Ubs global asset management

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Ubs global asset management

  1. 1. FOR PROFESSIONAL CLIENTS ONLYUBS USA Growth FundKevin Barker – Head of Equity Capability ManagementMontreux, May 2012
  2. 2. DisclaimerFor marketing and information purposes by UBS. For professional investors only. Representative in Switzerland for UBS funds established underforeign law: UBS Fund Management (Switzerland) AG, P.O. Box, CH-4002 Basel. Paying agent: UBS AG. Prospectuses, simplified prospectuses, the articles ofassociation or the management regulations as well as annual and semi-annual reports of UBS funds are available free of charge from UBS AG, P.O. Box,CH-4002 Basel or from UBS Fund Management (Switzerland) AG, P.O. Box, CH-4002 Basel. UBS Institutional Funds under Swiss and Luxembourg law. Beforeinvesting in a product please read the latest prospectus carefully and thoroughly. This document is for distribution only under such circumstances as maybe permitted by applicable law. It was written without reference to any specific or future investment objective, financial or tax situation or requirement onthe part of a particular individual or group. The document is for information purposes only and is not intended to be construed as a solicitation or aninvitation to make an offer, to conclude a contract, or to buy or sell any securities or related financial instruments. The products or securities describedherein may not be eligible for sale in all jurisdictions or to certain categories of investors. The information and opinions contained in this document havebeen compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith, but is not guaranteed as beingaccurate, nor is it a complete statement or summary of the securities, markets or developments referred to in the document. The details and opinionscontained in this document are provided by UBS without any guarantee or warranty and are for the recipients personal use and information purposesonly. Past performance of investments (whether simulated or actual) is not necessarily an indicator of future results. The performance shown does not takeaccount of any commissions and costs charged when subscribing to and redeeming units. Commissions and costs have a negative impact on performance.Should the currency of a financial product or service not match your reference currency, performance may rise or fall due to currency fluctuations. All suchinformation and opinions are subject to change without notice. UBS AG and / or other members of the UBS Group may have a position in and may make apurchase and / or sale of any of the securities or other financial instruments mentioned in this document. This document may not be reproduced,redistributed or republished for any purpose without the written permission of UBS AG. This document contains statements that constitute "forward-looking statements", including, but not limited to, statements relating to our future business development. While these forward-looking statementsrepresent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other importantfactors could cause actual developments and results to differ materially from our expectations. Source for all data and charts (if not indicated otherwise):UBS Global Asset Management. © UBS 2012. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. 1 22008
  3. 3. Key messagesUBS (Lux) USA Growth (USD) P acc Consistent outperformance versus peers Excellent time to buy growth fund Continuity of management and process provides consistent results 2 22008
  4. 4. UBS USA Growth Fund – consistent returnsHistory of Morningstar rating and Lipper rankings since inception 5 0 4 25 Percentile Stars 3 50 2 75 Overall Morningstar rating Lipper Rating 1 100 Jun 08 Jun 09 Jun 10 Oct 07 Feb 08 Oct 08 Feb 09 Oct 09 Feb 10 Oct 10 Mar 11 Jul 11 Nov 11 Mar 12Source: Morningstar Direct, based on UBS (Lux) USA Growth (USD) P account, as at end March2012Note: Past performance is no guarantee of future results 3 22008
  5. 5. Excellent time to buy growthGrowth stock valuations are low versus history 70 Relative PE Historical growth/value spread has been 8.7 60 50 40 30 20 Current 4.1 10 0 (10) Aug-86 Aug-04 Jun-96 Dec-84 Apr-88 Nov-89 Jul-91 Mar-93 Oct-94 Feb-98 Sep-99 May-01 Jan-03 Apr-06 Dec-07 Jul-09 Mar-11Source: FactsetData as at 31 March 2012 4 22008
