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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Mark F. Kemper UBS Asset Management 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, 2018 |
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Item 1. Reports to Stockholders.
The UBS Funds
Annual Report | June 30, 2018
Table of contents | |||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
UBS Dynamic Alpha Fund | 5 | ||||||
UBS Global Allocation Fund | 23 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 36 | ||||||
UBS International Sustainable Equity Fund | 42 | ||||||
UBS U.S. Small Cap Growth Fund | 49 | ||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | 59 | ||||||
UBS Municipal Bond Fund | 67 | ||||||
UBS Total Return Bond Fund | 75 | ||||||
Explanation of expense disclosure | 89 | ||||||
Statement of assets and liabilities | 92 | ||||||
Statement of operations | 100 | ||||||
Statement of changes in net assets | 104 | ||||||
Financial highlights | 108 | ||||||
Notes to financial statements | 123 | ||||||
Report of independent registered public accounting firm | 152 | ||||||
Federal tax information | 154 | ||||||
General information | 155 | ||||||
Board approval of investment advisory agreements | 156 | ||||||
Trustee and officer information | 160 |
President's letter
August 17, 2018
Dear Shareholder,
Market conditions in the first half of 2018 diverged sharply from the tranquility of 2017 as volatility reared its head, sometimes with a vengeance. In the US, inflation continued to creep up and growth remained robust—in part, thanks to some healthy stimulus from the Tax Cut and Jobs Act—and the current economic recovery became the second longest in post-war history. The Federal Reserve Board continued to tighten monetary policy, raising the federal funds rate by 25 basis points two times—in March and June—and is expected to continue on its steady path of normalization.
While global growth continued at an above-trend pace, it began to diverge regionally, as did monetary policy. Although the European Central Bank is holding rates near zero for the foreseeable future, it has said it will cease asset purchases by the end of the year, while the Bank of Japan remains adamantly committed to its accommodative policies. Chinese demand growth rates have moderated as policies to rebalance the economy and reduce debt were implemented, but the authorities likely have sufficient tools to respond if the slowdown accelerates.
That said, global trade tensions spurred by tariffs and fears of an all-out trade war with China have overshadowed the markets and raised concerns about challenges to global growth. Higher-than-expected US inflation, geopolitics and a hard landing in China appear to be the principal potential hazards to global risk assets. Amid this mosaic, active portfolio managers continue to find a variety of opportunities regionally and across multiple markets and asset classes.
Separately, one of the most conspicuous market events of the first half was the broad-based selloff across emerging market (EM) regions and asset classes. However, in contrast to the first half of the decade, we do not expect this to herald a prolonged period of underperformance. Improved fundamentals in most EM countries compared to before the "Taper Tantrum" in 2013, as well as a more growth-supportive China, suggest that these may be attractive valuations for investors with a longer-term investment horizon, offering diversification and return potential.
Indeed, at UBS Asset Management we believe a long-term perspective and financial plan is important for all investors, and our firm's historical commitment to the increasingly popular idea of sustainable investing supports that view. Sustainable investing is about broadening the use of material, non-financial data in the investment analysis process to include ESG—or environmental, social and governance—metrics. Incorporating these metrics helps investors take a broader view of the potential upside and downside of their investments and so make better informed investment decisions. At UBS Asset Management we have made the strategic decision to bring sustainable investing into the mainstream of our offering to all clients, building on a strong legacy of over twenty years' sustainable investing experience, and we will continue to develop and roll out new offerings so that our clients can benefit from investing through this "new set of eyes."
We continue to believe that there are compelling opportunities across global asset classes and that the right strategies in the hands of skilled investment professionals have the potential to deliver better investment outcomes for our clients. At UBS Asset Management, 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.
1
President's letter
Sincerely,
Mark E. Carver
President
The UBS Funds
Managing Director
UBS Asset Management (Americas) Inc.
The views expressed are those of UBS Asset Management (Americas) Inc. as of August 17, 2018. The views are subject to change based on market conditions; they are not intended to predict or guarantee the future performance of the markets, any individual security or market segment, or any UBS mutual fund.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. A prospectus or summary prospectus for the funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our web site at www.ubs.com/am-us.
2
The markets in review
The global economic expansion accelerates
The lengthy US economic expansion continued during the reporting period. Looking back, the US Commerce Department reported that gross domestic product ("GDP") grew at a revised 2.8% seasonally adjusted annualized rate during the third quarter of 2017. GDP growth then moderated to a revised 2.3% and 2.2% during the fourth quarter of 2017 and the first quarter of 2018, respectively. Finally, second quarter 2018 GDP grew at a 4.1% rate based on the US Commerce Department's initial estimate.1 This represented the strongest pace since the third quarter of 2014.
As expected, the US Federal Reserve Board (the "Fed") continued to raise interest rates during the reporting period. Specifically, the Fed raised rates in December 2017, March 2018 and June 2018. With its last rate hike, the federal funds rate2 moved to a range between 1.75% and 2.00%. In addition, starting in October 2017, the Fed began reducing its balance sheet. For the remainder of 2018, the Fed currently anticipates making two additional 0.25% rate hikes, while continuing to pare its balance sheet.
From a global perspective, in its July 2018 World Economic Outlook Update, released after the reporting period ended, the International Monetary Fund ("IMF") said, "Global growth is projected to reach 3.9 percent in 2018 and 2019...but...the balance of risks has shifted further to the downside, including in the short term. The recently announced and anticipated tariff increases by the United States and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions. These could derail the recovery and depress medium-term growth prospects." From a regional perspective, the IMF projects 2018 growth in the eurozone will be 2.2%, compared to 2.4% in 2017. Japan's economy is expected to expand 1.0% in 2018, versus 1.7% in 2017. Elsewhere, the IMF projects that growth in emerging market countries will increase to 4.9% in 2018, versus 4.7% in 2017.
Global equities: The US leads the way
The global equity market generated positive results during the reporting period. US equities posted positive returns during 10 of the 12 months of the period. Supporting the market were corporate profits that often exceeded expectations and the December 2017 signing of a tax reform bill. All told, the US stock market, as measured by the S&P 500 Index,3 gained 14.37% for the 12 months ended June 30, 2018. International equities produced more muted gains, as growth rates in a number of countries moderated, global trade war concerns increased and, later in the period, the US dollar strengthened. International developed equities, as measured by the MSCI EAFE Index (net),4 rose 6.84% during the reporting period, while emerging markets equities, as measured by the MSCI Emerging Markets Index (net),5 gained 8.20%.
1 Based on the Commerce Department's initial estimate announced on July 26, 2018, after the reporting period had ended on June 30, 2018.
2 The federal funds rate or the "fed funds rate," is the rate US banks charge one another for funds they borrow on an overnight basis.
3 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3
The markets in review
The fixed income market produces weak results
The global fixed income market posted weak results during the reporting period. In the US, short-term Treasury yields moved sharply higher in concert with the Fed's interest rate hikes. Longer-term Treasury yields also rose, albeit to a lesser extent. For the fiscal year as a whole, the yield on the US 10-year Treasury rose from 2.31% to 2.85% (bond yields and prices move in the opposite direction). The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Index,6 returned -0.40% for the 12 months ended June 30, 2018. Returns of riskier fixed income securities were mixed. High yield bonds, as measured by the ICE BofAML US High Yield Cash Pay Constrained Index,7 gained 2.50% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),8 returned -2.45%.
6 The Bloomberg Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
7 The ICE BofAML US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed, non-convertible, coupon-bearing US dollar denominated, below investment grade corporate debt with a term to maturity of at least one year. The index is market capitalization weighted, so that larger bond issuers have a greater effect on the index's return. However, the representation of any single bond issuer is restricted to a maximum of 2% of the total index. Investors should note that indices do not reflect the deduction of fees and expenses.
8 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
4
UBS Dynamic Alpha Fund
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned -2.15% (Class A shares declined 7.54% after the deduction of the maximum sales charge), while Class P shares returned -1.80%. For purposes of comparison, the ICE BofAML US Treasury 1-5 Year Index declined 0.35% during the same time period, the MSCI World Index (net) gained 11.09%, and the FTSE One-Month US Treasury Bill Index returned 1.27%. (Class P shares have lower expenses than other share classes of the Fund.)
Returns for all share classes over various time periods are shown on page 7; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a negative absolute return during the reporting period, with market allocations detracting from performance, while currency allocations contributed positively to results.
During the reporting period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, utilizing currency forwards had a direct positive impact on Fund performance. We used a variety of equity and fixed income futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, detracted from performance during the reporting period.
Portfolio performance summary1
What worked:
• Certain market allocations were positive for returns.
– The Fund's long China H-shares versus Taiwan equities trade contributed to performance.
– The Fund's long European bank stocks vs European large cap equities trade also contributed positively to performance.
• Overall, the portfolio's active currency strategy was positive for results.
– The strategy's long positions in the Malaysian ringgit versus Singapore dollar, Colombian peso versus US dollar, US dollar versus Chilean peso, US dollar versus Swiss franc, and long US dollar versus Canadian, Australian dollar and New Zealand dollar were the primary positive contributors to results.
– Escalating trade tensions caused the dollar to strengthen across the board with 'risk-on' currencies faring poorly through June and the Fund's short positioning in Canadian dollar (CAD) and Australian dollar (AUD) being rewarded.
– In New Zealand, deteriorating business confidence and a dovish RBNZ further weighed on NZD.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
5
UBS Dynamic Alpha Fund
What didn't work:
• Overall, market allocations detracted from results.
– Negative contributors included our long Russell 1000 Value versus US equities, long emerging markets versus US equities, and long EAFE versus US equities trades.
– US equities increased in value over the period, with the S&P 500 Index delivering strong performance on the back of the new tax bill that was passed in Congress, outpacing the gains made by the Russell 1000 Value Index.
– Emerging market equities were hit particularly hard during the second quarter of 2018 by rising trade tensions and a strengthening US dollar, offsetting some of the strong gains made in 2017.
– Also detracting from performance were the Fund's short US high yield and long US 10yr vs. German 10yr bond trades.
• Certain currency positions were negative for results during the period.
– The largest detractor during the reporting period was our long Turkish lira versus South African rand position. We closed the position following South African elections as our original thesis for the trade was no longer valid.
– Other detractors included our long Indian rupee versus Korean won and long Swedish krone versus Euro positions.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 17, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
6
UBS Dynamic Alpha Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | (2.15 | )% | 0.11 | % | 1.67 | % | |||||||||
Class C2 | (2.80 | ) | (0.66 | ) | 0.90 | ||||||||||
Class P3 | (1.80 | ) | 0.37 | 1.96 | |||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | (7.54 | )% | (1.02 | )% | 1.10 | % | |||||||||
Class C2 | (3.78 | ) | (0.66 | ) | 0.90 | ||||||||||
ICE BofAML US Treasury 1-5 Year Index4 | (0.35 | ) | 0.81 | 1.79 | |||||||||||
MSCI World Index (net)5 | 11.09 | 9.94 | 6.26 | ||||||||||||
FTSE One-Month US Treasury Bill Index6 | 1.27 | 0.37 | 0.26 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 27, 2017 prospectuses were as follows: Class A—1.52% and 1.38%; Class C—2.31% and 2.13%; Class P—1.30% and 1.13%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 29, 2018, do not exceed 1.35% for Class A shares, 2.10% for Class C shares and 1.10% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/ expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The ICE BofAML US Treasury 1-5 Year Index is an unmanaged index designed to track US Treasury securities with maturities between 1 and 5 years. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The MSCI World Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The FTSE One-Month US Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last one month Treasury Bill issue. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
7
UBS Dynamic Alpha Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS Dynamic Alpha Fund Class A and Class P shares versus the ICE BofAML US Treasury 1-5 Year Index, the MSCI World Index (net) and the FTSE One-Month US Treasury Bill Index over the 10 years ended June 30, 2018. 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.
UBS Dynamic Alpha Fund Class A vs. ICE BofAML US Treasury 1-5 Year Index, MSCI World Index (net) and FTSE One-Month US Treasury Bill Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2008 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS Dynamic Alpha Fund Class P vs. ICE BofAML US Treasury 1-5 Year Index, MSCI World Index (net) and FTSE One-Month US Treasury Bill Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2008 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
8
UBS Dynamic Alpha Fund
Portfolio statistics—June 30, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 0.7 | % | |||||
Bank of America Corp. 3.875%, due 08/01/25 | 0.6 | ||||||
The Goldman Sachs Group, Inc. 2.000%, due 07/27/23 | 0.5 | ||||||
Morgan Stanley 2.500%, due 04/21/21 | 0.4 | ||||||
Citigroup, Inc. 3.875%, due 10/25/23 | 0.4 | ||||||
Cooperatieve Rabobank UA 5.500%, due 06/29/20 | 0.4 | ||||||
Imperial Brands Finance PLC 2.950%, due 07/21/20 | 0.4 | ||||||
Mirvac Group Finance Ltd. 3.625%, due 03/18/27 | 0.3 | ||||||
Dream Global Funding I Sarl 1.375%, due 12/21/21 | 0.3 | ||||||
BAT International Finance PLC 0.875%, due 10/13/23 | 0.3 | ||||||
Total | 4.3 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 62.3 | % | |||||
United Kingdom | 5.7 | ||||||
Netherlands | 3.5 | ||||||
France | 2.7 | ||||||
Australia | 2.2 | ||||||
Total | 76.4 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
9
UBS Dynamic Alpha Fund
Industry diversification—June 30, 2018 (unaudited)1,2
Corporate bonds | Percentage of net assets | ||||||
Advertising | 0.07 | % | |||||
Agriculture | 1.22 | ||||||
Airlines | 0.15 | ||||||
Auto manufacturers | 0.48 | ||||||
Banks | 10.84 | ||||||
Beverages | 0.88 | ||||||
Biotechnology | 0.36 | ||||||
Chemicals | 1.00 | ||||||
Commercial services | 0.53 | ||||||
Computers | 0.48 | ||||||
Cosmetics & personal care | 0.07 | ||||||
Diversified financial services | 0.42 | ||||||
Electric | 4.63 | ||||||
Electronics | 0.08 | ||||||
Engineering & construction | 0.24 | ||||||
Food | 0.36 | ||||||
Gas | 1.18 | ||||||
Healthcare-products | 0.52 | ||||||
Healthcare-services | 0.74 | ||||||
Household products/wares | 0.20 | ||||||
Insurance | 3.67 | ||||||
Internet | 0.70 | ||||||
Investment company security | 0.24 | ||||||
Iron & steel | 0.21 | ||||||
Machinery-constr & mining | 0.09 | ||||||
Media | 1.50 | ||||||
Mining | 0.49 | ||||||
Miscellaneous manufacturers | 0.53 | ||||||
Oil & gas | 1.94 | ||||||
Oil & gas services | 0.13 | ||||||
Pharmaceuticals | 1.88 | ||||||
Pipelines | 1.56 | ||||||
Real estate investment trusts | 2.02 | ||||||
Retail | 0.24 | ||||||
Savings & loans | 0.16 | ||||||
Semiconductors | 0.37 | ||||||
Software | 0.51 | ||||||
Telecommunications | 2.66 | ||||||
Transportation | 0.85 | ||||||
Water | 1.18 | ||||||
Total corporate bonds | 45.38 | % |
Percentage of net assets | |||||||
Collateralized mortgage obligations | 0.00 | %† | |||||
Collateralized debt obligations | 0.00 | † | |||||
Non-US government obligation | 0.24 | ||||||
Exchange traded funds | 4.51 | ||||||
Short-term investments | 37.87 | ||||||
Total investments | 88.00 | % | |||||
Other assets in excess of liabilities | 12.00 | ||||||
Net assets | 100.00 | % |
† Amount represents less than 0.005%.
1 Figures represent the breakdown of direct investments of UBS Dynamic Alpha Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
10
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds: 45.38% | |||||||||||
Australia: 2.22% | |||||||||||
APT Pipelines Ltd. 4.200%, due 03/23/252 | 20,000 | $ | 19,844 | ||||||||
Aurizon Network Pty. Ltd. 2.000%, due 09/18/242 | EUR | 100,000 | 120,853 | ||||||||
Australia & New Zealand Banking Group Ltd. 4.500%, due 03/19/242 | 200,000 | 199,723 | |||||||||
Australia Pacific Airports Melbourne Pty. Ltd. 1.750%, due 10/15/242 | EUR | 150,000 | 183,584 | ||||||||
Commonwealth Bank of Australia (fixed, converts to FRN on 10/03/24), 1.936%, due 10/03/292 | EUR | 100,000 | 114,241 | ||||||||
2.050%, due 09/18/203 | 60,000 | 58,419 | |||||||||
Mirvac Group Finance Ltd. 3.625%, due 03/18/272 | 270,000 | 251,369 | |||||||||
Optus Finance Pty. Ltd. 4.625%, due 10/15/192 | 100,000 | 101,629 | |||||||||
Origin Energy Finance Ltd. 5.450%, due 10/14/212 | 115,000 | 120,333 | |||||||||
Scentre Group Trust 1 2.375%, due 04/28/212 | 80,000 | 77,345 | |||||||||
SGSP Australia Assets Pty. Ltd. 3.250%, due 07/29/262 | 200,000 | 188,690 | |||||||||
Telstra Corp. Ltd. 4.800%, due 10/12/212 | 60,000 | 62,086 | |||||||||
Westpac Banking Corp. 2.800%, due 01/11/22 | 40,000 | 39,055 | |||||||||
(fixed, converts to FRN on 09/21/27), 5.000%, due 09/21/274 | 120,000 | 103,542 | |||||||||
Total Australia corporate bonds | 1,640,713 | ||||||||||
Belgium: 0.47% | |||||||||||
AG Insurance SA (fixed, converts to FRN on 06/30/27), 3.500%, due 06/30/472 | EUR | 100,000 | 113,604 | ||||||||
Anheuser-Busch InBev SA/NV 1.500%, due 03/17/252 | EUR | 100,000 | 121,374 | ||||||||
RESA SA 1.000%, due 07/22/262 | EUR | 100,000 | 115,245 | ||||||||
Total Belgium corporate bonds | 350,223 | ||||||||||
Bermuda: 0.29% | |||||||||||
Bacardi Ltd. 2.750%, due 07/03/232 | EUR | 170,000 | 211,689 | ||||||||
British Virgin Islands: 0.26% | |||||||||||
Sinopec Capital 2013 Ltd. 3.125%, due 04/24/232 | 200,000 | 193,472 | |||||||||
Canada: 1.23% | |||||||||||
Bell Canada, Inc. 4.750%, due 09/29/44 | CAD | 40,000 | 32,278 | ||||||||
Canadian Natural Resources Ltd. 2.950%, due 01/15/23 | 55,000 | 53,064 | |||||||||
3.850%, due 06/01/27 | 60,000 | 58,511 | |||||||||
4.950%, due 06/01/47 | 20,000 | 20,626 |
Face amount1 | Value | ||||||||||
Cenovus Energy, Inc. 4.250%, due 04/15/27 | 70,000 | $ | 67,399 | ||||||||
Nexen Energy ULC 6.400%, due 05/15/37 | 80,000 | 97,923 | |||||||||
Royal Bank of Canada 1.650%, due 07/15/21 | CAD | 230,000 | 169,388 | ||||||||
Suncor Energy, Inc. 6.500%, due 06/15/38 | 90,000 | 111,473 | |||||||||
TELUS Corp. 3.750%, due 01/17/25 | CAD | 45,000 | 34,960 | ||||||||
The Toronto Dominion Bank 2.045%, due 03/08/21 | CAD | 230,000 | 172,172 | ||||||||
Yamana Gold, Inc. 4.950%, due 07/15/24 | 90,000 | 89,902 | |||||||||
Total Canada corporate bonds | 907,696 | ||||||||||
Cayman Islands: 1.11% | |||||||||||
Alibaba Group Holding Ltd. 3.400%, due 12/06/27 | 200,000 | 186,348 | |||||||||
Noble Holding International Ltd. 7.950%, due 04/01/25 | 50,000 | 46,500 | |||||||||
Phoenix Group Holdings 4.125%, due 07/20/222 | GBP | 150,000 | 202,569 | ||||||||
Transocean, Inc. 6.800%, due 03/15/38 | 50,000 | 40,625 | |||||||||
Vale Overseas Ltd. 6.250%, due 08/10/26 | 80,000 | 86,640 | |||||||||
6.875%, due 11/21/36 | 60,000 | 67,362 | |||||||||
XLIT Ltd. 5.250%, due 12/15/43 | 45,000 | 49,446 | |||||||||
Yorkshire Water Services Bradford Finance Ltd. (fixed, converts to FRN on 03/22/23), 3.750%, due 03/22/462 | GBP | 100,000 | 137,172 | ||||||||
Total Cayman Islands corporate bonds | 816,662 | ||||||||||
Curacao: 0.05% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 40,000 | 38,305 | |||||||||
Czech Republic: 0.17% | |||||||||||
NET4GAS sro 2.500%, due 07/28/212 | EUR | 100,000 | 123,848 | ||||||||
Denmark: 0.22% | |||||||||||
Ap Moller Maersk A/S 1.750%, due 03/16/262 | EUR | 100,000 | 114,592 | ||||||||
Orsted A/S (fixed, converts to FRN on 11/06/20), 3.000%, due 11/06/152 | EUR | 40,000 | 48,113 | ||||||||
Total Denmark corporate bonds | 162,705 | ||||||||||
Finland: 0.38% | |||||||||||
Elenia Finance OYJ 2.875%, due 12/17/202 | EUR | 100,000 | 124,149 | ||||||||
Teollisuuden Voima OYJ 2.500%, due 03/17/212 | EUR | 125,000 | 152,515 | ||||||||
Total Finland corporate bonds | 276,664 |
11
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
France: 2.73% | |||||||||||
APRR SA 2.250%, due 01/16/202 | EUR | 100,000 | $ | 120,910 | |||||||
AXA SA (fixed, converts to FRN on 05/28/29), 3.250%, due 05/28/492 | EUR | 100,000 | 112,039 | ||||||||
(fixed, converts to FRN on 07/06/27), 3.375%, due 07/06/472 | EUR | 100,000 | 117,546 | ||||||||
Banque Federative du Credit Mutuel SA 3.000%, due 09/11/252 | EUR | 100,000 | 123,561 | ||||||||
BNP Paribas SA 1.000%, due 04/17/242 | EUR | 100,000 | 114,870 | ||||||||
1.250%, due 03/19/252 | EUR | 200,000 | 230,632 | ||||||||
BPCE SA 1.375%, due 03/23/262 | EUR | 100,000 | 113,806 | ||||||||
Credit Agricole SA 1.375%, due 03/13/252 | EUR | 100,000 | 115,938 | ||||||||
Credit Logement SA 3 mo. Euribor + 1.150%, 0.829%, due 09/16/182,4,5 | EUR | 100,000 | 109,589 | ||||||||
Electricite de France SA 6.950%, due 01/26/393 | 50,000 | 63,373 | |||||||||
Engie SA (fixed, converts to FRN on 07/10/21), 4.750%, due 07/10/212,4 | EUR | 100,000 | 126,706 | ||||||||
RTE Reseau de Transport d'Electricite SADIR 1.000%, due 10/19/262 | EUR | 100,000 | 115,394 | ||||||||
Sanofi 0.000%, due 01/13/202 | EUR | 100,000 | 117,076 | ||||||||
SCOR SE (fixed, converts to FRN on 03/13/29), 5.250%, due 03/13/292,4 | 200,000 | 178,000 | |||||||||
TDF Infrastructure SAS 2.875%, due 10/19/222 | EUR | 100,000 | 125,473 | ||||||||
Transport et Infrastructures Gaz France SA 2.200%, due 08/05/252 | EUR | 100,000 | 125,517 | ||||||||
Total France corporate bonds | 2,010,430 | ||||||||||
Germany: 0.73% | |||||||||||
ADLER Real Estate AG 3.000%, due 04/27/262 | EUR | 100,000 | 113,812 | ||||||||
Allianz SE (fixed, converts to FRN on 10/24/23), 4.750%, due 10/24/232,4 | EUR | 100,000 | 129,804 | ||||||||
Deutsche Bank AG 3.150%, due 01/22/21 | 155,000 | 149,945 | |||||||||
Henkel AG & Co. KGaA 1.500%, due 09/13/192 | 150,000 | 147,555 | |||||||||
Total Germany corporate bonds | 541,116 | ||||||||||
Hong Kong: 0.26% | |||||||||||
CNAC HK Finbridge Co. Ltd. 3.500%, due 07/19/222 | 200,000 | 193,118 |
Face amount1 | Value | ||||||||||
Ireland: 0.92% | |||||||||||
Aquarius & Investments PLC for Swiss Reinsurance Co. Ltd. (fixed, converts to FRN on 09/01/19), 6.375%, due 09/01/242 | 200,000 | $ | 204,162 | ||||||||
Fresenius Finance Ireland PLC 0.875%, due 01/31/222 | EUR | 30,000 | 35,543 | ||||||||
1.500%, due 01/30/242 | EUR | 50,000 | 59,744 | ||||||||
GAS Networks Ireland 1.375%, due 12/05/262 | EUR | 120,000 | 142,846 | ||||||||
GE Capital International Funding Co., Unlimited Co. 4.418%, due 11/15/35 | 200,000 | 193,636 | |||||||||
Shire Acquisitions Investments Ireland DAC 3.200%, due 09/23/26 | 50,000 | 45,803 | |||||||||
Total Ireland corporate bonds | 681,734 | ||||||||||
Italy: 0.40% | |||||||||||
CDP Reti SpA 1.875%, due 05/29/222 | EUR | 155,000 | 178,576 | ||||||||
Italgas SpA 1.625%, due 01/19/272 | EUR | 100,000 | 114,790 | ||||||||
Total Italy corporate bonds | 293,366 | ||||||||||
Japan: 0.28% | |||||||||||
Mitsubishi UFJ Financial Group, Inc. 2.665%, due 07/25/22 | 60,000 | 57,910 | |||||||||
Sumitomo Mitsui Financial Group, Inc. 2.934%, due 03/09/21 | 40,000 | 39,542 | |||||||||
3.102%, due 01/17/23 | 110,000 | 107,430 | |||||||||
Total Japan corporate bonds | 204,882 | ||||||||||
Jersey: 0.38% | |||||||||||
AA Bond Co. Ltd. 2.875%, due 01/31/222 | GBP | 174,000 | 225,134 | ||||||||
HSBC Bank Capital Funding Sterling 2 LP (fixed, converts to FRN on 04/07/20), 5.862%, due 04/07/204 | GBP | 40,000 | 55,693 | ||||||||
Total Jersey corporate bonds | 280,827 | ||||||||||
Luxembourg: 0.90% | |||||||||||
ADO Properties SA 1.500%, due 07/26/242 | EUR | 100,000 | 116,150 | ||||||||
Allergan Funding SCS 2.125%, due 06/01/29 | EUR | 100,000 | 113,967 | ||||||||
3.450%, due 03/15/22 | 70,000 | 68,861 | |||||||||
4.750%, due 03/15/45 | 20,000 | 19,238 | |||||||||
Aroundtown SA 1.000%, due 01/07/252 | EUR | 100,000 | 111,765 | ||||||||
Dream Global Funding I Sarl 1.375%, due 12/21/212 | EUR | 200,000 | 234,211 | ||||||||
Total Luxembourg corporate bonds | 664,192 |
12
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Mexico: 0.80% | |||||||||||
America Movil SAB de CV, Series A (fixed, converts to FRN on 09/06/18), 5.125%, due 09/06/732 | EUR | 145,000 | $ | 170,465 | |||||||
Mexichem SAB de CV 5.500%, due 01/15/483 | 200,000 | 174,512 | |||||||||
Mexico City Airport Trust 5.500%, due 07/31/472 | 200,000 | 178,200 | |||||||||
Petroleos Mexicanos 5.500%, due 02/24/252 | EUR | 50,000 | 64,472 | ||||||||
Total Mexico corporate bonds | 587,649 | ||||||||||
Netherlands: 3.47% | |||||||||||
Bharti Airtel International Netherlands BV 4.000%, due 12/10/182 | EUR | 100,000 | 118,455 | ||||||||
Cooperatieve Rabobank UA (fixed, converts to FRN on 06/29/20), 5.500%, due 06/29/202,4 | EUR | 250,000 | 311,966 | ||||||||
Demeter Investments BV for Swiss Life AG (fixed, converts to FRN on 06/16/25), 4.375%, due 06/16/252,4 | EUR | 100,000 | 122,618 | ||||||||
Deutsche Telekom International Finance BV 0.625%, due 04/03/232 | EUR | 30,000 | 35,126 | ||||||||
6.500%, due 04/08/222 | GBP | 40,000 | 61,995 | ||||||||
ELM BV for Swiss Reinsurance Co. Ltd. (fixed, converts to FRN on 09/01/25), 2.600%, due 09/01/252,4 | EUR | 130,000 | 150,788 | ||||||||
Iberdrola International BV (fixed, converts to FRN on 05/22/23), 1.875%, due 05/22/232,4 | EUR | 100,000 | 111,525 | ||||||||
(fixed, converts to FRN on 03/26/24), 2.625%, due 03/26/242,4 | EUR | 100,000 | 114,415 | ||||||||
ING Bank NV (fixed, converts to FRN on 11/21/18), 4.125%, due 11/21/232 | 210,000 | 210,504 | |||||||||
ING Groep NV 1.125%, due 02/14/252 | EUR | 200,000 | 230,762 | ||||||||
Mylan NV 3.125%, due 11/22/282 | EUR | 180,000 | 220,222 | ||||||||
Redexis Gas Finance BV 1.875%, due 04/27/272 | EUR | 100,000 | 112,572 | ||||||||
Ren Finance BV 2.500%, due 02/12/252 | EUR | 180,000 | 224,282 | ||||||||
Shell International Finance BV 4.375%, due 05/11/45 | 130,000 | 133,146 | |||||||||
Teva Pharmaceutical Finance Netherlands II BV 1.125%, due 10/15/242 | EUR | 100,000 | 98,825 | ||||||||
Teva Pharmaceutical Finance Netherlands III BV 2.800%, due 07/21/23 | 75,000 | 64,759 | |||||||||
Volkswagen International Finance NV 1.125%, due 10/02/232 | EUR | 100,000 | 116,709 | ||||||||
Vonovia Finance BV (fixed, converts to FRN on 12/17/21), 4.000%, due 12/17/212,4 | EUR | 100,000 | 123,441 | ||||||||
Total Netherlands corporate bonds | 2,562,110 |
Face amount1 | Value | ||||||||||
Poland: 0.16% | |||||||||||
Tauron Polska Energia SA 2.375%, due 07/05/272 | EUR | 100,000 | $ | 114,552 | |||||||
Portugal: 0.16% | |||||||||||
Galp Gas Natural Distribuicao SA 1.375%, due 09/19/232 | EUR | 100,000 | 117,899 | ||||||||
Singapore: 0.42% | |||||||||||
DBS Group Holdings Ltd. (fixed, converts to FRN on 04/11/23), 1.500%, due 04/11/282 | EUR | 100,000 | 115,384 | ||||||||
(fixed, converts to FRN on 09/07/21), 3.600%, due 09/07/212,4 | 200,000 | 190,909 | |||||||||
Total Singapore corporate bonds | 306,293 | ||||||||||
Spain: 1.25% | |||||||||||
Aigues de Barcelona Finance SAU 1.944%, due 09/15/212 | EUR | 175,000 | 212,431 | ||||||||
Banco Santander SA 4.000%, due 01/19/232 | AUD | 200,000 | 148,321 | ||||||||
Canal de Isabel II Gestion SA 1.680%, due 02/26/252 | EUR | 100,000 | 118,498 | ||||||||
FCC Aqualia SA 1.413%, due 06/08/222 | EUR | 150,000 | 178,267 | ||||||||
Santander Issuances SAU 3.250%, due 04/04/262 | EUR | 100,000 | 120,880 | ||||||||
Telefonica Emisiones SAU 5.213%, due 03/08/47 | 150,000 | 144,478 | |||||||||
Total Spain corporate bonds | 922,875 | ||||||||||
Sweden: 0.31% | |||||||||||
Fastighets AB Balder 1.875%, due 01/23/262 | EUR | 100,000 | 114,347 | ||||||||
Swedbank AB (fixed, converts to FRN on 11/22/22), 1.000%, due 11/22/272 | EUR | 100,000 | 114,690 | ||||||||
Total Sweden corporate bonds | 229,037 | ||||||||||
Switzerland: 0.16% | |||||||||||
Credit Suisse Group AG (fixed, converts to FRN on 07/17/24), 1.250%, due 07/17/252 | EUR | 100,000 | 115,189 | ||||||||
United Kingdom: 5.70% | |||||||||||
Anglian Water Services Financing PLC 4.500%, due 02/22/262 | GBP | 100,000 | 144,510 | ||||||||
Arqiva Financing PLC 4.882%, due 12/31/322 | GBP | 125,667 | 184,741 | ||||||||
Barclays Bank PLC 6.625%, due 03/30/222 | EUR | 50,000 | 68,841 | ||||||||
9.500%, due 08/07/212 | GBP | 80,000 | 125,771 | ||||||||
Barclays PLC (fixed, converts to FRN on 10/06/22), 2.375%, due 10/06/232 | GBP | 100,000 | 129,549 | ||||||||
4.375%, due 09/11/24 | 200,000 | 194,316 |
13
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
BAT International Finance PLC 0.875%, due 10/13/232 | EUR | 200,000 | $ | 233,067 | |||||||
BP Capital Markets PLC 3.497%, due 11/09/20 | CAD | 240,000 | 186,045 | ||||||||
BUPA Finance PLC (fixed, converts to FRN on 09/16/20), 6.125%, due 09/16/204 | GBP | 45,000 | 62,952 | ||||||||
Cadent Finance PLC 2.750%, due 09/22/462 | GBP | 100,000 | 119,341 | ||||||||
Diageo Capital PLC 3.875%, due 04/29/43 | 50,000 | 48,728 | |||||||||
HSBC Holdings PLC 5.100%, due 04/05/21 | 150,000 | 156,784 | |||||||||
Imperial Brands Finance PLC 2.950%, due 07/21/203 | 305,000 | 301,844 | |||||||||
Lloyds Banking Group PLC (fixed, converts to FRN on 11/07/27), 3.574%, due 11/07/28 | 220,000 | 202,899 | |||||||||
Nationwide Building Society (fixed, converts to FRN on 07/25/24), 2.000%, due 07/25/292 | EUR | 100,000 | 114,623 | ||||||||
Prudential PLC (fixed, converts to FRN on 07/20/35), 5.000%, due 07/20/552 | GBP | 100,000 | 132,990 | ||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 200,000 | 194,256 | |||||||||
Scottish Widows Ltd. 5.500%, due 06/16/232 | GBP | 100,000 | 144,460 | ||||||||
Sky PLC 2.500%, due 09/15/262 | EUR | 150,000 | 188,717 | ||||||||
SSE PLC (fixed, converts to FRN on 09/10/20), 3.875%, due 09/10/202,4 | GBP | 100,000 | 133,733 | ||||||||
Standard Chartered PLC (fixed, converts to FRN on 03/15/23), 3.885%, due 03/15/242 | 200,000 | 196,379 | |||||||||
State Grid Europe Development 2014 PLC, Series A 1.500%, due 01/26/222 | EUR | 125,000 | 150,306 | ||||||||
Tesco Property Finance 4 PLC 5.801%, due 10/13/402 | GBP | 137,169 | 212,067 | ||||||||
Thames Water Utilities Finance Ltd. 5.125%, due 09/28/37 | GBP | 50,000 | 82,877 | ||||||||
Virgin Money Holdings UK PLC (fixed, converts to FRN on 04/24/25), 3.375%, due 04/24/262 | GBP | 100,000 | 132,022 | ||||||||
Vodafone Group PLC 4.125%, due 05/30/25 | 55,000 | 54,714 | |||||||||
4.375%, due 02/19/43 | 25,000 | 22,411 | |||||||||
Wales & West Utilities Finance PLC (fixed, converts to FRN on 12/17/18), 6.750%, due 12/17/36 | GBP | 50,000 | 67,428 | ||||||||
Western Power Distribution West Midlands PLC 5.750%, due 04/16/322 | GBP | 100,000 | 171,814 |
Face amount1 | Value | ||||||||||
WPP Finance 2010 3.750%, due 09/19/24 | 50,000 | $ | 48,279 | ||||||||
Total United Kingdom corporate bonds | 4,206,464 | ||||||||||
United States: 19.95% | |||||||||||
21st Century Fox America, Inc. 6.200%, due 12/15/34 | 120,000 | 141,665 | |||||||||
ABB Finance USA, Inc. 2.875%, due 05/08/22 | 70,000 | 68,733 | |||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 70,000 | 68,780 | |||||||||
4.900%, due 11/30/46 | 90,000 | 96,294 | |||||||||
AbbVie, Inc. 1.375%, due 05/17/24 | EUR | 100,000 | 118,503 | ||||||||
2.900%, due 11/06/22 | 50,000 | 48,504 | |||||||||
4.400%, due 11/06/42 | 60,000 | 56,949 | |||||||||
Aetna, Inc. 3.500%, due 11/15/24 | 75,000 | 72,823 | |||||||||
Albemarle Corp. 5.450%, due 12/01/44 | 70,000 | 74,454 | |||||||||
Alphabet, Inc. 1.998%, due 08/15/26 | 180,000 | 160,772 | |||||||||
Altria Group, Inc. 4.250%, due 08/09/42 | 160,000 | 149,161 | |||||||||
Amazon.com, Inc. 2.800%, due 08/22/24 | 180,000 | 171,612 | |||||||||
American Airlines Pass-Through Trust, Series 2014-1, Class B 4.375%, due 10/01/22 | 62,775 | 62,775 | |||||||||
American Express Co. 3.400%, due 02/27/23 | 115,000 | 113,751 | |||||||||
Amgen, Inc. 4.400%, due 05/01/45 | 40,000 | 38,261 | |||||||||
Andeavor Logistics LP 3.500%, due 12/01/22 | 30,000 | 29,303 | |||||||||
4.250%, due 12/01/27 | 30,000 | 28,862 | |||||||||
Anheuser-Busch InBev Worldwide, Inc. 3.750%, due 01/15/22 | 100,000 | 101,333 | |||||||||
Apache Corp. 4.250%, due 01/15/44 | 120,000 | 106,011 | |||||||||
Apple, Inc. 3.850%, due 08/04/46 | 130,000 | 122,510 | |||||||||
AT&T, Inc. 3.000%, due 02/15/22 | 80,000 | 78,090 | |||||||||
4.750%, due 05/15/46 | 140,000 | 124,964 | |||||||||
5.000%, due 03/01/21 | 100,000 | 103,660 | |||||||||
5.550%, due 08/15/41 | 80,000 | 79,576 | |||||||||
AXA Equitable Holdings, Inc. 3.900%, due 04/20/233 | 50,000 | 49,590 | |||||||||
Baltimore Gas & Electric Co. 3.500%, due 08/15/46 | 60,000 | 53,638 | |||||||||
Bank of America Corp. 3.875%, due 08/01/25 | 460,000 | 457,556 | |||||||||
BAT Capital Corp. 3.557%, due 08/15/273 | 50,000 | 46,502 |
14
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Berkshire Hathaway, Inc. 3.125%, due 03/15/26 | 50,000 | $ | 48,159 | ||||||||
Broadcom Corp. 3.625%, due 01/15/24 | 160,000 | 154,822 | |||||||||
Burlington Northern Santa Fe LLC 3.000%, due 03/15/23 | 80,000 | 78,491 | |||||||||
5.400%, due 06/01/41 | 60,000 | 68,733 | |||||||||
Capital One Financial Corp. 2.500%, due 05/12/20 | 40,000 | 39,431 | |||||||||
3.200%, due 02/05/25 | 120,000 | 112,621 | |||||||||
Celgene Corp. 3.875%, due 08/15/25 | 100,000 | 97,146 | |||||||||
CF Industries, Inc. 5.150%, due 03/15/34 | 60,000 | 55,650 | |||||||||
Charter Communications Operating LLC 4.464%, due 07/23/22 | 80,000 | 80,891 | |||||||||
4.500%, due 02/01/246 | 80,000 | 79,891 | |||||||||
5.375%, due 05/01/47 | 40,000 | 36,298 | |||||||||
Chevron Phillips Chemical Co. LLC/ Chevron Phillips Chemical Co. LP 3.300%, due 05/01/233 | 155,000 | 153,850 | |||||||||
Citigroup, Inc. 3.875%, due 10/25/23 | 320,000 | 319,909 | |||||||||
4.600%, due 03/09/26 | 40,000 | 39,930 | |||||||||
Comcast Corp. 4.750%, due 03/01/44 | 20,000 | 19,676 | |||||||||
Consumers Energy Co. 3.250%, due 08/15/46 | 30,000 | 26,217 | |||||||||
CVS Health Corp. 3.350%, due 03/09/21 | 55,000 | 54,936 | |||||||||
4.300%, due 03/25/28 | 90,000 | 88,742 | |||||||||
5.050%, due 03/25/48 | 50,000 | 50,500 | |||||||||
5.125%, due 07/20/45 | 90,000 | 91,127 | |||||||||
Dell International LLC 3.480%, due 06/01/193 | 90,000 | 90,227 | |||||||||
8.350%, due 07/15/463 | 120,000 | 144,428 | |||||||||
Discovery Communications LLC 3.950%, due 03/20/28 | 20,000 | 18,933 | |||||||||
Dominion Energy, Inc., Series D 2.850%, due 08/15/26 | 40,000 | 36,221 | |||||||||
DTE Energy Co. 6.375%, due 04/15/33 | 80,000 | 95,710 | |||||||||
Duke Energy Carolinas LLC 4.000%, due 09/30/42 | 80,000 | 78,317 | |||||||||
Eaton Corp. 4.150%, due 11/02/42 | 60,000 | 57,814 | |||||||||
Eli Lilly & Co. 2.350%, due 05/15/22 | 30,000 | 29,179 | |||||||||
3.100%, due 05/15/27 | 45,000 | 43,058 | |||||||||
Enable Midstream Partners LP 3.900%, due 05/15/24 | 60,000 | 57,412 | |||||||||
Energy Transfer Partners LP 6.000%, due 06/15/48 | 70,000 | 69,777 | |||||||||
6.050%, due 06/01/41 | 110,000 | 109,716 |
Face amount1 | Value | ||||||||||
EnLink Midstream Partners LP 4.400%, due 04/01/24 | 80,000 | $ | 76,928 | ||||||||
Enterprise Products Operating LLC 4.850%, due 03/15/44 | 50,000 | 49,736 | |||||||||
ERAC USA Finance LLC 5.625%, due 03/15/423 | 40,000 | 43,334 | |||||||||
ERP Operating LP 3.375%, due 06/01/25 | 70,000 | 68,320 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 55,000 | 52,220 | |||||||||
Exxon Mobil Corp. 3.567%, due 03/06/45 | 30,000 | 27,785 | |||||||||
FedEx Corp. 4.550%, due 04/01/46 | 20,000 | 19,392 | |||||||||
Fifth Third Bancorp 2.600%, due 06/15/22 | 70,000 | 67,744 | |||||||||
Five Corners Funding Trust 4.419%, due 11/15/233 | 100,000 | 102,854 | |||||||||
Freeport-McMoRan, Inc. 3.550%, due 03/01/22 | 100,000 | 95,000 | |||||||||
3.875%, due 03/15/23 | 100,000 | 94,500 | |||||||||
General Electric Co. 2.125%, due 05/17/37 | EUR | 100,000 | 108,755 | ||||||||
4.125%, due 10/09/42 | 30,000 | 27,841 | |||||||||
4.375%, due 09/16/20 | 40,000 | 41,013 | |||||||||
6.750%, due 03/15/32 | 50,000 | 61,000 | |||||||||
General Motors Financial Co., Inc. 3.200%, due 07/06/21 | 80,000 | 78,953 | |||||||||
4.350%, due 04/09/25 | 160,000 | 157,645 | |||||||||
Gilead Sciences, Inc. 2.050%, due 04/01/19 | 40,000 | 39,808 | |||||||||
4.750%, due 03/01/46 | 30,000 | 30,941 | |||||||||
4.800%, due 04/01/44 | 55,000 | 57,281 | |||||||||
Glencore Funding LLC 2.500%, due 01/15/193 | 9,000 | 8,950 | |||||||||
4.125%, due 05/30/233 | 70,000 | 69,847 | |||||||||
HCP, Inc. 3.875%, due 08/15/24 | 70,000 | 68,430 | |||||||||
Honeywell International, Inc. 1.800%, due 10/30/19 | 60,000 | 59,251 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 100,000 | 92,390 | |||||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 540,000 | 530,166 | |||||||||
3.625%, due 12/01/27 | 120,000 | 112,844 | |||||||||
Kinder Morgan Energy Partners LP 5.000%, due 03/01/43 | 120,000 | 111,505 | |||||||||
Kinder Morgan, Inc. 3.150%, due 01/15/23 | 140,000 | 135,108 | |||||||||
5.625%, due 11/15/233 | 30,000 | 31,909 | |||||||||
Kraft Heinz Foods Co. 4.875%, due 02/15/253 | 50,000 | 50,966 | |||||||||
5.000%, due 06/04/42 | 80,000 | 76,323 | |||||||||
Liberty Mutual Group, Inc. 2.750%, due 05/04/262 | EUR | 140,000 | 174,292 | ||||||||
4.250%, due 06/15/233 | 100,000 | 101,159 |
15
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Lincoln National Corp. 3.800%, due 03/01/28 | 110,000 | $ | 105,066 | ||||||||
Lowe's Cos., Inc. 4.250%, due 09/15/44 | 70,000 | 68,198 | |||||||||
Marathon Oil Corp. 3.850%, due 06/01/25 | 70,000 | 68,836 | |||||||||
Medtronic, Inc. 3.150%, due 03/15/22 | 70,000 | 69,421 | |||||||||
4.625%, due 03/15/45 | 30,000 | 31,776 | |||||||||
Merck & Co., Inc. 3.700%, due 02/10/45 | 20,000 | 18,997 | |||||||||
Metropolitan Life Global Funding I 1.250%, due 09/17/212 | EUR | 100,000 | 120,774 | ||||||||
Microsoft Corp. 2.400%, due 08/08/26 | 50,000 | 46,236 | |||||||||
3.500%, due 11/15/42 | 50,000 | 46,786 | |||||||||
3.700%, due 08/08/46 | 90,000 | 87,361 | |||||||||
Molson Coors Brewing Co. 3.000%, due 07/15/26 | 40,000 | 36,322 | |||||||||
Monongahela Power Co. 5.400%, due 12/15/433 | 40,000 | 47,261 | |||||||||
Morgan Stanley 2.500%, due 04/21/21 | 328,000 | 320,330 | |||||||||
4.000%, due 07/23/25 | 90,000 | 89,699 | |||||||||
4.350%, due 09/08/26 | 70,000 | 69,131 | |||||||||
6.375%, due 07/24/42 | 40,000 | 48,554 | |||||||||
MPLX LP 5.200%, due 03/01/47 | 60,000 | 59,390 | |||||||||
Nabors Industries, Inc. 9.250%, due 01/15/19 | 30,000 | 31,050 | |||||||||
NBCUniversal Media LLC 4.375%, due 04/01/21 | 180,000 | 184,705 | |||||||||
Oncor Electric Delivery Co. LLC 7.250%, due 01/15/33 | 150,000 | 203,321 | |||||||||
ONEOK, Inc. 7.500%, due 09/01/23 | 80,000 | 91,661 | |||||||||
Oracle Corp. 2.400%, due 09/15/23 | 130,000 | 122,584 | |||||||||
Pacific Gas & Electric Co. 6.050%, due 03/01/34 | 130,000 | 140,383 | |||||||||
PacifiCorp 6.000%, due 01/15/39 | 80,000 | 99,754 | |||||||||
Philip Morris International, Inc. 4.250%, due 11/10/44 | 50,000 | 47,335 | |||||||||
Phillips 66 4.650%, due 11/15/34 | 50,000 | 50,238 | |||||||||
Phillips 66 Partners LP 4.680%, due 02/15/45 | 35,000 | 32,784 | |||||||||
PPL Capital Funding, Inc. 4.700%, due 06/01/43 | 90,000 | 91,204 | |||||||||
QUALCOMM, Inc. 3.250%, due 05/20/27 | 90,000 | 84,110 | |||||||||
4.300%, due 05/20/47 | 40,000 | 37,182 |
Face amount1 | Value | ||||||||||
Reynolds American, Inc. 4.450%, due 06/12/25 | 70,000 | $ | 70,350 | ||||||||
5.700%, due 08/15/35 | 45,000 | 48,286 | |||||||||
Roche Holdings, Inc. 2.625%, due 05/15/262 | 200,000 | 187,222 | |||||||||
Schlumberger Holdings Corp. 3.000%, due 12/21/203 | 100,000 | 99,395 | |||||||||
Sempra Energy 6.000%, due 10/15/39 | 70,000 | 82,918 | |||||||||
Southwestern Electric Power Co. 6.200%, due 03/15/40 | 105,000 | 129,740 | |||||||||
SunTrust Banks, Inc. 2.700%, due 01/27/22 | 110,000 | 107,147 | |||||||||
Swiss Re Treasury US Corp. 4.250%, due 12/06/423 | 50,000 | 50,055 | |||||||||
Teachers Insurance & Annuity Association of America 4.900%, due 09/15/443 | 40,000 | 42,075 | |||||||||
The Coca-Cola Co. 1.875%, due 09/22/26 | EUR | 105,000 | 131,115 | ||||||||
The Goldman Sachs Group, Inc. 2.000%, due 07/27/232 | EUR | 300,000 | 368,724 | ||||||||
5.150%, due 05/22/45 | 60,000 | 59,669 | |||||||||
The Hartford Financial Services Group, Inc. 4.300%, due 04/15/43 | 60,000 | 56,639 | |||||||||
4.400%, due 03/15/48 | 90,000 | 86,561 | |||||||||
The Home Depot, Inc. 4.875%, due 02/15/44 | 40,000 | 43,813 | |||||||||
The Kroger Co. 3.700%, due 08/01/27 | 100,000 | 95,058 | |||||||||
3.875%, due 10/15/46 | 20,000 | 16,631 | |||||||||
4.650%, due 01/15/48 | 30,000 | 28,305 | |||||||||
The Mosaic Co. 3.250%, due 11/15/22 | 60,000 | 58,266 | |||||||||
4.050%, due 11/15/27 | 30,000 | 28,658 | |||||||||
The Procter & Gamble Co. 2.450%, due 11/03/26 | 60,000 | 55,442 | |||||||||
The Southern Co. 3.250%, due 07/01/26 | 80,000 | 75,068 | |||||||||
4.400%, due 07/01/46 | 30,000 | 29,264 | |||||||||
The Walt Disney Co. 1.850%, due 07/30/26 | 30,000 | 26,167 | |||||||||
Thermo Fisher Scientific, Inc. 2.875%, due 07/24/37 | EUR | 100,000 | 119,875 | ||||||||
Time Warner Cable LLC 4.500%, due 09/15/42 | 60,000 | 49,264 | |||||||||
5.000%, due 02/01/20 | 150,000 | 153,127 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 37,929 | |||||||||
United Airlines Pass-Through Trust, Series 2016-1, Class B 3.650%, due 01/07/26 | 50,000 | 48,650 | |||||||||
UnitedHealth Group, Inc. 2.700%, due 07/15/20 | 130,000 | 129,107 | |||||||||
Valero Energy Corp. 4.900%, due 03/15/45 | 70,000 | 70,771 |
16
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Verizon Communications, Inc. 2.875%, due 01/15/38 | EUR | 110,000 | $ | 126,207 | |||||||
2.946%, due 03/15/22 | 190,000 | 186,322 | |||||||||
3.376%, due 02/15/25 | 50,000 | 48,022 | |||||||||
5.250%, due 03/16/37 | 30,000 | 30,791 | |||||||||
5.500%, due 03/16/47 | 150,000 | 157,060 | |||||||||
Virginia Electric & Power Co., Series C 4.000%, due 11/15/46 | 60,000 | 57,653 | |||||||||
VMware, Inc. 3.900%, due 08/21/27 | 80,000 | 73,842 | |||||||||
Walgreens Boots Alliance, Inc. 3.800%, due 11/18/24 | 70,000 | 68,722 | |||||||||
Wells Fargo & Co. 2.100%, due 07/26/21 | 100,000 | 96,095 | |||||||||
2.625%, due 07/22/22 | 110,000 | 105,959 | |||||||||
3.069%, due 01/24/23 | 130,000 | 126,376 | |||||||||
Williams Partners LP 4.300%, due 03/04/24 | 80,000 | 80,257 | |||||||||
4.900%, due 01/15/45 | 40,000 | 38,183 | |||||||||
Xcel Energy, Inc. 4.800%, due 09/15/41 | 100,000 | 106,642 | |||||||||
Total United States corporate bonds | 14,714,505 | ||||||||||
Total corporate bonds (cost $34,215,582) | 33,468,215 | ||||||||||
Collateralized debt obligations: 0.00%† | |||||||||||
Cayman Islands: 0.00%† | |||||||||||
LNR CDO IV Ltd., Series 2006-1A, Class FFX 7.592%, due 05/28/433,7,8 (cost $8,094,895) | 8,000,000 | 0 | |||||||||
Collateralized mortgage obligations: 0.00%† | |||||||||||
United States: 0.00%† | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11 3.916%, due 04/25/359 (cost $17,009) | 138,567 | 3,670 |
Face amount1 | Value | ||||||||||
Non-US government obligations: 0.24% | |||||||||||
Italy: 0.24% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.350%, due 04/15/22 (cost $165,095) | 150,000 | $ | 174,392 | ||||||||
Number of shares | |||||||||||
Exchange traded funds: 4.51% | |||||||||||
iShares Edge MSCI Minimum Volatility Emerging Markets ETF (cost $3,076,900) | 57,500 | 3,325,800 | |||||||||
Short-term investments: 37.87% | |||||||||||
Investment companies: 1.43% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $1,050,191) | 1,050,191 | 1,050,191 | |||||||||
Face amount1 | |||||||||||
U.S. treasury obligations: 36.44% | |||||||||||
US Treasury Bills 1.879%, due 09/06/1810 | 12,500,000 | 12,456,916 | |||||||||
