UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06637
The UBS Funds
(Exact name of registrant as specified in charter)
One North Wacker Drive, Chicago, IL 60606-2807
(Address of principal executive offices) (Zip code)
Keith A. Weller, Esq.
UBS Asset Management
One North Wacker Drive
Chicago, IL 60606
(Name and address of agent for service)
Copy to:
Bruce Leto, Esq.
Stradley Ronon Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
Registrant’s telephone number, including area code: 312-525 7100
Date of fiscal year end: June 30
Date of reporting period: December 31, 2019
Item 1. Reports to Stockholders.
The UBS Funds
Semiannual Report | December 31, 2019
Table of contents | Page | ||||||
President's letter | 1 | ||||||
Market commentary | 3 | ||||||
UBS Dynamic Alpha Fund | 5 | ||||||
UBS Global Allocation Fund | 20 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 32 | ||||||
UBS Engage For Impact Fund | 38 | ||||||
UBS International Sustainable Equity Fund | 45 | ||||||
UBS U.S. Small Cap Growth Fund | 53 | ||||||
UBS U.S. Sustainable Equity Fund | 61 | ||||||
UBS Municipal Bond Fund | 68 | ||||||
UBS Sustainable Development Bank Bond Fund | 75 | ||||||
UBS Total Return Bond Fund | 81 | ||||||
Explanation of expense disclosure | 95 | ||||||
Statement of assets and liabilities | 98 | ||||||
Statement of operations | 106 | ||||||
Statement of changes in net assets | 110 | ||||||
Financial highlights | 114 | ||||||
Notes to financial statements | 124 | ||||||
General information | 154 |
President's letter
February 14, 2020
Despite generally strong performance across most markets in 2019, the year was notable for persistent volatility given uncertainty regarding many geopolitical issues, trade tensions and other event risks.
The first quarter of 2019 was a historically strong quarter for most markets—bouncing back from the sharp December 2018 sell-off as the US Federal Reserve (Fed) pivoted toward a dovish stance, and the US and China outlined positive trade developments. However, the second and third quarters were more volatile as markets were whipsawed, for instance, when trade talk deterioration was swiftly followed by dovish action from the Fed to shore up confidence. What a difference a year made in the US: rate hikes, followed by rate cuts, finally settling into a cautious holding pattern.
While investors worried about slowing economic data (especially in manufacturing) and corporate earnings that continued to be relatively sluggish compared to prior years of the economic expansion, the Fed's commitment to accommodative policy and a US-China trade deal pieced together throughout the end of the year provided a strong finish.
A combination of factors, such as rising interest rates, US-China trade tension, economic slowdown, and turmoil surrounding Brexit—that had roiled markets at the end of 2018 all seemed to come to at least partial resolution in the final months of 2019, making investors more comfortable and leading markets to close out a year of record performance. In December, the US and China hammered out a 'Phase One' trade deal, the Federal Reserve committed to keeping rates low, and the Conservative party had a strong victory in the UK to allow for a path toward an organized Brexit. Investor sentiment has proven to be broadly positive as we head into the new year.
The ongoing volatility in global markets continues to underscore the importance of diversification for investors and the portfolios. Asset classes frequently have differing shorter-term trajectories as events can present a variety of challenges and opportunities across asset classes, regions, industries and risk spectrums. While emerging markets currently present an attractive risk/return opportunity due, in part, to valuations, they are generally more sensitive to an array of global factors. On the other hand, developed markets, for instance, US equities in particular, may be less fickle, but may have more full valuations. Small cap equities in the US may present opportunities, as they are generally somewhat insulated from global events, and while China assets face slowing growth, they are increasingly driven by internal economic developments and demand. We have expanded our fund range in recent years to offer our clients more investment choice to allocate their capital across funds that invest in large and small capitalization US, developed international and emerging equity markets.
Sustainability continues to be a growing and driving force for investors and markets, and remains at the heart of UBS's DNA. We have incorporated sustainable considerations across all of our investment platforms and continued to show our commitment to an issue that is at the forefront of many of our clients' goals, as was front and center at the World Economic Forum in Davos where we presented our views on the challenges presented by the 'Climate Finance Gap.' We are continuing to develop sustainable solutions for our clients in our robust lineup of UBS funds.
1
President's letter
Sincerely
Igor Lasun
President
The UBS Funds
Executive Director
UBS Asset Management (Americas) Inc.
2
The markets in review
A resilient global economy
Despite concerns that trade conflicts, Brexit uncertainties and other issues could lead to an economic contraction, the global economy continued to expand during the reporting period, albeit at a modest pace. Looking back, the US Commerce Department reported that gross domestic product ("GDP") grew at a 3.1% seasonally adjusted annualized rate during the first quarter of 2019. GDP growth was then 2.0% and 2.1% during the second and third quarters of 2019, respectively. Finally, the US Commerce Department's initial estimate for fourth quarter GDP growth in the US, released after the reporting period ended, was 2.1%.
The US Federal Reserve Board (the "Fed") proactively addressed moderating growth with a "dovish pivot" in January 2019. In particular, after raising interest rates four times in 2018, the Fed indicated it would pause from additional rate hikes. After analyzing incoming economic data for several months, the Fed pulled the trigger and lowered the federal funds rate at its meetings in July, September and October 2019. In its final meeting of the year in December 2019, the Fed indicated a pause from further actions for the time being, saying, "...participants regarded the current stance of monetary policy as likely to remain appropriate for a time as long as incoming information about the economy remained broadly consistent with the economic outlook".
From a global perspective, in its October 2019 World Economic Outlook Update, the International Monetary Fund ("IMF") said, "...the pace of global economic activity remains weak. Momentum in manufacturing activity, in particular, has weakened substantially, to levels not seen since the global financial crisis. Rising trade and geopolitical tensions have increased uncertainty about the future of the global trading system and international cooperation more generally, taking a toll on business confidence, investment decisions, and global trade. A notable shift toward increased monetary policy accommodation—through both action and communication—has cushioned the impact of these tensions on financial market sentiment and activity, while a generally resilient service sector has supported employment growth. That said, the outlook remains precarious." The IMF projects 2019 GDP growth in the eurozone, U.K. and Japan will be 1.2%, 1.2% and 0.9%, respectively. In contrast, GDP growth in these countries was 1.9%, 1.4% and 0.8%, respectively, in 2018.
Global equities rally
The global equity market posted strong returns during the reporting period. Despite times of elevated volatility, these proved to be only temporary setbacks. All told, the US equity market moved higher during five of the six months of the reporting period. Supporting the market were accommodative monetary policy, corporate profits that often exceeded expectations and, late in the year, a "Phase 1" trade agreement between the US and China. Collectively, this buoyed investor sentiment and led to generally robust risk appetite. During the six months ended December 31, 2019, the S&P 500 Index1 gained 10.92% and ended the year near an all-time high. Returns were also strong outside the US. International developed equities, as measured by the MSCI EAFE Index (net),2 returned 7.01% during the reporting period, while emerging markets equities, as measured by the MSCI Emerging Markets Index (net),3 gained 7.09% in 2019.
1 The S&P 500 Index is an unmanaged, weighted index composed of 500 widely held common stocks varying in composition and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
2 The MSCI EAFE Index (net) is an index of stocks designed to measure the investment returns of developed economies outside of North America. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
3
The markets in review
The fixed income market also moves higher
The global fixed income market also rose during the reporting period. In the US, both short- and long-term Treasury yields declined (bond yields and prices move in the opposite direction). For the six months ended December 31, 2019, the yield on the US 10-year Treasury fell from 2.00% to 1.92%. Government bond yields outside the US also generally moved lower amid moderating economic growth and accommodative monetary policies by a number of developed and emerging market central banks. The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Index,4 returned 2.45% during the reporting period. Riskier fixed income securities also rallied. High yield bonds, as measured by the ICE BofA US High Yield Cash Pay Constrained Index,5 returned 14.40% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global),6 gained 3.45%.
4 The Bloomberg Barclays US Aggregate Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The ICE BofA US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed, non-convertible, coupon-bearing US dollar denominated, below investment grade corporate debt with a term to maturity of at least one year. The index is market capitalization weighted, so that larger bond issuers have a greater effect on the index's return. However, the representation of any single bond issuer is restricted to a maximum of 2% of the total index. Investors should note that indices do not reflect the deduction of fees and expenses.
6 The J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) is an unmanaged index which is designed to track total returns for US dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans and Eurobonds. Investors should note that indices do not reflect the deduction of fees and expenses.
4
UBS Dynamic Alpha Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS Dynamic Alpha Fund (the "Fund") returned 3.16% (Class A shares returned -2.51% after the deduction of the maximum sales charge), while Class P shares returned 3.23%. For purposes of comparison, the BofA US Treasury 1-5 Year Index retuned 1.10% during the same time period, the MSCI World Index (net) returned 9.14%, and the FTSE One-Month US Treasury Bill Index returned 0.97%. (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 positive absolute return during the reporting period. Market allocation decisions generally contributed to performance. However, active currency allocation decisions modestly detracted from performance over the period.
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, in aggregate, detracted from the Fund's performance. We used a variety of equity and fixed income options, futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, contributed to performance during the reporting period.
Portfolio performance summary1
What worked:
• Overall, market allocation decisions were positive for returns.
– Within equities, performance was positively impacted by a few equity relative value trades during the reporting period. These included a long Japanese versus French equities position, which benefited from the relative outperformance of Japanese equities over French equities. The Fund also had a long FTSE 250 versus FTSE 100 position (closed in October 2019) which benefited from lowered probabilities of a hard Brexit in the second half of 2019 given that FTSE 250 stocks are more domestically focused. Elsewhere, the Fund had a preference for Chinese equities over broader emerging market equities (closed in November 2019) which was supported by the improvement in trade relations between the US and China.
– Within fixed income, a long exposure to local currency emerging market (EM) debt was beneficial. Spreads on local currency EM debt relative to US Treasuries widened substantially in 2018 in the face of higher geopolitical risks, a strengthening US dollar and higher US dollar funding rates. However, in 2019 local currency EM debt rallied along with US Treasuries, delivering strong results. Additionally, a US two-year—ten-year steepener trade initiated in October 2019 was additive for performance.
• Certain active currency positions added to results during the period.
– A long Mexican peso versus US dollar position contributed to results, supported by tailwinds such as valuation and carry.
– Long positions in the Chilean peso and Colombian peso versus the US dollar also contributed to returns over the period. Both the Colombian peso and the Chilean peso were undervalued versus the dollar, presenting attractive opportunities.
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:
• Certain market allocation decisions detracted from results.
– Within equities, performance was negatively impacted by a long China H shares versus Taiwanese equities relative value trade which we closed in September 2019. Taiwanese equities outperformed over the period as the country's technology sector attracted capital in the wake of the US-China trade war.
• Overall, active currency positions modestly detracted from returns:
– Long positions versus the US dollar in certain European currencies, such as the Swedish krona and euro, as well as the Japanese yen weighed on performance, as the US dollar appreciated against them over the period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
6
UBS Dynamic Alpha Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 3.16 | % | 7.91 | % | (0.74 | )% | 1.85 | % | |||||||||||
Class P2 | 3.23 | 8.20 | (0.51 | ) | 2.12 | ||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (2.51 | )% | 2.04 | % | (1.84 | )% | 1.27 | % | |||||||||||
ICE BofA US Treasury 1-5 Year Index3 | 1.10 | 4.20 | 1.68 | 1.73 | |||||||||||||||
MSCI World Index (net)4 | 9.14 | 27.67 | 8.74 | 9.47 | |||||||||||||||
FTSE One-Month US Treasury Bill Index5 | 0.97 | 2.20 | 1.01 | 0.53 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—2.05% and 1.38%; Class P—1.73% and 1.13%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2020, do not exceed 1.35% for Class A shares and 1.10% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The ICE BofA US Treasury 1-5 Year Index is an unmanaged index designed to track US Treasury securities with maturities between 1 and 5 years. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The MSCI World Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The FTSE One-Month US Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last one month Treasury Bill issue. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
7
UBS Dynamic Alpha Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
U.S. Treasury Bills, 1.553% due 06/18/20 | 34.9 | % | |||||
U.S. Treasury Bills, 1.903% due 03/12/20 | 7.3 | ||||||
Cooperatieve Rabobank UA, 5.500% due 06/29/20 | 0.7 | ||||||
Mirvac Group Finance Ltd., EMTN, 3.625% due 03/18/27 | 0.6 | ||||||
JPMorgan Chase & Co., 3.200% due 01/25/23 | 0.6 | ||||||
Telefonica Emisiones SA, 5.520% due 03/01/49 | 0.6 | ||||||
Tesco Property Finance 4 PLC, 5.801% due 10/13/40 | 0.5 | ||||||
Mylan N.V., 3.125% due 11/22/28 | 0.5 | ||||||
AA Bond Co. Ltd., EMTN, 2.875% due 01/31/22 | 0.5 | ||||||
Bank of America Corp., MTN, 3.875% due 08/01/25 | 0.5 | ||||||
Total | 46.7 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 71.4 | % | |||||
United Kingdom | 5.8 | ||||||
France | 3.4 | ||||||
Netherlands | 3.2 | ||||||
Australia | 1.5 | ||||||
Total | 85.3 | % |
1 The Fund's Portfolio is actively managed and its composition will vary over time.
8
UBS Dynamic Alpha Fund
Industry diversification—December 31, 2019 (unaudited)1,2
Corporate bonds | Percentage of net assets | ||||||
Advertising | 0.1 | % | |||||
Aerospace & defense | 0.2 | ||||||
Agriculture | 0.8 | ||||||
Airlines | 0.2 | ||||||
Auto manufacturers | 1.5 | ||||||
Banks | 10.7 | ||||||
Beverages | 0.3 | ||||||
Biotechnology | 0.2 | ||||||
Building materials | 0.3 | ||||||
Chemicals | 0.9 | ||||||
Commercial services | 0.6 | ||||||
Computers | 0.5 | ||||||
Diversified financial services | 0.7 | ||||||
Electric | 3.1 | ||||||
Engineering & construction | 0.5 | ||||||
Food | 0.6 | ||||||
Gas | 0.8 | ||||||
Healthcare-products | 0.1 | ||||||
Healthcare-services | 0.2 | ||||||
Insurance | 3.4 | ||||||
Internet | 0.3 | ||||||
Machinery-construction & mining | 0.1 | ||||||
Media | 1.5 | ||||||
Mining | 0.2 | ||||||
Miscellaneous manufacturers | 0.3 | ||||||
Oil & gas | 1.6 | ||||||
Pharmaceuticals | 2.4 | ||||||
Pipelines | 1.4 | ||||||
Real estate | 2.0 | ||||||
Real estate investment trusts | 0.7 | ||||||
Retail | 0.2 | ||||||
Savings & loans | 0.3 | ||||||
Semiconductors | 0.2 | ||||||
Software | 0.3 | ||||||
Telecommunications | 1.8 | ||||||
Transportation | 0.5 | ||||||
Water | 1.1 | ||||||
Total corporate bonds | 40.6 | % |
Percentage of net assets | |||||||
Mortgage-backed securities | 0.0 | %† | |||||
Non-U.S. government agency obligations | 0.1 | ||||||
U.S. treasury obligations | 42.2 | ||||||
Exchange traded funds | 6.6 | ||||||
Short-term investments | 5.1 | ||||||
Investment of cash collateral from securities loaned | 0.8 | ||||||
Total investments | 95.4 | % | |||||
Other assets in excess of liabilities | 4.6 | ||||||
Net assets | 100.0 | % |
† Amount represents less than 0.05%
1 Figures represent the breakdown of direct investments of UBS Dynamic Alpha Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
9
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds: 40.6% | |||||||||||
Australia: 1.5% | |||||||||||
APT Pipelines Ltd. 4.200%, due 03/23/252 | 15,000 | $ | 15,939 | ||||||||
Aurizon Network Pty Ltd., MTN 4.000%, due 06/21/242 | AUD | 30,000 | 22,349 | ||||||||
Ausgrid Finance Pty Ltd., MTN 3.750%, due 10/30/242 | AUD | 30,000 | 22,652 | ||||||||
Commonwealth Bank of Australia, EMTN (fixed, converts to FRN on 10/03/24), 1.936%, due 10/03/292 | EUR | 100,000 | 116,547 | ||||||||
Mirvac Group Finance Ltd., EMTN 3.625%, due 03/18/272 | 270,000 | 276,005 | |||||||||
Origin Energy Finance Ltd. 5.450%, due 10/14/212 | 45,000 | 47,315 | |||||||||
Scentre Group Trust 1/Scentre Group Trust 2 2.375%, due 04/28/212 | 45,000 | 45,069 | |||||||||
Telstra Corp. Ltd. 4.800%, due 10/12/212 | 25,000 | 26,179 | |||||||||
Westpac Banking Corp. 2.800%, due 01/11/22 | 15,000 | 15,241 | |||||||||
(fixed, converts to FRN on 09/21/27), 5.000%, due 09/21/273 | 80,000 | 80,469 | |||||||||
667,765 | |||||||||||
Belgium: 0.8% | |||||||||||
AG Insurance SA (fixed, converts to FRN on 06/30/27), 3.500%, due 06/30/472 | EUR | 100,000 | 127,313 | ||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc. 3.650%, due 02/01/26 | 35,000 | 37,283 | |||||||||
Anheuser-Busch InBev Worldwide, Inc. 4.150%, due 01/23/25 | 25,000 | 27,199 | |||||||||
4.750%, due 01/23/29 | 35,000 | 40,518 | |||||||||
RESA SA 1.000%, due 07/22/262 | EUR | 100,000 | 114,269 | ||||||||
346,582 | |||||||||||
Bermuda: 0.1% | |||||||||||
XLIT Ltd. 5.250%, due 12/15/43 | 30,000 | 38,810 | |||||||||
Canada: 0.7% | |||||||||||
Bell Canada, Inc., MTN 4.750%, due 09/29/44 | CAD | 10,000 | 8,836 | ||||||||
Canadian Natural Resources Ltd. 2.950%, due 01/15/23 | 35,000 | 35,705 | |||||||||
3.850%, due 06/01/274 | 35,000 | 37,298 | |||||||||
Cenovus Energy, Inc. 4.250%, due 04/15/27 | 35,000 | 37,041 | |||||||||
Royal Bank of Canada 1.650%, due 07/15/21 | CAD | 85,000 | 65,034 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Canada—(Concluded) | |||||||||||
Suncor Energy, Inc. 6.500%, due 06/15/38 | 45,000 | $ | 62,502 | ||||||||
TELUS Corp. 3.750%, due 01/17/25 | CAD | 15,000 | 12,108 | ||||||||
Toronto Dominion Bank/The 2.045%, due 03/08/21 | CAD | 60,000 | 46,203 | ||||||||
304,727 | |||||||||||
China: 0.1% | |||||||||||
Nexen, Inc. 6.400%, due 05/15/37 | 35,000 | 48,092 | |||||||||
Czech Republic: 0.3% | |||||||||||
NET4GAS sro, EMTN 2.500%, due 07/28/212 | EUR | 100,000 | 116,031 | ||||||||
Denmark: 0.5% | |||||||||||
Ap Moller Maersk A/S, EMTN 1.750%, due 03/16/262 | EUR | 100,000 | 116,279 | ||||||||
Danske Bank A/S, EMTN 1.375%, due 05/24/222 | EUR | 100,000 | 115,018 | ||||||||
231,297 | |||||||||||
France: 3.4% | |||||||||||
AXA SA, EMTN (fixed, converts to FRN on 05/28/29), 3.250%, due 05/28/492 | EUR | 100,000 | 127,736 | ||||||||
Banque Federative du Credit Mutuel SA, EMTN 3.000%, due 09/11/252 | EUR | 100,000 | 126,246 | ||||||||
BNP Paribas SA, EMTN 1.000%, due 04/17/242 | EUR | 100,000 | 115,557 | ||||||||
1.250%, due 03/19/252 | EUR | 100,000 | 116,923 | ||||||||
BPCE SA, EMTN 1.375%, due 03/23/262 | EUR | 100,000 | 117,881 | ||||||||
Credit Agricole SA, EMTN 1.375%, due 03/13/252 | EUR | 100,000 | 117,782 | ||||||||
Credit Logement SA 3 mo. Euribor + 1.150%, 0.755%, due 03/16/202,3,5 | EUR | 100,000 | 91,073 | ||||||||
Electricite de France SA (fixed, converts to FRN on 01/22/24), 5.625%, due 01/22/242,3 | 100,000 | 106,000 | |||||||||
SCOR SE (fixed, converts to FRN on 03/13/29), 5.250%, due 03/13/292,3 | 200,000 | 200,627 | |||||||||
TDF Infrastructure SAS 2.875%, due 10/19/222 | EUR | 100,000 | 118,787 | ||||||||
Terega SA 2.200%, due 08/05/252 | EUR | 100,000 | 122,246 | ||||||||
Unibail-Rodamco-Westfield SE (fixed, converts to FRN on 01/25/26), 2.875%, due 01/25/262,3 | EUR | 100,000 | 118,856 | ||||||||
1,479,714 |
10
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Germany: 0.6% | |||||||||||
Volkswagen International Finance N.V. 1.125%, due 10/02/232 | EUR | 100,000 | $ | 114,977 | |||||||
Series NC6, (fixed, converts to FRN on 06/27/24), 3.375%, due 06/27/242,3 | EUR | 100,000 | 119,708 | ||||||||
Volkswagen Leasing GmbH, EMTN 1.625%, due 08/15/252 | EUR | 40,000 | 46,851 | ||||||||
281,536 | |||||||||||
Guernsey: 0.3% | |||||||||||
Globalworth Real Estate Investments Ltd., EMTN 3.000%, due 03/29/252 | EUR | 100,000 | 120,399 | ||||||||
Israel: 0.3% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 20,000 | 19,694 | |||||||||
Teva Pharmaceutical Finance Netherlands II BV 1.125%, due 10/15/242 | EUR | 100,000 | 97,588 | ||||||||
Teva Pharmaceutical Finance Netherlands III BV 2.800%, due 07/21/23 | 40,000 | 37,012 | |||||||||
154,294 | |||||||||||
Italy: 0.3% | |||||||||||
Buzzi Unicem SpA 2.125%, due 04/28/232 | EUR | 100,000 | 118,319 | ||||||||
Japan: 0.1% | |||||||||||
Mitsubishi UFJ Financial Group, Inc. 2.665%, due 07/25/22 | 25,000 | 25,370 | |||||||||
Jersey: 0.6% | |||||||||||
AA Bond Co. Ltd., EMTN 2.875%, due 01/31/222 | GBP | 174,000 | 228,683 | ||||||||
HSBC Bank Capital Funding Sterling 2 LP (fixed, converts to FRN on 04/07/20), 5.862%, due 04/07/203 | GBP | 20,000 | 26,791 | ||||||||
255,474 | |||||||||||
Luxembourg: 0.5% | |||||||||||
ADO Properties SA 1.500%, due 07/26/242 | EUR | 100,000 | 110,783 | ||||||||
Allergan Funding SCS 2.125%, due 06/01/29 | EUR | 100,000 | 123,690 | ||||||||
234,473 | |||||||||||
Mexico: 1.3% | |||||||||||
Mexico City Airport Trust 5.500%, due 07/31/472 | 200,000 | 206,688 | |||||||||
Orbia Advance Corp. SAB de CV 5.500%, due 01/15/486 | 200,000 | 204,500 | |||||||||
Petroleos Mexicanos 5.500%, due 02/24/252 | EUR | 20,000 | 25,666 | ||||||||
Petroleos Mexicanos, EMTN 3.750%, due 02/21/242 | EUR | 100,000 | 119,564 | ||||||||
556,418 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
Netherlands: 3.2% | |||||||||||
Argentum Netherlands BV for Swiss Life AG (fixed, converts to FRN on 06/16/25), 4.375%, due 06/16/252,3 | EUR | 100,000 | $ | 129,977 | |||||||
ATF Netherlands BV (fixed, converts to FRN on 01/20/23), 3.750%, due 01/20/232,3 | EUR | 100,000 | 119,742 | ||||||||
Cooperatieve Rabobank UA (fixed, converts to FRN on 06/29/20), 5.500%, due 06/29/202,3 | EUR | 250,000 | 286,735 | ||||||||
Iberdrola International BV, EMTN (fixed, converts to FRN on 03/26/24), 2.625%, due 03/26/242,3 | EUR | 100,000 | 119,730 | ||||||||
ING Groep N.V., EMTN 1.125%, due 02/14/252 | EUR | 100,000 | 116,330 | ||||||||
Mylan N.V. 3.125%, due 11/22/282 | EUR | 180,000 | 229,079 | ||||||||
Redexis Gas Finance BV, EMTN 1.875%, due 04/27/272 | EUR | 100,000 | 115,325 | ||||||||
Shell International Finance BV 4.375%, due 05/11/45 | 35,000 | 41,797 | |||||||||
Volkswagen International Finance N.V. 4.125%, due 11/16/382 | EUR | 100,000 | 144,403 | ||||||||
Vonovia Finance BV (fixed, converts to FRN on 12/17/21), 4.000%, due 12/17/212,3 | EUR | 100,000 | 120,014 | ||||||||
1,423,132 | |||||||||||
Poland: 0.3% | |||||||||||
Tauron Polska Energia SA 2.375%, due 07/05/272 | EUR | 100,000 | 117,119 | ||||||||
Portugal: 0.3% | |||||||||||
Galp Gas Natural Distribuicao SA, EMTN 1.375%, due 09/19/232 | EUR | 100,000 | 116,103 | ||||||||
Singapore: 0.4% | |||||||||||
DBS Group Holdings Ltd., GMTN (fixed, converts to FRN on 09/07/21), 3.600%, due 09/07/212,3 | 200,000 | 201,250 | |||||||||
Spain: 1.5% | |||||||||||
Banco Santander SA, EMTN 3.250%, due 04/04/262 | EUR | 100,000 | 127,598 | ||||||||
4.000%, due 01/19/232 | AUD | 200,000 | 146,394 | ||||||||
Canal de Isabel II Gestion SA, EMTN 1.680%, due 02/26/252 | EUR | 100,000 | 118,197 | ||||||||
Telefonica Emisiones SA 5.520%, due 03/01/49 | 200,000 | 250,167 | |||||||||
642,356 | |||||||||||
Switzerland: 0.2% | |||||||||||
ABB Finance USA, Inc. 2.875%, due 05/08/22 | 40,000 | 40,830 | |||||||||
Glencore Funding LLC 4.875%, due 03/12/296 | 40,000 | 43,406 | |||||||||
84,236 |
11
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United Kingdom: 5.8% | |||||||||||
Anglian Water Services Financing PLC, EMTN 4.500%, due 02/22/262 | GBP | 100,000 | $ | 146,758 | |||||||
Barclays Bank PLC 9.500%, due 08/07/212 | GBP | 40,000 | 59,464 | ||||||||
Barclays PLC, EMTN (fixed, converts to FRN on 10/06/22), 2.375%, due 10/06/232 | GBP | 100,000 | 134,810 | ||||||||
(fixed, converts to FRN on 11/11/20), 2.625%, due 11/11/252 | EUR | 100,000 | 114,196 | ||||||||
BAT Capital Corp. 3.557%, due 08/15/27 | 35,000 | 35,693 | |||||||||
BAT International Finance PLC, EMTN 0.875%, due 10/13/232 | EUR | 100,000 | 114,229 | ||||||||
BUPA Finance PLC (fixed, converts to FRN on 09/16/20), 6.125%, due 09/16/203 | GBP | 20,000 | 27,287 | ||||||||
Diageo Capital PLC 3.875%, due 04/29/43 | 25,000 | 27,536 | |||||||||
HSBC Holdings PLC 5.100%, due 04/05/21 | 60,000 | 62,214 | |||||||||
Lloyds Banking Group PLC, EMTN 2.250%, due 10/16/242 | GBP | 100,000 | 136,271 | ||||||||
M&G PLC, EMTN (fixed, converts to FRN on 07/20/35), 5.000%, due 07/20/552 | GBP | 100,000 | 147,310 | ||||||||
Nationwide Building Society, EMTN (fixed, converts to FRN on 07/25/24), 2.000%, due 07/25/292 | EUR | 100,000 | 116,531 | ||||||||
Phoenix Group Holdings PLC, EMTN 4.125%, due 07/20/222 | GBP | 150,000 | 207,944 | ||||||||
Prudential PLC 5.625%, due 10/20/512 | GBP | 100,000 | 151,422 | ||||||||
Reynolds American, Inc. 4.450%, due 06/12/25 | 25,000 | 26,896 | |||||||||
5.700%, due 08/15/35 | 10,000 | 11,602 | |||||||||
Royal Bank of Scotland Group PLC 6.100%, due 06/10/23 | 40,000 | 44,014 | |||||||||
(fixed, converts to FRN on 06/25/23), 4.519%, due 06/25/24 | 200,000 | 212,332 | |||||||||
SSE PLC (fixed, converts to FRN on 09/10/20), 3.875%, due 09/10/202,3 | GBP | 100,000 | 133,453 | ||||||||
Tesco Property Finance 4 PLC 5.801%, due 10/13/402 | GBP | 136,445 | 236,461 | ||||||||
Thames Water Utilities Finance PLC, EMTN 5.125%, due 09/28/372 | GBP | 50,000 | 88,627 | ||||||||
Virgin Money UK PLC, GMTN (fixed, converts to FRN on 04/24/25), 3.375%, due 04/24/262 | GBP | 100,000 | 134,336 | ||||||||
Vodafone Group PLC 4.375%, due 02/19/43 | 15,000 | 16,123 | |||||||||
WPP Finance 2010 3.750%, due 09/19/24 | 25,000 | �� | 26,360 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
Yorkshire Water Finance PLC, EMTN (fixed, converts to FRN on 03/22/23), 3.750%, due 03/22/462 | GBP | 100,000 | $ | 137,705 | |||||||
2,549,574 | |||||||||||
United States: 17.5% | |||||||||||
Abbott Laboratories 4.900%, due 11/30/46 | 50,000 | 65,602 | |||||||||
AbbVie, Inc. 4.250%, due 11/14/284 | 35,000 | 38,663 | |||||||||
4.400%, due 11/06/42 | 25,000 | 26,979 | |||||||||
4.875%, due 11/14/48 | 35,000 | 40,080 | |||||||||
Albemarle Corp. 5.450%, due 12/01/44 | 50,000 | 57,187 | |||||||||
Allergan Funding SCS 3.450%, due 03/15/22 | 25,000 | 25,564 | |||||||||
4.750%, due 03/15/45 | 15,000 | 16,291 | |||||||||
Alphabet, Inc. 1.998%, due 08/15/26 | 60,000 | 59,636 | |||||||||
Altria Group, Inc. 4.250%, due 08/09/42 | 80,000 | 79,837 | |||||||||
4.400%, due 02/14/26 | 25,000 | 27,140 | |||||||||
5.950%, due 02/14/49 | 35,000 | 42,317 | |||||||||
Amazon.com, Inc. 2.800%, due 08/22/24 | 70,000 | 72,417 | |||||||||
American Airlines Pass-Through Trust, Series 2014-1, Class B, 4.375%, due 10/01/22 | 50,191 | 51,639 | |||||||||
American Express Co. 3.400%, due 02/27/23 | 110,000 | 114,150 | |||||||||
Amgen, Inc. 4.400%, due 05/01/45 | 25,000 | 28,064 | |||||||||
Apache Corp. 4.250%, due 01/15/44 | 60,000 | 55,196 | |||||||||
Apple, Inc. 3.850%, due 08/04/46 | 50,000 | 56,427 | |||||||||
AT&T, Inc. 3.000%, due 02/15/22 | 45,000 | 45,883 | |||||||||
4.350%, due 03/01/294 | 70,000 | 77,772 | |||||||||
4.750%, due 05/15/46 | 70,000 | 78,991 | |||||||||
5.550%, due 08/15/41 | 50,000 | 61,031 | |||||||||
Baltimore Gas & Electric Co. 3.500%, due 08/15/46 | 35,000 | 35,541 | |||||||||
Bank of America Corp. (fixed, converts to FRN on 12/20/22), 3.004%, due 12/20/23 | 90,000 | 92,169 | |||||||||
Bank of America Corp., MTN 3.875%, due 08/01/25 | 210,000 | 225,509 | |||||||||
Bristol-Myers Squibb Co. 3.875%, due 08/15/256 | 70,000 | 75,671 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.625%, due 01/15/24 | 70,000 | 72,495 | |||||||||
Burlington Northern Santa Fe LLC 5.400%, due 06/01/41 | 25,000 | 32,262 |
12
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
CF Industries, Inc. 5.150%, due 03/15/34 | 30,000 | $ | 33,525 | ||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital 4.500%, due 02/01/24 | 50,000 | 53,770 | |||||||||
5.375%, due 05/01/47 | 15,000 | 16,782 | |||||||||
Chevron Phillips Chemical Co. LLC/Chevron Phillips Chemical Co. LP 3.300%, due 05/01/236 | 120,000 | 123,511 | |||||||||
Cigna Corp. 3.400%, due 09/17/21 | 25,000 | 25,585 | |||||||||
4.375%, due 10/15/28 | 45,000 | 49,791 | |||||||||
4.900%, due 12/15/48 | 25,000 | 29,770 | |||||||||
Citigroup, Inc. 3.875%, due 10/25/23 | 130,000 | 138,049 | |||||||||
4.600%, due 03/09/26 | 30,000 | 32,998 | |||||||||
4.650%, due 07/23/48 | 70,000 | 87,276 | |||||||||
Comcast Corp. 3.950%, due 10/15/25 | 45,000 | 49,076 | |||||||||
4.150%, due 10/15/28 | 15,000 | 16,873 | |||||||||
4.700%, due 10/15/48 | 15,000 | 18,463 | |||||||||
4.750%, due 03/01/444 | 15,000 | 18,222 | |||||||||
4.950%, due 10/15/58 | 15,000 | 19,476 | |||||||||
Conagra Brands, Inc. 3.800%, due 10/22/21 | 15,000 | 15,475 | |||||||||
4.600%, due 11/01/25 | 25,000 | 27,592 | |||||||||
5.400%, due 11/01/48 | 35,000 | 42,623 | |||||||||
Consumers Energy Co. 3.250%, due 08/15/46 | 10,000 | 10,022 | |||||||||
CVS Health Corp. 2.625%, due 08/15/24 | 45,000 | 45,347 | |||||||||
3.350%, due 03/09/21 | 17,000 | 17,279 | |||||||||
4.300%, due 03/25/28 | 35,000 | 38,193 | |||||||||
5.050%, due 03/25/484 | 35,000 | 41,352 | |||||||||
5.125%, due 07/20/45 | 35,000 | 41,404 | |||||||||
Dell International LLC/EMC Corp. 5.300%, due 10/01/294,6 | 60,000 | 67,564 | |||||||||
8.350%, due 07/15/466 | 80,000 | 109,973 | |||||||||
Diamondback Energy, Inc. 3.250%, due 12/01/26 | 50,000 | 50,553 | |||||||||
Discovery Communications LLC 5.300%, due 05/15/49 | 45,000 | 53,186 | |||||||||
Dominion Energy, Inc., Series D, 2.850%, due 08/15/26 | 25,000 | 25,237 | |||||||||
Duke Energy Carolinas LLC 4.000%, due 09/30/42 | 35,000 | 38,956 | |||||||||
Eaton Corp. 4.150%, due 11/02/42 | 30,000 | 33,475 | |||||||||
Enable Midstream Partners LP 3.900%, due 05/15/247 | 25,000 | 25,592 | |||||||||
Energy Transfer Operating LP 4.500%, due 04/15/24 | 35,000 | 37,233 | |||||||||
6.000%, due 06/15/48 | 45,000 | 52,364 | |||||||||
6.050%, due 06/01/41 | 45,000 | 50,695 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
EnLink Midstream Partners LP 4.400%, due 04/01/24 | 40,000 | $ | 38,804 | ||||||||
Enterprise Products Operating LLC 4.850%, due 03/15/44 | 25,000 | 28,997 | |||||||||
ERAC USA Finance LLC 5.625%, due 03/15/426 | 35,000 | 44,304 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 15,000 | 15,658 | |||||||||
FedEx Corp. 4.550%, due 04/01/46 | 15,000 | 15,385 | |||||||||
Ford Motor Credit Co. LLC, EMTN 3.021%, due 03/06/24 | EUR | 100,000 | 118,570 | ||||||||
Freeport-McMoRan, Inc. 3.875%, due 03/15/23 | 70,000 | 71,276 | |||||||||
GE Capital International Funding Co. Unlimited Co. 4.418%, due 11/15/35 | 200,000 | 212,955 | |||||||||
General Electric Co. 4.125%, due 10/09/42 | 3,000 | 3,082 | |||||||||
General Electric Co., GMTN 3.150%, due 09/07/22 | 30,000 | 30,655 | |||||||||
General Electric Co., MTN 4.375%, due 09/16/20 | 30,000 | 30,464 | |||||||||
General Motors Financial Co., Inc. 4.350%, due 04/09/25 | 90,000 | 96,380 | |||||||||
Gilead Sciences, Inc. 4.750%, due 03/01/46 | 25,000 | 29,976 | |||||||||
4.800%, due 04/01/44 | 15,000 | 17,977 | |||||||||
Goldman Sachs Group, Inc./The 5.150%, due 05/22/45 | 40,000 | 49,033 | |||||||||
Goldman Sachs Group, Inc./The, EMTN 1.625%, due 07/27/262 | EUR | 50,000 | 59,760 | ||||||||
2.000%, due 07/27/232 | EUR | 120,000 | 142,950 | ||||||||
2.000%, due 11/01/282 | EUR | 35,000 | 43,161 | ||||||||
Hartford Financial Services Group, Inc./The 4.300%, due 04/15/43 | 35,000 | 38,748 | |||||||||
4.400%, due 03/15/48 | 35,000 | 40,216 | |||||||||
Healthpeak Properties, Inc. 3.875%, due 08/15/24 | 35,000 | 37,206 | |||||||||
Home Depot, Inc./The 4.875%, due 02/15/44 | 30,000 | 38,071 | |||||||||
Humana, Inc. 3.125%, due 08/15/29 | 50,000 | 50,932 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 45,000 | 46,164 | |||||||||
JPMorgan Chase & Co. 3.200%, due 01/25/23 | 260,000 | 268,199 | |||||||||
3.625%, due 12/01/27 | 60,000 | 63,323 | |||||||||
(fixed, converts to FRN on 10/15/29), 2.739%, due 10/15/30 | 100,000 | 99,857 | |||||||||
Kinder Morgan, Inc. 3.150%, due 01/15/23 | 35,000 | 35,824 | |||||||||
5.625%, due 11/15/236 | 35,000 | 38,709 |
13
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Kraft Heinz Foods Co. 4.875%, due 02/15/256 | 35,000 | $ | 35,961 | ||||||||
5.000%, due 06/04/42 | 45,000 | 47,965 | |||||||||
Kroger Co./The 3.700%, due 08/01/27 | 50,000 | 53,483 | |||||||||
3.875%, due 10/15/46 | 15,000 | 14,651 | |||||||||
4.650%, due 01/15/48 | 15,000 | 16,385 | |||||||||
Liberty Mutual Group, Inc. 4.569%, due 02/01/296 | 25,000 | 27,901 | |||||||||
Lincoln National Corp. 3.800%, due 03/01/28 | 70,000 | 74,531 | |||||||||
Lowe's Cos., Inc. 4.250%, due 09/15/44 | 40,000 | 43,019 | |||||||||
Marathon Oil Corp. 3.850%, due 06/01/25 | 35,000 | 37,031 | |||||||||
Merck & Co., Inc. 3.700%, due 02/10/45 | 15,000 | 16,544 | |||||||||
Microsoft Corp. 2.400%, due 08/08/26 | 25,000 | 25,304 | |||||||||
3.500%, due 11/15/42 | 20,000 | 21,640 | |||||||||
3.700%, due 08/08/46 | 50,000 | 56,376 | |||||||||
Monongahela Power Co. 5.400%, due 12/15/436 | 25,000 | 32,257 | |||||||||
Morgan Stanley 6.375%, due 07/24/42 | 15,000 | 22,057 | |||||||||
Morgan Stanley, GMTN 2.500%, due 04/21/21 | 115,000 | 115,871 | |||||||||
4.000%, due 07/23/25 | 85,000 | 91,908 | |||||||||
4.350%, due 09/08/26 | 50,000 | 54,641 | |||||||||
Motiva Enterprises LLC 6.850%, due 01/15/406 | 30,000 | 36,200 | |||||||||
MPLX LP 4.250%, due 12/01/276 | 30,000 | 31,551 | |||||||||
5.200%, due 03/01/47 | 35,000 | 37,739 | |||||||||
National Rural Utilities Cooperative Finance Corp. 3.700%, due 03/15/29 | 15,000 | 16,390 | |||||||||
NBCUniversal Media LLC 4.375%, due 04/01/21 | 60,000 | 61,870 | |||||||||
Noble Energy, Inc. 3.850%, due 01/15/28 | 20,000 | 21,109 | |||||||||
Oncor Electric Delivery Co. LLC 3.700%, due 11/15/28 | 35,000 | 38,263 | |||||||||
PacifiCorp 6.000%, due 01/15/39 | 35,000 | 47,886 | |||||||||
Philip Morris International, Inc. 4.250%, due 11/10/44 | 25,000 | 27,561 | |||||||||
Phillips 66 4.650%, due 11/15/34 | 25,000 | 29,327 | |||||||||
Phillips 66 Partners LP 4.680%, due 02/15/45 | 10,000 | 10,826 | |||||||||
PPL Capital Funding, Inc. 4.700%, due 06/01/43 | 60,000 | 66,916 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
QUALCOMM, Inc. 4.300%, due 05/20/47 | 30,000 | $ | 34,311 | ||||||||
Sempra Energy 6.000%, due 10/15/39 | 35,000 | 45,302 | |||||||||
Southern California Edison Co. 2.850%, due 08/01/294 | 45,000 | 44,892 | |||||||||
4.000%, due 04/01/47 | 45,000 | 47,230 | |||||||||
Southern Co./The 3.250%, due 07/01/26 | 35,000 | 36,425 | |||||||||
4.400%, due 07/01/46 | 15,000 | 16,586 | |||||||||
Southwestern Electric Power Co. 6.200%, due 03/15/40 | 50,000 | 65,732 | |||||||||
Swiss Re Treasury U.S. Corp. 4.250%, due 12/06/426 | 30,000 | 34,568 | |||||||||
Teachers Insurance & Annuity Association of America 4.900%, due 09/15/446 | 30,000 | 36,791 | |||||||||
Time Warner Cable LLC 4.500%, due 09/15/42 | 25,000 | 25,492 | |||||||||
5.000%, due 02/01/20 | 45,000 | 45,084 | |||||||||
Truist Financial Corp. 2.700%, due 01/27/22 | 45,000 | 45,601 | |||||||||
TWDC Enterprises 18 Corp., MTN 1.850%, due 07/30/26 | 10,000 | 9,817 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 20,000 | 21,707 | |||||||||
United Airlines Pass-Through Trust 3.650%, due 01/07/26 | 43,576 | 44,246 | |||||||||
United Technologies Corp. 3.350%, due 08/16/21 | 30,000 | 30,712 | |||||||||
3.950%, due 08/16/25 | 25,000 | 27,251 | |||||||||
4.625%, due 11/16/48 | 15,000 | 18,737 | |||||||||
Valero Energy Corp. 4.900%, due 03/15/45 | 50,000 | 57,575 | |||||||||
Verizon Communications, Inc., 3.376%, due 02/15/25 | 25,000 | 26,455 | |||||||||
3.875%, due 02/08/29 | 15,000 | 16,541 | |||||||||
5.250%, due 03/16/37 | 15,000 | 18,796 | |||||||||
Series 20Y, 2.875%, due 01/15/38 | EUR | 100,000 | 135,859 | ||||||||
Virginia Electric & Power Co., Series C, 4.000%, due 11/15/46 | 25,000 | 27,505 | |||||||||
VMware, Inc. 3.900%, due 08/21/27 | 40,000 | 41,825 | |||||||||
Walt Disney Co./The 6.200%, due 12/15/34 | 100,000 | 140,162 | |||||||||
Wells Fargo & Co. 2.100%, due 07/26/21 | 50,000 | 50,071 | |||||||||
3.069%, due 01/24/23 | 60,000 | 61,232 | |||||||||
Wells Fargo & Co., MTN 2.625%, due 07/22/22 | 70,000 | 71,011 | |||||||||
Williams Cos., Inc./The 4.300%, due 03/04/24 | 35,000 | 37,325 |
14
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
4.550%, due 06/24/24 | 25,000 | $ | 26,970 | ||||||||
4.900%, due 01/15/45 | 15,000 | 16,152 | |||||||||
Xcel Energy, Inc. 4.800%, due 09/15/41 | 80,000 | 90,267 | |||||||||
7,659,824 | |||||||||||
Total corporate bonds (cost $16,999,081) | 17,772,895 | ||||||||||
Mortgage-backed securities: 0.0%† | |||||||||||
Cayman Islands: 0.0%† | |||||||||||
LNR CDO IV Ltd., Series 2006-1A, Class FFX, 7.592%, due 05/28/436,8,9 | 8,000,000 | 0 | |||||||||
0 | |||||||||||
United States: 0.0%† | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-7, Class B11, 4.286%, due 04/25/3510 | 42,639 | 544 | |||||||||
544 | |||||||||||
Total mortgage-backed securities (cost $8,099,973) | 544 | ||||||||||
Non-U.S. government agency obligations: 0.1% | |||||||||||
Italy: 0.1% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.350%, due 04/15/22 (cost $67,240) | EUR | 60,000 | 69,226 | ||||||||
U.S. treasury obligations: 42.2% | |||||||||||
United States: 42.2% | |||||||||||
U.S. Treasury Bills 1.553%, due 06/18/2011 | 15,400,000 | 15,289,709 | |||||||||
1.903%, due 03/12/2011 | 3,200,000 | 3,188,261 | |||||||||
Total U.S. treasury obligations (cost $18,477,970) | 18,477,970 |
Number of shares | Value | ||||||||||
Exchange traded funds: 6.6% | |||||||||||
United States: 6.6% | |||||||||||
iShares JP Morgan EM Local Currency Bond ETF | 45,239 | $ | 1,985,540 | ||||||||
VanEck Vectors J.P. Morgan EM Local Currency Bond ETF | 26,800 | 911,468 | |||||||||
Total exchange traded funds (cost $2,880,595) | 2,897,008 | ||||||||||
Short-term investments: 5.1% | |||||||||||
Investment companies: 5.1% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $2,217,295) | 2,217,295 | 2,217,295 | |||||||||
Investment of cash collateral from securities loaned: 0.8% | |||||||||||
Money market funds: 0.8% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $336,925) | 336,925 | 336,925 | |||||||||
Total investments: 95.4% (cost $49,079,079) | 41,771,863 | ||||||||||
Other assets in excess of liabilities: 4.6% | 2,026,759 | ||||||||||
Net assets: 100.0% | $ | 43,798,622 |
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 94.
