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)

51 West 52nd Street, New York, New York 10019-6114
(Address of principal executive offices) (Zip code)

Mark F. Kemper, Esq.
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, NY 10019-6114
(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: 212-882 5000

Date of fiscal year end: September 30

Date of reporting period: December 31, 2005



Item 1. Schedule of Investments

Fort Dearborn Income Securities, Inc.
Portfolio of Investments – December 31, 2005 (Unaudited)

    Face        
    Amount   Value  
   
 
 
Bonds – 98.37%              
U.S. Bonds – 91.47%              
U.S. Corporate Bonds – 52.71%              
Albertson’s, Inc.              
8.000%, due 05/01/31   $ 165,000   $ 162,335  
Allstate Corp.              
6.750%, due 05/15/18     195,000     215,739  
Altria Group, Inc.              
7.750%, due 01/15/27     310,000     368,023  
American General Finance Corp.              
5.375%, due 10/01/12     370,000     371,881  
AT&T Corp.              
9.750%, due 11/15/31     860,000     1,080,267  
AT&T, Inc.              
6.450%, due 06/15/34     995,000     1,035,371  
Avon Products, Inc.              
7.150%, due 11/15/09     1,270,000     1,363,892  
Bank of America Corp.              
7.400%, due 01/15/11     1,915,000     2,109,418  
Bank One Corp.              
7.875%, due 08/01/10     815,000     904,756  
BellSouth Corp.              
6.000%, due 10/15/11     315,000     327,456  
6.550%, due 06/15/34     890,000     947,994  
Bristol-Myers Squibb Co.              
5.750%, due 10/01/11     395,000     407,948  
Burlington Northern Santa Fe Corp.              
6.875%, due 12/01/27     120,000     139,164  
7.082%, due 05/13/29     740,000     879,676  
C.S. First Boston USA, Inc.              
6.500%, due 01/15/12     1,105,000     1,182,106  
Capital One Financial Corp.              
5.500%, due 06/01/15     700,000     695,904  
Caterpillar, Inc.              
6.550%, due 05/01/11     720,000     776,866  
CBS Corp.              
6.625%, due 05/15/11     825,000     859,233  
Cendant Corp.              
7.375%, due 01/15/13     340,000     379,856  
Centex Corp.              
7.875%, due 02/01/11     300,000     329,353  
CIT Group, Inc.              
7.750%, due 04/02/12     140,000     158,778  
Citigroup, Inc.              
5.000%, due 09/15/14     1,882,000     1,852,556  
5.625%, due 08/27/12     815,000     840,030  
Citizens Communications Co.              
9.000%, due 08/15/31     585,000     592,312  
Comcast Corp.              
7.050%, due 03/15/33     1,300,000     1,403,460  
ConAgra Foods, Inc.              
6.750%, due 09/15/11     420,000     447,373  
Coors Brewing Co.              
6.375%, due 05/15/12     350,000     370,888  
DaimlerChrysler N.A. Holding Corp.              
8.500%, due 01/18/31     845,000     1,022,464  
Devon Financing Corp. ULC              
6.875%, due 09/30/11     985,000     1,077,427  
Dominion Resources, Inc.              
5.950%, due 06/15/35     495,000     483,163  
Duke Energy Field Services LLC              
8.125%, due 08/16/30     590,000     750,492  
EOP Operating LP              
7.250%, due 06/15/28     700,000     773,888  
Erac U.S.A. Finance Co., 144A              
8.000%, due 01/15/11     1,065,000     1,189,857  
FirstEnergy Corp., Series B              
6.450%, due 11/15/11     650,000     688,998  
Ford Motor Credit Co.              
5.800%, due 01/12/09     6,090,000     5,312,545  
General Dynamics Corp.              
4.250%, due 05/15/13     730,000     698,271  
General Electric Capital Corp.              
6.000%, due 06/15/12     1,730,000     1,822,020  
6.750%, due 03/15/32     1,150,000     1,349,929  
General Motors Acceptance Corp.              
6.875%, due 09/15/11     2,340,000     2,133,951  
Goldman Sachs Group, Inc.              
6.125%, due 02/15/33     440,000     461,788  
6.875%, due 01/15/11     1,685,000     1,815,203  
HSBC Bank USA N.A.              
5.625%, due 08/15/35     855,000     836,257  
HSBC Finance Corp.              
6.750%, due 05/15/11     1,165,000     1,250,244  