2.012%, due 10/18/1810 | 14,500,000 | 14,415,610 | |||||||||
Total U.S. treasury obligations (cost $26,871,018) | 26,872,526 | ||||||||||
Total short-term investments (cost $27,921,209) | 27,922,717 | ||||||||||
Total investments: 88.00% (cost $73,490,690) | 64,894,794 | ||||||||||
Other assets in excess of liabilities: 12.00% | 8,845,367 | ||||||||||
Net assets: 100.00% | $ | 73,740,161 |
For a listing of defined portfolio acronyms, counterparty acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
17
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
30 | CAD | S&P TSX 60 Index Futures | September 2018 | $ | 4,359,778 | $ | 4,396,445 | $ | 36,667 | ||||||||||||||||||
17 | EUR | CAC 40 10 Index Futures | July 2018 | 1,083,370 | 1,056,258 | (27,112 | ) | ||||||||||||||||||||
7 | EUR | DAX Index Futures | September 2018 | 2,622,425 | 2,515,427 | (106,998 | ) | ||||||||||||||||||||
4 | EUR | EURO STOXX 50 Index Futures | September 2018 | 162,000 | 158,400 | (3,600 | ) | ||||||||||||||||||||
394 | EUR | EURO STOXX 600 Bank Index Futures | September 2018 | 3,819,234 | 3,690,108 | (129,126 | ) | ||||||||||||||||||||
36 | GBP | FTSE 100 Index Futures | September 2018 | 3,636,018 | 3,611,550 | (24,468 | ) | ||||||||||||||||||||
32 | HKD | Hang Seng Index Futures | July 2018 | 2,267,013 | 2,216,580 | (50,433 | ) | ||||||||||||||||||||
43 | JPY | TOPIX Index Futures | September 2018 | 6,860,001 | 6,720,995 | (139,006 | ) | ||||||||||||||||||||
119 | USD | MSCI Emerging Markets E-Mini Index Futures | September 2018 | 6,729,510 | 6,326,635 | (402,875 | ) | ||||||||||||||||||||
26 | USD | NASDAQ 100 E-Mini Index Futures | September 2018 | 3,797,388 | 3,674,710 | (122,678 | ) | ||||||||||||||||||||
70 | USD | Russell 1000 Value E-Mini Index Futures | September 2018 | 4,259,156 | 4,156,950 | (102,206 | ) | ||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
3 | CAD | Canada Government Bond 10 Year Futures | September 2018 | $ | 308,502 | $ | 311,969 | $ | 3,467 | ||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
21 | USD | US Treasury Note 5 Year Futures | September 2018 | $ | 2,391,406 | $ | 2,385,961 | $ | (5,445 | ) | |||||||||||||||||
$ | 42,295,801 | $ | 41,221,988 | $ | (1,073,813 | ) | |||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
22 | AUD | ASX SPI 200 Index Futures | September 2018 | $ | (2,458,019 | ) | $ | (2,502,405 | ) | $ | (44,386 | ) | |||||||||||||||
444 | SEK | OMX 30 Index Futures | July 2018 | (7,776,165 | ) | (7,738,119 | ) | 38,046 | |||||||||||||||||||
97 | USD | MSCI Taiwan Index Futures | July 2018 | (3,745,946 | ) | (3,759,720 | ) | (13,774 | ) | ||||||||||||||||||
19 | USD | S&P 500 E-Mini Index Futures | September 2018 | (2,631,015 | ) | (2,585,520 | ) | 45,495 | |||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
32 | EUR | German Euro Bund Futures | September 2018 | $ | (6,025,030 | ) | $ | (6,074,428 | ) | $ | (49,398 | ) | |||||||||||||||
16 | GBP | United Kingdom Long Gilt Bond Futures | September 2018 | (2,580,566 | ) | (2,598,536 | ) | (17,970 | ) | ||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
20 | USD | Ultra Long US Treasury Bond Futures | September 2018 | $ | (3,122,377 | ) | $ | (3,191,250 | ) | $ | (68,873 | ) | |||||||||||||||
7 | USD | US Treasury Note 10 Year Futures | September 2018 | (838,313 | ) | (841,313 | ) | (3,000 | ) | ||||||||||||||||||
$ | (29,177,431 | ) | $ | (29,291,291 | ) | $ | (113,860 | ) | |||||||||||||||||||
$ | (1,187,673 | ) |
18
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | AUD | 2,991,587 | USD | 2,290,000 | 07/23/18 | $ | 75,960 | ||||||||||||
BB | CAD | 6,908,839 | USD | 5,340,000 | 07/23/18 | 82,845 | |||||||||||||
BB | EUR | 200,000 | USD | 243,036 | 07/23/18 | 9,140 | |||||||||||||
BB | JPY | 340,361,748 | EUR | 2,610,000 | 07/23/18 | (25,941 | ) | ||||||||||||
BB | NOK | 12,266,737 | USD | 1,530,000 | 07/23/18 | 22,636 | |||||||||||||
BB | SEK | 3,850,000 | USD | 428,498 | 07/23/18 | (1,979 | ) | ||||||||||||
BB | USD | 765,000 | CLP | 480,458,250 | 07/23/18 | (29,629 | ) | ||||||||||||
BB | USD | 2,290,000 | COP | 6,494,898,000 | 07/23/18 | (75,954 | ) | ||||||||||||
BB | USD | 1,535,000 | GBP | 1,137,738 | 07/23/18 | (32,115 | ) | ||||||||||||
BB | USD | 4,575,000 | SEK | 39,512,440 | 07/23/18 | (157,027 | ) | ||||||||||||
BB | USD | 276,876 | SEK | 2,480,000 | 07/23/18 | 418 | |||||||||||||
BOA | USD | 430,226 | CNY | 2,730,000 | 07/23/18 | (18,338 | ) | ||||||||||||
CITI | GBP | 6,020,000 | USD | 8,576,334 | 07/23/18 | 624,270 | |||||||||||||
CITI | NOK | 2,560,000 | USD | 321,001 | 07/23/18 | 6,423 | |||||||||||||
CITI | USD | 6,502,305 | JPY | 693,600,000 | 07/23/18 | (229,283 | ) | ||||||||||||
CSI | BRL | 1,610,000 | USD | 469,388 | 07/23/18 | 54,969 | |||||||||||||
CSI | EUR | 365,000 | USD | 432,053 | 07/23/18 | 5,193 | |||||||||||||
CSI | KRW | 7,115,000,000 | USD | 6,684,517 | 07/23/18 | 297,587 | |||||||||||||
CSI | USD | 197,362 | GBP | 145,000 | 07/23/18 | (5,826 | ) | ||||||||||||
GSI | CNY | 30,130,000 | USD | 4,771,558 | 07/23/18 | 225,695 | |||||||||||||
GSI | JPY | 50,800,000 | USD | 459,234 | 07/23/18 | (209 | ) | ||||||||||||
GSI | USD | 2,100,000 | CAD | 2,790,312 | 07/23/18 | 23,237 | |||||||||||||
GSI | USD | 4,971,038 | CHF | 4,805,000 | 07/23/18 | (110,881 | ) | ||||||||||||
GSI | USD | 1,106,247 | EUR | 900,000 | 07/23/18 | (53,716 | ) | ||||||||||||
GSI | USD | 2,290,000 | TRY | 10,652,324 | 07/23/18 | 8,443 | |||||||||||||
JPMCB | AUD | 745,000 | USD | 577,670 | 07/23/18 | 26,304 | |||||||||||||
JPMCB | CAD | 3,090,000 | USD | 2,460,597 | 07/23/18 | 109,318 | |||||||||||||
JPMCB | CHF | 7,046,986 | USD | 7,291,311 | 07/23/18 | 163,434 | |||||||||||||
JPMCB | CLP | 2,061,100,000 | USD | 3,463,393 | 07/23/18 | 308,754 | |||||||||||||
JPMCB | HKD | 4,095,000 | USD | 522,670 | 07/23/18 | 604 | |||||||||||||
JPMCB | NZD | 10,086,963 | USD | 7,261,260 | 07/23/18 | 429,299 | |||||||||||||
JPMCB | SEK | 7,620,000 | USD | 912,105 | 07/23/18 | 60,096 | |||||||||||||
JPMCB | SGD | 3,370,000 | USD | 2,576,002 | 07/23/18 | 101,680 | |||||||||||||
JPMCB | TWD | 14,400,000 | USD | 494,166 | 07/23/18 | 21,288 | |||||||||||||
JPMCB | USD | 4,699,075 | INR | 309,810,000 | 07/23/18 | (187,823 | ) | ||||||||||||
JPMCB | USD | 3,815,000 | JPY | 417,921,042 | 07/23/18 | (35,259 | ) | ||||||||||||
JPMCB | USD | 577,211 | KRW | 616,000,000 | 07/23/18 | (24,246 | ) | ||||||||||||
JPMCB | USD | 3,289,959 | MXN | 60,090,000 | 07/23/18 | (273,796 | ) | ||||||||||||
JPMCB | USD | 6,100,000 | MXN | 124,795,520 | 07/23/18 | 163,999 | |||||||||||||
JPMCB | USD | 4,323,465 | NOK | 33,520,000 | 07/23/18 | (204,453 | ) | ||||||||||||
MSCI | EUR | 13,045,000 | USD | 16,224,039 | 07/23/18 | 968,179 | |||||||||||||
MSCI | EUR | 460,000 | USD | 534,962 | 07/23/18 | (2,999 | ) | ||||||||||||
MSCI | INR | 154,323,100 | USD | 2,290,000 | 07/23/18 | 42,847 | |||||||||||||
MSCI | JPY | 33,000,000 | USD | 302,863 | 07/23/18 | 4,406 | |||||||||||||
MSCI | KRW | 2,443,659,000 | USD | 2,290,000 | 07/23/18 | 96,398 |
19
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Forward foreign currency contracts—(Concluded)
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
MSCI | USD | 3,050,000 | CNY | 19,533,725 | 07/23/18 | $ | (102,850 | ) | |||||||||||
MSCI | USD | 1,103,709 | EUR | 920,000 | 07/23/18 | (27,788 | ) | ||||||||||||
MSCI | USD | 191,206 | EUR | 165,000 | 07/23/18 | 1,758 | |||||||||||||
MSCI | USD | 970,822 | GBP | 715,000 | 07/23/18 | (26,349 | ) | ||||||||||||
MSCI | USD | 2,468,545 | MYR | 9,594,000 | 07/23/18 | (94,531 | ) | ||||||||||||
$ | 2,214,188 |
Credit default swap agreements on corporate issues—sell protection11
Counterparty | Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio12 | Upfront payments received | Value | Unrealized appreciation | |||||||||||||||||||||||||||
JPMCB | Teck Resources Ltd. bond, 3.150%, due 3/20/20 | USD | 90 | 03/20/20 | Quarterly | 1.000 | % | $ | 2,501 | $ | 1,077 | $ | 3,578 |
Centrally cleared credit default swap agreements on credit indices—buy protection13
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments made by the Portfolio12 | Upfront payments received | Value | Unrealized appreciation | ||||||||||||||||||||||||
CDX North America Investment Grade 30 Index | USD | 16,400 | 06/20/23 | Quarterly | 1.000 | % | $ | 286,278 | $ | (247,608 | ) | $ | 38,670 | ||||||||||||||||||
iTraxx Europe Series 29 Index | EUR | 7,600 | 06/20/23 | Quarterly | 1.000 | 191,694 | (117,712 | ) | 73,982 | ||||||||||||||||||||||
$477,972 | $(365,320) | $112,652 |
Centrally cleared credit default swap agreements on credit indices—sell protection11
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio12 | Upfront payments made | Value | Unrealized depreciation | ||||||||||||||||||||||||
CDX North America High Yield 30 Index | USD | 2,000 | 06/20/23 | Quarterly | 5.000 | % | $ | (133,938 | ) | $ | 118,056 | $ | (15,882 | ) | |||||||||||||||||
iTraxx Europe Crossover Series 29 Index | EUR | 700 | 06/20/23 | Quarterly | 5.000 | (70,921 | ) | 66,316 | (4,605 | ) | |||||||||||||||||||||
$(204,859) | $184,372 | $(20,487) |
20
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 33,468,215 | $ | — | $ | 33,468,215 | |||||||||||
Collateralized debt obligations | — | — | 0 | 0 | |||||||||||||||
Collateralized mortgage obligations | — | 3,670 | — | 3,670 | |||||||||||||||
Non-US government obligations | — | 174,392 | — | 174,392 | |||||||||||||||
Exchange traded funds | 3,325,800 | — | — | 3,325,800 | |||||||||||||||
Short-term investments | — | 27,922,717 | — | 27,922,717 | |||||||||||||||
Futures contracts | 85,629 | 38,046 | — | 123,675 | |||||||||||||||
Forward foreign currency contracts | — | 3,935,180 | — | 3,935,180 | |||||||||||||||
Swap agreements | — | 185,449 | — | 185,449 | |||||||||||||||
Total | $ | 3,411,429 | $ | 65,727,669 | $ | 0 | $ | 69,139,098 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (772,445 | ) | $ | (538,903 | ) | $ | — | $ | (1,311,348 | ) | ||||||||
Forward foreign currency contracts | — | (1,720,992 | ) | — | (1,720,992 | ) | |||||||||||||
Swap agreements | — | (365,320 | ) | — | (365,320 | ) | |||||||||||||
Total | $ | (772,445 | ) | $ | (2,625,215 | ) | $ | — | $ | (3,397,660 | ) |
At June 30, 2018, $38,046 and $(538,903) of futures contracts were classified within Level 2 of the fair value hierarchy pursuant to the Portfolio's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
Level 3 rollforward disclosure
The following is a rollforward of the Fund's investments that were valued using unobservable inputs for the period ended June 30, 2018:
Assets | Collaterallized debt obligation | ||||||
Beginning balance | $ | 0 | |||||
Purchases | — | ||||||
Sales | — | ||||||
Accrued discounts/(premiums) | (426 | ) | |||||
Total realized gain/(loss) | — | ||||||
Net change in unrealized appreciation/depreciation | 426 | ||||||
Transfers into Level 3 | — | ||||||
Transfers out of Level 3 | — | ||||||
Ending balance | $ | 0 |
The change in net unrealized appreciation (depreciation) relating to the Level 3 investments held at June 30, 2018 was $426.
21
UBS Dynamic Alpha Fund
Portfolio of investments
June 30, 2018
Portfolio footnotes
† Amount represents less than 0.005%.
1 In US dollars unless otherwise indicated.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
3 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $1,730,550, represented 2.35% of the Fund's net assets at period end.
4 Perpetual investment. Date shown reflects the next call date.
5 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
6 When Issued Security.
7 Illiquid investment at period end. Illiquid assets, in the amount of $0, represented 0.00% of the Fund's net assets at period end.
8 Significant unobservable inputs were used in the valuation of this security; i.e. Level 3.
9 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
10 Rate shown is the discount rate at the date of purchase unless otherwise noted.
11 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
12 Payments made or received are based on the notional amount.
13 If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
See accompanying notes to financial statements.
22
UBS Global Allocation Fund
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS Global Allocation Fund (the "Fund") gained 6.34% (Class A shares returned 0.49% after the deduction of the maximum sales charge), while Class P shares increased 6.56%. In contrast, the Fund's benchmark, the 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD), gained 7.32% during the same time period. For comparison purposes, the MSCI All Country World Index (net) returned 10.73% and the FTSE World Government Bond Index (Hedged in USD) returned 2.12%. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 25; 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. Currency positioning and security selection were additive for results, whereas the market allocation strategy was a headwind for performance.
During the review period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. With respect to our active currency strategy, utilizing currency forwards had a direct positive impact on Fund performance. We used a variety of equity and fixed income options, futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, detracted from performance during the reporting period.
Portfolio performance summary
What worked:
• Certain market allocations were positive for returns.
– The Fund's long exposure to global equities (US, developed ex-US and emerging markets) contributed to results over the reporting period. Strong performance in equity markets was experienced worldwide.
– The Fund benefited from certain equity relative value trades during the reporting period, including a long position in Chinese H shares versus Chinese A shares1 and a long position in Canadian versus US equities.
– The Fund also benefited from short exposure to US 2-year Treasury notes.
• Overall, active currency positions were positive for results
– In New Zealand, deteriorating business confidence and a dovish Reserve Bank of New Zealand weighed on the New Zealand dollar the US dollar.
– The Fund maintained a preference for the Colombian peso relative to the US dollar. This contributed to performance on the back of rising oil prices and more attractive valuations.
• Overall, the portfolio's bottom-up security selection was positive for results.
– Positive security selection came from US, non-US developed and emerging market equities.
1 China A shares are Chinese companies listed on the Shanghai or Shenzhen stock exchanges and trade with a face value in Chinese renminbi. China H shares are Chinese companies listed on the Hong Kong Stock Exchange and are quoted and trade with a face value of Hong Kong dollars.
23
UBS Global Allocation Fund
What didn't work:
• Overall, market allocations detracted from results.
– A preference for US value stocks over the broader US equity market detracted from performance. Negative sector rotation and momentum was experienced throughout the reporting period, with information technology stocks a particular drag on relative results.
– The Fund's preference for ex-US equities over US equities negatively impacted performance. A preference for emerging market equities, in particular, weighed on returns as these markets came under pressure in the first half of 2018 given rising trade tensions and a strengthening US dollar.
– The Fund's performance was also negatively impacted by long exposure to emerging market debt and a bearish stance on US high yield fixed income.
• Certain active currency positions were negative for performance.
– The Fund's preference for the Turkish lira over the South African rand detracted from performance. We closed the trade in December 2017 after the political outlook in South Africa improved more than we expected and energy prices rebounded.
– The Fund's preference for the Swedish Krona versus euro detracted from returns over the period as the Riksbank pushed out policy rate increases further than market expectations.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 17, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
24
UBS Global Allocation Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 6.34 | % | 5.83 | % | 3.99 | % | |||||||||
Class C2 | 5.48 | 5.02 | 3.19 | ||||||||||||
Class P3 | 6.56 | 6.12 | 4.28 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 0.49 | % | 4.64 | % | 3.40 | % | |||||||||
Class C2 | 4.48 | 5.02 | 3.19 | ||||||||||||
MSCI All Country World Index (net)4 | 10.73 | 9.41 | 5.80 | ||||||||||||
FTSE World Government Bond Index (Hedged in USD)5 | 2.12 | 3.40 | 3.95 | ||||||||||||
60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)6 | 7.32 | 7.12 | 5.44 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 27, 2017 prospectuses were as follows: Class A—1.50% and 1.31%; Class C—2.27% and 2.06%; Class P—1.23% 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 Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, and extraordinary expenses to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, and extraordinary expenses), through the period ending October 29, 2018, do not exceed 1.20% for Class A shares, 1.95% for Class C shares and 0.95% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The 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 FTSE World Government Bond Index (Hedged in USD) is an unmanaged market capitalization-weighted index designed to measure the performance of fixed-rate, local currency, investment-grade sovereign bonds with a one-year minimum maturity and is hedged back to the US dollar. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD) is a unmanaged blended benchmark compiled by the Advisor. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
25
UBS Global Allocation Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS Global Allocation Fund Class A and Class P shares versus the MSCI All Country World Index (net), FTSE World Government Bond Index (Hedged in USD), and the 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD) over the 10 years ended June 30, 2018. 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.
UBS Global Allocation Fund Class A vs. MSCI All Country World Index (net), FTSE World Government Bond Index (Hedged in USD) and 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2008 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS Global Allocation Fund Class P vs. MSCI All Country World Index (net), FTSE World Government Bond Index (Hedged in USD) and 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2008 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
26
UBS Global Allocation Fund
Portfolio statistics—June 30, 2018 (unaudited)1
Top ten equity holdings
Percentage of net assets | |||||||
Amazon.com, Inc. | 1.4 | % | |||||
Visa, Inc., Class A | 0.7 | ||||||
Facebook, Inc., Class A | 0.7 | ||||||
Microsoft Corp. | 0.7 | ||||||
Sanofi | 0.7 | ||||||
Sony Corp. | 0.7 | ||||||
BP PLC | 0.6 | ||||||
JPMorgan Chase & Co. | 0.5 | ||||||
AIA Group Ltd. | 0.5 | ||||||
Philip Morris International, Inc. | 0.5 | ||||||
Total | 7.0 | % |
Top ten long-term fixed income holdings
Percentage of net assets | |||||||
U.S. Treasury Notes 1.000%, due 03/15/19 | 1.3 | % | |||||
U.S. Treasury Notes 1.875%, due 10/31/22 | 1.1 | ||||||
U.S. Treasury Notes 1.500%, due 08/15/22 | 1.0 | ||||||
New Zealand Government Bond 2.000%, due 09/20/25 | 0.9 | ||||||
U.S. Treasury Notes 1.875%, due 10/31/22 | 0.7 | ||||||
Japan Government Twenty Year Bond 0.400%, due 03/20/36 | 0.5 | ||||||
U.S. Treasury Notes 2.000%, due 11/30/22 | 0.5 | ||||||
U.S. Treasury Notes 2.500%, due 05/15/24 | 0.5 | ||||||
Japan Government Five Year Bond 0.100%, due 12/20/19 | 0.5 | ||||||
France Government Bond OAT 0.500%, due 05/25/26 | 0.4 | ||||||
Total | 7.4 | % |
Top five issuer breakdown by country or territory of origin2
Percentage of net assets | |||||||
United States | 30.5 | % | |||||
Japan | 6.3 | ||||||
United Kingdom | 4.7 | ||||||
France | 1.9 | ||||||
Germany | 1.8 | ||||||
Total | 45.2 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
2 Figures represent the direct investments of UBS Global Allocation Fund. If a breakdown of the underlying investment companies and exchange traded funds was included, the country or territory of origin breakdown would be as follows: United States: 34.4%, Japan: 6.4%, United Kingdom: 5.0%, France: 2.0% and Germany: 1.8%.
27
UBS Global Allocation Fund
Industry diversification—June 30, 2018 (unaudited)1,2
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 0.58 | % | |||||
Airlines | 0.55 | ||||||
Auto components | 1.02 | ||||||
Automobiles | 0.38 | ||||||
Banks | 3.97 | ||||||
Biotechnology | 1.20 | ||||||
Building products | 0.51 | ||||||
Capital markets | 0.10 | ||||||
Chemicals | 1.36 | ||||||
Commercial services & supplies | 0.51 | ||||||
Communications equipment | 0.14 | ||||||
Construction & engineering | 0.15 | ||||||
Consumer finance | 0.81 | ||||||
Distributors | 0.24 | ||||||
Diversified financial services | 0.97 | ||||||
Diversified telecommunication services | 0.82 | ||||||
Electric utilities | 0.14 | ||||||
Electrical equipment | 0.31 | ||||||
Electronic equipment, instruments & components | 0.28 | ||||||
Energy equipment & services | 0.09 | ||||||
Equity real estate investment trusts | 0.42 | ||||||
Food & staples retailing | 1.11 | ||||||
Food products | 0.31 | ||||||
Health care equipment & supplies | 0.70 | ||||||
Health care providers & services | 0.82 | ||||||
Hotels, restaurants & leisure | 0.43 | ||||||
Household durables | 1.05 | ||||||
Industrial conglomerates | 0.16 | ||||||
Insurance | 2.10 | ||||||
Internet & direct marketing retail | 1.84 | ||||||
Internet software & services | 1.56 | ||||||
IT services | 1.40 | ||||||
Life sciences tools & services | 0.20 | ||||||
Machinery | 1.83 | ||||||
Marine | 0.11 | ||||||
Media | 0.15 | ||||||
Metals & mining | 1.18 | ||||||
Multi-utilities | 0.31 | ||||||
Multiline retail | 0.20 | ||||||
Oil, gas & consumable fuels | 2.99 | ||||||
Personal products | 0.64 | ||||||
Pharmaceuticals | 2.57 | ||||||
Professional services | 0.23 | ||||||
Real estate management & development | 0.14 | ||||||
Road & rail | 0.25 | ||||||
Semiconductors & semiconductor equipment | 2.55 | ||||||
Software | 3.27 | ||||||
Specialty retail | 0.75 |
Common stocks—(Continued) | Percentage of net assets | ||||||
Technology hardware, storage & peripherals | 0.70 | % | |||||
Textiles, apparel & luxury goods | 0.17 | ||||||
Tobacco | 0.97 | ||||||
Trading companies & distributors | 0.69 | ||||||
Wireless telecommunication services | 0.15 | ||||||
Total common stocks | 46.08 | % | |||||
Non-US government obligations | 5.80 | ||||||
U.S. treasury obligations | 6.91 | ||||||
Investment company | 7.15 | ||||||
Exchange traded funds | 9.41 | ||||||
Short-term investments | 20.32 | ||||||
Options purchased | 0.19 | ||||||
Total investments | 95.86 | % | |||||
Other assets in excess of liabilities | 4.14 | ||||||
Net assets | 100.00 | % |
1 Figures represent the breakdown of direct investments of UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
28
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks: 46.08% | |||||||||||
Australia: 0.65% | |||||||||||
Insurance Australia Group Ltd. | 97,664 | $ | 616,133 | ||||||||
Rio Tinto Ltd. | 10,215 | 631,136 | |||||||||
Wesfarmers Ltd. | 20,967 | 765,008 | |||||||||
Total Australia common stocks | 2,012,277 | ||||||||||
Austria: 0.42% | |||||||||||
Erste Group Bank AG* | 31,185 | 1,300,100 | |||||||||
Belgium: 0.07% | |||||||||||
Galapagos NV* | 2,176 | 200,404 | |||||||||
Bermuda: 0.61% | |||||||||||
Jardine Matheson Holdings Ltd. | 8,000 | 504,105 | |||||||||
Marvell Technology Group Ltd. | 41,555 | 890,939 | |||||||||
Norwegian Cruise Line Holdings Ltd.* | 10,047 | 474,721 | |||||||||
Total Bermuda common stocks | 1,869,765 | ||||||||||
Canada: 1.38% | |||||||||||
Enerplus Corp. | 38,847 | 489,928 | |||||||||
Husky Energy, Inc. | 66,642 | 1,038,675 | |||||||||
Paramount Resources Ltd., Class A* | 23,493 | 266,087 | |||||||||
Suncor Energy, Inc. | 31,720 | 1,290,853 | |||||||||
The Toronto-Dominion Bank | 20,059 | 1,160,985 | |||||||||
Total Canada common stocks | 4,246,528 | ||||||||||
Cayman Islands: 0.32% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 2,901 | 538,223 | |||||||||
Ctrip.com International Ltd., ADR* | 4,900 | 233,387 | |||||||||
Tencent Holdings Ltd., ADR | 4,100 | 206,025 | |||||||||
Total Cayman Islands common stocks | 977,635 | ||||||||||
Denmark: 0.11% | |||||||||||
AP Moller—Maersk A/S, Class B | 274 | 338,965 | |||||||||
Finland: 0.19% | |||||||||||
Sampo Oyj, Class A | 12,115 | 590,009 | |||||||||
France: 1.30% | |||||||||||
Publicis Groupe SA | 6,693 | 459,290 | |||||||||
Sanofi | 25,155 | 2,018,928 | |||||||||
Thales SA | 7,416 | 954,097 | |||||||||
Valeo SA | 10,139 | 552,814 | |||||||||
Total France common stocks | 3,985,129 | ||||||||||
Germany: 1.63% | |||||||||||
Deutsche Telekom AG (Registered) | 98,132 | 1,516,571 | |||||||||
Infineon Technologies AG | 31,075 | 789,346 | |||||||||
LANXESS AG | 10,131 | 787,643 | |||||||||
SAP SE | 10,270 | 1,185,340 | |||||||||
thyssenkrupp AG | 29,700 | 719,924 | |||||||||
Total Germany common stocks | 4,998,824 | ||||||||||
Hong Kong: 0.67% | |||||||||||
AIA Group Ltd. | 185,917 | 1,619,599 | |||||||||
Power Assets Holdings Ltd. | 62,500 | 436,610 | |||||||||
Total Hong Kong common stocks | 2,056,209 |
Number of shares | Value | ||||||||||
Ireland: 1.02% | |||||||||||
Allegion PLC | 10,953 | $ | 847,324 | ||||||||
Allergan PLC | 8,278 | 1,380,109 | |||||||||
Ryanair Holdings PLC, ADR* | 7,892 | 901,503 | |||||||||
Total Ireland common stocks | 3,128,936 | ||||||||||
Italy: 0.78% | |||||||||||
Autogrill SpA | 40,772 | 503,598 | |||||||||
Banca Mediolanum SpA | 142,989 | 965,870 | |||||||||
Mediobanca Banca di Credito Finanziario SpA | 100,337 | 928,120 | |||||||||
Total Italy common stocks | 2,397,588 | ||||||||||
Japan: 5.24% | |||||||||||
Chiyoda Corp. | 53,900 | 467,351 | |||||||||
Inpex Corp. | 76,900 | 798,674 | |||||||||
ITOCHU Corp. | 54,800 | 991,104 | |||||||||
Katitas Co. Ltd. | 11,900 | 421,807 | |||||||||
Makita Corp. | 15,000 | 670,995 | |||||||||
MINEBEA MITSUMI, Inc. | 48,300 | 813,940 | |||||||||
Nabtesco Corp. | 19,300 | 592,991 | |||||||||
Nintendo Co. Ltd. | 1,800 | 587,572 | |||||||||
ORIX Corp. | 75,700 | 1,193,191 | |||||||||
Otsuka Holdings Co. Ltd. | 26,800 | 1,296,389 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 11,900 | 1,057,534 | |||||||||
Sony Corp. | 39,400 | 2,017,845 | |||||||||
Sumitomo Electric Industries Ltd. | 45,100 | 670,755 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 26,100 | 1,018,056 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 23,900 | 1,005,427 | |||||||||
Tokyo Electron Ltd. | 2,500 | 429,133 | |||||||||
Toyota Industries Corp. | 15,700 | 878,819 | |||||||||
Toyota Motor Corp. | 18,100 | 1,170,509 | |||||||||
Total Japan common stocks | 16,082,092 | ||||||||||
Jersey: 0.84% | |||||||||||
Aptiv PLC | 11,156 | 1,022,224 | |||||||||
Glencore PLC* | 133,623 | 634,414 | |||||||||
Shire PLC | 16,535 | 931,563 | |||||||||
Total Jersey common stocks | 2,588,201 | ||||||||||
Netherlands: 1.52% | |||||||||||
ABN AMRO Group NV CVA1 | 48,001 | 1,241,391 | |||||||||
ASR Nederland NV | 27,209 | 1,107,975 | |||||||||
Koninklijke Ahold Delhaize NV | 32,705 | 780,916 | |||||||||
Unilever NV CVA | 27,669 | 1,541,632 | |||||||||
Total Netherlands common stocks | 4,671,914 | ||||||||||
Norway: 0.84% | |||||||||||
Equinor ASA | 35,255 | 932,232 | |||||||||
Telenor ASA | 49,138 | 1,006,370 | |||||||||
Yara International ASA | 15,618 | 646,151 | |||||||||
Total Norway common stocks | 2,584,753 | ||||||||||
Spain: 0.24% | |||||||||||
Banco Santander SA | 137,387 | 734,260 |
29
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
United Kingdom: 4.63% | |||||||||||
Anglo American PLC | 44,726 | $ | 992,958 | ||||||||
Ashtead Group PLC | 38,235 | 1,138,613 | |||||||||
Babcock International Group PLC | 74,147 | 796,670 | |||||||||
Barclays PLC | 305,710 | 755,634 | |||||||||
BP PLC | 230,856 | 1,756,472 | |||||||||
British American Tobacco PLC | 27,549 | 1,387,736 | |||||||||
Centrica PLC | 463,698 | 962,813 | |||||||||
GlaxoSmithKline PLC | 52,184 | 1,052,078 | |||||||||
HSBC Holdings PLC | 143,421 | 1,340,176 | |||||||||
LivaNova PLC* | 9,000 | 898,380 | |||||||||
Sensata Technologies Holding NV* | 8,614 | 409,854 | |||||||||
Spectris PLC | 12,138 | 417,042 | |||||||||
Tesco PLC | 352,695 | 1,193,377 | |||||||||
The Sage Group PLC | 134,468 | 1,110,597 | |||||||||
Total United Kingdom common stocks | 14,212,400 | ||||||||||
United States: 23.62% | |||||||||||
Abbott Laboratories | 9,662 | 589,285 | |||||||||
Activision Blizzard, Inc. | 6,170 | 470,894 | |||||||||
Adobe Systems, Inc.* | 2,158 | 526,142 | |||||||||
AGCO Corp. | 11,965 | 726,515 | |||||||||
Alexion Pharmaceuticals, Inc.* | 3,065 | 380,520 | |||||||||
Alnylam Pharmaceuticals, Inc.* | 4,274 | 420,946 | |||||||||
Alphabet, Inc., Class A* | 1,309 | 1,478,110 | |||||||||
Amazon.com, Inc.* | 2,523 | 4,288,595 | |||||||||
American Express Co. | 14,307 | 1,402,086 | |||||||||
Anthem, Inc. | 2,446 | 582,221 | |||||||||
Apple, Inc. | 6,898 | 1,276,889 | |||||||||
Arista Networks, Inc.* | 1,660 | 427,433 | |||||||||
Ashland Global Holdings, Inc. | 8,458 | 661,246 | |||||||||
Autodesk, Inc.* | 4,617 | 605,243 | |||||||||
Bank of America Corp. | 11,041 | 311,246 | |||||||||
Bio-Rad Laboratories, Inc., Class A* | 2,108 | 608,242 | |||||||||
Booking Holdings, Inc.* | 331 | 670,967 | |||||||||
Broadcom, Inc. | 3,800 | 922,032 | |||||||||
Cboe Global Markets, Inc. | 3,040 | 316,373 | |||||||||
Cirrus Logic, Inc.* | 11,445 | 438,687 | |||||||||
Coherus Biosciences, Inc.* | 12,738 | 178,332 | |||||||||
Concho Resources, Inc.* | 5,621 | 777,665 | |||||||||
Diamondback Energy, Inc. | 1,061 | 139,596 | |||||||||
Dollar General Corp. | 6,381 | 629,167 | |||||||||
Eastman Chemical Co. | 5,180 | 517,793 | |||||||||
Electronic Arts, Inc.* | 3,628 | 511,621 | |||||||||
Expedia Group, Inc. | 3,759 | 451,794 | |||||||||
Facebook, Inc., Class A* | 10,880 | 2,114,202 | |||||||||
First Republic Bank | 2,884 | 279,142 | |||||||||
Gardner Denver Holdings, Inc.* | 40,673 | 1,195,379 | |||||||||
GoDaddy Inc., Class A* | 6,255 | 441,603 | |||||||||
Halliburton Co. | 5,799 | 261,303 | |||||||||
Hess Corp. | 13,948 | 932,982 | |||||||||
Illinois Tool Works, Inc. | 3,786 | 524,512 | |||||||||
Incyte Corp.* | 12,625 | 845,875 | |||||||||
Ironwood Pharmaceuticals, Inc.* | 24,350 | 465,572 |
Number of shares | Value | ||||||||||
Jabil, Inc. | 15,649 | $ | 432,851 | ||||||||
Johnson & Johnson | 9,306 | 1,129,190 | |||||||||
JPMorgan Chase & Co. | 16,114 | 1,679,079 | |||||||||
KLA-Tencor Corp. | 4,086 | 418,938 | |||||||||
Laboratory Corp. of America Holdings* | 3,641 | 653,669 | |||||||||
Lam Research Corp. | 2,782 | 480,869 | |||||||||
Lexicon Pharmaceuticals, Inc.* | 22,435 | 269,220 | |||||||||
LKQ Corp.* | 23,332 | 744,291 | |||||||||
Marsh & McLennan Cos., Inc. | 18,925 | 1,551,282 | |||||||||
Masco Corp. | 18,954 | 709,259 | |||||||||
Mastercard, Inc., Class A | 2,317 | 455,337 | |||||||||
MetLife, Inc. | 22,454 | 978,994 | |||||||||
Microchip Technology, Inc. | 5,003 | 455,023 | |||||||||
Micron Technology, Inc.* | 16,841 | 883,142 | |||||||||
Microsoft Corp. | 21,053 | 2,076,036 | |||||||||
Mohawk Industries, Inc.* | 1,482 | 317,548 | |||||||||
Mondelez International, Inc., Class A | 23,076 | 946,116 | |||||||||
MSA Safety ,Inc. | 3,774 | 363,587 | |||||||||
Newell Brands, Inc. | 33,976 | 876,241 | |||||||||
Nike, Inc., Class B | 6,512 | 518,876 | |||||||||
Noble Energy, Inc. | 21,962 | 774,819 | |||||||||
NVIDIA Corp. | 2,406 | 569,981 | |||||||||
Parker-Hannifin Corp. | 2,890 | 450,407 | |||||||||
Philip Morris International, Inc. | 19,757 | 1,595,180 | |||||||||
Rockwell Automation, Inc. | 3,291 | 547,063 | |||||||||
salesforce.com, Inc.* | 10,648 | 1,452,387 | |||||||||
ServiceNow, Inc.* | 3,548 | 611,924 | |||||||||
Simon Property Group, Inc. | 7,578 | 1,289,700 | |||||||||
Skyworks Solutions, Inc. | 4,764 | 460,441 | |||||||||
Spirit AeroSystems Holdings, Inc., Class A | 9,649 | 828,946 | |||||||||
Spirit Airlines, Inc.* | 21,521 | 782,288 | |||||||||
Square, Inc., Class A* | 5,815 | 358,437 | |||||||||
Steel Dynamics, Inc. | 13,750 | 631,813 | |||||||||
Stericycle, Inc.* | 6,416 | 418,901 | |||||||||
Synchrony Financial | 32,831 | 1,095,899 | |||||||||
T-Mobile US, Inc.* | 7,804 | 466,289 | |||||||||
Take-Two Interactive Software, Inc.* | 4,068 | 481,488 | |||||||||
Teradyne, Inc. | 11,489 | 437,386 | |||||||||
The Cooper Cos., Inc. | 2,840 | 668,678 | |||||||||
The Estee Lauder Cos., Inc., Class A | 3,038 | 433,492 | |||||||||
The Home Depot, Inc. | 5,095 | 994,035 | |||||||||
The Sherwin-Williams Co. | 1,209 | 492,752 | |||||||||
The TJX Cos., Inc. | 13,623 | 1,296,637 | |||||||||
The Ultimate Software Group, Inc.* | 1,681 | 432,538 | |||||||||
Union Pacific Corp. | 5,439 | 770,598 | |||||||||
UnitedHealth Group, Inc. | 5,169 | 1,268,162 | |||||||||
Universal Display Corp. | 7,772 | 668,392 | |||||||||
Verisk Analytics, Inc.* | 6,519 | 701,705 | |||||||||
Visa, Inc., Class A | 16,150 | 2,139,067 | |||||||||
Voya Financial, Inc. | 17,436 | 819,492 | |||||||||
Wabtec Corp. | 6,518 | 642,544 | |||||||||
Walgreens Boots Alliance, Inc. | 11,318 | 679,250 | |||||||||
Wells Fargo & Co. | 25,875 | 1,434,510 | |||||||||
Western Digital Corp. | 11,311 | 875,585 |
30
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Worldpay, Inc., Class A* | 16,355 | $ | 1,332,634 | ||||||||
Yum! Brands, Inc. | 4,328 | 338,536 | |||||||||
Total United States common stocks | 72,551,714 | ||||||||||
Total common stocks (cost $126,235,974) | 141,527,703 | ||||||||||
Face amount | |||||||||||
Non-US government obligations: 5.80% | |||||||||||
Australia: 0.55% | |||||||||||
Commonwealth of Australia 2.250%, due 11/21/22 | AUD | 1,220,000 | 903,327 | ||||||||
4.500%, due 04/15/202 | 625,000 | 482,707 | |||||||||
4.500%, due 04/21/332 | 122,000 | 108,685 | |||||||||
5.500%, due 04/21/232 | 230,000 | 195,038 | |||||||||
1,689,757 | |||||||||||
Austria: 0.07% | |||||||||||
Republic of Austria 1.200%, due 10/20/251,2 | EUR | 47,000 | 58,679 | ||||||||
3.150%, due 06/20/441,2 | 86,000 | 141,457 | |||||||||
200,136 | |||||||||||
Belgium: 0.09% | |||||||||||
Kingdom of Belgium 3.750%, due 06/22/452 | 161,000 | 280,478 | |||||||||
Canada: 0.34% | |||||||||||
Government of Canada 1.500%, due 06/01/23 | CAD | 1,100,000 | 814,083 | ||||||||
2.250%, due 06/01/25 | 206,000 | 157,801 | |||||||||
2.750%, due 12/01/64 | 82,000 | 72,900 | |||||||||
1,044,784 | |||||||||||
Finland: 0.03% | |||||||||||
Republic of Finland 0.500%, due 04/15/261,2 | EUR | 85,000 | 100,749 | ||||||||
France: 0.64% | |||||||||||
France Government Bond OAT 0.500%, due 05/25/262 | 952,000 | 1,127,457 | |||||||||
2.500%, due 05/25/302 | 336,000 | 469,487 | |||||||||
3.250%, due 05/25/452 | 216,000 | 354,045 | |||||||||
1,950,989 | |||||||||||
Germany: 0.16% | |||||||||||
Federal Republic of Germany 1.500%, due 05/15/232 | 270,000 | 343,455 | |||||||||
2.500%, due 08/15/462 | 100,000 | 160,353 | |||||||||
503,808 | |||||||||||
Ireland: 0.02% | |||||||||||
Republic of Ireland 2.000%, due 02/18/452 | 48,000 | 60,736 |
Face amount | Value | ||||||||||
Italy: 0.96% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.600%, due 06/01/26 | EUR | 950,000 | $ | 1,047,727 | |||||||
1.650%, due 03/01/321,2 | 60,000 | 60,614 | |||||||||
2.550%, due 09/15/412 | 368,947 | 478,621 | |||||||||
3.250%, due 09/01/461,2 | 215,000 | 247,712 | |||||||||
4.000%, due 02/01/372 | 309,000 | 405,914 | |||||||||
4.250%, due 02/01/192 | 560,000 | 669,820 | |||||||||
4.750%, due 09/01/441,2 | 25,000 | 35,746 | |||||||||
2,946,154 | |||||||||||
Japan: 1.08% | |||||||||||
Japan Government Five Year Bond 0.100%, due 12/20/19 | JPY | 155,000,000 | 1,404,569 | ||||||||
Japan Government Thirty Year Bond 0.300%, due 06/20/46 | 41,000,000 | 333,851 | |||||||||
Japan Government Twenty Year Bond 0.400%, due 03/20/36 | 176,350,000 | 1,591,140 | |||||||||
3,329,560 | |||||||||||
Netherlands: 0.08% | |||||||||||
Kingdom of the Netherlands 2.750%, due 01/15/471,2 | EUR | 139,000 | 232,405 | ||||||||
New Zealand: 0.92% | |||||||||||
New Zealand Government Bond 2.000%, due 09/20/252,3 | NZD | 3,967,392 | 2,818,107 | ||||||||
Spain: 0.79% | |||||||||||
Kingdom of Spain 1.450%, due 10/31/271,2 | EUR | 120,000 | 142,465 | ||||||||
3.450%, due 07/30/661,2 | 10,000 | 13,706 | |||||||||
3.750%, due 10/31/18 | 920,000 | 1,088,901 | |||||||||
4.200%, due 01/31/371,2 | 44,000 | 68,741 | |||||||||
4.800%, due 01/31/241,2 | 640,000 | 922,359 | |||||||||
5.150%, due 10/31/441,2 | 110,000 | 197,940 | |||||||||
2,434,112 | |||||||||||
United Kingdom: 0.07% | |||||||||||
United Kingdom Gilt 3.500%, due 01/22/452 | GBP | 120,000 | 216,517 | ||||||||
Total non-US government obligations (cost $17,761,882) | 17,808,292 | ||||||||||
U.S. treasury obligations: 6.91% | |||||||||||
US Treasury Bonds 2.250%, due 08/15/46 | $ | 230,000 | 197,872 | ||||||||
2.500%, due 02/15/46 | 590,000 | 535,863 | |||||||||
2.750%, due 11/15/42 | 543,000 | 521,513 | |||||||||
2.750%, due 08/15/47 | 430,000 | 409,894 | |||||||||
2.875%, due 05/15/43 | 1,045,000 | 1,025,365 | |||||||||
2.875%, due 08/15/45 | 50,000 | 48,953 | |||||||||
3.000%, due 11/15/45 | 125,000 | 125,317 | |||||||||
US Treasury Notes 1.000%, due 03/15/19 | 4,100,000 | 4,064,285 | |||||||||
1.250%, due 03/31/21 | 637,000 | 614,083 |
31
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Face amount | Value | ||||||||||
U.S. treasury obligations—(Concluded) | |||||||||||
1.375%, due 09/30/23 | $ | 400,000 | $ | 373,031 | |||||||
1.500%, due 08/15/20 | 3,000,000 | 2,934,844 | |||||||||
1.500%, due 02/28/23 | 444,000 | 420,204 | |||||||||
1.625%, due 12/31/19 | 770,000 | 760,375 | |||||||||
1.750%, due 05/15/23 | 680,000 | 649,427 | |||||||||
1.875%, due 07/31/22 | 2,300,000 | 2,226,059 | |||||||||
1.875%, due 10/31/22 | 3,490,000 | 3,370,577 | |||||||||
2.000%, due 11/30/22 | 1,575,000 | 1,528,365 | |||||||||
2.500%, due 05/15/24 | 1,440,000 | 1,417,163 | |||||||||
Total U.S. treasury obligations (cost $21,692,745) | 21,223,190 | ||||||||||
Number of shares | |||||||||||
Exchange traded funds: 9.41% | |||||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 127,600 | 14,619,132 | |||||||||
iShares JPMorgan USD Emerging Markets Bond ETF | 133,700 | 14,275,149 | |||||||||
Total exchange traded funds (cost $30,860,257) | 28,894,281 | ||||||||||
Investment companies: 7.15% | |||||||||||
UBS Emerging Markets Equity Opportunity Fund*,4 (cost $23,342,123) | 2,334,212 | 21,964,938 | |||||||||
Short-term investments: 20.32% | |||||||||||
Investment companies: 10.27% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $31,553,353) | 31,553,353 | 31,553,353 |
Face amount | Value | ||||||||||
U.S. treasury obligations: 10.05% | |||||||||||
US Treasury Bills 1.879%, due 09/06/185 | $ | 15,000,000 | $ | 14,948,300 | |||||||
2.012%, due 10/18/185 | 16,000,000 | 15,906,880 | |||||||||
Total U.S. treasury obligations (cost $30,853,552) | 30,855,180 | ||||||||||
Total short-term investments (cost $62,406,905) | 62,408,533 |
Number of contracts | Notional amount | ||||||||||||||
Options purchased: 0.19% | |||||||||||||||
Call options: 0.19% | |||||||||||||||
iShares MSCI Emerging Markets Index, strike @ 50, expires 12/21/18 | 4,656 | USD | 23,280,000 | 135,024 | |||||||||||
S&P 500 Index, strike @ 2,900, expires 12/21/18 | 171 | USD | 49,590,000 | 444,600 |
Total options purchased (cost $1,245,554) | 579,624 | ||||||
Total investments: 95.86% (cost $283,545,440) | 294,406,561 | ||||||
Other assets in excess of liabilities: 4.14% | 12,712,465 | ||||||
Net assets: 100.00% | $ | 307,119,026 |
For a listing of defined portfolio acronyms, counterparty acronyms and currency type abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
155 | EUR | EURO STOXX 50 Index Futures | September 2018 | $ | 6,279,318 | $ | 6,138,015 | $ | (141,303 | ) | |||||||||||||||||
106 | HKD | Hang Seng Index Futures | July 2018 | 7,509,482 | 7,342,421 | (167,061 | ) | ||||||||||||||||||||
20 | JPY | TOPIX Index Futures | September 2018 | 3,211,914 | 3,126,045 | (85,869 | ) | ||||||||||||||||||||
140 | USD | MSCI Emerging Markets E-Mini Index Futures | September 2018 | 7,911,470 | 7,443,100 | (468,370 | ) | ||||||||||||||||||||
494 | USD | Russell 1000 E-Mini Index Futures | September 2018 | 30,049,651 | 29,336,190 | (713,461 | ) | ||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
84 | AUD | Australian Bond 10 Year Futures | September 2018 | $ | 7,943,502 | $ | 8,041,665 | $ | 98,163 | ||||||||||||||||||
323 | CAD | Canada Government Bond 10 Year Futures | September 2018 | 32,756,007 | 33,588,659 | 832,652 | |||||||||||||||||||||
46 | GBP | United Kingdom Long Gilt Bond Futures | September 2018 | 7,368,193 | 7,470,791 | 102,598 |
32
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Futures contracts—(Concluded)
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
77 | USD | US Ultra Treasury Bond Futures | September 2018 | $ | 12,057,831 | $ | 12,286,312 | $ | 228,481 | ||||||||||||||||||
$ | 115,087,368 | $ | 114,773,198 | $ | (314,170 | ) | |||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
24 | CAD | S&P TSX 60 Index Futures | September 2018 | $ | (3,497,320 | ) | $ | (3,517,164 | ) | $ | (19,844 | ) | |||||||||||||||
526 | SEK | OMX 30 Index Futures | July 2018 | (9,189,108 | ) | (9,167,232 | ) | 21,876 | |||||||||||||||||||
211 | USD | S&P 500 E-Mini Index Futures | September 2018 | (29,422,794 | ) | (28,712,880 | ) | 709,914 | |||||||||||||||||||
687 | USD | SGX FTSE China A50 Index Futures | July 2018 | (8,239,191 | ) | (7,921,110 | ) | 318,081 | |||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
188 | EUR | German Euro Bund Futures | September 2018 | $ | (35,305,257 | ) | $ | (35,687,268 | ) | $ | (382,011 | ) | |||||||||||||||
21 | JPY | JGB MINI 10 Year Futures | September 2018 | (2,857,851 | ) | (2,861,075 | ) | (3,224 | ) | ||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
219 | USD | US Treasury Note 2 Year Futures | September 2018 | $ | (46,393,472 | ) | $ | (46,390,360 | ) | $ | 3,112 | ||||||||||||||||
$ | (134,904,993 | ) | $ | (134,257,089 | ) | $ | 647,904 | ||||||||||||||||||||
$ | 333,734 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | USD | 599,346 | ILS | 2,100,000 | 07/23/18 | $ | (24,495 | ) | |||||||||||
CITI | CAD | 20,005,000 | USD | 15,926,959 | 07/23/18 | 704,520 | |||||||||||||
CITI | CNY | 46,570,000 | USD | 7,254,459 | 07/23/18 | 228,213 | |||||||||||||
CITI | GBP | 5,565,000 | USD | 7,928,123 | 07/23/18 | 577,087 | |||||||||||||
CITI | USD | 13,818,795 | MXN | 252,530,000 | 07/23/18 | (1,143,279 | ) | ||||||||||||
CSI | USD | 6,109,116 | CNY | 39,135,000 | 07/23/18 | (204,625 | ) | ||||||||||||
GSI | CHF | 5,830,000 | USD | 6,070,495 | 07/23/18 | 173,572 | |||||||||||||
GSI | CNY | 11,420,000 | USD | 1,808,536 | 07/23/18 | 85,544 | |||||||||||||
GSI | JPY | 89,500,000 | USD | 831,361 | 07/23/18 | 21,910 | |||||||||||||
GSI | NZD | 14,630,000 | USD | 10,693,695 | 07/23/18 | 784,707 | |||||||||||||
GSI | USD | 10,403,448 | COP | 28,141,326,837 | 07/23/18 | (810,351 | ) | ||||||||||||
GSI | USD | 1,731,950 | INR | 118,500,000 | 07/23/18 | (6,430 | ) | ||||||||||||
JPMCB | CLP | 4,154,100,000 | USD | 6,980,390 | 07/23/18 | 622,287 | |||||||||||||
JPMCB | INR | 118,500,000 | USD | 1,797,361 | 07/23/18 | 71,841 | |||||||||||||
JPMCB | USD | 712,284 | DKK | 4,260,000 | 07/23/18 | (43,550 | ) | ||||||||||||
JPMCB | USD | 1,363,874 | EUR | 1,155,000 | 07/23/18 | (13,125 | ) | ||||||||||||
JPMCB | USD | 1,513,764 | HKD | 11,860,000 | 07/23/18 | (1,750 | ) | ||||||||||||
JPMCB | USD | 4,309,350 | JPY | 459,200,000 | 07/23/18 | (156,276 | ) | ||||||||||||
JPMCB | USD | 4,314,437 | NOK | 33,450,000 | 07/23/18 | (204,026 | ) | ||||||||||||
JPMCB | USD | 1,765,746 | SGD | 2,310,000 | 07/23/18 | (69,698 | ) | ||||||||||||
MSCI | EUR | 7,360,000 | USD | 9,165,297 | 07/23/18 | 557,927 | |||||||||||||
MSCI | USD | 6,663,057 | SEK | 55,680,000 | 07/23/18 | (437,354 | ) | ||||||||||||
$ | 712,649 |
33
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Centrally cleared credit default swap agreements on credit indices—sell protection7
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio6 | Upfront payments made (received) | Value | Unrealized depreciation | ||||||||||||||||||||||||
CDX Emerging Markets Series 29 Index | USD | 18,000 | 06/20/23 | Quarterly | 1.000 | % | $ | 321,232 | $ | (717,200 | ) | $ | (395,968 | ) | |||||||||||||||||
CDX North America Investment Grade 30 Index | USD | 13,000 | 06/20/23 | Quarterly | 1.000 | (228,437 | ) | 196,275 | (32,162 | ) | |||||||||||||||||||||
iTraxx Europe Series 29 Index | EUR | 19,000 | 06/20/23 | Quarterly | 1.000 | (481,579 | ) | 294,280 | (187,299 | ) | |||||||||||||||||||||
$ | (388,784 | ) | $ | (226,645 | ) | $ | (615,429 | ) |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 83,906,999 | $ | 57,620,704 | $ | — | $ | 141,527,703 | |||||||||||
Non-US government obligations | — | 17,808,292 | — | 17,808,292 | |||||||||||||||
U.S. treasury obligations | — | 21,223,190 | — | 21,223,190 | |||||||||||||||
Exchange traded funds | 28,894,281 | — | — | 28,894,281 | |||||||||||||||
Investment companies | 21,964,938 | — | — | 21,964,938 | |||||||||||||||
Short-term investments | — | 62,408,533 | — | 62,408,533 | |||||||||||||||
Options purchased | 444,600 | 135,024 | — | 579,624 | |||||||||||||||
Futures contracts | 1,974,920 | 339,957 | — | 2,314,877 | |||||||||||||||
Forward foreign currency contracts | — | 3,827,608 | — | 3,827,608 | |||||||||||||||
Swap agreements | — | 490,555 | — | 490,555 | |||||||||||||||
Total | $ | 137,185,738 | $ | 163,853,863 | $ | — | $ | 301,039,601 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (1,586,910 | ) | $ | (394,233 | ) | $ | — | $ | (1,981,143 | ) | ||||||||
Forward foreign currency contracts | — | (3,114,959 | ) | — | (3,114,959 | ) | |||||||||||||
Swap agreements | — | (717,200 | ) | — | (717,200 | ) | |||||||||||||
Total | $ | (1,586,910 | ) | $ | (4,226,392 | ) | $ | — | $ | (5,813,302 | ) |
At June 30, 2018, $57,620,704 of foreign investments, $339,957 and $(394,233) of futures contracts were classified within Level 2 of the fair value hierarchy pursuant to the Portfolio's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
34
UBS Global Allocation Fund
Portfolio of investments
June 30, 2018
Portfolio footnotes
* Non-income producing security.
