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Monthly Investment GuidePortfolio Advisory GroupApril 2010

Private Wealth Management

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Contributors

Anthony RothHead, PWM Portfolio Advisory Group

Richard Hollmann, CFA®

Senior Portfolio Construction Specialist

Ronald Colonna, CFA®

Senior Portfolio Construction Specialist

Christian CapassoBusiness Analyst

Andrea FisherBusiness Analyst

Sujata HingoraniBusiness Manager

UBS Wealth Management Americas Investment Committee

Stephen Freedman, CFA®

Global Investment Strategist, Wealth Management Research-Americas (WMR-A)

Brad GewehrHead, Macro and Fixed Income, WMR-A

Jim HausmannHead, Market Investments and Institutional Platforms

Simeon Hyman, CFA®

Head, Investment Strategy and Manager Research, Investment Solutions

Anthony RothHead, 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.

Members of the PWM Portfolio Advisory Group


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Introduction

The Private Wealth Management Portfolio Advisory Group (PWM PAG) is pleased to provide our valued clients the April 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, including 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, provide 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 April 12, 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.

PWM Portfolio Advisory GroupMonthly Investment Guide


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Economic Check-Up : Taking Healthcare Reform for a Spin

In the wake of a tumultuous first year in office, President Obama delivered on one of his most polarizing campaign promises by recently signing a comprehensive healthcare bill into law. This is a big deal, and not just because Joe Biden said so. In addition to the 32 million currently uninsured Americans who will be covered under the new legislation, the U.S. economy stands to benefit in the short term as the bill's passage enables the administration to focus on the issues which still threaten the economic recovery.

For the most part, recent economic data have been overwhelmingly positive, reflecting an entrenched expansion. For instance, consumer confidence has rebounded from its February low and appears to have stabilized. Activity in both the manufacturing and service sectors has increased, outpacing analyst expectations for March. At the same time, banks have eased lending standards, supporting the trend of an ongoing normalization of credit conditions. Even the employment picture has brightened: private payrolls posted a gain for the third consecutive month in March and construction jobs rose for the first time since June 2007, while the unemployment rate remained steady at 9.7%, slightly below its cyclical high of 10.1% in October 2008.

In the midst of this raft of optimistic data, the housing market, whose collapse initially heralded the global financial crisis, continues to flag, as evidenced by the disappointing existing and new home sales numbers released late last month. Compounding the issues facing housing is the end of the Fed's USD 1.25 trillion mortgage-backed securities purchase plan. Although originally set to expire in November 2009, the program finally came to a close at the end of March. Now that this measure to support the housing recovery has terminated, there is some concern that mortgage rates will push higher, undermining housing affordability. Indeed, the 10-year note's yield recently reached the 4% threshold for the first time since last June. As such, we expect further intervention by policymakers to repair a housing market still in turmoil. We feel that the administration's recent legislative success will give it the leverage to continue its assault on the problems ailing the housing market, which could become a political liability if unaddressed.

Lastly, we caution against mistaking the relatively positive short-term check-up on the cyclical economic rebound for long-term economic stability, as the severe headwinds of fiscal and global trade imbalances remain. Given these factors and our anticipation of largely non-directional markets for the foreseeable future, we have made a number of changes to our tactical asset allocation models. First off, we have reduced our moderate overweight to equities as we currently see more limited upside for stocks. We do, however, maintain our favorable view for risk assets overall, as evidenced by our increased overweight to commodities. Emerging markets also remains one of our strongest conviction calls. Finally, within U.S. equities, we have moved mid-cap to an overweight while, on a sector level, dropping materials and consumer staples to neutral and upgrading financials to an overweight.

Anthony RothHead, Private Wealth Management Portfolio Advisory GroupUBS Wealth Management Americas

Table of Contents & Editorial

Global Outlook

Economic andMarket Snapshot

Monthly Spotlight: Municipals: Crisisor Opportunity?

Strategic and Tactical Asset Allocation Models

Tactical Allocation Summary

Short- and Long-Term Investment Ideas

ImportantInformation and Glossary

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6

10

12

16

18

24


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Source: Economic Outlook immediately above reflects the views and opinions expressed in the UBS Wealth Management Research (WMR) Investment Strategy Guide as of Apr. 1, 2010.

Global OutlookEconomic Summary

Most economic data released over the past month continued to bring positive news, providing more evidence of a sustained U.S. recovery. The Consumer Confidence Index rebounded after the previous month's decline as consumers appeared less pessimistic about the labor market and the overall economy. In addition, consumer expectations, a leading indicator, reported a 7.3-point gain, pointing toward potential further improvement in April.

While consumer confidence bounced back, consumer spending ticked upward slightly and personal income remained flat versus the previous month. On the manufacturing front, inventories soared in March, indicating increased restocking. The ISM Manufacturing Index registered 59.6, easily beating the analyst consensus of 56.3. The Non-Manufacturing Index, aided by an increase in export orders from emerging markets, also surpassed expectations.

Within housing, disappointing existing and new home sales figures confirmed that the housing market is slumping. Retailers, on the other hand, showed surprising resilience, reporting a 3.7% sales gain for February, the biggest increase since November 2007.

The labor market exhibited mild signs of improvement as the four-week moving average for jobless claims fell slightly in March to its lowest level since late 2008. Overall unemployment remained unchanged at 9.7%.

Economic Outlook

Government stimulus packages and a moderation in inventory depletion were the catalysts for a significant rise in 4Q U.S. GDP growth. We expect the pace of GDP growth to slow in 1Q and remain at more moderate levels throughout the year as the inventory boost subsides and stimulus programs draw to a close. At the same time, many corporations are still looking to deploy built-up cash reserves amidst improved consumer spending. These factors lead us to believe that the U.S. expansion is not only sustainable, but more robust than originally expected. Indeed, UBS WMR maintains its forecast for 3.0% U.S. GDP growth for both 2010 and 2011 while increasing its probability of upside risks to its forecasts.

While our confidence in the U.S. recovery is increasing, we are becoming less enthusiastic about growth prospects in the Eurozone. The recent financial crises in Greece and other E.U. nations have put considerable pressure on the euro and further impacted growth prospects across the region. We have therefore reduced our E.U. 2010 growth forecast from 2.4% to 1.5%. In contrast, the pace of expansion in Asia appears to be accelerating on the back of a recovery in net exports and an increase in consumer spending. We expect China to continue to lead the region; in fact, UBS WMR recently boosted its China 2010 GDP forecast from 9.0% to 10.0%.

As the expansion in the U.S. continues, policymakers will need to determine the timing and pace of an inevitable move away from current near-zero interest rates. In our view, the Fed will be hesitant to commence this process in the near term, and we therefore do not expect the first Fed funds rate increase prior to 3Q10. Moreover, we predict that the initial tightening will be gradual, thus minimizing any risk of dampening the recovery. This limited policy action should keep inflation low in the near future: we project inflation rates of 1.6% and 1.5% for 2010 and 2011, respectively.

UBS WMR sees upside risk to its consumer spending forecasts

UBS WMR projects the Fed's first interest rate hike to occur in 3Q10, with the European Central Bank's first hike to follow toward year-end

The wind-down of key stimulus programs and potentially rising mortgage rates could put pressure on housing markets

Commodity exporters are experiencing strong growth, fueling expansion prospects for emerging nations

A slight increase in the Consumer Sentiment Index provided further evidence that consumers are becoming more optimistic



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Global Outlook

Source: Market Outlook immediately above reflects the views and opinions expressed in the UBS Wealth Management Research (WMR) Investment Strategy Guide as of Apr. 1, 2010.

We recommend that investors with large allocations to cash shift to short-term bonds given our 3-month Libor forecast

UBS WMR's upgrade of the financial sector leads us to slightly reduce our overweight to growth stocks

An increase in M&A activity has helped boost returns for mid- and small-cap stocks

At current price levels, we see more limited upside for global equity markets

Market Summary

Building off last month's momentum, U.S. equity markets surged in March, with the S&P 500 returning 6.0% for the month and 5.4% for 1Q. The strongest performance continues to come from mid- and small-cap stocks as represented by the Russell Mid-Cap Index (up 7.1%) and the Russell 2000 (up 8.1%).

The MSCI EAFE Index rose 5.8%, representing a strong rebound for non-U.S. equity markets. The MSCI Europe Index bounced back as well, returning 6.2%. Emerging markets was the best performer: the MSCI Emerging Markets Index rose 8.0%. The MSCI BRIC Index recorded a 7.2% gain.

