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
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, 2012


Item 1. Schedule of Investments

Fort Dearborn Income Securities, Inc.
 
Industry diversification (unaudited)
As a percentage of net assets
As of December 31, 2012
Bonds      
Corporate bonds      
Aerospace & defense   0.80 %
Air freight & logistics   0.23  
Automobiles   0.85  
Banks   0.33  
Beverages   0.14  
Biotechnology   0.08  
Building products   0.07  
Capital markets   4.71  
Chemicals   1.14  
Commercial banks   3.43  
Commercial services & supplies   0.93  
Communications equipment   0.31  
Computers & peripherals   0.20  
Consumer finance   0.84  
Diversified financial services   7.15  
Diversified telecommunication services   4.58  
Electric utilities   3.43  
Electronic equipment, instruments & components   0.25  
Energy equipment & services   1.29  
Food & staples retailing   1.00  
Food products   1.12  
Gas utilities   0.64  
Health care providers & services   0.31  
Independent power producers & energy traders   0.67  
Industrial conglomerates   0.06  
Insurance   3.37  
IT services   0.41  
Leisure equipment & products   0.16  
Life sciences tools & services   0.11  
Machinery   0.39  
Media   4.98  
Metals & mining   3.74  
Multiline retail   0.55  
Multi-utilities   0.42  
Office electronics   0.41  
Oil, gas & consumable fuels   10.31  
Paper & forest products   0.32  
Pharmaceuticals   0.09  
Real estate investment trust (REIT)   1.28  
Road & rail   0.69  
Semiconductors & semiconductor equipment   0.40  
Software   0.30  
Specialty retail   0.17  
Tobacco   1.00  
Wireless telecommunication services   0.62  
   
Total corporate bonds   64.28 %
Asset-backed securities   0.55  
Commercial mortgage-backed securities   3.55  
Mortgage & agency debt securities   5.89  
Municipal bonds   7.72  
US government obligations   12.86  
Non-US government obligations   2.77  
   
Total bonds   97.62 %
Common stocks   0.01  
Preferred stock   0.03  
Short-term investment   1.48  
   
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, 2012 (unaudited)

                 
    Face          
Security description   amount     Value  
 
   
 
Bonds — 97.62%                
Corporate bonds — 64.28%                
Australia — 0.87%                
Rio Tinto Finance USA Ltd.,                

3.750%, due 09/20/21

   $ 400,000     $ 427,720  

5.200%, due 11/02/40

     750,000       881,425  
           
 
Total Australia corporate bonds             1,309,145  
           
 
Brazil — 1.41%                
Petrobras International Finance Co.,                

5.375%, due 01/27/21

     1,130,000       1,267,408  

6.875%, due 01/20/40

     675,000       855,407  
           
 
Total Brazil corporate bonds             2,122,815  
           
 
Canada — 2.27%                
Anadarko Finance Co.,                

Series B, 7.500%, due 05/01/31

     790,000       1,045,222  
Barrick Gold Corp.,                

3.850%, due 04/01/22

     350,000       370,484  
Canadian Natural Resources Ltd.,                

5.850%, due 02/01/35

     435,000       534,462  
EnCana Corp.,                

6.625%, due 08/15/37

     250,000       318,711  
Petro-Canada,                

6.800%, due 05/15/38

     520,000       709,170  
Teck Resources Ltd.,                

6.250%, due 07/15/41

     375,000       441,100  
           
 
Total Canada corporate bonds             3,419,149  
           
 
Cayman Islands — 1.83%                
Transocean, Inc.,                

3.800%, due 10/15/22

     340,000       348,477  

6.800%, due 03/15/38

     535,000       654,930  

7.500%, due 04/15/31

     575,000       714,592  
Vale Overseas Ltd.,                

4.375%, due 01/11/22

     965,000       1,030,144  
           
 
Total Cayman Islands corporate bonds             2,748,143  
           
 
Curacao — 0.09%                
Teva Pharmaceutical Finance IV BV,                

3.650%, due 11/10/21

     125,000       133,779  
           
 
France — 0.51%                
Electricite De France,                

6.950%, due 01/26/391

     300,000       401,145  
France Telecom SA,                

8.500%, due 03/01/31

     75,000       112,265  
Vivendi SA,                

4.750%, due 04/12/221

     250,000       259,733  
           
 
Total France corporate bonds             773,143  
           
 