15
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Futures contracts
Number of contracts | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | |||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||
3 | ASX SPI 200 Index Futures | March 2020 | $ | 357,948 | $ | 347,524 | $ | (10,424 | ) | ||||||||||||||
2 | S&P TSX 60 Index Futures | March 2020 | 312,359 | 311,856 | (503 | ) | |||||||||||||||||
1 | DAX Index Futures | March 2020 | 376,024 | 371,465 | (4,559 | ) | |||||||||||||||||
37 | EURO STOXX 50 Index Futures | March 2020 | 1,552,353 | 1,547,643 | (4,710 | ) | |||||||||||||||||
5 | FTSE MIB Index Futures | March 2020 | 657,184 | 656,475 | (709 | ) | |||||||||||||||||
10 | FTSE 100 Index Futures | March 2020 | 992,334 | 993,317 | 983 | ||||||||||||||||||
21 | TOPIX Index Futures | March 2020 | 3,324,351 | 3,326,216 | 1,865 | ||||||||||||||||||
23 | Mini MSCI Emerging Markets (EM) Index Futures | March 2020 | 1,263,869 | 1,288,230 | 24,361 | ||||||||||||||||||
21 | S&P 500 E-Mini Index Futures | March 2020 | 3,341,854 | 3,392,655 | 50,801 | ||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||
3 | Canada Government Bond 10 Year Futures | March 2020 | $ | 323,510 | $ | 317,616 | $ | (5,894 | ) | ||||||||||||||
U.S. treasury futures buy contracts: | |||||||||||||||||||||||
21 | U.S. Treasury Note 2 Year Futures | March 2020 | $ | 4,528,319 | $ | 4,525,500 | $ | (2,819 | ) | ||||||||||||||
22 | U.S. Treasury Note 5 Year Futures | March 2020 | 2,618,204 | 2,609,406 | (8,798 | ) | |||||||||||||||||
Total | $ | 19,648,309 | $ | 19,687,903 | $ | 39,594 | |||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||
22 | CAC 40 Index Futures | January 2020 | $ | (1,478,026 | ) | $ | (1,473,241 | ) | $ | 4,785 | |||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||
23 | German Euro Bund Futures | March 2020 | $ | (4,441,001 | ) | $ | (4,398,488 | ) | $ | 42,513 | |||||||||||||
9 | United Kingdom Long Gilt Bond Futures | March 2020 | (1,585,625 | ) | (1,566,233 | ) | 19,392 | ||||||||||||||||
U.S. treasury futures sell contracts: | |||||||||||||||||||||||
4 | U.S. Treasury Note 10 Year Futures | March 2020 | $ | (518,271 | ) | $ | (513,687 | ) | $ | 4,584 | |||||||||||||
10 | U.S. Ultra Long Treasury Bond Futures | March 2020 | (1,877,056 | ) | (1,816,563 | ) | 60,493 | ||||||||||||||||
Total | $ | (9,899,979 | ) | $ | (9,768,212 | ) | $ | 131,767 | |||||||||||||||
Net unrealized appreciation (depreciation) | $ | 171,361 |
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 (made) | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
CDX North American Investment Grade 33 Index | USD | 9,850 | 12/20/24 | Quarterly | 1.000 | % | $ | 182,506 | $ | (258,717 | ) | $ | (76,211 | ) | |||||||||||||||||
iTraxx Europe Series 32 Index | EUR | 4,800 | 12/20/24 | Quarterly | 1.000 | 118,363 | (151,316 | ) | (32,953 | ) | |||||||||||||||||||||
Total | $ | 300,869 | $ | (410,033 | ) | $ | (109,164 | ) |
16
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Centrally cleared credit default swap agreements on credit indices—sell protection14
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments made by the Portfolio12 | Upfront payments received (made) | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
CDX North American High Yield 33 Index | USD | 1,148 | 12/20/24 | Quarterly | 5.000 | % | $ | (72,734 | ) | $ | 112,577 | $ | 39,843 | ||||||||||||||||||
iTraxx Europe Crossover Series 32 Index | EUR | 400 | 12/20/24 | Quarterly | 5.000 | (56,739 | ) | 61,872 | 5,133 | ||||||||||||||||||||||
Total | $ | (129,473 | ) | $ | 174,449 | $ | 44,976 |
OTC credit default swap agreements on corporate issues—sell protection14
Counterparty | Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments received by the Portfolio12 | Upfront payments received (made) | Value | Unrealized appreciation (depreciation) | |||||||||||||||||||||||||||
JPMCB | Teck Resources Ltd., bond, 3.150%, due 03/20/20 | USD | 90 | 03/20/20 | Quarterly | 1.000 | % | $ | 315 | $ | 208 | $ | 523 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | NZD | 1,052,615 | USD | 675,000 | 02/20/20 | $ | (34,083 | ) | |||||||||||
CIBC | SEK | 12,630,208 | NOK | 12,050,000 | 01/24/20 | 22,824 | |||||||||||||
CITI | USD | 1,360,921 | BRL | 5,650,000 | 01/24/20 | 42,721 | |||||||||||||
GSI | MYR | 979,000 | USD | 235,139 | 01/24/20 | (4,034 | ) | ||||||||||||
GSI | USD | 1,340,000 | CLP | 1,067,385,040 | 02/20/20 | 80,276 | |||||||||||||
GSI | USD | 894,812 | MYR | 3,760,000 | 01/24/20 | 23,768 | |||||||||||||
HSBC | HUF | 412,650,000 | USD | 1,402,786 | 01/24/20 | 2,808 | |||||||||||||
HSBC | THB | 89,660,000 | USD | 2,964,016 | 01/24/20 | (30,807 | ) | ||||||||||||
JPMCB | USD | 2,673,102 | COP | 9,309,477,000 | 01/24/20 | 156,705 | |||||||||||||
MSCI | GBP | 1,061,984 | EUR | 1,230,000 | 01/24/20 | (26,064 | ) | ||||||||||||
SSC | AUD | 2,670,000 | USD | 1,837,852 | 01/24/20 | (36,821 | ) | ||||||||||||
SSC | CAD | 5,920,000 | USD | 4,525,659 | 01/24/20 | (33,813 | ) | ||||||||||||
SSC | CHF | 2,740,000 | USD | 2,794,539 | 01/24/20 | (40,248 | ) | ||||||||||||
SSC | EUR | 4,570,000 | USD | 5,126,858 | 01/24/20 | (5,999 | ) | ||||||||||||
SSC | GBP | 710,000 | USD | 922,593 | 01/24/20 | (18,442 | ) | ||||||||||||
SSC | HKD | 4,315,000 | USD | 550,436 | 01/24/20 | (3,180 | ) | ||||||||||||
SSC | JPY | 30,000,000 | USD | 277,325 | 01/24/20 | 959 | |||||||||||||
SSC | NOK | 2,440,000 | USD | 275,595 | 01/24/20 | (2,359 | ) | ||||||||||||
SSC | NZD | 4,330,000 | USD | 2,788,762 | 01/24/20 | (126,929 | ) | ||||||||||||
SSC | USD | 230,032 | AUD | 335,000 | 01/24/20 | 5,179 | |||||||||||||
SSC | USD | 236,814 | CAD | 315,000 | 01/24/20 | 5,793 | |||||||||||||
SSC | USD | 620,922 | EUR | 560,000 | 01/24/20 | 8,049 | |||||||||||||
SSC | USD | 310,657 | HKD | 2,435,000 | 01/24/20 | 1,754 | |||||||||||||
SSC | USD | 194,441 | HKD | 1,515,000 | 01/24/20 | (66 | ) | ||||||||||||
SSC | USD | 3,458,884 | JPY | 373,400,000 | 01/24/20 | (19,057 | ) |
17
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Forward foreign currency contracts—(Concluded)
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
SSC | USD | 550,568 | JPY | 60,100,000 | 01/24/20 | $ | 3,084 | ||||||||||||
SSC | USD | 2,705,506 | MXN | 52,460,000 | 01/24/20 | 60,542 | |||||||||||||
SSC | USD | 2,844,991 | NOK | 25,940,000 | 01/24/20 | 109,981 | |||||||||||||
SSC | USD | 272,518 | NZD | 405,000 | 01/24/20 | 196 | |||||||||||||
SSC | USD | 2,763,240 | SEK | 26,480,000 | 01/24/20 | 66,824 | |||||||||||||
SSC | USD | 234,199 | THB | 7,060,000 | 01/24/20 | 1,619 | |||||||||||||
Net unrealized appreciation (depreciation) | $ | 211,180 |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Corporate bonds | $ | — | $ | 17,772,895 | $ | — | $ | 17,772,895 | |||||||||||
Mortgage-backed securities | — | 544 | 0 | 544 | |||||||||||||||
Non-U.S. government agency obligations | — | 69,226 | — | 69,226 | |||||||||||||||
U.S. treasury obligations | — | 18,477,970 | — | 18,477,970 | |||||||||||||||
Exchange traded funds | 2,897,008 | — | — | 2,897,008 | |||||||||||||||
Short-term investments | — | 2,217,295 | — | 2,217,295 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 336,925 | — | 336,925 | |||||||||||||||
Futures contracts | 209,777 | — | — | 209,777 | |||||||||||||||
Swap agreements | — | 174,657 | — | 174,657 | |||||||||||||||
Forward foreign currency contracts | — | 593,082 | — | 593,082 | |||||||||||||||
Total | $ | 3,106,785 | $ | 39,642,594 | $ | 0 | $ | 42,749,379 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (38,416 | ) | $ | — | $ | — | $ | (38,416 | ) | |||||||||
Swap agreements | — | (410,033 | ) | — | (410,033 | ) | |||||||||||||
Forward foreign currency contracts | — | (381,902 | ) | — | (381,902 | ) | |||||||||||||
Total | $ | (38,416 | ) | $ | (791,935 | ) | $ | — | $ | (830,351 | ) |
At December 31, 2019, there were no transfers in or out of Level 3.
18
UBS Dynamic Alpha Fund
Portfolio of investments
December 31, 2019 (unaudited)
Portfolio footnotes
† Amount represents less than 0.05%.
1 In U.S. dollars unless otherwise indicated.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
3 Perpetual investment. Date shown reflects the next call date.
4 Security, or portion thereof, was on loan at the period end.
5 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
6 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $942,867, represented 2.2% of the Fund's net assets at period end.
7 Step bond—coupon rate increases in increments to maturity. The rate disclosed is the rate at the period end; the maturity date disclosed is the ultimate maturity date.
8 Security fair valued by the Valuation Committee under the direction of the Board of Trustees.
9 Significant unobservable inputs were used in the valuation of this security; i.e. Level 3.
10 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
11 Rate shown is the discount rate at the date of purchase unless otherwise noted.
12 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.
14 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced 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.
19
UBS Global Allocation Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS Global Allocation Fund (the "Fund") returned 6.16% (Class A shares returned 0.33% after the deduction of the maximum sales charge), while Class P shares returned 6.27%. In contrast, the Fund's benchmark, the 60% MSCI All Country World Index (net)/40% Citigroup World Government Bond Index (Hedged in USD), returned 6.02% during the same time period. For comparison purposes, the MSCI All Country World Index (net) returned 8.92% and the FTSE World Government Bond Index (Hedged in USD) returned 1.59%. (Class P shares have lower expenses than other share classes of the Fund. Returns for all share classes over various time periods are shown on page 22; please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund produced a positive absolute return during the reporting period. Market allocation and security selection were both modestly additive for results, whereas the Fund's currency strategy had a neutral impact on relative 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 neutral impact on performance. We used a variety of equity and fixed income options, futures and swaps to implement our market allocation strategy. Derivatives were just one tool, among others, that we used to implement our market allocation strategy. These derivatives, in aggregate, were additive to performance during the reporting period.
Portfolio performance summary
What worked:
• Bottom-up security selection contributed to performance overall.
– Both developed market ex-US and emerging market equities were areas of strong security selection which was additive for performance.
• Overall, market allocations were positive for returns.
– An overall underweight to fixed income contributed to relative performance, as fixed income lagged equities over the reporting period despite rates falling throughout markets. Underweights to nominal government bonds (especially US government bonds) were particularly additive relative to the benchmark. Outside of the US, the Fund's short German bund positioning also helped performance.
– The Fund's overweight to equities outside of the US (both developed and emerging) bolstered performance as they outperformed global bonds. The relative value trade for Japanese equities over French equities within the ex-US equity exposure was also helpful.
• Certain active currency positions were positive for portfolio results.
– A long Mexican peso versus US dollar position was additive as the currency provided a strong return from carry and the peso's valuation was attractive as well.
20
UBS Global Allocation Fund
What didn't work:
• Bottom-up security selection within US equities detracted.
– Security selection within the US large-cap core and US large-cap growth active strategies was weak and, therefore, was a drag on performance.
• Certain market allocations detracted from results.
– The Fund's underweight to US equities, and resulting preference for non-US equities, detracted over the reporting period. The US economy remained resilient and US equities continued to outperform other developed and emerging market equities. This preference was expressed in broad Fund allocations in addition to a relative value trade which favored Europe, Australia and Far East (EAFE) over US equities.
– One other relative value trade which hurt performance was a preference for Canadian bonds over US bonds While both countries saw rates fall, US bonds appreciated quickly amid three Federal Reserve Board rate cuts in the second half of 2019.
• Certain active currency positions hurt performance over this reporting period.
– One relative value trade which favored the euro over the Swiss franc was a detractor as Brexit uncertainty loomed throughout the reporting period, while the franc maintained its strength as a safe haven currency.
– A preference for Japanese yen over the US dollar detracted as well. The US dollar maintained relative strength amid lacking clarity on global trade disputes.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
21
UBS Global Allocation Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 6.16 | % | 18.73 | % | 4.91 | % | 5.61 | % | |||||||||||
Class P2 | 6.27 | 19.03 | 5.16 | 5.89 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 0.33 | % | 12.24 | % | 3.72 | % | 5.02 | % | |||||||||||
MSCI All Country World Index (net)3 | 8.92 | 26.60 | 8.41 | 8.79 | |||||||||||||||
FTSE World Government Bond Index (Hedged in USD)4 | 1.59 | 7.59 | 3.45 | 3.90 | |||||||||||||||
60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD)5 | 6.02 | 18.94 | 6.61 | 7.07 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.47% and 1.27%; Class P—1.20% and 1.02%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, and extraordinary expenses to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, and extraordinary expenses), through the period ending October 28, 2020, do not exceed 1.20% for Class A shares and 0.95% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI All Country World Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The FTSE World Government Bond Index (Hedged in USD) is an unmanaged market capitalization-weighted index designed to measure the performance of fixed-rate, local currency, investment-grade sovereign bonds with a one-year minimum maturity and is hedged back to the US dollar. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The 60% MSCI All Country World Index (net)/40% FTSE World Government Bond Index (Hedged in USD) is a unmanaged blended benchmark compiled by the Advisor. Investors should note that indices do not reflect the deduction of fees and expenses.
Prior to August 3, 2015, a 1% redemption fee was imposed on sales or exchanges of any class of shares of the Fund made during the specified holding period.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
22
UBS Global Allocation Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten equity holdings
Percentage of net assets | |||||||
Microsoft Corp. | 2.0 | % | |||||
Amazon.com, Inc. | 1.5 | ||||||
Visa, Inc., Class A | 1.3 | ||||||
UnitedHealth Group, Inc. | 1.1 | ||||||
Johnson & Johnson | 1.1 | ||||||
Mondelez International, Inc., Class A | 1.0 | ||||||
Facebook, Inc., Class A | 0.9 | ||||||
salesforce.com, Inc. | 0.8 | ||||||
Simon Property Group, Inc. | 0.8 | ||||||
Progressive Corp./The | 0.7 | ||||||
Total | 11.2 | % |
Top ten fixed income holdings
Percentage of net assets | |||||||
U.S. Treasury Bills, 1.320% due 06/18/20 | 6.0 | % | |||||
U.S. Treasury Bills, 1.193% due 06/18/20 | 3.0 | ||||||
New Zealand Government Inflation Linked Bond, 2.000% due 09/20/25 | 1.2 | ||||||
U.S. Treasury Notes, 1.500% due 08/15/20 | 0.9 | ||||||
U.S. Treasury Notes, 1.875% due 07/31/22 | 0.7 | ||||||
Canadian Government Bond, 1.500% due 09/01/24 | 0.6 | ||||||
U.S. Treasury Notes, 2.500% due 05/15/24 | 0.6 | ||||||
U.S. Treasury Notes, 1.375% due 09/30/23 | 0.6 | ||||||
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 | ||||||
Total | 14.6 | % |
Top five issuer breakdown by country or territory of origin2
Percentage of net assets | |||||||
United States | 60.7 | % | |||||
Japan | 6.5 | ||||||
United Kingdom | 4.2 | ||||||
Canada | 1.7 | ||||||
Germany | 1.7 | ||||||
Total | 74.8 | % |
1 The 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: 64.8%, Japan: 6.6%, United Kingdom: 4.4%, Canada: 1.8% and Germany 1.7%.
23
UBS Global Allocation Fund
Industry diversification—December 31, 2019 (unaudited)1,2
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 0.2 | % | |||||
Airlines | 0.8 | ||||||
Auto components | 0.4 | ||||||
Automobiles | 0.3 | ||||||
Banks | 2.4 | ||||||
Beverages | 0.1 | ||||||
Biotechnology | 0.9 | ||||||
Capital markets | 0.7 | ||||||
Chemicals | 1.3 | ||||||
Commercial services & supplies | 0.7 | ||||||
Communications equipment | 0.2 | ||||||
Consumer finance | 0.6 | ||||||
Diversified financial services | 0.9 | ||||||
Diversified telecommunication services | 0.8 | ||||||
Electronic equipment, instruments & components | 0.5 | ||||||
Energy equipment & services | 0.2 | ||||||
Entertainment | 1.4 | ||||||
Equity real estate investment trusts | 1.5 | ||||||
Food & staples retailing | 0.4 | ||||||
Food products | 1.6 | ||||||
Health care equipment & supplies | 1.2 | ||||||
Health care providers & services | 1.6 | ||||||
Hotels, restaurants & leisure | 0.6 | ||||||
Household durables | 0.7 | ||||||
Insurance | 3.2 | ||||||
Interactive media & services | 1.8 | ||||||
Internet & direct marketing retail | 1.6 | ||||||
IT services | 1.6 | ||||||
Life sciences tools & services | 0.1 | ||||||
Machinery | 1.3 | ||||||
Metals & mining | 0.4 | ||||||
Multiline retail | 1.1 | ||||||
Oil, gas & consumable fuels | 1.5 | ||||||
Paper & forest products | 0.3 | ||||||
Personal products | 0.6 | ||||||
Pharmaceuticals | 3.2 | ||||||
Professional services | 0.3 | ||||||
Road & rail | 0.5 | ||||||
Semiconductors & semiconductor equipment | 2.3 | ||||||
Software | 4.2 | ||||||
Specialty retail | 0.6 | ||||||
Technology hardware, storage & peripherals | 1.0 | ||||||
Textiles, apparel & luxury goods | 0.7 |
Common stocks—(Concluded) | Percentage of net assets | ||||||
Tobacco | 0.7 | % | |||||
Trading companies & distributors | 0.9 | ||||||
Wireless telecommunication services | 0.2 | ||||||
Total common stocks | 48.1 | % | |||||
Preferred stocks | 0.3 | ||||||
Exchange traded funds | 9.4 | ||||||
Investment companies | 8.7 | ||||||
Non-U.S. government obligations | 5.4 | ||||||
U.S. treasury obligations | 15.8 | ||||||
Short-term investments | 8.5 | ||||||
Investment of cash collateral from securities loaned | 6.4 | ||||||
Total investments | 102.6 | % | |||||
Liabilities in excess of other assets | (2.6 | ) | |||||
Net assets | 100.0 | % |
1 Figures represent the breakdown of direct investments of UBS Global Allocation Fund. Figures would be different if a breakdown of the underlying investment companies and exchange traded funds was included.
2 The Fund's portfolio is actively managed and its composition will vary over time.
24
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 48.1% | |||||||||||
Austria: 0.4% | |||||||||||
Erste Group Bank AG* | 28,285 | $ | 1,064,768 | ||||||||
Belgium: 0.9% | |||||||||||
Euronav N.V. | 27,217 | 335,212 | |||||||||
Galapagos N.V.* | 2,745 | 574,246 | |||||||||
KBC Group N.V. | 18,483 | 1,390,313 | |||||||||
2,299,771 | |||||||||||
Canada: 1.0% | |||||||||||
Canadian Natural Resources Ltd.1 | 19,661 | 635,911 | |||||||||
Dollarama, Inc. | 15,820 | 543,719 | |||||||||
Husky Energy, Inc. | 65,428 | 525,016 | |||||||||
Nutrien Ltd.1 | 5,188 | 248,557 | |||||||||
Toronto-Dominion Bank/The | 11,575 | 649,191 | |||||||||
2,602,394 | |||||||||||
China: 0.1% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 1,048 | 222,281 | |||||||||
Denmark: 0.6% | |||||||||||
Genmab A/S* | 3,623 | 805,703 | |||||||||
H Lundbeck A/S | 17,746 | 677,677 | |||||||||
1,483,380 | |||||||||||
Finland: 0.4% | |||||||||||
Sampo Oyj, Class A | 25,742 | 1,123,518 | |||||||||
France: 0.5% | |||||||||||
Thales SA | 5,985 | 621,121 | |||||||||
Ubisoft Entertainment SA* | 11,073 | 764,860 | |||||||||
1,385,981 | |||||||||||
Germany: 1.4% | |||||||||||
Continental AG | 4,277 | 552,961 | |||||||||
Daimler AG (Registered) | 12,675 | 701,920 | |||||||||
Infineon Technologies AG | 25,842 | 588,726 | |||||||||
LANXESS AG | 10,280 | 689,789 | |||||||||
SAP SE | 8,311 | 1,121,677 | |||||||||
3,655,073 | |||||||||||
Ghana: 0.2% | |||||||||||
Kosmos Energy Ltd. | 114,161 | 650,718 | |||||||||
Hong Kong: 0.9% | |||||||||||
AIA Group Ltd. | 173,517 | 1,821,502 | |||||||||
WH Group Ltd.2 | 542,500 | 560,441 | |||||||||
2,381,943 | |||||||||||
Ireland: 0.2% | |||||||||||
Ryanair Holdings PLC, ADR* | 6,592 | 577,525 | |||||||||
Italy: 0.9% | |||||||||||
Banca Mediolanum SpA | 107,813 | 1,070,869 | |||||||||
Infrastrutture Wireless Italiane SpA2 | 91,778 | 898,731 | |||||||||
Prada SpA | 75,700 | 312,814 | |||||||||
2,282,414 |
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Japan: 5.8% | |||||||||||
Inpex Corp. | 56,600 | $ | 592,020 | ||||||||
ITOCHU Corp. | 45,600 | 1,063,671 | |||||||||
Kao Corp. | 8,500 | 706,019 | |||||||||
Keyence Corp. | 1,200 | 425,089 | |||||||||
Kissei Pharmaceutical Co. Ltd.1 | 15,700 | 450,821 | |||||||||
MINEBEA MITSUMI, Inc.1 | 44,300 | 928,361 | |||||||||
Nabtesco Corp. | 24,200 | 727,192 | |||||||||
Nintendo Co. Ltd. | 2,600 | 1,052,156 | |||||||||
Nippon Telegraph & Telephone Corp. | 47,200 | 1,197,648 | |||||||||
ORIX Corp. | 74,600 | 1,243,391 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 10,700 | 1,187,631 | |||||||||
SoftBank Group Corp. | 13,700 | 599,670 | |||||||||
Sony Corp.1 | 25,800 | 1,757,359 | |||||||||
Sumitomo Electric Industries Ltd. | 37,500 | 570,153 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 26,800 | 1,068,497 | |||||||||
TechnoPro Holdings, Inc. | 6,700 | 471,722 | |||||||||
Tokyo Electron Ltd. | 2,600 | 572,500 | |||||||||
West Japan Railway Co. | 8,200 | 712,495 | |||||||||
15,326,395 | |||||||||||
Luxembourg: 0.2% | |||||||||||
Tenaris SA | 44,666 | 503,524 | |||||||||
Netherlands: 1.2% | |||||||||||
ASR Nederland N.V. | 22,645 | 847,374 | |||||||||
Koninklijke Ahold Delhaize N.V. | 43,677 | 1,092,287 | |||||||||
NXP Semiconductors N.V. | 9,633 | 1,225,896 | |||||||||
3,165,557 | |||||||||||
Norway: 0.4% | |||||||||||
Equinor ASA | 42,654 | 852,662 | |||||||||
Mowi ASA | 11,263 | 292,759 | |||||||||
1,145,421 | |||||||||||
South Africa: 0.4% | |||||||||||
Anglo American PLC | 33,320 | 959,068 | |||||||||
Spain: 0.7% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 206,861 | 1,156,235 | |||||||||
Grifols SA, ADR | 27,000 | 628,830 | |||||||||
1,785,065 | |||||||||||
Sweden: 0.2% | |||||||||||
Swedish Match AB | 7,934 | 408,968 | |||||||||
Switzerland: 1.4% | |||||||||||
Alcon, Inc.* | 14,498 | 820,924 | |||||||||
Cie Financiere Richemont SA (Registered) | 11,351 | 892,082 | |||||||||
Nestle SA (Registered) | 7,875 | 852,596 | |||||||||
Zurich Insurance Group AG | 2,789 | 1,144,361 | |||||||||
3,709,963 | |||||||||||
United Kingdom: 3.6% | |||||||||||
Ashtead Group PLC | 31,720 | 1,014,274 | |||||||||
Babcock International Group PLC | 86,724 | 723,021 | |||||||||
Barclays PLC | 218,217 | �� | 519,250 |
25
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
United Kingdom—(Concluded) | |||||||||||
British American Tobacco PLC | 32,342 | $ | 1,384,381 | ||||||||
GlaxoSmithKline PLC | 64,050 | 1,509,314 | |||||||||
GlaxoSmithKline PLC, ADR | 9,000 | 422,910 | |||||||||
Mondi PLC | 32,938 | 773,336 | |||||||||
Sage Group PLC/The | 129,612 | 1,285,913 | |||||||||
Spectris PLC | 22,582 | 869,246 | |||||||||
Unilever N.V. | 14,525 | 834,675 | |||||||||
9,336,320 | |||||||||||
United States: 26.7% | |||||||||||
10X Genomics, Inc., Class A*,1 | 2,236 | 170,495 | |||||||||
Abbott Laboratories | 4,621 | 401,380 | |||||||||
AGCO Corp. | 19,319 | 1,492,393 | |||||||||
Alexion Pharmaceuticals, Inc.* | 4,049 | 437,899 | |||||||||
Align Technology, Inc.* | 1,463 | 408,236 | |||||||||
Alphabet, Inc., Class A* | 1,273 | 1,705,043 | |||||||||
Amazon.com, Inc.* | 2,170 | 4,009,813 | |||||||||
American Express Co. | 2,336 | 290,809 | |||||||||
Ameriprise Financial, Inc. | 10,458 | 1,742,094 | |||||||||
Analog Devices, Inc. | 2,165 | 257,289 | |||||||||
Apache Corp. | 18,721 | 479,070 | |||||||||
Apple, Inc. | 5,528 | 1,623,297 | |||||||||
Arista Networks, Inc.* | 2,632 | 535,349 | |||||||||
Autodesk, Inc.* | 3,114 | 571,294 | |||||||||
Burlington Stores, Inc.* | 1,801 | 410,682 | |||||||||
Carnival Corp. | 20,005 | 1,016,854 | |||||||||
Carvana Co.*,1 | 1,418 | 130,527 | |||||||||
Caterpillar, Inc. | 1,702 | 251,351 | |||||||||
Cooper Cos., Inc./The | 1,362 | 437,597 | |||||||||
Cree, Inc.* | 14,415 | 665,252 | |||||||||
Crown Castle International Corp. | 2,100 | 298,515 | |||||||||
Delta Air Lines, Inc. | 24,397 | 1,426,737 | |||||||||
Digital Realty Trust, Inc.1 | 12,943 | 1,549,795 | |||||||||
Dollar General Corp. | 3,664 | 571,511 | |||||||||
Dollar Tree, Inc.* | 18,543 | 1,743,969 | |||||||||
Domino's Pizza, Inc. | 1,163 | 341,666 | |||||||||
Elanco Animal Health, Inc.* | 53,068 | 1,562,853 | |||||||||
Facebook, Inc., Class A* | 11,998 | 2,462,589 | |||||||||
Fidelity National Information Services, Inc. | 3,661 | 509,208 | |||||||||
FMC Corp. | 3,545 | 353,862 | |||||||||
GoDaddy, Inc., Class A* | 6,640 | 450,989 | |||||||||
HubSpot, Inc.* | 1,728 | 273,888 | |||||||||
IAC/InterActiveCorp* | 1,836 | 457,366 | |||||||||
Johnson & Johnson | 19,397 | 2,829,440 | |||||||||
Laboratory Corp. of America Holdings* | 7,248 | 1,226,144 | |||||||||
Lam Research Corp. | 935 | 273,394 | |||||||||
LivaNova PLC* | 7,700 | 580,811 | |||||||||
Lowe's Cos., Inc. | 4,631 | 554,609 | |||||||||
Marvell Technology Group Ltd.1 | 13,161 | 349,556 | |||||||||
MetLife, Inc. | 31,335 | 1,597,145 | |||||||||
Micron Technology, Inc.* | 21,525 | 1,157,614 |
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Microsoft Corp. | 33,275 | $ | 5,247,467 | ||||||||
Mondelez International, Inc., Class A | 46,558 | 2,564,415 | |||||||||
Netflix, Inc.* | 656 | 212,262 | |||||||||
NIKE, Inc., Class B | 6,775 | 686,375 | |||||||||
ON Semiconductor Corp.* | 30,033 | 732,205 | |||||||||
PepsiCo, Inc. | 2,485 | 339,625 | |||||||||
Progressive Corp./The | 25,628 | 1,855,211 | |||||||||
salesforce.com, Inc.* | 13,553 | 2,204,260 | |||||||||
ServiceNow, Inc.* | 1,584 | 447,195 | |||||||||
Simon Property Group, Inc. | 14,015 | 2,087,674 | |||||||||
SmileDirectClub, Inc.* | 9,871 | 86,273 | |||||||||
Starbucks Corp. | 1,975 | 173,642 | |||||||||
Stericycle, Inc.*,1 | 14,940 | 953,321 | |||||||||
Synchrony Financial | 33,184 | 1,194,956 | |||||||||
Take-Two Interactive Software, Inc.* | 9,883 | 1,209,976 | |||||||||
TransUnion | 3,103 | 265,648 | |||||||||
Ulta Salon, Cosmetics & Fragrance, Inc.* | 1,724 | 436,413 | |||||||||
Union Pacific Corp. | 3,243 | 586,302 | |||||||||
United Rentals, Inc.* | 1,282 | 213,799 | |||||||||
UnitedHealth Group, Inc. | 10,047 | 2,953,617 | |||||||||
Universal Display Corp. | 1,583 | 326,209 | |||||||||
Visa, Inc., Class A | 17,568 | 3,301,027 | |||||||||
Walt Disney Co./The | 3,214 | 464,841 | |||||||||
Waste Connections, Inc. | 2,516 | 228,428 | |||||||||
Wells Fargo & Co. | 27,699 | 1,490,206 | |||||||||
Western Digital Corp. | 14,329 | 909,462 | |||||||||
Westlake Chemical Corp. | 13,795 | 967,719 | |||||||||
Zimmer Biomet Holdings, Inc. | 3,136 | 469,396 | |||||||||
70,216,309 | |||||||||||
Total common stocks (cost $107,720,281) | 126,286,356 | ||||||||||
Preferred stocks: 0.3% | |||||||||||
Germany: 0.3% | |||||||||||
Henkel AG & Co. KGaA (cost $717,961) | 7,001 | 724,048 | |||||||||
Exchange traded funds: 9.4% | |||||||||||
United States: 9.4% | |||||||||||
iShares JPMorgan USD Emerging Markets Bond ETF1 | 106,396 | 12,188,726 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF1 | 98,054 | 12,546,990 | |||||||||
Total exchange traded funds (cost $24,136,551) | 24,735,716 | ||||||||||
Investment companies: 8.7% | |||||||||||
UBS Emerging Markets Equity Opportunity Fund3 (cost $22,973,089) | 2,297,929 | 22,933,334 |
26
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount | Value | ||||||||||
Non-U.S. government agency obligations: 5.4% | |||||||||||
Australia: 0.2% | |||||||||||
Australia Government Bond, Series 126, 4.500%, due 04/15/204 | AUD | 486,000 | $ | 344,491 | |||||||
Series 138, 3.250%, due 04/21/294 | AUD | 380,000 | 310,343 | ||||||||
654,834 | |||||||||||
Austria: 0.1% | |||||||||||
Republic of Austria Government Bond 1.200%, due 10/20/252,4 | EUR | 37,000 | 45,037 | ||||||||
3.150%, due 06/20/442,4 | EUR | 67,000 | 120,188 | ||||||||
165,225 | |||||||||||
Belgium: 0.1% | |||||||||||
Kingdom of Belgium Government Bond, Series 71, 3.750%, due 06/22/454 | EUR | 125,000 | 236,034 | ||||||||
Canada: 0.7% | |||||||||||
Canadian Government Bond 1.500%, due 09/01/24 | CAD | 2,000,000 | 1,527,088 | ||||||||
2.250%, due 06/01/25 | CAD | 221,000 | 175,093 | ||||||||
2.750%, due 12/01/64 | CAD | 82,000 | 82,821 | ||||||||
1,785,002 | |||||||||||
France: 0.7% | |||||||||||
French Republic Government Bond OAT, Series OATE, 1.800%, due 07/25/402,4 | EUR | 210,348 | 364,515 | ||||||||
French Republic Government Bond OAT 0.500%, due 05/25/264 | EUR | 741,000 | 868,508 | ||||||||
2.500%, due 05/25/304 | EUR | 262,000 | 365,595 | ||||||||
3.250%, due 05/25/454 | EUR | 172,000 | 302,381 | ||||||||
1,900,999 | |||||||||||
Ireland: 0.1% | |||||||||||
Ireland Government Bond 1.500%, due 05/15/504 | EUR | 200,000 | 256,211 | ||||||||
2.000%, due 02/18/454 | EUR | 48,000 | 68,727 | ||||||||
324,938 | |||||||||||
Italy: 0.5% | |||||||||||
Italy Buoni Poliennali Del Tesoro 1.650%, due 03/01/322,4 | EUR | 60,000 | 68,008 | ||||||||
3.000%, due 08/01/294 | EUR | 300,000 | 387,559 | ||||||||
3.250%, due 09/01/462,4 | EUR | 45,000 | 59,594 | ||||||||
4.000%, due 02/01/372,4 | EUR | 129,000 | 186,011 | ||||||||
4.750%, due 09/01/442,4 | EUR | 25,000 | 40,569 | ||||||||
Series CPI, 2.550%, due 09/15/412,4 | EUR | 376,299 | 538,187 | ||||||||
1,279,928 |
Face amount | Value | ||||||||||
Non-U.S. government agency obligations—(Concluded) | |||||||||||
Japan: 0.7% | |||||||||||
Japan Government Forty Year Bond, Series 12, 0.500%, due 03/20/59 | JPY | 20,000,000 | $ | 187,850 | |||||||
Japan Government Thirty Year Bond, Series 51, 0.300%, due 06/20/46 | JPY | 32,000,000 | 288,944 | ||||||||
Japan Government Twenty Year Bond, Series 156, 0.400%, due 03/20/36 | JPY | 137,350,000 | 1,307,160 | ||||||||
1,783,954 | |||||||||||
New Zealand: 1.2% | |||||||||||
New Zealand Government Inflation Linked Bond, Series 0925, 2.000%, due 09/20/254,5 | NZD | 4,073,611 | 3,272,588 | ||||||||
Spain: 0.5% | |||||||||||
Spain Government Bond 1.450%, due 10/31/272,4 | EUR | 250,000 | 305,910 | ||||||||
3.450%, due 07/30/662,4 | EUR | 10,000 | 17,794 | ||||||||
4.200%, due 01/31/372,4 | EUR | 44,000 | 75,251 | ||||||||
4.800%, due 01/31/242,4 | EUR | 451,000 | 607,691 | ||||||||
5.150%, due 10/31/442,4 | EUR | 110,000 | 228,057 | ||||||||
1,234,703 | |||||||||||
United Kingdom: 0.6% | |||||||||||
United Kingdom Gilt 1.000%, due 04/22/244 | GBP | 140,000 | 188,539 | ||||||||
1.500%, due 07/22/474 | GBP | 263,000 | 361,117 | ||||||||
1.625%, due 10/22/284 | GBP | 580,000 | 825,858 | ||||||||
3.500%, due 01/22/454 | GBP | 120,000 | 231,777 | ||||||||
1,607,291 | |||||||||||
Total non-U.S. government agency obligations (cost $13,175,060) | 14,245,496 | ||||||||||
U.S. treasury obligations: 15.8% | |||||||||||
United States: 15.8% | |||||||||||
U.S. Treasury Bills 1.193%, due 06/18/206 | 8,000,000 | 7,943,667 | |||||||||
1.320%, due 06/18/206 | 16,000,000 | 15,883,953 | |||||||||
U.S. Treasury Bonds 2.250%, due 08/15/46 | 490,000 | 475,590 | |||||||||
2.500%, due 02/15/46 | 461,000 | 470,083 | |||||||||
2.750%, due 11/15/42 | 423,000 | 450,873 | |||||||||
2.750%, due 08/15/47 | 333,000 | 356,678 | |||||||||
2.875%, due 05/15/43 | 817,000 | 888,979 | |||||||||
2.875%, due 08/15/45 | 37,000 | 40,397 | |||||||||
3.000%, due 11/15/45 | 97,000 | 108,384 | |||||||||
U.S. Treasury Inflation Index Notes (TIPS) 0.125%, due 01/15/23 | 189,521 | 189,494 | |||||||||
U.S. Treasury Inflation Indexed Bonds (TIPS) 0.750%, due 02/15/45 | 688,445 | 713,749 | |||||||||
U.S. Treasury Notes 1.250%, due 03/31/21 | 497,000 | 494,663 |
27
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount | Value | ||||||||||
U.S. treasury obligations—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
1.375%, due 09/30/23 | 1,483,000 | $ | 1,467,076 | ||||||||
1.500%, due 08/15/20 | 2,339,000 | 2,337,140 | |||||||||
1.500%, due 02/28/23 | 346,000 | 344,578 | |||||||||
1.625%, due 08/15/22 | 1,160,000 | 1,160,528 | |||||||||
1.625%, due 11/30/26 | 1,150,000 | 1,134,063 | |||||||||
1.625%, due 08/15/29 | 300,000 | 292,026 | |||||||||
1.750%, due 05/15/23 | 530,000 | 531,689 | |||||||||
1.875%, due 07/31/22 | 1,794,000 | 1,805,848 | |||||||||
1.875%, due 10/31/22 | 1,037,000 | 1,044,179 | |||||||||
2.000%, due 11/30/22 | 1,228,000 | 1,241,174 | |||||||||
2.500%, due 05/15/24 | 1,437,000 | 1,485,616 | |||||||||
2.750%, due 07/31/23 | 702,000 | 728,477 | |||||||||
Total U.S. treasury obligations (cost $41,057,431) | 41,588,904 |
Number of shares | Value | ||||||||||
Short-term investments: 8.5% | |||||||||||
Investment companies: 8.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $22,243,400) | 22,243,400 | $ | 22,243,400 | ||||||||
Investment of cash collateral from securities loaned: 6.4% | |||||||||||
Money market funds: 6.4% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $16,658,350) | 16,658,350 | 16,658,350 | |||||||||
Total investments: 102.6% (cost $248,682,123) | 269,415,604 | ||||||||||
Liabilities in excess of other assets: (2.6)% | (6,813,579 | ) | |||||||||
Net assets: 100.0% | $ | 262,602,025 |
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 94.
Futures contracts
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
Index futures buy contracts: | |||||||||||||||||||||||||||
316 | EUR | EURO STOXX 50 Index Futures | March 2020 | $ | 13,318,439 | $ | 13,217,709 | $ | (100,730 | ) | |||||||||||||||||
77 | JPY | TOPIX Index Futures | March 2020 | 12,189,286 | 12,196,125 | 6,839 | |||||||||||||||||||||
221 | USD | E-Mini Russell 1000 Value Index Futures | March 2020 | 14,658,798 | 14,881,035 | 222,237 | |||||||||||||||||||||
50 | USD | Mini MSCI Emerging Markets (EM) Index Futures | March 2020 | 2,742,845 | 2,800,500 | 57,655 | |||||||||||||||||||||
Interest rate futures buy contracts: | |||||||||||||||||||||||||||
84 | AUD | Australian Bond 10 Year Futures | March 2020 | 8,570,753 | 8,426,953 | (143,800 | ) | ||||||||||||||||||||
252 | CAD | Canada Government Bond 10 Year Futures | March 2020 | 27,165,078 | 26,679,727 | (485,351 | ) | ||||||||||||||||||||
33 | GBP | United Kingdom Long Gilt Bond Futures | March 2020 | 5,806,238 | 5,742,856 | (63,382 | ) | ||||||||||||||||||||
U.S. treasury futures buy contracts: | |||||||||||||||||||||||||||
60 | USD | U.S. Ultra Bond Futures | March 2020 | 11,274,806 | 10,899,375 | (375,431 | ) | ||||||||||||||||||||
Total | $ | 95,726,243 | $ | 94,844,280 | $ | (881,963 | ) | ||||||||||||||||||||
Index futures sell contracts: | |||||||||||||||||||||||||||
36 | CAD | S&P TSX 60 Index Futures | March 2020 | $ | (5,611,339 | ) | $ | (5,613,400 | ) | $ | (2,061 | ) | |||||||||||||||
93 | EUR | CAC 40 Index Futures | January 2020 | (6,248,018 | ) | (6,227,790 | ) | 20,228 | |||||||||||||||||||
526 | SEK | OMX 30 Index Futures | January 2020 | (10,037,150 | ) | (9,930,224 | ) | 106,926 | |||||||||||||||||||
69 | USD | MSCI Taiwan Index Futures | January 2020 | (3,182,851 | ) | (3,171,240 | ) | 11,611 | |||||||||||||||||||
72 | USD | S&P 500 E-Mini Index Futures | March 2020 | (11,433,814 | ) | (11,631,960 | ) | (198,146 | ) | ||||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||||||
90 | EUR | German Euro Bund Futures | March 2020 | (17,350,791 | ) | (17,211,476 | ) | 139,315 | |||||||||||||||||||
21 | JPY | JGB MINI 10 Year Futures | March 2020 | (2,942,381 | ) | (2,936,386 | ) | 5,995 |
28
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Futures contracts—(Concluded)
Number of contracts | Currency | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||
U.S. treasury futures sell contracts: | |||||||||||||||||||||||||||
101 | USD | U.S. Treasury Note 10 Year Futures | March 2020 | $ | (12,973,621 | ) | $ | (12,970,609 | ) | $ | 3,012 | ||||||||||||||||
170 | USD | U.S. Treasury Note 2 Year Futures | March 2020 | (36,657,794 | ) | (36,635,000 | ) | 22,794 | |||||||||||||||||||
Total | $ | (106,437,759 | ) | $ | (106,328,085 | ) | $ | 109,674 | |||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (772,289 | ) |
Centrally cleared credit default swap agreements on credit indices—sell protection8
Referenced obligations | Notional amount (000) | Maturity date | Payment frequency | Payments made by the Portfolio7 | Upfront payments received (made) | Value | Unrealized appreciation (depreciation) | ||||||||||||||||||||||||
CDX Emerging Markets Series 32 Index | USD | 8,200 | 12/20/24 | Quarterly | 1.000 | % | $ | 395,427 | $ | (272,850 | ) | $ | 122,577 | ||||||||||||||||||
CDX North America High Yield Series 33 Index | USD | 17,919 | 12/20/24 | Quarterly | 5.000 | (1,294,140 | ) | 1,756,582 | 462,442 | ||||||||||||||||||||||
CDX North America Investment Grade 33 Index | USD | 10,100 | 12/20/24 | Quarterly | 1.000 | (192,550 | ) | 265,283 | 72,733 | ||||||||||||||||||||||
iTraxx Europe Series 32 Index | EUR | 15,900 | 12/20/24 | Quarterly | 1.000 | (389,360 | ) | 501,233 | 111,873 | ||||||||||||||||||||||
Total | $ | (1,480,623 | ) | $ | 2,250,248 | $ | 769,625 |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | JPY | 156,300,000 | USD | 1,442,519 | 01/24/20 | $ | 2,656 | ||||||||||||
CIBC | SEK | 37,377,029 | NOK | 35,660,000 | 01/24/20 | 67,543 | |||||||||||||
GSI | CNY | 8,400,000 | USD | 1,185,520 | 01/23/20 | (19,529 | ) | ||||||||||||
HSBC | GBP | 1,170,000 | USD | 1,528,781 | 01/24/20 | (21,938 | ) | ||||||||||||
HSBC | CHF | 7,675,000 | USD | 7,830,929 | 01/24/20 | (109,578 | ) | ||||||||||||
HSBC | EUR | 6,840,000 | USD | 7,673,924 | 01/24/20 | (8,514 | ) | ||||||||||||
HSBC | NZD | 12,305,000 | USD | 7,925,374 | 01/24/20 | (360,442 | ) | ||||||||||||
HSBC | CAD | 15,140,000 | USD | 11,578,691 | 01/24/20 | (81,850 | ) | ||||||||||||
JPMCB | USD | 5,097,037 | COP | 17,751,195,000 | 01/24/20 | 298,802 | |||||||||||||
SSC | USD | 1,697,732 | SGD | 2,310,000 | 01/24/20 | 20,059 | |||||||||||||
SSC | USD | 5,810,316 | SEK | 55,680,000 | 01/24/20 | 140,512 | |||||||||||||
SSC | USD | 5,309,406 | NOK | 48,410,000 | 01/24/20 | 205,250 | |||||||||||||
SSC | USD | 9,953,302 | MXN | 192,680,000 | 01/24/20 | 206,098 | |||||||||||||
SSC | EUR | 665,000 | USD | 741,497 | 01/24/20 | (5,407 | ) | ||||||||||||
SSC | CAD | 2,870,000 | USD | 2,195,225 | 01/24/20 | (15,195 | ) | ||||||||||||
SSC | AUD | 7,550,000 | USD | 5,196,923 | 01/24/20 | (104,120 | ) | ||||||||||||
SSC | GBP | 2,095,000 | USD | 2,722,298 | 01/24/20 | (54,416 | ) | ||||||||||||
Net unrealized appreciation (depreciation) | $ | 159,931 |
29
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 125,712,110 | $ | 574,246 | $ | — | $ | 126,286,356 | |||||||||||
Preferred stocks | 724,048 | — | — | 724,048 | |||||||||||||||
Exchange traded funds | 24,735,716 | — | — | 24,735,716 | |||||||||||||||
Investment companies | 22,933,334 | — | — | 22,933,334 | |||||||||||||||
Non-U.S. government agency obligations | — | 14,245,496 | — | 14,245,496 | |||||||||||||||
U.S. treasury obligations | — | 41,588,904 | — | 41,588,904 | |||||||||||||||
Short-term investments | — | 22,243,400 | — | 22,243,400 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 16,658,350 | — | 16,658,350 | |||||||||||||||
Futures contracts | 596,612 | — | — | 596,612 | |||||||||||||||
Swap agreements | — | 2,523,098 | — | 2,523,098 | |||||||||||||||
Forward foreign currency contracts | — | 940,920 | — | 940,920 | |||||||||||||||
Total | $ | 174,701,820 | $ | 98,774,414 | $ | — | $ | 273,476,234 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | $ | (1,368,901 | ) | $ | — | $ | — | $ | (1,368,901 | ) | |||||||||
Swap agreements | — | (272,850 | ) | — | (272,850 | ) | |||||||||||||
Forward foreign currency contracts | — | (780,989 | ) | — | (780,989 | ) | |||||||||||||
Total | $ | (1,368,901 | ) | $ | (1,053,839 | ) | $ | — | $ | (2,422,740 | ) |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Securities exempt from registration pursuant to Rule 144A, in the amount of $4,115,984, represented 1.6% of the Fund's net assets at period end.
3 The table below details the Fund's investment in a fund advised by the same Advisor as the Fund. The Advisor does not earn a management fee on the assets invested into the affiliated UBS Relationship Funds.
30
UBS Global Allocation Fund
Portfolio of investments
December 31, 2019 (unaudited)
Security description | Value 6/30/2019 | Purchases during the period ended 12/31/2019 | Sales during the period ended 12/31/2019 | Net realized loss during the period ended 12/31/2019 | Change in net unrealized appreciation (depreciation) during the period ended 12/31/2019 | Value 12/31/2019 | Net income earned from affiliate for the period ended 12/31/2019 | Shares 12/31/2019 | |||||||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | $ | 20,816,127 | $ | 614,199 | $ | — | $ | — | $ | 1,503,008 | $ | 22,933,334 | $ | 614,199 | 2,297,929 |
4 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.
5 Debt security whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the securities is fixed, while the principal value rises or falls based on changes in an index. Thus, if inflation occurs, the principal and interest payments on the securities are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the securities' principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the securities generally pay lower interest rates than typical government securities from the issuer's country. Only if inflation occurs will securities offer a higher real yield than a conventional security of the same maturity.
6 Rate shown is the discount rate at the date of purchase unless otherwise noted.
7 Payments made or received are based on the notional amount.
8 If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced obligation.
See accompanying notes to financial statements.
31
UBS Emerging Markets Equity Opportunity Fund
Portfolio performance
For the six months ended December 31, 2019, Class P2 shares of UBS Emerging Markets Equity Opportunity Fund (the "Fund") returned 10.17%, while Class P shares returned 9.68%. The Fund's benchmark, the MSCI Emerging Markets Index (net) (the "Index"), returned 7.09%. Please note that these returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.
The Fund posted a positive return and outperformed its benchmark during the reporting period.
Portfolio performance summary1
What worked:
• The Fund's holding in Taiwan Semiconductor Manufacturing Company (Taiwan, information technology) was the top contributor to results over the reporting period. The company posted better than expected results on the back of the continued recovery in its mobile and high-performing computing businesses. Taiwan Semiconductor Manufacturing Company is also seen as a big beneficiary of trends such as 5G and high performance computing (artificial intelligent, internet of things, edge computing, etc.).
• The Fund's position in SK Hynix (South Korea, information technology) was also additive for returns. The market may be turning more positive on the memory market. NAND prices bottomed out, while near term movement of DRAM, despite being still on a downtrend, would suggest a trough in the coming months.
What didn't work:
• The Fund's position in Bangkok Bank (Thailand, financials) was a headwind for returns. Bangkok Bank underperformed as it announced in December 2019 that it would buy an 89% stake in Bank Permata in Indonesia. Investors perceived this negatively in terms of the price paid and potential value add to Bangkok Bank's business. We are reconsidering our thesis on the company and continue to hold the stock.
• The Fund's position in Banco Bradesco (Brazil, financials) was a headwind for results, alongside broader weakness in the Brazilian market in August 2019, amid weakening sentiment over slower economic growth. The stock rallied in the fourth quarter, but it did not offset the losses from the prior quarter. We continue to hold the stock.