    Face        
    Amount   Value  
   
 
 
U.S. Corporate Bonds – (continued)              
ICI Wilmington, Inc.              
5.625%, due 12/01/13   $ 850,000   $ 846,064  
JPMorgan Chase & Co.              
6.750%, due 02/01/11     955,000     1,022,879  
Kinder Morgan Energy Partners LP              
5.800%, due 03/15/35     355,000     339,595  
Kraft Foods, Inc.              
5.625%, due 11/01/11     760,000     779,758  
Kroger Co.              
7.500%, due 04/01/31     650,000     725,644  
Lincoln National Corp.              
6.200%, due 12/15/11     390,000     413,989  
Lockheed Martin Corp.              
8.500%, due 12/01/29     255,000     347,557  
Marathon Oil Corp.              
6.125%, due 03/15/12     325,000     344,623  
Marsh & McLennan Cos., Inc.              
6.250%, due 03/15/12     705,000     734,506  
MBNA Corp.              
7.500%, due 03/15/12     550,000     619,483  
McKesson Corp.              
7.750%, due 02/01/12     600,000     675,382  
Mellon Funding Corp.              
5.000%, due 12/01/14     195,000     194,343  
Merck & Co., Inc.              
6.400%, due 03/01/28     520,000     563,701  
Miller Brewing Co., 144A              
5.500%, due 08/15/13     350,000     356,757  
Morgan Stanley              
6.750%, due 04/15/11     1,675,000     1,803,183  
7.250%, due 04/01/32     355,000     426,090  
National City Bank              
4.625%, due 05/01/13     360,000     349,991  
New Cingular Wireless Services, Inc.              
8.750%, due 03/01/31     945,000     1,251,953  
Newell Rubbermaid, Inc.              
6.750%, due 03/15/12     235,000     249,526  
News America, Inc.              
6.200%, due 12/15/34     810,000     804,573  
Northrop Grumman Corp.              
7.125%, due 02/15/11     425,000     463,120  
Occidental Petroleum Corp.              
8.450%, due 02/15/29     265,000     367,425  
Pacific Gas & Electric Co.              
6.050%, due 03/01/34     670,000     693,423  
Pitney Bowes, Inc.              
4.625%, due 10/01/12     300,000     293,692  
Progress Energy, Inc.              
7.000%, due 10/30/31     520,000     577,053  
Progressive Corp.              
6.250%, due 12/01/32     275,000     300,084  
PSEG Power LLC              
8.625%, due 04/15/31     290,000     381,601  
Qwest Capital Funding, Inc.              
7.900%, due 08/15/10     830,000     859,050  
Safeway, Inc.              
7.250%, due 02/01/31     645,000     696,005  
Sempra Energy              
7.950%, due 03/01/10     480,000     527,267  
Simon Property Group LP REIT, 144A              
5.375%, due 06/01/11     300,000     300,717  
SLM Corp.              
5.125%, due 08/27/12     115,000     115,167  
Sprint Capital Corp.              
8.750%, due 03/15/32     1,330,000     1,765,016  
Target Corp.              
7.000%, due 07/15/31     305,000     369,715  
Time Warner, Inc.              
7.625%, due 04/15/31     995,000     1,108,081  
Travelers Property Casualty Corp.              
6.375%, due 03/15/33     350,000     372,706  
TXU Energy Co. LLC              
7.000%, due 03/15/13     800,000     852,531  
U.S. Bank N.A.              
6.375%, due 08/01/11     500,000     533,916  
Union Oil Co. of California              
7.500%, due 02/15/29     300,000     383,714  
Union Pacific Corp.              
6.650%, due 01/15/11     470,000     500,639  
UST, Inc.              
6.625%, due 07/15/12     475,000     493,923  
Valero Energy Corp.              
7.500%, due 04/15/32     470,000     571,187  
Verizon New York, Inc., Series B              
7.375%, due 04/01/32     1,085,000     1,140,671  
Wachovia Bank N.A.              
7.800%, due 08/18/10     1,620,000     1,818,338  
Washington Mutual Bank FA              
5.500%, due 01/15/13     1,050,000     1,066,393  