Luxembourg — 0.88%                
ArcelorMittal,                

5.375%, due 06/01/13

     610,000       616,125  
Enel Finance International SA,                

6.000%, due 10/07/391

     365,000       353,447  
Telecom Italia Capital SA,                

6.375%, due 11/15/33

     350,000       352,625  
           
 
Total Luxembourg corporate bonds             1,322,197  
           
 
Mexico — 0.83%                
America Movil SAB de CV,                

5.000%, due 03/30/20

     625,000       727,170  
Petroleos Mexicanos,                

6.500%, due 06/02/41

     410,000       513,525  
           
 
Total Mexico corporate bonds             1,240,695  
           
 
Netherlands — 1.00%                
EDP Finance BV,                

6.000%, due 02/02/181

     350,000       366,971  
Koninklijke Philips Electronics NV,                

5.000%, due 03/15/42

     75,000       85,672  
LyondellBasell Industries NV,                

6.000%, due 11/15/21

     500,000       586,250  
Siemens Financieringsmaatschappij NV,                

6.125%, due 08/17/261

     350,000       460,210  
           
 
Total Netherlands corporate bonds             1,499,103  
           
 
Norway — 1.23%                
Eksportfinans ASA,                

5.500%, due 06/26/17

     1,750,000       1,841,747  
           
 
Qatar — 0.40%                
Qtel International Finance Ltd.,                

7.875%, due 06/10/191

     455,000       596,050  
           
 
South Africa — 0.29%                
AngloGold Ashanti Holdings PLC,                

5.375%, due 04/15/20

     430,000       443,786  
           
 
Sweden — 0.16%                
Nordea Bank AB,                

4.875%, due 05/13/211

     230,000       246,737  
           
 
United Kingdom — 1.23%                
Barclays Bank PLC,                

5.140%, due 10/14/20

     60,000       62,669  
British Telecommunications PLC,                

9.625%, due 12/15/30

     805,000       1,278,887  
HSBC Holdings PLC,                

4.000%, due 03/30/22

     275,000       301,088  

6.100%, due 01/14/42

     150,000       199,585  
           
 
Total United Kingdom corporate bonds             1,842,229  
           
 
United States — 51.28%                
AEP Texas Central Co.,                

Series E, 6.650%, due 02/15/33

     495,000       629,178  
Aflac, Inc.,                

6.450%, due 08/15/40

     325,000       411,018  
Alltel Corp.,                

7.875%, due 07/01/32

     300,000       470,391  
Ally Financial, Inc.,                

3.799%, due 06/15/152

     400,000       362,080  
Altria Group, Inc.,                

9.700%, due 11/10/18

     105,000       146,992  

9.950%, due 11/10/38

     480,000       790,771  

American International Group, Inc.,                

4.875%, due 06/01/22

     175,000       199,784  

5.850%, due 01/16/18

     785,000       928,025  
Amgen, Inc.,                

5.650%, due 06/15/42

     100,000       120,071  
Anadarko Petroleum Corp.,                

6.450%, due 09/15/36

     375,000       469,788  
Apache Corp.,                

5.100%, due 09/01/40

     625,000       710,463  
ArcelorMittal USA LLC,                

6.500%, due 04/15/14

     480,000       498,801  
AT&T, Inc.,                

4.300%, due 12/15/421

     26,000       26,113  

6.500%, due 09/01/37

     1,640,000       2,144,917  
AXA Financial, Inc.,                

7.000%, due 04/01/28

     165,000       196,292  
Bank of America Corp.,                

5.875%, due 02/07/42

     225,000       280,708  
Bear Stearns Cos. LLC,                

7.250%, due 02/01/18

     2,000,000       2,506,086  
Boeing Co.,                

6.875%, due 03/15/39

     400,000       609,699  
Burlington Northern Santa Fe LLC,                

5.400%, due 06/01/41

     480,000       568,406  
Case New Holland, Inc.,                

7.875%, due 12/01/17

     500,000       591,250  
CenterPoint Energy Resources Corp.,                

6.000%, due 05/15/18

     285,000       343,277  
CenturyLink, Inc.,                

Series P, 7.600%, due 09/15/39

     200,000       207,600  
Cisco Systems, Inc.,                

5.900%, due 02/15/39

     175,000       227,754  
CIT Group, Inc.,                

4.250%, due 08/15/17

     750,000       772,306  
Citigroup, Inc.,                

4.500%, due 01/14/22

     200,000       223,141  

5.875%, due 01/30/42

     155,000       191,292  

6.125%, due 05/15/18

     810,000       970,713  

6.875%, due 03/05/38

     425,000       559,494  

8.125%, due 07/15/39

     635,000       950,668  
Comcast Corp.,                

6.950%, due 08/15/37

     1,750,000       2,373,115  
ConocoPhillips,                

6.500%, due 02/01/39

     925,000       1,311,779  
CSX Corp.,                

6.220%, due 04/30/40

     150,000       193,601  