• The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the period from the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
32
UBS Emerging Markets Equity Opportunity Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Before deducting maximum sales charge | |||||||||||||||
Class P22 | 10.17 | % | 26.47 | % | 3.19 | % | |||||||||
Class P4 | 9.68 | % | N/A | 14.10 | % | ||||||||||
MSCI Emerging Markets Index (net)3 | 7.09 | % | 18.44 | % | 1.50 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class P2—1.44% and 0.42%; Class P—1.24% and 1.02%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 28, 2020, do not exceed 1.25% for Class A shares and 1.00% for Class P shares and 0.40% for Class P2 shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recounpment rights will survive.
1 Inception date of Class P2 of UBS Emerging Markets Equity Opportunity Fund is June 4, 2018.
2 Class P2 shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P2 shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI Emerging Markets Index (net) is a market capitalization-weighted index composed of different emerging market countries in Europe, Latin America, and the Pacific Basin. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to nonresident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 Inception date of Class P of UBS Emerging Markets Equity Opportunity Fund is January 31, 2019.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
33
UBS Emerging Markets Equity Opportunity Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Alibaba Group Holding Ltd., ADR | 8.1 | % | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 7.8 | ||||||
Samsung Electronics Co. Ltd. | 6.8 | ||||||
Tencent Holdings Ltd. | 4.8 | ||||||
SK Hynix, Inc. | 4.1 | ||||||
Naspers Ltd., N Shares | 4.0 | ||||||
TAL Education Group, ADR | 3.9 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 3.9 | ||||||
Banco Bradesco SA | 3.7 | ||||||
LUKOIL PJSC, ADR | 3.7 | ||||||
Total | 50.8 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
China | 32.8 | % | |||||
South Korea | 13.1 | ||||||
India | 9.0 | ||||||
Brazil | 8.5 | ||||||
Taiwan | 7.8 | ||||||
Total | 71.2 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
34
UBS Emerging Markets Equity Opportunity Fund
Industry diversification—December 31, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Automobiles | 2.3 | % | |||||
Banks | 18.4 | ||||||
Beverages | 4.9 | ||||||
Diversified consumer services | 4.9 | ||||||
Electric utilities | 0.8 | ||||||
Household durables | 1.5 | ||||||
Insurance | 3.9 | ||||||
Interactive media & services | 4.8 | ||||||
Internet & direct marketing retail | 12.1 | ||||||
IT services | 1.6 | ||||||
Metals & mining | 2.0 | ||||||
Oil, gas & consumable fuels | 8.0 | ||||||
Personal products | 1.7 | ||||||
Pharmaceuticals | 3.0 | ||||||
Real estate management & development | 2.5 | ||||||
Semiconductors & semiconductor equipment | 11.9 | ||||||
Technology hardware, storage & peripherals | 6.8 | ||||||
Thrifts & mortgage finance | 3.3 | ||||||
Total common stocks | 94.4 | % | |||||
Preferred stocks | 3.7 | ||||||
Short-term investments | 1.5 | ||||||
Total investments | 99.6 | % | |||||
Other assets in excess of liabilities | 0.4 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
35
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 94.4% | |||||||||||
Brazil: 4.8% | |||||||||||
Petroleo Brasileiro SA, ADR | 307,700 | $ | 4,590,884 | ||||||||
Petroleo Brasileiro SA, ADR | 290,800 | 4,635,352 | |||||||||
Vale SA | 509,386 | 6,749,266 | |||||||||
15,975,502 | |||||||||||
China: 32.8% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 128,795 | 27,317,420 | |||||||||
China Jinmao Holdings Group Ltd. | 10,706,000 | 8,339,697 | |||||||||
CNOOC Ltd. | 1,969,000 | 3,274,802 | |||||||||
Gree Electric Appliances, Inc. of Zhuhai, Class A | 521,689 | 4,911,547 | |||||||||
Jiangsu Hengrui Medicine Co. Ltd., Class A | 818,961 | 10,289,772 | |||||||||
Kweichow Moutai Co. Ltd., Class A | 62,237 | 10,569,845 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 28,193 | 3,418,401 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 1,108,000 | 13,095,851 | |||||||||
TAL Education Group, ADR* | 274,900 | 13,250,180 | |||||||||
Tencent Holdings Ltd. | 332,800 | 16,041,436 | |||||||||
110,508,951 | |||||||||||
Hungary: 1.2% | |||||||||||
OTP Bank Nyrt PLC | 80,146 | 4,191,238 | |||||||||
India: 9.0% | |||||||||||
HDFC Bank Ltd. | 450,000 | 8,019,891 | |||||||||
HDFC Bank Ltd., ADR | 44,930 | 2,847,214 | |||||||||
Housing Development Finance Corp. Ltd. | 331,820 | 11,215,370 | |||||||||
Power Grid Corp. of India Ltd. | 975,574 | 2,600,277 | |||||||||
Tata Consultancy Services Ltd. | 183,417 | 5,554,817 | |||||||||
30,237,569 | |||||||||||
Indonesia: 5.6% | |||||||||||
Astra International Tbk. PT | 15,292,800 | 7,628,499 | |||||||||
Bank Mandiri Persero Tbk. PT | 20,167,300 | 11,149,579 | |||||||||
18,778,078 | |||||||||||
Malaysia: 2.4% | |||||||||||
CIMB Group Holdings Bhd | 6,347,731 | 7,991,887 | |||||||||
Mexico: 4.2% | |||||||||||
Fomento Economico Mexicano SAB de CV | 619,500 | 5,854,083 | |||||||||
Grupo Financiero Banorte SAB de CV, Class O | 1,507,200 | 8,421,826 | |||||||||
14,275,909 |
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Russia: 7.4% | |||||||||||
LUKOIL PJSC, ADR | 125,851 | $ | 12,422,752 | ||||||||
LUKOIL PJSC, ADR | 1,854 | 183,880 | |||||||||
Sberbank of Russia PJSC | 3,021,060 | 12,399,895 | |||||||||
25,006,527 | |||||||||||
South Africa: 4.0% | |||||||||||
Naspers Ltd., N Shares | 81,500 | 13,329,958 | |||||||||
South Korea: 13.1% | |||||||||||
LG Household & Health Care Ltd.* | 5,257 | 5,732,264 | |||||||||
Samsung Electronics Co. Ltd. | 476,432 | 22,988,374 | |||||||||
SK Hynix, Inc.* | 166,872 | 13,578,326 | |||||||||
SK Innovation Co. Ltd. | 13,278 | 1,722,254 | |||||||||
44,021,218 | |||||||||||
Taiwan: 7.8% | |||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 2,386,000 | 26,345,732 | |||||||||
Thailand: 2.1% | |||||||||||
Bangkok Bank PCL NVDR | 1,322,600 | 7,064,758 | |||||||||
Total common stocks (cost $284,081,021) | 317,727,327 | ||||||||||
Preferred stocks: 3.7% | |||||||||||
Brazil: 3.7% | |||||||||||
Banco Bradesco SA (cost $11,844,586) | 1,399,300 | 12,581,769 | |||||||||
Short-term investments: 1.5% | |||||||||||
Investment companies: 1.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $5,027,668) | 5,027,668 | 5,027,668 | |||||||||
Total investments: 99.6% (cost $300,953,275) | 335,336,764 | ||||||||||
Other assets in excess of liabilities: 0.4% | 1,210,304 | ||||||||||
Net assets: 100.0% | $ | 336,547,068 |
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 94.
36
UBS Emerging Markets Equity Opportunity Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 317,727,327 | $ | — | $ | — | $ | 317,727,327 | |||||||||||
Preferred stocks | 12,581,769 | — | — | 12,581,769 | |||||||||||||||
Short-term investments | — | 5,027,668 | — | 5,027,668 | |||||||||||||||
Total | $ | 330,309,096 | $ | 5,027,668 | $ | — | $ | 335,336,764 |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
See accompanying notes to financial statements.
37
UBS Engage For Impact Fund
Portfolio performance
For the six months ended December 31, 2019, Class P shares of UBS Engage for Impact Fund (the "Fund") returned 6.39%. The Fund's benchmark, the MSCI All Country World Index (net) (the "Index"), returned 8.92% over the same time period. (Please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted positive absolute returns and underperformed its benchmark during the reporting period. This was driven by weak sector allocation. Stock selection was slightly negative.
Portfolio performance summary1
What worked:
• Stock selection within the industrials and consumer discretionary sectors contributed positively to Fund performance during the reporting period. The Fund's relative overweight to the health care sector contributed positively, as well.
• Several individual stock positions were positive for relative performance.
• New Oriental Education continued on its positive trajectory, as demand for a higher level of literacy and private tutoring is on the rise in China. The tutoring market is highly related to China's urbanization progress, and is still in a huge up-cycle for development.
• Prysmian posted solid results for the second quarter of the year, including adjusted earnings before interest, tax, depreciation and amortization (EBITDA) that was about 5% ahead of consensus. In November, Prysmian announced the final commissioning of a major project, a significant positive, which helped cash flow and allowed the group to shift resources to other projects. Prysmian is strongly cash generative, due to low capital expenditure requirements and prepayments on large turnkey contracts. The company's Draka deal provided significant opportunities for synergy, and helped with further expansion of profit margins. We believe the acquisition of General Cable should offer similar opportunities, as Prysmian's management has a good track record of adding value through industry consolidation.
• LKQ's share price increased beginning in September, after management updated investors on its European restructuring plans, which call for a significant expansion of profit margins. We believe the plan is achievable because it will be managed by the new CEO of Europe. LKQ is also being engaged by an increasingly active set of shareholders, who are pushing for operational improvements as well as possible divestitures of non-core businesses. We believe these developments have the potential to unlock value for the company.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
38
UBS Engage For Impact Fund
What didn't work:
• Stock selection in financials and health care detracted from Fund performance during the six-month period. The Fund's relative underweight to the information technology sector also detracted from relative performance.
• Certain stock selection decisions made a negative contribution to relative performance.
• The Fund suffered from not owning Apple, the largest stock in the benchmark. Apple's shares were lifted by expectations of strong holiday sales, as well as October results which were boosted by Services, Wearables and iPad sales. We do not believe Apple qualifies for this Fund, as the technology giant does not derive revenues from impactful product and services.
• The share price of KasikornBank decreased over the six months ended December 31, 2019, following the release of second quarter 2019 earnings, which showed loan growth and non-interest income growth below guidance. We continue to hold this security.
• Centrica was a top detractor to performance over the period. Our initial thesis on the company was based around our expectation that Centrica could maintain market share leadership while significantly reducing costs. While Centrica was rated in the top decile on environmental, social & governance (ESG) scoring, our view was that there needed to be improvements in management of the business, and we had been extensively engaging with the board to encourage change at the beginning of 2019. Hence, the departure of the CEO in June was both expected to us and a desired outcome. The company's additional restructuring costs, however, were not expected, and had a detrimental impact on our initial thesis. Although the stock was trading well below our previous fair value estimate, we sold out of it late in the summer due to our lack of confidence in the ability of management to execute on the restructuring plan.
• The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
39
UBS Engage For Impact Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Class P2 | 6.39 | % | 23.64 | % | 12.66 | % | |||||||||
MSCI All Country World Index (net)3 | 8.92 | % | 26.60 | % | 21.24 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class P—3.87% and 0.85%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 28, 2020, do not exceed 1.10% for Class A shares and 0.85% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of Class P of UBS Engage For Impact Fund is October 24, 2018.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI All Country World Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
40
UBS Engage For Impact Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Conagra Brands, Inc. | 3.6 | % | |||||
Takeda Pharmaceutical Co. Ltd. | 3.6 | ||||||
LKQ Corp. | 3.3 | ||||||
West Japan Railway Co. | 3.1 | ||||||
MSA Safety, Inc. | 3.0 | ||||||
China Mobile Ltd. | 3.0 | ||||||
Linde PLC | 2.9 | ||||||
Erste Group Bank AG | 2.8 | ||||||
Stericycle, Inc. | 2.8 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 2.8 | ||||||
Total | 30.9 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 45.8 | % | |||||
Japan | 9.5 | ||||||
Germany | 9.0 | ||||||
China | 8.1 | ||||||
United Kingdom | 4.9 | ||||||
Total | 77.3 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
41
UBS Engage For Impact Fund
Industry diversification—December 31, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Auto components | 3.8 | % | |||||
Banks | 12.7 | ||||||
Biotechnology | 8.0 | ||||||
Building products | 1.9 | ||||||
Chemicals | 7.2 | ||||||
Commercial services & supplies | 5.9 | ||||||
Distributors | 3.3 | ||||||
Diversified consumer services | 2.0 | ||||||
Electrical equipment | 2.6 | ||||||
Electronic equipment, instruments & components | 4.4 | ||||||
Food & staples retailing | 1.8 | ||||||
Food products | 5.0 | ||||||
Health care equipment & supplies | 5.9 | ||||||
Health care providers & services | 1.6 | ||||||
Machinery | 4.6 | ||||||
Metals & mining | 2.1 | ||||||
Oil, gas & consumable fuels | 4.3 | ||||||
Personal products | 2.0 | ||||||
Pharmaceuticals | 5.1 | ||||||
Real estate management & development | 0.8 | ||||||
Road & rail | 3.1 | ||||||
Semiconductors & semiconductor equipment | 5.5 | ||||||
Wireless telecommunication services | 3.0 | ||||||
Total common stocks | 96.6 | % | |||||
Short-term investments | 3.5 | ||||||
Investment of cash collateral from securities loaned | 2.2 | ||||||
Total investments | 102.3 | % | |||||
Liabilities in excess of other assets | (2.3 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
42
UBS Engage For Impact Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 96.6% | |||||||||||
Austria: 2.8% | |||||||||||
Erste Group Bank AG* | 16,607 | $ | 625,158 | ||||||||
China: 8.1% | |||||||||||
China Mengniu Dairy Co. Ltd.* | 77,000 | 311,269 | |||||||||
China Mobile Ltd. | 79,500 | 668,256 | |||||||||
China Suntien Green Energy Corp., Class H | 1,325,000 | 382,589 | |||||||||
New Oriental Education & Technology Group, Inc., ADR* | 3,545 | 429,831 | |||||||||
1,791,945 | |||||||||||
Denmark: 1.7% | |||||||||||
Genmab A/S* | 1,676 | 372,718 | |||||||||
Germany: 9.0% | |||||||||||
Continental AG | 3,059 | 395,489 | |||||||||
Infineon Technologies AG | 25,064 | 571,001 | |||||||||
KION Group AG | 7,587 | 523,897 | |||||||||
LANXESS AG | 7,481 | 501,976 | |||||||||
1,992,363 | |||||||||||
Hong Kong: 0.8% | |||||||||||
Sun Hung Kai Properties Ltd. | 12,000 | 183,720 | |||||||||
Indonesia: 2.3% | |||||||||||
Bank Mandiri Persero Tbk. PT | 914,000 | 505,309 | |||||||||
Ireland: 1.9% | |||||||||||
Kingspan Group PLC | 6,917 | 422,467 | |||||||||
Italy: 2.6% | |||||||||||
Prysmian SpA | 24,029 | 579,227 | |||||||||
Japan: 9.5% | |||||||||||
Sumitomo Mitsui Financial Group, Inc. | 16,500 | 613,198 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 19,653 | 783,551 | |||||||||
West Japan Railway Co. | 7,900 | 686,429 | |||||||||
2,083,178 | |||||||||||
Mexico: 2.6% | |||||||||||
Grupo Financiero Banorte SAB de CV, Class O | 103,050 | 575,816 | |||||||||
Netherlands: 1.8% | |||||||||||
Koninklijke Ahold Delhaize N.V. | 15,839 | 396,106 | |||||||||
Norway: 2.6% | |||||||||||
Equinor ASA | 28,538 | 570,480 | |||||||||
Spain: 1.5% | |||||||||||
Grifols SA, ADR | 14,300 | 333,047 | |||||||||
Thailand: 2.2% | |||||||||||
Kasikornbank PCL | 94,100 | 472,797 |
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
United Kingdom: 4.9% | |||||||||||
Linde PLC | 2,944 | $ | 626,777 | ||||||||
Unilever N.V. | 7,809 | 448,742 | |||||||||
1,075,519 | |||||||||||
United States: 42.3% | |||||||||||
Abbott Laboratories | 5,218 | 453,236 | |||||||||
AGCO Corp. | 6,220 | 480,495 | |||||||||
Aptiv PLC | 4,714 | 447,689 | |||||||||
Conagra Brands, Inc. | 23,023 | 788,307 | |||||||||
Danaher Corp. | 3,417 | 524,441 | |||||||||
Ecolab, Inc. | 2,365 | 456,421 | |||||||||
Elanco Animal Health, Inc.* | 11,916 | 350,926 | |||||||||
Incyte Corp.* | 5,969 | 521,213 | |||||||||
IPG Photonics Corp.* | 3,023 | 438,093 | |||||||||
Ironwood Pharmaceuticals, Inc.*,1 | 40,638 | 540,892 | |||||||||
Laboratory Corp. of America Holdings* | 2,041 | 345,276 | |||||||||
LivaNova PLC* | 4,235 | 319,446 | |||||||||
LKQ Corp.* | 20,160 | 719,712 | |||||||||
Micron Technology, Inc.* | 7,282 | 391,626 | |||||||||
MSA Safety, Inc. | 5,305 | 670,340 | |||||||||
Sims Metal Management Ltd. | 62,992 | 471,664 | |||||||||
Stericycle, Inc.*,1 | 9,703 | 619,148 | |||||||||
Trimble, Inc.* | 12,984 | 541,303 | |||||||||
Universal Display Corp. | 1,206 | 248,520 | |||||||||
9,328,748 | |||||||||||
Total common stocks (cost $19,178,698) | 21,308,598 | ||||||||||
Short-term investments: 3.5% | |||||||||||
Investment companies: 3.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $758,419) | 758,419 | 758,419 | |||||||||
Investment of cash collateral from securities loaned: 2.2% | |||||||||||
Money market funds: 2.2% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $488,524) | 488,524 | 488,524 | |||||||||
Total investments: 102.3% (cost $20,425,641) | 22,555,541 | ||||||||||
Liabilities in excess of other assets: (2.3)% | (501,144 | ) | |||||||||
Net assets: 100.0% | $ | 22,054,397 |
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 94.
43
UBS Engage For Impact Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 21,308,598 | $ | — | $ | — | $ | 21,308,598 | |||||||||||
Short-term investments | — | 758,419 | — | 758,419 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 488,524 | — | 488,524 | |||||||||||||||
Total | $ | 21,308,598 | $ | 1,246,943 | $ | — | $ | 22,555,541 |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
See accompanying notes to financial statements.
44
UBS International Sustainable Equity Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS International Sustainable Equity Fund (the "Fund") returned 6.98% (Class A shares returned 1.12% after the deduction of the maximum sales charge), while Class P shares returned 7.10%. The Fund's new benchmark, the MSCI ACWI ex-US Index (the "Index"), returned 6.96%. For comparison purposes, the Fund's previous benchmark, the MSCI World ex USA Index (net), returned 6.85%.1 (Class P shares have lower expenses than the other share class in the series. Returns for all share classes over various time periods are shown on page 47; 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's performance was primarily due to stock selection and sector allocation decisions.
Portfolio performance summary2
What worked:
• Stock selection in the financials, energy and materials sectors contributed the most to performance.
• Entertainment One's share price rallied as Hasbro announced it was acquiring the company for $4 billion. We sold out of our position before the reporting period ended.
• Shares of Banca Mediolanum were supported by the company's strong third quarter 2019 results, which showed more than 50% increase in its operating margins, driven by cost controls and improving quality of recurring revenues. In addition, net commissions and net interest income both increased over 25% compared to the previous year.
• Galapagos posted strong third quarter 2019 results and, most importantly, strengthened its balance sheet thanks to a $3.95 billion payment and a $1.1 billion equity investment from partner Gilead.
• From a sector allocation perspective, an average underweight to the energy sector contributed to performance.
What didn't work:
• Stock selection in the communication services, consumer discretionary and utilities sectors detracted from performance during the reporting period.
• The largest stock detractor was Centrica, which announced the much-anticipated restructuring in July 2019, costing approximately £1.3 billion. This was not expected and detrimental to our thesis. As such, we eliminated our position.
• Publicis Groupe guided down for 2019, with sales expected to decline 2.5% for the full year. New parts if its business (Sapient and Epsilon) haven't delivered the expected growth and margin improvement contributions. It appeared that our original thesis for Publicis Groupe to execute its strategy of transforming itself into an advertising and marketing service company fit for the world of digital will take longer than expected. We therefore sold out the position.
• Axis Bank's share price fell during the reporting period on fears over the Indian banking sector's stability. Although Axis Bank missed the market's estimates for the first quarter of the year, its net profit rose 95%.
1 Effective October 28, 2019, the MSCI ACWI ex-US Index replaced MSCI World ex USA Index (net) as the Fund's primary benchmark because it more closely aligns with the Fund's investment strategy.
For a detailed commentary on the market environment in general during the reporting period, see page 3.
45
UBS International Sustainable Equity Fund
• In terms of sector allocation, an average underweight to consumer discretionary and an average overweight to communication services slightly detracted from relative performance.
Portfolio highlights
• Sony is a conglomerate engaged in the production of various kinds of electronic equipment and production and licensing of music and films. Sony has significantly transformed its business portfolio over the past several years. We believe Sony will be able to grow its earnings in a sustainable way at least for the next three- to five-years. Keys to achieving this are its game and network services segment and the successful launch of PlayStation 5. The restructuring of its Mobile Communication and Pictures business is also very important. Sony is rated top decile based on our sustainability model, lifted by its environmental efficiency.
• Takeda Pharmaceutical is one of the top 10 global pharmaceuticial companies, with a balanced product portfolio. Investor frustration around the surprise $60 billion Shire acquisition resulted in a depressed valuation. At current levels, we believe concerns around the ability to grow its plasma business in-line with the market and to improve historically weak research and development (R&D) productivity are more than priced in to its share price, and we see the potential for upside surprises on both fronts. In addition, we believe its diversified business is better prepared to weather the upcoming loss of exclusivity of Velcade (2020+) and Vyvanse (2022-23) than either legacy Takeda or Shire alone. Although the company's financial leverage remains elevated, we see a clear path to delevraging within the next three years, even without additional divestitures of non-core assets. Takeda Pharmaceutical has formulated "Vision 2025" as its vision for sustainable growth, formulated around its strategic roadmap, with clear performance targets.
• Bank Central Asia is a diversified Indonesian bank, offering traditional commercial banking services, as well as insurance and investment products. The company generates one of the highest returns in the Indonesian and regional banking sector. This is driven by a positive domestic structure, macro momentum and better leverage of its deposit franchise. Bank Central Asia also has a strong balance sheet, coming from low loan-to-deposit ratio, strong ratio of deposits in current and saving accounts, and a solid transactional banking franchise.
• During the reporting period, we initiated several new positions, including Alibaba, Daimler, Grifols, HCL Technologies, Henkel, Mahindra & Mahindra and Softbank. We sold the Fund's positions in A.P. Moller Maersk, Publicis Groupe, KDDI, Novartis and Sumitomo Mitsui Financials.
• The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
46
UBS International Sustainable Equity Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 6.98 | % | 22.38 | % | 5.37 | % | 5.56 | % | |||||||||||
Class P2 | 7.10 | % | 22.61 | % | 5.62 | % | 5.83 | % | |||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 1.12 | % | 15.64 | % | 4.18 | % | 4.97 | % | |||||||||||
MSCI World ex USA Index (net)3 | 6.85 | % | 22.49 | % | 5.42 | % | 5.32 | % | |||||||||||
MSCI ACWI ex-US Index4 | 6.96 | % | 21.51 | % | 5.51 | % | 4.97 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.53% and 1.25%; Class P—1.26% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), has agreed irrevocably to waive its fees and reimburse certain expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed 1.25% for Class A shares and 1.00% for Class P shares. This fee waiver and expense arrangement may only be amended or terminated by shareholders.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The MSCI World ex USA Index (net) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets excluding the United States. Net total return indices reinvest dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. The index is constructed and managed with a view to being fully investable from the perspective of international institutional investors. Investors should note that indices do not reflect the deduction of fees and expenses.
4 Effective October 28, 2019, the MSCI ACWI ex-US Index replaced MSCI World ex USA Index (net) as the Fund's primary benchmark because it more closely aligns with the Fund's investment strategy
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
47
UBS International Sustainable Equity Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Sony Corp. | 3.2 | % | |||||
Takeda Pharmaceutical Co. Ltd. | 2.6 | ||||||
GlaxoSmithKline PLC | 2.5 | ||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 2.2 | ||||||
Bank Central Asia Tbk. PT | 2.1 | ||||||
SAP SE | 2.0 | ||||||
Banca Mediolanum SpA | 2.0 | ||||||
Aon PLC | 1.9 | ||||||
Kao Corp. | 1.9 | ||||||
Unilever N.V. | 1.9 | ||||||
Total | 22.3 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
Japan | 22.5 | % | |||||
United Kingdom | 13.8 | ||||||
Germany | 8.5 | ||||||
China | 6.3 | ||||||
Switzerland | 5.6 | ||||||
Total | 56.7 | % |
1 The Fund's Portfolio is actively managed and its composition will vary over time.
48
UBS International Sustainable Equity Fund
Industry diversification—December 31, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Auto components | 1.2 | % | |||||
Automobiles | 1.8 | ||||||
Banks | 9.1 | ||||||
Biotechnology | 3.1 | ||||||
Chemicals | 3.5 | ||||||
Commercial services & supplies | 1.3 | ||||||
Construction & engineering | 1.0 | ||||||
Diversified financial services | 3.5 | ||||||
Diversified telecommunication services | 2.0 | ||||||
Electronic equipment, instruments & components | 1.6 | ||||||
Entertainment | 2.9 | ||||||
Equity real estate investment trusts | 1.8 | ||||||
Food & staples retailing | 1.7 | ||||||
Food products | 2.1 | ||||||
Health care equipment & supplies | 2.1 | ||||||
Household durables | 3.2 | ||||||
Insurance | 7.9 | ||||||
Internet & direct marketing retail | 3.8 | ||||||
IT services | 0.6 | ||||||
Machinery | 5.8 | ||||||
Oil, gas & consumable fuels | 4.6 | ||||||
Paper & forest products | 1.1 | ||||||
Personal products | 4.6 | ||||||
Pharmaceuticals | 7.1 | ||||||
Real estate management & development | 1.2 | ||||||
Road & rail | 0.7 | ||||||
Semiconductors & semiconductor equipment | 4.7 | ||||||
Software | 3.8 | ||||||
Textiles, apparel & luxury goods | 1.6 | ||||||
Trading companies & distributors | 2.5 | ||||||
Wireless telecommunication services | 2.7 | ||||||
Total common stocks | 94.6 | % | |||||
Preferred stocks | 1.5 | ||||||
Short-term investments | 0.5 | ||||||
Investment of cash collateral from securities loaned | 0.8 | ||||||
Total investments | 97.4 | % | |||||
Other assets in excess of liabilities | 2.6 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
49
UBS International Sustainable Equity Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 94.6% | |||||||||||
Australia: 4.7% | |||||||||||
Brambles Ltd. | 340,670 | $ | 2,801,843 | ||||||||
Mirvac Group | 1,724,721 | 3,848,827 | |||||||||
Santos Ltd. | 580,660 | 3,333,171 | |||||||||
9,983,841 | |||||||||||
Austria: 1.5% | |||||||||||
Erste Group Bank AG* | 82,860 | 3,119,203 | |||||||||
Belgium: 2.1% | |||||||||||
Galapagos N.V.* | 785 | 164,220 | |||||||||
Galapagos N.V.*,1 | 8,386 | 1,754,326 | |||||||||
KBC Group N.V. | 34,020 | 2,559,025 | |||||||||
4,477,571 | |||||||||||
China: 6.3% | |||||||||||
Alibaba Group Holding Ltd., ADR* | 16,399 | 3,478,228 | |||||||||
China Mobile Ltd. | 386,500 | 3,248,816 | |||||||||
Ping An Insurance Group Co. of China Ltd., H Shares | 399,500 | 4,721,834 | |||||||||
Prosus N.V.* | 24,407 | 1,821,414 | |||||||||
13,270,292 | |||||||||||
Denmark: 2.5% | |||||||||||
Genmab A/S* | 12,428 | 2,763,809 | |||||||||
H Lundbeck A/S | 66,120 | 2,524,964 | |||||||||
5,288,773 | |||||||||||
Finland: 1.0% | |||||||||||
Neste Oyj | 59,423 | 2,067,631 | |||||||||
France: 1.2% | |||||||||||
Ubisoft Entertainment SA* | 35,577 | 2,457,456 | |||||||||
Germany: 7.0% | |||||||||||
Continental AG | 19,466 | 2,516,703 | |||||||||
Daimler AG (Registered) | 36,876 | 2,042,131 | |||||||||
Infineon Technologies AG | 104,867 | 2,389,051 | |||||||||
KION Group AG | 20,324 | 1,403,410 | |||||||||
LANXESS AG | 32,877 | 2,206,050 | |||||||||
SAP SE | 32,137 | 4,337,304 | |||||||||
14,894,649 | |||||||||||
Hong Kong: 1.2% | |||||||||||
Sun Hung Kai Properties Ltd. | 170,500 | 2,610,353 | |||||||||
India: 3.1% | |||||||||||
Axis Bank Ltd., GDR | 64,080 | 3,402,648 | |||||||||
Infosys Ltd., ADR | 124,499 | 1,284,830 | |||||||||
Mahindra & Mahindra Ltd., GDR | 246,611 | 1,864,379 | |||||||||
6,551,857 |
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Indonesia: 3.5% | |||||||||||
Bank Central Asia Tbk. PT | 1,853,300 | $ | 4,462,205 | ||||||||
Bank Mandiri Persero Tbk. PT | 5,219,900 | 2,885,844 | |||||||||
7,348,049 | |||||||||||
Italy: 3.1% | |||||||||||
Banca Mediolanum SpA | 413,224 | 4,104,410 | |||||||||
Infrastrutture Wireless Italiane SpA2 | 243,902 | 2,388,396 | |||||||||
6,492,806 | |||||||||||
Japan: 22.5% | |||||||||||
Inpex Corp. | 196,700 | 2,057,425 | |||||||||
ITOCHU Corp. | 101,100 | 2,358,271 | |||||||||
Kao Corp. | 49,000 | 4,069,992 | |||||||||
Kissei Pharmaceutical Co. Ltd. | 64,082 | 1,840,098 | |||||||||
Kubota Corp.1 | 167,500 | 2,660,761 | |||||||||
MINEBEA MITSUMI, Inc. | 185,900 | 3,895,765 | |||||||||
Nabtesco Corp. | 88,300 | 2,653,348 | |||||||||
Nintendo Co. Ltd. | 9,200 | 3,723,013 | |||||||||
Nippon Telegraph & Telephone Corp. | 76,600 | 1,943,640 | |||||||||
ORIX Corp. | 196,200 | 3,270,150 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 28,400 | 3,152,216 | |||||||||
SoftBank Group Corp. | 56,500 | 2,473,094 | |||||||||
Sony Corp. | 98,500 | 6,709,296 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 136,161 | 5,428,645 | |||||||||
West Japan Railway Co. | 17,400 | 1,511,881 | |||||||||
47,747,595 | |||||||||||
Netherlands: 4.4% | |||||||||||
ASML Holding N.V. | 12,476 | 3,690,305 | |||||||||
Koninklijke Ahold Delhaize N.V. | 141,835 | 3,547,052 | |||||||||
NXP Semiconductors N.V. | 16,205 | 2,062,248 | |||||||||
9,299,605 | |||||||||||
Norway: 2.0% | |||||||||||
Equinor ASA | 119,044 | 2,379,714 | |||||||||
Mowi ASA | 74,851 | 1,945,599 | |||||||||
4,325,313 | |||||||||||
South Africa: 1.3% | |||||||||||
Naspers Ltd., N Shares | 17,082 | 2,793,894 | |||||||||
South Korea: 2.6% | |||||||||||
LG Household & Health Care Ltd. | 1,561 | 1,702,124 | |||||||||
Samsung Engineering Co. Ltd.* | 122,706 | 2,037,230 | |||||||||
SK Hynix, Inc.* | 21,811 | 1,774,755 | |||||||||
5,514,109 | |||||||||||
Spain: 2.2% | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 491,695 | 2,748,295 | |||||||||
Grifols SA, ADR | 81,600 | 1,900,464 | |||||||||
4,648,759 |
50
UBS International Sustainable Equity Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Switzerland: 5.6% | |||||||||||
Alcon, Inc.* | 37,931 | $ | 2,147,777 | ||||||||
Cie Financiere Richemont SA (Registered) | 42,233 | 3,319,118 | |||||||||
Nestle SA (Registered) | 22,893 | 2,478,537 | |||||||||
Zurich Insurance Group AG | 9,449 | 3,877,039 | |||||||||
11,822,471 | |||||||||||
United Kingdom: 13.8% | |||||||||||
Ashtead Group PLC | 91,620 | 2,929,626 | |||||||||
Croda International PLC | 29,092 | 1,973,005 | |||||||||
GlaxoSmithKline PLC | 225,145 | 5,305,459 | |||||||||
Mondi PLC | 94,697 | 2,223,347 | |||||||||
Prudential PLC | 207,328 | 3,979,340 | |||||||||
Sage Group PLC/The | 369,374 | 3,664,653 | |||||||||
Spectris PLC | 85,070 | 3,274,588 | |||||||||
Unilever N.V. | 70,153 | 4,031,320 | |||||||||
Weir Group PLC/The | 88,294 | 1,765,424 | |||||||||
29,146,762 | |||||||||||
United States: 3.0% | |||||||||||
Aon PLC | 19,600 | 4,082,484 | |||||||||
LivaNova PLC* | 29,900 | 2,255,357 | |||||||||
6,337,841 | |||||||||||
Total common stocks (cost $181,857,464) | 200,198,830 |
Number of shares | Value | ||||||||||
Preferred stocks: 1.5% | |||||||||||
Germany: 1.5% | |||||||||||
Henkel AG & Co. KGaA | 23,371 | $ | 2,417,046 | ||||||||
Jungheinrich AG | 34,478 | 831,490 | |||||||||
Total preferred stocks (cost $3,436,468) | 3,248,536 | ||||||||||
Short-term investments: 0.5% | |||||||||||
Investment companies: 0.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $1,063,998) | 1,063,998 | 1,063,998 | |||||||||
Investment of cash collateral from securities loaned: 0.8% | |||||||||||
Money market funds: 0.8% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $1,673,164) | 1,673,164 | 1,673,164 | |||||||||
Total investments: 97.4% (cost $188,031,094) | 206,184,528 | ||||||||||
Other assets in excess of liabilities: 2.6% | 5,561,547 | ||||||||||
Net assets: 100.0% | $ | 211,746,075 |
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 94.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 200,034,610 | $ | 164,220 | $ | — | $ | 200,198,830 | |||||||||||
Preferred stocks | 3,248,536 | — | — | 3,248,536 | |||||||||||||||
Short-term investments | — | 1,063,998 | — | 1,063,998 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 1,673,164 | — | 1,673,164 | |||||||||||||||
Total | $ | 203,283,146 | $ | 2,901,382 | $ | — | $ | 206,184,528 |
51
UBS International Sustainable Equity Fund
Portfolio of investments
December 31, 2019 (unaudited)
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
2 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 $2,388,396, represented 1.1% of the Fund's net assets at period end.
See accompanying notes to financial statements.
52
UBS U.S. Small Cap Growth Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS U.S. Small Cap Growth Fund (the "Fund") returned 1.13% (Class A shares returned -4.41% after the deduction of the maximum sales charge), while Class P shares returned 1.24%. The Fund's benchmark, the Russell 2000 Growth Index (the "Index"), returned 6.75% 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 55; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund's underperformance was driven primarily by stock selection decisions.
Portfolio performance summary1
What worked:
• Roku was the top contributor to Fund performance during the six months ended December 31, 2019.
• Roku offers wireless-enabled devices that stream audio and video content from the internet to home entertainment systems. The stock rallied during the period on the news that Apple TV and Apple TV+ would be available over Roku-enabled devices. The announcement supported the company's position as a leading enabler of over-the-top content deliver to homes. We sold the stock during the reporting period.
• Several other stock selection decisions benefited performance during the six-month period.
• Generac Holdings is a manufacturer of residential standby and portable generators. The company's shares rose as investors anticipated both a near-term and long-term benefit to generator sales after PG&E announced that it would proactively implement its first widespread Public Safety Power Shutoffs in response to elevated wildfire risks in California.
• Ra Pharmaceuticals is a clinical-stage biopharmaceutical company that uses a proprietary peptide chemistry platform to develop novel therapeutics for the treatment of serious diseases. The stock outperformed after the company announced that it was being acquired by UCB SA. The stock was subsequently sold after the reporting period ended.
• Novocure, a developer of Tumor Treating Fields (TTF) technology for the treatment of solid tumor cancers, rallied following the release of positive quarterly results. The company has been buoyed by the continued adoption of and improving reimbursement for Optune, its TTF treatment for Glioblastoma Multiforme (GBM).
• Shares of Dick's Sporting Goods, a sporting goods retailer, rose on investor optimism regarding the potential for positive same store sales and improved operating margins.
• The Fund did not invest in derivatives during the reporting period.
What didn't work:
• Certain stock selection decisions made a negative contribution to Fund returns during the reporting period.
• Vonage Holdings, a provider of telecommunications services delivered over the internet, saw its shares decline during the six-month period after reporting earnings results and guidance below expectations. We continue to hold this stock.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
53
UBS U.S. Small Cap Growth Fund
• Exact Sciences is a molecular diagnostics company whose products include Cologuard, a stool-based, non-invasive test for the early detection of colorectal cancer. The company's shares traded lower on concerns related to both potential competition and the challenges associated with integrating the recent acquisition of Genomic Health. We continue to hold this stock. (For details, see "Portfolio highlights.")
• CrowdStrike Holdings is a provider of cloud-based security software. The share price declined despite the company reporting sales and earnings ahead of consensus expectations. Investors remained cautious given the current valuation, but we continued to have confidence in the stock, and remained invested.
• Ollie's Bargain Outlet, an operator of a chain of retail stores, underperformed due to a decline in same store sales and the unexpected passing of the company's CEO. We sold the stock after the reporting period.
• Wix.com, a cloud-based website creation platform, underperformed after the company reported quarterly results that included lower than expected gross margins. We continue to hold this stock. (For details, see "Portfolio highlights.")
Portfolio highlights
• Universal Display is a leader in the research, development and commercialization of organic light-emitting diode (OLED) technologies and materials. We remain positive regarding expected OLED industry shipments in the coming years as manufacturing capacity continues to grow and adoption across mobile, TV, auto and other form factors continues to broaden.
• Planet Fitness has a large network of gyms across the US, which we expect to expand significantly over time. Growth should come from both company-owned and franchisee gyms, with the latter being the faster-growing and more strongly profitable segment. The company's unique model has enabled it to deliver strong unit economics despite offering a positive value proposition to individuals, and helping to convert sporadic gym-goers into members.
• Alteryx designs and develops software solutions for data storage, retrieval, management, reporting and analysis. We believe the large and growing addressable market for business intelligence and advanced analytics will lead to better than expected sales and earnings growth for Alteryx.
• Wix.com is a web platform that enables businesses, organizations, professionals and individuals to develop customized websites and applications. The company's rapid growth is being driven by the continued move online by small and medium-sized businesses (SMB). Wix.com provides SMBs with an easy to use web design solution that incorporates full e-commerce capabilities.
• Exact Sciences focuses on the early detection and prevention of colorectal cancer. The company has exclusive intellectual property protecting its non-invasive molecular screening technology. We believe the market adoption of its Cologuard test continues to be robust, and we remain overweight to the stock.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
54
UBS U.S. Small Cap Growth Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 1.13 | % | 29.63 | % | 8.84 | % | 14.40 | % | |||||||||||
Class P2 | 1.24 | 29.95 | 9.11 | 14.70 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | (4.41 | )% | 22.53 | % | 7.61 | % | 13.76 | % | |||||||||||
Russell 2000 Growth Index3 | 6.75 | 28.48 | 9.34 | 13.01 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.58% and 1.25%; Class P—1.31% and 1.00%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc. the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses, and dividend expense and security loan fees for securities sold short), through the period ending October 28, 2020, do not exceed 1.24% for Class A shares and 0.99% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Investors should note that indices do not reflect the deduction of fees and expenses.
The Fund invests in IPOs which may have a magnified impact on performance.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
55
UBS U.S. Small Cap Growth Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Universal Display Corp. | 2.6 | % | |||||
Planet Fitness, Inc., Class A | 2.1 | ||||||
Teladoc Health, Inc. | 2.0 | ||||||
Performance Food Group Co. | 2.0 | ||||||
Alteryx, Inc., Class A | 1.9 | ||||||
Wix.com Ltd. | 1.7 | ||||||
Chegg, Inc. | 1.7 | ||||||
Generac Holdings, Inc. | 1.7 | ||||||
LivePerson, Inc. | 1.6 | ||||||
QTS Realty Trust, Inc., Class A | 1.6 | ||||||
Total | 18.9 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 96.3 | % | |||||
Israel | 1.7 | ||||||
Canada | 0.8 | ||||||
Netherlands | 0.8 | ||||||
Switzerland | 0.6 | ||||||
Total | 100.2 | % |
1 The Fund's Portfolio is actively managed and its composition will vary over time.
56
UBS U.S. Small Cap Growth Fund
Industry diversification—December 31, 2019 (unaudited)1
Common stocks | Percentage of net assets | ||||||
Aerospace & defense | 1.6 | % | |||||
Airlines | 1.3 | ||||||
Auto components | 1.1 | ||||||
Banks | 3.8 | ||||||
Biotechnology | 13.0 | ||||||
Chemicals | 1.3 | ||||||
Commercial services & supplies | 0.9 | ||||||
Construction & engineering | 2.7 | ||||||
Diversified consumer services | 1.7 | ||||||
Diversified telecommunication services | 0.8 | ||||||
Electrical equipment | 3.0 | ||||||
Entertainment | 0.7 | ||||||
Equity real estate investment trusts | 2.9 | ||||||
Food & staples retailing | 3.3 | ||||||
Health care equipment & supplies | 5.7 | ||||||
Health care providers & services | 1.5 | ||||||
Health care technology | 3.7 | ||||||
Hotels, restaurants & leisure | 4.7 | ||||||
Household durables | 0.9 | ||||||
IT services | 1.7 | ||||||
Life sciences tools & services | 2.4 | ||||||
Machinery | 6.4 | ||||||
Multiline retail | 1.1 | ||||||
Oil, gas & consumable fuels | 0.6 | ||||||
Paper & forest products | 1.2 | ||||||
Pharmaceuticals | 1.1 | ||||||
Professional services | 1.4 | ||||||
Road & rail | 1.0 | ||||||
Semiconductors & semiconductor equipment | 4.9 | ||||||
Software | 14.7 | ||||||
Specialty retail | 2.8 | ||||||
Textiles, apparel & luxury goods | 1.3 | ||||||
Thrifts & mortgage finance | 1.2 | ||||||
Total common stocks | 96.4 | % | |||||
Exchange traded funds | 1.3 | ||||||
Short-term investments | 2.6 | ||||||
Investment of cash collateral from securities loaned | 9.6 | ||||||
Total investments | 109.9 | % | |||||
Liabilities in excess of other assets | (9.9 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
57
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 96.4% | |||||||||||
Aerospace & defense: 1.6% | |||||||||||
Mercury Systems, Inc.* | 28,436 | $ | 1,965,212 | ||||||||
Airlines: 1.3% | |||||||||||
SkyWest, Inc. | 25,235 | 1,630,938 | |||||||||
Auto components: 1.1% | |||||||||||
Visteon Corp.* | 16,189 | 1,401,805 | |||||||||
Banks: 3.8% | |||||||||||
Columbia Banking System, Inc. | 28,997 | 1,179,743 | |||||||||
FB Financial Corp. | 9,752 | 386,082 | |||||||||
National Bank Holdings Corp., Class A | 38,209 | 1,345,721 | |||||||||
Webster Financial Corp. | 33,454 | 1,785,105 | |||||||||
4,696,651 | |||||||||||
Biotechnology: 13.0% | |||||||||||
Allogene Therapeutics, Inc.*,1 | 23,670 | 614,947 | |||||||||
Argenx SE, ADR*,1 | 5,912 | 948,994 | |||||||||
Avrobio, Inc.*,1 | 17,943 | 361,193 | |||||||||
Blueprint Medicines Corp.* | 12,394 | 992,883 | |||||||||
Bridgebio Pharma, Inc.* | 9,800 | 343,490 | |||||||||
CRISPR Therapeutics AG* | 11,300 | 688,226 | |||||||||
Exact Sciences Corp.*,1 | 21,061 | 1,947,721 | |||||||||
G1 Therapeutics, Inc.*,1 | 30,030 | 793,693 | |||||||||
Gritstone Oncology, Inc.*,1 | 46,939 | 421,043 | |||||||||
Immunomedics, Inc.*,1 | 59,584 | 1,260,797 | |||||||||
Ligand Pharmaceuticals, Inc.*,1 | 6,409 | 668,395 | |||||||||
MeiraGTx Holdings PLC* | 51,749 | 1,036,015 | |||||||||
Moderna, Inc.*,1 | 56,931 | 1,113,570 | |||||||||
Momenta Pharmaceuticals, Inc.* | 48,764 | 962,114 | |||||||||
NuCana PLC, ADR*,1 | 22,000 | 134,200 | |||||||||
Ra Pharmaceuticals, Inc.* | 21,806 | 1,023,356 | |||||||||
REGENXBIO, Inc.*,1 | 11,996 | 491,476 | |||||||||
Voyager Therapeutics, Inc.*,1 | 35,398 | 493,802 | |||||||||
Xencor, Inc.*,1 | 24,723 | 850,224 | |||||||||
Zymeworks, Inc.* | 21,187 | 963,161 | |||||||||
16,109,300 | |||||||||||
Chemicals: 1.3% | |||||||||||
Ingevity Corp.* | 17,762 | 1,552,044 | |||||||||
Commercial services & supplies: 0.9% | |||||||||||
U.S. Ecology, Inc. | 18,539 | 1,073,593 | |||||||||
Construction & engineering: 2.7% | |||||||||||
EMCOR Group, Inc. | 20,221 | 1,745,072 | |||||||||
MasTec, Inc.*,1 | 25,530 | 1,638,005 | |||||||||
3,383,077 | |||||||||||
Diversified consumer services: 1.7% | |||||||||||
Chegg, Inc.*,1 | 56,468 | 2,140,702 | |||||||||
Diversified telecommunication services: 0.8% | |||||||||||
Vonage Holdings Corp.* | 136,703 | 1,012,969 |
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Electrical equipment: 3.0% | |||||||||||
Generac Holdings, Inc.* | 20,827 | $ | 2,094,988 | ||||||||
Regal Beloit Corp. | 18,470 | 1,581,217 | |||||||||
3,676,205 | |||||||||||
Entertainment: 0.7% | |||||||||||
Glu Mobile, Inc.* | 144,299 | 873,009 | |||||||||
Equity real estate investment trusts: 2.9% | |||||||||||
QTS Realty Trust, Inc., Class A | 36,338 | 1,972,063 | |||||||||
Ryman Hospitality Properties, Inc. | 18,373 | 1,592,204 | |||||||||
3,564,267 | |||||||||||
Food & staples retailing: 3.3% | |||||||||||
Grocery Outlet Holding Corp.*,1 | 51,168 | 1,660,402 | |||||||||
Performance Food Group Co.* | 48,179 | 2,480,255 | |||||||||
4,140,657 | |||||||||||
Health care equipment & supplies: 5.7% | |||||||||||
Haemonetics Corp.* | 6,561 | 753,859 | |||||||||
Novocure Ltd.* | 21,408 | 1,804,052 | |||||||||
Sientra, Inc.* | 133,026 | 1,189,252 | |||||||||
Staar Surgical Co.*,1 | 44,112 | 1,551,419 | |||||||||
Tandem Diabetes Care, Inc.* | 22,659 | 1,350,703 | |||||||||
ViewRay, Inc.*,1 | 86,444 | 364,794 | |||||||||
7,014,079 | |||||||||||
Health care providers & services: 1.5% | |||||||||||
LHC Group, Inc.* | 13,330 | 1,836,341 | |||||||||
Health care technology: 3.7% | |||||||||||
Livongo Health, Inc.* | 28,693 | 719,047 | |||||||||
Tabula Rasa HealthCare, Inc.*,1 | 28,675 | 1,395,899 | |||||||||
Teladoc Health, Inc.*,1 | 29,657 | 2,482,884 | |||||||||
4,597,830 | |||||||||||
Hotels, restaurants & leisure: 4.7% | |||||||||||
Planet Fitness, Inc., Class A* | 34,864 | 2,603,643 | |||||||||
Shake Shack, Inc., Class A*,1 | 23,952 | 1,426,821 | |||||||||
Wendy's Co./The | 80,087 | 1,778,732 | |||||||||
5,809,196 | |||||||||||
Household durables: 0.9% | |||||||||||
Sonos, Inc.* | 72,963 | 1,139,682 | |||||||||
IT services: 1.7% | |||||||||||
Wix.com Ltd.* | 17,602 | 2,154,133 | |||||||||
Life sciences tools & services: 2.4% | |||||||||||
10X Genomics, Inc., Class A*,1 | 3,633 | 277,016 | |||||||||
Adaptive Biotechnologies Corp.* | 6,600 | 197,472 | |||||||||
Charles River Laboratories International, Inc.* | 4,961 | 757,843 | |||||||||
NanoString Technologies, Inc.* | 63,037 | 1,753,689 | |||||||||
2,986,020 |
58
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks—(Continued) | |||||||||||
Machinery: 6.4% | |||||||||||
Altra Industrial Motion Corp. | 49,180 | $ | 1,780,808 | ||||||||
Chart Industries, Inc.* | 26,191 | 1,767,630 | |||||||||
Kadant, Inc. | 13,948 | 1,469,282 | |||||||||
Kennametal, Inc. | 29,467 | 1,087,038 | |||||||||
Woodward, Inc. | 15,900 | 1,883,196 | |||||||||
7,987,954 | |||||||||||
Multiline retail: 1.1% | |||||||||||
Ollie's Bargain Outlet Holdings, Inc.*,1 | 21,331 | 1,393,128 | |||||||||
Oil, gas & consumable fuels: 0.6% | |||||||||||
Matador Resources Co.*,1 | 41,090 | 738,387 | |||||||||
Paper & forest products: 1.2% | |||||||||||
Boise Cascade Co. | 41,337 | 1,510,041 | |||||||||
Pharmaceuticals: 1.1% | |||||||||||
Amphastar Pharmaceuticals, Inc.* | 32,864 | 633,947 | |||||||||
Collegium Pharmaceutical, Inc.* | 36,585 | 752,919 | |||||||||
1,386,866 | |||||||||||
Professional services: 1.4% | |||||||||||
ASGN, Inc.* | 24,214 | 1,718,468 | |||||||||
Road & rail: 1.0% | |||||||||||
Werner Enterprises, Inc. | 35,444 | 1,289,807 | |||||||||
Semiconductors & semiconductor equipment: 4.9% | |||||||||||
MaxLinear, Inc.* | 49,567 | 1,051,812 | |||||||||
Monolithic Power Systems, Inc. | 7,121 | 1,267,680 | |||||||||
PDF Solutions, Inc.* | 30,291 | 511,615 | |||||||||
Universal Display Corp. | 15,684 | 3,232,002 | |||||||||
6,063,109 | |||||||||||
Software: 14.7% | |||||||||||
8x8, Inc.*,1 | 80,430 | 1,471,869 | |||||||||
Alteryx, Inc., Class A*,1 | 23,093 | 2,310,917 | |||||||||
Bill.Com Holdings, Inc.* | 6,990 | 265,970 | |||||||||
Cloudflare, Inc., Class A* | 89,000 | 1,518,340 | |||||||||
Crowdstrike Holdings, Inc., Class A* | 23,626 | 1,178,229 | |||||||||
j2 Global, Inc. | 16,507 | 1,546,871 | |||||||||
LivePerson, Inc.*,1 | 54,868 | 2,030,116 | |||||||||
Proofpoint, Inc.* | 13,576 | 1,558,253 |
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Software—(Concluded) | |||||||||||
PROS Holdings, Inc.* | 27,647 | $ | 1,656,608 | ||||||||
Sprout Social, Inc.* | 40,627 | 652,063 | |||||||||
Tenable Holdings, Inc.* | 58,925 | 1,411,843 | |||||||||
Upland Software, Inc.* | 24,775 | 884,715 | |||||||||
Varonis Systems, Inc.* | 22,521 | 1,750,107 | |||||||||
18,235,901 | |||||||||||
Specialty retail: 2.8% | |||||||||||
American Eagle Outfitters, Inc. | 66,040 | 970,788 | |||||||||
Children's Place, Inc./The1 | 11,981 | 749,052 | |||||||||
Dick's Sporting Goods, Inc. | 34,878 | 1,726,112 | |||||||||
3,445,952 | |||||||||||
Textiles, apparel & luxury goods: 1.3% | |||||||||||
Steven Madden Ltd. | 36,393 | 1,565,263 | |||||||||
Thrifts & mortgage finance: 1.2% | |||||||||||
Essent Group Ltd. | 28,157 | 1,463,882 | |||||||||
Total common stocks (cost $96,038,055) | 119,556,468 | ||||||||||
Exchange traded funds: 1.3% | |||||||||||
iShares Russell 2000 Growth ETF1 (cost $1,527,325) | 7,439 | 1,593,583 | |||||||||
Short-term investments: 2.6% | |||||||||||
Investment companies: 2.6% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $3,252,912) | 3,252,912 | 3,252,912 | |||||||||
Investment of cash collateral from securities loaned: 9.6% | |||||||||||
Money market funds: 9.6% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $11,941,276) | 11,941,276 | 11,941,276 | |||||||||
Total investments: 109.9% (cost $112,759,568) | 136,344,239 | ||||||||||
Liabilities in excess of other assets: (9.9)% | (12,252,920 | ) | |||||||||
Net assets: 100.0% | $ | 124,091,319 |
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 94.