    Face        
    Amount   Value  
   
 
 
U.S. Corporate Bonds – (concluded)              
Wells Fargo Bank N.A.              
6.450%, due 02/01/11   $ 1,025,000   $ 1,092,377  
Weyerhaeuser Co.              
7.375%, due 03/15/32     665,000     739,286  
Wyeth              
5.500%, due 03/15/13     700,000     709,638  
         
 
            73,811,464  
         
 
Asset-Backed Securities – 6.81%              
CenterPoint Energy Transition Bond Co., LLC 01-1, Class A4              
5.630%, due 09/15/15     3,200,000     3,312,575  
Conseco Finance Securitizations Corp., 00-2, Class A4              
8.480%, due 12/01/30     533,351     540,029  
Conseco Finance Securitizations Corp., 00-5, Class A4              
7.470%, due 02/01/32     220,073     221,491  
Conseco Finance Securitizations Corp., 00-5, Class A5              
7.700%, due 02/01/32     1,500,000     1,489,214  
CPL Transition Funding LLC, 02-1, Class A5              
6.250%, due 01/15/17     3,000,000     3,277,387  
Small Business Administration, 04-P10B, Class 1              
4.754%, due 08/10/14     709,238     696,985  
         
 
            9,537,681  
         
 
Mortgage and Agency Debt Securities – 9.68%              
C.S. First Boston Mortgage Securities Corp., 03-8, Class 5A1              
6.500%, due 04/25/33     188,519     189,179  
Federal Home Loan Mortgage Corp.              
5.000%, due 01/30/14     30,000     29,568  
5.750%, due 01/15/12     1,315,000     1,379,714  
Federal Home Loan Mortgage Corp., Gold              
5.500%, due 10/01/19     802,871     807,862  
6.500%, due 02/01/17     249,490     256,393  
Federal National Mortgage Association              
5.000%, TBA     555,000     537,656  
4.625%, due 10/15/13     785,000     775,611  
5.500%, due 03/01/33     503,863     500,315  
5.500%, due 09/01/34     2,491,566     2,469,554  
5.500%, due 11/01/34     405,656     402,072  
6.000%, due 06/01/23     229,722     233,575  
6.000%, due 11/01/28     331,278     335,604  
6.250%, due 02/01/11     1,370,000     1,446,871  
6.625%, due 11/15/30     1,500,000     1,849,548  
7.000%, due 03/01/31     179,488     187,807  
Federal National Mortgage Association Grantor Trust, 02-T19, Class A1              
6.500%, due 07/25/42     545,436     560,372  
Federal National Mortgage Association, 93-106, Class Z, REMIC              
7.000%, due 06/25/13     44,098     45,848  
Government National Mortgage Association              
6.500%, due 05/15/29     119,373     124,916  
Wells Fargo Mortgage Backed Securities Trust, 03-18, Class A2              
5.250%, due 12/25/33     1,467,920     1,419,479  
         
 
            13,551,944  
         
 
Municipal Notes and Bonds – 3.59%              
Illinois State Taxable Pension              
5.100%, due 06/01/33     2,350,000     2,309,862  
New Jersey Economic Development Authority, Series B*              
2.954%, due 02/15/18     5,000,000     2,724,050  
         
 
            5,033,912  
         
 
U.S. Government Obligations – 18.68%              
U.S. Treasury Bonds              
6.250%, due 05/15/30     8,900,000     11,053,382  
8.000%, due 11/15/21     1,510,000     2,080,319  
8.750%, due 05/15/17     4,515,000     6,200,011  
U.S. Treasury Inflation Indexed Bonds TIPS              
2.000%, due 01/15/14†     4,031,458     4,008,624  
U.S. Treasury Notes              
3.875%, due 07/31/07     75,000     74,391  
3.875%, due 02/15/13     320,000     310,163  
4.125%, due 05/15/15     320,000     312,987  
U.S. Treasury Strips*              
1.705%, due 02/15/27     5,620,000     2,124,332  
         
