Private markets Opportunities outside listed equities

Chief Investment Office GWM | 13 February 2020 4:13 pm GMT Karim Cherif, Strategist, karim.cherif@.com; Jay Lee, CIO Strategist

• Investing in can provide exposure to fast growing, innovative businesses at a time when the public market opportunity set is shrinking. • Private equity managers can add differentiated value through active ownership and operational value creation. • We recommend diversifying across vintage years, strategies, and managers when building private equity portfolios. Investors should consider illiquidity, longer time horizons, and higher fees when investing in the asset class.

Our view Source:UBS - Martin Ruetschi/IB photo shoot Private equity is becoming an increasingly important asset class as it not only provides potentially attractive long-term returns but access to unique opportunities not available through listed markets. Relevant research (UBS internal links) The supply of listed companies in developed markets is shrinking • Leveraged , 6 February 2019 rapidly, while more companies are choosing to stay private- delaying • Growth equity, 13 February 2019 listings or avoiding them altogether. For investors, this means that a • , 19 February 2019 portion of the value creation that was formerly captured by public Direct Lending, 14 March 2019 markets has now accrued to private investors. Getting exposure to • fast growing and innovative businesses is also getting harder when • Distressed Debt, 25 March 2019 only investing in listed equities. • Private real estate, 14 March 2019 With managers adding value through active ownership and • Can private equity managers deploy all operational value creation, private equity investing can provide their capital, 16 October 2019 differentiated return drivers beyond those of more passive public • How have private markets behaved in investments. We recommend investors consider a diversified downturns, 13 September 2019 portfolio of private equity funds as a complement to their listed • Are U.S. private markets overvalued, 25 equity holdings. Considerations before investing in the asset class July 2019 include significant illiquidity, high manager dispersion, limited • Why use secondary funds in portfolios, 20 disclosure and higher fees. May 2019

This report has been prepared by UBS AG and UBS Financial Services Inc. (UBS FS). Please see important disclaimers and disclosures at the end of the document. Private markets

Public market opportunities are declining Fig. 1: Falling number of listed US companies US listed company count vs IPOs From 2000-2018, the number of global listed equities remained 9'000 800 essentially flat, growing at an annualized rate of 0.4%. Regional 8'000 700 differences exist, however. While in emerging regions, listings con- 7'000 600 6'000 tinue to grow as public markets mature; in the developed markets, 500 5'000 400 the number of listed companies is down 25% with the US market 4'000 300 almost halving in the past two decades (see Fig.1). 3'000 2'000 200 There are various reasons underlying this phenomenon. Mergers 1'000 100 0 0 and acquisitions of publicly-listed firms have been continuously 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 increasing over the past 20 years. Meanwhile, fewer companies are Number of US IPOs (RHS) US publically listed co's (LHS) choosing to make initial public offerings (IPO), with the average Source: Jay R. Ritter, WorldBank, UBS, as of February 2020 number of IPO's per year in the US dropping from 310 in 1990-2000 towards 110 in 2001-2018. With high listing costs, regulatory burdens, and decreased confidentiality there has been less emphasis on listing on the public markets to access capital, especially with a growing supply of private capital to take its place. Private equity opportunities are expanding Fig. 2: The number of private equity backed firms continues to grow The private equity industry (PE) has attracted significant amount of Private equity backed company count capital over the past two decades. According to Preqin data, global 20'000 rose from ~USD 500bn in 2000 to USD 18'000 ~3,600bn in 2018. Just in the US alone, the number of firms active 16'000 14'000 in the market more than quadrupled to over 8000. 12'000 10'000 This abundance of private capital has provided entrepreneurs with 8'000 6'000 an alternative to the traditional listed market route. According to 4'000 Pitchbook data, the number of private equity backed companies 2'000 0 globally increased by an annualized rate of 10.7% since 2000 (see 00 02 04 06 08 10 12 14 16 18 Fig.2). PE remains small relative to global listed equity markets with Global US private equity accounting still for only 5% of public Source: Pitchbook, UBS, as of February 2020 market value but is rising. For many businesses, listing is now only needed when critical size is reached where only public markets can provide enough liquidity to further grow. Implications for investors With new companies taking longer to list on exchanges, public Fig. 3: More value is now captured pre-IPO equity investors are finding it harder to access fast growing and Market cap comparison between older and more innovative businesses that may look attractive to them. Importantly, recent IPOs when and if listed, these companies are much larger and at a more 1000 12 10 advanced stage of their lifecycle. 100 8