59
UBS U.S. Small Cap Growth Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event the Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 119,556,468 | $ | — | $ | — | $ | 119,556,468 | |||||||||||
Exchange traded funds | 1,593,583 | — | — | 1,593,583 | |||||||||||||||
Short-term investments | — | 3,252,912 | — | 3,252,912 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 11,941,276 | — | 11,941,276 | |||||||||||||||
Total | $ | 121,150,051 | $ | 15,194,188 | $ | — | $ | 136,344,239 |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
See accompanying notes to financial statements.
60
UBS U.S. Sustainable Equity Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS U.S. Sustainable Equity Fund (the "Fund") returned 11.51% (Class A shares returned 5.38% after the deduction of the maximum sales charge), while Class P shares returned 11.67%. The Fund's benchmark, the S&P 500 Index (the "Index"), returned 10.92% over the same time period. (Class P shares have lower expenses than the other share class in the Fund. Returns for all share classes over various time periods are shown on page 64; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund's performance was primarily due to stock selection decisions.
Portfolio performance summary1
What worked:
• Several stock selection decisions contributed positively to Fund performance during the six months ended December 31, 2019.
• Stericycle was the largest positive contributor to relative returns for the six-month period. The company continued to make progress toward simplifying its business by divesting non-core businesses. The market responded by bidding up Stericycle's share price.
• Best Buy's shares rose based on expectations that the company will benefit from the Phase 1 trade agreement between the U.S. and China. The deal should lead to a reduction in some tariffs and, therefore, lower prices for Best Buy's customers.
• Micron Technology's outperformance was driven by good results and expectations that memory pricing in both NAND and DRAM would be improving over the next several quarters. We sold out of the stock as it reached our estimate of intrinsic value.
• Shares of UnitedHealth Group traded higher during the period. Investor concerns about the potential for significant health care reform began to recede as the field for the Democratic presidential nomination grew more competitive. In addition, UnitedHealth announced that it expected to reach the higher end of its $15 earnings per share (EPS) guidance for 2019, and introduced guidance for 2020 that included revenues of $260 to $262 billion. (For details, see "Portfolio highlights.")
• Ameriprise Financial rallied alongside other higher-beta, equity market-sensitive financial companies during the six-month period. We believe the company's fundamentals remain intact and return on equity (ROE) is high. We increased our holdings in the financial planning and retirement solutions provider. (For details, see "Portfolio highlights.")
What didn't work:
• Several stock selection decisions in the financials and health care sectors detracted from relative performance for the six months ended December 31, 2019.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
61
UBS U.S. Sustainable Equity Fund
• Ironwood Pharmaceuticals was the second largest negative contributor during the reporting period. Ironwood's shares underperformed following the spin-out of R&D-Co on concerns around the growth prospects for the company's flagship product, Linzess. These concerns further intensified when AbbVie announced plans to acquire Ironwood's partner, Allergan, raising concerns that the Linzess franchise could be impacted by merger related reorganizations and reprioritizations. We sold out of the stock to pursue more attractive opportunities within the health care sector.
• Incyte's share price dropped after the company announced that its Itacitinib product failed in a Phase 3 trial for acute graft-versus-host disease. We sold out of the stock to pursue more attractive opportunities within the health care sector.
• Prudential's share price fell after company reported quarterly results and reduced guidance. Our positive thesis on Prudential is predicated on our belief that the company can continue to generate solid returns for the forseeable future that are not properly being recognized by the market. We continue to hold this stock. (For details, see "Portfolio highlights.")
• Certain other stock positions made a negative contribution to performance for the six-month period.
• The Fund suffered from not owning Apple, the largest detractor during the six-month period. The Fund's underweight to Apple was negative for relative performance, as the stock continued to benefit from better than expected demand for the iPhone 11 and strong growth in the company's wearables business (AirPods and Apple Watch). We remain cautious on Apple given concerns about the company's ability to drive material long-term growth in its core iPhone business.
• Mohawk Industries' share price fell after company announced quarterly results weakened by poor third quarter guidance across all markets. Management pointed to a more challenging environment, notably in the ceramic segment, as well as the US residential carpet business. We continue to hold this stock.
Portfolio highlights
• Ameriprise Financial provides financial planning, asset management and insurance services. The company has achieved double-digit margins in its flagship advice and wealth management business, benefitting from its strategy to carefully manage the success and happiness of its most productive advisors. Ameriprise has shifted its earnings focus away from more capital-intensive insurance and annuity products, and is relying more heavily on the balance sheet-light asset accumulation and management businesses. This has resulted in strong return on equity (ROE) improvement that we believe should remain fairly stable. Management has expressed confidence that its long-term care (LTC) reserves are sufficient, and says it intends to increase reserve transparency and LTC block characteristics within its public filings.
• UnitedHealth provides health care coverage, software and consultancy services. We believe the company is uniquely positioned to benefit from the increased consumerization of health care, as it holds industry-leading positions across five key growth markets. Investors have come to appreciate the value of Optum, the company's health services platform, particularly the Insight and Rx businesses. However, we believe the importance of Optum Care, which offers alternative site care delivery, remains underappreciated, both as a longer-term driver of revenues and profits, and as a way of bending the cost curve.
• Elanco Animal Health engages in innovation, development and manufacture of products for animals. We believe that Elanco provides a great opportunity to participate in the animal health market, which we view favorably due to its consistently recession-resistant nature, global opportunity and innovation developments. There are significant opportunities in this stable (4% to 6% annual growth), visible ($33 billion) market, driven by global
62
UBS U.S. Sustainable Equity Fund
demands for safe protein, and an uptick in new companion animal drugs. We see favorable structural trends that we believe are likely to continue to drive demand, and consequently top-line growth, across the industry.
• Prudential Financial is a provider of financial services and products. The company is growing earnings at a high compound annual growth rate. Prudential has a unique franchise in Asia where it benefits from the secular trend of an emerging middle class and an increased need for insurance. In the US, the company manages to sustain a high growth profile thanks to disciplined pricing and innovative products such as Elite access.
• The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our website at www.ubs.com/am-us.
63
UBS U.S. Sustainable Equity Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | 10 years | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 11.51 | % | 37.18 | % | 10.15 | % | 12.03 | % | |||||||||||
Class P2 | 11.67 | 37.51 | 10.42 | 12.31 | |||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A1 | 5.38 | % | 29.66 | % | 8.91 | % | 11.40 | % | |||||||||||
S&P 500 Index3 | 10.92 | 31.49 | 11.70 | 13.56 |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses, supplemented from time to time, were as follows: Class A—2.14% and 0.95%; Class P—1.85% and 0.70%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 28, 2020, do not exceed 0.95% for Class A shares and 0.70% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Maximum sales charge for Class A shares is 5.5%. Class A shares bear ongoing 12b-1 service fees.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The S&P 500 Index is an unmanaged, weighted index comprising 500 widely held common stocks varying in composition and is not available for direct investment. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
64
UBS U.S. Sustainable Equity Fund
Portfolio statistics and industry diversification—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
UnitedHealth Group, Inc. | 5.4 | % | |||||
Ameriprise Financial, Inc. | 4.7 | ||||||
Visa, Inc., Class A | 4.6 | ||||||
Prudential Financial, Inc. | 4.5 | ||||||
U.S. Bancorp | 4.3 | ||||||
Elanco Animal Health, Inc. | 4.2 | ||||||
Comerica, Inc. | 4.1 | ||||||
Simon Property Group, Inc. | 4.1 | ||||||
Electronic Arts, Inc. | 4.0 | ||||||
AGCO Corp. | 4.0 | ||||||
Total | 43.9 | % |
Issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 97.9 | % | |||||
Bahamas | 3.7 | ||||||
Netherlands | 2.0 | ||||||
Total | 103.6 | % |
Common stocks | Percentage of net assets | ||||||
Auto components | 3.4 | % | |||||
Banks | 8.4 | ||||||
Building products | 2.1 | ||||||
Capital markets | 4.7 | ||||||
Commercial services & supplies | 2.4 | ||||||
Distributors | 2.9 | ||||||
Diversified consumer services | 3.7 | ||||||
Electronic equipment, instruments & components | 1.5 | ||||||
Entertainment | 7.5 | ||||||
Equity real estate investment trusts | 4.1 | ||||||
Health care providers & services | 8.4 | ||||||
Household durables | 3.2 | ||||||
Insurance | 6.0 | ||||||
IT services | 7.5 | ||||||
Life sciences tools & services | 2.7 | ||||||
Machinery | 4.0 | ||||||
Pharmaceuticals | 4.2 | ||||||
Road & rail | 1.9 | ||||||
Semiconductors & semiconductor equipment | 7.1 | ||||||
Software | 9.1 | ||||||
Specialty retail | 2.6 | ||||||
Technology hardware, storage & peripherals | 2.1 | ||||||
Total common stocks | 99.5 | % | |||||
Short-term investments | 0.3 | ||||||
Investment of cash collateral from securities loaned | 3.8 | ||||||
Total investments | 103.6 | % | |||||
Liabilities in excess of other assets | (3.6 | ) | |||||
Net assets | 100.0 | % |
1 The Portfolio is actively managed and its composition will vary over time.
65
UBS U.S. Sustainable Equity Fund
Portfolio of investments
December 31, 2019 (unaudited)
Number of shares | Value | ||||||||||
Common stocks: 99.5% | |||||||||||
Auto components: 3.4% | |||||||||||
Aptiv PLC | 12,060 | $ | 1,145,338 | ||||||||
Banks: 8.4% | |||||||||||
Comerica, Inc. | 19,176 | 1,375,878 | |||||||||
U.S. Bancorp | 24,237 | 1,437,012 | |||||||||
2,812,890 | |||||||||||
Building products: 2.1% | |||||||||||
Masco Corp. | 14,389 | 690,528 | |||||||||
Capital markets: 4.7% | |||||||||||
Ameriprise Financial, Inc. | 9,412 | 1,567,851 | |||||||||
Commercial services & supplies: 2.4% | |||||||||||
Stericycle, Inc.*,1 | 12,716 | 811,408 | |||||||||
Distributors: 2.9% | |||||||||||
LKQ Corp.* | 26,810 | 957,117 | |||||||||
Diversified consumer services: 3.7% | |||||||||||
OneSpaWorld Holdings Ltd.*,1 | 72,790 | 1,225,784 | |||||||||
Electronic equipment, instruments & components: 1.5% | |||||||||||
Trimble, Inc.* | 12,212 | 509,118 | |||||||||
Entertainment: 7.5% | |||||||||||
Electronic Arts, Inc.* | 12,581 | 1,352,583 | |||||||||
Take-Two Interactive Software, Inc.* | 5,572 | 682,180 | |||||||||
Walt Disney Co./The | 3,274 | 473,519 | |||||||||
2,508,282 | |||||||||||
Equity real estate investment trusts: 4.1% | |||||||||||
Simon Property Group, Inc. | 9,211 | 1,372,071 | |||||||||
Health care providers & services: 8.4% | |||||||||||
Laboratory Corp. of America Holdings* | 6,006 | 1,016,035 | |||||||||
UnitedHealth Group, Inc. | 6,119 | 1,798,864 | |||||||||
2,814,899 | |||||||||||
Household durables: 3.2% | |||||||||||
Mohawk Industries, Inc.* | 7,837 | 1,068,810 | |||||||||
Insurance: 6.0% | |||||||||||
Marsh & McLennan Cos., Inc. | 4,489 | 500,119 | |||||||||
Prudential Financial, Inc. | 16,058 | 1,505,277 | |||||||||
2,005,396 | |||||||||||
IT services: 7.5% | |||||||||||
LiveRamp Holdings, Inc.* | 20,481 | 984,522 | |||||||||
Visa, Inc., Class A | 8,109 | 1,523,681 | |||||||||
2,508,203 |
Number of shares | Value | ||||||||||
Common stocks—(Concluded) | |||||||||||
Life sciences tools & services: 2.7% | |||||||||||
Bio-Rad Laboratories, Inc., Class A* | 2,432 | $ | 899,913 | ||||||||
Machinery: 4.0% | |||||||||||
AGCO Corp. | 17,358 | 1,340,905 | |||||||||
Pharmaceuticals: 4.2% | |||||||||||
Elanco Animal Health, Inc.* | 48,077 | 1,415,868 | |||||||||
Road & rail: 1.9% | |||||||||||
Lyft, Inc., Class A* | 14,742 | 634,201 | |||||||||
Semiconductors & semiconductor equipment: 7.1% | |||||||||||
KLA Corp. | 3,990 | 710,898 | |||||||||
NXP Semiconductors N.V. | 5,214 | 663,534 | |||||||||
ON Semiconductor Corp.* | 41,179 | 1,003,944 | |||||||||
2,378,376 | |||||||||||
Software: 9.1% | |||||||||||
Adobe, Inc.* | 3,704 | 1,221,616 | |||||||||
PTC, Inc.* | 9,051 | 677,830 | |||||||||
salesforce.com, Inc.* | 2,930 | 476,535 | |||||||||
VMware, Inc., Class A* | 4,461 | 677,135 | |||||||||
3,053,116 | |||||||||||
Specialty retail: 2.6% | |||||||||||
Best Buy Co., Inc. | 9,884 | 867,815 | |||||||||
Technology hardware, storage & peripherals: 2.1% | |||||||||||
Western Digital Corp. | 11,205 | 711,181 | |||||||||
Total common stocks (cost $30,385,554) | 33,299,070 | ||||||||||
Short-term investments: 0.3% | |||||||||||
Investment companies: 0.3% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $109,531) | 109,531 | 109,531 | |||||||||
Investment of cash collateral from securities loaned: 3.8% | |||||||||||
Money market funds: 3.8% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $1,255,630) | 1,255,630 | 1,255,630 | |||||||||
Total investments: 103.6% (cost $31,750,715) | 34,664,231 | ||||||||||
Liabilities in excess of other assets: (3.6)% | (1,194,334 | ) | |||||||||
Net assets: 100.0% | $ | 33,469,897 |
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 94.
66
UBS U.S. Sustainable Equity Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Common stocks | $ | 33,299,070 | $ | — | $ | — | $ | 33,299,070 | |||||||||||
Short-term investments | — | 109,531 | — | 109,531 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 1,255,630 | — | 1,255,630 | |||||||||||||||
Total | $ | 33,299,070 | $ | 1,365,161 | $ | — | $ | 34,664,231 |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
* Non-income producing security.
1 Security, or portion thereof, was on loan at the period end.
See accompanying notes to financial statements.
67
UBS Municipal Bond Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS Municipal Bond Fund (the "Fund") returned 1.92% (Class A shares returned -0.34% after the deduction of the maximum sales charge), while Class P shares returned 1.95%. For comparison purposes, the Fund's benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), returned 2.32%, and the Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index returned 2.08% over the same time period. (Class P shares have lower expenses than the other share class of the Fund. Returns for all share classes over various time periods are shown on page 69; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares, while the Index returns do not reflect the deduction of fees and expenses.)
The Fund posted a positive return during the reporting period, but underperformed its benchmark. This was primarily due to security selection and its positioning in a number of sectors.
Portfolio performance summary1
What worked:
• Certain positions on the yield curve contributed to performance. In particular, an underweight to the three year portion of the curve, along with overweights to the five and 10 to 20-year portions of the curve, were beneficial for relative performance. (The yield curve plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.)
• The Fund's ratings biases, overall, were modestly positive for performance. In particular, a large overweight to municipal securities rated A was additive for returns.
• An overweight to the special tax sector, along with an overweight to local general obligation bonds, contributed to returns.
What didn't work:
• Having an underweight allocation to the long end of the municipal yield curve (22+ years) detracted from relative performance as they outperformed the benchmark. In addition, an overweight to the seven year portion of the curve was negative for returns.
• An underweight to municipal securities rated BBB detracted from relative results.
• Positioning in a number of sectors detracted from performance. In particular, underweights to the industrial development, pollution control revenue, transportation and hospital sectors were drags on relative results.
• The Fund did not invest in derivatives during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at www.ubs.com.
1 For a detailed commentary on the market environment in general during the reporting period, see page 3.
68
UBS Municipal Bond Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | Inception1 | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A2 | 1.92 | % | 7.42 | % | 2.97 | % | 3.06 | % | |||||||||||
Class P3 | 1.95 | % | 7.70 | % | 3.21 | % | 3.30 | % | |||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A2 | (0.34 | )% | 5.04 | % | 2.50 | % | 2.60 | % | |||||||||||
Bloomberg Barclays Municipal Bond Index4 | 2.32 | % | 7.54 | % | 3.53 | % | 3.62 | % | |||||||||||
Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index5 | 2.08 | % | 7.10 | % | 3.23 | % | 3.30 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class A—1.07% and 0.65%; Class P—0.82% and 0.40%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 28, 2020, do not exceed 0.65% for Class A shares and 0.40% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement, or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of all shares of UBS Municipal Bond Fund and the indices is November 10, 2014.
2 Maximum sales charge for Class A shares is 2.25%. Class A shares bear ongoing 12b-1 service fees.
3 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Bloomberg Barclays Municipal Bond Index is an unmanaged index designed to measure the total return of the US dollar denominated tax exempt bond market. Investors should note that indices do not reflect the deduction of fees and expenses.
5 The Bloomberg Barclays Municipal Managed Money Intermediate (1-17) Index is an unmanaged sub-index of the Barclays Municipal Managed Money Index, which is a rules-based, market-value-weighted index designed to track the performance of municipal securities issued by state and local municipalities whose interest is exempt from federal income tax and the federal alternative minimum tax. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder could pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
69
UBS Municipal Bond Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Summary of municipal securities by state
Percentage of net assets | |||||||
Municipal bonds | |||||||
California | 1.1 | % | |||||
Connecticut | 9.1 | ||||||
Florida | 10.1 | ||||||
Georgia | 1.8 | ||||||
Illinois | 11.8 | ||||||
Maryland | 2.5 | ||||||
Massachusetts | 2.9 | ||||||
Michigan | 3.2 | ||||||
Minnesota | 1.2 | ||||||
Mississippi | 1.0 | ||||||
Missouri | 0.2 | ||||||
Nevada | 2.1 | ||||||
New Jersey | 3.6 | ||||||
New York | 25.4 | ||||||
Ohio | 1.4 | ||||||
Pennsylvania | 7.7 | ||||||
Rhode Island | 1.0 | ||||||
South Carolina | 2.4 | ||||||
Texas | 9.0 | ||||||
Washington | 1.2 | ||||||
Wisconsin | 0.3 | ||||||
Total municipal bonds | 99.0 | % | |||||
Short-term investments | 0.1 | ||||||
Total investments | 99.1 | % | |||||
Other assets in excess of liabilities | 0.9 | ||||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
70
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount | Value | ||||||||||
Municipal bonds: 99.0% | |||||||||||
California: 1.1% | |||||||||||
California State Kindergarten, GO Bonds, Series A-1, 1.370%, due 05/01/341 | $ | 1,000,000 | $ | 1,000,000 | |||||||
Series A5, 1.360%, due 05/01/341 | 200,000 | 200,000 | |||||||||
1,200,000 | |||||||||||
Connecticut: 9.1% | |||||||||||
State of Connecticut Special Tax Revenue, Transportation Infrastructure Revenue Bonds, Series A, 5.000%, due 01/01/30 | 1,665,000 | 2,058,323 | |||||||||
State of Connecticut, GO Bonds, Series A, 5.000%, due 04/15/25 | 1,250,000 | 1,478,275 | |||||||||
Series B, 5.000%, due 04/15/25 | 2,000,000 | 2,365,240 | |||||||||
Series C, 5.000%, due 06/15/23 | 1,000,000 | 1,126,070 | |||||||||
Series F, 5.000%, due 09/15/25 | 2,140,000 | 2,557,214 | |||||||||
9,585,122 | |||||||||||
Florida: 10.1% | |||||||||||
Central Florida Expressway Authority, Senior Lien Revenue Bonds, Series B, 5.000%, due 07/01/34 | 1,000,000 | 1,195,390 | |||||||||
Miami-Dade County Revenue Bonds 5.000%, due 10/01/26 | 1,000,000 | 1,223,250 | |||||||||
School Board of St. Lucie County, Sales Tax Revenue Bonds, AGM 5.000%, due 10/01/26 | 1,020,000 | 1,213,372 | |||||||||
School Board of Volusia County, Master Lease Program, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,143,820 | |||||||||
South Florida Water Management District, COP 5.000%, due 10/01/34 | 1,000,000 | 1,178,640 | |||||||||
The School Board of Broward County, COP, Series B, 5.000%, due 07/01/30 | 2,000,000 | 2,352,900 | |||||||||
The School Board of Miami-Dade County, COP, Series A, 5.000%, due 05/01/31 | 1,000,000 | 1,156,920 | |||||||||
The School Board of Palm Beach County, COP, Series B, 5.000%, due 08/01/31 | 1,000,000 | 1,174,930 | |||||||||
10,639,222 | |||||||||||
Georgia: 1.8% | |||||||||||
Brookhaven Development Authority, Childrens Healthcare of Atlanta Revenue Bonds, Series A, 5.000%, due 07/01/29 | 1,500,000 | 1,943,535 |
Face amount | Value | ||||||||||
Municipal bonds—(Continued) | |||||||||||
Illinois: 11.8% | |||||||||||
City of Chicago O'Hare International Airport Revenue Bonds, Series B, 5.000%, due 01/01/30 | $ | 1,000,000 | $ | 1,163,500 | |||||||
Series B, 5.000%, due 01/01/31 | 1,050,000 | 1,218,157 | |||||||||
County of Cook, GO Bonds, Series A, 5.000%, due 11/15/20 | 1,830,000 | 1,885,101 | |||||||||
Series A, 5.000%, due 11/15/26 | 1,500,000 | 1,801,845 | |||||||||
Illinois Finance Authority Revenue Bonds 5.000%, due 07/01/37 | 1,000,000 | 1,250,190 | |||||||||
Illinois State Toll Highway Authority Revenue Bonds, Series B, 5.000%, due 01/01/27 | 1,000,000 | 1,210,060 | |||||||||
Railsplitter Tobacco Settlement Authority Revenue Bonds 5.000%, due 06/01/25 | 1,235,000 | 1,457,510 | |||||||||
State of Illinois, Sales Tax Revenue Bonds 5.000%, due 06/15/20 | 1,190,000 | 1,207,136 | |||||||||
5.000%, due 06/15/22 | 1,105,000 | 1,178,759 | |||||||||
12,372,258 | |||||||||||
Maryland: 2.5% | |||||||||||
County of Prince George's MD, GO Bonds, Series A, 5.000%, due 07/15/30 | 1,000,000 | 1,303,370 | |||||||||
State of Maryland, GO Bonds, Series A, 5.000%, due 08/01/30 | 1,000,000 | 1,304,340 | |||||||||
2,607,710 | |||||||||||
Massachusetts: 2.9% | |||||||||||
The Commonwealth of Massachusetts, GO Bonds, Series A, 5.000%, due 01/01/40 | 1,500,000 | 1,821,135 | |||||||||
Series B, 5.000%, due 07/01/36 | 1,000,000 | 1,249,060 | |||||||||
3,070,195 | |||||||||||
Michigan: 3.2% | |||||||||||
Michigan Finance Authority, Trinity Health Credit Group, Hospital Revenue Bonds, Series A, 5.000%, due 12/01/35 | 1,000,000 | 1,213,330 | |||||||||
Michigan State Building Authority Revenue Bonds, Series I, 5.000%, due 10/15/29 | 1,800,000 | 2,185,776 | |||||||||
3,399,106 |
71
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount | Value | ||||||||||
Municipal bonds—(Continued) | |||||||||||
Minnesota: 1.2% | |||||||||||
State of Minnesota, GO Bonds, Series A, 5.000%, due 08/01/36 | $ | 1,000,000 | $ | 1,278,480 | |||||||
Mississippi: 1.0% | |||||||||||
Mississippi Business Finance Corp., (Chevron USA, Inc. Project) Revenue Bonds, Series A, 1.600%, due 11/01/351 | 100,000 | 100,000 | |||||||||
Series B, 1.600%, due 12/01/301 | 200,000 | 200,000 | |||||||||
Series G, 1.600%, due 12/01/301 | 400,000 | 400,000 | |||||||||
Series I, 1.600%, due 11/01/351 | 200,000 | 200,000 | |||||||||
Series L, 1.600%, due 11/01/351 | 100,000 | 100,000 | |||||||||
1,000,000 | |||||||||||
Missouri: 0.2% | |||||||||||
Missouri State Health & Educational Facilities Authority Educational Facilities Revenue (Washington University) Revenue Bonds, Series B, 1.670%, due 03/01/401 | 200,000 | 200,000 | |||||||||
Nevada: 2.1% | |||||||||||
County of Clark Department of Aviation, Las Vegas-McCarran International Airport Revenue Bonds, Series C, 5.000%, due 07/01/27 | 1,815,000 | 2,258,332 | |||||||||
New Jersey: 3.6% | |||||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series AA, 5.000%, due 06/15/27 | 1,500,000 | 1,655,925 | |||||||||
New Jersey Turnpike Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 1,000,000 | 1,162,360 | |||||||||
Series E, 5.000%, due 01/01/34 | 860,000 | 997,067 | |||||||||
3,815,352 | |||||||||||
New York: 25.4% | |||||||||||
City of New York, GO Bonds, Series B-1, 5.000%, due 10/01/42 | 1,200,000 | 1,487,292 | |||||||||
Series F-1, 5.000%, due 04/01/34 | 1,100,000 | 1,359,996 | |||||||||
Series F-1, 5.000%, due 04/01/40 | 1,000,000 | 1,214,400 | |||||||||
Metropolitan Transportation Authority Revenue Bonds, Series B-2A, 5.000%, due 05/15/21 | 1,060,000 | 1,112,343 |
Face amount | Value | ||||||||||
Municipal bonds—(Continued) | |||||||||||
New York—(Concluded) | |||||||||||
New York City Municipal Water Finance Authority, Water & Sewer System Revenue Bonds, Series EE, 5.000%, due 06/15/40 | $ | 1,000,000 | $ | 1,218,220 | |||||||
New York City Municipal Water Finance Authority, Water & Sewer System, Second General Resolution Fiscal 2017 Revenue Bonds, Series EE, 5.000%, due 06/15/33 | 1,000,000 | 1,224,110 | |||||||||
New York City Municipal Water Finance Authority, Water & Sewer System, Second General Resolution Revenue Bonds, Series A, 1.650%, due 06/15/321 | 900,000 | 900,000 | |||||||||
Series DD-2, 1.670%, due 06/15/431 | 700,000 | 700,000 | |||||||||
Series EE-2, 5.000%, due 06/15/40 | 1,200,000 | 1,496,244 | |||||||||
Series FF, 5.000%, due 06/15/39 | 2,000,000 | 2,455,480 | |||||||||
New York City Transitional Finance Authority Future Tax Secured Revenue Bonds, Series A-2, 5.000%, due 08/01/38 | 1,000,000 | 1,210,720 | |||||||||
Series C-2, 5.000%, due 05/01/35 | 3,000,000 | 3,697,650 | |||||||||
New York State Dormitory Authority, State Sales Tax Revenue Bonds, Series A, 5.000%, due 03/15/43 | 1,500,000 | 1,809,450 | |||||||||
New York State Urban Development Corp., Sales Tax Revenue Bonds, Series A, 5.000%, due 03/15/41 | 4,060,000 | 5,035,334 | |||||||||
New York State Urban Development Corp., State Personal Income Tax Revenue Bonds, Series A, 5.000%, due 03/15/36 | 1,500,000 | 1,861,125 | |||||||||
26,782,364 | |||||||||||
Ohio: 1.4% | |||||||||||
State of Ohio, GO Bonds, Series A, 5.000%, due 06/15/30 | 1,110,000 | 1,469,773 | |||||||||
Pennsylvania: 7.7% | |||||||||||
City of Philadelphia, GO Bonds 5.000%, due 08/01/20 | 1,590,000 | 1,625,234 | |||||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment Revenue Bonds 5.000%, due 06/01/24 | 1,625,000 | 1,865,386 | |||||||||
Pennsylvania Turnpike Commission Revenue Bonds 5.000%, due 12/01/30 | 1,750,000 | 2,136,593 |
72
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount | Value | ||||||||||
Municipal bonds—(Continued) | |||||||||||
Pennsylvania—(Concluded) | |||||||||||
Series 2017-3, 5.000%, due 12/01/28 | $ | 1,000,000 | $ | 1,233,760 | |||||||
Series A-2, 5.000%, due 12/01/28 | 1,000,000 | 1,248,790 | |||||||||
8,109,763 | |||||||||||
Rhode Island: 1.0% | |||||||||||
Tobacco Settlement Financing Corp., Asset-Backed Revenue Bonds, Series A, 5.000%, due 06/01/21 | 1,000,000 | 1,047,240 | |||||||||
South Carolina: 2.4% | |||||||||||
South Carolina Public Service Authority (Escrowed to Maturity) Revenue Bonds, Series B, 5.000%, due 12/01/202 | 555,000 | 574,303 | |||||||||
South Carolina Public Service Authority Revenue Bonds, Series A, 5.000%, due 12/01/26 | 1,010,000 | 1,187,437 | |||||||||
South Carolina Public Service Authority-Unrefunded Balance Revenue Bonds, Series B, 5.000%, due 12/01/20 | 690,000 | 712,977 | |||||||||
2,474,717 | |||||||||||
Texas: 9.0% | |||||||||||
Harris County Cultural Education Facilities Finance Corp., (Methodist Hospital) Revenue Bonds, Series C-1, 1.680%, due 12/01/241 | 370,000 | 370,000 | |||||||||
Lower Colorado River Authority Refunding LCRA Transmission Services Revenue Bonds 5.000%, due 05/15/31 | 1,000,000 | 1,260,810 | |||||||||
Lower Neches Valley Texas Authority Industrial Development Corp., (ExxonMobil Project) Revenue Bonds 1.590%, due 11/01/381 | 100,000 | 100,000 | |||||||||
North Texas Tollway Authority Revenue Bonds, Series A, 5.000%, due 01/01/27 | 3,030,000 | 3,458,199 |
Face amount | Value | ||||||||||
Municipal bonds—(Concluded) | |||||||||||
Texas—(Concluded) | |||||||||||
Series B, 5.000%, due 01/01/29 | $ | 1,140,000 | $ | 1,451,414 | |||||||
State of Texas, Revenue Anticipation Notes 4.000%, due 08/27/20 | 1,500,000 | 1,528,005 | |||||||||
University of Texas Revenue Bonds, Series A, 5.000%, due 08/15/38 | 1,000,000 | 1,260,080 | |||||||||
9,428,508 | |||||||||||
Washington: 1.2% | |||||||||||
Washington State, GO Bonds, Series C, 5.000%, due 02/01/37 | 1,000,000 | 1,249,880 | |||||||||
Wisconsin: 0.3% | |||||||||||
Uinta County Pollution Control Revenue Refunding-Chevron USA, Inc., Project Revenue Bonds 1.600%, due 08/15/201 | 300,000 | 300,000 | |||||||||
Total municipal bonds (cost $100,296,094) | 104,231,557 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 0.1% | |||||||||||
Investment companies: 0.1% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $96,683) | 96,683 | 96,683 | |||||||||
Total investments: 99.1% (cost $100,392,777) | 104,328,240 | ||||||||||
Other assets in excess of liabilities: 0.9% | 973,245 | ||||||||||
Net assets: 100.0% | $ | 105,301,485 |
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 94.
73
UBS Municipal Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Municipal bonds | $ | — | $ | 104,231,557 | $ | — | $ | 104,231,557 | |||||||||||
Short-term investments | — | 96,683 | — | 96,683 | |||||||||||||||
Total | $ | — | $ | 104,328,240 | $ | — | $ | 104,328,240 |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
1 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
2 Security 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 Sustainable Development Bank Bond Fund
Portfolio performance
For the six months ended December 31, 2019 (the "reporting period"), Class P shares of UBS Sustainable Development Bank Bond Fund (the "Fund") returned 1.23%. For comparison purposes, the Bloomberg Barclays U.S. Treasury Index (the "Index") returned 1.59%. The Fund's secondary benchmark, the Solactive Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index, retuned 1.44% during the reporting period. Please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on the redemption of Fund shares, while index returns do not reflect the deduction of fees and expenses.
Fund overview
The Fund seeks current income. Under normal circumstances, the Fund invests at least 80% of its net assets in bonds and/or instruments that provide exposure to bonds issued by development banks. Development banks are financial organizations formed by government entities to promote economic and social development.
The development bank bond market typically follows high-quality US government bonds. As each of the global Multilateral Development Banks ("MDB") are supranational entities backed by multiple member governments, MDBs historically have a similar credit profile to major sovereign issuers, such as the US government. Consequently, MDB bonds have generally delivered comparable returns to US Treasuries.
Market review
Global economic activity stabilized in the second half of 2019. Some of the major global themes that drove the slowdown, such as the trade war between the US and China, as well as the risk of a "No-Deal Brexit," were tackled, and at least temporary solutions were found. At the same time, central banks kept their cautions stance, with some of the major ones even cutting rates and restarting quantitative easing ("QE"). This helped to brighten both economic- and market-sentiment.
The US economy mirrored the global trend. Economic activity stabilized on a still healthy level. After cutting its benchmark rate three times in 2019, the Federal Reserve Board ("Fed") kept its policy unchanged in December, with a positive view on the labor market and household spending.
Meanwhile, volatility in the US rates market picked up during the reporting period. The 10-year US Treasury yield traded in a range of more than 50 basis points (i.e., 0.50%). After falling to a new record low, Treasury yields stabilized and closed the year at 1.92% versus 2.00% at the start of the reporting period.
Led by the direction of US Treasury yields, yields of sustainable development banks (SDB) closed the reporting period also slightly lower. The robust demand for high quality bonds, coupled with a lack of supply, continued and helped spreads of SDB bonds tighten somewhat.
75
UBS Sustainable Development Bank Bond Fund
Portfolio performance summary
The Fund seeks to minimize tracking error relative to its secondary benchmark (before fees and expenses), which is constructed from a blend of two market indexes designed to measure the performance of the US dollar-denominated multilateral development bank bond market. The Fund is passively managed but does not seek to directly replicate the secondary benchmark. During the reporting period, the Fund's underperformance relative to its secondary benchmark was largely driven by transaction costs, along with fees and expenses. Additionally, the performance deviation between the Fund and the primary index is explained by the longer duration of the Index. No derivatives were used in managing the Fund during the reporting period.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at (800) 647-1568 or by visiting our website at www.ubs.com/am-us.
76
UBS Sustainable Development Bank Bond Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | Inception1 | |||||||||||||
Class P2 | 1.23 | % | 6.80 | % | 7.59 | % | |||||||||
Bloomberg Barclays U.S. Treasury Index3 | 1.59 | % | 6.86 | % | 9.92 | % | |||||||||
Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index.4 | 1.44 | % | 6.74 | % | 9.59 | % |
The annualized gross and net expense ratios, respectively, for each class of shares as in the October 28, 2019 prospectuses were as follows: Class P—2.19% and 0.25%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 28, 2020, do not exceed 0.35% for Class A shares and 0.25% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of Class P of UBS Sustainable Development Bank Bond Fund is October 24, 2018.
2 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
3 The Bloomberg Barclays US Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury. Investors should note that indices do not reflect the deduction of fees and expenses.
4 The Solactive UBS Global Multilateral Development Bank Bond USD 40% 1-5 Year 60% 5-10 Year Total Return Index is a composite index, constructed from a blend of two market indexes designed to measure the performance of the US dollar denominated multilateral development bank bond market. Investors should note that indices do not reflect the deduction of fees and expenses.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
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UBS Sustainable Development Bank Bond Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Percentage of net assets | |||||||
Inter-American Development Bank, 2.250%, due 06/18/29 | 7.3 | % | |||||
International Bank for Reconstruction & Development, 2.500%, due 11/22/27 | 5.4 | ||||||
Inter-American Development Bank, 3.125%, due 09/18/28 | 5.1 | ||||||
Asian Infrastructure Investment Bank/The, 2.250%, due 05/16/24 | 4.4 | ||||||
International Development Association, 2.750%, due 04/24/23 | 4.1 | ||||||
International Bank for Reconstruction & Development, 2.500%, due 07/29/25 | 3.9 | ||||||
International Bank for Reconstruction & Development, 1.875%, due 10/27/26 | 3.8 | ||||||
Inter-American Development Bank, 2.000%, due 07/23/26 | 3.3 | ||||||
International Bank for Reconstruction & Development, 1.750%, due 10/23/29 | 3.3 | ||||||
Inter-American Development Bank, 2.375%, due 07/07/27 | 3.2 | ||||||
Total | 43.8 | % |
Sector allocation
Percentage of net assets | |||||||
Non-U.S. Government agency obligations | 97.8 | % | |||||
Short-term investments | 1.7 | ||||||
Investment of cash collateral from securities loaned | 2.5 | ||||||
Total investments | 102.0 | % | |||||
Liabilities in excess of other assets | (2.0 | ) | |||||
Total | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
78
UBS Sustainable Development Bank Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount | Value | ||||||||||
Non-U.S. government agency obligations: 97.8% | |||||||||||
Supranationals: 97.8% | |||||||||||
African Development Bank, Series GDIF, 1.250%, due 07/26/21 | $ | 450,000 | $ | 446,914 | |||||||
2.125%, due 11/16/22 | 200,000 | 202,291 | |||||||||
2.625%, due 03/22/21 | 200,000 | 202,229 | |||||||||
3.000%, due 09/20/231 | 700,000 | 732,287 | |||||||||
Agence Francaise de Developpement, EMTN 2.750%, due 03/22/212 | 1,000,000 | 1,011,170 | |||||||||
2.750%, due 01/22/222 | 400,000 | 407,576 | |||||||||
Asian Development Bank 2.625%, due 01/30/24 | 100,000 | 103,424 | |||||||||
Asian Development Bank, GMTN 1.750%, due 09/19/29 | 400,000 | 390,688 | |||||||||
2.000%, due 01/22/25 | 75,000 | 75,599 | |||||||||
2.500%, due 11/02/27 | 100,000 | 103,911 | |||||||||
2.625%, due 01/12/27 | 100,000 | 104,615 | |||||||||
2.750%, due 01/19/28 | 340,000 | 360,229 | |||||||||
3.125%, due 09/26/28 | 400,000 | 436,156 | |||||||||
Asian Infrastructure Investment Bank/The 2.250%, due 05/16/24 | 1,550,000 | 1,579,283 | |||||||||
Corp. Andina de Fomento 2.125%, due 09/27/21 | 125,000 | 124,655 | |||||||||
4.375%, due 06/15/22 | 300,000 | 314,664 | |||||||||
Council of Europe Development Bank 1.625%, due 03/16/21 | 750,000 | 748,815 | |||||||||
2.500%, due 02/27/24 | 800,000 | 821,285 | |||||||||
European Bank for Reconstruction & Development, EMTN 1.875%, due 07/15/21 | 200,000 | 200,499 | |||||||||
European Bank for Reconstruction & Development, GMTN 1.500%, due 11/02/21 | 250,000 | 249,151 | |||||||||
2.750%, due 03/07/23 | 850,000 | 877,155 | |||||||||
European Investment Bank 1.875%, due 02/10/251 | 375,000 | 375,971 | |||||||||
2.625%, due 03/15/24 | 425,000 | 439,808 | |||||||||
3.250%, due 01/29/24 | 500,000 | 529,355 | |||||||||
IDB Trust Services Ltd. 3.389%, due 09/26/232 | 800,000 | 835,600 | |||||||||
IDB Trust Services Ltd., EMTN 2.393%, due 04/12/222 | 400,000 | 402,508 | |||||||||
Inter-American Development Bank 2.000%, due 07/23/26 | 1,200,000 | 1,209,010 | |||||||||
2.125%, due 01/15/25 | 825,000 | 837,242 | |||||||||
2.250%, due 06/18/29 | 2,582,000 | 2,638,959 | |||||||||
2.375%, due 07/07/27 | 1,135,000 | 1,170,509 | |||||||||
3.000%, due 02/21/24 | 250,000 | 262,217 | |||||||||
3.125%, due 09/18/28 | 1,700,000 | 1,853,189 | |||||||||
Inter-American Development Bank, GMTN 1.750%, due 04/14/22 | 100,000 | 100,112 | |||||||||
2.000%, due 06/02/26 | 600,000 | 603,458 |
Face amount | Value | ||||||||||
Non-U.S. government agency obligations—(Concluded) | |||||||||||
Supranationals—(Concluded) | |||||||||||
International Bank for Reconstruction & Development, 2.000%, due 01/26/22 | $ | 100,000 | $ | 100,675 | |||||||
2.125%, due 07/01/22 | 50,000 | 50,538 | |||||||||
2.500%, due 03/19/24 | 650,000 | 669,654 | |||||||||
3.000%, due 09/27/23 | 100,000 | 104,613 | |||||||||
Series GDIF, 1.375%, due 05/24/21 | 250,000 | 248,993 | |||||||||
1.500%, due 08/28/24 | 950,000 | 938,553 | |||||||||
1.750%, due 10/23/29 | 1,210,000 | 1,181,272 | |||||||||
1.875%, due 10/27/26 | 1,400,000 | 1,396,571 | |||||||||
2.125%, due 03/03/25 | 100,000 | 101,717 | |||||||||
2.500%, due 11/25/24 | 300,000 | 309,892 | |||||||||
2.500%, due 07/29/25 | 1,350,000 | 1,398,775 | |||||||||
2.500%, due 11/22/27 | 1,893,000 | 1,970,773 | |||||||||
2.750%, due 07/23/21 | 300,000 | 304,912 | |||||||||
International Development Association 2.750%, due 04/24/231,2 | 1,425,000 | 1,471,199 | |||||||||
International Finance Corp., GMTN 1.125%, due 07/20/21 | 250,000 | 247,823 | |||||||||
1.375%, due 10/16/24 | 500,000 | 490,585 | |||||||||
2.125%, due 04/07/26 | 675,000 | 682,672 | |||||||||
2.250%, due 01/25/21 | 150,000 | 150,873 | |||||||||
2.875%, due 07/31/23 | 100,000 | 103,869 | |||||||||
Kreditanstalt fuer Wiederaufbau 2.000%, due 05/02/25 | 1,000,000 | 1,010,992 | |||||||||
2.875%, due 04/03/28 | 384,000 | 410,219 | |||||||||
Nordic Investment Bank 2.125%, due 02/01/22 | 200,000 | 201,720 | |||||||||
2.875%, due 07/19/23 | 1,100,000 | 1,142,620 | |||||||||
Total non-U.S. government agency obligations (cost $34,731,112) | 35,440,044 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 1.7% | |||||||||||
Investment companies: 1.7% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $612,590) | 612,590 | 612,590 | |||||||||
Investment of cash collateral from securities loaned: 2.5% | |||||||||||
Money market funds: 2.5% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $916,416) | 916,416 | 916,416 | |||||||||
Total investments: 102.0% (cost $36,260,118) | 36,969,050 | ||||||||||
Liabilities in excess of other assets: (2.0)% | (724,777 | ) | |||||||||
Net assets: 100.0% | $ | 36,244,273 |
79
UBS Sustainable Development Bank Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
For a listing of defined portfolio acronyms that are used throughout the Portfolio of investments as well as the tables that follow, please refer to page 94.
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments.
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Non-U.S. government agency obligations | $ | — | $ | 35,440,044 | $ | — | $ | 35,440,044 | |||||||||||
Short-term investments | — | 612,590 | — | 612,590 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 916,416 | — | 916,416 | |||||||||||||||
Total | $ | — | $ | 36,969,050 | $ | — | $ | 36,969,050 |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
1 Security, or portion thereof, was on loan at the period end.
2 Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
See accompanying notes to financial statements.
80
UBS Total Return Bond Fund
Portfolio performance
For the six months ended December 31, 2019, Class A shares of UBS Total Return Bond Fund (the "Fund") returned 2.95% (Class A shares returned -0.92% after the deduction of the maximum sales charge), while Class P shares returned 3.08%.For comparison purposes, the Bloomberg Barclays U.S. Aggregate Bond Index (the "Index") returned 2.45%. (Class P shares have lower expenses than the other share class of the Fund. Returns for all share classes over various time periods are shown on page 83; please note that the Fund's returns do not reflect the deduction of taxes that a shareholder would pay on the redemption of Fund shares, while index returns do not reflect the deduction of fees and expenses.)