  6. 6. Why has our performance been so consistent?We aim for reliability, accuracy and precision Structural benefits of growth index – Technology versus financials Stability of manager and team Blend different sources of growth to diversify returns Fundamental research identifies mis- priced secular growth opportunities Upside/downside modelling on all stocks – aim to find asymmetric risk/reward Risk management integral to our approach 5 22008
  7. 7. Growth Index has exposure to the fastest growing sectorsRussell 1000 Growth relative to Russell 1000 Value at 31 March 2012 Information Technology 21.3 Consumer Discretionary 5.2 Consumer Staples 4.2 Industrials 3.2 Materials 2.6 Energy -1.6 Health Care -1.9 Telecommunication Services -10.9 -3.6 Utilities -6.8 Financials -22.5 Active position (%)Source: UBS Global Asset ManagementData as at 31 Mar 2012 6 22008
  8. 8. Tech vs. Financials – faster growth; higher returnsUS Financials earnings vs. IT earnings US Financials ROE vs. IT ROE 0.35 Financials ROE 500 Financials Earnings IT ROE IT Earnings Financials Earnings Forecast 0.30 Financials ROE Forecast 400 IT ROE Forecast IT Earnings Forecast 0.25 300 0.20 200 0.15 100 0.10 0 0.05 (100) 0.00 (200) -0.05 Q1- Q1- Q1- Q1- Q1- 2012 2013 2014 Q1- Q1- Q1- Q1- Q1- 2012 2013 2014 2007 2008 2009 2010 2011 E E E 2007 2008 2009 2010 2011 E E ESource: Citi, Bloomberg, as at end March 2012 7 22008
  9. 9. Consistency comes from stability of leadershipLead manager in place since 2002, and running product since launch Fund Lead manager Morningstar rating AuM (USD bn) Date appointed UBS USA Growth Lawrence Kemp 5 3.8 Oct 20041 Fidelity American Adrian Brass 4 1.8 Jan 2008 Franklin US Opportunities Conrad Herman 4 2.4 Jan 2006 JPM US Select Susan Bao / Tom Luddy 5 1.7 Aug 2008 Robeco US Premium Duilio Ramallo 4 5.4 Jan 2006 Natixis Actions US Value Gary Lisenbee 5 1.9 Dec 2005Source: UBS Global Asset Management, company fact sheets, Morningstar as at end of March 2012Note: Past performance is no guarantee of future results1 Lawrence Kemp has led the US Large Cap Growth Equity team since 2002 8 22008
  10. 10. Diversified sources of growth help deliver consistencyBlend of three types of growth stocks Elite Sustainable Google Apple Classic McDonald’s CVS Caremark n Growth t io ua V al Cyclical Concho Resources Schlumberger Cyclical Low ROIC HighProcess for US Large Cap Select Growth Equity / US Large Cap Growth EquityInformation is supplemental to the US Large Cap Growth Composite and the US Large Cap Select Growth Composite.Note: The securities identified on this slide are current holdings as of the date of this presentation. This information should not be considered a recommendation to purchase or sell anyparticular security. Please see the additional disclosures at the end of this presentation for further information. US-I 9 22008
  11. 11. Diversified sources of growthHistorical allocations as of March 31, 2012 Fundamental Portfolio Risk management company research Construction 100% 80% 60% 40% 20% 0% Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Elite Classic CyclicalSource: US Large Cap Select Growth portfolio.Information is supplemental to the US Large Cap Select Growth Composite.As of March 31, 2012 US-I 10 GEN0190n.ppt
  12. 12. Example 1: Thinking further aheadEvaluate opportunity and competitive position of the company Dominant market player in room booking Growing at 40-50% per annum And yet single digit market share penetration Valuation discounts no growth from 2014 11 22008
  13. 13. Example 2 – Challenging misconceptions: The past 12 22008
  14. 14. Las Vegas Sands – The future 13 22008
  15. 15. Example 2 – Las Vegas Sands Analyst consensus 4.0 38% CAGR (2010-2014) 3.0 USD 2.0 1.0 0.0 2008 2009 2010 2011 2012 E 2013 E 2014 E Fully diluted 394 728 792 812 813 813 813 shares (mn) Strong revenue growth + Margin expansion + Cost control Strong EPS Growth +Reduced interest expense +Elimination of preferred dividendSource: Las Vegas Sands, as at end March 2012 14 22008
  16. 16. UBS USA Growth Fund – Our biggest viewsVs. Russell 1000 Growth as of 30 April 2012Ten largest overweights Active position (%)Visa 3.81 3.8Amazon.com 3.33 3.3CVS Caremark 3.10 3.1Priceline.com 2.98 3.0Estee Lauder 2.92 2.9Allergan 2.58 2.6Dollar General 2.50 2.5Baidu 2.31 2.3Nike 2.30 2.3Salesforce 2.28 2.3Source: UBS Global Asset ManagementSupplemental information to the US Large Cap Select Growth Composite US-I 15 22008
