Every time an Asian shops you benefit.

May 2011

UBS Asian Consumption Fund

Sophia Tang, Equity Strategist

STRICTLY CONFIDENTIALAsset Management

SECTION 1

Outlook

3

Transition to EM-led global economy

Source: Haver, Bloomberg, IMF, Morgan Stanley Research. Estimates from Morgan Stanley Global Economics Team

Real GDP Growth (%)

(4)

(2)

0

2

4

6

8

10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Industrialized EconomiesEmerging Market

The past ….

The future …. Real GDP Growth (%)2011-2015 (average)

0

2

4

6

8

Asia (ex. Japan) EM World US DM Euro area

Source: CEIC estimates & World Economic Outlook, IMF, UBS IB research and estimates as of Mar 2011

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EM, an increasingly significant contributor to global GDP

Share of Global GDP

Major EM economies projected to be 42% of global GDP by 2020

Notes: We assume share of “Others” remains constant at 5% of world GDP. The projections assume nominal GDP growth at potential real GDP growth and central banks inflation target. To compute FX for periods beyond 2010, we assume the normalization of REER over the forecasted period. Source: IMF, J.P. Morgan research as of December 2010

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Source: CEIC, UBS as of Apr 2011

Inflation a key risk

(4)

(2)

0

2

4

6

8

10

12

14

16

Feb-

98

Feb-

99

Feb-

00

Feb-

01

Feb-

02

Feb-

03

Feb-

04

Feb-

05

Feb-

06

Feb-

07

Feb-

08

Feb-

09

Feb-

10

Feb-

11

%y/y (2007 Nominal GDP weighted)

Asia inflation

Food inflation

Headline inflation

Coreinflation

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Central banks already exiting – to fight asset inflation Examples of policies

Source: J.P. Morgan estimates and research as of Nov 2010

Hong Kong Monetary Authority – Lower loan to value ratio

– Loan-to-valuation ratios for luxury property (more than HK$20 million) from 70 percent to 60 percent and tighten mortgage insurance criteria.

Reserve Bank of India – Higher provisioning

– RBI increased banks’ provisioning requirement for commercial real estate from 0.40 per cent to 1 per cent.

Korea – Higher taxes plus more supply

– Increase in ownership and capital gains taxes on owners of multiple homes

– More homes in southern Seoul and its satellite cities.

China – raised reserve requirement ratios; city level measures to regulate the property sector– Shanghai and Chongqing government have announced the respective local version of the Real

Estate Tax

– Beijing set a new target of 50% of land supply and new construction starts in 2010 for affordable housing (economic and price-cap housing).

Government of Singapore – To curb speculative activity in the residential property sector– Seller’s Stamp Duty: applicable to vendors of properties bought and sold within one year. Normal

stamp duty rates apply, with a tiered rate to 3%.

– Lowering the max LTV ratio from 90% to 80%: the LTV cap was raised in Aug 05 to 90% and banks currently charge a significantly higher rate on mortgages with a LTV above 80%. Less than 10% of mortgages are with LTVs in excess of 80%.

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Rate hikes, currency appreciation to mitigate inflation pressure

Asia ex Japan Policy rate (%)

Source: UBS IB research as of March 2011

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Jan

98

Jan

99

Jan

00

Jan

01

Jan

02

Jan

03

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Jan

10

Jan

11

Real rates

Nominal policy rates

Currencies (Dec 2009 – Mar 2011)1

1. Currencies indexed to Dec 2009 (RH chart)Source: Bloomberg, UBS Global Asset Management

95

100

105

110

115

Dec

-09

Ap

r-10

Jul-

10

Oct

-10

Feb

-11

Thailand

Indonesia

India

China

Malaysia

8

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0%

50%

100%

150%

2003

2004

2005

2006

2007

2008

2009

2010

E

2011

E

Asset Turnover Net Debt / Equity Net Margin

EM public, corporate and households debt levels are low

Public debt as % of GDP

Source: CLSA research as of April 2011. Data for 2009-2010

Asset turnover up, gearing down (ratios)

Source: UBS IB GEM Inc Workbook, UBS Global Asset Management

Consumer credit as % of GDP

Source: UBS IB research as of 2010

97%

78%71%

55%49%

39%

19% 17%10% 8%

0%

20%

40%

60%

80%

100%

U.S. Aus U.K TaiwanS'poreKorea Thai China India Indon

174%

116%

78%73%

62%58%

53%

35%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Japan Italy FranceGermanyU.K. U.S. Spain EM

