Professional Documents
Culture Documents
Risk Considerations
The UBS Client Experience
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Activist Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Activist Investing: A Hybrid Approach . . . . . . . . . . . . . . . . . .10
The Current Environment for Activist Investing . . . . . . . . . . .11
Activist Investing in Action . . . . . . . . . . . . . . . . . . . . . . . . . .12
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Portfolio Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Fund Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Potential Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Potential Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Investment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
About UBS and UBS Alternative Investments US . . . . . . . . . .21
Due Diligence Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Interests of UBS Activist Partners, L.L.C. (the “Fund”) are sold only to qualified investors, and
only by means of a Private Placement Memorandum that includes information about the risks,
performance and expenses of the Fund. Clients are urged to read the Memorandum carefully
before subscribing. This presentation is for clients only and should not be reproduced or otherwise
distributed, in whole or in part. This is not an offer to sell any interests of the Fund, and is not a
solicitation of an offer to purchase them.
The Fund is not a mutual fund and it is not subject to the same regulatory requirements as mutual
funds. The Fund’s performance may be volatile, and investors may lose all or a substantial amount
of their investment in the Fund. The Fund may engage in leveraging and other speculative
investment practices that may increase the risk of investment loss. Portfolio assets of the Fund
typically will be illiquid. The Fund may not be required to provide periodic pricing or valuation
information to investors. It generally involves complex tax strategies and there may be delays in
distributing tax information to investors. The Fund may charge high fees that would reduce profits.
Interests of the Fund are illiquid and subject to restriction and change. There is no secondary market
for the interests of the Fund, and none is expected to develop. Interests of the Fund are not
deposits or obligations of, or guaranteed or endorsed by any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other governmental agency.
The Fund is a fund-of-funds, meaning that it will primarily invest in hedge funds managed by
persons not affiliated with UBS (or in accounts managed by persons not affiliated with UBS).
The overall performance of the Fund is dependent not only on the investment performance of the
manager of the Fund, but also on the performance of the underlying managers. An investor bears
two levels of fees, one charged by the Fund and another by the funds or accounts in which the
Fund invests.
The Fund is available only to individuals with at least $10 million in net worth exclusive of residence
and at least $5 million dollars in investable assets. It is also available to partnerships and other
entities with at least $25 million in investable assets.
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 in the
United States, we are registered with the U.S. Securities and Exchange Commission (SEC) as an
investment advisor 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 of your accounts or services, please speak
with your Financial Advisor or call 201-352-9999. For more information, please visit our website at
www.ubs.com/workingwithus.
UBS Activist Partners, L.L.C. (the “Fund”) is a concentrated hedge fund-of-funds that seeks
capital appreciation over the long term. Highlights include:
• Value Investment: Investment with value-oriented Managers, who will be primarily investing
in the public securities of companies trading below their intrinsic value
• “Private Equity” Approach to Public Equity: Investment with Managers who seek to act as
a catalyst to influence corporate management in an effort to unlock value for investors. These
Managers can take large stakes in a company to maximize their influence
• Concentrated Investment: The Fund will invest with 10 – 12 core Managers who invest in
a limited number of their highest conviction investment ideas
• Long-Biased Portfolio: The Fund will be long-biased with limited exposure to short
selling strategies
• Exclusive Access: UBS Activist Partners, L.L.C. is available exclusively to select clients of
UBS Financial Services Inc.
• A Blend of Styles
– the Managers, who each employ their own style of “activism,” can invest in both equity and
debt securities, across geographies and market capitalizations
The Fund will be managed by UBS Alternative Investments US, a leader in hedge
funds-of-funds management for more than a decade.
• Within its funds-of-funds strategies, UBS Alternative Investments US has allocated its assets to a
number of shareholder activists who have been meaningful contributors to the performance of
its funds. It is this experience that has led to the creation of UBS Activist Partners, L.L.C.*
• Equity Investments
– acquiring a large equity stake in a company to influence corporate management
• Special Situations
– engaging in extraordinary activities to promote value realization, for example, debt-for-equity
swaps, acquisitions or divestitures
The investment process typically consists of several discrete steps. The amount of time that each step requires
will vary, and in the aggregate, the investment process for certain Activist Investors can take up to three years
or more to unlock the full value of an investment.
Sourcing
“Active” Enhancement
Value Realization
Time
Note: There can be no assurance that the illustrated investment process will be successful or profitable. Investment involves risks, including the risk of losing principal.
