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: 811-04919
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UBS Series Trust
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(Exact name of registrant as specified in charter)
51 West 52nd Street, New York, New York 10019-6114
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(Address of principal executive offices) (Zip code)
Mark F. Kemper, Esq.
UBS Global Asset Management Inc.
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401
Registrant's telephone number, including area code: 212-882 5000
Date of fiscal year end: December 31
Date of reporting period: June 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
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[LOGO OF UBS] UBS Global Asset
Management
UBS SERIES TRUST
U.S. ALLOCATION PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 2006
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
August 15, 2006
DEAR CONTRACT OWNER,
We present you with the semiannual report for UBS Series Trust--U.S. Allocation
Portfolio for the six months ended June 30, 2006.
PERFORMANCE
During the six months ended June 30, 2006, the Portfolio's Class H shares
returned 1.14%. Since the Portfolio invests in both stocks and bonds, we feel it
is appropriate to compare the Portfolio's performance to the U.S. Allocation
Fund Index* (the "Index"), which returned 2.02% over the same time frame. By
contrast, the S&P 500 Index, which tracks large cap US equities, returned 2.71%
during the reporting period. (For Class H and Class I returns over various time
periods, please refer to "Performance at a glance" on page 5.)
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
INVESTMENT GOAL:
Total return, consisting of long-term capital appreciation
and current income.
PORTFOLIO MANAGERS:
Portfolio Management Team, including Brian Singer UBS Global Asset Management
(Americas) Inc.
COMMENCEMENT:
Class H--September 28, 1998
Class I--January 5, 1999
DIVIDEND PAYMENTS:
Annually
AN INTERVIEW WITH LEAD PORTFOLIO MANAGER BRIAN SINGER
Q. CAN YOU DESCRIBE THE ECONOMIC ENVIRONMENT DURING THE REPORTING PERIOD?
A. The economy continued to expand during the reporting period. After gross
domestic product (GDP) rose 1.7% in the fourth quarter of 2005, the economy
rebounded sharply in the first half of 2006. During this period, GDP rose
at a 4.0% annual rate. However, higher interest rates, a cooling housing
market and continued high oil prices may cause economic growth to moderate
during the remainder of 2006.
* An unmanaged index (formerly known as the U.S. Tactical Allocation Fund
Index) compiled by the advisor, constructed as follows: from September 28,
1998 (Portfolio's inception) until February 29, 2004: 100% S&P 500 Index;
from March 1, 2004 until May 31, 2005: 65% Russell 3000 Index, 30% Lehman
Brothers Aggregate Bond Index, 5% Merrill Lynch US High Yield Cash Pay
Index; from June 1, 2005 until present: 65% Russell 3000 Index, 30% Lehman
Brothers Aggregate Bond Index, 5% Merrill Lynch US High Yield Cash Pay
Constrained Index.
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1
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
Q. HOW DID THE FEDERAL RESERVE BOARD (THE "FED") REACT IN THIS ECONOMIC
ENVIRONMENT?
A. As has been the case since June 2004, the Fed continued to raise interest
rates during the reporting period. While the leadership at the Fed changed
from Alan Greenspan to Ben Bernanke in early 2006, there was little
deviation from the tightening campaign to ward off inflation. During the
six-month reporting period, the Fed raised short-term interest rates four
times. Since June 30, 2004, the Fed increased rates at 17 consecutive
meetings, raising the federal funds target rate from 1.00% to 5.25%, before
pausing after the period ended.
As expected, short- and long-term yields rose over the reporting period
along with the Fed's repeated rate hikes. During the six months ended June
30, 2006, two-year Treasury yields increased from 4.41% to 5.16%. Over the
same period, 10-year Treasury yields moved from 4.39% to 5.15%.
Q. HOW DID YOU ALLOCATE THE PORTFOLIO OVER THE REPORTING PERIOD?
A. As the reporting period began, we had a negative view of the fixed income
market (both investment grade and high yield) as we found it to be generally
overvalued. Bond yields were exceptionally low versus our expected
equilibrium and, moreover, credit spreads were quite tight, meaning
investors were receiving little compensation for taking on the additional
risk of owning lower-rated bonds. As a result, we held fairly significant
underweight positions in both investment-grade and high-yield bonds relative
to the benchmark. This allocation, coupled with only a slight overweight to
equities, led to an overweight to cash and cash equivalents. As the period
progressed, we moved closer to a neutral position in investment grade fixed
income, while maintaining an underweight to high yield bonds. Throughout the
period we maintained a modest overweight to equities.
At the end of the reporting period, active strategy weights in the Portfolio
(including through the use of investment companies) were as follows: 67%
allocated to stocks, 29% to investment grade bonds, 2% to high yield bonds
and 2% to cash and cash equivalents.
Q. HOW DID YOUR SECTOR POSITIONING AND SECURITY SELECTION IMPACT PERFORMANCE
DURING THE REPORTING PERIOD?
A. Overall, the Portfolio's sector positioning and security selection in the
investment grade bond market enhanced results during the period. While
security selection in the high yield market also contributed
- --------------------------------------------------------------------------------
2
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
positively to returns, the Portfolio's underweight to that asset class
detracted from relative performance.
The Portfolio's equity weighting was a slight drag on performance as
security selection was generally weak, particularly during the second half
of the reporting period. During the first three months of the period, banks,
software and pharmaceuticals were some of the Portfolio's largest active
equity weightings, while energy reserves and materials were two of the
Portfolio's largest underweights. We found energy and materials to be
significantly overvalued, driven by what our analysis suggested to be
unsustainably high oil and metals prices. This positioning had a positive
impact on performance during the first quarter of 2006. However, during the
second quarter, stocks struggled, and the Portfolio's holdings in the
healthcare and information technology sectors were hit particularly hard.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKETS AND THE PORTFOLIO?
A. In our December 31, 2005 report to shareholders we anticipated a continuation
of the economic expansion in 2006, albeit at a slower pace than the previous
year. We also expressed reservations about predicting when the Fed would
stop raising interest rates. After a strong start to the year, it now
appears likely that growth will moderate because of higher interest rates, a
cooling housing market and record high oil prices. Some economists now
believe a hard landing is in store for the economy, but we are hesitant to
subscribe to such a bleak view of the coming months, which would require a
rather rapid reversal of direction in areas of the economy, such as jobs
creation, that have thus far been quite positive. As we monitor the
macroeconomic trends that emerge over the next six months, we continue to
believe that our extensive bottom-up research and well-diversified portfolio
should prove beneficial to investors over the long-term.
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3
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
We thank you for your continued support and welcome any comments or questions
you may have. For additional information on the UBS Funds,* please contact your
financial advisor or visit us at www.ubs.com/globalam-us.
Sincerely,
/s/ W. Douglas Beck
W. Douglas Beck, CFA
President
UBS Series Trust--U.S. Allocation Portfolio
Executive Director
UBS Global Asset Management (Americas) Inc.
/s/ Brian Singer
Brian Singer
Lead Portfolio Manager
UBS Series Trust--U.S. Allocation Portfolio
Regional Chief Investment Officer
UBS Global Asset Management (Americas) Inc.
This letter is intended to assist shareholders in understanding how the
Portfolio performed during the six months ended June 30, 2006. The views and
opinions in the letter were current as of August 15, 2006. They are not
guarantees of 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 or results. We encourage
you to consult your financial advisor regarding your personal investment
program.
* Mutual funds are sold by prospectus only. You should read it carefully and
consider a fund's investment objectives, risks, charges, expenses and other
important information contained in the prospectus before investing.
Prospectuses for most of our funds can be obtained from your financial
advisor, by calling UBS Funds at 800-647 1568 or by visiting our Web site at
www.ubs.com/globalam-us.
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4
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PERFORMANCE AT A GLANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 06/30/06
SINCE
6 MONTHS 1 YEAR 3 YEARS 5 YEARS INCEPTION(o)
- ---------------------------------------------------------------------------------------------------
Class H* 1.14% 6.31% 11.07% 2.11% 5.38%
- ---------------------------------------------------------------------------------------------------
Class I* 0.94 6.03 10.81 1.84 2.26
- ---------------------------------------------------------------------------------------------------
S&P 500 Index** 2.71 8.63 11.22 2.49 4.10
- ---------------------------------------------------------------------------------------------------
U.S. Allocation Fund Index*** 2.02 6.17 10.69 2.20 3.91
- ---------------------------------------------------------------------------------------------------
(o) Since inception returns are calculated as of the commencement of issuance
on September 28, 1998 for Class H shares and January 5, 1999 for Class I
shares. Since inception returns for the S&P 500 Index and the U.S.
Allocation Fund Index are calculated as of September 28, 1998, which is the
inception date of the oldest share class (Class H).
* Class H and Class I shares do not bear initial or contingent deferred sales
charges. Class I shares bear ongoing distribution fees; Class H shares do
not bear similar fees.
** 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.
*** An unmanaged index (formerly known as the U.S. Tactical Allocation Fund
Index) compiled by the Advisor, constructed as follows: from September 28,
1998 (Portfolio's inception) until February 29, 2004: 100% S&P 500 Index;
from March 1, 2004 until May 31, 2005: 65% Russell 3000 Index, 30% Lehman
Brothers Aggregate Bond Index, 5% Merrill Lynch US High Yield Cash Pay
Index; from June 1, 2005 until present: 65% Russell 3000 Index, 30% Lehman
Brothers Aggregate Bond Index, 5% Merrill Lynch US High Yield Cash Pay
Constrained Index.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. 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 AND DOES NOT REFLECT SEPARATE ACCOUNT
CHARGES APPLICABLE TO VARIABLE ANNUITY CONTRACTS. TOTAL RETURNS FOR THE PERIOD
OF LESS THAN ONE YEAR HAVE NOT BEEN ANNUALIZED. CURRENT PERFORMANCE MAY BE
HIGHER OR LOWER THAN THE PERFORMANCE DATA QUOTED.