CVS Caremark Corp.,                

6.250%, due 06/01/27

     500,000       660,191  
Dell, Inc.,                

5.400%, due 09/10/40

     290,000       295,265  
Devon Energy Corp.,                

4.750%, due 05/15/42

     375,000       401,180  
DirecTV Holdings LLC,                

6.000%, due 08/15/40

     445,000       493,763  
DISH DBS Corp.,                

7.875%, due 09/01/19

     800,000       948,000  
Dominion Resources, Inc.,                

Series B, 5.950%, due 06/15/35

     495,000       626,502  
Dow Chemical Co.,                

4.250%, due 11/15/20

     750,000       833,785  

8.550%, due 05/15/19

     222,000       299,717  
Duke Energy Carolinas LLC,                

6.050%, due 04/15/38

     350,000       458,500  
El Paso Corp.,                

7.250%, due 06/01/18

     300,000       346,751  
El Paso Natural Gas Co. LLC,                

8.625%, due 01/15/22

     375,000       515,854  
Energy Transfer Partners LP,                

5.200%, due 02/01/22

     500,000       570,356  

9.000%, due 04/15/19

     400,000       527,436  

Enterprise Products Operating LLC,                

6.125%, due 10/15/39

     500,000       604,046  
ERP Operating LP,                

4.750%, due 07/15/20

     485,000       545,470  
FedEx Corp.,                

3.875%, due 08/01/42

     350,000       342,205  
Fidelity National Financial, Inc.,                

5.500%, due 09/01/22

     250,000       276,706  
Florida Power Corp.,                

6.350%, due 09/15/37

     215,000       288,692  
Ford Motor Co.,                

7.450%, due 07/16/31

     1,000,000       1,270,000  
Ford Motor Credit Co. LLC,                

4.250%, due 09/20/22

     320,000       338,363  
FPL Group Capital, Inc.,                

6.650%, due 06/15/673

     200,000       214,000  
Freeport-McMoRan Copper & Gold, Inc.,                

3.550%, due 03/01/22

     200,000       198,355  
General Electric Capital Corp.,                

4.650%, due 10/17/21

     800,000       912,829  

5.875%, due 01/14/38

     1,000,000       1,206,252  
General Motors Financial Co., Inc.,                

4.750%, due 08/15/171

     540,000       567,805  
Genworth Financial, Inc.,                

7.625%, due 09/24/21

     300,000       331,071  
Goldman Sachs Group, Inc.,                

3.625%, due 02/07/16

     425,000       449,872  

5.750%, due 01/24/22

     1,355,000       1,601,897  

6.750%, due 10/01/37

     570,000       645,996  
Halliburton Co.,                

4.500%, due 11/15/41

     200,000       223,275  
Harris Corp.,                

6.375%, due 06/15/19

     200,000       236,406  
Hasbro, Inc.,                

6.350%, due 03/15/40

     200,000       247,002  
HSBC Bank USA N.A.,                

4.875%, due 08/24/20

     250,000       278,609  

5.625%, due 08/15/35

     855,000       971,615  
Intel Corp.,                

2.700%, due 12/15/22

     600,000       599,161  
International Lease Finance Corp.,                

7.125%, due 09/01/181

     750,000       870,000  
International Paper Co.,                

7.500%, due 08/15/21

     365,000       477,669  
JPMorgan Chase & Co.,                

4.500%, due 01/24/22

     185,000       209,279  
Kinder Morgan Energy Partners LP,                

5.800%, due 03/15/35

     710,000       808,994  

6.500%, due 09/01/39

     75,000       92,178  
Kraft Foods, Inc.,                

6.875%, due 02/01/38

     430,000       594,417  

6.875%, due 01/26/39

     440,000       606,682  
Kroger Co.,                

6.900%, due 04/15/38

     650,000       837,898  
Lehman Brothers Holdings, Inc.,                

6.750%, due 12/28/17 (Escrow Lehman Brothers, Inc.)4,5

     585,000       0  

6.875%, due 05/02/18 (Escrow Lehman Brothers, Inc.)5

     785,000       188,400  
Life Technologies Corp.,                

6.000%, due 03/01/20

     135,000       160,001  
Lowe’s Cos., Inc.,                

4.650%, due 04/15/42

     225,000       250,516  
Marathon Oil Corp.,                

6.600%, due 10/01/37

     180,000       240,521  
Massachusetts Mutual Life Insurance Co.,                

8.875%, due 06/01/391

     275,000       415,262  
Merrill Lynch & Co., Inc.,                

6.875%, due 04/25/18

     1,000,000       1,205,454  

7.750%, due 05/14/38

     1,000,000       1,301,699  

MetLife, Inc.,                

5.875%, due 02/06/41

     650,000       823,014  
Morgan Stanley,                

4.750%, due 03/22/17

     360,000       392,746  

Series F,

                

5.625%, due 09/23/19

     575,000       650,314  

6.625%, due 04/01/18

     550,000       648,216  
Motiva Enterprises LLC,                

6.850%, due 01/15/401

     340,000       470,666  

National Rural Utilities Cooperative Finance Corp.,

                

