Ubs

Citywire North 2012UBS Emerging Markets Equity Income Fund

September 2012

For Professional Clients onlyEquities

Justin Wells

Equity Strategist

2

Emerging Markets Equities Team

Source: UBS Global Asset ManagementAs at 31 July 2012 1 Member of Emerging Markets Equity Strategy Committee Equity Income Specialists

Portfolio construction and research

A stable and experienced team managing ca. USD 21 bn

Geoffrey Wong1

Head Global Emerging Markets & Asia Pacific Equities

Hong Kong / Singapore

Manish Modi1

Portfolio ManagerAsia ex Japan

Cheah Yit Mee1

Portfolio ManagerAsia ex Japan

Bin ShiPortfolio ManagerChina

Projit Chatterjee1

Portfolio Manager / Equity Strategist

Namit NayegandhiAnalyst

Chan Chee SengAnalyst

Yu ZhangAnalyst

Sanjeev JoshiAnalyst

Joanna MakAnalyst

Leslie ChowAnalyst

Matthew AdamsAnalyst

Hai HuangAnalyst

Kelvin TeoAnalyst

Han Yaw JuanTrader

Jimmy ChuaHead Trader

Paul HillmanTrader

Reginald OhTrader

Dorothy LekTrader

Gabriel Csendes1

Portfolio ManagerAnalyst

Michael AbelleraTrader Latin America

Zurich / London / Chicago

Urs Antonioli1

Head of EM EMEA / Latin America Equities

Mark RoggensingerAnalyst

Gabriella AbderhaldenAnalyst

Irina BudnikovaAnalyst

Benita MikolajewiczAnalyst

Steve HerbertTrader EMEA

Macrina OtienoTrader EMEA

Justin WellsEquity Strategist

Choo Shou PinAnalyst

SECTION 1

Emerging Markets Survey

4

SurveyPlease review questions on screen

SECTION 2

Why EM Equities for Income?

6

EM Equities provide stable dividend payments

For the MSCI EM Equity index, dividend payments have steadily increased over the last ten years– Dividends have been significantly more stable than earnings

– The dividend payout ratio has been stable over time and mostly in the 30 – 40% range

– However it is currently still ca. 10% below world average

Potential for further increase in dividend payouts, as many companies enter mature growth phase

Source: DataStream, UBS Investment Research, as at 30 April 2012

MSCI EM, DPS and EPS MSCI World, DPS and EPS

US

D

US

D

0

20

40

60

80

100

Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11

DPS EPS

0

20

40

60

80

100

120

Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11

DPS EPS

7

EM Equities are able to keep paying sustainable dividends…

EM companies reduced their debt levels consistently during the past decade– Current net debt to equity ratios are below 25%, significantly lower than developed markets

companies with a ratio of 50%

In addition, EM companies have high cash levels on their balance sheets

Source: Worldscope, UBS Investment Research, April 2012

Net debt to Equity by region

…supported by low debt, high earning growth potential

Cash/Total Assets v Actual Payout Ratio

0%

20%

40%

60%

80%

100%

120%

140%

88 90 92 94 96 98 00 02 04 06 08 10 12e

LatAm Asia EMEA

10%

11%

12%

13%

14%

15%

16%

17%

Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12

30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%

Cash / Total Asset (lhs) Payout ratio (rhs)

8

Back-test of a High Dividend EM Equity portfolio over 10 years

10 years (31 December 2001 – 31 December 2011) EM MSCI universe

EM high dividend portfolio

Annualised return 14.5% 24.1%

Annualised standard deviation 25% 23%

Source: UBS Investment Bank Worldscope, DatastreamNote: The above chart shows returns by calendar year to 31 December 2011. All other information is as at 31 December 2011. 1 Back test rules: At each month end, the universe is restricted to stocks which are in the MSCI EM Index on that date. Each stock has a market capitalisation of at least USD 1 billion on that date. 75 stocks with the highest trailing dividend yield over the previous 12 months on that date are selected. These stocks are equally weighted within the portfolio. The portfolio is rebalanced at month end and the total returns computed in USD.Note: Back-test results or past performance are not guides for the future. No restriction to buy/sell stocks i.e. no constraint on having to actually receive dividends and payout the same as income. Our portfolio will be selected from ca. 350-400 stocks under our research coverage.

