UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF
PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-02319
| Fort Dearborn Income Securities, Inc. |
| (Exact name of registrant as specified in charter) |
| One North Wacker Drive, Chicago, IL 60606-2807 |
| (Address of principal executive offices) (Zip code) |
Joseph J. Allessie,
Esq.
UBS Global Asset Management (Americas) Inc.
1285 Avenue of the
Americas
New York, NY 10019
(Name and address of agent for service)
Copy to:
Bruce G. Leto,
Esq.
Stradley Ronon Stevens & Young LLP
2600 One Commerce
Square
Philadelphia, PA 19103
Registrant’s telephone number, including area code: 212-821 3000
Date of fiscal year end: September 30
Date of reporting period: December 31, 2013
Item 1. Schedule of Investments
Fort Dearborn Income Securities, Inc.
| Industry diversification | ||
| (unaudited) | ||
| As a percentage of net assets as of December 31, 2013 | ||
| Bonds | ||
| Corporate bonds | ||
| Automobiles | 0.89 | % |
| Building products | 0.08 | |
| Capital markets | 6.14 | |
| Chemicals | 1.98 | |
| Commercial banks | 13.43 | |
| Commercial services & supplies | 0.72 | |
| Communications equipment | 0.40 | |
| Computers & peripherals | 0.77 | |
| Consumer finance | 2.98 | |
| Diversified financial services | 11.36 | |
| Diversified telecommunication services | 2.21 | |
| Electric utilities | 0.76 | |
| Electronic equipment, instruments & | ||
| components | 1.05 | |
| Energy equipment & services | 1.14 | |
| Food & staples retailing | 0.55 | |
| Gas utilities | 0.60 | |
| Health care providers & services | 0.47 | |
| Hotels, restaurants & leisure | 0.48 | |
| Insurance | 6.69 | |
| Leisure equipment & products | 0.15 | |
| Life sciences tools & services | 0.11 | |
| Machinery | 1.28 | |
| Media | 2.62 | |
| Metals & mining | 3.65 | |
| Office electronics | 0.45 | |
| Oil, gas & consumable fuels | 9.48 | |
| Paper & forest products | 1.21 | |
| Pharmaceuticals | 0.09 | |
| Real estate investment trust (REIT) | 0.68 | |
| Tobacco | 2.36 | |
| Trading companies & distributors | 1.47 | |
| Wireless telecommunication services | 0.49 | |
| Total corporate bonds | 76.74 | % |
| Asset-backed security | 0.21 | |
| Commercial mortgage-backed securities | 6.69 | |
| Mortgage & agency debt securities | 4.08 | |
| Municipal bonds | 5.72 | |
| US government obligation | 1.62 | |
| Non-US government obligations | 1.38 | |
| Total bonds | 96.44 | % |
| Common stock | 0.05 | |
| Preferred stock | 0.09 | |
| Short-term investments | 2.56 | |
| Total investments | 99.14 | % |
| Cash and other assets, less liabilities | 0.86 | |
| Net assets | 100.00 | % |
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Bonds: 96.44% | ||||||
| Corporate bonds: 76.74% | ||||||
| Brazil: 2.22% | ||||||
| Caixa Economica Federal, | ||||||
| 2.375%, due 11/06/171 | $ | 1,400,000 | $ | 1,295,000 | ||
| Petrobras International Finance Co., | ||||||
| 5.375%, due 01/27/21 | 1,130,000 | 1,125,344 | ||||
| 6.875%, due 01/20/40 | 675,000 | 634,858 | ||||
| Total Brazil corporate bonds | 3,055,202 | |||||
| Canada: 0.47% | ||||||
| EnCana Corp., | ||||||
| 6.625%, due 08/15/37 | 250,000 | 276,499 | ||||
| Teck Resources Ltd., | ||||||
| 6.250%, due 07/15/41 | 375,000 | 373,286 | ||||
| Total Canada corporate bonds | 649,785 | |||||
| Cayman Islands: 2.94% | ||||||
| Seagate HDD Cayman, | ||||||
| 3.750%, due 11/15/181 | 1,050,000 | 1,061,812 | ||||
| Transocean, Inc., | ||||||
| 3.800%, due 10/15/22 | 340,000 | 322,261 | ||||
| 6.800%, due 03/15/38 | 535,000 | 595,462 | ||||
| 7.500%, due 04/15/31 | 575,000 | 657,175 | ||||
| Vale Overseas Ltd., | ||||||