As a result, they may not offer the same growth profile and return 10 6 opportunity. Fig.3 shows how value creation pre IPO and five years 4 1 post IPO has considerably changed for newly listed companies 2 versus older ones. For many investors, complementing public equity 0 0 exposure with private equity investments is an attractive way to AMZN CSCO EBAY QCOM FB TWTR WDAY Market cap at IPO + 5 yrs (bn USD) Market cap at IPO (bn USD) access a wider spectrum of equity opportunities, add differentiated Avg. # of years to IPO (RHS) sources of returns to portfolios and potentially avoid missing out Source: Morgan Stanley, Factset, UBS estimates, as of February 2020. Companies included: Amazon, Cisco Systems, Ebay, Qualcomm, on returns. Facebook, Twitter, Workday

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Accessing various part of the corporate cycle Fig. 4: Investing in a company's life-cycle Private equity strategies differ by company Private equity investments come in various forms yet typically entail maturity purchasing significant or controlling private (non-traded) equity Buyout interests in largely unlisted businesses. A unique feature of such Growth

investments is that they provide access to different stages of a e u l a

given company's lifecycle, from formation to growth, transfer of v y n

ownership and even restructuring. Three broad strategies exist and a p m provide different return characteristics and risk profiles. o Venture C • Venture capital focuses on "building businesses" and targets companies in the concept/development stage, with revenues or profits several years away. The strategy entails identifying suc- Company life-cycle stage cessful businesses with limited track records, providing confi- Source: UBS, as of February 2020 dence to the next investor round, developing product strategy, establishing key customers, building depth in management teams and managing the exit process. • Growth equity focuses on "scaling businesses" and invests in companies that have established their business models and are already producing revenues or profits. GE managers aim at accelerating revenue growth, scaling organizations, managing team development, raising additional capital and preparing for eventual exits through strategic sale or IPO. • focuses on "turning around businesses" that target mature companies with more stable cash flows than earlier stage companies. Managers aim to expand margins, implement organic growth opportunities, and/or drive new strategic direction. They typically use debt to maximize equity returns. Attractive return prospects Fig. 5: Return comparison between global private equity and public equity Historically, private equity investments have outperformed public On a net internal rate of return listed equity investments (see Fig.5). There are many drivers behind (IRR) basis, private equity investments outperform this outperformance, including active ownership, complexity, illiq- public equity investments uidity, and leverage. Active ownership is a key differentiator as 30% taking significant/controlling ownership stakes allows fund man- 25% agers to drive strategic direction, develop management teams, and 20% enhance governance. There is also an information advantage in 15% sourcing deals as fund managers are legal insiders, which can provide deeper insight to potential investments compared to that 10% of public investments. 5% 0% Deal complexity can involve carve outs and spin-off transactions that 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 CA global buyout growth equity pooled IRR may be less competitive and where skilled fund managers can utilize MSCI ACWI public market equivalent (PME) their operational expertise to drive returns. Lastly, buyout managers Source: Cambridge Associates, UBS, as of February 2020. Note:Given most funds take a few years for performance to settle, figures for more can employ leverage to maximize equity returns, with the typical recent vintage years may be less meaningful transaction funded using roughly 40%-45% of equity in recent years. Illiquidity helps investors focus on the long term When investing in a private equity fund, investors are locked in for a period of 10 years or more. While this requires signif- icant commitment, the longer time frame is conducive to imple- menting strategic initiatives on underlying portfolio companies. With manager compensation directly tied to the performance of the fund, interests are well aligned with the investor.