Bond markets turned mostly negative in March. The Barclays Aggregate Index fell 0.1% while the Barclays Muni Index dropped 0.2%. On the other hand, the increased appetite for risk benefited high yield markets, as evidenced by the Barclays U.S. Aggregate Index's 3.1% gain.

Market Outlook

Following another strong month for equity markets, valuations have moved within fair-value range, with a more vigorous earnings recovery appearing to be priced in. At current levels, we believe that it will be difficult for equity markets to maintain the torrid pace of the past year and that returns are likely to be more muted. We have reduced the moderate overweight of our equity allocation and continue to advocate that investors be more selective by focusing on the particular sectors and regions which, in our view, provide greatest upside potential.

Within U.S. equity markets, we have moved mid-cap stocks to a moderate overweight by slightly reducing our overweight to large-caps. Valuations as well as earnings trends still favor large-caps, but we forecast that a pick-up in M&A activity will be a boon to mid-cap stocks. In contrast, we remain underweight small-caps as we believe that the benefits of increased M&A activity will be somewhat overshadowed by the negative ramifications of the recent healthcare legislation; smaller companies have a larger percentage of uninsured employees and will thus incur additional expenses as they implement the requirements of the healthcare bill. On a sector level, we maintain our largest overweight to technology. In addition, we have upgraded financials to a moderate overweight as valuations remain attractive and credit conditions continue to normalize, creating a recipe for potential relative outperformance by the banking industry.

Emerging markets remains our most favored region in non-U.S. equity markets. We view the recent Chinese and Indian tightening measures, which have led to market jitters, as prudent steps on the path to sustained expansion. Additionally, valuations appear fair and supported by the cyclical recovery taking place. As for non-U.S. developed equities, valuations are attractive, but growth prospects are less favorable given the financial predicament in Greece and the corresponding pressure on the euro. We have therefore reduced our weighting in the region.

We believe the recent relative underperformance within commodity markets presents an attractive entry point, leading us to increase our overweight to this asset class. Global growth prospects remain strong and supportive, particularly from emerging markets such as China. We also expect developed nations to manifest increased demand for commodities as a result of the inventory restocking which we expect to unfold in the latter half of 2010.

Within fixed income, we remain overweight credit sectors. High yield is one of our overweightsas investor demand and an improved default outlook continue to support the asset class. We also remain overweight preferred securities, favoring those with floating rates and those with above-average coupons to provide protection in a rising rate environment. We maintain a duration underweight as the risk of rising interest rates remains high.

Emerging markets paced non-U.S. equity regions, rising 8.0% in March

Emerging markets equity remains one of our strongest conviction calls


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Economic Snapshot

In % 2007 2008 2009 2010f 2011f

Real GDP 2.1 0.4 -2.4 3.0 3.0

1.5

9.5

2.0

n/a

CPI 2.9 3.8 -0.3 1.6

10-Yr Treasury (annual avg.) 4.6 3.7 3.9 4.5

Unemploy-ment 4.6 5.8 9.3 9.6

Fed Funds (year-end) 5.0 1.9 0.2 0.5

GDP Growth Inflation

11f

2.8

1.5

1.9

-0.2

1.4

4.0

1.5

In % 09 10f 11f 09 10f

World -1.0 3.7 3.8 1.5 2.6

U.S. -2.4 3.0 3.0 -0.3 1.6

Eurozone -4.0 1.5 2.2 0.2 1.2

China 8.7 10.0 8.7 -0.7 3.0

Switzerland -1.5 2.5 2.1 -0.5 1.3

Canada -2.6 3.2 3.5 0.3 1.5

Japan -5.2 2.0 1.4 -1.4 -1.6

Housing prices are showing signs of bottoming out

f: Forecast. Source: UBS WMR Forecast Tables, as of Apr. 6, 2010

U.S. Economic Forecasts

f: Forecast. Source: UBS WMR Forecast Tables, as of Mar. 29, 2010

GDP Growth and Inflation Forecasts

Source: Thomson Datastream as of Mar. 30, 2010

Housing Prices GDP Components and Growth

UBS WMR expects unemployment to remain elevated through 2011

We significantly lowered our 2010 Eurozone growth forecast from 2.4% to 1.5%


Source: Datastream and UBS WMR, as of Apr. 1, 2010

Residential real estate investment (left)

Residential real estate investment (hist. avg.) (left)

Homeowner vacancy rate (right)

0

1

2

3

4

5

6

7

8

Q11950

Q11960

Q11970

Q11980

Q11990

Q12000

Q12010

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5in % of GDP %

-15

-10

-5

0

5

10

Q2 2004 Q2 2005 Q2 2006 Q2 2007 Q2 2008 Q2 2009 Q2 2010

GovernmentNet exportsInventoriesResidential investment

Investment in equipment & softwareInvestment in nonresidential structuresConsumptionReal GDP (% q/q annualized)

UBS WMR forecasts

% q/q annualized

Fiscal stimulus and inventories provided a strong boost to GDP in 4Q


7

Outstanding Debt vs. Real GDP

Economic Snapshot

'00 '01 '02 '03 '04 '05 '06 '07 '08 '090

10

20

30

40

50

60

70

80

90

CBOE Market Volat ilit y Index - Price Index (AVG) CBOE Market Vola t ilit y Index - Price Index

Recent data have shown that deleveraging can be consistent with positive real GDP growth

The VIX measures expected equity market volatility and is often used as a measure of investor sentiment

While the gap between government outlays and receipts has grown significantly over the past few years, it has recently shown signs of stabilizing

Source: Thomson Datastream, UBS WMR, as of Mar. 30, 2010

Source: Thomson Datastream, UBS WMR, as of Mar. 30, 2010

Stabilizing U.S. Federal Deficit

Source: FactSet, as of Mar. 31, 2010

Volatility Index (VIX)

Global Manufacturing Recovery Supportive of Commodities

Source: Bloomberg, UBS WMR, as of Mar. 30, 2010

VIX levels are below their 10-year average

Domestic private nonfinancial debt outstanding (left)Real GDP (right)

(8)

(6)

(4)

(2)

0

2

4

6

8

10

Q1 1953 Q1 1963 Q1 1973 Q1 1983 Q1 1993 Q1 2003(8)

(6)

(4)

(2)

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2

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6

8

10Yearly change in % y/y rate % y/y rate

US federal government receiptsUS federal government outlays

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5

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25

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Q1 1960 Q1 1970 Q1 1980 Q1 1990 Q1 2000 Q1 2010

in % of GDP

30

35

40

45

50

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60

65

'03 '04 '05 '06 '07 '08 '09

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

Global Business Confidence (Global Manufacturing PMI JP Morgan), (left)

DJ UBS Commodity index (right)

A pick-up in manufacturing activity should provide further support for commodity prices


8

Market Snapshotas of March 31, 2010

Returns

1 Month YTD Trailing 12 Mos

49.77

Russell 1000 Growth 5.78 4.65 49.75

Russell 1000 Value 6.51 6.78 53.56

Russell Mid-Cap Growth

6.84 7.67 63.00

Russell Small-Cap Growth

7.94 7.61 60.32

Russell Small-Cap Value 8.32 10.02 65.07

Russell Mid-Cap Value 7.28 9.61 72.41

Non-U.S. Equity

MSCI EAFE 5.81 0.22 49.99

MSCI Europe 6.18 -2.33 51.11

MSCI Japan 4.19 7.32 35.64

MSCI Emerging Markets

7.95 2.11 77.26

Fixed Income

Real Estate

NAREIT 9.42 9.57 98.88

Barclays Aggregate -0.12 1.78 7.69

10-Year Treasury -1.92 1.98 -2.12

Barclays Muni Bond Index

-0.24 1.25 9.69

Barclays U.S. High Yield Index

3.13 4.62 56.18

JP Morgan Non-U.S. Dollar

-2.20 -1.94 8.18

6.03 5.39

Asset Class

U.S. Equity Indexes

S&P 500

20.53-5.03-1.24DJIA Commodities Index

-9.12-2.34-2.34TASS Index of CTAs3

-8.9427.4326.241Cambridge U.S. Pvt Equity Index

Currency Prices UBS WMR 12 Mo.