During the reporting period, we used derivatives for risk management purposes and as a tool to help enhance returns across various strategies. A number of credit derivatives, including credit-default swap index (CDX) options and total return swaps, were used to manage the Fund's credit exposure. For active currency management, we utilized FX forwards. For managing interest rate exposure, we utilized interest rate futures during the reporting period. Derivatives were just one tool, among others, that we used to implement our overall strategy. Looking at the impact of derivatives in isolation is not very meaningful and could potentially be misleading, as often times they are used as a complement or risk mitigant to other existing positions in the portfolio.
Market commentary
Despite concerns that trade conflicts, Brexit uncertainties and other issues could lead to an economic contraction, the global economy continued to expand during the reporting period, albeit at a modest pace. Looking back, the US Commerce Department reported that gross domestic product ("GDP") grew at a 3.1% seasonally adjusted annualized rate during the first quarter of 2019. GDP growth was then 2.0% and 2.1% during the second and third quarters of 2019, respectively. Finally, the US Commerce Department's initial estimate for fourth quarter GDP growth in the US, released after the reporting period ended, was 2.1%.
The US Federal Reserve Board (the "Fed") proactively addressed moderating growth with a "dovish pivot" in January 2019. In particular, after raising interest rates four times in 2018, the Fed indicated it would pause from additional rate hikes. After analyzing incoming economic data for several months, the Fed pulled the trigger and lowered the federal funds rate at its meetings in July, September and October 2019. In its final meeting of the year in December 2019, the Fed indicated a pause from further actions for the time being, saying, "...participants regarded the current stance of monetary policy as likely to remain appropriate for a time as long as incoming information about the economy remained broadly consistent with the economic outlook".
The global fixed income market posted positive results during the reporting period. In the US, both short- and long-term Treasury yields declined (bond yields and prices move in the opposite direction). For the six months ended December 31, 2019, the yield on the US 10-year Treasury fell from 2.00% to 1.92%. Government bond yields outside the US also generally moved lower amid moderating economic growth and accommodative monetary policies by a number of developed and emerging market central banks. The overall US bond market, as measured by the Bloomberg Barclays US Aggregate Index, returned 2.45% during the reporting period. Riskier fixed income securities also rallied. High yield bonds, as measured by the ICE BofA US High Yield Cash Pay Constrained Index, returned 14.40% during the reporting period. Elsewhere, emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global), gained 3.45%.
Portfolio performance summary
What worked:
• Duration management: The Fund's US exposure versus short positions in the Australia, the euro area and the UK contributed to performance during the reporting period.
81
UBS Total Return Bond Fund
• Security selection: The Fund's security selection was the primary driver of performance. Specifically, security selection in corporates (both financials and industrials), commercial mortgage-backed securities (CMBS) and US agency securities were additive for returns.
• Sector allocation: Sector allocation also contributed, notably allocations to corporate bonds, asset-backed securities, commercial mortgage-back securities and non-US dollar debt.
What didn't work:
• Mortgage-backed security (MBS): An underweight exposure to MBS and security selection within MBS was the primary negative for relative performance during the reporting period.
Market outlook
The recent increase in geopolitical tensions may have a lasting impact on interest rates and the performance of risk assets, as it will likely increase event risk. Economic data in the US has started the year with a disappointing manufacturing report, while European data continues to be more mixed. The signing of the initial US-China trade agreement will unlikely lead to a resolution of the larger tensions between the two nations. The Fed may still find it necessary to fine tune monetary policy if the economic outlook deteriorates and/or inflation remains below its long run target. Comments from Fed officials in late 2019 and early 2020 confirm our belief that the potential for a new approach to dealing with the ongoing shortfalls in inflation is being considered.
We find US rates attractive versus most developed markets. The mixed performance of the US dollar may finally offer some opportunities more broadly in foreign exchange. We have seen the early signs of greater risk taking in local currency emerging markets debt, as most risk assets continue to trade well into 2020. Thematically, the strong demand for fixed income assets appears to be well supported, as the ongoing scarcity of high quality, positive yielding fixed income assets will likely continue to drive flows into markets such as US securitized, investment-grade corporates and emerging markets.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended December 31, 2019. The views and opinions in the letter were current as of February 14, 2020. They are not guarantees of future performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Mutual funds are sold by prospectus only. You should read it carefully and consider a fund's investment objectives, risks, charges, expenses and other important information contained in the prospectus before investing. Prospectuses for most of our funds can be obtained from your financial advisor, by calling UBS Funds at (800) 647-1568 or by visiting our website at www.ubs.com/am-us.
82
UBS Total Return Bond Fund
Average annual total returns for periods ended 12/31/19 (unaudited)
6 months | 1 year | 5 years | 10 years or Inception1 | ||||||||||||||||
Before deducting maximum sales charge | |||||||||||||||||||
Class A1 | 2.95 | % | 10.35 | % | N/A | 2.75 | % | ||||||||||||
Class P3 | 3.08 | 10.62 | 2.48 | % | 4.86 | ||||||||||||||
After deducting maximum sales charge | |||||||||||||||||||
Class A2 | (0.92 | )% | 6.19 | % | N/A | 1.56 | % | ||||||||||||
Bloomberg Barclays US Aggregate Index4 | 2.45 | 8.72 | 3.05 | % | 2.68 |
The annualized gross and net expense ratios as in the October 28, 2019 prospectuses were as follows: Class A—1.68% and 0.75%; Class P—1.45% and 0.50%. Net expenses reflect fee waivers and/or expense reimbursements, if any, pursuant to an agreement that is in effect to cap the expenses. The Trust, with respect to the Fund, and UBS Asset Management (Americas) Inc., the Fund's investment advisor and administrator ("UBS AM (Americas)" or the "Advisor"), have entered into a written agreement pursuant to which the Advisor has agreed to waive a portion of its management fees and/or to reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Fund's ordinary operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses), through the period ending October 28, 2020, do not exceed 0.75% for Class A shares and 0.50% for Class P shares. Pursuant to the written agreement, the Advisor is entitled to be reimbursed for any fees it waives and expenses it reimburses to the extent such reimbursement can be made during the three fiscal years following the date on which such fee waivers and expense reimbursements were made, provided that the reimbursement of the Advisor by the Fund will not cause the Fund to exceed the lesser of any applicable expense limit that is in place for the Fund (i) at the time of the waiver or reimbursement or (ii) at the time of the recoupment. The fee waiver/expense reimbursement agreement may be terminated by the Fund's Board of Trustees at any time and also will terminate automatically upon the expiration or termination of the Fund's advisory contract with the Advisor. Upon termination of the fee waiver/expense reimbursement agreement, however, UBS AM (Americas)'s three year recoupment rights will survive.
1 Inception date of A shares of UBS Total Return Bond Fund and the index is September 29, 2016. 10 years fund performance is shown for Class P Shares, and the 10 years index performance of the Bloomberg Barclays US Aggregate Index is 3.75%. The Fund's Class P shares acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end fund (the "Predecessor Fund"), prior to the opening of business on May 23, 2016 (the "Reorganization"). The Predecessor Fund was also managed by the Advisor, and the day-to-day management of, and investment decisions for, the Fund and the Predecessor Fund are made by the same portfolio management team. The Funds have generally similar investment objectives and strategies. Therefore, the information shown above reflects the historical performance of the Predecessor Fund for periods prior to the Reorganization. The performance information shown for periods prior to the Reorganization is for the Predecessor Fund and may not be representative of performance of the Fund.
2 Maximum sales charge for Class A shares is 3.75%. Class A shares bear ongoing 12b-1 service fees.
3 Class P shares do not bear initial or contingent deferred sales charges or ongoing 12b-1 service and distribution fees, but Class P shares held through advisory programs may be subject to a program fee, which, if included, would have reduced performance.
4 The Bloomberg Barclays US Aggregate Bond Index is an unmanaged broad based index designed to measure the US dollar-denominated, investment-grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, assetbacked and commercial mortgage-backed sectors. Investors should note that indices do not reflect the deduction of fees and expenses."
A temporary redemption fee of 2% was imposed on sales of Class P shares of the Fund between May 23, and August 22, 2016.
Past performance does not predict future performance, and the performance information provided does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results assume reinvestment of all dividends and capital gain distributions at net asset value on the ex-dividend dates. Total returns for periods of less than one year have not been annualized. Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit www.ubs.com/us-mutualfundperformance.
83
UBS Total Return Bond Fund
Portfolio statistics—December 31, 2019 (unaudited)1
Top ten holdings
Precentage of net assets | |||||||
FNMA, 3.500% due 02/01/48 | 2.4 | % | |||||
AmeriCredit Automobile Receivables, 3.720% due 12/08/21 | 1.9 | ||||||
UMBS TBA, 3.500% | 1.8 | ||||||
FNMA, 3.500% due 01/01/50 | 1.8 | ||||||
GNMA II, 3.000% due 08/20/46 | 1.6 | ||||||
FNMA, 3.000% due 08/01/46 | 1.4 | ||||||
VNDO Mortgage Trust, 3.947% due 12/13/29 | 1.3 | ||||||
CHT Mortgage Trust, 4.740% due 11/15/36 | 1.2 | ||||||
FNMA, 3.500% due 11/01/47 | 1.2 | ||||||
U.S. Treasury Inflation Indexed Notes (TIPS), 0.500% due 04/15/24 | 1.1 | ||||||
Total | 15.7 | % |
Top five issuer breakdown by country or territory of origin
Percentage of net assets | |||||||
United States | 90.2 | % | |||||
United Kingdom | 2.6 | ||||||
Colombia | 1.2 | ||||||
Canada | 1.2 | ||||||
Mexico | 0.9 | ||||||
Total | 96.1 | % |
1 The Fund's Portfolio is actively managed and its composition will vary over time.
84
UBS Total Return Bond Fund
Industry diversification—December 31, 2019 (unaudited)1
Corporate bonds | Percentage of net assets | ||||||
Agriculture | 0.1 | % | |||||
Auto manufacturers | 0.2 | ||||||
Banks | 8.1 | ||||||
Beverages | 0.5 | ||||||
Biotechnology | 0.7 | ||||||
Chemicals | 1.9 | ||||||
Commercial services | 0.1 | ||||||
Computers | 0.9 | ||||||
Diversified financial services | 2.4 | ||||||
Electric | 1.7 | ||||||
Electronics | 0.4 | ||||||
Food | 0.3 | ||||||
Healthcare-products | 0.1 | ||||||
Healthcare-services | 0.9 | ||||||
Insurance | 1.0 | ||||||
Internet | 0.4 | ||||||
Media | 1.4 | ||||||
Mining | 0.3 | ||||||
Miscellaneous manufacturers | 1.0 | ||||||
Oil & gas | 3.3 | ||||||
Pharmaceuticals | 1.7 | ||||||
Pipelines | 1.7 | ||||||
Real estate | 1.6 | ||||||
Real estate investment trust | 0.6 | ||||||
Retail | 0.3 | ||||||
Semiconductors | 1.0 | ||||||
Software | 1.0 | ||||||
Telecommunications | 1.4 | ||||||
Transportation | 0.6 | ||||||
Total corporate bonds | 35.6 | % |
Percentage of net assets | |||||||
Asset-backed securities | 13.7 | % | |||||
Mortgage-backed securities | 19.4 | ||||||
Municipal bonds | 1.0 | ||||||
Non-U.S. government agency obligations | 3.0 | ||||||
U.S. government agency obligations | 24.2 | ||||||
U.S. treasury obligations | 3.1 | ||||||
Short-term investments | 2.5 | ||||||
Investment of cash collateral from securities loaned | 0.8 | ||||||
Total investments | 103.3 | % | |||||
Liabilities in excess of other assets | (3.3 | ) | |||||
Net assets | 100.0 | % |
1 The Fund's portfolio is actively managed and its composition will vary over time.
85
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Asset-backed securities: 13.7% | |||||||||||
United States: 13.7% | |||||||||||
American Credit Acceptance Receivables Trust, Series 2018-3, Class B, 3.490%, due 06/13/222 | 229,529 | $ | 229,919 | ||||||||
AmeriCredit Automobile Receivables, Series 2015-4, Class D, 3.720%, due 12/08/21 | 725,000 | 728,751 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2018-1, Class D, 3.820%, due 03/18/24 | 100,000 | 103,456 | |||||||||
Capital Auto Receivables Asset Trust, Series 2015-4, Class D, 3.620%, due 05/20/21 | 81,281 | 81,343 | |||||||||
Series 2016-2, Class B, 2.110%, due 03/22/21 | 28,739 | 28,736 | |||||||||
CPS Auto Trust, Series 2018-C, Class D, 4.400%, due 06/17/242 | 150,000 | 154,500 | |||||||||
Dell Equipment Finance Trust, Series 2017-1, Class C, 2.950%, due 04/22/222 | 95,938 | 96,009 | |||||||||
Series 2018-1, Class D, 3.850%, due 06/24/242 | 120,000 | 121,790 | |||||||||
Drive Auto Receivables Trust, Series 2017-1, Class D, 3.840%, due 03/15/23 | 75,000 | 75,762 | |||||||||
Series 2017-2, Class C, 2.750%, due 09/15/23 | 7,581 | 7,582 | |||||||||
Series 2018-1, Class D, 3.810%, due 05/15/24 | 225,000 | 228,688 | |||||||||
Series 2018-2, Class D, 4.140%, due 08/15/24 | 200,000 | 204,005 | |||||||||
Series 2018-3, Class D, 4.300%, due 09/16/24 | 300,000 | 307,393 | |||||||||
Series 2018-4, Class D, 4.090%, due 01/15/26 | 150,000 | 154,156 | |||||||||
Exeter Automobile Receivables Trust, Series 2016-3A, Class B, 2.840%, due 08/16/212 | 4,380 | 4,381 | |||||||||
Series 2018-1A, Class D, 3.530%, due 11/15/232 | 100,000 | 101,479 | |||||||||
Flagship Credit Auto Trust, Series 2016-4, Class B, 2.410%, due 10/15/212 | 40,049 | 40,046 | |||||||||
HPEFS Equipment Trust, Series 2019-1A, Class D, 2.720%, due 09/20/292 | 200,000 | 199,902 | |||||||||
Invitation Homes Trust, Series 2018-SFR1, Class C, 1 mo. USD LIBOR + 1.250%, 2.987%, due 03/17/372,3 | 100,000 | 99,756 | |||||||||
Series 2018-SFR2, Class D, 1 mo. USD LIBOR + 1.450%, 3.190%, due 06/17/372,3 | 150,000 | 150,187 |
Face amount1 | Value | ||||||||||
Asset-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
New Residential Advance Receivables Trust Advance Receivables Backed, Series 2019-T5, Class AT5, 2.425%, due 10/15/512 | 300,000 | $ | 299,994 | ||||||||
OneMain Direct Auto Receivables Trust, Series 2018-1A, Class C, 3.850%, due 10/14/252 | 300,000 | 306,755 | |||||||||
PSNH Funding LLC, Series 2018-1, Class A3, 3.814%, due 02/01/35 | 175,000 | 189,917 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-2, Class D, 3.490%, due 07/17/23 | 100,000 | 101,107 | |||||||||
Series 2017-3, Class D, 3.200%, due 11/15/23 | 225,000 | 227,732 | |||||||||
Series 2018-4, Class D, 3.980%, due 12/15/25 | 225,000 | 230,203 | |||||||||
Sofi Consumer Loan Program Trust, Series 2017-6, Class B, 3.520%, due 11/25/262 | 225,000 | 228,888 | |||||||||
Series 2018-1, Class B, 3.650%, due 02/25/272 | 100,000 | 101,881 | |||||||||
Series 2018-2, Class A2, 3.350%, due 04/26/272 | 175,000 | 176,051 | |||||||||
Series 2018-2, Class B, 3.790%, due 04/26/272 | 125,000 | 127,287 | |||||||||
Series 2018-3, Class B, 4.020%, due 08/25/272 | 125,000 | 128,210 | |||||||||
Total asset-backed securities (cost $5,161,559) | 5,235,866 | ||||||||||
Corporate bonds: 35.6% | |||||||||||
Belgium: 0.5% | |||||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc. 4.900%, due 02/01/46 | 165,000 | 195,135 | |||||||||
Brazil: 0.8% | |||||||||||
Petrobras Global Finance BV 7.375%, due 01/17/27 | 250,000 | 304,500 | |||||||||
Canada: 1.2% | |||||||||||
Canadian Natural Resources Ltd., GMTN 4.950%, due 06/01/47 | 50,000 | 60,620 | |||||||||
Cenovus Energy, Inc. 5.400%, due 06/15/47 | 80,000 | 93,205 | |||||||||
NOVA Chemicals Corp. 5.250%, due 08/01/232 | 210,000 | 214,471 | |||||||||
Rogers Communications, Inc. 5.000%, due 03/15/44 | 60,000 | 72,514 | |||||||||
440,810 | |||||||||||
Cayman Islands: 0.5% | |||||||||||
CIFI Holdings Group Co. Ltd. 5.500%, due 01/23/234 | 200,000 | 200,680 |
86
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
China: 0.6% | |||||||||||
Country Garden Holdings Co. Ltd. 8.000%, due 01/27/244 | 200,000 | $ | 218,955 | ||||||||
Colombia: 0.2% | |||||||||||
Ecopetrol SA 5.375%, due 06/26/26 | 70,000 | 78,488 | |||||||||
Germany: 0.4% | |||||||||||
Deutsche Bank AG 4.250%, due 02/04/21 | 150,000 | 152,372 | |||||||||
Hong Kong: 0.5% | |||||||||||
Yanlord Land HK Co. Ltd. 6.750%, due 04/23/234 | 200,000 | 204,540 | |||||||||
Israel: 0.1% | |||||||||||
Teva Pharmaceutical Finance IV BV 3.650%, due 11/10/21 | 57,000 | 56,127 | |||||||||
Luxembourg: 0.5% | |||||||||||
INEOS Group Holdings SA 5.625%, due 08/01/242,5 | 200,000 | 205,400 | |||||||||
Mexico: 0.9% | |||||||||||
Petroleos Mexicanos 7.690%, due 01/23/502 | 300,000 | 328,713 | |||||||||
Netherlands: 0.2% | |||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. 3.875%, due 06/18/262 | 65,000 | 68,877 | |||||||||
Peru: 0.3% | |||||||||||
Southern Copper Corp. 6.750%, due 04/16/40 | 90,000 | 120,094 | |||||||||
United Kingdom: 2.6% | |||||||||||
Barclays PLC 4.836%, due 05/09/28 | 200,000 | 215,443 | |||||||||
HSBC Holdings PLC 3.400%, due 03/08/21 | 260,000 | 264,068 | |||||||||
Lloyds Banking Group PLC 4.582%, due 12/10/25 | 200,000 | 216,383 | |||||||||
Reynolds American, Inc. 7.250%, due 06/15/37 | 35,000 | 45,522 | |||||||||
Royal Bank of Scotland Group PLC 3.875%, due 09/12/23 | 250,000 | 261,821 | |||||||||
1,003,237 | |||||||||||
United States: 26.3% | |||||||||||
Abbott Laboratories 3.750%, due 11/30/26 | 45,000 | 49,137 | |||||||||
AbbVie, Inc. 2.500%, due 05/14/20 | 200,000 | 200,300 | |||||||||
ADT Security Corp./The 3.500%, due 07/15/22 | 140,000 | 142,538 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
AEP Texas, Inc., Series G, 4.150%, due 05/01/49 | 50,000 | $ | 55,313 | ||||||||
Series E, 6.650%, due 02/15/33 | 50,000 | 67,443 | |||||||||
Alabama Power Co. 6.000%, due 03/01/39 | 100,000 | 137,724 | |||||||||
Apache Corp. 4.375%, due 10/15/285 | 100,000 | 104,401 | |||||||||
Apple, Inc. 4.650%, due 02/23/46 | 100,000 | 125,095 | |||||||||
AT&T, Inc. 4.300%, due 02/15/30 | 266,000 | 295,518 | |||||||||
Bank of America Corp. 6.110%, due 01/29/37 | 125,000 | 168,623 | |||||||||
Bank of America Corp., MTN 4.200%, due 08/26/24 | 150,000 | 161,008 | |||||||||
Berkshire Hathaway Energy Co. 4.450%, due 01/15/49 | 100,000 | 118,637 | |||||||||
Biogen, Inc. 4.050%, due 09/15/25 | 100,000 | 108,673 | |||||||||
5.200%, due 09/15/45 | 50,000 | 60,217 | |||||||||
Boston Properties LP, REIT 2.750%, due 10/01/26 | 210,000 | 212,783 | |||||||||
Bristol-Myers Squibb Co. 3.200%, due 06/15/262 | 150,000 | 157,300 | |||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. 3.125%, due 01/15/25 | 30,000 | 30,349 | |||||||||
Burlington Northern Santa Fe LLC 5.150%, due 09/01/43 | 100,000 | 127,286 | |||||||||
CCO Holdings LLC/CCO Holdings Capital Corp. 5.500%, due 05/01/262 | 150,000 | 158,063 | |||||||||
CF Industries, Inc. 3.450%, due 06/01/23 | 150,000 | 154,362 | |||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital 3.579%, due 07/23/20 | 150,000 | 150,954 | |||||||||
Citigroup, Inc. 4.125%, due 07/25/28 | 50,000 | 54,500 | |||||||||
5.500%, due 09/13/25 | 300,000 | 342,702 | |||||||||
6.675%, due 09/13/43 | 50,000 | 73,060 | |||||||||
Comcast Corp. 3.969%, due 11/01/47 | 88,000 | 96,783 | |||||||||
4.600%, due 10/15/38 | 50,000 | 59,472 | |||||||||
4.700%, due 10/15/48 | 50,000 | 61,542 | |||||||||
CVS Health Corp. 4.300%, due 03/25/28 | 120,000 | 130,948 | |||||||||
Dell International LLC/EMC Corp. 4.420%, due 06/15/212 | 100,000 | 102,889 | |||||||||
DuPont de Nemours, Inc. 4.725%, due 11/15/28 | 100,000 | 113,399 |
87
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Eaton Corp. 2.750%, due 11/02/22 | 190,000 | $ | 193,770 | ||||||||
Energy Transfer Operating LP 5.500%, due 06/01/27 | 50,000 | 56,153 | |||||||||
Enterprise Products Operating LLC 2.850%, due 04/15/21 | 105,000 | 106,132 | |||||||||
Exelon Corp. 3.400%, due 04/15/26 | 150,000 | 156,575 | |||||||||
FedEx Corp. 4.550%, due 04/01/46 | 50,000 | 51,284 | |||||||||
Fiserv, Inc. 3.200%, due 07/01/26 | 60,000 | 62,062 | |||||||||
GE Capital International Funding Co. Unlimited Co. 2.342%, due 11/15/20 | 200,000 | 200,151 | |||||||||
3.373%, due 11/15/25 | 200,000 | 208,168 | |||||||||
General Electric Co., Series D, (fixed, converts to FRN on 01/21/21), 5.000%, due 01/21/216 | 99,000 | 96,967 | |||||||||
General Motors Co. 6.600%, due 04/01/36 | 70,000 | 82,462 | |||||||||
Georgia Power Co., Series C, 2.000%, due 09/08/20 | 70,000 | 69,971 | |||||||||
Gilead Sciences, Inc. 3.650%, due 03/01/26 | 75,000 | 80,652 | |||||||||
Goldman Sachs Group, Inc./The 5.150%, due 05/22/45 | 80,000 | 98,067 | |||||||||
5.750%, due 01/24/22 | 305,000 | 327,293 | |||||||||
Home Depot, Inc./The 2.125%, due 09/15/26 | 100,000 | 99,839 | |||||||||
Illinois Tool Works, Inc. 2.650%, due 11/15/26 | 80,000 | 82,070 | |||||||||
International Lease Finance Corp. 5.875%, due 08/15/22 | 120,000 | 130,677 | |||||||||
JPMorgan Chase & Co., Series I, 3 mo. USD LIBOR + 3.470%, 5.406%, due 01/30/203,6 | 97,000 | 97,873 | |||||||||
Kinder Morgan, Inc. 5.550%, due 06/01/45 | 40,000 | 47,816 | |||||||||
6.500%, due 09/15/20 | 100,000 | 103,053 | |||||||||
Kroger Co./The 6.900%, due 04/15/38 | 25,000 | 33,603 | |||||||||
Liberty Mutual Group, Inc. 4.250%, due 06/15/232 | 45,000 | 47,789 | |||||||||
4.569%, due 02/01/292 | 155,000 | 172,989 | |||||||||
LYB International Finance BV 4.875%, due 03/15/445 | 50,000 | 56,186 | |||||||||
Marathon Oil Corp. 4.400%, due 07/15/27 | 75,000 | 81,480 |
Face amount1 | Value | ||||||||||
Corporate bonds—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
Marathon Petroleum Corp. 4.750%, due 09/15/44 | 70,000 | $ | 76,742 | ||||||||
MetLife, Inc. 6.400%, due 12/15/36 | 35,000 | 42,875 | |||||||||
Microsoft Corp. 2.375%, due 02/12/22 | 250,000 | 253,367 | |||||||||
4.450%, due 11/03/45 | 60,000 | 74,901 | |||||||||
Morgan Stanley 4.300%, due 01/27/45 | 50,000 | 58,638 | |||||||||
4.875%, due 11/01/22 | 350,000 | 374,959 | |||||||||
Morgan Stanley, GMTN 4.350%, due 09/08/26 | 140,000 | 152,996 | |||||||||
MPLX LP 4.875%, due 06/01/25 | 70,000 | 76,398 | |||||||||
Nabors Industries, Inc. 4.625%, due 09/15/21 | 150,000 | 149,063 | |||||||||
NCR Corp. 5.000%, due 07/15/22 | 40,000 | 40,425 | |||||||||
Netflix, Inc. 5.500%, due 02/15/22 | 140,000 | 148,225 | |||||||||
Oncor Electric Delivery Co. LLC 3.750%, due 04/01/45 | 50,000 | 54,201 | |||||||||
Prudential Financial, Inc., MTN 6.625%, due 06/21/40 | 50,000 | 70,130 | |||||||||
QUALCOMM, Inc. 3.250%, due 05/20/27 | 60,000 | 63,081 | |||||||||
Quicken Loans, Inc. 5.750%, due 05/01/252 | 260,000 | 268,775 | |||||||||
RR Donnelley & Sons Co. 7.875%, due 03/15/21 | 36,000 | 37,260 | |||||||||
Sabine Pass Liquefaction LLC 5.000%, due 03/15/27 | 200,000 | 219,933 | |||||||||
Seagate HDD Cayman 5.750%, due 12/01/34 | 80,000 | 83,668 | |||||||||
Shire Acquisitions Investments Ireland DAC 2.400%, due 09/23/21 | 100,000 | 100,543 | |||||||||
Smithfield Foods, Inc. 3.350%, due 02/01/222 | 80,000 | 80,205 | |||||||||
Sunoco Logistics Partners Operations LP 5.400%, due 10/01/47 | 50,000 | 54,218 | |||||||||
Synchrony Financial 4.500%, due 07/23/25 | 90,000 | 97,015 | |||||||||
Teachers Insurance & Annuity Association of America 4.270%, due 05/15/472 | 60,000 | 68,033 | |||||||||
Tenet Healthcare Corp. 4.625%, due 07/15/24 | 200,000 | 204,750 | |||||||||
Texas Instruments, Inc. 1.850%, due 05/15/22 | 220,000 | 219,785 | |||||||||
Union Pacific Corp. 4.050%, due 11/15/45 | 40,000 | 43,414 | |||||||||
UnitedHealth Group, Inc. 4.625%, due 07/15/35 | 100,000 | 121,216 |
88
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Corporate bonds—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
Verizon Communications, Inc. 5.250%, due 03/16/37 | 140,000 | $ | 175,433 | ||||||||
Wells Fargo & Co., MTN (fixed, converts to FRN on 06/17/26), 3.196%, due 06/17/27 | 70,000 | 72,558 | |||||||||
10,046,908 | |||||||||||
Total Corporate bonds (cost $12,883,276) | 13,624,836 | ||||||||||
Mortgage-backed securities: 19.4% | |||||||||||
United States: 19.4% | |||||||||||
Angel Oak Mortgage Trust, Series 2019-5, Class A1, 2.593%, due 10/25/492,7 | 168,333 | 167,919 | |||||||||
Angel Oak Mortgage Trust I LLC, Series 2018-3, Class A1, 3.649%, due 09/25/482,7 | 120,298 | 121,678 | |||||||||
Series 2019-4, Class A1, 2.993%, due 07/26/492,7 | 237,713 | 238,367 | |||||||||
Ashford Hospitality Trust, Series 2018-ASHF, Class D, 1 mo. USD LIBOR + 2.100%, 3.840%, due 04/15/352,3 | 100,000 | 99,749 | |||||||||
BANK, Series 2017-BNK7, Class C, 4.051%, due 09/15/607 | 100,000 | 103,572 | |||||||||
Series 2018-BN14, Class E, 3.000%, due 09/15/602,7 | 250,000 | 212,849 | |||||||||
Series 2018-BN15, Class A4, 4.407%, due 11/15/617 | 150,000 | 170,297 | |||||||||
BBCMS Trust, Series 2015-SRCH, Class B, 4.498%, due 08/10/352 | 135,000 | 147,251 | |||||||||
BENCHMARK Mortgage Trust, Series 2018-B4, Class D, 2.813%, due 07/15/512,7 | 100,000 | 88,448 | |||||||||
Series 2019-B10, Class C, 3.750%, due 03/15/62 | 200,000 | 201,692 | |||||||||
CHT Mortgage Trust, Series 2017-CSMO, Class E, 1 mo. USD LIBOR + 3.000%, 4.740%, due 11/15/362,3 | 475,000 | 475,431 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2015-GC33, Class A4, 3.778%, due 09/10/58 | 143,000 | 152,756 | |||||||||
Series 2017-P8, Class D, 3.000%, due 09/15/502 | 300,000 | 248,495 | |||||||||
Commercial Mortgage Trust, Series 2015-CR24, Class D, 3.463%, due 08/10/487 | 150,000 | 139,307 | |||||||||
Series 2017-COR2, Class C, 4.562%, due 09/10/507 | 200,000 | 211,892 |
Face amount1 | Value | ||||||||||
Mortgage-backed securities—(Continued) | |||||||||||
United States—(Continued) | |||||||||||
CSAIL Commercial Mortgage Trust, Series 2017-C8, Class D, 4.470%, due 06/15/502 | 141,000 | $ | 136,283 | ||||||||
Deephaven Residential Mortgage Trust, Series 2018-3A, Class A1, 3.789%, due 08/25/582,7 | 152,038 | 152,900 | |||||||||
FREMF Mortgage Trust, Series 2017-K64, Class B, 4.117%, due 05/25/502,7 | 50,000 | 52,810 | |||||||||
Series 2017-K724, Class B, 3.599%, due 11/25/232,7 | 265,000 | 270,340 | |||||||||
GS Mortgage Securities Corp. Trust, Series 2017-SLP, Class E, 4.591%, due 10/10/322,7 | 225,000 | 226,675 | |||||||||
Hilton USA Trust, Series 2016-SFP, Class E, 5.519%, due 11/05/352 | 125,000 | 125,202 | |||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-C6, Class D, 5.157%, due 05/15/457 | 150,000 | 151,757 | |||||||||
Series 2018-ASH8, Class D, 1 mo. USD LIBOR + 2.050%, 3.790%, due 02/15/35 2,3 | 100,000 | 99,999 | |||||||||
JPMBB Commercial Mortgage Securities Trust, Series 2014-C26, Class AS, 3.800%, due 01/15/48 | 200,000 | 210,026 | |||||||||
Series 2015-C29, Class D, 3.656%, due 05/15/487 | 100,000 | 85,916 | |||||||||
Series 2015-C30, Class A5, 3.822%, due 07/15/48 | 170,000 | 181,887 | |||||||||
JPMDB Commercial Mortgage Securities Trust, Series 2016-C2, Class D, 3.397%, due 06/15/492,7 | 175,000 | 159,152 | |||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C24, Class A4, 3.732%, due 05/15/48 | 100,000 | 106,412 | |||||||||
Series 2015-C24, Class AS, 4.036%, due 05/15/487 | 75,000 | 79,900 | |||||||||
Series 2016-C32, Class AS, 3.994%, due 12/15/497 | 273,000 | 290,345 | |||||||||
Series 2017-C34, Class C, 4.185%, due 11/15/527 | 100,000 | 103,997 | |||||||||
Morgan Stanley Capital I, Inc., Series 2017-HR2, Class C, 4.226%, due 12/15/507 | 175,000 | 183,972 | |||||||||
Series 2017-HR2, Class D, 2.730%, due 12/15/50 | 100,000 | 89,754 | |||||||||
Residential Mortgage Loan Trust, Series 2019-3, Class A1, 2.633%, due 09/25/592,7 | 192,416 | 191,818 |
89
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
Mortgage-backed securities—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
RETL, Series 2019-RVP, Class C, 1 mo. USD LIBOR + 2.100%, 3.840%, due 03/15/362,3 | 200,000 | $ | 200,500 | ||||||||
Rosslyn Portfolio Trust, Series 2017-ROSS, Class E, 1 mo. USD LIBOR + 3.000%, 4.740%, due 06/15/332,3 | 275,000 | 276,328 | |||||||||
Starwood Retail Property Trust, Series 2014-STAR, Class C, 1 mo. USD LIBOR + 2.750%, 4.490%, due 11/15/272,3 | 125,000 | 123,721 | |||||||||
Verus Securitization Trust, Series 2019-1, Class A1, 3.836%, due 02/25/592,7 | 161,517 | 163,155 | |||||||||
Series 2019-3, Class A1, 2.784%, due 07/25/592,8 | 157,155 | 157,336 | |||||||||
Series 2019-4, Class A1, 2.642%, due 11/25/592,8 | 146,831 | 146,714 | |||||||||
VNDO Mortgage Trust, Series 2013-PENN, Class D, 3.947%, due 12/13/292,7 | 500,000 | 502,814 | |||||||||
Wells Fargo Commercial Mortgage Trust, Series 2018-C44, Class C, 4.835%, due 05/15/517 | 150,000 | 160,909 | |||||||||
Total Mortgage-backed securities (cost $7,227,506) | 7,410,325 | ||||||||||
Municipal bonds: 1.0% | |||||||||||
California: 1.0% | |||||||||||
State of California, GO Bonds 7.300%, due 10/01/39 (cost $364,397) | 250,000 | 381,755 | |||||||||
Non-U.S. government agency obligations: 3.0% | |||||||||||
Colombia: 1.0% | |||||||||||
Colombia Government International Bond 8.125%, due 05/21/24 | 305,000 | 374,102 | |||||||||
Ecuador: 0.5% | |||||||||||
Ecuador Government International Bond 10.750%, due 01/31/294 | 200,000 | 195,000 | |||||||||
Indonesia: 0.4% | |||||||||||
Indonesia Government International Bond 6.625%, due 02/17/372 | 100,000 | 135,937 | |||||||||
Panama: 0.1% | |||||||||||
Panama Government International Bond 3.870%, due 07/23/60 | 50,000 | 53,825 | |||||||||
South Africa: 0.3% | |||||||||||
South Africa Government Bond, Series 2048, 8.750%, due 02/28/48 | ZAR | 1,900,000 | 118,784 |
Face amount1 | Value | ||||||||||
Non-U.S. government agency obligations—(Concluded) | |||||||||||
Turkey: 0.3% | |||||||||||
Turkey Government International Bond 6.875%, due 03/17/36 | 100,000 | $ | 103,375 | ||||||||
Uruguay: 0.4% | |||||||||||
Uruguay Government International Bond 7.625%, due 03/21/36 | 100,000 | 147,812 | |||||||||
Total non-U.S. government agency obligations (cost $1,072,310) | 1,128,835 | ||||||||||
U.S. government agency obligations: 24.2% | |||||||||||
United States: 24.2% | |||||||||||
FHLMC 4.000%, due 01/01/46 | 102,302 | 109,593 | |||||||||
4.000%, due 05/01/47 | 163,840 | 172,368 | |||||||||
4.000%, due 08/01/47 | 159,486 | 167,827 | |||||||||
4.000%, due 10/01/47 | 81,105 | 85,266 | |||||||||
4.000%, due 09/01/48 | 94,426 | 98,466 | |||||||||
4.500%, due 04/01/46 | 97,445 | 105,824 | |||||||||
FNMA 2.500%, due 08/01/34 | 94,836 | 95,638 | |||||||||
3.000%, due 02/01/33 | 233,133 | 239,892 | |||||||||
3.000%, due 07/01/34 | 270,228 | 276,899 | |||||||||
3.000%, due 02/01/43 | 65,536 | 67,505 | |||||||||
3.000%, due 05/01/43 | 74,806 | 77,007 | |||||||||
3.000%, due 07/01/43 | 101,365 | 104,373 | |||||||||
3.000%, due 09/01/43 | 138,965 | 143,691 | |||||||||
3.000%, due 05/01/46 | 146,543 | 149,985 | |||||||||
3.000%, due 08/01/46 | 529,058 | 540,990 | |||||||||
3.500%, due 04/01/32 | 83,750 | 88,104 | |||||||||
3.500%, due 11/01/33 | 36,097 | 37,420 | |||||||||
3.500%, due 06/01/45 | 111,989 | 118,425 | |||||||||
3.500%, due 06/01/46 | 188,040 | 199,051 | |||||||||
3.500%, due 11/01/47 | 433,732 | 450,879 | |||||||||
3.500%, due 02/01/48 | 884,303 | 917,310 | |||||||||
3.500%, due 06/01/49 | 110,224 | 113,239 | |||||||||
3.500%, due 07/01/49 | 64,824 | 66,745 | |||||||||
3.500%, due 01/01/50 | 650,000 | 670,225 | |||||||||
4.000%, due 09/01/40 | 126,889 | 136,098 | |||||||||
4.000%, due 03/01/41 | 38,099 | 40,855 | |||||||||
4.000%, due 12/01/43 | 167,630 | 181,328 | |||||||||
4.000%, due 02/01/45 | 123,039 | 133,074 | |||||||||
4.000%, due 09/01/45 | 138,214 | 146,763 | |||||||||
4.000%, due 06/01/47 | 318,613 | 335,918 | |||||||||
4.000%, due 08/01/47 | 89,695 | 94,421 | |||||||||
4.000%, due 01/01/48 | 87,214 | 91,607 | |||||||||
4.000%, due 05/01/48 | 18,197 | 19,016 | |||||||||
4.500%, due 02/01/44 | 23,132 | 25,639 | |||||||||
4.500%, due 04/01/44 | 113,413 | 125,721 | |||||||||
4.500%, due 12/01/44 | 22,702 | 24,524 | |||||||||
4.500%, due 02/01/45 | 39,929 | 43,206 | |||||||||
4.500%, due 06/01/46 | 152,542 | 168,982 | |||||||||
4.500%, due 08/01/46 | 21,319 | 23,211 | |||||||||
4.500%, due 05/01/47 | 70,347 | 75,334 | |||||||||
4.500%, due 02/01/49 | 136,668 | 145,787 |
90
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Face amount1 | Value | ||||||||||
U.S. government agency obligations—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
5.500%, due 03/01/33 | 31,532 | $ | 35,099 | ||||||||
5.500%, due 09/01/34 | 113,290 | 124,124 | |||||||||
5.500%, due 11/01/34 | 26,800 | 30,116 | |||||||||
6.000%, due 11/01/28 | 34,428 | 38,544 | |||||||||
GNMA 6.500%, due 05/15/29 | 8,408 | 9,503 | |||||||||
GNMA II 3.000%, due 09/20/44 | 73,339 | 75,928 | |||||||||
3.000%, due 08/20/46 | 589,324 | 607,964 | |||||||||
3.500%, due 02/20/43 | 17,007 | 17,882 | |||||||||
4.000%, due 06/20/44 | 12,530 | 13,294 | |||||||||
4.000%, due 09/20/44 | 47,736 | 50,610 | |||||||||
4.000%, due 05/20/45 | 11,999 | 12,693 | |||||||||
5.000%, due 08/20/48 | 27,714 | 29,434 | |||||||||
GNMA II TBA 2.500% | 125,000 | 125,532 | |||||||||
3.000% | 25,000 | 25,663 | |||||||||
UMBS TBA 2.500% | 150,000 | 151,267 | |||||||||
3.000% | 300,000 | 304,066 | |||||||||
3.500% | 675,000 | 694,002 | |||||||||
Total U.S. government agency obligations (cost $9,072,866) | 9,253,927 | ||||||||||
U.S. treasury obligations: 3.1% | |||||||||||
United States: 3.1% | |||||||||||
U.S. Treasury Inflation Indexed Bonds (TIPS) 1.000%, due 02/15/49 | 66,470 | 73,838 |
Face amount1 | Value | ||||||||||
U.S. treasury obligations—(Concluded) | |||||||||||
United States—(Concluded) | |||||||||||
U.S. Treasury Inflation Indexed Notes (TIPS) 0.500%, due 04/15/24 | 413,217 | $ | 419,875 | ||||||||
0.875%, due 01/15/29 | 208,918 | 221,825 | |||||||||
U.S. Treasury Notes 2.375%, due 05/15/29 | 275,000 | 285,608 | |||||||||
1.625%, due 08/15/29 | 200,000 | 194,684 | |||||||||
Total U.S. treasury obligations (cost $1,204,659) | 1,195,830 | ||||||||||
Number of shares | |||||||||||
Short-term investments: 2.5% | |||||||||||
Investment companies: 2.5% | |||||||||||
State Street Institutional U.S. Government Money Market Fund (cost $945,245) | 945,245 | 945,245 | |||||||||
Investment of cash collateral from securities loaned: 0.8% | |||||||||||
Money market funds: 0.8% | |||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio (cost $322,250) | 322,250 | 322,250 | |||||||||
Total investments: 103.3% (cost $38,254,068) | 39,498,869 | ||||||||||
Liabilities in excess of other assets: (3.3)% | (1,266,108 | ) | |||||||||
Net assets: 100.0% | $ | 38,232,761 |
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 94.
Futures contracts
Number of contracts | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | |||||||||||||||||||
U.S. treasury futures buy contracts: | |||||||||||||||||||||||
5 | U.S. Treasury Note 2 Year Futures | March 2020 | $ | 1,078,523 | $ | 1,077,500 | $ | (1,023 | ) | ||||||||||||||
26 | U.S. Treasury Note 5 Year Futures | March 2020 | 3,097,491 | 3,083,844 | (13,647 | ) | |||||||||||||||||
17 | U.S. Ultra Bond Futures | March 2020 | 3,179,955 | 3,088,156 | (91,799 | ) | |||||||||||||||||
6 | U.S. Ultra Treasury Note 10 Year Futures | March 2020 | 854,650 | 844,219 | (10,431 | ) | |||||||||||||||||
Total | $ | 8,210,619 | $ | 8,093,719 | $ | (116,900 | ) | ||||||||||||||||
Interest rate futures sell contracts: | |||||||||||||||||||||||
16 | Australian Bond 3 Year Futures | March 2020 | $ | (1,298,068 | ) | $ | (1,291,373 | ) | $ | 6,695 | |||||||||||||
4 | German Euro Bund Futures | March 2020 | (777,562 | ) | (764,954 | ) | 12,608 | ||||||||||||||||
6 | United Kingdom Long Gilt Bond Futures | March 2020 | (1,055,124 | ) | (1,044,156 | ) | 10,968 |
91
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Futures contracts—(Concluded)
Number of contracts | Expiration date | Current notional amount | Value | Unrealized appreciation (depreciation) | |||||||||||||||||||||||
U.S. treasury futures sell contracts: | |||||||||||||||||||||||||||
2 | U.S. Treasury Note 10 Year Futures | March 2020 | $ | (259,118 | ) | $ | (256,844 | ) | $ | 2,274 | |||||||||||||||||
Total | $(3,389,872) | $(3,357,327) | $32,545 | ||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (84,355 | ) |
Centrally cleared interest rate swap agreements
Notional amount (000) | Maturity date | Payment frequency | Payments made by the Portfolio9 | Payments received by the Portfolio9 | Value | Unrealized appreciation (depreciation) | |||||||||||||||||||||
MXN | 10,000 | 10/10/29 | Monthly | Mexico Interbank TIIE 28 Days | 6.782 | % | $ | (954 | ) | $ | (954 | ) |
Forward foreign currency contracts
Counterparty | Sell | Purchase | Settlement date | Unrealized appreciation (depreciation) | |||||||||||||||
BB | USD | 102,888 | ZAR | 1,500,000 | 03/18/20 | $ | 3,158 | ||||||||||||
BOA | EUR | 55,000 | USD | 61,585 | 03/18/20 | (399 | ) | ||||||||||||
BOA | USD | 193,279 | BRL | 800,000 | 03/18/20 | 4,983 | |||||||||||||
BOA | USD | 296,839 | MXN | 5,700,000 | 03/18/20 | 1,294 | |||||||||||||
CITI | AUD | 120,000 | USD | 82,658 | 03/18/20 | (1,708 | ) | ||||||||||||
GSI | GBP | 20,000 | USD | 26,805 | 03/18/20 | 259 | |||||||||||||
JPMCB | USD | 97,201 | CLP | 75,000,000 | 03/18/20 | 2,626 | |||||||||||||
Net unrealized appreciation (depreciation) | $ | 10,213 |
Fair valuation summary
The following is a summary of the fair valuations according to the inputs used as of December 31, 2019 in valuing the Fund's investments. In the event a Fund holds investments (other than a money market fund) for which fair value is measured using the NAV per share practical expedient (or its equivalent), a separate column will be added to the fair value hierarchy table; this is intended to permit reconciliation to the amounts presented in the Portfolio of investments:
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Assets | |||||||||||||||||||
Asset-backed securities | $ | — | $ | 5,235,866 | $ | — | $ | 5,235,866 | |||||||||||
Corporate bonds | — | 13,624,836 | — | 13,624,836 | |||||||||||||||
Mortgage-backed securities | — | 7,410,325 | — | 7,410,325 | |||||||||||||||
Municipal bonds | — | 381,755 | — | 381,755 |
92
UBS Total Return Bond Fund
Portfolio of investments
December 31, 2019 (unaudited)
Fair valuation summary—(Concluded)
Description | Unadjusted quoted prices in active markets for identical investments (Level 1) | Other significant observable inputs (Level 2) | Unobservable inputs (Level 3) | Total | |||||||||||||||
Non-U.S. government agency obligations | $ | — | $ | 1,128,835 | $ | — | $ | 1,128,835 | |||||||||||
U.S. government agency obligations | — | 9,253,927 | — | 9,253,927 | |||||||||||||||
U.S. treasury obligations | — | 1,195,830 | — | 1,195,830 | |||||||||||||||
Short-term investments | — | 945,245 | — | 945,245 | |||||||||||||||
Investment of cash collateral from securities loaned | — | 322,250 | — | 322,250 | |||||||||||||||
Futures contracts | 32,545 | — | — | 32,545 | |||||||||||||||
Forward foreign currency contracts | — | 12,320 | — | 12,320 | |||||||||||||||
Total | $ | 32,545 | $ | 39,511,189 | $ | — | $ | 39,543,734 | |||||||||||
Liabilities | |||||||||||||||||||
Futures contracts | (116,900 | ) | — | — | (116,900 | ) | |||||||||||||
Swap agreements | — | (954 | ) | — | (954 | ) | |||||||||||||
Forward foreign currency contracts | — | (2,107 | ) | — | (2,107 | ) | |||||||||||||
Total | $ | (116,900 | ) | $ | (3,061 | ) | $ | — | $ | (119,961 | ) |
At December 31, 2019, there were no transfers in or out of Level 3.
Portfolio footnotes
† Amount represents less than 0.05%.
1 In U.S. dollars unless otherwise indicated.
2 Security 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 $9,362,411, represented 24.5% of the Fund's net assets at period end.
3 Variable or floating rate security. The interest rate shown is the rate in effect as of period end and changes periodically.
4 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.
5 Security, or portion thereof, was on loan at the period end.
6 Perpetual investment. Date shown reflects the next call date.
7 Variable or floating rate security for which the interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
8 Step bond—coupon rate increases in increments to maturity. The rate disclosed is the rate at the period end; the maturity date disclosed is the ultimate maturity date.
9 Payments made or received are based on the notional amount.
See accompanying notes to financial statements.
93
The UBS Funds
December 31, 2019
Portfolio acronyms
ADR American Depositary Receipt
AGM Assured Guaranty Municipal
CDO Collateralized Debt Obligation
COP Certificate of Participation
DAC Designated Activity Company
EMTN Euro Medium Term Note
ETF Exchange Traded Fund
EURIBOR Euro Interbank Offered Rate
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GDR Global Depository Receipt
GMTN Global Medium Term Note
GNMA Government National Mortgage Association
GO General Obligation
LIBOR London Interbank Offered Rate
MTN Medium Term Note
NVDR Non-Voting Depository Receipt
OAT Obligation Assimilables du Trésor (French Government Bonds)
PJSC Private Joint Stock Company
REIT Real Estate Investment Trust
TIPS Treasury inflation protected securities
UMBS Uniform Mortgage-Backed Securities
Counterparty abbreviations
BB Barclays Bank PLC
BOA Bank of America NA
CIBC Canadian Imperial Bank of Commerce
CITI Citibank NA
GSI Goldman Sachs International
HSBC HSBC Bank PLC
JPMCB JPMorgan Chase Bank
MSCI Morgan Stanley & Co. International PLC
SSC State Street Bank and Trust Co.
