying value of securities denominated in the currency being sold. Alternatively, when a Fund enters into a non-cash settled forward contract to sell an amount of foreign currency, the Fund's custodian or sub-custodian will place assets in a segregated account of the Fund in an amount equal to the contract's full notional value. However, currency contracts with respect to identical currencies may be netted against each other and, in such cases, a Fund's custodian or sub-custodian will place assets in a segregated account of the Fund, in an amount equal to the net
94
The UBS Funds
Notes to financial statements
amount owed (the unrealized loss) by a Fund. If the assets placed in the account decline in value, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Fund's commitments with respect to such contracts.
The unrealized gain, if any, represents the credit risk to each Fund on a forward foreign currency contract.
Fluctuations in the value of the open forward foreign currency contracts are recorded daily for book purposes as unrealized gains or losses on foreign forward currency contracts by the Funds. Realized gains and losses include net gains and losses recognized by each Fund on contracts which have been sold or matured.
F. Futures contracts: The Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realize gains. Using financial futures contracts involves various market risks, including interest rate and equity risk. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Upon entering into a futures contract, the Fund is required to deliver to a broker an amount of cash and/or securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin".
Subsequent payments, known as "variation margin", are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized gain or loss on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
G. Securities traded on to-be-announced basis: Certain Funds may from time to time purchase, or sell short, securities on a to-be-announced ("TBA") basis. In a TBA transaction, the Fund commits to purchasing or selling securities for which all specific information is not yet known at the time of the trade, particularly the face amount and maturity date of the underlying security transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, US government securities or other liquid high grade debt obligations are segregated in the Funds' records in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
H. Swap agreements: Certain Funds may engage in swap agreements, including but not limited to interest rate, currency, total return, and credit default swap agreements. The Funds expect to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio's duration, to protect against any increase in the price of securities a Fund anticipates purchasing at a later date, to gain exposure to certain markets in the most economical way possible or in an attempt to enhance income or gains.
Certain Funds may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect itself from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
95
The UBS Funds
Notes to financial statements
Certain Funds may enter into currency swap agreements with another party to receive or pay amounts based on changes in currency exchange rates in order to protect itself from or take advantage of exchange rate fluctuations. The Fund utilizes currency swaps to earn income and enhance returns as well as to manage the risk profile of the Fund. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified currency exchange rate(s) for a specified amount. Currency swap agreements are subject to general market risk, liquidity risk, counterparty risk, foreign exchange risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default or other credit event of a referenced security. As a buyer, a Fund would make periodic payments to the counterparty, and a Fund would receive payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event does occur, a Fund typically would receive full notional value for a reference obligation that may have little or no value. As a seller, a Fund would receive periodic payments from the counterparty, and a Fund would make payments only upon the occurrence of a credit event. If no credit event occurs, a Fund will retain the periodic stream of payments it received over the term of the contract. However, if a credit event occurs, a Fund will pay full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if a Fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk.
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in delivery of a security with a value other than had been anticipated (such as a party's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swaps on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where a Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer's default.
The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of June 30, 2014 for which a Fund is the seller of protection are disclosed under the section "Credit default swaps on corporate issues—sell protection" and "Centrally cleared credit default swaps on credit indices—sell protection" in the Notes to Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
Certain clearinghouses currently offer clearing for limited types of derivatives transactions, such as interest and credit derivatives. In a cleared derivative transaction, a Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund's exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Only a limited number of transactions are currently eligible for clearing. Centrally cleared swaps, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
96
The UBS Funds
Notes to financial statements
The use of swap agreements involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If UBS Global AM is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of a Fund will be less favorable than it would have been if this investment technique was never used. Swap agreements do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap agreement defaults and fails to consummate the transaction, a Fund's risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, a Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
A Fund accrues for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap agreements on the Statement of assets and liabilities. Once interim payments are settled in cash, the net amount is recorded as realized gain/loss on swap agreements, in addition to realized gain/loss recorded upon the termination of swap agreements on the Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
I. Option writing: Certain Funds may write (sell) put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains. When a Fund writes a call or a put option, an amount equal to the premium received by the Fund is included in the Fund's Statement of assets and liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option which a Fund has written is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, the Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, index or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
J. Purchased options: Certain Funds may purchase put and call options on foreign or US securities, indices, foreign currencies and interest rate swaps (commonly referred to as swaptions), as well as exchange listed call options on particular market segment indices to achieve temporary exposure to a specific security, currency, industry or geographic region. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Fund pays a premium which is included in the Statement of assets and liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying futures, security or currency transaction to determine the realized gain or loss.
K. Short sales: UBS Dynamic Alpha Fund may enter into short sales whereby it sells a security it generally does not own, in anticipation of a decline in the security's price. The initial amount of a short sale is recorded as a liability
97
The UBS Funds
Notes to financial statements
which is marked to market daily. Fluctuations in the value of this liability are recorded as unrealized gains or losses on the Statement of operations. If the Fund shorts a security while holding a long position in the security (a "short against the box"), as the security price declines, the short position increases in value, offsetting the long position's decrease in value. The opposite effect occurs if the security price rises. The Fund will realize a gain or loss upon closing of the short sale (returning the security to the lender by way of purchase or delivery of a long position owned). The Fund is liable to the lender for any dividends payable on securities while those securities are in a short position. These dividends are booked as an expense or liability of the Fund. The Fund segregates collateral consisting of cash, US government securities or other liquid assets sufficient to collateralize the market value of short positions. The Fund is charged a securities loan fee in connection with short sale transactions. There were no short sale transactions for UBS Dynamic Alpha Fund during the year ended June 30, 2014.
L. Dividends and distributions: It is each Fund's (except UBS Multi-Asset Income Fund) policy to distribute its respective net investment income and net capital gains, if any, annually. Income dividends are normally declared and paid by UBS Multi-Asset Income Fund monthly and net realized capital gains, if any, are declared and distributed at least semi-annually, usually in September and December. Dividends and distributions to shareholders are recorded on the ex-distribution date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from US GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require reclassification.
M. Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which the Funds invest. The ability of the issuers of debt securities held by a Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
N. Commission recapture program: The Funds participate in a brokerage commission recapture program. The Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. For the year ended June 30, 2014, the following Fund recorded recaptured commissions which are reflected on the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS Global Allocation Fund | $ | 1,860 |
O. Redemption fees: Each class of each series of The UBS Funds will impose a 1% redemption fee on shares sold or exchanged within 90 days of their purchase date, subject to limited exceptions. This amount is paid to the applicable Fund, not the Advisor or UBS Global Asset Management (US) Inc., ("UBS Global AM (US)"). The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the year ended June 30, 2014, redemption fees for each Fund amounted to less than $0.01 per share and less than 0.01% of average net assets.