Portfolio selected from the entire universe of stocks in the MSCI EM index

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Ret

urn

by

year

EM MSCI universe High yield stocks

EM Equities performance from high dividend stocks is strong

9

Split of MSCI World stocks yielding greater than 3%

Developed Asia Pacific ex Japan

16%

UK12%

Emerging17%

Developed Europe ex

UK26%

Developed North

America29%

Developed Europe ex

UK20%

Japan8%

Developed Asia Pacific ex Japan

13%

Emerging33%

Developed North

America19%

UK7%

EM’s share of high yielding stocks has increased

1995

Total number of stocks = 356

2011

Total number of stocks = 938

60 stocks 302 stocks

Source: Datastream, 31 December 2011Note: Only companies with market capitalisation >USD 1 billion included in survey

10

0

1

2

3

4

5

6

Mat

eria

ls

Tele

com

s

Ener

gy

Finan

cial

s

Uti

liti

es IT

Indust

rial

s

Cons.

Sta

ple

s

Cons.

Dis

c.

Hea

lth c

are

Gro

ss d

ivid

end y

ield

(%

)

EM Equities yields vary among countries and sectors

MSCI EM Index¹ (including Hong Kong & Singapore) MSCI EM Index

Index Dividend Yield: 3.0%

Reference Index is the MSCI EM Index

Source: UBS Investment Research, Factset, July 2012 1 Data shown is not for index as a whole but represented by the major markets within it. 2 Source: UBS Global Asset Management, B Inc share class, 31 July 2012. Historic yield is based on distributions declared over the last year as a percentage of the share price. It does not include the effect of any initial charge paid.

0

1

2

3

4

5

6

7

Pola

nd

Bra

zil

Colo

mbia

Egyp

t

Taiw

an

Russ

ia

Chin

a

Hungar

y

Singap

ore

South

Afr

ica

Hong K

ong

Thai

land

Mal

aysi

a

Indones

ia

Turk

ey

Chile

Philip

pin

es

India

Mex

ico

Peru

Kore

a

Gro

ss d

ivid

end y

ield

(%

)

Historic portfolio yield 5.4%²

Index Dividend Yield: 3.0%

11

UBS Emerging Markets Equity Income Fund

OW Taiwan, South Africa, Poland

UW China, Korea, Brazil

Source: UBS Global Asset Management, Summit, as at 31 July 2012.

Country Positioning v MSCI EM Index

0 5 10 15 20

BrazilChile

ChinaColombia

Czech RepublicEgypt

Hong KongHungary

IndiaIndonesia

IsraelKorea

MalaysiaMexico

MoroccoPeru

PhilippinesPolandRussia

SingaporeSouth Africa

TaiwanThailand

Turkey

% weight

Portfolio %Reference Index %

12


Sector Positioning v MSCI EM Index OW Telecommunications and Information Technology

UW Energy and Consumer Staples

Source: UBS Global Asset Management, Summit, as at 31 July 2012.

0 5 10 15 20 25 30

TelecommunicationServices

InformationTechnology

Utilities

Financials

Health Care

Materials

Industrials

ConsumerDiscretionary

Consumer Staples

Energy

InformationTechnology

% weight

Portfolio %

Reference Index %

SECTION 3

Portfolio Construction

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Investment and Portfolio Construction Process

Investment Universe of EM Equity team (300-400 stocks

researched)

Top dividend yield stocks

Client portfolio40 – 80 stocks

Remove stocks where dividends not sustainable or weak fundamentals

Add stocks where dividends very stable and/or likely to increase

Final portfolio construction by PMs

Filtrate: Select high dividend stocksRemove overvalued stocks

15

Good Dividend Growth

Foschini is well positioned

Turnaround story

Mass middle market focus

Gaining market share due to improving product offering and attractive price points

Solid FCF improvement story driven by

Good revenue growth and stabilizing margins, scope to improve working capital

Future major acquisitions are unlikely, thereby sustaining the cash flow

Strong corporate governance

Responsible dividend discipline – flattish until top line performance improved

Expected improving dividend payout ratio going forward

Prospect of further funds being returned to shareholders post the IPO of microfinance business

Market Share of Modern Apparel Retail in South Africa

Top 5 Modern Apparel Retailers

Source: Bloomberg, UBS Global Asset Management, July 2012

Foschini (South Africa, Consumer Discretionary)

66%67%68%69%70%71%72%73%

2003 2004 2005 2006 2007 2008 2009 2010 2011

Modern73%

Woolworths10%

Mr Price13%

Truworths9%

Foschini13%Edcon

28%Informal28%

12 Month Yield FY1 FY2

3 Yr Dividend Growth


3.20% 3.90% 4.50% 12.97% 18.64%

16

Good Dividend Growth

Asustek enjoys strong positioning within the industry

One of the fastest growing PC brands over last 3 years

Delivered decent margins throughout, while steadily gaining market share

Has withstood the serious ‘headwinds’ impacting the wider PC industry

Strong R&D capabilities and product design have positioned it well for future challenges