  17. 17. UBS USA Growth Fund – Key messages Consistent outperformance versus peers Excellent time to buy growth fund Continuity of management and process provides consistent results 16 22008
  18. 18. APPENDIX
  19. 19. US Large Cap Growth TeamLawrence Kemp, CFA – Managing Director Brian Markovich, CFA – DirectorHead of US Large Cap Growth Equity Senior Investment AnalystPortfolio Manager Industrials, Materials26 years of investment experience 13 years of investment experienceSam Console – Executive Director Andrew Strommen, CFA - DirectorSenior Investment Analyst Investment AnalystConsumer Discretionary, Consumer Staples Financials, Materials, Telecom Services16 years of investment experience 11 years of investment experiencePeter Bye – Executive Director Joseph Wilson – DirectorSenior Investment Analyst Investment AnalystHealth Care. Consumer Discretionary Information Technology, Consumer Discretionary17 years of investment experience 8 years of investment experienceWendy Nickerson, CFA – Executive Director Grant Bughman – DirectorSenior Investment Analyst Client Portfolio ManagerEnergy, Materials, Industrials Client Service and Business Development17 years of investment experience 12 years of investment experienceAlbert Tsuei – DirectorSenior Investment AnalystInformation Technology20 years of investment experienceAs of March 2012 US-I 18 GEN0190n.ppt
  20. 20. US Large Cap Select Growth Composite: PerformanceTotal returns for periods ending March 31, 2012 (in USD) Annualized Since Track. Info Month Quarter 1 year 3 years 5 years inception2 Risk5 error6 ratio7US Large Cap Select Growth1 4.24% 19.50% 14.44% 28.05% 8.69% 10.08% 17.88% 4.55% 0.78Russell 1000 Growth 3.29 14.69 11.02 25.28 5.10 6.56 16.77Value added 0.95% 4.81% 3.42% 2.77% 3.59% 3.52%Supplemental performance information Annualized Since Track. Info Month Quarter 1 year 3 years 5 years inception4 Risk5 error6 ratio7UBS AG, NY Branch US Large Cap Select Growth3 4.26% 19.57% 14.28% 28.14% 8.66% 3.51% 18.60% 5.30% 0.73Russell 1000 Growth 3.29 14.69 11.02 25.28 5.10 -0.34 19.13Value added 0.97% 4.88% 3.26% 2.86% 3.56% 3.85%The returns shown above are based on currently available information and are subject to revision. Past performance is no guarantee of future results.Performance figures are gross of fees. Please see attached disclosure information.1 UBS Global AM US Large Capitalization Select Growth Composite2 Inception date of October 31, 20043 UBS AG, New York Branch (“Advisor”) Large Cap Select Growth Equity Composite. UBS AG NY Branch data is supplemental to US Large Cap Select Growth Equity Composite data andrepresents the UBS Global Asset Management model managed in a substantially similar manner.4 Inception as of February 1, 20005 Since inception standard deviation based on monthly logarithmic returns6 Tracking error is defined as annualized standard deviation of the difference between the monthly logarithmic returns of the portfolio and its benchmark7 Information ratio is defined as the added value divided by the Tracking error US-I, US-P (RU) 19
  21. 21. Our research process is consistent and repeatable • Analysts screen their sectors for companies with characteristics of a good business or attractive valuation Idea Generation • Quant screen organizes universe by sector, valuation, roe, and earnings revisions • Assess the sustainability of profitability and growth • Scenario based valuation analysis, understand current expectation — establish valuation-based upside / downside scenarios Thesis construction — employ reverse DCF to evaluate market perception of the magnitude and duration of growth prospects • Portfolio construction / risk management — assess correlation of current holdings Execution — valuation + quality of business model drives allocation — buy/hold/add – review/trim/sell decision makingProcess for US Large Cap Select Growth Equity / US Large Cap Growth Equity US-I 20
