For professional clients only                                           NL VersionKey themes in Asia/ Emerging MarketsProj...
DisclaimerFor marketing and information purposes by UBS. UBS funds under Luxembourg law. UBS (Lux) Equity Fund – AsianCons...
Table of ContentsSECTION 1    EM/ Asia Outlook: Key Points            3SECTION 2    Team and Capabilities                 ...
SECTION 1EM/ Asia Outlook: Key Points
EM and DM performance have decoupled recentlyEM underperforming DM (US and Japan) since beginning of 2013         Source: ...
Economic data out of DM surprising more positively than EMUBS Growth Surprise Indices 160.0 150.0 140.0 130.0 120.0 110.0 ...
Economic indicators in Asia are turning up moderatelyIndustrial production shows gradual recovery      30.0%      25.0%   ...
Emerging Markets do not face major sovereign debt issuesSovereign Debt to GDP*   120   100       80% OF GDP       60      ...
Urbanisation will continue to be a key driver of growthUrbanisation creates greater economic activityUrbanisation ratio (%...
Private sector debt has risen quickly in many EM/Asia marketsTwin deficits in Turkey, India, Brazil                       ...
Build up of Credit in AsiaBank Credit to GDP ratio is now higher than 1997 peak 110.0 105.0 100.0                         ...
Emerging Market trading below historic average and below DM     P/E and P/B up to March 2013                              ...
Emerging Market Equities: OutlookDespite lower levels of global growth, most major EM economies remain oncourse to sustain...
China & India: rise or return?Two thousand years of economic historyShare of world GDP40%35%30%25%20%15%10%  5%  0%       ...
SECTION 2Team and Capabilities
Portfolio construction and researchEmerging Markets Equities TeamA stable and experienced team managing ca. USD 26 bn     ...
Core/Value Asia & EM StrategiesManaging ca. USD 26 bn in various strategiesGlobal                             Regional    ...
SECTION 3EM/ Asia High Dividend
EM equities provide stable dividend payments    Number of high yielding stocks in EM has increased significantlyMSCI EM, D...
EM equities offer the potential to raise dividend paymentsNet debt to equity by region                                    ...
Dividends represent an important component of total returnReinvested dividends account for 40% total returns of MSCI EM si...
High dividend EM Equities have performed very wellBack-test of a High Dividend EM Equity portfolio over 10 yearsPortfolio ...
Investment and portfolio construction processUBS Emerging Markets High Dividend Equities                         Investmen...
Emerging Markets High Dividend Fund: Portfolio PositioningDiversification across countries and sectors per 31 March 2013Co...
PerformanceUBS (Lux) Equity SICAV – Emerging Markets High Dividend (USD) P-accPerformance indexed in % (Basis USD, net of ...
Emerging Markets High Dividend Fund: Composite PerformancePeriods up to 31 March 2013Source UBS Global Asset Management   ...
Asia High Dividend Fund: Portfolio PositioningDiversification across countries and sectors per 31 March 2013Country alloca...
PerformanceUBS (Lux) Equity SICAV – Asia High Dividend (USD) P-accPerformance indexed in % (Basis USD, net of fees)105100 ...
Asia High Dividend Fund: Composite performancePeriods up to 31 March 2013Source UBS Global Asset Management               ...
Why high dividend stocks in Emerging Markets/Asia ?Benefits of high and stable yield, with the potential for long-term cap...
SECTION 4Asian Consumption Fund
Growing consumption in AsiaStrong secular drivers behind Asian consumption growth Young population Increasing income and...
Youngest and largest consumer base in the worldAsia will have 1 billion middle class consumers by 201550%                 ...
The EM Consumer is set to become a dominant forceNumber of Households with Disposable Income above US$10,000              ...
Low penetration of consumer goods in Asia  Light vehicle ownership vs GDP per capita                                      ...
Government policies stimulate mass market consumptionEconomic rebalancing boost domestic consumption by middle,low-income ...
Investment and portfolio construction processUBS Asian Consumption Equities                                 Screen: Valuat...
UBS Asian Consumption FundPlaying the strong Asian consumption theme                                   Includes:          ...
Top 10 stock overweightsAs of end March 2013          Company                                        Fund (%)             ...
Asian Consumption: Performance up to Mar 13 Strong performance since inceptionSince Inception                             ...