98
The UBS Funds
Notes to financial statements
2. Investment advisory fees and other transactions with affiliates
The Advisor, a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee, accrued daily and paid monthly, based on each Fund's respective average daily net assets in accordance with the following per annum schedule:
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $3.0 billion | $3.0 billion to $6.0 billion | $6.0 billion and over | ||||||||||||||||||||||||
UBS Asset Growth Fund | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | 0.950 | % | |||||||||||||||||
UBS Global Allocation Fund | 0.800 | 0.750 | 0.700 | 0.675 | 0.650 | 0.630 | 0.610 |
$0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $4.0 billion | $4.0 billion and over | ||||||||||||||||||||||
UBS Dynamic Alpha Fund | 0.850 | % | 0.800 | % | 0.750 | % | 0.725 | % | 0.700 | % | 0.680 | % | |||||||||||||||
UBS Multi-Asset Income Fund | 0.590 | 0.590 | 0.590 | 0.590 | 0.590 | 0.590 |
For UBS Global Allocation Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Dynamic Alpha Fund, UBS Asset Growth Fund, and UBS Multi-Asset Income Fund the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) do not exceed the expense limit of each class of shares as indicated in the following table. Investment advisory fees, including the dollar amount waived or reimbursed, for the year ended June 30, 2014 were as follows:
Fund | Class A expense cap | Class C expense cap | Class Y expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | |||||||||||||||||||||
UBS Asset Growth Fund | 1.40 | % | 2.15 | % | 1.15 | % | $ | (9,831 | ) | $ | 313,785 | $ | 262,893 | ||||||||||||||
UBS Dynamic Alpha Fund | 1.35 | 2.10 | 1.10 | 195,620 | 2,707,899 | 217,275 | |||||||||||||||||||||
UBS Global Allocation Fund | 1.35 | 2.10 | 1.10 | 399,195 | 5,174,841 | — | |||||||||||||||||||||
UBS Multi-Asset Income Fund | 0.95 | 1.70 | 0.70 | (10,135 | ) | 284,059 | 287,258 |
99
The UBS Funds
Notes to financial statements
Each Fund will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived or reimbursed for the year ended June 30, 2014 are subject to repayment through June 30, 2017. At June 30, 2014, 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, 2015 | Expires June 30, 2016 | Expires June 30, 2017 | |||||||||||||||
UBS Asset Growth Fund—Class A | $ | 453,755 | $ | 126,044 | $ | 142,026 | $ | 185,685 | |||||||||||
UBS Asset Growth Fund—Class C | 153,437 | 41,066 | 49,000 | 63,371 | |||||||||||||||
UBS Asset Growth Fund—Class Y | 28,825 | 6,265 | 8,723 | 13,837 | |||||||||||||||
UBS Dynamic Alpha Fund—Class A | 389,416 | 103,797 | 137,169 | 148,450 | |||||||||||||||
UBS Dynamic Alpha Fund—Class C | 124,304 | 40,147 | 43,675 | 40,482 | |||||||||||||||
UBS Dynamic Alpha Fund—Class Y | 37,747 | — | 9,404 | 28,343 | |||||||||||||||
UBS Multi-Asset Income Fund—Class A | 264,241 | 4,583 | 127,379 | 132,279 | |||||||||||||||
UBS Multi-Asset Income Fund—Class C | 107,874 | 1,602 | 47,130 | 59,142 | |||||||||||||||
UBS Multi-Asset Income Fund—Class Y | 396,415 | 90,384 | 210,194 | 95,837 |
Each Fund pays UBS Global AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the year ended June 30, 2014, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Asset Growth Fund | $ | 2,002 | $ | 24,773 | |||||||
UBS Dynamic Alpha Fund | 20,194 | 238,933 | |||||||||
UBS Global Allocation Fund | 37,867 | 492,485 | |||||||||
UBS Multi-Asset Income Fund | 1,459 | 36,109 |
The Funds may invest in certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the year ended June 30, 2014 have been included near the end of each Fund's Portfolio of investments.
The Funds may invest in UBS Cash Management Prime Relationship Fund ("Cash Prime"). Cash Prime is offered as a cash management option only to mutual funds and certain other accounts. Distributions received from Cash Prime are reflected as affiliated income in the Statement of operations. Amounts relating to those investments at June 30, 2014 and for the period then ended have been included near the end of each Fund's Portfolio of investments.
Under normal conditions, the Funds invest cash collateral from securities lending activities into an affiliated private money market fund, UBS Private Money Market Fund LLC ("Private Money Market"), which operates in compliance with most of the substantive provisions of Rule 2a-7 of the 1940 Act. Private Money Market is managed by the Advisor and is offered as a cash management option only to mutual funds and certain other accounts managed by the Advisor. UBS Global AM acts as managing member and receives a management fee from Private Money Market payable monthly in arrears at the annual rate of 0.10% of Private Money Market's average daily members' equity, minus the aggregate operating expenses of, and incurred by, Private Money Market during each such related month, not including investment expenses (including brokerage commissions, taxes, interest charges and
100
The UBS Funds
Notes to financial statements
other costs with respect to transactions in securities) and extraordinary expenses including litigation expenses, if any. The Advisor may, in its sole discretion, waive all or any portion of the management fee to which it may be entitled from time to time in order to maintain operating expenses at a certain level. Distributions received from Private Money Market, net of fee rebates paid to borrowers, are reflected as securities lending income in the Statement of operations. Amounts relating to those investments at June 30, 2014 and for the year then ended have been included near the end of each Fund's Portfolio of investments.
The following Funds have incurred brokerage commissions with UBS AG, an affiliated broker-dealer. Amounts relating to those transactions for the year ended June 30, 2014, were as follows:
Fund | UBS AG | ||||||
UBS Asset Growth Fund | $ | 30 | |||||
UBS Global Allocation Fund | 700 | ||||||
UBS Multi-Asset Income Fund | 203 |
3. Distribution and service plans
UBS Global AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A and Class C. Annual fees under the Plans as a percentage of the average daily net assets of each representative class of each of the Funds are as follows:
Fund | Class A | Class C | |||||||||
UBS Asset Growth Fund | 0.25 | % | 1.00 | % | |||||||
UBS Dynamic Alpha Fund | 0.25 | 1.00 | |||||||||
UBS Global Allocation Fund | 0.25 | 1.00 | |||||||||
UBS Multi-Asset Income Fund | 0.25 | 1.00 |
UBS Global AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A and Class C. At June 30, 2014, certain Funds owed UBS Global AM (US) distribution and service fees, and for the year ended June 30, 2014, certain Funds were informed by UBS Global AM (US) that it had earned sales charges as follows:
Fund | Distribution and service fees owed | Sales charges earned | |||||||||
UBS Asset Growth Fund—Class A | $ | 4,737 | $ | 6,635 | |||||||
UBS Asset Growth Fund—Class C | 6,302 | 21 | |||||||||
UBS Dynamic Alpha Fund—Class A | 39,913 | 120,446 | |||||||||
UBS Dynamic Alpha Fund—Class C | 42,908 | 18,890 | |||||||||
UBS Global Allocation Fund—Class A | 63,840 | 32,497 | |||||||||
UBS Global Allocation Fund—Class C | 143,451 | 760 | |||||||||
UBS Multi-Asset Income Fund—Class A | 3,278 | 12,249 | |||||||||
UBS Multi-Asset Income Fund—Class C | 6,289 | 2,789 |
101
The UBS Funds
Notes to financial statements
4. Transfer agency and related services fees
UBS Financial Services Inc. provides certain services pursuant to a delegation of authority from BNY Mellon Investment Servicing ("BNY Mellon"), as each Fund's transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the year ended June 30, 2014, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total service fees as follows:
Fund | Amount paid | ||||||
UBS Asset Growth Fund | $ | 7,184 | |||||
UBS Dynamic Alpha Fund | 93,048 | ||||||
UBS Global Allocation Fund | 180,691 | ||||||
UBS Multi-Asset Income Fund | 10,300 |
5. Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly.
Each Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees.
UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Asset Growth Fund loaned securities to certain qualified broker-dealers, with the Funds' custodian acting as the Funds' lending agent. Cash collateral received is invested in Private Money Market, which is included in the Fund's Portfolio of investments. In addition, UBS Dynamic Alpha Fund and UBS Global Allocation Fund received US government agency securities as collateral with a market value of $933,255 and $583,893, respectively, which cannot be resold. The value of loaned securities and related collateral at June 30, 2014 was as follows:
Fund | Market value of securities loaned | Market value of collateral received from securities loaned | Cash collateral received | ||||||||||||
UBS Asset Growth Fund | $ | 7,640,886 | $ | 7,801,795 | $ | 7,801,795 | |||||||||
UBS Dynamic Alpha Fund | 1,716,170 | 1,749,845 | 816,590 | ||||||||||||
UBS Global Allocation Fund | 23,380,734 | 23,931,116 | 23,347,223 |
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The UBS Funds
Notes to financial statements
6. Purchases and sales of securities
For the year ended June 30, 2014, aggregate purchases and sales of portfolio securities, excluding short-term investments and US Government and agency securities, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Asset Growth Fund | $ | 20,014,841 | $ | 30,180,020 | |||||||
UBS Dynamic Alpha Fund | 136,917,788 | 82,900,315 | |||||||||
UBS Global Allocation Fund | 222,762,419 | 342,046,789 | |||||||||
UBS Multi-Asset Income Fund | 56,020,771 | 87,505,336 |
For the year ended June 30, 2014, aggregate purchases and sales of US Government and agency securities, excluding short-term investments, were as follows:
Fund | Purchases | Sales proceeds | |||||||||
UBS Asset Growth Fund | $ | 69,316 | $ | 1,880,311 | |||||||
UBS Global Allocation Fund | 7,801,018 | 10,233,331 | |||||||||
UBS Multi-Asset Income Fund | 2,055,836 | 2,907,663 |
7. Federal income taxes
It is each Fund's policy to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, each Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
The tax character of distributions paid during the fiscal years ended June 30, 2014 and June 30, 2013 were as follows:
2014 | 2013 | ||||||||||||||||||
Fund | Distributions paid from net long-term gains | Distributions paid from ordinary income | Total distributions paid | Distributions paid from ordinary income | |||||||||||||||
UBS Asset Growth Fund | $ | — | $ | 114,699 | $ | 114,699 | $ | 397,666 | |||||||||||
UBS Dynamic Alpha Fund | — | 492,870 | 492,870 | 4,453,076 | |||||||||||||||
UBS Global Allocation Fund | — | 7,051,191 | 7,051,191 | 16,705,514 | |||||||||||||||
UBS Multi-Asset Income Fund | 245,364 | 1,377,110 | 1,622,474 | 1,759,238 |
At June 30, 2014, the components of accumulated earnings (deficit) on a tax basis were as follows:
Fund | Undistributed long-term gains | Undistributed ordinary income | Accumulated capital and other losses | Unrealized appreciation/ (depreciation) | Total | ||||||||||||||||||
UBS Asset Growth Fund | $ | — | $ | — | $ | (25,124,467 | ) | $ | 592,794 | $ | (24,531,673 | ) | |||||||||||
UBS Dynamic Alpha Fund | — | 1,207,678 | (363,728,263 | ) | (5,680,100 | ) | (368,200,685 | ) | |||||||||||||||
UBS Global Allocation Fund | — | — | (1,005,410,383 | ) | 50,048,454 | (955,361,929 | ) | ||||||||||||||||
UBS Multi-Asset Income Fund | 446,471 | 949,008 | (4,200 | ) | 388,705 | 1,779,984 |
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The UBS Funds
Notes to financial statements
Due to inherent differences in the recognition of income, expenses and realized gains/losses under US GAAP and federal income tax purposes, permanent differences between book and tax basis reporting for the current fiscal year have been identified and appropriately reclassified. Reclassifications for the year ended June 30, 2014 were as follows:
Fund | Undistributed net investment income | Accumulated net realized gain/(loss) | Beneficial interest | ||||||||||||
UBS Asset Growth Fund | $ | (34,925 | ) | $ | (2,881,498 | ) | $ | 2,916,423 | |||||||
UBS Dynamic Alpha Fund | (922,067 | ) | 922,067 | — | |||||||||||
UBS Global Allocation Fund | (2,400,018 | ) | (11,314,568 | ) | 13,714,586 | ||||||||||
UBS Multi-Asset Income Fund | 202,046 | (169,223 | ) | (32,823 | ) |
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At June 30, 2014, the following Funds had pre-enactment capital loss carryforwards for federal income tax purposes available to offset future capital gains through the indicated expiration dates:
Expiration Dates | |||||||||||||||
Fund | June 30, 2017 | June 30, 2018 | June 30, 2019 | ||||||||||||
UBS Asset Growth Fund | $ | 12,299,199 | $ | 9,543,610 | $ | 3,269,324 | |||||||||
UBS Dynamic Alpha Fund | 113,538,799 | 202,927,795 | 46,428,719 | ||||||||||||
UBS Global Allocation Fund | 137,722,381 | 862,762,158 | — |
During the fiscal year ended June 30, 2014, the following Funds utilized capital loss carryforwards to offset current year realized capital gains:
Fund | Amount | ||||||
UBS Asset Growth Fund | $ | 542,129 | |||||
UBS Dynamic Alpha Fund | 4,212,905 | ||||||
UBS Global Allocation Fund | 58,129,719 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the year ended June 30, 2014, the following Funds incurred, and elected to defer, losses of the following:
Fund | Late year ordinary losses | ||||||
UBS Asset Growth Fund | $ | 12,334 | |||||
UBS Global Allocation Fund | 4,597,544 |
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, 2014 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 year ended June 30, 2014, the Funds did not incur
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The UBS Funds
Notes to financial statements
any interest or penalties. Capital gains realized by the Funds on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Each of the tax years in the four year period ended June 30, 2014, or since inception in the case of UBS Multi-Asset Income Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
8. Line of credit
The Trust has entered into an agreement with JPMorgan Chase Bank to provide a $50 million committed line of credit to the Funds ("Committed Credit Facility") to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of each Fund at the request of shareholders and other temporary or emergency purposes. Interest on amounts borrowed is calculated based on the prevailing rates in effect at the time of borrowing. Under the Committed Credit Facility arrangement, each Fund has agreed to pay commitment fees, pro rata, based on the relative asset size of the Funds in the Committed Credit Facility. There were no borrowings from the Committed Credit Facility outstanding as of or during the year ended June 30, 2014.