  22. 22. A current stock case study: Visa (V)Evaluate opportunity and competitive position of the companyCase study Fundamental Portfolio Risk management company research Construction Visa benefits from 1) The shift from cash and check to debit and credit card payments for domestic payments in both developed economic countries, as well as developing nations with high rates of personal Upside Scenario: +32% consumption growth. 2) Growth in cross-border transactions. 3) High Downside Scenario: -20% barriers to entry for new potential new entrants into the payments space, which ensures stability in market share and pricing. Revenue Growth EBIT Operating Visa enjoys very high incremental operating margins as the costs to ($mm) Y/Y ($mm) Margin process additional transactions are minimal, and the necessary 2009A 6,911 10% 3,540 51% marketing, personnel, and technology costs to support future growth 2010A 8,065 17% 4,544 56% are modest. 2011A 9,188 14% 5,463 59% Visa’s return on invested capital (ROIC) is both high and sustainable, 2012E 10,174 11% 6,142 60% as it can scale double-digit transaction growth with modest capital outlays and working capital investment. Converting earnings to free 2013E 11,333 11% 6,952 61% cash flow has enabled the company to consistently return capital to 2014E 12,608 11% 7,981 63% shareholders while delivering top and bottom-line growth. 2015E 13,869 10% 8,922 64% Current valuation implies Visa will reach mature single digit FCF 2016E 15,117 9% 9,814 65% growth in the 2017-2021 time period. We believe higher growth rates Implied earnings growth 2017 to 2021: 3.5% are sustainable because: Other Assumptions 75% of U.S. transactions are comprised of debit which is growing in the mid teens due to continued shift from cash. 43% of revenues are Weighted Average Cost of Capital 9.0% generated outside the U.S. where volumes are growing at 14% Terminal growth rate 1.5% (debit/credit combined) as foreign markets are in earlier stages of Long-term tax rate 36.0% migrating away from cash and check. Long-term operating margin 65.0%Note: The security identified on this slide represents one of the top five overweights in both the US Large Cap Growth and US Large Cap Select Growth portfolios as of March 31, 2012. Thisinformation should not be considered a recommendation to purchase or sell any particular security. Information is supplemental to the US Large Cap Growth and US Large Cap Select GrowthComposites. Please see the additional disclosures at the end of this presentation for further information. US-I 21
  23. 23. Objectives: US Large Cap Select GrowthInvestment goals and risk parameters Investment goalsSeek to outperform Russell 1000 Growth Index by 300 basis points per annum over the course of a market cycle1 Investment universeAll US marketsApproximately 1,000 stocksHow we aim to achieve this goal: Ex-ante tracking error: Normal range 4% - 9% Number of equity holdings: Approximately 35 to 55 Individual stock weights: Maximum position size of 8% Sector weights: Maximum 15% over/underweight vs benchmark Fully invested: Maximum 5% cashThis is a brief summary of certain investment guidelines by which the strategy is managed. Actual investment guidelines for any client account may differ.1 Market cycle is typically 3-5 years US-I 22
  24. 24. Focus on risk managementFoundation for consistent alpha generationType of risk Action Thesis construction risk • Diversification: 35-55 stocks, limits on • Price/unit assumptions too high individual stock position size • Bias towards quality businesses • Margins not sustainable Macroeconomic risks • Invest in 3 diverse sources of growth • Manage weights within distinct growth • Business/monetary cycle risk buckets • Widening of potential future • Focus on non-correlated risks outcomes Valuation risks • Probability-weighted scenario analysis • Adherence to target prices • Buy/sell disciplineUS Large Cap Select Growth Equity US-I 23 GEN0190n.ppt
  25. 25. Risk management: A hallmark of UBS Global AMSeeks to ensure risks are understood and intendedGlobal Equity Risk Management System Cap/style screen & growth rankings Fundamental company research Construction & risk management Further analysis drills deeper into the portfolio Headline active risk: (key risk measure) Beta: (sensitivity to market) Major stock level, style, sector and country contributors to risk Statistical factor analysis Exposures to country / industry / sizeFor illustrative purposes only. This information should not be considered a recommendation to purchase or sell any particular security. US-I 24