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5
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
UNDERSTANDING YOUR PORTFOLIO'S EXPENSES (UNAUDITED)
As a shareholder of the Portfolio, you incur ongoing costs, including management
fees, distribution fees (if applicable) and other Portfolio expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Portfolio and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period, January 1, 2006 to June 30, 2006.
ACTUAL EXPENSES
The first line for each class of shares in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over a period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line for each class of shares 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 the
Portfolio's actual expense ratios for each class of shares and an assumed rate
of return of 5% per year before expenses, which is not the Portfolio's actual
return for each class of shares. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing costs
of investing in the Portfolio 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 contract level charges that may be applicable to variable annuity
contracts. 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.
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6
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
UNDERSTANDING YOUR PORTFOLIO'S EXPENSES (UNAUDITED)
(CONCLUDED)
Beginning Ending Expenses paid
account value account value during period*
January 1, 2006 June 30, 2006 01/01/06 tO 06/30/06
- --------------------------------------------------------------------------------------------------
Class H Actual $1,000.00 $1,011.40 $4.24
- --------------------------------------------------------------------------------------------------
Hypothetical (5%
annual return before
expenses) 1,000.00 1,020.58 4.26
- --------------------------------------------------------------------------------------------------
Class I Actual 1,000.00 1,009.40 5.48
- --------------------------------------------------------------------------------------------------
Hypothetical (5%
annual return before
expenses) 1,000.00 1,019.34 5.51
- --------------------------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratios: Class H:
0.85%, Class I: 1.10%, multiplied by the average account value over the
period, multiplied by 181 divided by 365 (to reflect the one-half year
period).
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7
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO STATISTICS (UNAUDITED)
CHARACTERISTICS 06/30/06 12/31/05 06/30/05
===================================================================================================
Net Assets (mm) $48.2 $52.9 $70.1
- ---------------------------------------------------------------------------------------------------
Number of Securities 157 145 183
- ---------------------------------------------------------------------------------------------------
PORTFOLIO COMPOSITION* 06/30/06 12/31/05 06/30/05
===================================================================================================
Common Stocks and
Warrants 63.4% 61.4% 59.6%
- ---------------------------------------------------------------------------------------------------
Bonds 28.5 27.4 24.9
- ---------------------------------------------------------------------------------------------------
Investment Companies 5.9 6.5 7.0
- ---------------------------------------------------------------------------------------------------
Cash Equivalents and
Other Assets Less
Liabilities 2.2 4.7 8.5
- ---------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
===================================================================================================
TOP FIVE EQUITY
SECTORS* 06/30/06 12/31/05 06/30/05
===================================================================================================
Financials 15.6% 16.2% 15.6%
- ---------------------------------------------------------------------------------------------------
Health Care 11.4 11.7 11.0
- ---------------------------------------------------------------------------------------------------
Consumer Discretionary 9.2 9.2 7.2
- ---------------------------------------------------------------------------------------------------
Information Technology 8.6 7.6 6.6
- ---------------------------------------------------------------------------------------------------
Industrials 6.8 6.7 6.0
- ---------------------------------------------------------------------------------------------------
Total 51.6% 51.4% 46.4%
===================================================================================================
TOP TEN EQUITY
SECURITIES* 06/30/06 12/31/05 06/30/05
===================================================================================================
Citigroup 2.9% Citigroup 2.9% Citigroup 2.7%
- ---------------------------------------------------------------------------------------------------
Nextel
Morgan Stanley 2.3 Microsoft 2.4 Communications 2.1
- ---------------------------------------------------------------------------------------------------
Microsoft 2.3 Morgan Stanley 2.0 Johnson & Johnson 2.0
- ---------------------------------------------------------------------------------------------------
Wells Fargo 2.1 Wells Fargo 1.9 Wells Fargo 1.9
- ---------------------------------------------------------------------------------------------------
Wyeth 2.0 Wyeth 1.9 Microsoft 1.9
- ---------------------------------------------------------------------------------------------------
Exelon 1.8 Sprint Nextel 1.8 UnitedHealth Group 1.9
- ---------------------------------------------------------------------------------------------------
Sprint Nextel 1.6 United Health Group 1.7 Morgan Stanley 1.7
- ---------------------------------------------------------------------------------------------------
American
Allergan 1.5 International Group 1.6 Exelon 1.6
- ---------------------------------------------------------------------------------------------------
Masco 1.5 Exelon 1.6 J.P. Morgan 1.4
- ---------------------------------------------------------------------------------------------------
Federal Home Loan
Omnicom Group 1.4 J.P. Morgan 1.5 Mortgage 1.4
- ---------------------------------------------------------------------------------------------------
Total 19.4% 19.3% 18.6%
===================================================================================================
* Weightings represent percentages of net assets as of the dates indicated.
The Portfolio is actively managed and its composition will vary over time.
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8
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO STATISTICS (UNAUDITED) (CONTINUED)
FIXED INCOME
SECTOR ALLOCATION* 06/30/06 12/31/05 06/30/05
===================================================================================================
Mortgage & Agency
Debt Securities 11.1% 9.9% 12.0%
- ---------------------------------------------------------------------------------------------------
US Government
Obligations 8.1 7.4 3.7
- ---------------------------------------------------------------------------------------------------
Corporate Bonds 5.3 4.7 4.9
- ---------------------------------------------------------------------------------------------------
Commercial
Mortgage-Backed
Securities 2.9 3.6 2.4
- ---------------------------------------------------------------------------------------------------
Asset-Backed
Securities 1.0 1.7 1.7
- ---------------------------------------------------------------------------------------------------
International
Government
Obligations 0.1 0.1 0.2
- ---------------------------------------------------------------------------------------------------
Total 28.5% 27.4% 24.9%
===================================================================================================
* Weightings represent percentages of net assets as of the dates indicated.
The Portfolio is actively managed and its composition will vary over time.
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9
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO STATISTICS (UNAUDITED) (CONCLUDED)
TOP TEN FIXED
INCOME SECURITIES* 06/30/06 12/31/05 06/30/05
===========================================================================================================
US Treasury US Treasury GNMA
Notes, 4.750% Bonds, 8.750% Certificates, 6.500%
due 03/31/11 1.7% due 05/15/17 1.6% due 06/15/29 1.8%
- -----------------------------------------------------------------------------------------------------------
FNMA US Treasury FNMA
Certificates, 6.500% Notes, 3.625% Certificates, 5.500%
due 12/01/29 1.4 due 06/15/10 1.5 due 10/01/33 1.8
- -----------------------------------------------------------------------------------------------------------
US Treasury FNMA FNMA
Notes, 4.875% Certificates, 6.500% Certificates, 6.500%
due 05/15/09 1.1 due 12/01/29 1.4 due 12/01/29 1.3
- -----------------------------------------------------------------------------------------------------------
FNMA
GNMA Certificates, 5.000% FHLMC
Certificates, 6.000% maturity to be Certificates, 5.000%
due 07/15/29 1.0 assigned 1.4 due 01/30/14 1.2
- -----------------------------------------------------------------------------------------------------------
FNMA US Treasury GNMA
Certificates, 5.000% Bonds, 6.250% Certificates, 6.000%
maturity to be assigned 0.9 due 05/15/30 1.1 due 07/15/29 1.0
- -----------------------------------------------------------------------------------------------------------
US Treasury GNMA US Treasury Inflation
Bonds, 8.500% Certificates, 6.000% Index Notes, 2.000%
due 02/15/20 0.9 due 07/15/29 1.1 due 01/15/14 0.9
- -----------------------------------------------------------------------------------------------------------
US Treasury US Treasury FHLMC
Notes, 4.500% Notes, 4.125% Certificates, 5.625%
due 11/15/15 0.8 due 05/15/15 0.9 due 03/15/11 0.9
- -----------------------------------------------------------------------------------------------------------
Asset Securitization
Corp., Series
1995-MD4, US Treasury US Treasury
Class A3, 7.384% Notes, 3.875% Notes, 3.750%
due 08/13/29 0.8 due 05/15/09 0.9 due 03/31/07 0.9
- -----------------------------------------------------------------------------------------------------------
US Treasury US Treasury FHLMC
Bonds, 8.875% Notes, 3.875% Certificates, 5.125%
due 02/15/19 0.8 due 02/15/13 0.9 due 07/15/12 0.9
- -----------------------------------------------------------------------------------------------------------
Asset Securitization
Corp., Series
US Treasury 1995-MD4, WFS Financial Owner
Notes, 3.875% Class A3, 7.384% Trust, 4.500%
due 02/15/13 0.8 due 08/13/29 0.8 due 02/20/10 0.6
- -----------------------------------------------------------------------------------------------------------
Total 10.2% 11.6% 11.3%
===========================================================================================================
* Weightings represent percentages of net assets as of the dates indicated.
The Portfolio is actively managed and its compostion will vary over time.