Sourcing
“Active” Enhancement
Value Realization
Time
The investment process begins with a value-oriented review of candidates. These companies can have good cash
flow or asset-rich characteristics, but valuations may be depressed because of low investor expectations and/or a
history of investor disappointment. This can be the result of:
Because of low investor expectations, these companies can trade at a discount to what the Manager believes to
be their true intrinsic value.
Sourcing
“Active” Enhancement
Value Realization
Time
Managers next, will analyze and conduct thorough due diligence to fully understand the source of the discount to
intrinsic value and to identify potential actions which can enhance investor value. This step usually includes:
Following this analysis, the Managers will decide whether there is an opportunity to eliminate or narrow the
discount to intrinsic value.
Sourcing
“Active” Enhancement
Value Realization
Time
If there is sufficient value and the probability of a favorable outcome, Managers will carefully craft a strategy
and then begin to accumulate a meaningful share of securities in an attempt to influence management. Activist
actions can be pursued in a friendly or hostile manner. Techniques can range from discussions with management
to publicly advocating for change. Strategies can focus on the following:
• Strategic
– reshaping business plans, making divestitures or acquisitions
• Financial
– changing dividend policies, share repurchase programs, capital structure
• Operational
– seeking cost reduction programs or maximizing operational efficiencies
• Governance
– changing corporate management, directorship and/or realignment of governance policies and incentive structures
Sourcing
“Active” Enhancement
Value Realization
Time
Rather than passively buying or selling securities and waiting for change, Activist Investors seek to take specific
actions designed to realize the true value of a business. When the market price begins to approach the perceived
intrinsic value, Managers have a variety of exit strategies at their disposal:
• Registered offering
Value is created when the actions taken by the Managers are able to narrow the gap between the market price
of a security and its intrinsic value
An activist-oriented investment can be viewed as a hybrid—a “private equity” approach to public equity. It combines
elements of both hedge fund and private equity structures to help increase investment flexibility and potential
opportunities.
Characteristics Typical Hedge Fund UBS Activist Partners Typical Private Equity Fund
Liquidity/Lock Up Typically semiannual after initial Semiannual after initial 3-year lock None; 5 – 10 years
1-year lock
Exit Public market sale Public market, or sale to IPO or sale to strategic/financial
strategic/financial buyer buyer
Changes around the world are creating an environment which is seen as more favorable to
shareholder activism.
Europe Asia
Major financial Increasing
and operational acceptance
restructurings of corporate
underway. governance
initiatives.
In addition, investors such as hedge funds are increasingly able to accumulate sufficient equity
positions to engage corporate management in a two-way dialogue.
Dissident Success Rate1 Recent studies show that Activist Investors have been
increasingly successful in their campaigns. In situations
80%
where a Manager declared his/her intention of becoming
active, findings show:
70%
In practice, certain institutional investors such as the California Public Employees Retirement System (CalPERS)
have successfully advocated for better corporate governance in hopes of generating excess returns. Their
success has led others to objectively evaluate shareholder concerns, rather than simply siding with corporate
management.
The Investment Objective of UBS Activist Partners, L.L.C. is to seek capital appreciation
over the long term. In so doing, the Fund seeks to deploy its assets among a select
group of Investment Managers who pursue shareholder activism strategies as part
of their overall investment program.
“These are managers who actively seek to bolster the returns of their investments by
working with company managements to improve shareholder value directly. These
managers, who are some of our favorites in terms of their resources and insight
deployed in this pursuit, are another prime example of having conviction in one’s
capabilities. UTIMCO appreciates manager efforts to make something happen,
rather than waiting for it to happen.“*
The Fund’s portfolio is designed to balance the risks of Manager concentration while
preserving the alpha generation of skilled Managers. Typical characteristics include:
• Global orientation
– developed markets (primarily North America, Europe and Japan)
– limited emerging markets exposure
The following table represents those Managers with whom the Fund intends to invest its capital. There can be no
guarantees that all or any of the Managers will receive capital from the Fund. (For more details on each fund, see
Appendix.)