Forecast

1 Mo. %

Spot Price

6.500.006.83USD | CNY

105.005.1593.44USD | JPY

82.516.129.66Base Metals

1Cambridge U.S. Pvt Equity is a quarterly index, one month return is represented by the Q3 2009 return2Data as of Sept. 30, 20093Data as of Feb. 26, 2010

n/a0.8881.29U.S. Dollar Index

1.53-0.851.35EUR | USD

1.70-0.361.52GBP | USD

0.95-4.011.01USD | CAD

0.93-1.891.05USD | CHF

-11.79-16.01-8.04Grains

23.732.341.14Precious Metals

32.803.474.70Crude Oil

6.58-8.29-3.21Energy

Commodity Indexes

12.661.451.69HFRI Fund of Funds Index

22.64

Trailing 12 Mos

2.56

YTD

2.70

1 Month

Returns

HFRI Fund Wgt. Composite

Alternative Investments

Asset Class

European equities bounced back in March but fiscal concerns within the region remain

High yield securities continue to gain traction as risk appetite increases

U.S. small-cap stocks were the strongest performers in March

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


Base metals significantly outperformed precious metals


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Market Snapshot

Sector MTD YTDTrailing 12 Mos

Financials 8.8% 10.8% 80.4%

Info. Tech. 6.8% 1.7% 56.4%

Cons. Disc. 7.7% 10.0% 67.1%

Cons. Staples 3.6% 5.0% 31.7%

Utilities 2.4% -4.6% 15.6%

Materials 7.6% 2.4% 53.0%

Healthcare 2.4% 2.9% 31.7%

Industrials 8.8% 12.5% 68.6%

Energy 2.9% 0.1% 26.7%

Telecom 5.4% -5.7% 5.8%

Distressed funds have outperformed year-to-date

We favor technology, energy and financial sectors

Source: FactSet, as of Mar. 31, 2010

U.S. Equity: S&P Sector Performance

Source: Hedge Fund Research, as of Mar. 31, 2010

Hedge Fund Research, Inc. Returns

YTD MTD

Distressed

Equity Hedge

Event Driven

Relative Value

Fund of Funds

Macro

Source: Bloomberg, DataStream, as of Mar. 30, 2010

China Becoming The Key Driver For Commodities

Cash Holdings on Corporate Balance Sheets

Source: Federal Reserve, UBS WMR, as of Apr. 1, 2010

China has a significant stake in the growth in global commodity demand

0%

10%

20%

30%

40%

50%

Iron

Ore

Coa

l

Cot

ton

Cop

per

Alu

min

um

Soyb

eans

Cor

n

Oil

60%

8%

9%

10%

11%

12%

13%

14%

15%

'80 '85 '90 '95 '00 '05

Cash to Financial Assets (U.S. nonfinancial corporates)Average

0% 1% 2% 3% 4% 5%

`

U.S. companies appear to be more actively seeking opportunities to employ built-up cash reserves


10

UBS WMR Treasury rate forecast - one year time horizon

Source: This material reflects the views and opinions expressed in the UBS WMR Investment Strategy Guide as of Apr. 1, 2010; UBS WMR U.S. Fixed Income Update as of Apr. 6, 2010; and WMR Municipal Report, as of Mar. 31, 2010. The information stated on pages 10 and 11 is the result of analysis completed by UBS PWM Portfolio Advisory Group.

Monthly SpotlightMunicipals: Crisis or Opportunity?


Source: UBS WMR interest rates and bond markets as of Mar. 22, 2010. For informational purposes only.

Figure 1: U.S. Interest Rate Forecasts

UBS WMR lowered its 12-month forecasts on 2-and 5-year Treasuries by 25bps.

Mar. 30, 2010

In 3 months

In 6 months

3-month LIBOR 0.29 0.30 0.75

1.50

3.25

4.25

5.00

1.25

1.25

2.75

4.00

4.75

In 12 months

2-year Treasury 1.06 2.25




Figure 2: Sensitivity of Total Returns on 'A'-Rated Munis

Note: Approximate total return (income plus price change) over a one-year time horizon. 1Muni horizon yield assumes UBS WMR Treasury rate forecast and an historical average 'AAA'-rated muni-to-Treasury ratio since 1991. Roll down effect due to the passage of time is considered. 2Muni horizon price assumes that the original bond price was par. Source: UBS WMR as of Mar. 30, 2010.

Maturity

'A'-Rated Muni Yield

Horizon Yield1

Horizon Price1

1.95 99.26198.68799.39895.322

2.773.915.08

Total ROR2-year 1.31 0.5855-year 2.42 1.12910-year 3.83 3.24930-year 4.77 0.162

Though state and local governments continue to struggle with thelingering effects of the "great recession", we believe that there are attractive opportunities in the municipal bond market. Indeed, while UBS WMR expects state and local governments to lag the broader economic recovery, we feel that recent fears over a municipal meltdown are overblown and have been exacerbated by the constantwave of negative press. We expect the emergence of key factors, such as tight tax-exempt supply and the prospect of higher future tax rates, to bode well over the longer term for municipal bonds.

Current State of MunicipalsMunicipal bond valuations depend highly on the issuer's ability to generate revenue, predominately through income, sales and property tax receipts. In the economic downturn, these sources of revenuewere significantly impaired due to weak labor markets, depressedconsumer consumption and a severe downturn in housing. Further, municipals continue to be strained by increased service demands as a result of high unemployment and the depletion of reserve "rainy day funds" given price declines on investments following the historic downturn in capital markets. This has lead to heightened concernregarding credit risk and the ability of municipal issuers to service their outstanding debt.

OutlookUBS WMR has identified several long-term trends which it believes will support the municipal space. First and foremost, Moody's and Fitch have announced plans to move forward with their respectiverating recalibration processes to shift to a global rating system that assesses municipal bonds on a scale that is comparable with corporate securities. These actions should boost a large number of municipal issuer credit ratings without, of course, any change to the underlying fundamentals. In essence, this means that many municipal issuers will no longer appear underrated relative to corporate bonds, which may renew investor confidence and provide a tailwind for the sector.

In addition, the upper income tax cuts enacted under the Bush administration are set to expire at the end of 2010, reverting to the pre-2001 income tax rate of 39.6%. Higher tax rates applied to taxable investment income should increase demand for tax-exempt muni bonds. This should provide a catalyst for appreciation as we believe that the market is yet to price in the full impact of higher federal income taxes.

Build America Bond (BAB) taxable muni issuance has risen to nearly 30% of total new issue volume, therefore reducing the available supply of tax-exempt munis (see Figure 3). While demand has stayed strong, tight supply of traditional tax-exempt securities due to BAB issuance has supported prices at the longer end of the curve.

While we expect Treasury yields to trend higher over the next year and beyond, we believe the municipal market will hold up better on a

BABs market share is nearly 30% of total new issue supply.

Source: UBS WMR, MMD Interactive, as of Mar. 30, 2010. For informational purposes only.

Figure 3: BABs New Issuance (USD billions)

7.6

2.7

5.03.5

9.5

6.7

12.5

7.5 7.56.1

6.9

11.8

0

5

10

15

20

25

30

35

Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.

BABs (bln's) BABs/total muni%


11

1.0

2.0

3.0

4.0

5.0

6.0

Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10

AAA GO 5 yr AAA GO 10 yr AAA GO 30 yr

Figure 6: S&P Default Rates, Muni vs. U.S. Corporates15-year cumulative default rate

relative basis. As described previously, higher tax rates and tight supply will likely act as a significant counterweight to these effects.

Investing in MunicipalsWithin municipals, we currently favor 7- to 12-year maturity bonds as we feel that this range provides a balance of maximizing yield while limiting interest rate volatility. In addition, we prefer defensive sectors such as pre-refunded, essential purpose revenue in the water/sewer and public utility sectors, general obligation and special tax bonds. 'A'-rated munis in high-quality sectors may also present an opportunity since potential spread compression over 'AAA' could offset the negative effects of a rate increase. Lastly, 'BBB'-rated munis have exhibited low historical default rates and may offer value for investors with a higher risk appetite (see Figure 6).

High Yield Municipals - Despite the heightened credit concerns, we continue to favor an allocation to high yield municipals for investors willing to accept a higher degree of credit risk and price volatility. This segment of the market offers attractive tax-free yields while, like their investment grade counterparts, exhibiting a significantly lower default rate versus other similarly-rated fixed income sectors. We recommend exposure through a diversified and professionally managed open-end or closed end mutual fund.

State-Specific - State-specific municipal strategies, while highly tax efficient, may not be warranted for residents of states hit hardest by the economic downturn. Heightened credit risks in these states places a premium on diversifying an individual's muni allocation by purchasing out-of-state bonds. In addition, residents of smaller issuance states should forego state-specific tax benefits in favor of a nationally supplemented portfolio.