9. Shares of beneficial interest
For the year ended June 30, 2014, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Asset Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 124,121 | $ | 1,088,605 | 36,491 | $ | 315,049 | 23,991 | $ | 206,491 | ||||||||||||||||||
Shares repurchased | (851,961 | ) | (7,260,277 | ) | (319,502 | ) | (2,696,467 | ) | (69,753 | ) | (592,445 | ) | |||||||||||||||
Dividends reinvested | 11,634 | 96,682 | — | — | 1,535 | 12,725 | |||||||||||||||||||||
Redemption fees | — | 174 | — | 57 | — | 13 | |||||||||||||||||||||
Net decrease | (716,206 | ) | $ | (6,074,816 | ) | (283,011 | ) | $ | (2,381,361 | ) | (44,227 | ) | $ | (373,216 | ) |
UBS Dynamic Alpha Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 4,599,284 | $ | 32,454,724 | 1,216,225 | $ | 8,057,242 | 5,081,730 | $ | 36,928,055 | ||||||||||||||||||
Shares repurchased | (8,360,195 | ) | (59,064,240 | ) | (1,982,672 | ) | (13,239,060 | ) | (1,033,768 | ) | (7,452,221 | ) | |||||||||||||||
Dividends reinvested | 36,239 | 256,205 | — | — | 27,477 | 197,841 | |||||||||||||||||||||
Redemption fees | — | 24,290 | — | 6,281 | — | 5,822 | |||||||||||||||||||||
Net increase (decrease) | (3,724,672 | ) | $ | (26,329,021 | ) | (766,447 | ) | $ | (5,175,537 | ) | 4,075,439 | $ | 29,679,497 |
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The UBS Funds
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UBS Global Allocation Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 492,266 | $ | 5,100,774 | 142,668 | $ | 1,450,604 | 431,301 | $ | 4,608,701 | ||||||||||||||||||
Shares repurchased | (11,455,365 | ) | (119,301,996 | ) | (4,526,645 | ) | (46,006,971 | ) | (1,900,921 | ) | (20,110,700 | ) | |||||||||||||||
Dividends reinvested | 380,019 | 3,895,196 | 65,888 | 662,837 | 171,107 | 1,784,642 | |||||||||||||||||||||
Redemption fees | — | 4,463 | — | 2,406 | — | 1,675 | |||||||||||||||||||||
Net decrease | (10,583,080 | ) | $ | (110,301,563 | ) | (4,318,089 | ) | $ | (43,891,124 | ) | (1,298,513 | ) | $ | (13,715,682 | ) |
UBS Multi-Asset Income Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 268,384 | $ | 2,745,006 | 60,782 | $ | 620,986 | — | $ | — | ||||||||||||||||||
Shares repurchased | (1,240,796 | ) | (12,716,153 | ) | (240,542 | ) | (2,480,987 | ) | (2,664,613 | ) | (27,718,901 | ) | |||||||||||||||
Dividends reinvested | 50,239 | 515,133 | 17,117 | 175,299 | 70,450 | 718,556 | |||||||||||||||||||||
Redemption fees | — | 408 | — | 169 | — | 467 | |||||||||||||||||||||
Net decrease | (922,173 | ) | $ | (9,455,606 | ) | (162,643 | ) | $ | (1,684,533 | ) | (2,594,163 | ) | $ | (26,999,878 | ) |
For the year ended June 30, 2013, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Asset Growth Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 66,560 | $ | 534,630 | 2,945 | $ | 22,675 | 36,183 | $ | 286,552 | ||||||||||||||||||
Shares repurchased | (1,362,915 | ) | (10,428,839 | ) | (318,005 | ) | (2,430,109 | ) | (82,178 | ) | (598,008 | ) | |||||||||||||||
Dividends reinvested | 42,346 | 322,676 | 3,654 | 27,879 | 3,325 | 25,302 | |||||||||||||||||||||
Redemption fees | — | 964 | — | 311 | — | 55 | |||||||||||||||||||||
Net decrease | (1,254,009 | ) | $ | (9,570,569 | ) | (311,406 | ) | $ | (2,379,244 | ) | (42,670 | ) | $ | (286,099 | ) |
UBS Dynamic Alpha Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 12,252,337 | $ | 84,313,524 | 1,850,422 | $ | 12,124,178 | 1,036,159 | $ | 7,216,312 | ||||||||||||||||||
Shares repurchased | (7,378,446 | ) | (50,335,272 | ) | (1,812,827 | ) | (11,689,662 | ) | (2,268,279 | ) | (15,887,648 | ) | |||||||||||||||
Dividends reinvested | 388,822 | 2,612,881 | 73,356 | 468,013 | 157,720 | 1,078,807 | |||||||||||||||||||||
Redemption fees | — | 6,332 | — | 1,680 | — | 1,727 | |||||||||||||||||||||
Net increase (decrease) | 5,262,713 | $ | 36,597,465 | 110,951 | $ | 904,209 | (1,074,400 | ) | $ | (7,590,802 | ) |
UBS Global Allocation Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 707,270 | $ | 6,981,695 | 179,907 | $ | 1,725,958 | 594,901 | $ | 5,923,397 | ||||||||||||||||||
Shares repurchased | (17,320,014 | ) | (167,676,729 | ) | (6,818,760 | ) | (64,517,652 | ) | (2,411,014 | ) | (23,788,360 | ) | |||||||||||||||
Dividends reinvested | 946,587 | 9,039,904 | 314,590 | 2,944,563 | 320,815 | 3,121,528 | |||||||||||||||||||||
Redemption fees | — | 3,759 | — | 1,906 | — | 1,192 | |||||||||||||||||||||
Net decrease | (15,666,157 | ) | $ | (151,651,371 | ) | (6,324,263 | ) | $ | (59,845,225 | ) | (1,495,298 | ) | $ | (14,742,243 | ) |
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Notes to financial statements
UBS Multi-Asset Income Fund
Class A | Class C | Class Y | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,338,475 | $ | 24,211,553 | 785,673 | $ | 8,116,691 | 4,912 | $ | 50,000 | ||||||||||||||||||
Shares repurchased | (221,474 | ) | (2,291,861 | ) | (34,216 | ) | (354,226 | ) | — | — | |||||||||||||||||
Dividends reinvested | 40,701 | 421,044 | 12,511 | 129,450 | 83,238 | 859,201 | |||||||||||||||||||||
Redemption fees | — | 3,540 | — | 1,287 | — | 4,528 | |||||||||||||||||||||
Net increase | 2,157,702 | $ | 22,344,276 | 763,968 | $ | 7,893,202 | 88,150 | $ | 913,729 |
10. Contribution from Advisor
During the year ended June 30, 2014, the Advisor reimbursed UBS Multi-Asset Income Fund for a trading error in the amount of $32,823.
107
The UBS Funds
Report of independent registered public accounting firm
The Board of Trustees and Shareholders of The UBS Funds
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of UBS Asset Growth Fund (formerly UBS Global Frontier Fund), UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Multi-Asset Income Fund (four of the series comprising The UBS Funds) (collectively the "Funds") as of June 30, 2014, and the related statements of operations for the year the ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2014, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Asset Growth Fund, UBS Dynamic Alpha Fund, UBS Global Allocation Fund and UBS Multi-Asset Income Fund at June 30, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.
New York, New York
August 28, 2014
108
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-202-551 8090. Additionally, you may obtain copies of Forms N-Q from the Funds upon request by calling 1-800-647 1568.
Proxy voting policies, procedures and record
You may obtain a description of the Funds' (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Funds voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Funds directly at 1-800-647 1568, online on UBS's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site http://www.sec.gov).
109
The UBS Funds
Board approval of investment advisory agreements
(unaudited)
At the meeting of the Board of Trustees (the "Board") of The UBS Funds (the "Trust"), held on June 5 and 6, 2014 (the "Meeting"), the Board, including those Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust or UBS Global Asset Management (Americas) Inc. (the "Advisor") and its affiliates (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 Asset Growth Fund (formerly, UBS Global Frontier Fund), UBS Multi-Asset Income Fund, UBS Global Sustainable Equity Fund (formerly, UBS International Equity Fund), UBS U.S. Defensive Equity Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Opportunity Fund, UBS U.S. Small Cap Growth Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS Fixed Income Opportunities Fund, UBS Core Plus Bond Fund and UBS Emerging Markets Debt Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process, on May 30, 2014, June 5, 2014 and June 6, 2014, to discuss the materials provided to them in response to the information request, including materials prepared by the Advisor, as well as reports prepared by Lipper Inc. ("Lipper Reports"), an independent statistical compilation company, providing comparative expense information on an actual and contractual basis and comparative performance information for the Funds. The Board also made reference to information and material that had been provided to the Independent Trustees throughout the year at quarterly Board meetings.