 
            26,164,209  
         
 
Total U.S. Bonds           128,099,210  
         
 
International Bonds – 6.90%              
International Corporate Bonds – 6.55%              
Canada – 2.34%              
Anadarko Finance Co., Series B              
7.500%, due 05/01/31   $ 745,000     913,082  
Bombardier, Inc., 144A              
6.750%, due 05/01/12     1,020,000     943,500  
Burlington Resources Finance Co.              
6.680%, due 02/15/11     370,000     398,938  
Canadian National Railway Co.              
6.900%, due 07/15/28     285,000     339,237  
Conoco Funding Co.              
7.250%, due 10/15/31     275,000     342,635  
Telus Corp.              
8.000%, due 06/01/11     305,000     341,923  
         
 
            3,279,315  
         
 


    Face        
    Amount   Value  
   
 
 
International Corporate Bonds – (concluded)              
Cayman Islands – 2.36%              
Augusta Funding VI, 144A              
7.375%, due 04/15/13   $ 2,500,000   $ 2,568,825  
Transocean, Inc.              
7.500%, due 04/15/31     585,000     737,075  
         
 
            3,305,900  
         
 
Luxembourg – 0.60%              
Telecom Italia Capital S.A.              
6.375%, due 11/15/33   $ 835,000     844,633  
         
 
United Kingdom – 1.25%              
Abbey National PLC              
7.950%, due 10/26/29   $ 750,000     972,290  
Barclays Bank PLC, 144A††              
8.550%, due 06/15/11     290,000     334,567  
Royal Bank of Scotland Group PLC              
9.118%, due 03/31/10     385,000     441,056  
         
 
            1,747,913  
         
 
Total International Corporate Bonds           9,177,761  
         
 
Sovereign/SupraNational Bonds – 0.35%              
PEMEX Project Funding Master Trust              
8.000%, due 11/15/11     440,000     492,360  
         
 
Total International Bonds           9,670,121  
         
 
Total Bonds (Cost $133,098,050)           137,769,331  
         
 
Short-Term Investment – 0.95%**              
Other – 0.95%              
    Shares      
   
     
UBS Supplementary Trust – U.S. Cash Management Prime Fund, yield of 4.357%***              
(Cost $1,325,130)     1,325,130     1,325,130  
         
 
Total Investments (Cost $134,423,180) – 99.32%#           139,094,461  
Cash and other assets, less liabilities – 0.68%           953,320  
         
 
Net Assets – 100.00%         $ 140,047,781  
         
 
NOTES TO SCHEDULE OF INVESTMENTS              
Aggregate cost for federal income tax purposes, which was substantially the same for book purposes, $134,423,180; and net unrealized appreciation consisted of:
    
               

Gross unrealized appreciation

         $ 6,041,082  

Gross unrealized depreciation

           (1,369,801 )
         
 

Net unrealized appreciation

         $ 4,671,281  
         
 
†   All or a portion of this security is segregated for “to be announced” (“TBA”) securities.
††   Floating rate securities – The interest rates shown are the current rates as of December 31, 2005.
*   Reflects annualized yield at December 31, 2005 on zero coupon bonds.
**   Security is issued by a fund that is advised by a related entity of UBS Global Asset Management (Americas) Inc., Fort Dearborn Income Securities, Inc.’s advisor.
***   Interest rate reflects yield at December 31, 2005.
#   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 from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix 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. Securities traded in the over-the-counter (“OTC”) market and listed on The Nasdaq Stock Market, Inc. (“Nasdaq”) normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Securities which are listed on U.S. and foreign stock exchanges normally are valued at the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. (“UBS Global AM” or the “Advisor”), the investment advisor of the Fund. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG, an internationally diversified organization with headquarters in Zurich and Basel, Switzerland and operations in many areas of the financial services industry. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board determines that this does not represent fair value.
144A   Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2005, the value of these securities amounted to $5,694,223 or 4.07% of net assets.
REIT   Real Estate Investment Trust.
REMIC   Real Estate Mortgage Investment Conduit.
Strips   Bonds that can be subdivided into a series of zero-coupon bonds.
TBA   (To Be Announced) Security is purchased on a forward commitment basis with an approximate principal amount (generally+/-1.0%) and no definite maturity date. The actual principal amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned.
TIPS   Treasury Inflation Protected Security. Inflation protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. Inflation-protected securities include Treasury Inflation Protected Securities (“TIPS”), which are securities issued by the U.S. Treasury. The interest rate paid by the TIPS is fixed, while the principal value rises or falls based on changes in a published Consumer Price Index (“CPI”). Thus, if inflation occurs, the principal and interest payments on the TIPS are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the TIPS’ principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the TIPS generally pay lower interest rates than typical U.S. Treasury securities. Only if inflation occurs will TIPS offer a higher real yield than a conventional Treasury bond of the same maturity.