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10
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
COMMON STOCKS--63.39%
NUMBER
OF
SECURITY DESCRIPTION SHARES VALUE
================================================================
AEROSPACE & DEFENSE--0.75%
Lockheed Martin Corp. 1,200 $86,088
- ----------------------------------------------------------------
Northrop Grumman Corp. 4,300 275,458
- ----------------------------------------------------------------
361,546
================================================================
AIR FREIGHT & COURIERS--1.11%
FedEx Corp. 4,600 537,556
- ----------------------------------------------------------------
AUTO COMPONENTS--1.66%
- ----------------------------------------------------------------
BorgWarner, Inc. 3,300 214,830
- ----------------------------------------------------------------
Johnson Controls, Inc. 7,100 583,762
- ----------------------------------------------------------------
798,592
================================================================
BANKS--5.47%
Fifth Third Bancorp 14,700 543,165
- ----------------------------------------------------------------
Mellon Financial Corp. 18,500 636,955
- ----------------------------------------------------------------
PNC Financial Services Group 6,400 449,088
- ----------------------------------------------------------------
Wells Fargo & Co. 15,000 1,006,200
- ----------------------------------------------------------------
2,635,408
================================================================
BEVERAGES--0.49%
Anheuser-Busch Cos., Inc. 5,200 237,068
================================================================
BIOTECHNOLOGY--1.08%
Genzyme Corp.* 8,500 518,925
================================================================
BUILDING PRODUCTS--1.47%
Masco Corp. 23,900 708,396
================================================================
COMMERCIAL SERVICES & SUPPLIES--0.79%
Cendant Corp. 13,000 211,770
- ----------------------------------------------------------------
H&R Block, Inc.* 7,000 167,020
- ----------------------------------------------------------------
378,790
================================================================
COMPUTERS & PERIPHERALS--0.73%
Dell, Inc.* 14,400 351,504
================================================================
DIVERSIFIED FINANCIALS--7.35%
Citigroup, Inc. 29,100 1,403,784
- ----------------------------------------------------------------
Federal Home Loan Mortgage Corp. 7,700 438,977
- ----------------------------------------------------------------
J.P. Morgan Chase & Co. 14,100 592,200
- ----------------------------------------------------------------
Morgan Stanley 17,500 1,106,175
- ----------------------------------------------------------------
3,541,136
================================================================
DIVERSIFIED TELECOMMUNICATION SERVICES--2.58%
AT&T, Inc. 14,700 409,983
- ----------------------------------------------------------------
Embarq Corp.* 1,894 77,635
- ----------------------------------------------------------------
Sprint Nextel Corp. 37,888 757,381
- ----------------------------------------------------------------
1,244,999
================================================================
ELECTRIC UTILITIES--2.74%
American Electric Power Co., Inc. 7,400 253,450
- ----------------------------------------------------------------
Exelon Corp. 15,000 852,450
- ----------------------------------------------------------------
Northeast Utilities 3,800 78,546
- ----------------------------------------------------------------
Pepco Holdings, Inc. 5,800 136,764
- ----------------------------------------------------------------
1,321,210
================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.61%
Waters Corp.* 6,600 293,040
================================================================
ENERGY EQUIPMENT & SERVICES--1.56%
Baker Hughes, Inc. 2,900 237,365
- ----------------------------------------------------------------
ENSCO International, Inc. 3,200 147,264
- ----------------------------------------------------------------
GlobalSantaFe Corp. 6,400 369,600
- ----------------------------------------------------------------
754,229
================================================================
FOOD& DRUG RETAILING--1.57%
Kroger Co.* 21,000 459,060
- ----------------------------------------------------------------
Sysco Corp. 9,700 296,432
- ----------------------------------------------------------------
755,492
================================================================
GAS UTILITIES--1.06%
NiSource, Inc. 8,800 192,192
- ----------------------------------------------------------------
Sempra Energy 7,000 318,360
- ----------------------------------------------------------------
510,552
================================================================
HEALTH CARE EQUIPMENT & SUPPLIES--0.84%
Boston Scientific Corp.* 6,500 109,460
- ----------------------------------------------------------------
- --------------------------------------------------------------------------------
11
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
COMMON STOCKS--(CONCLUDED)
NUMBER
OF
SECURITY DESCRIPTION SHARES VALUE
- ----------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--(CONCLUDED)
Medtronic, Inc. 6,300 $295,596
- ----------------------------------------------------------------
405,056
================================================================
HEALTH CARE PROVIDERS & SERVICES--2.00%
Caremark Rx, Inc.* 5,700 284,259
- ----------------------------------------------------------------
UnitedHealth Group, Inc. 15,200 680,656
- ----------------------------------------------------------------
964,915
================================================================
HOTELS, RESTAURANTS & LEISURE--1.05%
Carnival Corp. 12,100 505,054
================================================================
INSURANCE--3.19%
Allstate Corp. 5,800 317,434
- ----------------------------------------------------------------
American International Group, Inc. 11,700 690,885
- ----------------------------------------------------------------
Hartford Financial Services Group, Inc. 4,000 338,400
- ----------------------------------------------------------------
WellPoint, Inc.* 2,600 189,202
- ----------------------------------------------------------------
1,535,921
================================================================
INTERNET & CATALOG RETAIL--0.21%
Expedia, Inc.* 6,850 102,545
================================================================
IT CONSULTING & SERVICES--0.49%
Accenture Ltd., Class A 8,400 237,888
================================================================
LEISURE EQUIPMENT & PRODUCTS--0.60%
Harley-Davidson, Inc. 5,300 290,917
================================================================
MACHINERY--1.36%
Illinois Tool Works, Inc. 13,800 655,500
================================================================
MEDIA--3.53%
DIRECTV Group, Inc.* 23,900 394,350
- ----------------------------------------------------------------
News Corp., Class A 12,700 243,586
- ----------------------------------------------------------------
Omnicom Group, Inc. 7,800 694,902
- ----------------------------------------------------------------
R.H. Donnelley Corp.* 4,820 260,617
- ----------------------------------------------------------------
Univision Communications, Inc.,
Class A * 3,300 110,550
- ----------------------------------------------------------------
1,704,005
================================================================
MULTI-LINE RETAIL--2.16%
Costco Wholesale Corp. 10,300 588,439
- ----------------------------------------------------------------
Kohl's Corp.* 7,700 455,224
- ----------------------------------------------------------------
1,043,663
================================================================
OIL & GAS--1.79%
EOG Resources, Inc. 900 62,573
- ----------------------------------------------------------------
Exxon Mobil Corp. 4,900 300,615
- ----------------------------------------------------------------
Marathon Oil Corp. 6,000 499,800
- ----------------------------------------------------------------
862,988
================================================================
PHARMACEUTICALS--7.07%
Allergan, Inc. 6,900 740,094
- ----------------------------------------------------------------
Bristol-Myers Squibb Co. 16,500 426,690
- ----------------------------------------------------------------
Cephalon, Inc.(1)* 3,000 180,300
- ----------------------------------------------------------------
Johnson & Johnson 11,500 689,080
- ----------------------------------------------------------------
Medco Health Solutions, Inc.* 7,100 406,688
- ----------------------------------------------------------------
Wyeth 21,700 963,697
- ----------------------------------------------------------------
3,406,549
================================================================
ROAD & RAIL--1.28%
Burlington Northern Santa Fe Corp. 7,800 618,150
================================================================
SEMICONDUCTOR EQUIPMENT & PRODUCTS--1.77%
Analog Devices, Inc. 8,100 260,334
- ----------------------------------------------------------------
Intel Corp. 22,900 433,955
- ----------------------------------------------------------------
Xilinx, Inc. 7,000 158,550
- ----------------------------------------------------------------
852,839
================================================================
SOFTWARE--5.03%
Mercury Interactive Corp.* 6,900 241,293
- ----------------------------------------------------------------
Microsoft Corp. 46,800 1,090,440
- ----------------------------------------------------------------
Oracle Corp.* 43,300 627,417
- ----------------------------------------------------------------
Salesforce.com, Inc.* 3,400 90,644
- ----------------------------------------------------------------
Symantec Corp.* 24,063 373,939
- ----------------------------------------------------------------
2,423,733
================================================================
Total Common Stocks
(cost--$27,315,064) 30,558,166
================================================================
- --------------------------------------------------------------------------------
12
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
===========================================================================================
US GOVERNMENT OBLIGATIONS--8.10%
$245 US Treasury Bonds 05/15/17 8.750% $316,107
- -------------------------------------------------------------------------------------------
305 US Treasury Bonds 02/15/19 8.875 405,269
- -------------------------------------------------------------------------------------------
315 US Treasury Bonds 02/15/20 8.500 411,961
- -------------------------------------------------------------------------------------------
290 US Treasury Bonds 08/15/23 6.250 319,838
- -------------------------------------------------------------------------------------------
145 US Treasury Bonds 05/15/30 6.250 164,235
- -------------------------------------------------------------------------------------------
170 US Treasury Notes 02/29/08 4.625 168,453
- -------------------------------------------------------------------------------------------
510 US Treasury Notes 05/15/09 4.875 506,533
- -------------------------------------------------------------------------------------------
845 US Treasury Notes 03/31/11 4.750 832,292
- -------------------------------------------------------------------------------------------
400 US Treasury Notes 02/15/13 3.875 372,344
- -------------------------------------------------------------------------------------------
430 US Treasury Notes 11/15/15 4.500 409,575
- -------------------------------------------------------------------------------------------
Total US Govment Obligations (cost--$3,923,691) 3,906,607
===========================================================================================
MORTGAGE & AGENCY DEBT SECURITIES--11.14%
282 Countrywide Home Loans,
Series 2006-HYB1, Class 1A1 03/20/36 5.410++ 277,242
- -------------------------------------------------------------------------------------------
264 CS First Boston Mortgage Securities
Corp., Series 2005-11, Class 4A1 12/25/35 7.000 266,284
- -------------------------------------------------------------------------------------------
300 Federal Home Loan Mortgage
Corporation Certificates 06/15/31 5.000 284,565
- -------------------------------------------------------------------------------------------
233 Federal Home Loan Mortgage
Corporation Certificates 12/01/34 4.500 212,094
- -------------------------------------------------------------------------------------------
150 Federal National Mortgage
Association Certificates 05/15/10 4.125 143,058
- -------------------------------------------------------------------------------------------
85 Federal National Mortgage
Association Certificates 06/01/10 4.625 82,097
- -------------------------------------------------------------------------------------------
125 Federal National Mortgage
Association Certificates 10/01/17 5.500 122,821
- -------------------------------------------------------------------------------------------
239 Federal National Mortgage
Association Certificates 12/01/17 5.500 234,638
- -------------------------------------------------------------------------------------------
