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: June 30, 2013


Item 1. Schedule of Investments

Fort Dearborn Income Securities, Inc.


Industry diversification (unaudited)
As a percentage of net assets
As of June 30, 2013
Bonds      
Corporate bonds      
Automobiles   0.86 %
Banks   0.34  
Beverages   0.15  
Building materials   0.76  
Building products   0.08  
Capital markets   5.01  
Chemicals   1.45  
Commercial banks   6.28  
Commercial services & supplies   0.22  
Communications equipment   0.40  
Consumer finance   1.87  
Distributors   0.70  
Diversified financial services   8.86  
Diversified telecommunication services   3.09  
Electric utilities   0.81  
Electronic equipment, instruments & components   1.01  
Energy equipment & services   1.10  
Food & staples retailing   0.55  
Gas utilities   0.61  
Health care providers & services   0.46  
Hotels, restaurants & leisure   0.48  
Insurance   2.65  
Leisure equipment & products   0.16  
Life sciences tools & services   0.11  
Machinery   0.81  
Media   2.11  
Metals & mining   2.20  
Office electronics   0.44  
Oil, gas & consumable fuels   8.34  
Paper & forest products   0.92  
Pharmaceuticals   0.29  
Real estate investment trust (REIT)   0.68  
Tobacco   2.27  
Trading companies & distributors   0.59  
Wireless telecommunication services   0.62  
Total corporate bonds   57.28 %
Asset-backed security   0.21  
Commercial mortgage-backed securities   3.54  
Mortgage & agency debt securities   3.72  
Municipal bonds   5.42  
US government obligations   21.71  
Non-US government obligations   2.35  
Total bonds   94.23 %
Common stock   0.01  
Preferred stocks   0.10  
Short-term investment   6.44  
Total investments   100.78 %
Liabilities, in excess of cash and other assets   (0.78 )
Net assets   100.00 %

Fort Dearborn Income Securities, Inc.
Portfolio of investments — June 30, 2013 (unaudited)

    Face          
    amount     Value  
 
   
 
Bonds — 94.23%                
Corporate bonds — 57.28%                
Brazil — 1.96%                
Caixa Economica Federal,                

2.375%, due 11/06/171

   $ 1,000,000     $ 926,300  
Petrobras International Finance Co.,                

5.375%, due 01/27/21

     1,130,000       1,136,724  

6.875%, due 01/20/40

     675,000       674,014  
           
 
Total Brazil corporate bonds             2,737,038  
           
 
Canada — 2.19%                
Anadarko Finance Co.,                

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

     1,090,000       1,358,896  
Canadian Natural Resources Ltd.,                

5.850%, due 02/01/35

     435,000       463,370  
EnCana Corp.,                

6.625%, due 08/15/37

     250,000       279,487  
Petro-Canada,                

6.800%, due 05/15/38

     520,000       602,619  
Teck Resources Ltd.,                

6.250%, due 07/15/41

     375,000       355,262  
           
 
Total Canada corporate bonds             3,059,634  
           
 
Cayman Islands — 1.75%                
Transocean, Inc.,                

3.800%, due 10/15/22

     340,000       323,868  

6.800%, due 03/15/38

     535,000       569,122  

7.500%, due 04/15/31

     575,000       639,093  
Vale Overseas Ltd.,                

4.375%, due 01/11/22

     965,000       916,591  
           
 
Total Cayman Islands corporate bonds             2,448,674  
           
 
China — 0.20%                
China Oil & Gas Group Ltd.,                

5.250%, due 04/25/181

     280,000       276,850  
           
 
Curacao — 0.09%                
Teva Pharmaceutical Finance IV BV,                

3.650%, due 11/10/21

     125,000       125,012  
           
 
France — 0.74%                
Orange SA,                

8.500%, due 03/01/31

     575,000       781,188  
Vivendi SA,                

4.750%, due 04/12/221

     250,000       250,043  
           
 
Total France corporate bonds             1,031,231  
           
 
Luxembourg — 0.85%                
Enel Finance International SA,                

6.000%, due 10/07/391

     365,000       337,078  
Intelsat Jackson Holdings SA,                

7.500%, due 04/01/21

     500,000       525,000  
Telecom Italia Capital SA,                

6.375%, due 11/15/33

     350,000       326,874  
           
 
Total Luxembourg corporate bonds             1,188,952  
           
 
Mexico — 1.54%                
America Movil SAB de CV,                

5.000%, due 03/30/20

     625,000       670,806  
Cemex Finance LLC,                

9.500%, due 12/14/161

     1,000,000       1,057,500  
Petroleos Mexicanos,                

6.500%, due 06/02/41

     410,000       427,220  
           
 
Total Mexico corporate bonds             2,155,526  
           
 