Activist Principal Lock-Up North Western Nordic Japan Asia Emerging Equities Debt
Fund Period America Europe Ex-Japan Markets
Activist Principal Lock-Up North Western Nordic Japan Asia Emerging Equities Debt
Fund Period America Europe Ex-Japan Markets
• Manager Access
– access to Managers whose funds are possibly closed to new and non-institutional investors
or which require a high investment minimum
– key relationships that can be difficult to replicate
• Multi-Manager Approach
– mitigates some risks inherent in single-manager fund investing, while preserving the alpha
generation of skilled Managers
All investments carry specific risks. For this Fund, considerations include:
• Concentration
– the Fund will allocate to a limited number of Managers, each holding a limited number of
investments. Duplicate investments by more than one Manager will further increase exposure
to a single investment
• Limited Liquidity
– redemptions initially restricted for three years
– liquidity available semiannually thereafter1
– some of the Investment Funds subject to side pockets2
• Long-Biased Portfolio
– limited hedging; portfolio subject to traditional market risks
• Other Risks
– as outlined in the Risk Considerations section of this presentation and the Private
Placement Memorandum
1
After a 3-year lock-up period, each June and December, with 100 days prior written notice. For each June withdrawal date, if interests
redeemed exceed 15% of the Fund’s Net Asset Value, such requests will be pro-rated.
2
The term “side pocket” refers to a portion of a fund’s less liquid investments that are segregated from the remainder of the fund.
Qualified Investors • An individual or beneficiary of IRA/participant-directed plan with a $10 million net worth (or jointly with spouse),
exclusive of residence.1
• A corporation, partnership or limited liability company with investable assets of at least $25 million. (Certain
entities may be subject to additional requirements.)
• Investment may not exceed 5% of the client’s net worth on the Client Account Inquiry (CAI).
• Investors subject to ERISA and other tax-exempt or tax-deferred investors may incur unrelated business taxable
income (“UBTI”) as a result of investment. Not suitable for Charitable Remainder Trusts.
Subscriptions • Monthly
Liquidity • After a 3-year lock-up period, each June and December, with 100 days prior written notice. For each June
withdrawal date, if interests redeemed exceed 15% of the Fund’s Net Asset Value, such requests will be
pro-rated.
Placement Fee • 0 – 2%
1
UBS has imposed a higher-than-required net worth criteria. This is subject to change at the discretion of UBS Financial Services Inc. Individuals must also have investable assets of a least
$5 million.
UBS AG
UBS is the world’s largest wealth manager and a recognized leader in alternative investments,
managing and distributing more than $70 billion in this category. Our global team has relationships
with many of the world’s leading hedge fund, managed futures, private equity and real estate
firms. We bring this elite talent to institutional and high net worth clients who seek attractive
risk-adjusted returns.
Every Manager to whom UBS Alternative Investments US has allocated capital undergoes
a rigorous due diligence process in which qualitative data is analyzed and conviction
established. Quantitative data points are also reviewed.
• As part of initial due diligence, a combination of direct and indirect research techniques are
utilized.* Of course, the process continues unabated after capital has actually been placed
with a Manager. Due diligence and monitoring are on-going over the life of the investment.
• The following pages outline our initial and ongoing due diligence processes.
* Not all of these factors are considered with respect to all Managers. Other factors may also be considered.
“Direct” Research
• Tax filings
“Indirect” Research
* Not all of these factors are considered with respect to all Managers. Other factors may also be considered.
*Not all of these factors are considered with respect to all Managers. Other factors may also be considered.
The following information was presented to us by the funds and their Managers with
whom the Fund intends to invest. You should note the following about this information:
• There is no guarantee that the Fund will invest in all of these different funds and Managers.
• The Fund’s investments will not be equally weighted, i.e., it intends to invest more money with
one or more of the funds and Managers, and less money with others.
• The Fund intends to invest over time, i.e., it will not invest in all of the funds and Managers at
the same time. Some investments may begin in January, some in April, and some later than that.
• The Fund may withdraw from the various underlying funds and Managers at different times.
• All performance and internal rate of return information contained in this Appendix A has been
approved by the funds and their Portfolio Managers. They are net of management fees, incentive
allocations and expenses. However, they do not reflect any fees that the Fund would charge.
2006 performance is estimated and unaudited. Please note that we have not independently
reviewed the performance information in this Appendix.
Performance for the S&P 500 Index over this same period was 9.1%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is an
unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses.
Performance for the S&P 500 Index over this same period was 7.5%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is an
unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses.
Performance for the S&P 500 Index over this same period was 8.4%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is an
unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 12.5%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is
an unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of
all dividends, but does not deduct any fees or expenses.
AUM: Not disclosed Before joining UBS Warburg, Samii was a Vice President in the
investment banking division of Bankers Trust (1993 – 1996). He
Investment Minimum: $1 million earned an M.B.A. from New York University with Beta Gamma
Sigma honors and a B.A. in Economics from Columbia University.
Geographic Focus: North America, Western Europe Samii also studied European Union formation at the London
School of Economics.