251 Federal National Mortgage
Association Certificates 07/01/18 5.500 246,610
- -------------------------------------------------------------------------------------------
650 Federal National Mortgage
Association Certificates 12/01/29 6.500 656,604
- -------------------------------------------------------------------------------------------
317 Federal National Mortgage
Association Certificates 06/01/33 5.500 306,251
- -------------------------------------------------------------------------------------------
326 Federal National Mortgage
Association Certificates 07/01/33 5.500 314,683
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
===========================================================================================
MORTGAGE & AGENCY DEBT SECURITIES--(CONCLUDED)
$227 Federal National Mortgage
Association Certificates 11/01/34 5.500% $219,007
- -------------------------------------------------------------------------------------------
254 Federal National Mortgage
Association Certificates ARM 05/01/35 4.889 247,314
- -------------------------------------------------------------------------------------------
172 Federal National Mortgage
Association Certificates ARM 05/01/35 5.109 171,021
- -------------------------------------------------------------------------------------------
455 Federal National Mortgage
Association Certificates TBA TBA 5.000 425,283
- -------------------------------------------------------------------------------------------
95 FNMA REMIC, Series 2001-69,
Class PN 04/25/30 6.000 94,628
- -------------------------------------------------------------------------------------------
194 FNMA REMIC, Series 2001-T4,
Class A1 07/25/41 7.500 199,046
- -------------------------------------------------------------------------------------------
240 FNMA REMIC, Series 2002-T19,
Class A1 07/25/42 6.500 241,794
- -------------------------------------------------------------------------------------------
496 Government National Mortgage
Association Certificates 07/15/29 6.000 493,521
- -------------------------------------------------------------------------------------------
130 Government National Mortgage
Association Certificates 04/15/31 6.500 132,331
- -------------------------------------------------------------------------------------------
Total Mortgage & Agency Debt Securities (cost--$5,524,509) 5,370,892
===========================================================================================
COMMERCIAL MORTGAGE-BACKED SECURITIES--2.92%
400 Asset Securitization Corp.,
Series 1995-MD4, Class A3 08/13/29 7.384 407,264
- -------------------------------------------------------------------------------------------
46 First Union-Lehman Brothers
Commercial Mortgage,
Series 1997-C2, Class A3 11/18/29 6.650 46,320
- -------------------------------------------------------------------------------------------
292 Greenwich Capital Commercial
Funding Corp., Series 2002-C1,
Class A1 01/11/13 3.357 284,560
- -------------------------------------------------------------------------------------------
278 Hilton Hotel Pool Trust,
Series 2000-HLTA, Class A1** 10/03/15 7.055 286,480
- -------------------------------------------------------------------------------------------
143 Mach One Trust Commercial Mortgage,
Series 2004-1A, Class A1** 05/28/40 3.890 139,632
- -------------------------------------------------------------------------------------------
161 Morgan Stanley Mortgage Loan Trust,
Series 2006-1AR, Class 2A 02/25/36 6.048++ 160,690
- -------------------------------------------------------------------------------------------
80 Nomura Asset Securities Corp.,
Series 1996-MD5, Class A4 04/13/39 8.190++ 81,393
- -------------------------------------------------------------------------------------------
Total Commercial Mortgage-Backed Securities (cost--$1,434,761) 1,406,339
===========================================================================================
- --------------------------------------------------------------------------------
14
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
===========================================================================================
ASSET-BACKED SECURITIES--1.03%
$365 Conseco Finance Securitizations Corp.,
Series 2000-5, Class A5 02/01/32 7.700% $363,239
- -------------------------------------------------------------------------------------------
35 Greenpoint Home Equity Loan Trust,
Series 2004-3, Class A 03/15/35 5.429++ 35,626
- -------------------------------------------------------------------------------------------
100 Paragon Mortgages PLC, Series 7A,
Class B1A** 05/15/43 5.920++ 100,131
- -------------------------------------------------------------------------------------------
Total Asset-Backed Securities (cost--$500,461) 498,996
===========================================================================================
CORPORATE BONDS--5.27%
AEROSPACE & DEFENSE--0.10%
45 Boeing Capital Corp. 09/27/10 7.375 47,812
===========================================================================================
AUTOMOBILE OEM--0.92%
115 DaimlerChrysler N.A. Holding Corp. 06/04/08 4.050 111,188
- -------------------------------------------------------------------------------------------
295 Ford Motor Credit Co. 01/12/09 5.800 269,503
- -------------------------------------------------------------------------------------------
65 General Motors Acceptance Corp. 09/15/11 6.875 62,020
- -------------------------------------------------------------------------------------------
442,711
===========================================================================================
BANKING-NON-US--0.25%
90 HSBC Finance Corp. 05/15/11 6.750 93,361
- -------------------------------------------------------------------------------------------
25 Royal Bank of Scotland Group PLC,
Series 1 03/31/10 9.118 27,455
- -------------------------------------------------------------------------------------------
120,816
===========================================================================================
BANKING-US--1.09%
105 Bank of America Corp. 01/15/11 7.400 111,722
- -------------------------------------------------------------------------------------------
40 Bank One Corp. 08/01/10 7.875 43,041
- -------------------------------------------------------------------------------------------
50 Citigroup, Inc 08/27/12 5.625 49,401
- -------------------------------------------------------------------------------------------
101 Citigroup, Inc. 09/15/14 5.000 94,533
- -------------------------------------------------------------------------------------------
75 J.P. Morgan Chase & Co. 02/01/11 6.750 77,954
- -------------------------------------------------------------------------------------------
115 Washington Mutual, Inc. 01/15/07 5.625 114,901
- -------------------------------------------------------------------------------------------
35 Wells Fargo & Co. 08/01/11 6.375 35,943
- -------------------------------------------------------------------------------------------
527,495
===========================================================================================
BROKERAGE--0.45%
90 Goldman Sachs Group, Inc. 01/15/11 6.875 93,518
- -------------------------------------------------------------------------------------------
120 Morgan Stanley 04/15/11 6.750 124,587
- -------------------------------------------------------------------------------------------
218,105
===========================================================================================
CABLE--0.19%
90 Comcast Cable Communications, Inc. 01/30/11 6.750 92,873
===========================================================================================
- --------------------------------------------------------------------------------
15
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
CHEMICALS--0.12%
$ 60 ICI Wilmington, Inc. 12/01/08 4.375% $57,904
===========================================================================================
CONSUMER PRODUCTS-DURABLES--0.09%
45 Fortune Brands, Inc. 01/15/16 5.375 41,626
===========================================================================================
CONSUMER PRODUCTS-NONDURABLES--0.10%
45 Avon Products, Inc. 11/15/09 7.150 46,992
===========================================================================================
ELECTRICAL-INTEGRATED--0.20%
30 Dominion Resources, Inc. 06/15/35 5.950 26,897
- -------------------------------------------------------------------------------------------
40 FirstEnergy Corp. 11/15/11 6.450 40,701
- -------------------------------------------------------------------------------------------
30 Pacific Gas & Electric 03/01/34 6.050 28,315
- -------------------------------------------------------------------------------------------
95,913
===========================================================================================
FINANCE-NONCAPTIVE CONSUMER--0.11%
25 Capital One Financial 06/01/15 5.500 23,644
- -------------------------------------------------------------------------------------------
30 Residential Capital Corp. 11/21/08 6.125 29,652
- -------------------------------------------------------------------------------------------
53,296
===========================================================================================
FINANCE-NONCAPTIVE DIVERSIFIED--0.68%
240 General Electric Capital Corp. 06/15/12 6.000 242,757
- -------------------------------------------------------------------------------------------
35 General Electric Capital Corp. 03/15/32 6.750 37,360
- -------------------------------------------------------------------------------------------
50 International Lease Finance Corp. 04/01/09 3.500 47,180
- -------------------------------------------------------------------------------------------
327,297
===========================================================================================
FOOD--0.10%
50 Kraft Foods, Inc. 11/01/11 5.625 49,249
===========================================================================================
FOOD PROCESSORS/BEVERAGE/BOTTLING--0.10%
50 Miller Brewing Co.** 08/15/13 5.500 47,974
===========================================================================================
GAS PIPELINES--0.07%
40 Kinder Morgan Energy Partners 03/15/35 5.800 34,134
===========================================================================================
HEALTHCARE--0.07%
40 UnitedHealth Group, Inc. 03/15/36 5.800 35,804
===========================================================================================
PHARMACEUTICALS--0.08%
40 Allergan, Inc.** 04/01/16 5.750 38,866
===========================================================================================
REAL ESTATE INVESTMENT TRUSTS--0.07%
35 Prologis** 11/15/15 5.625 33,420
===========================================================================================
- --------------------------------------------------------------------------------
16
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
===========================================================================================
CORPORATE BONDS--(CONCLUDED)
ROAD & RAIL--0.05%
- -------------------------------------------------------------------------------------------
$ 25 Norfolk Southern Corp. 09/17/14 5.257% $24,031
===========================================================================================
TECHNOLOGY-HARDWARE--0.11%
55 Cisco Systems, Inc. 02/22/16 5.500 52,812
===========================================================================================
WIRELESS TELECOMMUNICATIONS SERVICES--0.32%
80 Sprint Capital Corp. 03/15/32 8.750 96,472
- -------------------------------------------------------------------------------------------
55 Verizon New York, Inc., Series A 04/01/12 6.875 55,731
- -------------------------------------------------------------------------------------------
152,203
===========================================================================================
Total Corporate Bonds (cost--$2,635,765) 2,541,333
===========================================================================================
INTERNATIONAL GOVERNMENT OBLIGATION--0.07%
30 Pemex Project Funding Master Trust
(cost--$32,447) 11/15/11 8.000 31,710
===========================================================================================
NUMBER OF
SHARES
(000)
- -------------------------------------------------------------------------------------------
INVESTMENT COMPANIES--5.86%
46 UBS High Yield Relationship Fund (2)* 906,055
- -------------------------------------------------------------------------------------------
46 UBS U.S. Small Cap Equity
Relationship Fund (2)* 1,920,226
- -------------------------------------------------------------------------------------------
Total Investment Companies (cost--$2,328,049) 2,826,281
===========================================================================================
PRINCIPAL
AMOUNT
(000)
- -------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--3.16%
$1,524 Repurchase Agreement dated 06/30/06
with State Street Bank & Trust Co.,
collateralized by $1,562,320 US
Treasury Notes, 4.125% due 08/15/08;
(value--$1,554,508); proceeds:
$1,524,525 (cost--$1,524,000) 07/03/06 4.130 1,524,000
===========================================================================================