1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $3,463,964, represented 1.13% of the Fund's net assets at period end.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
3 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional security of the same maturity.
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 Funds.
Security description | Value 6/30/17 | Purchases during the year ended 6/30/18 | Sales during the year ended 6/30/18 | Net realized gain during the year ended 6/30/18 | Change in net unrealized appreciation (depreciation) during the year ended 6/30/18 | Value 6/30/18 | Net income earned from affiliate for the year ended 6/30/18 | Shares 6/30/18 | |||||||||||||||||||||||||||
UBS Global Corporate Bond Relationship Fund | $ | 51,581,219 | $ | — | $ | 52,322,531 | $ | 3,816,560 | $ | (3,075,248 | ) | $ | — | $ | — | — | |||||||||||||||||||
UBS-HALO Emerging Markets Equity Relationship Fund | 24,479,787 | — | 30,094,428 | 10,339,211 | (4,724,570 | ) | — | — | — | ||||||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 23,342,123 | — | — | (1,377,185 | ) | 21,964,938 | — | 2,334,212 | ||||||||||||||||||||||||||
$ | 76,061,006 | $ | 23,342,123 | $ | 82,416,959 | $ | 14,155,771 | $ | (9,177,003 | ) | $ | 21,964,938 | $ | — |
5 Rate shown is the discount rate at the date of purchase unless otherwise noted.
6 Payments made or received are based on the notional amount.
7 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
See accompanying notes to financial statements.
35
UBS Emerging Markets Equity Opportunity Fund
Portfolio performance
For the period from its inception on June 4, 2018 through June 30, 2018, Class P2 shares of UBS Emerging Markets Equity Opportunity Fund (the "Fund") returned -5.90%. The Fund's benchmark, the MSCI Emerging Markets Index (net) (the "Index"), returned -6.35%. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.
The Fund posted a negative return, but outperformed its benchmark during the short period from its inception through the end of June 2018. The Fund did not use derivatives during the reporting period.
Portfolio performance summary1
What worked:
• The Fund's holdings in Banorte, a leading Mexican bank, contributed to performance over the reporting period. The stock was supported by improved market sentiments towards Andrés Manuel López Obrador as Mexico's new President-elect.
• The Fund's position in HDFC Bank, one of Indian's leading bank, was also additive for results. The stock benefited from foreign inflows ahead of a regulatory change with respect to foreign ownership limit.
What didn't work:
• The Fund's holdings in Samsung Electronics, Korea's multinational electronics company, detracted from performance over the period amid concerns around peaking memory prices. We continue to hold our position in the stock.
• The Fund's position in Tal Education, a leading provider of education, was a headwind for returns. The stock declined on the back of an activist short seller's allegations of questionable accounting practices. We continue to hold our position in the stock.
This letter is intended to assist shareholders in understanding how the Fund performed during the period from the Fund's inception on June 4, 2018 through June 30, 2018. The views and opinions in the letter were current as of August 17, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
36
UBS Emerging Markets Equity Opportunity Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
Inception1 | |||||||
Before deducting maximum sales charge | |||||||
Class P22 | (5.90 | )% | |||||
MSCI Emerging Markets Index (net)3 | (6.35 | )% |
The annualized gross and net expense ratios, respectively, for each class of shares as in the May 25, 2018 prospectus are as follows: Class P2—1.41% and 0.41%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement, effective date of June 22, 2018, pursuant to which the Advisor has agreed to waive its management fees and administration fees, and to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) through the period ending October 29, 2019 do not exceed 0.40%. Pursuant to the expense limitation agreement, the Advisor is entitled to be reimbursed for any expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the reimbursement, or (ii) at the time of the recoupment. The expense limitation 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 expense limitation agreement, however, the Advisor's three year recoupment rights will survive.
1 Inception date of Class P2 of UBS Emerging Markets Equity Opportunity Fund and the indices is June 4, 2018.
2 Class P2 shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P2 shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to nonresident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
37
UBS Emerging Markets Equity Opportunity Fund
Portfolio statistics—June 30, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Samsung Electronics Co. Ltd. | 6.0 | % | |||||
Alibaba Group Holding Ltd., ADR | 6.0 | ||||||
Tencent Holdings Ltd. | 5.1 | ||||||
iShares MSCI India ETF | 4.4 | ||||||
Naspers Ltd., N Shares | 4.1 | ||||||
HDFC Bank Ltd., ADR | 4.0 | ||||||
LG Household & Health Care Ltd. | 3.8 | ||||||
SK Hynix, Inc. | 3.5 | ||||||
Bank Mandiri Persero Tbk. PT | 3.4 | ||||||
Mahindra & Mahindra Ltd., GDR | 3.4 | ||||||
Total | 43.7 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
South Korea | 18.2 | % | |||||
Cayman Islands | 17.0 | ||||||
China | 10.1 | ||||||
India | 7.3 | ||||||
Curacao | 6.1 | ||||||
Total | 58.7 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
38
UBS Emerging Markets Equity Opportunity Fund
Industry diversification—June 30, 2018 (unaudited)1,2
Common stocks | Percentage of net assets | ||||||
Automobiles | 5.94 | % | |||||
Banks | 19.13 | ||||||
Beverages | 1.76 | ||||||
Chemicals | 2.10 | ||||||
Diversified consumer services | 6.04 | ||||||
Insurance | 2.94 | ||||||
Internet software & services | 11.00 | ||||||
Media | 4.12 | ||||||
Metals & mining | 5.69 | ||||||
Oil, gas & consumable fuels | 2.42 | ||||||
Paper & forest products | 2.31 | ||||||
Personal products | 3.84 | ||||||
Real estate management & development | 1.60 | ||||||
Semiconductors & semiconductor equipment | 4.65 | ||||||
Technology hardware, storage & peripherals | 5.96 | ||||||
Total common stocks | 79.50 | % | |||||
Preferred stocks | 2.57 | ||||||
Exchange traded funds | 4.43 | ||||||
Warrants | 6.05 | ||||||
Short-term investments | 48.80 | ||||||
Total investments | 141.35 | % | |||||
Liabilities in excess of other assets | (41.35 | ) | |||||
Net assets | 100.00 | % |
1 Figures represent the breakdown of direct investments of UBS Emerging Markets Equity Opportunity Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
39
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks: 79.50% | |||||||||||
Bermuda: 2.57% | |||||||||||
Brilliance China Automotive Holdings Ltd. | 1,352,000 | $ | 2,425,770 | ||||||||
Brazil: 2.90% | |||||||||||
Vale SA | 213,540 | 2,732,232 | |||||||||
Cayman Islands: 17.04% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 30,261 | 5,614,323 | |||||||||
New Oriental Education & Technology Group, Inc., ADR | 28,400 | 2,688,344 | |||||||||
TAL Education Group, ADR* | 81,800 | 3,010,240 | |||||||||
Tencent Holdings Ltd. | 94,900 | 4,765,439 | |||||||||
Total Cayman Islands common stocks | 16,078,346 | ||||||||||
China: 10.06% | |||||||||||
China Construction Bank Corp., H Shares | 3,273,000 | 2,994,929 | |||||||||
China Vanke Co. Ltd., H Shares | 432,200 | 1,507,288 | |||||||||
Industrial & Commercial Bank of China Ltd., H Shares | 2,971,000 | 2,215,891 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 303,000 | 2,774,775 | |||||||||
Total China common stocks | 9,492,883 | ||||||||||
Hungary: 0.88% | |||||||||||
OTP Bank PLC | 22,854 | 825,148 | |||||||||
India: 7.32% | |||||||||||
HDFC Bank Ltd., ADR | 35,500 | 3,728,210 | |||||||||
Mahindra & Mahindra Ltd., GDR | 243,684 | 3,180,076 | |||||||||
Total India common stocks | 6,908,286 | ||||||||||
Indonesia: 3.42% | |||||||||||
Bank Mandiri Persero Tbk. PT | 6,738,800 | 3,224,029 | |||||||||
Mexico: 4.23% | |||||||||||
Fomento Economico Mexicano SAB de CV | 189,000 | 1,661,009 | |||||||||
Grupo Financiero Banorte SAB de CV, Class O | 396,000 | 2,328,515 | |||||||||
Total Mexico common stocks | 3,989,524 | ||||||||||
Russia: 5.31% | |||||||||||
LUKOIL PJSC, ADR | 33,052 | 2,278,274 | |||||||||
Sberbank of Russia PJSC | 787,419 | 2,735,154 | |||||||||
Total Russia common stocks | 5,013,428 | ||||||||||
South Africa: 4.12% | |||||||||||
Naspers Ltd., N Shares | 15,408 | 3,885,031 | |||||||||
South Korea: 18.20% | |||||||||||
LG Household & Health Care Ltd. | 2,892 | 3,623,884 | |||||||||
Lotte Chemical Corp. | 6,362 | 1,983,234 | |||||||||
POSCO | 8,937 | 2,636,949 | |||||||||
Samsung Electronics Co. Ltd. | 134,328 | 5,626,941 | |||||||||
SK Hynix, Inc. | 43,043 | 3,303,947 | |||||||||
Total South Korea common stocks | 17,174,955 |
Number of shares | Value | ||||||||||
Taiwan: 1.14% | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 152,000 | $ | 1,079,363 | ||||||||
United Kingdom: 2.31% | |||||||||||
Mondi PLC | 80,822 | 2,180,422 | |||||||||
Total common stocks (cost $75,450,607) | 75,009,417 | ||||||||||
Preferred stocks: 2.57% | |||||||||||
Brazil: 2.57% | |||||||||||
Banco Bradesco SA (cost $2,402,020) | 349,400 | 2,425,043 | |||||||||
Exchange traded funds: 4.43% | |||||||||||
iShares MSCI India ETF (cost $4,145,720) | 125,614 | 4,181,690 | |||||||||
Number of warrants | |||||||||||
Warrants: 6.05% | |||||||||||
Curacao: 6.05% | |||||||||||
Kweichow Moutai Co. Ltd.* | 26,800 | 2,967,269 | |||||||||
Hangzhou Hikvision Digital Technology Co. Ltd.* | 487,063 | 2,734,372 | |||||||||
Total warrants (cost $5,796,677) | 5,701,641 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 48.80% | |||||||||||
Investment companies: 48.80% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $46,040,533) | 46,040,533 | 46,040,533 | |||||||||
Total investments: 141.35% (cost $133,835,557) | 133,358,324 | ||||||||||
Liabilities in excess of other assets: (41.35)% | (39,009,485 | ) | |||||||||
Net assets: 100.00% | $ | 94,348,839 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
40
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
June 30, 2018
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 29,956,377 | $ | 45,053,040 | $ | — | $ | 75,009,417 | |||||||||||
Preferred stocks | 2,425,043 | — | — | 2,425,043 | |||||||||||||||
Exchange traded funds | 4,181,690 | — | — | 4,181,690 | |||||||||||||||
Warrants | 5,701,641 | — | — | 5,701,641 | |||||||||||||||
Short-term investments | — | 46,040,533 | — | 46,040,533 | |||||||||||||||
Total | $ | 42,264,751 | $ | 91,093,573 | $ | — | $ | 133,358,324 |
At June 30, 2018, $45,053,040 of foreign investments were classified within Level 2 of the fair value hierarchy pursuant to the Portfolio's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
Portfolio footnote
* Non-income producing security.
See accompanying notes to financial statements.
41
UBS International Sustainable Equity Fund
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS International Sustainable Equity Fund (the "Fund") gained 7.67% (Class A shares returned 1.72% after the deduction of the maximum sales charge), while Class P shares returned 7.94%. The Fund's benchmark, the MSCI World Free ex USA Index (net) (the "Index"), returned 7.04%. (Class P shares have lower expenses than other share classes in the series. Returns for all share classes over various time periods are shown on page 44; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a solid absolute return and outperformed its benchmark during the reporting period. This was driven by a combination of strong stock selection and sector allocation. The Fund did not use derivatives during the reporting period.
Portfolio performance summary1
What worked:
• Stock selection in the health care, energy and materials sectors contributed the most to performance.
• Sino Biopharmaceutical is a Hong Kong-based manufacturer of biopharmaceutical products for the treatment of ophthalmic, hepatitis B, cardiovascular disease and diabetes, along with modern Chinese medicines. The company has a robust pipeline of 30 to 40 drugs that are likely to receive China Food & Drug Administration approval in 2018 and 2019. Several of these are potential blockbuster drugs, including HIV treatment and breast cancer biosimilars (Herceptin). The company experienced strong revenues, driven by organic growth, coupled with robust net profit growth. Rising sales of its new blockbuster anti-cancer drug Anlotinib and its new generic Hepatitis B treatment Entecavir are expected to deliver solid future growth.
• Ping An Insurance is a China-based insurer and provider of financial services, such as wealth management and credit card services. The company is increasing its footprint in Asia, reaching 166 million customers. Ping An is growing rapidly due to an estimated 20% increase in demand for insurance from China's growing middle class. Its share price rose sharply in the second half of 2017, as tighter monetary conditions led to higher interest rates and investor sentiment for the company's financials improved.
• Santos Limited is a gas producer with operations in Australia, Papua New Guinea, Malaysia, Indonesia and Vietnam. Its share price rose after Harbour Energy made an all cash offer to purchase 100% of the company in April 2018, which subsequently increased from an initial $4.98/share to $5.21 per share. However, management and Santos' Board rejected the offer. Rising Brent oil price improved Santos' performance and free cash flow generation.
• From a sector allocation perspective, an average overweight to the information technology and average underweight to the financials sectors contributed to relative performance.
What didn't work:
• Stock selection in the industrials and consumer discretionary sectors detracted from performance during the reporting period.
• Capita provides technology and back office support solutions for businesses and public services. The company continued to struggle in a weak outsourcing environment in the UK. Despite a long courtship, the company was not contracted by a large organization to manage its call centers. This was a significant setback to the company's previous guidance issued in January 2018, which assumed flat sales growth and a large award. Pressure on public spending, Brexit uncertainties, coupled with capital allocation issues, led us to eliminate our position in the stock during the reporting period.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
42
UBS International Sustainable Equity Fund
• A.P. Moller—Maersk engages in shipping, energy, transportation, offshore drilling and retail activities. Its share price continued to fall due to growing concerns that the company was gaining market share by lowering its rates. Overcapacity continues to be a challenge as the global top 10 carriers increased their total capacity by almost 10% in the first quarter of 2018, due largely to excess chartered capacity. Maersk Line, the company's global container division, substantially reduced its chartered capacity toward the end of first quarter, indicating that the second might bring improved results. We continue to hold our position in the stock.
• Nordea Bank engages in the provision of commercial banking services, life insurance, investment advice and funds. Its share price weakened due to lower than expected third quarter 2017 results and, at the beginning 2018, due to political uncertainty in Italy that triggered a sharp selloff in the financials sector. We continue to hold our position in the stock.
• In terms of sector allocation, an average underweight to consumer discretionary and an average overweight energy were modest detractors from relative performance.
Portfolio highlights
• Santos engages in the exploration, development, transportation and marketing of natural gas in Australia and Papua New Guinea, and has a significant liquid natural gas (LNG) business. Increasing Chinese demand for cleaner natural gas should continue to increased LNG demand and ultimately lead to higher prices. Chinese LNG demand in January 2018 was up 50% year-over-year from a very strong base. In our view, natural gas production is likely to increase due to a recent surge in Australian natural gas prices given tight supplies and strong demand in Western Australia.
• Ashtead is a U.K. provider of equipment rentals to the construction and industrials sectors, with the majority of its sales in the US. The company has doubled its market share over the past decade, growing at a significantly higher pace than the overall market in the fragmented, but consolidating US tool hire market. As the US market continues to move from equipment ownership to rental, Ashtead is expected to continue growing in the coming years, which is not fully reflected in its current share price. Compared with smaller competitors, Ashtead benefits from better buying power, fleet availability, technology and the ability to share equipment between branches, all of which boost its resource and energy efficiency. In addition, the company is very successful at both geographic expansion and increasing local market strength, with "clusters" of stores.
• During the reporting period, we initiated several new positions, including Takeda Pharmaceutical, Otsuka, Hino, Brambles and Lanxess. We sold the Fund's positions in Credit Agricole, Infosys, Canon, Capita and Aviva.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 17, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
43
UBS International Sustainable Equity Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 7.67 | % | 7.87 | % | 3.75 | % | |||||||||
Class C2 | 6.89 | 7.06 | 2.98 | ||||||||||||
Class P3 | 7.94 | 8.12 | 4.00 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 1.72 | % | 6.65 | % | 3.16 | % | |||||||||
Class C2 | 5.89 | 7.06 | 2.98 | ||||||||||||
MSCI World ex USA Index (net)4 | 7.04 | 6.23 | 2.63 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 27, 2017 prospectuses were as follows: Class A—2.25% and 1.25%; Class C—3.11% and 2.00%; Class P—2.06% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), has agreed irrevocably to waive its fees and reimburse certain expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed 1.25% for Class A shares, 2.00% for Class C shares and 1.00% for Class P shares. This fee waiver and expense arrangement may only be amended or terminated by shareholders.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The MSCI World ex USA Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets excluding the United States. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
44
UBS International Sustainable Equity Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following graph depicts the performance of UBS International Sustainable Equity Fund Class A and Class P shares versus the MSCI World Free ex USA Index (net) over the 10 years ended June 30, 2018. 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.
UBS International Sustainable Equity Fund Class A vs. MSCI World ex USA Index (net)
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2008 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS International Sustainable Equity Fund Class P vs. MSCI World ex USA Index (net)
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2008 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
45
UBS International Sustainable Equity Fund
Portfolio statistics and industry diversification—June 30, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Santos Ltd. | 2.7 | % | |||||
Ashtead Group PLC | 2.6 | ||||||
Statoil ASA | 2.6 | ||||||
Zurich Insurance Group AG | 2.6 | ||||||
Koninklijke DSM NV | 2.5 | ||||||
Shire PLC | 2.5 | ||||||
Carl Zeiss Meditec AG | 2.4 | ||||||
Prudential PLC | 2.4 | ||||||
Bank Central Asia Tbk. PT | 2.3 | ||||||
Unilever NV CVA | 2.3 | ||||||
Total | 24.9 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
Japan | 17.6 | % | |||||
United Kingdom | 15.8 | ||||||
Germany | 10.5 | ||||||
Netherlands | 9.8 | ||||||
Australia | 6.4 | ||||||
Total | 60.1 | % |
Common stocks | Percentage of net assets | ||||||
Airlines | 1.95 | % | |||||
Auto components | 2.18 | ||||||
Automobiles | 0.91 | ||||||
Banks | 11.49 | ||||||
Biotechnology | 2.45 | ||||||
Building products | 1.29 | ||||||
Chemicals | 8.65 | ||||||
Commercial services & supplies | 1.64 | ||||||
Diversified telecommunication services | 2.01 | ||||||
Electrical equipment | 1.45 | ||||||
Electronic equipment, instruments & components | 0.97 | ||||||
Energy equipment & services | 1.43 | ||||||
Equity real estate investment trusts | 2.14 | ||||||
Food & staples retailing | 0.86 | ||||||
Food products | 1.19 | ||||||
Health care equipment & supplies | 2.41 | ||||||
Household products | 1.02 | ||||||
Insurance | 8.18 | ||||||
IT services | 1.08 | ||||||
Machinery | 8.11 | ||||||
Marine | 1.26 | ||||||
Oil, gas & consumable fuels | 6.55 | ||||||
Personal products | 3.99 | ||||||
Pharmaceuticals | 6.11 | ||||||
Real estate management & development | 1.29 | ||||||
Semiconductors & semiconductor equipment | 4.68 | ||||||
Software | 5.26 | ||||||
Trading companies & distributors | 2.63 | ||||||
Water utilities | 0.60 | ||||||
Wireless telecommunication services | 1.83 | ||||||
Total common stocks | 95.61 | % | |||||
Preferred stocks | 0.97 | ||||||
Short-term investments | 2.99 | ||||||
Total investments | 99.57 | % | |||||
Other assets in excess of liabilities | 0.43 | ||||||
Net assets | 100.00 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
46
UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks: 95.61% | |||||||||||
Australia: 6.43% | |||||||||||
Brambles Ltd. | 191,454 | $ | 1,256,946 | ||||||||
Mirvac Group, REIT | 1,024,940 | 1,645,038 | |||||||||
Santos Ltd.* | 440,783 | 2,041,550 | |||||||||
Total Australia common stocks | 4,943,534 | ||||||||||
Brazil: 0.60% | |||||||||||
Cia de Saneamento Basico do Estado de Sao Paulo | 76,500 | 459,701 | |||||||||
Canada: 1.08% | |||||||||||
Magna International, Inc. | 14,254 | 829,012 | |||||||||
Cayman Islands: 2.01% | |||||||||||
Sino Biopharmaceutical Ltd. | 1,009,000 | 1,540,951 | |||||||||
China: 1.70% | |||||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 143,000 | 1,309,547 | |||||||||
Curacao: 1.43% | |||||||||||
Schlumberger Ltd. | 16,389 | 1,098,555 | |||||||||
Denmark: 2.78% | |||||||||||
AP Moller: Maersk A/S, Class B | 783 | 968,649 | |||||||||
Novo Nordisk A/S, Class B | 25,195 | 1,163,771 | |||||||||
Total Denmark common stocks | 2,132,420 | ||||||||||
France: 3.98% | |||||||||||
Sanofi | 13,725 | 1,101,562 | |||||||||
Schneider Electric SE | 13,369 | 1,111,856 | |||||||||
Valeo SA | 15,521 | 846,260 | |||||||||
Total France common stocks | 3,059,678 | ||||||||||
Germany: 9.55% | |||||||||||
Bayerische Motoren Werke AG | 7,761 | 701,536 | |||||||||
Carl Zeiss Meditec AG | 27,188 | 1,855,139 | |||||||||
Deutsche Telekom AG (Registered) | 44,728 | 691,244 | |||||||||
Infineon Technologies AG | 50,122 | 1,273,164 | |||||||||
KION Group AG | 6,432 | 461,685 | |||||||||
LANXESS AG | 10,159 | 789,820 | |||||||||
SAP SE | 13,556 | 1,564,602 | |||||||||
Total Germany common stocks | 7,337,190 | ||||||||||
Hong Kong: 1.29% | |||||||||||
Sun Hung Kai Properties Ltd. | 66,000 | 994,352 | |||||||||
India: 2.28% | |||||||||||
Axis Bank Ltd., GDR1 | 21,920 | 816,817 | |||||||||
ICICI Bank Ltd., ADR | 116,090 | 932,203 | |||||||||
Total India common stocks | 1,749,020 | ||||||||||
Indonesia: 2.32% | |||||||||||
Bank Central Asia Tbk. PT | 1,194,400 | 1,783,752 | |||||||||
Italy: 1.43% | |||||||||||
Mediobanca Banca di Credito Finanziario SpA | 118,381 | 1,095,027 | |||||||||
Japan: 17.56% | |||||||||||
Hino Motors Ltd. | 65,300 | 696,312 | |||||||||
Kao Corp. | 17,100 | 1,303,389 |
Number of shares | Value | ||||||||||
KDDI Corp. | 51,500 | $ | 1,408,262 | ||||||||
Kubota Corp. | 76,900 | 1,206,940 | |||||||||
Makita Corp. | 18,700 | 836,508 | |||||||||
Nabtesco Corp. | 21,000 | 645,223 | |||||||||
Nintendo Co. Ltd. | 4,100 | 1,338,359 | |||||||||
Otsuka Corp. | 21,100 | 826,009 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 11,400 | 1,013,100 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 43,200 | 1,685,059 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 21,200 | 891,843 | |||||||||
THK Co. Ltd. | 30,100 | 859,407 | |||||||||
Unicharm Corp. | 26,000 | 781,670 | |||||||||
Total Japan common stocks | 13,492,081 | ||||||||||
Jersey: 2.45% | |||||||||||
Shire PLC | 33,418 | 1,882,732 | |||||||||
Netherlands: 9.82% | |||||||||||
ASML Holding NV | 7,822 | 1,547,854 | |||||||||
Koninklijke Ahold Delhaize NV | 27,706 | 661,552 | |||||||||
Koninklijke DSM NV | 19,018 | 1,902,542 | |||||||||
LyondellBasell Industries NV, Class A | 15,222 | 1,672,137 | |||||||||
Unilever NV CVA | 31,666 | 1,764,333 | |||||||||
Total Netherlands common stocks | 7,548,418 | ||||||||||
Norway: 3.72% | |||||||||||
Equinor ASA | 75,705 | 2,001,833 | |||||||||
Telenor ASA | 41,813 | 856,351 | |||||||||
Total Norway common stocks | 2,858,184 | ||||||||||
South Korea: 1.01% | |||||||||||
SK Hynix, Inc. | 10,114 | 776,343 | |||||||||
Spain: 1.52% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 165,109 | 1,164,442 | |||||||||
Sweden: 3.04% | |||||||||||
Assa Abloy AB, Class B | 46,692 | 990,412 | |||||||||
Nordea Bank AB | 140,549 | 1,348,228 | |||||||||
Total Sweden common stocks | 2,338,640 | ||||||||||
Switzerland: 2.58% | |||||||||||
Zurich Insurance Group AG | 6,716 | 1,986,122 | |||||||||
Taiwan: 1.19% | |||||||||||
Uni-President Enterprises Corp. | 362,000 | 917,606 | |||||||||
United Kingdom: 15.84% | |||||||||||
Aon PLC | 8,400 | 1,152,228 | |||||||||
Ashtead Group PLC | 67,738 | 2,017,192 | |||||||||
Croda International PLC | 20,073 | 1,268,155 | |||||||||
easyJet PLC | 67,990 | 1,495,773 | |||||||||
Prudential PLC | 80,506 | 1,835,241 | |||||||||
Spectris PLC | 21,631 | 743,206 | |||||||||
The Sage Group PLC | 138,189 | 1,141,329 | |||||||||
The Weir Group PLC | 58,076 | 1,525,206 | |||||||||
Tullow Oil PLC* | 308,429 | 992,413 | |||||||||
Total United Kingdom common stocks | 12,170,743 | ||||||||||
Total common stocks (cost $72,782,814) | 73,468,050 |
47
UBS International Sustainable Equity Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Preferred stocks: 0.97% | |||||||||||
Germany: 0.97% | |||||||||||
Jungheinrich AG (cost $767,307) | 20,132 | $ | 744,225 | ||||||||
Short-term investments: 2.99% | |||||||||||
Investment companies: 2.99% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $2,295,392) | 2,295,392 | 2,295,392 | |||||||||
Total investments: 99.57% (cost $75,845,513) | 76,507,667 | ||||||||||
Other assets in excess of liabilities: 0.43% | 331,721 | ||||||||||
Net assets: 100.00% | $ | 76,839,388 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 6,483,154 | $ | 66,984,896 | $ | — | $ | 73,468,050 | |||||||||||
Preferred stocks | — | 744,225 | — | 744,225 | |||||||||||||||
Short-term investments | — | 2,295,392 | — | 2,295,392 | |||||||||||||||
Total | $ | 6,483,154 | $ | 70,024,513 | $ | — | $ | 76,507,667 |
At June 30, 2018, $67,729,121 of foreign investments were classified within Level 2 of the fair value hierarchy pursuant to the Portfolio's fair valuation procedures for foreign portfolio holdings as discussed in the Notes to financial statements.
Portfolio footnotes
* Non-income producing security.
1 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
See accompanying notes to financial statements.
48
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 26.17% (Class A shares returned 19.22% after the deduction of the maximum sales charge), while Class P shares returned 26.50%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 21.86% over the same time period. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 52; 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 stock selection decisions. The Fund did not use derivatives during the reporting period.
Portfolio performance summary1
What worked:
• ABIOMED was the Fund's top-performing stock during the 12 months ended June 30, 2018.
• ABIOMED is a provider of heart support and recovery technologies. The company's shares rose on investor optimism regarding its continued penetration of both the protected percutaneous coronary intervention (PCI) and cardiogenic shock markets.
• Several information technology stocks had a positive impact on relative performance.
• MuleSoft, a provider of integration software that enables customers to connect their applications, outperformed after Salesforce.com announced a definitive agreement to acquire MuleSoft for $6.5 billion. The deal offered $36 in cash and 0.0711 share of Salesforce.com common stock for each share of MuleSoft. We sold the Fund's position after the acquisition.
• Varonis Systems is a designer and developer of data security and software solutions. Its stock price increased after the company reported sales and earnings ahead of expectations. Varonis continues to benefit from the implementation of General Data Protection Regulations (GDPR) in the European Union. The company's solutions can help organizations prevent breaches by discovering and protecting data. (For details, see "Portfolio highlights.")
• Stock selection in the health care sector benefited performance during the 12 months.
• Tabula Rasa Healthcare, a designer and developer of cloud-based healthcare software solutions, saw its shares rise after reporting sales and earnings ahead of expectations. The market responded positively to the company's potential to sell its proprietary software into health plans and at-risk providers. Tabula Rasa continues to gain traction in multiple markets for its product offering. (For details, see "Portfolio highlights.")
• Stock selection within consumer discretionary contributed to performance.
• Chegg, a provider of an online educational platform, contributed positively to Fund performance. During the period, the company reported better than expected sales and earnings, and raised its annual guidance for fiscal year 2018. (For details, see "Portfolio highlights.")
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
49
UBS U.S. Small Cap Growth Fund
What didn't work:
• Certain healthcare stocks detracted from relative performance during the 12 months ended June 30, 2018.
• Acadia Healthcare, an operator of a network of behavioral health centers, underperformed after reporting disappointing quarterly earnings driven by softness in volumes in the UK market alongside increased labor costs. We sold out of the stock during the reporting period.
• Evolent Health, a provider of a platform of services designed to help clients migrate to value-based payment models, underperformed during the period. We believe that Evolent will benefit from its new partnerships with three Florida health plans in five Medicaid regions to provide health plan administration and operational services. We continue to hold our position in the stock. (For details, see "Portfolio highlights.")
• Shares of Tenet Healthcare declined over uncertainty about succession plans after CEO Trevor Fetter announced he would be stepping down and the firm changing its composition of board members. In light of this and concerns over patient volume growth, increasing uncompensated care, and high leverage, we sold our position in Tenet.
• Other stock selection decisions made a negative contribution to relative returns.
• Spirit Airlines saw its shares decline on fears regarding a fare war with United Airlines, as well as potential labor issues with its pilots union. We continue to hold our position in the stock. (For details, see "Portfolio highlights.")
• MaxLinear is a fabless provider of mixed-signal solutions for broadband communications and the wired/wireless infrastructure markets. The stock underperformed after the company reported first quarter revenue that missed consensus due to weakness in connected home applications, continued softness in infrastructure, and lower industrial revenue. We continue to hold our position in the stock.
• Stock selection in the industrials sector also detracted during the 12 months.
Portfolio highlights
• Varonis Systems is a provider of software solutions that protect data from insider threats and cyberattacks. Its data security platform allows companies to analyze, secure, manage, and migrate their volumes of sensitive unstructured data. We believe that growth will come from broadening the customer base, sales capacity expansion, international penetration, and upsells.
• Tabula Rasa Healthcare is a proprietary, cloud-based technology suite that aims to reduce adverse drug events (ADEs) through clinical decision support tools, risk alerts, e-prescribing, real-time messaging and advanced precision dosing functionality. The company has developed a proprietary Medication Risk Management (MRM) Matrix, which personalizes the medicine regime for each patient by using scientific research and proprietary algorithms to combine patient-specific data (clinical, lab, genomic, Rx) with pharmacokinetic and pharmacodynamics science.
• Chegg is a leading connected learning platform that seeks to improve student outcomes. The company operates an integrated platform of educational services that is online, on-demand, personalized, adaptive, affordable, and backed up by human help. It is transitioning from a capital intensive textbook rental company to a digital student services platform, and we believe that EBITDA will ramp up as this transition progresses.
50
UBS U.S. Small Cap Growth Fund
• Evolent Health's platform allows healthcare providers to migrate from fee-for-service reimbursement to value-based payment models that reward quality and cost-effective care. We believe Evolent's growth will come from several factors, including embedded growth in existing covered populations, partners expanding into new lines of value-based care, and partners utilizing additional capabilities. The company should also benefit from its target of five to seven new clients per year. Evolent appears well-positioned to capitalize on the expansion of Medicare and Medicaid. The company is expanding its platform offerings and considering potential acquisitions.
• Spirit Airlines is an ultra low cost carrier that operates multiple daily flights to an increasing list of destinations. The company went public in 2011, eliminated all debt, and is now one of the most profitable US airlines. Spirit has a cost per available seat mile (CASM) advantage over Southwest, JetBlue and the legacy carriers. The airline sets prices below prevailing fares in a market and makes up the difference with higher-margined ancillary revenues that are well above those generated by other airlines. In addition, the dramatically lower base fare tends to increase traffic relative to competitors on any given route. Given its attractive operating model, the company has been aggressively increasing fleet capacity and adding new destinations.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 15, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
51
UBS U.S. Small Cap Growth Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 26.17 | % | 13.47 | % | 10.97 | % | |||||||||
Class C2 | 25.30 | % | 12.62 | % | 10.15 | % | |||||||||
Class P3 | 26.50 | % | 13.77 | % | 11.26 | % | |||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 19.22 | % | 12.19 | % | 10.35 | % | |||||||||
Class C2 | 24.38 | % | 12.62 | % | 10.15 | % | |||||||||
Russell 2000 Growth Index4 | 21.86 | % | 13.65 | % | 11.24 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 27, 2017 prospectuses were as follows: Class A—1.57% and 1.25%; Class C—2.30% and 2.00%; Class P—1.23% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc. the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 29, 2018, do not exceed 1.24% for Class A shares, 1.99% for Class C shares and 0.99% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Investors should note that indices do not reflect the deduction of fees and expenses.
The Fund invests in IPOs which may have a magnified impact on performance.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
52
UBS U.S. Small Cap Growth Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 5.5% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS U.S. Small Cap Growth Fund Class A and Class P versus the Russell 2000 Growth Index over the 10 years ended June 30, 2018. 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.
