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: 811-06292
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UBS Investment 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
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: August 31
Date of reporting period: August 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
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[LOGO OF UBS] UBS Global Asset
Management
UBS U.S. ALLOCATION FUND
ANNUAL REPORT
AUGUST 31, 2006
UBS U.S. ALLOCATION FUND
October 16, 2006
DEAR SHAREHOLDER,
We present you with the annual report for UBS U.S. Allocation Fund (the "Fund")
for the fiscal year ended August 31, 2006.
PERFORMANCE
Over the fiscal year ended August 31, 2006, the Fund's Class A shares returned
6.84% before deducting the maximum sales charge (after deducting maximum sales
charges, the return was 0.98%). During the same period, the S&P 500 Index
returned 8.88% and the U.S. Allocation Fund Index* (the "Index") returned 6.46%.
(Returns for all share classes over various time periods are shown in
"Performance at a glance" on page 6; please note that the returns shown do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.)
UBS U.S. ALLOCATION FUND
INVESTMENT GOAL:
Total return, consisting of long-term capital appreciation and current income.
PORTFOLIO MANAGERS:
Portfolio Management Team, including Brian D. Singer, CFA UBS Global Asset
Management (Americas) Inc.
COMMENCEMENT:
Class A--May 10, 1993
Class B--January 30, 1996
Class C--July 22, 1992
Class Y--May 10, 1993
DIVIDEND PAYMENTS:
Annually, if any.
AN INTERVIEW WITH LEAD PORTFOLIO MANAGER BRIAN D. SINGER
Q. WHAT WAS THE ECONOMIC ENVIRONMENT DURING THE FUND'S REPORTING PERIOD?
A. Economic signals during the past fiscal year were quite mixed and, in
certain areas, almost contradictory. Throughout the fiscal year, gross
domestic product (GDP), unemployment and consumer confidence figures, despite
being somewhat volatile, all showed signs of improvement. On the other hand,
oil prices climbed significantly higher in the wake of a record-breaking 2005
hurricane season and inflation increasingly became an issue of concern.
Throughout the year, equity market returns were quite solid, as investors
seemed to focus primarily on the good economic news being reported.
* An unmanaged index compiled by the advisor, constructed as follows: from July
22, 1992 (the Fund'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;
and 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 U.S. ALLOCATION FUND
International stocks continued to outperform US equities, while fixed
income markets in aggregate generally remained fairly benign.
Q. HOW DID THE FEDERAL RESERVE BOARD (THE "FED") REACT IN THIS ECONOMIC
ENVIRONMENT?
A. The Fed continued its tightening policy throughout the majority of the
reporting period, raising short-term interest rates seven times before
pausing during its August meeting. After the reporting period ended, the
Fed again opted to leave rates unchanged during its September meeting.
Although short-term interest rates have been held steady recently, the Fed
indicated that future rate changes will be "data dependent," and has not
ruled out the possibility of future tightening in the months ahead.
Q. HOW DID YOU ALLOCATE THE PORTFOLIO OVER THE REPORTING PERIOD?
A. The most significant divergence from the Index's allocations, from an asset
class perspective, was within cash equivalents. At the beginning of the
reporting period, we held a sizable overweight to cash and cash equivalents,
as we believed equities to be fairly valued, while investment-grade and high
yield bonds appeared overvalued. We trimmed our cash position throughout the
year, however, bringing the portfolio's asset class weightings more in line
with those of the benchmark.
In looking at the fixed income side of the portfolio, we found it necessary
to position the portfolio defensively in a rising interest rate environment.
Opportunities within high yield bonds were not abundant, and the portfolio
maintained a weighting that was less than that of the benchmark throughout
the period.
We did find certain sectors of the fixed-income market attractive, however,
and focused on mortgage- and asset-backed securities when possible. Overall,
the Fund's fixed income weightings over the course of the fiscal year were
approximately 27% to US investment grade bonds and 2% to high yield bonds,
compared with 30% and 5% for the Index, respectively.
The portfolio's positions in equities remained in line with the Index's
exposure. As corporate earnings in the US rose, stock market prices generally
kept pace, meaning we didn't encounter any significant top-down opportunities
in the asset class. Security selection within equities was solid, and
represented the main driver of the Fund's outperformance of the Index during
the reporting period.
Q. WHAT WERE SOME OF THE TRENDS THAT DROVE STOCK PRICES HIGHER DURING THE
REPORTING PERIOD?
A. Investors generally were willing to concentrate on the more positive economic
data that emerged during the reporting period, and stocks
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2
UBS U.S. ALLOCATION FUND
across market capitalizations and styles posted solid returns. Broadly
speaking, investors seemed to have a significant appetite for risk, as
evidenced by the strong performance of international and emerging markets
equities. Domestically, that translated into strong returns for smaller
company stocks and stocks with above-average volatility.
Q. WHAT PARTICULAR AREAS OF THE STOCK MARKET DID YOU FIND COMPELLING?
A. Our security selection process is driven by bottom-up analysis. As always,
we seek to allocate assets to what we believe are attractively valued
securities representing the risks we feel are most likely to be compensated.
In terms of industry exposure, we maintained overweights to banks,
pharmaceuticals and biotechnology, and software during the reporting period.
Our proprietary research suggests meaningful changes are afoot in the large
cap pharmaceutical competitive landscape, such as generic challenges to
blockbuster drug patents and increasing FDA safety pressures. The 2006
Medicare prescription drug benefit program rollout will likely create both
significant price pressure and opportunities, and we have attempted to
position the portfolio to capitalize on those potential opportunities.
We also maintained an overweight to the telecom industry, where consolidation
continues with increasing integration of wireless and wire-line capabilities.
While we believe it has been overhyped recently, we think voice-over-Internet
protocol (VOIP) will gain mainstream acceptance over the next few years.
The Fund's underweights to the energy and, to a lesser extent, the materials
sector negatively impacted performance. We find both to be significantly
overvalued, and view current oil and commodity prices to be unsustainably
high. As a result, we continue to underweight the energy reserves sector and
the entire materials industry, with the exception of construction and real
property.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE FUND OVER THE COMING MONTHS?
A. We believe the US economy is better positioned than recent headlines suggest.
Our analysis indicates that gross domestic product may slip from its recent
above-average growth rate to a more normal, trend-like range. Inflation,
while an issue of some concern, is not likely to send the economy into a
tailspin. Current short-term interest rates appear neutral, rather than
restrictive, and more opportunities are beginning to emerge in the fixed
income markets. That said, we believe the vast majority of market
opportunities are bottom-up in nature, and with markets appearing fairly
valued, we believe this dynamic may continue to be the case over the near
term. Our intensive security selection process,
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3
UBS U.S. ALLOCATION FUND
within both equity and fixed income asset classes, should help position
the portfolio to benefit during such a market environment.
We thank you for your continued support and welcome any comments or questions
you may have. For additional information on the UBS family of funds,* please
contact your financial advisor, or visit us at www.ubs.com/globalam-us.
Sincerely,
/s/ Kai R. Sotorp
Kai R. Sotorp
President
UBS U.S. Allocation Fund
Head of the Americas
UBS Global Asset Management (Americas) Inc.
/s/ Brian D. Singer
Brian D. Singer, CFA
Lead Portfolio Manager
UBS U.S. Allocation Fund
Americas Chief Investment Officer
UBS Global Asset Management (Americas) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended August 31, 2006. The views and opinions
in the letter were current as of October 16, 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.
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 U.S. ALLOCATION FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CLASS C SHARES OF
THE UBS U.S. ALLOCATION FUND, THE S&P 500* INDEX AND US ALLOCATION FUND INDEX**
FROM AUGUST 31, 1996 THROUGH AUGUST 31, 2006 (UNAUDITED)
[CHART OF COMPARISON]
US ALLOCATION UBS U.S. ALLOCATION
S&P 500 INDEX FUND INDEX FUND CLASS C
08/31/96 $10,000 $10,000 $10,000
09/30/96 $10,563 $10,563 $10,546
10/31/96 $10,854 $10,854 $10,825
11/30/96 $11,675 $11,675 $11,625
12/31/96 $11,443 $11,443 $11,378
01/31/97 $12,158 $12,158 $12,069
02/28/97 $12,254 $12,254 $12,138
03/31/97 $11,750 $11,750 $11,621
04/30/97 $12,452 $12,452 $12,306
05/31/97 $13,210 $13,210 $13,035
06/30/97 $13,801 $13,801 $13,602
07/31/97 $14,900 $14,900 $14,668
08/31/97 $14,065 $14,065 $13,820
09/30/97 $14,835 $14,835 $14,555
10/31/97 $14,340 $14,340 $14,044
11/30/97 $15,004 $15,004 $14,674
12/31/97 $15,261 $15,261 $14,905
01/31/98 $15,430 $15,430 $15,056
02/28/98 $16,543 $16,543 $16,117
03/31/98 $17,390 $17,390 $16,920
04/30/98 $17,565 $17,565 $17,020
05/31/98 $17,263 $17,263 $16,794
06/30/98 $17,964 $17,964 $17,441
07/31/98 $17,773 $17,773 $17,234
08/31/98 $15,203 $15,203 $14,717
09/30/98 $16,177 $16,177 $15,640
10/31/98 $17,493 $17,493 $16,889
11/30/98 $18,553 $18,553 $17,893
12/31/98 $19,622 $19,622 $18,896
01/31/99 $20,443 $20,443 $19,652
02/28/99 $19,807 $19,807 $19,012
03/31/99 $20,600 $20,600 $19,749
04/30/99 $21,398 $21,398 $20,492
05/31/99 $20,892 $20,892 $19,979
06/30/99 $22,052 $22,052 $21,056
07/31/99 $21,363 $21,363 $20,377
08/31/99 $21,258 $21,258 $20,248
09/30/99 $20,675 $20,675 $19,665
10/31/99 $21,983 $21,983 $20,883
11/30/99 $22,430 $22,430 $21,280
12/31/99 $23,752 $23,752 $22,227
01/31/00 $22,558 $22,558 $21,605
02/29/00 $22,131 $22,131 $21,429
03/31/00 $24,296 $24,296 $22,489
04/30/00 $23,566 $23,566 $22,168
05/31/00 $23,082 $23,082 $21,965
06/30/00 $23,651 $23,651 $22,246
07/31/00 $23,281 $23,281 $21,965
08/31/00 $24,728 $24,727 $22,992
09/30/00 $23,422 $23,422 $22,430
10/31/00 $23,323 $23,323 $22,403
11/30/00 $21,484 $21,484 $21,559
12/31/00 $21,590 $21,590 $21,574
01/31/01 $22,356 $22,356 $22,331
02/28/01 $20,317 $20,317 $20,264
03/31/01 $19,030 $19,030 $18,954
04/30/01 $20,509 $20,509 $20,402
05/31/01 $20,646 $20,646 $20,512
06/30/01 $20,144 $20,144 $19,988
07/31/01 $19,946 $19,946 $19,762
08/31/01 $18,697 $18,697 $18,503
09/30/01 $17,187 $17,187 $16,981
10/31/01 $17,515 $17,515 $17,280
11/30/01 $18,858 $18,858 $18,583
12/31/01 $19,024 $19,024 $18,720
01/31/02 $18,746 $18,746 $18,427
02/28/02 $18,385 $18,385 $18,046
03/31/02 $19,076 $19,076 $18,698
04/30/02 $17,919 $17,919 $17,534
05/31/02 $17,787 $17,787 $17,380
06/30/02 $16,520 $16,520 $16,122
07/31/02 $15,233 $15,233 $14,834
08/31/02 $15,333 $15,333 $14,914
09/30/02 $13,667 $13,667 $13,275
10/31/02 $14,869 $14,869 $14,424
11/30/02 $15,745 $15,745 $15,251
12/31/02 $14,820 $14,820 $14,329
01/31/03 $14,431 $14,431 $13,934
02/28/03 $14,215 $14,215 $13,707
03/31/03 $14,353 $14,353 $13,824
04/30/03 $15,535 $15,535 $14,936
05/31/03 $16,354 $16,354 $15,705
06/30/03 $16,562 $16,562 $15,888
07/31/03 $16,854 $16,854 $16,144
08/31/03 $17,183 $17,183 $16,436
09/30/03 $17,001 $17,001 $16,239
10/31/03 $17,962 $17,962 $17,132
11/30/03 $18,120 $18,120 $17,256
12/31/03 $19,071 $19,071 $18,129
01/31/04 $19,421 $19,421 $18,437
02/29/04 $19,691 $19,691 $18,664
03/31/04 $19,394 $19,590 $18,518
04/30/04 $19,089 $19,167 $18,254
05/31/04 $19,351 $19,309 $18,298
06/30/04 $19,727 $19,606 $18,606
07/31/04 $19,074 $19,195 $18,173
08/31/04 $19,152 $19,374 $18,466
09/30/04 $19,359 $19,597 $18,686
10/31/04 $19,655 $19,874 $19,001
11/30/04 $20,450 $20,437 $19,514
12/31/04 $21,146 $20,982 $20,124
01/31/05 $20,631 $20,657 $19,842
02/28/05 $21,065 $20,931 $19,983
03/31/05 $20,692 $20,640 $19,828
04/30/05 $20,299 $20,422 $19,643
05/31/05 $20,945 $21,010 $20,035
06/30/05 $20,975 $21,158 $20,353
07/31/05 $21,755 $21,679 $20,760
08/31/05 $21,556 $21,633 $20,686
09/30/05 $21,731 $21,679 $20,767
10/31/05 $21,369 $21,355 $20,664
11/30/05 $22,177 $21,932 $21,138
12/31/05 $22,185 $22,018 $21,288
01/31/06 $22,772 $22,509 $21,625
02/28/06 $22,834 $22,568 $21,708
03/31/06 $23,118 $22,760 $21,813
04/30/06 $23,428 $22,915 $21,865
05/31/06 $22,754 $22,429 $21,355
06/30/06 $22,785 $22,463 $21,415
07/31/06 $22,926 $22,551 $21,663
08/31/06 $23,471 $23,030 $21,932
[END CHART]
The graph depicts the performance of UBS U.S. Allocation Fund Class C shares
versus the S&P 500 Index and UBS US Allocation Fund Index over the 10 years
ended August 31, 2006. The performance of the other share classes will vary from
the performance of the class shown based on the difference in sales charges and
fees paid by shareholders investing in different share classes. Past performance
does not predict future performance and the performance provided does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. Performance results assume
reinvestment of all dividend and capital gain distributions at net asset value
on ex-dividend dates. It is important to note that the Fund is a professionally
managed portfolio, while the Indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
* The S&P 500 Index is an unmanaged, weighted index comprising 500 widely held
common stocks varying in composition and is not available for direct
investment.
** An unmanaged index compiled by the advisor, constructed as follows: from
July 22, 1992 (the Fund'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, and 5% Merrill Lynch US High Yield Cash
Pay Index; and from June 1, 2005 until present: 65% Russell 3000 Index, 30%
Lehman Brothers Aggregate Bond Index, and 5% Merrill Lynch US High Yield Cash
Pay Constrained Index.
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5
UBS U.S. ALLOCATION FUND
PERFORMANCE AT A GLANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 08/31/06
1 YEAR 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------
Class A* 6.84% 4.23% 8.99%
--------------------------------------------------
Before deducting maximum sales charge Class B** 5.99 3.43 8.49
--------------------------------------------------
Class C*** 6.02 3.46 8.17
--------------------------------------------------
Class Y**** 7.22 4.58 9.32
================================================================================================
Class A* 0.98 3.06 8.37
--------------------------------------------------
After deducting maximum sales charge Class B** 0.99 3.08 8.49
--------------------------------------------------
Class C*** 5.02 3.46 8.17
================================================================================================
S&P 500 Index+ 8.88 4.65 8.91
- ------------------------------------------------------------------------------------------------
U.S. Allocation Fund Index++ 6.46 4.26 8.70
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Lipper Flexible Portfolio Funds median+++ 6.74 5.65 7.99
================================================================================================
For most recent quarter-end performance, please refer to the "Average Annual
Total Returns" table on page 7.
* Maximum sales charge for Class A shares is 5.5%. Class A shares bear
ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% imposed
on redemptions and is reduced to 0% after a maximum of six years. Class B
shares bear ongoing 12b-1 service and distribution fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% imposed
on redemptions and is reduced to 0% after one year. Class C shares bear
ongoing 12b-1 service and distribution fees.
**** The Fund offers Class Y shares to a limited group of eligible investors,
including certain qualifying retirement plans. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing 12b-1 service and
distribution fees.
+ The S&P 500 Index is an unmanaged, weighted index comprising 500 widely
held common stocks varying in composition and is not available for direct
investment.
++ An unmanaged index compiled by the advisor, constructed as follows: from
July 22, 1992 (the Fund'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, and 5% Merrill Lynch US High Yield
Cash Pay Index; and from June 1, 2005 until present: 65% Russell 3000
Index, 30% Lehman Brothers Aggregate Bond Index, and 5% Merrill Lynch US
High Yield Cash Pay Constrained Index.
+++ Lipper peer group data calculated by Lipper Inc; used with permission. The
Lipper median is the return of the fund that places in the middle of a
Lipper peer group.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE, AND THE PERFORMANCE
INFORMATION PROVIDED DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. THE RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE
RESULTS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS AT
NET ASSET VALUE ON THE EX-DIVIDEND DATES. CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-END PERFORMANCE FIGURES,
PLEASE VISIT HTTP://WWW.UBS.COM.
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6
UBS U.S. ALLOCATION FUND
PERFORMANCE AT A GLANCE (UNAUDITED) (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 09/30/06
1 YEAR 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------
Class A* 8.63% 6.47% 8.63%
--------------------------------------------------
Before deducting maximum sales charge Class B** 7.78% 5.65% 8.14%
--------------------------------------------------
Class C*** 7.85% 5.69% 7.82%
--------------------------------------------------
Class Y**** 9.02% 6.84% 8.97%
================================================================================================
Class A* 2.67% 5.27% 8.02%
--------------------------------------------------
After deducting maximum sales charge Class B** 2.78% 5.33% 8.14%
--------------------------------------------------
Class C*** 6.85% 5.69% 7.82%
================================================================================================
* Maximum sales charge for Class A shares is 5.5%. Class A shares bear
ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% imposed
on redemptions and is reduced to 0% after a maximum of six years. Class B
shares bear ongoing 12b-1 service and distribution fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% imposed
on redemptions and is reduced to 0% after one year. Class C shares bear
ongoing 12b-1 service and distribution fees.
**** The Fund offers Class Y shares to a limited group of eligible investors,
including certain qualifying retirement plans. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing 12b-1 service and
distribution fees.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE, AND THE PERFORMANCE
INFORMATION PROVIDED DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. THE RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE
RESULTS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS AT
NET ASSET VALUE ON THE EX-DIVIDEND DATES. CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-END PERFORMANCE FIGURES,
PLEASE VISIT HTTP://WWW.UBS.COM.
- --------------------------------------------------------------------------------
7
UBS U.S. ALLOCATION FUND
UNDERSTANDING YOUR FUND'S EXPENSES (UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transactional
costs (as applicable), including sales charges (loads); and (2) ongoing costs,
including management fees; service and/or distribution (12b-1) fees (if
applicable); and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example below is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period, March 1, 2006 to August 31, 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 Fund's
actual expense ratios for each class of shares and an assumed rate of return of
5% per year before expenses, which is not the Fund's actual return for each
class of shares. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing Fund costs only and do not reflect any transactional costs (as
applicable), such as sales charges (loads). Therefore, the second line in the
table for each class of shares is useful in comparing ongoing Fund 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.
