Monthly Investment Guide

Portfolio Advisory Group May 2010

Private Wealth Management C:\DPS NEW\Pres\PPT\PresPrint.pot Contributors

Members of the PWM Portfolio Advisory Group

Anthony Roth Head, PWM Portfolio Advisory Group

Richard Hollmann, CFA® Senior Portfolio Construction Specialist

Ronald Colonna, CFA® Senior Portfolio Construction Specialist

Christian Capasso Business Analyst

Andrea Fisher Business Analyst

Sujata Hingorani Business Manager

UBS Wealth Management Americas Investment Committee

Stephen Freedman, CFA® Global Investment Strategist, Wealth Management Research-Americas (WMR-A)

Simeon Hyman, CFA® Head, Investment Strategy and Manager Research, Investment Solutions

Anthony Roth Head, PWM Portfolio Advisory Group

Michael Ryan, CFA® Head, WMR-A, Chair

Jeremy Zirin, CFA® Head, Equities, WMR-A

CFA® is a trademark owned by the CFA Institute.

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PWM Portfolio Advisory Group Introduction Monthly Investment Guide

The Private Wealth Management Portfolio Advisory Group (PWM PAG) is pleased to provide our valued clients the May 2010 Monthly Investment Guide. The Guide sets out key economic and market data from the past month and offers forward-looking UBS views over a wide range of market and investment areas. Unless otherwise noted, all opinions, projections and forecasts found within this Guide are taken from research conducted and published by UBS Wealth Management Research-Americas. All strategic asset allocation models included have been developed by UBS Investment Solutions, a business sector within UBS Wealth Management Americas that develops research-based traditional investments (e.g., managed accounts and mutual fund offerings) and alternative strategies (e.g., hedge funds, private equity and real estate) offered to UBS clients. The tactical asset allocation models presented reflect the strategic asset allocation models overlayed with the tactical shifts that have been identified by the UBS Wealth Management Americas Investment Committee (WMA-IC), which is made up of members from various business groups within UBS Wealth Management Americas. The short- and long-term investment ideas reflect the views of PWM PAG and UBS Wealth Management Americas product areas. For more information on the composition of the UBS Wealth Management Americas Investment Committee, please see the previous page. In publishing this Guide, PWM PAG intends to provide a general framework to assist our clients in making informed investment decisions. Specifically, the current strategic and tactical asset allocation models respectively reflect the short- to-medium- and long-term views on an asset-class level of various business groups within UBS Wealth Management Americas. In providing these models, we have differentiated among investors whose net portfolio withdrawals exceed 5% of portfolio value from those whose withdrawals do not. With respect to the latter group of clients, the models included reflect a higher allocation to illiquid asset classes, which seek to align with the clients' reduced liquidity needs. Please note that the asset allocation models are current as of the date shown, but that UBS Wealth Management Americas revises these models as warranted. In the context of making actual investment decisions, clients should work with their Private Wealth Advisors to customize their portfolios to meet their unique financial and life circumstances, taking into account age, risk tolerance, financial commitments and short-term liquidity needs. In addition, each UBS program, product or service is subject to specific eligibility and suitability requirements, each of which must be met in order for a client to invest. Implementing or changing an investment strategy may result in incurring gains or losses for income tax purposes. Neither UBS Financial Services Inc., nor any of its employees, provides tax or legal advice. We encourage all investors to consult qualified tax and legal counsel where appropriate, particularly before undertaking any investment in a product that may use leverage, options, derivatives or other complex financial structures. Finally, nothing contained herein should be construed as an offer to sell or as a solicitation of an offer to buy securities or other investments identified. Unless otherwise noted, all information in the Monthly Investment Guide, including allocations, is as of May 10, 2010.

Important Information It is important that you understand the ways in which we conduct business and the applicable laws and regulations that govern us. As a firm providing wealth management services to clients, we are registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser and a broker-dealer, offering both investment advisory and brokerage services. Though there are similarities among these services, the investment advisory programs and brokerage accounts we offer are separate and distinct, differ in material ways and are governed by different laws and separate contracts. It is important that you carefully read the agreements and disclosures that we provide to you about the products or services we offer. While we strive to ensure the nature of our services is clear in the materials we publish, if at any time you seek clarification on the nature of your accounts or the services you receive, please speak with your Private Wealth Advisor. For more information, please visit our website at www.ubs.com/workingwithus.

2 C:\DPS NEW\Pres\PPT\PresPrint.pot Table of Contents & Editorial

Global Outlook 4 Modern Greece: Oedipus Redux

Economic and 6 As chaos ensued in Athens amidst last week's deadly riots, the prophecy foretold by the market of a Greek default looked more imminent than ever. The demonstrations in the Market Snapshot shadows of the Acropolis protesting the proposed austerity measures coincided with the credit default swap (CDS) spread for Greek debt reaching a new record high of over 850 basis Monthly Spotlight: 10 points. At the same time, as concerns of contagion broadened, Spain's CDS spread surpassed MLPs its previous high-water mark by rising above 225 basis points.

Strategic and 12 Last week's events – and notwithstanding the broader Eurozone rescue package – Tactical Asset demonstrated that the situation in Greece has yet to stabilize. Recent market activity reflects Allocation Models the increasing possibility of an eventual Greek default, and the country's funding costs have spiked, essentially precluding Greece from further tapping global credit markets to fund its ongoing spending needs. In response, Greece, in collaboration with the European Union (E.U.) Tactical Allocation 16 and International Monetary Fund (IMF), has, in fits and starts, worked hard to put together an Summary alternative funding plan. Ironically, these efforts seem to have only increased the potential of Greece defaulting on its debt, as the EUR 110 billion aid package which resulted should only Short- and 18 suffice to cover Greek funding requirements through 2010. Long-Term Investment Ideas The fact that Eurozone participants have now expanded the scope of the rescue effort to all Eurozone countries does little to improve the shaky structural fundamentals that lie at the Important 24 heart of the problem. As intended, the roughly US $1 trillion package of loan, guarantee and liquidity measures has provided immediate relief to recent punishing anti-euro market Information and behavior and thus, at least in the short term, seems to have halted the contagion to the Glossary sovereign debt markets of other Eurozone countries. But the long-term viability of the Eurozone remains very much in question for several reasons. First, there is concern that the net-funders of the program, in particular Germany, may experience an acute political and legal backlash as the details of the program become known. Second, will the austerity measures required of the net-recipients of the program trigger merely tolerable levels of social unrest? Third, will these measures – namely, fiscal austerity coupled with the creation of additional public debt of up to US $1 trillion – stall European GDP recovery?

On a macro level, Greece indeed represents a microcosm of fiscal challenges that broadly afflict the Eurozone and the developed world overall. We expect long-term structural problems, like ballooning public debt levels and high unemployment, to continue to disrupt market momentum attributable to cyclical tailwinds. Therefore, on the heels of the recent run- up in risk assets coupled with heightened volatility, we are placing a greater emphasis on shielding rather than creating wealth. In this regard, we are now employing strategies discussed in recent versions of this publication, such as collars and put spreads, to hedge asset values.

Anthony Roth Head, Private Wealth Management Portfolio Advisory Group UBS Wealth Management Americas

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PWM Portfolio Advisory Group Global Outlook Monthly Investment Guide

Economic Summary Consumer spending, The U.S. economy grew at a 3.2% annual rate in the first quarter, a slightly lower-than- which represents expected clip. This deceleration of GDP expansion was partially a result of slower export 70% of economic growth and a spike in imports relative to last quarter. On a positive note, consumer spending activity, rose rose 3.6%, more than double the previous quarter's rate, and comprised nearly 80% of 1Q significantly in 1Q GDP growth. Citing high unemployment and low inflation, the Federal Reserve maintained its policy stance The Fed reiterated to keep interest rates low "for an extended period" at its meeting on April 28. While the that interest rates Fed's language did not materially change from recent meetings, the overall tone regarding will remain low for the strength of the economic recovery was more upbeat as the Fed noted the pick-up in "an extended consumer and business spending. Although the Fed pointed out that labor markets remain period" challenged, its description of the overall job market struck a more positive tenor.

The Eurozone The Conference Board's April consumer confidence report reached its highest point since support package August 2009, beating consensus estimates as consumers' outlook for the labor market includes a loan became more optimistic. The number of respondents citing favorable labor conditions pledge funded by increased to its highest level since April 2009. The key expectations component also rose, E.U. members forecasting a positive trend in consumer spending growth that correlates with the recent improvement in retail sales. through a special purpose vehicle Labor markets showed modest signs of healing in April, as evidenced by weekly jobless claims falling slightly after recently trending upward and private hiring surging to levels not seen in over three years. Overall unemployment, however, rose to 9.9%. Economic Outlook

While the U.S. The combination of increased manufacturing activity, a rebound in consumer spending and recovery continues modest improvements in the housing and labor markets signals that the U.S. is settling into a to gain steam, long-term sustainable economic expansion. However, the lingering effects of the credit crisis several risks remain, on consumers and the financial sector should result in a relatively restrained expansion, fueled mostly by a restocking of inventories and increased business spending. UBS WMR recently including the slightly reduced its forecast for 2010 GDP growth to 3.2%, while maintaining its 3.0% potential impact of forecast for 2011. financial reform and the growing fiscal As long as the economy continues to operate below capacity, we expect inflation fears to be crises in Europe kept at bay. Thus, we maintain the belief that when the FOMC begins to raise the Fed funds rate, it will do so gradually. Before the initial rate hike occurs, the first signs of a shift away from the extraordinarily accommodative monetary policy will come in the form of a removal Excess slack in the or winding down of current stimulus measures such as the homebuyers' tax credit, which economy has eased expired on April 30. A gradual withdrawal of excess liquidity in the system is likely to follow inflation fears these actions. While the slow pace of tightening is apt to keep short-term rates low, longer- term interest rates should continue to move higher as business spending accelerates and government borrowing needs increase. Changing economic conditions could accelerate or Greek fiscal delay FOMC action, however. problems run deep as wage and price Whereas the economic revival in the U.S. appears stable, Greece's fiscal predicament and increases in the attendant contagion to other EU countries have threatened the Eurozone's recovery. S&P has country have well downgraded Greece's sovereign debt to junk status; the downgrading of Portugal's and outpaced those Spain's sovereign debt has further fueled fears of contagion throughout the region. In throughout the response, E.U. policymakers cobbled together a comprehensive relief package to support the euro and the fiscally-distressed member nations. While these actions should bring short-term region relief to the Eurozone, the details are yet to emerge and it is premature to judge the long- term implications for the region.

Source: Economic Outlook immediately above reflects the views and opinions expressed in the UBS Wealth Management Research (WMR) Investment Strategy Guide as of Apr. 28, 2010. 4 C:\DPS NEW\Pres\PPT\PresPrint.pot Global Outlook

Market Summary Value stocks Despite Greece's ongoing fiscal issues and the SEC investigation into Goldman Sachs leading continue to to a market pullback in the final week of April, equity markets remained positive for the outperform growth month on the back of strong corporate earnings. The S&P gained 1.6% and is now up over stocks 7% year-to-date. Mid- and small-cap stocks continued to lead the rally as the Russell Mid-Cap Index rose 3.8% and the Russell 2000 gained 5.7%. While European The lack of a clear plan to aid Greece continued to weigh on European markets. The MSCI markets have Europe Index fell 3.1% and is down over 5% for the year. The MSCI EAFE Index was also faltered, Japanese negative, returning -2.1% in April. The MSCI Emerging Markets Index rose 1.0%. equities have been U.S. bond markets posted strong gains in April. The Barclays Aggregate Index gained 1.0% providing strong while the Barclays Muni Bond Index rose 1.2%. The Barclays U.S. Aggregate High Yield Index returns year-to-date continued to rally, returning 2.3%. Outside the U.S., the J.P. Morgan Non-U.S. Dollar Index fell 0.3%. Market Outlook Aggressive cost Another surprisingly strong earnings season has neared its conclusion, with corporate profits cutting and well exceeding consensus expectations. Quarterly profits of those companies which have improved business reported thus far have increased nearly 50% year-over-year. While corporate earnings have prospects have been impressive overall, not all sectors have participated. A disproportionate percentage of the helped fuel companies beating expectations have been concentrated in the technology and financial corporate earnings sectors, highlighting our view that market behavior will be less directional in 2010 and that investors should focus on specific opportunities within individual sectors and regions. As the focus shifts While corporate earnings have yet again surprised to the upside, UBS WMR maintains a toward a measured neutral weight to equity markets for several reasons. First, the sharp rally has pushed removal of excess valuations near fair value, leaving additional price appreciation to be dependent on future liquidity, the earnings growth exceeding expectations. Second, accommodative policy measures are starting "reflation" rally that to be unwound, removing a tailwind for risk assets. Last, earnings and economic expectations lifted risk assets has are rising, leaving greater room for disappointments that could lead to periodic pull-backs. run its course Within equity markets, we have increased our overweight to emerging markets while reducing our weighting to the Eurozone. In emerging markets, fears of continued monetary tightening have led to a deceleration of returns to date. In our view, these measures are prudent given Despite a wide- the rapid growth occurring within emerging markets, and we therefore feel that the negative ranging relief market reaction is likely to be temporary. In the midst of cyclical economic expansion in these package, many markets and reasonable stock valuations, we believe that the equities of emerging markets Eurozone countries present the most attractive investment opportunity relative to those of other regions. Fiscal face a long road crises within the Eurozone have lead us to remain cautious on equities within the region ahead in solving despite current attractive valuations. While E.U. policymakers finally agreed upon a wide- their fiscal budgets ranging aid package intended to fend off a debt contagion crisis, the details of the package as well as the lasting effects on the economy are still to be determined. In any case, we expect funding costs and growth prospects across the E.U. will continue to be impacted by fiscal challenges. Financial sector reform and recent Within the U.S., we maintain our overweights to large- and mid-caps relative to small-caps SEC investigations while continuing to slightly favor growth over value stocks. At the sector level, UBS WMR have increased the increased energy's overweight and maintained its technology and financial overweights. risk related to We continue to have an above-benchmark allocation to credit sensitive sectors within U.S. corporate bonds fixed income. With both investment grade and high yield corporate spreads having moved of financial sector closer to long-term averages, returns are likely to be muted but are still poised to outperform issuers rate-sensitive areas of the market, such as Treasuries and agencies. Our expectations for rising Treasury yields lead us to maintain our duration underweight. We favor 2- to 7-year maturities for Treasuries, agencies and corporates and 7- to 12-year maturities for municipals.

