UBS Investment Proposal March 2011 Joe Advisor Sr. Vice President - Invetments

UBS Investment Proposal March 2011

Joe AdvisorSr. Vice President - Invetments

Table of Contents

Wealth Management 3

Asset allocation 13

Investing in equities 29

Wealth Management

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What matters most

The better we understand your priorities in life and your plans for the future...

What’s really important to you? At UBS, that’s where our conversation begins.

How hard is your cash working for you and how easily can you access it?

We have some suggestions to help you maximize the value of all your assets.

With your children gone, your business sold, your career complete, what’s next?

We’ll help you prepare for your next endeavor.

You’ve got big dreams. Big dreams usually take resources. So what’s your plan?

Good advice can carry you through a lifetime.

...the better we can collaborate with you to develop a financial strategy for all you hope to achieve.

4


Understanding your needs and life goals

Depending on your needs we can help you implement your retirement strategies through both our brokerage and advisory capabilities.

Neither UBS Financial Services Inc. nor its employees provide tax or legal advice. You must consult with your tax and/or legal advisors regarding your personal circumstances.

The information we gather helps to create strategies that are personalized for your needs.

We will discuss the things that matter to you so we can help you build, manage and protect your wealth.

Growing your assets

Protecting what you’ve achieved

Managing cash flow Caring for others

Maintaining your lifestyle

Grow your wealth now and into the future

• Building your portfolio

• Asset allocation

• Planning for retirement

• Funding children’s education

Help to preserve what

you’ve worked so hard

to build

• Tax-efficient investing

• Managing concentrated stock holdings

• Insurance and other wealth protection strategies

Access your funds when and where you need them

• Short-term liquidity strategies

• Smart use of credit

• Real estate financing

• Small business services

Do your best for those

people and causes you

care deeply about

• Estate planning strategies

• Wealth transfer strategies

• Gifting

• Philanthropy

• Long-term care

Take on new opportunities and

enjoy life to the fullest

• Managing income in retirement

• Starting a new business

• Business succession planning

5


Taking a comprehensive approach



At UBS, we look at how every financial decision impacts other choices. Our broad view will help integrate different parts of your financial life so you can make confident financial decisions that work together to help you pursue your needs.

Planning for your goals and objectives

• Investment management

• Retirement planning

• Liability management

• Corporate benefits

• Estate planning strategies

• Education funding

• Insurance strategies

• Closely held businesses

6


An extended team



Your Financial Advisor draws on teams of specialists

Based on what we learn through our conversations, we take a team approach to addressing your needs. Dedicated professionals work side by side with your Financial Advisor to provide specialized expertise across various aspects of your financial life.

YouYour Financial AdvisorRetirement

services

• IRAs

• Company retirement plans

• Small business pension plans

Asset management

• Managed accounts

• Alternative investments

• Structured products

Brokerage services

• Equities

• Taxable fixed income

• Municipal securities

• Mutual funds

Estate planning

• Wealth transfer strategies

• Asset and estate preservation

• Philanthropic planning

Financing

• Mortgages

• Securities-backed financing

Cash management

• Checking

• Online bill payment

• Business account

Insurance

• Annuities

• Protection planning

• Life insurance

• Trust funding

7


How we work with you

• We believe in transparency. We will explain the reasoning behind all our recommendations to you and tell you how we get paid for the services we provide

• Our initial recommendations are just the beginning of what we hope will be a long-term relationship with you. We will continue to review your financial situation on a schedule that works best for you

• Of course, you retain the freedom and flexibility to tell us when you feel a review or changes are necessary

We see working with you as a long-term relationship, based on mutual trust. We will present strategies and services as recommendations that you can review and decide upon.

8


A global leader focused on youWith UBS, you benefit from the resources of a global firm focused on you and your goals.

Global • Presence in over 50 countries

You gain access to markets and economies around the world

• One of the world’s largest wealth managers

You benefit from the ideas of 600 analysts throughout the world conducting research tailored to individual investors

Financial Strength

• Strong credit ratings of A+ from Standard & Poor’s and Aa3 from Moody’s

You understand that we hold ourselves accountable to the highest standards

You benefit from our ability to offer competitive rates

Wealth Management Focus

• Wealth management is our core business

You benefit from a comprehensive range of products and services tailored to you as an individual

History/Perspective

• 140-year tradition serving individuals and families in Europe and the U.S.

You benefit from our deeply rooted culture of client service and personal attention

UBS

9


Providing access to the resources you need

1 Services in U.S. provided by UBS Financial Services Inc., a registered broker/dealer offering securities, trading, brokerage and related products and services.

2 UBS Wealth Management Research in the U.S. is provided by UBS Financial Services Inc. and UBS AG. UBS Financial Services Inc. is a subsidiary of UBS AG. UBS Wealth Management Research and any affiliate of UBS AG may publish research, express opinions or provide recommendations that may be inconsistent with each other and/or may be inconsistent with investing in a specific product. Investors should make their own independent investigation of the merits of investing in any particular product. Two Sources of UBS Research are available to you as a UBS client. One source is UBS Wealth Management Research. UBS Wealth Management Research is part of UBS Global Wealth Management & Business Banking (the UBS business group that includes, among others, UBS Financial Services Inc. and UBS International Inc.), whose primary business focus is individual investors. The second source is UBS Investment Research. UBS Investment Research is part of UBS Investment Bank, whose primary business focus is institutional investors. Because both sources of information are independent of one another and reflect the different assumptions, views and analytical methods of the analysts who prepared them, there may exist a difference of opinions between the two sources.