- --------------------------------------------------------------------------------
8
UBS U.S. ALLOCATION FUND
UNDERSTANDING YOUR FUND'S EXPENSES (UNAUDITED) (CONCLUDED)
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
MARCH 1, 2006 AUGUST 31, 2006 03/01/06 TO 08/31/06
- -------------------------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,014.20 $4.62
- -------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return
before expenses) 1,000.00 1,020.62 4.63
=================================================================================================
Class B Actual 1,000.00 1,010.40 8.51
- -------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return
before expenses) 1,000.00 1,016.74 8.54
=================================================================================================
Class C Actual 1,000.00 1,010.30 8.31
- -------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return
before expenses) 1,000.00 1,016.94 8.34
=================================================================================================
Class Y Actual 1,000.00 1,016.10 2.79
- -------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return
before expenses) 1,000.00 1,022.43 2.80
=================================================================================================
* Expenses are equal to the Fund's annualized net expense ratios: Class A:
0.91%, Class B: 1.68%, Class C: 1.64% and Class Y: 0.55%, multiplied by the
average account value over the period, multiplied by 184 divided by 365 (to
reflect the one-half year period).
- --------------------------------------------------------------------------------
9
UBS U.S. ALLOCATION FUND
PORTFOLIO STATISTICS (UNAUDITED)
CHARACTERISTICS 08/31/06 02/28/06 08/31/05
- -----------------------------------------------------------------------------------------------------
Net Assets (mm) $892.6 $991.8 $1,068.70
- -----------------------------------------------------------------------------------------------------
Number of Securities 491 486 484
- -----------------------------------------------------------------------------------------------------
PORTFOLIO COMPOSITION* 08/31/06 02/28/06 08/31/05
- -----------------------------------------------------------------------------------------------------
Stocks 66.1% 64.8% 64.0%
- -----------------------------------------------------------------------------------------------------
Bonds 31.8 29.6 26.7
- -----------------------------------------------------------------------------------------------------
Cash equivalents and
other assets less
liabilities 2.1 5.6 9.3
- -----------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
=====================================================================================================
TOP FIVE EQUITY
SECTORS* 08/31/06 02/28/06 08/31/05
- -----------------------------------------------------------------------------------------------------
Financials 17.2% 16.4% 14.7%
- -----------------------------------------------------------------------------------------------------
Health Care 11.9 12.0 12.7
- -----------------------------------------------------------------------------------------------------
Information Technology 9.2 9.9 7.1
- -----------------------------------------------------------------------------------------------------
Consumer Discretionary 9.1 8.1 9.3
- -----------------------------------------------------------------------------------------------------
Industrials 6.5 7.5 6.9
- -----------------------------------------------------------------------------------------------------
Total 53.9% 53.9% 50.7%
=====================================================================================================
TOP TEN EQUITY
SECURITIES* 08/31/06 02/28/06 08/31/05
- -----------------------------------------------------------------------------------------------------
Citigroup 2.9% Citigroup 2.6% Citigroup 2.5%
- -----------------------------------------------------------------------------------------------------
Microsoft 2.4 Microsoft 2.3 Johnson & Johnson 2.2
- -----------------------------------------------------------------------------------------------------
Morgan Stanley 2.3 Wyeth 2.1 Microsoft 2.1
- -----------------------------------------------------------------------------------------------------
Wyeth 2.1 Morgan Stanley 2.0 Sprint Nextel 2.1
- -----------------------------------------------------------------------------------------------------
Wells Fargo 2.1 Wells Fargo 1.8 Wells Fargo 1.8
- -----------------------------------------------------------------------------------------------------
Exelon 1.8 Sprint Nextel 1.8 UnitedHealth Group 1.8
- -----------------------------------------------------------------------------------------------------
Allergan 1.6 Exelon 1.7 Exelon 1.6
- -----------------------------------------------------------------------------------------------------
American
UnitedHealth Group 1.6 International Group 1.5 Morgan Stanley 1.6
- -----------------------------------------------------------------------------------------------------
American
International Group 1.5 J.P. Morgan Chase 1.5 Allergan 1.4
- -----------------------------------------------------------------------------------------------------
Johnson & Johnson 1.5 UnitedHealth Group 1.5 J.P. Morgan Chase 1.3
- -----------------------------------------------------------------------------------------------------
Total 19.8% 18.8% 18.4%
=====================================================================================================
* Weightings represent percentages of the Fund's net assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
- --------------------------------------------------------------------------------
10
UBS U.S. ALLOCATION FUND
PORTFOLIO STATISTICS (UNAUDITED) (CONTINUED)
FIXED INCOME
SECTOR ALLOCATION* 08/31/06 02/28/06 08/31/05
- -----------------------------------------------------------------------------------------------------
Mortgage & agency debt securities 13.1% 13.2% 11.7%
- -----------------------------------------------------------------------------------------------------
Corporate bonds 7.4 7.0 5.9
- -----------------------------------------------------------------------------------------------------
US government obligations 5.9 5.8 4.6
- -----------------------------------------------------------------------------------------------------
Commercial mortgage-backed
securities 3.3 2.1 2.4
- -----------------------------------------------------------------------------------------------------
Asset-backed securities 2.1 1.5 1.7
- -----------------------------------------------------------------------------------------------------
International government
obligations 0.0+ 0.0+ 0.1
- -----------------------------------------------------------------------------------------------------
Municipal bonds and notes - - 0.3
- -----------------------------------------------------------------------------------------------------
Total 31.8% 29.6% 26.7%
=====================================================================================================
* Weightings represent percentages of the Fund's net assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
+ Weightings represent less than 0.05% of the Fund's net assets as of the date
indicated.
- --------------------------------------------------------------------------------
11
UBS U.S. ALLOCATION FUND
PORTFOLIO STATISTICS (UNAUDITED) (CONCLUDED)
TOP TEN FIXED
INCOME SECURITIES* 08/31/06 02/28/06 08/31/05
- -------------------------------------------------------------------------------------------------------------
US Treasury FNMA Certificates, US Treasury
Notes, 3.875% 5.000% maturity Notes, 3.625%
due 02/15/13 0.9% to be assigned 1.8% due 04/30/07 1.3%
- -------------------------------------------------------------------------------------------------------------
US Treasury US Treasury US Treasury Inflation
Bonds, 8.500% Bonds, 8.750% Index Notes, 2.000%
due 02/15/20 0.9 due 05/15/17 1.4 due 01/15/14 1.2
- -------------------------------------------------------------------------------------------------------------
US Treasury US Treasury FNMA
Bonds, 8.750% Bonds, 8.500% Certificates, 5.500%
due 05/15/17 0.8 due 02/15/20 1.0 due 11/01/17 0.9
- -------------------------------------------------------------------------------------------------------------
US Treasury US Treasury FHLMC
Bonds, 8.875% Notes, 3.875% Certificates, 5.000%
due 02/15/19 0.8 due 02/15/13 0.9 due 01/30/14 0.8
- -------------------------------------------------------------------------------------------------------------
FNMA FNMA FNMA
Certificates, 5.500% Certificates, 5.500% REMIC, 6.000%
due 11/01/17 0.8 due 11/01/17 0.8 due 01/25/32 0.8
- -------------------------------------------------------------------------------------------------------------
US Treasury FNMA US Treasury
Notes, 4.875% REMIC, 6.000% Bonds, 8.750%
due 05/31/08 0.7 due 01/25/32 0.7 due 05/15/17 0.8
- -------------------------------------------------------------------------------------------------------------
FNMA US Treasury FNMA
Certificates, 4.625% Notes, 3.875% Certificates, 5.500%
due 06/01/10 0.7 due 05/15/09 0.6 due 09/01/17 0.6
- -------------------------------------------------------------------------------------------------------------
FNMA FNMA FNMA
REMIC, 6.000% Certificates, 4.625% Certificates, 6.500%
due 01/25/32 0.7 due 06/01/10 0.6 due 08/01/29 0.6
- -------------------------------------------------------------------------------------------------------------
Ford Motor FNMA FNMA
Credit Co., 5.800% Certificates, 5.500% REMIC, 4.544%
due 01/12/09 0.6 due 09/01/17 0.6 due 01/25/43 0.6
- -------------------------------------------------------------------------------------------------------------
FNMA FNMA FNMA
Certificates, 5.500% Certificates, 6.500% Certificates, 4.625%
due 09/01/17 0.6 due 08/01/29 0.6 due 06/01/10 0.6
- -------------------------------------------------------------------------------------------------------------
Total 7.5% 9.0% 8.2%
=============================================================================================================
* Weightings represent percentages of the Fund's net assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
- --------------------------------------------------------------------------------
12
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
COMMON STOCKS--66.09%
NUMBER OF
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.75%
Esterline Technologies Corp.(1)* 20,100 $704,103
- --------------------------------------------------------------------------------
Hexcel Corp* 20,200 303,404
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 76,500 5,110,965
- --------------------------------------------------------------------------------
Triumph Group, Inc. 13,808 607,000
- --------------------------------------------------------------------------------
6,725,472
================================================================================
AIR FREIGHT & COURIERS--0.93%
FedEx Corp. 82,600 8,345,078
================================================================================
AIRLINES--0.04%
AMR Corp.(1)* 15,700 324,205
================================================================================
AUTO COMPONENTS--1.69%
BorgWarner, Inc. 77,000 4,366,670
- --------------------------------------------------------------------------------
Johnson Controls, Inc. 149,200 10,731,956
- --------------------------------------------------------------------------------
15,098,626
================================================================================
AUTOMOBILES--0.62%
Harley-Davidson, Inc. 94,800 5,546,748
================================================================================
BANKS--5.97%
Boston Private Financial Holdings, Inc. 12,200 304,512
- --------------------------------------------------------------------------------
City National Corp. 24,400 1,605,520
- --------------------------------------------------------------------------------
Colonial BancGroup, Inc. 24,500 600,005
- --------------------------------------------------------------------------------
Cullen/Frost Bankers, Inc. 11,700 689,832
- --------------------------------------------------------------------------------
Fifth Third Bancorp 262,038 10,308,575
- --------------------------------------------------------------------------------
Mellon Financial Corp. 329,100 12,252,393
- --------------------------------------------------------------------------------
Placer Sierra Bancshares 21,900 520,344
- --------------------------------------------------------------------------------
PNC Financial Services Group 114,300 8,091,297
- --------------------------------------------------------------------------------
South Financial Group, Inc.(1) 11,600 313,548
- --------------------------------------------------------------------------------
Wells Fargo & Co. 535,600 18,612,100
- --------------------------------------------------------------------------------
53,298,126
================================================================================
BEVERAGES--0.51%
Anheuser-Busch Cos., Inc. 92,000 4,542,960
================================================================================
BIOTECHNOLOGY--1.34%
Connetics Corp.* 24,700 267,748
- --------------------------------------------------------------------------------
Genzyme Corp.* 138,700 9,186,101
- --------------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc.* 15,800 216,934
- --------------------------------------------------------------------------------
Millennium Pharmaceuticals, Inc.* 193,600 2,102,496
- --------------------------------------------------------------------------------
Telik, Inc.(1)* 10,600 188,998
- --------------------------------------------------------------------------------
11,962,277
================================================================================
BUILDING PRODUCTS--1.48%
American Woodmark Corp.(1) 14,800 466,644
- --------------------------------------------------------------------------------
ElkCorp 12,700 357,759
- --------------------------------------------------------------------------------
Masco Corp.(1) 425,100 11,651,991
- --------------------------------------------------------------------------------
Trex Co., Inc.(1)* 19,700 530,521
- --------------------------------------------------------------------------------
Watsco, Inc. 4,600 202,124
- --------------------------------------------------------------------------------
13,209,039
================================================================================
CHEMICALS--0.03%
Airgas, Inc. 8,700 311,634
================================================================================
COMMERCIAL SERVICES & SUPPLIES--0.60%
Bristow Group, Inc.* 11,000 410,410
- --------------------------------------------------------------------------------
Coinstar, Inc.* 23,100 606,375
- --------------------------------------------------------------------------------
H&R Block, Inc. 124,700 2,622,441
- --------------------------------------------------------------------------------
Heidrick & Struggles International, Inc.* 18,500 657,860
- --------------------------------------------------------------------------------
McGrath Rentcorp. 16,600 378,480
- --------------------------------------------------------------------------------
Universal Technical Institute, Inc.* 11,800 217,710
- --------------------------------------------------------------------------------
Valassis Communications, Inc.* 24,200 477,224
- --------------------------------------------------------------------------------
5,370,500
================================================================================
COMMUNICATIONS EQUIPMENT--0.22%
Black Box Corp. 11,300 435,502
- --------------------------------------------------------------------------------
Harris Corp. 20,900 917,928
- --------------------------------------------------------------------------------
InPhonic, Inc.(1)* 37,600 266,208
- --------------------------------------------------------------------------------
Powerwave Technologies, Inc.(1)* 40,200 304,716
- --------------------------------------------------------------------------------
1,924,354
================================================================================
- --------------------------------------------------------------------------------
13
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
COMMON STOCKS--(CONTINUED)
NUMBER OF
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.65%
Dell, Inc.* 255,700 $5,766,035
================================================================================
CONTAINERS & PACKAGING--0.08%
Caraustar Industries, Inc.* 35,000 264,950
- --------------------------------------------------------------------------------
Jarden Corp.(1)* 15,400 451,528
- --------------------------------------------------------------------------------
716,478
================================================================================
DIVERSIFIED FINANCIALS--7.78%
Apollo Investment Corp. 59,000 1,178,230
- --------------------------------------------------------------------------------
Citigroup, Inc. 516,286 25,478,714
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 136,100 8,655,960
- --------------------------------------------------------------------------------
J.P.Morgan Chase & Co. 251,200 11,469,792
- --------------------------------------------------------------------------------
Jackson Hewitt Tax Service, Inc. 23,100 729,960
- --------------------------------------------------------------------------------
Lazard Ltd., Class A(1) 22,700 854,655
- --------------------------------------------------------------------------------
Morgan Stanley 310,150 20,404,769
- --------------------------------------------------------------------------------
National Financial Partners Corp. 18,600 684,852
- --------------------------------------------------------------------------------
69,456,932
================================================================================
DIVERSIFIED TELECOMMUNICATION SERVICES--2.40%
AT&T, Inc. 261,100 8,128,043
- --------------------------------------------------------------------------------
Embarq Corp. 33,684 1,588,201
- --------------------------------------------------------------------------------
NeuStar, Inc., Class A* 12,200 344,284
- --------------------------------------------------------------------------------
Sprint Nextel Corp.(1) 673,794 11,400,594
- --------------------------------------------------------------------------------
21,461,122
================================================================================
ELECTRIC UTILITIES--2.88%
American Electric Power Co., Inc. 131,300 4,789,824
- --------------------------------------------------------------------------------
Exelon Corp.(1) 266,200 16,232,876
- --------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc.(1) 18,600 510,012
- --------------------------------------------------------------------------------
Northeast Utilities 68,200 1,555,642
- --------------------------------------------------------------------------------
Pepco Holdings, Inc. 102,600 2,605,014
- --------------------------------------------------------------------------------
25,693,368
================================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.74%
Methode Electronics, Inc. 3,800 30,172
- --------------------------------------------------------------------------------
Newport Corp.* 29,900 527,137
- --------------------------------------------------------------------------------
Park Electrochemical Corp. 17,600 459,360
- --------------------------------------------------------------------------------
Regal-Beloit Corp. 13,200 569,712
- --------------------------------------------------------------------------------
Waters Corp.* 117,100 4,994,315
- --------------------------------------------------------------------------------
6,580,696
================================================================================
ENERGY EQUIPMENT & SERVICES--1.78%
Baker Hughes, Inc. 6,100 434,198
- --------------------------------------------------------------------------------
Dawson Geophysical Co.* 2,500 68,325
- --------------------------------------------------------------------------------
ENSCO International, Inc. 116,100 5,188,509
- --------------------------------------------------------------------------------
GlobalSantaFe Corp. 113,100 5,566,782
- --------------------------------------------------------------------------------
Halliburton Co. 110,000 3,588,200
- --------------------------------------------------------------------------------
Oceaneering International, Inc.* 12,800 460,416
- --------------------------------------------------------------------------------
Oil States International, Inc.* 17,200 549,712
- --------------------------------------------------------------------------------
15,856,142
================================================================================
FOOD & DRUG RETAILING--1.36%
Kroger Co.(1) 277,600 6,609,656
- --------------------------------------------------------------------------------
Nash Finch Co.(1) 7,500 171,375
- --------------------------------------------------------------------------------
Sysco Corp. 172,100 5,402,219
- --------------------------------------------------------------------------------
12,183,250
================================================================================
GAS UTILITIES--1.06%
NiSource, Inc. 156,600 3,315,222
- --------------------------------------------------------------------------------
Sempra Energy 124,500 6,190,140
- --------------------------------------------------------------------------------
9,505,362
================================================================================
HEALTH CARE EQUIPMENT & SUPPLIES--0.84%
Cooper Cos., Inc. 15,622 780,788
- --------------------------------------------------------------------------------
I-Flow Corp.* 17,200 207,432
- --------------------------------------------------------------------------------
Medtronic, Inc. 132,800 6,228,320
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
COMMON STOCKS--(CONTINUED)
NUMBER OF
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--(CONCLUDED)
Syneron Medical Ltd.(1)* 10,300 $244,110
- --------------------------------------------------------------------------------
7,460,650
================================================================================
HEALTH CARE PROVIDERS & SERVICES--2.57%
Amedisys, Inc.(1)* 10,900 441,123
- --------------------------------------------------------------------------------
Caremark Rx, Inc. 100,800 5,840,352
- --------------------------------------------------------------------------------
Centene Corp.* 36,300 560,835
- --------------------------------------------------------------------------------
LifePoint Hospitals, Inc.(1)* 14,400 490,320
- --------------------------------------------------------------------------------
Matria Healthcare, Inc.(1)* 28,674 774,198
- --------------------------------------------------------------------------------
Molina Healthcare, Inc.* 11,800 437,072
- --------------------------------------------------------------------------------
Option Care, Inc.(1) 27,100 358,262
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 269,800 14,016,110
- --------------------------------------------------------------------------------
22,918,272
================================================================================
HOTELS, RESTAURANTS & LEISURE--1.27%
Carnival Corp.(1) 214,700 8,995,930
- --------------------------------------------------------------------------------
Red Robin Gourmet Burgers, Inc.(1)* 10,400 438,984
- --------------------------------------------------------------------------------
Vail Resorts, Inc.* 15,600 586,872
- --------------------------------------------------------------------------------
Wyndham Worldwide Corp.* 46,300 1,354,738
- --------------------------------------------------------------------------------
11,376,524
================================================================================
HOUSEHOLD DURABLES--0.15%
Lenox Group, Inc.* 19,200 109,056
- --------------------------------------------------------------------------------
Tempur-Pedic International, Inc.(1)* 41,000 658,050
- --------------------------------------------------------------------------------
Yankee Candle Co., Inc. 21,000 542,850
- --------------------------------------------------------------------------------
1,309,956
================================================================================
INSURANCE--2.95%
Allstate Corp. 102,900 5,962,026
- --------------------------------------------------------------------------------
American International Group, Inc. 207,700 13,255,414
- --------------------------------------------------------------------------------
AmerUs Group Co. 5,700 386,460
- --------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 71,000 6,096,060
- --------------------------------------------------------------------------------
Primus Guaranty, Ltd.(1)* 55,500 644,355
- --------------------------------------------------------------------------------
26,344,315
================================================================================
INTERNET SOFTWARE & SERVICES--0.15%
iPass, Inc.* 4,700 21,432
- --------------------------------------------------------------------------------
RightNow Technologies, Inc.(1)* 19,400 297,984
- --------------------------------------------------------------------------------
Tumbleweed Communications Corp.* 106,800 295,836
- --------------------------------------------------------------------------------
WebEx Communications, Inc.* 6,200 221,340