UBS U.S. Small Cap Growth Fund Class A vs. Russell 2000 Growth Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2008 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS U.S. Small Cap Growth Fund Class P vs. Russell 2000 Growth Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2008 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
53
UBS U.S. Small Cap Growth Fund
Portfolio statistics—June 30, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Wix.com Ltd. | 2.7 | % | |||||
Varonis Systems, Inc. | 2.1 | ||||||
Chegg, Inc. | 2.1 | ||||||
Tabula Rasa HealthCare, Inc. | 1.9 | ||||||
8x8, Inc. | 1.8 | ||||||
Teladoc, Inc. | 1.8 | ||||||
Ligand Pharmaceuticals, Inc. | 1.8 | ||||||
Boise Cascade Co. | 1.6 | ||||||
Alteryx Inc., Class A | 1.6 | ||||||
Proofpoint, Inc. | 1.6 | ||||||
Total | 19.0 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 92.5 | % | |||||
Israel | 2.6 | ||||||
Jersey | 2.6 | ||||||
Ireland | 1.4 | ||||||
Netherlands | 0.9 | ||||||
Total | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
54
UBS U.S. Small Cap Growth Fund
Industry diversification—June 30, 2018 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 0.94 | % | |||||
Airlines | 0.74 | ||||||
Auto components | 1.06 | ||||||
Banks | 6.33 | ||||||
Biotechnology | 9.84 | ||||||
Building products | 0.84 | ||||||
Chemicals | 1.29 | ||||||
Construction & engineering | 1.32 | ||||||
Construction materials | 1.24 | ||||||
Diversified consumer services | 3.49 | ||||||
Electrical equipment | 2.33 | ||||||
Electronic equipment, instruments & components | 1.40 | ||||||
Energy equipment & services | 0.35 | ||||||
Equity real estate investment trusts | 0.81 | ||||||
Food & staples retailing | 1.53 | ||||||
Health care equipment & supplies | 6.26 | ||||||
Health care technology | 6.12 | ||||||
Hotels, restaurants & leisure | 4.07 | ||||||
Household durables | 1.17 | ||||||
Internet software & services | 7.57 | ||||||
Life sciences tools & services | 0.50 | ||||||
Machinery | 4.61 | ||||||
Multiline retail | 1.36 | ||||||
Oil, gas & consumable fuels | 0.93 | ||||||
Paper & forest products | 1.63 | ||||||
Pharmaceuticals | 3.58 | ||||||
Professional services | 1.78 | ||||||
Road & rail | 2.32 | ||||||
Semiconductors & semiconductor equipment | 4.42 | ||||||
Software | 10.52 | ||||||
Specialty retail | 2.24 | ||||||
Technology hardware, storage & peripherals | 1.39 | ||||||
Textiles, apparel & luxury goods | 1.30 | ||||||
Thrifts & mortgage finance | 0.89 | ||||||
Trading companies & distributors | 0.64 | ||||||
Total common stocks | 96.81 | % | |||||
Exchange traded funds | 1.28 | ||||||
Short-term investments | 4.50 | ||||||
Total investments | 102.59 | % | |||||
Liabilities in excess of other assets | (2.59 | ) | |||||
Net assets | 100.00 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
55
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks: 96.81% | |||||||||||
Aerospace & defense: 0.94% | |||||||||||
Mercury Systems, Inc.* | 29,280 | $ | 1,114,397 | ||||||||
Airlines: 0.74% | |||||||||||
Spirit Airlines, Inc.* | 24,132 | 877,198 | |||||||||
Auto components: 1.06% | |||||||||||
Visteon Corp.* | 9,738 | 1,258,539 | |||||||||
Banks: 6.33% | |||||||||||
BankUnited, Inc. | 27,882 | 1,138,980 | |||||||||
Columbia Banking System, Inc. | 30,194 | 1,234,935 | |||||||||
FB Financial Corp. | 9,874 | 402,069 | |||||||||
National Bank Holdings Corp., Class A | 38,743 | 1,495,092 | |||||||||
Origin Bancorp, Inc. | 6,800 | 278,392 | |||||||||
South State Corp. | 14,294 | 1,232,857 | |||||||||
Webster Financial Corp. | 27,458 | 1,749,075 | |||||||||
7,531,400 | |||||||||||
Biotechnology: 9.84% | |||||||||||
Adamas Pharmaceuticals, Inc.* | 25,443 | 657,193 | |||||||||
AnaptysBio, Inc.* | 10,862 | 771,636 | |||||||||
Array BioPharma, Inc.* | 52,792 | 885,850 | |||||||||
Avrobio, Inc.* | 14,100 | 402,696 | |||||||||
Bluebird Bio, Inc.* | 2,918 | 457,980 | |||||||||
Blueprint Medicines Corp.* | 12,701 | 806,259 | |||||||||
Clovis Oncology, Inc.* | 7,937 | 360,895 | |||||||||
Editas Medicine, Inc.* | 21,597 | 773,820 | |||||||||
Exact Sciences Corp.* | 30,920 | 1,848,707 | |||||||||
Ligand Pharmaceuticals, Inc.* | 10,086 | 2,089,517 | |||||||||
Loxo Oncology, Inc.* | 7,299 | 1,266,231 | |||||||||
NuCana PLC, ADR* | 30,500 | 579,500 | |||||||||
Translate Bio, Inc.* | 5,000 | 63,250 | |||||||||
Voyager Therapeutics, Inc.* | 38,140 | 745,256 | |||||||||
11,708,790 | |||||||||||
Building products: 0.84% | |||||||||||
JELD-WEN Holding, Inc.* | 34,932 | 998,706 | |||||||||
Chemicals: 1.29% | |||||||||||
Ferro Corp.* | 32,536 | 678,376 | |||||||||
Ingevity Corp.* | 10,625 | 859,137 | |||||||||
1,537,513 | |||||||||||
Construction & engineering: 1.32% | |||||||||||
EMCOR Group, Inc. | 20,674 | 1,574,945 | |||||||||
Construction materials: 1.24% | |||||||||||
Summit Materials, Inc., Class A* | 56,306 | 1,478,032 | |||||||||
Diversified consumer services: 3.49% | |||||||||||
Chegg, Inc.* | 87,661 | 2,436,099 | |||||||||
Grand Canyon Education, Inc.* | 15,338 | 1,711,874 | |||||||||
4,147,973 |
Number of shares | Value | ||||||||||
Electrical equipment: 2.33% | |||||||||||
Generac Holdings, Inc.* | 30,185 | $ | 1,561,470 | ||||||||
Regal Beloit Corp. | 14,829 | 1,213,012 | |||||||||
2,774,482 | |||||||||||
Electronic equipment, instruments & components: 1.40% | |||||||||||
Orbotech Ltd.* | 27,000 | 1,668,600 | |||||||||
Energy equipment & services: 0.35% | |||||||||||
Patterson-UTI Energy, Inc. | 22,901 | 412,218 | |||||||||
Equity real estate investment trusts: 0.81% | |||||||||||
Education Realty Trust, Inc. | 23,200 | 962,800 | |||||||||
Food & staples retailing: 1.53% | |||||||||||
Performance Food Group Co.* | 49,697 | 1,823,880 | |||||||||
Health care equipment & supplies: 6.26% | |||||||||||
ABIOMED, Inc.* | 3,258 | 1,332,685 | |||||||||
Insulet Corp.* | 7,181 | 615,412 | |||||||||
Novocure Ltd.* | 43,950 | 1,375,635 | |||||||||
Sientra, Inc.* | 73,714 | 1,438,160 | |||||||||
Tactile Systems Technology, Inc.* | 30,568 | 1,589,536 | |||||||||
Wright Medical Group NV* | 41,950 | 1,089,022 | |||||||||
7,440,450 | |||||||||||
Health care technology: 6.12% | |||||||||||
Evolent Health, Inc., Class A* | 78,243 | 1,647,015 | |||||||||
Tabula Rasa HealthCare, Inc.* | 36,042 | 2,300,561 | |||||||||
Teladoc, Inc.* | 36,971 | 2,146,167 | |||||||||
Vocera Communications, Inc.* | 39,790 | 1,189,323 | |||||||||
7,283,066 | |||||||||||
Hotels, restaurants & leisure: 4.07% | |||||||||||
Dave & Buster's Entertainment, Inc.* | 13,639 | 649,217 | |||||||||
Del Taco Restaurants, Inc.* | 68,545 | 971,968 | |||||||||
Planet Fitness, Inc., Class A* | 35,836 | 1,574,634 | |||||||||
Shake Shack, Inc., Class A* | 24,818 | 1,642,455 | |||||||||
4,838,274 | |||||||||||
Household durables: 1.17% | |||||||||||
Century Communities, Inc.* | 44,089 | 1,391,008 | |||||||||
Internet software & services: 7.57% | |||||||||||
Alteryx Inc., Class A* | 49,667 | 1,895,293 | |||||||||
DocuSign, Inc.* | 5,600 | 296,520 | |||||||||
LogMeIn, Inc. | 11,328 | 1,169,616 | |||||||||
Mimecast Ltd.* | 41,800 | 1,722,578 | |||||||||
Twilio, Inc., Class A* | 13,802 | 773,188 | |||||||||
Wix.com Ltd.* | 31,382 | 3,147,614 | |||||||||
9,004,809 | |||||||||||
Life sciences tools & services: 0.50% | |||||||||||
Charles River Laboratories International, Inc.* | 5,337 | 599,132 | |||||||||
Machinery: 4.61% | |||||||||||
Chart Industries, Inc.* | 23,359 | 1,440,783 | |||||||||
Kadant, Inc. | 14,530 | 1,397,059 | |||||||||
Kennametal, Inc. | 30,045 | 1,078,616 |
56
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Machinery—(Concluded) | |||||||||||
REV Group, Inc. | 28,470 | $ | 484,275 | ||||||||
Woodward, Inc. | 14,092 | 1,083,111 | |||||||||
5,483,844 | |||||||||||
Multiline retail: 1.36% | |||||||||||
Ollie's Bargain Outlet Holdings, Inc.* | 22,293 | 1,616,242 | |||||||||
Oil, gas & consumable fuels: 0.93% | |||||||||||
Callon Petroleum Co.* | 49,462 | 531,222 | |||||||||
Matador Resources Co.* | 19,168 | 575,998 | |||||||||
1,107,220 | |||||||||||
Paper & forest products: 1.63% | |||||||||||
Boise Cascade Co. | 43,351 | 1,937,790 | |||||||||
Pharmaceuticals: 3.58% | |||||||||||
Aerie Pharmaceuticals, Inc.* | 9,480 | 640,374 | |||||||||
Amphastar Pharmaceuticals, Inc.* | 35,270 | 538,220 | |||||||||
Cymabay Therapeutics, Inc.* | 63,264 | 849,003 | |||||||||
Nektar Therapeutics* | 11,723 | 572,434 | |||||||||
Supernus Pharmaceuticals, Inc.* | 16,968 | 1,015,535 | |||||||||
WaVe Life Sciences Ltd.* | 16,690 | 638,392 | |||||||||
4,253,958 | |||||||||||
Professional services: 1.78% | |||||||||||
ASGN, Inc.* | 15,514 | 1,213,040 | |||||||||
WageWorks, Inc.* | 18,029 | 901,450 | |||||||||
2,114,490 | |||||||||||
Road & rail: 2.32% | |||||||||||
Saia, Inc.* | 16,895 | 1,365,961 | |||||||||
Werner Enterprises, Inc. | 37,179 | 1,396,071 | |||||||||
2,762,032 | |||||||||||
Semiconductors & semiconductor equipment: 4.42% | |||||||||||
MaxLinear, Inc.* | 51,708 | 806,128 | |||||||||
Monolithic Power Systems, Inc. | 9,614 | 1,285,103 | |||||||||
Semtech Corp.* | 31,915 | 1,501,601 | |||||||||
Universal Display Corp. | 19,391 | 1,667,626 | |||||||||
5,260,458 |
Number of shares | Value | ||||||||||
Software: 10.52% | |||||||||||
8x8, Inc.* | 108,220 | $ | 2,169,811 | ||||||||
Carbon Black, Inc.* | 5,700 | 148,200 | |||||||||
ForeScout Technologies, Inc.* | 22,300 | 763,998 | |||||||||
Paycom Software, Inc.* | 13,963 | 1,379,963 | |||||||||
Pluralsight, Inc., Class A* | 6,800 | 166,260 | |||||||||
Proofpoint, Inc.* | 16,044 | 1,850,034 | |||||||||
SailPoint Technologies Holding, Inc.* | 44,270 | 1,086,386 | |||||||||
Talend SA ADR* | 13,500 | 840,780 | |||||||||
Upland Software, Inc.* | 46,235 | 1,589,097 | |||||||||
Varonis Systems, Inc.* | 33,786 | 2,517,057 | |||||||||
12,511,586 | |||||||||||
Specialty retail: 2.24% | |||||||||||
Dick's Sporting Goods, Inc. | 44,517 | 1,569,224 | |||||||||
The Children's Place, Inc. | 9,072 | 1,095,898 | |||||||||
2,665,122 | |||||||||||
Technology hardware, storage & peripherals: 1.39% | |||||||||||
USA Technologies, Inc.* | 118,388 | 1,657,432 | |||||||||
Textiles, apparel & luxury goods: 1.30% | |||||||||||
Steven Madden Ltd. | 29,061 | 1,543,139 | |||||||||
Thrifts & mortgage finance: 0.89% | |||||||||||
Essent Group Ltd.* | 29,382 | 1,052,463 | |||||||||
Trading companies & distributors: 0.64% | |||||||||||
Beacon Roofing Supply, Inc.* | 17,951 | 765,072 | |||||||||
Total common stocks (cost $84,031,362) | 115,157,060 | ||||||||||
Exchange traded funds: 1.28% | |||||||||||
iShares Russell 2000 Growth ETF (cost $1,532,066) | 7,450 | 1,522,259 | |||||||||
Short-term investments: 4.50% | |||||||||||
Investment companies: 4.50% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $5,356,193) | 5,356,193 | 5,356,193 | |||||||||
Total investments: 102.59% (cost $90,919,621) | 122,035,512 | ||||||||||
Liabilities in excess of other assets: (2.59)% | (3,075,172 | ) | |||||||||
Net assets: 100.00% | $ | 118,960,340 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
57
UBS U.S. Small Cap Growth Fund
Portfolio of investments
June 30, 2018
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 115,157,060 | $ | — | $ | — | $ | 115,157,060 | |||||||||||
Exchange traded funds | 1,522,259 | — | — | 1,522,259 | |||||||||||||||
Short-term investments | — | 5,356,193 | — | 5,356,193 | |||||||||||||||
Total | $ | 116,679,319 | $ | 5,356,193 | $ | — | $ | 122,035,512 |
At June 30, 2018, there were no transfers between Level 1 and Level 2.
Portfolio footnote
* Non-income producing security.
See accompanying notes to financial statements.
58
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS U.S. Sustainable Equity Fund (the "Fund") returned 10.79% (Class A shares returned 4.69% after the deduction of the maximum sales charge), while Class P shares returned 11.08%. The Fund's benchmark, the S&P 500 Index (the "Index"), returned 14.37% over the same time period. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 62; 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.)
In October 2017, the Fund was repositioned from the U.S. Large Cap Equity strategy to the U.S. Sustainable Equity strategy. Due to the timing, the repositioning has created a temporary headwind for performance.
Security selection within the health care and consumer discretionary sectors was a significant detractor from Fund returns, while selection in financials and materials contributed to performance. The Fund did not use derivatives during the reporting period.
Portfolio performance summary1
What worked:
• Micron Technology was the largest contributor to returns during the 12 months ended June 30, 2018.
• The company's outperformance was driven by strong earnings and its positive outlook, both of which indicated continued strength in semiconductor memory pricing (DRAM and NAND). We continue to be optimistic regarding Micron's future profitability and the overall health of the industry. (For details, see "Portfolio highlights.")
• The Fund benefited from other successful holdings in the information technology sector.
• The share price of Salesforce.com rallied after the company released quarterly earnings that exceeded expectations, and raised guidance for the year. The results reflected strength across all of the company's products and geographies as the momentum in the customer relationship management (CRM) market continues. We expect Salesforce to continue its leadership in software as a service (SaaS) and the cloud.
• Several stock selection decisions contributed positively to Fund performance.
• TJX Companies traded higher after announcing quarterly earnings above expectations due to better than expected same-store sales and gross margins. The results demonstrated the ability of TJX's off-price business model to gain market share despite heightened competitive pressures. (For details, see "Portfolio highlights.")
• Alnylam Pharmaceuticals made a positive contribution to Fund performance. The company's share price rose after Alnylam released new data on Patisiran, its lead RNA-silencing drug. The implications of the study go beyond the treatment of a rare form of amyloidosis, potentially impacting treatments for other diseases the company is attempting to cure.
• Stock selection in the financial sector had a positive impact on relative performance during the period.
• Voya Financial's share price rallied in December 2017 following an agreement to transfer the bulk of its ongoing and "closed-block" annuity operations to two financial sponsors. Post-deal, VOYA's balance sheet and consolidated income statement should be more exposed to the higher-margin businesses that do not require the same level of ongoing capital support, such as group insurance, asset management, and retirement planning services. (For details, see "Portfolio highlights.")
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
59
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
What didn't work:
• Stock selection in the consumer discretionary sector detracted from Fund returns.
• Newell Brands was the top detractor from Fund performance during the 12 months ended June 30, 2018. Its share price declined after the company announced quarterly earnings below expectations. Although the company reduced guidance for 2018, we expect the price to rise based on progress Newell has made with its divestiture plan and the simplification of the business. We believe the company's brands have equity, and we look forward to the innovations the company plans to introduce as part of its future product lines. We continue to hold the stock.
• Certain stocks made a negative contribution to performance during the reporting period.
• Johnson Controls was partially a turnaround story, with new management and an improved outlook for free cash flow. We exited the position over concerns that execution would take longer than expected.
• Western Digital detracted from performance during the 12-month period. The company underperformed due to continuing debate about the competitive state of the flash memory industry, the near-term prognosis for memory prices, and the potential impact of tariffs. We remain optimistic about future profitability and the overall health of the semiconductor memory industry, and we continue to hold Western Digital. (For details, see "Portfolio highlights.")
• The health care and consumer staples sectors hindered relative returns.
• Allergan's share price declined during the period due to investor disappointment over several factors. Management lowered earnings expectations for several legacy brands in the second half of 2017. The stock came under pressure in early 2018 after Mylan announced a plan to introduce a competitor to Botox. In addition, Allergan's CEO announced the completion of a strategic review by the board, which recommended only minor changes. Investors had hoped for a more significant shift from the company. We continue to hold the stock. (For details, see "Portfolio highlights.")
• Walgreens underperformed after Amazon.com announced its entry into the prescription drug market with the acquisition of privately held PillPack. The news, combined with modest weakness in Walgreens' quarterly earnings results, contributed to a selloff of the stock. We maintained our position in the name.
Portfolio highlights
• Micron Technology is a leading manufacturer of semiconductor memory, including DRAM, NAND Flash and NOR Flash. Recent consolidation in the DRAM industry has resulted in more sustainable profitability. We expect this trend to continue for the foreseeable future as the industry consolidates to three suppliers, all of whom are acting rationally with regard to capacity additions. Micron's stock, while up significantly from its lows of a few years ago, is still priced at what we believe are attractive levels relative to its ultimate earnings power, in our view. We believe its balance sheet is sufficiently capitalized and that the company can access the straight debt market if additional capital is required.
• TJX Companies is the leading off-price apparel and home fashions retailer in the world. TJX's flexible business model includes opportunistic buying, inventory management, logistics and store layouts. It is designed to give customers a compelling value proposition and a treasure hunt shopping experience to discover brand name and designer merchandise. TJX has been a high quality operator in the off-price channel for over 30 years with a proven ability to grow sales and take share in a changing retail distribution model. We believe that a significant increase in competitor store closings over the next few years will provide a unique tailwind for the business.
60
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
• We believe that Voya Financial's current valuation does not accurately reflect the margin improvements that are likely to emerge in coming years. We also believe the life insurer / retirement planning firm has a positive—and largely asymmetrical—exposure to a rising interest rate environment. Voya should be able to generate return on equity (ROE) improvement over the medium term through more efficient capital management, the implementation of a cost-savings program and stronger top-line growth. Improved levels of return on invested capital (ROIC) from Voya's operating businesses should emerge as a result of investments the company made over the last few years. Should recent macro trends continue to improve and the Federal Reserve continue to reduce the size of its balance sheet, we believe Voya will be particularly attractive relative to its financial sector peers. Our view reflects the high correlation between rising interest rates, equity market appreciation, and the company's long-term earnings growth and operating margin potential.
• Western Digital is a producer of data storage devices and solutions. Although hard drives are giving way to solid-state drives (SSDs) in client business, they continue to be the lowest cost storage means for the cloud. Though the market implies the demise of the hard drive business, we believe it will persist longer than expected. In our view, margins should expand due to the integration of the HGST acquisition and an increasing enterprise mix. Western Digital's acquisition of Sandisk provides another source of upside potential.
• Allergan engages in the research, development and manufacture of pharmaceutical products. Despite recent pipeline setbacks, the company has a number of interesting opportunities over the next 12 to 18 months. These could help to improve sentiment given current low investor expectations. Even absent any positive surprises, we see a path to meaningful value creation as Allergan redeploys its nearly $5 billion of free cash flow.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 15, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
61
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | 5 years | 10 years | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A1 | 10.79 | % | 12.56 | % | 8.83 | % | |||||||||
Class C2 | 9.98 | 11.71 | 8.02 | ||||||||||||
Class P3 | 11.08 | 12.83 | 9.10 | ||||||||||||
After deducting maximum sales charge | |||||||||||||||
Class A1 | 4.69 | % | 11.28 | % | 8.21 | % | |||||||||
Class C2 | 8.98 | 11.71 | 8.02 | ||||||||||||
S&P 500 Index4,6 | 14.37 | 13.42 | 10.17 | ||||||||||||
Russell 1000 Index5,6 | 14.54 | 13.37 | 10.20 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 27, 2017 prospectuses, supplemented from time to time, were as follows: Class A—2.04% and 0.95%; Class C—2.81% and 1.70%; Class P—1.76% and 0.70%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 29, 2018, do not exceed 0.95% for Class A shares, 1.70% for Class C shares and 0.70% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The S&P 500 Index is an unmanaged, weighted index comprising 500 widely held common stocks varying in composition and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The Russell 1000 Index is designed to measure 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.
6 Effective October 27, 2017, the S&P 500 Index replaced the Russell 1000 Index as the Fund's primary benchmark because it more closely aligns with the Fund's investment strategy.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
62
UBS U.S. Sustainable Equity Fund
(formerly, 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 P shares (unaudited)
The following two graphs depict the performance of UBS U.S. Sustainable Equity Fund Class A and Class P shares versus the Russell 1000 Index over the 10 years ended June 30, 2018. 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.
UBS U.S. Sustainable Equity Fund Class A vs. Russell 1000 Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of June 30, 2008 = $9,450
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.5%.
UBS U.S. Sustainable Equity Fund Class P vs. Russell 1000 Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2008 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
63
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
Portfolio statistics and industry diversification—June 30, 2018 (unaudited)1
Top ten equity holdings
Percentage of net assets | |||||||
The TJX Cos., Inc. | 4.9 | % | |||||
Marsh & McLennan Cos., Inc. | 4.8 | ||||||
Amazon.com, Inc. | 4.8 | ||||||
UnitedHealth Group, Inc. | 4.8 | ||||||
AGCO Corp. | 4.8 | ||||||
Allergan PLC | 4.8 | ||||||
Visa, Inc., Class A | 4.7 | ||||||
salesforce.com, Inc. | 4.5 | ||||||
Aptiv PLC | 4.4 | ||||||
Johnson & Johnson | 4.4 | ||||||
Total | 46.9 | % |
Issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 91.4 | % | |||||
Ireland | 4.8 | ||||||
Jersey | 4.4 | ||||||
Total | 100.6 | % |
Common stocks | Percentage of net assets | ||||||
Auto components | 4.39 | % | |||||
Banks | 4.19 | ||||||
Biotechnology | 3.15 | ||||||
Chemicals | 3.10 | ||||||
Consumer finance | 4.29 | ||||||
Diversified financial services | 2.70 | ||||||
Electronic equipment, instruments & components | 4.01 | ||||||
Equity real estate investment trusts | 3.43 | ||||||
Food & staples retailing | 3.13 | ||||||
Health care providers & services | 4.80 | ||||||
Household durables | 3.81 | ||||||
Insurance | 7.91 | ||||||
Internet & direct marketing retail | 4.83 | ||||||
Internet software & services | 4.00 | ||||||
IT services | 4.67 | ||||||
Life sciences tools & services | 3.96 | ||||||
Machinery | 4.79 | ||||||
Pharmaceuticals | 9.14 | ||||||
Semiconductors & semiconductor equipment | 7.55 | ||||||
Software | 4.53 | ||||||
Specialty retail | 4.86 | ||||||
Technology hardware, storage & peripherals | 3.27 | ||||||
Total common stocks | 100.51 | % | |||||
Short-term investments | 1.04 | ||||||
Total investments | 101.55 | % | |||||
Liabilities in excess of other assets | (1.55 | ) | |||||
Net assets | 100.00 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
64
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
Portfolio of investments
June 30, 2018
Number of shares | Value | ||||||||||
Common stocks: 100.51% | |||||||||||
Auto components: 4.39% | |||||||||||
Aptiv PLC | 14,122 | $ | 1,293,999 | ||||||||
Banks: 4.19% | |||||||||||
US Bancorp | 24,701 | 1,235,544 | |||||||||
Biotechnology: 3.15% | |||||||||||
Ironwood Pharmaceuticals, Inc.* | 48,675 | 930,666 | |||||||||
Chemicals: 3.10% | |||||||||||
Ashland Global Holdings, Inc. | 11,685 | 913,533 | |||||||||
Consumer finance: 4.29% | |||||||||||
American Express Co. | 12,899 | 1,264,102 | |||||||||
Diversified financial services: 2.70% | |||||||||||
Voya Financial, Inc. | 16,958 | 797,026 | |||||||||
Electronic equipment, instruments & components: 4.01% | |||||||||||
Jabil, Inc. | 42,799 | 1,183,820 | |||||||||
Equity real estate investment trusts: 3.43% | |||||||||||
Simon Property Group, Inc. | 5,939 | 1,010,759 | |||||||||
Food & staples retailing: 3.13% | |||||||||||
Walgreens Boots Alliance, Inc. | 15,388 | 923,511 | |||||||||
Health care providers & services: 4.80% | |||||||||||
UnitedHealth Group, Inc. | 5,766 | 1,414,631 | |||||||||
Household durables: 3.81% | |||||||||||
Newell Brands, Inc. | 43,605 | 1,124,573 | |||||||||
Insurance: 7.91% | |||||||||||
Marsh & McLennan Cos., Inc. | 17,442 | 1,429,721 | |||||||||
Prudential Financial, Inc. | 9,662 | 903,493 | |||||||||
2,333,214 | |||||||||||
Internet & direct marketing retail: 4.83% | |||||||||||
Amazon.com, Inc.* | 839 | 1,426,132 | |||||||||
Internet software & services: 4.00% | |||||||||||
Facebook, Inc., Class A* | 6,070 | 1,179,522 |
Number of shares | Value | ||||||||||
IT services: 4.67% | |||||||||||
Visa, Inc., Class A | 10,391 | $ | 1,376,288 | ||||||||
Life sciences tools & services: 3.96% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 4,048 | 1,168,010 | |||||||||
Machinery: 4.79% | |||||||||||
AGCO Corp. | 23,278 | 1,413,440 | |||||||||
Pharmaceuticals: 9.14% | |||||||||||
Allergan PLC | 8,421 | 1,403,949 | |||||||||
Johnson & Johnson | 10,653 | 1,292,635 | |||||||||
2,696,584 | |||||||||||
Semiconductors & semiconductor equipment: 7.55% | |||||||||||
Lam Research Corp. | 7,222 | 1,248,323 | |||||||||
Micron Technology, Inc.* | 18,681 | 979,631 | |||||||||
2,227,954 | |||||||||||
Software: 4.53% | |||||||||||
salesforce.com, Inc.* | 9,803 | 1,337,129 | |||||||||
Specialty retail: 4.86% | |||||||||||
The TJX Cos., Inc. | 15,053 | 1,432,745 | |||||||||
Technology hardware, storage & peripherals: 3.27% | |||||||||||
Western Digital Corp. | 12,471 | 965,380 | |||||||||
Total common stocks (cost $29,032,367) | 29,648,562 | ||||||||||
Short-term investments: 1.04% | |||||||||||
Investment companies: 1.04% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $306,462) | 306,462 | 306,462 | |||||||||
Total investments: 101.55% (cost $29,338,829) | 29,955,024 | ||||||||||
Liabilities in excess of other assets: (1.55)% | (456,998 | ) | |||||||||
Net assets: 100.00% | $ | 29,498,026 |
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
65
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
Portfolio of investments
June 30, 2018
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 29,648,562 | $ | — | $ | — | $ | 29,648,562 | |||||||||||
Short-term investments | — | 306,462 | — | 306,462 | |||||||||||||||
Total | $ | 29,648,562 | $ | 306,462 | $ | — | $ | 29,955,024 |
At June 30, 2018, there were no transfers between Level 1 and Level 2.
Portfolio footnote
* Non-income producing security.
See accompanying notes to financial statements.
66
UBS Municipal Bond Fund
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS Municipal Bond Fund (the "Fund") returned 0.04% (Class A shares declined 2.25% after the deduction of the maximum sales charge), while Class P shares gained 0.30%. For comparison purposes, the Fund's benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), returned 1.56%, and the Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index gained 0.59% over the same time period. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 68; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a modest gain during the reporting period but underperformed its benchmark. This was primarily due to positioning on the municipal yield curve. The Fund did not use derivatives during the reporting period.
Portfolio performance summary1
What worked
• From a yield curve perspective, positioning in the three year portion of the municipal yield curve) was beneficial for returns. (The yield curve plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.)
• An overweight to the leasing sector was positive for returns
What didn't work
• Yield curve positioning was the largest detractor from results. In particular, a significant underweight to the long end of the municipal yield curve (20+ years) was a headwind for relative results as the yield curve flattened over the period. Overweights to the seven and 10 year portions of the municipal yield curve were also negative for relative returns as they lagged the Index.
• Having a shorter duration than that of the benchmark was not rewarded over the reporting period.
• Underweighting BBB-rated municipal bonds was not beneficial, as lower rated securities outperformed their higher quality counterparts during the reporting period.
• Security selection of A-rated municipal securities was a negative for performance.
• Positioning in certain sectors detracted from performance versus the benchmark. In particular, an underweight to the hospital sector and an overweight to industrial development revenue/pollution control revenue sector negative for relative results.
• Duration positioning detracted from results. Having a shorter duration than that of the benchmark was not rewarded.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 17, 2018. 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.
67
UBS Municipal Bond Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | Inception1 | ||||||||||
Before deducting maximum sales charge | |||||||||||
Class A2 | 0.04 | % | 1.85 | % | |||||||
Class C3 | (0.45 | ) | 1.33 | ||||||||
Class P4 | 0.30 | 2.08 | |||||||||
After deducting maximum sales charge | |||||||||||
Class A2 | (2.25 | )% | 1.22 | % | |||||||
Class C3 | (1.19 | ) | 1.33 | ||||||||
Bloomberg Barclays Municipal Bond Index5 | 1.56 | 2.65 | |||||||||
Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index6 | 0.59 | 2.24 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 27, 2017 prospectuses were as follows: Class A—1.00% and 0.65%; Class C—1.52% and 1.15%; Class P—0.77% and 0.40%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 29, 2018, do not exceed 0.65% for Class A shares, 1.15% for Class C shares and 0.40% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS Municipal Bond Fund and the indices is November 10, 2014.
2 Maximum sales charge for Class A shares is 2.25%. Class A shares bear ongoing 12b-1 service fees.
3 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
5 The Bloomberg Barclays Municipal Bond Index is an unmanaged index designed to measure the total return of the US dollar denominated tax exempt bond market. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index is an unmanaged sub-index of the Barclays Municipal Managed Money Index, which is a rules-based, market-value-weighted index designed to track the performance of municipal securities issued by state and local municipalities whose interest is exempt from federal income tax and the federal alternative minimum tax. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
68
UBS Municipal Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 2.25% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS Municipal Bond Fund Class A and Class P shares versus the Bloomberg Barclays Municipal Bond Index and Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index from November 10, 2014, which is the inception date of the two classes, through June 30, 2018. 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 could pay on Fund distributions or the redemption of Fund shares. Past performance is no guarantee of future results. Share price and returns will vary with market conditions; investors may realize a gain or loss upon redemption.
UBS Municipal Bond Fund Class A vs. Barclays Municipal Bond Index and Barclays Municipal Managed Money Intermediate (1-17) Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of November 10, 2014 = $9,775
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 2.25%.
UBS Municipal Bond Fund Class P vs. Barclays Municipal Bond Index and Barclays Municipal Managed Money Intermediate (1-17) Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of November 10, 2014 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
69
UBS Municipal Bond Fund
Portfolio statistics—June 30, 2018 (unaudited)1
Summary of municipal securities by state
Percentage of net assets | |||||||
Long-term municipal bonds | |||||||
Alaska | 0.41 | % | |||||
California | 2.99 | ||||||
Colorado | 1.62 | ||||||
Connecticut | 3.91 | ||||||
District of Columbia | 0.96 | ||||||
Florida | 12.62 | ||||||
Georgia | 1.36 | ||||||
Illinois | 13.54 | ||||||
Kentucky | 1.38 | ||||||
Maryland | 2.15 | ||||||
Massachusetts | 3.90 | ||||||
Michigan | 0.95 | ||||||
Minnesota | 0.16 | ||||||
Mississippi | 1.57 | ||||||
Nebraska | 1.19 | ||||||
Nevada | 1.77 | ||||||
New Jersey | 5.85 | ||||||
New York | 8.74 | ||||||
Ohio | 0.97 | ||||||
Pennsylvania | 14.49 | ||||||
Rhode Island | 1.30 | ||||||
South Carolina | 2.02 | ||||||
Texas | 14.43 | ||||||
Wisconsin | 1.07 | ||||||
Total long-term municipal bonds | 99.35 | % | |||||
Short-term investments | 0.44 | ||||||
Total investments | 99.79 | % | |||||
Other assets in excess of liabilities | 0.21 | ||||||
Net assets | 100.00 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
70
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2018
Face amount | Value | ||||||||||
Long-term municipal bonds: 99.35% | |||||||||||
Alaska: 0.41% | |||||||||||
City of Valdez, Marine Terminal Revenue Bonds, Series A, 1.500%, due 12/01/331 | $ | 500,000 | $ | 500,000 | |||||||
California: 2.99% | |||||||||||
California State Public Works Board Revenue Bonds, Series F, 5.000%, due 05/01/26 | 1,500,000 | 1,754,505 | |||||||||
Golden State Tobacco Securitization Corp., Enhanced Tobacco Settlement, Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/32 | 1,000,000 | 1,136,000 | |||||||||
5.000%, due 06/01/33 | 650,000 | 736,216 | |||||||||
3,626,721 | |||||||||||
Colorado: 1.62% | |||||||||||
City and County of Denver, Airport System Revenue Bonds, Series A, 5.000%, due 11/15/23 | 1,545,000 | 1,767,866 | |||||||||
City and County of Denver, Certificates of Participation Refunding, COP, Series A2, 1.550%, due 12/01/291 | 200,000 | 200,000 | |||||||||
1,967,866 | |||||||||||
Connecticut: 3.91% | |||||||||||
State of Connecticut, GO Bonds, Series A, 5.000%, due 04/15/25 | 1,250,000 | 1,399,100 | |||||||||
Series B, 5.000%, due 04/15/25 | 2,000,000 | 2,238,560 | |||||||||
Series C, 5.000%, due 06/15/23 | 1,000,000 | 1,109,405 | |||||||||
4,747,065 | |||||||||||
District of Columbia: 0.96% | |||||||||||
District of Columbia, GO Bonds, Series E, 5.000%, due 06/01/25 | 1,000,000 | 1,169,510 | |||||||||
Florida: 12.62% | |||||||||||
Central Florida Expressway Authority Revenue Bonds, Series B, 5.000%, due 07/01/34 | 1,000,000 | 1,146,580 | |||||||||
City of Gainesville, Florida Utilities System Revenue Bonds, Series A, 5.000%, due 10/01/26 | 1,000,000 | 1,185,180 | |||||||||
Miami-Dade County Revenue Bonds, 5.000%, due 10/01/26 | 1,000,000 | 1,178,650 | |||||||||
School Board of Volusia County, Certificates Refunding, Master Lease Program, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,126,310 |
Face amount | Value | ||||||||||
School District of St. Lucie County, Sales Tax Revenue Bonds, AGM, 5.000%, due 10/01/26 | $ | 1,020,000 | $ | 1,174,836 | |||||||
South Florida Water Management District, COP, 5.000%, due 10/01/34 | 1,000,000 | 1,137,990 | |||||||||
State of Florida, Board of Education, Public Education Capital Outlay, GOI Bonds, Series B, 5.000%, due 06/01/20 | 1,500,000 | 1,593,540 | |||||||||
The School Board of Broward County, COP, Series B, 5.000%, due 07/01/30 | 2,000,000 | 2,270,940 | |||||||||
The School Board of Miami-Dade County, COP, Series A, 5.000%, due 05/01/31 | 1,000,000 | 1,116,070 | |||||||||
Series D, 5.000%, due 02/01/23 | 1,000,000 | 1,117,120 | |||||||||
5.000%, due 11/01/31 | 1,000,000 | 1,131,680 | |||||||||
The School Board of Palm Beach County, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,132,110 | |||||||||
15,311,006 | |||||||||||
Georgia: 1.36% | |||||||||||
State of Georgia, GO Bonds, Series F, | |||||||||||
5.000%, due 07/01/26 | 1,385,000 | 1,652,194 | |||||||||
Illinois: 13.54% | |||||||||||
City of Chicago O'Hare International Airport, Senior Lien Revenue Bonds, Series B, 5.000%, due 01/01/30 | 1,000,000 | 1,119,730 | |||||||||
5.000%, due 01/01/31 | 1,050,000 | 1,173,081 | |||||||||
Series C, 5.000%, due 01/01/23 | 2,900,000 | 3,244,346 | |||||||||
County of Cook, GO Bonds, Series A, 5.000%, due 11/15/20 | 1,830,000 | 1,951,860 | |||||||||
5.000%, due 11/15/26 | 1,500,000 | 1,720,470 | |||||||||
Illinois Finance Authority, Clean Water Initiative Revolving Fund Revenue Bonds, 5.000%, due 01/01/24 | 1,920,000 | 2,190,394 | |||||||||
Illinois State Toll Highway Authority Revenue Bonds, Series B, 5.000%, due 01/01/27 | 1,000,000 | 1,167,520 | |||||||||
Railsplitter Tobacco Settlement Authority Revenue Bonds, 5.000%, due 06/01/25 | 1,235,000 | 1,405,455 | |||||||||
State of Illinois, Sales Tax Revenue Bonds, 5.000%, due 06/15/20 | 1,190,000 | 1,251,142 | |||||||||
5.000%, due 06/15/22 | 1,105,000 | 1,206,096 | |||||||||
16,430,094 |
71
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2018
Face amount | Value | ||||||||||
Long-term municipal bonds—(Continued) | |||||||||||
Kentucky: 1.38% | |||||||||||
Kentucky Property & Buildings Community Project No. 87, Revenue Bonds, AGC, 5.250%, due 02/01/272 | $ | 1,635,000 | $ | 1,670,692 | |||||||
Maryland: 2.15% | |||||||||||
State of Maryland, GO Bonds, 5.000%, due 06/01/26 | 2,180,000 | 2,503,534 | |||||||||
Montgomery Country Consolidated Public (Improvement Bond), GO Bonds, Series E, 1.450%, due 11/01/371 | 100,000 | 100,000 | |||||||||
2,603,534 | |||||||||||
Massachusetts: 3.90% | |||||||||||
Massachusetts Development Finance Agency, Partners Healthcare System Revenue Bonds, Series S-1, 5.000%, due 07/01/23 | 1,500,000 | 1,701,420 | |||||||||
The Commonwealth of Massachusetts, Consolidated Loan of 2016, GO Bonds, Series A, 5.000%, due 03/01/34 | 1,125,000 | 1,260,585 | |||||||||
The Commonwealth of Massachusetts, Consolidated Loan, GO Bonds, Series D, 5.000%, due 07/01/26 | 1,500,000 | 1,774,980 | |||||||||
4,736,985 | |||||||||||
Michigan: 0.95% | |||||||||||
Michigan Finance Authority, Trinity Health Credit Group, Hospital Revenue Bonds, Series A, 5.000%, due 12/01/35 | 1,000,000 | 1,148,750 | |||||||||
Minnesota: 0.16% | |||||||||||
Rochester Minnesota Health Care Facilities Revenue Bonds, Series B, 1.430%, due 11/15/381 | 200,000 | 200,000 | |||||||||
Mississippi: 1.57% | |||||||||||
Mississippi Business Finance Corp., Gulf Opportunity Zone, Industrial Development, Chevron USA, Inc., Project Revenue Bonds, Series F, 1.470%, due 12/01/301 | 400,000 | 400,000 | |||||||||
Series I, 1.530%, due 11/01/351 | 1,500,000 | 1,500,000 | |||||||||
1,900,000 | |||||||||||
Nebraska: 1.19% | |||||||||||
Douglas County Hospital Authority No. 2 Revenue Bonds, 5.000%, due 05/15/25 | 1,250,000 | 1,447,725 |
Face amount | Value | ||||||||||
Nevada: 1.77% | |||||||||||
Clark County, Las Vegas-McCarran International Airport Revenue Bonds, Series C, 5.000%, due 07/01/27 | $ | 1,815,000 | $ | 2,152,753 | |||||||
New Jersey: 5.85% | |||||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series AA, 5.000%, due 06/15/27 | 1,500,000 | 1,597,215 | |||||||||
New Jersey Turnpike Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 1,000,000 | 1,138,370 | |||||||||
Series E, 5.000%, due 01/01/34 | 860,000 | 961,884 | |||||||||
State of New Jersey, GO Bonds, 5.000%, due 06/01/20 | 1,000,000 | 1,056,730 | |||||||||
State of New Jersey, GO Bonds, Series Q, 5.000%, due 08/15/19 | 1,500,000 | 1,553,985 | |||||||||
Series T, 5.000%, due 06/01/20 | 750,000 | 792,548 | |||||||||
7,100,732 | |||||||||||
New York: 8.74% | |||||||||||
City of New York, GO Bonds, Series A, 5.000%, due 08/01/27 | 1,000,000 | 1,192,930 | |||||||||
Series E, 5.000%, due 08/01/26 | 1,000,000 | 1,181,010 | |||||||||
Subseries F-1, 5.000%, due 04/01/34 | 1,100,000 | 1,286,670 | |||||||||
New York City Municipal Water Finance Authority, Water and Sewer System, Second General Resolution Fiscal 2017 Revenue Bonds, Series EE, 5.000%, due 06/15/33 | 1,000,000 | 1,167,910 | |||||||||
New York City Transitional Finance Authority Future Tax Secured Revenue Bonds, Subseries C-2, 5.000%, due 05/01/35 | 3,000,000 | 3,504,510 | |||||||||
New York City Transitional Finance Authority Revenue Bonds, Subseries B-1, 5.000%, due 08/01/33 | 1,000,000 | 1,133,500 | |||||||||
Subseries E-1, 5.000%, due 02/01/32 | 1,000,000 | 1,146,310 | |||||||||
10,612,840 | |||||||||||
Ohio: 0.97% | |||||||||||
State of Ohio, Cleveland Clinic Health System Revenue Bonds, Series A, 5.000%, due 01/01/32 | 1,000,000 | 1,177,740 |
72
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2018
Face amount | Value | ||||||||||
Long-term municipal bonds—(Concluded) | |||||||||||
Pennsylvania: 14.49% | |||||||||||
City of Philadelphia, GO Bonds, 5.000%, due 08/01/20 | $ | 1,590,000 | $ | 1,689,264 | |||||||
Series A, 5.000%, due 08/01/22 | 1,000,000 | 1,110,270 | |||||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment Revenue Bonds, 5.000%, due 06/01/24 | 1,625,000 | 1,826,955 | |||||||||
Commonwealth of Pennsylvania, GO Bonds, 5.000%, due 08/15/21 | 1,700,000 | 1,842,579 | |||||||||
5.000%, due 01/01/24 | 2,000,000 | 2,250,820 | |||||||||
5.000%, due 09/15/25 | 1,500,000 | 1,716,930 | |||||||||
Pennsylvania Turnpike Commission Revenue Bonds, 5.000%, due 12/01/28 | 1,000,000 | 1,145,250 | |||||||||
5.000%, due 12/01/30 | 1,750,000 | 1,976,852 | |||||||||
Series A-1, 5.000%, due 12/01/24 | 1,500,000 | 1,733,325 | |||||||||
Series A-2, 5.000%, due 12/01/28 | 1,000,000 | 1,170,950 | |||||||||
Pennsylvania Turnpike Commission, Oil Franchise Tax Revenue Bonds, Series A, 5.000%, due 12/01/22 | 1,000,000 | 1,117,970 | |||||||||
17,581,165 | |||||||||||
Rhode Island: 1.30% | |||||||||||
Rhode Island Industrial Facilities Corp., Marine Terminal Revenue, 1.500%, due 02/01/251 | 500,000 | 500,000 | |||||||||
Tobacco Settlement Financing Corp., Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/21 | 1,000,000 | 1,078,520 | |||||||||
1,578,520 | |||||||||||
South Carolina: 2.02% | |||||||||||
South Carolina Public Service Authority Revenue Bonds, Series A, 5.000%, due 12/01/26 | 1,010,000 | 1,121,898 | |||||||||
Series B, 5.000%, due 12/01/20 | 1,245,000 | 1,325,489 | |||||||||
2,447,387 | |||||||||||
Texas: 14.43% | |||||||||||
Austin Community College District Public Facility Corp., Round Rock Campus Revenue Bonds, 5.000%, due 08/01/24 | 1,000,000 | 1,140,130 |
Face amount | Value | ||||||||||
Garland Independent School District, GO Bonds, PSF-GTD, 5.000%, due 02/15/25 | $ | 1,200,000 | $ | 1,394,580 | |||||||
Houston Independent School District, GO Bonds, PSF-GTD, 5.000%, due 02/15/26 | 2,000,000 | 2,349,300 | |||||||||
North Texas Tollway Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 3,030,000 | 3,423,264 | |||||||||
Plano Independent School District, GO Bonds, PSF-GTD, 5.000%, due 02/15/25 | 2,000,000 | 2,320,320 | |||||||||
State of Texas Revenue Bonds, 4.000%, due 08/30/18 | 685,000 | 687,843 | |||||||||
State of Texas Transportation Commission Highway Fund First Tier Revenue Bonds, Series A, 5.000%, due 10/01/25 | 1,000,000 | 1,174,090 | |||||||||
Texas A&M University, Financing System Revenue Bonds, Series C, 5.000%, due 05/15/26 | 2,275,000 | 2,680,587 | |||||||||
Series E, 5.000%, due 05/15/25 | 1,750,000 | 2,042,442 | |||||||||
University of Texas Permanent University, Funding System Revenue Bonds, Series A, 1.430%, due 07/01/381 | 300,000 | 300,000 | |||||||||
17,512,556 | |||||||||||
Wisconsin: 1.07% | |||||||||||
State of Wisconsin Prerefunded, GO Bonds, Series A, 5.000%, due 05/01/242 | 1,165,000 | 1,294,047 | |||||||||
Total long-term municipal bonds (cost $121,829,634) | 120,569,882 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 0.44% | |||||||||||
Investment companies: 0.44% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $529,629) | 529,629 | 529,629 | |||||||||
Total investments: 99.79% (cost $122,359,263) | 121,099,511 | ||||||||||
Other assets in excess of liabilities: 0.21% | 260,359 | ||||||||||
Net assets: 100.00% | $ | 121,359,870 |
73
UBS Municipal Bond Fund
Portfolio of investments
June 30, 2018
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Long-term municipal bonds | $ | — | $ | 120,569,882 | $ | — | $ | 120,569,882 | |||||||||||
Short-term investments | — | 529,629 | — | 529,629 | |||||||||||||||
Total | $ | — | $ | 121,099,511 | $ | — | $ | 121,099,511 |
At June 30, 2018 there were no transfers between Level 1 and Level 2.
Portfolio footnotes
1 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
2 Security is prerefunded or escrowed to maturity. The maturity date shown is the earlier of the reset date or the date of the prerefunded call.
See accompanying notes to financial statements.
74
UBS Total Return Bond Fund
Portfolio performance
For the 12 months ended June 30, 2018, Class A shares of UBS Total Return Bond Fund (the "Fund") returned -1.12% (Class A shares returned -4.81% after the deduction of the maximum sales charge), while Class P shares returned -0.88%.For comparison purposes, the Bloomberg Barclays US Aggregate Index returned -0.40%. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 77; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on the redemption of Fund shares, while index returns do not reflect the deduction of fees and expenses.)
Market Commentary:
The lengthy US economic expansion continued during the reporting period. Looking back, the US Commerce Department reported that gross domestic product ("GDP") grew at a revised 2.8% seasonally adjusted annualized rate during the third quarter of 2017. GDP growth then moderated to a revised 2.3% and 2.2% during the fourth quarter of 2017 and the first quarter of 2018, respectively. Finally, second quarter 2018 GDP grew at a 4.1% rate based on the US Commerce Department's initial estimate.1 This represented the strongest pace since the third quarter of 2014.
As expected, the US Federal Reserve Board (the "Fed") continued to raise interest rates during the reporting period. Specifically, the Fed raised rates in December 2017, March 2018 and June 2018. With its last rate hike, the federal funds rate moved to a range between 1.75% and 2.00%. In addition, starting in October 2017, the Fed began reducing its balance sheet. For the remainder of 2018, the Fed currently anticipates making two additional 0.25% rate hikes, while continuing to pare its balance sheet.
The US fixed income market posted weak results during the reporting period. Short-term Treasury yields moved sharply higher in concert with the Fed's interest rate hikes. Longer-term Treasury yields also rose, albeit to a lesser extent. For the fiscal year as a whole, the yield on the US 10-year Treasury rose from 2.31% to 2.85% (bond yields and prices move in the opposite direction). The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Index, returned -0.40% for the 12 months ended June 30, 2018. Returns of riskier fixed income securities were mixed. High yield bonds, as measured by the ICE BofAML US High Yield Cash Pay Constrained Index, gained 2.50% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global), returned -2.45%.
Portfolio Performance Summary:
What Worked:
• Duration and yield curve management: The Fund's tactical adjustments to its duration, as well as its yield curve positioning, contributed to returns over the reporting period. In particular, exposure to long-term rates as the yield curve flattened was beneficial.
• A long position in the US dollar. Having a long position in the US dollar was additive for returns as it appreciated versus most other currencies, in particular during the second half of the reporting period.
• Sector exposure: The Fund's overweight to and security selection within various securitized sectors, namely commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) contributed to performance as their spreads tightened. In addition, an overweight to investment grade corporate bonds was beneficial for returns.
1 Based on the Commerce Department's initial estimate announced on July 26, 2018, after the reporting period had ended.
75
UBS Total Return Bond Fund
What Didn't Work:
• Emerging market exposures: The Fund's long exposures to a basket of emerging market currencies, including the Argentine peso, Brazilian real and Turkish lira, detracted from performance as they depreciated versus the US dollar during the second half of the reporting period. Allocations to Brazilian local currency debt and US dollar-denominated debt from Argentina and Brazil were also headwinds for returns.
• Agency mortgage-backed securities ("MBS") exposure. The Fund's security selection within the MBS sector was negative for results.
• Exposure to the Swedish krona. This position detracted from returns as the krona weakened versus the US dollar over the first half of 2018.
Use of Derivatives
During the reporting period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. A number of credit derivatives, including credit-default swap index (CDX) options and total return swaps, were used to manage the Fund's credit exposure. Collectively they contributed to results over the period. With respect to our active currency management, utilizing currency options was a modest detractor from performance. Derivatives were just one tool, among others, that we used to implement our overall strategy. These derivatives, in aggregate, added to performance during the reporting period.
Market Outlook:
Economic growth in the US has recently accelerated and outpaced both the European Union and Japan. We expect the US economy to continue expanding, with tailwinds from recent tax cuts and pro-growth deregulation. In addition, we see a positive backdrop in terms of consumer metrics, including delinquencies and losses that are at very low levels. Furthermore, with historically low unemployment there is an expectation that wages will rise going forward. Against this backdrop, we believe the Federal Reserve Board (Fed) will continue to tighten monetary policy, with two more rates hikes anticipated in 2018. However, should the economy falter, the Fed may pare back the number of rate hikes this year. In terms of portfolio positioning, we currently favor secured assets, including mortgage-backed securities (MBS), CMBS and ABS, as we believe they are attractively valued relative to non-secured assets, such as investment grade and, to a lesser extent, high yield corporate bonds. In the case of corporate debt, there is concern that at this point in the credit cycle this segment could face challenges associated with increased merger and acquisition (M&A) activity, debt coverage issues and less attractive leverage ratios. Elsewhere, there could be continued volatility in the emerging markets debt asset class given uncertainties surrounding the trajectory for non-US growth and a potential trade war.
This letter is intended to assist shareholders in understanding how the Fund performed during the 12 months ended June 30, 2018. The views and opinions in the letter were current as of August 17, 2018. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at (800) 647-1568 or by visiting our website at www.ubs.com/am-us.
76
UBS Total Return Bond Fund
Average annual total returns for periods ended 06/30/18 (unaudited)
1 year | 5 years | 10 years or Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class A2 | (1.12 | )% | N/A | (0.81 | )% | ||||||||||
Class C3 | (1.76 | )% | N/A | (1.38 | )% | ||||||||||
Class P4 | (0.88 | )% | 1.81 | % | 5.24 | % | |||||||||
After deducting maximum sales charge | |||||||||||||||
Class A2 | (4.81 | )% | N/A | (2.94 | )% | ||||||||||
Class C3 | (2.48 | )% | N/A | (1.38 | )% | ||||||||||
Bloomberg Barclays US Aggregate Index5 | (0.40 | )% | 2.27 | % | �� | (0.80 | )% |
The annualized gross and net expense ratios as in the October 27, 2017 prospectuses were as follows: Class A—1.77% and 0.78%; Class C—2.17% and 1.28%; Class P—1.32% and 0.53%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 29, 2018, do not exceed 0.75% for Class A shares, 1.25% for Class C shares and 0.50% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of A and C shares of UBS Total Return Bond Fund and the index is September 29, 2016. 10 years fund performance is shown for Class P Shares, and the 10 years index performance of the Bloomberg Barclays US Aggregate Index is 3.72%. The Fund's Class P shares acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end fund (the "Predecessor Fund"), prior to the opening of business on May 23, 2016 (the "Reorganization"). The Predecessor Fund was also managed by the Advisor, and the day-to-day management of, and investment decisions for, the Fund and the Predecessor Fund are made by the same portfolio management team. The Funds have generally similar investment objectives and strategies. Therefore, the information shown above reflects the historical performance of the Predecessor Fund for periods prior to the Reorganization. The performance information shown for periods prior to the Reorganization is for the Predecessor Fund and may not be representative of performance of the Fund.
2 Maximum sales charge for Class A shares is 3.75%. Class A shares bear ongoing 12b-1 service fees.
3 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 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
5 The Bloomberg Barclays US Aggregate Bond Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
A temporary redemption fee of 2% was imposed on sales of Class P shares of the Fund between May 23 and August 22, 2016.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
77
UBS Total Return Bond Fund
Illustration of an assumed investment of $10,000 in Class A shares (adjusted for 3.75% maximum sales charge) and $5,000,000 in Class P shares (unaudited)
The following two graphs depict the performance of UBS Total Return Bond Fund Class A and Class P shares versus the Bloomberg Barclays US Aggregate Index from September 29, 2016 for Class A and over 10 years for Class P, both ending June 30, 2018. 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.