| 4.375%, due 01/11/22 | 1,465,000 | 1,424,713 | ||||
| Total Cayman Islands corporate bonds | 4,061,423 | |||||
| China: 0.20% | ||||||
| China Oil & Gas Group Ltd., | ||||||
| 5.250%, due 04/25/181 | 280,000 | 279,300 | ||||
| Curacao: 0.09% | ||||||
| Teva Pharmaceutical Finance IV BV, | ||||||
| 3.650%, due 11/10/21 | 125,000 | 122,602 | ||||
| France: 0.58% | ||||||
| Orange SA, | ||||||
| 8.750%, due 03/01/31 | 575,000 | 793,888 | ||||
| Luxembourg: 0.63% | ||||||
| Intelsat Jackson Holdings SA, | ||||||
| 7.500%, due 04/01/21 | 500,000 | 551,250 | ||||
| Telecom Italia Capital SA, | ||||||
| 6.375%, due 11/15/33 | 350,000 | 316,750 | ||||
| Total Luxembourg corporate bonds | 868,000 | |||||
| Mexico: 1.78% | ||||||
| America Movil SAB de CV, | ||||||
| 5.000%, due 03/30/20 | 625,000 | 680,587 | ||||
| Petroleos Mexicanos, | ||||||
| 3.500%, due 07/18/18 | 685,000 | 703,838 | ||||
| 3.500%, due 01/30/23 | 700,000 | 640,500 | ||||
| 6.500%, due 06/02/41 | 410,000 | 427,425 | ||||
| Total Mexico corporate bonds | 2,452,350 | |||||
| Netherlands: 2.58% | ||||||
| Basell Finance Co. BV, | ||||||
| 8.100%, due 03/15/271 | 625,000 | 789,181 | ||||
| EDP Finance BV, | ||||||
| 4.900%, due 10/01/191 | 1,000,000 | 1,017,500 | ||||
| 6.000%, due 02/02/181 | 350,000 | 375,288 | ||||
| LyondellBasell Industries NV, | ||||||
| 6.000%, due 11/15/21 | 1,200,000 | 1,380,134 | ||||
| Total Netherlands corporate bonds | 3,562,103 | |||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Corporate bonds–(Continued) | ||||||
| Norway: 1.62% | ||||||
| Eksportfinans ASA, | ||||||
| 5.500%, due 05/25/16 | $ | 620,000 | $ | 654,100 | ||
| 5.500%, due 06/26/17 | 1,500,000 | 1,581,750 | ||||
| Total Norway corporate bonds | 2,235,850 | |||||
| Singapore: 0.21% | ||||||
| Flextronics International Ltd., | ||||||
| 5.000%, due 02/15/23 | 300,000 | 281,400 | ||||
| South Africa: 0.29% | ||||||
| AngloGold Ashanti Holdings PLC, | ||||||
| 5.375%, due 04/15/20 | 430,000 | 403,125 | ||||
| Spain: 2.01% | ||||||
| BBVA US Senior SAU, | ||||||
| 4.664%, due 10/09/15 | 1,700,000 | 1,787,173 | ||||
| Telefonica Emisiones SAU, | ||||||
| 3.192%, due 04/27/18 | 970,000 | 987,864 | ||||
| Total Spain corporate bonds | 2,775,037 | |||||
| Sweden: 0.92% | ||||||
| Nordea Bank AB, | ||||||
| 4.875%, due 05/13/211 | 1,230,000 | 1,271,355 | ||||
| United Kingdom: 5.53% | ||||||
| Barclays Bank PLC, | ||||||
| 2.750%, due 02/23/15 | 350,000 | 357,906 | ||||
| 5.140%, due 10/14/20 | 760,000 | 809,303 | ||||
| 6.050%, due 12/04/171 | 1,500,000 | 1,676,974 | ||||
| Lloyds TSB Bank PLC, | ||||||
| 6.500%, due 09/14/201 | 2,300,000 | 2,614,502 | ||||
| Royal Bank of Scotland Group PLC, | ||||||
| 6.100%, due 06/10/23 | 1,760,000 | 1,774,249 | ||||
| Sinopec Group Overseas Development | ||||||
| 2013 Ltd., | ||||||
| 2.500%, due 10/17/181 | 400,000 | 395,020 | ||||
| Total United Kingdom corporate bonds | 7,627,954 | |||||
| United States: 54.67% | ||||||
| 21st Century Fox America, Inc., | ||||||
| 7.750%, due 12/01/45 | 350,000 | 442,261 | ||||
| ADT Corp., | ||||||
| 3.500%, due 07/15/22 | 1,140,000 | 992,315 | ||||
| AEP Texas Central Co., | ||||||
| Series E, 6.650%, due 02/15/33 | 495,000 | 571,735 | ||||
| Allstate Corp., | ||||||
| 5.750%, due 08/15/532 | 1,000,000 | 1,007,500 | ||||
| Ally Financial, Inc., | ||||||
| 4.078%, due 06/15/153 | 1,150,000 | 1,104,000 | ||||
| 8.300%, due 02/12/15 | 550,000 | 591,250 | ||||
| Altria Group, Inc., | ||||||
| 4.000%, due 01/31/24 | 750,000 | 733,060 | ||||
| 9.700%, due 11/10/18 | 658,000 | 864,870 | ||||
| American International Group, Inc., | ||||||