Municipal Bond ImplementationActive Management - Separately managed accounts provide highly tax-efficient, professionally managed municipal strategies that can be highly customized. By contrast, open and closed-end mutual funds, while less tax efficient, provide significant diversification and may provide a particularly attractive means to invest in lower-rated bonds.

Passive Management - Passively managed, high-quality muni bond ladders can be a cost-efficient investment option for longer-term investors. In addition, ETFs offer a low-cost, federally tax-exempt and diversified exposure to the muni market. However, investors should note that ETFs provide broad exposure and do not allow investors to implement specific short-term, thematic investment views.

ConclusionWe believe that investment opportunities in municipals exist forprudent investors. Overall, we expect the transition to a global rating scale, higher future tax rates and limited tax-exempt municipal supply to be supportive of prices over the longer term. Due to the widerange of credit qualities available and diminished role of bond insurance, we recommend investors focus on issuer credit qualitywhen selecting investments.

Monthly SpotlightMunicipals: Crisis or Opportunity?

Source: This material reflects the views and opinions expressed in the UBS WMR Investment Strategy Guide as of Apr. 1, 2010; UBS WMR U.S. Fixed Income Update as of Apr. 6, 2010; and WMR Municipal Report, as of Mar. 31, 2010. The information stated on pages 10 and 11 is the result of analysis completed by UBS PWM Portfolio Advisory Group.

Figure 4: Muni Credit Quality Spreads (bps)Credit spreads remain elevated compared to history

Figure 5: AAA GO 5, 10 and 30-Yr. Yields (bps)

Source: UBS WMR, MMD Interactive as of Mar. 30, 2010.

Source: UBS WMR, MMD Interactive as of Feb. 26, 2010.

0.00%

0.07%

0.11%

0.37%

0.16%

0.69%

1.21%

3.34%

8.08%

4.21%

AAA

AA

A

BBB

IG

Municipal U.S. Corporate

Source: UBS WMR, S&P, as of Mar. 30, 2010.

0

50

100

150

200

250

300

350

Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10

BAA GO 10 yr - AAA GO 10 yrA GO 10 yr - AAA GO 10 yrAA GO 10 yr - AAA GO 10 yravg for BAA - AAAavg for A - AAAavg for AA - AAA


12

Private Wealth Management Asset Allocation Models

Portfolios with net consumption >5% with non-traditional asset classes

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 Apr. 12, 2010. See page entitled, Important Information: UBS Strategic and Tactical Asset Allocation Models for information regarding UBS's process for developing the allocation models presented. Estimated forward-looking portfolio analytics are based on UBS's estimated forward-looking returns and standard deviations and are calculated by weighting the return assumptions for each asset class according to the respective strategic asset allocation model. See page entitled, Important Information: Portfolio Analytics for detailed explanation.

We continue to favor high yield and investment grade credit within fixed income

We increased our overweight to commodities

We reduced our overall underweight in fixed income

Strategic Asset Allocation Estimated Forward-Looking Portfolio Analytics

Conservative Mod Cons Moderate Growth Aggressive

Estimated Return 5.59% 6.76% 7.40%

8.71%

0.39

9.05%

Estimated Standard Deviation

5.23% 7.32%

8.26%

10.42% 12.18%

0.41Estimated Sharpe Ratio 0.30 0.38 0.42

We have moved to a moderate overweight for mid-cap equities


Strategic Strategic Strategic Strategic Strategic

Equity 19.0 19.0 -1.5 33.5 35.0 -2.0 41.5 43.0 -2.5 50.0 52.0 -3.0 58.0 60.5 -3.5

U.S. Equity 14.0 14.0 -0.5 24.0 25.0 -0.5 29.0 29.5 -1.0 34.0 34.5 -1.5 40.0 41.0 -1.0Large Growth 5.5 6.0 9.0 10.0 -1.0 10.0 11.5 -1.0 9.5 11.5 -1.5 9.5 12.0 -1.5Large Value 8.5 8.0 -0.5 9.0 9.5 10.0 10.5 -0.5 9.5 9.5 -1.0 9.5 10.0 -0.5Mid Growth 0.0 0.0 2.0 2.5 0.5 2.5 3.0 0.5 3.5 4.0 0.5 4.5 5.0 0.5Mid Value 0.0 0.0 2.0 2.0 2.5 2.5 3.5 4.0 0.5 4.5 5.0 0.5Small Growth 0.0 0.0 1.0 0.5 1.0 0.0 2.0 1.0 3.0 1.5

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

Non-U.S. Equity 5.0 5.0 -1.0 9.5 10.0 -1.5 12.5 13.5 -1.5 16.0 17.5 -1.5 18.0 19.5 -2.5Developed Equity 5.0 5.0 -1.0 9.5 9.0 -1.0 10.5 9.5 -1.5 12.5 11.0 -2.0 13.5 12.0 -2.0Emerging Equity 0.0 0.0 0.0 1.0 -0.5 2.0 4.0 3.5 6.5 0.5 4.5 7.5 -0.5

Fixed Income 67.0 66.0 1.0 48.0 47.0 2.0 38.0 36.5 2.0 25.0 23.0 2.5 11.5 9.0 3.0

U.S. Fixed Income 67.0 66.0 1.0 48.0 47.0 2.0 38.0 36.5 2.0 25.0 23.0 2.5 11.5 9.0 3.0U.S. Tax Exempt Fixed Income

67.0 59.0 1.0 48.0 41.5 2.0 35.0 29.5 2.0 20.0 15.0 2.5 6.5 3.0 3.0

U.S. Government Securities

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

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 5.5Non-U.S. Fixed Income

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Developed Fixed income

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Emerging Market Fixed Income

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Non-Traditional Asset Classes

12.0 13.5 0.5 16.5 17.0 18.5 20.0 0.5 23.0 24.0 28.5 30.5 0.5

Hedge Funds 9.0 9.0 9.0 9.0 10.0 10.0 13.0 13.0 15.0 15.0Tactical Trading (Macro, CTA)

1.0 1.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Relative Value (Arb. Strategies ex-Merger Arb, Equity Market Neutral)

2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Credit Strategies (Hedged Credit, Distressed)

2.0 2.0 -0.5 2.0 2.0 -0.5 2.0 2.0 -0.5 3.0 3.0 -0.5 3.0 3.0 -0.5

Event Driven (Merg Arb, Special Situations)

2.0 1.5 1.0 2.0 1.5 1.0 2.0 1.5 1.0 2.0 1.5 1.0 3.0 2.5 1.0

Equity Hedge (Long/Short)

2.0 2.0 -0.5 2.0 2.0 -0.5 2.0 2.0 -0.5 3.0 3.0 -0.5 3.0 3.0 -0.5

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

Venture Capital 0.0 0.0 0.0 0.0 0.0 0.0 1.0 1.0 2.0 2.0

Real Estate 0.0 0.0 1.5 0.0 -0.5 1.5 0.0 -0.5 4.0 2.0 -0.5 4.5 2.0 -1.0Public Real Estate (REITS)

0.0 0.0 1.5 0.0 -0.5 1.5 0.0 -0.5 2.0 0.0 -0.5 2.5 0.0 -1.0

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 0.5 4.0 6.0 0.5 5.0 8.0 1.0 4.0 7.0 0.5 6.0 10.5 1.5

Cash 2.0 1.5 2.0 1.0 2.0 0.5 2.0 0.5 2.0 0.0

Aggressive

Tactical Tactical Tactical Tactical Tactical

GrowthAsset Class

Conservative Mod Cons Moderate


13


Portfolios with net consumption <5% with non-traditional asset classes






8.58%

0.41

9.18%


5.24% 7.21%

8.32%

10.13% 11.67%







Equity 17.0 17.0 -1.5 30.5 32.0 -2.0 35.5 37.0 -2.5 42.0 43.0 -3.5 48.5 48.5 -4.0


Small Value 0.0 0.0 1.0 0.5 1.5 0.5 2.0 0.5 3.0 1.0 0.5Convertibles 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 4.0 -1.0 8.5 9.0 -1.5 10.5 11.5 -1.5 12.0 13.5 -1.5 14.5 16.0 -2.0Developed Equity 4.0 4.0 -1.0 7.5 7.0 -1.0 8.5 7.5 -1.5 9.0 7.5 -2.0 11.0 9.5 -2.0Emerging Equity 0.0 0.0 1.0 2.0 -0.5 2.0 4.0 3.0 6.0 0.5 3.5 6.5

Fixed Income 67.0 66.0 1.0 48.0 47.0 2.0 37.0 35.5 2.5 25.0 23.0 3.0 10.5 8.0 3.0