Netherlands — 2.01%                
Basell Finance Co. BV,                

8.100%, due 03/15/271

     625,000       791,152  
EDP Finance BV,                

4.900%, due 10/01/191

     1,000,000       982,500  

6.000%, due 02/02/181

     350,000       360,500  
LyondellBasell Industries NV,                

6.000%, due 11/15/21

     600,000       674,224  
           
 
Total Netherlands corporate bonds             2,808,376  
           
 
Norway — 1.57%                
Eksportfinans ASA,                

5.500%, due 05/25/16

     620,000       645,885  

5.500%, due 06/26/17

     1,500,000       1,552,500  
           
 
Total Norway corporate bonds             2,198,385  
           
 
Qatar — 0.40%                
Qtel International Finance Ltd.,                

7.875%, due 06/10/191

     455,000       558,513  
           
 
Singapore — 0.21%                
Flextronics International Ltd.,                

5.000%, due 02/15/231

     300,000       290,250  
           
 
South Africa — 0.29%                
AngloGold Ashanti Holdings PLC,                

5.375%, due 04/15/20

     430,000       402,006  
           
 
Spain — 0.69%                
BBVA US Senior SAU,                

4.664%, due 10/09/15

     500,000       515,061  
Telefonica Emisiones SAU,                

3.192%, due 04/27/18

     470,000       455,246  
           
 
Total Spain corporate bonds             970,307  
           
 
Sweden — 0.17%                
Nordea Bank AB,                

4.875%, due 05/13/211

     230,000       236,026  
           
 
United Kingdom — 2.84%                
Barclays Bank PLC,                

5.140%, due 10/14/20

     60,000       60,619  

6.050%, due 12/04/171

     1,500,000       1,622,580  
British Telecommunications PLC,                

9.625%, due 12/15/30

     805,000       1,211,882  
Lloyds TSB Bank PLC,                

6.500%, due 09/14/201

     600,000       639,670  
Royal Bank of Scotland Group PLC,                

6.100%, due 06/10/23

     460,000       436,408  
           
 
Total United Kingdom corporate bonds             3,971,159  
           
 
United States — 39.78%                
ADT Corp.,                

3.500%, due 07/15/22

     340,000       312,646  
AEP Texas Central Co.,                

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

     495,000       583,447  
Ally Financial, Inc.,                

4.336%, due 06/15/152

     400,000       370,080  
Altria Group, Inc.,                

9.700%, due 11/10/18

     105,000       139,588  

9.950%, due 11/10/38

     980,000       1,450,412  
American International Group, Inc.,                

5.850%, due 01/16/18

     785,000       882,662  
AT&T, Inc.,                

4.300%, due 12/15/42

     26,000       22,643  
AXA Financial, Inc.,                

7.000%, due 04/01/28

     165,000       184,804  

Barrick North America Finance LLC,                

5.750%, due 05/01/431

     750,000       606,598  
Bear Stearns Cos. LLC,                

7.250%, due 02/01/18

     2,000,000       2,381,482  
Boston Properties LP, REIT,                

3.800%, due 02/01/24

     430,000       422,321  
Case New Holland, Inc.,                

7.875%, due 12/01/17