3 Services in U.S. provided through UBS Securities, LLC, a registered broker/dealer.

We access investment capabilities within UBS as well as from outside the firm to deliver appropriate strategies for your individual needs.

• Global presence, insight and advice1

• Asset and liability management

• Dedicated investment research capabilities for wealth management clients2

• One of world’s fastest growing banks3

• Strong fixed income capabilities, including municipal bonds

• One of the largest global institutional asset managers

• Global capabilities with a focus on asset allocation and risk management

• Institutional asset managers

• Hedge funds and private equity

• Life insurance companies

Global Wealth Management &Banking Business Investment Bank

Global Asset Management External Partners

You

UBS Financial Advisor

Based on each client’s needs, develops personalized strategies by accessing capabilities and resources across the firm as well as from external partners

10


Recognized strengthOur ongoing commitment to excellence regularly earns industry recognition

Best at Range of Advisory Services andInvestment ProductsEuromoney, February 2010

Best Provider of Fixed Income and Equities Portfolio ManagementEuromoney, February 2010 (Fixed Income), 2009, ‘08, ‘07

Best at High Net Worth ServicesEuromoney, February 2010

Best Provider of Hedge Fund InvestmentsEuromoney, February 2010, ’09, ‘08, ‘07

#1 in Research• #1 All-Europe Research Team• #1 Latin American Research Team• #1 All-Asia Research Team• #1 All-Brazil Research TeamInstitutional Investor, 2009 (eight straight year)

#1 Team Rankings, “All Europe Fixed Income

Research Team Survey”• #1 for Equity Derivatives Overall• #1 for Equity Index Options• #1 for Single Stock Options• #1 All-Europe Equity Research Team (last

seven years)

Institutional Investor, 2008©2010 UBS Financial Services Inc. All rights reserved. Member SIPC.

UBS Financial Services Inc. is a subsidiary of UBS AG.

Best at Inheritance and Succession PlanningEuromoney, February 2010

Best Global Private BankEuromoney, February 2009, ’08, ‘07, ‘06, ‘05, ‘04Global Finance, 2006

Best at Relationship ManagementEuromoney, March 2009, ‘08, ‘07

The Top Private Bank in Asia-PacificAsiamoney, May 2009

Best at Family Office ServicesEuromoney, February 2010

11


What you can expect

©2010 UBS Financial Services Inc. All rights reserved. Member SIPC.


The UBS Client Experience

We take the time to understand your needs and goals and proactively provide appropriate solutions. We keep you informed on a periodic basis and can monitor and update strategies as appropriate to respond to ever-changing markets and your evolving needs.

Review Understand

Agree &Implement Propose

Focused on you

12

Asset allocation


What is asset allocation?

Asset allocation does not assure profits or prevent against losses from an investment portfolio or account in a declining market.

By helping you understand how asset allocation works, we can help you better pursue your investment objectives.

Asset allocation is a fundamental principle of investing. It involves diversifying your portfolio across a variety of different asset classes such as stocks, bonds and cash to help increase potential returns at a level of risk you find acceptable.

Maintaining your lifestyle

Do you wonder how to find the optimal balance of growth and income investments in your portfolio?

Preserving your wealth

Do you worry about the effects of market volatility on your investments?

Building your wealth

How often have you been tempted to move from one hot investment sector to another?

14


The importance of asset allocation

Source: “Determinants of Portfolio Performance II: An Update,” by Gary P. Brinson, Brian D. Singer and Gilbert L. Beebower, Financial Analysts Journal, May/June, 1991.

Asset allocation does not assure profits or prevent against losses from an investment portfolio or account in a declining market.

Asset allocation decisions outweigh other factors

Strategic asset allocation can help manage portfolio risk while stabilizing returns.

Market timing1.8%

Asset allocation91.5%

Security selection4.6%

Other2.1%

In 1991, a landmark study concluded that asset allocation explained over 91% of the variation of portfolio returns. Previously, many had believed the difference was due to security selection.

15


The building blocks of an investment portfolio

1 Represents securities commonly considered to be cash equivalents due to their short-term maturities and high level of liquidity.

Determining the appropriate mix of investments for your portfolio is very personal, based on your individual goals, time horizon and ability to tolerate risk.

With a thorough understanding of your investor profile, we can work with you to build an asset allocation strategy for your particular goals.

Stocks

International stocks

Growth stocks

Value stocks

Large-cap stocks

Mid-cap stocks

Small-cap stocks

U.S. stocks

Bonds

Municipal bonds

Corporate bonds

High yield bonds

Mortgage-backed securities

Foreign bonds

U.S. government bonds

Cash1

Certificates of deposit

Commercial paper

Treasury bills

Deposits/money marketinstruments

Alternative investments

Private equity

Hedge funds

Real estate

Managed futures

16


Understanding risks and rewardsThe reward for taking on risk is the potential to earn greater investment returns. Stocks, for example, experience greater market fluctuations than bonds and cash but have historically provided higher returns. Typically, the longer your time horizon, the better you are able to tolerate risk.

Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1926, through December 31, 2009. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment.

Small stocks in this example are represented by the fifth capitalization quintile of stocks on the NYSE for 1926–1981 and the performance of the Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio thereafter. Large stocks are represented by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. Government bonds are represented by the 20-year U.S. government bond, Treasury bills by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. Underlying data is from the Stocks, Bonds, Bills, and Inflation® (SBBI®) Yearbook, by Roger G. Ibbotson and Rex Sinquefield, updated annually. An investment cannot be made directly in an index.

Stocks represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value. Small company stocks are generally more volatile than large company stocks. Government bonds and treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while corporate bonds are not guaranteed

©2010 Morningstar. All Rights Reserved. 3/1/2010

1926 1936 1946 1956 1966 1976 1986 1996 20060.10

1

10

100

1,000

$10,000

Compoundannual return

$12,231

$2,592

$84

$21$12

Small stocks 11.9% Large stocks 9.8% Government bonds 5.4%

Treasury bills 3.7%

17

Market leadership is unpredictableThe key to diversification is understanding that no single asset class tends to perform well consistently. Diversification involves spreading your money among various investments so potential gains can offset potential losses. We believe your portfolio should be diversified between and within asset classes. Diversifying your portfolio can increase the opportunity to benefit from the next market leader.

Source: UBS Global Asset Management.

Data as of 12/31/09. For illustrative purposes only. Security indices are unmanaged. They assume reinvestment of distributions and interest payments and do not take into account fees, taxes and other charges. Such fees and charges would reduce performance. It is not possible to invest directly in an index. Past performance does not guarantee future results.

Small Cap Value, represented by the Russell 2000 Value Index, contains those Russell 2000 securities with a less-than-average growth orientation. Securities in this index generally have lower price-to-book and price-to-earnings ratios than those in the Russell 2000 Growth Index.

Large Cap Stocks, represented by the Russell 1000 Index, which measures the performance of the 1,000 largest companies in the Russell 3000 Index.

US Bonds, represented by the Barclays Capital U.S. Aggregate Bond Index, includes US government, corporate, and mortgage-backed securities with maturities up to 30 years.

Small Cap Stocks, represented by the Russell 2000 Index. The Russell 2000 is a market-value-weighted index of the 2000 smallest stocks in the broad-market Russell 3000 Index. These securities are traded on the NYSE, AMEX and NASDAQ.

Large Cap Growth and Large Cap Value, represented by the Russell 1000 Growth and the Russell 1000 Value indexes. The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

International Stocks, represented by the MSCI EAFE Index, is a Morgan Stanley Capital International index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.

Small Cap Growth, represented by the Russell 2000 Growth Index, contains those Russell 2000 securities with a greater-than-average growth orientation. Securities in this index generally have higher price-to-book and price-to-earnings ratios than those in the Russell 2000 Value Index.

20051987 19891988 19911990 19931992 19951994 19971996 19991998 20012000 20032002 2004 2006 2007 2008

-10.48 10.547.88 12.14-23.45 2.87-12.17 11.21-2.92 1.783.63 -1.49-6.45 -21.44-22.43 4.10-30.26 2.434.34 4.33 -9.78 -43.43 5.93

24.63% 35.9229.47 51.198.95 32.5629.14 7.78 23.13 43.0938.71 14.0222.83 48.5410.2638.36 35.18 13.4522.25 26.28 11.10 5.24 37.21

11.8123.485.31 30.4228.27 46.05-0.26 23.7718.42 37.772.62 32.8522.44 33.1627.02 8.4411.62 47.25-11.43 7.0720.18 -28.92 34.47

-8.77 12.4311.27 16.00-21.77 9.754.99 18.48-2.43 9.656.05 -0.83-2.55 -20.42-22.42 29.75-27.88 5.276.30 9.07 -1.57 -38.54 19.69

-1.96-7.11 14.5317.23 24.56-19.51 10.157.40 25.75 12.9411.26 7.331.23 -12.45-14.17 29.89-21.65 4.1511.40 13.35 -0.17 -38.44 20.58

15.460.50 7.77 -20.4816.2420.37 33.03-17.41 13.37 28.44 22.3616.50 20.918.67 -5.59-7.79 30.03-1.82 4.5514.31 5.77 -37.60 27.17

6.9718.3730.49 -15.9420.1723.16 41.27-8.08 18.14 31.04 21.37 21.2615.63 -9.23-3.02 38.572.76 -1.54 4.7116.499.04 -36.85 28.43

7.0522.2537.182.94 25.1924.89 41.70-4.16 18.9113.81 0.38 31.7821.65 27.0219.94 2.497.01 46.03-15.52 6.2718.33 -33.79 31.59

2009

18


Diversification can reduce portfolio volatility

Information shown is for illustrative purposes only and is not meant to represent the performance of any particular investment or asset class. It is rare to find two perfectly negatively correlated asset classes as shown in the diagram above. Asset classes with low or moderate correlation should still reduce overall volatility. However, there is no guarantee that combining two asset classes will reduce a portfolio’s overall volatility.