Asian Consumption: PositioningPositioning as of end March 2013Sector allocation               Consumer Discretionary      ...
AxJ consumer sector valuations below its historical averages           PE Fwd to March 2013                               ...
APPENDIX ABios and disclaimers
Projit Chatterjee, CFAEquity Strategist, Global Emerging Markets and Asia Pacific Equities,Managing DirectorYears of inves...
Emerging Markets High Dividend DisclosureSchedule of composite performance                                            44
Asia High Dividend Composite DisclosureSchedule of composite performance                                          45
Asian Consumption Composite DisclosureSchedule of composite performanceThe composites past performance is not necessarily ...
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Ubs global am

  1. 1. For professional clients only NL VersionKey themes in Asia/ Emerging MarketsProjit Chatterjee, CFAEquity Strategist, EM and Asian EquitiesUBS Global AMUBS Emerging Markets High Dividend FundUBS Asian Consumption FundApril 2013
  2. 2. DisclaimerFor marketing and information purposes by UBS. UBS funds under Luxembourg law. UBS (Lux) Equity Fund – AsianConsumption (USD) P-acc, UBS (Lux) Equity SICAV - Emerging Markets High Dividend (USD) P-acc, UBS (Lux) Equity SICAV - AsiaHigh Dividend (USD) P-acc, s an investment institution (beleggingsinstelling) within the meaning of the FSMA and registered inthe Dutch register held with the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten).Representative in the Netherlands for UBS funds established under foreign law: UBS Global Asset Management, UBS InvestmentBank Nederland B.V. Rembrandt Tower – 18e verdieping, Amstelplein 1, 1096 HA AMSTERDAM, The Netherlands. Prospectuses,simplified prospectuses or Key investor information, the articles of association or the management regulations as well as annualand semi-annual reports of UBS funds are available free of charge from UBS Investment Bank Nederland BV or on the internet atwww.ubs.com/fondsen. Before investing in a product please read the latest prospectus carefully and thoroughly. Units of UBSfunds mentioned herein may not be offered, sold or delivered in the United States. The information mentioned herein is notintended to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Pastperformance is not a reliable indicator of future results. The performance shown does not take account of any commissions andcosts charged when subscribing to and redeeming units. Commissions and costs have a negative impact on performance. If thecurrency of a financial product or financial service is different from your reference currency, the return can increase or decreaseas a result of currency fluctuations. This information pays no regard to the specific or future investment objectives, financial ortax situation or particular needs of any specific recipient. The details and opinions contained in this document are provided byUBS without any guarantee or warranty and are for the recipients personal use and information purposes only. This documentcontains statements that constitute “forward-looking statements”, including, but not limited to, statements relating to ourfuture business development. While these forward-looking statements represent our judgments and future expectationsconcerning the development of our business, a number of risks, uncertainties and other important factors could cause actualdevelopments and results to differ materially from our expectations. Source for all data and charts (if not indicated otherwise):UBS Global Asset Management© UBS 2013. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. 1
  3. 3. Table of ContentsSECTION 1 EM/ Asia Outlook: Key Points 3SECTION 2 Team and Capabilities 14SECTION 3 EM/ Asia High Dividend 17SECTION 4 Asian Consumption Fund 30APPENDIX A Bios and disclaimers 42 2 GEN0190n.ppt
  4. 4. SECTION 1EM/ Asia Outlook: Key Points
  5. 5. EM and DM performance have decoupled recentlyEM underperforming DM (US and Japan) since beginning of 2013 Source: UBS Global AM, Factset as of April 2013 4