Source: Market Outlook immediately above reflects the views and opinions expressed in the UBS Wealth Management Research (WMR) Investment Strategy Guide as of Apr. 28, 2010. 5 C:\DPS NEW\Pres\PPT\PresPrint.pot

PWM Portfolio Advisory Group Economic Snapshot Monthly Investment Guide

U.S. Economic Forecasts GDP Growth and Inflation Forecasts

UBS WMR GDP Growth Inflation f f expects the In % 2007 2008 2009 2010 2011 In % 09 10f 11f 09 10f 11f unemployment World -1.1 3.8 3.8 1.5 2.6 2.8 rate to decline Real GDP 2.1 0.4 -2.4 3.2 3.0 slightly in 2011 U.S. -2.4 3.2 3.0 -0.3 1.6 1.5 CPI 2.9 3.8 -0.3 1.6 1.5 Canada -2.6 3.2 3.5 0.3 1.5 1.9

Unemploy- Japan -5.2 2.0 1.4 -1.4 -1.6 -0.2 Given the fiscal ment 4.6 5.8 9.3 9.6 9.5 Eurozone -4.0 1.5 2.2 0.2 1.2 1.4 concerns in Fed Funds Greece, we expect (year-end) 5.0 1.9 0.2 0.5 2.0 China 8.7 10.0 8.7 -0.7 3.0 4.0 the Eurozone 10-Yr Switzerland -1.5 2.5 2.1 -0.5 1.3 1.5 recovery to lag Treasury those of other (annual avg.) 4.6 3.7 3.9 4.5 n/a regions

f: Forecast. Source: UBS WMR Forecast Tables, as of f: Forecast. Source: UBS WMR Forecast Tables, as of May 3, 2010 May 3, 2010

Debt-to-GDP Projections GDP Components and Growth 400 8% q/q annualized UBS WMR We expect the forecasts 6% debt-to-GDP ratios 350 Simulation

of developed 4% economies to rise 300 over the next two 2% decades 250 0%

200 -2%

150 -4% Consumption is beginning to rise 100 -6% and thus become -8% a larger 50 component of -10% 0 GDP growth 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Consumption Commercial real estate investment US EMU UK Japan Capital expenditures Residential investment Inventories Net Exports Government Real GDP (q/q annualized) Source: OECD and UBS WMR as of Apr. 15, 2010 Source: Thomson Financial and UBS WMR, as of Apr. 27, 2010

6 C:\DPS NEW\Pres\PPT\PresPrint.pot Economic Snapshot

CPI Is Less Volatile Than Gold Volatility Index (VIX)

Gold has exhibited 150 90 high volatility relative to the 130 80 VIX levels are close inflation rate 110 their 10-year 70 90 average 60 70 50 50 40 30 30 10 The VIX measures -10 20 expected equity market volatility -30 10 and is often used -50 0 as a measure of Jan-71 Jan-81 Jan-91 Jan-01 Jan-11 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 CBOE Market Volatility Index - Price Index investor sentiment Gold y/y Inflation rate (AVG) CBOE Market Volatility Index - Price Index

Source: Federal Reserve Economic Data, Bloomberg, Source: FactSet, as of May 6, 2010 UBS WMR, as of Apr. 15, 2010

Treasury Yields Growth Shifts Beyond the G-7 UBS WMR forecasts 80% Treasury yields to 7.0 WMR Forecast rise over the next 70% twelve months 6.0

60% 5.0 50% 4.0 40% 3.0 30% We expect 2.0 20% emerging markets 1.0 to continue to drive 10% growth 0.0 0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 1970 1975 1980 1985 1990 1995 2000 2005 2009 2-year Treasury note G-7 EmergingEmerging markets markets 10-year Treasury note Source: Bloomberg and UBS WMR, as of Apr. 27, 2010 Source: UBS WMR, as of Apr. 27, 2010

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Market Snapshot PWM Portfolio Advisory Group as of April 30, 2010 Monthly Investment Guide

Returns Returns Asset Class Asset Class

Trailing Trailing 1 Month YTD 12 Mos 1 Month YTD 12 Mos

U.S. Equity Indexes Alternative Investments

U.S. value stocks S&P 500 1.58 7.05 38.84 HFRI Fund Wgt. 1.29 3.79 19.80 outperformed Composite Russell 1000 Growth 1.12 5.81 38.16 growth in April HFRI Fund of Funds 0.98 2.48 12.63 Index Russell 1000 Value 2.59 9.55 42.28 Cambridge U.S. Pvt 6.241 7.432 -8.942 Russell Mid-Cap 2.97 10.87 46.95 Equity Index Growth TASS Index of CTAs3 7.11 3.51 -4.48 Grains and base Russell Mid-Cap Value 4.50 14.55 54.39 metals were the Commodity Indexes top commodity Russell Small-Cap 4.20 12.13 45.20 DJIA Commodities 1.95 -3.18 21.98 gainers in April Growth Index Russell Small-Cap Value 7.00 17.72 52.44 Energy 2.40 -6.08 16.11

Crude Oil 3.31 6.90 43.69 Non-U.S. Equity Precious Metals 6.02 8.50 36.79 European equities MSCI EAFE -2.10 -1.88 30.80 continued their Grains 6.08 -10.90 -9.67 MSCI Europe -3.10 -5.36 29.40 decline as the Base Metals -3.22 2.70 61.14 fiscal crises MSCI Japan -0.20 7.11 23.49 intensified MSCI Emerging 0.96 3.09 53.91 Markets Currency Prices Spot Price 1 Mo. UBS WMR Fixed Income % U 12 Mo. Forecast Barclays Aggregate 1.04 2.84 8.30 High yield bonds U.S. Dollar Index 81.991 0.98 -3.25 10-Year Treasury 0.96 2.96 2.85 continued to gain EUR | USD 1.33 -1.73 0.34 traction Barclays Muni Bond 1.21 2.48 8.85 GBP | USD 1.53 0.91 3.30 Index USD | CAD 1.01 -0.17 -14.75

Barclays U.S. High Yield 2.34 7.07 42.58 USD | CHF 1.08 2.42 -5.35 Index USD | JPY 94.01 0.61 -4.45 JP Morgan Non-U.S. -0.33 -2.26 7.30 USD | CNY 6.83 -0.01 0.03 Dollar 1Cambridge U.S. Pvt Equity is a quarterly index, one month Real Estate return is represented by the Q3 2009 return 2Data as of Sept. 30, 2009 NAREIT 6.58 16.79 65.63 3Data as of Apr. 30, 2010

Source: Cambridge Associates LLC, Russell Investments, MSCI Barra, Hedge Fund Research, REIT.com from NAREIT, Bloomberg, S&P.

8 C:\DPS NEW\Pres\PPT\PresPrint.pot Market Snapshot

U.S. Equity: S&P Sector Performance S&P Q1 Results Earnings (%) We favor the Trailing 12 60% Sector MTD YTD Mos technology, 50% energy and Financials 1.3% 12.3% 49.6% financial sectors Info. Tech. 1.8% 3.5% 42.0% 40% Healthcare -3.9% -1.1% 27.7% Industrials 4.1% 17.1% 49.1% 30% Financials have Cons. Disc. 6.0% 16.7% 49.4% 20% been driving Q1 Energy 4.4% 4.5% 26.2% earnings higher Cons. Staples -1.6% 3.4% 25.8% 10% Telecom -1.4% -7.0% 2.0% Utilities 2.4% -2.3% 17.9% 0% Materials 0.4% 2.8% 33.5% Care Discr. Health Health Energy Staples Utilities Telecom Materials Financials Industrials Consumer Consumer Technology Source: FactSet, as of Apr. 30, 2010 Source: Factset and UBS WMR, as of Apr. 26, 2010

Hedge Fund Research, Inc. Returns Sovereign Risk CDS Spreads

Distressed funds 1,200 have outperformed Equity Hedge year-to-date 1,000 Distressed

800 Event Driven 600 Relative ` Value The lack of a clear 400 resolution to the Fund Greek crises has of Funds increased fears of 200 contagion within Macro the Eurozone 0 0% 1% 2% 3% 4% 5% 6% 7% Jan 10 Feb 10 Mar 10 Apr 10 May 10 YTD MTD Greece Portugal Ireland Spain Source: Hedge Fund Research, as of Apr. 30, 2010 Source: Bloomberg and UBS WMR, as of Apr. 26, 2010

9 C:\DPS NEW\Pres\PPT\PresPrint.pot Monthly Spotlight PWM Portfolio Advisory Group Master Limited Partnerships Monthly Investment Guide

MLPs have experienced significant gains since we last discussed the Figure 1: Price Performance of MLPs sector in our May 2009 Monthly Spotlight, surging nearly 50.0% as MLPs have relatively outperformed the S&P 500 in measured by the Alerian MLP Price Index. Given the importance of the past few years, with the exception of 2007 80 the yield component of total return in today's non-directional markets, we continue to believe that the combination of competitive 60 yields, improving fundamentals and inherent tax-deferral advantages 40

offered by MLPs presents an attractive investment opportunity. 20 Indeed, among higher income-producing asset classes, only high yield bonds currently offer greater yields, yet without the aforementioned 0 tax-deferral advantages. We therefore recommend that income- -20 seeking investors who are willing to accept equity-like volatility - and -40

are also seeking the associated appreciation potential - build selective -60 2007 2008 2009 YTD exposure to larger, diversified MLPs. S&P 500 - Total Return Alerian MLP Barclays Capital US Aggregate S&P GSCI Total Return Overview of the Sector Source: FactSet as of Apr. 30, 2010. MLPs are limited partnerships that issue investment units which are listed on public exchanges. Similar to fixed income, MLPs trade based Figure 2: Yield Spreads on their current yield and generate significant cash flow through The MLP yield spread over 10-Year U.S. Treasuries quarterly distributions. Generally, at least 70% of cash distributions is now closer to historical norms. to individual investors are tax-deferred, with this portion treated as a 16.00

return of capital which thus reduces the investor's tax basis. Deferred 14.00

taxes are not realized until the unit is sold. 12.00

While MLPs are involved in the transportation of oil and natural gas, 10.00 they have historically demonstrated reduced volatility and low 8.00 correlations relative to traditional commodity investments (see Figures 3, 4). MLPs are generally not strongly affected by fluctuations in 6.00 natural gas and crude oil prices; accordingly, they are far less 4.00 influenced by short-term shocks in the space. 2.00

Rather, key risks to the MLP sector, which can manifest in heightened 0.00 price volatility, center around access to and the cost of capital to fund growth projects. During the credit crisis, MLPs' dependency on third- Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 party funding left the asset class particularly vulnerable at the peak of Source:Source: FactSet FactSetAverage asSpread as ofof Apr. Apr. 30,30, 2010.2010. MLPSpread spreads above are based on a basket of 23 currently traded MLPs from the capital market turmoil, with many unable to obtain affordable 12/2001-3/2010. financing, if any at all. A change to the existing, favorable regulatory environment also poses risk to the MLP space. The Obama Figure 3: Rolling Volatility Administration's review of existing tax law could conceivably lead to Rolling 12-month volatility, 5/2000 - 4/2010 proposed reform that could eliminate these tax benefits. 100 Current State Over the past year, much improved access to capital markets, 80 investors taking advantage of attractive valuations due to short-term price dislocations, and increased commodity demand provided strong 60 tailwinds for MLP investors (see Figure 1). Following the impressive rally, the sector is now fairly valued, as measured by the yield spread 40 over 10-year U.S. Treasuries (see Figure 2). As such, unit prices are currently more vulnerable to volatility. In addition, yield spreads 20 between lower and higher risk MLPs have converged due to investors

increasingly seeking higher yields. This has rendered higher yielding '01 '02 '03 '04 '05 '06 '07 '08 '09 Alerian MLP S&P 500 - Total Return MLPs relatively less attractive. S&P GSCI Total Return S&P GSCI Crude Oil Total Return S&P GSCI Natural Gas Total Return Source: FactSet as of Apr. 30, 2010. 5/2000-4/2010