- --------------------------------------------------------------------------------
Websense, Inc.* 22,600 467,142
- --------------------------------------------------------------------------------
1,303,734
================================================================================
IT CONSULTING & SERVICES--0.50%
Accenture Ltd., Class A 150,100 4,451,966
================================================================================
LEISURE EQUIPMENT & PRODUCTS--0.07%
Nautilus, Inc.(1) 47,900 593,002
================================================================================
MACHINERY--1.37%
Briggs & Stratton Corp. 17,800 501,070
- --------------------------------------------------------------------------------
Dionex Corp.* 4,700 236,974
- --------------------------------------------------------------------------------
ESCO Technologies, Inc.* 9,500 484,880
- --------------------------------------------------------------------------------
Illinois Tool Works, Inc. 245,800 10,790,620
- --------------------------------------------------------------------------------
Insteel Industries, Inc. 9,400 195,896
- --------------------------------------------------------------------------------
12,209,440
================================================================================
MEDIA--3.53%
DIRECTV Group, Inc.(1)* 424,500 7,976,355
- --------------------------------------------------------------------------------
News Corp., Class A 226,400 4,308,392
- --------------------------------------------------------------------------------
Omnicom Group, Inc.(1) 138,300 12,090,186
- --------------------------------------------------------------------------------
R.H. Donnelley Corp.* 86,285 4,687,001
- --------------------------------------------------------------------------------
Saga Communications, Inc., Class A* 17,100 136,116
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
COMMON STOCKS--(CONTINUED)
NUMBER OF
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
MEDIA--(CONCLUDED)
Scholastic Corp.* 11,100 $333,666
- --------------------------------------------------------------------------------
Univision Communications, Inc., Class A* 56,600 1,956,096
- --------------------------------------------------------------------------------
31,487,812
================================================================================
METALS & MINING--0.10%
Alpha Natural Resources, Inc.* 12,900 233,877
- --------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 17,800 639,376
- --------------------------------------------------------------------------------
873,253
================================================================================
MULTI-LINE RETAIL--1.58%
Costco Wholesale Corp. 162,800 7,617,412
- --------------------------------------------------------------------------------
Kohl's Corp.(1)* 99,700 6,232,247
- --------------------------------------------------------------------------------
Tuesday Morning Corp.(1) 16,100 217,028
- --------------------------------------------------------------------------------
14,066,687
================================================================================
OIL & GAS--1.90%
EOG Resources, Inc. 79,000 5,120,780
- --------------------------------------------------------------------------------
Equitable Resources, Inc. 21,600 796,176
- --------------------------------------------------------------------------------
EXCO Resources, Inc.* 17,600 235,136
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 86,400 5,846,688
- --------------------------------------------------------------------------------
Marathon Oil Corp. 59,100 4,934,850
- --------------------------------------------------------------------------------
16,933,630
================================================================================
PERSONAL PRODUCTS--0.06%
Chattem, Inc.* 9,700 336,396
- --------------------------------------------------------------------------------
Nu Skin Enterprises, Inc.(1) 13,800 239,016
- --------------------------------------------------------------------------------
575,412
================================================================================
PHARMACEUTICALS--7.19%
Alkermes, Inc.* 19,200 313,920
- --------------------------------------------------------------------------------
Allergan, Inc. 122,700 14,056,512
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co.(1) 292,900 6,370,575
- --------------------------------------------------------------------------------
Cephalon, Inc.(1)* 53,100 3,027,762
- --------------------------------------------------------------------------------
Johnson & Johnson(1) 203,864 13,181,846
- --------------------------------------------------------------------------------
K-V Pharmaceutical Co., Class A* 18,000 401,940
- --------------------------------------------------------------------------------
Medco Health Solutions, Inc.* 126,400 8,009,968
- --------------------------------------------------------------------------------
Wyeth 386,500 18,822,550
- --------------------------------------------------------------------------------
64,185,073
================================================================================
REAL ESTATE--0.50%
American Financial Realty Trust 11,200 128,464
- --------------------------------------------------------------------------------
Capital Lease Funding, Inc. 46,900 536,067
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 4,900 387,443
- --------------------------------------------------------------------------------
LaSalle Hotel Properties 17,000 746,980
- --------------------------------------------------------------------------------
Parkway Properties, Inc. 6,000 294,120
- --------------------------------------------------------------------------------
RAIT Investment Trust 4,300 120,314
- --------------------------------------------------------------------------------
Realogy Corp.* 77,800 1,664,920
- --------------------------------------------------------------------------------
Taberna Realty Finance Trust(4)++ 11,410 123,228
- --------------------------------------------------------------------------------
Thornburg Mortgage, Inc.(1) 7,400 169,978
- --------------------------------------------------------------------------------
Trammell Crow Co.* 7,900 271,918
- --------------------------------------------------------------------------------
4,443,432
================================================================================
ROAD & RAIL--1.30%
Burlington Northern Santa Fe Corp. 154,300 10,330,385
- --------------------------------------------------------------------------------
Genesee & Wyoming, Inc., Class A* 20,650 513,978
- --------------------------------------------------------------------------------
Kansas City Southern* 10,700 281,945
- --------------------------------------------------------------------------------
Landstar System, Inc. 1,000 42,700
- --------------------------------------------------------------------------------
YRC Worldwide, Inc.* 13,100 481,818
- --------------------------------------------------------------------------------
11,650,826
================================================================================
SEMICONDUCTOR EQUIPMENT & PRODUCTS--2.25%
Analog Devices, Inc. 180,500 5,530,520
- --------------------------------------------------------------------------------
Intel Corp. 539,200 10,535,968
- --------------------------------------------------------------------------------
Xilinx, Inc. 173,900 3,977,093
- --------------------------------------------------------------------------------
20,043,581
================================================================================
- --------------------------------------------------------------------------------
16
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
COMMON STOCKS--(CONCLUDED)
NUMBER OF
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------------------------
SOFTWARE--4.74%
Innerworkings, Inc.* 11,400 $132,240
- --------------------------------------------------------------------------------
Microsoft Corp. 832,500 21,386,925
- --------------------------------------------------------------------------------
Oracle Corp.* 523,300 8,189,645
- --------------------------------------------------------------------------------
Reynolds & Reynolds Co., Class A 3,900 149,604
- --------------------------------------------------------------------------------
Salesforce.com, Inc.(1)* 105,800 3,647,984
- --------------------------------------------------------------------------------
Secure Computing Corp.* 35,800 227,330
- --------------------------------------------------------------------------------
Symantec Corp.* 428,273 7,983,009
- --------------------------------------------------------------------------------
VASCO Data Security International, Inc.(1)* 26,400 237,600
- --------------------------------------------------------------------------------
Witness Systems, Inc.* 21,100 342,875
- --------------------------------------------------------------------------------
42,297,212
================================================================================
SPECIALTY RETAIL--0.10%
Interline Brands, Inc.* 16,300 408,152
- --------------------------------------------------------------------------------
Movado Group, Inc. 20,756 466,802
- --------------------------------------------------------------------------------
United Rentals, Inc.* 2,900 61,929
- --------------------------------------------------------------------------------
936,883
================================================================================
TEXTILES & APPAREL--0.05%
True Religion Apparel, Inc.(1)* 23,900 485,170
================================================================================
WIRELESS TELECOMMUNICATIONS SERVICES--0.01%
@Road, Inc.* 14,000 66,220
- --------------------------------------------------------------------------------
Total common stocks (cost--$526,315,304) 589,891,454
================================================================================
- --------------------------------------------------------------------------------
17
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS--5.85%
$5,655 US Treasury Bonds(1) 05/15/17 8.750% $7,500,385
- --------------------------------------------------------------------------------------------------
5,160 US Treasury Bonds(1) 02/15/19 8.875 7,067,183
- --------------------------------------------------------------------------------------------------
5,940 US Treasury Bonds(1) 02/15/20 8.500 8,022,249
- --------------------------------------------------------------------------------------------------
1,940 US Treasury Bonds(1) 08/15/23 6.250 2,224,484
- --------------------------------------------------------------------------------------------------
1,205 US Treasury Bonds(1) 02/15/36 4.500 1,134,112
- --------------------------------------------------------------------------------------------------
4,752 US Treasury Inflation Index Notes 07/15/14 2.000 4,663,682
- --------------------------------------------------------------------------------------------------
1,355 US Treasury Notes 05/31/07 3.500 1,339,703
- --------------------------------------------------------------------------------------------------
2,030 US Treasury Notes(1) 02/29/08 4.625 2,022,704
- --------------------------------------------------------------------------------------------------
6,530 US Treasury Notes(1) 05/31/08 4.875 6,534,081
- --------------------------------------------------------------------------------------------------
895 US Treasury Notes 05/15/09 4.875 898,391
- --------------------------------------------------------------------------------------------------
1,665 US Treasury Notes(1) 04/30/11 4.875 1,676,512
- --------------------------------------------------------------------------------------------------
8,430 US Treasury Notes(1) 02/15/13 3.875 8,040,441
- --------------------------------------------------------------------------------------------------
1,120 US Treasury Notes 02/15/16 4.500 1,099,131
- --------------------------------------------------------------------------------------------------
Total US government obligations (cost--$51,634,036) 52,223,058
==================================================================================================
MORTGAGE & AGENCY DEBT SECURITIES--13.09%
2,745 Adjustable Rate Mortgage Trust,
Series 2006-1, Class 5A1 03/25/36 6.116 2,764,292
- --------------------------------------------------------------------------------------------------
1,000 Bear Stearns Alternative-A Trust,
Series 2006-4, Class 3B2 07/25/36 6.342[++] 999,979
- --------------------------------------------------------------------------------------------------
1,147 Countrywide Alternative Loan Trust,
Series 2005-J2, Class 2A1 04/25/35 7.500 1,153,039
- --------------------------------------------------------------------------------------------------
2,898 Countrywide Home Loans,
Series 2006-HYB1, Class 1A1 03/20/36 5.408[++] 2,883,085
- --------------------------------------------------------------------------------------------------
2,494 Credit Suisse First Boston Mortgage
Securities Corp., Series 2005-10,
Class 10A3 11/25/35 6.000 2,506,245
- --------------------------------------------------------------------------------------------------
2,175 Credit Suisse First Boston Mortgage
Securities Corp., Series 2005-11,
Class 1A1 12/25/35 6.500 2,192,720
- --------------------------------------------------------------------------------------------------
1,750 Federal Home Loan Bank Certificates 06/13/16 5.625 1,786,416
- --------------------------------------------------------------------------------------------------
1,750 Federal Home Loan Mortgage
Corporation Certificates 06/27/16 5.750 1,807,557
- --------------------------------------------------------------------------------------------------
21 Federal Home Loan Mortgage
Corporation Certificates 09/01/17 5.500 21,347
- --------------------------------------------------------------------------------------------------
31 Federal Home Loan Mortgage
Corporation Certificates 12/01/17 6.000 31,653
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
18
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
MORTGAGE & AGENCY DEBT SECURITIES--(CONTINUED)
$36 Federal Home Loan Mortgage
Corporation Certificates 01/01/18 5.500% $36,143
- --------------------------------------------------------------------------------------------------
31 Federal Home Loan Mortgage
Corporation Certificates 04/01/18 5.500 31,188
- --------------------------------------------------------------------------------------------------
1,620 Federal Home Loan Mortgage
Corporation Certificates 08/01/28 6.500 1,656,799
- --------------------------------------------------------------------------------------------------
24 Federal Home Loan Mortgage
Corporation Certificates 02/01/29 6.500 24,962
- --------------------------------------------------------------------------------------------------
22 Federal Home Loan Mortgage
Corporation Certificates 04/01/29 6.500 22,447
- --------------------------------------------------------------------------------------------------
10 Federal Home Loan Mortgage
Corporation Certificates 10/01/29 6.000 10,143
- --------------------------------------------------------------------------------------------------
7 Federal Home Loan Mortgage
Corporation Certificates 03/01/32 6.000 7,110
- --------------------------------------------------------------------------------------------------
52 Federal Home Loan Mortgage
Corporation Certificates 11/01/32 6.500 52,785
- --------------------------------------------------------------------------------------------------
2,438 Federal Home Loan Mortgage
Corporation Certificates 12/01/34 4.500 2,275,843
- --------------------------------------------------------------------------------------------------
2,965 Federal National Mortgage
Association Certificates 02/15/08 5.750 2,989,912
- --------------------------------------------------------------------------------------------------
2,890 Federal National Mortgage
Association Certificates 09/15/09 6.625 3,019,908
- --------------------------------------------------------------------------------------------------
6,420 Federal National Mortgage
Association Certificates 06/01/10 4.625 6,302,694
- --------------------------------------------------------------------------------------------------
2,710 Federal National Mortgage
Association Certificates 08/15/10 4.250 2,635,055
- --------------------------------------------------------------------------------------------------
3,525 Federal National Mortgage
Association Certificates 11/08/10 5.200 3,501,827
- --------------------------------------------------------------------------------------------------
2,930 Federal National Mortgage
Association Certificates 02/01/11 6.250 3,050,537
- --------------------------------------------------------------------------------------------------
4,180 Federal National Mortgage
Association Certificates 03/15/13 4.375 4,019,768
- --------------------------------------------------------------------------------------------------
1,943 Federal National Mortgage
Association Certificates 02/01/14 6.000 1,966,868
- --------------------------------------------------------------------------------------------------
1,945 Federal National Mortgage
Association Certificates 05/12/16 6.070 1,960,663
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
MORTGAGE & AGENCY DEBT SECURITIES--(CONTINUED)
$72 Federal National Mortgage
Association Certificates 03/01/17 6.500% $73,595
- --------------------------------------------------------------------------------------------------
14 Federal National Mortgage
Association Certificates 07/01/17 6.000 14,102
- --------------------------------------------------------------------------------------------------
5,642 Federal National Mortgage
Association Certificates 09/01/17 5.500 5,638,441
- --------------------------------------------------------------------------------------------------
6,967 Federal National Mortgage
Association Certificates 11/01/17 5.500 6,962,379
- --------------------------------------------------------------------------------------------------
4,149 Federal National Mortgage
Association Certificates 02/01/19 5.000 4,075,036
- --------------------------------------------------------------------------------------------------
4 Federal National Mortgage
Association Certificates 06/01/23 6.000 4,142
- --------------------------------------------------------------------------------------------------
2,510 Federal National Mortgage
Association Certificates 02/01/24 5.500 2,489,324
- --------------------------------------------------------------------------------------------------
16 Federal National Mortgage
Association Certificates 03/01/29 6.000 15,885
- --------------------------------------------------------------------------------------------------
39 Federal National Mortgage
Association Certificates 04/01/29 6.500 39,905
- --------------------------------------------------------------------------------------------------
4,933 Federal National Mortgage
Association Certificates 08/01/29 6.500 5,036,723
- --------------------------------------------------------------------------------------------------
2,341 Federal National Mortgage
Association Certificates 12/01/29 6.500 2,389,897
- --------------------------------------------------------------------------------------------------
15 Federal National Mortgage
Association Certificates 05/01/30 6.500 15,701
- --------------------------------------------------------------------------------------------------
2,633 Federal National Mortgage
Association Certificates 07/01/30 6.500 2,687,805
- --------------------------------------------------------------------------------------------------
3,386 Federal National Mortgage
Association Certificates 11/01/30 6.500 3,456,635
- --------------------------------------------------------------------------------------------------
10 Federal National Mortgage
Association Certificates 05/01/31 7.500 10,545
- --------------------------------------------------------------------------------------------------
17 Federal National Mortgage
Association Certificates 11/01/31 6.500 17,562
- --------------------------------------------------------------------------------------------------
1,539 Federal National Mortgage
Association Certificates 08/01/32 7.000 1,582,718
- --------------------------------------------------------------------------------------------------
24 Federal National Mortgage
Association Certificates 02/01/33 7.500 25,314
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
MORTGAGE & AGENCY DEBT SECURITIES--(CONTINUED)
$2,156 Federal National Mortgage
Association Certificates 05/01/33 5.500% $2,122,361
- --------------------------------------------------------------------------------------------------
3,537 Federal National Mortgage
Association Certificates 06/01/33 5.500 3,488,911
- --------------------------------------------------------------------------------------------------
16 Federal National Mortgage
Association Certificates 06/01/33 6.000 15,772
- --------------------------------------------------------------------------------------------------
2,056 Federal National Mortgage
Association Certificates 07/01/33 5.500 2,023,973
- --------------------------------------------------------------------------------------------------
74 Federal National Mortgage
Association Certificates 10/01/33 6.000 73,946
- --------------------------------------------------------------------------------------------------
56 FHLMC REMIC, Series 2148, Class ZA 04/15/29 6.000 55,971
- --------------------------------------------------------------------------------------------------
23 FHLMC REMIC, Series 2426, Class GH 08/15/30 6.000 22,768
- --------------------------------------------------------------------------------------------------
1,089 FHLMC REMIC, Series 2430, Class UC 09/15/16 6.000 1,097,157
- --------------------------------------------------------------------------------------------------
2,579 FHLMC REMIC, Series T-42, Class A5 02/25/42 7.500 2,672,167
- --------------------------------------------------------------------------------------------------
468 First Horizon Mortgage Pass-Through
Trust, Series 2004-FL1, Class 1A1 02/25/35 5.594[++] 467,863
- --------------------------------------------------------------------------------------------------
6,114 FNMA REMIC, Series 2002-53,
Class PD 01/25/32 6.000 6,237,220
- --------------------------------------------------------------------------------------------------
4,349 FNMA REMIC, Series 2004-W1,
Class 3A 01/25/43 5.220[++] 4,500,333
- --------------------------------------------------------------------------------------------------
10 Government National Mortgage
Association Certificates 04/15/26 7.000 10,157
- --------------------------------------------------------------------------------------------------
15 Government National Mortgage
Association Certificates 10/15/28 6.500 15,238
- --------------------------------------------------------------------------------------------------
4,011 Government National Mortgage
Association Certificates 07/15/29 6.000 4,058,991
- --------------------------------------------------------------------------------------------------
32 Government National Mortgage
Association Certificates 04/15/31 6.500 32,931
- --------------------------------------------------------------------------------------------------
7 Government National Mortgage
Association Certificates II 11/20/28 6.000 6,850
- --------------------------------------------------------------------------------------------------
15 Government National Mortgage
Association Certificates II 02/20/29 6.000 15,129
- --------------------------------------------------------------------------------------------------
3,528 Government National Mortgage
Association Certificates II 02/20/34 6.000 3,557,078
- --------------------------------------------------------------------------------------------------
608 GSMPS Mortgage Loan Trust,
Series 2001-2, Class A** 06/19/32 7.500 631,370
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
MORTGAGE & AGENCY DEBT SECURITIES--(CONCLUDED)
$515 Merrill Lynch Credit Corporation
Mortgage Investors, Inc.,
Series 2003-D, Class XA1(2)(4) 08/25/28 1.000% $3,402
- --------------------------------------------------------------------------------------------------
1,444 Salomon Brothers Mortgage
Securities VII, Series 2003-CDCA,
Class C** 02/15/15 5.880[++] 1,444,668
- --------------------------------------------------------------------------------------------------
Total mortgage & agency debt securities (cost--$118,676,949) 116,800,950
==================================================================================================
COMMERCIAL MORTGAGE-BACKED SECURITIES--3.29%
5,150 Asset Securitization Corp.,
Series 1995-MD4, Class A3 08/13/29 7.384 5,241,471
- --------------------------------------------------------------------------------------------------
330 Commercial Mortgage
Pass-Through Certificates,
Series 2001-FL5A, Class E** 11/15/13 6.830[++] 330,046
- --------------------------------------------------------------------------------------------------
880 Commercial Mortgage
Pass-Through Certificates,
Series 2001-FL5A, Class F** 11/15/13 6.086[++] 862,400
- --------------------------------------------------------------------------------------------------
840 First Union Lehman-Brothers
Commercial Mortgage,
Series 1997-C2, Class A3 11/18/29 6.650 846,307
- --------------------------------------------------------------------------------------------------
3,500 GS Mortgage Securities Corp. II,
Series 2006-CC1, Class A** 03/21/46 5.522[++] 3,451,516