10.375%, due 11/01/18

     160,000       236,515  
News America, Inc.,                

6.200%, due 12/15/34

     695,000       841,748  

7.750%, due 12/01/45

     350,000       494,687  
Norfolk Southern Corp.,                

5.590%, due 05/17/25

     38,000       46,666  
Oncor Electric Delivery Co. LLC,                

7.000%, due 09/01/22

     270,000       343,167  
ONEOK Partners LP,                

8.625%, due 03/01/19

     215,000       285,464  
Oracle Corp.,                

6.500%, due 04/15/38

     320,000       444,965  
Owens Corning,                

6.500%, due 12/01/16

     97,000       108,996  
Pacific Gas & Electric Co.,                

6.050%, due 03/01/34

     400,000       515,361  
Pacific Life Insurance Co.,                

9.250%, due 06/15/391

     210,000       293,664  
Petrohawk Energy Corp.,                

6.250%, due 06/01/19

     500,000       569,348  
Phillips 66,                

4.300%, due 04/01/221

     225,000       251,419  
Plains Exploration & Production Co.,                

6.500%, due 11/15/20

     330,000       365,475  

6.875%, due 02/15/23

     300,000       342,750  
Progress Energy, Inc.,                

7.750%, due 03/01/31

     95,000       129,781  
Prudential Financial, Inc.,                

Series B, 5.750%, due 07/15/33

     40,000       45,584  

6.625%, due 12/01/37

     780,000       971,807  
PSEG Power LLC,                

8.625%, due 04/15/31

     695,000       1,013,452  
Regions Financial Corp.,                

7.750%, due 11/10/14

     620,000       687,456  
Republic Services, Inc.,                

6.200%, due 03/01/40

     425,000       533,367  
Reynolds American, Inc.,                

7.250%, due 06/15/37

     425,000       557,316  
SABMiller Holdings, Inc.,                

3.750%, due 01/15/221

     200,000       215,966  
Sanmina-SCI Corp.,                

7.000%, due 05/15/191

     370,000       377,400  
Simon Property Group LP,                

6.750%, due 02/01/40

     325,000       440,425  
Southern California Edison Co.,                

6.650%, due 04/01/29

     320,000       421,745  
Southern Copper Corp.,                

3.500%, due 11/08/22

     400,000       408,493  

6.750%, due 04/16/40

     250,000       300,969  
Southern Natural Gas Co.,                

8.000%, due 03/01/32

     430,000       613,151  
Sprint Capital Corp.,                

6.875%, due 11/15/28

     200,000       208,000  
SunTrust Bank,                

7.250%, due 03/15/18

     495,000       605,819  
Swiss Re Solutions Holding Corp.,                

7.000%, due 02/15/26

     295,000       375,020  
Target Corp.,                

6.350%, due 11/01/32

     315,000       418,037  

6.500%, due 10/15/37

     185,000       258,233  

7.000%, due 01/15/38

     105,000       154,225  
Time Warner Cable, Inc.,                

7.300%, due 07/01/38

     600,000       797,210  

8.750%, due 02/14/19

     410,000       553,156  
Time Warner, Inc.,                

7.625%, due 04/15/31

     710,000       977,444  
Union Pacific Corp.,                

5.780%, due 07/15/40

     180,000       228,436  

United Technologies Corp.,                

5.700%, due 04/15/40

     290,000       372,886  

6.700%, due 08/01/28

     160,000       217,035  
UnitedHealth Group, Inc.,                

5.800%, due 03/15/36

     50,000       60,323  

6.875%, due 02/15/38

     300,000       411,944  
US Bancorp,                

2.950%, due 07/15/22

     150,000       151,534  