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Asia ex Japan consumer sector valuations look attractive

Source: J.P.Morgan Quant Strategy as of Apr 2011

Markets have corrected on the back of macro concerns

PE Fwd to Mar 2011

SECTION 2

The Opportunity

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Every minute…

50 BABIES are born in India1

46 VISITORS arrive in China2

28 CHINESE RURAL DWELLERS migrate to the city3

Source: UBS Global Asset Management1 Estimated from 2008/2009 crude birth rate as provided by The World Bank 2 Based on number of visitor arrivals in 2008 as provided by the Nation Bureau of Statistics of China 3 Estimated from urban population in China from 2008 to 2009 as provided by The World Bank

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Asian Consumption – multi decade themeConsumption in Asia has been growing – and will continue to be so

Source: CLSA

Young population

More wealth

Urbanization More consumption

More debt

Low penetration of consumer goods

Asia Consumption Potential

Did you know?

One in four billionaires is now in Asia, up from one in ten in 2005

Greater China consumers will account for 44% of global luxury sales by 2020

Wine sales in Hong Kong rose 268% in 2010, making it arguably the world’s largest wine market

In India, only 17% of households have taken a mortgage loan

In Indonesia, 67% of households plan to buy a car in the next three years

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Young population => more consumersAsia accounts for 60% of world population, substantially younger than DM% of population aged 25 years and less

Source: UN population database, Merrill Lynch research as of July 2010Prediction, projection and forecast of economies or markets are not necessary indicative of future or likely performance of the UBS Asian Consumption Fund.

Expected addition (m) to working age population (15 – 64 age group) during 2010 – 2030

Source: United Nations Population Division estimates as of 2010

0

10

20

30

40

50

Asia U.S. France U.K. Spain Germany Japan

1818

-13-17

-48

24132

10

-100 -50 0 50 100 150 200 250 300

IndiaIndonesia

BrazilU.S.

ChinaJapanRussia

Europe

Expected addition of 283 mn working age population from IN, ID and CH by

2030

16x that from U.S.

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Urbanization => more economic activity => more consumption

Source: UN Population Statistics, GS Global ECS Research as of June 2010

Urbanisation ratio (%)

Much room for urbanization trend to continue in China, India, Indonesia

From…

To…

0

10

20

30

40

50

60

70

80

90

100

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

China Japan KoreaGermany US IndiaIndonesia

Japan(1962)

Korea(1972)

45%

India(2037E)

China, Indonesia (2010)

…leads to changes in culture & spending habits

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Low; 55%

Middle; 28%

Upper-Middle,

12%

High; 5%

Low; 30%

Middle; 31%

Upper-Middle,

24%

High; 15%

Low; 7%

Middle; 14%

Upper-Middle,

28%

High; 51%

Low; 62%

Middle; 28%

Upper-Middle,

5%

High; 2%

2005

Low; 49%

Middle; 35%

Upper-Middle,

13%

High; 4%

2010E

Low; 19%

Middle; 33%

Upper-Middle,

32%

High; 16%

2020E

Rising income levels => greater propensity to spend

E = Euromonitor estimates. Source: Euromonitor, Morgan Stanley Research as of Aug 2010

India: Income Pyramids

China: Income Pyramids

3x

2x

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Low penetration of consumer goods in Asia

Source: Ashwin Chotai, CEIC, CLSA Asia-Pacific Markets Apr 2010

Light vehicle ownership vs GDP per capita

0

100

200

300

400

500

600

700

800

0 10,000 20,000 30,000 40,000 50,000

Nominal GDP per capita (USD)

Light

vehic

le o

wner

ship

/ 1,

000

popula

tion

AustraliaNew Zealand

Taiwan

Malaysia

Singapore

Korea

Japan

Thailand

Hong KongIndonesia

China

Vietnam

IndiaPakistan

Philippines

PC Penetration (PCs per 1,000 population)

0

200

400

600

800

1000

US DevelopedEurope

Japan Worldwide Asia Pacific

Source: Gartner Data, Goldman Sachs Research March 2010

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0 0.5 1 1.5 2 2.5 3

Japan

USA

HK

Korea

Singapore

Taiwan

UK

Malaysia

Thailand

Philippines

China

India

Indonesia

0 10 20 30 40

China

Singapore

Hong Kong

India

Malaysia

Korea

Indonesia

Thailand

Australia

Taiwan

Japan

Philippines

USA

Increasing acceptance and accessibility to credit

Credit card per capita

2009 dataSource: CEIC, CLSA Asia-Pacific Markets as of April 2010

Household savings/disposable income

Household debt can grow from its current low base as receptivity to debt increases