- --------------------------------------------------------------------------------------------------
3,125 GS Mortgage Securities Corporation II,
Series 2006-RR2, Class A1** 06/23/46 5.816[++] 3,137,477
- --------------------------------------------------------------------------------------------------
1,300 Host Marriott Pool Trust,
Series 1999-HMTA, Class C** 08/03/15 7.730 1,382,144
- --------------------------------------------------------------------------------------------------
800 Host Marriott Pool Trust,
Series 1999-HMTA, Class D** 08/03/15 7.970 854,714
- --------------------------------------------------------------------------------------------------
800 Host Marriott Pool Trust,
Series 1999-HMTA, Class E** 08/03/15 8.070 856,094
- --------------------------------------------------------------------------------------------------
2,787 JP Morgan Alternative Loan Trust,
Series 2006-S1, Class 1A19 03/25/36 6.500 2,816,355
- --------------------------------------------------------------------------------------------------
3,651 JP Morgan Commercial Mortgage
Finance Corp., Series 1998-C6,
Class A3 01/15/30 6.613 3,685,854
- --------------------------------------------------------------------------------------------------
5 Lehman Brothers Commercial
Conduit Mortgage Trust,
Series 1999-C1, Class A1 06/15/31 6.410 5,049
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
22
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--(CONCLUDED)
$3,250 Lehman XS Trust, Series 2005-8,
Class 2A3 12/25/35 6.000%# $3,209,148
- --------------------------------------------------------------------------------------------------
1,967 Morgan Stanley Capital I,
Series 1997-ALIC, Class D 12/15/07 7.230 1,995,779
- --------------------------------------------------------------------------------------------------
5 Morgan Stanley Dean Witter Capital I,
Series 2000-LIF2, Class A1 10/15/33 6.960 4,813
- --------------------------------------------------------------------------------------------------
689 Nomura Asset Securities Corp.,
Series 1996-MD5, Class A4 04/13/39 8.193[++] 696,758
- --------------------------------------------------------------------------------------------------
Total commercial mortgage-backed securities (cost--$29,541,637) 29,375,925
==================================================================================================
ASSET-BACKED SECURITIES--2.14%
726 Conseco Finance Securitizations
Corp., Series 2000-2, Class A4 12/01/30 8.480 728,276
- --------------------------------------------------------------------------------------------------
4,957 Conseco Finance Securitizations
Corp., Series 2000-5, Class A5 02/01/32 7.700 4,945,394
- --------------------------------------------------------------------------------------------------
11 Countrywide Asset-Backed Certificates,
Series 2004-SD1, Class A1** 06/25/33 5.664[++] 11,009
- --------------------------------------------------------------------------------------------------
175 GSAMP Trust, Series 2006-S2,
Class B2** 01/25/36 7.000# 143,662
- --------------------------------------------------------------------------------------------------
300 GSAMP Trust, Series 2006-S5,
Class A2 09/25/36 5.658# 300,520
- --------------------------------------------------------------------------------------------------
2,000 Home Equity Mortgage Trust,
Series 2006-4, Class A2 11/25/36 5.730# 2,001,600
- --------------------------------------------------------------------------------------------------
1,400 Paragon Mortgages PLC, Series 7A,
Class B1A** 05/15/43 6.155[++] 1,402,316
- --------------------------------------------------------------------------------------------------
4,500 Permanent Financing PLC, Series 4,
Class 2C 06/10/42 6.020[++] 4,518,488
- --------------------------------------------------------------------------------------------------
660 Providian Gateway Master Trust,
Series 2004-AA, Class C** 03/15/11 6.230[++] 662,888
- --------------------------------------------------------------------------------------------------
770 Providian Gateway Master Trust,
Series 2004-AA, Class D** 03/15/11 7.180[++] 776,617
- --------------------------------------------------------------------------------------------------
3,000 Residential Asset Securitization Trust,
Series 2006-A2, Class A11 05/25/36 6.000 2,987,779
- --------------------------------------------------------------------------------------------------
645 Rutland Rated Investments,
Series DRYD-1A, Class A6F** 06/20/13 6.957 654,933
- --------------------------------------------------------------------------------------------------
Total asset-backed securities (cost--$19,059,456) 19,133,482
==================================================================================================
- --------------------------------------------------------------------------------
23
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--7.36%
AEROSPACE & DEFENSE--0.11%
$100 BE Aerospace, Inc., Series B 05/01/11 8.875% $104,250
- --------------------------------------------------------------------------------------------------
325 Boeing Capital Corp. 09/27/10 7.375 349,626
- --------------------------------------------------------------------------------------------------
300 Bombardier, Inc.** 05/01/14 6.300 267,000
- --------------------------------------------------------------------------------------------------
175 Lockheed Martin Corp.** 09/01/36 6.150 172,847
- --------------------------------------------------------------------------------------------------
125 Sequa Corp. 08/01/09 9.000 131,875
- --------------------------------------------------------------------------------------------------
1,025,598
==================================================================================================
AGRICULTURE--0.02%
150 American Rock Salt Co. LLC 03/15/14 9.500 153,750
==================================================================================================
APPAREL/TEXTILES--0.04%
75 Collins & Aikman Floorcovering,
Series B 02/15/10 9.750 73,688
- --------------------------------------------------------------------------------------------------
225 Levi Strauss & Co.** 12/15/12 12.250 252,000
- --------------------------------------------------------------------------------------------------
75 Rafaella Apparel Group** 06/15/11 11.250 72,375
- --------------------------------------------------------------------------------------------------
398,063
==================================================================================================
AUTOMOBILE OEM--0.98%
1,200 DaimlerChrysler N.A. Holding Corp. 06/04/08 4.050 1,169,929
- --------------------------------------------------------------------------------------------------
5,920 Ford Motor Credit Co. 01/12/09 5.800 5,671,094
- --------------------------------------------------------------------------------------------------
400 Ford Motor Credit Co. 10/28/09 7.375 392,324
- --------------------------------------------------------------------------------------------------
300 General Motors 01/15/11 7.200 268,875
- --------------------------------------------------------------------------------------------------
225 General Motors Acceptance Corp 03/02/11 7.250 224,486
- --------------------------------------------------------------------------------------------------
1,055 General Motors Acceptance Corp.(1) 09/15/11 6.875 1,039,047
- --------------------------------------------------------------------------------------------------
8,765,755
==================================================================================================
AUTOMOTIVE PARTS--0.05%
175 Arvinmeritor 09/15/15 8.125 161,875
- --------------------------------------------------------------------------------------------------
200 Cooper Standard Auto** 12/15/14 8.375 151,500
- --------------------------------------------------------------------------------------------------
125 Stanadyne Corp. 08/15/14 10.000 122,813
- --------------------------------------------------------------------------------------------------
436,188
==================================================================================================
BANKING-NON-US--0.08%
275 Abbey National PLC 10/26/29 7.950 341,665
- --------------------------------------------------------------------------------------------------
350 Royal Bank of Scotland Group PLC 03/31/10+++ 9.118 389,371
- --------------------------------------------------------------------------------------------------
731,036
==================================================================================================
- --------------------------------------------------------------------------------
24
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
BANKING-US--1.19%
$1,000 Bank of America Corp. 01/15/11 7.400% $1,079,166
- --------------------------------------------------------------------------------------------------
1,600 Citigroup, Inc. 08/27/12 5.625 1,619,786
- --------------------------------------------------------------------------------------------------
880 Citigroup, Inc. 09/15/14 5.000 851,427
- --------------------------------------------------------------------------------------------------
510 CS First Boston, Inc.(1) 01/15/12 6.500 534,974
- --------------------------------------------------------------------------------------------------
580 HSBC Bank USA 08/15/35 5.625 548,000
- --------------------------------------------------------------------------------------------------
1,000 J.P. Morgan Chase & Co. 02/01/11 6.750 1,054,438
- --------------------------------------------------------------------------------------------------
350 US Bank N.A. Minnesota 08/01/11 6.375 365,972
- --------------------------------------------------------------------------------------------------
775 Wachovia Bank N.A.(1) 08/18/10 7.800 841,424
- --------------------------------------------------------------------------------------------------
1,000 Washington Mutual, Inc. 01/15/07 5.625 1,000,516
- --------------------------------------------------------------------------------------------------
800 Washington Mutual Preferred Funding** 03/15/11+++ 6.534[++] 782,712
- --------------------------------------------------------------------------------------------------
1,250 Wells Fargo Bank N.A. 02/01/11 6.450 1,307,594
- --------------------------------------------------------------------------------------------------
655 Wells Fargo Bank N.A. 08/26/36 5.950 660,738
- --------------------------------------------------------------------------------------------------
10,646,747
==================================================================================================
BROADCAST--0.06%
125 CMP Susquehanna** 05/15/14 9.875 116,563
- --------------------------------------------------------------------------------------------------
295 News America, Inc. 12/15/34 6.200 275,657
- --------------------------------------------------------------------------------------------------
125 Nexstar Finance Holdings LLC, Inc. 04/01/13 11.375# 103,125
- --------------------------------------------------------------------------------------------------
100 Nexstar Finance, Inc. 01/15/14 7.000 89,500
- --------------------------------------------------------------------------------------------------
584,845
==================================================================================================
BROKERAGE--0.36%
1,525 Goldman Sachs Group, Inc.(1) 01/15/11 6.875 1,610,199
- --------------------------------------------------------------------------------------------------
1,550 Morgan Stanley 04/15/11 6.750 1,632,751
- --------------------------------------------------------------------------------------------------
3,242,950
==================================================================================================
BUILDING MATERIALS--0.03%
75 Ahern Rentals, Inc. 08/15/13 9.250 76,125
- --------------------------------------------------------------------------------------------------
100 Ainsworth Lumber 10/01/12 7.250 73,500
- --------------------------------------------------------------------------------------------------
100 Interface, Inc. 02/01/10 10.375 108,875
- --------------------------------------------------------------------------------------------------
258,500
==================================================================================================
BUSINESS SERVICES--0.02%
125 Da-Lite Screen Co., Inc. 05/15/11 9.500 131,250
- --------------------------------------------------------------------------------------------------
50 Sensata Technologies BV** 05/01/14 8.000 49,000
- --------------------------------------------------------------------------------------------------
180,250
==================================================================================================
- --------------------------------------------------------------------------------
25
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
CABLE--0.19%
$1,025 Comcast Cable Communications, Inc. 01/30/11 6.750% $1,071,837
- --------------------------------------------------------------------------------------------------
175 CSC Holdings, Inc., Series B 07/15/09 8.125 180,906
- --------------------------------------------------------------------------------------------------
150 Insight Communications, Inc. 02/15/11 12.250# 159,375
- --------------------------------------------------------------------------------------------------
150 Mediacom Broadband LLC 01/15/13 9.500 154,125
- --------------------------------------------------------------------------------------------------
100 Quebecor Media 03/15/16 7.750 99,000
- --------------------------------------------------------------------------------------------------
1,665,243
==================================================================================================
CHEMICALS--0.20%
100 Chemtura Corp. 06/01/16 6.875 96,750
- --------------------------------------------------------------------------------------------------
150 Hercules, Inc. 06/30/29 6.500 118,875
- --------------------------------------------------------------------------------------------------
400 ICI Wilmington, Inc. 12/01/08 4.375 390,052
- --------------------------------------------------------------------------------------------------
150 Ineos Group Holdings PLC** 02/15/16 8.500 142,500
- --------------------------------------------------------------------------------------------------
200 Montell Finance Co. BV** 03/15/27 8.100 185,500
- --------------------------------------------------------------------------------------------------
150 Omnova Solutions, Inc. 06/01/10 11.250 159,000
- --------------------------------------------------------------------------------------------------
150 Polyone Corp. 05/15/10 10.625 160,875
- --------------------------------------------------------------------------------------------------
195 Rhodia SA 06/01/10 10.250 214,013
- --------------------------------------------------------------------------------------------------
64 Rockwood Specialties Group, Inc. 05/15/11 10.625 68,640
- --------------------------------------------------------------------------------------------------
200 Terra Capital, Inc. 10/15/08 12.875 223,500
- --------------------------------------------------------------------------------------------------
1,759,705
==================================================================================================
COMMERCIAL SERVICES--0.02%
200 Technical Olympic USA, Inc. 01/15/15 7.500 158,750
==================================================================================================
COMMERCIAL SERVICES & SUPPLIES--0.02%
200 Xerox Capital Trust I 02/01/27 8.000 205,250
==================================================================================================
CONSUMER PRODUCTS--0.09%
560 Fortune Brands, Inc. 01/15/16 5.375 532,859
- --------------------------------------------------------------------------------------------------
125 Gregg Appliances, Inc. 02/01/13 9.000 112,813
- --------------------------------------------------------------------------------------------------
150 Prestige Brands, Inc. 04/15/12 9.250 149,250
- --------------------------------------------------------------------------------------------------
794,922
==================================================================================================
CONSUMER PRODUCTS-NONDURABLES--0.04%
335 Avon Products, Inc. 11/15/09 7.150 353,437
==================================================================================================
CONTAINERS & PACKAGING--0.06%
250 Berry Plastics 07/15/12 10.750 272,500
- --------------------------------------------------------------------------------------------------
150 Owens-Illinois, Inc. 05/15/18 7.800 140,250
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
26
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
CONTAINERS & PACKAGING--(CONCLUDED)
$125 Solo Cup Co.(1) 02/15/14 8.500% $108,750
- --------------------------------------------------------------------------------------------------
521,500
==================================================================================================
DIVERSIFIED FINANCIALS--0.01%
125 Bluewater Finance Ltd. 02/15/12 10.250 125,469
==================================================================================================
DIVERSIFIED MANUFACTURING--0.01%
100 Jacuzzi Brands, Inc. 07/01/10 9.625 106,000
==================================================================================================
ELECTRIC UTILITIES--0.25%
125 Comstock Resources, Inc. 03/01/12 6.875 119,844
- --------------------------------------------------------------------------------------------------
280 Dominion Resources, Inc. 06/15/35 5.950 265,320
- --------------------------------------------------------------------------------------------------
100 Dynegy Holdings, Inc.** 05/01/16 8.375 98,500
- --------------------------------------------------------------------------------------------------
450 FirstEnergy Corp., Series B 11/15/11 6.450 466,714
- --------------------------------------------------------------------------------------------------
175 Mirant Americas Generation LLC 05/01/31 9.125 175,875
- --------------------------------------------------------------------------------------------------
100 Mirant N.A. LLC 12/31/13 7.375 99,000
- --------------------------------------------------------------------------------------------------
150 NRG Energy, Inc. 02/01/16 7.375 147,750
- --------------------------------------------------------------------------------------------------
270 Pacific Gas & Electric Co. 03/01/34 6.050 266,860
- --------------------------------------------------------------------------------------------------
325 Progress Energy, Inc. 10/30/31 7.000 354,008
- --------------------------------------------------------------------------------------------------
265 TXU Energy Co. 03/15/13 7.000 276,503
- --------------------------------------------------------------------------------------------------
2,270,374
==================================================================================================
ELECTRONICS--0.02%
150 Sanmina-SCI Corp. 03/01/16 8.125 146,250
==================================================================================================
ENERGY--0.13%
225 Anadarko Finance Co., Series B 05/01/11 6.750 235,636
- --------------------------------------------------------------------------------------------------
350 Devon Financing Corp., U.L.C. 09/30/11 6.875 371,170
- --------------------------------------------------------------------------------------------------
195 Devon Financing Corp., U.L.C. 09/30/31 7.875 233,159
- --------------------------------------------------------------------------------------------------
100 Gulfmark Offshore, Inc. 07/15/14 7.750 99,500
- --------------------------------------------------------------------------------------------------
200 Whiting Petroleum Corp. 05/01/12 7.250 197,500
- --------------------------------------------------------------------------------------------------
1,136,965
==================================================================================================
ENERGY-INTEGRATED--0.03%
250 PPL Energy Supply LLC, Series A 11/01/11 6.400 258,224
==================================================================================================
ENTERTAINMENT--0.03%
225 Time Warner, Inc. 04/15/31 7.625 243,657
==================================================================================================
- --------------------------------------------------------------------------------
27
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
ENVIRONMENTAL SERVICES--0.04%
$300 Waste Management, Inc. 08/01/10 7.375% $319,909
==================================================================================================
FINANCE-NONCAPTIVE CONSUMER--0.32%
490 Capital One Financial(1) 06/01/15 5.500 476,964
- --------------------------------------------------------------------------------------------------
500 Countrywide Home Loans(1) 05/21/08 3.250 483,266
- --------------------------------------------------------------------------------------------------
700 HSBC Finance Corp. 05/15/11 6.750 738,997
- --------------------------------------------------------------------------------------------------
335 MBNA Corp. 03/15/12 7.500 368,653
- --------------------------------------------------------------------------------------------------
765 Residential Capital Corp. 11/21/08 6.125 766,665
- --------------------------------------------------------------------------------------------------
2,834,545
==================================================================================================
FINANCE-NONCAPTIVE DIVERSIFIED--0.44%
2,350 General Electric Capital Corp.(1) 06/15/12 6.000 2,428,640
- --------------------------------------------------------------------------------------------------
600 General Electric Capital Corp. 03/15/32 6.750 677,163
- --------------------------------------------------------------------------------------------------
850 International Lease Finance Corp.(1) 04/01/09 3.500 812,626
- --------------------------------------------------------------------------------------------------
3,918,429
==================================================================================================
FOOD--0.14%
200 Ameriqual Group LLC** 04/01/12 9.000 204,000
- --------------------------------------------------------------------------------------------------
300 Conagra Foods, Inc. 09/15/11 6.750 315,325
- --------------------------------------------------------------------------------------------------
100 Dole Foods Co.(1) 03/15/11 8.875 97,500
- --------------------------------------------------------------------------------------------------
375 Kraft Foods, Inc. 11/01/11 5.625 377,383
- --------------------------------------------------------------------------------------------------
150 Pinnacle Foods Holding Corp. 12/01/13 8.250 147,375
- --------------------------------------------------------------------------------------------------
150 Wornick Co. 07/15/11 10.875 142,500
- --------------------------------------------------------------------------------------------------
1,284,083
==================================================================================================
FOOD PROCESSORS/BEVERAGE/BOTTLING--0.10%
325 Coors Brewing Co. 05/15/12 6.375 336,299
- --------------------------------------------------------------------------------------------------
175 Le-Natures, Inc.** 06/15/13 10.000 182,875
- --------------------------------------------------------------------------------------------------
410 Miller Brewing Co.** 08/15/13 5.500 403,515
- --------------------------------------------------------------------------------------------------
922,689
==================================================================================================
GAMING--0.20%
150 Chukchansi Economic Development
Authority** 11/15/13 8.000 151,500
- --------------------------------------------------------------------------------------------------
100 Circus & Eldorado 03/01/12 10.125 105,000
- --------------------------------------------------------------------------------------------------
225 Jacobs Entertainment** 06/15/14 9.750 224,719
- --------------------------------------------------------------------------------------------------
250 MTR Gaming Group, Inc. 04/01/10 9.750 262,812
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
28
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
GAMING--(CONCLUDED)
$100 Pokagon Gaming Authority** 06/15/14 10.375% $105,750
- --------------------------------------------------------------------------------------------------
150 Poster Financial Group 12/01/11 8.750 156,750
- --------------------------------------------------------------------------------------------------
150 River Rock Entertainment 11/01/11 9.750 158,812
- --------------------------------------------------------------------------------------------------
150 San Pasqual Casino** 09/15/13 8.000 150,938
- --------------------------------------------------------------------------------------------------
100 Seneca Gaming Corp. 05/01/12 7.250 98,250
- --------------------------------------------------------------------------------------------------
150 Tunica-Biloxi Gaming Authority** 11/15/15 9.000 154,125
- --------------------------------------------------------------------------------------------------
200 Wheeling Island Gaming, Inc. 12/15/09 10.125 205,500
- --------------------------------------------------------------------------------------------------
1,774,156
==================================================================================================