Source: This material reflects the views and opinions expressed in the UBS Investment Bank MLP Insight as of Apr. 21, 2010. The information stated on pages 10 and 11 is the result of analysis completed by UBS Portfolio Advisory Group. 10 C:\DPS NEW\Pres\PPT\PresPrint.pot Monthly Spotlight Master Limited Partnerships

Outlook and Opportunity Despite reduced price appreciation prospects, we maintain our Figure 4: Correlation Matrix positive outlook based on competitive yields and constructive long- Though in the energy business, MLPs do not term fundamentals. exhibit much correlation with commodities Attractive Yields - MLPs continue to present compelling cash 1 2 3 4 5 6

distribution yields, with most ranging between 6% and 8%. While 1. Alerian MLP 1.00 0.39 0.23 0.02 0.58 0.21 current costs of capital have risen, likely hindering future growth Index prospects, we still expect yields of 7% and distribution growth of 2. S&P 500 0.39 1.00 0.23 -0.05 0.66 0.17 approximately 5%, which in our view should support low double- 3. S&P GSCI Total digit annual returns. Growth in distribution rates is particularly 0.23 0.23 1.00 0.02 0.24 0.98 Return important as it provides investors with the prospect of a larger cash 4. Barclays US flow cushion to offset unit price volatility in the face of inflation and 0.02 -0.05 0.02 1.00 0.18 0.01 Agg. rising interest rates (see Figure 5). In addition, the slated increase in 5. Barclays U.S. 0.58 0.66 0.24 0.18 1.00 0.18 U.S. tax rates may serve as a tailwind for MLP prices as demand Agg. - High Yield 6. S&P GSCI grows for tax-advantaged investments that offer solid income. 0.21 0.17 0.98 0.01 0.18 1.00 Energy TR Fundamentals - Most MLPs currently maintain healthy balance Source: FactSet as of Apr. 30, 2010. For informational sheets and have taken advantage of recently improved market purposes only. Correlation matrix above is based on conditions to raise capital. This bodes well for these MLPs since they monthly returns between 5/2000-4/2010. depend on the ability to finance a pipeline of projects to grow cash distributions. Further, we expect broader demand for domestically- sourced natural resources, like shale, gas and oil, will provide MLPs with a constant stream of project growth for the foreseeable future. Figure 5: MLP Price Performance and 10-Year Implementation Options Treasury Yields In our view, investors should focus on larger, diversified partnerships 400 7 that have strong underlying business fundamentals. MLPs can present 350 significant company-specific risk and, consequently, we recommend 6 that clients gain exposure to MLPs through active management. 300 There are three primary ways to invest in MLPs: separately managed 5 accounts, closed-end funds and exchange-traded notes. 250 4 For larger investments (>$500k), a separately managed account will 200 typically offer a more attractive cost structure. On the other hand, 3 closed-end funds offer simplified tax reporting, though income 150 streams are taxed twice - at the fund and investor level. High 2 associated fees can also reduce yield, which most closed-end funds 100

attempt to replace by employing leverage. 50 1 Like closed-end funds, MLP ETNs are convenient from a tax '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 Alerian MLP - Price Index (Left) perspective, since variable coupons are reported on Form 1099s, US Treasury Constant Maturity - 10 Year - Yield (Right) which eliminate the administrative burden associated with K-1's. In Source: FactSet as of Apr. 30, 2010. addition, ETNs possess other benefits such as low expenses and no leverage, which can provide reduced price volatility. It is important to note that ETNs are subject to issuer credit risk; distributions are taxed at marginal income tax rates and therefore do not benefit from deferred income advantages. Conclusion While a significant run-up in the sector during 2009 has dampened price appreciation potential, we nonetheless believe that the MLP space continues to present attractive opportunities for equity investors seeking high tax-advantaged income. It is important to note that since the taxation of MLPs can be complex, investors should consult with a qualified tax advisor prior to investing. Source: This material reflects the views and opinions expressed in the UBS Investment Bank MLP Insight as of Apr. 21, 2010. The information stated on pages 10 and 11 is the result of analysis completed by UBS Portfolio Advisory Group. 11 Private Wealth Management C:\DPS NEW\Pres\PPT\PresPrint.pot PWM Portfolio Advisory Group Asset Allocation Models Monthly Investment Guide

Portfolios with net Conservative Mod Cons ModerateGrowth Aggressive Asset Class consumption >5% StrategicTactical StrategicTactical StrategicTactical StrategicTactical Strategic Tactical with Equity 19.0 19.0 33.5 35.0 0.0 41.5 43.0 50.0 52.0 58.0 60.5 0.0 non-traditional U.S. Equity 14.0 14.5 0.5 24.0 25.0 29.0 29.5 34.0 34.5 40.0 41.0 Large Growth 5.5 6.0 9.0 10.0 10.0 11.5 9.5 11.5 9.5 12.0 asset classes Large Value 8.5 8.5 0.5 9.0 9.5 10.0 10.5 9.5 9.5 9.5 10.0 Mid Growth 0.0 0.0 2.0 2.5 2.5 3.0 3.5 4.0 4.5 5.0 Mid Value 0.0 0.0 2.0 2.0 2.5 2.5 3.5 4.0 4.5 5.0 We have increased Small Growth 0.0 0.0 1.0 0.5 1.0 0.0 2.0 1.0 3.0 1.5 our overweight to Small Value 0.0 0.0 1.0 0.5 1.0 0.0 2.0 0.5 3.0 1.5 Convertibles 0.0 0.0 0.0 0.0 2.0 2.0 4.0 4.0 6.0 6.0 emerging market Non-U.S. Equity 5.0 4.5 -0.5 9.5 10.0 12.5 13.5 16.0 17.5 18.0 19.5 equities Developed Equity 5.0 4.5 -0.5 9.5 8.0 -1.0 10.5 8.5 -1.0 12.5 10.0 -1.0 13.5 10.5 -1.5 Emerging Equity 0.0 0.0 0.0 2.0 1.0 2.0 5.0 1.0 3.5 7.5 1.0 4.5 9.0 1.5 Fixed Income 67.0 66.0 48.0 47.0 38.0 36.5 25.0 23.0 11.5 9.0 U.S. Fixed Income 67.0 66.0 48.0 47.0 38.0 36.5 25.0 23.0 11.5 9.0 We continue to U.S. Tax Exempt 67.0 59.0 48.0 41.5 35.0 29.5 20.0 15.0 6.5 3.0 favor high yield and Fixed Income U.S. Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 investment grade Securities credit within fixed Investment Grade 0.0 4.0 0.0 3.0 0.0 2.0 0.0 1.5 0.0 0.5 High Yield 0.0 3.0 0.0 2.5 3.0 5.0 5.0 6.5 5.0 5.5 income Non-U.S. Fixed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Income Developed Fixed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 income Emerging Market 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fixed Income Non-Traditional 12.0 13.5 16.5 17.0 18.5 20.0 23.0 24.5 28.5 30.5 We prefer tactical Asset Classes trading hedge fund Hedge Funds 9.0 9.0 9.0 9.0 10.0 10.0 13.0 13.0 15.0 15.0 Tactical Trading 1.0 1.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 strategies (Macro, CTA) Relative Value (Arb. Strategies ex-Merger 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Arb, Equity Market Neutral) Credit Strategies (Hedged Credit, 2.0 2.0 2.0 2.0 2.0 2.0 3.0 3.0 3.0 3.0 Distressed) Event Driven (Merg Arb, Special 2.0 1.5 2.0 1.5 2.0 1.5 2.0 1.5 3.0 2.5 Situations) Equity Hedge 2.0 2.0 2.0 2.0 2.0 2.0 3.0 3.0 3.0 3.0 (Long/Short) Private Equity 0.0 0.0 2.0 2.0 2.0 2.0 2.0 2.0 3.0 3.0 LBO (Secondaries) 0.0 0.0 2.0 2.0 2.0 2.0 1.0 1.0 1.0 1.0 We maintain our Venture Capital 0.0 0.0 0.0 0.0 0.0 0.0 1.0 1.0 2.0 2.0 overweight to Real Estate 0.0 0.0 1.5 0.0 1.5 0.0 4.0 2.0 4.5 2.0 Public Real Estate 0.0 0.0 1.5 0.0 1.5 0.0 2.0 0.0 2.5 0.0 commodities (REITS) Private Real Estate 0.0 0.0 0.0 0.0 0.0 0.0 2.0 2.0 2.0 2.0 Commodities 3.0 4.5 4.0 6.0 5.0 8.0 4.0 7.5 6.0 10.5 Cash 2.0 1.5 2.0 1.0 2.0 0.5 2.0 0.5 2.0 0.0

Strategic Asset Allocation Estimated Hypothetical Portfolio Analytics Conservative Mod Cons Moderate Growth Aggressive

Estimated Return 5.59% 6.76% 7.40% 8.26% 9.05%

Estimated Standard 5.23% 7.32% 8.71% 10.42% 12.18% Deviation

Estimated Sharpe Ratio 0.30 0.38 0.39 0.41 0.42

Numbers in green/red indicate a positive/negative change, in percentage, of allocation to any asset class on a tactical level since previous month's asset allocation table. Source: Asset allocation models are current as of May 10, 2010. See page entitled Important Information: UBS Strategic and Tactical Asset Allocation Models for information regarding how the models are developed. Estimated hypothetical portfolio analytics are based on UBS's estimated returns and standard deviations and are calculated by weighting the return assumptions for each asset class in the same proportion as that shown in the respective strategic asset allocation model. See page entitled Important Information: Portfolio Analytics for a more detailed explanation. 12 Private Wealth Management C:\DPS NEW\Pres\PPT\PresPrint.pot Asset Allocation Models

Portfolios with net Conservative Mod Cons Moderate Growth Aggressive Asset Class consumption <5% StrategicTactical StrategicTactical StrategicTactical StrategicTactical Strategic Tactical with Equity 17.0 17.0 30.5 32.0 0.0 35.5 37.0 0.0 42.0 43.0 0.0 48.5 48.5 non-traditional U.S. Equity 13.0 13.5 0.5 22.0 23.0 25.0 25.5 30.0 29.5 34.0 32.5 Large Growth 5.0 5.5 8.0 9.0 8.0 9.5 8.0 9.5 8.0 9.5 asset classes Large Value 8.0 8.0 0.5 8.08.58.08.58.08.08.08.0 Mid Growth 0.0 0.0 2.0 2.5 2.0 2.5 3.0 3.5 3.5 4.0 Mid Value 0.0 0.0 2.0 2.0 2.0 2.0 3.0 3.5 3.5 4.0 We have increased Small Growth 0.0 0.0 1.0 0.5 1.5 0.5 2.0 0.5 3.0 1.0 our overweight to Small Value 0.00.01.00.51.50.52.00.53.01.0 Convertibles 0.0 0.0 0.0 0.0 2.0 2.0 4.0 4.0 5.0 5.0 emerging market Non-U.S. Equity 4.0 3.5 -0.5 8.5 9.0 10.5 11.5 12.0 13.5 14.5 16.0 equities Developed Equity 4.0 3.5 -0.5 7.5 6.0 -1.0 8.5 6.5 -1.0 9.0 6.5 -1.0 11.0 8.0 -1.5 Emerging Equity 0.0 0.0 1.0 3.0 1.0 2.0 5.0 1.0 3.0 7.0 1.0 3.5 8.0 1.5 Fixed Income 67.0 66.0 48.0 47.0 37.0 35.5 25.0 23.0 10.5 8.0 U.S. Fixed Income 67.0 66.0 48.0 47.0 37.0 35.5 25.0 23.0 10.5 8.0 U.S. Tax Exempt 67.0 59.0 48.0 41.5 34.5 29.0 21.5 16.5 8.0 4.5 We continue to Fixed Income U.S. Government favor high yield and 0.00.00.00.00.00.00.00.00.00.0 Securities investment grade Investment Grade 0.0 4.0 0.0 3.0 0.0 2.0 0.0 1.5 0.0 0.5 credit within fixed High Yield 0.0 3.0 0.0 2.5 2.5 4.5 3.5 5.0 2.5 3.0 Non-U.S. Fixed 0.00.00.00.00.00.00.00.00.00.0 income Income Developed Fixed 0.00.00.00.00.00.00.00.00.00.0 income Emerging Market 0.00.00.00.00.00.00.00.00.00.0 Fixed Income Non-Traditional 14.0 15.5 20.5 21.0 26.5 27.5 32.0 34.0 40.0 43.5 We prefer tactical Asset Classes Hedge Funds 9.0 9.0 10.0 10.0 12.0 12.0 15.0 15.0 19.0 19.0 trading hedge fund Tactical Trading 2.02.52.02.53.03.54.04.55.05.5 strategies (Macro, CTA) Relative Value (Arb Strategies ex-Merger 2.02.02.02.02.02.02.02.02.02.0 Arb, Equity Market Neutral) Credit Strategies (Hedged Credit, 1.01.02.02.02.02.02.52.54.04.0 Distressed) Event Driven (Merg Arb, Special 2.01.52.01.52.01.52.52.03.02.5 Situations) Equity Hedge 2.02.02.02.03.03.04.04.05.05.0 (Long/Short) Private Equity 2.0 2.0 3.0 3.0 6.0 6.0 9.0 9.0 11.5 11.5 We maintain our LBO (Secondaries) 2.0 2.0 3.0 3.0 4.0 4.0 5.0 5.0 6.5 6.5 Venture Capital 0.0 0.0 0.0 0.0 2.0 2.0 4.0 4.0 5.0 5.0 overweight to Real Estate 0.00.03.52.03.52.04.03.04.54.5 Public Real Estate commodities 0.00.01.50.01.50.01.00.00.00.0 (REITS) Private Real Estate 0.0 0.0 2.0 2.0 2.0 2.0 3.0 3.0 4.5 4.5 Commodities 3.04.54.06.05.07.54.07.05.08.5 Cash 2.01.51.00.01.00.01.00.01.00.0