Currency abbreviations
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CHF Swiss Franc
CLP Chilean Peso
CNY Chinese Yuan
COP Colombian Peso
EUR Euro
GBP Great Britain Pound
HKD Hong Kong Dollar
HUF Hungarian Forint
JPY Japanese Yen
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
THB Thai Baht
USD United States Dollar
ZAR South African Rand
See accompanying notes to financial statements.
94
The UBS Funds
December 31, 2019 (unaudited)
Explanation of expense disclosure
As a shareholder of the Funds, you incur two types of costs: (1) transactional costs (as applicable); including sales charges (loads); and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees (if appli- cable); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example below is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, July 1, 2019 to December 31, 2019 (unless otherwise noted).
Actual expenses
The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expens- es that you paid over a period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on that Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not that Fund's actual return for each class of shares. The hypo- thetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs (as applicable), such as sales charges (loads). Therefore, the second line in the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
95
The UBS Funds
December 31, 2019 (unaudited)
Beginning account value July 1, 2019 | Ending account value December 31, 2019 | Expenses paid during period 07/01/19 to 12/31/19* | Expense ratio during the period | ||||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,031.60 | $ | 6.89 | 1.35 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.35 | 6.85 | 1.35 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,032.30 | 5.62 | 1.10 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.61 | 5.58 | 1.10 | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,061.60 | 6.22 | 1.20 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.10 | 6.09 | 1.20 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,062.70 | 4.93 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.36 | 4.82 | 0.95 | |||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,096.80 | 5.75 | 1.09 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,019.66 | 5.53 | 1.09 | |||||||||||||||||||
Class P2 | Actual | 1,000.00 | 1,101.70 | 1.00 | 0.19 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,024.18 | 0.97 | 0.19 | |||||||||||||||||||
UBS Engage for Impact Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,063.90 | 4.41 | 0.85 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.86 | 4.32 | 0.85 | |||||||||||||||||||
UBS International Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,069.80 | 6.50 | 1.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.85 | 6.34 | 1.25 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,071.00 | 5.21 | 1.00 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.11 | 5.08 | 1.00 | |||||||||||||||||||
UBS U.S. Small Cap Growth Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,011.30 | 6.27 | 1.24 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,018.90 | 6.29 | 1.24 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,012.40 | 5.01 | 0.99 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.16 | 5.03 | 0.99 | |||||||||||||||||||
UBS U.S. Sustainable Equity Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,115.10 | 5.05 | 0.95 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,020.36 | 4.82 | 0.95 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,116.70 | 3.72 | 0.70 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.62 | 3.56 | 0.70 |
* Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184 divided by 366 (to reflect the one-half year period).
96
The UBS Funds
December 31, 2019 (unaudited)
Beginning account value July 1, 2019 | Ending account value December 31, 2019 | Expenses paid during period 07/01/19 to 12/31/19* | Expense ratio during the period | ||||||||||||||||||||
UBS Municipal Bond Fund | |||||||||||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,019.20 | $ | 3.30 | 0.65 | % | ||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.87 | 3.30 | 0.65 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,019.50 | 2.03 | 0.40 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.13 | 2.03 | 0.40 | |||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | |||||||||||||||||||||||
Class P | Actual | 1,000.00 | 1,012.30 | 1.26 | 0.25 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,023.88 | 1.27 | 0.25 | |||||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||||||
Class A | Actual | 1,000.00 | 1,029.50 | 3.83 | 0.75 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,021.37 | 3.81 | 0.75 | |||||||||||||||||||
Class P | Actual | 1,000.00 | 1,030.80 | 2.55 | 0.50 | ||||||||||||||||||
Hypothetical (5% annual return before expenses) | 1,000.00 | 1,022.62 | 2.54 | 0.50 |
* Expenses are equal to the Fund's annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184 divided by 366 (to reflect the one-half year period).
97
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2019 (unaudited)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Assets | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 49,079,079 | $ | 225,709,034 | $ | 300,953,275 | |||||||||
Affiliated issuers | — | 22,973,089 | — | ||||||||||||
Foreign currency | 631,896 | 2,007,764 | 3,073,886 | ||||||||||||
$ | 49,710,975 | $ | 250,689,887 | $ | 304,027,161 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 41,771,863 | $ | 246,482,270 | $ | 335,336,764 | |||||||||
Affiliated issuers | — | 22,933,334 | — | ||||||||||||
Foreign currency | 638,561 | 2,031,582 | 3,087,514 | ||||||||||||
Cash collateral on futures | 756,062 | 4,477,730 | — | ||||||||||||
Cash collateral on swap agreements | 128,161 | 2,277,379 | — | ||||||||||||
Due from broker | 635,156 | 654,345 | — | ||||||||||||
Receivable for investments sold | — | 1,080,072 | — | ||||||||||||
Receivable for fund shares sold | 14,200 | 12,801 | 1,168,420 | ||||||||||||
Receivable for dividends and interest | 209,147 | 333,192 | 874,063 | ||||||||||||
Receivable for foreign tax reclaims | — | 129,910 | 1,283 | ||||||||||||
Receivable from affiliate | — | — | — | ||||||||||||
Receivable for variation margin on futures contracts | 171,682 | — | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | 10,176 | 1,284,737 | — | ||||||||||||
OTC swap agreements, at value2 | 208 | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 593,082 | 940,920 | — | ||||||||||||
Other assets | 26,781 | 18,547 | 25,683 | ||||||||||||
Total assets | 44,955,079 | 282,656,819 | 340,493,727 | ||||||||||||
Liabilities | |||||||||||||||
Payable for cash collateral from securities loaned | 336,925 | 16,658,350 | — | ||||||||||||
Payable for investments purchased | — | 766,562 | 1,312,327 | ||||||||||||
Payable for fund shares redeemed | 108,267 | 511,475 | 2,038,959 | ||||||||||||
Payable to affiliate | 24,319 | 163,857 | 75,688 | ||||||||||||
Payable to Trustees | 11,646 | 25,602 | 9,699 | ||||||||||||
Payable to custodian | 47,231 | 74,173 | 77,717 | ||||||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | — | 4,733 | 322,218 | ||||||||||||
Payable for variation margin on futures contracts | — | 767,790 | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 381,902 | 780,989 | — | ||||||||||||
Accrued expenses and other liabilities | 246,167 | 301,263 | 110,051 | ||||||||||||
Total liabilities | 1,156,457 | 20,054,794 | 3,946,659 | ||||||||||||
Net assets | $ | 43,798,622 | $ | 262,602,025 | $ | 336,547,068 |
1 Includes $329,517; $17,589,585; $0; $1,131,098 and $4,058,207, respectively, of investments in securities on loan, at value, plus accrued interest and dividends, if any.
2 Net upfront payments received by UBS Dynamic Alpha were $315.
98
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Assets | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 20,425,641 | $ | 188,031,094 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 28,692 | 5,717,445 | |||||||||
$ | 20,454,333 | $ | 193,748,539 | ||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 22,555,541 | $ | 206,184,528 | |||||||
Affiliated issuers | — | — | |||||||||
Foreign currency | 29,093 | 5,772,757 | |||||||||
Cash collateral on futures | — | — | |||||||||
Cash collateral on swap agreements | — | — | |||||||||
Due from broker | — | — | |||||||||
Receivable for investments sold | — | — | |||||||||
Receivable for fund shares sold | 21,636 | 1,604,729 | |||||||||
Receivable for dividends and interest | 2,711 | 253,701 | |||||||||
Receivable for foreign tax reclaims | 4,372 | 193,938 | |||||||||
Receivable from affiliate | 3,699 | — | |||||||||
Receivable for variation margin on futures contracts | — | — | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | |||||||||
OTC swap agreements, at value2 | — | — | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | |||||||||
Other assets | 19,008 | 22,228 | |||||||||
Total assets | 22,636,060 | 214,031,881 | |||||||||
Liabilities | |||||||||||
Payable for cash collateral from securities loaned | 488,524 | 1,673,164 | |||||||||
Payable for investments purchased | 33,374 | — | |||||||||
Payable for fund shares redeemed | 2,814 | 240,275 | |||||||||
Payable to affiliate | — | 140,687 | |||||||||
Payable to Trustees | 7,091 | 14,044 | |||||||||
Payable to custodian | 13,973 | 48,698 | |||||||||
Payable for foreign withholding taxes and foreign capital gains taxes | — | 45,484 | |||||||||
Payable for variation margin on futures contracts | — | — | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | |||||||||
Accrued expenses and other liabilities | 35,887 | 123,454 | |||||||||
Total liabilities | 581,663 | 2,285,806 | |||||||||
Net assets | $ | 22,054,397 | $ | 211,746,075 |
See accompanying notes to financial statements.
99
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2019 (unaudited) (continued)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 86,728,963 | $ | 235,742,429 | $ | 309,105,417 | |||||||||
Distributable earnings (losses) | (42,930,341 | ) | 26,859,596 | 27,441,651 | |||||||||||
Net assets | $ | 43,798,622 | $ | 262,602,025 | $ | 336,547,068 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 26,033,202 | $ | 200,731,305 | $ | — | |||||||||
Shares outstanding | 4,156,532 | 16,121,325 | — | ||||||||||||
Net asset value and redemption proceeds per share | $ | 6.26 | $ | 12.45 | $ | — | |||||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | 6.62 | $ | 13.17 | $ | — | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 17,765,420 | $ | 61,870,720 | $ | 93,996,889 | |||||||||
Shares outstanding | 2,771,226 | 4,849,534 | 9,453,587 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 6.41 | $ | 12.76 | $ | 9.94 | |||||||||
Class P2: | |||||||||||||||
Net assets | $ | — | $ | — | $ | 242,550,179 | |||||||||
Shares outstanding | — | — | 24,296,902 | ||||||||||||
Net asset value, offering price and redemption value per share3 | $ | — | $ | — | $ | 9.98 |
3 Assumes shares were held a sufficient period or are otherwise not subject to a redemption fee.
100
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 20,167,464 | $ | 197,915,703 | |||||||
Distributable earnings (losses) | 1,886,933 | 13,830,372 | |||||||||
Net assets | $ | 22,054,397 | $ | 211,746,075 | |||||||
Class A: | |||||||||||
Net assets | $ | — | $ | 10,340,073 | |||||||
Shares outstanding | — | 977,419 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 10.58 | |||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 11.20 | |||||||
Class P: | |||||||||||
Net assets | $ | 22,054,397 | $ | 201,406,002 | |||||||
Shares outstanding | 1,967,147 | 18,995,642 | |||||||||
Net asset value, offering price and redemption value per share | $ | 11.21 | $ | 10.60 | |||||||
Class P2: | |||||||||||
Net assets | $ | — | $ | — | |||||||
Shares outstanding | — | — | |||||||||
Net asset value, offering price and redemption value per share3 | $ | — | $ | — |
See accompanying notes to financial statements.
101
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2019 (unaudited) (continued)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Assets | |||||||||||||||
Investments, at cost | |||||||||||||||
Unaffiliated issuers | $ | 112,759,568 | $ | 31,750,715 | $ | 100,392,777 | |||||||||
Foreign currency | — | — | — | ||||||||||||
$ | 112,759,568 | $ | 31,750,715 | $ | 100,392,777 | ||||||||||
Investments, at value | |||||||||||||||
Unaffiliated issuers1 | $ | 136,344,239 | $ | 34,664,231 | $ | 104,328,240 | |||||||||
Foreign currency | — | — | — | ||||||||||||
Cash collateral on futures | — | — | — | ||||||||||||
Cash collateral on swap agreements | — | — | — | ||||||||||||
Due from broker | — | — | — | ||||||||||||
Receivable for investments sold | — | 711,697 | — | ||||||||||||
Receivable for fund shares sold | 17,874 | 241 | 49,750 | ||||||||||||
Receivable for dividends and interest | 73,817 | 34,342 | 1,123,659 | ||||||||||||
Receivable from affiliate | — | 7,809 | — | ||||||||||||
Receivable for variation margin on centrally cleared swap agreements | — | — | — | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Other assets | 25,394 | 19,925 | 25,701 | ||||||||||||
Total assets | 136,461,324 | 35,438,245 | 105,527,350 | ||||||||||||
Liabilities | |||||||||||||||
Payable for cash collateral from securities loaned | 11,941,276 | 1,255,630 | — | ||||||||||||
Payable for investments purchased | — | 590,006 | — | ||||||||||||
Payable for fund shares redeemed | 152,715 | 39 | 58,567 | ||||||||||||
Payable to affiliate | 72,820 | — | 14,219 | ||||||||||||
Payable to Trustees | 14,674 | 7,546 | 13,526 | ||||||||||||
Payable to custodian | 21,901 | 8,475 | 10,270 | ||||||||||||
Payable for variation margin on futures contracts | — | — | — | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | — | — | — | ||||||||||||
Accrued expenses and other liabilities | 166,619 | 106,652 | 129,283 | ||||||||||||
Total liabilities | 12,370,005 | 1,968,348 | 225,865 | ||||||||||||
Net assets | $ | 124,091,319 | $ | 33,469,897 | $ | 105,301,485 |
1 Includes $24,890,213; $2,042,406; $0; $896,732 and $372,895, respectively of investments in securities on loan, at value, plus accrued interest and dividends, if any.
102
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Assets | |||||||||||
Investments, at cost | |||||||||||
Unaffiliated issuers | $ | 36,260,118 | $ | 38,254,068 | |||||||
Foreign currency | — | 107,498 | |||||||||
$ | 36,260,118 | $ | 38,361,566 | ||||||||
Investments, at value | |||||||||||
Unaffiliated issuers1 | $ | 36,969,050 | $ | 39,498,869 | |||||||
Foreign currency | — | 109,072 | |||||||||
Cash collateral on futures | — | 140,181 | |||||||||
Cash collateral on swap agreements | — | 28,266 | |||||||||
Due from broker | — | 274,863 | |||||||||
Receivable for investments sold | — | 496,356 | |||||||||
Receivable for fund shares sold | 24,629 | 87 | |||||||||
Receivable for dividends and interest | 239,993 | 246,258 | |||||||||
Receivable from affiliate | 13,522 | 18,971 | |||||||||
Receivable for variation margin on centrally cleared swap agreements | — | 7,462 | |||||||||
Unrealized appreciation on forward foreign currency contracts | — | 12,320 | |||||||||
Other assets | 21,041 | 14,902 | |||||||||
Total assets | 37,268,235 | 40,847,607 | |||||||||
Liabilities | |||||||||||
Payable for cash collateral from securities loaned | 916,416 | 322,250 | |||||||||
Payable for investments purchased | — | 2,034,754 | |||||||||
Payable for fund shares redeemed | 57,625 | 2,916 | |||||||||
Payable to affiliate | — | — | |||||||||
Payable to Trustees | 7,228 | 9,523 | |||||||||
Payable to custodian | 3,523 | 22,212 | |||||||||
Payable for variation margin on futures contracts | — | 84,299 | |||||||||
Unrealized depreciation on forward foreign currency contracts | — | 2,107 | |||||||||
Accrued expenses and other liabilities | 39,170 | 136,785 | |||||||||
Total liabilities | 1,023,962 | 2,614,846 | |||||||||
Net assets | $ | 36,244,273 | $ | 38,232,761 |
See accompanying notes to financial statements.
103
The UBS Funds
Financial Statements
Statement of assets and liabilities—December 31, 2019 (unaudited) (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Net assets consist of: | |||||||||||||||
Beneficial interest | $ | 98,418,872 | $ | 29,152,470 | $ | 101,387,890 | |||||||||
Distributable earnings (losses) | 25,672,447 | 4,317,427 | 3,913,595 | ||||||||||||
Net assets | $ | 124,091,319 | $ | 33,469,897 | $ | 105,301,485 | |||||||||
Class A: | |||||||||||||||
Net assets | $ | 24,192,566 | $ | 13,222,320 | $ | 13,196,521 | |||||||||
Shares outstanding | 1,324,862 | 340,404 | 1,232,323 | ||||||||||||
Net asset value and redemption proceeds per share | $ | 18.26 | $ | 38.84 | $ | 10.71 | |||||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | 19.32 | $ | 41.10 | $ | 10.96 | |||||||||
Class P: | |||||||||||||||
Net assets | $ | 99,898,753 | $ | 20,247,577 | $ | 92,104,964 | |||||||||
Shares outstanding | 4,835,462 | 519,313 | 8,607,441 | ||||||||||||
Net asset value, offering price and redemption value per share | $ | 20.66 | $ | 38.99 | $ | 10.70 |
104
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Net assets consist of: | |||||||||||
Beneficial interest | $ | 35,341,776 | $ | 40,256,230 | |||||||
Distributable earnings (losses) | 902,497 | (2,023,469 | ) | ||||||||
Net assets | $ | 36,244,273 | $ | 38,232,761 | |||||||
Class A: | |||||||||||
Net assets | $ | — | $ | 634,227 | |||||||
Shares outstanding | — | 41,337 | |||||||||
Net asset value and redemption proceeds per share | $ | — | $ | 15.34 | |||||||
Maximum offering price per share (NAV per share plus maximum sales charge) | $ | — | $ | 15.94 | |||||||
Class P: | |||||||||||
Net assets | $ | 36,244,273 | $ | 37,598,534 | |||||||
Shares outstanding | 3,433,409 | 2,449,207 | |||||||||
Net asset value, offering price and redemption value per share | $ | 10.56 | $ | 15.35 |
See accompanying notes to financial statements.
105
The UBS Funds
Financial Statements
Statement of operations—For the six months ended December 31, 2019 (unaudited)
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||
Investment income | |||||||||||||||
Unaffiliated dividends | $ | 95,852 | $ | 1,629,445 | $ | 7,519,423 | |||||||||
Affiliated dividends | — | 614,199 | — | ||||||||||||
Interest | 509,334 | 886,650 | 50,846 | ||||||||||||
Securities lending | 13,381 | 10,024 | 515 | ||||||||||||
Foreign tax withheld | (331 | ) | (53,668 | ) | (364,231 | ) | |||||||||
Total income | 618,236 | 3,086,650 | 7,206,553 | ||||||||||||
Expenses | |||||||||||||||
Investment management and administration fees | 213,436 | 1,147,731 | 1,357,130 | ||||||||||||
Service and distribution fees—Class A | 34,943 | 255,400 | — | ||||||||||||
Transfer agency and related services fees—Class A | 13,158 | 67,770 | — | ||||||||||||
Transfer agency and related services fees—Class P | 11,087 | 12,723 | 213 | ||||||||||||
Transfer agency and related services fees—Class P2 | — | — | 11,721 | ||||||||||||
Custody and fund accounting fees | 21,360 | 38,461 | 54,005 | ||||||||||||
Trustees fees | 19,265 | 42,481 | 31,202 | ||||||||||||
Professional services fees | 92,153 | 99,850 | 78,733 | ||||||||||||
Printing and shareholder report fees | 20,716 | 51,120 | 13,834 | ||||||||||||
Federal and state registration fees | 16,019 | 18,186 | 26,334 | ||||||||||||
Interest expense | 174 | 3,630 | — | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other | 32,076 | 49,360 | 17,874 | ||||||||||||
Total expenses | 474,387 | 1,786,712 | 1,591,046 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (185,456 | ) | (281,574 | ) | (1,011,252 | ) | |||||||||
Net expenses | 288,931 | 1,505,138 | 579,794 | ||||||||||||
Net investment income (loss) | 329,305 | 1,581,512 | 6,626,759 | ||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 302,882 | 3,635,782 | (1,617,501 | ) | |||||||||||
Futures contracts | 523,379 | 1,455,209 | — | ||||||||||||
Swap agreements | (127,740 | ) | 112,227 | — | |||||||||||
Forward foreign currency contracts | 162,843 | (534,464 | ) | — | |||||||||||
Foreign currency transactions | (88,032 | ) | 494,806 | (4,995 | ) | ||||||||||
Net realized gain (loss) | 773,332 | 5,163,560 | (1,622,496 | ) | |||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers (net of change in deferred foreign capital gain taxes of $0; $0; $180,406; $0 and $0, respectively) | 65,553 | 7,626,888 | 28,533,856 | ||||||||||||
Investments in affiliated issuers | — | 1,503,008 | — | ||||||||||||
Futures contracts | 206,413 | (1,254,571 | ) | — | |||||||||||
Swap agreements | 12,987 | 605,834 | — | ||||||||||||
Forward foreign currency contracts | 56,694 | 374,251 | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | (26,825 | ) | (45,250 | ) | 2,928 | ||||||||||
Change in net unrealized appreciation (depreciation) | 314,822 | 8,810,160 | 28,536,784 | ||||||||||||
Net realized and unrealized gain (loss) | 1,088,154 | 13,973,720 | 26,914,288 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 1,417,459 | $ | 15,555,232 | $ | 33,541,047 |
106
The UBS Funds
UBS Engage For Impact Fund | UBS International Sustainable Equity Fund | ||||||||||
Investment income | |||||||||||
Unaffiliated dividends | $ | 120,440 | $ | 3,021,677 | |||||||
Affiliated dividends | — | — | |||||||||
Interest | 6,661 | 34,887 | |||||||||
Securities lending | 1,688 | 4,584 | |||||||||
Foreign tax withheld | (8,840 | ) | (141,520 | ) | |||||||
Total income | 119,949 | 2,919,628 | |||||||||
Expenses | |||||||||||
Investment management and administration fees | 77,247 | 773,868 | |||||||||
Service and distribution fees—Class A | — | 12,206 | |||||||||
Transfer agency and related services fees—Class A | — | 2,980 | |||||||||
Transfer agency and related services fees—Class P | 4,526 | 12,751 | |||||||||
Transfer agency and related services fees—Class P2 | — | — | |||||||||
Custody and fund accounting fees | 10,450 | 24,226 | |||||||||
Trustees fees | 14,138 | 28,228 | |||||||||
Professional services fees | 50,146 | 69,425 | |||||||||
Printing and shareholder report fees | 3,119 | 6,558 | |||||||||
Federal and state registration fees | 6,350 | 19,608 | |||||||||
Interest expense | — | — | |||||||||
Amortization of offering costs | 40,342 | — | |||||||||
Other | 10,264 | 30,243 | |||||||||
Total expenses | 216,582 | 980,093 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (136,993 | ) | (83,467 | ) | |||||||
Net expenses | 79,589 | 896,626 | |||||||||
Net investment income (loss) | 40,360 | 2,023,002 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | (119,581 | ) | (1,335,012 | ) | |||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | 692 | — | |||||||||
Foreign currency transactions | 631 | 105,917 | |||||||||
Net realized gain (loss) | (118,258 | ) | (1,229,095 | ) | |||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers (net of change in deferred foreign capital gain taxes of $0; $0; $180,406; $0 and $0, respectively) | 1,548,530 | 13,237,787 | |||||||||
Investments in affiliated issuers | — | — | |||||||||
Futures contracts | — | — | |||||||||
Swap agreements | — | — | |||||||||
Forward foreign currency contracts | — | — | |||||||||
Translation of other assets and liabilities denominated in foreign currency | (371 | ) | 59,983 | ||||||||
Change in net unrealized appreciation (depreciation) | 1,548,159 | 13,297,770 | |||||||||
Net realized and unrealized gain (loss) | 1,429,901 | 12,068,675 | |||||||||
Net increase (decrease) in net assets resulting from operations | $ | 1,470,261 | $ | 14,091,677 |
See accompanying notes to financial statements.
107
The UBS Funds
Financial Statements
Statement of operations—For the six months ended December 31, 2019 (unaudited) (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||
Investment income | |||||||||||||||
Unaffiliated dividends | $ | 342,901 | $ | 255,364 | $ | — | |||||||||
Interest | 36,043 | 6,298 | 1,235,871 | ||||||||||||
Securities lending | 71,854 | 1,723 | — | ||||||||||||
Total income | 450,798 | 263,385 | 1,235,871 | ||||||||||||
Expenses | |||||||||||||||
Investment management and administration fees | 559,108 | 119,803 | 249,238 | ||||||||||||
Service and distribution fees—Class A | 30,505 | 15,343 | 16,398 | ||||||||||||
Transfer agency and related services fees—Class A | 13,679 | 2,321 | 1,375 | ||||||||||||
Transfer agency and related services fees—Class P | 37,921 | 1,239 | 8,440 | ||||||||||||
Custody and fund accounting fees | 11,223 | 3,969 | 9,136 | ||||||||||||
Trustees fees | 26,097 | 16,991 | 24,247 | ||||||||||||
Professional services fees | 69,052 | 80,418 | 70,409 | ||||||||||||
Printing and shareholder report fees | 15,249 | 3,629 | 8,425 | ||||||||||||
Federal and state registration fees | 16,954 | 16,749 | 18,249 | ||||||||||||
Interest expense | — | — | — | ||||||||||||
Amortization of offering costs | — | — | — | ||||||||||||
Other | 24,796 | 17,439 | 23,339 | ||||||||||||
Total expenses | 804,584 | 277,901 | 429,256 | ||||||||||||
Fee waivers and/or expense reimbursements by Advisor | (175,683 | ) | (154,349 | ) | (202,973 | ) | |||||||||
Net expenses | 628,901 | 123,552 | 226,283 | ||||||||||||
Net investment income (loss) | (178,103 | ) | 139,833 | 1,009,588 | |||||||||||
Net realized gain (loss) on: | |||||||||||||||
Investments in unaffiliated issuers | 5,953,102 | 1,404,401 | 989,772 | ||||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Foreign currency transactions | — | — | — | ||||||||||||
Net realized gain (loss) | 5,953,102 | 1,404,401 | 989,772 | ||||||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||||||
Investments in unaffiliated issuers | (4,372,503 | ) | 1,874,538 | 21,821 | |||||||||||
Options and swaptions written | — | — | — | ||||||||||||
Futures contracts | — | — | — | ||||||||||||
Swap agreements | — | — | — | ||||||||||||
Forward foreign currency contracts | — | — | — | ||||||||||||
Translation of other assets and liabilities denominated in foreign currency | — | — | — | ||||||||||||
Change in net unrealized appreciation (depreciation) | (4,372,503 | ) | 1,874,538 | 21,821 | |||||||||||
Net realized and unrealized gain (loss) | 1,580,599 | 3,278,939 | 1,011,593 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 1,402,496 | $ | 3,418,772 | $ | 2,021,181 |
108
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||
Investment income | |||||||||||
Unaffiliated dividends | $ | — | $ | 2,725 | |||||||
Interest | 408,499 | 691,320 | |||||||||
Securities lending | 112 | 1,346 | |||||||||
Total income | 408,611 | 695,391 | |||||||||
Expenses | |||||||||||
Investment management and administration fees | 38,608 | 112,572 | |||||||||
Service and distribution fees—Class A | — | 769 | |||||||||
Transfer agency and related services fees—Class A | — | 142 | |||||||||
Transfer agency and related services fees—Class P | 2,595 | 12,934 | |||||||||
Custody and fund accounting fees | 3,699 | 15,268 | |||||||||
Trustees fees | 15,138 | 17,303 | |||||||||
Professional services fees | 47,173 | 77,479 | |||||||||
Printing and shareholder report fees | 3,177 | 11,100 | |||||||||
Federal and state registration fees | 7,541 | 16,592 | |||||||||
Interest expense | 404 | 160 | |||||||||
Amortization of offering costs | 46,980 | — | |||||||||
Other | 10,685 | 17,009 | |||||||||
Total expenses | 176,000 | 281,328 | |||||||||
Fee waivers and/or expense reimbursements by Advisor | (132,699 | ) | (182,510 | ) | |||||||
Net expenses | 43,301 | 98,818 | |||||||||
Net investment income (loss) | 365,310 | 596,573 | |||||||||
Net realized gain (loss) on: | |||||||||||
Investments in unaffiliated issuers | 245,879 | 247,170 | |||||||||
Options and swaptions written | — | 4,560 | |||||||||
Futures contracts | — | 299,587 | |||||||||
Swap agreements | — | 1,030 | |||||||||
Forward foreign currency contracts | — | (41,698 | ) | ||||||||
Foreign currency transactions | — | (2,742 | ) | ||||||||
Net realized gain (loss) | 245,879 | 507,907 | |||||||||
Change in net unrealized appreciation (depreciation) on: | |||||||||||
Investments in unaffiliated issuers | (310,114 | ) | 248,023 | ||||||||
Options and swaptions written | — | 51,153 | |||||||||
Futures contracts | — | (251,132 | ) | ||||||||
Swap agreements | — | 17,313 | |||||||||
Forward foreign currency contracts | — | 23,892 | |||||||||
Translation of other assets and liabilities denominated in foreign currency | — | 1,986 | |||||||||
Change in net unrealized appreciation (depreciation) | (310,114 | ) | 91,235 | ||||||||
Net realized and unrealized gain (loss) | (64,235 | ) | 599,142 | ||||||||
Net increase (decrease) in net assets resulting from operations | $ | 301,075 | $ | 1,195,715 |
See accompanying notes to financial statements.
109
The UBS Funds
Financial Statements
Statement of changes in net assets
UBS Dynamic Alpha Fund | UBS Global Allocation Fund | UBS Emerging Markets Equity Opportunity Fund | |||||||||||||||||||||||||
For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | ||||||||||||||||||||||
From operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 329,305 | $ | 832,770 | $ | 1,581,512 | $ | 2,911,921 | $ | 6,626,759 | $ | 2,756,966 | |||||||||||||||
Net realized gain (loss) | 773,332 | (906,818 | ) | 5,163,560 | 6,043,109 | (1,622,496 | ) | (5,416,540 | ) | ||||||||||||||||||
Net change in unrealized appreciation (depreciation) | 314,822 | 216,555 | 8,810,160 | 1,013,011 | 28,536,784 | 6,314,757 | |||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,417,459 | 142,507 | 15,555,232 | 9,968,041 | 33,541,047 | 3,655,183 | |||||||||||||||||||||
Total distributions—Class A | (1,215,326 | ) | (310,989 | ) | (13,406,464 | ) | — | — | — | ||||||||||||||||||
Total distributions—Class C | — | — | — | — | — | — | |||||||||||||||||||||
Total distributions—Class P | (848,376 | ) | (305,252 | ) | (4,161,168 | ) | — | (2,126,928 | ) | — | |||||||||||||||||
Total distributions—Class P2 | — | — | — | — | (6,516,989 | ) | (522,535 | ) | |||||||||||||||||||
Total distributions | (2,063,702 | ) | (616,241 | ) | (17,567,632 | ) | — | (8,643,917 | ) | (522,535 | ) | ||||||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||||||
Proceeds from shares sold | 489,800 | 2,734,063 | 5,697,963 | 6,444,682 | 105,809,617 | 171,284,237 | |||||||||||||||||||||
Cost of shares redeemed | (7,256,536 | ) | (27,175,324 | ) | (24,467,918 | ) | (56,321,997 | ) | (25,429,668 | ) | (43,473,455 | ) | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 1,829,496 | 556,939 | 16,174,628 | — | 5,864,091 | 113,629 | |||||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | (4,937,240 | ) | (23,884,322 | ) | (2,595,327 | ) | (49,877,315 | ) | 86,244,040 | 127,924,411 | |||||||||||||||||
Net increase (decrease) in net assets | (5,583,483 | ) | (24,358,056 | ) | (4,607,727 | ) | (39,909,274 | ) | 111,141,170 | 131,057,059 | |||||||||||||||||
Net assets: | |||||||||||||||||||||||||||
Beginning of period | 49,382,105 | 73,740,161 | 267,209,752 | 307,119,026 | 225,405,898 | 94,348,839 | |||||||||||||||||||||
End of period | $ | 43,798,622 | $ | 49,382,105 | $ | 262,602,025 | $ | 267,209,752 | $ | 336,547,068 | $ | 225,405,898 |
* For the period October 24, 2018 (commencement of operations) through June 30, 2019
110
The UBS Funds
UBS Engage for Impact Fund | UBS International Sustainable Equity Fund | ||||||||||||||||||
For the six months ended December 31, 2019 (unaudited) | For the period ended June 30, 2019* | For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income (loss) | $ | 40,360 | $ | 166,987 | $ | 2,023,002 | $ | 2,149,436 | |||||||||||
Net realized gain (loss) | (118,258 | ) | 241,288 | (1,229,095 | ) | (2,800,892 | ) | ||||||||||||
Net change in unrealized appreciation (depreciation) | 1,548,159 | 582,083 | 13,297,770 | 4,255,231 | |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,470,261 | 990,358 | 14,091,677 | 3,603,775 | |||||||||||||||
Total distributions—Class A | — | — | (123,994 | ) | (157,033 | ) | |||||||||||||
Total distributions—Class C | — | — | — | — | |||||||||||||||
Total distributions—Class P | (567,242 | ) | (6,444 | ) | (2,822,544 | ) | (1,718,519 | ) | |||||||||||
Total distributions—Class P2 | — | — | — | — | |||||||||||||||
Total distributions | (567,242 | ) | (6,444 | ) | (2,946,538 | ) | (1,875,552 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 7,172,317 | 22,129,964 | 57,477,392 | 108,186,440 | |||||||||||||||
Cost of shares redeemed | (2,460,038 | ) | (7,202,590 | ) | (15,953,254 | ) | (32,148,876 | ) | |||||||||||
Shares issued on reinvestment of dividends and distributions | 521,370 | 6,441 | 2,692,439 | 1,779,184 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 5,233,649 | 14,933,815 | 44,216,577 | 77,816,748 | |||||||||||||||
Net increase (decrease) in net assets | 6,136,668 | 15,917,729 | 55,361,716 | 79,544,971 | |||||||||||||||
Net assets: | |||||||||||||||||||
Beginning of period | 15,917,729 | — | 156,384,359 | 76,839,388 | |||||||||||||||
End of period | $ | 22,054,397 | $ | 15,917,729 | $ | 211,746,075 | $ | 156,384,359 |
See accompanying notes to financial statements.
111
The UBS Funds
Financial Statements
Statement of changes in net assets (concluded)
UBS U.S. Small Cap Growth Fund | UBS U.S. Sustainable Equity Fund | UBS Municipal Bond Fund | |||||||||||||||||||||||||
For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | ||||||||||||||||||||||
From operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (178,103 | ) | $ | (398,020 | ) | $ | 139,833 | $ | 254,796 | $ | 1,009,588 | $ | 2,158,899 | |||||||||||||
Net realized gain (loss) | 5,953,102 | 8,136,512 | 1,404,401 | 1,413,142 | 989,772 | (78,589 | ) | ||||||||||||||||||||
Net change in unrealized appreciation (depreciation) | (4,372,503 | ) | (3,158,717 | ) | 1,874,538 | 422,783 | 21,821 | 5,173,394 | |||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,402,496 | 4,579,775 | 3,418,772 | 2,090,721 | 2,021,181 | 7,253,704 | |||||||||||||||||||||
Total distributions—Class A | (1,775,575 | ) | (2,527,048 | ) | (586,981 | ) | (109,184 | ) | (112,927 | ) | (217,914 | ) | |||||||||||||||
Total distributions—Class C | — | — | — | — | — | (17,493 | ) | ||||||||||||||||||||
Total distributions—Class P | (6,480,541 | ) | (8,633,439 | ) | (940,561 | ) | (193,173 | ) | (906,972 | ) | (1,922,730 | ) | |||||||||||||||
Total distributions | (8,256,116 | ) | (11,160,487 | ) | (1,527,542 | ) | (302,357 | ) | (1,019,899 | ) | (2,158,137 | ) | |||||||||||||||
From beneficial interest transactions: | |||||||||||||||||||||||||||
Proceeds from shares sold | 11,973,007 | 31,560,714 | 1,216,749 | 2,573,638 | 11,002,379 | 26,363,694 | |||||||||||||||||||||
Cost of shares redeemed | (11,520,965 | ) | (31,938,307 | ) | (1,301,568 | ) | (3,922,567 | ) | (9,492,296 | ) | (52,421,163 | ) | |||||||||||||||
Shares issued on reinvestment of dividends and distributions | 7,893,853 | 10,597,009 | 1,443,865 | 282,160 | 772,608 | 1,619,544 | |||||||||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 8,345,895 | 10,219,416 | 1,359,046 | (1,066,769 | ) | 2,282,691 | (24,437,925 | ) | |||||||||||||||||||
Net increase (decrease) in net assets | 1,492,275 | 3,638,704 | 3,250,276 | 721,595 | 3,283,973 | (19,342,358 | ) | ||||||||||||||||||||
Net assets: | |||||||||||||||||||||||||||
Beginning of period | 122,599,044 | 118,960,340 | 30,219,621 | 29,498,026 | 102,017,512 | 121,359,870 | |||||||||||||||||||||
End of period | $ | 124,091,319 | $ | 122,599,044 | $ | 33,469,897 | $ | 30,219,621 | $ | 105,301,485 | $ | 102,017,512 |
* For the period October 24, 2018 (commencement of operations) through June 30, 2019.
112
The UBS Funds
UBS Sustainable Development Bank Bond Fund | UBS Total Return Bond Fund | ||||||||||||||||||
For the six months ended December 31, 2019 (unaudited) | For the period ended June 30, 2019* | For the six months ended December 31, 2019 (unaudited) | For the year ended June 30, 2019 | ||||||||||||||||
From operations: | |||||||||||||||||||
Net investment income (loss) | $ | 365,310 | $ | 331,806 | $ | 596,573 | $ | 1,314,644 | |||||||||||
Net realized gain (loss) | 245,879 | 71,604 | 507,907 | (326,848 | ) | ||||||||||||||
Net change in unrealized appreciation (depreciation) | (310,114 | ) | 1,019,046 | 91,235 | 2,009,306 | ||||||||||||||
Net increase (decrease) in net assets resulting from operations | 301,075 | 1,422,456 | 1,195,715 | 2,997,102 | |||||||||||||||
Total distributions—Class A | — | — | (7,836 | ) | (9,381 | ) | |||||||||||||
Total distributions—Class C | — | — | — | (431 | ) | ||||||||||||||
Total distributions—Class P | (489,527 | ) | (331,507 | ) | (532,183 | ) | (1,182,844 | ) | |||||||||||
Total distributions | (489,527 | ) | (331,507 | ) | (540,019 | ) | (1,192,656 | ) | |||||||||||
From beneficial interest transactions: | |||||||||||||||||||
Proceeds from shares sold | 21,457,371 | 35,672,488 | 211,263 | 532,802 | |||||||||||||||
Cost of shares redeemed | (10,642,133 | ) | (11,831,843 | ) | (2,491,235 | ) | (5,240,932 | ) | |||||||||||
Shares issued on reinvestment of dividends and distributions | 382,209 | 303,684 | 419,705 | 925,634 | |||||||||||||||
Net increase (decrease) in net assets from beneficial interest transactions | 11,197,447 | 24,144,329 | (1,860,267 | ) | (3,782,496 | ) | |||||||||||||
Net increase (decrease) in net assets | 11,008,995 | 25,235,278 | (1,204,571 | ) | (1,978,050 | ) | |||||||||||||
Net assets: | |||||||||||||||||||
Beginning of period | 25,235,278 | — | 39,437,332 | 41,415,382 | |||||||||||||||
End of period | $ | 36,244,273 | $ | 25,235,278 | $ | 38,232,761 | $ | 39,437,332 |
See accompanying notes to financial statements.
113
UBS Dynamic Alpha Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.36 | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | $ | 7.24 | |||||||||||||||
Net investment income (loss)1 | 0.04 | 0.08 | 0.04 | 0.03 | 0.05 | 0.04 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.16 | (0.04 | ) | (0.18 | ) | 0.32 | (0.79 | ) | 0.11 | ||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | 0.002 | |||||||||||||||||||||
Net increase (decrease) from operations | 0.20 | 0.04 | (0.14 | ) | 0.35 | (0.73 | ) | 0.15 | |||||||||||||||||||
Dividends from net investment income | (0.30 | ) | (0.06 | ) | — | — | (0.23 | ) | (0.26 | ) | |||||||||||||||||
Return of capital | — | — | — | — | (0.00 | )2 | — | ||||||||||||||||||||
Total dividends and distributions | (0.30 | ) | (0.06 | ) | — | — | (0.23 | ) | (0.26 | ) | |||||||||||||||||
Net asset value, end of period | $ | 6.26 | $ | 6.36 | $ | 6.38 | $ | 6.52 | $ | 6.17 | $ | 7.13 | |||||||||||||||
Total investment return3 | 3.16 | % | 0.60 | % | (2.15 | )% | 5.84 | % | (10.48 | )%4 | 2.03 | %5 | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.14 | %6,7 | 2.02 | %7 | 1.69 | % | 1.49 | % | 1.45 | % | 1.43 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.35 | %6,7 | 1.35 | %7 | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||||
Net investment income | 1.32 | %6 | 1.29 | % | 0.57 | % | 0.42 | % | 0.82 | % | 0.58 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 26,033 | $ | 30,025 | $ | 31,066 | $ | 43,930 | $ | 65,741 | $ | 89,421 | |||||||||||||||
Portfolio turnover | 8 | % | 32 | % | 31 | % | 48 | % | 50 | % | 54 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 6.52 | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | $ | 7.38 | |||||||||||||||
Net investment income (loss)1 | 0.05 | 0.10 | 0.06 | 0.04 | 0.07 | 0.06 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.16 | (0.04 | ) | (0.19 | ) | 0.34 | (0.82 | ) | 0.12 | ||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | 0.002 | |||||||||||||||||||||
Net increase (decrease) from operations | 0.21 | 0.06 | (0.13 | ) | 0.38 | (0.74 | ) | 0.18 | |||||||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.07 | ) | — | — | (0.25 | ) | (0.29 | ) | |||||||||||||||||
Return of capital | — | — | — | — | (0.00 | )2 | — | ||||||||||||||||||||
Total dividends and distributions | (0.32 | ) | (0.07 | ) | — | — | (0.25 | ) | (0.29 | ) | |||||||||||||||||
Net asset value, end of period | $ | 6.41 | $ | 6.52 | $ | 6.53 | $ | 6.66 | $ | 6.28 | $ | 7.27 | |||||||||||||||
Total investment return3 | 3.23 | % | 0.83 | % | (1.80 | )% | 6.05 | % | (10.17 | )%4 | 2.29 | %5 | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.92 | %6,7 | 1.70 | %7 | 1.43 | % | 1.27 | % | 1.22 | % | 1.20 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.10 | %6,7 | 1.10 | %7 | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||||
Net investment income | 1.58 | %6 | 1.52 | % | 0.94 | % | 0.68 | % | 1.07 | % | 0.84 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 17,765 | $ | 19,357 | $ | 30,647 | $ | 98,018 | $ | 132,725 | $ | 192,777 | |||||||||||||||
Portfolio turnover | 8 | % | 32 | % | 31 | % | 48 | % | 50 | % | 54 | % |
1 Calculated using the average share method.
2 Amount represents less than $0.005 per share.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 During the year ended June 30, 2016, the Advisor reimbursed the Fund $128,212, which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions, and $86,068 for a trading error, both reimbursements had no impact on the Fund's total return.
5 During the year ended June 30, 2015, the Advisor reimbursed the Fund for a trading error in the amount of $2,068, which had no impact on the Fund's total return.
6 Annualized.
7 Includes interest expense representing less than 0.005%.
See accompanying notes to financial statements
114
UBS Global Allocation Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.56 | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | $ | 11.04 | |||||||||||||||
Net investment income (loss)1 | 0.07 | 0.12 | 0.05 | 0.02 | 0.01 | (0.00 | )2 | ||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.70 | 0.36 | 0.68 | 1.27 | (0.56 | ) | 0.23 | ||||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | — | |||||||||||||||||||||
Net increase (decrease) from operations | 0.77 | 0.48 | 0.73 | 1.29 | (0.54 | ) | 0.23 | ||||||||||||||||||||
Dividends from net investment income | (0.35 | ) | — | (0.17 | ) | (0.23 | ) | (0.27 | ) | — | |||||||||||||||||
Distributions from net realized gains | (0.53 | ) | — | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.88 | ) | — | (0.17 | ) | (0.23 | ) | (0.27 | ) | — | |||||||||||||||||
Net asset value, end of period | $ | 12.45 | $ | 12.56 | $ | 12.08 | $ | 11.52 | $ | 10.46 | $ | 11.27 | |||||||||||||||
Total investment return3 | 6.16 | % | 3.97 | %4 | 6.34 | % | 12.51 | % | (4.81 | )%5 | 2.08 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.42 | %6,7 | 1.40 | %7 | 1.40 | % | 1.39 | % | 1.36 | % | 1.32 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.20 | %6,7 | 1.20 | %7 | 1.20 | % | 1.25 | % | 1.35 | % | 1.32 | % | |||||||||||||||
Net investment income (loss) | 1.14 | %6 | 1.04 | % | 0.39 | % | 0.16 | % | 0.09 | % | (0.01 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 200,731 | $ | 209,407 | $ | 159,678 | $ | 174,148 | $ | 190,813 | $ | 234,665 | |||||||||||||||
Portfolio turnover | 36 | % | 35 | % | 54 | % | 56 | % | 60 | % | 62 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.87 | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | $ | 11.25 | |||||||||||||||
Net investment income (loss)1 | 0.09 | 0.16 | 0.08 | 0.05 | 0.04 | 0.03 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.72 | 0.37 | 0.68 | 1.30 | (0.56 | ) | 0.23 | ||||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | — | |||||||||||||||||||||
Net increase (decrease) from operations | 0.81 | 0.53 | 0.76 | 1.35 | (0.51 | ) | 0.26 | ||||||||||||||||||||
Dividends from net investment income | (0.39 | ) | — | (0.20 | ) | (0.26 | ) | (0.31 | ) | — | |||||||||||||||||
Distributions from net realized gains | (0.53 | ) | — | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.92 | ) | — | (0.20 | ) | (0.26 | ) | (0.31 | ) | — | |||||||||||||||||
Net asset value, end of period | $ | 12.76 | $ | 12.87 | $ | 12.34 | $ | 11.78 | $ | 10.69 | $ | 11.51 | |||||||||||||||
Total investment return3 | 6.27 | % | 4.21 | %4 | 6.56 | % | 12.85 | % | (4.50 | )%5 | 2.31 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.15 | %6,7 | 1.13 | %7 | 1.14 | % | 1.12 | % | 1.09 | % | 1.04 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %6,7 | 0.95 | %7 | 0.95 | % | 1.00 | % | 1.09 | % | 1.04 | % | |||||||||||||||
Net investment income | 1.43 | %6 | 1.27 | % | 0.64 | % | 0.41 | % | 0.34 | % | 0.26 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 61,871 | $ | 57,803 | $ | 64,009 | $ | 67,156 | $ | 91,004 | $ | 124,415 | |||||||||||||||
Portfolio turnover | 36 | % | 35 | % | 54 | % | 56 | % | 60 | % | 62 | % |
1 Calculated using the average share method.
2 Amount represents less than $0.005 per share.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 During the period, the Fund recorded a gain of $263,116 from affiliated funds that were previously liquidated. If this gain had been excluded, the total return of Class A and Class P would have been 3.89% and 4.13%, respectively.
5 During the year ended June 30, 2016, the Advisor reimbursed the Fund $316,557 which was determined to be the value of the ineligible services paid for from the Fund's dealing commissions. If payment from Advisor was not made, the estimated total return would have been -4.90% for A shares and -4.59% for P shares.
6 Annualized.
7 Includes interest expense representing less than 0.005%.
See accompanying notes to financial statements
115
UBS Emerging Markets Equity Opportunity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class P
Six months ended December 31, 2019 (unaudited) | Period ended June 30, 20191 | ||||||||||
Net asset value, beginning of period | $ | 9.28 | $ | 8.92 | |||||||
Net investment income (loss)3 | 0.20 | 0.21 | |||||||||
Net realized and unrealized gain (loss) | 0.70 | 0.15 | |||||||||
Net increase (decrease) from operations | 0.90 | 0.36 | |||||||||
Dividends from net investment income | (0.24 | ) | — | ||||||||
Net asset value, end of period | $ | 9.94 | $ | 9.28 | |||||||
Total investment return5 | 9.68 | % | 4.04 | % | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.13 | %6 | 1.22 | %6 | |||||||
Expenses after fee waivers and/or expense reimbursements | 1.09 | %6 | 1.15 | %6 | |||||||
Net investment income | 4.31 | %6 | 5.73 | %6 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 93,997 | $ | 38,465 | |||||||
Portfolio turnover | 15 | % | 52 | % |
Class P2
Six months ended December 31, 2019 (unaudited) | Year ended June 30, 2019 | Period ended June 30, 20182 | |||||||||||||
Net asset value, beginning of period | $ | 9.31 | $ | 9.40 | $ | 10.00 | |||||||||
Net investment income (loss)3 | 0.23 | 0.19 | 0.03 | ||||||||||||
Net realized and unrealized gain (loss) | 0.71 | (0.23 | )4 | (0.63 | ) | ||||||||||
Net increase (decrease) from operations | 0.94 | (0.04 | ) | (0.60 | ) | ||||||||||
Dividends from net investment income | (0.27 | ) | (0.05 | ) | — | ||||||||||
Net asset value, end of period | $ | 9.98 | $ | 9.31 | $ | 9.40 | |||||||||
Total investment return5 | 10.17 | % | (0.46 | )% | (5.90 | )% | |||||||||
Ratios to average net assets: | |||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.14 | %6 | 1.42 | % | 4.39 | %6 | |||||||||
Expenses after fee waivers and/or expense reimbursements | 0.19 | %6 | 0.40 | % | 0.44 | %6 | |||||||||
Net investment income | 4.89 | %6 | 2.16 | % | 4.05 | %6 | |||||||||
Supplemental data: | |||||||||||||||
Net assets, end of period (000's) | $ | 242,550 | $ | 186,941 | $ | 94,349 | |||||||||
Portfolio turnover | 15 | % | 52 | % | 0 | % |
1 For the period February 1, 2019 (commencement of operations) through June 30, 2019.
2 For the period June 4, 2018 (commencement of operations) through June 30, 2018.
3 Calculated using the average share method.
4 The amount of net realized and unrealized loss per share does not correspond with the net realized and unrealized gain reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
5 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.