Good prospects for maintaining sustainable dividend

Recent corporate actions have reduced working capital requirements

Allowing cash dividends to increase over time

Future major acquisitions are unlikely, thereby sustaining the cash flow

Payout ratio likely to be maintained

Potential for special dividend upon future prospective divestments

Dividend Per Share

Top 5 PC vendor’s market share globally

Source: UBS Global Asset Management, July 2012

Source: IDC

Asustek (Taiwan, Information Technology)

0

5

10

15

20

2007 2008 2009 2010 2011 2012E 2013E 2014E

12 Month Yield FY1 FY2



4.90% 5.60% 6.40% 9.96% 26.36%

SECTION 4

Performance since inception

18

Strong Performance

Source: Lipper as at 31 July 2012. The performance shown is for the B Inc share class, based on NAV prices with income reinvested net of basic rate tax and in Sterling terms.1 The Fund’s Sector is IMA Global Emerging Markets. 2 Launch date 31 January 2011.

Source: UBS Global Asset Management / FactSet, 31 July 2012Each bar relates to the discrete monthly performance of the MSCI Emerging Markets Index. The blue line relates to the cumulative performance of the fund relative to the index.

Fund (%) Sector¹ (%) Quartile

3 Months -0.7 -2.1 1

6 Months -0.1 -2.5 1

1 Year 0.1 -9.3 1

Since launch² 3.9 -9.3 1

-15%

-10%

-5%

0%

5%

10%

15%

20%

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12

Monthly perf absolute Relative performance cumulative

19

UBS Emerging Markets Equity Income

Source: Lipper, based on NAV prices with income reinvested net of basic rate tax and in GBP terms. UBS EMEI refers to the B Income share class.

Risk/Return from launch (31 January 2011 to 31 July 2012)

UBS EMEI

IMA Global Emerging Markets MSCI Emerging Markets

20 20

Structural growth: transition to an EM-led global economy

Source: IMF, UBS IB research, July 2012

The past ….

The future (estimated average growth rates until 2015)….

Source: CEIC estimates & World Economic Outlook, IMF, UBS IB research and estimates, July 2012

Real GDP Growth (%)

0

2

4

6

8

Asia ex Japan EM World US DM Euro area

-6

-4

-2

02

4

6

8

10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Advanced economies Emerging economies

21

(30)

(20)

(10)

0

10

20

30

40

50

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

EM Earnings growth likely peaked

EM Earnings Revision EM Earnings Growth YoY

Source: MSCI, Datastream, IBES, UBS Quantitative Research, July 2012

Earn

ing

s R

evis

ion

s

Earn

ing

s G

row

th (

%)

-80%

-60%

-40%

-20%

0%

20%

40%

60%

00 01 02 03 04 05 06 07 08 09 10 11 12

22

Summary

A summary of benefits

Prospect of providing a rising and sustainable income stream with the potential for capital growth from investing in EM equities

May be suitable for UK investors looking to diversify their sources of income from sole exposure to developed markets, that are burdened with debt and face demographic challenges

The UBS Emerging Markets Equity Income Fund

Benefit from the investment experience of a stable team managing in excess of USD 21 billion1 in EM and Asian equities

Leverages UBS EM Equity team’s fundamental research based investment process. The Fund invests in established companies within EM

Fund has achieved strong performance across multiple time periods

Coupled with an historic yield of 5.4%²

Why invest in Emerging Markets for Income?

1 Source: UBS Global Asset Management, as at 31 July 20122 Source UBS Global Asset Management, as at 31 July 2012. B income shareclass. Historic yield is based on distributions declared over the last year as a percentage of the share

price. It does not include the effect on any initial charge paid.

APPENDIX

Additional information

24

The UBS Emerging Markets Equity Income Fund

Investment goals

Focus on income generation, together with long-term capital appreciation. To be achieved by investing in equity securities across EM Equity Markets and HK/SG, focusing on companies with high and/or increasing dividend distributions

Targets to exceed 120% of the yield of the MSCI EM1

Other parameters

Active risk: Not applicable as no active benchmark

Expected beta range: typical <1

Number of equity holdings: 40-80

Opportunistic allocation of up to 20% to Singapore and Hong Kong2

Portfolio exposures

Investment goals and risk parameters:

1 Gross of fees and withholding tax over a full market cycle, which is typically 3-5 years.2 Maximum 20% allocation to Hong Kong & Singapore individually or cumulatively (to comply with IMA sector requirements this figure includes the amount of cash currently held

in the Fund).Otherwise, 25% absolute limit.

Relative Absolute

Stock weights Typical maximum of around 5%

Sector weights +/- 25% vs index 35%

Country weights2 +/- 25% vs index 25%

25

Source: UBS Global Asset Management1 This is a non-benchmarked, equity income product. The dividend yield of the MSCI Emerging Markets Index is used in reference to the overall dividend yield of the Fund.2 The IMA Global Emerging Markets sector ranks Funds on a Total Return basis. It should be noted that the Fund’s primary objective is to deliver income.