If one asset class declines, another asset class in your diversified allocation may rise and thereby help dampen portfolio fluctuation.

Historically, the returns of certain asset classes have a low correlation, meaning they have not typically moved up and down at the same time. By investing in two or more asset classes with low or negative correlation, you may be able to reduce your portfolio’s overall risk and volatility.

Individual asset classes Combined asset classes

A

B

Performance of asset classes A and B differs over time.

Asset class BAsset class A

Owning both A and B may help make overall returns less volatile.

Combined asset classes

19


How you can benefit from low correlation during bear markets

Source: Russell Mellon Analytical Services, UBS Financial Services Inc. Manager Research Group. Past performance does not guarantee future results. Investing involves risk. The information shown is for illustrative purposes only and is based on index results. Returns shown above are cumulative returns for the time periods listed. Time periods start on the first day of the initial month and end on the last day of the final month. U.S. stocks are represented by the S&P 500® Index. U.S. bonds are represented by the Barclays Capital Aggregate Bond Index. Indexes are not available for direct investment and reflect an unmanaged universe of securities, which does not take into account advisory or transaction fees, all of which will reduce their overall return. Please see the page entitled ”Description of Indexes” at the end of this section for more information on the indexes listed in this presentation.

The performance of stocks and bonds in bear markets

Because stocks and bonds have traditionally had a low correlation, an allocation to bonds can help offset declining stock prices during a bear market.

U.S. stocks

Bear marketU.S.

bonds

- 14.3% Jan. 1977 – Feb. 1978 + 3.2%

- 16.5%Dec. 1980 – July 1982

+ 21.6%

- 29.6%Sep. 1987 – Nov. 1987

+ 2.2%

- 14.7%June 1990 – Oct. 1990

+ 3.8%

- 13.4%May 1998 – Aug. 1998

+ 3.7%

- 33.0%Mar. 2000 – Dec. 2002

+ 32.3%

-50.17%Oct. 2007 – Feb. 2009

+7.04

As stocks fell in value …

… bonds rose, dampening volatility.

20

Benefits of diversifying within an asset class

Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

Small stocks in this example are represented by the fifth capitalization quintile of stocks on the NYSE for 1926–1981 and the performance of the Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio thereafter. Large stocks are represented by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. An investment cannot be made directly in an index. The average return represents a compound annual return. The data assumes reinvestment of all income and does not account for taxes or transaction costs.

Small company stocks are generally more volatile than large company stocks.


We believe it is prudent to diversify within a single asset class. For example, within U.S. stocks there are different investment styles, such as growth and value, and different market capitalizations, such as large- and small-cap. Each subcategory offers its own risk/reward characteristics—and an opportunity to manage risk by reducing your exposure to any one type of investment.

Small stocks outperform large stocksLarge stocks outperform small stocks

Excess return

–60

–40

–20

0

20

40

60

80

100%

1996 20061986197619661956194619361926

Value stocks vs. growth stocksRelative performance over the past 25 years (1926 –

2009)

21


Gaining exposure to the global marketplace

•Source: World Federation of Exchanges, as of March 2010. Foreign investments may be exposed to certain risks not typically involved in domestic investments, such as exchange rate fluctuations, adverse political and economic developments, imposition of currency exchange controls or other foreign laws or restrictions.

** As of July 13, 2010

By not allocating a portion of your investment portfolio to international stocks, you could be missing out on an important source of potential returns.

Non-U.S. stocks can provide another degree of diversification to your portfolio, plus the potential for increased returns. Some of the most well-known and successful companies are found outside the U.S.

Global stock market capitalization*100% = $49 trillion

Non-U.S. companies 52%

U.S. companies 48%

S&P 100 Global Top 10 Holdings**

Exxon Mobil Corp. United States

Microsoft Corp United States

Nestle SA Switzerland

Procter & Gamble United States

HSBC Holdings Great Britain

Intl Business Machines Corp.

United States

Johnson & Johnson United States

General Electric United States

JP Morgan Chase & Co

United States

Chevron Corp. United States

22


International enhances domestic portfolios

Past performance is no guarantee of future results. Data expressed in U.S. dollars. Risk and return are based on 1970–2009 annual data. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. U.S. bonds in this example are represented by the 20-year U.S. government bond and U.S. stocks by the Standard & Poor’s 500® which is an unmanaged group of securities and considered to be representative of the stock market in general. Canadian stocks are represented by the Morgan Stanley Capital International Canada Index, European stocks by the Morgan Stanley Capital International Europe except U.K. Index, U.K. stocks by the Morgan Stanley Capital International U.K. Index, Japanese stocks by the Morgan Stanley Capital International Japan Index, and Pacific stocks by the Morgan Stanley Capital International Pacific except Japan Index. Risk and return are measured by standard deviation and arithmetic mean return, respectively. Standard deviation measures the fluctuation of returns around the arithmetic average return of the investment. The higher the standard deviation, the greater the variability (and thus risk) of the investment returns. The data assumes reinvestment of all income and does not account for taxes or transaction costs.