6 Annualized.
See accompanying notes to financial statements
116
UBS Engage For Impact Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class P
Six months ended December 31, 2019 (unaudited) | Period ended June 30,20191 | ||||||||||
Net asset value, beginning of period | $ | 10.81 | $ | 10.00 | |||||||
Net investment income (loss)2 | 0.02 | 0.15 | |||||||||
Net realized and unrealized gain (loss) | 0.68 | 0.67 | |||||||||
Net increase (decrease) from operations | 0.70 | 0.82 | |||||||||
Dividends from net investment income | (0.11 | ) | (0.01 | ) | |||||||
Distributions from net realized gains | (0.19 | ) | — | ||||||||
Total dividends and distributions | (0.30 | ) | (0.01 | ) | |||||||
Net asset value, end of period | $ | 11.21 | $ | 10.81 | |||||||
Total investment return3 | 6.39 | % | 8.27 | % | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 2.31 | %4 | 3.87 | %4 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.85 | %4 | 0.85 | %4 | |||||||
Net investment income | 0.43 | %4 | 2.13 | %4 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 22,054 | $ | 15,918 | |||||||
Portfolio turnover | 18 | % | 67 | % |
1 For the period October 24, 2018 (commencement of operations) through December 31, 2018.
2 Calculated using the average shares method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 Annualized.
See accompanying notes to financial statements
117
UBS International Sustainable Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.01 | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | $ | 8.95 | |||||||||||||||
Net investment income (loss)1 | 0.10 | 0.13 | 0.08 | 0.19 | 0.13 | 0.10 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.60 | (0.16 | )2 | 0.66 | 1.51 | (1.47 | ) | 0.53 | |||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | — | |||||||||||||||||||||
Net increase (decrease) from operations | 0.70 | (0.03 | ) | 0.74 | 1.70 | (1.33 | ) | 0.63 | |||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.06 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | |||||||||||||||
Distributions from net realized gains | — | (0.10 | ) | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.16 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.58 | $ | 10.01 | $ | 10.20 | $ | 9.58 | $ | 8.05 | $ | 9.47 | |||||||||||||||
Total investment return3 | 6.98 | % | (0.14 | )% | 7.67 | % | 21.43 | % | (14.07 | )%4 | 7.14 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.39 | %5 | 1.53 | % | 2.02 | % | 2.25 | % | 2.37 | % | 2.47 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.25 | %5 | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||||||||||||
Net investment income | 2.05 | %5 | 1.38 | % | 0.79 | % | 2.16 | % | 1.59 | % | 1.09 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 10,340 | $ | 9,769 | $ | 8,049 | $ | 15,811 | $ | 5,204 | $ | 6,371 | |||||||||||||||
Portfolio turnover | 20 | % | 57 | % | 43 | % | 33 | % | 114 | % | 42 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.04 | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | $ | 8.99 | |||||||||||||||
Net investment income (loss)1 | 0.12 | 0.17 | 0.14 | 0.14 | 0.16 | 0.13 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.59 | (0.18 | )2 | 0.63 | 1.58 | (1.48 | ) | 0.51 | |||||||||||||||||||
Net increase from payment by Advisor | — | — | — | — | 0.01 | — | |||||||||||||||||||||
Net increase (decrease) from operations | 0.71 | (0.01 | ) | 0.77 | 1.72 | (1.31 | ) | 0.64 | |||||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.08 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | |||||||||||||||
Distributions from net realized gains | — | (0.10 | ) | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.18 | ) | (0.15 | ) | (0.19 | ) | (0.11 | ) | (0.13 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.60 | $ | 10.04 | $ | 10.23 | $ | 9.61 | $ | 8.08 | $ | 9.50 | |||||||||||||||
Total investment return3 | 7.10 | % | 0.10 | % | 7.94 | % | 21.68 | % | (13.83 | )%4 | 7.32 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.09 | %5 | 1.26 | % | 1.70 | % | 2.06 | % | 2.12 | % | 2.21 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.00 | %5 | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||||
Net investment income | 2.30 | %5 | 1.80 | % | 1.37 | % | 1.65 | % | 1.92 | % | 1.40 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 201,406 | $ | 146,616 | $ | 65,750 | $ | 19,952 | $ | 16,277 | $ | 17,103 | |||||||||||||||
Portfolio turnover | 20 | % | 57 | % | 43 | % | 33 | % | 114 | % | 42 | % |
1 Calculated using the average share method.
2 The amount of net realized and unrealized loss per share does not correspond with the net realized and unrealized gain reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
4 During the year ended June 30, 2016, the Advisor reimbursed the Fund $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.
5 Annualized.
See accompanying notes to financial statements
118
UBS U.S. Small Cap Growth Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 19.49 | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | $ | 24.76 | |||||||||||||||
Net investment income (loss)1 | (0.05 | ) | (0.10 | ) | (0.17 | ) | (0.15 | ) | (0.13 | ) | (0.16 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 0.25 | 0.80 | 4.92 | 4.34 | (3.89 | ) | 3.38 | ||||||||||||||||||||
Net increase (decrease) from operations | 0.20 | 0.70 | 4.75 | 4.19 | (4.02 | ) | 3.22 | ||||||||||||||||||||
Distributions from net realized gains | (1.43 | ) | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | |||||||||||||||
Net asset value, end of period | $ | 18.26 | $ | 19.49 | $ | 20.74 | $ | 21.26 | $ | 17.75 | $ | 23.60 | |||||||||||||||
Total investment return2 | 1.13 | % | 5.95 | % | 26.17 | % | 23.75 | % | (17.58 | )% | 15.61 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.56 | %3 | 1.57 | % | 1.66 | % | 1.56 | % | 1.53 | % | 1.51 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 1.24 | %3 | 1.24 | % | 1.24 | % | 1.24 | % | 1.24 | % | 1.35 | % | |||||||||||||||
Net investment loss | (0.50 | )%3 | (0.53 | )% | (0.83 | )% | (0.77 | )% | (0.65 | )% | (0.69 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 24,193 | $ | 26,114 | $ | 26,498 | $ | 27,464 | $ | 28,048 | $ | 46,813 | |||||||||||||||
Portfolio turnover | 28 | % | 54 | % | 67 | % | 50 | % | 109 | % | 64 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 21.84 | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | $ | 26.00 | |||||||||||||||
Net investment income (loss)1 | (0.03 | ) | (0.06 | ) | (0.13 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | |||||||||||||||
Net realized and unrealized gain (loss) | 0.28 | 0.96 | 5.37 | 4.66 | (4.15 | ) | 3.60 | ||||||||||||||||||||
Net increase (decrease) from operations | 0.25 | 0.90 | 5.24 | 4.55 | (4.23 | ) | 3.49 | ||||||||||||||||||||
Distributions from net realized gains | (1.43 | ) | (1.95 | ) | (5.27 | ) | (0.68 | ) | (1.83 | ) | (4.38 | ) | |||||||||||||||
Net asset value, end of period | $ | 20.66 | $ | 21.84 | $ | 22.89 | $ | 22.92 | $ | 19.05 | $ | 25.11 | |||||||||||||||
Total investment return2 | 1.24 | % | 6.24 | % | 26.50 | % | 24.09 | % | (17.39 | )% | 15.93 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.27 | %3 | 1.30 | % | 1.34 | % | 1.22 | % | 1.17 | % | 1.10 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.99 | %3 | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | 1.07 | % | |||||||||||||||
Net investment income | (0.24 | )%3 | (0.27 | )% | (0.58 | )% | (0.50 | )% | (0.40 | )% | (0.43 | )% | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 99,899 | $ | 96,485 | $ | 88,845 | $ | 75,770 | $ | 130,227 | $ | 178,495 | |||||||||||||||
Portfolio turnover | 28 | % | 54 | % | 67 | % | 50 | % | 109 | % | 64 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 Annualized.
See accompanying notes to financial statements
119
UBS U.S. Sustainable Equity Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 36.51 | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | $ | 25.03 | |||||||||||||||
Net investment income (loss)1 | 0.14 | 0.26 | 0.16 | 0.14 | 0.21 | 0.14 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 3.98 | 2.13 | 3.20 | 5.84 | (1.88 | ) | 2.50 | ||||||||||||||||||||
Net increase (decrease) from operations | 4.12 | 2.39 | 3.36 | 5.98 | (1.67 | ) | 2.64 | ||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.32 | ) | (0.13 | ) | (0.28 | ) | (0.37 | ) | (0.12 | ) | |||||||||||||||
Distributions from net realized gains | (1.69 | ) | — | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (1.79 | ) | (0.32 | ) | (0.13 | ) | (0.28 | ) | (0.37 | ) | (0.12 | ) | |||||||||||||||
Net asset value, end of period | $ | 38.84 | $ | 36.51 | $ | 34.44 | $ | 31.21 | $ | 25.51 | $ | 27.55 | |||||||||||||||
Total investment return2 | 11.51 | % | 7.15 | % | 10.79 | % | 23.61 | % | (6.13 | )% | 10.61 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.96 | %3 | 2.14 | % | 2.07 | % | 2.04 | % | 1.93 | % | 1.56 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.95 | %3 | 0.95 | % | 0.95 | % | 0.95 | % | 1.13 | % | 1.20 | % | |||||||||||||||
Net investment income | 0.75 | %3 | 0.76 | % | 0.48 | % | 0.49 | % | 0.81 | % | 0.53 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 13,222 | $ | 12,010 | $ | 10,586 | $ | 11,857 | $ | 9,774 | $ | 9,784 | |||||||||||||||
Portfolio turnover | 81 | % | 102 | % | 166 | % | 78 | % | 57 | % | 59 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 36.68 | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | $ | 25.14 | |||||||||||||||
Net investment income (loss)1 | 0.19 | 0.34 | 0.25 | 0.21 | 0.26 | 0.20 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 4.00 | 2.14 | 3.21 | 5.87 | (1.89 | ) | 2.52 | ||||||||||||||||||||
Net increase (decrease) from operations | 4.19 | 2.48 | 3.46 | 6.08 | (1.63 | ) | 2.72 | ||||||||||||||||||||
Dividends from net investment income | (0.19 | ) | (0.40 | ) | (0.20 | ) | (0.35 | ) | (0.43 | ) | (0.19 | ) | |||||||||||||||
Distributions from net realized gains | (1.69 | ) | — | — | — | — | — | ||||||||||||||||||||
Total dividends and distributions | (1.88 | ) | (0.40 | ) | (0.20 | ) | (0.35 | ) | (0.43 | ) | (0.19 | ) | |||||||||||||||
Net asset value, end of period | $ | 38.99 | $ | 36.68 | $ | 34.60 | $ | 31.34 | $ | 25.61 | $ | 27.67 | |||||||||||||||
Total investment return2 | 11.67 | % | 7.44 | % | 11.08 | % | 23.87 | % | (5.91 | )% | 10.90 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.69 | %3 | 1.85 | % | 1.79 | % | 1.76 | % | 1.64 | % | 1.07 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.70 | %3 | 0.70 | % | 0.70 | % | 0.70 | % | 0.90 | % | 0.95 | % | |||||||||||||||
Net investment income | 1.00 | %3 | 1.00 | % | 0.74 | % | 0.74 | % | 1.00 | % | 0.77 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 20,248 | $ | 18,210 | $ | 17,182 | $ | 16,754 | $ | 15,147 | $ | 28,345 | |||||||||||||||
Portfolio turnover | 81 | % | 102 | % | 166 | % | 78 | % | 57 | % | 59 | % |
1 Calculated using the average share method.
2 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
3 Annualized.
See accompanying notes to financial statements
120
UBS Municipal Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended December 31, 2019 | Years ended June 30, | Period ended | |||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | June 30, 20151 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.60 | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||||||
Net investment income (loss)2 | 0.09 | 0.18 | 0.16 | 0.15 | 0.17 | 0.09 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.11 | 0.53 | (0.16 | ) | (0.27 | ) | 0.59 | (0.06 | ) | ||||||||||||||||||
Net increase (decrease) from operations | 0.20 | 0.71 | — | (0.12 | ) | 0.76 | 0.03 | ||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.18 | ) | (0.16 | ) | (0.15 | ) | (0.18 | ) | (0.09 | ) | |||||||||||||||
Distributions from net realized gains | — | — | — | (0.02 | ) | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.18 | ) | (0.16 | ) | (0.17 | ) | (0.18 | ) | (0.09 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.71 | $ | 10.60 | $ | 10.07 | $ | 10.23 | $ | 10.52 | $ | 9.94 | |||||||||||||||
Total investment return3 | 1.92 | % | 7.17 | % | 0.04 | % | (1.11 | )% | 7.74 | % | 0.30 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.04 | %4 | 1.07 | %5 | 1.03 | % | 1.00 | % | 1.15 | % | 1.46 | %4 | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.65 | %4 | 0.65 | %5 | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %4 | |||||||||||||||
Net investment income | 1.71 | %4 | 1.80 | % | 1.61 | % | 1.42 | % | 1.66 | % | 1.43 | %4 | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 13,197 | $ | 12,796 | $ | 9,378 | $ | 21,007 | $ | 17,671 | $ | 10,929 | |||||||||||||||
Portfolio turnover6 | 20 | % | 31 | % | 39 | % | 60 | % | 100 | % | 72 | % |
Class P
Six months ended December 31, 2019 | Years ended June 30, | Period ended | |||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | 2016 | June 30, 20151 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.60 | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | $ | 10.00 | |||||||||||||||
Net investment income (loss)2 | 0.11 | 0.21 | 0.19 | 0.17 | 0.19 | 0.10 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.10 | 0.54 | (0.16 | ) | (0.28 | ) | 0.60 | (0.05 | ) | ||||||||||||||||||
Net increase (decrease) from operations | 0.21 | 0.75 | 0.03 | (0.11 | ) | 0.79 | 0.05 | ||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.21 | ) | (0.19 | ) | (0.17 | ) | (0.21 | ) | (0.11 | ) | |||||||||||||||
Distributions from net realized gains | — | — | — | (0.02 | ) | —— | — | ||||||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.21 | ) | (0.19 | ) | (0.19 | ) | (0.21 | ) | (0.11 | ) | |||||||||||||||
Net asset value, end of period | $ | 10.70 | $ | 10.60 | $ | 10.06 | $ | 10.22 | $ | 10.52 | $ | 9.94 | |||||||||||||||
Total investment return3 | 1.95 | % | 7.55 | % | 0.30 | % | (0.97 | )% | 8.01 | % | 0.45 | % | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 0.79 | %4 | 0.82 | %5 | 0.79 | % | 0.77 | % | 0.89 | % | 1.23 | %4 | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.40 | %4 | 0.40 | %5 | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | %4 | |||||||||||||||
Net investment income | 1.96 | %4 | 2.03 | % | 1.88 | % | 1.68 | % | 1.89 | % | 1.63 | %4 | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 92,105 | $ | 89,222 | $ | 107,153 | $ | 101,601 | $ | 90,146 | $ | 46,993 | |||||||||||||||
Portfolio turnover6 | 20 | % | 31 | % | 39 | % | 60 | % | 100 | % | 72 | % |
1 For the period November 10, 2014 (commencement of operations) through June 30, 2015.
2 Calculated using the average share method.
3 Total investment return is calculated assuming a $10,000 investment on the first day of each period reported, reinvestment of all dividends and other distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges or redemption fees; results would be lower if they were included. Total investment return for periods of less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder pay on Portfolio distributions or the redemption of Portfolio shares.
4 Annualized.
5 Includes interest expense representing less than 0.005%.
6 Effective with the fiscal year ended June 30, 2017, calculation of the portfolio turnover rate excludes transactions involving variable-rate demand notes,which are considered short-term instruments due to the ability to demand immediate repayment.
See accompanying notes to financial statements
121
UBS Sustainable Development Bank Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class P
Six months ended December 31, 2019 (unaudited) | Period ended June 30, 20191 | ||||||||||
Net asset value, beginning of period | $ | 10.58 | $ | 10.00 | |||||||
Net investment income (loss)2 | 0.11 | 0.19 | |||||||||
Net realized and unrealized gain (loss) | 0.023 | 0.58 | |||||||||
Net increase (decrease) from operations | 0.13 | 0.77 | |||||||||
Dividends from net investment income | (0.11 | ) | (0.19 | ) | |||||||
Distributions from net realized gains | (0.04 | ) | — | ||||||||
Total dividends and distributions | (0.15 | ) | (0.19 | ) | |||||||
Net asset value, end of period | $ | 10.56 | $ | 10.58 | |||||||
Total investment return4 | 1.23 | % | 7.75 | % | |||||||
Ratios to average net assets: | |||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.03 | %5,6 | 2.19 | %5 | |||||||
Expenses after fee waivers and/or expense reimbursements | 0.25 | %5,6 | 0.25 | %5 | |||||||
Net investment income | 2.13 | %5 | 2.67 | %5 | |||||||
Supplemental data: | |||||||||||
Net assets, end of period (000's) | $ | 36,244 | $ | 25,235 | |||||||
Portfolio turnover | 38 | % | 20 | % |
1 For the period October 24, 2018 (commencement of operations) through June 30, 2019
2 Calculated using the average share method.
3 The amount of net realized and unrealized gain per share does not correspond with the net realized and unrealized loss reported within the Statement of Changes due to the timing of purchases and redemptions of Fund shares and fluctuating market values.
4 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
5 Annualized.
6 Includes interest expense representing less than 0.005%.
See accompanying notes to financial statements
122
UBS Total Return Bond Fund
Financial highlights
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
Class A
Six months ended December 31, 2019 | Years ended June 30, | Period ended | |||||||||||||||||
(unaudited) | 2019 | 2018 | June 30, 20171 | ||||||||||||||||
Net asset value, beginning of period | $ | 15.09 | $ | 14.40 | $ | 14.94 | $ | 15.24 | |||||||||||
Net investment income (loss)2 | 0.22 | 0.45 | 0.47 | 0.25 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.22 | 0.65 | (0.65 | ) | (0.30 | ) | |||||||||||||
Net increase (decrease) from operations | 0.44 | 1.10 | (0.18 | ) | (0.05 | ) | |||||||||||||
Dividends from net investment income | (0.19 | ) | (0.41 | ) | (0.36 | ) | (0.25 | ) | |||||||||||
Return of capital | — | — | — | (0.00 | )3 | ||||||||||||||
Total dividends and distributions | (0.19 | ) | (0.41 | ) | (0.36 | ) | (0.25 | ) | |||||||||||
Net asset value, end of period | $ | 15.34 | $ | 15.09 | $ | 14.40 | $ | 14.94 | |||||||||||
Total investment return4 | 2.95 | % | 7.63 | % | (1.12 | )% | (0.31 | )% | |||||||||||
Ratios to average net assets: | |||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.66 | %5,6 | 1.68 | %6 | 1.45 | % | 1.74 | %5 | |||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.75 | %5,6 | 0.75 | %6 | 0.75 | % | 0.75 | %5 | |||||||||||
Net investment income | 2.80 | %5 | 3.10 | % | 3.22 | % | 2.28 | %5 | |||||||||||
Supplemental data: | |||||||||||||||||||
Net assets, end of period (000's) | $ | 634 | $ | 488 | $ | 108 | $ | 44 | |||||||||||
Portfolio turnover | 90 | % | 234 | % | 236 | % | 700 | % |
Class P
Six months ended | Years ended June 30, | ||||||||||||||||||||||||||
December 31, 2019 | Nine months ended | Year ended | |||||||||||||||||||||||||
(unaudited) | 2019 | 2018 | 2017 | June 30, 20167 | September 30, 2015 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.10 | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | $ | 15.99 | |||||||||||||||
Net investment income (loss)2 | 0.23 | 0.49 | 0.49 | 0.37 | 0.36 | 0.64 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.23 | 0.64 | (0.63 | ) | (0.18 | ) | 0.13 | (0.96 | ) | ||||||||||||||||||
Net increase (decrease) from operations | 0.46 | 1.13 | (0.14 | ) | 0.19 | 0.49 | (0.32 | ) | |||||||||||||||||||
Dividends from net investment income | (0.21 | ) | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.64 | ) | |||||||||||||||
Distributions from net realized gains | — | — | — | — | — | (0.05 | ) | ||||||||||||||||||||
Return of capital | — | — | — | (0.00 | )3 | — | — | ||||||||||||||||||||
Total dividends and distributions | (0.21 | ) | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.33 | ) | (0.69 | ) | |||||||||||||||
Net asset value, end of period | $ | 15.35 | $ | 15.10 | $ | 14.41 | $ | 14.94 | $ | 15.14 | $ | 14.98 | |||||||||||||||
Total investment return4 | 3.08 | % | 7.95 | % | (0.88 | )% | 1.32 | % | 3.33 | % | (2.05 | )% | |||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||||
Expenses before fee waivers and/or expense reimbursements | 1.43 | %5,6 | 1.45 | %6 | 1.30 | % | 1.29 | % | 1.21 | %5 | 0.75 | % | |||||||||||||||
Expenses after fee waivers and/or expense reimbursements | 0.50 | %5,6 | 0.50 | %6 | 0.50 | % | 0.50 | % | 1.16 | %5 | 0.75 | % | |||||||||||||||
Net investment income | 3.05 | %5 | 3.35 | % | 3.29 | % | 2.45 | % | 3.22 | %5 | 4.04 | % | |||||||||||||||
Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (000's) | $ | 37,599 | $ | 38,949 | $ | 41,245 | $ | 49,919 | $ | 126,922 | $ | 131,473 | |||||||||||||||
Portfolio turnover | 90 | % | 234 | % | 236 | % | 700 | % | 251 | % | 26 | % |
1 For the period September 29, 2016 (commencement of operations) through June 30, 2017.
2 Calculated using the average share method.
3 Amount represents less than $0.005 per share.
4 Total investment return is calculated assuming a $10,000 investment on the first day of each year reported, reinvestment of all dividends and distributions, if any, at net asset value on the ex-dividend dates, and a sale at net asset value on the last day of each period reported. The figures do not include any applicable sales charges; results would be lower if they were included. Total investment return for periods less than one year has not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends/distributions or the redemption of Fund shares.
5 Annualized.
6 Includes interest expense representing less than 0.005%.
7 On May 23, 2016 Class P shares of the UBS Total Return Bond Fund acquired the assets and liabilities of Fort Dearborn Income Securities, Inc., a closed-end management investment company (the "Predecessor Fund"). The UBS Total Return Bond Fund's Class P shares have adopted the historical performance of the Predecessor Fund. In connection with the Reorganization, the fiscal year end for UBS Total Return Bond Fund has changed from September 30th to June 30th. As such, the fiscal period ended June 30, 2016 for UBS Total Return Bond Fund reflects the nine month period from October 1, 2015 through June 30, 2016.
See accompanying notes to financial statements
123
The UBS Funds
Notes to financial statements (unaudited)
Organization and significant accounting policies
The UBS Funds (the "Trust") is an open-end management investment company registered with the US Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "1940 Act"), as amended, currently offering multiple series representing seperate investment portfolios. The Trust is a Delaware statutory trust organized on August 13, 1993. The trustees of the Trust have authority to issue an unlimited number of shares of beneficial interest at par value of $0.001 per share.
The Trust has ten Funds available for investment, each having its own investment objectives and policies: UBS Dynamic Alpha Fund, UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS International Sustainable Equity Fund, UBS US Small Cap Growth Fund, UBS US Sustainable Equity Fund, UBS Municipal Bond Fund, UBS Sustainable Development Bank Bond Fund, and UBS Total Return Bond Fund, (each a "Fund", and collectively, the "Funds"). Each of the Funds is classified as a diversified investment company with the exception of UBS Dynamic Alpha Fund, UBS Municipal Bond Fund, and the UBS Sustainable Development Bank Bond Fund which are classified as non-diversified for purposes of the 1940 Act.
UBS Asset Management (Americas) Inc. ("UBS AM" or the "Advisor") serves as the investment advisor and administrator for the Funds. UBS Asset Management (US) Inc. ("UBS AM (US)") serves as principal underwriter for the Funds. UBS AM and UBS AM (US) are indirect wholly owned subsidiaries of UBS Group AG. UBS Group AG is an internationally diversified organization with headquarters in Zurich, Switzerland. UBS Group AG operates in many areas of the financial services industry.
The Funds currently offer Class A and Class P shares, with the exception of UBS Emerging Markets Equity Opportunity Fund, which currently offers Class P2 shares only. Each class represents interests in the same assets of the applicable Fund and the classes are identical except for differences in their sales charge structures, ongoing service and distribution charges and certain transfer agency and related services expenses. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plan, if any. Class P and Class P2 shares have no service or distribution plan.
Prior to July 12, 2018, the Funds offered Class C shares. At the recommendation of UBS Asset Management (Americas) Inc., each Fund's investment advisor, the Board of Trustees of the Trust approved the closure of Class C of each Fund and the automatic conversion of Class C shares of each Fund into Class A shares of the same Fund (the "Conversion").
Effective on July 12, 2018 (the "Closure Date"), the Funds ceased offering Class C shares. New or additional investments into Class C shares, including investments through an automatic investment plan, were not permitted after the Closure Date.
On October 12, 2018 (the "Conversion Date"), all outstanding Class C shares of each Fund were automatically converted into Class A shares of the same Fund. From the Closure Date to the Conversion Date (the "Conversion Period"), the 12b-1 distribution fees (0.50% of average net assets for UBS Municipal Bond Fund and UBS Total Return Bond Fund, and 0.75% of average net assets for all other Funds) and any contingent deferred sales charges applicable to Class C shares were waived; 12b-1 service fees (0.25% of average net assets) continued to be assessed. During the Conversion Period, automatic reinvestment of Class C share dividend and capital gain distributions continued. Upon the conversion of Class C shares into Class A shares, each Class C shareholder owned Class A shares having an aggregate value equal to the aggregate value of Class C shares held by that shareholder as of the close of business on the Conversion Date. Any contingent deferred sales charges applicable to Class C shares were waived in connection with the conversion to Class A shares. The 12b-1 service fee applicable to Class A shares applies to the converted shares. Class C shares converted into Class A shares as a tax-free for federal income tax purposes.
124
The UBS Funds
Notes to financial statements (unaudited)
The Trust accounts separately for the assets, liabilities and operations of each Fund. Expenses directly attributable to each Fund are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them on a pro rata basis.
In the normal course of business, the Funds may enter into contracts that contain a variety of representations that provide indemnification for certain liabilities. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had any prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
Under certain circumstances, shareholders of the Funds may receive payment for redemptions in securities rather than in cash.
The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the exclusive reference of authoritative US generally accepted accounting principles ("US GAAP") recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative US GAAP for SEC registrants. The Fund's financial statements are prepared in accordance with US GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
In March 2017, the FASB issued Accounting Standards Update 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization On Purchased Callable Debt Securities ("ASU 2017-08"). The update provides guidance related to the amortization period for certain purchased callable debt securities held at a premium. ASU 2017-08 is effective for annual periods beginning after December 15, 2018. Management has assessed the impact of these changes, and the changes are incorporated within the financial statements.
In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The update introduces new fair value disclosure requirements, eliminates some prior fair value disclosure requirements, and modifies certain existing fair value disclosure requirements. ASU 2018-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management has assessed the potential impact of these changes and the changes are incorporated within the financial statements.
The following is a summary of significant accounting policies:
Investment transactions, investment income and expenses: Investment transactions are recorded on the trade date. Realized gains and losses from investment transactions and foreign exchange transactions are calculated using the specific identified cost method. Dividend income and expenses are recorded on the ex-dividend date ("ex-date") except in the case of certain dividends from foreign securities which are recorded as soon after the ex-date as the respective Fund, using reasonable diligence, becomes aware of such dividends. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend eligible shares, as appropriate) of each class at the beginning of the day after adjusting for current capital share activity of the respective classes. Class specific expenses are charged directly to the applicable class of shares.
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.
125
The UBS Funds
Notes to financial statements (unaudited)
These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
Foreign currency translation: The books and records of the Funds are maintained in US dollars. Foreign currency amounts are translated into US dollars as follows: (1) the foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into US dollars based on the current exchange rates each business day; and (2) purchases and sales of investment securities and income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. The resulting exchange gains and losses are included in the Statement of operations.
The Funds do not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in the market prices of securities. However, the Funds do isolate the effect of fluctuations in foreign exchange rates when determining the realized gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. Net realized foreign currency transaction gain (loss) is treated as ordinary income (loss) for income tax reporting purposes.
Concentration of risk: Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which some Funds in the Trust invest.
Small capitalization ("small cap") companies may be more vulnerable than larger capitalization ("large cap") companies to adverse business or economic developments. Small cap companies may also have limited product lines, markets or financial resources, and may be dependent on a relatively small management group. Securities of such companies may be less liquid and more volatile than securities of large cap companies or the market averages in general and therefore may involve greater risk than investing in large cap companies. In addition, small cap companies may not be well-known to the investing public, may not have institutional ownership and may have only cyclical, static or moderate growth prospects.
The ability of the issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
Investments in bonds with ratings of BB (Standard & Poor's Financial Services LLC or Fitch Ratings, Inc.) or Ba (Moody's Investors Service, Inc.) or below (commonly referred to as "high yield" bonds), or deemed of equivalent quality, have an increased risk of defaulting or otherwise being unable to honor a financial obligation. These securities are considered to be predominantly speculative with respect to an issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations. Lower-quality bonds are more likely to be subject to an issuer's default or downgrade than investment grade (higher-quality) bonds.
Valuation of investments
Each Fund generally calculates its net asset value on days that the New York Stock Exchange ("NYSE") is open. A Fund calculates net asset value separately for each class as of the close of regular trading on the NYSE (generally, 4:00 p.m., Eastern time). The NYSE normally is not open, and the Funds do not price their shares, on most national holidays and Good Friday. To the extent that a Fund's assets are traded in other markets on days when the NYSE is not open, the value of the Fund's assets may be affected on those days. If trading on the NYSE is halted for the day 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
126
The UBS Funds
Notes to financial statements (unaudited)
regular trading on the NYSE. The time at which a Fund calculates its net asset value and until which purchase, sale or exchange orders are accepted may be changed as permitted by the SEC.
Each Fund calculates its net asset value based on the current market value, where available, for its portfolio investments. The Funds normally obtain market values for their investments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized "evaluation" systems that derive values based on comparable investments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio investments. Investments also may be valued based on appraisals derived from information concerning the investment or similar investments received from recognized dealers in those holdings.
Investments traded in the over-the-counter ("OTC") market and listed on The NASDAQ Stock Market, Inc. ("NASDAQ") normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Investments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. Investments listed on foreign stock exchanges may be fair valued based on significant events that have occurred subsequent to the close of the foreign markets. In cases where investments are traded on more than one exchange, the investments are valued on the exchange designated as the primary market by UBS AM. If a market value is not readily available from an independent pricing source for a particular investment, that investment is valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees (the "Board"). Foreign currency exchange rates are generally determined as of the close of the NYSE.
Certain investments in which the Funds invest are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m., Eastern time, will not be reflected in a Fund's net asset value. However, if any of the Funds determine that such developments are so significant that they will materially affect the value of the Fund's investments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these investments as of 4:00 p.m., Eastern time.
Certain Funds may use a systematic fair valuation model provided by an independent third party to value investments principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. The systematic fair valuation model may use calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. If an investment is valued at a "fair value," that value is likely to be different from the last quoted market price for the investment. The use of the fair valuation model may result in securities being transferred between Level 1 and Level 2 of the fair valuation hierarchy at the end of the reporting period.
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.
127
The UBS Funds
Notes to financial statements (unaudited)
Futures contracts are generally valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using forward exchange rates quoted by independent pricing services.
Swaps are marked-to-market daily based upon values from third-party vendors or quotations from market makers to the extent available. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
The Board has delegated to the Equities, Fixed Income and Multi-Asset Valuation Committee ("VC") the responsibility for making fair value determinations with respect to the Funds' portfolio holdings. The VC is comprised of representatives of management. The VC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the VC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the VC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances; securities of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund's portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the "limit up" or "limit down" price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment's fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the investment is purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US GAAP requires disclosure regarding the various inputs that are used in determining the value of each Fund's investments. These inputs are summarized into the three broad levels listed below:
Level 1—Unadjusted quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risks.
Level 3—Unobservable inputs inclusive of the Funds' own assumptions in determining the fair value of investments.
In accordance with the requirements of US GAAP, a fair value hierarchy has been included near the end of each Fund's Portfolio of investments.
Investments
Treasury Inflation Protected Securities: The Fund may purchase Treasury inflation protected securities ("TIPS") which are debt securities issued by the US Treasury. TIPS adjust for inflation based on changes in the published Consumer Price Index ("CPI"). During periods of inflation when the CPI index increases, the principal amount of the debt to which the rate of interest is applied increases, which in turn increases the yield. During periods of deflation when the CPI index decreases, the principal amount of the debt to which the rate of interest is applied decreases,
128
The UBS Funds
Notes to financial statements (unaudited)
which in turn lowers the yield. At maturity, TIPS return the higher of the principal amount at maturity or the initial face amount of the debt.
Real estate investment trusts: Certain Funds may invest in real estate investment trusts ("REITs"). Distributions from a REIT are initially recorded as dividend income and may subsequently be recharacterized by the REIT at the end of its tax year as a return of capital and/or capital gains. The Fund estimates the character of dividends received from REITs for financial reporting purposes based on the distribution history of each REIT. Once actual distribution characterizations are made available by the REITs, typically after calendar year end, the Fund updates its accounting and/or tax books and records.
Securities traded on to-be-announced basis: Certain Funds may from time to time purchase, or short sell, securities on a to-be-announced ("TBA") basis. In a TBA transaction, the Fund commits to purchasing securities for which all specific information is not yet known at the time of the trade, particularly the face amount and maturity date of the underlying securities. Securities purchased on a TBA basis are not settled until they are delivered to the Fund, normally 15 to 45 days later. Beginning on the date the Fund enters into a TBA transaction, cash, US government securities or other liquid securities are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
Mortgage-backed securities: Certain Funds may invest in mortgage-backed securities ("MBS"), representing direct or indirect interests in pools of underlying mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.
The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Company or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government.
Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but with some form of non-government credit enhancement.
Collateralized mortgage obligations ("CMO") are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.
The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time. 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
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The UBS Funds
Notes to financial statements (unaudited)
principal-only ("PO") classes. IOs are entitled to receive all or a portion of the interest, but none (or only a nominal amount) of the principal payments, from the underlying mortgage assets. If the mortgage assets underlying an IO experience greater than anticipated principal prepayments, then the total amount of interest payments allocable to the IO class, and therefore the yield to investors, generally will be reduced. Conversely, PO classes are entitled to receive all or a portion of the principal payments, but none of the interest, from the underlying mortgage assets. PO classes are purchased at substantial discounts from par, and the yield to investors will be reduced if principal payments are slower than expected.
Asset-backed securities: Certain Funds may invest in asset-backed securities ("ABS"), representing interests in pools of certain types of underlying installment loans, home equity loans, leases of various types of real and personal property and receivables from revolving lines of credit (credit cards). Such assets are securitized through the use of trusts or special purpose corporations. The yield characteristics of ABS differ from those of traditional debt securities. One such major difference is that principal may be prepaid at any time because the underlying obligations generally may be prepaid at any time. ABS may decrease in value as a result of increases in interest rates and may benefit less than other fixed-income securities from declining interest rates because of the risk of prepayment.
Short sales: UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund may engage in short sale transactions in which the Fund sells a security it does not own (or does not have the right to acquire at no added cost), in anticipation of a decline in the security's price.
The Fund must borrow the security to make delivery to the buyer. The initial amount of a short sale is recorded as a liability which is marked to market daily. Fluctuations in the value of this liability are recorded as unrealized appreciation or depreciation on the Statement of operations. The Fund will realize a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security, and the Fund will realize a gain if the security declines in price between those same dates. The Fund segregates collateral, consisting of cash or liquid assets, sufficient to collateralize the market value of the investments sold short. The Fund incurs transaction costs, including dividend expense, borrowing costs and interest expenses in connection with opening, maintaining and closing short sales. These dividends and interest are booked as an expense or liability to the Fund.
Because a Fund's loss on a short sale arises from increases in the value of the investment sold short, such loss, like the potential increase in price of the security sold short, is theoretically unlimited. The Fund's investments held long could also decline in value at the same time the value of the investment sold short increases, thereby increasing the Fund's potential for loss. There is also the risk that the counterparty to a short sale transaction may fail to honor its contract terms, causing a loss to the Fund.
For the period ended December 31, 2019, UBS Dynamic Alpha Fund, UBS U.S. Small Cap Growth Fund and UBS Total Return Bond Fund did not engage in short sale transactions.
Restricted securities: The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities, if any, is included in each Fund's portfolio footnotes.
Derivative instruments
Purchased options: Certain Funds may purchase put and call options, including, but not limited to, options on foreign or US securities, indices, foreign currencies, options on futures contracts and options on swap agreements (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an
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The UBS Funds
Notes to financial statements (unaudited)
attempt to enhance income or gains. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument.
The Funds pay a premium which is included on the Statement of assets and liabilities as an investment and subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Purchased options are shown as portfolio holdings within the Portfolio of investments and are included in the Statement of assets and liabilities in investments, at value.
The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future, security or currency transaction to determine the realized gain or loss.
Option writing: Certain Funds may write (sell) put and call options, including, but not limited to, options on foreign or US securities, indices, foreign currencies, options on futures contracts and options on swap agreements (commonly referred to as swaptions), in order to gain exposure to or protect against changes in the markets or in an attempt to enhance income or gains.
When a Fund writes a call or a put option, an amount equal to the premium received by the Fund is included on the Fund's Statement of assets and liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option, which a Fund has written, is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option, which a Fund has written, is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, a Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security, or currency underlying the written option. Exercise of an option written by a Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
In the normal course of trading activities, the Funds trade and hold certain fair valued derivative contracts that constitute guarantees. Such contracts include written put options, where the Funds would be obligated to purchase securities at specified prices (i.e. the options are exercised by the counterparties). The maximum payout for these contracts is limited to the number of put option contracts written and the related strike prices, respectively. Maximum payout amounts could be offset by the subsequent sale, if any, of assets obtained via the execution of a payout event. At December 31, 2019, UBS Total Return Bond Fund had maximum payout amounts of approximately $4,000,000 relating to written put option contracts.
Futures contracts: Certain Funds may purchase or sell futures contracts to increase or reduce their exposure to an asset class without purchasing or selling the underlying securities, either as a hedge or to enhance income or realized gains. Generally, a futures contract is a standard binding agreement to buy or sell a specified quantity of an underlying reference asset, such as a specific security or currency, at a specified price at a specified later date.
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
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The UBS Funds
Notes to financial statements (unaudited)
statement purposes on a daily basis as an unrealized appreciation or depreciation on futures until the futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
Using futures contracts involves various risks, including market, interest rate and equity risks. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. To the extent that market prices move in an unexpected direction, there is a risk that a Fund will not achieve the anticipated benefits of the futures contract or may realize a loss.
Forward foreign currency contracts: Certain Funds may enter into forward foreign currency contracts in order to expedite settlement of portfolio transactions, manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. Generally, a forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Non-deliverable forward foreign currency contracts are settled with the counterparty in US dollars, or another fully convertible currency, without the physical delivery of foreign currency.
Fluctuations in the value of open forward foreign currency contracts are recorded daily for book purposes as unrealized appreciation or depreciation on forward foreign currency contracts by the Funds. Realized gains and losses on forward foreign currency contracts include net gains or losses recognized by the Funds on contracts which have been sold or matured.
Risks may arise upon entering into forward foreign currency contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of foreign currencies relative to the US dollar or each other.
Swap agreements: Certain Funds may engage in swap agreements, including, but not limited to, interest rate, credit default and total return swap agreements. A Fund expects to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio's duration, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date, to gain exposure to certain markets in the most economical way possible or in an attempt to enhance income or gains.
The Funds accrue for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation or depreciation of swap agreements. Once interim payments are settled in cash, the net amount is recorded as realized gain or loss on swap agreements, in addition to realized gain or loss recorded upon the termination of swap agreements on the Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
Certain Funds may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect themselves from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default of a security or other credit event of the referenced obligation. As a buyer, the Fund would make periodic payments to 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
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The UBS Funds
Notes to financial statements (unaudited)
counterparty, and the Fund would make payments only upon the occurrence of a default or a credit event. If no default or credit event occurs, the Fund will gain the periodic stream of payments it received over the term of the contract and the counterparty will lose its periodic stream of payments over the term of the contract. However, if a default or credit event occurs, the Fund typically would pay full notional value for the referenced obligation that may have little or no value. Credit default swap agreements may involve greater risks than if the Fund had invested in the referenced obligation directly and are subject to general market risk, liquidity risk and credit risk.
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a list of a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of referenced credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name's weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. A Fund may use credit default swap agreements on credit indices to hedge a portfolio of credit default swaps or bonds with a credit default swap on indices which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. Credit default swap agreements on credit indices are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality.
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection's right to choose the deliverable obligation with the lowest value following a credit event). A Fund may use credit default swap agreements on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer's default.
The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement, which may exceed the amount of the value reflected on the Statement of assets and liabilities. Notional amounts of all credit default swap agreements outstanding as of the period end for which a Fund is the seller of protection are disclosed under the section "Credit default swap agreements on corporate issues—sell protection" in the Portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by a Fund for the same referenced entity or entities.
Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a 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
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The UBS Funds
Notes to financial statements (unaudited)
market risk, liquidity risk, counterparty risk, interest rate risk, credit risk and the risk that there may be unfavorable changes in the underlying investments or instruments.
The use of swap agreements involves investment techniques, risks, and transaction costs different from those associated with ordinary portfolio security transactions, including assumptions about market conditions, interest rates, and other applicable factors. As a result, the performance of the Fund will be different than if it had used ordinary portfolio security transactions. OTC swap agreements do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap agreement defaults and fails to consummate the transaction, the Fund's risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, the Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
Certain clearinghouses offer clearing for limited types of derivatives transactions, such as interest rate and credit default swap agreements. Centrally cleared swap agreements must be transacted through a futures commission merchant ("FCM") and cleared through a clearinghouse that serves as a central counterparty. The performance of a centrally cleared swap transaction is effectively guaranteed by a central clearinghouse, thereby reducing the Fund's exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. Centrally cleared swap agreements, if any, are reported on the Statement of assets and liabilities based on variation margin receivable or payable, if any.
Derivatives by underlying risk: Investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of operations. Under US GAAP, investment companies do not qualify for hedge accounting. Accordingly, even though Funds' investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of disclosure under US GAAP.
The volume of derivatives as disclosed in each Funds' Portfolio of investments is representative of the volume of derivatives outstanding during the period ended December 31, 2019, except forward foreign currency contracts for UBS Dynamic Alpha Fund for which the volume during the period was lower than period end.
Swap agreements, forward foreign currency contracts, swaptions and options written entered into by the Funds may contain credit-risk related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value thresholds. If triggered, the derivative counterparty could request additional cash margin and/or terminate the derivative contract. The aggregate fair value of the derivative contracts that are in a net liability position that contain these triggers can be found in the Portfolio of investments. The aggregate fair value of assets that are already posted as collateral as of December 31, 2019 is reflected in the Statement of assets and liabilities.
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The UBS Funds
Notes to financial statements (unaudited)
At December 31, 2019, the Fund had the following derivatives categorized by underlying risk:
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | 126,982 | $ | — | $ | — | $ | 82,795 | $ | 209,777 | |||||||||||||
Swap agreements | — | — | 174,657 | — | 174,657 | ||||||||||||||||||
Forward foreign currency contracts | — | 593,082 | — | — | 593,082 | ||||||||||||||||||
Total value | $ | 126,982 | $ | 593,082 | $ | 174,657 | $ | 82,795 | $ | 977,516 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Futures contracts | $ | (17,511 | ) | $ | — | $ | — | $ | (20,905 | ) | $ | (38,416 | ) | ||||||||||
Swap agreements | — | — | (410,033 | ) | — | (410,033 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (381,902 | ) | — | — | (381,902 | ) | ||||||||||||||||
Total value | $ | (17,511 | ) | $ | (381,902 | ) | $ | (410,033 | ) | $ | (20,905 | ) | $ | (830,351 | ) |
During the period ended December 31, 2019, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Dynamic Alpha Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Option purchased | $ | (22,266 | ) | $ | — | $ | — | $ | — | $ | (22,266 | ) | |||||||||||
Futures contracts | (334,237 | ) | — | — | 857,616 | 523,379 | |||||||||||||||||
Swap agreements | — | — | (127,740 | ) | — | (127,740 | ) | ||||||||||||||||
Forward foreign currency contracts | — | 162,843 | — | — | 162,843 | ||||||||||||||||||
Total net realized gain (loss) | $ | (356,503 | ) | $ | 162,843 | $ | (127,740 | ) | $ | 857,616 | $ | 536,216 | |||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Futures contracts | $ | 240,673 | $ | — | $ | — | $ | (34,260 | ) | $ | 206,413 | ||||||||||||
Swap agreements | — | — | 12,987 | — | 12,987 | ||||||||||||||||||
Forward foreign currency contracts | — | 56,694 | — | — | 56,694 | ||||||||||||||||||
Net change in appreciation (depreciation) | $ | 240,673 | $ | 56,694 | $ | 12,987 | $ | (34,260 | ) | $ | 276,094 |
Table footnotes begin on page 137.
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The UBS Funds
Notes to financial statements (unaudited)
Asset derivatives1
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | 171,116 | $ | — | $ | — | $ | 425,496 | $ | 596,612 | |||||||||||||
Swap agreements | — | — | 2,523,098 | — | 2,523,098 | ||||||||||||||||||
Forward foreign currency contracts | — | 940,920 | — | — | 940,920 | ||||||||||||||||||
Total value | $ | 171,116 | $ | 940,920 | $ | 2,523,098 | $ | 425,496 | $ | 4,060,630 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Futures contracts | $ | (1,067,964 | ) | $ | — | $ | — | $ | (300,937 | ) | $ | (1,368,901 | ) | ||||||||||
Swap agreements | — | — | (272,850 | ) | — | (272,850 | ) | ||||||||||||||||
Forward foreign currency contracts | — | (780,989 | ) | — | — | (780,989 | ) | ||||||||||||||||
Total value | $ | (1,067,964 | ) | $ | (780,989 | ) | $ | (272,850 | ) | $ | (300,937 | ) | $ | (2,422,740 | ) |
During the period ended December 31, 2019, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Global Allocation Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Option purchased | $ | — | $ | — | $ | — | $ | (363,475 | ) | $ | (363,475 | ) | |||||||||||
Futures contracts | 2,115,121 | — | — | (659,912 | ) | 1,455,209 | |||||||||||||||||
Swap agreements | — | — | 112,227 | — | 112,227 | ||||||||||||||||||
Forward foreign currency contracts | — | (534,464 | ) | — | — | (534,464 | ) | ||||||||||||||||
Total net realized gain (loss) | $ | 2,115,121 | $ | (534,464 | ) | $ | 112,227 | $ | (1,023,387 | ) | $ | 669,497 | |||||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||||||
Futures contracts | $ | (1,111,227 | ) | $ | — | $ | — | $ | (143,344 | ) | $ | (1,254,571 | ) | ||||||||||
Swap agreements | — | — | 605,834 | — | 605,834 | ||||||||||||||||||
Forward foreign currency contracts | — | 374,251 | — | — | 374,251 | ||||||||||||||||||
Net change in appreciation (depreciation) | $ | (1,111,227 | ) | $ | 374,251 | $ | 605,834 | $ | (143,344 | ) | $ | (274,486 | ) |
During the period ended December 31, 2019, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Equity risk | Total | |||||||||||||||||||
UBS Engage For Impact Fund | |||||||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||||||
Forward foreign currency contracts | $ | — | $ | 692 | $ | — | $ | — | $ | 692 |
Table footnotes begin on page 137.
