Preferred securities combine features of both fixed income and equity. Preferred securities tend to perform more like traditional fixed income securities because regular income distributions are the principal source of return, as opposed to capital appreciation.

Typically issued at $25 par, most preferred securities are listed on a major stock exchange. Many preferred securities pay quarterly income distributions at a fixed rate and provide the issuer with the option to defer and accumulate dividend payments for a period of time, generally not exceeding five years. However, all preferred securities have preference/seniority to common stock when it comes to the payment of dividends, and issuers generally retain the right to retire securities through redemption provisions.

To help clients select appropriate preferred securities, UBS Financial Advisors have access to preferred securities research written expressly for the individual investor. Our Wealth Management Research team provides:

• Investment opinions and regular quarterly updates on our universe of preferred securities
• Strategic assessment of the relative value in the preferred market and recommended allocations geared toward improving total return performance.
• Educational pieces on the many sub-sectors of the preferred securities market, as well as detailed lists of the preferred securities that belong to each separate sector, their relevant income tax treatment and level of subordination.

Interest Rate Risk - Fixed income securities are subject to market value fluctuation given changes in interest rates. For example, if interest rates rise, the value of this security could decline.

Credit Quality Fluctuations - Adverse changes in the credit quality of the issuer may negatively impact the market value of the securities.

Call Risk - The securities may be redeemed beginning on their call date, or at any time following a special event (i.e. a change in tax law that adversely affects the Company with regard to the securities). If called, holders may face a reinvestment decision at lower future rates.

Liquidity - While most preferred stocks are listed on a publicly traded exchange, which provides some degree of liquidity, there is no guarantee made as to an active and liquid secondary market for these issues.

UBS Financial Services Inc. does not provide tax or legal advice.  Please contact your tax advisor regarding the suitability of these investments in your portfolio.

UBS Wealth Management Research in the U.S. is provided by UBS Financial Services Inc. UBS Financial Services Inc. is a subsidiary of UBS AG. UBS Wealth Management Research and any affiliate of UBS AG may publish research, express opinions or provide recommendations that may be inconsistent with each other and/or may be inconsistent with investing in a specific product. Investors should make their own independent investigation of the merits of investing in any particular product. Two sources of UBS Research are available to you as a UBS client. One source is UBS Wealth Management Research. UBS Wealth Management Research is part of UBS Global Wealth Management & Business Banking (the UBS business group that includes, among others, UBS Financial Services Inc. and UBS International Inc.), whose primary business focus is individual investors. The second source is UBS Investment Research. UBS Investment Research is part of UBS Investment Bank, whose primary business focus is institutional investors. Because both sources of information are independent of one another and reflect the different assumptions, views and analytical methods of the analysts who prepared them, there may exist a difference of opinions between the two sources.