Ubs

Citywire Wealth Manager Retreat

UBS Emerging Markets Equity Income Fund

18,19 October 2012

Justin Wells

Equity Strategist

For Professional Clients only Equities

SECTION 1

Why EM Equities for Income?

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Survey

Please review questions on screen

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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

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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 rat io (rhs)

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

Source: UBS Investment Bank Worldscope, Datastream

Note: 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

Retu

rn b

y y

ear

EM MSCI universe High yield stocks

EM Equities performance from high dividend stocks is strong

10 years (31-Dec-2001 – 31-Dec-2011) EM M SCI universe EM high dividend portfolio

Annualised return 14.5% 24.1%

Annualised standard deviat ion 25% 23%

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Split of MSCI World stocks yielding greater than 3%

Developed

Asia Pacif ic

ex Japan

16%

UK

12%

Emerging

17%

Developed

Europe ex

UK

26%

Developed

North

America

29%

Developed

Europe ex

UK

20%

Japan

8%

Developed

Asia Pacif ic

ex Japan

13%

Emerging

33%

Developed

North

America

19%

UK

7%

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 2011

Note: Only companies with market capitalisation >USD 1 billion included in survey

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0

1

2

3

4

5

6

Mate

rials

Tele

com

Serv

ices

En

erg

y

Uti

liti

es

Fin

an

cials

Info

rmati

on

Tech

no

log

y

Ind

ust

rials

Co

nsu

mer

Sta

ple

s

Co

nsu

mer

Dis

creti

on

ary

Healt

h C

are

Gro

ss d

ivid

en

d y

ield

(%

)

EM Equities yields vary among countries and sectors

MSCI EM Index¹ (inc. Hong Kong & Singapore) MSCI EM Index

Index Dividend Yield: 2.9%

Reference Index is the MSCI EM Index

Source: UBS Investment Research, Factset, September 2012

1 Data shown is not for index as a whole but represented by the major markets within it and includes the markets of Hong Kong & Singapore, which are not included within the MSCI EM Index.

2 Source: UBS Global Asset Management. 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.

0

1

2

3

4

5

6

7

Po

lan

d

Czech

Rep

ub

lic

Mo

rocc

o

Bra

zil

Co

lom

bia

Ru

ssia

Taiw

an

Sin

gap

ore

Ch

ina

So

uth

Afr

ica

Eg

yp

t

Hu

ng

ary

Th

ail

an

d

Mala

ysi

a

Peru

Ho

ng

Ko

ng

Tu

rkey

Ch

ile

Ph

ilip

pin

es

Ind

ia

Mexic

o

Ko

rea

Gro

ss d

ivid

en

d y

ield

(%

) Fund historic yield 5.3%²

Index Dividend Yield: 2.9%

Section 2

Why UBS for Equity Income?

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Emerging Markets Equities Team

Source: UBS Global Asset Management

As at 30 September 2012

1 Member of Emerging Markets Equity Strategy Committee EM

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 Manager

Asia ex Japan

Cheah Yit Mee1

Portfolio Manager

Asia ex Japan

Bin Shi

Portfolio Manager

China

Projit Chatterjee1

Portfolio Manager /

Equity Strategist

Namit Nayegandhi

Analyst

Chan Chee Seng

Analyst

Yu Zhang

Analyst

Sanjeev Joshi

Analyst

Joanna Mak

Analyst

Leslie Chow

Analyst

Matthew Adams

Analyst

Hai Huang

Analyst

Kelvin Teo

Analyst

Han Yaw Juan

Trader

Jimmy Chua

Head Trader

Paul Hillman

Trader

Reginald Oh

Trader

Dorothy Lek

Trader

Gabriel Csendes1

Portfolio Manager

Analyst

Michael Abellera

Trader Latin America

Zurich / London / Chicago

Urs Antonioli1

Head of EM EMEA /

Latin America Equities

Mark Roggensinger

Analyst

Gabriella

Abderhalden

Analyst

Irina Budnikova

Analyst

Benita

Mikolajewicz

Analyst

Steve Herbert

Trader EMEA

Macrina Otieno

Trader EMEA

Justin Wells

Equity Strategist

Choo Shou Pin

Analyst

Section 3

What does an EM Equity Income fund look like?