Strategic Asset Allocation Estimated Hypothetical Portfolio Analytics Conservative Mod Cons Moderate Growth Aggressive

Estimated Return 5.57% 6.81% 7.52% 8.32% 9.18%

Estimated Standard 5.24% 7.21% 8.58% 10.13% 11.67% Deviation

Estimated Sharpe Ratio 0.30 0.39 0.41 0.43 0.44

Numbers in green/red indicate a positive/negative change, in percentage, of allocation to any asset class on a tactical level since previous month's asset allocation table. Source: Asset allocation models are current as of May 10, 2010. See page entitled Important Information: UBS Strategic and Tactical Asset Allocation Models for information regarding how the models are developed. Estimated hypothetical portfolio analytics are based on UBS's estimated returns and standard deviations and are calculated by weighting the return assumptions for each asset class in the same proportion as that shown in the respective strategic asset allocation model. See page entitled Important Information: Portfolio Analytics for a more detailed explanation. 13 Private Wealth Management C:\DPS NEW\Pres\PPT\PresPrint.pot PWM Portfolio Advisory Group Asset Allocation Models Monthly Investment Guide

Without Conservative Mod Cons Moderate Growth Aggressive Asset Class alternative StrategicTactical StrategicTactical StrategicTactical StrategicTactical Strategic Tactical investments1 Equity 22.0 23.0 39.0 42.0 50.0 54.0 61.0 66.0 77.0 83.0 U.S. Equity 16.0 17.0 0.5 28.0 29.5 35.0 37.0 42.0 44.5 53.0 56.0 We have increased Large Growth 6.5 7.5 0.5 10.0 11.5 12.0 14.0 12.0 15.0 13.0 16.0 Large Value 9.5 9.5 10.0 10.5 12.0 13.0 12.0 13.0 13.0 14.5 our overweight to Mid Growth 0.0 0.0 2.5 3.0 3.0 3.5 4.5 5.0 6.5 7.5 emerging market Mid Value 0.0 0.0 2.5 2.5 3.0 3.5 4.5 5.0 6.5 7.0 equities Small Growth 0.0 0.0 1.5 1.0 1.5 0.5 2.5 1.5 4.0 2.5 Small Value 0.0 0.0 1.5 1.0 1.5 0.5 2.5 1.0 4.0 2.5 Convertibles 0.0 0.0 0.0 0.0 2.0 2.0 4.0 4.0 6.0 6.0 Non-U.S. Equity 6.0 6.0 -0.5 11.0 12.5 15.0 17.0 19.0 21.5 24.0 27.0 Developed Equity 6.0 6.0 -0.5 9.5 8.5 -1.0 12.5 11.5 -1.0 15.0 13.5 -1.5 18.0 16.5 -1.5 Emerging Equity 0.0 0.0 1.5 4.0 1.0 2.5 5.5 1.0 4.0 8.0 1.5 6.0 10.5 1.5 Fixed Income 76.0 75.5 57.5 56.5 46.0 45.0 33.0 31.5 15.0 13.5 U.S. Fixed Income 76.0 75.5 57.5 56.5 46.0 45.0 33.0 31.5 15.0 13.5 We continue to U.S. Tax Exempt 76.0 68.5 57.5 51.0 43.5 38.5 28.0 24.0 10.0 6.5 favor high yield and Fixed Income U.S. Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 investment grade Securities credit within fixed Investment Grade 0.0 4.0 0.0 3.0 0.0 2.0 0.0 1.5 0.0 1.0 High Yield 0.0 3.0 0.0 2.5 2.5 4.5 5.0 6.0 5.0 6.0 income Non-U.S. Fixed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Income Developed Fixed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 income Emerging Market 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fixed Income Non-Traditional 0.0 0.0 1.5 0.0 2.0 0.0 4.0 1.5 6.0 3.0 Asset Classes We remain Real Estate 0.0 0.0 1.5 0.0 2.0 0.0 4.0 1.5 6.0 3.0 Public Real Estate underweight REITs 0.0 0.0 1.5 0.0 2.0 0.0 4.0 1.5 6.0 3.0 (REITS) Cash 2.0 1.5 2.0 1.5 2.0 1.0 2.0 1.0 2.0 0.5

Strategic Asset Allocation Estimated Hypothetical Portfolio Analytics Conservative Mod Cons Moderate Growth Aggressive

Estimated Return 5.08% 6.26% 7.00% 7.90% 9.03%

Estimated Standard 5.43% 7.51% 9.18% 11.35% 14.33% Deviation

Estimated Sharpe Ratio 0.20 0.30 0.33 0.34 0.35

Numbers in green/red indicate a positive/negative change, in percentage, of allocation to any asset class on a tactical level since previous month's asset allocation table.

1Alternative investments referenced above include hedge funds, private equity, private real estate and commodities. Source: Asset allocation models are current as of May 10, 2010. See page entitled Important Information: UBS Strategic and Tactical Asset Allocation Models for information regarding how the models are developed. Estimated hypothetical portfolio analytics are based on UBS's estimated returns and standard deviations and are calculated by weighting the return assumptions for each asset class in the same proportion as that shown in the respective strategic asset allocation model. See page entitled Important Information: Portfolio Analytics for a more detailed explanation. 14 Private Wealth Management C:\DPS NEW\Pres\PPT\PresPrint.pot Asset Allocation Models

Tax-exempt Conservative Mod Cons Moderate Growth Aggressive Asset Class entities StrategicTactical StrategicTactical StrategicTactical StrategicTactical Strategic Tactical Equity 17.0 17.0 30.5 32.0 35.5 37.0 42.0 43.0 48.5 48.5 U.S. Equity 13.0 13.5 0.5 22.0 23.0 25.0 25.5 30.0 29.5 34.0 32.5 We have increased Large Growth 5.0 5.5 8.0 9.0 8.0 9.5 8.0 9.0 8.0 9.5 Large Value 8.0 8.0 0.5 8.0 8.5 8.0 8.5 8.0 8.5 8.0 8.0 our overweight to Mid Growth 0.0 0.0 2.0 2.5 2.0 2.5 3.0 3.5 3.5 4.0 emerging market Mid Value 0.0 0.0 2.0 2.0 2.0 2.0 3.0 3.5 3.5 4.0 Small Growth 0.0 0.0 1.0 0.5 1.5 0.5 2.0 0.5 3.0 1.0 equities Small Value 0.0 0.0 1.0 0.5 1.5 0.5 2.0 0.5 3.0 1.0 Convertibles 0.0 0.0 0.0 0.0 2.0 2.0 4.0 4.0 5.0 5.0 Non-U.S. Equity 4.0 3.5 -0.5 8.5 9.0 10.5 11.5 12.0 13.5 14.5 16.0 Developed Equity 4.0 3.5 -0.5 7.5 6.0 -1.0 8.5 6.5 -1.0 9.0 6.5 -1.0 11.0 8.0 -1.5 Emerging Equity 0.0 0.0 1.0 3.0 2.0 5.0 3.0 7.0 3.5 8.0 We continue to 1.0 1.0 1.0 1.5 Fixed Income 67.0 66.0 48.0 47.0 37.0 35.5 25.0 23.0 10.5 8.0 favor high yield and U.S. Fixed Income 59.0 58.5 40.0 39.5 29.0 28.5 20.0 19.0 8.0 7.0 U.S. Government investment grade 47.0 32.5 24.0 12.0 17.0 8.0 7.5 1.0 0.0 0.0 Securities credit within fixed Investment Grade 12.0 19.0 10.0 15.5 7.0 11.0 7.5 10.0 5.5 4.5 income High Yield 0.0 7.0 6.0 12.0 5.0 9.5 5.0 8.0 2.5 2.5 Non-U.S. Fixed 8.0 7.5 8.0 7.5 8.0 7.0 5.0 4.0 2.5 1.0 Income Developed Fixed 8.0 7.5 8.0 7.5 8.0 7.0 5.0 4.0 2.5 1.0 income Emerging Market 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fixed Income Non-Traditional 14.0 15.5 20.5 21.0 26.5 27.5 32.0 34.0 40.0 43.5 We prefer tactical Asset Classes trading hedge fund Hedge Funds 9.0 9.0 10.0 10.0 12.0 12.0 15.0 15.0 19.0 19.0 Tactical Trading 2.0 2.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 strategies (Macro, CTA) Relative Value (Arb Strategies ex-Merger 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Arb, Equity Market Neutral) Credit Strategies (Hedged Credit, 1.0 1.0 2.0 2.0 2.0 2.0 2.5 2.5 4.0 4.0 Distressed) Event Driven (Merg Arb, Special 2.0 1.5 2.0 1.5 2.0 1.5 2.5 2.0 3.0 2.5 Situations) Equity Hedge 2.0 2.0 2.0 2.0 3.0 3.0 4.0 4.0 5.0 5.0 (Long/Short) We maintain our Private Equity 2.0 2.0 3.0 3.0 6.0 6.0 9.0 9.0 11.5 11.5 overweight to LBO (Secondaries) 2.0 2.0 3.0 3.0 4.0 4.0 5.0 5.0 6.5 6.5 Venture Capital 0.0 0.0 0.0 0.0 2.0 2.0 4.0 4.0 5.0 5.0 commodities Real Estate 0.0 0.0 3.5 2.0 3.5 2.0 4.0 3.0 4.5 4.5 Public Real Estate 0.0 0.0 1.5 0.0 1.5 0.0 1.0 0.0 0.0 0.0 (REITS) Private Real Estate 0.0 0.0 2.0 2.0 2.0 2.0 3.0 3.0 4.5 4.5 Commodities 3.0 4.5 4.0 6.0 5.0 7.5 4.0 7.0 5.0 8.5 Cash 2.0 1.5 1.0 0.0 1.0 0.0 1.0 0.0 1.0 0.0

Strategic Asset Allocation Estimated Hypothetical Portfolio Analytics Conservative Mod Cons Moderate Growth Aggressive

Estimated Return 6.18% 7.40% 7.94% 8.58% 9.27%

Estimated Standard 5.10% 7.59% 8.81% 10.27% 11.69% Deviation

Estimated Sharpe Ratio 0.43 0.45 0.45 0.51 0.45

PWM Portfolio Advisory Group Tactical Allocation Summary Monthly Investment Guide

Asset Class Tactical View

U.S. Equities Moderate ♦ While equity valuations appear more attractive in Europe, the cyclical picture favors U.S. markets. Overweight ♦ Equities are trading at fair value and are supported by strong earnings growth. ♦ Positive corporate earnings exceeded analyst expectations in 1Q and can be attributed to aggressive cost cutting, increased business spending and rebounding revenue. ♦ Preference for U.S. mid-cap over small-cap and growth over value, as well as select sectors, notably technology, energy and financials. ♦ Recommend dollar cost averaging when entering equity markets. Investors need to balance long-term potential with the possibility of further market volatility.* Non-U.S. Developed Equity Moderate ♦ Eurozone continues to lag in its recovery relative to the U.S. and Asia-ex Japan. Underweight ♦ Greece's fiscal concerns will likely keep the euro under pressure, and fears of a broader financial contagion have risen resulting in a tactical downgrade for the Eurozone region. ♦ Remain moderate underweight Japan on a relative basis as we are concerned that the yen may come under pressure in the next few months. Emerging Markets Equity Overweight ♦ With fewer structural challenges and superior growth prospects, emerging markets (EMs) remain an attractive investment opportunity over the medium and long term. ♦ EMs have historically outperformed developed markets when the global economy enters a cyclical recovery. ♦ Current EM equity valuations are fairly valued, in our opinion. ♦ We expect weakness on the heels of recent monetary tightening to be temporary as we view these measures to be prudent steps to preserve long-term growth. ♦ This year's underperformance by EM equities has presented a relatively attractive investment opportunity, leading UBS WMR to upgrade the region. U.S. Convertibles Neutral ♦ Risks remain for short-term volatility and selling pressure, although this pressure has abated recently. ♦ In general, convertible bonds offer investors diversification benefits over a full market cycle. ♦ Issuance trends remain favorable. U.S. Municipals Moderate ♦ Increased Build America Bond issuance and recent ratings recalibration strategies by Moody’s and Fitch have Underweight been key drivers of municipal strong performance. BABs may be suitable for income buyers with long-term horizons. ♦ Tight tax-exempt supply and the prospects for higher tax rates continue to support municipal prices. ♦ Moderate underweight stance inferred from the combination of spread compression and attractive relative opportunities available within investment grade and high yield corporates. ♦ We favor 7- to 12-year maturities as well as defensive sectors, such as pre-refunded, essential purpose revenue in the water/sewer and public utility sectors, general obligation and special tax bonds. U.S. Government Securities Underweight ♦ Even without a major pick-up in inflation, we believe that Treasury yields will rise as the recovery takes hold. ♦ Treasury valuations remain unattractive relative to other parts of the fixed income market, as they are most exposed to any re-pricing due to inflation risk. ♦ Underweight TIPS since we expect real yields to edge higher along with nominal yields, which would hurt price performance of longer maturity TIPS. ♦ In terms of a long-term strategic position, we believe that TIPS with 5- to 10-year maturities hold value. Investment Grade Corporates Moderate ♦ Investment grade corporate bond fundamentals are positive as companies have participated in debt reduction Overweight efforts and maintained strong balance sheets. ♦ Recommend 'BBB'-rated bonds across all sectors since we feel that they present the best relative value and offer greater yield opportunity at only modestly higher levels of risk. ♦ Prefer bonds with emerging markets exposure to help alleviate concerns over rising interest rates. ♦ Favor shorter-dated bonds (3- to 7-yr maturities), which can outperform in a rising rate environment.