| 5.850%, due 01/16/18 | 785,000 | 900,434 | ||||
| Anadarko Holding Co., | ||||||
| 7.500%, due 10/15/26 | 1,354,000 | 1,552,219 | ||||
| AT&T, Inc., | ||||||
| 4.300%, due 12/15/42 | 26,000 | 22,054 | ||||
| AXA Financial, Inc., | ||||||
| 7.000%, due 04/01/28 | 165,000 | 181,369 | ||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Corporate bonds–(Continued) | ||||||
| Bank of America Corp., | ||||||
| 1.281%, due 01/15/192 | $ | 1,000,000 | $ | 1,007,816 | ||
| Barrick North America Finance LLC, | ||||||
| 5.750%, due 05/01/43 | 750,000 | 674,403 | ||||
| Boston Properties LP, REIT, | ||||||
| 3.800%, due 02/01/24 | 430,000 | 412,354 | ||||
| Case New Holland, Inc., | ||||||
| 7.875%, due 12/01/17 | 1,500,000 | 1,770,000 | ||||
| CenturyLink, Inc., | ||||||
| Series P, 7.600%, due 09/15/39 | 200,000 | 178,000 | ||||
| Citigroup, Inc., | ||||||
| Series D, 5.350%, due 05/15/232,4 | 1,430,000 | 1,255,540 | ||||
| 8.125%, due 07/15/39 | 1,435,000 | 2,012,857 | ||||
| DISH DBS Corp., | ||||||
| 7.875%, due 09/01/19 | 1,300,000 | 1,488,500 | ||||
| Dow Chemical Co., | ||||||
| 8.550%, due 05/15/19 | 222,000 | 286,645 | ||||
| El Paso Corp. | ||||||
| 7.250%, due 06/01/18 | 300,000 | 342,492 | ||||
| Energy Transfer Partners LP, | ||||||
| 5.200%, due 02/01/22 | 500,000 | 526,397 | ||||
| 9.000%, due 04/15/19 | 900,000 | 1,137,490 | ||||
| ERP Operating LP, REIT, | ||||||
| 4.750%, due 07/15/20 | 485,000 | 522,903 | ||||
| Fidelity National Financial, Inc., | ||||||
| 5.500%, due 09/01/22 | 700,000 | 726,015 | ||||
| Ford Motor Co., | ||||||
| 7.450%, due 07/16/31 | 1,000,000 | 1,224,668 | ||||
| Ford Motor Credit Co. LLC, | ||||||
| 8.125%, due 01/15/20 | 675,000 | 844,054 | ||||
| Freeport-McMoRan Copper & Gold, Inc., | ||||||
| 3.550%, due 03/01/22 | 200,000 | 190,080 | ||||
| General Electric Capital Corp., | ||||||
| 0.618%, due 05/05/262 | 1,000,000 | 903,226 | ||||
| Series C, 5.250%, due 06/15/232,4 | 1,650,000 | 1,551,000 | ||||
| General Motors Financial Co., Inc., | ||||||
| 4.750%, due 08/15/171 | 850,000 | 902,062 | ||||
| Genworth Holdings, Inc., | ||||||
| 7.625%, due 09/24/21 | 900,000 | 1,070,995 | ||||
| Georgia-Pacific LLC, | ||||||
| 8.000%, due 01/15/24 | 1,300,000 | 1,673,148 | ||||
| Glencore Funding LLC, | ||||||
| 1.396%, due 05/27/161,2 | 1,000,000 | 995,321 | ||||
| Goldman Sachs Group, Inc., | ||||||
| 5.750%, due 01/24/22 | 1,355,000 | 1,525,307 | ||||
| 6.750%, due 10/01/37 | 570,000 | 634,151 | ||||
| Harris Corp., | ||||||
| 6.375%, due 06/15/19 | 200,000 | 231,565 | ||||
| Hasbro, Inc., | ||||||
| 6.350%, due 03/15/40 | 200,000 | 210,670 | ||||
| HCA, Inc., | ||||||
| 7.875%, due 02/15/20 | 600,000 | 644,250 | ||||
| HSBC Bank USA N.A., | ||||||
| 4.875%, due 08/24/20 | 250,000 | 269,808 | ||||
| International Lease Finance Corp., | ||||||
| 7.125%, due 09/01/181 | 1,750,000 | 2,025,625 | ||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Corporate bonds–(Continued) | ||||||
| JPMorgan Chase & Co., | ||||||
| 3.375%, due 05/01/23 | $ | 360,000 | $ | 335,520 | ||
| 3.700%, due 01/20/15 | 1,882,000 | 1,940,726 | ||||
| Series 1, 7.900%, due 04/30/182,4 | 3,000,000 | 3,307,500 | ||||
| Kinder Morgan Energy Partners LP, | ||||||
| 5.800%, due 03/15/35 | 710,000 | 727,881 | ||||
| 6.500%, due 09/01/39 | 75,000 | 82,225 | ||||
| Kroger Co., | ||||||
| 6.900%, due 04/15/38 | 650,000 | 757,048 | ||||
| Liberty Mutual Group, Inc., | ||||||
| 4.250%, due 06/15/231 | 1,000,000 | 965,531 | ||||
| Life Technologies Corp., | ||||||
| 6.000%, due 03/01/20 | 135,000 | 155,118 | ||||
| Massachusetts Mutual Life Insurance Co., | ||||||