UBS Total Return Bond Fund Class A vs. Bloomberg Barclays US Aggregate Index
Wealth value with dividends reinvested. Initial investment for Class A Shares as of September 29, 2016 = $9,625.
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 3.75%.
UBS Total Return Bond Fund Class P vs. Bloomberg Barclays US Aggregate Index
Wealth value with dividends reinvested. Initial investment for Class P shares as of June 30, 2008 = $5,000,000
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
78
UBS Total Return Bond Fund
Portfolio statistics—June 30, 2018 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
FHLMC, 4.000%, due 12/01/47 | 3.4 | % | |||||
New Zealand Government Bond, 5.500%, due 04/15/23 | 3.3 | ||||||
FNMA, 3.500%, due 02/01/48 | 2.6 | ||||||
FHLMC, 3.500%, due 02/01/48 | 2.3 | ||||||
FNMA, 3.500%, due 12/01/47 | 2.3 | ||||||
FHLMC, 3.500%, due 11/01/47 | 2.1 | ||||||
New Zealand Government Bond, 4.500%, due 04/15/27 | 2.0 | ||||||
FNMA, 3.000%, due 11/01/46 | 1.9 | ||||||
FNMA, 4.000%, due 07/01/48 | 1.8 | ||||||
FNMA, 3.000%, due 11/01/47 | 1.8 | ||||||
Total | 23.5 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 82.4 | % | |||||
New Zealand | 5.3 | ||||||
United Kingdom | 2.1 | ||||||
Mexico | 1.2 | ||||||
Canada | 1.2 | ||||||
Total | 92.2 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
79
UBS Total Return Bond Fund
Industry diversification—June 30, 2018 (unaudited)1
Corporate bonds | Percentage of net assets | ||||||
Agriculture | 0.26 | % | |||||
Auto manufacturers | 0.34 | ||||||
Banks | 7.36 | ||||||
Beverages | 0.53 | ||||||
Biotechnology | 0.67 | ||||||
Chemicals | 1.44 | ||||||
Commercial services | 1.03 | ||||||
Computers | 0.67 | ||||||
Diversified financial services | 2.60 | ||||||
Electric | 1.61 | ||||||
Food | 0.38 | ||||||
Healthcare-products | 0.69 | ||||||
Healthcare-services | 0.71 | ||||||
Insurance | 1.41 | ||||||
Internet | 0.74 | ||||||
Media | 1.65 | ||||||
Mining | 0.48 | ||||||
Miscellaneous manufacturers | 1.46 | ||||||
Oil & gas | 3.43 | ||||||
Pharmaceuticals | 1.78 | ||||||
Pipelines | 1.38 | ||||||
Real estate investment trusts | 0.82 | ||||||
Retail | 0.22 | ||||||
Semiconductors | 0.57 | ||||||
Software | 0.75 | ||||||
Telecommunications | 1.92 | ||||||
Transportation | 0.36 | ||||||
Total corporate bonds | 35.26 | % |
Percentage of net assets | |||||||
Asset-backed securities | 8.93 | % | |||||
Commercial mortgage-backed securities | 15.00 | ||||||
Mortgage-backed securities | 27.19 | ||||||
Municipal bonds and notes | 0.85 | ||||||
Non-US government obligations | 9.09 | ||||||
Supranationals | 0.45 | ||||||
U.S. treasury obligations | 2.16 | ||||||
Preferred stocks | 0.25 | ||||||
Short-term investments | 0.85 | ||||||
Foreign exchange options purchased | 0.00 | † | |||||
Total investments | 100.03 | % | |||||
Liabilities in excess of other assets | (0.03 | ) | |||||
Net assets | 100.00 | % |
† Amount represents less than 0.005%
1 The Fund's portfolio is actively managed and its composition will vary over time.
80
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds: 35.26% | |||||||||||
Canada: 1.20% | |||||||||||
Cenovus Energy, Inc. 5.400%, due 06/15/47 | 80,000 | $ | 78,261 | ||||||||
NOVA Chemicals Corp. 5.250%, due 08/01/232 | 210,000 | 209,475 | |||||||||
Rogers Communications, Inc. 5.000%, due 03/15/44 | 110,000 | 114,158 | |||||||||
Teck Resources Ltd. 3.750%, due 02/01/23 | 100,000 | 94,875 | |||||||||
Total Canada corporate bonds | 496,769 | ||||||||||
Cayman Islands: 0.87% | |||||||||||
Seagate HDD Cayman 5.750%, due 12/01/34 | 150,000 | 136,839 | |||||||||
XLIT Ltd. 6.375%, due 11/15/24 | 200,000 | 224,543 | |||||||||
Total Cayman Islands corporate bonds | 361,382 | ||||||||||
Colombia: 0.17% | |||||||||||
Ecopetrol SA 5.375%, due 06/26/26 | 70,000 | 71,841 | |||||||||
Curacao: 0.13% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 57,000 | 54,584 | |||||||||
France: 0.47% | |||||||||||
Societe Generale SA 4.000%, due 01/12/272 | 200,000 | 192,618 | |||||||||
Ireland: 0.23% | |||||||||||
Shire Acquisitions Investments Ireland DAC 2.400%, due 09/23/21 | 100,000 | 95,728 | |||||||||
Luxembourg: 0.95% | |||||||||||
Allergan Funding SCS 3.800%, due 03/15/25 | 200,000 | 194,152 | |||||||||
INEOS Group Holdings SA 5.625%, due 08/01/242 | 200,000 | 197,000 | |||||||||
Total Luxembourg corporate bonds | 391,152 | ||||||||||
Mexico: 0.80% | |||||||||||
Petroleos Mexicanos 3.500%, due 01/30/23 | 350,000 | 331,335 | |||||||||
Netherlands: 1.10% | |||||||||||
Deutsche Telekom International Finance BV 8.750%, due 06/15/303 | 60,000 | 79,481 | |||||||||
LYB International Finance BV 4.875%, due 03/15/44 | 50,000 | 49,761 | |||||||||
Mylan NV 3.950%, due 06/15/26 | 80,000 | 76,471 | |||||||||
Petrobras Global Finance BV 7.375%, due 01/17/27 | 250,000 | 249,688 | |||||||||
Total Netherlands corporate bonds | 455,401 |
Face amount1 | Value | ||||||||||
United Kingdom: 2.14% | |||||||||||
Barclays PLC 4.836%, due 05/09/28 | 200,000 | $ | 188,811 | ||||||||
HSBC Holdings PLC 3.400%, due 03/08/21 | 260,000 | 259,888 | |||||||||
Lloyds Banking Group PLC 4.582%, due 12/10/25 | 200,000 | 195,991 | |||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 250,000 | 242,819 | |||||||||
Total United Kingdom corporate bonds | 887,509 | ||||||||||
United States: 27.20% | |||||||||||
21st Century Fox America, Inc. 7.750%, due 12/01/45 | 50,000 | 70,414 | |||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 80,000 | 78,606 | |||||||||
AbbVie, Inc. 2.500%, due 05/14/20 | 200,000 | 197,521 | |||||||||
AEP Texas, Inc., Series E 6.650%, due 02/15/33 | 50,000 | 63,469 | |||||||||
Alabama Power Co. 6.000%, due 03/01/39 | 100,000 | 123,911 | |||||||||
Amazon.com, Inc. 4.050%, due 08/22/47 | 60,000 | 58,675 | |||||||||
Anadarko Petroleum Corp. 5.550%, due 03/15/26 | 20,000 | 21,428 | |||||||||
Anheuser-Busch InBev Finance, Inc. 4.900%, due 02/01/46 | 215,000 | 221,053 | |||||||||
Antero Resources Corp. 5.375%, due 11/01/21 | 150,000 | 151,875 | |||||||||
AT&T, Inc. 4.300%, due 02/15/302 | 266,000 | 251,506 | |||||||||
Bank of America Corp. 4.200%, due 08/26/24 | 150,000 | 150,721 | |||||||||
6.110%, due 01/29/37 | 125,000 | 143,501 | |||||||||
Biogen, Inc. 4.050%, due 09/15/25 | 150,000 | 150,729 | |||||||||
5.200%, due 09/15/45 | 50,000 | 52,919 | |||||||||
Boston Properties LP, REIT 2.750%, due 10/01/26 | 210,000 | 189,267 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.125%, due 01/15/25 | 30,000 | 27,825 | |||||||||
Burlington Northern Santa Fe LLC 5.150%, due 09/01/43 | 100,000 | 110,750 | |||||||||
Capital One Financial Corp. 3.750%, due 07/28/26 | 10,000 | 9,289 | |||||||||
4.200%, due 10/29/25 | 140,000 | 135,921 | |||||||||
CCO Holdings LLC 5.500%, due 05/01/262 | 150,000 | 145,455 | |||||||||
CF Industries, Inc. 3.450%, due 06/01/23 | 150,000 | 141,936 | |||||||||
Charter Communications Operating LLC/ Charter Communications Operating Capital 3.579%, due 07/23/20 | 150,000 | 149,978 | |||||||||
Citigroup, Inc. 5.500%, due 09/13/25 | 375,000 | 398,019 |
81
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Comcast Corp. 3.969%, due 11/01/47 | 113,000 | $ | 99,453 | ||||||||
CVS Health Corp. 4.300%, due 03/25/28 | 120,000 | 118,322 | |||||||||
Dell International LLC 4.420%, due 06/15/212 | 100,000 | 101,419 | |||||||||
Devon Energy Corp. 5.000%, due 06/15/45 | 80,000 | 81,321 | |||||||||
Eaton Corp. 2.750%, due 11/02/22 | 190,000 | 184,414 | |||||||||
Enterprise Products Operating LLC 2.850%, due 04/15/21 | 105,000 | 103,687 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 150,000 | 142,417 | |||||||||
Ford Motor Co. 7.450%, due 07/16/31 | 55,000 | 64,627 | |||||||||
General Electric Co., Series D (fixed, converts to FRN on 01/21/21), 5.000%, due 01/21/214 | 349,000 | 344,288 | |||||||||
General Mills, Inc. 3.200%, due 04/16/21 | 50,000 | 49,737 | |||||||||
General Motors Co. 6.600%, due 04/01/36 | 70,000 | 75,722 | |||||||||
Georgia Power Co., Series C 2.000%, due 09/08/20 | 70,000 | 68,376 | |||||||||
Gilead Sciences, Inc. 3.650%, due 03/01/26 | 75,000 | 74,022 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 80,000 | 73,912 | |||||||||
International Lease Finance Corp. 5.875%, due 08/15/22 | 120,000 | 127,225 | |||||||||
7.125%, due 09/01/182 | 400,000 | 402,610 | |||||||||
Jefferies Finance LLC 7.500%, due 04/15/212 | 200,000 | 203,000 | |||||||||
JPMorgan Chase & Co., Series I 3 mo. USD LIBOR + 3.470%, 5.829%, due 07/30/184,5 | 200,000 | 201,910 | |||||||||
Kinder Morgan, Inc. 5.550%, due 06/01/45 | 40,000 | 40,385 | |||||||||
6.500%, due 09/15/20 | 100,000 | 106,295 | |||||||||
Liberty Mutual Group, Inc. 4.250%, due 06/15/232 | 200,000 | 202,317 | |||||||||
Life Technologies Corp. 6.000%, due 03/01/20 | 135,000 | 140,712 | |||||||||
Marathon Oil Corp. 4.400%, due 07/15/27 | 125,000 | 125,397 | |||||||||
Marathon Petroleum Corp. 4.750%, due 09/15/44 | 120,000 | 114,084 | |||||||||
MetLife, Inc. 6.400%, due 12/15/36 | 35,000 | 37,100 | |||||||||
Microsoft Corp. 2.375%, due 02/12/22 | 250,000 | 244,378 | |||||||||
4.450%, due 11/03/45 | 60,000 | 64,440 |
Face amount1 | Value | ||||||||||
Morgan Stanley 4.350%, due 09/08/26 | 140,000 | $ | 138,261 | ||||||||
4.875%, due 11/01/22 | 350,000 | 362,916 | |||||||||
MPLX LP 4.875%, due 06/01/25 | 70,000 | 71,951 | |||||||||
Nabors Industries, Inc. 4.625%, due 09/15/21 | 150,000 | 146,625 | |||||||||
NCR Corp. 5.000%, due 07/15/22 | 40,000 | 39,600 | |||||||||
Netflix, Inc. 5.500%, due 02/15/22 | 240,000 | 246,900 | |||||||||
Noble Energy, Inc. 5.050%, due 11/15/44 | 50,000 | 49,931 | |||||||||
Oncor Electric Delivery Co. LLC 3.750%, due 04/01/45 | 50,000 | 47,362 | |||||||||
Pacific Gas & Electric Co. 2.950%, due 03/01/26 | 150,000 | 133,800 | |||||||||
Prudential Financial, Inc. 6.625%, due 06/21/40 | 50,000 | 62,664 | |||||||||
Quicken Loans, Inc. 5.750%, due 05/01/252 | 260,000 | 254,483 | |||||||||
Realogy Group LLC 5.250%, due 12/01/212 | 150,000 | 149,625 | |||||||||
Reynolds American, Inc. 7.250%, due 06/15/37 | 85,000 | 106,357 | |||||||||
RR Donnelley & Sons Co. 7.875%, due 03/15/21 | 200,000 | 203,000 | |||||||||
Sabine Pass Liquefaction LLC 5.000%, due 03/15/27 | 200,000 | 203,169 | |||||||||
Smithfield Foods, Inc. 3.350%, due 02/01/222 | 80,000 | 77,231 | |||||||||
Southern Copper Corp. 6.750%, due 04/16/40 | 90,000 | 103,361 | |||||||||
Sprint Corp. 7.875%, due 09/15/23 | 200,000 | 207,375 | |||||||||
Sunoco Logistics Partners Operations LP 5.400%, due 10/01/47 | 50,000 | 45,842 | |||||||||
Synchrony Financial 4.500%, due 07/23/25 | 90,000 | 88,363 | |||||||||
Teachers Insurance & Annuity Association of America 4.270%, due 05/15/472 | 60,000 | 57,332 | |||||||||
Tenet Healthcare Corp. 4.625%, due 07/15/242 | 200,000 | 189,440 | |||||||||
Texas Instruments, Inc. 1.850%, due 05/15/22 | 220,000 | 210,235 | |||||||||
The ADT Corp. 3.500%, due 07/15/22 | 240,000 | 224,640 | |||||||||
The Cleveland Electric Illuminating Co. 5.950%, due 12/15/36 | 75,000 | 89,213 | |||||||||
The Goldman Sachs Group, Inc. 5.150%, due 05/22/45 | 30,000 | 29,834 | |||||||||
5.750%, due 01/24/22 | 305,000 | 326,274 | |||||||||
The Home Depot, Inc. 2.125%, due 09/15/26 | 100,000 | 89,159 |
82
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
The Kroger Co. 6.900%, due 04/15/38 | 25,000 | $ | 30,220 | ||||||||
Thermo Fisher Scientific, Inc. 5.300%, due 02/01/44 | 60,000 | 66,519 | |||||||||
Time Warner Cable LLC 8.750%, due 02/14/19 | 210,000 | 217,009 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 37,929 | |||||||||
UnitedHealth Group, Inc. 4.625%, due 07/15/35 | 100,000 | 105,108 | |||||||||
Verizon Communications, Inc. 5.250%, due 03/16/37 | 140,000 | 143,691 | |||||||||
Wells Fargo & Co. 5.375%, due 11/02/43 | 70,000 | 73,042 | |||||||||
Total United States corporate bonds | 11,264,799 | ||||||||||
Total corporate bonds (cost $14,989,827) | 14,603,118 | ||||||||||
Asset-backed securities: 8.93% | |||||||||||
United States: 8.93% | |||||||||||
AmeriCredit Automobile Receivables Trust, Series 2017-3, Class D 3.180%, due 07/18/23 | 175,000 | 173,130 | |||||||||
Series 2017-4, Class D 3.080%, due 12/18/23 | 175,000 | 171,988 | |||||||||
Series 2018-1, Class D 3.820%, due 03/18/24 | 100,000 | 100,407 | |||||||||
Capital Auto Receivables Asset Trust, Series 2015-4, Class D 3.620%, due 05/20/21 | 125,000 | 125,679 | |||||||||
Dell Equipment Finance Trust, Series 2016-1, Class D 3.240%, due 07/22/222 | 268,000 | 268,453 | |||||||||
Series 2018-1, Class D 3.850%, due 06/24/242 | 120,000 | 119,993 | |||||||||
Drive Auto Receivables Trust, Series 2017-1, Class D 3.840%, due 03/15/23 | 75,000 | 75,636 | |||||||||
Series 2017-2, Class B 2.250%, due 06/15/21 | 250,000 | 249,626 | |||||||||
Series 2017-2, Class C 2.750%, due 09/15/23 | 100,000 | 99,778 | |||||||||
Series 2017-3, Class B 2.300%, due 05/17/21 | 150,000 | 149,609 | |||||||||
Series 2018-1, Class A2 2.230%, due 04/15/20 | 300,000 | 299,779 | |||||||||
Series 2018-1, Class D 3.810%, due 05/15/24 | 225,000 | 224,630 | |||||||||
Series 2018-2, Class D 4.140%, due 08/15/24 | 200,000 | 201,116 | |||||||||
Exeter Automobile Receivables Trust, Series 2018-1, Class AD 3.530%, due 11/15/232 | 100,000 | 98,752 |
Face amount1 | Value | ||||||||||
GM Financial Automobile Leasing Trust, Series 2015-3, Class B 2.320%, due 11/20/19 | 175,000 | $ | 174,904 | ||||||||
PSNH Funding LLC, Series 2018-1, Class A3 3.814%, due 02/01/35 | 175,000 | 176,429 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-2, Class D 3.490%, due 07/17/23 | 100,000 | 99,904 | |||||||||
Series 2017-3, Class D 3.200%, due 11/15/23 | 225,000 | 223,018 | |||||||||
Sofi Consumer Loan Program Trust, Series 2018-1, Class B 3.650%, due 02/25/272 | 100,000 | 99,153 | |||||||||
Series 2018-2, Class A2 3.350%, due 04/26/272 | 175,000 | 175,337 | |||||||||
Series 2018-2, Class B 3.790%, due 04/26/272 | 125,000 | 124,567 | |||||||||
World Financial Network Credit Card Master Trust, Series 2016-A, Class A 2.030%, due 04/15/25 | 275,000 | 266,466 | |||||||||
Total asset-backed securities (cost $3,713,811) | 3,698,354 | ||||||||||
Commercial mortgage-backed securities: 15.00% | |||||||||||
United States: 15.00% | |||||||||||
Ashford Hospitality Trust, Series 2018-ASHF, Class D 1 mo. USD LIBOR + 2.100%, 4.173%, due 04/15/352,5 | 100,000 | 100,076 | |||||||||
BANK 2017, Series 2017-BNK7, Class C 4.193%, due 09/15/606 | 100,000 | 96,152 | |||||||||
BBCMS Trust, Series 2015-SRCH, Class B 4.498%, due 08/10/352 | 135,000 | 139,713 | |||||||||
BENCHMARK Mortgage Trust, Series 2018-B1, Class D 2.750%, due 01/15/512 | 350,000 | 270,825 | |||||||||
Series 2018-B4, Class D 2.966%, due 07/15/512,6 | 100,000 | 81,456 | |||||||||
Caesars Palace Las Vegas Trust, Series 2017-VICI, Class E 4.499%, due 10/15/342,6 | 100,000 | 98,156 | |||||||||
CHT Mortgage Trust, Series 2017-CSMO, Class E 1 mo. USD LIBOR + 3.000%, 5.073%, due 11/15/362,5 | 475,000 | 478,407 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2015-GC33, Class A4 3.778%, due 09/10/58 | 143,000 | 144,372 | |||||||||
Series 2017-P8, Class D 3.000%, due 09/15/502 | 150,000 | 117,205 | |||||||||
COMM Mortgage Trust, Series 2015-CCRE24, Class D 3.463%, due 08/10/48 | 150,000 | 122,212 |
83
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Commercial mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Series 2015-CR24, Class A5 3.696%, due 08/10/48 | $ | 400,000 | $ | 400,798 | |||||||
Series 2015-PC1, Class A4 3.620%, due 07/10/50 | 90,000 | 89,518 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2015-C4, Class A4 3.808%, due 11/15/48 | 85,000 | 85,671 | |||||||||
Series 2017-C8, Class D 4.470%, due 06/15/502 | 141,000 | 124,099 | |||||||||
FREMF Mortgage Trust, Series 2017-K64, Class B 4.117%, due 03/25/272,6 | 50,000 | 49,463 | |||||||||
Series 2017-K724, Class B 3.601%, due 11/25/232,6 | 265,000 | 256,636 | |||||||||
GS Mortgage Securities Corp. II, Series 2017-SLP, Class E 4.744%, due 10/10/322,6 | 225,000 | 218,312 | |||||||||
GS Mortgage Securities Trust, Series 2014-GSFL, Class D 1 mo. USD LIBOR + 3.900%, 5.342%, due 07/15/312,5 | 116,524 | 117,004 | |||||||||
Hilton USA Trust, Series 2016-SPF, Class E 5.519%, due 11/05/352 | 125,000 | 126,488 | |||||||||
Invitation Homes Trust, Series 2018-SFR1, Class C 1 mo. USD LIBOR + 1.250%, 3.335%, due 03/17/372,5 | 100,000 | 100,121 | |||||||||
Series 2018-SFR2, Class D 1 mo. USD LIBOR + 1.450%, 3.523%, due 06/17/372,5 | 275,000 | 274,666 | |||||||||
JPMBB Commercial Mortgage Securities Trust, Series 2014-C26, Class AS 3.800%, due 01/15/48 | 200,000 | 198,999 | |||||||||
Series 2015-C29, Class D 3.817%, due 05/15/486 | 100,000 | 80,845 | |||||||||
Series 2015-C30, Class A5 3.822%, due 07/15/48 | 420,000 | 425,156 | |||||||||
Series 2016-C2, Class D 3.555%, due 06/15/492,6 | 175,000 | 144,824 | |||||||||
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2018-ASH8, Class D 1 mo. USD LIBOR + 2.050%, 4.123%, due 02/15/352,5 | 100,000 | 99,968 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C24, Class A4 3.732%, due 05/15/48 | 100,000 | 100,491 | |||||||||
Series 2016-C32, Class AS 3.994%, due 12/15/496 | 273,000 | 274,681 | |||||||||
Series 2017-C34, Class C 4.326%, due 11/15/526 | 100,000 | 96,240 |
Face amount1 | Value | ||||||||||
Morgan Stanley Capital I, Inc., Series 2017-HR2, Class C 4.370%, due 12/15/506 | 175,000 | $ | 170,112 | ||||||||
Series 2017-HR2, Class D 2.730%, due 12/15/50 | 100,000 | 78,815 | |||||||||
Rosslyn Portfolio Trust, Series 2017-ROSS, Class E 1 mo. USD LIBOR + 3.000%, 5.073%, due 06/15/332,5 | 275,000 | 279,723 | |||||||||
Starwood Retail Property Trust, Series 2014-STAR, Class C 1 mo. USD LIBOR + 2.500%, 4.573%, due 11/15/272,5 | 125,000 | 123,676 | |||||||||
VNDO Mortgage Trust, Series 2013-PENN, Class D 4.079%, due 12/13/292,6 | 500,000 | 499,035 | |||||||||
Wells Fargo Commercial Mortgage Trust, Series 2018-C44, Class C 4.998%, due 05/15/516 | 150,000 | 149,300 | |||||||||
Total commercial mortgage-backed securities (cost $6,289,916) | 6,213,215 | ||||||||||
Mortgage-backed securities: 27.19% | |||||||||||
United States: 27.19% | |||||||||||
FHLMC 3.500%, due 10/01/47 | 169,621 | 168,790 | |||||||||
3.500%, due 11/01/47 | 866,630 | 862,390 | |||||||||
3.500%, due 02/01/48 | 976,943 | 972,020 | |||||||||
4.000%, due 08/01/47 | 186,102 | 190,014 | |||||||||
4.000%, due 12/01/47 | 1,392,506 | 1,421,987 | |||||||||
FNMA 3.000%, due 11/01/46 | 800,954 | 776,857 | |||||||||
3.000%, due 11/01/47 | 775,197 | 751,859 | |||||||||
3.500%, due 01/01/47 | 369,170 | 368,370 | |||||||||
3.500%, due 11/01/47 | 407,795 | 406,090 | |||||||||
3.500%, due 12/01/47 | 945,267 | 941,274 | |||||||||
3.500%, due 02/01/48 | 1,083,959 | 1,079,952 | |||||||||
4.000%, due 09/01/40 | 161,101 | 165,405 | |||||||||
4.000%, due 06/01/47 | 406,038 | 414,127 | |||||||||
4.000%, due 11/01/47 | 165,058 | 168,493 | |||||||||
4.000%, due 05/01/48 | 24,779 | 25,294 | |||||||||
4.000%, due 07/01/48 | 750,000 | 765,611 | |||||||||
5.500%, due 03/01/33 | 39,354 | 42,969 | |||||||||
5.500%, due 09/01/34 | 143,646 | 155,959 | |||||||||
5.500%, due 11/01/34 | 31,621 | 34,414 | |||||||||
6.000%, due 11/01/28 | 44,074 | 48,481 | |||||||||
GNMA 3.000%, due 09/20/47 | 480,707 | 470,580 | |||||||||
6.500%, due 05/15/29 | 11,254 | 12,547 | |||||||||
GNMA II 3.000%, due 07/20/47 | 654,001 | 640,491 | |||||||||
3.500%, due 07/19/48 | 375,000 | 376,318 | |||||||||
Total mortgage-backed securities (cost $11,455,016) | 11,260,292 |
84
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Face amount1 | Value | ||||||||||
Municipal bonds and notes: 0.85% | |||||||||||
California: 0.85% | |||||||||||
State of California, GO Bonds 7.300%, due 10/01/39 (cost $370,007) | 250,000 | $ | 354,200 | ||||||||
Non-US government obligations: 9.09% | |||||||||||
Argentina: 0.78% | |||||||||||
Republic of Argentina 7.500%, due 04/22/26 | 350,000 | 322,875 | |||||||||
Brazil: 0.68% | |||||||||||
Federative Republic of Brazil 6.000%, due 04/07/26 | 275,000 | 281,050 | |||||||||
Colombia: 0.67% | |||||||||||
Republic of Colombia 8.125%, due 05/21/24 | 230,000 | 276,863 | |||||||||
Indonesia: 0.28% | |||||||||||
Republic of Indonesia 6.625%, due 02/17/372 | 100,000 | 114,750 | |||||||||
Ivory Coast: 0.43% | |||||||||||
Ivory Coast Government Bond 6.125%, due 06/15/332 | 200,000 | 176,250 | |||||||||
Mexico: 0.41% | |||||||||||
United Mexican States 4.000%, due 10/02/23 | 100,000 | 100,300 | |||||||||
4.150%, due 03/28/27 | 60,000 | 59,070 | |||||||||
6.750%, due 09/27/34 | 10,000 | 11,775 | |||||||||
171,145 | |||||||||||
New Zealand: 5.30% | |||||||||||
New Zealand Government Bond 4.500%, due 04/15/277 | NZD | 1,065,000 | 824,961 | ||||||||
5.500%, due 04/15/237 | NZD | 1,760,000 | 1,372,050 | ||||||||
2,197,011 | |||||||||||
Turkey: 0.23% | |||||||||||
Republic of Turkey 6.875%, due 03/17/36 | 100,000 | 94,042 | |||||||||
Uruguay: 0.31% | |||||||||||
Oriental Republic of Uruguay 7.625%, due 03/21/36 | 100,000 | 129,225 | |||||||||
Total non-US government obligations (cost $4,025,005) | 3,763,211 |
Face amount1 | Value | ||||||||||
Supranationals: 0.45% | |||||||||||
European Bank for Reconstruction & Developent 6.450%, due 12/13/22 (cost $206,786) | IDR | 2,800,000,000 | $ | 185,839 | |||||||
U.S. treasury obligations: 2.16% | |||||||||||
US Treasury Bonds 3.125%, due 05/15/48 | 340,000 | 349,124 | |||||||||
US Treasury Inflation Index Notes (TIPS) 0.500%, due 01/15/28 | 477,332 | 466,911 | |||||||||
US Treasury Notes 2.875%, due 05/15/28 | 80,000 | 80,125 | |||||||||
Total U.S. treasury obligations (cost $889,711) | 896,160 | ||||||||||
Number of shares | |||||||||||
Preferred stocks: 0.25% | |||||||||||
United States: 0.25% | |||||||||||
JPMorgan Chase & Co. 5.450%, due 09/01/184 (cost $102,000) | 4,000 | 101,760 | |||||||||
Short-term investments: 0.85% | |||||||||||
Investment companies: 0.85% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $352,000) | 352,000 | 352,000 |
Number of contracts | Notional amount | ||||||||||||||
Foreign exchange options purchased: 0.00%† | |||||||||||||||
Call options: 0.00%† | |||||||||||||||
USD Call/EUR Put, strike @ 0.87, expires 07/17/18 (Counterparty: GS) (cost $5,483) | 1,150,000 | USD | 1,150,000 | 1,578 | |||||||||||
Total investments: 100.03% (cost $42,399,562) | 41,429,727 | ||||||||||||||
Liabilities in excess of other assets: (0.03)% | (14,345 | ) | |||||||||||||
Net assets: 100.00% | $ | 41,415,382 |
For a listing of defined portfolio acronyms, counterparty acronyms and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 88.
85
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Credit default swaptions written
Notional amount (000) | Number of contracts | Put swaptions | Counterparty | Buy/sell protection | Expiration date | Premiums received | Current value | Unrealized appreciation | |||||||||||||||||||||||||||
USD | 1,000 | 1,000,000 | CDX North American Investment Grade 30 Index, strike @ 0.75% | BOA | Sell | 08/15/18 | $ | 1,000 | $ | (13 | ) | $ | 987 |
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
US Treasury futures buy contracts: | |||||||||||||||||||||||||||
5 | USD | US Long Bond Futures | September 2018 | $ | 705,500 | $ | 724,990 | $ | 19,490 | ||||||||||||||||||
16 | USD | US Treasury Note 2 Year Futures | September 2018 | 3,381,024 | 3,389,250 | 8,226 | |||||||||||||||||||||
2 | USD | US Treasury Note 5 Year Futures | September 2018 | 226,268 | 227,234 | 966 | |||||||||||||||||||||
13 | USD | US Ultra Long Treasury Bond Futures | September 2018 | 2,022,944 | 2,074,313 | 51,369 | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
29 | AUD | Australian Bond 3 Year Futures | September 2018 | $ | 2,383,306 | $ | 2,389,593 | $ | 6,287 | ||||||||||||||||||
$ | 8,719,042 | $ | 8,805,380 | $ | 86,338 | ||||||||||||||||||||||
US Treasury futures sell contracts: | |||||||||||||||||||||||||||
6 | USD | US Treasury Note 10 Year Futures | September 2018 | $ | (714,770 | ) | $ | (721,125 | ) | $ | (6,355 | ) | |||||||||||||||
2 | USD | US Ultra Treasury Note 10 Year Futures | September 2018 | (254,685 | ) | (256,469 | ) | (1,784 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
4 | EUR | German Euro Bund Futures | September 2018 | $ | (749,167 | ) | $ | (759,303 | ) | $ | (10,136 | ) | |||||||||||||||
47 | EUR | German Euro Schatz Futures | September 2018 | (6,145,110 | ) | (6,151,965 | ) | (6,855 | ) | ||||||||||||||||||
11 | GBP | United Kingdom Long Gilt Bond Futures | September 2018 | (1,761,959 | ) | (1,786,493 | ) | (24,534 | ) | ||||||||||||||||||
$ | (9,625,691 | ) | $ | (9,675,355 | ) | $ | (49,664 | ) | |||||||||||||||||||
$ | 36,674 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
CITI | GBP | 85,000 | USD | 111,618 | 07/25/18 | $ | (672 | ) | |||||||||||
CITI | NZD | 3,300,000 | USD | 2,258,121 | 07/25/18 | 23,002 | |||||||||||||
GSI | EUR | 415,000 | USD | 479,478 | 07/25/18 | (5,927 | ) | ||||||||||||
$ | 16,403 |
86
UBS Total Return Bond Fund
Portfolio of investments
June 30, 2018
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of June 30, 2018 in valuing the Portfolio's investments. In the event a Portfolio holds investments for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | ||||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 14,603,118 | $ | — | $ | 14,603,118 | |||||||||||
Asset-backed securities | — | 3,698,354 | — | 3,698,354 | |||||||||||||||
Commercial mortgage-backed securities | — | 6,213,215 | — | 6,213,215 | |||||||||||||||
Mortgage-backed securities | — | 11,260,292 | — | 11,260,292 | |||||||||||||||
Municipal bonds and notes | — | 354,200 | — | 354,200 | |||||||||||||||
Non-US government obligations | — | 3,763,211 | — | 3,763,211 | |||||||||||||||
Supranationals | — | 185,839 | — | 185,839 | |||||||||||||||
U.S. treasury obligations | — | 896,160 | — | 896,160 | |||||||||||||||
Preferred stocks | 101,760 | — | — | 101,760 | |||||||||||||||
Short-term investments | — | 352,000 | — | 352,000 | |||||||||||||||
Foreign exchange options purchased | — | 1,578 | — | 1,578 | |||||||||||||||
Futures contracts | 86,338 | — | — | 86,338 | |||||||||||||||
Forward foreign currency contracts | — | 23,002 | — | 23,002 | |||||||||||||||
Total | $ | 188,098 | $ | 41,350,969 | $ | — | $ | 41,539,067 | |||||||||||
Liabilities | |||||||||||||||||||
Credit default swaptions written | $ | — | $ | (13 | ) | $ | — | $ | (13 | ) | |||||||||
Futures contracts | (49,664 | ) | — | — | (49,664 | ) | |||||||||||||
Forward foreign currency contracts | — | (6,599 | ) | — | (6,599 | ) | |||||||||||||
Total | $ | (49,664 | ) | $ | (6,612 | ) | $ | — | $ | (56,276 | ) |
At June 30, 2018, there were no transfers between Level 1 and Level 2.
Portfolio footnotes
† Amount represents less than 0.005%.
1 In US dollars unless otherwise indicated.
2 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $7,510,619, represented 18.13% of the Fund's net assets at period end.
3 Step bond—coupon rate ranges from 8.25% - 8.75% based on the current credit rating of the bond. The rate may decrease to 8.25% if the bond's credit rating improves. The rate disclosed is the rate at period end.
4 Perpetual investment. Date shown reflects the next call date.
5 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
6 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
7 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
87
The UBS Funds
June 30, 2018
Portfolio acronyms
ADR American Depositary Receipt
AGC Assured Guaranty Corp.
AGM Assured Guaranty Municipal
CDO Collateralized Debt Obligation
COP Certificate of Participation
CVA Dutch Certification—Depository Certificate
DAC Designated Activity Company
ETF Exchange Traded Fund
EURIBOR Euro Interbank Offered Rate
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GDR Global Depository Receipt
GNMA Government National Mortgage Association
GO General Obligation
LIBOR London Interbank Offered Rate
OAT Obligation Assimilables du Trésor (French Government Bonds)
PJSC Private Joint Stock Company
PSF-GTD Permanent School Fund Guaranteed
REIT Real Estate Investment Trust
TBA To Be Announced. TBA 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 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 bond of the same maturity.
Counterparty abbreviations
BB Barclays Bank PLC
BOA Bank of America NA
CITI Citibank NA
CSI Credit Suisse International
GS Goldman Sachs
GSI Goldman Sachs International
JPMCB JPMorgan Chase Bank
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
DKK Danish Krone
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
IDR Indonesian Rupiah
ILS Israel New Shekel
INR Indian Rupee
JPY Japanese Yen
KRW Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
TRY Turkish Lira
TWD Taiwan Dollar
USD United States Dollar
See accompanying notes to financial statements.
88
The UBS Funds
June 30, 2018 (unaudited)
Explanation of expense disclosure
As a shareholder of the Funds, you incur two types of costs: (1) transactional costs (as applicable); including sales charges (loads); and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees (if applicable); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example below is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, January 1, 2018 to June 30, 2018 (unless otherwise noted).
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on that Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not that Fund's actual return for each class of shares. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Please note that while UBS Emerging Markets Equity Opportunity Fund commenced operations on June 4, 2018, the "hypothetical" expenses paid during the period reflect activity for the full six month period for the purposes of comparability. This projection assumes that the Fund's expense ratio in effect during its initial period (June 4, 2018 through June 30, 2018) also would have been in effect during the period from January 1, 2018 to June 30, 2018.
89
The UBS Funds
June 30, 2018 (unaudited)
Beginning account value January 1, 2018 | Ending account value June 30, 2018 | Expenses paid during period* 01/01/18 – 06/30/18 | Expense ratio during period | ||||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 975.50 | $ | 6.56 | 1.34 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.15 | 6.71 | 1.34 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 970.30 | 10.21 | 2.09 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.43 | 10.44 | 2.09 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 977.60 | 5.34 | 1.09 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.39 | 5.46 | 1.09 | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 992.60 | 5.93 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.84 | 6.01 | 1.20 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 989.10 | 9.62 | 1.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,015.12 | 9.74 | 1.95 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 993.60 | 4.70 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.08 | 4.76 | 0.95 | |||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund1 | |||||||||||||||||||||||
Class P2 | Actual | 1,000.00 | 941.00 | 0.32 | 0.44 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,003.37 | 0.33 | 0.44 | |||||||||||||||||||
UBS International Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 951.50 | 6.05 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.60 | 6.26 | 1.25 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 948.40 | 9.66 | 2.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.88 | 9.99 | 2.00 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 952.50 | 4.84 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.84 | 5.01 | 1.00 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,152.90 | 6.62 | 1.24 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.65 | 6.21 | 1.24 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 1,148.70 | 10.60 | 1.99 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,014.93 | 9.94 | 1.99 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,154.20 | 5.29 | 0.99 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.89 | 4.96 | 0.99 |
* Expenses are equal to each 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).
1 The Fund commenced operations on June 4, 2018. Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 27 divided by 365 (to reflect the actual days in the period for the actual example) and 181 divided by 365 (to reflect the one-half year period for the hypothetical example).
90
The UBS Funds
June 30, 2018 (unaudited)
Beginning account value January 1, 2018 | Ending account value June 30, 2018 | Expenses paid during period* 01/01/18 – 06/30/18 | Expense ratio during period | ||||||||||||||||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,043.60 | $ | 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 | 1,039.60 | 8.60 | 1.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,016.36 | 8.50 | 1.70 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,045.00 | 3.55 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.32 | 3.51 | 0.70 | |||||||||||||||||||
UBS Municipal Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 990.70 | 3.21 | 0.65 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.57 | 3.26 | 0.65 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 988.20 | 5.67 | 1.15 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.09 | 5.76 | 1.15 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 991.90 | 1.98 | 0.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.81 | 2.01 | 0.40 | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 972.20 | 3.67 | 0.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.08 | 3.76 | 0.75 | |||||||||||||||||||
Class C | Actual | 1,000.00 | 968.40 | 6.10 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.60 | 6.26 | 1.25 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 973.40 | 2.45 | 0.50 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.32 | 2.51 | 0.50 |
* Expenses are equal to each 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).
91
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2018
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 73,490,690 | $ | 260,203,317 | $ | 133,835,557 | |||||||||
Affiliated issuers | — | 23,342,123 | — | ||||||||||||
Foreign currency | 1,462,534 | 3,113,691 | 3,744,074 | ||||||||||||
$ | 74,953,224 | $ | 286,659,131 | $ | 137,579,631 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers | $ | 64,894,794 | $ | 272,441,623 | $ | 133,358,324 | |||||||||
Affiliated issuers | — | 21,964,938 | — | ||||||||||||
Foreign currency | 1,434,115 | 2,826,152 | 3,742,377 | ||||||||||||
Cash | — | 2,300 | 9,526 | ||||||||||||
Cash collateral on futures | 3,107,384 | 5,644,363 | — | ||||||||||||
Cash collateral on swap agreements | 215,689 | 3,783,302 | — | ||||||||||||
Receivable for investments sold | — | — | — | ||||||||||||
Receivable for fund shares sold | 4,154 | 2,487 | 272,875 | ||||||||||||
Due from broker | 3,432,090 | — | — | ||||||||||||
Deferred offering cost | — | — | 60,562 | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 3,935,180 | 3,827,608 | — | ||||||||||||
Receivable for interest | 430,919 | 255,738 | 5,512 | ||||||||||||
Receivable for dividend | — | 246,103 | 87,791 | ||||||||||||
Outstanding swap agreements, at value1 | 1,077 | — | — | ||||||||||||
Receivable for variation margin on futures contracts | — | 337,493 | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | 108,781 | 779,277 | — | ||||||||||||
Receivable for foreign tax reclaims | 62 | 110,232 | — | ||||||||||||
Receivable from affiliate | — | — | 1,816 | ||||||||||||
Other assets | 29,728 | 41,659 | — | ||||||||||||
Total assets | 77,593,973 | 312,263,275 | 137,538,783 | ||||||||||||
Liabilities: | |||||||||||||||
Unrealized depreciation on forward foreign currency contracts | 1,720,992 | 3,114,959 | — | ||||||||||||
Payable for variation margin on futures contracts | 1,186,315 | — | — | ||||||||||||
Payable for fund shares redeemed | 367,318 | 909,460 | 26,400 | ||||||||||||
Payable for investments purchased | 196,587 | — | 43,075,983 | ||||||||||||
Payable to affiliate | 116,803 | 285,057 | — | ||||||||||||
Payable to custodian | 14,166 | 28,004 | 5,970 | ||||||||||||
Payable for Trustees' fees | 13,723 | 30,089 | — | ||||||||||||
Due to broker | — | 415,686 | — | ||||||||||||
Payable for foreign withholding taxes | — | 16,325 | 14,906 | ||||||||||||
Accrued expenses and other liabilities | 237,908 | 344,669 | 66,685 | ||||||||||||
Total liabilities | 3,853,812 | 5,144,249 | 43,189,944 | ||||||||||||
Net assets | $ | 73,740,161 | $ | 307,119,026 | $ | 94,348,839 |
1 Net upfront payments received by UBS Dynamic Alpha Fund were $2,501.
92
The UBS Funds
UBS International Sustainable Equity Fund | UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | |||||||||||||
Assets: | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 75,845,513 | $ | 90,919,621 | $ | 29,338,829 | |||||||||
Affiliated issuers | — | — | — | ||||||||||||
Foreign currency | 71,376 | — | — | ||||||||||||
$ | 75,916,889 | $ | 90,919,621 | $ | 29,338,829 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers | $ | 76,507,667 | $ | 122,035,512 | $ | 29,955,024 | |||||||||
Affiliated issuers | — | — | — | ||||||||||||
Foreign currency | 71,634 | — | — | ||||||||||||
Cash | — | — | — | ||||||||||||
Cash collateral on futures | — | — | — | ||||||||||||
Cash collateral on swap agreements | — | — | — | ||||||||||||
Receivable for investments sold | — | 265,592 | — | ||||||||||||
Receivable for fund shares sold | 424,248 | 188,973 | 608 | ||||||||||||
Due from broker | — | — | — | ||||||||||||
Deferred offering cost | — | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Receivable for interest | 3,364 | 7,200 | 716 | ||||||||||||
Receivable for dividend | 164,351 | 10,066 | 13,646 | ||||||||||||
Outstanding swap agreements, at value1 | — | — | — | ||||||||||||
Receivable for variation margin on futures contracts | — | — | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | — | ||||||||||||
Receivable for foreign tax reclaims | 77,106 | — | — | ||||||||||||
Receivable from affiliate | — | — | 38,736 | ||||||||||||
Other assets | 30,078 | 25,913 | 25,270 | ||||||||||||
Total assets | 77,278,448 | 122,533,256 | 30,034,000 | ||||||||||||
Liabilities: | |||||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Payable for variation margin on futures contracts | — | — | — | ||||||||||||
Payable for fund shares redeemed | 196,870 | 602,049 | 430,170 | ||||||||||||
Payable for investments purchased | 33,698 | 2,695,552 | — | ||||||||||||
Payable to affiliate | 10,822 | 85,071 | — | ||||||||||||
Payable to custodian | 11,891 | 11,418 | 7,585 | ||||||||||||
Payable for Trustees' fees | 11,310 | 15,314 | 8,117 | ||||||||||||
Due to broker | — | — | — | ||||||||||||
Payable for foreign withholding taxes | 32,052 | — | — | ||||||||||||
Accrued expenses and other liabilities | 142,417 | 163,512 | 90,102 | ||||||||||||
Total liabilities | 439,060 | 3,572,916 | 535,974 | ||||||||||||
Net assets | $ | 76,839,388 | $ | 118,960,340 | $ | 29,498,026 |
See accompanying notes to financial statements.
93
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2018 (continued)
UBS Municipal Bond Fund | |||||||
Assets: | |||||||
Investments, at cost | |||||||
Unaffiliated issuers | $ | 122,359,263 | |||||
Foreign currency | — | ||||||
$ | 122,359,263 | ||||||
Investments, at value | |||||||
Unaffiliated issuers | $ | 121,099,511 | |||||
Foreign currency | — | ||||||
Cash collateral on futures | — | ||||||
Receivable for investments sold | — | ||||||
Receivable for fund shares sold | 215,305 | ||||||
Receivable for interest | 1,433,651 | ||||||
Receivable for variation margin on futures contracts | — | ||||||
Due from broker | — | ||||||
Unrealized appreciation on forward foreign currency contracts | — | ||||||
Other assets | 24,151 | ||||||
Total assets | 122,772,618 | ||||||
Liabilities: | |||||||
Payable for fund shares redeemed | 1,270,190 | ||||||
Payable for Trustees' fees | 16,575 | ||||||
Payable to custodian | 9,768 | ||||||
Payable to affiliate | 63 | ||||||
Payable for investments purchased | — | ||||||
Unrealized depreciation on forward foreign currency contracts | — | ||||||
Options and swaptions written, at value (premiums received $0 and $1,000, respectively) | — | ||||||
Accrued expenses and other liabilities | 116,152 | ||||||
Total liabilities | 1,412,748 | ||||||
Net assets | $ | 121,359,870 |
94
The UBS Funds
UBS Total Return Bond Fund | |||||||
Assets: | |||||||
Investments, at cost | |||||||
Unaffiliated issuers | $ | 42,399,562 | |||||
Foreign currency | 166,771 | ||||||
$ | 42,566,333 | ||||||
Investments, at value | |||||||
Unaffiliated issuers | $ | 41,429,727 | |||||
Foreign currency | 159,280 | ||||||
Cash collateral on futures | 132,398 | ||||||
Receivable for investments sold | 983,288 | ||||||
Receivable for fund shares sold | — | ||||||
Receivable for interest | 301,512 | ||||||
Receivable for variation margin on futures contracts | 36,718 | ||||||
Due from broker | 75,265 | ||||||
Unrealized appreciation on forward foreign currency contracts | 23,002 | ||||||
Other assets | 23,438 | ||||||
Total assets | 43,164,628 | ||||||
Liabilities: | |||||||
Payable for fund shares redeemed | 161,939 | ||||||
Payable for Trustees' fees | 11,071 | ||||||
Payable to custodian | 12,135 | ||||||
Payable to affiliate | 2,985 | ||||||
Payable for investments purchased | 1,398,276 | ||||||
Unrealized depreciation on forward foreign currency contracts | 6,599 | ||||||
Options and swaptions written, at value (premiums received $0 and $1,000, respectively) | 13 | ||||||
Accrued expenses and other liabilities | 156,228 | ||||||
Total liabilities | 1,749,246 | ||||||
Net assets | $ | 41,415,382 |
See accompanying notes to financial statements.
95
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2018 (continued)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 161,979,244 | $ | 296,686,032 | $ | 94,936,966 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | (1,219,632 | ) | (680,814 | ) | 46,363 | ||||||||||
Accumulated net realized gain (loss) | (79,509,002 | ) | 114,922 | — | |||||||||||
Net unrealized appreciation (depreciation) | (7,510,449 | ) | 10,998,886 | (634,490 | ) | ||||||||||
Net assets | $ | 73,740,161 | $ | 307,119,026 | $ | 94,348,839 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 31,066,204 | $ | 159,678,036 | $ | — | |||||||||
Shares outstanding | 4,868,332 | 13,220,660 | — | ||||||||||||
Net asset value and redemption proceeds per share | $ | 6.38 | $ | 12.08 | $ | — | |||||||||
Offering price per share (NAV per share plus maximum sales charge) | $ | 6.75 | $ | 12.78 | $ | — | |||||||||
Class C: | |||||||||||||||
Net assets | $ | 12,026,552 | $ | 83,432,194 | $ | — | |||||||||
Shares outstanding | 2,041,424 | 7,102,334 | — | ||||||||||||
Net asset value and offering price per share | $ | 5.89 | $ | 11.75 | $ | — | |||||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge) | $ | 5.83 | $ | 11.63 | $ | — | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 30,647,405 | $ | 64,008,796 | $ | — | |||||||||
Shares outstanding | 4,691,773 | 5,185,480 | — | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 6.53 | $ | 12.34 | $ | — | |||||||||
Class P2: | |||||||||||||||
Net assets | $ | — | $ | — | $ | 94,348,839 | |||||||||
Shares outstanding | — | — | 10,032,450 | ||||||||||||
Net asset value, offering price and redemption value per share1 | $ | — | $ | — | $ | 9.40 |
1 Assumes shares were held for a sufficient period or are otherwise not subject to a redemption fee.
96
The UBS Funds
UBS International Sustainable Equity Fund | UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 75,882,378 | $ | 79,853,561 | $ | 28,860,193 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | 447,928 | (122,000 | ) | 177,865 | |||||||||||
Accumulated net realized gain (loss) | (151,435 | ) | 8,112,888 | (156,227 | ) | ||||||||||
Net unrealized appreciation (depreciation) | 660,517 | 31,115,891 | 616,195 | ||||||||||||
Net assets | $ | 76,839,388 | $ | 118,960,340 | $ | 29,498,026 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 8,048,528 | $ | 26,497,745 | $ | 10,585,755 | |||||||||
Shares outstanding | 789,097 | 1,277,802 | 307,341 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 10.20 | $ | 20.74 | $ | 34.44 | |||||||||
Offering price per share (NAV per share plus maximum sales charge) | $ | 10.79 | $ | 21.95 | $ | 36.44 | |||||||||
Class C: | |||||||||||||||
Net assets | $ | 3,041,003 | $ | 3,617,538 | $ | 1,730,731 | |||||||||
Shares outstanding | 306,289 | 220,919 | 52,698 | ||||||||||||
Net asset value and offering price per share | $ | 9.93 | $ | 16.37 | $ | 32.84 | |||||||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge) | $ | 9.83 | $ | 16.21 | $ | 32.51 | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 65,749,857 | $ | 88,845,057 | $ | 17,181,540 | |||||||||
Shares outstanding | 6,425,815 | 3,880,615 | 496,590 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 10.23 | $ | 22.89 | $ | 34.60 | |||||||||
Class P2: | |||||||||||||||
Net assets | $ | — | $ | — | $ | — | |||||||||
Shares outstanding | — | — | — | ||||||||||||
Net asset value, offering price and redemption value per share1 | $ | — | $ | — | $ | — |
See accompanying notes to financial statements.