  6. 6. Economic data out of DM surprising more positively than EMUBS Growth Surprise Indices 160.0 150.0 140.0 130.0 120.0 110.0 100.0 90.0 EM growth surprise index DM growth surprise index 80.0 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Source: UBS IB research, Bloomberg as of March 2013 The global surprise index is calculated as a GDP-weighted average of country-specific (27 countries) data surprise indices from a host of developed and major developing economies. These are in turn calculated using data on outturns and consensus forecasts from Bloomberg. 5
  7. 7. Economic indicators in Asia are turning up moderatelyIndustrial production shows gradual recovery 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 China, YoY % China, YoY % 3MMA AXJ ex China, YoY % AXJ ex China, YoY % 3MMASource: Morgan Stanley research as of Apr 2013. Data as of end Feb 13 6
  8. 8. Emerging Markets do not face major sovereign debt issuesSovereign Debt to GDP* 120 100 80% OF GDP 60 40 20 0 50 55 60 65 70 75 80 85 90 95 00 05 10 15 G7 ADVANCED ECONOMIES EMERGING ECONOMIES* Average using GDP-PPP Weights. IMF Forecasts, World Economic Outlook, as of June 2012Source: Morgan Stanley Research 7
  9. 9. Urbanisation will continue to be a key driver of growthUrbanisation creates greater economic activityUrbanisation ratio (%) 100% 90% 80% 70% 60% 50% 50% Japan 40% (pre 1950) Korea China India 30% (1976) (2010) (2047E) 20% 10% 0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 China India Russia Brazil Japan US Indonesia Korea GermanySource: UN Population Statistics, GS Global ECS Research as of March 2012 8
  10. 10. Private sector debt has risen quickly in many EM/Asia marketsTwin deficits in Turkey, India, Brazil 3-year % chg in loans (real) Current account as % of GDP Government balance as % of GDP Turkey Turkey Indonesia Poland Hong Kong India China Colombia Colombia Brazil Peru Chile Brazil Peru Philippines South Africa Singapore Czech R. Russia Indonesia India Mexico Malaysia Hungary Thailand Thailand Chile Russia Mexico Korea Poland Philippines Taiwan China Korea Hong Kong Czech R. MalaysiaSouth Africa Taiwan Hungary Singapore -40% -20% 0% 20% 40% 60% 80% 100% 120% -15% -10% -5% 0% 5% 10% 15% 20% 25%Source: UBS IB, IMF; as of 30 September 2012 9
  11. 11. Build up of Credit in AsiaBank Credit to GDP ratio is now higher than 1997 peak 110.0 105.0 100.0 Asian Financial Crisis 95.0 leverage 90.0 85.0 80.0 Global Financial 75.0 Crisis 70.0 Dec-90 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-91 Dec-01 Dec-10 Dec-12 Dec-11 Asia ex Japan Asia ex Japan and China Source: CEIC ,HSBC as of Apr 2013. Data up to Dec 2012 10
  12. 12. Emerging Market trading below historic average and below DM P/E and P/B up to March 2013 430 325 320 215 210 1 Global credit 5 crisis Global credit 1 crisis 0 0Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 EM (Emerging Markets) 12M trailing PE Average EM (Emerging Markets) 12M trailing PB Average +1SD (EM) -1SD (EM) +1SD (EM) -1SD (EM) MSCI World 12M trailing PE MSCI World 12M trailing PB Source: Factset, I/B/E/S, UBS Global AM as of end March 2013 11
  13. 13. Emerging Market Equities: OutlookDespite lower levels of global growth, most major EM economies remain oncourse to sustain their long term structural growth path Opportunities Risks  Structural growth potential driven  Contagion risks from sovereign debt by demographics, urbanisation, issues in Europe and US productivity and consumption growth – Economies which require global capital markets to fund current account and fiscal deficits affected  Sound balance sheets  Rising regulatory intervention – On average low debt levels at government. – Price controls and resource taxes in emerging corporate and household sectors markets  Both DM and EM macro policies are  Increase in bank credit/GDP in Asia, still supportive: back to pre-Asian crisis level – Loose monetary policy in DM  Escalating tensions in the Korean  Economic growth appears to be peninsula bottoming out in some key EM countriesAs of January 2013 12