| 8.875%, due 06/01/391 | 275,000 | 394,092 | ||||
| Merrill Lynch & Co., Inc., | ||||||
| 1.003%, due 09/15/262 | 1,000,000 | 860,323 | ||||
| 6.875%, due 04/25/18 | 1,000,000 | 1,182,368 | ||||
| 7.750%, due 05/14/38 | 1,000,000 | 1,291,065 | ||||
| MetLife, Inc., | ||||||
| 6.400%, due 12/15/36 | 1,130,000 | 1,161,075 | ||||
| Monongahela Power Co., | ||||||
| 4.100%, due 04/15/241 | 275,000 | 274,869 | ||||
| Morgan Stanley, | ||||||
| 4.100%, due 05/22/23 | 1,000,000 | 967,751 | ||||
| Series F, 5.625%, due 09/23/19 | 1,175,000 | 1,335,606 | ||||
| 7.300%, due 05/13/19 | 560,000 | 680,069 | ||||
| Motorola Solutions, Inc., | ||||||
| 3.500%, due 03/01/23 | 350,000 | 323,801 | ||||
| NextEra Energy Capital Holdings, Inc., | ||||||
| 6.650%, due 06/15/672 | 200,000 | 204,000 | ||||
| ONEOK Partners LP, | ||||||
| 8.625%, due 03/01/19 | 215,000 | 269,649 | ||||
| Owens Corning, | ||||||
| 6.500%, due 12/01/16 | 97,000 | 107,640 | ||||
| Phillips 66, | ||||||
| 4.300%, due 04/01/22 | 225,000 | 228,649 | ||||
| Plains Exploration & Production Co., | ||||||
| 6.500%, due 11/15/20 | 830,000 | 916,635 | ||||
| 6.875%, due 02/15/23 | 950,000 | 1,059,250 | ||||
| PNC Financial Services Group, Inc., | ||||||
| 4.459%, due 02/21/142,4 | 1,000,000 | 997,500 | ||||
| Series R, 4.850%, due 06/01/232,4 | 1,000,000 | 895,500 | ||||
| Prudential Financial, Inc., | ||||||
| 5.200%, due 03/15/442 | 2,305,000 | 2,230,087 | ||||
| Series B, 5.750%, due 07/15/33 | 40,000 | 42,960 | ||||
| Regions Bank, | ||||||
| 7.500%, due 05/15/18 | 1,850,000 | 2,189,079 | ||||
| Reynolds American, Inc., | ||||||
| 6.150%, due 09/15/43 | 100,000 | 107,985 | ||||
| 7.250%, due 06/15/37 | 1,325,000 | 1,551,538 | ||||
| Sanmina-SCI Corp., | ||||||
| 7.000%, due 05/15/191 | 1,090,000 | 1,159,488 | ||||
| SLM Corp., | ||||||
| 3.875%, due 09/10/15 | 650,000 | 671,937 | ||||
| Southern Copper Corp., | ||||||
| 3.500%, due 11/08/22 | 800,000 | 733,288 | ||||
| 6.750%, due 04/16/40 | 250,000 | 241,270 | ||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Corporate bonds–(Concluded) | ||||||
| Southern Natural Gas Co., | ||||||
| 8.000%, due 03/01/32 | $ | 430,000 | $ | 549,829 | ||
| Sprint Capital Corp., | ||||||
| 6.875%, due 11/15/28 | 200,000 | 188,500 | ||||
| SunTrust Bank, | ||||||
| 7.250%, due 03/15/18 | 495,000 | 582,410 | ||||
| Tesoro Corp., | ||||||
| 9.750%, due 06/01/19 | 370,000 | 400,525 | ||||
| Time Warner Cable, Inc., | ||||||
| 7.300%, due 07/01/38 | 600,000 | 598,308 | ||||
| 8.750%, due 02/14/19 | 910,000 | 1,085,486 | ||||
| US Bancorp, | ||||||
| 2.950%, due 07/15/22 | 150,000 | 139,369 | ||||
| Valero Energy Corp., | ||||||
| 7.500%, due 04/15/32 | 465,000 | 565,545 | ||||
| Valspar Corp., | ||||||
| 4.200%, due 01/15/22 | 275,000 | 271,203 | ||||
| Wells Fargo & Co., | ||||||
| 1.250%, due 02/13/15 | 958,000 | 965,909 | ||||
| Wells Fargo Capital X, | ||||||
| 5.950%, due 12/15/36 | 475,000 | 459,960 | ||||
| Williams Cos., Inc., | ||||||
| 8.750%, due 03/15/32 | 177,000 | 206,650 | ||||
| Williams Partners LP, | ||||||
| 5.250%, due 03/15/20 | 500,000 | 546,737 | ||||
| 6.300%, due 04/15/40 | 275,000 | 295,546 | ||||
| Wyndham Worldwide Corp., | ||||||
| 3.900%, due 03/01/23 | 710,000 | 668,796 | ||||
| Xerox Corp., | ||||||
| 6.350%, due 05/15/18 | 540,000 | 617,155 | ||||
| XL Group PLC, | ||||||
| Series E, 6.500%, due 04/15/172,4 | 750,000 | 737,813 | ||||
| Total United States corporate bonds | 75,429,173 | |||||
| Total corporate bonds | ||||||
| (cost $104,258,465) | 105,868,547 | |||||
| Asset-backed security: 0.21% | ||||||
| United States: 0.21% | ||||||