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The UBS Funds
Notes to financial statements (unaudited)
Asset derivatives1
Interest rate risk | Foreign exchange risk | Total | |||||||||||||
UBS Total Return Bond Fund | |||||||||||||||
Futures contracts | $ | 32,545 | $ | — | $ | 32,545 | |||||||||
Forward foreign currency contracts | — | 12,320 | 12,320 | ||||||||||||
Total value | $ | 32,545 | $ | 12,320 | $ | 44,865 |
Liability derivatives2
Interest rate risk | Foreign exchange risk | Total | |||||||||||||
UBS Total Return Bond Fund | |||||||||||||||
Futures contracts | $ | (116,900 | ) | $ | — | $ | (116,900 | ) | |||||||
Swap agreements | (954 | ) | — | (954 | ) | ||||||||||
Forward foreign currency contracts | — | (2,107 | ) | (2,107 | ) | ||||||||||
Total value | $ | (117,854 | ) | $ | (2,107 | ) | $ | (119,961 | ) |
During the period ended December 31, 2019, net realized gains (losses) and net change in unrealized appreciation (depreciation) from derivatives were as follows:
Interest rate risk | Foreign exchange risk | Credit risk | Total | ||||||||||||||||
UBS Total Return Bond Fund | |||||||||||||||||||
Net realized gain (loss)3 | |||||||||||||||||||
Swaptions purchased | $ | (12,623 | ) | $ | — | $ | — | $ | (12,623 | ) | |||||||||
Swaptions written | 4,560 | — | — | 4,560 | |||||||||||||||
Futures contracts | 299,587 | — | — | 299,587 | |||||||||||||||
Swap agreements | 22,445 | — | (21,415 | ) | 1,030 | ||||||||||||||
Forward foreign currency contracts | — | (41,698 | ) | — | (41,698 | ) | |||||||||||||
Total net realized gain (loss) | $ | 313,969 | $ | (41,698 | ) | $ | (21,415 | ) | $ | 250,856 | |||||||||
Net change in unrealized appreciation (depreciation)4 | |||||||||||||||||||
Swaptions purchased | $ | — | $ | — | $ | 4,500 | $ | 4,500 | |||||||||||
Swaptions written | — | — | 51,153 | 51,153 | |||||||||||||||
Futures contracts | (251,132 | ) | — | — | (251,132 | ) | |||||||||||||
Swap agreements | — | — | 17,313 | 17,313 | |||||||||||||||
Forward foreign currency contracts | — | 23,892 | — | 23,892 | |||||||||||||||
Net change in appreciation (depreciation) | $ | (251,132 | ) | $ | 23,892 | $ | 72,966 | $ | (154,274 | ) |
1 In the Statement of assets and liabilities, options purchased are shown within investments of unaffiliated issuers, at value, swap agreements (except centrally cleared swap agreements) are shown within outstanding swap agreements, at value, while forward foreign currency contracts are shown within unrealized appreciation on forward foreign currency contracts. Futures contracts are reported in the table above using cumulative appreciation on futures contracts and centrally cleared swap agreements, if any, are reported at value, as reported in the futures contracts and centrally cleared swap agreements tables at the end of the Portfolio of investments, respectively, but only the variation margin to be received, if any, is reported within the Statement of assets and liabilities.
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The UBS Funds
Notes to financial statements (unaudited)
2 In the Statement of assets and liabilities, options written are shown within options written, at value, swap agreements (except centrally cleared swap agreements) are shown within outstanding swap agreements, at value, while forward foreign currency contracts are shown within unrealized depreciation on forward foreign currency contracts. Futures contracts are reported in the table above using cumulative depreciation of futures contracts and centrally cleared swap agreements, if any, are reported at value, as reported in the futures contracts and centrally cleared swap agreements tables at the end of the Portfolio of investments, respectively, but only the variation margin to be paid, if any, is reported within the Statement of assets and liabilities.
3 The net realized gain (loss) is shown in the Statement of operations in net realized gain (loss) on futures contracts, options written, swap agreements and forward foreign currency contracts, unless otherwise noted. The net realized gain (loss) on options purchased is shown in the Statement of operations in net realized gain (loss) on investments in unaffiliated issuers.
4 The change in net unrealized appreciation (depreciation) is shown in the Statement of operations in change in net unrealized appreciation (depreciation) on futures contracts, options written, swap agreements and forward foreign currency contracts, unless otherwise noted. The change in net unrealized appreciation (depreciation) of options and swaptions purchased is shown in the Statement of operations in change in net unrealized appreciation (depreciation) on investments.
Offsetting of certain derivatives: The Funds typically enter into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Funds typically may offset with the counterparty certain derivative financial instrument's payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. The Statement of assets and liabilities is presented gross of any netting.
At December 31, 2019, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar were as follows:
UBS Dynamic Alpha Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Futures contracts1 | $ | 209,777 | $ | (38,416 | ) | ||||||
Swap agreements1 | 174,657 | (410,033 | ) | ||||||||
Forward foreign currency contracts | 593,082 | (381,902 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 977,516 | $ | (830,351 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (384,226 | ) | 448,449 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 593,290 | $ | (381,902 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the year end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
CITI | $ | 42,721 | $ | — | $ | — | $ | 42,721 | |||||||||||
CIBC | 22,824 | — | — | 22,824 | |||||||||||||||
GSI | 104,044 | (4,034 | ) | 100,010 | |||||||||||||||
HSBC | 2,808 | (2,808 | ) | — | — | ||||||||||||||
JPMCB | 156,913 | — | — | 156,913 | |||||||||||||||
SSC | 263,980 | (263,980 | ) | — | — | ||||||||||||||
Total | $ | 593,290 | $ | (270,822 | ) | $ | — | $ | 322,468 |
Table footnotes begin on page 140.
138
The UBS Funds
Notes to financial statements (unaudited)
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
BB | $ | (34,083 | ) | $ | — | $ | — | $ | (34,083 | ) | |||||||||
GSI | (4,034 | ) | 4,034 | — | — | ||||||||||||||
HSBC | (30,807 | ) | 2,808 | — | (27,999 | ) | |||||||||||||
MSCI | (26,064 | ) | — | — | (26,064 | ) | |||||||||||||
SSC | (286,914 | ) | 263,980 | — | (22,934 | ) | |||||||||||||
Total | $ | (381,902 | ) | $ | 270,822 | $ | — | $ | (111,080 | ) |
At December 31, 2019, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar were as follows:
UBS Global Allocation Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Futures contracts1 | $ | 596,612 | $ | (1,368,901 | ) | ||||||
Swap agreements1 | 2,523,098 | (272,850 | ) | ||||||||
Forward foreign currency contracts | 940,920 | (780,989 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 4,060,630 | $ | (2,422,740 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (3,119,710 | ) | 1,641,751 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 940,920 | $ | (780,989 | ) |
The following tables present the Portfolio's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Portfolio as of the period end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BB | $ | 2,656 | $ | — | $ | — | $ | 2,656 | |||||||||||
CIBC | 67,543 | — | — | 67,543 | |||||||||||||||
JPMCB | 298,802 | — | — | 298,802 | |||||||||||||||
SSC | 571,919 | (179,138 | ) | — | 392,781 | ||||||||||||||
Total | $ | 940,920 | $ | (179,138 | ) | $ | — | $ | 761,782 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
GSI | $ | (19,529 | ) | $ | — | $ | — | $ | (19,529 | ) | |||||||||
HSBC | (582,322 | ) | — | — | (582,322 | ) | |||||||||||||
SSC | (179,138 | ) | 179,138 | — | — | ||||||||||||||
Total | $ | (780,989 | ) | $ | 179,138 | $ | — | $ | (601,851 | ) |
Table footnotes begin on page 140.
139
The UBS Funds
Notes to financial statements (unaudited)
At December 31, 2019, derivative assets and liabilities (by type) on a gross basis and derivatives subject to an enforceable master netting arrangement ("MNA") or similar were as follows:
UBS Total Return Bond Fund
Derivative Financial Instruments: | Assets | Liabilities | |||||||||
Futures contracts1 | $ | 32,545 | $ | (116,900 | ) | ||||||
Swap agreements1 | — | (954 | ) | ||||||||
Forward foreign currency contracts | 12,320 | (2,107 | ) | ||||||||
Total gross amount of derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 44,865 | $ | (119,961 | ) | ||||||
Derivatives not subject to MNA or similar agreements | (32,545 | ) | 117,854 | ||||||||
Total gross amount of assets and liabilities subject to MNA or similar agreements | $ | 12,320 | $ | (2,107 | ) |
The following tables present the Fund's derivative assets and liabilities by counterparty net of amounts available for offset under a MNA and net of the related collateral received/pledged by the Fund as of the year end.
Counterparty | Gross amount of assets | Financial instruments and derivatives available for offset | Collateral received | Net amount of assets | |||||||||||||||
BB | $ | 3,158 | $ | — | $ | — | $ | 3,158 | |||||||||||
BOA | 6,277 | (399 | ) | — | 5,878 | ||||||||||||||
GSI | 259 | — | — | 259 | |||||||||||||||
JPMCB | 2,626 | — | — | 2,626 | |||||||||||||||
Total | $ | 12,320 | $ | (399 | ) | $ | — | $ | 11,921 | ||||||||||
Counterparty | Gross amount of liabilities | Financial instruments and derivatives available for offset | Collateral pledged | Net amount of liabilities | |||||||||||||||
BOA | $ | (399 | ) | $ | 399 | $ | — | $ | — | ||||||||||
CITI | (1,708 | ) | — | — | (1,708 | ) | |||||||||||||
Total | $ | (2,107 | ) | $ | 399 | $ | — | $ | (1,708 | ) |
1 Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps, at value as reported in the futures contracts and centrally cleared swaps tables in the Portfolio of investments, but only the unpaid variation margin is reported within the Statement of assets and liabilities within variation margin on futures contracts and centrally cleared swap agreements, respectively.
Investment advisory fees and other transactions with affiliates
The Advisor, a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee, accrued daily and paid monthly, based on each Fund's respective average daily net assets in accordance with the following per annum schedule:
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $4.0 billion | $4.0 billion and over | |||||||||||||||||||||
UBS Dynamic Alpha Fund | 0.850 | % | 0.800 | % | 0.750 | % | 0.725 | % | 0.700 | % | 0.680 | % |
140
The UBS Funds
Notes to financial statements (unaudited)
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion to $3.0 billion | $3.0 billion to $6.0 billion | $6.0 billion and over | ||||||||||||||||||||||||
UBS Global Allocation Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | 0.630 | % | 0.610 | % |
Fund | $0 to $250 mm | $250 mm to $500 mm | $500 mm to $750 mm | $750 mm to $1.0 billion | $1.0 billion and over | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 0.900 | % | 0.875 | % | 0.850 | % | 0.825 | % | 0.750 | % | |||||||||||||
UBS Sustainable Development Bank Bond Fund | 0.150 | 0.145 | 0.140 | 0.135 | 0.130 | ||||||||||||||||||
Fund | $0 to $500 mm | $500 mm to $1.0 billion | $1.0 billion to $1.5 billion | $1.5 billion to $2.0 billion | $2.0 billion and over | ||||||||||||||||||
UBS International Sustainable Equity Fund | 0.800 | % | 0.750 | % | 0.700 | % | 0.675 | % | 0.650 | % | |||||||||||||
UBS U.S. Small Cap Growth Fund | 0.850 | 0.850 | 0.825 | 0.825 | 0.825 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.700 | 0.650 | 0.600 | 0.575 | 0.550 |
Fund | All assets | ||||||
UBS Engage For Impact Fund | 0.750 | % | |||||
UBS Municipal Bond Fund | 0.400 | ||||||
UBS Total Return Bond Fund | 0.500 |
For UBS Global Allocation Fund, UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS International Sustainable Equity Fund, UBS U.S. Sustainable Equity Fund, UBS Municipal Bond Fund, UBS Sustainable Development Bank Bond Fund, and UBS Total Return Bond Fund, the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) to the extent necessary so that the Funds' operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed the expense limit of each class of shares as indicated in the following table. For UBS Dynamic Alpha Fund and UBS U.S. Small Cap Growth Fund the Advisor has agreed to waive its fees and/or reimburse expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) to the extent necessary so that the Fund's operating expenses (excluding expenses incurred through investment in other investment companies, interest, taxes, brokerage commissions, extraordinary expenses and dividend expense and security loan fees for securities sold short) do not exceed the expense limit of each class of shares as indicated in the following table. The contractual fee waiver and/or expense reimbursement agreement for each Fund, except UBS International Sustainable Equity Fund, will remain in place through the period ending October 28, 2020. The fee waiver and/or expense reimbursement for UBS International Sustainable Equity Fund is irrevocable. Investment advisory fees, including the dollar amount waived or reimbursed, for the period ended December 31, 2019 were as follows:
Fund | Class A expense cap | Class P expense cap | Class P2 expense cap | Amount due to (due from) advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | Recoupments | ||||||||||||||||||||||||
UBS Dynamic Alpha Fund | 1.35 | % | 1.10 | % | — | $ | (1,590 | ) | $ | 196,130 | $ | (185,456 | ) | $ | — | ||||||||||||||||
UBS Global Allocation Fund | 1.20 | 0.95 | — | 7,264 | 1,049,354 | (281,574 | ) | — | |||||||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 1.00 | 0.40 | % | 18,705 | 1,252,413 | (1,011,252 | ) | — | ||||||||||||||||||||||
UBS Engage For Impact Fund | — | 0.85 | 0.40 | % | (11,655 | ) | 70,225 | (136,993 | ) | — | |||||||||||||||||||||
UBS International Sustainable Equity Fund | 1.25 | 1.00 | — | 65,068 | 707,536 | (83,467 | ) | — | |||||||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 1.24 | 0.99 | — | 15,286 | 513,775 | (175,683 | ) | — |
141
The UBS Funds
Notes to financial statements (unaudited)
Fund | Class A expense cap | Class P expense cap | Class P2 expense cap | Amount due to (due from) advisor | Advisory fees incurred | Fees waived/ expenses reimbursed | Recoupments | ||||||||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 0.95 | % | 0.70 | % | — | $ | (26,930 | ) | $ | 108,209 | $ | (154,349 | ) | $ | — | ||||||||||||||||
UBS Municipal Bond Fund | 0.65 | 0.40 | — | (34,087 | ) | 209,884 | (202,973 | ) | — | ||||||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 0.25 | — | (27,914 | ) | 25,738 | (132,699 | ) | — | ||||||||||||||||||||||
UBS Total Return Bond Fund | 0.75 | 0.50 | — | (36,199 | ) | 97,889 | (182,510 | ) | — |
Each Fund, except for UBS International Sustainable Equity Fund and UBS Emerging Markets Equity Opportunity Fund Class P2, will reimburse the Advisor for expenses it waives or reimburses for a period of three years following such expense waivers or reimbursements, provided that the reimbursement by a Fund of the Advisor will not cause the total operating expense ratio to exceed the contractual limit as then may be in effect for the Fund. The expenses waived or reimbursed for the period ended December 31, 2019 are subject to repayment through June 30, 2022.
UBS Emerging Markets Equity Opportunity Fund Class P2 will reimburse the Advisor for expenses it reimburses for a period of three years following such expense reimbursements, provided that the reimbursement by the Fund of the Advisor will not cause the total expense ratio to exceed the contractual limit as then may be in effect for the class. The expenses reimbursed for the period ended December 31, 2019 are subject to repayment through June 30, 2022.
At December 31, 2019, the following Funds had remaining fee waivers and expense reimbursements subject to repayment to the Advisor and respective dates of expiration as follows:
Fund | Fee waivers/ expense reimbursements subject to repayment | Expires June 30, 2020 | Expires June 30, 2021 | Expires June 30, 2022 | Expires June 30, 2023 | ||||||||||||||||||
UBS Dynamic Alpha Fund—Class A | $ | 538,188 | $ | 78,717 | $ | 131,826 | $ | 216,606 | $ | 110,969 | |||||||||||||
UBS Dynamic Alpha Fund—Class P | 649,641 | 197,801 | 217,649 | 159,704 | 74,487 | ||||||||||||||||||
UBS Global Allocation Fund—Class A | 1,216,664 | 244,083 | 350,483 | 397,509 | 224,589 | ||||||||||||||||||
UBS Global Allocation Fund—Class P | 397,170 | 100,857 | 129,591 | 109,737 | 56,985 | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P | 17,258 | — | — | 2,9461 | 14,312 | ||||||||||||||||||
UBS Emerging Markets Equity Opportunity Fund—Class P2 | 178,611 | — | 68,961 | 109,650 | — | ||||||||||||||||||
UBS Engage For Impact Fund—Class P | 374,217 | — | — | 237,2242 | 136,993 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class A | 326,365 | 92,631 | 111,537 | 83,376 | 38,821 | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund—Class P | 984,475 | 289,826 | 270,691 | 287,096 | 136,862 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund—Class A | 433,270 | 112,035 | 125,718 | 133,325 | 62,192 | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund—Class P | 652,261 | 171,679 | 189,607 | 198,818 | 92,157 | ||||||||||||||||||
UBS Municipal Bond Fund—Class A | 205,056 | 78,706 | 50,025 | 50,814 | 25,511 | ||||||||||||||||||
UBS Municipal Bond Fund—Class P | 1,348,059 | 356,454 | 420,099 | 394,044 | 177,462 | ||||||||||||||||||
UBS Sustainable Development Bank Bond Fund—Class P | 374,409 | — | — | 241,7102 | 132,699 | ||||||||||||||||||
UBS Total Return Bond Fund—Class A | 6,289 | 1933 | 278 | 3,032 | 2,786 | ||||||||||||||||||
UBS Total Return Bond Fund—Class P | 1,461,817 | 543,959 | 367,169 | 370,965 | 179,724 |
1 For the period from February 1, 2019 (commencement of operations) through June 30, 2019.
2 For the period from October 24, 2018 (commencement of operations) through June 30, 2019.
3 For the period from September 29, 2016 (commencement of operations) through June 30, 2017.
142
The UBS Funds
Notes to financial statements (unaudited)
Each Fund pays UBS AM a monthly administration fee that is accrued daily and paid monthly at an annual rate of 0.075% of the average daily net assets of such Fund. For the period ended December 31, 2019, the Funds owed and incurred administrative fees as follows:
Fund | Administrative fees owed | Administrative fees incurred | |||||||||
UBS Dynamic Alpha Fund | $ | 20,376 | $ | 17,306 | |||||||
UBS Global Allocation Fund | 114,697 | 98,377 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 56,983 | 104,717 | |||||||||
UBS Engage For Impact Fund | 7,956 | 7,022 | |||||||||
UBS International Sustainable Equity Fund | 75,619 | 66,332 | |||||||||
UBS U.S. Small Cap Growth Fund | 52,539 | 45,333 | |||||||||
UBS U.S. Sustainable Equity Fund | 13,414 | 11,594 | |||||||||
UBS Municipal Bond Fund | 45,604 | 39,354 | |||||||||
UBS Sustainable Development Bank Bond Fund | 14,392 | 12,870 | |||||||||
UBS Total Return Bond Fund | 17,106 | 14,683 |
The Funds may invest in shares of certain affiliated investment companies also advised or managed by the Advisor. Investments in affiliated investment companies for the period ended December 31, 2019 have been included near the end of each Fund's Portfolio of investments.
During the period ended December 31, 2019, the Funds listed below paid broker commissions to affiliates of the investment advisor as detailed in the below table. These broker commissions are reflected in the Statement of assets and liabilities within investments at cost of unaffiliated issuers, and the Statement of operations within net realized gain (loss) on, and/or change in net unrealized appreciation (depreciation) on investments and/or futures contracts.
Fund | UBS Group AG | ||||||
UBS Global Allocation Fund | $ | 90 | |||||
UBS Emerging Markets Equity Opportunity Fund | 8,593 | ||||||
UBS Engage For Impact Fund | 6 | ||||||
UBS International Sustainable Equity Fund | 385 |
Service and distribution plans
UBS AM (US) is the principal underwriter of each Fund's shares. The Trust has adopted distribution and/or service plans ("the Plans") pursuant to Rule 12b-1 under the 1940 Act for Class A shares. The Plans govern payments made for the expenses incurred in the service and/or distribution of Class A shares. Annual fees under the Plans as a percentage of the average daily net assets of each representative class of each of the Funds are as follows:
Fund | Class A | ||||||
UBS Dynamic Alpha Fund | 0.25 | % | |||||
UBS Global Allocation Fund | 0.25 | ||||||
UBS International Sustainable Equity Fund | 0.25 | ||||||
UBS U.S. Small Cap Growth Fund | 0.25 | ||||||
UBS U.S. Sustainable Equity Fund | 0.25 | ||||||
UBS Municipal Bond Fund | 0.25 | ||||||
UBS Total Return Bond Fund | 0.25 |
143
The UBS Funds
Notes to financial statements (unaudited)
UBS AM (US) also receives the proceeds of the initial sales charges paid upon purchases of Class A shares and the contingent deferred sales charges paid by shareholders upon certain redemptions of Class A shares. At December 31, 2019, certain Funds owed UBS AM (US) service and distribution fees, and for the period ended December 31, 2019, certain Funds were informed by UBS AM (US) that it had earned sales charges as follows:
Portfolio | Service and distribution fees owed | Sales charges earned by distributor | |||||||||
UBS Dynamic Alpha Fund—Class A | $ | 5,533 | $ | 389 | |||||||
UBS Global Allocation Fund—Class A | 41,896 | 3,441 | |||||||||
UBS International Sustainable Equity Fund—Class A | — | 10,571 | |||||||||
UBS U.S. Small Cap Growth Fund—Class A | 4,995 | 7,155 | |||||||||
UBS U.S. Sustainable Equity Fund—Class A | 5,707 | 8,299 | |||||||||
UBS Municipal Bond Fund—Class A | 2,702 | 5,004 | |||||||||
UBS Total Return Bond Fund—Class A | 122 | 1,435 |
Transfer agency and related services fees
UBS Financial Services Inc. provides certain services to the Funds pursuant to a delegation of authority from BNY Mellon Investment Servicing (US) Inc. ("BNY Mellon"), the Funds' transfer agent, and is compensated for these services by BNY Mellon, not the Funds.
For the period ended December 31, 2019, UBS Financial Services Inc. received from BNY Mellon, not the Funds, total delegated service fees as follows:
Fund | Delegated services fees earned | ||||||
UBS Dynamic Alpha Fund | $ | 10,699 | |||||
UBS Global Allocation Fund | 34,655 | ||||||
UBS Emerging Markets Equity Opportunity Fund | 11,117 | ||||||
UBS Engage For Impact Fund | 1,808 | ||||||
UBS International Sustainable Equity Fund | 5,458 | ||||||
UBS US Small Cap Growth Fund | 2,376 | ||||||
UBS US Sustainable Equity Fund | 1,380 | ||||||
UBS Municipal Bond Fund | 5,504 | ||||||
UBS Sustainable Dev Bank Bond Fund | 1,990 | ||||||
UBS Total Return Bond Fund | 557 |
Securities lending
Each Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are initially secured by cash, US government securities and irrevocable letters of credit in an amount at least equal to 102% of the market value of the securities loaned with respect to domestic securities and 105% of the market value of the securities loaned with respect to foreign securities. In the event that the market value of the cash, US government securities, and irrevocable letters of credit securing the loan falls below 100% of the market value for domestic securities, and 103% for foreign securities, the borrower must provide additional cash, US government securities, and irrevocable letters of credit so that the total securing the loan is at least 102% of the market value for domestic securities and 105% of the market value for foreign securities.
Each Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, each Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. Each Fund receives compensation for lending its securities from interest or dividends earned on the cash, US government securities and irrevocable letters of credit held as collateral, net of fee rebates paid to the borrower plus
144
The UBS Funds
Notes to financial statements (unaudited)
reasonable administrative and custody fees. Cash collateral received is invested in State Street Navigator Securities Lending Government Money Market Fund, which is included in each Fund's Portfolio of investments. State Street Bank and Trust Company serves as the Funds' lending agent.
At December 31, 2019, the following Funds had securities on loan at value, cash collateral and non-cash collateral as follows:
Funds | Value of securities on loan | Cash collateral | Non-cash collateral* | Total collateral | Security type held as non-cash collateral | ||||||||||||||||||
UBS Dynamic Alpha Fund | $ | 329,517 | $ | 336,925 | $ | — | $ | 336,925 | |||||||||||||||
UBS Global Allocation Fund | 17,589,585 | 16,658,350 | 1,320,441 | 17,978,791 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS Engage For Impact Fund | 1,131,098 | 488,524 | 673,017 | 1,161,541 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS International Sustainable Equity Fund | 4,058,207 | 1,673,164 | 2,588,669 | 4,261,833 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS U.S. Small Cap Growth Fund | 24,890,213 | 11,941,276 | 13,616,924 | 25,558,200 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS U.S. Sustainable Equity Fund | 2,042,406 | 1,255,630 | 834,862 | 2,090,492 | U.S. Treasury Notes and U.S. Treasury Bills | ||||||||||||||||||
UBS Sustainable Development Bank Bond Fund | 896,732 | 916,416 | — | 916,416 | |||||||||||||||||||
UBS Total Return Bond Fund | 372,895 | 322,250 | 58,573 | 380,823 | U.S. Treasury Notes and U.S. Treasury Bills |
* These securities are held for the benefit of the Fund at the Fund's custodian. The Fund cannot repledge or resell this collateral. As such, collateral is excluded from the Statement of assets and liabilities.
The table below represents the disaggregation at December 31, 2019 of the gross amount of recognized liabilities for securities lending transactions. As the securities loaned are subject to termination by the Portfolios or the borrower at any time, the remaining contractual maturities of the transactions presented below are considered to be overnight and continuous.
Type of securities loaned | Total amount of recognized | ||||||||||||||
Fund | Equity securities | Corporate bonds | liabilities for securities lending transactions | ||||||||||||
UBS Dynamic Alpha Fund | $ | — | $ | 336,925 | $ | 336,925 | |||||||||
UBS Global Allocation Fund | 16,658,350 | — | 16,658,350 | ||||||||||||
UBS Engage For Impact Fund | 488,524 | — | 488,524 | ||||||||||||
UBS International Sustainable Equity Fund | 1,673,164 | — | 1,673,164 | ||||||||||||
UBS U.S. Small Cap Growth Fund | 11,941,276 | — | 11,941,276 | ||||||||||||
UBS U.S. Sustainable Equity Fund | 1,255,630 | — | 1,255,630 | ||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 916,416 | 916,416 | ||||||||||||
UBS Total Return Bond Fund | — | 322,250 | 322,250 |
Bank line of credit
The Fund participates with other funds managed by UBS AM in a $185 million committed credit facility (the "Committed Credit Facility") with State Street Bank and Trust Company. The Committed Credit Facility is to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of a participating Fund at the request of shareholders and other temporary or emergency purposes.
145
The UBS Funds
Notes to financial statements (unaudited)
Interest on amounts borrowed is calculated based on the prevailing rates in effect at the time of borrowing. Each Fund covered by the Committed Credit Facility has agreed to pay commitment fees on the average daily balance of the Committed Credit Facility not utilized. Commitment fees have been allocated among the Funds in the Committed Credit Facility as follows: 50% of the allocation is based on the relative asset size of funds and the other 50% of the allocation is based on utilization.
For the period ended December 31, 2019, the following Funds had borrowings as follows:
Fund | Average daily amount of borrowing outstanding | Days outstanding | Interest expense | Weighted average annualized interest rate | |||||||||||||||
UBS Sustainable Development Bank Bond Fund | $ | 5,226,184 | 1 | $ | 404 | 2.785 | % |
Commission recapture program
Certain Funds participate in a brokerage commission recapture program. These Funds have established commission recapture arrangements with certain participating brokers or dealers. If a Fund's investment manager chooses to execute a transaction through a participating broker subject to best price and execution, the broker will rebate a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. For the period ended December 31, 2019, the following Funds recorded recaptured commissions which are reflected in the Statement of operations within the net realized gains (losses) on investments in unaffiliated issuers:
Fund | Amount | ||||||
UBS Global Allocation Fund | $ | 1,824 | |||||
UBS U.S. Sustainable Equity Fund | 1,923 | ||||||
UBS U.S. Small Cap Growth Fund | 12,144 |
Purchases and sales of securities
For the period ended December 31, 2019, aggregate purchases and sales of portfolio securities, excluding short-term securities, were as follows:
Fund | Purchases | Sales | |||||||||
UBS Dynamic Alpha Fund | $ | 1,799,517 | $ | 5,678,885 | |||||||
UBS Global Allocation Fund | 70,753,761 | 74,705,357 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 124,815,889 | 41,520,656 | |||||||||
UBS Engage For Impact Fund | 7,635,299 | 3,231,449 | |||||||||
UBS International Sustainable Equity Fund | 80,869,530 | 34,717,655 | |||||||||
UBS U.S. Small Cap Growth Fund | 32,457,312 | 32,366,762 | |||||||||
UBS U.S. Sustainable Equity Fund | 24,999,493 | 24,615,660 | |||||||||
UBS Municipal Bond Fund | 23,468,740 | 19,135,509 | |||||||||
UBS Sustainable Development Bank Bond Fund | 23,268,867 | 12,639,764 | |||||||||
UBS Total Return Bond Fund | 34,945,448 | 32,714,681 |
146
The UBS Funds
Notes to financial statements (unaudited)
Shares of beneficial interest
There is an unlimited number of $0.001 par value shares of beneficial interest authorized. Transactions in shares of beneficial interest for each of the Funds for the period ended December 31, 2019 were as follows:
UBS Dynamic Alpha Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 3,272 | $ | 20,929 | 71,509 | $ | 468,871 | |||||||||||||||||
Shares repurchased | (729,764 | ) | (4,656,712 | ) | (396,725 | ) | (2,599,824 | ) | |||||||||||||||
Dividends reinvested | 163,909 | 1,026,069 | 125,536 | 803,427 | |||||||||||||||||||
Net increase (decrease) | (562,583 | ) | $ | (3,609,714 | ) | (199,680 | ) | $ | (1,327,526 | ) |
UBS Global Allocation Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 26,825 | $ | 338,983 | 405,616 | $ | 5,358,980 | |||||||||||||||||
Shares repurchased | (1,564,289 | ) | (19,868,130 | ) | (353,820 | ) | (4,599,788 | ) | |||||||||||||||
Dividends reinvested | 991,416 | 12,293,553 | 305,596 | 3,881,075 | |||||||||||||||||||
Net increase (decrease) | (546,048 | ) | $ | (7,235,594 | ) | 357,392 | $ | 4,640,267 |
UBS Emerging Markets Equity Opportunity Fund
Class P | Class P2 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 7,193,145 | $ | 64,966,928 | 4,539,821 | $ | 40,842,689 | |||||||||||||||||
Shares repurchased | (2,066,630 | ) | (18,610,179 | ) | (731,364 | ) | (6,819,489 | ) | |||||||||||||||
Dividends reinvested | 181,865 | 1,793,186 | 411,203 | 4,070,905 | |||||||||||||||||||
Net increase (decrease) | 5,308,380 | $ | 48,149,935 | 4,219,660 | $ | 38,094,105 |
UBS Engage For Impact Fund
Class P | |||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Shares sold | 674,398 | $ | 7,172,317 | ||||||||||||||||||||
Shares repurchased | (225,646 | ) | (2,460,038 | ) | |||||||||||||||||||
Dividends reinvested | 46,551 | 521,370 | |||||||||||||||||||||
Net increase (decrease) | 495,303 | $ | 5,233,649 |
UBS International Sustainable Equity Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 50,047 | $ | 487,529 | 5,700,077 | $ | 56,989,863 | |||||||||||||||||
Shares repurchased | (59,063 | ) | (586,535 | ) | (1,546,505 | ) | (15,366,719 | ) | |||||||||||||||
Dividends reinvested | 10,737 | 112,848 | 244,975 | 2,579,591 | |||||||||||||||||||
Net increase (decrease) | 1,721 | $ | 13,842 | 4,398,547 | $ | 44,202,735 |
147
The UBS Funds
Notes to financial statements (unaudited)
UBS U.S. Small Cap Growth Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 83,954 | $ | 1,603,079 | 484,478 | $ | 10,369,928 | |||||||||||||||||
Shares repurchased | (183,467 | ) | (3,503,315 | ) | (375,071 | ) | (8,017,650 | ) | |||||||||||||||
Dividends reinvested | 84,387 | 1,541,748 | 307,310 | 6,352,105 | |||||||||||||||||||
Net increase (decrease) | (15,126 | ) | $ | (358,488 | ) | 416,717 | $ | 8,704,383 |
UBS U.S. Sustainable Equity Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 7,512 | $ | 282,560 | 24,790 | $ | 934,189 | |||||||||||||||||
Shares repurchased | (10,028 | ) | (375,836 | ) | (25,036 | ) | (925,732 | ) | |||||||||||||||
Dividends reinvested | 14,016 | 544,385 | 23,075 | 899,480 | |||||||||||||||||||
Net increase (decrease) | 11,500 | $ | 451,109 | 22,829 | $ | 907,937 |
UBS Municipal Bond Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 87,107 | $ | 933,271 | 939,809 | $ | 10,069,108 | |||||||||||||||||
Shares repurchased | (70,124 | ) | (752,090 | ) | (816,411 | ) | (8,740,206 | ) | |||||||||||||||
Dividends reinvested | 8,579 | 91,846 | 63,632 | 680,762 | |||||||||||||||||||
Net increase (decrease) | 25,562 | $ | 273,027 | 187,030 | $ | 2,009,664 |
UBS Sustainable Development Bank Bond Fund
Class P | |||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,013,027 | $ | 21,457,371 | ||||||||||||||||||||
Shares repurchased | (1,001,901 | ) | (10,642,133 | ) | |||||||||||||||||||
Dividends reinvested | 35,995 | 382,209 | |||||||||||||||||||||
Net increase (decrease) | 1,047,121 | $ | 11,197,447 |
UBS Total Return Bond Fund
Class A | Class P | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 8,904 | $ | 134,566 | 4,999 | $ | 76,697 | |||||||||||||||||
Shares repurchased | (282 | ) | (4,325 | ) | (162,959 | ) | (2,486,910 | ) | |||||||||||||||
Dividends reinvested | 367 | 5,614 | 27,072 | 414,091 | |||||||||||||||||||
Net increase (decrease) | 8,989 | $ | 135,855 | (130,888 | ) | $ | (1,996,122 | ) |
148
The UBS Funds
Notes to financial statements (unaudited)
For the period ended June 30, 2019, transactions in shares of beneficial interest for each of the Funds were as follows:
UBS Dynamic Alpha Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 20,153 | $ | 125,896 | 29 | $ | 172 | 404,851 | $ | 2,607,995 | ||||||||||||||||||
Shares repurchased | (1,934,583 | ) | (12,135,248 | ) | (174,078 | ) | (1,023,720 | ) | (2,172,989 | ) | (14,016,356 | ) | |||||||||||||||
Shares converted | 1,721,672 | 10,812,100 | (1,867,375 | ) | (10,812,100 | ) | |||||||||||||||||||||
Dividends reinvested | 43,541 | 263,858 | — | — | 47,271 | 293,081 | |||||||||||||||||||||
Net increase (decrease) | (149,217 | ) | $ | (933,394 | ) | (2,041,424 | ) | $ | (11,835,648 | ) | (1,720,867 | ) | $ | (11,115,280 | ) |
UBS Global Allocation Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 108,452 | $ | 1,292,971 | 368 | $ | 4,343 | 419,109 | $ | 5,147,368 | ||||||||||||||||||
Shares repurchased | (3,249,998 | ) | (38,813,492 | ) | (324,397 | ) | (3,850,001 | ) | (1,112,447 | ) | (13,658,504 | ) | |||||||||||||||
Shares converted | 6,588,259 | 77,543,804 | (6,778,305 | ) | (77,543,804 | ) | |||||||||||||||||||||
Net increase (decrease) | 3,446,713 | $ | 40,023,283 | (7,102,334 | ) | $ | (81,389,462 | ) | (693,338 | ) | $ | (8,511,136 | ) |
UBS Emerging Markets Equity Opportunity Fund
Class P* | Class P2 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||
Shares sold | 4,221,277 | $ | 38,256,377 | 15,065,841 | $ | 133,027,860 | |||||||||||||||||
Shares repurchased | (76,070 | ) | (681,755 | ) | (5,035,235 | ) | (42,791,700 | ) | |||||||||||||||
Dividends reinvested | — | — | 14,186 | 113,629 | |||||||||||||||||||
Net increase (decrease) | 4,145,207 | $ | 37,574,622 | 10,044,792 | $ | 90,349,789 |
* Commenced of operations on February 1, 2019.
UBS Engage For Impact Fund*
Class P | |||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Shares sold | 2,176,480 | $ | 22,129,964 | ||||||||||||||||||||
Shares repurchased | (705,330 | ) | (7,202,590 | ) | |||||||||||||||||||
Dividends reinvested | 694 | 6,441 | |||||||||||||||||||||
Net increase (decrease) | 1,471,844 | $ | 14,933,815 |
* Commencement of operations on October 24, 2018.
149
The UBS Funds
Notes to financial statements (unaudited)
UBS International Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 167,229 | $ | 1,624,563 | 68 | $ | 677 | 11,068,863 | $ | 106,561,200 | ||||||||||||||||||
Shares repurchased | (269,997 | ) | (2,566,549 | ) | (25,910 | ) | (263,350 | ) | (3,084,176 | ) | (29,318,977 | ) | |||||||||||||||
Shares converted | 272,608 | 2,633,394 | (280,447 | ) | (2,633,394 | ) | |||||||||||||||||||||
Dividends reinvested | 16,761 | 146,495 | — | — | 186,593 | 1,632,689 | |||||||||||||||||||||
Net increase (decrease) | 186,601 | $ | 1,837,903 | (306,289 | ) | $ | (2,896,067 | ) | 8,171,280 | $ | 78,874,912 |
UBS U.S. Small Cap Growth Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 186,595 | $ | 3,578,194 | 64 | $ | 1,074 | 1,267,640 | $ | 27,981,446 | ||||||||||||||||||
Shares repurchased | (407,588 | ) | (7,967,661 | ) | (41,635 | ) | (737,695 | ) | (1,228,062 | ) | (23,232,951 | ) | |||||||||||||||
Shares converted | 141,492 | 2,835,493 | (179,348 | ) | (2,835,493 | ) | |||||||||||||||||||||
Dividends reinvested | 141,687 | 2,146,557 | — | — | 498,552 | 8,450,452 | |||||||||||||||||||||
Net increase (decrease) | 62,186 | $ | 592,583 | (220,919 | ) | $ | (3,572,114 | ) | 538,130 | $ | 13,198,947 |
UBS U.S. Sustainable Equity Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 15,808 | $ | 551,173 | 339 | $ | 11,498 | 59,731 | $ | 2,010,967 | ||||||||||||||||||
Shares repurchased | (43,383 | ) | (1,482,939 | ) | (4,908 | ) | (166,563 | ) | (65,994 | ) | (2,273,065 | ) | |||||||||||||||
Shares converted | 45,803 | 1,535,325 | (48,129 | ) | (1,535,325 | ) | |||||||||||||||||||||
Dividends reinvested | 3,335 | 98,945 | — | — | 6,157 | 183,215 | |||||||||||||||||||||
Net increase (decrease) | 21,563 | $ | 702,504 | (52,698 | ) | $ | (1,690,390 | ) | (106 | ) | $ | (78,883 | ) |
UBS Municipal Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 136,575 | $ | 1,376,134 | — | $ | — | 2,448,797 | $ | 24,987,560 | ||||||||||||||||||
Shares repurchased | (317,027 | ) | (3,229,687 | ) | (42,023 | ) | (423,297 | ) | (4,816,504 | ) | (48,768,179 | ) | |||||||||||||||
Shares converted | 438,383 | 4,361,912 | (439,266 | ) | (4,361,912 | ) | |||||||||||||||||||||
Dividends reinvested | 17,389 | 177,830 | 1,430 | 14,361 | 139,978 | 1,427,353 | |||||||||||||||||||||
Net increase (decrease) | 275,320 | $ | 2,686,189 | (479,859 | ) | $ | (4,770,848 | ) | (2,227,729 | ) | $ | (22,353,266 | ) |
150
The UBS Funds
Notes to financial statements (unaudited)
UBS Sustainable Development Bank Bond Fund*
Class P | |||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Shares sold | 3,528,985 | $ | 35,672,488 | ||||||||||||||||||||
Shares repurchased | (1,172,191 | ) | (11,831,843 | ) | |||||||||||||||||||
Dividends reinvested | 29,494 | 303,684 | |||||||||||||||||||||
Net increase (decrease) | 2,386,288 | $ | 24,144,329 |
* Commencement of operations on October 24, 2018.
UBS Total Return Bond Fund
Class A | Class C | Class P | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Shares sold | 20,189 | $ | 288,872 | — | $ | — | 16,980 | $ | 243,930 | ||||||||||||||||||
Shares repurchased | (156 | ) | (2,227 | ) | — | — | (362,773 | ) | (5,238,705 | ) | |||||||||||||||||
Shares converted | 4,382 | 62,527 | (4,388 | ) | (62,527 | ) | |||||||||||||||||||||
Dividends reinvested | 460 | 6,668 | 30 | 444 | 63,494 | 918,522 | |||||||||||||||||||||
Net increase (decrease) | 24,875 | $ | 355,840 | (4,358 | ) | $ | (62,083 | ) | (282,299 | ) | $ | (4,076,253 | ) |
Federal tax status
It is each Fund's policy to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. In addition, by distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, each Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
The tax character of distributions paid during the fiscal year ended June 30, 2019 was as follows:
2019 | |||||||||||||||||||
Fund | Distributions paid from tax-exempt income | Distributions paid from ordinary income | Distributions paid from long term realized capital gains | Total distributions paid | |||||||||||||||
UBS Dynamic Alpha Fund | $ | — | $ | 616,241 | $ | — | $ | 616,241 | |||||||||||
UBS Global Allocation Fund | — | — | — | — | |||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | — | 522,535 | — | 522,535 | |||||||||||||||
UBS Engage For Impact Fund | — | 6,444 | — | 6,444 | |||||||||||||||
UBS International Sustainable Equity Fund | — | 843,254 | 1,032,298 | 1,875,552 | |||||||||||||||
UBS U.S. Small Cap Growth Fund | — | 3,772,850 | 7,387,637 | 11,160,487 | |||||||||||||||
UBS U.S. Sustainable Equity Fund | — | 302,357 | — | 302,357 | |||||||||||||||
UBS Municipal Bond Fund | 2,147,143 | 10,994 | — | 2,158,137 | |||||||||||||||
UBS Sustainable Development Bank Bond Fund | — | 331,507 | — | 331,507 | |||||||||||||||
UBS Total Return Bond Fund | — | 1,192,656 | — | 1,192,656 |
The tax character of distributions paid and components of accumulated earnings (deficit) on a tax basis current fiscal year will be determined after the Trust's fiscal year ending June 30, 2020.
151
The UBS Funds
Notes to financial statements (unaudited)
For federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments, including derivatives, held at December 31, 2019 were as follows:
Fund | Cost of investments | Gross unrealized appreciation | Gross unrealized depreciation | Net unrealized appreciation (depreciation) on investments | |||||||||||||||
UBS Dynamic Alpha Fund | $ | 58,726,585 | $ | 1,797,852 | $ | (8,786,192 | ) | $ | (6,988,340 | ) | |||||||||
UBS Global Allocation Fund | 238,729,666 | 26,039,061 | (5,148,313 | ) | 20,890,748 | ||||||||||||||
UBS Emerging Markets Equity Opportunity Fund | 300,953,275 | 40,173,657 | (5,790,168 | ) | 34,383,489 | ||||||||||||||
UBS Engage For Impact Fund | 20,425,641 | 2,402,616 | (272,716 | ) | 2,129,900 | ||||||||||||||
UBS International Sustainable Equity Fund | 188,031,094 | 21,280,483 | (3,127,049 | ) | 18,153,434 | ||||||||||||||
UBS U.S. Small Cap Growth Fund | 112,759,568 | 29,908,780 | (6,324,109 | ) | 23,584,671 | ||||||||||||||
UBS U.S. Sustainable Equity Fund | 31,750,715 | 3,244,098 | (330,582 | ) | 2,913,516 | ||||||||||||||
UBS Municipal Bond Fund | 100,392,777 | 3,989,304 | (53,841 | ) | 3,935,463 | ||||||||||||||
UB Sustainable Development Bank Bond Fund | 36,260,118 | 794,693 | (85,761 | ) | 708,932 | ||||||||||||||
UBS Total Return Bond Fund | 43,148,513 | 1,334,535 | (164,830 | ) | 1,169,705 |
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, 2019, the following Funds had post-enactment net capital losses that will be carried forward indefinitely, as follows:
Fund | Short-term losses | Long-term losses | Net capital losses | ||||||||||||
UBS Dynamic Alpha Fund | $ | 18,010,629 | $ | 12,660,174 | $ | 30,670,803 | |||||||||
UBS Emerging Markets Equity Opportunity Fund | 4,354,586 | 51,391 | 4,405,977 | ||||||||||||
UBS Municipal Bond Fund | 880,092 | 91,941 | 972,033 | ||||||||||||
UBS Total Return Bond Fund | 2,326,577 | 1,242,293 | 3,568,870 |
During the fiscal year ended June 30, 2019, the following Funds had capital loss carryforwards un-utilized:
Fund | Capital loss carryforwards expired | ||||||
UBS Dynamic Alpha Fund | $ | 46,428,719 |
Qualified late year losses are deemed to arise on the first business day of a Fund's next table year. For the fiscal year ended June 30, 2019, the following Funds incurred and elected to defer qualified late year losses of the following:
Post October capital loss | |||||||||||||||
Fund | Late year ordinary loss | Short-term losses | Long-term losses | ||||||||||||
UBS International Sustainable Equity Fund | $ | — | $ | 2,867,499 | $ | 776,128 | |||||||||
UBS Total Return Bond Fund | 58,006 | — | — |
152
The UBS Funds
Notes to financial statements (unaudited)
ASC 740-10 "Income Taxes-Overall" sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken. The Funds have conducted an analysis and concluded, as of December 31, 2019, that there are no significant uncertain tax positions taken or expected to be taken that would require recognition in the financial statements. It is each Fund's policy to record any significant foreign tax exposures in the financial statements. The Funds recognize interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of operations. During the period ended December 31, 2019, the Funds did not incur any interest or penalties.
Under the applicable foreign tax laws, gains on certain securities held in certain foreign countries may be subject to taxes that will be paid by the Funds.
Each of the tax years in the four year fiscal period ended December 31, 2019 or since inception in the case of UBS Emerging Markets Equity Opportunity Fund, UBS Engage For Impact Fund, UBS Municipal Bond Fund, and UBS Sustainable Development Bank Bond Fund remains subject to examination by the Internal Revenue Service and state taxing authorities.
153
The UBS Funds
General information (unaudited)
Quarterly portfolio schedule
The Funds filed its complete schedule of portfolio holdings with the US Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Funds' Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. (Please note that on the SEC's Web site, the "filing type" designation for this information may be "NPORT-EX.") Additionally, you may obtain copies of such portfolio holdings schedules for the first and third quarters of each fiscal year from the funds upon request by calling 1-800-647 1568.
Proxy voting policies, procedures and record
You may obtain a description of the Fund's (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Fund voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Fund directly at 1-800-647 1568, online on the Fund's Web site: www.ubs.com/ubsam-proxy, or on the EDGAR Database on the SEC's Web site (http://www.sec.gov).
154
PRESORTED
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PAID
COMPUTERSHARE
UBS Asset Management (Americas) Inc.
1285 Avenue of the Americas
New York, NY 10019-6028
S1627
Item 2. Code of Ethics.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 3. Audit Committee Financial Expert.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 4. Principal Accountant Fees and Services.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the registrant.
Item 6. Schedule of Investments.
(a) Included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to the registrant.
Item 10. Submission of Matters to a Vote of Security Holders.
The Nominating Committee will consider nominees recommended by Qualifying Fund Shareholders if an Independent Trustee vacancy on the Board occurs. A Qualifying Fund Shareholder is a shareholder that: (i) owns of record, or beneficially through a financial intermediary, 1/2 of 1% or more of the Trust's outstanding shares and (ii) has been a shareholder of at least 1/2 of 1% of the Trust's total outstanding shares for 12 months or more prior to submitting the recommendation to the Nominating Committee. In order to recommend a nominee, a Qualifying Fund Shareholder should send a letter to the chairperson of the Nominating Committee, Ms. Adela Cepeda, care of Keith Weller, Secretary of The UBS Funds, at UBS Asset Management, One North Wacker Drive, Chicago, Illinois 60606, and indicate on the envelope "Nominating Committee." The Qualifying Fund Shareholder's letter should include: (i) the name and address of the Qualifying Fund Shareholder making the recommendation; (ii) the number of shares of each class and series of shares of the Trust which are owned of record and beneficially by such Qualifying Fund Shareholder and the length of time that such shares have been so owned by the Qualifying Fund Shareholder; (iii) a description of all arrangements and understandings between such Qualifying Fund Shareholder and any other person or persons (naming such person or persons) pursuant to which the recommendation is being made; (iv) the name and address of the nominee; and (v) the nominee's resume or curriculum vitae. The Qualifying Fund Shareholder's letter must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. |
(b) | The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to the registrant.
Item 13. Exhibits.
(a) | (1) Code of Ethics – Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report. |
(a) | (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.CERT. |
(a) | (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons – not applicable to the registrant. |
(a) | (4) Change in the registrant's independent public accountant - not applicable to the registrant. |
(b) | Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The UBS Funds | ||
By: | /s/ Igor Lasun | |
Igor Lasun | ||
President | ||
Date: | March 9, 2020 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
The UBS Funds | ||
By: | /s/ Igor Lasun | |
Igor Lasun | ||
President | ||
Date: | March 9, 2020 | |
By: | /s/ Joanne M. Kilkeary | |
Joanne M. Kilkeary | ||
Vice President, Treasurer and Principal Accounting Officer | ||
Date: | March 9, 2020 |