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In addition, illiquidity can help investors take advantage of dislo- cations, particularly during periods of stress. As highlighted in our report "How private markets behaved in downturns", during the global financial crisis private equity firms continued to invest in port- folio companies. As a result, these PE backed companies were more likely to be acquired in the post crisis period at a higher valuation. So, while illiquidity should be considered in the context of investor's goals and objectives, private equity investing can help align investors towards the long term. How to invest? Fig. 6: Private equity investment vehicles Investors have a range of options when investing Investors have a range of different options for incorporating private into private equity equity into their portfolios (see Fig.6). Each investor has to decide Direct Primary Funds Multi-Managers individually which approach is right based on size, level of expertise, Investments preference for control, and desired degree of time and involvement Investor Investor Investor • Direct investments: Investors who want control and hands- Fund of on involvement can make direct investments in companies. Funds/Secondaries However, this approach requires a sizable asset base, and the responsibility of managing the assets directly or hiring a man- Fund Fund Fund Fund Fund Fund 1 2 3 1 2 3 agement team. Investors in direct investments should consider diversifying their portfolio of holdings. Portfolio Portfolio Portfolio companies/assets companies/assets companies/assets Co-investments: • Some private fund managers offer their Source: UBS, as of February 2020 investors the ability to invest alongside them in specific deals, known as co-investing. This approach is ideal for investors who want to select deals to participate in without the responsi- bility of actively sourcing/managing the investment. However, investors have no control over when and what co-investments are offered, and fund managers tend to offer these opportu- nities selectively to certain limited partners. Further, co-invest- ments may lead to concentration risk for investors who only execute a few deals. • Primary investments: Many investors prefer to delegate to a professional fund manager to select and manage a portfolio of private companies. They invest directly as limited partners in a private equity fund, agreeing to commit capital for an extended period and ceding control over investment decisions. In return, they benefit from the fund manager's expertise in sourcing and executing investments, portfolio diversification, and active risk and portfolio management. Investors however need a strong manager network to ensure access to the best funds. Further, in order to achieve diversified private equity exposure, an investor would need to create and manage a port- folio of multiple primary investments. • Fund of private funds (multi-manager): First time and smaller size investors requiring a turnkey solution can invest through a fund of funds, which provides diversified exposure to a pool of primary funds. The approach provides the advantages of professional research and expertise, institutional due dili- gence processes, access to top-tier managers via scale and rela- tionships, portfolio diversification, active portfolio monitoring and risk management. In return, investors cede control over investment decisions and pay an additional layer of fees. • Secondary investments (multi-manager): Secondary invest- ments involve purchases of seasoned primary limited part- nership interests in private equity funds. These stakes can transact at a premium or discount to estimated fund net asset

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value depending on factors such as fund manager quality, underlying portfolio investments, and how invested the under- lying fund is. Because secondary investments are typically well into their investment periods, a fund investing in sec- ondaries typically experiences earlier return of capital. Addi- tionally, buyers have greater visibility into the portfolio holdings, which in aggregate tend to be highly diversified. How do private equity investments work? Private equity funds have distinctive characteristics compared to listed equities that investors must consider carefully. The firm man- aging such a fund is called the general partner, and investors in the fund are called limited partners. Key features of private equity funds are: • Closed structure: Private equity funds are not continuously offered, but are offered to investors only during a defined fundraising period. Once fundraising is completed, funds are closed and illiquid for a specified term, typically ranging from 7 to 12 or more years depending on the strategy. The term may be extended by the general partner with limited partners' consent. • Commitment/drawdown: Limited partners invest in a private equity fund which has a commitment/drawdown structure. During the fundraising period, each limited partner makes an irrevocable upfront capital commitment of a specific amount to the fund. None of this capital is immediately invested; instead, limited partners only fund it upon request by the fund manager, referred to as a "". • Investment period: Funds can only make investments during a pre-specified investment period, typically the first three to six years of a fund. As the fund manager makes investments, it will make capital calls to "draw down" limited partners' com- Fig. 7: Illustrative life-cycle of a private equity mitments in order to fund each investment. fund • Timing of cash flows: Limited partners accept uncertainty The 'j-curve' of a private markets fund illustrates an investor's net cash flow experience over time over the timing and magnitude of cash flows into and out of Commitment a fund. Cash outflows are determined by the pace at which to fund Harvest period the fund manager makes investments. Cash distributions by the fund to limited partners typically come in the mid to later Investment period s s w r o o l

years of a fund's life, once the general partner has had time to t f s e h v s

work with and realize value from the underlying investments n a I c

whether through dividends, maturity, sale or other exit. Distri- Capital calls Distributions butions are at the discretion of the fund manager and can be Cumulative cash flows

highly dependent on prevailing debt and equity market condi- Year Year Year Year Year Year Year Year Year Year tions. 1 2 3 4 5 6 7 8 9 10 Source: UBS, as of February 2020 • "J-curve": The J-curve refers to the typical cumulative net cash flow profile of a fund investment from a limited partner's perspective (see Fig.7). In the early years, the limited partner experiences net cash outflows as he/she funds capital calls for investments, with limited inflows as investments are early in their life-cycle. In the middle years of a fund, the cumulative net cash outflow diminishes and begins to turn positive as the fund stops investing and begins to harvest (sell or extract value through dividends) early investments and distribute cash to limited partners. In the later years, the fund primarily dis- tributes cash to limited partners as investments are harvested.