  14. 14. China & India: rise or return?Two thousand years of economic historyShare of world GDP40%35%30%25%20%15%10% 5% 0% 1 1820 1870 1913 1950 1973 2001 1700 1000 1500 China India Europe 1600 USSource: Angus Maddison, The World Economic: Historical Statistics, OECD, March 2010 13
  15. 15. SECTION 2Team and Capabilities
  16. 16. Portfolio construction and researchEmerging Markets Equities TeamA stable and experienced team managing ca. USD 26 bn Geoffrey Wong1 Head Global Emerging Markets & Asia Pacific EquitiesHong Kong / Singapore Zurich / London / ChicagoManish Modi1 Cheah Yit Mee1 Projit Chatterjee1 Urs Antonioli1 Gabriel Csendes1Portfolio Manager Portfolio Manager Equity Strategist Head of EM EMEA/ Portfolio ManagerAsia ex Japan Asia ex Japan Latin America Equities AnalystChoo Shou Pin Namit Nayegandhi Bin Shi Mark Roggensinger Gabriella Justin WellsAnalyst Analyst Portfolio Manager Analyst Abderhalden Equity Strategist China AnalystMatthew Adams Chan Chee Seng Yu Zhang Irina Budnikova BenitaAnalyst Analyst Analyst Analyst Mikolajewicz AnalystLeslie Chow Sanjeev Joshi Joanna MakAnalyst Analyst AnalystKelvin Teo Hai Huang Grace TayAnalyst Analyst Equity StrategistJimmy Chua Paul Hillman Reginald Oh Macrina Otieno Michael Abellera Steve HerbertHead Trader Trader Trader Trader EMEA Trader Latin America Trader EMEADorothy Lek Han Yaw JuanTrader Trader Source: UBS Global Asset Management As at 28 February 2013 1 Member of Emerging Markets Equity Strategy Committee 15
  17. 17. Core/Value Asia & EM StrategiesManaging ca. USD 26 bn in various strategiesGlobal Regional Country BRIC Asia: Asia: EM Infrastructure  Asia ex Japan  China Global EM  Asia Opportunity  China A GEM Value Focus  Far East ex Japan  Greater China (HALO)  Emerging Asia  China Opportunity EM High Dividend  Asia Pacific ex Japan  Hong Kong EM Synergy  AC Pacific ex Japan  India  Pacific ex Japan  Singapore  Asian Consumption  Taiwan  Asia High Dividend Ex-Asia:  Asia Small and Mid Caps  Russia  Asia 130/30  Brazil Ex-Asia:  Central Europe  Eastern Europe  Latin America  EM ex-Asia Note: As of 28 Feb 2013 16
  18. 18. SECTION 3EM/ Asia High Dividend
  19. 19. EM equities provide stable dividend payments Number of high yielding stocks in EM has increased significantlyMSCI EM, DPS and EPS EM and Asian Dividends have grown fastest500 500400 400300 300200 200100 100- 0 2002 2004 2006 2008 2010 2012 2000 2002 2004 2006 2008 2010 2012 DPS EPS AxJ Europe EM DM USA JapanSource: UBS IB, MSCI, as per 31 December 2012 Source: Factset, CLSA Asia-Pacific Markets, as per 31 December 2012 For the MSCI EM equity index, DPS (dividend per share) has steadily increased over the last 10 years Dividends have been more stable than earnings in downturns EM and Asia are the regions with the fastest growth rates of DPS EM have managed DPS compound annual growth rate of 13% since 2000 18
  20. 20. EM equities offer the potential to raise dividend paymentsNet debt to equity by region EM and DM pay out ratios120% 80%100% 70% 60%80% 50%60% 40% 30%40% 20%20% 10% 0% 0% 1992 1995 1998 2001 2004 2007 2010 2013e 2002 2004 2006 2008 2010 2012 Asia ex Japan MSCI World MSCI EM Payout DM Payout EMSource: UBS IB, as per 31 December 2012 Source: UBS IB, MSCI, as per 31 December 2012 EM companies consistently reduced their debt levels during the past decade Current net debt to equity ratios ~ 28%, lower than developed markets with a ratio of ~40% EM companies have high cash levels on their balance sheets Potential to further increase dividend pay out ratios – Current pay out ratios are at the lower end of historical range and below DM levels – many companies enter mature growth phase 19
  21. 21. Dividends represent an important component of total returnReinvested dividends account for 40% total returns of MSCI EM since 2000 Dividends compound over the long run to make a substantial contribution to total return The contribution from dividends becomes more important in periods of normal or muted equity market returnsDividend (re-investment) gain vs Capital gain MSCI EM – Total vs Price returns (CAGR) 400% 2500 350% 300% 2000 250% 1500 200% 150% 1000 100% 50% 500 0% (50%) 0 87 92 97 02 07 12 5 year 10 year Capital Gain Dividend and dividend reinvestment gain Price index Total return indexSource: UBS, December 2012 – cumulative returns excl. transaction costs, commissions, fees,margin interest. Actual transactions adjusted for such costs will result in reduced total returns Source: Datastream, UBS, December 2012 20