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Investment and Portfolio Construction Process

Investment Universe of EM Equity team

(300-400 stocks researched)

Top dividend yield stocks

Client portfolio

40 – 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 stocks

Remove overvalued stocks

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0% 5% 10% 15% 20%

Poland

Singapore

South Af rica

Taiw an

Czech Republic

Hong Kong

Thailand

Israel

Hungary

Peru

Philippines

Turkey

Morocco

Chile

Malaysia

Egypt

Indonesia

Colombia

Russia

Mexico

India

Brazil

China

Korea

Port folio %Reference Index %


Country Positioning v MSCI EM Index

Overweight

Underweight


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Overweight

Underweight


Sector Positioning v MSCI EM Index


0% 5% 10% 15% 20% 25% 30% 35%

Telecommunicat ion

Services

Financials

Informat ion

Technology

Ut ilit ies

Health Care

Materials

Indust rials

Consumer Staples

Energy

Consumer

Discret ionary

Port folio %Reference Index %

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Foschini: South Africa, Consumer Discretionary

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 stabilising 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

Good Dividend Growth

66%

67%

68%

69%

70%

71%

72%

73%

2003 2004 2005 2006 2007 2008 2009 2010 2011

Modern

73%

Woolworths

10%

Mr Price

13%

Truworths

9%

Foschini

13% Edcon

28% Informal

28%

Source: Bloomberg, Factset, UBS Global Asset Management, September 2012

1 Historic data

3 year

dividend

grow th1

1 year

dividend

grow th1

12 month

yield1 FY1 FY2

16.5% 30.0% 3.8% 4.5% 5.3%

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Asustek: Taiwan, Information Technology

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: IDC

Good Dividend Growth

0

5

10

15

20

2007 2008 2009 2010 2011 2012E 2013E 2014E

Source: Bloomberg, Factset, UBS Global Asset Management, September 2012

1 Historic data

3 year

dividend

grow th1

1 year

dividend

grow th1

12 month

yield1 FY1 FY2

10.0% 26.4% 4.8% 5.3% 6.0%

SECTION 4

Performance since inception

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Strong Performance

Source: Lipper as at 30 September 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, 30 September 2012

Each 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.

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Feb-11 Apr-11 Jun-11 Aug-11 Oct -11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12

Monthly perf absolute Relat ive performance cumulat ive

Fund (%) Sector¹ (%) Quart ile

6 months -1.4 -2.6 2

1 year 16.3 12.6 1

Since launch² 5.2 -7.6 1

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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 September 2012)

IMA Global Emerging Markets MSCI Emerging Markets

UBS EMEI

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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 5.3%²

Why invest in Emerging Markets for Income?

1 Source: UBS Global Asset Management, as at 30 September 2012

2 Source UBS Global Asset Management, as at 30 September 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

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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.

Relat ive Absolute

Stock weights Typical maximum of around 5%

Sector weights +/- 25% vs index 35%

Country weights2 +/- 25% vs index 25%

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1 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.

3 From 1 January 2013

4 For total direct investment. Also available through certain platforms.


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 ‘B’ shares ‘C’ shares

Fund Launch date 31 January 2011

Reference index¹ MSCI Emerging Markets Index

Sector IMA Global Emerging Markets²

Init ial charge 0.00% 0.00%

AMC 1.00%³ 0.75%

Minimum init ial investment

£1,000 £1,000,000

XD dates 31 March, 30 September

Pay dates 31 May, 30 November

Sedol code (Acc) B5M1470 B8BDQ49

Sedol code (Inc) B5KZ5J3 B8BLLB5

ISIN code (Acc) GB00B5M14703 GB00B8BDQ491

ISIN code (Inc) GB00B5KZ5J37 GB00B8BLLB55

ISA Yes

ISA t ransfer Yes

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Urs Antonioli, CFA

Head of EM EMEA & Latin America Equities and Portfolio Manager

Managing 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

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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

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Justin Wells

Equity 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)

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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 October 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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