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The shape of this cumulative net cash flow curve resembles the letter "J" hence the "J-curve". • Effective exposure levels and over-commitment: A limited partner's total commitment to a private equity fund will not translate into 100% investment exposure. The limited partner's net invested capital level can fall significantly below target (or full) commitment, because distributions can occur before all the committed capital is invested. Net effective investment levels of funds vary but have historically ranged from 50-80%. Limited partners can achieve more fully invested effective exposure levels in two ways: (1) over-committing to a single fund, which means committing more than the target allo- cation, or (2) pursuing a consistent strategy of ongoing commit- ments to multiple funds to achieve closer to 100% exposure. Neither approach is an exact science, and ongoing monitoring is required to assess effective exposure. • : Private equity funds charge a to allow the firm to pay its operating costs, and an incentive fee paid to the fund manager if the fund achieves returns above a specified hurdle or preferred rate of return. This fee is known as carried interest, and generally represents 20% of profits on the overall fund. This structure is intended to align the interests of the fund manager and its limited partners such that the manager only receives the incentive if the fund is profitable above a certain threshold. Key considerations when building private equity Fig. 8: IRR distribution across private equity strategies for vintage years 1993-2015 exposure Vintage year IRRs can vary widely Frequency Building up a private equity allocation requires following a few key 50% principles: 40% • Diversification: Investors should allocate to a number of private equity funds across geographies, managers, strategies 30% and vintage years (starting year of the fund). Strategy diversi- 20% fication reduces dependence on any single factor or strategy 10% exposure. Geographic diversification reduces dependence on 0% a single economy or region. Manager diversification reduces (5)-0% 0-5% 5-10% 10-15% 15-20% 20-25% 25-30% 30+% risk of over-exposure to the biases of any single fund manager. Buyout Growth Venture Capital Vintage year diversification ensures investors are exposed to Source: Cambridge Associates, UBS, as of February 2020 the opportunity set and market conditions across time, to mit- igate performance variance between funds launched in dif- ferent years (see Fig.8). • Long term commitment: Building exposure to private equity requires a long term commitment. After setting a target allo- cation, an investor must then source funds for investment, yet managers in preferred strategies and geographies may not be raising capital on the same schedule. Diversifying across vintage years further extends this process. Even after investors select and commit capital to funds, managers typically deploy that capital over multi-year investment periods. • Maintaining exposure: Given the unpredictability of private equity fund cash flows, managing a pro forma private equity portfolio to ensure consistent and sufficiently invested exposure can be challenging. As funds return capital through distribu- tions, investors must put that capital to work in other private equity funds or risk effective investment levels falling well below

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target allocations. In order to maintain private equity allocation levels near target, investors need to continually redeploy distri- butions into existing or new private equity funds, which require strong manager relationships and ongoing monitoring of the fundraising schedules of top tier managers. • Manager selection matters: Manager selection has a signif- Fig. 9: Public vs. private manager fund icant impact on performance in private equity. Performance returns varies greatly between the top and bottom quartile private PE managers exhibit higher return dispersion equity funds (see Fig.9). Returns also diverge significantly compared to traditional markets between funds from different vintage years. The performance in% differential arises because specific investments are unique to 80 each fund's portfolio, and therefore returns are highly idio- 60 syncratic. This dynamic underscores how important manager 40 selection is to achieving above average returns in private equity. 20 0 Risks of investing in private equity (20) Investors in private equity funds must consider the following risks. (40) Many of these factors can actually work in investors' favor as long as (60) Fixed Equities Distressed Real estate Buyout Venture expectations of investors and managers are set properly in advance. income debt capital