     1,000,000       1,132,500  
CenturyLink, Inc.,                

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

     200,000       190,000  
CIT Group, Inc.,                

5.000%, due 05/15/17

     500,000       510,625  
Citigroup, Inc.,                

Series D, 5.350%, due 05/15/233,4

     830,000       778,125  

6.875%, due 03/05/38

     425,000       515,369  

8.125%, due 07/15/39

     1,435,000       1,895,260  
DirecTV Holdings LLC,                

6.000%, due 08/15/40

     445,000       444,548  
DISH DBS Corp.,                

7.875%, due 09/01/19

     800,000       896,000  
Dow Chemical Co.,                

8.550%, due 05/15/19

     222,000       283,244  
El Paso Corp.,                

7.250%, due 06/01/18

     300,000       332,317  
Energy Transfer Partners LP,                

5.200%, due 02/01/22

     500,000       529,138  

9.000%, due 04/15/19

     900,000       1,145,000  
ERP Operating LP REIT,                

4.750%, due 07/15/20

     485,000       521,626  
Fidelity National Financial, Inc.,                

5.500%, due 09/01/22

     250,000       264,957  
Ford Motor Co.,                

7.450%, due 07/16/31

     1,000,000       1,197,215  
Ford Motor Credit Co. LLC,                

8.125%, due 01/15/20

     675,000       813,087  
FPL Group Capital, Inc.,                

6.650%, due 06/15/673

     200,000       208,500  
Freeport -McMoRan Copper & Gold, Inc.,                

3.550%, due 03/01/22

     200,000       181,671  
General Electric Capital Corp.,                

0.653%, due 05/05/263

     1,000,000       921,012  

Series C, 5.250%, due 06/15/233,4

     1,150,000       1,098,250  
General Motors Financial Co., Inc.,                

4.750%, due 08/15/171

     850,000       871,250  
Genworth Holdings, Inc.,                

7.625%, due 09/24/21

     300,000       348,624  
Georgia-Pacific LLC,                

8.000%, due 01/15/24

     1,000,000       1,288,273  
Glencore Funding LLC,                

1.431%, due 05/27/161,3

     1,000,000       973,724  
Goldman Sachs Group, Inc.,                

5.750%, due 01/24/22

     1,355,000       1,494,583  

6.750%, due 10/01/37

     570,000       583,887  
Harris Corp.,                

6.375%, due 06/15/19

     200,000       231,772  
Hasbro, Inc.,                

6.350%, due 03/15/40

     200,000       219,835  
HCA, Inc.,                

7.875%, due 02/15/20

     600,000       646,125  
HSBC Bank USA N.A.,                

4.875%, due 08/24/20

     250,000       267,819  

5.625%, due 08/15/35

     855,000       876,589  
International Lease Finance Corp.,                

7.125%, due 09/01/181

     750,000       828,750  
JPMorgan Chase & Co.,                

3.375%, due 05/01/23

     360,000       335,218  
Kinder Morgan Energy Partners LP,                

5.800%, due 03/15/35

     710,000       733,345  

6.500%, due 09/01/39

     75,000       83,903  

Kinder Morgan Finance Co. LLC,                

5.700%, due 01/05/16

     500,000       535,548  
Kroger Co.,                

6.900%, due 04/15/38

     650,000       767,612  
Lehman Brothers Holdings, Inc.,                

6.750%, due 12/28/17

                