Asset Class Tactical View

High Yield Fixed Income Moderate ♦ High yield markets continue to benefit from high investor demand and an improved default outlook as Overweight WMR predicts default rates to drop. ♦ Still favor high yield over investment grade due to more attractive relative yields. ♦ High yield bonds may offer some protection against rising Treasury rates over the next year. Non-U.S. Fixed Income Neutral ♦ Fiscal sustainability in Greece and other EU nations such as Portugal and Spain has become a concern for European markets and growth prospects, lowering consumer and business confidence. ♦ Moderate underweight stance on European bond markets and Japan, and neutral on the U.K. Within emerging markets, we prefer Brazilian, Chilean, Hungarian, Indonesian, and Russian bonds. ♦ We also recommend exposure to commodity currencies in the form of sovereign bonds. Hedge Funds* Neutral ♦ Neutral relative value: Within fixed income, less capital is committed to chasing more persistent anomalies, allowing ample trading opportunities. Sufficiently high volatility enables managers to use less leverage for the same return. ♦ Neutral long/short equity: Managers are showing increased risk appetite by expanding gross and net exposure when opportunities dictate. Total market- and sector-level stock dispersion has reached long-term levels. ♦ Moderate overweight tactical trading: Imbalances between economies or long-term changes in consumption patterns can trigger potentially large flows between regions and asset classes. Thus, opportunities for discretionary trading appear strong across currencies, fixed income, equities and commodities. The overall macroeconomic uncertainty should continue to provide sufficient volatility in the markets to present a range of investment opportunities. ♦ Moderate underweight event driven: 2010 deal activity is forecasted to be more robust than last year. Access to capital, lower volatility in equity markets and increased optimism for company management could contribute to an uptick in deal activity. Improving company valuations could enhance the importance of stock deals. Strategic buyers are expected to be more active than private equity sponsors, although high yield financing is now more available and leveraged loans may also provide a source of funding. ♦ Neutral credit strategies: Asset prices are reflecting attractive IRRs. Distressed and credit long/short should benefit from an abundance of opportunities. Market technicals continue to drive the argument behind spreads grinding tighter in 2010; however, we would argue that technicals are getting a bit ahead of fundamentals. There is need for some caution with directional credit-oriented strategies. Private Equity* Neutral ♦ Favor distressed funds due to longer investment horizons, current valuations and the need of many corporations to adjust balance sheets. ♦ Somewhat restrictive lending likely to limit activity in the LBO market, particularly affecting mega buyouts. ♦ Current environment favors secondary funds, which provide transparency and flexibility in choosing deals. Real Estate* Moderate ♦ Stabilizing commercial property values and an increase in risk appetite has helped drive gains within the real Underweight estate market. ♦ Although REITs have recently benefitted, we currently view them as having unattractive valuations, poor relative earnings momentum trends and challenging fundamentals. ♦ Over $1 trillion of debt is set to mature over the next three years, putting further pressure on homeowners. Commodities* Overweight ♦ Maintain our overweight to commodities as demand remains solid and we believe that prices should continue to rise given the global cyclical recovery. ♦ Growth in emerging markets and inventory restocking in developed markets should underpin demand. ♦ Commodities could act as an attractive hedge against future inflationary concerns in the markets as well as protect against potential long-term depreciation of the U.S. dollar. ♦ Recommend increasing allocations to crude oil and select base metals, precious metals and soft commodities. ♦ Debt fears have increased physical demand for gold, which should support prices in the coming quarters.

Source: UBS Wealth Management Americas Investment Committee as expressed in the UBS WMR Investment Strategy Guide, as of Apr. 28, 2010. See page entitled Important Information: UBS Strategic and Tactical Asset Allocation Models. Please note tactical views represent the tactical positioning for the overall allocation model. *See page entitled Important Information: Investment Risks – Non-Traditional Asset Classes. 17 Short- and Long-Term C:\DPS NEW\Pres\PPT\PresPrint.pot PWM Portfolio Advisory Group Investment Ideas Monthly Investment Guide Short-Term Investment Ideas Possible Principal Recommendation Rationale Implementation Investment Risks Status1 Financial Sector ♦ Steady, sustainable economic ♦ ETFs linked to the ♦ Financial reform risk UPDATED growth should support further financial sector ♦ Credit losses widen 05/10/10 outperformance of both banks and ♦ For stock selections: ♦ Currently steep yield diversified financials by leading to See UBS WMR Top 25 curve levels off lower provisioning and stronger Stock List and UBS loan growth WMR outperform-rated ♦ Valuations remain at attractive stocks levels ♦ Asset quality continues to improve more than expected, and first quarter earnings were very strong ♦ Net interest margins should be a positive for banks given the steepness of the yield curve and a Federal Reserve which appears committed to keeping short rates low for an extended period of time Energy Sector ♦ We deem the energy equity sector ♦ ETFs and structured ♦ Commodity price UPDATED as attractive based on crude oil products linked to the weakness and volatility 05/10/10 outlook; UBS WMR forecasts oil energy sector ♦ Decreasing demand for prices to average $85 per barrel in ♦ Futures contracts natural resources 2010 and believes that oil prices ♦ Basket of individual ♦ Structured products have will fluctuate between USD 90 and energy stocks issuer credit risk 100 during 2Q ♦ UBS WMR ♦ Uptick in industrial activity and overweighted stocks stabilizing U.S. crude oil inventories should propel prices higher ♦ Favor oil-oriented names in the energy sector ♦ China and India exhibit strong demand for coal, which should lead to price acceleration ♦ Sector should benefit from relatively stronger global growth prospects outside U.S., as foreign sales are a key driver at about 50% of total sales

1See description of Status on page 23. See page 23 for sources and disclosures on Short- and Long-Term Investment Ideas. 18 Short- and Long-Term C:\DPS NEW\Pres\PPT\PresPrint.pot Investment Ideas Short-Term Investment Ideas (Continued) Possible Principal Recommendation Rationale Implementation Investment Risks Status1 Technology Sector ♦ Tech corporate balance sheets ♦ ETFs linked to the ♦ Recession fears return, UPDATED appear to be healthy, and access to technology sector further deteriorating 05/10/10 credit for large companies has ♦ Mutual funds consumer and corporate significantly improved ♦ Basket of individual spending ♦ During recession, many companies technology stocks cut back on IT, creating pent-up ♦ UBS WMR demand for productivity-enhancing overweighted stocks tech products given the recovery in the corporate profit cycle ♦ High exposure to emerging markets ♦ Expect consumer appetite for higher priced electronics to improve ♦ Sector's P/E multiple is at one of its lowest levels since the 1990s Investment Grade ♦ After price rebound, yields are now ♦ Focus on 'BBB'-rated ♦ Credit conditions worsen, UPDATED Corporates much less compelling, and the bonds in non-financial causing spreads to widen 05/10/10 segment has reached full valuation sectors ♦ Financial reform risk ♦ We believe investment grade in ♦ For investors with ♦ Interest rate risk select segments ('BBB'-rated bonds greater risk tolerance, in non-financial sectors) still presents recommend U.S. a solid alternative to most other fixed dollar-denominated income sectors emerging market ♦ Bonds with emerging markets bonds and U.S. exposure often offer more attractive company bonds with yields and may protect against rising emerging markets interest rates exposure ♦ As we have returned to a more ♦ UBS WMR target normalized spread range, investors maturity range is 3-7 will need to be aware of idiosyncratic years risk and choose carefully in this ♦ Investors may also environment want to consider Build America Bonds as a possible alternative to corporate bonds Preferred Securities ♦ Favor higher-coupon fixed rate and ♦ Active managers ♦ Fixed income instruments UPDATED floating-rate preferred issues to (mutual funds/SMAs) may be subject to call risk, 05/10/10 mitigate interest rate risk focused on preferreds interest rate risk, ♦ Higher-coupon preferreds provide a ♦ UBS WMR attractively reinvestment risk, buffer to help absorb price loss rated preferreds credit/event risk and call stemming from higher Treasury ♦ Reduce exposure to provisions yields low coupon preferreds ♦ Preferred securities exhibit ♦ Recommend reducing exposure to of strong credits – "equity-like" low coupon preferreds of strong consider Build characteristics relative to credits due to high interest rate price America Bonds to bonds and other fixed risk of this category – consider Build replace income income securities America Bonds to replace income ♦ Market risk due to long duration should interest rates move higher ♦ Financial reform risk

1See description of Status on page 23. See page 23 for sources and disclosures on Short- and Long-Term Investment Ideas. 19 Short- and Long-Term C:\DPS NEW\Pres\PPT\PresPrint.pot PWM Portfolio Advisory Group Investment Ideas Monthly Investment Guide Short-Term Investment Ideas (Continued) Possible Principal Recommendation Rationale Implementation Investment Risks Status1 Large-Cap Growth ♦ Expect large-cap growth to ♦ Active large-cap ♦ Equity market pullback UPDATED Stocks continue to outperform large-cap growth managers 05/10/10 value stocks in 2010 (mutual funds/SMAs) ♦ Our equity sector views, notably our ♦ ETFs overweight to technology, support ♦ UBS WMR a preference for growth recommended growth ♦ More favorable valuations for stocks growth over value stocks ♦ Recommend large-cap stocks that are globally oriented and derive a greater proportion of revenue from emerging markets ♦ Large-cap earnings trends remain strong, supported by more aggressive cost cutting and EM exposure Broad Commodities ♦ Markets continue to benefit from ♦ ETFs, ETNs and ♦ Commodity price UPDATED the global recovery structured products weakness and volatility 05/10/10 ♦ Increase in global demand, linked to commodities ♦ Slower demand than especially from the restocking of ♦ Mutual funds and expected from fast-growing and resource-intensive active managers developed and emerging economies in 2010 emerging markets ♦ Select energy and agricultural ♦ Structured products and commodities stand to benefit the ETNs have issuer credit most from growth expectations risk ♦ UBS WMR favors crude oil, gold, corn, coal, nickel, copper, unleaded gas, heating oil, coffee and cotton ♦ In our view, gold is attractive at or below USD 1140/oz Emerging Markets ♦ With fewer structural challenges ♦ ETFs and ETNs with ♦ Currency volatility UPDATED Exposure and superior growth prospects, exposure to UBS WMR ♦ Abrupt changes in 05/10/10 emerging markets (EMs) remain, in preferred countries cost of capital and the our opinion, an attractive ♦ Mutual funds economic growth investment opportunity outlook ♦ Bonds with EM exposure offer more ♦ Socio-political risk attractive yields and may protect ♦ Country-specific risk against rising interest rates ♦ Counterparty and credit ♦ UBS WMR prefers Chinese, Polish, risks involved with ETNs Russian and Indian equities and Brazilian, Chilean, Hungarian, Indonesian and Russian bonds ♦ Although monetary tightening in some EMs has led to market jitters this year, we think that these policy steps actually make the expansion in the underlying economies more sustainable ♦ This year's underperformance by EM equities has presented an attractive opportunity

1See description of Status on page 23. See page 23 for sources and disclosures on Short- and Long-Term Investment Ideas.