• Illiquidity: When investing, investors must be prepared to Source: Preqin, Bloomberg, UBS. Dispersion of fund returns relative to median performance. Data references 1995-2015 for private market accept significant illiquidity (10 years +). This illiquidity is what funds, 1995-2018 for traditional equity and funds allows access to these inefficient markets. Investors cannot expect to access their capital or receive distributions with any regularity. Their only potential for liquidity is to sell their stakes in the secondary market, where there may be no bid at all or they may have to sell at a significant discount to fair value, if the fund manager even permits. • Layered fee structure: Private equity fund managers charge both management fees (typically in the 1.5-2.0% range) and incentive fees (typically in the 15-20% range). These levels are high compared to traditional asset funds, but the incentive fee should align objectives as the manager only gets paid if the investor achieves attractive returns. Most funds specify a hurdle or preferred return below which the manager does not receive incentive pay. • Lack of control: Investors in private equity funds cede control over investment decisions, pace of investments and exits, strategic and operational matters, and other significant deci- sions to the third party fund manager. While this eliminates investors' ability to express displeasure with a manager deci- sions, ceding control gives the manager the necessary tools to try to deliver outperformance for investors. • Blind pool risk: Investors must make long-term commitments to private equity in advance, without knowing what the under- lying investments will be. This is known as blind pool risk. This dynamic can be mitigated through familiarity with the general partner and its track record as well as proper due diligence. • Limited disclosure: Disclosure on performance of underlying investments is periodic and can be more limited given that man- agers need time and flexibility to work with underlying com- panies and are focused on long-term value creation. Also, val- uation of private assets involves subjectivity and assumptions, and as such may not necessarily be indicative of long-term per- formance or potential.

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• Use of leverage: Certain private equity strategies such as buyout use significant leverage which poses potential default risk if the company encounters stress. Prudent leverage in the right situation, however, can help to enhance returns without much incremental risk. • Regulatory risk: Potential regulation on tightening disclo- sures, liabilities, tax treatments or use of leverage on fund managers may impact future strategy execution and ultimately returns. The bottom line As the private equity industry and opportunity set continues to grow, we expect higher penetration of the asset class across dif- ferent types of investors. For investors willing to accept the long time horizon, the illiquidity/higher complexity of the asset class, as well as the higher fee structure, the addition of private equity can drive attractive, differentiated returns typically not attainable in public investments. When building exposure, investors should identify how much illiquidity they are prepared to tolerate and size their portfolios accordingly. Importantly, to maximize the probability of success, investors should 1) ensure diversification across strategy, geography, manager and vintage year, 2) commit regularly to the asset class to maintain exposure, and 3) access best in class man- agers. In general, we view fund of funds or secondaries as a good starting point for first time investors. For more details on the asset class, please refer to the other CIO GWM publications on private markets listed at the beginning of this document.

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Non-Traditional Assets

Non-traditional asset classes are alternative investments that include funds, private equity, real estate, and managed futures (collectively, alternative investments). Interests of funds are sold only to qualified investors, and only by means of offering documents that include information about the risks, performance and expenses of alternative investment funds, and which clients are urged to read carefully before subscribing and retain. An investment in an alternative is speculative and involves significant risks. Specifically, these investments (1) are not mutual funds and are not subject to the same regulatory requirements as mutual funds; (2) may have performance that is volatile, and investors may lose all or a substantial amount of their investment; (3) may engage in leverage and other speculative investment practices that may increase the risk of investment loss; (4) are long-term, illiquid investments, there is generally no secondary market for the interests of a fund, and none is expected to develop; (5) interests of alternative investment funds typically will be illiquid and subject to restrictions on transfer; (6) may not be required to provide periodic pricing or valuation information to investors; (7) generally involve complex tax strategies and there may be delays in distributing tax information to investors; (8) are subject to high fees, including management fees and other fees and expenses, all of which will reduce profits.

Interests in alternative investment funds are not deposits or obligations of, or guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Corporation, the Federal Reserve Board, or any other governmental agency. Prospective investors should understand these risks and have the financial ability and willingness to accept them for an extended period of time before making an investment in an alternative investment fund and should consider an alternative investment fund as a supplement to an overall investment program.