| Continental Airlines, Inc., | ||||||
| Series 2009-2, Class A, | ||||||
| 7.250%, due 11/10/19 | ||||||
| (cost $247,823) | 247,823 | 284,996 | ||||
| Commercial mortgage-backed securities: 6.69% | ||||||
| United States: 6.69% | ||||||
| Americold 2010 LLC Trust, | ||||||
| Series 2010-ARTA, Class D, | ||||||
| 7.443%, due 01/14/291 | 440,000 | 488,647 | ||||
| BAMLL Commercial Mortgage | ||||||
| Securities Trust, | ||||||
| Series 2013-DSNY, Class E, | ||||||
| 2.767%, due 09/15/261,2 | 1,000,000 | 1,000,000 | ||||
| Banc of America Commercial Mortgage, Inc., | ||||||
| Series 2007-2, Class AM, | ||||||
| 5.645%, due 04/10/492 | 475,000 | 527,914 | ||||
| Boca Hotel Portfolio Trust, | ||||||
| Series 2013-BOCA, Class D, | ||||||
| 3.217%, due 08/15/261,2 | 1,000,000 | 1,001,198 | ||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Commercial mortgage-backed securities– | ||||||
| (Concluded) | ||||||
| Commercial Mortgage Pass Through | ||||||
| Certificates, | ||||||
| Series 2013-THL, Class D, | ||||||
| 2.820%, due 06/08/301,2 | $ | 1,500,000 | $ | 1,505,341 | ||
| Series 2013-FL3, Class MMHP, | ||||||
| 3.767%, due 10/13/281,2 | 900,000 | 901,767 | ||||
| FREMF Mortgage Trust, | ||||||
| Series 2013-KF02, Class B, | ||||||
| 3.165%, due 12/25/451,2 | 799,395 | 807,523 | ||||
| GS Mortgage Securities Corp. II, | ||||||
| Series 2013-KYO, Class D, | ||||||
| 2.768%, due 11/08/291,2 | 515,000 | 511,823 | ||||
| Madison Avenue Trust, | ||||||
| Series 2013-650M, Class D, | ||||||
| 4.034%, due 10/12/321,2 | 500,000 | 486,211 | ||||
| Morgan Stanley Re-REMIC Trust, | ||||||
| Series 2009-GG10, Class A4B, | ||||||
| 5.804%, due 08/12/451,2 | 1,000,000 | 1,092,333 | ||||
| Wells Fargo Commercial Mortgage Trust, | ||||||
| Series 2013-120B, Class C, | ||||||
| 2.710%, due 03/18/281,2 | 1,000,000 | 912,398 | ||||
| Total commercial mortgage-backed | ||||||
| securities | ||||||
| (cost $9,052,117) | 9,235,155 | |||||
| Mortgage & agency debt securities: 4.08% | ||||||
| United States: 4.08% | ||||||
| Federal Home Loan Mortgage Corp.,5 | ||||||
| 5.000%, due 01/30/14 | 30,000 | 30,116 | ||||
| Federal Home Loan Mortgage Corp., Gold Pools,5 | ||||||
| #E01127, 6.500%, due 02/01/17 | 19,278 | 20,399 | ||||
| Federal Home Loan Mortgage Corp. | ||||||
| REMIC, IO,5 | ||||||
| 3.500%, due 10/15/42 | 2,695,673 | 640,209 | ||||
| Federal National Mortgage Association | ||||||
| Pools,5 | ||||||
| #AE1568, 4.000%, due 09/01/40 | 405,537 | 417,735 | ||||
| #688066, 5.500%, due 03/01/33 | 94,170 | 104,929 | ||||
| #793666, 5.500%, due 09/01/34 | 397,366 | 439,965 | ||||
| #802481, 5.500%, due 11/01/34 | 88,958 | 98,563 | ||||
| #596124, 6.000%, due 11/01/28 | 86,863 | 97,566 | ||||
| #253824, 7.000%, due 03/01/31 | 51,014 | 58,321 | ||||
| Federal National Mortgage Association REMIC, IO,5 | ||||||
| Series 2013-15, Class IO, | ||||||
| 2.500%, due 03/25/28 | 3,846,355 | 437,601 | ||||
| Series 2013-87, Class IW, | ||||||
| 2.500%, due 06/25/28 | 5,599,963 | 630,580 | ||||
| Series 2013-64, Class LI, | ||||||
| 3.000%, due 06/25/33 | 3,809,831 | 564,747 | ||||
| Series 2011-91, Class EI, | ||||||
| 3.500%, due 08/25/26 | 3,589,797 | 440,723 | ||||
| Government National Mortgage Association Pools, | ||||||
| #781029, 6.500%, due 05/15/29 | 24,906 | 28,353 | ||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Face amount |
Value | |||||
| Mortgage & agency debt securities–(Concluded) | ||||||
| Government National Mortgage Association, IO, | ||||||
| Series 2013-53, Class OI, | ||||||
| 3.500%, due 04/20/43 | $ | 2,843,585 | $ | 534,504 | ||
| GSR Mortgage Loan Trust, | ||||||