At the Meeting, the Board considered a number of factors in connection with its deliberations concerning the continuation of the Advisory Agreement for each Fund, including: (i) the nature, extent, and quality of the services provided by the Advisor to the Fund; (ii) the performance of the Fund and the Advisor; (iii) the Fund's expenses, costs of the services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund; and (iv) whether economies of scale are realized by the Advisor with respect to the Fund, as it grows larger, and the extent to which the economies of scale are reflected in the level of the management fees charged.
Nature, Extent, and Quality of Services.
In considering the nature, extent, and quality of the services provided by the Advisor to a Fund, the Board reviewed the material presented by the Advisor describing the various services provided to each Fund. The Board noted that in addition to investment management services, the Advisor provides each Fund with operational, legal, and compliance support. The Board also considered the scope and depth of the Advisor's organization and the experience and expertise of the professionals currently providing investment management and other services to the Funds. The Board considered that the Advisor was a well-established investment management organization employing investment personnel with significant experience in the investment management industry. The Board also considered the Advisor's in-house research capabilities, as well as other research services available to it, including research services available to the Advisor as a result of securities transactions effected for the Funds and the Advisor's other investment management clients, and noted that the Advisor had extensive global research capabilities. The Board also evaluated the Advisor's portfolio management process for each Fund, including the use of risk management techniques and the proprietary technologies utilized to structure the Fund's portfolio. The Board noted that various presentations had been made by investment personnel at Board meetings throughout the year concerning the Funds' investment performance and investment strategies, 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 Global Asset Management (US) Inc. ("UBS Global AM (US)"), and sub-transfer agency services provided by UBS Financial Services Inc. ("UBS Financial Services"). In connection with the non-investment management services, the Board also considered the quarterly reports that the Advisor provides to the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addi-
110
The UBS Funds
Board approval of investment advisory agreements (unaudited)
tion, the Board considered the presentations provided with respect to distribution strategies for the Funds. After analyzing the services provided by the Advisor to each Fund, both quantitatively and qualitatively, including the impact of these services on investment performance, the Board concluded that the nature, extent, and quality of services provided to each Fund were consistent with the operational requirements of each Fund, and met the needs of the Fund's shareholders.
Performance.
In evaluating the performance of each Fund, the Board analyzed the Lipper Reports, which compared the performance of each Fund with other funds in its respective peer universe over various time periods. The Board also reviewed the memoranda provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Lipper Reports, the Board noted that the UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Asset Growth Fund, UBS U.S. Large Cap Equity Fund, UBS Equity Opportunity Fund, UBS U.S. Small Cap Growth Fund, and UBS Core Plus Bond Fund each had appeared in one of the top three performance quintiles for the one-year performance period. At the Board's request, the Advisor further addressed the performance data for the UBS Multi-Asset Income Fund, UBS Global Sustainable Equity Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS U.S. Defensive Equity Fund, UBS Fixed Income Opportunities Fund and UBS Emerging Markets Debt Fund, each of which had appeared in one of the lower performance quintiles for the one-year period.
In explaining the performance of the UBS Multi-Asset Income Fund, the Advisor discussed the factors that had affected the performance of the Fund over the past year. The Advisor noted that the UBS Multi-Asset Income Fund pursues a tactical income strategy to provide risk-managed income over the long-term. The Advisor noted that the Fund produced positive performance for the year and outperformed its benchmark index. The Advisor noted the Fund's relative underperformance compared to its Lipper peer group was due to the variety of different strategies of the funds included in the peer group. The Advisor noted that the UBS Multi-Asset Income Fund was designed for a conservative income investor that seeks a positive income stream through various market conditions. The Advisor stated that the Fund's performance results during the past year were consistent with the Fund's investment objective.
The Advisor then discussed the performance of the UBS Global Sustainable Equity Fund. The Advisor stated that the main reason for the Fund's underperformance relative to its peers was due to the transition in strategy during the past year from international equity to global sustainable equity. Due to the strong performance of the U.S. market over the past year, international strategies on average underperformed global strategies, which distorted this transitioning Fund's performance versus its global equity peers.
The Advisor then discussed the factors that had a negative effect on the relative performance of the UBS Equity Long-Short Multi-Strategy Fund during the one-year performance period. The Advisor noted that strategy changes had been implemented for the Fund in October 2012, and that additional investment sleeves had been added in 2013. The Advisor stated that since the transition to the new strategy, the Fund has experienced better risk-adjusted performance. The Advisor reported that it believed that the Fund's relative performance versus its peers would fare better in down markets.
In discussing the performance of the UBS U.S. Defensive Equity Fund for the one-year performance period, the Advisor explained that the Fund's defensive strategy was the primary reason for the Fund's underperformance as compared to its peer universe. The Advisor noted that the options overlay strategy for the Fund, which reduced the volatility profile of the Fund, detracted from the Fund's performance. The Advisor stated the options overlay strategy should benefit the Fund's relative performance when the U.S. equity market experiences a down turn.
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The Advisor next addressed the relative underperformance of the UBS Fixed Income Opportunities Fund with respect to the Fund's peers. The Fund produced a small positive return over the period; however, produced weaker peer relative rankings. Its weaker relative performance as compared to its peer universe was largely attributable to the composition of the Fund's current absolute return peer group. The peer group contains a wide mix of funds that are managed to varying risk/return objectives and follow investment strategies that may not be similar to the Fund. This includes strategies with sizable allocation to equity markets, such as asset allocation funds, which benefited from equity exposure in a positive equity market.
With respect to the performance of the UBS Emerging Markets Debt Fund, the Advisor noted that the Fund underperformed relative to its peer universe. The Advisor explained that the Fund's relative underperformance as compared to its peers was due primarily to the Fund's investments in longer duration Brazil debt and its overweight to local currencies as compared to its peers. The Advisor explained that U.S. dollar-denominated debt generally outperformed local currency debt during the period and noted that any fund that allocated more heavily to local markets would reflect lower performance rankings.
The Board concluded that the Advisor's explanations provided a sound basis for understanding the performance of each Fund that underperformed in comparison to its peer universe. The Board determined, after analyzing the performance data, that the performance of each Fund was acceptable as compared with relevant performance standards, given the investment strategies and risk profile of each Fund, the expectations of the shareholder base, the current market environment and the Advisor's efforts to address the underperformance issues of each Fund.
Fund Fees and Expenses.