1) Transactions with Affiliates

The Fund invests in shares of UBS Supplementary Trust – U.S. Cash Management Prime Fund (“Supplementary Trust”). Supplementary Trust is managed by UBS Global Asset Management (Americas) Inc. (the “Advisor”) and is offered as a cash management option only a business trust to mutual funds and other accounts managed by Advisor. Distributions from Supplementary Trust are reflected as affiliated interest income. Amounts relating to those investments at December 31, 2005 and for the period ended are summarized as follows:

        Sales   Interest       % of Net
Fund   Purchases   Proceeds   Income   Value   Assets
UBS Supplementary Trust – U.S. Cash Management Prime Fund
   $7,712,539   $8,325,732   $22,870   $1,325,130   0.95%

For more information regarding the Fund’s other significant policies, please refer to the Fund’s annual report dated September 30, 2005.

Fort Dearborn Income Securities, Inc.
 
Industry Diversification
As a Percent of Net Assets
As of December 31, 2005 (unaudited)
       
BONDS      
U.S. BONDS      
U.S. CORPORATE BONDS      
Aerospace & Defense   1.08 %
Automobiles   0.73  
Beverages   0.52  
Capital Markets   4.09  
Chemicals   0.60  
Commercial Banks   5.46  
Commercial Services & Supplies   0.96  
Consumer Finance   3.26  
Diversified Financial Services   9.38  
Diversified Telecommunication Services   5.53  
Electric Utilities   2.01  
Food & Staples Retailing   1.13  
Food Products   0.88  
Gas Utilities   0.38  
Household Durables   0.41  
Insurance   1.46  
Machinery   0.56  
Media   2.98  
Multiline Retail   0.26  
Multi-Utilities & Unregulated Power   1.15  
Oil & Gas   2.20  
Paper & Forest Products   0.53  
Personal Products   0.97  
Pharmaceuticals   1.20  
Real Estate   0.77  
Road & Rail   1.94  
Thrifts & Mortgage Finance   0.76  
Tobacco   0.62  
Wireless Telecommunication Services   0.89  
   
 

Total U.S. Corporate Bonds

   52.71  
   
 
Asset-Backed Securities   6.81  
Mortgage and Agency Debt Securities   9.68  
Municipal Notes and Bonds   3.59  
U.S. Government Obligations   18.68  
   
 

Total U.S. Bonds

   91.47  
   
 
INTERNATIONAL BONDS      
International Corporate Bonds      
Aerospace & Defense   0.67  
Commercial Banks   1.25  
Diversified Financial Services   1.83  
Diversified Telecommunication Services   0.85  
Energy Equipment & Services   0.53  
Oil & Gas   1.18  
Road & Rail   0.24  
   
 

Total International Corporate Bonds

   6.55  
Sovereign/SupraNational Bonds   0.35  
   
 

Total International Bonds

   6.90  
   
 
TOTAL BONDS   98.37  
SHORT-TERM INVESTMENT   0.95  
   
 
TOTAL INVESTMENTS   99.32  
CASH AND OTHER ASSETS, LESS LIABILITIES   0.68  
   
 
NET ASSETS   100.00 %
   
 


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/ W. Douglas Beck
    W. Douglas Beck
    President
     
Date:   February 28, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:   /s/ W. Douglas Beck
    W. Douglas Beck
    President
     
Date:   February 28, 2006
     
By:   /s/ Joseph T. Malone
    Joseph T. Malone
    Treasurer
     
Date:   February 28, 2006