- --------------------------------------------------------------------------------
17
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
NUMBER OF
SHARES MATURITY INTEREST
(000) DATES RATES VALUE
===========================================================================================
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LOANED--0.24%
MONEY MARKET FUNDS+--0.08%
3 AIM Prime Portfolio 5.099% $3,189
- -------------------------------------------------------------------------------------------
35 UBS Private Money Market Fund LLC (2) 5.095 34,539
- -------------------------------------------------------------------------------------------
Total Money Market Funds (cost--$37,728) 37,728
===========================================================================================
PRINCIPAL
AMOUNT
(000)
===========================================================================================
REPURCHASE AGREEMENT--0.16%
$75 Repurchase Agreement dated 06/30/06
with Merrill Lynch & Co., collateralized
by $90,000 Federal Home Loan
Bank obligations, zero coupon
due 07/28/11; (value--$78,948);
proceeds: $75,033 (cost--$75,000) 07/03/06 5.200 75,000
===========================================================================================
Total Investments of Cash Collateral from
Securities Loaned (cost--$112,728) 112,728
===========================================================================================
Total Investments (cost--$45,331,475)--101.18% 48,777,052
- -------------------------------------------------------------------------------------------
Liabilities in excess of other assets--(1.18)% (567,329)
- -------------------------------------------------------------------------------------------
Net Assets--100.00% $48,209,723
===========================================================================================
* Non-income producing security.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities, which represent 1.34% of net assets as of June 30,
2006, are considered liquid and may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Interest rates shown reflect yield at June 30, 2006.
++ Floating rate security. The interest rate shown is the current rate as of
June 30, 2006.
(1) Security, or portion thereof, was on loan at June 30, 2006.
- --------------------------------------------------------------------------------
18
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS--JUNE 30, 2006 (UNAUDITED)
(2) The table below details the Portfolio's transaction activity in affiliated
issuers for the six months ended June 30, 2006.
INCOME
NET NET EARNED
SALES REALIZED UNREALIZED FROM
PURCHASES DURING GAINS GAIN (LOSS) AFFILIATE
DURING THE THE FOR THE FOR THE FOR THE
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
SECURITY VALUE AT ENDED ENDED ENDED ENDED VALUE AT ENDED
DESCRIPTION 12/31/05 06/30/06 06/30/06 06/30/06 06/30/06 06/30/06 06/30/06
==========================================================================================================================
UBS High Yield
Relationship
Fund $871,205 -- -- -- $34,850 $906,055 --
- --------------------------------------------------------------------------------------------------------------------------
UBS Private
Money Market
Fund LLC 412,733 $5,201,516 $5,579,710 -- -- 34,539 $53
- --------------------------------------------------------------------------------------------------------------------------
UBS U.S. Small
Cap Equity
Relationship
Fund 2,563,749 -- 750,000 $180,338 (73,861) 1,920,226 --
- --------------------------------------------------------------------------------------------------------------------------
ARM Adjustable Rate Mortgage. The interest rate shown is the current rate as
of June 30, 2006.
FNMA Federal National Mortgage Association
OEM Original Equipment Manufacturer
REMIC Real Estate Mortgage Investment Conduit
TBA (To Be Assigned) Securities are purchased on a forward commitment basis
with an approximate principal amount (generally +/- 1.0%) and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
ISSUER BREAKDOWN BY COUNTRY PERCENTAGE OF PORTFOLIO ASSETS
==================================================================================================
United States 97.4%
- --------------------------------------------------------------------------------------------------
Panama 1.0
- --------------------------------------------------------------------------------------------------
Cayman Islands 0.8
- --------------------------------------------------------------------------------------------------
Bermuda 0.5
- --------------------------------------------------------------------------------------------------
United Kingdom 0.3
- --------------------------------------------------------------------------------------------------
Total 100.0%
==================================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
19
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES--JUNE 30, 2006 (UNAUDITED)
ASSETS:
Investments in unaffiliated securities, at value (cost--$42,968,887)* $45,916,232
- -----------------------------------------------------------------------------------
Investments in affiliated securities, at value (cost--$2,362,588) 2,860,820
- -----------------------------------------------------------------------------------
Total investments in securities, at value (cost--$45,331,475) $48,777,052
- ---------------------------------------------------------------------------------------------------
Cash 83
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 794,800
- ---------------------------------------------------------------------------------------------------
Receivable for dividends and interest 155,573
- ---------------------------------------------------------------------------------------------------
Other assets 2,574
- ---------------------------------------------------------------------------------------------------
Total assets 49,730,082
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,264,646
- ---------------------------------------------------------------------------------------------------
Payable for cash collateral from securities loaned 112,728
- ---------------------------------------------------------------------------------------------------
Payable to affiliates 63,213
- ---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 79,772
- ---------------------------------------------------------------------------------------------------
Total liabilities 1,520,359
- ---------------------------------------------------------------------------------------------------
NET ASSETS:
Beneficial interest--$0.001 par value per share (unlimited
amount authorized) 74,099,106
- ---------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 122,502
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment activities (29,457,462)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,445,577
- ---------------------------------------------------------------------------------------------------
Net assets $48,209,723
- ---------------------------------------------------------------------------------------------------
CLASS H:
Net assets $15,268,571
- ---------------------------------------------------------------------------------------------------
Shares outstanding 1,093,976
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption value per share $13.96
- ---------------------------------------------------------------------------------------------------
CLASS I:
Net assets $32,941,152
- ---------------------------------------------------------------------------------------------------
Shares outstanding 2,360,998
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption value per share $13.95
===================================================================================================
* Includes $120,200 of investments in securities on loan, at value.
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
20
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
STATEMENT OF OPERATIONS
For the six
months ended
June 30, 2006
(unaudited)
- ---------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $396,591
- ---------------------------------------------------------------------------------------------
Dividends 259,964
- ---------------------------------------------------------------------------------------------
Securities lending income (includes $53 earned from an affiliated entity) 128
- ---------------------------------------------------------------------------------------------
656,683
- ---------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory and administration fees 125,541
- ---------------------------------------------------------------------------------------------
Professional fees 50,277
- ---------------------------------------------------------------------------------------------
Distribution fees-Class I 42,858
- ---------------------------------------------------------------------------------------------
Reports and notices to shareholders 14,501
- ---------------------------------------------------------------------------------------------
Custody and accounting fees 10,043
- ---------------------------------------------------------------------------------------------
Trustees' fees 4,684
- ---------------------------------------------------------------------------------------------
Transfer agency fees-Class H 744
- ---------------------------------------------------------------------------------------------
Transfer agency fees-Class I 744
- ---------------------------------------------------------------------------------------------
Other expenses 6,353
- ---------------------------------------------------------------------------------------------
255,745
- ---------------------------------------------------------------------------------------------
Net investment income 400,938
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from investments (includes $180,338 of net
realized gains from an affiliated entity) 992,957
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments (817,341)
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain from investment activities 175,616
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $576,554
=============================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
21
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six For the
months ended year ended
June 30, 2006 December 31,
(unaudited) 2005
- ----------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $400,938 $942,231
- ----------------------------------------------------------------------------------------------------
Net realized gains from:
- ----------------------------------------------------------------------------------------------------
Investments 992,957 2,419,589
- ----------------------------------------------------------------------------------------------------
Redemption-in-kind - 444,103
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments (817,341) 107,631
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 576,554 3,913,554
- ----------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income-Class H (437,847) (285,578)
- ----------------------------------------------------------------------------------------------------
Net investment income-Class I (832,466) (700,153)
- ----------------------------------------------------------------------------------------------------
(1,270,313) (985,731)
- ----------------------------------------------------------------------------------------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares 672,381 1,895,296
- ----------------------------------------------------------------------------------------------------
Cost of shares repurchased (5,907,223) (15,828,602)
- ----------------------------------------------------------------------------------------------------
Cost of shares redeemed in-kind - (12,832,521)
- ----------------------------------------------------------------------------------------------------
Proceeds from dividends reinvested 1,270,313 985,731
- ----------------------------------------------------------------------------------------------------
Net decrease in net assets from beneficial interest transactions (3,964,529) (25,780,096)
- ----------------------------------------------------------------------------------------------------
Net decrease in net assets (4,658,288) (22,852,273)
- ----------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 52,868,011 75,720,284
- ----------------------------------------------------------------------------------------------------
End of period $48,209,723 $52,868,011
- ----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income $122,502 $991,877
====================================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
22
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
UBS Series Trust--U.S. Allocation Portfolio (the "Portfolio") is a diversified
portfolio of UBS Series Trust (the "Trust"). The Trust is organized under
Massachusetts law pursuant to an Amended and Restated Declaration of Trust dated
February 11, 1998, as amended, and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Trust operates as a series company
currently offering one portfolio. Shares of the Portfolio are offered to
insurance company separate accounts which fund certain variable annuity and
variable life contracts.