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

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

Emerging Market Investments Investors should be aware that Emerging Market assets are subject to, amongst others, potential risks linked to currency volatility, abrupt changes in the cost of capital and the economic growth outlook, as well as regulatory and socio-political risk, interest rate risk and higher credit risk. Assets can sometimes be very illiquid and liquidity conditions can abruptly worsen. CIO GWM generally recommends only those securities it believes have been registered under Federal U.S. registration rules (Section 12 of the Securities Exchange Act of 1934) and individual State registration rules (commonly known as "Blue Sky" laws). Prospective investors should be aware that to the extent permitted under US law, CIO GWM may from time to time recommend bonds that are not registered under US or State securities laws. These bonds may be issued in jurisdictions where the level of required disclosures to be made by issuers is not as frequent or complete as that required by US laws. For more background on emerging markets generally, see the CIO GWM Education Notes, Emerging Market Bonds: Understanding Emerging Market Bonds, 12 August 2009 and Emerging Markets Bonds: Understanding Sovereign Risk, 17 December 2009. Investors interested in holding bonds for a longer period are advised to select the bonds of those sovereigns with the highest credit ratings (in the investment grade band). Such an approach should decrease the risk that an investor could end up holding bonds on which the sovereign has defaulted. Sub-investment grade bonds are recommended only for clients with a higher risk tolerance and who seek to hold higher yielding bonds for shorter periods only.

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Appendix

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Brazil: This publication is not intended to constitute a public offer under Brazilian law or a research analysis report as per the definition contained under the Comissão de Valores Mobiliários ("CVM") Instruction 598/2018. It is distributed only for information purposes to clients of UBS Brasil Administradora de Valores Mobiliários Ltda. and/or of UBS Consenso Investimentos Ltda., entities regulated by CVM. Canada: In Canada, this publication is distributed to clients of UBS Wealth Management Canada by UBS Canada Inc.. China: This report is prepared by UBS Switzerland AG or its offshore subsidiary or affiliate (collectively as "UBS Offshore"). UBS Offshore is an entity incorporated out of China and is not licensed, supervised or regulated in China to carry out banking or securities business. The recipient should not contact the analysts or UBS Offshore which produced this report for advice as they are not licensed to provide securities investment advice in China. UBS Investment Bank (including Research) has its own wholly independent research and views which at times may vary from the views of UBS Global Wealth Management. This report shall not be regarded as providing specific securities related analysis. The recipient should not use this document or otherwise rely on any of the information contained in this report in making investment decisions and UBS takes no responsibility in this regard. Czech Republic: UBS is not a licensed bank in the Czech Republic and thus is not allowed to provide regulated banking or investment services in the Czech Republic. Please notify UBS if you do not wish to receive any further correspondence. Denmark: This publication is not intended to constitute a public offer under Danish law. It is distributed only for information purposes to clients of UBS Europe SE, Denmark Branch, filial af UBS Europe SE, with place of business at Sankt Annae Plads 13, 1250 Copenhagen, Denmark, registered with the Danish Commerce and Companies Agency, under No. 38 17 24 33. UBS Europe SE, Denmark Branch, filial af UBS Europe SE is subject to the joint supervision of the European Central Bank ("ECB"), the German Central Bank (Deutsche Bundesbank), the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), as well as of the Danish Financial Supervisory Authority (Finanstilsynet), to which this publication has not been submitted for approval. UBS Europe SE is a credit institution constituted under German law in the form of a Societas Europaea, duly authorized by the ECB. France: This publication is distributed by UBS (France) S.A., French "société anonyme" with share capital of € 132.975.556, 69, boulevard Haussmann F-75008 , R.C.S. Paris B 421 255 670, to its clients and prospects. UBS (France) S.A. is a provider of investment services duly authorized according to the terms of the "Code Monétaire et Financier", regulated by French banking and financial authorities as the "Autorité de Contrôle Prudentiel et de Résolution". Germany: This publication is not intended to constitute a public offer under German law. It is distributed only for information purposes to clients of UBS Europe SE, Germany, with place of business at Bockenheimer Landstrasse 2-4, 60306 Frankfurt am Main. UBS Europe SE is a credit institution constituted under German law in the form of a Societas Europaea, duly authorized by the European Central Bank ("ECB"), and supervised by the ECB, the German Central Bank (Deutsche Bundesbank) and the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), to which this publication has not been submitted for approval. Greece: UBS Switzerland AG and its affiliates (UBS) are not licensed as a bank or financial institution under Greek legislation and do not provide banking and financial services in Greece. Consequently, UBS provides such services from branches outside of Greece, only. This document may not be considered as a public offering made or to be made to residents of Greece. Hong Kong: This publication is distributed to clients of UBS AG Hong Kong Branch by UBS AG Hong Kong Branch, a licensed bank under the Hong Kong Banking Ordinance and a registered institution under the Securities and Futures Ordinance. UBS AG Hong Kong Branch is incorporated in Switzerland with limited liability. India: UBS Securities India Private Ltd. (Corporate Identity Number U67120MH1996PTC097299) 2/F, 2 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai (India) 400051. Phone: +912261556000. It provides brokerage services bearing SEBI Registration Number INZ000259830; merchant banking services bearing SEBI Registration Number: INM000010809 and Research Analyst services bearing SEBI Registration Number: INH000001204. UBS AG, its affiliates or subsidiaries may have debt holdings or positions in the subject Indian company/companies. Within the past 12 months, UBS AG, its affiliates or subsidiaries may have received compensation for non- securities-related services and/or non-securities services from the subject Indian company/companies. The subject company/companies may have been a client/clients of UBS AG, its affiliates or subsidiaries during the 12 months preceding the date of distribution of the research report with respect to investment banking and/or non-investment banking securities-related services and/or non-securities services. With regard to information on associates, please refer to the Annual Report at: http://www.ubs.com/global/en/about_ubs/investor_relations/