  26. 26. US Large Cap Select Growth: Strategy summaryAs of March 31, 2012 US Large Cap Select Growth Equity Market Factor Industry Stock strategy1 exposures weightings selection2 Beta 1.03 ++ Growth ++ Internet Allergan Tracking Error 4.52 ++ Momentum + Apparel & Textiles Amazon.com Yield 0.63 ++ Trading Activity + Computer Hardware Apple # Holdings 46 + Currency + Electronic Equipment CVS Caremark + Price Volatility + Financial Services Google - Leverage + Hotels Las Vegas Sands -- Earnings / Price - Information Services Estee Lauder -- Yield - Tobacco Priceline.com -- Computer Software Qualcomm -- Food & Beverages VisaSupplemental information to the US Large Cap Select Growth Composite1 Beta and tracking error figures are forward-looking (ex-ante) estimates calculated using the BARRA risk system or other suitable systems. The actual active risk level will vary according to market conditions and our views. There is no guarantee these projections will ultimately be realized.2 Note: Holdings represent ten largest positions in portfolio as of March 31, 2012 US-I 25 GEN0190n.ppt
  27. 27. Consistent excess returnsRolling three-year periods excess returnsAs of March 31, 20128% US Large Cap Select Growth Composite Supplemental - UBS AG Large Cap Select Growth6%4%2%0% Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12UBS Global AM US Large Capitalization Select Growth Composite inception date of October 31, 2004.UBS AG, New York Branch (“Advisor”) Large Cap Select Growth Equity Composite. UBS AG NY Branch data is supplemental to US Large Cap Select Growth Equity Composite data andrepresents the UBS Global Asset Management model managed in a substantially similar manner. Inception as of February 1, 2000.The returns shown above are based on currently available information and are subject to revision. Past performance is no guarantee of future results.Performance figures are gross of fees. Please see attached disclosure information.Excess returns calculated by subtracting benchmark returns from portfolio returns. Returns greater than one year annualized. Returns in USD. Benchmark used for excess return calculation isthe Russell 1000 Growth Index. US-I, US-P (RU) 26
  28. 28. Value added over style cyclesRolling one-year excess returns since inceptionAs of March 31, 2012 30% 20% 10% 0% % Return -10% -20% Value outperforms Growth Growth outperforms Value -30% Rolling 1 year alpha: US Large Cap Select Growth Strategy -40% Inception of UBS Global AM US Large Capitalization Select Growth Composite -50% Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12As of March 31, 2012.UBS Global AM US Large Capitalization Select Growth Composite inception date of October 31, 2004.UBS AG, New York Branch (“Advisor”) Large Cap Select Growth Equity Composite. UBS AG NY Branch data is supplemental to US Large Cap Select Growth Equity Composite data and representsthe UBS Global Asset Management model managed in a substantially similar manner. Inception as of February 1, 2000.Performance data shows UBS AG NY Branch supplemental performance from February 1, 2000 until October 31, 2004 and UBS Global AM US Large Cap Select Growth Composite for allsubsequent periods.The returns shown above are based on currently available information and are subject to revision. Past performance is no guarantee of future results.Performance figures are gross of fees. Please see attached disclosure information.Excess returns calculated by subtracting benchmark returns from portfolio returns. Returns greater than one year annualized. Returns in USD. Benchmark used for excess return calculation is theRussell 1000 Growth Index. Growth performance is measured by the Russell 1000 Growth Index. Value performance is measured by the Russell 1000 Value Index. US-I, US-P (RU) 27 GEN0190n.ppt