(Escrow Lehman Brothers, Inc.)5,6

     585,000       0  
Life Technologies Corp.,                

6.000%, due 03/01/20

     135,000       152,087  
Massachusetts Mutual Life Insurance Co.,                

8.875%, due 06/01/391

     275,000       403,012  
Merrill Lynch & Co., Inc.,                

6.875%, due 04/25/18

     1,000,000       1,150,923  

7.750%, due 05/14/38

     1,000,000       1,143,884  
MetLife, Inc.,                

6.400%, due 12/15/36

     300,000       306,750  
Morgan Stanley,                

4.100%, due 05/22/23

     1,000,000       923,919  

Series F, 5.625%, due 09/23/19

     575,000       618,028  

6.625%, due 04/01/18

     550,000       623,400  
Motorola Solutions, Inc.,                

3.500%, due 03/01/23

     350,000       329,941  
Mylan, Inc.,                

2.600%, due 06/24/181

     290,000       287,100  
National Rural Utilities Cooperative Finance Corp.,                

10.375%, due 11/01/18

     160,000       221,675  
News America, Inc.,                

7.750%, due 12/01/45

     350,000       453,774  
ONEOK Partners LP,                

8.625%, due 03/01/19

     215,000       272,231  
Owens Corning,                

6.500%, due 12/01/16

     97,000       108,280  
Phillips 66,                

4.300%, due 04/01/22

     225,000       232,476  
Plains Exploration & Production Co.,                

6.500%, due 11/15/20

     330,000       349,868  

6.875%, due 02/15/23

     950,000       1,016,407  
PNC Financial Services Group, Inc.,                

Series R, 4.850%, due 06/01/233,4

     1,000,000       932,500  
Prudential Financial, Inc.,                

5.200%, due 03/15/443

     375,000       354,375  

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

     40,000       42,732  
Regions Bank,                

7.500%, due 05/15/18

     250,000       291,602  
Regions Financial Corp.,                

2.000%, due 05/15/18

     290,000       274,140  

7.750%, due 11/10/14

     175,000       189,101  
Reynolds American, Inc.,                

7.250%, due 06/15/37

     1,325,000       1,576,411  
SABMiller Holdings, Inc.,                

3.750%, due 01/15/221

     200,000       203,537  
Sanmina-SCI Corp.,                

7.000%, due 05/15/191

     1,090,000       1,122,700  
SLM Corp.,                

3.875%, due 09/10/15

     550,000       555,529  
Southern Copper Corp.,                

3.500%, due 11/08/22

     400,000       358,994  

6.750%, due 04/16/40

     250,000       245,802  
Southern Natural Gas Co.,                

8.000%, due 03/01/32

     430,000       570,357  
Sprint Capital Corp.,                

6.875%, due 11/15/28

     200,000       192,000  
State Street Corp.,                

3.100%, due 05/15/23

     500,000       468,336  
SunTrust Bank,                

7.250%, due 03/15/18

     495,000       593,698  
Swiss Re Solutions Holding Corp.,                

7.000%, due 02/15/26

     295,000       372,639  

Tesoro Corp.,                

9.750%, due 06/01/19

     370,000       408,850  
Time Warner Cable, Inc.,                

7.300%, due 07/01/38

     600,000       652,085  

8.750%, due 02/14/19

     410,000       503,266  
US Bancorp,                

2.950%, due 07/15/22

     150,000       139,147  
Valero Energy Corp.,                

7.500%, due 04/15/32

     465,000       567,600  
Valspar Corp.,                

4.200%, due 01/15/22

     275,000       280,248  
Wells Fargo Bank N.A.,                

5.950%, due 08/26/36

     700,000       782,595  
Wells Fargo Capital X,                

5.950%, due 12/15/36

     475,000       476,322  
Williams Cos., Inc.,                

8.750%, due 03/15/32

     177,000       224,522  
Williams Partners LP,                

6.300%, due 04/15/40

     275,000       288,273  
Wyndham Worldwide Corp.,                

3.900%, due 03/01/23

     710,000       676,440  
Xerox Corp.,                

6.350%, due 05/15/18

     540,000       618,883  
XL Group PLC,                

Series E, 6.500%, due 04/15/173,4

     750,000       731,250  
           
 
Total United States corporate bonds             55,589,673  
           
 
Total corporate bonds                

(cost $79,374,853)

             80,047,612  
           
 
Asset-backed security — 0.21%                
United States — 0.21%                
Continental Airlines, Inc.,                

Series 2009-2, Class A,

                

7.250%, due 11/10/19

                

(cost $255,408)

     255,408       291,292  
           
 
Commercial mortgage-backed securities — 3.54%                
United States — 3.54%                
Banc of America Commercial Mortgage, Inc.,                

Series 2007-2, Class AM,

                

5.803%, due 04/10/493

     475,000       522,045  
Commercial Mortgage Pass Through Certificates,                

Series 2013-THL, Class D,

                

2.843%, due 06/08/301,3,6

     1,500,000       1,500,000  
Wachovia Bank Commercial Mortgage Trust,                

Series 2007-C33, Class A4,

                

6.122%, due 02/15/513

     2,000,000       2,224,862  
WF-RBS Commercial Mortgage Trust,                

Series 2013-C12, Class B,

                