Valero Energy Corp.,                

6.625%, due 06/15/37

     150,000       184,806  

7.500%, due 04/15/32

     465,000       596,596  
Verizon New York, Inc.,                

Series B, 7.375%, due 04/01/32

     1,085,000       1,437,581  
Virginia Electric & Power Co.,                

6.350%, due 11/30/37

     165,000       227,926  
Vornado Realty LP, REIT,                

4.250%, due 04/01/15

     880,000       930,171  
Washington Mutual Bank,                

5.500%, due 01/15/134,5,8

     750,000       75  
Wells Fargo Bank N.A.,                

5.950%, due 08/26/36

     700,000       883,208  
Wells Fargo Capital X,                

5.950%, due 12/15/36

     475,000       492,078  
Western Union Co.,                

2.375%, due 12/10/15

     610,000       612,824  
Williams Cos., Inc.,                

8.750%, due 03/15/32

     177,000       245,346  
Williams Partners LP,                

6.300%, due 04/15/40

     275,000       336,197  
Wisconsin Power & Light Co.,                

7.600%, due 10/01/38

     175,000       276,680  
WM Wrigley Jr. Co.,                

3.700%, due 06/30/141

     465,000       481,286  
Xcel Energy, Inc.,                

4.800%, due 09/15/41

     475,000       533,017  
Xerox Corp.,                

6.350%, due 05/15/18

     540,000       622,783  
           
 
Total United States corporate bonds             77,063,439  
           
 
Total corporate bonds                

(cost $85,732,307)

             96,602,157  
           
 
 
Asset-backed securities — 0.55%
United States — 0.55%                
Citibank Credit Card Issuance Trust,                

Series 2007-A3, Class A3,

                

6.150%, due 06/15/39

     390,000       517,641  
Continental Airlines, Inc.,                

Series 2009-2, Class A,

                

7.250%, due 11/10/19

     262,974       302,420  
           
 
Total asset-backed securities                

(cost $652,019)

             820,061  
           
 
Commercial mortgage-backed securities — 3.55%
United States — 3.55%                

Banc of America Commercial Mortgage, Inc.,

                

Series 2007-2, Class AM,

                

5.635%, due 04/10/493

     475,000       540,502  

JP Morgan Chase Commercial Mortgage Securities Corp.,

                

Series 2007-LD11, Class A4,

                

5.812%, due 06/15/493

     2,100,000       2,448,915  
Wachovia Bank Commercial Mortgage Trust,                

Series 2007-C33, Class A4,

                

5.921%, due 02/15/513

     2,000,000       2,346,442  
           
 
Total commercial mortgage-backed securities                

(cost $5,018,508)

             5,335,859  
           
 
Mortgage & agency debt securities — 5.89%
United States — 5.89%                
Federal Home Loan Mortgage Corp.,                

5.000%, due 01/30/146

     30,000       31,552  
Federal Home Loan Mortgage Corp. Gold Pools,                

#E01127, 6.500%, due 02/01/176

     30,486       32,929  

Federal National Mortgage Association Pools,6                

#AE1568, 4.000%, due 09/01/40

     574,039       615,977  

#688066, 5.500%, due 03/01/33

     135,030       153,466  

#793666, 5.500%, due 09/01/34

     665,783       736,500  

#802481, 5.500%, due 11/01/34

     127,170       140,678  

#596124, 6.000%, due 11/01/28

     103,126       115,160  

#253824, 7.000%, due 03/01/31

     60,767       71,676  
Federal National Mortgage Association Re-REMIC,                

Series 1993-106, Class Z,

                