  29. 29. Value added in up and down marketsRolling one-year excess returns since inceptionAs of March 31, 2012 40% 30% 20% 10% % Return 0% -10% Inception of UBS Global AM US Large -20% Capitalization Select Growth Composite -30% Rolling 1-year benchmark return -40% Rolling 1-year alpha: US Large Cap Select Growth Strategy -50% Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12As of March 31, 2012.UBS Global AM US Large Capitalization Select Growth Composite inception date of October 31, 2004.UBS AG, New York Branch (“Advisor”) Large Cap Select Growth Equity Composite. UBS AG NY Branch data is supplemental to US Large Cap Select Growth Equity Composite data and representsthe UBS Global Asset Management model managed in a substantially similar manner. Inception as of February 1, 2000.Performance data shows UBS AG NY Branch supplemental performance from February 1, 2000 until October 31, 2004 and UBS Global AM US Large Cap Select Growth Composite for allsubsequent periods.The returns shown above are based on currently available information and are subject to revision. Past performance is no guarantee of future results.Performance figures are gross of fees. Please see attached disclosure information.Excess returns calculated by subtracting benchmark returns from portfolio returns. Returns greater than one year annualized. Returns in USD. Benchmark used for excess return calculation isthe Russell 1000 Growth Index. US-I, US-P (RU) 28 GEN0190n.ppt
  30. 30. A look at upside performance/downside performanceUS Large Cap Select Growth vs. eVestment peer average 125 Since Inception 120 5 years 115 110 3 years Upside (%) 105 eVestment peer 100 median (Since 95 Inception) 90 85 80 80 90 100 110 120 130 140 150 Downside (%)Upside Market Capture Ratio – A measure of the manager’s performance in up markets relative to the market itself. A value of 110 suggests the manager performs ten percent better thanthe market when the market is up during the selected time period. The return for the market for each period is considered an up market if it is greater than or equal to zero. The UpsideCapture Ratio is calculated by dividing the return of the manager during the up market periods by the return of the market during the same periods.Downside Market Capture Ratio – A measure of the manager’s performance in down markets relative to the market itself. A value of 90 suggests the manager’s loss is only nine tenths of themarket’s loss during the selected time period. A market is considered down if the return for the benchmark is less than zero. The Downside Capture Ratio is calculated by dividing the return ofthe manager during the down market periods by the return of the market during the same periods.Source: eVestment AllianceAs of March 31, 2012.UBS Global AM US Large Capitalization Select Growth Composite inception date of October 31, 2004.The returns shown above are based on currently available information and are subject to revision. Past performance is no guarantee of future results.Performance figures are gross of fees. Please see attached disclosure information.Returns greater than one year are annualized. Returns in USD. Benchmark used for calculation is the Russell 1000 Growth Index. Information is supplemental to the US Large Cap Select GrowthComposite.The eVestment Universe comprises 265 peers who are considered US Large Cap Growth US-I, US-P (RU) 29 GEN0190n.ppt
  31. 31. US Large Capitalization Select Growth CompositeSchedule of composite performanceUBS Global Asset Management (the Firm) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. UBS Global Asset Management has beenindependently verified for the periods January 1, 2002 through December 31, 2010. Verification assesses whether (1) the Firm has complied with all the composite construction requirements of the GIPS standards on a Firm-wide basis and (2) the Firm’s policiesand procedures are designed to calculate and present performance in compliance with the GIPS standards. The US Large Capitalization Select Growth Composite has been examined for the periods November 1, 2004 through December 31, 2010. Theverification and performance examination reports are available upon request.1. US Large Capitalization Select Growth Composite - A composite of accounts investing in the common stocks of US companies whose returns and earnings or cash flow growth prospects are above the average large capitalization company ($2.5 billion or larger). The investment strategy emphasizes stock selection with attention given to factor and sector exposures relative to the benchmark. Accounts in this strategy will hold a smaller number of securities than the typical US Large Cap Growth portfolio. The benchmark is the Russell 1000 Growth Index.2. A complete list of all Firm composite descriptions is available upon request. The