>THE DIRECTOR'S CUT (UBS)

Highlights: Global Survey of UBS Research

■ Setting the stage for a gradual recovery in the Global economy
In late July, we conducted a brief survey of the Global Equity Research Department at UBS. We received 380+ responses from across the globe. Looking at the survey results in aggregate, we believe the stage is set for the world economy to gradually recover, driven in part by relatively benign inflation, rolling impacts from global stimulus packages and improving credit conditions. Interestingly, the aggregate “bottom-up” analyst responses to each question on this survey were
consistent with our current “top-down” macro team views.

■ We see muted inflation as more likely than deflation
Based on our survey, 72% of the 381 Research respondents expect inflation in their regions over the next 18 months, with the remaining 28% expecting deflation. The only region expecting deflation over the next 18 months is Japan.

■ We expect stimulus packages to be meaningfully effective in 2010
Of the respondents, 27% expect stimulus packages to be effective in 2009, 49% expect stimulus packages in their regions to be effective in 2010 and 11% expect stimulus packages to be effective post-2010. Only 13% indicated that they believe stimulus packages in their regions will never be meaningfully effective.

■ We expect upward revisions to corporate earnings in 2H 2009
The survey indicated that 41% of the 327 respondents expect upward earnings revisions in 2H2009, 21% expect downward revisions and the remaining 38% expect companies’ earnings guidance to remain unchanged. By sector, Industrials / Materials and Media & Telecomm were the only two sectors that expected earnings to be revised lower. The sectors that expressed the most optimism regarding upwards earnings revisions included Technology, Healthcare and Consumer (see Table below). By region, Japan is the only region that expects earnings to be revised lower.

■ We believe companies expect improved credit availability
According to our survey results, 50% of the 330 respondents believe their companies expect improving credit availability over the balance of the year. Only 5% believe that companies in their sector expect credit availability to deteriorate.

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