Currently the Portfolio offers Class H and Class I shares. Each class represents
interests in the same assets of the Portfolio, and the classes are identical
except for the Class I distribution charge. Both classes have equal voting
privileges except that Class I has exclusive voting rights with respect to its
distribution plan. Class H has no distribution plan.
In the normal course of business the Portfolio may enter into contracts that
contain a variety of representations or that provide indemnification for certain
liabilities. The Portfolio's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the
Portfolio that have not yet occurred. However, the Portfolio has not had prior
claims or losses pursuant to these contracts and expects the risk of loss to be
remote.
The preparation of financial statements in accordance with US generally
accepted accounting principles requires the Trust's management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Portfolio calculates net asset values based on the
urrent market value for its portfolio securities. The Portfolio normally
obtains market values for its securities from independent pricing sources.
Independent pricing sources may use last reported sale prices, current market
quotations or valuations from computerized "matrix" systems that derive values
based on comparable securities. Securities 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
- --------------------------------------------------------------------------------
23
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
available prior to valuation. Securities which are listed on US and foreign
stock exchanges normally are valued at the last sale price on the day the
securities are valued or, lacking any sales on such day, at the last available
bid price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market by UBS
Global Asset Management (Americas) Inc. If a market value is not available from
an independent pricing source for a particular security, that security is valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees (the "Board"). Various factors may be reviewed in
order to make a good faith determination of a security's fair value. These
factors may include, but are not limited to, the type and cost of the security;
contractual or legal restrictions on resale of the security; relevant financial
or business developments of the issuer; the value of actively traded similar or
related securities; conversion or exchange rights on the security; related
corporate actions; and changes in overall market conditions. If events occur
that materially affect the value of securities (particularly non-US securities)
between the close of trading in those securities and the close of regular
trading on the New York Stock Exchange, these securities would be fair valued.
The amortized cost method of valuation, which approximates market value,
generally is used to value short-term debt-instruments with sixty days or less
remaining to maturity, unless the Board determines that this does not represent
fair value.
REPURCHASE AGREEMENTS--The Portfolio may purchase securities or other
obligations from a bank or securities dealer (or its affiliate), subject to the
seller's agreement to repurchase them at an agreed upon date (or upon demand)
and price. The Portfolio maintains custody of the underlying obligations prior
to their repurchase, either through its regular custodian or through a special
"tri-party" custodian or sub-custodian that maintains a separate account for
both the Portfolio and its counterparty. The underlying collateral is valued
daily to ensure that the value, including accrued interest, is at least equal to
the repurchase price. In the event of default of the obligation to repurchase,
the Portfolio generally has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Repurchase agreements involving
obligations other than US government securities (such as commercial paper,
corporate bonds and mortgage loans) may be subject to special risks and may not
have the benefit of certain protections in the event of counterparty insolvency.
If the seller (or seller's guarantor, if any) becomes insolvent, the Portfolio
may suffer delays, costs and possible losses in connection with the disposition
or retention of the collateral. Under certain circumstances, in the event of
- --------------------------------------------------------------------------------
24
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings. The Portfolio
may participate in joint repurchase agreement transactions with other funds
managed, advised or sub-advised by UBS Global AM.
INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES-- Investment
transactions are recorded on the trade date. Realized gains and losses from
investment transactions are calculated using the identified cost method.
Dividend income is recorded on the ex-dividend date ("ex-date"). 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-date. The amount of dividends and distributions is
determined in accordance with federal income tax regulations, which may differ
from US generally accepted accounting principles. 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.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Portfolio to meet
their obligations may be affected by economic developments; including those
particular to a specific industry, country or region.
INVESTMENT ADVISOR AND ADMINISTRATOR
UBS Global Asset Management (US) Inc. ("UBS Global AM--US") served as the
Portfolio's investment advisor and administrator until April 1, 2006. On April
1, 2006, the Portfolio's Investment Advisory and Administration Contract
("Advisory Contract") was transferred from
- --------------------------------------------------------------------------------
25
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UBS Global AM--US to UBS Global Asset Management (Americas) Inc. ("UBS Global
AM--Americas").
The transfer of the Advisory Contract between sister companies occurred in
connection with an internal reorganization involving UBS Global AM--US and UBS
Global AM--Americas. The Portfolio's Board of Trustees approved the transfer of
the Advisory Contract effective April 1, 2006. All of the personnel of UBS
Global AM--US who previously provided investment advisory services to the
Portfolio continue to provide investment advisory services to the Portfolio as
employees of UBS Global AM--Americas. UBS Global AM--Americas has the same
contractual rights and responsibilities under the Advisory Contract as those
previously held by UBS Global AM--US. UBS Global AM--US and UBS Global
AM--Americas are both indirect wholly owned subsidiaries of UBS AG.
In accordance with the Advisory Contract, the Portfolio paid UBS Global
AM--Americas (or UBS Global AM--US for periods prior to April 1, 2006) an
investment advisory and administration fee, which was accrued daily and paid
monthly, at an annual rate of 0.50% of the Portfolio's average daily net
assets. At June 30, 2006, the Portfolio owed UBS Global AM--Americas $19,748 for
investment advisory and administration fees.
For the six months ended June 30, 2006, the Portfolio paid $704 in brokerage
commissions to UBS Financial Services Inc., an indirect wholly owned subsidiary
of UBS AG for transactions executed on behalf of the Portfolio.
ADDITIONAL INFORMATION REGARDING COMPENSATION TO AFFILIATE OF A BOARD MEMBER
Effective March 1, 2005, Professor Meyer Feldberg accepted the position of
senior advisor to Morgan Stanley, resulting in him becoming an interested
trustee of the Portfolio. The Portfolio has been informed that Professor
Feldberg's role at Morgan Stanley does not involve matters directly affecting
any UBS funds. Portfolio transactions are executed through Morgan Stanley based
on that firm's ability to provide best execution of the transactions. During
the six months ended June 30, 2006, the Portfolio paid brokerage commissions to
Morgan Stanley in the amount of $343. During the six months ended June 30, 2006,
the Portfolio purchased and sold certain securities (e.g., fixed income
securities) in principal trades with Morgan Stanley having an aggregate value of
$5,413,050. Morgan Stanley received compensation in connection with these
trades, which may have been in
- --------------------------------------------------------------------------------
26
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
the form of a "mark-up" or "mark-down" of the price of the securities, a fee
from the issuer for maintaining a commercial paper program, or some other form
of compensation. Although the precise amount of this compensation is not
generally known by UBS Global AM--Americas (or UBS Global AM--US for periods
prior to April 1, 2006), UBS Global AM--Americas (or UBS Global AM--US for
periods prior to April 1, 2006) believes that under normal circumstances it
represents a small portion of the total value of the transactions.
DISTRIBUTION PLAN
Class I shares are offered to insurance company separate accounts where the
related insurance companies receive payments for their services in connection
with the distribution of the Portfolio's Class I shares. Under the plan of
distribution, the Portfolio pays to UBS Global AM--US for remittance to each
participating insurance company or, at UBS Global AM--US's direction, pays
directly to a participating insurance company, a monthly distribution fee at the
annual rate of 0.25% of the average daily net assets of the Class I shares held
by the separate accounts of that participating insurance company. At June 30,
2006, the Portfolio owed UBS Global AM--US $43,465 for distribution fees.
SECURITIES LENDING
The Portfolio may lend securities up to 331/3% of its total assets to qualified
broker-dealers or institutional investors. The loans are secured at all times by
cash, US government securities or irrevocable letters of credit in an amount at
least equal to the market value of the securities loaned, plus accrued interest
and dividends, determined on a daily basis and adjusted accordingly. The
Portfolio will regain ownership of loaned securities to exercise certain
beneficial rights; however, the Portfolio may bear the risk of delay in recovery
of, or even loss of rights in, the securities loaned should the borrower fail
financially. The Portfolio receives compensation for lending its securities from
interest or dividends earned on the cash, US government securities or
irrevocable letters of credit held as collateral, net of fee rebates paid to the
borrower plus reasonable administrative and custody fees. UBS Financial Services
Inc. and other affiliated broker-dealers have been approved as borrowers under
the Portfolio's securities lending program. UBS Securities LLC is the
Portfolio's lending agent. For the six months ended June 30, 2006, UBS
Securities LLC earned $121 in compensation as the Portfolio's lending agent. UBS
Securities LLC has voluntarily waived its compensation as the Portfolio's
lending agent for the month of June.