67.0 59.0 1.0 48.0 41.5 2.0 34.5 29.0 2.5 21.5 16.5 3.0 8.0 4.5 3.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0



0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


14.0 15.5 0.5 20.5 21.0 26.5 27.5 32.0 34.0 0.5 40.0 43.5 1.0


2.0 2.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5

Relative Value (Arb Strategies ex-Merger Arb, Equity Market Neutral)

2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0


1.0 1.0 -0.5 2.0 2.0 -0.5 2.0 2.0 -0.5 2.5 2.5 -0.5 4.0 4.0 -0.5


2.0 1.5 1.0 2.0 1.5 1.0 2.0 1.5 1.0 2.5 2.0 1.0 3.0 2.5 1.0


2.0 2.0 -0.5 2.0 2.0 -0.5 3.0 3.0 -0.5 4.0 4.0 -0.5 5.0 5.0 -0.5

Private Equity 2.0 2.0 3.0 3.0 6.0 6.0 9.0 9.0 11.5 11.5

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

Real Estate 0.0 0.0 3.5 2.0 -0.5 3.5 2.0 -0.5 4.0 3.0 4.5 4.5Public Real Estate (REITS)

0.0 0.0 1.5 0.0 -0.5 1.5 0.0 -0.5 1.0 0.0 0.0 0.0


Commodities 3.0 4.5 0.5 4.0 6.0 0.5 5.0 7.5 0.5 4.0 7.0 0.5 5.0 8.5 1.0

Cash 2.0 1.5 1.0 0.0 1.0 0.0 1.0 0.0 1.0 0.0

Asset Class Conservative Mod Cons Moderate Aggressive


Growth


14


Without alternative investments1


1Alternative investments referenced above include hedge funds, private equity, private real estate and commodities.





9.18%

0.33

9.03%


5.43% 7.51%

7.90%

11.35% 14.33%







Equity 22.0 23.0 -0.5 39.0 42.0 -0.5 50.0 54.0 61.0 66.0 77.0 83.0

U.S. Equity 16.0 16.5 28.0 29.5 35.0 37.0 0.5 42.0 44.5 0.5 53.0 56.0 1.0Large Growth 6.5 7.0 10.0 11.5 -0.5 12.0 14.0 -0.5 12.0 15.0 -0.5 13.0 16.0 -1.0Large Value 9.5 9.5 10.0 10.5 12.0 13.0 12.0 13.0 13.0 14.5 0.5Mid Growth 0.0 0.0 2.5 3.0 0.5 3.0 3.5 0.5 4.5 5.0 0.5 6.5 7.5 1.0Mid Value 0.0 0.0 2.5 2.5 3.0 3.5 0.5 4.5 5.0 0.5 6.5 7.0 0.5Small 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 6.5 -0.5 11.0 12.5 -0.5 15.0 17.0 -0.5 19.0 21.5 -0.5 24.0 27.0 -1.0Developed Equity 6.0 6.5 -0.5 9.5 9.5 -0.5 12.5 12.5 -0.5 15.0 15.0 -0.5 18.0 18.0 -0.5Emerging Equity 0.0 0.0 1.5 3.0 2.5 4.5 4.0 6.5 6.0 9.0 -0.5

Fixed Income 76.0 75.5 0.5 57.5 56.5 0.5 46.0 45.0 0.5 33.0 31.5 0.5 15.0 13.5 1.0


76.0 68.5 0.5 57.5 51.0 0.5 43.5 38.5 0.5 28.0 24.0 0.5 10.0 6.5 1.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0



0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


0.0 0.0 1.5 0.0 -0.5 2.0 0.0 -1.0 4.0 1.5 -1.0 6.0 3.0 -1.5

Real Estate 0.0 0.0 1.5 0.0 -0.5 2.0 0.0 -1.0 4.0 1.5 -1.0 6.0 3.0 -1.5Public Real Estate (REITS)

0.0 0.0 1.5 0.0 -0.5 2.0 0.0 -1.0 4.0 1.5 -1.0 6.0 3.0 -1.5

Cash 2.0 1.5 2.0 1.5 0.5 2.0 1.0 0.5 2.0 1.0 0.5 2.0 0.5 0.5

Asset Class Conservative Mod Cons Moderate

Tactical

Aggressive

Tactical Tactical Tactical Tactical

Growth


15


Tax-exempt entities






8.81%

0.45

9.27%


5.10% 7.59%

8.58%

10.27% 11.69%







Equity 17.0 17.0 -1.5 30.5 32.0 -2.0 35.5 37.0 -2.5 42.0 43.0 -3.5 48.5 48.5 -4.0


Small Value 0.0 0.0 1.0 0.5 1.5 0.5 2.0 0.5 3.0 1.0 0.5Convertibles 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 4.0 -1.0 8.5 9.0 -1.5 10.5 11.5 -1.5 12.0 13.5 -1.5 14.5 16.0 -2.0Developed Equity 4.0 4.0 -1.0 7.5 7.0 -1.0 8.5 7.5 -1.5 9.0 7.5 -2.0 11.0 9.5 -2.0Emerging Equity 0.0 0.0 1.0 2.0 -0.5 2.0 4.0 3.0 6.0 0.5 3.5 6.5

Fixed Income 67.0 66.0 1.0 48.0 47.0 2.0 37.0 35.5 2.5 25.0 23.0 3.0 10.5 8.0 3.0

U.S. Fixed Income 59.0 58.5 0.5 40.0 39.5 1.0 29.0 28.5 1.5 20.0 19.0 1.5 8.0 7.0 2.0U.S. Government Securities

47.0 32.5 24.0 12.0 17.0 8.0 7.5 1.0 0.0 0.0

Investment Grade 12.0 19.0 10.0 15.5 0.5 7.0 11.0 0.5 7.5 10.0 0.5 5.5 4.5 1.5High Yield 0.0 7.0 0.5 6.0 12.0 0.5 5.0 9.5 1.0 5.0 8.0 1.0 2.5 2.5 0.5Non-U.S. Fixed Income

8.0 7.5 0.5 8.0 7.5 1.0 8.0 7.0 1.0 5.0 4.0 1.5 2.5 1.0 1.0


8.0 7.5 0.5 8.0 7.5 1.0 8.0 7.0 1.0 5.0 4.0 1.5 2.5 1.0 1.0


0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0


14.0 15.5 0.5 20.5 21.0 26.5 27.5 32.0 34.0 0.5 40.0 43.5 1.0


2.0 2.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5


2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0


1.0 1.0 -0.5 2.0 2.0 -0.5 2.0 2.0 -0.5 2.5 2.5 -0.5 4.0 4.0 -0.5


2.0 1.5 1.0 2.0 1.5 1.0 2.0 1.5 1.0 2.5 2.0 1.0 3.0 2.5 1.0


2.0 2.0 -0.5 2.0 2.0 -0.5 3.0 3.0 -0.5 4.0 4.0 -0.5 5.0 5.0 -0.5

Private Equity 2.0 2.0 3.0 3.0 6.0 6.0 9.0 9.0 11.5 11.5

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

Real Estate 0.0 0.0 3.5 2.0 -0.5 3.5 2.0 -0.5 4.0 3.0 4.5 4.5Public Real Estate (REITS)

0.0 0.0 1.5 0.0 -0.5 1.5 0.0 -0.5 1.0 0.0 0.0 0.0


Commodities 3.0 4.5 0.5 4.0 6.0 0.5 5.0 7.5 0.5 4.0 7.0 0.5 5.0 8.5 1.0

Cash 2.0 1.5 1.0 0.0 1.0 0.0 1.0 0.0 1.0 0.0

Asset Class Conservative Mod Cons Moderate Aggressive


Growth


16

Tactical Allocation SummaryAsset Class Tactical View

U.S. Equities♦ While valuations are slightly more attractive in European stock markets than in the U.S., the cyclical picture

favors U.S. markets.♦ Equities trade at or near fair value while providing, in our view, less upside potential from current levels.♦ An accelerating earnings recovery cycle, cost cutting, increased business spending and rebounding revenue

should translate into earnings growth of 29% in 2010 and a further increase of 15% in 2011. ♦ 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.*

Moderate Overweight

ModerateUnderweight

Overweight

U.S. Convertibles♦ 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.

Neutral

U.S. Government Securities♦ Even without a major pickup 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.

Underweight

Investment Grade Corporates♦ Investment grade corporate bond fundamentals are positive as companies have participated in debt reduction

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, which will likely perform better in a rising rate environment.

