Equities     For Professional Clients onlyCitywire Wealth Manager RetreatUBS Emerging Markets Equity Income FundJustin Wel...
SECTION 1Why EM Equities for Income?
SurveyPlease review questions on screen                                        2                                    22503
EM Equities provide stable dividend payments For the MSCI EM Equity index, dividend payments have steadily increased over...
EM Equities are able to keep paying sustainable dividends……supported by low debt, high earning growth potential EM compan...
EM Equities performance from high dividend stocks is strongBack-test of a High Dividend EM Equity portfolio over 10 yearsP...
Split of MSCI World stocks yielding greater than 3%EM’s share of high yielding stocks has increased1995                   ...
EM Equities yields vary among countries and sectorsReference Index is the MSCI EM IndexMSCI EM Index¹ (inc. Hong Kong & Si...
Section 2Why UBS for Equity Income?
Portfolio construction and researchEmerging Markets Equities TeamA stable and experienced team managing ca. USD 21 bn     ...
Section 3What does an EM Equity Income fund look like?
Investment and Portfolio Construction ProcessUBS Emerging Markets Equity Income Fund                     Investment Univer...
UBS Emerging Markets Equity Income FundCountry Positioning v MSCI EM IndexAs at 30 September 2012        Poland    Singapo...
UBS Emerging Markets Equity Income FundSector Positioning v MSCI EM IndexAs at 30 September 2012 Telecommunicat ion       ...
Foschini: South Africa, Consumer DiscretionaryGood Dividend GrowthFoschini is well positioned                             ...
Asustek: Taiwan, Information TechnologyGood Dividend GrowthAsustek enjoys strong positioning within the industry          ...
SECTION 4Performance since inception
Strong Performance                                                               Fund (% )                                ...
UBS Emerging Markets Equity IncomeRisk/Return from launch (31 January 2011 to 31 September 2012)                          ...
SummaryWhy invest in Emerging Markets for Income?A summary of benefits Prospect of providing a rising and sustainable inc...
APPENDIXAdditional information
The UBS Emerging Markets Equity Income FundInvestment goals and risk parameters:Investment goals Focus on income generati...
UBS Emerging Markets Equity Income FundFund objective To seek to generate income and achieve some long-term capital appre...
Urs Antonioli, CFAHead of EM EMEA & Latin America Equities and Portfolio ManagerManaging DirectorYears of investment indus...
Projit Chatterjee, CFAEquity Strategist, Global Emerging Markets and Asia Pacific Equities, ManagingDirectorYears of inves...
Justin WellsEquity StrategistDirectorYears of investment industry experience: 7Education: Queen’s University of Belfast (U...
DisclaimerThis document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients ...
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  1. 1. Equities For Professional Clients onlyCitywire Wealth Manager RetreatUBS Emerging Markets Equity Income FundJustin WellsEquity Strategist18,19 October 2012
  2. 2. SECTION 1Why EM Equities for Income?
  3. 3. SurveyPlease review questions on screen 2 22503
  4. 4. 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 phaseMSCI EM, DPS and EPS MSCI World, DPS and EPS 100 120 100 80 USD 80USD 60 60 40 40 20 20 0 0 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 DPS EPS DPS EPSSource: DataStream, UBS Investment Research, as at 30 April 2012 3 22503
  5. 5. EM Equities are able to keep paying sustainable dividends……supported by low debt, high earning growth potential 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 sheetsNet debt to Equity by region Cash/Total Assets v Actual Payout Ratio140% 17% 50% 48%120% 16% 46%100% 15% 44%80% 42% 14% 40%60% 13% 38%40% 12% 36% 34%20% 11% 32% 0% 10% 30% 88 90 92 94 96 98 00 02 04 06 08 10 12e Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Lat Am Asia EMEA Cash / Tot al Asset (lhs) Payout rat io (rhs)Source: Worldscope, UBS Investment Research, April 2012 4 22503
  6. 6. EM Equities performance from high dividend stocks is strongBack-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 st ocks 100% 80% Ret urn by year 60% 40% 20% 0% -20% -40% -60% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 10 years (31-Dec-2001 – 31-Dec-2011) EM M SCI universe EM high dividend port f olio Annualised ret urn 14.5% 24.1% Annualised st andard deviat ion 25% 23%Source: UBS Investment Bank Worldscope, DatastreamNote: The above chart shows returns by calendar year to 31 December 2011. All other information is as at 31 December 2011.1 Back test rules: At each month end, the universe is restricted to stocks which are in the MSCI EM Index on that date. Each stock has a market capitalisation of at least USD 1 billion on that date. 75stocks 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 andthe 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. Ourportfolio will be selected from ca. 350-400 stocks under our research coverage. 5 22503
  7. 7. Split of MSCI World stocks yielding greater than 3%EM’s share of high yielding stocks has increased1995 2011 Total number of stocks = 356  Total number of stocks = 938 UK UK Developed 12% 7% Nort h Developed America Nort h 19% America 29% Emerging Emerging 33% 17% 60 stocks 302 stocks Developed Europe ex UK 20% Developed Asia Pacif ic Developed ex Japan Europe ex Developed 16% UK Japan Asia Pacif ic 26% 8% ex JapanSource: Datastream, 31 December 2011 13%Note: Only companies with market capitalisation >USD 1 billion included in survey 6 22503
  8. 8. EM Equities yields vary among countries and sectorsReference Index is the MSCI EM IndexMSCI EM Index¹ (inc. Hong Kong & Singapore) MSCI EM Index 7 6 Fund historic yield 5.3%² 6 Gross dividend yield (% ) 5 Gross dividend yield (% ) 5 4 Index Dividend Yield: 2.9% 4 Index Dividend Yield: 2.9% 3 3 2 2 1 1 0 0 Ut ilit ies Philippines Financials Indust rials Mat erials Telecom Services Consumer St aples Consumer Discret ionary Czech Republic Russia China Chile Colombia India Singapore Malaysia Sout h Af rica Inf ormat ion Technology Healt h Care Korea Taiw an Thailand Mexico Energy Brazil Hungary Turkey Hong Kong Poland Peru Morocco EgyptSource: UBS Investment Research, Factset, September 20121 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. 7 22503
  9. 9. Section 2Why UBS for Equity Income?