Investing in foreign securities presents certain unique risks not associated with domestic investments such as currency fluctuations and political and economic changes. This may result in greater share price volatility.


1970 – 2009

Domestic portfolios Global portfolios

9

15%

14

13

12

11

10

5% 10 15 20 25 30 35 40Risk

Return

U.S. bonds

European stocks

U.K. stocks

Pacific stocks

U.S. stocks

Canadian stocks

Japanese stocks

23


Diversifying across global and domestic stocks

Past performance is no guarantee of future results. Based on data from 1976–2009. Calculated using rolling 10-year average returns. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

U.S. stocks in this example are represented by the Standard & Poor’s 500® which is an unmanaged group of securities and considered to be representative of the stock market in general and international stocks by the Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE®) Index. All values are expressed in U.S. dollars. The average return represents a compound annual return. The data assumes reinvestment of income and does not account for taxes or transaction costs.

Investing in foreign securities presents certain unique risks not associated with domestic investments such as currency fluctuations and political and economic changes. This may result in greater share price volatility.


Just as there’s no way to predict which asset class will outperform in any given year, there’s no way of knowing which of the world’s stock markets will generate the best returns. Diversifying your holdings geographically is another way to potentially optimize your asset allocation.

U.S. stocks International stocks

-5

5

10

15

20

25%

0

1985 1988 1991 1994 1997 20092000 2003 2006

24


Rebalancing can help to manage volatility

US-R

Without Rebalancing: More variability and downside risk

With Rebalancing: Less variability and downside risk

Annualized Returns (%)

Maximum 12-month loss (%)

20 years through December 31, 2009

-19.20%

-14.10%

7.41% 8.00%

-20.0%

-10.0%

0.0%

10.0%

20.0%

Portfolios that are rebalanced even once a year are significantly less volatile than portfolios that have not been rebalanced.

Source: UBS Global Asset Management. For illustrative purposes only. The example above is based on a hypothetical portfolio consisting of 40% S&P 500 Index and 60% Barclays Capital Treasury Index. The indices are unmanaged and are not available for direct investment. The portfolio rebalanced annually was rebalanced every January during the 20-year period. Maximum loss is based on any rolling 12-month period during the 20-year period. Past performance is no guarantee of future results. Rebalancing alone does not ensure gains or prevent losses from occurring in a portfolio or account.

25


The cost of market timing

Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. Stocks in this example are represented by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.


A well-diversified, periodically rebalanced portfolio can help mitigate the impact of market volatility and may help you reduce the temptation to move in and out of the markets.

10%

8

6

-4

0

2

4

Return

-2

8.2%

4.5%

2.1%

–1.8%

–3.5%

0.1%

Invested for all5,044 trading days

10 best daysmissed

20 best daysmissed

30 best daysmissed

40 best daysmissed

50 best daysmissed

This chart shows the cost of missing the best trading days in the stock market over the past 20 years (1990 – 2009).

26


Revisiting your strategic asset allocation

The life events that may affect your financial situation and prompt reconsideration of your asset allocation include:

Your life situation and financial priorities are likely to change over time. By working with your Financial Advisor, you can re-evaluate your asset allocation strategy.

As you approach retirement, you may want to consider transitioning to a more conservative, income-oriented asset allocation

Start or sale of a new business

Change in marital status

Birth of a child Retirement Purchase of a new home

27


With UBS, asset allocation is a collaborative process

1 Neither UBS Financial Services Inc. nor its Financial Advisors provide tax or legal advice. You must consult your tax and legal advisors regarding your particular situation.

• Among the factors we’ll discuss are your investment goals, income needs, tax situation, time horizon and feelings regarding risk1

• We will work with you to develop an investment strategy that can accommodate a dynamic asset allocation process

• We will help you monitor your investments and are available to consult with you as necessary to keep your strategy on track

By understanding your needs, we can help you determine and maintain an appropriate asset allocation.

28

Investing in equities

Why own equities?Equities offer the potential for both capital appreciation and income, and can help you diversify your portfolio. Their benefits include:

Potential for building wealth

A diversified portfolio of equities has historically delivered the greatest returns over inflation compared to other investment assets when held for the long term (see next slide)

Income

Many stocks pay dividends, which you can use as an income source or reinvest for greater long-term growth

Diversification

To reduce risk and potentially

enhance your returns, the

equity portion of your portfolio can:

• Include both domestic and international stock1

• Be spread across a variety of market sectors and company sizes

Transparency

The wealth of knowledge usually available to investors regarding domestic, publicly traded companies can help you make educated decisions

Note: Investing in equities also involves risks. See “Understanding the risks of equity investing.”

1 Investors should keep in mind that investing in securities of foreign companies and governments involves considerations and potential risks not typically associated with investments in domestic corporations and obligations issued by the U.S. government. An investment could be subject to risks associated with changes in currency values, economic, political and social conditions, the regulatory environment of the foreign country, as well as the difficulties of receiving current and accurate information.