ModerateOverweight

U.S. Municipals♦ Moody's and Fitch plan to transition to a global rating scale in April, which is expected to cause a widespread

credit rating boost for municipals, serving as a tailwind for the sector. ♦ 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.♦ 'A'-rated munis in high-quality sectors are still attractive since the eventual spread compression on lower

rated munis could offset potential negative effects for a rate increase.

Moderate Underweight

Non-U.S. Developed Equity♦ Eurozone continues to lag in its recovery relative to the U.S. and Asia-ex Japan. ♦ Valuations remain slightly attractive, especially within Europe, relative to U.S. equities leading us to a neutral

position for the Eurozone region.♦ WMR recently downgraded its 2010 Eurozone growth from 2.4% to 1.5%. ♦ 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♦ 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.♦ View recent weakness as temporary as concerns over monetary tightening should subside.

Source: UBS Wealth Management Americas Investment Committee as expressed in the UBS WMR Investment Strategy Guide, as of Apr. 1, 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.

*Dollar cost averaging neither assures a profit nor guarantees protection from a loss in a falling market.



17

Tactical Allocation SummaryAsset Class Tactical View

High Yield Fixed Income♦ High yield markets continue to benefit from high investor demand and an improved default outlook as

WMR predicts default rates to decline from its 2009 peak of 13% to below 8% in 2010. ♦ 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.

Moderate Overweight

Non-U.S. Fixed Income♦ Remain neutral as 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.♦ Maintain preference for European bond markets over those in Japan, and are neutral on the U.K. Within

emerging markets, we prefer Indonesian, Brazilian, Bulgarian, Hungarian, Russian and Turkish bonds. ♦ We also recommend exposure to commodity currencies in the form of sovereign bonds issued by Australia,

Norway, New Zealand, Brazil, Sweden and Canada.

Neutral

Hedge Funds*♦ 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 continue to show 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 macro economic 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's low level of activity. 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.

Neutral

Private Equity*♦ Favor distressed funds due to longer investment horizons, current valuations and the likely need of

corporations to adjust balance sheets.♦ 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.

Neutral

Real Estate*♦ Stabilizing commercial property values and an increase in risk appetite has helped drive gains within the real

estate market. ♦ Currently view REITs 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.

Moderate Underweight

Commodities*♦ We have increased our overweight to commodities as demand remains solid and 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.

Overweight

Source: UBS Wealth Management Americas Investment Committee as expressed in the UBS WMR Investment Strategy Guide, as of Apr. 1, 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.


18

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


Recommendation RationalePossible Implementation

Principle Investment Risks Status1

Financial Sector ♦ Steady, sustainable economic growth should support further outperformance of both banks and diversified financials

♦ Valuations remain at attractive levels

♦ The moderation of credit conditions is a boon to the sector

♦ 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

♦ ETFs linked to the financial sector

♦ For stock selections: See UBS WMR Top 25 Stock List and UBS WMR outperform-rated stocks

♦ Financial reform risk♦ Credit losses widen♦ Currently steep yield

curve levels off

OPENED04/12/10

Mid-Cap Stocks ♦ Mid-caps should benefit both from an investor shift to higher-quality stocks as well as a pick-up in M&A activity

♦ As the domestic economy improves relative to other global regions, mid-caps, which have less global 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

♦ Stocks:-Please see UBS WMR Top 25 Stock List and UBS WMR Sector Outperform Lists

♦ Separately managed accounts

♦ Equity market pullback OPENED04/12/10

Short-Term Investment Ideas



19





Technology Sector ♦ Tech corporate balance sheets appear to be healthy, and access to credit for large companies has significantly improved

♦ During recession, many companies cut back on IT, creating pent-up demand for productivity-enhancing tech products given the recovery in the corporate profit cycle

♦ High exposure to foreign sales, which should be boosted by a weaker dollar

♦ Sector valuations, relative to S&P 500, are at decade lows

♦ Prefer the stocks of higher-quality companies, such as industry leaders, that offer above-average earnings visibility

♦ ETFs linked to the technology sector

♦ Mutual funds♦ Basket of individual

technology stocks♦ UBS WMR

overweighted stocks

♦ Recession fears return, further deteriorating consumer and corporate spending

UPDATED04/12/10

Investment Grade Corporates

♦ After price rebound, yields are now much less compelling, and the segment has reached full valuation

♦ We believe investment grade in select segments ('BBB'-rated bonds across all sectors) still presents a solid alternative to most other fixed income sectors

♦ Bonds with emerging markets exposure offer more attractive yields and may protect against rising interest rates

♦ As we have returned to a more normalized spread range, investors will need to be aware of idiosyncratic risk and choose carefully in this environment

♦ Focus on 'BBB'-rated bonds across all sectors and bonds with emerging markets exposure

♦ WMR target maturity range is 2-5 years

♦ Credit conditions worsen, causing spreads to widen

♦ Financial reform risk♦ Interest rate risk

UPDATED04/12/10

Preferred Securities ♦ With a stabilizing market, expect credit ratings for financial institutions to improve, causing spreads to tighten and prices to increase

♦ Prefer higher-coupon fixed rate and floating-rate preferred issues to mitigate interest rate risk

♦ Higher-coupon preferreds provide a buffer to help absorb price loss stemming from higher Treasury yields

♦ Recommend reducing exposure to low coupon preferreds of strong credits due to high interest rate price risk of this category

♦ Active managers (mutual funds/SMAs) focused on preferreds

♦ UBS WMR attractively rated preferreds

♦ Reduce exposure to low coupon preferreds of strong credits

♦ Fixed income instruments may be subject to call risk, interest rate risk, reinvestment risk, credit/event risk and call provisions.

♦ Preferred securities exhibit "equity-like" characteristics relative to bonds and other fixed income securities.

♦ Market risk due to long duration should interest rates move higher

♦ Financial reform risk

UPDATED04/12/10

Short-Term Investment Ideas (Continued)


20





Agricultural Commodities

♦ Select agricultural commodities present an opportunity in 2010 as we expect support from demand growth and a renewed market focus on the scarcity of resources

♦ Coffee inventories have continued to decline, and with current cheap prices, we think that conditions are set for supply disappointments

♦ Corn should be supported by Chinese demand as well as demand for ethanol

♦ ETFs and ETNs linked to agricultural commodities

♦ UBS WMR overweighted stocks

♦ Commodity price weakness and volatility

♦ Slower demand than expected

♦ ETNs have issuer credit risk

UPDATED04/12/10

Broad Commodities ♦ Markets continue to benefit from the global recovery and a weaker dollar

♦ Increase in global demand, especially from the restocking of fast-growing and resource-intensive emerging economies in 2010

♦ Select energy and agricultural commodities stand to benefit the most from growth expectations

♦ 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 1100/oz

♦ ETFs, ETNs and structured products linked to commodities

♦ Mutual funds and active managers


♦ Slower demand than expected from developed and emerging markets

♦ Structured products and ETNs have issuer credit risk

UPDATED04/12/10

Emerging Markets Exposure

♦ With fewer structural challenges and superior growth prospects, emerging markets remain, in our opinion, an attractive investment opportunity

♦ Emerging market equities have historically outperformed developed markets when the global economy enters a cyclical recovery phase

♦ Bonds with emerging markets exposure offer more attractive yields and may protect against rising interest rates

♦ UBS WMR prefers Chinese, Polish, Russian and Indian equities and Brazilian, Bulgarian, Hungarian, Indonesian, Russian and Turkish bonds

♦ Although monetary tightening in some emerging markets has led to market jitters this year, we think that these policy steps actually make the expansion in the underlying economies more sustainable

♦ ETFs and ETNs with exposure to UBS WMR preferred countries

♦ Mutual funds

♦ Currency volatility♦ Abrupt changes in

cost of capital and the economic growth outlook

♦ Socio-political risk♦ Country-specific risk♦ Counterparty and credit

risks involved with ETNs

UPDATED04/12/10




21




Large-Cap Growth Stocks

♦ Expect large-cap growth to continue to outperform large-cap value stocks in 2010

♦ Our equity sector views, notably our overweight to technology, support a preference for growth

♦ Growth stocks are more expensive than value stocks, but the current growth premium is relatively small on a historical basis

♦ Recommend large-cap stocks that are globally oriented and derive a greater proportion of revenue from emerging markets

♦ Active large-cap growth managers (mutual funds/SMAs)

♦ ETFs♦ UBS WMR

recommended growth stocks

♦ Equity market pullback UPDATED04/12/10

High Yield Bonds ♦ Improving fundamentals in credit markets support taking on more credit risk, and high yield bonds may outperform if credit spreads continue to tighten