HEALTHCARE--0.10%
150 Ameripath, Inc. 04/01/13 10.500 158,625
- --------------------------------------------------------------------------------------------------
100 Psychiatric Solutions 07/15/15 7.750 96,500
- --------------------------------------------------------------------------------------------------
420 UnitedHealth Group 03/15/36 5.800 405,621
- --------------------------------------------------------------------------------------------------
200 Universal Hospital Services 11/01/11 10.125 207,000
- --------------------------------------------------------------------------------------------------
867,746
==================================================================================================
INSURANCE-MULTILINE--0.04%
300 Allstate Corp. 12/01/09 7.200 316,802
==================================================================================================
MACHINERY-AGRICULTURE & CONSTRUCTION--0.04%
325 John Deere Capital Corp. 03/15/12 7.000 348,786
==================================================================================================
MANUFACTURING-DIVERSIFIED--0.01%
100 Maax Corp. 06/15/12 9.750 76,000
- --------------------------------------------------------------------------------------------------
25 Maax Holdings, Inc.** 12/15/12 11.250# 8,500
- --------------------------------------------------------------------------------------------------
84,500
==================================================================================================
MEDIA--0.07%
100 Affinion Group, Inc.** 10/15/13 10.125 103,750
- --------------------------------------------------------------------------------------------------
75 Baker & Taylor, Inc.** 07/01/13 11.500 74,625
- --------------------------------------------------------------------------------------------------
150 LIN Television Corp. 05/15/13 6.500 138,375
- --------------------------------------------------------------------------------------------------
175 Sinclair Broadcast Group 03/15/12 8.000 177,187
- --------------------------------------------------------------------------------------------------
100 Sirius Satellite Radio 08/01/13 9.625 95,000
- --------------------------------------------------------------------------------------------------
588,937
==================================================================================================
METALS & MINING--0.05%
225 AK Steel Corp. 06/15/12 7.750 219,375
- --------------------------------------------------------------------------------------------------
200 FastenTech, Inc. 05/01/11 11.500 205,000
- --------------------------------------------------------------------------------------------------
424,375
==================================================================================================
- --------------------------------------------------------------------------------
29
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
OIL & GAS--0.17%
$150 Atlas Pipeline Partners 12/15/15 8.125% $153,000
- --------------------------------------------------------------------------------------------------
175 Inergy LP/Inergy Finance** 03/01/16 8.250 179,813
- --------------------------------------------------------------------------------------------------
510 Kinder Morgan Energy Partners 11/15/14 5.125 481,720
- --------------------------------------------------------------------------------------------------
770 Kinder Morgan Energy Partners 03/15/35 5.800 691,292
- --------------------------------------------------------------------------------------------------
1,505,825
==================================================================================================
OIL REFINING--0.05%
80 Giant Industries, Inc. 05/15/12 11.000 86,800
- --------------------------------------------------------------------------------------------------
325 Valero Energy Corp. 04/15/32 7.500 376,526
- --------------------------------------------------------------------------------------------------
463,326
==================================================================================================
PAPER & FOREST PRODUCTS--0.08%
150 Abitibi-Consolidated, Inc. 04/01/08 6.950 148,875
- --------------------------------------------------------------------------------------------------
50 Abitibi-Consolidated, Inc. 08/01/10 8.550 49,375
- --------------------------------------------------------------------------------------------------
150 Buckeye Technologies, Inc. 10/15/10 8.000 141,000
- --------------------------------------------------------------------------------------------------
150 Cellu Tissue Holdings, Inc. 03/15/10 9.750 146,250
- --------------------------------------------------------------------------------------------------
150 Millar Western Forest 11/15/13 7.750 119,250
- --------------------------------------------------------------------------------------------------
75 P.H. Glatfelter** 05/01/16 7.125 73,934
- --------------------------------------------------------------------------------------------------
678,684
==================================================================================================
PHARMACEUTICALS--0.21%
275 Abbott Laboratories 05/15/11 5.600 278,704
- --------------------------------------------------------------------------------------------------
770 Allergan, Inc.** 04/01/16 5.750 773,906
- --------------------------------------------------------------------------------------------------
325 Bristol-Myers Squibb Co. 10/01/11 5.750 329,253
- --------------------------------------------------------------------------------------------------
160 Teva Pharmaceutical Finance LLC 02/01/16 5.550 155,420
- --------------------------------------------------------------------------------------------------
350 Wyeth 03/15/13 5.500 349,600
- --------------------------------------------------------------------------------------------------
1,886,883
==================================================================================================
PUBLISHING--0.18%
125 Advanstar Communications, Inc. 08/15/10 10.750 135,000
- --------------------------------------------------------------------------------------------------
200 Cadmus Communications Corp. 06/15/14 8.375 195,500
- --------------------------------------------------------------------------------------------------
125 Cenveo Corp. 12/01/13 7.875 118,125
- --------------------------------------------------------------------------------------------------
100 Clarke American Corp.** 12/15/13 11.750 104,500
- --------------------------------------------------------------------------------------------------
200 Deluxe Corp. 12/15/12 5.000 161,250
- --------------------------------------------------------------------------------------------------
325 Houghton Mifflin Co. 10/15/13 11.500# 272,187
- --------------------------------------------------------------------------------------------------
200 Quebecor World Capital Corp.** 03/15/16 8.750 188,000
- --------------------------------------------------------------------------------------------------
175 R.H. Donnelley Corp. 01/15/16 8.875 172,375
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
PUBLISHING--(CONCLUDED)
$200 Sheridan Acquisition Corp. 08/15/11 10.250% $201,500
- --------------------------------------------------------------------------------------------------
75 Vertis, Inc. 06/15/09 10.875 75,750
- --------------------------------------------------------------------------------------------------
1,624,187
==================================================================================================
REAL ESTATE INVESTMENT TRUSTS--0.11%
325 Avalonbay Communities 08/01/09 7.500 343,845
- --------------------------------------------------------------------------------------------------
325 EOP Operating LP 06/15/28 7.250 349,570
- --------------------------------------------------------------------------------------------------
280 Prologis 11/15/15 5.625 275,731
- --------------------------------------------------------------------------------------------------
969,146
==================================================================================================
RESTAURANTS--0.06%
150 Buffets, Inc. 07/15/10 11.250 158,250
- --------------------------------------------------------------------------------------------------
175 Landry's Restaurants, Inc., Series B** 12/15/14 7.500 165,375
- --------------------------------------------------------------------------------------------------
150 Restaurant Co. 10/01/13 10.000 133,875
- --------------------------------------------------------------------------------------------------
125 Sbarro, Inc. 09/15/09 11.000 126,562
- --------------------------------------------------------------------------------------------------
584,062
==================================================================================================
RETAIL--0.16%
50 Brookstone Co., Inc. 10/15/12 12.000 45,500
- --------------------------------------------------------------------------------------------------
225 GSC Holdings Corp.(1)** 10/01/12 8.000 229,781
- --------------------------------------------------------------------------------------------------
200 Ingles Markets, Inc. 12/01/11 8.875 208,500
- --------------------------------------------------------------------------------------------------
75 Jean Coutu Group PJC, Inc. 08/01/14 8.500 71,531
- --------------------------------------------------------------------------------------------------
260 Kroger Co. 04/01/31 7.500 284,210
- --------------------------------------------------------------------------------------------------
150 Pantry, Inc. 02/15/14 7.750 147,750
- --------------------------------------------------------------------------------------------------
150 Petro Stopping Center/Financial 02/15/12 9.000 150,750
- --------------------------------------------------------------------------------------------------
275 Safeway, Inc. 02/01/31 7.250 290,632
- --------------------------------------------------------------------------------------------------
1,428,654
==================================================================================================
ROAD & RAIL--0.07%
275 Burlington Northern Santa Fe Corp. 05/13/29 7.082 309,006
- --------------------------------------------------------------------------------------------------
150 Kansas City Southern 06/15/09 7.500 149,250
- --------------------------------------------------------------------------------------------------
155 Norfolk Southern Corp. 09/17/14 5.257 152,879
- --------------------------------------------------------------------------------------------------
611,135
==================================================================================================
SERVICE--0.02%
150 Carriage Services, Inc. 01/15/15 7.875 145,500
==================================================================================================
- --------------------------------------------------------------------------------
31
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
SPECIALTY PURPOSE ENTITY--0.03%
$150 AAC Group Holding Corp. 10/01/12 10.250%# $120,375
- --------------------------------------------------------------------------------------------------
175 Riddell Bell Holdings, Inc. 10/01/12 8.375 171,063
- --------------------------------------------------------------------------------------------------
291,438
==================================================================================================
TECHNOLOGY-HARDWARE--0.04%
250 Cisco Systems, Inc. 02/22/16 5.500 248,901
- --------------------------------------------------------------------------------------------------
125 Xerox Corp. 02/01/17 6.750 125,313
- --------------------------------------------------------------------------------------------------
374,214
==================================================================================================
TECHNOLOGY-SOFTWARE--0.05%
350 Computer Sciences Corp. 04/15/08 3.500 338,894
- --------------------------------------------------------------------------------------------------
125 Unisys Corp. 10/15/12 8.000 115,781
- --------------------------------------------------------------------------------------------------
454,675
==================================================================================================
TELECOMMUNICATIONS--0.16%
325 Bellsouth Corp. 06/15/34 6.550 317,726
- --------------------------------------------------------------------------------------------------
200 Citizens Communications 08/15/31 9.000 211,000
- --------------------------------------------------------------------------------------------------
100 Dycom Industries, Inc. 10/15/15 8.125 101,000
- --------------------------------------------------------------------------------------------------
200 Intelsat Subsidiary Holding Co. Ltd. 01/15/15 8.625 202,000
- --------------------------------------------------------------------------------------------------
350 Telecom Italia Capital 11/15/13 5.250 333,422
- --------------------------------------------------------------------------------------------------
310 Telecom Italia Capital 11/15/33 6.375 292,708
- --------------------------------------------------------------------------------------------------
1,457,856
==================================================================================================
TOBACCO--0.02%
150 Reynolds American, Inc.** 06/01/13 7.250 153,650
==================================================================================================
TRANSPORTATION SERVICES--0.05%
400 ERAC USA Finance Co.** 01/15/11 8.000 437,396
==================================================================================================
UTILITIES-OTHER--0.05%
500 Duke Capital LLC 08/15/14 5.668 488,648
==================================================================================================
WIRELESS TELECOMMUNICATIONS SERVICES--0.26%
200 American Cellular Corp., Series B 08/01/11 10.000 208,000
- --------------------------------------------------------------------------------------------------
300 AT&T Corp. 11/15/31 8.000 358,418
- --------------------------------------------------------------------------------------------------
175 AT&T Wireless Services, Inc. 03/01/31 8.750 221,188
- --------------------------------------------------------------------------------------------------
135 Cincinnati Bell, Inc. 01/15/14 8.375 135,506
- --------------------------------------------------------------------------------------------------
650 Sprint Capital Corp. 03/15/32 8.750 788,169
- --------------------------------------------------------------------------------------------------
350 Verizon New York, Inc., Series A 04/01/12 6.875 363,410
- --------------------------------------------------------------------------------------------------
100 Wind Acquisition Finance SA** 12/01/15 10.750 108,625
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONCLUDED)
WIRELESS TELECOMMUNICATIONS SERVICES--(CONCLUDED)
$125 Windstream Corp.** 08/01/16 8.625% $132,188
- --------------------------------------------------------------------------------------------------
2,315,504
==================================================================================================
Total corporate bonds (cost--$66,683,106) 65,725,168
==================================================================================================
INTERNATIONAL GOVERNMENT OBLIGATION--0.04%
- --------------------------------------------------------------------------------------------------
330 Pemex Project Funding Master
Trust (cost--$365,907) 11/15/11 8.000 359,700
==================================================================================================
REPURCHASE AGREEMENT--2.23%
- --------------------------------------------------------------------------------------------------
19,946 Repurchase agreement dated 08/31/06
with State Street Bank & Trust Co.,
collateralized by $15,489 US Treasury
Bonds, 6.500% to 7.250% due 08/15/22
to 11/15/26 and $20,326,003
US Treasury Notes, 4.125% to 4.375%
due 12/31/07 to 08/15/10;
(value--$20,345,020); proceeds:
$19,948,693 (cost--$19,946,000) 09/01/06 4.860 19,946,000
==================================================================================================
NUMBER OF
SHARES
(000)
- --------------------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LOANED--8.02%
- --------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS+--3.25%
- --------------------------------------------------------------------------------------------------
683 AIM Liquid Assets Portfolio 5.182 682,648
- --------------------------------------------------------------------------------------------------
58 AIM Prime Portfolio 5.216 58,460
- --------------------------------------------------------------------------------------------------
[++][++] 0 BlackRock Provident TempFund 5.137 105
- --------------------------------------------------------------------------------------------------
6,066 DWS Money Market Series 5.251 6,066,309
- --------------------------------------------------------------------------------------------------
22,164 UBS Private Money Market Fund LLC(3) 5.231 22,164,084
- --------------------------------------------------------------------------------------------------
Total money market funds (cost--$28,971,606) 28,971,606
==================================================================================================
- --------------------------------------------------------------------------------
33
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--4.77%
- --------------------------------------------------------------------------------------------------
$42,600 Repurchase agreement dated 08/31/06
with Barclays Bank PLC, collateralized by
$2,639,000 Federal Home Loan Mortgage
Corp. obligations, zero coupon due
05/11/07 and $41,948,000 Federal
National Mortgage Association obligations,
zero coupon due 02/21/07;
(value--$43,452,741); proceeds:
$42,606,236 (cost--$42,600,000) 09/01/06 5.270% $42,600,000
==================================================================================================
Total investments of cash collateral from securities loaned
(cost--$71,571,606) 71,571,606
==================================================================================================
Total investments (cost--$903,794,001)--108.11% 965,027,343
- --------------------------------------------------------------------------------------------------
Liabilities in excess of other assets--(8.11)% (72,411,780)
- --------------------------------------------------------------------------------------------------
Net assets--100.00% $892,615,563
==================================================================================================
* Non-income producing security.
** Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities, which represent 2.60% of net assets as
of August 31, 2006, are considered liquid and may be resold in
transactions exempt from registration, normally to qualified
institutional buyers.
+ Interest rates shown reflect yield at August 31, 2006.
[++] Floating rate securities. The interest rates shown are the current
rates as of August 31, 2006.
[++][++] Amount represents less than 500 shares.
++ Security is being fair valued by a Valuation Committee under the
direction of the Board of Trustees.
+++ Perpetual bond security. The maturity date reflects the next call
date.
# Denotes a step-up bond that converts to the noted fixed rate at a
designated future date.
(1) Security, or portion thereof, was on loan at August 31, 2006.
(2) Interest Only Security. This security entitles the holder to receive
interest payments from an underlying pool of mortgages. The risk
associated with this security is related to the speed of the
principal paydowns. High prepayments would result in a smaller amount
of interest being received and cause the yield to decrease. Low
prepayments would result in a greater amount of interest being
received and cause the yield to increase.
- --------------------------------------------------------------------------------
34
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
(3) The table below details the Fund's transaction activity in an affiliated
issuer for the year ended August 31, 2006.
PURCHASES SALES INCOME EARNED
DURING THE DURING THE FROM AFFILIATE
SECURITY VALUE AT YEAR ENDED YEAR ENDED VALUE AT FOR THE YEAR
DESCRIPTION 08/31/05 08/31/06 08/31/06 08/31/06 ENDED 08/31/06
- -------------------------------------------------------------------------------------------------------
UBS Private
Money Market
Fund LLC $45,139,164 $1,110,558,037 $1,133,533,117 $22,164,084 $27,908
=======================================================================================================
(4) The securities detailed in the table below, which represent 0.01% of net
assets, are considered illiquid and restricted as of August 31, 2006:
ACQUISITION
ILLIQUID AND COST AS A VALUE AS A
RESTRICTED ACQUISITION ACQUISITION PERCENTAGE PERCENTAGE OF
SECURITY DATES COST OF NET ASSETS VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------
Merrill Lynch
Credit
Corporation
Mortgage
Investors, Inc.,
Series 2003-D,
Class XA1,
1.000%,
08/25/28 09/12/03 $3,440 0.00% $3,402 0.00%
- --------------------------------------------------------------------------------------------------
Taberna Realty
Finance Trust 08/04/05 136,920 0.02 123,228 0.01
- --------------------------------------------------------------------------------------------------
$140,360 0.02% $126,630 0.01%
==================================================================================================
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GSAMP Goldman Sachs Asset Mortgage Passthrough
GSMPS Goldman Sachs Mortgage Passthrough Securities
OEM Original Equipment Manufacturer
REMIC Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
35
UBS U.S. ALLOCATION FUND
PORTFOLIO OF INVESTMENTS--AUGUST 31, 2006
ISSUER BREAKDOWN BY COUNTRY (UNAUDITED) PERCENTAGE OF PORTFOLIO ASSETS
- --------------------------------------------------------------------------------
United States 96.7%
- --------------------------------------------------------------------------------
Panama 1.0
- --------------------------------------------------------------------------------
United Kingdom 0.8
- --------------------------------------------------------------------------------
Cayman Islands 0.7
- --------------------------------------------------------------------------------
Bermuda 0.7
- --------------------------------------------------------------------------------
Canada 0.1
- --------------------------------------------------------------------------------
Total 100.0%
================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
36
UBS U.S. ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES--AUGUST 31, 2006
ASSETS:
Investments in unaffiliated securities, at value (cost-$881,629,917)* $942,863,259
- -------------------------------------------------------------------------------------------
Investments in an affliliated security, at value (cost-$22,164,084) 22,164,084
===========================================================================================
Total investments in securities, at value (cost-$903,794,001) 965,027,343
- -------------------------------------------------------------------------------------------
Cash 41
- -------------------------------------------------------------------------------------------
Receivable for investments sold 5,096,022
- -------------------------------------------------------------------------------------------
Receivable for shares of beneficial interest sold 118,453
- -------------------------------------------------------------------------------------------
Receivable for dividends and interest 3,673,781
- -------------------------------------------------------------------------------------------
Other assets 43,130
- -------------------------------------------------------------------------------------------
Total assets 973,958,770
- -------------------------------------------------------------------------------------------
LIABILITIES:
Payable for cash collateral from securities loaned 71,571,606
- -------------------------------------------------------------------------------------------
Payable for investments purchased 5,781,552
- -------------------------------------------------------------------------------------------
Payable for shares of beneficial interest repurchased 2,717,774
- -------------------------------------------------------------------------------------------
Payable to affiliates 698,578
- -------------------------------------------------------------------------------------------
Payable for foreign witholding taxes 1,386
- -------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 572,311
- -------------------------------------------------------------------------------------------
Total liabilities 81,343,207
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beneficial interest-$0.001 par value per share (unlimited amount authorized) 992,491,383
- -------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 14,556,482
- -------------------------------------------------------------------------------------------
Accumulated net realized loss from investments and options written (175,665,644)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and options written 61,233,342
- -------------------------------------------------------------------------------------------
NET ASSETS $892,615,563
===========================================================================================
* Includes $147,309,958 of investments in securities on loan, at value.