3.863%, due 03/15/483

     750,000       705,551  
           
 
Total commercial mortgage-backed securities                

(cost $4,953,103)

             4,952,458  
           
 
Mortgage & agency debt securities — 3.72%                
United States — 3.72%                
Federal Home Loan Mortgage Corp.,7                

5.000%, due 01/30/14

     30,000       30,835  
Federal Home Loan Mortgage Corp. Gold Pools,7                

#E01127, 6.500%, due 02/01/17

     24,223       25,804  
Federal Home Loan Mortgage Corp. REMIC, IO,7                

3.500%, due 10/15/42

     2,759,624       621,707  
Federal National Mortgage Association Pools,7                

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

     452,422       471,554  

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

     118,620       132,344  

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

     505,484       553,416  

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

     102,521       113,032  

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

     95,654       106,398  

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

     56,593       65,511  

Federal National Mortgage Association REMIC, IO,7                

Series 2013-15, Class IO,

                

2.500%, due 03/25/28

     4,105,295       482,602  

Series 2013-64, Class LI,

                

3.000%, due 06/25/33

     3,936,324       647,502  
Government National Mortgage Association Pools,                

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

     27,660       30,889  
Government National Mortgage Association, IO,                

Series 2013-53, Class OI,

                

3.500%, due 04/20/43

     2,919,894       626,295  
GSR Mortgage Loan Trust,                

Series 2006-2F, Class 3A4,

                

6.000%, due 02/25/36

     1,091,619       1,089,774  
Wells Fargo Mortgage Backed Securities Trust,                

Series 2003-18, Class A2,

                

5.250%, due 12/25/33

     198,545       202,070  
           
 
Total mortgage & agency debt securities                

(cost $5,044,229)

             5,199,733  
           
 
Municipal bonds — 5.42%                
Illinois — 1.59%                
Illinois State Taxable Pension,                

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

     2,350,000       2,216,003  
           
 
New Jersey — 3.26%                
New Jersey Economic Development Authority Revenue Bonds,                

Series B, 24.500%, due 02/15/182

     5,000,000       4,364,250  
New Jersey State Turnpike Authority Revenue Bonds,                

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

     140,000       187,026  
           
 
              4,551,276  
           
 
New York — 0.32%                
Port Authority New York & New Jersey,                

4.458%, due 10/01/62

     500,000       453,355  
           
 
Tennessee — 0.25%                

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

                

6.731%, due 07/01/43

     300,000       348,756  
           
 
Total municipal bonds                

(cost $6,681,148)

             7,569,390  
           
 
US government obligations — 21.71%                
US Treasury Notes,                

0.250%, due 01/31/15

     29,245,000       29,239,297  

1.625%, due 11/15/22

     1,185,000       1,106,217  
           
 
Total US government obligations                

(cost $30,401,006)

             30,345,514  
           
 
Non-US government obligations — 2.35%                
Brazil — 1.48%                
Brazilian Government International Bond,                

2.625%, due 01/05/23

     1,000,000       870,000  

8.250%, due 01/20/34

     900,000       1,197,000  
           
 
              2,067,000  
           
 
Mexico — 0.87%                
United Mexican States,                

4.750%, due 03/08/44

     1,349,000       1,220,845  
           
 
Total Non-US government obligations                

(cost $3,451,302)

             3,287,845  
           
 
Total bonds                

(cost $130,161,049)

             131,693,844  
           
 

    Shares          
   
         
Common stock — 0.01%                
United States — 0.01%                
WMI Holdings Corp.*                

(cost $14,157)

     25,741       20,618  
           
 
Preferred stocks — 0.10%                
United States — 0.10%                
Ally Financial, Inc.,                

7.000%, due 07/17/131,4

     42       39,920  
JPMorgan Chase & Co.,                

5.450%, due 03/01/18*4

     4,000       95,320  
Washington Mutual Funding Tranche III,                

9.750%, due 12/15/17*1,4,5,6,8,9

     1,300       13  
           
 
Total preferred stocks                

(cost $136,713 )

             135,253  
           
 
Short-term investment — 6.44%                
Investment company — 6.44%                
UBS Cash Management Prime Relationship Fund10                

(cost $8,993,575)