| Series 2006-2F, Class 3A4, | ||||||
| 6.000%, due 02/25/36 | 967,879 | 922,137 | ||||
| Wells Fargo Mortgage Backed Securities Trust, | ||||||
| Series 2003-18, Class A2, | ||||||
| 5.250%, due 12/25/33 | 164,555 | 167,426 | ||||
| Total mortgage & agency debt securities | ||||||
| (cost $5,580,327) | 5,633,874 | |||||
| Municipal bonds: 5.72% | ||||||
| Illinois: 2.17% | ||||||
| State of Illinois, GO Bonds, | ||||||
| 5.100%, due 06/01/33 | 1,350,000 | 1,257,930 | ||||
| 5.665%, due 03/01/18 | 710,000 | 774,028 | ||||
| 5.877%, due 03/01/19 | 885,000 | 963,243 | ||||
| 2,995,201 | ||||||
| New Jersey: 3.31% | ||||||
| New Jersey Economic Development | ||||||
| Authority Revenue Bonds, | ||||||
| Series B, 7.300%, due 02/15/183 | 140,000 | 4,372,050 | ||||
| New Jersey State Turnpike Authority | ||||||
| Revenue Bonds, | ||||||
| Series F, 7.414%, due 01/01/40 | 140,000 | 186,543 | ||||
| 4,558,593 | ||||||
| Tennessee: 0.24% | ||||||
| Metropolitan Government of Nashville & | ||||||
| Davidson County Convention Center | ||||||
| Authority Revenue Bonds, | ||||||
| 6.731%, due 07/01/43 | 300,000 | 332,544 | ||||
| Total municipal bonds | ||||||
| (cost $7,090,471) | 7,886,338 | |||||
| US government obligation: 1.62% | ||||||
| US Treasury Note, | ||||||
| 1.250%, due 09/30/15 | ||||||
| (cost $2,235,748) | 2,200,000 | 2,235,664 | ||||
| Non-US government obligations: 1.38% | ||||||
| Brazil: 1.38% | ||||||
| Banco Nacional de Desenvolvimento | ||||||
| Economico e Social, | ||||||
| 3.375%, due 09/26/161 | 750,000 | 757,500 | ||||
| Brazilian Government International Bond, | ||||||
| 8.250%, due 01/20/34 | 900,000 | 1,147,500 | ||||
| Total Non-US government obligations | ||||||
| (cost $1,791,361) | 1,905,000 | |||||
| Total bonds | ||||||
| (cost $130,256,312) | 133,049,574 | |||||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Shares | Value | ||||
| Common stock: 0.05% | |||||
| United States: 0.05% | |||||
| WMI Holdings Corp.* | |||||
| (cost $14,157) | 25,741 | $ | 72,590 | ||
| Preferred stocks: 0.09% | |||||
| United States: 0.09% | |||||
| Ally Financial, Inc., | |||||
| 7.000%, due 02/05/141,4 | 42 | 40,114 | |||
| JPMorgan Chase & Co., | |||||
| 5.450%, due 03/01/184 | 4,000 | 81,120 | |||
| Total preferred stocks | |||||
| (cost $136,713) | 121,234 | ||||
| Short-term investments: 2.56% | |||||
| Investment company: 1.84% | |||||
| UBS Cash Management Prime | |||||
| Relationship Fund6 | |||||
| (cost $2,531,753) | 2,531,753 | 2,531,753 | |||
| Commercial paper: 0.72% | |||||
| Sinopec Century Bright Capital | |||||
| Investment Ltd., | |||||
| 0.300%, due 01/10/147,8 | |||||
| (cost $999,925) | 1,000,000 | 999,917 | |||
| Total short-term investments | |||||
| (cost $3,531,678) | 3,531,670 | ||||
| Total investments: 99.14% | |||||
| (cost $133,938,860)9 | 136,775,068 | ||||
| Cash and other assets, less liabilities: 0.86% | 1,190,658 | ||||
| Net assets: 100.00% | $ | 137,965,726 | |||
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
| Notes to portfolio of investments | ||||
| Aggregate cost for federal income tax purposes was substantially the same as for book purposes; and net unrealized appreciation consisted of: | ||||
| Gross unrealized appreciation | $ | 4,445,216 | ||
| Gross unrealized depreciation | (1,609,008 | ) | ||
| Net unrealized appreciation of investments | $ | 2,836,208 | ||
For a listing of defined portfolio acronyms, counterparty abbreviations and currency abbreviations that are used throughout the Portfolio of investments as well as the tables that follow, please refer to the end of this report.