- --------------------------------------------------------------------------------
27
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
At June 30, 2006, the Portfolio had securities on loan having a market value of
$120,200. The Portfolio's custodian held cash equivalents as collateral for
securities loaned of $112,728. In addition, the Portfolio's custodian held US
government securities having an aggregate value of $15,482 as collateral for
portfolio securities loaned as follows:
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
=========================================================================================
$5 US Treasury Inflation Index Note 01/15/10 4.250% $6,461
- -----------------------------------------------------------------------------------------
9 US Treasury Inflation Index Note 07/15/13 1.875 9,021
=========================================================================================
$15,482
=========================================================================================
BANK LINE OF CREDIT
The Portfolio participates with other funds managed, advised or sub-advised by
UBS Global AM in a $100 million committed credit facility with State Street Bank
and Trust Company ("Committed Credit Facility"), to be utilized for temporary
financing until the settlement of sales or purchases of portfolio securities,
the repurchase or redemption of shares of the Portfolio at the request of
shareholders and other temporary or emergency purposes. Under the Committed
Credit Facility arrangement, the Portfolio has agreed to pay commitment fees,
pro rata, based on the relative asset size of the funds in the Committed Credit
Facility. Interest is charged to the Portfolio at the overnight federal funds
rate in effect at the time of borrowings, plus 0.50%. The Portfolio did not
borrow under the Committed Credit Facility during the six months ended June 30,
2006.
PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2006, aggregate purchases and sales of
portfolio securities, excluding short-term securities and US government and
agency securities, were $6,269,285 and $9,298,629, respectively. For the six
months ended June 30, 2006, aggregate purchases and sales of US government and
agency securities, excluding short-term securities were $13,189,927 and
$13,519,462 respectively.
FEDERAL TAX STATUS
The Portfolio intends to distribute substantially all of its income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, net realized
- --------------------------------------------------------------------------------
28
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
capital gains and certain other amounts, if any, the Portfolio intends not to be
subject to a federal excise tax.
The tax character of distributions paid by the Portfolio during the fiscal year
ended December 31, 2005 was as follows:
DISTRIBUTIONS PAID FROM:
- ----------------------------------------------------------------------------------
Ordinary income $985,731
==================================================================================
The tax character of distributions paid and the components of accumulated
earnings (deficit) on a tax basis for the current fiscal year will be determined
after the Portfolio's fiscal year ending December 31, 2006.
At December 31, 2005, the Portfolio had a net capital loss carryforward of
$29,184,709. This loss carryforward is available as a reduction, to the extent
provided in the regulations, of any future net realized capital gains and will
expire as follows: $11,508,634 will expire December 31, 2010, $7,434,714 will
expire December 31, 2011 and $10,241,361 will expire December 31, 2012. To the
extent that such losses are used to offset future net realized capital gains, it
is probable these gains will not be distributed. Also, in accordance with US
Treasury regulations, the Portfolio has elected to defer realized capital losses
of $154,182 arising after October 31, 2005. Such losses are treated for tax
purposes as arising on January 1, 2006.
For federal income tax purposes, which was substantially the same for book
purposes, the tax cost of investments and the components of net unrealized
appreciation of investments at June 30, 2006 were as follows:
<TABLE
Tax cost of investments $45,331,475
==================================================================================
Gross appreciation (investments having an excess of value over cost) 4,703,172
- ----------------------------------------------------------------------------------
Gross depreciation (investments having an excess of cost over value) (1,257,595)
==================================================================================
Net unrealized appreciation of investments $3,445,577
==================================================================================
- --------------------------------------------------------------------------------
29
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
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 were as follows:
CLASS H CLASS I
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2006: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------
Shares sold 20,650 $289,246 27,518 $383,135
- -------------------------------------------------------------------------------------------
Shares repurchased (130,900) (1,866,265) (282,901) (4,040,958)
- -------------------------------------------------------------------------------------------
Dividends reinvested 30,704 437,847 58,378 832,466
- -------------------------------------------------------------------------------------------
Net decrease (79,546) $(1,139,172) (197,005) $(2,825,357)
===========================================================================================
YEAR ENDED
DECEMBER 31, 2005:
===========================================================================================
Shares sold 5,458 $73,471 136,532 $1,821,825
- -------------------------------------------------------------------------------------------
Shares repurchased (267,993) (3,633,632) (1,839,239) (25,027,491)*
- -------------------------------------------------------------------------------------------
Dividends reinvested 21,767 285,578 53,406 700,153
- -------------------------------------------------------------------------------------------
Net decrease (240,768) $(3,274,583) (1,649,301) $(22,505,513)
===========================================================================================
* Includes $12,832,521 redeemed-in-kind on September 23, 2005.
- --------------------------------------------------------------------------------
30
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- --------------------------------------------------------------------------------
31
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
CLASS H
------------------------------------------------------------------------------------
For the six
months ended For the years ended December 31,
June 30, 2006 -------------------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
====================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $14.19 $13.50 $12.31 $9.77 $12.73 $15.83
- --------------------------------------------------------------------------------------------------------------------
Net investment income 0.12@ 0.22@ 0.17@ 0.11@ 0.10@ 0.08
- --------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains
(losses) from
investment activities 0.05 0.68 1.14 2.55 (2.97) (2.02)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 0.17 0.90 1.31 2.66 (2.87) (1.94)
- --------------------------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.40) (0.21) (0.12) (0.12) (0.09) (0.33)
- --------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gains from
investment activities -- -- -- -- -- (0.83)
- --------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions to
shareholders (0.40) (0.21) (0.12) (0.12) (0.09) (1.16)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $13.96 $14.19 $13.50 $12.31 $9.77 $12.73
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT
RETURN(1) 1.14% 6.79% 10.68% 27.62% (22.68)% (12.39)%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's) $15,269 $16,656 $19,088 $20,949 $19,743 $32,607
- --------------------------------------------------------------------------------------------------------------------
Expenses to average
net assets 0.85%* 0.83% 0.80% 0.77% 0.66% 0.67%
- --------------------------------------------------------------------------------------------------------------------
Net investment income to
average net assets 1.77%* 1.60% 1.39% 1.03% 0.91% 0.67%
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover 40% 77% 136% 5% 5% 10%
====================================================================================================================
* Annualized.
@ Calculated using average month-end shares outstanding for the period.
1 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 additional contract level charges; results would be
lower if they were included. Total investment return for the period of less
than one year has not been annualized.
- --------------------------------------------------------------------------------
32
Class I
- -------------------------------------------------------------------------------
For the six
months ended For the years ended December 31,
June 30, 2006 --------------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
===============================================================================
$14.16 $13.46 $12.28 $9.73 $12.69 $15.78
- -------------------------------------------------------------------------------
0.11@ 0.18@ 0.14@ 0.08@ 0.07@ 0.04
- -------------------------------------------------------------------------------
0.03 0.69 1.13 2.56 (2.97) (2.00)
- -------------------------------------------------------------------------------
0.14 0.87 1.27 2.64 (2.90) (1.96)
- -------------------------------------------------------------------------------
(0.35) (0.17) (0.09) (0.09) (0.06) (0.30)
- -------------------------------------------------------------------------------
-- -- -- -- -- (0.83)
- -------------------------------------------------------------------------------
(0.35) (0.17) (0.09) (0.09) (0.06) (1.13)
- -------------------------------------------------------------------------------
$13.95 $14.16 $13.46 $12.28 $9.73 $12.69
- -------------------------------------------------------------------------------
0.94% 6.60% 10.38% 27.37% (22.95)% (12.55)%
- -------------------------------------------------------------------------------
$32,941 $36,212 $56,632 $59,124 $50,270 $85,825
- -------------------------------------------------------------------------------
1.10%* 1.07% 1.05% 1.02% 0.91% 0.92%
- -------------------------------------------------------------------------------
1.52%* 1.35% 1.15% 0.78% 0.66% 0.42%
- -------------------------------------------------------------------------------
40% 77% 136% 5% 5% 10%
===============================================================================
- --------------------------------------------------------------------------------
33
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
GENERAL INFORMATION (UNAUDITED)
PROXY VOTING POLICIES, PROCEDURES AND RECORD You may obtain a description of the
Portfolio's (1) proxy voting policies, (2) proxy voting procedures and (3)
information regarding how the Portfolio voted any proxies related to portfolio
securities during the 12-month period ended June 30, 2005, without charge, upon
request by contacting the Portfolio directly at 1-800-647 1568, online on the
Portfolio's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on
the SEC's Web site (http://www.sec.gov).
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
The Portfolio will file its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Portfolio's Forms N-Q are available on the
SEC's Web site at http://www.sec.gov. The Portfolio's Forms N-Q may be reviewed
and copied at the SEC's Public Reference Room in Washington, D.C. Information on
the operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the
Portfolio upon request by calling 1-800-647 1568.
- --------------------------------------------------------------------------------
34
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
BOARD APPROVAL OF INVESTMENT ADVISORY AND
ADMINISTRATION CONTRACT (UNAUDITED)
BACKGROUND--At a meeting of the board of UBS Series Trust (the "Trust") on
February 8, 2006, the members of the board, including the board members who are
not "interested persons" of the Trust ("Independent Trustees"), as defined in
the Investment Company Act of 1940, as amended, considered and approved the
transfer of the current Investment Advisory and Administration Contract between
the Trust, with respect to U.S. Allocation Portfolio (the "Fund"), a series of
the Trust, and UBS Global Asset Management (US) Inc. ("UBS Global AM") to UBS
Global Asset Management (Americas) Inc. ("UBS Global Americas"), an affiliate of
UBS Global AM. The board received information and materials about the proposed
transfer both at its November 2005 meeting and at its February 2006 meeting. In
considering the approval of the transfer of the Investment Advisory and
Administration Contract (such transfer referred to as the "New Investment
Advisory and Administration Contract"), the board reviewed a memorandum from UBS
Global AM explaining the reasons for the proposed transfer, including that the
transfer would result in management efficiencies and eliminate the duplication
of functions that had resulted from having two registered investment advisors,
UBS Global AM and UBS Global Americas, providing investment advisory services to
the UBS funds. The board also reviewed material provided by UBS Global AM on UBS
Global Americas, including that the current portfolio managers for the Fund
would not change as a result of the transfer from UBS Global AM to UBS Global
Americas. The board also noted management's explanation that any expenses
resulting from the transfer would be borne by UBS Global AM, and not the Fund.