20 Short- and Long-Term C:\DPS NEW\Pres\PPT\PresPrint.pot Investment Ideas Short-Term Investment Ideas (Continued) Possible Principal Recommendation Rationale Implementation Investment Risks Status1 Agricultural ♦ Select agricultural commodities ♦ ETFs and ETNs linked to ♦ Commodity price UPDATED Commodities present an opportunity in 2010 as agricultural weakness and volatility 04/12/10 we expect support from demand commodities ♦ Slower demand than growth and a renewed market ♦ UBS WMR expected focus on the scarcity of resources overweighted stocks ♦ ETNs have issuer credit ♦ Coffee inventories have continued risk to decline, and with current cheap prices, we think that conditions are set for supply disappointments ♦ Corn should be supported by Chinese food demand as well as demand for ethanol

High Yield Bonds ♦ Improving fundamentals in credit ♦ Higher beta, cyclical ♦ Heightened credit risk UPDATED markets support taking on more names for individual ♦ Issuers' financial 04/12/10 credit risk, and high yield bonds bonds conditions can weaken may outperform if credit spreads ♦ High yield money further until they are continue to tighten on favorable managers, mutual unable to service their economic news and better funds and ETFs debt obligations corporate results ♦ Concentration risk ♦ The incremental yield offered by ♦ Greater need for high yield bonds affords some portfolio monitoring protection against rising Treasury and review rates over the next year ♦ Interest rate risk ♦ Increased evidence of the economic recovery and improved outlook for high yield defaults Mid-Cap Stocks ♦ Mid-caps should benefit both from ♦ Stocks: ♦ Equity market pullback OPENED an investor shift to higher-quality -Please see UBS WMR 04/12/10 stocks as well as a pick-up in M&A Top 25 Stock List and activity UBS WMR Sector ♦ As the U.S. economy improves Outperform Lists relative to other global regions, ♦ Separately managed mid-caps, which have less global accounts exposure than large-caps, continue to perform well ♦ The dollar rally has been beneficial to mid-caps ♦ We prefer mid-caps over small-caps as the former are of higher quality and M&A may spike up the capitalization spectrum. Smaller companies are also likely to be more negatively affected by healthcare reform

1See description of Status on page 23. See page 23 for sources and disclosures on Short- and Long-Term Investment Ideas.

21 Short- and Long-Term C:\DPS NEW\Pres\PPT\PresPrint.pot PWM Portfolio Advisory Group Investment Ideas Monthly Investment Guide Long-Term Investment Ideas Possible Principal Recommendation Rationale Implementation Investment Risks Status1 Medium-Quality ♦ We expect continued credit ♦ Value in 'A'-rated bonds ♦ Volatility due to fiscal UPDATED Intermediate pressures on state/local govern- in safe sectors challenges may persist 05/10/10 Municipals ment issuers, less tax-exempt ♦ Favor 7- to 12-year ♦ Credit conditions worsen supply and looming increases in intermediate-term ♦ Interest rate risk marginal tax rates to be key munis drivers of the municipal market ♦ Favor intermediate ♦ Short muni yields have settled maturities given the below historical averages relative steep tax-exempt curve to Treasuries ♦ Consider 'A'-rated munis, which appear cheap versus historical relationships ♦ For income-oriented investors, value in safe sectors, including pre-refunded, essential purpose revenue in water/sewer and public utility sector and general obligation bonds ♦ Credit spreads have tightened due to light tax-exempt supply and continued BAB issuance ♦ For taxable fixed income buyers who have a long-term time horizon and are not concerned with price volatility, consider BABs Energy Efficiency ♦ Future energy scarcity and higher ♦ Companies focused in ♦ Budget constraints have UPDATED energy prices are likely to keep areas such as removed some near-term 05/10/10 government focused on rigid agribusiness, building, momentum behind policies to improve energy transport, electricity, energy policy reform efficiency production, industrial ♦ U.S. investment in green processes and IT technologies could potentially be ♦ Defensive wind park major catalyst for job creation operators ♦ Stimulus packages should benefit ♦ Broadly diversified and energy efficiency and renewable actively managed funds energies focused on energy efficiency, renewable energy and/or increased productivity along the agribusiness value chain Commodity-Related ♦ Expected recovery in the global ♦ Direct investment in a ♦ Commodity price UPDATED Foreign Currency economy should be accompanied portfolio of sovereign volatility and strength of 05/10/10 Exposure by a sustainable increase in debt in local currency the recovery is commodity demand ♦ ETFs and ETNs linked to unsustainable ♦ Emergence of China as a price commodity currency ♦ Double dip-recession setter for commodities, displacing basket emerges, weakening USD, as China's symbiotic ♦ Structured products commodity demand relationships with countries like linked to a basket of ♦ Foreign exchange risk Australia continue to grow commodities ♦ Structured products, ♦ Commodity currencies could ♦ Forward contracts ETNs and global time benefit from weakening USD and ♦ Global time deposits deposits have issuer rising renminbi, and be supported credit risk by widening yield differential

1See description of Status on page 23. See page 23 for sources and disclosures on Short- and Long-Term Investment Ideas. 22 Short- and Long-Term C:\DPS NEW\Pres\PPT\PresPrint.pot Investment Ideas Long-Term Investment Ideas (Continued) Possible Principal Recommendation Rationale Implementation Investment Risks Status1 Broad Foreign ♦ Expect the USD to weaken against ♦ Direct investment in ♦ Better-than-expected UPDATED Currency Exposure most currencies over the long foreign currency U.S. growth rate 05/10/10 term despite possible short-term instruments, especially a ♦ Reduced risk stability or appreciation due to well-diversified tolerances rekindle strength of U.S. cyclical recovery instrument of minor demand for USD ♦ Rising concerns over U.S. currencies ♦ Foreign investors government's ability to finance a ♦ Non-U.S. sovereign continue to large and growing deficit and/or corporate debt aggressively buy U.S. ♦ Improving risk appetite could ♦ Structured products Treasuries, providing weigh on dollar in the long term ♦ ETFs and ETNs USD support ♦ Foreign investors seem less likely ♦ Structured products to absorb oversupply of and ETNs have issuer Treasuries, causing USD weakness credit risk ♦ Emerging market currency appreciation is likely to remain a structural trend arising from higher productivity growth in the underlying economies Distressed Fixed ♦ While near-term risks remain, ♦ Distressed hedge funds ♦ Credit conditions UPDATED Income valuations within distressed and funds of funds worsen, causing 09/09/09 securities still present an attractive (FoF)* spreads to reverse and longer-term return opportunity ♦ Distressed private widen ♦ See "High Yield Bonds" under equity* ♦ Issuers' financial Short-Term Investment Ideas conditions can weaken further until they are unable to service their debt obligations ♦ Concentration risk ♦ Greater need for portfolio monitoring and review

Ideas Closed from Previous Guides Date Closed Residential nonagency mortgage market short-term idea 2/8/10 Non-U.S. developed equity short-term idea 2/8/10 Precious metals short-term idea 01/11/10 Inflation protection long-term idea 11/9/09 Consumer discretionary short-term idea 10/12/09 Real estate long-term idea 9/9/09

1Status reflects the dates upon which the investment ideas were initiated (“Open”) or reaffirmed (“Updated”) by PWM PAG within the Monthly Investment Guide. “Ideas Closed from Previous Guides” reflect the dates that PWM PAG no longer recommended the investment idea. Please note that only those ideas closed within the preceding six months are reflected in the Guide. Your Private Wealth Advisor can provide a complete list of the ideas closed during earlier periods of time upon request. Also, by closing an investment idea, the PWM PAG is not necessarily indicating that it is no longer supportive of the investment idea; closing investments can also indicate that the conviction for a tactical buying opportunity is not as strong as when it was opened or updated. All short-and long-term investment ideas are subject to change at any time and represent general recommendations that may not be suitable for all clients. Please consult your Private Wealth Advisor before acting on any investment recommendations. *See page entitled Important Information: Investment Risks – Non-Traditional Asset Classes. Source: UBS PWM Portfolio Advisory Group and UBS Wealth Management Americas product areas. See page entitled Important Information: Investment Risks for a summary of risks associated with the various investments and investment strategies identified. Investments and investment strategies are provided for general information. Note that there may be other investments and strategies not reflected that also align with the recommendations shown. In addition, each UBS program, product or service is subject to specific eligibility and suitability requirements, each of which must be met in order for a client to invest.

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PWM Portfolio Advisory Group Important Information Monthly Investment Guide

UBS Wealth Management Research Two sources of research are available to clients of UBS Financial Services Inc. Reports from the first source, UBS Wealth Management Research, are designed primarily for use by individual investors and are produced by UBS Wealth Management Americas (the UBS business group that includes, among others, UBS Financial Services Inc.) and UBS Wealth Management & Swiss Bank. The second source is UBS Investment Research, and its reports are produced by UBS Investment Bank, whose primary business focus is institutional investors. The two sources may have different opinions and recommendations. The various research content provided does not take into account the unique investment objectives, financial situation or particular needs of any specific individual investor. If you have any questions, please consult your Private Wealth Advisor. UBS Wealth Management Research is provided by UBS Financial Services Inc. and UBS AG. UBS Financial Services Inc. is a subsidiary of UBS AG.

UBS Strategic and Tactical Asset Allocation Models The strategic asset allocation models presented represent the longer-term allocation of assets that is deemed suitable for a particular type of investor. The strategic asset allocations presented in this Guide have been developed by UBS Investment Solutions, a business sector within UBS Wealth Management Americas, that develops research-based traditional investments (e.g., managed accounts and mutual fund programs) and alternative strategies (e.g., hedge funds, private equity and real estate) offered to UBS clients. These allocation models are provided for illustrative purposes only. They were designed by UBS Investment Solutions for hypothetical U.S. investors with a total return objective under five different investor profiles: conservative, moderate conservative, moderate, growth and aggressive. Please note that UBS has changed its strategic asset allocation models in the past and may do so in the future.

The process by which UBS Investment Solutions has derived the strategic asset allocations can be described as follows. First, an allocation is made to broad asset classes based on the Investor Profile. This is accomplished using optimization methods within a mean-variance framework. Based on a proprietary set of capital market assumptions, including expected returns, risk and correlation of different asset classes, combinations of the broad asset classes are computed. A qualitative judgmental overlay is then applied to the output of the optimization process to arrive at the strategic asset allocation models. The capital market assumptions are developed by UBS Global Asset Management.

The tactical asset allocation models presented reflect the strategic asset allocation models overlayed with the tactical shift that has been identified by the UBS Wealth Management Americas Investment Committee (WMA-IC), which is made up of members from various business groups within UBS Wealth Management Americas, including UBS Wealth Management Research-Americas, UBS Investment Solutions and Private Wealth Management Portfolio Advisory Group. Note that UBS Wealth Management Research- Americas also publishes tactical asset allocations in its Investment Strategy Guide which may differ from the tactical asset allocation models presented here.

Your UBS Private Wealth Advisor can help you determine how the strategic and tactical allocation could be applied or modified according to your individual profile and investment goals.

24 Important Information Benchmark Indexes for the Asset Allocation Models

Asset Class Benchmark Index Historical Benchmark Statistics (Annualized)

Equity 1 Month 1 Year 3 Year 5 Year 10 Year Return Risk1 Return Risk Return Risk Return Risk Return Risk U.S. Equity Large-Cap Growth Russell 1000 Growth Performance 1.1 0.8 38.2 11.0 -1.9 20.0 4.0 16.4 -3.6 18.8 Large-Cap Value Russell 1000 Value Performance 2.6 1.1 42.3 12.2 -7.7 21.5 1.9 17.4 3.5 15.7 Mid-Cap Growth Russell Mid-Cap Growth 3.0 1.1 46.9 13.1 -2.5 24.4 5.7 20.2 -0.4 23.5 Mid-Cap Value Russell Mid-Cap Value 4.5 1.2 54.4 13.9 -4.8 25.6 5.2 20.5 8.9 17.6 Small-Cap Growth Russell Small-Cap Growth 4.2 1.2 45.2 15.9 -1.9 25.6 6.1 21.7 -0.1 24.1 Small-Cap Value Russell Small-Cap Value 7.0 1.4 52.4 16.8 -3.9 26.6 5.3 21.8 9.6 19.4 Convertibles Barclays Capital U.S. Convertibles Composite 2.2 0.6 44.2 8.4 2.3 17.7 6.8 14.1 n/a n/a Non-U.S. Equity Developed Equity MSCI EAFE -2.1 1.0 30.8 15.6 -11.5 23.5 1.2 19.4 -0.7 17.5 Emerging Equity MSCI Emerging Markets 1.0 1.0 53.9 20.7 1.7 32.5 13.9 27.5 8.5 24.7 Fixed Income U.S. Fixed Income U.S. Tax-Exempt Fixed Income Barclays Muni Bond 1.2 0.1 8.9 4.7 4.9 5.9 4.5 4.8 5.8 4.6 U.S. Government/Agency Securities Barclays Capital U.S. Aggregate - Government 0.9 0.2 2.2 3.5 6.1 5.0 5.1 4.3 6.1 4.6 Investment Grade Corporates Barclays Capital U.S. Aggregate - Investment Grade 1.8 0.3 21.8 4.9 6.3 8.9 5.4 7.3 7.0 6.3 High Yield Corporates Barclays Capital U.S. Aggregate - High Yield 2.3 0.1 42.6 7.0 7.0 17.0 8.5 13.3 7.7 11.4 Non-U.S. Fixed Income Developed Fixed income JPMorgan Non-U.S. Dollar -0.3 0.3 7.3 9.3 7.2 10.0 4.4 8.7 7.0 8.7 Emerging Market Fixed Income Barclays Capital Global Emerging Markets 1.1 0.2 28.3 5.1 7.2 14.8 9.3 11.8 10.6 10.8 Non-Traditional Asset Classes Hedge Funds Tactical Trading (Macro, CTA)2 HFRI Macro 1.8 n/a 4.4 5.2 6.3 5.5 6.6 5.0 7.1 5.5 Relative Value (Arb Strategies ex- HFRI Relative Value 2.2 n/a 27.3 3.3 4.4 7.8 6.4 6.3 7.3 4.7 Merger Arb, Equity Market Neutral)2 Credit Strategies (Hedged Credit, HFRI Distressed & Restructuring 3.1 n/a 35.1 5.1 0.9 9.4 5.4 7.7 9.0 6.6 Distressed)2 Event Driven (Merg Arb, Special HFRI Event Driven 3.8 n/a 32.1 4.3 2.0 8.9 5.8 7.6 7.8 6.9 Situations)2 Equity Hedge (Long/Short)2 HFRI Equity Hedge 4.2 n/a 32.2 7.4 0.7 11.4 4.7 9.6 4.6 8.7 Private Equity LBO (Secondaries)3 Cambridge U.S. Private Equity Index 6.2 n/a -9.9 20.2 3.7 15.4 13.1 13.8 9.3 13.1 Venture Capital3 Cambridge U.S. Venture Capital Index 2.3 n/a -12.9 13.1 2.1 11.1 5.7 9.4 2.6 31.6 Real Estate Public Real Estate (REITs) NAREIT 6.6 1.9 65.6 18.9 -9.1 37.3 2.9 30.2 10.9 23.7 Private Real Estate4 NCREIF 0.8 n/a -9.6 4.3 -4.3 8.2 4.2 8.2 7.1 6.1 Commodities DJIA Commodities 1.9 0.8 21.8 15.7 -8.0 23.2 -2.4 20.0 3.4 17.4 Cash Barclays Capital U.S. Treasury - Bills (1-3 months) 0.0 0.0 0.1 0.0 1.7 0.5 2.7 0.6 2.7 0.6