     8,993,575       8,993,575  
           
 
Total investments11 — 100.78%                

(cost $139,305,494)

             140,843,290  
Liabilities, in excess of cash and other assets — (0.78%)             (1,086,687 )
           
 
Net assets — 100.00%           $ 139,756,603  
           
 

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   $ 4,730,321  
Gross unrealized depreciation     (3,192,525 )
   
 
Net unrealized appreciation of investments   $ 1,537,796  
   
 
         
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 June 30, 2013 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     $ —       $ 80,047,612       $ 0       $ 80,047,612  
Asset-backed security       —         291,292         —         291,292  
Commercial mortgage-backed securities       —         4,952,458         —         4,952,458  
Mortgage & agency debt securities       —         5,199,733         —         5,199,733  
Municipal bonds       —         7,569,390         —         7,569,390  
US government obligations       —         30,345,514         —         30,345,514  
Non-US government obligations       —         3,287,845         —         3,287,845  
Common stock       20,618         —         —         20,618  
Preferred stocks       95,320         39,920         13         135,253  
Short-term investment       —         8,993,575         —         8,993,575  
Total     $ 115,938       $ 140,727,339       $ 13       $ 140,843,290  

At June 30, 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:

    Corporate bonds   Preferred stock   Total
Assets                        
Beginning balance   $ 204,175     $ 13     $ 204,188  
Purchases     —       —       —  
Issuances     —       —       —  
Sales     (262,185 )     —       (262,185 )
Accrued discounts (premiums)     (1,998 )     —       (1,998 )
Total realized loss     (1,237,861 )     —       (1,237,861 )
Net change in unrealized appreciation (depreciation)     1,297,869       —       1,297,869  
Transfers into Level 3     —       —       —  
Transfers out of Level 3     —       —       —  
Ending balance   $ 0     $ 13     $ 13  

The net change in unrealized appreciation/depreciation relating to the Level 3 investments held at June 30, 2013 was $1,778.

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 June 30, 2013, the value of these securities amounted to $15,165,566 or 10.85% of net assets.
2   Rate shown reflects annualized yield at June 30, 2013 on zero coupon bond.
3   Variable or floating rate security — the interest rate shown is the current rate as of June 30, 2013 and changes periodically.
4   This security is subject to perpetual call and may be called in full or partially on or anytime after the next call date. Maturity date reflects the next call date.
5   Security is in default.
6   Security is being fair valued by a valuation committee under the direction of the Board of Trustees. At June 30, 2013, the value of these securities amounted to $1,500,013 or 1.07% of net assets.
7   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.
8   Security is illiquid. At June 30, 2013, the value of this security amounted to $13 or 0.00% of net assets.
9   This security, which represents 0.00% of net assets as of June 30, 2013, is considered restricted. (See restricted security table below for more information.)
     
                      Acquisition cost           Value as a
        Acquisition     Acquisition       as a percentage       Value   percentage of
Restricted security       date     cost       of net assets       06/30/13   net assets
Washington Mutual Funding Tranche III,                                  

9.750%, due 12/15/17

       05/17/12     $0       0.00%       $13   0.00%
     
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
            nine months   nine months           nine months
    Value   ended   ended   Value   ended
Security description   09/30/12   06/30/13   06/30/13   06/30/13   06/30/13
UBS Cash Management Prime Relationship Fund   $ 3,251,034     $ 70,538,100     $ 64,795,559     $ 8,993,575     $ 3,749  

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 t han 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 forceswhich 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
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
 

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 me etings. Pricing decisions, processes, and controls over fair value determinations are subject to internal and external reviews, including annual internal compliance reviews and periodic internal audit reviews.

The types of investments for which such fair value pricing may be necessary include, but are not limited to: foreign investments under some circumstances, 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 investments may also result from low trading volume in foreign markets or thinly traded domestic investments, 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 an investment’s fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the investment; and the evaluation of forces which influence the market in which the 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 semi-annual report to shareholders dated March 31, 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:   August 29, 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:   August 29, 2013
     
By:   /s/ Thomas Disbrow 
    Thomas Disbrow
    Treasurer & Principal Accounting Officer
     
Date:   August 29, 2013