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Appendix annualreporting.html Indonesia, Malaysia, Philippines, Thailand: This material was provided to you as a result of a request received by UBS from you and/or persons entitled to make the request on your behalf. Should you have received the material erroneously, UBS asks that you kindly destroy/delete it and inform UBS immediately. Any and all advice provided and/or trades executed by UBS pursuant to the material will only have been provided upon your specific request or executed upon your specific instructions, as the case may be, and may be deemed as such by UBS and you. The material may not have been reviewed, approved, disapproved or endorsed by any financial or regulatory authority in your jurisdiction. The relevant investments will be subject to restrictions and obligations on transfer as set forth in the material, and by receiving the material you undertake to comply fully with such restrictions and obligations. You should carefully study and ensure that you understand and exercise due care and discretion in considering your investment objective, risk appetite and personal circumstances against the risk of the investment. You are advised to seek independent professional advice in case of doubt. Israel: UBS is a premier global financial firm offering wealth management, asset management and investment banking services from its headquarters in Switzerland and its operations in over 50 countries worldwide to individual, corporate and institutional investors. In Israel, UBS Switzerland AG is registered as Foreign Dealer in cooperation with UBS Wealth Management Israel Ltd., a wholly owned UBS subsidiary. UBS Wealth Management Israel Ltd. is a Portfolio Manager licensee which engages also in Investment Marketing and is regulated by the Israel Securities Authority. This publication is intended for information only and is not intended as an offer to buy or solicitation of an offer. Furthermore, this publication is not intended as an investment advice and/or investment marketing and is not replacing any investment advice and/or investment marketing provided by the relevant licensee which is adjusted to each person needs. The word "advice" and/or any of its derivatives shall be read and construed in conjunction with the definition of the term "investment marketing" as defined under the Israeli Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995.Italy: This publication is not intended to constitute a public offer under Italian law. It is distributed only for information purposes to clients of UBS Europe SE, Succursale Italia, with place of business at Via del Vecchio Politecnico, 3-20121 Milano. UBS Europe SE, Succursale Italia is subject to the joint supervision of the European Central Bank ("ECB"), the German Central Bank (Deutsche Bundesbank), the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), as well as of the Bank of Italy (Banca d’Italia) and the Italian Financial Markets Supervisory Authority (CONSOB - Commissione Nazionale per le Società e la Borsa), to which this publication has not been submitted for approval. UBS Europe SE is a credit institution constituted under German law in the form of a Societas Europaea, duly authorized by the ECB. Jersey: UBS AG, Jersey Branch, is regulated and authorized by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. Where services are provided from outside Jersey, they will not be covered by the Jersey regulatory regime. UBS AG, Jersey Branch is a branch of UBS AG a public company limited by shares, incorporated in Switzerland whose registered offices are at Aeschenvorstadt 1, CH-4051 Basel and Bahnhofstrasse 45, CH 8001 Zurich. UBS AG, Jersey Branch's principal place business is 1, IFC Jersey, St Helier, Jersey, JE2 3BX. Luxembourg: This publication is not intended to constitute a public offer under Luxembourg law. It is distributed only for information purposes to clients of UBS Europe SE, Luxembourg Branch, with place of business at 33A, Avenue J. F. Kennedy, L-1855 Luxembourg. UBS Europe SE, Luxembourg Branch is subject to the joint supervision of the European Central Bank ("ECB"), the German Central bank (Deutsche Bundesbank), the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), as well as of the Luxembourg supervisory authority (Commission de Surveillance du Secteur Financier), to which this publication has not been submitted for approval. UBS Europe SE is a credit institution constituted under German law in the form of a Societas Europaea, duly authorized by the ECB. Mexico: This information is distributed by UBS Asesores México, S.A. de C.V. ("UBS Asesores"), an affiliate of UBS Switzerland AG, incorporated as a non-independent investment advisor under the Securities Market Law due to the relation