Equity styles | UBS view Prefer mid caps in US, large caps in Europe Regional differentiation ¢ We believe that medium-sized companies (mid caps) will outperform large caps in the US. US economic = tia the Us. we Prefer mid caps to large Id data is forecast to stabilize and then show moderate economic growth in the second half of 2012 and into caps. ochein € economic ott smu 2013. The greater domestic sales exposure of US mid caps reduces the earnings risk coming from Europe. . hehe US he earnings ae tunities | e In Europe, we prefer companies with a large market capitalization (large caps) over ones with a small one amas that nice how cron c cath ue (small caps) in the current very challenging economic environment. Small caps generate more sales in £ within Fureoe weavaid sail —_ and Continental Europe than large caps. Thus, they are more negatively affected by weak domestic demand. instead otote into larae caps P Small caps also have a more cyclical earnings exposure than large caps. GE caps. ¢ Globally, high-quality dividend paying stocks promise to provide a real and stable income stream to Strategic (1 to 2 years) investors in the current low-yield environment. Furthermore, they give exposure to the long-term potential ° We expect value strategies to outperform of equity markets while tending to suffer less in declining markets. the European market over a multi-year time horizon. A Positive scenario Prefer value, low quality and small caps e Mid-cap stocks provide attractive ¢ Leading indicators continue to move higher, and risks related to the Eurozone debt crisis subside. In this opportunities over the longer term. case, add deep cyclical value (cheap price/book, price/earnings) regardless of the sector, with high beta and high leverage. In such an environment, small and mid-cap stocks should also perform well. A dividend . strategy would be too defensive to outperform the market. avord small caps and favor large caps : : ; in Europe & Negative scenario Prefe