97
The UBS Funds
Financial Statements
Statement of assets and liabilities—June 30, 2018 (continued)
UBS Municipal Bond Fund | |||||||
Net assets consist of: | |||||||
Beneficial interest | $ | 123,543,124 | |||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | (30,058 | ) | |||||
Accumulated net realized loss | (893,444 | ) | |||||
Net unrealized depreciation | (1,259,752 | ) | |||||
Net assets | $ | 121,359,870 | |||||
Class A: | |||||||
Net assets | $ | 9,378,434 | |||||
Shares outstanding | 931,441 | ||||||
Net asset value and redemption proceeds per share | $ | 10.07 | |||||
Offering price per share (NAV per share plus maximum sales charge) | $ | 10.30 | |||||
Class C: | |||||||
Net assets | $ | 4,828,579 | |||||
Shares outstanding | 479,859 | ||||||
Net asset value and offering price per share | $ | 10.06 | |||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge) | $ | 9.98 | |||||
Class P: | |||||||
Net assets | $ | 107,152,857 | |||||
Shares outstanding | 10,648,140 | ||||||
Net asset value, offering price and redemption value per share | $ | 10.06 |
98
The UBS Funds
UBS Total Return Bond Fund | |||||||
Net assets consist of: | |||||||
Beneficial interest | $ | 45,898,993 | |||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | 14,747 | ||||||
Accumulated net realized loss | (3,574,223 | ) | |||||
Net unrealized depreciation | (924,135 | ) | |||||
Net assets | $ | 41,415,382 | |||||
Class A: | |||||||
Net assets | $ | 107,638 | |||||
Shares outstanding | 7,473 | ||||||
Net asset value and redemption proceeds per share | $ | 14.40 | |||||
Offering price per share (NAV per share plus maximum sales charge) | $ | 14.96 | |||||
Class C: | |||||||
Net assets | $ | 62,771 | |||||
Shares outstanding | 4,358 | ||||||
Net asset value and offering price per share | $ | 14.40 | |||||
Redemption proceeds per share (NAV per share less maximum contingent deferred sales charge) | $ | 14.29 | |||||
Class P: | |||||||
Net assets | $ | 41,244,973 | |||||
Shares outstanding | 2,862,394 | ||||||
Net asset value, offering price and redemption value per share | $ | 14.41 |
See accompanying notes to financial statements.
99
The UBS Funds
Financial Statements
Statement of operations—For the year ended June 30, 2018
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund* | |||||||||||||
Investment income | |||||||||||||||
Dividends | $ | 124,554 | $ | 4,093,944 | $ | 113,906 | |||||||||
Interest | 2,243,613 | 1,308,237 | 5,512 | ||||||||||||
Securities lending | 3,175 | 17,360 | — | ||||||||||||
Foreign tax withheld | — | (147,869 | ) | (14,906 | ) | ||||||||||
Total income | 2,371,342 | 5,271,672 | 104,512 | ||||||||||||
Expenses | |||||||||||||||
Advisory and administration | 1,107,370 | 2,907,323 | 24,694 | ||||||||||||
Distribution and service: | |||||||||||||||
Class A | 97,264 | 428,223 | — | ||||||||||||
Class C | 148,521 | 930,653 | — | ||||||||||||
Transfer agency and related service fees: | |||||||||||||||
Class A | 24,781 | 104,096 | — | ||||||||||||
Class C | 15,791 | 80,716 | — | ||||||||||||
Class P | 59,724 | 31,977 | — | ||||||||||||
Class P2 | — | — | 750 | ||||||||||||
Professional services | 177,375 | 202,021 | 48,150 | ||||||||||||
Custody and fund accounting | 77,628 | 124,863 | 5,970 | ||||||||||||
Trustees | 60,523 | 118,079 | 3,200 | ||||||||||||
Shareholder report | 71,206 | 124,656 | 5,200 | ||||||||||||
Federal and state registration | 43,967 | 44,224 | — | ||||||||||||
Interest expense | 236 | 63 | — | ||||||||||||
Amortization of offering costs | — | — | 4,838 | ||||||||||||
Other | 80,573 | 110,392 | 9,420 | ||||||||||||
Total expenses | 1,964,959 | 5,207,286 | 102,222 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (406,007 | ) | (695,208 | ) | (91,910 | ) | |||||||||
Net expenses | 1,558,952 | 4,512,078 | 10,312 | ||||||||||||
Net investment income (loss) | 812,390 | 759,594 | 94,200 | ||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments unaffiliated issuers | 1,778,681 | 23,523,842 | — | ||||||||||||
Investments in affiliated issuers | — | 14,155,771 | — | ||||||||||||
Futures contracts | (793,380 | ) | (3,950,197 | ) | — | ||||||||||
Swap agreements | (1,596,352 | ) | 1,519,732 | — | |||||||||||
Forward foreign currency contracts | (2,597,979 | ) | (712,390 | ) | — | ||||||||||
Foreign currency transactions | 636,591 | 50,008 | (47,837 | ) | |||||||||||
Net realized gain (loss) | (2,572,439 | ) | 34,586,766 | (47,837 | ) | ||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (1,207,111 | ) | (6,423,505 | ) | (477,233 | ) | |||||||||
Investments in affiliated issuers | — | (9,177,001 | ) | — | |||||||||||
Futures contracts | (1,733,343 | ) | 721,397 | — | |||||||||||
Swap agreements | 511,708 | (916,472 | ) | — | |||||||||||
Forward foreign currency contracts | 3,677,939 | 1,346,266 | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | (570,141 | ) | (179,206 | ) | (157,257 | ) | |||||||||
Change in net unrealized appreciation (depreciation) | 679,052 | (14,628,521 | ) | (634,490 | ) | ||||||||||
Net realized and unrealized gain (loss) | (1,893,387 | ) | 19,958,245 | (682,327 | ) | ||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (1,080,997 | ) | $ | 20,717,839 | $ | (588,127 | ) |
* Commenced operations on June 4, 2018.
100
The UBS Funds
UBS International Sustainable Equity Fund | UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | |||||||||||||
Investment income | |||||||||||||||
Dividends | $ | 1,175,219 | $ | 354,963 | $ | 433,840 | |||||||||
Interest | 22,990 | 37,196 | 4,664 | ||||||||||||
Securities lending | 3,010 | 53,474 | 407 | ||||||||||||
Foreign tax withheld | (133,914 | ) | — | — | |||||||||||
Total income | 1,067,305 | 445,633 | 438,911 | ||||||||||||
Expenses | |||||||||||||||
Advisory and administration | 406,144 | 1,002,769 | 237,188 | ||||||||||||
Distribution and service: | |||||||||||||||
Class A | 21,156 | 66,531 | 28,168 | ||||||||||||
Class C | 28,038 | 37,541 | 19,219 | ||||||||||||
Transfer agency and related service fees: | |||||||||||||||
Class A | 5,417 | 41,155 | 6,990 | ||||||||||||
Class C | 1,886 | 4,969 | 1,556 | ||||||||||||
Class P | 11,273 | 63,446 | 4,983 | ||||||||||||
Class P2 | — | — | — | ||||||||||||
Professional services | 161,448 | 138,901 | 140,957 | ||||||||||||
Custody and fund accounting | 46,500 | 42,559 | 35,063 | ||||||||||||
Trustees | 42,511 | 55,463 | 36,862 | ||||||||||||
Shareholder report | 16,102 | 44,373 | 21,426 | ||||||||||||
Federal and state registration | 44,068 | 41,448 | 43,979 | ||||||||||||
Interest expense | — | — | — | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other | 60,267 | 35,281 | 22,300 | ||||||||||||
Total expenses | 844,810 | 1,574,436 | 598,691 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (331,451 | ) | (397,130 | ) | (337,071 | ) | |||||||||
Net expenses | 513,359 | 1,177,306 | 261,620 | ||||||||||||
Net investment income (loss) | 553,946 | (731,673 | ) | 177,291 | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments unaffiliated issuers | 3,189,063 | 14,562,273 | 6,774,958 | ||||||||||||
Investments in affiliated issuers | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | (8,769 | ) | — | — | |||||||||||
Foreign currency transactions | (52,812 | ) | 143 | — | |||||||||||
Net realized gain (loss) | 3,127,482 | 14,562,416 | 6,774,958 | ||||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (2,936,404 | ) | 11,582,980 | (3,739,690 | ) | ||||||||||
Investments in affiliated issuers | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | 58 | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | (2,802 | ) | — | — | |||||||||||
Change in net unrealized appreciation (depreciation) | (2,939,148 | ) | 11,582,980 | (3,739,690 | ) | ||||||||||
Net realized and unrealized gain (loss) | 188,334 | 26,145,396 | 3,035,268 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 742,280 | $ | 25,413,723 | $ | 3,212,559 |
See accompanying notes to financial statements.
101
The UBS Funds
Financial Statements
Statement of operations—For the year ended June 30, 2018 (continued)
UBS Municipal Bond Fund | |||||||
Investment income | |||||||
Dividends | $ | — | |||||
Interest | 2,900,615 | ||||||
Total income | 2,900,615 | ||||||
Expenses | |||||||
Advisory and administration | 605,661 | ||||||
Distribution and service: | |||||||
Class A | 33,177 | ||||||
Class C | 40,799 | ||||||
Transfer agency and related service fees: | |||||||
Class A | 2,177 | ||||||
Class C | 1,725 | ||||||
Class P | 21,556 | ||||||
Professional services | 141,064 | ||||||
Trustees | 64,134 | ||||||
Federal and state registration | 45,980 | ||||||
Custody and fund accounting | 46,094 | ||||||
Shareholder reports | 29,059 | ||||||
Other | 44,260 | ||||||
Total expenses | 1,075,686 | ||||||
Fee waivers and/or expense reimbursements by Advisor | (491,680 | ) | |||||
Net expenses | 584,006 | ||||||
Net investment income | 2,316,609 | ||||||
Net realized gain (loss) on: | |||||||
Investments in unaffiliated issuers | (9,176 | ) | |||||
Futures contracts | — | ||||||
Options written | — | ||||||
Swap agreements | — | ||||||
Forward foreign currency contracts | — | ||||||
Foreign currency transactions | — | ||||||
Net realized loss | (9,176 | ) | |||||
Change in net unrealized appreciation (depreciation) on: | |||||||
Investments | (1,986,604 | ) | |||||
Futures contracts | — | ||||||
Options and swaptions written | — | ||||||
Swap agreements | — | ||||||
Forward foreign currency contracts | — | ||||||
Translation of other assets and liabilities denominated in foreign currency | — | ||||||
Change in net unrealized depreciation | (1,986,604 | ) | |||||
Net realized and unrealized loss | (1,995,780 | ) | |||||
Net increase (decrease) in net assets resulting from operations | $ | 320,829 |
102
The UBS Funds
UBS Total Return Bond Fund | |||||||
Investment income | |||||||
Dividends | $ | 12,004 | |||||
Interest | 1,735,768 | ||||||
Total income | 1,747,772 | ||||||
Expenses | |||||||
Advisory and administration | 264,892 | ||||||
Distribution and service: | |||||||
Class A | 100 | ||||||
Class C | 314 | ||||||
Transfer agency and related service fees: | |||||||
Class A | 30 | ||||||
Class C | 185 | ||||||
Class P | 39,823 | ||||||
Professional services | 135,846 | ||||||
Trustees | 42,743 | ||||||
Federal and state registration | 40,387 | ||||||
Custody and fund accounting | 40,018 | ||||||
Shareholder reports | 31,833 | ||||||
Other | 2,494 | ||||||
Total expenses | 598,665 | ||||||
Fee waivers and/or expense reimbursements by Advisor | (367,910 | ) | |||||
Net expenses | 230,755 | ||||||
Net investment income | 1,517,017 | ||||||
Net realized gain (loss) on: | |||||||
Investments in unaffiliated issuers | (583,699 | ) | |||||
Futures contracts | 26,947 | ||||||
Options written | 8,105 | ||||||
Swap agreements | 41,606 | ||||||
Forward foreign currency contracts | 7,156 | ||||||
Foreign currency transactions | 7,510 | ||||||
Net realized loss | (492,375 | ) | |||||
Change in net unrealized appreciation (depreciation) on: | |||||||
Investments | (1,325,804 | ) | |||||
Futures contracts | (41,231 | ) | |||||
Options and swaptions written | 987 | ||||||
Swap agreements | (7,242 | ) | |||||
Forward foreign currency contracts | 140 | ||||||
Translation of other assets and liabilities denominated in foreign currency | (12,942 | ) | |||||
Change in net unrealized depreciation | (1,386,092 | ) | |||||
Net realized and unrealized loss | (1,878,467 | ) | |||||
Net increase (decrease) in net assets resulting from operations | $ | (361,450 | ) |
See accompanying notes to financial statements.
103
The UBS Funds
Financial Statements
Statement of changes in net assets
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | ||||||||||||||||||
For the year ended June 30, 2018 | For the year ended June 30, 2017 | For the year ended June 30, 2018 | For the year ended June 30, 2017 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | 812,390 | $ | 959,377 | $ | 759,594 | $ | 3,678 | |||||||||||
Net realized gain (loss) | (2,572,439 | ) | 9,102,503 | 34,586,766 | 17,658,602 | ||||||||||||||
Change in net unrealized appreciation (depreciation) | 679,052 | 732,775 | (14,628,521 | ) | 25,335,726 | ||||||||||||||
Net increase (decrease) in net assets resulting from operations | (1,080,997 | ) | 10,794,655 | 20,717,839 | 42,998,006 | ||||||||||||||
Dividends and distributions to shareholders from: | |||||||||||||||||||
Net investment income—Class A | — | — | (2,389,937 | ) | (3,709,639 | ) | |||||||||||||
Net investment income—Class C | — | — | (601,488 | ) | (1,163,177 | ) | |||||||||||||
Net investment income—Class P | — | — | (1,099,437 | ) | (1,947,479 | ) | |||||||||||||
Total dividends and distributions to shareholders | — | — | (4,090,862 | ) | (6,820,295 | ) | |||||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 3,219,012 | 6,143,479 | 8,935,477 | 12,635,795 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | — | — | 3,732,469 | 6,231,895 | |||||||||||||||
Cost of shares repurchased | (87,796,218 | ) | (83,276,893 | ) | (59,836,089 | ) | (115,259,301 | ) | |||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (84,577,206 | ) | (77,133,414 | ) | (47,168,143 | ) | (96,391,611 | ) | |||||||||||
Increase (decrease) in net assets | (85,658,203 | ) | (66,338,759 | ) | (30,541,166 | ) | (60,213,900 | ) | |||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 159,398,364 | 225,737,123 | 337,660,192 | 397,874,092 | |||||||||||||||
End of year | $ | 73,740,161 | $ | 159,398,364 | $ | 307,119,026 | $ | 337,660,192 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | (1,219,632 | ) | $ | (1,137,644 | ) | $ | (680,814 | ) | $ | 3,584,343 |
1 For the period June 4, 2018 (commencement of operations) through June 30, 2018.
104
The UBS Funds
UBS Emerging Markets Equity Opportunity Fund | UBS International Sustainable Equity Fund | ||||||||||||||
For the period ended June 30, 20181 | For the year ended June 30, 2018 | For the year ended June 30, 2017 | |||||||||||||
From operations: | |||||||||||||||
Net investment income | $ | 94,200 | $ | 553,946 | $ | 482,786 | |||||||||
Net realized gain (loss) | (47,837 | ) | 3,127,482 | 171,461 | |||||||||||
Change in net unrealized appreciation (depreciation) | (634,490 | ) | (2,939,148 | ) | 5,180,310 | ||||||||||
Net increase (decrease) in net assets resulting from operations | (588,127 | ) | 742,280 | 5,834,557 | |||||||||||
Dividends and distributions to shareholders from: | |||||||||||||||
Net investment income—Class A | — | (85,846 | ) | (107,890 | ) | ||||||||||
Net investment income—Class C | — | (18,182 | ) | (26,845 | ) | ||||||||||
Net investment income—Class P | — | (411,618 | ) | (369,867 | ) | ||||||||||
Total dividends and distributions to shareholders | — | (515,646 | ) | (504,602 | ) | ||||||||||
From beneficial interest transactions: | |||||||||||||||
Proceeds from shares sold | 94,963,376 | 54,066,034 | 13,512,832 | ||||||||||||
Shares issued on reinvestment of dividends and distributions | — | 484,976 | 468,472 | ||||||||||||
Cost of shares repurchased | (26,410 | ) | (15,741,755 | ) | (5,340,120 | ) | |||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 94,936,966 | 38,809,255 | 8,641,184 | ||||||||||||
Increase (decrease) in net assets | 94,348,839 | 39,035,889 | 13,971,139 | ||||||||||||
Net assets: | |||||||||||||||
Beginning of year | — | 37,803,499 | 23,832,360 | ||||||||||||
End of year | $ | 94,348,839 | $ | 76,839,388 | $ | 37,803,499 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | 46,363 | $ | 447,928 | $ | 408,459 |
See accompanying notes to financial statements.
105
The UBS Funds
Financial Statements
Statement of changes in net assets (continued)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | ||||||||||||||||||
For the year ended June 30, 2018 | For the year ended June 30, 2017 | For the year ended June 30, 2018 | For the year ended June 30, 2017 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | (731,673 | ) | $ | (922,237 | ) | $ | 177,291 | $ | 165,172 | |||||||||
Net realized gain (loss) | 14,562,416 | 27,041,263 | 6,774,958 | 1,946,218 | |||||||||||||||
Change in net unrealized appreciation (depreciation) | 11,582,980 | 9,556,957 | (3,739,690 | ) | 3,907,417 | ||||||||||||||
Net increase (decrease) in net assets resulting from operations | 25,413,723 | 35,675,983 | 3,212,559 | 6,018,807 | |||||||||||||||
Dividends and distributions to shareholders from: | |||||||||||||||||||
Net investment income—Class A | — | — | (46,850 | ) | (96,685 | ) | |||||||||||||
Net investment income—Class C | — | — | — | (5,319 | ) | ||||||||||||||
Net investment income—Class P | — | — | (106,200 | ) | (197,574 | ) | |||||||||||||
Net realized gains—Class A | (6,251,756 | ) | (1,010,739 | ) | — | — | |||||||||||||
Net realized gains—Class C | (1,045,852 | ) | (164,852 | ) | — | — | |||||||||||||
Net realized gains—Class P | (16,473,329 | ) | (4,314,480 | ) | — | — | |||||||||||||
Return of capital—Class A | — | — | — | — | |||||||||||||||
Return of capital—Class C | — | — | — | — | |||||||||||||||
Return of capital—Class P | — | — | — | — | |||||||||||||||
Total dividends and distributions to shareholders | (23,770,937 | ) | (5,490,071 | ) | (153,050 | ) | (299,578 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 18,277,548 | 28,894,607 | 1,749,809 | 3,903,550 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 22,078,250 | 5,212,883 | 145,512 | 286,088 | |||||||||||||||
Cost of shares redeemed | (30,381,324 | ) | (119,609,922 | ) | (6,076,611 | ) | (6,340,155 | ) | |||||||||||
Redemption fees | — | — | — | — | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 9,974,474 | (85,502,432 | ) | (4,181,290 | ) | (2,150,517 | ) | ||||||||||||
Net increase (decrease) in net assets | 11,617,260 | (55,316,520 | ) | (1,121,781 | ) | 3,568,712 | |||||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 107,343,080 | 162,659,600 | 30,619,807 | 27,051,095 | |||||||||||||||
End of year | $ | 118,960,340 | $ | 107,343,080 | $ | 29,498,026 | $ | 30,619,807 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | $ | (122,000 | ) | $ | — | $ | 177,865 | $ | 161,956 |
106
The UBS Funds
UBS Municipal Bond Fund | UBS Total Return Bond Fund | ||||||||||||||||||
For the year ended June 30, 2018 | For the year ended June 30, 2017 | For the year ended June 30, 2018 | For the year ended June 30, 2017 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income | $ | 2,316,609 | $ | 2,005,206 | $ | 1,517,017 | $ | 1,684,997 | |||||||||||
Net realized gain (loss) | (9,176 | ) | (729,645 | ) | (492,375 | ) | 1,208,787 | ||||||||||||
Change in net unrealized appreciation (depreciation) | (1,986,604 | ) | (2,761,625 | ) | (1,386,092 | ) | (1,640,173 | ) | |||||||||||
Net increase (decrease) in net assets resulting from operations | 320,829 | (1,486,064 | ) | (361,450 | ) | 1,253,611 | |||||||||||||
Dividends and distributions to shareholders from: | |||||||||||||||||||
Net investment income—Class A | (208,985 | ) | (317,347 | ) | (1,041 | ) | (452 | ) | |||||||||||
Net investment income—Class C | (60,872 | ) | (57,086 | ) | (815 | ) | (864 | ) | |||||||||||
Net investment income—Class P | (2,036,241 | ) | (1,630,048 | ) | (1,214,180 | ) | (1,759,722 | ) | |||||||||||
Net realized gains—Class A | — | (54,279 | ) | — | — | ||||||||||||||
Net realized gains—Class C | — | (15,735 | ) | — | — | ||||||||||||||
Net realized gains—Class P | — | (223,923 | ) | — | — | ||||||||||||||
Return of capital—Class A | — | — | — | (5 | ) | ||||||||||||||
Return of capital—Class C | — | — | — | (10 | ) | ||||||||||||||
Return of capital—Class P | — | — | — | (19,932 | ) | ||||||||||||||
Total dividends and distributions to shareholders | (2,306,098 | ) | (2,298,418 | ) | (1,216,036 | ) | (1,780,985 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 35,084,588 | 72,756,643 | 175,672 | 345,280 | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 1,843,235 | 1,835,254 | 938,852 | 1,364,650 | |||||||||||||||
Cost of shares redeemed | (42,005,574 | ) | (56,365,873 | ) | (8,127,941 | ) | (78,136,932 | ) | |||||||||||
Redemption fees | — | — | — | 38,529 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (5,077,751 | ) | 18,226,024 | (7,013,417 | ) | (76,388,473 | ) | ||||||||||||
Net increase (decrease) in net assets | (7,063,020 | ) | 14,441,542 | (8,590,903 | ) | (76,915,847 | ) | ||||||||||||
Net assets: | |||||||||||||||||||
Beginning of year | 128,422,890 | 113,981,348 | 50,006,285 | 126,922,132 | |||||||||||||||
End of year | $ | 121,359,870 | $ | 128,422,890 | $ | 41,415,382 | $ | 50,006,285 | |||||||||||
Accumulated undistributed (distributions in excess of) net investment income (loss) | $ | (30,058 | ) | $ | (40,569 | ) | $ | 14,747 | $ | (207,039 | ) |
See accompanying notes to financial statements.
107
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.52 | $ | 6.17 | $ | 7.13 | $ | 7.24 | $ | 6.82 | |||||||||||||
Net investment income1 | 0.04 | 0.03 | 0.05 | 0.04 | 0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.18 | ) | 0.32 | (0.79 | ) | 0.11 | 0.38 | ||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | 0.002 | — | ||||||||||||||||||
Total income (loss) from investment operations | (0.14 | ) | 0.35 | (0.73 | ) | 0.15 | 0.43 | ||||||||||||||||
Dividends from net investment income | — | — | (0.23 | ) | (0.26 | ) | (0.01 | ) | |||||||||||||||
Return of capital | — | — | (0.00 | )2 | — | — | |||||||||||||||||
Total dividends and distributions | — | — | (0.23 | ) | (0.26 | ) | (0.01 | ) | |||||||||||||||
Net asset value, end of year | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | $ | 7.24 | |||||||||||||
Total investment return3 | (2.15 | )% | 5.84 | % | (10.48 | )%4 | 2.03 | %5 | 6.31 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.69 | % | 1.49 | % | 1.45 | % | 1.43 | % | 1.42 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||
Net investment income | 0.57 | % | 0.42 | % | 0.82 | % | 0.58 | % | 0.66 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 31,066 | $ | 43,930 | $ | 65,741 | $ | 89,421 | $ | 194,185 | |||||||||||||
Portfolio turnover | 31 | % | 48 | % | 50 | % | 54 | % | 45 | % |
Class P
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.66 | $ | 6.28 | $ | 7.27 | $ | 7.38 | $ | 6.96 | |||||||||||||
Net investment income1 | 0.06 | 0.04 | 0.07 | 0.06 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.19 | ) | 0.34 | (0.82 | ) | 0.12 | 0.39 | ||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | 0.002 | — | ||||||||||||||||||
Total income (loss) from investment operations | (0.13 | ) | 0.38 | (0.74 | ) | 0.18 | 0.45 | ||||||||||||||||
Dividends from net investment income | — | — | (0.25 | ) | (0.29 | ) | (0.03 | ) | |||||||||||||||
Return of capital | — | — | (0.00 | )2 | — | — | |||||||||||||||||
Total dividends and distributions | — | — | (0.25 | ) | (0.29 | ) | (0.03 | ) | |||||||||||||||
Net asset value, end of year | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | $ | 7.38 | |||||||||||||
Total investment return3 | (1.80 | )% | 6.05 | % | (10.17 | )%4 | 2.29 | %5 | 6.45 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.43 | % | 1.27 | % | 1.22 | % | 1.20 | % | 1.15 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||
Net investment income | 0.94 | % | 0.68 | % | 1.07 | % | 0.84 | % | 0.87 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 30,647 | $ | 98,018 | $ | 132,725 | $ | 192,777 | $ | 81,168 | |||||||||||||
Portfolio turnover | 31 | % | 48 | % | 50 | % | 54 | % | 45 | % |
1 Calculated using the average share method.
2 Amount represents less than $0.005 per share.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each 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.
108
UBS Dynamic Alpha Fund
Financial highlights
Class C
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 6.06 | $ | 5.78 | $ | 6.68 | $ | 6.81 | $ | 6.46 | |||||||||||||
Net investment income (loss)1 | (0.01 | ) | (0.02 | ) | 0.002 | (0.01 | ) | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | (0.16 | ) | 0.30 | (0.73 | ) | 0.09 | 0.36 | ||||||||||||||||
Net increase from payment by Advisor | — | — | 0.002 | 0.002 | — | ||||||||||||||||||
Total income (loss) from investment operations | (0.17 | ) | 0.28 | (0.73 | ) | 0.08 | 0.35 | ||||||||||||||||
Dividends from net investment income | — | — | (0.17 | ) | (0.21 | ) | — | ||||||||||||||||
Return of capital | — | — | (0.00 | )2 | — | — | |||||||||||||||||
Total dividends and distributions | — | — | (0.17 | ) | (0.21 | ) | — | ||||||||||||||||
Net asset value, end of year | $ | 5.89 | $ | 6.06 | $ | 5.78 | $ | 6.68 | $ | 6.81 | |||||||||||||
Total investment return3 | (2.80 | )% | 4.84 | % | (11.00 | )%4 | 1.21 | %5 | 5.42 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.48 | % | 2.28 | % | 2.23 | % | 2.19 | % | 2.18 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | |||||||||||||
Net investment income | (0.18 | )% | (0.33 | )% | 0.07 | % | (0.17 | )% | (0.09 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 12,027 | $ | 17,450 | $ | 27,271 | $ | 45,871 | $ | 51,119 | |||||||||||||
Portfolio turnover | 31 | % | 48 | % | 50 | % | 54 | % | 45 | % |
4 During the year ended June 30, 2016, the Advisor reimbursed the Fund $128,212, which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions, and $86,068 for a trading error, both reimbursements had no impact on the Fund's total return.
5 During the year ended June 30, 2015, the Advisor reimbursed the Fund for a trading error in the amount of $2,068, which had no impact on the Fund's total return.
See accompanying notes to financial statements.
109
UBS Global Allocation Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 11.52 | $ | 10.46 | $ | 11.27 | $ | 11.04 | $ | 9.79 | |||||||||||||
Net investment income (loss)1 | 0.05 | 0.02 | 0.01 | (0.00 | )2 | 0.02 | |||||||||||||||||
Net realized and unrealized gain (loss) | 0.68 | 1.27 | (0.56 | ) | 0.23 | 1.36 | |||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | — | — | ||||||||||||||||||
Total income (loss) from investment operations | 0.73 | 1.29 | (0.54 | ) | 0.23 | 1.38 | |||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.23 | ) | (0.27 | ) | — | (0.13 | ) | ||||||||||||||
Net asset value, end of year | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | $ | 11.04 | |||||||||||||
Total investment return3 | 6.34 | % | 12.51 | % | (4.81 | )%4 | 2.08 | % | 14.20 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.40 | % | 1.39 | % | 1.36 | % | 1.32 | % | 1.30 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.20 | % | 1.25 | % | 1.35 | % | 1.32 | % | 1.30 | % | |||||||||||||
Net investment income (loss) | 0.39 | % | 0.16 | % | 0.09 | % | (0.01 | )% | 0.17 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 159,678 | $ | 174,148 | $ | 190,813 | $ | 234,665 | $ | 309,296 | |||||||||||||
Portfolio turnover | 54 | % | 56 | % | 60 | % | 62 | % | 49 | % |
Class P
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 11.78 | $ | 10.69 | $ | 11.51 | $ | 11.25 | $ | 9.98 | |||||||||||||
Net investment income1 | 0.08 | 0.05 | 0.04 | 0.03 | 0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.68 | 1.30 | (0.56 | ) | 0.23 | 1.39 | |||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | — | — | ||||||||||||||||||
Total income (loss) from investment operations | 0.76 | 1.35 | (0.51 | ) | 0.26 | 1.44 | |||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.26 | ) | (0.31 | ) | — | (0.17 | ) | ||||||||||||||
Net asset value, end of year | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | $ | 11.25 | |||||||||||||
Total investment return3 | 6.56 | % | 12.85 | % | (4.50 | )%4 | 2.31 | % | 14.56 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.14 | % | 1.12 | % | 1.09 | % | 1.04 | % | 1.00 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | % | 1.00 | % | 1.09 | % | 1.04 | % | 1.00 | % | |||||||||||||
Net investment income | 0.64 | % | 0.41 | % | 0.34 | % | 0.26 | % | 0.51 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 64,009 | $ | 67,156 | $ | 91,004 | $ | 124,415 | $ | 129,417 | |||||||||||||
Portfolio turnover | 54 | % | 56 | % | 60 | % | 62 | % | 49 | % |
1 Calculated using the average share method.
2 Amount represents less than $0.005 per share.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each 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.
110
UBS Global Allocation Fund
Financial highlights
Class C
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 11.21 | $ | 10.15 | $ | 10.92 | $ | 10.79 | $ | 9.55 | |||||||||||||
Net investment income (loss)1 | (0.04 | ) | (0.06 | ) | (0.07 | ) | 0.22 | (0.06 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | 0.65 | 1.24 | (0.54 | ) | 0.13 | 1.34 | |||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | — | — | ||||||||||||||||||
Total income (loss) from investment operations | 0.61 | 1.18 | (0.60 | ) | 0.13 | 1.28 | |||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.12 | ) | (0.17 | ) | — | (0.04 | ) | ||||||||||||||
Net asset value, end of year | $ | 11.75 | $ | 11.21 | $ | 10.15 | $ | 10.92 | $ | 10.79 | |||||||||||||
Total investment return3 | 5.48 | % | 11.76 | % | (5.49 | )%4 | 1.20 | % | 13.31 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.18 | % | 2.16 | % | 2.15 | % | 2.10 | % | 2.08 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.95 | % | 2.01 | % | 2.10 | % | 2.10 | % | 2.08 | % | |||||||||||||
Net investment loss | (0.37 | )% | (0.60 | )% | (0.66 | )% | (0.79 | )% | (0.59 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 83,432 | $ | 96,356 | $ | 116,057 | $ | 145,277 | $ | 174,078 | |||||||||||||
Portfolio turnover | 54 | % | 56 | % | 60 | % | 62 | % | 49 | % |
4 During the year ended June 30, 2016, the Advisor reimbursed the Fund $316,557 which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions. If payment from Advisor was not made, the estimated total return would have been -4.90% for A shares, -5.59% for C shares, and -4.59% for P shares.
See accompanying notes to financial statements.
111
UBS Emerging Markets Equity Opportunity Fund
Financial highlights
Selected data for one share of beneficial interest outstanding throughout the period is presented below:
Class P2 | |||||||
Period ended June 30, 20181 | |||||||
Net asset value, beginning of period | $ | 10.00 | |||||
Net investment income2 | 0.03 | ||||||
Net realized and unrealized loss | (0.63 | ) | |||||
Total loss from investment operations | (0.60 | ) | |||||
Net asset value, end of period | $ | 9.40 | |||||
Total investment return3 | (5.90 | )% | |||||
Ratios to average net assets: | |||||||
Expenses before fee waivers and/or expense reimbursements | 4.39 | %4 | |||||
Expenses after fee waivers and/or expense reimbursements | 0.44 | %4 | |||||
Net investment income | 4.05 | %4 | |||||
Supplemental data: | |||||||
Net assets, end of period (000's) | $ | 94,349 | |||||
Portfolio turnover | 0 | % |
1 For the period June 4, 2018 (commencement of operations) through June 30, 2018.
2 Calculated using the average share method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of the period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of the period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for the period of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 Annualized.
See accompanying notes to financial statements.
112
UBS International Sustainable Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each year presented.
Class A
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 9.58 | $ | 8.05 | $ | 9.47 | $ | 8.95 | $ | 7.55 | |||||||||||||
Net investment income1 | 0.08 | 0.19 | 0.13 | 0.10 | 0.08 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.66 | 1.51 | (1.47 | ) | 0.53 | 1.51 | |||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | — | — | ||||||||||||||||||
Total income (loss) from investment operations | 0.74 | 1.70 | (1.33 | ) | 0.63 | 1.59 | |||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | (0.19 | ) | |||||||||||||
Net asset value, end of year | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | $ | 8.95 | |||||||||||||
Total investment return2 | 7.67 | % | 21.43 | % | (14.07 | )%3 | 7.14 | % | 21.32 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.02 | % | 2.25 | % | 2.37 | % | 2.47 | % | 2.74 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||
Net investment income | 0.79 | % | 2.16 | % | 1.59 | % | 1.09 | % | 0.91 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 8,049 | $ | 15,811 | $ | 5,204 | $ | 6,371 | $ | 7,541 | |||||||||||||
Portfolio turnover | 43 | % | 33 | % | 114 | % | 42 | % | 137 | % |
Class P
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 9.61 | $ | 8.08 | $ | 9.50 | $ | 8.99 | $ | 7.58 | |||||||||||||
Net investment income1 | 0.14 | 0.14 | 0.16 | 0.13 | 0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.63 | 1.58 | (1.48 | ) | 0.51 | 1.53 | |||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | — | — | ||||||||||||||||||
Total income (loss) from investment operations | 0.77 | 1.72 | (1.31 | ) | 0.64 | 1.62 | |||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | (0.21 | ) | |||||||||||||
Net asset value, end of year | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | $ | 8.99 | |||||||||||||
Total investment return2 | 7.94 | % | 21.68 | % | (13.83 | )%3 | 7.32 | % | 21.65 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.70 | % | 2.06 | % | 2.12 | % | 2.21 | % | 2.45 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||
Net investment income | 1.37 | % | 1.65 | % | 1.92 | % | 1.40 | % | 1.10 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 65,750 | $ | 19,952 | $ | 16,277 | $ | 17,103 | $ | 12,462 | |||||||||||||
Portfolio turnover | 43 | % | 33 | % | 114 | % | 42 | % | 137 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each 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.
113
UBS International Sustainable Equity Fund
Financial highlights
Class C
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 9.35 | $ | 7.85 | $ | 9.26 | $ | 8.80 | $ | 7.43 | |||||||||||||
Net investment income1 | 0.02 | 0.04 | 0.07 | 0.04 | 0.03 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.63 | 1.56 | (1.44 | ) | 0.51 | 1.47 | |||||||||||||||||
Net increase from payment by Advisor | — | — | 0.01 | — | — | ||||||||||||||||||
Total income (loss) from investment operations | 0.65 | 1.60 | (1.36 | ) | 0.55 | 1.50 | |||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.10 | ) | 0.05 | (0.09 | ) | (0.13 | ) | ||||||||||||||
Net asset value, end of year | $ | 9.93 | $ | 9.35 | $ | 7.85 | $ | 9.26 | $ | 8.80 | |||||||||||||
Total investment return2 | 6.89 | % | 20.56 | % | (14.72 | )%3 | 6.36 | % | 20.32 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.76 | % | 3.11 | % | 3.15 | % | 3.23 | % | 3.54 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | 2.00 | % | |||||||||||||
Net investment income | 0.24 | % | 0.48 | % | 0.86 | % | 0.46 | % | 0.37 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 3,041 | $ | 2,040 | $ | 2,351 | $ | 2,672 | $ | 1,579 | |||||||||||||
Portfolio turnover | 43 | % | 33 | % | 114 | % | 42 | % | 137 | % |
3 During the year ended June 30, 2016, the Advisor reimbursed the Fund $34,326, which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions, and $5,471 for a trading error. lf payment from Advisor was not made, the estimated total return would have been -14.18% for A shares, -14.83% for C shares, and -13.94% for P shares.
See accompanying notes to financial statements.
114
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, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 21.26 | $ | 17.75 | $ | 23.60 | $ | 24.76 | $ | 20.10 | |||||||||||||
Net investment loss1 | (0.17 | ) | (0.15 | ) | (0.13 | ) | (0.16 | ) | (0.21 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 4.92 | 4.34 | (3.89 | ) | 3.38 | 5.40 | |||||||||||||||||
Total income (loss) from investment operations | 4.75 | 4.19 | (4.02 | ) | 3.22 | 5.19 | |||||||||||||||||
Distributions from net realized gains | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | (0.53 | ) | |||||||||||||
Net asset value, end of year | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | $ | 24.76 | |||||||||||||
Total investment return2 | 26.17 | % | 23.75 | % | (17.58 | )% | 15.61 | % | 26.42 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.66 | % | 1.56 | % | 1.53 | % | 1.51 | % | 1.45 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.24 | % | 1.24 | % | 1.24 | % | 1.35 | % | 1.40 | % | |||||||||||||
Net investment loss | (0.83 | )% | (0.77 | )% | (0.65 | )% | (0.69 | )% | (0.92 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 26,498 | $ | 27,464 | $ | 28,048 | $ | 46,813 | $ | 42,552 | |||||||||||||
Portfolio turnover | 67 | % | 50 | % | 109 | % | 64 | % | 57 | % |
Class P
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 22.92 | $ | 19.05 | $ | 25.11 | $ | 26.00 | $ | 21.01 | |||||||||||||
Net investment loss1 | (0.13 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | (0.15 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 5.37 | 4.66 | (4.15 | ) | 3.60 | 5.67 | |||||||||||||||||
Total income (loss) from investment operations | 5.24 | 4.55 | (4.23 | ) | 3.49 | 5.52 | |||||||||||||||||
Distributions from net realized gains | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | (0.53 | ) | |||||||||||||
Net asset value, end of year | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | $ | 26.00 | |||||||||||||
Total investment return2 | 26.50 | % | 24.09 | % | (17.39 | )% | 15.93 | % | 26.79 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.34 | % | 1.22 | % | 1.17 | % | 1.10 | % | 1.09 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.99 | % | 0.99 | % | 0.99 | % | 1.07 | % | 1.09 | % | |||||||||||||
Net investment loss | (0.58 | )% | (0.50 | )% | (0.40 | )% | (0.43 | )% | (0.61 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 88,845 | $ | 75,770 | $ | 130,227 | $ | 178,495 | $ | 226,376 | |||||||||||||
Portfolio turnover | 67 | % | 50 | % | 109 | % | 64 | % | 57 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
See accompanying notes to financial statements.
115
UBS U.S. Small Cap Growth Fund
Financial highlights
Class C
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 17.92 | $ | 15.16 | $ | 20.60 | $ | 22.32 | $ | 18.29 | |||||||||||||
Net investment loss1 | (0.26 | ) | (0.26 | ) | (0.23 | ) | (0.29 | ) | (0.35 | ) | |||||||||||||
Net realized and unrealized gain (loss) | 3.98 | 3.70 | (3.38 | ) | 2.95 | 4.91 | |||||||||||||||||
Total income (loss) from investment operations | 3.72 | 3.44 | (3.61 | ) | 2.66 | 4.56 | |||||||||||||||||
Distributions from net realized gains | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | (0.53 | ) | |||||||||||||
Net asset value, end of year | $ | 16.37 | $ | 17.92 | $ | 15.16 | $ | 20.60 | $ | 22.32 | |||||||||||||
Total investment return2 | 25.30 | % | 22.77 | % | (18.18 | )% | 14.71 | % | 25.51 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.39 | % | 2.29 | % | 2.28 | % | 2.24 | % | 2.24 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.99 | % | 1.99 | % | 1.99 | % | 2.10 | % | 2.15 | % | |||||||||||||
Net investment loss | (1.58 | )% | (1.52 | )% | (1.39 | )% | (1.44 | )% | (1.67 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 3,618 | $ | 4,109 | $ | 4,385 | $ | 5,398 | $ | 3,687 | |||||||||||||
Portfolio turnover | 67 | % | 50 | % | 109 | % | 64 | % | 57 | % |
116
UBS U.S. Sustainable Equity Fund
(formerly, 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, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 31.21 | $ | 25.51 | $ | 27.55 | $ | 25.03 | $ | 19.85 | |||||||||||||
Net investment income1 | 0.16 | 0.14 | 0.21 | 0.14 | 0.11 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 3.20 | 5.84 | (1.88 | ) | 2.50 | 5.23 | |||||||||||||||||
Total income (loss) from investment operations | 3.36 | 5.98 | (1.67 | ) | 2.64 | 5.34 | |||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.28 | ) | (0.37 | ) | (0.12 | ) | (0.16 | ) | |||||||||||||
Net asset value, end of year | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | $ | 25.03 | |||||||||||||
Total investment return2 | 10.79 | % | 23.61 | % | (6.13 | )% | 10.61 | % | 27.05 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.07 | % | 2.04 | % | 1.93 | % | 1.56 | % | �� | 1.29 | % | ||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | % | 0.95 | % | 1.13 | % | 1.20 | % | 1.20 | % | |||||||||||||
Net investment income | 0.48 | % | 0.49 | % | 0.81 | % | 0.53 | % | 0.47 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 10,586 | $ | 11,857 | $ | 9,774 | $ | 9,784 | $ | 9,478 | |||||||||||||
Portfolio turnover | 166 | % | 78 | % | 57 | % | 59 | % | 55 | % |
Class P
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 31.34 | $ | 25.61 | $ | 27.67 | $ | 25.14 | $ | 19.94 | |||||||||||||
Net investment income1 | 0.25 | 0.21 | 0.26 | 0.20 | 0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 3.21 | 5.87 | (1.89 | ) | 2.52 | 5.27 | |||||||||||||||||
Total income (loss) from investment operations | 3.46 | 6.08 | (1.63 | ) | 2.72 | 5.43 | |||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.35 | ) | (0.43 | ) | (0.19 | ) | (0.23 | ) | |||||||||||||
Net asset value, end of year | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | $ | 25.14 | |||||||||||||
Total investment return2 | 11.08 | % | 23.87 | % | (5.91 | )% | 10.90 | % | 27.38 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.79 | % | 1.76 | % | 1.64 | % | 1.07 | % | 0.99 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.70 | % | 0.70 | % | 0.90 | % | 0.95 | % | 0.95 | % | |||||||||||||
Net investment income | 0.74 | % | 0.74 | % | 1.00 | % | 0.77 | % | 0.71 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 17,182 | $ | 16,754 | $ | 15,147 | $ | 28,345 | $ | 126,735 | |||||||||||||
Portfolio turnover | 166 | % | 78 | % | 57 | % | 59 | % | 55 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each year reported. The figures do not include any applicable sales charges; results would be lower if they were included. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
See accompanying notes to financial statements.
117
UBS U.S. Sustainable Equity Fund
(formerly, UBS U.S. Large Cap Equity Fund)
Financial highlights
Class C
Year ended June 30, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of year | $ | 29.86 | $ | 24.41 | $ | 26.34 | $ | 23.99 | $ | 19.06 | |||||||||||||
Net investment income (loss)1 | (0.09 | ) | (0.07 | ) | 0.01 | (0.05 | ) | (0.06 | ) | ||||||||||||||
Net realized and unrealized gain (loss) | 3.07 | 5.59 | (1.80 | ) | 2.40 | 5.03 | |||||||||||||||||
Total income (loss) from investment operations | 2.98 | 5.52 | (1.79 | ) | 2.35 | 4.97 | |||||||||||||||||
Dividends from net investment income | — | (0.07 | ) | (0.14 | ) | — | (0.04 | ) | |||||||||||||||
Net asset value, end of year | $ | 32.84 | $ | 29.86 | $ | 24.41 | $ | 26.34 | $ | 23.99 | |||||||||||||
Total investment return2 | 9.98 | % | 22.63 | % | (6.82 | )% | 9.80 | % | 26.09 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.83 | % | 2.81 | % | 2.68 | % | 2.31 | % | 2.08 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.70 | % | 1.70 | % | 1.88 | % | 1.95 | % | 1.95 | % | |||||||||||||
Net investment income (loss) | (0.27 | )% | (0.26 | )% | 0.03 | % | (0.22 | )% | (0.27 | )% | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of year (000's) | $ | 1,731 | $ | 2,009 | $ | 2,130 | $ | 2,643 | $ | 3,299 | |||||||||||||
Portfolio turnover | 166 | % | 78 | % | 57 | % | 59 | % | 55 | % |
118
UBS Municipal Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Year ended June 30, | Period ended | ||||||||||||||||||
2018 | 2017 | 2016 | June 30, 20151 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.23 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||
Net investment income2 | 0.16 | 0.15 | 0.17 | 0.09 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.16 | ) | (0.27 | ) | 0.59 | (0.06 | ) | ||||||||||||
Total income (loss) from investment operations | — | (0.12 | ) | 0.76 | 0.03 | ||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.15 | ) | (0.18 | ) | (0.09 | ) | |||||||||||
Distributions from net realized gains | — | (0.02 | ) | — | — | ||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.17 | ) | (0.18 | ) | (0.09 | ) | |||||||||||
Net asset value, end of period | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | |||||||||||
Total investment return3 | 0.04 | % | (1.11 | )% | 7.74 | % | 0.30 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.03 | % | 1.00 | % | 1.15 | % | 1.46 | %4 | |||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %4 | |||||||||||
Net investment income | 1.61 | % | 1.42 | % | 1.66 | % | 1.43 | %4 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 9,378 | $ | 21,007 | $ | 17,671 | $ | 10,929 | |||||||||||
Portfolio turnover5 | 39 | % | 60 | % | 100 | % | 72 | % |
Class P
Year ended June 30, | Period ended | ||||||||||||||||||
2018 | 2017 | 2016 | June 30, 20151 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.22 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||
Net investment income2 | 0.19 | 0.17 | 0.19 | 0.10 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.16 | ) | (0.28 | ) | 0.60 | (0.05 | ) | ||||||||||||
Total income (loss) from investment operations | 0.03 | (0.11 | ) | 0.79 | 0.05 | ||||||||||||||
Dividends from net investment income | (0.19 | ) | (0.17 | ) | (0.21 | ) | (0.11 | ) | |||||||||||
Distributions from net realized gains | — | (0.02 | ) | — | — | ||||||||||||||
Total dividends and distributions | (0.19 | ) | (0.19 | ) | (0.21 | ) | (0.11 | ) | |||||||||||
Net asset value, end of period | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | |||||||||||
Total investment return3 | 0.30 | % | (0.97 | )% | 8.01 | % | 0.45 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 0.79 | % | 0.77 | % | 0.89 | % | 1.23 | %4 | |||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | %4 | |||||||||||
Net investment income | 1.88 | % | 1.68 | % | 1.89 | % | 1.63 | %4 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 107,153 | $ | 101,601 | $ | 90,146 | $ | 46,993 | |||||||||||
Portfolio turnover5 | 39 | % | 60 | % | 100 | % | 72 | % |
1 For the period November 10, 2014 (commencement of operations) through June 30, 2015.
2 Calculated using the average share method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and 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.