When considering the fees and expenses borne by each Fund, and the reasonableness of the management fees paid to the Advisor in light of the services provided to each Fund, the Board compared the fees charged by the Advisor to each Fund to fees charged to the funds in its peer group for comparable services, as provided in the Lipper Reports, on both an actual (taking into account expense limitation arrangements) and a contractual basis (assuming all funds in the peer expense group were similar in size to the respective Fund). In examining the Lipper Reports, and in reviewing comparative costs, it was noted that the results of such expense comparisons showed that the actual management fee rate for each Fund, except the UBS Global Allocation Fund, was comparable to, or lower than, the Lipper median in its respective Lipper expense group. The Board also noted that each Fund, except the UBS Global Allocation Fund, UBS Asset Growth Fund, UBS Multi-Asset Income Fund and UBS U.S. Small Cap Growth Fund, had a contractual fee rate comparable to, or lower than, the Lipper median in its respective Lipper expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund had total expenses that were comparable to, or lower than, the Lipper median in its respective Lipper expense group, except for UBS Global Allocation Fund and UBS Emerging Markets Debt Fund.
The Board first discussed the management fee and expenses of the UBS Global Allocation Fund. It was noted that the contractual management fee, actual management fee and total expenses for the UBS Global Allocation Fund were each slightly higher than the fees and expenses of several of the funds in its Lipper expense group. The Advisor noted that changes to the funds in the peer group and a reduction in the UBS Global Allocation Fund's assets caused the Fund's relative lower rankings. The Board, however, noted that the Fund's management fee and expenses were each reasonable considering that neither the management fee nor the Fund's total expenses were significantly higher than the respective Lipper expense group medians. The Board will continue to monitor the Fund's peers and expenses.
The Board then discussed the management fee of the UBS Asset Growth Fund. It was noted that the UBS Asset Growth Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis. The Board noted that while the UBS Asset Growth Fund's contractual management fee was higher than the
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The UBS Funds
Board approval of investment advisory agreements (unaudited)
median of the Fund's Lipper expense group, the Fund's actual management fee and total expenses were each at the median of the Fund's Lipper expense group.
The Board next considered that the management fee of the UBS Multi-Asset Income Fund was slightly higher than the median of its Lipper expense group on a contractual basis, but noted that the Fund's actual management fee compared favorably with the Fund's peers placing in the second quintile of the Lipper expense group. The Board also considered that the UBS Multi-Asset Income Fund's total expenses were lower than the median of the Fund's expense group.
The Board next discussed the management fee of the UBS U.S. Small Cap Growth Fund. It was noted that the UBS U.S. Small Cap Growth Fund's management fee was higher than the median of the Fund's Lipper expense group on a contractual basis, which led the Board to discuss this Fund's management fee with the Advisor. The Board noted that while the UBS U.S. Small Cap Growth Fund's contractual management fee was higher than the median of the Fund's Lipper expense group, the Fund's actual management fee compared more favorably to its peers. The Board also noted that the total expenses of the UBS Small Cap Growth Fund were comparable to the other funds in its peer group.
The Board also reviewed the expenses of the UBS Emerging Markets Debt Fund and noted that the Fund's expenses were higher than the Fund's peers. The Board noted that the Fund's management fee on both a contractual and actual basis compared favorably to the management fee of its Lipper peers. The Advisor noted that the Fund's total expenses were higher than its peers primarily because the Fund was relatively newer and had less assets than many of the funds in its peer group. The Advisor also note that some of the UBS Emerging Markets Debt Fund's peers maintain only limited or no exposure to securities denominated in local market currencies, which have additional expenses that are not associated with holding U.S. dollar-denominated debt.
The Board also received and considered information about the fee rates charged to other funds and accounts that are managed by the Advisor. After discussing the information about the other funds and accounts with the Advisor, the Board determined that the fees charged by the Advisor to the Funds were within a reasonable range, giving effect to differences in services performed for such other funds and accounts as compared to such fee rates. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.
Costs and Profitability.
The Board considered the costs of providing services to the Funds and the profitability of the Funds to the Advisor and its affiliates by reviewing the profitability analysis provided by the Advisor, including information about its fee revenues and expenses. The Board reviewed the profitability of each Fund to the Advisor and its affiliates, and the compensation that was received for providing services to each Fund. The profitability analysis, which provided information for the last three calendar years, included schedules relating to the revenue and expenses attributable to: (i) the investment advisory and administration services provided by the Advisor; (ii) the distribution and shareholder services provided by UBS Global AM (US) and UBS Financial Services; (iii) the transfer agency-related services provided by UBS Financial Services; and (iv) all services provided by the Advisor, UBS Global AM (US), and UBS Financial Services shown on a consolidated basis. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. The Advisor also explained to the Board the reasons for an increase or decrease in profitability of each Fund from last calendar year to this calendar year.
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Board approval of investment advisory agreements (unaudited)
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 AG, in the form of commissions for executing securities transactions for the Funds. Upon closely examining the information provided concerning the Advisor's profitability, the Board concluded that the level of profits realized by the Advisor and its affiliates with respect to each Fund, if any, was reasonable in relation to the nature and quality of the services that were provided.
Economies of Scale.
The Board also discussed whether economies of scale are realized by the Advisor with respect to each Fund as it grows larger, and the extent to which this is reflected in the level of management fees charged. The Board noted that with respect most Funds, any actual or potential economies of scale are, or will be, shared with the Fund and its shareholders through existing management fee breakpoints so that as the Fund grows in size, its effective management fee declines. The Board noted that each Fund, except UBS Asset Growth Fund, UBS Equity Long-Short Multi-Strategy Fund, UBS Multi-Asset Income Fund, UBS Emerging Markets Debt Fund, and UBS Fixed Income Opportunities Fund, had a breakpoint schedule that provided for continuing breakpoints past the current asset level for the Fund. Based on each Fund's fees and expenses and the Advisor's profitability analysis, the Board concluded that any actual or potential economies of scale would be reasonably shared with a Fund and its shareholders.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, including a majority of the Independent Trustees, with the assistance of independent counsel, concluded that the continuation of the Advisory Agreement for each Fund was in the best interests of the Fund and its shareholders.
114
The UBS Funds
Trustee and officer information (unaudited)
The Trust is a Delaware statutory trust. Under Delaware law, the Board has overall responsibility for managing the business and affairs of the Trust, including general supervision and review of its investment activities. The Trustees elect the Officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and the Funds.
The table shows, for each Trustee and Officer, his or her name, address and age, the position held with the Trust, the length of time served as a Trustee or Officer of the Trust, the Trustee's or Officer's principal occupations during the last five years, the number of funds in the UBS Family of Funds overseen by the Trustee or Officer and other directorships held by such Trustee.
The Trust's Statement of Additional Information contains additional information about the Trustees and is available, without charge, upon request, by calling 1-800-647 1568.