SECTION 3

UBS Asian Consumption Fund

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Asian consumption companies with substantial business exposure to Asia

Non-Asian consumption companies with substantial business exposure to Asia

Non-Asian consumption companies with substantial business exposure outside Asia

Asian consumption companies with substantial business exposure outside Asia

How is UBS Asian Consumption Fund managed?A theme product rather than sector product

Note: Asia refers to Asia ex Japan

Business Exposure

Outside AsiaAsia

Dom

icile

Ou

tsid

e A

sia

Asia

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UBS Asian Consumption FundThe fund mainly invests in Asia ex Japan consumption companies with substantial business exposure to Asia

Includes: Food: e.g. ITC, Lotte Beverages: e.g. China Mengniu Dairy, Uni

President Agriculture: e.g. Olam Tobacco: e.g. British American Tobacco Consumables: e.g. Unilever

Includes Retail: e.g. Parkson Retail Autos: e.g. Honda, Tata Motors Media: e.g. Clear Media, Focus Media Gaming and hotels: e.g. Genting International Apparel: e.g. Giordano, Esprit, Ports Design

Includes Hospitals: e.g. Apollo hospital Pharmaceuticals: e.g. Sun Pharma Medical services: e.g. Mindray Medical

International

Note: This information should not be considered as a recommendation to purchase or sell any security.

Consumerstaples

(basic needs)

Consumerdiscretionary

(“good to have”)

Healthcare

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Luxury Spending Theme

Source: CEIC, CLSA Asia-Pacific Markets

Luxury market size and growth – by domestic spend

0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(CH

F)

China 23%

Japan 3%

Americas 5%

Europe 7%

Rest of World 11%

Example: China ZhengTong Auto ServicesCar dealer (and service) of premium brands

including BMW, MINI and Audi.

Note: This information should not be considered a recommendation to purchase or sell any security

Source: Bloomberg

6.06.57.07.58.08.59.09.5

10.0

12-10 01-11 02-11 03-11 04-11

China ZhengTongLast Price (HKD)

Example: Trinity (China) High end apparel

0.0

2.0

4.0

6.0

8.0

10.0

11-09 03-10 07-10 11-10 03-11

Trinity Last Price(HKD)

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Disciplined investment philosophy and process

Example: China Mengniu Dairy

Proven Investment Philosophy

Established Investment Process

Price/Intrinsic Value Philosophy

Identify significant market price to fair value discrepancies

Research: Long-term focus, deep industry knowledge

Risk control: Starts at the company level

2008 2009Source: Bloomberg

Milk Scandal

Sep 2008

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Consumer Staple stock example: ITC

Leading player in India’s cigarette market

Strong and resilient growth in cigarette market, especially in the higher end

– High consumer loyalty

Strong pricing power, ability to pass on tax increase

Extensive distribution network - >1.2mn outlets

Entrenched brand name in strong growth cigarette industry

Note: This information should not be considered a recommendation to purchase or sell any securitySource: Industry sources, IIFL research as of Dec 2010

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Japan U.S China World average Pakistan Nepal Sri Lanka Bangladesh India

Cigarette Consumption(Number of cigarettes per adult per year)

India’s cigarette per capita consumption is abysmal

Price (indexed from Mar 2008 to April 2011)

Source: Bloomberg

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1.0%

0.7%

1.3%

3.5%

4.0%

6.6%

6.8%

15.7%

15.8%

19.1%

25.7%

0.0%

0.5%

2.3%

7.6%

6.6%

5.4%

8.3%

29.5%

10.2%

10.7%

18.8%

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

Cash

Philippines

Thailand

Malaysia

Indonesia

Taiwan

Singapore

Korea

Hong Kong

India

China

Fund BM

UBS Asian ConsumptionCharacteristics and portfolio structure

Investment objective: Stocks of companies that are engaged in business activities of providing goods/services to Asian consumers.

Number of stocks: Concentrated portfolio with 30-60 stocks

Universe: Asia (ex Japan) stocks and other equity rights.