Annualized Return: 30.4% (April 2005 – Oct 2006)*
Joseph Thornton co-founded Pardus with Samii. Thornton
Investment Overview: began his career in 1988 as an attorney at Rogers & Wells
Pardus is an event-driven hedge fund focused on deep value (now Clifford Chance) in the firm’s corporate and securities
investments. The Managers seek to unlock value through department. In 1993, Thornton helped launch WR Huff’s
total restructuring solutions of stressed/distressed opportunities alternative funds, which invested opportunistically in distressed
and special situations, primarily in Western Europe and securities, mezzanine debt and special situations. Thornton has
opportunistically in other regions where the principals have experience on numerous creditors committees, serving as
expertise. Chairman of Adelphia Communications. Most recently, he is
serving as Chairman of the Official Equity Committee at Delphi
Portfolio Managers: Corporation. He earned his J.D., M.B.A., and B.A. in Economics
Karim Samii is President, CIO and founder of Pardus Capital. and Political Science from the University of North Carolina,
Before starting Pardus, Samii spent three years as a restructuring Chapel Hill. Thornton is a CFA charter holder.
and distressed debt specialist for WR Huff Asset Management
Co. From 1999 – 2001, Samii served as Managing Director of an Office Location(s): New York, Frankfurt
emerging market high-yield research team at Credit Suisse First
Boston. From 1996 – 1999, he was an Executive Director at UBS
Warburg, leading a team of global high-yield research analysts.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 12.3%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is
an unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of
all dividends, but does not deduct any fees or expenses.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 9.8%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is an
unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses.
Investment Overview: Office Location(s): New York, Los Angeles, London, Seoul,
The Fund invests in under-followed, undervalued securities, Tokyo, Beijing, Hong Kong
including debt (senior and subordinated) and equities of public
and private companies. The Investment Manager attempts to
work with management to implement long-term strategies to
unlock and build value. Bottom-up portfolio construction process
focuses on 20 – 30 core positions, with 5 – 10 making up 50%
of the portfolio. Average holding period is approximately 3 – 5
years. The portfolio is long biased, with net exposure usually
greater than 80%.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 10.8%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is
an unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of
all dividends, but does not deduct any fees or expenses.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 6.0%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is an
unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 13.0%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is
an unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of
all dividends, but does not deduct any fees or expenses.
*Past performance is not indicative of future results. Performance shown is net of fees and expenses.
Performance for the S&P 500 Index over this same period was 9.8%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is an
unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of all
dividends, but does not deduct any fees or expenses.
AUM: Not disclosed Throughout his extensive career, Peltz has served as CEO,
Chairman, and Board member of numerous public companies. He
Investment Minimum: $25 million attended The Wharton School of the University of Pennsylvania.
Geographic Focus: North America Peter May is President and a founding partner of Trian Partners.
May is also a director, President and COO of Triarc since April
Total Return: 16.5% (Nov 05 – Oct 06)* 1993. Throughout his extensive career, May has been President,
COO, and Board member of numerous public companies. He
Investment Overview: graduated from the University of Chicago with an A.B., and
Operational activists seeking to create significant capital received his MBA from the University of Chicago School of
appreciation by adding value to companies through active, Business and is a CPA.
hands-on influence and involvement.
Ed Garden is Portfolio Manager and a founding partner of Trian
The investment strategy is to build a highly concentrated, long Partners. He is also a Director and Vice Chair of Triarc since
only portfolio of 4 – 6 positions, held typically over a medium- August 2003. Garden also serves as a director for Deerfield
term investment horizon of 1 – 3 years. Capital Management, LLC. Before Joining Trian, he was a
Managing Director at CSFB, where he served as a senior
Portfolio Managers: investment banker in the Financial Sponsors Group. He
Nelson Peltz is the CEO and a founding partner of Trian Fund graduated from Harvard College with a B.A. in Economics.
Management. Peltz is also a Director and the Chairman and CEO
of Triarc, a publicly held company controlled by Peltz and his Office Location(s): New York
longtime business partner, Peter May, since April 1993.
Performance for the S&P 500 Index over this same period was 16.4%. The S&P 500 Index should not be considered to be a benchmark for this Fund or for this Manager. The S&P 500 Index is
an unmanaged index and is considered to be generally representative of the U.S. large-cap stock market as a whole. The performance data for the S&P 500 Index assumes the reinvestment of
all dividends, but does not deduct any fees or expenses.
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UBS Financial Services Inc.
www.ubs.com/financialservicesinc
061019-2251
UBS Financial Services Inc. is a subsidiary of UBS AG. Private and Confidential