Structured Products Wealth Management Usa

Summary

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Structured Products
Designing a modern portfolio
Achieving your personal goals is the driving motivation
for how and why you invest. Whether your goal is to grow
and preserve wealth, save for your children’s education,
maintain your lifestyle in retirement or give to a cause that
is important to you, we are here to help you achieve it

An integral part
of a modern portfolio
Investment objectives change throughout one’s life. In order to keep pace with these evolving goals
and circumstances, your portfolio may require a greater degree of sophistication. You may want to
look beyond stocks, bonds and mutual funds to consider investments that can provide more flexibility
and control in pursuing your goals. One such investment is structured products. No other financial
instrument lets you implement your market view and control your risk level so precisely. You can
either choose from among the structured products carefully developed for UBS clients, or work with
your Financial Advisor to customize an investment specifically for your individual circumstances

Reduce market risk Access markets and innovation
Perhaps you are looking to transition to retirement You may be considering diversifying your portfolio
and are concerned about an untimely market decline with investments in commodities, foreign currencies
undermining your plans. Or maybe you’re years from or emerging markets. Structured products can provide
retirement but are still concerned about near-term exposure to markets that may be difficult for you to
market risk and would like to mitigate its impact on your access, as well as opportunities to reduce market risk
portfolio. Structured products offer a range of choices which can make entering these new markets much
for investors seeking to maintain market exposure while more comfortable

reducing downside market risk

Enhance potential returns
On the other hand, you may be seeking to improve the
returns or income generated by your portfolio. Structured
products can provide opportunities to enhance growth
or yield for investors willing to accept market risk

1
What are structured products?
While structured products may be new to you, they have
been used for decades by institutional and individual Underlying asset
investors. A structured product combines many of the The index, security, commodity or other investment or
characteristics of a bond with certain of the features and benchmark to which a structured product is linked

risks of the structured product’s underlying asset

Like a bond, a structured product is issued by a
corporation, usually an investment grade financial
company, and is subject to the credit risk of the issuer

But unlike a bond, a structured product is linked to an
underlying asset and may offer some or all of the upside
growth as well as the downside market risk of the
underlying asset. Regardless of its features, all payments
on a structured product are made by its issuer, and if the
issuer is unable to pay its obligations when due, investors
may lose some or all of their investment

Structured products at UBS
A platform designed around your needs Creating your own opportunities
Your needs are at the center of our industry-leading If our current offerings do not address your needs, you
structured products platform. Our success is rooted in the can quickly create an individualized investment with the
practice of having clients’ needs and concerns be the only help of your Financial Advisor, aligned with your portfolio
motivation for what we offer. and tailored to your specifications. Your structured
product can match your individual risk profile, your
Built on research, powered by competition investment horizon, your market view and more. And
The investment strategies that form the basis of our because we put your needs at the center of everything we
structured products offerings come from understanding do, you will have a choice from among many providers
your goals and needs as well as from implementing to issue your structured product. The ability to create
our published research recommendations. Once we are individualized structured investments is subject to a
prepared to move forward with an investment strategy, minimum investment requirement

we source the actual structured product from among
several potential issuers, not just from UBS. By putting
product issuers in competition for your business whenever
possible, we seek to control costs and improve pricing for
you. It places us in the position of being able to demand
the highest level of service for our clients. This open
architecture platform also allows us to tap into the latest
strategies from the most sophisticated investment banks
in the world and deliver them to you

2
Key risks
Investing in structured products involves significant risks. No dividends or voting rights
Some of the key risks are summarized below. Investors In owning a structured product rather than owning the
should carefully review the more detailed discussion of underlying asset directly, investors give up certain benefits
risks in the issuer’s offering materials prior to investing in associated with direct ownership. If the underlying asset
any product. pays a dividend, that dividend will not be paid out to
investors. Investors also will not have voting rights that
Issuer credit risk direct owners may have

A structured product is an unsecured obligation of the
applicable issuer. Any payment on a structured product, Potential conflicts
including any repayment of principal, is subject to the The issuer of a structured product and its affiliates may
creditworthiness of the issuer. If the issuer is unable to pay play a variety of roles in connection with the structured
its obligations as they come due, investors may lose some product, including acting as calculation agent and hedging
or all of their investment in the product. the issuer’s obligations under the structured product. In
performing these duties, the economic interests of the
Risk of loss calculation agent and other affiliates of the issuer may be
Many structured products subject investors to the adverse to the interests of investors in the structured product

downside market risk of an underlying asset. Depending
on the product, investors may lose some or all of their Taxation
investment if the underlying asset declines in value. The tax treatment of a structured product may be very
different from that of a traditional investment or the
Potential returns may be limited underlying asset. The issuer’s offering materials for a
Potential returns on a structured product may be limited. structured product will contain a tax disclosure discussing
Investors may not participate in the growth potential of the expected federal income tax consequences of investing
an underlying asset beyond a certain limit or at all. in the product. Significant aspects of the tax treatment
of a structured product may be uncertain. UBS Financial
Performance prior to maturity Services Inc. and its employees do not provide tax advice