The following is a summary of the fair valuations according to the inputs used as of December 31, 2013 in valuing the Fund's investments:
| Description | Unadjusted quoted prices in active markets for identical investments (Level 1) |
Other
significant observable inputs (Level 2) |
Unobservable inputs (Level 3) |
Total | ||||||||
| Corporate bonds | $ | – | $ | 105,868,547 | $ | – | $ | 105,868,547 | ||||
| Asset-backed security | – | 284,996 | – | 284,996 | ||||||||
| Commercial mortgage-backed securities | – | 7,333,388 | 1,901,767 | 9,235,155 | ||||||||
| Mortgage & agency debt securities | – | 5,633,874 | – | 5,633,874 | ||||||||
| Municipal bonds | – | 7,886,338 | – | 7,886,338 | ||||||||
| US government obligation | – | 2,235,664 | – | 2,235,664 | ||||||||
| Non-US government obligations | – | 1,905,000 | – | 1,905,000 | ||||||||
| Common stock | 72,590 | – | – | 72,590 | ||||||||
| Preferred stocks | 81,120 | 40,114 | – | 121,234 | ||||||||
| Short-term investments | – | 3,531,670 | – | 3,531,670 | ||||||||
| Total | $ | 153,710 | $ | 134,719,591 | $ | 1,901,767 | $ | 136,775,068 | ||||
At December 31, 2013, there were no transfers between Level 1 and Level 2.
Level 3 rollforward disclosure
The following is a rollforward of the Fund’s investments that were valued using unobservable inputs for the period:
| Commercial mortgage-backed securities |
Total | |||||
| Assets | ||||||
| Beginning balance | $ | - | $ | - | ||
| Purchases | 1,900,000 | 1,900,000 | ||||
| Issuances | - | - | ||||
| Sales | - | - | ||||
| Accrued discounts (premiums) | - | - | ||||
| Total realized gain | - | - | ||||
| Change in net unrealized appreciation (depreciation) | 1,767 | 1,767 | ||||
| Transfers into Level 3 | - | - | ||||
| Transfers out of Level 3 | - | - | ||||
| Ending balance | $ | 1,901,767 | $ | 1,901,767 | ||
The change in net unrealized appreciation relating to the Level 3 investments held at December 31, 2013 was $1,767.
|
Portfolio footnotes |
| * Non-income producing security. |
| 1 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2013, the value of these securities amounted to $26,997,775 or 19.57% of net assets. |
| 2 Variable or floating rate security — The interest rate shown is the current rate as of December 31, 2013 and changes periodically. |
| 3 Rate shown reflects annualized yield at December 31, 2013 on zero coupon bond. |
| 4 This security is subject to perpetual call and may be called in full or partially on or anytime after the next call date. Date shown reflects the next call date. |
| 5 On September 7, 2008, the Federal Housing Finance Agency placed the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association into conservatorship, and the US Treasury guaranteed the debt issued by those organizations. |
| 6 The table below details the Fund's investment in a fund advised by the same advisor as the Fund. The advisor does not earn a management fee from the affiliated UBS Relationship Fund. |
| Security description | Value 09/30/13 |
Purchases during the three months ended 12/31/13 |
Sales during the three months ended 12/31/13 |
Value 12/31/13 |
Net income earned from affiliate for the three months ended 12/31/13 | ||||||||||
| UBS Cash Management Prime Relationship Fund | $ | 3,063,384 | $ | 14,974,074 | $ | 15,505,705 | $ | 2,531,753 | $ | 959 | |||||
| 7 Rate shown is the discount rate at date of purchase. |
| 8 Security exempt from registration pursuant to Section 4(2) under the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2013, the value of these securities amounted to $999,917 or 0.72% of net assets. |
Fort Dearborn Income Securities, Inc.