♦ The incremental yield offered by high yield bonds affords some protection against rising Treasury rates over the next year

♦ Increased evidence of the economic recovery and improved outlook for high yield defaults

♦ Higher beta, cyclical names for individual bonds

♦ High yield money managers, mutual funds and ETFs

♦ Heightened credit risk♦ Issuers' financial

conditions can weaken further until they are unable to service their debt obligations

♦ Concentration risk♦ Greater need for

portfolio monitoring and review

♦ Interest rate risk

UPDATED04/12/10

Energy Sector ♦ We deem the energy equity sector as attractive based on crude oil outlook

♦ Uptick in industrial activity and stabilizing U.S. crude oil inventories should propel prices higher

♦ UBS WMR forecasts oil prices to average $85 per barrel in 2010

♦ Believe integrated oil companies are the most attractively valued sub-sector in the industry

♦ 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

♦ ETFs and structured products linked to the energy sector

♦ Futures contracts♦ Basket of individual

energy stocks♦ UBS WMR

overweighted stocks


♦ Decreasing demand for natural resources

♦ Structured products have issuer credit risk

UPDATED04/12/10




22




Medium-Quality Intermediate Municipals

♦ We expect continued credit pressures on state and local government issuers, less tax-exempt supply and looming increases in marginal tax rates to be key drivers of the municipal market

♦ Short muni yields have settled below historical averages relative to Treasuries

♦ Consider 'A'-rated defensive sectors for value

♦ 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 recently tightened due to light tax-exempt supply and continued issuance of BABs

♦ Value in 'A'-rated bonds in safe sectors

♦ Favor 7-12-year intermediate-term munis

♦ Favor intermediate maturities given the steep tax-exempt curve

♦ Recommend 'BBB' for higher risk investors

♦ Volatility due to fiscal challenges may persist

♦ Credit conditions worsen♦ Interest rate risk

UPDATED04/12/10

Energy Efficiency ♦ Future energy scarcity and higher energy prices are likely to keep government focused on rigid policies to improve energy efficiency

♦ U.S. investment in green technologies could potentially be major catalyst for job creation

♦ Stimulus packages should benefit energy efficiency and renewable energies

♦ Companies focused in areas such as building, transport, electricity, production, industrial processes and IT

♦ Defensive wind park operators

♦ Broadly diversified and actively managed funds

♦ Budget constraints have removed some near-term momentum behind energy policy reform

UPDATED04/12/10

Commodity-Related Foreign Currency Exposure

♦ Expected recovery in the global economy should be accompanied by a sustainable increase in commodity demand

♦ Emergence of China as a price setter for commodities, displacing USD, as China's symbiotic relationships with countries like Australia continue to grow

♦ Commodity currencies to potentially benefit from faltering dollar and rising renminbi, and be well supported by widening yield differential

♦ Direct investment in a portfolio of sovereign debt in local currency

♦ ETFs and ETNs linked to commodity currency basket including AUD, NZD, NOK, CAD, BRL and ZAR

♦ Structured products linked to a basket of commodities

♦ Forward contracts♦ Global time deposits

♦ Commodity price volatility and potential weakness of the recovery is unsustainable

♦ Double dip-recession emerges, weakening commodity demand

♦ Foreign exchange risk♦ Structured products,

ETNs and global time deposits have issuer credit risk

UPDATED04/12/10

1See description of Status on page 23.

See page 23 for sources and disclosures on Short- and Long-Term Investment Ideas.

Long-Term Investment Ideas



23




Broad Foreign Currency Exposure

♦ Expect the USD to weaken against most currencies over the long term despite possible short-term stability or appreciation due to strength of U.S. cyclical recovery

♦ Rising concerns over U.S. government's ability to finance a large and growing deficit

♦ Improving risk appetite should further weigh on the dollar

♦ Foreign investors seem less likely to absorb oversupply of Treasuries, causing USD weakness

♦ Direct investment in foreign currency instruments, especially a well-diversified instrument of minor currencies

♦ Non-U.S. sovereign and/or corporate debt

♦ Structured products♦ ETFs and ETNs

♦ Better-than-expected U.S. growth rate

♦ Reduced risk tolerances rekindle demand for USD

♦ Foreign investors continue to aggressively buy U.S. Treasuries, providing USD support

♦ Structured products and ETNs have issuer credit risk

UPDATED03/08/10

Distressed Fixed Income

♦ While near-term risks remain, valuations within distressed securities still present an attractive longer-term return opportunity

♦ See "High Yield Bonds" under Short-Term Investment Ideas

♦ Distressed hedge funds and fund of funds (FoF)*

♦ Distressed private equity*

♦ High yield ETFs, money managers and mutual funds

♦ Credit conditions worsen, causing spreads to reverse and widen

♦ Issuers' financial conditions can weaken further until they are unable to service their debt obligations

♦ Concentration risk♦ Greater need for

portfolio monitoring and review

UPDATED09/09/09

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 investmentstrategies 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.

Long-Term Investment Ideas (Continued)


24


UBS Wealth Management ResearchTwo 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 ModelsThe 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, anallocation 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.


25

Important InformationBenchmark Indexes for the Asset Allocation Models

Source: FactSet. All data is shown as of Mar. 31, 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 2/28/10.31-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 Q4 2009 quarterly return as of 12/31/09. 1-,3-,5-,10-year returns are as of 12/31/09.

Correlation Matrix – Major Indexes

Russell 1000MSCI AC World Index ex. USA -

Net Return

Barclays Capital U.S. Aggregate

Barclays Capital Global Aggregate

ex. U.S.

HFRI Fund of Funds Composite

NAREIT Index - Total Return

DJ AIG Commodity

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

EquityReturn Risk1 Return Risk Return Risk Return Risk Return Risk

Large-Cap Growth Russell 1000 Growth Performance 5.8 0.5 49.8 12.6 -0.8 20.2 3.4 16.4 -4.2 18.8

Large-Cap Value Russell 1000 Value Performance 6.5 0.5 53.6 14.2 -7.3 21.6 1.0 17.4 3.1 15.6

Mid-Cap Growth Russell Mid-Cap Growth 6.8 0.7 63.0 16.7 -2.0 24.5 4.3 20.2 -1.7 23.7

Mid-Cap Value Russell Mid-Cap Value 7.3 0.7 72.4 18.7 -5.2 25.5 3.7 20.5 8.5 17.6

Small-Cap Growth Russell Small-Cap Growth 7.9 0.9 60.3 19.5 -2.4 25.5 3.8 21.8 -1.5 24.3

Small-Cap Value Russell Small-Cap Value 8.3 0.8 65.1 20.3 -5.7 26.3 2.8 21.8 8.9 19.3

Convertibles Barclays Capital U.S. Convertibles Composite 4.6 0.4 53.9 10.0 2.3 17.7 5.7 14.2 n/a n/a

Non-U.S. Equity

Developed Equity MSCI EAFE 5.8 0.7 50.0 17.4 -9.6 23.6 1.0 19.4 -1.0 17.6

Emerging Equity MSCI Emerging Markets 7.9 0.7 77.3 23.6 2.8 32.6 13.0 27.6 7.3 24.9

Fixed Income

U.S. Fixed Income

U.S. Tax-Exempt Fixed Income Barclays Muni Bond -0.2 0.1 9.7 4.9 4.6 5.9 4.6 4.8 5.6 4.6

U.S. Government/Agency Securities Barclays Capital U.S. Aggregate - Government -0.7 0.2 -0.1 3.7 6.0 5.0 5.2 4.3 5.9 4.6

Investment Grade Corporates Barclays Capital U.S. Aggregate - Investment Grade 0.3 0.2 23.8 5.2 5.9 8.9 5.3 7.3 6.7 6.3

High Yield Corporates Barclays Capital U.S. Aggregate - High Yield 3.1 0.1 56.2 11.1 6.7 17.0 7.8 13.3 7.5 11.4

Non-U.S. Fixed Income

Developed Fixed income JPMorgan Non-U.S. Dollar -2.2 0.5 8.2 9.2 7.7 10.0 4.8 8.7 6.6 8.8

Emerging Market Fixed Income Barclays Capital Global Emerging Markets 3.0 0.1 34.1 6.0 7.2 14.8 9.4 11.8 10.3 10.9


Hedge Funds

Tactical Trading (Macro, CTA)2 HFRI Macro -1.7 n/a 2.7 5.0 5.8 5.5 6.7 5.0 7.3 5.5