4 Annualized.
119
UBS Municipal Bond Fund
Financial highlights
Class C
Year ended June 30, | Period ended | ||||||||||||||||||
2018 | 2017 | 2016 | June 30, 20151 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.22 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||
Net investment income2 | 0.11 | 0.09 | 0.12 | 0.06 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.16 | ) | (0.28 | ) | 0.59 | (0.06 | ) | ||||||||||||
Total income (loss) from investment operations | (0.05 | ) | (0.19 | ) | 0.71 | 0.006 | |||||||||||||
Dividends from net investment income | (0.11 | ) | (0.09 | ) | (0.13 | ) | (0.06 | ) | |||||||||||
Distributions from net realized gains | — | (0.02 | ) | — | — | ||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.11 | ) | (0.13 | ) | (0.06 | ) | |||||||||||
Net asset value, end of period | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | |||||||||||
Total investment return3 | (0.45 | )% | (1.71 | )% | 7.21 | % | 0.03 | % | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.55 | % | 1.52 | % | 1.65 | % | 1.98 | %4 | |||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.15 | % | 1.15 | % | 1.15 | % | 1.14 | %4 | |||||||||||
Net investment income | 1.12 | % | 0.92 | % | 1.15 | % | 0.94 | %4 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 4,829 | $ | 5,815 | $ | 6,164 | $ | 2,948 | |||||||||||
Portfolio turnover5 | 39 | % | 60 | % | 100 | % | 72 | % |
5 Effective with the fiscal year ended June 30, 2017, calculation of the portfolio turnover rate excludes transactions involving variable-rate demand notes,which are considered short-term instruments due to the ability to demand immediate repayment.
6 Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
120
UBS Total Return Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Year ended June 30, 2018 | Period ended June 30, 20171 | ||||||||||
Net asset value, beginning of period | $ | 14.94 | $ | 15.24 | |||||||
Net investment income2 | 0.47 | 0.25 | |||||||||
Net realized and unrealized gain (loss) | (0.65 | ) | (0.30 | ) | |||||||
Total income (loss) from investment operations | (0.18 | ) | (0.05 | ) | |||||||
Dividends from net investment income | (0.36 | ) | (0.25 | ) | |||||||
Return of capital | — | (0.00 | )3 | ||||||||
Total dividends and distributions | (0.36 | ) | (0.25 | ) | |||||||
Net asset value, end of period | $ | 14.40 | $ | 14.94 | |||||||
Total investment return4 | (1.12 | )% | (0.31 | )% | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.45 | % | 1.74 | %5 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.75 | % | 0.75 | %5 | |||||||
Net investment income | 3.22 | % | 2.28 | %5 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 108 | $ | 44 | |||||||
Portfolio turnover | 236 | % | 700 | % |
Class P
Year ended June 30, | Year ended September 30, | ||||||||||||||||||||||
Nine months ended | |||||||||||||||||||||||
2018 | 2017 | June 30, 20166 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 14.94 | $ | 15.14 | $ | 14.98 | $ | 15.99 | $ | 15.89 | |||||||||||||
Net investment income2 | 0.49 | 0.37 | 0.36 | 0.64 | 0.60 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (0.63 | ) | (0.18 | ) | 0.13 | (0.96 | ) | 0.44 | |||||||||||||||
Total income (loss) from investment operations | (0.14 | ) | 0.19 | 0.49 | (0.32 | ) | 1.04 | ||||||||||||||||
Dividends from net investment income | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.64 | ) | (0.62 | ) | |||||||||||||
Distributions from net realized gains | — | — | — | (0.05 | ) | (0.32 | ) | ||||||||||||||||
Return of capital | — | (0.00 | )3 | — | — | — | |||||||||||||||||
Total dividends and distributions | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.69 | ) | (0.94 | ) | |||||||||||||
Net asset value, end of period | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | $ | 15.99 | |||||||||||||
Total investment return4 | (0.88 | )% | 1.32 | % | 3.33 | % | (2.05 | )% | 6.77 | % | |||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.30 | % | 1.29 | % | 1.21 | %5 | 0.75 | % | 0.83 | % | |||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.50 | % | 0.50 | % | 1.16 | %5 | 0.75 | % | 0.83 | % | |||||||||||||
Net investment income | 3.29 | % | 2.45 | % | 3.22 | %5 | 4.04 | % | 3.76 | % | |||||||||||||
Supplemental data: | |||||||||||||||||||||||
Net assets, end of period (000's) | $ | 41,245 | $ | 49,919 | $ | 126,922 | $ | 131,473 | $ | 140,338 | |||||||||||||
Portfolio turnover | 236 | % | 700 | % | 251 | % | 26 | % | 44 | % |
1 For the period September 29, 2016 (commencement of operations) through June 30, 2017.
2 Calculated using the average share method.
3 Amount represents less than $0.005 per share.
4 Total investment return is calculated assuming a $10,000 investment on the first day of each 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.
5 Annualized.
6 On May 23, 2016 Class P shares of the UBS Total Return Bond Fund acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end management investment company (the "Predecessor Fund"). The UBS Total Return Bond Fund's Class P shares have adopted the historical performance of the Predecessor Fund. In connection with the Reorganization, the fiscal year end for UBS Total Return Bond Fund has changed from September 30th to June 30th. As such, the fiscal period ended June 30, 2016 for UBS Total Return Bond Fund reflects the nine month period from October 1, 2015 through June 30, 2016.
See accompanying notes to financial statements.
121
UBS Total Return Bond Fund
Financial highlights
Class C
Year ended June 30, 2018 | Period ended June 30, 20171 | ||||||||||
Net asset value, beginning of period | $ | 14.94 | $ | 15.24 | |||||||
Net investment income2 | 0.35 | 0.19 | |||||||||
Net realized and unrealized loss | (0.61 | ) | (0.30 | ) | |||||||
Total loss from investment operations | (0.26 | ) | (0.11 | ) | |||||||
Dividends from net investment income | (0.28 | ) | (0.19 | ) | |||||||
Return of capital | — | (0.00 | )3 | ||||||||
Total dividends and distributions | (0.28 | ) | (0.19 | ) | |||||||
Net asset value, end of period | $ | 14.40 | $ | 14.94 | |||||||
Total investment return4 | (1.76 | )% | (0.66 | )% | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.36 | % | 2.14 | %5 | |||||||
Expenses after fee waivers and/or expense reimbursements | 1.25 | % | 1.25 | %5 | |||||||
Net investment income | 2.35 | % | 1.71 | %5 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 63 | $ | 43 | |||||||
Portfolio turnover | 236 | % | 700 | % |
122
The UBS Funds
Notes to financial statements
Organization and significant accounting policies
The UBS Funds (the "Trust") is an open-end management investment company registered with the US Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act"), as amended, currently offering multiple series representing separate investment portfolios. The Trust is a Delaware statutory trust organized on August 13, 1993. The trustees of the Trust have authority to issue an unlimited number of shares of beneficial interest at par value of $0.001 per share.
The Trust has eight Funds available for investment, each having its own investment objectives and policies: UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS International Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund), UBS Municipal Bond Fund and UBS Total Return Bond Fund, (each a "Fund", and collectively, the "Funds"). Each of the Funds is classified as a diversified investment company with the exception of UBS Dynamic Alpha Fund and UBS Municipal Bond Fund, which are classified as non-diversified for purposes of the 1940 Act.
UBS Asset Management (Americas) Inc. ("UBS AM" or the "Advisor") serves as the investment advisor and administrator for the Funds. UBS Asset Management (US) Inc. ("UBS AM (US)") serves as principal underwriter for the Funds. UBS AM and UBS AM (US) are indirect wholly owned subsidiaries of UBS Group AG. UBS Group AG is an internationally diversified organization with headquarters in Zurich, Switzerland. UBS Group AG operates in many areas of the financial services industry.
The Funds currently offer Class A, Class C and Class P shares, with the exception of UBS Emerging Markets Equity Opportunity Fund, which currently offers Class P2 shares only. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing service and distribution charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plan, if any. Class P and Class P2 shares have no service or distribution plan.
The Trust accounts separately for the assets, liabilities and operations of each Fund. Expenses directly attributable to each Fund are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them on a pro rata basis.
In the normal course of business, the Funds may enter into contracts that contain a variety of representations that provide indemnification for certain liabilities. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had any prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
Under certain circumstances, shareholders of the Funds may receive payment for redemptions in securities rather than in cash.
The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("US GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative US GAAP for SEC registrants. The Funds' financial statements are prepared in accordance with US GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
In October 2016, the SEC adopted new rules and forms, and amendments to certain then current rules and forms, to modernize reporting and disclosure of information by registered investment companies. The amendments to Regulation S-X require standardized, enhanced disclosure about derivatives in the investment company financial
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statements, as well as other amendments. The amendments to Regulation S-X were applied to the Funds' financial statements as of August 1, 2017. The adoption had no effect on the Funds' net assets or results of operations.
The following is a summary of significant accounting policies:
Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment transactions and foreign exchange transactions are calculated using the specific identified cost method. Dividend income and expense are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
Dividends and distributions: Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital are determined in accordance with US federal income tax regulations, which may differ from US GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
Foreign currency translation: The books and records of the Funds are maintained in US dollars. Foreign currency amounts are translated into US dollars as follows: (1) the foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into US dollars based on the current exchange rates each business day; and (2) purchases and sales of investment securities and income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. The resulting exchange gains and losses are included in the Statement of operations.
The Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the realized gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. Net realized foreign currency transaction gain (loss) is treated as ordinary income (loss) for income tax reporting purposes.
Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which some Funds in the Trust invest.
Small capitalization ("small cap") companies may be more vulnerable than larger capitalization ("large cap") companies to adverse business or economic developments. Small cap companies may also have limited product lines, markets or financial resources, and may be dependent on a relatively small management group. Securities of such companies may be less liquid and more volatile than securities of large cap companies or the market averages
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in general and therefore may involve greater risk than investing in large cap companies. In addition, small cap companies may not be well-known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects.
The ability of the issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
Investments in bonds with ratings of BB (Standard & Poor's Financial Services LLC or Fitch Ratings, Inc.) or Ba (Moody's Investors Service, Inc.) or below (commonly referred to as "high yield" bonds), or deemed of equivalent quality, have an increased risk of defaulting or otherwise being unable to honor a financial obligation. These securities are considered to be 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.
Valuation of investments
Each Fund generally calculates its net asset value on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). The NYSE normally is not open, and the Funds do not price their shares, on most national holidays and Good Friday. To the extent that a Fund's assets are traded in other markets on days when the NYSE is not open, the value of a Fund's assets may be affected on those days. If trading on the NYSE is halted for the day before 4:00 p.m., Eastern time, a Fund's net asset value per share generally will still be calculated as of the close of regular trading on the NYSE. The time at which a Fund calculates its net asset value and until which purchase, sale or exchange orders are accepted may be changed as permitted by the SEC.
Each Fund calculates its net asset value based on the current market value, where available, for its portfolio investments. The Funds normally obtain market values for their investments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "evaluation" systems that derive values based on comparable investments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings.
Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Investments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. Investments listed on foreign stock exchanges may be fair valued based on significant events that have occurred subsequent to the close of the foreign markets. In cases where investments are traded on more than one exchange, the investments are valued on the exchange designated as the primary market by UBS AM. If a market value is not readily available from an independent pricing source for a particular investment, that investment is valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees (the "Board"). Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments in which the Funds invest are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m., Eastern time, will not be reflected in a Fund's net asset value. However, if any of the Funds determine that such developments are so significant that they will materially affect the value of the Fund's investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments as of 4:00 p.m., Eastern time.
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Certain Funds may use a systematic fair valuation model provided by an independent third party to value investments principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If an investment is valued at a "fair value," that value is likely to be different from the last quoted market price for the investment. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period. Transfers between Level 1 and Level 2, if any, are disclosed near the end of each Fund's Portfolio of investments.
The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with 60 days or less remaining to maturity, unless the Board determines that this does not represent fair value.
Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Funds' use of the practical expedient within ASC Topic 820, Fair Value Measurement, investments in investment companies without publicly published prices are also valued at the daily net asset value.
All investments quoted in foreign currencies are valued daily in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Funds' custodian.
Futures contracts are generally valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using forward exchange rates quoted by independent pricing services.
Swaps are marked-to-market daily based upon values from third party vendors or quotations from market makers to the extent available. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
The Board has delegated to the Equities, Fixed Income, and Multi-Asset Valuation Committee ("VC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The VC is comprised of representatives of management. The VC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the VC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the VC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances; securities of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than
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valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US GAAP requires disclosure regarding the various inputs that are used in determining the value of each Fund's investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Funds' own assumptions in determining the fair value of investments.
A fair value hierarchy table has been included near the end of each Fund's Portfolio of investments.
Investments
Real estate investment trusts: Certain Funds may invest in real estate investment trusts ("REITs"). Distributions from a REIT are initially recorded as dividend income and may subsequently be recharacterized by the REIT at the end of its tax year as a return of capital and/or capital gains. The Fund estimates the character of dividends received from REITs for financial reporting purposes based on the distribution history of each REIT. Once actual distribution characterizations are made available by the REITs, typically after calendar year end, the Fund updates its accounting and/or tax books and records.
Securities traded on to-be-announced basis: Certain Funds may from time to time purchase, or short sell, securities on a to-be-announced ("TBA") basis. In a TBA transaction, the Fund commits to purchasing or selling securities for which all specific information is not yet known at the time of the trade, particularly the face amount and maturity date of the underlying securities. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, US government securities or other liquid securities are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations, and their current value is determined in the same manner as for other securities.
Mortgage-backed securities: Certain Funds may invest in mortgage-backed securities ("MBS"), representing direct or indirect interests in pools of underlying mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.
The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government.
Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but with some form of non-government credit enhancement.
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Collateralized mortgage obligations ("CMO") are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.
The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time. Prepayments on a pool of mortgage loans are influenced by a variety of economic, geographic, social and other factors. Generally, prepayments on fixed-rate mortgage loans will increase during a period of falling interest rates and decrease during a period of rising interest rates. Certain classes of CMOs and other MBS are structured in a manner that makes them extremely sensitive to changes in prepayment rates. Such classes include interest-only ("IO") and principal-only ("PO") classes. IOs are entitled to receive all or a portion of the interest, but none (or only a nominal amount) of the principal payments, from the underlying mortgage assets. If the mortgage assets underlying an IO experience greater than anticipated principal prepayments, then the total amount of interest payments allocable to the IO class, and therefore the yield to investors, generally will be reduced. Conversely, PO classes are entitled to receive all or a portion of the principal payments, but none of the interest, from the underlying mortgage assets. PO classes are purchased at substantial discounts from par, and the yield to investors will be reduced if principal payments are slower than expected.
Asset-backed securities: Certain Funds may invest in asset-backed securities ("ABS"), representing interests in pools of certain types of underlying installment loans, home equity loans, leases of various types of real and personal property and receivables from revolving lines of credit (credit cards). Such assets are securitized through the use of trusts or special purpose corporations. The yield characteristics of ABS differ from those of traditional debt securities. One such major difference is that principal may be prepaid at any time because the underlying obligations generally may be prepaid at any time. ABS may decrease in value as a result of increases in interest rates and may benefit less than other fixed-income securities from declining interest rates because of the risk of prepayment.
Short sales: UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund may engage in short sale transactions in which the Fund sells a security it does not own (or does not have the right to acquire at no added cost), in anticipation of a decline in the security's price.
The Fund must borrow the security to make delivery to the buyer. The initial amount of a short sale is recorded as a liability which is marked-to-market daily. Fluctuations in the value of this liability are recorded as unrealized appreciation or depreciation on the Statement of operations. The Fund will realize a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security, and the Fund will realize a gain if the security declines in price between those same dates. Each Fund segregates collateral, consisting of cash or liquid assets, sufficient to collateralize the market value of the investments sold short. Each Fund incurs transaction costs, including dividend expense, borrowing costs and interest expenses in connection with opening, maintaining and closing short sales. These dividends and interest are booked as an expense or liability to the Fund.
Because a Fund's loss on a short sale arises from increases in the value of the investment sold short, such loss, like the potential increase in price of the security sold short, is theoretically unlimited. The Fund's investments held long could also decline in value at the same time the value of the investment sold short increases, thereby increasing the Fund's potential for loss. There is also the risk that the counterparty to a short sale transaction may fail to honor its contract terms, causing a loss to the Fund.
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For the period ended June 30, 2018, UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund did not engage in short sale transactions.
Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's portfolio footnotes.
Derivative instruments
Purchased options: Certain Funds may purchase put and call options, including, but not limited to, options on foreign or US securities, indices, foreign currencies and options on swap agreements (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument.
The Fund pays a premium which is included 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. Purchased options are shown as portfolio holdings within the Portfolio of investments and are included in the Statement of assets and liabilities in investments of unaffiliated issuers, at value.
The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future, security or currency transaction to determine the realized gain or loss.
Option writing: Certain Funds may write (sell) put and call options, including, but not limited to, options on foreign or US securities, indices, foreign currencies and options on swap agreements (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains.
When a Fund writes a call or a put option, an amount equal to the premium received by the Fund is included in the Fund's Statement of assets and liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which a 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 a Fund has written, is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option, which a Fund has written, is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, a Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, or currency underlying the written option. Exercise of an option written by a Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
In the normal course of trading activities, the Funds trade and hold certain fair valued derivative contracts that constitute guarantees. Such contracts include written put options, where the Funds would be obligated to purchase securities at specified prices (i.e. the options are exercised by the counterparties). The maximum payout for these contracts is limited to the number of put option contracts written and the related strike prices, respectively.
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Maximum payout amounts could be offset by the subsequent sale, if any, of assets obtained via the execution of a payout event. At June 30, 2018, UBS Total Return Bond Fund had maximum payout amounts of approximately $1,000,000 relating to written put option contracts.
Futures contracts: Certain Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realized gains. Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference asset, such as a specific security or currency, at a specified price at a specified later date.
Upon entering into a futures contract, a Fund is required to deliver to a broker an amount of cash and/or US government securities equal to a certain percentage of the contract amount. This amount is known as the "initial margin". Subsequent payments, known as "variation margin", generally are made or received by a Fund, depending on the daily fluctuations in the value of the underlying futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized appreciation or depreciation on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
Using futures contracts involves various market risks, including interest rate and equity risk. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Forward foreign currency contracts: Certain Funds may enter into forward foreign currency contracts in order to expedite settlement of portfolio transactions, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Generally, a forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Non-deliverable forward foreign currency contracts are settled with the counterparty in US dollars, or another fully convertible currency, without the physical delivery of foreign currency.
Fluctuations in the value of open forward foreign currency contracts are recorded daily for book purposes as unrealized appreciation or depreciation on forward foreign currency contracts by the Funds. Realized gains and losses on forward foreign currency contracts include net gains or losses recognized by the Funds on contracts which have been sold or matured.
Risks may arise upon entering into forward foreign currency contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of foreign currencies relative to the US dollar or each other.
Swap agreements: Certain Funds may engage in swap agreements, including, but not limited to, interest rate, credit default and total return swap agreements. A Fund expects to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio's duration, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date, to gain exposure to certain markets in the most economical way possible or in an attempt to enhance income or gains.
The Funds accrue for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation or depreciation of swap agreements. Once interim payments are settled in cash, the net amount is recorded as realized gain or loss on swap agreements, in addition to realized gain or loss recorded upon the termination of swap agreements on the Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
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Certain Funds may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect themselves from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default of a security or other credit event of the referenced obligation. As a buyer, the Fund would make periodic payments to the counterparty, and the Fund would receive payments only upon the occurrence of a default or credit event. If no default or credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a default or a credit event does occur, the Fund typically would receive full notional value for the referenced obligation that may have little or no value. As a seller, the Fund would receive periodic payments from the counterparty, and the Fund would make payments only upon the occurrence of a default or a credit event. If no default or credit event occurs, the Fund will gain the periodic stream of payments it received over the term of the contract and the counterparty will lose its periodic stream of payments over the term of the contract. However, if a default or credit event occurs, the Fund typically would pay full notional value for the referenced obligation that may have little or no value. Credit default swap agreements may involve greater risks than if the Fund had invested in the referenced obligation directly and are subject to general market risk, liquidity risk and credit risk.
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a list of a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of referenced credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name's weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. A Fund may use credit default swap agreements on credit indices to hedge a portfolio of credit default swaps or bonds with a credit default swap on indices which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. Credit default swap agreements on credit indices are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality.
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swap agreements on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer's default.
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Notes to financial statements
The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement, which may exceed the amount of the value reflected on the Statement of assets and liabilities. Notional amounts of all credit default swap agreements outstanding as of the period end for which a Fund is the seller of protection are disclosed under the section "Credit default swap agreements on corporate issues—sell protection" in the Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swap agreements are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation or depreciation. Total return swap agreements are subject to general market risk, liquidity risk, counterparty risk, interest rate risk, credit risk and the risk that there may be unfavorable changes in the underlying investments or instruments.
The use of swap agreements involves investment techniques, risks, and transaction costs different from those associated with ordinary portfolio security transactions, including assumptions about market conditions, interest rates, and other applicable factors. As a result, the performance of the Fund will be different than if it had used ordinary portfolio security transactions. OTC swap agreements do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap agreement defaults and fails to consummate the transaction, the Fund's risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, the Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
Certain clearinghouses offer clearing for limited types of derivatives transactions, such as interest rate and credit default swap agreements. Centrally cleared swap agreements must be transacted through a futures commission merchant ("FCM") and cleared through a clearinghouse that serves as a central counterparty. The performance of a centrally cleared swap transaction is effectively guaranteed by a central clearinghouse, thereby reducing the Fund's exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Centrally cleared swap agreements, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
Derivatives by underlying risk: Investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of operations. Under US GAAP, investment companies do not qualify for hedge accounting. Accordingly, even though a Fund's investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under US GAAP.
The volume of derivatives as disclosed in each Fund's Portfolio of investments is representative of the volume of derivatives outstanding during the period ended June 30, 2018, except forward foreign currency contracts for UBS Total Return Bond Fund for which the volume during the period was higher than at period ended.
Swap agreements, forward foreign currency contracts, swaptions and options written entered into by the Funds may contain credit-risk related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts
132
The UBS Funds
Notes to financial statements
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, 2018 is reflected in the Statement of assets and liabilities.
At June 30, 2018, the Fund had the following derivatives categorized by underlying risk:
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 3,935,180 | $ | — | $ | — | $ | 3,935,180 | |||||||||||||
Futures contracts | 3,467 | — | — | 120,208 | 123,675 | ||||||||||||||||||
Swap agreements | — | — | 185,449 | — | 185,449 | ||||||||||||||||||
Total value | $ | 3,467 | $ | 3,935,180 | $ | 185,449 | $ | 120,208 | $ | 4,244,304 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (1,720,992 | ) | $ | — | $ | — | $ | (1,720,992 | ) | |||||||||||
Futures contracts | (144,686 | ) | — | — | (1,166,662 | ) | (1,311,348 | ) | |||||||||||||||
Swap agreements | — | — | (365,320 | ) | — | (365,320 | ) | ||||||||||||||||
Total value | $ | (144,686 | ) | $ | (1,720,992 | ) | $ | (365,320 | ) | $ | (1,166,662 | ) | $ | (3,397,660 | ) |
During the period ended June 30, 2018, net realized gains (losses) and change in net unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (2,597,979 | ) | $ | — | $ | — | $ | (2,597,979 | ) | |||||||||||
Futures contracts | (929,307 | ) | — | — | 135,927 | (793,380 | ) | ||||||||||||||||
Swap agreements | — | — | (1,596,352 | ) | — | (1,596,352 | ) | ||||||||||||||||
Total net realized gain (loss) | $ | (929,307 | ) | $ | (2,597,979 | ) | $ | (1,596,352 | ) | $ | 135,927 | $ | (4,981,711 | ) | |||||||||
Change in net unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 3,677,939 | $ | — | $ | — | $ | 3,677,939 | |||||||||||||
Futures contracts | (381,997 | ) | — | — | (1,351,346 | ) | (1,733,343 | ) | |||||||||||||||
Swap agreements | — | — | 511,708 | — | 511,708 | ||||||||||||||||||
Total change in net unrealized appreciation (depreciation) | $ | (381,997 | ) | $ | 3,677,939 | $ | 511,708 | $ | (1,351,346 | ) | $ | 2,456,304 |
Table footnotes begin on page 135.
133
The UBS Funds
Notes to financial statements
At June 30, 2018, the Fund had the following derivatives categorized by underlying risk:
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 3,827,608 | $ | — | $ | — | $ | 3,827,608 | |||||||||||||
Futures contracts | 1,265,006 | — | — | 1,049,871 | 2,314,877 | ||||||||||||||||||
Options purchased | — | — | — | 579,624 | 579,624 | ||||||||||||||||||
Swap agreements | — | — | 490,555 | — | 490,555 | ||||||||||||||||||
Total value | $ | 1,265,006 | $ | 3,827,608 | $ | 490,555 | $ | 1,629,495 | $ | 7,212,664 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (3,114,959 | ) | $ | — | $ | — | $ | (3,114,959 | ) | |||||||||||
Futures contracts | (385,235 | ) | — | — | (1,595,908 | ) | (1,981,143 | ) | |||||||||||||||
Swap agreements | — | — | (717,200 | ) | — | (717,200 | ) | ||||||||||||||||
Total value | $ | (385,235 | ) | $ | (3,114,959 | ) | $ | (717,200 | ) | $ | (1,595,908 | ) | $ | (5,813,302 | ) |
During the period ended June 30, 2018, net realized gains (losses) and change in net unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | (712,390 | ) | $ | — | $ | — | $ | (712,390 | ) | |||||||||||
Futures contracts | (2,856,878 | ) | — | — | (1,093,319 | ) | (3,950,197 | ) | |||||||||||||||
Swap agreements | — | — | 1,519,732 | — | 1,519,732 | ||||||||||||||||||
Total net realized gain (loss) | $ | (2,856,878 | ) | $ | (712,390 | ) | $ | 1,519,732 | $ | (1,093,319 | ) | $ | (3,142,855 | ) | |||||||||
Change in net unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 1,346,266 | $ | — | $ | — | $ | 1,346,266 | |||||||||||||
Futures contracts | 1,287,197 | — | — | (565,800 | ) | 721,397 | |||||||||||||||||
Options purchased | — | — | — | (665,930 | ) | (665,930 | ) | ||||||||||||||||
Swap agreements | — | — | (916,472 | ) | — | (916,472 | ) | ||||||||||||||||
Total change in net unrealized appreciation (depreciation) | $ | 1,287,197 | $ | 1,346,266 | $ | (916,472 | ) | $ | (1,231,730 | ) | $ | 485,261 |
Table footnotes begin on page 135.
134
The UBS Funds
Notes to financial statements
At June 30, 2018, the Fund had the following derivatives categorized by underlying risk:
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Futures contracts | $ | 86,338 | $ | — | $ | — | $ | — | $ | 86,338 | |||||||||||||
Forward foreign currency contracts | — | 23,002 | — | — | 23,002 | ||||||||||||||||||
Options and swaptions purchased | — | 1,578 | — | — | 1,578 | ||||||||||||||||||
Total value | $ | 86,338 | $ | 24,580 | $ | — | $ | — | $ | 110,918 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Futures contracts | $ | (49,664 | ) | $ | — | $ | — | $ | — | $ | (49,664 | ) | |||||||||||
Forward foreign currency contracts | — | (6,599 | ) | — | — | (6,599 | ) | ||||||||||||||||
Options and swaptions written | — | — | (13 | ) | — | (13 | ) | ||||||||||||||||
Total value | $ | (49,664 | ) | $ | (6,599 | ) | $ | (13 | ) | $ | — | $ | (56,276 | ) |
During the period ended June 30, 2018, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Futures contracts | $ | 26,947 | $ | — | $ | — | $ | — | $ | 26,947 | |||||||||||||
Forward foreign currency contracts | — | 7,156 | — | — | 7,156 | ||||||||||||||||||
Options and swaptions purchased | — | 12,840 | — | — | 12,840 | ||||||||||||||||||
Options and swaptions written | — | — | 8,105 | — | 8,105 | ||||||||||||||||||
Swap agreements | 41,606 | — | — | — | 41,606 | ||||||||||||||||||
$ | 68,553 | $ | 19,996 | $ | 8,105 | $ | — | $ | 96,654 | ||||||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Futures contracts | $ | (41,231 | ) | $ | — | $ | — | $ | — | $ | (41,231 | ) | |||||||||||
Forward foreign currency contracts | — | 140 | — | — | 140 | ||||||||||||||||||
Options and swaptions purchased | — | (3,905 | ) | — | — | (3,905 | ) | ||||||||||||||||
Options and swaptions written | — | — | 987 | — | 987 | ||||||||||||||||||
Swap agreements | (7,242 | ) | — | — | — | (7,242 | ) | ||||||||||||||||
Net change in appreciation (depreciation) | $ | (48,473 | ) | $ | (3,765 | ) | $ | 987 | $ | — | $ | (51,251 | ) |
1 In the Statement of assets and liabilities, options and swaptions purchased are shown within investments of unaffiliated issuers, at value, swap agreements (except centrally cleared swap agreements) are shown within outstanding swap agreements, at value, while forward foreign currency contracts are shown within unrealized appreciation on forward foreign currency contracts. Futures contracts are reported in the table above using cumulative appreciation of futures contracts and centrally cleared swap agreements are reported at value, as reported in the futures contracts and centrally cleared swap agreements tables at the end of the Portfolio of investments, respectively, but only the variation margin to be received, if any, is reported within the Statement of assets and liabilities.
135
The UBS Funds
Notes to financial statements
2 In the Statement of assets and liabilities, options written are shown within options written, at value, swap agreements (except centrally cleared swap agreements) are shown within outstanding swap agreements, at value, while forward foreign currency contracts are shown within unrealized depreciation on forward foreign currency contracts. Futures contracts are reported in the table above using cumulative depreciation of futures contracts and centrally cleared swap agreements are reported at value, as reported in the futures contracts and centrally cleared swap agreements tables at the end of the Portfolio of investments, respectively, but only the variation margin to be paid, if any, is reported within the Statement of assets and liabilities.
3 The net realized gain (loss) is shown in the Statement of operations in net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts, unless otherwise noted. The net realized gain (loss) on options purchased is shown in the Statement of operations in net realized gain (loss) on investments in unaffiliated issuers.
4 The change in net unrealized appreciation (depreciation) is shown in the Statement of operations in change in net unrealized appreciation (depreciation) on futures contracts, options written, swap agreements and forward foreign currency contracts, unless otherwise noted. The change in net unrealized appreciation (depreciation) of options purchased is shown in the Statement of operations in change in net unrealized appreciation (depreciation) on investments.
Offsetting of certain derivatives: The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. The Statement of assets and liabilities is presented gross of any netting.
At June 30, 2018, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar agreement were follows:
UBS Dynamic Alpha Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Forward foreign currency contracts | $ | 3,935,180 | $ | (1,720,992 | ) | ||||||
Futures contracts1 | 123,675 | (1,311,348 | ) | ||||||||
Swap agreements1 | 185,449 | (365,320 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | $ | 4,244,304 | $ | (3,397,660 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (308,047 | ) | 1,676,668 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 3,936,257 | $ | (1,720,992 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BB | $ | 190,999 | $ | (190,999 | ) | $ | — | $ | — | ||||||||||
CITI | 630,693 | (229,283 | ) | — | 401,410 | ||||||||||||||
CSI | 357,749 | (5,826 | ) | — | 351,923 | ||||||||||||||
GSI | 257,375 | (164,806 | ) | — | 92,569 | ||||||||||||||
JPMCB | 1,384,776 | (725,577 | ) | — | 659,199 | ||||||||||||||
MSCI | 1,113,588 | (254,517 | ) | — | 859,071 | ||||||||||||||
Total | $ | 3,935,180 | $ | (1,571,008 | ) | $ | — | $ | 2,364,172 |
136
The UBS Funds
Notes to financial statements
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
BB | $ | (322,645 | ) | $ | 190,999 | $ | — | $ | (131,646 | ) | |||||||||
BOA | (18,338 | ) | — | — | (18,338 | ) | |||||||||||||
CITI | (229,283 | ) | 229,283 | — | — | ||||||||||||||
CSI | (5,826 | ) | 5,826 | — | — | ||||||||||||||
GSI | (164,806 | ) | 164,806 | — | — | ||||||||||||||
JPMCB | (725,577 | ) | 725,577 | — | — | ||||||||||||||
MSCI | (254,517 | ) | 254,517 | — | — | ||||||||||||||
Total | $ | (1,720,992 | ) | $ | 1,571,008 | $ | — | $ | (149,984 | ) |
Table footnotes begin on page 138.
At June 30, 2018, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable MNA or similar agreement were follows:
UBS Global Allocation Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Forward foreign currency contracts | $ | 3,827,608 | $ | (3,114,959 | ) | ||||||
Futures contracts1 | 2,314,877 | (1,981,143 | ) | ||||||||
Options purchased | 579,624 | — | |||||||||
Swap agreements1 | 490,555 | (717,200 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | $ | 7,212,664 | $ | (5,813,302 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (3,385,056 | ) | 2,698,343 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 3,827,608 | $ | (3,114,959 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
CITI | $ | 1,509,820 | $ | (1,143,279 | ) | $ | — | $ | 366,541 | ||||||||||
GSI | 1,065,733 | (816,781 | ) | — | 248,952 | ||||||||||||||
JPMCB | 694,128 | (488,425 | ) | — | 205,703 | ||||||||||||||
MSCI | 557,927 | (437,354 | ) | — | 120,573 | ||||||||||||||
Total | $ | 3,827,608 | $ | (2,885,839 | ) | $ | — | $ | 941,769 |
137
The UBS Funds
Notes to financial statements
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
BB | $ | (24,495 | ) | $ | — | $ | — | $ | (24,495 | ) | |||||||||
CITI | (1,143,279 | ) | 1,143,279 | — | — | ||||||||||||||
CSI | (204,625 | ) | — | — | (204,625 | ) | |||||||||||||
GSI | (816,781 | ) | 816,781 | — | — | ||||||||||||||
JPMCB | (488,425 | ) | 488,425 | — | — | ||||||||||||||
MSCI | (437,354 | ) | 437,354 | — | — | ||||||||||||||
Total | $ | (3,114,959 | ) | $ | 2,885,839 | $ | — | $ | (229,120 | ) |
At June 30, 2018, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable MNA or similar agreement were as follows:
UBS Total Return Bond Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Forward foreign currency contracts | $ | 23,002 | $ | (6,599 | ) | ||||||
Futures contracts1 | 86,338 | (49,664 | ) | ||||||||
Options purchased | 1,578 | — | |||||||||
Swaptions written | — | (13 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of assets and liabilities | $ | 110,918 | $ | (56,276 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (87,916 | ) | 49,677 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 23,002 | $ | (6,599 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
CITI | $ | 23,002 | $ | (672 | ) | $ | — | $ | 22,330 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
CITI | $ | (672 | ) | $ | 672 | $ | — | $ | — | ||||||||||
GSI | (5,927 | ) | — | — | (5,927 | ) | |||||||||||||
Total | $ | (6,599 | ) | $ | 672 | $ | — | $ | (5,927 | ) |
1 Includes cumulative appreciation (depreciation) of futures contracts and centrally cleared swaps, at value as reported in the futures contracts and centrally cleared swap 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.
138
The UBS Funds
Notes to financial statements
Investment advisory fees and other transactions with affiliates
The Advisor, a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee, accrued daily and paid monthly, based on each Fund's respective average daily net assets in accordance with the following per annum schedule:
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $4.0 billion | $4.0 billion and over | |||||||||||||||||||||
UBS Dynamic Alpha Fund | 0.850 | % | 0.800 | % | 0.750 | % | 0.725 | % | 0.700 | % | 0.680 | % |
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $3.0 billion | $3.0 billion to $6.0 billion | $6.0 billion and over | ||||||||||||||||||||||||
UBS Global Allocation Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | 0.630 | % | 0.610 | % |
Fund | $0 to $250 mm | $250 mm to $500 mm | $500 mm to $750 mm | $750 mm to $1.0 billion | $1.0 billion and over | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 0.900 | % | 0.875 | % | 0.850 | % | 0.825 | % | 0.750 | % | |||||||||||||
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion and over | ||||||||||||||||||
UBS International Sustainable Equity Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | |||||||||||||
UBS U.S. Small Cap Growth Fund | 0.850 | 0.850 | 0.825 | 0.825 | 0.825 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 |
Fund | All assets | ||||||
UBS Municipal Bond Fund | 0.400 | % | |||||
UBS Total Return Bond Fund | 0.500 |
For UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS International Sustainable Equity Fund, UBS U.S. Sustainable Equity Fund, UBS Municipal Bond Fund and UBS Total Return Bond Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Funds' operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Dynamic Alpha Fund and UBS U.S. Small Cap Growth Fund the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) do not exceed the expense limit of each class of shares as indicated in the following table. The contractual fee waiver and/or expense reimbursement agreement for each Fund, except UBS International Sustainable Equity Fund, will remain in place through the period ending October 29, 2018. The fee waiver and/or expense reimburse-
139
The UBS Funds
Notes to financial statements
ment for UBS International Sustainable Equity Fund is irrevocable. Investment advisory fees, including the dollar amount waived or reimbursed, for the period ended June 30, 2018 were as follows:
Fund | Class A expense cap | Class C expense cap | Class P expense cap | Class P2 expense cap | Amount due to or (due from) Advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | Recoupments | |||||||||||||||||||||||||||
UBS Dynamic Alpha Fund | 1.35 | % | 2.10 | % | 1.10 | % | — | $ | 95,643 | $ | 1,017,583 | $ | (406,007 | ) | $ | — | |||||||||||||||||||
UBS Global Allocation Fund | 1.20 | 1.95 | 0.95 | — | 163,574 | 2,658,123 | (695,208 | ) | — | ||||||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | — | — | 0.40 | %* | (1,816 | ) | 22,949 | (91,910 | ) | |||||||||||||||||||||||||
UBS International Sustainable Equity Fund | 1.25 | 2.00 | 1.00 | — | 1,817 | 371,332 | (331,451 | ) | — | ||||||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.24 | 1.99 | 0.99 | — | 69,334 | 921,463 | (397,130 | ) | — | ||||||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.95 | 1.70 | 0.70 | — | (44,213 | ) | 214,234 | (337,071 | ) | — | |||||||||||||||||||||||||
UBS Municipal Bond Fund | 0.65 | 1.15 | 0.40 | — | (9,731 | ) | 510,030 | (491,680 | ) | — | |||||||||||||||||||||||||
UBS Total Return Bond Fund | 0.75 | 1.25 | 0.50 | — | 348 | 230,341 | (367,910 | ) | — |
* Effective June 22, 2018. From the period June 4, 2018 (commencement of operations) to June 21, 2018, the expense cap was 0.50%.
Each Fund, except for UBS International Sustainable Equity Fund and UBS Emerging Markets Equity Opportunity Fund Class P2, will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived or reimbursed for the period ended June 30, 2018 are subject to repayment through June 30, 2021.
At June 30, 2018, the following Funds had remaining fee waivers and expense reimbursements subject to repayment to the Advisor and respective dates of expiration as follows:
Fund | Fee waivers/ expense reimbursements subject to repayment | Expires June 30, 2019 | Expires June 30, 2020 | Expires June 30, 2021 | |||||||||||||||
UBS Dynamic Alpha Fund—Class A | $ | 284,406 | $ | 73,863 | $ | 78,717 | $ | 131,826 | |||||||||||
UBS Dynamic Alpha Fund—Class C | 140,675 | 44,827 | 39,316 | 56,532 | |||||||||||||||
UBS Dynamic Alpha Fund—Class P | 609,620 | 194,170 | 197,801 | 217,649 | |||||||||||||||
UBS Global Allocation Fund—Class A | 620,649 | 26,083 | 244,083 | 350,483 | |||||||||||||||
UBS Global Allocation Fund—Class C | 439,281 | 60,816 | 163,331 | 215,134 | |||||||||||||||
UBS Global Allocation Fund—Class P | 230,448 | — | 100,857 | 129,591 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 313,874 | 109,706 | 92,631 | 111,537 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class C | 41,159 | 13,652 | 12,605 | 14,902 | |||||||||||||||
UBS U.S. Small Cap Growth Fund—Class P | 835,307 | 274,790 | 289,826 | 270,691 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class A | 312,771 | 75,018 | 112,035 | 125,718 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class C | 63,040 | 17,727 | 23,567 | 21,746 | |||||||||||||||
UBS U.S. Sustainable Equity Fund—Class P | 533,346 | 172,060 | 171,679 | 189,607 | |||||||||||||||
UBS Municipal Bond Fund—Class A | 194,161 | 65,430 | 78,706 | 50,025 | |||||||||||||||
UBS Municipal Bond Fund—Class C | 67,280 | 22,631 | 23,093 | 21,556 | |||||||||||||||
UBS Municipal Bond Fund—Class P | 1,048,397 | 271,844 | 356,454 | 420,099 | |||||||||||||||
UBS Total Return Bond Fund—Class A | 471 | — | 1931 | 278 |
140
The UBS Funds
Notes to financial statements
Fund | Fee waivers/ expense reimbursements subject to repayment | Expires June 30, 2019 | Expires June 30, 2020 | Expires June 30, 2021 | |||||||||||||||
UBS Total Return Bond Fund—Class C | $ | 894 | $ | — | $ | 4311 | $ | 463 | |||||||||||
UBS Total Return Bond Fund—Class P | 953,723 | 42,595 | 543,959 | 367,169 |
1 For the period from September 29, 2016 (commencement of operations) through June 30, 2017.
Each Fund pays UBS AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the period ended June 30, 2018, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Dynamic Alpha Fund | $ | 4,628 | $ | 89,787 | |||||||
UBS Global Allocation Fund | 19,267 | 249,200 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 1,745 | 1,745 | |||||||||
UBS International Sustainable Equity Fund | 4,809 | 34,812 | |||||||||
UBS U.S. Small Cap Growth Fund | 7,412 | 81,306 | |||||||||
UBS U.S. Sustainable Equity Fund | 1,887 | 22,954 | |||||||||
UBS Municipal Bond Fund | 7,563 | 95,631 | |||||||||
UBS Total Return Bond Fund | 2,574 | 34,551 |
The Funds may invest in shares of certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the period ended June 30, 2018 have been included near the end of each Fund's Portfolio of investments.
During the period ended June 30, 2018, the Funds listed below paid broker commissions to affiliates of the investment advisor as detailed in the below table. These broker commissions are reflected in the Statement of assets and liabilities within investments at cost of unaffiliated issuers, and the Statement of operations within net realized gain (loss) on, and/or change in net unrealized appreciation (depreciation) on investments and/or futures contracts.
Fund | UBS Group AG | ||||||
UBS Global Allocation Fund | $ | 477 | |||||
UBS International Sustainable Equity Fund | 3,790 | ||||||
UBS U.S. Small Cap Growth Fund | 11 | ||||||
UBS U.S. Sustainable Equity Fund | 538 |
Service and distribution plans
UBS AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans (the "Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A and Class C shares. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A and Class C shares. Annual
141
The UBS Funds
Notes to financial statements
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 Dynamic Alpha Fund | 0.25 | % | 1.00 | % | |||||||
UBS Global Allocation Fund | 0.25 | 1.00 | |||||||||
UBS International Sustainable Equity Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Small Cap Growth Fund | 0.25 | 1.00 | |||||||||
UBS U.S. Sustainable Equity Fund | 0.25 | 1.00 | |||||||||
UBS Municipal Bond Fund | 0.25 | 0.75 | |||||||||
UBS Total Return Bond Fund | 0.25 | 0.75 |
UBS AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A and Class C shares. At June 30, 2018, certain Funds owed UBS AM (US) service and distribution fees, and for the period ended June 30, 2018, certain Funds were informed by UBS AM (US) that it had earned sales charges as follows:
Fund | Service and distribution fees owed | Sales charges earned by distributor | |||||||||
UBS Dynamic Alpha Fund—Class A | $ | 6,472 | $ | 2,259 | |||||||
UBS Dynamic Alpha Fund—Class C | 10,060 | — | |||||||||
UBS Global Allocation Fund—Class A | 32,970 | 17,010 | |||||||||
UBS Global Allocation Fund—Class C | 69,246 | 42 | |||||||||
UBS International Sustainable Equity Fund—Class A | 1,654 | 40,706 | |||||||||
UBS International Sustainable Equity Fund—Class C | 2,542 | 13 | |||||||||
UBS U.S. Small Cap Growth Fund—Class A | 5,346 | 12,556 | |||||||||
UBS U.S. Small Cap Growth Fund—Class C | 2,979 | — | |||||||||
UBS U.S. Sustainable Equity Fund—Class A | 2,201 | 1,450 | |||||||||
UBS U.S. Sustainable Equity Fund—Class C | 1,389 | — | |||||||||
UBS Municipal Bond Fund—Class A | 1,827 | 13,019 | |||||||||
UBS Municipal Bond Fund—Class C | 404 | 911 | |||||||||
UBS Total Return Bond Fund—Class A | 10 | — | |||||||||
UBS Total Return Bond Fund—Class C | 53 | — |
Transfer agency and related services fees
UBS Financial Services Inc. provides certain services to the Funds pursuant to a delegation of authority from BNY Mellon Investment Servicing (US) Inc. ("BNY Mellon"), the Funds' transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the period ended June 30, 2018, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total delegated service fees as follows:
Fund | Delegated services fees earned | ||||||
UBS Dynamic Alpha Fund | $ | 32,938 | |||||
UBS Global Allocation Fund | 90,641 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 1,197 | ||||||
UBS International Sustainable Equity Fund | 5,578 | ||||||
UBS U.S. Small Cap Growth Fund | 5,865 |
142
The UBS Funds
Notes to financial statements
Fund | Delegated services fees earned | ||||||
UBS U.S. Sustainable Equity Fund | $ | 2,449 | |||||
UBS Municipal Bond Fund | 14,535 | ||||||
UBS Total Return Bond Fund | 1,193 |
Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. When loaning portfolio securities, each Fund will initially require the borrower to provide the Fund with collateral in an amount at least equal to 102% of the market value of the loaned securities with respect to domestic securities or 105% of the market value of the loaned securities with respect to foreign securities, provided that loans of "Government Securities" as defined in the 1940 Act may be collateralized at 100%. Thereafter, collateral will generally be maintained in an amount at least equal to 102% of the value of the securities loaned with respect to domestic securities, 105% of the value of the securities loaned with respect to foreign securities, or 100% of the value of the securities loaned with respect to "Government Securities." Occasionally, for certain securities, the market value of the collateral may fall below the collateral amount stated above by a de minimis amount for a period of time. However, at no time will the market value of the collateral fall below the market value of the loaned securities with respect to domestic securities or 102% of the value of the loaned securities with respect to foreign securities.
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. Each Fund receives compensation for lending its securities from interest or dividends earned on the cash, US government or government agency securities or, under certain conditions, bank letters of credit held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. Cash collateral received is invested in State Street Navigator Securities Lending Government Money Market Portfolio, which is included in each Fund's Portfolio of investments. State Street Bank and Trust Company serves as the Funds' lending agent.
At June 30, 2018, the Funds did not have any securities on loan.
Bank line of credit
The Funds participate with other funds managed by UBS AM in a $125 million committed credit facility (the "Committed Credit Facility") with State Street Bank and Trust Company. The Committed Credit Facility is to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of a participating Fund at the request of shareholders and other temporary or emergency purposes.
Interest on amounts borrowed is calculated based on the prevailing rates in effect at the time of borrowing. Each Fund covered by the Committed Credit Facility has agreed to pay commitment fees on the average daily balance of the Committed Credit Facility not utilized. Commitment fees have been allocated among the Funds in the Committed Credit Facility as follows: 50% of the allocation is based on the relative asset size of Funds and the other 50% of the allocation is based on utilization. For the period ended June 30, 2018, the Funds had no borrowings under the Committed Credit Facility.
Commission recapture program
Certain Funds participate in a brokerage commission recapture program. These Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. For the period ended June 30, 2018, the following Funds
143
The UBS Funds
Notes to financial statements
recorded recaptured commissions which are reflected in the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS Global Allocation Fund | $ | 122 | |||||
UBS U.S. Small Cap Growth Fund | 21,559 | ||||||
UBS U.S. Sustainable Equity Fund | 785 |
Purchases and sales of securities
For the period ended June 30, 2018, aggregate purchases and sales of portfolio securities, excluding short-term securities, were as follows:
Fund | Purchases | Sales | |||||||||
UBS Dynamic Alpha Fund | $ | 18,653,227 | $ | 62,360,674 | |||||||
UBS Global Allocation Fund | 138,137,718 | 228,805,193 | |||||||||
UBS Emerging Markets Equity Opportunity Fund* | 87,795,024 | — | |||||||||
UBS International Sustainable Equity Fund | 54,999,624 | 19,223,449 | |||||||||
UBS U.S. Small Cap Growth Fund | 71,623,167 | 86,318,847 | |||||||||
UBS U.S. Sustainable Equity Fund | 50,241,271 | 54,377,801 | |||||||||
UBS Municipal Bond Fund | 47,181,971 | 45,231,886 | |||||||||
UBS Total Return Bond Fund | 107,117,990 | 113,295,715 |
* Commenced operations on June 4, 2018.
Shares of beneficial interest
There is an unlimited number of $0.001 par value shares of beneficial interest authorized. Transactions in shares of beneficial interest for each of the Funds for the period ended June 30, 2018 were as follows:
UBS Dynamic Alpha Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 31,316 | $ | 204,659 | 9,602 | $ | 58,365 | 442,351 | $ | 2,955,988 | ||||||||||||||||||
Shares repurchased | (1,904,131 | ) | (12,419,160 | ) | (846,800 | ) | (5,135,444 | ) | (10,476,773 | ) | (70,241,614 | ) | |||||||||||||||
Net decrease | (1,872,815 | ) | $ | (12,214,501 | ) | (837,198 | ) | $ | (5,077,079 | ) | (10,034,422 | ) | $ | (67,285,626 | ) |
UBS Global Allocation Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 289,406 | $ | 3,564,575 | 28,848 | $ | 341,578 | 409,046 | $ | 5,029,324 | ||||||||||||||||||
Shares repurchased | (2,359,162 | ) | (28,667,203 | ) | (1,571,007 | ) | (18,660,574 | ) | (1,007,646 | ) | (12,508,312 | ) | |||||||||||||||
Dividends reinvested | 179,487 | 2,178,965 | 46,140 | 547,419 | 81,201 | 1,006,085 | |||||||||||||||||||||
Net increase (decrease) | (1,890,269 | ) | $ | (22,923,663 | ) | (1,496,019 | ) | $ | (17,771,577 | ) | (517,399 | ) | $ | (6,472,903 | ) |
144
The UBS Funds
Notes to financial statements
UBS Emerging Markets Equity Opportunity Fund*
Class P2 | |||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Shares sold | 10,035,301 | $ | 94,963,376 | ||||||||||||||||||||||||
Shares repurchased | (2,851 | ) | (26,410 | ) | |||||||||||||||||||||||
Net increase | 1,0,032,450 | $ | 94,936,966 |
* Commenced operations on June 4, 2018.