  22. 22. High dividend EM Equities have performed very wellBack-test of a High Dividend EM Equity portfolio over 10 yearsPortfolio selected from the entire universe of stocks in the MSCI EM index 120% EM MSCI universe High yield stocks 100% 80% Return by year 60% 40% 20% 0% -20% -40% -60% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 10 years (31 December 2002 – EM high dividend 31 December 2012) EM MSCI universe portfolioAnnualised return 17.0% 24.8%Annualised standard deviation 24% 23%Source: UBS Investment Bank Worldscope, DatastreamNote: The above chart shows returns by calendar year to 31 December 2012. All other information is as at 31 December 2012.1 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 thatdate. 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 rebalancedat 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 asincome. Our portfolio will be selected from ca. 350-400 stocks under our research coverage. 21
  23. 23. Investment and portfolio construction processUBS Emerging Markets High Dividend Equities Investment Universe 300-400 stocks for EM Selected top dividend yield stocks Selection of high dividend stocks, 60-100 stocks remove overvalued stocks Remove stocks where dividends are Qualitative overlay not sustainable or have weak by analysts fundamentals Add stocks where dividends are stable and/or likely to increase Final portfolio construction by PMs Client portfolio Typically 40-70 stocks 22 GEN0190n.ppt
  24. 24. Emerging Markets High Dividend Fund: Portfolio PositioningDiversification across countries and sectors per 31 March 2013Country allocation Sector allocation Industrials 1.7 Turkey 3.3 Brazil 6.9 Utilities Cons. Discretionary 3.4 0.8 Thailand 6.7 Chile 1.7 Cons. Staples China 6.5 3.5 Financials Materials Taiwan 14.8 Czech Republic 3.8 31.5 10.1 Hong Kong 3.3 Indonesia 1.7 Israel 1.7 Energy 11.7 Korea 3.4 Malaysia 3.2 South Mexico 1.8 Africa 12.4 Peru 1.7 Philippines 1.8 IT 14.6 Telecoms Singapore 8.3 Poland 6.6 Russia 10.4 22.7Indicative current div. yield: 5.4%* (gross of withholding taxes) 4.9%* (net of withholding taxes)In comparison, MSCI Emerging Markets index currently has a gross dividend yield of 2.8%* Indicative current dividend yield: This figure is indicative only and gross of fund fees. The indicative current dividend yield is based on the dividends of last year paid bythe companies held in the fund. Withholding taxes paid by the fund are already deducted from this figure. The final dividend yield can deviate significantly from theindicative current dividend yield due to changes in company earnings, dividends and stock prices etc. In accumulating share classes, the dividend yield, net of fund fees,will be accumulated. In distributing share classes, the dividend yield, net of fund fees, will be distributed.For illustrative purposes only. The fund is actively managed hence the above portfolio composition is indicative only and can be changed at any time at UBS absolute discretion.Source: UBS Global Asset Management, Factset, GEVS,,Worldscope 23
  25. 25. PerformanceUBS (Lux) Equity SICAV – Emerging Markets High Dividend (USD) P-accPerformance indexed in % (Basis USD, net of fees) 105 100 95 90 85 80 75 06.11 12.11 05.12 10.12 03.13 UBS (Lux) Equity SICAV - Emerging Markets High Dividend (USD) P-acc MSCI Emerging Market (net divi. reinv.)Performance in % (basis USD, net of fees)in % 2009 2010 2011 2012 2013 March since  p.a. 1 YTD 2013 31.05.11Fund (USD) – – – 17.50 -1.80 -0.55 0.60 0.33 2Benchmark – – – 18.23 -1.62 -1.72 -7.38 -4.10Added Value – – -0.73 -0.18 1.17 7.98 4.421) YTD: year-to-date (since beginning of the year)2) Benchmark in currency of account (without costs)Data as at end of March 2013These figures refer to the past. Past performance is not a reliable indicator of future results. The performance shown does not take account of any 0commissions and costs charged when subscribing to and redeeming units. 24