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
37
UBS U.S. ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES--AUGUST 31, 2006
CLASS A:
Net assets $472,212,998
- -------------------------------------------------------------------------------------------
Shares outstanding 15,772,510
- -------------------------------------------------------------------------------------------
Net asset value per share $29.94
- -------------------------------------------------------------------------------------------
Maximum offering price per share (net asset value plus
maximum sales charge of 5.50%) $31.68
- -------------------------------------------------------------------------------------------
CLASS B:
Net assets $77,296,278
- -------------------------------------------------------------------------------------------
Shares outstanding 2,643,815
- -------------------------------------------------------------------------------------------
Net asset value and offering price per share $29.24
- -------------------------------------------------------------------------------------------
CLASS C:
Net assets $226,218,769
- -------------------------------------------------------------------------------------------
Shares outstanding 7,728,663
- -------------------------------------------------------------------------------------------
Net asset value and offering price per share $29.27
- -------------------------------------------------------------------------------------------
CLASS Y:
Net assets $116,887,518
- -------------------------------------------------------------------------------------------
Shares outstanding 3,845,862
- -------------------------------------------------------------------------------------------
Net asset value, offering price and redemption value per share $30.39
===========================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
38
UBS U.S. ALLOCATION FUND
STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
AUGUST 31, 2006
- ----------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $10,852,422
- ----------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $1,516) 16,583,433
- ----------------------------------------------------------------------------------------------------
Securities lending income (includes $27,908 earned from an affiliated entity) 122,874
- ----------------------------------------------------------------------------------------------------
27,558,729
- ----------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory and administration fees 4,535,942
- ----------------------------------------------------------------------------------------------------
Service fees-Class A 1,264,723
- ----------------------------------------------------------------------------------------------------
Service and distribution fees-Class B 1,060,405
- ----------------------------------------------------------------------------------------------------
Service and distribution fees-Class C 2,482,898
- ----------------------------------------------------------------------------------------------------
Transfer agency and related services fees-Class A 648,412
- ----------------------------------------------------------------------------------------------------
Transfer agency and related services fees-Class B 193,945
- ----------------------------------------------------------------------------------------------------
Transfer agency and related services fees-Class C 296,570
- ----------------------------------------------------------------------------------------------------
Transfer agency and related services fees-Class Y 21,036
- ----------------------------------------------------------------------------------------------------
Custody and accounting fees 418,098
- ----------------------------------------------------------------------------------------------------
Reports and notices to shareholders 232,473
- ----------------------------------------------------------------------------------------------------
Professional fees 112,731
- ----------------------------------------------------------------------------------------------------
State registration fees 53,752
- ----------------------------------------------------------------------------------------------------
Insurance expense 52,941
- ----------------------------------------------------------------------------------------------------
Trustees' fees 21,890
- ----------------------------------------------------------------------------------------------------
Other expenses 32,298
- ----------------------------------------------------------------------------------------------------
11,428,114
- ----------------------------------------------------------------------------------------------------
Less: Fee waivers by investment advisor and administrator (240,105)
- ----------------------------------------------------------------------------------------------------
Net expenses 11,188,009
- ----------------------------------------------------------------------------------------------------
Net investment income 16,370,720
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSS) FROM INVESTMENT ACTIVITIES:
Net realized gain from investments 49,492,775
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
- ----------------------------------------------------------------------------------------------------
Investments (2,616,205)
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain from investment activities 46,876,570
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $63,247,290
====================================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
39
UBS U.S. ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31,
------------------------------
2006 2005
- ----------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $16,370,720 $18,631,766
- ----------------------------------------------------------------------------------------------------
Net realized gains from investments 49,492,775 69,010,509
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments and options written (2,616,205) 55,659,498
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 63,247,290 143,301,773
- ----------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income-Class A (10,696,257) (10,204,377)
- ----------------------------------------------------------------------------------------------------
Net investment income-Class B (947,042) (1,960,273)
- ----------------------------------------------------------------------------------------------------
Net investment income-Class C (3,192,484) (3,383,530)
- ----------------------------------------------------------------------------------------------------
Net investment income-Class Y (2,885,670) (2,739,816)
- ----------------------------------------------------------------------------------------------------
(17,721,453) (18,287,996)
- ----------------------------------------------------------------------------------------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares 19,991,380 30,554,718
- ----------------------------------------------------------------------------------------------------
Cost of shares repurchased (258,340,216) (391,894,693)
- ----------------------------------------------------------------------------------------------------
Proceeds from dividends reinvested 16,781,941 17,405,269
- ----------------------------------------------------------------------------------------------------
Net decrease in net assets from beneficial interest transactions (221,566,895) (343,934,706)
- ----------------------------------------------------------------------------------------------------
Net decrease in net assets (176,041,058) (218,920,929)
- ----------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 1,068,656,621 1,287,577,550
- ----------------------------------------------------------------------------------------------------
End of year 892,615,563 1,068,656,621
- ----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income $14,556,482 $15,213,242
====================================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
40
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
UBS U.S. Allocation Fund (the "Fund") is a series of UBS Investment Trust (the
"Trust") and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, as an open-end, diversified
management investment company.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares. Each
class represents interests in the same assets of the Fund, and the classes are
identical except for differences in their sales charge structures, ongoing
service and distribution charges and certain transfer agency and related
services expenses. In addition, Class B shares and all corresponding reinvested
dividend shares automatically convert to Class A shares within a certain number
of years after issuance which varies depending upon the amount invested. All
classes of shares have equal voting privileges except that Class A, Class B and
Class C shares each have exclusive voting rights with respect to their
respective service and/or distribution plans. Class Y shares have no service or
distribution plan.
In the normal course of business the Fund may enter into contracts that contain
a variety of representations or that provide indemnification for certain
liabilities. The Fund's maximum exposure under these arrangements is unknown, as
this would involve future claims that may be made against the Fund that have not
yet occurred. However, the Fund 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 Fund 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 Fund calculates net asset values based on the
current market value for its portfolio securities. The Fund 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 available prior to
- --------------------------------------------------------------------------------
41
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
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 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; 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, the securities are 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 Fund 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 Fund 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 Fund 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
Fund 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 Fund may suffer delays,
costs and possible losses in connection with the disposition or retention of the
collateral. Under certain circumstances, in the event of default or bankruptcy
- --------------------------------------------------------------------------------
42
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund may participate in
joint repurchase agreement transactions with other funds managed, advised or
sub-advised by UBS Global Asset Management (Americas) Inc.
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.
PURCHASED OPTIONS--The Fund may also purchase put and call options. Purchasing
call options tends to increase exposure to the underlying instrument. Purchasing
put options tends to decrease exposure to the underlying instrument. The Fund
pays a premium which is included in the Statement of Assets and Liabilities as
an investment and subsequently marked to market to reflect the current value of
the option. Premiums paid for purchasing options which expire are treated as
realized losses. The risk associated with purchasing put and call options is
limited to the premium paid. Premiums paid for purchasing options which are
exercised or closed are added to the amounts paid or offset against the proceeds
on the underlying future, security or currency transaction to determine the
realized gain or loss.
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
- --------------------------------------------------------------------------------
43
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
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 Fund 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 Fund's
investment manager and administrator from August 1, 2005 until April 1, 2006. On
April 1, 2006, the Fund's Investment Management and Administration Agreement
("Advisory Contract") was transferred from 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 Trust'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 management services to the Fund
continue to provide investment management services to the Fund 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. UBS Global AM--US continues to serve as the
Fund's principal underwriter. In accordance with the Advisory Contract, the Fund
pays UBS Global AM an investment advisory and administration fee, which was
accrued daily and paid monthly, at an annual rate of 0.50% of the Fund's average
daily net assets up to $250 million and 0.45% thereafter.
UBS Global AM--Americas had agreed to permanently reduce its advisory and
administration fee based on the Fund's average daily net assets so that it was
as follows: $0 to $250 million - 0.50%; in excess of $250 million up to $500
million - 0.45%; in excess of $500 million up to $2 billion - 0.40%; and over $2
billion - 0.35%. Accordingly, for the year ended August 31, 2006, UBS Global
AM--Americas (or UBS Global AM--US for periods prior to April 1, 2006) waived
$240,105 in investment advisory and administration fees. At August 31, 2006, the
Fund owed UBS Global AM--Americas
- --------------------------------------------------------------------------------
44
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
$351,447 in investment advisory and administration fees. At August 31, 2006, UBS
Global AM--Americas owed the Fund $16,637 for fee waivers under the above
agreement.
For the year ended August 31, 2006, the Fund paid $19,929 in brokerage
commissions to UBS Securities LLC, an indirect wholly owned subsidiary of UBS
AG, for transactions executed on behalf of the Fund.
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 Fund. The Fund has been informed that Professor Feldberg's role
at Morgan Stanley does not involve matters directly affecting any UBS funds.
Fund transactions are executed through Morgan Stanley based on that firm's
ability to provide best execution of the transactions. During the year ended
August 31, 2006, the Fund paid brokerage commissions to Morgan Stanley in the
amount of $34,572. During the year ended August 31, 2006, the Fund purchased and
sold certain securities (e.g., fixed income securities) in principal trades with
Morgan Stanley having an aggregate value of $178,505,500. Morgan Stanley
received compensation in connection with these trades, which may have been in
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 the advisor, it is believed that under normal circumstances
it represents a small portion of the total value of the transactions.
SERVICE AND DISTRIBUTION PLANS
UBS Global AM--US is the principal underwriter of the Fund's shares. Under
separate plans of service and/or distribution pertaining to Class A, Class B and
Class C shares, the Fund pays UBS Global AM--US monthly service fees at an
annual rate of 0.25% of the average daily net assets of Class A, Class B and
Class C shares and monthly distribution fees at the annual rate of 0.75% of the
average daily net assets of Class B and Class C shares. At August 31, 2006, the
Fund owed UBS Global AM--US $358,018 in service and distribution fees.
UBS Global AM--US also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares and the
- --------------------------------------------------------------------------------
45
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
contingent deferred sales charges paid by shareholders upon certain redemptions
of Class A, Class B and Class C shares. UBS Global AM--US has informed the Fund
that for the year ended August 31, 2006, it earned $114,897, $291,139, and
$6,406 in initial sales and deferred sales charges on Class A, Class B and Class
C shares, respectively.
TRANSFER AGENCY AND RELATED SERVICES FEES
UBS Financial Services Inc., an indirect wholly owned subsidiary of UBS AG,
provides transfer agency related services to the Fund pursuant to a delegation
of authority from PFPC, Inc. ("PFPC"), the Fund's transfer agent, and is
compensated for these services by PFPC, not the Fund.
For the year ended August 31, 2006, UBS Financial Services Inc. received from
PFPC, not the Fund, $506,228 of the total transfer agency and related services
fees paid by the Fund to PFPC.
SECURITIES LENDING
The Fund may lend securities up to 33 1/3% 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 Fund
will regain ownership of loaned securities to exercise certain beneficial
rights; however, the Fund may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower fail financially.
The Fund receives compensation for lending its securities from interest or
dividends earned on the cash, 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 Fund's
securities lending program. UBS Securities LLC is the Fund's lending agent. For
the year ended August 31, 2006 UBS Securities LLC earned $45,174 in compensation
as the Fund's lending agent. At August 31, 2006, the Fund owed UBS Securities
LLC $5,750 in compensation as the Fund's lending agent.
At August 31, 2006, the Fund had securities on loan having a market value of
$147,309,958. The custodian for the Fund held cash and cash equivalents as
collateral for securities loaned of $71,571,606. In addition, the Fund held US
government and agency securities having an aggregate value of $79,690,811 as
collateral for portfolio securities loaned as follows:
- --------------------------------------------------------------------------------
46
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -------------------------------------------------------------------------------------------
$5,525 Federal Home Loan Mortgage Corp. 04/05/07 4.250% $5,582,493
- -------------------------------------------------------------------------------------------
12,143 Federal National Mortgage Association 03/16/09 3.125 11,762,961
- -------------------------------------------------------------------------------------------
6,246 US Treasury Bonds 05/15/17 8.750 8,423,987
- -------------------------------------------------------------------------------------------
85 US Treasury Bonds 11/15/18 9.000 119,021
- -------------------------------------------------------------------------------------------
53,651 US Treasury Inflation Index Notes 01/15/16 2.000 53,802,349
- -------------------------------------------------------------------------------------------
$79,690,811
===========================================================================================
BANK LINE OF CREDIT
The Fund participates with other funds managed, advised or sub-advised by UBS
Global AM--Americas 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 Fund at the request of
the shareholders and other temporary or emergency purposes. Under the Committed
Credit Facility arrangement, the Fund has agreed to pay a commitment fee, pro
rata, based on the relative asset size of the funds in the Committed Credit
Facility. Interest is charged to the Fund at the overnight federal funds rate in
effect at the time of borrowings, plus 0.50%. The Fund did not borrow under the
Committed Credit Facility during the year ended August 31, 2006.
PURCHASE AND SALES OF SECURITIES
For the year ended August 31, 2006, aggregate purchases and sales of portfolio
securities, excluding short-term securities and US Government securities, were
$290,375,522 and $415,369,112, respectively.
For the year ended August 31, 2006, aggregate purchases and sales of US
Government securities, excluding short-term securities, were $476,555,683 and
$491,014,606, respectively.
FEDERAL TAX STATUS
The Fund 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 capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
- --------------------------------------------------------------------------------
47
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
The tax character of distributions paid during the fiscal years ended August 31,
2006 and August 31, 2005 were as follows:
DISTRIBUTIONS PAID FROM: 2006 2005
- -------------------------------------------------------------------------------------------
Ordinary Income $17,721,453 $18,287,996
===========================================================================================
At August 31, 2006, the components of accumulated deficit on a tax basis were as
follows:
Undistributed ordinary income $14,538,707
- -------------------------------------------------------------------------------------------
Accumulated realized capital and other losses (167,762,681)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 53,348,154
- -------------------------------------------------------------------------------------------
Total accumulated deficit $(99,875,820)
===========================================================================================
The differences between book-basis and tax-basis unrealized appreciation/
depreciation is attributable primarily to the tax deferral of losses on wash
sales and return of capital adjustments from real estate investment trusts.
At August 31, 2006, the Fund had a net capital loss carryforward of
$167,762,681. 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 August 31, 2011. To the extent that such losses are used to offset future
net realized capital gains, it is probable these gains will not be distributed.
In addition, the Fund utilized $41,388,979 of the capital loss carryforward to
offset current year realized gains.
For federal income tax purposes, the tax cost of investments and the components
of net unrealized appreciation of investments at August 31, 2006 were as
follows:
Tax cost of investments $911,679,189
- -------------------------------------------------------------------------------------------
Gross appreciation (investments having an excess of value over cost) 74,441,910
- -------------------------------------------------------------------------------------------
Gross depreciation (investments having an excess of cost over value) (21,093,756)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments $53,348,154
===========================================================================================
To reflect reclassifications arising from permanent "book/tax" differences for
the year ending August 31, 2006, undistributed net investment income was
increased by $693,973, and accumulated net realized losses from investment
transactions were increased by $693,973. These differences
- --------------------------------------------------------------------------------
48
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
are primarily due to return of capital adjustments from real estate investments
trusts and paydown reclasses.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48, and its impact on the financial
statements has not yet been determined.
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
CLASS A CLASS B
---------------------------------------------------------
YEAR ENDED
AUGUST 31, 2006: SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------
Shares sold 452,746 $13,229,529 24,074 $687,476
- ---------------------------------------------------------------------------------
Shares repurchased (5,038,838) (147,389,209) (1,064,911) (30,347,204)
- ---------------------------------------------------------------------------------
Shares converted from
Class B to Class A 1,633,859 47,559,412 (1,675,063) (47,559,412)
- ---------------------------------------------------------------------------------
Dividends reinvested 344,764 10,039,512 30,776 879,895
- ---------------------------------------------------------------------------------
Net decrease (2,607,469) $(76,560,756) (2,685,124) $(76,339,245)
=================================================================================
YEAR ENDED
AUGUST 31, 2005:
- ---------------------------------------------------------------------------------
Shares sold 724,677 $19,823,615 67,241 $1,794,125
- ---------------------------------------------------------------------------------
Shares repurchased (7,461,777) (204,580,314) (2,435,021) (64,713,634)
- ---------------------------------------------------------------------------------
Shares converted from
Class B to Class A 3,375,151 92,362,408 (3,466,959) (92,362,408)
- ---------------------------------------------------------------------------------
Dividends reinvested 351,070 9,686,022 67,540 1,822,230
- ---------------------------------------------------------------------------------
Net decrease (3,010,879) $(82,708,269) (5,767,199) $(153,459,687)
=================================================================================
- --------------------------------------------------------------------------------
49
UBS U.S. ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
CLASS C CLASS Y
YEAR ENDED -------------------------------------------------------
AUGUST 31, 2006: SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 95,556 $2,726,972 112,245 $3,347,403
- ------------------------------------------------------------------------------
Shares repurchased (2,206,226) (63,042,153) (590,909) (17,561,650)
- ------------------------------------------------------------------------------
Dividends reinvested 106,455 3,045,661 95,552 2,816,873
- ------------------------------------------------------------------------------
Net decrease (2,004,215) $(57,269,520) (383,112) $(11,397,374)
==============================================================================
YEAR ENDED
AUGUST 31, 2005:
- ------------------------------------------------------------------------------
Shares sold 160,442 $4,302,776 166,719 $4,634,202
- ------------------------------------------------------------------------------
Shares repurchased (3,785,482) (101,554,394) (755,998) (21,046,351)
- ------------------------------------------------------------------------------
Dividends reinvested 120,241 3,258,519 94,468 2,638,498
- ------------------------------------------------------------------------------
Net decrease (3,504,799) $(93,993,099) (494,811) $(13,773,651)
==============================================================================
- --------------------------------------------------------------------------------
50
(This page has been left blank intentionally)
- --------------------------------------------------------------------------------
51
UBS U.S. ALLOCATION FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
CLASS A
---------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
---------------------------------------------------------
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $28.60 $25.81 $23.00 $20.80 $25.78
- -------------------------------------------------------------------------------------------------
Net investment income (loss) 0.56@ 0.51@ 0.30@ 0.18@ 0.13@
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) from investment activites 1.38 2.79 2.72 2.10 (4.94)
- -------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 1.94 3.30 3.02 2.28 (4.81)
- -------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.60) (0.51) (0.21) (0.08) (0.03)
- -------------------------------------------------------------------------------------------------
Distributions from net realized
gains from investment activities -- -- -- -- (0.14)
- -------------------------------------------------------------------------------------------------
Total dividends and distributions (0.60) (0.51) (0.21) (0.08) (0.17)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $29.94 $28.60 $25.81 $23.00 $20.80
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 6.84% 12.85% 13.19% 10.99% (18.79)
- -------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $472,213 $525,711 $552,195 $649,582 $690,546
- -------------------------------------------------------------------------------------------------
Expenses to average net assets,
net of fee waivers by advisor(2) 0.91% 0.90% 0.93% 0.98% 0.89%
- -------------------------------------------------------------------------------------------------
Expenses to average net assets,
before fee waivers by advisor(2) 0.94% 0.93% 0.95% 0.98% 0.89%
- -------------------------------------------------------------------------------------------------
Net investment income (loss) to
average net assets 1.91% 1.87% 1.18% 0.84% 0.54%
- -------------------------------------------------------------------------------------------------
Portfolio turnover 82% 67% 128% 2% 5%
=================================================================================================
@ Calculated using the average month-end shares outstanding for the year.
1 Total investment return is calculated assuming a $10,000 investment on the
first day of each year reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the ex-dividend dates and a sale
at net asset value on the last day of each year reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2 During the years ended August 31, 2003 and August 31, 2002, UBS Global Asset
Management (US) Inc. did not waive any advisory and administration fees.