Non-interested Trustees:
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
Adela Cepeda; 56 A.C. Advisory, Inc. 150 North Wacker Drive Suite 2160 Chicago, Illinois 60601 | Trustee | Since 2004 | Ms. Cepeda is founder and president of A.C. Advisory, Inc. (since 1995). | Ms. Cepeda is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global 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), trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) (since 2008). Ms. Cepeda was a director of Amalgamated Bank of Chicago (since 2003 to 2012) and a director of the Municipal Securities Rulemaking Board (from 2012 to 2012). | ||||||||||||||||||
John J. Murphy; 70 268 Main Street P.O. Box 718 Gladstone, NJ 07934 | Trustee | Since 2009 | Mr. Murphy is the president of Murphy Capital Management (investment advisor) (since 1983) | Mr. Murphy is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Murphy is a director of the Legg Mason Equity Funds (54 portfolios) and a trustee of Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). |
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The UBS Funds
Trustee and officer information (unaudited)
Non-interested Trustees (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee |
Abbie J. Smith; 61 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 | Trustee | Since 2009 | Ms. Smith is Boris and Irene Stern Professor of Accounting in the University of Chicago Booth School of Business (since 1980). 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 director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation and chair of the human resources and compensation committee (formerly known as HON Industries Inc.) (office furniture) and a director (since 2003) and chair of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee and portfolio performance committee of the Dimensional Funds complex (89 Portfolios). | ||||||||||||||||||
Frank K. Reilly; 78 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5649 | Chairman and Trustee | Since 1992 | Mr. Reilly is the Bernard J. Hank Professor of Finance in the Mendoza College of Business at the University of Notre Dame (since 1982). | Mr. Reilly is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Reilly is a director (since 1994) of Discover Bank, a subsidiary of Discover Financial Services and is Chairman of the Audit Committee for the bank. | ||||||||||||||||||
Edward M. Roob; 79 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 1995 | Mr. Roob is retired (since 1993). | Mr. Roob is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | None. |
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Trustee and officer information (unaudited)
Non-interested Trustees (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years | Number of portfolios in fund complex overseen by Trustee | Other directorships held by Trustee | ||||||||||||||||||
J. Mikesell Thomas; 63 c/o UBS Global AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008) and President and sole shareholder of Mikesell Advisory Corp (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (from 2004 to 2008) and of First Chicago Bancorp (from 2008 to 2011). | Mr. Thomas is a director or trustee of four investment companies (consisting of 32 portfolios) for which UBS Global AM serves as investment advisor or manager. | Mr. Thomas is a director (since 1992) and chairman of the Audit Committee for NorthShore University HealthSystem a not for profit healthcare organization and a director (since 2012) and a member of the Audit and Investment and Finance Committees of HCC Insurance Holdings Inc. Mr. Thomas was previously a director of First Chicago Bancorp (2008 to 2010) and First Chicago Bank & Trust (from 2008 to 2010). |
Interested Trustee:
Shawn Lytle; 44*2 | Trustee | Since 2011 | Mr. Lytle is a Group Managing Director and Head of Americas at UBS Global Asset Management (Americas) Inc. (since 2010). Mr. Lytle is a member of the UBS Global Asset Management Executive Committee. Prior to his role as Head of Americas, he was Deputy Global Head of Equities (from 2008 to 2010), Head of Equity Capabilities and Business Management in 2008, and a team manager (from 2005 to 2008) at UBS Global Asset Management (Americas) Inc. | Mr. Lytle is a director or trustee of three investment companies (consisting of 31 portfolios) for which UBS Global AM serves as investment advisor or manager. | None |
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The UBS Funds
Trustee and officer information (unaudited)
Officers:
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Joseph J. Allessie*; 49 | Vice President, Assistant Secretary and Chief Compliance Officer | Since 2005 (Vice President and Assistant Secretary); since July 2014 (Chief Compliance Officer) | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, "UBS Global AM—Americas region"). Mr. Allessie is head of compliance and operational risk control for the UBS Global Asset Management Division in the Americas with oversight for traditional and alternative investment businesses in Canada, the US and Cayman Islands. Prior to that he served as deputy general counsel of UBS Global AM—Americas region (from 2005 to 2014). Mr. Allessie is a vice president, assistant secretary and chief compliance officer (prior to which he was interim chief compliance officer) (from January to July 2014) of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Rose Ann Bubloski*; 46 | 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 the US mutual fund treasury administration department of UBS Global AM—Americas region. She was a vice president and assistant treasurer of certain UBS funds (from 2004 to 2007). She is vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mark E. Carver*; 50 | President | Since 2010 | Mr. Carver is a managing director and Head of Product Development and Management—Americas for UBS Global AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is a member of the Americas Management Committee (since 2008) and the Regional Operating Committee (since 2008). Prior to 2008, Mr. Carver held a number of product-related or sales responsibilities with respect to funds, advisory programs and separately managed accounts. Mr. Carver is president of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Thomas Disbrow*; 48 | Vice President, Treasurer and Principal Accounting Officer | Since 2004 and 2006, respectively | Mr. Disbrow is a managing director (since 2011), (prior to which he was an executive director) (since 2007) and head of North Americas Fund Treasury (since 2011) of UBS Global AM—Americas region. Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Michael J. Flook*; 49 | Vice President and Assistant Treasurer | Since 2006 | Mr. Flook is a director (since 2010) (prior to which he was an associate director) (since 2006) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Flook is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
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The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Christopher S. Ha*; 34 | Vice President and Assistant Secretary | Since September 2012 | Mr. Ha is a director and associate general counsel (since September 2012) at UBS Global AM—Americas region. Prior to joining UBS Global AM—Americas region, Mr. Ha was of counsel at Buhler, Duggal & Henry LLP (law firm) (from March 2012 to July 2012) and an associate attorney at Dechert LLP (law firm) (from 2007 to 2009). Mr. Ha is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mark F. Kemper**; 56 | Vice President and Secretary | Since 1999 | Mr. Kemper is a managing director (since 2006) and head of the legal department of UBS Global AM—Americas region (since 2004). He has been secretary of UBS Global AM—Americas region (since 2004), secretary of UBS Global Asset Management Trust Company (since 1993) and secretary of UBS AM Holdings (USA) Inc. (since 2001). Mr. Kemper is vice president and secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Joanne M. Kilkeary*; 46 | Vice President and Assistant Treasurer | Since 2006 | Ms. Kilkeary is an executive director (since March 2013) (prior to which she was a director) (since 2008) and a senior manager (since 2004) of the US mutual fund treasury administration department of UBS Global AM—Americas region. Ms. Kilkeary is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Tammie Lee*; 43 | Vice President and Assistant Secretary | Since 2005 | Ms. Lee is an executive director (since 2010) (prior to which she was a director) (since 2005) and associate general counsel of UBS Global AM—Americas region (since 2005). Ms. Lee is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Nancy D. Osborn*; 48 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of the US mutual fund treasury administration department of UBS Global AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Eric Sanders*; 48 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
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The UBS Funds
Trustee and officer information (unaudited)
Officers (continued):
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Andrew Shoup*; 58 | Vice President and Chief Operating Officer | Since 2006 | Mr. Shoup is a managing director and global head of the Fund treasury administration department of UBS Global AM—Americas region (since 2006). Mr. Shoup is also a director of UBS (IRL) Fund p.l.c. (since 2008). Mr. Shoup is a vice president and chief operating officer of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Keith A. Weller*; 53 | Vice President and Assistant Secretary | Since 2004 | Mr. Weller is an executive director and senior associate general counsel of UBS Global AM—Americas region (since 2005). Mr. Weller is a vice president and assistant secretary of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. | ||||||||||||
Mandy Yu*; 30 | Vice President | Since March 2013 | Ms. Yu is an authorized officer (since 2012) and tax compliance manager (since March 2013) of the US mutual fund treasury administration department of UBS Global AM—Americas region. She was a Fund Treasury Manager (from 2012 to March 2013) and a Mutual Fund Administrator (from 2007 to 2012) for UBS Global AM—Americas region. Ms. Yu is a vice president of 15 investment companies (consisting of 75 portfolios) for which UBS Global AM serves as investment advisor or manager. |
1 Each Trustee holds office for an indefinite term. Officers of the Trust are appointed by the Trustees and serve at the pleasure of the Board.
2 Mr. Lytle is considered to be an interested person of the Trust under the federal securities laws due to his position as an officer of UBS Global AM.