  26. 26. Emerging Markets High Dividend Fund: Composite PerformancePeriods up to 31 March 2013Source UBS Global Asset Management 25 GEN0190n.ppt
  27. 27. Asia High Dividend Fund: Portfolio PositioningDiversification across countries and sectors per 31 March 2013Country allocation Sector allocation Utilities Malaysia Philippines Materials 2.4 Industrials 5.1 2.6 2.4 2.5 Indonesia Taiwan 5.2 Cons. Staples 22.7 Financials 5.0 Hong Kong 29.9 7.3 Energy 12.4 Korea 9.9 Singapore 19.8 Thailand 12.6 Telecoms 22.6 IT China 22.7 14.8Indicative current div. yield: 4.3%* (gross of withholding taxes) 3.8%* (net of withholding taxes)In comparison, MSCI Asia ex Japan index currently has a gross dividend yield of 2.4%* Indicative current dividend yield: This figure is indicative only and gross of fund fees. The indicative current dividend yield is based on the dividends of last year paid bythe companies held in the fund. Withholding taxes paid by the fund are already deducted from this figure. The final dividend yield can deviate significantly from theindicative current dividend yield due to changes in company earnings, dividends and stock prices etc. In accumulating share classes, the dividend yield, net of fund fees,will be accumulated. In distributing share classes, the dividend yield, net of fund fees, will be distributed.For illustrative purposes only. The fund is actively managed hence the above portfolio composition is indicative only and can be changed at any time at UBS absolute discretion. Source: UBS Global Asset Management, Factset, GEVS,,Worldscope 26
  28. 28. PerformanceUBS (Lux) Equity SICAV – Asia High Dividend (USD) P-accPerformance indexed in % (Basis USD, net of fees)105100 95 90 85 80 75 06.11 11.11 04.12 10.12 03.13 UBS (Lux) Equity SICAV - Asia High Dividend (USD) P-acc MSCI All Country Asia ex Japan (net divi. reinv.)Performance in % (basis USD, net of fees)in % 2009 2010 2011 2012 2013 March since  p.a. 1 YTD 2013 01.06.11Fund (USD) – – – 19.25 2.20 -0.20 2.20 1.18 2Benchmark – – – 22.26 -0.39 -1.98 -3.10 -1.71Added Value – – – -3.01 2.59 1.79 5.30 2.891) YTD: year-to-date (since beginning of the year)2) Benchmark in currency of account (without costs)Data as at end of March 2013These figures refer to the past. Past performance is not a reliable indicator of future results. The performance shown does not take account of anycommissions and costs charged when subscribing to and redeeming units. 27
  29. 29. Asia High Dividend Fund: Composite performancePeriods up to 31 March 2013Source UBS Global Asset Management 28 GEN0190n.ppt
  30. 30. Why high dividend stocks in Emerging Markets/Asia ?Benefits of high and stable yield, with the potential for long-term capitalappreciation Stable dividend payout: EM/Asian companies have typically paid shareholders between 30-40% of their earnings over the past 10 years1 Ability to pay sustainable dividends – EM/Asian companies show low debt levels on their balance sheets and have the cash to fund sustainable dividend payments – Their current payout ratio is <35%1 which is at the lower end of its historic band, and below DM cos. payout ratio, suggesting room to increase Dividend strategies have performed very well – A simple illustrative portfolio2 that picked the EM/Asia stocks with the highest dividend yields, performed significantly better than the market1 over the last 10 years – The UBS EM/Asia high dividend strategies have performed very well since inception in 2011 Diversification: EM/Asia High Dividend funds should provide good diversification to both your yield/income and Emerging markets exposures1 Source: UBS Investment Research, data based on respective MSCI indices as of 31 Mar20112 Based on back test portfolio of highest dividend yielding stocks, rebalanced monthly, from March 2001 to March 2011, conducted by UBS Investment Bank 29
  31. 31. SECTION 4Asian Consumption Fund