Correlation Matrix – Major Indexes MSCI AC World Barclays Capital DJ AIG Barclays Capital HFRI Fund of NAREIT Index - Russell 1000 Index ex. USA - Global Aggregate Commodity U.S. Aggregate Funds Composite Total Return Net Return ex. U.S. Futures

Russell 1000 1.00 0.94 -0.05 0.17 0.81 0.85 0.56 MSCI AC World Index ex. USA - Net Return 0.94 1.00 -0.03 0.30 0.88 0.72 0.66 Barclays Capital U.S. Aggregate -0.05 -0.03 1.00 0.64 -0.22 0.05 -0.30 Barclays Capital Global Aggregate ex. U.S. 0.17 0.30 0.64 1.00 0.03 0.24 0.18 HFRI Fund of Funds Composite 0.81 0.88 -0.22 0.03 1.00 0.48 0.72 NAREIT Index - Total Return 0.85 0.72 0.05 0.24 0.48 1.00 0.36 DJ AIG Commodity Futures 0.56 0.66 -0.30 0.18 0.72 0.36 1.00

Source: FactSet. All data is shown as of Apr. 30, 2010, unless otherwise noted. Risk (measured by standard deviation) and return are based on monthly returns. Correlation is based on quarterly returns between 01/2005-12/2009. Index information is presented for illustrative purposes only and the results shown reflect realized and unrealized gains and losses and the reinvestment of income, but do not reflect the deduction of fees and expenses which would reduce the results shown. Indexes are not available for direct investment and do not reflect the performance of any specific investment. With respect to the non-traditional asset classes, due to the non- public nature of many of the investments that comprise the indexes, the results shown may tend to overstate the potential benefits and do not fully reflect potential risks of these asset classes. Past performance does not guarantee or indicate future results. 11-month standard deviation is based on daily returns. n/a indicates the information is not available. 2Data is as of 3/31/10. 31-month return and standard deviation are based on the Q3 2009 quarterly return as of 9/30/09. 1-,3-,5-,10-year returns are as of 9/30/09. 41-month return and standard deviation are based on the Q1 2010 quarterly return as of 3/31/10. 1-,3-,5-,10-year returns are as of 3/31/10. 25 C:\DPS NEW\Pres\PPT\PresPrint.pot

PWM Portfolio Advisory Group Important Information Monthly Investment Guide

Portfolio Analytics

The portfolio analytics shown for the strategic asset allocation models are based on the estimated hypothetical return and standard deviation assumptions (capital market assumptions) shown below, which are based on UBS proprietary research. The development process includes a review of a variety of factors, including the return, risk, correlations and historical performance of various asset classes, inflation and risk premium. These capital market assumptions do not assume any particular investment time horizon. The process assumes a situation in which the supply and demand for investments is in balance, and in which expected returns of all asset classes are a reflection of their expected risk and correlations regardless of timeframe. Please note that these assumptions are not guarantees and are subject to change. UBS has changed its risk and return assumptions in the past and may do so in the future. Neither UBS nor your Private Wealth Advisor is required to provide you with an updated analysis based upon changes to these or other underlying assumptions.

In order to create the analysis shown, the rates of return for each asset class are combined in the same proportion as the asset allocations illustrated (e.g., if the asset allocation indicates 40% equities, then 40% of the results shown for the allocation will be based on the estimated hypothetical return and standard deviation assumptions for equities shown below).

You should understand that the analysis shown and assumptions used are hypothetical estimates provided for your general information. The results are not guarantees and pertain to the asset allocation and/or asset classes in general, not the performance of specific securities or investments. Your actual results may vary significantly from the results shown in this report, as can the performance of any individual security or investment.

Asset Class Benchmark Index Capital Market Assumptions

Equity Estimated Return Estimated Standard Deviation U.S. Equity Large-Cap Growth Russell 1000 Growth 9.27 19.01 Large-Cap Value Russell 1000 Value 8.66 16.38 Mid-Cap Growth Russell Mid-Cap Growth 11.33 24.43 Mid-Cap Value Russell Mid-Cap Value 9.38 17.38 Small-Cap Growth Russell Small-Cap Growth 11.68 25.94 Small-Cap Value Russell Small-Cap Value 9.46 18.47 Convertibles Barclays Capital U.S. Convertibles Composite 8.56 14.28 Non-U.S. Equity Developed Equity MSCI EAFE 10.40 17.67 Emerging Equity MSCI Emerging Markets 12.56 26.64 Fixed Income U.S. Fixed Income U.S. Tax-Exempt Fixed Income Barclays Muni Bond 3.88 5.36 U.S. Government/Agency Securities Barclays Capital U.S. Aggregate - Government 4.62 4.76 Investment Grade Corporates Barclays Capital U.S. Aggregate - Investment Grade 4.62 4.76 High Yield Corporates Barclays Capital U.S. Aggregate - High Yield 6.62 10.01 Non-U.S. Fixed Income Developed Fixed income JPMorgan Non-U.S. Dollar 6.05 8.77 Emerging Market Fixed Income Barclays Capital Global Emerging Markets 7.97 14.45 Non-Traditional Asset Classes Hedge Funds Tactical Trading (Macro, CTA) HFRI Macro 6.57 9.57 Relative Value (Arb Strategies ex-Merger Arb, Equity HFRI Relative Value 10.53 9.56 Market Neutral) Credit Strategies (Hedged Credit, Distressed) HFRI Distressed & Restructuring 11.90 8.83 Event Driven (Merg Arb, Special Situations) HFRI Event Driven 11.82 8.33 Equity Hedge (Long/Short) HFRI Equity Hedge 8.13 10.54 Private Equity LBO (Secondaries) Cambridge U.S. Private Equity Index 11.39 17.66 Venture Capital Cambridge U.S. Venture Capital Index 11.39 17.66 Real Estate Public Real Estate (REITs) NAREIT 9.55 23.00 Private Real Estate NCREIF 8.72 11.36 Commodities DJIA Commodities 7.59 17.10 Cash Barclays Capital U.S. Treasury - Bills (1-3 months) 4.00 0.54

26 C:\DPS NEW\Pres\PPT\PresPrint.pot Important Information

Investment Risks All investments involve risks which you should carefully consider prior to implementing an investment strategy. The following are general descriptions of the risks that can arise from the investments identified in this Guide. In addition to these risks, securities issued by small-cap companies may relatively be highly volatile because the earnings and business prospects typically fluctuate more than larger-cap companies. Securities issued by non-U.S. companies can have risks not typically associated with domestic securities, including risks associated with changes in currency values, economic, political and social conditions, loss of market liquidity,the regulatory environment of the respective country and difficulties in receiving current or accurate information.

Equities: Equity securities are subject to market risk and will undergo price fluctuations in which downward and upward trends may occur over short or extended periods. Historically, equities have shown greater growth potential than other types of securities, but they have also shown greater volatility.

Corporate Bonds: Fixed income securities are subject to market risk and interest rate risk. If sold in the secondary market prior to maturity, investors may experience a gain or loss depending on interest rates, market conditions and issuer credit quality.

Municipal Securities: Income from municipal bonds may be subject to state and local taxes based on residency of the investor and may be subject to the Alternative Minimum Tax. Call features may exist that can impact yield. If sold prior to maturity, investments in municipal securities are subject to gains/losses based on the level of interest rates, market conditions and credit quality of the issuer.

U.S. Treasury TIPS: The market for U.S. Treasury TIPS may not be as active or liquid as the secondary market for Treasury fixed- principal securities. Lesser liquidity and fewer market participants may result in larger spreads between the dealer-bid and the dealer- offered side of the market for inflation-protected securities than the bid-asked spreads for fixed-principal securities with the same time to maturity. Larger bid-asked spreads normally result in higher transaction costs and/or lower overall returns.

Preferred Securities: Preferred securities are subject to market value fluctuation given changes in the level of interest rates. Rising rates may lead to a decline in value. In addition, there is no guarantee that there will be an active secondary market for any issue.

Convertible Securities: Convertible securities are subject to the risks of both equity and fixed income securities, including that the values may fluctuate due to interest rate changes.

Inflation Indexed Securities: An investment in securities with principal or interest determined by reference to an inflation index involves factors not associated with an investment in a fixed coupon and principal security, such as the inflation index may be subject to significant changes; that changes in the index may or may not correlate to changes in interest rates generally or with changes in other indexes and that the resulting interest may be greater or less than that payable on other securities of similar maturities. Historic performance of the index is not necessarily indicative of future performance. In addition, there is no guarantee that there will be an active and liquid secondary market for these securities.

Structured Products: Structured products involve risks which can include, but are not limited to: fluctuations in the price, level or yield of underlying instruments, interest rates, currency values and credit quality, substantial or complete loss of principal, limits on participation in the appreciation of the underlying instrument, limited liquidity/limited or no secondary market for the structured product, credit risk of the issuer of the structured product, potential conflicts of interest between the investor and the business activities of UBS, other issuers of structured products or their respective affiliates. Clients should carefully read the detailed explanation of risks, together with other information in the relevant offering materials. As structured products are debt obligations of the issuer, investors should be comfortable with the credit risk of the issuer before purchasing a structured product.

Managed Accounts: For complete information regarding an investment manager, including fees and performance, see the manager’s Form ADV, Part II. For information regarding managers participating in ACCESS or other UBS investment advisory programs, your Private Wealth Advisor can provide additional information, including the respective program's disclosure brochure.

Mutual Funds and ETFs: Mutual funds and exchange traded funds are sold by prospectus. For complete information about a fund, including detailed information on risks, charges and expenses, see the fund’s prospectus. Please read the prospectus and offering documents carefully before you invest. Investors should be aware that the value of mutual funds and exchange traded funds changes from day to day. Therefore, an investment’s return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

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PWM Portfolio Advisory Group Important Information Monthly Investment Guide

Investment Risks – Non-Traditional Asset Classes Non-traditional asset classes are alternative investments that include hedge funds, private equity, real estate, managed futures and commodities (collectively, alternative investments). Alternative investments are often long-term, illiquid investments that are not easily valued. The performance of these investments may be volatile and investors may lose all or a substantial amount of their investments. Leveraging and other speculative investment practices that increase the risk of investment loss may be used. Periodic pricing or valuation information may not be available for investors. Generally, complex tax strategies are involved, and there may be delays in distributing tax information to investors. High fees may reduce profits. Alternative investments are sold only to qualified investors, and only by means of offering documents that include information about the risks, performance and expenses of the strategies, all of which should be read carefully before making an investment.

In addition to the risks that apply to alternative investments generally, the following are additional risks related to an investment in these strategies:

Hedge Fund Risk: There are risks specifically associated with investing in hedge funds, which may include risks associated with investing in short sales, options, small-cap stocks, “junk bonds," derivatives, distressed securities, non-U.S. securities and illiquid investments.

Hedge Fund of Funds: In addition to the risks associated with hedge funds generally, an investor should recognize that the overall performance of a fund of funds is dependent not only on the investment performance of the manager of the fund, but also on the performance of the underlying managers. The investor will bear the management fees and expenses of both the fund of funds and the underlying hedge funds or accounts in which the fund of funds invests, which could be significant.

Managed Futures: There are risks specifically associated with investing in managed futures programs. For example, not all managers focus on all strategies at all times, and managed futures strategies may have material directional elements.

Real Estate: There are risks specifically associated with investing in real estate products and real estate investment trusts. They involve risks associated with debt, adverse changes in general economic or local market conditions, changes in governmental, tax, real estate and zoning laws or regulations, risks associated with capital calls and, for some real estate products, the risks associated with the ability to qualify for favorable treatment under the federal tax laws.