- --------------------------------------------------------------------------------
52
CLASS B
----------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $27.81 $25.04 $22.29 $20.23 $25.24
- --------------------------------------------------------------------------------------------------
Net investment income (loss) 0.30@ 0.28@ 0.09@ 0.02@ (0.05)@
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) from investment activites 1.36 2.70 2.66 2.04 (4.82)
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 1.66 2.98 2.75 2.06 (4.87)
- --------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.23) (0.21) -- -- --
- --------------------------------------------------------------------------------------------------
Distributions from net realized
gains from investment activities -- -- -- -- (0.14)
- --------------------------------------------------------------------------------------------------
Total dividends and distributions (0.23) (0.21) -- -- (0.14)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $29.24 $27.81 $25.04 $22.29 $20.23
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 5.99% 11.95% 12.34% 10.18% (19.41)%
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $77,296 $148,208 $277,891 $461,273 $606,133
- --------------------------------------------------------------------------------------------------
Expenses to average net assets,
net of fee waivers by advisor(2) 1.71% 1.70% 1.70% 1.74% 1.65%
- --------------------------------------------------------------------------------------------------
Expenses to average net assets,
before fee waivers by advisor(2) 1.74% 1.73% 1.72% 1.74% 1.65%
- --------------------------------------------------------------------------------------------------
Net investment income (loss) to
average net assets 1.07% 1.08% 0.36% 0.08% (0.22)%
- --------------------------------------------------------------------------------------------------
Portfolio turnover 82% 67% 128% 2% 5%
==================================================================================================
- --------------------------------------------------------------------------------
53
UBS U.S. ALLOCATION FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
CLASS C
---------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
---------------------------------------------------------
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $27.95 $25.21 $22.46 $20.38 $25.42
- -------------------------------------------------------------------------------------------------
Net investment income (loss) 0.33@ 0.30@ 0.10@ 0.02@ (0.05)
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) from investment activites 1.35 2.72 2.67 2.06 (4.85)
- -------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 1.68 3.02 2.77 2.08 (4.90)
- -------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.36) (0.28) (0.02) -- --
- -------------------------------------------------------------------------------------------------
Distributions from net realized
gains from investment activities -- -- -- -- (0.14)
- -------------------------------------------------------------------------------------------------
Total dividends and distributions (0.36) (0.28) (0.02) -- (0.14)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $29.27 $27.95 $25.21 $22.46 $20.38
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 6.02% 12.02% 12.35% 10.21% (19.39)
- -------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $226,219 $271,996 $333,765 $458,117 $538,109
- -------------------------------------------------------------------------------------------------
Expenses to average net assets,
net of fee waivers by advisor(2) 1.65% 1.65% 1.67% 1.72% 1.63%
- -------------------------------------------------------------------------------------------------
Expenses to average net assets,
before fee waivers by advisor(2) 1.68% 1.68% 1.69% 1.72% 1.63%
- -------------------------------------------------------------------------------------------------
Net investment income (loss)
to average net assets 1.16% 1.12% 0.42% 0.10% (0.20)
- -------------------------------------------------------------------------------------------------
Portfolio turnover 82% 67% 128% 2% 5%
=================================================================================================
@ Calculated using the average month-end shares outstanding for the year.
1 Total investment return is calculated assuming a $10,000 investment on the
first day of each year reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the ex-dividend dates and a sale
at net asset value on the last day of each year reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2 During the years ended August 31, 2003 and August 31, 2002, UBS Global Asset
Management (US) Inc. did not waive any advisory and administration fees.
- --------------------------------------------------------------------------------
54
CLASS Y
----------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------
2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $29.02 $26.19 $23.33 $21.07 $26.05
- --------------------------------------------------------------------------------------------------
Net investment income (loss) 0.67@ 0.61@ 0.39@ 0.25@ 0.21@
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) from investment activites 1.40 2.83 2.76 2.13 (5.00)
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 2.07 3.44 3.15 2.38 (4.79)
- --------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.70) (0.61) (0.29) (0.12) (0.05)
- --------------------------------------------------------------------------------------------------
Distributions from net realized
gains from investment activities -- -- -- -- (0.14)
- --------------------------------------------------------------------------------------------------
Total dividends and distributions (0.70) (0.61) (0.29) (0.12) (0.19)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $30.39 $29.02 $26.19 $23.33 $21.07
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 7.22% 13.22% 13.58% 11.39% (18.54)%
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $116,888 $122,743 $123,727 $137,401 $149,653
- --------------------------------------------------------------------------------------------------
Expenses to average net assets,
net of fee waivers by advisor(2) 0.55% 0.55% 0.58% 0.63% 0.58%
- --------------------------------------------------------------------------------------------------
Expenses to average net assets,
before fee waivers by advisor(2) 0.57% 0.58% 0.60% 0.63% 0.58%
- --------------------------------------------------------------------------------------------------
Net investment income (loss) to
average net assets 2.27% 2.21% 1.53% 1.19% 0.85%
- --------------------------------------------------------------------------------------------------
Portfolio turnover 82% 67% 128% 2% 5%
==================================================================================================
- --------------------------------------------------------------------------------
55
UBS U.S. ALLOCATION FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of
UBS U.S. Allocation Fund
We have audited the accompanying statement of assets and liabilities of the UBS
U.S. Allocation Fund (the sole Fund comprising UBS Investment Trust) (the
"Fund"), including the portfolio of investments, as of August 31, 2006, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of August 31, 2006, by correspondence with the custodian and
brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of UBS
U.S. Allocation Fund at August 31, 2006, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
October 17, 2006
- --------------------------------------------------------------------------------
56
UBS U.S. ALLOCATION FUND
GENERAL INFORMATION (UNAUDITED)
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (August 31,
2006) as to the federal tax status of distributions received by shareholders
during such fiscal year. The percentage of dividends paid that qualify for the
70% dividends received deduction for corporate shareholders is 76.08%.
For the fiscal year ended August 31, 2006, certain dividends paid by UBS U.S.
Allocation Fund may be subject to a maximum tax rate of 15%, as provided for by
the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions
paid during the fiscal year, $17,721,453 represents the maximum amount that may
be considered qualified dividend income.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be
reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual information
reporting.
Since the Fund's fiscal year is not the calendar year, another notification will
be sent in respect of calendar year 2006. The second notification, which will
reflect the amount to be used by calendar year taxpayers on their federal income
tax returns, will be made in conjunction with Form 1099 DIV and will be mailed
in January 2007. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in the Fund.
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
The Fund 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 Fund's Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Fund'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 Fund
upon request by calling 1-800-647 1568.
- --------------------------------------------------------------------------------
57
UBS U.S. ALLOCATION FUND
GENERAL INFORMATION (UNAUDITED)
PROXY VOTING POLICIES, PROCEDURES AND RECORD
You may obtain a description of the Fund's (1) proxy voting policies, (2) proxy
voting procedures and (3) information regarding how the Fund voted any proxies
related to portfolio securities during the most recent 12-month period ended
June 30 for which an SEC filing has been made, without charge, upon request by
contacting the Fund directly at 1-800-647 1568, online on the Fund's Web site
www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC's Web site
(http://www.sec.gov).
- --------------------------------------------------------------------------------
58
UBS U.S. ALLOCATION FUND
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
BACKGROUND--At a meeting of the board of UBS Investment Trust (the "Company") on
July 19, 2006, the members of the board, including the trustees who are not
"interested persons" of the Company ("Independent Trustees"), as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), considered and
approved the continuance of the Investment Advisory and Administration Agreement
of the Company, with respect to its series, UBS U.S. Allocation Fund (the
"Fund"), with UBS Global Asset Management (Americas) Inc. ("UBS Global AM"). In
preparing for the meeting, the board members had requested and received
extensive information from UBS Global AM to assist them, including performance
and expense information for other investment companies with similar investment
objectives. The board received and considered a variety of information about UBS
Global AM, as well as the advisory, administrative and distribution arrangements
for the Fund. The Independent Trustees discussed the materials initially
provided by management prior to the scheduled board meeting in a session with
their independent legal counsel and requested, and received from management,
supplemental materials to assist them in their consideration of the Investment
Advisory and Administration Agreement. The board received materials detailing
the administrative services provided to the Fund by UBS Global AM, which include
providing accounting and financial analysis, ensuring that all financial and tax
regulatory reporting requirements were met, certifying required Securities and
Exchange Commission documentation and monitoring the performance of the Fund's
service providers.
The Independent Trustees also met for several hours the evening before the board
meeting and met again after management's presentation was completed to review
the disclosure that had been made to them at the meeting. At all of these
sessions the Independent Trustees met in session with their independent legal
counsel. The Independent Trustees also received a memorandum from their
independent legal counsel discussing the duties of board members in considering
approval of advisory, administration and distribution agreements.
In its consideration of the approval of the Investment Advisory and
Administration Agreement, the board considered the following factors:
NATURE, EXTENT AND QUALITY OF THE SERVICES UNDER THE INVESTMENT ADVISORY AND
ADMINISTRATION AGREEMENT--The board received and considered information
regarding the nature, extent and quality of
- --------------------------------------------------------------------------------
59
UBS U.S. ALLOCATION FUND
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
management services provided to the Fund by UBS Global AM under the Investment
Advisory and Administration Agreement during the past year. The board also
received a description of the administrative and other services rendered to the
Fund and its shareholders by UBS Global AM. The board considered the nature,
extent and quality of administrative, distribution, and shareholder services
performed by UBS Global AM and its affiliates. (Given that the Investment
Advisory and Administration Agreement had been transferred between sister
companies during the period reviewed, the services provided by UBS Global Asset
Management (US) Inc. prior to April 1, 2006, were taken into account nearly as
if they had been provided by UBS Global AM) The board also considered the
resources devoted to, and the record of compliance with the Fund's compliance
policies and procedures. The board noted that it received information at regular
meetings throughout the year regarding the services rendered by UBS Global AM
concerning the management of the Fund's affairs and UBS Global AM's role in
coordinating providers of other services to the Fund, including custody,
accounting and transfer agency services. The board's evaluation of the services
provided by UBS Global AM 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 UBS Global AM's investment management and
other capabilities and the quality of its administrative and other services.
The board observed that the scope of services provided by UBS Global AM had
expanded over time as a result of regulatory and other developments, including
maintaining and monitoring its own and the Fund's expanded compliance programs.
The board had available to it the qualifications, backgrounds and
responsibilities of the Fund's senior personnel at UBS Global AM and had
received information regarding the person primarily responsible for the
day-to-day portfolio management of the Fund and recognized that the Fund's
senior personnel at UBS Global AM report to the board regularly, some at every
board meeting, and that at each regular meeting the board receives a report on
the Fund's performance. The board also considered, based on its knowledge of UBS
Global AM and its affiliates, the financial resources available to UBS Global AM
and its parent organization, UBS AG. In that regard, the board received
extensive financial information regarding UBS Global AM and noted that it was a
wholly owned, indirect subsidiary of one of the largest financial services firms
in the world. It was also noted that UBS Global AM had well over $100 billion in
assets under
- --------------------------------------------------------------------------------
60
UBS U.S. ALLOCATION FUND
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
management and was part of the UBS Global Asset Management Division, which had
over $600 billion of assets under management worldwide.
The board reviewed how transactions in Fund assets are effected. The board also
reviewed the Fund's brokerage policies and practices, the standards applied in
seeking best execution, policies and practices regarding soft dollars, the use
of a broker affiliated with UBS Global AM and the existence of quality controls
applicable to brokerage allocation procedures. In addition, UBS Global AM also
reported to the board on, among other things, its disaster recovery plans and
portfolio manager compensation plan.
The board concluded that, overall, it was satisfied with the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Advisory and Administration Agreement.
ADVISORY FEES AND EXPENSE RATIOS--The board reviewed and considered the
contractual management fee ("Contractual Management Fee") payable by the Fund to
UBS Global AM in light of the nature, extent and quality of the advisory and
administrative services provided by UBS Global AM. The board also reviewed and
considered the fee waiver arrangement in place for the Fund and considered the
actual fee rate (after taking any waivers into account) (the "Actual Management
Fee"). Additionally, the board received and considered information comparing
the Fund's Contractual Management Fee, Actual Management Fee and overall
expenses with those of funds in a group of funds selected and provided by
Lipper, Inc. ("Lipper"), an independent provider of investment company data (the
"Expense Group").
In connection with its consideration of the Fund's advisory fees, the board also
received information on UBS Global AM's standard institutional account fees for
accounts of a similar investment type to the Fund. The board noted that, in
general, these fees were lower than the Contractual Management Fees and Actual
Management Fees for the Fund, but also noted management's explanation that
comparisons with such accounts may be of limited relevance given the different
structures and regulatory requirements of mutual funds versus such accounts and
the differences in the levels of services required by mutual funds and such
accounts. The
- --------------------------------------------------------------------------------
61
UBS U.S. ALLOCATION FUND
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
board also received information on fees charged to other mutual funds managed by
UBS Global AM.
In addition to the Contractual and Actual Management Fees, the board also
reviewed and considered the total expenses for the Fund. The comparative Lipper
information showed that the Fund's Contractual Management Fee, Actual Management
Fee and total expenses were in the first quintile in the Fund's Expense Group
for the comparison periods utilized in the Lipper report (with the first
quintile representing that fifth of the funds in the Expense group with the
lowest level of fees or expenses, as applicable, and the fifth quintile
representing that fifth of the funds in the Expense Group with the highest level
of fees or expenses, as applicable).
Taking all of the above into consideration, the board determined that the
management fee was reasonable in light of the nature, extent and quality of the
services provided to the Fund under the Investment Advisory and Administration
Agreement.
FUND PERFORMANCE--The board received and considered performance information of
the Fund compared to other funds (the "Performance Universe") selected by Lipper
over the one-, three-, five-, ten- and since inception periods ended April 30,
2006. The board was provided with a description of the methodology Lipper used
to determine the similarity of the Fund with the funds included in its
Performance Universe. The board also noted that it had received information
throughout the year at periodic intervals with respect to the Fund's
performance, including in most cases with respect to its benchmark index.
The comparative Lipper information showed that the Fund's performance was in the
fourth quintile for the one-year period, the third quintile for the three-year
period, the fifth quintile for the five-year period and the second quintile for
the ten-year period and since inception (with the first quintile representing
that fifth of the funds in the Performance Universe with the highest performance
and the fifth quintile representing that fifth of the funds in the Performance
Universe with the lowest performance). In its review the board particularly
concentrated on the Fund's performance for the one- and five-year periods as
compared to the average return for the Fund's Performance Universe and benchmark
index, taking the volatility in returns for the Performance Universe and the
index into account. The board took note of management's explanation that the
Fund's portfolio
- --------------------------------------------------------------------------------
62
UBS U.S. ALLOCATION FUND
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
manager had implemented a more conservative investment approach in both security
selection and asset allocation for the one-year period, which was reflected in
the returns for that period. Management also explained that the below average
five-year return was due almost entirely to the legacy Tactical Allocation
investment model, and reminded the board that the Fund had discontinued using
that model and had changed its investment strategies in 2004. Based on its
review, and management's explanations, the board concluded that the Fund's
investment performance was satisfactory.
ADVISER PROFITABILITY--The board received and considered a profitability
analysis of UBS Global AM and its affiliates in providing services to the Fund.
The board also received profitability information with respect to the UBS New
York fund complex as a whole. In addition, the board received information with
respect to UBS Global AM's allocation methodologies used in preparing this
profitability data. UBS Global AM's profitability was considered not excessive
in light of the nature, extent and quality of the services provided to the Fund.
ECONOMIES OF SCALE--The Board received and considered information from
management regarding whether it has achieved economies of scale with respect to
the management of the Fund, whether the Fund has appropriately benefited from
any economies of scale, and whether there is potential realization of further
economies of scale. The Board considered whether economies of scale in the
provision of services to the Fund were being passed along to shareholders. The
Board also considered whether alternative fee structures (such as breakpoints)
would be more appropriate or reasonable taking into consideration economies of
scale or other efficiencies.
Although the Board noted that the Fund's Contractual Management Fee did not
contain breakpoints, it recognized that the Company had entered into an
agreement with UBS Global AM, whereby UBS Global AM agreed to permanently reduce
its Contractual Management Fee by utilizing breakpoints based on the Fund's
average daily net assets, thereby achieving the same effect as if the
Contractual Management Fee contained breakpoints. The Board also noted that as
the Fund's assets have increased over time, it has realized other economies of
scale as certain expenses, such as fees for Trustees, auditors and legal fees,
become a smaller percentage of overall assets.
- --------------------------------------------------------------------------------
63
UBS U.S. ALLOCATION FUND
BOARD APPROVAL OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT (UNAUDITED)
Generally, in light of UBS Global AM's profitability data and the Contractual
Management Fee and Actual Management Fee currently in place, the board believed
that UBS Global AM's sharing of current economies of scale with the Fund was
acceptable.
OTHER BENEFITS TO UBS GLOBAL AM--The board considered other benefits received by
UBS Global AM and its affiliates as a result of its relationship with the Fund,
including the opportunity to offer additional products and services to Fund
shareholders.
In light of the costs of providing investment management, administrative and
other services to the Fund and UBS Global AM's ongoing commitment to the Fund,
the profits and other ancillary benefits that UBS Global AM and its affiliates
received were considered reasonable.
In light of all of the foregoing, the board approved the Investment Advisory and
Administration Agreement to continue for another year.
In making its decision, the board identified no single factor as being
determinative in approving the Investment Advisory and Administration Agreement.
The Independent Trustees were advised by separate independent legal counsel
throughout the entire process. The board discussed the proposed continuance of
the Investment Advisory and Administration Agreement in a private session with
their independent legal counsel at which no representatives of UBS Global AM
were present.
- --------------------------------------------------------------------------------
64
(This page has been left blank intentionally)
- --------------------------------------------------------------------------------
65
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
BOARD OF TRUSTEES & OFFICERS
The Fund is governed by a Board of Trustees which oversees the Fund's
operations. Each trustee serves an indefinite term of office. Officers are
appointed by the trustees and serve at the pleasure of the Board. The table
below shows, for each trustee and officer, his or her name, address and age, the
position held with the Trust, the length of time served as a trustee and officer
of the Fund, the trustee's or officer's principal occupations during the last
five years, the number of portfolios in the UBS fund complex overseen by the
trustee or for which a person served as an officer, and other directorships held
by the trustee.
The Fund's Statement of Additional Information contains additional information
about the trustees and is available, without charge, upon request by calling
1-800-647 1568.
INTERESTED TRUSTEE
TERM OF
POSITION(s) OFFICE+ AND
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(s)
NAME, ADDRESS, AND AGE TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------
Meyer Feldberg; ++ 64 Trustee Since 1996 Professor Feldberg is Dean Emeritus and
Morgan Stanley Sanford Bernstein Professor of Leadership and
1585 Broadway Ethics at Columbia Business School, although
33rd Floor on a two year leave of absence. He is also a
New York, NY 10036 senior advisor to Morgan Stanley (financial
services) (since March 2005). Prior to July
2004, he was Dean and Professor of Management
of the Graduate School of Business at
Columbia University (since 1989).
- --------------------------------------------------------------------------------
66
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX
OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------
Professor Feldberg is a director or trustee of Professor Feldberg is also a director of
29 investment companies (consisting of 48 Primedia Inc. (publishing), Federated
portfolios) for which UBS Global AM or one Department Stores, Inc. (operator of
of its affiliates serves as investment advisor, department stores), Revlon, Inc. (cosmetics)
sub-advisor or manager. and SAPPI, Ltd. (producer of paper).
- --------------------------------------------------------------------------------
67
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
INDEPENDENT TRUSTEES
TERM OF
POSITION(s) OFFICE+ AND
HELD WITH LENGTH OF
NAME, ADDRESS, AND AGE TRUST TIME SERVED PRINCIPAL OCCUPATION(s) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------
Richard Q. Armstrong; 71 Trustee and Since 1995 Mr. Armstrong is chairman and principal of
c/o Willkie Farr & Gallagher Chairman (Trustee) R.Q.A. Enterprises (management consulting
LLP of the Since 2004 firm) (since April 1991 and principal
787 Seventh Avenue Board of (Chairman of occupation since March 1995).
New York, NY 10019-6099 Trustees the Board
of Trustees)
Richard R. Burt; 59 Trustee Since 1996 Mr. Burt is chairman of Diligence Inc.
1275 Pennsylvania Ave., N.W. (information and risk management firm) and
Washington, D.C. 20004 IEP Advisors (international investments and
consulting firm).
Alan S. Bernikow; 65 Trustee Since 2005 Mr. Bernikow is a consultant on
207 Benedict Ave. non-management matters for the firm of
Staten Island, NY 10314 Deloitte & Touche (international accounting
and consulting firm) (since June 2003).
Previously, he was Deputy Chief Executive
Officer at Deloitte & Touche.
Bernard H. Garil; 66 Trustee Since 2005 Mr. Garil is retired (since 2001). He was a
6754 Casa Grande Way Managing Director at PIMCO Advisory Services
Delray Beach, FL 33446 (from 1999 to 2001) where he served as
President of closed-end funds and
Vice-President of the variable insurance
product funds advised by OpCap Advisors
(until 2001).