  10. 10. Portfolio construction and researchEmerging Markets Equities TeamA stable and experienced team managing ca. USD 21 bn Geoffrey Wong1 Head Global Emerging Markets & Asia Pacific EquitiesHong Kong / Singapore Zurich / London / Chicago Manish Modi1 Cheah Yit Mee1 Projit Chatterjee1 Urs Antonioli1 Justin Wells Gabriel Csendes1 Portfolio Manager Portfolio Manager Portfolio Manager / Head of EM EMEA / Equity Strategist Portfolio Manager Asia ex Japan Asia ex Japan Equity Strategist Latin America Equities Analyst Choo Shou Pin Namit Nayegandhi Bin Shi Mark Roggensinger Gabriella Analyst Analyst Portfolio Manager Analyst Abderhalden China Analyst Matthew Adams Chan Chee Seng Yu Zhang Irina Budnikova Benita Analyst Analyst Analyst Analyst Mikolajewicz Analyst Leslie Chow Sanjeev Joshi Joanna Mak Analyst Analyst AnalystKelvin Teo Hai HuangAnalyst Analyst Jimmy Chua Paul Hillman Reginald Oh Macrina Otieno Michael Abellera Steve Herbert Head Trader Trader Trader Trader EMEA Trader Latin America Trader EMEA Dorothy Lek Han Yaw Juan Trader Trader Source: UBS Global Asset Management As at 30 September 2012 1 Member of Emerging Markets Equity Strategy Committee EM Equity Income Specialists 9 22503
  11. 11. Section 3What does an EM Equity Income fund look like?
  12. 12. Investment and Portfolio Construction ProcessUBS Emerging Markets Equity Income Fund Investment Universe of EM Equity team (300-400 stocks researched) Filtrate: Select high dividend stocks Remove overvalued stocks Top dividend yield 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 Client portfolio 40 – 80 stocks 11 22503
  13. 13. UBS Emerging Markets Equity Income FundCountry Positioning v MSCI EM IndexAs at 30 September 2012 Poland Singapore Sout h Af rica Taiw anCzech Republic Hong Kong Thailand Port f olio % Israel Ref erence Index % Hungary Peru Philippines Turkey Morocco Chile Malaysia Egypt Indonesia Colombia Russia Mexico India Brazil China Korea 0% 5% 10% 15% 20% Overweight Underweight Source: UBS Global Asset Management 12 22503
  14. 14. UBS Emerging Markets Equity Income FundSector Positioning v MSCI EM IndexAs at 30 September 2012 Telecommunicat ion Services Financials Inf ormat ion Technology Ut ilit ies Port f olio % Healt h Care Ref erence Index % Mat erials Indust rials Consumer St aples Energy Consumer Discret ionary 0% 5% 10% 15% 20% 25% 30% 35% Overweight Underweight Source: UBS Global Asset Management 13 22503
  15. 15. Foschini: South Africa, Consumer DiscretionaryGood Dividend GrowthFoschini is well positioned Market Share of Modern Apparel Retail in South Africa 73% Turnaround story 72% Mass middle market focus 71% 70% Gaining market share due to improving product offering and 69% attractive price points 68% 67% 66% 2003 2004 2005 2006 2007 2008 2009 2010 2011Solid FCF improvement story driven by Top 5 Modern Apparel Retailers Good revenue growth and stabilising margins, scope to improve working capital Foschini 13% Edcon Future major acquisitions are unlikely, thereby sustaining the 28% Truworths cash flow Informal 9% 28% Modern 73% Mr Price 13%Strong corporate governance Woolworths 10% Responsible dividend discipline – flattish until top line performance improved 3 year 1 year Expected improving dividend payout ratio going forward dividend dividend 12 m ont h grow t h 1 grow t h 1 yield 1 FY1 FY2 Prospect of further funds being returned to shareholders post the IPO of microfinance business 16.5% 30.0% 3.8% 4.5% 5.3% Source: Bloomberg, Factset, UBS Global Asset Management, September 2012 1 Historic data 14 22503
  16. 16. Asustek: Taiwan, Information TechnologyGood Dividend GrowthAsustek enjoys strong positioning within the industry Top 5 PC vendor’s market share globally 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 Source: IDC Dividend Per Share 20Good prospects for maintaining sustainable dividend 15 Recent corporate actions have reduced working capital 10 requirements 5 Allowing cash dividends to increase over time 0 Future major acquisitions are unlikely, thereby sustaining the 2007 2008 2009 2010 2011 2012E 2013E 2014E cash flow Payout ratio likely to be maintained 3 year 1 year dividend dividend 12 m ont h Potential for special dividend upon future prospective grow t h 1 grow t h 1 yield 1 FY1 FY2 divestments 10.0% 26.4% 4.8% 5.3% 6.0% Source: Bloomberg, Factset, UBS Global Asset Management, September 2012 1 Historic data 15 22503