Benchmark: MSCI Asia ex Japan Consumer and Healthcare sectors*

* 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. Source: UBS Global Asset Management, 31 March 2011

Sector allocation Country allocation

10.7%

2.8%

48.9%

37.7%

0.0%

5.6%

62.5%

32.0%

0% 10% 20% 30% 40% 50% 60% 70%

Others

Health Care

Consumer

Discretionary

Consumer

Staples

UBS Asian Consumption (%) Benchmark (%)

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Performance since inception to 31 March 2011

40

60

80

100

120

140

160

Apr

-08

Jun-

08

Aug

-08

Oct

-08

Dec

-08

Feb-

09

Apr

-09

Jun-

09

Aug

-09

Oct

-09

Dec

-09

Feb-

10

Apr

-10

Jun-

10

Aug

-10

Oct

-10

Dec

-10

Feb

2011

Asia Consumption Composite MSCI Asia ex Japan Consumer and Healthcare sectors MSCI Asia ex Japan

Asian Consumption Composite: Performance

 YTD Mar

2011 2010 2009 2008*Since inception

(cumulative)Asia Consumption Composite -3.4% 22.2% 93.2% -38.3% 40.8%MSCI Asia ex Japan index 1.2% 19.6% 72.1% -47.8% 3.9%MSCI Asia ex Japan Consumer and Healthcare sectors** 0.9% 29.2% 88.6% -44.5% 35.5%Value added against MSCI Asia ex Japan index -4.6% 2.6% 21.1% 9.5% 36.9%Value added against MSCI Asia ex Japan Consumer and Healthcare sectors** -4.3% -7.0% 4.6% 6.2% 5.3%

       

Source: UBS Global Asset Management, Factset.*Strategy was incepted in 29 February 2008** 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. Based on Asian Consumption Fund (USD). 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 vehicle was 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.Please note that performance refers to the Asian Consumption Composite, which is not indicative of the future performance of UBS (Lux) Equity Fund – Asian Consumption USD/SGD P-acc. The manager of the UBS (Lux) Equity Fund – Asian Consumption USD/SGD P-acc will apply the same investment strategy, guidelines and objectives as those of the existing Asian Consumption Composite.

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Conclusion

Asia’s growth and consumption set to rise

Credible team, philosophy & process

Fund – Unique, proven track record

ACF for Asian Consumption Fund and for…

APPENDIX A

Investment philosophy and process

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Client portfolio

Risk systemAccurately quantify all portfolio risks

Portfolio teamWork as a team to challenge and implement best

research ideas

Global-Local Fundamental research70 – 80% of valued-added

…to create a single ´Optimal’ portfolio

Investment processDisciplined application of global fundamental research…

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Research drives results

Proven Investment Philosophy

Research with global and local perspectives

Common valuation process and system (GEVS)

Career analysts and PMs are ‘equals’

Established Investment Process

Remuneration linked to results

Analysts manage ‘real’ money

Experienced Investment Team

Sector portfolios = buy list

Comprehensive research database (Pedestal)

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Industry-leading risk system – GERS

Comprehensiverisk factors

Note: For illustrative purposes only. This information should not be considered a recommendation to purchase or sell any securitySource: GERS, UBS Global Asset Management, as at 1 March 2011

Highest conviction ideas

Industry and country risk factors that

mirror the way we manage regional

portfolios

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Distinctive investment philosophy & process

Intrinsic value is defined by the fundamentals which determine a security’s cash flows

Discrepancies between price and intrinsic value combined with market behaviour provide opportunities to add value

Overvalued

Price

Time

Intrinsicvalue

Undervalued

Price / intrinsic value is our only focus

Buy decisions Sell decisions

Declining alpha – price appreciation has reduced price/value discrepancy– Decrease / eliminate weight as security moves toward fair

value / becomes overvalued

– Fund new investment with sale of relatively less attractive holding

Thesis violation

High alpha – significant price/value discrepancy

Supporting industry analysis

Strong thesis on why we want to hold the stock

Portfolio weight is a function of:– Size of mispricing

– Degree of conviction

– Impact on risk

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Asia ex Japan Equities TeamA stable and experienced team. Avg investment experience ~14 years

Note: As of April 2011Source: UBS Global Asset Management

Part of a globally integrated team of over 100 analysts

Asia ex Japan Research Universe

Emerging AsiaAC Asia ex Japan Greater China Asian Consumption Asia 130-30

Geoffrey Wong

Head Asia Pacific Equities

Singapore / Hong Kong

Cheah Yit Mee

Portfolio Manager

Manish Modi

Portfolio Manager

Bin Shi

Portfolio Manager

Jimmy Chua

Head Trader

Choo Shou Pin

Analyst

Projit Chatterjee

Equity Strategist

Dorothy Lek

Trader

Sophia Tang

Equity Strategist

Han Yaw Juan

Trader

Chan Chee Seng

Analyst

Reginald Oh

Trader

Namit Nayegandhi

Analyst, Portfolio ManagerRoger Lum

Analyst

Matthew Adams

Analyst

Sanjeev Joshi

Analyst

Leslie Chow

Analyst

Hai Huang

Analyst

Paul Hillman

Trader

Joanna Mak

Analyst

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Why Asian consumption?