Firm is defined as all actively and passively managed institutional and retail accounts of UBS Global Asset Management (the Firm). The effective date of the Firm is January 1, 2002. Prior to that, the Firm originally consisted of the following entities: UBS Global Asset Management (Americas) Inc., UBS Global Asset Management Trust Company, UBS Realty Investors LLC & UBS AgriVest LLC. As of 2001, the Firm assets reflect the integration of the investment management platform of UBS Global Asset Management (UK) Ltd and UBS Global Asset Management International Ltd into the existing Firm definition. Each of the entities comprising the Firm definition is an affiliate of UBS AG.3. Composites consisting of more than one portfolio are asset weighted by beginning-of-period asset values. Investment results are time-weighted performance calculations representing total return. Returns are calculated using geometric linking of monthly returns. Composites are valued at least monthly, taking into account cash flows. All realized and unrealized capital gains and losses, as well as all dividends and interest from investments and cash balances, are included. Interest income from fixed income securities is accrued, and equity dividends are accrued as of the ex-dividend date. Investment transactions are accounted for on a trade date basis with the exception of selected equity accounts. The rates of return are presented both net and gross of investment management fees. Gross of fee returns are calculated net of transaction fees and other trading expenses. Net of fee performance reflects the deduction of the highest fee charged, as described in Part II of Form ADV. The highest fee charged for accounts of this type is up to 2.04%. Due to the graduated nature of fees, as account size increases, the annual percentage fee will decline. Net of fee returns are calculated by geometrically deducting the deannualized highest annual management fee from each monthly gross return and geometrically linking the monthly returns for each period. Policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request.4. Results include all actual fee-paying, discretionary client portfolios including those clients no longer with the Firm. Portfolios are included in the composite beginning with the first full month of performance to the present or to the cessation of the client’s relationship with the Firm. Terminated accounts are included through the last full month in which they were fully invested, and no alterations of composites have occurred due to changes in personnel.5. Composite dispersion represents the consistency of the Firm’s composite performance results with respect to the individual portfolio returns within the composite. Presented is the asset-weighted dispersion (standard deviation) of the portfolios within the composite. Only portfolios in the composite for each full time period are included in the dispersion calculation, and no dispersion is presented for composites consisting of only a single portfolio. Composite Performance: US Large Capitalization Select Growth Composite November 1, 2004 through December 31, 2010 Amounts and returns expressed in USD Year Gross Asset- Benchmark Net Asset- Composite 3 Yr St Dev Benchmark 3 Yr St Dev # of Portfolios End of Total Composite Assets End of Asset-Weighted Composite Assets as Firm Assets Weighted Return Return (%) Weighted Return (%) (%) Period Period (millions) Dispersion (%) % of Firm Assets (billions) (%) (%) 2004* 7.33 7.49 6.98 1 5 NA 0.00 500 2005 16.04 5.27 13.72 1 82 NA 0.02 542 2006 5.88 9.07 3.74 1 239 NA 0.04 641 2007 18.48 11.81 16.11 11.15 8.60 1 408 NA 0.06 675 2008 -37.96 -38.44 -38.94 19.03 17.50 2 1,449 NA 0.32 452 2009 49.76 37.21 47.90 21.26 20.65 6 3,888 0.18 0.81 481 2010 15.34 16.71 13.06 23.09 22.94 6 3,647 0.27 0.71 514 Performance presented from November through December. No statistics are annualized. Composite created October 31, 2004. Benchmark returns are not covered by the Report of Independent Accountants. The 3-year annualized ex-post standard deviations are based on monthly returns, shown starting with the first full 3-year calendar period.The composites past performance is not necessarily an indication of how it will perform in the future. US-I, US-P (RU) 30