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
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The UBS Funds
Federal tax information (unaudited)
For the year ended June 30, 2014, the percentage of dividends paid that qualify for the 70% dividends received deduction for corporate shareholders are approximated as follows:
Fund | Dividends received deduction | ||||||
UBS Asset Growth Fund | 2.96 | % | |||||
UBS Global Allocation Fund | 5.76 | ||||||
UBS Multi-Asset Income Fund | 89.84 |
For the year ended June 30, 2014, the percentage of income earned from direct US Treasury obligations approximately amounted to the following:
Fund | Direct US Treasury obligations | ||||||
UBS Asset Growth Fund | 2.46 | % | |||||
UBS Global Allocation Fund | 5.88 | ||||||
UBS Multi-Asset Income Fund | 3.61 |
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The UBS Funds
Fund's privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds managed by UBS Global Asset Management (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information and to comply with applicable laws and regulations.
The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as otherwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1196
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of ethics adopted pursuant to Sarbanes-Oxley as a “Code of Conduct” to lessen the risk of confusion with its separate code of ethics adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended.)
Item 3. Audit Committee Financial Expert.
The registrant’s Board has determined that the following person serving on the registrant’s Audit Committee is an “audit committee financial expert” as defined in item 3 of Form N-CSR: J. Mikesell Thomas. Mr. Thomas is independent as defined in item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees:
For the fiscal years ended June 30, 2014 and June 30, 2013, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $699,706 and $668,120, 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, 2014 and June 30, 2013, 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 $67,300 and $67,300, respectively.
Fees included in the audit-related category are those associated with (1) the reading and providing of comments on the 2013 and 2012 semiannual financial statements and (2) agreed upon procedures performed in connection with the review of Form N-1A.
There were no audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(c) Tax Fees:
In each of the fiscal years ended June 30, 2014 and June 30, 2013, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $79,873 and $85,700, respectively.
Fees included in the tax fees category comprise all services performed by professional staff in the independent accountant’s tax division except those services related to the audits. This category comprises fees for review of tax returns.
There were no tax fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(d) All Other Fees:
In each of the fiscal years ended June 30, 2014 and June 30, 2013, there were no fees billed by E&Y for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant.
Fees included in the all other fees category would consist of services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the registrant.
There were no “all other fees” required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(e) (1) Audit Committee Pre-Approval Policies and Procedures:
The Audit Committee Charter contains the Audit Committee’s pre-approval policies and procedures. Reproduced below is an excerpt from the Audit Committee Charter regarding pre-approval policies and procedures:
To carry out its purposes, the Audit Committee shall have the following duties and powers:
(a) To pre-approve the engagement of, and to recommend to the Board the engagement, retention or termination of, the independent auditors to provide audit, review or attest services to the UBS Funds, and, in connection therewith, to review and evaluate the capabilities and independence of the auditors, and receive the auditors’ specific representations as to their independence. In evaluating the auditor’s qualifications, performance and independence, the Committee must, among other things, obtain and review a report by the auditors, at least annually, describing the following items: (i) all relationships between the, independent auditors and the UBS Funds, as well as with the UBS Funds, investment advisor or any control affiliate of the investment advisor that provides ongoing services to the UBS Funds; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (iii) the audit firm’s internal quality control procedures.
(b) To pre-approve all non-audit services to be provided to the UBS Funds by the independent auditors when, without such pre-approval, the auditors would not be independent of the UBS Funds under applicable federal securities laws, rules or auditing standards.
(c) To pre-approve all non-audit services to be provided by the UBS Funds’ independent auditors to the UBS Funds’ investment advisor or to any entity, that controls, is controlled by or is under common control with the UBS Funds investment advisor (“advisor affiliate”) and that provides ongoing services to the UBS Funds when, without such pre-approval by the
Committee, the auditors would not be independent of the UBS Funds under applicable federal securities laws, rules or auditing standards.
(d) To establish, if deemed necessary or appropriate as an alternative to Committee pre-approval of services to be provided by the independent auditors as required by paragraphs (b) and (c) above, policies and procedures to permit such services to be pre-approved by other means, such as by action of a designated member or members of the Committee, subject to subsequent Committee review or oversight.
(e) To consider whether the non-audit services provided by the UBS Funds’ independent auditor to the UBS Funds investment advisor or any advisor affiliate that provides on-going services to the UBS Funds, which services were not pre-approved by the Committee, are compatible with maintaining the auditors’ independence.
(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees:
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2014 and June 30, 2013 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, 2014 and June 30, 2013 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, 2014 and June 30, 2013 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, 2014 and June 30, 2013 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, 2014 and June 30, 2013 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, 2014 and June 30, 2013 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, 2014, 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, 2014 and June 30, 2013, the aggregate fees billed by E&Y of $325,513 and $326,125, respectively, for non-audit services rendered on behalf of the registrant (“covered”), its investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser (“non-covered”) that provides ongoing services to the registrant for each of the last two fiscal years of the registrant is shown in the table below:
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| 2014 |
| 2013 |
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Covered Services |
| $ | 147,173 |
| $ | 153,000 |
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Non-Covered Services |
| $ | 178,340 |
| $ | 173,125 |
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(h) The registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the registrant.
Item 6. Schedule of Investments.
(a) Included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to the registrant.
Item 10. Submission of Matters to a Vote of Security Holders.
The Nominating Committee will consider nominees recommended by Qualifying Fund Shareholders if an Independent Trustee vacancy on the Board occurs. A Qualifying Fund Shareholder is a shareholder that: (i) owns of record, or beneficially through a financial intermediary, 1/2 of 1% or more of the Trust’s outstanding shares and (ii) has been a shareholder of at least 1/2 of 1% of the Trust’s total outstanding shares for 12 months or more prior to submitting the recommendation to the Nominating Committee. In order to recommend a nominee, a Qualifying Fund Shareholder should send a letter to the chairperson of the Nominating Committee, Ms. Adela Cepeda, care of Mark Kemper, the Secretary of the UBS Funds at UBS Global Asset Management, One North Wacker Drive, Chicago, Illinois 60606, and indicate on the envelope “Nominating Committee.” The Qualifying Fund Shareholder’s letter should include: (i) the name and address of the Qualifying Fund Shareholder making the recommendation; (ii) the number of shares of each class and series of shares of the Trust which are owned of record and beneficially by such Qualifying Fund Shareholder and the length of time that such shares have been so owned by the Qualifying Fund Shareholder; (iii) a description of all arrangements and understandings between such Qualifying Fund Shareholder and any other person or persons (naming such person or persons) pursuant to which the recommendation is being made; (iv) the name and address of the nominee; and (v) the nominee’s resume or curriculum vitae. The Qualifying Fund Shareholder’s letter must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics as required pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (and designated by registrant as a “Code of Conduct”) is filed herewith.
(a) (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.CERT.
(a) (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons — not applicable to the registrant.
(b) Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.906.CERT.
(c) Iran related activities disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934 is filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The UBS Funds |
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By: | /s/ Mark E. Carver |
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| Mark E. Carver |
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| President |
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Date: | September 8, 2014 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Mark E. Carver |
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| Mark E. Carver |
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| President |
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Date: | September 8, 2014 |
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By: | /s/ Thomas Disbrow |
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| Thomas Disbrow |
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| Vice President, Treasurer and Principal Accounting Officer | |
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Date: | September 8, 2014 |
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