Attractive income solution riding on Asia’s growth

UBS Asian High Yield Bond Fund

Please read the important information of the fund before proceeding

UBS (Lux) Bond SICAV – Asian High Yield (USD)

1. The Fund, UBS (Lux) Bond SICAV – Asian High Yield (USD) (or “ UBS Asian High Yield Bond Fund”), may mainly invest in debt securities issued by international and supranational organisations, public and semi-public bodies, and companies based in Asia or that are predominantly active in that region. At least two-thirds of the Fund’s investments in debt securities have a maximum rating of BBB by Standard & Poor’s, a comparable rating from another internationally recognised rating agency or are unrated.

2. The Fund’s investments in debt securities may subject to credit/counterparty risk, interest rate risk, downgrading risk, valuation risk, credit rating risk, volatility and liquidity risk.

3. The Fund’s investments are concentrated in Asia. The value of the Fund may be more volatile than that of a fund having a more diverse portfolio of investments, and more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting Asia.

4. The Fund may invest in debt securities rated below investment grade or unrated. Such securities are generally subject to lower liquidity, higher volatility and greater risk of loss of principal and interest than high-rated debt securities.

5. Debt instruments with loss-absorption features are subject to greater risks when compared to traditional debt instruments as such instruments are typically subject to the risk of being written down or converted to ordinary shares upon the occurrence of predefined trigger event(s) which are likely to be outside of the issuer’s control. Such trigger events are complex and difficult to predict and may result in a significant or total reduction in the value of such instruments.

6. The Fund may use financial derivative instruments for investment management and hedging purposes. The Fund’s net derivative exposure may be up to 50% of the Fund’s net asset value. It may involve additional risks, e.g. counterparty/credit risk, liquidity risk, valuation risk, volatility risk and over-the-counter transaction risk. Under extreme market conditions and circumstances, investment in the Fund may potentially result in total loss of investment.

7. Specifically for the share classes with “-mdist” in their name, the Fund may at the discretion of the Management Company make distributions out of capital or out of gross income while charging/paying all or part of the Fund’s fees and expenses to/out of capital of the Fund, resulting in an increase in the payment of dividends by the Fund. Payment of dividends out of/effectively out of capital may result in an immediate reduction of the net asset value per share.

8. Any distributions from the income and/or involving the capital result in an immediate reduction of the net asset value per share of the Fund. Payment of dividends out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment.

9. Investors should not invest in the Fund solely based on this document and should read the relevant offering document for further details including risk factors. Investors are responsible for their investment decisions and should seek independent financial and professional advice if required.

Asia remains the key driver for global economic growth. With significant monetary and fiscal measures by central banks in Asia, particularly China, Asian high yield fundamentals are solid with attractive yield to offer.

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Attractive return potential

Supportive macro-trends

Low exposure to commodities

1. Attractive return potential

The yields in credit markets offer attractive carry returns. The current spread and yield levels offer an attractive entry point into the Asian high yield market.

Asian USD Credit Market: Yields

Bloomberg China Credit Impulse

(year-on-year % change)

2. Supportive macro-trends in Asia

China’s credit impulse growth has been picking up. The Asia markets are supported by significant policy measures and more flexibility in monetary and fiscal policy.

3. Low exposure to commodities

The Asian high yield universe has low exposure to commodity markets. The sector is under pressure from oil price volatility and movement lockdowns. Therefore, default rates in the Asian High Yield space are expected to remain low compared to broader emerging markets and US High Yield. China high yield bonds have shorter duration, so typically they are less sensitive to interest rate changes.

Chart showing distribution of Asian High Yield in different sectors

Source: J.P. Morgan. For illustration purposes only. Data available as of end December 2022.
^ TMT stands for Technology, Media and Telecommunications.

Comparatively stable income potential

>6% p.a.^{1, 2}

Yield distribution of UBS Asian High Yield Bond Fund (USD) P-mdist

Distribution Month	Distribution Month	Equivalent Yield (p.a.) ^{1, 2}	Equivalent Yield (p.a.) ^{1, 2}
Distribution Month	12/2022	Equivalent Yield (p.a.) ^{1, 2}	7.0%
Distribution Month	09/2022	Equivalent Yield (p.a.) ^{1, 2}	6.8%
Distribution Month	08/2022	Equivalent Yield (p.a.) ^{1, 2}	6.9%
Distribution Month	07/2022	Equivalent Yield (p.a.) ^{1, 2}	6.9%
Distribution Month	06/2022	Equivalent Yield (p.a.) ^{1, 2}	6.7%
Distribution Month	05/2022	Equivalent Yield (p.a.) ^{1, 2}	6.7%
Distribution Month	04/2022	Equivalent Yield (p.a.) ^{1, 2}	6.8%
Distribution Month	03/2022	Equivalent Yield (p.a.) ^{1, 2}	6.7%
Distribution Month	02/2022	Equivalent Yield (p.a.) ^{1, 2}	6.7%
Distribution Month	01/2022	Equivalent Yield (p.a.) ^{1, 2}	6.8%

Valuations in the Asian High Yield space look attractive as investors get a substantial yield pick-up with lower duration.

Source: UBS Asset Management. As of Sep 2022.
1 The share classes with “-mdist” aim to pay dividends on a monthly basis. Dividend is not guaranteed. Dividend may be paid out of capital. Share classes with “-mdist” in their name may also make distributions out of capital and realized capital gains, at the discretion of the Management Company, or pay distributions out of gross income while charging/paying all or part of the fund’s fees and expenses to/out of the capital of the relevant fund, resulting in an increase in distributable income for the payment of distributions by the fund and therefore, the fund may effectively pay distributions out of capital. Any distributions involving payment of dividends out of the fund’s capital or payment of dividends effectively out of the fund’s capital (as the case may be) may result in an immediate reduction of the next asset value per share/unit.
2 A positive distribution yield does not imply a positive return. Distribution yield = (Dividend per unit on last record date x 12 /Previous month-end NAV) x 100. The distribution yields shown here are for reference only. These share classes continue to distribute in periods that the Fund has negative return/is making losses which further reduces the NAV of the Fund. In extreme circumstances, investors may not be able to get back the original investment amount. Constant distributing share classes must not be seen as alternative to savings account or fixed-interest paying investment.