Liquidity

Stock can typically be sold at market prices at any time, thereby allowing you to gain immediate access to your capital

30

A stock allocation in a diversified portfolio can help reduce volatility

Past performance is no guarantee of future results. Time period illustrated is from 1956 – 1962. This time period was chosen as a dramatic illustration of stock and bond return behavior and how their often opposite movements reduced portfolio volatility. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

Stocks in this example are represented by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general, and bonds by the 20-year U.S. government bond. Annual rebalancing is assumed in the 50% stocks/50% bonds portfolio. An investment cannot be made directly in an index. The data assumes reinvestment of all income and does not account for taxes or transaction costs.

Stock represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value.

©2009 Morningstar, Inc. All rights reserved. 3/1/2009

Compound annual return

Stocks 8.5% 50/50 portfolio 5.8 Bonds 1.9

Return

40

30

20

10

0

-10

-20

1 2 3 4 5 6 7 Year

50%

31

The power of reinvesting1989 – 2008

Past performance is no guarantee of future results. Hypothetical value of $1,000 invested at the beginning of 1989. Data does not account for taxes or transaction costs. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

Stocks are represented by the Standard & Poor’s 500 which is an unmanaged group of securities and considered to be representative of the stock market in general. Bonds are represented by the 20-year U.S. government bond.

Stocks represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of maturity and fixed principal value.

© 2009 Morningstar, Inc. All rights reserved. 3/1/2009

Bonds with reinvestment10.0% Bonds without reinvestment3.4

Stocks with reinvestment8.4 Stocks without reinvestment6.1

Compound annual return

$10k

1

1989 1992 1995 1998 2001 2004 2007

$5,043

$3,252

$6,762

$1,966

32

Understanding the risks of equity investing

Market risk

• A stock may lose value because the overall stock market has declined

Company risk

• A stock’s value is directly related to the company that issued it, so the company’s performance and prospects will affect the stock’s value

Industry risk

• A specific industry may suffer a downturn, affecting stock prices

The long-term growth potential of equities is accompanied by certain risks. Stocks tend to be more volatile for a number of reasons.

Economic risk

• Economic downturns typically depress stock prices

National, international and political risk

• Wars, embargoes and changes in government can have a negative impact on financial markets

Currency risk

• A shift in foreign exchange rates can cause a stock’s price to fall and adversely affect the prospects of a company, industry or economy

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How UBS research helps you get more from equities Wealth Management Research and UBS Investment Research provide you with a rich, comprehensive offering of equities research.

Wealth Management Research

Wealth Management Research focuses specifically on the issues and trends of greatest importance to individual investors.

Analysts, strategists and economists across the globe provide

concise and relevant research to help you make confident

investment decisions, including:

• Corporate research coverage reflecting a majority of UBS client holdings

• Strategic analysis on U.S. equities and the corresponding equity markets

• Research on closed-end funds with investment recommendations and educational content

UBS Investment Research

UBS Investment Research is provided by UBS Investment Bank,

which has one of the world’s largest equity research teams.

• Global coverage of more than 3,200 companies

• Domestic coverage of more than 800 companies

• Outstanding Research rankings from Institutional Investor magazine

#1 All-Europe Equity Research Team (2002 – 2007)

#1 Emerging EMEA Research Team (2005 and 2007)

#1 Latin America Research Team (2003 – 2007)

Two sources of UBS Research are available to you as a UBS client. One source is UBS Wealth Management Research. UBS Wealth Management Research is part of UBS Global Wealth Management & Business Banking (the UBS business group that includes, among others, UBS Financial Services Inc. and UBS International Inc.), whose primary business focus is individual investors. The second source is UBS Investment Research. UBS Investment Research is part of UBS Investment Bank, whose primary business focus is institutional investors. Because both sources of information are independent of one another and reflect the different assumptions, views and analytical methods of the analysts who prepared them, there may exist a difference of opinion between the two sources.

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How UBS helps you get the most from equity resources With one of the largest equities trading operations in the world, UBS gives you access to expertise and execution capabilities that can translate into better opportunities.

Expertise

Our Equity Advisory Group is dedicated to providing UBS Financial Advisors with insights on our research, new opportunities and consultation to help select

equity investment solutions appropriate for clients. They

offer:

• Client portfolio review to determine asset allocation strategies, including sector recommendations

• Market news distribution, including timely market news, company information and changes in the Equity Advisory Group’s research calls

Execution

• State-of-the-art trading technology helps you capture lower trading costs

• Block trading capabilities facilitate the handling of large orders or trades that require special handling

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Beyond individual equities

Types of managed funds include:

Professionally managed funds are pooled investments that allow you to invest in many stocks through one vehicle.

Open-end mutual fund

Open-end mutual funds are a portfolio

of securities managed according to

a stated set of objectives and held in

an investment company that issues

shares.