In addition to the performance of the underlying Investors should consult their own tax advisors about their
asset, structured product fees and market factors that tax situation before investing in any structured product

influence the price of bonds and options generally will
also influence the value of a structured product prior to Additional disclosure for structured CDs
maturity. Therefore, the value of a structured product Structured CDs are deposit obligations of the applicable
prior to maturity may be more or less than its initial price issuer. In the event the issuer fails, the principal amount
and may be substantially different from the payment of the CD would be insured by the FDIC up to applicable
expected at maturity. Investors must hold their structured statutory limits. To the extent this amount, combined with
product to maturity to receive the stated payout, including all other deposits an investor holds in the same capacity at
any repayment of principal. the same bank, exceeds FDIC insurance limits, the investor
would be subject to the credit risk of the issuer and may
No guarantee of liquidity lose all of this excess amount. FDIC insurance does not
Unless explicitly stated otherwise in the offering materials, apply to any market-linked return, and investors may not
a structured product will not be listed on any exchange. receive this payment if the bank fails. The rules and
Typically, any available liquidity is provided by the issuer regulations regarding the limit and applicability of FDIC
as a service to investors, but the issuer is not obligated insurance coverage can change. The FDIC also has the
to provide a secondary market. If an issuer is making a right to terminate the deposit insurance of a bank under
secondary market for its structured product, it may be certain limited circumstances, which could potentially
at a significant discount to the fair value of the product. result in the loss of FDIC insurance for a CD prior to
As a result, investors should be prepared to hold their maturity. For the latest information regarding FDIC
structured product to maturity. insurance coverage, visit fdic.gov

3
The UBS structured products spectrum
UBS classifies structured products into four categories to make it easier to identify the investment that may suit your needs:
Return
Leverage
Performance
Optimization
Protection
Risk
Classification of structured products into categories is not intended to guarantee particular results, performance or level of market risk

Protection. Protection strategies are structured to In addition, UBS arranges its offerings into three platforms
complement and provide the potential to outperform to complement various investment styles:
traditional fixed income investments. These structured
products are generally designed for investors with low to Portfolio Platform: strategies linked to benchmark
moderate risk tolerances. investments and indexes that can be used as part of the
core portfolio construction process to reduce risk and/or
Optimization. Optimization strategies provide the enhance returns

opportunity to enhance market returns or yields and can
be structured with full downside market exposure or with Single Stock Platform: strategies linked to individual
buffered or contingent downside market exposure. These stocks (or shares of ETFs) that can be used to enhance
structured products are generally designed for investors the return or yield potential of an investor’s portfolio,
who can tolerate downside market risk. although investors should be careful to consider any
downside market risk associated with these investments

Performance. Performance strategies provide efficient
access to markets and can be structured with full Special Opportunities Platform: strategies whose
downside market exposure or with buffered or contingent design is based on specific market opportunities or
downside market exposure. These structured products outlooks; these investments can be used to implement a
are generally designed for investors who can tolerate tactical market view, address a specific investor need or
downside market risk. take advantage of a new market opportunity

Leverage. Leverage strategies provide leveraged exposure
to the performance of an underlying asset. These
structured products are generally designed for investors
with high risk tolerances

4
Case studies
The real world application of structured products within
client portfolios can take many forms. The following pages
illustrate just a few of the ways that structured products can
be employed to help you achieve your financial goals. We
encourage you to discuss with your UBS Financial Advisor
how structured products may be appropriate to your needs

5
Integrating structured products into your portfolio
Meet Sarah
Sarah’s situation
• 65 years old
• Lost substantial part of her
retirement savings during
financial crisis
• Exited markets completely
Sarah’s perspective
• Afraid to re-enter markets
• Cannot afford to remain fully
in cash but cannot tolerate
downside market risk
• Seeking lower-risk strategy for
rebuilding IRA
Sarah’s investment
• Market-linked CD
Sarah decides to invest $100,000 in Scenario 1
a Market-Linked CD linked to a U.S

stock index. This CD allows her to The index grows by 30% over the 5-year term of the CD

participate in some of the growth of Sarah’s investment grows by 30%, from $100,000 to $130,000
the U.S. stock market without any of at maturity