- --------------------------------------------------------------------------------
68
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX
OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------
Mr. Armstrong is a director or trustee of 16 None
investment companies (consisting of 35
portfolios) for which UBS Global AM or one of
its affiliates serves as investment advisor,
sub-advisor or manager.
Mr. Burt is a director or trustee of 16 Mr. Burt is also a director of The Central
investment companies (consisting of 35 European Fund, Inc., The Germany Fund,
portfolios) for which UBS Global AM or one of Inc., The New Germany Fund, Inc., IGT, Inc.
its affiliates serves as investment advisor, (provides technology to gaming and
sub-advisor or manager. wagering industry) and The Protective
Group, Inc. (produces armor products).
Mr. Bernikow is a director or trustee of 16 Mr. Bernikow is also a director of Revlon,
investment companies (consisting of 35 Inc. (cosmetics) (and serves as the chair of
portfolios) for which UBS Global AM or one of its audit committee), a director of
its affiliates serves as investment advisor, Mack-Cali Realty Corporation (real estate
sub-advisor or manager. investment trust) (and serves as the chair of
its audit committee) and a director of the
Casual Male Retail Group, Inc. (menswear).
Mr. Garil is a director or trustee of 16 Mr. Garil is also a director of OFI Trust
investment companies (consisting of 35 Company (commercial trust company) and
portfolios) for which UBS Global AM or one of a trustee for the Brooklyn College
its affiliates serves as investment advisor, Foundation, Inc. (charitable foundation).
sub-advisor or manager.
- --------------------------------------------------------------------------------
69
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
INDEPENDENT TRUSTEES (CONCLUDED)
TERM OF
POSITION(s) OFFICE+ AND
HELD WITH LENGTH OF
NAME, ADDRESS, AND AGE TRUST TIME SERVED PRINCIPAL OCCUPATION(s) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------
Heather R. Higgins; 47 Trustee Since 2005 Ms. Higgins is the President and Director of
255 E. 49th St., Suite 23D The Randolph Foundation (charitable
New York, NY 10017 foundation) (since 1991). Ms. Higgins also
serves on the boards of several non-profit
charitable groups, including the Independent
Women's Forum (chairman), the Philanthropy
Roundtable (vice chairman) and the Hoover
Institution (executive committee).
- --------------------------------------------------------------------------------
70
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX
OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------
Ms. Higgins is a director or trustee of 16 None
investment companies (consisting of 35
portfolios) for which UBS Global AM or one of
its affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
71
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Joseph Allessie*; 41 Vice President Since 2005 Mr. Allessie is a director and deputy general
and Assistant counsel at UBS Global Asset Management (US)
Secretary Inc and UBS Global AM (collectively, "UBS
Global AM--Americas region") (since 2005).
Prior to joining UBS Global AM--Americas
region, he was senior vice president and
general counsel of Kenmar Advisory Corp.
(from 2004 to 2005). Prior to that
Mr. Allessie was general counsel and
secretary of GAM USA Inc., GAM Investments,
GAM Services, GAM Funds, Inc. and the GAM
Avalon Funds (from 1999 to 2004).
Mr. Allessie is a vice president and
assistant secretary of 20 investment
companies (consisting of 91 portfolios) for
which UBS Global AM--Americas region or one
of its affiliates serves as investment
advisor, sub-advisor or manager.
Rose Ann Bubloski*; 38 Vice President Since 2006 Ms. Bubloski is an associate director
and Assistant (since 2003) and a senior manager of the US
Treasurer mutual fund treasury administration
department of UBS Global AM--Americas region.
Ms. Bubloski is vice president and assistant
treasurer of 20 investment companies
(consisting of 91 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
72
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Thomas Disbrow*; 40 Vice President Since 2000 Mr. Disbrow is a director (since 2001), and
and Treasurer (Vice head of US mutual fund treasury
President); administration department (since September
Since 2004 2006) of UBS Global AM--Americas region.
(Treasurer) Mr. Disbrow is a vice president and treasurer
and/or principal accounting officer of 20
investment companies (consisting of 91
portfolios) for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
Michael J. Flook*; 41 Vice President Since 2006 Mr. Flook is an associate director and a
and Assistant senior manager of the US mutual fund treasury
Treasurer administration department of UBS Global AM--
Americas region (since 2006). Prior to
joining UBS Global AM--Americas region, he
was a senior manager with The Reserve (asset
management firm) from May 2005 to May 2006.
Prior to that he was a senior manager with
PFPC Worldwide since October 2000. Mr. Flook
is a vice president and assistant treasurer
of 20 investment companies (consisting of 91
portfolios) for which UBS Global AM--
Americas region or one of its affiliates
serves as investment advisor, sub-advisor or
manager.
- --------------------------------------------------------------------------------
73
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Mark F. Kemper**; 48 Vice President Since 2004 Mr. Kemper is general counsel of UBS Global
and Secretary AM--Americas region (since 2004). Mr. Kemper
also is a managing director of UBS Global
AM--Americas region (since 2006). He was
deputy general counsel of UBS Global Asset
Management (Americas) Inc. ("UBS Global
AM--Americas") from July 2001 to July 2004.
He has been secretary of UBS Global
AM--Americas since 1999 and assistant
secretary of UBS Global Asset Management
Trust Company since 1993. Mr. Kemper is
secretary of UBS Global AM--Americas region
(since 2004). Mr. Kemper is vice president
and secretary of 20 investment companies
(consisting of 91 portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Joanne M. Kilkeary*; 38 Vice President Since 2004 Ms. Kilkeary is an associate director (since
and Assistant 2000) and a senior manager (since 2004) of
Treasurer the US mutual fund treasury administration
department of UBS Global AM--Americas region.
Ms. Kilkeary is a vice president and
assistant treasurer of 20 investment
companies (consisting of 91 portfolios) for
which UBS Global AM--Americas region or one
of its affiliates serves as investment
advisor, sub-advisor or manager.
- --------------------------------------------------------------------------------
74
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Tammie Lee*; 35 Vice President Since 2005 Ms. Lee is a director and associate general
and Assistant counsel of UBS Global AM--Americas
Secretary region (since 2005). Prior to joining UBS
Global AM-Americas region, she was
vice president and counsel at Deutsche
Asset Management/Scudder Investments
from 2003 to 2005. Prior to that she was
assistant vice president and counsel at
Deutsche Asset Management/Scudder
Investments from 2000 to 2003. Ms. Lee
is a vice president and assistant secretary
of 20 investment companies (consisting
of 91 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Joseph McGill*; 44 Vice President Since 2004 Mr. McGill is a managing director (since
and Chief 2006) and chief compliance officer (since
Compliance 2003) at UBS Global AM--Americas
Officer region. Prior to joining UBS Global AM--
Americas region, he was assistant general
counsel at J. P. Morgan Investment
Management (from 1999 to 2003).
Mr. McGill is a vice president and chief
compliance officer of 20 investment
companies (consisting of 91 portfolios)
for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
- --------------------------------------------------------------------------------
75
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Eric Sanders*; 41 Vice President Since 2005 Mr. Sanders is a director and associate
and Assistant general counsel of UBS Global AM--
Secretary Americas region (since 2005). From 1996
until June 2005, he held various positions
at Fred Alger & Company, Incorporated,
the most recent being assistant vice
president and associate general counsel.
Mr. Sanders is a vice president and
assistant secretary of 20 investment
companies (consisting of 91 portfolios)
for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or manager.
Andrew Shoup *; 50 Vice President Since 2006 Mr. Shoup is a managing director and
and Chief senior member of the Global Treasury
Operating Administration department of UBS Global
Officer AM--Americas region (since July 2006).
Prior to joining UBS Global AM--Americas
region, he was Chief Administrative
Officer for the Legg Mason Partner Funds
(formerly Smith Barney, Salomon
Brothers, and CitiFunds mutual funds)
from November 2003 to July 2006. Prior
to that, he held various positions with
Citigroup Asset Management and related
Companies with their domestic and
offshore mutual funds since 1993.
Additionally, he has worked for another
mutual fund complex as well as spending
eleven years in public accounting.
Mr. Shoup is a Vice President of 20
investment companies (consisting of
91 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
76
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Brian D. Singer**; 46 Vice President Since 2004 Mr. Singer is chief investment officer--
UBS Global AM--Americas region (since 2003).
Prior to 2003, he was global head of asset
allocation and risk management at UBS Global
AM--Americas region. Mr. Singer is a vice
president of two investment companies
(consisting of two portfolios) for which UBS
Global AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Kai R. Sotorp**; 47 President Since 2006 Mr. Sotorp is the Head of the Americas for
UBS Global Asset Management (since 2004); a
member of the UBS Group Managing Board (since
2003) and a member of the UBS Global Asset
Management Executive Committee (since 2001).
Prior to his current role, Mr. Sotorp was
Head of UBS Global Asset Management--Asia
Pacific (2002-2004), covering Australia,
Japan, Hong Kong, Singapore and Taiwan; Head
of UBS Global Asset Management (Japan) Ltd.
(2001-2004); Representative Director and
President of UBS Global Asset Management
(Japan) Ltd. (2000-2004) and member of the
board of Mitsubishi Corp.--UBS Realty Inc.
(2000-2004) Mr. Sotorp is President of 16
investment companies (consisting of 35
portfolios) for which UBS Global Asset
Management--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
77
UBS U.S. ALLOCATION FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONCLUDED)
TERM OF PRINCIPAL OCCUPATION(s) DURING
POSITION(s) OFFICE+ AND PAST 5 YEARS; NUMBER OF PORTFOLIOS
HELD WITH LENGTH OF IN FUND COMPLEX FOR WHICH PERSON
NAME, ADDRESS, AND AGE THE FUND TIME SERVED SERVES AS OFFICER
- ------------------------------------------------------------------------------------------------------------------
Keith A. Weller*; 45 Vice President Since 1996 Mr. Weller is an executive director and
and Assistant senior associate general counsel of UBS
Secretary Global AM--Americas region (since 2005) and
has been an attorney with affiliated entities
since 1995. Mr. Weller is a vice president
and assistant secretary of 20 investment
companies (consisting of 91 portfolios) for
which UBS Global AM--Americas region or one
of its affiliates serves as investment
advisor, sub-advisor or manager.
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
** This person's business address is One North Wacker Drive, Chicago, Illinois
60606
+ Each trustee holds office for an indefinite term. Each trustee who has
attained the age of seventy-two (72) years will be subject to retirement on
the last day of the month in which he or she attains such age. Officers of
the Fund are appointed by the trustees and serve at the pleasure of the
Board.
++ Professor Feldberg is deemed an "interested person" of the Fund as defined
in the Investment Company Act because he is a senior advisor to Morgan
Stanley, a financial services firm with which the Fund may conduct
transactions.
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TRUSTEES
Richard Q. Armstrong Meyer Feldberg
Chairman
Bernard H. Garil
Alan S. Bernikow Heather R. Higgins
Richard R. Burt
PRINCIPAL OFFICERS
Kai Sotorp 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
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, New York 10019-6114
This report is not to be used in connection with the offering of shares of the
Fund unless accompanied or preceded by an effective prospectus.
(C) 2006 UBS Global Asset Management (Americas) Inc. All rights reserved.
[LOGO OF UBS] UBS
-------------
PRESORTED
STANDARD
U.S. POSTAGE
PAID
COMPUTERSHARE
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UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.
51 West 52nd Street
New York, New York 10019-6114
ITEM 2. CODE OF ETHICS.
- -----------------------
The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions pursuant to Section 406 of
the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of
ethics adopted pursuant to Sarbanes-Oxley as a "Code of Conduct" to lessen the
risk of confusion with its separate code of ethics adopted pursuant to Rule
17j-1 under the Investment Company Act of 1940, as amended.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- -----------------------------------------
The registrant's Board has determined that the following person serving on the
registrant's Audit Committee is an "audit committee financial expert" as defined
in item 3 of Form N-CSR: Alan S. Bernikow. Mr. Bernikow is independent as
defined in item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
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(a) Audit Fees:
----------
For the fiscal years ended August 31, 2006 and August 31, 2005, the
aggregate Ernst & Young LLP (E&Y) audit fees for professional services
rendered to the registrant were approximately $56,400 and $65,700,
respectively.
Fees included in the audit fees category are those associated with the
annual audits of financial statements and services that are normally
provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees:
------------------
In each of the fiscal years ended August 31, 2006 and August 31, 2005,
the aggregate audit-related fees billed by E&Y for services rendered
to the registrant that are reasonably related to the performance of
the audits of the financial statements, but not reported as audit
fees, were approximately $3,773 and $6,212, respectively.
Fees included in the audit-related fees category are those associated
with (1) the reading and providing of comments on the 2006 and 2005
semiannual financial statements and (2) review of the consolidated
2005 and 2004 reports on the profitability of the UBS Funds to UBS
Global Asset Management (US) Inc. and its affiliates to assist the
board members in their annual advisory/administration contract and
service/distribution plan reviews.
There were no audit-related fees required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal
years indicated above.
(c) Tax Fees:
--------
In each of the fiscal years ended August 31, 2006 and August 31, 2005,
the aggregate tax fees billed by E&Y for professional services
rendered to the registrant were approximately $5,300 and $6,100,
respectively.
Fees included in the tax fees category comprise all services performed
by professional staff in the independent accountant's tax division
except those services related to the audits. This category comprises
fees for review of tax compliance, tax return preparation and excise
tax calculations.
There were no tax fees required to be approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years
indicated above.
(d) All Other Fees:
--------------
In each of the fiscal years ended August 31, 2006 and August 31, 2005,
there were no fees billed by E&Y for products and services, other than
the services reported in Item 4(a)-(c) above, rendered to the
registrant.
Fees included in the all other fees category would consist of services
related to internal control reviews, strategy and other consulting,
financial information systems design and implementation, consulting on
other information systems, and other tax services unrelated to the
registrant.
There were no "all other fees" required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal
years indicated above.
(e) (1) Audit Committee Pre-Approval Policies and Procedures:
----------------------------------------------------
The registrant's Audit Committee ("audit committee") has adopted an
"Audit Committee Charter (Amended and Restated as of May 12, 2004 -
Revised as of February 3, 2006)" (the "charter"). The charter
contains the audit committee's pre-approval policies and
procedures. Reproduced below is an excerpt from the charter
regarding pre-approval policies and procedures:
The [audit] Committee shall:
...
2. Pre-approve (a) all audit and permissible non-audit
services(1) to be provided to the Fund and (b) all permissible
non-audit services to be provided by the Fund's independent
auditors to UBS Global Asset Management (Americas) Inc. ("UBS
Global AM") and any Covered Service Providers, if the
engagement relates directly to the operations and financial
reporting of the Fund. In carrying out this responsibility,
the Committee shall seek periodically from UBS Global [AM] and
from the independent auditors a list of such audit and
permissible non-audit services that can be expected to be
rendered to the Fund, UBS Global [AM] or any Covered Service
Providers by the Fund's independent auditors, and an estimate
of the fees sought to be paid in connection with such
services. The Committee may delegate its responsibility to
pre-approve any such audit and permissible non-audit services
to a sub-committee consisting of the Chairperson of the
Committee
and two other members of the Committee as the Chairperson,
from time to time, may determine and appoint, and such
sub-committee shall report to the Committee, at its next
regularly scheduled meeting after the sub-committee's
meeting, its decision(s). From year to year, the Committee
shall report to the Board whether this system of pre-approval
has been effective and efficient or whether this Charter
should be amended to allow for pre-approval pursuant to such
policies and procedures as the Committee shall approve,
including the delegation of some or all of the Committee's
pre-approval responsibilities to other persons (other than
UBS Global [AM] or the Fund's officers).
______________
(1) The Committee will not approve non-audit services
that the Committee believes may taint the independence
of the auditors. Currently, permissible non-audit
services include any professional services (including
tax services) that are not prohibited services as
described below, provided to the Fund by the
independent auditors, other than those provided to the
Fund in connection with an audit or a review of the
financial statements of the Fund. Permissible
non-audit services may not include: (i) bookkeeping or
other services related to the accounting records or
financial statements of the Fund; (ii) financial
information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services;
(v) internal audit outsourcing services; (vi)
management functions or human resources; (vii) broker
or dealer, investment adviser or investment banking
services; (viii) legal services and expert services
unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines,
by regulation, is impermissible.
Pre-approval by the Committee of any permissible
non-audit services is not required so long as: (i) the
aggregate amount of all such permissible non-audit
services provided to the Fund, UBS Global [AM] and any
service providers controlling, controlled by or under
common control with UBS Global [AM] that provide
ongoing services to the Fund ("Covered Service
Providers") constitutes not more than 5% of the total
amount of revenues paid to the independent auditors
(during the fiscal year in which the permissible
non-audit services are provided) by (a) the Fund, (b)
its investment adviser and (c) any entity controlling,
controlled by, or under common control with the
investment adviser that provides ongoing services to
the Fund during the fiscal year in which the services
are provided that would have to be approved by the
Committee; (ii) the permissible non-audit services
were not recognized by the Fund at the time of the
engagement to be non-audit services; and (iii) such
services are promptly brought to the attention of the
Committee and approved by the Committee (or its
delegate(s)) prior to the completion of the audit.
(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X:
Audit-Related Fees:
------------------
There were no amounts that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended
August 31, 2006 and August 31, 2005 on behalf of the registrant.
There were no amounts that were required to be approved by the
audit committee pursuant to the de minimis exception for the
fiscal years ended August 31, 2006 and August 31, 2005 on behalf
of the registrant's service providers that relate directly to the
operations and financial reporting of the registrant.
Tax Fees:
--------
There were no amounts that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended
August 31, 2006 and August 31, 2005 on behalf of the registrant.
There were no amounts that were required to be approved by the
audit committee pursuant to the de minimis exception for the
fiscal years ended August 31, 2006 and August 31, 2005 on behalf
of the registrant's service providers that relate directly to the
operations and financial reporting of the registrant.
All Other Fees:
--------------
There were no amounts that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended
August 31, 2006 and August 31, 2005 on behalf of the registrant.
There were no amounts that were required to be approved by the
audit committee pursuant to the de minimis exception for the
fiscal years ended August 31, 2006 and August 31, 2005 on behalf
of the registrant's service providers that relate directly to the
operations and financial reporting of the registrant.
(f) According to E&Y, for the fiscal year ended August 31, 2006, the
percentage of hours spent on the audit of the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons who are not full-time, permanent employees of E&Y
was 0%.
(g) For the fiscal years ended August 31, 2006 and August 31, 2005, the
aggregate fees billed by E&Y of $1,888,547 and $2,876,074,
respectively, for non-audit services rendered on behalf of the
registrant ("covered"), its investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any
entity controlling, controlled by, or under common control with the
adviser ("non-covered") that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant is
shown in the table below:
2006 2005
---- ----
Covered Services $ 9,073 $ 12,312
Non-Covered Services 1,879,474 2,863,762
(h) The registrant's audit committee was not required to consider whether
the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under
common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- -----------------------------------------------
Not applicable to the registrant.
ITEM 6. 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 that occurred during the registrant's most
recent fiscal half-year that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
- ------------------
(a) (1) Code of Ethics as required pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 (and designated by registrant as a "Code of
Conduct") is incorporated by reference herein from Exhibit EX-99.CODE
ETH to the registrant's Report on Form N-CSR filed November 9, 2004
(Accession Number: 0000950136-04-003777)(SEC File No. 811-06292).
(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 Investment Trust
By: /s/ Kai Sotorp
--------------
Kai Sotorp
President
Date: November 8, 2006
----------------
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/ Kai Sotorp
--------------
Kai Sotorp
President
Date: November 8, 2006
----------------
By: /s/ Thomas Disbrow
------------------
Thomas Disbrow
Vice President and Treasurer
Date: November 8, 2006
----------------