UBS International Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 196,951 | $ | 2,054,040 | 102,906 | $ | 1,044,928 | 4,773,953 | $ | 50,967,066 | ||||||||||||||||||
Shares repurchased | (1,064,788 | ) | (10,673,023 | ) | (16,388 | ) | (170,155 | ) | (460,563 | ) | (4,898,577 | ) | |||||||||||||||
Dividends reinvested | 6,904 | 73,043 | 1,637 | 16,928 | 37,265 | 395,005 | |||||||||||||||||||||
Net increase (decrease) | (860,933 | ) | $ | (8,545,940 | ) | 88,155 | $ | 891,701 | 4,350,655 | $ | 46,463,494 |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 290,435 | $ | 5,750,755 | 14,650 | $ | 247,378 | 557,112 | $ | 12,279,415 | ||||||||||||||||||
Shares repurchased | (595,980 | ) | (11,835,852 | ) | (88,717 | ) | (1,456,115 | ) | (786,334 | ) | (17,089,357 | ) | |||||||||||||||
Dividends reinvested | 291,339 | 5,232,441 | 65,635 | 934,650 | 803,594 | 15,911,159 | |||||||||||||||||||||
Net increase (decrease) | (14,206 | ) | $ | (852,656 | ) | (8,432 | ) | $ | (274,087 | ) | 574,372 | $ | 11,101,217 |
UBS U.S. Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 15,561 | $ | 523,438 | 7,139 | $ | 232,242 | 29,771 | $ | 994,129 | ||||||||||||||||||
Shares repurchased | (89,463 | ) | (2,989,898 | ) | (21,726 | ) | (698,276 | ) | (70,821 | ) | (2,388,437 | ) | |||||||||||||||
Dividends reinvested | 1,343 | 44,336 | — | — | 3,057 | 101,176 | |||||||||||||||||||||
Net decrease | (72,559 | ) | $ | (2,422,124 | ) | (14,587 | ) | $ | (466,034 | ) | (37,993 | ) | $ | (1,293,132 | ) |
UBS Municipal Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 87,495 | $ | 891,300 | 43,409 | $ | 445,022 | 3,312,184 | $ | 33,748,266 | ||||||||||||||||||
Shares repurchased | (1,225,823 | ) | (12,579,549 | ) | (137,287 | ) | (1,392,979 | ) | (2,764,240 | ) | (28,033,046 | ) | |||||||||||||||
Dividends reinvested | 15,594 | 158,836 | 4,802 | 48,795 | 161,035 | 1,635,604 | |||||||||||||||||||||
Net increase (decrease) | (1,122,734 | ) | $ | (11,529,413 | ) | (89,076 | ) | $ | (899,162 | ) | 708,979 | $ | 7,350,824 |
145
The UBS Funds
Notes to financial statements
UBS Total Return Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 8,147 | $ | 118,949 | 3,138 | $ | 46,135 | 710 | $ | 10,588 | ||||||||||||||||||
Shares repurchased | (3,666 | ) | (54,433 | ) | (1,738 | ) | (26,088 | ) | (542,478 | ) | (8,047,420 | ) | |||||||||||||||
Dividends reinvested | 65 | 950 | 56 | 815 | 63,417 | 937,087 | |||||||||||||||||||||
Net increase (decrease) | 4,546 | $ | 65,466 | 1,456 | $ | 20,862 | (478,351 | ) | $ | (7,099,745 | ) |
For the period ended June 30, 2017, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Dynamic Alpha Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 324,115 | $ | 2,048,589 | 22,260 | $ | 131,381 | 616,014 | $ | 3,963,509 | ||||||||||||||||||
Shares repurchased | (4,246,201 | ) | (26,813,692 | ) | (1,863,321 | ) | (10,990,127 | ) | (7,018,203 | ) | (45,473,074 | ) | |||||||||||||||
Dividends reinvested | — | — | — | — | — | — | |||||||||||||||||||||
Net decrease | (3,922,086 | ) | $ | (24,765,103 | ) | (1,841,061 | ) | $ | (10,858,746 | ) | (6,402,189 | ) | $ | (41,509,565 | ) |
UBS Global Allocation Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 809,815 | $ | 8,846,203 | 26,726 | $ | 284,483 | 308,851 | $ | 3,505,109 | ||||||||||||||||||
Shares repurchased | (4,258,751 | ) | (46,378,135 | ) | (2,964,452 | ) | (31,354,216 | ) | (3,285,596 | ) | (37,526,950 | ) | |||||||||||||||
Dividends reinvested | 318,584 | 3,373,805 | 103,791 | 1,073,201 | 165,115 | 1,784,889 | |||||||||||||||||||||
Net decrease | (3,130,352 | ) | $ | (34,158,127 | ) | (2,833,935 | ) | $ | (29,996,532 | ) | (2,811,630 | ) | $ | (32,236,952 | ) |
UBS International Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 1,084,582 | $ | 9,431,602 | 12,501 | $ | 107,705 | 446,870 | $ | 3,973,525 | ||||||||||||||||||
Shares repurchased | (92,917 | ) | (825,993 | ) | (96,847 | ) | (811,317 | ) | (427,874 | ) | (3,702,810 | ) | |||||||||||||||
Dividends reinvested | 12,031 | 99,137 | 3,112 | 25,111 | 41,673 | 344,224 | |||||||||||||||||||||
Net increase (decrease) | 1,003,696 | $ | 8,704,746 | (81,234 | ) | $ | (678,501 | ) | 60,669 | $ | 614,939 |
UBS U.S. Large Cap Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 115,398 | $ | 3,309,668 | 3,738 | $ | 99,051 | 16,513 | $ | 494,831 | ||||||||||||||||||
Shares repurchased | (121,919 | ) | (3,371,576 | ) | (23,886 | ) | (655,577 | ) | (80,006 | ) | (2,313,002 | ) | |||||||||||||||
Dividends reinvested | 3,244 | 92,024 | 167 | 4,560 | 6,661 | 189,504 | |||||||||||||||||||||
Net increase (decrease) | (3,277 | ) | $ | 30,116 | (19,981 | ) | $ | (551,966 | ) | (56,832 | ) | $ | (1,628,667 | ) |
146
The UBS Funds
Notes to financial statements
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 332,360 | $ | 6,657,203 | 12,103 | $ | 206,614 | 1,017,424 | $ | 22,030,790 | ||||||||||||||||||
Shares repurchased | (662,420 | ) | (13,149,173 | ) | (79,327 | ) | (1,330,303 | ) | (4,744,999 | ) | (105,130,446 | ) | |||||||||||||||
Dividends reinvested | 42,131 | 843,036 | 7,412 | 125,480 | 196,954 | 4,244,367 | |||||||||||||||||||||
Net decrease | (287,929 | ) | $ | (5,648,934 | ) | (59,812 | ) | $ | (998,209 | ) | (3,530,621 | ) | $ | (78,855,289 | ) |
UBS Total Return Bond Fund
Class A1 | Class C1 | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 3,089 | $ | 45,442 | 7,648 | $ | 114,229 | 12,187 | $ | 185,609 | ||||||||||||||||||
Shares repurchased | (186 | ) | (2,759 | ) | (4,805 | ) | (70,673 | ) | (5,145,916 | ) | (78,063,500 | ) | |||||||||||||||
Dividends reinvested | 24 | 362 | 59 | 863 | 90,987 | 1,363,425 | |||||||||||||||||||||
Redemption fees | — | — | — | — | — | 38,529 | |||||||||||||||||||||
Net increase (decrease) | 2,927 | $ | 43,045 | 2,902 | $ | 44,419 | (5,042,742 | ) | $ | (76,475,937 | ) |
1 For the period from September 29, 2016 (commencement of operations) through June 30, 2017.
UBS Municipal Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 949,490 | $ | 9,859,344 | 141,161 | $ | 1,453,294 | 6,020,944 | $ | 61,444,005 | ||||||||||||||||||
Shares repurchased | (599,513 | ) | (6,045,175 | ) | (164,230 | ) | (1,663,573 | ) | (4,801,298 | ) | (48,657,125 | ) | |||||||||||||||
Dividends reinvested | 24,923 | 253,441 | 5,985 | 60,709 | 149,567 | 1,521,104 | |||||||||||||||||||||
Net increase (decrease) | 374,900 | $ | 4,067,610 | (17,084 | ) | $ | (149,570 | ) | 1,369,213 | $ | 14,307,984 |
Redemption fees
The Board of Trustees approved a temporary redemption fee of 2.00% following the reorganization of Fort Dearborn Income Securities, Inc. with UBS Total Return Bond Fund. The temporary redemption fee was paid to the UBS Total Return Bond Fund and was in effect until August 22, 2016.
The redemption fees retained by the Funds are disclosed in the Statement of changes in net assets. For the period ended June 30, 2018, redemption fee represented less than $0.005 per share.
Federal tax status
It is each Fund's policy to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, each Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
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The UBS Funds
Notes to financial statements
The tax character of distributions paid during the fiscal years ended June 30, 2018 and June 30, 2017 was as follows:
2018 | |||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from net long-term capital gains | Total distributions paid | |||||||||||||||
UBS Global Allocation Fund | $ | — | $ | 4,090,862 | $ | — | $ | 4,090,862 | |||||||||||
UBS International Sustainable Equity Fund | — | 515,646 | — | 515,646 | |||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 2,899,291 | 20,871,646 | 23,770,937 | |||||||||||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | — | 153,050 | — | 153,050 | |||||||||||||||
UBS Municipal Bond Fund | 2,305,211 | 887 | — | 2,306,098 | |||||||||||||||
UBS Total Return Bond Fund | — | 1,216,036 | — | 1,216,036 |
2017 | |||||||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from net long-term gains | Return of capital | Total distributions paid | ||||||||||||||||||
UBS Global Allocation Fund | $ | — | $ | 6,820,295 | $ | — | $ | — | $ | 6,820,295 | |||||||||||||
UBS International Sustainable Equity Fund | — | 504,602 | — | — | 504,602 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 212,094 | 5,277,977 | — | 5,490,071 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 299,578 | — | — | 299,578 | ||||||||||||||||||
UBS Municipal Bond Fund | 2,000,918 | 83,331 | 214,169 | — | 2,298,418 | ||||||||||||||||||
UBS Total Return Bond Fund | — | 1,761,038 | — | 19,947 | 1,780,985 |
For federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments, including derivatives, held at June 30, 2018 were as follows:
Fund | Cost of investments | Gross unrealized appreciation | Gross unrealized depreciation | Net unrealized appreciation (depreciation) on investments | |||||||||||||||
UBS Dynamic Alpha Fund | $ | 77,873,234 | $ | 4,958,637 | $ | (18,103,547 | ) | $ | (13,144,910 | ) | |||||||||
UBS Global Allocation Fund | 284,298,563 | 29,060,543 | (18,027,560 | ) | 11,032,983 | ||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 133,835,557 | 817,324 | (1,294,557 | ) | (477,233 | ) | |||||||||||||
UBS International Sustainable Equity Fund | 76,044,657 | 4,149,429 | (3,686,419 | ) | 463,010 | ||||||||||||||
UBS U.S. Small Cap Growth Fund | 91,096,850 | 34,011,475 | (3,072,813 | ) | 30,938,662 | ||||||||||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | 29,493,101 | 1,850,574 | (1,388,651 | ) | 461,923 | ||||||||||||||
UBS Municipal Bond Fund | 122,359,263 | 484,148 | (1,743,900 | ) | (1,259,752 | ) | |||||||||||||
UBS Total Return Bond Fund | 42,410,894 | 298,679 | (1,272,572 | ) | (973,893 | ) |
The difference between book and tax basis appreciation (depreciation) on investments is primarily attributed to tax deferral of losses on wash sales, tax treatment of certain derivatives, mark-to-market of passive foreign investment companies and non-taxable special dividends.
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The UBS Funds
Notes to financial statements
At June 30, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows:
Fund | Undistributed tax-exempt income | Undistributed ordinary income | Undistributed long-term capital gains | Accumulated capital and other losses | Unrealized appreciation (depreciation) | Total | |||||||||||||||||||||
UBS Dynamic Alpha Fund | $ | — | $ | — | $ | — | $ | (75,057,362 | ) | $ | (13,181,721 | ) | $ | (88,239,083 | ) | ||||||||||||
UBS Global Allocation Fund | — | — | — | (306,800 | ) | 10,739,794 | 10,432,994 | ||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 46,572 | — | — | (634,490 | ) | (587,918 | ) | |||||||||||||||||||
UBS International Sustainable Equity Fund | — | 495,637 | — | — | 461,373 | 957,010 | |||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 3,708,261 | 4,459,856 | — | 30,938,662 | 39,106,779 | |||||||||||||||||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | — | 175,910 | — | — | 461,923 | 637,833 | |||||||||||||||||||||
UBS Municipal Bond Fund | 7,229 | — | — | (893,444 | ) | (1,259,752 | ) | (2,145,967 | ) | ||||||||||||||||||
UBS Total Return Bond Fund | — | 40,967 | — | (3,546,227 | ) | (978,351 | ) | (4,483,611 | ) |
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized by the Funds after December 22, 2010, may be carried forward indefinitely, and retain their character as short-term and/or long-term losses. These carryforwards are available as a reduction, to the extent provided in regulations, of future realized capital gains. To the extent that such losses are used to offset future net realized capital gains, it is probable these gains will not be distributed. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At June 30, 2018, the following Funds had post-enactment net capital losses that will be carried forward indefinitely, as follows:
Fund | Short-term losses | Long-term losses | Net capital losses | ||||||||||||
UBS Dynamic Alpha Fund | $ | 16,063,911 | $ | 12,318,050 | $ | 28,381,961 | |||||||||
UBS Municipal Bond Fund | 874,634 | 18,810 | 893,444 | ||||||||||||
UBS Total Return Bond Fund | 2,443,941 | 1,102,286 | 3,546,227 |
At June 30, 2018, the following Funds had pre-enactment capital loss carryforwards for federal income tax purposes available to offset future capital gains through the indicated expiration dates:
Fund | Expiration dates | ||||||
June 30, 2019 | |||||||
UBS Dynamic Alpha Fund | $ | 46,428,719 |
During the fiscal year ended June 30, 2018, the following Funds utilized capital loss carryforwards to offset current capital gains:
Fund | Amount | ||||||
UBS Dynamic Alpha Fund | $ | 1,104,248 | |||||
UBS Global Allocation Fund | 29,685,921 | ||||||
UBS International Sustainable Equity Fund | 2,960,490 | ||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | 6,741,326 |
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The UBS Funds
Notes to financial statements
During the fiscal year ended June 30, 2018, the following Funds had capital loss carryforwards expire un-utilized:
Fund | Amount | ||||||
UBS Dynamic Alpha Fund | $ | 202,927,795 | |||||
UBS Global Allocation Fund | 833,882,020 | ||||||
UBS International Sustainable Equity Fund | 5,690,042 | ||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | 73,195,633 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next taxable year. For the fiscal year ended June 30, 2018, the following Funds incurred and elected to defer qualified late year losses of the following:
Post October Capital Loss | |||||||||||||||
Fund | Late year ordinary loss | Short-term losses | Long-term losses | ||||||||||||
UBS Dynamic Alpha Fund | $ | 237,385 | $ | — | $ | — | |||||||||
UBS Global Allocation Fund | 111,619 | — | — |
At June 30, 2018, the effect of permanent "book/tax" reclassifications resulted in increases and decreases to components of the Funds' net assets as follows:
Fund | Accumulated undistributed (distributions in excess of) net investment income | Accumulated net realized gain (loss) | Beneficial interest | ||||||||||||
UBS Dynamic Alpha Fund | $ | (894,378 | ) | $ | 205,411,918 | $ | (204,517,540 | ) | |||||||
UBS Global Allocation Fund | (933,889 | ) | 830,926,581 | (829,992,692 | ) | ||||||||||
UBS Emerging Markets Equity Opportunity Fund | (47,837 | ) | 47,837 | — | |||||||||||
UBS International Sustainable Equity Fund | 1,169 | 5,688,872 | (5,690,041 | ) | |||||||||||
UBS U.S. Small Cap Growth Fund | 609,673 | (609,673 | ) | — | |||||||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | (8,332 | ) | 73,203,965 | (73,195,633 | ) | ||||||||||
UBS Total Return Bond Fund | (79,195 | ) | 79,195 | — |
These differences are primarily due to the tax treatment of foreign currency transactions, paydown gains and losses, tax character distributions, the tax treatment of certain derivatives, non-taxable special dividends, passive foreign investment company gains and losses, net operating losses, expiration of capital loss carryforwards, tax treatments of certain debt instruments and partnership adjustments.
ASC 740-10 "Income Taxes—Overall" sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken. The Funds have conducted an analysis and concluded, as of June 30, 2018, that there are no significant uncertain tax positions taken or expected to be taken that would require recognition in the financial statements. It is each Fund's policy to record any significant foreign tax exposures in the financial statements. The Funds recognize interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of operations. During the period ended June 30, 2018, the Funds did not incur any interest or penalties.
Under the applicable foreign tax laws, gains on certain securities held in certain foreign countries may be subject to taxes that will be paid by the Funds.
Each of the tax years in the four year fiscal period ended June 30, 2018 or since inception in the case of UBS Emerging Markets Equity Opportunity Fund and UBS Municipal Bond Fund, remains subject to examination by the Internal Revenue Service and state taxing authorities.
150
The UBS Funds
Notes to financial statements
Subsequent events
At the recommendation of UBS Asset Management (Americas) Inc., each Fund's investment advisor, the Board of Trustees of the Trust approved the closure of Class C of each Fund and the automatic conversion of Class C shares of each Fund into Class A shares of the same Fund (the "Conversion").
Effective on July 12, 2018 (the "Closure Date"), the Funds ceased offering Class C shares. New or additional investments into Class C shares, including investments through an automatic investment plan, were not permitted after the Closure Date.
On or about October 12, 2018 (the "Conversion Date"), all outstanding Class C shares of each Fund will be automatically converted into Class A shares of the same Fund. From the Closure Date to the Conversion Date (the "Conversion Period"), the 12b-1 distribution fees (currently, 0.50% of average net assets for UBS Municipal Bond Fund and UBS Total Return Bond Fund, and 0.75% of average net assets for all other Funds) and any contingent deferred sales charges applicable to Class C shares will be waived; 12b-1 service fees (currently, 0.25% of average net assets) will continue to be assessed. During the Conversion Period, automatic reinvestment of Class C share dividend and capital gain distributions will continue and existing shareholders may exchange their Class C shares of the Funds for Class C shares of other UBS Family Funds (as defined in the Prospectus), as permitted by existing exchange privileges. Upon the conversion of Class C shares into Class A shares, each Class C shareholder will own Class A shares having an aggregate value equal to the aggregate value of Class C shares held by that shareholder as of the close of business on the Conversion Date. Any contingent deferred sales charges applicable to Class C shares will be waived in connection with the conversion to Class A shares, and the 12b-1 service fee currently applicable to Class A shares will then apply to the converted shares. It is anticipated that the conversion of Class C shares into Class A shares will be tax-free for federal income tax purposes.
The Conversion will occur without any action being necessary from shareholders.
151
The UBS Funds
Report of independent registered public accounting firm
To the Shareholders and the Board of Trustees of The UBS Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of The UBS Funds (the "Trust"), (comprising UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS International Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund), UBS Municipal Bond Fund and UBS Total Return Bond Fund (collectively referred to as the "Funds")), including the portfolios of investments, as of June 30, 2018, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising The UBS Funds at June 30, 2018, the results of their operations and changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Funds comprising The UBS Funds | Statement of operations | Statement of changes in net assets | Financial highlights | ||||||||||||
UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS International Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund and UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | For the year ended June 30, 2018 | For each of the two years in the period ended June 30, 2018 | For each of the five years in the period ended June 30, 2018 | ||||||||||||
UBS Emerging Markets Equity Opportunity Fund | For the period from June 4, 2018 (commencement of operations) through June 30, 2018 | ||||||||||||||
UBS Municipal Bond Fund | For the year ended June 30, 2018 | For each of the two years in the period ended June 30, 2018 | For each of the three years in the period ended June 30, 2018 and the period from November 10, 2014 (commencement of operations) through June 30, 2015 | ||||||||||||
UBS Total Return Bond Fund | For the year ended June 30, 2018 | For each of the two years in the period ended June 30, 2018 | For each of the two years in the period ended June 30, 2018, for the nine months ended June 30, 2016, and for each of the two years in the period ended September 30, 2015 |
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on each of the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an
152
The UBS Funds
Report of independent registered public accounting firm (concluded)
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2018, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more UBS investment companies since 1978.
New York, New York
August 29, 2018
153
The UBS Funds
Federal tax information (unaudited)
We are required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise you in writing as to the federal tax status of distributions received by shareholders during the fiscal year. Accordingly, the amount of ordinary dividends paid that qualify for the dividends received deduction for corporate shareholders and the amount of foreign tax credit to be passed through to shareholders are as follows:
Fund | Dividends received deduction | Foreign tax credit | |||||||||
UBS Global Allocation Fund | $ | 593,763 | $ | — | |||||||
UBS International Sustainable Equity Fund | — | 133,351 | |||||||||
UBS U.S. Small Cap Growth Fund | 2,899,232 | — | |||||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | 153,050 | — | |||||||||
UBS Total Return Bond Fund | 5,205 | — |
Also, for the fiscal year ended June 30, 2018, the foreign source income for information reporting purposes for UBS International Sustainable Equity Fund was $1,175,857.
For the taxable year ended June 30, 2018, the Funds designate the amounts below as the maximum amount that may be considered qualified dividend income for individual shareholders.
Fund | Maximum amount considered qualified dividend income | ||||||
UBS Global Allocation Fund | $ | 1,863,893 | |||||
UBS International Sustainable Equity Fund | 626,361 | ||||||
UBS U.S. Small Cap Growth Fund | 2,899,232 | ||||||
UBS U.S. Sustainable Equity Fund (formerly, UBS U.S. Large Cap Equity Fund) | 153,050 | ||||||
UBS Total Return Bond Fund | 5,655 |
Shareholders should not use the above information to prepare their tax returns. Since the Funds' fiscal year end is not the calendar year end, another notification will be sent with respect to calendar year 2018. Such notification, which will reflect the amount to be used by calendar year taxpayers on their federal income tax returns, will be made in conjunction with Form 1099 DIV and will be mailed in February 2019. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in each of the Funds.
154
The UBS Funds
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Funds will file their complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-202-551 8090. Additionally, you may obtain copies of Forms N-Q from the Funds upon request by calling 1-800-647 1568.
Proxy voting policies, procedures and record
You may obtain a description of the Fund's (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Fund voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Fund directly at 1-800-647 1568, online on the Fund's Web site: www.ubs.com/ubsam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).
155
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 7 and 8, 2018 (the "Meeting"), the Board, including those Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust or UBS Asset Management (Americas) Inc. (the "Advisor") and its affiliates (together, the "Independent Trustees"), considered the continuation of the investment advisory agreements (the "Advisory Agreements") between the Trust and the Advisor for the UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS International Sustainable Equity Fund, UBS U.S. Sustainable Equity Fund, UBS U.S. Small Cap Growth Fund, UBS Total Return Bond Fund and UBS Municipal Bond Fund (each a "Fund," and together, the "Funds"). Prior to the Meeting, the Independent Trustees' counsel had sent to the Advisor a request detailing the information that the Independent Trustees wished to receive in connection with their consideration of the continuation of the Advisory Agreements. The Independent Trustees met with their independent counsel, as well as an independent consultant engaged by the Board to assist in the annual Advisory Agreement review process, on May 21, 2018, June 7, 2018 and June 8, 2018, to discuss the materials provided to them in response to the information request, including materials prepared by the Advisor, as well as reports prepared by Broadridge Financial Solutions, Inc. ("Broadridge Reports"), an independent statistical compilation company, providing comparative expense information on an actual and contractual basis and comparative performance information for the Funds. The Board also made reference to information and material that had been provided to the Independent Trustees throughout the year at 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 Asset Management (US) Inc. ("UBS AM (US)"), and sub-transfer agency services provided by UBS Financial Services Inc. ("UBS Financial Services"). In connection with the non-investment management services, the Board also considered the quarterly reports that the Advisor provides to the Board throughout the year pertaining to brokerage commissions, soft dollars, portfolio valuations, and Rule 12b-1 fees, among others. In addition, the Board considered the presentations provided with respect to distribution strategies for the Funds. After analyzing the services provided by the Advisor to each Fund, both quantitatively and qualitatively, including the impact of these
156
The UBS Funds
Board approval of investment advisory agreements (unaudited) (continued)
services on investment performance, the Board concluded that the nature, extent, and quality of services provided to each Fund were consistent with the operational requirements of each Fund, and met the needs of the Fund's shareholders.
Performance.
In evaluating the performance of each Fund, the Board analyzed the Broadridge Reports, which compared the performance of each Fund with other funds in its respective peer universe over various time periods. The Board also reviewed the memoranda provided by the Advisor providing an analysis of the markets and the Funds' performance during the past year. In reviewing the Broadridge Reports, the Board noted that the UBS Global Allocation Fund and UBS International Sustainable Equity Fund each had appeared in the top performance quintile for the one-year performance period. The Board also noted that the UBS Total Return Bond Fund had appeared in the second performance quintile of its respective performance universe for the one-year performance period, while the UBS Municipal Bond Fund and appeared in the third performance quintile of its performance universe for the one-year period. At the Board's request, the Advisor further addressed the performance data for the UBS Dynamic Alpha Fund, UBS U.S. Sustainable Equity Fund and UBS U.S. Small Cap Growth Fund, each of which had appeared in fourth performance quintile for the one-year period.
In discussing the performance of the UBS Dynamic Alpha Fund for the one-year performance period, the Advisor explained that a value bias in U.S. equities in the Fund was the major detractor from the Fund's performance. The Advisor also stated that another detractor to the Fund's performance was its long Turkish lira vs. South African rand position. The Advisor explained that the Fund just recently appointed a new lead portfolio manager that the Advisor expected to help bring the best investment ideas into the Fund.
In explaining the performance of the UBS U.S. Sustainable Equity Fund, the Advisor discussed the changes in the Fund over the past year. The Advisor noted that the comparative performance information in the Broadridge Reports for the Fund were for periods ending February 28, 2018. The Advisor reminded the Board that the Fund adopted a new strategy, the U.S. sustainable equity strategy, on October 27, 2017. The Fund's new strategy differs from its prior strategy in that the U.S. sustainable equity strategy has a narrower opportunity set, is more concentrated and employs sustainable investing screens. The Advisor then noted that the Fund's most recent performance compared to its peers was much more favorable. The Advisor noted that for the calendar year-to-date period, ending April 30, 2018, the UBS U.S. Sustainable Equity Fund was in the top quintile of its performance peer universe.
The Advisor next addressed the performance of the UBS U.S. Small Cap Growth Fund. In discussing the performance of the UBS U.S. Small Cap Growth Fund for the one-year performance period, the Advisor explained that the Fund's sector selection was the primary reason for the Fund's underperformance as compared to its peer universe. The Advisor noted that its positions with respect to the energy sector, financial sector and health care sector were the biggest detractors from performance. The Advisor noted that the Fund's more recent performance has improved. For the calendar year-to-date period, ending April 30, 2018, the UBS U.S. Small Cap Growth Fund ranked in the top third of its performance peer universe.
The Board concluded that the Advisor's explanations provided a sound basis for understanding the performance of each Fund that underperformed in comparison to its peer universe. The Board determined, after analyzing the performance data, that the performance of each Fund was acceptable as compared with relevant performance standards, given the investment strategies and risk profile of each Fund, the expectations of the shareholder base and the current market environment.
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The UBS Funds
Board approval of investment advisory agreements (unaudited) (continued)
Fund Fees and Expenses.
When considering the fees and expenses borne by each Fund, and the reasonableness of the management fees paid to the Advisor in light of the services provided to each Fund, the Board compared the fees charged by the Advisor to each Fund to fees charged to the funds in its peer group for comparable services, as provided in the Broadridge Reports, on both an actual (taking into account expense limitation arrangements) and a contractual basis (assuming all funds in the peer expense group were similar in size to the respective Fund).
In examining the Broadridge Reports, and in reviewing comparative costs, it was noted that each Fund, except the UBS U.S. Small Cap Growth Fund and UBS U.S. Sustainable Equity Fund, had a contractual fee rate higher than the Broadridge median in its respective Broadridge expense group. The Advisor noted, however, that the results of such expense comparisons showed that the actual management fee rate for each Fund, except the UBS Dynamic Alpha Fund, was lower than, or within two basis points of, the Broadridge median of the Fund's respective Broadridge expense group. In addition, the Board reviewed the actual total expenses of each Fund and noted that each Fund had total expenses that were comparable to, or lower than, the Broadridge median in its respective Broadridge expense group, except for the UBS Dynamic Alpha Fund. After reviewing the fee and expense information, the Board asked the Advisor to further discuss the fees and expenses of the UBS Dynamic Alpha Fund, which had contractual fee rates, actual fee rates and total expenses that were higher than its respective Broadridge expense group medians.
The Advisor and the Board discussed the management fee and expenses of the UBS Dynamic Alpha Fund. At the request of the Board, the Advisor explained the reasons for the less favorable comparative expenses, noting the small size of the Fund compared to many of the peer funds in its expense group. The Advisor discussed with the Board the funds that it considered to be the UBS Dynamic Alpha Fund's key competitors within its distribution channels. The Advisor noted that among these key competitors, UBS Dynamic Fund's total expenses were very competitive. The Advisor and the Board agreed to continue to monitor the Fund's peers and expenses.
The Board also received and considered information about the fee rates charged to other funds and accounts that are managed by the Advisor. After discussing the information about the other funds and accounts with the Advisor, the Board determined that the fees charged by the Advisor to the Funds were within a reasonable range, giving effect to differences in services performed for such other funds and accounts as compared to such fee rates. The Board, after reviewing all pertinent material, concluded that the management fee payable under each Fund's Advisory Agreement was fair and reasonable, both on an absolute basis and in comparison with the fees of other funds identified in its peer group.
Costs and Profitability.
The Board considered the costs of providing services to the Funds and the profitability of the Funds to the Advisor and its affiliates by reviewing the profitability analysis provided by the Advisor, including information about its fee revenues and expenses. The Board reviewed the profitability of each Fund to the Advisor and its affiliates, and the compensation that was received for providing services to each Fund. The profitability analysis, which provided information for the last three calendar years, included schedules relating to the revenue and expenses attributable to: (i) the investment advisory and administration services provided by the Advisor; (ii) the distribution and shareholder services provided by UBS AM (US) and UBS Financial Services; (iii) the transfer agency-related services provided by UBS Financial Services; and (iv) all services provided by the Advisor, UBS AM (US), and UBS Financial Services shown on a consolidated basis. In discussing the profitability analysis with the Board, the Advisor, as requested by the Board, provided the Board with a presentation on the methodology utilized in the profitability analysis. The Board noted that the methodology used for the profitability analysis provided to the Board for purposes of its annual review of the Advisory Agreements was reasonable. The Advisor also explained to the Board the reasons for an increase or decrease in profitability of each Fund from last calendar year to this calendar year.
158
The UBS Funds
Board approval of investment advisory agreements (unaudited) (concluded)
The Board also considered "fallout" or ancillary benefits to the Advisor or its affiliates as the result of their relationship with the Funds; for example, the ability to attract other clients due to the Advisor's role as investment advisor to the Funds and the research services available to the Advisor through soft dollar brokerage commissions. The Independent Trustees also considered the ancillary benefits received by the Advisor's affiliates, UBS Securities LLC and UBS Group AG, in the form of commissions for executing securities transactions for the Funds. Upon closely examining the information provided concerning the Advisor's profitability, the Board concluded that the level of profits realized by the Advisor and its affiliates with respect to each Fund, if any, was reasonable in relation to the nature and quality of the services that were provided.
Economies of Scale.
The Board also discussed whether economies of scale are realized by the Advisor with respect to each Fund as it grows larger, and the extent to which this is reflected in the level of management fees charged. The Board noted that with respect most Funds, any actual or potential economies of scale are, or will be, shared with the Fund and its shareholders through existing management fee breakpoints so that as the Fund grows in size, its effective management fee declines. The Board noted that each Fund, except the UBS Total Return Bond Fund and UBS Municipal Bond Fund, had a breakpoint schedule that provided for continuing breakpoints past the current asset level for the Fund. Based on each Fund's fees and expenses and the Advisor's profitability analysis, the Board concluded that any actual or potential economies of scale would be reasonably shared with a Fund and its shareholders.
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.
159
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; 60 PFM Financial Advisors LLC 222 N. LaSalle Street Suite 910 Chicago, IL 60601 | Trustee | Since 2004 | Ms. Cepeda is managing director at PFM Financial Advisors LLC (since 2016). Prior to joining PFM Financial Advisors LLC, from 1995 to 2016, Ms. Cepeda was founder and president of A.C. Advisory, Inc. | Ms. Cepeda is a trustee of three investment companies (consisting of 21 portfolios) for which UBS AM serves as investment advisor or manager. | Ms. Cepeda is a director (since 2012) of BMO Financial Corp. (U.S. holding company for BMO Harris Bank N.A.), director of the Mercer Funds (9 portfolios) (since 2005) and trustee of the Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios) (since 2008). | ||||||||||||||||||
John J. Murphy2; 74 268 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 trustee of three investment companies (consisting of 21 portfolios) for which UBS AM serves as investment advisor or manager. | Mr. Murphy is a director (since 2007) of the Legg Mason Equity Funds (54 portfolios) and a trustee of Morgan Stanley Smith Barney Consulting Group Capital Markets Funds (11 portfolios). |
160
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; 65 University of Chicago Booth School of Business 5807 S. Woodlawn Avenue Chicago, IL 60637 | Trustee | Since 2009 | Ms. Smith is the Boris and Irene Stern Distinguished Service Professor of Accounting in the University of Chicago Booth School of Business (since 1980). Formerly, Ms. Smith was a co-founding partner and Director of Research of Fundamental Investment Advisors, a hedge fund (co-founded in 2004, commenced operations in 2008) (from 2008 to 2010). | Ms. Smith is a trustee of three investment companies (consisting of 21 portfolios) for which UBS AM serves as investment advisor or manager. | Ms. Smith is a director (since 2000) of HNI Corporation (formerly known as HON Industries Inc.) (office furniture) and a director and member (since 2003) and also a member of the audit committee (since May 2017). Ms. Smith was also chair (until October 2015) of the audit committee of Ryder System Inc. (transportation, logistics and supply-chain management). In addition, Ms. Smith is a trustee/director (since 2000) and a member of the audit committee of the Dimensional Funds complex (128 portfolios). | ||||||||||||||||||
Frank K. Reilly; 82 Mendoza College of Business University of Notre Dame Notre Dame, IN 46556-5646 | Chairman and Trustee | Since 1992 | Mr. Reilly is the Bernard J. Hank Professor Emeritus of Finance in the Mendoza College of Business at the University of Notre Dame (since 1982), and is a Chartered Financial Analyst (CFA). | Mr. Reilly is a trustee of three investment companies (consisting of 21 portfolios) for which UBS AM serves as investment advisor or manager. | Mr. Reilly is a director (since 1994) of Discover Bank and Bank of New Castle, both banks are subsidaries of Discover Financial Services, and Mr. Reilly is chairman of the audit committee for both banks. |
161
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; 67 c/o UBS AM One North Wacker Drive Chicago, IL 60606 | Trustee | Since 2004 | Mr. Thomas is a principal with the investment firm Castle Creek Capital (since 2008) and president and sole shareholder of Mikesell Advisory Corp. (since 2009). He is the former President and CEO of Federal Home Loan Bank of Chicago (from 2004 to 2008) and of First Chicago Bancorp (from 2008 to 2011). | Mr. Thomas is a trustee of three investment companies (consisting of 21 portfolios) for which UBS AM serves as investment advisor or manager. | Mr. Thomas is a director (since 1992) and chairman of the audit committee for NorthShore University HealthSystem, a not-for-profit healthcare organization, and a director and member, (since January 2016) of the audit committee of four indirect subsidiaries of Tokio Marine Holdings, Inc., a publicly traded insurance company headquartered in Tokyo, Japan: HCC Life Insurance Co., U.S. Specialty Insurance Co., Houston Casualty Co., and Producers Agriculture Insurance Co. Mr. Thomas was previously a director (2012-October 2015), a member of the audit committee (2012-October 2015) and chairman of the Investment and Finance Committees (2014-October 2015) of HCC Insurance Holdings Inc.; and a director of First Chicago Bancorp (from 2008 to 2010) and First Chicago Bank & Trust (from 2008 to 2010). |
162
The UBS Funds
Trustee and officer information (unaudited)
Officers
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Rose Ann Bubloski*; 50 | Vice President and Assistant Treasurer | Since 2011 | Ms. Bubloski is a director (since 2012) (prior to which she was an associate director (from 2008 to 2012)) and senior manager of product control and investment support (previously named registered fund product control) of UBS Asset Manangement (Americas) Inc. and/or UBS Asset Management (US) Inc. ("UBS AM—Americas region.") She is vice president and assistant treasurer of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Mark E. Carver*; 54 | President | Since 2010 | Mr. Carver is a managing director and head of product development and management for UBS AM—Americas region (since 2008). In this role, he oversees product development and management for both wholesale and institutional businesses. He is chair of the Americas Product Structuring Committee. Mr. Carver is president of 13 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Franklin P. Dickson*; 40 | Vice President | Since December 2017 | Mr. Dickson is an associate director (since 2015) and tax compliance manager (since October 2017) (prior to which he was a product controller (from 2015 to 2017) of product control and investment support (previously named registered fund product control) of UBS AM—Americas region. From 2013 through 2015, Mr. Dickson was fund administration and compliance manager for U.S. Bancorp Fund Services, LLC, and from April 2008 through June 2013, Mr. Dickson was vice president, client service manager at BNY Mellon Asset Servicing. Mr. Dickson is a vice president of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Mark F. Kemper**; 60 | Vice President and Secretary | Since 1999 | Mr. Kemper is a managing director and general counsel of UBS AM—Americas region (since 2006 and 2004 respectively). He has been secretary of UBS AM—Americas region (since 2004) and assistant secretary of UBS Asset Management Trust Company (since 1993). Mr. Kemper is vice president and secretary of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. Mr. Kemper is employed by UBS Business Solutions US LLC (since January 2017). | ||||||||||||
Joanne M. Kilkeary*; 50 | Vice President, Treasurer and Principal Accounting Officer | Since 2006 | Ms. Kilkeary is an executive director (since 2013) (prior to which she was a director (from 2008 to 2013) and head of regulatory, tax, audit and board governance for product control and investment support (since October 2017) prior to which she was a senior manager of registered fund product control of UBS AM—Americas region (from 2004 to 2017)). Ms. Kilkeary is a vice president and assistant treasurer of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
William Lawlor**; 30 | Vice President and Assistant Secretary | Since June 2018 | Mr. Lawlor is a director and associate general counsel with UBS Business Solutions US LLC (since January 2017) and also with UBS AM—Americas region sine 2013. Prior to joining UBS AM—Americas region, Mr. Lawlor attended Kent College of Law, where he graduated in 2013. Mr. Lawlor is a vice president and assistant secretary of 7 investment companies (consisting of 65 portfolios) for which UBS AM serves as investment advisor or manager. |
163
The UBS Funds
Trustee and officer information (unaudited)
Officers (concluded)
Name, address and age | Position(s) held with Trust | Term of office1 and length of time served | Principal occupation(s) during past 5 years; number of portfolios in fund complex for which person serves as officer | ||||||||||||
Nancy D. Osborn*; 52 | Vice President and Assistant Treasurer | Since 2007 | Mrs. Osborn is a director (since 2010) (prior to which she was an associate director) and a senior manager of product control and investment support (previously named registered fund product control) of UBS AM—Americas region (since 2006). Mrs. Osborn is a vice president and assistant treasurer of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Frank S. Pluchino*; 58 | Chief Compliance Officer | Since March 2018 | Mr. Pluchino is an executive director with UBS AM—Americas region and is also the chief compliance officer of UBS Hedge Fund Solutions LLC (since 2010). Mr. Pluchino serves as chief compliance officer of 15 investment companies (consisting of 73 portfolios) for which UBS AM or one of its affiliates serves as investment advisor or manager. | ||||||||||||
Eric Sanders*; 52 | Vice President and Assistant Secretary | Since 2005 | Mr. Sanders is a director and associate general counsel with UBS Business Solutions US LLC (since January 2017) and also with UBS AM—Americas region (since 2005). Mr. Sanders is a vice president and assistant secretary of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Philip Stacey**; 33 | Vice President and Assistant Secretary | Since June 2018 | Mr. Stacey is a director and associate general counsel with UBS Business Solutions US LLC (since January 2017) and also with UBS AM—Americas region since 2015. Prior to joining UBS AM—Americas region. Mr. Stacey was a legal associate with the Chicago-based investment manager HFR Asset Management, LLC from 2009 through 2015. Mr. Stacey is a vice president and assistant secretary of 7 investment companies (consisting of 65 portfolios) for which UBS AM serves as investment advisor or manager. | ||||||||||||
Keith A. Weller*; 57 | Vice President and Assistant Secretary | Since 2004 | Mr. Weller is an executive director and senior associate general counsel with UBS Business Solutions US LLC (since January 2017) and also with UBS AM—Americas region (since 2005) and has been an attorney with affiliated entities since 1995. Mr. Weller is a vice president and assistant secretary of 10 investment companies (consisting of 68 portfolios) for which UBS AM serves as investment advisor or manager. |
* This person's business address is 1285 Avenue of the Americas, New York, NY 10019-6028
** This person's business address is One North Wacker Drive, Chicago, IL 60606.
1 Each Trustee holds office for an indefinite term. Officers of the Trust are appointed by the Trustees and serve at the pleasure of the Board.
2 Mr. Murphy is the president and owner of Murphy Capital Management Inc. ("Murphy Capital"), an investment advisory firm. Murphy Capital serves as an investment manager through certain wrap fee investment advisory programs sponsored by UBS Financial Services, Inc. ("UBSFS"), an affiliate of UBS AM (Americas). Murphy Capital is paid management fees for the clients it advises through these wrap fee programs.
164
The UBS Funds
Funds' privacy notice
This notice describes the privacy policy of the UBS Family of Funds, the PACE Funds and all closed-end funds man- aged by UBS AM (collectively, the "Funds"). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer serv- ice. Personal information, which is obtained from applications and other forms or correspondence submitted to the Funds, may include name(s), address, e-mail address, telephone number, date of birth, social security number or other tax identification number, bank account information, information about your transactions and experiences with the Funds, and any affiliation a client has with UBS Financial Services Inc. or its affiliates ("Personal Information").
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information and to follow established procedures. The Funds maintain physical, electronic and proce- dural safeguards to protect Personal Information and to comply with applicable laws and regulations. The Funds may share Personal Information with their affiliates to facilitate the servicing of accounts and for other business purposes, or as otherwise required or permitted by applicable law. The Funds may also share Personal Information with non-affiliated third parties that perform services for the Funds, such as vendors that provide data or transaction processing, computer software maintenance and development, and other administrative services. When the Funds share Personal Information with a non-affiliated third party, they will do so pursuant to a contract that includes pro- visions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. In addition to sharing information with non-affiliated third parties to facilitate the servicing of accounts and for other business purposes, the Funds may disclose Personal Information to non-affiliated third parties as oth- erwise required or permitted by applicable law. For example, the Funds may disclose Personal Information to credit bureaus or regulatory authorities to facilitate or comply with investigations; to protect against or prevent actual or potential fraud, unauthorized transactions, claims or other liabilities; or to respond to judicial or legal process, such as subpoena requests.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them (or affirmatively approve the use of Personal Information, if required by applicable law). The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice is not a part of the shareholder report.
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PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
UBS Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019
S1197
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of ethics adopted pursuant to Sarbanes-Oxley as a “Code of Conduct” to lessen the risk of confusion with its separate code of ethics adopted pursuant to Rule 17j-1 under the 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, 2018 and June 30, 2017, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $431,769 and $396,536, 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, 2018 and June 30, 2017, 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 $17,316 and $35,696, respectively.
Fees included in the audit-related category are those associated with (1) the reading and providing of comments on the 2017 and 2016 semiannual financial statements and (2) agreed upon procedures performed in connection with the review of Form N-1A during 2016.
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, 2018 and June 30, 2017, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $53,186 and $84,451, 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, 2018 and June 30, 2017, there were no fees billed by E&Y for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant.
Fees included in the all other fees category would consist of services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the registrant.
There were no “all other fees” required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above.
(e) (1) Audit Committee Pre-Approval Policies and Procedures:
The Audit Committee Charter contains the Audit Committee’s pre-approval policies and procedures. Reproduced below is an excerpt from the Audit Committee Charter regarding pre-approval policies and procedures:
To carry out its purposes, the Audit Committee shall have the following duties and powers:
(a) To pre-approve the engagement of, and to recommend to the Board the engagement, retention or termination of, the independent auditors to provide audit, review or attest services to The UBS Funds, and, in connection therewith, to review and evaluate the capabilities and independence of the auditors, and receive the auditors’ specific representations as to their independence. In evaluating the auditor’s qualifications performance and independence, the Committee must, among other things, obtain and review a report by the auditors, at least annually, describing the following items: (i) all relationships between the, independent auditors and The UBS Funds, as well as with The UBS Funds, investment advisor or any control affiliate of the investment advisor that provides ongoing services to The UBS Funds; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (iii) the audit firm’s internal quality control procedures.
(b) To pre-approve all non-audit services to be provided to The UBS Funds by the independent auditors when, without such pre-approval, the auditors would not be independent of The UBS Funds under applicable federal securities laws, rules or auditing standards.
(c) To pre-approve all non-audit services to be provided by The UBS Funds’ independent auditors to The UBS Funds’ investment advisor or to any entity, that controls, is controlled by or is under common control with The UBS Funds investment advisor (“advisor affiliate”) and that provides ongoing services to The UBS Funds when, without such pre-approval by the
Committee, the auditors would not be independent of The UBS Funds under applicable federal securities laws, rules or auditing standards.
(d) To establish, if deemed necessary or appropriate as an alternative to Committee pre-approval of services to be provided by the independent auditors as required by paragraphs (b) and (c) above, policies and procedures to permit such services to be pre-approved by other means, such as by action of a designated member or members of the Committee, subject to subsequent Committee review or oversight.
(e) To consider whether the non-audit services provided by The UBS Funds’ independent auditor to The UBS Funds investment advisor or any advisor affiliate that provides on-going services to The UBS Funds, which services were not pre-approved by the Committee, are compatible with maintaining the auditors’ independence.
Pursuant to Section (d), the Committee has delegated its responsibility to pre-approve the audit and permissible non-audit services required by paragraphs (a), (b) and (c) of Section 4, not exceeding $100,000 (excluding reasonable out-of-pocket expenses) on an annual basis to the Chairperson. All such pre-approvals will be subject to subsequent Committee review or oversight, including being reported to the full Committee on a quarterly basis at the Committee’s next regularly scheduled meeting after pre-approval. The Committee may not delegate to management its responsibility to pre-approve services to be performed by the independent auditor. Requests or applications to provide services that require specific pre-approval by the Committee or the Chairperson will be submitted by both the Fund’s independent auditors and the Fund’s Treasurer or other designated Fund officer and must include a joint statement as to whether, in their view, the request or application is consistent with U.S. Securities and Exchange Commission rules on auditor independence.
(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees:
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2018 and June 30, 2017 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, 2018 and June 30, 2017 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, 2018 and June 30, 2017 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, 2018 and June 30, 2017 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, 2018 and June 30, 2017 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, 2018 and June 30, 2017 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, 2018, 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, 2018 and June 30, 2017, the aggregate fees billed by E&Y of $332,742 and $180,147, 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:
|
| 2018 |
| 2017 |
| ||
Covered Services |
| $ | 70,502 |
| $ | 120,147 |
|
Non-Covered Services |
| $ | 262,240 |
| $ | 60,000 |
|
(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 Asset Management, One North Wacker Drive, Chicago, Illinois 60606, and indicate on the envelope “Nominating Committee.” The Qualifying Fund Shareholder’s letter should include: (i) the name and address of the Qualifying Fund Shareholder making the recommendation; (ii) the number of shares of each class and series of shares of the Trust which are owned of record and beneficially by such Qualifying Fund Shareholder and the length of time that such shares have been so owned by the Qualifying Fund Shareholder; (iii) a description of all arrangements and understandings between such Qualifying Fund Shareholder and any other person or persons (naming such person or persons) pursuant to which the recommendation is being made; (iv) the name and address of the nominee; and (v) the nominee’s resume or curriculum vitae. The Qualifying Fund Shareholder’s letter must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 13. Exhibits.
(a) (1) Code of Ethics 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
By: | /s/ Mark E. Carver |
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| Mark E. Carver |
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| President |
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Date: | September 10, 2018
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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 10, 2018
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By: | /s/ Joanne Kilkeary |
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| Joanne Kilkeary |
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| Vice President, Treasurer and Principal Accounting Officer |
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Date: | September 10, 2018
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