  17. 17. SECTION 4Performance since inception
  18. 18. Strong Performance Fund (% ) Sect or¹ (% ) Quart ile 6 mont hs -1.4 -2.6 2 1 year 16.3 12.6 1 Since launch² 5.2 -7.6 1Source: 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 Markets2 Launch date 31 January 2011 25% Mont hly perf absolut e Relat ive perf ormance cumulat ive 20% 15% 10% 5% 0% -5% -10% -15% Feb-11 Apr-11 Jun-11 Aug-11 Oct -11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12Source: UBS Global Asset Management / FactSet, 30 September 2012Each bar relates to the discrete monthly performance of the MSCI Emerging Markets Index. The blue line relates to the cumulative performance of the fund relative to the index. 17 22503
  19. 19. UBS Emerging Markets Equity IncomeRisk/Return from launch (31 January 2011 to 31 September 2012) UBS EMEI MSCI Emerging Markets IMA Global Emerging MarketsSource: 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. 18 22503
  20. 20. SummaryWhy invest in Emerging Markets for Income?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 challengesThe 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%²1 Source: UBS Global Asset Management, as at 30 September 20122 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. 19 22503
  21. 21. APPENDIXAdditional information
  22. 22. The UBS Emerging Markets Equity Income FundInvestment goals and risk parameters: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 EM1Other 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 Kong2Portfolio exposures Relat ive Absolut eSt ock w eight s Typical maximum of around 5%Sect or w eight s +/- 25% vs index 35%Count ry w eight s2 +/- 25% vs index 25%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. 21 22503
  23. 23. UBS Emerging Markets Equity Income FundFund 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 det ails ‘B’ shares ‘C’ shares Fund Launch dat e 31 January 2011 Ref erence index¹ M SCI Emerging M arket s Index Sect or IM A Global Emerging M arket s² Init ial charge 0.00% 0.00% AM C 1.00% ³ 0.75% M inimum init ial £1,000 £1,000,000 invest ment XD dat es 31 M arch, 30 Sept ember Pay dat es 31 M ay, 30 November Sedol code (Acc) B5M 1470 B8BDQ49 Sedol code (Inc) B5KZ5J3 B8BLLB5 ISIN code (Acc) GB00B5M 14703 GB00B8BDQ491 ISIN code (Inc) GB00B5KZ5J37 GB00B8BLLB55 ISA Yes ISA t ransf er Yes Source: UBS Global Asset Management 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. 22 22503
  24. 24. Urs Antonioli, CFAHead of EM EMEA & Latin America Equities and Portfolio ManagerManaging DirectorYears of investment industry experience: 16Education: University of Fribourg (Switzerland) MBA 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. 23 22503
  25. 25. Projit Chatterjee, CFAEquity Strategist, Global Emerging Markets and Asia Pacific Equities, ManagingDirectorYears 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 Mashreq Bank, a UAE bank in Mumbai. 24 22503
  26. 26. Justin WellsEquity StrategistDirectorYears of investment industry experience: 7Education: Queen’s University of Belfast (UK), BA (Hons); Durham University (UK), LL.B (Hons) 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. 25 22503
  27. 27. DisclaimerThis document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under anycircumstances.Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as upand are not guaranteed. Investors may not get back the amount originally invested. Changes in rates of exchange may cause the valueof this investment to fluctuate. Investments in less developed markets may be more volatile than investments in more establishedmarkets. The Fund is permitted to, and may, on occasion, hold a limited number of investments. As the annual management fee of theFund 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 investmentresearch and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The informationcontained in this document should not be considered a recommendation to purchase or sell any particular security and the opinionsexpressed 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. 26 22503

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