The value of the shares directly reflects

the value of the securities in the fund’s

portfolio, based on a daily calculation

or net asset value (NAV). Open-end

mutual funds offer:

• Liquidity—Shares can be traded daily or converted into cash daily at NAV1

Closed-end funds (CEFs)

CEFs are actively managed portfolios

of securities designed to pursue clearly

identified objectives. They issue a fixed

number of shares through an IPO and

then list their shares on a stock exchange. CEFs offer:

• Income—Regularly scheduled distributions are paid monthly to the investor

• Liquidity—Shares can be bought and sold at market prices throughout the trading day

Note: Prices may deviate from NAV

for extended periods of time.

Exchange-traded funds (ETFs)

ETFs are passively managed portfolios

of securities that track the performance

of an index. Share prices are primarily

impacted by the value of the underlying

assets. There are more than 700 ETFs

available tracking a variety of indexes.

ETFs offer:

• Tax efficiency—Capital gains distributions are generally rare for ETFs

• Portfolio efficiency—ETFs can be used as trading or hedging instruments

• Liquidity—ETFs may generally be bought or sold at any time during the trading day at market prices

Note: Market prices of ETFs can deviate

from NAV.

1 Net asset value is a measure of the current dollar value of one share of a mutual fund. It is the total of the fund’s assets minus its liabilities divided by the number of outstanding shares.

Mutual funds are offered by prospectus, which contains more complete information regarding the investment objectives, risks, charges and expenses associated with an investment

in the fund. Please contact a UBS Financial Advisor for a free prospectus and be sure to carefully read and consider the information found in the prospectus before investing.

Exchange-traded funds (ETFs) are sold by prospectus, which contains details about the ETFs, including risks, charges and expenses. Clients should read it carefully before investing.

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Professional portfolio management

Managed account offerings are aligned according to the desired level of client involvement, providing access to a wide range of investments.

UBS offers research-based equity portfolio strategies to help you achieve your investment goals.

UBS discretionary

You delegate to UBS the decision-making and management of your portfolio. UBS is in charge of construction and management of the portfolio, while providing personalized strategies, global research, ongoing monitoring and tactical asset allocation. These programs offer centrally managed portfolios, providing you with access to a wide range of investments, including mutual funds, domestic and global equities, fixed income and ETFs.

FA discretionary

The Financial Advisor (FA) acts as the portfolio manager, and you delegate the management of your portfolio to your advisor. The FA draws upon the combined thinking of UBS experts to manage the portfolio based on personalized asset allocation, providing access to equities, fixed income, ETFs, mutual funds and alternative investments.

Nondiscretionary

You work with your advisor to build

a portfolio personalized to your specific preferences, with access to select managers, mutual funds, ETFs and alternative investments. You assume an active role in the decision-making process with your FA, using a research-based asset allocation framework and accessing a variety of investments.

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At UBS, equity investing is a collaborative process



By understanding your situation and your needs, we can help you choose and manage a stock portfolio that fits your long-term investment goals and your risk tolerance.• We begin with conversations that allow us to

understand your investment goals and help you to determine which investments are most suitable

• We will discuss your goals, needs, tax situation, time horizon and feelings about risk, among other factors

• We will recommend equity strategies to implement

as part of a dynamic asset allocation process

• Over time, we will regularly monitor your equity investments and consult with you to help keep your plan on track

Review Understand

Agree &Implement Propose

Focused on you

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Definitions of indexesBarclays Capital Aggregate Bond Index—Composed of securities from Barclays Capital government/corporate bond index, mortgage-backed securities index, and the asset-backed securities index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization.

MSCI EAFE (EAFE) Net: An arithmetic, market value-weighted average of the performance of over 900 securities listed on the stock exchanges of the following countries in Europe, Australia and the Far East: Australia, Hong Kong, Norway, Austria, Ireland, Singapore, Belgium, Italy, Spain, Denmark, Japan, Sweden, Finland, Malaysia, Switzerland, France, Netherlands, United Kingdom, Germany, and New Zealand.

S&P 500: Covers 500 industrial, utility, transportation, and financial companies of the U.S. markets (mostly NYSE issues). The index represents about 75% of NYSE market capitalization and 30% of NYSE issues. It is a capitalization-weighted index calculated on a total return basis with dividends reinvested.

Russell 1000 Growth: Contains those Russell 1000 securities with a greater-than-average growth orientation. Securities in this index tend to exhibit higher price-to-book and price-earnings ratios, lower dividend yields and higher forecasted growth values than the value universe.

Russell 1000 Value: Contains those Russell 1000 securities with a less-than-average growth orientation. It represents the universe of stocks from which value managers typically select. Securities in this index tend to exhibit low price-to-book and price-earnings ratios, higher dividend yields and lower forecasted growth values than the growth universe.

Russell 2000 Index: Includes the smallest 2000 securities in the Russell 3000 offers investors access to the small-cap segment of the U.S. equity universe. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.

Russell 2000 Growth: Contains those Russell 2000 securities with a greater-than-average growth orientation. Securities in this index tend to exhibit higher price-to-book and price-earnings ratios, lower dividend yields and higher forecasted growth values than the value universe.

Russell 2000 Value: Contains those Russell 2000 securities with a less-than-average growth orientation. Securities in this index tend to exhibit lower price-to-book and price-earnings ratios, higher dividend yields and lower forecasted growth values than the growth universe.