  32. 32. Growing consumption in AsiaStrong secular drivers behind Asian consumption growth Young population Increasing income and wealth Urbanisation More consumption Low penetration of consumer goods Favourable government policies Asia Consumption Potential Did you know?  Nearly one in three billionaires in the world is now in Asia, up from one in ten in 2005  Over 65% of all global luxury sales is now to emerging market customers  Greater China consumers will account for 50% of global luxury sales by 2020  In Indonesia, 11% of households in Indonesia have personal computersSource: CLSA Research as of Feb 2013, except for the point on Indonesia - data as of 2011. 31
  33. 33. Youngest and largest consumer base in the worldAsia will have 1 billion middle class consumers by 201550% % of population aged 25 years and less (2011)45%40%35%30%25%20%15%10% 5% 0% Asia US France UK Spain Germany JapanSource: United Nations Population Division, UBS IB researchand estimates as of Jun 2012 % of global share of middle class consumption 25 20 2020 F 2030 F 15 10 5 0 India China US Indonesia Japan Russia GermanyMexico 32 Source: Brookings Institition, Deutsche Bank as of March 2013. Assumption: People spending USD 10 to USD 100 a day (2005 PPP$) fall in the middle class category
  34. 34. The EM Consumer is set to become a dominant forceNumber of Households with Disposable Income above US$10,000 400 350 300 No. of Households in Millions 250 200 150 100 50 0 1991 2011 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 1992 1993 1994 1995 1996 1997 1998 1999 2001 2010 2020E 2000 2002 2003 2004 2005 2006 2007 2008 2009 China India Russia Brazil Japan US Indonesia Source: Euromonitor, Morgan Stanley Research, as of Nov 2012 33
  35. 35. Low penetration of consumer goods in Asia Light vehicle ownership vs GDP per capita PC penetration (PCs per 1,000 population) 1,200 900 600 300 0 US Western Japan Worldwide Asia Europe Pacific Source: Gartner Data, Goldman Sachs Research as of Jun 2012 Latest available data: Mar 2011Source: Ashwin Chotai, CEIC, CLSA Asia-Pacific Markets research as of Jun 2012Latest available data: Apr 2011 34
  36. 36. Government policies stimulate mass market consumptionEconomic rebalancing boost domestic consumption by middle,low-income households  Nationwide increase in minimum wage China  Social housing to provide affordable housing  National Rural Employment Guarantee Scheme India  Higher minimum support prices for key agri-produce have helped drive rural incomes  New rice pricing scheme - guarantee paddy rice prices (50% higher than current price)Thailand  Nationwide increase in daily minimum wages by 40% … Source: UBS Global Asset Management 35
  37. 37. Investment and portfolio construction processUBS Asian Consumption Equities Screen: Valuation based metrics (e.g. P/E, P/B) ~100 - 150 stocks Investment Universe ~400-500 stocks Fundamental research 1. Industry outlook 2. Company model 3. Valuation Portfolio Construction Risk system ACF portfolio Typically 30-60 stocks Note: Valuation primarily based on the Price/Intrinsic Value Philosophy 36 Investment universe of investible stocks (i.e. at least USD 500 mn market capitalisation)
  38. 38. UBS Asian Consumption FundPlaying the strong Asian consumption theme Includes: Company examples:  Tobacco: • KT&G, ITCConsumer  Beverages: • Nestle India, Uni President,staples  Consumables:  Unilever(basic  Food:  Want Want, Tingyiconsumption) Includes CompaniesConsumer  Retail:  Golden Eagle, Bellediscretionary  Cosmetics: LG H&H,  LG H&H, Amorepacific Amorepacific(“good to have”  Hyundai, Dongfeng  Autos:  Media: Zee TV, BEC Worldwith more wealth)  Media:  Sands, Bloomberry.  Gaming and hotels: Includes Companies  Medical services:  Mindray Medical InternationalHealthcare  Hospitals:  Apollo hospital, Bumrungrad  Pharmaceuticals:  Sun Pharma, Lupin,Note: This information should not be considered as a recommendation to purchase or sell any security. 37
  39. 39. Top 10 stock overweightsAs of end March 2013 Company Fund (%) Benchmark (%) Active (%) Hyundai Mobis 4.82 4.14 0.68 Belle International Holdings 3.89 1.69 2.19 Sands China Ltd 3.77 2.75 1.02 Kt&G Corporation 3.73 1.66 2.07 Hengan 3.58 1.58 1.99 Uni-President Enterprises 3.50 1.72 1.78 Lg House & Healthcare 3.48 1.14 2.35 Astra International 3.19 3.61 -0.43 Godrej Consumer Products 2.79 0.37 2.42 Itc Limited 2.74 2.75 -0.02 This information should not be considered as a recommendation to purchase or sell any security Source: UBS Global Asset Management. Figures refer to UBS (Lux) Equity Fund – Asian Consumption 38