the downside market risk at maturity

$100,000 $30,000
Example terms:
• 5-year maturity
Scenario 2
• Participates in any positive return
of the index at maturity up to a
The index grows by 60% over the 5-year term of the CD

maximum gain of 50%
Even though the index grows by 60%, the return of the CD is capped
by the 50% maximum gain. Sarah’s investment grows by 50% from
• No participation in any negative
$100,000 to $150,000

index return at maturity
• Any payment on the CD, including $100,000 $50,000
any repayment of principal, is
subject to the creditworthiness of
the issuer; in the event the issuer
fails, FDIC insurance would apply Scenario 3
only to the principal amount of a
CD and only up to statutory limits The index declines by 30% over the 5-year term of the CD

Sarah is not exposed to the index decline at maturity and receives her
original $100,000 at maturity

$100,000
These examples are for illustrative purposes only. Actual terms, conditions and risks for structured
Principal amount products are included in applicable offering materials. Any payment on a structured product, including
any repayment of principal, is subject to the creditworthiness of the issuer. If the issuer is unable to pay
Investment growth its obligations as they come due, investors may lose some or all of their investment in the product

7
Integrating structured products into your portfolio
Meet Tom and Anna
Tom and Anna’s situation
• 46 years old
• Invested in mutual funds
• Active management did not help
during the financial crisis and
they suffered significant losses
Tom and Anna’s perspective
• They are looking to get back
some of the assets they lost
• Want to reduce their downside
market risk
Tom and Anna’s investment
• Buffered Return Optimization
Security
Tom and Anna decide to invest Scenario 1
$100,000 in a Buffered Return
Optimization Security linked to an The index grows by 12% over the 2-year term of the security

international stock index. This security Tom and Anna’s investment grows by 15% (equal to 12% times 1.25),
allows them to potentially enhance from $100,000 to $115,000 at maturity

their upside exposure to international
stocks up to a maximum gain, with $100,000 $15,000
reduced downside market risk at
maturity

Scenario 2
Example terms:
The index grows by 30% over the 2-year term of the security

• 2-year maturity Even though the index grows by 30%, the return of the security is capped by
the 20% maximum gain. Tom and Anna’s investment grows by 20%, from
• 1.25 times any positive return $100,000 to $120,000 at maturity

of the index at maturity up to a
maximum gain of 20%
$100,000 $20,000
• No downside market exposure at
maturity to the first 10% decline in
Scenario 3
the index, and downside exposure
only to the extent the index decline
The index declines by 10% over the 2-year term of the security

exceeds 10%
Tom and Anna are not exposed to the index decline at maturity and
receive their original $100,000 at maturity

• Any payment on the security,
including any repayment of
principal, is subject to the $100,000
creditworthiness of the issuer
Scenario 4
The index declines by 30% over the 2-year term of the security

Tom and Anna are only exposed to the index decline in excess of 10% at
maturity. Their investment declines by 20% and they receive $80,000 at maturity

$80,000
Principal amount
These examples are for illustrative purposes only. Actual terms, conditions and risks for structured
Investment growth products are included in applicable offering materials. Any payment on a structured product, including
any repayment of principal, is subject to the creditworthiness of the issuer. If the issuer is unable to pay
Remaining principal amount its obligations as they come due, investors may lose some or all of their investment in the product

9
Integrating structured products into your portfolio
Meet Rob
Rob’s situation
• 60 years old
• Invested in exchange traded funds
• Prefers lower-cost indexed
strategies to active management
Rob’s perspective
• Wants to maintain his U.S. stock
market exposure
• Willing to explore efficient
strategies for reducing downside
market risk
Rob’s investment
• Trigger Performance Security

Asset, structured product fees and market factors that influence the price of bonds and options generally will also influence the value of a structured product prior to maturity. Therefore, the …

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Frequently Asked Questions

What are the unique strengths of our structured products?

The unique strengths of our structured products offer the advantages of capital protection, an enhanced risk/return profile and more. Structured investments are sophisticated products combining bond investment with a strategy using derivatives.

What is the role of structured products in investment?

Structured products can bring many derivative benefits to investors who otherwise would not have access to them. As a complement to traditional investment vehicles, structured products have a useful role to play in modern portfolio management . Investopedia requires writers to use primary sources to support their work.

Should you look beyond stocks for structured investments?

look beyond stocks, bonds and mutual funds to consider investments that can provide more flexibility and control in pursuing your goals. One such investment is structured products. No other financial.

What are the benefits of a structured fund?

Structured products can provide exposure to markets that may be difficult for you to access, as well as opportunities to reduce market risk which can make entering these new markets much more comfortable. Investment objectives change throughout one’s life.