Fund objective

To seek to generate income and achieve some long-term capital appreciation predominantly through active management of a diversified portfolio invested in high yield equity securities across global emerging markets including Hong Kong and Singapore

Fund details ‘A’ shares ‘B’ shares

Launch date 31 January 2011 Reference index1 MSCI Emerging Markets Index Sector IMA Global Emerging Markets2 Initial charge 4.00% 0.00% AMC 1.50% 0.90% Minimum initial investment £1,000 £100,000 XD dates 31 March, 30 September Pay dates 31 May, 30 November Sedol code (Acc) B5LPBN8 B5M1470 Sedol code (Inc) B5W93T9 B5KZ5J3 ISIN code (Acc) GB00B5LPBN84 GB00B5M14703 ISIN code (Inc) GB00B5W93T93 GB00B5KZ5J37 ISA Yes ISA transfer Yes

26

Urs Antonioli, CFA

Head of EM EMEA & Latin America Equities and Portfolio ManagerManaging Director

Urs Antonioli heads investment management and research for Emerging Europe, the Middle East and Latin America. He manages a team of analysts researching companies, industries and countries in the above region.

Urs is a member of the UBS Global Asset Management Emerging Markets Strategy Committee.

Urs began his financial career by joining the UBS Zurich graduate training programme in 1994. In 1995 he moved to UBS Asset Management to launch and manage the first UBS emerging market fund investing in Eastern European countries. From 1996 to 2000, his responsibilities comprised management of all Eastern European portfolios managed at UBS. He has spent more than eight years in research activities, specializing in energy, telecommunications, basic materials and the technology sector. He took up his present position in August 2001.

Years of investment industry experience: 16

Education: University of Fribourg (Switzerland) MBA

27

Projit Chatterjee, CFA Equity Strategist, Global Emerging Markets and Asia Pacific Equities, Managing Director

Projit Chatterjee is an Equity Strategist within the Global Emerging Markets and Asia Pacific Equities team. He is a member of the Global Emerging Markets Strategy Committee and is based in the Singapore office. He is also co-manager of the GEM and Asia High Dividend funds.

Projit has primary responsibility for overall product positioning and development of Emerging Markets and Asian Equity strategies, as well as marketing and communication of these strategies to existing and prospective clients globally.

Prior to this, Projit led an acquisition project in the Indian market.

Projit joined UBS in 1997 as a Corporate Finance Analyst with UBS Investment Bank in Mumbai, India. In 1999, he moved to UBS Global Asset Management in Zurich to work in Strategic Projects, International Fund Marketing. In Zurich, Projit held various roles in the areas of strategic business development, business management and investment solutions.

Before joining UBS, Projit worked briefly as a money market and foreign exchange dealer in the treasury of Mashreq Bank, a UAE bank in Mumbai.


Education: Indian Institute of Technology (India), B.Tech; Indian Institute of Management (India), MBA

28

Justin WellsEquity Strategist Director

Justin Wells is an Equity Strategist for Emerging Market Equities, based in Zurich. He is responsible for representing the strategies managed by the EM Equities team in Zurich, including Global Emerging Markets, Latin America, Russia, and Central & Eastern Europe.

Justin joined UBS Global Asset Management in 2007 initially as a Product Development Manager. He was responsible for coordinating the launch of the Global Emerging Market HALO fund and worked with the Equities team on the Long-Short initiative. He moved to his current role in August 2010.

Prior to joining UBS, Justin worked in various roles within Equity Capital Markets, latterly as an Investment Advisor to the CIO of Shinsei Bank, Tokyo. Before pursuing a career in finance, Justin practiced as a Barrister in London for a number of years.


Education: Queen’s University of Belfast (UK), BA (Hons); Durham University (UK), LL.B (Hons)

29

Disclaimer

This document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances.Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and are not guaranteed. Investors may not get back the amount originally invested. Changes in rates of exchange may cause the value of this investment to fluctuate. Investments in less developed markets may be more volatile than investments in more established markets. The Fund is permitted to, and may, on occasion, hold a limited number of investments. As the annual management fee of the Fund is charged to capital, the potential capital growth of the Fund will be reduced.

This document is a marketing communication. Any market or investment views expressed are not intended to be investment research. The document has not been prepared in line with the FSA requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this document should not be considered a recommendation to purchase or sell any particular security and the opinions expressed are those of UBS Global Asset Management and are subject to change without notice.

Issued in September 2012 by UBS Global Asset Management (UK) Ltd, a subsidiary of UBS AG, 21 Lombard Street, London EC3V 9AH. Authorised and regulated by the Financial Services Authority. Telephone calls may be recorded.

© UBS 2012. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

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