  40. 40. Asian Consumption: Performance up to Mar 13 Strong performance since inceptionSince Inception Calendar yearCumulative returns returns 120 UBS Asian Consumption Composite 70 MSCI Asia ex Japan 65.2 Benchmark * 100 93.2 88.6 60 80 72.1 50 45.6 60 40 40 29.2(%) (%) 22.2 19.6 22.2 22.4 30 20 15.4 (0.5) 0.1 20 0 -1.0 -6.6 -6.1 8.4 -20 10 (17.3) -40 -38.3 0 -44.5 (47.8) Mar 08 - Mar 13 -60 2008** 2009 2010 2011 2012 YTD 2013Source: UBS Global Asset Management, Factset. Strategy was incepted in 29 February 2008Past performance is not indicative of future results.* There was no representative benchmark up to 31 March 2010. Since 1 April 2010, the MSCI Asia ex Japan Consumer and Health Care Sectors Index (i.e. comprising of the consumer staples,consumer discretionary and healthcare sectors of MSCI Asia ex Japan) has been used as the benchmark.Returns are gross of fees. The Asian Consumption Strategy was launched in February 2008 with the UBS (Lux) Institutional Sicav – Asian Consumption (USD)/(SGD) RA. This institutional vehiclewas subsequently terminated after it was moved into the retail vehicle – the UBS (Lux) Equity Fund - Asian Consumption (USD) P-acc (valor 1041161) in Jul 2009.** From inception 29 February 2008 to Dec 2008 39 GEN0190n.ppt
  41. 41. Asian Consumption: PositioningPositioning as of end March 2013Sector allocation Consumer Discretionary 47.4% 58.8% Health Care 7.0% 3.4% Industrials 1.3% Information Technology 2.5% Financials 3.7% Consumer Staples 34.2% 39.7% 0% 10% 20% 30% 40% 50% 60% 70% UBS Asian Consumption (%) Benchmark (%) Cash 0.0% 2.4%Country allocation Thailand 3.5% 1.7% Taiwan 6.7% 6.4% Singapore 6.3% Fund BM 4.3% Philippines 0.8% 3.8% Malaysia 6.9% 3.7% Korea 28.4% 20.1% Indonesia 7.9% 8.7% India 12.4% 18.2% Hong Kong 10.1% 11.6% China 17.0% 19.1% 0% 5% 10% 15% 20% 25% 30% * There was no representative benchmark up to 31 March 2010. Since 1 April 2010, the MSCI Asia ex Japan Consumer and Health Care Sectors Index (i.e. comprising of the 40 consumer staples, consumer discretionary and healthcare sectors of MSCI Asia ex Japan) has been used as the benchmark. Source: UBS Global Asset Management GEN0190n.ppt
  42. 42. AxJ consumer sector valuations below its historical averages PE Fwd to March 2013 AsiaEx - CD-CS-HC All Mean 1SD Upper 1SD Low er 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Jul/02 Jul/03 Jul/04 Jul/05 Jul/06 Jul/07 Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 Consumer Discretionary Consumer Staples ASIA EX JP Cons Desc Mean 1SD Upper 1SD Low er ASIA EX JP Cons Stap Mean 1SD Upper 1SD Low er18.00 25.0016.0014.00 20.0012.00 15.0010.00 8.00 10.00 6.00 4.00 5.00 2.00 0.00 0.00 Jul/02 Jul/03 Jul/04 Jul/05 Jul/06 Jul/07 Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 Jul/02 Jul/03 Jul/04 Jul/05 Jul/06 Jul/07 Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 Data on the forward P/E of the Asia ex Japan consumer staples, consumer discretionary and healthcare sectors. SD refers to standard deviation (based on 5Y data) Source: J.P.Morgan Quant Strategy 41
  43. 43. APPENDIX ABios and disclaimers
  44. 44. Projit Chatterjee, CFAEquity Strategist, Global Emerging Markets and Asia Pacific Equities,Managing DirectorYears of investment industry experience: 16Education: Indian Institute of Technology (India), B.Tech;Indian Institute of Management (India), MBA  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 MashreqBank, a UAE bank in Mumbai. 43
  45. 45. Emerging Markets High Dividend DisclosureSchedule of composite performance 44
  46. 46. Asia High Dividend Composite DisclosureSchedule of composite performance 45
  47. 47. Asian Consumption Composite DisclosureSchedule of composite performanceThe composites past performance is not necessarily an indication of how it will perform in the future. 46
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