Private Equity: There are risks specifically associated with investing in private equity. Capital calls can be made on short notice, and the failure to meet capital calls can result in significant adverse consequences including, but not limited to, a total loss of investment.

Foreign Exchange/Currency Risk: Investors in securities of issuers located outside of the United States should be aware that even for securities denominated in U.S. dollars, changes in the exchange rate between the U.S. dollar and the issuer’s “home” currency can have unexpected effects on the market value and liquidity of those securities. Those securities may also be affected by other risks (such as political, economic or regulatory changes) that may not be readily known to a U.S. investor.

Options: Options are not suitable for all investors. Please read the Options Clearing Corporation Publication titled "Characteristics and Risks of Standardized Options Trading" and consult your tax advisor prior to investing. The Publication can be obtained from your Financial Services Inc., Financial Advisor, or can be accessed under the Publications Section of the Option Clearing Corporation's website: www.theocc.com.

Description of Certain Alternative Investment Strategies Equity Hedge: investment managers who maintain positions both long and short in primarily equity and equity-derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. Equity hedge managers would typically maintain at least 50% and may, in some cases, be substantially entirely invested in equities, both long and short.

Event Driven: investment managers who maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety including, but not limited to, mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior inthe capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event-driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company-specific developments. Investment theses are typically predicated on fundamental characteristics (as opposed to quantitative), with the realization of the thesis predicated on a specific development exogenous to the existing capital structure. 28 C:\DPS NEW\Pres\PPT\PresPrint.pot Important Information

Description of Certain Alternative Investment Strategies (continued)

Credit Arbitrage Strategies: employ an investment process designed to isolate attractive opportunities in corporate fixed income securities. These include both senior and subordinated claims as well as bank debt and other outstanding obligations, structuring positions with little or no broad credit market exposure. These may also contain a limited exposure to government, sovereign, equity, convertible or other obligations, but the focus of the strategy is primarily on fixed corporate obligations and other securities held as component positions within these structures. Managers typically employ fundamental credit analysis to evaluate the likelihood ofan improvement in the issuer's creditworthiness. In most cases, securities trade in liquid markets, and managers are only infrequently or indirectly involved with company management. Fixed income: corporate strategies differ from event driven; credit arbitrage in the former more typically involves more general market hedges, which may vary in the degree to which they limit fixed income market exposure, while the latter typically involves arbitrage positions with little or no net credit market exposure, but are predicated on specific, anticipated idiosyncratic developments.

Macro: investment managers who trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top-down and bottom-up theses, quantitative and fundamental approaches and long- and short-term holding periods. Although some strategies employ relative value techniques, macro strategies are distinct from relative value strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macroeconomic variables may have on security prices, as opposed to equity hedge, in which the fundamental characteristics of the company are the most significant and integral to investment thesis.

Distressed Restructuring Strategies: employ an investment process focused on corporate fixed income instruments, primarily on corporate credit instruments of companies trading at significant discounts to their value at issuance, or obliged (par value) at maturity, as a result of either a formal bankruptcy proceeding or financial market perception of near-term proceedings. Managers are typically actively involved with the management of these companies, frequently involved on creditors' committees in negotiating the exchange of securities for alternative obligations, either swaps of debt, equity or hybrid securities. Managers employ fundamental credit processes focused on valuation and asset coverage of securities of distressed firms. In most cases, portfolio exposures are concentrated in instruments which are publicly traded, in some cases actively and in others under reduced liquidity but, in general, for which a reasonable public market exists. In contrast to special situations, distressed strategies primarily employ debt (greater than 60%) but also may maintain related equity exposure.

Relative Value: investment managers who maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing relationship between instruments and,in some cases, identify attractive positions in which the risk-adjusted spread between these instruments represents an attractive opportunity for the investment manager. Relative value position may be involved in corporate transactions also, but as opposed to event driven exposures, the investment thesis is predicated on realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction.

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PWM Portfolio Advisory Group Glossary – Index Definitions Monthly Investment Guide

10-Year U.S. Treasury Index: a debt obligation issued by the U.S. Dow Jones AIG Commodity Index: composed of futures contracts Treasury with a term of 10 years. on 20 physical commodities. It is composed of commodities traded on Barclays Capital Global Aggregate X U.S.: an index consisting of all U.S. exchanges with the exception of nickel, aluminum and zinc. The investment grade securities issued in different currencies and Index relies primarily on liquidity data or the relative amount of trading combining the Barclays Aggregate, Barclays Pan-European Aggregate activity to determine its weightings. All data used for both liquidity and and Barclays Global Treasury indexes. The index also includes production calculations are averaged for a five-year period. Eurodollar and Euro-Yen corporate bonds, Canadian government, agency and corporate securities and U.S. dollar investment grade, HFRI Equity Hedge: equally weighted index of investment managers 144A securities. who employ equity hedge strategies, maintaining both long and short positions primarily in equity and equity derivative securities. Equity Barclays Capital Global Emerging Markets: tracks total returns of external-currency-denominated debt instruments of the emerging hedge managers would typically maintain at least 50% exposure to, markets: Brady bonds, loans, Eurobonds, and U.S. dollar-denominated and may in some cases be entirely invested in, equities - both long and local market instruments. The index covers five regions: Americas, short. Europe, Asia, Middle East and Africa. HFRI Event Driven: equally weighted index of investment managers Barclays Capital Muni Bond Index: a capitalization-weighted bond who maintain positions in companies currently or prospectively involved index created by Barclays intended to be a representative of major in corporate transactions of a wide variety including but not limited to municipal bonds of all quality ratings. mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure Barclays Capital U.S. Aggregate Index: covers the U.S. dollar- adjustments. Security types can range from most senior in the capital denominated, investment grade, fixed rate, taxable bond market structure to most junior or subordinated, and frequently involve segment of SEC-registered securities and includes bonds from the U.S. additional derivative securities. Treasury, government.-related, corporate, mortgage- and asset-backed and commercial mortgage-backed securities. HFRI Distressed & Restructuring: equally weighted index of investment managers that employ an investment process focused on Barclays Capital U.S. Aggregate Government: composed of the corporate fixed income instruments, primarily on corporate credit Barclays U.S. Treasury Bond Index (all public obligations of the U.S. instruments of companies trading at significant discounts to their value Treasury, excluding flower bonds and foreign-targeted issues) and the at issuance or obliged (par value) at maturity as a result of either formal Agency Bond Index (all publicly issued debt of U.S. government bankruptcy proceeding or financial market perception of near-term agencies, quasi-federal corporations, and corporate debt guaranteed proceedings. Distressed strategies employ primarily debt (greater than by the U.S. government). 60%) but also may maintain related equity exposure. Barclays Capital U.S. Aggregate High Yield: covers the universe of HFRI Fund of Funds Index: fund of funds invested with multiple fixed-rate, dollar-denominated, non-convertible, publicly issued, non- managers through funds or managed accounts. The strategy accesses a investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds and debt diversified pool of managers with the objective of lowering the risk of issues from countries designated as emerging markets (e.g., Argentina, investing in one single manager. The fund of funds manager has Brazil, Venezuela, etc.) are excluded but Canadian bonds and SEC- discretion in choosing which strategies and managers to invest in the registered global bonds of issuers in non-emerging countries are fund. included. Original issue zeroes, step-up coupon structures and 144-As are also included. Bonds must have at least one year to final maturity, HFRI Fund Weighted Composite: an equally weighted return of all at least $150 million par amount outstanding and be rated Ba1 or funds net of fees in the HFRI monthly indexes. Fund strategies include, lower. but are not limited to: convertible arbitrage, distressed securities, emerging markets, equity hedge, equity market neutral, statistical Barclays Capital U.S. Aggregate Investment Grade: covers all arbitrage, event driven, macro, market timing, merger and risk publicly issued, fixed-rate, nonconvertible, investment grade corporate arbitrage, relative value, short selling and sector funds. debt. Issues are rated at least Baa by Moody's Investors Service or BBB by Standard & Poor's. Total return comprises price HFRI Macro: equally weighted index of investment managers which appreciation/depreciation and income as a percentage of the original trade a broad range of strategies in which the investment process is investment. predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and Barclays Capital U.S. Convertibles Composite: The Barclays Capital commodity markets. Managers employ a variety of techniques, both U.S. Convertible Bond Index represents the market of U.S. convertible discretionary and systematic analysis, combinations of top down and bonds. Convertible bonds are bonds that can be exchanged, at the bottom up theses, quantitative and fundamental approaches and long- option of the holder, for a specific number of shares of the issuer’s and short-term holding periods. preferred stock or common stock. HFRI Relative Value: equally weighted index of investment managers Barclays Capital U.S. Treasury - Bills (1-3 months): is a market who maintain positions in which the investment thesis is predicated on value-weighted index of investment-grade fixed-rate public obligations realization of a valuation discrepancy in the relationship between of the U.S. Treasury with maturities of three months, excluding zero multiple securities. Managers employ a variety of fundamental and coupon strips. quantitative techniques to establish investment theses, and security Cambridge U.S. Private Equity: based on returns data compiled on types range broadly across equity, fixed income, derivative or other funds representing more than 70% of the total dollars raised by U.S. security types. leveraged buyout funds, subordinated debt, and special situation managers between 1986-2008. Cambridge U.S. Venture Capital Index: based on returns data compiled for more than 75% of U.S., institutional venture capital assets between 1990-2008.

Source: Bloomberg, MSCI Barra, Barclays Capital, JPMorgan, Citigroup, Cambridge Associates, and HFRI Indexes definitions. Note: The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. 30 C:\DPS NEW\Pres\PPT\PresPrint.pot Glossary – Index Definitions

JP Morgan Global Ex-U.S. Bond Index: consists of regularly traded, Russell 1000® Growth Index: measures the performance of the large- fixed-rate domestic government debt instruments from 12 international cap growth segment of the U.S. equity universe. It includes those bond markets. Countries included are Austria, Belgium, Canada, Russell 1000 companies with higher price-to-book ratios and higher Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, forecasted growth values. Sweden and the United Kingdom. Russell 1000® Value Index: measures the performance of the large- MSCI AC World Index ex USA: consists of approximately 2,000 cap value segment of the U.S. equity universe. It includes those Russell securities across 47 markets, with emerging markets representing 1000 companies with lower price-to-book ratios and lower expected approximately 18%. MSCI attempts to capture approximately 85% of growth values. the market capitalization in each country. ® MSCI EAFE Index (Europe, Australasia, Far East): a free float- Russell 2000 Growth Index: measures the performance of the adjusted market capitalization index that is designed to measure the small-cap growth segment of the U.S. equity universe. It includes those equity market performance of developed markets, excluding the U.S. & Russell 2000 companies with higher price-to-book ratios and higher Canada. As of June 2007, the MSCI EAFE Index consisted of the forecasted growth values. following 21 developed market country indexes: Australia, Austria, ® Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Russell 2000 Value Index: measures the performance of the small- Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, cap value segment of the U.S. equity universe. It includes those Russell Singapore, Spain, Sweden, Switzerland and the United Kingdom. 2000 companies with lower price-to-book ratios and lower forecasted growth values. MSCI Emerging Markets Index: a free float-adjusted market capitalization index that is designed to measure equity market Russell Mid-Cap® Growth Index: measures the performance of the performance of emerging markets. As of November 2008, the MSCI mid-cap growth segment of the U.S. equity universe. It includes those Emerging Markets Index consisted of the following 24 emerging Russell mid-cap companies with higher price-to-book ratios and higher market country indexes: Argentina, Brazil, Chile, China, Colombia, forecasted growth values. Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, Russell Mid-Cap® Value Index: measures the performance of the South Africa, Taiwan, Thailand and Turkey. mid-cap value segment of the U.S. equity universe. It includes those MSCI Europe Index: a free float-adjusted market capitalization- Russell mid-cap companies with lower price-to-book ratios and lower weighted index that is designed to measure the equity market forecasted growth values. performance of the developed markets in Europe. As of June 2007, the TASS Index of CTAs: is a dollar-weighted index based on historical MSCI Europe Index consisted of the following 16 developed market managed futures performance of CTAs with established track records. country indexes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. MSCI Japan Index: a free float-adjusted market capitalization- weighted index that is designed to measure the equity market performance of Japan. NAREIT Index: benchmarks the performance of the REIT industry since its inception in 1972. It was designed to provide a comprehensive assessment of overall industry performance. Some REITs available from over-the-counter markets are not included due to the lack of real-time pricing. NCREIF Property Index (NPI): a quarterly time series composite total rate of return measure of investment performance of a large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary environment. Russell 1000® Index: measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.

Source: Bloomberg, MSCI Barra, Barclays Capital, JPMorgan, Citigroup, Cambridge Associates, and HFRI Indexes definitions. Note: The indexes are unmanaged. An investor can not invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. 31 UBS Financial Services Inc. www.ubs.com/privatewealthmanagement H265 May 2010

UBS Financial Services Inc. and UBS International Inc. are subsidiaries of UBS AG. Private Wealth Management is a business unit within UBS Financial Services Inc.