Relative Value (Arb Strategies ex-Merger Arb, Equity Market Neutral)2

HFRI Relative Value 2.1 n/a 25.8 3.6 4.1 7.8 6.3 6.3 7.2 4.7

Credit Strategies (Hedged Credit, Distressed)2

HFRI Distressed & Restructuring 1.9 n/a 29.1 6.3 0.4 9.3 5.1 7.6 9.1 6.6

Event Driven (Merg Arb, Special Situations)2

HFRI Event Driven 1.3 n/a 26.2 5.4 1.3 8.8 5.4 7.5 7.8 7.0

Equity Hedge (Long/Short)2 HFRI Equity Hedge -0.5 n/a 25.1 8.3 -0.2 11.2 4.5 9.6 5.3 9.1

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 9.4 0.8 98.9 29.5 -11.0 37.1 2.5 30.1 11.0 23.7

Private Real Estate4 NCREIF -2.1 n/a -16.9 2.3 -3.4 4.5 4.7 4.3 7.3 3.1

Commodities DJIA Commodities -1.3 0.8 20.4 15.8 -8.4 23.2 -4.0 20.2 3.0 17.4

Cash Barclays Capital U.S. Treasury - Bills (1-3 months) 0.0 0.0 0.1 0.0 1.8 0.6 2.8 0.6 2.7 0.6

5 Year 10 Year

Historical Benchmark Statistics (Annualized)

U.S. Equity

Asset Class Benchmark Index

1 Month 1 Year 3 Year


26


Portfolio Analytics

The portfolio analytics shown for the strategic asset allocation models are based on estimated forward-looking return and standard deviation assumptions (capital market assumptions), 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 where 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.

You should understand that the assumptions used are estimates, not guarantees, of future results and pertain to the asset class 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. UBS has changed its risk and return assumptions in the past and may do so in the future.

Equity Estimated Return Estimated Standard Deviation

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


Hedge Funds

Tactical Trading (Macro, CTA) HFRI Macro 6.57 9.57


HFRI Relative Value 10.53 9.56

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

Capital Market Assumptions

U.S. Equity

Asset Class Benchmark Index



27


Investment RisksAll 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 change 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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Investment Risks – Non-Traditional Asset ClassesNon-traditional asset classes are alternative investments that include hedge funds, private equity, real estate, managed futures andcommodities (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 fromyour 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 StrategiesEquity 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 in the 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.



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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 of an 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) atmaturity, 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, portfolioexposures 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 quantitativetechniques 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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Dow Jones AIG Commodity Index: composed of futures contracts on 20 physical commodities. It is composed of commodities traded on U.S. exchanges with the exception of nickel, aluminum and zinc. The Index relies primarily on liquidity data or the relative amount of trading activity to determine its weightings. All data used for both liquidity and production calculations are averaged for a five-year period.

HFRI Equity Hedge: equally weighted index of investment managers who employ equity hedge strategies, maintaining both long and short positions primarily in equity and equity derivative securities. Equity hedge managers would typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities - both long and short.

HFRI Event Driven: equally weighted index of 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 in the capital structure to most junior or subordinated, and frequently involveadditional derivative securities.

HFRI Distressed & Restructuring: equally weighted index of investment managers that employ an investment process focused oncorporate 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 formal bankruptcy proceeding or financial market perception of near term proceedings. Distressed strategies employ primarily debt (greater than 60%) but also may maintain related equity exposure.

HFRI Fund of Funds Index: fund of funds invested with multiple managers through funds or managed accounts. The strategy accesses a diversified pool of managers with the objective of lowering the risk of investing in one single manager. The fund of funds manager has discretion in choosing which strategies and managers to invest in the fund.

HFRI Fund Weighted Composite: an equally weighted return of all funds net of fees in the HFRI monthly indexes. Fund strategies include, but are not limited to: convertible arbitrage, distressed securities, emerging markets, equity hedge, equity market neutral, statistical arbitrage, event driven, macro, market timing, merger and risk arbitrage, relative value, short selling and sector funds.

HFRI Macro: equally weighted index of investment managers which trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and theimpact these have on equity, fixed income, hard currency and commodity markets. Managers employ a variety of techniques, bothdiscretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods.

HFRI Relative Value: equally weighted index of 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.

Glossary – Index Definitions10-Year U.S. Treasury Index: a debt obligation issued by the U.S. Treasury with a term of 10 years.

Barclays Capital Global Aggregate X U.S.: an index consisting of all investment grade securities issued in different currencies and combining the Barclays Aggregate, Barclays Pan-European Aggregate and Barclays Global Treasury indexes. The index also includes Eurodollar and Euro-Yen corporate bonds, Canadian government, agency and corporate securities and U. S. dollar investment grade, 144A securities.

Barclays Capital Global Emerging Markets: tracks total returns of external-currency-denominated debt instruments of the emerging markets: Brady bonds, loans, Eurobonds, and U.S. dollar-denominated local market instruments. The index covers five regions: Americas, Europe, Asia, Middle East and Africa.

Barclays Capital Muni Bond Index: a capitalization-weighted bond index created by Barclays intended to be a representative of major municipal bonds of all quality ratings.

Barclays Capital U.S. Aggregate Index: covers the U.S. dollar-denominated, investment grade, fixed rate, taxable bond market segment of SEC-registered securities and includes bonds from the U.S. Treasury, gov't.-related, corporate, mortgage- and asset-backed and commercial mortgage-backed securities.

Barclays Capital U.S. Aggregate Government: composed of the Barclays U.S. Treasury Bond Index (all public obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted issues) and the Agency Bond Index (all publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate debt guaranteed by the U.S. government).

Barclays Capital U.S. Aggregate High Yield: covers the universe of fixed-rate, dollar-denominated, non-convertible, publicly issued, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded but Canadian bonds and SEC-registered global bonds of issuers in non-emerging countries are included. Original issue zeroes, step-up coupon structures and 144-As are also included. Bonds must have at least one year to final maturity, at least $150 million par amount outstanding and be rated Ba1 orlower.

Barclays Capital U.S. Aggregate Investment Grade: covers all publicly issued, fixed-rate, nonconvertible, investment-grade corporate debt. Issues are rated at least Baa by Moody's Investors Service or BBB by Standard & Poor's. Total return comprises price appreciation/depreciation and income as a percentage of the original investment.

Barclays Capital U.S. Convertibles Composite: The Barclays Capital U.S. Convertible Bond Index represents the market of U.S. convertible bonds. Convertible bonds are bonds that can be exchanged, at theoption of the holder, for a specific number of shares of the issuer’s preferred stock or common stock.

Barclays Capital U.S. Treasury - Bills (1-3 months): is a market value-weighted index of investment-grade fixed-rate public obligations of the U.S. Treasury with maturities of three months, excluding zero coupon strips.

Cambridge U.S. Private Equity: based on returns data compiled on funds representing more than 70% of the total dollars raised by U.S. leveraged buyout funds, subordinated debt, and special situationmanagers 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 can not invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment.



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Russell 1000® Growth Index: measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000® Value Index: measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

Russell 2000® Growth Index: measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 2000® Value Index: measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

Russell Mid-Cap® Growth Index: measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell mid-cap companies with higher price-to-book ratios and higher forecasted growth values.

Russell Mid-Cap® Value Index: measures the performance of the mid-cap value segment of the U.S. equity universe. It includes thoseRussell mid-cap companies with lower price-to-book ratios and lower forecasted growth values.

TASS Index of CTAs: is a dollar-weighted index based on historical managed futures performance of CTAs with established track records.

Glossary – Index DefinitionsJP Morgan Global Ex-U.S. Bond Index: consists of regularly traded, fixed-rate domestic government debt instruments from 12 international bond markets. Countries included are Austria, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden and the United Kingdom.

MSCI AC World Index ex USA: consists of approximately 2,000 securities across 47 markets, with emerging markets representingapproximately 18%. MSCI attempts to capture approximately 85% ofthe market capitalization in each country.

MSCI EAFE Index (Europe, Australasia, Far East): a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. As of June 2007, the MSCI EAFE Index consisted of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

MSCI Emerging Markets Index: a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. As of November 2008, the MSCI Emerging Markets Index consisted of the following 24 emerging market country indexes: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea,Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

MSCI Europe Index: a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of the developed markets in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed marketcountry 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.

UBS Financial Services Inc.www.ubs.com/privatewealthmanagementH265 April 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.

©2010 UBS Financial Services Inc. All rights reserved. Member SIPC.

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