7.000%, due 06/25/136

     2,893       2,916  
Government National Mortgage Association Pools,                

#G2 AB2784, 3.500%, due 08/20/42

     4,947,777       5,445,964  

#781029, 6.500%, due 05/15/29

     30,764       35,866  
GSR Mortgage Loan Trust,                

Series 2006-2F, Class 3A4,

                

6.000%, due 02/25/36

     1,175,916       1,219,327  
Wells Fargo Mortgage Backed Securities Trust,                

Series 2003-18, Class A2,

                

5.250%, due 12/25/33

     242,470       252,310  
           
 
Total mortgage & agency debt securities                

(cost $8,531,600)

             8,854,321  
           
 
Municipal bonds — 7.72%                
California — 2.32%                
Los Angeles Unified School District,                

6.758%, due 07/01/34

     150,000       198,467  
State of California, GO,                

7.300%, due 10/01/39

     1,820,000       2,522,028  

7.550%, due 04/01/39

     365,000       523,768  
University of California Revenue Bonds,                

Series 2009, 5.770%, due 05/15/43

     195,000       238,666  
           
 
              3,482,929  
           
 
Illinois — 1.54%                
Illinois State Taxable Pension,                

Series 2003, 5.100%, due 06/01/33

     2,350,000       2,318,604  
           
 
Massachusetts — 0.10%                
Commonwealth of Massachusetts, GO,                

5.456%, due 12/01/39

     125,000       155,544  
           
 
New Jersey — 3.02%                

New Jersey Economic Development Authority Revenue Bonds,

                

Series B, 4.981%, due 02/15/182

     5,000,000       4,324,800  

New Jersey State Turnpike Authority Revenue Bonds,

                

Series F, 7.414%, due 01/01/40

     140,000       205,124  
           
 
              4,529,924  
           
 
New York — 0.50%                

Metropolitan Transportation Authority Revenue Bonds,

                

6.668%, due 11/15/39

     200,000       260,478  
Port Authority New York & New Jersey,                

4.458%, due 10/01/62

     500,000       490,610  
           
 
              751,088  
           
 

Tennessee — 0.24%                

Metropolitan Government of Nashville & Davidson County Convention Center Authority Revenue Bonds,

                

6.731%, due 07/01/43

     300,000       360,915  
           
 
Total municipal bonds                

(cost $9,860,636)

             11,599,004  
           
 
US government obligations — 12.86%
US Treasury Bonds,                

2.750%, due 08/15/42

     1,550,000       1,496,719  
US Treasury Notes,                

0.250%, due 10/31/14

     625,000       625,146  

0.250%, due 11/30/14

     8,710,000       8,710,340  

1.625%, due 11/15/227

     8,585,000       8,491,097  
           
 
Total US government obligations                

(cost $19,382,164)

             19,323,302  
           
 
Non-US government obligations — 2.77%
Brazil — 1.76%                
Brazilian Government International Bond,                

8.250%, due 01/20/34

     900,000       1,509,750  

8.875%, due 04/15/24

     700,000       1,128,750  
           
 
              2,638,500  
           
 
Mexico — 1.01%                
United Mexican States,                

4.750%, due 03/08/44

     1,349,000       1,524,370  
           
 
Total Non-US government obligations                

(cost $3,362,387)

             4,162,870  
           
 
Total bonds                

(cost $132,539,621)

             146,697,574  
           
 
    Shares          
   
         
Common stocks — 0.01%                
United States — 0.01%                

Washington Mutual Funding Tranche III*4,8

     1,300       13  
WMI Holdings Corp.*     25,741       21,622  
           
 
Total common stocks                

(cost $14,157)

             21,635  
           
 
Preferred stock — 0.03%                
United States — 0.03%                
Ally Financial, Inc., 7.000%1,9                

(cost $34,713)

     42       41,251  
           
 
Short-term investment — 1.48%                
Investment company — 1.48%                

UBS Cash Management Prime Relationship Fund10

                

(cost $2,229,238)

     2,229,238       2,229,238  
           
 
Total investments11 — 99.14%                

(cost $134,817,729)

             148,989,698  

Cash and other assets, less liabilities — 0.86%

             1,290,356  
           
 
Net assets — 100.00%           $ 150,280,054  
           
 

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   $ 16,209,575  
Gross unrealized depreciation     (2,037,606 )
   