Sustainable growth story, both geographically and sector wise

Strong historical consumption growth

Young population and more consumers set the foundation for sustained domestic demand

Movement from villages to cities and associated increase in income will fuel consumption expenditure

Low penetration of consumer goods such as mobile phones, personal computers, etc. provides exponential growth opportunities

Low consumer debt levels – consumers are more inclined to use credit to fund purchases, creating a multiplier effect on consumption

Domestic Asian brands have become regional and are poised to develop into tomorrow’s global brands

APPENDIX B

Biographies

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Sophia Tang

Equity Strategist, Global Emerging Markets and Asia Pacific Equities, Director

Years of investment industry experience: 5

Education: Nanyang Technological University (Singapore), B Acc.

Sophia Tang is a member of the Global Emerging Markets and Asia Pacific Equities team, which is responsible for constructing and managing global emerging markets and Asia Equity portfolios.

Sophia has responsibility for communicating the above equity strategies to existing and prospective clients globally.

Prior to this, Sophia was a strategy project manager with UBS’s Wealth Management division in Singapore. In this role, Sophia developed business plans for market entry strategies, conducted product feasibility and market sizing studies.

Before joining UBS in 2006, Sophia was a consultant with several leading consultancy firms, including Boston Consulting Group, where she had extensive experience in strategic business development and project management.

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Namit Nayegandhi

Namit is a member of the Asia (ex-Japan) investment team, located in Singapore. As an analyst, he covers the regional consumer sector and is also Country Analyst for India focusing on Indian stocks in addition to some regional stocks. He is the Portfolio Manager for the Asian Consumption Fund and the India Country Fund.

Prior to joining UBS in February 2006, Namit spent three years in private wealth management with JM Morgan Stanley, one of the largest Investment Banks in India. Prior to that, Namit worked as a research analyst at ICICI Bank and was instrumental in setting up its private wealth investment advisory business. He started his career as a sell side analyst covering the consumer sector in India.

Research Analyst, Global Emerging Markets and Asia Pacific Equities, Executive Director

Years of investment industry experience: 13

Education: St. Xaviers College (India), BA; K J Somaiya Institute of Management Studies and Research (India), MBA

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Asian Consumption CompositeSchedule of composite performance

The composite's past performance is not necessarily an indication of how it will perform in the future.

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Disclaimer

UBS 2011. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

This document is for Professional Clients only. It is not to be distributed to or relied upon by Retail Clients under any circumstances.

This material supports the presentation(s) given. It is not intended to be read in isolation and may not provide a full explanation of all the topics that were presented and discussed. Care has been taken to ensure the accuracy of the content, but no responsibility is accepted for any errors or omissions.

Please note that past performance is not a guide to the future. The value of investments and the income from them may go down as well as up, and investors may not get back the original amount invested.

This document is a marketing communication. Any market or investment views expressed are not intended to be investment research. The document has not been prepared in line with the FSA requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

The information contained in this document should not be considered a recommendation to purchase or sell any particular security and the opinions expressed are those of UBS Global Asset Management and are subject to change without notice. Furthermore, there can be no assurance that any trends described in this document will continue or that forecasts will occur because economic and market conditions change frequently.

This document does not create any legal or contractual obligation with UBS Global Asset Management.

The recipient agrees that this information shall remain strictly confidential where it relates to the Investment Manager's business. The prior consent of UBS Global Asset Management (UK) Ltd should be obtained prior to the disclosure of commercially sensitive information to a third party (excluding the professional advisors of the recipient).

Information reasonably deemed to be commercially sensitive and obtained from UBS Global Asset Management (UK) Ltd should not be disclosed. This information is supplied with a reasonable expectation that it will not be made public. If you receive a request under the Freedom of Information Act 2000 for information obtained from UBS Global Asset Management (UK) Ltd we ask that you consult with us. We also request that any information obtained from UBS Global Asset Management (UK) Ltd in your possession is destroyed as soon as it is no longer required.