Russell 3000: Measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As of the 2005 reconstitution, the average market capitalization was approximately $4.8 billion; the median market capitalization was approximately $944.7 million.

Russell Midcap Growth: Contains those Russell Midcap securities with a greater-than-average growth orientation. Securities in this index tend to exhibit higher price-to-book and price-earnings ratios, lower dividend yields and higher forecasted growth values than the value universe. The stocks are also members of the Russell 1000 Growth Index.

Russell Midcap Value: Contains those Russell Midcap securities with a less-than-average growth orientation. Securities in this index tend to exhibit low price-to-book and price-earnings ratios, higher dividend yields and lower forecasted growth values than the growth universe. The stocks are also members of the Russell 1000 Value Index.

Hedge Fund Research Index, Equity Hedge Index (HFRI): The HFRI Equity Hedge Index represents performance of a universe of hedge funds that employ core holding strategies of long equities hedged at all times with short sales of stocks and/or stock index options. The hedge funds in this index commonly employ a variety of strategies and some employ leverage. Relatively conservative funds mitigate market risk by maintaining market exposure from zero to 100 percent. Relatively aggressive funds may magnify market risk by exceeding 100 percent exposure and, in some instances, maintain a short exposure. In addition to equities, some funds in this index may have limited assets invested in other types of securities.

Citigroup 3-Month U.S. T Bill: Tracks the performance of U.S. Treasury bills with a remaining maturity of three months. U.S. Treasury bills, which are short-term loans to the U.S. government, are full-faith-and-credit obligations of the U.S. Treasury and are generally regarded as being free of any risk of default.

Source: UBS Financial Services Inc. Manager Research Group. © 2009 UBS Financial Services Inc. All Rights Reserved. Member SIPC.

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Definitions of indexes

Source: UBS Financial Services Inc. Manager Research Group. ©2010 UBS Financial Services Inc. All Rights Reserved. Member SIPC.



Russell 3000: Measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As of the 2005 reconstitution, the average market capitalization was approximately $4.8 billion; the median market capitalization was approximately $944.7 million.

Russell Midcap Growth: Contains those Russell Midcap securities with a greater-than-average growth orientation. Securities in this index tend to exhibit higher price-to-book and price-earnings ratios, lower dividend yields and higher forecasted growth values than the value universe. The stocks are also members of the Russell 1000 Growth Index.

Russell Midcap Value: Contains those Russell Midcap securities with a less-than-average growth orientation. Securities in this index tend to exhibit low price-to-book and price-earnings ratios, higher dividend yields and lower forecasted growth values than the growth universe. The stocks are also members of the Russell 1000 Value Index.

Hedge Fund Research Index, Equity Hedge Index (HFRI): The HFRI Equity Hedge Index represents performance of a universe of hedge funds that employ core holding strategies of long equities hedged at all times with short sales of stocks and/or stock index options. The hedge funds in this index commonly employ a variety of strategies and some employ leverage. Relatively conservative funds mitigate market risk by maintaining market exposure from zero to 100 percent. Relatively aggressive funds may magnify market risk by exceeding 100 percent exposure and, in some instances, maintain a short exposure. In addition to equities, some funds in this index may have limited assets invested in other types of securities.

Citigroup 3-Month U.S. T Bill: Tracks the performance of U.S. Treasury bills with a remaining maturity of three months. U.S. Treasury bills, which are short-term loans to the U.S. government, are full-faith-and-credit obligations of the U.S. Treasury and are generally regarded as being free of any risk of default.

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Important client information

It is important that you understand the ways in which we conduct business and the applicable laws and regulations that govern us. As a firm providing wealth management services to clients, we are registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser and a broker-dealer, offering both investment advisory and brokerage services. Though there are similarities among these services, the investment advisory programs and brokerage accounts we offer are separate and distinct, differ in material ways and are governed by different laws and separate contracts.

All references to mutual funds found in this presentation refer only to funds registered in the U.S. These mutual funds are sold by prospectus only. Offshore mutual funds are only available to non-U.S. residents. Please speak with your Financial Advisor about these funds. Investors are advised to read the relevant offering documents before investing. With respect to any discussion in this presentation that may relate to fee-based advisory products (such as ACCESS or PACE), please note that such advisory products may not be available in all jurisdictions.

It is important that you carefully read the agreements and disclosures that we provide to you about the products or services we offer. While we strive to ensure the nature of our services is clear in the materials we publish, if at any time you seek clarification on the nature of your accounts or the services you receive, please speak with your Financial Advisor. For more information, please visit our website at www.ubs.com/workingwithus

Borrowing considerationsBorrowing using securities as collateral entails risk and may not be appropriate for your needs. All loans are subject to credit approval. For a full discussion of the risks associated with borrowing using securities as collateral, you should review the Loan Disclosure Statement that will be included in your application package. Neither UBS Financial Services Inc. nor UBS Bank USA provides legal or tax advice. You should consult your legal and tax advisors regarding the legal and tax implications of borrowing using securities as collateral for a loan.

Documents

UBS Investment Proposal March 2011 Joe Advisor Sr. Vice President - Invetments