The board also received and reviewed a draft of an opinion to be provided by
Dechert LLP, counsel to the Fund, that the proposed transfer would not be
considered an "assignment" of the existing investment advisory contract under
the Investment Company Act of 1940, as amended, because (1) there would be no
change of actual control of the investment advisor to the Fund; (2) there would
be no change of management of the investment advisor to the Fund; (3) the
nature, quality and extent of the investment advisory services provided by UBS
Global AM under the current Investment Advisory and Administration Contract
would not change as a result of the transfer; (4) the transfer would not result
in any change in the fundamental investment processes, investment strategies or
investment techniques currently employed by UBS Global AM portfolio managers or
other investment professionals in providing services to the Fund; and (5) there
would be no change to any of the material terms of the Investment
- --------------------------------------------------------------------------------
35
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
BOARD APPROVAL OF INVESTMENT ADVISORY AND
ADMINISTRATION CONTRACT (UNAUDITED)
Advisory and Administration Contract as a result of the transfer. The board took
note of its knowledge of UBS Global AM and its affiliates, including UBS Global
Americas, and the current Investment Advisory and Administration Contract for
the Fund, including the extensive materials it had reviewed at its annual
contract renewal meeting in the summer of 2005 for the Fund, and noted that it
had at that time received a memorandum from its independent legal counsel
discussing, among other things, the duties of board members in considering
approval of advisory and administration agreements.
In its consideration of the approval of the New Investment Advisory and
Administration Contract, the board considered the following factors:
NATURE, EXTENT AND QUALITY OF THE SERVICES UNDER THE NEW INVESTMENT ADVISORY
AND ADMINISTRATION CONTRACT--The board took note that at its last annual
contract renewal meeting for the Fund, in connection with its review of the
Fund's advisory and distribution agreements, it had received and considered
extensive information regarding the nature, extent and quality of management
services generally provided to the Fund by UBS Global AM under the Investment
Advisory and Administration Contract, and a description of the administrative
and other services rendered to the Fund and its shareholders by UBS Global AM
and UBS Global AM's role in coordinating providers of other services to the
Fund, including custody, accounting and transfer agency services. The board
considered management's explanation that UBS Global Americas would provide
identical services under the New Investment Advisory and Administration Contact
as were provided by UBS Global AM under the current Investment Advisory and
Administration Contract. The board's evaluation of the services to be provided
by UBS Global Americas to the Fund took into account the board's knowledge and
familiarity gained as board members of funds in the UBS New York fund complex,
including the scope and quality of investment management and other capabilities
and the quality of administrative and other services, and considered that based
on the materials presented to them these services would remain the same. The
board also considered, based on its knowledge of UBS Global AM and UBS Global
Americas, the financial resources available to UBS Global Americas and its
parent organization, UBS AG, one of the leading financial services companies in
the world.
- --------------------------------------------------------------------------------
36
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT (UNAUDITED)
The board concluded that, overall, it was satisfied with the nature, extent and
quality of services expected to be provided to the Fund under the New Investment
Advisory and Administration Contract.
MANAGEMENT FEES--The board noted that the current contractual management fee for
the Fund under the current Investment Advisory and Administration Contract was
not proposed to be changed under the New Investment Advisory and Administration
Contract. The board also considered that at its most recent annual contract
renewal meeting during the summer of 2005 it had received and reviewed
information on the contractual management fee payable by the Fund to UBS Global
AM, including information on management fees paid by comparable funds. The board
recognized that the current fee arrangements would not change as a result of the
transfer.
Taking all of the above into consideration, the board determined that the
proposed contractual management fee was reasonable in light of the nature,
extent and quality of the services proposed to be provided to the Fund under the
New Investment Advisory and Administration Contract.
FUND PERFORMANCE--The board took into consideration the reports on Fund
performance received by the board at each meeting and the more extensive review
and discussion of Fund performance at its most recent annual contract renewal
meeting. The board also noted that the transfer would not result in any change
in the fundamental investment processes, investment strategies or investment
techniques of the Fund and that no changes in the current Fund personnel
overseeing Fund management were proposed or anticipated as a result of the
transfer.
Based on its prior review and the more updated performance information provided,
the board concluded that the Fund's investment performance was satisfactory.
ADVISOR PROFITABILITY--As UBS Global Americas would be a new advisor to the
Fund, profitability of UBS Global Americas in providing services to the Fund was
not a primary factor considered by the board. The board did note that at its
most recent annual contract renewal meeting it received and considered a
profitability analysis of UBS Global AM and its affiliates in providing services
to the Fund and had determined at that time that
- --------------------------------------------------------------------------------
37
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT (UNAUDITED)
UBS Global AM's profitability was considered not excessive in light of the
nature, extent and quality of the services provided to the Fund. The board also
recognized that the management fee would not change as a result of the transfer
and the services provided to the Fund by UBS Global Americas would be identical
to those currently provided by UBS Global AM, making the profitability data
received at its last contract renewal meeting still of some relevance. UBS
Global AM also noted management's explanation that a significant benefit of the
transfer of the Investment Advisory and Administration Contract to UBS Global
Americas was to reduce a regulatory capital requirement imposed on UBS Global
AM, which was expected to permit the eventual transfer of certain financial
assets owned by UBS Global AM to satisfy regulatory requirements to other parts
of UBS AG for other corporate purposes.
ECONOMIES OF SCALE--The board noted that it had previously considered whether
economies of scale in the provision of services to the Fund would be passed
along to the shareholders during its most recent consideration of the annual
renewal of the Investment Advisory and Administration Contract and did not see
the need to reconsider this factor again in the context of the transfer of the
agreement to a sister investment advisor.
OTHER BENEFITS TO UBS GLOBAL AMERICAS--The board considered other benefits
received by UBS Global Americas and its affiliates as a result of its proposed
relationship with the Fund, including the potential opportunity to offer
additional products and services to Fund shareholders. The board also considered
the benefits to be realized when certain assets of UBS Global AM were freed from
certain regulatory requirements and were available to be paid as a dividend from
one part of UBS AG to another part of UBS AG for such purposes as UBS AG deemed
appropriate.
In light of the costs of providing investment management, administrative and
other services to the Fund and UBS Global America's expected ongoing commitment
to the Fund, the profits and other ancillary benefits that UBS Global Americas
and its affiliates received or would receive were considered reasonable.
In light of all of the foregoing, the board approved the New Investment
Advisory and Administration Contract for the Fund.
- --------------------------------------------------------------------------------
38
UBS SERIES TRUST--U.S. ALLOCATION PORTFOLIO
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION CONTRACT (UNAUDITED)
No single factor reviewed by the board was identified by the board as the
principal factor in determining whether to approve the New Investment Advisory
and Administration Contract. The Independent Trustees were advised by separate
independent legal counsel throughout the process. The board discussed the
proposed approval of the New Investment Advisory and Administration Contract in
a private session with their independent legal counsel at which no
representatives of UBS Global AM or UBS Global Americas were present.
- --------------------------------------------------------------------------------
39
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- --------------------------------------------------------------------------------
40
TRUSTEES
Richard Q. Armstrong Meyer Feldberg
Chairman
Bernard H. Garil
David J. Beaubien Heather R. Higgins
Alan S. Bernikow
Richard R. Burt
PRINCIPAL OFFICERS
W. Douglas Beck Thomas Disbrow
President Vice President and Treasurer
Mark F. Kemper Brian D. Singer
Vice President and Secretary Vice President
INVESTMENT ADVISOR AND ADMINISTRATOR
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New York 10019-6114
PRINCIPAL UNDERWRITER (CLASS I SHARES)
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, New York 10019-6114
The financial information included herein is taken from the records of the
Portfolio without examination by independent auditors who do not express an
opinion thereon.
This report is not to be used in connection with the offering of shares of the
Portfolio unless accompanied or preceded by an effective prospectus.
(C) 2006 UBS Global Asset Management (Americas) Inc. All rights reserved.
[LOGO OF UBS] UBS
UBS GLOBAL ASSET MANAGEMENT
51 West 52nd Street
New York, New York 10019-6114
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.
- --------------------------------
Included as part of the report to shareholders filed under Item 1 of this form.
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 registrant's Board has established a Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee will consider
nominees recommended by shareholders if a vacancy occurs among those board
members who are not "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended. In order to recommend a nominee, a
shareholder should send a letter to the chairperson of the Nominating and
Corporate Governance Committee, Richard R. Burt, care of the Secretary of the
registrant at UBS Global Asset Management (Americas) Inc., 51 West 52nd Street,
New York, New York 10019-6114, and indicate on the envelope "Nominating and
Corporate Governance Committee." The shareholder's letter should state the
nominee's name and should include the nominee's resume or curriculum vitae, and
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 (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940, as amended) that occurred during the
registrant's last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
- ------------------
(a) (1) Code of Ethics - 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.
(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.
UBS Series Trust
By: /s/ W. Douglas Beck
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W. Douglas Beck
President
Date: September 8, 2006
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ W. Douglas Beck
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W. Douglas Beck
President
Date: September 8, 2006
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By: /s/ Thomas Disbrow
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Thomas Disbrow
Vice President and Treasurer
Date: September 8, 2006
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