 
Net unrealized appreciation of investments   $ 14,171,969  
   
 

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, 2012 in valuing the Fund’s investments:

    Unadjusted quoted                        
    prices in active                        
    markets for   Other significant   Unobservable        
    identical investments   observable inputs   inputs        
Description   (Level 1)   (Level 2)   (Level 3)   Total  
Corporate bonds   $ —     $ 96,413,682     $ 188,475     $ 96,602,157  
Asset-backed securities     —       820,061       —       820,061  
Commercial mortgage-backed securities     —       5,335,859       —       5,335,859  
Mortgage & agency debt securities     —       8,854,321       —       8,854,321  
Municipal bonds     —       11,599,004       —       11,599,004  
US government obligations     —       19,323,302       —       19,323,302  
Non-US government obligations     —       4,162,870       —       4,162,870  
Common stocks     21,622       —       13       21,635  
Preferred stock     —       41,251       —       41,251  
Short-term investment     —       2,229,238       —       2,229,238  
Total   $ 21,622     $ 148,779,588     $ 188,488     $ 148,989,698  

Level 3 rollforward disclosure
The following is a rollforward of the Fund’s investments that were valued using unobservable inputs for the period:

    Corporate bonds   Common stock   Total
Assets                        
Beginning balance   $ 204,175     $ 13     $ 204,188  
Purchases     —       —       —  
Issuances     —       —       —  
Sales     —       —       —  
Settlements     —       —       —  
Accrued discounts (premiums)     (621 )     —       (621 )
Total realized loss     (18 )     —       (18 )
Change in net unrealized appreciation/depreciation     (15,061 )     —       (15,061 )
Net transfers into Level 3     —       —       —  
Net transfers out of Level 3     —       —       —  
Ending balance   $ 188,475     $ 13     $ 188,488  

The change in unrealized appreciation/depreciation relating to the Level 3 investments held at December 31, 2012 was $(15,061).


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, 2012, the value of these securities amounted to $6,695,125 or 4.46% of net assets.
2   Rate shown reflects annualized yield at December 31, 2012 on zero coupon bond.
3   Variable or floating rate security — The interest rate shown is the current rate as of December 31, 2012 and changes periodically.
4   Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At December 31, 2012, the value of these securities amounted to $88 or 0.00% of net assets.
5   Security is in default.
6   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.
7   Interest rates shown are the discount rates at date of purchase.
8   Security is illiquid. At December 31, 2012, the value of these securities amounted to $88 or 0.00% of net assets.
9   This security is subject to a perpetual call and may be called in full or partially on or anytime after February 01, 2013.
10   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.
                    Net income
        Purchases   Sales       earned from
        during the   during the       affiliate for the
    Value   three months ended   three months ended   Value   three months ended
Security description   09/30/12   12/31/12   12/31/12   12/31/12   12/31/12
 
 
 
 
 
UBS Cash Management Prime Relationship Fund   $3,251,034   $17,064,683   $18,086,479   $2,229,238   $1,951
   
 
 
 
 

11   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 non-registered investment companies are also valued at the daily net asset value.

Portfolio acronyms
GO General Obligation
GSR Goldman Sachs Residential
REIT Real estate investment trust
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 securities or instruments 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.

The types of securities or instruments for which such fair value pricing may be necessary include, but are not limited to: foreign securities and instruments under some circumstances, as discussed below, securities of an issuer that has entered into a restructuring; securities or instruments 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 securities or instruments that are restricted as to transfer or resale. The need to fair value a Fund’s portfolio securities and other instruments may also result from low trading volume in foreign markets or thinly traded domestic securities or instruments, and when a security 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 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. Valuing securities and other instruments at fair value involves greater reliance on judgment than valuing securities and other instruments 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 May 2011, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between US GAAP and IFRS. ASU 2011-04 requires reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 requires reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new disclosures have been implemented for annual and interim periods beginning after December 15, 2011. At December 31, 2012, there were no transfers between Level 1 and Level 2 for the Fund.

For more information regarding the Fund’s other significant accounting policies, please refer to the Fund’s annual report to shareholders dated September 30, 2012.


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:   March 01, 2013

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:   March 01, 2013
     
By:   /s/ Thomas Disbrow
    Thomas Disbrow
    Treasurer & Principal Accounting Officer
     
Date:   March 01, 2013