  32. 32. US Large Capitalization Select Growth Equity CompositeSupplemental performance information The UBS AG, New York Branch (“Advisor”) Large Cap Select Growth Equity Composite represented below is a composite of diversified accounts, representative of the Private Bank Investor Services Growth Equity Model, a portfolio run in accordance with the Large Cap Select Growth Model as provided by UBS Growth Investors and managed in a substantially similar manner to the UBS Global AM US Large Capitalization Select Growth Strategy. The Account Composite Performance was obtained from the records maintained by the Advisor. Please note that the Account Composite Performance is not the UBS Global AM Large Cap Select Growth Strategy’s own historical performance and should not be considered a substitute for it. The Account Composite Performance is not necessarily an indication of the UBS Global AM Large Cap Select Growth Strategy’s future performance.1. The presentation of historical investment performance sets forth the time-weighted rates of return (the “Returns”) of the Large Cap Growth Equity Composite (the “Composite”) of UBSNY. The performance results of the Composite represent the historical returns of all accounts managed by UBSNY (from February 1, 2000 to December 31, 2010) on a fully discretionary basis in accordance with the equity strategy described below. It should be noted that past performance may not be indicative of future results.2. UBSNY employs a long-term approach in managing a focused portfolio of high quality securities of US companies whose returns and earnings or cash flow growth prospects are above the average large capitalization company ($2.5 billion or larger). The investment strategy emphasizes stock selection with attention given to factor and sector exposures relative to the benchmark, the Russell 1000 Growth Index.3. The total rate of return for each of the time periods presented is equal to the change in the value of the Composite, including capital appreciation and depreciation, and dividend income, as a percentage of the beginning market value of the Composite, adjusted for the net of all contributions and withdrawals (the “cash flows”). The composite includes accounts where income received is withdrawn from the portfolio on a monthly basis in accordance with the client’s mandate.4. The rate of return is calculated on a “time-weighted” basis for all investments. The “time-weighted” rate of return minimizes the effect of cash flows on the investment performance of the Composite.5. The annual Composite total rate of return is derived by geometrically linking monthly total rates of return.6. The rates of return are after any trading expenses, and are presented gross of investment management fees. Generally, fees are charged quarterly in arrears and are based on the average of the month end market values. Performance is stated gross of fees. Performance figures would be lower if shown net of fees.7. Securities are valued at fair market value. Securities are valued using market quotations when readily available, provided such quotations adequately reflect, in the judgment of UBSNY, the fair value of the securities. Securities transactions are recorded on trade dates and income is recognized when earned. UBS AG NY Branch Large Cap Select Growth Equity Composite (February 1, 2000 through December 31, 2010) Amounts and returns expressed in USD Year Gross Asset-Weighted Return (%) Benchmark Return (%) Composite Market Value – end of Period 20001 (7.59) (18.61) $61,804,360 2001 (21.72) (20.42) 44,614,850 2002 (26.25) (27.88) 21,908,483 2003 32.52 29.75 34,412,470 2004 13.83 6.30 35,948,466 2005 15.90 5.26 59,188,543 2006 5.71 9.07 68,388,489 2007 18.66 11.82 25,332,283 2008 (38.20) (38.44) 37,292,897 2009 49.63 37.21 35,541,995 2010 15.44 16.71 41,910,509Note: Composite created February 1, 2000.The Attestation Report of Independent Accountants, available upon request, is based on procedures performed on the composite from February 1, 2000 through December 31, 2010.Benchmark returns are not covered by the Report of Independent Accountants. The composite’s past performance is not necessarily an indication of how it will perform in the future.1 Performance for the year 2000 is for the period from February 1 to December 31. US-I, US-P (RU) 31

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