Portfolio of investments — December 31, 2013 (unaudited)
9 The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities and other instruments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, official market closing prices, current market quotations or valuations from computerized “evaluation” systems that derive values based on comparable securities or instruments. An evaluation system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities or instruments. Securities and other instruments also may be valued based on appraisals derived from information concerning the security or instrument or similar securities or instruments received from recognized dealers in those holdings. Securities and instruments traded in the over-the-counter (“OTC”) market and listed on The NASDAQ Stock Market, Inc. (“NASDAQ”) normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Securities and instruments which are listed on US and foreign stock exchanges normally are valued at the market closing price, the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities or instruments are traded on more than one exchange, the securities or instruments are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. (“UBS Global AM” or the “Advisor”), the investment advisor of the Fund. If a market value is not readily available from an independent pricing source for a particular security or instrument, that security or instrument is valued at fair value as determined in good faith by or under the direction of the Fund’s Board. Various factors may be reviewed in order to make a good faith determination of a security’s or instrument’s fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the securities or instruments; and the evaluation of forces which influence the market in which the securities or instruments are purchased and sold. Certain securities or instruments in which the Fund invests are traded in markets that close before 4:00 p.m., Eastern time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m. Eastern Time will not be reflected in the Fund’s net asset value. However, if the Fund determines that such developments are so significant that they will materially affect the value of the Fund’s securities or instruments, the Fund may adjust the previous closing prices to reflect what is believed to be the fair value of these securities or instruments as of 4:00 p.m. Eastern Time. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Pursuant to the Fund’s use of the practical expedient within ASC Topic 820, investments in nonregistered investment companies are also valued at the daily net asset value.
| Portfolio acronyms | ||
| GO | General Obligation | |
| GS | Goldman Sachs | |
| GSR | Goldman Sachs Residential | |
| IO | Interest only — This security entitles the holder to receive interest payments from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase. | |
| REIT | Real estate investment trust | |
| REMIC | Real Estate Mortgage Investment Conduit | |
| Re-REMIC | Combined Real Estate Mortgage Investment Conduit |
The Fund’s Board of Directors (the “Board”) has delegated to the UBS Global Asset Management Global Valuation Committee (“GVC”) the responsibility for making fair value determinations with respect to the Fund’s portfolio holdings. The GVC is comprised of representatives of management, including members of the investment team.
The GVC provides reports to the Board at each quarterly meeting regarding any investments that have been fair valued, valued pursuant to standing instructions approved by the GVC, or where non-vendor pricing sources had been used to make fair value determinations when sufficient information exists during the prior quarter. Fair valuation determinations are subject to review at least monthly by the GVC during scheduled meetings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews of security valuations.
The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, as discussed below; securities of an issuer that has entered into a restructuring; investments whose trading has been halted or suspended; fixed income securities that are in default and for which there is no current market value quotation; and investments that are restricted as to transfer or resale. The need to fair value a Fund’s portfolio investments may also result from low trading volume in foreign markets or thinly traded domestic investments, and when a security that is subject to a trading limit or collar on the exchange or market on which it is primarily traded reaches the “limit up” or “limit down” price and no trading has taken place at that price. Various factors may be reviewed in order to make a good faith determination of an investment’s fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of investments; and the evaluation of forces which influence the market in which the investments are purchased and sold. Valuing investments at fair value involves greater reliance on judgment than valuing investments that have readily available market quotations. Fair value determinations can also involve reliance on quantitative models employed by a fair value pricing service.
US Generally Accepted Accounting Principles (“GAAP”) requires disclosure regarding the various inputs that are used in determining the value of the Fund’s investments. These inputs are summarized into the three broad levels listed below:
Level 1 – Unadjusted quoted prices in active markets for identical investments.
Level 2 – Other significant observable inputs including, but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3 – Unobservable inputs inclusive of the Fund’s own assumptions in determining the fair value of investments.
A fair value hierarchy has been included near the end of the Fund’s Portfolio of investments.
In January 2013, Accounting Standards Update 2013-01 (“ASU 2013-01”), “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”, replaced Accounting Standards Update 2011-11 (“ASU 2011-11”), “Disclosures about Offsetting Assets and Liabilities”. ASU 2013-01 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. ASU 2011-11 was intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. ASU 2013-01 limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement. Management is currently evaluating the application of ASU 2013-01 and its impact, if any, on the Fund’s financial statements.
For more information regarding the Fund’s other significant accounting policies, please refer to the Fund’s annual report to shareholders dated September 30, 2013.
Item 2. 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 (“Investment Company Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. | ||
| (b) | The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | ||
Item 3. Exhibits.
| (a) | Certifications of principal executive officer and principal financial officer of registrant pursuant to Rule 30a-2(a) under the Investment Company Act is attached hereto as Exhibit EX-99.CERT. |
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.
Fort Dearborn Income Securities, Inc.
| By: | /s/ Mark E. Carver |
| Mark E. Carver | |
| President | |
| Date: | February 28, 2014 |
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.
Fort Dearborn Income Securities, Inc.
| By: | /s/ Mark E. Carver |
| Mark E. Carver | |
| President | |
| Date: | February 28, 2014 |
| By: | /s/ Thomas Disbrow |
| Thomas Disbrow | |
| Treasurer & Principal Accounting Officer | |
| Date: | February 28, 2014 |