with a Foreign Bank. UBS Asesores is a regulated entity and it is subject to the supervision of the Mexican Banking and Securities Commission ("CNBV"), which exclusively regulates UBS Asesores regarding the rendering of portfolio management, as well as on securities investment advisory services, analysis and issuance of individual investment recommendations, so that the CNBV has no surveillance faculties nor may have over any other service provided by UBS Asesores. UBS Asesores is registered before CNBV under Registry number 30060. You are being provided with this UBS publication or material because you have indicated to UBS Asesores that you are a Sophisticated Qualified Investor located in Mexico. The compensation of the analyst(s) who prepared this report is determined exclusively by research management and senior management of any entity of UBS Group to which such analyst(s) render services. Nigeria: UBS Switzerland AG and its affiliates (UBS) are not licensed, supervised or regulated in Nigeria by the Central Bank of Nigeria or the Nigerian Securities and Exchange Commission and do not undertake banking or investment business activities in Nigeria. Portugal: UBS Switzerland AG is not licensed to conduct banking and financial activities in Portugal nor is UBS Switzerland AG supervised by the portuguese regulators (Bank of Portugal "Banco de Portugal" and Portuguese Securities Exchange Commission "Comissão do Mercado de Valores Mobiliários"). Singapore: This material was provided to you as a result of a request received by UBS from you and/or persons entitled to make the request on your behalf. Should you have received the material erroneously, UBS asks that you kindly destroy/delete it and inform UBS immediately. Clients of UBS AG Singapore branch are asked to please contact UBS AG Singapore branch, an exempt financial adviser under the Singapore Financial Advisers Act (Cap. 110) and a wholesale bank licensed under the Singapore Banking Act (Cap. 19) regulated by the Monetary Authority of Singapore, in respect of any matters arising from, or in connection with, the analysis or report. Spain: This publication is not intended to constitute a public offer under Spanish law. It is distributed only for information purposes to clients of UBS Europe SE, Sucursal en España, with place of business at Calle María de Molina 4, C.P. 28006, Madrid. UBS Europe SE, Sucursal en España is subject to the joint supervision of the European Central Bank ("ECB"), the German Central bank (Deutsche Bundesbank), the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), as well as of the Spanish supervisory authority (Banco de España), to which this publication has not been submitted for approval. Additionally it is authorized to provide investment services on securities and financial instruments, regarding which it is supervised by the Comisión Nacional del Mercado de Valores as well. UBS Europe SE, Sucursal en España is a branch of UBS Europe SE, a credit institution constituted under German law in the form of a Societas Europaea, duly authorized by the ECB. Sweden: This publication is not intended to constitute a public offer under Swedish law. It is distributed only for information purposes to clients of UBS Europe SE, Sweden Bankfilial, with place of business at Regeringsgatan 38, 11153 Stockholm, Sweden, registered with the Swedish Companies Registration Office under Reg. No 516406-1011. UBS Europe SE, Sweden Bankfilial is subject to the joint supervision of the European Central Bank ("ECB"), the German Central bank (Deutsche Bundesbank), the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), as well as of the Swedish supervisory authority (Finansinspektionen), to which this publication has not been submitted for approval. UBS Europe SE is a credit institution constituted under German law in the form of a Societas Europaea, duly authorized by the ECB. Taiwan: This material is provided by UBS AG, Taipei Branch in accordance with laws of Taiwan, in agreement with or at the request of clients/prospects. UAE: UBS is not licensed in the UAE by the Central Bank of UAE or by the Securities & Commodities Authority. The UBS AG Dubai Branch is licensed in the DIFC by the Dubai Financial Services Authority as an authorised firm. UK: This document is issued by UBS Wealth Management, a division of UBS AG which is authorised and regulated by the Financial Market Supervisory Authority in Switzerland. In the , UBS AG is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of regulation by the Prudential Regulation Authority are available from us on request. A member of the London Exchange. This publication is distributed to retail clients of UBS Wealth Management. Version 06/2019. CIO82652744

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